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Welcome to How to Retire on Time, a show that answers your retirement questions. Say goodbye to the oversimplified advice you've heard hundreds of times. This show is about getting into the nitty-gritty so you can make better decisions as you prepare for retirement. Text your questions to 913-363-1234 and we'll feature them on the show. Don't forget to grab a copy of the book, How to Retire on Time, or check out our resources by going to www.retireontime.com.
Welcome to how to retire on time, a show that answers your retirement questions. Say goodbye to the oversimplified advice. This show is about getting into the nitty gritty so you can determine what is right for you. My name is Mike Decker. I'm a fiduciary financial adviser, and with me is my associate, David Franson.
Mike:As always, text your questions to (913) 363-1234, and we'll feature them on the show. David, what do we got today?
David:Hey, Mike. I've got a great portfolio and don't wanna sell any of it. How do you build a retirement plan around a portfolio without selling anything?
Mike:Yeah. This is a very common situation. Okay. And let me talk to you through it with an analogy. You ever hear about the experiment with how to trap a monkey?
Mike:Actually, let me ask you this. Do you want how to catch a monkey? Are bananas involved? Not really, actually. Not sometimes, but Alright.
David:It's very cliche of me. Sorry to all the monkeys out there.
Mike:How dare you? That's not politically correct. All the monkeys are offended.
David:Yeah.
Mike:So how to trap a monkey? What you do is you create, like, in a coconut or some sort of thing, you put something that they want in some sort of container, but if they hold it, their fist is now too big they can't Oh, right. Let go.
David:Yes.
Mike:And so what you do is they'll just they'll grab onto it, they won't let go, and so they'll just sit there because they're unwilling to let go, and that's how you trap monkeys. They won't let go of the thing that they want, regardless of the risk that it puts them in.
David:Okay. Yeah. So voluntarily, through their own desires, they've they've reached through, they've grabbed it, even though they know that they'd have to let go to get their hand back out, they're unwilling to. Yeah. So they're stuck.
Mike:Yeah. And so why is this important? Why am I giving the analogy? Yeah. Let's just talk about the market for just a moment.
Mike:Okay? We have very similar conditions to 1999. 1998, 1999. What are those? Markets are overvalued.
Mike:You can look at the price earnings ratio or Shiller's price earnings as it's been nicknamed. It's c a p e. You can look it up. Capital appreciation price earnings, I believe. Or no.
Mike:Cyclical. Anyway, it's Yeah. The Schiller PE, look it up. It's predicted almost every significant flat market cycle in American's history. A flat market cycle is when you don't make any money for ten years if you're invested in the stock market.
Mike:Okay? We've got the US dollar decreasing in value. We've got gold growing like exponentially. We've got oil going down in value and price as well. We've got a new industry, a new asset class that's never existed before called AI, kinda like in 1998, 1999.
Mike:It was the .com. The Fed has neutralized inflation, but is looking at dropping the Fed rates a little bit here in the near future. We've got all of these it's the conditions that trigger a potential flat market cycle. What if a flat market cycle were to hit? Ten years of no growth in the market.
Mike:When I say no growth, by the way, it's great growth, and then a massive crash, and then a recovery, and then another massive crash. So ten plus years point to point, there's no growth. Yes. And it was a wild roller coaster, and you were not rewarded for it. Even with your dividends being reinvested, you've probably gone backwards.
Mike:And so even after we've talked about how this is a historical pattern that happened in February, happened in 1965, it happened in 1929, it happened in nineteen o six, even though all the signs point to this are probably gonna happen in the near future, Even though we've got the World Bank, we've had Goldman Sachs, we've had Morgan Stanley, we've had large companies saying, yeah, it could happen in the near future. All the signs point to the possibility of it. Even though Warren Buffett, that guy that everyone likes to quote and be like Yeah. Is in massive amounts of cash in preparation for this. People are still saying, well, I don't wanna sell my NVIDIA stock.
Mike:It's done too well. I don't wanna sell my Palantir stock. It's done too well. I don't wanna sell my Apple. It's grown great over the last ten years.
Mike:I can't sell Amazon. It's a great company. It's grown so much over the next ten years. And in those situations, many people struggle to realize that they're the monkey holding on to the thing that they won't let go despite the risk it puts them in.
David:Yeah.
Mike:Yes. Those stocks have done a great job helping you get rich. But what happens when the markets fall down 50%? Those stocks are subject to cyclical crashes. Those stocks are subject to recessions and depressions.
Mike:Those stocks are subject to not making as much money.
David:Yeah. Isn't it Amazon that sort of went gangbusters and then lost, like, 90% of its value, and then it slowly it's come up? I
Mike:don't know. It's a more stable company today. Yes. So it might not lose 90%, but it could lose 50%. It could lose 30%.
Mike:That's still a tough pill to swallow when your job isn't to get rich anymore. When you're in retirement, your job is to stay rich. But we focus so much on, well, I wanna just wait another couple of months, timing the market, just a little bit more growth, not realizing that if the markets do turn over, it could delay their retirement. I'm not saying you sell all of your stocks. I'm saying is at some point, you start locking in those gains, pay the capital gains if it's in your brokerage account, or just reposition your IRA assets, your retirement accounts, and put it into safer investments, like buffered ETFs, like structured notes.
Mike:And by the way, those two are the ones where you can't lose money. There are buffered ETFs where you can lose money. There are structured notes where you can lose money. I'm talking about the safer ones, the more modest ones. Yes.
Mike:The ones that don't make you as much money, but they help you keep your money.
David:That's the big difference here.
Mike:The the huge difference. Fixed index annuities, the ones that are focused on cash growth that don't have fees, can help you grow your money. Most people are smart enough to realize, yeah, I should probably not be this concentrated in this few amount of positions, or maybe I shouldn't have this much in the portfolio or then these stocks. Maybe I should, but not today. Mhmm.
Mike:Let's do it next month. Let's do it next year. I just want a little bit more out of it. Mhmm. Do you see how the emotions can betray people?
David:Right. And and it's okay if you're really young. Right? Hey. I'm I'm staying all in on stocks because because I need to grow it, and I've got time to recover.
David:But when you're depending on your portfolio for your income, because you're not working anymore, let's protect that.
Mike:Yeah. When you're young, you wanna have enough cash on hand, so that in a recession or depression, which can happen, you have enough to get you through. If you get fired, you have enough to pull you through the next job. Right. But you don't need five years of income.
David:Right.
Mike:That's where they comes in, like, the six months of income just on the side to get you through a potential firing
David:Yes.
Mike:Which what happens in market crashes, but it's different. When you're retirement and you need income from your portfolio, how do you structure it, and where do you go when the markets go down? And keeping all your assets in the high growth stocks isn't necessarily what you maybe want to do or ought to do. You just gotta be careful with these sorts of things.
David:What if you've, like, inherited some stocks and there's, like, just purely sentimental value? How do you can people let go of those? Or
Mike:Yeah. Can you afford the luxury of passing those on to your kids? So if you earn enough that you don't need to touch it, and many people do, then you can put it into the part of your portfolio that you plan to never touch. That's the legacy portfolio. If you need the money, okay, then at some point, you're going to have to accept that your inheritance gave you the ability to retire on time or whatever made sense to you, but you're gonna need to start selling them to enjoy them.
Mike:You can't have your cake and eat it too. You can't enjoy I mean, a classic example are things like Chevron stock, or a Coca Cola stock, or these old classic positions. At some point, you'll need to either sell them, or maybe you have a dividend strategy, but you gotta know how you're using them, and do they make sense? Are they competitive? Maybe you just need a little bit more growth in your portfolio to get the life that you want, And maybe the inherited stock doesn't pay a dividend, so you're gonna have to take income from the growth.
Mike:Or maybe the dividend just isn't competitive anymore because the stock isn't competitive anymore. So you have to understand what you're receiving and what you're giving up in these trades. It's not just trades in the market. It's also trades in life. To get something, you've gotta give something up.
Mike:You've got to understand what that is. And so all things considered, when it comes to really broaching this topic, don't be the monkey that's stuck. Markets are up right now, at least at the time of this recording. Markets are at all time highs. All the indicators suggest that at some point, we could roll into a flat market cycle, which would start with a 50% crash.
Mike:Would you be okay risking that? I mean, really. A lot of people risked it in 1998, 1999 thinking, oh, I've got a few more years. Oh, everyone says they're gonna crash, but it hasn't crashed. They must be wrong.
Mike:They create echo chambers that allow them to rationalize the behavior that isn't necessarily best for them. It's just prolonging the thing that they need to do. It's procrastination, and those are the people that typically get hurt in these situations. Now am I predicting the market's gonna crash next month? No.
Mike:It could crash next month. It could crash next year. It could crash in five years. We don't know. But starting to put enough of your assets so at least the first five years of your retirement are protected, and there's different ways you can do this and still have growth in the market and growth potential and all of that.
Mike:But starting to lock in those gains is the healthy thing to do, whether you'll acknowledge that or not. What do you think, David? Any last thoughts? No. I I Are you doing the healthy thing?
Mike:How hard is that?
David:The healthy thing is not always easy, but I have found that, like, the idea of eating, like, a really healthy meal, like, just some, like, rice, broccoli, chicken breast, it doesn't sound very good in the beginning, I guess I'll just do it. But once I'm eating it, I'm like, actually, this is pretty good. I don't know if that translates You at all feel better. But I feel better, eating that meal felt really good. Yeah.
Mike:That's a great analogy. If you diet and exercise, you feel better long term. If you eat like crap, you feel better in the moment, but there's a price to pay. Right. The same is right now.
Mike:And this is my big warning to everyone, whether you're saving for retirement or not, is be ready for whenever the next market crash hits. I don't know when. No one can predict the market, but timing the market is not advantageous for you. Please heed these words of caution. That's all the time we've got for the show today.
Mike:If you enjoyed the show, consider subscribing to it wherever you get your podcast. Just search for how to retire on time. Discover if your portfolio is built to weather flat market cycle or if you're missing tax minimization opportunities that you may not even know exist. Explore strategies that may be able to help you lower your overall risk while potentially increasing your overall growth and lifestyle flexibility. This is not your ordinary financial analysis.
Mike:Learn more about Your Wealth Analysis and what it could do for you regardless of your age, asset, or target retirement date, go to www.yourwealthanalysis.com today to learn more and get started.