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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 questions about all things retirement, including income, taxes, Social Security, health care, and more. The show is an extension of the book, How to Retire on Time, which you can grab exclusively on Amazon or by going to www.how to retire on time.com. My name is Mike Decker. I'm the author of the book, How to Retire on Time, but I'm also a licensed financial advisor, insurance agent, and tax professional, which means when it comes to financial topics, we can pretty much cover it all. Now that said, please remember this is just a show.
Mike:Everything you hear should be considered informational as a not financial advice. If you want personalized financial advice, then request your wealth analysis from my team today by going to www.yourwealthanalysis.com. With me in the studio today is mister David Fransen. David, thanks for being here.
David:Yes. Hello.
Mike:David's gonna be reading your questions that you've submitted, and I'm gonna do my best to answer them. You can send your questions in anytime this week by texting them to 913-363-1234. Again, that's 913-363-1234, or you can email them to hey mike@howtoretyme.com. Let's begin.
David:Hey, Mike. How do you believe Trump's tariffs will affect the economy?
Mike:Yeah. The tariff conversation's a very popular one right now because it's probably the hallmark of what could be his next term. Tariff taxation at the level that he's talking about is not something we've experienced for many, many years. So this is probably gonna be an interesting transition. I wanna highlight a couple of things, though, in this.
Mike:The tariff strategy in theory is the idea that you gotta tax something. So instead of taxing the labor within America, you can tax basically what comes in, the goods and services coming from other countries. And businesses as a whole, this is oversimplification, but they don't really care what the rules are. They just wanna know what the rules are. And so right now, with the low amount of tariffs, it makes more sense for businesses to have factories and manufacturing overseas because it's just cheaper there.
Mike:And then they can bring their goods over and then all as well. Right? Well, America still has to tax something. So they're taxing their people, the income tax. Well, what if the tables were to turn a little bit?
Mike:Now it's try I'm trying to paint the picture here Sure. To have an understand what the theory is behind it. You only need so much tax, to come in each year, and you don't wanna overdo the taxes. You could just, in theory, tax what's coming in, and then you'd have a surplus. And if you had a surplus or you're not running that deficit, then you could, in theory, get rid of income tax.
Mike:And if you got rid of income tax, then Americans could spend more. They'd have more wiggle room. They could save more. They can invest more. They could do more with their money.
Mike:And if they could do more with their money, then in theory, that would boom our economy. And if our economy is booming, then more people would wanna get on the action. So they'd be willing to pay the tariffs, the taxation on the goods coming in, and it it would be a a self propelled kind of upward trend. That's the theory behind this. Okay.
Mike:In addition to the tax side of it, the theory is that if it's cheaper to make a product in America than making a product outside of America, net of the tariff tax, then you would put your factories in America. Right? Businesses just care about the profit at the end of the day. Mhmm. So that's the theory behind it.
Mike:Now I wanna highlight something that happened in 2018 during Trump's first presidency. If you look at the market in 2018 when Trump was going through the trade war with China, on just a couple of things, it spooked the market. Look at the market crash. It recovered when things got settled in. There was a lot of pressure on the farmers for what was going on.
Mike:It hurt. So the the question, do I believe Trump's tariffs strategy would affect the economy? Absolutely. I mean, most geopolitical like strategies would probably affect the economy. I look back at 1990 when I recommended Kuwait that affected the economy.
Mike:Right? So there are so many things that could affect it. I I believe the tariff strategy will require a digestion period. So how long does it take to build a factory?
David:Oh, wow.
Mike:You know, it's
David:A while.
Mike:Imagine a Tesla factory being built in Detroit or or Texas. That doesn't just happen. Like, did you ever see those HGTV shows where they build a house in, like, a week or whatever?
David:Yeah. One of them was here in Kansas City, actually.
Mike:Yeah. So Yeah. They don't have those systems for factories.
David:Oh, no.
Mike:So there's a very delicate balance that he's going to have to balance if this is digested well. But even if everything goes according to plan, there still may be a physical therapy like experience where it's good for you, but it hurts like crazy.
David:I've been there. Yeah.
Mike:Right? So we have to understand there's no perfect strategy, including geopolitical strategies. That if we were to mimic what happened in 2018 on a larger scale, It's not to create panic in the markets. It's just to understand that there may be some pain before the healing can really happen Uh-huh. As we transition to a different way to generate revenue for the government.
Mike:So in this situation, there's so much speculation on will it work or will it not work? I've outlined the theories behind it. Yeah. There are some detriments. Well, what if the other countries just say no?
Mike:They're just like, yeah. We're gonna go do the bricks. We're gonna go do these other things or try to create our own economy and just kind of cut us out. I mean, there there are risks associated with it. Sure.
Mike:This is hardball when it comes to business deals. So either Trump still has the skills as what what was that book? The Art of the Deal.
David:Oh, right. Yeah.
Mike:Or something like that.
David:That sounds right.
Mike:Maybe he still has the mastery of the art of the deal, or maybe he doesn't. But we will find out. It's gonna take years, in my opinion, to figure out if this really works or not. Mhmm. But don't judge it based on the beginning of the transition of the tariff strategy.
Mike:It may work well. It may not. We may not fully understand the outcome even during his 4 years. So when it comes to your investment strategy, going all the bonds or bond funds or trying to be very conservative saying, oh, he's gonna screw it up, may lead you to miss out on a lot of growth opportunity. Or going all into the equities market, the stock market, you may lose some money.
Mike:Right. So you've got to take a balanced systematic approach, a properly diversified portfolio that has, based on the philosophy we have in the book, how to retire on time, that explains that some of your assets probably should be principal protected with growth potential, whether that's CDs, treasuries, fixed or fixed index annuities, or cash value life insurance, whatever you wanna use. But the idea is you want to be able to have enough exposure to capture the upside while having enough principal protected accounts that you can draw from in case the markets were to digest or crash. And I say digest playfully because most people have experienced physical therapy in one way or the other. It's rough.
David:Yes. I can testify.
Mike:It's rough. So having exposure to the market makes sense, but maybe not all at risk. Having some exposure to the bond market, which is way bigger than stock market, may make sense. But maybe don't get too risky on the bond funds you're doing and maybe don't be too conservative with it. Maybe you pepper in some CDs in there, some money markets, some high yield savings.
Mike:Right? Very boring. Mhmm. But boring is good in finance. Maybe explore fixed index annuities or cash value life insurance as a bond or CD alternative because they may offer you more growth potential than you realize if you do the shopping right.
Mike:And if if that's the first time you've heard of it, go to our podcast. Look up the episodes where we actually unpack how to shop for these things. Just like today, you can get a CD for 5% or 0.5%. Many fixed indexed annuities are garbage, but there are a few that are competitive from the cash growth standpoint with protection. Maybe you even get a little more technical and you're looking at buffered ETFs or structured notes, but proceed with caution.
Mike:Because even those instruments that give you some upside potential, but some protection, Many of them don't offer all protection and they sell it like, oh, well, that'll never happen. Well, it's just a matter of time before those things do happen. If you're looking for protection, you don't want protection with an asterisk. You want protection, legitimate protection backed by a large entity like an insurance company, a bank, a municipality, something like that. But I would challenge everyone listening in right now to question the assumptions you have on the investments and product options that are available to you and really explore what's out there.
Mike:Challenge the portfolio you may have right now, which you probably received because you filled out a suitability questionnaire and it, based on those results, gave you a recommended portfolio cookie cutter approach. There probably is more out there. There are many different markets that you can invest in. So you've got the cash equivalents market. You've got the bond market.
Mike:You have the equities market or the stock market. You've got the insurance product market, which is vast unto itself, and you have the real estate market as well. Diversifying among all of these according to JPMorgan's research shows specifically adding the alternative investments can help increase your overall growth while decreasing your overall volatility or risk. The outcome is not obvious. No one knows the future of the market.
David:Right.
Mike:It's not just stocks and bonds. There's more you can do to prepare yourself for what could be a wild roller coaster ahead of us. And that's not a criticism to Trump. That's a an awareness of an overvalued market that has a lot of skepticism towards it. 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 cycles 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.