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Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, healthcare, and more. This show is an extension of the book How to Retire on Time, which you can grab today on Amazon or by going to www.howtoretireontime.com.
This show is intended for those within 10 years of their target retirement date or for those are are currently retired and are concerned about their ability to stay retired.
Welcome to How to Retire On Time, a show that answers your retirement questions. Say goodbye to the oversimplified advice. This show's about getting to the details so you can determine what is right for you. My name is Mike Decker. I'm a licensed financial adviser and fiduciary.
Mike:With me here is David Franson. He'll be reading your questions, and I'm gonna do my best to answer them. As always, text your questions to (913) 363-1234. David, let's begin. Hey, Mike.
David:I know you can't predict the market, but could you give
Mike:Fair fair start. Yeah. Thank thank you for acknowledging.
David:Yes. Right? Yes.
Mike:I know you can't predict the market, but
David:Could you give a general market update?
Mike:Sure.
David:And this is as of where we are? We're in July 2025.
Mike:So if you listen to this in 2027, it's irrelevant. Yeah. But so you can't predict the markets. Don't try to do that. Historically speaking, no one has successfully over and over again timed the market.
Mike:Timing the market is defined as going to cash, and then going in the market and investing, and then cash, and then investing. K? And then just to further the explanation here, because I'm hesitant to give this information out, because it tends to cause fear or greed. The two things that destroy a portfolio. But investing is when you buy something based on its intrinsic value with the expectation it's going to grow over the next five to ten years, and you just let it sit there.
Mike:And then trading is when you are trading for a short term time period, whether you're trading for the day, the week, the month, with the expectation that you're gonna get out when you've found your inefficiency and capitalized on the alleged inefficiency of the market. Now trading has higher risk than investing because of timelines, volatility, as in the ups and downs, and so on.
David:So if I heard you right, trading is more a certain time period, investing is sort of long term, sort of buy and hold. Is that right? Yeah. Okay.
Mike:Yep. I mean and you need to be able to change the investment if something significantly shifts. Here's an example. FICO was a great investment for a long term period of time. The FICO stock, you know, the FICO scores when you're when you get a mortgage score.
Mike:Yeah. Credit scoring. It was basically a soft monopoly. It wasn't any other really score that was honored by these mortgage companies. Until recently, they started accepting other credit score systems.
Mike:So guess what happened to FICO? It fell off a cliff. The price dropped because the intrinsic value or its competitiveness or its underlying position became less valuable. And so that's a situation where maybe you wanna get out of it. You're not trading.
Mike:You're just saying, oh, the landscape significantly shift, and you might move on to another investment. Okay? So do you see the difference there?
David:Yes.
Mike:So with that said, what I'm about to say is probably the most important thing I will say today, this week, or even this month. Okay? And it's one of the market cycles that many people miss. When I say many people miss, I'm including financial professionals as well. So the markets historically go flat for ten plus years every twenty years or so.
Mike:We saw that in February. We saw that in 1965. We saw that in 1929. We saw that in 02/2006. I personally believe, not tomorrow, not next month, but in the near future, we could be heading into another flat market cycle.
Mike:What does that mean? It doesn't mean that the stocks in your portfolio are just doing nothing for 10. It means they go up, and then they crash very heavily. And then they go up, and then they crash very heavily. But the price, including dividends being reinvested, is basically the same ten years after the start.
Mike:It's a wild roller coaster, and you end up where you started, like all roller coasters do.
David:Oh, so yeah. You have all these like peaks, troughs, valleys, whatever. But at the end of that cycle, you still have the same money basically?
Mike:Yeah. So let me give you an example. Okay? Let's go back to the year 1998.
David:Oh, yeah. I like that year.
Mike:Yeah. It was a great year.
David:Love that.
Mike:So in 1998, there was a quick crash that happened. Okay? There was some concerns that certain banking and certain geopolitical risks and certain things were going on that caused, oh, well, maybe the market might crash this time. But it didn't. It recovered really quickly.
Mike:Yeah. K. That scared some people, but it recovered quickly. But if the market's gonna shift that violent that quick, something is going on. Why would the market shift that much?
Mike:And you could say, well, tariffs and businesses and all these things, that's all true. But if the market was priced right, if financial companies had good financials, so not high debt, reasonable price earnings, and so on, it maybe wouldn't have shifted or jolted that much that intensely. So we see a similar situation to 1998. Now there are other things that you have to be aware of. Okay?
Mike:This is the part where you turn the volume up, you tell everyone around you to shut up.
David:Okay.
Mike:I need to listen to this. Okay? Here in the Midwest, if you're listening to this outside the Midwest, there are tornado watches and tornado warnings. David, you're a Midwest local. What does it mean to have a tornado watch?
David:That means the conditions are right for a tornado to maybe happen, so we're just we're on the lookout. Yeah. But we're nothing's happening yet. And what do you do when a warning hits? If there's a tornado warning, something has been spotted, it's coming for you, you gotta go downstairs to the basement.
Mike:K. Yeah. Right now is a flat market watch.
David:Okay.
Mike:Not a warning Yeah. But it's a watch. The conditions are right. Now here's the problem. K?
Mike:I'm from Seattle originally. K. Moved to Kansas. My wife's from Kansas. That's how I ended up here.
Mike:There's still long story short.
David:Alright.
Mike:When I first got here and I got a tornado watch, I panicked. I was very scared. I'm going, oh, no. Uh-huh. And so what did I do?
Mike:I would reschedule appointments. I'd go home. K? Maybe I'd cancel appointments. Sometimes I would just take them from home because I was like, oh, this is the end of the world.
Mike:My house is gonna make like the Wizard of Oz. It's the end. I'm gonna lose everything. It's a tornado watch. These don't happen very often.
Mike:And then I have learned, no. They actually happen enough, but there's a good chance it probably won't happen. It's just you gotta be aware just in case. Yeah. Is that a fair assessment now?
David:Yeah. Yeah. You're aware that there's a potential for it, so just be ready.
Mike:Yeah. And so now it's like, okay. I'm aware of it. I know where I am and all that, but I'm keeping an eye maybe on my phone a little bit more closely if there's a tornado warning, checking in a little bit more frequently. That's it.
Mike:Right now, there's a flat market watch, in my opinion. Okay. Here's why. In 1998, the market specifically had a high price earnings. What in the world does that mean?
Mike:The price of a stock, whatever that is, compared to the earnings of the company. So if the price is high compared to the earnings, it means it's been overpurchased. Another way of saying that is for the price that you're paying for a share of that company, if the price earnings is high, and I'm talking like 50 x, a 100 x, whatever it might be, then the company needs to have significant earnings growth, so they need to have a lot more profits to get back into harmony with what that price actually is.
David:Okay.
Mike:So let's use an example of Palantir, the Internet's favorite company to buy that I like to pick on a little bit. Mhmm. Is Palantir a good company? I have no comment. I'm sure they're a great company, but when you have a price earnings of 500 x or so, and I don't know what it is today, but it's pretty high.
Mike:That means that the company has to earn or increase their revenue, their earnings by probably around 900% with the price staying the same. That's a tall order. Now we saw this behavior in 1998 with tech companies that said, well, if we just adopt the Internet, our shares are gonna go up. The earnings are probably gonna stay the same, but we will be able to inflate or grow our price, and then the companies can use that to their benefit. That's one red flag.
Mike:K? And I'm gonna go back to that in just a second. But here are some other red flags in our current situation. The dollar's being devalued. K?
Mike:We've lost over 10% of the valuation of the dollar compared to the rest of the world. Gold is increasing drastically. That's another canary in the coal mine as they say. The Fed is holding rates. Inflation seems to be under control with the promise of decreasing rates in the near future.
Mike:These are all kind of indicators that create this environment that is a bit of a red flag. Oil is decreasing in price drastically. All of these things sum eight into a possible flat market cycle. And another one to look at here is that the majority of the growth in the stock market seems to be around a new industry, a new category. So in February, could you invest in artificial intelligence or AI companies?
David:Gosh. It'd probably be very limited, if any at all.
Mike:I don't know. Didn't exist. Okay. So 2010, didn't exist. 2015, didn't exist.
Mike:OpenAI didn't really become a thing until after the pandemic. So we have this new category that has exploded kinda like in 1998 when .com exploded. You put any money into a .com company, you were probably making money. Yeah. Now you have to compare the growth.
Mike:Let's say that I pick on the S and P a lot. Let's pick on the S and P. The growth of the S and P as it's currently weighted versus the growth of the S and P with equal weighting, as in every company gets an equal share. And when the growth of the S and P itself is significantly greater than had it been equally weighted, that means there's a concentration of growth in a certain sector that may be blowing up a balloon that could pop. Let me say all of that in a very simple way.
David:Okay.
Mike:You go to a wonderful buffet. One of those beautiful buffets, you know, maybe you pay a little bit extra for it, but it's got surf and turf, or it's got all the fancy stuff. Okay? The best steaks. Really good.
Mike:Imagine a buffet full of prime steaks, and lobsters, and seafood, what whatever it is, like the nicest kind, and you indulge. And you hit that point where you're kind of full, but you don't wanna miss out because you've already paid to be here. Yeah. So what do you do? I'll get a little bit more dessert.
Mike:Maybe I'll I'll get the creme brulee because I've already paid for it. Might as well. And Yeah. Maybe you'll do a few extra of whatever, and you get a little bit more full. And you're like, I should probably just let this digest a little bit.
Mike:And then you go back for another round. This is gluttony. This is greed. K? Remember the last time this happened?
Mike:It happens to everyone. And then what's the next twenty four hours like?
David:You're digesting. You're sort of bloated. Your stomach, everything is you just you don't feel well. It's like, why did I do that?
Mike:Are you waking up to want breakfast?
David:No. That's usually the next day where I'm like, I'll eat maybe at dinner. And even then, you might not.
Mike:Yeah. Right. The point of this being is right now, we have grown so much, and it's out of proportion of based on the actual earnings and the price that we have. We are out of harmony of a normal healthy economic situation. And we see the same conditions in the late nineties, which then proceeded into a flat market cycle.
Mike:We saw similar conditions in 1964, which proceeded into a flat market cycle. We saw similar conditions in 1928, which proceeded into another flat market cycle. And I could go on and on and on about indicators when the bond yield is inverted for as long as it has been. So short term treasuries have a better yield than long term treasuries. Okay.
Mike:All these things distort an economy, distort the shares of a price, distort how the markets operate. And at some point, it's gotta be digested. And based on very rudimentary charting, so technical analysis, to correct and get back into a normal situation would probably be a 50% correction.
David:So that sounds scary. Is it scary?
Mike:It's scary if you're not prepared. Yeah. It's scary if you're just a passive buy and hold portfolio person, maybe a DIY, then you've bought SPY, and that's it. It's scary if all of your assets are in the market. It's scary if you assume that the markets are gonna average 12 each year, and you're gonna take income as growth.
Mike:It's scary if you're taking a dividend as your income in retirement, because dividends aren't required. It's scary if fill in the blank. It is scary for most DIY people are unprepared, and this is the other part. Many financial professionals are uninitiated with this. Was your financial professional working in the two thousand o one and o two financial crisis or the o eight financial crisis?
Mike:This industry is tough. As in, you don't earn your stripes unless you've gone through a market crash. K? The joke with some people, and this is not meant to be derogatory, is that some companies, and this is not true. This is a joke.
Mike:Okay? So please don't hold me to it. Alright. Is allegedly yeah. Can I have any more Yeah?
David:Don't write us any nasty letters. Yeah.
Mike:Yeah. Allegedly, many fund managers are fund managers that have never actually managed money in a market crash. Because they're more likely to take more risk, because if they take more risk, there's more growth potential. If there's more growth potential, they're more likely to gather assets, which is how you get paid. Right.
Mike:Another way of saying that is, are you aware of the risk that you're taking considering that in the next year, two, or three, the markets could turn over? It could be a 50% correction. Whatever happens, it then could be rough for the next ten years. Could your retirement plan function if you went through another 2000 or 1965 or 1929 flat market cycle? I wrote about this in Kiplinger as one of the articles that got a lot of views, but whether you read it or not, regardless, these are things people need to be aware of.
Mike:And they're not, because here's what you're hearing on social media. Hey. I'm I'm a guy. I used to be a former blah blah blah financial professional, but today, I'm demystifying how financial really works so you can just cut out the professionals and like, I'm fine if you wanna manage your assets yourself, but the portfolio needs some alignments adjustments. It needs to be tweaked a little bit so that greed isn't taken over.
Mike:Because if we do go through this, it will be one of the worst things for the retirement community, and there are more people retired today than ever before in the history of our country.
David:That's wild. Yeah. I mean,
Mike:you started in the financial services during the last decade, as they say, 2000 to 02/2010. It's true.
David:And I
Mike:You were taking those calls? Yeah. How happy were those calls?
David:I now I know why. Like, there weren't very many returns. Everything was just kinda sitting there. I was like, I thought we were supposed to be getting these, like, 8% returns, and Yeah. It just wasn't happening.
David:But now all these years later, oh, that's why.
Mike:Yeah. We have been taught now to believe that markets crash and recover quickly. Those were two fake crashes. There's only so much adrenaline you can inject into the economic body before the adrenaline injections just don't work as much anymore. And the reality too is maybe they inject more cash to try and fix it quickly again, kinda like they tried to do in 2008 or in 2020 and and so on.
Mike:That creates hyperinflation. Hyperinflation helps the wealthy, hurts the poor, but you know what also hurts? All of the people that took their money and bought an annuity and turned on lifetime income. Because that flat income stream doesn't increase when they print a lot of money and the markets increase. So the reason why I'm getting at this is the youth call it, I've got the receipts.
Mike:I'm calling it right now Yeah. That everyone I believe that's retiring now, the first half of your retirement is probably going to be very rough, and taking more risk is probably not the solution. And buying an annuity and deferring this responsibility to someone else while keeping the blinders on is probably not the solution. One of the reasons why I left the previous practice to create Kedrick Wealth, one of the reasons why I wrote the book How to Retire on Time, one of the reasons why I profusely write for Kiplinger, which by the way, I don't pay Kiplinger. Kiplinger doesn't pay for me.
Mike:They reached out to me, and they said, hey. We'd like you to write so that you can bring more clarity in this space. All of this is to raise the warning of saying, hey. Maybe the stuff you're reading online is riskier than you realize. There's this thing called the Dunning Kruger effect, and it's kind of funny.
Mike:John Cleese from Monty Python says it really, really well. You have to be smart enough in any topic to realize how dumb you are on that topic. And I'm not saying that people are dumb. People are generally pretty smart. I would say we are in the smartest civilization ever, but you can't be smart and well initiated into everything.
Mike:I mean, David, how would you feel if I performed not a heart surgery on you, just a foot surgery? It's your foot.
David:It's my foot.
Mike:It's not a lifesaving organ. Would you mind if I did a foot surgery on you?
David:I don't know. What are your credentials? None. No. Then I I would have some trepidation.
Mike:How about if you had like a little skin tag? Would you feel fine if I took a scalpel, maybe put some ice on it and cut it? You You think that would work out okay? There's It's not gonna kill you.
David:It might not kill me, but yeah, it could I I don't know. Probably not. How would you feel
Mike:if I was your nutritionist, having no background in nutrition?
David:Right. You could probably like read a lot of things online or ask ChadGPT, and maybe some of it would be helpful, but mainly, I mean, it's not your expertise, so I'm not gonna read
Mike:your blood work. No. I don't have a clue. How about, let's say you got a speeding ticket. Uh-huh.
Mike:Now you could hire an attorney to help you get out of it Yeah. Or you could hire me, your friend, to try and talk you out of it.
David:Well, yeah. I mean, I I know you're a good talker, so I might have a fighter's chance, but
Mike:probably not. So asking your friends for this in your investment clubs, going to social media, the or even reading articles online. The problem is many people have a bias, and they want that bias to be so true. They want to be right so badly that they look for echo chambers.
David:You can find a lot of those online. Right?
Mike:You can find anyone online that will agree with you. Yeah. So please, everyone listening in, whether you wanna schedule a call with us or not, whatever you wanna do with this information you've been given, at the very least, I would invite you to go to retireontime.com. Howtoretireontime.com also goes to the same place.
David:Could go there, but if you wanna type less.
Mike:Yeah. Www.retireontime.com. We are still giving away digital copies of my book away for free. Anyone can download it, but it is worth the life you've spent saving to at least understand these risks, and we've only talked about one of them. To understand the risks that you're taking that your current adviser may not be talking to you about, or maybe they're just saying, oh, well, we'll just figure it out as we go.
Mike:That's a terrible system. Or, oh, well, here's a lifetime income stream. We'll just turn that on. You'll be fine. I'm not saying some income in an annuity for income stream is is terrible.
Mike:Maybe that's appropriate for you. But too many people are unaware of what could happen in the next future. It's chapter three specifically of the book. Please, in a couple of years, if my assumptions are right, I am going to say, I told you so. Not to your face, but on the radio, on the podcast, on my articles, I'm gonna be saying, in a very sad manner, the warnings were given there.
Mike:Please take a moment. It's just your life savings. It's worth an hour to three of reading some pages on a book for free on your weekend to be more prepared for what I think is going to come. There are many ways you can solve this, but your typical $60.40 portfolio is probably not one. Buying annuity and just electing that I don't have the responsibility anymore.
Mike:I have my pension and all as well is also not one. There are a lot of assumptions. They're oversimplified assumptions. You've got to diversify by objectives. You've gotta put a plan together in anticipation for the ups and the downs, the good and the bad.
Mike:If you have predetermined guidelines on the good and the bad, you increase your odds of success. That's all the time we've got for the show today. 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 or if you're missing tax minimization opportunities that you may not even know exist.
Mike: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. Learn more about Your Wealth Analysis and what it could do for you regardless of your age, asset, or target retirement date, go to ww.yourwealthanalysis.com today to learn more and get started.