The Do-It-Yourself Investor Case Study

In this episode Jeff talks about earnings reports year over year, his case of the week about DIY investing. He also answers 3 listener questions in depth. 

What is Premiere Retirement With Jeff Vogan?

Every week Jeff Vogan comments on the state of the market and economy as well as gives advice on retirement planning and wealth management.

When it comes to investing, retirement legacy planning, taxes or health care, the decisions you make today can greatly impact the quality of life for you and your loved ones tomorrow. What you need is straight and unbiased information on the most important issues you'll face when planning for your retirement and financial future. Good news, you found a premier retirement radio show with Jeff Bowgun. Jeff is the founder of Premier retirement planning and wealth management. And he's been guiding people financially and to retirement for 30 years. So get ready for an hour of the most comprehensive financial information on the radio premier retirement with Jeff Hogan. And now here's Jeff Hogan, with Jeff shade. Thank you so much. Welcome to premier retirement with Jeff over the radio show that gives you the straight talk and honest answers you need to help you reach your wealth management and retirement goals through Smart Investing and careful planning. On today's show. We're going to be talking about current events. We've got a little information about some earnings reports. And we'll talk about those. We'll also be talking about the case of the week or actually not this week. But almost every week, Jeff gets this particular question. We'll tell you what that is. We've also got listener questions. And then finally, we'll wrap it up with things that you need to know if you're retiring in the next five years. My name is Jeff shade. And I'm just here to ask the questions. But of course, the words of wisdom and solid advice come from Jeff Bogan founder and president of Premier retirement planning and wealth management. Hey, Jeff, how you doing today? I'm doing great. It's always fun to be with you and with the listeners. And here we go again. That's right. Likewise, too glad to be with all the people here in the greater Tucson area. We're glad to be with you each and every week here on 790 k and S T. So Jeff, let's dive into current events. Here. We were talking off the air a little bit about an earnings declined 7.7% From the second quarter of last year to the second quarter of this year, and its effect on the market. Can you explain a little bit more about that? Well, yeah, you know, we're continuing to get really, in my opinion, negative information on the market yet, you know, interestingly, the market is defying gravity going up, it really does remind me of what I felt like in retrospect. Now I know what I was feeling like back in the.com, boom, the.com bubble where everything blew up, but nobody wanted to miss the bubbles. Everybody's just jumping in right now we have this AI craze artificial intelligence supposed to run everything, we've had about three to $4 trillion in market cap growth on an AI industry that expects to generate maybe a couple trillion dollars in revenues over the next five years, maybe. And most of the companies like Microsoft and other people are, even though they're using the AI, they're not necessarily selling it or monetizing it to the point where they're going to generate tons of money. Nevertheless, they're using it. And somehow they're free services like was that chat GPT, or whatever it was the automated, we can look up anything, but we really don't have all the information, but we'll try our best and pretend like, you know, it's not a pre programmed encyclopedia, but it really is. And it's considered AI yet, people are jumping on this crazy like crazy, you've got stocks that are double, tripling quadrupling, that may or may not even have profits or products just based on this AI thing. So there's this hype that's driving the market, which was like the.com era was driving, we had companies back then in the 90s that had zero earnings, you know, zero prospects of earnings, just a name of.com. And they were going through the roof, then we had companies like the big market makers, Merrill Lynch, for one that got fined for doing a lot of injustice to the investor by saying that Worldcom was a viable company issuing 10s of billions of dollars of bonds and things like that, and just increasing debt and basically selling out, you know, bad debt to the public that ended up blowing up and they just go oh, sorry, they made, you know, a billion dollars in commissions and got fined for 300. And something million, I think something like that. So I mean, there's a lot of crap going on in the market where I think there's a lot of misinformation where the big market makers and the brokers and stuff are maybe not just the institutions themselves, because the institution itself really aren't out there buying a lot and actually propping up the market by their own purchases, but they're sure allowing the news of the day to influence people, dumb people, and I say dumb, not because they're dumb, IQ wise, but they're dumb. From the standpoint they don't know a lot about the market or fundamentals, nor do they have experience in the market. They don't have experience in cycles. They don't have experience in a lot of things that really drive markets on a on a macro level, meaning, you know, what's the underpinning support for this market going up? And there really isn't any right now we have these data gathering institutions refinitiv for one that basically looks at corporate profits and things like that they right now they're expecting a 7.7% decline in earnings and actual earnings from a year ago. Now, last year, the market was plummeting because earnings were stopping the government is raising rates. And guess what the Fed still raising rates, guess what, we still have inflation, guess what, we still have the 20% plus inflation that already happened, still affecting the amount of money that people can spend on things. So earnings have been revised downward by many companies, and we're having a ton of reports this week and next on mostly second quarter results always comes out a little bit late middle third quarter. So you know, we're not ready for third quarter results until probably October, November. But right now we're hearing what's going on in the second quarter, the stuff that ended June 30. And we're starting to get those numbers
as they roll in, I think what's funny as well, I know, what we're gonna see is we're gonna see Oh, earnings surprises, you know, 3am beat expectations? Well, that's because they lowered their expectations to an unreal low number, but just because they lowered the expectations to something that they could easily beat. And that's what most companies want to do is, you know, 70% of the companies can beat their earnings expectations. They tried to do that in order to pad their stock, but they have to revise them down first, and they did revise them down first, and they're still revising downward. Some companies are saying, Oh, well, we think because we beat our earnings, downward revised estimate, we think the end of the year is gonna be really good. So we have hopeful designs on our end of the year profits. Well, who knows what's that's going to really be we don't even know if we're going into recession. Yet. We want to talk about an interview that we read about the Stan Druckenmiller thing that we talked about earlier to very smart people, smart investors out there know what's going on on a macro level, yet the investors are easily duped. They're like sheep that just go and just do whatever the hype says to do, like they did in the 90s with the dot coms. If it had.com, it threw money at it, and you made money until you didn't until it blew up until you lost everything on Worldcom till you lost everything on global crossing, those were two that I did lose everything on I personally, because I bought into the hype, I was in the business and I was buying into the hype, I was selling it, I was buying it, you know, we were all getting rich together. And then we all got poor together in the 2000 meltdown. Right now, I feel like we're in the same thing. There's no underlying fundamentals driving the market, there's no profits and earnings growth, there's a government that has gotten so deep into debt, that just the debt service and the higher interest rates that are happening out there are going to cause more and more money that has to go to the government more of our taxpayers money that goes there can't be spent on these growth programs that the government is so you know, noted for me shoot, they helped Elon Musk star Tesla with government grants and loans and things like that, they do that to a lot of companies, not just woke companies, but a lot of companies that have good ideas that will grow into good economic benefit. So they're gonna have a lot less money to do that. And think about all the money that people who are now spending 20 to 30% more just to live, how much less they're gonna have to spend on extra stuff, shoot a week or two ago, we just saw Netflix on the cost 10 bucks a month, they're losing earnings, their earnings are going down because they're losing membership. Of course, they got new memberships in for a minute. And then now they're losing revenue. So they're not looking as good as they thought, yeah, Home Depot is getting a little soft. People can't afford lumber prices, they are people who used to stay home now have to go back to work. So they're not busy fixing up their houses like these. There's a lot of things in the market that aren't looking as good or don't give me any indication to feel comfortable about what the markets been. I hate to say that I don't like to be a doom and gloom guy. Gosh, I hate so bad being a bear. I hate being a bear. But right now I am because indications show that fundamentally speaking, we should be we've got 1.3 stocks going down for every one stock that goes up. In other words, 30% more stocks are going down, that are going up on any given day lately. So that means more stocks going down and going up, that means we're having negative growth across the board. You know, from the standpoint of Brett, the market isn't good, we should have more Advancers than decliners, that's a good sign right? When more stocks are going up and going down, that means you know, more things are happening when we have, you know, a 30% disparity between the goods. And the bads are the ups and the downs. And we also have a market that reflects indexes that give a lot more credit to big companies. So if the big companies go up a little bit, the indexes go up a lot, the little companies that are losing money only go down a little bit because they're not getting accurate representation from the standpoint of how much of the market cap or how much of the economy they actually represent. So there's kind of a false sense of representation in the indexes, but I guess we buy the six biggest stocks and everybody keeps buying them the invidious the Googles, the Amazons, the apples, or even the Netflix, which is in the meta platform, the Facebook, those things that you know, are still out there trying to generate cash and getting large market share still, and unfortunately, at the expense of a lot of other intermediate smaller companies, you know, maybe that's the play, but even still, with the economy the way it is, with people spending less time with interest going up, even those companies are going to get squeezed for profits, and the increase in price earnings ratios. So the P E ratios on some of these companies have almost doubled in the last six or eight months, meaning that they're not earning anymore, they're just or you just have to pay twice as much for that share of stock, or that dollar of earnings. And that's scary. That just makes me feel like we're on the brink of this big sell off. And you know, I'm a little bit nervous about that. Anyway, just because we had the yield curve inversion a year ago, which almost in so far, in every instance has been followed by a recession, we had all the smart money, including all the CIOs of all the big institutional firms saying the market was gonna, you know, have a recession this year. Well, now we're at the point where it typically happens. And now they're saying, Oh, well, gee, the economy is really resilient. Maybe we're not gonna have a recession. They're like clawing back their estimates. And now they're trying to go with the market because a whole bunch of people have thrown money at stuff when even it doesn't make sense. Oh, you know, one example is, you know, what does it make sense that Dogecoin you know, it basically was started as a joke and gets, you know, just an algorithm pulled out of thin air and created this new coin. I mean, bitcoins been around for a while and it's is equally weird to me, but
it anyway Dogecoin sell for $8 billion, some investor buys the company for $8 billion, shoot, I mean, can't you just buy a bunch of Bitcoins for that and call it good? Or Oh, is there a finite supply of Bitcoins, maybe I don't know that industry just is weird. But when people will throw billions of dollars at stuff that doesn't make any sense, the market doesn't make any sense. And when the market doesn't make any sense, it's really hard to get behind buying anything. When we know by history, when all of a sudden, the market doesn't make so much sense that all the evidence is against what's been happening, that there's a big crash or a meltdown. And there's a hard landing or a recession that statistically and historically has to come between now and the end of the year, maybe middle of next year, the latest historically, based on trends based on history repeating itself, based on just economic macro things that happen if you look at history, that's what happened. That's why what I like to do is listen to these old guys, guys that have been in the business 4050 6070 years, or maybe not 70, but they might be 70 years old. But people that have been in business decades longer than I've been around this business, who have actually managed money, who studied the macro economics of the system and the cycles, they're the ones that I want to listen to right now. And they're the ones that are the most cautious. They're also the ones that were telling us, you know, not to be scared of all these little, you know, market corrections, like in 2018. And other times that, you know, they still kind of hung in there even COVID wasn't a big rock their boat, but right now it's rocking their boats. And that makes me worried. So anyway, that's a good start. What's next? Well, Jeff, what's next is I want to take a moment to remind our listeners that if you want to have a conversation with Jeff and ask your questions about the market, about the recession on the horizon, and how to navigate through these financial times, then listen up. If you need answers, then request your no cost no obligation premier retirement roadmap by calling 5207809 59. That's 520-782-9059. Now when you call you get a friendly voice, more than likely Shelly on the other end of the line will gather some basic information from you then set you up with a conversation with Jeff to create a path towards a successful retirement. Now remember, it's not going to cost you a dime, but it could uncover some blind spots that when addressed may help improve your quality of life at a retirement that could last as long as 30 years, you'll get to ask Jeff your questions and get the answers that you need to put you on the path to a successful retirement again, call 520 7290 59. That's 520-780-9059, you could also request your complimentary consultation online at Prem red.com. That's Prem red.com, Jeff and this section of the show, we normally talk about a case of the week, this is not necessarily a case of this past week, but it is a case that you get quite frequently, and that is people who come in to you and they say, Well, you know, I'm gonna do this myself. I'm a bright guy, I think I can do it. Or I got some advice from my brother in law, who did it himself. But I just want to ask you a couple of questions. First of all, why are they doing it themselves? When a financial professional such as yourself, who's been doing it for three plus years is right at their fingertips? Well, I think there's a few reasons. One is they think they're very smart. And they probably worked with some financial advisors, or for some companies that are basically puppets on the company string, and they give them advice to buy and hold, they don't do anything they don't manage, and they charge a fee. And people say, like, what am I paying a fee for that for? So they get to be kind of fee adverse, you know, they get kind of have an aversion to paying for some forgetting nothing, I get that one, then there's this other stats that companies like Vanguard would love to put out, you know, they have, you know, ETFs, a lot of low fee, you know, buy and hold portfolios, they don't really do any management, they just say, hey, here's a bucket of stocks, put them in all these and you know, over the long haul, you'll probably make some money. And by the way, you know, if you pay a fee for this 1% to an advisor, if you compound that fee, you know, in 30 years, that'll add up to $600,000. Wouldn't you rather have this $600,000? Well, you might also say that if that person paid a fee and had better tax planning, maybe they can save $600,000 in taxes during the same period of time that they could have invest and actually be ahead 1.2 million if they'd have had an advisor that did more stuff. Yeah, there was a dowel bar study done shoot long a time ago, I think it was probably 25 years ago or so. And it's been reiterated in somewhere between like the 2.3, and the 2.6 range as the amount of money 2.6% is the amount that people that use advisors make over and above people that don't use advisors. So it's two plus, let's just say it's between two and three or two and a half percent. That adds up to a lot more compounded not to mention any tax savings you might do by doing Roth conversions, or basically looking at your tax planning early and going ahead and paying taxes now for things that you won't have to pay taxes for later looking at the next 30 years of your tax returns and seeing where there'll be rather than only looking at one tax return is that his last years after the fact which most accountants love to do, and I'm not merging the accounting profession. I think you do a great job looking back and doing your taxes and knowing the laws and knowing what they can deduct and whatnot, but I think they lack a lot in planning and I don't think they lack a lot in planning because they can't do it is this people aren't asking him to do it because most people even rich people, especially the accountants, best clients are typically doing one thing with their money, they own a business. They make a lot of money, they just invest the rest and let it sit in the market. And that's what the accountants
season if you don't touch stocks or ETFs, you don't have to pay tax on them. So that's a great strategy, they learn that but you know, they might not see, you know, less their clients have been exposed to a good financial advisor might I throw in like premier retirement planning and wealth management, you know, they will have seen tax planning ideas like Roth conversions paying more now in order to pay less later basically lining up a plan where your overall tax bill over the next 20 or 30, or 40 years is going to be hundreds of 1000s of dollars less than it would be if you don't do anything about it, kick the tax can down the road, make as much as you can and pay more taxes later, because they're not really looking ahead, they just look at the accounting numbers, and they don't realize that, hey, a planner could actually make some more money and actually earn those fees. So they either become fee weenies because they don't want to pay a fee. And frankly, some people are just jealous. You know, I've worked really long and hard and I've driven really cheap cars. And you know, one of my slacks though, I had holes on my pants and holes in my shoes before I switched them early on in my career, but I'm not in that position anymore. I've done very well to stick with it and to hang in there and be really good at what I do. And I make a really good live and I drive some really nice cars, I had a lady come out of a seminar one time because oh my gosh, that's your car, or whoever's car that is I would never do business with that guy. And I'm thinking I always just had to hear the answer. I really why? Well, he's obviously charging too much. He's obviously helping a lot of people and can afford that. Now, there could be a situation where a guy's a sleazebag, and he just rips people off and has nice stuff too. But the bottom line is, if you're jealous about the car, or the watch, or the shoes your advisor wears because they're nicer than yours. Change your attitude, you ought to be happy to deal with him because maybe he can help you get those nice shoes and the nice cars yourself. Yeah, so you know it's like weird that there's this there is a certain sense and I don't know why I brought that up I just guess it was exposed to me recently again, but like somebody like what you're obviously not even qualified or even a fit to be a client Am I because you don't appreciate you know, meritocracy, hard work hard be word being smart about investing. And by the way, I've learned a lot of good investments. Guess who from from all my clients over the years, all my wealthy clients that have done really well, I've learned so many things from people that have done it right that guess what I can do it right. And I can also tell other people how to do it right, maybe save a little bit more money, maybe you saved, let's say $30,000 in taxes over the next 10 years, maybe you could be driving a Bentley instead of a Ford excursion. I mean, you know, whatever, you know, maybe you don't want to maybe you just want to go on nicer vacations, whatever it is, it's the DI wires either think they're smarter, and sometimes they are honestly, there's a lot of boneheaded people in the financial industry out there that I think don't apply themselves don't learn what they could learn, don't go to classes, don't go to school, don't put their notes into the internet and into books and you know, learn to hone their skill because they think once they've been in it 10 years, they know everything, they don't have to do anything. They just need to, you know, make enough money to call for their friends every weekend and visit a client once in a while. Well, that's not our approach. Our approach is Who can we help next, you know, how many more people can we help Life is short, let's see if we can make a biggest market in this retirement planning world as we can, because we're good at what we do. And we can make a difference. So you know, that's, that's the approach. And, you know, if we get paid handsomely for it, and you save handsomely and make money and a handsomely level, if you want to keep using that word, I mean, if it's a win win, who cares, you don't want to do it yourself as a win lose, because you know, some people will come to me want to do it themselves. So ask me for all my years of expertise and experience, and I'll give it to them, they might win by using some of that, that comes back to me, I'm okay without it. But at the same time, I'm just losing a waste of time, or they'll implement it wrong thinking they could do it themselves. And then they end up losing a waste both of our times because it wasn't implemented correctly, or they didn't have a an experienced coach or an experienced teammate, looking it over and watching you know how things were working out over time. So again, you have to keep this plan in the big perspective. And I agree that if a financial adviser is not earning their fees, if they're just portfolio managing, you should just park your stuff in an index and let it ride because if that's all they're doing, and they're not doing any tactical management, like getting you out of the market last year, when the market stunk and waiting for an opportunity to get back in the market, when the market looks like it might be getting better than they're missing their boat, they're not doing their job, so you shouldn't pay them. But if they add value, even if they're just parking and holding your investments, but if they give you a guaranteed income source like an annuity that pays guaranteed income, no matter how long you live, if they give you a tax free income source through loops, life insurance planning using the tax code to your benefit, basically spending your death benefit while you're alive, that's life insurance, not death insurance. I think life insurance is great. I think death insurance is good only if you die and only if you have to leave somebody rich when you die they should change the name of life insurance a death insurance gradually what most people use it for. But I believe you can use it for life insurance because it for lifetime income stealth income that never shows up on your tax returns. And you can convert money you've already paid taxes in or on into an income stream that you never pay taxes on and still leave a chunk for your heirs if you want to or spend it down to almost nothing. You can even use the last dollars in that account for nursing home or final expenses or terminal illness and milk the tax code by using creative planning Well, Wall Street doesn't want anything to do with insurance products. They don't make enough money on them. So okay, well maybe I don't make enough money either. But I do sell Wall Street products too. So we make a little bit on everything. You can diversify and do well.
For yourself, you can also diversify do well for your client back, it's better for your client with a diversified portfolio. That doesn't mean just, you know, 10 different mutual funds or 10 different stocks or 100 different stocks or 100 pages worth of different stocks and positions. That's not what diversification is. Diversification is asset style, risk style, risk management income, you know, some assets need to be income, some assets need to control taxes, some assets need to provide some growth for the future. Some assets need to provide liquidity, there's different buckets or jobs that each bucket of money has to do for you. That's diversification, use all the different buckets and strategies and styles of investing to benefit you on a diversified basis. So that if the markets not doing well, you've still got income. If the market is doing well, you've got income, but you can go on some nice trips and have some fun and buy those nicer cars or whatever help your kids out, you know, take advantage of the good when the goods here but don't lose it when the markets not protecting you. You can either be on a roller coaster ride and be subject to the risk and the whim of the market and things you can't control. Or you can diversify and categorize assets into an area where you can get predictive income, predictive safety floors on your investments and still get some growth to the amount and extent that you want to take some risks. So again, it's really just all about seeing the whole plan and seeing the value in the plan. And if you can't see the value in the planning, you should do it yourself. But if you don't open your mind to why an advisor might actually add 30 years of full time, knowledge and experience to you who might be a smart guy, but was an engineer a doctor, some very high paid very high intelligent level required career path, but only had a few hours a week maybe to look at investments or maybe not even that much. I mean, believe me in the investment world, the diversification we're on the planning world in the adviser world, I'm more experienced than you I'm sorry, you might have a higher IQ. But I don't know, I don't think so.
Not to brag here, but I'm not too bad. No, but I can I can hang with the best one. But even still, I could be a dummy, but just my experience alone, and the ability that I have to diversify in all these different categories allows me to help people in so much of a better productive way than they can help themselves. So I think it's really self defeating. And it hurts somebody to be a do it yourselfer unless they get to the level of expertise of their advisor. And honestly, I hate to say it, but there's a lot of people out there who have done it themselves that are at the level or beyond the level of their advisor. Because in this business, you don't have to be that smart and that good to make a decent living. You just got to hang in there and manage a few assets and get fees and don't have enough people fire you right. So yeah, there's a lot of people that get in there and do the job, but they just don't do it. Well, you know, we got in this business to do it well and to make a difference and to not do what everybody else does, but do what everybody really ought to have and the quality of services that they should have. And should should require a Jeff, I'm gonna back up and comment on something that you said little while ago, and that was the person who came out and they were commenting about your car, I've got to say this, that if I went into a financial advisors office, and they were dressed in ratty clothing, they had a ratty office, they drove a ratty car, I would not have confidence in that person, because it would indicate to me that they're really not very good at what they do, and people don't come to them. So that's my comment on that. Now as far as di wires, people who do it themselves, as you said, they're very, very good at what they did for 30 years. But you've been doing this for 30 plus years. And I also want to point out this is a fact is that there are many products and services that the individual cannot avail themselves of that you can you must be an investment advisor in order to put somebody into an annuity you cannot if you think an annuity is right for you and your financial plan, you cannot call up the insurance company and buy that annuity you have to go through a financial advisor. So I think you would be doing yourself a big disservice and playing into your ego if you don't at least run your plan by a financial advisor. And speaking of that, it's funny you say that because I had a client that actually worked for a big insurance company he was retiring and he came to a seminar he wanted to milk me for all the information you want to be a do it yourself or he even told me about his company asked me if I was licensed with his company. I said Yeah, yeah, I told them all the products I said great. Well, I get you this product and stuff. And so he says okay, right well, hey, go ahead and put a plan together show me how I could use them. So I did I went back there and you know I'm not even thinking that this guy's you know, going to try to backdoor me but he did. He calls his own company says hey, yeah, this is the products I want. I want to strategize them this way. I want this one for income. I want this one for my wife. And when this one growth, these are the three annuities I want from this particular company. And they go well you're not an agent and he goes well why do I have to be I work for the company. I'm a I'm a freaking vice president. You know, and they go like well, you need an agent so he calls me Hey, Jeff, he says I guess my company told me I need an agent so can you come back and help me You stinker you know
Yeah, I tried to backdoor me but it's true. You can't even work though company and the vice president level and get the you have to be licensed by him through the agency. So you know, go ahead and try to be at do yourself or sometimes it'll backfire in your face. Anyway, if you're just joining us, this is premier retirement with Jeff Hogan. I'm Jeff shade and we just talked about DIY Investing
If you want to hear the whole show again, don't worry, we are a podcast. Just go to wherever you get your podcast and search for Premier retirement with Jeff Hogan. You'll get this show and all our past shows so you can stay on top of your wealth and your path to a successful retirement. We're going to take a quick break. Jeff, when we come back, we'll be discussing listener questions. All that and more when our show continues right here on 790 K in St. Tucsonans most stimulating talk.
Welcome back to premier retirement with Jeff Logan, founder president of Premier retirement planning and Wealth Management here in Tucson. Also with an office up in Mesa. If you have questions you'd like to ask Jeff, we invite you to call us and request your complimentary premier retirement roadmap. It's just a friendly conversation with Jeff. It'll cover a wide range of topics based on your individual situation so that you can proactively adjust your financial plan to address your retirement journey and any blind spots that may hinder you from reaching your goal. If you're not on the right course. When would you like to know that when it's too late to do anything about it or now when you can make a difference and make some adjustments again, there's no cost, no obligation whatsoever that number to get your roadmap 5207809 59 520-780-9059 One call could make all the difference. You can also request your complimentary plan online at puram ret.com. That is p r e m r e t.com. Okay, Jeff Barr questions this week in this segment include one from Scott who's listening to us in Silvano and it's related to the rule of 55. Scott says, If I turned 55 this year and quit on December 31 2023, does the rule of 55 Apply to all the funds in the company 401k. Even those funds rolled into it after my termination date, I'll receive a sizable lump sum ESOP distribution in mid 2024, per six months or so after I separate service, can I still roll that into my company 401 K, and enjoy penalty free distributions was there's a lot there. And there's a lot of options that you probably haven't even considered that we probably should talk about, first of all, by turning 55 That is a rule that applies to most 401k is most generic 401k is if you're at Fidelity or Vanguard, some of the big companies are probably always going to be baked into that there are some smaller companies that have very unique provisions. And they don't allow the H 55 provision to be part of the plan because it has to be elected or when you set up your plan, it has to maybe have a checkmark checked on whether or not your plan will or will not apply or allow the 55 rule. So if you already know that the 50 rule applies to your 401k. That's great. Now most 401k is will allow you to roll and combine other 401 K's while you're working. But many once you stop working, you can't add 401k money or IRA money to it. As far as ESOP money goes employee stock option program, the employee stock option program is not always qualified money. In fact, more often than not, I think it may not b I have not seen a situation where ESOP money can be put into a 401k. Maybe I'm missing something, but especially if it's after you've already terminated, I'd be surprised if the 401k would allow you to put it in there. Typically, it's after tax distributions, you know, if they wanted to put the ESOP money in there, so you could take tax free distributions out. And maybe my question I should ask you is are you trying to take all your money out between age 55 and 59, in my opinion, and if you were to come here and plan, we would never try to roll all your money to that one 401k Just because it has options anyway, unless you really liked the investment strategies, but I will about able to guarantee you that they do not offer anything that gives guaranteed income protection from risk and principle like annuities and other more suitable retirement plan distribution phase type investments would be so if you want to just keep on rolling in the market and take your chances with the market start using money out of a 401k when a lump sum it together do as much as you can before termination. And typically money that you roll in whether the old plan did or didn't have the rule of 55 Apply, it will apply because it has been rolled over legitimately to your new company, and then you separate it 55 Or you know before 59 and a half, which is the rule for all 401 K's unless you're still working there some 401k Still don't let you access the money 59 and a half. And then of course penalty free withdrawals from IRAs are available at 59 and a half as well. 55 rule is just an exception for people that retire early and want to use some 401k money so I would take your overall picture, maybe roll some of those dollars, even in the ESOP plan, if it is qualified even into something that you could defer taxes and growth on for a while, whether it be in an IRA, maybe convert some to a Roth once you terminate from your job, you're not making money maybe over the next few years, you do some Roth conversions with some of this not maybe not just the 401 K money but do a laddered Ira program where every year you roll 100 or 150 or $200,000 of IRA money into a Roth and pay tax at 22% instead of 28 or 32% when the Trump tax cuts go away and you get into the RMD age where in your 70s you have to start taking out you know money and now it's worth millions of dollars. So I'm talking fast because I
I've really talked about all these things, you know, over the years on this radio show. So I hope the listeners kind of understand where I'm going with this, the basic idea is, let's look at what it looks like in the future, let's look like how much of this 401k money, you actually need to be liquid, because you're going to be using it coming out of a qualified account prior to 59 and a half, if you've got $2 million in there, unless you plan on spending 500 a year, I don't see you run out of money or needing all that penalty free money between 55 and 59, I'm guessing that maybe live on 100,000 a year for the next five years. And if that's the case, put four or $500,000 in the in the 401k keep it fairly liquid in some low volatility investments and take your risk elsewhere where you can park that money for five or 10 years in an IRA, let it grow. So that you know, once you get done with this first phase, then you maybe start turning on Social Security or their pensions and things like that, or start using some of the money that you've converted into Roth or even Lourve. So you want to look at those or index annuities, then maybe you know, when you're 65, or whatever you've spent, you know, half your investment money, then you turn all these income streams, but the other half creates an additional income stream for the future where you know, your bills are gonna get paid, you know, you're gonna have guaranteed growth, you know, if you do a Roth conversion, you pay taxes on money, that's not going backwards. But how would you like to move $500,000 of money from your IRA or 401 k into a Roth account, have the market crash and have your $200,000 and not get back to even for another 15 years. That's what happened with the NASDAQ when the dot coms blew up, the dot bombs blew up or the dot coms became dot bombs back in the 2000. Era, it took about 15 years for the NASDAQ to get back to event. I mean, man, what if you just did that conversion right when the market was high right before it crashed. So again, you want to make sure that you use the right type of investments, if you are going to use a Roth conversion strategies for some of that, you want to make sure that you're creating enough income to last you 259 and a half. And you may want to create other streams of income that you can ladder in such a way that you turn on those incomes at different ages, when they're available. Maybe you have a pension from an old job that isn't available at full value until you're age 65. Well, that's great, you've got some money that you can use from 55 to 59 and a half in your 401k, then you can turn on your IRA money, you can even set it up to where it guarantees you a certain level of income for maybe the next five years or so or six years, then when your full retirement age is 66 years of access, you'll be 67 Where are you by then you'd be on Medicaid, you can turn on your social security, your other pension, and then maybe you need a little bit less guaranteed money, but you have this growth account that you've set aside with some of this IRA money didn't have to be moved to your 401k Could even be your ESOP money or play stock option money, maybe you keep some of that stock, because it's a good company, you have belief that it's gonna stay good for many, many years. So again, you don't have to cash it all in, you don't have to roll it out. And you could leave some of these accounts intact, maybe just reposition them or use each account for different strategies for different purposes for income at a different time growth, tax planning, or whatever. So again, it takes a look at the whole picture before I can really answer this question. But the rule of 55 may or may not be available to you, I assume you've already looked into it. And it is but again, before you get too excited about just lump sum it all into one big account that has to be managed with certain restrictions in a certain way. Why not look at the options of diversifying those accounts into different strategies and creating a plan that goes out 30 years instead of just between 55 and 59. Scott, we appreciate you listening to us since Ivano. Thank you for that question. And we will be sending you out a hard copy of Jeff's book retirement the road ahead, by the way for our listeners do want to take a look at that book. They can download it for free by going to Prem red.com. under the resources tab there you will see one that is labeled books simply click on that and you can download retirement the road ahead it is a great book. Okay, our next question Jeff comes from Quinton in Rita ranch. He asked about contributing to a Roth Quinton says I understand that I have to open up a Roth and put some money into it. So it'll be there for five years. But what if I'm still working? And my income is too high to qualify for a Roth? I'm 53. So would it make sense for me to open up a Roth now so I can use it at age 58? If I retire then, but how can I start a Roth if I make too much money to contribute to a Roth? Well, now the Roth IRA, keep in mind, a 58 years old is still under the 59 and a half penalty period, Ross and IRAs both applied to that 59 and a half rule. So if you did a Roth, you could do it possibly in your 401k through your job at work, and you could do a Roth contribution there that you could possibly use at 58. If you were to retire prior to the 59 and a half, we just talked about that in our last question. But as far as a Roth goes as far as you just opening a Roth so you can start that 5% rule, you can do a Roth with $1. You don't have to do it with a whole bunch. You might make too much money to contribute to a Roth but if you have an IRA anywhere, you can convert it to a Roth pay taxes on it now. So let's say you have a $5,000 IRA sitting somewhere that you did 20 years ago and you put 1000 bucks in a CD and now it's worth five grand, he never even thought about it. convert that to a Roth pay taxes, pay 1000 bucks and taxes roughly and you got your off time clock ticking away. By the way, anything that you convert or put in a Roth you've paid taxes on so that money can be withdrawn within that five year period. So that five year waiting period doesn't mean you can't do
Any money in the Roth, it just means you can't touch any of the profits in a Roth. So as long as you let the profits ride, you're still okay. The other thing that you can do, if you don't have IRA money, maybe all you have is a 401k. Or maybe your company doesn't even offer a 401k. So you've never even done an IRA before, but you want to, and you want to, you know, start making up ground as quick as you can, I would look for a Roth alternative if you want to pay taxes now instead of later, you know, at the 401k level with your company, but also you can do what's called a backdoor Roth IRA, where you do what's called a non deductible IRA contribution, I don't know why they don't let you just put it in a Roth and pay tax on it, because there really shouldn't be a contribution limit. But no matter how much money you can make, you can put money in an IRA and call it a non deductible contribution. So it's non deductible, the growth on that would be tax deferred, but the principle you know, the basis would still grow. And that would still be a taxable event later. However, if you put that $7,000 that say your your IRA contribution for the year, you put it into a non deductible IRA you had to pay tax on anyway and then you'd convert it, you just do convert it to a Roth. Now you have a Roth, the five year time clock starts ticking. So there's a few ways around that almost every tax code has left a loophole in it for the cronies of the people that write those laws. Remember that? So there's usually a way around some of these tricks that people don't know, Quentin. Thanks for that question. Of course, we will be sending you all Jeff's book retirement the road ahead, Jeff, next question has to do with an optimized question around implementing the bond portion of a portfolio. And it comes from Christopher in Houghton, Arizona. And Christopher says, Hey, Jeff, thanks for the great show. Here's my question for you about the pluses and minuses of a new investment strategy that I've incorporated since last December, I was tired of seeing bond prices do nothing but fall. At the same time, though this year, interest rates for T bills and CDs have been rising. So in January, I began moving nearly all of my bond investment allocation in my 401 k out of bonds. And I began building a ladder of T bills whose maturity dates are six months and outs, I now have a ladder of six, one matures each month, and I just rolled my first T bill into another that'll mature in December at 5.3%. I'll continue doing this until the market turns south. So I am out of bonds for the moment. And in the UK government guaranteed interest even though 5% might be barely keeping up with inflation, this is better than the losses the bond funds were taking what's good about this strategy and what are the potential downfalls. Do you think? Well, we're actually using that strategy ourselves right now, we haven't been in the market since we march in May of last year, we got out the writing was on the wall and the fibbing of the Fed and the Treasury secretary and all those people that you know said it was a short term glitch and you know, as transitory inflation all that stuff, you know, it'd be became obvious that it was BS. So we got to the market. And you know, we we've actually been enjoying at least being able to make some money on short term bonds, short term government securities, we generally use one called S. Gov. It's an ETF. But it has basically what you have in it, basically short term stuff that is liquid. Now the difference is, you know, I mean, you're not going to buy and sell on with too much of a margin to lose money if you're doing it yourself. But you know, I just like having a liquid ETF that I could sell in a minute if I wanted to, and buy Apple stock if it goes down to 100 bucks or something like that. So me I also am waiting for the market to correct Yeah, there was a an interview I referred to earlier in the program. I want to talk a little bit more maybe next section on Stan Druckenmiller that, you know, says that he still expects a hard landing by the end of the year, and this guy's had a 40 year history without a calendar year loss. That's pretty impressive. He's one of the guys that helped make George Soros rich, and he became a billionaire himself trading stocks, he's worth I think, five or $6 billion now and trades his own own money. But he's a macro economist and he understands things and he basically is confirmed in my mind that you are on the right track that you know short term bonds, there's nothing on the planet for him that would entice him to take a an equity position right now, according to an interview with Bloomberg just last month, so and I don't think it's changed in a month. I mean, we're getting earnings coming in lower for some companies and higher for some companies but higher than what higher than the lowered expectations of the companies, almost nobody's actually increasing earnings from last year. I mean, a few companies maybe but it's very few and far between that are in growth mode. And if they are, they're probably getting government subsidized or somehow regulated into success rather than success based on the fact that everybody has more money to spend. So again, I think the short term loss strategies is fine. Um, if you're a do it yourselfer, and you don't want to pay a fee or a fee for either a manager to you know, help time the market for you or help watch the macro economics of when to get in. If you're good at your own gut feeling then fine. So be it. If you were one of our clients, you know, we're waiting for certain very smart people to pull the trigger. And that's when we'll get back in. But we're able being in an ETF that has the same type of investments that are already laddering. And for you, they're buying new ones every day, and they're maturing every day. So the interest rate keeps creeping up and up and up as they go. And eventually the market will get better. There'll be a better entry point and we'll get back in when the time is right
But right now I don't think the time is right. So you're on the right track. You're doing exactly what we're doing. So not sure why you asked me that question. If you really listen to the show, you already know that strategy. So maybe you're just calling in for a pat on the back. Yes, you're doing great. You wanted to make sure he just wanted to make sure he's doing the right thing. He looks up to you, Jeff has so many of our listeners do me included. Thank you so much for listening to us in Houghton. And of course, we're gonna send you out a hard copy of Jeff's book retirement, the redhead and once again, if you do want to take a look at that book, you can download it for free right now go to the premier att.com Go to the Resources tab all the way to the right there and click on that you'll see one that says book and it is a very, very good read retirement the road ahead. If you've got a question for us, you can go to premier att.com email it to us from there. And again, if we use your question on the air, we will be sending you out Jeff's book retirement the road ahead, Jeff, we're going to postpone that segment that we promised earlier in the show about the four sources of income for your retirement because I do want you to comment on Stanley Druckenmiller, his comments that he made just recently but before we get to that, I think based on our conversation today, I'm willing to bet that our listeners do have some questions for you if you need some answers and request your no cost no obligation premier retirement roadmap by calling 52078 Donati 59 520-780-9059 When you call you're gonna get the friendly voice of Shelly on the other end of the line will gather some basic information and set you up with a conversation with Jeff to create a path towards your successful retirement. Now remember, it isn't going to cost you a dime, but he could uncover some blind spots that will address may help you improve your quality of life in retirement, but more than likely is going to last 30 plus years. If you're healthy enough, you get to ask Jeff your questions and get the answers you need to put you on the path to a successful retirement again that number 520-780-9059 5207809 59 or you can request your complimentary consultation online at Prem red.com. It is p r e m r e t.com. Okay, Jeff. So Peter Druckenmiller had these comments that he made back in June. Can you tell us more about those and why we should be interested in listen to Mr. Druckenmiller? Well, you know, he's got a great track record. You know, I listen to guys that another person that I've quoted a few times is Ray Dalio, you know, head of Bridgewater securities, which is I believe, the biggest hedge fund on the planet. I mean, the guy makes money when the markets are down. He makes money when the markets are up. Stan Druckenmiller is very much the same way. He's one of the guys as much as I hate to say the name George Soros. He was George Soros has money manager for probably half of his career. And they saw macroeconomic trends on the British pound, for example, and shorted it when they knew banks were strapped, and yeah, there was going to be a problem they had this was back in the early 90s, I believe made a billion dollars, you know, is when I was first getting in the market. I heard about this guy and heard about Soros and you know what he was doing, you know, making enough money to rule the world basically. And Druckenmiller was the right hand, man, this guy's got a brain, he understands what's going on. He did an interview with Bloomberg and I read the interview. And I was just amazed that you know, he still thinks and is convinced that there is no place in equities. Now he invests in equities invest in bonds, he invests in private capital invests in anything that is stable and on a macroeconomic level, in other words, of the trends of the world would go a certain direction he would jump in on well, you know, there's a rumor that you would think the macro economic underpinnings of the market, everything would be AI, well, it's really not that is not anything macro economic. It's just a hype word that is used to get people who would be considered dumb money to throw money at hopes and fantasies of things, hopefully coming out good in the end, and there might be some that do but you know, good luck, I think AI is probably here to stay, there's probably gonna be some regulations needed to keep it under control. So it doesn't turn on itself and then kill us and then turn on us. But I see some good and bad in that industry. But it seems to be the wave of the future. Kind of like the dot coms were back in the 90s. But it can also be overhyped, and I think that's where we're seeing it. And that's also where Druckenmiller who basically confirmed my suspicions as to where we are, I just feel like we're in the late 90s. Again, you know, watching this.com Bubble ready to burst. And in his opinion, we are in the largest bubble in the history of the world, we have never been in a bubble so big with the amount of debt credit cycles are peeking out, they typically don't last more than about 40 years. And here we are, again, kind of you know, look what happened 40 years ago, where we had, you know, interest rates, you know, in order to just curb the inflation cycle, interest rates had to be raised up to like 18%, you get CDs at 18%. I don't know that we'll get there. But we have so much debt, that just to service that debt at current interest rates, the government is in a in a hole, it's basically using up a huge percentage of GDP. And according to Druckenmiller, the US debt officially is around $31 trillion. But if you think about it, it's actually around 200 trillion because of Social Security, Medicare that they've already that they already know they have to pay out. So that's huge. If you're a corporation you'd have to report 20 trillion in debt, not 31 trillion so the government has to cook its books differently. So many entitlement spendings there's so security
Medicare, none of the parties want to fix it, they just want to kick the can down the road. But according to him, according to the big numbers, you know, Medicare and Medicaid make up about 70% of the federal budget Is that crazy 70% of federal budgets gonna be over 100% In the next 10 years. I mean, obviously, we have to keep raising the debt ceilings and everything else, or we have to fix it. Let's see the interest rates, the interest expense is about 2% of GDP and about 6% of outlays. The CBO estimates the interest expense will grow to 27% of outlays. 27 is going to go up like five times almost by 2050. If those estimates are correct, this is what happens to options, we have to raise everybody's taxes immediately by 40% forever, or we have to cut all spending by 36%, immediately and forever to make the math work out. So there are some economic cycles there's we're getting to a crossroads where some financial things are going to happen that are going to hurt and higher taxes may be the way out and people might just say, Oh, well, you know, the rich get to pay more taxes, but they're rich. So it's okay. And we got to do this because we got to save the world. All right, fine. But what happens to economy? What happens to economics? What happens to the stock market? What happens when if we have to raise taxes by 40%? That's 40% of discretionary income that can't be spent on stuff or invested in the market. So what about the government? If they're spending more money on on just satisfying and propping up or just servicing the debt? How much help can they give to other startup companies? How much contracts can they give? The government is a big source of redistributing wealth and building opportunities for businesses to thrive, you have to be well connected. And you typically have to be a crony of somebody who elected or you know, I mean, we know the game. But the bottom line is economy is generated in part by the government if there is any money left after they've blown it all on their entitlements and cronyism and paybacks, and whatnot. But there's a 500 year of history of asset bubbles. And this is this guy looks back at history. I mean, recommenders, the historian, he says, there's 500 years of asset bubbles that are well documented. You know, basically, every time there's been an asset bubble, economic trouble has fallen. We are currently in the biggest broadest asset bubble ever in the history of the world. In 500 years, when you have 11 years of free money, people do stupid things, all you have to do is look it up is that somebody actually paid $80 billion for Dogecoin. I thought it was 8 billion, it's 80 billion, which was invented as a joke. I mean, this has only happened a world of free money that where money is not even valued as money, he says is the most disruptive economic cycle we've seen since the late 1800s. Yet, there's still no bankruptcies. There's still a bunch of games being played. The Silicon Valley Bank is just the start of many to come, he thinks, and he has not changed his view that there will be a hard landing recession, likely by the end of 23. So in my opinion, would I want to listen to Wall Street who's trying to sell me their oversupply of, let's say invidious stock when they could sell it to me at three or 400 bucks a share? Because they bought it cheap at 75 or 80 bucks a share and not too long ago? Or should I listen to because they say, oh, invidious AI company is going to the moon, you should buy it. And they're going to sell it to me out of their inventory. In other words, they're betting against me. They're betting for themselves and against me, they're talking me into basically do they're betting or should I listen to Stan Druckenmiller, a billionaire that trades for himself and just has really just his own research to go on? And what is he doing? He's not buying going, he has probably some stocks he could sell. And he's not buying or taking on any new positions at this point. And he's never had a down year and 40 year career. He's not sure right now, if he's made any money on the short position, because right now he's down about 600 million in just a few weeks. But you know, we'll see if that kicks in and pays off. So bottom line is he's betting on the downside. He's a smart guy. He's one of the two smartest, biggest money managers on the planet. And they're worth listening to, you know, guys like Warren Buffett own like basically a mutual fund, they can't sell it go to cash. So I mean, you just have to, he just has to try to bob and weave through cycles and do the best he can with Berkshire Hathaway, he's a long term investor, these hedge fund managers, they're more tactical, they will get in and they will get out of the market. And they will, you know, say when it's a good time to buy and when it's not a good time to buy. And that was just some feedback I got that confirmed that in my opinion, well, it just confirmed my opinions are that we should stay in a safe place. It's better to make four or 5% in a safe place for the next six months till we see if in fact this recession happens. And if it's a bad one, aren't we going to be glad to buy 20 or 30 or 40%, lower than we are right now. And that's what he thinks that most corporate profits will fall by he says most corporate profits will by by will fall by 20 to 30%. Credit tightening in the next six to nine months is going to create the biggest problem with the recession. And that's what's happening. I look for smart people to help guide me and that's just what I wanted to share with you this week. You're listening to premier retirement with Jeff Hogan. And once again, if you've missed any part of the program, you want to hear it all over again. We are a podcast simply go to wherever you get your podcast search for Premier retirement with Jeff boven. You could also do it on Google. You will find this show and many other shows in the past that we have done. Jeff we're out of time for this week. I certainly want to thank you for your time but most of all, I want to thank our fine listeners here in the greater Tucson area for joining us for Jeff Organon Jeff shade get out have a great weekend. We'll talk again next week with another edition of Premier retirement right here. 790 K in st Tucson.
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