How Wrong Wall Street Was About The First Half of 2023

In this episode Jeff discusses how wrong Wall Street was about the first half of 2023 and what to expect for the 2nd half, which is best for your estate plan - a will or a trust, longevity risk, and listener questions. 

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 in retirement 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 Vogan, with Jeff shade. Thank you so much. Welcome to premier retirement with Jeff Vogan, 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 the economy it didn't really crater in the first half of 2023. And that means Wall Street was very wrong. And they'll probably be wrong about the second half of 2023. We'll get Jeff's comments on that. Also, we'll be talking about which is best for your estate plan, a will or a trust, how to calculate your life expectancy. And of course listener questions and more. My name is Jeff shade, and I'm just here to ask those questions. But of course, the words of wisdom is solid advice come from Jeff ogen, founder and president of Premier retirement planning and wealth management. Jeff, how you doing this weekend?
I'm doing great. How are you doing?
I'm doing great. Thank you. July 4 is finally behind us here. Did you have a good July 4 weekend, maybe a little cooking of hot dogs and hamburgers on the grill with the kids?
That's exactly what we did. Dogs hamburgers at the pool. We spent a couple of weekends up at the last two weekends actually up at the cabin. Yeah, my nice cool weather got up into the high 80s which was certainly better than turning to the valley and the 112 rain. It was kind of nuts. But we got over that. And then, of course works starting up, you know, middle of the week, but we have a pool and you know, yeah, my son bought one of these little blow up slides that Oh yeah, yeah, sure. You put water on and stuff like that. And fantastic when using that and a couple of last parties and I've got let's see two birthdays happened this week. My oldest daughter Whitney Whitney had her birthday on July 5. We got a couple of firecrackers. Yeah. Good for her for her and my my youngest grandson Lincoln was also born on the fifth of July. Wow.
Well, it sounds like you had a busy holiday weekend. I'm glad it was good. celebrating America's independence and the birthday. 247 years old so far. Well, Joey Chestnut had a good weekend too. If you know who he is he inhaled 62 Hot dogs and bonds and 10 minutes to once again when the Nathan's Famous Hot Dog Eating Contest his personal bests was 76 but still impressive. I mean, 65 Hot dogs, I would imagine. What do you think GHS not never eat hot dogs any other time of the year probably despises them.
Yeah, I don't know. You know, maybe so interest in that $1,000 report or whatever it is. I know it's or what it was a lifetime supply. I don't know what it is. It's not worth blowing your body up. Now. I can't imagine somebody unless you're a genetic anomaly that has a stretchable stomach that gets bigger than a beach ball. Or you must have to have some pre surgery to re invent your stomach is something that's elastic that can hold that many hotdogs. I just don't get it. I'm going to get on my fourth one. Well, I can't imagine
it's all about the fame part of it too, but I think they probably should. That's a good point. You probably should check him to make sure there's no scar from enlarging his stomach you know, it's the opposite of weight loss surgery. He wants to make his bigger but nevertheless more power to him. I mean, I know the name Joy chest not so I guess he's achieving his goal. But he doesn't look too healthy. I mean, hotdogs, not the best thing for you. Well, anyway, let's get into our show today. Jeff, as I said, the economy didn't crater in the first half of 2023. And that means Wall Street was very wrong. And I'm gonna give you some examples here, the start of the year, the top forecasters were predicting the s&p 500 would have a bad first half as the US would slide into recession will the reality the s&p 500 turned into stellar six months rocketing 17%. They said the index would end in 2023, around 4000. It's already 4500. And as far as the recession, we are still waiting on that. So I guess Jeff, the question is, should you really take with a grain of salt, the things that you hear on the radio or you see on TV? Do these prognosticators really know more than you or I do?
They really don't in my opinion. I mean, history tells us more in my head, you know, history generally tells us more but you know, even sometimes that's weird. I'm kind of old school, you know, I was taught this business, you know, 30 plus years ago when fundamentals actually mattered, you know, earnings growth, that's good. There's a certain realistic price you pay based on price earnings ratio, growth potential versus that price earnings ratio can be higher if the company grows faster dividends, I'm not really a dividend guy. I'm really more about what you keep that matters. There's a lot of companies paying dividends that you know, have gone down like a big one, at&t, I mean, it's gone down over the last five years about the same amount as dividends they've paid out so in my opinion, that's a breakeven deal. You could have done that in the bank without you know, watching your stock go down. Yeah, but we get the dividend. Well, they can stop that dividend anytime you want to. You've got companies speaking of debit has like GE General Electric, which has paid dividends since the 30s. And you know, I think just for a brief moment may have missed a few but after like 100 years, but they're paying a dividend again, isn't that exciting? Their dividends? 30 cents and the stocks over $100? So that's less than a third of a percent. Is that a dividend stock? Do you buy it just because that No, right now people buying GE because it's growing and, you know, shoots up, I think, probably 100% Last year, because they're selling all kinds of jet engines to everybody from the big guy, airplane makers to other people. So there's different reasons to buy a stock. I mean, maybe you bought ge 100 years ago because I paid a dividend, but right now I buy it, because it's getting a lot of sales and the earnings are actually up that actually has some fundamental underpinnings to make it a reasonable buy. But what really scares me is this AI craze which has caused six stocks, six stocks out of the s&p 500 to basically equate to all the earnings or all the growth of all the other 493 stocks are about even the other foreigner 93 stocks more are down than up this year, which means breath means the market overall is not performing. So yeah, the prognosticators I think were right about the performance of the market in general, that it was going to be soft, that there wasn't going to be a lot of earnings growth for many of these companies. A lot of the companies are you know, we've got that chat GPT Microsoft's behind that one, and that's been driving its entire stock, rebound, Apple, it's always got something, you know, around the corner, that it can, you know, dangle out there and make people excited about buying Apple, Amazon's got some, you know, they're trying to get in the AI business and you know, develop chips, Tesla, they're going to do their own ship but invidious going crazy. But the AI business, artificial intelligence business, I just read a report just a couple of days ago that said that there's probably about $2.4 trillion in total growth or total realistic revenues over the next three or four years in the AI business. Okay, so that's in the next three or four years, yet, there's been like two or $3 trillion in market cap rebound growth. If you count in Vidya and other companies that have rebounded just based on this rumor now. That's just in the total market cap, and that the capitalization of the price of those stocks, the price of those stocks has to be diluted by earnings, not revenue. So we're talking about a couple of million in revenues, yet the value of those six stocks have gone up more than that. So, you know, how does that justify overpaying paying based on revenues, rather than earnings? I mean, who knows what AI is going to really do. So a lot of that's been speculative. So we've got seven stocks driving the market that is speculative. So I think, you know, it comes down to the prognosticators they're looking at the overall economy. Yeah, it's going to be flat. I think they jumped the gun as far as thinking that there was going to be a recession right away. You know, if you look at history, and I've said this before, that, you know, after the inversion of the interest rates, when the long term rates basically go lower than the short term interest rates, we have this inversion cycle that has happened seven or eight times in the last 3040 years. And every time that it happens about 11, to 14 months later, is when the recession happens on average now could happen a little bit sooner, but typically, it's like between six and 24 months, but more often, it's the 11 to 14 month range. And depending on when you say you notice it, or when it actually starts, we may actually already be there. But we just passed the 12 month, one of the 13 months. So we're still in that range, when recession based on that yield curve, inversion would actually take place. So, you know, that's usually when we get the fear coming back into the market, people start selling and so forth. But, you know, keep in mind, the prognosticators as you call them, the gurus that are supposed to guess where the market is the chief investment officers of the big companies are saying, you know, earnings growth is not going that, well, you know, the cost of borrowing is huge, only the companies that have hoarded cash at low interest rates are going to win on this one. And if you haven't, you've got to pay double or triple the interest rate you were paying just a few months ago. And that's gonna cut into earnings also and cut into the infrastructure growth of these companies, the growth in the manufacturing growth, and a lot of things that drive the growth of the companies in the future are stalling out right now. So you know, that's why we don't see a lot of institutions buying the stock. But we do see that liquidity even though our Fed is reducing liquidity by contracting the money supply by raising interest rates, there's still a lot of money out there coming in from UK, I think there's been three or $4 trillion come in from other countries. And those are the country investors, by and large, don't like their own markets. And so they've been jumping on this AI bandwagon and the American stock market and pumping some of that money into the market. So we've got a liquidity issue that is being created from around the world globally, that is affecting our market, even though our markets trying to push off that increase of capital and get inflation back under control. I mean, we're still well above 20% inflation from where we were when Biden took office. And that means there's 20% Less buying power than there was just a couple of years ago, the payment, the average payment on the typical average house has doubled just because interest rates have more than doubled, the prices have gone up. So you consider somebody used to be able to buy a house for 12 or $1,500 a month. Now they've got to pay 2500 to $3,000 a month to buy that same house Oh, and come up with 30% more on the down payment in order to get into that house. So there's a lot of things from the standpoint of the average consumer that are not going to be able to prop up the economy much longer, and we're gonna see that kind of filter out, we also have what's called the credit cycle. That's when credit needs to be contracted, and banks get a little bit skittish about loaning money. Another article I read just recently this past week is that banks haven't been tighter on money since before the 1990s. Meaning when the dot coms became top pumps during the 90s, when it got crazy when every bank would throw money at anything that was related to real estate or not, not so much real estate until the early 2000s. But anything that had to do with internet and stuff like that got a lot of looks and a lot of investment attention. So, you know, we had this crazy market go up, but and then we had the real estate craze followed right after that. So banks have been very loose on money. In fact, the last decade, they've been very loose on money, because Sure, they can borrow money from the Fed for 0%, loan it out to you at two or three or four and still make a ton of money if if you consider those margins, double and triple their money on the interest that they pay versus what they get. In fact, most banks make a lot more than that, because they charge points, fees and other things that enhance the rate of returns too much higher than that. Bottom line is our money supply is tightening banks are getting tighter, the credit cycle is turning. There was a interest rate inversion, long term short term interest rates, we have too many things that in my mind show that we have to kind of hit those crossroads where things are going to shake down. And we've got to have that correction we've been waiting for. It's been pushed off a little bit. There's been a lot of hype that's driven that I think too many people listen to hype and don't look at fundamentals nowadays. Does that mean we get in the market? Because there's a lot of hype and there's some liquidity coming in from other countries? Or do we look at the fundamentals say you know what long term fundamentals still matter and do what John Templeton did and John Bogle and those other people that said, the best way to make money is by when everybody else is selling and sell when everybody else is buying right now everybody else is buying, so might be a good time to sell. And that's why a lot of these market makers, the Merrill Lynch's Bank of America, Citi corpse, JP, Morgan's, Goldman Sachs, Morgan, Stanley's, all these big guys, based on what I've read, are not buying and sucking up all these stocks, they're not buying a video at 400. They're glad to sell you their inventory at 400. And let you think it's the best thing since sliced bread. So again, consider the market is not your friend, it's usually against you, the adviser sometimes claim things are going to happen, because that's what they want to suggest the power of suggestion drives investments sometimes, or they're just flat out guessing. And they want to guess, right? And if they guess, right, they're a guru for the until they guessed wrong. And if they guess wrong, then they just revise their claims, like so many investors are doing right now. Oh, the markets up? Well, let's just revise it a little higher. However, based on your original question. I know I went a lot of directions right now. Because you know, I wait a whole week to talk to you again. Right, but, and I have all these things on my mind, I just want to dump out. That's all thank you for just sitting back listening. And I hope the listeners aren't bored yet. But bottom line is, a lot of things are happening that still look like fundamentally, we've got to go through this long awaited correction that didn't happen the first half of the year, just looking at history, the cycles show that it should happen the last half of the year. So I'm still expecting that that's why we're not back in the market, you know, our index annuities are going up when the markets going up. That's good. And the nice thing about that is they're locking in the profits. Our non market stuff is still making, you know, four and a half 5% private equity is making eight or more consistently with no or low risk. I shouldn't say no risk, but very little risk. And you know, so we're in a good place. If the market continues to surprise us, we're still making money and we're not losing if the market turns a corner goes down, we're not going to be in a position to get our butts kicked either because, you know, just like the markets gone up a little counterintuitive. Lee this year, so far, especially the NASDAQ, the one of the tech stocks, it could slip and went back so fast with just the wrong Newsflash, or just a little bit of selling where one of these market makers, one of the big institutions decide to just get rid of the rest of their portfolios of all these overvalued stocks that are 234 or five years ahead of their time price wise and dump them when the markets good so that they can buy them again low. And then when everybody freaks out and sells out later. That's how the Wall Street people get richer and how the rank and file investor gets poor and has to regroup and start over and come back and Wall Street doesn't care. They're there to make money. And I'm not dogging on Wall Street. It's a good place to make money when fundamentals support the uptrend. When fundamentals don't support the uptrend, there's better places to be. And right now that's where we're at.
So Jeff, it sounds like fundamentals. That is the key word there. If you're listening to the program today, and you're interested in how to navigate what's going on in Wall Street, and you really want to ignore the misinformation that you hear on the radio and the TV, obviously, except for this particular radio show, get in and sit down and talk with Jeff and get the straight talk and the honest answers about your particular retirement journey. We call this the premier retirement roadmap that we're offering at no cost and no obligation whatsoever to get yours call 5207809 59. It's 5207808 9059. As I said, straight talk and honest answers from Jeff. This is a discovery process for Jeff to get to know you and for you to get to know Jeff and find out what you are looking to do in retirement or retirement hopefully that you will thrive in and not just survive. Once again, there's no cost or obligation to this retirement roadmap. It'll take take about an hour, but it could be the most valuable hour that you'll ever spend in your life. This roadmap includes an income plan investments to support that income plan, also a tax plan, health care plan and an estate plan. And once again, no cost, no obligation call right now, if you want 520-780-9059. To request it, you can also go online to Prem ret.com, pr EMR e t.com. and request your retirement roadmap right there, p r e m r e t.com Get started today, Jeff, part of a comprehensive retirement plan, I think involves legacy or an estate plan. And I think a lot of people are confused about whether they should have a will or a trust. So let's break that down in this segment for people, first of all, when is a will good enough and you don't need a trust or you always need to trust
Well, you don't always need to trust. In fact, I was just listening to some commercials by a an estate planning firm, they're actually building out an estate planning firm, they're a trust mill, they just do trust you trust, they always claim that they're gonna give you a 65% discount when they never charge the full price to anybody ever anyway. But in other words, he said it was normally 5000 bucks for you today at 1700 bucks, right will be due. But they also say if you don't get a trust, you could lose millions of dollars in probate, lose your assets and be caught them in court for years. Well, you could be but it's not likely if you've got beneficiaries on your assets. You can even do a beneficiary on your house, you can do beneficiaries on life insurance products, annuities, CDs, called pod Pay on Death, you can get totally out of probate without a trust. So there's kind of a misinformation there misinformation campaign on trust. In fact, there's another they claim their retirement focused planning firm, they'll just basically try to do anything for anybody kind of, you know, shotgun approach to financial planning. And they're here to have a lot on the radio to that I don't consider a competitor because they're not niche marketers like us. But they're now adding trust services to their portfolio and talking about Oh, get a trust in there scaring people and thinking that they're going to go through probate Now I will tell you where you will go through probate. And this is true, if you have a will, the only place to really read that will is in a court process or to basically determine who gets what through a will a will is a court document and it has to go through the probate process. So I would do things without a will. Now if you do a trust package, I'm not saying trusts are not good. I mean, I've probably done three or four trusses in the last few weeks for clients or new clients or done revisions, you know, the reason you might need a trust is because you want a trustee or someone in your family that you trust or someone a friend, maybe you don't have kids, you want a brother or sister or somebody take care of your state and make sure that all your assets get to who you want when you die with the least amount of trouble and taxes and other things. So you want a trustee or somebody you trust in charge. So that's why you would do a trust, you might have kids that, you know, three of them know how to spend money. And two of them are just really horrible. Or, you know, I had a client that had a son who was in Las Vegas and, you know, got caught up, he was a musician but got caught up in drugs when he was in and out of rehab, the last thing they want him to do is inherit half a million dollars or actually in this case, it would have been a couple million dollars that they did pass away. But you know, sister had to be the trustee. So a trust basically helps you control from the grave how your money goes, and how you might want to set up distribution processes and stuff, if you leave it to the court to decide. And you have a whole bunch of people talking and sharing their opinions that the court doesn't know you, they don't know your kids, you're gone, you can't even you know, express your thoughts because you're long gone from this earth, then who knows is gonna win, they don't really do it by a jury. It's just kind of a bunch of lawyers talking and getting and setting up some sort of a parameters, all the while they're charging you four or 500 bucks or more per hour, because you're dead, you can't even negotiate the fee, but your kids want your stuff. So they're willing to pay whatever. And the legal system ends up confiscating a whole bunch of it. So that's the process with a will. So I would not recommend a will almost at any time. However, if you have a trust portfolio, or even if you don't, it's probably good that we call a pour over will or a backup will just in case for some reason you get dragged into a court process where somebody is trying to figure out how your stuffs supposed to go because they didn't have a beneficiary designation on it or you didn't have a beneficiary deed on your home. And it was just owned by two people who both died. And then it would follow what's called intestate succession laws, which means it would still go to you know, a spouse and children and things based on what the court says the normal distribution should be. However, if you want something different than that, or you have your own mind made up of how your stuff should go or where it should it up, you should be able to say that so you can still put it in in a while you could also do a trust, which many of our clients do, and you spell out all your wishes to how your assets should end up. And the will that goes along with that particular document would be a will that says hey, whatever I said on my trust is how you distribute my property, that trust prevails here. So let's not go through this court process and just you know, point to the trust and it's already laid out for you. Let's not go through, you know, deliberation on you know, what might be a better distribution, because it's already laid out here for you. So a wheel can be a companion in a way to a trust just in case there's things that are left out. But if you're really thorough in the way you plan, you can have a probate without a trust and without a will you just have to make sure that everything has a direct succession listed on it. And nowadays, everything pretty much does. The things that don't would be called the pickup truck estate plan. That means all your personal property is sitting in there. House, all you do is you drive up your pickup truck, load it up, take it to your house, and it's yours. I mean, there's nobody really watching how many spoons and forks and knives, you've gotten the silverware drawer, they don't, nobody's gonna remember, you know, if that was a real Kincaid painting, or it was a fake, I mean, who cares? I mean, none of that matters, right? So the court doesn't even matter. But if it gets to court, oh, they'd love to, you know, try to send people into value all that stuff and make it part of the probate estate so they can milk more and more hours and somehow feel like there's a price to pay. Some people avoid the court system, and they have trust, or they inherited trust from their parents, they think, Oh, I better get a lawyer to help distribute it. There's a lawyer in town and I, I'm not gonna say names, but actually has more than one way to tell. But there's one that has a great reputation, you know, at his church and all this kind of stuff, and people will go to him and and Phil, he'll charge you like two to 3%, just to distribute your assets that you've already gotten a trust in you, all you have to do is ask for them. So you got a couple of million dollar estate and they're charging you 60 or $80,000, just to move your stuff to you that in my mind is a ripoff. So don't get caught up in the hype of somebody has to help you with your estate plan, you can direct it now you can set it up and just understand how the system works. We're certified estate planners, I am because I was tired of people being misdirected. Misled, I'm not an attorney. But you know what you can do courses and classes and get up to date on and be certified in estate planning, understand what the rules are, how to jump through the legal hoops and comply with the law that is in your state and do just fine without a lot of legal costs, and so forth. So, you know, as one of those five pillars of planning that we offer, you know, estate plan review is also what we do if you don't have an estate plan, we'll build one, or we'll at least include the way we set this up with the accounts in your estate. And if you need a trust, we'll get a trust you need a Will you need well, we'll probably do both, we're not going to do just a well, because that's that's again, that's kind of a set up for Direct problem with the probate issue. Now, here's something that people don't realize is there's other things that are involved typically in a trust portfolio, which I think are invaluable, not only valuable, they're necessary and that is powers of attorney because you might not just die in your sleep, you might actually live for a while invalid and need somebody to take care of your bills and take care of your medical advice and make decisions on your behalf when you can't do it for yourself. Powers of attorney have very important health care and for medical, make sure they have HIPPA releases so that whoever's in charge of your power of attorney for health care can actually receive the information about you from your doctors and caregivers so that they can make proper decisions on your behalf living will that is an important document as well a living with what is that that's the one that says if I'm brain dead in a persistent vegetative state, I can have the blood poll, I can go meet my maker on my terms rather than be lingered and kept alive because you know, Medicare is going to continue to pay a bill for me to be on a machine for another year, if somebody says it's okay. You know, I don't think everybody's kind of out for that. But the medical industry is a business. And I do know that it can be manipulated, unfortunately against you and for their benefit. So again, take it into your own hands control that with your powers of attorney living wills. There's also community property agreement, you can make all the property that you own in a trust as community property, why would you want to do that? Believe it or not, if you own it, and just joint tenancy with rights of survivorship, when a spouse inherits it, you don't get actually a step up and basis on that half. But if you have any joint tenancy with community property, you do actually get a step up basis when the first spouse dies, which is kind of cool. So when the first spouse dies, you have a new basis for all the stuff you bought. And if you want to sell something, there's not going to be a capital gains tax on those things. So that might be one reason to have a trust with a community property agreement attached that all trust property is treated as community property gets that tax break, or you could do it a lot of my clients do that don't have trust, and that is to make sure that you take it in you own your house and other things in joint tenancy with community property with rights of survivorship and community property, joint tenancy and community property with rights of survivorship. So bottom line is, you know, while there are some applications for a will, generally speaking, you don't need a will I prefer not to a trust may be the answer. But you don't even need a trust, the best thing to do is, you know, talk to a certified estate planner, or somebody that knows the business inside and out doesn't have something to sell you, but help you understand what options are available to you. But there's many and it might not be just what the guy in the radio is trying to sell you that day. So learn the options and do what's best for you.
And of course, Jeff is a certified estate planner. So if you have questions about wills versus trusts once again, give Jeff a call at Premier retirement 520-780-9059 and get your retirement roadmap that does include the question whether or not you need a will or a trust 5207809 59 To request your plan online no cost no obligation at Grim red.com br EMR et dotcom time for a break Jeff when we come back listener questions and more when premier retirement continues here on 790 K in St. Tucsonans most stimulating talk
if you're 59 and a half or older, you may qualify for the 401k breakout. Hi, I'm Jeff Vogan. From premier retirement planning and wealth management 401 k's are a great way to save money when you're in your younger working years, but they're not always designed for those in or nearing retirement. So if you have the bulk of your savings and 401k is compromised retirement planning and wealth management at 520-780-9059 You may be able to break out of your 401k without penalty to find out schedule a complimentary financial review today with the retirement pros at Premier retirement plan. Adding a wealth management you've worked hard to earn and save. Now it's time to put your money to work for you. Call 520-780-9059 or visit Prem red.com. To see how easy it can be to minimize risk and grow your wealth in retirement, call us at 520-780-9059 or visit premier att.com. To learn about a financial plan designed around your needs for today and tomorrow
investment advisory services offered by Premier Wealth Advisors LLC and Arizona state registered investment advisor. Welcome back to premier retirement with Jeff Hogan, founder and president of Premier retirement planning and wealth management in Tucson and Mesa. Glad you could join us this weekend. We've got a lot of great information to come on the show today. By the way, if you've missed any part of our program today, or you want to hear it all over again, we are a podcast. Simply go to wherever you get your podcasts and search premier retirement with Jeff Hogan. And you'll find this show and increasingly many more right there because all of our shows are going to be archived on our podcast platform. Again, it's wherever major podcasts are found. And you can also hear our show on our website at Prim. ret.com prmret.com. By the way, we're going to be on YouTube as well. And if that confuses you simply go to Google and search premier retirement podcast, Jeff Hogan, and you will find our show. Okay, let's get to listener questions this week. Jeff, our first question comes from Jesse who's listening to us in Oro Valley. And it's related to social security. Jesse says, Hey, Jeff, I love the show. And I have a question about Social Security. I started receiving payments at my full retirement age in December 2022. My financial projections have changed and I want to reverse my decisions. It's my understanding that I have a 12 month window until December 2023. To do so I know, I'll have to pay back the gross amount received today. But are there any other consequences of reversing this decision?
You know, it just depends what your situation is. Because, yeah, I mean, quitting within a year, and paying back is definitely an option. But you know, it just depends what your goals are. And you know, without the context of your entire estate and financial planning, probably hard for me to say, you know, is there any detriment or lack of benefit, I mean, there's some people that are scared that the Social Security Trust Fund when it goes broke in the early 2000 30s, right, you know, that maybe they'll make some sort of an adjustment to your income based on kind of a needs based system, perhaps, or whatever. So for some people might say, You know what, I'm going to just collect every bit of Social Security I can, because if they change in the future, at least I can reinvest the money and do something myself, and I at least have my money out of the stress. But you know, I don't know, if you're in such a high income bracket with the rest of your income and so forth, that you would end up losing any benefits or if they're even going to change the benefits, or they're just going to start printing money again, which is seems like the solution the government has found works most, which just means higher stock market, higher inflation, and all the other negative effects to the rest of the world that everybody in the country, you know, just for a higher social security benefit that might end up getting spent and eaten up just based on the inflation of the bad economy anyway, that it would create. So again, there's a lot of what if down the road, you can if for whatever reason, you've decided you just want to give it back and start over? That's fine. You're right, you just pay it back and take it again later. And that's your new number. So I don't know if that answered your question. But I would like to look at it in a bigger setting than just I'm taking the Social Security and you know, what are your financial projection? If it changed? Well, okay, what is your financial projection? And what are you basing that on? Right? Is it based on the stock market growing at 12%? A year, but I think that's a bad projection, you should probably say, you know, that's let's just consider we'd be lucky if we have a last decade, and that grows zero. And if it grows at 12, great, that's gravy, but I don't know that we're gonna go into I think we're gonna go on a roller coaster, right. So it just depends on what your philosophy is about the markets where your money is invested if you have annuities that are going to guarantee you more income than you need, and you can wait on Social Security and or if you're doing Roth conversions or other tax planning right now. So you don't need the income because it's going to force you into a higher tax bracket, while you do those tax maneuvers between now and 2026. When the well 2025 is the last year, we can do it under the Trump tax cuts before the tax code changes, and we get a higher tax brackets, which means you'll pay tax on more of your Social Security in three years, and you would pay now given the fact that you'll make more but at the same time, there's a portion of social security that's tax free, which means if you wait a few years, then you're gonna get a bigger paycheck theoretically, or presumably, and a bigger chunk of that is going to be tax free. So I think the best reason to not take Social Security right now is if you're busy doing some tax maneuvers, so that you can get a higher paycheck that's tax efficient from Social Security later and not be forced to try to on your assets at RMD required minimum distribution time at age 73 or 75, depending on how old you are right now. So that's my two cents.
And Jesse Jeff is right here. He needs a little bit more information. But if you are at full retirement age, of course, you can make as much as you want while taking Social Security. So it can't be that but you are right. You can undo or redo social security within the first 12 months from the benefit approval. And you're correct. You do have to reimburse any income that you've received from Social Security from the time that you got your first check to when you're stopping it. Now that's also going to include Just a reminder, any Medicare premiums or taxes that were withdrawn from the paycheck prior to getting to you. So let's say you got 2000 A month, but you had a $500 a month Medicare deduction prior to the 2000. Getting to you that 500 is going to be part of the reimbursement that you have to do. But good question. And again, I would encourage you to call Jeff to give him all the information so he can give you a more comprehensive answer. And that number again, 5207809 e 59. We appreciate you listening to us. Next question is from Pat in Alta Vista. And this is an investment related question related to reinvestment of dividends during the D cumulation. Phase. Pat gives a bunch of background but I'm gonna get to the essence of it here. Pat says we have dividends and interest that we've been reinvesting in both taxable and non taxable accounts. Since the get go, our living expenses will be more than our pensions, dividends and interest. So we'll need to sell off some of our assets, ETFs, and stocks to cover our living expenses, I understand the advantage of compound dividend reinvestment, but in thinking since we need to sell assets to cover expenses, we might want to stop those reinvestments and long term care and reinvestment. So in order to have more cash flow coming to our account, so the core question is, what do you think about stopping automatic reinvestment in dividends?
Well, depends on you know what you're taking them out of, I mean, it might be smart to continue to do the automatic reinvestment of dividends in your non qualified accounts. For example, I mean, you're paying tax on those anyway, because they're coming to you in a 1099. Maybe you want to draw down your IRAs in order to just not be in a situation where your cash flows, you know, impaired even more by the taxes on required minimum distributions that might get high, depending on you know, how old you are now, and by the time you get into your 70s and 80s, and have to start taking that money out. So you might want to just look at doing that on different accounts, looking at the overall picture, again, is it's really hard to answer one question without being in the context of your entire plan your entire income, picture, tax picture and other things. That's why we do an entire comprehensive plan. That's why we spend two or three visits with a person before we even ask them if they want to come on board, we got to figure out if it's a fit, they've got to figure out if the plan makes sense. And you know, when the questions come in just, you know, one part of the plan, there's a lot to look at, I hate to sound ignorant, but I mean, I'm not I mean, we could do a lot with this question. But bottom lines is, it just depends. You know, I think the fact that you've saved and reinvested, you have enough so that as you withdraw your principal and interest, you know, hopefully you have enough to outlast your income and your life expectancies that may be better done, because one of the things that happens when you start divesting and not re investing dividends and interest is you do what's called negative dollar cost averaging what you've been doing up till now is dollar cost averaging. And it doesn't really matter if the markets up or down as long as you're reinvesting those dividends, shoot, if a stock goes down 50%, a dividend that used to be 4%, is now 8%, you get by 8%, double the amount of stock you could have bought before the market went down. So when you're in the accumulation phase over the last few decades, that dividend reinvestment plan is awesome when you're taking money out on a regular basis, the valuation fluctuations of your stocks, so the price of the stocks regardless of whether or not dividend interest paying ETFs or whatever, you're gonna have to look at what that does, what the volatility might do to your cash flow and to projections going forward. I prefer that if you need a certain amount of income to cover your expenses, your needs is you do that in non risk accounts, non risk, no risk, insured, preserved accounts, I know if you're just a wall street person, you've only done stocks and bonds and dividend stocks, you may think that's the only world that's out there. And you have to just change strategies with the same product and the same vehicle you don't you can change vehicles, you can buy a garage full of different vehicles and drive a different one every day. You just diversify. You know what you have into the different strategies, things that are more tax efficient? You know, maybe you want to do some Roth conversions. So you save some tax in the future. When it comes down to this. What's the bottom line? How much you're going to get to keep to spend, how much are your expenses? How much shortfall Do you have? How much are we going to have to draw into principle? And would you like that principle to be guaranteed as long as you live? No matter how long you live, there are annuity companies that are insured and secured that if they underperform their expectations, they'll still pay you a paycheck till you die. And we don't know what our life expectancies are these days. I mean, we keep living longer longer than we expect. Most of my clients think they're gonna live. Well just do my plan for 10 or 15 years, you know, in 10 or 15 years, you're gonna wish you did it for another 20 or 30. Because you're still kicking and you think, Oh, she's they got this new medicine and it cured me of my whatever. And I'm living longer than I thought I would well yeah, welcome to the new age of aging as you get a lot longer time to play, read the retirement cashflow game, because people are living longer, and you might be one of those people or your spouse might be. So again, I would look at your overall assets, give it a reasonable rate of return. But don't count on anything that's at risk. And the dividend reinvestment program is great, that's great for money that you can afford to maybe wait on maybe you convert all your assets and IRAs and Ross's things to income plans that'll guarantee you your 120 130,000 a year and then maybe you invest the other half million or million in non IRA assets into those ETFs that you know, don't actually they can actually reinvest the dividends and interest internally without causing you a tax problem. So Again, I would look at the overall picture, we'd sell the things that cause you an unknown tax problem, like some of the mutual funds and non qualified accounts, I think are a bad idea cuz you never know what they're gonna make, generally speaking, the trade so often, you're gonna get a tax bill you don't like on good years, and you might not get the losses you expect, even in the bad years, depending on what they buy or sell. So anyway, I've probably covered a lot of things that may be nebulous with some of the listeners, but ETFs. And mutual funds, for example, are taxed differently. So you might want to consider that in the non tax qualified accounts. If they're in an IRA, they all get taxed the same. You'd pay taxes, when you pull the money out, you don't pay taxes until you pull the money out. Unless it's in a Roth, you already paid taxes once, you don't have to pay taxes again. So again, look at everything taxes, the way they're taxed, how they grow, and you will kind of guarantees they give you as far as income that might even exceed the account, should the account run dry, because the only thing worse than dying is outliving your money. And I had one person say when I asked that question, I said, What's the only thing worse than dying? Well, I don't know having to move back in with your kids. Like, yeah, that would be a bad thing, right? That's kind of retirement failure unless you really love your kids. And they have a really big nice house. In fact, that might be the better retirement plan if you have that situation arranged. But the bottom line is most people want to retire on their terms. They don't want to have to move in with their kids, even if they are rich and have a big house. So do it on your own and make sure you're okay,
Pat, thanks for that question. Thanks for listening to us in Alta Vista. And of course, you will get Jeff's book retirement the road ahead in just a moment. I'm going to tell our listeners how anybody can get retirement the road ahead. But right now we're going to take a hard right turn and answer a question from Brad in Tucson who's wondering about a financial advisor and Brett is one of the younger listeners I would imagine of this show because Brett is only 38. He has about $200,000 in retirement funds that he writes when should I consider a financial advisor write down why I'm following the Bogle heads three funds approach, I'm single, I have no kids, and I'm not expecting any either. Currently I make about $80,000 a year I have a $40,000 emergency fund and currently putting about 27% into my 403 b and a target date fund with Vanguard any advice would be appreciated. So when should Brett consider a financial advisor?
Well, if the sum total of all your investments is 20%, and your 403 B industry Vanguard, first of all, I would not use target date funds, they're typically inefficient and don't outperform just the s&p ETF that Vanguard has the lowest cost way to play the market dollar cost averaging, you're, in my opinion, you're too young for a financial advisor unless you have maybe 200,000 in income you're living on 16, you have an extra $100,000 a year you can put away or even 50 or $40,000 a year you can put away in things other than the 403 B sounds like you're maxing it out. So you're just gonna be on a tear to dollar cost average into the market. Even if we have what I expect is kind of a choppy decade ahead of us kind of like the last decade of the 2000 2010, I think we're probably going to go into a kind of a similar pattern just based on the credit cycle we're in. And that's the thing that nobody addresses, there's more than just the market cycles, there's credit cycles, meaning how banks loosen and tighten loans. I mean, the Feds help and tightened up the loans just by raising interest rates because the inflation situation has gotten out of control because of all the money printing. So the government hasn't done us any favors by printing money, they've just kicked the can down the road and made it look like the economy's better than it is they've created some huge market caps and some these behemoth companies, these huge, huge companies that are now trillions of market cap size, by printing money, many of the smaller companies were able to use that too, but they're gonna get squeezed. Bottom line is I think we're in a choppy market. So I wouldn't even try to time I would just dollar cost averaging. And if you're planning on working 20 or 30 or 40 more years, you're going to have two or $3 million minimum in your retirement accounts. If you keep on the pace that you're at, when you get to be in your 50s that's probably when you ought to look at more of a comprehensive plan. However, there is one thing I would suggest that you might want to look at, maybe you need an advisor, maybe you need to just come by and just look how you might want to round out your plan 80,000 A year, I'm guessing you're living on everything else. I mean, between your taxes and stuff, you know, I mean, you're living maybe on 40. So I don't know that there's a lot extra. But you know, if you start getting some raises, I would consider Merp life insurance retirement plans because they grow tax free, they won't probably grow as fast as what will end up being taxable to you in the 403 B. I mean, I anticipate that by the time you retire, even if you had three or $4 million in that 403 B because a compounding interest dollar cost averaging and the fact that you're putting a good chunk in every year, you're looking at over $20,000 A year going into that in addition to the fact that you've already got 200,000 in that investment, I mean, I just don't see it worth less than a few million dollars. If you keep on that pace. If you're in your mid 60s, by the time you retire. Here's the deal, though, as that money comes back out, you're probably going to be spending close to half of that in taxes. So you might want to consider doing that 27% in a Roth version of the 403. B if they have it with your company or with your school or church or could be medical usually does 403 B as well. But wherever it is find out there's a Roth version, you might want to pay taxes on it now while you're still in a reasonably low tax bracket compared to what you will be at the pace that you're setting up for yourself. So either do it now or maybe add a life insurance type retirement plan where it grows tax free and in the end you can actually borrow against it rather than take the withdrawals out the thing with the Roth is you will be taken that money and spend To get down with the life insurance, there's some additional advantages that you might want to consider maybe diversifying into. So from that content man, maybe you got to look at a financial planner that doesn't have just, you know, stocks, bonds, mutual funds to offer like Vanguard does. But if you're just trying to make the most money you can over the next 30 years, you're doing the right thing you're living on less than you make, you're saving a chunk and you're you're on the right track. So if you want to add to it, get an advisor that but not an advisor at Vanguard, because they're not going to do anything for you. You can't do I get an advisor that's more like a fiduciary that does comprehensive planning that might be able to add something that Vanguard doesn't offer.
And Brett I would suggest, of course, Jeff there at Premier retirement we appreciate your listening to us sound like an intelligent guy H 38. On the right path and of course intelligent because you're listening to this program. Everybody who sends us a question, of course is going to be sent out the book retirement the road ahead by Jeff Bogan, if you would like to get us a question, you can get it to us, I think the best way is to go to premier att.com prmret.com right hand corner there on the page, it says contact us send us your question there. If we answered on the air, of course, we'll send you a hard copy of just book retirement the road ahead now if you'd like to download a copy of the book and read it today, or tonight, or whenever you can do that by going to Prem red.com. Going to the upper right hand corner where it says resources first habita that is going to be book and in this particular book, Jeff dives into his approach to successful retirement. He pulls from personal experience and years of course hard industry experience success stories of his own from his clients and family and friends. And Jeff really just helps you understand the possibilities as well as the challenges ahead from risks to retirement, Jeff is gonna keep you safe on every page. It's called retirement the road ahead, you can get it right now you can download it at Premier att.com Resources tab and click book. Once again, if you'd like to get in and sit down with Jeff and get your retirement roadmap 5207809 59 is the number to call no cost, no obligation, no judgment 5207809 at 59. You can also request that online at Prem ret.com Pru Mr. et.com. Jeff, let's talk about something that I teased in the beginning of the show. And that's how to calculate your life expectancy. Now a key part of retirement planning is managing longevity risk, the risk that you outlive your money. So how do you deal with longevity risk at Premier retirement? And of course, how do we know how long we're going to live? Oh, we don't
and that's just the key. You know, I learned this on his early on in my career. I remember a guy name was Evan. Yeah, he was like in his 70s. And he had arthritis really bad. He could already get around. He's living in a facility owned by Marriott is one of those little assisted living facilities really nice place right at a pool table. He loved to play pool with me when I go over there. And I remember seeing Evan every, at least every year, maybe, you know, in between that time, but you know, he just said, you know, I don't think I'll make another 10 years. You know, I'd be lucky if I make it. 10. And I said, Well, you know, but he wanted his money safe. And he didn't really want an annuity with income, you know, potential. He just wanted, you know, something that was safe. So we did a deferred annuity and figured he could you know, give the bonus points to growth to the kids and whatnot. When he finally passed? Well, it was over 20 years, we were playing pool at least once a year on an annual review. And poor guy. I mean, he's getting more bent over Yeah, he was getting harder to move around. But the guy didn't live five or 10 years you live 20 Plus, no, you know, luckily he ended up needing some of that money out of the annuity, which had been kept safe at grew locked in profits, didn't have to worry about risks and have to worry about losing in the market and was able to sustain him and still leave, you know, enough left for the heirs to be happy. So that was kind of my first lesson on you know, people, people think they might die early. And then there's other people I think I'm gonna retire, I'm gonna have this 30 year fun retirement, I got plenty of money. And you know, go get hit by a bus or figuratively speaking, of course, you know, a year or two out of the gates, because whatever, you know, nobody really knows bottom line is, because we don't know we have to have flexibility in our plans. I like to plan to at least age 100. You know, if you know you'll live to 100. Great. And we probably had a plan at 110. But if you don't know, because you don't have your death certificate yet most people don't, then let's just go up to 100 and say, you know, if something happens, and I come up short, are there enough of my assets that can be set up with guaranteed income streams that will pay me at least what I need for my bills, at least and pay me let's say 100,000 or 120,000 a year, whatever it is, till I die and then use the rest to live on, you need 40 or 50,000 because all your bills are paid and there's just one of you and you can eat and sleep on that? Well then, okay, you need less of your money probably to convert into those guaranteed lifetime income situations. I don't think social security is going to be as guaranteed as it is right now. 30 or 40 years from now, I think there probably be some changes to it just because of you know, the baby boomer era is the fact that there's a lot of people that are still living at home not working. So yeah, there's not going to be enough coming into the trust fund to cover all the people that are retired, you know, 10 years from now even and the trust fund that, you know, I think a couple years ago when I looked at it was like $2.7 trillion, I think is down below two and a half trillion now and is shrinking. So you know, within about 10 years that'll be gone and they'll only be about 75% of money coming in. So I think you know when it comes to social Kirti I don't think you should put all your eggs in that basket by waiting to 70. And hoping that's all the income you'll need and spending everything else between now and then you might want to convert some of your assets into something that has no longevity risk that takes care of that issue with either annuity, the old school annuities used to be where you could buy a nice payment till you die. But if you died and didn't use up all your money, your money goes to the insurance company and pays for the people that live too long, there are a new generation type of an annuity where it can still grow based on the indexes of the market on a very good clip, I mean, you can make better than double figures in the good years, and you'll never make less than zero in a bad year, those products do exist. And you know, if you put your money in one of those the company because they know you're not risking any of the principal, they know your principal is gonna at least live you know, if you take say a five or 6% drawdown, they know that your principal is at least gonna be 1618 or 20 years long. And then if they're smart with your money, they know they're gonna make enough to give you another 10 or 15. So they can do an income plan based on a really nice payout better than the 4% rule, Wall Street tells you as a safe way to resolve if you have a stock and bond portfolio, which is odd when stocks, you know, over the course of history have averaged around 10. And bonds have averaged around five or six interesting that you can only take four when the average rate of return is higher on those well guess what? They just basically, you know, self indicted that I mean, they basically said Yeah, guess what volatility kills an income plant, and you really shouldn't have it here. It's great for growth at five or 6% on bonds and 10% on stocks over time. But on income, your money's gonna run out at 4%. And by the way, after the last decade of the 2000 to 2010, some actuaries revised that withdrawal rate to more like a 2.1 or a 2.5 rate of withdrawal. Well, if you could do an annuity that's deferred till you die, meaning that if there's any leftover account, your heirs get it, but if for some reason you run out of money, you still get a payment, why is that not the best win win situation you could come up with in retirement, I love that fact is Wall Street doesn't make as much money on those type of annuities. And neither do I frankly, but it's the safe part of the client's income that keeps them happy and keeps them sticky and keeps them around here, so that we get to manage the rest of their money. So I mean, if Wall Street Well, I should probably not say that out loud. So if Wall Street, people heard that, that they'd keep their counts longer if they took care of the person's income in retirement first, rather than just keep trying to risk it, because that's where the money's at, because you can trade it, you can charge fees on it, there's just it goes to chain to chain to chain a lot of different ways. And so Wall Street firm, you know, does a lot better managing mutual funds, plus charging a fee, and then having a advisor charged fees, and they split the fees with the advisor, I mean, shoot there, they're raking in at a pretty good clip, you know, Forbes did a study five or six years ago, maybe now, that was very explicit on how many ways a Wall Street company makes money on a mutual fund that the average cost of a mutual fund is really in the neighborhood of 3.6 to 4%, not the less than one that you think the expense ratio that is the one they put on the front page, but they don't show you what's on the other 800 pages of their prospectus of all the different ways they're making money. So I get the Wall Street model, they want to talk you into doing the same thing in retirement that gotcha to retirement, but it isn't the thing that's going to preserve your income. So longevity risk is a big issue. And it's really only satisfied or solved with those companies that deal with insuring life life insurance, longevity risk is insured by insurance companies periods, that means you have to wear both hats in my business, you get to manage the money that you want to grow and keep liquid and keep exposed the market. Even though there's risk, you still kind of like the upside potential. We all like hitting homeruns once in a while. But you also like to know that our bills are paid on a monthly basis. And so we solidify that with what we call our paycheck money, those things that don't have risk. And there's two buckets, there's really only two buckets, you can put your money in one that protects your principal and doesn't have risk and grows at a reasonable rate. And the other one that could grow at an extraordinary rate, but also lose your money. So there's the risk bucket in the non risk bucket, what would you rather have your income come out of? I will say that in all cases, the math works better out of a non risk bucket. So why not do that and not worry about how long you live, whether it's 8595 or 105 or 65.
So the bottom line is Do not be subject to longevity risk. Because I mean planning for a 10 year retirement looks a lot different than paying for 30 years out of the workforce. If you've got questions certainly about longevity risk, get in touch with Jeff at Premier retirement 5207809 8059. And if you're wondering how long you're going to live mean, these are not actual figures, but you can get a guesstimate Social Security has a site to do that is titled Social Security life expectancy calculator, Social Security life expectancy calculator. There's also one called actuaries, longevity illustrator, actuaries, longevity illustrator, and we'll see if we can put those on the website for you under our radio page. Jeff, we're out of time for this week. I want to thank you for your time but most of all, certainly thank our fine listeners here in the greater Tucson area for listening to us this weekend. For Jeff Hogan. I'm Jeff shade. Have a great weekend. We'll talk to you again next week with another edition of Premier retirement here on 790 k and S T Tucsonans most stimulating talk investment advisory services provided through premier Wealth Advisors LLC and Arizona state registered investment advisor. securities transactions are placed through TD Ameritrade insurance and annuity products are offered through premier advantage Inc. DBA. Premier retirement planning and wealth management investing involves risk including the potential loss of principal any reference to protection, safety or lifetime income generally referred to fixed insurance products. Insurance guarantees are backed by the financial strength and claims paying abilities of the insurance carrier this show is intended for informational purposes only not to be construed as advice or recommendations do to show the format accuracy and completeness cannot be guaranteed by Premier and Premier and its representatives do not provide legal or tax advice and may only conduct business with regiments of states and jurisdictions where they're properly registered.