RR S3 E38 SAFER RETIREMENT Q & A     [00:00:00]

ANNOUNCER: You’ve found it. It’s your safer place for retirement planning. Prepare to be coddled in pure fiduciary goodness, with your host and President of Decker Retirement Planning, Mike Decker. This is Safer Retirement Radio. If you’re in or near retirement, listen up and learn about a math-based, principle-based approach to retirement that is designed to help you enjoy a safer retirement. These strategies are to help protect and grow what you’ve saved. And live the life you want today. So, grab a pen, because your safer path to retirement planning starts now.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:00:37]

MIKE:  Welcome to Safer Retirement Radio where you get the transparency that you deserve.  I’m Mike Decker.

CLAYTON:  And I’m Clayton Bradshaw.

MIKE:  And today we’re doing an open Q and A.  Usually, we try and teach about the show and then we like to answer questions and so, but today with the markets and how they’re going right now we’re doing an open Q and A.  This is all about you, your questions and what’s going on with the markets and your retirement.  So before we get started though Clayton, I do want to announce that we do have webinars, daily webinars talking about one, a safer retirement and how to get there, and two, five secrets, or we could call steps, but really, they’re secrets on how to get to a safer retirement.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:01:13]

MIKE:  These are all principal-based and if you follow the principals of retirement planning, then you’re able to really unlock a whole, new level of comfort and clarity to your retirement and that’s such an important thing.  Before we dive into all of the wonderful thought-provoking questions we’ve got today, and some of them are pretty hard hitting, especially some of them coming from Monday, the seven percent in a day drop.

CLAYTON:  Yeah, I think a lot of folks that are investing right now are probably asking themselves a lot of questions.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:01:44]

MIKE:  Yeah, what in the world?  But we just continue to defer to the principals of retirement.  And you could even say these are principals for all finance, but the first principal, only draw income from principal guaranteed sources, period.  If you’re drawing income from principal guaranteed sources and the markets crash, your income’s not hurt.  The second one, diversify by purpose using the investment triangle.  The investment triangle is a tool that we use here, but essentially diversifying by purpose is to not just be trying to have a fancy pie chart, but these assets do this, these assets do that.  It’s understanding the purpose you have in retirement.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:02:19]

CLAYTON:  Well, whenever you get into investing you hear that you should be diversifying away from risk, right?  That’s how you decrease your risk is you diversify.  But to what end?  And that’s why this principal is here, is to help people understand the purpose for that diversification.  What is that money going to be used for?

MIKE:  Income risk, tax minimization, these are the big topics here that your assets now have as a new responsibility once you retire.  These are responsibilities your assets did not have when you had a paycheck coming in and you were just growing your assets.  Life was easier when you had a paycheck.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:02:52]

MIKE:  It doesn’t have to be more complicated and more difficult.  Just follow the second principal:  diversify by purpose, not just by risk.  Use the investment triangle there.  But the third one is to use a distribution plan, not a pie chart.  A distribution plan is a written-out plant that tells you down to the month and at a tax how much you can spend for as long as you live.  It’s a wonderful way to organize your assets to implement the first and second principal and it gives you clarity.  This week, at least for our clients, we haven’t received any phone calls of panic because the plan is working.  They have a written solution for these situations, and they happen every seven to eight years.  Clayton, were you surprised when the market started tanking?

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:03:31]

CLAYTON:  It was supposed to do this several years ago and it finally caught up.  It had been kicked along.  The can had been kicked down the road too far.

MIKE:  Gosh, now let’s dive into some questions here.  The first question that we’re gonna be answering here is “my advisor says I’m diversified, but I keep losing money.”  Okay.  The first question I have is what is the diversification that you have done?  It sounds like you’re diversified by risk, and that’s typically done when they hand you a little risk questionnaire and you fill it all out and it tells you what your declared risk tolerances is.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:04:06]

MIKE:  And risk tolerance moderate, high, it’s the different levels and every company has a little different way to state it, but how tolerant you are to risk and the other part of it is your age.

CLAYTON:  Sure.

MIKE:  Okay, but risk diversification in itself has upside potential and downside potential.  Are you comfortable with that?  It sounds like this question here centers around the breaking of the second principal.

CLAYTON:  Yeah.

MIKE:  You’re losing money.  Why is that a concern?  Now for some people it could be, well, I’m trying to grow my assets for retirement.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:04:40]

MIKE:  Okay, well if you’re trying to grow your assets for retirement, then you can either write it out or use more suitable models, maybe like a two-sided model.  That’s what we use here at Decker Retirement Planning.  But what’s the purpose?  Because it sounds like there’s a significant disconnect between your assets and what they’re doing right now.  What your assets are doing right now and what you want them to do.

CLAYTON:  Well, right, and Mike, I think this goes to the purpose.  So there’s two phases in life when it comes to investing, at least as far as I feel.

MIKE:  Two phases.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:05:12]

CLAYTON:  There’s the accumulation phase where your 20’s, 30’s and 40’s you’re working, you’re saving money in your 401(k), your IRA’s, your retirement accounts.

MIKE:  And your assets have what purpose in the accumulation phase?

CLAYTON:  To grow.

MIKE:  That’s it.  That’s it.

CLAYTON:  That’s all they’re there for is just to grow.  You want to make as much money as you can.  And when you’re doing that, this is why for people that are in their 20’s, 30’s and 40’s that are still working, they have the luxury of what’s called dollar cost averaging.  And I know I’m getting a little technical here, but when you’re contributing to your 401(k) every paycheck or every month, whatever schedule it is, as you’re buying in, you are lowering the average cost of your shares and it’s a very efficient and very effective way to save and to invest.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:05:54]

MIKE:  That’s it.

CLAYTON:  But it works because you’re in your 20’s, 30’s and 40’s and you’re still years and years away from retirement.

MIKE:  And what’s the second stage?

CLAYTON:  The second stage, that is the distribution phase of retirement.  And anybody that’s, I don’t know, around five or so years away from retirement or wants to be, that’s when they need to start considering a switch.  And when you go from that accumulation phase to that distribution phase, a lot of times, at least from what I see from the clients that I’ve got coming in, their previous advisor doesn’t switch them over to a more effective approach to retirement through what we call the distribution plan, which gets to all three of these principals.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:06:31]

CLAYTON:  They’re just not followed as often as they should be.

MIKE:  Yeah.  The expectation that there’s one-size-fits-all investing exists, it’s not the case at all.  Your assets are gonna fall into one of three categories. So there’s assets that are liquid and can grow, okay?  Like your mutual funds, your ETF’s.

CLAYTON:  And you’re talking about the investment triangle right now, right?

MIKE:  Yeah, this is the investment triangle.  There’s assets that can grow and are liquid.  They can go up or down, right?  There’s no principal protection.  Though it sounds like what you’re invested in right here and you only want the upside, so you’re probably not invested correctly.  There’s other assets that can grow and be principal protected, but you give up some liquidity, kind of like a CD.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:07:08]

MIKE:  Now I know, I know, CD’s aren’t paying a good rate right now, but there’s a lot of other investments that are paying two or three times what a CD is offering that offer that kind of risk shelter, you maybe could say.  And then you’ve got assets that are principal protected and are liquid.  That’s your savings account.  I’m not gonna recommend that you put all your assets into a savings account, especially even with the markets panicked right now.  But there’s just so many other ways to invest it, so it just sounds like right now you’re breaking the second principal here.  You’re not diversified by purpose.  You’re only diversified by risk, which puts all of your assets at risk whether it’s high-risk or low-risk, and it sounds like you’re experiencing what happens every seven to eight years, which is when markets tend to crash.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:07:49]

MIKE:  Everything or near everything tends to fall, and that’s what we’re experiencing right now.  I think I saw gold was doing okay, but besides gold everything else seemed to be hurting.

CLAYTON:  So I’m going to chime in here, Mike.  On Monday, as of Monday, the 10 year treasury, it was below point four percent.

MIKE:  Geez.

CLAYTON:  The lowest it’s ever been in history.

MIKE:  So this is like you, again, the number to call, questions you could submit or you can talk to us, 833-707-3030.  Again, that number 833-707-3030.  This is Safer Retirement Radio.  I’m Mike Decker.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:08:26]

CLAYTON:  And I’m Clayton Bradshaw.

MIKE:  And we love taking questions, and we’re happy even to address your questions one-on-one if need be for privacy and all that, but we’re here answering questions on Safer Retirement Radio.

CLAYTON:  So I’ve got a question here that I was looking at, which I just mentioned that the 10 year treasury yield has hit its all-time low.

MIKE:  Yeah, did you get a question on that?

CLAYTON:  Yeah.  The question is, “are bonds a safe option?”.

MIKE:  Okay.  There’s a couple of layers here, Clayton.  I just want to lay them all out then I want to hear your answer on that, ‘cause it’s a fair question.  Bonds are typically considered a safe investment, but you’ve got municipals and you’ve got federal government bonds.  You’ve got corporate bonds, so there’s different types of bonds.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:09:06]

CLAYTON:  Sure.

MIKE:  There’s different classes of bonds.

CLAYTON:  Right.

MIKE:  I feel like I’m building a matrix here.

CLAYTON:  Yeah.  Yeah.

MIKE:  And then you’ve got bond funds versus actual bonds.

CLAYTON:  Yep.

MIKE:  Can you break it down?  [LAUGH]

CLAYTON:  Yeah.  [LAUGH]  And again, I don’t want to get too technical on this.

MIKE:  Real quick, what do you think the purpose of this- what are they trying to get out of this question?

CLAYTON:  They way I read it, ‘cause when I get this question from people that come into meet with me that ask about bonds being a safe option, typically that’s because when you hear “I have a low risk tolerance” when you’re doing that risk questionnaire, you say you’ve got a low risk tolerance, typically what happens is the advisor’s gonna push you out of the stock market into that bond side of the category.

MIKE:  Okay.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:09:51]

CLAYTON:  And simply put, they’re gonna do it through what are called bond funds.  It’s a simple, it’s an easy purchase because you buy them.  They work like a mutual fund.  And again, I’m trying to not get into too many details.

MIKE:  It’s a pile of bonds that are supposed to make some money and the fund can trade them in and out.  But essentially, they’re just trying to make you money into a collection of bonds as opposed to individual bonds.  Is that a correct summary?

CLAYTON:  And so I think what the question is, “are they a safe option?”  But it goes to the point of interest rate risk.

MIKE:  Okay.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:10:23]

CLAYTON:  And interest rate risk is the risk that as prices on a bond go one direction, the yield goes the other direction.  So bond yields and bond prices have an inverse relationship.  And when you’re dealing with a mutual fund, with a bond fund, if one goes down, the other goes up.  And so right now we have been following this roller coaster, so to speak, of the interest rates.  I’ve got a graph that I love showing people, because it shows the 10 year treasury yield over the last 100-plus years.

MIKE:  [LAUGH]  We had to make room because it got so low.  We had to add more space to the graph.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:10:57]

CLAYTON:  Yeah, we had to add more space, and so when you look at that, there’s a massive spike in the 80’s.

MIKE:  Yeah.

CLAYTON:  And when I talk to a lot of folks that are heading into retirement, are already retired, I typically get this comment almost every time, “yep, that’s about when we bought our first house.”  And then they’ll say something along the lines of, “I got a nine percent interest rate.”  I’m sure those that are listening are probably smiling and laughing along, ‘cause they remember what this was like.  I got a nine percent interest rate on my mortgage.

MIKE:  What a steal.

CLAYTON:  We got a steal of a deal.  And I hear that a lot from folks.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:11:31]

CLAYTON:  And right back then, I mean you could buy treasury bonds, 10 year treasury bonds were going for 14, 15, 16 percent at the time.

MIKE:  Whoo.  Wouldn’t that be nice right now?

CLAYTON:  Right?  Yeah.  That was a great time to buy bonds, terrible time to buy a house.  Now the environment has flipped and now we know that mortgage rates are hitting close to all-time lows.  I think a 15 year fixed as of a week or two ago was three percent and interest rates have only gone down since then, ‘cause the market’s crashing.

MIKE:  A low interest rate environment is good typically for young people who are trying to buy a house, but horrible for the retirees and near retirees because there’s not many options for safer investments.

CLAYTON:  Yep.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:12:09]

MIKE:  Just like the inverse – high interest rates are great for retirees and near retirees because there’s a lot of great safe investments that you can invest in, but buying a home for young people is just really tough.  It’s kind of either-or situation right now.  We’re favoring the young people unfortunately, which is crazy because there are so many people who are trying to retire right now and the rates are making it incredibly difficult for people to stay retired, which is why we’re seeing more and more risky investments.

CLAYTON:  Right.

MIKE:  And then we get questions like, “well, my advisor says I’m diversified but I keep losing money.”  Okay, well even in bond funds you can still keep losing money.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:12:44]

CLAYTON:  Yeah.  Right, exactly.  And so that goes back to the question.  So I will bring up the name Bill Gross, and I’m sure most are our listeners haven’t heard that name before.

MIKE:  Can I explain who Bill Gross is?

CLAYTON:  Please.

MIKE:  Clayton, who is Bill Gates?  What does Bill Gates mean to you?

CLAYTON:  Wealthiest man in the world.

MIKE:  Okay.  Michael Jordan, what does he mean to you?

CLAYTON:  This is debatable for some people, but I agree that he is the best basketball player ever.  I loved watching him growing up.

MIKE:  Okay, and then one more.  Winston Churchill, who is he to you?

CLAYTON:  He was a great leader.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:13:14]

MIKE:  Okay.  Bill Gross who is he to you?

CLAYTON:  He is the bond king.

MIKE:  If you don’t know Bill Gross is, he is the number one guy of all bonds.  He’s it.  So just to put it into perspective, he’s the Michael Jordan of bond funds and bonds.

CLAYTON:  Yep.

MIKE:  Okay.  Continue.

CLAYTON:  So Bill Gross made his name in the 80’s when he bought a bunch of bonds.  The interest rates dropped and the value of the bonds that he had skyrocketed and he sold them and he made tons of money.  So he is a good example of what to do in a high interest rate environment.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:13:49]

CLAYTON:  Buy a bunch of bonds, ‘cause then the interest rates drop, you can make a ton of money off of ‘em.

MIKE:  Yep.

CLAYTON:  Now we’re in the reverse of that, or the inverse of that.  We are in a historically low interest rate environment so if your advisor is telling you that bonds are safe option right now, if you get in on some bond funds and if you buy some and you’re holding ‘em in your portfolio, if interest rates start to go back up you’re gonna get cooked on your portfolio.

MIKE  Who in the world is gonna buy a bond that’s paying less used?  Let me explain it this way.  People buy used cars because it saves them money.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:14:23]

MIKE:  Who in the world would buy a used BMW?  Let’s just say a used BMW at 50,000 dollars when you could buy a new BMW for 30,000 dollars?

CLAYTON:  Right.

MIKE:  Who would do that?  The same is with bonds.  Who would buy a bond that’s paying a lesser interest rate than a new one?  No one’s gonna do that and so you have to sell them at a loss to make it up.

CLAYTON:  Right.

MIKE:  And the BMW analogy, it’s a 20,000 dollar loss to get rid of your used BMW.  Actually probably more than that, because why would you match a price of a brand-new one?

CLAYTON:  Yeah.

MIKE:  It doesn’t make sense.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:14:55]

CLAYTON:  And so with that, I guess I’ll say this another way to kind of sum up the conversation as we’ve been back and forth on some jargon.  I’ll sum up interest rate risk.  Interest rates are at an all-time low, which puts interest rate risk near an all-time high.

MIKE:  Now I’m gonna hold you to the other half of this equation here, Clayton, is bonds themselves.  Specifically, I want to talk about corporate bonds.  A lot of people think these are safe investments, and for all of you Safer Retirement Radio listeners tuning in right now, it is important to note that there are more triple B corporate bonds available right now or in the market than ever before that I’m aware of based on my research.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:15:32]

MIKE:  Now what does that mean to you?  Triple B is the lowest rating you can have before it goes into what’s called the junk-bond territory.

CLAYTON:  Yep.

MIKE:  Pensions, funds, big mutual funds and different investment classes are required by their bylaws to have to sell these investments when a bond goes to junk territory.  If the markets continue to go down and it forces companies to then start to default on their bonds and their degraded from a triple B to a double B, here’s what I’ve just said.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:16:13]

MIKE:  There could be another financial crisis.  If all these bonds keep going down, we’re not just worried about the coronavirus anymore.  We’re now worried about the bond market, and specifically corporates.

CLAYTON:  Right.

MIKE:  Are those safe investments?  Really?

CLAYTON:  Yeah, and that’s a consideration.  So you’ve got several different types of bonds, and I’ll wrap this bond conversation up pretty quick here, but you’ve got four different types of bonds.  You’ve got municipals, you’ve got corporates, you’ve got agencies and you’ve got treasuries.  So generally speaking, those are the four different types of bonds that you can get into.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:16:45]

CLAYTON:  Municipals, we know that municipals have taken on a massive amount of debt so that their pensions are underfunded.  There’s only a couple of states as far as I know at this point that are fully funded on their pension obligations.  So municipal bonds are carrying high credit risk as a result of that.  Corporate bonds, there’s only as far as I know two corporations right now that still carry the AAA rating.  It’s Microsoft and Johnson & Johnson.  So you can barely even find a secure AAA rated corporate bond, so you have very limited options there.  If you’re looking at agency bonds, there’s the potential that you still have.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:17:23]

MIKE:  It’s just, the environment is rough if you’re looking for bonds.  And like we said, we talked safer investment options and that’s not just safe investments like what a bond or a CD could be.  But just generally speaking, what are you looking to do?  Second principal, what are you looking to do?  Okay, let’s diversify by purpose and then let’s find what falls into that category and what are the highest performing investments that would fall under that category.  Whether it’s securities or risk or no risk at all, that’s up to you.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:17:54]

CLAYTON:  Right now, and I guess with the last two agencies in US treasuries, you can get checking accounts, savings accounts that are paying a higher yield than those bonds right now.  And so in my mind, at least personally, it makes more sense to me to put my money in a checking account that I have access to that’s paying me twice what a U.S. Treasury is paying, or three times what a U.S. Treasury is paying.

MIKE:  It’s a weird place.

CLAYTON:  Yeah.

MIKE:  We’re in a weird place, but thank you for that question.  For those just tuning in, this is Safer Retirement Radio where you get the transparency that you deserve.  And as always, you can submit questions for it to be on the show, as well as you can submit questions that we can talk personally or individually with one of our financial advisors.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:18:35]

MIKE:  That number 833-707-3030.  Again, that’s 833-707-3030.  I’m Mike Decker.

CLAYTON:  And I’m Clayton Bradshaw.

MIKE:  We’re from Decker Retirement Planning doing this show, but it’s all about giving you the transparency that you deserve and we hope that you’re enjoying that here.  There’s one question here in front of me that I want to make sure that we can address on here because it’s about the markets.  The question is, “what do you think will happen between the markets and the coronavirus in the next given future?”  And this is a tough one, because in my opinion the coronavirus is not the only underlying issue.  It’s just the one that’s making the headlines in the news circuit.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:09:13]

CLAYTON:  Yeah.

MIKE:  There are many other issues that are happening right now, like with Iran and the oil conundrum, the fight with oil that’s happening over there.  We see that with oil prices in that commodity as well.  Trade is an issue.  So we have coronavirus and trade both are an issue right now.  If coronavirus stops trade or if coronavirus just went away, the trade tension between the US and China is an issue that needs to be aware of.  You’ve also got the debts from pigs.  That’s Portugal, Italy, Greece and Spain that also could affect global markets.  They tend to have financial struggles.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:19:47]

MIKE:  And the list goes on, but all of you Safer Retirement Radio listeners, here’s my point.  We’ve had a wonderful bull market over the last 10 years, and we have gotten to where the market is very, very expensive.  And people even started complaining.  It’s too much for someone to buy into the market.  Now I would argue well, with ETF’s anyone can buy into the market, but okay.  To buy Apple, you have to have some wealth to buy Apple [installed?] in a diversified portfolio.  I get that argument but we were at a market high.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:20:22]

MIKE:  And what’s so interesting, and you can Google this or go to YouTube, look at news commentary on financial markets in 1999 or 2007.  The commentary keeps saying, you know, we fixed it, or the market’s only gonna go up.  Things are so good.  It’s this rosy eyed perspective of things and then Armageddon hits.  When I say Armageddon hits, markets really crash and it tends to be every seven to eight years or so.  This is a normal thing that markets do, yet we seem to have a short memory.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:20:57]

MIKE:  So when we talk about is the coronavirus gonna continue to affect it, no one’s really gonna know.  There’s no cure for it that I’m aware of.  It’s affecting the older generation and it’s hurting a lot of public gatherings and it’s going to have a way on our economy, as well as the economies all over the world, as there is a lot of panic with the coronavirus.  It’s contagious level.

CLAYTON:  And it is a serious thing.  It’s a worry for those that don’t have it and it’s a worry for those that are near or have loved ones that are dealing with it.  So we’re not trying to make light of the situation.  It is something that is very serious.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:21:31]

MIKE:  It’s not the only issue that we will face.  It’s just the one getting the news here.  This was gonna happen one way or the other.  Either the coronavirus was gonna be the pinprick that started the contagion, no pun intended, or you could have a terrorist attack that would start this.  Just one fear-based attack.

CLAYTON:  So a term for these in the investing world is a black swan event.

MIKE:  Can’t calculate it.

CLAYTON:  Yeah, you can’t calculate or plan on.  And our markets were getting overvalued, so there’s an evaluation called the price to earnings ratio that tracks the valuation of businesses.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:22:05]

CLAYTON:  And the only time it’s ever been higher than it has been is in 1999 and again in 1929.  And we know what happened after both of those.  We had the depression, right, in the 30’s, and then we had the dotcom bubble that burst in 2000.

MIKE:  Yeah, so here’s an analogy for just kind of what we’re looking at for the markets, is we just feel so healthy and so healthy and everything is good and you just can’t go wrong that we forget to eat our vegetables.  And so slowly the diet starts to change to candy bars and Top Ramen.  Now don’t get me wrong.  I’m a sophisticated foodie and I still love Top Ramen once in a while.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:22:40]

MIKE:  There’s something nostalgic about it, and a Snickers bar is always gonna taste good.  But the diet became unhealthy for a while and if you ate just Snickers and candy bars and Top Ramen, do you have a higher probability of getting sick?

CLAYTON:  Yeah.  Yeah.

MIKE:  Yeah, your immune system’s gone.  There’s a lot of issues there.  How we’ve been treating the markets is very, very similar with stimulus, quantitative easing, lowering and manipulating the Fed.  All these different moving levers behind the scenes have created a market that was putting a lot of sugar into the economy diet, economic diet, as opposed to the vegetables which gave us a higher probability of getting sick which means there’s a faster collapse.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:23:23]

MIKE:  Basically, it was just about time for the economy to get sick and it’s just ironic that it was triggered by the coronavirus and actual illness.

CLAYTON:  Well, and Mike, I’m glad you mention the Fed as well.  So our CEO and founder, Brian James Decker, he makes a comment about what the Fed has done, and he says that the Fed is out of bullets.

MIKE:  Yeah, not like in the movies where you have 100 bullets in your pistol.  [LAUGH]

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:23:51]

CLAYTON:  Yeah.  Yeah, exactly.  But what he means by that is- and out of bullets, they’re almost out of bullets regardless, they have very little options left to stimulate the economy.  So they just dropped the rates a half a percent and the market still a week later is doing this.  It’s dropping the way it’s dropping.  And that stimulus from that rate drop, that’s supposed to be a booster shot for the economy and it didn’t do anything.

MIKE:  Yep.

CLAYTON:  And what else are they gonna do?  They can keep lowering rates.  In my opinion shouldn’t keep lowering rates ‘cause of what it’s gonna do and the effect that it’s gonna have.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:24:29]

CLAYTON:  And so these are considerations that we’ve got all these different things.  We’re at historic rates, we’re at historic or close to historic high market valuation.  We’ve got this black swan event.  We’re at the longest bull market in history.  There were all these things that were adding up and this Jenga tower was just getting taller and taller, and somebody’s finally started pulling out the wrong bricks.

MIKE:  And when it comes down to your retirement if you just stick to the principals, none of this matters.  Eventually markets will recover.  It may not be for a couple of years, they start to recover.  But if you’re, like the first principals says, drawing income from principal guaranteed sources, are you losing money while the coronavirus takes over our markets?

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:25:10]

MIKE:  No.  They’re principal guaranteed.  They cannot lose money.  If you’ve diversified by purpose not just by risk using the investment triangle, then your income for the next 20 years is taken care of.  Your risk assets have time to recover or you’re using two-sided models designed to make money in up or down markets.  And then for emergencies, you’ve got emergency cash.  You’re still fine.  That’s the beauty of the principals, and those who just stick to the principals don’t have to be as concerned about the coronavirus in the markets.  Just make sure that you don’t get sick with the actual coronavirus.  [LAUGH]  You want to stay alive to enjoy your retirement, and I mean that with all sincerity.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:25:49]

MIKE:  Gosh, it would just kill me to hear about elderly people dying from the virus when they just started their retirement.

CLAYTON:  Yeah.  Well, and I think too, in our weekly newsletter that we that we send out there were some comments that were made in there about how to keep yourself healthy, right, through all of this.  And really, I mean avoid people that are coughing, wash your hands frequently, don’t touch your face.  There’s a lot of very, very simple things that we can all do to protect ourselves from this.

MIKE:  Yeah.  I’m worried we’re gonna get the V for vendetta masks so we don’t touch our faces, or like a bane mask or something.

CLAYTON:  Yeah.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:26:24]

MIKE:  But anyway, you’re listening to Safer Retirement Radio where you get the transparency that you deserve.  I’m Mike Decker.

CLAYTON:  And I’m Clayton Bradshaw.

MIKE:  And as always if you got questions you want to submit or you want to talk to us, just give us a call.  833-707-3030, you’ll get a friendly voice on the phone.  They’ll gather your information and then we can get connected.  Again, that number:  833-707-3030.  All about getting the transparency that you deserve, and what we like to talk about is a safer retirement.  Just stick to the principals, folks.  Just stick to the principals.  Clayton, do you have another question you want to rattle off here?

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:26:55]

CLAYTON:  Yeah.  This is one that I frequently get when I meet with folks and they say, listen, I’ve got a friend who seems like a pretty savvy investor.  They’ve told me about some of the decisions they’ve made and they seem like they’ve got everything under control.  And they say that I just need to hold on for the ride.  There’s something in my gut that just says that it’s not a good option.  So what should I do in that situation?

MIKE:  Okay, a couple of things to consider right here is one, how long have they been doing well for this?  Because there are a few savvy investors that are out there that have been doing this for 20 or 30 years.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:27:28]

MIKE:  I think of Dr. Burry who was a medical doctor they got into investing because he was just really good at it, and then he started his own fund, then got famous for the big short.  Okay.  That’s a very small percent, though.  There’s a lot of people who have been doing well with investing when the markets have only gone up.  And Warren Buffet’s quote does a great job of illustrating it.  You know who swings naked when the tide washes out.  Is this your friend?  That’s my first question.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:27:57]

CLAYTON:  But Mike, I also think you need to consider, I think that that everybody needs to remember that when you talk to your friends about this kind of stuff, to me it seems a little like the way people’s lives are portrayed on social media.

MIKE:  Okay.

CLAYTON:  So when we go on social media, most of the time we’re gonna see that five or 10 percent or one percent of somebody’s life that is amazing.  They’re doing the fun things.  They’re always having fun.  They’ve got the best cars and the nicest houses and the hottest spouses, and right?

MIKE:  Nice house, hot spouse.  A little bit of rhyming there.  Geez.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:28:31]

CLAYTON:  But it seems like there are those types of people that that’s all they post about on social media.  But then when you actually sit down and have a face-to-face conversation with that person, you learn about the other 90 or 95 or 99 percent of their life that isn’t all roses, right?

MIKE:  Yeah.

CLAYTON:  And I think all of us can probably think of that one friend or somebody that they know on social media that that’s all they ever do.  That they seem to be living this immaculate life, but you know deep down that it’s not like that.  And I think you need to be cautious when it comes to listening to your friends and their investment advice.  Number one, they’re a friend, they’re not an investment advisor.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:29:06]

MIKE:  Yeah.

CLAYTON:  Well, in most cases.  Maybe they are an investment advisor in which case they have the ability to give advice.

MIKE:  Sure, yeah.

CLAYTON:  But if they’re not telling you to follow the principals, what’s good for them might not be good for you.  That’s why it comes back to the principals.

MIKE:  But something to consider here too, is a lot of investment newsletters go out that are unregulated by FINRA and SCC, and regulations, you can check them all at Broker Check by FINRA.  Check that out.  It’s a great resource.  Highly encourage you to look up anyone that you’re gonna be doing investing with, but back to newsletters.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:29:37]

MIKE:  Newsletters are not regulated, and so they’ll give you a list of 50 investments.  And then the next month the newsletter says if you would have invested in these three investments like we told you last month, you would have been doing great.

CLAYTON:  Yep.

MIKE:  But then they disregard the other, what, 40, 47 investments that maybe didn’t perform very well.  It’s manipulation.

CLAYTON:  Yeah.  Well, And this is a little aside.  There was a case study that was done.  I learned about it in school. There was a case study that was done on a group that sent out mailers recommending specific investments.

MIKE:  Yeah.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:30:12]

CLAYTON:  And they sent out 100 mailers.  I can’t remember what the numbers were, but let’s say they sent out 100 mailers and they were sent out in groups of 10.  And then each group of 10 had different investment advice.  So by their calculations, 10 of those letters made it.  They were correct, right?  So one-tenth, so 10 percent of what they said was right, which is a very small percentage.

MIKE:  Okay.

CLAYTON:  Then they sent to those 10 people that were like, this company knows what they’re doing, they got it right, they then sent out another round of letters to those people and they got it right again on 10 percent of that.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:30:48]

CLAYTON:  So now it’s down to one person.  So that’s one percent of the original 100 that they started with.  And that one person is hooked on their newsletter because they got it right a couple of times.  One percent of the time.  And it’s an interesting study to see because newsletters are gonna broadcast this information.  I know that FINRA regulates this and so…

MIKE:  Kind of.  It depends on how they’re set up.

CLAYTON:  If they’re recommending specific investments though, that’s the thing that you always need to be cautious of because those might not fit your suitability.  They might not be okay for you.  And so those are things to consider, but it was a really interesting study.  So sorry for that aside.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:31:22]

CLAYTON:  When it comes to the market, when it comes to investments and recommendations, be cautious about how they’re being recommended and who is recommending them because if that person doesn’t have your full investment profile in front of you, if they don’t know about your life situation, if they haven’t asked you what’s important to you, if they haven’t asked you what you need and if they aren’t a fiduciary, then the chances are you are not going to get the best investment advice for you.

MIKE:  Yeah.  There’s a bias assumption that you just want it to work.  You like this person and so you’re gonna go with it without understanding really what the ins and outs are of your investments.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:31:56]

MIKE:  I would suggest that you don’t need to have a financial background or economic background to have a basic understanding of how they work.  But if you don’t understand how they work, then maybe you need to do either more diligence, due diligence, or maybe you need to look at a different investment strategy or option, because just hoping this work and blind trust really I don’t think is appropriate for anyone who’s in the markets in any capacity with any investment.

CLAYTON:  Well, and I think for most of us whatever we go and if we have work done on our house or work done in our yard, or if we’re a business trying to find out who we’re gonna work with next, typically we get a bid.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:32:34]

CLAYTON:  We get a couple of bids.  We get two or three second opinions or third opinions to make sure that everybody falls in line with the right stuff.  And your investment profile, your retirement plan shouldn’t be any different.  So if you have one set up and you’ve only gotten the one consultation from the one advisor, it’s worth checking into and getting a second opinion and finding out from a fiduciary is this plan really in my best interest.  And we do this all the time.  And we have people that do come in occasionally that their plan’s on track.

MIKE:  Yep.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:33:05]

CLAYTON:  And there are a lot of people that come in that they have a hole or two in their plan they didn’t know about and we talk about options at that point.

MIKE:  Keep in mind, 85 percent of money managers don’t keep up with the S&P, so 85 percent of professionals aren’t meeting expectations.  How likely is your friend gonna be the exception?  All I’m suggesting is probably not.  So look for a fiduciary.  Look for someone who we recommend with two sided models designed to make money in up or down markets.  The technical term for those models is absolute return models.  Anyway, it’s worth looking into at the very least.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:33:39]

MIKE:  And so for those just tuning in, we’re doing an open Q and A here on Safer Retirement Radio where you get the transparency that you deserve.  I’m Mike Decker.

CLAYTON:  And I’m Clayton Bradshaw.

MIKE:  We’re from Decker Retirement Planning.  If you want get in touch with us or submit a question, you can always call 833-707-3030.  That number one more time, 833-707-3030.  You’ll get a friendly voice on the phone, gathers your information so we can get in touch with you for one or the other.  Happy to do either or both.  But when it comes down to it, let’s get you the transparency that you deserve and expose a few assumptions.  I think we’re doing that at least today on financial advice and in investing and so on and so forth.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:34:18]

MIKE:  I’ve got this question that I think is very timely right now, given the election year.  I’m not gonna get political.  I’m just gonna suggest taxes are a very important topic for a lot of people right now and here’s a question coming in, one question that we do get often.  I’m about to retire.  All my assets are in a 401(k) and I’m nervous about taxes.  What should I do?  Now for all of those who are just thinking about this for the first time, let me kind of illustrate what I think this person’s concern is.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:34:49]

MIKE:  If all of your assets are into a 401(k), then no matter how you draw it, you’re still gonna get taxed on income.  So if you have X amount of assets saved up and you’re currently earning 100,000 dollars a year and you want to earn 100,000 dollars a year from your assets, your tax situation is ultimately still the same.  You’re [bidding?] tax on the same amount of money.  A lot of retirees make the assumption that once they retire they will pay less in taxes.  The only way to pay less in taxes if all of it is coming from accounts like a 401(k) or an IRA is to take less income and I have yet to meet a retiree who willingly says “I just want to take less income because I just want to take less income.”

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:35:27]

MIKE:  That’s not a normal situation, so what should you do?  Before we answer this, Clayton, I also want to say the tax environment that we’re in right now, because this is the political aspect that I think is causing a lot of uncomfort for this person’s question.  The first one is taxes are relatively low historically speaking.

CLAYTON:  Sure.  Yeah.  They’re close to historic lows, historically speaking.

MIKE:  Okay.  It’s not uncommon to get a tax bracket at 50 or 60 percent historically speaking.  We’ve been there for a large part of our time.

CLAYTON:  Yeah.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:36:00]

MIKE:  We’ve lowered it.  I can’t remember the president administration that lowered taxes to where we are right now and they’ve stayed about there for a while.  But going back up is not out of the ordinary.  It’s not an uncommon situation given our history.

CLAYTON:  Well, and this also points to the other issue that we’ve got where our debt is at an all-time high.

MIKE:  So where do you think taxes are gonna go?  And let’s assume that Uncle Bernie gets elected and now the United States government is supposed to take care of everyone’s student debt.  The debt’s gonna get even higher.

CLAYTON:  Right.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:36:34]

MIKE:  I don’t care about the other issues of universal Medicare and this, that and the other.  At some point if the debt keeps growing, the integrity of the United States government being able to pay their debt is going to go away.  It’s going to collapse.

CLAYTON:  Sure.

MIKE:  It is a huge issue and the only way that I can see right now the United States debt is gonna be taken care of is by raising your taxes.  So let me ask you this, Safer Retirement Radio listeners, what should I do about this?  Are you willing to pay a little more in taxes now while you’re in lower tax rate environments to then offset it and then follow the second principal and the third principal which is second principal, diversify by purpose, purpose being focus on tax minimization and then use a distribution plan.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:37:18]

MIKE:  The third principal to then get yourself hopefully within 10 years or so to a tax-free retirement so whenever the taxes go up, that you’re not participating with an additional 10 percent of your income going to the federal government to pay for their taxes.  Oh, I did that in one breath.  I’m just gonna replay a few of those things for all listeners to keep up with me.

CLAYTON:  Yeah.

MIKE:  Okay.  Whenever you retire, I call it the retirement runway, 10 years from your retirement date to 10 years out, let’s get you a tax-free retirement.  Why 10 years?

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:37:50]

MIKE:  I don’t think taxes will shoot up significantly within the next 10 years.  That’s a gut guess.  I don’t have a crystal ball that works, so I just put 10 years out as an arbitrary goal within 10 years to get you to a tax-free retirement.  Then from there, are you okay paying a little more taxes now given the current rates because taxes may go up significantly in the future.  And if you’re okay with that, then hacking away at it right now with IRA to Roth conversions.  And then for those of you who are comfortable and healthy, you can also use an index universal life insurance policy.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:38:28]

MIKE:  Not a whole life policy.  Not a term life policy.  These are very specific that could help minimize your taxes when implemented correctly.  The only problem is if you’re not healthy, they’re gonna have higher fees and it doesn’t make any sense.

CLAYTON:  Yeah.  They’re not good options for some people.

MIKE:  For most people, but about 20 percent of people can use them because they’re healthy enough that the fees are low and their age makes sense for it.  It’s a small amount of people, but there is one plan we put together that saved someone seven figures.

CLAYTON:  Yeah.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:39:00]

MIKE:  Seven figures.

CLAYTON:  Right.  And seeing how these are put together, for those that it works correctly with their plan and with all of their investments, it’s a really cool thing to see how it all fits together.

MIKE:  I wish we could put the 60 Minutes end show going [TICKING].  And the clock is ticking.

CLAYTON:  Yeah.

MIKE:  At some point taxes are gonna give and they’re gonna go up and it’s going to be a very unnecessary strain against the retiree because of the spending the United States government has been doing.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:39:34]

CLAYTON:  Right.  And so you say 10 years to get to a tax free retirement.  That’s an arbitrary number.

MIKE:  Arbitrary number.  No one knows what the future is, but getting started on your 401(k) now.

CLAYTON:  Right.

MIKE:  Assuming you’re 59 and a half or older, because you can’t pull it out until 59 and a half, oh my gosh.  I mean it’s a ticking time bomb.

CLAYTON:  Yeah, and depending on how old you are, how much you have in your different types of accounts, how much you’ve already paid on tax, if you’ve been utilizing that Roth since those came out about 20 years ago and really became popular, then if you’ve got a lot of nonqualified funds, there’s a lot of different ways that these can be structured depending on the type of money that you have.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:40:15]

CLAYTON:  And so when a plan is put together, that’s one of the things that we look at for all of our clients is we look to all right, how much do you have in retirement accounts?  How much do you have non-retirement accounts?  In your retirement accounts where’s your pretax?  Where’s your Roth money?  And we look at all of that and optimize it based on what’s best for you and your spouse if you have one and your retirement date and your age and all these other factors.  There is so much that goes into it.  But again, it all boils down to the three principals that that’s our focus with these distribution plans.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:40:44]

MIKE:  I would say especially the third principal because minimizing your taxes generically or ambiguously isn’t gonna get you into tax free retirement.  It’s just kind of help out each year, which is your CPA is great at just minimizing some taxes but there’s no context behind it.  Unless you have a written distribution plan that’s gonna tell you how to get to a tax free retirement within 10 years, you’re guessing.  That’s the proactive nature of what we’re trying to talk about by those three principals, is let’s be deliberate and get you there before it’s too late.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:41:13]

CLAYTON:  Well, and Mike, the distribution plan and these principals, these are culmination of 35 years of financial experience from our founder, Brian James Decker, as he has worked and been on both sides.  He’s been on the banker/broker side.  He saw what that was like, which is why he has turned to distribution planning.  That’s why he has created all of this that we do at the company with the distribution plan, with the principals and implementing those because he has been on both sides and he has seen the success that clients can have when they follow these principals.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:41:47]

MIKE:  Yep.  So for the listener here and any listener that’s concerned about taxes, I’m about retire, all of my assets are in a 401(k), I’m nervous about taxes.  What should I do.  Get a written distribution plan in order that’s going to get you to a tax free retirement with the goal of 10 years or sooner.  That’s what I’m gonna say right now.  You’re gonna pay more in taxes right now, but guess what?  Taxes are on sale and they’re gonna become very expensive in the near future.  So if that makes sense to you, then that’s how you would want to proceed in that situation.  This is Safer Retirement Radio where you get the transparency that you deserve.  I’m Mike Decker.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:42:20]

CLAYTON:  And I’m Clayton Bradshaw.

MIKE:  We’re from Decker Retirement Planning and we’re asking questions about retirement.  How to get to a safer retirement and I think it’s been kind of fun.  I mean it’s been, whoo, high energy here.  [LAUGH]  It’s just been rapid fire, but it’s because the corona crash is happening.  There’s a lot of questions here.  There’s no way we’re getting through all our questions, but hey.  If you want to submit a question to be on the show or you just want to talk to us, as always you can call 833-707-3030.  That number one more time, 833-707-3030.  You’ll get a friendly voice on the phone.  They’ll gather your information so we can connect and look forward to that connection.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:42:55]

MIKE:  It’s a good time.  It’s a real good time.  Shall we continue?  I’ve got another question that’s kind of like what we just talked about.

CLAYTON:  Let’s hear it.

MIKE:  We okay on that?  It says I am 50 years old.  I want to retire in five years but most of my money is in my 401(k).  It says most, not all.  What should I do?  And this is an interesting conundrum because assets into an IRA or a 401(k) if you draw them before you’re 59 and a half, there’s a is a 10 percent penalty that you would receive.  An additional 10 percent on top of the taxes that would be owed or that you have to pay on that.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:43:30]

CLAYTON:  Right.  Generally speaking.  There are a few exceptions to that, but generally speaking…

MIKE:  The technical term 72T, 72Q, we’re not gonna get into the nuances of what those are.

CLAYTON:  Sure.

MIKE:  Especially because the riskless rate of what those operate off of is so low, it’s almost not even worth mentioning.  But there is a way, but is it a feasible way?  Usually not, and so here’s what I would ask.  Do you have enough of assets that you can put into a bucket one or a first bucket that can pay you income from when you retire to 59 and a half, and then transition into then IRA or 401(k) assets, to then start paying yourself that way, and if so, what would that look like?

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:44:11]

MIKE:  I mean, it revolves around again, a couple principals here, but could you do that or not?  That’s the beginning of the question and like I said, the third principal, use a distribution plan, not a pie chart guesser.  If you can calculate that can do that, great.  If you’re close to it, then I would say talk to a financial professional like a fiduciary at Decker Retirement Planning to get to that point so they can mathematically calculate how that works or incorporate other practices to get you to that point.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:44:42]

CLAYTON:  Well, and Mike, I love putting these plans in front of folks to show them how all of their money flows in as income, because it’s clear on the plan.  You can see it all.  It’s a big snapshot of, okay, how much do I have?  Where’s my emergency cash coming from?  Right, that’s here in this pot, or we call them buckets, right?

MIKE:  [LAUGH]  Buckets.

CLAYTON:  I know.

MIKE:  Are you Uncle Drew?

CLAYTON:  Gosh.  But it’s a good categorization or a good placeholder to show where these funds are sitting.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:45:13]

CLAYTON:  And so you’ve got your emergency cash, then you’ve got your principal guarantee buckets and these are structured depending on how long you’re gonna need principal guaranteed income, because again, to follow the number one principal, you only draw income from principal guaranteed sources.  And so we show you where that income comes from.

MIKE:  All you folks following this first principal, you’re probably not very nervous right now with the corona crash.

CLAYTON:  Right, exactly, because it’s set up so that if the market drops, your income should be unaffected because of the principal guaranteed sources that you’re drawing from.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:45:46]

MIKE:  Yep.

CLAYTON:  And then you’ve got the final portion on there that you can see where your assets that are in the stock market that are at risk are at.  And you can see, okay.  How much is at risk?  How much is protected?  It’s all in front of you.  And then you can see how it fits in with your Social Security.  You can see how it fits in with your pension.  You can see how it fits in with your rental income.

MIKE:  Yep.

CLAYTON:  Or if you still are working, when you retire, what it’s gonna be.  These plans are clear, at least in my eyes, as far as how they work and how somebody can draw income out of them.

MIKE:  Yep.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:46:17]

CLAYTON:  And that’s why this is the third principal.  Use a distribution plan and not a pie chart so that you can see where this income is coming from, you can see how much down to the month net of tax what you’re gonna get in retirement all the way to age 100.

MIKE:  Yep, just a written plan.  It shows you in a very beautiful and a very articulate way how you’re gonna be able to succeed in retirement.  It’s a beautiful thing.  If you want to get one, I mean we build these at Decker Retirement Planning.  Just let us know.  Love to help you or any financial professional that has the technology.  I don’t know anyone that really does, but there you go.  A written plan, that’s what you need.

CLAYTON:  Yeah.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:46:52]

MIKE:  And follow the principals.  If you’re just tuning in, this is Safer Retirement Radio where you get the transparency that you deserve.  I’m Mike Decker.

CLAYTON:  And I’m Clayton Bradshaw.

MIKE:  And to submit a question or to talk to one of us about what we’re talking about here and the answers we’re giving, as well as anything else that may be on your mind about retirement, you can always call us, 833-707-3030.  That number one more time is 833-707-3030.  Just call to get that friendly voice, submit your information so we can connect.  This has been fun so far.  We only have about, what, 15 minutes or so left in the show.  Do you have one that you’d like to address?

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:47:28]

CLAYTON:  Yeah.  Well first, I want to talk about something that I saw today.  I guess you could call it a stat or a fact.  So in the stock market, I guess we’ll go back to the history of the stock market here, October of ‘87 it was black Monday.  I’m sure most of our listeners remember black Monday.  There was a 22 percent drop in a single day in the stock market.  October of ’87.  Big news stories.  And when that happened, there were a lot of I guess triggers that were put into place that if the stock market dropped so far, it triggered the next layer of selloffs and so on and so forth.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:48:08]

CLAYTON:  And that happened in October, which it was the culmination.  It ended up being over a 30 percent drop from September leading up to that day in October.  So when that happened, the regulators realized, whoa.  Something was wrong here.  This shouldn’t be allowed to happen.  The stock market fell way too fast and it was a major issue.  And we know that not too long after that, the stock market bounced back and it was pretty quick, but it still scared a lot of people and some regulation was put into place to protect that.  So if the stock market falls a certain percentage, trading stops happening.

MIKE:  Yeah.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:48:47]

CLAYTON:  The last time that it happened was in the early ‘90’s.  Well it happened again Monday of this week.

MIKE:  Monday the ninth, March ninth the stock market stopped.  It froze.

CLAYTON:  They froze trading for a period of time to get people to stop trying to sell.  That’s how bad it got.

MIKE:  If you think it’s gonna stop.

CLAYTON:  Right.

MIKE:  And now I want to point this out, Clayton.  In December of what was it, 2018, the markets tanked pretty hard and then they recovered.

CLAYTON:  Yeah.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:49:18]

MIKE:  That was a warning that how sensitive our markets were, and it was just kind of a lip that just happened with nothing really of a panicky situation.

CLAYTON:  Right.

MIKE:  The coronavirus is making much more fear and panic affect the market and it doesn’t look like it’s gonna stop anytime soon.  For all of our listeners up in Seattle, Washington for example, it’s a ghost town up there.

CLAYTON:  Yep.  Yeah.  King County, that’s the county that Seattle’s in, I think they had a work from home order in place.

MIKE:  Yeah.

CLAYTON:  Which, how do you make airplanes from home?

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:49:52]

MIKE:  I don’t think King County’s in Seattle.  I could be wrong, but it’s Belleview, Redmond, Issaquah, Kirkland.  It’s the east side of Seattle.

CLAYTON:  Oh, my apologies.

MIKE:  But yeah.  Actually, it might be Seattle.  Either way.

CLAYTON:  But, so Boeing’s up there, right?

MIKE:  Yeah.

CLAYTON:  What do you do?

MIKE:  Work from home.  Two point two people.

CLAYTON:  Go make airplanes from home.

MIKE:  Yeah.  Basically, all of this social fear has to be resolved, then maybe the markets will have a chance to recover.  But right now there’s too much panic happening.  I think it’s just gonna get worse.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:50:29]

CLAYTON:  Yeah.  Well, and I saw that the event in Texas, SXSW, it’s that music festival/tech festival.

MIKE:  Huge.

CLAYTON:  They estimate that there is an over $300 million impact to the economy with that festival because of, I assume, the coming and going and all the travel and everything that surrounds it and all the buying that surrounds that festival.

MIKE:  Yep.

CLAYTON:  That’s a massive impact.  So the next big event like that, similar to that, is Coachella.  It’s another big festival that happens out in Nevada, I believe.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:51:02]

MIKE:  Did you see that meme?  Coronavirus is headlining Coachella?

CLAYTON:  [LAUGH]  Oh no.  They estimate that Coachella, if it gets canceled, they estimate it’s about a billion dollars worth of economic impact.  And if it gets canceled that’s another billion.  So think about it.  That’s just two events that I’ve talked about.

MIKE:  I mean, just for Utah listeners, the Domo event,  that’s about 50 million dollars lost to just the Utah economy.

CLAYTON:  Right.

MIKE:  Now think of all the different events all over the nation that are getting canceled because of the coronavirus.

CLAYTON:  Right, and that I think is where some of the fear is spurred because of these different economic impacts that can happen.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:51:39]

CLAYTON:  So if these events are being canceled, that’s gonna create a drag on the economy.  So these are all the leading indicators, or some of the leading indicators that folks are looking at, which is why in my opinion is one of the reasons why the stock market is taking a dive.

MIKE:  A huge dive.  Do you think it’s gonna go over 50 percent for the dip?

CLAYTON:  No, I don’t think it’ll get that.  I don’t think it’ll get that low.

MIKE:  I think it will.

CLAYTON:  Do you think it’ll hit over 50 percent?

MIKE:  My opinion is it’s gonna be between 50 and 60 percent of the hit.  That’s my opinion because momentum strategies are gonna be driving it down even further.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:52:12]

MIKE:  And until they have a cure in place and there’s hope and upside to this, it’s just gonna keep going down.  That’s my opinion.

CLAYTON:  Yeah.

MIKE:  I mean, I looked at the markets today and if you just invested and bought and hold from a year ago, or two years ago to today, you’re negative over a two year span.

CLAYTON:  Right.

MIKE:  That’s how bad it is right now.

CLAYTON:  Well, as of Monday year-to-date, I think the market was down over 15 percent just year-to-date.  So that’s in little less than three months.

MIKE:  That’s rough.

CLAYTON:  Yeah.

MIKE:  That’s really rough.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:52:41]

CLAYTON:  And so for anybody, and the reason I bring this up in talking about this is while yes, this can have a sustained prolonged effect on our stock market, for retirees that are following the principals, and comes back to these principals again because for those that are following the principals they are set up to have the best possible chance at successfully staying and being retired.

MIKE:  Yeah.  So for the last five minutes let’s go over the principals here and just rearticulate them.  And for any of you listening right now, if you want to talk to one of us, either submit a question or get us on the phone and privately talk to us, we’re here for you.  The number always is 833-707-3030.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:53:17]

MIKE:  You’re listening to Safer Retirement Radio by Decker Retirement Planning.  This is where you get the transparency that you deserve.  I’m Mike Decker.

CLAYTON:  And I’m Clayton Bradshaw.

MIKE:  And just to kind of sum up the show here, the three principals of retirement, and I would say the three principals of finance are as follows:  if you’re gonna draw income, you draw it from principal guaranteed sources.  From sources that cannot lose money because just because the market may take a 50 percent hit doesn’t mean your income should take a 50 percent hit, because we all know that your bills aren’t gonna give you a 50 percent discount because the markets went down 50 percent.  That doesn’t happen.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:53:49]

MIKE:  Stability in retirement comes from following the first principal, which is to only draw income from principal guaranteed accounts.  That does not mean- I can’t say this emphatically enough- that does not mean all of your assets are principal guaranteed.  You don’t put your assets all in one investment basket or one investment strategy.  That flies in the face of the very root purpose of diversification, but that’s why we have the second principal there, is to diversify by purpose using the investment triangle.  Just keep in mind when you are working your assets had one purpose:  grow.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:54:22]

MIKE:  When you retire your assets have more than one purpose now.  It’s grow, it’s provide income, it’s minimize your taxes, pass to your beneficiaries tax-free.  You’re gonna want to reduce your risk as you get older, and the list goes on.  There is an additional amount of responsibility that your assets have and unless you diversify by purpose, your assets only have one purpose.  And if you try to get your assets to leave that purpose without diversifying them correctly, you’re essentially shooting yourself in the foot.  And Clayton, you want to take this home with the third principal?

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:54:55]

CLAYTON:  Yeah, so the third principal is use a distribution plan and not a pie chart, or the pie chart guesser, as we like to call it.

MIKE:  Yeah.

CLAYTON:  And so effectively when you’re doing this, when you’re using and drawing income from principal guaranteed sources, when you are diversifying by purpose using that investment triangle, using a distribution plan you can see how those first two are mapped out.  You can see where your income’s coming from.  You can see where your diversification lies.  What’s the purpose of that money?  How does it fit into the bigger picture?  How does it fit with Social Security?  How does it fit with the pension, with the rental income, with your current income?  What does it look like when it starts?  There are so many things that goes into this.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:55:32]

MIKE:  Here’s a fun, little analogy for you.  Just imagine you got a go kart and it’s got wheels and goes downhill and it can go downhill real fast.  Great.  What if you need to turn?  Okay, we need to add that in there.  What about brakes?  What if you need to slow down a little bit?  Well, let’s add that in there.  You could keep adding things on there.  When you are working your go kart only goes downhill and it goes one direction.  And it may get hit a couple of things once in a while, it may bump into the walls.  That’s when the markets typically crash, but whatever.  You’ve got enough time.  You’re still working.

CLAYTON:  Yeah.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:56:02]

MIKE:  That’s kind of a weird analogy I guess, but just think of all the purposes you would need in your go kart in this analogy.  You can’t just have one.  You can’t expect your assets to only have one purpose of growth and expect it to accommodate all the other issues and needs that you have in retirement.  It just doesn’t work that way.  Yet so many people are trying to put this square peg into the round hole, so to speak, so…

CLAYTON:  Right.  Well, and for people that are retired that are following these principals, it feels, at least from my standpoint from what I can see in my conversations with them, very similar to how it feels when somebody is working.

MIKE:  Yep.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:56:38]

CLAYTON:  When somebody is working, you’ve got your income coming from a protected source.  That’s your job, right?  We know obviously you can lose your job, but you still have your own two hands that you can work and you can earn money, so as confident as you are in your own skills you’ve got your income, right?

MIKE:  Yep.

CLAYTON:  Then you’ve got your savings, your IRA, 401(k) money where you’ve got some money at risk.  You’ve got your emergency cash.  It’s a very similar approach in retirement.  You’ve got your income from a protected source and the principal guaranteed sources.  You’ve got some funds that are in the market that are at risk, if you’re comfortable with that, and then you’ve got your emergency cash.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:57:14]

MIKE:  Yep.  It’s that simple, folks.  So for all of you listening right here, this is Safer Retirement Radio where you get the transparency you deserve powered by Decker Retirement Planning.  And stick to the principals.  If you’re principal-based in retirement, then the corona crash and all these fears and conundrums just seem to melt away and you can focus on what matters most to you, whether that’s travel, time with family, picking up new hobbies or whatever it means.  And from the bottom of my heart and Clayton’s heart, we wish you the best of times.  2020 may be the best year you’ve ever experienced.

 

RR S3 E38 SAFER RETIREMENT Q & A     [00:57:47]

MIKE:  May you enjoy your ideal retirement, or maybe you plan for your ideal retirement this year regardless of the corona crash, and enjoy your time how it matters most to you.  Thank you so much and tune in same time, same place next week.

 

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Decker Retirement Planning Inc. is a registered investment advisor in the state of Washington. Our investment advisors may not transact business in states unless appropriately registered or excluded or exempted from such registration. We are registered as an investment advisor in WA, ID, UT, CA, NV and TX. We can provide investment advisory services in these states and other states where we are exempted from registration.