Wes Moss: Recent Episodes
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A recent article from the Wall Street Journal took a shot at two time-honored investment strategies: the 60/40 portfolio and the 4% rule. Will these two financial principles work in the future? CERTIFIED FINANCIAL PLANNER® Wes Moss, a managing partner with Capital Investment Advisors, joins Christa to discuss the purpose of these fundamentals and explains why they still belong on the Mt. Rushmore of finance.
This information is provided to you as a resource for informational purposes only and is not to be viewed
as investment advice or recommendations. Investing involves risk, including the possible loss of principal.
There is no guarantee offered that investment return, yield, or performance will be achieved. Stock prices
fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular
industries or sectors, or general market conditions. For stocks paying dividends, dividends are not
guaranteed, and can increase, decrease, or be eliminated without notice. Fixed-income securities involve
interest rate, credit, inflation, and reinvestment risks, and possible loss of principal. As interest rates rise,
the value of fixed-income securities falls. Past performance is not indicative of future results when
considering any investment vehicle. This information is being presented without consideration of the
investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be
suitable for all investors. There are many aspects and criteria that must be examined and considered
before investing. Investment decisions should not be made solely based on information contained in this
article. This information is not intended to, and should not, form a primary basis for any investment
decision that you may make. Always consult your own legal, tax, or investment advisor before making any
investment/tax/estate/financial planning considerations or decisions. The information contained in the
article is strictly an opinion and it is not known whether the strategies will be successful. The views and
opinions expressed are for educational purposes only as of the date of production/writing and may change
without notice at any time based on numerous factors, such as market or other conditions.
The post Wes Moss Featured On The Clark Howard Podcast: Do the 60/40 Portfolio and the 4% Rule Still Work? appeared first on Wes Moss.
Recently Wes Moss was featured in The Street: Retirement Daily article on Factors, Financial and Otherwise, That Can Lead to a Happy Retirement. Read the excerpted section of the article below.
A 2020 meta-analysis found that approximately 28% of retirees are depressed, a significantly higher number than the broader population, with the highest prevalence among those forced into retirement, either due to downsizing or illness. On the flip side, separate research from Age Wave and Merrill Lynch found that 76% of retirees reported often feeling happy, more than any other age group studied. This raises the question of what factors contribute to an individual having a happier retirement.
From his research, Fritz Gilbert, author of “The Retirement Manifesto Blog,” identifies three financial traits and six non-financial traits of happy retirees.
Financial Factors
Gilbert emphasizes that retirees tend to have at least $500,000 in liquid assets, a paid-off mortgage and multiple streams of income. He came to this conclusion upon reading — and subsequently citing — What the Happiest Retirees Know: 10 Habits for a Healthy, Secure, and Joyful Life by Wes Moss, a money educator and writer.
Read the full article here.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
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Recently Wes Moss was featured in the Yahoo Finance article “Soaring number of Americans are now 401(k) millionaires” where he shared his insights on saving for retirement.
A hot stock market lifted more retirement accounts to new heights in 2023, Fidelity says.
Sweet 401(k) balances.
The number of folks with $1 million or more saved in their 401(k) accounts jumped 20% from September to the end of December, according to Fidelity Investments.
All told, there were 422,000 retirement savers in Fidelity 401(k) plans sporting balances of seven figures and beyond as of Dec. 31, up from 349,000 at the end of September and 299,000 at the end of 2022.
There were also 391,562 IRA millionaires on Dec. 31, up from 338,725 at the end of September and 280,320 at the end of December 2022.
“We are encouraged to see retirement balances increase so dramatically this quarter, reflecting the improving market conditions and enabling retirement savers to see significant gains in their account balances and retirement preparedness,” Michael Shamrell, vice president of thought leadership for Fidelity Workplace Investing, told Yahoo Finance.
No kidding.
Retirement savers ended the year with average account balances at their highest level in nearly two years. Adding to that good juju was that more than a third of workers increased their retirement savings contribution rate in 2023.
That’s according to Fidelity’s fourth quarter analysis of savings account balances for more than 45 million IRA, 401(k), and 403(b) retirement accounts.
If you’re one of the nearly 1 in 4 Americans who don’t have a clue how much they have socked away in their retirement accounts, maybe it’s time to take a gander.
You might be pleasantly surprised. Last year was a dream for many Americans’ retirement savings account balances, with the S&P 500 index (^GSPC) up 26.3% and the Dow Jones Industrial Average (^DJI) up 13.7%.
The bigger balances, however, came from a combination of a few things, not just the strong stock market.
At the end of 2023, 78% of 401(k) savers were contributing at a rate high enough to secure the full matching contribution offered by their employer. The total average 401(k) savings rate for the fourth quarter — a combo of employee and employer match contributions — was roughly 14%.
In the fourth quarter, nearly half of individuals increased their contribution of their own volition without waiting for their plan to automatically add a bump up. About 1 in 4 employers offer auto-enrollment now, and the average employer default contribution rate (the amount paid into your retirement account if you don’t make your own selection) is at an all-time high of 4.1%, according to the report.
401(k) millionaire keys to swelling balances
So, who are these millionaires, and what’s their secret sauce?
First, they go the distance. The average savings tenure of Fidelity account millionaire savers is 26 years. What that tells us is that it pays to continue to invest steadily over the long term. The average age of a retirement account millionaire is 59.
“The key to saving for retirement is playing the long game and maintaining consistent contributions over time,” Shamrell said. “The increase in the number of 401(k) millionaires is a perfect example, as the majority of these savers aren’t necessarily doing anything special other than saving at a high rate in the same plan over a long period of time.”
Nearly half of Fidelity’s millionaires are boomers, which was on par with the number of Gen X millionaires. Millennials accounted for just 0.8%.
Another key takeaway: It takes more than simply investing paycheck after paycheck for decades or a roaring stock market to make it over that bar. The new millionaire club members save on steroids.
The Fidelity breakdown shows that they save 17.5% of their pay on average. Their employers contribute an additional 9% to their retirement accounts for a total savings rate of 26.6%.
If you are one of these newly crowned millionaires, congratulations. Just don’t get too ahead of your skis.
“My advice to these millionaires would be similar to when the market is very low,” Stephanie McCullough, founder and chief executive of Berwyn, Pa.-based Sofia Financial, told Yahoo Finance. “Close your eyes and keep doing what you’ve been doing. Don’t get too caught up in highs and lows because both are temporary; the market is going to keep doing its thing, bouncing around.”
This is not the time to ease up on the pedal. “Just because you’ve hit a new milestone doesn’t necessarily mean it’s time to stop saving,” Wes Moss, chief investment strategist at Capital Investment Advisors, told Yahoo Finance. “Like all things personal finance, the amount of money you have socked away for retirement must be considered in the context of the money you’ll need to support yourself in retirement.”
One caveat: Those within five years of retiring or who plan to start spending some of their nest egg might consider making a few calculated shifts. This is a good time to rebalance your retirement portfolio so you have some cash and pull a piece of profits on some of your stock appreciation.
“Start to move some of your retirement savings into short-term vehicles like a money market account,” McCullough said. “It’s those years close to retirement when your investment strategy needs to get more nuanced.”
“You want to have a few years’ worth of withdrawals in something that won’t go down if the market tanks,” she said.
Read the original Yahoo Finance article here.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions
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ATLANTA (January 30, 2024) —Atlanta magazine released its sixth annual special publication, The Atlanta 500, recognizing the 500 most influential business and civic leaders in Atlanta. The list also includes dozens of leaders whom the magazine has deemed as “Legends.” The Atlanta 500 recognizes the most influential Atlantans— including not only corporate CEOs, but also leading entrepreneurs, educators, researchers, artists, and those leading nonprofits and shaping public policy. The print publication is for sale on newsstands throughout Atlanta, and the online listings is available, at atlantamagazine.com/atlanta-500.
“CEOs of our city’s largest corporations or firms’ top producers were likely candidates, but we also looked to see if those achievers were plugged into the city—serving on nonprofit boards, spearheading programs for their communities, and creating opportunities for their employees,” said Scott Freeman, Editor in Chief of Atlanta magazine. “What makes our list unique is that it is not just about business, but also about creatives, teachers, health care providers, essential workers, and visionaries, all of the people who help make Atlanta the city we love.”
The Atlanta 500 is comprised of eight categories: Business; Professionals; Real Estate & Design; Government & Infrastructure; Arts, Sports & Entertainment; Education & Healthcare; Restaurants & Hospitality; and Religion, Nonprofits & Advocacy. Atlanta magazine’s editors spent months consulting experts across different sectors while also taking into consideration nominations from the public.
“One of our former longtime editors used to say Atlanta magazine has the ability to tell you something you’ve never known about people you know, while introducing you to people you may never have heard of but should know—it’s in this spirit that we introduce our readers to our sixth annual The Atlanta 500,” said Sean McGinnis, President and Publisher of Atlanta magazine.
Rankings and/or recognition by unaffiliated rating services and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Capital Investment Advisors, LLC (“CIA”) is engaged, or continues to be engaged, to provide investment advisory services, nor should it be construed as a current or past endorsement of CIA or any of its financial advisors by any of its clients. CIA and Wes Moss do not pay a fee to be considered for any ranking or recognition but may purchase plaques or reprints to publicize rankings. The Atlanta Magazine’s editors list of 500 honorees for the 2024 Atlanta 500 was published January 30, 2024. The time for which that decision is based was 9/1/2022 to 8/31/2023. No compensation was exchanged between Capital Investment Advisors and Atlanta Magazine. This ranking was not based on investment related criteria and should not be indicative or CIA’s services. For additional information, please visit https://www.yourwealth.com/members/wes-moss/.
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Wes Moss recently made a captivating appearance on The Stacking Benjamins Podcast, delving into 5 Things You Should Know Before You Retire. What do the happiest retirees share in common? What are some of the steps you can take to get ready for retirement before you actually reach your number? Wes joins Crystal Hammond from the Stacking Deeds Podcast and Len Penzo from the award-winning blog LenPenzo.com in this special roundtable discussion.
Listen to the episode here.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions,
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Wes Moss recently made a captivating appearance on The BiggerPockets Money Podcast, delving into finances in retirement. The episode goes beyond the surface, engaging in a much deeper discussion with Wes about what he thinks a happy retirement looks like and some key things that may help you work toward a satisfying retirement life. You can find the episode wherever you listen to podcasts.
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As the holidays are rapidly approaching, the main concern I’m hearing is, “How am I going to pay for everything? Inflation is out of control!” Families are concerned about how they are going to fund everything from Christmas and Hannukah presents to holiday travel to holiday meals. People are reluctant to host the holidays at their homes or throw their annual holiday parties as the costs of food and beverages seem to rise by the day. And that trip to see Aunt June and Uncle Joe? Definitely out of the question with travel prices sky-high.
However, I did a little digging to see what the real impact of inflation could be this holiday season. What can we really expect?
Higher Prices and Lower SalesAccording to PWC, American consumers are expected to spend $1,530 this holiday season on gifts, travel, and entertainment. This is 7% more than in 2023, in line with inflation. That’s a hefty price tag for most Americans, and about 40% of consumers are expected to spend more than they did last year. U.S. holiday sales in 2023 are expected to rise at the slowest pace in five years, according to recent data from the National Retail Federation (NRF). Americans are pausing and thinking twice before any purchases they make this holiday shopping season. On a number basis, the NRF said holiday sales, including e-commerce and non-store sales, could rise between 3% and 4% to $957.3 billion and $966.6 billion during November and December. This compares with a 5.4% rise in 2022 and a 12.7% rise in 2021.
The Holiday Table When it comes to the holidays, most people dream more about the delectable food on their holiday table than their wrapped gift. Succulent ham and sweet potatoes, latkes, and brisket…take your pick! I looked to Wells Fargo for some ideas on what we can expect to spend on our holiday feasts.
The good news is that turkeys are 16% cheaper than last year. That’s quite some savings! Unfortunately, if you prefer ham, you’ll pay 5% more this year, a whopping $4.56 per pound. The classic canned green bean prices are up 9% and russet potatoes are up to $1.17 compared to $1.08 last year. And if you’re making your favorite pumpkin pie, expect to pay 30% more for canned pumpkin!
Leaving On a Jet Plane…Maybe Not This YearWhile we are seeing the impact of inflation across all areas such as food, gifts, and décor, we are seeing the most pain in the travel sector. According to Bankrate:
Inflation is impacting travelers. 77% of people traveling for leisure during the 2023 winter holiday are likely to change their plans due to inflation or rising prices.
Budgeting is the most significant worry for holiday travelers. 30% of 2023 holiday travelers are worried their trip will place a strain on their budget and 25% anticipate feeling pressured to spend more than they’re comfortable with.
People are unpleasantly surprised by travel prices. 55% of Americans traveling for leisure or business in 2023 say they’re worried about higher prices than they’re accustomed to.
Four Tips to Avoid OverspendingWhile consumers feel frustrated with rising costs, there are a few ways to combat overspending. A couple of these tips do require discipline, but your discipline will be rewarded!
- Create a budget- and stick to it. It sounds obvious, and yes, most people tend to make a holiday budget year after year. The problem is that a lot of those people don’t stick to it. This year, try to take your budgeting seriously and if you stay within the range, you will prevent wracking up unwanted credit card debt- especially at these high-interest
- Avoid waiting until the last minute to holiday shop. We’ve all been there, with less than three days to get gifts for everyone, we are empty-handed. This is when we tend to buy anything we can and don’t shop for deals and discounts. We generally spend the most amount of money on gifts when we are frantically trying to buy those last-minute gifts. This year, take your time. Do some research on the items that you want to purchase and see if there are discounts in stores or online. Taking your time and planning ahead will avoid last-minute shopping pitfalls.
- Focus on experiences rather than gifts. More and more people are leaning towards purchasing experiences that the whole family can enjoy rather than a gift that may sit in the closet for an undisclosed length of time – or re-gifted! The great thing about experiences is that they are invaluable if you are making family memories to last a lifetime. Purchasing and spending money on experiences oftentimes brings much more joy and satisfaction than a material gift.
- Potluck is OK! We all know hosting a holiday dinner or lunch takes a lot of time, preparation, and resources. Few of us want to give up all of the control over our holiday meals and enjoy doing all of the work. But in a year with exceedingly high costs, it’s okay to let others chip in. Allow your guests to bring their favorite dish and let that take some pressure off of your time and wallet. At the end of the day, most people truly enjoy making contributions.
Bottom Line: Focus On the Magic of the HolidaysYes, 2023 is going to be an expensive holiday season but the most important parts of the holiday season do not carry a price tag. The holidays are a time to celebrate your beliefs and spend time with friends and family. It’s a time to reflect on your blessings. It’s a time to slow down and take in the magic.
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Recently Wes Moss was featured in the WebMD article “Beyond Finances: Other Types of Retirement Planning” where he shared his insights on building a retirement fund.
In planning for retirement, you may have contributed to a 401(k), met with financial planners, and created a budget to make sure you could afford to leave the workforce. But building a retirement fund isn’t enough to prepare you for life after work. You need to consider the social and emotional aspects of retirement, too.
“There’s a tendency to think that the social side … is something that you can just do quickly once you’ve got the money part figured out,” says Wes Moss, managing partner and senior investment adviser for Capital Investment Advisors. “But it should be a lifelong pursuit to make sure that you’ve got all of the non-financial components in a good place when the time comes for you to stop working.”
Many people don’t give much thought to these things ahead of time. An AARP survey found that 57% of retirees never planned for their emotional health, and 46% never thought about how they would remain fulfilled, once they stopped working.
But one of the best ways to avoid social isolation, loss of identity, and lack of purpose is to plan ahead.
Rethink your 9-to-5: Your calendar may no longer be filled with meetings, deadlines, and conferences. But that doesn’t mean it should be blank. A lack of planned activities could lead to feelings of boredom, aimlessness, and isolation.
Your schedule will be less intense than it was when you were working full time, says Moss, author of What the Happiest Retirees Know. But having a few entries on your calendar each week will help you restart a routine and give you something to look forward to.
Consider joining a book club, signing up for fitness classes, volunteering, or scheduling regular lunches with friends. These activities can prevent boredom and give you a sense of purpose and well-being, says Moss.
Make connections: Retirement can take a toll on your social life. In a 2023 University of Michigan poll, 37% of retirees admitted to feeling that they lacked companionship.
“For a lot of people, even if our colleagues were virtual, we were talking with the same people all day, every day, [and] now we don’t have those people around anymore,” says Richard Eisenberg, who writes the View from Unretirement column for MarketWatch.
In the absence of birthday celebrations in the lunchroom or impromptu invitations to join co-workers for happy hour, Eisenberg says, “It’s up to you to make a point of seeing other people and getting out of the house.”
You can grow your social network by signing up for classes, joining recreational sports leagues, or attending events. Eisenberg has made new connections through volunteering. He says these interactions are important even if they don’t lead to deep, meaningful friendships.
“Typically, we think of friends as people that we spend a lot of time with, that we’ve known for years,” he says. “That isn’t necessarily what friendship has to be in retirement. It can be. But it can also be just some new people that you hang out with.”
Even if you’re not yet retired, Moss advises joining clubs, volunteering, and taking classes now.
“There is a quantity problem in retirement when it comes to our social networks,” he says. “The only way to solve for that is to constantly be working on growing and maintaining a larger social network.”
Reimagine your identity: Often, your career and identity go hand-in-hand. For professionals whose self-worth was tied to their careers, retirement can leave a void.
“So many of us are wrapped up in who we are because of what we do,” Eisenberg says. “It may take a while before you figure out what your new identity is. And that identity may be in some way related to who you were before you left your full-time job … but it may be a whole new identity.”
Find a sense of purpose: Contributing to the greater good can help you create a new identity in retirement, according to Eric Thurman, author of Thrive in Retirement: Simple Secrets for Being Happy for the Rest of Your Life.
You don’t necessarily get a sense of purpose from pursuing hobbies or social activities, he says. Joining a pickleball league, knitting, or re-reading the classics are great leisure pursuits but won’t provide a deep sense of meaning.
“You’ve got to find something that you love, that you can throw yourself into, that makes you want to get up in the morning,” Thurman says. “You need get involved in something bigger than you.”
Volunteering is a popular way to develop a sense of purpose during retirement. Your volunteer activities could mirror your professional skills. An entrepreneur might coach new business owners, accountants could help low-income seniors with tax preparation, and a nurse might volunteer with a blood bank. Or, you might want new challenges, like joining a board or traveling overseas to volunteer with an international aid organization.
The key to building social networks, creating a fulfilling routine, developing a sense of identity, and finding a sense of purpose comes down to intention and effort, Eisenberg says.
“There are a lot of opportunities,” he says. “But you have to make an effort to find them and make them happen.”
Read the original WebMD article here.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.The post Wes Moss Featured in WebMD appeared first on Wes Moss.
Recently Wes Moss was featured in the AARP article “Why More Retirees Are Going Back to Work” where he shared his insights on how working will affect Social Security, Medicare and pension benefits.
After Ray Hurtado of Haverford, Pennsylvania, retired eight years ago from his job at a health care company, he began thinking about how he wanted to spend his retirement years.
“I’m in good health, believe in aging well and plan to be around for a long time,” says Hurtado, 68. “I started looking for opportunities where I could meet new people, challenge my mind, and also make a meaningful contribution.”
The solution, he decided, was to start working again. Hurtado is one of many Americans who have unretired, a post-pandemic trend that’s seeing some retirees rejoin the workforce. Many are returning to work to offset inflation, increase their social interactions, and find a new passion and purpose.
According to Judith Ward, a certified financial planner and thought leadership director with Baltimore-based T. Rowe Price, a global investment management firm and a leader in retirement, many of the “excess” retirees from the height of the COVID-19 pandemic — 2.4 million people who retired before they would have been expected to, by the Federal Reserve’s calculations — have now chosen to unretire.
Many find purpose in going back to workA September T. Rowe Price report, “‘Unretiring’: Why Recent Retirees Want to Go Back to Work,” sheds light on the trend and offers financial advice to those reentering the workforce.
“Returning to work doesn’t always mean returning to a previous career,” Ward says. “Our study found that many choose to unretire in order to secure additional financial or social benefits.”
Hurtado, who now works as a licensed real estate agent, wants to help families achieve their dreams of owning a home while they’re achieving a sense of stability and financial independence. He is also looking to get a part-time job with a nonprofit that helps children in need.
“My own family immigrated to the U.S. when I was 7,” Hurtado says. “I know how owning a home can bring a sense of stability, and I also want to take some of the lessons I’ve learned over the years to help other families.”
Hurtado isn’t alone in his desire to remain in the workforce. Ward says T. Rowe Price’s latest annual “Retirement Savings and Spending Study” found that about 20 percent of retirees are working either part- or full-time.
“The reasons retirees return to work vary along gender and marital lines,” Ward says. “Our study found women and single retirees are more likely to cite income as the primary motivator for working into retirement, while men were more likely to cite social connections as a motivator to return to work.”
Yet before retirees decide to unretire, experts say they should consider the financial implications:
- Think about how working will affect Social Security, Medicare and pension benefits. For retirees who are receiving Social Security benefits prior to their full retirement age (up to 67 years old, depending on birth year), going back to work and earning more than a certain amount ($21,240 in 2023) can lead to penalty deductions from their Social Security payments.
“If a retiree has been taking Social Security for less than 12 months, they may have the option to withdraw their claim and pay back what they have received so far,” says Wes Moss, a certified financial planner, investment adviser and managing partner of Capital Investment Advisors in Atlanta. “This could allow their monthly benefits to begin increasing again, potentially leading to higher monthly Social Security benefits starting at a later date.”
In addition, Moss says choosing to unretire can increase an individual’s annual income, which in turn could increase their premiums for Medicare parts B and D.
“Unretiring should have little impact on a pension amount,” Moss says. “However, if an individual’s income rises now that they have unretired, their overall tax bracket could end up being higher, and their take-home [after-tax] dollars from a pension check could be diminished.”
- Strengthen your retirement plan. On the plus side, Ward says unretiring can be a good way to save more money for retirement, while also delaying retirement account withdrawals and collecting Social Security benefits.
Ward notes that unretiring allows individuals who are 50 or older to make higher catch-up contributions to their 401(k) and individual retirement accounts (IRAs). For 2023, eligible workers can save another $7,500 after maxing out employee deferrals at $22,500.
Plan for additional expenses. According to Ward, those retirees who choose to go back to work can use the additional time to plan for fluctuating retirement expenses.
“While spending generally decreases in retirement, many retirees experience meaningful ups and downs in their spending over time,” she says. “Home-related expenses, health-related costs and transportation can all be expenses that aren’t anticipated and pose a financial challenge.”
On the positive side, Moss says income made after a return to the workplace can provide a retirement savings cushion.
“Unretiring can result in ‘bonus money’ retirees didn’t necessarily plan on having,” he says. “I often see these extra cushion funds go towards experiential spending, like a [two-week] Scandinavian cruise, a long wine tour trip to Italy or a heritage tour of Israel.”
Read the original AARP article here.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.The post Wes Moss Featured in AARP appeared first on Wes Moss.
On today’s show, Wes talks about what Warren Buffett called the “rising tide.” Wes feels the bad news about higher interest rates is good news for income investors. By combining the rising stock dividends, the concept of yield at cost over time, and higher interest rates paying more income, Wes has seen the typically diversified growth/income portfolio looking more robust than it has in a long time.
The mention of any company is provided to you for informational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any company. The listener should not assume that an investment in the securities identified was or will be profitable.
Read The Full Transcript From This Episode(click below to expand and read the full interview)
- Wes Moss [00:00:00]:Today we’re talking about the rising tide for income investors. And it’s not just one thing. It’s the rising tide that Warren Buffett just wrote about in his 2022 letter, something we’ll call yield at cost that we’ll discuss today. And the bad news about higher interest rates in the economy because the Feds raised rates eleven times over the last year and a half. That’s really good news, I think, for income investors. Put both sides of the equation together rising stock dividends, the concept of yield at cost over time, and then just good old fashioned higher interest rates paying you more income. Put it all together, and this is the best the balanced or diversified 60 40 portfolio has looked in a long time. We’ll dive into that on today’s episode. I’m Wes Moss. The prevailing thought in America is that you’ll never have enough money and it’s almost impossible to retire early. Actually, I think the opposite is true. For more than 20 years, I’ve been researching, studying and advising American families, including those who started late, on how to retire sooner and happier. So my mission with the Retire Sooner podcast is to help a million people retire earlier while enjoying the adventure along the way. I’d love for you to be one of them. Let’s get started.So today’s episode is really for anyone who is thinking about retirement or early retirement and is a balanced investor. I know we have a lot of folks on the Retire Sooner podcast that are all stock investors and believe in growth stocks, and that works over time. And then there are folks that are listening that are more income oriented, where they may rely on dividends and reinvest dividends and then look forward to those dividends paying for life in retirement. And those are all great options. And of course, there are balanced investors that if we go back to what Benjamin Graham said in his seminal book called The Intelligent Investor, benjamin Graham, who was again Warren Buffett’s professor at University of Chicago, said that an investor, whether they’re 30 or 80, would do well to have a balanced portfolio, half in stocks, half in bonds. That way, at any given time, you’ve got some stability on the bond side that allows the stock side to be more volatile and grow over time. And there’s still a lot of merit to that today. One of the most popular products ever invented in the mutual fund industry after the invention of the mutual fund, was to start putting stock and bond mutual funds together and calling them balanced funds. And after the proliferation of modern portfolio theory, which essentially says that you can reduce your risk dramatically by combining different asset classes, stocks and bonds and cash, while not really sacrificing a whole lot in your longer term return.So if you can reduce your risk, let’s say by 30%, but only reduce your return by one or 2% hypothetically here, maybe that keeps you on track. You sleep better at night knowing that your portfolio doesn’t look like a bungee core tied to a roller coaster. And then we know if we can stay invested over time. Participation in markets is really the key time, not perfection of when we get in and out of the markets. That’s the variable that leads to long term investment success. So it makes sense that balanced portfolios took off when they were first introduced and over the last call it 30, 40 years make up a big portion of the mutual fund industry, not to mention the proliferation of target based funds that are another version of balanced funds. They’re more aggressive when you’re in your twenty s and thirty s and forty s, and then as you get into your 60s, quote a normal, quote, retirement age, they get much more conservative, and they consist of a higher portion, they consist of a higher portion of bonds. So there’s more steadiness to the overall portfolio. The thinking you have less time to make up for market declines when you’re already in retirement.And on top of that, bond income can be a big chunk of your paycheck. Fast forward to 2022, when we saw interest rates go from effectively zero and had been for many years to where we are now today, five and a half percent, depending on what you’re looking at. But as I sit here today on the precipice of the fall of 2023, the one year treasury yields around 5.4%. So we’ve gone from virtually zero yield to nearly five and a half percent yield on government Treasuries. That’s because the Fed has raised interest rates eleven times in the last year and a half. To put that dramatic change into perspective, imagine this today if you had a million dollars and you put it in a one year treasury bond, provided all goes well, you should receive $54,000. That’s 5.4% in interest income over the course of one year. If we go back to September of 2020, when rates were a fraction of a percent, how much capital would it have taken using a one year treasury to yield $54,000? The answer almost $45 million. Say it another way what $45 million yielded three years ago in Treasuries. Today, $1 million would yield the same thing. Pretty shocking statistic and thought.But it’s meant to drive home the point that income for income investors, or anyone with just a balanced stock bond portfolio, things have gotten dramatically better over the past year and a half. So to some extent I look at the past year. We don’t know how 2023 will be defined until we can look at it in retrospect, but it may very well be defined as a year where the Fed essentially got what they wanted after eleven interest rate hikes, they’ve brought down inflation pretty darn dramatically and largely kept the job market intact. You could call that a soft landing from an economics perspective. I think of it as the year of the unrecession, the beginning of 2023. The whole world was screaming, we’re going into recession. 70, 80% of economists said, oh, we’re going into recession in 2023. Couldn’t have been more wrong, at least so far. And we’re almost three quarters of the way through the year. So we’ve seen this rising tide.
If you’re looking at income investing in general, part of that rising tide is just the perennial increase in dividends paid out by companies in the S and P 500. The other big chunk of that, of course, would be higher interest rates. We’ve returned rates back to more historical norms, back to the days when bonds actually paid you three, four, 5% a year. Getting 5% from bonds may feel new and almost delightful today, but that’s the way bonds have been for the better part of 50 or 100 years. It just seems a lot better because we’re coming from a place that was close to zero now, from a stock market perspective. And when I say markets, I think of in my head, I’m thinking of multiple markets that encapsulate what I think are the important areas for investors. I think the real estate market, I think the Dow, the S and P 500, I think the aggregate bond index.
So when I say markets, I’m thinking of a lot of different markets that are emblematic of what different sectors of the economy are doing. And 2023 has been good for the broader markets. And when I say that, let’s focus on stocks here for a minute. The Dow going into the fall here up around 5%, SP 500 up around 18%, after being down 25% in 2022 at one point. So even though the stock market headlines have largely been positive since April of this year, the reality is that since the beginning of 2022, because that was a rough year, markets are largely flat or actually even down a little bit when you look at the major quote averages, the Dow, the SP 500. So let’s take a look at the last 20 months. This takes us back to the beginning of 2022. And I think it’s important because we always want to expand our view, our purview of investing. Investing is not about today, tomorrow, next week, next month. It’s really about multi year periods of time. So it’s very important and natural to be looking at, hey, how have things done? Not just this year to date, which is arbitrary, but how have they done over the last couple of years? Even more importantly, how have they done over the past 1020, 30 years? But for the purposes of what we’re talking about today, this rising tide for income investors, you go back to the beginning of 2022, and most of that year was declining. Markets for the Dow and the S and P 500. The Dow fared a little better or a lot better. Last year wasn’t as dramatic of a fall, not nearly as bad as the S and P 500.
And then this year, the S and P 500 is kind of slingshot past the Dow up in the teens, where the Dow is still up in the single, the middle single digits. But guess what? Look, over the course of the last two years, they’re almost at the exact same level. Here we are today. They’re almost at the exact same level. If you’re looking over the last 20 months. Call it a round trip for stocks. Let’s put some numbers to this. And I’m looking from January 1, 2022, till August 31, 2023. And this is just the level. So this doesn’t count dividends. But the S and P 500, over that 20 month period, the level is down just over 5%, down right around 5%. The Dow down right around three and a half percent. Not to mention the aggregate bond index, from a price perspective off about 15%. And that reflects how bad things were last year for the bond market, which has largely been flat so far in 2023. Most of that damage, that down 15%. Nearly all that happened in 2022. So you look back over that longer period of time and maybe you’re looking at your 401K balance and yeah, maybe you’ve been adding to that. And even though you may be adding to that, maybe it doesn’t feel as though things have grown all that much since 2022. Because again, markets are largely flat. And that can test our patience. I know it tests mine.
And I have to continue to remind myself to expand my time horizon and think long, long term. Now, market history in general is always testing you. It’s always testing us. It’s always making it hard to be an investor. The market operates on its timeline, not your timeline. That’s nothing new. It’s always testing us. And I always think back when wes go through longer periods of declines and recoveries, ultimately flatness. I think back to when I was very early in the investment business, and I think back in April of 1999, the Dow Jones Industrial Average clipped for the first time 10,000 10,000 on the Dow, big time. On the news rally, caps were abound. I remember people of the NYSE were putting on hats that said Ten K. And I was thinking, just, things are just going to get better from here. The Internet was starting to really blossom and about to transform our economy, which it did. However, we went into a recession and we had 911 in 2001, and we went into a bear market one and two. And it took more than eleven years for the Dow, which had hit 10,000 early in my career.
It took eleven more years to finally get back to 10,000. Think of it this way, 10,000 to 10,000 in over ten years. Talk about a long arduous slog. Now, the good news is that what followed was an incredibly strong wealth building period of time. Now, I still think we’re in that period of time today. But the patient investor was rewarded 10,000 to 10,000 in ten years. Not so good. 10,000 to 35,000. That’s three and a half times. Now, this is where income investing can come in anytime we go through those periods of flatness. As long as I’m getting some income now, maybe I’m just reinvesting it, or maybe I’m living on it in a retire sooner world. But one reason we believe so strongly in income investing is that annual dividends and then bond interest and then cash distributions from your other investments can help us remain patient. We’re all after the same thing total return. We want our money to grow, which is really a third grade math formula. It’s total return equals G plus I growth plus income. But those two variables act very differently.
Income should act, as I think of it, as just a very steady stream from the faucet. Think about when the water is turned on so slightly that it’s dripping, dripping, dripping. But I remember as a kid going through this game of turning the water on just enough so it goes from drip, drip, drip to the steadiest of small streams. Not the full blown turn the faucet on. We’re not washing dishes. Just a steady flow. And that steady flow is a couple of things. One, stock dividends. As long as we’re highly diversified and we’re not relying on a couple of companies to pay us those dividends. Wes know that in aggregate, the S and P 500 has grown its overall dividend in aggregate at a pace of around 6% per year, meaning 6% more stock income, dividend income year after year after year on average. Well, from a steadiness standpoint, bond income or interest should look largely the same. It’s certainly grown from where it was three years ago from my US. Treasury example. But if you’re locking in rates today for ten years at call it 4%, then you should largely get 4% each year for the next ten years. And that’s because, of course, the Federal Reserve has raised rates, really normalized interest rates. Now, a big portion of the bond market is paying in the four to 5% range in annualized interest. So in combination, we’ve got stock dividends, we have bond interest, and they’re now together producing an even more significant stream of income.
So we’ve turned up the faucet just ever so slightly. And that steady stream, at least, is how I think about it can afford us to be more patient and more patient to allow the G part of that total turn equation to grow. Now, couple that with the US. Economy enjoying the army of American productivity, both the G and the I should continue to combine in helping us reach our goals, our long term family goals, our long term financial goals that we’re all working so hard to achieve. As Warren Buffett reminds us, the stock market is a device for transferring money from the impatient to the patient. And I think that’s fitting. In the month of August 2023, buffett turned 93. And if you take a look@his.net, worth around 120,000,000. I came up with this because one of my kids asked me, how much money does Warren Buffett make every day? I thought wait a minute. I know he’s 93. Just turned 93, and he’s worth about 120,000,000,000. If he were to have gotten a paycheck every day of his life and not even invested it at 0% interest, he would have had to collect about three and a half million dollars every single day of his 93 year life to be where he is today. That means just over the past week, called the last seven days, he would have made about 24 and a half million dollars. Not bad for a week’s work.
Is your cash working for you? For years, banks have gotten away with paying next to nothing for the privilege of holding your money. Today, investors have more options, as the Federal Reserve has raised and raised and raised interest rates dramatically. Why not take advantage of it? If you’re interested in finding a higher yielding solution for the safety allocation of your investment portfolio, reach out to my team@yourwealth.com. That’s your wealth. Talk about patience. Think about what Buffett often writes about in those annual letters. He’s always highlighting how much cash he’s getting. Where is it coming from? It’s coming from stock dividends. The last letter he wrote, he gave a couple of different examples of companies that he had bought. And again, I’m just giving these as historical examples. And this was in the 2022 Berkshire Hathaway annual letter. And I want to go through just how much he used to receive in dividends and how much he receives today from these two examples. One’s Coca Cola, one’s American Express. And then we’ll calculate what’s called yield at cost on these same investments and how you can take advantage of it, just like Buffett has over over the years. So, back in 1994, they completed a purchase. They say it was around 400 million shares of Coca Cola.
It cost them $1.3 billion to do so. And I know these are crazy large numbers, so when we start doing some percentages, you can just knock off several zeros, and the percentages stay the same. These are Buffett dollars, so they’re big. There’s a lot of zeros involved. But think about the math here. So, $1.3 billion when they were done, that’s how much they had. So, in 1994, the dividends that they received from Coca Cola were about $75 billion. Do the math 75 divided by 1.3 billion. They were getting about a 5.7% yield. And without even checking what Coca Cola was yielding way back then, that’s how we calculate yield, total dividends divided by how much we have. What’s somewhat mind blowing here is that now, that same investment that he had in 94 last year in 2022, paid him $704,000,000 in dividends. Now, guess what? Coca Cola only yields a little over 3%. So buying it today, its yield today, its current yield is lower than when Buffett bought it. But it’s paying him so much more. It’s because Coca Cola has perennially raised the amount it pays out per share. So Buffett’s yield at cost. So the amount of dividends he’s getting today on the investment he made in 94, 704,000,000 divided by his original 1.3 billion yielded cost is 54%. That’s the yield he’s getting today relative to what he put in each year, it’s 54%. Cut off a bunch of zeros and you and I could do the same thing. He gives another example. 1995, he completed about $1.3 billion total purchases of $1.3 billion. Total purchase of American Express that year, it paid him 41 million.
It’s about 3.1%. Not a crazy high dividend yield. In 2022, it paid him 302,000,000 for a yield at cost. I take our yield or the income I’m getting today divided by what I paid for that originally. So 302,000,000 divided by 1.3 billion. Now we’re talking 23%. That’s how much yield he’s getting on the money he put to work in 1995. Now, yes, the numbers are different for you and me and you’re not plunking down a billion dollars into a stock, by the way. Dividends work. The same percentage change here, the same yield at cost calculation would end up with the same percentage income growth or yield at cost relative to the current yield if you bought one share. There’s no difference from a percentage perspective. And I think that’s the perennial good news for income investors, at least on the stock side, is that we look around and we find our one and a half and two and a half and three and a half percent yielders today, 2023.
And that may not sound like a whole lot, hey, I can get 5% going and buying bonds these days. Well, as important and stable and good, I think bond income is it’s not going to grow. It’s flat, then it matures and then you have to reinvest in whatever the prevailing rate is at the time you get your money back from the bonds that you held. But if you’re a long term dividend stockholder and you’re owning a company that’s every year just ratcheting their dividend a little bit higher, a few cents a year, then today’s two and 3% yielders can be tomorrow’s 5610 percent yielders as long as you hold it long enough. So we’ve come a long way in the last couple of years. Back in 2020, because of the Pandemic and the Fed taking rates to zero, it was hard to find any yield anywhere. The bond market, the interest payments from that important piece of the diversified investment pie just wasn’t doing a lot. The river had run essentially down to a trickle. Today, the water is back flowing. Bond yields, interest rates, they’re back and they’re producing very real income in arguably a much steadier, predictable way than most other income streams. You can find that steady stream of bond interest that’s there to allow you to be more patient while the stock market goes through its inevitable undulations.
But underneath that surface as well is this tide or faucet of dividends. And that faucet is turning to the left, open ever so slightly higher year after year after year, as long as you own dividend, growers, put it all together. We’ve got income flowing now, and that income can either pay for your life and family and income goals in retirement, or if you’re not there yet, it can just be reinvested and reinvested as a reminder of some semblance. Of Steadiness so that we allow the real power in the total return equation, which is equity growth or capital growth or appreciation in addition to increasing income, so that our total return is strong over time. So I think as income investors, we’re in a better place today than we’ve been for a long time. That gives me optimism about the future. We know that the army of American productivity is not going anywhere. The army of American productivity never goes to sleep.
It is operating 24 hours a day, seven days a week, 365 days a year. There is new growing productivity in the United States every single second of every single day. Maybe it slows down a little bit on Christmas, but guess what? Good ideas happen on Christmas. And people are still working on Thanksgiving. And every single holiday, somebody’s coming up with something new, somebody’s working. It just gets a little bit better every single day of our lives. I think that’s pretty cool. And I think that’s the very reason I’m such a believer in staying in this game. Staying invested, harnessing the power of American productivity. Maybe we don’t end up like Warren Buffett’s, but that’s fine. We’re going to be able to do all the things we want to do as long as we put in the work early and often, and we remain patient, just like the big guy, Warren Buffett.
Mallory Boggs [00:26:00]:
Hey, y’all, this is Mallory with the Retire Sooner team. Please be sure to rate and subscribe to this podcast and share it with a friend. If you have any questions, you can find us@westmoss.com. That’s wesmoss.com. You can also follow us on Instagram and YouTube. You’ll find us under the handle Retire Sooner podcast. And now for our show’s. Disclosure this information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guaranteed offer that investment, return, yield, or performance will be achieved. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions for stocks paying dividends. Dividends are not guaranteed and can increase, decrease, or be eliminated without notice. Fixed income securities involve interest rate, credit inflation and reinvestment risks and possible loss of principal. As interest rates rise, the value of fixed income securities falls. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Investment decisions should not be based solely on information contained here. This information is not intended to and should not form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment tax, estate or financial planning considerations or decisions. The information tier is strictly an opinion and it is not known whether strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production and may change without notice at any time based on numerous factors such as market and other conditions. Call in with your financial questions for Wes to answer: 800-805-6301Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcastThis information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #172 – Good Returns Come to Those Who Wait appeared first on Wes Moss.
I spend a lot of time thinking about retirement. Not so much mine, although I should. No, my focus is typically on the retirement of the families we serve, radio and podcast listeners, and people who read my books. My mind is constantly attempting to solve for “x” in the many unique retirement equations that present themselves.
Plenty of these scenarios involve financial planning: savings, allocations, income investing, Roth IRAs, etc. It’s tough to enjoy retirement without ample means to do so. But over the years, one of the most essential pieces of the retirement puzzle has become clear: Core Pursuits.
I immerse myself so deeply in the topic that sometimes I forget that not everyone knows what core pursuits are. It’s a good time for a refresher.
Core Pursuits: Hobbies on Steroids
Core pursuits are like hobbies but more powerful—the activities that make your passions burn. They bring you excitement and fulfillment while you’re doing them. They may even get you out of bed in the morning. Imagine the happiness potential of this concept. You got out of bed for most of your life because your alarm was buzzing, and you’d get fired if you didn’t. In retirement, you can wake up of your own accord, eager to tackle a core pursuit.
Core pursuits aren’t just for current retirees. People in their thirties, forties, and fifties would be well served to discover them, too. The sooner you begin development, the better. In addition to upping your happiness quotient, they help you save and invest more efficiently. The logic makes sense—you can winnow your expenditures when you have a specific purpose. Trim the fat and keep the protein.
Which endeavors you designate as core pursuits matters far less than that you have nominated them in the first place and regularly fostered them. Whether volunteering, singing in the choir, painting, traveling, taking college courses, playing tennis, or playing golf, these are core pursuits if they bring you happiness. Filling up your time with cherished habits sets you up for a fulfilling retirement.
To some folks, this is a no-brainer. Not because they’re loaded with a quiver full of core pursuits but because they’re under the impression that happy retirements are effortless. They assume the pesky career is the only obstacle between them and pure joy. This notion, my friends, is fool’s gold. A comfortable couch and free time will not get you across the happy retirement finish line. You have to have a purpose. You have to know what you want to do before you can enjoy doing it.
The research for my book, You Can Retire Sooner Than You Think, uncovered that happy retirees have an average of 3.6 core pursuits, while the unhappy lot has only 1.9. The difference between jubilant and melancholy is less than two core pursuits. That’s how critical each one is to the bottom line. No matter how far away you are from calling it a career, now is the time to build your arsenal!
Core Pursuits: Building Blocks
“I found out retirement means playing golf, or I don’t know what the hell it means. But to me, retirement means doing what you have fun doing,” said legendary actor Dick Van Dyke. I couldn’t agree more, and it’s not just because golf has developed into one of my core pursuits. I believe the most essential ingredient for a happy retirement is doing what sparks joy in your life.
Core pursuits are the building blocks for happiness during your post-career years. I get questions regularly about how to develop them. For someone who doesn’t already have a list, 3.6 can sound overwhelming. Folks wonder how to compile that many. I understand the angst. Determining what you will do for the next thirty years can be daunting.
To help, my team and I created our own Core Pursuit Finder. It quizzes you about preferences to narrow down your interests and generate suggestions. It did a pretty decent job of analyzing me—offering solid, logically concluded recommendations. It also served up some “off-the-wall” ideas in case I felt adventurous. Give it a try and see what comes your way!
As inspiration, allow me to share a story about my dad. In 2020, he retired after forty-three years of working as a veterinarian. He sent a letter to his clients, which is on point with our topic. In it, he wrote, “While stepping away from veterinary medicine is hard, as many of you know I have a few other interests that I look forward to pursuing (geology, Civil War medicine, fencing, leatherwork, fox hunting, trail riding, woodworking, sewing, time-traveling through historical reenacting (Civil War, Revolutionary, Pirate), music (guitar, singer-songwriter), art, cooking, cowboy poetry, and more! I also look forward to spending more time with our family (four grown children and eight growing grandchildren) and supporting my wife Anne’s interest and career in pottery and equine pursuits.”
I may be biased because he’s my dad, but I love this letter. It’s chock-full of exciting and outlandish core pursuits. Pirate reenactments?! He retired with a purposeful, clear picture of how he’d spend his newfound freedom. That’s what I want for all of you.
A few years ago, I surveyed forty of my coworkers, asking for the most memorable core pursuits they’d come across while working with our clients. It was a fun exercise, and we created quite a list.
Most of them fell into four categories. There was part-time work, like teaching, consulting, and decorating. Then there was exercise and health—hiking, biking, swimming, and walking. The arts were significant, with cooking, painting, and music making up a chunk of the list. And then there was adventure, such as travel, cruising, RVing, piloting, and sailing.
Take a look and see if you recognize anything from your life.
The truth is that no list will encompass everything because there are infinite possibilities. The only limitation is your creativity and openness to trying new things. Incidentally, that limitation is also the key ingredient.
Bottom Line
Some hopeful retirees might read this and decide to try everything under the sun. There’s a great new show starring Eugene Levy called The Reluctant Traveler, where he travels the world doing things far outside his comfort zone. If it sounds appealing to take a sleigh ride to an Arctic TreeHouse Hotel for ice fishing, husky sledding, and vodka sipping, go for it! Or if you’d rather just start a book club in the comfort of your home, that counts, too!
The key is to find at least three or four core pursuits. Anything less just won’t cut it. I want you to be a happy retiree. Find a purpose and make it happen. As Mister Rogers once said, “Often when you think you’re at the end of something, you’re at the beginning of something else.” Take advantage of your new beginning!
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post What the Heck is a Core Pursuit? appeared first on Wes Moss.
What does your digital footprint say about what you want?
Data scientist, author of best-seller “Everybody Lies,” and speaker Seth Stephens-Davidowitz sits down with Wes Moss to talk about how data can reveal societal and personal trends in desires, psychology, wealth building, and more. This includes when you become a sports fan, who you seek out for romantic partners and how you present yourself to them, and what activities are ranked as the happiest to do. Seth explains how he went from just reviewing data to using it to make his life decisions, and gives examples of how listening to his own data has made a difference for him. As for what data he encourages retirees to pay attention to, listen in to learn!
Read The Full Transcript From This Episode(click below to expand and read the full interview)
- Wes Moss [00:00:30]:Today on this episode, the unvarnished truth of what humans really want. And where are we getting that data from? Google. Google. Google. The entire planet uses Google. It’s a verb and a global technology company. Talk about good branding. It’s always good to create a brand new word, whether it’s to research a pasta recipe or look up a song you heard on Yellowstone or even Doom Scroll. Potential causes of joint pain. Our Google search history leaves quite a digital footprint. And as Seth Stevens Davidowitz explains, that footprint can often tell a far greater truth than we ever knew. You’re going to love Seth. He’s actually a very funny, cool guy. He’s an author, a data scientist, and he’s a speaker who studies what we can learn from tons of anonymous data. Big data. He wrote a book in 2017 called Everybody Lies. It ended up being a New York Times bestseller, an Economist Book of the year. He’s an op ed writer for The New York Times. He’s worked as a visiting lecturer at the Wharton School. He even spent time within the belly of the beast as a data scientist for Google. Also has a BA in Philosophy from Stanford and a PhD in economics from Harvard. He’s a Jersey guy, and maybe that explains his love and fandom for the Knicks, the Mets, and the jets, which probably makes his Google results full of disappointing sports updates. So to really understand what motivates humans, it’s not the answer the search engines give us. True data is found in the questions that are asked. I’m Wes Moss. The prevailing thought in America is that you’ll never have enough money and it’s almost impossible to retire early. Actually, I think the opposite is true. For more than 20 years, I’ve been researching, studying, and advising American families, including those who started late, on how to retire sooner and happier. So my mission with the Retire Sooner podcast is to help a million people retire earlier while enjoying the adventure along the way. I’d love for you to be one of them. Let’s get started. Seth. Welcome to the retire sooner podcast. I don’t know exactly where to start here, but I guess if we sum up your work and your latest first of all, let’s just start with this. Everybody Lies is your very popular book. And essentially what I’ve gathered from all of this is that you’re able to figure out why we are lying by figuring out what people are really searching for. So maybe just explain to our audience here before we get into happiness, before we get into retirement, talk to me about your data science.Seth Stephens-Davidowitz [00:03:27]:Yes, that was my first book called Everybody Lies, and it was how you can use the Internet to see who we really are. And a lot of it was analyzing aggregate, anonymous Google search data. And kind of the idea is that people are really honest. So there’s some dark topics where if you ask people in a know, Are you racist? Nobody’s like, yeah, of course I’m racist. They’d say, no, of course not. But then if you analyze Google searches, you see, oh, these are the parts of the country that have the highest racism or questions about sexuality or dark but important topics child abuse, do it yourself, abortions. There are all these topics where people are typing on Google what they’re really interested in, really. You know, by analyzing the anonymous aggregate data, you kind of get a better, more accurate view of humankind than we’ve ever had before.
Wes Moss [00:04:15]:
Well, let’s get some examples of this. And I don’t know if these are all you’re looking at big data now, and this is important too. This is just anonymous data, right? Are you able to tell us just about that for a second? Are you able to just aggregate? Do you have to be working for a search place, or can you do.
Seth Stephens-Davidowitz [00:04:33]:
A lot of it? So Google Trends is a tool that’s available to anybody, and you can see kind of where and when searches are made. And it’s a tool. It’s still underutilized. It’s used more and more when I first started. Like, I give a lot of lectures, a speaker around the country, around the world, and I first started describing Google Trends, I was like, what the hell is that? And now at least 60, 70% of people have least heard of Google Trends. I think a lot of people aren’t using it as much as maybe they could be.
Wes Moss [00:05:03]:
And again, it’s just taking the raw big data and seeing what people care about, what people are searching for.
Seth Stephens-Davidowitz [00:05:09]:
Yeah, exactly.
Wes Moss [00:05:11]:
Then how do you back into things like climate being a factor in, let’s say, depression? The thought around when do you get hooked on your favorite baseball team? Like, what ages do you get hooked? Let me start with that one just for a second, because that’s fascinating to me because I live in a melting pot city, Atlanta. You don’t have the strongest pro sport loyalty here. I think it’s because it’s a newer, younger city where people have been moving and moving and moving. So you’re coming from New Jersey or Pennsylvania for me. And you grew up kind of an Eagles fan, kind of a Phillies fan, but you don’t hate the Braves. So when do you ever switch over? The answer is not really. And then I see my kids. I got four boys, and they’re all very into sports. I find that they’re kind of into, like, ten different teams because they like one player from this team. And I don’t see any real heavy loyalty in pro sports when it comes to my kids. So tell me about when you get hooked on a team.
Seth Stephens-Davidowitz [00:06:14]:
Yeah, so this is a study, actually using Facebook data, likes of different teams, and you see that kind of the teams get a big bump among males. If they were good when males were about eight years old, that’s the biggest bump. So the Mets, my team, they won a two championship, 1969 and 1986, and they have the Moss fans, 1977 and 1994, kind of when people were sorry. Most fans among men born 1961 and 1978, kind of those boys were eight years old when the Mets won championship. And you see that kind of throughout teams, that if the team is really good at eight years old among boys, they kind of win them for life. Now, I haven’t seen how that’s changed. You might be correct. I’ve heard that there is some evidence that younger generations, the idea of a favorite team is kind of passe, which is shocking to me. That’s kind of a big part of my childhood. It was finding my teams. And I think people are moving away from that model. Maybe everyone’s so into fantasy sports now, so it’s much more about the players, and the players all move around so much.
Wes Moss [00:07:31]:
Yeah, I think that’s interesting point you make is that you’re right, they’re into the players because they do care about their fantasy teams, which is really just about what player does, what not so much about a particular team. And here in Atlanta, the Falcons went to the Super Bowl. My kids were in that sweet spot. They were five, six, 8910, and the Falcons lost the Super Bowl. And it was very depressing. It was like because we grabbed it out of the jaws of victory and the jaws of defeat, whatever that is, because we were about to win the Super Bowl and then we let it go to the Patriots in the last it was a disaster. And it almost crushed my children’s loyalty to them, maybe forever.
Seth Stephens-Davidowitz [00:08:12]:
Yeah, I don’t know. I can relate. The Knicks lost a championship in 1994 against the Houston Rockets. And I still think that may have been the darkest day of my life. Like that game seven, which all the things that have happened since then, they don’t really quite compare. That childhood brain. But I don’t think it turned me against the team.
Wes Moss [00:08:30]:
So I don’t know what about this is interesting. You do a lot of studies around depression in different states, how it’s treated, and then just the thought around climate as a factor in depression. So how are you figuring that out throughout?
Seth Stephens-Davidowitz [00:08:45]:
Well, it just is very clear in the Google search data that warm climates, I mean, it’s not so shocking, but the magnitude of it is pretty unbelievable that warm climates just have way lower levels of depression in winter months in Hawaii versus chicago. The depression rates might be similar in the summer months, but in the winter, it’s just through the roof in Chicago and much lower in Hawaii. So that’s kind of the value of these big, huge data sets. And other scholars have found similar things looking around the world, kind of just how much climate seems to play a role in depression, and definitely something to think about. If you do suffer from depression, should you be escaping those cold winter months if you live in a colder climate?
Wes Moss [00:09:27]:
Yeah, it’s more than just a passing good idea. It’s a very real, clinical thing for a lot of people.
Seth Stephens-Davidowitz [00:09:35]:
Yeah. Seasonal affective disorder. But the magnitude of it kind of did surprise me where I think I said that if you look at kind of just the data, it seems being in a warmer climate in the winter months may be twice as effective as antidepressants for fighting depression, and it’s not something that a lot of people think about. I actually have suffered from depression a lot, and I live in New York, and I’ve been kind of down this winter, and I’ve taken two trips. I went to the Caribbean, and then I went to Florida. And I did notice, like, oh, my mood’s a lot better when I’m around sunshine. And, like, I haven’t made any drastic decisions like, well, maybe I should be in a climate like this more regularly.
Wes Moss [00:10:16]:
Yeah, you need to listen to your own data.
Seth Stephens-Davidowitz [00:10:18]:
I guess it is hard. I have a whole second book, Don’t Trust Your Gut, and I just present all this data on kind of how you should make the biggest decisions in life and what career you should pick and how you can be happier. And everyone’s always like, so how have you changed your life based on this data? And I kind of sometimes exaggerate the extent to which I’ve made life changes, because I find it just so hard. Even when you know the data, you know that it’s good to escape a bad winter climate, or, you know that the importance of socializing for happiness, or you know that being an entrepreneur is a better path to wealth than being an employee. And you know all these things, and yet it’s so hard to act on them. For me, and I think for a.
Wes Moss [00:11:07]:
Lot of people, well, let’s just go right into that. I want to talk about. Don’t trust your gut. And I think you say that we make all these major life decisions flying very blind. I guess we’re using our gut. How so? Tell me more about that.
Seth Stephens-Davidowitz [00:11:23]:
Well, I just think of I reflected back on my own life, and I’m a data scientist. I’ve written out two books on data science. I have a PhD, basically in data science. I worked at Google as a data scientist. I’m not saying that to brag. I’m just saying the contrast between so much of my life has been devoted to data and the way I make decisions was really striking to me that I just never I was single for many years. I’m not single now, but when I was single, I was never like, let me look at the data on what I should look for in a partner or let me look at the data on how I can date better. I just never and that’s bizarre because I’m a data scientist. I believe so much in data, why do I not do that and think about my happiness? Very rarely was I consulting charts and data on what things would might make me happy, happier, how I picked a career. It was basically just totally random. I wasn’t looking at data on what careers make the best offer, the best financial opportunities, or the best happiness or any of those questions. And I figured if I’m not using data, then most other people must not be using data as well. And I’m going to just end a few years looking at the data on some of these big questions that pretty much everybody faces at some point.
Wes Moss [00:12:41]:
Well, let’s go into that. So let’s start with relationships. And I know you talk a lot about, I guess, the science behind finding somebody that’s the right match. Clearly, most of us do not do this. And it sounds like, I don’t know if you see yourself longer term being, well, an advocate to say, look, please listen to the data and implement it in your life. Tell us about dating and relationships and what are we looking for in partners if we would just follow the data?
Seth Stephens-Davidowitz [00:13:09]:
Well, I’ll tell you what data says, and I think you’ll understand why this one is a particularly hard one to follow. But the data basically says that all of us are looking for the wrong things in terms of long term happiness. Because many of us, if you look at the data from online dating sites, what are people drawn to? Well, most people are drawn to hot people. That’s kind of the number one predictor of dating success, someone who’s physically convinced.
Wes Moss [00:13:33]:
Can you define that for our audience? When you say hot, what does that mean?
Seth Stephens-Davidowitz [00:13:36]:
I think most people know it when they see it. Right, okay, cool. If you ask people to rate someone one to ten, researchers have said rate these people one to ten on attractiveness and the ten, they’re just going to get way more messages than the five, four, threes. I’ll get more to that in a bit. Conventionally attractive people, tall people, tall men, heights, such a huge advantage in, in males. Men in certain occupations, women find more attractive. Lawyers, firemen, even controlling for income, certain occupations do better than accountants tend to do very bad in online dating on average. Not that an accountant can’t do well, but those are the averages. People in hospitality, males in hospitality do really bad. So we’re looking for all these things. Oh, race. It’s not talked about. There’s almost more evidence for racism in dating than any other arena of life, I would argue.
Wes Moss [00:14:50]:
How so?
Seth Stephens-Davidowitz [00:14:51]:
Well, there’s just overwhelming evidence that certain groups, asian males and African American women in particular just are way less likely to get responses in online dating sites. And you can correct for other factors like the income that people have. And still racial dynamics play a big role in how many messages people receive or how likely their messages are to be responded to. So we’re looking for all these things and that’s been proven with dating sites and then data from dating sites and you compare that to what actually makes people happy. Well, there have been big studies using machine learning models, 11,000 couples and it basically shows that everything we look for has just about dough predictive power for long term relationship happiness. So people who end up with someone hotter, I didn’t know, I’m like, maybe you have a hot wife, a hot husband, you’re going to have more wild sex, you’re going to feel good every time you bring them to a party, you’re going to be happy in a relationship. But there’s basically no correlation between how hot your spouse is and how happy you are in your relationship. Similarly how tall your spouse is, what occupation they’re in.
Wes Moss [00:16:02]:
So again, none of those things do correlate to happiness at all.
Seth Stephens-Davidowitz [00:16:06]:
None of the things and the things that do, what does it psychological traits. You know, those psychological quizzes for me, my romantic partners are always giving me these psychological tests like, do you have? What kind of attachment style are you? And I’m always like, this is so annoying, I just want to watch a baseball game, let me do something else with my time. And it turns out these are like the only things that predict romantic happiness. So if your partner has something called a secure attachment style, which I didn’t even know what that meant, but you can take a test online and see or you can give a potential partner more relevantly a test. And people have secure attachment styles, kind of the way they relate to other people probably due to childhood. That does increase your chance of being happiness. People are more conscientious, people have a growth mindset, people are more satisfied with life. So we massively overvalue these superficial traits.
Wes Moss [00:17:06]:
And I think money and looks, right? Dating is money and looks which mean.
Seth Stephens-Davidowitz [00:17:11]:
Nothing long term, very little long term. Money does have a tiny bit, but very little. And then the things and we really undervalue these psychological traits which are, again.
Wes Moss [00:17:24]:
Your attachment style, if you have a growth mindset, if you’re a conscientious person that ends up correlating with higher levels of happiness over if your partner has.
Seth Stephens-Davidowitz [00:17:35]:
Those, yeah, you’re going to be happier if you end up with a partner with those qualities.
Wes Moss [00:17:39]:
Wow, so it’s totally flip flopped, right? We’re thinking about the next six months. And when we’re dating, we’re not thinking about this next, like, 50 years. That’s the problem. That’s part of it. That’s the challenge.
Seth Stephens-Davidowitz [00:17:51]:
Maybe, but I tell people that. I’m like, yeah, so don’t worry about the looks of your partner, and everyone just like you. Seth, I don’t know if I can use that language on this podcast.
Wes Moss [00:18:01]:
You can. It’s like the Joe Rogan podcast.
Seth Stephens-Davidowitz [00:18:04]:
Okay. They’re like, well, maybe we believe, I don’t know.
Wes Moss [00:18:06]:
We can always bleep that part out. But no, please speak as freely as humanly possible.
Seth Stephens-Davidowitz [00:18:11]:
Okay.
Wes Moss [00:18:12]:
Data science shows that we appreciate that.
Seth Stephens-Davidowitz [00:18:14]:
Yeah. My data science on how people have received my dating advice is they do not like it. They’re like, Tell me how to get a hot person. Which I actually have a section of the book that tells people how they can get a hot person, but that’s.
Wes Moss [00:18:27]:
Not give us a preview. Come on, give us a preview. Come on, give me a preview of that section of the book.
Seth Stephens-Davidowitz [00:18:32]:
Well, one of the big things about I talked about how looks impact your chances of getting a response, and a ten reaching out to a ten, according to people who are asked to rate the photos, is you have a much higher chance getting a response than a one reaching out to a ten.
Wes Moss [00:18:49]:
Sure.
Seth Stephens-Davidowitz [00:18:49]:
But I was shocked. Not surprised at all, but I was shocked. The odds of what happens when a one reaches out to a ten, like, what’s the odds they get a message back like a one this is someone, like, really at the bottom of the barrel, physical appearance reaching out to a borderline model. Sure. And I thought, what are the odds of the response? I’m like, okay, one in a billion.
Wes Moss [00:19:13]:
I would say, like, yeah, one in a million.
Seth Stephens-Davidowitz [00:19:15]:
Literally one in a million. That’s just not going to happen. And it was around 14% if it’s a man reaching out, and it’s around 30% if it’s a woman reaching out in the data set they use, it could be a little different for different dating sites. And there are some caveats, but I think the general point that asking someone out, you may have a higher probability of success than you think, and then you use that, combine that with basically there’s a law of statistics. If you have a 14% chance of getting a yes and you do it 30 times, you have core than 98% chance of getting one yes. So if each time you have a 14% chance and you do it 1234 or five, keep doing it 30 times, you’ll get up to a 98% chance. So basically, I think what a lot of people don’t do enough is just ask more people out. That’s certainly been because I think people are scared of rejection. I understand why people do that and humiliation. But I think a lot of people, if you look at sometimes I’m walking down the street. I’m like, how did this person end up with that person?
Wes Moss [00:20:23]:
We all say that, Seth. We all say that. How did they did they just ask? It was a numbers game.
Seth Stephens-Davidowitz [00:20:29]:
I think I’m concluding that it is largely that they played the numbers game and they act out a lot more people and they got rejected a lot. If you see a guy and you’re like, how the heck did that guy end up with that woman or that man? Or how did that woman end up with that man? My read of the data I’ve looked at a lot of different studies is probably they got rejected more than everybody else on their way to reaching that kind of person out of their proverbial league.
Wes Moss [00:21:03]:
It’s so funny and good. That is amazing. Full disclosure, I am affiliated with Capital Investment Advisors, which is a full service and a fee only financial planning and investment management firm in Atlanta and Denver and Tampa and Phoenix or wherever you are. And if you’d like to take your retirement planning or retire sooner, journey to the next level, capital Investment Advisors would love to help. You can find our team and schedule a time to chat. Right@yourwealth.com, that’s your wealth.
AD [00:21:42]:
Wait, are you gaming on a Chromebook?
Wes Moss [00:21:46]:
Yeah, it’s got a high res 120 Hz display plus this killer RGB keyboard.
Seth Stephens-Davidowitz [00:21:51]:
And I can access thousands of games anytime, anywhere.
AD [00:21:54]:
Stop playing.
Wes Moss [00:21:55]:
What?
AD [00:21:56]:
Get out of here. Yeah, I want you to stop playing and get out of here so I can game on that Chromebook.
Wes Moss [00:22:01]:
Got it. Discover the ultimate cloud gaming machine. A new kind of chromebook all right, so let’s go with a slightly easier one. Well, no, actually this one seems even harder. This seems way harder to me. When it comes to success or people achieving success, what do we learn about that? Who ends up successful? What does the data science say around that? And by the way, how do you measure that? You’re just talking about income or yeah.
Seth Stephens-Davidowitz [00:22:35]:
There are many ways notarized success. And data science will tell different things on different measures and then there’s a question, does success make people happy? Which is a whole other question that data can help us on. But there’s sentence to really stuck out to me that the typical member of a top .1%, kind of the typical richest American is the owner of a regional business such as an auto dealership or beverage distributor. And that’s kind of not how we usually think of a rich person. I mean, we usually think rich person like Hollywood athlete, financier, maybe startup founder and definitely there are lots of those in the rich people. Particularly if you get to billionaire status, they’re going to be dominant. But if you get to just not just but the very healthy people making like one and a half million dollars a year at least, it’s kind of dominated by these small business owners frequently in very boring fields like I find boring. You don’t have to find boring like auto dealerships or beverage distribution. And frequently it’s fields that have some sort of protection against competition. So auto dealerships and beverage distributors are kind of protected local monopolies and other fields have their own ways to kind of give you a little protection. So you kind of got to find this niche, unsexy area that has some sort of protection and then you’re just crushing it, making a couple of million bucks a year, living the dream. And it’s not the path. Most people, when you say I want to be rich, you move to Hollywood to be an actor, you moved to Silicon Valley to start your company, you.
Wes Moss [00:24:15]:
Moved to Wall Street.
Seth Stephens-Davidowitz [00:24:17]:
Yeah, to Wall Street to go into finance. And definitely those are options and most people aren’t, know, let me get into the auto dealership business or the beverage distribution business. Know some of these other businesses that really allow you to crush it.
Wes Moss [00:24:31]:
Yeah, it sounds like that wouldn’t even work on a dating profile. Beverage distribution, what industry are you in?
Seth Stephens-Davidowitz [00:24:36]:
Beverage.
Wes Moss [00:24:37]:
I’m going to put them over there with the accountants.
Seth Stephens-Davidowitz [00:24:40]:
Well, if you’re a beverage distributor, maybe you just have to put your income right there just be like $2 million a year beverage distributor.
Wes Moss [00:24:49]:
You have data around making us a good parent and I don’t even know what do you say is good? How do you even measure that?
Seth Stephens-Davidowitz [00:24:58]:
Yeah, so that’s another area where there’s obviously a lot of different measures. But one of the things that’s surprising in the data is how little overall parents matter. So you would think I think most parents I’m not a parent, but also I just want to apologize. I wasn’t dissing the accountants or the ones on the one to ten scale or the shorter guys. I’m just presenting the data.
Wes Moss [00:25:22]:
I always say that when I have listen, it’s not that there’s anything wrong against this group. That group we have happy and happy retiree traits. I think one of them showed up on the unhappy retiree list was hunting. And I remember getting real feedback like and I was like, no, I always say data. It’s not what I think the data.
Seth Stephens-Davidowitz [00:25:45]:
Nobody’S going to blame you anyway.
Wes Moss [00:25:48]:
So the first thing in parenting parenting.
Seth Stephens-Davidowitz [00:25:50]:
The data on parenting is that the overall effects of parents, the way they study this is adoptees. So sometimes people are there are these adoption programs where it’s kind of randomly determined who your parent ends up being. And it turns out kind of parents matter overall to much less than just about everybody thinks on moss dimensions, income, education. There are a few things you can influence. One of the things you can influence most, actually is how your kids think of you. Do they think they had good parents? So you can’t change how educated they are, how rich they are, how happy they are, but you can change how they think of you, which is something that is pretty valuable to most parents. But some of the big things, again, education, income, happiness, parents don’t really influence things, values. Parents aren’t having a huge impact. So all these decisions we sweat about, when you actually look at the overall effect, the effect just isn’t that big. That said, there is one decision that parents make that may have kind of a disproportionate impact, and that’s where parents raise their kids. So there’s all this research, again, from tax data, which is just becoming available to researchers that where kids grow up just can dramatically impact any outcome we can measure in tax data. So how educated they are, how rich they are, whether they have kids as a teenager. Neighborhood really does matter for parents. And what is it about a good neighborhood? Like, why are certain?
Wes Moss [00:27:25]:
Yeah.
Seth Stephens-Davidowitz [00:27:25]:
What is that really good?
Wes Moss [00:27:27]:
Yeah. How do you measure that? Or like, what’s good?
Seth Stephens-Davidowitz [00:27:30]:
Yeah. We can also compare it to other facts about the neighborhood. It turns out a lot of the things you think might really matter, so great schools or booming economy, those don’t really matter a lot that much at all. The things that really seem to matter are the qualities of the people in the neighborhood are 2% of two parent homes, a percent of people with college degrees, percent of people return their census forms. A very, very random measure, but it seems to be something about adult role models giving your kids good adult role models. And there’s actually also studies that if you have a daughter, if you raise her around a lot of female scientists, she’s more likely to become a scientist herself when she grows up. So I think we don’t think how much the other adults we’re exposing our kids to are impacting them and how they turn out. And even if apart from the actual place you live, the city you live, the block you live, who are you exposing your kids to? Are these people you want them to turn out to be? I think one of the reasons that parenting is overrated, but neighborhoods are underrated is kids have complicated views about their parents. So sometimes kids think their parents are the coolest people. Sometimes kids think their parents are the least cool people, the people they don’t want to be, the people they want to rebel against. But neighborhoods kids tend to think they’re pretty cool regardless. So they may rebel against you, but they’re not necessarily going to rebel against the other people you expose them to. So I kind of recommend outsourcing parenting a little bit. Expose your kids to people you want them to turn into.
Wes Moss [00:29:21]:
Parenting is overrated, neighborhoods are underrated. I’m going to take that as probably the favorite thing I’ve heard in a long time. Yeah. And that is true. I think about it. Yeah. I’m thinking back to when I was a. Kid, how much did I consider or look at and judge my parents on their friends? And I guess thinking back now, I don’t have ever thought of it that way, but I guess, yeah, it is important. It’s a big deal.
Seth Stephens-Davidowitz [00:29:54]:
Yeah. Exposure, which are their careers. You might see someone who is a beverage distributor, and they’re crushing it, and they have this great life, and you’re like, oh, I want to be a beverage distributor. There are all kinds of ways it can play out, right?
Wes Moss [00:30:11]:
Yeah, I think that is interesting. That makes a ton of sense. I think it was one of my little League baseball coaches. I always looked at as rich because we used to go over to his pool and after games, he’s the only guy with a big pool and he would pay for hamburgers. I always thought, wow, he’s giving everybody hamburgers and hot. Like, this guy’s got to be rich. And you know what? He was a small business owner in an insurance agency in southeastern rural Pennsylvania and probably made an absolute killing. He had, like, a cool truck. I remember he’d drive this giant F 350 truck. He’s got this great you know what? And that’s maybe why I wanted to become an entrepreneur. It’s not an insignificant thing for me to remember in my mid to late 40s relative to when I was like, seven. And I still remember that maybe it had an impact. All right, what about and this goes back to I want to go back to success and then happiness for just a second. Is it mostly because you’re a data guy? You’re not really defining what success is? Are we pretty much having to look at income data here, or is there any other measure of sometimes, like one.
Seth Stephens-Davidowitz [00:31:24]:
Thing I think about as a data scientist is you go to war with the army you got, not the army you want. Like as Rumsfeld said in know, you go to war with the data, you you know, there aren’t great data sets that compare every kid in the United States to how happy they ended up. The data sets that have every kid in the United States are administrative data sets from the IRS, income, education, marriage. So it obviously would be great to also measure happiness on that dimension. How much does a neighborhood impact adult happiness? Because I think obviously, money is not in education aren’t the only things that matter. But on that question, there isn’t data.
Wes Moss [00:32:09]:
How about this? Now, again, this is a harder question because it’s even broader than success is the term happiness, right? So we write about the happy retiree here. What do they do? What are the five financial traits of the happy retiree? What are the five life habits of the happy retiree? How do you define it or what makes people happy? And then what data are you finding to figure this out?
Seth Stephens-Davidowitz [00:32:32]:
So there’s kind of revolutionary understanding of happiness thanks to iPhones. So not iPhones haven’t made people happy. They make people miserable. But they actually have allowed us to understand basically how miserable iPhones and other things make people. There’s this project mappiness that I became obsessed with. It’s really cool. They ask people on their phone, they ping them maybe multiple times a day. They say, who are you with? What are you doing, and how happy are you? It was founded by George McCarron, Susana Barado, two British economists, and they built this data set of more than 60,000 people, more than 3 million happiness points. Like, just this revolutionary understanding of kind of people ranking one to ten how happy they are and what are they doing, who are they with, and they ranked 40 activities basically how happy someone is when they’re doing each of 40 activities. On average, the number one activity was making love and intimacy, which wasn’t too surprising, except it was kind of funny that people were stopping their sexual activity to answer the survey. Yeah. I’m like, oh, let me take a break from that, to tell Happiest that I’m a ten out of ten.
Wes Moss [00:33:57]:
All right, so that’s unshakable, right? That’s boom. Making love.
Seth Stephens-Davidowitz [00:34:03]:
Yeah. Making love is ten out of 1010 out of ten. But then other things near the top were maybe a little more not shocking, but gardening very high. Exercise high. Walking, karaoke singing really high.
Wes Moss [00:34:23]:
Yeah.
Seth Stephens-Davidowitz [00:34:24]:
And I actually did a study with my friend Spencer Greenberg. We took these 40 activities, and we just asked people to rank how happy they thought people they thought they made people. And we can compare, okay? These are how happy people think these activities, the joy people think these activities bring. And these are how happy the activities actually make people. And let’s see what activities are kind of overrated and underrated.
Wes Moss [00:34:51]:
Love that.
Seth Stephens-Davidowitz [00:34:52]:
Yeah. And the overrated activities were like almost all the massively overrated activities all fit into a very similar bucket. They were things like resting, relaxing, watching TV, playing computer games, social media, basically passive activities, watching TV. Passive activities don’t make people happy, but we think they’re going to make us happy. So lying on the couch and watching Netflix, you ask know how happy you think that. That’s a pretty good day. You actually ask people who are lying on their couch watching Netflix in the moment, how happy are you? They say they’re actually unhappy. And the activities that give people more joy than we expect are things like going for a walk with friends, going out with friends, going to a museum or a show, kind of things that require more energy. Those tend to give people more happiness than we expect. So I think we’re all kind of fighting our own minds, our own laziness. Basically, our minds are tricking us to do nothing, to lie on the couch, play that computer game, watch that show. And really, that’s not a path to happiness. You got to go out and do stuff if you want to be happy.
Wes Moss [00:36:20]:
Well, I think this really relates back to the happy retiree, the happiness results I’ve gotten. And I didn’t do it in the big data way like you have done. But it seems to have this high correlation around anything that’s socially interactive, whether it’s exercising or any sort of sport, whether it’s tennis or pickleball. Something that is active, really ends up ranking really high on the list, whether it’s physical, social, maybe even better if it’s both combined. But I love looking at things as over versus underrated. So again, resting, just hanging out on the beach doesn’t really rank all that high necessarily.
Seth Stephens-Davidowitz [00:37:06]:
Well, unless you’re having sex on the beach.
Wes Moss [00:37:10]:
You actually talk about the ultimate thing in the world when it comes to pure happiness is what tell our audience.
Seth Stephens-Davidowitz [00:37:16]:
Yeah, I said the data driven answer to life is being with your love on an 80 deg and sunny day, overlooking a beautiful body of water, having sex, because those are actually the highest ranked of everything. So the highest ranked people to be around is your romantic partner person to be around as your romantic partner. Highest ranked weather is 80 degrees and sunny. Highest ranked environment to be in is near a body of water and highest ranked activity is sexual, is intimacy. So you put them all together, it basically converges on sex on the beach.
Wes Moss [00:37:52]:
There’s a reason that a perennial drink was named that many years ago. Water. How did you get the water data? Is it just very highly ranked search that there’s tons of people looking for water? No.
Seth Stephens-Davidowitz [00:38:09]:
So the water stuff is again, the Mappiness project where they compare because it has GPS of using people’s phones. They look where people are. And if you’re near a body of water, you get a boost in happiness.
Wes Moss [00:38:24]:
Warm water, warm and water and it boosts happiness in a good neighborhood.
Seth Stephens-Davidowitz [00:38:31]:
Well, if you want to raise kids. If you’re raising kids.
Wes Moss [00:38:34]:
Yeah, if you’re going to have kids. Let’s talk about money for a minute. Have you found any correlation between more income? Well, first of all, there’s the distinction. There’s income and then there’s overall net worth or wealth. Right. So your tax records typically are probably looking more towards income and it’s a little harder to judge wealth. But again, if you have a billion dollars, you’re probably getting millions in dividends alone. But my question then goes back to did you see a correlation between money and happiness? Higher plateaus?
Seth Stephens-Davidowitz [00:39:09]:
There’s a popular study from a long time ago that said that happiness plateaus at $70,000 a year. You might have heard it. So kind of up until then there’s a big effect, but at kind of stops that’s actually not true. Better data has come out and it finds that happiness there’s no point that we found where happiness plateaus, it increases throughout the income distribution. That said, it increases in what statisticians call a log form, which is basically doubling your income, increases your happiness the same amount. So you need more and more income to increase your happiness. And going from 40,000 to 80,000 has the same effect of going from 400,000 to 800,000, which has the same effect of going from 4 million to 8 million. So basically the effects at higher levels are smaller. The other thing to note is the effects aren’t as big. And this gets probably to your happy retiree study. The effects aren’t that huge compared to other things. So people with a net worth of $8 million are happier than the average person. But the happiness boost of having an $8 million net worth is only about half as large as the happiness boost from being married. So in other words, having an $8 billion net worth is going to help. But just keep it in perspective that just getting married would give you twice the effect in happiness of that net worth boost. So someone who’s working nonstop and doesn’t have any time for dating just to get that $8 million net worth and sacrifice their friends, that’s probably not the best path to happiness. Like the things that matter more friendships, marriage, relationships those have bigger impacts on your well being than money. But money does have an effect.
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Wes Moss [00:41:50]:
You’re a data scientist, so I would ask you the way I look at the money data, at least the research that we’ve done is I think of it as this plateauing effect, but it continues to rise as income goes up or network. Actually net worth goes up, but I call that diminishing marginal returns for each new dollar of happiness. Would that jive with you?
Seth Stephens-Davidowitz [00:42:14]:
Yeah, that’s exactly what I’m saying. That’s kind of this curve that a log curve that just slows down. Except there is some evidence, there’s another study that says that there is this gain at the level of about $8 million. They interviewed like people with a wide range of wealth. So there may be my theory on this. So one thing you also see in the happiness data is that doing chores really sucks. Like, people are not happy cooking, cleaning, waiting on a line that doesn’t make people happy. And I think there is a level. You talk about living on dividends. If you have a net worth of $8 million, 4% of that is already, what, 320K? You pay a little tax on that. You’re living at a level where you can outsource. You can have a housekeeper pretty consistently living person. You can kind of outsource a lot of the drudgery of life, and I think that does help a lot.
Wes Moss [00:43:18]:
Okay, so you’re saying data did see at least some sort of material, at least a little bit of a boost at the $8 million net worth level.
Seth Stephens-Davidowitz [00:43:26]:
Yeah, exactly.
Wes Moss [00:43:28]:
Interesting. So it’s just a little jump up. And you attribute that back to is this also from the data, or is this just no, that’s my I don’t.
Seth Stephens-Davidowitz [00:43:37]:
Know the reason for that. But if I’m thinking about why would 8 million kind of reach that point? That’s when you have such freedom to get out of doing the things you don’t want to do and devoting your life to if you look at the studies on what makes people unhappy, a lot of things that tend to make people unhappy are things you kind of have to do in the maintenance of life. So working, for example, this wes kind of depressing. Working was the second least happy activity. It was just slightly above being sick in bed.
Wes Moss [00:44:12]:
Hold on. Okay. You got to be kidding me. So out of the 40?
Seth Stephens-Davidowitz [00:44:15]:
Yeah, out of the 40. This is George McCarron and Alex Bryson.
Wes Moss [00:44:19]:
Give me the bottom couple here. That’s crazy. Yes. I actually thought you were going to say, like, working was number, like, five or six on the list.
Seth Stephens-Davidowitz [00:44:28]:
No, working very low.
Wes Moss [00:44:31]:
It’s number 39.
Seth Stephens-Davidowitz [00:44:32]:
- Wes sick in bed is number 40.
Wes Moss [00:44:36]:
Yeah.
Seth Stephens-Davidowitz [00:44:37]:
It’s kind of depressing, isn’t it?
Wes Moss [00:44:39]:
That’s amazing. Yeah. What was 38?
Seth Stephens-Davidowitz [00:44:44]:
Core or help for adults? Not telling. People do that often, but if you’re caring for mom or dad, that doesn’t make people happy. Waiting queuing waiting in line. Yeah. Administrative, finances, organizing in a meeting, seminar, or class traveling, commuting muting just alone is 34. Wow.
Wes Moss [00:45:15]:
Okay.
Seth Stephens-Davidowitz [00:45:15]:
And housework chores. And do it. Housework and chores is 33. So one of the things you see in the activities at the very bottom is they’re the annoying things that you have to do as a part of life. Right. So you can’t not wait in lines. You can’t not work. Presumably. You have to feed yourself. You have to take care of administrative finance, organizing. You might have to commute. You have to do housework chores, do it yourself. So I think the fact that those activities, perhaps not surprisingly, rank so low is one of the reasons that people above a net worth of $8 million or $10 million do legitimately get a boost in happiness. Because if your net worth that high, you are able to do a lot more fewer of those annoying things.
Wes Moss [00:46:07]:
Sure. Yeah. You may not be working. Yeah. A lot of these are outsourceable you’re right.
Seth Stephens-Davidowitz [00:46:16]:
At that level, but only at extreme levels of wealth. You can’t stop working and stop doing core. If your net worth even three or $4 million, maybe you could stop working. But you’d have to live a frugal lifestyle and do a lot of the chores. So the only way to stop doing both is to have a really high net worth.
Wes Moss [00:46:40]:
How about the I know that’s something you talk about is the work trap. Can you explain that?
Seth Stephens-Davidowitz [00:46:46]:
Well, just that work is the second lowest ranking activity and they also from the same Happiest project. They look at what people are doing while they work. And my read of the data is the only thing that really makes work tolerable is working with your friends.
Wes Moss [00:47:13]:
Interesting.
Seth Stephens-Davidowitz [00:47:13]:
Yeah. So if you’re at work but you’re also with your friends, then work is not so bad. If you don’t like the people or you’re by yourself, then work is going to be pretty tough. So I think that’s something that people undervalue in picking a job or deciding whether to stay in a job. Do you like the people you work with?
Wes Moss [00:47:39]:
How about wealth building? What are some of the biggest misconceptions around becoming wealthy or wealth building?
Seth Stephens-Davidowitz [00:47:46]:
Or is that well, the fact that a beverage distributor is one of the more likely paths to that was definitely yeah, I guess that’s a misconception. Definitely. The importance of owning something rather than being an employee. That’s also clear in the tax data. About 80% of members in the top .1% own their own business. So, again, you see a lot of TV, you might see CEOs and employees. You’re pretty capped there. So even if you’re on a pretty lucrative employee path, it really doesn’t compete with owning your business. There’s a fun fact that the richest it was pointed out by the data scientist Nick Majulli. The richest NFL player in history is Jerry Richardson, who also owner of the Carolina Panthers. And he played in the NFL for two years, and then he stopped playing and he bought up a bunch of Hardee’s franchises and became a billionaire. And you compare that to Jerry Rice, one of the best wide receivers of all time. Jerry Richardson has 30 times the net worth of Jerry Rice because he owned his product in a way that Jerry Rice never did. So even obviously, Jerry Rice still made a lot of money and more money than most of us could dream of making. And being an NFL star is a legitimate path to wealth. But it doesn’t really compare to the fact that he’s nowhere close to the richest NFL player or that Peyton Manning or any of these guys aren’t close to the richest NFL player. That’s this guy who owned a lot of hardy’s franchises, does show the value of owning.
Wes Moss [00:49:36]:
Yeah, it makes sense that we think about Shaq. I watched the Shaq documentary the other day. He’s legitimately, I think, halfway through a billion, and he owns a ton of Pizza Huts and he he’s a real he’s a business owner. How about this? Let’s go back to we’re talking about building wealth and success. One of the ideas I think you talk about in Don’t Trust Your Gut is about looks, success. What’s that to explain that to our it’s kind of sad retire sooner audience.
Seth Stephens-Davidowitz [00:50:07]:
It’s kind of sad just how much looks matter in every dimension of life. So there’s a study I find this sad. I don’t know if other people find it sad that you try to predict who rises at West Point, who rises in the military. And they’ve looked at all kinds of data. What was their GPA, what’s their family background, what were their athletic accomplishments. And the number one predictor of success in the military is having a face that other people rank as dominance. So basically, forget everything. If you just look like you should be dominant, you will rise higher in the military, and this has been proven in politics that looking competent is one of the biggest predictors of a politician winning. You can predict 70% of Senate races just based on which candidate looks more competent, which, again, is sad. We’d like to think the winner is going to be the one with the best ideas or the smartest, the hardest working. It frequently is someone who just looks the part. There are also studies these are even more depressing looking baby faced is a massive predictor of being judged innocent in grand juries. So just like that guy couldn’t have killed those people. Look at him. He looks like cute. So, yeah, it’s a little depressing how much looks matter for success.
Wes Moss [00:51:41]:
Wow. And anything on income and looks? Have they done studies on that?
Seth Stephens-Davidowitz [00:51:45]:
Yeah, I mean, also just that looks are a big predictor of income. But one of the things I did, I did this little study on myself where I could just I created using AI. I expect nobody to do this because you have to be nerdy than me. Different versions of myself. Versions of myself with different hairstyles, different glasses, no glasses, smile, no smile. Beard, no beard. And I asked people to rank kind of which one looks the best on many dimensions, and I found out I looked the best with glasses and a beard. So now I usually wear glasses, except when I’m on a podcast interview because I’m too close to the screen. But now my look is glasses and a beard, which is apparently the best version of myself, according to the data, matters so much, I might as well figure out how I come across. Right.
Wes Moss [00:52:35]:
Well, okay. And this is something that we touched on earlier, is that you were saying that it’s hard for you, and I think it’s just hard for people in general to take the data and use it or what do you think the easier things are for you to use out of your data?
Seth Stephens-Davidowitz [00:52:52]:
So definitely the beard thing. So now I definitely always keep my beard because people take me more seriously with my big, full beard.
Wes Moss [00:53:00]:
It makes you look more prominent.
Seth Stephens-Davidowitz [00:53:02]:
More prominent, I guess. Yeah.
Wes Moss [00:53:04]:
You rise quickly in the military.
Seth Stephens-Davidowitz [00:53:06]:
Plenty of gray, an increasing amount of gray in it, I think will just only help, I think some of the happiness stuff I’ve used. But it’s hard. I still find myself. My friends invite me, hey, you want to go out and go to this show? And I’m like, but there’s a Knicks game I want to watch, and I just want to lie on my couch and watch the Knicks game. And it’s really hard to overrule, even though I know the data so well. I know the data says go out, go out with your friends. I find it hard to know. But I think it’s helped on the margins, knowing the data. And I don’t have kids. When I do have kids, I think I will maybe there’s a website I talk about the book Opportunity Atlas, where you can see how good every neighborhood is for raising kids. So that’s definitely something that I would look in if I had look at if I had kids. So definitely there are areas where I am using it, but it is.
Wes Moss [00:54:15]:
That something you have online or you’re saying in the book or online?
Seth Stephens-Davidowitz [00:54:18]:
Online.
Wes Moss [00:54:19]:
The opportunity.
Seth Stephens-Davidowitz [00:54:19]:
Atlas. Yeah.
Wes Moss [00:54:21]:
So you could really zero in on what, zip code or even further?
Seth Stephens-Davidowitz [00:54:25]:
Yeah, senses tracks even smaller than zip code.
Wes Moss [00:54:28]:
Yeah, it’s pretty wild. I hope mine ranks higher else I’m moving. I’m telling you. I’m going to go look at this as soon as we’re done. If it’s not good, I’m moving. So you’ve tried to implement some of this, but this is just like the habits of everything that we know. We know we should eat the Mediterranean diet. We know we need 30 to 45 minutes a day of vigorous exercise. I mean, we know all that stuff, right? I don’t know why. Maybe that’d be an amazing thing to figure out. Why is it so difficult to do the things we know we are supposed to do? Can we get some big data around that or do you yeah, I think.
Seth Stephens-Davidowitz [00:55:03]:
That may be a follow up book. Like, here’s all the things you should do. And then the next book would be, here’s how to actually do them, which would be useful. I mean, another one. Social media. There’s increasing evidence that social media is terrible for our mental health, particularly teenagers, but for lots of people. And they’ve done experiments where they’ve asked people to quit Facebook, to quit TikTok, to quit Instagram, and they report big increases in happiness, big decreases in you know, I’ve known that and I still find myself spending much of my day on Twitter and Facebook. I think the next level is using this data to really learn to do these things, because some of these things, you need the data first to say what you should do. So we didn’t know before seeing the data just how bad social media can be for mental health. But once we have that data, the next level is, okay, well, how can you actually stop doing these things that are bad for you.
Wes Moss [00:56:09]:
So is it that well agreed upon? Right. There was a period of time where the thought is, oh, well, social media, how can it be bad? You’re connecting with lots of people and your old friends, right? Then you hear studies that friendship and close friendships in America have gone down by 50% over the last 25, 30 years. So what happened with social media? From thinking it might be a pretty darn good thing to just almost the consensus says it’s really pretty horrible. Does most people just agree that it’s terrible?
Seth Stephens-Davidowitz [00:56:40]:
It’s a common it’s just so many studies and so much it’s just data. I mean, you look at the rise in teenage mental health problems, it’s shocking how high depression rates have risen among teenagers, particularly teenage girls. It almost perfectly tracks the smartphone, the rise in the smartphone, and the rise of social media. And then these studies, like I talked about, where they’re literally randomly asking certain groups, randomly assigning people to groups, and one group, there’s no intervention. One group is paid to stop using Facebook, and they just report a large decline in depression and other mental health problems. So a lot of these things, it’s just you’re waiting on the data, you’re waiting for the academics to look at. I think, you know, the academics have looked at it, and the research is pretty overwhelming.
Wes Moss [00:57:30]:
How many people read the books they buy?
Seth Stephens-Davidowitz [00:57:34]:
Very low. That’s a study by Jordan Ellenberg where he analyzed Kindle data and how often people make it to the end of books. And for nonfiction books, like the books I read, science books, pop science books, the numbers are 3-5-7. It actually motivated me. My first book. Everybody lies. I was struggling so much on the conclusion. I want a perfect conclusion, and I was torturing myself, taking everything. You know, what’s the and then I read that Jordan Ellenberg study. I go, oh, effort. I don’t care. I’ll just phone it in because nobody’s reading anyway. The hard work is behind me, so.
Wes Moss [00:58:19]:
That allowed me to done only 3% of you. Now, what about in a fiction?
Seth Stephens-Davidowitz [00:58:27]:
Some of the addictive romance fiction can be 70, 80%, so some of those can be a lot higher.
Wes Moss [00:58:35]:
Okay. Yeah. Have you ever done studies around the romance and fiction novels that I’ve seen for my entire life, but I’ve never know who actually reads them? Are those a thing? Somebody must read them.
Seth Stephens-Davidowitz [00:58:48]:
Yeah, I don’t know the demographics. I could guess demographic. I haven’t seen the demographics. But there’s probably a lot of deception about what books people are reading. A lot of people probably are a little embarrassed. I’ve done some work on that, that if you look on social media and what people report they’re reading, it’s always intellectual. It’s the Atlantic and nonfiction books.
Wes Moss [00:59:12]:
Danny Khan, the Economist.
Seth Stephens-Davidowitz [00:59:14]:
Yeah. And then if you look at what people are actually reading, like the sales data. It’s National Enquirer and romance novels. I think people are embarrassed by their taste for that material.
Wes Moss [00:59:26]:
Yeah, I don’t see how people don’t want to read your two books, everybody Lies and Don’t Trust Your Gut. I didn’t ask you this. Maybe it’s rhetorical, but what’s your explanation around why everybody lies? And does everybody really lie about everything or just, like, a few things?
Seth Stephens-Davidowitz [00:59:44]:
I think part of the reason we lie is it can help us advance. There’s a strategic element to lying. So if you’re on a dating site and you exaggerate your income or your height or you minimize your age and those can allow you to get more dates, the lie might eventually be uncovered. But a lot of lying people lie in their resume or shade the truth. You don’t want to say nobody on their resume is like, yeah, I wasn’t a great employee there. It wasn’t my best work. I didn’t do much. I slacked off. I was on social media much of the day. Everyone lists all their grand accomplishments. I think that’s probably smart. So there is some sense in which lying makes some sense and does serve a strategic purpose. I think we also lie to ourselves a little bit. There’s a great line from George Costanza in Seinfeld where he said, it’s not a lie if you believe.
Wes Moss [01:00:52]:
So is that credited to Costanza?
Seth Stephens-Davidowitz [01:00:55]:
Yeah, I think it’s Costanza line, and I think that kind of shows that there’s value in if you lie to yourself, then you’ll be more convincing to other people. So if you think of yourself, there are these studies that 90% of engineers think they’re above average engineers, which is only 50%. Can be impossible. Yes, impossible. But maybe it’s good to think you’re an above average engineer because then when you’re applying to a new job and you’re trying to impress a new potential Moss, you’ll be core persuasive in your claim that you’re a great engineer rather than a more realistic assessment.
Wes Moss [01:01:37]:
Parental concerns. Sons versus daughters.
Seth Stephens-Davidowitz [01:01:41]:
Yeah, that’s just Google search data, where parents are much more likely to ask if their son is a genius or is gifted, and they’re much more likely to ask if their daughter is overweight or unattractive. It’s much more intrigued by the intellectual potential of their sons and much more concerned about the physical appearance of their daughters.
Wes Moss [01:02:04]:
And again, that’s seeing what people are caring about. You’d never read that in a parenting book.
Seth Stephens-Davidowitz [01:02:11]:
Well, and that might be parents may be lying to themselves. They might have a son, and search, Is my son a genius? And think if they had a daughter, they’d ask the same question. But the aggregate data says that that’s probably not true.
Wes Moss [01:02:25]:
So maybe we’ll wrap it up here and maybe the data is the same for podcasts. Nobody ever makes it to the end. So I’ll phone this last question in. In your opinion, if you were able to wave. A magic wand and actually listen to your data. I’m sorry, enact or act on your data and you’re approaching retirement. You’re somebody in the you’re 60 and you’re getting ready to retire. What data would you encourage them to really take a hard look at? What matters. You talked about what matters when we pick a spouse, even though we don’t look at it. What matters for the 60 year old American to have an awesome retirement?
Seth Stephens-Davidowitz [01:03:06]:
I would say your relationships with other people are the biggest predictor of happiness and the time you spend with other people. So put much of your energy into close friends, romantic partner, and enjoying your time with them.
Wes Moss [01:03:21]:
By the water.
Seth Stephens-Davidowitz [01:03:22]:
By the water.
Wes Moss [01:03:24]:
Awesome. Amazing.
Mallory Boggs [01:03:27]:
Hey, y’all, this is Mallory with the Retire Sooner team. Please be sure to rate and subscribe to this podcast and share it with a friend. If you have any questions, you can find us@westmoss.com. That’s wesmoss.com. You can also follow us on Instagram and YouTube. You’ll find us under the handle Retire Soonerpodcast. And now for our show’s. Disclosure this podcast is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. It is not intended to and should not form a primary basis for any investment decision that you may make. Always consult your own legal tax or investment advisor before making any investment or financial planning considerations. Please refer to the full disclosure in the podcast description for any additional information. Call in with your financial questions for Wes to answer: 800-805-6301Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcastThis information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
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Suze Orman is at it again!In a 2023 interview for Moneywise, she took aim at the 4 Percent Rule. “I think it doesn’t work anymore,” she said. “I think it’s very dangerous.”
To say I take umbrage with her outlook is an understatement. Claiming that a time-tested retirement plan is irresponsible doesn’t sit well with me. Sure, every case is unique, but let’s not throw the retired baby out with the retirement bath water. Taking 4 percent, with a willingness to adjust up or down, has been a productive way to find happiness and security in retirement for many happiest retirees.
Suze worries about the rules and tax ramifications of Medicare B premiums and Social Security. She wants people to keep these in mind and possibly “. . . work until at least seventy, or longer so that your assets have more of a chance to build up . . .” I’m not saying there aren’t cases when this is necessary, but it’s unfair and untrue to deny that using the 4 Percent Rule of thumb as a guide can work for many retirees.
Suze does not budge. “I would not be using the 4 percent figure on any level,” she declared. Specifically, she wants retirees to withdraw 3 percent at most every year. On a million-dollar retirement portfolio, that 1 percent drop leads to a $10,000 annual difference. I just disagree. People work hard and save their entire lives, and I’m not interested in telling them to keep working forever. At some point, it’s okay to enjoy your life. Otherwise, what was the point?
Origin of the Story: The 4 Percent Rule
Let’s use some context and market history to defend the legitimacy of the 4 Percent Rule.
In 1994, William Bengen, an MIT aeronautics and astronautics graduate turned Certified Financial Planner, made a historic discovery. He calculated actual stock returns and retirement scenarios over the last seventy-five years. He found that retirees who draw down 4 percent of their portfolio in their first year of retirement and adjust every year for inflation should likely see their money outlive them. (This scenario assumes a 50-75 percent allocation in stocks.) Based on his calculations, 80 percent of the time, nest eggs lasted fifty years. In the worst-case scenario, the money lasted thirty-five years.
In 2021, Bengen again broke news by revealing that “by adding a third asset class, small-cap stocks, investors could safely withdraw as much as 4.5% annually.” One-half of a percent may not seem like much, but that bump gives retirees a 12.5 percent increase in purchasing power, meaning they could possibly retire months or years ahead of their current schedule.
Is 4.5 percent the correct number? Everyone’s financial situation is unique, so there’s no exact answer. During my twenty years of helping people plan for retirement, I’ve found that starting around 4 percent and adjusting dynamically can be very effective. That might mean withdrawing less than 4 percent at times and possibly withdrawing up to 5 percent at other times. The more you roll with it, the less you depend on a roll of the dice.
I believe one of the scariest notions for retirees is the fear that their retirement savings won’t last. That’s why people like Suze Orman take such a harsh view of the 4 Percent Rule. To be fair, she’s not the only one. The Wall Street Journal cited a Morningstar study that “simulated future returns over a 30-year period and found that in a quarter of the simulations a half-stock, half-bond portfolio would run out of money if withdrawals stayed at 4%.” The article reported that the 4 percent strategy worked well from 1926 to 2020 but that beginning in 2021, that reality had changed because market forecasters predicted lower returns in future years.
Do I pay attention to studies like this? Of course. Do they change my view? Not so far. Indeed, it’s never a good idea to be close-minded and intransigent. But I also value what Warren Buffett said about people who try to make economic predictions. “Something different happens all the time. And that’s one reason economic predictions just don’t enter into our decisions. Charlie Munger – my partner – and I in 54 years now never made a decision based on an economic prediction.”
Warren Buffett’s mindset has worked well for him and his company, Berkshire Hathaway. I think it applies to retirement planning as well. None of us are fortune tellers. But we don’t need to be as long as we remain flexible and willing to adapt to a changing environment.
There have been other critics, too. In 2018, The Wall Street Journal published another article in which Wade Pfau, a professor at the American College of Financial Services in Bryn Mawr, Pennsylvania, argued that “3% is the new safe withdrawal rate.” Pfau doubled down in a 2020 Forbes article, arguing that the 4 Percent Rule should be replaced with a 2.4 Percent Rule. Note that Bengen’s 4.5 percent is almost double that of Pfau’s!
If widely respected financial gurus say 2.4 percent, what’s stopping someone down the line from calling for 1 percent withdrawal as the new normal? The retirement marathon is already hard enough. Would you even start the race if you could only withdraw 1 or 2 percent of your savings? Or would you just take on Suze Orman’s apprehensions and work until you die?
All of the doubters inspired my team and me to run our own numbers. We recreated and updated the 4 Percent Rule, replicating Bengen’s study, but with retirement withdrawals every year from 1929 to 2009, giving us eighty-two different retirement starting points. Using actual market data through 2022, we made multiple simulations with historically conservative average return estimates after that: 5 percent for stocks, 3 percent for bonds, and 3 percent for inflation.
We found that 59% percent of the time, the retirement funds lasted 50 years or more. In the worst-case scenario, the nest egg was depleted in 29 years. So, by my research, the 4 Percent Rule still can work, but you need to understand that it’s meant as a rule of thumb and needs to be adjusted over time to ensure its effectiveness.
Let’s walk through some examples:
Retirement begins on January 1st, 2000.
- The S&P 500 kicks off your retirement with a brutal run of returns: -9 percent, -12 percent, and -22 percent in the first three years.
- After using actual stock, bond, and CPI (inflation) numbers through 2022, we assume 5 percent stock returns, 3 percent bond, and 3 percent inflation.
- In this model, the money lasts 44 years.
Retirement begins on January 1st, 2008.
- Using actual returns through 2022, we assume 5 percent stock returns and 3 percent bond returns. In this model, we assume you don’t inflate your earnings every year.
- In this case, the money lasts 82 years!
- If inflation goes to 3 percent, spending goes from $40,000 to $133,000 in the last tested year. Even then, the money lasts 44 years!
Finally, let’s try January 1st, 2000, again, but this time with a 5 percent withdrawal.
- With actual returns and inflation, then 5 percent, 3 percent, and 3 percent for stocks, bonds, and inflation, respectively, the money still lasts 31 years!
Despite all of the media skepticism, we believe the 4 Percent Rule still works. And I believe the 4.5 Percent Rule passes the same muster as long as you remember that retirement planning is not a straight line. There isn’t, and never will be, an exact percentage that retirees need nor want to stick to each year, come hell or high water. Remember that these “rules” are guidelines, not laws etched in stone. Flexibility is the key.
In my twenty years of helping people plan for retirement, I’ve seen that using a dynamic approach to your nest egg is the key. Anywhere from 4 to 5 percent should be sustainable if you are willing to make adjustments. And there’s always the three-step dance between math (objective), common sense (subjective), and emotions (very subjective) like greed or fear.
My focus is on happy retirees. They’ve worked hard to save for an enjoyable life after their primary working years have passed. I want to help them max it out without running out. And as much as Suze Orman might hate to hear it, the 4 Percent Rule is a helpful tool for making that possible.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. For stocks paying dividends, dividends are not guaranteed, and can increase, decrease, or be eliminated without notice. Fixed-income securities involve interest rate, credit, inflation, and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed-income securities falls. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions,
The post Why We Believe The 4 Percent Rule Is Here To Stay appeared first on Wes Moss.
Suze Orman recently called the 4 Percent Rule “very dangerous” and said, “It doesn’t work anymore.” In today’s episode, Wes joins forces with Connor Miller, Co-Chief Investment Officer for Capital Investment Advisors, to fight against those statements. Using market history, they defend the legitimacy of what they feel has been a solid retirement strategy since William Bengen discovered it in the mid-1990s. Giving specific examples, they lay out the case for this dynamic, flexible rule of thumb as a roadmap for a happy retirement.
Read The Full Transcript From This Episode(click below to expand and read the full interview)
- Wes Moss [00:00:00]:I’m Wes Moss. The prevailing thought in America is that you’ll never have enough money and it’s almost impossible to retire early. Actually, I think the opposite is true. For more than 20 years, I’ve been researching, studying, and advising American families, including those who started late, on how to retire sooner and happier. So my mission with the Retire Sooner podcast is to help a million people retire earlier while enjoying the adventure along the way. I’d love for you to be one of them.Wes Moss [00:00:34]:Let’s get started.Wes Moss [00:00:36]:Your host, Wes Moss, along with Connor Miller. You’re in the studio. Welcome connor Miller.
Connor Miller [00:00:42]:
Good to be back on with you, Wes.
Wes Moss [00:00:45]:
I’m going to go right into this. Susie Orman slams the 4% rule. I think it doesn’t work anymore. I think it’s very dangerous. What? This is a headline while its creator, Bill Bangin now says it’s too conservative. What’s the new golden number for your golden years? This thing has made its way around the Internet, and Susie Orman, who is now famous for essentially saying, the way to not run out of money is to work until you die. Just keep working, keep collecting the paycheck, I don’t care how old you are. But she goes on to say Connor Miller. And the reason I’m bringing this up right out of the gate is that we here, our own team. You leading this effort when it comes to running these numbers. And this is a long historical study. This is not a small thing to run. What Bengan did, he did this back in the early 90s where he would choose a year every single year, all the way back to, I want to say, 1928. So he’s including the Depression and saying, what if you retired in January and February and March of 1928 and did it every single year to try to see what the optimal number is to pull out of your assets or be able to live on your assets without running out? The way I like to think about it is how do I max it out without running out? How do I use as much as I can without ever having the fear of running out of money? So arguably the greatest financial fear we all have. It’s the crux of retirement planning. It takes me a lifetime to save. Now I want to use it. And Susie Orman here is saying that you essentially shouldn’t. She says, quote, I would not be using the 4% Rule on any level. Why? Because there’s no way to predict what’s going to happen once you actually are living in retirement. Oh, wait, we don’t have crystal balls. That’s why we’re using history as a guide here. Susie and I know it’s Susie Orman, but just because she’s such a retirement planning wet blanket Debbie Downer, she’s saying that you can only withdraw up to 3% of your nest egg. And I’m not even sure she’s accounting for increasing that for inflation. So this is the crux of all retirement planning. Whether you have $500,000 that you’ve saved or two and a half million or five or $50 million, we’re all thinking about the same thing how do I use as much of as I can for as long as I can? And that’s what Bangin came up with. William Bangin, the aerospace engineer turned certified financial planner and really became the godfather of the 4% rule. And then a couple of years ago, Connor, he came out and said that 4% rule is too conservative. He said if you were to add small cap stocks to the allocation, he says you could really bump the rule up to four and a half percent. Now, this is a rule of thumb. There are very few in stone rules in the world of financial planning. This is just a really important rule of thumb. And I call it the 4% plus rule because Bengan is I side with Bengan on this because we’ve done it ourselves. We’ve run our own numbers, we’ve used our own assumptions. And the only assumptions that you really and let me maybe back up Connor. We’re going to talk about what the rule really says. So we save for 30 years or 40 years, and now we want to live, God willing, in retirement for 2030, maybe 40 years. If you retire early, super early at 50 and you’re going to make it to 100, you’ve got a half century. So it is a really long period of time. And inflation is a great nemesis to this because if as your costs get higher, your asset base has to grow or else it’s going to run down even more quickly. So the way that the original 4% rule works pretty simple. We’ll use a million dollars as an example. You start with 4% in the first year, and that gives you a dollar figure. It comes from a percentage, but the key here is the dollar figure of $40,000. And then the rule says that you’re going to every year in the future, adjust that $40,000 for whatever inflation is. So if inflation is 5%, then Connor, what’s the math on that 5%? You would up it by $2,000 per year, so it would go to $42,000 your next year. And that’s your new baseline?
Connor Miller [00:05:18]:
Yeah. So that you’re not adjusting your standard of living that you’re able to afford next year what you afforded last year.
Wes Moss [00:05:25]:
Ultimately it’s protecting your purchasing power. My purchasing power is protected if I can ratchet up what I pull out from my investments or I live on along with inflation. So then what Bengan said and looked at this at every iteration, every month from 1928 until he published this in the early ninety s. And then he’s redone this. We redid this in 2017. We started hearing, well, interest rates were low. There’s lots of chatter around retirement planning communities and Wall Street. That because interest rates are so low, the 4% rule doesn’t stand anymore. Well, here’s the good news. The good news is interest rates are back to more normal levels, more historically normal levels. Ten year treasury this week it was over 4.1%. So we’re not dealing with a 1% ten year treasury anymore. So bonds are paying something. Money markets are paying something. So if you’re able to look and see what Bangin said is that he gives us a probability. He says, well, if you’re only taking 4% and you’re ratcheting that number for inflation for a long retirement, then you’ve got an 80% to 90% chance, depending on when you retire, that you’re not going to run out of money by the time you have a 30, 40, or 50 year retirement. That was Bangin’s original thesis and what he proved out, or at least his evidence proved out. We’ve redone this. We’ve done it over and over again. And the most recent version, we did it as of what year?
Connor Miller [00:06:54]:
Connor our last starting year was 2013. So going all the way back to 1928, all the way through a starting retirement year of 2013. And then you got to make some assumptions thereafter to continue it out into the future.
Wes Moss [00:07:08]:
Explain that part of it.
Connor Miller [00:07:10]:
Yeah, like I said. So 2013, that’s ten years ago. We don’t want a retirement just to last ten years. We want to make sure that it’s going to be durable, it’s extend for the long term. And so you have to make some assumptions moving on past this year. Obviously, we don’t know what the stock market is going to do on a year to year basis. But generally speaking, using history as a guide, you can make some broad assumptions on what the stock market will do, looking at what the S and P 500 has done, what bonds will return you, and then ultimately what inflation could and should be as well.
Wes Moss [00:07:44]:
Okay, so for the assumptions moving forward, for the years that we haven’t experienced, we utilized 5% for stocks as at just an average annual rate of return.
Connor Miller [00:07:54]:
Which, by the way, is below the historical average of the market. So being a little conservative there, it’s.
Wes Moss [00:07:59]:
Below by a lot. It really is. Right? Depending on what tranche you’re looking at, stocks have really been double digit returns over 10, 20, 30 years, 10%, 11%, depending. So we’re using five in these assumptions. For bonds, we’re using a 3% rate of return. Again, the ten year treasury today is yielding over 4%. I would say that’s being relatively conservative. And the other way we make this even more conservative is because, remember, the nemesis of the running out of money is the ratcheting up of how much you’re pulling out because inflation goes up. So we’re assuming 3% inflation into the future every single year, year over year after year. I think I’d be remiss to not jump back to, say, another critical component of making the 4% rule work. Connor is that you have some sort of balance between stocks and bonds. And what Bengan also discovered in all of this analysis, and we’ve redone the study in the same way, is that if you’re only using, let’s say, 20% in stocks over that period of time, the longevity of your assets doesn’t look all that good if you’re using too much in equities, if you have a 100% stock portfolio. Because we have a couple of really big drawdown periods throughout the course of market history, of course, and we’ve lived through many of them just in the last 20 years. The damage to the portfolio is so big that it also cuts the lifespan short of being able to max out without running out. So interestingly, he found this optimal range of having a portfolio that had anywhere from 50% to 70% in equities. No more than 70, no less than 50. Then you start getting into either not enough growth to keep up or too much volatility with an all equity portfolio that digs you too big of a hole a couple of times in history. It’s really the balance that Bangin studied that I very much believe in around this rule of thumb that is our friend because for the most part, and this didn’t happen last year, but for the most part, when we have a bad year in equities, we’re going to have a decent year in bonds. And that is that ballast in an overall portfolio. Sure, you may have a bad year on the stock side, but if bonds are holding up or even accelerating, then you’re getting a steadier overall amount that you’re working with that can then provide income for you. So I think it’s a really important piece of the equation here. You’re taking 4% in year one. You’re taking that dollar amount you’re ratcheting up for whatever inflation is over time. These are all historical numbers since 1928, starting in every given month. And then we’re assuming we have a balanced portfolio. And for the years that still haven’t happened, because we’re trying to plan for 30, 40, 50 years out. We’ve got to use some assumptions. Connor we went back and said, let’s just be really conservative with those assumptions. So we’re saying stocks do five, bonds do three, and inflation ratchets every single year at a solid 3%. Now, remember, we had a lot of years where inflation was way under 3%. We had a decade and a half of one and a half to 2% inflation. Now we just had a one year period or two year period where it was much more than that. And now, as we know, CPI is back to the three range. So today we’re at 3.2%.
Connor Miller [00:11:21]:
And remember, the Fed’s long term target for inflation is 2%. So 3% 50% above the Fed’s long term target.
Wes Moss [00:11:31]:
So if we run these numbers, we’re looking at probabilities of not running out of money. And if you utilize the 4% rule and you use our assumptions here that are similar to Bengan’s assumptions. Again, real data. We use the S and P 500 and for the bond index, did we use the aggregate bond index or what was the exact index we used?
Connor Miller [00:11:54]:
Yeah, using the aggregate bond index as far back as we could go, and then using a blend of treasury bonds, essentially going back beyond the data that.
Wes Moss [00:12:03]:
We had when you’re in the 1930s and correct, the S and P 500 fell nearly 20% in 2022. Inflation jumped to double digits, and the Fed has continued to relentlessly raise interest rates. It feels like chaos, but at Capital Investment Advisors, we take a disciplined approach to investing to help our clients find happiness in retirement, regardless of the scary headlines. We can’t control the chaos, but we can control what we do about it. If you’d, like, help with your disciplined retiree strategy, reach out to our team@yourwealth.com that’s your wealth. Susie Orman this last couple of weeks has been making its way around every single, almost any financial planning website that I’ve been on, or financial website I’ve seen. It keeps popping up. Susie Orman says the 4% Rule is dangerous. She would have, quote, no part of the 4% Rule. And that because you don’t know what’s going to happen in retirement, then that’s utilizing too much of your money. Essentially what she’s saying. So she’s saying you don’t have a crystal ball from what I have read, and she’s had some iterations, but she’s really getting aggressive now in the last couple of weeks around this, from what I can tell. She’s essentially saying the only way to not run out of money over time in retirement is to, one, continue to work and work and work until you die, and never touch anything in your nest egg. And that way you won’t run out. Is that essentially what she’s saying?
Connor Miller [00:13:47]:
That’s what it sounds like. I mean, she specifically says she wants you to work until at least 70 now. At least? At least 70? Yeah. It doesn’t sound like she really wants us to spend any of our money, which really could be a self fulfilling prophecy at that point, because if nobody’s spending money, then economy is not going to do too well.
Wes Moss [00:14:07]:
It doesn’t sound very good for the economy either. Right. No. Spending working forever would be good. So that’s productivity.
Connor Miller [00:14:15]:
But if no one’s spending their money, then no one needs to work.
Wes Moss [00:14:20]:
That’s true. So again, it’s not only is this a wet blanket when it comes to retirement planning, it’s also terrible for the economy. And I just think psychologically it shuts people down. Wall street is always well, Wall Street for many years, to me, sends the messages, it’s never enough. If you have a million dollars, you should really have two if you really want to retire. If you have $2 million, you really should have five if you really want to retire and inflation makes it so that your cost of living goes up so dramatically, you need more than you ever thought. But at some point, you have to sit down and get realistic about what we can achieve. What can we do? We’re working for 30 or 40 years. We can’t work forever. Moss humans can’t do that. So there’s got to be some sort of planning balance. There’s got to be some sort of goal in the future that we can try to hit, so then we can utilize the hard earned savings and investments that we’ve worked so hard to save over the years. We try to take a step back and say, well, what is realistic here? William Bangon, the famous aeronautic engineer who turned certified financial planner back in 19 90 91, published his 4% rule. We call it a rule of thumb. And it works not perfectly because it’s a rule of thumb. It’s not etched in stone. It essentially says you can pull out 4% a year from your initial dollar value. So 40,000 on a million, and then ratchet that up every year for whatever inflation is. And yes, when we go through 10% inflation a year, you’re ratcheting up 40,000 by $4,000, and that’s your new high watermark. And then the next year, if it’s another 10%, it’s 10% on 44,000. We’re accounting for inflation. But if you’re looking at the numbers, what’s really interesting here is that as long as you have 50% in stocks and again, when banging into the study and when we redid the study, we used at least 50% of a portfolio in the S and P 500 actual retirees going back to the late 1920s and then the aggregate bond index. So that’s the other part of the overall investment equation.
Connor Miller [00:16:37]:
I do want to say I think that inflation piece is really important too, because you could be saying, well, hey, we’ve had last year, we had 9% inflation. Does this rule still apply? But going back to 1928 encompasses all of those periods of high inflation before it’s got the 70s in there. And so even in periods of elevated inflation, this rule of thumb has proven to have a high probability of success.
Wes Moss [00:17:04]:
And really the success measure, and that’s such a good point, Connor, is that this is a probability of not running out. That is what is, quote, success when it comes to the way we’ve run this and the way the numbers work out here. 90% of the time, utilizing this rule, 90% of the time money lasts 40 plus years. That’s a pretty good rule of thumb to go on. 94% of the time money lasts 35 plus years. And then 98% of the time money lasts 30 plus years.
Connor Miller [00:17:38]:
And the two years where it didn’t last 30 years, you know, how many.
Wes Moss [00:17:42]:
Years, how long did it last, those two fateful percents?
Connor Miller [00:17:45]:
29 years.
Wes Moss [00:17:46]:
29 years. So as long as you’re investing in a balanced, diversified way at least that’s what this study has done. Your money really should last 30 years. Now you could make the case that if you retire at 60, that only gets you to 90. And that’s true. But here’s where the reality of planning really comes in, because this is a rule of thumb. How do you then take off that 2% chance that you might run out or the 10% chance in one out of ten cases it doesn’t quite work? Well, that’s not all that difficult to solve for either. And that goes back to being sensible around your retirement planning and thinking of this in a couple of different ways. One, of course, retirement planning is not a straight line. So it’s never been, it never will be, going back to what Susie says, which is there’s going to be unforeseen things that happen in retirement. Of course that’s life. But these rules are really just guidelines and they’re not etched in stone. So flexibility is a key. It’s not a straight line. Which brings me to use a range in the 4% range dynamically. Maybe there’s some years when you can get away with only needing three and a half percent from your retirement portfolio and that’s going to be enough. Maybe you’re going to have some years when it has to go to 5% or maybe even a little bit more than that. And that’s the reality. Connor as we work with families, I’ve seen this over and over and over again. Very rarely does anybody stick to their exact 4% rule. They may have years where they don’t need as much and they have years and they say, look, I’m going to build a new barn and it’s going to cost me $50,000 or $80,000. I’m going to need a little bit more than my 4%. Okay, noted. That means that in the future we may want to be looking at scaling back a little bit, at least for a year or two. So this is a continuum. It’s a continuum, I think anywhere from three and a half percent to 5% in some years. But we want to try to get back to that average of around four, maybe slightly higher than that. So that’s what I’ve seen in 20 plus years of doing this. And then number three on, I would say, my caveat list, or let’s put this to work in the real world list, is that the real world supports a four and a half percent withdrawal rate. So Bengan came back, william Bangin, the grandfather of this rule, originally came back and said this a few years ago. Barron’s published this and said when he originally did the study, he looked at large cap equities with the S and P 500 and the aggregate bond index going back, call it 80 some years. But what he redid, he said, well, small cap companies, even though they’re more volatile, they do have overall higher returns over the course of time. So let’s say as an example, large cap stocks have been around ten. They’ve been a little more than that, but let’s just say ten and small caps have been more like twelve. So he said, what if I utilize instead of only having large cap stocks, what if he introduces to his model 10% of the overall investment? Pie to small caps have a slightly better rate of return and in doing so he gets similar probabilities of money not running out over these 30 plus year periods of time, even using a four and a half percent withdrawal rate. So Bang in here is saying, look, you could even model out four and a half percent. Susie orman is recently saying you can’t do anything more than three. That’s a huge difference. And I want to just put that in context here. So using four and a half percent versus using 3% connor is, let’s call that 50%. That’s a 50% difference.
Connor Miller [00:21:42]:
Yeah. On a million dollars you can take $45,000 versus someone else telling you to take $15,000, less $30,000 a year.
Wes Moss [00:21:51]:
So it’s a 50% difference between these two. It’s really a great divide and there is no perfect answer and there is no one that is perfectly right in this. So Bangin is not perfectly right. Susie’s certainly not perfectly right. And we’re trying to be the arbiter here and just look at this practically speaking, which brings us to the timing of this. So you’re probably thinking what’s the worst period of time? In my mind, I would think right out of the gate, if you retired right at the beginning of the Great Depression, I would have guessed that’s probably the worst period of time to retire. The stock market went down, the economy was terrible, we had kind of a yoyo inflation to me, without looking at the numbers before we did this, I thought that’d be the ultimate worst time. Ironically, the worst time, and we call this getting into the danger zone, was not during the Depression. And then if I would have guessed so we’re going to get to what’s the kind of the worst time when money does run out and ready for the gasp, 29 years. But we do have these two different zones, so we call the danger zone and we have what’s called the buffett zone. The buffett zone, I would say, is a little more fun to talk about. And you get into a buffet zone anytime your annual withdrawal rates drop below a 2% level. So imagine you start out year one, it’s 4%, but you had the great fortune that inflation was low for a while right as you retired and the stock market, so at least half of the overall portfolio did really well. So you had a lot of growth and you didn’t have to ratchet up your spending all that much because you had fortunate timing. And now if you chose to stay disciplined and not go beyond the rule now your withdrawal rate drops because you’ve got this larger portfolio and you haven’t increased your spending. So you end up where in some cases, you get a withdrawal rate that goes below 2% per year. And I think one of the best examples of that is if you were retired in 1950, the numbers get really pretty almost. They get very buffett like. That’s why we named it the buffett zone, meaning that if you stick to your guns and you never spend more than your 4% year, one even ratcheted for inflation. If you retire 1950 because markets did so well and inflation was so low for so long, then you ended up with a really low withdrawal rate about 1213 years in. By 1963, the withdrawal rate had dropped to 1.9% because the portfolio had grown so much. By 2009, this original million dollar investment that we’ve run this with grew to over $50 million. And then by 2013, it was 75. And by the year 2020, Connor, it was over what, way over $100 million? Yeah.
Connor Miller [00:24:46]:
This is really like the generational zone, right? This is when you stop thinking about yourself and just thinking about the next generation, who you’re going to pass this to.
Wes Moss [00:24:54]:
But that’s the other way to think about this dynamically. If you end up retiring at a really good time, you’re probably not sticking to your 4% number because the markets have done so well, you’re probably going to spend a lot more. So you’re not going to just sit there and have the discipline if 50 years later, your million dollar has turned into 50 million. So I think it works both ways. Now, in the danger zone, this is anytime your withdrawal rate gets over 6%. And one of the worst times wes retire would have been mid 1960s when we ended up with bad markets, particularly in the early seventy s and super high inflation. So your $40,000 very quickly was 50, 55, or $60,000. And again, if you run that linearly and never change it, your withdrawal rate ends up over 6%. And then you go into this, what we call this danger zone spiral. And as an example, this is the very small 2% scenario. Only 2% of the time over the course of this whole study when money ran out in less than 30 years, in this case, 29 years. So it still lasts almost three decades. And I think we’ll wrap up on that note. Connor Miller, man, thank you so much for being here. Awesome input today. Thank you for bringing so much of this together.
Mallory Boggs [00:26:12]:
Hey, y’all, this is Mallory with the Retire Sooner team. Please be sure to rate and subscribe to this podcast and share it with a friend. If you have any questions, you can find us@wesmoss.com that’s wesmoss.com. You can also follow us on Instagram and YouTube. You’ll find us under the handle Retire Sooner podcast. And now for our show’s disclosure. This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guaranteed offer that investment return, yield or performance will be achieved. Stock prices fluctuate, sometimes rapidly and dramatically due to factors affecting individual companies, particular industries or sectors, or general market conditions. For stocks paying dividends, dividends are not guaranteed and can increase, decrease or be eliminated without notice. Fixed income securities involve interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed income securities falls. Past performance is not indicative of future results. When considering any investment vehicle, this information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Investment decisions should not be based solely on information contained here. This information is not intended to and should not form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment tax, estate or financial planning considerations or decisions. The information contained here is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production and may change without notice at any time based on numerous factors such as market and other conditions. Call in with your financial questions for Wes to answer: 800-805-6301Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcastThis information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
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Wes Moss was recently featured in the U.S. News and World Report article “8 Biggest Myths About Early Retirement” where he shared his insights on financial worries and the “Gray Zone.”
Even in a chaotic economic environment, Americans of a certain age want to retire early. It’s a tempting siren call for hard-working people who’ve been on the job 30 or even 40 years and seek the easy life.
According to a study from Northwest Mutual, the average American believes they’ll need $1.25 million for an adequate retirement – up 20% from last year’s numbers. “At the same time, Americans’ average retirement savings has dropped 11% – from $98,800 last year to $86,869 now – while their expected retirement age has risen,” Northwest Mutual reports.
Americans who want to plow ahead and retire early can’t ignore the numbers, and they shouldn’t ignore the relative risks – including financial, social and health-related – of retiring at age 50 or even 60. Here are eight major myths that represent the most risk for career professionals mulling an early retirement, according to money management specialists.
- Early retirement will be wonderful.
- Your financial worries are over.
- Health care costs can easily be handled in your healthy 50s and 60s.
- You’re done working forever.
- You can tap into retirement savings without consequences.
- You can live on a fixed budget.
- Your investment portfolio must avoid risk.
- You can easily cut back on spending.
- Early Retirement Will Be Wonderful.“The real myth on retiring early is that retirement is the goal,” says Steve Davis, CEO of Total Wealth Academy, a passive income training firm in Katy, Texas. “The first thing that people need to know is that retirement is not what you think. It’s not the wonderful end game everybody believes. You can only fish so much, you can only golf so much, you can only travel so much.”
“There is not much happiness in just doing nothing or only doing things for yourself,” Davis notes.
After retiring early himself, Davis began to realize he found no happiness in retirement – just “useless, selfish goals.”
“I went back to work within six months of early retirement,” he says. “Only this time at something I truly enjoyed doing.”
- Your Financial Worries Are Over.Another myth is that once you execute your financial plan, early retirement will be void of financial worries.
“There’ll always be concerns about the economy, inflation and the state of the world,” says Wes Moss, managing partner and chief investment strategist at Capital Investment Advisors, a fee-only investment management firm in Atlanta. “Plus, when you’re no longer bringing in wage income, there is less room for error.”
To minimize those errors, Moss advises having a retirement “gray zone” of between three to five years. “This is where you take on a new second act career that’s more enjoyable and which brings in some level of replacement income,” he says.
Financial planning here is also key. According to Moss, some core financial principles associated with happy early retirees include:
- An average of close to $1 million in liquid net worth.
- Mortgage payoff within sight (over the next one to five years).
-
Multiple streams of income. “Happy retirees average three to four different or unique streams of income,” Moss says.
-
Health Care Costs Can Easily Be Handled in Your Healthy 50s and 60s.Many Americans erroneously assume that Medicare will handle their health care needs, but that’s not the case.
According to a 2022 study from Fidelity Investments, even a healthy 65-year-old couple retiring now can expect to spend an average of $315,000 on health care costs throughout retirement. “The estimates for single retirees are $150,000 for men and $165,000 for women,” the study notes. “For single retirees, the 2021 estimate was $157,000 for women and $143,000 for men.”
Additionally, Medicare doesn’t cover every health care need, and you’re going to need to put aside cash for extra health care coverage, anyway – especially long-term care needs.
“With early retiree health care coverage, you have to understand your needs in retirement,” says Tatiana Tsoir, certified public accountant and founder of Tatiana Tsoir Inc., a business management consultancy in New York City. “Most importantly, where is that money coming from?”
Early retirees will need to find out what Medicare covers. “You’ll want to know if you need to buy any supplemental items to support your health care needs,” Tsoir says. “Consider life insurance with a chronic illness or a long-term care rider. This will rule out having to buy expensive long-term care insurance.”
- With Early Retirement, You’re Done Working Forever.There’s a “good news-bad news” mindset when it comes to work ending in early retirement. Yes, you’re out of the working world. But it’s tough to get back in if you need to.
“With early retirement, you can’t change your mind, and quite possibly you’ll never be able to work again,” says David Blanchett, head of retirement research for PGIM DC Solutions in Newark, New Jersey. “I think what happens a lot is people are absolutely burnt out from working too much and want a break.”
When you’re not sure about leaving the working world, run the numbers to get a sense of where you’ll be financially, Blanchett advises.
“If you think you’d be able to rejoin the workforce in some capacity, know that it won’t be the same income you were earning previously,” he warns.
Ideally, one potential option is to “retire” from your primary job and move into a part-time job, at least at first. “That move allows you more freedom while at the same time ideally providing health benefits and minimizing when you have to dip into savings,” Blanchett adds.
- You Can Tap Into Retirement Savings Without Consequences.The reality is that withdrawing from retirement accounts before age 59½ can incur early withdrawal penalties and taxes.
“If you’re planning to withdraw from your retirement accounts before this age, you should consult a financial advisor who can guide you through the proper retirement account withdrawal method,” says Tammy Trenta, founder of Family Financial in Los Angeles.
- You Can Live on a Fixed Budget.One of the biggest myths about early retirement is that retirees will have a fixed budget throughout their retirement.
“That just doesn’t happen,” says Michael Kazakewich, a partner at Coastal Bridge Advisors, in Westport, Connecticut. “Home repairs, medical expenses and the unforeseen can dramatically throw off the budget and reduce available assets of an individual that retired early.”
- Your Investment Portfolio Must Avoid Risk.Another myth about retiring early is that investments must become more conservative. Not so, Kazakewich says.
“We believe that with a longer retirement time period, investors still need equities and other asset classes that will provide growth over the long term,” he notes. “That growth can help to offset the impact of inflation over the long term.”
- You Can Easily Cut Back on Spending.Early retirees believe they can live on 80% of their pre-retirement wages, but that’s easier said than done.
“The reality is that most people who are planning on an early exit are doing so to pursue travel, golf and other pursuits,” says Brian Ream, principal at CliftonLarsonAllen Wealth Advisors LLC. “The reality is that in the early years of retirement, in pursuit of these activities, we spend at least as much if not more than our working years.”
3 Tips for Early RetireesBeing reliant on your investments means little room for error, and that’s a problem when most investors are predisposed to risk aversion.
“That’s especially the case in a high inflation environment, and that’s doubly so when portfolio growth has to play a role in any allocation strategy to preserve buying power and longevity of the asset base,” Ream notes.
To shine some light on the investment side of early retirement issues, Ream offers three investment tips for like-minded individuals considering an early exit from the working world.
Clearly define, at a granular level, what retirement really means. Travel is too broad to plan for in retirement. Does that mean a pop-up camper or a large RV?
“Details matter in order to assign accurate costs to the goal,” Ream says.
Know that what you’ve saved is important, but what you spend can be more important. A degree of discipline related to budgeting is paramount.
“In addition, there needs to be flexibility in the budget for the unexpected and built-in pivot points in order to react in a measured and meaningful way,” Ream notes.
Define “happy.” Clients often reach their financial targets, feel they can take the leap, and life will be all rainbows and unicorns, only to find six months later that they are sitting around the house going stir-crazy.
“This is especially true for ‘type A’ personalities who have thrown themselves into work for years and that’s their identity,” Ream says. “We have to plan for the emotional aspects of reinventing how we find purpose and meaning. When clients say, ‘I’ll be happy when I retire,’ it’s a good indication that we need to discuss what ‘happy’ means.”
Read the original article here.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.The post Wes Moss Featured in U.S. News and World Report appeared first on Wes Moss.
Matthew McConaughey’s persona has become ubiquitous in American society. At times it feels like his charm and confidence willed him to stardom. There’s no denying his acting talent, but he’s also one hell of a public speaker. I’ve always been a sucker for graduation speeches, and when I came across the one he delivered at the University of Houston in 2015, it spoke to me. I couldn’t help but notice how well his advice applied to retirement planning and investment strategy.
How To Not Be a Dazed & Confused InvestorThe investment path is paved with uncertainty, but throw a pandemic, hyperinflation, massive Fed intervention, and bitterly divided government into the cement mix and the bumps in the road start to threaten your alignment. With all this unease, I thought there was no one better to ease our anxieties than the man who oozes poise. So, here is some of Matthew McConaughey’s graduation advice with the lens refocused on investments. Alright, alright, alright.
1. Life Is Not Easy
Nor is investing. Remembering that investing takes time and discipline is especially crucial during challenging periods. Planning to become an overnight millionaire with the next meme stock isn’t investing. It’s gambling.
Rome wasn’t built in a day, and your portfolio won’t be, either. So educate yourself about the companies involved and create a diversified, income-generating apparatus.
Remember that there will always be aches and pains along the way. That’s okay. Life isn’t always easy, but you aren’t alone. You don’t think Warren Buffett ever had a bad day, week, month and year in the market? Of course, he has; it’s the price of doing business. But he summons enough wisdom and patience to let the bad days transition into good ones. If you can do the same, perhaps you’ll become one of the wealthiest people in the world. Okay, maybe that’s aiming a bit high, but you get the idea.
2. “Unbelievable” Is the Stupidest Word in the Dictionary
Matthew McConaughey doesn’t like this word, and neither do I. It’s used far too often to describe the rise and fall of equities. “Stock X is up or down 75 percent. It’s unbelievable!” No, it’s not. Market history is full of outrageous examples. As an example, what if I told you that Warren Buffett’s overall Berkshire Hathaway performance from 1964 through 2022 gained 3,787,464 percent? Is that unbelievable? Nope. It’s true! I’m not saying you’ll reach that peak, but with time and discipline, many “unbelievable” things start looking possible.
3. Choose Joy Over Happiness
McConaughey describes happiness as an emotional response to an outcome but says joy is the constant feeling we get when we pursue our natural interests.
This may be my favorite message from his speech because that’s what I’ve dedicated my professional life to helping retirees do. I write articles about it, record podcasts and radio shows, and talk to my clients about it. My last book, What the Happiest Retirees Know: 10 Habits for a Healthy, Secure, and Joyful Life, covers the topic extensively.
Using the word “joyful” in the title was intentional. It may be the most important word in the entire book. We used ten habits to explain how to live a life with purpose and joy: money habits, curiosity habits, family habits, love habits, faith habits, social habits, health habits, home habits, investing habits, and spending habits.
4. Define Success For Yourself
Write down your investing goals, literally. There’s something about having a tangible list that often helps. Then sit back and look at each one. Contemplate what’s behind each one. Are you trying to leave money for your kids? Donating to charity? Creating a future income stream to be diverted from the reservoir in retirement? Are you focused on parenthood, physical health, mental health, career, or friendships?
Or, perhaps, you’re even trying to get that nest egg up to $100 million. Remember, the word “unbelievable” has been removed from our dictionary. Figure out what success means for you. Then, go get it.
5. Process Of Elimination Is the First Step to Our Identity
Don’t tell Kenny Rogers, but the gambler would be a terrible investor. We generally don’t focus on meme stocks, bitcoin, NFTs, or other get-rich-quick strategies. Sure, there’s room to play if you have a little extra money, but for the most part, we consider these excesses in the market.
Decide what your investment strategy is and stick to it. Do you want to invest in growth or value stocks? Are ESG (Environmental, Social, and Corporate Governance) principles essential to you? Whittle down your options. Separate the wheat from the chaff. McConaughey used an example of his iconic character, Wooderson, from the movie Dazed and Confused. The director kept offering him more scenes, and he kept accepting because he was new to the movie business and eager to work. In retrospect, some of these scenes weren’t true to Wooderson’s character, and he felt they were detrimental to the character.
Figure out who you are and what you want, then clear away the options that don’t serve those aims. As McConaughey said, knowing who we are is hard, so why not make it a little easier? Eliminate who you are not first, and then you’ll almost accidentally find yourself where you need to be.
6. Don’t Leave Crumbs
McConaughey interprets crumbs as questionable choices that hurt us down the road. With retirement planning, that can mean going out on a limb rather than sticking to the plan. So many folks pull money out when the market falls, only to miss the incredible recovery. Do you think they don’t regret letting panic override their investment plan?
Dedicate the time it takes to make good decisions, so you don’t end up anxiously looking over your shoulder in the future. If you leave crumbs today, they will cause you more stress tomorrow.
7. Dissect Your Success and Reciprocity of Gratitude
McConaughey points out that we tend to focus on our failures. Instead of obsessing over those, he suggests dissecting our successes with gratitude — giving thanks for the things that are working. When we do this, he says, that gratitude tends to reciprocate and gives us more things for which we can be grateful.
From a financial standpoint, I give thanks for what I call the Army of American Productivity. No matter how much the market may drop in a given day, we live in the country with the most productive economy in the world. Most people aren’t that lucky.
As McConaughey says, life is a verb. We try our best even though we don’t always do our best. No person or entity is perfect, but every business wants to grow, and every human wants to feed their family. When these two goals overlap, it creates the harmony of progress and growth of earnings. The companies listed on the S&P 500 have millions of employees working every single day. That unstoppable inertia is the driving force that pushes our economy to new heights, and it’s why I keep investing in the United States.
8. Make Voluntary Obligations
Here, McConaughey tells us that everyone needs to live by their own code. Sure, there are society’s hard and fast laws, but he’s referring to the standards of integrity that we each decide to live by. It reminds me of a character named Omar Little from HBO’s The Wire. Omar was a hardened criminal whose chosen profession was robbing drug dealers. But when a rival framed him for murdering a tax-paying, law-abiding citizen and one of the detectives nearly fell for the ruse, Omar protested, “Come on now, when you ever know me to put my gun on anybody that wasn’t in the game?” Here was a stone-cold killer offended that anyone might think him capable of breaking the voluntary obligations he had set for his life. “A man got to have a code,” he explained.
There are voluntary obligations we can each incorporate into our retirement planning. One of the most vital is to put your savings on auto to remove any temptation or forgetfulness. Let gravity push your hard-earned money toward investments.
Over time, despite the peaks and valleys, there’s a good chance your money will continue to grow and compound. Think of it as a bit of pain in the wallet now that can lead to a joyful retirement later.
9. From Can to Want
On this point, McConaughey tells the story of the first time he was successful enough to hire a maid. He was so excited about her pressing his jeans that he forgot to notice his aversion to how it looked. It helped him realize that “because I can” is not a good enough reason to do something.
Similarly, it’s essential not to consider saving and investing as “spending money” on stocks. Instead, think of it as investing in your future. Get excited about that. You are taking steps toward financial freedom. Embrace the ups and downs. They’re just part of the process. Don’t let them derail you from a long-term, disciplined approach.
10. A Roof Is a Man-Made Thing
McConaughey tells a tale of the 1993 Houston Oilers jumping to a 35-3 lead in an NFL playoff game before eventually losing. He mused about why and suggested it may have been a case of the team putting a roof, or ceiling, on themselves — thinking it was all too good to be true and limiting their path to victory.
With investing, this can manifest when we try to play it too safe or cut our losses before they have time to grow.
11. Turn the Page
McConaughey chronicles the story of a successful musician with a drug problem who found the courage to admit his problem, forgive himself, and move forward. With investing, this attitude can come in handy. Mistakes are made; there’s no way around that. But, unfortunately, no investor is perfect, and the market doesn’t come with an instruction book or crystal ball.
When a mistake knocks you down, simply get back up, dust yourself off, and try again, using the lesson learned from misfortune to inform your future actions. Retirement planning isn’t about perfection. It’s about participation. As McConaughey says, you’re the author of the book of your life. Turn that page.
12. Give Your Obstacles Credit
McConaughey brings up those “No Fear” t-shirts that were en vogue a couple of decades ago. He confesses his disdain and confusion for the message they conveyed. No fear? Who doesn’t have any fear? Furthermore, who thinks having no fear is a productive aim?
McConaughey says he tries to scare himself at least once per day. Whether that means asking someone on a date, getting butterflies about a challenging day at work, or asking for a raise, he thinks fear is something to overcome rather than ignore. The fear signifies an obstacle, on the other side of which lies progress and growth.
There are plenty of obstacles in investing. When is the right time to buy? To sell? If the market is down 20 percent, should you stay out until it bottoms? How do you know when it will bottom? (Hint: you don’t!)
Other than Matthew McConaughey’s surprising acumen for retirement planning, the bottom line is that life and investments are both about choices. You can’t control which scenarios will arise, but you can manage your reactions. Arm yourself with the tools you need to make sound judgments, and then give them time to develop. No one person or company is perfect, but with thoughtful and deliberate actions, we can be happy, healthy, and secure.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. The mention of any company is provided to you for informational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any company. The reader should not assume that an investment in the securities identified was or will be profitable. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. For stocks paying dividends, dividends are not guaranteed, and can increase, decrease, or be eliminated without notice. Fixed-income securities involve interest rate, credit, inflation, and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed-income securities falls. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information is strictly an opinion, and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions,
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If there’s ever a concern about whether a partner is financially cheating or fudging the numbers on finances, you better hope Tracy Coenen is busy doing something else!
Author of three books on fraud and embezzlement with more than 500 forensic accounting engagements completed, Tracy Coenen has spent more than 25 years investigating fraud. In this Retire Sooner episode, she joins Wes Moss to discuss forensic accounting and dig into signs that your spouse may be financially cheating on you. Tracy regales many examples she’s seen of marital and divorce-related financial fraud and how she uses investment records, tax returns, bank statements, and even behavioral changes and social media to find the truth. She also shares her insights on how to have potentially difficult money conversations with your partner so that you both remain informed about marital finances. Tracy also shares how couples can use utilize resources such as her Red Flag Assessment and online Marriage, Divorce, and Post-Divorce Money Guides to navigate financial conversations.
Time-Stamped Show Notes from the Video* [00:01:42] Wes and Tracy discuss their experiences with clients who have had addiction problems or lost money due to gambling. * [00:07:55] Tracy explains how she looks at transactions off statements in a digital or paper format to find missing money in cases of divorce. * [00:12:03] Tracy tells the story of a client who’s ex-husband was hiding a relationship and spending on his girlfriend but gets caught through social media and credit card statements. * [00:19:30] Tracy lists signs of financial infidelity, including secret credit cards, withdrawals, and bank accounts with potential addiction problems and hidden cash. * [00:26:30] The Divorce Money Guide is an online video-based handbook that helps people in the process of divorce understand their finances. * [00:34:59] The Post-Divorce money guide offers 10 steps to protect oneself legally and financially after divorce, including changing life insurance beneficiaries and locking down credit. Additionally, there is a separate guide for Marriage. * [00:42:39] Take Tacy’s Red Flag Assessment here: fraudcoach.com/redflag
Read The Full Transcript From This Episode(click below to expand and read the full interview)
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- Wes Moss [00:00:00]:A forensic accountant is like if Sherlock Holmes carried a calculator instead of a magnifying glass or Dirty Harry had a spreadsheet instead of a 44 Magnum. They use accounting and auditing and investigative skills to analyze the finances of people and businesses. Tracy Coenen has spent more than 25 years investigating fraud, financial statement fraud, investment fraud, and insurance fraud. She’s even handled divorce fraud. Sounds so romantic, doesn’t it? She’s personally completed more than 500 forensic accounting engagements. She’s been an expert witness in numerous cases and testified more than 80 times. As the author of three books about fraud and embezzlement and the holder of multiple undergraduate and graduate degrees, Tracy is the perfect person to talk to about this fascinating topic. If you’ve ever fudged your numbers, you better hope Tracy Coenen is busy doing something else, because she’ll see your numeric inconsistencies clearer than a chalk outline at a murder scene. I’m Wes Moss. The prevailing thought in America is that you’ll never have enough money and it’s almost impossible to retire early. Actually, I think the opposite is true. For more than 20 years, I’ve been researching, studying, and advising American families, including those who started late on how to retire sooner and happier. So my mission with the Retire Sooner podcast is to help a million people retire earlier while enjoying the adventure along the way. I’d love for you to be one of them. Let’s get started. Tracy Coenen, you might wonder, why are we the Happy Retiree show and the Retire Sooner podcast, interviewing someone that digs into forensic accounting and whether your spouse is cheating on you from a money perspective. And it’s because we talk about marriage and how it impacts our retirement happiness. And it’s a big topic here. And if somebody is hiding money, shuffling it around, I want our audience to be able to figure that out.Tracy Coenen [00:02:11]:Well, and I think it’s important to talk about the topic of divorce as it relates to retirement, because when people are getting close to retiree or are in retirement and there is a divorce, it can really upend them financially. Everyone’s standard of living goes down after divorce, but if retirement is imminent or you are already in retirement, it can really have some damaging effects on you.Wes Moss [00:02:36]:
Well, unless you’re a billionaire, right? So if you split a billion in two, you’re still pretty good. Each side has 500 million, but that’s not 99.9% of America. So you’re right. When you get into a divorce, pretty much always standard of living goes down.
Tracy Coenen [00:02:52]:
Well. And how about situations like this where we’ve been married for 20 years? Retirement is a little ways off yet, but over that 20 years, my spouse has been working and putting a bunch of money into our 401K account. And now that we’re getting divorced, we’re going to have to split that in half. But that’ll probably be okay. I’ll work on my budget a little bit, but I’ll still be okay. And then we go to split the doesn’t exist because the spouse cashed it out to gamble it all away.
Wes Moss [00:03:19]:
All right, that’s really wow. I mean, we should go to a commercial break and say, we’ll be back with Tracy Coenen and where did the money go and where did it go? What form of gambling was it lost to? When the Retire Sooner podcast returns. But I don’t think we actually have a commercial right now, so we’re going to go right into it. First of all, I can tell you that I have seen a little bit of this even in my, let’s call it, happy retiree practice. We have almost 4000 clients. I’ve seen a lot of different things over the years, and most of the time, the millionaire next door type person doesn’t get into that crap, if you will. And the reason they end up with a million or two or $3 million is they’re pretty darn good about saving and not fettering money away. But I do see families that have had somebody had an addiction problem or their kids had an addiction problem or there was a gambling problem, and I’ve seen money go away pretty quickly. But I haven’t seen from our side of being an advisor and this is why I want to hear your examples or stories about this, is that if it’s just you and your spouse, it seems like it’d be a lot easier to play funny money here and have money go missing. So what happened here in this gambling story?
Tracy Coenen [00:04:37]:
Well, it’s a generic story, but I have seen it. I have been involved in divorces with gambling. Some of the cases, a more recent case, the wife knew that there was a gambling problem and was still a little bit surprised at what was going on with the 401K. But I have been involved in other cases multiple times where it’s just very simply a hidden gambling problem. And the 401K had either not nearly as much as they thought in it or had been completely drained altogether. Which is why one of the things that I’m a big advocate of is the spouse who’s not in control of the money, staying informed about what’s going on, showing them here’s what you would look for to find out if the 401K was cashed out in part or in whole. I’m going to show you on a tax return where to look to see if that was happening.
Wes Moss [00:05:25]:
Right. So first of all, let me back up for just a minute here and explain forensic accounting. First of all.
Tracy Coenen [00:05:32]:
Oh, I thought you were going to explain forensic accounting. Didn’t sound like a question.
Wes Moss [00:05:35]:
No, I would be terrible at explaining this. I would like you to explain what is forensic accounting and you’re a CPA, but as a forensic CPA or somebody that specializes in this, what are you doing?
Tracy Coenen [00:05:49]:
Finding money. So I am a fraud investigator and I find money. It is very often when corporate executives are stealing money, doing funny money with the company’s books and records. Or it may be in divorce cases where someone is trying to find out where has our money gone? Or they’re maybe trying to find out how much are we making as a family? I don’t know where all of our sources of income are now. Great problem to have right there’s. Extra money that you didn’t know was coming in, or cases just where companies are fighting over money. Maybe a contract gone bad, and I’ll come in and figure out how much money was lost because of that contract gone bad, and I’ll testify in court. So that kind of all falls under that umbrella of forensic accounting. But the easiest way to describe it to people is I just say I figure out where the money went.
Wes Moss [00:06:37]:
Okay, so let’s just think about, from a family perspective, a husband and wife. And I could see this maybe it seems even more complicated in a company, but it seems like you would by the time you get brought in, you kind of have the keys to be able to go figure it out. You’re allowed to go in, they probably give you the keys to the accounts, and you get to go look forensically. But it seems a little more complicated maybe for a husband and wife, particularly if you’ve just started a divorce or are the rule I don’t even know the rules on this. Let’s say you’ve got a spouse that’s kind of hiding something. How quickly can the spouse that you’re representing get it so that you can go look?
Tracy Coenen [00:07:18]:
It’s pretty quick because the divorce process itself allows for documents to be subpoenaed. So bank records can be gotten in that fashion, investment records can be gotten in that fashion, tax returns, et cetera. What I tell my clients is that they should get whatever documents they have legal access to on their own immediately. So if your name is on the bank account and you’ve got online banking access, go download everything immediately just in case your spouse is sneaky and takes you off that bank account once the divorce is filed. So gather what you can and for what you don’t have legal access to. Very simple process of your attorney preparing a subpoena, sending that off to the bank, and the bank is legally required to give us the record.
Wes Moss [00:08:02]:
Well, what if you don’t even know what banks to ask?
Tracy Coenen [00:08:06]:
That’s an interesting concept. Of course, you probably have an idea of where your bank account is even if you don’t know a lot of information about it. So we start there, but then when I get into my investigation, typically there are clues to other banks that may exist. Now, I do ask my clients, think about banks that your spouse ever talked about. Or can you remember? We applied for a mortgage from this bank, and we didn’t take that mortgage but maybe there’s a relationship there so we can sense strategically if we have some information in hand that suggests there could be an account at that bank.
Wes Moss [00:08:42]:
Do you remember your husband flying back and forth to Switzerland?
Tracy Coenen [00:08:47]:
People think about that kind of stuff. I get asked all the time about hiding money overseas. And quite frankly, unless you’re wealthy, that’s probably not a concern. There’s a lot that goes into that Swiss bank account, and if you’re kind of the average Joe, it’s just not going to happen. So it’s usually not a concern. And also, if you do have an account that is secretly overseas, we usually will find some sort of clues to that. And so when you’re talking about finding these hidden bank accounts, when I am going through all these bank records, sometimes I find clues. I’ll find a transfer to a bank that you never knew you did business with before, and there’s usually some sort of paper trail so we can find it.
Wes Moss [00:09:30]:
So once you start to get into the documents, by the way, do you do this, Tracy, through statements, or are you going online and actually looking through? How do you typically do it?
Tracy Coenen [00:09:42]:
It’s really with the statements, and we can get them either paper or digital format, it doesn’t matter. But I’m taking those statements, getting all the transactions off the statements into a database and looking line by line.
Wes Moss [00:09:56]:
How often are you brought into a case where somebody, maybe the spouse, thinks that there’s some sort of money movement and there isn’t? Or is it super prevalent that it happens, like, all the time?
Tracy Coenen [00:10:08]:
By the time someone gets to me, they’re pretty certain that something has gone wrong. So my client base really isn’t a good litmus test for society as a whole. I will tell you, though, there are cases that I have worked on where I have gone through everything and in the end said, it’s all accounted for and I find nothing that gives me pause. Now, I can’t give them a 100% guarantee that nothing is wrong, but I can say, I’ve been doing this for 25 years, and in my experience, what I’ve seen here is very normal, and I haven’t found any missing money.
Wes Moss [00:10:42]:
All right, so then we think about what are the maybe the red flags? If you’re going through a divorce and you start to see maybe what is a red flag that you would start suspecting, what kind of behavior would we be saying, wait a minute, maybe there’s more money to be split up.
Tracy Coenen [00:11:02]:
I would look for things like a change in behavior. So a big change. Maybe the person becomes more controlling over the money or controlling over how you spend, controlling access to information about the finances. Those are usually pretty good tip offs when they’re becoming more secretive about the money or secretive of their whereabouts or the phone. I like to say if you have the spouse who always came in the house at the end of the work day and set their phone on the kitchen counter and you went about your business and had dinner and did your watch to TV program at night and all those kinds of things and the phone sat there on the counter and then all of a sudden one day your spouse started coming home from work and that phone never left his or her side even when they went to the bathroom and all those things. Right. That kind of change in behavior would make me suspicious that potentially there’s an affair. Affairs are expensive. The spending has to be hidden. All of those things make it really ripe for there to be something funny going on with the money.
Wes Moss [00:12:09]:
So the behavior can not only identify an affair, but you could also do it in reverse where you’re seeing, well, where’s all this spending going that can then identify that there was also an affair. Has it worked that way as well? Have you ever figured out that there was an affair?
Tracy Coenen [00:12:24]:
For sure. Yeah, we’ve seen it go both ways. Absolutely. And it’s heartbreaking for my clients, right. It’s heartbreaking for me to have to tell them, here’s what I’m seeing. But in I think most cases, they’ve already had suspicions, and this is really just confirming it.
Wes Moss [00:12:42]:
Yeah. So what about with social media? Do you use social media as well to figure this stuff out?
Tracy Coenen [00:12:48]:
We do use social media. Not as often as maybe we’d like, because I think social media is really something that exposes things about relationships. It doesn’t always expose things about the money, except for one really good case that I do call the Instagram investigation.
Wes Moss [00:13:08]:
Oh, come on. You got to tell me.
Tracy Coenen [00:13:11]:
It’s true. I had a client. She and her husband separated, and he got a young girlfriend. There was not a suspicion that he was dating this woman during their marriage. But the wife was upset about this girlfriend, and she said he’s spending all this money on her, and that money is half mine. And she wasn’t wrong. It was half mine.
Wes Moss [00:13:30]:
Wait a minute. I thought that they had already been divorced.
Tracy Coenen [00:13:33]:
No, they were just separated. They weren’t yet divorced.
Wes Moss [00:13:36]:
Separated, but not divorced. And then online, the husband, you’re saying, was posting pictures with his new girlfriend while separated?
Tracy Coenen [00:13:46]:
Well, he wasn’t posting anything. The girlfriend was posting things, but she wasn’t posting pictures with him. So they were kind of smart about it. No pictures of them online together. But the girlfriend wasn’t a secret. The wife knew about the girlfriend. What she was upset about was all the money that was going out the door for this girlfriend. Leasing a car, paying for an apartment, expensive handbags and jewelry and dinners out and all these things. But he denied that any of this was for her. We tried to find out. Does she have a credit card? On your account, because we’re looking at some of these spending patterns, and it looks like a woman is doing some shopping. He denied that she had a credit card on his account. The credit card company denied that she had a credit card on his account. And then one day, I was looking at the girlfriend’s Instagram account and realizing that what she liked to do was take pictures on her shopping trips. Here I am standing outside the Fendi store with a handbag tag the store. So I’ve got the date, the store, and I went and looked at the credit card statement, and there you go. There’s Fendi. And then right after that, she went to fancy lunch at a restaurant, tagged the restaurant, picture of herself. I look at the credit card statement. There’s the restaurant. It was great. When all was said and done, I had $400,000 of spending.
Wes Moss [00:15:11]:
Holy so was this a really wealthy client as well?
Tracy Coenen [00:15:15]:
Okay, there was a good deal of wealth there.
Wes Moss [00:15:19]:
Yeah. $400,000 on a girlfriend. And it’s funny. Here I am, we’re looking at these stories as almost this mystery, or we’re watching this as a Netflix special, and it’s exciting, but in your world, it’s kind of sad, right? You’re telling your client that, yeah, actually, you’ve got these these are their affairs. This is money going to somebody else. But in this particular case, Tracy, that was then reaccounted for, I suspect, when they ultimately were divorced.
Tracy Coenen [00:15:49]:
That’s right. So half of that was the wife’s money. Really, $200,000 of that had to be credited back to her. And certainly that’s a negotiation point when they’re trying to settle everything. And I suppose nobody’s going to cry too much about my client, who is going to get millions of dollars coming out of this divorce. But as far as I’m concerned, half of that was hers. And until they were divorced and divvying up the money, it’s marital property.
Wes Moss [00:16:21]:
Full disclosure, I am affiliated with Capital Investment Advisors, which is a full service and a fee only financial planning and investment management firm in Atlanta and Denver and Tampa and Phoenix or wherever you are. And if you’d like to take your retirement planning or retire sooner, journey to the next level, Capital Investment Advisors would love to help you can find our team and schedule a time to chat. Write at yourwealth.com. So you’ve husband and wife. We’ve already talked about a separation phase, which is obviously different than, I guess, a divorce phase when it’s you’re getting a divorce. Well, when you’re getting a divorce, that in itself could take a good what, year? Or two years, easily.
Tracy Coenen [00:17:08]:
Sometimes three years, four years, depending on how contentious it is. Sure.
Wes Moss [00:17:13]:
So the question then would be, when do you start confronting your spouse on these issues? I guess would it be during the separation? Once you’ve already got attorneys involved and you’re already head to head and it’s a divorce when do you bring it up?
Tracy Coenen [00:17:30]:
It’s really situationally specific. What I do suggest to people is that they gather information, again, going back to getting those bank statements and credit card statements, income tax returns, if you have legal access to those, get copies for yourself, secure them so they can’t disappear, and then start asking questions. Of course, I suggest asking the questions in as non confrontational of a way as possible. That’s not always possible. By the time there are all of these suspicions, I think there probably is pretty good chance that things are argumentative and contentious. Right.
Wes Moss [00:18:11]:
What would be a typical example? And again, you said you’re not typically brought in until there’s already kind of a high suspicion here, but what would be a typical example of what one of the spouses would do? Is it, hey, I’ve got $3 million, but I want to put up a million over somewhere? Is it less than that? Or what is your typical trying to either hide or maybe what about maybe spending on other things that maybe only benefit one party, if you will. You see what I’m saying?
Tracy Coenen [00:18:43]:
What I typically see is people siphoning off money little by little. Okay. Depending on your level of wealth, it might be the $500 withdrawal from the ATM repeatedly that sort of disappears, or it might be a $5,000 cash withdrawal from the bank account that disappears into thin air, things like that. Over time, someone building up a stash of money off to the side is what I see most commonly.
Wes Moss [00:19:15]:
And what are some of the typical time frames? Is that saying that the spouse that’s doing that is just preparing for this? And how long do they do that for?
Tracy Coenen [00:19:24]:
What I see is often that that goes on for a year or two. I typically, in my investigations, go back three to five years, depending on the circumstances. I would say three is probably most common. It’s long enough for us to get a history of what’s been going on, but not so long that it bankrupts my client in trying to pay the fees for the work. So three years is pretty typical. And I think usually when I’m looking at these cases, what we see is going back the first year back or second. That’s kind of where it starts. When you get back to three years, not as usual, to see it going back that far. Certainly there are cases where this has been a long standing thing in a marriage where someone’s been salting away money for ten or 20 years. But many of the cases, it is a much more recent issue.
Wes Moss [00:20:11]:
Well, so wait, you have seen some of these that have gone on that long over ten years?
Tracy Coenen [00:20:16]:
Absolutely, we can see. One of the difficulties is that banks only keep records for seven years. So it’s hard to go back beyond that unless a client has been keeping their own records. There are people who keep copies of bank statements for 10, 15 years. Yes. So that’s really helpful in these cases where we think the problem may go further back. And the way that we approach it is I will start with that three to five year period. And if we see that this kind of behavior with the money goes all the way back, then we might go back five more years and see what we find and just kind of keep working our way back until we decide that it’s no longer worth it to keep going.
Wes Moss [00:20:55]:
And is it just the same intent for everybody? It’s just, hey, once we get divorced, if this money is in some other place, then I don’t have to split it. Is that pretty much the only intent?
Tracy Coenen [00:21:09]:
Right? Absolutely. I think that’s the only intent. I suppose there are the cases well, of course, cases where someone has the affair or the addiction, the secret spending that they don’t want to disclose, of course, would be the other big reason why. So it’s either, let’s get a pile of money that I get to keep all for myself, or we’ve had a pattern of secret spending.
Wes Moss [00:21:30]:
Yeah. Okay. So how often has that shown up? And is that pretty easy to figure out if you’ve got some sort of gambling problem or maybe let’s walk through some of those gambling or maybe addiction problems as well, those kinds of things.
Tracy Coenen [00:21:45]:
The other type of thing that I see is the secret credit card. I like to say maybe in many families, there’s one main bank account and there’s one main credit card. So let’s say you’ve got your credit card, Citibank, and you, as the spouse who’s not in control of money, maybe see a credit card statement every so often. Or see a bank statement every so often. You see that Citibank is being paid. Yes. You know, that’s our credit card and that looks normal to you, doesn’t raise any red flags. What you might not have realized is Citibank might be paid twice every month, but you wouldn’t pay attention to that. Why might they be paid twice every month? Because there might be a second credit card at Citibank that’s being paid that your spouse said, well, if I have another card at Citibank, my spouse won’t get suspicious when they see Citibank is being paid. There’s so many ways to do it.
Wes Moss [00:22:34]:
Wes okay, give us another way. Give us another way to do this.
Tracy Coenen [00:22:40]:
Oh, what can I think of that’s? A good one. It’s so simple.
Wes Moss [00:22:47]:
We’re informing spouses that are trying to do this in a very sneaky way. Are we allowed to do this here on the show?
Tracy Coenen [00:22:53]:
Well, that’s just it. Sometimes people want to hear about things like this, and it’s like, please don’t go use don’t reverse engineer me to use it against your spouse and try to hide money. Let’s see. We’ve talked about the withdrawals, right? And we’ve talked about the secret bank account. We’ve talked about the second credit card, the ATM withdrawals. So when I ask people why you never used the ATM before, but now you’ve started going there regularly a couple of times a week, what’s going on? Response is typically, oh, I was using that to put gas in the car or buy groceries. And I’m saying, but I still see you using the debit card for gas and groceries. So where did the cash really go?
Wes Moss [00:23:37]:
And again, that would be cash that people that just end up opening some other bank account and putting it in there.
Tracy Coenen [00:23:43]:
Either that or the secret spending or even I mean, I have been involved in cases where there’s been a duffel bag with piles of cash in it hidden somewhere.
Wes Moss [00:23:54]:
Wow. Yeah. So somebody just keeping the physical cash.
Tracy Coenen [00:23:58]:
Right. Because there’s no paper trail. There there’s no risk. There’s almost no risk of us finding that duffel bag. Right, but you did.
Wes Moss [00:24:08]:
You guys found the duffel bag. How’d you find it?
Tracy Coenen [00:24:10]:
Fair enough. I don’t know how wife found it. I don’t recall. And it’s not only husbands that do this. Let us be clear.
Wes Moss [00:24:20]:
Let’s turn the tables here. What have you seen that I don’t know why we always say that’s men that do this, but from a wife perspective or is it pretty much the same? Is it pretty similar patterns?
Tracy Coenen [00:24:31]:
It’s a lot of similar patterns, but let’s flip this a little bit to a positive so we’re going to talk about flipping the gender roles, and we’re also going to flip it a little bit to a more positive thing, because right now I feel like Oprah. You have fraud. You have fraud. Right. So I last year worked on a case. My client was the husband, and he had been a stay at home dad for about 15 years. His wife was a physician, and she made anywhere from a million to $2 million a year, depending on what her caseload was and what her bonus structure was. They were getting divorced, and she said, thank you very much. I am going to pay you $2,000 a month for the next two years for support, spousal support, and then you’re going to be done, and you’re going to go away. And he said, Well, I don’t think that sounds quite fair. We’ve been married for 15 years. I gave up my career to raise our children. And you’re making a million to $2 million a year. I think I probably deserve more support than that than $2,000 a month and for a longer period. And she said, oh, no, you don’t. You know why? Because you have been hiding a bunch of money. So go live off of that. And he said, hiding money. What are you talking about? She said, well, we don’t really have a whole lot in any investment accounts or bank accounts right now. You certainly must be hiding money. He said, well, no, I wasn’t hiding money. What I was doing remember when you wanted that house two states over and we went and bought that house, and then a couple of years later, you changed your mind and didn’t want it, and we sold it for a loss. And then we did that again, and he said, our lifestyle has eaten up all our money. I was hired to come in to do two things to prove the negative that he wasn’t hiding money and to help make his case for what her income was so that he could go in front of a judge and ask for proper spousal support.
Wes Moss [00:26:14]:
Okay, so you were there to prove that because they didn’t. So you’re telling okay, so this story here wife is making a million to $2 million, and there weren’t really a lot of assets to split, right? It was the husband saying, I should be getting a fair amount of money every month based on your income. And she said, no, I’m only going to do two grand a month. Is she making a couple of million bucks a year?
Tracy Coenen [00:26:38]:
Right.
Wes Moss [00:26:39]:
Was that based on child support or is that based on spouse?
Tracy Coenen [00:26:42]:
That was going to be all in.
Wes Moss [00:26:43]:
Wow, that’s aggressive.
Tracy Coenen [00:26:46]:
It’s very aggressive. But you know what? When gender roles are reversed, we see this all the time. The husband who is making the big money, who holds the purse strings, is saying, I’m not going to give you hardly anything in support. Too bad.
Wes Moss [00:26:58]:
Go get a job, maybe. Fair point.
Tracy Coenen [00:27:02]:
So it was really interesting to have the roles reversed here.
Wes Moss [00:27:06]:
So what happened there? You had to prove that essentially, how could we not have any money? And you said, well, the husband essentially said, we’ve either spent it or we’ve lost it in investments. And she said, Prove it.
Tracy Coenen [00:27:20]:
Yes. Which sounds ridiculous, right? Because they had been, in the course of the divorce, had been saying, well, you’re saying he was stealing money. Can you be more specific? And the answer was, no, we can’t be more specific. So I went in, and basically what I did was for the last three years, I looked at all the money that she made that came into the house, and then I was able to document every bit of spending, all the money that was going out of the house, so we could see there was the purchase of the house. None of this money was unaccounted for.
Wes Moss [00:27:53]:
Wow.
Tracy Coenen [00:27:54]:
The bottom line.
Wes Moss [00:27:55]:
Okay, so what about is there any sort of ironclad way to ensure that your partner is not hiding anything? Or is it really just about communication and trust? Except when you’re starting to get divorced, the communication and trust goes away.
Tracy Coenen [00:28:13]:
The best way that you can protect yourself is by keeping an eye on things on an ongoing basis. So be informed every single month, take a look at those statements. Keep an eye on it. I have tips. And techniques for what you want to look for every month and things like that. And if you are staying informed and your spouse knows you’re staying informed, it’s less likely that they’re going to do something. It’s those scenarios where someone is not participating at all in the financial process.
Wes Moss [00:28:44]:
Totally head in the sand.
Tracy Coenen [00:28:45]:
Right. And the person holding the purse strings knows this and knows, gosh, I can do whatever I want. My spouse was never going to know about what I’ve done.
Wes Moss [00:28:54]:
Divorce Money Guide this is something that you’ve written, are there? Give us a little bit of a preview on the Divorce Money Guide and some of the things that you’re walking through for folks.
Tracy Coenen [00:29:06]:
The Divorce Money Guide is an online handbook for people who are in the process of divorce. It is very heavily video based in.
Wes Moss [00:29:14]:
The process in the process of so once you’re thinking about it, actually, if.
Tracy Coenen [00:29:18]:
You’re thinking about it, let’s say you have concerns about the money, you’re in the decision process. I don’t know if I want to stay with my spouse or not, but if that money issue is a big deal for you and it might help sway that decision one way or another and you want to become informed about your finances, certainly the Divorce Money Guide is going to help you with that. So videos, written materials, worksheets, checklists that basically walk you through the process of what’s going to go on in the financial part of your divorce. What financial documents do you need for this divorce process? How do you get them and what do you look for in them once you have them? And what you’re looking for is a to get an understanding of how your money was spent, but then B, as you’re learning how your money was spent, how to identify transactions or hints that there has been money that’s disappearing.
Wes Moss [00:30:08]:
Yeah. Again, you would think a lot of American families, you would think they talk about, hey, here’s what I have in retirement and here’s what you have in retirement. But the reality here, and I think the reality here is that just not everybody talks about money. In fact, it’s probably maybe the exception. The happy retiree talks about money, but there’s not as many happy retirees as we’d like. Right. And you have families that just don’t want to talk about money. It’s a tough subject and it seems like it gets to be really uncomfortable if one of the spouses is trying to siphon money somewhere else off to some sort of duffel bag.
Tracy Coenen [00:30:44]:
Well, it can get really uncomfortable, especially if you have always in your marriage had a division of duties where one spouse took care of the money and not a lot of questions were asked. This is very typical. So I work a lot with women. I see a lot of them come to me feeling ashamed because they weren’t actively involved with the money. And now they’re in a position of being concerned that some money has been siphoned off or hidden. And I tell them there’s nothing to be ashamed about. This is how most marriage work, where one spouse takes care of the money. And you don’t have to be ashamed. The point is that we want to get information now. And if you are in a marriage where your spouse has been holding all the information and controlling all the money and you want to change that because you want information, I suggest doing things like saying, hey, I’m concerned. What if something happened to you? What if you got into a car accident and you’re in a coma? What if you unexpectedly died? I don’t know where our money is. I don’t know what’s on automatic payments. I don’t know how much we’ve got in the accounts. I want to get an understanding of what’s going on with our money and where it is so that I wouldn’t have to worry about that issue as I am in the hospital with you or grieving your death.
Wes Moss [00:31:59]:
It is a tip, and that’s one of your steps in the Divorce Money Guide. But it’s normal best practice that we should all be asking anyway, right? If my wife asked me that today, I’d be like, oh, my God, you’re thinking about getting divorced, and you just listen to Tracy Coenen. But if we hadn’t done this interview today, I would say, look, about a month ago, I got hit in the head with a speaker doing a speaking event, right? I was at a podium, and it was outside, and it blew over, and it obviously didn’t kill me. I’m fine. But I had a concussion. It could have if I’d been maybe, like 3ft further away, the momentum would have been really bad.
Tracy Coenen [00:32:40]:
Wes, I want you to know that you’re going to have a whole bunch of attorneys calling you. Now.
Wes Moss [00:32:43]:
Don’t you know that I got a free dinner out of it and they paid for a big chunk of the event. They were freaked out about it. The venue was pretty freaked out, and they called me like 18 times. One time I was in the ER. I was like, Actually, I’m getting a CAT scan on my head. That freaked him out even more. I got a free dinner out of it.
Tracy Coenen [00:33:05]:
Wow.
Wes Moss [00:33:06]:
Order anything you want. I was like, I want the seafood tower. Right? I want the seafood tower. Anyway, my point here is that that’s the right question that any spouse should be asking. It’s like, hey, I want to make sure where are the main bank accounts? And then that’s a great question, is, hey, where are all the auto payments? Because everything is so crazy automated that I almost don’t even think about it anymore because it’s been on auto for so long, let alone a spouse. And in an automated world, it’s easy to kind of lose track of a lot of different things payment wise, and then that’s a disaster if something happens to one of the spouses.
Tracy Coenen [00:33:46]:
Well, I’ve had people say, I did the song and dance with my spouse and said, I want to know where our money is. I want to make sure that the mortgage can be paid. And the response has been, don’t worry about it. It’s all on auto pay. Well, guess what? At some point, the money runs out, even if it is on auto pay. So I still need to know. And of course, I don’t want to discount that. There are family situations, maybe abusive situations, where one spouse would not even be able to ask a question like this, would not even be able to suggest I need information because it could put them at risk or at danger. I understand that. I don’t want to minimize that. This is simply one technique that I know in many relationships is possible to ask and use.
Wes Moss [00:34:28]:
Yeah, I think it’s a really good point. You’re right. There are marriages where that’s almost an unsafe issue. They’re probably better off getting a divorce and then bringing somebody like you in so that they don’t have to deal with that conflict. And I guess that’s another way to look at this, right? If you don’t want to deal with a conflict, you end up getting divorced. We could always know. You could bring someone like you, Tracy, in that’s forensic that can make sure that everything’s accounted for. You have a story about someone paying for school for someone. I wanted to hear about that. If someone was paying for some sort of graduate type school.
Tracy Coenen [00:35:05]:
I don’t have a lot of details. So it is someone who used the Divorce Money Guide to go through their finances. And the short of it, Wes? The husband had a secret bank account that the wife didn’t know about and was taking part of the paychecks every month and putting them in the secret bank account. So enough was going into their main checking account that she never would have noticed, never got suspicious. She ended up finding out that part of his paycheck was going into this secret account. When she finally got access to that secret account through the divorce process, what we saw were, like, cash app type of payments on a repeating basis. And when we got down to the bottom of it, it was $501,000 going to his girlfriend at a time. And then the wife found out she was in nursing school, and she said, oh, gosh, so my husband was paying for her to go to nursing school.
Wes Moss [00:36:03]:
All right, so what about second marriages, Tracy? What about second marriage? Please tell me you don’t have clients that have come back a second time and needing to figure out forensics.
Tracy Coenen [00:36:14]:
I have never had repeat clients on the divorce side. But now that you said that, maybe that’s a goal I should have before the end of my career. Second marriages do get really interesting though, especially if you both have children of your own and you want to protect them financially. There are interesting issues. You might want to give your child a car when they become of the age of driving and your new spouse may say, hey, I don’t want my kids to have a car, I want them to earn their own car. Really interesting issues. Which is why I’ve put together the Marriage Money Guide to help people address some of these financial issues as they are going into marriage, especially second marriages.
Wes Moss [00:36:55]:
You have the Marriage Money Guide, and then you have the Divorce Money Guide.
Tracy Coenen [00:37:01]:
And I also have the Post Divorce Money Guide. I mean, as long as we’re throwing it all out there, we recently released the Post Divorce Money Guide as well. So all those things that you need to do after your divorce is final to protect yourself legally and financially. So we’ve got ten steps again, videos, worksheets, those kinds of things. But I’ve got a checklist of 30 things that you have to think about doing after your divorce is final. All those things that nobody ever give.
Wes Moss [00:37:28]:
Give me a couple of examples. I’m very interested.
Tracy Coenen [00:37:31]:
Change the beneficiary in your life insurance policies. You don’t want your ex husband or ex wife getting the life insurance if you pass away tomorrow, right? Changing your will, double checking whose names are on your auto insurance policies. But let me talk about the most important thing, and it is all about locking down your credit. So if you had credit cards or loans together, making sure that your name is no longer on accounts, making sure that your ex’s name is no longer on accounts that you control. And really my best advice there is closing those credit cards altogether and opening brand new ones in your name only if that’s possible. And there are certainly some considerations there and it’s not always as easy as I make it sound to get new credit cards, but if that’s an option, that’s the best way.
Wes Moss [00:38:22]:
I want to know about Marriage Money Guide if you’re a newlywed, what should you be talking about? Give me the same three main things you should be talking about with your fiance or new wife.
Tracy Coenen [00:38:36]:
Right. So the first thing you’re going to talk about is how are we going to manage our money? And I give three options, three basic options. Of course, there’s all sorts of different things you could do, but if you looked at it on a very basic level, you could combine all your money, manage it all together, you could keep your money completely separate. I’ve got mine, my income, and I spend it on my things. You’ve got your income, you spend it on your things. Or we could do something kind of in the middle where we combine some of our funds but keep some separate. So it’s deciding how you want to do that and how you’re going to manage it. The second big thing to talk about is budgeting. How much we’re going to spend on things. So that includes not only the house and the cars and the groceries, but also our hobbies. How much does that hobby of yours cost? So that I know what to be prepared for and so that I can plan my own hobbies accordingly.
Wes Moss [00:39:29]:
My hobby is gardening, which includes buying seeds and some fertilizer. Your hobby is speedboat racing? Like maybe a little lopsided.
Tracy Coenen [00:39:39]:
Well, my hobby is the thing that I spend an obnoxious amount of money on is my hair and my nails.
Wes Moss [00:39:45]:
Well, I haven’t seen your nails, but if you’re listening to this, hopefully if you’re on YouTube, you’d see you do have awesome hair.
Tracy Coenen [00:39:52]:
Thank you on it. That was something that my spouse had to be prepared for as we were heading into marriage. So the budgeting is really important. And the third big thing, because you asked for three tips my third big thing is that we go into this marriage with an agreement that no matter what we’ve decided about how we’re handling our money or how much we’re spending on various things, that it can always be discussed again, that no decision is permanent. Because once we get into the marriage and we start managing the money the way we’ve agreed, we might find out it doesn’t work as well for us as we thought it would. Let’s come back together and talk about it. I do actually even recommend having monthly chats about the money so that on a routine basis we’re reassessing. Does this still work?
Wes Moss [00:40:41]:
I’ve always wondered about prenuptial agreements, and I wonder how helpful are they? Or do they help when you’re going through some sort of divorce?
Tracy Coenen [00:40:50]:
From a financial perspective, it actually is very helpful, because what the prenup does is it tells the judge how we intend to separate our finances. So some people say prenups are bad because it is like you’re preparing to have a divorce. And I say, no. A prenup is a contract that says if, God forbid we ever get divorced, here’s how we’re going to divide the money and here’s what we’re going to do with our finances. It is a fantastic way to take control of how things get divided, rather than being at the mercy of the court or the mercy of something that the lawmakers did.
Wes Moss [00:41:30]:
Particularly, though I would think maybe Tracy, where you’ve seen these, they’re almost I don’t know of any newlyweds, let’s say, that are both in their 20s that get prenups. Right. That doesn’t usually happen, but it’s typically for second marriages, right?
Tracy Coenen [00:41:44]:
It is a lot of times, because, again, there might be children involved. We want to protect their interests. We want to make sure that things go right with the money there. I do think it’s more typical to see a prenup when the people getting married are older. I think that’s really the more typical thing because you’re right, it is different if we’re getting married in our early 20s versus if we’re getting married in our forties and maybe one of the spouses has accumulated a little bit of wealth and the other hasn’t.
Wes Moss [00:42:13]:
Yeah, well, and I love your point, though, about, God forbid, if this happens, we’re making these decisions today as opposed to letting some court or judge wrangle around these financial decisions in the middle of a divorce, which is already so messy.
Tracy Coenen [00:42:29]:
Well, and it’s much better to agree on what happens with the money when we’re all getting along versus by the time we’re all bitter and arguing about everything anyway, then how are we going to agree on anything?
Wes Moss [00:42:43]:
What about a red flag? If we were headed into a new marriage, what could be is it going through year three steps about they don’t want to talk about a budget. They don’t want to talk about combining or not. What’s a red flag? As you’re getting married?
Tracy Coenen [00:42:58]:
I would look for things like secrecy about the money, because when we’re getting married, this should be the time where we’re kind of putting all our cards out on the table, and I would be worried about someone who has problematic spending patterns.
Wes Moss [00:43:11]:
The Fendi bag story tagging the Fendi bag. And then the fancy restaurant that you go to for lunch. That is a pretty cool story that you figured that out on Instagram.
Tracy Coenen [00:43:22]:
It was fun.
Wes Moss [00:43:24]:
By the way, that was a couple. They never posted together.
Tracy Coenen [00:43:27]:
Never.
Wes Moss [00:43:27]:
You just knew, okay.
Tracy Coenen [00:43:31]:
Girlfriend, right?
Wes Moss [00:43:35]:
Trying to be smart, but it didn’t work. Not so smart after all. Tell me about I’m curious about your main amount of time. Is it case by case? When I see CPA, I think taxes. But you’re not doing taxes. You’re doing these are projects that you will do, correct?
Tracy Coenen [00:43:54]:
You’re right. I don’t do any taxes. I don’t do any traditional accounting services. Everything that I do is project based. My clients are attorneys who come to me on behalf of their clients who are getting divorced or who are running companies that have been defrauded and things of this nature. Earlier this year, I came up with the idea for the money guides because I was looking for an option. I would have people call me regarding their divorces who were in a position where they couldn’t afford a forensic accountant or it didn’t make sense to spend the money on a forensic accountant. And I was frustrated because there was no option for them, there was no product, no guide out there to help them sort out the money. So I said, why don’t I build this? And then as I was developing the Divorce Money Guide, I thought, gosh, we could actually head off a lot of problems if people were more informed as they went into marriage about how to talk about money, about those red flags to look for in their marriage to figure out if their spouse might be hiding money. And so the whole concept kind of developed from there. So the money guides are really a new thing for me that’s now the product side of my business. But it is a much smaller piece of my business, of course, than the consulting side is.
Wes Moss [00:45:10]:
You are the Oprah of forensic accounting. You are. But in a good way. I would say in a good way.
Tracy Coenen [00:45:17]:
Wes one of the things that I want people to understand is I’m not trying to scare everyone. I’m not trying to get everyone super paranoid about their marriages, about their divorces. And one of the things that I see in these situations is that the spouse who hasn’t been in control of the money might have some questions, but then might wonder, well, am I just being paranoid? They don’t know how to objectively evaluate what they’re seeing. Is this a red flag or is it not? Is it super important? Super bad? Is it not? So I created an assessment that people could take 15 questions. Have you seen this? How does your family manage money? What is the reaction when you say this? They can answer these questions, and the result that they get is my objective assessment of how likely it is that there is financial fraud in their marriage.
Wes Moss [00:46:10]:
Oh, so you actually have a questionnaire that’ll kind of give a score.
Tracy Coenen [00:46:14]:
Yes, the Red Flag Assessment.
Wes Moss [00:46:18]:
I like that. What website is this on?
Tracy Coenen [00:46:21]:
This is on my website. Fraudcoach.com. We can put a link in the show. Notes to the Red Flag Assessment is linked at the very top of the page, but you can find it at fraudcoach.com /redflag.
Wes Moss [00:46:35]:
See? That’s cool. So, fraud coach. You’re the ultimate fraud coach. I think I like that better. The oprah forensic accounting. And last thing, and this is really what I should have asked you first, but I always ask people their favorite places to go in the world, travel wise because travel is a top three hobby for the happy retiree. And so my question first is where’s your favorite place to travel in Michigan?
Tracy Coenen [00:46:56]:
I’ve only been to Michigan a couple of times.
Wes Moss [00:47:01]:
Wait.
Tracy Coenen [00:47:01]:
Where’s?
Wes Moss [00:47:01]:
Marquette. Isn’t Marquette, Michigan?
Tracy Coenen [00:47:06]:
Yes, Marquette University is in Milwaukee, Wisconsin. There is a city called Marquette, Michigan. It is in the Upper Peninsula. So you’re not incorrect in that. You’re not completely off base.
Wes Moss [00:47:16]:
Oh, wait a minute. But hold on, though. Wait, but all these wait, so Marquette, the school, is in Marquette, Wisconsin?
Tracy Coenen [00:47:24]:
No, Milwaukee, Wisconsin. Marquette University is in Milwaukee, Wisconsin.
Wes Moss [00:47:29]:
And Marquette is in the up of the Upper Peninsula of Michigan as well. So there’s one’s a school and one is a city.
Tracy Coenen [00:47:37]:
Yes. Do we have to edit that whole thing out now?
Wes Moss [00:47:39]:
Yeah, but hold on. But no, actually, because I ask everybody what their favorite place to travel in Michigan is because I think it’s the most underrated state in the United States. And people are like, what? Why would I go to Michigan? Or they say, I love Michigan, and I’m the dumb one here because I thought Marquette was actually in Michigan. It is, but the school is not right. So that’s just educational for our listener. How about travel in the world? Where’s your favorite place to travel in the world?
Tracy Coenen [00:48:11]:
My favorite city in the entire world drumroll. Barcelona.
Wes Moss [00:48:17]:
Nobody’s going to argue with that one.
Tracy Coenen [00:48:18]:
That’s a pretty barcelona is amazing.
Wes Moss [00:48:22]:
Have you spent a lot of time there or have you just like I’ve.
Tracy Coenen [00:48:25]:
Been there a couple of times. I have a goal of living there for a month sometime in the next few years. Yeah, I have this plan. I want to go to different cities and live in each of them for a month.
Wes Moss [00:48:42]:
That’s kind of a cool idea. A month at a time, and then maybe pick long term retirement wise. No. Where are you now, by the way? Where do you live now?
Tracy Coenen [00:48:53]:
So I live in Milwaukee, Wisconsin.
Wes Moss [00:48:55]:
You stayed? You stayed?
Tracy Coenen [00:48:57]:
I did.
Wes Moss [00:48:58]:
And the slight accent you had would just be you would call that a Midwestern.
Tracy Coenen [00:49:05]:
I think that we have a special accent that goes way back to the Norwegians. If you ever visit Minnesota or Wisconsin, you definitely hear a sort of accent that we get made fun of for a lot.
Wes Moss [00:49:19]:
Well, my wife is from Michigan, so she has a little bit of a Michigan accent, and her sister has a really heavy, heavy Michigan accent. I don’t know how they grew up in the same house, so I’m a big fan of the Midwestern accents. By the way, I did a semester abroad. I lived in Seville or Sevilla in southern Spain for five or four months.
Tracy Coenen [00:49:45]:
Are you fluent in Spanish?
Wes Moss [00:49:47]:
No, literally, one of my kids, my 7th grader the other day asked me, they’re like, what did you study? I was like, well, it’s pretty just Spanish. And he goes, well, why isn’t your Spanish better? And I was like, I didn’t really study all that much when I was there. That is the prototypical. I even went to the Universad de Sevilla, and I still my Spanish. Listen, my Spanish got to be pretty okay, actually. By the end of the fourth month, I always think if I would have stayed about eight and it would have been much closer to fluent. And I live with guys from Italy and America, so I left my host family after the first week, and I ended up getting these roommates from Italy and the United States, and it just killed my Spanish.
Tracy Coenen [00:50:36]:
Wow, you didn’t follow protocol.
Wes Moss [00:50:39]:
No, I left my Spanish family after one week, and I answered an ad that was in the university from a couple of guys looking for a roommate. And I was like, These guys are so fun. And they thought I was great from America. And it was a real hit on my Spanish, but it was still fun. Tracy Coenen thank you so much for this.
Tracy Coenen [00:50:59]:
Hey, y’all.
Mallory Boggs [00:51:00]:
This is Mallory with the retire Sooner team. Please be sure to rate and subscribe to this podcast and share it with a friend. If you have any questions, you can find us@westmoss.com. That’s wesmoss.com. You can also follow us on Instagram and YouTube. You’ll find us under the handle Retire Soonerpodcast. And now for our show’s. Disclosure this podcast is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. It is not intended to and should not form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment or financial planning considerations. Please refer to the full disclosure in the podcast description for any additional information. Call in with your financial questions for Wes to answer: 800-805-6301Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcastThis information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #158 – Navigating Financial Fraud In Marriage With Tracy Coenen appeared first on Wes Moss.
The Federal Reserve (The Fed) spends endless hours worrying about inflation, and analysts on Wall Street spend just as much time reacting to whatever actions the Fed takes. Regular folks on Main Street might not have their eyes glued to actual inflation figures, but they do closely scrutinize the prices they see all around them. For them, the question is less about when rates will return to 1, 2, or 3 percent, but when will the cost of groceries or gasoline stop eating away at their family budget?
If we can get the inflation rate under control, as many recent signs suggest is starting to occur, what happens next? Those who follow the news closely know that many in the financial world, including some at the Fed, are predicting the likelihood of a recession.
If it sounds like doom and gloom, don’t fret. As investors, we have permission to ignore economic forecasts. Permission from whom, you might ask? From the Oracle of Omaha himself, Warren Buffett. As referrals go, it doesn’t get much better.
“I don’t pay any attention to what economists say, frankly,” Buffett once said in a CNBC interview. “Well, think about it. You have all these economists with 160 IQs that spend their life studying it, can you name me one super-wealthy economist that’s ever made money out of securities? No.” He went on to add, “If you look at the whole history of [economists], they don’t make a lot of money buying and selling stocks, but people who buy and sell stocks listen to them. I have a little trouble with that.”
He didn’t become the chairman and CEO of Berkshire Hathaway and one of the wealthiest people in the world by not knowing how to invest, so whenever he speaks, I tend to listen. In this case, one of the words he used stood out to me — history.
Making money is hard, so it’s not surprising that once people have invested that hard-earned cash into retirement accounts, they feel highly anxious about stock market volatility. Anxiety is part of the human experience. It’s what kept our ancestors safe from danger. You can’t eradicate it, but you can learn to tame its adverse effects. While we can’t always look at the past to predict the future, we can use history as our guide. Zooming out to look at market history as a guide can be an effective strategy to help tune out scary economic forecasts.
The dream of a perfect investment plan is just that — a dream. People do win the lottery, but if it were a common occurrence, it wouldn’t be the lottery! If you allow a perfect plan to become the enemy of a good one, you’ll most likely regret it. Instead of focusing on the right time to get in, focus on how costly it can be to get out. The math behind the power of remaining fully invested is stunningly clear, and trusting the consistent trends that the statistics show is vital to long-term success as an investor.
I asked my research team to pull market timing data as evidence. The results show how damaging it can be to flee when times are tough.
Source: Strategas; Capital Investment Advisors
Looking back at the S&P 500 annual growth rate of return from January 1995 through December 31 of 2022 gives us nearly thirty years to study. The tumult of multiple bear markets and recessions still produced an average total annual rate of return of about 7.9 percent.
But what if an investor missed just a few of the best days in the market over that colossal period? Missing the five best ones cuts the rate of return from about 7.9 percent to 6.1 percent. Still a respectable number, but that’s a 23 percent reduction compared to the total per-year return you would have received if you had stayed fully invested. All because an investor got nervous and pulled money out for five trading days!
Bumping it up to missing the best ten days drops the rate of return down to 4.9 percent — a 38 percent decline. Missing the best twenty trading days lowers the overall return by 63 percent, bringing it down to 2.9 percent. Depressing, right?
At thirty days, the rate of return falls to 1.3 percent. Try forty days or fifty days. Now it’s in negative territory.
As you can see, just a snippet of time on the sidelines can lead to a bounty of missed opportunities. If your strategy is to enter and exit the market according to declines and rebounds, you can be asking for a world of dramatic, fretful moments.
And to borrow another quote from Mr. Buffett which I think is helpful these days for investors, he once said, “we will continue to ignore political and economic forecasts which are an expensive distraction for many investors and businessmen.”
The bottom line is that most investors are rewarded for staying invested in the stock market. It is often beneficial to remain invested in reliable, high-quality companies, diversify, remain calm, and practice self-control over substantial stretches. Economic forecasting makes for good headlines but oftentimes, retirees past, present, and future would be well served to ignore them when making investment decisions. When you find yourself drifting back toward the pull of the financial fortune tellers, remember the words of Warren Buffett, “If I depended in my life on economic forecasts, I don’t think I’d make any money.”
That is good enough for me. How about you?
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. For stocks paying dividends, dividends are not guaranteed, and can increase, decrease, or be eliminated without notice. Fixed-income securities involve interest rate, credit, inflation, and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed-income securities falls. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions,
The post Why Economic Forecasting Is Not Important to Investors appeared first on Wes Moss.
Do the dollars in your wallet seem to be wilting as prices increase?
In this episode, Wes Moss and Retire Sooner producer Mallory Boggs discuss the worth of a dollar and price volatility at every level of purchase power. Whether you noticed price increases for a bottle of soda or a new car, we’re all experiencing the impact of rising costs. First, Wes shares insights about the most recent Consumer Price Index (CPI) numbers, though he notes that those differ from what investors should consider looking at right now. Next, he explains the US economy’s inflation, deflation, and avenues for capital once you’ve saved enough emergency cash. Finally, Wes and Mallory wrap up the episode with a few final thoughts and good news for investors.
Read The Full Transcript From This Episode(click below to expand and read the full interview)
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- Wes Moss [00:00:00]:We are living in a period of wilting dollars. It’s really a conversation that we’re about to have around inflation. We keep hearing about inflation going up and egg prices higher and chicken prices higher, car prices higher, and housing prices higher. But what we don’t typically see, or don’t look at it in reverse, which is a much more powerful way to see how inflation is slowly but surely, and sometimes not so slowly, eviscerating the buying power of the dollars that are sitting in your wallet. Today we’ll talk about wilting dollars. It’s a problem we constantly face as investors. It is the very reason why we almost need to invest in order to get to retiree and outpace inflation so we can protect our purchasing power. That today right here on the Retire Sooner podcast. I’m Wes Moss. The prevailing thought in America is that you’ll never have enough money and it’s almost impossible to retire early. Actually, I think the opposite is true. For more than 20 years, I’ve been researching, studying, and advising American families, including those who started late, on how to retire sooner and happier. So my mission with the Retire Sooner podcast is to help a million people retire earlier while enjoying the adventure along the way. I’d love for you to be one of them. Let’s get started. Mallory, how are the dollars in your wallet? Are they wilting?Mallory Boggs [00:01:29]:You know, I would definitely describe them as not nearly as stiff, strong, and ready to spend as they used to be.Wes Moss [00:01:36]:Well, is it because of inflation?Mallory Boggs [00:01:40]:
Okay, listen. Example. I went to the zoo recently with some family and we went to go and buy Coca Cola out of the vending machine. Guess how much it was?
Wes Moss [00:01:49]:
Oh, it was probably like $3.
Mallory Boggs [00:01:51]:
It was like $3.75.
Wes Moss [00:01:53]:
Almost $5 for Coke.
Mallory Boggs [00:01:55]:
I was like, this is outrageous. I just want to drink a tasty beverage and you’re trying to charge me almost $5.
Wes Moss [00:02:02]:
So you used to be. And this is this concept of wilting dollars. It wasn’t that long ago that for a dollar, you throw a dollar in and you can get one of those big 16 ounce bottles. Today your dollar only gets you a third of a Coca Cola. Not even one quarter. Almost just one quarter. And this is how we’re going to look at this today. Your soda dollars. In this specific year, your vending machine soda dollars are really only worth about twenty five cents. And that’s how we’re going to look at inflation today. I want us to imagine, as you’re listening to the podcast today, that every dollar in your whole entire budget is specifically dollars for a particular need. So if you want to go buy a car, you’ve got to go use your car dollars. Mallory, your example, you want to buy soda pop. You have only soda pop dollars. If you’re going to go out to eat it’s only your going out to eat dollars. So we have food dollars and car dollars and housing dollars. And this is a way to really illustrate just how powerful the wilting force for your purchasing power inflation really is. I think we’ve been talking about inflation for the last year. It’s been top economic topic number one. We had lots of stimulus money from the pandemic and supply chain issues due to COVID and all that combined to push prices dramatically higher. The definition of inflation is too much money chasing too few goods. So we dumped 40% of new money on the US economy and oh, guess what? Prices went up by about 40%. Now it took a couple of years before that happened and when it happened, it happened rapidly. But all year long the Fed’s been talking. Really, it’s been over a year now. The Fed is waging war against inflation. But the headline you hear, Mallory, is about what? It’s CPI. Do you sit there and watch the CPI numbers come in?
Mallory Boggs [00:03:55]:
It’s so funny. I don’t think I had heard that term before. Probably like in the headlines, at least before the last year. Really. Now I feel like everybody and their mother knows that phrase.
Wes Moss [00:04:07]:
That’s a good point. I think you’re right. It’s CPI. We say it because we said it a million times, but inflation didn’t get a lot of billing five years ago. Three years ago, because we had so little inflation, it was never really a big economic worry. So today I think anybody knows what CPI is, but it’s because it’s been in the headlines. Five years ago. Was it as commonly used a term? Probably not sure. I was looking at it. But I look at the economy every day. But for the average American, were they worried about CPI? Not really. But what the world has been focused on, and this is what led me to write about wilting dollars, is that we’re very focused on CPI coming down. So we need to get CPI was over 9% last summer and it’s come down. They went down to eight and then seven and it’s come down about a little bit every month since then. And now here as we stand today, we’re looking at CPI just under 5%. But the number we’re getting for CPI is really still the rate of inflation increase year over year. Even if CPI were to go to zero, let’s just say magically it’s at zero today. You’re listening to this podcast and there’s just no more. CPI has hit zero. What that doesn’t change is all the inflation that we’ve just had, the massive run up in prices that we’ve just had, let’s call it up 30% on average. Maybe it’s better to even look at specifically. Let’s say housing inflation goes to zero. It doesn’t do away with the fact that housing prices in general are now 40% higher than they were, let’s call it three years ago. The world’s been focusing on getting inflation down. The Federal Reserve has been focusing on getting inflation back to its 2% target. But really what they’re trying to do is core the rate of inflation. Getting even worse doesn’t fix the fact that prices are already dramatically more expensive than they have been over the last couple of years. And they’re very likely going to stay there as a new high watermark, almost permanently higher prices.
Mallory Boggs [00:06:12]:
So can I ask, do we want deflation then, as investors?
Wes Moss [00:06:17]:
So we’ve had such price volatility, we’ve seen some disinflation. As an example, we’ll talk about car dollars. Car prices went up 55% and down 15 or 16%. Now they’re only up only up 32%. We do not want deflation in general. We right now are just focusing on disinflation, which means we’re bringing the rate back down to 2%. We actually want, as an economy, a little bit of upward pricing pressure. It helps motivate consumers to not wait forever to go buy whatever they’re about to buy. If we live in a world of deflation, then you get into this weird spiral where a debt becomes more expensive because you’re earning less, and your debt relative to new dollars just automatically balloons, number one. Number two, if we have deflation in general, we would tend to wait for purchases because everything would be getting cheaper. So it’s a very bad economic situation to end up having deflation. So a naturally growing, strong, robust economy wants a little bit of inflation all the time, but we don’t want ten or 15% a year like we saw in the 1970s and like we’ve just seen over the past year. But very good question. That’s why we have you on this podcast. What other questions do you have?
Mallory Boggs [00:07:35]:
I don’t know. As we keep going, I’m sure I’ll.
Wes Moss [00:07:37]:
Find all right now, so let’s give some examples. Mallory, you and I were hosting a radio show a couple of weeks ago, and the producer, Uncle Leo. Uncle Leo came in and said, hey, man, can you talk about used car inflation or deflation? He’s thinking about I’m thinking about buying a car. I’m wondering if prices are ever going to go down. Which led me down the track of saying, this is a big ticket item that Americans are always thinking about. So think of it this way. The Bureau of Labor Statistics keeps track of used car and truck prices, and it’s an interesting economic exercise. They’re always looking at cars that are between two and seven years old. That’s what they measure. And it’s every used car. It’s subcompacts, it’s full size luxury cars, it’s light trucks, pickups vans, specialties fort, utilities. And if you take a look at what prices have done and there’s so much like an earthquake on the Seismograph, when you look at economic data because of COVID, COVID was the earthquake.
Mallory Boggs [00:08:41]:
That was true in so many ways.
Wes Moss [00:08:43]:
In so many ways. But used car prices and again, we’re going to look at January of 2020, right before the pandemic .
Mallory Boggs [00:08:50]:
And I think we all remember whenever the prices shot up during COVID and a lot of that was because of what?
Wes Moss [00:08:58]:
Well, first of all, it was economic stimulus payments. And so that is the root cause of a lot of the inflation. So people had more money in their bank accounts and they could potentially buy more cars and interest rates were really low. So again, the financing was cheap and then there was an increase in demand for cars because less people wanted to take public transportation. And then on top of that, supplies got hit because factories are shut down. So it was the classic surge in demand, limited supply, and we saw prices whipsaw higher.
Mallory Boggs [00:09:31]:
Okay, I’ve got another question for you. We know that so much of this comes back with inflation to COVID and really the stimulus money that was dumped into the system. Do you consider that dollars well spent still gosh?
Wes Moss [00:09:45]:
I think that’s a hard question. I mean, it’s a politically fraught question. I think that we were in a situation where we truly unprecedented. We didn’t know what to do, and it was frightening for a period of time that the world was shut down. I mean that was something that we just were never taught in any economics class, that we would just shut down a modern economy for an extended period of time. Schools, businesses, roads were empty. So it was such a twilight zone there for a while. As much as we look back and see all the issues that were created by the economic stimulus, by Washington, they were just making it up as they went. And I see as a lawmaker you wanted to do something, hey we’re mandating you shutting down and not being able to go to work. So we also have to provide economic support at the same time. So I don’t know if there was a whole lot of choice, but we’re paying for it today still to this day through inflation. And again it has increased the rate of how our dollars are wilting and here are the numbers behind it. So again, we’re looking at January 2020 to January 2022. Used car prices shot up 55% in that two year period. Since then, they’ve fallen about 14%. We have had a little bit of that’s actual deflation, but in this particular one segment of the economy it’s prices do yoyo a little bit. Prices in one particular item can oscillate a fair amount. So since then, prices fell about 14%. But that still means wes have a net increase of 32% from where we started. So the used truck that would have been 20 grand in 2022 is now approximately $26,400. All things being equal, which means that not not the actual truck, but the truck. And another one, all things being equal, that’s taken an extra $6,000 out of your budget and $6,000 is a very real amount of money. It might mean the cancellation of an entire family trip, the underfunding of a retirement account. Real money. So now let’s look at this in reverse. We’re going to now look at the value, the hit to the value of your car dollars. Remember, these are dollars that you can only spend on cars. Remember, we have food dollars, car dollars, gas dollars for each line item.
Mallory Boggs [00:12:12]:
And I think this is how most people really operate, right? You don’t just magically have more money in your bank because you need to buy something that costs more. You’re like, okay, I’ve got X amount saved for a new car, right? It doesn’t just immediately jump up because that’s true.
Wes Moss [00:12:26]:
We do think in terms of that. Oftentimes it’s like we’ve got a, there’s a car budget, I’ve got my house budget over here. So to some extent, this is real life. But if you look at using car dollars as an example, and you set a baseline of $1 value, january 2020, right before the pandemic, today that same car dollar is only worth about $0.75.
Mallory Boggs [00:12:52]:
Ouch.
Wes Moss [00:12:54]:
Inflation looks a lot different if you’re looking at it from that angle, talking about not just the increase in cost, but the decrease in your purchasing power, you don’t have less money, but your money is worth less. Full disclosure, I am affiliated with Capital Investment Advisors, which is a full service and a fee only financial planning and investment management firm in Atlanta and Denver and Tampa and Phoenix or wherever you are. And if you’d like to take your retirement planning or retire sooner, journey to the next level, Capital Investment Advisors would love to help. You can find our team and schedule a time to chat at YourWealth.com . Now let’s look at what inflation has essentially done to every dollar or collectively in your wallet. In this case, we have to look at the now famous CPI data. As you pointed out, it’s now famous. Everybody knows what CPI is.
Mallory Boggs [00:13:54]:
It’s having its 15 minutes of fame. So, great. Yeah, let this be like a shorter lifespan than the Kardashians.
Wes Moss [00:14:03]:
That’s funny. The overall CPI, so overall CPI was 260 back in January 2020. Same exact periods of time that we looked at car dollars. And you can see that. And then by March of this year CPI, the overall CPI level is at 301. So 260 to 301, that’s a 16% increase in aggregate price. Everything aggregate prices. That’s all the major categories. That’s everything from eggs to bread to barbecues, beer, gasoline, cars, airline tickets. This is the overall CPI number.
Mallory Boggs [00:14:39]:
That’s such a high number for everything.
Wes Moss [00:14:44]:
In aggregate, everything’s 16% more than it was. That’s quick.
Mallory Boggs [00:14:49]:
And looking at that in reverse, essentially our $1 is worth eighty four cents.
Wes Moss [00:14:54]:
Now, mathematically, $1 is worth eighty six cents today.
Mallory Boggs [00:14:58]:
Eighty six. This is why you’re the numbers guy.
Wes Moss [00:15:01]:
Connor Miller, our CIO, helped me out with that number. So again, a buck in 2020 is now worth $0.86 no matter what happens to the inflation rate. 15 minutes of fame CPI. What’s the annual CPI. It’s very improbable that the $0.86 will ever return to being worth a dollar. It’s not going to happen unless, again, we have deflation, which we talked about is very improbable, very unlikely, and something that would create a whole nother set of problems. And we’ve seen this very rapidly over just three years. It was a much less steep line going back to 2011 until 2020, the ten years prior. Very little inflation, one to 2% a year. But it’s still there. The dollars are still wilting. They’ve wilted very quickly over the last couple of years. They wilted more slowly for the decade prior to that. And that’s why it didn’t get a lot of press. We just didn’t really we weren’t worried about inflation as much because it was so nascent. But we know it’s going to continue. And it’s almost this insidiousness that will just continue. Sometimes it’ll be fast, sometimes it’ll be slow. And that’s why cash that’s not keeping up with inflation creates a major problem. So once you’ve saved enough emergency cash and again that amount is different for everybody, then it’s time to start looking elsewhere for the rest of your capital and the rest of your wealth. The good news is there are a lot of places we can put it that could potentially keep up with inflation. I think of it as we want to make sure that we are placing our dollars not just in our wallets that are earning zero, but in other assets that have the ability to inflate along with inflation. What could that be? Homes, real estate, 401K, IRA, stock options, businesses, private businesses. All of those areas have the potential to keep up with inflation. An actual physical dollar in your wallet, in a safe is earning zero. Or a bank account that’s earning zero is equivalent of a wilting dollar. Even bonds today are now keeping up with inflation. For the most part. The important thing is to avoid the wilting value of cash. And here’s the good news, or here’s the bottom line is that we got a lot of good options here in the United States. We are a country with bountiful opportunities to find things that inflate along with inflation. Growth stocks, dividend stocks, mutual funds, ETFs, real estate funds, all of those, even though there’s much more volatility in those investments over time, we’ve seen the US equity market be one of the most formidable places to combat inflation. And the only way to combat inflation is that our dollars keep up with inflation.
Mallory Boggs [00:18:01]:
So our dollars should join us in the US army.
Wes Moss [00:18:05]:
They should join us in the army of productivity and not be stuck in the break room doing nothing. They need to be working for us as well. And again, the great news is there’s a lot of places that we can find to do that. So rather than putting our heads in the sand, rather than naivety. I look at this perspective as a way to really understand why we almost have no other choice but to invest, even though we’ve got all these problems at any given time. Whether it’s we don’t like Congress, or who’s in Washington, or we’re on the precipice of a recession, or in a recession, or coming out of a recession, or the unemployment rates going up, or the stock market’s overvalued, or there’s a constant set of problems of why we don’t want to invest. And pessimists always make great arguments of why you shouldn’t have your money invested anywhere. But when you really look at just how immutable inflation is, sometimes it’s slow, sometimes it’s fast, but it’s almost always there and it just keeps going. The way I look at it is we almost have no choice but to invest to combat wilting dollars.
Mallory Boggs [00:19:17]:
Hey y’all, this is Mallory with the Retire Sooner team. Please be sure to rate and subscribe to this podcast and share it with a friend. If you have any questions, you can find us at WesMoss.com. That’s Wes Moss.com. You can also follow us on Instagram and YouTube. You’ll find us under the handle @Retire SoonerPodcast. And now for our show’s. Disclosure this podcast is provided to as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. It is not intended to and should not form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment or financial planning considerations. Please refer to the full disclosure in the podcast description for any additional information. Call in with your financial questions for Wes to answer: 800-805-6301Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcastThis information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #157 – The Guide To Inflation For Investors: The Wilting Dollar appeared first on Wes Moss.
Recently Wes Moss was featured in the Reader’s Digest article “What Is Passive Income—and How Can You Earn This Easy Money Now” where he shared his insights on high-yield savings.
Gone are the days when making money required punching a clock. These days, it’s the dream to pull in cash while you sleep, or take a vacation while your business runs itself. Passive income makes all this and more possible. But what is passive income, exactly, and is it only for people who are already wealthy?
“When people think of passive income, they [often] think of real estate or investing,” says Niki Puls, a Nebraska-based passive-income mentor who earns $30,000 a month working just five hours a week. “But it’s definitely possible for stay-at-home moms and people who don’t have a lot of time.” Puls is now teaching others how to make money fast with tons of unique side hustles that can become passive-income streams over time. That extra money, of course, can go toward your expenses, bulk up your savings account and even help you retire early.
According to the most recent U.S. Census data, about 20% of Americans earn passive income, with those households bringing in about $4,200 per year through these streams, though some earn much more. All signs point to that number growing, and the sky is the limit when you have the knowledge about where to start. In fact, it’s one of the secrets that millionaires know—and you will soon too.
What is passive income, exactly?There’s not a single passive income definition, but the idea is basically that it’s the kind of work that runs itself. “Passive income is income that takes little effort to generate compared to active income, and it’s money you earn outside of a traditional employer or contractor,” says Courtney Alev, a consumer financial advocate at Credit Karma.
One way to think of passive income is to assess whether that money stream could still come in even if you weren’t around to oversee it. For example, Steve Davis, CEO of Total Wealth Academy, once owned 4,000 rental units that were generating passive income for him. Davis never had a key to any of those properties, and he never saw them in person; he simply owned them and let others manage them while he cashed in. That’s a true passive-income stream, and real estate isn’t the only way to do it.
Is passive income the same as a side hustle?No. A side hustle is more like a second job—one you can do in addition to your full-time work. Side hustles are a way to generate more income “on the side” to supplement your full-time job. They aren’t usually lucrative enough to replace your full-time work, but some people manage to turn their side hustles into full-blown careers, if that’s the goal.
Passive income is similar to a side hustle in that the income it generates supplements your full-time work, but the key difference is how much time and attention you need to spend on passive-income streams in order to keep them working. Ideally, passive-income streams operate in the background, with minimal effort once you’ve done the work to set them up. With passive income, you can literally make money in your sleep, whereas side hustles require hands-on work on a regular basis.
What are the benefits of passive income?Earning passive income helps you bring in more money while working less or while working a full-time job. For many people, it frees up time and helps them to become financially independent with income that doesn’t rely on holding a job for a company that might have layoffs or pay cuts at any time. As a result, they end up happier at home.
Puls was working a regular 9-to-5 job when she decided she wanted to spend more time at home with her family. Her first foray into passive income was an e-book centered around intentional living, teaching other moms how to slow down and prioritize their families. She spent hours writing the book and designing it for free using Canva, then began selling it for $35 a pop. Soon, she was making about $5,000 a month in book sales. Then she expanded into other books, courses, templates and social media, and she now works about five hours a week while earning $30,000 a month. “Before passive income, I would only see [my family] for a few hours a day,” she says.
Davis points out that passive income also gives his clients a sense of stability, since having multiple income streams can protect them from job loss or a turn in the market. One thing the pandemic taught many Americans is how problematic putting all your eggs in one income basket can be. At the height of the pandemic in May 2020, 49.8 million Americans reported not being able to work or working fewer hours. And while the situation is much better today, as of April 2023, 5.7 million Americans are currently without work.
Even if you aren’t facing job loss, generating passive income can help you save toward other purchases. Think: new cars, vacations and even college expenses for your kids. “If you’re able to budget for all your normal expenses with your primary salary,” Alev says, “anything additional you earn can go straight into savings for your goal.”
How much money can you make through passive income?There really is no cap when it comes to passive income. Puls didn’t expect to make a ton of money when she first got started, but soon she had outpaced her salary. The bottom line: You could make a few extra dollars a month, a few thousand or a few million. It really boils down to what you’re doing and how successful you are at it.
For example, blogging and affiliate marketing can bring in great money, but real estate can generate a lot more, Davis says. And the best part about passive income is that it requires so little ongoing work that you can easily set up multiple passive-income streams to increase your earning potential.
“And for those who are lucky enough to get their source of passive income working like a well-oiled machine,” Alev says, “it’s money you’re earning with minimal effort.”
What are some good passive-income ideas?Now you know the answer to the question: What is passive income? The next logical question, of course, is: How can I make this kind of money for myself? For some types of passive-income ventures, you need money to make money. But there are plenty of options where this isn’t necessary. Just keep in mind that there is a ramp-up period, and you may have to learn to walk, so to speak, before you can run.
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Real estateFor this passive-income stream, you’ll need an upfront investment for the property, and this can range anywhere from thousands to tens of thousands of dollars. From there, many investors will find tenants and pay a company to manage the property. If you own real estate but act as a superintendent, the money you earn would be considered active income. When you pay a company to manage the property for you, chances are you’ll be checking in on your properties on a weekly or monthly basis and dealing only with major problems, such as repairs or missed rent payments, if your staff cannot handle them.
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BloggingBlogging offers tons of ways to make passive income, and it starts with a website that you create content for. From there, you can get sponsorships and earn money through affiliate marketing. “I earn affiliate income by placing referral links on my blog to products that I recommend,” explains Michelle Schroeder-Gardner, the founder of Making Sense of Cents. “If someone purchases the product through my link, I then earn a commission from the company. For example, I may link to a book from Amazon on my blog.”
Just keep in mind that you’ll need to do a lot of work upfront before you can start cashing in. You have to build a site, YouTube channel or other platform, and grow your audience. “The income from affiliate marketing can vary greatly,” says Adrian Tamminga, the co-founder and business manager at Iron Embers. “It depends on factors like the size and engagement level of your audience, the products you promote and the commission rate. Some people make a few hundred dollars a month, while others make thousands or even tens of thousands.”
- Downloadable digital productsThe internet has made it possible for anyone to sell a product online to a buyer without ever physically exchanging goods. Downloadable digital products can include everything from digital templates for journaling and meal-prep lists to downloadable art, templates for wedding invitations or custom party decorations. You’ll find loads of these on Etsy, though that’s just one venue for selling these items.
“You create the product, and then you can sell it an unlimited amount of times because customers are either printing or downloading the product to their computer,” says Schroeder-Gardner. “You don’t have to ship a thing.”
- Create an online courseBoth Puls and Schroeder-Gardner have had success in this arena. Once you set up the course, customers can pay to access it and take that digital course on their own time. Just be aware that you’ll have to do a significant amount of work upfront before you start counting your Benjamins.
“Creating a course is not the easiest of these passive-income ideas, but it can be a great way to earn an income around the clock,” Schroeder-Gardner writes on her site. “Most of the work is done in the very beginning, and then there is some maintenance along the way to keep the course updated, help students and so on.”
- Dividend stocksWith a regular growth stock, you can’t make money until you sell. With dividend stocks, you’ll get payments through regular distributions the company pays to its shareholders, without having to sell the stock. “In plain English, when you buy dividend stocks, you’re buying a small piece of a company,” says Tamminga. “As the company makes a profit, it shares a portion of that profit with its shareholders, which is you. These payments are called dividends.”
To get started, you’ll need a brokerage account, which you can set up with an online broker who will place trades for you. You can also invest in these stocks on your own, if you don’t want to pay a financial planner to help you. “You can definitely do it yourself,” Tamminga says, “but it’s essential to do your research and understand the company and the industry you’re investing in.”
- E-booksSelf-publishing an e-book is another long-term way to reap the benefits of sales. Even better? Unlike writing a full-blown novel, e-books can be short pamphlets explaining a skill set you’re already well versed in. Plus, Alev points out, “you don’t need any physical inventory, and you don’t need to worry about shipping costs.”
Aside from actually writing the book, however, you’ll also need to do some maintenance to advertise the book.
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Car rentalsPlatforms such as Getaround and Turo let you rent your vehicle anywhere from a few days to a few months. According to Turo, their car owners make about $10,516 a year on average renting a single vehicle on the side. One thing to note: Turo hosts, as they’re called, do have to purchase a third-party liability insurance plan to allow renters to use their vehicles.
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High-yield savingsAre you building up your nest egg? Good … but it would be even better if you moved your funds to an account that will do a little more work for you. “Certain banks and financial services companies will pay you just for having cash there,” says Wes Moss, managing partner and chief investment strategist at Capital Investment Advisors. This is one of the secrets of people who are great at saving money.
How does this translate into real-world math? If you put $1,000 into a regular savings account, you might grow it an additional 10 cents after a year. A high-yield savings account might go up $5. This is one of those passive-income streams that works best with larger chunks of money if you have it.
And here’s another bonus, according to Tamminga: “While the earnings from a high-yield savings account might not seem as substantial as other passive-income sources, they offer a lower risk level and provide a secure way to grow your savings.”
- Renting your space“Through homesharing, you can earn an average of $10,000 a year to put toward living expenses, mortgage payments, retirement savings or that upcoming vacation,” says Amy Ford, VP of Silvernest. “That’s about the same as you’d make with a part-time job.” This might entail getting a roommate or renting short-term to vacationers or to professionals traveling for business through Airbnb.
Ford also suggests renting out your unused garage space as storage for people looking to stow their vehicles or boats. You can offer these services through sites like Craigslist or Facebook Marketplace, but if you want to be a little more official about it, try a platform such as Stow It, where users report making $4,000 a year on otherwise unused garage space.
- Buying vending machinesThis one is pretty specific, but buying vending machines and spending a couple hours a month to restock them and claim your earnings is another simple way to sell products with minimal effort. You can earn a few thousand a month depending on how many vending machines you purchase.
How much work does passive income require—really?The most common myth around passive income is that it requires no work. But experts warn there is certainly upfront work, as well as a certain amount of maintenance required to oversee this kind of income stream. “As with anything in life, if it were too easy, everyone would be doing it,” Alev says. “Getting a business started—even if it’s passive income—takes some time and often money, so be prepared to invest in your business at first in order to get it to a good place.”
Puls spends about five hours a week maintaining her social media, answering customer questions, sending email campaigns and updating her website. But when she got started, she was spending a lot more time on the side, in addition to working her full-time job, to get things going.
Schroeder-Gardner agrees. “One common misconception about passive income is that there is no work involved. However, that is not always the case. Sometimes you need to do work and spend time in order to build and maintain the passive-income stream,” she says. “Plus, some passive-income streams are more passive than others. For example, typically dividend paying stocks are less work than being a landlord with rental property.”
How is passive income taxed?Like all types of income, passive income is taxed. The difference is you’ll likely have to report those earnings yourself in order to pay the taxes on them each year.
Be sure to consult a CPA, especially when you’re getting started, to avoid any mistakes when reporting your income. You might find that at a certain point you’re earning enough money through passive income to be paying quarterly taxes, for instance, and you’ll want to stay on top of that.
“Your source of passive income should be by the book and follow any relevant tax laws,” Alev says. “Make sure to save for any estimated taxes so that you’re not surprised when it comes time to make payments.”
Mistakes to avoid when launching a passive-income plan Don’t underestimate the workload. “The internet makes it seem like it’s some magical thing where you don’t have to do anything, it just flows,” Moss says. “But the reality here is just a varied amount of either lots of upfront work, or at least a little bit of ongoing maintenance.” * Follow the rules. While there might be a learning curve to generating passive income, you shouldn’t try to get the hang of the tax side of things as you go. Instead, consult with a tax accountant at the outset. * Change your mindset.* An abundance mindset is key, but Davis also says you must believe the idea that multiple income streams are best. You don’t want to wait until you’re unhappy with your job or you get fired. Instead, change your mindset now from “I should have another income stream” to “I must have another income stream,” and you’ll be in a much better position in the long run.
Read the original Reader’s Digest article here.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions,
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Discover. Assimilate. Rewire. Expand. These are the four tenets of George Jerjian’s DARE Method of teaching retirees to embrace passion, prosperity, and purpose. A retirement and mindset coach, Emmy award-winning producer, and multi-industry author, Jerjian joins Wes Moss in this Retire Sooner episode to talk about how attracting your purpose rather than chasing the dollar can lead to a happier retirement. Based on his own experiences with health scares, semi-retiring, and surveying retirement-age concerns, Jerjian explains how he’s living the life he truly desires now and aims to help retirees find their own new beginnings. Wes concludes the episode agreeing that it’s not just money, but intangibles like mindset, that guides the mission of the Retire Sooner podcast to help people retire sooner.
Time-Stamped Show Notes from the Video* [00:00:00] Wes introduces George Jerjian and this podcast episode. * [00:10:25] Interesting statistic: Most Americans will outlive their savings, with retirees needing $2 million to retire comfortably. * [00:19:48] George discusses how our work (even when we don’t enjoy it) can become our identity. * [00:27:44] George shares thoughts about loneliness in retirement and the need to love oneself. * [00:40:23] The quote, “the cave you fear to enter holds the treasure you seek” explains that what we are looking for is often behind our fears. * [00:48:40] Reflection on how a burn tumor turned out to be a blessing in disguise. * [00:55:19] Retiree health concerns and identity crisis can be addressed through mental and social engagement and by embracing a new beginning, which can lead to spiritual growth and wisdom. * [01:01:59] Final thoughts with Wes and George.
Read The Full Transcript From This Episode(click below to expand and read the full interview)
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- Wes Moss [00:00:00]:
You know, one of the biggest real life challenges I see in helping folks in their retire sooner journey is that even if we get to the money side of the equation, we solve for that. And we do a cash flow analysis and we figure out the right investment strategy that somebody’s comfortable with. And we are dividend investors and income investors, and we solve for inflation and the things that come try to eat our money and our purchasing power. And we’ve solved the financial side of the equation. The next big piece of figuring out a next phase is what are we going to be doing in retirement? And it sounds easy. It sounds as though, well, financially I can now do what I want to do. I can go to coffee shops if that’s what I want to do for two or 3 hours in the morning. I can do long lunches, I can play golf, I can play tennis, I can do all the core pursuit that I want to do. It still very often falls short of what we expected it to be. And part of that, what we discover here in today’s interview with George Jurgen is that it’s not easy to keep our identity intact, it’s not easy to keep our relevance to the world. Even if we’re full of core pursuits. We may have lost our identity and that wears on us over time. George, who’s the author of Dare to Discover Your Purpose dedicates his life now to helping people find their purpose and their identity. And it’s beyond just having core pursuits and that is what I think is so helpful about today’s interview. I almost want to put everyone I know that’s retired or semi retired through his course because he is pulling out in us a brand new beginning. Not just another phase, but a totally new beginning. That takes imagination, it takes curiosity, it takes us facing our fears, what we’re afraid of, to drop all of those barriers and figure out not just the next phase, hey, what are we going to be doing? But fully, fully a new chapter, a full new beginning which can take away the big anxieties that haunt us in retirement even if we have plenty of money. 50% of retirees reportedly are just constantly worried about their health. 35% of retirees say their biggest issue within retirement is they still haven’t found another real purpose. And as you can imagine, it’s not an easy fix. It’s not just a light switch. Oh, I’ve got a second act career, I have a new purpose. It takes some work, it takes some digging in. And after being told he was about to die, being diagnosed with what was a life threatening medical condition and his doctors told him he had no longer than six months to live shook George to the core. To go into what he thought was his limited period of time when he was then given more time and given him his life back, which he’ll talk about. His retirement years fell dreadfully short, like it does so many people that I’ve talked to and interviewed over the years. He has a fix for that. It’s not an overnight or a quick fix, it’s more of a metamorphosis. But it took him almost a decade to figure it out. He tries to help people through this over the course of a couple of weeks, but it takes a lot of digging in and we’re going to learn about that and how to explore what he calls the galaxy that is completely within us, undiscovered. So we have a completely new, fascinating beginning when it’s time to stop working at our primary job. I was locked in this entire conversation, one of our longer interviews we’ve ever done here on the Retire sooner podcast. But I really think it does so much to help you dig in and make sure the next phase once you get the money portion solved, is the best phase yet. I’m Wes Moss. The prevailing thought in America is that you’ll never have enough money and it’s almost impossible to retire early. Actually, I think the opposite is true. For more than 20 years, I’ve been researching, studying, and advising American families, including those who started late, on how to retire sooner and happier. So my mission with the Retire Sooner podcast is to help a million people retire earlier while enjoying the adventure along the way. I’d love for you to be one of them. Let’s get started. George Jurgen, I’m glad we found you. And then we’ve hunted you down to try to get you to come on to Retire Sooner podcast. And when did Dare to Discover come out?George Jerjian [00:04:47]:The program itself came out just before the pandemic hit.Wes Moss [00:04:52]:Good timing.George Jerjian [00:04:53]:Yeah. I finished all the recording of the eight modules in end of February, early.Wes Moss [00:05:01]:March 2020, literally, right as the world was shutting down.George Jerjian [00:05:06]:Yeah. And in a sense, in many ways, I think if it wasn’t for the pandemic, it might have taken me another five years to get to where I am here. The pandemic was a blessing in disguise. It fast forwarded everything. I mean, let’s not paint it as an all rosy picture pandemic. As a pandemic, it’s not pleasant. We all actually hated it. I was working, so I cut out all the white noise. I was focused on what I was doing, and I think that I wouldn’t have been as focused without the pandemic. My attention would have been scattered. The pandemic kind of helped me to focus on pushing my material forward.Wes Moss [00:05:51]:Well, let’s start because again, the fascinating just the very beginning of your story and why and I think a big catalyst for you doing dare to discover your purpose is that you have this kind of remarkable catalyst story where you were diagnosed with something and told you had six months to live and then that turned out not to necessarily be true. So let’s just start there, because that’s a crazy beginning.George Jerjian [00:06:18]:Yeah, but that was the catalyst. That’s what kicked off my change of mind, my change of perspective on life. I, like everybody else, was just chasing the buck. That’s what we do, that’s what we’re trained to do, and we consider that thinking. And the better your strategy in making money and turning things over, the smarter you are, the more intelligent you are. And in January 2007, I had three events, unrelated events, come together and form a perfect storm in my life. The first one was we were moving home downsizing. The second one is we got a phone call from my brother in law to say that my wife’s father had a stroke and we needed to get to see him. And we went to see him, and within a week he passed away. I had an appointment for a colonoscopy. And so I went to the health center to have the colonoscopy to discover that with the MRI that they were doing, they discovered a bone tumor sitting on my pelvis on the right side, and it was the size of a large eggplant, an obergene. I mean, it was huge.
Wes Moss [00:07:44]:
Dad, you had symptoms.
George Jerjian [00:07:47]:
Yeah, here’s the thing. I was having a lot of back pains and I was going to the gym three times a week, I was going to physio, I was doing everything. And I even went to a specialist to check the back problem. And because I’m with an equivalent of, I think in the US, you call it HMOs, it’s one of these insurance backed things. So they’ve got parameters and they can’t do this and they can’t do that, but they can do this. So on my second visit, I told the specialist, I said, look, the pain is above, not below. You guys are taking MRIs below. And look, I said, I’ll pay for it, can you just take it above? The guy goes, I really wish I could, but I can’t because I’m precluded from so anyway, they finally found it in error by mistake when they were doing a colonoscopy. And the nurse comes up to me and goes, did you come in for your pelvis? I go, no, I thought you must have the wrong patient. And then it dawned on me, whoa, what’s wrong with my pelvis? And then literally the next day I’m seeing an oncologist. So I go in with my wife and we see the oncologist and the guy says that it looks like you have a bone tumor sitting on your pelvis. And in 98% of cases, bone tumors are secondary cancer, which means it’s spread across your body, and which means invariably, that there’s nothing we can do, and that you’re looking at six to eight months, tops.
Wes Moss [00:09:40]:
Holy so just you went from normal life to extraordinary fear all within just a day? Just yeah.
George Jerjian [00:09:52]:
It’s like being hit by a truck and you’re just out of it. I was in this space of having an out of body experience. I’m looking at this guy, he’s dying, that can’t be me, that’s him, that’s not me.
Wes Moss [00:10:06]:
And at the time, you didn’t even feel bad? All that bad at the time, no.
George Jerjian [00:10:10]:
It was just the back pain that was constantly annoying me, but not all the time. It came and went and occasionally I’d have a sciatica pain, but that’s the only indication I had. Anyway, long story short, three weeks of tests, and I’m talking about weird tests. I’m not going to go into the details because I don’t think we have time for that, but essentially for three weeks, I’d get up every morning, I’m looking at the sunrise and going, how many of those am I going to see? So I had thoughts like that. But what was surprising to me, actually shocking to me, was that I wasn’t afraid of death. And I see it’s bizarre because prior to this, if you’d ask me, Would you be afraid of death? I’d go, yeah, truth be told, of course I am, I’d be afraid of death. But there was a calmness around me. The only thing that agitated me was that I have two daughters and they were teenagers at that time and I wasn’t going to be around for them. That was killing me. That was the only thing that was really causing me to well up from time to time, the fact that I wasn’t going to be around. I wasn’t really thinking about that. It wasn’t top of mind. I was wondering what things I wanted to do in the next six months to make sure that my cup runeth over. I wanted to make sure that so.
Wes Moss [00:11:49]:
You didn’t get hit with this overwhelming anxiety around death, necessarily. You were more worried that you’re leaving behind teenagers as a parent. And were you also, though? Was it though? That thinking, okay, it’s so definitive, I really only have six months. What can I do in these next six months without necessarily a whole lot of anxiety around what they had told you, that you only have six months left to live?
George Jerjian [00:12:18]:
When I’m looking back on it, I think what was a saving to answer your question, I think what was a saving feature for me was that we were busy packing, moving homes.
Wes Moss [00:12:31]:
And this is, by the way, in the UK, this is not when you’re in the United States, this is in.
George Jerjian [00:12:35]:
The UK, this is in London. This is all happening in London.
Wes Moss [00:12:37]:
All in London.
George Jerjian [00:12:38]:
Yeah. So I’m so busy packing, it’s almost like it was a weird sensation because I was almost numb. I’m going through a process of packing, moving, what’s going to storage, what’s going to our new place, and I’m thinking, what is all this about? And I realized the futility of all this stuff because I’m leaving, mate. I’m not around. I’m kind of almost doing it for my wife, as it were, helping out, but I hadn’t quite processed the magnitude of what was coming.
Wes Moss [00:13:24]:
So then they go into these tests. So you’re busy packing tests.
George Jerjian [00:13:28]:
Right.
Wes Moss [00:13:29]:
And they keep they’re going back and forth to see how much this is spread, et cetera.
George Jerjian [00:13:34]:
Yeah, they did all kinds of tests to find out if there was any spread of cancer. So they did all these tests, and three weeks later, we go and see the oncologist and he says, I’ve got some good news and bad news. The good news is that your bone tumor is benign but aggressive. Benign means that you’re not going to die. Well, aggressive means that we got to take it out, which means an operation. And it looks like it could mean you need a hip replacement, et cetera, et cetera.
Wes Moss [00:14:13]:
Serious operation.
George Jerjian [00:14:14]:
Yeah.
Wes Moss [00:14:14]:
What a roller coaster.
George Jerjian [00:14:16]:
Well, the thing is, I punched the air because my death sentence has been commuted to six months. Right. So I was super happy. But I was thinking to myself that even with this six month thing, it’s not fun.
Wes Moss [00:14:33]:
But after they realized it was a benign, you no longer thought you were going to die.
George Jerjian [00:14:38]:
Oh, yeah. Because the guy said, if it’s benign, it’s just we just need to operate and take it out. Got it. It’s the fact that actually, he said to me, you’re lucky because you belong to the 2% club.
Wes Moss [00:14:51]:
98% of the time it would be and you fell into the 2%.
George Jerjian [00:14:55]:
Exactly.
Wes Moss [00:14:55]:
But you also went through almost an entire month of just saying, this is it. So I’ve got six months left to live.
George Jerjian [00:15:01]:
Yeah. But on reflection, it was a blessing in disguise because it woke me up. It woke me up to really live a life that I should have been leading instead of the kind of fake life that I’ve been living until then.
Wes Moss [00:15:16]:
George, let me ask you this. I think of how you describe I think what you said in the beginning today is that you were chasing the buck. We don’t necessarily use that phrase here in the United States all that much, but we certainly live that it’s very normal in America to be 100% about work. It’s very normal to be all work. And we live for our work. And we actually look at Europe and we say that to some extent, that the philosophy in Europe is the opposite of that, where it’s live to work here in the United States, and it’s work to live in European cultures, if you will. But you’re saying in the UK, similar to the US, where it was about career, making money, saving money. And what was your career, by the way? What were you boiling away at?
George Jerjian [00:16:04]:
So which one do you want me to answer first?
Wes Moss [00:16:06]:
All of the above.
George Jerjian [00:16:07]:
All the above. Okay. Just quickly going back, I lived in the States for eight years and I was brought up with a strong work ethic. It’s perhaps not a very British thing, but to be fair, there’s a lot of Brits who work very hard, but the Brits don’t have the same work ethic as the Americans or North Americans. But that said, I think in North America, when people are working at jobs they love, it’s not really work. It’s hard work when you’re working at a job because you need the money and you’re working at the job because of the money. And that’s where it’s very painful. And I think it’s also very self destructive if you’re working in a job because of the money, which, by the.
Wes Moss [00:16:59]:
Way, George, is extraordinarily prominent here.
George Jerjian [00:17:04]:
Absolutely.
Wes Moss [00:17:06]:
I’m not going to say it’s 98%, but it is 90% of people would rather not be doing the job that they’re doing.
George Jerjian [00:17:16]:
Well, I think that’s the sad thing about it, and I don’t blame them because I would say that kind of in a good part of my life I was doing that myself, by the way.
Wes Moss [00:17:28]:
What industry?
George Jerjian [00:17:29]:
Okay, I’m a maverick. I have worked in very different industries. I’ve worked in import export, I’ve worked in marketing, I’ve worked in furniture design and selling to design centers across the US. I’ve worked in commercial real estate for 35 years, marketing for 35 years overall. And that’s kind of been my industry. And also I’ve been involved in funding and litigation for 15 years. And I’ve also been an author of eleven books. So I’ve lived multiple lives. And I suspect that’s probably one of the reasons why I wasn’t as disturbed about dying as I might have been. Because if you’re living life to the max, if you’re living several lives in one lifetime, then there’s kind of less issue about regrets. Regrets. I haven’t lived my life, but that said, now I’m really living the life that I desire and want to live.
Wes Moss [00:18:36]:
Okay, so at 52, you had this whipsaw, emotional life whipsaw. And what did year 53 look like then for you? So did that force you into some sort of retirement? Was it a catalyst for you to rethink the plate spinning career that you had? Which, by the way, we understand this very well here in the United States, and I do, where it’s not uncommon to have a couple of jobs, a couple very real jobs, not side gigs, but full time job number one. Full time job number two, sometimes full time job number three. So we end up working just all the time, and it’s not totally uncommon. It sounds exactly like what you were doing. So was there a big downshift or was it a massive change in what you were going to do with your time?
George Jerjian [00:19:27]:
Okay, that’s a really good question. I took the slow lane. I decided that, okay, time is the most important commodity I have now, which I wasn’t aware of because until then, I thought I was immortal. I mean, I know it sounds stupid, but I think the way we live our lives, we literally function as though we are immortal, and that’s the danger, because we’re not. And so we’re living a delusion. So at 53, I decided the best thing to do is I retire, because that’s what we’ve been programmed to do, right? Work stops, you retire. And I didn’t even know what I was doing in retirement. I wasn’t fully retired. I wes semi retired. And believe me, that sucked. So I thought, full retirement? Oh, my God. Hold on. Just explain.
Wes Moss [00:20:18]:
So you’re 52, you were semi retired, and then you went to fully by 53.
George Jerjian [00:20:24]:
No, I did not fully retire ever. I was semi retired for ten years. So what I was doing was instead of having one thing that I was focused on doing, I was only doing what needed to be done and filling time, doing things that I wanted to do.
Wes Moss [00:20:45]:
Like what?
George Jerjian [00:20:46]:
Playing golf, traveling, going for long breakfasts, long lunches, and sometimes long dinners.
Wes Moss [00:20:58]:
Doesn’t sound awful, by the way, George, but no.
George Jerjian [00:21:01]:
The first six months or a year, it’s like, this is the life. And then boredom sets in because you’re filling time. You’re not passionate. You’re not invested in something with passion. And I got to tell you, passion is beautiful. Filling time, which you think is kind of a dream world situation, an ideal situation is a nightmare.
Wes Moss [00:21:34]:
Okay, you’re catching me fresh off of having coffee in a coffee shop for the first time in probably seven years. I was in Tampa the other yesterday, and we had a meeting set up in a coffee shop at 10:00 A.m.. So there was no real rush, right? 10:00 a.m. Easy time. And I looked around, and I thought, wow, this is cool. I get why people it was the perfect coffee shop scenario in a cool little area of Tampa. It wasn’t a chain. It was its own little coffee shop with some character, and multiple people were with their headphones and their laptops, and they were clearly working. Then you’ve got me. I had a four person meeting, and we had an hour and a half coffee chat. I had an almond latte. It was wonderful. And I thought, no wonder people love these coffee shops so much. I totally forgot what it’s like. I get it. So you did that for about a year, and it was cool in the beginning. So you had a what was that feeling like? Was it a were you relaxed? Were you excited that you get to tell me about the feeling of that, at least the beginning? That was fun.
George Jerjian [00:22:47]:
The feeling is that I’m king of my castle. I’ve reached the pinnacle. This is what people are slaving away.
Wes Moss [00:22:55]:
To reach, to be able to do.
George Jerjian [00:22:57]:
To be able to do what I’m doing. It’s a great feeling. I mean, really. And enjoying that cup of coffee. I like my cappuccinos. I’m still an old school. I like my cappuccinos with no chocolate on and think myself, damn it, I’ll have some pastry as well. Gone. Bring it in. Bring it in. I want it. It’s like, this is it. You’ve reached the pinnacle because you’re now king of time. You’re free of all the shackles that you had before.
Wes Moss [00:23:37]:
Full disclosure, I am affiliated with Capital Investment Advisors, which is a full service and a fee only financial planning and investment management firm in Atlanta and Denver and Tampa and Phoenix or wherever you are. And if you’d like to take your retirement planning or retire sooner, journey to the next level, capital Investment Advisors would love to help. You can find our team and schedule a time to chat. Right@yourwealth.com? That’s Y-O-U rwealth.com. You may be the first person to describe it as this multi phase where you get this bliss. So we’re talking right now. You’re in the 6th to maybe it’s the honeymoon, right? So it’s the it’s the Time Freedom honeymoon, right?
George Jerjian [00:24:23]:
It’s exactly what it is.
Wes Moss [00:24:24]:
Where were you financially, and did you what was your level of financial confidence at age 53 in this honeymoon phase? Were you thinking, I’ve got way more, plenty of money saved, no worries, or I’ve got kind of just enough if I do this right. What was your thought around your financial.
George Jerjian [00:24:44]:
Situation at that time? I had zero financial worries. I had no worries at all. I’d kind of reached a place where if I was careful, I wouldn’t have to work another day.
Wes Moss [00:25:03]:
Okay, so you were in a strong position. You weren’t in a position where you had $100 million in generational wealth, zero worry. You were conscious of, hey, I can’t overspend. I can do a pastry, but I can’t also do a Maserati.
George Jerjian [00:25:18]:
No. I mean, no, listen, truth be told, that is how I felt. But the reality, of course, is that what I didn’t know then, which I know now, is that 96% of the US population will outlive their savings. That is based on Charles Schwab saying that retirees need about $2 million savings, total savings, to retire reasonably comfortably. This is pre Trump, pre pandemic, pre Ukraine. Factor all the rest in, I reckon even 2 million is not going to cut it. So then you look at how many people in the United States have assets worth 2 million, right? It’s like 2%. So to be conservative, I add another 2% and I work out, take 4% away from 196% of the population. Let’s be even more conservative. 90%. Nine out of ten retirees will outlive their savings. So longevity has destroyed the pension equation. But the money is a side issue here. It’s not even the number one issue. The two main issues are right. I mean, I think I’m jumping the gun here, but I did a survey of 21,000 people, 55 to 75.
Wes Moss [00:26:53]:
55 to 75. 21,000 people.
George Jerjian [00:26:57]:
21,000 people in North America, the UK, Australia, New Zealand, the English speaking world. And I asked them nine questions, and one of the pivotal questions was, what is your single biggest challenge in retirement? Now, in parentheses, this was done right in the middle of the pandemic. Right. I’m just putting it out there because the answers are kind of going to show you that 50% said health issues is their single biggest challenge. Yes. That took me aback.
Wes Moss [00:27:30]:
Whoa. 50% 50%.
George Jerjian [00:27:33]:
So people are worrying about their health. Right. The pandemic didn’t help, obviously, so it might have even contributed to how high that is. The second one was 35% outliving. Their savings, 15% aimlessness, lack of purpose. Now, that’s the question number five. Two questions later, question number seven, I asked them, I tweaked the question, if you were given a magic wand, what single challenge would you address? 50% said health again. So that doesn’t change. But what changes is you give people agency 35 or 36% said wanting a new purpose.
Wes Moss [00:28:27]:
Whoa.
George Jerjian [00:28:28]:
Yeah. The finance and the purpose flipped over, which was a fascinating thing. But after I’d done this study, which.
Wes Moss [00:28:37]:
Took a year, so hold on, hold on. So it makes sense. So health stayed the same, but instead of worrying about outliving their money, 35% now, 35%, if they had a magic wand, would figure out a new purpose. And then the latter part was the rest of it a money concern.
George Jerjian [00:28:56]:
Yeah, the 15%. 15% was money. Yeah. So it’s interesting when you give people agency, money is not the most important factor, but money is not the most important factor, because after I did the study, I was telling this to an engineer. You know how engineers tick boxes? They check everything? They tick boxes and all the boxes are ticked, but you have this nagging feeling that something is wrong, something isn’t right here. And that’s the feeling I had when I finished the survey. And I realized that when I came across a quote from Henry Ford who said, if I had asked people what they wanted, they would have said, Faster horses. Isn’t that brilliant?
Wes Moss [00:29:44]:
Yeah, that is brilliant.
George Jerjian [00:29:45]:
And here I am asking people what is their single biggest challenge in retirement? And they’re telling me what they think. And they’re not wrong. They’re absolutely right. That’s what they think. That’s what they believe. But here’s the point. They don’t know what they don’t know. And that’s where I then had to backtrack and ask myself, what is the real problem here? Now, we’re not talking about the symptoms. What is the real issue? The underlying issue here and the underlying issue, it came to me by process of elimination, is that just like and I always come back to the Russia Ukraine war. For some unknown reason, the first casualty in war is the truth. Why? Because propaganda kicks in.
Wes Moss [00:30:41]:
Sure.
George Jerjian [00:30:42]:
Right. That’s just the nature of war. The first casualty in retirement, which nobody recognizes because it’s kind of hidden, is loss. Of identity. Who am I now? And that loss of identity is like a virus. It’s like a termite in a house. It eats away at the staircase and you don’t know. You go up and down that staircase every day, nothing’s wrong. And then suddenly, boom, it caves in.
Wes Moss [00:31:17]:
So you’re doing this survey. What age were you at this doing all this work?
George Jerjian [00:31:22]:
Oh, really good question. We’ve been going backwards and forwards. I was semi retire for ten years. So I picked this up ten years into semi retiree and I was getting increasingly weary, stressed out. I was losing my self confidence. I book lunch or dinners with people and they cancel on me because they’re busy doing something else. And I go, oh my God, I’m not a priority anymore.
Wes Moss [00:31:58]:
So this is a new topic for us because you’re talking about I guess it’s not just purpose here. Identity is a deeper fundamental human feeling than purpose, isn’t it?
George Jerjian [00:32:17]:
No, I mean, actually I’m glad you’re making this point because what it is, is that for me, I’ve worked backwards, but just process of elimination. You go for the obvious things and then suddenly you realize, well, this is not it, which was the survey. Then I end up because purpose was an important factor here. And then I realize it’s about identity and purpose and they’re interlinked.
Wes Moss [00:32:42]:
They’re interlinked. That does make sense. Okay, hold on. Just to describe to our audience, the issue you’re seeing here is that you’re starting to lose, particularly for such a work based culture, whether it’s UK or it’s here, even though I can be busy and I can have plenty to do, my value in the world is no longer what it used to be. And that is psychologically really difficult for a lot of people. Is that what you’re saying?
George Jerjian [00:33:12]:
Absolutely. And the higher you up in the totem pole pole, the worse it is for you.
Wes Moss [00:33:17]:
Yeah.
George Jerjian [00:33:18]:
If you’re a CEO and the next day you’re back at home, that’s harsh. And for those of us who are not so high up the totem pole, there’s a relief that there’s karma in life. I’m not doing so badly. But the thing is, if I can just take a step back. Let’s take a helicopter view. We talked about money. We’re going to outlive our savings, right? What’s the next thing that goes wrong? I want to focus on this, on identity first. The identity issue is that we go through a transformation and we’ve lost this idea that we go from adolescence wes transition into adulthood. We are prepared for this new immersion into adulthood. We go to college, we do all the stuff, and we know when we move into adulthood that we need to let go of our adolescence. Right. It’s not easy, but we do it.
Wes Moss [00:34:26]:
Yeah, I guess we’re supposed to do that.
George Jerjian [00:34:29]:
Exactly. And most of us are now following doing work that we don’t enjoy, but because it. Puts bread on the table. We’re on it. And we spend moss of our life doing work we don’t particularly like. But it puts money on the table. We get good at it. We build an ego, an identity around it. Okay? And then we get to the stage where you retire or you get to a place where I am. You confront death, and you have to change how you think, because this is a really hard, difficult place to be. Think of the caterpillar cocoon butterfly effect, right? The caterpillar goes into the chrysalis and it breaks down into caterpillar juice. Not an easy job. This is painful. This is difficult to be reconstituted into fractals, to become a butterfly. So when you go into retirement, recognize this. There’s an awful lot of difficulties and challenges, but the best is yet to come. You have to believe that. If you believe it, you can make it. If you don’t believe it, you’re right as well.
Wes Moss [00:35:39]:
And it’s always then, George, it’s always this transition. There’s no escaping this. Or does your work help us get through that metamorphosis in a more informed way? And what is that?
George Jerjian [00:35:57]:
Is that again, really, really good question. We move across. But just before I answer that, can I just finish off the thread? So identity and purpose, they are interlinked because they’re two sides of the same coin. Identity is in effect, who you desire to be, who you really are inside all the facades and the personas that you’ve created in the world. In other words, we’re not who we think we are. We’re not who we project to other people. The persona that we project to the outside world is one that has been carefully and craftily. Chiseled. We’ve worked hard at chiseling who we are to present this wonderful image, right? Of sure. And again, it’s an image. It’s not real, because the real person behind that is vulnerable right. Is a warmer human being with feelings.
Wes Moss [00:37:06]:
Right.
George Jerjian [00:37:06]:
We do not display that, because if we do that in the outside world, we’ve been taught, and it’s our fear, we’ll be crushed. But guess what? Retirement is the perfect place to take down that mask, to become who you really are, what you really feel. Right? And this isn’t an instantaneous process, and I’m sure there are geniuses out there for whom it is, but for me, it was a long, hard road.
Wes Moss [00:37:39]:
So really, you had a whole ten years of thinking you were in the right spot, but really, it impacted you mentally. It was almost a decline for you over that ten year period.
George Jerjian [00:37:50]:
Absolutely. I have more energy today than I had ten years ago. So that’s the first thing. But to come back to the question you asked from my personal experience, and I then devised the Dare program, which in itself, right, did not suddenly come as a download from heaven.
Wes Moss [00:38:14]:
Download from heaven?
George Jerjian [00:38:15]:
I worked it out. I mean, I chiseled at this. I worked at it and it didn’t come out right the first time. It had to be played around with. And ultimately it was this wonderful woman that came out and said, george, I’ve got just the right word for you. It’s there. And I go, what? She said, yes, because the first part is discover what retirement is and what it’s not, which is what I was saying, but not in those words. The second letter, A. Assimilate is about assimilating new information about our minds, particularly our subconscious mind, which is 99% of our mind, but none of us are ever taught how to use it. Right. Because we all been programmed to work in a certain way, to deliver certain.
Wes Moss [00:39:06]:
Goods and chisel our image.
George Jerjian [00:39:08]:
Exactly. And not to be who we are, so we can take orders and do it. R is for rewiring our mindset and E is for expanding our horizons. Now, there’s a lot of material here which I can’t go into, but the word dare in itself is also really important because it’s another word for courage. And you need courage to unretire. Right. Anybody who unretires, I salute them because they’re taking a risk. They’re taking a risk from being in the safe place, which, by the way, of course, we know is not a safe place to be because you’re a plankton and you’re going to be eaten. It’s over. You will outlive your savings. You’re going to actually outlive your savings and you’re going to run out of money at the worst possible time.
Wes Moss [00:40:03]:
Most people. Most people.
George Jerjian [00:40:04]:
Most people, yeah. And even those who have enough money to survive retirement, their cognitive abilities are going to disintegrate and they’re going to go downhill because they haven’t created what I call a new beginning.
Wes Moss [00:40:23]:
They’re really kind of starting at the end as opposed to restarting. What you’re saying is that very normally, retirement is the beginning of the end. And what you’re saying is it needs to be a brand new beginning, not the beginning of the end.
George Jerjian [00:40:37]:
Correct. And the reason for that is that the word retirement itself, just look at the word if you sort of drill down, retirement is a withdrawal from active life.
Wes Moss [00:40:47]:
Right.
George Jerjian [00:40:48]:
The concept itself is flawed because if you look at nature, nothing retires in nature. You’re either growing or dying. Those are the two binary choices.
Wes Moss [00:41:00]:
That’s right.
George Jerjian [00:41:00]:
And if you choose retirement by default, you’re choosing death. And death can come in all forms, particularly the cognitive. Once this starts to go, because you’re not engaged socially or mentally, you’ve already signed your own death warrant. Whereas if you choose a new beginning, you’re choosing to have a beginner’s mind and to start again.
Wes Moss [00:41:30]:
I want to get to choose a new beginning. But if we go back to where we fall and we’re 62 or 65 and we’ve stopped working right. Clearly you found that health is a perpetual concern and it probably only grows and of course we’re already talking about identity. But then regrets, is that part of that difficult process to get through that you miss work, that you maybe just moss social connectedness. But let’s talk through regret, health and identity for a minute, okay?
George Jerjian [00:42:03]:
Just thinking about you retire, right? The mindset you’re in is that I’ve done everything. I’ve reached the top of the game. I’ve got all my certificates up on the wall. I’ve got all my books. And now I’m an elder statesman. People come to me, guess what? Nobody’s coming to you. Nobody wants to know you anymore. You’re a has been because you’ve chosen to retire and you’re surprised that nobody’s going to knock on your door. Trust me, it’s a very lonely place and you don’t want to disengage from people. Now, here’s the caveat. I was studying. Dr. Elizabeth Kubler ross’s work. She’s the Swiss American psychologist who interviewed hundreds of people on their deathbeds. And what she discovered is that a great majority of them had retirees. In fact, more than that, they were actually angry. They were angry and resentful because they had not lived their lives. What do I mean by that? What I mean is that they had lived the lives that other people had expected of them. And invariably it’s your deceased parents whose voices are still churning in your head. So you’re doing what you were told to do. And if that doesn’t work, your spouse helped you to think that way. And for some of us, including my good self, even your kids end up telling you what to do. So it’s like, hello, who’s looking after me? I’m not standing up for myself. I’m supporting other people. Yes, love is really important. And listen, I am a family guy. I love my family to death. Well, close. But you know what I mean. The point I’m making is that what we don’t realize is we betray ourselves for the people we love. And the danger here is this that on your deathbed you’ll be kicking yourself. Because guess what? The truth of the matter is this. We’ve all heard the adage, love your neighbor as yourself. It’s an equation. Love your neighbor as yourself. So here’s my question to you. If you don’t love yourself, how can you love your neighbor?
Wes Moss [00:44:51]:
And therein lies the problem. If we go back to this thought of regret, is it that so we’re listening to what our parents told us to do, what our spouse tells us do what we think we’re supposed to do and we regret that we didn’t take chances? Or is it that we regret that we didn’t live the last 20 and 30 years doing what we wanted to do because we were stuck in a retiree quagmire and just were slowly sinking. Is that so much of the regret?
George Jerjian [00:45:21]:
The regret is that we succumbed to our fears. Fears of lack of money, fears of rocking the boat, fears of my spouse will leave me if I do what I want, fears that I’m going to upset my kids. And it’s about putting other people, other people’s needs before ours. And ultimately, here’s the question. If you take that chance, if you take that risk to be who you are meant to be, what kind of message do you think that will send to your kids and grandkids? See, Grandpa took a chance at the age of 68 and started a new business. He took a chance and he actually left his spouse and went to Arkansas to start some farm. I don’t know.
Wes Moss [00:46:09]:
Wait, George, you didn’t move to Arkansas and leave your wife, did you?
George Jerjian [00:46:12]:
Not yet. We haven’t got there yet. But my point is that nothing is off the table.
Wes Moss [00:46:20]:
But we do so culturally, we do. Whether it’s in the United States or it’s in the UK. You’re right. The prevailing thought is that anything new and big is totally off the table. And you’re challenging that.
George Jerjian [00:46:34]:
What I’m saying is that, okay, here’s the point. Only in the face of death. And this is one of the reasons why in our society, we don’t like to talk about death. We don’t like to face death. And everything is anesthetized around death, right? Funeral homes, closed casket where nobody wants to see death, nobody wants to meet death. And we’re almost in denial. And we don’t realize that if we don’t keep this is what the Benedictine monks used to do. One of the things they used to be told is for 1500 years, Benedictine monks have been told to keep death. Top of mind. Why? Because, A, none of us know our date of death. Secondly, if you really want to engage in life and be present in the moment and enjoy each moment that we have which is not guaranteed, know that you might not make it to the end of the night. So here’s my question. Living in a lie because it’s convenient and we don’t rock the boat, we’re not helping anyone, least of all ourselves.
Wes Moss [00:47:52]:
George, tell me some. So you’ve dedicated your life to this new, let’s call it an unretirement phase, finding identity, finding purpose. How do we do it? How do you take I love this idea of just totally starting over, taking off the shackles and maybe some examples of folks that you have worked with or interviewed or talked to that really did a great job of restarting new beginnings, a totally new chapter. How do we do it, man?
George Jerjian [00:48:21]:
Okay, first of all, I wish everybody could do it, but obviously everybody has to make that personal choice. You can take a horse to water, you can’t force it to drink, to give examples. I mean, I’ve got three at the top of my mind, I’m thinking of a guy, actually a woman by the name of Judy from Nashville, Tennessee, right? Here’s a woman who was depressed for years. She was unhappy, depressed. She didn’t know what to do. She was retired and she was stuck. And then she did my digital course, my eight week online digital course, and transformed her life completely. In fact, on my website, I’ve got her testimonial. She says I saved her life. I’m not sure I go that far, but it’s very nice of her to say that. But she said I saved her life because now she’s totally engaged in what she’s doing. She’s working towards getting herself she was in It and health and I don’t know, for six years or something, she was like, drifting, going nowhere, very depressed, everything semi retired. I don’t know if she was semi retired or fully retired. I think she was sort of fully retired. But she did my course and she found herself creating a new beginning for itself. And she’s now finishing a personal trainer certification.
Wes Moss [00:49:57]:
Totally different than what she used to do.
George Jerjian [00:49:58]:
Yeah. And now she’s going to focus on people her age. So she’s serving her tribe, which is what I do. Right. My clients range between 55 and 75. Right. That’s my purpose, is and in fact, it’s on my website. It says my elevator pitch is I help retirees, find a new beginning. So she has found her new beginning. So that’s Judy from Nashville, Tennessee. Then I have John Rick from St. Louis, Missouri. He was a fundraiser. He’s actually no, he’s 80 something now, 82 and five. Four years ago, I helped him. He wes struggling because at 78, he couldn’t find new clients. New clients would worry that he might drop on the job. Right.
Wes Moss [00:50:54]:
So old to hire you.
George Jerjian [00:50:56]:
Yeah. So we sat down and we worked out. He loves what he does, fundraising. It’s his passion. And his trouble was he couldn’t find clients. So we worked around it and he discovered that if he worked with a company, a fundraising company, if anything happened to him, there’s a fallback situation, so all is not lost. And the company recruited him, and off he goes. He’s now serving first of all, he says he’s got more energy, enthusiasm now than he’s ever had at 82. At 82, he’s now helping five schools in St. Louis in a poor black neighborhood that don’t have money. He’s almost doing pro bono, but he’s pitching it to very wealthy people who will then back pay him for the work he’s done. So he’s actually kind of paying it forward and helping them to find wealthy donors who will put the foundation stones for endowments for these five schools in St. Louis. And he says, I’ll die a happy guy.
Wes Moss [00:52:18]:
The work I’m doing, never been happier. So. Judy. John. This is us. I love this.
George Jerjian [00:52:25]:
Yeah, I’ve got one person in the well, I’ve got two in the UK, but I’ll just share one more. Karen. Karen was a nurse who then became a carer. And then she opened a business as a carer, hiring former nurses to do caring work and earn more money. And she reached the point in her life where she’s retiring soon and she doesn’t know what to do. So she did my course, and now she’s created, right, this concept because we work on imagination, right? There’s no imagination. That’s stupid. Throw out what it is you want, what is it you love to do, what gives you joy working down that path? What do you lose all sense of time in? And the other question I have, which is beautiful and it gets so much results, is what are you afraid of?
Wes Moss [00:53:23]:
Hold on. I understand imagination, which is a wonderful word. I love the thought around. I think I use curiosity a lot, but I think I like the idea of imagination. You’re just totally brainstorming around what you would maybe want to do at some point. And nothing’s off the table. The farm in Arkansas, anything’s on the table, nothing’s off imagination. But what is it about? What are you afraid of that works?
George Jerjian [00:53:46]:
I’ll tell you what it is. Before we do that, can I just finish about Karen. She’s now looking she’s got herself a van campervan, and she’s going around Europe visiting her dad in Spain, and she’s doing all the stuff that she was going people think about doing in retirement but never get round to it. Guess why? They have identity issues they have to deal with. And that goes on the back burner. And before you know it, they’re in a nursing home and it’s over.
Wes Moss [00:54:12]:
It’s over.
George Jerjian [00:54:13]:
So you’ve got to do it.
Wes Moss [00:54:15]:
Karen’s running around Europe in a van.
George Jerjian [00:54:17]:
In a campervan, but wait, in a luxurious campervan. But her sort of dream is now to have a kind of health center in a large field near the sea in Norfolk, in the U. K. And have holistic pods around the center where people in that sort of health and wellness can come and rent for their clients. And she’s going to make honey, she’s going to make various stuff, but she’s got this wonderful thing and she’s going to sell out. She was afraid one of her daughters, who’s on her own would feel bad that she’s leaving her. And I go, well, might she not join you? Why is it that you see, this is what parents do. We do it for other people. But again, if you think big, they’ll come with you. So here’s the thing. You’re turning things around. So that was Karen. But coming back to your question about fear. Why is fear so important? Fear is inculcated into us as we’ve grown up. Don’t do this, don’t do that. You’ll hurt yourself. Children are fearless. Puppies are fearless. They don’t know. They just try new things. And the topic you talked about, curiosity is a huge thing. Children always asking questions. We we’ve stopped asking questions. We only make statements and declarations. Wes, don’t ask questions. Because if you ask questions, it means you’re stupid. And you don’t know. You have new experience. Get real. So curiosity is hugely important, but coming back to fear, and I love this quote from Joseph Campbell, the American Mythologist, who said, the cave you fear to enter holds the treasure you seek. In other words, what you’re looking for is right behind that fear. So what are you afraid of.
Wes Moss [00:56:30]:
As you take people through this journey, this new beginnings? Whether it takes in in your case, it maybe takes a couple of months. You say it’s eight weeks, but that’s a fair amount of time to put into it. But it doesn’t seem like a tall order either because it is such an important restart. So you take people through for, I don’t know, you said eight weeks or so, and you’re constantly getting them to imagine what they could be doing, drop the fears of what they think they shouldn’t be doing, and ultimately they arrive at some sort of new blueprint or new destination. That’s what your purpose now is.
George Jerjian [00:57:10]:
Okay. In a nutshell, yeah. So my purpose is, if I can rephrase that, is people do this eight week course, which is 90 minutes each week. This is the live 119 minutes each week with me. I go through a 30 minutes presentation to give them the material, and the next hour is spent on the exercises. And the reason I spend that and I kick off with the exercises is because it starts to trigger things and they start asking questions and then suddenly, oh, yeah, that applies to me, too. So there’s a lot of banter that goes on and conversation, and each week it’s the same thing until the 8th week, we end up collating all these exercises into a one page document, which I call a blueprint. Now, the blueprint is effectively saving them eight years of work.
Wes Moss [00:58:13]:
Because it took you eight years to figure this out.
George Jerjian [00:58:16]:
It took me longer. I’m just being generous. It took me longer. What I’m trying to do is fast forward from where you are now, retired, stuck to moving into the next stage. And I was lucky. Most people who’ve been retire for 810 years, well, I was semi retire, so it’s not quite the same. But if you’re retired, this starts to go, it’s over, you can’t come back.
Wes Moss [00:58:42]:
The plane has already landed. And in your case, you were almost about to be landed and you really took the plane out of a nosedive.
George Jerjian [00:58:50]:
I was so unhappy, I pushed myself out and I went to learn about mindset. And I mean, the story I didn’t tell you is I came to the point where it was so bad, I ended up doing a 30 day silent retreat in North Wales.
Wes Moss [00:59:08]:
What is that?
George Jerjian [00:59:10]:
That wes one of Wales.
Wes Moss [00:59:12]:
I want to say across the if I would be in in near Liverpool, and I look across almost a bay and I can see whales. Where was I?
George Jerjian [00:59:23]:
Yeah, I was near Snowdonia, the Mount mount Snowden, which is not too far away from where you were just pitching, and it was in the Clid Valley. Beautiful.
Wes Moss [00:59:35]:
A silent retreat.
George Jerjian [00:59:37]:
30 day silent retirees. It’s an ignatian Jesuit retreat.
Wes Moss [00:59:43]:
Dreadful, by the way.
George Jerjian [00:59:45]:
I know it sounds dreadful, believe me, it was one of the best investments I’ve made. Me. I’m a talker. Three days in, I was ready to shoot myself.
Wes Moss [00:59:55]:
This is fascinating to me. So, a silent treat. Is it truly silent or is there some there’s some conversation. Come on.
George Jerjian [01:00:01]:
Okay, first of all, no newspapers, no TV, nothing, no smartphone, everything is off the table. You have no connection to the outside world. All that white noise is taken away. So that’s the first thing. When you say silence, they give you two days to sort of settle in, right? And then it kicks off at 05:00 p.m. On the third date. Now, three days in and I was sweating. If I had come by car, I might have left. I might have just gone in the car, said, Screw this, I’m out of here. But I resisted all impulses to leave and to stay in and to gradually decompress and go into that silence, which most of us avoid because we don’t really want to know. That’s why we have a lot of social activities and stuff we don’t want to go in. And this journey in retirement, by the way, is a journey of the interior. There’s a galaxy inside you. You’ve no idea. You haven’t even touched it. We die as virgins before we’ve even explored ourselves. We always look to explore the universe outside us, and we don’t realize there’s a galaxy within us.
Wes Moss [01:01:27]:
I feel like almost everything you say is like a great quote. You almost speak in wonderful quotes. There’s a galaxy thank you. Within us. There’s an entire galaxy within us. So three days in, you’re totally silent and keep going. Are you really not able to there’s nobody to talk to. There’s got to be a guide or a SHERP or something.
George Jerjian [01:01:48]:
Of course there is. There’s a spiritual director. I had a wonderful woman, a nun, who was a psychologist. Yeah, psychologist.
Wes Moss [01:01:57]:
A psychologist. Nun. All right.
George Jerjian [01:01:59]:
Yeah, in Wales. Wonderful. I had a meeting with her every morning at 11:00 for half an hour, 30 minutes in, which in that 30 minutes, you spend the first 15 minutes sharing what was going through your head, your mind, your heart, the previous day. And the next 15 minutes is on what you’re going to be doing the next day, the current day. So three days in, I remember I was gagging to speak to a nun. Can you imagine? That’s how bad it was. So she came in with two cups of tea, one for her, one for me, and I said, Sister Ann, it’s so good to see you. She nearly dropped those cups of tea. But anyhow yeah, but she was a lovely woman. And great banter. She didn’t take any prisoners. And it’s amazing. I mean, one of the things that came out of that was an exercise which, by the way, I do in my course, in a slightly sort of lighter version, is doing an audit on your life, which means going back to the very beginning childhood. I chose a house people can choose a river or whatever. I chose the homes I’d lived in throughout my life. And so I went in each home and I thought, what good stuff happened here and what bad stuff happened? And I’m a writer, so I wrote two notebooks, thick notebooks over that sort of month of all the stuff that was coming out, and I wrote it. And I was able to then go back and look at what I’ve written. And I recognized that none of the good stuff that happened in my life could have happened without the preceding bad stuff. In other words, the difficulties and challenges I had opened me up to new things and good things that could not have opened up without the preceding. And in the end, I ended up selecting twelve stories in my life. And I wrote a book called Spirit of Gratitude. Crises are opportunities because opportunities invariably come to us during a crisis. So, for example, our lives are going beautifully, humming away, and suddenly shit happens. And that’s all taken away from you, right? And it can happen to any of us. It probably does, and not just once. And it forces you to go down a road you would never have gone down. And so, in a sense, having done that, I realized that even my bone tumor was a blessing in disguise. Now, you could have told me that when this was happening and I would have looked at you like you need some sort of an operation, there’s something wrong with you. But on reflection, in hindsight, it was a blessing in disguise. I woke up.
Wes Moss [01:05:18]:
So after 30 days of this mostly silent period of time, you walked away with really the true belief that it is only the difficult times that it led to your own prosperity and your own better place to be.
George Jerjian [01:05:38]:
I think what it is is that we’re so focused on pursuing happiness, we’re so focused on chasing things that we don’t realize that you don’t need to chase. You can attract. It’s just the reverse. And it takes the stress out. But it’s such a difficult thing to get your head round because we’ve been programmed differently.
Wes Moss [01:06:07]:
Tell me about that, though. Tell me your thought around attracting relative to chasing. That’s interesting.
George Jerjian [01:06:14]:
Let me give you a perfectly simple explanation, right? I wish I’d known this when I was 1718 and started dating.
Wes Moss [01:06:24]:
Well, you’ve left your wife to move to Arkansas already.
George Jerjian [01:06:28]:
Oh my God. If you’ve projected that god knows how many people are projecting that now. No, my God, this is not good news. But here’s my point. We’re always chasing. We like something, we want it, we chase it. And what that does is it repels and makes your job even harder. Right? So reverse it. If there’s a girl that you don’t like chasing you, what do you do? And maybe her brother’s your best friend. Oh, my God. What do you do? Right? So this is what I’m saying is that if you stay within your own power, right? And you do what you like, you do what you enjoy, you attract people towards you.
Wes Moss [01:07:22]:
Yeah. A new beginning. You’re right. It restarts that law of attraction. And when you’ve found an identity and a purpose, you’re right. It’s a motivating thing. There’s a lot of inertia to that. Not just to you internally, but you’re right to the outside. To the outside world. I wanted to as we wrap I don’t want to keep you for hours and hours, but I just so locked into our conversation. What do wes do about health? 50% of people list that as the number one challenge with worry. Which is, again, an interesting data point that I’ve not discussed before. I didn’t realize there was such a worry around health. When we’re in retirement, is there a way to put that at ease or do we just come to peace with that? What is your prescription for that?
George Jerjian [01:08:12]:
Probably both. I think the thing about the word health really denotes you have the word heal. In health, it’s about healing. And healing isn’t about popping pills or going to seeing your doctor. And in retirement, we have a lot of time now to worry about health because we’ve got so much time. What do we do? If we’re not worried about money? We’re worried about health because our conscious mind is open 10 hours a day. Our subconscious mind sorry. Our conscious mind is open, say, 10 hours a day. Our subconscious mind is working. Twenty four seven. And if it’s not focused on solving problems, creating stuff, doing positive things, it will do the reverse. It will create problems. So when we have time on our hands and we’re not focused, we’ll start to look for problems. And so my point is that if you’re mentally and socially engaged you won’t have to worry about your health. It’s going to look after itself. So that’s the first point. The second point is that moss of identity and retirement, right? We’re talking about mental health issues, emotional health issues, psychological health issues, spiritual health issues. And all because you don’t know who you are now. But if you create a new beginning, you now have a whole new life ahead of you where you might not have the energy that you had when you were in your 40s, but guess what? You’re going to have a different kind of energy. A kind of spiritual energy. You’re moving from knowledge to wisdom. You’re moving from role to soul. You’re in a different place. And it. Was Cicero, the Roman philosopher and senator, who said, old age is the crown of life, our life’s last act, which means the best is yet to come. But we live in a consumer society where if you hit 30 or 35 in California, you’re over your life’s over it’s, finished.
Wes Moss [01:10:44]:
35 in California is old.
George Jerjian [01:10:46]:
Right. It’s over. It’s not. It’s just another new beginning, and you have to believe that.
Wes Moss [01:10:56]:
How much fun do you have doing these courses as we wrap? Do you do these in? Well, obviously you do them via Zoom or online, but you’re there for these. Or this is something a self study?
George Jerjian [01:11:07]:
No, I have three courses. The first one is a 1 hour taster course, so people can jump in, have a look at it, feel it, look under the bonnet, see if they like it, and then they can move to a choice of the next two. One is a digital, pre recorded version of the eight week course, including how to do the exercises. There’s all videos. It’s already packaged. That’s at $195. So nobody can say, I can’t afford it.
Wes Moss [01:11:38]:
Sure.
George Jerjian [01:11:39]:
Listen, you’ve got another 25 years to go. Are you not worth $195? What is wrong with you? So I made it so that nobody could use that excuse.
Wes Moss [01:11:48]:
Sure.
George Jerjian [01:11:49]:
But I also have my live. When I say live, it’s live on Zoom.
Wes Moss [01:11:55]:
Sure.
George Jerjian [01:11:55]:
I don’t have any lives because it’s just not economic for anyone, not me or any or the client. And the live ones are fully engaged, 90 minutes each week for eight weeks, and that’s what I offer to people. And I can only do about five, six of those. So I’m going to reach a point not too far from now where I’m going to have to train trainers.
Wes Moss [01:12:22]:
Yes, you are.
George Jerjian [01:12:23]:
And my issue is that I’m happy to train the trainers, but I don’t want to run the business of the whole operation, because that’s not what I want to be doing. I’m happy to train the trainers because that’s what I love doing. For me, that’s not work.
Wes Moss [01:12:42]:
Are they one on one or do you have multiple people with it?
George Jerjian [01:12:44]:
One on one doesn’t work. No.
Wes Moss [01:12:46]:
You’ve got a few people at one time, right?
George Jerjian [01:12:49]:
I have had one to ones because that’s how I started. You can only start one to ones, but they’re not economic.
Wes Moss [01:12:56]:
So now you can have 20 people and you’re live 20 people.
George Jerjian [01:13:02]:
I’m hoping to ramp up to maybe 200, which won’t be as deep as if you do it with ten people.
Wes Moss [01:13:10]:
Sure.
George Jerjian [01:13:10]:
But it’s still going to be way better than not having done this at all.
Wes Moss [01:13:16]:
All right. This is amazing. This is so much fun. I know we didn’t really talk a whole lot about money, but the reality here is that if we are doing this next act, new beginning, complete restart, and you call this a couple of different things, but again, new beginnings. Really is. I think it really embodies. It discovering your purpose. It also typically will take care of so many other worries. A, when you talk about health, if we’re really engaged in something else, we’re less worried. We’re also probably attracting some sort of financial benefit as well.
George Jerjian [01:13:53]:
To your point, ultimately, yes, it’ll take time, like everything else. But here’s the thing with retirees and our sooner generation, a lot of whom have started new businesses, they’re also more likely to succeed because they’ve got experience.
Wes Moss [01:14:08]:
They’re more likely to succeed?
George Jerjian [01:14:10]:
Yeah, they’re more likely to succeed because they’ve got experience. They know how to recover from failure. They know that failure is kind of the building blocks to success. I’ve had to fail many times to get to where I am. It just didn’t happen overnight. And the thing is that it does cover everything else. And this is kind of you’re moving from faster horses to the motor car. That’s what you’re doing. It’s a quantum leap, right, that you.
Wes Moss [01:14:42]:
Didn’T know you weren’t asking the right question to begin with.
George Jerjian [01:14:47]:
Yeah, but you can only start with the wrong questions, and then you slowly find out the right questions and you don’t know what you don’t know.
Wes Moss [01:14:55]:
If I asked people what they want, they would have said faster horses.
George Jerjian [01:15:00]:
Little do they know, they want a question in retirement. If you’d ask people what they want in retiree, what do they tell you? Health, money, purpose. But it’s not just that. There’s that underlying problem, which is identity, and that is intricately linked to purpose. And as you say, if you find a new beginning for yourself, no more health worries. Well, I shouldn’t say that because everybody has some health, they diminish. And because they go out of mind, out of sight, out of mind, they’re no longer priority. Our mind can’t differentiate between reality and fantasy, and by that I mean our subconscious mind cannot. And that’s why the adage, Fake it till you make it works. I hate that adage, but it actually works because the mind can be fooled right into thinking. And we’re kind of fool it’s not so much that we’re fooling our minds, because if we think the reality of where we are in retirement, being stuck is reality, well, that’s the reality you want. That’s the reality you get. When we come to the other bit, the e of dare is about expansion, right? You look at a mountain and all you see is a mountain. Move 100 yards to the right and you can see behind the mountain there’s a village. Hey, I did not know that. New opportunity change the way you look at something, and what you look at changes.
Wes Moss [01:16:40]:
We’re going to leave it on that note. George Jurgen, thank you, my friend. God bless you. Thank you for being here, and let’s stay in touch.
George Jerjian [01:16:47]:
Thank you, Wes. Been a terrific interview. Thoroughly enjoyed it.
Mallory Boggs [01:16:51]:
Hey, y’all. This is Mallory with the retire Sooner team. Please be sure to rate and subscribe to this podcast and share it with a friend. If you have any questions, you can find us@wesmoss.com that’s wesmoss.com. You can also follow us on Instagram and YouTube. You’ll find us under the handle. Retire sooner, podcast. And now for our show’s. Disclosure this podcast is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. It is not intended to and should not form a primary base basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment or financial planning considerations. Please refer to the full disclosure in the Podcast description for any additional information. Call in with your financial questions for Wes to answer: 800-805-6301Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcastThis information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
- Wes Moss [00:00:00]:
The post #156 – DARE to Discover Your Purpose with George Jerjian appeared first on Wes Moss.
Inflation has dominated financial conversations for quite some time, and rightfully so. The Federal Reserve (The Fed) recently raised interest rates by a quarter of a percentage point, totaling five full percentage points since March 2022. Remember, the Fed helps combat rising inflation through raising interest rates. However, we may finally be at or near the end of a rising interest rate environment. Don’t just take my word for it, take Fed Chair Jerome Powell’s. He went as far as to say, “We’re closer, or maybe even there,” referring to the finish line of rate increases. (SOURCE: REUTERS)
Inflation, as measured by the Consumer Price Index (CPI), dropped in April 2023 to the lowest level consumers have seen in two years. Was that welcome news? Definitely. But does that metaphorical sigh of relief translate to more money in your pocket? Not necessarily. It’s safe to say many Americans don’t feel any less financial pain than before rates started dropping.
Combat Wilting DollarsWe’re living in a period of wilting dollars. Let me explain.
For some, their wallets have been lighter because they had to buy a new or used vehicle, and the sticker price was more than they wanted to spend. Or, maybe it was the family vacation, groceries, school clothes for the kids, diapers, baby formula, and so on. Others may have had to transfer money out of savings to cover a monthly bill increase. Or maybe the 40 percent rise in home prices meant they refrained from buying that house for which they’d been saving.
All this gets discussed within the premise of “when will the rate of inflation get back to a more normal level of 2 or 3 percent?” However, I think we’re putting our focus on the wrong number. The rate of inflation will very likely continue to ease, but how much higher are prices now, and will they remain there forever?
Even if the inflation rate magically fell to 0 percent next year, that would only mean the surge in prices had stopped…and it would do nothing to have reversed the surge we’ve seen in overall price increases. Consequently, we need to look at the more permanent impact of higher prices and identify what can we do about it.
Let’s look at the following examples.
The Bureau of Labor Statistics (BLS) keeps track of used car and truck prices between two and seven years old. Subcompacts, compacts, intermediates, full-sized, and luxury cars, as well as light trucks, pickups, vans, specialty, and sports utility vehicles, are all included in the index.
Used car prices shot up 55 percent from 2020 to 2022. Since then, prices have fallen 14 percent, but that’s still a net increase of 32 percent. So the used truck that would have been $20,000 in 2020 is now approximately $26,400 — taking an extra $6,400 out of your budget. That $6,400 expenditure might mean the cancellation of a family trip or the underfunding of a retirement account.
We naturally view all of this through the lens of the current price vs. the previous price. So if cereal is a couple of dollars more than it was, it’s annoying but not the end of the world, right?
But now, let’s look at it in reverse. Presuppose that every dollar in your budget is earmarked for a particular expense. You have food dollars, gas dollars, car dollars, etc. Using car dollars as an example, set the baseline of a $1 value in January 2020, right before the pandemic. Today, that same dollar is worth about seventy-five cents. Inflation looks a lot more real from this angle.
You don’t have less money, but your money is worth less. That’s what I mean by the wilting dollar!
Now, let’s look at what inflation has done to every dollar in your wallet, income, outflow, and savings.
The overall CPI level was 260 in January 2020, whereas you can see on the chart above that it’s 301 today. That’s a 16 percent increase in aggregate prices, which includes major categories — everything from eggs and bread to beer to gasoline and even airline tickets.
In other words, today’s dollar, the one that was worth $1 in 2020, is now only worth eighty-six cents.
No matter what happens to the inflation rate, it’s improbable that the eighty-six cents will ever return to being worth a dollar. That is unless the economy plunges into deflation, which presents its own set of problems.
Bottom LineThe good news is that the United States economy powers so many inflation-resistant investment opportunities to help folks plan for and achieve a happy retirement. From growth stocks, dividend stocks, mutual funds, ETFs, real estate funds, energy funds, energy pipeline funds, and beyond, the more assets we can keep outside of cash, the more we have the potential to protect ourselves from wilting dollars. Equity investing is designed as an inflation elixir. As with most things in life, it’s not without risk, but there are sensible ways to proceed based on historical trends and diversification.
I understand that the U.S. has its share of problems: political divisions, the environment, national debt, the war in Ukraine, and tensions with China. It’s all concerning, and any of those can have severe personal and financial implications. But when you look at the stark reality of wilting dollars, to battle against the inevitable decline in your purchasing power, is to keep up with and outpace inflation. The optimal way to do that is to prioritize getting your dollars out of your wallet and into something that should keep pace over time.
If you’re sitting on the sidelines due to fear and pessimism, you could risk letting your dollars wilt. I’m not blindly optimistic, but I do believe in the army of American productivity and the US equity markets. We’re lucky that its’ growth opportunities can help shield us from the perils of inflation over time.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post A Guide To Inflation For Investors appeared first on Wes Moss.
The movie, “Rounders”, (1998) starring Matt Damon, Ed Norton and John Malkovich widely popularized the poker game known as “No-Limit Hold‘em”. In the culminating scene law school student Mike McDermott (Damon) defeats Russian mobster Teddy KGB (Malkovich) by going “all-in” on a $60,000 pot. He settles his and Worm’s (Norton) debts, drops out of law school and leaves New York for Las Vegas to play in the World Series of Poker.
I can’t think of that scene without hearing Malkovich say to Damon in an exaggerated accent, “…and in in my club I vill (will) splash the pot venever (whenever) the (insert bad word) I please.”
If you are neither familiar with the movie nor the game Hold’em, here are the basics.
Each player is dealt two “hole cards”, face down, so that no player knows what the others are holding. Subsequently, five community cards are dealt face up in three rounds. The first round consists of three cards called, “the flop”, followed by the fourth card known as, “the turn”, and the fifth and final card referred to as, “the river”.
Each player uses their two “hole cards” and the community cards to make their best possible five card hand ranking from: Royal Flush (highest), Straight Flush, Four-of-Kind, Full House, Flush, Straight, Three-of-a Kind, Two Pair, One Pair, to High Card (lowest).
There are four rounds of betting; pre-flop, post-flop, turn and river where each player in turn may check (pass), bet, or raise any amount over the minimum raise and up to all the chips a player has in front of them known as an “all-in bet”.
Unfortunately, I can never seem to remember if a Flush beats a Straight which has led to my chagrin a time or two. But let’s not go there.
The real attraction to Hold’em, in my opinion, is that veteran players (“rounders”) make calculated decisions to check, bet, raise, or fold as the game progresses because mathematically they are dealing with a finite probability field. There are only 52 cards in the deck. As each card is dealt the probability of winning the pot changes for each remaining participant. On televised Hold’em tournaments the odds of winning for each player are recalculated as each round of betting unfolds. It’s fascinating to watch.
On the one hand, it is a game of risk. On the other hand, that risk is quantifiable as it relates to the probability of winning.
A parallel can be drawn to investment behavior considering that the spectrum of the investor mindset ranges from risk averse to risk seeking.
Risk averse investors prefer to take less risk for a more certain outcome albeit for a lower reward potential. Risk seeking investors conversely assume more risk for a less certain outcome in exchange for a higher potential reward.
Risk aversion to investing in the stock market can be amplified by the abundance of 24-7 outlets focused on day-to-day volatility, news headlines, opinion pieces, internet blogs all seemingly highlighting present and future uncertainty. How will financial markets be affected by Federal Reserve rate hikes, inflation, politics, bank failures, the debt ceiling, pandemics, natural disasters, wars? The wall of worry can be paralyzing and perhaps push risk averse investors to try to “time the market” by moving money into or out of stocks as opposed to taking a “buy-and-hold” approach regardless of market volatility.
It is difficult to tune out the noise.
In Hold’em, a player can use the estimated probability of success and reduced uncertainty as the game progresses to inform their decisions. As a self-professed poker novice, math nerd and data junkie, I challenged myself to see if similar logic applies to investing. Can the probability of market returns be calculated to better inform investment strategy? In my opinion, yes, while keeping the two caveats in mind:
- Past performance (historical data) is not indicative of future results.
- Future uncertainty (unlike a deck of cards) is essentially infinite (not finite).
The chart below summarizes 87 years of S&P 500 Index data (S&P 500) from March 27, 1936, through March 24, 2023.
The bars represent the range of annualized total returns by holding period (as opposed to annualized return by calendar year). For example, a 1-Year holding period can be from July 15, 2019, to July 15, 2020, as opposed to a 1-Year calendar year from January 1, 2019, to January 1, 2020. The rationale for using the holding period is that investors can choose to invest at any point in time. They are not limited to investing only on the first day of any given calendar year.
Source: Bloomberg – As of 3/24/2023
Four data points are shown for each holding period:
- The maximum annualized total return
- The minimum annualized total return
- The average annualized return
- The positivity rate (the percentage of outcomes that have a positive rate of return)
Let’s take the 1-Year holding period as an example:
The maximum return for the S&P 500 was +73% (+72.7%) from March 19, 2020 (which was near the market bottom of the COVID pandemic), to March 19, 2021. Wow, what a return in a single year. I’ll take that action! If an investor was able to pull that off, they would feel pretty good about the prospect of making future investments. Now flip it and go into the market on March 6, 2008, and cut bait on March 6, 2009. This hypothetical unfortunate soul was down -46% (-45.8%) and after that experience would likely never consider investing in the stock market ever again. And who would blame them? Even though you have a 77% positivity rate for any 1-Year holding period from 1936 to 2023, the range of potential outcomes anywhere from down 46% to up 73% might not appeal to a risk averse investor.
But as we increase the holding period, we see three things happening:
- The positivity rate increases dramatically from 77% (1-Year) to over 90% (5-Year) to 100% (12-Year or more).
- The range of outcomes narrows significantly (getting smaller). From the 1-Year holding period to the 5-Year holding period, the dispersion between the minimum and maximum return contracts by 65% from down 46% | up 73% (1-Year) to a down 10% |up 32% (5-Year).
- The minimum is getting less and less negative and becomes positive at the 12-Year holding period (and beyond).
Now let’s analyze the 15-Year holding period:
The worst annualized return was about +4% (+3.7%) which was from September 8, 2000, to September 4, 2015. That might not sound so great but consider that this period included the “Dot.com” bubble burst (2000), the September 11th Terrorist Attacks & Enron (2001), The Iraq War (2003), Hurricane Katrina (2005), Bernie Madoff and the Global Financial Crisis (2008). All in, this specific period included two separate market declines of more than 45%. One might logically assume that the best annualized return of +20% (+19.8%) from August 6, 1982, to August 1, 1997, was a cakewalk. Not exactly as this period included Black Monday (1987) where the market dropped 33% in just 38 trading days as well as the Friday the 13th mini-crash (1989) and the 1990 Recession.
The point is that realizing either outcome (+4% or +20% annualized) required staying invested for the full 15-Year holding period.
And just in case you were curious about how the average inflation rate (measured by the Consumer Price Index “CPI”) compared to the minimum return during the 100% positivity rate periods, here is the data:
- 15-Year Minimum +3.7% | Average CPI 2.23% (9/8/2000 to 9/4/2015)
- 20-Year Minimum +4.3% | Average CPI 2.17% (3/19/2000 to 3/20/2020)
- 30-Year Minimum +8.9% | Average CPI 2.44% (3/20/1990 to 3/20/2020)
So even the minimum annualized return outperformed inflation for these holding periods.
Bottom Line:
The stock market, like poker, may feel like a gamble to some of us. Market risk is inherent in investing, there is no doubt about it. But the historical data presented here reflects that longer holding periods generally result in a more favorable outcome than shorter holding periods when it comes to returns and outpacing inflation. We can never fully remove uncertainty from investing. And while we cannot predict the future, I personally subscribe to the following sentiment:
“History may not repeat itself, but it often rhymes.” – Samuel Clemens (aka Mark Twain)
Simply meaning because we are humans, we exhibit certain behavioral patterns, and these patterns result in market cycles. And while the combination of today’s circumstances may not be exactly like a past period in our history, there are certainly similarities and conclusions we can draw from those analogues.
The key perspectives from this analysis are, as the holding period increases:
- The probability of having a positive market return generally increases.
- The range of returns from minimum to maximum contracts (narrows).
- The minimum return shifts upward (becomes less negative) eventually becoming positive.
By no means is there a one-size-fits-all approach to investing such as buy-and-hold vs. market timing. Everyone has their own unique set of circumstances, risk tolerance and time horizon. If you find yourself grappling with whether to hold or fold your investment strategy, consider working with a trusted, qualified investment advisor to help you find your balance.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. For stocks paying dividends, dividends are not guaranteed, and can increase, decrease, or be eliminated without notice. Fixed-income securities involve interest rate, credit, inflation, and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed-income securities falls. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions,
The post Know When to Hold‘em or Fold Your Investment Strategy appeared first on Wes Moss.
In today’s episode, Wes Moss shares his watch experience of the film Air with Retire Sooner producer, Mallory Boggs. Air is the new movie directed by and starring Ben Affleck, Matt Damon, Viola Davis, and others that depicts Nike signing Michael Jordan to one of the most lucrative shoe deals of all time in 1984. Wes and Mallory discuss the film’s relation to fantasy football, Warren Buffett’s concept of the American Tailwind, and how one corporate idea can create a billion-dollar company.
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #155 – Key Takeaways from AIR: The Story of Nike and Michael Jordan appeared first on Wes Moss.
Back in February we suggested five books that we believe could help readers on their journey towards a happy retirement. You’ve all read them by now, right? At the very least, I hope you’ve got them on your nightstand, making you feel guilty when you stream Netflix instead.
For those who consumed all the wisdom nuggets and are hungry for more, allow me to serve up the brilliant lessons I learned from sitting down with this next set of talented scribes. I’ve had the pleasure of interviewing these authors and learned so much. I hope you’re able to find a new book to add to your shelf.
1. The Power of Meaning: Crafting a Life That Matters
By Emily Esfahani Smith
There’s more to life than being happy.
As surprised as you might be to hear those words from me, Emily Esfahani Smith convinced me they are true. Between her international best-selling book and her extremely popular TED Talk, Emily argues that finding meaning in life is even more important than happiness.
In my quest of helping people retire, I come across many folks who have the finances figured out but need more post-career purpose. Emily helped provide more ways for retirees to find the answers.
Just like with retirement planning, it’s never too late to find your purpose. Read Emily’s book and put her wisdom into practice. Maybe you’ll discover belonging and gratitude in something as simple as your morning discussion with the barista, or who knows; perhaps you’ll win the Nobel Peace Prize for saving the world. The what is less important than the when. And the when is now!
Plot Summary: Emily offers advice about the tension between living a happy life and a meaningful life. The two aren’t always in opposition, but at times they can be. Emily has since made it her mission to show people how to perform worthwhile activities that make the world a better place and fulfill each of us deeply. She wants us all to examine and strengthen four pillars in our lives: belonging, purpose, transcendence, and storytelling.
2. What Will I Do All Day?: Wisdom to Get You Over Retirement and On With Living!
By Patrice Jenkins
Plot Summary: Your dreams shouldn’t have an expiration date, even in retirement. Patrice Jenkins, Ph.D., is an organizational psychologist, retirement speaker, and Founder of Day One Dreams. Patrice explained how it’s not too late to go after your dreams but implores you to start today. Next, she laid out the intricacies of success stories and some other juicy details from her book. She believes that two components lead to a thriving life and that there’s a common thread between doing so at work and in retirement. Finally, she gave her take on where to find the intrinsic motivation for reaching your dreams.
Ever the thoughtful sage, Patrice’s teachings offer up a one-two punch of willingness to adapt to daily retirement and planning for it in advance. She said there are new roles to learn and explained what retirement means to her.
3. Why I Find You Irritating: Navigating Generational Friction at Work
By Chris De Santis
Every generation thinks they’ve got it all figured out. The same kids who rebelled against their parents by listening to the “sinful” rock and roll of The Beatles later became moms and dads pleading with their offspring to “turn down that noise.”
How can we all find our way to enjoying the benefits of variety and compromise?
Chris De Santis helped me find the answer. He’s spent thirty years as an organizational behavior speaker, facilitator, and consultant. He has worked with some of the world’s largest companies to improve their productivity, performance, and overall workplace harmony.
This former Director of Training and Development for the American Medical Association broke down each of the following generations: Traditionalists (Born 1922-1943), Boomers (Born 1944-1964), Gen X (Born 1965-1981), Millennials (Born 1982-1996), Gen Z (Born 1996-2012), and Gen Alpha (Born 2012-today).
Plot Summary: As the title of his book would suggest, Chris isn’t shy about people being irritating. When a coworker in the adjacent cubicle has different behaviors and norms, we often avoid interaction. The more productive reaction, he noted, is to try to understand where each person is coming from. He believes we use preconceived judgments to see our younger coworkers as who we were at that age, not who they are now.
Chris asserted that the more we see each other as valuable parts of each other’s success or failure, the more we realize that by helping others, we help ourselves.
Chris feels that the key to the success of any society is more people in the middle. This sentiment fits with so much of my research on happy retirees. The happiest ones are absolute masters of the middle. Having too much or too little can wreak havoc. On the other hand, having just enough provides a glide path toward contentment.
4. The Way of Wanderlust: The Best Travel Writing of Don George
By Don George
Plot Summary: Taking an occasional trip is good for the soul, but have you ever thought about what a life full of traveling experiences could do? Legendary travel writer Don George shared what it’s like to create unforgettable memories.
He revealed when he caught the travel bug and got into travel writing, along with the piece that changed his career for the better. He also shared some of his experiences, including an astonishing Mount Kilimanjaro story and how he considers traveling a religion. In addition, he divulged details from his book, listed his favorite travel destinations, and discussed how his dad retired early to travel.
5. We Need to Talk: How to Have Conversations That Matter
By Celeste Headlee
Plot Summary: As human beings, communication is our superpower. Conversationation can lead to stress relief, the absorption of new information, and personal connection. Celeste Headlee, internationally recognized journalist and radio host, professional speaker, and author, shared ways to stop hiding behind emails, text messages, data, and statistics to start having more impactful conversations with one another.
Celeste explained how our brains could not do two impactful things at once, how conversations can turn negative, and why we should stop pontification during our interactions. She feels that each of us living our best life is the most powerful way to influence someone else. She also gave examples of how we can work on our listening skills, including why follow-up questions are helpful but saying “I know how you feel” to a loved one in need of listening is not.
It was an honor for me to speak with each of these authors. Gleaning their knowledge is one of the perks of my role as host of the Retire Sooner podcast. They’ve provided guidance for a happy retirement, and I encourage you to take full advantage. The perfect retirement is out there. Go grab it!
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post Retire Sooner Reading List (Part 2) appeared first on Wes Moss.
Once upon a time, a man stood on the moon’s surface. Looking back at the Earth, he couldn’t help but feel a sense of awe and wonder at its vastness. At that moment, he took a step back and imagined he was an investor in every company on the planet, with the entire population able to drive the fortune of all those businesses.
This line of thinking helped him realize that the true value of his home planet was not in any one corporate entity but in the collective efforts of billions of people working together to create goods and services and in the choices of their respective consumers.
He saw how population growth fueled the expansion of cities and economies, creating markets and driving demand for commodities old and new. He noted that productivity increases made it possible for people to generate more products with fewer resources. Finally, he marveled how innovation had transformed how we lived and worked — from the first telegraph to the latest breakthroughs in artificial intelligence and biotechnology, from carrier pigeons to high-speed internet.
But most of all, he saw how people all over the map were emerging from poverty, creating more aggregate consumption and fueling global economic growth. He realized that as the population grows, so does the economic pie — offering new opportunities for all willing to work hard and invest in the future.
As he gazed back at the third rock from the Sun, the man knew that the power of owning every company in the world came from harnessing a unified front of like-minded, inspired teammates working together to create a brighter future for all: a global army of productivity and economic progress.
Though he knew there was no air in space, he couldn’t help but feel a global version of what Warren Buffett calls the “American Tailwind.” He thought this is what Buffett must have meant when he said, “The pie gets bigger.” In a growing economy, the total shareable value increases over time. Neither the U.S. nor the international economies are zero-sum games. One person’s gain doesn’t have to equal another person’s loss.
How Does the Pie Get Bigger?As the world’s economy grows, there is more wealth to be shared by everyone, with the hope of increased prosperity and higher living standards. Let’s examine some examples of how the world economy grows and just how that pie actually gets bigger.
1. Global population growth has averaged about 1 to 2 percent per year.
Over the past one hundred years, the global population has grown at an average annual rate of about 1.4 percent. In 1920, the world’s population was approximately 1.8 billion, and by 2020, it had ballooned to 7.8 billion. In other words, it more than quadrupled.
To be clear, the population growth rate has slowed over time. In the early part of the Twentieth century, it was close to 2 percent, but since then the rate of increase has moderated. But despite the slower pace, the UN projects continued growth, estimating 9.7 billion people by 2050 and 10.9 billion by 2100.
2. Productivity growth has averaged about 1.9 to 2.3 percent per year.
In the US labor productivity (output per hour worked) has increased by an average annual rate of about 2.3% from 1948 to 2019, according to data from the Bureau of Labor Statistics. Over the entire 20th century, the annual rate of increase was about 1.9%.
3. Over 1 billion new consumers have been added to the global economy over the last thirty years.
How many people moved out of poverty in the last thirty years? Of course, the percentage can vary depending on how poverty is defined. However, based on the most commonly used measures, we can assess a few key facts.
According to the World Bank, the global poverty rate, the percentage of people living on less than $1.90 per day, fell from 36 percent in 1990 to 8.6 percent in 2018 (the latest year for which data is available). That math translates to more than 1 billion people climbing out of poverty over that span and into the global economy!
4. The S&P 500 earnings growth rate has averaged 6.8 percent over the past fifty years.
The average annual growth rate of S&P 500 earnings over the past fifty years (1971 to 2021) was approximately 6.8 percent, according to data from S&P Global. This average includes periods of solid earnings growth but also includes periods of steep decline, such as the recessions in the early 1980s, the Dot-com bubble in the 2000s, the Global Financial Crisis of 2007-2008, and the COVID-19 recession in 2020.
It is important to note that past performance does not guarantee future results, and there can be significant fluctuations in earnings growth rates from year to year, depending on various economic and market factors. But even despite that, the numbers are fascinating.
What Does All This Equate To?The sum of population increase, the productivity increase, and the earnings growth from the S&P 500 you get a total of somewhere between 9.7 -11.1 percent. Is it a coincidence that the S&P 500, an index famous for companies that harness the power of innovation and productivity, has come close to matching the same rate?
Source: https://dqydj.com/sp-500-return-calculator/
Bottom LineDespite World War I, World War II, the Korean War, Vietnam, the Great Financial Crisis of 2008, the Covid Pandemic of 2020, and even near catastrophes such as the Silicon Valley Bank collapse, we continue to find a way to grow.
We can’t always prevent bad things from happening in the world or the stock market. But if we react with patience and stick to the principles with which we began our retirement planning journey, we can continually move forward with an enriched context to create a better world.
As you prepare for retirement, let market history, growth data, and population trends give you the benefit of a broad perspective. Be like the man on the moon — visualize the global economy as an inspired team marching toward prosperity. Invest in the future and be patient enough to let it invest in you.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions,
The post Man On The Moon Takes A Look At The American Economy appeared first on Wes Moss.
Do you know why you make the financial decisions you do?
On today’s Retire Sooner episode, associate professor of Practice and Financial Psychology at Creighton University and director of the Financial Psychology Institute®, Ted Klontz, joins Wes Moss to discuss our subconscious beliefs about money that control behavior. Klontz explains the importance and assessment of Money Scripts®, beliefs that are rooted in our childhood that ultimately shape our financial health. They go on to discuss the mindset around saving, the practice of exquisite listening, and the advantage of curiosity over judgement when it comes to your relationship with money.
Watch the full episode!
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #154 – Money Scripts and Understanding Our Subconscious Beliefs Around Finances with Ted Klontz appeared first on Wes Moss.
Recently Wes Moss was featured on The Stacking Benjamins Show in a roundtable discussion. The roundtable featured Wes, writer Paulette Perhach, Joe Saul-Sehy, Neighbor Doug, and Stacking Benjamins in-house CFP, OG as they discussed how recent college graduates can best get a head start on adulting. You can find the episode wherever you listen to podcasts.
The post Wes Moss Featured on The Stacking Benjamins Show appeared first on Wes Moss.
It’s time to talk about the real problem with banks. No, not the recent collapse and calamity of Silicon Valley and Signature Banks, respectively. Thanks to the actions of the Federal Reserve to protect all depositors, it’s doubtful that very many of us should feel adverse effects from that situation. I’m referring to the real problem: banks don’t want to pay up for the privilege of holding your money.
According to Bankrate, the national average savings rate sat at less than 0.25 percent as of April 19, 2023. In contrast, 1 Year U.S. Treasury Bonds were at approximately 4.75 percent. For those without a calculator, that’s almost 20x the return for U.S. Treasury bonds, which are typically just as safe as typical savings accounts.
There are a few reasons for this mismatch. First, the big banks are, to some extent, relying on the perception that they are the “safest” place for people to put their money. Like the prettiest girl in school or beachfront homes in California, they’re in demand. They can get away with paying lower returns. Second, when the Fed raised interest rates, it hamstrung the ability of some financial institutions to issue home loans, a steady source of income of the banks. Lastly, some banks made the mistake of purchasing long-term, low-yield bonds before interest rates increased (for example, it caused trouble for Silicon Valley Bank). It’s tough for them to pay you 4 percent interest when their money is tied up and earning much less.
Though it’s particularly galling under the current circumstances, the recalcitrance of banks to pony up higher interest rates on your deposits is anything but a new phenomenon. It’s been true for so long that most of us fell asleep to the lullabying status quo. But now that we’re awake, alert, and aware, asking ourselves if there anything we can do. Yes, there is, and it’s already happening.
It’s taken about a year, but we are finally seeing money leaving commercial deposits and entering money market funds. The numbers are staggering. In about a month, money market funds ballooned to over $5.2 trillion.
The FDIC does not guarantee money market funds, but that doesn’t necessarily make them a risky alternative. As Ryan Ely, a Senior Investment Advisor at Capital Investment Advisors, said on a recent episode of my Money Matters radio show, “A lot of money markets are just U.S. Treasury money markets that are full of short-term U.S. Treasuries, which are highly liquid and, by and large, the safest investment available to anyone.”
In terms of risk vs. reward, these can be attractive and easy to purchase. Most people have a money market option in their 401(k)s. It probably didn’t pay much before, but now it might land somewhere between 4 to 4.5 percent.
For those who want to pass on a money market fund, a good ol’ fashioned short-term U.S. Treasury bond is another option. Any big brokerage firm should be able to purchase you one, and they are undoubtedly valuable assets for many folks.
Finally, it might behoove investors to search for a certificate of deposit (CD) or savings accounts at financial institutions paying higher yields. In the current higher interest rate environment, they are more common than we have seen in the past decade. All Federal Deposit Insurance Corporation (FDIC-insured) banks and National Credit Union Administration (NCUA-insured) credit unions cover deposits up to $250,000. You don’t need to solely rely on the big banks for this type of safety.
The bottom line is that we have entered a period of higher interest rates, and we now have some additional options to earn more interest on that cash. Sure, keeping some maintenance cash in the bank is still a good idea. However, the excess cash you may not need for everyday use could be earning more in a money market fund, a U.S. Treasury, or high yield CD or savings account.
Investing in equities remains an important part of preparing for and living through retirement.
However, now that interest rates increased dramatically, other high-earning safety assets like U.S. Treasury bonds and money markets exist to keep the conservative portion of your portfolio earning higher levels of interest than we have seen in quite some time.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions,
The post More Bang for Your Buck: Higher Levels of Interest Outside of the Big Banks appeared first on Wes Moss.
Why might famed businessman and investor Warren Buffett respond, “I don’t care,” when asked about a recession?
Today on Retire Sooner, Wes Moss dives into the Buffett mindset of sticking to your principles in long-term investing decisions and looking toward economic growth. In doing so, he discusses one investing planning strategy that could be essential to the journey of retiring sooner: investing in companies versus stocks. Taking Federal Reserve forecasts for 2023 into consideration, many companies can still survive, thrive, and have great returns. The episode concludes with the inspiration that having even a bit of the Buffett mindset may help you retire sooner than you think!
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #153 – Why Economic Forecasts Are Irrelevant To Investors (The Warren Buffett Mindset) appeared first on Wes Moss.
To err is human, but to Air is Jordan. It’s also the title of a new movie about Nike signing Michael Jordan to one of the most lucrative shoe deals of all time. Directed by and starring Ben Affleck, the film also touts Matt Damon, Viola Davis, Chris Tucker, and Jason Bateman. It premiered at the South by Southwest Film Festival in March and hit theaters earlier this month.
Set in 1984, Air zooms in on Nike talent scout Sonny Vaccaro (Matt Damon) and co-founder Phil Knight (Affleck), who clash over the strategy for a basketball shoe endorsement deal. By following some of the ten essential principles created by VP of marketing Rob Strasser (Jason Bateman), Vaccaro pulls off one of the most glorious underdog stories in business sports history.
There are so many lessons to be taken from the narrative, not to mention the gripping drama and magnetic aura surrounding anything remotely adjacent to Michael Jordan’s legacy. Of course, the jaw-dropping success of the deal is a story in and of itself. Though there’s never an exact formula to recreate lightning in a bottle, I think a few key takeaways apply to investing and retirement planning.
The Business of Change and InnovationInstead of the more traditional choice to split its $250,000 budget among three different NBA (National Basketball Association) rookies, Vaccaro implored Knight to go all in on Michael Jordan, creating a sneaker in his name. Despite having a solid foothold on running shoes, Nike only had a 17 percent share of the basketball market and had just laid off 25 percent of its workforce. In other words, the Jordan deal was quite a risk.
Why would Vacarro stick his neck out for someone who had never played a professional game? He saw Jordan as a generational talent and a catalyst for the future, and he was confident enough to bet his career on it. Luckily, Phil Knight ultimately gave the green light.
1. Participation vs. PerfectionThe Nike team went way above and beyond to complete the deal. Wooing players directly to sign endorsement deals was so verboten that Jordan’s agent, David Falk (Chris Messina), made Vaccaro promise he wouldn’t. Rather than letting this obstacle stop him, Vaccaro showed up at the North Carolina home of Michael’s parents to plead his case to Deloris (Viola Davis) and James (Julius Tennon) in person.
Unprofessional? Probably. Effective? Absolutely. Sometimes thinking outside the box is more important than following protocol.
2. The Paying Of DividendsOn top of the $250,000, already a meatier figure than Nike’s basketball division had ever paid to any athlete, they offered Jordan a revenue share, which was completely unheard of in that era. Phil Knight, CEO at the time, could have been removed from the board for making such an unprecedented move. But Knight knew enough to believe in Vaccaro’s faith in Jordan. He figured that if all went as planned, that high price would ultimately be a bargain.
Luckily for Knight, any anxieties were quickly extinguished, as the publicly traded company earned $162 million from the Air Jordan line in the first year alone. Today it brings over $5 billion annually, generating over an estimated $250 million worth of annual passive income for Jordan.
Today, Nike’s slice of the basketball pie takes up much more of the plate. According to the market research firm NPD, Nike and the Jordan Brand commanded 86 percent of the performance basketball market in 2019. Furthermore, 77 percent of NBA players wore Nike or Jordan shoes during the 2019-2020 season, an eye-opening stat from shoe database site Baller Shoes DB. As an example, to help put into perspective the contrast between pre-Jordan Nike and the one that exists today, $10,000 would have purchased about 40,000 shares of stock in 1982. In 2023, those same shares would be worth about $4.9 million. This in no way is a recommendation of Nike but simply provided to give context to investing.
To bring full circle the theme of breaking the mold to achieve success, Affleck and Damon’s new production company, Artists Equity, is following in the footsteps of trailblazers like Nike. With Air as its initial offering, Artists Equity is pledging to share a percentage of profits with the casts and crews of its films. “We’re trying to take a similar step, really, because I think that’s how you get the best work,” Affleck said at a March press conference for the film.
In many ways, retirement requires a commensurate mindset. At Capital Investment Advisors, we encourage our investors and retirees to find their core pursuits and believe in themselves. But, of course, there’s no right or wrong pursuit to shoot for as long as you decide to go for it. So my team and I created a core pursuit finder, which is meant to be a living, breathing guide rather than a tablet set in stone.
The lessons from Air can also be utilized in the financial side of retirement planning. Remember the words of Warren Buffett, the Michael Jordan of investing. He doesn’t get caught up in the angst of a potential recession because he looks at the bigger picture — what he calls the American Tailwind, and I call the Army of American Productivity. In time, markets recover and grow. In a 2008 NY Times interview, he said that “fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.”
I avoid recommending specific companies as this is a personal decision for each investor based upon their situation, but I do believe in the spirit of what Buffett was saying. Invest in solid companies as a matter of practice. Nike invested in Michael Jordan because they believed he was a solid talent that would generate long-term success. They weren’t trying to make a quick buck. Use that as inspiration.
When it comes to sound retirement planning, be like Nike: just do it.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. The mention of any company is provided to you for informational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any company. The reader should not assume that an investment in the securities identified was or will be profitable. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. For stocks paying dividends, dividends are not guaranteed, and can increase, decrease, or be eliminated without notice. Fixed-income securities involve interest rate, credit, inflation, and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed-income securities falls. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information is strictly an opinion, and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions,
The post Key Takeaways From Air: The Story Of Nike And Michael Jordan appeared first on Wes Moss.
Today on Retire Sooner, Wes Moss sits down with the three-time winner of Atlanta’s Best Divorce Attorney, Aaron Thomas, also the founder of Prenups.com.
As Aaron and Prenups.com will tell you, prenups are not just planning or anticipating for marital failure. He explains that they’re more of a set of rules for how your money, kids, and assets are treated during marriage and divorce.
Wes and Aaron go over the differences in prenup rules in Georgia versus other states, as well as the “first paycheck rule,” the cost of divorce, how having a prenup in place can help keep it down, and how to approach a prenup conversation. This episode concludes with a few interesting marriage statistics such as: On average, the happiest Retirees On The Block spend more time discussing finances with their partners (based on research for the book “You Can Retire Sooner Thank You Think”).
Watch the full episode!
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #152 – How To Communicate About Finances Before and During Marriage with Aaron Thomas appeared first on Wes Moss.
The first episode of my Retire Sooner podcast dropped on April 1st, 2021. By then, I’d already been hosting Money Matters on WSB radio for more than a decade, but I just couldn’t pass up the opportunity for long-form interviews, thoughts, and analysis from the nation’s best and brightest. So, my team and I set up our microphones and hit record. Our mission was to help a million people retire at least one year sooner, or at least a little earlier than they ever thought possible.
Two years into this massive undertaking felt like the right time for reflection, so I compiled a list of the ten most important lessons I’ve learned thus far. We’ll start with five and then finish up in the next installment.
Lesson #1Interview: Data Scientist, Seth Stephens-Davidowitz
What I Learned: Exactly what humans describe as ultimate happiness.
Seth has a unique way of understanding what people really want rather than what they say they want. As a data scientist and former Google employee, he doesn’t rely on answers compiled from survey questions or interviews. Instead, he uses Google Trends to dig deep into troves of anonymous search query data to see what people are asking about and searching for when they don’t think anyone is looking. This approach removes the inherent bias that can accompany the typical question-and-response method. It’s a little scary, but hard to argue with the results.
Seth found what he believes to be the hard and fast answers to ultimate happiness — what people want in this world. First, humans want to be by the water — overlooking a lake, river, or ocean. Their ideal temperature is around eighty degrees. They yearn to sit beside a romantic partner and experience intimacy — cuddling, hugging, or sex. Whoever coined the drink “Sex on the Beach” was really onto something.
Along with search data, Seth references the Mappiness Project, where people worldwide checked in multiple times a day (via smartphone alerts) to rate their happiness levels. The study instantaneously captured the participants’ actual states of mind and location through geolocation.
It determined the things that make people the happiest. What blew me away was how far “work” was down on the list — number thirty-nine out of forty! So it looks like retiring sooner is more crucial to happiness than ever!
Lesson #2Interview: Guru and Author, Ken Honda
What I Learned: The difference between happy and unhappy money.
In the United States, it’s effortless to fall into the trap of underappreciating income and over-agonizing expenditures. Perhaps property taxes seem too high, gas prices are through the roof, and parking tickets always strike when we’re most vulnerable. Culturally, as Americans, we resent these things, and those emotions can create an unhealthy relationship between us and our finances.
Ken Honda, the author of Happy Money: The Japanese Art of Making Peace with Your Money, flipped this on its head. He taught me how to reverse my personal money dynamic. Those who know me were surprised by how quickly his words changed my perspective — literally the minute after our interview. Of course, I’m still not perfect, but I’ve used him as an inspiration to be more grateful.
Part of the trick is to understand the root of where the money is coming in. Rather than visualizing the paycheck, imagine the people who pay for the services you provide. In Ken’s case, it’s his readers. One day, when his daughter thanked him for buying her an ice cream cone, he told her his readers deserved the thanks. Without them, he wouldn’t have been able to buy it.
His teachings can also be helpful from an investment perspective. Financial decisions are always easier in retrospect. We often make mistakes in real time but can appreciate our imperfect investments for the fruit they have borne.
Ken Honda stands out as an indelible muse. As a financial advisor, I’m trained to find ways to help your assets to appreciate, and I may not always focus on ways for you to appreciate your assets. It was a foreign concept to me, and that’s why I’ve been thinking about it ever since.
Lesson #3Interview: Writer, Editor, and Speaker, Emily Esfahani Smith
What I Learned: Happiness is overrated relative to finding belonging, meaning, and purpose.
Emily’s four pillars are mighty: belonging, purpose, storytelling (how you tell your story), and transcendence.
A sense of belonging is critical for happy retirees. It’s something that we all need to continue to work towards. Humans are social animals, and we can’t survive without a community.
Purpose means having a robust list of core pursuits that help give our lives meaning — an essential ingredient for a happy retirement. Emily’s words reminded me to focus on the purpose I set for my podcast. Purpose can help retirees find a reason to get out of bed every day.
Storytelling is vital because we all arrange our different experiences into a compelling narrative that allows us to define ourselves and the world. Without a good story, our wisdom is locked inside, unable to be shared with those who need to hear it.
Transcendence is about getting out of our own way to zoom out and view the world from a broader perspective. For example, a bird’s eye view can help us realize that rather than being alone, we are all connected.
Lesson #4Interview: Writer of design, technology, science, and culture and author of Beginners, Tom Vanderbilt
What I Learned: The older we get, the more we stop looking for and trying new core pursuits.
Tom Vanderbilt was inspired by his young daughter’s insatiable need to know how to do everything. So, in his book Beginners, he spent a year learning purely for the sake of learning, attempting chess, singing, surfing, drawing, and juggling. But, of course, he didn’t expect that the adventure of learning those skills would be even more gratifying than any end result.
Tom does a great job explaining the critical lessons he learned on his journey, how folks can reclaim their identities by learning something new, and why failure can be a good thing. The positive aspect of beginning again with those first few awkward steps is more important than the negative.
My team and I were fascinated by his pursuit to continue learning new skills and inspired to explore our own childlike wonders in retirement.
Lesson #5Interview: Legendary author of “Tuesdays with Morrie,” Mitch Albom
What I Learned: Giving is Living.
Prolific author Mitch Albom describes his most famous book better than I ever could: “The last class of my old professor’s life took place once a week in his house, by a window in the study where he could watch a small hibiscus plant shed its pink leaves. The class met on Tuesdays. It began after breakfast. The subject was The Meaning of Life. It was taught from experience… Although no final exam was given, you were expected to produce one long paper on what was learned. That paper is presented here. The last class of my old professor’s life had only one student. I was the student…”
His books have sold more than forty million copies worldwide; if you ask me, that number is too low. So, when the opportunity arose to interview him, I didn’t even need Ken Honda’s grace to feel maximum gratitude.
Mitch did not disappoint. Drawing from some tips he’d picked up courtesy of his former professor and mentor, Morrie Schwartz, Mitch offered wisdom about how current and future retirees can plan for the future while living for today. In addition, he stressed the importance of positive thinking and giving to others.
He admitted that he has a beautiful and privileged life, but that hasn’t stopped him from finding ways to give. In 2010 he founded the Have Faith Haiti Mission & Orphanage in Port-au-Prince. He said, “I never sleep better in my life than when I’m on a four-inch mattress in ninety-something degree heat down in an orphanage in Haiti because I wake up to the sound of children outside my door and knowing I am needed there. That sense of peace and giving allows me to sleep better than the fourteen-inch mattress and the foam pillow and the perfect temperature and all the rest of my very comfortable home. There must be something to be learned from that.”
All my research confirms that there certainly is. Volunteering is the number one core pursuit for the happiest retirees on the block (HROBs). Giving is living. It’s that simple.
As you can see, we’re lucky to get some incredible guests on the Retire Sooner podcast. I’ll be back in a future article to share more of the gold they’ve spun.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post The 10 Most Important Lessons I’ve Learned from Hosting the Retire Sooner Podcast: Part 1 appeared first on Wes Moss.
In the aftermath of two big banks collapsing, it’s no surprise that some investors may feel uneasy about the state of their retirement savings. In this episode, Wes Moss gives details to explain if and how these bank failures impact your retirement journey. He provides insights into how the banking system works, walks through the history and current state of the FDIC, and the common perception that it’s safer to use bigger banks versus regional or community banks. Additionally, he delves into the mismatch between interest rates and short-term US Treasury bonds and how you can invest your funds wisely to secure a respectable yield.
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #151 – The Real Problem With Banks appeared first on Wes Moss.
Can money buy happiness in retirement? I think it can, but the cost might be lower than you think.
We often miss the point when philosophizing about the benefits of having money vs. not. Of course, most of us would prefer having a lot of money, but there’s a social or self-imposed pressure not to admit it. “If I were truly enlightened, I wouldn’t need money to make me happy,” we think while jealously scrolling through our neighbors’ Hawaiian vacation photos on Instagram and Facebook. That may be true in a perfect world, but I don’t know anyone who lives in one of those.
The pragmatic truth is that we need money; therefore, it’s okay to want it. Materialistic associations need not be attached to this essential possession. Where folks run into trouble is when they forget why they desire financial prosperity in the first place. If the goal becomes money itself rather than the opportunities it can provide for stability, companionship, flexibility, health, and enjoyment, then we have a problem. As long as those priorities are in place, sufficient legal tender allows us the freedom to make memories with those we love without the stress of struggling to pay for it.
In short, monetary security allows happy retirees to SWAN: Sleep Well At Night.
Remain Steady in Turbulent Times
The inflationary period we’re currently enduring has investors concerned. In addition to the gut punch of exorbitant egg prices or paying more at the pump, folks worry about what it means for their 401(k)’s and other investment accounts.
The Federal Reserve’s (the Fed) penchant for raising interest rates has added to the collective anxiety for current and future retirees. Will it ever end? And when it does, will we plunge into a recession? Where is the light at the end of the tunnel, especially for people looking to retire or already in retirement?
In turbulent times many people forget about the steadiness of income investing, so let’s use a hypothetical situation to trigger our memory. Imagine you have $1 million. If your overall portfolio generates yields of 4 percent, you’ll receive $40,000 in dividend paychecks per year. Unfortunately, the dollar value of your portfolio may have dropped by 5 or 10 percent due to recent tough times. That’s a $50,000 to $100,000 loss of value on paper. But if that income remains steady, you’ll still generate $40,000 in actual cash for the year.
This cash flow from dividends and interest payments is real and spectacular. So, keep that income in mind and let it counterbalance the apprehension of a fluctuating market.
3 Powerful Keys to Help Investors SWAN
Challenging times create retirement jitters, so my team and I devised ways to calm the mind. We help our clients understand three powerful keys to help them SWAN.
1. The Power of a Plan. If you don’t know what you want to do, you’ll never do anything.
2. The Power of Understanding Cash Flow. Your steady portfolio cash flow comes from reliable, value-oriented companies and the dividends they pay.
3. The Power of Diversification. Most ETFs can hold between 100 and 250 stocks, alleviating the worry of one company falling apart. That many companies won’t crumble unless the world ends.
Despite the ongoing tumult, there is a break in the clouds: as interest rates ascend, so do the payout of bonds. In other words, the bad news is that interest rates are up, and the good news is that interest rates are up. If I have to drink from the well of bad news, I’d rather chase it with a shot of good news.
Protect your Purchasing Power
I recently had the honor of interviewing Dr. Burt Malkiel, the legendary author of A Random Walk Down Wall Street, for my Retire Sooner podcast. He mentioned the critical role bonds, among other less risky assets, can play in our mental and financial health. “Part of the thing is to get a fair, substantial part of your portfolio in very, very safe, short-term securities,” he said. “And, for the nervous nellies, that’s probably bigger than it is for other people. And also to have asset classes that don’t move exactly in the same direction as the stock market. And this is one of the reasons why I think real estate funds, which would impart a little more stability into a portfolio that still has inflation protection, will work. And, even some bonds, recognizing that bonds aren’t going to do it for you all the time.”
To be clear, I’m still a proponent of dividend-paying equities over bonds. For my money, I believe that’s the best way to protect your purchasing power. Typically, dividend rates stay ahead of inflation. But, if I were to jump on the bond train, now would be the time.
I should note that I don’t endorse any specific investments, but when Burt speaks, I always listen. “In general,” he told me, “Bonds move in opposite directions (from equities), but when inflation just exploded from 1 percent to the high single digits, bonds were tough. And so, what it suggests to me is probably you need some bonds, but maybe the thing you ought to look for are inflation-indexed bonds as another way in which you can get some stability.”
Burt even mentioned that U.S. Treasury I Bonds have recently yielded high single-digits. If folks want to do that, single individuals can buy up to $10,000, and married couples can purchase $20,000 per year. These assets can help calm the restless mind that tends to interrupt the blissful slumber we crave.
Burt frets about the Fed getting interest rates back down to 2 percent or less. “If you’re worried the way I am that they might not, that safe part would look for instruments that are inflation-indexed, and those will be a wonderful balance for the volatility of the equity market.”
It goes without saying that we all should keep an appropriate amount of emergency funds somewhere that can be accessed quickly. Burt agreed that this could help ease fears. “For some people who are really, really concerned, it does mean that you want other asset classes in there, including, frankly, a good proportion of your portfolio in money market funds. I think the only solution is that everyone needs at least some liquid funds because, you know, the medical emergency happens just when junior has cracked up the family car.”
As one might guess, picking the brain of Dr. Burt Malkiel bears more fruit than I can share here. However, you can find the entire episode on my website or wherever you listen to podcasts.
Maintain a Diversified Portfolio
Though it doesn’t seem like it, history shows that the U.S. market goes up more than it goes down, and over time the income generated through a diversified portfolio ought to remain consistent. The interest paid on bonds should stay constant when markets go down. Likewise, dividend-paying stocks tend to continue paying similar amounts if you’re invested in solid quality, value-oriented companies.
You can’t control inflation or interest rates, but you can manage your anxiety. If you remember the power of SWAN and the keys to help you get there, you increase your chances of finding happiness in retirement. Our team at Capital Investment Advisors is always here to help if you have a financial question or would like to review your investing strategy.
If that counts as buying happiness, sign me up!
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions
The post 3 Investing Keys to Help Retirees Sleep Well at Night appeared first on Wes Moss.
What do economists and philosophers have in common?
It’s not a trick question, but rather a debatable topic that Wes Moss and today’s guest, Paul Blaschko could discuss until the end of time! Paul Blaschko is the professor for the University of Notre Dame’s most popular undergraduate class on philosophy.
Wes and Paul dive deep into the philosophy versus theology schism and how Aristotle could be in the happy retiree camp. They also discuss Paul’s “good life method” and the importance of good conversations.
As this episode concludes, Paul shares some ways that people approaching retirement or later stages in life can continue improving their happiness and virtues and be comfortable with leisure for leisure’s sake.
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #150 – The Good Life Method With Paul Blaschko appeared first on Wes Moss.
Tis’ the season for W-2’s, 1040’s, Schedule C’s, 1099’s, capital gains, and all the rest. Yes, it’s tax season, yet again, and no matter how many challenges we’ve seen this year with the stock market, interest rates, and egg prices, the government still wants its money.
While others may kneel before the tax gods and pray for mercy, I gather my tax documents and face whatever direction Ed Slott is standing. Because when it comes to IRA advice, in my opinion he is Mecca, and the rest of us are but weary pilgrims seeking shelter.
A nationally recognized IRA distribution specialist, professional speaker, television personality, and best-selling author, Ed Slott was called one of the best sources for IRA advice by the Wall Street Journal. His latest books, The New Retirement Savings Time Bomb and Ed Slott’s Retirement Decisions Guide: 2022 Edition, are valuable tools for this tax season and beyond.
When interviewing him for my Retire Sooner podcast, I hoped to find some actionable steps for Americans looking to become more competent taxpayers. As always, he delivered.
Roth IRAs vs. Traditional IRAs and 401(k)s
Traditional IRAs and 401(k)s allow people to deduct their contributions from that year’s taxes. But, when it’s time to pull the money out, the tax bill can pack quite a punch. As Ed tells it, “We put money in 401(k)s and IRAs and we made that deal with the devil, with the government, saying ‘Alright, we’ll get a little tax break upfront each year.’ But then, as with any deal with the devil, there’s a day of reckoning.”
That specific day of reckoning was added to the calendar when the Secure Act 2.0 Act was signed into law in December of 2022. The new law raises the RMD age to 73 beginning in 2023. In 2033, the RMD age will further increase to 75. Individuals who were born between 1951 and 1959 will need to start their RMDs after age 73. Those born in 1960 or later can delay RMDs until after age 75. So why does the government care whether or not you pull out your money? Because they get to tax it! Or, as Ed put it, “That’s the date that the government has determined they are sick and tired of waiting for you to drop dead!”
Each time you take a deduction for retirement, you’re, in essence, receiving a tax loan to be paid back at some future date, most likely at a higher rate. Ed is not a fan of this option. He avoids it whenever possible and even compares the dynamic to Pig Pen from the Peanuts cartoon, who was constantly followed by an ominous dirt cloud. So how does one avoid Pig Pen’s dirty fate? One of the best ways, according to Ed, is to focus on Roth IRAs. “Every young person should only be doing Roth IRAs or Roth 401(k)s at work. They have the ability to start from dollar one, building a retirement account that’s absolutely tax-free. So all the growth, all the compounding, will be 100 percent theirs.”
As a quick review, a Roth IRA is an individual retirement account that offers tax-free growth and tax-free retirement withdrawals. Of course, you can’t deduct the deposits, but folks aged 59 ½ or older, who have owned their account for at least five years, can withdraw funds without owing any federal taxes.
If Roth IRAs are so great, why would anyone bother with other retirement accounts? Well, there are limits and stipulations. For 2023, the total contributions can’t exceed $6,500 ($7,500 if you’re 50 or older). There are also income restrictions. For example, single-filing taxpayers can’t have earned more than $144,000 in 2022 and $153,000 in 2023. For those married and filing jointly, those numbers are $214,000 and $228,000, respectively.
From time to time, I get anxious calls from radio listeners, worried that the government will change the rules down the road. In other words, they don’t want to go the Roth IRA route only to have the tax perk rug pulled out from under them upon retirement. Can they trust that this won’t happen? “The answer is absolutely not!” says Ed. “You can’t trust these guys as far as you can throw them. Tax laws are written in pencil.” But that doesn’t matter, he exclaimed. “It’s here now! Take advantage of it now!”
Does that mean Ed would convert traditional IRAs to Roth? You bet it does.
Now, let’s say you’re already in a high tax bracket, paying 35 percent per year. Is it wise to convert your traditional IRA or old 401(k) into a Roth, knowing that every penny you convert is taxable and contributes to your overall income? The answer is that a tax projection should be run with a CPA to determine how much the Roth conversion would raise your overall effective income rate. In general, my opinion is that a tax increase higher than about 24 percent might make the Roth less attractive, despite its benefits.
Look, Ed’s not a sadist. He loves Roth IRAs but doesn’t want you going broke to get one. In some cases, a moderate approach of more minor, annual conversions is more appropriate. However, Ed puts his own money where his mouth is. Back in 2010, when a new tax law made it possible, he “converted everything: lock, stock, and barrel!”
What about Social Security? Some folks in their 60s worry that the conversion would cause a spike in income and make it taxable. Ed believes that’s a non-issue because Social Security thresholds are so low that it’s already taxable for most people.
What about Medicare premium surcharges? Ed gets an earful from people about the possibility of those increasing. “If that’s going to make you angry, do the conversion anyway because I’d rather have you be angry one year than be angry for the rest of your life. Because if you don’t do it and you do nothing, that account is going to grow, grow, grow, and [at your RMD age] you’ll be forced to take it out, and the very thing that makes you angry is going to happen every year.”
For those who already have enough money to retire comfortably, converting to a Roth IRA can serve as a pre-paid tax gift for children and grandchildren. For instance, Ed has a sixty-seven-year-old doctor-client. She’s still earning a nice income but has millions in her traditional IRA from all the 401(k)s rolled over in her career. Each year she converts about a million dollars to her Roth IRA. But, she told him, “I’ll never need any of that money. I’m doing it because it’s going to my grandchildren.”
The Sweet Spot
Some of my Retire Sooner podcast listeners might need to use a portion of their IRA money to stop working. So, I wanted Ed to walk us through some of the crucial ages of retirement planning. He calls the time between ages 59 and ½ and 73—the retirement sweet spot.
Touching a retirement account before age 59 and ½ would mean a 10 percent early withdrawal penalty. That’s a dealbreaker to Ed. But on the other end of the spectrum, mandatory distributions kick in at age 73, which is why the time between is an oasis of planning. This sweet spot is when you get more of the carrot and less of the stick. Ed implores you to take advantage of it.
Life Insurance
Ed believes the tax exemption for life insurance is one of the most significant single benefits in the tax code, and most people don’t realize it. “You might look at a permanent life insurance policy as a super-duper Roth that has a giant death benefit, all tax-free without all the government tax rules. Because of that, it’s another prudent option for people who want to leave bigger legacies to their children and grandchildren.”
Bottom Line
The bottom line is there is no one size fits all with retirement planning. Take the time now to speak to your personal tax advisor to determine what is right for you.
It’s critical to face retirement planning head-on rather than succumbing to avoidance, procrastination, and regret. Spend the time you need to select the most tax-efficient options.
“The biggest mistake is not addressing the planning,” Ed told me. “They’ve done all the working, building, saving, and investing. They look at their IRA or 401(k) and say, ‘Well, I’ve saved all I’ll ever need for retirement.’” Ed says this is a huge mistake.
You worked hard for your money. So why jeopardize the fruits of that labor with a short-sighted retirement plan? Instead, keep your eye on the ball so you and your loved ones can experience all the joy you’ve earned.
Listen to my full discussion with Ed Slott.*
This information is provided to you as a resource for informational purposes only and is not to be viewed as tax advice or recommendations. This information is being presented without consideration of the tax or investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post The Taxman Cometh: Ed Slott To The Rescue appeared first on Wes Moss.
There are seven fundamental habits that many self-made millionaires have in common, and today’s guest best-selling co-author of “The Millionaire Next Door,” affluence expert and educator Dr. Bill Danko, explains.
In this episode, Dr. Danko sits down with Wes to explain his research and findings on the most common traits among those who have accumulated wealth and how they did it. Dr. Danko also goes over what frugality can accomplish, the role of marketing in American consumer behavior, and occupations that may help you retire sooner. They also discuss the dynamics between being versus feeling versus looking wealthy and how happiness, giving, and gratitude fold into that idea.
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #149 – The Millionaire Next Door & Richer Than A Millionaire with Bill Danko appeared first on Wes Moss.
As Robert Sanders, Co-Chief Investment Officer at Capital Investment Advisors, recently said on my Money Matters radio show, the number one job of a bank is to not run out of money. Unfortunately, Silicon Valley Bank broke this rule, as a timing mismatch left them short on dry powder — cash reserves a company maintains to meet obligations in times of economic stress.
Generally speaking, banks need to invest a large share of their deposits in short-term bonds in order to satisfy withdrawals at any given time. However, years of low-interest rates seduced SVB into investing cash in longer-term bonds that boasted higher interest rates and therefore higher income for the bank. And because SVB was so accustomed to the consistent flow of new deposits from a booming tech sector, they ostensibly thought it was a safe play. Unfortunately, they were wrong.
Bonds have an inverse relationship to interest rates. So, when the cost of borrowing money rises, bond prices usually fall. And bonds with further out maturities fall even more. So, as the Fed raised interest rates, SVB’s long-term government bonds lost value. Thus, when SVB had to sell these bonds to cover its clients’ routine (short-term) business cash needs, it did so at a loss.
Furthermore, SVB’s client base was composed of more underinsured companies than most — many with tens and hundreds of millions of dollars sitting in cash. These clients were well aware that the FDIC only covered up to $250,000, so as soon as they learned of SVB’s bond losses, tech entrepreneurs and CFOs in California were spooked. They went to their smartphones and laptops and quickly moved money to other banks. As a result, nearly 25 percent of the bank’s assets walked out the door in a single day, far surpassing the most extensive prior modern-day bank run (less than 10 percent in outflows over nine days).
Is This Another Global Financial Crisis Like 2008 and 2009?
In short, I doubt it. The Global Financial Crisis of 2008 and 2009 stemmed from a credit problem. Many bank assets were worth far less than they showed on their books, and therefore were at significant risk of not getting repaid on their loans. This contorted reality put bankruptcy on the radar for many of our largest financial institutions.
Silicon Valley Bank’s problem was liquidity. Credit had nothing to do with it. The ill-advised long-term bonds they purchased will very likely be worth more than they paid for them over the life of the bonds. Most are AAA-rated U.S. government debt, the highest rated in the world. The problem was that they simply did not have the time to wait for the bond value to recover because too many depositors were pulling out their money.
Good assets. Bad timing.
In the short time since SVB’s collapse, the U.S. government has already gone to great lengths to buttress any cracked foundations by providing money to banks suffering similar problems. While SVB may not have had enough flexibility to wait for longer maturity bonds, the U.S. government does. So, they took what they believed to be a necessary step to ensure all depositors’ money continued to be safe.
What Does This Mean Going Forward?
First, the U.S. government’s safety measures greatly lower the risk of many Americans losing the money they have deposited at U.S. banks over the $250k FDIC limit. In addition to standard FDIC rules, Janet Yellen announced on Wednesday, March 22nd, that if there’s a contagious bank run, the Treasury would likely pursue an exception that would permit the FDIC to protect all depositors of the failed banks. This would be considered on a case-by-case basis.
Secondly, what are the market implications? Again, I avoid short-term market predictions, but for the long-term, there are a few salient points of note:
- The financial system appears to be in much better shape than it was during the crisis of 2008 and 2009.
- As stated previously, the issues at SBV were a liquidity problem, not a credit problem.
- History shows that buying high-quality dividend-paying stocks and mostly high-quality debt typically leads to success over the long run.
Though governmental actions to quell financial unrest seem to have stabilized a potentially volatile situation, it’s normal for anxieties to linger, especially for folks looking to live on a fixed income. I’m sure I’ll continue to discuss developments on my radio show and Retire Sooner podcast. If you have more questions, speaking with a financial advisor can sometimes be helpful. At Capital Investment Advisors, we’re always happy to help.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions
The post What Happened To Silicon Valley Bank? appeared first on Wes Moss.
What does your digital footprint say about what you want?
Data scientist, author of best-seller “Everybody Lies,” and speaker Seth Stephens-Davidowitz sits down with Wes Moss to talk about how data can reveal societal and personal trends in desires, psychology, wealth building, and more. This includes when you become a sports fan, who you seek out for romantic partners and how you present yourself to them, and what activities are ranked as the happiest to do. Seth explains how he went from just reviewing data to using it to make his life decisions, and gives examples of how listening to his own data has made a difference for him. As for what data he encourages retirees to pay attention to, listen in to learn!
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #148 – The Unvarnished Truth Of What Humans Really Want With Seth Stephens-Davidowitz appeared first on Wes Moss.
The Retirement System of Georgia podcast host, Everett Crockett talks to Wes Moss, a seasoned financial professional, best-selling author, podcaster, and teacher. Wes discusses the top 3 financial habits of the happiest retirees and much more! How do events such as marriage, divorce, kids, location, hobbies, and income streams impact your happiness? Capital Investment Advisors’ AUM is $4.35 billion in assets under management (as of December 31, 2022).
Listen below!
This information is provided to you as a resource for informational purposes only and is not to be
viewed as investment advice or recommendations. Investing involves risk, including the possible
loss of principal. There is no guarantee offered that investment return, yield, or performance will
be achieved. There will be periods of performance fluctuations, including periods of negative
returns and periods where dividends will not be paid. Past performance is not indicative of future
results when considering any investment vehicle. This information is being presented without
consideration of the investment objectives, risk tolerance, or financial circumstances of any
specific investor and might not be suitable for all investors. There are many aspects and criteria
that must be examined and considered before investing. Investment decisions should not be made
solely based on information contained in this article. This information is not intended to, and
should not, form a primary basis for any investment decision that you may make. Always consult
your own legal, tax, or investment advisor before making any investment/tax/estate/financial
planning considerations or decisions. The information contained in the article is strictly an opinion
and it is not known whether the strategies will be successful. The views and opinions expressed
are for educational purposes only as of the date of production/writing and may change without
notice at any time based on numerous factors, such as market or other conditions.
The post Wes Moss ‘What Makes A Happy Retiree’ Interview On TRSGA’s ‘Your Retirement In Focus’ Podcast appeared first on Wes Moss.
Purpose + passion + fun = core pursuits!
When it comes to living a happy retirement, the more passions a retiree has, the better. But, on the other hand, our research shows that unhappy retirees tend to have less than two core pursuits driving their post-work life. So, how can you discover your core pursuits as part of your happy retirement plan? This episode will help you revisit ways to find core pursuits and what they can mean for you.
In honor of March Madness, we’ve compiled a Core Pursuits Bracket to square off sixty-four “hobbies on steroids” to see what kind of core pursuit is championed for the happiest retirees on the block. Would you choose gardening versus pickleball or skydiving versus pottery? Voting is still open, so make your selections on the Retire Sooner social media pages!
Core Pursuit Resources
- Core Pursuit Finder: https://www.wesmoss.com/core-pursuit-finder/
- “What Are Core Pursuits?” Article: https://www.wesmoss.com/news/what-are-core-pursuits/
—————————————————————————————————–Call in with your financial questions for Wes to answer: 800-805-6301Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #147 – Revisiting How To Find Your Core Pursuits appeared first on Wes Moss.
Doctor Burton Malkiel is a living legend!
His all-time classic, A Random Walk Down Wall Street, is widely regarded as one of the most influential books in the history of investment management. I can’t emphasize enough how much of an impact it had on the entire financial industry. Many of us who work in finance stand on the shoulders of this giant. I recently sat down to interview him for an episode on my Retire Sooner podcast and found him as delightful as ever.
By the way, he insisted that I call him Burt.
Burt’s Story
Burt has undergraduate and graduate degrees from Harvard, a Ph.D. from Princeton, and even served on the President’s Council of Economic Advisers in Washington, D.C. When those highlights aren’t even the best thing on your resumé, you know you’re something special. And Burt, indeed, is.
Before Random Walk’s publishing in 1973, it was not common practice for investors to use passively managed index funds as the primary tool of their investment portfolios. He was ridiculed for even suggesting it!
It was the heyday of the stockbrokers, and they were not eager to relinquish the high commissions they earned from trading and managing the assets of so many. “I would gather the data on returns, and some of my academic colleagues had done the work. And it was becoming clear that the emperor didn’t have any clothes,” Burt revealed. The industry insiders claimed to be able to out-pick the right stocks to outperform the market. They would tell people, “You don’t want an index fund. That’s guaranteed mediocrity. But, in fact, the data show that it’s superior investing.”
The Early Days of Index Funds
Those familiar with the early days of index funds are probably aware of the man credited with its creation, Jack Bogle, who went on to find The Vanguard Group. His philosophy was to put long-term patience over short-term action, and reduce broker fees. And for folks to hold low-cost index funds for a lifetime, reinvesting the dividends purchased utilizing dollar cost averaging.
It seemed to me Jack and Burt were of a similar mind, and it turned out I was right. “Jack Bogle was a great friend,” he told me. “I was on the Vanguard board for twenty-eight years. I knew Jack Bogle extremely well. We got along famously because we both did have the same philosophy. Jack was certainly one of my heroes. And I’ll tell you one of the reasons he was the hero. It’s fine for an academic to go and write a book and say, ‘Go buy index funds.’ But Jack bet his whole company on starting an index fund.”
Burt used to joke with Jack that they were the only people who held index funds when they first came out. So for a time, it was them against the world!
Since those days, investors have become more than comfortable relying on index funds. As Burt pointed out, Standard & Poor’s now generates a SPIVA Report to compare the S&P indexes vs. active management. “What’s fascinating about this,” Burt exclaims, “Is that every year when they do the report, about two-thirds of active managers do worse than, are outperformed by, a simple index. And, moreover,” he points out, “the one-third that win in one year aren’t the same as the one-third that win in the next year.” Perhaps even more eye-opening is that compounding the numbers over ten and twenty years only makes the contrast more lopsided. The S&P index runs away with a clear victory most of the time. “I’m not saying it’s impossible to outperform,” Burt admits. “Not at all. There are some people who have done it. But it’s like looking for a needle in a haystack.”
Before anyone sees fit to protest, Burt confesses that he does buy some individual stocks. So how does he justify it? Easy. Because his essential retirement assets are invested 100 percent in index funds, he is fine with getting creative around the edges. And he thinks it’s okay for you to do the same as long as your core nest egg is secure so you can count on it for retirement.
Writing A Random Walk Down Wall Street
A Random Walk Down Wall Street is a perennial book. So many people read it when they first enter the investment industry. And because Burt has updated it consistently over its lifespan, he has managed to stay current with the times. As we celebrate its fiftieth anniversary, we’re now on the thirteenth edition! I’m currently working on the second edition of my book, and I can tell you how herculean the task of thirteen editions would be. But, Burt being Burt, felt it was necessary. “A lot of the things that people can use to retire sooner were not available at the beginning, and as they have become available, they’ve been incorporated into the book.”
When he wrote the original book, there were no Roth IRAs, no 529s, and not even any money market funds. Over the years, we’ve seen so much dynamic financial innovation to help investors. But, with all that powerful, personal access comes more landmines. Burt warns, “The fact that I can buy an exchange-traded, broad-based index fund and pay two or three basis points, two or three one-hundredths of one percent, this is great, but there have also been financial innovations that can kill you. Distinguishing between the innovations that have been helpful and the innovations that can lead you astray is exactly what was the objective in making sure that I had covered all of these things.”
Burt also stresses one of my most oft-repeated refrains: time in the market is more important than timing the market. He points out how difficult it is to guess and that to capitalize, you must be right twice — when you get in and out. But, unfortunately, in his view, that’s not likely to happen.
Before letting this titan leave my sight, I had to know what keeps him going at ninety years old. He says it’s the feeling he gets when receiving letters from people who read his book and use the advice to invest their way to healthy and happy retirements. He’s never more pleased than when someone says they never made a lot of money, but by continuing to add small amounts over a lifetime, they ended up with more than a million dollars.
The mission of the Retire Sooner podcast is to help a million people retire earlier while enjoying the journey along the way. No matter where that journey takes you, I hope part of it includes a random walk down wall street. I know mine does.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions,
The post A Random Walk Down Wall Street with Burton Malkiel appeared first on Wes Moss.
The finance industry has innovated exponentially in recent decades, but are there some innovations that investors find more helpful than others?
In this episode of Retire Sooner, Wes is joined by renowned economist and author of the highly influential book on investing, “A Random Walk Down Wall Street,” Burton Malkiel. They dive deep into investing insights for yourself and your family’s future and discuss various investment types. In addition, Wes and Burton address multiple ways to handle emotions and expectations during market volatility and how there’s no one rule for how retirees should organize their finances.
Watch the full episode!
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. Investment decisions should not be made solely based on information contained in this article. The information contained in the article is strictly an opinion and for informational purposes only and it is not known whether the strategies will be successful. There are many aspects and criteria that must be examined and considered before investing.
The post #146 – A Random Walk Down Wall Street With Burton Malkiel appeared first on Wes Moss.
My book, You Can Retire Sooner Than You Think, has helped many families retire happier and sooner than they ever thought! But as much as I’d like to believe it was because of my delightful mastery of the English language, the credit belongs to the data within and what it reveals about achieving happiness in retirement. A chef is nothing without his ingredients, and an author is nothing without his message.
My message is all about helping people retire sooner and happier than they ever thought possible.
Sound financial planning is a vital element and one we covered in my book. However, my research has also shown that happiness in retirement can come from what I call core pursuits: hobbies on steroids. (Note: because weightlifting is a popular core pursuit, I need to point out that steroids are merely a figure of speech to signify the passion happy retirees have for these activities.)
Core pursuits are more important than casual interests. They help you determine what you want to spend your retirement money on and to what purpose you want to dedicate your post-working years.
My study uncovered that the happiest retirees on the block (HROBs) average 3.6 core pursuits, while the unhappy lot have only 1.9. Core pursuits are that critical to living a happy life in retirement. Let’s look at five popular core pursuits that happy retirees claim help them live with active purpose.
5 Popular Core Pursuits of Happy Retirees
- Pickleball: Played with a wiffle ball and paddle, this combination of ping pong and tennis is fun and physically active without exposing the joints to quite as much impact as other sports. According to a report by the Association of Pickleball Professionals given to CNBC, more than 36.5 million people played the sport from August 2021 to August 2022. Seeing as megastar athletes such as LeBron James and Patrick Mahomes have recently invested in professional pickleball teams, it’s safe to say it’s taking the sports world by storm.
- Volunteering: This is a prevalent and fulfilling option because it makes folks feel like they are truly accomplishing something. The happiest couples and individuals I work with beam from ear to ear when they talk about the charities they support. If you find your interest piqued, there is no dearth of options and no shortage of those in need of help.
- Gardening: Whether you have a naturally green thumb or you’ve killed enough houseplants to be labeled a serial killer, gardening is a great way to relieve stress, increase patience, and spend time outside. Planting the herbs, fruits, and vegetables you eat is a great way to cut down the grocery budget.
- Starting a Band: Sure, it’s an overgeneralization, but is there a dad out there who didn’t once dream of playing in front of a live audience? Guess what? Just because those guitar-playing dads become grandpas doesn’t mean they stopped shredding on that battle ax after work — time to pull out the leather jacket and take the stage.
- Dancing: Contrary to popular belief, human beings of all sexes love to dance. But since I let men monopolize the music section, I’ll focus on ladies hitting the dance floor. Whether you like salsa, country line dancing, or the waltz, many communities offer all kinds of opportunities to boogie. Before you know it, you might even find yourself traveling (another popular core pursuit) to attend dance conventions.
If you want to get more into the weeds of my survey results, pick up a copy of my book. In the meantime, with the NCAA college basketball tournament quickly approaching, I thought a March Madness style Core Pursuit Bracket would be fun.
Look at the rankings and follow along to see which ones make it to the Sweet Sixteen, Elite Eight, Final Four, and ultimately, the championship. You can print the bracket and vote for your winner on our stories on the @retiresoonerpodcast Instagram page.
Download and print a bracket here
No one said retirement planning couldn’t be fun. First, figure out what your money is for, and then use the hell out of it. You’ve earned it.
The post 5 Core Pursuits to Try in Retirement appeared first on Wes Moss.
Sufficient funds may not be the only ingredient in the happy retirement sauce, but there’s a reason the recipe calls for it. Of course, you could make marinara without tomatoes, but why would you punish your taste buds that way?
There’s no way around the fact that money serves an essential purpose. It provides opportunities and flexibility. Look, I know Buddha renounced his royal palace to live as an ascetic, but most of us need more realistic goals. I know I do.
Based upon the research for my book, there are five vital money secrets that the happiest retirees on the block (HROBs) responded with importance.
Five Money Secrets
Note, that these are meant to be used as a full recipe together, rather than picking and choosing ingredients.
-
- Having at least $500,000 In Liquid Retirement Funds
- Mortgage Payoff Within Sight
- Multiple Streams of Income
- Income Investor — Saving Doesn’t Typically Cut It
- 4 Percent Plus Spending Rule — Set a goal to max It Out Without Running Out
Today, we are going to focus on number four. I put it in bold so you would pay extra attention. I hope that today’s foreshadowing will prevent tomorrow’s foreboding.
Let me explain.
It’s human nature to value our hard-earned wages and ferociously protect them like a mama bear spotting danger to her cub. The logic, then, follows that perhaps it might be a good idea to put our savings into safe, conservative money market accounts rather than investing them in a volatile stock market. I get it. I have the same urge from time to time.
The problem is that unless each paycheck is higher than most of us, including me, are making, the low-interest rate on a regular savings account won’t usually earn us enough to sustain a comfortable lifestyle in a fixed-income retirement.
Take a look at the chart below.
Source: Investor.gov Note, both hypothetical investors start with $1,000, and add $1,000 per month for 32 years, navy blue line (Jill) compounds annually at 10%, the red line (Jack) compounds at 1% annually.
We’ll use Jack and Jill as our hypothetical test cases. Jack is a saver. Jill is an investor. Each one managed to save $1,000 per month for thirty years. Pretty good. Yeoman’s work.
Jack socked all of his money in a savings account. If he’s lucky, he’ll see a 1 percent average compounded return on his money.
Jill was just as responsible a saver as Jack, but she made one small change. Instead of parking her earnings in a money market, she invested the same amount in a stock-based index mutual fund or exchange-traded fund (ETF). As a result, she can reasonably hope for 10 percent compounded annual returns because, in general, the S&P 500 often hovers above or below that bellwether mark. For example, the rate of return for the S&P 500 with dividends reinvested from 1990 through 2020 (thirty years) averaged 10.6 percent per year.
So, Jack the saver is looking at a 1 percent rate of return. Presupposing he endured this saving routing for 32 years, he would have ended up with slightly more than $451,000.
On the other hand, Jill the Investor enjoyed a 10 percent annual rate of return and ended up with more than $2.4 million. Quick show of hands, how many of you would rather have $2.4 million than $451,000?
Jack and Jill both worked hard, and both saved conscientiously. The divergence was where they put their money. Jack was a saver. Jill was both a saver and an investor. This one change could make a $2 million difference.
Source: https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
Note that in the above example, we referenced stocks listed on the S&P 500. Investors with a growth bias (growth investing) or a value bias (dividend investing) both have strong potential for long-term gains. Still, HROBs tend to gravitate toward income/dividend investing as they move from the accumulation phase to the distribution phase of their lives.
HROBs know that being a saver isn’t enough. They keep emergency savings, sure. That goes without saying. But most of their retirement funds are typically invested in equities for extended periods because the overarching goal is to acquire enough capital to stop working and “retire sooner.” It’s a lofty aim and challenging enough without stacking the deck against yourself by failing to take advantage of the long-term investing potential of companies here in the United States.
No one likes losing money when the market dips. But I’ve studied economic trends and seen enough consistency to feel comfortable that the army of American productivity typically bounces back when it falters. I use that knowledge and experience to remain disciplined about investing and providing for a happy life in retirement.
At Capital Investment Advisors, our financial advice focuses on retirement income planning, helping to ensure that your spending needs will be met over multiple decades, even with future inflation. Click the image below to schedule a free consultation with our team.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. For stocks paying dividends, dividends are not guaranteed, and can increase, decrease, or be eliminated without notice. Fixed-income securities involve interest rate, credit, inflation, and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed-income securities falls. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions,
Calculator Notes for reference
https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
See calculator assumptions below.
The post Saving vs. Investing: One Small Shift to Make a Two Million Dollar Difference appeared first on Wes Moss.
In this episode, Wes and Retire Sooner producer Mallory Boggs go over Warren Buffett’s “secret sauce” published in the Berkshire Hathaway 2022 Year In Review. They talk about how investing is not easy.
While browsing through Buffett’s rate-of-returns, Wes explains how Buffet’s big numbers can equate to a more manageable scale that the average American can work with. He also assures that while Buffett is a special case of investing success, the mogul’s lesson that the big wins tend to overshadow the little losses can be applicable to all who invest in stocks. The takeaway? Happy retirees aren’t just savers, they’re investors, too.
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. Investment decisions should not be made solely based on information contained in this article. The information contained in the article is strictly an opinion and for informational purposes only and it is not known whether the strategies will be successful. There are many aspects and criteria that must be examined and considered before investing.
The post #145 – One Small Change To Make A $2 Million Difference appeared first on Wes Moss.
Recently Wes Moss was featured in a Finacial Advisor article on What To Do If Your Clients Are Freaking Out About A U.S. Default. Read the excerpted section of the article below.
Advisors are already fielding questions from clients about a potential default, even though the “X date” marking the end of America’s bill-paying ability won’t arrive until July at the soonest, according to a February 15 report from the Congressional Budget Office (CBO). As America’s date with fiscal destiny nears, advisors can anticipate mounting client queries.
One advisor said he is proactively owning the conversation. “We communicated heavily with clients during the debt ceiling flare up in 2011 and are readdressing the topic today with the families we work with,” said Wes Moss, managing partner and chief investment strategist at Capital Investment Advisors in Atlanta.
Moss believes federal spending cuts are an inevitable part of whatever final accord the politicos reach. That would adversely impact defense, healthcare, information technology and other companies deriving significant revenues from the government. “Clients are focused on how the sectors and companies they invest in would be affected,” he said, adding, “We are not raising cash at this point.”
Read the full article here.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post Wes Moss Featured in Finacial Advisor Article appeared first on Wes Moss.
Wes Moss featured in Clark.com article on 6 Major Expenses in Retirement (and How To Reduce Them!) Read the excerpted section of the article below.
Paying off your mortgage before you hit retirement is one of the smartest things you can do to keep your living expenses low after you stop working.
It has the added benefit of increasing your happiness, according to research. That’s according to CERTIFIED FINANCIAL PLANNER Wes Moss, who interviewed more than 1,350 retirees across 46 states to see what created happiness in retirement.
“One of the main recurring themes was that the happiest and most successful retirees had either eliminated or dramatically reduced their mortgage payment before pressing the retirement button,” Moss says.
“My advice is to follow the one-third rule. If you can pay off your mortgage using no more than one-third of your non-retirement savings, consider paying off your mortgage — today.”
Read the full article here.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post Wes Moss Featured in Clark.com Article on Expenses in Retirement appeared first on Wes Moss.
Making money is hard. Even though I’ve been fortunate to meet many of my financial goals, I still feel a sense of accomplishment and relief when that “check” clears. Maybe it’s different for billionaires, but then again, maybe not. Most folks remember the trauma of staring into the abyss of an empty bank account.
It’s not surprising that once people have earned enough to invest for the future, they feel highly anxious about volatile market swings. In my two decades of working in the financial industry, I’ve found this to be one of the most challenging aspects for folks to handle.
An amusing anecdote about the famously wealthy Ted Turner illustrates my point. As the story goes, he received many Time Warner shares in his sale of CNN in 1996. He installed a stock-tracking ticker tape machine in his office, but this led to it tormenting him as he would see most of his net worth rise and fall daily. It became more than he could bear, and he eventually sold off a considerable portion of his stocks to invest in real estate.
This tale may or may not be apocryphal, but the moral is that not even Ted Turner was immune to the emotional highs and lows of gain and loss. So, don’t be discouraged by your mercurial temperaments because you’re in good company. Anxiety is part of the human experience. It’s what kept our ancestors safe from danger. You can’t eradicate it, but you can learn to filter its effects.
One method I’ve found to be helpful is to use history as a guide when reviewing two fundamental investing principles.
1. Timing Matters, But Not As Much As You Might Think.
I’d prefer to buy a stock at its nadir than its peak to reap the spoils of a possible upswing. But we can’t let this quest consume us because we don’t have a crystal ball. Yet, here’s the good news. In the U.S. economy, investment results with bad timing have generally still been pretty darn good.
This sentiment leads us to principle two, which tends to trump the first.
2. Time In The Market Is Typically More Important Than Timing The Market.
The dream of a perfect investment plan is just that — a dream. People do win the lottery, but if it were a common occurrence, it wouldn’t be the lottery! If you allow a perfect plan to become the enemy of a good one, you’ll most likely regret it. Instead of focusing on the right time to get in, focus on how costly it can be to get out. The math behind the power of remaining fully invested is stunningly clear, and trusting the consistent trends the statistics layout is vital to your long-term success as an investor.
On bad days in the market, your body can secrete the primary stress hormone known as cortisol to warn you of danger. “Abandon ship!” I know I’ve felt the same survival instincts. However, years of experience have taught me the flaw of this approach, so I asked my research team to pull our market timing data as evidence. The results show how ruinous it can be to flee when times are tough.
Source: Strategas; Capital Investment Advisors
Looking back at the S&P 500 annual growth rate of return from January 1995 through December 31 of 2022 gives us nearly thirty years to study. The tumult of multiple bear markets and recessions still produced an average total annual rate of return of about 7.9%.
But what if an investor missed just a few of the best days in the market over that colossal period? Our research team at Capital Investment Advisors ran the numbers, and here’s what we found.
Missing the five best ones cuts the rate of return from about 7.9% to 6.1%. Still a respectable number, but that’s a 23% reduction compared to the full per-year return you would have gotten if you would have stayed invested. All because an investor got nervous and pulled money out for just five trading days!
Let’s say we miss the best ten days. This drops the rate of return down to 4.9% a 38% decline. So a person who had a short-lived lull in faith now has a forever unrequited love affair with the money they would have earned.
Say we miss the best twenty trading days. The overall return would drop by 63%, bringing it down to 2.9%. Depressing, right? At thirty days, the rate of return falls to 1.3%. That’s less than inflation, less than long-term money markets. Try forty days or fifty days. Now it’s in negative territory.
As you can see, just a snippet of time wasted can lead to a hair-raising abundance of missed opportunities. If your strategy is to enter and exit the market according to declines and rebounds, you could save yourself the hassle and put your money in a savings account.
Bank of America recently published a study that examines each decade’s returns from the 1930s through 2020. The research tells a similar story but by decade.
Let’s look at the 1950s. Fully invested, the return of the S&P 500 is a little over 250%. Miss just the ten best days of the decade, and it drops to 167%, or by more than one-third. Examine the 1980s. The total price return for the S&P 500 was 227%. Without the best ten days, it becomes 108%, or 52% less. In undesirable market decades like the 2000s, the price-only return of the S&P 500 was -24%. But if you missed the best ten days, your loss tripled to -62%.
If your preconceived notions are still making you doubt the data, note that often, the biggest market recovery days bookend the worst. For example, on October 27, 1997, the market fell 6.9%. The next day, it rose 5 percent.
On August 31st, 1998, the market fell 6.8%, and then on September 8th, markets were up 5% in just one day. On November 20th, 2008, it was down 6.7% in a day, followed by a 6.3% rise on November 21st, 2008. The market fell a whopping 12% on March 16th, 2020, and then on March 24, 2020, it increased by 9.4%. Then, it rose another 6.2% on March 26th, 2020. Unlike the Ted Turner story, this is information you can corroborate.
The bottom line is that most investors are rewarded for staying the course. It is often beneficial to remain invested in reliable, high-quality companies, diversify, remain calm, and practice self-control over substantial stretches.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. For stocks paying dividends, dividends are not guaranteed, and can increase, decrease, or be eliminated without notice. Fixed-income securities involve interest rate, credit, inflation, and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed-income securities falls. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions,
The post The Perils of Market Timing appeared first on Wes Moss.
If Hollywood made a movie about your life, who would they cast to play you? Today’s Retire Sooner guest is Los Angeles Times columnist and four-time Pulitzer Prize finalist, Steve Lopez. In Steve’s case, Iron Man himself, Robert Downey Jr., plays Steve in the film adaptation of his best-selling nonfiction book, The Soloist. Wes and Steve talk about the story behind the story, as well as how Steve fell in love with Los Angeles and the fateful accident that got Steve thinking about retirement for his latest book, Independence Day.
As they dig deeper into the book and discussion around retirement, Steve addresses the importance of structure and planning in retirement, six classifications of happy retirees, and why women can be better at retirement planning than men. Steve later relates advice Mel Brooks and Norman Lear gave him about purpose and passion. Finally, Wes wraps up the episode by asking Steve about his future plans for retirement and core pursuits.
Watch the full episode!
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #144 – The Importance Of Structure In Retirement with Steve Lopez appeared first on Wes Moss.
Any author will tell you that self-promotion is a vital muscle to develop. You pour your heart out, scribbling ideas before heading to the office, during lunch breaks, and after the kids go to bed. You brainstorm, outline, write, and then rewrite more times than anyone would like to admit. After taming that beast, the idea of no one reading your words is abhorrent, so you pound the pavement, hit the airwaves, shake hands, and kiss babies. In short, you say yes to every exhausting idea your marketing team generates.
The promotion machine isn’t always fun, but once the momentum builds, it can be pretty difficult to stop. Therefore, when one of my radio show listeners recently asked me what other authors I recommend, it seemed like the perfect opportunity to promote someone else for a change. Who knows, maybe this can help some other writers take a day off now and then.
My team and I suggest you add these tomes to your bookshelf…
1. The Pursuit of Happyness by Chris Gardner
This story is, as the youth say, everything! Its message struck such a chord that I opened with a discussion about it in the preface of my first book, You Can Retire Sooner Than You Think.
Plot Summary: “At the age of twenty, Milwaukee native Chris Gardner, just out of the Navy, arrived in San Francisco to pursue a promising career in medicine. Considered a prodigy in scientific research, he surprised everyone and himself by setting his sights on the competitive world of high finance. Yet no sooner had he landed an entry-level position at a prestigious firm than Gardner found himself caught in a web of incredibly challenging circumstances that left him as part of the city’s working homeless and with a toddler son. Motivated by the promise he made to himself as a fatherless child to never abandon his own children, the two spent almost a year moving among shelters, hotels, soup lines, and even sleeping in the public restroom of a subway station.”
Later made into a movie starring Will Smith, the story resonated with me because I have four sons and work in the financial industry. Every time I even consider complaining about the lackluster performance of a stock, I remind myself of Chris Gardner taking care of his son while simultaneously pulling himself up off the street and into a successful career as an investment advisor. Chris’ words blew me away and gave me a deeper insight into the relationship between money and happiness.
2. Tuesdays with Morrie: An Old Man, A Young Man, and Life’s Greatest Lesson by Mitch Albom
Plot Summary: “The last class of my old professor’s life took place once a week in his house, by a window in the study where he could watch a small hibiscus plant shed its pink leaves. The class met on Tuesdays. It began after breakfast. The subject was The Meaning of Life. It was taught from experience… Although no final exam was given, you were expected to produce one long paper on what was learned. That paper is presented here. The last class of my old professor’s life had only one student. I was the student…”
Mitch Albom’s books have sold more than forty million copies worldwide, and if you ask me, that number is too low. So, I was lucky enough to interview him for an episode of my Retire Sooner podcast, and he did not disappoint. Drawing from some tips he’d picked up courtesy of his former professor and mentor, Morrie Schwartz, Mitch offered wisdom about how current and future retirees can plan for the future while living for today.
3. Bolder: How to Age Better and Feel Better About Ageing by Carl Honoré
Plot Summary: “Ageing – how we can do it better and feel better about doing it. It’s also a rallying cry against the last form of discrimination that dare speak its name: ageism.”
Carl also came on my podcast and, in addition to the topic of aging, talked about the importance of slowing down and cherishing time. His dedication to this concept led to his little son giving him an award for being the “best reader of bedtime books.”
Bolder is for folks of any generation concerned about what it means to age. Carl discovered through his research that many things can improve as we grow older.
4. Happy Money: The Japanese Art of Making Peace With Your Money by Ken Honda
Plot Summary: “It is not how much you make or have that makes you have Happy Money or Unhappy Money; it is the energy in which your money is given and received that determines your flow. Even if you make a lot of money or very little, your money can be in either flow. Ultimately, it is your choice.”
Ken Honda stands out as an indelible muse. A master of money and happiness, he is a best-selling self-development author in Japan. I’ve dedicated my career to improving the lives of retirees, and his words enhanced my own. His writings synthesize finance and self-help, spotlighting personal wealth and happiness through deeper self-honesty.
He insists it’s crucial to appreciate the money coming in and out of your life. As a financial advisor, I’m trained to find ways for your assets to appreciate, and I may not always be focused on ways for you to appreciate your assets. It was a foreign concept to me, and that’s why I’ve been thinking about it ever since.
5. Beginners: The Joy and Transformative Power of Lifelong Learning by Tom Vanderbilt
Plot Summary: “Inspired by his young daughter’s insatiable need to know how to do almost everything, Tom Vanderbilt begins a year of learning purely for the sake of learning. He tackles five skills, choosing them for their difficulty to master and their lack of marketability–chess, singing, surfing, drawing, and juggling. What he doesn’t expect is that the circuitous journey he takes while learning these skills will be even more satisfying than any knowledge he gains.”
Tom does a great job explaining the critical lessons he learned on his journey, how folks can reclaim their identities by learning something new, and why failure can be a good thing. The positive aspect of beginning again with those first few awkward steps is more important than the negative. My team and I were fascinated by his pursuit to continue learning new skills and inspired to explore our own childlike wonders in retirement.
There are more books we want to share, but these five should give you a solid foundation and plenty of motivation to keep on keepin’ on. The perfect retirement is out there. So take full advantage of the people who have been to the mountaintop. Let their adventures inform your own.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post Retire Sooner Reading List appeared first on Wes Moss.
Can there be progress without pain? The last 50 years have been a rollercoaster in the financial world and the world at large.
In this episode, Wes gives a snapshot of key events from decades passed that had a significant impact on both the financial and cultural zeitgeist, including the effects of the COVID-19 pandemic. Yet, despite every war, conflict, or struggle, Wes emphasizes the positive developments that keep him (and happy retirees) rationally optimistic. “Tomorrow” can always be somewhere good and great!
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. For stocks paying dividends, dividends are not guaranteed, and can increase, decrease, or be eliminated without notice. Fixed-income securities involve interest rate, credit, inflation, and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed-income securities falls. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post #143 – Pain AND Progress For Longterm Investors appeared first on Wes Moss.
There’s a story I like to share about my son Jake. He saw a dollar coin on the ground, and lying next to the dollar coin was an old penny, which he did not retrieve. “Jake, what about the penny?” I asked. “Dad, a penny doesn’t even buy a piece of candy these days,” he scoffed.
Jake’s catch-and-release treasure hunt was an awakening for me — the youth have no love for the coin of the realm. Instead, it’s all about the Benjamins. Or, at least, the Washingtons. In the case of stock dividends, however, cents make a lot more sense.
How Dividends Work
Dividends are a way for a company to return some of its profits to shareholders. They’re cash payments that certain companies give to investors. Each allotment is often paid out as small amounts per share.
For example, it’s not uncommon for a company to pay its dividend as fifty or sixty cents per share, divided into four quarterly payments. Unfortunately, the public, like my son, Jake, can sometimes neglect to appreciate such a decimal point of distribution. After all, does the spare coin jar really make a difference to your bottom line?
Perhaps an even more ignored creature is the dividend increase, typically only a few cents more in any given year. For example, if you own stock in a company that pays a dividend of fifty-seven cents per share, they may announce a dividend increase of four cents to sixty-one cents. That means you get an extra four cents for each share you own.
What’s the big deal? It’s only four cents, right?
It might look that way at first, but four cents on fifty-seven cents is a 7 percent dividend increase on each share you own. If it went up by this amount every year, it would only take about a decade to double. Yes, double. In other words, if you stick with dividends, dividends typically stick with you.
Though a micro view focuses on the modest payouts, the macro perspective reveals that S&P 500 companies alone paid out $563 billion in dividends to shareholders in 2022.
Are the pennies adding up yet?
Source: Strategas
These figures date back twenty-five years, a quarter of a century! The journey takes us through the dot.com bust, the Great Financial Crisis, COVID, and 2022’s interest rate hikes. The S&P 500 dividends in aggregate have only dipped year-over-year once, between 2008 and 2009, when they dropped from $246 billion to $197 billion. They’ve so consistently increased each year that not even COVID could stop them.
The Study: Dividend Income vs. Bond Interest
As a reminder, bonds are essentially IOUs issued by governments or companies. Investors buy these loans, and the issuer promises to pay them back in full, plus interest, along the way. So the risk is typically lower than equities, but so often is the reward.
How does bond interest stack up against the income-producing power of stock dividends? Examining a $10,000 investment in the S&P 500 vs. the Aggregate Bond Index, my team at Capital Investment Advisors charted the results over more than forty years. In each case, investors left the principal alone while taking the income produced each year by the dividends.
The table below shows what happened over time with each investment.
Comparing Investments
Source: Bloomberg data; Capital Investment Advisors
In 1980, a $10,000 investment in the S&P 500 paid a dividend of about $529, 5.29 percent of the initial investment. Forty-three years later, the dividend income had climbed to $6,128 — a 61 percent annual yield on the original investment.
Don’t forget that the original investment grew as well. For example, if you had invested $10,000 in the S&P 500 in 1980, it would have flourished into more than $355,700, not even incorporating the dividend income you received each year.
On the other hand, the Aggregate Bond Index only grew from $10,000 to $14,034 and would now pay out just $288 per year, or 2.88 percent of your investment. It’s clear that income from stock dividends outpaced bond interest. Annual stock dividend income increased over 11.6 times in price, while the remaining price-only return grew thirty-five times. On the other hand, bonds rose less than 1.5 times in price, with about a 75 percent reduction in income.
Whether your retirement portfolio holds $500,000 or $5 million, it’s hard to find a more consistent source of sprouting income to outpace inflation than dividend-paying stocks.
The Verdict: Dividends Are a Powerful Wealth-Building Source That Should Not Be Ignored
The statistics above can be frustrating for unaware investors, but let the knowledge guide your future decisions rather than fill you with regret. For example, if you’re forty or fifty, you still have three to four decades to invest. So you have more years of spending ahead of you than you might think.
Look for stocks that are perennial dividend payers and consistent dividend growers. Then be patient, and watch the dividends roll in over time. Remember, despite price fluctuation, dividends from established American companies tend to remain relatively steady, even in tumultuous years like 2020 and 2022.
Act calmly and with purpose. You’ll find that those pennies start adding up over the years, and you’ll be happy you picked them up. The pursuit of dividends can be a rewarding endeavor for any investor with enough long-term vision to let the spare coins turn into treasure.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions,
The post Falling in Love with Dividends appeared first on Wes Moss.
This Valentine’s Day, let’s talk about something near and dear to Wes’s heart: Dividends!
What does it take to be wealthy in America? In this episode, Wes and Retire Sooner producer Mallory Boggs take a look at statistics from a new wealth survey showing what level of earner is considered “wealthy” in this day and age. They also discuss dividend investing, show what a balanced portfolio could look like, and the possibility of enjoying dividend returns in retirement. Wes and Mallory wrap up this episode sharing what they love about Valentine’s Day!
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. For stocks paying dividends, dividends are not guaranteed, and can increase, decrease, or be eliminated without notice. Fixed-income securities involve interest rate, credit, inflation, and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed-income securities falls. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post #142 – Falling In Love With Dividends appeared first on Wes Moss.
Wes Moss was recently featured in The Grey Journal’s article highlighting 5 Must-Try Recreational Activities After Retirement.
Relaxing is one thing that’s good to do after you retire, but too much relaxing can get boring. However, it doesn’t need to be that way. Getting out and staying active will help make your retirement fulfilling. Most people tend to retire later in life, so while rock climbing might be off your list of accessible activities, these five recreational activities are perfect for the average retiree. Read an excerpted section of the article below.
TravelNow that you’re not tied down to a 9-5 job, it’s time to get out and see the world! If you have the means to travel abroad, you can start marking off your bucket list of places you’ve always wanted to visit. If you’re on a budget, there are still plenty of places within the states that are easy to get to by bus, train, car, or plane. Some retirees opt to rent an RV to travel, hoping across the country from the campground to campground. There are also cruise options that let you travel, see sites, and live in luxury while on a ship. In a survey of 1,350 retired Americans, Wes Moss found that the happiest retirees reported taking an average of 2.4 vacations a year, while the least happy only took 1.4 per year.
Read the full Grey Journal article here.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post Wes Moss Featured in The Grey Journal appeared first on Wes Moss.
Wes Moss featured in ESI Money’s article on Moving to a New Location in Retirement, where he shares on of the habits of the happiest retirees. Read the excerpted section of the article below.
I certainly like the familiar (my gym, church, local grocery store, etc.)
We also like being close to our kids. They are in Colorado Springs, so there’s little reason on that front to move.
In fact, author Wes Moss says that one habit of happy retirees is living close to at least 50% of their children.
Read the full article here.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post Wes Moss Featured in ESI Money: Moving to a New Location in Retirement appeared first on Wes Moss.
The cost of living has been rising, and college tuition is no different. With that harsh reality, folks have had to find creative ways to fund their beloved offspring’s expensive hopes and dreams.
According to the US News & World Report, a “2022 Sallie Mae and Ipsos survey found that 18% of parents withdrew from their retirement savings, including a 401(k), Roth IRA or other IRA, to pay for college – up from just 6% in 2015.”
As a quick review, Individual Retirement Accounts (IRAs) often serve as the backbone of retirement savings. They provide an opportunity for regular folks to make tax-deferred investments in their quest for financial security and happiness later in life.
There are many types of IRAs but a traditional and Roth are the most common. Contributions made to a traditional IRA can be deducted from your annual tax bill, and the earnings/gains typically aren’t taxed until withdrawn for personal use. However, a required minimum withdrawal (RMD) kicks in at age seventy-two or seventy-three (please consult with your financial advisor or CPA to determine which age is right for your situation), which effectively means the tax payment is forced upon you at that point.
A Roth IRA can provide more bang for your buck when used correctly. With a Roth IRA, contributions are made from your after-tax earnings, grow tax free, and you can withdraw from your account without having to pay any taxes after the age of 59 ½. Of note, you cannot withdraw funds tax free until it’s been at least 5 years since you first contributed to the Roth IRA. Unlike RMD’s from traditional IRA’s, no distributions are ever required from the original account holder! As a side note, there can be distribution requirements from an inherited Roth IRA, so please consult with your financial advisor or tax professional if that situation applies to you.
I recently got a question from a client who wanted to know if she could withdraw IRA funds to pay for her daughter’s college tuition without incurring any tax penalties.
The short answer is yes and no. Both traditional and Roth IRAs allow you to withdraw money for qualified higher education expenses before the age of 59 ½ without incurring the 10 percent early withdrawal penalty. These expenses can be used for you, your spouse, children, or grandchildren, including tuition, fees, books, supplies, equipment, room, and board. The student must be enrolled at least half-time.
Keep in mind that the IRS requires proof of the student’s attendance at an eligible institution, and the amount of the IRA withdrawal cannot be more than the qualifying expenses. In other words, you can’t withdraw $50,000 to pay a $30,000 tuition bill and expect to skate on those penalties. Also, remember that even though the penalty is waived, the total amount withdrawn is taxable for those using a traditional IRA.
There are potential options for those wishing to use a 401(k) or workplace retirement savings account rather than an IRA, as long as the plan allows withdrawals for current employees. When that isn’t the case, people might consider rolling their 401(k) into an IRA and going from there if their plan allows for this.
If you need to use retirement funds to pay college costs, keep in mind that it can affect the amount of financial aid offered because funds withdrawn from an IRA count as income. That means the FAFSA (Free Application for Federal Student Aid) report will essentially think you make more money than you do and assume your needs are less.
However, the FAFSA uses information from two years prior, so it would be prudent to plan accordingly and withdraw the IRA money during the student’s sophomore or junior years. However, this strategy could affect the financial aid of any younger siblings.
My mission is to help folks retire sooner and happier than they ever thought they could. A big part of that happiness is the freedom that comes from having financial stability even after the paychecks stop coming. Ideally, retirement accounts are used for retirement, and it makes me nervous to see slices cut for other purposes. However, life can be a bumpy ride. We all love our kids and want the best for them. So when that college tuition bill lands on your desk and the college fund isn’t as robust as you’d prefer, it’s nice to know a retirement fund can be a viable option, and if done correctly, additional taxes and penalties can be avoided.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post IRAs for Education appeared first on Wes Moss.
In this episode, guest Kathleen Rehl shares her expertise and experience with widowdom. Widely featured writer and author of the multi-award-winning book, Moving Forward on Your Own: A Financial Guidebook for Widows, Kathleen is a leading authority on financial challenges that widows face with over 17 years of personal finance advice.
Wes and Kathleen discuss grief, growth, and grace in widowhood, including how it affects retirement, investing decisions, and getting back into the dating pool. And, in a Retire Sooner first, you can also listen to a little bit of poetry!
Watch the full episode!
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #141 – What Widows Need To Know About Their Financial Future with Kathleen Rehl appeared first on Wes Moss.
Considering all your retirement options can feel like wandering through a maze. But with the proper planning, that confusing network of passages can transform from an unclear situation to a situation with well-defined financial and lifestyle retirement plans. The key is to find the pathway that works best for you.
My team at Capital Investment Advisors put together a guide with 101 retirement tips that can help you prepare you for and/or help you navigate retirement. Of course, every situation is different, but incorporating this guidance can point you where you want to go.
We designed this guide for folks with $500,000 or more in investable assets but it can certainly be effective for those with less. I recommend taking advantage of every tip,but here is a quick and delicious taste to show what my crew cooked up for you.
TIP #4: Don’t Claim Social Security at the Wrong Time.
The prevailing idea of some, including the best-selling book on Social Security, Get What’s Yours by Laurence J. Kotlikoff, is that old age is the biggest threat to your retirement income plan. While I agree in many ways, it’s also imperative to remember that there is no right or wrong answer for when to take Social Security. Instead, the most productive moves depend upon the needs of the people making them.
Sixty-two is the earliest eligible age to claim Social Security, but your monthly benefit will increase every year that you wait to take it up until seventy. Does that mean waiting is a no-brainer? Not necessarily. You may have financial needs or health considerations that support an earlier start. And waiting too long can sometimes mean you never fully recoup the lost wages of your “retirement youth.” There are several Social Security calculators on the web. Find one that works for you.
TIP #19: RIDD Method to Generate Multiple Streams of Investment Income.
If you want to get “RIDD” of your 9-to-5 job, it can help to secure income in the form of Rent, Interest, Dividends, and Distributions, or RIDD. Let’s break this down.
Rent – a $150,000 home could produce about $1,000 monthly rent.
Interest – income generated by bonds.
Dividends – income from stocks.
Distributions – income from real estate investment trusts (REITs) and other investments that don’t fit neatly into the stock or bond category.
Depending on how you weigh each category, an income-producing portfolio could generate an annual “cash flow” in the 4 to 5 percent range.
Based on my experience as financial planner and studying happy retirees for over two decades, I believe retirees could withdraw around 5 percent from their investments assuming a balanced income portfolio. However, if you retire at fifty, you might consider withdrawing less and closer to 4 percent per year.
To put that into better perspective, a fifty-year-old with $1,000,000 in income producing investments could potentially withdraw $40,000 per year in gross income at a 4 percent withdrawal rate. Combined with one or two mortgage-free rental properties, that’s an income of roughly $50,000 to $60,000 per year.
If you’re ready to move away from your career but don’t yet have enough RIDD income, one option is part-time work. Whether in the same field or a new genre, part-time income could allow you to step out of the rat race without drawing on your nest egg immediately. The right part-time job might also provide health insurance.
Super early retirement is not easy to achieve, but the RIDD method can help make it more possible.
TIP #22: The Importance of Creating Three to Four Core Pursuits.
Core pursuits are hobbies on steroids, activities that bring you excitement and a sense of fulfillment while you’re doing them. They are the building blocks for happiness during your post-career years.
Fill time with three to four “core pursuits” to help enhance your quality of life when you are no longer working in retirement. These can be anything from socially engaging activities to part-time work, volunteering, singing in the choir, painting, taking college courses, playing tennis, golf, or even cowboy poetry and Civil War history, like my dad enjoys.
Core pursuits aren’t just for current retirees. They are for people in their thirties, forties, and fifties, and so on. The sooner you develop them, the better. In addition to upping your happiness quotient when you reach your golden years, they help you save and invest better. Above all, they generate a purpose for your money and a passionate reason to get out of bed in the morning.
TIP #32: Plan for never running Out of Money In Retirement.
A helpful rule of thumb to keep yourself honest when it comes to maintaining enough retirement savings is the 4 Percent Plus Rule. The idea is to withdraw only 4 to 5 percent from your retirement portfolio each year after you stop working. Studies have found that historically, a retiree could withdraw 4% of their initial retirement assets, and increase that amount every year to account for inflation, assuming a 50% to 75% portfolio allocation to stocks.
For instance, let’s say the Gonzalez family has a cool $1,000,000 stashed away for retirement. So, if they withdraw $40,000 (4% of $1,000,000) in their first year of retirement, during their second year, they can withdraw the same $40,000, except this time account for inflation. So, if inflation is at 5%, they’d take out $42,000 (the extra $2,000 being 5% of their $40,000 starting point). And so on for the next year and the next.
The disciplined use of these defined amounts dramatically increases your chances of your money lasting you through retirement, especially if your 401(k) is the primary source of income. In addition, the more assets and retirement income you have, such as rental properties or a part-time job, the less you will need to withdraw. Therefore, stretching out your 401(k) by only withdrawing small amounts can be highly beneficial.
TIP #63: The 6 Percent Test — Know If You Should Take a Lump Sum vs. Monthly Pension.
How do you know which one to pick if you can choose between a lump sum or monthly pension allotments? A helpful indicator is the 6 Percent Test. 6% is an industry average of expected returns over time in invested in the S&P 500, so it serves as a guide to factor in when weighing lump sum vs. monthly pension.
First, determine if your pension passes the 6 percent test by taking your monthly payment and multiplying it by twelve. Then, divide that number by the lump sum offer.
For example, an allotment of $1,000 per month for life beginning at age sixty-five vs. a $160,000 lump sum today.
$1,000 x 12 = $12,000
$12,000 ÷ $160,000 = 7.5 percent.
This means that the monthly pensions may be a better deal long-term (7.5 percent is greater than 6 percent) than a lump sum. On the other hand, if the number is below 6 percent, you likely can do as well (or better) by taking the lump sum, investing it, and then paying yourself each year.
The bottom line is that there’s more than one way to find happiness in retirement. Don’t keep second-guessing yourself if your instincts differ from your neighbor’s. I’ve worked with happy and unhappy retirees and have seen firsthand which principles and habits can make a huge difference. Do yourself a favor and become familiar with these 101 retirement tips so you can make the best decisions for yourself and your family.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. For stocks paying dividends, dividends are not guaranteed, and can increase, decrease, or be eliminated without notice. Fixed-income securities involve interest rate, credit, inflation, and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed-income securities falls. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions,
The post 101 Retirement Tips appeared first on Wes Moss.
Recently Wes Moss was featured in a Fortune Recommends article where he shared his insights on the U.S. officially hitting the debt ceiling.
“The United States runs a budget deficit, which means it doesn’t generate enough money from taxes and other revenue sources to fully fund its operations. In order to fund those operations, the US issues debt to continue to provide services to its citizens and fund expenses,” says Wes Moss, CFP®, managing partner of Capital Investment Advisors in Atlanta.
So what does this mean? Lawmakers have a few months to reach an agreement before the U.S. defaults entirely. Some are pushing for an increase to the debt ceiling, others think the U.S. needs to reign in its spending.
Read the full article here.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post Wes Moss Featured on Fortune.com: US Hits Debt Ceiling appeared first on Wes Moss.
Preparing for retirement is like figuring out an equation. Even if you know most of the variables, you can’t find the answer until solving for x. Or, in this case, 25x. We’ll come back to this figure in a minute.
I treat retirement data like a treasure because the overarching goal of my career as a podcast and radio host as well as the chief strategist of a fee-only financial advisory firm is to help people retire happier and sooner than they ever thought possible. Accordingly, I strive to stay plugged into what’s working for folks and what isn’t. So when one of the producers on my Retire Sooner podcast pointed me toward an eye-opening study conducted by GSAM (Goldman Sachs Asset Management), I grabbed my reading glasses and got to work.
The GSAM findings resulted from 1,566 individuals surveyed in July and August of 2022. It provides insights from working individuals across generations — Baby Boomers, Generation X, Millennials, and Gen Z. It also takes into account retired folks (age 50-75) and gender and generational breakdowns for both populations.
It revealed that a substantial portion of future retirees feel they’ve fallen short of their savings goals and fear they’ll simply have to “make do.” That is not what I want for my retirees, including you.
In addition to the anxieties of those still working, GSAM found that working individuals heading toward retirement are insecure about several factors. The top three financial challenges Americans face when headed into retirement are:
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Generating Income
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Understanding How Long Your Savings Will Last
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Understanding If Your Retirement Savings Are On Track
I’ve found there is one question that can take care of all three concerns: how much money does it take to stop working? That’s the real meat and potatoes of this entire discussion. If we can answer that, most other things should fall into place.
Strangely enough, I came to this conclusion by talking with people too young to even work — my kids. I have four boys, and their blunt curiosity cuts through the financial morass. One day they asked me, “How much money does it take to not work?” Their interest was fueled by different motives than yours or mine might be. They aren’t analyzing stock prices or calculating pre-tax retirement funds. They simply want to know what it would take to keep dad around the house more
Raising four boys is a costly undertaking. They enjoy vacations to Michigan in the summer, love ski trips in the winter, and have about half a dozen collective lacrosse tournaments coming down the pike, all of which require air travel. And did I mention boys eat a lot of food? Some days I think my wife and I are single-handedly keeping the local grocery store in business. Once the kids are out of the house, the expenses go way down. My wife and I can live much cheaper when it’s just a table for two.
But how much money in the bank would we need? At what point is it okay to walk away from the office and into the sunset? Seeking this answer brings that 25x figure back into the equation.
The 25x Rule takes the entire financial planning conversation and simplifies it into thirty seconds or less. I first became aware of it when doing a podcast with Carrie Schwab-Pomerantz. She demonstrated how the 25x Rule provides answers for generating income, understanding how long savings will last, and if your retirement savings are on track.
Take the money you think you need in retirement and multiply it by twenty-five. Once you’ve accumulated that amount, you should be able to retire.
For example, let’s say you’ll need $5,000 per month to live a happy and fulfilled life.
$5,000 x 12 months = $60,000 per year.
$60,000 x 25 = $1.5 million
So, theoretically, your goal would be to amass $1.5 million in retirement savings to stop working. Admittedly, this explanation is a bit abridged because you can subtract what you’ll get from Social Security, pensions, rental income, etc. In other words, it will end up being 25x minus those line items.
If you’ve read either of my books, you know what a big fan I am of the 4% Rule. It essentially states that if folks draw down 4 percent of their portfolio in the first year of retirement and then adjust this amount every year for inflation, they will likely see their money outlive them, assuming a 50% to 75% allocation in stocks.
The math of the 25x Rule is just the inverse of the 4% Rule.
If your total savings were a delicious pie, the 4% Rule helps you slice a 0.4 percent piece to enjoy every year. But, inversely, the 25x Rule tells you how big that pie needs to be before you can start eating it.
It’s common to forget, become confused, or lose faith in the simplicity of math regarding financial stability in retirement. The 25x Rule can help provide clarity to help alleviate concerns in the GSAM study. Of course, it’s not easy to save all that money, but hard work isn’t the problem. Instead, the unease comes from not knowing how to get where you want to go. With the 25x Rule, you can use uncomplicated high school algebra to calculate your magic number and then set about getting it.
Of course, there’s no guaranteed success in any financial rule because life isn’t perfect. The best we can do is lower the risk and make a happy retirement more likely. With the 25x Rule, you can determine your magic number. Seeing this as a clear destination in the future will free your mind and chart your course for the perfect work-life balance in retirement.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post Stop Working When You Reach 25x In The Bank appeared first on Wes Moss.
If 2022 felt painful, it’s because it was. There is no use sugarcoating the profound challenges investors endured.
A traditional balanced portfolio with 60 percent in stocks and 40 percent in bonds had its worst performance since 1937. Not even the 2008 global financial crisis or the inflationary bear market of 1973-1974 matched its agony. Technology stocks ended the year down almost -30 percent, while consumer discretionary stocks as a group (Amazon, Tesla, Nike, etc. as an example) were down practically -40 percent. As of this writing, the S&P 500 still hovers near bear market territory. Inflation is alive and likely to persist for the foreseeable future. Combine that with a war in Ukraine, a cryptocurrency collapse, and a Federal Reserve committed to raising interest rates to the highest level in nearly two decades, and you have the potential for another problematic year.
However, it’s not all bad news. Some significant silver linings were sprinkled amongst 2022’s outrageous misfortune.
1. Dividend stocks held up relatively well.
Despite the deluge of scary market headlines and sizable negative returns from irresponsible investing styles, income-oriented investors held up well on a relative basis. It certainly wasn’t a year for celebration, but investing with an eye toward stock dividends proved a durable strategy in a time of stress. For example, the Russell 1000 Value Index which measures dividend/value-oriented stocks was down 8 percent, while the Russell 1000 Growth Index which measures growth-oriented stocks finished down 29%. See the chart below.
Source: Capital Investment Advisors; Bloomberg data
2. Bond yields rose to attractive levels.
The 10-year treasury currently yields nearly 4 percent, its highest level since Fall 2008 and well above the 0.5 percent COVID nadir. This rate means many investment-grade bonds are now paying 4 to 5 percent interest rates. To say this is welcome news for income-oriented investors is an understatement.
3. Many market excesses have been wrung out of the system.
Many pockets of excess, which began bubbling up in the near-zero interest rate environment, have finally burst — think cryptocurrencies, pandemic “stay-at-home stocks” like Zoom and Peloton, and tech stocks with sky-high valuations despite little-to-no earnings. With that era in the rearview mirror, the market should be placing more attention on well established companies with actual earnings.
Those are some shiny silver linings, but looking ahead to 2023, will the polish continue to sparkle? I hope it will.
Undoubtedly, inflation will remain a key theme in the year ahead. While I think it’s peaked, and price increases should continue to slow, inflation could persist to some degree. Unfortunately, the Fed can only do so much to put on the brakes on inflation without causing too many other problems. Their primary tool to combat inflation is raising interest rates, but there’s little they can do to solve a world economy marching toward less globalization after a decade of under-investment in energy resources.
Less globalization, onshoring to the U.S., and dampened oil and natural gas supply leads me to believe that inflation should linger, keeping prices higher than we all might like. This isn’t to say a 5 percent plus period of inflation awaits, but there are signs it should remain higher than the 1 to 2 percent range to which we were accustomed for decades.
With this perspective in mind, here are two central investment themes.
1. Dividend stocks can help combat higher inflation.
If inflation remains elevated, the data show us that value stocks (which tend to pay higher dividends) have historically weathered the storm better than growth-oriented stocks. As inflation eats away at the value of a dollar, investors tend to value cash in their hands sooner rather than later. And what helps to solve that problem are companies that pay dividends today (value stocks) rather than promise to pay in the future (growth stocks). This trend gained steam in 2022, and I wouldn’t be surprised if it were the start of a multi-year dividend renaissance.
The chart below is a beneficial illustration of what to understand as we move into 2023. Keep in mind that the last period of sustained inflation in the 1970s and the last twelve months saw value stocks significantly outperform growth stocks. See the figures below.
Source: Capital Investment Advisors; Bloomberg data
2. Bond yields are now at fifteen-year highs.
Many high-quality bonds are now paying 4 to 5 percent, among the highest rates in nearly fifteen years. While the road to get here has been rough, a much better rate of return on bonds is a happy consequence. Of course, prudence is still required, but there’s nothing wrong with toasting to the fact that high-quality bonds are finally lucrative.
Source: Capital Investment Advisors; Bloomberg data
2022 was a historically tricky year, but sensible decisions about income investing with more value-oriented stocks did provide some cushion and safety in a hairy market with very few places to hide. While we don’t know precisely what 2023 will have in store, a continued focus on high-quality stocks and bonds that provide consistent and growing income will remain as important as ever. Remember the words of vaunted investor Peter Lynch: “The real key to making money in stocks is not to get scared out of them.”
The U.S. economy isn’t without flaws, but time and time again, it’s shown robust resilience. Let history guide you toward peace and prosperity.
If you’re ready to plan your retirement, schedule your free consultation today.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. The mention of any company is provided to you for informational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any company. The reader should not assume that an investment in the securities identified was or will be profitable. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. For stocks paying dividends, dividends are not guaranteed, and can increase, decrease, or be eliminated without notice. Fixed-income securities involve interest rate, credit, inflation, and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed-income securities falls. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information is strictly an opinion, and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions,
The post Predictions for the Market in 2023 appeared first on Wes Moss.
Is your new year resolution to retire a little sooner? If so, this episode might be for you. In today’s episode, Wes Moss and Retire Sooner podcast producer Mallory Boggs discuss their personal financial resolutions for 2023, Wes’s favorite financial advice from 2022, what investors may expect from the markets this year, and why now is the time to reassess your retirement goals.
Wes shares his thoughts on some of the biggest stock market challenges in 2022. He discusses why he’s optimistic for investors in 2023, what he likes about what he sees with value stocks this year, and how shifts in the bond market, cryptocurrencies, and interest rates may shape the market in 2023.
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #139 – An Investor’s Outlook for 2023 appeared first on Wes Moss.
Wes Moss joins the Employee’s Retirement System of Georgia’s, Executive Director, Jim Potvin in an interview discussing what you can do now to be happier in retirement.
Watch the full interview here.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post Wes Moss Interviewed By The Employee’s Retirement System of Georgia appeared first on Wes Moss.
If you live in a great home, why move out of it into a lesser one? Currently working on her eleventh flip, Mindy Jensen is a mom, works her day job at biggerpockets.com, and has bought and sold houses live-and-flip style for over two decades.
In this episode, Mindy discusses the process of moving into an ugly house and turning it into a beautiful one through do-it-yourself construction and eye-grabbing kitchens. She also addresses some of the perks of the live-and-flip lifestyle, such as advantageous tax exclusions. Wes and Mindy dig into why real estate is an excellent investment class and cautionary areas for inexperienced buyers, such as overpaying property taxes. They also address loan rates, reverse mortgages, second homes through COVID, and Mindy’s preference for local lenders.
Watch the full episode!
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #138 – Building Bigger Pockets with Real Estate Investing and Smart Money Moves with Mindy Jensen appeared first on Wes Moss.
It’s a new year, and with it comes new opportunities for people all over the country to set retirement goals.
Financial gurus and critics tell us we need millions of dollars to stop working. Whether it’s a scary article in the Wall Street Journal making the case against withdrawing retirement funds or Suze Orman practically demanding you work a shift at your own funeral, at a certain point, we have to wonder what the point of working and saving is if we can’t ever enjoy it.
It’s time to turn down the volume on the hyperbole. The truth is, we can find a happy medium. Regular folks can retire sooner and happier than they ever thought possible.
There are various methods to accomplish this overarching goal, but those who follow certain foundational principles tend to have incredible luck reaching happiness in retirement. I cover the topic extensively in my first book, You Can Retire Sooner Than You Think: The 5 Money Secrets of the Happiest Retirees, but I wanted to share a little with you here to start your new year off on the right foot.
1. No MortgageYou’ve got to find a way to eliminate the pesky bill that haunts your dreams every month. Regardless of the original loan balance, happy retirees will likely be within five years of paying off their mortgage as they approach their last day at the office. The best way to accomplish this is to pay above and beyond the minimum required monthly payment. If this is possible for you, it’s typically one step closer to a happy retirement.
Chisel away at that principle to ensure the payoff is within reach when planning to retire. It should give you more financial flexibility and provide the peace of mind of knowing you own your home free and clear.
2. How Much Money Do You Need?I’ll give it to Suze Orman that transitioning to retirement with millions in savings would be easier than doing it with $20,000. That said, most of us don’t have the option of living on a private island in the Bahamas, so what’s a realistic amount? My research shows that the magic number is closer to $500,000.
Some folks might need help finding this figure attainable. Don’t worry. I’m not saying it’s impossible to have a happy retirement with less. Based on the happy retirees I’ve surveyed and studied, that amount allows for enough of an income stream to replace your paycheck when supplemented with Social Security. Having $500,000 in retirement savings should generate approximately $2,000 in monthly income. That math looks like this:
$500,000 x 5%* = $25,000 annually.
*We use 5% in this exercise as an example. From what I’ve seen during my 20 years of helping people plan for retirement, using a dynamic approach to your nest egg is the key. Anywhere from 4% to 5% should be sustainable so long as you are willing to make adjustments as needed. As always, please consult with a financial advisor before making a decision like this.
$25,000 / 12 months = $2,083 per month in income.
For example, if you and your spouse each receive $1,500 monthly in Social Security, that totals $3,000. Adding that to the $2,000 puts you at $5,000 per month. That might not seem like a ton of money, but remember that if you’ve followed the first principle, you don’t have a mortgage payment. Imagine how far $5,000 can go without that big monthly expense!
Now, if you want to retire before you can draw Social Security, that’s okay as long as you account for the extra income you’ll need to find elsewhere.
3. Core PursuitsCore pursuits are the activities you’re passionate about that bring you excitement and a sense of fulfillment. Think of them as hobbies on steroids. So whether it’s woodworking, windsurfing, chess, golf, tennis, music, travel, or volunteering, all these and more count as core pursuits.
My research found that unhappy retirees average 1.9 core pursuits, whereas happy retirees average closer to 3.6. The difference between those two numbers is enormous.
Having a purpose and an outlet for the financial resources you’ve worked so hard to accumulate is a crucial part of happiness. Getting the first two principles locked down means you have sufficient financial footing, but instead of writing a check to the bank, you can spend your time and money creating memories and pursuing passions.
All this may sound simple, but it takes a long time to get there. That’s why you don’t see many forty-five-year-olds retiring. I’ve witnessed so many people able to accomplish it by their late fifties and early sixties, and there’s no reason you can’t be one of them.
There are always exceptions, but these tools have worked repeatedly. It doesn’t mean there aren’t some who do it quicker and cheaper and some who need more to pull it off. Situations can vary for those living in the extremes — affordable areas vs. the heart of Manhattan or San Francisco. But, in general, these baseline numbers can be very effective retirement tips for most people in the U.S.
Take the bull by the horns in 2023! Enjoy a more detailed roadmap for financial stability and happiness in retirement by picking up either of my books, including my latest, What the Happiest Retirees Know: 10 Habits for a Healthy, Secure, and Joyful Life.
Happy New Year!
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post How to Retire in 2023 appeared first on Wes Moss.
As host of the Money Matters radio show and Retire Sooner podcast, I try to stay plugged into what my listeners have on their minds. To that end, my team and I set up a Retire Sooner Hotline (800-805-6301) so folks can call in to ask anything under the sun. And ask they did! We recently had some topical and evergreen retirement questions, so the time was perfect for answering them. Chances are, others have similar questions. After all, the happiest retirees on the block share a vivacious sense of curiosity.
The first question came from Andrew.
“Hey, Wes. What are your thoughts on having a 100% stock portfolio even up through and to retirement?”I love the question and the idea as long as people know the risks. History shows that stocks tend to yield higher returns over time, but they can be more volatile than other holdings like bonds and other fixed-income products. The risk can ultimately affect your financial and mental well-being if you don’t limit your exposure.
Until recently, the interest rate on bonds had been so low that many found them unattractive. But bonds are predicated on current interest rates, and as we’re all painfully aware, the Fed has been steadily raising those. So, if you’re an income investor today and don’t want all your eggs in the equity/stock basket, bond yields are the best we’ve seen in a long time.
As much as I’d love to tell Andrew to shoot for the moon and hope for the best, the responsible answer is that it’s essential to have something other than stocks in your portfolio and have some dry powder in your portfolio.
What exactly do I mean by dry powder? The term dry powder refers to the historical necessity of keeping moisture from gunpowder in battle. I imagine there’s nothing scarier than scoping an advancing army only to realize your musket won’t fire because of the rain. In finance, dry powder means the cash reserves a company or individual maintains to meet obligations in times of economic stress — the various ways to fill your cash (savings, money market, CDs) and income (treasuries, municipal and investment-grade bonds) buckets.
Holding a diversified portfolio that includes dry powder can help you maintain discipline and sleep well at night when volatility strikes.
People typically have more dry powder like bonds and treasuries as they near or enter retirement. A target date retirement fund automatically downshifts the percentage of stocks and accelerates the more conservative allocations with time. An eighty-twenty stock-to-bond ratio might be appropriate at an earlier age during prime working years but not realistic once you get to or close to retirement.
To sum up, I love Andrew’s ambition and drive as long as he understands the risks associated with that type of portfolio.
Next, Jenny had a question about Roth IRA conversions.
“Hello. I just had a question about converting IRA money into a Roth IRA in a massive amount of as much as you can — a lot of money in transfers to negate taxes in the future. Is it okay to convert massive amounts?”I’m glad Jenny reached out because Roth conversions are a hot topic. The reason you’d want to convert a traditional IRA into a Roth IRA is that there are certain tax advantages you can receive with the Roth IRA. You can invest that money in a tax-sheltered container that can later be withdrawn tax-free. Furthermore, the IRS doesn’t mandate required minimum distributions (RMDs) from a Roth. I’d certainly be interested if we could all transfer limitless funds into Roth IRAs, but it’s not that simple. There are other factors to consider.
First, figure out your tax bracket today and which one you think you’ll be in tomorrow. The answer to that comes into play once we consider the following component: paying the taxes that come along with a Roth conversion.
The money converted to a Roth counts as income for that year. Let’s say you earned $70,000 annually at your job in 2022. Converting $50,000 from a traditional IRA to a Roth would increase your MAGI (Modified Adjusted Gross Income) to $120,000. If you are married and filing jointly, that difference would bump you to a higher tax bracket. Instead of paying 12 percent income tax, you’d be paying 22 percent. Ouch!
Another aspect to consider is the state of the markets. It’s better to convert when the markets are down because you’re essentially taking money from one retirement account and putting it in another, hoping for a later rebound. But this is where it gets complicated. In general, a Roth conversion makes sense if you’re in the 20 percent bracket today and will be in the 25 percent bracket when you retire. But, the inverse is also true. If your tax bracket will be much lower in retirement, a conversion today may not make sense.
There’s a lot to think about here, but the upshot is that with the markets down, it’s a good year to at least consider the conversion option. As you do, remember that the more we convert, hypothetically, the more immediate pain we’ll feel come tax time. So, folks often elect to convert smaller, more measured amounts to their Roth each year. That way, they aren’t stuck with a giant bill.
I’d have to know the exact situation in answering Jenny’s question about moving massive amounts. In rare cases, people have enough of a loss to report elsewhere that it cancels out the income reported from the Roth conversion.
The bottom line is to look at taxes today vs. taxes tomorrow. Then, figure out which one benefits you more. As always, speak to your CPA or personal tax advisor about your specific situation.
Finally, Bob brought up something called Tax Loss Harvesting, which is pretty cool once you understand it.
“Good morning, Wes. This is Bob from Norcross, Georgia. I was talking with my financial advisor the other day, and he mentioned a tax strategy called ‘Tax Loss Harvesting.’ Could you talk about that a little bit and give me an idea of what it means exactly?” Tax Loss Harvesting is a tool designed that helps you chisel away capital gains taxes.
Sector divergence is common in the market, even in a good stock market year. For example, in 2022, technology investments have struggled, but energy equities have thrived. In a diversified portfolio, most likely investors have had some winners and some losers.
So how does tax harvesting work? Remember, this only works for taxable accounts like brokerage accounts you can open with Fidelity, Schwab, Vanguard, etc. Retirement accounts — IRAs, 401(k)s — are typically excluded for tax loss harvesting purposes.
Let’s say you sold a booming stock in your brokerage account mid-year for a gain of $20,000. Come year end, you would be liable to pay taxes on that long- or short-term gain of $20,000. Chances are, after a down year like we have seen in 2022, you may have a few positions in your account that you could sell for a loss. Maybe you even had a stock showing a loss of $20,000. You can sell that stock for a $20,000 loss, and that would offset your gain of $20,000.
Maybe you still think the stock you sold for a loss is a good stock and you want to buy it back. That’s okay as long as you wait the thirty days mandated by the wash-sale rule. The IRS put that in place to keep folks from creating a deductible loss purely to offset gains on a short-term basis.
It’s hard to have a blanket answer to cover the spectrum of tax loss harvesting options because of the potential tax loss carrying forward. The road can get rocky, so I typically recommend sitting down with a CPA (Certified Public Accountant) or financial advisor to make sure you drive with caution and swerve when necessary.
Thanks for the question, Bob! Stop by and see us if you’re ever in the Sandy Springs area.
No matter how many tax losses you harvest or traditional IRAs you convert to Roth, I wish you all a great holiday season. If you have a question on your mind, call the Retire Sooner hotline (800-805-6301). Your financial questions keep me focused on my mission to help folks retire sooner and happier than they thought possible.
And if you’re looking for a happy retirement heading into 2023, pick up a copy of my book What the Happiest Retirees Know: 10 Habits for a Healthy, Secure, and Joyful Life.
The post Answering Listener Retirement Questions: 100% Stock Portfolios, Converting IRA Money into a Roth IRA, and Tax Loss Harvesting appeared first on Wes Moss.
Following the steps to build a solid financial foundation is critical to finding happiness in retirement. But once the economic infrastructure is in place, folks struggle with the next part — finding purpose.
Let’s use the analogy of a vacation. When you’re at work, you dream of taking time off. Once the scheduled date finally arrives, you skip merrily away from that office or cubicle without a care in the world. You overeat, over-imbibe, and burn the midnight oil. And that’s okay. That’s the definition of a great vacation!
From beneath the stacks of empty room service plates, you celebrate the deadly sin of sloth. But once the honeymoon phase wears off, the unsustainability of indolence creeps. And deep down inside, some subliminal part of your ego yearns for the daily routine — taking the kids to school, commuting to work, feeding the dog. This lust for the rigamarole isn’t some misguided passion for taking out the trash. Rather, it’s because human beings crave purpose.
Whether meeting with clients in person or answering listener questions on the radio and podcast, I tell folks to find their purpose through core pursuits. What exactly are core pursuits? I like to refer to them as “hobbies on steroids.”
The research for my book, You Can Retire Sooner Than You Think: The 5 Money Secrets of the Happiest Retirees, uncovered that the happiest retirees on the block (HROBs) have an average of 3.6 core pursuits, while the unhappy lot has only 1.9. So core pursuits are that critical to living a happy life in retirement.
Most folks fall into one of two categories.
1. Core Pursuit Abundance
Full disclosure, I’m probably in this camp. Between golf, coaching my kids’ sports teams, family trips to Michigan, playing piano, watching Yellowstone, rebelling against the craft beer movement, and a million other things, my wife wishes I had a little less passion and purpose.
2. Core Pursuit Scarcity
If you can’t find that magical hobby, you aren’t alone. It’s very common. Perhaps you spent most of your time building a successful business or raising a family. Daily life was about “needs,” whereas “wants” were a luxury.
You’re ahead of the game if you’ve already got your core pursuits in place. The best time to make that list was yesterday, but the next best time is today. Take a deep breath. It’s okay to admit that significant life changes are complex. For those near retirement age, it’s daunting to suddenly ask, “What do I want to do?” But, to achieve happiness, you must find an answer. The question is how? The answer is curiosity.
Curiosity killed the cat, but a lack of curiosity killed the happy retiree.
Give your mind permission to roam freely. What activities or topics have you always wondered about but never explored? Where do your thoughts go when the day quiets down and the distractions fade? Figuring that out will help point you in the right direction.
As inspiration, allow me to share a story about my dad. In 2020, he retired after forty-three years of working as a veterinarian. He sent out a letter to his clients which is right on point with our topic. In it, he wrote:
“I must admit that I approach this change of life with mixed emotions. While stepping away from veterinary medicine is hard, as many of you know I have a few other interests that I look forward to pursuing geology, Civil War medicine, fencing, leatherwork, fox hunting, trail riding, woodworking, sewing, time-traveling through historical reenacting (Civil War, Revolutionary, Pirate), music (guitar, singer-songwriter), art, cooking, cowboy poetry, and more! I also look forward to spending more time with our family (four grown children and eight growing grandchildren) and supporting my wife Anne’s interest and career in pottery and equine pursuits.”
I love this letter, not just because the term “equine pursuits” is so specific and extraordinary, but because after a fulfilling career, my dad retired with much more to accomplish. When he was busy treating bovine ulcerative mammary dermatitis, he didn’t have time to be a revolutionary pirate or a cowboy poet. But he knew that he would seize the day when time and resources allowed. His purpose bucket was ready to be filled. It’s time to start filling yours.
Consider some tried and true activities if you’re having trouble pinpointing your curiosity categories. The top four core pursuits of HROBs are travel, family/grandkids, golf/tennis, and volunteering.
Some other options include: snowboarding, skiing, knitting, quilting, hunting, gardening, camping, fishing, church/choir/bible study, college football, crossword puzzles, reading, theater, biking, running, jogging, and walking.
New to the scene is a game called pickleball. With the news that LeBron James recently bought a major franchise, it’s no surprise that it’s one of the fastest-growing sports in the U.S. It combines the excitement of tennis with the low impact of ping pong — burns calories without as much knee pain.
Suppose you don’t see something that sparks inquisitive joy within you. No problem. My team and I have created a core pursuit finder. You enter your personality preferences, and it spits out some suggestions.
If you want to read more about core pursuits and the other habits of HROBs, you can check out both of my books: You Can Retire Sooner Than You Think: The 5 Money Secrets of the Happiest Retirees and What the Happiest Retirees Know: 10 Habits for a Healthy, Secure, and Joyful Life. I also recommend a great book by Tom Vanderbilt called Beginners: The Joy and Transformative Power of Lifelong Learning.
The list of core pursuit options is endless for the happy retiree. Your only limitation is your creativity and openness to try new things. Incidentally, that limitation is also the key ingredient.
You can be a real go-getter and try everything under the sun, but the key is to nail down three or four at a minimum. Then, just think about how much fun you’ll have! As long as you’ve planned for these core pursuits and are financially ready to support them, you’ll be on your way toward a happy retirement.
The post How to Find Your Core Pursuits appeared first on Wes Moss.
Is money really the greatest need for retirement, or is there something more important to start with that we should all consider?
In this episode, Wes is joined by popular newspaper columnist, award-winning college professor, and bestselling author Mike Bellah. Mike makes us think twice about our greatest needs for retirement as he shares his personal experiences with core pursuits that drive this stage of his life and enable him to be one of the happiest retirees on the block. Mike and Wes also address the importance of learning from grandkids and cultivating multiple income streams. They also discuss the need to rebalance, some physical challenges that many retirees encounter during the latter phase of retirement, and the importance of curiosity to keep growing.
Watch the full episode!
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #137 – Ideas On How To Spend Your New-Found Time In Retirement with Mike Bellah appeared first on Wes Moss.
Tune in to this episode as Wes Moss uncovers why demographics play an impactful role in shaping your retirement destiny along with his review of population history and statistics of multiple countries. He walks through recent financial headlines and news, reveals what would happen if everyone bought stocks and never sold them, dives into market liquidity, and what adds up to more longevity. Additionally, he addresses market trends and the silent and powerful march forward of economic demand across the globe.
Wes wraps up this episode talking about the increasing popularity of pickleball, predictions for the ever-growing population, and unveils two of the most populous regions in the world.
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #136 – Demographics Is Your Retirement Destiny! (And Probably Pickleball) appeared first on Wes Moss.
As a financial advisor, radio host, and podcast host, I spend most of my time trying to help people retire happier and avoid the pitfalls of becoming the unhappiest retirees on the block (UROBs). If you’ve ever felt overwhelmed by the monumental task of searching for the right plan, you can take a deep sigh of relief. In fact, the happiest retirees on the block (HROBs) achieve contentment in a myriad of ways.
Indeed, retirement looks different for everyone based on preferences.
Screenwriting guru Robert McKee speaks to a similar sentiment in his definitive book — Story: Style, Structure, Substance, and the Principles of Screenwriting. “A rule says, ‘You must do it this way.’ A principle says, ‘This works and has through all remembered time.’” In other words, it’s helpful to understand the basics even if you don’t follow them all. This frame of mind comes in handy when considering the ways and means of fulfilling your retirement dreams.
So, what are the basics? After conducting robust surveys and compiling extensive data, I’ve identified ten common habits of HROBs. These principles have proven to work for a lot of happy retirees. Take some time to study them first, and then try to apply them to your happy retirement.
10 Common Habits of Happy Retirees1. HROBs have excellent money habits. They have $500,000 or more in savings, their mortgage payoff is complete (or at least in sight), and they have multiple income streams.
2. Happy retirees are curious and adventurous, with at least three core pursuits (hobbies on steroids). They know how to travel, play, and explore. They engage wholeheartedly in three or more hobbies regularly.
3. They love their kids and see them regularly — but their kids are independent. The happiest retirees’ adult children are out in the world living their own lives rather than suckling off the financial teats of their parents.
4. HROBs are married (or were happily married until a spouse passed), and they’ve either never been divorced or only divorced once. That’s right; you get one marriage mulligan.
5. The happiest retirees believe, give, and do good. Their faith is important to them, and they attend a place of worship at least twice a year. They also volunteer and support the causes they believe are vital.
6. HROBs stay connected. They are, at heart, social creatures. On average, they have three close social connections, belong to at least one organized social group, and travel at least once a year with friends.
7. Happy retirees are healthy. They are often “on the move,” recognizing the value of regular exercise. They are also mindful of what they eat and stick to a health-conscious diet.
8. HROBs have good home habits. They don’t live in McMansions, they don’t have mortgages, and they don’t rush to downsize their houses because they know their kids and grandkids will come home to visit.
9. The happiest retirees exhibit excellent investor behavior. They don’t go chasing waterfalls — by which I mean the investment advice du jour. Even when other retirees default to fight or flight, HROBs remain stoically invested over a long period.
10. They are “masters of the middle.” HROBs are savvy spenders. Sure, they may have had times when they were carrying too much credit card debt or struggling financially. But, for the most part, they’ve prioritized saving over spending — and they don’t deprive themselves needlessly.
To help you identify the most productive habits you can incorporate to achieve your retirement goals, my team created a Dream Retirement Quiz. Take some time to fill it out for yourself.
Every retiree is special and unique, and so is their retirement dream. The first step to reaching that promised land is knowing what your ideal situation looks like to you. From there, you can study the tried-and-true habits of happy retirees who have come before you — incorporating some and discarding others — to craft the one that suits you. Once you do, reach out and let me know. Maybe I’ll add your habits to my list.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post What’s Your Retirement Style? appeared first on Wes Moss.
With such a challenging year in the market, I relish every opportunity to report good news — the world economy continues to grow at an astounding rate. The global population is nearly eight billion people and rising. We’ll come back to that number in a minute.
Any isolationists out there might want to put politics aside and focus on the financial impact of global expansion. As the demand for goods and services continues to rise industry-wide, so does the potential growth of our retirement dollars as companies find ways to harness the massive demographic trends. After all, the more hot dog stands you own, the more hot dogs you can sell.
This positive news contrasts the tone and tenor of the content you’ve seen debated ad nauseam on various media outlets. Just because fear adds eyeballs to television ratings doesn’t mean yours can’t avert their gaze. Sure, scary things can happen, but life has a way of balancing out. It doesn’t do any good to your bottom line or mental health to dwell on bear market bottoms and bounces, bull market head fakes, the Fed, peak inflation, or the rise and fall of interest rates.
Too much of that puts anyone on edge.
On a recent episode of CNBC’s Fast Money Halftime Report, host Scott Wapner argued with three different fund managers about a bevy of stock trends. Next week could be a disaster! Stock multiples are too high! Earnings are flattening! It was all so hyperbolic. I’m not dismissing Wapner and his ilk, but I am asking you to put their discussions into perspective. Wapner and other media personalities have a priority to entertain, not advise. That’s not to say he doesn’t hope to educate and inform, but at the end of the day, he and his bosses probably care more about viewership than viewer portfolios.
To be fair, many daily financial news shows aren’t speaking to the people I am — the happiest retirees on the block (HROBs). Their target demographic is the fast-money crowd of day traders and short-term investors. While this may not describe you, fast-money folks are part of the overall market, and their presence is beneficial because they create liquidity opportunities for longer-term investors. If everyone were as patient as Warren Buffet, withdrawing funds when necessary would be much more difficult.
Population Perspective
Now, let’s add some context to the unbelievable news that the world population has reached nearly eight billion. In the United State alone the population in 1800 was 6 million people. By 1900 it had increased to 78 million, then to 150 million in 1950, and to 330 million by 2020. So it took one hundred and fifty years to go from 6 million to 150 million and then only another seventy to go up roughly 180 million! That growth is, in large part, responsible for the surge in U.S. and global markets.
Population Growth + Wealth and Prosperity = More Longevity & Continued Economic Growth
Mortality has dropped, and in general, we are living longer. A higher standard of living has increased this longevity — clean water, sanitation, healthcare, nutrition, etc.
Between 1990 and 2019, life expectancy for humans increased. Even after accounting for COVID deaths, the global average is up at seventy-one years of age. So for our kids and grandkids born in the coming decades, let’s say 2050, life expectancy is projected to increase to seventy-seven. That’s an almost 10 percent increase in longevity!
This blossoming of human durability has contributed to a population explosion. And, although the meteoric rise might have slowed, the US is projected to reach almost 375 million by 2040. Moreover, by 2060, the number of folks sixty-five and older could grow over 90 percent, while the eighteen to sixty-four age group could be down near 15 percent.
These analytical movements mean the job market should continue to have massive demand with an aging retirement population and a continued shift to healthcare, medicine, travel, and recreation.
There’s a reason Lebron James just bought a major league Pickleball team. Imagine a more exciting version of ping pong without as much tennis elbow or knee pain. People of all ages can play, which is perfect for everything from youthful competition to retirement recreation. It’s the fastest-growing sport and perfect for our demographic trends.
Looking Ahead
Although the growth rate is slowing as families reduce the number of children they have, the United Nations projects the population should reach about 10.5 billion in the 2080s and remain at that level into the 2100s.
Just eight countries could make up half of the world’s population growth by 2050. They are primarily concentrated in Africa and South Asia: The Democratic Republic of the Congo, Egypt, Ethiopia, India, Nigeria, Pakistan, the Philippines, and Tanzania.
The two most populous regions of the world in 2022 were South and East Asia, and China and India accounted for the majority of people in these regions at 1.4 billion each. However, though China has more people than any other country, but its population could start declining as early as 2023, and India should surpass it.
That means plenty of opportunities for more hot dog stands.
Bottom Line
As investors, we’re fascinated by the latest and most dramatic market activity. It’s normal and human. What will the market do this week, this month, or this year? What governmental policies will affect it? Will inflation ever end?
Every day global markets swing by hundreds of millions or even billions of dollars. Yes, it all matters, and it impacts our psyche. But, a trend that towers over the daily machinations of market news is the silent and powerful march forward of world demand. More people means more demand, more earnings, and more income from more sources.
Focus on these demographics’ positive effects on your retirement options as you plan your financial and social goals. Keep your chin up and limit the doom scrolling. That’s what the happiest retirees on the block do.
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What happens when you introduce humor into a serious conversation surrounding finances? You’ll have to listen to find out!
In this episode, Wes is joined by financial all-stars and old friends; Emily Guy Birken, author, money coach, and retirement connoisseur and Joe Saul-Sehy, former financial advisor, author, and co-host of the Stacking Benjamins and Money With Friends podcasts to talk finance with a comical twist. Emily and Joe share details about the process of writing their book together, what the book entails, and a useful tool for financial planning. Additionally, the trio dive into discussing stocks and how they can progress in a positive way with time, how the right house comes along at the right time, and why having a financial timeline can help you reach your goals.
Call in with your financial questions for Wes to answer: 800-805-6301Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #135 – How To Have A Fun Conversation About The Hard Topic Of Finances with Emily Guy Birken and Joe Saul-Sehy appeared first on Wes Moss.
The team at Retirement Daily has chosen Wes Moss’s What The Happiest Retirees Know: 10 Habits for a Healthy, Secure, and Joyful Life as one of their top picks and features on their 2022 Reading List.
Read an excerpt below and the full reading list here.
What the Happiest Retirees Know: 10 Habits for a Healthy, Secure, and Joyful Life – by Wes Moss. What the Happiest Retirees Know reveals what it takes to have a truly happy retirement. Wes Moss asked more than 2,000 of the nation’s retirees to find out—and their answers may surprise you. From his research, Moss identified 10 transformational habits that the happiest retirees shared. He outlines these habits in What the Happiest Retirees Know, from simple lifestyle choices to smart financial strategies.
This information is provided to you as a resource for informational purposes only. It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. The information contained in this piece is not considered investment advice or recommendation or an endorsement of any particular security. Further, the mention of any specific security is solely provided as an example for informational purposes only and should not be construed as a recommendation to buy or sell. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
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I recently came across an article by Mark Patterson in U.S. News & World Report that caught my eye. The …
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Wes Moss joins Podcast Host, Lacey Langford, on episode #208 of the Military Money Show Podcast where he shares what …
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As host of the Retire Sooner podcast and Money Matters radio show, I’ve interviewed many impressive guests. Talented experts from …
The post 1 Trick to Change Your Relationship with Money from My Interview with Ken Honda appeared first on Wes Moss.
Is your relationship with money holding you back from finding financial success? Many of us have a rocky relationship with …
The post #133 – One Trick To Change Your Relationship With Money From Ken Honda appeared first on Wes Moss.
Extensive research and tireless surveys of thousands of happy retirees have convinced me that several different tiers of preparation are …
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Humans encounter numerous fears throughout their lifetime. Some of those fears include public speaking, being locked in an unknown space, …
The post #132 – Setting A Goal Of Income For Life appeared first on Wes Moss.
Financial literacy is the blueprint to building financial success for the younger generation. In general, that could lead to earning …
The post #131 – Instilling Financial Literacy In Younger Generations with Dan Sheeks appeared first on Wes Moss.
Stock reports invade your daily news cycle. For radio listeners, it’s a rapid-fire attack on the “fives” along with weather …
The post The DOW Jones And S&P 500 Explained appeared first on Wes Moss.
Although numerous habits make up the structure of a happy retiree, financial habits play a large part in creating the …
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A happy retirement requires diligence and consistency in several categories. If you’ve read either of my books, You Can Retire …
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A sense of belonging, support, and accountability; these benefits come with joining a community. In this episode of Retire Sooner, …
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Mitch Albom’s books have sold more than forty million copies worldwide. But, if you ask me, that number is too …
The post Giving To Others And Finding Your Marginal Propensity For Happiness – A Recap Of My Interview With Mitch Albom appeared first on Wes Moss.
Tune in as Wes Moss discusses the investment math, data, and history that could make a major difference in your …
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2022 has been a rough year for investors. Nearly every corner of the market is in the red — stocks, …
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Several different categories of preparation are required to find happiness in retirement, but let’s be honest—the financial one is huge. …
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What’s the secret to unlocking your best life yet? Finding your purpose. To aid us in doing so, we sought …
The post #127 – “Purpose Is A Verb” and Seeking Meaning in Life with Richard Leider appeared first on Wes Moss.
Each generation is different. In fact, some generations are so hard-wired and hardcoded with their own values, that they may …
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Every generation thinks they’ve got it all figured out. The same kids who rebelled against their parents by listening to …
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So you’ve retired. What comes next? Many retirees find themselves lingering within the retirement grey zone as they make their …
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2022 has not been an ideal year for some investors. Tune in to today’s episode as Wes Moss explains what …
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Congratulations, you’re retired!! All your hard work, savings, and financial planning have gotten you to this point, and now it’s …
The post Finding Your Core Pursuits – A Primer on Finding Your “Hobbies on Steroids” in Retirement appeared first on Wes Moss.
What if we told you aging like fine wine and fitness go hand in hand? While some seek to kickstart …
The post #118 – Finding Fitness At 80 Years Old with Jim Owen appeared first on Wes Moss.
You might have been planning for retirement since the day you started working, socking money aside in savings, funding a …
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If you’re on your own- single, divorced, widowed and you are trying to determine how your finances are going to …
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Teachers impact more lives than almost any other profession. Whether you are one or know one, it’s highly likely that …
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A daunting question has been lingering in the minds of many U.S. investors – Are we in a recession in …
The post #117 – Are We In A Recession Or Not In 2022? And Why It Shouldn’t Matter For Investors. appeared first on Wes Moss.
After studying and researching the happiest retirees for decades, our team is always on the lookout for real life stories …
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Many of us experience anxiety. It’s normal to feel it before a big test, speaking in public, competing in a …
The post #116 – Pinpointing Your Anxiety and Getting A Head Start On A Happy Retirement with Dr. Gail Saltz appeared first on Wes Moss.
Have you ever finished a conversation and immediately realized you didn’t remember anything the other person said? Do you sometimes …
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With prices rising at a record rate, many retirees or people planning to retire soon may be increasingly worried about …
The post Wes Moss Featured In Forbes: How Inflation Affects Your Retirement Plans appeared first on Wes Moss.
How do you get to Carnegie Hall? I always took 7th Ave but it never got me onto the stage. …
The post Client Spotlight: The Story Of How Two Happy Retirees Played At Carnegie Hall appeared first on Wes Moss.
I love when clients, investors, and listeners of the Money Matters radio show and the Retire Sooner podcast reach out …
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Apprehension abounds for people trying to save for a happy retirement. Inflation is stubbornly persistent, and stock prices have been …
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It’s one of the most difficult experiences to go through, but almost half of married couples in the United States …
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There’s a difference between living the life you think you should live and living a life you want to live. …
The post #114 – What It Means To Live Life In Your Truth And With Integrity with Martha Beck appeared first on Wes Moss.
ATLANTA – July 13, 2022 – Today, Capital Investment Advisors is proud to announce that partner Wes Moss has been …
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How are you feeling about the world, the market, the economy, and everything else? It’s a little rough out there …
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Taking a trip every once in a while is good for the soul, but have you ever thought about what …
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The year has gotten off to a rough start, leaving many nervous about what to do with their finances when …
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Lazy Saturdays are the best. On one such recent and glorious occasion, I managed to change out of the bathrobe …
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While our physical health is extremely important, people often overlook exercising their mind. Mental health is the driving force behind …
The post #110 – The Importance Of Maintaining Your Mental Health with Dr. Gregory Scott Brown appeared first on Wes Moss.
A few weekends ago I was shopping for pancake mix at the grocery store with my 10-year-old son, Jake. The …
The post The Violence Of Economic Recoveries And The 30-For-30 Can Leave Market Timers Behind appeared first on Wes Moss.
As human beings, communication is our superpower. Having a conversation can lead to stress relief, the absorption of new information, …
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If you had $10,000,000 and the ability to do anything you wanted before you died, what would it be? Star …
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In this episode, Wes Moss talks about a top core pursuit that many happy retirees enjoy, golf. He covers the …
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Traveling is inspiring, exciting, and takes us out of our comfort zone. As funny as it sounds, there are numerous …
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As parents, we want our kids to be well educated and to lend a hand in helping achieve their dreams. …
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Wes dives into the history of stock market recoveries and the DNA behind them during this episode. Wes explains bear …
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There are numerous benefits to practicing meditation and mindfulness. Some may even say that it helps to relieve stress and …
The post #104 – The Power of Meditation and How To Get Started with Sharon Salzberg appeared first on Wes Moss.
What impact do your judgments and decisions have on your happiness and fulfillment? Award-winning professor, blogger, author, and teacher of …
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The clock is ticking towards your final day on the job. On the other side sits the promise of a …
The post Wes Moss Featured In Forbes: Why Is It Normal For You To Worry About Retirement Before You Retire? appeared first on Wes Moss.
2022 has proven to be a difficult year thus far. If it feels like it’s been a volatile year for …
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Wes Moss was recently featured in Great Senior Living’s recent article highlighting what to do in retirement and great ways …
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When it comes to finances and investing, we’ve found that women tend to take a backseat in decision-making while their …
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People continuously postpone traveling because they presume that the “perfect time” will come, but what if we told you the …
The post #101 – It’s Time To Plan Your Next Trip with Pauline Frommer appeared first on Wes Moss.
The start of 2022 has led the market into a rough patch. As many of us feel the pain of …
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Wes is joined by Maggie Doyne, philanthropist, author, Founder of BlinkNow, and 2015’s CNN Hero of the Year Award recipient, …
The post #99 – Identifying Your Philanthropic Pursuits and Giving Back with Maggie Doyne appeared first on Wes Moss.
Wes Moss sits down with Retire Sooner Podcast Producer, Mallory Boggs, to review the newly updated Money and Happiness Quiz; …
The post #98 – How To Be A Happy Retiree: Reviewing The Money And Happiness Quiz with Mallory Boggs appeared first on Wes Moss.
I have written two books and many articles about the differences between happy and unhappy retirees, the accumulation of which …
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Medicines help to treat illness within the body, but what if we replaced filling a prescription with filling our bags …
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As a financial advisor, I can say without hesitation that in 60 percent of my meetings, the person sitting on …
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Knowing the fundamental habits of happy retirees can be beneficial. In fact, if we implement those habits into our own …
The post #96 – Money and Lifestyle Habits of the Happiest Retirees Part 2 (Lifestyle Habits) appeared first on Wes Moss.
What would you do with an unexpected gift of $220,000? Inversely, what would a $220,000 contribution from you mean for …
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Internationally renowned and best-selling author, journalist, screenwriter, playwright, radio and television broadcaster and musician, Mitch Albom, joins this episode to …
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In part one of this two-part podcast, Wes Moss compiles research from his latest book “What The Happiest Retirees Know,” …
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ATLANTA – April 20, 2022 – Today, Capital Investment Advisors is proud to announce that managing partner and Chief Investment …
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Divorce rates have doubled for those aged 50 and over since 1990, and tripled for those 65 and over. It’s shocking to think what once seemed like your happily ever after, could possibly turn out to be the downfall of your family, finances, and overall happiness. For that reason, many couples are left asking, “How did we get here?” Meredith Shirey, Founder and Practice Director at Meredith Shirey Marriage & Family Therapy, provides her insight on that question and more in this week’s episode.
Meredith reviews the biggest catalysts leading to divorce and how marriage is perceived in different cultures and throughout history. Furthermore, she reveals what to consider when divorcing, as well as how this can impact your family and children. Later in the episode, Wes mentions his findings regarding marriage mulligans for Happy Retirees, Meredith dives into the touchy subject of affairs, marrying for happiness, and describes divorce patterns along with how to repair them
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
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Dan Abramowitz and Joel Dean join this episode of Retire Sooner to talk through The Great Wealth Transfer. Dan Abramowitz is a Regional Business Development Manager and Investment Advisor at CIA, and Joel Dean, CFP® is an Investment Advisor and Director of Investment Associates at CIA.
During this episode, we discuss how to prepare for The Great Wealth Transfer, as well as why Generation X and Millennials are most likely to benefit and what wealth looks like for these generations in the future. Dan and Joel also touch base on The FIRE Movement and how people are now preparing children for wealth and not their wealth for their children. This episode wrapped up with Wes, Dan, and Joel discussing the spending habits of Happy Retirees, transferring finances into a Donor Advised Fund along with how inflation can impact transferred wealth, and tips for your own Great Wealth Transfer.
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
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Technology is constantly evolving, but for older generations, this can be scary and seeking help can feel paralyzing. In this episode, Wes sits down with Trish Lopez, Founder of Teeniors, a business created to connect tech-savvy teens with tech-hungry adults and seniors, to discuss mending this digital divide.
Trish shares her journey and the history behind Teeniors, her process for hiring employees, making her business lucrative, and the technological learning curve that came with the pandemic. She also addresses the impact of her business on seniors and shares Teeniors success stories. Additionally, Wes and Trish analyze when we start getting “bad” at technology and why it’s important to never stop learning.
Read Show Notes From This Episode (click to expand and read notes from the full interview) * It’s almost as if it’s okay for someone to slowly not understand technology as they get older. Wes remembers people being confused about email. Then it just kept going from there. Rapidly evolving tech. Now facebook going to the metaverse.
Teeniors: tech savvy teens and young adults helping seniors learn tech through 1 on 1 personalized coaching. Our goal is to empower older folks while providing paying jobs for teens. It started in New Mexico. Virtually, it’s available all over the globe. In person it’s only in New Mexico right now.
Pre-pandemic it was 100% in person. In person in the office space downtown, at homes, senior centers, etc. Once covid hit, as you can imagine it was quite a learning curve telling folks how to do zoom. NPR had just done a great story on Teeniors. As restrictions have been lifted they’ve been doing more in person.
Wes says how do you make this lucrative? If it only costs $50 it’s not enough. If it’s $1500 that’s more than the computer costs. Trish Loves this because no one ever brings it up. Trish is not yet paying herself what she’s worth. The kids do get paid $15 or $16. (Trish used to work in the film industry). She’s been able to succeed as a small business but in no time she realized a lot of people couldn’t afford to pay. Trish doesn’t turn anyone away. They weren’t profiting. Now she has a small business and a non-profit. Almost like Bombas socks, where they give away a free pair of socks to someone in need. That’s not how Trish is doing it per se. What essentially happens is, that if someone can afford to pay she puts it through the small business, and if they can’t pay they put it through the non-profit.
Trish says it’s not hard to recruit the kids. If it did happen she would go to college for computer science projects. But they get great press so it’s been pretty easy to find people.
There are about a dozen teens working for her at any given time.
Impact on seniors: Goes way beyond a product or service. They address social isolation. They try to survey everyone they work with. And with their coaches. What has come from that has been astounding. They were getting ready to let go of one of his coaches and when she reached out he said “please don’t fire me, this is the reason I wake up in the morning. Give me another shot.” He had been in depression and that’s why he had been late. And after that he was fantastic.
In the beginning, Trish thought people would want to learn social media. But that’s been the least. They want to learn how to attach files. Whatsapp to talk to people in other countries. Get rid of spam emails and messages. Some are a little more advanced – got a new computer to want to learn how to transfer everything. Use cloud more efficiently. Use zoom.
Teens run from 15-29. It’s been back to being more in person than virtual. Sometimes contact them through the website. They always get a live person. Trish’s whole goal is to empower the people to do it themselves. Not to just do it for them.
If the client wants it at their home they’ll send an older teenior. The client will charge by the hour and then after that in 15 minutes. $39.95 per hour to start. And then $10 more if they want to visit the office. If they come to your home, then it’s $10 more ($59.95). How often does Trish see repeat biz? At least 35%. And it’s cool because it’s not usually about the same thing. Cool. Want to learn how to do a resume online or sell something on amazon. They want to learn. It’s empowering.
Client ages run from 50 to 103.
How do they train? Trish doesn’t train the kids in software or hardware. They hire them knowing what they know and that’s the topic they teach. Sometimes the teens are scared that they’ll be asked something they don’t know. She says don’t worry about it. Just tell them you don’t know it and google it. And almost always the older person is like “Oh fun! You don’t know either!”
Wes: Brings up Tom Vanderbilt’s “Beginners” – one of his favorite people he interviewed. Trying to break out of that human mode and not being scared to be a beginner despite age.
Wes: When do we start getting bad at tech? Trish says 50 seems to be the age. But even at her age, she has friends who want to do it but they are embarrassed because they feel like they should know. Trish has hired someone to wipe her computer because they are so fast.
The tech has changed so quickly in the world that of course people can’t keep up.
Are there other companies like Teeniors? (Geek Squad?) Wes doesn’t like the name of Geek Squad. But also, Geek Squad is going to do it for you, not empower you. Trish is very big on empowerment.
Trish thinks the intergenerational connections have been amazing because we live in an ageist society. To Trish, ageism can go either way – too young or too old. Trish says we reinforce it unintentionally by saying “I’m dating myself but . . .”
Trish says ageism is the same as racism or sexism.
One woman Trish met after a first time teenior was crying. Overwhelmed by feeling so welcomed. Didn’t feel stupid or condescended to. She just wanted to learn how to do boarding passes online. A young woman let me learn it myself. I asked them the same question 6 or 7 times and no one minded.
Trish realized that sometimes in surveys people were saying the coach was amazing but they’d only give him/her a 4 out of 5 because they felt like their own performance was bad.
Wes: an acceptable nudge is like “you don’t know computers. It’s funny and dumb, etc.” Wes is saying even his age range is saying it like a badge of honor – I don’t even need tech.
Wes asks how big Teeniors can get. Trish is a mom. How do you become a small giant? Trish brings up Navajo Nation. Every time there’s a national press piece on them they get calls from around the country.
Trish would like to put it as a non-profit if it scaled because she’s way more interested in helping people than she is about being a billionaire. Wes says that’s why this is going to continue to work. She sees her mission so clearly.
In film – Trish was working in the studios from college onward. Interned at Sony then Warner Bros. She said if you take out the cool industry it was really just an office job. It was cool but her actual job was just a job. What greater purpose was she adding to the world?
Trish always says the main service they provide is human connection, not tech.
Connecting seniors back into the world. Trish’s mom didn’t know you could just open a program and listen to music. Beach boys on Pandora. They’ve taught the mapping app. NY Times app would be more friendly than the website.
Never ever stop learning.
New Mexico is one of the most impoverished states in the country. Wes brings up how Suze Orman and how she says you have so many millions to be able to retire. Wes has gone the other way. You need more than social security. But you don’t have to have too many. $500,0000.
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post #91 – Maximizing Technology For Seniors with Trish Lopez appeared first on Wes Moss.
To pay or not to pay? As much as I try not to invoke Shakespeare when weighing financial decisions, that is an important question to ask when considering paying off your mortgage before retirement. Do you want to suffer the slings and arrows of outrageous interest rates or take up arms against a sea of noteholders, and by opposing, end them?
In other words, is it smarter to keep paying off that loan or to get rid of it so you can move forward with your new life in peace?
It’s a rare week when someone doesn’t ask me this question. Clients, radio and podcast callers, even friends—it seems like every single person wonders if, how, and when they should pay theirs off. It makes sense for the subject to draw so much heat seeing as a mortgage is often the biggest expense we take on in our lifetimes.
I’ll be upfront and honest right from the jump—there is no right answer. As a whole, financial professionals can’t seem to agree. Some implore you to keep your savings invested while others swear by the happiness that comes from removing the heavy burden of debt.
I believe that if you can afford to pay off your mortgage you would be well served to do so. The happiest retirees enter post-career life mortgage-free or within five years of the last payment. That opinion isn’t just a gut feeling, it’s the accumulation of extensive research from writing two books about happy retirees.
In “You Can Retire Sooner Than You Think” and my latest book “What the Happiest Retirees Know: 10 Habits for a Healthy, Secure, and Joyful Life” I found that the decision to this important question depends on many factors specific to your unique situation.
First off, figure out how your tax bill would be impacted by such a move. Most expect that paying off a mortgage leads to a juicy interest deduction come tax time but that could shrink once you retire for a couple of reasons. First off, your tax rate might be lower because instead of bringing in the big paycheck you’ll be collecting Social Security or a pension and drawing funds from the nest egg you spent all those years building. This often means your total taxable income will be lower.
Second, as the years pass more and more of your mortgage payments will directly pay down the principal rather than the interest. This consistently reduces the size of your mortgage interest deduction for your tax return over time.
Your other itemized deductions will likely be lower, too. Because you only receive a tax benefit to the extent that your itemized deductions exceed your standard deduction, you may see less of a tax break from mortgage payments. And remember that the recent tax laws ushered in increased standard deduction limits, so you may not be itemizing your deductions going forward anyway. All of that matters.
What about rates of return? Try comparing the benefits you expect to earn from the greener pastures of a post mortgage payoff to the benefits of keeping more of those funds in savings. Should you choose to pay off your mortgage, your rate of return is certain. You “earn” by saving the interest rate charged on your mortgage. If you choose to invest your savings, things are a little less clear.
The argument you’ll hear from the “keep the mortgage” folks is that you can earn more by leaving those savings invested despite continuing to pay interest on your house. As an example, these planners say that, instead of using $100,000 to pay off a 4% mortgage, you should invest it in the market, where you could see a return of, say, 8%. The result would be a net 4% gain of $4,000.
This logic looks good on paper, but may not hold up in the real world. As we all know, the market is an unpredictable gamble. You might see that 8% return but you might also see the market lag, stumble, or crash.
I’m a believer in the one-third rule. If you can pay off your mortgage with no more than one-third of your non-retirement savings, consider doing so. If you owe $50,000 and have $160,000 in savings, it could be a good idea to drop that on the mortgage. You’ll still have $110,000 in liquid assets to ease you along the retirement road.
One of the intangibles that makes this such a complex decision is that emotional health is just as important as financial health. Fearless folks might be able to roll the dice and keep all their savings invested in the market, but most of us need some sense of stability to sleep well at night.
The scenario of a market crash is hypothetical but the fear is real. Humans no longer need to run from saber-tooth predators to survive, but the reptilian parts of our brain don’t yet seem to know it. Any kind of perceived danger, whether it be from a Grizzly Bear or a bear market can cause the body to release fight-or-flight hormones (adrenaline and cortisol) that can trigger intense anxiety.
Conversely, I’ve learned from the happiest retirees that there is a real sense of peace and serenity that comes with knowing that you own your house free and clear. It just feels good to have some stability as you enter a new phase of life that is changing in so many other ways.
Eliminating a house payment also dramatically lowers your monthly retirement living expenses, thus taking pressure off your nest egg and other sources of monthly income. Hopefully, you’ll have multiple streams, but they’ll be tributaries, not raging rapids. Having less of a nut to cover leaves you with more money to follow your dreams and passions, take vacations, give to charity, and keep up on your core pursuits (hobbies on steroids). After all, that’s what a happy retirement is all about. You’ve worked your entire life. Now it’s time to explore the things that you’ve never had time to try.
As crucial as it is to have peace of mind, you have to make sure you can afford it without damaging your financial fitness. It’s not a great idea to use retirement account (IRA, 401k) money to pay off a mortgage. Breaking your nest egg to enjoy a mortgage-free omelet does not make for a nutritious retirement meal.
Non-retirement accounts are the ideal sources for the big pay-off but be careful here, too. These funds also play an important part in your ongoing security by providing a source of liquidity for emergencies or opportunities. Use my one-third rule as a guide when deciding which route might work best for you. Even if you can’t allocate a large portion of capital toward your mortgage right now, it’s proactive to consider paying a little extra each month.
The house your mortgage paid for wasn’t built in a day. The carpenters, electricians, and laborers chipped away at it over time. In much the same way, you can hammer a few more financial nails with each payment, shave months or years off the finish date, and be well on your way to living a mortgage-free and happy life in retirement.
Read the original AJC article here.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post When Does It Make Sense To Pay Off Your Mortgage Early? appeared first on Wes Moss.
We’ve all heard about housing prices increasing dramatically over the past few years. Several new factors are not only increasing housing prices but impacting the affordability of homes for buyers. In fact, a recent cover story in Barron’s shared data from the National Association of Realtors indicating that 1.9 million first-time homebuyers will be shut out of the housing market this year.
In this episode, Wes addresses historic fluctuations in the housing economy due to oversupply, undersupply, and the unexpected impact of Covid. He discusses today’s housing shortage coupled with increasing interest rates that will continue to rise throughout the rest of this year. He also addresses the advantages of paying off your mortgage, the correlation between paying off your mortgage to levels of happiness in retirement, what homeowners can do to pay down or pay off a mortgage, and what first-time homebuyers should consider when it comes to the reality of buying a home. This episode also wraps up with a few call-in questions that Wes answers from Retire Sooner listeners.
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post #90 – What To Know As Housing Costs Surge appeared first on Wes Moss.
As humans, happiness is important to us all. There are numerous variables that dial into what generates this emotion, but does happiness mimic our growing age? Will we be as happy at 65 as we were at 25, or will we find ourselves even happier? Wes sits down with Professor of Psychology and Public Policy and the Director of the Stanford Center on Longevity, Laura Carstensen to discuss the correlation between aging and happiness.
In the episode, Laura describes the U-shape of happiness, takes us through the concept of on balance, along with the experience study that showed people feel negative emotions less frequently when they’re older. Laura and her group of colleagues developed the social, emotional, and selectivity theory that accounts for seeing rates of positive emotions staying stable and shares where time horizons come into play. Later in the episode, she stresses why close connections are magic, especially in retirement, and puts a slightly different spin on retiring sooner. To wrap up, Laura reveals variables that contribute to longevity and details on a Stanford project she and her team are working on.
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post #89 – The Correlation Between Aging and Happiness with Laura Carstensen appeared first on Wes Moss.
Wes Moss responds to listener questions and talks through the concept of yield at cost during this episode.
He also provides examples of dividend growth, generating retirement income from your investment sources, and why it’s essential to have a plan and investment policy that aligns with your goals. Furthermore, Wes explains how modest yields can turn to significant yields, shares advice for young investors, and discusses the inverted yield curve along with what it means for the economy.
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #88 – Answering Listener Questions And Understanding Yield At Cost appeared first on Wes Moss.
The past two years have led to so much rescheduling that even my postponements have postponements. I call them COVID COVID trips because COVID forced us to reschedule them twice.
I’m certainly not the only one trying to make up for lost time. Miami Beach recently had to declare a state of emergency due to oversized Spring Break crowds. People want to go go go.
If you’ve been to the airport recently you know it’s an absolute zoo, and the TSA screening numbers bear that out. The TSA reported that March 20th, 2022 saw 2,366,751 travelers passing through its U.S. checkpoints. If you look back at March 27th, 2020, nearly two years prior, the number was closer to one hundred and eighty-four thousand people. Twelve times as many folks are on the move today.
If you regularly read my work, you know I love statistics. Once I start, I can’t stop. Further research revealed how bad things got at their lowest point during COVID. Turns out, the travel nadir occurred in April of 2021 when TSA screenings were under one hundred thousand. Imagine fewer than one hundred thousand people in the entire United States, traveling by air, due to the pandemic. Today, we’re more than twenty times higher than that. In fact, as of March 20th, 2022 we’re 93% to 94% of the way back to normal.
But airplanes aren’t the only viable method of transportation. What about the good old family truck or car? The nation’s VMT, or Vehicle Miles Traveled, is measured by the Bureau of Transportation Statistics which means we can track how much people are driving. As of the end of last year, VMT has now exceeded that of 2019. So, we as a country are driving even more than we did before the pandemic. We’re driving about two hundred and seventy-eight billion miles per month. That’s far enough to fly around the world eleven million times or take five hundred and eighty-one thousand round trips to the moon. All of this driving is even though used car prices are now up 40% due to inflation.
However, there’s also a deeper level of importance to traveling that is worth discussing because of its unique contribution to retirement happiness. Travel is healthy. Taking vacations breaks up the monotony of our everyday routine, enhances life experiences and understanding of other cultures, and creates opportunities for bonding with loved ones.
With the shutdowns now in the rearview mirror, hopefully, for good, I thought it was the right time to weigh the worst and best parts of travel to see whether or not it’s worth it to get back out there amongst the masses.
Let’s start with the worst.
I’m a human being. I get scared every time there’s a plane crash just like you do. We see the images of the wreckage and think “Wait a minute. I’m getting on a flight later this week.” It’s jarring, but just as with difficult periods in the stock market, I always go back to the data to give myself some context and comfort. Looking at a situation analytically can help ease the fear so we can figure out the best and most productive path.
Objectively, there are about forty-two thousand commercial flights per day in the U.S. That’s sixteen million flights per year. Going back to look at the numbers, starting after September 11th, 2001, you can look at commercial flights with fifty plus people to see the crash statistics. In November of 2001, an American Airlines flight went down in New York. I remember vividly. Two hundred and sixty-five people died. There were crashes in 2006 and 2009. Both of these resulted in about fifty casualties each. In 2013 an Asiana flight crashed in San Francisco but most of the people survived.
So, going back over the last twenty years, we’ve had three catastrophic crashes in the United States in the course of roughly three hundred and twenty million flights. I can handle those odds but before you make your decision, let’s look at the risk involved in some other activities you may or may not consider dangerous.
The chances of dying while canoeing are one in ten thousand. Canoeing! I thought this was a typo until l remembered it almost happened to me as a kid. My father and I went canoeing after a hurricane and our creek had turned into a class four rapid. We ended up hitting a tree, the inflatable canoe exploded, and we were pulled downstream about five hundred yards. Life outside the city can be dangerous at times.
Speaking of rural areas, living on a farm has its own risk. Twenty people per year die from the kick of a horse. The same number applies to cows. But don’t think you’re safe just because you live in a fancy city. Twenty-four people per year die from champagne corks. Yes, you read that right. I don’t typically use emojis, but if I did this would be the perfect place for the one with the flabbergasted expression.
Think it’s safe at your office? Not so fast. The chances of dying from a vending machine falling on you is one in one hundred and twelve million. Adventurous? Bungee jumping carries a one in five hundred chance of death. I think you’re asking for it with that one. What about a good old-fashioned shark bite? One in one million chance. Like riding a bicycle? That puts you at a one in one hundred and forty thousand chance of shuffling off this mortal coil.
Wow. Is it safe to get off the couch or should I Netflix and chill with the front door bolted?
To answer this, we need to discuss the best parts of travel, specifically, how it relates back to a happy retirement. If you read my latest book, “What the Happiest Retirees Know: 10 Habits for a Healthy, Secure, and Joyful Life” know that the happiest retirees on the block (HROBs) vs. the unhappiest retirees on the block (UROBs), statistically, take more vacations on average per year. HROBs come in at 2.4 vacations whereas UROBs fall to 1.4. More travel is better if you want to be a happy retiree.
Let’s take this one step further. More travel and more vacations aren’t just better, they are an HROB multiplier. There’s something magical about a group excursion, and I don’t care if it’s one friend, two friends, five friends, or more. It’s an irreplaceable happiness multiplier in retirement. If you’re like me, the story of your friendships probably includes a trip or two. Some of them are awful trips and some are amazing. Either way, they become fond memories.
What’s more, there doesn’t seem to be any plateau effect. Retirees who take at least one group trip per year are two and a half times more likely to be in the happy group. Take two trips per year and you’re four times more likely to end up in the happy group. Four trips and you’re six times as likely.
People might be thinking “I’d love to take these 2.4 vacations per year vs 1.4, Wes, but it’s so expensive.” I hear you. It’s not easy, but there are certain things that we can choose to spend our money on that have an impact. Traveling is one of them. The positive effects are worth so much more than the cost of the plane ticket or the fuel at the gas station.
My research is primarily for people sixty years and older but I’m confident it applies to folks in their fifties, forties, and thirties as well. When it comes to moving the meter to a higher quality of life, traveling with family and friends gives us a really big bang for our buck.
So, give yourself permission. The best outweighs the worst. Go plan a trip, and then make sure to let me know how it goes. Call my hotline at 800-805-6301 and leave a voicemail. You might even be featured on an upcoming episode of my Retire Sooner podcast.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post Secrets To A Happy Retirement: Give Yourself Permission To Travel appeared first on Wes Moss.
There’s no way around the fact that financial planning impacts retirement. The decisions you make today will affect your tomorrow. But, how do you know which decisions are the right ones? Kristin Curcio, an Investment Advisor at Capital Investment Advisors (CIA), is here to help. Kristin has over a decade of experience in the financial services industry and is here to share her financial planning guide for retirees.
I asked her to explain the importance of budgeting and emergency funds, and how to avoid the penalties for early withdrawals. Between that and her tips on estate, will, and trust planning, Kristin’s nuggets of wisdom can help ease anxieties generated by the intimidating task of choosing the right impactful strategy for your future.
“I think that really it starts first with putting a budget together, making sure that you know how much money you need to be able to live the life that you want to live.” Whether you’re in your 20s, 30s, 40s, 50s, or beyond, Kristin wants you to be able to know how much money you’re spending so that you can put the appropriate plan in place.
Budgeting isn’t glamorous or sexy, but it is absolutely necessary. An approach that Kristin and I both use is called the TSL Budget. It stands for taxes, savings, and life. “So basically you’ve got 3 different buckets,” she explains. Look at your total pre-tax income and figure that about 30% of your paycheck is probably going to go into the taxes bucket. It’s painful but true, so you need to account for it. Some people adjust this number up to 40%. It depends on your specific situation.
After that, think about 20% for the savings bucket. Kristin suggests you have enough of an “emergency fund” in an easy-to-access liquid account because the one certainty about life is how uncertain it can be. She suggests setting aside 6 months’ worth of expenses just in case. The savings account doesn’t need to be anything fancy, as long as the money can be withdrawn quickly and easily.
Once the emergency fund is supple enough, the next step is to arrange for pre-tax dollars to funnel directly from your paycheck into your 401(k). It is suggested that you allocate as much you can. Put in as much as possible and try to increase the percentage each year. Fingers crossed that your company matches funds, but even if not, it’s typically still the right move to make to save for your retirement. And remember that there are no income limits associated with 401(k)’s, so you can participate no matter what your salary is.
Kristin notes that different industries use slightly different retirement accounts. For instance, teachers use a 403(b) rather than a 401(k). Government employees use a TSP (Thrift Savings Plan). They’re all similarly productive so go ahead and use whichever one your employer offers.
At CIA and on the Retire Sooner Podcast, our goal is to get people to a place where they can retire earlier than expected. Oftentimes, that doesn’t mean they stop working completely. Rather, they downgrade from full-time to part-time or consultant roles to give themselves time to focus on their passions and core pursuits. In these situations, some folks decide to rollover their 401(k) into their personal IRA of choice or they might decide to keep the funds in the 401(k). As a reminder, with a traditional IRA, the taxes are deferred until you withdraw the funds whereas with a ROTH IRA you pay them upfront.
Then we come to the fun part: life. If we aren’t living, what’s the point of paying taxes and saving? Living expenses are a combination of food, shelter, transportation, insurance, kid-related costs, entertainment, and the like. After accounting for taxes and savings, the money remaining will go into this bucket. If you can limit your life spending down to 30-40% of your income during your working years you’ll have more financial reserves to put toward maintaining your lifestyle once you retire.
Let’s say you have the budgeting figured out and the right amount of money is going into savings. How do you determine what kind of investments are right for you? Note that with a 401(k) you don’t always have complete control over this as plans typically have a selection of investment options. But, to the degree you can control it, or if you have your own IRA with total autonomy, Kristin says the investment decisions should be selected based on the right risk tolerance level for your age.
“A great thing to think about is ‘How long is my time horizon?’ Well, if you’re 20-years-old you probably have a very long time of investing so you can typically be more aggressive. It’s really when you get to that, I’d say between 55 and 60, and retirement is actually kind of creeping . . . you want to be able to scale back on the aggressive scale and go ahead and have a bit more of a conservative portfolio.”
About 2 years before you plan to retire is a smart time to shift some of your money away from the equities (i.e. stock) markets. Up until that point, the risk of a market fallout can be less worrisome because you have time to let it recover before leaving your job. Kristin encourages people to keep their foot on the gas and then slowly release the pedal when the risk of volatility is no longer worth it.
What about fees? If you succeed in your quest to retire before the traditional age, how do you avoid them? Kristin explains that if you begin withdrawing from a 401(k) or IRA before turning 59 and ½, there is a 10% penalty. It’s technically possible to avoid it, but the process is so complicated and treacherous that she advises against it. Unless you’re okay with the fee, the most sensible plan is to wait until you’re 59 and ½. And let’s be clear, that’s still quite young — a whole lot of joyful retirement years are still ahead, so it is recommended that you hold off on withdrawing the funds until at or near retirement.
If you do retire at 59 and ½, that’s still a couple of years before social security payments kick in and medicare doesn’t start until 65, so you want to make sure to have enough funds saved to fill that gap. This time period is what we call the financial grey zone because not all of your income streams are yet available to you.
And since we mentioned medicare, we should note that healthcare, in general, is a huge part of life in retirement and deserves ample time and focus during the planning process. There are a few different techniques and Kristin recommends you speak to a professional in the field to get the latest and greatest advice for how to navigate. It can be a little tricky for the layperson.
Another important part of your overall financial future is estate planning. It’s so important. You scratch and claw to get that nest egg and it’s imperative to protect it. “We highly encourage people to work with legal counsel to have their wills in place,” says Kristin. “And, if there is extreme wealth, perhaps even a trust in place. I speak to some people and they don’t have anything in place and maybe not even a will and usually, after our meeting, it’s their next stop.”
When is the right time to create a will? Kristin says once you have children or possibly even after getting married. And if you feel like you don’t have enough to justify it, think again. “It doesn’t matter how much or how little you have, it’s a good thing to have in place.” She cautions that it’s also critical to review the beneficiaries on your retirement accounts.
Overall, Kristin stresses that more important than becoming an expert in every detail is that folks understand how their money is going to work for them in retirement. “Really, that’s the key,” she emphasizes. “You’ve saved, you’ve worked for 40 years, you’ve got your money, you’re planning to retire, but how is that money going to work for you?”
Gather. Budget. Save. Let your money work for you. If you can do those things you’ll make Kristin, and yourself, very happy.
Click here to listen to Kristin’s episode on Retire Sooner Podcast This information is provided to you as a resource for informational purposes only and should not be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post A Financial Planning Guide for Retirees with Kristin Curcio appeared first on Wes Moss.
We all know tax season comes at the same time every year, yet many of us still show up unprepared. Little do we know our secret weapon is to proactively plan, not just for the present, but also for the future and that includes retirement.
In this episode, Wes sits down with Financial Planner, Author, and Host of the Stay Wealthy Podcast, Taylor Schulte, CFP® to examine tax preparation. Taylor shares details about his podcast show, opening his fee-only financial planning firm, and why he consistently puts his clients first. Additionally, Taylor reveals common misconceptions about using an advisor, the importance of calculating your total tax bill and proactively tax planning for your future. Lastly, Taylor wraps up the episode by sharing some knowledge that could move you closer to retiring sooner.
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post #83 – A Guide To Proactive Tax Planning with Taylor Schulte appeared first on Wes Moss.
Wes Moss joins Brian Preston and Bo Hanson to share what makes for a truly happy retirement and details from his new book, What The Happiest Retirees Know.
Watch the full podcast episode here or view the video below.
The 4% Plus Rule This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post Wes Moss Featured On The Money Guy Show: What the Happiest Retirees Know That You Don’t appeared first on Wes Moss.
Market corrections and downturns are inevitable. Although this is something we can’t avoid, there’s power in utilizing the Dry Powder Principle to fully understand how and why investing in different asset classes can help you sail through difficult times from a psychological and financial planning perspective.
During this episode, Wes Moss breaks down the Dry Powder Principle and stresses the importance of calculating your dry powder to prepare for inescapable market corrections. He also explains how the dry powder concept can add cushion to your investment portfolio and reshares a story about his son that reveals how losing money can be tough on anyone regardless of your age. Wes goes on to review historical market corrections, the two principles that dry powder is hinged on, and walks listeners through how to assess their own dry powder using the online calculator tool. To wrap up the episode, Wes is joined by the creator of the dry powder calculator tool and Senior Investment Advisor at CIA, James Lewis CFP®, MBA.
Use the Dry Powder Calculator to discover how much you have: https://www.wesmoss.com/dry-powder-calculator/
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #82 – Breaking Down The Dry Powder Principle appeared first on Wes Moss.
It has been a tough few weeks watching the Russia-Ukraine conflict unfold. First and foremost, this is terrible for the Ukrainian people. I can’t even begin to comprehend the hardships to come. My thoughts are with them as they struggle to find the peace they knew only a short time ago.
The world is indeed small, and many of us have a direct or indirect connection to the turmoil. The human cost is much more important than stock prices or dividend payouts.
Despite this harsh reality, my know-how lies within the world of finance, and it’s best that I stay in my lane and leave the geopolitical solutions to the people better suited for that purpose. Even in difficult times, we need to objectively look at the markets to see what they mean for our own families. Once we feel safe and secure, we can always look for charitable avenues to help those in dire need.
It’s no surprise that military conflict leads to market uncertainty and volatility, which is exactly what we are seeing. Over the past few weeks, all the major stock indexes entered correction territory by falling over 10% at some point from recent highs. Last year was one of the smoothest years in recent history for the stock market, and while many expected 2022 to be more volatile because of traditional events such as the midterm elections and the probability of the Federal Reserve raising interest rates, few called for war as the exogenous event.
Typically, when an unpredictable authoritarian invades a sovereign nation, it creates new challenges, to say the least. There’s no timeline telling us how long the military conflict will last or how grave the consequences will be.
There are additional consequences of this conflict. While not primarily about oil and energy, there is a risk of supply disruptions for those resources. If you think people panic when Sony PlayStations aren’t available, imagine how they’d feel if they couldn’t put gas in their car. Oil pipelines from Russia supply a sizable portion of the fuel Europe uses. Conflicts lead to supply disruptions, a lack of supply leads to higher prices, and the rise in oil prices leads to even more inflation. This could force the Federal Reserve to raise interest rates even more, which could further hurt the market.
All of these issues are coming together and culminating into a cloud of economic anxiety. We need some sort of financial Zoloft, and we can find it in the form of historical context. It is helpful to explore market history to understand how markets and investor psychology reacted during similar times of hostility. When we look back through market history we can see that markets typically normalize through most events, even the most extreme ones. While past performance is not a guarantee of future results, it does provide us with a guide as we look at the weeks to come.
From the Russo-Japanese War of 1904 to World War I and World War II to the Korean War to the Cuban Missile Crisis to the Bosnian War to Sept. 11, we have more than a century of tragic events around the globe, and most incidents sent the markets into a nosedive — 24% corrections, 30% corrections, and on and on as I go down the list. On average, markets went down about 13%. But what’s more important is looking at where the markets were three months, six months, a year or three years afterward.
Here’s the good news. If you take all of these events and look at the Dow Jones Industrial Average three months after initiation, the markets are up almost 2% on average. At six months that rises to almost 5% on average. In most cases, after a year markets are up on average over 12%. Three years brings that to nearly 30%. In other words, on average the fear in markets is typically overstated relative to the actual market performance.
I’m here to remind you that corrections happen all the time — roughly every 1½ years. When they come, they’re not so pleasant. Even though we have no control over the next international twist or turn, we do have control over how we invest. If we invest in stable, dividend-paying stocks and have adequate levels of dry powder we can better navigate these periods of uncertainty. As a reminder, dry powder refers to safety assets within your portfolio (cash, U.S. treasuries and investment-grade bonds). That, combined with some perspective of time, has proven to get us through the temporary pullbacks.
The world is not ending. It’s the fear of uncertainty that casts a long shadow on the markets, which is completely understandable. However, we need to maintain a level head and stay financially disciplined. The worst thing we can do for our portfolios is panic.
Look at what we’ve recently overcome. The COVID pandemic completely shut down the global economy for a quarter of a year, but we’re still standing. In fact, the market is higher despite all of that uncertainty, dread and unrest. It’s our human emotion that makes the markets so volatile, even more so than the events that trigger that emotion.
Investors worry that every temporary bump is permanent. The most likely way to make them permanent is human error. If you’re down 20% or 30% and decide to jump ship, you are making it permanent when it doesn’t need to be. Through over two decades of my working with clients, I’ve found that the happiest retirees don’t check their portfolios every five minutes. They trust the long-term trends, even during times of strife.
Read the full AJC Article here
This is a formula that has proven to work throughout history despite wars, recessions and global pandemics. The next time you see a scary headline about what’s happening, remember that markets are resilient, and I hope you can be tooThis information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post The Russia-Ukraine Conflict And Economic Anxiety appeared first on Wes Moss.
Our world is built on speed. From our lives to the stock market, even retirement, we aim to tackle every task as quickly as possible; but when is it time to reduce speed and pump the brakes? While our first instinct is to hurry, as humans, we must remind ourselves that being slow is not about doing everything as fast as possible but as smart as possible.
In this episode, Carl Honoré, Journalist, TED Speaker, and Author of “In Praise of Slow,” joins Wes Moss to talk through the “slow movement” and the importance of finding your inner tortoise. Carl reveals the root of his fast-paced life, taking a slow approach to money, and how slowing down grants us time to reflect. He also touches on ageism, unveils the signs of being stuck in fast forward as well as three tips for slowing down your life.
Watch the full podcast episode here:
Call in with your financial questions for Wes to answer: 800-805-6301
Join other happy retirees on our Retire Sooner Facebook Group: https://www.facebook.com/groups/retiresoonerpodcast
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post #81 – The Art of Slowing Down Your Life with Carl Honoré appeared first on Wes Moss.
ATLANTA, Georgia, March 9, 2022 – Today, best-selling author and radio host Wes Moss announced a new radio show for the Denver and Nashville markets. The new show, called Retire Sooner, airs on Sundays in Denver on KHOW from 11AM-Noon and Nashville on WLAC from Noon-1PM.
On this weekly show, Moss addresses current market conditions, answers audience questions, and offers plain-speaking financial guidance. Moss also shares key lifestyle and money habits that listeners can implement today to help prepare for a secure future. Differentiating it from other financial shows is Moss’ focus on happiness, both today and in retirement. In addition to leveraging his 20+ years of knowledge as an investment advisor, Moss calls upon his own research to reveal the social, emotional, and financial behaviors that result in a happy and early retirement. Retire Sooner gives listeners the tools to retire sooner in the real world.
Wes Moss has been an established voice in the financial world for more than a decade. Moss has been hosting “Money Matters” on Atlanta’s historic WSB radio for 13 years and is the host of a top financial podcast “Retire Sooner with Wes Moss”. In addition to hosting the radio show, Moss is an owner and managing partner of Capital Investment Advisors – a $4+ Billion (as of 12/21/2021) Registered Investment Advisor (RIA) with offices in Atlanta, Denver, Tampa and Phoenix; a Barron’s top 100 independent financial advisor; the best-selling author of What the Happiest Retirees Know (2021) and You Can Retire Sooner Than You Think (2014); a nationally recognized speaker; and the financial columnist for the Atlanta Journal-Constitution.
About Wes Moss:
Wes Moss is a CERTIFIED FINANCIAL PLANNER, managing partner and chief investment strategist at Capital Investment Advisors, an Atlanta-based RIA with more than $4 Billion in assets (as of 12/31/2021) under management. Additionally, Moss is the host of Money Matters, a weekly call-in financial show on 95.5 WSB — Atlanta’s News and Talk. Moss is also the author of four books, including What the Happiest Retirees Know and You Can Retire Sooner Than You Think; serves as financial columnist for the Atlanta Journal-Constitution; acts as editor of WesMoss.com; and is a frequent resource for journalists across all mediums — print, tv, radio, and online. Barron’s has named Moss one of America’s top 1,200 Financial Advisors every year since 2014 and was ranked #74 on the top 100 independent advisors list by Barron’s in 2021. For more information, visit www.WesMoss.com.
Media Contact:
Andrea Rizk
Rizk Public Relations
404-316-0251
andrea@rizkpr.com
Rankings and/or recognition by unaffiliated rating services and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Capital Investment Advisors, LLC (“CIA”) is engaged, or continues to be engaged, to provide investment advisory services, nor should it be construed as a current or past endorsement of CIA or any of its financial advisors by any of its clients. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized advisor. Therefore, individuals who did not submit an application for consideration were excluded and may be equally qualified. Rankings are generally limited to participating advisors. CIA does not pay a fee to be considered for any ranking or recognition but may purchase plaques or reprints to publicize rankings.
Barron’s magazine “America’s Top 1,200 Financial Advisors” rankings are based on quantitative and qualitative criteria data provided by over 4,000 advisors. The ranking considered advisors with a minimum of seven years financial services experience and have been employed at their current firm for at least one year. This report lists the top advisors in each state, with the number of ranking spots determined by each state’s population and wealth. Other quantitative and qualitative measures include assets under management, revenues generated by advisors for their firms, and the quality of the advisors’ practices, regulatory records, internal company documents, and 100-plus points of data provided by the advisors themselves. Investment performance is not an explicit component because not all advisors have audited results and because performance figures often are influenced more by clients’ risk tolerance than by an advisor’s investment-picking abilities. Wes Moss was ranked in 2014, 2015, 2016, 2017, #7 in 2018, #7 of 30 Georgia advisors in 2019 and #7 of 30 Georgia Advisors in 2020. Rankings and recognition from Barron’s are no guarantee of future investment success and do not ensure that a current or prospective client will experience a higher level of performance results, and such rankings should not be construed as an endorsement of the advisor. Neither CIA nor Mr. Moss paid a fee to Barron’s in exchange for the rating.
Barron’s magazine “Top 100 Financial Advisors” ranking considered advisors with a minimum of seven years financial services experience. Quantitative and qualitative measures used to determine the advisor rankings include: client assets, return on assets, client satisfaction/retention, compliance records, and community involvement, among others. Wes Moss was ranked #90 in 2017, #65 in 2019 & #53 in 2020. Barron’s does not receive compensation from advisors, participating firms and their affiliates, or the media in exchange for rankings. Rankings and recognition from Barron’s are no guarantee of future investment success and do not ensure that a current or prospective client will experience a higher level of performance results, and such rankings should not be construed as an endorsement of the advisor.
The post Wes Moss Expands Radio Show to Denver and Nashville Markets appeared first on Wes Moss.
We’ve all seen the headlines recently — #BidensWar, #StockMarketCrash, and so on. From a pandemic to a slower moving crisis, the current state of these geopolitical issues has led to market uncertainty and volatility. However, in this phase of world issues, we’ve found it best to analyze similar moments in history to help us understand what’s to come.
During this episode, Wes references historical corollaries to help listeners grasp what the future holds for the market. Wes also simplifies the current state of military issues, explains what these issues mean for the United States, and how this can scare investors. Further, he shares historical market averages, a pattern in market corrections, and stresses why our best weapon against turning temporary losses into permanent losses is understanding the market. While past performance is not a guarantee of future results, it does provide us with a guide as Wes explains in the podcast. Wes concludes the episode by explaining how dry powder can provide a bridge to the other side of this difficult time.
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #80 – Russia Vs. Ukraine Vs. Your Retirement appeared first on Wes Moss.
David York churns out nuggets of wisdom so effortlessly that it’s easy to see why the TED Talk folks invited him onto their hallowed stage to define a new paradigm for thinking about inheritance.
An attorney, Certified Public Accountant, and managing partner with the Salt Lake City law firm of York Howell & Guymon, David is an expert in the areas of estate planning, tax, business planning, and nonprofit entities. He is the co-author of two books: “Entrusted: Building a Legacy That Lasts” and “Riveted: 44 Values that Change the World,” which was the #1 Business Ethics book on Amazon. In 2017, YHG was recognized as an Inc. 5000 Company.
I recently sat down to ask him an unanswerable question that I desperately wanted answered: Is inherited wealth powerful or destructive?
It’s a topic I struggle with often. I think about my kids. I think about all the families I’ve advised. Some inherited money, and it worked out incredibly well. Others inherited money, and it ruined them. I do this for a living, and even I can’t seem to crack the code. Time to bring in the big guns. Time to put David York to the test.
The answer, as you might imagine, isn’t simple.
Despite seeing so many failed situations, David and his team decided to focus on the positive. “My partner and I sat down and said ‘What are the common characteristics of families that actually do successfully transfer wealth?’” In much the same way that I studied the habits of the happiest retirees in my latest book “What the Happiest Retirees Know: 10 Habits for a Healthy, Secure, and Joyful Life,” David wanted to know what his success stories had in common. He identified 7 unique disciplines.
- Entrusted families know who they are and what they believe.
- Entrusted families prepare the family for the wealth and not just the wealth for the family.
- Entrusted families maximize the positive benefits of wealth and minimize the negative effects.
- Entrusted families focus on flint and kindling and not on the fire.
- Entrusted families are generous.
- Entrusted families preserve and protect wealth.
- Entrusted families design and implement dynamic governance.
David says that the families who successfully transferred their wealth, first and foremost, “knew who they were, what they valued, and what they believed.” They had clarity of their “why” and that drove everything else that they did.
So often in estate planning, people focus on the mechanics. David says that’s the wrong approach. “We should be asking the questions of why and who? Why are we doing what we’re doing, who do we want to impact, and how do we want to do that?”
He says that one of the problems with inherited wealth is that while it offers financial freedom, it can strip people of their purpose. He mentions the famous quote billionaire Warren Buffet gave to “Fortune” magazine in 1986, saying he would leave his children “enough money so that they would feel they could do anything, but not so much that they could do nothing.” David says that too many people, once financially secure, put down the compass that has guided them. “They just go rudderless and that’s part of what creates the problem.”
He finds that the people who do it right don’t just prepare their wealth for their children, but they also prepare their children for wealth. It’s not just about transferring assets in the most tax-efficient way, it’s also about passing down the wisdom and attitude it takes to possess them.
This can lead to the vicious three generation accumulation dissipation phenomenon that he’s seen so often. “That first generation is the wealth creator who built and sustained that wealth. The second generation saw how it was created and oftentimes can sustain it but by the time you get to that 3rd generation, they’re so removed from the wealth creation that it ends up being squandered and you’re back to starting over.”
As an example, he explained that at the time of his death, Cornelius Vanderbilt was one of the wealthiest people in the world but a short 100 years later, not a single one of his descendants was a millionaire!
“If I’ve learned one thing it’s this, we value things based on what they cost us. And what’s interesting is when you look at a wealth creator, how did they earn their wealth? Hard work. Risk. Stress. Sleepless nights. Worry. All of those things. As a result, they highly value their wealth because it costs them so much.” The paradox, he went on to say, is that inherited wealth helps the offspring avoid these same traits. Parents toil and suffer to accumulate enough money to help their children avoid that struggle. What they don’t realize is that they are undercutting the very values that are needed.
David believes that what’s more important and meaningful to people than wealth is their legacy. In this regard, he found 5 truths:
- Legacy is about so much more than money. Substitute the word legacy with the word impact. One of the most impactful people in David’s life was his 8th-grade math teacher.
- Legacies aren’t neutral. We tend to think of legacies in a positive sense, but they can be positive or negative.
- Legacies are not optional. You can’t opt-out of leaving one because your life inherently affects others.
- People are more legacy-minded today than they have been for thousands of years. This shifts the focus from inheritance to impact.
- Legacies can change. We are more than the sum of what we’ve done in the past. And there are countless examples of people who change their legacy.
David refers to the traditional estate planning model as the 4D Model: Dump, Divide, Defer, and Dissipate. “We dump the money down to the next generation, we divide it up equally, we try to defer any taxes, and we dissipate the wealth. It’s a shotgun approach to wealth transfer, and that’s part of why it doesn’t last.”
Instead, he recommends the 4P Model: Purpose, Participation, Preparation, and Perspective. Help your kids understand their purpose, guide them toward age-appropriate family participation to avoid entitlement, prepare them to find their way toward self-reliance, and expose them to different walks of life to give them enough perspective to value their good fortune.
So, what does all this mean? Is inherited wealth good or bad? I demanded that David tell me! He was too coy to take the bait. “The answer is yes. It depends.”
He must have sensed my disappointment. I wanted to nail this down. “Solomon, 3,000 years ago, he said, this: ‘Give me neither riches nor poverty, but only my daily bread,’ right? He saw the problem of too little wealth and he saw the problem of too much wealth. The way I describe it is if you don’t have access to any resources, it’s hard to get in the game. If you have too many resources you don’t even need to play.”
I had to admit. He and King Solomon had a point. I want my kids and my clients to have what they need, but they’ve got to stay in the game. It’s no fun to sit on the bench, there’s too much life to be lived.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post Is Inherited Wealth Powerful Or Destructive? Insights From Estate Planning Expert, David York appeared first on Wes Moss.
Is inherited wealth a powerful tool or a destructive one? Though inherited wealth sounds effortless, there is more to successfully transferring this wealth amongst generations. In this episode, Wes sits down with Estate Planning Attorney, CPA, and Author, David York, to discuss the particulars of inherited wealth and wealth transfer.
David also shares the logistics of giving a TED talk and details from his book, “Entrusted.” Additionally, David reveals the common habits of families who have successfully transferred wealth, walks through the background of a well-known wealthy family, explains how people learn to value things based on cost, and exposes five truths and the importance of legacy. David and Wes wrap up the conversations discussing what steps families can take to remain successful in wealth transfers for the foreseeable future.
Watch the full podcast episode here:
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #79 – The Realities of Inherited Wealth and The Importance of Legacy with David York appeared first on Wes Moss.
Inflation is dominating financial headlines. I don’t like it any more than you, but we need to bravely face reality to help guide and shape our financial decisions.
A key inflationary data point revealed itself when the consumer price index (CPI) released its most recent numbers. As a reminder, the CPI is a measure of the average change over time in the prices paid by urban consumers for a market basket of a fixed set of consumer goods and services. In short, it’s a good inflationary measuring stick here in the U.S.
According to the recent report, the CPI climbed 7.5% in January of 2022, compared to January a year ago. You’d have to go all the way back to February of 1982 to see an increase that big. That’s 40 years!
What’s the primary cause? Officials from the Federal Reserve are attributing the jump to factors associated with the pandemic. During the pandemic, there was strong demand for consumer goods, and that demand along with factory shutdowns and worker shortages led to supply chain bottlenecks as well. Combine those factors with the huge economic stimulus that was injected into the American economy and you have a recipe for inflation.
Let’s look more closely at that market basket of consumer goods I mentioned earlier that is part of the CPI. Incredibly, every single item within it increased in price from a year ago. Gasoline, shelter, food, and vehicles were among the larger contributors to the year-over-year increases. Meat, poultry, fish and eggs were all up 12.2%. New vehicles also rose 12.2%, but more eye-opening is that used vehicles increased 40.5%! That’s about in line with how much more consumers are paying for gasoline, which is up 40% from last year’s levels.
Now that we’re aware of the challenges to our purchasing power, can we find some good news? Yes, we can. Historically, inflation has been good for the stock market, according to data compiled from Bloomberg.
In the period spanning from 1960 to 1973, we saw a CPI of 2.9% before stagflation (increased inflation plus slow economic output) took hold. Value stocks — think stocks that for the most part pay out dividends and trade at relatively lower trading multiples — did really well, climbing 12.5% annually. Growth stocks — companies who are generally more focused on growing than returning profits to shareholders in the form of dividends — grew 9.3% per year during these 12 years. The S&P 500 index was up 9% annually during this time.
From 1973 to 1982, stagflation popped in for a visit. A lot of people are not very fond of the period in time, but the annual numbers tell a slightly different story. Value stocks were up 10.9%, growth stocks 2.1%, and the S&P 500 4.7%. Value stocks outperformed both the S&P 500 and growth stocks during this period of elevated inflation.
After that period of stagflation, we saw a CPI of 3.2% from 1982 to 2008. Even through the dot-com bubble, on an annual basis value stocks still grew 9.5%, growth stocks 8.5%, and the S&P 500 11.2%.
More recently, the years immediately following the financial crisis of 2008 look even better for investors. From 2009 to 2021, with a CPI of 1.6%, value stocks grew at an impressive annual rate of 12.4%. Growth stocks outperformed, increasing annually during this time by 18.4%, and the S&P 500 increased by 15.2%.
What does this mean? The S&P 500 has performed well in each of these inflationary scenarios, and most of the time value stocks performed better than growth stocks in periods with elevated inflation. While nothing is absolute, this is a reminder that periods of elevated inflation aren’t necessarily detrimental to the overall stock market and your investments.
It’s important to understand how the market has historically performed to give our readers some context, but all the scary headlines and talking points are starting to take a toll on the U.S. consumer.
The University of Michigan publishes a monthly Consumer Sentiment Index to gauge the confidence consumers have in the economy, and its most recent release showed a “stunning” drop from December 2021 levels. It’s down to its lowest since October 2011. To put this in context, consumer confidence was higher during the heart of the COVID pandemic than it is now. Think about that!
These declines have been driven by the aforementioned scary headlines, rising inflation, reaction to governmental economic policies, rising gas prices, Russia/Ukraine tensions, and COVID fatigue. Sentiment can withstand most of these as stand-alone issues, but the accumulated anxiety of them all together weighs on consumers.
The bottom line is that while we don’t know exactly how long the current inflationary period will last, we do know that we can get through it by remaining mindful and taking some comfort in the fact that it isn’t permanent. At my firm, we continue to focus on investing in solid, blue-chip dividend-paying value stocks to help weather this inflationary environment. We believe that value should perform better than growth at elevated CPI levels which is where we are now!
Read the full AJC Article here
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. There are many aspects and criteria that must be examined and considered before investing. Investment decisions should not be made solely based on information contained in this article. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions.
The post A Guide To Navigating Inflation appeared first on Wes Moss.
After taking some time off, The Retire Sooner team is excited to announce that Wes Moss will return as your host starting February 28th!
In upcoming episodes, we will cover topics such as Bitcoin 101, bucket list places to visit, and we’ll interview a retired Wall Street workaholic in his 80s and the best shape of his life. Wes will also be answering listener questions and covering new financial, investment, and economic topics to help you towards a happy retirement.
You can expect new episodes every Monday and Thursday. Be sure to mark your calendars, subscribe, and tune in to catch the latest! You can also join our Retire Sooner Facebook Group for more in-depth conversations and topics about retirement. https://bit.ly/3J8w1Qx
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post Wes Moss Returns With New Episodes To Help You Retire Sooner appeared first on Wes Moss.
In 1994, William Bengen, a Massachusetts Institution of Technology aeronautics and astronautics graduate turned certified financial planner, calculated stock returns and retirement scenarios for the previous 75 years and found that retirees who drew down 4% of their portfolio in the first year of retirement, adjusting every year for inflation, would likely see their money outlive them. He assumed the portfolio would have a 50-75% allocation to stocks.
Based on his calculations, 80% of the time nest eggs lasted 50 years. In the worst-case scenario, the money lasted 35 years. In no time, the 4% Rule quickly became a road map to help people maximize spending without running out of money.
In other words, this was the way to go for broke without going broke.
But not all industry specialists agree, and there’s always the fearthat it won’t continue to work, which is perfect fodder for doomsday writers. Here we are in 2022, and yet another article from the Wall Street Journal is attempting to dispel the 4% Rule. They do it every year. I understand caution, but these folks don’t want you to spend anything! Two percent? How about 0%? Why spend any of the money you’ve worked so hard to make? Just stash it under the mattress until Father Time calls you away.
I’m not going to bury the lead. The 4% Rule still works, but you need to understand that it’s meant as a guide and is adjusted over time to ensure its effectiveness. In the Wall Street Journal and elsewhere, industry professionals all opine on their optimal withdrawal rates. And it seems like the same people change their withdrawal rate suggestions every year!
Well, I, too, will be making a change to my 4% Rule, but it’s not going down. It’s going up by 0.5%. That’s right, the 4% Rule has become the 4% Plus Rule!
While that half of 1% may not sound like a lot, it’s a 12.5% raise. Imagine a $1 million portfolio. Drawing down 4% would mean $40,000 per year, but that extra 0.5% would give folks an extra $5,000 annually to spend on life’s needs and wants. Of course, inflation rates would adjust the numbers a bit, but you get the point.
I’m massively interested in this topic. If you’ve listened to my “Money Matters”radio show and “Retire Sooner”podcast or read my new book “What the Happiest Retirees Know,” you’ve heard me talk about it a lot.
Why do I believe so strongly in it? Because not only was William Bengen a really smart guy, but my team re-created and re-tested the formula in 2014 and 2021.
At 4%, it turned out that 82.9% of the time your money will last 45 years. And 92.7% of the time it will last 40 years. Even at the high end of the projection, at 50 years — and most of us are not going to have a 50-year retirement — there’s a 70.7% chance your money will go the distance. Once we veer into the more realistic retirement lengths of 30 or 35 years, you’re edging closer and closer to a 100% chance of retirement savings lasting as long as you do.
When Bengen announced the new 4.5% rate in 2021, it was because he discovered that keeping 50% in bonds while redistributing stocks to a 40% large caps/10% small caps ratio made space for a small improvement. At this new rate, if you retire early at 60 and live until 90, there’s a 90.2% chance your funds will last. Incredibly, if you did manage to stick around for 50 years there’s a 53.7% chance your money would, too.
What’s the bottom line? No matter what you do, retirement planning is a living, breathing, dynamic strategy, not a tablet of stone. Bengen, Pfau and all the others want to say their piece. I’m less interested in theory and more interested in what these numbers look like in the real world.
I want to help retirees pull out the maximum amount from their savings with full confidence that they won’t outlive their money. And in the real world, somewhere in the 4%–5% range works most of the time.
Retirement planning is not a straight line. There isn’t, and never will be, an exact percentage that retirees need or want to stick to each year, come hell or high water. Remember that these “rules” are guidelines, not mandates. Flexibility is the key.
In my opinion, Bengen’s calculations are more accurate to follow than Pfau’s, largely because Pfau’s just aren’t practical. If 2.4% were the guideline, then the majority of Americans could never afford to retire. Life requires us to run on the hamster wheel from time to time, but if it never stops, what’s the point?
From what I’ve seen during my 20 years of helping people plan for retirement, using a dynamic approach to your nest egg is the key. Anywhere from 4% to 5% is sustainable so long as you are willing to make adjustments as needed. And there’s always the three-step dance between math (objective), common sense (subjective), and emotions (very subjective) like greed or fear. Stay the course but be willing to take tiny detours to avoid pitfalls.
The takeaway is that retirement withdrawals aren’t static. Sometimes you withdraw a little more, and sometimes you tighten the belt if you’ve overspent or the markets aren’t particularly generous. Dipping into your nest egg should be flexible, but it needn’t be miserly.
I am a believer in the 4% Rule, and I am excited about the new 4.5% Rule. After all, my focus is on happy retirees, and what makes a person happier in retirement than peace of mind, financial stability and a nice raise? I’d say those are key ingredients to a retirement well-spent.
Read the full AJC Article here
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. Investment decisions should not be made solely based on information contained in this article. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. There are many aspects and criteria that must be examined and considered before investing.
The post The 4% Rule . . . The 4% Plus Rule appeared first on Wes Moss.
We encourage happy retirees to think of income as a river, not a reservoir, and advocate having multiple sources of income to generate financial stability during retirement. One common income stream among happy retirees is real estate investments.
In this episode, we’re joined by Partner, Senior Investment Advisor, and Investment Committee Director at Capital Investment Advisors, Tom Moore, CFP®, to cover the intricacies of real estate investing. Tom shares his real estate history, mindset, and experiences, as well as various methods to invest in real estate. He goes on to compare investing in a single-family home versus a commercial property, talks through income and growth returns, lays out the steps for kickstarting your real estate investment journey, and uncovers how the successful investment situation of a happy retiree could look.
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #76 – Real Estate Investing for Retirees: Where To Start, Steps To Take and What Success Looks Like with Tom Moore appeared first on Wes Moss.
Key Takeaways * Estimate your retirement expenses: Choose an approach that makes sense for you, whether it’s making a detailed list of necessary and discretionary spending, or using an online calculator. If you can lower your retirement expenses, then you won’t have to save as much to reach your target goal. * Calculate how much you’ll need to save: There are several solid formulas — including the “4% rule” and the “$1,000-a-month rule” — that can help you determine how much total money you will need in retirement accounts and other investments to retire at 55. * Use a financial planner: A financial planner can help assess your financial situation and create a plan to achieve your early retirement goals. Online financial planners are an affordable alternative that still offer customized investment guidance and planning.
Early retirement is an achievable goal, but it takes planning and persistence.
In this learning path, you will learn what it takes to retire as early as 55. The journey starts with an accurate estimate of how much money you’ll spend in retirement, which will allow you to calculate a target savings goal. Then we’ll walk you through the different types of financial planners — both online and in-person — that can help you work toward that goal through smart investment and saving strategies.
How Much Will Your Retirement Expenses Be? This is actually the easiest part. If you already keep a budget, then you probably have a good idea of how much you are currently spending each month on necessary expenses, things like food, housing (monthly mortgage or rent), insurance, transportation, health care, etc. Those dollar amounts probably won’t change very much in retirement, says Wes Moss, a certified financial planner, author, and host of the podcast “Retire Sooner.”
“Most people I work with want to maintain their same lifestyle in retirement,” says Moss, “which means that their ‘needs’ stay the same.”
What will likely change in retirement are some of the items in the “wants” category, what’s known as discretionary spending. Moss finds that the happiest retirees have three to four “core pursuits” that keep them active and engaged. These could include sports/fitness activities, volunteering, taking classes you’ve always wanted to try, traveling to other countries, or taking more road trips to see relatives or grandchildren.
Start Budgeting Sit down and make a list of the four most important things that you want to do once you stop commuting to work every day. Now figure out how much each of those activities (Moss calls them “hobbies on steroids”) is going to cost. That dollar amount will make up the bulk of your discretionary spending.
Another way to estimate your retirement expenses is to use an online calculator like this retirement expenses calendar from Fifth Third Bank. The calculator prompts you to enter your current expenses in 11 categories and comes up with projected figures during retirement. Calculators like these allow you to enter a projected retirement age, too, and to adjust for different rates of inflation.
What If Your Budget Doesn’t Balance? If your estimated retirement expenses are higher than you’d like, here are some tips for lowering them:
- Downsize to a smaller home or apartment.
- Get by with one vehicle.
- Cook at home more.
- Adjust insurance coverage, including life insurance.
Of all of these tips, downsizing to a smaller place might be the most important if money is tight. Debt of any kind — including a mortgage — makes it very difficult to live off your savings during retirement.
“Plan to have your mortgage completely paid off by your retirement date or at least within five years of retirement,” says Moss, who advises clients to follow the “one-third rule.” If the principal that you owe on your mortgage equals one-third or less of your total retirement savings, then you should pay it off in one lump sum. It will save you money in the long run.
If you still have plenty of time before retirement, you can chip away at your mortgage principal faster by making extra contributions to your monthly payment. Use this additional payment calculator from Bankrate to see how quickly you can pay off your mortgage by upping your monthly payment.
How Much Will You Need to Save? Once you have a solid estimate of your monthly or annual retirement expenses, you can calculate how much you’ll need to save to comfortably cover those costs for the length of your retirement. Retiring 10 years early means that you will have to save enough for a 35- to 40-year retirement, but it’s not impossible.
There are three popular methods for calculating your target retirement nest egg, each allowing you to withdraw a small percentage of your savings each year to cover your retirement expenses:
- The 25 times method
- The 4% rule
- The $1,000-a-month rule
Let’s quickly run down what each of these methods looks like.
The 25 Times Method The simplest and most straightforward calculation is called the “25 times” method. Since you want your savings to last at least 25 years, then you take your estimated annual retirement expenses and multiply them by 25. So, if you estimate that you’re going to spend $60,000 a year in retirement, you will need a $1.5 million nest egg ($60,000 x 25).
If you plan to retire at 55, though, you’ll need more than 25 years of savings. To live solely on your investments until 90 or older, multiply your annual expenses by 35 ($2.1 million) or more.
The 4% Rule The “4% rule” is a little more advanced, because it assumes the steady growth of your investment nest egg as you are withdrawing funds during retirement. This method, popularized in the 1990s by financial advisor William Bengen, calculates a savings amount big enough to comfortably withdraw 4% of the total amount every year for roughly 30 years.
Here’s how it works. Take your estimated annual retirement expenses of $60,000 and divide it by 4%, which again gives you a $1.5 million savings goal ($60,000 ÷ 0.04). Bengen’s model assumes a balanced investment portfolio of 50% stocks and 50% Treasury bonds and a 3% rate of inflation [source: Barrons]. If those investments deliver their expected rates of return, then you should be able to comfortably withdraw $60,000 (plus inflation) every year for 30 years without depleting the $1.5 million nest egg.
Again, retiring at 55 means that your nest egg will likely need to last longer than 30 years, so it may be smart to divide your annual expenses by a lower percentage like 3% ($60,000 ÷ 0.03) which would require a $2 million nest egg. For a more in-depth dive, check out our feature article on the 4% rule.
The $1000-a-Month Rule Moss thinks the 4% rule has its own limitations, so he developed his own method of calculating retirement savings called the “$1,000-a-month rule.”
To use this method, you first need to figure out exactly how much money you will need to withdraw from your retirement savings each month. Maybe your estimated monthly retirement expenses are $5,000, but you expect to receive a $1,000 Social Security check, plus you own a rental property that generates another $2,000 a month. So, you really only need your investments to cover the remaining $3,000 a month.
“The ‘$1,000-a-month rule states that for every $1,000 a month you want to be generating from your investments, you’ll need $240,000 stashed away,” explains Moss.
So, if you need to cover $3,000 a month, you will need to have at least $720,000 in your retirement accounts (3 x $240,000). If you’ll need to cover the full $5,000 a month, that requires $1.2 million.
Note that Moss’s method also assumes a 5% withdrawal rate over 30 years adjusted for inflation. To make that money stretch over a 35 to 40-year retirement, you will either need to save more or lower your expenses to allow a 3% or 4% withdrawal rate.
Do I Need a Financial Planner? Retiring early is a noble goal, but it’s really hard to achieve on your own. You should definitely consider using the services of a financial planner or financial advisor.
“All successful investing has to follow some kind of plan,” says Moss. “It doesn’t work unless it’s directed toward a goal. A financial advisor will work with you to figure out what the actual goal is, how much money you’ll need, and what investment strategies will get you there.”
According to research, using a financial advisor adds an average of 1.5% to 4% to your investments over the life of the portfolio [source: SmartAsset].
If you’re an early-stage investor, you might think that financial advisers are too expensive, but there are different options for different budgets:
Robo-Advisers Robo-advisers are automated systems that are customizable to your investment goals. If you want to retire at 55, for example, the system will calculate how much you’ll need to invest in your retirement accounts each month to reach your target number. Robo-advisers also automatically adjust your portfolio to keep it balanced and diversified for maximum returns. Most robo-advising services (like Bettermentand SoFi) also allow you to speak with a human adviser for big-picture questions.
Cost:
The only fee charged by robo-advisors is a small percentage of assets under management (AUM) around 0.25%. So if you have $50,000 managed by a robo-advisor, you could expect to pay around $125 a year in fees. Most robo-advisors don’t require a minimum AUM, either.
Online Adviser Service Online financial advisers are a step up from robo-advisers in terms of personalized service. While all interactions continue to happen online or over the phone, there’s an actual human on the other end who is managing your money and helping you stick to a personalized, long-term plan. Companies like Vanguard and Charles Schwab off these services.
Cost:
Unlike robo-advisers, online financial advisers require a minimum AUM of $50,000. That said, they don’t charge significantly more than robo-advisers. Vanguard charges 0.3% of AUM, so a $50,000 portfolio would generate $150 a year in fees.
In-Person Financial Adviser This is the traditional, full-service financial adviser who meets you in her office and draws up a personalized financial plan that is adjusted as your life situation changes (marriage, home, kids, retirement). An in-person adviser provides the highest level of service and is the best choice for large and complicated financial portfolios that require estate planning. There are also in-person advisers who don’t actually manage your money, but just offer advice and guidance for an hourly fee.
Cost:
Full-service, in-person advisers charge a percentage of assets under management (AUM), usually between 1% and 2% a year. In addition, they will charge a fixed rate for developing a financial plan ($1,000 to $3,000) plus hourly rates of $100 to $400 for special projects like estate planning [source: SmartAsset].
What’s Next? Before continuing in our Retire by 55 Learning path, you should have a good idea of how much you should be aiming to save per month. This money will be invested in your retirement accounts — 401(K)s and IRAs— and will grow as you get closer to your target retirement age.
If you’re anxious about meeting your savings goal, you’re not alone. Our next section will explore ways of earning more, reducing your cost of living, and tracking your goals. Thankfully, you don’t have to reach your savings goals right away, but every dollar you invest now will earn compound interest that will help you live comfortably in retirement.
Read the full Wallet Genius Article here
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post Wes Moss Featured In Wallet Genius Article: How Much Money Do I Need to Retire at 55? appeared first on Wes Moss.
What are the top secrets of the happiest retirees? Wes Moss (literally) wrote the book on it. And Joe Stenken read it so you don’t have to.
A book review from Joe Stenken, J.D. Wes Moss has written a fascinating book on happy retirees and what they do or have done to make their retirement happy. He calls these people the Happiest Retirees on the Block or HROB for short. He contrasts these HROB with UROB, the Unhappiest Retirees on the Block.
He starts out the book by telling the story of following his father, a large-animal veterinarian, on his visits to Amish clients. Wes spent a great deal of time on Amish farms and doing that allowed him to get to know the Amish world. The Amish had no electricity, no means of fast and convenient communication, and no cars. In addition to the Amish, his dad also had plenty of wealthy clients. But one thing he noticed was that even though the Amish did not have nearly the material wealth of the non-Amish, they seemed to be as happy or happier than the non-Amish people he knew.
This led to a question for Wes that gave him a passion and eventually a career: How exactly does money correlate to happiness? This led him on an over 10-year journey culminating in this book.
While discussing whether retirees are happy or not certainly involves monetary issues; more than half the book discusses aspects of retirement that do not (directly, anyway) involve a retiree’s finances. In this way, it is very much a holistic guide to help a person work toward a retirement that is happy and fulfilling.
Among the non-financial habits of the HROB is how close they live to their adult children. Generally, the closer the better (but not in the same house and not on their parents’ payroll!). Michael J. Fox is quoted as saying, “Family is not an important thing. It’s everything.” But it is also pointed out that, according to a CNN report, 52 percent of young adults are living with their parents. Moss also says that according to his own research, over 40 percent of families are giving their adult children some level of financial support. On the other hand, his research has found that retirees who live “near or close” to at least half their children are five times more likely to be happy.
So, what are you going to “do” in retirement? Moss has determined that the happiest retirees have 3.6 “core pursuits” in retirement. A “core pursuit” is like a hobby but with more activity involved. A hobby might involve occasionally reading about golf and playing a couple times a year. A core pursuit would be getting on the links at least a couple times a month and maybe joining a golf league. The top four core pursuits are travel, activities with family and grandchildren, playing golf or tennis, and volunteering. The unhappiest retirees have on average only 1.9 core pursuits. Moss recommends that even if you are not yet retired it’s a good idea to start thinking about the core pursuits you would like to engage in when retirement comes.
Moss talks about how marriage and divorce can affect whether or not a retiree is happy. He shows that there is a real correlation between marriage and happiness in retirement. For retirees who are not married, they are 4.5 times more likely to be unhappy. But retirees who are not married have a higher chance of being a happy retiree if they make sure they have support networks, stay active and are socially engaged with their family of choice. Moss’s research shows that someone who has been divorced and remarried one time does not have a lower chance of happiness. But those who have been divorced more than once have a lower chance of happiness in retirement.
Related to marriage and divorce is the issue of couples communicating about money. Of course, married couples need to talk about money. But, according to Moss, the happiest retirees discuss but do not obsess over money. The happiest retirees spend between one and two hours a month discussing money issues. Those couples who spend over 3.5 hours a month discussing money may find it counterproductive because at that level of discussion happiness levels begin to go down.
Did I say the book is a holistic look at retirement? There is research that Moss has done regarding the happiness of retirees and how often they go to church. Those who go to church at least once a week are 1.5 times more likely to be happy than other retirees. Related to going to church is the ability to maintain a network of contacts and friends. In addition, volunteering for what a retiree thinks are worthy causes also leads to a better chance at happiness and well-being in retirement.
Speaking of a network of friends, Moss’s research says that happy retirees have an average of 3.6 close connections (friends). On the other hand, unhappy retirees have an average of 2.6 close connections. Apparently, this difference in one friend can make a big difference. In fact, the number of friends a retiree has is more correlated to happiness than the amount of money they have. Related to this is that happy retirees report they belong to at least one group. It doesn’t matter what kind of group as long as the retiree participates in the group’s activities.
If you are not a healthy retiree you are likely not a happy retiree. So those retirees who take care of themselves in retirement and maintain a healthier lifestyle are generally happier than those who do not. Happy retirees are fans of what Moss calls the “ings.” These are low-cost forms of exercise such as walking, swimming, biking, and hiking. Moss points out that a retiree is three times as likely to be happy if she follows the Mediterranean diet. Vegetarians and those who prefer “meat and potatoes” do all right though. The key seems to be to take seriously what you eat and try to avoid fast food if possible. And thankfully, happy retirees do not need to give up alcohol. The happiest retirees report that white wine and gin are their favorite alcoholic drinks.
While many aspects of what makes a happy retirement do not involve financial issues (at least directly), Moss does discuss the financial aspects that can be the difference between a happy and an unhappy retirement. One of these is the retiree’s home and also the home mortgage. According to Moss, the happiest retirees are those who have paid off their mortgage or will have it paid off soon. And, it isn’t necessarily the house that leads to happiness but often the neighborhood or community the home is in. The home the retiree has lived in for a number of years creates a local network and community. And the happiest retirees don’t tend to downsize, because they anticipate their children and grandchildren will be coming to visit. As far as whether to pay off the mortgage in one lump sum, Moss uses what he calls the one-third rule. If a person is able to pay off the mortgage with no more than one-third of their non-retirement assets then it is a good idea to do so.
There are other financial aspects to a happy retirement. One of them is having at least $500,000 in liquid retirement savings. Moss points out that having retirement savings in excess of $500,000 does not have an impact on happiness that getting to $500,000 does. Another characteristic of happy retirees is having multiple streams of retirement income. These multiple streams of income can include Social Security, multiple pensions, rental real estate, or part-time work in retirement. In fact, about 20 percent of retirees continue to work part-time after deciding to retire from their full-time careers.
As mentioned at the beginning, this book is a fascinating study of retirement and provides a great deal of research and examples regarding how retirees can help ensure they will be happy retirees.
Read the full Retirement Daily Review here
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post Retirement Daily Reviews Wes Moss’s Book “What The Happiest Retirees Know” appeared first on Wes Moss.
Retirement planning is necessary for creating a successful life after work. However, life throws us curve balls that are sometimes out of our control and you need to have an additional plan in place when this happens. In this episode, we are joined by Dan Abramowitz, Regional Business Development Manager and Investment Advisor at Capital Investment Advisors’ Tampa office location. Dan talks through retirement backup plans and how they can save you when unexpected circumstances occur.
Dan also reveals blindsiding challenges he has seen from those entering retirement and stresses the significance of rediscovering your purpose and core pursuits in life. Additionally, Dan urges retirees to be prepared with a plan A, B, C, explains how there is only so much we can plan for, talks through pivoting when hit with life’s curveballs, and shares why we should focus on three priorities to live an efficient and fulfilling life.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #75 – Why It’s Important to Have a Retirement Backup Plan with Dan Abramowitz appeared first on Wes Moss.
Investors can utilize technology to manage money faster, smarter, and easier; but how did we get here? Founder of Benjamin and Managing Partner at Capital Investment Advisors and Wela Strategies, Matt Reiner, CFP®, CFA joins this week’s episode to walk through the history and evolution of investments and technology.
Matt explains the how to’s of diversifying your investment portfolio in the past and paints a day in the life at the New York Stock Exchange. He also shares huge milestones in investment history that have led to simplicity and inclusivity, explains when 401k’s rose in popularity, reveals what he believes the future of investing looks like and its challenges, and unveils details about his new book.
This information is provided to you as a resource for educational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular security. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. The mention of any specific security should not be inferred as having been successful or responsible for any investor achieving their investment goals. Additionally, the mention of any specific security is not to infer investment success of the security or of any portfolio. A reader may request a list of all recommendations made by Capital Investment Advisors within the immediately preceding period of one year upon written request to Capital Investment Advisors. It is not known whether any investor holding the mentioned securities have achieved their investment goals or experienced appreciation of their portfolio. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
The post #74 – The Evolution of Investing, Trading, and Technology with Matt Reiner appeared first on Wes Moss.
If I had told you in January of 2020 that a devastating pandemic was about to descend upon the world, leading to 5 million deaths — over 800,000 in the U.S. — and that it would still be front-page news heading into 2022, your U.S. stock market performance predictions would likely have been gloomy. Incredibly, reality has seen far more sunshine bursting through those clouds. After a short but sharp market decline in February of 2020, the S&P 500 has climbed over 50% in the past two years.
In 2021 alone, the S&P 500 total return was up 28.7%. Total household wealth in the U.S. reached a record $144.7 trillion, and gross domestic product (GDP) is forecasted to grow by more than 5%. These are excellent financial and economic numbers. Why, then, doesn’t this wonderful news seem to not permeate Americans’ minds?
The University of Michigan maintains a Consumer Sentiment Index to measure how U.S. consumers feel about the economy, their finances, business conditions and general purchasing confidence. Currently, sentiment sits crouched at the low levels we saw during the Great Recession in 2008 and below where it was in March and April of 2020 when the world was almost completely shut down.
The obvious question is why? What is the disconnect between economic and stock market performance versus how the average American feels about it? The answer points towards the insidious persistence of COVID-19. We all thought that the pandemic would largely be under control heading into 2021. Instead, two years after it began, we are seeing a record numbers of COVID-19 cases.
Herein lies the problem. COVID-19 is a wet blanket on the American way of life. It infringes on our personal freedoms and collectively hampers our typically unbridled American lifestyle. Consider all the new “to-dos” and concerns that you weren’t burdened with back in 2019. COVID-19 tests. Vaccine and mask mandates. Virtual school. Canceled public events.
No single change damages our pursuit of happiness, but collectively they take a toll. When will COVID-19 end? When will it all be OK?
The answer is, hopefully, sooner than we might think. I believe that this is the year COVID-19 finally moves into the endemic phase. Consumer sentiment should start to improve once Americans feel a true inflection point. We don’t know when that will start, but thanks to science and experience, we are much closer to that phase today than two years ago.
This brings us to 2022, a year in which the U.S. should enjoy more tailwinds than headwinds, making a positive impact on both markets and the economy. Here are the major themes to watch for:
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Pandemic to Endemic —COVID-19 should shift from pandemic to endemic. Less virulent strains in combination with mass vaccination, natural immunity, and multiple treatment options should make extraordinary and growth-prohibitive governmental and central banking measures less likely.
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Less Government Stimulus, But Stimulus Nonetheless — With the pandemic fading, years of massive stimulus — more than $5.8 trillion in the U.S. alone — will, too. We should see far less in 2022, even if a modified version of the Build Back Better plan passes in Washington. Stimulus as a percent of GDP was 10% in 2020 and 11% in 2021. It should fall to the 2% to 3% range in 2022.
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Moderating GDP Growth — Overall economic growth should moderate from the 2% to 6% quarterly growth range we saw in 2021 to a more modest but still strong 2% to 3.5% range. Looking at the critically important U.S. Leading Economic Index (LEI), we can glean that a recession over the next year is highly unlikely. LEI levels are hovering around +10. When they are this elevated, falling to the zero bound or below — spelling a recession — is typically years away.
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Strong Corporate Earnings — While it won’t keep pace with 2021′s recovery, we should still see earnings growth in the 9% range for the S&P 500. To put this in perspective, the S&P 500 companies during 2019 earned in aggregate $163 per share; 2022 should bring earnings to $223 per share according to FactSet.
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Tamer Inflation — Inflation almost has to self-correct and moderate. Think of it this way, if it didn’t, economy vehicles would reach the $50,000 range. That being said, I think it will remain more elevated than it has been over the past decade. What this means is that the average investor will want to look at owning companies with pricing power.
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A Hiking Fed — The Fed has kept interest rates exceedingly low over the past two years in response to the circumstances caused by the pandemic. As COVID-19 moves into an endemic phase and the U.S. economy continues to gain momentum, the Fed will likely raise rates to combat inflation and return to a more normal interest rate environment. This would raise borrowing costs in the U.S., but higher rates should benefit massive parts of the economy. Think banks, financial institutions, and higher rates of interest for millions of American savers.
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Politics Back in Focus — Historically, election years cause a heightened level of market uncertainty, which might keep first- and second-quarter gains in check. However, midterm election years historically tend to be strong for markets in the order of 9.9% on average. And once the elections are settled, the following twelve months are typically better, averaging returns of 15%. Going back to 1946, there have been no negative S&P 500 returns in a 12-month period following a midterm election.
The bottom line is that good news in 2022 should far exceed the bad. The election cycle suggests a muted stock market for the first few quarters but lower inflation, and strong earnings growth. The pandemic moving to the rearview mirror should bode well in the year ahead. Coupling all of this with interest rate normalization could bring rewards for dividend-seeking investors. I’m also realistic in that I cannot predict the future, and as an investor I’m focused on participation instead of perfection.
Be mindful of the challenges, but I’m hopeful for what I think will be a prosperous 2022.
Read the full AJC Article here
Disclosure: This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. Investment decisions should not be made solely based on information contained in this article. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. There are many aspects and criteria that must be examined and considered before investing.
The post Seven Themes For A Changing World appeared first on Wes Moss.
What a crazy couple of years it has been! It’s almost surreal to think that we continue to be in a world where masks are normal, vaccinations are a part of every conversation, some schools around the country are back to virtual learning and trips abroad are still being canceled.
The news and impact of COVID have left us all with hard-won battle scars both in general life and as investors over the last two years. But rational optimists have been rewarded for staying the course and staying invested with the belief that better days were ahead.
While we can probably agree that we’re glad the last couple of years is over, the biggest question this first month of the new year is what will 2022 bring? We, at Capital Investment Advisors, believe it will be a year in which the U.S. should enjoy more tailwinds than headwinds, making a positive impact on both markets and the economy.
Below, you will find what we believe to be the seven biggest themes to watch for in 2022:
1. Pandemic to Endemic – The pandemic should finally shift to an endemic phase. Less virulent strains in combination with mass vaccination, natural immunity, and multiple treatment options should take extraordinary measures by governments and central banks mostly off the table.
2. Less government stimulus, but stimulus nonetheless – With the pandemic fading, years of massive stimulus (more than $5.8 Trillion in the US alone) will fade. 2022 should see far less even if a modified version of the Build Back Better plan passes in Washington. Stimulus as a percent of GDP in 2020 was 10%, 11% in 2021, but our research partners suggest we should fall to the 2% to 3% range in 2022. Lower economic stimulus than during the pandemic, but still stimulus nonetheless, and on top of a fully reopened, uninhibited US economy.
3. Moderating GDP Growth – Overall economic growth should moderate from the 2% to 6% quarterly growth range we saw in 2021 to a more modest but still strong 2%-3.5% range. Looking at data tracking the critically important US Leading Economic Index (LEI), we can glean that a recession over the next year is highly unlikely. LEI levels are hovering around +10%, and when the data is this elevated, falling to the zero bound or below (spelling a recession) is typically years away.
4. Strong Corporate Earnings – While earnings growth won’t keep pace with 2021’s recovery, estimates from our research partners suggest that we should still see earnings growth in the 9% range for the S&P 500. To put this in perspective, the S&P 500 companies during 2019 earned in aggregate $163/share. 2022 should bring earnings to $223/share according to FactSet.
5. Tamer Inflation – Inflation which has also weighed on consumer sentiment in 2021 almost has to moderate. Think of it this way, if inflation doesn’t moderate then, for example, economy cars could reach the $50,000 range. An unsustainable level. So, the inflation we’ve seen should become self-correcting and begin to moderate in 2022. That being said, we think it will remain more elevated than it has been over the past decade. What does this mean for the average investor – own companies with pricing power.
6. A Hiking Fed – The Fed has kept interest rates exceedingly low over the past two years in response to the extraordinary economic circumstances caused by the pandemic. As the pandemic moves into an endemic phase and the US economy continues to gain momentum, it will be natural for the Fed to raise rates to combat inflation and return to a more “normal” interest rate environment. Even though this would raise borrowing costs in the US, higher rates should actually benefit massive parts of the US economy. Think banks, financial institutions, and higher rates of interest for millions of American savers.
7. Politics Back in Focus – It’s time for yet another onslaught of election commercials that will bombard the airways across the US as the midterms arrive in November. Historically, election years do cause a heightened level of market uncertainty, which might keep gains in the first half of the year in check. However, historically, midterm election years still tend to be strong for markets: 9.9% on average. But, once the elections are settled, the next twelve months are typically even better, averaging 15%. And there have not been any negative returns for the S&P 500 in any twelve-month period going back to 1946 following a midterm election.
All of this being said, we acknowledge that there’s no way to perfectly and consistently predict what will happen to the US economy or stock market. Perhaps more importantly, we also must remember that markets cannot be timed with perfection. This acknowledgement reinforces what we do know; that we should own quality companies for long periods of time and be willing to ride out the inevitable and sometimes painful declines that come our way. Participation is the key to investing, not perfection.
Bottom Line
The good news in 2022 should far exceed the bad. The election cycle suggests a muted stock market for the first few quarters. However, lower inflation, strong earnings growth, and a pandemic moving to the rear-view mirror should bode well in the year ahead. Couple this with normalization for interest rates and dividend-seeking investors should be rewarded.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. Investment decisions should not be made solely based on information contained in this article. The information contained in the article is strictly an opinion and it is not known whether the strategies will be successful. There are many aspects and criteria that must be examined and considered before investing.
The post 7 Economic Themes for 2022 appeared first on Wes Moss.
It’s a hot topic that has been on everyone’s mind lately — inflation. In this episode, Retire Sooner team member and Capital Investment Advisors Investment Committee Director, Ryan Ely, addresses what investors and retirees need to take into consideration.
Ryan simplifies the consumer price index and touches on the deflationary shock causing an impact on the economy. He also reveals challenges that come with recovering the economy during inflation, describes the biggest areas of inflation and provides real-world examples of what inflation means for retirees and their wallet share. Finally, Ryan unveils his inflation predictions for the foreseeable future.
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns and periods where dividends will not be paid. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions. Investment decisions should not be made solely based on information contained in this article. The information contained in the article is strictly an opinion and for informational purposes only and it is not known whether the strategies will be successful. There are many aspects and criteria that must be examined and considered before investing.
The post #73 – The Impact of Inflation and What It Means for Retirees with Ryan Ely appeared first on Wes Moss.