A Retirement Reckoning for Generation X

8.4.23: Audio automatically transcribed by Sonix

8.4.23: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer:
Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.

Producer:
Welcome to Retire 360 with your host, Dwight Mejan. Dwight is a licensed fiduciary and financial advisor who always places your needs first. Dwight works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for. And he can help you, too. So now let's start the show. Here's Dwight Mejan.

Dwight Mejan:
Okay. Welcome back, everybody. Glad to have you with us. My name is Dwight Mejan. I am your host of 360 Retire 360 show. And with me is Mitchell Keiser. I'm glad to have you folks with us again. Got a great show lined up for you. How's it going with you, Mitchell? I'm having a good day and we're getting ready to hop on a plane here. So, yeah, all is going well over here. We actually lost power this past week here, and I'm down in the Whispering Pines Carthage area. If we have any of our listeners in low country around there. But yeah, we had a couple trees down on our power line, so we're just kind of getting back up and rolling. But yeah, getting ready to head to a different part of the country and looking forward to that. Don't know if we have any Yellowstone fans out there, but we've been looking forward to seeing Montana and we're fortunate that we have the opportunity to do that. So yeah, life is good. Well, hey, we got a great show lined up here today. This is brought to you by 360 Capital Management. We are down in the Southern Pines area today, but we want to welcome our folks out in the western part of the state in the banner Elk Blowing Rock and Boone area. But we got a show here today that we're going to talk about how we can help make your retirement dreams a reality. If you're new to the show, welcome. We're glad that you took a little time today to stay tuned in to us.

Dwight Mejan:
If you're new, you can go to our podcasts. You can check us out at Retire 360 show. We had a great show last week where we had Mike Mazzoni on talking about the defensive strategy of portfolio planning with long term care, specifically asset based, long term care. We've received some calls from folks regarding that. Figured we would, but if you did not have a chance to listen to that and you've done a good job with your portfolio, but you have yet to consider the defensive side of planning. Great, great podcast for you to go back and look at last week's show. But yeah, we're going to jump into to this week here, but if you want to reach out to us, call us. If you're in the western part of the state. We're at (828) 278-7814. If you're in the Southern Pines area, our number here is (910) 235-0812. But we're going to get into the quote of the week here and jump in. We got a lot to cover in today's show. Mitchell is going to take us with the quote of the week here in just a moment. We have a inflation demonstration. We're going to talk a little bit about that today. We're going to talk about risk. Very appropriate to discuss, of course, with asset planning and investment planning. We're going to talk about right and wrong. Mitchell's got some questions. He's going to shoot at me from some of our listeners and we're going to talk about why people need a comprehensive plan and how we can help you with yours.

Producer:
And now, wholesome financial wisdom. It's time for the Quote of the Week.

Mitchell Keiser:
Yeah. So this week's quote of the week is brought to us by George Foreman. And that is the question isn't at what age I want to retire. It's at what income. But what income do you want to retire? I'm sure you know I could retire. To our listeners, I'm 27. I could retire now if I really wanted to, but that might require me to live in my car and start my family there. But everybody's kind of at a different age and a different situation. If you guys have been looking at your financial picture for an extended period of time, I'm sure you've worked with a financial advisor to tell you what income you need in retirement to sustain your standard of living. For some people, that is significantly different than others. I will say there's a lot of people that we meet that are over the age of 75 that say, Hey, I need some help. I'm going to run out of money. And the really only answer to tell them is that, yeah, you are going to run out of money unless you make some significant changes to your lifestyle just because of how much that you have saved and for how you have prepared. So the objective here is that you plan for that on the forefront so you don't face that problem, because that is very true. It's not at what age, it's at what income.

Mitchell Keiser:
Some people are very fortunate to be able to sock away a ton of money or maybe they had some investment skyrocket at a young age and they're able to retire younger. Sometimes they do that, sometimes they don't. Very real stuff here, folks. I just want to tell our listeners, if you guys are in the low country now, that would be the Pinehurst Southern Pines Sanford area. We are going to be doing an event on August 10th and 11th at Sandhills Community College, and we are going to be talking on taxes and retirement. So taxes and retirement is something that you guys feel that you want to get more information on. This event is going to be free. And again, that is at Sandhills Community College on it is going to be August 10th, which is Thursday at 6 p.m. and it's going to be on August 11th, which is a Friday at 11 a.m. If that is something that would interest you guys, make sure you give us a call because we need to reserve a seat because we do fill up the best number to reach us at for that is (910) 235-0812. And if you're one of our listeners on the western part of the state, we do have an event coming up near you guys as well. So stay tuned. We'll be out there in just a little bit to do some educational events.

Dwight Mejan:
Yeah, just some of our listeners I know, you know, they they have advisors like you just mentioned that they work with. But taxes may be an area where you're not getting any advice. And I just want to encourage all of our listeners, if you're not in that area, maybe you're out in the western part of the state or you have a conflict with those dates, but would like to find out a little bit more, reach out to our office, let us know that, hey, no one's really giving me advice around, you know, taxes. How does my portfolio going to be taxed in retirement? Are there ways to lower taxes? When I get to that point in retirement? And, you know, we had somebody that came to our event just recently. Mitchell The last one, actually, and we have them on a map to go from the 24% tax bracket, and they're in their early 60s that by the time they hit the RMD age required minimum distributions at 73. If tax brackets don't change any, which the brackets won't, but the amount of tax likely could could go up. So current 24% bracket, they're going to be in the 12% bracket with the plan that we laid out for them. So folks, that's a that's considerably a lot of money in your future. Yeah. So don't neglect taxes. It's not just, hey, you did a great job and that's awesome if you have and you've saved well, but you got to consider, you know, it's not at the end of the day what you make or even what you saved.

Dwight Mejan:
It's how much you've saved that you're allowed to keep. And that, at the end of the day, is what taxes and retirement is all about. And we will show you hands on strategies and things that we do with existing clients that you can implement into your plan on how you can reduce the tax planning aspect. And you know, Mitchell, that's just one of five areas that we specialize in. It's not just the tax plan. It's not just the investment plan. That's another piece of it. It's the income plan. We're going to talk about the income plan today, and it's the the estate and legacy plan and also the health care component. So we we hit on that one last week. In fact, we think it's so important we dedicated the entire show last week to health care, specifically long term care. You know, Mitchell, we say this as well. You know, health care costs are going up at a rate of about three times the pace of inflation. So very, very expensive. If a person needs long term care and has to be something that you plan for. So check that last episode out. Just go to our YouTube channel and you can rewatch that at at your leisure. But. Mitchell Yeah, you were you were saying something about where we're headed here next on the show. Where was that?

Mitchell Keiser:
Yeah, I just. You brought up a lot of good points there, Dwight. And for our listeners, you know, this that's why you're tuning in, is that it's a it's complex stuff that we're going over here and there's a lot of components and you need to be prepared. You need to be with the relevant laws and information. I just got through reading a securities book, which I do not recommend for a fun read, but it is very important and especially for what we do. But I'll tell you, even in the past year, the laws that have changed since that book was published is significantly different. The laws are not the same. So. And what does that mean as far as when people can take distributions, how much those distributions are, what you do with inherited IRAs, you know, all of that. I mean, it's you know, you could save yourself from huge burdens, folks. Make sure that apart from your planning, you're making sure that you are also educated in that planning because just to plan is not enough. And if you don't know that yet, you will just give it time. But anyhow, Dwight, I know you were telling me earlier about some harsh realities about your generation, that being Generation X. Do you want to touch on that a little bit?

Dwight Mejan:
Yeah, it's Mitchell. It's. It's actually a sad reality for Generation X, which is my generation. Some news came out this week about Gen Xers, but so everybody's clear. You know, we all these Gen Y, Gen X, all these different, you know, names that we place on years of birth. But if you were born between 1965 and 1980, that is collectively known as Generation X, and that group is unfortunately headed toward retirement, woefully unprepared for their retirement years. According to a recent analysis, the typical Gen X household with a private retirement plan has a mere $40,000 in savings, according to the report this past week from the National Institute on Retirement Security. The figures are even more alarming for lower income Gen Xers, who've managed to stash away no more than about $4,300 and often less, this group found out. So across all members of the generation, some 40%, if you can believe this, Mitchell and our listeners, they don't have a penny saved for retirement. Not one penny, 40%. So Gen Xers are fast approaching retirement age, but the data indicate the vast majority are not even close to having enough savings to retire.

Dwight Mejan:
And, you know, we talk about, you know, the goal really towards retirement is if you're an average wage earner, average household, you know, the target is to have somewhere between 70 and 90% of that pre-retirement income set up for retirement through guaranteed sources or from your portfolio. And you know, we talk about on this show the 4% rule. So if you have $1 million saved for retirement, that could, you know, you can clip off of that about 4%, $40,000 for income conservatively. And that would, you know, in a conservatively invested portfolio that should ensure that you don't run out of money. You take that coupled with any maybe pension that you have. No, those are kind of a dying breed. But Social Security and, you know, you got to get to 70 to 90%. That's just to enjoy the same standard of living. So this group, if you're in that some of those statistics I shared, you better put the pedal down and and have a plan. So yeah, most Gen Xers don't. Yeah, go ahead, Mitchell.

Mitchell Keiser:
I was just going to say a question that people might be asking you or themselves. So why is Gen X so unprepared? Just wanted to share some statistics with you guys. So only 55% of Gen X workers participated in an employer sponsored pension or 401. Plan. So that's only 55%. Wage growth has been relatively stagnant compared to the previous generations, that being the baby boomers. And student loan debts are also higher for Gen Xers compared to baby boomers. So part of that's not a shock. But I will say the part of that that is shocking is that people of that age group, which think the youngest Gen Xer would would have been in 1980. Is that right?

Dwight Mejan:
1980. Yeah.

Mitchell Keiser:
Yeah, I think so. So people that were born in 1980 are still carrying, you know, tons of debt. That's, you know, that's people that are pushing their 50s. Right? So that's.

Dwight Mejan:
That's a lot. Yeah. Yeah, it's, you know, Mitchell, a lot of people hear this, and maybe they're in this category and they're listening right now. You know, if you're the first place to start is if you're working for an employer and you are not participating in a 401. Plan at work, you need to go in to your HR department, ask for the form, or ask what you do online for the website and start to get the maximum, at least up to the amount that your employer matches and start contributing and do it in a Roth account. Do Roth contributions and get that match. Some people, you know, Mitchell just say, well, I'm behind. It's not going to matter. It will matter if you have, you know, ten years left and you can max some savings out. You know, having something is better than having nothing or just relying on Social Security. So, you know, reach out to us. We'll be glad to put you on the right track. Go over some specific steps, more that you can take that 401. K if you're employed, is the first place you should start with saving.

Producer:
Want to know where your hard earned money is going. It's time for an inflation demonstration.

Dwight Mejan:
You know, the question here is, will Social Security keep up? So we're going to shift gears here and talk about an inflation demonstration. So while it remains higher than the Federal Reserve would like it to be, inflation is consistently been slowing down in recent months. You know, last I think it was June, it was 9.1%. So we've certainly come down since then. But it's an indicator that could lead to lower cost of living adjustments in 2024 for millions of American retirees. You know, this year saw one of the largest increases to Social Security at 8.7%. And, you know, earlier this year, the senior Citizen League estimated that based on the most recent consumer data, next year's cost of living adjustment to Social Security and Supplemental Security income, otherwise known as SSI, could be as low as 3%. This would probably be a difficult situation to navigate for retirees who rely, you know, strictly on Social Security for their spending. In Florida's Miami, Fort Lauderdale and West Palm Beach area, which is estimated to have the highest inflation rate of all metro areas in the country, it's up to 9%. So they're still don't know what they were a year ago, but they're still hovering around that 9% area. So, folks, that's just all the more important reason to have a plan in place besides just relying on Social Security, because it's not going to enable you to enjoy the lifestyle that you're living. The cost of living will officially be announced this October, meaning that the Senior Citizens League estimate could still change, but the estimate remains much lower than the adjustment for 2023, which included the highest boost in four years. Like I said earlier, at 8.7%. So, Mitchell, where else is inflation hitting the hardest over the last 12 months?

Mitchell Keiser:
Yeah. So some other places that have been hit pretty hard is also down in Florida, the Tampa, Saint Petersburg Clearwater area, they've hit about 7.3% on average. San Diego, Carlsbad, California, they're around 5.2. Denver and Aurora, Colorado, are about 5.1. Detroit, Michigan. 4.7. Dallas, Arlington, Fort Worth, Texas. They're about 4.7. And Atlanta, Georgia is about 4.6% inflation. And those are just some of the top places. But apart from inflation, Dwight, I think we were going to talk about risk as well. We find a lot of people are not allocated appropriately with their risk measurements. So what that means is a lot of times in our office we go over the rule of 100. And so basically what that means is it's a simple financial guideline, often used for retirement planning. It helps individuals determine the appropriate assets allocated based on their risk tolerance. So here we say you take 100 minus your age, and that is the amount of money that you should have invested in safe solutions. And the other. Sorry. The other amount is what should be invested in the market. So. Anything you wanted to add?

Dwight Mejan:
No. You know, Mitchell, I think the thing with with risk just kind of came to mind in light of a meeting I had a couple of days ago, actually towards the end of last week with a client that we were going over an analysis of their portfolio that we had run, and we went back to 2008 with their current portfolio holdings. We just wanted to have some discussion around performance over the last 12 months and then we measured it on a three year back period. We went back five years, ten years, and then we took it back to oh eight. And what was interesting. For this couple to to really find out is they put themselves at about a. I asked them on a risk score 1 to 10. They put themselves he was a five and she was about a six. She was maybe a little bit more of a risk taker than him. Their portfolio was right about landing where they wanted to be. But what was interesting is based on the performance of their portfolio, particularly when we looked at it like over the last ten year period, what we saw was a proposed portfolio that matched similar risk. It was actually a little bit less risky. It would have put them down each about a point in risk. So it helped the portfolio from a risk standpoint, lower risk. The historical rate of return actually improved on this couple's portfolio rather significantly, and that that formed a whole discussion where they had questions about, well, what type of instruments are in the proposed portfolio.

Dwight Mejan:
And I won't go deep into this, but, you know, we're not a fan of Bonds. I think bonds are served a purpose back in the day. But there are plenty of bond alternative strategies today to consider that I believe and statistics show us, at least from the asset allocations and portfolios that we've managed, that being out of bonds have been more favorable in a bond alternative strategy so that that 40% in a traditional 60 over 40 portfolio finding a place different for that other 40%, which is what we showed this couple, it actually reduced risk because remember, bonds still have risk, right? Interest rates go up, the value of the bond portfolio goes down. We just saw the feds raise rates here last month, in July. A little bit. Could do it again in a in another month. So particularly if you have, you know, long duration bonds where your bonds are further out in terms of maturity, those bonds have a greater sensitivity to changes in interest rates. And, you know, if you're going to be in bonds and you still like them, make sure that the duration of your bond is is is short. You don't want to be in long term bonds. You want to be in shorter term bonds.

Dwight Mejan:
And it's just a much better place to be in. But yeah, risk very, very important. I can't emphasize it enough, particularly if you're in that retirement red zone where you're pretty close, let's say within five years or so, six years from retiring. Very important that if you're not sitting down with your advisor, you need to sit down and actually take a risk assessment, look at your portfolio, look at how it's set up with risk. And, you know, this couple wanted to make a change. They were ready to do something different when they saw how much risk they could reduce in their portfolio. And they looked at what the historical return had been over that ten year period. It was significant. And again, that past performance doesn't indicate what the future is going to do. But a ten year period tells a pretty good story as to what that might look like if the next ten years repeated itself or if we had a big downturn in the economy. You don't want to have your your income that you're planning on out of that portfolio be drastically reduced or that portfolio to be drastically reduced right before you retire. So yeah. So, hey, we're going to Mitchell. Let's take a break. And when we come back, we'll jump back into our next topic. So we'll be right back after this. Mitchell is going to do right and wrong.

Producer:
You're listening to Retire 360.

Producer:
At 360 Capital Management. We know you've worked hard to earn your money and you've worked even harder to save it. When it comes to wealth management and planning for retirement, Dwight Mejan is passionate about helping people protect and grow their wealth. Visit Retire360Show.com to schedule your free consultation today. It's a $1,500 value provided at no cost to you. Book yours now at Retire360Show.com. You're listening to Retire 360 with Dwight Midgen. Now back to the show.

Mitchell Keiser:
And we are back. You guys are listening to the Retire 360 show brought to you by 360 Capital Management. Next, we are going to go over a segment called Right or Wrong, and we invite you guys to tune in with us. What we do here is we take a lot of questions that we get from our listeners, and we set that up in a way that is right or wrong. So I'm going to ask Dwight a series of questions or give him prompts, and he is going to go over that with us and explain to us how we can better prepare ourselves for a longevity of retirement.

Producer:
Come on down as we test your financial knowledge in right or wrong.

Mitchell Keiser:
So right or wrong, you should keep working to stop contributing to your retirement accounts to maximize your Social Security benefit.

Dwight Mejan:
All right. Well, I hope you said wrong on that one, because if you did, you are correct. You know, you want to always continue to contribute to your retirement account. Always like to say it's not free money. It's money that you earn. But your employer most often times is matching somewhere, hopefully 3 to 6% on that contribution. So definitely you want to continue to do that. But I said this earlier in the show. Make sure in your employer plan, if you're able to do it and they offer it, contribute into that Roth account. Folks, we're seeing more and more people who, you know, again, a lot more money today is still in tax deferred accounts where people are saving pre-tax. And I know we have listeners right now who, you know, have heard about Ross. They said, I need to do this. I need to go in and change my contributions. If you can put all of it into the Roth account, there's maybe a few circumstances that, you know that would be different to do pre-tax, but I can't really think of one here now for our listeners. So I would encourage all of you to be doing Roth contributions. And if you're doing the pre-tax, you probably can go online. If you're good on the computer and know how to go in, you can change them right on that website.

Dwight Mejan:
If you're not sure how to do that, call the custodian of the plan or call your HR department and somebody there can direct you on how to do that. But you want your money working as hard as you do. It's important to get, you know, a Social Security maximization plan. That's the other thing that we would encourage you to do. So if you're getting close to Social Security, reach out to us. Our office runs those for, you know, any of our listeners. We'll run that for you for free and it'll show you the optimal point for when you can start taking or when you should start taking Social Security. It's not a one size fits all. You know, everybody thinks, well, I don't I can't wait till I'm 70. 70th May not be the right age for you folks. It's going to depend on a lot of factors. It's going to depend on your health. What's the family health tree look like? Did your parents have longevity? Do you have some of their, you know, genes and some of their makeup? For some of our listeners, it might make sense to draw Social Security early. You may not want to wait till full retirement age. Other questions Do you know? Do you like your work? Some people are getting to the point where you have talked to somebody here this past week and last I talked to him about 4 or 5 months ago, he was going to be working another four years.

Dwight Mejan:
Now he's thinking the end of this year he wants to be done because there were some changes that were made at his place of employment and he's just not sure he wants to hang in there. So for him, he's got the ability to do that. It's not going to affect his income. So we may be looking at triggering his Social Security here at the beginning of the year. Do you want to leave a legacy? How big of a legacy do you want to leave? All of these are questions that need to be asked and explained so that you can best decide, hey, what is the best situation for me? And then, of course, there's the dreaded tax question What's the best scenario for me from a tax perspective of when to take Social Security? So again, there's Social Security decisions that have to be made but do not under any circumstance. If you can avoid it, don't stop contributing to that retirement plan because you would be doing yourself a disservice for sure.

Mitchell Keiser:
Next prompt here. The rule of 100 is a simple calculation to help one determine how much risk they should be taking inside of their portfolio of assets.

Dwight Mejan:
Well, that is correct. If you were at the hearing at the beginning of the show. Mitchell went through that. So that is correct. You simply take 100, subtract your age, and the resulting number is the percentage of assets that you could have at risk. We call it smart risk in the market. Make sure that risk is appropriate for, you know, how much you'd be comfortable losing. The idea that your the younger you are, the more time you have to make up for any significant losses. As you get older, you want to have more of your savings in a safe investment product. So somebody like Mitchell, 27 years old, I'm always encouraging him, you know, take more risk. Mitchell you've got years ahead of you at 27 to make it up. Someone like myself at 55 needs to be more moderate in the level of risk that we take, right? Because we don't have as many years. Those of us that are getting up in age, we don't have the years ahead to make up for those losses. So rule 100 know it. Very important to implement into your own portfolio strategy. What's the next question a listener had for us? Mitchell?

Mitchell Keiser:
All right, Dwight. Right or wrong, there is no way to grow your money tax free in an era.

Dwight Mejan:
Well, hopefully you just tuned in there. We're paying attention because that would be incorrect. That would be wrong. I just mentioned to our listeners, Roth IRAs allow you to pay taxes on the front end on those contributions, but you enjoy the tax free earnings and the tax free distribution when you pull it out in retirement with no requirement or I'm sorry, required minimum distributions. And, you know, Mitchell, that's a huge point that we see with clients who don't do Roth conversions. They they got this large bucket of money that they just continue to kick the can down the road and most people get settled into their retirement, you know, with the income that they have coming in. Maybe they've got a pension, maybe they've got Social Security or they're pulling some income out of the portfolio, but they don't take more money out of that pre-tax account. And what happens is when they do have to start taking required minimum distributions, oftentimes they're doing that at a huge detriment to their tax status because we see people jump 10 or 12% more into a tax bracket, some higher. And the other danger in doing that is you have this thing called Irma, which is a higher premium that you pay for your Medicare premium. Some people are triggered into higher adjustments for their Medicare cost because that required minimum distribution. They're already near a threshold. And by pulling a larger amount out of that required minimum distribution, it's enough to throw them over that threshold and then they have to pay higher amounts for their Medicare. Irma stands for income related Medicare adjustment. Monthly adjustment amount is what it is. So that's that's what Irma is. I know some of our listeners have been probably hit by that unexpectedly and they're nodding their heads that they're driving or listening right now going, Yeah, you want to prepare for that? So Roth accounts, you're not subject to required minimum distributions, which is a good thing, not just not only does it come out tax free, but the government's not forcing you to take money out later in life. You can do that at your own discretion.

Mitchell Keiser:
All right, Dwight, last one for this segment, a 60 over 40 portfolio, which is 60% in stocks and 40% in bonds, is a tried and true method and is still the best way to construct a portfolio for retirement.

Dwight Mejan:
We might get some mixed reviews on this, but I would say two to that. That would be wrong in my opinion. The modern portfolio theory of 60 over 40 portfolios is a strategy from 19, believe it or not, 1952. Do you really want to rely on a 70 year old strategy for your retirement? I don't. And if you are in that portfolio last year, you got a double whammy against you because not only did equities fall significantly, you know, S&P dropped about 20%, 19.5, but it was the worst year on record for bonds. So your bond portfolio took a beating as well. And if you would have been in some new asset classes to properly balance that smart risk money, which is the money that's in securities with smart, safe investments, you would not have seen near the drop potentially in that portfolio. So yeah, very important. If you're in bonds and you're still in that 60 over 40 model or you look at your portfolio and you're like, Hey, my advisor's just not talking to me about alternative strategies that you all have talked about. If we have time in today's show, I'm going to talk about another specific asset class.

Dwight Mejan:
I haven't talked about it for a while. We use them in a whole bunch of our portfolios. I would say better than 60 to 70% of our portfolios. We're using a certain asset class, but it's a great strategy and it would have prevented a larger loss last year if you were heavy in bonds. But if you want to talk to us about that, give us a call. Our number here is (910) 235-0812. Or if you're in the western part of the state, you can reach out to us at (828) 278-7814. We welcome your call. We welcome talking with you and seeing what we could do to help guide you better, maybe in how your portfolio is allocated right now. You can also go to our website at retire 360. Show.com, there's a little tab there that you can click on and you can schedule a complimentary zoom call with us or a meeting face to face. We'll be happy to meet with you and have that complimentary session. But we're going to take another quick break. And when we come back, we're going to talk about why people need a comprehensive retirement plan. So we'll be right back.

Producer:
You're listening to Retire 360.

Producer:
You're listening to Retire 360. To schedule your free no obligation consultation with Dwight visit Retire360Show.com.

Mitchell Keiser:
All right and we are back and you guys are listening to the retire 360 show brought to you by 360 capital management. We're going to jump in here to the decumulation phase. You hear us talk a lot about accumulation. Now we are going to talk about accumulation. Accumulation is the process you go through during retirement phase where you shift your focus from saving to using your assets to generate income. So that is the drawdown period. Um, so I'll say a recent study we had from BlackRock said only 36% of Americans are confident with what they have an income to retire, while 55% are returned, concerned that they will outlive their money. So with the decumulation phase, Dwight learning how people are spending down their assets, why would that be important for them to need a comprehensive retirement plan or to meet with somebody to learn how they could take advantage of that?

Dwight Mejan:
Well, one of the things we find, Mitchell, that to many people, they think retirement planning is simply about the rate of return, but they don't have any income plan that is guaranteed to fund their expenses. So we find that to many people, they don't have a clue about their bonds. And in many cases, you know, bonds are 40% or more of the portfolio. As I was discussing earlier, and this asset class has been significantly underperforming. A lot of people don't have any plan for health care expenses. And this is a big, big problem. You know, long term care, like we talked about, we just spent a whole show dedicated to that. It's one of the the biggest areas of people's need to plan because the expense is so high. It's about ten grand on average a month in this area. And that's part of a comprehensive plan, is to look at the defensive side of that portfolio. And health care certainly is a very large expense. We've shared statistics on the show before about that. But approximately 300,000 if you're a couple, is what you could expect to spend in health care costs. In retirement. Many people will go, you know, much, much higher than that. So it surprises me to find out how many people have no legacy plan whatsoever for their beneficiaries. They don't have a will or a trust to avoid the costly and lengthy, lengthy probate process. Probate here in North Carolina ranges anywhere from 5 to 7% of the cost of the estate or the value of the estate.

Dwight Mejan:
So very important that you have that looked at life expectancies. I think you mentioned this earlier, Mitchell. People are living longer. That's the thing we have to look forward to. That's a good thing. But it's more important, you know, now more than ever, for pre-retirees and retirees to have a comprehensive plan that's going to not only get them to retirement, but that's going to help get them through retirement. So by working with us during the the planning process, you'll have a team that's by your side that can answer questions for you and properly align your plan with your retirement goals. So if you haven't heard from your advisor lately, or you simply aren't receiving the attention that you deserve through your work based retirement plan, let us provide you with an opportunity to show you the service that we offer and a complimentary consultation. So if you're out west in the western part of the state, reach out to us at (828) 278-7814. Or if you're a little more local, you down in the low country area we're at (910) 235-0812. And you can also go to our website at Retire360Show.com and you can get a hold of us there and set up a complimentary meeting with us. So we're going to have one last break and we'll be back to finish up our last segment. We'll be right back with you.

Producer:
Like what you're hearing, you can watch the show to visit YouTube.com and search retire 360 to watch clips from this program. You're listening to Retire 360. Here's Dwight.

Dwight Mejan:
All right. Well, my name is Dwight. Meghan. I'm your host. Along with me here is Mitchell Keiser. We want to just take a brief moment here. I talked in the last segment about Bonds and the old 60 over 40 portfolio that was designed back in 1952 and want to give our listeners an idea or part of their portfolio. This is probably a new asset class for many of our listeners, but I want to talk just briefly here a moment about structured notes. Structured notes are an asset class that we use in place of using bonds for our clients. Structured notes are basically a type of investment that combines the features of bonds and derivatives and derivatives. Well that that can sometimes people hear that and their eyes start spinning or rolling the back of their head. A derivative is simply something that just like it sounds, it derives its value from something else, from an underlying asset. And they're issued by banks. Structured notes are and other financial institutions. They typically offer a return that is tied to the performance of an underlying asset, such as a stock or commodity index or a basket of assets could be tracking, or the underlying asset could be the S&P 500 or the Nasdaq. Those are some of the ones that we use within client portfolios. But the two components of a structured note are, first off, there's a bond component. The majority of your investment that provides protection of your principal. Okay. And these are issued, like we said, typically by very large investment banks.

Dwight Mejan:
We're working with notes this month that are issued by JP Morgan, just to give an example. But the second component to a structured note is the derivative component, and that offers a potential value increase of the structured notes return. This derivative can offer the investor exposure to any asset class whatsoever. So we'll work with our clients on income notes where if a client wants current income, we'll use structured notes that provide income for clients just like a bond where it kicks out that income every single month. And those yields today on some of them that we're currently offering this month range anywhere from 10 to 10% to a little bit north of 12%. So you can certainly see a lot more yield being offered within the structured note realm than you can in the typical bond market. Structured notes can be customized to meet specific investment objectives. It could be structured to provide exposure to a wide range of assets and markets. However, they are often complex and may have features that are difficult for some investors to understand, and as such, they might not be suitable for all investors. And it's important to have a good grasp of the features of the risks and of the benefits before you invest. A financial advisor that you trust can help you understand exactly how structured notes will work in your portfolio and guide you in your decision on whether or not to invest. You know, we have a lot of structured note offerings that offer principal protection.

Dwight Mejan:
There are structured notes out now that they'll cap you on the upside of the return. For example, they might have a cap feature where you're maybe you're only going to get 10% if the market goes up in a given 12 month period, 20%. But the structured notes will completely have have protection in it from the downside. So you don't lose any money. If the market was to collapse, you know, 20, 30%. So there's opportunities in all different types of notes to tailor and customize these notes to a specific target goal that you have. So if you want to find out a little bit more of those when we finish up the show here, we'll give you our contact information. But those might be for somebody listening that might be a great feature for you or a great asset class to consider, especially if you wanted to unload some bonds. So with that, Mitchell, we're going to shift here. You know, the Fed is is no longer predicting a recession for the US economy in the near future. Many economists disagree with that. Several leading economic indicators are pointing towards, you know, a downturn. Protecting your retirement plan from economic downturns can help ensure a financial plan is secure. And we're going to give you our listeners here. We're going to end today's show with ten strategies to recession proof your retirement plan. So, Mitchell, why don't you give our listeners the first recession proof idea?

Mitchell Keiser:
All right. So step number one, you guys have heard this 1,000,010 times. Diversify your investment portfolio, spread those investments across various asset classes like stocks, bonds, mutual funds, real estate, annuities, structured notes, as Dwight just went over. Diversification can help reduce the impact of market volatility on your retirement. With that. Number one, I just want to reiterate with you guys, as you diversify and as you plan, make sure that you guys are informed of what stocks, what annuities, what bonds, what real estate you want to make sure that you're making educated choices and that you're not just, you know, throwing blind darts at a dartboard. There is a way to strategically diversify your portfolio. So you want to go ahead with number two.

Dwight Mejan:
Absolutely. Number two is establish an emergency fund. Got to maintain a separate savings account. I would keep the separate from your checkbook with enough funds to cover. I like to see six months. And I don't think it's it's wrong to have, you know, nine months sitting in cash. You know, the benefit we have today is we've got higher yields. Right. I know some of our listeners right now might, you know, be hearing this and had to have that emergency fund. But I ask people every time I'm in a client meeting about their cash fund and I'll tell you, probably 7 to 8 out of ten of them don't have the right interest earning right now on that account. Money market accounts are out there. Folks at 4% think you don't have to look hard to find that. And the place I'd start is start with your own bank and tell them that you're looking at elsewhere to park some funds and you've gotten some pretty competitive yields. What can they do? They might ask you a question back and you know, if they want to keep your business, they'll probably match it. They might even beat it. So but pick up the phone. It might be one of the best calls you make for the day is if you just check with two other banks where you don't bank and find out what that money market account is and put that six month savings emergency fund in there and you'll see some nice interest accruing in that account better than what we saw a year ago at this time. So got to have that emergency fund.

Mitchell Keiser:
Absolutely. And that brings us into number three. We want to minimize our debt. Now, when we talk about minimizing debt, we're specifically or should say mostly talking about the high interest debts like credit card balances and personal loans. Being debt free or having manageable debt can provide a more and provide more flexibility during a recession. Now, we might offer a bit of leeway there. If you're one of those people that has a 2.5 interest rate on your home and your current yield and your bank is at 4%, then if that's the case, then you might be better off keeping that mortgage. But if you definitely have credit card debt or personal loans, you want to make sure that you get those paid off as soon as possible because it's hard to get ahead when you're giving away all your money to creditors.

Dwight Mejan:
Right? Absolutely. Well, Mitchell, Number four is to increase contributions during good times. So whenever it's possible, you know, boost your retirement contributions and objectives. Now, I say this. You want to be a little cautious. I believe when you do this inside of your 401. K plan. I think it makes sense to fund it up to the match that your employer is doing. But if you're going to fund beyond that and you have the ability to do it, and I hope you do start a plan outside of your employer plan and fund into that. And the reason I tell you to do that is you have more investment choices, and that's what it's really all about, folks. It's about you maintaining control of where you get to invest. And in that 401. K plan, you probably don't have as many options. You know, some of you have better than than other listeners who are listening right now. But if you put it into an individual plan like a Roth or a traditional IRA, that opens up the entire investment landscape for you. And that's where we would recommend you to to do that. So maybe you got a boost in your income. So take advantage of higher income and employer matches. Just make sure you're getting that employer match because that's money that you've earned. Don't leave that on the table.

Mitchell Keiser:
Yep, absolutely. And number five, we want to regularly review and adjust your plan. So if you guys think back to a little earlier in this show, we talked on the rule of 100, and that is the how much risk you should be taking to how much of your portfolio should be in principal protected assets. So regularly reviewing and adjusting that plan is constantly making sure that your risk matches your age, which matches your investment objective. So my investment objective being a 27 year old is different than Dwight's as a 54 year old versus, you know, our grandpa who's an 80 year old. They're all different and they all need to be adjusted continuously. And again, you probably should unless you're pretty savvy on the market and you're studying that actively, you should consult a professional to have them help you do that. As you go through the different stages of life.

Dwight Mejan:
Number six is to consider annuities. An annuity is a financial product. You've heard us talk about them on the show that provides a stream of income during retirement. Some annuities offer protection against the market down and provide stable income regardless of economic conditions. You know, some some of our listeners, you know, an annuity is a fit and for others it may not be a fit. But particularly if, you know, you might be 5 to 10 years away from retirement and your only source of income is Social Security, with certain annuity products, you have the ability to guarantee a growth on one side of that annuity contract or kind of a contract within a contract, as I call it, that has guaranteed elements attached to it for growth, which will guarantee you a minimum amount of income down the road. And that can be forecasted depending on how many years down the road a listener might be hearing this and going, I might need more income in seven years or eight years. Well, certain annuity products can give you with certainty a worst case scenario. Here's how much income you could get. Other people maybe that don't need income or they don't think they'll need income, but they're looking at safety. That's a different type of annuity product where they can accumulate money. And some of these contracts are relatively short term in nature. You don't have to be in some of these for ten years. There are shorter term products that give you caps on the upside and totally remove the downside risk that you take. So might want to consider an annuity if you're listening. Mitchell What's the seventh tip that we have here?

Mitchell Keiser:
Yeah, so exploring defensive stocks. So defensive stocks belong to industries that are relatively resistant to economic fluctuations like health care, utilities, consumer staples, including such stocks into your portfolio, can help protect your investments during recessions. There's different ways to use defensive strategies. Like Dwight just said, there's annuities. There's also buffered products. So a buffered product would be one where you can gain. So I know there's buffered products out right now where you can gain 22% of the S&P 500. But if the market goes so anything over that, you wouldn't gain but you get protection on the downside. So if the market goes down 9%. You do not lose anything but anything below 9%, then you start to accrue some losses. If that didn't make sense, then your best bet is to probably just give us a call and I could explain that better. But anyhow, they give you a bit of a buffer, so they let you experience a large amount of the upside and they take some of the hit on the downside. So that's another way just to minimize your risk and use a defensive strategy. Defensive stocks is I just went over are also always a safe bet. Utilities probably not going anywhere. Health care, that's a pretty safe bet. But I will say, you want to just take a note of this. Health care year to date has been down about 4%. So you want to make sure that you're constantly even looking at the consumer staples because they do fluctuate not as much, but they do fluctuate as well.

Dwight Mejan:
You know, I love that the market, you know, at least the country we live in, it provides opportunities. And it's no different in the investment world is that we have some great instruments that have been put together in the investment world to give people more defensive ways in their portfolio where they're not sacrificing too much of the upside, where we could still get some generous gains and protect the downside. And some of that was what Mitchell was just talking about. So I love that. Um, number eight is delay Social Security benefits if and when possible by delaying your Social Security benefits until full retirement age or beyond, you can receive basically higher monthly payments. And who doesn't want higher monthly payments? This could be a valuable source of income, of course, during retirement, especially during economic downturns. Again, is it right for everybody to delay? Not necessarily. But if you can do that again, beyond full retirement age, it's the only place that we can use the term guaranteed because you get that guaranteed 8% increase just by delaying past full retirement age. So another great strategy there, Mitchell. We got two left, so why don't you share your last one?

Mitchell Keiser:
So number nine, continuously educating yourself. You guys want to make sure that you're staying informed on and on top of these economic trends, it is always good to say, Oh, well, you know, Mitchell and Dwight have my back. They're going to take care of me. They're going to make sure it gets done right. And if you work with us or if you have people that are like us that help you, that's awesome. And trust is the number one thing when working with a financial advisor that you're working with somebody that you can trust. But I will say whoever you are working with should always make sure that you yourself are being educated. And if you don't feel that way, maybe you're not asking questions or maybe they're not informing you. Either way, folks, what's important is that you guys yourself stay educated. I would just reiterate with you that there is no such thing as a stupid question. It's your money. We're helping you manage your money. Somebody's helping you manage your money. And if you have a question, no matter how dumb you think it is, just ask it. Because that's something that we probably haven't all thought at one point in time or another. Y'all. You also have to remember that we are working professionals, so we do this stuff on a daily basis and we dissect the nitty gritty and we realize that that is not the case for everybody. You know, there's a doctor listening to this right now, and I could ask a doctor a really stupid question or I could feel that it's stupid, but it's not. It's my health and this is your money. So if you guys have something, if you have a question, ask and make sure that you do feel informed moving your assets.

Dwight Mejan:
Yep. And finally, number ten, consult with a financial advisor or a professional seeking guidance from a professional financial advisor could be invaluable when you craft a recession proof retirement plan. And Michelle, you touched on that just a minute ago. You know, with somebody who specializes in a particular field, for example, like a physician, you know, we could be called geeks. You know, we sit in our office all day and we're on computers or, you know, putting together, you know, a portfolio plan or recommendation for somebody. This is what we do. We enjoy doing it. And a lot of people you've got something else that you do. My wife reminded me actually last night I was out in my yard because I had one of those sprinkler heads that popped and I could not figure out. I watched YouTube. I always go to YouTube. I still couldn't figure this thing out. And I came in and she just reminded me, she said, You know what, Dwight? You don't enjoy that. You're not really that great at it. She said, Why don't you just hire somebody to do that? That's exactly where I was at when I came inside.

Dwight Mejan:
I'm like, I got to just get somebody else in and they can fix this. I'm not that handy around the house. I'm not that handy in the yard. And, you know, this is what I enjoy doing and it's where I get fulfillment. It's where I get a lot of satisfaction. And I would just encourage our listeners, we hope you would consider us if you're taking time to listen to this show, we would consider it an honor if you'd reach out to us. And to do that and you want to talk about something we've discussed on today's show, reach out to us if you're in the western side of the state. (828) 278-7814 is our number there. And if you're in the Southern Pines area, we're at (910) 235-0812. You can also look us up on Retire360Show.com and you can get in touch with us there. Mitchell share those dates one more time. We got a class next week. We've got a few openings left, but give our listeners the dates for taxes and retirement. Sure.

Mitchell Keiser:
So if you guys are looking to come to our class on taxes and retirement at the Sandhills Community College here in Pinehurst, our next event for that is on Thursday, August 10th at 6 p.m. and it is on Friday, August 11th at 11 a.m. You guys are interested in that. Make sure you give us a call so that way we can make sure that we have a seat reserved for you guys because we do have a name on just about every seat for our classes come the day of a class. So that is of interest to you. Give us a call. (910) 235-0812.

Dwight Mejan:
Hey everybody, have a great week and we look forward to having you back on our next program. Take care, everybody.

Producer:
Thanks for listening to Retire 360. You deserve to work with an experienced and licensed expert who will strategically work to protect and grow your hard earned assets. To schedule your free no obligation consultation with Dwight, visit Retire360Show.com or pick up the phone and call (910) 235-0812. That's (910) 235-0812.

Producer:
Investment Advisory Services offered through Brookstone Capital Management, LLC, BCM A Registered investment Advisor. Bcm and 360 Capital Management are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results.

Producer:
Structured notes involve risks not associated with an investment in ordinary debt securities. The securities are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency. Nor are they obligations of or guaranteed by a bank. The securities will not be listed on any securities exchange and the secondary trading may be limited. Therefore, there may be little or no secondary market for the securities. Accordingly, you should be willing to hold your securities to maturity. The securities are subject to the credit risk of the issuing bank and any actual or anticipated changes to its credit rating or credit spreads may adversely affect the market value of the securities. Fixed annuities, including multiyear guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer.

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