1.27.23: Audio automatically transcribed by Sonix

1.27.23: 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 your Retirement Unbroken with your host, Merrit Strunk. Merrit is a licensed fiduciary and financial advisor who always places your needs first. Merrit 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 Merrit Strunk.

Merrit Strunk:
Hey, welcome again to the Retirement Unbroken Show. I'm your host, Merrit Strunk. And I just want to welcome you if you're a regular listener here, welcome to the great unbroken nation. That's right. You're a member of the Unbroken Nation. And with me today is our senior producer, Matt McClure. Say howdy, Matt.

Producer:
Howdy, Matt. Howdy, Matt. It's like, what was it back in the day? Say goodnight, Gracie. Goodnight, Gracie.

Merrit Strunk:
Goodnight, Gracie. Yeah. And I want to thank everybody for tuning in today and just sharpening your. Your brains and your financial acumen. That's what it's all about here today. And, you know, if you haven't stopped by our Retirement Unbroken dot com website, please do that. And you can also listen to the podcast there or get a link to go to wherever you have podcast outlets that you listen to. And of course, we're on the air every day now, not every day every Saturday at 1 p.m. on 1170 AM and 96.1 FM in San Diego. But it's great that we do this in podcast too. So you can listen to it all throughout the country any time you're doing anything. So reach out to us, you know when you do. Do yourself a favor. Please ask us for and you've got to mention this. Please remember to ask us. This is for our radio and podcast listeners to get your essential reports. And we call this the Free Retirement Unbroken report. And this has got tons of stuff in it. The critical stuff you need in this day and age, right? Talks about your goals, your rates of return fees, investment analysis, net worth projections, social Security maximization, retirement income taxes, and much, much more.

Merrit Strunk:
This is the kind of critical information you need to have to understand where you are, where you're headed, and are there any options that you might need to consider. So when I talk to people who are listeners and they reach out to us, I just want to say thank you. I'm full of gratitude. You know, you get this. It's been said that gratitude is one of the greatest and most powerful feelings on the planet. And I agree. So talking with our clients that listen, people that listen to the show in the podcast, they said some nice things. You know how educational the show is. And I love to get that feedback. And and you could drop us a line, let us know how we're doing. If you have any questions you want us to address on the air, we'll be happy to do that. So on today's show, I feel like, by the way, Matt, I feel like what's what's the big buzz in the news these days? What are these folders everybody's finding in their garage or basements or all these government folks?

Producer:
So I feel like.

Merrit Strunk:
Say, yeah, I feel like saying, you know, I have the top secret file here and it's got your retirement. Unbroken report here. I should have had some props. I should have had some. I know I should have I should have done that.

Producer:
Big classified folder right across the front.

Merrit Strunk:
Yeah, classified. Your eyes only. So, no, we're not going to open up the folder of classified information, but today we're going to touch on that market. What's happened today and inflation demonstration, which we often do. And then we're going to revisit some of these aspects of smart risk, smart safety, safe and smart tax and taxation. So that brings us to the market update. Here we go. The market was lower in afternoon trading here, with the street digesting mixed results from corner for earnings as the season gets going here. So the big one, Microsoft topped profit projections, but its revenues and guidance were disappointing, unfortunately. And the you know, they're part of the part of the Dow and a big part of it. And the Boeing posted some unexpected losses. And that's too bad. You know, I know a lot of people that hold Boeing and its revenues came in a little short of the forecast. The economic calendar is relatively light today. So with a lone report being a third straight weekly gain for mortgage mortgage applications, and I guess that's good because, you know, housing had come down a little bit. Treasury yields are mixed and the dollar is nudging to the downside, while crude oil and gold prices are a little bit higher. Europe was mostly lower as investors continue to digest yesterday's flood of manufacturing and services data. So on the main indexes, Dow Jones average was down 0.05, so no big deal.

Merrit Strunk:
But boy, it was really down for a while. I mean, we looking at somewhere close to 400 to the to the south, right. The S&P index dropped 0.10. The Nasdaq was falling to 0.23 negative, the VIX. And if you're a listener, what's the VIX? I'll give you a chance to answer there in your car or your home or your office with a VIX. That's right. That's the fear index. Or really in reality, it's the volatility index. So as people get worried, the VIX goes up. As volatility increases, the VIX goes up. So that was 0.49, gold was up a half point and. Oil was up 0.57, so a little more than one half point the February one is the monetary policy decision approaching with the Fed. The Fed is expected to continue to downshift to 25 basis points and the lending rate. So that's after they've had a litany for 75 bips or basis points rate increases with a 50 bips rise in December. So they also have signaled that the restrictive policy will continue to remain in place while they're hoping to go for a higher what's called a terminal rate than expected. So that is the market recap of what's going on here. And Matt. Kenya, go ahead and share the financial quote of the week, please.

Producer :
And now for some financial wisdom, it's time for the quote of the week.

Producer:
Of. Of course I can. I was I was going to say, certainly I can. And then I changed our mind. And so it came out of. Certainly I can.

Merrit Strunk:
It's easy for you to say.

Producer:
All right. Easy for me to say first day with my new tongue. All right. So, yeah, our words of wisdom this week come from Evan. Esther, who was an American humorist, wrote Acer's Comic Dictionary way back in 1943, also wrote 20,000 quips and quotes in 1968. So this is so this is one of those quips and quotes, only 19,999 to go. So here we go. Evan, Esther once said, quote, Some taxpayers close their eyes, some stop their ears, some shut their mouths, but all pay through the nose.

Merrit Strunk:
Got it. Check. Absolutely. I'll pay through the nose. Wonderful. What a what a nice combination. You know, we're going to talk about a little information about when how you talk to a financial advisor, When should you do it? Why should you do it? How do you know if that's something you should do? And it dawned on me, Matt, that there's there's a couple of different classifications that I might throw out there for consideration. There are people who are proactive when it comes to planning for their financial well-being. They just say, this is something we should do. I'm that person that takes care of that thing and I'm going to go ahead and do it. And they may start that early in life and it's only going to help them. Those guys who do that, they are going to end up in a better place because they regularly do that. I'm going to give this the analogy of thinking about your career. So these people who go ahead and take action and they're proactive about their financial wellbeing or their future, when you use the metaphor for career, well, these are the people that think about, well, what experience do I need? How do I grow my income, What skill base or certifications do I need in order to make make more money? Right. I'd say that that's that's a pretty good analogy, kind of that kind of personality.

Merrit Strunk:
Then there is a rather large segment of people who are more reactive, meaning that if something happens then they'll pay attention to it. But other than that, they're getting on with life and work and so on and so forth, and they're not thinking about, you know, someday I may need money because maybe they have money now and it just isn't dawning on them. So they in terms of being reactive, like, I need to do something, when does that come into place? Well, normally something bad, right? So. And the career metaphor. How would that work? It'd be somebody like who got fired. Or maybe it's the reverse that maybe they get an unexpected promotion. Now, I better think about something. I got more money. What do I do with this money? And the reverse of that is, you know, the career metaphor. I got fired. Well, now I have to think about getting another job instead of, like, thinking that through planning the steps, being worthy of a promotion, making sure you put those things in place so kind of reactive. Maybe they get passed over for a promotion, right? Oh, I better start thinking about that. You know, I don't like the way that happened now. Like, it's what I mean. Reactive, right? In this case, it's like the pain of staying in the same situation in your life is more painful than than the change and the moves you make.

Merrit Strunk:
Right. That's what people change. A lot of people change was just too painful to stay exactly where they are now. They've got to change right then there are folks that that just don't think about it at all. They're really just not future oriented. Or they may feel that it's so painful of a topic like taxes that they just want to avoid it. They would avoid it. And that means potentially actually, you've just you just put off the pain that you're going to feel in the future. So, you know, they may find themselves doing the same job, not really thinking about promotion, just happy what they're doing. They don't grow their skill base and potentially they might be marginalized or eventually retire without much. I kind of feel like, you know, I tried to put the career metaphor in there that people can relate. It's like, okay, well, who who? One of that the proactive people, the the the reactive folks or the folks that just avoid that conversation. Procrastinate that conversation. Right. Which which ones? You know which ones ended up better there? I'd have to say the proactive folks. You know. Would you agree, Matt?

Producer:
Yeah. It's definitely not the ones who just sort of buried their head in the sand. I used to. I used to try that when I was a kid in school, like, with with my homework, because I didn't like doing it. I wanted to, you know, go out and play or watch cartoons or something. And, you know, if you ignore it, it doesn't go away. It only makes the problem worse. So that's not a winning strategy.

Merrit Strunk:
That's right. Much like taxes, you don't pay those taxes some time in your life. You're going to get some letters followed up by some, you know, legal authorities anyway. So I would say that related to our topic here, it does take a bit of frontal lobe activity. Right. The strategic forethought. So let me share with you the reasons why maybe you may want to meet with an adviser or financial professional or a certified financial fiduciary like we are. If you don't have a financial I mean, a formal retirement plan. That's a good one. You just ask yourself or ask your your spouse, honey. Where do we put that retirement plan? Not right if you don't have one of those. And she's like, what? Retirement plan? Right. So here's an example. If you're 40 years old or right near 40, I didn't say like 38. Right. 3840. And you've never had that planning conversation? Well, you need to get on your bicycle, right? You need to get on your bicycle. That's another Southern ism for you. You better get on your bicycle. That means you better hurry up. Right? Because many times, if you aren't following a wealth growth plan by 40, you may end up in some place you don't want to be in the future. You want to make a good use of the time. So when it comes and I say this often, I say in the book and I've said it on the show before, when it comes to money, time has a lot to do with it, right? Different strategies, different investments, compound interest, dollar cost averaging, investing over time, adding money.

Merrit Strunk:
I've said the equation for wealth is something like this an amount of money where you add systematically additional amounts of money over time, add a rate of return. Da da. Where is Einstein at this point? Right. Where where's where's Merrit 's emcee? Square wealth formula. I guess that's just a very easy way of saying it, trying to understand and really accenting the fact that the earlier you start, the better. You are. Right? I'd say it was much about real estate investing. The earlier you start in real estate investing, the better you're going to be, right, as long as there's no catastrophes along the way. But you could see people who amass great wealth via real estate. They've started early on. If you how about this one? If you don't understand the risk you're taking with your investments, I got to say, this is super duper common. Risk with my investments. And again, if you're that person never thinks about this, doesn't understand it, has some questions about it, I got it. It's very, very common. Every investment has a level of risk exposed to market volatility. There's a risk reward dance when it comes to investing, right? So every investment has a level of risk, but the higher risk, the higher potential reward, obviously, for taking that risk, but also the greater potential for loss. The less risky, the lower the potential for return and the lower the potential for loss makes sense, right? Many people in this this last year where they have index funds, 6040, 90, ten, 70, 30, whatever the split would be between equities and bonds, found out they actually had a lot more risk than they thought.

Merrit Strunk:
And the risk didn't come from specifically that exposure. It's just everything was down at the same time and they weren't using certain strategies that would help hedge that. When normal hedges don't work, what are the hedges that do work? You know, actively manage portfolios, tactically manage portfolios, those kind of things that we have talked about, bond alternatives at different shows. We've covered these things ad nauseum. So if you don't understand the risk you're taking in your investments, you need to know it. If you don't understand how to manage that risk as you get older, right? As we get older, we get a little less risky. Not always, but most times it starts right about close to 50. And of course, it does matter how many assets you have right during you get closer to 50 or you get closer to retirement, you get more conservative, right? Because you don't want to lose that money. You're going to need that money. Makes sense, right? Many times when we look at portfolios and we're doing our analysis that we always do a risk tolerance calculation so that we end up with a quantitative risk tolerance number. Risk tolerance number. What's that mean? That is the your number in terms of the percentage of your assets at risk to market volatility.

Merrit Strunk:
But you could still go to sleep at night knowing you're going to be okay with that if there was a loss, Right. You're not gnashing your teeth and waking up and checking everything. And we're checking your phone throughout the night going, how much do we lose? How bad is it right now? How about should you pay off your home? Should you pay off your house, get rid of that debt. Let's have a conversation about that. If you don't know if that's an option for you, let's do the math on it. If you don't understand what an expense ratio in your investments is, you need to talk to somebody. You need to understand the instincts. These is the critical information. Right. And I would say also, if you don't know how much money you will have in the future, whether or not you need to change your strategy, why not? It's getting a little late for you to to to know that that's a huge one. Right. People fear running out of money in retirement. And how long are you prepared to go on not knowing that? Right, Matt? I've hit you with that one before, brother, where I say, All right, Matt, do you know if you're going to have enough money over your lifetime so that you don't ever run out of money and you say, no, I don't know that. The next one is, well, how long are you prepared to go on not knowing.

Producer:
That piece of mind that would come with knowing and being prepared is just like it's worth so much. And yeah, I mean, I would be like, okay, tell me, tell me now. Let's let's figure this out.

Merrit Strunk:
Look, if I was a doctor and you were going to get some sort of dreadful disease, you didn't know it, right? And and what you want to if you could find out about it, wouldn't you want to have some proactive measurement of care to mitigate those effects over time? Maybe you could just avoid it. Some disease? Totally. Well, the disease I'm talking about is poverty. You know, run out of money. That's that's no bueno. Yuck. Who wants to do it? Everybody raise your hand out there. Wants to run out of money on their lifetime, right? Nobody. Nobody. That's awful, right? We're going to make sure that doesn't happen. That's the whole goal.

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

Merrit Strunk:
Consumers paid 14.3% more in electrical costs last year on average. And this is according to a website called utility dive dot com and their inflation prices for consumer data. So they paid 14.3% more last year than in the previous year of that 2021, according to consumer price increase data. And that was dated January the 12 and also contributed to by the US Bureau of Labor Statistics. So the price of residential electricity is now projected in the coming years to rise more slowly. The Energy Information Administration on January ten said it jumped to 15.0 $0.07 per kilowatt hour last year, from 13.60 $0.06 right In 2021, it's projected to rise 15.40 $0.05 kilowatt this year and by a penny more in 2024. Now, what if you're using a. Gas. Gas prices have really increased. So electricity to heat homes, which are a lot of homes, are using that. Up north, they use heating oil and things like that. So electricity to heat the homes is expected to cost 10.2% more this winter that we're going through right now over last winter. Or let's put it in dollars and cents, 1350 $9 for the season. And that's according to the National Energy Assistance Directors Association. So so let's just say let's just you know, we're broadcasting out of San Diego here, San Diego, California, and let's say they passed that mileage tax, but then they have the super gas tax and then they have the utility increase between, what is it, 9:00, 4:00 and 9:00, something like that.

Merrit Strunk:
I forgot the bracket there. It's probably between I think it's between 4:00 PM and 9:00 PM, like some astronomical percent increase in costs. And now those prices go up with inflation and cost and the supply chain and commodities and so on. How can you keep taxing and raising prices? And for somebody who's on a fixed income or low income or middle income, what the heck? No wonder people are moving out of California. But this is not just California's problem. It's everybody's problem, Right? So we talked about when you want to go and see a financial advisor, how do you know you should do that? We're going to get into this conversation about risk. You know, retirees need to be aware of and how to how to have smart risk. We always talk about the smart planning, smart taxation, smart fees. Now we're going to talk about smart risk. So building your air, quote, smart plan by considering the risk that you will face over your retirement, that's something financial planners have to deal with all the time. We're constantly looking is how do you check off the box and make sure that all those risks to your successful retirement and lifetime, how do we mitigate them, how to prepare for them? How do we know to supply money to those certain things? So Smart Risk is investing in an investment strategy that's designed to maximize returns while minimizing the risk.

Merrit Strunk:
You hear that? What's a smart risk? Investment strategy is designed to maximize returns while minimizing risk. So smart risk investing is based on the concept that all investments carry some amount of risk like we talked about. And the only way to reduce that risk is to diversify your holdings. Diversifying means investing in a variety of different asset classes stocks, bonds, real estate, commodities and other financial instruments. And investors need to consider their individual needs and goals and what their risk tolerance is. So we're going to cover these different types of risk that you, as an aspiring retiree or maybe an already retired person, need to be aware of and that your plan needs to include. But we're going to get to that right after we break at the end of this first segment here and then join us back and we'll be talking about those things that you really should be planning for. And if you haven't considered some of them, then this will be very educational for you. So join us back here. My name is Merrit Strunk. This is a Retirement Unbroken show and stop by our website and during the break is Retirement Unbroken dot com. We'll see you back.

Producer:
How much risk are you willing to take with your investments? I'm Matt McClure with the Retirement.Radio Network powered by AmeriLife. If you're a thrill seeker, you probably enjoy the adrenaline rush of jumping out of a plane, bungee jumping off a high cliff or kayaking down a raging river. But when it comes to your finances, do you still find a lot of risk exciting, or does the danger of losing your hard earned money change your perspective? Think back for a moment to the 2008 financial crisis. Thanks to market risk and some shady Wall Street deals, the S&P 500 fell more than 46% between October 2007 and March 2009.

John Mack:
If you go back and look at the risk that we took 25, 30 years ago and it was kind of way out there, and a lot of these firms, including some of the things that happened at Morgan Stanley, we were so mesmerized by the great trader and the money they made that they got more and more autonomy until it was too late. We had huge losses.

Producer:
That's former Morgan Stanley CEO John Mack, speaking with Yahoo! News. So how do you protect yourself if we have another year like that or even another 2022 when the markets had their worst performance since 2008? Financial advisors will tell you that to maximize your investment growth, you need to take some risk with your money. Just be smart about it.

Ford Stokes:
You want to have an actively managed portfolio strategy. You just do. It involves shifting investments in your portfolio to take advantage of pricing anomalies and strong market sectors. You want to reduce the risk. You want to have smart risk as part of your portfolio. You want to increase returns and you want to truly diversify your portfolio.

Producer:
Active Wealth Management founder and President Ford Stokes says smart risk investing is based on the concept that all investments carry some amount of risk and that the only way to reduce that risk is to diversify. This means investing in a variety of different asset classes such as stocks, bonds, real estate, commodities and other financial instruments. Everyone's situation is different, and that's why it's important to work with a fiduciary financial advisor to get the most out of your hard earned and hard saved money. So how much risk are you willing to take with your retirement? That's a key question to consider as you invest for the future. With the Retirement.Radio Network Powered by AmeriLife, I'm Matt McClure.

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.

Merrit Strunk:
All right. Welcome back from the break. This is Merrit Strunk at the Retirement Unbroken show and we just got through talking about how do you know what if you should be talking to a financial advisor or a financial professional about your plan. And we covered all the different aspects about that and hopefully that if that's you, then you dinged in your head here. You're like, Hey, I don't have one of those. Maybe I should be calling it. And if you don't, if you don't know the answer to some of those questions and give us a call at 858 521 9700 or stop by the RetirementUnbroken.com website. So as promised, we're going to go through the risks that retirees and pre retirees should consider and that their plan should accommodate four. And the first one is near and dear to all of our hearts. If you've got any money invested in the market, then you know this. This is called market risk. These are the things that, you know, your money will go up and down if it's in the market. If if you are in the market like last year, you definitely would have felt that you could look and look at that negative percentage and go, yep, I have market risk. So the question is just how much. And what you need to know is how much of that is unnecessary risk. That's a that's right.

Merrit Strunk:
Unnecessary investment risk. In order to meet your goals, I'll flip it around. Can you meet your retirement goals and remove some of the risk at the same time? That would be unnecessary risk. I'm going to be fine. Why do I need to risk this? Right. You got it. Interest rate risk. Interest rates change when there is a dip or a rise in the overall economy. So changes in interest rates can have a significant effect on American families and that they can affect the entire economy as a whole. So we're seeing that we're living in that. The Fed interest rate lending rate has gone up and up and up and up. That's helped drive the stock market down. You may have had some investments that were affected by that. Well, I will tell you this. You certainly can't tell if you were trying to get a mortgage, right? Inflation. Whew. Yeah. How does that really affect it? Well, we test. Retirement plans and our financial plans. And we test. We stress test them. Have you ever had your financial plan stress tested? How will you know how good it is if you don't stress test it? Inflation is that secret partner in your retirement. That erodes your retirement dollar. What you spend in expenses today can be drastically higher. And ten years from now, you know, you could be spending 6500 bucks as an example, and that might turn into 20,000 a month, you know, Yikes.

Merrit Strunk:
You know, due to inflation, that was fuzzy math. Those are an exact numbers. If there's a compliance person listening, that was just an estimate right off the top of my head. Please read the disclosure down below. I'm kidding. You know, but we have to make sure when we're giving specifics and citing our sources. So that's the deal. Inflation can really be a killer and really derail your retirement if you do not account for it. In our plans that we do for people, many times we have a different lever that we have already planned on pulling in, say, five, six years from now that their income will go up. We've put provisions in place, then maybe another five or six more years and they'll have a raise in their income again in their plan. Wow, that would be nice. So if you have guaranteed income, you know, your expenses coming in, you know you're going to get a raise and you've accounted for all these other factors. And I'd say you have a pretty good plan, right? That's well, let's put it this way. That's the goal. Not everybody can make that happen, right? Depends on your situation. Public policy is a risk that's also potentially called legislative risk. Public policy and legislation affects everything from taxes, retirement accounts like IRAs or Roth IRAs for one case for 50 sevens, things like that.

Merrit Strunk:
It will affect the rules of contribution limits, and retirees should pay attention to the policies related to their pension plans, Social Security benefits, their health care coverage, any of those things. So be prepared or be aware of the latest tax law changes and how you can use them to your advantage. How does your plan need to adjust? And it's funny to say, but government agencies and people who have public office, they essentially go to work every day and ask themselves, what's a new rule? What rule can we come up with today? What law and legislation can we put in there today? What changes can we do to raise taxes? How can we fund our runaway spending? Those are all the questions. I'm sure they put it to themselves a little differently, but that's what they're dealing with. All right. How about timing, risk, timing? When are you going to retire? But you can't predict what happens to the market when you retire. What would it look like when you do? Your retirement may look a little different if you retire during a recession than it would in a more favorable market, like if you retire and the next three years or your retirement, your assets are growing astronomically because the market's up is great. If you retire and you have three subsequent consecutive down markets and you're drawing money from that, that is called the the the negative sequence of returns in retirement, because as you're drawing down that money to fund your lifestyle, your bucket you're pulling from is getting smaller and smaller.

Merrit Strunk:
And folks, if that bucket you're pulling from is tax deferred assets like a traditional IRA and taxes go up and the rate of return goes down. But you're having to spend money and let's say inflation is up at the same time. You have got the perfect plan. It's actually the perfect storm. And you could run out of money faster in your during your lifetime. That is disturbing. So negative sequence of returns you need need to know either you're exposed to that or you're not based on your assets and your expenses and your life, your lifespan, and to see what provisions can be put in place to make that happen. That is a severe one. And a lot of people right now, if they're in drawdown and they have tax deferred money and inflation is going up and taxes go up at their lifetime, they potentially have the perfect storm for them. And it's a tough one. That is a really, really tough one. We do something that's called the two brothers. We compare two brothers, one retiring with three consecutive increase in markets three years in a row, and then you randomly show the rest of the market returns and you show the other brother retiring where he has three down markets.

Merrit Strunk:
So that Brother B as compared to Brother Ray runs out of money very quickly. Brother A who retired with up markets at the beginning while he is in drawdown, last a lot longer his buckets were bigger. How do you how do you deal with that? Right. How about liquidity? Liquidity. Hmm. What's that mean? Well, it's a fancy financial advisor term liquidity, which means you put your hands on your money and it's a lot locked up. It refers to the ease with which an asset can be bought or sold. Liquidated. Getting the cash without affecting too much. Right. Of your asset prices. And it's not locked up. So you want a plan that allows sufficient access to savings funds. You want to make sure you have enough money in your savings account that you can put your hands on if something happened. You don't want to have to go and sell in a down market, things like that. We put that in people's plans, folks. This is an old financial advisor joke. They say, How much money will I need to retire? And the answer would be, I don't know. Tell me when you're going to die and how much you spend. Right. So you don't know when you're going to die and you could live a very long time.

Merrit Strunk:
It's like I say, we're going to live longer. We are living longer than than we have in past generations. And we're just doing it with replacement parts many times. So if you have longevity or you're going to live a long time and you just don't know it, you're probably going to need more money than you think. So here you go. You'll probably live longer than you think, and you'll probably need more money than than you think, Right? So if you live a long time, we use a 90 or 95 year old planning horizon and all of our plans. You need to make sure you could do that. And by the way, I know what you're saying. I don't want to live that long. Many people say that, but they may not have a choice. Right? They may live longer. And sometimes maybe their health is not that great and that's going to take money to och. Wow. This is all silver lining, cheery up stuff. But these are the risks you have to deal with, right? So, Matt, here's a here's a word question. If you have a finite bucket of money and you're spending a lot of money. And you just keep spending and spending and spending. But that money is not growing as much. It's not outpacing your spending. Is that a good thing or a bad thing?

Producer:
Just off the top of my head, I would say that's a bad thing. Bad does not sound good to me. Yeah.

Merrit Strunk:
Right. Bad, Bad. You need that button goes bad, bad, bad. So, you know, it's a it's You want to avoid unwise withdrawal rates in retirement. Fancy way of saying don't don't spend so much that at a rate that's higher than what your assets can sustain or the rate of return can sustain. There used to be this thing called the 4% rule. And, you know, all the financial economist and and book writers out there, they were like, if you just take 4% of your assets per year, that you'll you'll be guaranteed to have enough money. Odds are right. That was the 4% rule. Well, with different market conditions and a low interest rate environment that we had not that long ago, boy, that got debunked pretty darn quick. So you can't rely on the 4% rule. They revised it to three and then they revised it to two. And and let's just say you got to do the math. You have to run the projections and then you've got to stress test it for the unknown. So you'll end in withdrawal and retirement. And folks, if you're retired and you're taking money out of your assets right now, I want you to listen to this. During tough economic times where the rate of return may be negative in the market we just had, you probably want to tighten your belt on your expenses. You may want to put off some things so that what? So that you have money in the future. Don't continue spending like bandits if you don't have the assets to do that you want to.

Merrit Strunk:
Tough times require a little tightening the belt, right? And then health expense is another risk. So later on in life, very typically your expenses go up as you get older, your health care expenses go up. So we call that the retirement smile. You might have heard me talk about that before, where you're the go go years of your life and retirement and you're traveling, you're seeing the grandkids, you're doing fun stuff and you should. And at some point you go to the slow go and then you go to the no go. You know, the wheels are kind of rickety, right? So then your medical costs go up. So you may have high expenses at the beginning of your retirement, then slowly get to the other side of that. And then you have this essentially what means their retirement smile. Your expenses could be much higher later on. So health expense is greater. Health expense is a risk. How about a spouse? Love one predisposing you. Well, there goes one of your Social Security benefits. It could be you also lose a pension that there's no pension continuation. So wait a minute. There goes. The higher the two Social Security, there goes the pension. That's a lot of money that just left the planet. Now you get to keep one of the social securities, which is the higher of the two. The pension may be gone. Expenses might be a little less.

Merrit Strunk:
Taxes may go up. Inflation may go up. Whatever you want to make sure that if you're in that situation, you've checked the box, you've done it, and you found out what can happen if I lose my spouse and our planning and our preliminary planning, we do two things. We bump off the husband right away tomorrow. By the way, it's not polite to to bump off the ladies. And, you know, so and if you have to. You name them some other name, Carol, you know, Karen, you going to name them another name and just to show what it looks like. So the worst storm is you die, you go out for a date, you don't go back. It is San Diego, after all, and people don't come back sometimes. That's unfortunate, but that's that's our human frailty. It does happen. That's one of the risk. So if if that person who has this bringing in the money is gone, what's going to happen to you? Does mama and child, are they out of the house? Do you have to sell the house? Does the child not get an education? We need to make sure that's covered. And at least that you understand that, right? So what about fees? You've got to watch out for fees, too. You've got to know what you're paying. So big fees, fees you're unaware of can also erode your profitability. So those are the risks everyone has to account for in comprehensive planning. We are comprehensive plan planners. We're certified financial fiduciaries.

Merrit Strunk:
We have to make sure each plan or recommendation is in your best interest. And how can a plan be comprehensive? It doesn't account for these risk or at least take walk you through them, check the boxes. Are we going to be okay? We like to say if the economy crashes, you're going to be okay. If the stock market crashes, you're going to be okay if somebody gets sick. We've already gone through that scenario. We know what's going to happen. If somebody know predecessors, you know what's going to happen and mom is going to be okay, guys out there, that's your job. You promised to take care of mama, right? So that's part of what you committed to. And why wouldn't you go through this for her, right? Yeah, I know. I put the thumbscrews on you, right, to think about. Okay, so most investments have fees. Like I mentioned. You've got to know what they are, right? Some fees are paid upfront, some fees are not paid upfront. And they come out of your returns and some you never see or never know of because they're not disclosed fee non disclosed fees. They can't tell you what they are because they haven't happened yet and they don't know how many they're going to be. So I want to tell you a little bit a thing about structured notes. Just want to throw this concept out at you. We've talked about them before and structured notes are a type of investment that combines the features of bonds and derivatives.

Merrit Strunk:
Together, they are issued by banks and other financial institutions. They typically offer a return that is tied to the performance of an underlying asset such as a S&P or a Dow. Or maybe they'll let the lesser of the two maybe a commodity index or a basket of assets. So the two components of a structured note are the bond component, the majority of your investment that provides protection of your principal and then derivative component offers a potential value increase of the structured notes. Return. This derivative can offer investors exposure to any asset class. So some offer a buffer note, some off a barrier. There's big differences between the two, and this can be a possible option for folks who want some downside covered but still want the potential upside. At the end of the term of the structured notes and you get your money back, pretty cool. But those are an example of something that you haven't heard us talk about that before. Then you've just got exposed to some new vehicle. It's not real new, but it hasn't been out there forever and you may be unaware of it. If you hadn't listened to this show or if you hadn't talked to a financial advisor, you would not have known this. So one of the other things you could do is reduce your expense ratio, expense ratio. So for many funds, there's an expense ratio, there's a cost of the the investment that's inside of the investment. So that shows how much of your assets in that investment is being used for administrative and operative operating costs.

Merrit Strunk:
Operating costs reduce your overall return of that investment and you can calculate the expense ratio by dividing the total fund cost with the total fund assets. So if you reduce that expense ratio, then you're also increasing your returns by default, Right? Less expense, more profit. And there are investments that we can find that we'll have less sales expense ratio in there. But you have to know whether that's right for you. Does it include the bells and whistles that you are looking for right in your plan? We talked, we said that we were going to talk about smart, safe, Right. We just got through talking about smart investment to kind of segway right into that without the intro. So I apologize, folks. But now, smart, safe, Right. Smart. Safe is investing in an investment strategy designed to generate the highest possible return while keeping risk to a minimum. That would be smart, wouldn't it? We talked about unnecessary risk. So there are assets out there that will provide benefits to you during retirement. One of those might be, say, a guaranteed income stream or something like that, if that's appropriate. And they are seen as an alternative to traditional bonds. So like a bond alternative that you could also get an income stream if you needed that in retirement. And it provides a way for investors to protect their retirement savings from market volatility. So it won't go down during market volatility, but it could go up with upside market returns.

Merrit Strunk:
And so there are strategies like that that we use for bond alternatives that could be an option for you. You know, you could also get not only just that income stream, you got protection from market volatility on a downside loss to your principal, but you also can get tax deferred growth. That means you're putting off the taxes while you're getting growth in that vehicle. I'd say that, you know, if you get an income stream that might go up over your lifetime, if you can have tax deferral, if you've got like a zero loss provision inside of that, along with your at risk assets and you've checked off all the other boxes, you're starting to get to a pretty solid plan, right? That sounds pretty good. Smart tax, right? Did you know that different investment accounts are taxed differently? Something we deal with all the time? It's a it's a huge component in every conversation. So by understanding how accounts are in different tax asset tax class classes, then you can understand how taxes work for your money and how they might work over time. Right. And this is a way that you can just be smart about, you know, your taxes. Quickly here. People have heard this, but sometimes it's often misunderstood. I want to talk about Roth IRAs and this this is a great way and we've talked about it before, how to divest the IRS out of your retirement plan.

Merrit Strunk:
Wouldn't we all like to do that? So one of the ways to do that is with a Roth IRA. So the Roth IRA is is an after tax money. In contrast, the standard and traditional IRA is a pre-tax IRA where money goes in before it's taxed. It used to be, Hey, that sounds pretty good. However, if you think taxes are going up, not so much anymore. So if we can all, like I say, get up and line up under the sign that we'd like to live the rest of our life under it would be the tax free forever Bucket. Agree. Can we all agree on that? All right. Great. Yeah. We're all shaking our heads, and there's amens coming from the back of the pews there. Amen, brother. Preach it. Preach it. Okay, so in a Roth, you put the money in, it's taxed at like we're going to go ahead and take our current scenario. It's taxed at potentially your lowest historical income tax rate you're ever going to have in your life. If you think that the prospect of tax rates going up over your lifetime is a real thing, and most people do. Most people I talked to say I can't imagine anybody saying no taxes are going to go down. Right. So this means that you'll pay taxes on the money you contribute to the account. But up front. But how long is that tax free? You know, in the future? Well, it's tax free forever. Tax free forever.

Merrit Strunk:
That's what I want. So you get tax free withdrawals. You there is no age limit for for contribution, for the contributions. Unlike traditional IRAs, there is no RMDs required minimum distributions. And by the way, they change that from 70 and one half. I think that was either the ticket or the Secure Act, and then they move that back to 72. So at 72, if you have a traditional IRA, you to start taking money out of it. Why? Because they need to tax you, whether you like it or not, whether you need it or not. A Roth IRAs do not have that. So that's a wonderful thing. After 59 and one half, you can start taking money out if you want, and there's no taxes. I'd rather take my money for retirement and a tax free fashion. Right. There are several other many. You know, advisable tax free sort of things that you can get. Those are life insurance policies that you could take withdrawals from. Right? That's tax free income that can be from any any kind of cash value policy that you have and that many times can come with chronic care provisions as well. So we we hit like a ton of that know, why do you want to talk with a with a potentially an advisor. What are the some things the risk you need to think about in your plan? What are some of those great aspects about a Roth and where it can get tax free income? We hit that ever so quickly here at the end.

Merrit Strunk:
And lastly, I want to say is I want to remind you what it's like to to work with us if you need somebody to talk to and a lot of people need somebody to to to consult with, especially during this time. Low stress, very easy. I talk I make a commitment to talk to everybody that responds to the radio show or podcast myself. Just talk to a fellow to today. It was great, great conversation. It gave us some great feedback. I complimented us on their on the show and said how educational that was. But when you call us at 858521 9700 or go by the Retirement Unbroken dot com website, make sure you ask us about getting your Retirement Unbroken report. And at the beginning of the show I told you all the stuff that goes in. It's a really great benefit for folks in terms of getting clarity. So I want to thank you for stopping by. We are grateful to have you as listeners stop by the podcast, drop us a line, give us your questions. We'd love to talk to you. This is Merrit Strunk. You can listen to this show at 1:00 pm on Saturdays at 1170 a m and 96.1 FM in San Diego or anywhere you get podcast. And please go ahead and stop by that website at Retirement Unbroken dot com. It's been my pleasure to be on the air with you today and we'll talk to you again soon.

Producer :
Thanks for listening to your Retirement Unbroken. 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 complimentary no-obligation consultation with merit, visit RetirementUnbroken.com, or pick up the phone and call 858 521 9700.

Producer:
Advisory services are offered through Momentum Financial and Insurance Services LLC. An investment advisor in the state of California. Insurance products and services are offered through Merit Strunk an independent agent. California License number 0L7510 Certified Financial Fiduciary is a FINRA-recognized professional certification.

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