Preparing to Pay Yourself When You Stop Working

Transcript

Speaker 1 (00:02):

Welcome to the Retirement Wealth Podcast. Our goal is to help those retired or soon-to-be-retired investors make more informed financial decisions and live an enjoyable retirement. Our host, Mike Lester, is the founder and CEO of Talon Wealth Management. Mike is an investment advisor representative of Retirement Wealth Advisors, Inc, and SEC-registered investment advisor. Thanks for joining us today, and let’s get started

Kristen (00:31):

Working out paying yourself when you stop working, because that’s terrifying to a lot of folks. We’re used to that paycheck when we go in Monday through Friday, our entire working career. When we stop, hello, it’s time to pay yourself. Michael talked to you about how that works. And, find out if it’s time to walk away from volatility. That and more coming up. Wall Street right now makes me feel like I should be on some sort of drinking game with the ups and downs. A survey by New York Federal Reserve finds that one in three Americans expect their financial wellbeing to decline over the next year.

Kristen (01:07):

Now, obviously that is not where we want to be in the last few years before we retire, so what’s the deal with this information? Does that mean we keep working longer than we planned, or what?

Mike Lester (01:17):

Have you ever noticed how things seem to be just obvious for somebody to come out and write a report right now or have a story that says, “Hey, listen, I think that your financial wellbeing might not be as good as it was three, four or five months ago.” It’s obvious.

Kristen (01:31):

Well, duh, nobody’s really is.

Mike Lester (01:34):

Yeah, duh. I don’t know how much I’d put it into just stating the obvious. I think what people are really looking for, at least the people that we talk to week after week, Kristen, are individuals that, they don’t consider themselves do-it-yourselfers when it comes to investments, they’re typically people that have been working for 20, 30, 40 years, they’re either retired or very close to it, and they’re looking for some guidance. And stating the obvious just isn’t guidance. So what I’d say is, is there a chance you’ll have to work longer than you planned?

Mike Lester (02:03):

Well, it’s going to depend on how tight that budget was, how much money you’d set aside for retirement versus how much you’re going to need an income. Because chances are, a lot of people have taken a pretty significant hit, markets have bounced back. I think things are coming back faster than anticipated by markets maybe early on. There were a lot of financial advisors out there, frankly, Kristen, there are still financial advisors out there that are week after week telling people to get out of the market, doom and gloom, and, “I’ll save you by getting you out of the market.” Meanwhile, the market keeps creeping up. We do have volatility, and so that can be a little more stressful, but to just get out…

Mike Lester (02:38):

I’ve been saying this for a while now, I don’t know how you’d dump this much stimulus on our economy and you don’t push markets higher. Now, it doesn’t mean that they’re higher for healthier reasons, it doesn’t mean that the economy is fundamentally extremely strong, it just means that if you give people money, they’re probably going to go out and spend it and it’s going to make the numbers look good, I think for a period of time. So when people ask us for advice or ask us for guidance, we’ve been telling people since March, late March, I guess, early April, that we feel, with the stimulus, that the markets are going to rebound nicely, and so you would want to participate in that.

Mike Lester (03:19):

Again, don’t have a crystal ball, that’s just how we feel. So in this case, that’s worked out well for our clients, the ones that have participated in the gains. And I think if you had been out of markets over that period of time or if you got scared, when things were really, really low and you sold out, you’re probably really frustrated right now. You’re staring at markets and they’re going up, and then they’re going up, and then bad couple of days, but then they go back up higher and you’re just looking for a plan. And so I think the best that we can do for our listeners is to, when they call, when we schedule appointments, if you want to come to the office, it’s fine. Well, I’m happy to sit down with you at the office.

Mike Lester (03:56):

If you want this to be a phone conversation, maybe a screen share, that type of a planning session, we can do that as well, but the ability to get some guidance at this time, I think it’s going to be pretty important. There is going to be a time in my opinion, when you’re going to want to get out of these markets, because with all the money they’re throwing at it, yes, I think it’ll stimulate it, but they still haven’t told us how they’re going to pay for it, Kristen, and that’s the problem. So great, we spent trillions and trillions, maybe it turns out to be five trillion, six trillion. What if it’s nine trillion?

Mike Lester (04:25):

There’s a number, but eventually, that bill comes due, and that’s a time, and certainly before that time because markets are forward looking, but we just want to be very, very aware of everything that’s going on and plan accordingly. And then of course, each investor has their own risk tolerance, so let’s find out just how much volatility you’re willing to have in your portfolio. Let’s look at active management.

Kristen (04:49):

You know what? I bet you that people would have a different answer if you had asked them months ago, compared to right now. That would be my guess.

Mike Lester (04:55):

Different answer about what?

Kristen (04:56):

How much volatility they’d be comfortable with. It’s different when things have been really good for a long time. Now that we’ve had the volatility, I don’t know, my comfort level has changed.

Mike Lester (05:05):

Yeah. Well, it has changed for a lot of people. We tend to be a little nearsighted, and if things are just on average doing pretty well, you’ll find individuals that are less likely to be worried about the allocation in their portfolios. Kristen, that’s something that I worry about every single day, because portfolios can be good, can be bad, but if markets are going up and you’ve got a portfolio, let’s say it was averaging eight, 9% per year, and you felt pretty good about it. But if you had tweaked it a little bit, you could have been averaging the same return with half the risk or maybe even a higher return.

Mike Lester (05:37):

Those kinds of things are important to us, but let’s just take it back to, it’s going to take longer to retire than we had initially planned based on what’s going on right now. The way things are with all this money, I do think in the short term, my opinion is, we would want to participate in markets because I think they’ll go up. Then later on, I can’t tell you exactly when, but we’re watching this week after week, after week, and we’re willing to make changes to our portfolios quickly. If things start to look bad, our clients are retired or very close to it, so that’s when we’re going to want to move them to safer investment options, but I think it’s a little premature right now.

Mike Lester (06:13):

Bottom line, it starts with an analysis of your current portfolio, understanding what it’s likely to do moving forward, whether things are good or bad, Kristen, because I’ll be the first one to admit, I don’t have a crystal ball, but I can build smarter portfolios based on historical data.

Kristen (06:28):

Professor Jeremy Siegel of the Wharton School of Business was recently asked on CNBC if the effects of the coronavirus would have a long-lasting change on the way we invest, at least his perspective on this. He pointed out something interesting, how low interest rates and possible inflation might affect bonds.

Prof. Jeremy Siegel (06:49):

I think the 40-year bull market in bonds, which is one of the longest bull markets in world history, is over. Moderate inflation is not bad for the stock market, it is terrible for the bond market, not bad for the stock market.

Kristen (07:03):

God, his voice, I can’t even almost focus on what he’s saying. I’m sure he’s a smart guy.

Mike Lester (07:08):

I was focused on what he was saying, Kristen.

Kristen (07:10):

So let’s talk about this with bonds. What role do they really play in a portfolio? Because I know that when people are seeking, air quotes, safety, traditionally they have gone to bonds.

Mike Lester (07:20):

It’s a nice audio clip, but again, we’re stating the obvious. I’ll be honest, I didn’t hear the whole-

Kristen (07:25):

I told you, it’s distracting.

Mike Lester (07:25):

I didn’t hear the whole interview, Kristen, what I heard is what he just said. And so I don’t want to speak out of line, but to say, “Hey, listen, I think the bond bull market is over,” is an obvious statement. If you look at the reason we’ve had a 40-year bull market in bonds is because if you go back to the late ’70s, early ’80s, and interest rates were super, super high. Those of us who can remember the Carter administration and what happened there, interest rates could really only go in one direction. They were coming down for that 40 year period of time, which is helpful for bonds. If interest rates are coming down, it helps bond values. But if interest rates are going up, it’s the opposite, it hurts bond values.

Mike Lester (08:07):

So for him to say, “Now, that interest rates are essentially at all-time lows, that I think the bull market’s over.” It’s an obvious statement because if interest rates go up, which is pretty much the only direction that they can go, obviously, if you study this thing, it hurts bonds. That’s a little obvious. Now, my concern, and I want to just apply it to more real life common sense investing. And again, Kristen, that’s really where we’re our clients are, individuals that have 401(k)s and IRAs and trust accounts, or maybe they sold a business and they’re trying to find a way to invest the money to make money moving forward, you have to look at allocation.

Mike Lester (08:43):

So many times people will build an investment allocation based on somebody checking boxes off of a form, and then they find out that they’re a moderate investor, and the next thing you know, they’ve got a portion of their portfolio in bonds and a portion of their portfolio in stocks. And sometimes it’s not specific stocks and individual bonds, sometimes it’s bond funds or stock funds. And it’s very, very hard to track, particularly if this is in a 401(k) or something like that, Kristen. Pretty much your only option, a lot of times, is going to be the funds, mutual funds that are in those accounts, maybe some ETFs.

Mike Lester (09:14):

But here’s the thing, if you don’t understand your allocation and we can be… I mean, I’m pretty confident as well, I agree with him that bonds aren’t likely to do well moving forward, even if I’m a moderate investor and let’s say I had half my money in stocks and half my money in bonds, I would want to be looking at alternatives. I don’t think I want half my money in something that’s not likely to do well because I’m pretty darn certain that interest rates are going to be going up moving forward. That’s not a crazy expectation, particularly with all of the stimulus. It’s going to have to be paid for in some way.

Mike Lester (09:46):

So what I would say is, it’s okay to continue to be a moderate investor, and it’s okay to have, quote unquote, a diversified portfolio where your percentage stocks and a percentage, something else, but you should probably understand all of your options when it comes to fixed investment options. Because first of all bonds, aren’t the only option. There are some bank investments that are liquid and probably more attractive than bonds right now. But at the same time, if you have an actively managed portfolio where somebody isn’t just sticking you in bonds and leaving you there, there are opportunities inside of a managed portfolio that create scenarios you wouldn’t have in what we call a, quote unquote, hang-in-there portfolio.

Mike Lester (10:26):

So if you’re trading a bond portfolio as opposed to just hanging-in-there bond portfolio, you’re not carrying as much risk as a hang-in-there portfolio with interest rates. So this is important, and we just want to recommend to people, don’t just take for granted that your portfolio is well diversified. Take some time to understand it, but if you’re not able to do that on your own, we can certainly do that for you and just in detail help you understand what’s likely to happen moving forward with everything that’s going on.

Speaker 5 (10:59):

Mike Lester is a registered representative of and offers securities through World Equity Group, Inc, member FINRA and SIPC, a registered investment adviser. Investment advisory services offered through Retirement Wealth Advisors. Talon Wealth Management and Retirement Wealth Advisors are separate entities and are not owned or controlled by World Equity Group, Inc.

Kristen (11:16):

(singing)

Kristen (11:22):

Oh, we’ve all got some glory days we flash back to. 35 years ago, Bruce Springsteen released this one, Glory Days, one of seven different hits that came off the Born In The USA album. It’s one of his favorite songs to do in concert. I’ve never seen him perform live. I hear he is a phenomenal show to go to. I want to check that out. But when I hear Glory Days, it reminds me of something I thought of the other day, when you’re in the good times, the glory days, you don’t realize it, you realize it many years later, and you appreciate it in that moment. Have you ever thought about that?

Mike Lester (11:56):

I have thought about it. And I’ve always thought of myself, I guess, as fortunate in this business that we’re in, the sense that I’ve always worked with individuals that are retired or are very close to it. Kristen, I’m 46 now, but in my early 20s, I was spending a lot of time with people in their ’60s and ’70s, sometimes ’80s. So even in my early 20s, I may have had more financial knowledge just through experiences, through work and college and everything like that that they may have had because they had a different career path, but just the real life experience stuff. And a lot of it was glory day stuff and some of it was a pretty terrible stuff.

Mike Lester (12:39):

I mean, I’ve been just so fortunate and blessed over time to… I remember I’ve told you this, Kristen, in my early 20s, I was meeting a lot of people that were World War II era retirees. I met a gentleman that was literally in Schindler’s Camp.

Kristen (12:57):

Wow, I didn’t hear that story before. Man.

Mike Lester (12:59):

Yeah. And I met another gentleman that was shot down over France and was in the prison camps. I mean, our listeners know because they had parents who went through that, but I think about my kids, they just have no real, I think, appreciation for what has happened, and I guess what could happen. And so I was just very, very fortunate to have those experiences early on, and I think it’s caused me to stop and realize, I want to make sure I don’t miss out on stuff. I think we all get to a point where we look back and it’s the glory days. But as those glory days are happening with my kids and family and everything, I don’t want it to go unnoticed, which is I guess why we do what we do, we spend some time together. Yeah.

Kristen (13:47):

That’s right. That’s why you spend the time together and you enjoy these moments while you have them so that you don’t have to look back and only remember that they were glory days’ moments. Treat every day that way. I think that that’s one thing that this current environment, if you will, has brought out in me, is to be thankful and embrace the real moments and take a step back from technology and the craziness and the he said, she said.

Mike Lester (14:09):

Just brought out some chin whiskers on me, I remember saying that,

Kristen (14:13):

Yeah, don’t look at my roots. There’s a reason we’re not on TV with this, I can promise you that.

Mike Lester (14:18):

Katie says, “Hey, you’ve never had a beard before, you want to try to grow one?” I’m like, “I’m pretty sure I can’t. I’m just one of those guys that doesn’t really… ” At best, it’d be really like patchy, probably like the worst beard you’ve ever seen, but I figured, well corona is my opportunity to give it a shot.

Kristen (14:34):

That’s right. That’s right. If you’ve got questions about your financial life near and in retirement, you’re at the right place. You’re listening to Guarding Your Nest Egg, and you can always connect to Mike and the team at GuardingYourNestEgg.com, and connect and even set up a complete financial plan from the website. As we grow older and back at these glory days, doctors often suggest us to come in for a stress test to make sure our heart is still in good shape and to check everything out. And likewise, Mike, you’ve talked here on the show before about how we should stress test our portfolio, our financial life. How do you go about doing that?

Mike Lester (15:09):

Well, it’s really, really boring, Kristen.

Kristen (15:12):

I’m good.

Mike Lester (15:12):

What we do is we would have a conversation with somebody on the phone or they would come into the office. We’d tell them a little bit about what we do and how we do it, and then they share their statements with us from their retirement plan. We don’t need account numbers or anything like that, we just need to know how your portfolio, so portfolio would be things like savings accounts, retirement accounts, trust accounts, joint accounts, your stuff, how that stuff’s invested. And with that information, we can do an analysis for you and predict what your portfolio is likely to do moving forward. Do I know what the stock market’s going to do moving forward? The answer’s no. We can come up with averages and stuff like that.

Mike Lester (15:55):

What we can do is take a look at your portfolio. We can say, “Well, hey, listen. If markets do better moving forward than they have historically, this is where you’d wind up.” By the way that can’t happen, markets can’t always be better. But then also, if markets consistently do worse than they have in the past, this is where you’d wind up, which also can happen. But if you can identify those outliers in a portfolio, here’s your best case scenario, here’s your worst case scenario. People never get the best or the worst case, they always get somewhere in between those two. And as long as the in-between is an acceptable outcome, then we have a predictable future in the portfolio.

Mike Lester (16:30):

And I find that’s really what people ultimately are looking for, “How do I invest my money so that I can maintain my standard of living throughout retirement, adjusted for inflation and taxes?” Because if I can do that, I effectively have income off of my portfolio for the rest of my life, and whether markets are really good or really bad or somewhere in between, I have a plan for them.

Kristen (16:51):

I saw a recent study by the Employee Benefit Research Institute, which I’m always intrigued by the names of these places and what they do.

Mike Lester (16:58):

That’s a big name.

Kristen (16:59):

Three quarters of those surveyed said their top priority for retirement is to have a set amount of income for life. I think that’s a pretty good assumption and probably even more than three quarters of people feel that way. But Mike, where do you, as a financial advisor, start in helping people figure out how to pay themselves a paycheck, in essence, when they stop working and are no longer receiving a weekly, 15th, 31st, monthly paycheck from work?

Mike Lester (17:27):

Yeah. Well, if you pay attention to marketing, like I do, you’ll notice in retirement planning, this income for life ideas is all over the place, you hear about it all the time. Now, if you break it down or internet, or maybe a radio show and people are talking about it, usually they’re talking about annuities. And then annuity for some people is like a four-letter word, like, “Oh no, I heard I should never ever have an annuity.” And you know what? Never is a strong word, but in our financial planning process, we find it difficult to come up with a reason why somebody should have one. It’s not that we can’t do it, it’s just difficult.

Mike Lester (18:04):

My job as a fiduciary and a fee-based advisor is to take a look at all the investment options that are available and find ways for people to get the return that they need in their portfolio, maintain liquidity in their portfolio, and then certainly income for life. And if I can accomplish income for life without locking my money up on some financial product, that’s the way I want to do it. But I have to have the information to be able to make that happen

Kristen (18:29):

And stay with us because coming up next, we will find out if it’s time for you to walk away from some of this market volatility or not, on Guarding Your Nest Egg, with Mike Lester of Talon Wealth Management.

Kristen (18:40):

(singing).

Speaker 6 (18:40):

WealthGuard is a complete portfolio monitoring system designed by determining the amount of downside risk a client is willing tolerate. WealthGuard is added to client accounts that help protect from downside risk. WealthGuard is not a stop loss strategy. When the account value in the portfolio hits a targeted downside value, an alert is sent to the client, advisor and money manager. There is no guarantee the exact wealth guard value will be captured or assets will be trading or liquidated the same day the WealthGuard value is reached due to time of day and, or market restrictions.

Speaker 6 (19:25):

(singing).

Kristen (19:26):

Thank you so much for joining us this weekend on the radio for Guarding Your Nest Egg with Mike Lester of Talon Wealth Management. By the way, check in anytime, GuardingYourNestEgg.com. Stevie Nicks is the sole credited writer on this 1983 hit Stand Back. But she later said the song really belongs to Prince because he wrote and recorded these synthesizer parts that make it so memorable. I love that she’s giving credit where credit is due, a lot of artists don’t do that. Stevie Nicks, so well known in the music industry. And Mike, I think about friends of mine, guy friends of mine especially, would always say, “I don’t know how to explain it. If she couldn’t sing, I wouldn’t say this, but Stevie Nicks is hot because of her voice.” Would you agree with that?

Mike Lester (20:09):

She’s definitely hot because of her voice. I mean, I don’t know how you don’t work your voice.

Kristen (20:14):

I would say, that’s true about many folks, I mean, Steven Tyler, if it wasn’t for his voice, he’s just an odd-looking guy, right?

Mike Lester (20:22):

You know what, God forbid, Stevie Nicks or Steven Tyler are listening to us right now. I’m sure they could care less what we think about.

Kristen (20:31):

Of course they don’t care, but we’re real people and this is what real people think.

Mike Lester (20:34):

All right. We’re talking about real stuff. All right. [inaudible 00:20:37].

Kristen (20:36):

That’s right. That’s right. You know why? Is because I keep hearing so much about this economy, how weak it is overall, yada, yada, yada. That’s all anybody’s talking about. However, stocks have rallied from their low point in March, Morgan Stanley’s, Andrew Harmstone tells CNBC that he believes people who’ve been jumping back into the market are actually making a big mistake though.

Andrew Harmstone (21:01):

The fear of missing out or another term for that traditionally has been greed. Is definitely playing a role in the current market, and it’s actually not a good sign. And it’s a sign of the phase one period where people still think that things are going to go back to normal quite quickly, whereas in fact, quite a bit of damage has been done. And basically right now, the next phase we think is the real cost of the damage that’s been done will become visible and the markets will respond accordingly.

Kristen (21:32):

It sounds like he’s expecting another correction or maybe even worse. Mike, how seriously should we take what Andrew is saying here?

Mike Lester (21:39):

Well, again, have you ever noticed when you turn on the television, they’ll find somebody like Andrew to give you the doom and gloom, and then they’ll find somebody else to tell you how great everything’s going to be, and then at the end of the news broadcast, you just find yourself even more confused?

Kristen (21:54):

Yes.

Mike Lester (21:56):

One person saying that it’s going to be terrible and the other person saying it’s going to be great. They can’t both be right, Kristen. Again, these are very smart people, I appreciate that they’re giving their two cents. The reality is they don’t know, I don’t know, nobody has a crystal ball, we all know that. So Kristen, if I came on the radio every weekend and I told everybody that markets are going to crash and things are going to be terrible, and I just kept doing it and doing it, eventually one day I’ll be right.

Kristen (22:25):

First of all, nobody is going to listen to that.

Mike Lester (22:26):

I wouldn’t be any fun to listen to. And by the way, some people do that. But the point is, eventually I’ll be right. Ever noticed they don’t tell you when it’s going to happen? They just say it’s going to happen. So they don’t tell you when it’s going to be great, and they don’t tell you when it’s going to be terrible, they just say it’s going to be terrible or it’s going to be great. And so it’s the when that matters most to anybody who’s an investor, and telling me that we’re not going to get back to normal quickly, well, I know that already. Telling me that the real cost of all this is going to be a ton of money, well, I know that already, that’s not a surprise.

Mike Lester (22:58):

And okay, fine, eventually he’ll be right in that statement. That’s not very helpful when it comes to investment planning because if you listen to him, you would just be on the sidelines probably for a really, really long period of time because currently, market has been pretty good lately. We bounced off of lows, that got down to mid-18,000, and now we’re doing very, very well. The S&P 500 is back higher than it’s been since early March. That sort of a thing. This is all good stuff. If you had just taken your money out of the market and buried your head in the sand, back on the lows and missed out on this, run-up, you’d be upset.

Mike Lester (23:36):

We want to take just a closer look at investing and portfolios, and we want to be willing to make choices and decisions, not just tell people to hang in there and say, “Hey, listen for right now, what are the things actually look like?” Well, they’re going to dump a bunch of money in our economy and people are going to get checks and they’re talking about sending more and more, and more. And that probably looks pretty good. So far, at least to me, it doesn’t look like we’re going to get a big… Anything could happen here, Kristen, but so far as right now, it doesn’t look there’s going to be a big shakeup in the White House come November depending on who you talk to.

Mike Lester (24:10):

So that’s probably good for markets if there isn’t a big shake up there. I don’t know, people are ready and willing and they want to go back to work. Fortunately, Corona or COVID-19, everything that they had, this whole prophecy of all these terrible, terrible, terrible things were going to happen, didn’t come true. Hopefully, that’s because they shut down the country and we’ve flattened the curve, so to speak. But all of that being said, it looks like things are going to turn around pretty quickly, quickly than they had initially anticipated. And also all the stimulus is going to help. You see the protests on TV.

Kristen (24:54):

You can’t miss this.

Mike Lester (24:55):

You can’t miss it. So what does all that mean? And I’m going to say in the short term for markets. In my opinion, they probably do pretty well. Do I think he’s eventually right? Yeah. But I don’t think I want a relationship with my portfolio where I’m just sitting on the sidelines waiting for things to get terrible. I could do that, I guess, but I’m not making anything while I’m doing that. So it comes down to having a plan and working with an advisor that’s willing to be helpful, not one that just says, well, “Hey, listen, we’re just going to sit out on the market until I say it’s time to get back in.” Meanwhile, you’re just watching all of these gains pass you buy.

Mike Lester (25:29):

A relationship with an advisor that has a vested interest in you doing well, we recommend that you work with fee-based advisors. There’s plenty of fee-based advisors out there, business has changed.

Kristen (25:39):

And that’s because they benefit when you benefit, so they have skin in the game. It makes sense once you finally explained to me the benefit of working with a fee-based advisor.

Mike Lester (25:47):

Sure. If our portfolios take a big hit, our income takes a big hit. So again, we want our clients to do well and it’s not just because we’re nice people, it’s also because for selfish reason, it helps us if the portfolios do well. So again, just going back to the whole fear of missing out thing, just be very, very careful with the information that you’re getting, be very, very careful with a 24-hour news cycle, realize it’s their job to sell advertising. And if they can’t keep your eyes glued to the television or to the radio, they’re not going to sell advertising. Take a very close look at your portfolio and what you’re looking to accomplish, not just in the next six months, but the next 10 years, 20 years, 30 years, and come up with a plan for that.

Mike Lester (26:29):

Do I think markets are going to get bad at some point? I do. And I think it’s going to be because we don’t have a plan to spend… Well, a plan to pay for all the spending that we got. But I think we’ve got a little time too, and do you really want to be on the sideline? I don’t think so, not right now.

Kristen (26:43):

In Washington, they’re debating another round of stimulus spending, the price tag for one proposal is $3 trillion. Now, Fortune Magazine is warning that within the next decade, the government will likely need to impose a monumental tax increases to pay for that spending. I could have written this article for Fortune Magazine, we were spending so much money, we already had a huge deficit, but the bottom line is, we want to know what that means for those who are hoping to be able to enjoy retirement within the next decade with all of this debt looming.

Mike Lester (27:17):

Yeah. I’m just thinking about the numbers. We’ve never done this kind of spending and our listeners don’t have to listen to our radio show to know that, they can just turn on the TV. There’s craziness, politics is getting involved, which is a shame. I know our listeners. aren’t surprised by that, I’m not surprised by it, but sitting around and saying to ourselves, “Hey, gee, whiz, why does it have to be that way?” Well, it just is that way, and they are just going to fight over it. And the people who hate the current administration, are going to hate the current ministry, no matter what happens, that’s just all there is to it.

Mike Lester (27:50):

People who love the current administration, they’re going to love the current administration for the most part. It’s everybody in between that is really going to move the needle moving forward, and that’s why we just got tune a lot of the stuff out and realize that when Nancy Pelosi throws a $3 trillion package in front of government knowing full well there’s no way in the world anybody in their right mind would pass that, does it irritate me? Sure. However, that’s, I guess the games that they play and they do what they do. and my job is to look out for my clients and just look at the facts. Do they eventually get this passed?

Mike Lester (28:26):

Yeah, they do. They’re going to kick it around and they’re going to yell at each other and they’re going to act like everybody else being a jerk, but eventually, it gets passed and more money gets pumped into the economy and more money gets spent. And frankly, that is good for markets. The other thing is, which industries are going to get hurt? Well, obviously airlines are getting beat up.

Kristen (28:48):

Travel tourism in general.

Mike Lester (28:48):

Travel tourism. I mean, Hertz just declared Chapter 11. We could have anticipated that, nobody’s renting cars right now, Kristen. So we’re going to see a lot of that, be careful with your portfolios. There are going to be companies that are going to go under. Yes, I realize there’s some opportunities in there. Kristen, we typically don’t deal in speculation because we’re working with individuals that are retired or very close to it. They all want the highest rate of return that they can get in their portfolio, they’re just not willing to take a lot of risks to get those returns. So we’re building actively managed portfolios. Yeah, we’re looking for opportunities, but we’re also willing to make moves in those portfolios to protect money.

Mike Lester (29:26):

I don’t like the idea of hanging there approach. We’re a fee-based where our clients pay us a fee to manage their portfolio and bottom line, we need to be able to show value. We need to be able to show someone how to get a higher average rate of return than they’re currently doing, net of any fee that they would pay us. Otherwise, it makes no sense to pay us a fee to manage your portfolio, they might as well stay right where they’re at and do what they’re currently doing. But if we could not only show them a higher average rate of return, but also reduce the amount of risk they’re taking to get those returns, that’s valuable too because our clients, again, are retired or very close to it, and volatility is not their friend.

Mike Lester (30:02):

They need dependable, consistent income streams moving forward, and they need to know their money is going to last the rest of their lives. So that’s what goes into our retirement planning process.

Kristen (30:13):

Learning money lessons from our elders, we learn so many other lessons, why not financial one? What had more coming up next on Guarding Your Nest Egg with Mike Lester.

Speaker 1 (30:37):

Any comments regarding safe and secure investments and guaranteed income streams, refer only to fixed insurance products. They do not refer in any way to securities or investment advisory products. Fixed insurance and annuity product guarantees are subject to the claims paying ability of the issuing company and are not offered by retirement wealth advisors,

Kristen (30:59):

Deep Purple – Smoke On The Water, released back in 1973. Mike, I read a pretty interesting story in the Motley Fool, one of their financial writers talked about money lessons that she learned from visiting with her mother and her mother’s friends in their assisted living community. Now, I will tell you, when I have visited my Aunt kitty, she always passes on some knowledge, sometimes it is financial. The one I’ve gotten from her is that, “Kristen, don’t worry about anything because worry is interest paid on money you never even spent.” So that’s something I’ve gotten from her, so I could see how this could happen.

Mike Lester (31:36):

That’s a good one. One that I liked a lot, my father-in-law passed, but he was older and he used to tell me, “Don’t sweat the small stuff, it’s all small stuff.”

Kristen (31:48):

That’s true.

Mike Lester (31:51):

Yeah. Just in context.

Kristen (31:52):

See, these words of wisdom come from folks that are older than us at any point in life, but you focus solely on helping people near and in retirement. Do you ever pick up any nuggets of wisdom from the clients that you work with?

Mike Lester (32:03):

I think so. We talked earlier in the program, just about 20 something years ago, when I got started in this business, a lot of the people that I was sitting down with World War II veterans. They’d been through all of that and they were in Europe, and in prison camps and all kinds of stuff. And so there’s just some, it’s not necessarily financial nuggets, but life knowledge there. No matter how bad you think you have it, when you’re sitting in the living room with somebody who spent, I forget how many years in Schindler’s Camp, that really puts things in context, grandparents went through.

Mike Lester (32:38):

And they’re just financial knowledge, things have changed. People didn’t use to invest like they invest now. Most of the people that we’ll sit down with have been investing over time, that wasn’t typical, 30, 40 years ago, people were going to rely on pensions primarily. Then things changed and now pensions went away and people are supposed to rely on 401(k)s or 403(b)s or GSP accounts. And instead of being able to depend, and I don’t want to go down the road of how some pension programs haven’t worked out for people, let’s just assume that they work out and people could depend on that check for the rest of their lives and get the watch.

Kristen (33:12):

The gold watch. It doesn’t happen anymore.

Mike Lester (33:12):

The gold watch. People don’t get, I don’t think they get gold watches anymore, Kristen, but they don’t. They also, a lot of times don’t get pension. So the things have changed, I guess that’s good for us, why would you need investment advisor if you didn’t have investments and your guaranteed check just rolled in every single month, but it’s changed. So just words of wisdom, I think are, first of all, understanding that things have changed and they will continue to change, and there is no cookie cutter approach to investing. I don’t care what people tell you, there is no silver bullet, there is nothing that just fixes every worry you could possibly have.

Kristen (33:53):

If that were real, we’d all stay home and relax.

Mike Lester (33:56):

Well, we’d all stay home and relax, we wouldn’t have a whole lot of anything to worry about, but I guess the word, Kristen, would be the one constant is change, and everybody’s heard that, things will change. What’s going on now, and we’ve talked about it a little bit this program, I’m not talking about Corona or COVID-19 any more for the rest of the program because everybody has already heard it, we’re done with that. Weren’t you just looking at some… You were telling me before the show about this new program, what was the number one thing? And now we’re also sick of it, we’re not going to watch the news anymore, I just want to go watch something more routine.

Kristen (34:30):

Jeopardy, or Wheel of Fortune or Family Feud is doing better because we just want to escape.

Mike Lester (34:34):

Because people don’t want to have to hear about it, nobody want to talk about it. But what we will talk about it are our investments and what we could do. So the constant has changed. Things will change from where they are right now, people are going to ask me every single week when they come to the office, what do I think about what’s going to happen moving forward? And I could say the constant has changed, but we still need to come up with a plan for that change. As things change, we need to adapt, we need to overcome, we can’t just hang in there.

Mike Lester (34:58):

You can’t just assume that what was a good investment in the past is going to be good moving forward. That’s one of my pet peeves. An advisor, and I’m not picking anybody in particular, but an advisor a lot of times we’ll recommend an investment based on past performance, and they’ll throw in this clause, “Well, past performance is an addictive future results,” but they’re still selling it based on that. But you shouldn’t invest in this because in the past 10 years, it’s averaged 10% per year. That’s not very helpful. Well, I wish you would’ve told me about it 10 years ago, and that would have been great, not now after it already did it.

Mike Lester (35:30):

So we have to continually adapt and we have to have financial plans that are very specific our needs and what we’re looking to accomplish. So that’s why I sound like a broken record every week. We do talk about fun stuff, Kristen, but at the end of the day, it comes down to taking the time to sit down, understand your portfolio, what it’s likely to do moving forward and coming up with a good plan, coming up with a smart plan and just finding a way to maintain liquidity, active management and income to help you maintain your current standard of living adjusted for inflation and taxes moving forward

Mike Lester (36:07):

Once you have that, and you understand more about your plan, whether you’re a financial expert or not, if somebody will take the time to explain to you how it works, you’ll be more confident. In my experience, it’s that confidence that helps people sleep at night.

Kristen (36:21):

There’s an old expression among investors, sell in May and go away. It’s a half serious suggestion that the stock market declines in the months from May to October, and then rises again from November to April. Overall, I think that has been fairly-ish consistent, but Mike, with everything going on right now, is that something we should pay attention to, or is this just more financial fluff?

Mike Lester (36:46):

Well, again, I have to preface everything with, I don’t know, and I don’t know have crystal ball.

Kristen (36:51):

All right, show’s over. Thanks for listening everybody.

Mike Lester (36:54):

However, we want to be smart investors. And so there was a comments by the Fed chair, I believe it was here a couple of weeks ago and I thought it was powerful, and maybe I thought it was powerful just because I agree with it. But the statement was essentially, I would not bet against the American economy. I would not bet against this.

Kristen (37:15):

I love a statement like that.

Mike Lester (37:16):

Right. I love it. And that resonates with me, first of all, like I said, because that’s how I feel, but also because I wouldn’t. And so things like sell in May and go away, these are generic terms based on history. And if only you could tie markets, which we can’t, so do you really want to bet, particularly now that we’re getting more and more information, particularly now that we’re getting closer to a vaccine, particularly now that there’s going to be, should be, I should say, another 3 trillion in stimulus, turns out Corona maybe isn’t as bad, thank goodness, than we initially feared. Do you really want to bet against that right now in May? Because there’s a lot going on, and I think there’s a lot of room to run.

Mike Lester (37:59):

And I’m not saying it’s for healthy reasons, I am afraid of this market down the road. But if we just tell all of our clients, “Yeah. You know what, I think things might get bad at some point in the future, so here’s what we’re going to do. We’re just going to put you in cash and we’ll let you know when you should go back in.” And if this market goes up over 30,000 in the Dow again, do you think they’re really going to want to be our clients at that point in time? That’s just bad advice. And I guess if we told people to get out and market’s crashed, we’d look like heroes, but again, it’s our job to give clients advice based on the information we have at hand in the moment.

Mike Lester (38:34):

And we have a relationship with our clients, we understand that information can change at any given day. And that being said, right now, I wouldn’t bet against this, I would want a financial plan that I understand, I would want a portfolio that I understand, and I would want to participate, but I would also want to be working with an advisor that’s willing if needed, if things change, to snatch me right back out of the market and protect my money. So that’s our plan moving forward, we can’t promise anything.

Speaker 1 (39:01):

If you would like to have a comprehensive financial plan and an analysis of your current portfolio, go ahead and visit our website at retirement.tips/plan, and we can do that for you complimentary. Thanks so much for joining us on today’s show. Be sure to subscribe to our podcast, visit our website at retirement.tips for more free retirement planning and investment resources. Thanks for tuning in to today’s show, and we’ll see you next time on the Retirement Wealth Podcast. Exposure to ideas and financial vehicles discussed should not be considered investment advice or recommendation to buy or sell any financial vehicle.

Speaker 1 (39:43):

This information should not be considered tax or legal advice. Individuals should consult with professionals specializing in the fields of tax, legal, accounting, or investments regarding the applicability of this information to their situation. Past performance is not a guarantee of future results. Investments may fluctuate, and when redeemed, maybe worth more or less than originally invested.