What Should You Do Right Now With Your Retirement Finances?

by Mike Lester

Jul 12, 2020


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. An SEC registered investment advisor. Thanks for joining us today, and let’s get started.

Kristen (00:31):
Addressing things that matter to your life and your personal economy, also, looking at our overall economy, especially in a time like this and find out how, with everything that’s going on right now, what you should do if you were planning to retire soon or even this year. Is it a good time to do things like convert some of your traditional retirement savings into a Roth account? All valid questions because of what is happening in the world right now, and that is social distancing, Mike. We are doing that ourselves. I’m at my home studio. You’re at your office studio. Doing our part to keep people safe and healthy.

Kristen (01:08):
Mike, right now, most of us are just trying to get through this crisis on so many different levels, but there are some daredevils out there who say since the market’s down some days, this might be a good time to buy. What’s your philosophy on investing more in times like this?

Mike Lester (01:24):
Well, it’s complicated Kristen, for a lot of different ways. So there’s a lot of emotion involved. We’re talking to people every single week. Anytime you see this type of volatility in markets, obviously when it’s crashing, you don’t want anything to do with the stock market. If you think for a second, “Hey, this is unreasonable.” And now the government’s throwing all this money at it. Interest rates are going to be zero potentially. Close to it. Gas prices are super low. It’s, when do I get in? So there are people that have been on the sidelines for a very long time wondering if this is a good time to get in. There are people that are currently invested, wondering, should they get out? Should they stay in? If they do stay in, should they get more aggressive? I mean, these are the types of questions and they’re all very, very reasonable.

Mike Lester (02:07):
So let’s just take it back to the people that we talked to on a weekly basis, or really our business model. We work with individuals that are either retired or very close to it. Let’s separate everybody who’s a 20, 30, 40 maybe even early fifties. If you’re in my opinion, if you’re 10 years plus to retirement, this is an opportunity. You could buy into this market right now and it could be a thousand, two thousand three thousand points, less in a week. But at the same time with everything they’re dumping on this problem, if you go out six months to a year, I think your probability of success is pretty darn high. So I would be willing to make that bet.

Mike Lester (02:46):
But Kristen, we don’t work with people who are trying to grow their nest egg. We’re working with people who have their nest egg and their goal is preservation and distribution, typically. A lot of people in that scenario right now have been working with advisors who maybe they did a great job, maybe they didn’t, but if you weren’t getting communication and if you feel like you’ve been really, really beat up and you’re not getting answers moving forward, I think it’s time, and again, get a second opinion. I realize its kind of self serving, but try to understand your portfolio. Moving forward from right now, Kristen, we’ve never dealt with this before-

Kristen (03:20):
This is unchartered territory for all of us.

Mike Lester (03:21):
It’s completely uncharted territory. I also don’t know that we’re going to get this opportunity in our lifetimes again. So I realize it’s really easy to be down about, if you’re looking at your portfolio and it’s down and you’re looking at this volatility and it’s stressful. I just want to encourage people to find silver linings. I know it’s kind of tough, but I think about things like, I don’t know, oil, right? So lots of volatility and I’m not encouraging people to rush out and put tons of money in oil, but we haven’t seen these oil prices in forever, and oil can’t be 20 to $21 a barrel. I mean, economies around the world just don’t work that way.

Mike Lester (04:02):
So would you see tons of volatility in something like oil positions? Yes. Are you likely to do well over time? Yes. The question is why are we seeing these opportunities? Well it’s because of all the craziness that’s going on, it’s because of coronavirus, COVID-19, it’s because of all the problems around the world. It’s because of Russia and Saudi Arabia going at it, all of these things happening at the same time, there are slivers of silver.

Mike Lester (04:27):
There are silver linings out there, and I just want to make sure, and particularly for individuals that just feel unsatisfied or feel like I don’t have a direction, taking some time to understand your portfolio and spend some time with somebody who’s got a vested interest in you doing well, in particular, hopefully a fiduciary to help you maybe find some ways to say, “Listen, if you wrote it down, sorry, if you’re close to retirement, sorry, but instead of burying your head in the sand, let’s take a really close look at it and find ways to benefit from it.”

Mike Lester (04:57):
I realized a lot of people are hurting right now, Kristen, and this is very, very real for lots and lots of families. There are people that are retired and worried about staying that way. There are people that are close to retirement, where they’re going to have to put that aside for a while, but I do think it starts with understanding portfolios and looking for these opportunities. And Kristen, I believe they exist. I do believe we can build portfolios that will help people, instead of look at these days as such kind of dark gloomy times. It’s a horrible thing. But if we can find just little pieces of hope in there, and opportunity, it’s going to help us all get through it.

Mike Lester (05:31):

So Kristen, we typically, these days, and I say these days for the next several weeks, we’re not sitting down typically face-to-face with people, that just doesn’t make sense right now. It’s not socially responsible, but we are taking phone calls and we are sharing information and we do have our phones and our computers and we can help you with … We help you, we can literally help you with analysis of your current portfolio and we can give you maybe some ideas to help you out, and communication, I think, is key right now. So again, I’m working from the office, you’re working from the home office. We’re not out there like we normally would be, but there are ways to at least communicate. I just encourage people to do that.

Kristen (06:08):
Mike, I am curious what has been the reaction that folks have when you do this virtual analysis? Do they feel that’s a little odd or does it feel pretty comfortable to them?

Mike Lester (06:20):
Well, I think initially if you had talked to someone two months ago, at this point, you had said, “Hey, listen, by the way, instead of coming into the office and meeting face-to-face and putting a face with the voice on the radio, why don’t we just do a virtual meeting?” That was, I mean, at that point in time, and by the way, I think we’re all going back to that here in the near future, we’ll be able to do that. But it just doesn’t make sense in a lot of cases to do that at this point in time. So people are very open to, “Let’s just set up a phone call. Let’s set up a conversation.”

Mike Lester (06:47):
I’m having conversations with people every week about their concerns. They’re sharing with me where they are currently right now, what their experience has been, what their concerns are and what their goals are. Really in these conversations, and through emails and video conference, the process, isn’t that complicated. I mean, my experience has been, people have been pretty surprised about how easy it is. They really weren’t encouraged to use this technology in the past. I mean, just watch the news, right? So everybody’s working from home and you’ve got all these news anchors and they’re doing their own makeup-

Kristen (07:17):
And their kids are running through the background.

Mike Lester (07:19):
And their kids are running around, and they’re still doing the reports because we’re all kind of in the same boat. So what I would say is, it is a very, very concerning time, and there are people dealing with this conflict of interest being that, “Well, I’m not supposed to go anywhere and I’m supposed to stay home, but at the same time, markets are all over the place and they’ve gone from 29,000 all the way down to 18 five, and now they seem like they’re going back up and what should I be doing with my money?”

Mike Lester (07:45):
That’s a very legitimate question and people are struggling with it, but afraid to come in. So we’re just opening it up saying, visit our website, give us a phone call. We will schedule a time. I’m not saying we’re going to finish the process over the phone, Kristen. But we can start it, right? We can start the communication, we can give you some advice and we can just, again, get the process started of getting where you need to be for your situation.

Kristen (08:09):
Stay with us. As we explain something, these advisors called the bucket approach and how it impacts your money, and through technology, one of Mike’s friends seems to be hanging out with one of country music’s biggest stars. We’ll get the inside scoop coming up next with Mike Lester of Talon Wealth Management.

Kristen (08:34):
Except for during the coronavirus, please stay as fully clothed as possible when around the others and physically distance from them at the same time, if you are not a household family member, Kenny Chesney, one of my favorite country music artists, of course his tour has been postponed because of everything that’s going on with the virus to maintain that social distance so everyone healthy. But he recently celebrated his 50th … Let’s see, no 52nd trip around the sun. Born in 1968. Mike, before today’s show you screenshot me a photo of someone hanging out with Kenny Chesney. What’s going on there? Again, because we’re socially distanced and operating from two different places.

Mike Lester (09:13):
Right, I think we’re all distancing. So over the years, we’ve got to know a few people and you travel a little bit. One of the places that I’ve been to is down to the British Virgin islands. When I go down there and Kenny Chesney’s-

Kristen (09:27):
He’s a staple there.

Mike Lester (09:28):
He’s kind of a staple there. He’s around. So you get there and you see his boat and-

Kristen (09:32):
He’s got a bar there, a restaurant?

Mike Lester (09:35):
I think he’s got a lot of stuff going on in there. So he’s kind of a staple. But there’s also several other people that we would know their names that are a staple there. But I go down there and you’ll pass this boat and this and that and the other. But anyway, I’ve got a friend down there, just a great guy, his name’s Leon and his love is photography, and his occupation, other than photography, because that’s probably not the easiest way to make a living is a bartender.

Mike Lester (10:02):
So I’ve met him down there in the islands and he’s around and he shot me … He shoots me some pictures, or kind of everybody that are on Facebook with him, pictures of him and Kenny Chesney on the beach on the 26th, which was his birthday. So I mean, I’m not sure I don’t want to go out too far on a limb here, but I’m pretty sure I know what Kenny Chesney was doing on his birthday because I’ve got pictures of him and my buddy Leon standing on the beach down in the Virgin Islands. So I hope that-

Kristen (10:33):
That’s pretty awesome. Hey, listen, if you’re going to socially distance yourself, you may as well do it somewhere beautiful, if you’ve got that option. So good for you, Kenny, as you’re celebrating your birthday. He was born in 1968, if you do the math, and that’s a year in which Fidelity says that a nest egg of just $56,000 would have been enough to fund an average retirement. That’s the year Kenny Chesney was born. But that 56 grand today, in 2020, wouldn’t go very far. So Mike, how do you overcome this? Helping your clients establish that they can be confident that their savings will last 20 or 30 years or however long their nonworking life might be?

Mike Lester (11:13):
The 20 to 30 year number is really, really important because Kristen, we’re talking to people every week that are in their fifties and sixties, right? So if you look at life expectancies, hopefully into … Let’s just say, let’s average it out to the mid nineties. That number is really, really important, and yeah, things have changed over time. A nest egg of $56,000 isn’t going to cut it. I mean, there were other factors there. Back when people needed $56,000 in 1968 people were leaning on pensions, at that point in time. So they had sources of income.

Mike Lester (11:45):
Things changed. Late ’70s, they passed laws allowing 401ks. Early ’80s, companies started getting rid of pensions and doing 401k plans and stuff like that. But you’re on your own, for lack of a better word, right? So the government and corporations, and everybody said, “Hey, listen, we’re going to allow you to save for retirement, but you’re going to have to turn this nest egg, this pile of money that you’ve set aside, you’re going to have to turn it into an income stream for yourself, and you’re going to have to find a way to make that money last, the rest of your life.” Again, that’s potentially 20, 30 years, maybe even more over that period of time.

Mike Lester (12:18):
So in order to do that, we have to be careful. It would be nice to say, “I’m going to go down to the bank and I’m going to take out a CD that’s going to pay me 5% for the rest of my life, and I’m just not going to worry about it.” The problem is that’s not an option. It would be nice to be able to buy government bonds that are guaranteed to get five or 6% on your money. The problem is, that’s not an option. None of these fixed investments are paying that, partially due to a lot of things that are going on with economy and everything. I mean, people have to find a way to invest their money. They have to find a way to earn money on their money so that they’re getting income and so that they’re not just spending principle every single year.

Mike Lester (12:55):
Then you take a look at times like we’re in right now, this week, Kristen, and it’s just scary. I think people overall realize that if they’re going to be successful because these other fixed rate investments aren’t going to be helpful, they’re going to need the stock market to make it happen. By the way, it’s not just us here in the United States. It’s countries around the world are realizing that rates are low and they’re going to have to invest, but they’re also investing in the US because it’s their best chance for success.

Mike Lester (13:23):
So let’s just take that and apply it to a typical meeting that I would have with someone when they call me up and they say, “Hey, listen, I’ve got this money. I need for it to last the rest of my life, and I’m worried about markets. I’m worried about this. I’m worried about that.” We’re going to take that conversation very seriously. We’re going to take a look at what they’re looking to accomplish, and we’re going to explain to them what active management of their portfolio looks like, what markets can potentially do over time, and where they would need to be.

Mike Lester (13:53):
I mean, we’re all just looking for our best option and Kristen, again, if we could just go to the bank and get 5% on our money, that’d be pretty easy. It doesn’t exist so we’re searching for options, and we’re asking ourselves right now, “Is this a good time to invest?” This corona thing has been stressful, kind of crazy. It seems like people are overreacting, but what if they aren’t overreacting?

Kristen (14:14):
It’s the whole unknown that’s the fear.

Mike Lester (14:16):
The whole unknown thing. Well, what do we do? Well, we got to take a really close look at it, find opportunities, and find a way to help keep people successful in retirement. To me, that’s just conversation and communication. So give us a call. We will find a time to have a meeting Kristen. These days, it’s probably not going to be face-to-face, unless you want to schedule it several weeks, maybe even six to eight weeks down the road. I don’t recommend that, okay? I’m not trying to scare people, but I do think things are going to change pretty quickly.

Mike Lester (14:42):
So we’re happy to schedule an appointment with you at the office, down the road when all of us are able to get out there. But in the meantime, give us a call or visit the website. We’ll schedule a conference call or a screen share, just internet meeting, and we can get the ball rolling to understanding your portfolio, and what we could possibly do moving forward.

Kristen (15:01):
Many of us have heard financial advisors in the past talk about something they call the bucket approach to managing our money and Morningstar’s Christine Benz says, “You put your assets in three separate buckets.” That’s pretty self explanatory. The first of which is an easily accessible sum of cash.

Christine Benz (15:18):
It’s really there to serve as your spending money in case your longterm assets, your bond and your stock assets, for whatever reason are not cooperating. So maybe your bonds aren’t delivering the yields you’re looking for, maybe your stocks are down, so it’s not a good time to sell any pieces of those to meet your living expenses. Your cash is there to meet your ongoing living expenses.

Kristen (15:42):
Okay, I hope your cash bucket was a big one. But what are the other two buckets? And what do you think about this whole bucket approach in general, Mike.

Mike Lester (15:51):
The bucket approach is interesting to me because I think it’s an easy thing for people to understand this principle of a bucket approach, and if I have a cash bucket, if I have a stock bucket, if I have a fixed bucket. Some advisors I’ve seen, they do variations of it that I don’t like where every buckets and annuity. I’ve seen that one, which is … Again, I don’t think that’s great, but I guess if you’re an annuity slinger, as we call them, then that might work out in your favor. The idea of having buckets really just means segmenting your money and buckets are very visual, so that’s why they use the term. I would say that in some ways, I don’t call it this, I don’t describe it as a bucket approach, but we’re implementing that through diversification of portfolios. That’s really just what bucket approach means. It’s a different way of saying it.

Mike Lester (16:40):
So a certain percentage of your money should not be at risk because you might need it and you can’t afford the volatility. Another portion of your money, which is the money you need longterm or down the road, you can afford more risk. So literally, segmenting these types of money or money that you’re going to need, or when you’re going to need it. I do agree that that’s important and I understand how they oversimplify it by calling it buckets, but nobody really has buckets. What they have is a diversified portfolio. So I think the best thing is just to talk about diversification and why it’s important. So every single week we sit down with individuals, we do an analysis of their current portfolio and we find out whether they’re diversified or they’re not diversified. We find out whether they’re efficient or they’re not efficient.

Mike Lester (17:21):
We need to move portfolios to the most efficient area that we can get them to. Meaning, I want the highest rate of return I can get for the least amount of risk, net of fees. But also times have changed a little bit, these are very unique times. So our considerations for these portfolios and how they’re likely to work, maybe not longterm, but certainly in the short term, which maybe six months, 12 months, 18 months, that sort of a thing. It really just boils down to conversations, which is why we’re encouraging people, if you’re not comfortable where you are currently or you have concerns, or maybe you’d like a few ideas moving forward, just give us a call or visit our website.

Kristen (17:55):
Stay with us as we discuss how retirees can make it through this crisis without losing their shirt and what you may be hearing about from a lot of online brokers commission free trading. What’s the real deal there? Next with Mike Lester of Talon Wealth Management.

Kristen (18:18):
Mr. Las Vegas himself, Wayne Newton, is celebrating his 78th birthday. Still performing in Vegas. Although probably not at this exact instant with everything going on. Newton once told a reporter that, “As long as show businesses there for him, he doesn’t see himself ever retiring.” Have you seen any of the pictures out of Vegas at how empty it is? I don’t think it’s ever been like this. It should be empty by the way.

Mike Lester (18:45):
Well, I mean, it’s good that they’re doing that. I have not seen them. I guess I’m kind of interested now to look at them. I was, I was distracted by the song. Does that remind you of a movie at all?

Kristen (18:54):
Yes, it does. Speaking of Vegas, Vegas Vacation with Chevy Chase.

Mike Lester (19:00):
It reminds me of Ferris Bueller’s Day Off.

Kristen (19:00):
Oh, and that! Yes.

Mike Lester (19:04):
Yeah. It comes to my mind because it’s one of my favorite movies. I don’t know.

Kristen (19:07):
That’s a good movie too. Some good ’80s movies. Although I think Vegas vacation was part of the National Lampoon’s ’90s additions of some things they did, which some of that was not all that great.

Mike Lester (19:19):
Not as good. Yeah, they were trying to make a little money on some past success.

Kristen (19:26):
Speaking of trying to make a little money, there is a consumer advocate out there and he’s known nationally across some radio stations named Clark Howard. He’s always trying to help people save money. He started in the industry as a travel agent and trying to find good travel deals. Now he just looks at deals all the way around at everything in life. Someone asked him how people who are recently retired can financially weather this current crisis. He said, quote, “They should look at how many different sources of retirement income they have.” Now, that’s the same advice that you’ve been giving us for years. But I guess it’s even more relevant in times like this. I mean, you do have social security coming in, but you still have to pay yourself from your investments and other things too.

Mike Lester (20:10):
Well, I mean, Clark’s been at this longer than we have. So I guess I got that from him. So it is, I mean, quite a bit more relevant in these times. I mean, people are taking a really, really close look at their sources of income because for people that have been particularly upset, surprised. I mean, coronavirus surprised everyone. We’ve had viruses like this. Okay, so that’s in the past. Now people are looking at their portfolio. Some of you haven’t opened it up yet because you’re afraid of what you might see. Some of you look at it every single day, right? And regardless of where you’re at, you do need to, whether you’re looking at it and you’re upset with it, understand why you’re upset with it, understand what happened. I know we can just sort of cover this in a coronavirus blanket, but it’s not that simple.

Mike Lester (20:54):
As terrible as it is, and we’re going to see lots of volatility for a while. It still creates opportunities in markets. If we just, again, bury our head in the sand and ignore it and wait for our portfolio to get back to where it used to be before we do anything, we’re making the assumption that the same positions that we wrote down are going to be the positions that go back up and it doesn’t necessarily work that way. Kristen, we are going to find out after the dust settles here, that particular companies that we thought we would see if not forever, a long time, are just gone. Right? I mean, we haven’t seen the fall yet. I’m not trying to scare people, but that’s just the way these things work.

Mike Lester (21:33):
There are going to be companies that were in exactly the wrong position. They never saw this coming just like nobody else, and they took out some leverage or they did this, or they did that, and coronavirus, it just ruins them. If I’m buying individual stocks in my portfolio, I’m increasing my risk of that happening. I’m not saying that in your portfolio, one of the positions that you have is going to go out of business, but diversification is going to be important moving forward because you have to diversify away some of the risk of these things happening.

Mike Lester (22:02):
The other side of this is it’s creating opportunities. There are companies that have, I mean, they’re way, way, oversold. We talked a little bit earlier in the program about any company that is invested in, or participating in, or has anything to do with the oil industry, right? Or the airline industry or the cruise ship industry or any of these industries that are just getting hammered. Kristen, I mean, oil is an easy example because I don’t believe it can be in the little low twenties forever. The reason I believe it can’t is because companies who are in the oil business are losing money at that value, it would just cease to exist.

Mike Lester (22:39):
So everything finds, its … Eventually, markets find their balance, right? And so that’s probably worth a lot more than 20 at some point in time. It wasn’t that long ago oil was 65 bucks a barrel. So if you’re looking at your portfolio and you’ve been in the stock market and you’re off 20, 30% and you’re going, “Gee whiz, this is really, really awful.” Well, I don’t know. Good thing you weren’t in oil, right?

Kristen (23:01):
That’s true.

Mike Lester (23:02):
Yeah. So you’re not as bad off of there, but what did that do? That created an opportunity. So take a close look at your portfolio. Look for opportunities. I’m not on the radio here today encouraging everybody to dump what they’re doing and take a look at oil, but I’m just trying to point out wanting to be smarter moving forward. All right. So the positions that you’ve written down aren’t necessarily the positions that are going to help you moving forward because things are changing. This is very, very unique and you probably need to take a unique perspective and look at your portfolio, try to get dialed in, and just find some ways to be more efficient moving forward.

Mike Lester (23:40):
It’s not an exact science, Kristen, and nobody can tell you exactly what markets are going to do tomorrow, but we can make an educated bet that with all of the stimulus and with interest rates as low as they are and with cheap gas and with everything else going on that, what is the probability that we’re higher at some point down the road? I personally feel it’s a pretty good probability. The question is how do you want to be positioned from here to there? Take a close look at the portfolio.

Mike Lester (24:07):
If you’re not confident in sort of decipher in what’s in there or understanding what’s likely to happen moving forward, just give us a call and we’ll schedule a phone conference, we’ll do a screen share or internet meeting, virtual meeting. What have you. We don’t have to sit down with the office, Kristen people aren’t doing that right now. All right. We’ll get back to that when this is over, but give us a call. We’re happy to help you out.

Kristen (24:26):
Several of the major online brokers have been in the news lately for offering commission free trading. Now that sounds like a good thing, but a study from New York’s Stern School of Business warns that it might encourage retirees to buy and sell stocks more frequently. Any thoughts on that?

Mike Lester (24:43):
Well, first of all, it’s a great thing. I mean, there were a lot of changes. They have happened here, I mean, fairly recently. But it used to be, let’s just say that on average, you had an online training account, and let’s say on average, they charge you $8 to trade a stock or maybe an ETF or something like that. An ETF is an exchange traded fund. Maybe they charge you a little bit more to trade a mutual fund. Bottom line, they were charging for these transactions. I guess I can see how if now we all know that we’re trading for free we might trade more frequently, and that is a potential problem for individuals that are trading on their own or maybe they’re very, very skilled, watch it all the time, and they do a pretty good job for themselves. I mean, good for them.

Mike Lester (25:24):
I’d say most of our clients aren’t individuals that want to manage their own portfolio because if they did, that’s what they would be doing. They wouldn’t be hiring us to manage their portfolio. So I can see why this article says that maybe it could create some potential problems. For us and our clients, its creating some nice solutions in the sense that, guess what, if they’re not going to be charging us for trades anymore, we can sort of pass those savings along to our clients and help them save money. So for me, any opportunity to compress the expenses in portfolios is a win. Anytime we can save our clients, that’s a win. So being efficient is a really, really big deal, and Kristin, I like it. Sorry for those, if it’s creating issues, but for us, it’s creating solutions and it just goes into being more efficient with the portfolios.

Kristen (26:12):
Well, Mike, it makes sense that you would be into this because you’ve said time and time again on this radio show that you and your team only do well when your clients do well, it’s hands on investing, and that way everyone is just as air quote, invested in the process as their clients. I like that.

Mike Lester (26:31):
Well, yeah. I every week we have a conversation, I think of a conversation I just had the other day. I had some individuals, they had been listening to the radio program and they had recently sold their business. So in their situation-

Kristen (26:45):
That’s probably their retirement.

Mike Lester (26:46):
It is their retirement. So they invested over time in the business. They did have some 401ks and they did have some IRAs, but it wasn’t the bulk of their nest egg, the majority of their assets or in the business that they sold. So in their situation, we’re taking a look at it, it’s a big step for them. Their life’s history is really trusting in their own business that they were investing in overtime. Now, suddenly they’re looking to make a transition, which says, “Well, how do we convert this lump sum or this nest egg into income for the rest of our lives?” They’re looking for ways to trust the stock market. Then on top of that, all this craziness is going on, which makes it even harder to trust.

Mike Lester (27:23):
So naturally they’re looking around at the different options that are available to them. They’re finding that, well fixed options. I mean, they can’t go out and get a high fixed rate of return on their money using bonds or CDs or something like that. Real estate’s may be not as attractive as it was back when real estate was doing really poorly. It’s hard to find good deals in real estate these days, and they’re going back and looking at the stock market going, “Well gee whiz, this thing’s way oversold. This looks like the opportunity, Mike, what do you think?” And the conversation is, I think you’re right.

Mike Lester (27:53):
I realize there’s going to be a lot of volatility, and this is a very, very terrible thing and it’s been terrible for individuals health wise, and deaths, and it’s around the world, and it’s affecting people all over the world, but what would you do with your money at this point in time? Your options are kind of limited and it keeps finding its way back to the market, and is this a good time? And the answer, longterm anyway, is yeah. If you invested today, not this weekend, Kristen, but on Monday. If you invested on Monday, yes, markets could go down from where you were. From where they were on Monday.

Mike Lester (28:28):
But where is it likely to be six months from now a year from now? So ask yourself, “When do you need that money? How long can you wait? And what is my average rate of return likely to be? And would I have rather invested at almost 30,000? Or would I rather invest at this level right now?” Well things pick up, economies pickup, stimulus works, all of this works. I would want to be invested now. So again, that’s not for everyone, but it’s worth having a conversation and explaining to people how to invest, but do it strategically and efficiently.

Kristen (28:59):
Stay with us to find out if now is a good time to convert some of your traditional retirement savings into a Roth account, on Guarding Your Nest Egg with Mike Lester of Talon Wealth Management.

Kristen (29:13):
A song that was written by Bobbie Gentry, but country music superstar Reba McEntire made it a hit on the radio in the early ’90s. Reba McEntire, is country as the day is long. I want to say that she is an Oklahoman. Watch me get that wrong and make everybody so mad about that.

Mike Lester (29:30):
Are you looking it up, or what?

Kristen (29:33):
No, I’m just going to go with my gut here.

Mike Lester (29:33):
There we go. Okay.

Kristen (29:34):
Because she’s 65 years young, and although she has no plans to retire anytime soon, she told us a while back that she has given it some thought though.

Reba McEntire (29:43):
All of my girlfriends and I, even my youngest daughter Chastity, we want to have a compound, and we would like my mother-in-law’s place. She lives at a retirement home and they play games all the time and they’re doing activities. You call her, she’ll say, “Yeah, hello.” I say, “Hi, Gloria, what are you doing?” “Playing 42, got to call you back.” We’re like, can we move in with you? So that’s the retirement I want. I want to be with my buddies, my friends, my family, and just having a big time.

Kristen (30:11):
Having a big time. She’s country like me-

Mike Lester (30:12):
Big time and on the compound-

Kristen (30:14):
And she’s from Oklahoma. I was right about that. She comes from a family of champion steer ropers, and that’s kind of how she got her start singing was at rodeos and things like that. So she’s just a good lady too. Always doing a lot of really nice things for folks. Speaking of nice things, at a time like this, we’re all trying to find the silver lining in life. If you’re trying to find it in this bear market, some say it might be a good time to talk about converting some of your traditional retirement account money into a Roth account. So is that a conversation worth having with our advisor Mike?

Mike Lester (30:46):
I’m glad you brought it up Kristen. I mean, I think it is, and let’s just dive into why they’re saying it. So chances are, let’s say that you got a 401k or an IRA, and these are, as we call them kind of hang in their portfolios. While you’ve seen a lot of volatility, but your portfolio’s value is probably … Well, let’s say it’s significantly less than what it was just, well, within the past couple of months. I mean, things have changed quite a bit. So when you start looking at converting money from an IRA over to a Roth IRA, what you’re going to pay tax on is the amount that you convert. Now the value of your IRA or 401k is less than it was before. When you do the conversions, you’re converting at a lower amount.

Mike Lester (31:27):
The advantage is if you get it over into that Roth account, after paying the taxes, the future growth, which again, I believe we’re likely to see from these levels back up with all of the stimulus and cheap gas prices and oil prices and low interest rates. If you wanted to convert and you knew you’ve been wanting to convert, you might as well just do it now. You were originally going to convert so that you could get tax free gains and tax free income in the future. At this point, you’re going to pay less in taxes to do it because it’s a smaller dollar amount and you’re still getting the future gains.

Mike Lester (31:59):
Now I want to point something else out, which would be things like trust accounts, Kristen, or just brokerage accounts, individual accounts, joint accounts. There were people that had been invested in these accounts for, I mean, frankly, before we had COVID-19, they had had gains from essentially mid 2009 all the way through the end of 2019. Those gains were very, very substantial and people were reluctant to sell positions because selling positions in those types of accounts would have triggered a capital gain, and maybe there were positions that you weren’t thrilled with, and you just didn’t want to have the gain, or maybe he didn’t have a very diversified portfolio or maybe, I would have these conversations with people that wanted to work with us, Kristen.

Mike Lester (32:40):
They’d say, “Hey, listen, I’ve got this much in investible assets. We’d really, really like to work with you because we like the idea of active management. We don’t like the idea of hanging in there and we feel like you’re going to provide value in our situation.” The conversation that we would have is like, “Listen, we would love to work with you. We look forward to working with you in the future,” but we’re not going to go into an account that has, I don’t know, pick a number 20, 30, 40, 50, sometimes a hundred percent in gains over the past 10 years, and just liquidate it and hand you a tax bill at the end of the year. You’re not going to like me very much if I do that.

Mike Lester (33:14):
Well guess what? I mean, our plan on those was to spread the taxable gains over a period of time, but now we’ve just been handed coronavirus. You might want to look at those accounts a little bit differently because converting from a hang in their approach to an active management approach on those accounts were where the gains would have been taxable, as hopefully longterm capital gains. Well, that issue is either not as big of an issue or an issue at all at this point in time. So take a close look at those accounts, Kristen. There are opportunities to convert from IRA or 401k to Roth, and there are opportunities on joint accounts, individual accounts, trust accounts, and we want to take a close look at that.

Kristen (33:52):
Everyone’s focusing on the stock market right now, but Mike, inflation is one of those sneaky things that also has the potential to doom our retirement if we don’t properly prepare for it. So let’s talk about how folks can use this time to prepare for that.

Mike Lester (34:07):

Well, we’ve got to be obviously careful about inflation all the time, but it’s that invisible thing that we don’t always take into consideration. So it’s pretty hard to, with all of this volatility and everything going on, preparing for it typically means staying committed, having a good plan, having a smart plan and staying with the plan, and all this volatility can be very, very emotional. So having a smart plan can mean different things to different people. In our case, what it means is, well, we need to build portfolios that will accomplish goals. Those goals typically for our clients are, I need an income stream on my portfolio that’s going to help me maintain my current standard of living moving forward, adjusted for inflation and taxes moving forward.

Mike Lester (34:52):
So again, I’ve said already on the program today, it’d be really, really nice. If we could just go out and get a fixed guarantee of five or 6%, we just can’t do that. It’s getting harder and harder as the government reduces interest rates to try to combat things like a recession from COVID-19. So getting back into it, inflation isn’t going to go away just because everybody’s concerned about the effects of the coronavirus. In fact, inflation’s probably an even bigger issue as countries around the world, not just the US, I mean, the US is dumping two point 2 trillion on the economy. Other countries are doing the same thing.

Mike Lester (35:25):
So my fear is inflation can become an even bigger issue moving forward, and we need to have a plan not just for, “Well, what do I do now that the markets have sold off after this?” What’s to happen in the next, maybe not next week, Kristen, I think it received volatility, but look down the road six months, 12 months, 18 months. What’s my plan? Do I really believe that coronavirus is going to be around forever? I don’t think so. Summer’s around the corner, right. Let’s maybe follow some of the flu models, right? It probably tapers off, people probably go back to work. They probably got money in their pocket.

Mike Lester (35:57):
What’s the end result. I think Marcus do pretty well for a while, but as we’re ending up today’s program, I want to warn people about the back end of this, which is potentially some inflation problems. It just all goes into understanding the portfolios, having a smart plan, but realizing things change over time. Coronavirus is the most recent reminder, right? We were on track, had a phenomenal economy, everything was great, then boom. You can’t just come up with a plan that doesn’t evolve. You can’t just lock your money up and fix products that guarantee you income for life because things are going to change. Be careful moving forward.

Mike Lester (36:30):
As we wrap up the program here today, Kristen, I just invite people, I know we can’t sit down face-to-face, I know depending on where you are in the country, and we work with people all over the country, Kristen, we’ve all kind of got our own rules and the rules are probably going to be the same by the end. But eventually, we will get the opportunity to sit down face-to-face-

Kristen (36:47):
Yeah, we’ll get back to normal at some point.

Mike Lester (36:48):
We’ll get back to normal. I don’t want the fact that we can’t necessarily sit down face-to-face everywhere now to have people hesitate with what I see as an opportunity in markets. I think take the time to understand your portfolio, take the time to come up with a plan now, before it’s not going to be too late. It’s just that you don’t want to miss too much of what’s going to happen, I think, moving forward.

Mike Lester (37:07):
All it takes at this point, Kristen is a phone call. Frankly, you don’t even have to get out of your pajamas because I’m not actually going to see you. We’re just going to have a phone conversation or we’ll do a screen share. I won’t be able to see what you’re wearing or what you’re drinking or whether you shaved or did your makeup. We’re just going to have a conversation. So one last time before we wrap up the show and invite people to just reach out, if you have concerns or want a little more information on your portfolio, or if you just want to make sure we’re real and we’ll actually pick up the phone, give us a call and we’ll go from there.

Kristen (37:34):
Hey, there’s one test we haven’t talked about in a while.

Mike Lester (37:37):
Well, there you go.

Kristen (37:38):
Not a bad idea.

Mike Lester (37:38):
Do they actually pick up the phone if I dial the number?

Kristen (37:41):
And if you want to see if Mike’s real, with a virtual analysis, you can do that too. So call this weekend so that you’re ready for what’s to come and that you don’t miss out on possibilities with what’s happening in our economy. There’s a lot of gloom and doom out there. We’re looking forward to the future and Mike and the team want to help you with that by doing a virtual analysis by phone or simple video conference. I’m Kristen Charles on behalf of Mike Lester and the entire team at Talon wealth management. Thank you so much for making us a part of your weekend.

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 into 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. 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.

Mike Lester

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