The Importance of Making Regular Adjustments to Your Retirement Plan

Mike Lester

by Mike Lester

Sep 14, 2020


Announcer (00:00):

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 Charles (00:35):

Thank you so much for joining us this weekend on the radio with Mike Lester and the team from Talon Wealth Management. Today, is a job buyout offer in your future? If so, how should you handle that? Plus, the importance of making regular adjustments to your retirement plan, all coming up. Mike, you recently had an incident, not with a bear or bull market so much as an actual bear.

Mike Lester (00:59):


Kristen Charles (00:59):

I don’t know the full story. You started telling me and I was like, “Whoa, whoa, whoa! Hold on, tell us on the show.” What happened?

Mike Lester (01:04):

Well, it starts with social distancing and COVID-19. So we’re all-

Kristen Charles (01:10):

What doesn’t?

Mike Lester (01:11):

What doesn’t these days. So I’m doing a lot of working from home, my wife is also … Well, not even working from home, they just kind of asked her not to come in … sort of thing. Like, “Well, you’ve got this many vacation days. And guess what, you’re taking them … whether you want to or not,” so that’s how they’re handling it. And the kids are out of school! So, we find ourselves in a situation, “Well, if we’re going to be sitting around the house, [inaudible 00:01:30] sit around.” So we decided to … We’ve got a place in the National Forest on a lake. And so, it’s just a tranquil, nice spot and there aren’t very many people around, but there aren’t very many people around so then you get the animal element associated with it.

Kristen Charles (01:43):

I have seen foxes in downtown major cities on television, it’s crazy!

Mike Lester (01:47):

Yeah. Well, I mean, that’s sadder. That’s more like populations encroaching on their environment-

Kristen Charles (01:52):

Okay, well …

Mike Lester (01:52):

… but this is not that. There’s not much out there and it’s kind of nice. So part of that, living or having a place out in the forest, it’s pretty rural, there’s no garbage service. I mean, the garbage isn’t going to come by so you got to go to the dump.

Kristen Charles (02:07):


Mike Lester (02:07):

I got a pickup truck and I put stuff in the back of the truck. And my intention was to take it to the dump first thing in the morning. And I had this thought, “You know, it might be a bad idea to leave the garbage in the back of the truck.” I know that bears are around and this has happened before, it just hadn’t happened in a really, really long time. To keep it simple, I got lazy, Kristen. I could have gotten off of the couch, I could have taken all the garbage back out of the truck, I could have put it in the garage and close it. I didn’t, I thought I could get by. I got-

Kristen Charles (02:38):

You watched cartoons as a kid, right?

Mike Lester (02:39):

I know. I got-

Kristen Charles (02:40):

You know what happens with a bear and any kind of food product left behind.

Mike Lester (02:43):

Oh, it was … Yeah, so sure enough I got up … And even before I got outside, I could see out the window, the lawn was littered with …

Kristen Charles (02:52):


Mike Lester (02:53):

And there were probably … And this is a pretty good sized trash can, so there were probably five of the garbage bags in there. And the bear was so selective, it had just distributed it across the entire lawn, took one whole bag out. I can almost envision this bear standing on two legs and walking out with a bag to this tree, and just hung out … I could tell, hung out under this tree and-

Kristen Charles (03:14):

Went through it, saw what he wanted.

Mike Lester (03:16):

Just saw what he wanted. Bottom line, I spent that morning cleaning that up and I hope that-

Kristen Charles (03:21):

Lesson learned there, Mr. Lester.

Mike Lester (03:24):

I mean, I really wasn’t that upset. I thought it was kind of nice that the bear had an interesting meal and … probably made that bear’s night.

Kristen Charles (03:31):

Probably so.

Mike Lester (03:32):

It was a little bit of a pain in the neck for me, but-

Kristen Charles (03:33):

And I’m sure your wife didn’t blame you at all for this process.

Mike Lester (03:38):


Kristen Charles (03:38):

Okay, let’s not talk about that. Let’s move on.

Mike Lester (03:42):

[crosstalk 00:03:42]. Yeah, okay.

Kristen Charles (03:42):

Because we all know that, yes, if I were married to you, I would blame you for that 110 percent.

Mike Lester (03:46):

I didn’t tell her, it was all cleaned up before [crosstalk 00:03:49]. I’m still hoping she doesn’t see … The bear decided to take a swipe at her car-

Kristen Charles (03:54):


Mike Lester (03:54):

… on his or her way by.

Kristen Charles (03:56):

Oh my gosh!

Mike Lester (03:56):

And there’s bear-like scratch marks. It’s not dented but …

Kristen Charles (04:01):

You’ll take care of it. But still, that’s going to be a … a fun thing to find out.

Mike Lester (04:03):

I don’t know what the bear was thinking. It’s like, “Eh, I don’t like that car.”

Kristen Charles (04:07):

It’s a big bear! Bear claws! It’s just moving around, man!

Mike Lester (04:12):

It’s a big bear. Bear claw, yeah. Just scratched the paint.

Kristen Charles (04:12):

Just trying to get things done. I mean, it’s not the bear’s fault that we’re all vacationing at the lake house, if we’ve got one, a little bit more often because of the virus and staying home. I mean, think about it, those of you listening, that are still in the workforce, are you tired of working from home yet? Or are you finding that you actually enjoy it?

Kristen Charles (04:28):

Personally, I’m really enjoying it! I find myself more focused and creative, but everyone’s so different on this issue. But, Mike, here’s what’s really interesting, some folks are recommending that we look at this time at home, this quarantine period, on and off, as a sort of practice for retirement. Now, obviously, I hope retirement for me will be more than Netflix, and eating too many carbs, and having ice cream almost every other night. But what are some lessons we can learn here from this, air quote, practice retirement?

Mike Lester (05:00):

Well, I think that, first of all … And we deal with people that are either retired or very close to it, they’re dealing with, if they’re not retired yet but they’re looking at retiring, they’re getting very close to that transition where they go from working, probably five days a week, pretty typical. They’ve got their healthcare, they’ve got healthcare insurance, they’ve got their income from employment, they’re making contributions to their financial plans, whether that’s a 401k, 403b, TSP, depending on your employer. But your lifestyle is pretty dictated, particularly if we’ve been doing what we’ve been doing for the past 20, 30, 40 years. You get up, you got your morning routine, you get your coffee, you know what you like for breakfast, you get to work at a certain time, all these things happen.

Mike Lester (05:39):

And so, taking this back to COVID-19, that’s changed for people quite a bit. Their routines have been changed an awful lot. There’s a chance, although not for everyone, but there’s a chance that you’ve got more time on your hands … than you had had initially. Maybe it’s because you’re working from home and it’s just a little bit more efficient. But I do think that we’re getting a glimpse at what it might look like to be retired, in the sense that … not going into the office and things are just looking different now.

Mike Lester (06:07):

Hopefully, for a lot of you, that doesn’t mean that you’ve been furloughed or lost your job, although that is the case for a lot of people.

Kristen Charles (06:13):

Unfortunately, yeah.

Mike Lester (06:14):

So they’re getting a very, very close look at what retirement looks like at some point down the road. But, regardless of your situation, if you retire and you’re making that transition, not only do you need to be prepared financially, but you also need to be prepared socially and you have to understand what it is you’re going to do, Kristen. There are a lot of people that retire without any really big hobbies and they find themselves really, really bored.

Kristen Charles (06:35):

Mm-hmm (affirmative).

Mike Lester (06:35):

There are other people that retire and it’s a really smooth transition for them because they had … They knew exactly what they were going to do. Fishing or golf or …

Kristen Charles (06:44):


Mike Lester (06:44):

Or travel or … Whatever your thing is, personally, they knew what they were going to do. So I do agree that there are some lessons that we can learn, what to do, what not to do. We’re getting a glimpse at what the not-going-into-work part of retirement feels like. If you’re still currently working and you’re not currently retired, you’re going to be very, very focused and concerned, I think, about your portfolios and markets.

Mike Lester (07:10):

So, obviously, there’s been a lot of volatility. We experienced a bear market, markets were off more than 20 percent, if you look at the indexes. That was scary for a lot of people, particularly if they’re close to retirement. And a lot of the people that we’re talking to on the phone, Kristen, are scratching their heads, wondering, “How is this going to affect me long term? If I had a plan to retire, let’s say, in January of 2021, how is that affected at this point in time?” And the answer is, well, if you’re in the markets, your portfolio is likely significantly lower than it was just two months ago or three months ago. But, at the same time, what’s it likely to do moving forward?

Mike Lester (07:50):

And so, we’re seeing a lot going on with government, we’re seeing a lot of stimulus plans. They were talking about 2 trillion in stimulus. We got that. Now maybe 3 trillion. I heard President Trump mention this could even go to 6 trillion before it’s all over.

Mike Lester (08:04):

And so, we got to look at this and go, “Well, listen, if they dump 2 trillion, 3 trillion, what if they dump 6 trillion dollars on this economy? Is it likely to grow?” The answer is … I don’t know how it couldn’t. Economies grow because people are spending money and if you’re having them money to spend, then that’s going to happen. And Corona or COVID-19 will be over and people will be back to work.

Mike Lester (08:24):

And so, right now, what we’re telling clients is, “You got to take a very, very close look at your portfolio and you need to understand, moving forward, how it’s likely to react.” So we’re making those changes in the portfolios for our clients. If markets did poorly, the same things that went down aren’t necessarily going to be the same positions that go up, moving forward. And so, what we’re telling our listeners on the radio is, if you haven’t taken a close look at your portfolio or if you’re feeling a little like, “You know what, I don’t want to touch anything until things get back to where they used to be,” because I have heard that comment, that’s probably a bad idea.

Kristen Charles (08:58):


Mike Lester (08:58):

And why I say probably, probably means it depends on what’s in your portfolio. Are you invested in things that are likely to do really, really well moving forward or are you invested in things that aren’t likely to benefit as much from the stimulus? Because, if they’re going to dump this much money in our economy, and I can bet with … I don’t know for sure, but I’ve got some confidence that the third quarter and fourth quarter of this year probably look better, even if there’s still Corona or COVID-19 around.

Kristen Charles (09:23):


Mike Lester (09:23):

And I can be pretty confident, with all the stimulus, that 2021, at least in the beginning, looks pretty good. I want to participate in that. But I want to participate in it in the most responsible way possible, which means taking a close look at my portfolio, understanding what got me to where I am today, and then coming up with a plan moving forward … that’s the most efficient. There are companies that haven’t done poorly, at all, in the situation. I think I mentioned this maybe last week.

Kristen Charles (09:51):

That’s crazy to me!

Mike Lester (09:51):

Well, take Johnson & Johnson for example. It’s a household name, they’ve done very, very well. They’re trading near all-time highs. So, what are the chances that Johnson & Johnson’s price, if it’s trading at all-time highs now in this crisis … Again, it would have been a great thing to own up to this point. When the economy turns around and markets turn around, what are the chances that Johnson & Johnson are going to go up by a huge percentage? And huge, I mean 20, 30, 40, 50 percent or something like that. Not great.

Mike Lester (10:18):

It could. They may have the vaccine for the virus. But if it’s at all-time highs now and everything else is down, what do you think is your best bet moving forward, as the economy turns back around? And all I’m saying is … I got nothing against Johnson & Johnson, it’s a fantastic company, but there might be options out there that provide more growth opportunity and those are going to be the ones that are beat up a little bit.

Mike Lester (10:39):

And so, taking the time to do an analysis of your current portfolio, let’s measure how much risk you’re willing to take and then, once we do that, find out what’s the most appropriate way to be positioned right now when they’re going to dump all of this money on our economy, when gas prices are super low, when we’re coming up on summertime which is when viruses typically subside a little bit, even if it comes back around for a second round. We got to look at that and we got to look at it really, really closely.

Mike Lester (11:05):

So, that’s the kind of thing we’re going to do for someone when they call, Kristen. They’ve got those types of questions about their retirement accounts or their savings accounts or their trust accounts or their joint accounts. And we’ll do that deep dive on an analysis for them, and we’ll also provide them with a complete financial plan to show them the steps they need to take to be successful in retirement.

Kristen Charles (11:25):

Up next, is a job buyout offer in your future? If so, how should you handle that? Plus, we’ll gauge how much risk you should be exposed to for yourself.

Kristen Charles (11:40):


Kristen Charles (11:41):

A song about Ozzy’s wife Sharon. They met when her father, Don Arden, was managing Black Sabbath. And, after they married, Sharon bought out Ozzy’s contract and became his manager. The rest is history. She’s certainly a manager that was very picky about a lot of things and made sure he had a lot of things he needed. Honestly, he needed a lot of watching over … in many years of his life. So, Sharon being in charge of that may not be a bad idea.

Kristen Charles (12:09):

You know, I don’t want someone in charge of my money but I do want someone I can lean on to help guide me through crazy times on Wall Street and the great times on Wall Street. And, Mike, that’s what you yourself have been doing for well over 20 years, is helping people near and in retirement with that process. And it’s no secret that one result of the bear market is that we’re seeing a rash of buyout offers from private companies and even some local governments.

Kristen Charles (12:38):

Now, for baby boomers who are close to winding down their careers anyway, an offer like that might be tempting. What sort of things should we consider when deciding if a buyout makes sense for us?

Mike Lester (12:50):

Sure! I mean, another word for buyout is early retirement, right? So it’s an early retirement option, you weren’t planning to do it for certain amount of time. But if your company comes to you and says, “Hey, listen, if you’d be willing to leave early, we’d be willing to give you X amount of dollars.” And usually leaving early means that certainly you get a payment upfront, but you’re going to lose the healthcare, you’re going to lose some benefits, and stuff like that. So everybody’s situation is going to be pretty unique on whether it makes sense for them or not.

Mike Lester (13:18):

I think some of the buyout options, right now, in some ways would be a little harder to swallow if your 401k or retirement account at work is down considerably, because you probably felt pretty good about your position for retirement. And then, if you didn’t have any active management on your portfolio and just kind of rode it down through the COVID-19 Corona issue, maybe you’re asking yourself, “How prepared am I?” Because a lot of people, Kristen, are down 15, 20, 30, 40 percent in their portfolios.

Kristen Charles (13:48):

Mm-hmm (affirmative). Depends on the day and how they’re allocated.

Mike Lester (13:49):

That’s right, depending on allocations and everything. So, you got to take a closer look at this. So, when it comes to buyout offers, I think of this in a couple of different ways. First of all, as we always say, you need to understand your portfolio, you need to understand your own personal financial situation. And find out, if you retired today, is your portfolio the way it needs to be positioned? And when I say, “Needs to be positioned,” we’re just talking about efficiencies.

Mike Lester (14:12):

Kristen, everybody that I talk to, they want the highest rate of return that they can get. But they’re also either retired or very close to it and they’re just not willing to take a lot of risk to get returns. And so, we’re always looking for efficient options. By efficiency … I know I’ve defined it before, I’ll just define it again, I would say, to oversimplify, if I showed someone two portfolios and both of those portfolios are averaging eight percent per year, and I asked them which one they would like to invest in, what a lot of people are going to say is, “Well, Mike, I’ve always heard I should be diversified and I don’t want all my eggs in one basket. So if they’re both averaging eight percent per year, put half my money in one and half her money in the other one, and let’s just go from there.” Again, more diversification.

Mike Lester (14:51):

Now, if I change the question just a little bit and I said, “I’ve got two portfolios, both of them are averaging eight percent per year. One of them is half as risky as the other one. How do you want to invest your money?” Well, that little piece of information changes things quite a bit, and people go, “Well, don’t put it in both. If I can get eight percent with half the risk of the other one, put all my money in that investment option.”

Mike Lester (15:11):

And so, literally the details matter a lot when it comes to investing. Average rates of return don’t tell the whole story. And so, our clients … Because, again, they’re retired or close to it, they’re seeking returns that they can’t get in … I don’t know, fixed rate investments. You know, things like CDs and savings accounts. But they’re still not willing to take tons of risks, they’re just looking for a relationship with an advisor that can help with that, which is why we promote and recommend active management of your portfolio.

Mike Lester (15:39):

I don’t like this, “Hey, listen, just hang in there. Don’t worry. Eventually the market will go back up.” That doesn’t work for retirees or people that are close to retirement. So back to this question on … you know, “What about buyout offers?” And that sort of a thing, if you’ve gotten one. Well, it’s going to start with an evaluation of your current investments and portfolio, because if you take that buyout, the question is going to be, “Well, so what now? What do I do with that money?”

Kristen Charles (16:01):


Mike Lester (16:01):

Do I just dump it back into the same types of investments that I’ve done all along? What if those options aren’t as efficient as they could be? What if I’m taking twice as much risk as I need to, to accomplish the return that I’m looking for? Or what if, for the amount of risk that I’m willing to take, Kristen, looking at this a little bit differently, if I’m willing to take risk, I want to be compensated for the risk I’m taking. And so, we got to look at it both ways.

Mike Lester (16:23):

So, early retirement could be a good thing. There could be some opportunities in this market, if somebody’s considering early retirement right now and somebody’s basically willing to give you a lump sum check and we’re looking at markets going well. They’re about to dump all this money on our economy, whether it’s 2 trillion, 3 trillion … I heard President Trump mention 6 trillion possibly. I’d be surprised, but maybe. That’s just like pouring gasoline on the fire. And so, maybe there’s some opportunities in there.

Mike Lester (16:48):

I think the bottom line though, Kristen, is: understand your portfolio, make sure you’re efficient. That’s really what we’re here for. If you have questions, if you want analysis, we specialize in retirement planning for individuals that are either retired or very close to it. And so, if you’d like our assistance, we provide analysis and financial planning, complimentary.

Kristen Charles (17:08):

You know, one of the decisions we have to make is how much of our money to invest in the markets. And Sharon Carson, a retirement strategist for JP Morgan, tells The Street that you need to think carefully about how much risk you’re comfortable taking.

Sharon Carson (17:21):

You don’t want to be all risk. And the more guaranteed or protected income you have, maybe the more risk you can take. But you need a personal assessment to see how much risk you want to take in the rest of your portfolio.

Kristen Charles (17:33):

What does she mean when she talks about a personal assessment with this portfolio and risk.

Mike Lester (17:39):

Sure, I think it goes along with what we were just talking about. So, there are a lot of people out there, and through no fault of their own, Kristen, but they’re working very, very hard, they go to work, they do their job, they get paid, they’ve got their health insurance, they make contributions to retirement plans. They really don’t have a lot of time in their lives to go back and then, sit down in front of the computer and do an analysis of their current plan to find out how efficient it is. And risk assessment is part of that efficiency that we’re talking about.

Mike Lester (18:08):

So, when I talk about, “How much risk are you taking to get the return in your portfolio?” And I give examples like I just gave, which is, “If I had two portfolios averaging eight percent per year, which one would you like to invest in?” Well, the answer is, if the risk is the same, you would diversify. But if one’s half as risky as the other one, you’d choose the eight percent return with half the risk. And so, risk assessment, essentially, gives us those details and those facts.

Mike Lester (18:33):

So when we sit down with individuals, let’s say they’ve been listening to a radio program today, they say, “Hey, listen, I want to come and I want to find some time on your calendar to get this risk assessment done,” which is an analysis of the portfolio, “so that we can show you what you could expect moving forward as far as an average rate of return. You need to know what that’s going to be. But then how much risk are you taking to get that average rate of return?” Because if we can make some little tweaks to the portfolio that either maintain or increase your average rate of return, but at the same time reduce the amount of risk you’re taking to get that return, that’s part of risk assessment and that’s what we’re talking about when it comes to efficiencies.

Mike Lester (19:09):

Kristen, our job is to help individuals, because we work with people that are retired or very close to it, help them transition into retirement and maintain their current standard of living. How do we do that? Well, you have to be able to generate, after you retire, generate an income off of your portfolio, that’s adjusted for inflation and taxes, moving forward, that accomplishes everything that you were doing while you were working. If you can’t do that, it means a couple of different things. Either, one, you’ll run out of money, because you’re not making enough to pay for your expenses. Or the other is you have to cut back on your lifestyle.

Mike Lester (19:40):

And, Kris, I just don’t meet people that dreamed about a retirement where they had to sell their house, sell their car, move into a small place, and penny pinch … throughout their retirement. And we’re talking to individuals that have been very structured in the way they built out their retirement savings, they made contributions to retirement savings, they paid off homes, they got their debt pretty low … or non existent. And now they’re sitting on their nest egg and wondering, “Okay, in this transition, what do I do?”

Mike Lester (20:07):

What we recommend is active management. We’re fee-based advisors, we are fiduciaries. And when we sit down with individuals or just talk to them on the phone, it’s literally just a way for us to kind of get to know you. We’ll explain to you what it is you could do in your portfolio. You’re welcome to take that information to your current advisor, you’re welcome to go implement it on your own. If you want to hire us to do it for you, that’s fine too. But, Kristen, the only way somebody would hire us is if they felt like we were providing enough value, and that’s really the key.

Kristen Charles (20:34):

If were planning to retire this year or next year, before the virus did a number on the stock market, is it too late to still keep those plans on track? Find out next with Mike Lester.

Kristen Charles (20:55):


Kristen Charles (20:56):

If you were listening to the radio back in 1971, you were probably hearing Carole King’s classic It’s Too Late, for the very first time. Speaking of it being too late, Mike, I bet a lot of our listeners were planning to retire this year or next, all before this virus did a number on the stock market. I mean, is it too late to financially recover enough to keep our retirement timetable intact?

Mike Lester (21:22):

Well, the timetable is the tricky part. So, I think that if my retirement was within the next six months and I had already made an arrangement with my company to do that, I don’t know that you’re in big trouble right now, but I do think it’s going to be a little bit nerve-racking. What we find, just emotionally and psychologically, is people tend to have a number in their head. A lot of times, they say, “Hey, when I get to this number, what I’m going to do is I’m going to go ahead and retire, and I’m going to live off that money for the rest of my life.”

Mike Lester (21:50):

And sometimes the math is kind of simple. Sometimes they think, “Well, if I can average three percent of my money or four percent of my money or five, ” I mean, just pick a number. But let’s say that somebody needed … 60000 dollars a year in income from their portfolio, and they were figuring three percent, they’d need … around 2000000 dollars set aside for retirement. Simple math, but sometimes our brains work that way. And recent events, certainly COVID-19, Corona, has changed that for a lot of people.

Mike Lester (22:21):

We were blindsided, there was no expectation. China kept a lot of secrets, which created more problems. We’ll eventually see how all of that plays out in the world markets and the world courts, and everything else. But I think what we all have to do right now is take a look, at least financially, at our own personal situation. And what’s likely to happen? Well, I don’t know how we can put as much stimulus into this economy as we’re talking about. You know, we were talking … We’re already over 2 trillion in commitments, and they’re talking 3 trillion, maybe 6 trillion.

Mike Lester (22:55):

If you’re stimulating an economy, and we can argue about all the bad things that can happen later, okay? But, for right now, if you’re going to dump that much money in our economy, as long as people have money to spend, and it does look like that’s going to happen, that money is going to get spent and the economy, I do think, does well in the third, fourth quarter. Certainly, first and second quarter of 2021, it probably starts to look pretty good.

Mike Lester (23:19):

It’s a little bit hard to think about now, but we are starting to see the light at the end of the tunnel. And COVID-19 is going to be … I mean, realize it’s going to be a distant memory, a bad one for some people, not so bad for others depending on how you were affected. But it’s a distant memory after there’s a vaccine.

Kristen Charles (23:34):

Of course.

Mike Lester (23:35):

And the problem is it takes a while for that, but there’s already some nice things going on. Markets don’t think that way.

Kristen Charles (23:42):

Well, markets don’t have a brain.

Mike Lester (23:43):

They don’t have a brain-

Kristen Charles (23:46):

They’re reacting to information.

Mike Lester (23:46):

That’s right, they react to information, but they also act ahead of time. And so, if you believe like I believe, and I’m not saying everybody out there listening should agree with me, but if you believe like I believe, that if you’re going to dump this much money in our economy, and Corona is eventually gone, certainly less of a problem than it is or has been in the past eight weeks or so, then where do you think markets are going to be? Do you think they’ll be higher than they are today or lower than they are today? It’s hard to imagine that they aren’t higher.

Mike Lester (24:15):

Again, we don’t know for sure. Anything can happen. But it’s this business of managing portfolios, there’s a lot of math and science that goes into it, but it’s all about probabilities. What is the probability that markets go up? What is the probability that markets go down? Yes, we were blindsided by this, but it does go away and, eventually, people do go back to work, and, eventually, there is a vaccine. And, eventually, we start riding in airplanes and staying in hotels, and going to restaurants, and everything else.

Mike Lester (24:43):

Where do you want to be with your investments when that happens? Because we got really, really beat up over this. But do you want to be on the sideline, or do you want to be invested? Do you want to be invested the way that you were as it went down, which was probably a little bit different mentality. We didn’t know Corona was coming. Or do you want a more calculated approach, moving forward, based on what we now know about Corona and which industries that have been beat up, maybe a little more than they should have been, just out of fear? How do you want that to look for yourself and your own personal economy, moving forward?

Mike Lester (25:17):

Kristen, I know that’s maybe a little deep, but those are the types of conversations we’re having with people when they call into the office and we’re scheduling appointments. And meetings, obviously, have been virtual, or sometimes on the phone. You know, what have you, depending on where you’re at. But the point is … I don’t like the idea of waiting.

Mike Lester (25:36):

Our clients are asking, “What would you do?” Kristen, I would want to participate … if they’re going to dump this much money on it. I don’t want to get in later and miss out. And I know it’s going to be a rocky ride, but if you’re wondering how all this affects your personal economy and your situation, and everything else … Kristen, a conversation about it is really just a phone call away.

Mike Lester (25:54):

As long as you’re retired or close to it, we work with individuals just like yourself. All it takes is a phone call and we’ll set something up.

Kristen Charles (26:01):

You know, Mike, you mentioned the virus definitely affecting some folk’s health, unfortunately. Speaking of health, Forbes Magazine asked economist Teresa Ghilarducci if she had any advice for folks who are concerned about what’s happening now. She said that we should be practicing some healthy hygiene on our retirement money. Okay, while everybody on Facebook is trying to tell me the right way to sew a face mask at home, and how many times to wash my hands and for how long, and how to Lysol off my groceries … But, seriously, I have no idea how to make sure my retirement accounts are hygienic. Is that even a thing? What is she talking about here?

Mike Lester (26:37):

I don’t know how-

Kristen Charles (26:38):

I think maybe it’s just a pun she’s making.

Mike Lester (26:40):

Yeah, I think she’s … It’s an analogy, right?

Kristen Charles (26:42):

Because you don’t need your money too sterile, right?

Mike Lester (26:44):

I don’t know. Money is probably … Cash? I’ve been using credit cards, Kristen. Cash is probably the-

Kristen Charles (26:51):


Mike Lester (26:51):

… worst way to spread, germiest thing you could possibly have in your entire life.

Kristen Charles (26:53):

I’ve always been that way because the germs of cash money make me a little uncomfortable, but … I think by healthy hygiene, actually, she’s not talking about making massive changes as much as not panicking and making sure that you’re taking care of your family and your community. But there’s got to be a way to keep things … healthy with our retirement right now.

Mike Lester (27:16):

It just goes back to what we’ve been talking about. I really don’t want to be in a situation right now, on my retirement account or portfolio, where I’m burying my head in the sand, where I’m afraid to open that statement when it comes in because … I know I’m not going to like what I see, right? If I feel like I’ve got a hang-in-there portfolio, maybe I’ve got a 401k with target-date funds or … I was just sort of checking boxes, there’s no real active management there. You look at the TV and you realize that the Dow is down, the S&P is down … Depending on when, right? We’ve got up days and down days.

Mike Lester (27:52):

But my point is we all, at this point, know that COVID-19 had a very significant impact on our economy, it’s had a significant impact on our jobs, it’s had a significant impact on the stock market. And so there is, sometimes, a tendency to not look, right? Because, “When things get better I’ll look.” I want to encourage people to … It’s kind of that ripping the band-aid off kind of a thing. Like, I know this isn’t going to … It’s probably not going to be great, but the advantage to ripping that band-aid off and taking a close look at the portfolio, is going to be … Well, listen, things are different. There’s probably some opportunities in there. And target-date funds, Kristen, and for our listeners who aren’t aware, I know a lot of them are, but they don’t care about anything but the date.

Mike Lester (28:37):

It has nothing to do with the economy, it has nothing to do with your age, it has nothing to do-

Kristen Charles (28:42):

It’s targeting what? 20, 30 years? Whatever number you plug in there.

Mike Lester (28:44):

Whatever number you plug in there. The 2025, the 2030, the 2035. These are extremely common in 401k accounts. Mutual fund companies … whatever their prospectus says, they have to follow that. So we see a lot of mutual funds inside of 401k’s, and if that mutual fund says, in their prospectus, they’re going to be 100 percent stocks, they’re always going to be a hundred percent stocks no matter what happens.

Kristen Charles (29:06):

Does that mean that target-date funds and mutual funds are good or bad for our portfolios?

Mike Lester (29:12):

Well, it depends. And it’s a terrible word, depends, but there are times when it could be great. I’m not a big fan of target-date funds because they’re just going to get more and more conservative the closer you get to that date. That’s what they’re designed to do. And, in this economy, and … I don’t know, I think things are going to go pretty darn well with all this money they’re going to dump on us. A target-date fund would hurt me in that situation, if it was getting more conservative as markets are going up.

Mike Lester (29:39):

Bonds aren’t very attractive because they’ve cut rates as low as they do. So, in a lot of target-date funds, when they pull you out of stocks … or equities, when they pull you out of those to move you to fixed accounts to get more conservative, they’re moving you to bond accounts. And those bond accounts might not be awesome. I mean, interest rates are, essentially, at all-time lows. There’s only one way for them to go, for the most part, and that’s up. And if interest rates go up, bonds typically do poorly.

Mike Lester (30:08):

So, not to get too far into the weeds here, Kristen, but it does make sense when we’re talking about being … Healthy hygiene, applying that to our portfolio, it starts with understanding what’s helping us and what’s hurting us in the portfolio, and having more of what’s likely to help us, moving forward, and less of what’s likely to hurt us, moving forward. But then, realizing that’s going to change over time and not utilizing just a hang-in-there approach. Let’s utilize active management and find out if it makes sense.

Mike Lester (30:37):

Frankly, Kristen, there’s a lot of people out there that have never worked with an investment advisor and they’ve never hired one. They don’t know if it would be of any value to pay somebody to help them manage their portfolio. And that’s really where that introduction or conversation starts with us. It’s, “Well, let’s sit down, let’s take a look at your portfolio. Let’s see if net of any fee that you would pay us to manage your portfolio, if we can provide value.” And we would answer that by, “Well, what if we could show you a higher average rate of return than you’ve historically done in your portfolio net-a-fees, that would be valuable. What if we can show you a higher average rate of return over time? What if you were taking half the risk … right over that period of time? That would be valuable.”

Mike Lester (31:14):

So, again, this comes through analysis and financial planning. We’re just inviting people to have that conversation and take advantage of our complimentary offer.

Kristen Charles (31:23):

Stay with us as we talk about bonds. Are they something we should be looking at in a time like this? And if you’re into cars, a fun audio piece coming up next with Mike Lester of Talon Wealth Management.

Kristen Charles (31:46):


Kristen Charles (31:52):

The Beach Boys released 409 in 1962 as the B-side of Surfin’ Safari. Mike, we were talking, before today’s show, about how you’ve got this kind of prized … It’s a Buick, right? That you’re rebuilding?

Mike Lester (32:09):

I don’t know about prized. I like it.

Kristen Charles (32:11):

Well, you’re excited about it.

Mike Lester (32:13):

It makes me happy. Yeah.

Kristen Charles (32:15):

That’s prized to me.

Mike Lester (32:17):

Yeah! Obviously, I’m familiar with the song and then … 409 is obviously talking about an engine and the displacement, I imagine. And then I’ve got this old ’69 Buick. And Buick sounds kind of boring. You know, like a big … Like a four-door, but this is a little more sporty. It’s an old ’69 two-door Buick. But it’s got a 430 in it, so there you! A little bit bigger than a 409. It’s not all that fast yet, but it’d be kind of fun to make it that way.

Kristen Charles (32:47):

I mean, are you going to kind of pump it up so that it can be that fast?

Mike Lester (32:50):

I think it’d fun! I don’t want to get too far into … But the guy that I got it from, just great guy and spent a lot of time with the car and just wanted to simplify his life. And he never really did any big modifications, but it’s already not the original color and it’s already not the original wheels. So at some point, for car enthusiasts, there’s a lot of value in keeping something all original.

Kristen Charles (33:14):

Mm-hmm (affirmative).

Mike Lester (33:14):

This is not that.

Kristen Charles (33:15):

I see! I see. It’s more for-

Mike Lester (33:18):

So …

Kristen Charles (33:18):

… what your taste is, what you enjoy.

Mike Lester (33:19):

Yeah. So now I’m thinking … you know, maybe I will do a few things. It’s almost like I’m not … I’m not doing any harm by making it a little bit louder and a little bit faster, and a little bit everything. The kids-

Kristen Charles (33:34):

You only live once!

Mike Lester (33:34):

The kids love it! There’s no-

Kristen Charles (33:36):

Oh, for sure! Anything loud, they’re all over.

Mike Lester (33:39):

Yeah. It’s not even loud yet, they still love it. Climbing over the big seat that kind of folds forward, and they get in the back and …. Yeah.

Kristen Charles (33:46):

A lot of baby boomers definitely remember the type of Buick you’re talking about. And the Chevrolet 409, I guess it was, from the early 60s. But baby boomers, specifically, remember what it’s like to go through market downturns and they are terrified that during a market downturn, if they retire or they’re already retired, they’re not going to be able to accomplish all that they had planned. In fact, Next Avenue is a website that focuses specifically on baby boomers, and they say it’s not just enough to have a retirement plan, we also need to update it at least once a year.

Kristen Charles (34:19):

Mike, I know that you do this with your clients. What does that involve, updating our retirement plan?

Mike Lester (34:27):

Well, so any plan, especially these days, things have changed. I mean, there was a time in the … Wasn’t so much the 80s, that was more the stockbroker area where you had a stockbroker and they picked individual stocks, and then things kind of evolved, I guess, into the 90s in the 2000s where people had … what they felt were diversified portfolios. It’d be group of mutual funds, you told somebody what your risk tolerance was and what you were looking to accomplish, and they were using historical numbers to build a portfolio. And then they would just tell you to hang in there. Like, “Hey, listen, you can’t get out because then you’re going to miss out on this or that. So if you just ride it out, overall, a long enough period of time, markets go up.”

Mike Lester (35:05):

And that’s true to an extent, but then, also, things have changed. I mean, it’s not the market of the 80s or the 90s anymore. At that point in time, Kristen, markets went up … gosh, almost 1300 percent from 1980 to 2000. And if you start looking for reasons why, I mean … economies weren’t always good but they were pretty good. But more than that, corporations were getting away from pension plans. So late 70s, legislation to allow 401k’s went through. In the early 80s, people started contributing.

Mike Lester (35:37):

And so you had the baby boomer generation making contributions to the market every month or every couple of weeks … and it drove the market up. And so, for an advisor to say to somebody, “Well, listen, I’m going to put together a diversified portfolio. If you just hang in there, things should be okay based on historical data.” That wasn’t inaccurate at that time, it’s just that situations have changed.

Kristen Charles (36:01):


Mike Lester (36:02):

Baby boomers are now retiring. It’s the largest generation we’ve ever had. So instead of the largest generation or the most people putting money into the market, to drive it up, now we have the largest generation, ever, pulling money out of the market to supplement their income in retirement. And if we’re not addressing that issue as financial advisors and fiduciaries, and if we’re not acknowledging the fact that things are going to look different from 2020, moving forward, than they did at that point in time, that’s just craziness! We can’t do a hang-in-there portfolio.

Mike Lester (36:31):

What’s probably going to look different is that we’re going to have very good years and very bad years. And finding a way to navigate that, to maintain an average rate of return that is acceptable to maintain our standard of living, adjusted for inflation and taxes, moving forward, all that’s really, really important. So, just full circle, Kristen, coming back to updating at least once a year, I agree 100 percent.

Mike Lester (36:55):

I think in the 80s and 90s, it maybe didn’t matter much. I mean, markets were just kind of going up. There probably wasn’t a reason to pay a financial advisor to manage your portfolio because markets were just going up no matter what, it would have been a waste of money. With volatility, if we can show, as investment advisors, as fiduciaries, and fee-based advisors, if we can show that it makes more sense to pay someone to help you be active in management, meaning there are certain times I would want to be in the market because the probability was very high of success, and there are certain times I would want to be out of the market because the probability was very low, and I wanted to pay somebody to worry about that for me so I didn’t have to? As long as the average rate of return net-a-fees is higher than what you would get on just a hang-in-there portfolio, that might make sense in your situation.

Mike Lester (37:43):

And that’s a something we’ve been talking about, Kristen, for years on the radio and inviting people to visit with us or meet with us, and have the conversation to find out whether that makes sense in your specific situation. And what we find is most people, Kristen, aren’t looking for a hang-in-there. They don’t want to self-

Kristen Charles (38:04):

They want more-

Mike Lester (38:05):

They want more.

Kristen Charles (38:05):

… active management, yeah.

Mike Lester (38:06):

And then, the only problem I see with that is … you’ll see people who think they have active management, and they don’t, right? They’re paying somebody a fee to manage their portfolio but they aren’t seeing any activity. That’s a problem on the other side. So, somewhere in the middle, outside of hang-in-there, and then the other extreme would be somebody telling you that they’re managing your portfolio but they’re really not and collecting a fee, if you can work with an advisor that is a fiduciary and has a vested interest in you doing well, then I think it’s likely to work out.

Mike Lester (38:35):

So, we’re inviting people to give us a call, we can have that conversation, show you what active management looks like, provide you with a written financial plan, we call it our Complete Financial Plan. Worst case scenario, Kristen, people are going to get an analysis and that Complete Financial Plan, and they go implement it on their own or they just have more information. Really, it wasn’t any skin off their back, they had some value there.

Mike Lester (38:56):

But, outside of that, some people, Kristen, are going to say, “Hey, listen, I don’t want to do this myself. I want to hire you guys to do it for me. I feel like you’re providing value.” And if that’s the case, we’re happy to have you as a client.

Kristen Charles (39:07):

Mike, before we wrap up today’s show, we hear a lot of discussion about how much of our portfolio should be invested in stocks, of course. But what about bonds? I mean, even though yields today are near historic lows, is there still a place for bonds in our portfolio?

Mike Lester (39:22):

Well, I think for the time being, Kristen, we want to be careful. We want people to understand bonds and how they work. There’s a big difference between owning individual bonds. In other words, I bought the individual bond and the guarantees associated with that, and the safety associated with that. And what most people actually have, which is not individual bonds but bond funds. Bond funds do not work like individual bonds, and we want to be careful.

Mike Lester (39:43):

It’s all about interest rates. Interest rates are at or close to all-time lows. And we’re just not in a situation where bonds are likely to do very well. If I’m applying a hang-in-there, I’m-going-to-own-bonds type of portfolio scenario, the yields are low, the risk is higher. High, I’d say higher. It’s higher because interest rates are likely to go up at some point and that’s going to create some problems with the value of your actual bond investments.

Mike Lester (40:10):

So, we want to take a really close look at that and, like you said, as we finish today’s program, there is a place for fixed investments in your portfolio. It may or may not be bonds at this time, we have to look at the right balance between equities and bonds, and then we have to look at all of the options that are available to you. It’s not as simple as just stocks and bonds, there’s a lot of ways to go about this. That’s what active management is about, that’s why we talked about doing reviews on a regular basis, that’s what that’s about.

Mike Lester (40:36):

We want to put together a great plan now, and then we want to make updates to that on a semi-annual to annual basis. And, as we wrap up today’s program, I just say, listen, if you’d like to find out more about what we do and how we do it, all it takes is a phone call.

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Announcer (41:18):

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 a 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.

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Mike Lester

Mike Lester

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The Importance of Making Regular Adjustments to Your Retirement Plan