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[music] Peter, hello. So good to see you. Welcome back, everyone. Let’s talk through the headlines today and ask a question. Does the stock market boom mean that you can retire early? So, check this out. Peter, I came across this article, found it very interesting. More Americans aed 55 plus are leaving the workforce, and some economists believe the strong stock market has a lot to do with it. But does a bigger portfolio really mean that you are actually ready to retire early? So, as we are recording here in early
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September, the S&P is up 40% over the past two years. In your opinion, how much can a growing investment portfolio influence someone’s decision to retire? >> Well, I I think that it does influence it and I think it can provide us with a sense of confidence. just don’t have an overestimated sense of confidence or a completely false and misguided sense of confidence because the market has moved up over the last several years, but it can also move down and we haven’t really experienced a lot of that. We kind of
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have some recency biased here and even where we have seen downturns in the market really since the great recession, they’ve been very temporary and not all that significant. But right >> those those events can and at some point probably will happen. So the market has always moved up over time but it does not always go up and that is a very important distinction in the verbiage and the language is that we cannot count on this reliably and average returns don’t tell the story of what really
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happens to your money especially when you’re making withdrawals in retirement. So, we need to have a plan put together. Maybe we don’t look this gift horse in the mouth. We appreciate that the market has moved up. Maybe we take it as an opportunity that it presents us to really formulate a plan, but don’t simply rely on our current and present condition and atmosphere always holding true to support you financially. If you are looking at retirement, >> a higher portfolio balance can certainly
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make retirement look more achievable. But how do you know if that growth is enough to support you for the next 20 or 30 years? >> You you really don’t because the higher portfolio balance today is a product of the current market environment and the current market environment is not going to be the forever market environment. So it depends on how you have placed a and located your assets and and how they are working as part of a plan. Right? The the exposure to the market is absolutely
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and can be and has been very beneficial for long-term growth. But in retirement, not everything is long-term. There is a current and present need for income and an ongoing need for income. So that’s why we look at like the bucket approach and strategies and the order of operations for how to tap into accounts and risk management and specific income planning strategies for that optimized retirement plan and and again the market can be and will be an important and valuable part of long-term growth. But when you’re talking about
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retirement, there are current needs, there are future needs, and your money needs to be placed in a way that reflects that kind of timeline that lasts, by the way, for an unknown amount of time. The duration of retirement, we don’t know. But I do know that over the course of one or two years, maybe a market downturn doesn’t impact us uh to the point where our lifestyle changes, but over the course of 20 or 30 years, we are likely to see several market cycles and downturns. And if that happens, that definitely can impact the
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kind of trajectory that we have and whether or not we’re we’re living up to the expectations that we had on day one of retirement. >> Right. So, let’s talk through the why of that. As you mentioned, of course, we all know the market moves up and down. We need a plan for retirement income that is not reliant on our in our invested money. Why is that? >> Uh sequence of returns risk is is an interesting phenomenon and it’s kind of the opposite impact of dollar cost averaging. If you are making
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contributions on a regular ongoing basis to the market as it is moving up and down, you are actually taking advantage of downturns, right? It seems counterintuitive, but when the money is moving in, a downturn is advantageous to us. In fact, I’ve got charts I’ve covered in recent webinars where if somebody starts with $500,000 versus somebody contributes that same amount of money over like a 20-year period, you would think the person who started with half a million dollar head start would end up better. But the power
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of dollar cost averaging actually leads to better return and and end result and account balance for the person who had been contributing. Uh if you’d like to see that uh just uh text us your name and we’ll send you the webinar slides on that. But the opposite impact happens when we are withdrawing money. We are now impacted negatively by that same phenomenon in reverse. The dollar cost averaging turns into sequence of returns risk. And a way that this is illustrated, as you can see on your
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screen, is if you have the same returns over any given period of time and you don’t add or contribute to an account, it doesn’t matter what order the returns happen in, you have the same amount of money at the end of that period of time. But if you start making withdrawals, then the order of the returns matters. And if we’ve got negative returns in the first few years of retirement, it completely changes the end result and the trajectory of retirement. So I have yet to encounter anyone that says, you
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know, I know that the next 5 to 10 years are going to be positive years in the market and so I feel completely confident in retiring um based on market returns. We don’t know that. we we won’t know that and you know hindsight we have the benefit of knowing that the market does have volatility from time to time significant volatility at certain periods of time and that we haven’t seen that in a pretty extended period of time as of today and so when that comes I don’t know but in order to have lasting
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financial confidence we need a plan to prepare us for when that does eventually happen. Mhm. Okay. So, let’s make this last question specific to everybody who is watching and perhaps within a few years of retirement, they’ve seen their portfolio grow. It feels really good. So, what should they be doing right now to figure out if they are really ready to leave the workforce? >> Yeah. I mean mapping it out, putting a plan together, uh taking advantage of the generosity the market has shown us,
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the gains and growth that we have already achieved, not what we anticipate uh this this continues to provide us into the future. I I really am not sure if the next 15 years are as generous in the market as the last 15 years have been. And so again, take advantage of the opportunity while it exists today. Specifically, if you are still working, but you’ve reached age 59 and a half, this is an opportunity to take control and better position your assets even in your existing workplace plan like your
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401k. You can utilize more choices and options after age 59 and a half through what’s called an inservice distribution. So, this is widely available. More and more companies have offered this because they understand it’s actually a move that is in their employees best interest to remove dollars from the 401k. So if the companies are acknowledging this, why should we as individuals ignore this this important opportunity and this milestone to better plan and prepare and position and strategize for the future
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years where those assets are going to need to be there to support us. So, you’ve got more control. You’ve got a wider variety of choices and options. You can begin to do some strategic uh tax planning maneuvers that you can’t do inside of your 401k. So, just regardless of where you’re at in your career and your your progress or even already in retirement, you should absolutely have a documented plan in place that covers income, investments, taxes, healthcare, and legacy. But if you have reached that
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milestone of 59 and a half or or you’re past that by a couple years, you should really be looking at the opportunity to better take control of the assets that are going to be there to support you into future years. And right now, we’ve got this opportunity to uh do some Roth conversions in in what is a known and potentially lower tax rate than we might be into the future. So, that’s another strategy that I think people should be looking at. Mhm. And just a friendly reminder for everybody who is watching
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us to visit your YouTube channel where you and I did do a great deep dive on inservice rollover so they can search for that and take their time to uh think that through because as you mentioned we need to get laser focused as we get closer to retirement. So Peter, if again somebody is looking at their, you know, fat portfolio right now, feeling good about it, maybe wants to talk through the plan if they want to retire or see if they are able to retire, what’s the best way to reach you to work out that
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math? >> Give me a call 919-30005886 919-3000-5886. And if your portfolio has reflected some of the gains and growth of the market, that does indicate that you probably are exposed to risk in the market as well. And as account balances have grown, so has the amount of risk in somebody’s portfolio because there there there is more there on the equity side than there was maybe five years ago. So a larger percentage of your portfolio is actually exposed to the potential risk. So again, wherever you’re at, take advantage of
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this market, but don’t count and rely on it always being this generous. have a plan in place that has reasonable assumptions for continued growth. And if we do experience growth that is better than reasonably conservative assumptions, fantastic. We are in better shape than we thought. But don’t let your financial future be based on an assumption that if it doesn’t hold true, if it doesn’t come to fruition, you are not in as good a shape as you thought. Your results are only as good as the
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assumptions that your planning is based on. And a lot of people don’t even have that plan in the first place, Aaron. So that I think is the message of of this program today. >> Step number one. All right, Peter, thank you so much for your time today. I really appreciate it. >> Always a pleasure. And again, we’ll put that plan together for you. No cost, no obligation. It’s a it’s a courtesy service at Rashan Planning. Uh give us a call 919-30005886. 919-30005886. Right,
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>> Peter. Thank you. >> Thank you. The content of this radio show is provided forformational purposes only and is not a solicitation or recommendation of any investment strategy. You are [music] encouraged to seek investment, tax, or legal advice from an independent professional adviser. Any investments and/or investment strategies mentioned involve risk, including the possible loss principle. Advisory services offered through Brooks Zone Capital Management, a registered investment adviser.
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Fiduciary duty extends solely to investment advisory advice and does not extend to other activities such as insurance or broker dealer services. Advisory clients are charged a quarterly [music] fee for assets under management while insurance products pay a commission which may result in a conflict of interest regarding compensation.
