Leibel on FIRE

 Today we're going to talk about the biggest mistakes people make with Roth conversions and how to avoid them. We're also going to talk about how Aunt Irma and Uncle Ronald, r m d, and our good old friend, uncle Sam, so stick around while we go through the nitty gritty of what you need to know before doing a Roth conversion. What is a Roth conversion? So a Roth conversion is essentially when we decide to pay taxes on our retirement accounts and choose when and how we pay taxes.Ordinarily, we would pay taxes when we take the money out of the account and we would take it, out in retirement. A Roth conversion is saying, Hey, I'm gonna pull out more money than I need. I am going to pay taxes on that immediately, and I'm going to put it in this Roth. Now the benefit of this Roth account is that it grows tax free, and when we take the money out, it's tax free on the distributions.Of course, there's an asterisk with that, that we'll talk about more about, but essentially that's what it is. It's paying taxes when it's convenient to you and not when it's convenient. In Congress, What About IRMMA? So I think that, these are nice hypothetical discussions and like lots of things in finance, we can get caught in the weeds.We can talk about, like what's theoretically the best decision to do, right? What's the best stock to buy? What's the best bond to buy? What's the best, R M D or Roth conversion? But at the end of the day, all of the hypothetical decisions and all the hypothetically best things to do really don't carry any water or hold any water when it comes to your retirement because this is your retirement we're talking about.We're talking about the money that you need to live on, the money that you need to count on. Then you need to be there for the rest of your life and your spouse's life and maybe even your children, right? So when we are talking about. What we need to look at is really, is it going to create the experience that we want to have?Is the decisions that we are making as converting, doing this Roth conversion? Is it going to help our retirement? Is it gonna make our money last longer? Is it gonna give us more income in retirement? Or is it gonna detract from that? Because at the end of the day, that is the only thing that.Not some theoretical decision of, will this theoretically save me money if I live to 120? Maybe theoretically, but I don't care about theory, I care about practice. And so that's really, when it comes down to it, I think that every single person, it has a unique decision, right? And how much to convert, if you should convert when you should.That is a uniquely personal decision, and I really, it really gets to me when he will make these blatant statements out there and they say, oh, everyone should convert. Everyone should do this. Everyone should do that. No, you are not everyone. You are a unique human being. The Biggest Roth Conversion Mistake I think probably the biggest mistake that I see people making, especially right now is to do these massive Roth conversions upfront. I, for some people I recommend Roth conversions for the vast majority of people.I actually show them that. Either doing a small conversion or not doing any conversion at all is beneficial for them, but I do tell them right the concerns that we have today about doing Roth conversions, like the fact that our tax code is scheduled to expire in 2026. The fact that every administration comes in and puts their stamp on the tax code, the fact that we have high inflation, the fact that we have, interest rates are rising, which means that the Federal deficit and the Federal Debt service cost is gonna go up, right?All of these are reasons why we should be concerned about taxes increasing. . But the thing that I also tell everyone is that you can bet that Congress is going to have a way to protect their money and that in the United States, the tax code is not set up to collect revenue. It's actually an extension of our economic policy.It is a way of for the government to incentivize behaviors that drive our economic. And so there will always be opportunities for us to reduce our taxable income in retirement to be able to reduce the impact that has. And so what we wanna be is strategic about the decisions that we make, and make sure that we have as many options as possible.Now ha. Having said all that, there are people, right? If you have all your money tied up in a retirement account, right then you are right for Congress to come after. And we might want to do a Roth conversion at that point. Not because we're worried about taxes, but because we don't want to have Congress be able to dictate when and how we take money out and we don't wanna be subject to the whims of Congress.And when we do that, we wanna make sure that we do it in a way that's beneficial to our retire. And that it doesn't detract from our retirement. And the answer for that is gonna be different for every single person. It's gonna depend on your tax bracket. It's gonna depend on how much money you need, how much money you need in retirement, right?What your shortfall is, how much your, what your health is, how well your age is. There are so many factors that are individual. Is This Strategy Right For You?  I get this question all the time, right? Almost every single conversation I have with a new person begins with I read this article, or my current advisor told me X, Y, Z. What are your opinions about it? And I always, my answer is always the same. It's, those are great ideas. And they work for a certain set, a subset of people, right? They're the perfect solution for a certain person. Now, I don't know if you are that person, right? And from the information that you've given, You don't know if you're that person, and I don't know if you're that person.And the only way we're gonna figure it out is to actually map it out, right? Let's put pen to paper. Let's map out the future, figure out what it, what exactly will impact us and will this have a positive or negative impact? And when people say but by the Wall Street Journal said this, or, Montley Fool said this.The answer is they're selling headlines. They're selling views, right? And when you're trying to, when you're trying to get people to read something, when you're trying to engage people, you say really strong, bold statements, right? Because that attracts people. It riles people up. It makes people feel like, this is the truth, right?And either I feel strongly for or against it, and it gets people engaged. Your retire. Is not a political statement. Your retirement is not, some headline that gets viewership. It is, it, I it is your experience, right? It is th your life and we don't want to, have some headline truth.We want to have the experience that we've worked really hard to have, and the only way we're gonna do that is by doing the hard work. Don't let anyone convince you that there's a shortcut to doing the. Common Roth Conversion Mistakes when we look at Roth conversions, right? And we look at the mistakes that, people make or that, even advisors and financial professionals and the media, right? The things that they espouse, right? So the things that you will encounter are taxes are gonna go up. So let's convert it also where at lower taxes, right?Which, there may be truth to taxes are going to go up. I do believe that taxes are gonna go up, but that doesn't mean it's gonna go up for you. But the other thing is if you're gonna pay a whole bunch of money in taxes now that's gonna decrease your portfolio value, which means it's gonna decrease the amount of money that you have to grow your assets on, right?And depending on where you are in retirement, it's gonna determine how much of an impact that's gonna have on your retirement lifestyle, right? Because that's gonna directly impact how much money you have. So mistake number one would be converting too much upfront. Mistake number two is if you don't have anything converted, and you do need to.Convert right, than not doing the conversion. So it's, it's two sides to that coin. So you have to every single year look and make the decision of, do I do a Roth conversion this year? If so, how much do I do? And it is very much a game day decision. The next thing is you wanna look at, how does this affect your overall picture?So you have, are there things you can do to take advantage? Which we can talk more about the five year rule, which is a negative impact, right? So I can, when I take that money outta my retirement account, I don't necessarily have to put it into a Roth account. I can put it in a brokerage account if I put it in a brokerage account, right?I have to pay taxes every time I have capital. But it also means I can harvest lost losses. It also means that I can borrow money against it, which means that when the market, if the market is down and I have a significant amount in my brokerage account, I can borrow live off of that and then repay that loan when the market recovers.That's one of the things that the wealthy do to stay wealthy. It's how they, how their investments are constantly growing because they don't have to tap into it when the market is down, right? So that's something that you can do by, again, not doing a Roth conversion. Now, five year rule is something that kind of rears its ugly head, where when you do a Roth conversion, Congress says we don't want you just doing this conversion and then getting money tax free, growing it and having it tax free.You don't get this benefit for. So in order to get this benefit, you're gonna have to hold that money in this Roth account for at least five years and not touch it. You have to be over 59 and a half, which you'll pro, you're probably already at that point. But you gotta, it is gotta sit there, right?It's gotta mature, it's gotta, marinate and. . If you are living off of this money, then you're not gonna see that benefit and you're gonna actually get hit by a 10% tax penalty. So we need to be careful about that. And we need to be careful about things like Irma, which is, the Medicare premium, which is tied to your income.So if we do these Roth conversions and that jacks up our taxable income, , all of a sudden our Medicare premiums make up go up, which also is the flip side, the argument when people say, why? Actually you should do these high Roth conversions early so that later in life your retirement premiums are lower. How To Avoid Roth Conversion Mistakes Number one, make decisions based on the future that we know is going to happen and the likelihood of it's that it's actually gonna happen, right?It's easy to get scared about unknowns, right? We don't know what the tax code is gonna be like in two years. We don't know what tax rates are gonna be. Like, we don't know. We can't make decisions based on unknowns. We have to make decisions based on. And we need to know what our income's gonna be in retirement what our distributions are gonna be in retirement.Let's try to make these decisions based upon evidence. I'm a firm believer that any financial decision you need, you make needs to be overwhelmingly obvious. If you do not feel like this decision is overwhelmingly obvious that you should be making it, then it is probably the wrong. Want help deciding if a Roth conversion is right for you? Book a free appointment with our team and we'll help you decide. https://www.yields4u.com/book-your-tax-swot-analysis

there are. Five major risks that I see a or for retirees. It's for everyone in general, but it's specifically once we, as we're transitioning into retirement and you need to start thinking about this, within a few years of retirement.But there are five major concerns and really every financial decision you make shouldn't be made through the prism, through the lens of how does it impact me for. Five major risks. And those five major risks are, number one, is draw down, right? So anything that decreases the value of your retirement, savings of your portfolio doesn't matter whether it's taxes or market loss or inflation or having to pay, retail for something.And I was talking to someone the other. And I was like, listen, toilet paper, right? You know how much toilet paper you use? Just buy it up in bulk, right? So that you save that money, right? And it's not a lot of money, but if you're looking for ways to save and that can make a difference.We know how much toilet paper we're gonna use. Everything is a, it really is a penny saved as a penny earned. And when it comes to retirement, we need to hold onto as many pennies as possible. , everything that decreases the value of our portfolio. It doesn't just affect us today.It affects our entire retirement. It affects, five years from now, 10 years from now, 20 years from now, I have done analysis for clients and I've shown them how just saving. Figuring out how they can save 5,000 or 6,000 or $10,000 a year, right? And we're not talking about a lot of money, at least in, in portion for them.But we're talking, saving five, 10% off of your annual expenses. And again, that can come from taxes. It can come from maximizing your social security. It can come from, buying wholesale instead of retail. It doesn't matter where it's coming from, but that can have such a huge impact. It can be the difference between running outta money.It can be the difference between, living the life and not worrying about what you're spending to, pension pinching pennies. And, not seeing the grandkids as often as you'd like.  number one, biggest risk is you gotta make sure that the decisions you.  and the things that you are doing, protect your retirement, nest egg as much as possible, and conserve as much of that capital as possible so that you can spend it on the things that you want, and it'll be there when you need it.Draw down risk number one, right? Risk number two. . Okay. Risk number two is inflation, right? Inflation is the second biggest risk, and I put this on the list, it, it's, draw down, brings down the value portfolio.  inflation is that you're gonna have to spend more money than you planned in order to meet your living expenses.We usually, I have to teach this a lot and I have to explain this, and people just look at me and ignore me. But the last two years, right? We really know what inflation is. Yes, we do.  And here's the thing, right? You just to put it in perspective, how bad inflation has been. It used to be that if you looked in the last hundred years, inflation was an average of 3%.So if you took all the inflation that we experienced and average that was 3% a year because of the last two years, that's now 4%. Wow. 4%, four, over the last a hundred years. And so when you're thinking about, okay, how do I protect myself, right? It's, we need to keep an eye on and make sure.The, our assets are, we can't just put them under our mattress in cash. I actually had someone comment that on Facebook. I put out a.  Saying, what's the worst things that, you know a retiree can do with their money? And one person said, what happened in the stock market?Cash is king. Put it, under your mattress. And, I didn't tell this guy off, but here's the truth, right? If you put your money under the mattress, you are guaranteeing a loss. You are guaranteeing that your money is going to devalue your buying power is gonna devalue. And you're guaranteeing that in 10 years of 15, 20 years.You're not going to be able to live the same life that you have right now. I, I don't know. The last time we had inflation like this it was sometime in the nineties. And it wasn't even this high. It was like, four or 5%. But it happened for a few years and. , people's social security checks were not meeting their needs.And I remember people talking about the fact that, they couldn't pay their rent.  Because they were, their budget was so tight. That's what happens when you don't protect your portfolio from inflation. When you don't protect your nest egg from inflation, then what ends up happening is, You're going along just fine.You start dipping into your savings and before you know it, you're struggling to pay your rent. You're struggling to put food on the table, so we always need to keep in mind. That there will be years like this where inflation is, 8%, 10%, right? That could happen At the same time, there's also the steady erosion of inflation, because that's what drives our economy.The Fed is targeting a 2%, inflation. That means our economy is growing. That means wages are growing. That means things are healthy, when things are unhealthy. , right? It grows a little too fast or it goes negative, but we always have to keep in mind on that, right? So that risk number one, draw down, right?Devalue in our portfolio. Risk number two is inflation, that we, our buying power is gonna decrease, which brings us to number three, which is longevity, right? , every assumption out there, every analysis, any advisor you go to, they're going to use an assumption for how long you're gonna.  right the way, if you think about the 4% rule that is not based on you living for forever, people talk about it like, oh, if you have the 4% rule, you do the 60 40 or 50 50 or whatever, you're never gonna run outta money in retirement.That is not what that rule says. That is not what any of those studies say it was that you won't run outta money in 25 years or 30 years. . It wasn't that it was gonna be for forever, but eventually it will happen. So eventually that's where you need to be a good steward of your money. If you protected your money well from drawdown and you protected it from inflation, right?And then you factor in, maybe I live longer than I expect, then you have a potential that maybe your assets will actually grow in retirement and not.  because that is the ultimate goal. But that requires balancing. Now, for a lot of people, they may not have enough money to retire today, right? If they wanna be super conservative.So they have to take on more risk, and they may, they will have to eat up some of their principles. So you're gonna have to make assumptions of, how long do I need this money to last? And you wanna make sure that you bake into those assumption.  that you've lived long enough and that you're not running outta money by the time you're 85.Because maybe you're gonna live to 90. Medicine's always getting better and better. That's true. People are staying healthy longer. It's e easier to stay alive longer. I think it's 10% of social security beneficiaries are over the age of 90 or 100. It's it's a very high number.Wow. And who knows what that's gonna be in 15 or 20? So longevity, right? Making sure that as you get older, you're not looking at the gas gauge going, I'm running on empty, I'm running on fumes. That you're not worried about that, so that you can enjoy your retirement, you can enjoy your time with your family, and this time that you've earned and deserve.Which brings us to number three, right? We're number four, which is number four. Sorry, number four, which is the inevitable, right? The unexpected expenses and the inevitable, right? Listen, we all get old . We all have body parts that start failing. That is just a reality of life, right? It's either we get hit by a bus and not, and die, without all of that, or something happens, right?And we, our body so slowly fails on us. We get sick, this is just the reality of life. Now, what. In those unexpected expenses, right? Whether it's a tree falling out in our house or it is, we get sick, right? And we have an extended stay. You fall, right? And now you're in rehab and you for a few months, those are expenses, correct?Those are things Now, if you think about it, right? And we don't like to think about it. , but we need to prepare for them because if we don't prepare for it, what's gonna happen? We're gonna have a sudden and massive expense in our retirement at a time when we can't withstand it, right? When we probably don't have the savings for it.And all of a sudden, when you have that massive expense, if we are not properly insured and we're not properly prepared, it will completely destroy the rest of our retirement, and we'll go from living comfortably to having to move in with our kids or having to. Into a facility or downgrade or who knows what.And so we wanna make sure that we're properly insured and we're properly protected. And most importantly, that we don't hurt our surviving spouse because let's face it. Almost certainly one spouse is gonna outlive the other one, right? Usually by a wide margin. . So we wanna make sure that surviving spouse isn't inheriting debt, that they're not inheriting a financial mess, and it doesn't take a lot of work to make sure that we have those insurance policies in place, that we make sure we have a financial and a legal plan in place to take care of that.. But you wanna make sure to do that, which brings us to number five which is, the inevitable, right? We will die even. . And we wanna make sure that we're prepared for that, right? Both for those last few years of our life, as well as for transitioning over our finances to our loved one.I have seen too many people get hurt by that, where they were not prepared for it, and, Bad things can happen when you're not prepared for it. And it can be, whether it's expenses or it's, bank accounts get frozen, nobody knows what to do, and all of a sudden things are getting sold that shouldn't get sold, or creditors are coming after things and everything falls apart.So you wanna make sure that you have a plan in place to take care of it, . And so the five major risks, right? Just to recap, five major risks, right? Portfolio decreases in value to draw down inflation. We can't buy as much as we need to. We can't maintain our lifestyle longevity. We live longer than expected because a life is awesome.And then we have unexpected expenses. Tree falls on our house. We trip and fall, things like that. And then we have the inevitable that happens to all of us, right? And so we need to make sure to prepare for and plan for these things. And in really every single decision in our life, it affects something like this.Now, let's take Social Security, right? Social security is a decision that everyone needs to make. We all need to make this decision of when do we file for social security? Are we taking it early? Are we taking it late?  When you're thinking about that, right? You need to think of it in the context of these five questions because these five questions will tell you, do I need to take it early?Does more money now, earlier in retirement, taking, sorry, less money earlier in retirement, that's gonna help me more than more money later in life, right? , I've talked to a lot of people. My dad died at 63 right. Waiting until age 70. So he got the bigger check. Wouldn't have helped anyone. Oh my gosh.And him taking social security as early as possible allowed not only him to take, to get benefits, but allowed my siblings right. And his wife to get benefits. And so a lot more financial value. And a lot more value as survivor benefits, right? So you gotta think about that. You gotta think about what's more important now versus later.How will that affect you over the lifetime, right? Over your lifetime, over your spouse's lifetime. And so you really gotta think of it from that holistic context. And every decision. It really is. Every decision needs to be done through the prism of those five questions.    

Tips on how we can take advantage of our losses in the market: So end of the year and end of the year is a great time to start looking at your taxes because you got, you have an idea of how much income you're gonna have earned for this year, and that gives you the ability to actually do some real tax planning and to really.Really take steps to minimize your tax bill. There are things that you can do after December 31st, but the vast majority and the best stuff is before December 31st. And so highly recommend, right? Something that I do for all my clients is, end of year tax planning. And we, we look for, what we can do to maximize.Exclusions, our deductions, our credits, and then we look forward and say, okay, what can we change for next year? Knowing that this is, what we've done and the things that we wish we could have taken advantage of that we can do for next year to further decrease our. Tax bill because let's face it the markets, we don't control the markets.We can manage our investments as best as we can, but the markets will do what the markets will do, right? And in retirement, we need, every penny we can. So let's, we're gonna try to manage that as best as possible. But taxes is something that, once you owe it, it's forever gone,And so we need to, every penny that we can save on taxes is a penny. More in our pockets market. Come up and down. Inflation, nothing we can do about it. Taxes, there's always something you can do about taxes. What is Tax Loss Harvesting tax loss harvesting probably one of the best things to do and I should preface this by saying you need to be in a position where it'll do you some good, right?And that requires, that's one of those things that doesn't happen overnight. It takes, years of working to get yourself into a position where tax loss harvesting is something that really pays off dividends. And that's a little bit of a pun and you'll see in a second, but, Tax law is harvesting and it's most basic.My, my account is down in value. Let me harvest all those losses, right? This thing, you're going through the field and you're harvesting those losses and you're not gonna pocket those and you're gonna use them for some time in the future to reduce your future tax bill. And you can do this with gains, and you can do this with losses, but losses are the most beneficial because it offsets those gains.And even a small part of that can be used to offset ordinary. Now, here's the best thing, right? I said, it takes some years to get into a position where you can really use that tax loss harvesting and really benefit you. . But vast majority of people have their money in retirement accounts.If you're, if you move, and you work to get your money out of those retirement accounts, so you're not subject to require minimum distributions, what you can. Is, make it so that all of your gains in your taxable accounts are completely offset by losses. Because what's the one thing that, that we know for certain about the markets?The markets are volatile. They go up and down, and so in the moments where the market goes down, it doesn't have to stay down for very long, but let's say it goes down 5% one day, right? If we harvest that loss and capture. And we ride the market back up, right? But we harvest that loss, put it in our pocket, we can offset it again in the future.We can offset it when we're selling for income so that our taxable income in our taxable base in retirement is much lower. It sounds like a lot of work. It's definitely work. Saving, saving money on taxes and making money in the markets is not easy work, right? It's not say a fire and forget it, but it's something that can make a huge difference in your retirement if you do it properly and you shouldn't do this yourself, right?This is why you pay advisors is to do things like this. (P.S. Here's a great article I wrote on Tax-Loss Harvesting: https://www.yields4u.com/blog/turn-your-paper-losses-in-to-tax-savings) What is a Roth Conversion So a Roth conversion is a what I like to call it is tax arbitrage.And tax arbitrage. Arbitrage is fundamentally, it means taking advantage of a mismatch in pricing. For instance, let's take a basic example. Let's say I am buying, Cotton, right? And or I'm buying, oil, right? Oil, let's say oil, right? So oil in, Saudi Arabia, oil is, a hundred dollars a barrel.And in, Texas, it's, $90 a barrel. So there's a price missed batch of $10 a barrel. So if I were to buy. If I were to buy oil in Texas and I were to sell it on the open market I would be able to arbitrage that and get that $10 a profit, right? It's the same thing, same value, right?And I can realize that difference when we look at taxes that way. And we add in a factor of time. So it's not just right now, it's also in the future. And we say, okay, right now my taxes are lower, or my taxes are higher, and in the future they're gonna be lower, they're gonna be higher, right? And I can control my taxes because this is something that I actively work on as to control my taxes.I can take advantage of that mismatch and pricing. So let me give you a perfect example. I'm working, right? , working towards the end of your career, you're probably making the most amount of money you're ever gonna make, right? Which means you're in the highest tax bracket possible. Now, what happens when you retire?What's the first thing that happens? You lose your w2, right? You stop making income and you have to start taking money from your retirement accounts. Now there's this period from when you retire until the IRS requires that you take required minimum distributions from your retirement.Which right now it's at age 72. It might get pushed out to age 75. So you have this opportunity, this time period where you need to take money from your retirement accounts, but the IRS doesn't require you to take them yet. Which me and you're in the lowest tax bracket possible because, so you're at zero, right?Because now you get to control how much income you have for the next, whatever. 10 years, five years, seven years. Until you are required to take RMDs, you control your income, which means you control your tax rate. So you can decide when and where and how to take your income, and maybe you'll take a little bit more one year because you're in a lower tax rate to convert it, pay taxes on it upfront in those low years so that in the future you're not paying more money.And so a Roth conversion is taking advantage of that mismatch and pricing. And it's taking money from your traditional retirement account, your traditional ira, you pull that money out, pay taxes on it, and then put it into this Roth IRA account where it grows tax free tax tax free. When you take the money out, it's tax free.The only caveat is you gotta have it in there for five years or more. Otherwise you get hit with a 10% tax penalty. Check out this great article on Roth Conversions: https://www.yields4u.com/blog/roth-conversions-windfall-for-some-bust-for-others-investors-should-proceed-with-caution Tax Worries for Retirees The biggest thing that's on the horizon that I, the two things that I really worry about number one is we have the tax cut and jobs. Which one of the biggest provisions in it is that it inflation adjusts the tax brackets. And so that means that, the tax brackets where they are right now, they weren't there 15 years ago.And the tax cut and jobs act was, 20 18, 20 19. It's, if it goes back to those levels, it is really low numbers and that will automatically bump people into higher tax brackets. So that's something that I worry about is, you know what happens when the tax cut and jobs act expires and the tax brackets automatically by default will increase, right?Or rather the number, the brackets will decrease and everyone's gonna jump to a higher tax. What happens at that point Now here is what worries me about it. Okay. Tax cut, tax code changes with every administration and every four to six years it's constantly changing, right? That's nothing new about that.What I'm worried about is that. We have interest rates are rising, which means that our federal deficit, which is at 30 trillion, the payment that our government has to make in order to meet those obligations in order to pay the servicing cost, the minimum payment on that debt is going to increase over time.And as that increases, they're gonna need to generate revenue from somewhere. I can totally see our Congress, being deadlocked and not passing a bill, and them intentionally not passing something when it comes, when the tax cut and jobs act expire. Because they need the revenue to cover those tax payments to those interest payments.I can see them letting it expire without a new bill or with an inadequate bill that doesn't inflation adjust the tax brackets intentionally so that it harms. The average American, because that's who gets the harmed the most by that. And it increases their tax base, and they're just gonna point the finger at the other party and say, it's their fault.It's their fault. Especially now we have, Congress is really, the Senate and the house. It's very close there. There isn't a clear majority. It'll be very easy for them to do. And that, that is really what scares me is that will happen and then everyday Americans will pay a lot more money and this will fall especially on retirees.And there's gonna be no blow back on, the, every party is gonna think it's an advantage to them. So it's not like one of those things like cutting social security where everyone's gonna get upset. It's, whichever party thinks they have the most to gain is. Is gonna benefit.    

We were talking about the 60 40 portfolio. If it was dead or not what do you do during the retirement years? How do you make adjustments and changes as the economy continues to shift and change? When we were together last week, we were talking about the 60 40 portfolio. We're wondering if it was dead or not, and as a thumbnail, what is a 60 40 portfolio and where does it stand right now? What is the 60/40 portfolio? So the 60 40 portfolio is this ideal portfolio that has been held up as if you had an allocation and you allocated your money, 60% of it to, stocks and equities and things that had ownership in a company. And then you allocated the remainder of your money, 40% to. Things that were safer, right? That didn't have as much volatility as stocks like bonds. Then in theory have a very stable portfolio that would produce the returns that you need over the lifetime of your retirement. What does the 60/40 portfolio have to do with the 4% rule? And this goes along with that 4% rule that in theory, you shouldn't run outta money in retirement or you'll have enough money to live off of and not really worry about a change in lifestyle.And so it's heralded as the, word looked upon as the ideal middle of the road portfolio for retirees. Bonds or Bond Funds? I see. And when we were also talking, we got into the discussion about bonds as stocks and bonds, and one could come away with the impression that you're not in favor of individual bonds.So I actually am I love individual bonds. I just think that very few people know how to buy them or actually are invested in them. And let's talk about that, right? So an individual bond, I'm loaning an individual company money. And when I do that there's the terms of the loan. Just like when you got a mortgage on your house, right?That you got it for 30 years, right? Or 15 years. And there was a certain amount of interest and hopefully it was a fixed rate of. And so you had this payment that you were making on a regular basis to the bank, and everyone, all parties involved, knew what the terms were. Right? And if you didn't pay them, the bank had the right to foreclose on you and collect from your assets and in this case that your house, but they could also come after other stuff that they wanted to and they could repay that loan. And that's fundamentally how loans work, right? And bonds are just the same thing, but to corporation. Now here's the interesting thing about bonds, is that if I get a mortgage from the bank I can't, then sell that.That's not assignable to my friend, right? My friend wants to buy my house. I can't have him just take over my mortgage most of the time. The bank doesn't allow that. However, with a bond, right? I can just sell that to anybody. Anybody can come up to me and say, I wanna buy your bond, and then we can negotiate a price and I can sell it. What happens to bonds when interest rates change? So here's the interesting thing that happens is when interest rates start changing, people start negotiating. And, you usually end up having to give up. You sell it for a lower price than you paid for in order to get that return, right? Now here is where it gets. It gets really crazy, right?Is that's fine and good. You loan a company money, you get your principal at the end, you get your interest while they hold onto your money. You're good. You're golden, right? I think that's great. There's, there are individual risks, but those can be managed if you go out and buy and do your research.But most people were like we don't wanna do that. We don't have the time, we don't have the resources. We don't have the connections. We don't wanna research a million different companies to find who's got the best bond. The Dark Side of Bond Funds... Instead, we outsourced it to companies, and you got these ETF companies and mutual fund companies, and these bond companies, these bond funds, where they aggregate all this together and they say, You can't pick the best bond, so we're gonna get, 30 of them or a hundred of them, and we're gonna pick it from all these companies and we're gonna do that selection for you.We're gonna deal with the buy, buying and selling of them. . And we're gonna target a certain return. Now here's the problem, right? The best thing about a bond, the thing that makes it less risky than equities is that you get your principle. But you only get your principal back if you hold onto the loan until maturity, until the loan terms come due. And the person who you loan the money back, your money too, gives you your money back until that day comes. You could, all you could do is sell it to someone else. And that's what these bonds bond fund do do. Very rarely are they, holding them until maturity. Most of the time they're just buying and selling them to try to get a, a certain return.So in that regard, it's no different than equities, right? It's no different than day trading stocks to try to get a return. You're just doing it with a different instrument and you're calling it less risky because it's something that has characteristics that would be less risky if you used it the way it's supposed to be.But the truth is a bond fund should be treated no differently than an equity fund, really no differently. In fact, it probably has more risk than equity cause less people are trading it. Is there an alternative to Bonds? So is there an alternative to the classic mainstay equity, if you will, a fixed income mix? We've been used to for eons I'll just say since the nineties, as you mentioned in our last episode.Is there an alternative to that? So I'm gonna answer your question in two parts. So first I'm gonna say the first question is, are there alternatives to, bonds and bond funds? Is there something else that you can do that has that same safety that we've been told? Bonds are that they very clearly are not right or that they're very hard to access.And the truth is that yes, there are alternatives, there are other ways of getting that same safety of. A guaranteed return or getting a, a more, less, a less volatile return with principal protection. Cause that's the primary reason why we go into bonds is that we don't wanna lose money. Or we don't wanna risk all of our money in order to get that return. And so there are very much alternatives to that. Some examples. You probably heard, because I'm sure that everyone listening has gotten pitch this is some kind of insurance or annuity contract. Yes, those are the big, alternatives. Bank CDs You also have bank CDs. Bank CDs for a long time couldn't give good returns. There's equity link CDs, but with interest rates on the rise, those are now a possibility. There are also all kinds of contracts like options. Exchange trade in notes and structured products, and there's all kinds of things that you can do where you can simulate that same kind of behavior.The behavior of, I want to participate in the market, but I don't want to take on full equity risk. I don't wanna risk losing all my money. And there are, for every scenario that you can think of, there is someone on the other side who's willing to take that contract. So for instance, right now my firm is doing a lot of business with something. Buffer notes and UITS, which are essentially what they'll do is this other company, like an insurance company, like an investment bank, they will say, okay, we will give you up to 20%. We will give you up to 20% of the upside of the market, but on the downside, we are going to eat the first 10% or the first 20%.So you, it mimics that same kind of behavior that you. Not to the same degree that a bond is, not to the same degree that an annuity has, but it gives you that similar type of ability without having to put the same kind of risks or the same kind of limitations that you have with annuity contracts or that you have with bonds. Is There an Alternative to the 60/40 Portfolio? So there are definitely alternatives. Now, to answer your question of, 60 40, is there an alternative of 60 40? I would argue you should have never done the 60 40. That the 60 40 was just a hypothetical concept that we came up with that basically said, take one asset class that, will, that's a long term asset class that will go up over time and then take another one that has less volatility and more secure.Combine them together, right? So that we have the type of stability and the type of risk that we want for our. And I think that it's a job of every financial advisor, every money manager. Our job is to make sure that we can read the tea leaves, that we look at the data and we create for you a portfolio that does what you want it to do.And you have different building blocks that you can build with equities and fixed income are just two of the building blocks. But you should use the different building blocks to create the experience that your clients want, that the people wanna have, right? And every person is individual in what they want that experience to be.Both subjectively and objectively, right? Subjectively, I don't wanna wake up and see that, I've lost you 20, $30,000 or whatever that number is, right? My wife has a different concept of what conservative to her means to her, and we want to create an experience that works, right? And so for every person, that should be something unique.And then you have the objective, right? Objectively, I need to have a certain amount of money to maintain my lifestyle. I need to have enough. I need to make my assets grow a certain amount so that I don't run outta money in retirement. And we need to find a balance between those two so that we have the retirement, that we have, the investments in the portfolio that we can live with, that we can sleep with at night.That doesn't keep us up or, like the sleep mattress thing that, if I'm comfortable, my wife is also comfortable. Not that she's, it's at her expense that, okay, I get to sleep at night, but she's, up at night all all night because she's worried about the risks that we're taking on.I think, that is my take on the 60 40 and how I think you should address it. So what do you do during the retirement years? How do you make adjustments and changes as the economy continues to shift and change? Create Layers of Protection So I think that there are two fundamental concepts that I really like employing.The first is what I call layers of protection, right? So we can't predict the future. I, I spend my life, looking at the data to try to predict the future. But ultimately at the end of the day, we don't have a crystal ball. It's gonna be a hundred percent correct. We don't have a crystal ball that was gonna tell us, that Russia was gonna invade Ukraine or that Ukraine would be able to withstand it.No one thought that would happen, but yet that's the world that we live in.  The consequences of that, with the, Russia cutting off gas to Europe and now Europe actually looking at the potential that they may have people going cold during the winter and they're trying to figure out to survive.That's something that no one could have predicted, right? These events will happen and they happen on a fairly regular basis. So what we need is layers of protection, and that's number one. So we need to have things that aren't really correlated with each other, that will provide us protection so that if one of our layers of protection fail, the other one will work for us.People, a lot of people think that the 60 40 provided that layer of protection, that you had equities and you had bonds and they don't work together. So therefore they're their same protection. They offer protection, but that's not the case when you know that they're gonna both have things happening at the same time.We knew interest rates were gonna go up and we know that the Fed is trying to, rig on a correct. Because there's been basically too much money in the economy which is inflation. So we have those things that we knew they were gonna come. So that's another thing that's part two is you gotta read the tea leaves and say, okay, the longstanding beliefs that we had are changing the future is not gonna look like the past. The Future Will Not Look Like the Past And so we need to make sure that the assumptions we have in our portfolio and the investments that we're doing are forward looking, not backwards looking. Lots of advisors will give you these reports and these analysis and they'll say look at how I did over the last 20 years. Great. How will you do over the next 20 years?That's my question. I don't care about the last 20 years. I know what happened, right? I lived it. Now what's gonna happen in the future? That is the real question. We need to be able to survive what's coming tomorrow. And don't tell me that tomorrow's gonna look like the best. 20 years ago I didn't have an iPhone.I didn't have a computer that I can put in my pocket. I didn't even dream that I would be able to have something that powerful. But that's the reality we live in, that we have kids who can't put down their damn phones. And that they don't like talking to people. You told me that 20 years ago, I wouldn't have believe.That's the truth. That's our reality today. And you're telling this is a great case for living with financial anxiety. How can we get more information?So if you go to my website, yields for you.com, I've got classes, I've got guides, I've got resources. And of course if you want, attend one of our upcoming classes or if you just wanna talk to me or one of my team members, go ahead, book an appointment.We're more than happy to take a look at what you have going on, answer any questions you have. This is just something that we do for the community to help you guys retire and stay retired and live the life of your dreams. It's interesting you said something about reading the tea leaves and in closing.Do you think it'll snow tomorrow in new? If we go with the accuracy of the of the weather for forecasters, right? It's what they're right. Less than 50% of the time. Listen, I think I'd do a better job than that, but there, I have no idea. ,

Hello libel. How you feeling today, sir? I'm doing pretty good. How about you? I'm doing well, and I'm really excited to talk about today's topic because we've talked about it on the edges before. I'll say it that way. Uh, I'm looking at, uh, the idea that.Investing. In my opinion, investing strategies really don't get more classic than the so-called 60 40 allocation, holding 60% of your portfolio in stocks and 40% in bonds. And the thinking goes that you can get the best of both worlds, high growth potential from your riskier stocks and protection from your more.Conservative bonds, but I was also seeing a report libel that this could be the worst year ever for the 60 40 portfolio. How do you stand on that? Well, , I say, Well, where I stand doesn't really matter. You know what matters is reality, right? ? Yes. And, and the reality is, uh, is that, you know, this is gonna be one of the worst years for bonds and.Here's the thing, right? It's like, you know, people are acting surprised like that bonds are having a really volatile year and that they're all over the place and they've lost more than you know they've ever had in the last like 20 years. But here's the thing, right? We knew this was coming. Anyone who understands how bonds work, Fundamentally understood that this is what's gonna happen, that that bonds were going to take.Now does that mean that people lost their money? It depends how you're invested. It depends how you have your 60 40. Um, and so when we think about these rules that we have about investing, about retirement and what we should do, And especially if you start looking online, right? It's, you know, we, we like to think that, you know, knowledge has been there for forever and that the internet's been there for forever.But the fact is, is that the internet only really came into, into its, um, you know, into being, into being something that had had a lot of resources in the late nineties. Right, And so for most of the life of the internet, bonds have acted a very specific way because interest rates have been really, really low, artificially low.And so all the people who are writing articles online and all the content that you can find online are based on this environment. That we've had for the last 20 years, which is not what we're existing right now. It's not what we're experiencing right now. And anyone who was invested, you know, at any period of time where interest rates were on the rise, where interest rates were being volatile and there was uncertainty about the future or inflation.Would know that this is what was gonna happen. And unfortunately, uh, there's, you know, a lot of advisors haven't experienced that themselves, or they didn't understand what it meant that, you know, when interest rates go up and when inflation goes up and. They just stuck with the 60 40 because, you know, nobody ever got fired for, you know, purchasing an ibm.Right. I'm sure you've heard that saying, . It's, it's the safe thing, right? If the SCC comes in, if an auditor comes in and says, Why did you allocate your client this way? You say, Well, 60 40, there's, you know, a whole lot of academic research. Everyone says it. 60 40 is a good thing to have for a retiree. You know, when you think about it, is it really a good thing to have?Does it actually make sense? It really depends on what's gonna happen now and in the near future. And that changes, right? Especially when we have the Fed raising interest rates and central banks across the world raising interest rates. What do you think that does to loans? Right? So our mortgage rates go up, Well, bonds are just loans to companies.Wow. Everybody libel sternbach with us this weekend and we're talking. The 60 40 portfolio, and I'm just so based on what you've just shared in response to my first question. In your opinion, do you think bonds are no longer safe in this regard? So I think that they were never sa, you know, quote unquote safe.I, I don't think that you could treat any asset class or any investment, right as being safe. The only reason why they are technically safer than stocks is because if a company goes into bankruptcy, You have priority over the majority of shareholders, right? Because you are a debt and debts get paid before the owners of the company.The owners are the last in line when there's a bankruptcy, so that's why people talk about it being safe. The other reason why they happen to tend to be like, you know, less volatile, I'm not gonna say the word safe, I'm gonna say less volatile, that they don't move as much as stocks. Mm-hmm.  is because, They don't move as much as stocks  because their value is derived by the fact that they're a loan, that you loan them, the company money, and the company is guaranteeing you a certain interest rate.So the only time that their value is gonna change, right? Everyone knows how much that interest rate that you're gonna get on that is you loan a thousand dollars and let's say it's a 10% interest rate, you're gonna get. You know, a hundred dollars, that's, that's what your payment is for giving this loan.Everyone knows it, so it gets priced in. Now, the only time that that price moves around is when people either fear that the company is gonna go bankrupt and they can't pay their creditors. Right.  or if all of a sudden people can start using their money and get more, a higher interest rate, if you know all of a sudden companies are paying, you know, 15% interest and you're holding a 10% loan, right?And you're only paying 10%, well you got one of two choices. You can either hold that to maturity, right, get your principal back, or you can try to sell it to someone else and buy something that pays more, right? And that's really where that volatility comes in. If you need to sell this, if you need to convince someone else to buy something that is below market value, right?That everyone else is paying more and you have something that's, you know, pays less well, you're gonna have to take a hit so that the new investor can receive the same amount of profit as everyone else, right? And you're in a, in a bad situation, right? If you're, if you're forced to have to sell this, At, at, you know, a lower rate, at a discount.Um, so people are taking advantage of that and that's what happens. So it's not that it's less, you know, it's not that it's more safe than, than equities or that it's, you know, there's something inherently safer about it. No, it's just that it tends to move less when interest rates move less when the bond market moves less When.Loan prices are loo are are moving less. When the outlook for the future is stable, then yeah, they tend not to move. But when people don't know what company is gonna survive, right? When we're worried about a recession and they're trying to figure out, okay, who has good balance sheets, Who's gonna be able to pay off their debt, Who's gonna be able to survive?And we have interest rates are moving. So people can go move their money elsewhere, make more money. Right. So you lose, you lose your buyers and you have to incentivize 'em to buy from you. Then yeah, it's gonna become very volatile and it can become even riskier than stocks. The only thing that you have with a, with a bond that you don't have with stocks is that if you hold it to maturity, you can get your principal back, assuming the company remains solvent.So it sounds like, Go ahead. But there, But there's a catch here, right? Yes. Okay. How it used to be that people bought individual bonds, the vast majority of people don't buy individual bonds anymore, right? We're now buying bond ETFs and all these packaged products, so we don't get to control whether we get to hold it until, until maturity, and that makes it extremely risky.And in fact, I think it makes it even more risky than equities because you know that they're buying and selling things at the wrong time because they. Well, interesting everybody. We're talking with libel stern box. So does that mean that does a fundamental, uh, a way that we manage our money when we're talking about saving for retirement?Mean that if we're investing that in order to come out, uh, the wave that we would like to on the back end, that we do have to ride the wave the wave and accept the ups and downs of the market and the bond. So I think that you shouldn't ever ride the wave, right? Listen, unless, unless you're really young and you've got a long time ahead of you, right?Then you can afford to ride the wave and the law of averages is gonna work in your favor. Um, but when you're nearing retirement or you're in retirement and you're taking money out of your portfolio, then you don't have the time to ride the wave. But not only that, but every time you have. And you take money out of your portfolio, you're, you're going further down than everyone else, which means it's gonna be harder for you to come back up.So when everyone else, right? And when in your working years you rode it down, okay, You tightened your belt a little bit, but you also got the benefit from that dip by investing more during buying more stocks or more shares because they were at a discount. When you're contributing to your 401k or your retire, Come retirement when you're taking money out, that starts to work against you, right?So I think very much as we transition into retirement, our mindset needs to not be, let's ride the wave. It needs to be, how can we smooth out the wave? How can we not be on the same rollercoaster ride that everyone else is? Right? Um, you know, you don't wanna be, you know, well, you know, I'm very brave and I'm, you know, I'll go, go on the big roller coaster, right?No, you know, you wanna be on the kid roller coaster. When you're in retirement, you wanna have just enough bumps. That your money grows at the pace that you need it to grow in order for you not to have to change your lifestyle in retirement. Mm-hmm. . But you don't want any more volatility than you have to.You don't wanna be holding on for dear life and wondering whether you're gonna puke your guts out. Right. And whether you're gonna still be around at the end of this ride. I love your analogies in life, but we're talking with libel Sternbach about the 60 40 portfolio and I, I get a. That, uh, with, even with the, the basic questions that are out there in the marketplace today, that there are many investors, either new investors or even ones who have been with, uh, with different companies for a long time, don't have a fundamental basic on what a bond actually is.Can you level set for a lot of folks who are listening today, Yeah, the best analogy that I have for a bond, and forget about what it actually is, right? It, it's, you're loan money to a company. So think about, you know, your worst relative who comes up to you on the holidays and, you know, they're always, you know, drunk and they're always, you know, losing their money and they're asking you for money.That's how you should treat a bond and what you should think about it is, right? So you're loaning money to somebody who you don't, you're not really sure whether they're gonna be able to turn it into something or not, right? The price of the bond, right? If you just waited it out until they paid you back, and maybe they'll pay you back.Maybe they'll pay you back in a year when they said they would. Maybe they paid you back in 10 years, right? Then eventually they'll pay you back. That's fundamentally a bond. But how it works in your retirement, how it works in your portfolio, and especially these bond funds, I want you to think of a seesaw.Right. Kids playing in a playground, they got a seesaw, right? One kid goes up, one kid goes down. On one side of that seesaw, you have your return, right? So that's the interest that's being paid to you on the other side, right? You have interest rates, right? And so as sorry, the price of your bond, right? So as interest rates rise, the price of your bond has to go down one side of your seesaw.One kid has to go down in order for your bond to produce a. That's equivalent to the higher interest rate when interest rates go down, right? Your bond that's paying a higher interest rate goes up, right? And the other person on the seesaw is down in Europe, right? It's a seesaw, right? People think about it and you're like, Well, it's safer because usually it's flat, right?Usually you have two kids who weigh the same amount and you know, words. One kid's just slightly heavier than the other, and everyone knows and they don't move and they don't jump up and down, and if they don't play around, But what happens when the kids start being kids again, Right? And one of them starts gaining weight and the other one is, you know, becomes antsy.All of a sudden you're gotta, you gotta ride and it's going up and down, up and down, and you're losing your shirt. , what a great analogy. And we're talking about the 60 40 portfolio in different aspects of it. Do you have information on yields for you.com that we can access about the 60 40 portfolio? Yes, absolutely.So if you go to my website, yields for you.com, you go on there, go to classes, we've got classes on investing, we've got resources under resources, we've got guides, we've got checklists, we've got on the blogs, we've got blogs on how to do it. But if you have any questions about your portfolio, if you want us to take a look at a second opinion, just hit that book appointment and we'll be more than happy to answer any questions you have.This is just something that we do for the. All right. Libel Sternbach definitely is on fire this weekend. Be sure to join us next week when we'll continue this conversation on the 60 40 portfolio.

So what exactly is happening now in the world of crypto? I've seen some bankruptcies go across and people losing money. Yeah. As Warren Buffet likes to say, and I love quoting this, a rising tide lifts all ships, but it's only when the tide goes out that you see who is swimming without trunks.Right. . And that's never been truer than the last few months. People are calling in like the crypto winter or whatever, but basically what happened is you know, they. You have highs and you have lows, and everything has to at some point come down. Everything that goes up, comes down.And as things came down, what ended up happening is we got to see who was operating. On the level who was taking appropriate risk management, who was being fiscally responsible with the trust that their customers had placed with them and who just didn't understand what they were doing and were taking on excessive risk.And what I think is important to understand for our listeners who may not know what crypto is or how it all works, This analogy from from the guy who, who just Ftx that just crashed. He describes it as this. Imagine you have a box and you decide that this box has value and you give it value, and people see that you give it value.So they put in more money in it. Now people are buying and selling this box that may or may not actually, do anything, but they give it value. That's what cryptocurrency is based on. It's that people collectively come together and decided that something had value. Now, Ordinarily if you wanted to buy and sell this box and trade it among each other, right?It's a complicated technical thing. And so these companies have come along over the last few years to facilitate these transactions. They facilitate people buying the boxes and people selling the boxes. Like when you go to, TD Ameritrade or the New York Stock Exchange, or you go to your bank, right?All these people are part. And the financial system, and they serve a purpose, right? Either they hold your money or they help you buy, and they help you sell. In the US right? In our normal, traditional financial system, everything is regulated. Everyone's got, their role to play and people oversee and make sure that they do what they're supposed to be doing. Crypto is non-regulated, right? It's the wild west. And so what you end up having is you end up having people who are mixing and matching what they. Some people are taking on the job of TD Ameritrade and some people are taking on the job of traders and some people are taking on the job of, banks and they start, it starts becoming a mingle of what exactly they're doing and how they're doing it, but, All the average investor knows is they're giving me 16% return on my moneyThey're giving me like these outrageous returns, so I wanna keep getting it right. And nobody really was looking under the hood of how these things were working and. As the assumptions underlying their business model kind of, changed because, it's not always sunshine and rainbows.They companies that weren't built to withstand the volatility they started crashing. What happened in the eighties with the stock market in the nineties when the.com bust, right? In 2000 where you had even more and you had the housing cr crash. All of that was people made outsize bets on the market based on false assumptions.And when those assumptions came to be realized that they were false and the market pulled their money or wouldn't take the other side of their transactions, they went bust. Except we're dealing with a. A very small economy here. We're not dealing with a huge, international, dozens of countries on, trillions of dollars.We're dealing with, billions of dollars. It is billions, but it's a very small segment of the economy. We're talking with libel, sternbach, and we're talking about crypto. So how is it possible that all of these crypto exchanges are going bankrupt at roughly the same time? , it's what happened with the financial crisis?Or maybe a better analogy would be, the market crash of the 1920s, where what happened was, you had the stock market. People were buying companies and they were investing in them, but nobody had any real insight into what these companies were doing or whether they were valuable.So much so to the point that like a whole bunch of companies that were listed on the New York Stocks Exchange were fictitious. They were just scams set up to take investors money and kind of in the crypto world, what you have is, you have a lot of that going. Where you don't have any transparency, you don't really know what it is that's out there.And then you have companies being built upon this kind of these companies that may or may not exist, these tokens that may or may not exist, and they're trading them and they're making money, and money is changing hands, or this virtual money is changing hands. That at some point translates to real money and.What ends up happening is there's inter-party interrelated risk. So one company takes an outsize bet, but five other companies are part of that bet. And so that first company goes bankrupt. The second company, you know the other five companies, they take a hit on their balance sheet. One of them, one of those next five companies may not be able to withstand the hit and they go bankrupt, and then the next one goes bankrupt, and it becomes a domino, except there was something else that also happened.It wasn't just financial insolvency, it wasn't just risky trading. What you also have are mismanagement and misappropriation of client funds. Everyday average investor, they think of traditional finance and they try to translate that to the crypto market. They the crypto world, right?They say I have a bank. And the equivalent of that in the crypto market is, the wallets and exchanges. And they try to act as if those things are the same thing as they are in the regular market, but they're not regulated. And so what you have is, Institutions, companies that are holding themselves out to be banks, they're holding themselves out to be trading firms or to be exchanges, and to have the same kind of protections and safeguards that traditional banks and traditional stock exchanges have.But they didn't put the infrastructure in place to actually have those protections. And in the, in this case ftx, which just collapsed, it collapsed because they loaned out money to a related party to accompany the owner of ftx, the majority shareholder. Owned a trading company and then he made a loan to that trading company cuz that trading company should have gone bust.But he made a loan to them of 10 billion. Oh my goodness. Yeah. 10 billion to his own company. But he, Where did that money come from? It came from customer deposits, which is not something that could have happened. It can happen. It just, it's, the laws and the regulations are against doing that in the financial markets, and there's oversight and audited financials, none of which exists in crypto.So the way this got discovered was because somebody leaked the balance sheet that was actually months old.  and somebody started asking questions. Questions that would've been asked in the traditional market, that never would've come up because everyone was, would be looking for it. You know what, what happened?Why are these going, bust, it's. The analogy I like to lose use is, number one, taking on too much risk. Number two, you're dealing with something that fundamentally is based, it doesn't have any intrinsic value, right? The US dollar is tied to the US economy. It's based on the faith of the United States government, on the people that live in the United States of our manufacturing capacity, right?People believe in our country as a whole. And our government as in a whole, and part of, and that's, very materialistic. There, there are actual things that you can point to, whereas, let's say Iran right? They their currency, right? Nobody cares about their currency. Nobody wants their currency or, some pod North Korea, right?You're not, you can't use North Korean dollars to do anything  or whatever it is that they use there, right? Nobody cares about it. But in the crypto world there's, hundreds, thousands of these tokens, of these currencies that come into existence and people give them value. So you had that going on.And then when you add into it the fact that there's just this, this kind of incestuous in no insight, it's literally you're letting the fox into the he house and then you're wondering why your money goes missing, right? Why your chickens aren't there the next day. In there. And that's what happens.So does this mean that crypto is dying? Will the patient survive? I'll put it. Yes. So I think and this is something that I've been saying for a long time, that crypto, that at some point somebody was, something was gonna happen. Either was gonna be a government was gonna be threatened enough by crypto, or there was gonna be a fiasco like this, that, in that, that caused enough people to lose money that would cause governments to start regulating it.So in this case, we have literal. It's thousands, tens of thousands of average Americans. People can own this in their 401K accounts, right? So average Americans, average investors just lost billions of dollars of what should have been secure, right? It should have been low risk. It's things that. Nobody in their right mind would've thought the, this is what would've happened to their money.They thought it was safe. They thought it was just in the custody of, FTX or in these, high yield savings accounts and they didn't read the fine print. And as a result, they lost all their money, which this is what causes regulation to occur, right? The stock market crash, 1929 1929, right?Stock market crashed. The s e c got created as a result of that cuz Congress ordered a probe and said a commission, and they investigated and said, Come back with what caused the market crash. They came back with a report that said, the, these were the underlying causes. Our recommendation is to create a commission, an agency that will, protect the public and we'll make sure that these things can happen.Same thing's gonna happen in crypto. The, there's going to be something, especially when you have so many large investors, institutional investors, people like, Kevin O'Leary, BlackRock, Sequoia, right? These are the. These are, kind of pillars of the financial community when they got taken in these scams.And it is a scam, right? It was embezzlement, it was every bad word that you can use in finance. Oh my. That's what happened, right? They're gonna call for regulation because or it won't get regulated and there just won't be any more money put into it. But yeah, it this is what's gonna happen and I think it's going to.Unfortunately what, when? Once it starts regulating, it means that everything that has come beforehand, it's probably gonna get destroyed. And it's gonna be something new moving forward. And this is why you, It's very hard to pick the winners in the beginning, right? Everything looks like a winner until the winter comes.We're just about out of time. Less than a minute or so. But do you have a report or more information that we can get once this program is. So if you go on our website I'm actually putting together a detailed article on, if you wanna get the basics of, hey, this is what happened, this is what my outlook is for the future, and this, just so you can understand.So when your grandkids come home for the holidays and they're talking about you knowd, and sbf and all these guys, right? You know what these words are, you know what's going on and you. You know how to protect yourself from, when they say, Oh, you should go buy, Luna or Dogecoin or whatever.You'll have some basic understanding. So go again on the, on our website that article's coming out. So subscribe to our email list and you'll get that website

There are many ways to participate in the market without having to ride the Wall Street Roller coaster. It is important first to identify what "safe" means to the individual and then create a strategy that allows for participation in the market without risking one's financial future. One can also contractually limit losses through the use of options, contracts, buffers, structured products, and insurance policies. The key is to have a strategy that is designed to help you protect your savings while growing them during times of opportunity.  

Q: What was the impetus for living with financial anxiety? Many people's biggest stumbling block to success is that they act out of fear. When it comes to financial planning, this manifests as the fear of not having enough money. The key to overcoming this is to find an investment strategy that allows you to enjoy life and make sound decisions without being ruled by fear. We can't completely conquer our fears, but we can learn to live with them and make them work for us instead of against us. Q: How do you deal with what the market is doing right now? When money no longer has a hold on an individual because their essentials are covered, they can view everything as an opportunity. The goal is to have stable finances so that one can laugh at market fluctuations and view them as opportunities. Q: Can you make money in the market without taking on risk? You can never eliminate your risk, but you can change what type of risk you have.  When we talk about the risk of running out of money in retirement or not being able to put food on the table, we need to make sure that's not a risk when we invest in the market. If the risks we're taking on are risks that we're okay with, then we'll be able to sleep at night. There are lots and lots of ways to manage your downside, including getting contracts and contractual obligations so that if the market goes down, you have a buyer who will lock in your downside and limit your losses or absorb your losses or transfer your risk. Q: How do you limit your downside as an individual advisor? There are two basic ways to do it as an individual investor. The number one is you find someone else who's willing to take on the risk, and you can do that using something called a buffered product or structured note or options.And so these are essentially people who are willing to take the other side of that risk. And so you say I don't want the first 10% of losses in the market. I don't want the first 20% of losses, right, which is where the vast majority of losses occur, right? So you. Whatever that number is, I want you to absorb that first percentage of losses, and there are people who will take the opposite side of that bet any day, and in exchange, they'll say you don't get all the upside, right? If the market goes up more than, let's say 10% or 15%, or 30%, whatever that number is.We want the upside on that. And you say, Okay, that's a deal I'm willing to take. And it's constantly changing what those numbers are. But you find numbers that are comfortable with you, and you find a willing participant, and that's it. Insurance companies have made a living out of doing that exchange over and over again.Banks, right? CDs used to be the way to do that. They've become harder and harder because interest rates were really low. . now that they're coming. CDs are another way of doing that. Structured notes, which is they're exchange-traded products. So I like to think of them as private annuities with more volatility that you can buy and sell. You can buy them. And there's lots of providers who, who have different versions of them. So it's just a matter of finding what you're comfortable. Q: How do you stay disciplined? So this goes back to the initial discussion of living with financial anxiety. It is something that we have to accept – the highs and lows are part of participating in the stock market. The only way to not be beholden to the stock market is to make sure that our livelihood and enjoyment of life are not tied to it. We need to be confident that our essentials will be taken care of no matter what happens in the market. Once we realize that our future isn't tied to the stock market, we can see it as a game or a casino and something for us to win. Q: Is there a safe way to invest in the stock market right now? Absolutely. There is a safe way to invest in the stock market, and safe is relative. You're giving up either upside or time or you're accepting a certain amount of risk. But what is safe for me and what is safe for you is a different thing.The Key is to find the strategy and the numbers that work for you. And we have a process for doing that for our clients. If you're interested, reach out to us. I'm more than happy to walk you through that process. But there are lots of ways to participate in the market and feel safe. Q: Any recommendations on how to learn more? My book Living with Financial Anxiety My blog and Articles Classes that I teach If you have any questions feel free to book an appointment or email us at [email protected]

Q:  What type of advisor should I hire? A: The answer is, is the advisor who can help you, The advisor that you connect with..coming from the marketing side of this business, I have dealt with the full spectrum of advisors out there, from people who were completely unlicensed and were real estate investors, and other types of people who help people out of financial situations that just they weren't financial planners. They didn't have designations, they weren't licensed, but they did a job that was better. Or as good as most financial planners. I've dealt with and I've experienced all of them, and I will tell you this right off the bat, and I tell this to everyone who I work with, each model has its own pros and cons and its own lens that they look through the world. But that doesn't mean that any one of them can't help you? You could have a financial coach who is incapable of managing your investments but will guide you and steer you better than a person who can do sophisticated investments. The real question you gotta ask yourself is: Can this person help me? Do I connect with them? is there a basis for me to assume that they are going to be able to produce the results that I want? Q: Should you only work with a Fiduciary advisor? A: I don't think it's a fair statement. Let's talk about what a Fiduciary is, and let you jude for yourself. The term fiduciary is hundreds of years old. It's probably thousands of years old. It is not something new to financial services, and it doesn't define a single type of financial advisor. And in fact, if you ask a lawyer, if you ask an insurance agent, and you ask a stock broker, are you a fiduciary? They all will feel or say that they're a fiduciary. The question is, is really what capacity are they acting as a fiduciary? In what instances are they acting as a salesperson in what they are asking? Or are they acting just as your friend? Or a planner? And the truth is, is that very few of them know where that line is. Their compliance department might tell them where the line is, but they may not know. At the end of the day, I, I think I can count on one hand the number of advisors who have met, and I have met, you know, hundreds of advisors, gotten to know them really, really well. I can count on one hand the number of truly malicious advisors. The vast majority of advisors really have their client's best interests in mind. Now, whether they're capable of delivering on that value, on that desire to help people, that's a separate question. But they all wanted the best for their clients. So, the term fiduciary means I'm going to treat your money like mine, and I have a legal responsibility to do that. Obviously, there's gonna be limits on where that responsibility begins and ends, and that's a real question, but, at this point, the word "fiduciary" is more of a marketing term that very few people understand well.   Q: If you have some type of retirement plan at work, do you think it's important to have that retirement plan, uh, before working with an advisor or if you've got one at work, do you even need an advisor? A: Great Question! If you work for a fortune 500 company, chances are you can access a certified financial planner or some other type of planner through your work benefits. A a lot of them, as part of the 401K package, will provide some kind of planning services. So you may be able to tap into that before you have to hire an advisor. Having said that right, the retirement plan that you have at work is kind of limited to work, right? It's designed to help you save for retirement. They'll help you. Some of them are salespeople, and they'll sell you other types of policies. Some of them are working for the plan administrator, so. You know, this fiduciary word coming in. Again, the fiduciary of your retirement plan, of your work plan has a responsibility to you as the, you know, participant in the plan. And one of those is to educate you on the decisions that you make of what investments to choose and things like that. So they will provide resources for you. Having said that, those resources are gonna be limited. They're not going to do in-depth planning for you, so you may want to engage a financial advisor. Q: When Should You Hire a Financial Advisor? A: When you start asking yourself those questions, "when should I retire?" or "Do I have enough?" that's the point where you wanna start talking to financial. And potentially engage with them to start managing your money or to help you plan. The question of how are you're gonna transition from working into retirement? Because the dangerous part is really that transition period, the five years, five to 10 years before retirement, and then the first five to 10 years of retirement are, we're a mistake that gets made, whether it's you retired a little too early, or you invested it, you know, and you took out money in a down market.There's all kinds of like little hidden gotchas, but that's where mistakes are very hard to recover.  Q: What Should I look for in an advisor? A: The attributes you wanna look for right, is you wanna know what is their knowledge base? Most states don't regulate the term, and it's not regulated on a federal level, So anyone can technically call themselves a financial advisor.So you wanna know first what makes you a financial advisor? And they may tell you, Oh, I have an insurance license, or I, you know, I passed this, this designation from this college, or from this, you know, uh, governing body, right? Or they may say, I've got this license from this other governing body. You wanna know what makes 'em an advisor?The next question is, what makes you an expert in retirement?Right? Maybe this person is just really good at. Maybe this person's just really good at stock picking. So you look at, you know, what, what makes you a financial advisor? What's your education? What's your experience? And then ask them, what is your philosophy, right? What is your approach? How are you gonna solve this problem for me?And you should get that. All of that should be, you know, they should communicate that to you before you sign an agreement. Right. And, and this is something that I teach all the financial advisors I've ever worked with, right, is really before the first meeting or if the first meeting, you know, between the first and second meeting that all those questions need to be answered.Because if you, as the consumers, you, as the person who's hiring this person has any question as to what that experience will look like, what, what it'll be like to work with this financial. Then you shouldn't work with them. You should not sign on the dotted line. You need to know what you're buying because getting out of an advisory relationship is usually pretty difficult. You may think like, Oh, well I'll just go down the street and hire another advisor. But we both know that that involves signing lots of paperwork and waiting for things to transfer. And, and the real problem is, is when those assets are transferring, What? It depends what's happening in the market because you may lock in losses, you may miss out on returns, You may, who knows what's gonna happen.So you want to try to find someone who can really work with you long term, uh, rather than, you know, shopping around. But you wanna shop around beforehand, right? So if you don't get a good vibe from the first advisor, go down the block to the second advisor, right? You there? There's no reason not to shop.

What is the 4% Rule? A: It seems like even the people who seem to think that they know what the 4% rule is, and once they start talking, you kind of realize that everyone has a different impression of what the 4% rule is. And when you start actually digging into it, you discover that it isn't quite what anybody thinks. What People Think The 4% Rule Is The media and people have this idea that the 4% rule is, if I only took. 4% of my portfolio every single year. I would never run out of money in retirement. People have latched onto that idea from different studies, and when you start diving into it, you might start to question whether it's something you actually want to rely on. Want to Learn More? Attend an Upcoming Class or Watch a Replay of a Previous Class Here. What the 4% rule is really trying to do is predict the future. And we both know, right? You can't predict the future. So then we start looking in the past, and we go, Okay, historically, things have happened. So if historically, if things continue to happen as they have and the future. Is like the past, then therefore this would be a safe number.Right? And now we're starting to read into the tea leaves. And so if you don't even know what the assumptions are behind the tea leaves that you're reading, then before you know it, right? You're, who knows what you're building on. The 4% Rule Says You Need 25x to 30x Your Annual Expenses Saved So when we think about the 4% rule, right? Another, another way of phrasing that is you've probably heard, you know, uh, save 25 to 30 times your annual expenses, right? That you should have, that your retirement number, that the amount that you should have saved should be 25 to 30 times what you spend in a year.Mm-hmm. . If you think about it 25 times, right? So if you took one and you divide by four, it becomes 25. Ah, yeah. So the 25 rule, 25 x rule, right, of 25 years or 30 years is essentially saying the 4% rule, right? It's a mirror image of that. Um, but it's for different reason. Um, and that's kind of where people come up with this number of how much money should you have saved up for retirement.It's based on this 4% concept that if you somehow took out only 4% a year, that you would be okay. Right? And. It's, you know, is it based on something? Well, let's talk about that. But that, that is what it's based on. It's based on this idea that if you somehow only took 4% a year, you would never run outta money in retirement.And let's just, you know, between the two of us, let's be honest, right? Realistically speaking, there's a lot of people who may not even have that much money in savings, right? They might not have 25 times their annual expenses save. So are we telling all of these people that they can't retire? Right. And if we're telling these people that they can't retire, Right?Well, reality has a different outlook. Right? Reality is, well, these people can't work anymore or they, they're not getting a job anymore. They get fired. Right? Or they're forced into retirement. Mm-hmm. . But now, right? So there's this whole world of people. Just, you know, they got to 65 or they got to 70 or whatever that year was, or they had an injury at work and it forced 'em to retire and they don't have 25 times their annual expenses saved.They don't have, you know, enough that they can take out 4% every year and be okay. So are we telling these people they're not safe, that they're gonna run outta money in retire? Um, and I think when we start diving into, you know, what, where the 4% rule came from and you start looking into it, you might question and say, Well, okay, maybe I don't actually need that much money saved in retirement.Maybe I could take out more than 4% and still be okay.  Is the 4% Rule Something You Can Live By? I think that as a rule of thumb, right, if you are, if you're trying to gauge whether you have enough money for retirement. if we only took 4% out of our portfolio, out of our life savings and that covered our expense needs in retirement, then we are doing awesome, right? Because I, we can definitely create a retirement plan around 4%.if 4% is not enough, right, and you still have a shortfall, I don't think that you should at that point give up and say, Well, I have to work longer, or I have to cut my expenses. I think it just means you gotta be a little more creative in how you structure your retirement because that just means that this rule of thumb doesn't apply to you and you're gonna need to use other factors to fund your retirement. What is the Trinity Study and How Does it Apply to the 4% Rule? So the Trinity study, which everyone kind of like looks to and calls, you know, the 4% rule or the Trinity, you know, the Trinity study, which was, you know, Trinity University, which is where these professors were, actually came on the backs of another study that was done by a retired financial advisor, Uh, John Big, um, if I'm pronouncing his name right, I, and he's, you know, both them and the people who created that Trinity study have come out multiple times over the years.Updating their rule. Um, but let's let, let's talk, take a look at the fundamentals, right? Both be and the Trinity guys, right? What they looked at was, they said, Let's start with the question of how mu, how, how, how can we structure a portfolio so that someone would not run out of retirement money during retirement, right?So that they would not deplete all of their savings by the time that they died. That was the question that they asked themselves right now. They said, Okay, how are we gonna structure this? They, this was, you know, 1998 was the first study that was done by the Trinity University, right? These guys. So they went back historically and they looked 1925 to 1995.And they looked at different periods of the stock market and the bond market, and then they looked at the returns and they were like, Okay, what percentage could we take out of a portfolio over a 15 year period or a 25 year period that if we took that percentage would consistently allow the person retiring to still have money when they died? Or at the end of that 15 or 25 year period. Assumptions That No Longer Hold True About the 4% Rule let's look at some of the assumptions of this study. Okay. Assumption number one is that the past is gonna look like the futureWe starting in 19, right? 1925 to 1995. Right. Let's talk about all the changes that underwent the world, right? We're, we're talking about, you know, coming off of World War I, right? World War I. Right. Um, we have, we have Cold War, we have the space race, We have hyper inflation, right of the seventies. We had Soviet Union in 87, right?Defaulting on their sovereign debt for the first time. Collapse of the Soviet Union, right? And then we have the.com boom. So this was literally in the height of the.com boom, was where the study ended. Um, and the first study in 1995, during that period, also, by the way, right? We went off the gold standard.So in 1925, a dollar was worth a dollar of gold. You can go and exchange that dollar bill for a dollar of physical gold that you can buy things with by, you know, 1970, you couldn't do that anymore. And that completely, that's part of what drove inflation and that completely changed economics. We had globalization, we have technology, right?The world did not look the same. The stock market did not look the same. 1925, you wanted to buy stocks. You literally went down to Wall Street. But nowadays, right? You wanna buy a stock, you go online on Robin Hood, and you can have that within a few seconds.  What validity does the 4% rule still have for us today? I think that concept that you should look to the past and then say based on that what I can expect the future to look like, let's use some statistical analysis to say what we can take out of our retirement each year. I think that was the innovation that they did, that they introduced this concept to the finance world.Like, Hey, don't just guess at this. Do you some analysis. But beyond that, the numbers change. They literally change, you know, every few years. Because the stock market, depending on whether we're in, in a beer market or a bull market, will determine what the future expectations are for the return on the market now over a long enough period.Yeah. Those numbers will kind of even out. But I, I, I mean, I, I think everyone will agree that the bond market has changed significantly from 1925 to 1995 or even to, you know, 2015, um, or 2022. Right. Exactly. And, and what's gonna happen in the future, right? It's not going to mimic what happened in the last 20 or 40 or 50 years. How Do You Use The 4% Rule In Your Retirement Planning? So first of all, the further away you are from retirement, the more the 4% rule is a good rule of thumb. Ah, uh, it's when you actually get to the point where you're like, Well, I need to start taking money out of my account, right?I actually need to retire. Do I have enough money that the 4% rule becomes a, a problematic? Now, here's, I do use the 4% rule in my planning, but I use it in the way of saying, are we, do you know, do we have a thumbs up of like, we have enough money or do we need to do additional work? To see, do we actually have enough money to retire?Because if we have 4%, the way I look at it, right, it, the, the stock market, when we look at the historical returns of just the s and p 500, so you're just invested in the top 500 companies and the United States. When we look at the historical return that that has had over the last 200 years, that has averaged 6.7%.After inflation. So that means no matter whether inflation was like 10% right, or inflation was, you know, 1% after inflation, statistically that has returned an average of 6.7%. So if I only take 4% from that, that still leaves me with 2.7% to put towards next year's retirement and my future, right? So I'm still accumulating wealth over the long run.Probably end up hurting you as any financial planner will tell you, but as a rule of thumb, do you have enough or not? Or do we need to figure out how to cut expenses or increase our income? I think is a good rule of thumb because worst case scenario, You know, a hundred percent invested in the stock market, which everyone says not to do, right?But if you had to, you could be a hundred percent invested in the stock market and you would be okay. Right. So I see it as kind of a green light, red light thing of are we, are we safe to proceed with our retirement planning or do we have more work to do? What if I don't Have Enough Money? So you're not in trouble, Right? I, I would say that right off the bat, right? Just because you're gonna run outta money, just because it says you're gonna run outta money doesn't mean you're gonna run outta money, right?Because it is trying to project into the future. It's trying to look at it crystal ball, It's making assumptions that may not be. Right. So what we wanna do, right when it says, when it starts fr uh, flashing red lights, all that says is one, we gotta be super careful about the decisions we make because every decision that we make is gonna have more of an impact on us than it will have on regular people, right?So that's number one. Number two, it means we probably will have to get creative. Like, something that I didn't mention about the Trinity study is they found that that 4%, it went along with a portfolio that was 50% equities, 50% bonds, which right now anyone would tell you would be nuts. So the, you know, they, over time that changes and it's all based on, you know, what historical returns and what the projected future returns are.Mm-hmm. . So we may need to take on more risk or we may need to say, you know, we need to. Prepay some of your expenses to bring those expenses down, right? There are things that you can do. All it does is it says where you need to focus your planning. It does not tell you whether you can retire or not.