April 10, 2025 • 41 mins
"Tell me about this 'Monte Carlo' simulation you're using for your clients?" Hosts John and Giuseppe break down our strategy that looks at market history using relevant data. Plus, maximizing your tax advantages, and 401K positions for optimum matching. The Wise Money Guys.
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Episode Transcript
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Speaker 1 (00:00):
The Wise Money Guys Radio show is brought to you
by One Source of Wealth Management SEC Licensed three one
nine zero seven eight. For disclosures and more information, visit
our website One Source WM dot com.
Speaker 2 (00:13):
Welcome to the Wisemoney Guys Radio Show. I'm your co
host John Scambray, and I'm sitting here with my partner
extraordinaire JIZEB Visconti, and we are certified portfolio managers, which
I'll explain what that means and how important that is
later in the show. But we specialize in helping people
who are retired orre about to retire manage their money.
If you like our show, or have any questions, or
(00:34):
want to meet for a no obligation consultation, or just
give us a topic to talk about on the show,
whatever the case may be called nine one six nine
six seven thirty five hundred or we always throw this out.
You can email us a question at question at wysmoneyguys
dot com. Also for more information and very important disclosures,
(00:57):
go to our website at Wise money guys com. Scroll
to the bottom of the page and you'll find basically
all the information you're looking for to scrutinize whether or
not we're a good fit by visiting our website. Also
from the website wisemadyguys dot com, you can basically click
(01:17):
on that you have questions, there's a live chat function,
and then there's also you can click on that you
want to meet for a no obligation consultation. And I
thought i'd throw out just based on a new client
that we met with yesterday and who's becoming a new
client that one of the powerful things that we do
(01:40):
is with every client that meets with us, whether they
become a client or not, we're going to send you,
really what we believe is the top financial planning software questionnaire,
and we will run an analysis for you, and this
is free at charge and no obligation to see if
(02:02):
we can help you and if your goals and objectives
are you know, realistic, or what work you need to
do to make your goals and objectives, Whether you've already
retired or you're about to retire, like our client had
about a five to eight year time horizon for retiring,
(02:22):
it will answer a lot of those questions. More importantly,
like Giuseppe likes to say, it will give you a
road map to start a relationship with us or continue
managing things your own. Hopefully we're a fit and you
hire us again for getting a hold of us called
nine one six nine six seven thirty five hundred, and
(02:45):
I should announce real quick while I'm on a roll
here that we're having our first of the year Roseville
So Greater Sacramento Area workshop. It is on April thirtieth,
which is a Wednesday, from six to seven thirty pm
at the Old Spaghetti Factory on Sunrise. For that, you
(03:07):
can also register at our website which is again whis
money Guys got dot com, or you can call us
at nine one six nine six seven thirty five hundred.
So let's talk about our agenda today. We're going to
talk a little bit about the markets, compare and contrast
you know, the cap weighted S and P five hundred
last year to you know, year to date this year
(03:30):
against the equal weighted S and p ETF. We're also
going to talk about how important it is to you know,
even contribute a nominal amount of money in your four
oh one K plan. It's never too soon to get started,
(03:50):
It's never too late to get started, especially if there's
a match. So we'll dive into just some numbers that
Joseppi calculated and what those could add up to at
a nominal investment rate, and then we'll also talk about
the average withdraw rates that we see people taking and
(04:14):
how those have drastically changed, meaning once you're retired and
you're in that distribution phase versus accumulation, and what you
could realistically expect as an income or a draw down
or a distribution nowadays versus you know, a decade ago or.
Speaker 3 (04:34):
Yeah, it used to be used to be that, you know,
four percent withdraw rate was was kind of the status
quo for a balanced portfolio. But we'll look at, you know,
what the historical depending on exposure to equities or bonds,
and then running through what we call a Monty Carlo
simulation and what the average safe withdrawal rate would be
based off.
Speaker 4 (04:54):
For the explosure.
Speaker 2 (04:55):
You have to go to Monty Carlo to get the
money Carlo simulation because I mean that'd be great, great.
Speaker 4 (05:00):
Right, really cool financial plan and it show some money.
Speaker 2 (05:03):
So first let's let's talk about you know, this withdrawal rate,
this distribution, this draw down. I don't think a lot
of people especially retirees understand how sensitive that amount is
from either you know, being able to not outlast your
money or finding out that you did outlast your money
(05:25):
and you ran out. I mean, what has been the
typical withdraw rate and some of the other key components
of being retired and the type of money you should
kind of realistically expect these days from from your wealth,
from your savings, from your era, your trust, so on
and so forth.
Speaker 3 (05:46):
Yeah, and the tricky part is is the sequence of
returns and the timing, right, I mean, nobody knows when
the next big downfall in the market or the recession
is going to, you know, come into place. And we
do this exercise with one of our clients when he
was first onboarding and said.
Speaker 4 (06:03):
Why don't I just put my money in the.
Speaker 3 (06:05):
Spy ETF which just tracks the S and P five hundred,
because it has an average on the return of almost
like ten percent and more recently, you know, more like
eleven twelve percent, And if I just need eight percent
a year, why can't I just do that?
Speaker 4 (06:20):
Well, it all depends.
Speaker 3 (06:21):
It depends if you go in it now and we
have a good next one to three decades of stock market.
But if you had gone in two thousand and six.
Speaker 4 (06:30):
You know, just two.
Speaker 3 (06:31):
Years prior to the big financial crisis in two thousand
and eight, you would have ran out of money in
twenty eighteen. Versus if you started in twenty ten, you
would have actually been able to pull out eight percent
every year and your your account value.
Speaker 4 (06:44):
Would have grown.
Speaker 3 (06:44):
But if we look back and just looking in some data,
I read this article. It was through morning Star. It
was at the end of last year, and it was
really interesting because what it is. It took the data
for stocks or you know, just all stocks, bonds or
treasury money markets and ran it from nineteen twenty six
(07:06):
until the end of last year, and then kind of
put the data together is figure to figure out what
would be the safe withdrawal rate, you know, the best,
kind of the worst, and then the average, right, because
it all depends on when you got started. Did you
get started just before the Great Depression? Did you get
started before two thousand and eight. But if you break
it down, you know, if you one hundred percent equity,
(07:28):
so if you had an all stock portfolio, the best
withdrawal rate scenario during that time period and this is
a rolling thirty period, rolling thirty years, right, and it's
starting at different time, different points in time. So the
best outcome was you could have withdrawn just under eighteen percent.
I was like seventeen point nine percent a year, which
(07:49):
that would have been amazing.
Speaker 2 (07:51):
And I would highly suggest that you when you're when
you're getting this information that again, and what a plan
will really help you do is not half to live
to a withdrawal rate of the best average thirty year Yeah.
Speaker 4 (08:08):
You don't want to.
Speaker 3 (08:09):
You don't want to assume that and have that as
part of your plan, to assume that that's.
Speaker 2 (08:12):
What you're going to be able to take out seventeen
percent a year, yeah, and not run out of money.
Speaker 3 (08:16):
You're like, I could retire now exactly because on the
flip side, the worst was just over two and a
half percent. So the worst rolling thirty year period, the
safe withdrawal rate for one hundred percent stock portfolio was
just over two and a half percent.
Speaker 2 (08:32):
What a drastic difference if you think about that. I mean,
and again that's where portfolio management from. You know what
a plan kind of guides us to say, this is
what your risk appetite is, this is the type of
money you'll need to have, and that more importantly, the
types of returns you'll need to get to not run
(08:54):
out of money at over a thirty year period, which
is what most people need to plan for retirement. I
mean that's a huge thing. Yeah, I mean right there
saying that if I have one hundred percent stock portfolio,
I can actually really only rely on taking out two
percent a year versus the seventeen percent you know, because
you want.
Speaker 3 (09:15):
To or if you're a person, if you're a person
with bad luck, yeah, because you have the bat, you'd
have the worst timing. But if you had a fifty
to fifty so fifty percent equity fifty percent bonds, the
best rolling thirty year period would be eleven point four percent.
As far as a safe controwal rate. On the flip side,
(09:35):
the worst is three point nine percent. So the importance is,
you know, it's not all about risk versus reward and
trying to go out there and go for the gusto
and thinking that that's going to provide you a better return.
And it's also taking the consideration sequence of returns and
not looking and saying I could just put my money
in the sm P five hundred or this index funder
(09:57):
that passive index fund because the average when you return
is X. Well, it all depends on when you get started, right,
when is your rolling thirty year period, and so that's
where diversification and having access to all kinds of different
asset classes, right and acid classes are going to not
be correlated to one another. That can smooth out the
ride and not go from seventeen eighteen percent, you know
(10:20):
what's you're all right down to two and a half percent.
Speaker 2 (10:23):
So you've said so many things in there to unpack,
but generally speaking, you know, most people don't have a
true diversified portfolio. They think that if they have mutual
funds or multiple firms with multiple different accounts, that they're
probably diversified. And let us help you determine that. Come
(10:44):
in and see us by calling nine one six ninety
six seven thirty five hundred. We were talking about some
of really the expectations that you can or shouldn't have
as far as what you can contain actually take out
of a stock portfolio, a blended portfolio, or an all
(11:06):
money market and treasury portfolio over a rolling thirty year period,
and where we start to see some of that play
out as far as good year bad year, and the
differences is literally right now. I mean, you know, one
of the things I want you to talk about is,
and this is something we've spent some time on that
(11:29):
the if you just have an S and P five
hundred index fund, how big of a difference it is
when that is weighted primarily by what five ten stocks
that really drive that into SY versus if you have
something that's equally weighted. And that's what I want you
(11:53):
to just kind of mention how important, because it really
does tied to the diversification, true diverseification and timing, timing
and understanding what you're really buying, you know, and where
along the the value proposition you're buying it at. So
what is the difference between you know, an equal weighted
(12:17):
uh uh investment like s P Y versus I mean
like h R s P versus a cap weighted investment
like s P Y. And it really ties back to
just overall, you know, shopping for value, which is what
we said at the beginning of this year. The end
of last year, the mark the S and P was
(12:38):
overvalued because of you know, the big names, look for value,
look for things that pay dividends. That's still super crucial today,
especially when you look at the draw down or the
or the or the decline and and go over some
of the numbers. Yeah, I think you showed me this morning.
Speaker 4 (12:57):
I think it's.
Speaker 3 (12:57):
Important also when having a portfolio investments, or specially funds,
to be able to identify the inherent risk within the
funds as well, because it's easy to look at the
past track record of a fund or particular stock that's
(13:19):
done very well in the past year or two years
and say, you know what, I want to jump on
board with that one because that thing has had a
good past couple of years. And so s you know,
SMP five hundred. And we pick on this only because
anybody turning on the you know, the radio or the
financial news network or the news and.
Speaker 4 (13:40):
Brings up the stock market.
Speaker 2 (13:41):
Yeah.
Speaker 3 (13:42):
Yeah, and you bring up the stock market, they're going
to be talking the stock market is referencing typically SMP
five hundred. They have Dow and NASDAK, but SMP five
hundred is widely known. And so the ETF that tracks
SMP five hundred that we talked about multiple times as spy.
The unique thing about it is that it's cap weighted
(14:03):
and so these five to ten names that John had
talked about earlier, which are you know, you hear the
Magnificent seven.
Speaker 2 (14:10):
And the video Tesla, Microsoft, Amazon, Google, Netflix, you know,
so on and so forth.
Speaker 3 (14:15):
Exactly, they they pull a lot of weight literally of
that whole Indussy and the remaining of the four hundred
and ninety three or four hundred and ninety names.
Speaker 2 (14:25):
And don't we just pull the weight as much as
those names do pull the weight or the value of
the Indassy.
Speaker 4 (14:32):
Well, it swings, it swings it quite a bit.
Speaker 3 (14:34):
So looking at the past year, the trailing one year
of what the funds have done, you in comparison to
the equal weighted which is an RSP is a ticker
symbol where it's a level playing field. No name or
company is going to have more weight than another company.
Speaker 4 (14:52):
They're all equally weighted.
Speaker 3 (14:54):
But if we look at the height, so in the
last year, the height of SP one I was February nineteenth,
which was the peak of the market, and the fund
grew and it would have would have grown from the
start a year ago seventeen point three percent. Okay, now
(15:14):
just from February nineteenth until now it's down. It's still
positive overall, but it's at eight point three, so it's
lost almost half of its overall return.
Speaker 4 (15:24):
That is more than half.
Speaker 2 (15:26):
Actually yeah, well no, not eight point three versus seventeen
point two.
Speaker 4 (15:30):
Oh yeah, sixteen point six. That's true.
Speaker 2 (15:32):
Thank you. We always say there will be no math,
but just just and that's only that's that's a short
period of time. That's February nineteenth, so imagine and this
goes back to our previous you know commentary in our
previous episode is what if you started and put all
your money and you're like, you know what, I'm gonna
put her in S and P.
Speaker 4 (15:52):
You just lost.
Speaker 3 (15:53):
Yeah, And in comparison to RSP where the peak in
February nineteenth, it was up eight point three percent, it's
also come down, but it's still you know, in the
mid fives, so come down, but not as much as
the as spy. And the reason being is we're seeing
all of these you know Darling, Yeah, the AI Darling
(16:16):
and Video, which is down almost thirty percent from its peak.
You have Tesla which is down fifty was at one
point it was fifty. Microsoft, Google, they've all gotten hit
and you're seeing it on a couple and why you're
seeing it is a couple different reasons.
Speaker 4 (16:33):
One valuation, which you spoke to already.
Speaker 3 (16:36):
The other is we're in this environment with with you know,
this tariffs and kind of figuring out uh, you know,
Trump administration is figuring out this whole tariff situation and
trying to even the playing field.
Speaker 4 (16:47):
Right, He's trying to make an rsp versus a spy.
He doesn't want to.
Speaker 3 (16:50):
Capboy that he wants equally waited across the world. And
recently in Vidia got hit because China came out and said,
you know, they're two chips don't comply with their.
Speaker 2 (17:03):
New energy requirements minimum regular regulations.
Speaker 3 (17:08):
Which is interesting because I pulled up data on China
and said, okay, if it's all about energy efficiency and
trying to clean up.
Speaker 2 (17:15):
The efficient, dirtiest producing country in the world, China, maybe
India is the worst.
Speaker 3 (17:22):
Well see, and this is the thing, So I've actually
pulled up data. China has eleven hundred operational coal plants
and ninety four plants on the way new ones.
Speaker 2 (17:34):
With no emissions on them whatsoever. By the way, when
we operate coal here, they put so many different, you know,
small scinting types of controls on them to produce that
coal as clean as possible. I mean, if you look
at coal production in the US in the fifties and
sixties versus now, the admittance of you know, pollution is
(17:57):
a fraction of what it was. And then you have
a China and other countries around the world, Eastern Europe,
all throughout Asia, you name it, even South America, you know,
Latin America where they don't put any emission control.
Speaker 3 (18:12):
Yeah, they don't have all the guidelines and regulations. So
they're number one on the list of the world. Number
two is India. They have like thirty four new coal
plants that are coming on board.
Speaker 2 (18:24):
But you know that there is a cord fraud where
we were just taxing the manufacturing and mison and making
energy be produced offshore versus on shore, you know, and
how how much that does for the environment. That's how
dumb You know most environmentalists are is they think not
(18:48):
producing the energy here in the US is actually going
to save the world from a pollution perspective. No, it's
just the opposite. It actually hurts the world from a
pollution perspective to not produce as much energy here as
we possibly can and then export it. If we have excess.
Speaker 3 (19:06):
Yeah, and I think that whole play within video chip
and the energy regulation and that's just all due to
due to terror. Yeah, it's all due to terrorifs and
push and pull has nothing to do with nvideo and
energy efficiency. I just thought I thought it would be
funny once I once I pulled up the data, I
was like, wait a minute, they have energy regulatory, but
they have the most coal plants and the most new
(19:28):
coal plants out out of any other nation in the
world that are going to be coming on Onlinely.
Speaker 2 (19:32):
What this really means is, you know, strategically, what are
we saying that we're doing. What are we saying that
maybe you should take away from this is that really
focus on true diversification. There is so many categories of
different types of investments. All of your returns don't need
(19:54):
to come from the stock market, and in fact, if
your risk advert you know, there are many things that
are low correlated to stocks that truly diversify your portfolio
and have not gone down at all this year. In fact,
many of the private credit and the private equity or
(20:16):
the structured notes or other alternative investments that we've been
doing are actually up this year. And paying their dividends
on top of it. And so strategically, if you really
don't have a plan or you have not updated that plan,
you absolutely want to come in or give us a
(20:37):
call for a no obligation consultation because this is the
type of thought, research and energy we put into, you know,
managing your portfolio, your hard long saved retirement dollars. Give
us a call at nine one, six ninety six, seven
thirty five hundred and just to kind of re cap
(21:00):
a little bit so far, the number one strategy that
we've been talking about for years is true diversification, and
most people aren't diversified at all. Most of the investments
they have tend to be highly correlated, have really large
roller coaster peaks and valleys, which is measured as standard
(21:22):
deviation or our lockstep with you know, some of these
overvalued companies that everybody follows and then ends up buying,
and then for.
Speaker 3 (21:35):
Their fund or their funds that they're in their their
stock funds have a big allocation to those holdings and
it drags that fun down.
Speaker 2 (21:43):
Yeah, So let's talk about strategy number two, and this
is the one that just is amazing to me. You know,
we read a statistic recently that the average American citizen
has two thousand dollars saved to put towards emergency, their bills,
their emergencies, any sort of emergency if one should arise,
(22:06):
And that, to me, that just says that most people
aren't taking advantage of one of the most easiest things
to take advantage of us. And in fact, laws were
passed about employers of I believe more than five employees.
Don't quote me on the number of employees that have
to offer Yeah, in California have to offer companies sponsored
(22:29):
retirement plans to their employees. So you've been doing some
research and data on what some basic numbers, some nominal
numbers mean if you were to put just uh, a
small percentage of your income deferred away into a retirement plan,
specifically like AFOORA. When came this I believe doesn't even
(22:53):
include matching, right, it does, Oh, it does include matching.
So the match that that the average that you came
out with was including matching. So why don't you dive
into that? Because what we're saying is if you're not
maximizing your four oh one K, or if you're not
putting money in a four oh one K or IRA
or roth Ira or sep Ira or whatever, or TSA
(23:17):
or four h three B. Those are the typical retirement
vehicles that are out there that have tax advantages. This
is what you're missing out on, you know, run through
the numbers a little bit.
Speaker 3 (23:28):
Yeah, and you know most a lot of times, you know,
people will say like, oh, well, you know, my company
matches four percent of my income, and you know I
only make X, so four percent is not that much.
Like am I going to be able to really retire
on that? Because even if I say it for like
three years, it's not that much money. But the reality
is the you know, I looked up and this is
(23:51):
just for Sacramento. Other counties are going to be higher,
especially the Bay Area, but Sacramento median income is eighty
four out just over eighty four thousand dollars. Use that
as the assumed income level. Let's say you're with an
employer and they match four percent, and we tell any
of our clients that are still working, you want to
(24:12):
put in at least the minimum of whatever the company matches.
So there's some companies out to that match. I remember
Redmen with some companies six percent, which is phenomenal. That's
free money. That's free money. But this just shows you
the power of investing and compounding over a period of time.
And that's really what we're getting to. So if you
were to contribute four percent of your income, let's assume
(24:33):
that eighty four thousand dollars when you break it down.
That's less than three hundred bucks a month when you
break it down, and then the employer matches four percent.
Let's assume an average annual return of seven percent a year,
so that is very rearable, you know, and that's not
going into all stock portfolio. And let's also assume that
(24:54):
you get a pay raise at three.
Speaker 4 (24:56):
Percent a year over thirty years.
Speaker 3 (25:01):
That would equate to a lump sum at the end
of thirty years of eight hundred and seventy one thousand,
two thirty five, So over eight hundred and seventy one
thousand dollars, which is what your four to one K
would be worth thirty years from now. Just putting four
percent of your income to work and your employee matching
(25:21):
the other four. Now, let's say you know, you say, hey,
I've already been working. I'm not I just didn't start.
I don't have thirty years, I'm kind of halfway through.
I have maybe another fifteen years before I can retire. Well,
if you started, if you started now even fifteen years,
assuming all those other numbers being the same, fifteen years later,
(25:42):
you would have amassed over two hundred thousand dollars in
your four to one K.
Speaker 2 (25:46):
I mean, now hear what we're really saying. So a
couple of things to unpack in that. First of all,
if you're a business owner and you have you know,
from one employee yourself to dozens of employees or even
hundreds of employees, and you're not offering you know, a
retirement vehicle of any kind, or you have not had
(26:10):
your current four oh one K, sepp I RA solo K,
whatever it is that you're offering or want to offer,
give us a call. We can help you set that
up easily. We can do analysis on existing you know,
plans that you sponsor or do an analysis and help
you determine which plan to put in place that will
(26:32):
benefit you the owner as well as you know you're
certainly your key employees and other employees. And you can
do that by calling nine one six ninety six seven
thirty five hundred The other thing is, now, if you've amassed,
so let's say you have been doing this fifteen our
years already, you have another fifteen years to go. What
(26:55):
that really means is that at eight hundred and seventy
one thousand dollars. Now, we put together a portfolio recently
for a client that you know, had a diversification amongst
five different asset classes, stocks, bonds, real estate alternatives, and
cash equivalents. And the average yield on that and it
(27:18):
and it varies depending on you know, the ratio of
the different categories that you either increase or decrease also
is dependent, especially on the cash and bond side, of
what current interest rates are. But but this is very
recent and just the average you know, yield was the
(27:38):
average weighted yield was six point three percent. And that's
without all of your money at risk in stocks. Now
that was actually that allocation is only thirty percent stocks exactly.
Now take that and multiply that times eight hundred and
what was the figure eight hundred and seventy one. I mean,
you're talking over fifty thousand dollars a year in supplemental
(28:03):
income during retirement, all by just putting away four percent
of your money with it being matched right and averaging
a seven percent return. So if you don't have that
in place, or you do and you're not fully you know,
maxing it if you can, that is why you should.
Speaker 4 (28:23):
I mean you're missing Yeah, you're missing out.
Speaker 2 (28:25):
I can't tell people an easier way you know, to
make money and help them from a retirement perspective than that,
can you. No.
Speaker 3 (28:34):
The other thing is I think a good point you
know for employers or business owners that especially here in California,
because it is you know, if you have five or
more employees you have to have some retirement plan set up.
Is that just creates a value add to your employers,
right that you're looking out for them. You have a
plan the longevity and that just creates a stick of
(28:55):
your environment to help maintain your employees.
Speaker 2 (28:58):
With with your By the way, do you think of
this and research this? Because of the meeting we're having
with our with our largest four oh one K client,
and so if we are your advisor to your company plan, uh,
your the plan that you sponsor, I mean we do
regular reviews, regular analysis on the fees and the and
(29:20):
the uptake in the and the adoption of the plan.
And how much the loans are maybe impacting it, and
more importantly, what is the administration, administrative experience and so
on and so forth. But then we also sit down
with any employee in this particular firm has an excess
of one hundred employees, and every year we have a
(29:44):
list set up by the by the manager at the
HR director at the firm of people that we sit down,
all included in the plan advisory, no additional cost to
the employee to help them with their alloction, to help
them with their goals and objectives for retirement. So, if
(30:05):
you're an employer and you don't have somebody who's helping
you at that level with your company sponsored retirement plan,
give us a call at nine one six nine six
seven thirty five hundred. Also, if you're somebody about to
retire from a company, like the new client we just
(30:25):
got yesterday, or many of our clients, where we help
you make decisions on do you roll out of your pension,
do you stay in your pension, what do you do
with your IRA money and all these types of things,
what sort of income do you need from it, and
on and on and on. You know, also you can
give us a call or sign up for our free
(30:47):
you know, dinner included workshop on April thirtieth at the
Old Spaghetti Factory from six to seven thirty pm by
that's in Roseville, by calling N six ninety six seven
five hundred and we are certified portfolio managers if you
haven't heard, you know, throughout the show over and over again.
(31:08):
And what that really means is that it's about the
research and the analysis and the time and effort we
put in to creating the best possible scenario with the
best possible average outcome that anybody could do as your
professional money managers. And so that is just crucial. And
(31:32):
what that means is we're always looking for, you know,
the types of investments that could be added or diversified
into people's portfolios. And the reason why we're going to
talk about this again and again and again is because
it's just that good. So we've been talking about, you know,
of the five classes of investments again, stocks, bonds, real estate, alternatives, cash,
(31:58):
cash equivalents. We love the alternative space right now. In fact,
we just closed upon as a piece of people's portfolios
a structured note that I want you to describe, and
then we'll talk about the one that's coming up next week.
And this is a micro a specific example of the
(32:20):
types of things you might have in your portfolio. Again,
remember to some of our other shows and the other
conversations that we've had. Never do we put all of
your money in any category. Never do we put all
of your money on any one investment in any category.
So keep that in mind. This is just to give
(32:40):
you a live example, a recent example of just the
phenomenal investments that we're putting together for people that quite frankly,
you can't find anywhere. So talk about the one heart
that we just placed last week, what it was, what
it's expected to return, you know, what's the the risk mitigators,
(33:03):
you know, and all of those things, and then maybe
talk about the one that's coming up.
Speaker 4 (33:08):
Yeah, and.
Speaker 3 (33:11):
Just to add to that, what's what's important and part
of the planning and the exercise of putting the whole plan.
Speaker 4 (33:18):
Together is.
Speaker 3 (33:20):
How hard does your assets need to work in order
to get you to where you want to go as
far as your goals. And then it's our job and
what we do is you try and find those investment vehicles,
the blend of investment vehicles, putting that portfolio together to
get you to you know that that number as far
as how hard your portfolio needs to work is at
(33:40):
five six percent average and to return seven eight, ten percent,
so on and so forth. But how do we how
do we get you there without with taking the least
amount of risk right and not having to add any
unnecessary risk to the portfolio. So that's where these vehicles
come into play, because it can give you an attractive
rate return without having to go out there and take
(34:02):
a bunch of risk. And the one that John was
alluding to that we just added to some client portfolios
was really juicy one because volatility picked up on the market.
Anytime volatility picks up, it makes the terms and the
return potential returns of these structure investments a lot more attractive.
But that one was through Bank of America, who's the issuer?
Speaker 4 (34:26):
And then and we had.
Speaker 2 (34:27):
To cupe on guarantee or guaranteur guaranteur not the guarantee or.
Speaker 4 (34:36):
Is that like you?
Speaker 2 (34:38):
But go on, I'm sorry to interrupt. I mean, these
are the things that come to.
Speaker 3 (34:41):
My it's it's twelve It was twelve point four percent
as long as it hits certain metrics and metrics right
as long as it hit certain metrics, and those metrics
are it tracks three stock in disease S and P
five hundred, RUSTLED two thousand, and the equo weight NASDA
one hundred and as a thirty percent downside barrier. So
(35:03):
what it does is it will take a look every month.
It has a monthly observation date on a specific day
of the month, and it'll take a look at those
three indices and as long as they haven't gone down
thirty percent or more, then you get paid out one
twelveth of that twelve point four percent, So it'd be
just over one percent per month.
Speaker 2 (35:19):
Highlight that a little bit because think about that for
a second, that thirty percent barrier. I don't think people
really understand the power of that, especially from a timing perspective.
This year, when if you look at from the peak
of the Nasdaq, of the S and P or of
the Dow, whichever one you want to look at, you
know those are already down let's just say ten percent
(35:42):
on average. Nasdaq was down more, Dow was down less.
So let's just say on average across the board of
those three they're down ten percent. They'd their peak, right,
They've already pulled back, so then you would need another
thirty percent pull back for these things each month not
to pay out their monthly distribution rate. That is that.
Speaker 3 (36:05):
Yeah, and so let's assume so you know, let's let's
let's flip the script and go on the other side.
So let's assume one month the Russell two thousand, which
is one of the indices attracts, is down forty five
percent on the monthly observation date from its start date.
What would happen is nothing. You just don't get paid
out that month. It just goes on to the next month.
Let's say the market starts to recover and in Russell
(36:26):
two thousand is still the worst performer of the three
and the next month, but it's down, but it's only
down twenty eight percent versus what it was a previous month.
Well it's not down thirty or more. So you actually
get paid out and it continues on that process.
Speaker 2 (36:39):
Thirty six months a year. And that one, that one
was eighteen month month. That was the short term eighteen months. Yeah,
and a lot of times what happens is these issuers,
this one being Bank of America, we'll call it. What
that means is they just matured early. You get your
original principle back, plus you've collected whatever payouts, the monthly
payouts along the way, if in fact they don't. The
(37:01):
other risk is, you know, if Bank of America has
financial troubles, they go belly up, then obviously there's no
principle or payout at that point in time. But think
about that now. Again, just because we talk quickly about
these things, and I want to make sure you know
people listening, because we do describe this in our workshop too,
if you if you want to hear and understand more
(37:22):
about our portfolios and the types of investments. Is that
most people you know have exposure, especially in their four
one K plans or their eras to some sort of
S and P type stock, or it may be even
just in their four one k they have an sp
y or an index fund, right, and those have absolutely
(37:45):
no guarantees or from a yield perspective or a barrier
at all. So and you're really in the S and
P trying to get a ten percent return, right, So
here this one is paying out a twelve point four
percent and it will turn rate return assuming that the
(38:08):
S and P the wrestle so on, and so forth,
like you said, doesn't go down thirty percent or more mohore,
and I just want to make sure and emphasize that
because that is huge.
Speaker 4 (38:18):
You know.
Speaker 2 (38:19):
And so we try to find these every week and
quite frankly, sometimes they're not out there.
Speaker 3 (38:26):
So yeah, when they picks up, then we go to
our partner and say, hey, this is what we're looking for.
Here's kind of the terms of parameters we want monthly
payout or whatever the case may be.
Speaker 4 (38:37):
And that's just example of one. There's growth.
Speaker 3 (38:40):
You know, if people are worried about tax and a
taxable account, we can get them designed where they don't
pay out until twelve months later. So there's all kinds
to design, more conservative, more AGGRESSI.
Speaker 2 (38:50):
Yeah, we can even go one hundred percent barriers where
there's no downside risk on these types of things, but
you give up the income.
Speaker 4 (38:57):
So the potential return.
Speaker 2 (38:59):
But still there's so many ways to slice this this
pie or skin the cat, whatever you want to say.
And what's important again, if this isn't the level of
analysis of effort of diversification that you're doing in your
own portfolio or what we find most often many people
(39:24):
in the professional they're working with is not doing this
or not doing that, or they don't have access to it,
or they don't have access to it. You definitely want
to give us a call for a couple of reasons.
A just to talk about the different types of investments.
B to get a absolutely no obligation free retirement plan
(39:44):
analysis and have a consultation or see you know, register
for our workshop on April thirtieth, which is a Wednesday
from six to seven thirty pm in Roseville, California, and
call nine six seven thirty five hundred to do that.
Speaker 3 (40:04):
And if you don't know which one A, B or C,
I was always told to choose C, which is go
to the workshop.
Speaker 2 (40:10):
Go to the workshop. Yeah, if you're just not ready
to come in and have a sit down, or maybe
you're you're not in the area, but let me let
me do because actually we haven't mentioned this in a
few shows. We do have convenient offices and or meeting
places throughout the Bay area. One in the East Bay,
one in the Peninsula, one in the South Bay. So
(40:33):
if you're in the Bay Area or you're in the
greater you know, Northern California area, we probably have a
convenient meeting location to come out and visit with you,
So don't let that stop you. And also as well
as Sacramento obviously, yeah, well Sacramento be in our hub.
But we have so many clients in the Bay Area,
(40:55):
in southern California, in the Central Valley, in Nevada, so
on and so forth, and a handful and many other
states because they've been clients and then they relocated to
other states. And nowadays, you know, because so much of
what we do is electronic, is is a video, you know,
so on and so forth, that's no reason to prevent
(41:16):
you from giving us a call and potentially having us
help you. Well, holy moly, I think we're out of time.
So you've been listening to John Scambray and just Seti
Visconti the Wise money guys. I hope you enjoyed the
show and have a wonderful weekend.
Speaker 4 (41:33):
Have a great weekend.
The Wise Money Guys Radio show is brought to you
by One Source of Wealth Management SEC Licensed three one
nine zero seven eight. For disclosures and more information, visit
our website One Source WM dot com.
Speaker 2 (00:13):
Welcome to the Wisemoney Guys Radio Show. I'm your co
host John Scambray, and I'm sitting here with my partner
extraordinaire JIZEB Visconti, and we are certified portfolio managers, which
I'll explain what that means and how important that is
later in the show. But we specialize in helping people
who are retired orre about to retire manage their money.
If you like our show, or have any questions, or
(00:34):
want to meet for a no obligation consultation, or just
give us a topic to talk about on the show,
whatever the case may be called nine one six nine
six seven thirty five hundred or we always throw this out.
You can email us a question at question at wysmoneyguys
dot com. Also for more information and very important disclosures,
(00:57):
go to our website at Wise money guys com. Scroll
to the bottom of the page and you'll find basically
all the information you're looking for to scrutinize whether or
not we're a good fit by visiting our website. Also
from the website wisemadyguys dot com, you can basically click
(01:17):
on that you have questions, there's a live chat function,
and then there's also you can click on that you
want to meet for a no obligation consultation. And I
thought i'd throw out just based on a new client
that we met with yesterday and who's becoming a new
client that one of the powerful things that we do
(01:40):
is with every client that meets with us, whether they
become a client or not, we're going to send you,
really what we believe is the top financial planning software questionnaire,
and we will run an analysis for you, and this
is free at charge and no obligation to see if
(02:02):
we can help you and if your goals and objectives
are you know, realistic, or what work you need to
do to make your goals and objectives, Whether you've already
retired or you're about to retire, like our client had
about a five to eight year time horizon for retiring,
(02:22):
it will answer a lot of those questions. More importantly,
like Giuseppe likes to say, it will give you a
road map to start a relationship with us or continue
managing things your own. Hopefully we're a fit and you
hire us again for getting a hold of us called
nine one six nine six seven thirty five hundred, and
(02:45):
I should announce real quick while I'm on a roll
here that we're having our first of the year Roseville
So Greater Sacramento Area workshop. It is on April thirtieth,
which is a Wednesday, from six to seven thirty pm
at the Old Spaghetti Factory on Sunrise. For that, you
(03:07):
can also register at our website which is again whis
money Guys got dot com, or you can call us
at nine one six nine six seven thirty five hundred.
So let's talk about our agenda today. We're going to
talk a little bit about the markets, compare and contrast
you know, the cap weighted S and P five hundred
last year to you know, year to date this year
(03:30):
against the equal weighted S and p ETF. We're also
going to talk about how important it is to you know,
even contribute a nominal amount of money in your four
oh one K plan. It's never too soon to get started,
(03:50):
It's never too late to get started, especially if there's
a match. So we'll dive into just some numbers that
Joseppi calculated and what those could add up to at
a nominal investment rate, and then we'll also talk about
the average withdraw rates that we see people taking and
(04:14):
how those have drastically changed, meaning once you're retired and
you're in that distribution phase versus accumulation, and what you
could realistically expect as an income or a draw down
or a distribution nowadays versus you know, a decade ago or.
Speaker 3 (04:34):
Yeah, it used to be used to be that, you know,
four percent withdraw rate was was kind of the status
quo for a balanced portfolio. But we'll look at, you know,
what the historical depending on exposure to equities or bonds,
and then running through what we call a Monty Carlo
simulation and what the average safe withdrawal rate would be
based off.
Speaker 4 (04:54):
For the explosure.
Speaker 2 (04:55):
You have to go to Monty Carlo to get the
money Carlo simulation because I mean that'd be great, great.
Speaker 4 (05:00):
Right, really cool financial plan and it show some money.
Speaker 2 (05:03):
So first let's let's talk about you know, this withdrawal rate,
this distribution, this draw down. I don't think a lot
of people especially retirees understand how sensitive that amount is
from either you know, being able to not outlast your
money or finding out that you did outlast your money
(05:25):
and you ran out. I mean, what has been the
typical withdraw rate and some of the other key components
of being retired and the type of money you should
kind of realistically expect these days from from your wealth,
from your savings, from your era, your trust, so on
and so forth.
Speaker 3 (05:46):
Yeah, and the tricky part is is the sequence of
returns and the timing, right, I mean, nobody knows when
the next big downfall in the market or the recession
is going to, you know, come into place. And we
do this exercise with one of our clients when he
was first onboarding and said.
Speaker 4 (06:03):
Why don't I just put my money in the.
Speaker 3 (06:05):
Spy ETF which just tracks the S and P five hundred,
because it has an average on the return of almost
like ten percent and more recently, you know, more like
eleven twelve percent, And if I just need eight percent
a year, why can't I just do that?
Speaker 4 (06:20):
Well, it all depends.
Speaker 3 (06:21):
It depends if you go in it now and we
have a good next one to three decades of stock market.
But if you had gone in two thousand and six.
Speaker 4 (06:30):
You know, just two.
Speaker 3 (06:31):
Years prior to the big financial crisis in two thousand
and eight, you would have ran out of money in
twenty eighteen. Versus if you started in twenty ten, you
would have actually been able to pull out eight percent
every year and your your account value.
Speaker 4 (06:44):
Would have grown.
Speaker 3 (06:44):
But if we look back and just looking in some data,
I read this article. It was through morning Star. It
was at the end of last year, and it was
really interesting because what it is. It took the data
for stocks or you know, just all stocks, bonds or
treasury money markets and ran it from nineteen twenty six
(07:06):
until the end of last year, and then kind of
put the data together is figure to figure out what
would be the safe withdrawal rate, you know, the best,
kind of the worst, and then the average, right, because
it all depends on when you got started. Did you
get started just before the Great Depression? Did you get
started before two thousand and eight. But if you break
it down, you know, if you one hundred percent equity,
(07:28):
so if you had an all stock portfolio, the best
withdrawal rate scenario during that time period and this is
a rolling thirty period, rolling thirty years, right, and it's
starting at different time, different points in time. So the
best outcome was you could have withdrawn just under eighteen percent.
I was like seventeen point nine percent a year, which
(07:49):
that would have been amazing.
Speaker 2 (07:51):
And I would highly suggest that you when you're when
you're getting this information that again, and what a plan
will really help you do is not half to live
to a withdrawal rate of the best average thirty year Yeah.
Speaker 4 (08:08):
You don't want to.
Speaker 3 (08:09):
You don't want to assume that and have that as
part of your plan, to assume that that's.
Speaker 2 (08:12):
What you're going to be able to take out seventeen
percent a year, yeah, and not run out of money.
Speaker 3 (08:16):
You're like, I could retire now exactly because on the
flip side, the worst was just over two and a
half percent. So the worst rolling thirty year period, the
safe withdrawal rate for one hundred percent stock portfolio was
just over two and a half percent.
Speaker 2 (08:32):
What a drastic difference if you think about that. I mean,
and again that's where portfolio management from. You know what
a plan kind of guides us to say, this is
what your risk appetite is, this is the type of
money you'll need to have, and that more importantly, the
types of returns you'll need to get to not run
(08:54):
out of money at over a thirty year period, which
is what most people need to plan for retirement. I
mean that's a huge thing. Yeah, I mean right there
saying that if I have one hundred percent stock portfolio,
I can actually really only rely on taking out two
percent a year versus the seventeen percent you know, because
you want.
Speaker 3 (09:15):
To or if you're a person, if you're a person
with bad luck, yeah, because you have the bat, you'd
have the worst timing. But if you had a fifty
to fifty so fifty percent equity fifty percent bonds, the
best rolling thirty year period would be eleven point four percent.
As far as a safe controwal rate. On the flip side,
(09:35):
the worst is three point nine percent. So the importance is,
you know, it's not all about risk versus reward and
trying to go out there and go for the gusto
and thinking that that's going to provide you a better return.
And it's also taking the consideration sequence of returns and
not looking and saying I could just put my money
in the sm P five hundred or this index funder
(09:57):
that passive index fund because the average when you return
is X. Well, it all depends on when you get started, right,
when is your rolling thirty year period, and so that's
where diversification and having access to all kinds of different
asset classes, right and acid classes are going to not
be correlated to one another. That can smooth out the
ride and not go from seventeen eighteen percent, you know
(10:20):
what's you're all right down to two and a half percent.
Speaker 2 (10:23):
So you've said so many things in there to unpack,
but generally speaking, you know, most people don't have a
true diversified portfolio. They think that if they have mutual
funds or multiple firms with multiple different accounts, that they're
probably diversified. And let us help you determine that. Come
(10:44):
in and see us by calling nine one six ninety
six seven thirty five hundred. We were talking about some
of really the expectations that you can or shouldn't have
as far as what you can contain actually take out
of a stock portfolio, a blended portfolio, or an all
(11:06):
money market and treasury portfolio over a rolling thirty year period,
and where we start to see some of that play
out as far as good year bad year, and the
differences is literally right now. I mean, you know, one
of the things I want you to talk about is,
and this is something we've spent some time on that
(11:29):
the if you just have an S and P five
hundred index fund, how big of a difference it is
when that is weighted primarily by what five ten stocks
that really drive that into SY versus if you have
something that's equally weighted. And that's what I want you
(11:53):
to just kind of mention how important, because it really
does tied to the diversification, true diverseification and timing, timing
and understanding what you're really buying, you know, and where
along the the value proposition you're buying it at. So
what is the difference between you know, an equal weighted
(12:17):
uh uh investment like s P Y versus I mean
like h R s P versus a cap weighted investment
like s P Y. And it really ties back to
just overall, you know, shopping for value, which is what
we said at the beginning of this year. The end
of last year, the mark the S and P was
(12:38):
overvalued because of you know, the big names, look for value,
look for things that pay dividends. That's still super crucial today,
especially when you look at the draw down or the
or the or the decline and and go over some
of the numbers. Yeah, I think you showed me this morning.
Speaker 4 (12:57):
I think it's.
Speaker 3 (12:57):
Important also when having a portfolio investments, or specially funds,
to be able to identify the inherent risk within the
funds as well, because it's easy to look at the
past track record of a fund or particular stock that's
(13:19):
done very well in the past year or two years
and say, you know what, I want to jump on
board with that one because that thing has had a
good past couple of years. And so s you know,
SMP five hundred. And we pick on this only because
anybody turning on the you know, the radio or the
financial news network or the news and.
Speaker 4 (13:40):
Brings up the stock market.
Speaker 2 (13:41):
Yeah.
Speaker 3 (13:42):
Yeah, and you bring up the stock market, they're going
to be talking the stock market is referencing typically SMP
five hundred. They have Dow and NASDAK, but SMP five
hundred is widely known. And so the ETF that tracks
SMP five hundred that we talked about multiple times as spy.
The unique thing about it is that it's cap weighted
(14:03):
and so these five to ten names that John had
talked about earlier, which are you know, you hear the
Magnificent seven.
Speaker 2 (14:10):
And the video Tesla, Microsoft, Amazon, Google, Netflix, you know,
so on and so forth.
Speaker 3 (14:15):
Exactly, they they pull a lot of weight literally of
that whole Indussy and the remaining of the four hundred
and ninety three or four hundred and ninety names.
Speaker 2 (14:25):
And don't we just pull the weight as much as
those names do pull the weight or the value of
the Indassy.
Speaker 4 (14:32):
Well, it swings, it swings it quite a bit.
Speaker 3 (14:34):
So looking at the past year, the trailing one year
of what the funds have done, you in comparison to
the equal weighted which is an RSP is a ticker
symbol where it's a level playing field. No name or
company is going to have more weight than another company.
Speaker 4 (14:52):
They're all equally weighted.
Speaker 3 (14:54):
But if we look at the height, so in the
last year, the height of SP one I was February nineteenth,
which was the peak of the market, and the fund
grew and it would have would have grown from the
start a year ago seventeen point three percent. Okay, now
(15:14):
just from February nineteenth until now it's down. It's still
positive overall, but it's at eight point three, so it's
lost almost half of its overall return.
Speaker 4 (15:24):
That is more than half.
Speaker 2 (15:26):
Actually yeah, well no, not eight point three versus seventeen
point two.
Speaker 4 (15:30):
Oh yeah, sixteen point six. That's true.
Speaker 2 (15:32):
Thank you. We always say there will be no math,
but just just and that's only that's that's a short
period of time. That's February nineteenth, so imagine and this
goes back to our previous you know commentary in our
previous episode is what if you started and put all
your money and you're like, you know what, I'm gonna
put her in S and P.
Speaker 4 (15:52):
You just lost.
Speaker 3 (15:53):
Yeah, And in comparison to RSP where the peak in
February nineteenth, it was up eight point three percent, it's
also come down, but it's still you know, in the
mid fives, so come down, but not as much as
the as spy. And the reason being is we're seeing
all of these you know Darling, Yeah, the AI Darling
(16:16):
and Video, which is down almost thirty percent from its peak.
You have Tesla which is down fifty was at one
point it was fifty. Microsoft, Google, they've all gotten hit
and you're seeing it on a couple and why you're
seeing it is a couple different reasons.
Speaker 4 (16:33):
One valuation, which you spoke to already.
Speaker 3 (16:36):
The other is we're in this environment with with you know,
this tariffs and kind of figuring out uh, you know,
Trump administration is figuring out this whole tariff situation and
trying to even the playing field.
Speaker 4 (16:47):
Right, He's trying to make an rsp versus a spy.
He doesn't want to.
Speaker 3 (16:50):
Capboy that he wants equally waited across the world. And
recently in Vidia got hit because China came out and said,
you know, they're two chips don't comply with their.
Speaker 2 (17:03):
New energy requirements minimum regular regulations.
Speaker 3 (17:08):
Which is interesting because I pulled up data on China
and said, okay, if it's all about energy efficiency and
trying to clean up.
Speaker 2 (17:15):
The efficient, dirtiest producing country in the world, China, maybe
India is the worst.
Speaker 3 (17:22):
Well see, and this is the thing, So I've actually
pulled up data. China has eleven hundred operational coal plants
and ninety four plants on the way new ones.
Speaker 2 (17:34):
With no emissions on them whatsoever. By the way, when
we operate coal here, they put so many different, you know,
small scinting types of controls on them to produce that
coal as clean as possible. I mean, if you look
at coal production in the US in the fifties and
sixties versus now, the admittance of you know, pollution is
(17:57):
a fraction of what it was. And then you have
a China and other countries around the world, Eastern Europe,
all throughout Asia, you name it, even South America, you know,
Latin America where they don't put any emission control.
Speaker 3 (18:12):
Yeah, they don't have all the guidelines and regulations. So
they're number one on the list of the world. Number
two is India. They have like thirty four new coal
plants that are coming on board.
Speaker 2 (18:24):
But you know that there is a cord fraud where
we were just taxing the manufacturing and mison and making
energy be produced offshore versus on shore, you know, and
how how much that does for the environment. That's how
dumb You know most environmentalists are is they think not
(18:48):
producing the energy here in the US is actually going
to save the world from a pollution perspective. No, it's
just the opposite. It actually hurts the world from a
pollution perspective to not produce as much energy here as
we possibly can and then export it. If we have excess.
Speaker 3 (19:06):
Yeah, and I think that whole play within video chip
and the energy regulation and that's just all due to
due to terror. Yeah, it's all due to terrorifs and
push and pull has nothing to do with nvideo and
energy efficiency. I just thought I thought it would be
funny once I once I pulled up the data, I
was like, wait a minute, they have energy regulatory, but
they have the most coal plants and the most new
(19:28):
coal plants out out of any other nation in the
world that are going to be coming on Onlinely.
Speaker 2 (19:32):
What this really means is, you know, strategically, what are
we saying that we're doing. What are we saying that
maybe you should take away from this is that really
focus on true diversification. There is so many categories of
different types of investments. All of your returns don't need
(19:54):
to come from the stock market, and in fact, if
your risk advert you know, there are many things that
are low correlated to stocks that truly diversify your portfolio
and have not gone down at all this year. In fact,
many of the private credit and the private equity or
(20:16):
the structured notes or other alternative investments that we've been
doing are actually up this year. And paying their dividends
on top of it. And so strategically, if you really
don't have a plan or you have not updated that plan,
you absolutely want to come in or give us a
(20:37):
call for a no obligation consultation because this is the
type of thought, research and energy we put into, you know,
managing your portfolio, your hard long saved retirement dollars. Give
us a call at nine one, six ninety six, seven
thirty five hundred and just to kind of re cap
(21:00):
a little bit so far, the number one strategy that
we've been talking about for years is true diversification, and
most people aren't diversified at all. Most of the investments
they have tend to be highly correlated, have really large
roller coaster peaks and valleys, which is measured as standard
(21:22):
deviation or our lockstep with you know, some of these
overvalued companies that everybody follows and then ends up buying,
and then for.
Speaker 3 (21:35):
Their fund or their funds that they're in their their
stock funds have a big allocation to those holdings and
it drags that fun down.
Speaker 2 (21:43):
Yeah, So let's talk about strategy number two, and this
is the one that just is amazing to me. You know,
we read a statistic recently that the average American citizen
has two thousand dollars saved to put towards emergency, their bills,
their emergencies, any sort of emergency if one should arise,
(22:06):
And that, to me, that just says that most people
aren't taking advantage of one of the most easiest things
to take advantage of us. And in fact, laws were
passed about employers of I believe more than five employees.
Don't quote me on the number of employees that have
to offer Yeah, in California have to offer companies sponsored
(22:29):
retirement plans to their employees. So you've been doing some
research and data on what some basic numbers, some nominal
numbers mean if you were to put just uh, a
small percentage of your income deferred away into a retirement plan,
specifically like AFOORA. When came this I believe doesn't even
(22:53):
include matching, right, it does, Oh, it does include matching.
So the match that that the average that you came
out with was including matching. So why don't you dive
into that? Because what we're saying is if you're not
maximizing your four oh one K, or if you're not
putting money in a four oh one K or IRA
or roth Ira or sep Ira or whatever, or TSA
(23:17):
or four h three B. Those are the typical retirement
vehicles that are out there that have tax advantages. This
is what you're missing out on, you know, run through
the numbers a little bit.
Speaker 3 (23:28):
Yeah, and you know most a lot of times, you know,
people will say like, oh, well, you know, my company
matches four percent of my income, and you know I
only make X, so four percent is not that much.
Like am I going to be able to really retire
on that? Because even if I say it for like
three years, it's not that much money. But the reality
is the you know, I looked up and this is
(23:51):
just for Sacramento. Other counties are going to be higher,
especially the Bay Area, but Sacramento median income is eighty
four out just over eighty four thousand dollars. Use that
as the assumed income level. Let's say you're with an
employer and they match four percent, and we tell any
of our clients that are still working, you want to
(24:12):
put in at least the minimum of whatever the company matches.
So there's some companies out to that match. I remember
Redmen with some companies six percent, which is phenomenal. That's
free money. That's free money. But this just shows you
the power of investing and compounding over a period of time.
And that's really what we're getting to. So if you
were to contribute four percent of your income, let's assume
(24:33):
that eighty four thousand dollars when you break it down.
That's less than three hundred bucks a month when you
break it down, and then the employer matches four percent.
Let's assume an average annual return of seven percent a year,
so that is very rearable, you know, and that's not
going into all stock portfolio. And let's also assume that
(24:54):
you get a pay raise at three.
Speaker 4 (24:56):
Percent a year over thirty years.
Speaker 3 (25:01):
That would equate to a lump sum at the end
of thirty years of eight hundred and seventy one thousand,
two thirty five, So over eight hundred and seventy one
thousand dollars, which is what your four to one K
would be worth thirty years from now. Just putting four
percent of your income to work and your employee matching
(25:21):
the other four. Now, let's say you know, you say, hey,
I've already been working. I'm not I just didn't start.
I don't have thirty years, I'm kind of halfway through.
I have maybe another fifteen years before I can retire. Well,
if you started, if you started now even fifteen years,
assuming all those other numbers being the same, fifteen years later,
(25:42):
you would have amassed over two hundred thousand dollars in
your four to one K.
Speaker 2 (25:46):
I mean, now hear what we're really saying. So a
couple of things to unpack in that. First of all,
if you're a business owner and you have you know,
from one employee yourself to dozens of employees or even
hundreds of employees, and you're not offering you know, a
retirement vehicle of any kind, or you have not had
(26:10):
your current four oh one K, sepp I RA solo K,
whatever it is that you're offering or want to offer,
give us a call. We can help you set that
up easily. We can do analysis on existing you know,
plans that you sponsor or do an analysis and help
you determine which plan to put in place that will
(26:32):
benefit you the owner as well as you know you're
certainly your key employees and other employees. And you can
do that by calling nine one six ninety six seven
thirty five hundred The other thing is, now, if you've amassed,
so let's say you have been doing this fifteen our
years already, you have another fifteen years to go. What
(26:55):
that really means is that at eight hundred and seventy
one thousand dollars. Now, we put together a portfolio recently
for a client that you know, had a diversification amongst
five different asset classes, stocks, bonds, real estate alternatives, and
cash equivalents. And the average yield on that and it
(27:18):
and it varies depending on you know, the ratio of
the different categories that you either increase or decrease also
is dependent, especially on the cash and bond side, of
what current interest rates are. But but this is very
recent and just the average you know, yield was the
(27:38):
average weighted yield was six point three percent. And that's
without all of your money at risk in stocks. Now
that was actually that allocation is only thirty percent stocks exactly.
Now take that and multiply that times eight hundred and
what was the figure eight hundred and seventy one. I mean,
you're talking over fifty thousand dollars a year in supplemental
(28:03):
income during retirement, all by just putting away four percent
of your money with it being matched right and averaging
a seven percent return. So if you don't have that
in place, or you do and you're not fully you know,
maxing it if you can, that is why you should.
Speaker 4 (28:23):
I mean you're missing Yeah, you're missing out.
Speaker 2 (28:25):
I can't tell people an easier way you know, to
make money and help them from a retirement perspective than that,
can you. No.
Speaker 3 (28:34):
The other thing is I think a good point you
know for employers or business owners that especially here in California,
because it is you know, if you have five or
more employees you have to have some retirement plan set up.
Is that just creates a value add to your employers,
right that you're looking out for them. You have a
plan the longevity and that just creates a stick of
(28:55):
your environment to help maintain your employees.
Speaker 2 (28:58):
With with your By the way, do you think of
this and research this? Because of the meeting we're having
with our with our largest four oh one K client,
and so if we are your advisor to your company plan, uh,
your the plan that you sponsor, I mean we do
regular reviews, regular analysis on the fees and the and
(29:20):
the uptake in the and the adoption of the plan.
And how much the loans are maybe impacting it, and
more importantly, what is the administration, administrative experience and so
on and so forth. But then we also sit down
with any employee in this particular firm has an excess
of one hundred employees, and every year we have a
(29:44):
list set up by the by the manager at the
HR director at the firm of people that we sit down,
all included in the plan advisory, no additional cost to
the employee to help them with their alloction, to help
them with their goals and objectives for retirement. So, if
(30:05):
you're an employer and you don't have somebody who's helping
you at that level with your company sponsored retirement plan,
give us a call at nine one six nine six
seven thirty five hundred. Also, if you're somebody about to
retire from a company, like the new client we just
(30:25):
got yesterday, or many of our clients, where we help
you make decisions on do you roll out of your pension,
do you stay in your pension, what do you do
with your IRA money and all these types of things,
what sort of income do you need from it, and
on and on and on. You know, also you can
give us a call or sign up for our free
(30:47):
you know, dinner included workshop on April thirtieth at the
Old Spaghetti Factory from six to seven thirty pm by
that's in Roseville, by calling N six ninety six seven
five hundred and we are certified portfolio managers if you
haven't heard, you know, throughout the show over and over again.
(31:08):
And what that really means is that it's about the
research and the analysis and the time and effort we
put in to creating the best possible scenario with the
best possible average outcome that anybody could do as your
professional money managers. And so that is just crucial. And
(31:32):
what that means is we're always looking for, you know,
the types of investments that could be added or diversified
into people's portfolios. And the reason why we're going to
talk about this again and again and again is because
it's just that good. So we've been talking about, you know,
of the five classes of investments again, stocks, bonds, real estate, alternatives, cash,
(31:58):
cash equivalents. We love the alternative space right now. In fact,
we just closed upon as a piece of people's portfolios
a structured note that I want you to describe, and
then we'll talk about the one that's coming up next week.
And this is a micro a specific example of the
(32:20):
types of things you might have in your portfolio. Again,
remember to some of our other shows and the other
conversations that we've had. Never do we put all of
your money in any category. Never do we put all
of your money on any one investment in any category.
So keep that in mind. This is just to give
(32:40):
you a live example, a recent example of just the
phenomenal investments that we're putting together for people that quite frankly,
you can't find anywhere. So talk about the one heart
that we just placed last week, what it was, what
it's expected to return, you know, what's the the risk mitigators,
(33:03):
you know, and all of those things, and then maybe
talk about the one that's coming up.
Speaker 4 (33:08):
Yeah, and.
Speaker 3 (33:11):
Just to add to that, what's what's important and part
of the planning and the exercise of putting the whole plan.
Speaker 4 (33:18):
Together is.
Speaker 3 (33:20):
How hard does your assets need to work in order
to get you to where you want to go as
far as your goals. And then it's our job and
what we do is you try and find those investment vehicles,
the blend of investment vehicles, putting that portfolio together to
get you to you know that that number as far
as how hard your portfolio needs to work is at
(33:40):
five six percent average and to return seven eight, ten percent,
so on and so forth. But how do we how
do we get you there without with taking the least
amount of risk right and not having to add any
unnecessary risk to the portfolio. So that's where these vehicles
come into play, because it can give you an attractive
rate return without having to go out there and take
(34:02):
a bunch of risk. And the one that John was
alluding to that we just added to some client portfolios
was really juicy one because volatility picked up on the market.
Anytime volatility picks up, it makes the terms and the
return potential returns of these structure investments a lot more attractive.
But that one was through Bank of America, who's the issuer?
Speaker 4 (34:26):
And then and we had.
Speaker 2 (34:27):
To cupe on guarantee or guaranteur guaranteur not the guarantee or.
Speaker 4 (34:36):
Is that like you?
Speaker 2 (34:38):
But go on, I'm sorry to interrupt. I mean, these
are the things that come to.
Speaker 3 (34:41):
My it's it's twelve It was twelve point four percent
as long as it hits certain metrics and metrics right
as long as it hit certain metrics, and those metrics
are it tracks three stock in disease S and P
five hundred, RUSTLED two thousand, and the equo weight NASDA
one hundred and as a thirty percent downside barrier. So
(35:03):
what it does is it will take a look every month.
It has a monthly observation date on a specific day
of the month, and it'll take a look at those
three indices and as long as they haven't gone down
thirty percent or more, then you get paid out one
twelveth of that twelve point four percent, So it'd be
just over one percent per month.
Speaker 2 (35:19):
Highlight that a little bit because think about that for
a second, that thirty percent barrier. I don't think people
really understand the power of that, especially from a timing perspective.
This year, when if you look at from the peak
of the Nasdaq, of the S and P or of
the Dow, whichever one you want to look at, you
know those are already down let's just say ten percent
(35:42):
on average. Nasdaq was down more, Dow was down less.
So let's just say on average across the board of
those three they're down ten percent. They'd their peak, right,
They've already pulled back, so then you would need another
thirty percent pull back for these things each month not
to pay out their monthly distribution rate. That is that.
Speaker 3 (36:05):
Yeah, and so let's assume so you know, let's let's
let's flip the script and go on the other side.
So let's assume one month the Russell two thousand, which
is one of the indices attracts, is down forty five
percent on the monthly observation date from its start date.
What would happen is nothing. You just don't get paid
out that month. It just goes on to the next month.
Let's say the market starts to recover and in Russell
(36:26):
two thousand is still the worst performer of the three
and the next month, but it's down, but it's only
down twenty eight percent versus what it was a previous month.
Well it's not down thirty or more. So you actually
get paid out and it continues on that process.
Speaker 2 (36:39):
Thirty six months a year. And that one, that one
was eighteen month month. That was the short term eighteen months. Yeah,
and a lot of times what happens is these issuers,
this one being Bank of America, we'll call it. What
that means is they just matured early. You get your
original principle back, plus you've collected whatever payouts, the monthly
payouts along the way, if in fact they don't. The
(37:01):
other risk is, you know, if Bank of America has
financial troubles, they go belly up, then obviously there's no
principle or payout at that point in time. But think
about that now. Again, just because we talk quickly about
these things, and I want to make sure you know
people listening, because we do describe this in our workshop too,
if you if you want to hear and understand more
(37:22):
about our portfolios and the types of investments. Is that
most people you know have exposure, especially in their four
one K plans or their eras to some sort of
S and P type stock, or it may be even
just in their four one k they have an sp
y or an index fund, right, and those have absolutely
(37:45):
no guarantees or from a yield perspective or a barrier
at all. So and you're really in the S and
P trying to get a ten percent return, right, So
here this one is paying out a twelve point four
percent and it will turn rate return assuming that the
(38:08):
S and P the wrestle so on, and so forth,
like you said, doesn't go down thirty percent or more mohore,
and I just want to make sure and emphasize that
because that is huge.
Speaker 4 (38:18):
You know.
Speaker 2 (38:19):
And so we try to find these every week and
quite frankly, sometimes they're not out there.
Speaker 3 (38:26):
So yeah, when they picks up, then we go to
our partner and say, hey, this is what we're looking for.
Here's kind of the terms of parameters we want monthly
payout or whatever the case may be.
Speaker 4 (38:37):
And that's just example of one. There's growth.
Speaker 3 (38:40):
You know, if people are worried about tax and a
taxable account, we can get them designed where they don't
pay out until twelve months later. So there's all kinds
to design, more conservative, more AGGRESSI.
Speaker 2 (38:50):
Yeah, we can even go one hundred percent barriers where
there's no downside risk on these types of things, but
you give up the income.
Speaker 4 (38:57):
So the potential return.
Speaker 2 (38:59):
But still there's so many ways to slice this this
pie or skin the cat, whatever you want to say.
And what's important again, if this isn't the level of
analysis of effort of diversification that you're doing in your
own portfolio or what we find most often many people
(39:24):
in the professional they're working with is not doing this
or not doing that, or they don't have access to it,
or they don't have access to it. You definitely want
to give us a call for a couple of reasons.
A just to talk about the different types of investments.
B to get a absolutely no obligation free retirement plan
(39:44):
analysis and have a consultation or see you know, register
for our workshop on April thirtieth, which is a Wednesday
from six to seven thirty pm in Roseville, California, and
call nine six seven thirty five hundred to do that.
Speaker 3 (40:04):
And if you don't know which one A, B or C,
I was always told to choose C, which is go
to the workshop.
Speaker 2 (40:10):
Go to the workshop. Yeah, if you're just not ready
to come in and have a sit down, or maybe
you're you're not in the area, but let me let
me do because actually we haven't mentioned this in a
few shows. We do have convenient offices and or meeting
places throughout the Bay area. One in the East Bay,
one in the Peninsula, one in the South Bay. So
(40:33):
if you're in the Bay Area or you're in the
greater you know, Northern California area, we probably have a
convenient meeting location to come out and visit with you,
So don't let that stop you. And also as well
as Sacramento obviously, yeah, well Sacramento be in our hub.
But we have so many clients in the Bay Area,
(40:55):
in southern California, in the Central Valley, in Nevada, so
on and so forth, and a handful and many other
states because they've been clients and then they relocated to
other states. And nowadays, you know, because so much of
what we do is electronic, is is a video, you know,
so on and so forth, that's no reason to prevent
(41:16):
you from giving us a call and potentially having us
help you. Well, holy moly, I think we're out of time.
So you've been listening to John Scambray and just Seti
Visconti the Wise money guys. I hope you enjoyed the
show and have a wonderful weekend.
Speaker 4 (41:33):
Have a great weekend.
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