Make More Than 5% On Cash? Ep 119

Last week the Federal Reserve board who determines if rates will rise or fall or remain met and determined that they were going to leave rates unchanged for the time being. The board is always vague about what comes next for rates, so it’s to be determined if rates decrease later this year. 

To many conservative investors this rate environment feels like they’ve walked into a perfect situation, because our rates we earn on cash is elevated. I’d ask you to consider whether the rate we earning on our cash is keeping us ahead of inflation. Of course, the government states inflation is one thing but most people I talk to tell me it’s higher. If we are earning less that real inflation we may be losing our purchasing power. 

The financial product space is always innovating and right now there are ETFs that have 100% downside protection that allow you to earn what the S&P 500 earns up to a cap. Some of them may earn well over what a C D earns. That beats the socks off what most CDs are earning, and the ETFs can be withdrawn anytime.

It’s always worthwhile making sure you’re getting the most value out of our money. If you’d like to discuss this further, please reach out at 864.641.7955. 

Investment advisory services offered through CreativeOne Wealth, LLC. Clients Excel, LLC and CreativeOne Wealth are not affiliated companies. Licensed Insurance Professionals. Investing involves risk, including potential loss of principal. Any references to protection or lifetime income generally refer to fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strength and claims paying abilities of the insuring carrier. Annuity withdrawals are subject to ordinary income taxes and potentially a 10% IRS penalty before age 59-1/2. Roth distributions are tax free after age 59-1/2 and the account has been open for at least 5 years. This video is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet particular needs of an individual’s situation. Clients Excel is not permitted to offer and no statement made during this show shall constitute tax or legal advice. Our firm is not affiliated with or endorsed by any governmental agency. The information and opinions contained herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Clients Excel. The use of logos and/or trademarks of hosting sites are the property of their respective owners and are not an endorsement by those owners of our firm or our program.

Episode Transcript

SPEAKER_01 (00:00):
Welcome back to the Excel and Retirement Podcast,
where we help good people makewise financial decisions so that
they may excel in retirementwith confidence.
Learn more at ClientsExcel.com.
Now, to your host, David Treese.

SPEAKER_00 (00:24):
Welcome back to episode 119 of the Excel in
Retirement show.
If you're not getting our weeklynewsletter, that's where you get
all of our content at.
You can go to clientsexcel.comor just email us at hello at
clientsexcel and we can put youon that distribution and that
comes out once a week and it hascontent like this and we are

(00:48):
always doing that.
Been doing that for a long time.
Well, have you ever anticipatedsomething happening?
You made plans and you preparedand you felt like you were ready
to go.
Maybe you spent a whole semesterin college studying for a big
exam, or maybe you startedpacking well in advance for a
well-deserved vacation.

(01:09):
When stuff like this comes up,the anticipation can be immense,
right?
But then sometimes somethinghappens, and maybe the exam
didn't go well, or your trip gotpostponed.
Well, last Friday, I took theday off, and Mallory and I had
planned to go to New York forour wedding anniversary.

(01:29):
And it was going to be the firsttime we were away from both of
our girls overnight.
And as you could imagine,Mallory had packed for days to
get all the stuff ready.
I don't know about you.
If you have kids, you mightremember or you might know that
they have a lot of stuff.
And she wanted them to be wellprepared and the grandparents to

(01:51):
be equipped.
And so it took a lot ofpreparation.
And then, of course, we had toget ourselves ready to go.
And Mallory bared the burdenwith that.
primarily, but we like to keepour stress level low when it
comes to flying, so we arrivedat the airport with plenty of
time to spare.
And I don't know about you, butwhen I see that blue TSA

(02:11):
uniform, I start having anxiety.
I guess I just feel like I'mlivestock going through a cattle
shoot while being examined atthe doctor.
That's the way it feels to me.
Any way you cut it, it is notfor me.
I don't like it.
And we'd figured out as we werearriving at the airport that our
flight was going to be delayed,but at this point in my life, I
welcome delays.

(02:32):
I stay pretty busy, and so whenI have a little bit of a delay,
sometimes it's a chance to catchmy breath and drink a cup of
coffee and pull out a good bookto read.
But then we were delayed alittle bit more, and we finally
got loaded up on the plane, onlyto find out there wasn't a crew
yet for our flight.
Finally, the crew arrived, andthey rolled us out to the

(02:52):
runway, and we sat there for twohours.
They We sat there for about twohours.
We had paid for upgraded seats.
It wasn't too bad for me, butMallory was getting a little bit
worried.
And finally they took us back tothe gate and they told us to get
off.
It was going to be a furtherdelay.
And at this point we were aboutsix hours into the ordeal at the

(03:16):
airport and it was going to bethe early morning before we
arrived at our hotel in NewYork.
So we called it a day and wenthome and figured we would try it
again another day.
The economy has had a sort of afailure to launch like this,
like we had.
Coming out of the pandemic era,economists and market

(03:36):
commentators had anticipatedwhat they call a hard landing
for the economy.
If you recall, after thegovernment sent out what they
called economic impact payments,inflation shot up to levels we
have not seen in many years.
And the government, in essence,turned on the digital printing
press and sent in air quotes,free money to to many of us, you

(03:59):
might have been one that got oneof these checks.
And like most things, it wasn'treally free.
It came with a price.
When the government flooded theeconomy with all this new money,
it devalued all the currency incirculation.
Therefore, our money bought lessgoods.
Not good, right?
We want to be able to retain ourpurchasing power.
A possible remedy to this issueis for the government to

(04:22):
increase interest rates to makeit harder for people to finance
vehicles and homes and whateverelse you can think to finance,
credit cards, etc.
The goal with this was to lowerthe demand for things that are
financed.
And as a result, this was tobring down the price of goods.
That was the goal.
And interest rates have hoveredaround 5% for a while now.

(04:45):
And some commentators expectedour economy to not be able to
withstand higher rates, butsomehow it magically has.
And with no major recession,like most people thought would
happen, and rates have stayed uplonger than most people thought.
But the thing is, is inflationis still persisting.
Now, the government states it'sgoing down, but they do not

(05:07):
factor in things like food andgas, and we all need those
things, right?
It's my view that the reasoninflation has remained for so
long despite the high interestrates is because the government
continues to spend like there'sno tomorrow.
Don't forget, we mentioned thisin a previous episode, but don't
forget that the government isadding$1 trillion of debt to our

(05:31):
national deficit every 100 days.
For context of what a trillionis, a trillion seconds ago would
have been 31,688 years ago.
And so these numbers don'tcompute.
It's hard to even make sense ofthem in our mind, and our
government is running up thisdeficit, and there's no will to

(05:53):
change in Congress.
Last week, the Federal ReserveBoard, they're the folks that
determine if rates will rise orfall or remain the same.
They met and they determinedthat they are going to leave
rates unchanged for the timebeing.
The board is always vague aboutwhat comes next for rates, so
it's to be determined if ratesdecrease later this year.

(06:14):
For many conservative investors,this rate environment feels like
they walked into a perfectsituation because our rates we
earn on cash is elevated.
It's easier to make money on ourbank accounts.
I'd like to ask you to consider,though, whether the rate we are
earning on cash is keeping usahead of inflation.

(06:35):
And again, of course, thegovernment states inflation is
one thing, but most people Italk to tell me they think it's
higher.
If we are earning less...
than what real inflation is,that means we're losing
purchasing power.
So if inflation is 5% and we'reearning 4% at the bank, then

(06:58):
we're losing 1% of ourpurchasing power.
Here's another example.
If we have$100,000 sitting inthe bank and it's earning no
interest, And inflation is 5%that year.
Well, we have lost 5% of ourmoney because we can now buy
$95,000 worth of goods withthat.
And so we want to protect ourpurchasing power because we've

(07:21):
worked so doggone hard for ourmoney and we want it to stretch
and last as long as possible,right?
The financial product space isalways innovating, and right now
there are different ETFs,exchange-traded funds, that some
of them even have 100% downsideprotection, and they'll allow

(07:42):
you to earn what the S&P 500earns up to a cap.
And normally, it's well overwhat a CD or what a bond is
paying right now.
This beats the socks off of whatmost CDs are earning right now,
and the ETF can be with drawnany time, so it's liquid.
So it's always worthwhile tomake sure we're getting the most

(08:03):
value out of our money and it'sworking as hard as possible.
That's the takeaway today.
If you'd like to learn moreabout this, please reach out to
us.
You can contact me at864-641-7955.
I wish you the very best andlook forward to speaking with
you on another podcast nextweek.

UNKNOWN (08:25):
Music

SPEAKER_01 (08:26):
Investment advisory services offered through
Creative One Wealth, LLC.
Clients Excel, LLC and CreativeOne Wealth are not affiliated
companies.
Licensed insuranceprofessionals.
Investing involves risk,including potential loss of
principal.
Any references to protection orlifetime income generally refer
to fixed insurance products,never securities or investments.

(08:50):
Insurance guarantees are backedby the financial strength and
claims-paying abilities of theinsuring carrier.
Annuity withdrawals are subjectto ordinary income taxes and
potentially a 10% IRS penaltybefore age 59 and a half.
Roth distributions are tax-freeafter age 59 and a half, and the
account has been open for atleast five years.

(09:11):
This video was intended forinformational purposes only.
It is not intended to be used asthe sole basis for financial
decisions, nor should it beconstrued as advice designed to
meet particular needs of anindividual's situation.
Clients Excel is not permittedto offer and no statement made
during this show shallconstitute tax or legal advice.