Let's Talk Money

August 26th, 2023

Episode Transcript

(00:00):
Good morning everyone, and thank youfor joining me here on let's talk money
on this beautiful summer Saturday morning.My name's Harmony Wagner. I'm one of
the wealth advisors here at Bouchet FinancialGroup. I am a CFP Certified Financial
Planner as well as a certified privatewealth advisor, and it's just a pleasure
to be to be here with youon this sunny day, busy weekend in

(00:22):
Saratoga at least this weekend with travelsat the track and some some big concerts,
So hopefully everyone's staying safe as weenjoy and you know, maybe in
some ways try not to think abouthow summer is coming to an end very
quickly, it seems, and Iknow for me at my house personally,
we feel it in a big waybecause my husband is as a teacher,

(00:44):
so he always has the countdown gooingof how many weeks I left of summer
vacation. And for anyone wondering thatcountdown is down to only one full week,
that's right, one week, Soenjoy it and soak it up,
especially these last few you know,quote unquote summer weekends. And on the
bright side, you know, Septemberand October are some really beautiful months here

(01:06):
in the Northeast as well, somebeautiful weather still ahead. And you know
it's not time to start thinking aboutyou know, anything too too cold or
wintry yet, but it is alittle bitter sweet to see summer coming to
an end as always. Well,you were listening to Let's Talk Money,
brought to you by Bouchet Financial Group, where we talk about all things financial

(01:29):
markets, economy, financial planning,taxes, personal finance, many many different
topics. So you know this isyour your asking advisor time. If you'd
like to ask a question or talkabout something, maybe a strategy or something
on your mind, please call in. The phone lines are open so you
can give me a ring at oneeight hundred talk WGY. That's one eight

(01:53):
hundred eight two five, five,nine four nine. Would love to hear
what you want to talk about today, so please take advantage. And one
thing on my mind is we dostart thinking about back to school. For
you know, many young adults whoare in college, they've already started their
their false semester. Younger individuals whoare still in elementary, middle high school

(02:15):
are going back soon, at leastin this part of the country. Are
the other parts that they're already backand you're just thinking about that time of
year. Reminds me of a statisticthat I've shared before, but I do
think it's especially relevant now as weas we just do think about school,
and that is regarding how parents perceivethere are children's financial literacy education and how

(02:39):
children perceive that as well. Andthe statistics goes like as follows, It's
that eighty seven percent of parents thinkthat their children are learning everything they need
to know about money, personal finance, money management from from school. That's
you know, almost nine out often parents are assuming that school's teaching your

(03:00):
children this. And on the flipside, we the studies show that ninety
percent of children students are saying thatthey actually learn everything they know about money
from their parents, so they're notreally feeling that they're learning these things at
school. And you know, itgets joked about. We see memes go
around social media from time to timeabout how, you know, oh,
I wish I had learned taxes inhigh school instead of you know, trigonometry

(03:23):
maybe which most people probably won't usein their everyday life. And you know,
it is it is kind of funnywhen you think about you know,
maybe what's taught and what's not.I'm sure the discussion for a different day,
but you know, these statistics reallyare showing that financial literacy, there's
a disconnect there, and young peoplein this day and age really aren't getting

(03:44):
the financial literacy that they need tobe successful long term. Now for some
good news, studies also show thatthe best time to teach young people about
finance and money management is between theages of seven to fourteen. So if
you have a school age child ora grandchild, it's a perfect time to
start those conversations. And in today'sday and age, there are lots of

(04:06):
tools available to do this, andyou're not sure where to start a lot
of things you can find online toolslike stock market games, where you know,
without actually putting any money in,you can show kids how to invest
and what the repercussions might be overtime. If you're in a spot where
you can give them a little bitof money and help them, you know,

(04:29):
maybe you have an account that's earmarkedfor your child or grandchild and with
them working with you, maybe youbuy a stock or two, help them
pick that out and help them trackit and watch it over time so they
understand from an early age investing andcompounding and those kind of topics that otherwise
they they're not going to be runningabout it. They're ninety percent of kids

(04:49):
aren't going to hear about that atschool. So it's it's a great opportunity
for us all to think about,you know, how we can help those
young people in our lives. It'ssuch a key peace to their success long
term, even if you have anolder child or grandchild, maybe someone in
college. Studies show that most peopledon't fully establish their money management habits until

(05:11):
they reach age thirty, so there'sstill plenty of time even if you're not
in that age seven to fourteen windowanymore. But you know, young people
starting out in college or in theircareers, it's still a great time in
college. Honestly, when you thinkabout it, that brings up a lot
of financial decisions and discussions. SoI ever want I'm a big believer in
that being a great opportunity to startor continue having some of these conversations with

(05:38):
the young people in your life,making sure that you know, if there's
any kind of student debt in thepicture, that that eight nineteen year old
really has a sense of what that'sgoing to mean for them when they graduate.
You know, what is their paymentgoing to be? What can they
expect to earn based on what theywant to study? You know, what
are they what things could they bedoing now to reduce that payment, whether

(06:00):
it's paying down early maybe while interestis being deferred, working during college so
that they can pay more tuition outof pocket, or you know, different
things that they can do to helpimprove their odds of being able to handle
student debt afterwards. Again, ifthat's a part of their financial picture,
these are great conversations and uh,you know, things to be talking about

(06:26):
and and transparent about with your yourkids, your grandkids, niece's nephews,
the important people in your life thatare in that phase of life. You
know, I really think that thebest thing we can be giving them is
is knowledge and empowering them to beable to make good decisions. So that
was kind of on my mind justthinking about back to school and the end
of summer, and I'm you know, I have a lot of friends and

(06:46):
you know friends kids who are atcollege now, some for the first time.
Such an exciting time. I think, you know, a lot of
us can remember back to when wewere there, and so just kind of
the financial advisor spin on how toapproach this season of life for those folks
who are in it. All right, well, let's see you don't have
a little bit of a market recap. So markets closed mixed for the week,

(07:10):
although yesterday, Friday was actually agood day for all three major indexes.
After some you know, commentary comingout of the Fed, and actually
the commentary was that Fed is preparedto raise rates further. We're still seeing
a strong economy that signals maybe theFED is either going to be able to
or may have to raise rates furtherto control inflation. It's coming down,

(07:32):
and you know, we're seeing certainlythe trend going the direction that we all
want it to as far as inflation, but still not at the Fed's target.
You know, we've talked about fromthe beginning of this inflation battle.
Their target is two percent. They'rereally focused on that number. So you
know, they're going to keep doingwhat they need to do, and we're

(07:53):
still seeing the economy hold up.You know, so many rate hikes later,
so many months later, we're stillseeing that in that gives them,
you know a little bit of leewayand perhaps are a rationale to keep doing
that, and that's exactly what theFederal Chairman dr Own Powell was sharing after
their their summit. So you knowthat that actually created a positive day in

(08:16):
the markets for the week. TheSMP was up just under point six percent,
Nasdaq up about one point eight andthe DAW was actually the only index
that was down for the week,about half a percentage point, despite you
know, good day on Friday.So markets at this point are pricing in
about a fifty fifty chance of onemore rate hike before the end of this

(08:37):
year. And markets are also notexpecting rate cuts as soon as you know,
maybe it may have been talked aboutpreviously, but you know, the
what they're pricing in is that anyrate cuts would be expected to be out
further perhaps middle of next year iskind of the general expectation at this point.
Another thing to think about, andyou know, seasonal factors always are

(09:01):
at play, and August is oftena down month for stocks. Historically speaking,
it's the third worst month for stocksin the year. You know,
as with any of these seasonal factors, there's always some you know, basis
behind it, whether it's a lotof traders being on vacation and trading volumes
being you know, different than whatthey normally are. There's a lot of

(09:22):
different things that you could say arethe reason for it. Could even be
self fulfilling prophecy in some ways.When we all know that this month is
usually a rough one, choppy oneon Wall Street, that can always play
into it as well. And actuallySeptember is the worst month historically, so
we've got the third worst and theworst historical months for stock markets, you

(09:43):
know, back to back here inthe third quarter of the year. So
it's something to think about. We'vehad a great year so far in the
markets, and you know, acouple weeks of market turbulence isn't derailing the
market rally, and it's still upso far from you know, the beginning
of the year, certainly when wecompare to last year. But it is
just something interesting to think about.And tomorrow morning at eight am, Ryan

(10:07):
Bouche, our chief investment officer,we'll be on and I'm sure he'll share
his thoughts as well about the marketsin the economy and what we're seeing and
what we're doing in client portfolios,both on the equity side and the fixed
income side in light of you know, what we're seeing, what we're expecting,
and the current environment which is youknow, ever changing as always.

(10:30):
So we are going to go toa quick break here, but we'll be
right back with more. Let's talkmoney on WGY. Don't go away.
Hi there everyone, This is HarmonyWagner Wealth Advisor here at Bouchet Financial Group
and it's just a pleasure to besitting here and chatting with you on this
beautiful Saturday morning. As as youjust heard. The full lines are open,

(10:56):
so if you have anything on yourmind, don't miss this opportunity.
Give me a call one eight hundredtalk WGY. That is one eight hundred
eight two five five nine four nine. You know, I recently had a
client ask a question about, youknow, ways to approach working with an
advisor and the value that's added froman advisor relationship with the client. And

(11:20):
it's a great question and you know, one that we hear from time to
time, and you know it's somethingthat we're considering always as well, is
what value are we adding to ourclients and you know, how are we
improving their their financial lives, theirfinancial health. And I after kind of
having that conversation and we had agreat, great chat. You know,
I happen to stumble across a statwhich has actually been circulating in one form

(11:43):
or another for many years, whichis about the average investor versus the market.
And you know how they kind oftrack this average investor persona is they
really just look at you know,inflows and outflows out of funds, and
these studies kind of put together thisconglomerate average investor and say this is how

(12:05):
the average investor performs year over yearversus the market. And it's always a
little surprising to me, and especiallywhen it gets updated, which is you
know, how it came across mynew speed more recently, is just that
it was a recent morning Star studythat really just confirmed the same information that
we've been hearing for years. Butthe general sentiment is that the average investor

(12:30):
earns about two percent less than themarkets on an annual basis when it comes
to you know, their portfolios.And this is always just shocking to me
because you think about today's day andage, the technology we have, it's
not really a secret what you needto do to be successful in the markets.

(12:52):
You know, obviously, you couldmake the argument that there's a lot
we don't know, and there's alot of complexity, and I would one
hundred percent agree with that. Butgenerally speaking, you know, most people
know the general themes, right,They know to buy low and sell high.
They know that the market always comesback historically from you know, even
the worst darkest times, the GreatDepression, the Great Recession, the tech

(13:15):
bubble, all these things that havehappened in the history of the markets,
and we know that they always italways comes back. And at the same
time, you know, we stillsee people that are not getting the market
performance. So the most recent morningStar studies showed the average investor only earning
six percent annually compared to a sevenpoint seven percent return for the markets.

(13:39):
So you think, if you justbought a basic market index fund, broad
market index fund, you know,for low cost, you could you could
almost guarantee it at least match themarket performance. And it's still the the
story perpetuates. The average investor isstill earning almost two percent less than than
the markets, and that one pointseven percent, the most recent stat really

(14:03):
adds up. If you thought abouta one million dollars portfolio over just ten
years, a one point seven percentannual difference would be over three hundred thousand
dollars in money left on the table, and that's only over ten years.
You can think about how much thatwould compound even more over twenty thirty plus

(14:24):
years. You know how large thatnumber could be. Just a one point
seven percent under performance annually, itreally adds up because of course of the
power of compounding. So why doesthis Why does this happen? Right when
we have all the knowledge, weknow the themes, we know what not
to do in theory, anyone cango out there and just buy an index

(14:45):
fund, Why does this happen?Well, you know, I attribute it
personally to what would be consider theadaptive markets hypothesis, and that's a blend
of two schools of thought. Theefficient market hypothesis, which said that it's
very hard to beat the market becausethe market is very efficient. Whenever news
comes out, prices almost immediately correctbecause of technology and everyone knowing about at

(15:09):
the same time, everyone adjusts soquickly, and so markets are very efficient
because of that. Then you alsohave the school of thought that says,
you know, markets may be efficient, but market behavior is made up of
people, and so there's this behavioralelement to it, and people making decisions
that are not always rational, arenot always logical, despite having the information

(15:31):
right in front of them, theymake mistakes. And you know, the
adaptive markets hypothesis, which you know, I personally subscribe to, and it's
how I view the conversations I havewith clients, you know, portfolio construction
for different clients. It blends thesetwo together and it says, you know,
we do have a lot of informationavailable. There's certainly much more efficiency

(15:52):
in the markets than you know,years ago, pre technology. And you
know, for there the modern era, it's still made up of people,
and because of that, there isalways that element of human arncy and irrational
behavior at times, and it's somethingthat's so interesting. But you know,
the encouraging thing that when you readmore into the science behind the adaptive markets

(16:17):
hypothesis is that over time people canlearn and they can adapt, just like
you know the name implies, andit can change. And if you recognize
the behavior that can befall all ofus, then you have the opportunity to
correct it before it becomes to yourdetriment financially. So you know, one
thing that I've seen in practice,we're working with clients over many years,

(16:41):
been doing this for almost seven yearsand so worked with a lot of different
types of people and seen a lotof different decisions made by by individuals,
many of whom are are quite intelligentpeople. And one of those things that
we see that the official name forit is confirmation bias, but it's this
behavioral theory that people and this doesn'tapply to just finance. Of course,

(17:03):
it applies to everything, as mostof these things do, but it's the
phenomenon where we as humans seek outinformation that confirms things that we already believe.
When we find something, it isvery easy to accept it because we
already we're kind of thinking that way. And on the flip side, when

(17:25):
confirmation bias is in action, westruggle to accept any news that is contradictory
to that it causes attention and wedon't like to. You know, it's
harder to really internalize that kind ofnews or information and make a change based
on it, and it can leadpeople to be slow moving. And overall,

(17:45):
this just can lead investors to makedecisions that may not be correct.
So you know, how I seethis play out is, you know folks
who maybe if the markets are downright and they they're feeling very worried about
it now. Actually, as asmany of us do. There's that emotional
element when you're watching your own moneyexperience a down market or a decline,

(18:08):
especially especially though the larger it is, the more intense that's felt. But
when people feel that, some folkstend to naturally believe in their mind they
take a bit more of a pessimisticapproach and say, I don't think that
it's gonna bounce back. I havethis thought in my mind that this time
is different than all the others,that it's either the markets are crashing and

(18:33):
they're going to have a complete collapseand they will never recover, or that
it's going to take a very longtime. And even though historically we know
that the average market recovery after abear market is less than two years,
many clients they express things like,I don't have ten years to wait.
I don't have fifteen years to waitfor my money to come back. So
they're they're having this expectation in theirin their mind that you know, it's

(18:56):
going to take much much longer thanit ever has for the market to come
back. And what can happen inthis kind of situation is we see confirmation
by us start to take hold becausethey start reading the fear mongering headlines that
agree with that. They start seekingout data points however, you know,

(19:19):
difficult they may be defined, ormaybe however you know, incorrectly base they
may be at times, and theyseek out this, you know, information
stats that that confirm it, thatsay, yes, this is this time
is worse than others, and youknow, maybe you're right, maybe it's
different, maybe the market will nevercome back, and they can cling to

(19:41):
those kind of things, and theymay use that as an as a reason,
a rationale to sell out, tosay I just can't take it.
I know this time is different.I'm gonna go to cash. And so
it is just something so interesting whenyou see it play out, and you
know, like I said, I'veseen it time and time again, people
seeking out information because they have thisthought in their mind. However that thought

(20:02):
got in, they seek out informationthat confirms it. And despite a much
larger body of evidence that would contradictit and say that this time probably isn't
different, that the markets will bounceback, odds are just like they always
have. They struggle to accept evena much larger body of evidence and instead
can make some really financially detrimental decisions. So something you know, interesting and

(20:26):
kind of spurred my thoughts based onjust seeing this this study that shows even
in twenty twenty three that the averageinvestor is still underperforming the markets by by
a large margin. And you know, it speaks to some of the value
added by working with an advisor,you know, especially an advisor that has

(20:47):
a team approach. Right here atBouche, we do everything by committee.
We have our investment committee, wehave a financial planning committee. We collaborate
on these kind of decisions because youknow, any one person can be subject
to these biases, these heuristics thataffect the way they think in it.
You know, we're not immune tothat, and of course we realize that,
so you know, it's it's importantto be aware. And as we

(21:10):
see many different people handle situations inmany different ways, and we see the
way they think, we see theway that finds their behavior. We get
that sense of you know, whatkind of biases are out there and the
behavioral things that happen that you know, lead people to make imprudent decisions,
and we also learn, you know, how to help them, so you

(21:30):
know, when it comes to workingwith an advisor that you trust, and
especially a team that you trust,knowing that you know, no one person
and their own human error is goingto be making all the decisions. It
really is compelling. And you know, you can see when you when you
see a firm that has a reallygood track record of performing well compared to
their benchmarks. It's it's not aseasy as it looks when you look at

(21:53):
the average investor and the mistakes thatthe average person makes. You know,
it really it really of the valueof working with a team that you trust.
So anyway, kind of my endof my behavioral finance soapbox. Anyone
who's heard me on the on theradio before, you know how much I
appreciate this particular field of study.And you know, we do see it

(22:15):
so much with clients in the waythat they process things, and it's so
interesting. So lots of lots ofgood stuff there and something I could always
you know, talk about for hoursand hours, it feels like. But
great, well, we're going tobe coming to the halfway point of the
show pretty soon. When we docome back, we'll be talking about some

(22:38):
retirement related topics, specifically some ofthe financial and non financial indicators of a
happy retirement. It's a really interestinginformation coming out there and thinks I think
are probably relevant to our our audiencein many ways. And you know what
retirement is looking like for people thesedays as well as uh, you know
some other strategies, roth conversions,things that you may or may not know

(23:03):
about social Security. So lots andlots of exciting things coming up after the
break. So if you do havequestions, get those ready. We're going
to go to the news, butyou be ready to call in when we
come back, and we'll be backsoon with more or Let's Talk Money brought
to you by Bouche Financial Group,where we help our clients prioritize their health

(23:23):
while we manage their wealth for life. We'll be right back. Hello there,
this is Harmony Wagner, Wealth Advisor, certified a financial Planner, certified
private wealth Advisor, here with youon this beautiful Sunday Saturday morning. Thank
you for staying with me through thenews, and hello to anyone who may

(23:45):
be just joining now you're listening toLet's Talk Money, brought to you by
Bouche Financial Group, where we helpour clients prioritize their health while we manage
their wealth for life. And it'struly a pleasure to be here with you
today as we think about you know, some are winding down and all the
things that are to come, andjust enjoying this beautiful water that we have,
although it has been quite a wetsummer and then seemingly a little bit

(24:08):
chilly for August as well. Butfor any of those who maybe don't love
the heat, maybe this is thisis perfect. And I look out my
window right now it is a beautiful, beautiful blue skies out there, so
I can't complain. Well, herewe are today talking about all things financial
markets, economy, financial planning,tax planning, personal finance, and anything

(24:30):
else on your minds. The fullminds are open and I would love to
hear what questions, strategies, topicsyou are on your mind this morning,
So give me a call at oneeight hundred talk WGY. That's one eight
hundred eight two five five nine fournine. Well, as I referenced before
we went into the break, weI think it would be a good time

(24:53):
to talk about some kind of retirementrelated topics. You know, I think
many of our listen owners maybe thinkingabout retirement or in retirement, and so
I thought it would be quite arelevant thing to discuss. And you know,
I also read an article this weekthat was you know, I found
it quite interesting working with a lotof retirees in our in our client base

(25:15):
on a weekly, even daily basis, and you know, there was just
a recent study about why what makesretirees happy? What are the characteristics that
contribute to a happy retirement for theaverage person. Obviously that's a personal thing
and everyone's going to be a littlebit different. But as they did research

(25:37):
and pulled retirees at large in America, they found that seventy six percent of
retirees reported often feeling happy. Andthat's more than any other demographic group that
was studied in this particular survey.So, you know, it kind of
begs the question, what are thesethings that are contributing to an individu duel

(26:00):
being happy in retirement and why arethose people perhaps happier than the population at
large. And you know, maybeyou'd say, well, that's pretty obvious.
They don't have the stress of work, and that probably is partly true,
but there's there's some other, youknow, things that they've found that
go into it as well. SoWe're going to talk about that in just
a moment, but before we do, let's go to the phone mines and

(26:22):
chat with Mike from Lake George.Morning, Mike, how are you?
Good? Morning? How are you? I'm good? Thanks? What's on
your mind today? I have aquestion. I own property, a nice
piece of property on Lake George,New York, and it's coming time in
my life where I would like toput it up for sale. The preliminary

(26:45):
sales has told me that it's goingto go for about three three and a
half million dollars. I probably havea million in it. You know,
I bought it many years ago,and I'm in my late sixties, and
I wanted to know. I heardfrom my bookkeeper that I would probably be
in the thirty percent range for thatmoney, which is a lot of money

(27:10):
to give away. And I waswondering if you knew of any avenues,
legal avenues that I could take todo with that money. I don't necessarily
have to live off and I canreinvest it. But that's my question.
Yeah, are you talking about thirtypercent for taxes? Is that what you're
referencing? Yes, if I sellthis property for three million dollars, I'm

(27:34):
told that the gains will be probablyin the six to seven hundred thousand dollars
range. M yeah, that doessound accurate based on you know, just
tax brackets and where you'd be.Is it your primary residence? Well,
yes and no, it has beenfor forty years. I just recently homesteaded

(27:57):
in Florida. I bought a placein Florida. So I do I do
six? I do five months inFlorida in the balance here in New York
State. I did rent that propertyout this year, in last year.
I no longer live in it,but I have for forty years. Okay,

(28:18):
so out of the last five years, have you been there for at
least two? When did you moveto Florida? I'm okay, so you
know two years ago, so I'llcall that point. I did. I
did live in that house, soyes, okay, great. So I'm
not sure exactly how rental income oryou know, renting out that property may
affect it. That's you know,something you can probably talk with your A,

(28:41):
your CPA, or your your taxprepare about just to confirm. But
you know, if you do qualifyfor the primary residence exclusion, you can
get some of the game you know, excluded from taxes. But you know,
at that rate, if you knowyour basis is one million and you're
going to sell it for you know, even three on the conservative side,

(29:02):
there's still going to be a lotthat that is, you know, that's
going to be tax unfortunately. Andyou know, the good thing is you
made a lot of money in andover time and you'll have you know that
you know, liquid cash coming in. But you know, if you don't
need the money, my advice wouldbe to you know, to reinvest it.
Uh, you know, there's notanything I'm aware of in terms of
being able to avoid taxes on thator you know, you get out of

(29:27):
it in any way, so youknow, it's it's gonna have to be
just the butting the bullet on onthe tax bill. But if if you're
not needing it, then then reinvestingit in just a brokerage account. You
can't put it into retirement accounts atthat's that size, but reinvesting it into
a brokerage account would be my recommendationin terms of what to do with that

(29:47):
money if you don't have anything else, so they're foreseeable expenses, you're not
going to be buying any other propertythan that would be you know, my
thought of what to do with theproceeds. Okay, thank you, you're
welcome, Thanks for your call.I have a great rest of your day.
Awesome. Well, appreciate Mike's questionand call today. If anyone else

(30:11):
has something they'd like to discuss,you can give me a call out one
eight hundred talk w G Y orone eight hundred eight two five five nine
four nine. So let's talk aboutsome of those indicators to having a happy
retirement. Right, there was threefinancial ones that were revealed in this study,
and I think there was six nonfinancial. I've picked a feudge to

(30:33):
kind of highlight from my own experiences. But here are the financial ones,
which you know are are of interest, certainly because there are more quantifiable ones,
right if it can be a littlebit harder to get the non tangibles
and make sure those are lined upbefore retirement. But for the financial ones,
those are those are the ones alot of people want to hear about,
so they're like I mentioned, thereare three, and what those results

(30:59):
are based on all the retirees thatwe're surveyed is having at least five hundred
thousand in liquid assets you know,this is an interesting one. I'll comment
on in a moment, but that'swhat they discovered having a mortgage paid off,
and the third is having multiple streamsof income. So all three of
those contributed to less stress and thatequates to, you know, a happier

(31:22):
retirement. So you know, thereason why I had a little caveat on
the on the asset value is thatyou know, that really differs for a
for each person. And oftentimes wehave people come to us and say,
well, you know, what's mynumber? How much do I need to
have to retire? And the answeris almost always, you know, it
depends. There's a much larger conversationthere about how much you need to live

(31:48):
off of. What's your long termgoals are? You know, do you
want to leave a certain amount behindto your loved ones? Do you want
to spend every penny? How muchother incomes sources do you have? What's
social Security making up, what's yourpension? If you have one rental income,
part time employment. There's so manythings that go into that decision of

(32:08):
how much money you need to haveto live off of, so it's hard
to you know, really say okay, this is the number that's going to
make people happier or take stress offacross the board, because if someone wants
to spend two hundred thousand dollars ayear, well, unless you have some
pretty substantial other sources of income,five hundred thousand is not going to last

(32:30):
you very long. So it reallydepends on the person. But what I
think this is really speaking to is, you know, having liquid assets available
really reduces stress for so many people. It's of course, having an emergency
fund is, you know, necessary. One of the first things we'd recommend
to someone who is starting from scratchesto build that emergency fund three to six

(32:51):
months worth of expenses that you havein your bank. No matter what happens,
you know you can you can supportyourself for that long and figure things
out. So that's a good startingpoint. But as we're seeing here,
it's a little bit more than that. And especially for retirees, once you've
made that break from your career,you're not working anymore, you're not seeing
a paycheck coming in. Having justthree to six months in liquid assets is

(33:15):
not as comforting as maybe it waswhen you did have that paycheck and you
had that steady income stream and youfelt you know, Okay, you know,
I'm in my working years and myaccumulation years, and that's where my
lifestyle is going to be supported from. Once you're in retirement and if you're
on some level spending down your assetsand you just don't have that income potential

(33:37):
that you did earlier in your life, having a little bit larger amount is
helpful. You know. It's oneof the pros and cons we often talk
about with clients when they're thinking,do I take a lump sum pension or
do I take the monthly payments?Well, one thing to think about is,
you know, you come across abig expense, whether it's a big
leisure purchase that you decide you wantto pursue or something that's you know,

(34:02):
an emergency or something on your housethat's really significant that you have to have
to pay. Well, you're notgoing to be able to call up that
pension if you've if you've taken themonthly income and say, you know,
I need to take an advance,I need you know, a larger lump
sum that's not going to go overwell. So you know, having that
liquid assets in a way that's accessibleto you is something that can take a

(34:27):
lot of stress off and you know, overall increased happiness. So it is
an interesting concept certainly, And againI don't think that the number is as
important on an individualized basis as justthis concept of you know, saving and
having you know, wealth accumulated thatyou can get to when you need it,

(34:47):
so that that is one of thefinancial indicators of a more successful retirement.
Another one, of course, likeI mentioned, having mortgage paid off.
You know, it's not necessarily aprerequisite for retirement. When we do
planning for clients and you know,maybe they have ten years on their mortgage
and five years left on their retirementclock, you don't need to necessarily rush

(35:08):
to pay it off, right ifyou have the cash flow set up that
you can support it, especially ifit's a low interest rate, that interest
rate is less than five percent,you really want to hold on to it.
You can make more in the marketsthan you're gonna save by paying it
off, so it benefits you financially. But we do see some people who
say, I just cannot handle havingdebt in retirement. That mentally does not

(35:31):
feel right to me, and soyou know, maybe they do pursue an
early payoff of that mortgage or youknow, despite that it may not be
the most financially advantageous, but mentallyit gives them that peace of mind and
that is worth something as well.So you know, that's not very surprising
to me to see that that isin there. I would probably say that

(35:51):
having no debt and retirement is issomething that's prized by a lot of people.
And then having multiple streams of income. You know, again, most
people are going to have Social Securityin some way, shape or form,
so that's that's one of them.We're seeing few and fewer pensions now,
so it's not as common, butyou know, some people do still have

(36:14):
pensions or you know, people whowork for state or government on some level,
the lucky few and the private sectorwho still have them. So that
can help as well. But alsojust having you know, a portfolio that
you can sustainably take income from overtime, that that kind of satisfies both
one and three. You know,if you have a large portfolio, you

(36:35):
can live off of four to fivepercent of that every year without uh,
you know, depleting it early inretirement. You know that'll that would last
the average person thirty years if theyjust or more if they just spend four
to five percent each year of theirportfolio. And you also have that that
large account balance where if you doneed to access more money for something like

(36:57):
we talked about a purchase or anemergency, you have it there. So,
you know, having these multiple streamsof income it helps people feel more
secure. People are often worried aboutsocial security or they know, you know,
if I have a private pension,that's that's only as guaranteed as the
company that's paying it. Maybe I, you know, don't have full confidence
in it. So having multiple streamsof income, multiple avenues where God forbid

(37:22):
something happens to one, you knowyou're not going to be left high and
dry. That's the third financial markerof a happy retirement. So you know,
those are some interesting things, andmaybe it is sparking some uh some
thoughts and in folks who are approachingretirement and wondering, you know, do
I have kind of those those thingslined up? And you know, are
they important to me? And amI in a good spot when it comes

(37:44):
to these these financial indicators? It'ssomething good to think about. Now,
what are some of those non financialones I mentioned? As I mentioned there
was six that were kind of turnedup in this study. There's a few
that I really want to highlight though, because I see it so often with
our clients, especially those who areapproaching retirement in the near future in one
to two years, and you know, we're talking with them about what their

(38:06):
concerns are. And for those whoare maybe you know, just a few
years in, you know what they'refinding in terms of what's making them enjoy
retirement or what they're feel that's lacking. So three of those non financial indicators
are involvement in hobbies, interests,things that keep your curiosity and your mental

(38:29):
engagement alive. That's an important one. Having a purpose, right, having
a reason to wake up, getdressed, go out of the house.
You know where work may have atone point in your life been that purpose,
you know, finding something to replaceit oftentimes it can be more meaningful.
You have all the freedom without thefinancial obligation, so you can often

(38:51):
find something that's more meaningful, butyou do have to be intentional about it.
And a third important one is socialconnections too, and we do see
that. You know, when youleave a company, unless you were working
for yourself by yourself, there's someelement of social connection there. Right,
you walk in, you say hito people that sit around you, or
you know, you're working and collaboratingon things with your co workers or clients,

(39:15):
customers. So there's some real valuein those social connections that as much
stress or angst as I suppose theycould bring for some at times, you
know, there is some value thereand a lot of people do fun they
miss that once they retire. Thesethings, you know, they kind of
are speaking to a larger trend thatwe're seeing more and more. You know,
we're seeing more people desire it,and we're also seeing more companies offer

(39:37):
it, and that is kind ofa semi retirement or a phase out approach
to retirement as opposed to what youmight think of as the more traditional where
you know, my sixty fifth birthday, I'm not going to work a day
more. I'm done, you know, walk away. I go from forty
hours a week to zero hours aweek and I'm retired. Or we're just

(39:58):
not seeing that being as desirable topeople. Some of the contributors to a
happy retirement are social connections, purpose, having multiple income streams. These are
all things that you can do ifyou you can maintain, if you maybe
you supposed to a phase out parttime schedule. Instead, it can reduce
the stress of full time work withoutyou know, having you step fully away

(40:22):
and all of a sudden have thistotally different life that you don't even recognize
anymore. It can give you timeas well to say, Okay, you
know, I have a little moretime now, what is my purpose going
to be? What are the thingsI care about? Maybe it's spending time
with family, Maybe it's volunteering orgetting involved with a cause that's close to

(40:43):
your heart. You know, onceyou kind of if you start phasing out,
you may realize, you know,just how much involvement you wanted to
have in those kind of activities andwhat you want to do. And it's
just a great way to you know, kind of bridge that gap to retirement,
which it can be a shocking transitionfor some even when they're financially ready

(41:04):
that you know, that mental andemotional transition is a big one. So
just some interesting food for thought againfor anyone who's in that maybe three to
five year window on either side ofretirement thinking about it, approaching it,
or early in it. You know, these are kind of some of the
things that are going to set youup to have a happy and fulfilling time

(41:25):
of your life once you're full timeworking years have ended, and you know
you're onto that next next phase ofrest and relaxation hopefully. But you know,
also some of these other things thatwe've talked about, you know,
I've also talked to a few clientsrecently who are still earlier in their working
careers and they're thinking about making achange right there, maybe in high pressured

(41:50):
situations where their job causes a lotof stress, or they feel they're not
able to devote the time to theirfamily or to things that are important to
them, or just to their ownmental health truthfully, sometimes and so I've
talked to some clients recently, youknow, in different situations, but whether
they're either thinking about taking a paycut to pursue a career path that is

(42:13):
less stressful, more work life balance, or even some clients who are taking
some actual time off, they're quittingtheir job mid career and they're going to
reassess and they're gonna say, Ineed to step back from this so I
can figure out what I really needto do. And for you know,
both of these clients, some ofthe things that are both these client personas
you know, situations that people findthemselves in, is there's some things to

(42:35):
think about from a financial advisor perspective. So you know, for anyone out
there who's thinking that would be goodfor me to change my career direction or
fully take a break and take sometime off, you know, there's some
things to think about that I wouldbe suggesting as a financial advisor that I
wanted to share today. So youknow, one of those things it's really
important is health insurance. If you'regoing to be stepping away from your work

(43:00):
or making a change, whether it'sgoing part time or you know, a
gap year if you want to callit that, making sure you're covered from
health insurance and that you're planning forthat expense if you're gonna have to get
it privately, or you know,even if you have Cobra through your your
work, but you're going to haveto start taking on those premiums, that's
a big expense. Looking into that, making sure you know exactly how much

(43:21):
it's going to cost you, whatyour options are, and you know how
that's going to affect your cash flowplanning. That is a you know,
really important thing something that you allof course want to have that coverage,
and it can be more expensive thansome people think about. So if you're
taking a break from your job thatinvolves no longer being covered under an employer
plan, that is a big onethat I'd be first urging someone to consider.

(43:45):
When gonna go to the phone lineshere and chat with Michelle from Vermont.
Good morning, Michelle, Hi,good morning. What's on your mind
today? Well, I have agood question. I'm in semi retirement,
so I'm only working like a littlebit part time. I need to take

(44:06):
a distribution for a purchase that Iwant to make. I don't know whether
I should take it out of mytraditional IRA or my roth IRA. That's
a great question, so I'll giveyou kind of some pros and cons for
both. Roth Ira is obviously goingto be tax free, so you know,
depending on your tax bracket, especiallyif you're still working, you still

(44:28):
off some element of income. Thatcan be attractive because you can take out
as much as you need without payingany taxes. The downside to that is
you're taking money out of an accountwhere all future growth is going to be
tax free, So you know thatthat can be you know, quite often
we recommend clients not to take fullyfrom a roth IRA just because the tax

(44:49):
free growth is great. It's alsoone of the best accounts that your future
errors can inherit. So as longas you can preserve a ROTH, it
can be a great thing. Thetraditional IRA, you're going to pay ordinary
income tax, but you know,if you're depending on the size of the
distribution in your tax bracket, youmay be able to do that and still
stay in a low tax bracket.So that's something to consider as well.

(45:12):
And there's always the option too ofsplitting it, taking some from the traditional
and some from the ROTH, andthat way you kind of get the best
of both worlds. Maybe from thetraditional you take up to a certain point
where I would push you into thenext bracket for tax purposes, so you
you don't take any more. Let'ssay you're in the twelve percent, you
don't take any more, that wouldpush you into the twenty two percent.

(45:32):
Federally, you take the rest fromthe ROTH. But again, if you're
in a lower tax bracket, myfirst inclination would say to you know,
pursue the traditional IRRI first. Doesthat help? Okay, great, Yes,
that's very helpful, Thank you verymuch. I appreciate that you're welcome
and enjoy the rest of your weekend. Thank you too, Bye bye bye.

(45:55):
Great. So, you know,we we were chatting about taking a
gap year and or taking a paycut and how that affects different people,
and so, you know, thefirst thing that I have mentioned thinking about
is health insurance. If you're goingto be stepping away from your job,
either going part time, going coldTurkey for a little bit, making sure
you're covered from a health insurance.The second is cash flow planning. Making

(46:17):
sure that your emergency reserve fund isa little bit more cushion than you would
normally have. If you're working threeto six months is great. If you're
not working or you're working at areduced level, you're going to want to
increase that in some way before You'regonna want to kind of prepare for that.
Make sure you know what your expensesare going to be month to month,
again considering that you may have ahigher health insurance bill than you did

(46:42):
and planning for that. This alsokind of puts out the idea of you
know, when do you re enterthe workforce if you're not really retiring,
you're still the middle of your career. Having a plan for when do I
need to think about my next moveand what that's going to be, and
how long is it going to takeme if I want to get back back
out there, how long is itrealistically going to take me to get a

(47:05):
job in my desired field. Sothose are all some some great things to
think about if you find yourself inthis spot. You know, for a
lot of these clients, I'm gladthat I can encourage them to do this.
It can be a really great thingfor people mentally work life balance,
but it doesn't always fit for everyone. So those are some of the main
things I'd be encouraging someone to thinkabout if they were in that spot.

(47:28):
Great, Well, thank you somuch everyone for tuning in for today's show.
We'll be right back here on WGYtomorrow at eight am. But until
then, thank you so much forlistening to Let's Talk Money, brought to
you by a Bouchet Financial Group,where we help our clients prioritize their health,
what we manage their wealth for life. Have a great weekend.