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December 24, 2023 • 44 mins
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(00:01):
In your corner, saving one investorat a time, working for clients,
not companies, all while bullyproofing portfolios, totally committed to sharing academic truths.
Abottom missing always representing Main Street andnot Wall Street. Team, It's your
Sound Money team and this is theSound Money Investment Show with Drawn Financial Advisors.

(00:25):
Hello and welcome to the Sound ManyInvestment Show with Brown Financial Advisors.
I'm Greg Brown and I'm James Borthand we are a registered investment advisory firm.
We are independent. We do workfor clients and not companies. To
receive your complimentary and personalized financial incomeplan, give us a call five to
one, three, five to seven, five, nine to sixty five four.
If you're seeking advice on old fourone K four to three B some

(00:49):
type of employer sponsor plan, perhapseven in UA analysis before you decide doing
it, that fateful IRA rollover,give us a call five one, three,
five seven five on six' fivefour. Our website Brownfinancial Advisors dot
com. Email team at Brownfinancial Advisorsdot com. Our home office is at
Milford, but we also have locationsin Blue Ash, Westchester and Florence.

(01:11):
Greg Well, Today's show, We'regoing to be discussing financial planning rules of
thumb and are they worth using.So one thing is for sure, you
need to beware of financial planning mythsand these generalized rules of thumb when you
design your own personal plan. That'ssomething we take in consideration, is you
know, fact over fiction. Youalways hear about financial planning rules of thumb.

(01:34):
When that comes to mind, isthe four percent with the draw rule.
You may have heard of it,you may have planned on the back
of a napkin this way for yourown retirement purposes. Or another one is
the eighty percent of pre retirement incomerule. You know kind of pattern that
whatever you're making the last couple ofyears of your career path and work that
that salary at eighty percent would bean appropriate amount of income to target into

(01:56):
retirement. Well, regardless, it'simportant to have a track to run on
when it comes to this retirement planningprocess. And that's what we provide in
a process is just that. Sowe want to exercise as we move along
a little bit of caution here,right, Putting too much weight in any
one of the financial planning rules couldput you out of balance. Put the
emphasis of your plan on something that'sthat's not as built upon rock, more

(02:21):
on sand. So how well dosome of these rules that many folks are
familiar with and try to work with, how well do they actually work?
Would they work for all shapes andsizes? Well, that we already know
by the you know, the statingthat question in such a way that the
answer is probably not. Then whydo so many people use these just default
the facto rules, as if it'sgoing to be the right recipe, you

(02:44):
know, for them. So foryou in your personal situation, we need
to make sure that the plan matchesup with your needs and the appropriate planning
method along with that. So quitefrankly, one rule of thumb may work
better for you than it might someoneelse, and vice versa. So today
we're going to talk about a fewcommon rules of THEMB. You know,
we see it out there in themarketplace and the industry, We read it

(03:06):
in the magazines, you see iton the internet, so that must be
true, right, And how doyou know if it has the merit that
you need for your plan and again, your personal situation, James, Well,
here's some thought provoking questions to tieinto today's show. So, for
starters, what are some of theMaybe the good better best ways to determine

(03:28):
how much you need to retire?Here's a hint. It has to do
with budgeting, has to do withcontrolling your spending habits. Do you really
need at least a million dollars toretire comfortably? Maybe that's the key word
comfortably. Maybe it's more, maybeit's less. How does the one hundred
age rule work? What's the bestway? Again? Is there a best

(03:49):
way to determine how much? Asin what percentage of money you should have
invested in stocks and bonds? Maybethink of that as the allocation your risk.
Allocation stocks bonds is the traditional wayof saying, well, if I'm
safe, for example, a balancedinvestor, maybe it's a sixty to forty
allocation of stocks to bonds. Maybethat applies to today, Maybe it does

(04:11):
not. What types of asset shouldbe owned in a portfolio as a hedge
against inflation? What should I door what should we do to focus on?
As far as paying off debt andsaving for retirement? And again,
different types of debts, Some aremore constructive than others. We'll get to
that throughout the show. Could Iget by on only? I say only
seventy to eighty percent of the workingincome that we had when we're in retirement.

(04:35):
So maybe it's a conversion issue whenyou say percentages of dollars. So
for example, four percent, fourpercent of what, eighty percent of something,
well, eighty percent of what?How dramatically could the expenses change over
time? And again part of thatI'd say factor may be a major factor.
That would be what's the rate ofinflation and the rate of inflation when

(04:57):
you say overall rate of inflation versusindividually for different sectors or different types of
expenses, such as the medical rateof inflation versus prices of food, eggs,
and milk. When picking investments,how much reliance should I have on
the track record the past performance?Is it a guarantee or an indicator of
future results? How about market timing? How about don't try to do market

(05:19):
timing because usually that results in youchasing returns instead of the capturing of the
returns. And could adhering to picka number, whether it's four percent or
three percent. For the withdrawal rule, keep me or we the us from
running out of money prior to runningout of life. You know you skipped

(05:42):
across several of those just market timingtriggers. In my mind, the three
do not use and that as youmentioned, you know, track record investing,
no, no, chasing returns,no lucky stock picking and market timing
no no, no. However,people do it all the time. And
then one of the worst things thatcan happen, James, is they have

(06:03):
some luck with it, right.It gives a false sense of confidence,
and I would say even competence insome area that is for many people not
their area of strength. They dowhat you know they do. You all
out there have your professions and thethings you've arrived at doing quite well and
are known for. And you know, frankly, this is what we do.

(06:25):
And we will come to you whenwe have a need for your service
and not try to do it ourselves. And we think that you should consider
doing the same. Come to usin this area that is so broadly provided
for. We're holistic advisors, okay. We handle a state planning, investment
management, investments, income planning,social security maximization, pension maximization, insurance,

(06:47):
financial planning, all of it broughttogether, like we say each week,
similar to the Mayo Clinic of FinancialServices. And that's important. That's
synergy, something that will help youin the district phase of your life rather
than this accumulation phase. But whileyou're out there just trying to you know,
file through, rummage through different conceptsand ideas as you try to put

(07:10):
together the puzzle pieces of what youwant to be the picture box of your
retirement, we know that we needto do some myth busting together today and
we need to check in on someof these rules of thumb because they come
from a variety of sources. Youknow, the financial planning rules of thumb
that just permeate TV media again,journals, money, magazines, all across

(07:31):
media. And one of the mostfascinating things if you ever catch a CNBC
episode, there's there's a person thatgives you three bullets in three minutes that
are all bearish, and you're thinking, hmm, well that's compelling. Gosh,
it looks pretty bad out there,and then it's just the next person
is all bullish with three points andall the reasons why the other person is

(07:51):
just all wrong, and you're thinking, well, that's a good perspective too.
I can certainly gravitate towards that.And then as you walk away to
get your coffee and you're ready forthe next program. You're thinking, what
was the takeaway there? It's doesanyone know what they're doing? W Here's
what we don't know. We don'tknow what the market's going to do next
exactly, and all of what's known, all of the known, is factored

(08:16):
into current prices in the market,so only something unknowable could change that.
Now, if you know someone thatknows the unknowable, please introduce us to
them. But we're going to stickwith planning the fundamentals the way to be
prepared for any of the outcomes,so that your plan stays on track like

(08:37):
a train. Yeah there'll be somebumps here and there, but you will
stay on track and you'll head tothe price and you will arrive to the
depot that is your happy place inretirement. So as we look at the
track record of some of these theserules of thumb, we're going to kick
the tires a bit. And Jamessaid, do you need a million dollars
to retire? People throw out numbersthat can't really be backed up in time.

(09:00):
I hear a million dollars, James, I think about a broker,
and I think about that dark humorout there that if you would like a
million dollars in retirement with a broker, you better start with two. Yeah,
it drops dead flat right, becausethis is your money, this is
your future. This is important,serious stuff. And how many do overs
will you get? How many timeshave you retired? How much experience do

(09:22):
you have in doing this now?I know you learned as many of us
to accumulate over the years, didyour best to make some income, pay
your bills, and try to savesomething too for this day that's approaching cold
retirement, and I hope you're doingwell with that. We'd like to help
you. We'd like to show whereyou need to be so you can fill
in the gap properly to arrive whereyou need to be. So it's all
good. But this distribution phase isa phase you don't get to until you're

(09:46):
there. And then you got tomake it work. You got to take
all the money you ever made,ever saved, and now somehow you got
to turn it into income that's goingto last as long as you do.
How long is that? Jameson thoughts, Well, I would I would say
this when when we it's I knowit's easy to say and tougher to do,
which is take your emotions out ofyour investment decisions. Yes, it's

(10:09):
it's easy for us to sit herefrom the outside looking in and say,
well, don't worry about it,and for the person who's actually worrying about
it, it's like, Okay,thanks for saying that. Now I'm not
going to worry. It's like,no, we know that human emotions get
in the way of our investing decisions, good investing decisions. But here's something
else that ties into emotions. Ifyou're watching the stock market every single day

(10:31):
and you seem to be living ordying on what the market does today or
this week, that's maybe an indicatorthat you're at too much market risk.
So one way to cool off yourmarket risk is not have all of your
money at market risk. You canhave other investments out there. There are
other ways to make gains on yourmoney without having it be at stock market

(10:54):
risk. There's there's more. There'smuch more. We're going to cover this
after the commercial break, But ourpuhne nun brought the office five v one
three, five seven, five ninesixty five to four. Call us we
can help a stay tune. You'relistening to the Sound Money Investment Show with
Brown Financial Advisors here on fifty fiveKRC Detalk Station. Opinions expressed are solely
those of Brown Financial Advisors and shouldnot be interpreted as specific advice. Materials

(11:18):
presented are believed to be from reliablesources and no representations can be made as
to its accuracy. All ideas andinformation should be discussed in detail with one
of our qualified investment advisors prior toimplementation. Market based investments involve risk,
and past performance is no guarantee offuture results. Insurance based investments offer guarantees
based upon the claims paying ability ofthe issuing company. All insurance, tax

(11:39):
and mortgage services are offered through BrownInsurance and Tax Advisors LLC. Brown Financial
Advisors and Brown Insurance and Tax Advisorsare affiliated companies and may only transact business
in those states in which registered orare otherwise legally permitted. Welcome back to
the Sound Many Investment Show with BrownFinancial Advisors. I'm Greg Brown and I'm
James Borth and we are an independentRIA. We do our for clients and

(12:01):
not companies. Our fund number fiveone three, five seventy five nine sixty
five four. Our website Brownfinancial Advisorsdot Com. Email team at Brownfinancial Advisors
dot Com. Home offices in Milford, but also have locations in Blue Ash,
Westchester, and Florence. Greg Wellcontinuing with our financial planning rules of
thumb and are they worth using?So stepping back a little bit, what

(12:24):
is a definition of what we're talkingabout here, James, Well, this
is taken from Investipedia. Rule ofthumb is an informal piece of practical advice,
providing simplified rules that apply in mostsituations. So there's many different rules
of thumb in finance that give guidanceon how much to save, how much
to pay for a house, howmuch to invest, et cetera. But

(12:46):
maybe here's the point. Rules ofthumb are not scientific and they also don't
take into account your individual circumstances.So for the general public, for the
masses, this is what rules ofthem are all about out but for individual
advice, and that's where you needto come see someone such as us.
You know, James, I wasjust thinking, how damaging or consequentially can

(13:11):
the outcome be by misapplying a rule. You have a basically a good rule,
but applied to the wrong situation,Well, it could be anywhere from
a little harmful to very catastrophic.You know, like, how bad is
it if you're supposed to have akidney removed but they end up taking the
wrong one all the way to theytake a leg and not a kidney,

(13:33):
and still need to take the kidney. I mean, that's a harsh example,
but you get the idea. Applicationfor the right purpose makes the most
sense. Now we're going to lightenit up a little bit and share some
examples of things you can hardly hurtyourself by. They're kind of good for
us. I was going to saythe kidney example. Usually that's why in
the hospital they draw a big Xon which side they're going to take it
from. But you know, sometimesaccidents occur if your grandparent and your grandchildren

(13:56):
come before the procedure and they happento have markers, just look out.
You just don't know. Anyway,some examples, some rule of thumb that
might be just good for everyone generally. One is pay yourself first. Save
at least at least five percent,preferably ten to fifteen percent of your take
home pay leading up to retirement,so you can build that nest egg.

(14:18):
We know that most folks as theyturn age fifty and heading for sixty and
whatever, they're after plateau where theylevel off in inner retirement. They're arriving
at more of their highest earning years. You know, somewhere along the way
they became empty nesters. Money goesfurther. Yeah, they travel a little
bit, but they get serious aboutthis retirement. Just like you probably realize

(14:41):
when you're crossing in your thirties andapproaching your forties, the sense of mortality
becomes increasingly real to you. Asyou get close to retirement, this thing
becomes more real to you. Also, paying down high interest rate debt,
spend less on the interest by payingdown the debt that costs you the most.
Now that's snowball avalanche, you know, and a lot of people have
different names for it, but you'rein essence knocking out one, you know,

(15:07):
amount of debt, taking the paymentthat went towards that, combining it
with the payment for the other paymentsthat are due, targeting the next one
and the next one and so forth, until you just have a large amount
of money to target the remaining debtsuntil they they just go away. So
that's a nice approach, I mean, it makes perfect sense just doing it.

(15:28):
You know, so many things inlife can make perfect sense, and
intending on doing it actually doing itcan be two different things. I mean,
how many of us know that losingweight it's really a function of eating
less and moving more exercise. Itis literally that simple, or is it?
You know what I mean? Creatinga safety net, you suld have

(15:48):
an emergency fund equal to three tosix months worth of household expenses. Now
you could have a couple months inthat literally and more cash like instruments,
and you could have another three orfour months of this in liquid investments at
low risk. They don't have tojust be setting mothballed, waiting for some
event that might never happen, likeso many worries and concerns we have in

(16:11):
life. How many times have youlost sleep worrying about something that just never
ever came to fruition? And Iknow for me it's far more things I
worry about than actually become worry worthy. Well, the point of the safety
net is it should be liquid.It should not be tied up into a
long term investment. Yes, doesn'tmean it can't be invested, just liquid
and not long term. So trackingyour spending only makes sense. Also,

(16:37):
a lot of folks are blessed enoughfinancially to not have to get down to
tracking spending or having a proverbial budget. But we all know we'd be more
efficient if we did. I mean, it's good if you don't have to,
but as you approach retirement, itis good. It's kind of like
a test drive to do just that. Track your expenses, arrive at some
form of a budget, See justhow much of your your wage based income

(17:02):
you're going to need what percentage inretirement you've already heard here seventy seventy five,
eighty percent or some of those rules. So if you were making one
hundred thousand on average a couple ofyears before retirement, then maybe you can
live on seventy thousand going forward,because out of the one hundred thousand,
you probably had contributions, and youknow, some job related expenses, travel
back and forth, gas, thingsthat will smooth out and go down and

(17:25):
be reduced. So you may verywell already be living off this smaller number
in reality. But track you're spending, Track those inflows and outflows. Now,
others will say, what if Idon't, I don't need to live
on a fixed income. Why hearyou, you might be in a situation
where it's not technically that you're enteringinto fixed income reality when you retire.

(17:47):
But I'd suggest that everyone, whetheryou have more fixed income to deal with
or work with or less, whenyou start working on a monthly basis without
earned income money come in in everymonth, new money coming in every month.
Then everyone, to some extents,on a fixed income and retirement.
So there's no harm, no foulin just getting more efficient at it.

(18:08):
For a whole lot of reasons.Inefficiency can mean we'll figure out which buckets
of money you take to provide income, what sources of investments are best for
provision of income versus growth and appreciation, which methods are more tax efficient,
so the money you take out youget to keep and not give away to
the government and all the government Imean Indiana, Kentucky, Ohio City County,

(18:32):
property considerations on property tax, mygoodness, don't forget Uncle Sam,
the big federal number, and soforth. A home purchase should cost less
than an amount equal to two yearsof annual income. So if your annual
income is one hundred, then maybethen technically, by some kind of rule
two hundred thousand would be the targetprice for the home you used to live

(18:53):
in. Now that may or maynot work depending on some real estate markets
and appreciation. I think we're seeingin real estate kind of turn over.
There's going to be increasing inventory,a less competition out there fighting and buying
over those limited properties to where they'reselling at an inflated rate. So it
looks like there's a good season comingat least for the for the buyer,
a little tougher for the seller.Right, life insurance have at least five

(19:15):
times your gross salary and life insurancedeath benefit if it's suitable. Do you
need life insurance first of all,then how much and for what reason?
But just generally speaking, if youarrive at about five times, so back
to the one hundred thousand a year, that would mean five hundred thousand dollars
because when it pays, it's goingto pay tax free, so that gives

(19:36):
it even more horsepower to be appliedto whatever circumstances. Situation is needing more
cash at the time of you steppingoff the planet. The stop market,
the long term average return is I'mjust looking at it the other day.
Even with the current downturn in themarket year to date. I think the
S and P through yesterday midday waslike nine point nine to three percent over

(19:57):
twenty years, So this ten percentnumber isn't too far off. But the
problem with just being in a marketsaying index like the SMP and you know,
be a Bensteined kind of person whenit comes to investing, is you
might get that return over time ifyou can stay in the saddle, but
you might get backed off the horsebecause of volatility because it's too hot for
you to be in certain investments.Even if they average that, you've got

(20:19):
to be in it twenty years toget it. And what happens is that
same index that sounds so sweeted approachingten percent over long periods of time,
it's the same index that can plummetfifty plus percent in some of the worst
times, and that can be aproblem without planning and proper appropriate diversification and

(20:40):
deploying the right investments for the rightpurpose at the right risk. That's really
the solution there. But life insurancecan become something very helpful. When we
look at the stock market average,now apply it to let's say, based
on a balanced portfolio of sixty percentstocks, forty percent bonds. Historically,
it's been pretty good up until theinterest rates went up, the bond values
went down, and they become verytoxic as an investment and volatile. Similar

(21:04):
to their brother or sister, thestock market. Stocks are more volatile than
bonds, but both became and havebecome very volatile here to date. But
historically speaking, a retirement portfolio oftentimesfares pretty well and good and bad times
on a working average, so longas you don't get greedy. And we
see this all the time. Yougo through a couple of years of a

(21:25):
bullish move and people just become dissatisfiedwith their sixty forty portfolio because they want
more, so they get in alittle deeper in the pool until they're just
flat out in the deep end ofthe pool. And then what do we
know happens? Markets pivot change andgo the other direction. And where are
you someplace you don't belong, someplaceyou can't stay. You react emotionally and

(21:47):
you make bad decisions at the worsttime. What do I mean by that?
Well, we see people sell atbottoms. It gets too hot in
the kitchen, they run out ofthe kitchen and they miss time where they
should be in different market cycles.We'll come back to some of the We
have a couple of these rules withthem that just wouldn't Hurtchin could help you
befhere we look at some of thosethat can be misapplied. All right,
stay with us our fund number fiveone three, five, seven, five

(22:07):
nine six five four again five onethree, five seven, five nine sixty
five four call us. We canhelp, but stay tune. You're listening
to the Sound Money Investment Show withBrown Financial Advisors here on fifty five KRC
DETOK station. Welcome back to theSound Money Investment Show with Brown Planecial Advisors.

(22:32):
I'm Greg Brown and I'm James Borthlan. We are an independent registered investment
advisory firm. We do it forclients and not companies. And if really
does all start with the plan.That means actually having a plan, knowing
what you own and why you ownit. So what you're seeking advice on
an old four one K four threeb IRA rollover investment planning, retirement planning,
income planning, tax planning, socialistcomcurity, maximization, roth conversion analysis,

(23:00):
anyway analysis, perhaps even for somean in service rollover all that more,
we can help five one three fiveseven, five nine to sixty five
four. Our website Brownfinancial Advisors dotcom. Email team at Brownfinancial Advisors dot
Com. Our home offices in Moford, but we have some locations in blue
Ash, Westchester and lord Shaw.Well covering some of those rules of thumb

(23:22):
and are they worth using, wewere going over a few that can be
positive to about anyone leading up toretirement. And one thing we just had
mentioned something about a balanced portfolio historicallybeing about sixty forty and at moderate leaning
slightly towards equities, towards some growth. We don't want to see you on
the fence fifty to fifties, kindof like being on the fence. You

(23:44):
need to decide to succeed on purposefor your future, and that means total
come inflation and provide for your needsto I really do suggest you lean in
a little bit further on the equityside because you get the benefit of dividends
in good times and bad times.You get the most reward in terms of
capital appreciation, expansion of your wealthover long periods of time, and it

(24:06):
just it's nicely liquid. I couldgo on, but so what is the
percentage for you or someone else onan individual basis, Well, you could
apply a rule of one hundred orlet's say one to ten if you're a
little more let's see optimistic or risktaking or adventuresome or more seasoned us an
investor relative to stocks in the market, and you know you're a little have

(24:30):
a little more spine in it forwhat markets can do. So your age
represents in this case the percentage ofbonds you would hold in a portfolio.
So if someone was let's say sixtyfive, guess what the bond or fixed
income or the non stock allocation.And we have a lot of options to
replace bonds, bond alternatives that mayactually be better functionally for this purpose.

(24:53):
But just conceptually here, the saferside of your portfolio would egal your age
sixty five percent at each six five, forty five would be the equities.
Now that means you don't water downthe other forty five percent. You're all
in equities, hopefully actively managed withthe bias of selection towards the best companies,
the best stocks, the best marketcap, best opportunities, best sectors,

(25:17):
growing increasing dividends year over year.They have it going on, and
our biases towards the better companies,not the less good and not the bad.
Active management can give you kind ofa friend in your corner by applying
different metrics to actually own the goodstuff on purpose. Now, again it's
an imperfect world, so none ofthis is perfect, but you can be

(25:37):
you know, close enough to perfectlike Alabama. Remember close enough to perfect
for me, There is a oneten version of that. So now in
that case you would just take anessence, it'll just end up with more
equities. One hundred and ten minusyour age gives you a larger portion that
would be on the equity side.Now your age from one hundred, If
you'll subtract your age from one hundred. Conversely, that's how much you haven't

(25:59):
stocked. So again, if ifyour age is sixty five and you take
one hundred, minds sixty five,leaving that forty thirty five, you'd have
the thirty five in the stocks.So so many options. Even just saying
sixty percent equity and then saying outloud forty percent bonds. Don't think we
just pack people in bonds on thatforty percent side. There are defensive alternatives,

(26:26):
there are inverse alternatives. We havesome buffered index portfolios that can give
you a certain part of the upsideof a market, and it can absorb
a certain portion of the downside andgive you a nice range to operate in
to reduce your direct risk in themarket while still participating in the market without
having to hide out in annuities.But annuities properly used from a good source

(26:48):
like US, you know where we'refinancial fidiaries, and put your interest first.
And it can't be about commission,so you get a better product that
pays you the future benefit and notyou know, an entity or agency commissions.
But here here's some rates for youto be aware of. There's at
least one rate I saw on afixed index annuity that would allow you to

(27:08):
participate in sixty five percent of theSMP's upside over a one year period s
and p five hundred sixty five percentof the upside and in a downside,
zero is your hero. There isno downside. So it's true you wouldn't
be out there getting one hundred percentof the market return, but you would
conversely not be getting any of thedownside of bear market corrections or going backwards.

(27:32):
So those are out there, andI know interest rates are changing,
and so check with us all thetime. But just as an example of
another alternative, say even a bondalternative CD type annuities also known as fixed
annuities that have shorter terms like threeyears five years. We have a four
point sixty five percent rate on afive year product now, and so if

(27:53):
you're just someone that sits on alot of cash or keeps it in CDs
or many markets with very little interest, these rates pretty much knock the socks
off the banks and what they're offering. So if that's you and you have
some interest, checking with us onthe current rates, they may or may
not be that they might be hiredbecause they fed increase a little bit more.
And if five years is two long, three years is more of what's

(28:14):
in your strike zone, that wouldbe more like four point three percent.
So maybe that's the sweet spot isfour point three over three years each year
again for three years, versus thefour six five for five years. So
everyone has their little strike zone ortheir sweet spot about what is what they're
willing to accept or what they wantto have. Now, a couple of
closing thoughts on this as far asdifferent rules of thumb. One is on

(28:36):
the rule of one hundred or therule of one ten and for those that
are still working, typically this resultsin something like either a target date fund
or a life cycle fund, anda lot of times what happens is you
get put into one of these that'slike a default selection for your four to
one K, so that's you know, in the absence of choosing anything else,

(28:57):
that's actually a good alternative because asyour life cycles towards retirement, you
get progressively more and more conservative.Is what the target target date funds are
all about. And then also backto the paying yourself first. This is
specifically for those who are in likethe gig economy or their independent contractors are

(29:18):
self employed. Take advantage of thedifferent rules that the IRS the government has
out there, which is starting yourown retirement plan either a solo four one
K or a set ray. Administrationwise, maybe the steps little bit easier
to manage, easier also to makecontributions to, and it also does not
eliminate contributing to both. This isfor some out there, not for everyone

(29:41):
to both a set ray and aregular IRA both in the same year.
So the regular IRA would be yourtraditional IRA or your ofth iray depending upon
your income level, your tax statusand what's applicable in your situation. So
that's a really effective way to turbochargeyour retirement, especially for those who are
self employed. So all good points, all more on the favorable side things

(30:06):
that you can do to kind ofhelp yourself out. Now, the other
side of the coin would be someof the things that you need to examine
more carefully, like saving ten percentof your income rule. If you don't
know how much to save, sure, it's better to save ten percent of
your income then nothing at all.It's a great starting place, but the
reality is some have already saved enough, some have inherited and the process of

(30:27):
inheriting enough money, but others mayneed to save far more than ten percent,
So relying just on that won't getthem to the right place. So
if we're working together to just projecta plan, you'll know what you need
and if you have it, ifyou're on the right course. And if
it's just about better investing styles andbeing more tax savvy and efficient, and
getting a spouse who's a little weakeron the subject of finance up to speed

(30:49):
so that they can be part ofthe quarterbacking in the huddle. Something happens
with you and you go down beforethe game's over all. Those are very
good reasons. There's just plenty ofreasons to do the right thing here.
But if you're falling behind and don'tknow it, the plan will show you
the degree of gap you have,how much money you need to increase in
saving to arrive at the right numberto make it all work. Using your

(31:11):
age as that sole determinant of yourstock bond allocation, you know, like
the rule of one hundred. Therehe goes. When you're trying to figure
out how much of your money toinvest in stocks versus bonds, you kind
of use your age. We talkedabout that one hundred minus your age.
If you're sixty, then that'd beforty percent. In equity sixty percent,
and safer solutions bonds have not provento be so safe this year, I

(31:33):
get it, But over the longerperiod of time they are the safer asset
class between the two, that beingbonds versus equities, which are stocks.
So arriving at the right allocation,but your age would be that amount that
you'd invest again in the conservative portion. But whatever calculation I just kind of,
you know, spilled on the tablehere. It may not be the
right one for you. You mightbe in a position where you can be

(31:56):
far more in stocks by different strategies, some providing some income, some providing
capital appreciation and growth over time,hedging inflation, being liquid in case things
pop up over the course of life. Or you might just need to be
in a larger portion of a varietyof safer solutions because your risk tolerance has
changed over the years. You recognizethat sequence of returns can be your enemy.

(32:19):
If bear markets hit in the firstcouple of years of your entering into
retirement, what was seeming to beenough resource ends up to be mathematically far
insufficient. So what are some alternativesto keep you safer and growing your money
on some part of your money theory? This whole World War one hundred theory
gained some popularity when the four toone K accounts first came into the scene

(32:42):
and people had to decide somehow howto transition retirement and grow their money and
also use their money to pay themselvesthe cash flow over time because they entered
a new world of world mostly withoutpensions. So again, rules of thumb
for the general public for the masses, but maybe not necessarily applicable in your
individual situation. There's more, there'smuch more off funder. But at the

(33:06):
office five one three, five seven, five nine sixty five four call us
we can help, but stay tune. You're listening to the Sound Money Investment
Show with Brown Financial Advisors here onfifty five car see Detok station. Welcome
back to the Sound Money Investment Showwith Brown Financial Advisors. I'm Greg Brown

(33:30):
and I'm James Boorth and we area registered investment advisory firm. We are
independent. We do it for clients, not companies. That's main street and
not wall streets. Our fundnumber fiveone, three, five seven, five
nine six five four. Website BrownfinancialAdvisors dot com. Email team at Brownfinancial
Advisors dot Com. Our home officeis in No furbo Wessel locations in blueh

(33:50):
Westester and Florence. Greg Well,James. We've talked about income replacement retirement.
What's the target income someone needs tohave so they'll have enough cash flow
when they enter retirement. Well asa rule, seventy to eighty percent of
your working income in retirement to livecomfortably. And again keyword there perhaps is
comfortably. Now on the converse,you might also look at that and say,

(34:13):
are you really willing to accept atwenty to thirty percent reduction in your
standard of living. That's one wayof looking at it. Maybe your expenses
are still as high, maybe they'reeven higher. Statistically, there's that word
statistics. There's a prevalence of peoplewho actually have greater expenses in the first

(34:35):
several years of retirement than they hadduring their working years. It typically is
like a wave that goes up andthen after they've had their fun, then
it starts going back down again.So about two to five years after retirement
is when we see people start maybecutting back on their spending. How'd you
like that sound effect? If you'vegot the wrong income figure entering retirement,
it's a nine to one to onesituation. Here's another way of looking at

(35:00):
that. Maybe every day is aSaturday, or what seems like every day's
a Saturday? Right, So whatdo people spend usually their weekends doing,
which is enjoying the weekends, spendingmoney perhaps on the weekends. So what
are you going to do with yourtime in retirement? Are you going to
travel? Do you have different expensivehobbies that you're going to be partaking in?

(35:22):
Is it golf? Is it boting? Is it pickleball. It doesn't
really have to be necessarily anything that'soverly expensive, but nevertheless it will be
somewhat expensive. And maybe the bottomline point about all of this is that
discretionary spending is still spending. Soif you have a discretionary life, it's

(35:42):
going to cost some money. Wheredoes that come from as far as part
of your budget or is it partof your budget? And yes, because
of this, many people really doand should front load their income plan in
those first two to five years afterretirement. You know, live it up
while you're still young is what wehear people say, or relatively young is
what they say. So other considerations, This is when you say, well

(36:07):
this is maybe the not so funthings that we need to spend money on
in retirement. That includes things likehealth insurance. So as you transition from
your workplace health insurance to then say, for example, Medicare insurance, well
who pays for that? How muchis that? And who's that irma person
that might be taking two or threetimes of what seems like normal Medicare premiums

(36:30):
just because your income level exceeds acertain threshold. It could also be long
term care needs, inflation, emergencytypes of expenses. It goes on and
on. It's all part of orshould be part of your income plan.
Greg, I'm thinking irma excuse mewas a hurricane name once upon a time,
And how fitting is that it blowsright in and adds layers of additional

(36:52):
expense making your living more expensive justbecause you have a certain income threshold.
Income related Medicare adjustment to what youpay for your premiums, both for your
Part B and also for your PartD premiums. There's just something wild about
a system that penalizes you for beingsuccessful. I can't quite figure that out,

(37:13):
don't think I ever will, butit's just another form of attacks.
Sure enough, Well, thank youfor sharing several of those elements, because
every one of those can represent anothervariable in the layer cake of what is
your real expense structure? Therefore,what are your necessary income needs? And
when you come in please know firstof all, just contact us, call

(37:36):
us, email us team at BrownfinancialAdvisors dot com. When you come in,
first appointment's all about you. Wewill take all of your information,
fact and feeling finding find the factsabout your situation, how you're invested,
what your risk tolerance is, howyou feel about risk, will assign your
buckets of money to job descriptions.We'll show you the analysis of the internal
spread speeds, margins, loads,and real costs, your total cost of

(37:58):
investing at what risks you're currently atversus what you should be at. Will
make all the recommendations that will getyou better. You know that can stay,
that needs adjusted, that's got togo, it needs replaced. Here's
what to do. We will takethat plan, develop the income plan,
maximized social security and pension benefits,your legacy and tax efficiency as a living
benefit to save on taxes and inpassing how to end well and leave it

(38:21):
well to people you love and cherriesshit care about. But in the meantime,
we'll also apply a test for probabilityof success at different income levels based
on some of these different variables ofthese inputs that James just has covered,
we'll see what the probability of yoursuccess is. If you get a high
probability of it working out, that'sa pretty good feeling to know that you

(38:44):
know, regardless of this or thathappening, markets misbehaving in different intervals,
your expenses being expended at different intervals, that you're going to be okay,
with a high probability. So welook forward to doing that with you.
And when it comes to producing incomeoff of your invest assets, what's your
draw down, what's your withdrawal rate? What is your withdrawal rule? What

(39:05):
does that mean? Well, simplyput, if you had a million dollars
and you were taking four percent becauseyou needed forty thousand, you're often going
forty thousand a year off that onemillion dollars. But if the market pulled
back by twenty percent and your investments, let's say we're reduced, I'd like
to think, in the context ofour clients that the market's down thirty that
we're going to save you a lotof that downside through wise active selection and

(39:28):
investments. But nonetheless, keeping itsimple, a pullback of twenty percent,
you're now eight hundred thousand. Ifyou take four percent of eight hundred thousand,
that's thirty two thousand year, right, not forty. So if you
needed forty and you're going to staytrue to your four percent rule, you're
going to take an eight thousand ayear pay cut going into that second year.
Now, I'd rather see you takea three or four percent withdrawal rate

(39:50):
that first year maybe it's thirty fiveto forty thousand, and that works for
you, and we'll just tee upand take that thirty five forty thousand on
down the road, and we'll letthe market do. It's good, it's
bad, it's ugly, it's good, it's fun, it's fascinating in its
wealth building. Over time, we'llkeep you at a rate we're confident our
investments over three, seven, tenyears in the rest of your forever will
marry up and line up with thatrate to provide you the income you need.

(40:15):
But all that will then be testedon probability, excuse me, so
you'll know with high probability and likelihoodthat you're going to succeed on purpose and
not happenstance. Jameson thoughts. Yes, let's on that four percent withdrawal rate.
Let's go through a couple of assumptions, because you know, if you
turn the word assume into a threesyllable word, maybe not such a good

(40:37):
outcome. So, first of all, the assumption is built on the blend
that you have of overall equities tofixed or stocks to bonds, So it
assumes a sixty to forty blend inyour investments and that one hundred percent of
your assets need to be allocated tothese market based investments. So those are
a couple of serious assumptions here thatmay not actually fit in your individual situation.

(41:00):
It's kind of like this, areyou really willing to have all of
your eggs in one basket that proverbialstock market basket? If you will?
So, do you have the appropriaterisk tolerance or you know, are you
wired to really handle this type ofmarket risk? That's that's what we find
more than anything else, is thatwhen the markets are doing well, didn't

(41:22):
you know I want to be aggressiveand the markets are not doing so well,
It's like, hey, didn't youknow I'm conservative when the markets are
not doing well. That's that's howthe human emotion aspect of investing works is
we think we should already be infront of this by moving to something conservative
before the market started declining. Yeah, and there are ways to break up

(41:44):
your money between different types of investmentsand assey classes. So if you were
using, say, and this isbased on some old rates, this is
an example though. Let's say thatit used to be seven hundred and fifty
thousand dollars at four percent, wegive you thirty thousand, and that would
be true if the rule of fourwas still valid. We have more recent

(42:06):
studies that say you really shouldn't bankon a four percent withdrawal rate. It's
a Wall Street Morning Star objectively researchstudied and said, you know what the
old four percent is now two pointeight percent, which would mean you need
more like, not seven hundred andfifty thousand to get thirty thousand at two
point eight percent, you need morelike just over a million dollars. That's
a pretty big difference. And thenwhat you might have planned for when you

(42:27):
were planning to save seven hundred andfifty thousand and find out as you enter
retirement that to get the thirty thousandyear reliably over the long term, that
you need about two hundred fifty thousandmore. That you got to pull out
of a hat like a rabbit.That's not how it works. Or print
it in your basement on one ofthose high resolution color printers you know what
I'm talking about. Don't do thatat home, right, So we need
to plan up front. So thereare some options. There were some fixed

(42:49):
indexinuities that you could take five hundredand fifty five thousand of seven hundred and
fifty dedicate towards income and get aguaranteed paycheck for life for both of you,
both of your forevers. So ifthat's what you needed for income on
top of Social Security, you justnow got it. It's reliable, it's
insured based on claims the ability ofan insurance company, but guaranteed for your
lifetime. So if you had sevenhundred and fifty and you just dedicated five

(43:12):
hundred fifty five thousand for the incomepurpose, the rest of your money can
be invested well, goodness, itcould be invested in all equities because you
don't have dependenity on that part ofthe money. But talking along those lines
is talking about some alternatives. Wehave some boutique type investments that can give
you just run through quickly the lesserof performing the S and P five hundred
or the Dow over two years.In this case, yeap two years.

(43:36):
You could get parts of forty threepercent as a cap and it would absorb
the first ten percent of the downside. There are so many options that you
don't get from Wall Street because we'remain Street working with main Street. We
work for you. We work forclients, not companies. And on the
market based approach for an income portfolio. There's our designed income portfolio that really

(43:57):
has such a fantastic opportunity to yielda much higher result than say a fixed
annuity. But it also is designedto not deplete your your nest egg.
So there's just more, so muchmore to learn. Our funderbourself is five
one three, five seven, fivenine sixty five four call us we can
help now on behalf of Greg myself. James. We want to thank you
for listening today. Have a greatwe can remember this sound money where good

(44:22):
things are believable, achievable and truefor you
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