Sound Money Show - 8/13/23

None

Episode Transcript

(00:01):
In your corner, saving one investorat a time. I'm working for clients,
not companies, all whild bullyproofing portfolios, totally committed to sharing academic truths
of botomistic always representing Main Street andnot Wall Street. It's your Sun Money
team, and this is the SoundMoney Investment Show with Drown Financially Advisers.

(00:25):
Hello and welcome to the Sound MoneyInvestment Show with Brown Financial Advisors. I'm
Greg Brown and I'm James Borth andwe are a registered investment advisory firm.
We are independent. We two workfor clients and not companies, tricy.
If you're complementary and personalized financial incomeplan, give us a call five one
three five seven five nine six fivefour. If you're seeking advice on old

(00:47):
four one K four three B sometype of employer sponsored plan, perhaps even
INU a analysis before you decide doingthat, fateful I ra rollover, give
us a call five one three sevenfive four. Our website Brown Financial Advisors
dot com. Email team at BrownFinancial Advisors dot com. Our home office

(01:07):
is at Milford, but we alsolocations in Blue Ash, Westchester and Florence.
Greg Well, Today's show, we'regoing to be discussing financial planning rules
of thumb and are they worth using. So, one thing's for sure,
you need to be aware of financialplanning myths and these generalized rules of thumb
when you design your own personal plan. That's something we take in consideration,

(01:27):
is you know, fact over fiction. You always hear about financial planning rules
at thumb when it comes to mind. Is the four percent withdrawal rule.
You may have heard of it,you may have planned on the back of
a napkin this way for your ownretirement purposes. Or another one is the
eighty percent of preretirement income rule.You know, kind of pattern that whatever

(01:48):
you're making the last couple of yearsof your career path and work that that
salary at eighty percent would be anappropriate amount of income to target into retirement.
Well, regardless, it's important tohave a track to run on when
it comes to this retirement planning process. And that's what we provide in a
process is just that. So wewant to exercise as we move along a
little bit of caution here, right. Putting too much weight in any one

(02:10):
of the financial planning rules could putyou out of balance. Put the emphasis
of your plan on something that's that'snot as built upon rock, more on
sand. So how well do someof 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 and sizes? Well, we already know by the

(02:34):
you know, the stating that questionin such a way that the answer is
probably not. Then why does somany people use these just default to factor
rules as if it's going to bethe right recipe, you know, for
them? So for you, yourpersonal situation, we need to make sure
that the plan matches up with yourneeds and the appropriate planning method along with
that. So quite frankly, onerule of thumb may work better for you

(02:58):
than it might someone else, andvice versa. So today we're going to
talk about a few common rules ofthumb. You know, we see it
out there in the marketplace and theindustry. We read it in the magazines,
you see it on the internet,so must be true, right,
And how do you know if ithas the merit that you need for your
plan and again, your personal situation? James, Well, here's some thought

(03:19):
provoking questions to tie into today's show. So, for starters, what are
some of the maybe the good,better best ways to determine how much you
need to retire? Here's a hint. It has to do with budgeting,
has to do with controlling your spendinghabits. Do you really need at least
a million dollars to retire comfortably?Maybe that's the key word comfortably. Maybe

(03:40):
it's more, maybe it's less.How does the one hundred age rule work?
What's the best way? Again?Is or a best way to determine
how much, as in what percentageof money you should have invested in stocks
and bonds? Maybe think of thatas the allocation your risk? Allocations stocks
to bonds is the traditional way ofsaying, well, if I'm, say,

(04:01):
for example, a balanced investor,maybe it's a sixty forty allocation of
stocks to bonds. Maybe that appliesto today, Maybe it does not.
What types of asset should be ownedin a portfolio as a hedge against inflation?
What should I do or what shouldwe do to focus on? As
far as paying off debt and savingfor retirement? And again, different types

(04:23):
of debts, some are more constructivethan others. Will get to that throughout
the show. Could I get byon only I say, only seventy to
eighty percent of the working income thatwe had when we're in retirement. So
maybe it's a conversion issue when yousay percentages to dollars. So for example,
four percent four percent of what eightypercent of something will eighty percent of

(04:45):
what? How dramatically could the expenseschange over time? And again part of
that I'd say factor, maybe amajor factor that would be what's the rate
of inflation and the rate of inflationwhen you say overall rate of inflation versus
individually for different sectors or different typesof expenses, such as the medical rate
of inflation versus prices of food,eggs, and milk. When picking investments,

(05:10):
how much reliance should I have onthe track record the past performance?
Is it a guarantee or an indicatorof future results? How about market timing?
How about don't try to do markettiming because usually that results in you
chasing returns instead of the capturing ofthe returns. And could adhering to pick
a number, whether it's four percentor three percent for the withdrawal rule,

(05:33):
keep me or we the us fromrunning out of money prior to running out
of life. You know you seeskipped across several of those just market timing
triggers. In my mind, thethree do not dues and that as you
mentioned, track record investing no,no, chasing returns, no lucky stock

(05:55):
picking and market timing no no,no. However, people do it all
the time, and then one ofthe worst things that can happen, James,
is they have some luck with it, right. It gives a false
sense of confidence, and I wouldsay even competence in some area that is
for many people not their area ofstrength. They do what you know they

(06:15):
do. You all out there haveyour professions and the things you've arrived at
doing quite well and are known for. And you know, frankly, this
is what we do. And wewill come to you when we have a
need for your service and not tryto do it ourselves. And we think
that you should consider doing the same. Come to us in this area that
is so broadly provided for. We'reholistic advisors, okay. We handle a

(06:40):
state planning, investment management, investments, income planning, soul security maximization,
pension maximization, insurance, financial planning, all of it brought together, like
we say each week, similar tothe Mayo Clinic of Financial Services. And
that's important that synergy something that willhelp you in the district ution phase of

(07:00):
your life rather than this accumulation phase. But what you're out there just trying
to file through, rummage through differentconcepts and ideas as you try to put
together the puzzle pieces of what youwant to be the picture box of your
retirement. We know that we needto do some mythbusting together today and we
need to check in on some ofthese rules of thumb because they come from

(07:21):
a variety of sources. You know, the financial planning rules of thumb that
just permeate TV media again, journals, money, magazines, all across media.
And one of the most fascinating thingsif you ever catch a CNBC episode
there there's a person that gives youthree bullets in three minutes that are all
barish, and you're thinking, hm, wow, that's compelling. Gosh,

(07:44):
it looks pretty bad out there.And then it's just the next person is
all bullish with three points and allthe reasons why the other person is 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 for thenext program, you're thinking, what was
the takeaway there? It does anyoneknow what they're doing? Here's what we

(08:07):
don't know. We don't know whatthe market's going to do next exactly,
and all of what's known, allof the known, is factored in the
current prices and the market, soonly something unknowable could change that. Now,
if you know someone that knows theunknowable, please introduce us to them.

(08:28):
But we're going to stick with planningthe fundamentals, the way to be
prepared for any of the outcomes,so that your plan stays on track like
a train. Yeah, there'll besome bumps here and there, but you
will stay on track and you'll headto the horizon and you will arrive to
the depot that is your happy placein retirement. So as we look at
the track record of some of thesethese rules of thumb, we're going to

(08:50):
kick the tires a bit. AndJames said, do you need a million
dollars to retire? People throw outnumbers that can't really be backed up.
But any time I hear a milliondollars, James, I think about a
broker, and I think about thatdark humor out there that if you would
like a million dollars in retirement witha broker. You better start with two.

(09:11):
Yeah, it drops dead flat right, because this is your money,
this is your future. This isimportant, serious stuff. And how many
doovers will you get? How manytimes have you retired? How much experience
do you have in doing this now? I know you learned as many of
us to accumulate over the years,did your best to make some income,
pay your bills, and try tosave something too for this day that's approaching
cold retirement, and I hope you'redoing well with that. We'd like to

(09:35):
help you. We'd like to showyou where you need to be so you
can fill in the gap purposely toarrive where you need to be. So
it's all good. But this distributionphase is a phase you don't get to
until you're there, and then yougot to make it work. You gotta
take all the money you ever made, ever saved, and now somehow you
got to turn it in the incomethat's gonna last as long as you do.
How long's that? James? Somethoughts? Well, I would I

(10:00):
would say this when we it's Iknow it's easy to say and tougher to
do, which is take your emotionsout of your investment decisions. Yes,
it's it's easy for us to sithere from 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

(10:22):
get in the way of our investingdecisions, good investing decisions. But here's
something else that ties into emotions.If you're watching the stock market every single
day and you seem to be livingor dying on what the market does today
or this week, that's maybe anindicator that you're at too much market risk.
So one way to cool off yourmarket risk is not have all of

(10:45):
your money at market risk. Youcan have other investments out there. There
are other ways to make gains onyour money without having it be at stock
market risk. There's more. There'smuch more. We're going to cover this
after the commercial break, but ourphone and brought the office five one nine
six, five four callus. Wecan help, but stay tune. You're
listening to the Sound Money Investment Showwith Brown Financial Advisors here on fifty five

(11:07):
care s. The talk station Opinionsexpressed are solely those of Brown Financial Advisors
and should not be interpreted as specificadvice. Materials presented are believed to be
from reliable sources, and no representationscan be made as to its accuracy.
All ideas and information should be discussedin detail with one of our qualified investment
advisors prior to implementation. Market basedinvestments involve risk, and past performance is

(11:31):
no guarantee of future results. Insurancebased investments offer guarantees based upon the claims
paying ability of the issuing company.All insurance, tax and mortgage services are
offered through Brown Insurance and Tax AdvisorsLLC. Brown Financial Advisors and Brown Insurance
and Tax Advisors are affiliated companies andmay only transact business in those states in
which registered or were otherwise legally permitted. Welcome back to the sound Many Investment

(11:54):
Show with Brown Financial Advisors. I'mGreg Brown and I'm James Borthon. We
are independent URA. We do ourfor clients and not companies. Our fundumber
five one three five seven five ninetysix five four. Our website Brown Financial
Advisors dot Com. Email team atBrown Financial Advisors dot Com. Home office
is in Milford. Book also havelocations in Blue ash Westchester and Florence.

(12:16):
Greg Well continuing with our financial planningrules of thumb and are they worth using?
So stepping back a little bit,what is a definition of what we're
talking about here, James, Well, this is taken from Investopedia. Rule
of thumb is an informal piece ofpractical advice, providing simplified rules that apply
in most situations. So there's manydifferent rules of thumb and finance. I

(12:39):
give guidance on how much to save, how much to pay for a house,
how much to invest, et cetera. But maybe here's the point.
Rules of thumb are not scientific andthey also don't take into account your individual
circumstances. So for the general public, for the masses, this is what
rules of thumb are all about outBut for individual advice, that's where you

(13:03):
need to come see someone such asus. You know, James, I
was just thinking how damaging or consequentialleague you can the outcome be by misapplying
a rule. You have a basicallya good rule, but applied to the
wrong situation, I could be anywherefrom a little harmful to very catastrophic.

(13:24):
You know, Like, how badis it if you're supposed to have a
kidney removed, but they end uptaking the wrong one all the way too.
They take a leg and not akidney, and still need to take
the kidney. I mean, that'sa harsh example, but you get the
idea. Application for the right purposemakes the most sense. Now we're gonna
lighten it up a little bit andshare some examples of things you can hardly
hurt yourself by. They're kind ofgood for I was gonna say the kidney

(13:46):
example. Usually that's why in thehospital they draw a big X on which
side they're going to take it from. But you know, sometimes accidents occur.
If you're a grandparent and your grandchildrencome before the procedure and they happen
to have markers. It just alookout it you just don't know. Anyway,
some example size some rules of thumbthat might be just good for everyone

(14:07):
generally. One is pay yourself first. Save at least at least five percent,
preferably ten to fifteen percent of yourtake home pay leading up to retirement,
so you can build that nest egg. We know that most folks as
they turn age fifty and heading forsixty and whatever they're after plateau where they
level off and inner retirement. They'rearriving at more of their highest earning years.

(14:31):
You know, somewhere along the waythey became empty nesters. Money goes
further. Yeah, they travel alittle bit, but they get serious about
this retirement, just like you probablyrealize when you're crossing in your thirties and
approaching your forties that the sense ofmortality becomes increasingly real to you. So
you get close to retirement, thisthing becomes more real to you. Also,

(14:52):
paying down high interest rate debt.Spend less on the interest by paying
down the debt that costs you themost. Now that's snowball, we avalanche,
you know, and a lot ofpeople have different names for it.
But you're in essence, knocking outone amount of debt, taking the payment
that went towards that, combining itwith the payment for the other payments that

(15:13):
are due, targeting the next oneand the next one and so forth,
until you just have a large amountof money to target the remaining debts until
they just they just go away.So that's a nice approach. I mean,
it makes perfect sense just doing it. You know, so many things
in life can make perfect sense.And intending on doing it and actually doing
it can be two different things.I mean, how many of us know

(15:35):
that losing weight it's really a functionof eating less and moving more exercise.
It is literally that simple, oris it? You know what I mean?
Creating a safety net, you shouldhave an emergency fund equal to three
to six months worth of household expenses. Now you could have a couple of
months and that literally and more cashlike instruments, and you could have another

(15:58):
three or four months of this inliquid investments at low risk. They don't
have to just be setting mothballed,waiting for some event that might never happen,
like so many worries and concerns wehave in life. How many times
have you get lostly borrying about somethingthat just never ever came to fruition?
And I know for me it's farmore things I worry about than actually become

(16:22):
worry worthy. Well, the pointof the safety net is it should be
liquid. It should not be tiedup until long term investment. Yes,
doesn't mean it can't be invested,just liquid and not long term, So
tracking your spending only makes sense.Also, a lot of folks are blessed
enough financially to not have to getdown to tracking spending or having a proverbial

(16:42):
budget. But we all know we'dbe more efficient if we did. I
mean, it's good if you don'thave to, but as you approach retirement,
it is good. It's kind oflike a test drive to do just
that. Track your expenses, arriveat some form of a budget. See
just how much of your your wagebased income you're going to need what percentage

(17:03):
in retirement you've already heard here seventyseventy five, eighty percent or some of
those rules. So if you weremaking one hundred thousand on average a couple
of years before retirement, then maybeyou can live on seventy thousand going forward,
because out of one hundred thousand,you probably had contributions, and you
know, some job related expenses,travel back and forth, gass things that
will smooth out and go down andbe reduced. So you may very well

(17:26):
already be living off this smaller numberin reality. But track your spending,
track those inflows and outflows. Now, others will say, what if I
don't I don't need to live ona fixed income. Why hear you?
You might be in a situation whereit's not technically that you're entering into fixed
income reality when you retire. ButI'd suggest that everyone, whether you have

(17:49):
more fixed income to deal with orwork with or less, when you start
working on a monthly basis without earnedincome money coming in every month, new
money coming in every month, theneveryone, to some extents, on a
fixed income and retirement. So there'sno harm, no foul in just getting
more efficient at it for a wholelot of reasons. And efficiency can mean

(18:11):
we'll figure out which buckets of moneyyou take to provide income, what sources
of investments are best for provision ofincome versus growth and appreciation, Which methods
are more tax efficient, so themoney you take out you get to keep
and not give away to the governmentand all the government I mean Indiana,
Kentucky, Ohio City County, propertyconsiderations on property tax, my goodness,

(18:36):
don't forget Uncle Sam, the bigfederal number, and so forth. A
home purchase should cost less than anamount equal to two years of annual income.
So if your annual income is onehundred then maybe then technically, by
some kind of rule, two hundredthousand would be the target price for the
home used to live in. Nowthat may or may not work, depending
on some real estate markets and appreciation. I think we're seeing real estate kind

(18:59):
of turn over. There's going tobe increased in inventory, a less competition
out there fighting and buying over thoselimited properties to where they're selling at an
inflated rate. So it looks likethere's a good season coming at least for
the buyer, a little tougher forthe seller. Right, life insurance have
at least five times your gross salaryand life insurance death benefit if it's suitable.

(19:21):
Do you need life insurance first ofall, then how much and for
what reason? But just generally speaking, if you arrive at about five times,
so back to one hundred thousand ayear, that would mean five hundred
thousand dollars because when it pays,it's going to pay tax free. Set
gives it even more horsepower to beapplied to whatever circumstance or situation is needing
more cash at the time of younow stepping off the planet. The stock

(19:44):
market, the long term average returnis I'm just looking at it the other
day, even with the current downturnin the market a year to date,
I think the SMP through yesterday midday was like nine point nine three percent
over twenty years so this ten percentnumber isn't too far off. But the
problem is just being in a market, say index like the SMP and be

(20:07):
a Benstein kind of person when itcomes to investing, is you might get
that return over time if you canstay in the saddle, but you might
get backed off the horse because ofvolatility because it's too hot for you to
be in certain investments. Even ifthey average that, you've got to be
in it twenty years to get it. And what happens is that same index
that sounds so sweet approaching ten percentover long periods of time, it's the

(20:27):
same index that can plummet fifty pluspercent and some of the worst times,
and that can be a problem withoutplanning and proper appropriate diversification and deploying the
right investments for the right purpose atthe right risk. That's really the solution
there. But life insurance can becomesomething very helpful. When we look at

(20:48):
the stock market average, now applyit to let's say, based on a
balanced portfolio of sixty percent stocks fortypercent bonds. Historically, it's been pretty
good up until the interest rates wentup, the bond values went down,
and they became very toxic. Asan investment and volatile. Similar to their
brother or sister the stock market.Stocks are more volatile than bonds, but

(21:10):
both became and have become very volatileear to date. But historically speaking,
a retirement portfolio oftentimes fares pretty welland good and bad times on a working
average, so long as you don'tget greedy. And we see this all
the time. You go through acouple of years of a bullish move and
people just become dissatisfied with their sixtyforty portfolio because they want more, so

(21:32):
they get in a little deeper inthe pool until they're just flat out in
the deep end of the pool.And then what do we know happens?
Markets pivot change and go the otherdirection. And where are you someplace you
don't belong, someplace you can't stay. You react emotionally and you make bad
decisions of the worst time. Whatdo I mean by that? Well,
we see people sell at bottoms.It gets too hot in the kitchen,

(21:52):
They run out of the kitchen,and they miss time where they should be
in different market cycles. We'll comeback to some of these. We have
a couple of these rules with them. It just wouldn't hurt chink could help
you where we look at some ofthose that can be misapplied. All right,
stay with us our fund number fiveone three, five seven, five
ninety six five four again five onethree, five seven, five nine six
five four call us. We canhelp, but stay tune. You're listening

(22:15):
to the Sound Money Investment Show withBrown Financial Advisors here on fifty five KRC
the talk station. Welcome back tothe Sound Many Investment Show with Brown Financial
Advisors. I'm Gregg Brown and I'mJames Burton. We are an independent registered

(22:36):
investment advisor firm. We do itfor clients and not companies, and it
really does all start with the plan. That means actually having a plan,
knowing what's your own and why youown it. So what you're seeking and
vice on old four one K fourthree b IRA rollover investment planning, retirement
planning, income planning, tax planning, socialist commurity, maximization, roth conversion

(22:57):
analysis, away analysis, perhaps evenfor some an end service rollover all that
more. We can help five onethree, five seven, five nine six
five four. Our website Brown FinancialAdvisors dot com. Email team at Brown
Financial Advisors dot Com. Our homeoffice is in Milford, but we'll also
some locations in blue Ash, Westchesterand Laurence. Y'all, we're covering some

(23:21):
of those rules of thumb and arethey worth using. We were going over
a few that can be positive toabout anyone leading up to retirement. And
one thing we just had mentioned somethingabout balanced portfolio historically being about sixty forty
and at moderate leaning slightly towards equities, towards some growth. We don't want
to see you on the fence fiftyfifties, kind of like being on the

(23:42):
fence. You need to decide tosucceed on purpose for your future, and
that means to overcome inflation and providefor your needs to. I really do
suggest you lean in a little bitfurther on the equity side because you get
the benefit of dividends and good timesand bad times. You get the most
reward in terms of capital appreciation,expansion of your wealth over long periods of

(24:03):
time, and it just it's nicelyliquid. I could go on, but
so what is the percentage for youor someone else on an individual basis,
Well, you could apply a ruleof one hundred or let's say one ten.
If you're a little more let's seeoptimistic or risk taking or adventuresome or

(24:26):
more seasoned as an investor relative tostocks in the market. And you know
you're a little have a little morespine in it for what markets can do.
So your age represents, in thiscase the percentage of bonds you would
hold in a portfolio. So ifsomeone was let's say sixty five, guess
what the bond or fixed income orthe non stock allocation. And we have
a lot of options to replace bonds, bonds alternatives that may actually be better

(24:52):
functionally for this purpose. But justconceptually here, the safer side of your
portfolio would equal your age sixty fivepercent at each forty five would be the
equities. Now that means you don'twater down the other forty five percent.
You're all in equities, hopefully activelymanaged with the bias of selection towards the
best companies, the best stocks,the best market cap, best opportunities,

(25:15):
best sectors, growing increasing dividends yearover year. They have it going on,
and our biases towards the better companies, not the less good, and
not the bad. Active management cangive you kind of a friend in your
corner by applying different metrics to actuallyown the good stuff on purpose. Now
again, it's an imperfect world.So none of this is perfect, but

(25:37):
you can be close enough to perfect, like Alabama. Remember close enough to
perfect for me, there is aone ten version of that. So now
in that case you would just takenan essence, it'll just end up with
more equities. One hundred and tenminus your 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 onehundred. Conversely, that's how much you

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

(26:25):
alternatives, there are inverse alternatives.We have some buffering index portfolios that can
give you a certain part of theupside of a market, and it can
absorb a certain portion of the downsideand give you a nice range to operate
in to reduce your direct risk inthe market while still participating in the market
without having to hide out in annuities. But annuities properly used from a good

(26:47):
source like us, you know wherewe're financial feditionaries and put your interest first,
and it can't be about commission.So you get a better product that
pays you the feature benefit and notyou know, an entity or agency commissions.
But here's some rates for you tobe aware of. There's at least
one rate I saw and a fixedindex annuity that would allow you to participate

(27:10):
in sixty five percent of the SMP'supside over a one year period SMP five
hundred sixty five percent the upside andin a downside zero is your hero.
There is no downside. So it'strue you wouldn't be out there getting one
hundred percent in the market return,but you would conversely not beginning any of
the downside of bear market corrections orgoing backwards. So those are out there,

(27:33):
and I know interest rates are changing, and so check with us all
the time. It just as anexample of another alternative, say even a
bond alternative CD type annuities also knownas fixed annuities that have shorter terms like
three years, five years. Wehave a four point six to five percent
rate on a five year product now, and so if you're just someone that

(27:55):
sits on a lot of cash orkeeps it in CDs or many markets with
very little interest, these rates prettymuch knock the socks off the banks and
what they're offering. So if that'syou and you have some interest, checking
with us on the current rates,they may or may not be that they
might be hired because they feed increaseda little bit more and in five years
is too long. Three years ismore of what's in your strike zone,
that would be more like four pointthree percent, So maybe that's the sweet

(28:18):
spot is four point three over threeyears each year again for three years versus
the four six five for five years. So everyone has their little strike zone
or their sweet spot about what iswhat they're willing to accept for what they
want to have. Now, acouple of closing thoughts on this as far
as different rules of thumb, oneis on the rule of one hundred or
the rule of one ten. Andfor those that are still working, typically

(28:42):
this results in something like either atarget date fund or a life cycle fund,
and a lot of times what happensis you get put into one of
these, that's like a default selectionfor your four one K, so that's
you know, in the absence ofchoosing anything else. That's actually a good
alternative because as your life cycles towardsretirement, you get progressively more and more

(29:04):
conservative. Is what the target datefunds are all about. And then also
back to the paying yourself first.This is specifically for those who are in
like the gig economy or their independentcontractors, are self employed, take advantage
of the different rules that the IRSthe government has out there, which is
starting your own retirement plan either asolo four one K or a set I

(29:29):
ray administration wise, maybe the stepslittle bit easier to manage, easier also
to make contributions to, and italso does not eliminate contributing to both.
This is for some out there,not for everyone, to both a set
I RAY and a regular iray bothin the same year. So the regular
IRA would be your traditional IRA oryour awth I RAY, depending upon your

(29:52):
income level, your tax status,and 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
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

(30:17):
know how much to save, sure, it's better to save ten percent of
your income than nothing at all.It's a great starting place, but the
reality is some have already saved enough, some have inherited in the process of
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 are working together to justproject a plan, you'll know what you

(30:40):
need and if you have it,and if you're on the right course,
And if it's just about better investingstyles and being more tax savvy and efficient,
and getting a spouse who's a littleweaker on the subject to finance up
to speed so that they can bepart of the quarterbacking in the huddle if
something happens with you and you godown before the game's over all, those
are very good reasons. There's justplenty of reasons to do the right thing

(31:00):
here. But if you're falling behindand don't know it. The plan will
show you the degree of gap youhave, how much money you need to
increase in saving to arrive at theright number to make it all work,
using your age as that soul determinantof your stock bond allocation, you know,
like the rule of one hundred.There he goes when you're trying to
figure out how much of your moneyto invest in stocks versus bonds, to

(31:21):
kind of use your age. Wetalked about that one hundred minus your age.
If you're sixty, then that wouldbe forty percent in equity sixty percent
and safer solutions. Bonds have notproven to be so safe this year,
I get it, But over thelonger period of time they are the safer
asset class between the two, thatbeing bonds versus equities, which are stocks.
So arriving at the right allocation,but your age would be that amount

(31:44):
that you would invest again in theconservative portion. But whatever calculation I just
kind of spilled on the table here, it may not be the right one
for you. You might be ina position where you can be far more
in stocks by different strategies, someproviding some income, some providing capital appreciation
and growth over time, Hedging inflation, being liquid in case of things pop

(32:06):
up over the course of life,or you might just need to be in
a larger portion of a variety ofsafer solutions because your risk tolerance has changed
over the years. You recognize thatsequence of returns can be your enemy.
If bear markets hit in the firstcouple of years of your entering into retirement,
what was seeming to be enough resourceends up to be mathematically far insufficient.

(32:30):
So what are some alternatives to keepyou safer and growing your money on
some part of your money? Thetheory, this whole one hundred theory,
gained some popularity when the four oneK accounts first came into the scene and
people had to decide somehow how totransition retirement and grow their money and also
use their money to pay themselves thecash flow over time because they entered a

(32:51):
new world world mostly without pensions.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's muchmore off funder about the office. Five
one, three, five, seven, five nine, six five four callus
We can help, but stay tune. You're listening to the sound Mighty Investment

(33:12):
Show with Brown Financial Advisors here onfifty five CAREC D talk station. Welcome
back to the Sound Mighty Investment Showwith Brown Financial Advisors. I'm Greg Brown
and I'm James Boordan. We area registered investment advisory firm. We are

(33:34):
independent. We do it for clients, not companies. That's main street and
not wall streets. Our fundumber fiveone three, five seven five nine six
five four, website Brown Financial Advisorsdot com. Email team at Brown Financial
Advisors dot com. Our home officeis in Milverboat Wessel locations in blue As,
Westchester and Florence. Greg well,James, We've talked about income replacement

(33:54):
retirement. What's the target income someoneneeds to have so they'll have enough cash
flow when they enter retirement. Wellas a rule, seventy to eighty percent
of your working income in retirement tolive comfortably. And again keyword there perhaps
is comfortably. Now on the converse, you might also look at that and
say, are you really willing toaccept a twenty to thirty percent reduction in

(34:19):
your standard of living? That's oneway of looking at it. Maybe your
expenses are still as high, maybethey're even higher. Statistically, there's that
word statistics. There's a prevalence ofpeople who actually have greater expenses in the
first several years of retirement than theyhad during their working years. It typically

(34:39):
is like a wave that goes upand then 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 startmaybe cutting back on their spending. How'd
you like that sound effect? Ifyou've got the wrong income figure inning retirement,
it's a nine one one situation.Here's another way of looking at that.

(35:00):
Maybe every day is a Saturday,or what seems like every days a
Saturday. Right, So what dopeople spend usually their weekends doing, which
is enjoying the weekends, spending moneyperhaps on the weekends. So what are
you going to do with your timein retirement? Are you going to travel?
Do you have different expensive hobbies thatyou're going to be partaking in?

(35:22):
Is it golf? Is a boating? Is at pickle ball? 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 frontload their income plan in those
first two to five years after retirements. You know, live it up while
you're still young is what we hearpeople say, or relatively young is what

(36:02):
they say. So other considerations.This is when you say, well,
this is maybe the not so funthings that we need to spend money in
retirement. That includes things like healthinsurance. So as you transition from your
workplace health insurance to then say,for example, Medicare insurance, will who
pays for that? How much isthat? And who's that? IRMA person

(36:24):
that might be taking two to threetimes of what seems like normal Medicare premiums
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,

(36:49):
And how fitting is that It blowsright in and adds layers of additional
expense, making your living more expensivejust because ye you have a certain income
threshold you didn't income related Medicare adjustmentto what you pay for your premiums,
both for your Part B and alsofor your Part D premiums. There's just
something wild about a system that penalizesyou for being successful. I can't quite

(37:13):
figure that out, don't think Iever will, but it's just another form
of attacks. Sure enough, Well, thank you for sharing several of those
elements, because every one of thosecan represent another variable in the layer cake
of what is your real expense structure? Therefore, what are your necessary income
needs? And when you come inplease know first of all, just contact

(37:35):
us, call us email us teamat Brown Financial Advisors dot com. When
you come in, first appointment's allabout you. We will take all of
your information, fact and feeling findingfind the facts about your situation, how
you're invested, what your risk toleranceis, how you feel about risk,
will assign your buckets of money tojob descriptions, will show you the analysis
of the internal spread, spees,margins, loads, and real costs,

(37:57):
your total cost of investing at whatrisk you're currently at versus what you should
be at. Will make all therecommendations that will get you better. You
know that can stay, that needsadjusted, that's got to go, it
needs replaced. Here's what to do. We will take that plan, develop
the income plan, maximized sociecurity andpension benefits, your legacy and tax efficiency
as a living benefit to save ontaxes, and in passing how to end

(38:20):
well and leave it well to peopleyou'll love and cherish you care about.
But in the meantime, will alsoapply a test for probability of success at
different income levels based on some ofthese different variables of these inputs that James
has covered, we'll see what theprobability for success is. If you get
a high probability of it working out, that's a pretty good feeling to know

(38:43):
that you know, regardless of thisor that happening, markets misbehaving in different
intervals, your expenses being expended indifferent intervals, that you're going to be
okay with a high probability. Sowe look 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 withdrawalrate, what is your withdrawal rule.

(39:05):
What does that mean? Well,simply put, if you had a million
dollars and you were taking four percentbecause you needed forty thousand, you're often
going forty thousand a year off thatone million dollars. But if the market
pulled back by twenty percent and yourinvestments, let's say we're reduced, I'd
like to think, in the contextof our clients that the market found thirty
that we're going to save you alot of that downside through wise active selection

(39:28):
and investments, but nonetheless, keepingit simple, a pullback of twenty percent,
you're now eight hundred thousand. Ifyou take four percent of eight hundred
thousand, that's thirty two thousand ayear, right, not forty. So
if you needed forty and you're gonnastay true to your four percent rule,
you're going to take an eight thousanda year pay cut going into that second
year. Now, I'd rather seeyou take a three or four percent withdrawal

(39:49):
rate that first year. Maybe it'sthirty five forty thousand, and that works
for you, and we'll just teeup and 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 it's fun,it's fascinating, and it's wealth building
over time. We'll keep you ata rate we're confident our investments over three,
seven, ten years and the restof your favor will marry up and

(40:12):
line up with that rate to provideyou the income you need. But all
that will then be tested on probability. Excuse me, so you'll know with
high probability and likelihood that you're goingto succeed on purpose and not happenstance.
Jameson thoughts. Yes, let's onthat four percent withdrawal rate. Let's go
through a couple of assumptions, becauseyou know, if you turn the word

(40:34):
assume into a three syllable word,maybe not such a good outcome. So,
first of all, the assumption isbuilt on the blend that you have
of overall equities too fixed or stocksto bonds. So it assumes a sixty
forty blend in your investments, andthat one hundred percent of your assets need
to be allocated to these market basedinvestments. So those are a couple of

(40:57):
serious assumptions here that may not actuallyfit in your individual situation. It's kind
of like this, are you reallywilling to have all of your eggs in
one basket that proverbial stock market basketif you will so, do you have
the appropriate risk tolerance or you know, are you wired to really handle this
type of market risk. That's that'swhat we find more than anything else,

(41:19):
is at when the markets are doingwell, didn't you know I want to
be aggressive and the markets are notdoing so well? It's like, hey,
didn't you know? I'm conservative whenthe markets are not doing well.
That's that's how the human emotion aspectof investing works is we think we should
already be in front of this bymoving to something conservative before the market started

(41:40):
declining. And there are ways tobreak up your money between different types of
investments and asset classes. So ifyou're using, say, and this is
based on some old rates, thisis an example. Though, Let's say
that it used to be seven hundredand fifty thousand dollars at four percent and
give you thirty thousand, and thatwould be true if the rule of four

(42:04):
was still valid. We have morerecent studies that say you really shouldn't bank
on a four percent withdrawal rate.It's Wall Street Morning Star objectively research studied
and said, you know what,the old four percent is now two point
eight percent, which would mean youneed more like not seven hundred fifty thousand,
you get thirty thousand at two pointeight percent, you need more like
just over a million dollars. That'sa pretty big difference and than what you

(42:25):
might have planned for when you wereplanning to save seven hundred fifty thousand and
find out issue in a retirement thatto get the thirty thousand year reliably over
the long term, that you needabout two hundred fifty thousand more that you
got to pull out of a hatlike a rabbit. That's not how it
works, or printed in your basementon one of those high resolution color printers
you know what I'm talking about.Don't do that at home, right,
So we need to plan up front. So there are some options. There

(42:47):
are some fixed indexinuities that you couldtake five hundred and fifty five thousand of
seven hundred and fifty dedicate towards incomeand get a guaranteed paycheck for life for
both both of your forevers. Soif that's what you needed for income on
top of sol security, you justnow got it. It's reliable it's insured
based on claims paying ability of aninsurance company, but guaranteed for your lifetime.

(43:08):
So if you had seven hundred andfifty and you just dedicated five hundred
fifty five thousand for the income purpose, the rest of your money can be
invested well, goodness, it couldbe invested in all equities because you don't
have dependency on that part of themoney. But talking along those lines is
talking about some alternatives. We havesome boutique type investments that can give you

(43:28):
just run through quickly the lesser ofperforming the SMP five hundred or the DOW
over two years. In this case, yep, two years, you could
get up forts of forty three percentas a cap and it would absorb the
first ten percent of downside. Thereare so many options that you don't get
from Wall Street because we're main Streetworking with main Street. We work for
you, We work for clients,not companies. And on the market based

(43:51):
approach for an income portfolio, there'sour designed income portfolio that really has such
a fantastic opportunity to yield a muchhigher resultant than say a fixed annuity,
but it also is designed to notdeplete your nest egg. So there's just
more, so much more to learn. Our funder baself is five one three
five seven, five nine six fivefour call us we can help now on

(44:14):
behalf of Greg myself James. Wewant to thank you for listening today.
Have a great we can remember thissound money where good things are believable,
achievable and true for you