PODCAST EPISODE 232: Ugly Retirement Decisions in a Wild Market!

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Paul 0:08

Hello, and welcome to your business your wealth. I’m Paul Adams. I am the CEO of sound financial group and I’m joined by somebody that you all know and love. And you especially love when he’s back. Because you’re not listening to me alone by myself in this empty room, giving you the thoughts off the top of my head. Cory, how was your trip?

Cory 0:30

So amazing. It is me if anyone doesn’t recognize me with his beard. I did forget my shaving cream. So I just decided to go for for beach beer. And I haven’t gotten any texts from anybody about the episode you did last week. So I think that’s a win.

Paul 0:46

Yeah, that is what yeah, we’re we’re not worried about you texting, Cory, any compliments. We’re worried about people texting, like, Did you hear what Paul did while you were gone? Right?

Cory 0:56

Let’s go straight to Paul. I know.

Paul 1:00

Go No, I needed to know I need it. Well, we got a pretty fun episode. Today, we’re gonna be looking at some of the news. Now the news that has to do with planning, we’re not going to be getting into what’s going on with Ukraine, Russia, all that we know that that stuff is creating volatility in the markets. And we’ve covered the last two episodes of what this up and down can do to you emotionally. Why it is you have to have courage. And we’ve got a little bit of that in our content today. So we’re going to be looking at the secret to braving these wild markets. We’re going to talk a little bit about a fidelity study in an article that was released, where the headline was really valuable. And the article itself was just about useless. And then we’re going to talk about Social Security running out on you. So stay tuned to the end of the episode for that. Corey, let’s uh, let’s hit up first, this article on the secrets to braving a wild market. You really liked this one.

Cory 2:02

I did. And we’ve, we’ve written up some art or you some articles by Jason’s week, really like and maybe we’ll try to get him on the podcast? Who would be you know, we’ll do enough articles on him and send him all the links are enough podcasts on his article. Sorry, I’m a little slow coming back from from the meat. So you know this article. He’s talking about John Templeton. Now if you recognize the name, Templeton, of Franklin Templeton, John Templeton, big investor in the early days of what we now know as the market and mutual funds, and this article starts out in World War Two. So kind of a similar time of disruption as to what we’re starting to feel right now. And the story, this isn’t Jason’s reporting, this is just how the story normally goes, is John Templeton, young guy at 23 borrows the equivalent of $200,000 today to buy a little bit of 104 different stocks. And right as we’re going into the depths of World War or two and that like courage to go in at the bottom is what like, launches them into the investment industry.

Paul 3:27

And, and it is funny, so they say at the tender age of 2626. Yeah, but we we just had to pull this up. So looking at his bio. I was like, man, I’ve

Cory 3:37

heard I’d heard some version of this story before about about him of like, being really young. Like this is familiar, but I never kind of looked up his full history. I think you have the Yeah.

Paul 3:49

So Templeton started his Wall Street career 1938 Oh, what did he do before that? He was, let’s see, followed his brother’s footsteps attended Yale University, supporting himself during the depression and graduated 1934 near the top of his class as president of Phi Beta Kappa. He was named Rhodes Scholar to bullyville. College at Oxford, which he graduated with a degree in law in 1936. templed started as Wall Street career in 1938. And so then, is the part when the war in Europe in 1939, you borrowed money to buy 100 stocks. So that’s the part that came out the article. But skipping the idea of this guy was incredibly for the time, well grounded as a thinker. He wasn’t you know, in law, one thing that you learned is how to assess situations and partially a framework in which to think so he had that going in, but they certainly frame it like often happens in these articles as like he was some rube from Tennessee who convinced somebody to lend him the equivalent of $200,000 to be able to go purchase all these stocks.

Cory 5:00

Now, Jason’s point in the article is about having courage in investing. And part of it is for the last decade, as the markets been going up and up and up and up, it’s taken a little bit less, less courage to be an investor because we haven’t had to weather these these ups and downs. You know, I think I think the point that we could find from this is Templeton having that grounding in the philosophy of investing, understanding how markets work, gave him gave him the ability to have more courage, like I like that story a lot better than the kind of urban legend about him. Because we can all do that, like education, academic research and allocation. And that’s where we can derive our courage from because that’s what I I hear that he did,

Paul 5:52

indeed, when you think about what he was investing during, right, is it was the Great Depression, then France fell in 41, Pearl Harbor and 42 Nazis rolling across Russia. And then he sold out in 1944. Of those positions he bought during the depths of the depression, right? And any only had 100 stocks, you didn’t have the ability to diversify, like you can, today back then. Right. But fundamentally, think about the past history. You know, Cory, you and I talk a fair amount about this idea of would you ever want to, you wouldn’t want to be Rockefeller, compared to being a household that makes $80,000 a year today? Right, like air conditioning, right water, like the the ability to like literally get even with these high gas prices, the kind of things you had to do even 6070 years ago, you would do a small mechanics checkup on your own car, before you would drive 500 miles. Right, like you would check the oil. I remember that being a thing when I was a kid, that my dad would check the oil before we went on a long car drive, like, like, we don’t even look at the gas gauge before we leave on a long trip or like, like pack the cooler food, because we know there’s abundant resources to be able to pull over and get a sandwich anywhere. Right. And that just wasn’t the case back then. And here we are looking at something like what they had gone through in the terms of investing gyrations. And today, it’s not that it’s not nearly as scary as it was. So one way that I cultivate contentment in my own life is looking back to like I would rather be living today than any time in history. Because you look back at i, there’s a painting that I used to have on the wall of a dentist’s office I went to, and it was this beautiful painting of like 16th century French countryside, I think, and there’s a couple of people out, walking to the river with their laundry baskets, and these small, quaint stone homes is beautiful. But what I would think about when sitting in the dentist’s chair waiting for the doctor to come in is how brutal that existence actually had. And we can romanticize that past. But we could do the same thing with our investing, especially if you’ve only been investing four or five years, you haven’t seen the kind of things that we are going to see over the next not this time. We don’t know when the next big recession is going to happen. But you’re going to have a decent sized recession many times over your investing career unless you just got some really bad news from your doctor.

Cory 8:51

You know, the only the only other exception that other time I might want to live in is like late 70s, early 80s when McDonald’s still use V fat for their French fries. Oh my gosh, because if you haven’t had a beef tallow French fried, you are living a shadowy black and white existence compared to the Technicolor that is waiting for you just on the other

Paul 9:14

side of that, as you were saying that I’m like this. I know Cory isn’t going to say the 70s and 80s because of the prevalence of swinger clubs and cocaine. What is this gonna be? Of course it’s food.

Unknown Speaker 9:29

Beef, fat, french fries.

Paul 9:33

That’s, that’s all all Cory has to say about this beef, fat french fry. We’ll say that three times fast. All right. Let’s hit our next one. This is the news headline that I thought was the making for a great article with absolutely horrid content. Yeah, so the headline is under the personal finance of Fox Business, fidelity study shows downright ugly return moves Americans made over the past two years.

Cory 10:04

And when I first saw this headline because you sent it to me, I like I was just like, Oh, what is downright ugly look like? What does that what does that even mean? And it’s so sensational and then so boring. Well,

Paul 10:20

and and for, for me, let’s let’s think about what those ugly moves are that either we’ve seen people make before their meeting with us or people get tempted to make that we give them good academic thinking that keeps them from making those bad decisions would be exiting out of the market because they were freaked out. The market is up tremendously since the Coronavirus pandemic. They’re up tremendously since a very, very close presidential race. They’re up tremendously. Even with all of this terrible world news and we could be headed into a recession, we don’t know. But the other things people might have done is bought new cars cranked up to a larger home unnecessarily. Because they were dissatisfied with their home after being cooped up for a year at home working from home. All of those things would have been quality reasons why. And what did they say? People just put their retirement planning on hold,

Cory 11:21

right, not maxing out cash advances on their credit card to play slots to or blackjack to try to get out of this. But just and they said 55% among young investors aged 1830 to 35 put their piling on hold, like 70% of them haven’t even started to begin with.

Paul 11:43

And I gotta say, what really bugs me about these? Is that they do it by like some polling. Right? Right. They did. They don’t. They’re not looking at the calendars of these young investors and saying, Oh, I see here on March 3, you put your planning on hold, right? You had a meeting with your Edward Jones guy and you said put on hold till after the pandemic? Or like

Cory 12:09

for the prior three quarters once a week you had an appointment on your calendar for work on planning and then they’re gone after much. No, i

Paul 12:17

i about guarantee you that this is a whole bunch of people answering your question where they are shooting on themselves. Now we’ve talked about this on the show before the idea I should do this, I should do that. And we feel guilty or lacking or vulnerable in some way that I should be further along them. So when you’re asked by somebody, did you keep your planning going? Did you put your planning on hold? I mean irresponsive now doesn’t matter what the third one says. It’s what you read you what you read is I’m an irresponsible individual that making no plans for the inevitable future in which I will no longer be able to earn an income and therefore have chosen instead to make irresponsible decisions without money. Doesn’t matter if the third one says I haven’t started planning yet. But that’s what people read.

Cory 13:06

Yeah. I will say as far as this downright ugly headline. I’ve noticed, have you noticed Fox News is particularly good at like if they’re taking a thumbnail of a video picking their frame with like the worst possible expression.

Unknown Speaker 13:20

Yeah. Oh, yeah. Well, and the other one I like is

Paul 13:25

I, I particularly I read several new sources every day Fox is one of them. And that they’ll put a video that has nothing to do with the article I used to play them and they’d sit through a 32nd ad and then I was like, wow, this is this is about a Tesla like this thinking had something to do with the article. I’m like you buggers got me to click on this article and click on your video

Cory 13:51

Well, or the embedded links that also have nothing to do with the article dirt in the body of that article. They’re actually ads. Yeah. And they’re not the only ones that don’t do that nobody this straining,

Paul 14:01

but we might as well pick on them all this is the article. Although a majority so inflation emerges although and majority of Americans expressed optimism that hang ups from the past two years are behind them was 65% of those polled telling fidelity 2022 This is the year for waving goodbye to the pandemic and looking at the future numbers show a new fear has emerged inflation. Now, this is something we we haven’t done an episode specifically on inflation. We probably ought to. I’m waiting for when we have a bunch of congressional representative start talking about wealth tax again. Because secret everybody inflation is the wealth tax. It is diminishing your wealth. So the one of the best things that you can do his own assets in an inflationary environment because Inflation affects the value of assets. Now for the first time ever assets that used to go down in value going up in value. Like I just went, I can’t believe this Corey, so we bought our RV. In 2018, it’s a 2016 it has gone up in value. Whoa, we were at the credit union. So you guys know we talk to people about getting a home equity line of credit on your home for the just in case. So we we got a house with some land kind of well north of Seattle here. And that that house needs a home equity line of credit just in case. That’s the case. And while we’re there, he says, Hey, you notice you’ve got an RV loan? I wonder if you’d be interested in refinancing that it you know, 3.9% and I was like, what? I said, we’ve had that thing like four years, we have driven it all over the country. It’s got a boatload of miles on it. Can we do that? And he goes, I don’t know, let’s look at the value is $10,000 higher than when we got it four years ago? And having used the daylights out. So it is it is bananas, and not up for sale? If anybody’s asking. Let’s go to our next one, Cory to close us out today. And this is his so security gonna run out of money? Yes,

Cory 16:25

yes. Well, then because, you know, headlines like these distract us from the simple fact that it’s always been constantly running out of money. There’s no giant trust, for Social Security, growing over time, it’s people that are currently working, paying in to send those benefits to people that are currently retired. It’s a constant cycle.

Paul 16:52

Well, and at one point, there was a and you guys may remember this in the when Gore was running against Bush, Jr. I think I’ve got that right. Now we talk about the Social Security lockbox and like, so security has been even back then there was no quote unquote, lockbox, there is a journal entry. And then the government was just using the money for other stuff all the time. And it has since ended up that money goes in and goes right back out. And by 2034, they’ll only be able to pay 78% of benefits. Now, if this thing changes, if nothing changes, but I’ll take you guys back to a little over 10 years ago, when Social Security stopped sending out statements. And it just so happened, that the federal government had a federal program, those federally failing. And on the statements in like 2011 12, maybe eight, somewhere in there is when they started putting on your Social Security statements, they would mail to your home, which had your history of earnings and is a big thing, we would have clients check to make sure that they got credit. And you guys all should check that income history, make sure it’s accurate. Because if you’re you don’t correct it for seven years, you just don’t get credit. So it’s, it’s a good thing to check. Now you have to go to ssa.gov and get it. But they stopped sending out those letters, two years after they had to put on it in Asterix that said this,

Unknown Speaker 18:28

right. This is not new news.

Paul 18:32

Not new. It’s the reason why we don’t want to count on it. So it but don’t get me wrong, especially for high income earners, this can be a decent amount of money. If you have a dual income earning household, you got a solid shot of this feeling like you have another 700,000 Plus in capital at work. It’s nothing to sneeze at, except somebody is going to get left out. And here’s what I mean by that it was initially given to us as a savings program. And I remember my father being upset when I was a kid. Second, how the heck can they ask me to put my social security number on documents? It says right here on my social security card not to be used for identification. It used to be that way. And then it was your paying into Social Security was the initial thing because it was supposed to be basically an old person’s pension or widows fund as they refer to it as time. And then it became the Social Security tax. Yeah, they change our language. And now it’s a tax. It’s a very regressive one because it affects people that make under about $144,000 a year the most. And now what they then they integrated that if you have other income, so security becomes taxable. So that was like their initial dip into means testing. So security Right. And all they have to do is wait long enough, we might be there now, where they’re able to start saying to people, well, if you have over this amount of retirement income, when you’re taking Social Security, we’re actually gonna lower your benefits.

Cory 20:17

And they don’t actually have to change the formula, they just tax Social Security more, and it lowers the benefit. Okay, so they don’t have to change that system, they can just, and that’s usually how the government does it, right? Add another thing on top of. Now, the other thing they could do, if I’m a politician, and I’m thinking, Okay, I’ve got all these constituents, but a giant number of them are retirees, and more and more people are retiring every year, who do I want to upset the least, the really big population or the smaller population, and so they could raise taxes, raise Social Security taxes on those still working. And they’ll make those people mad. But they’ll keep the whole retiree and soon to be retired population really happy because their benefits stay the same. Or it could be some combination of above?

Paul 21:12

Yeah, but the big, I totally agree with you. The thing is, it has to happen. And you’ve heard the old saying of kicking the can down the road? Well, that comes from the idea of seeing litter on the road, you could do something about it. But if you just kick it down the road a bit, you don’t pick it up yet. You just keep kicking it down the road? Well, because this is so politically unpopular. Because the solution, let’s say, there are things that you want to solve. And let’s say it’s climate, well, at least half of that arguments going to be popular with somebody. If somebody says the best way to do a climate change is we need to drill and produce more petroleum products in the United States, because the US has the most environmentally friendly, lowest carbon footprint, have that kind of stuff that’s going to be popular with one group. And then you have another group that would say, No, we think shall be solved with renewables. And if you take that stance, it’s gonna be very popular with that group and unpopular with another group, the solution of social security is going to be popular with no group. No benefits, or increased taxes, and no one’s going to be happy with either one of those outcomes. Yeah, that’s why it keeps getting kicked down the road. And so if and, and you can read this article, we’ll have the post on our website, you can find it the link below. But so security makes a big difference for a lot of people. But they can’t fix it unless they say, well, we need to raise the cap. And that was something that was proposed under the Obama administration is that they would lift the cap, so that you would pay your full social security taxes on whatever amount of income do you make, wow, put that in perspective, that would mean the employee pays their 6.2 ish Plus, there’s Medicare in there, too. So let’s just call it seven and a half, and then there’s seven and a half from the employer side. So that’s 15%. So if they said, Well, we’re going to just let that tax go all the way up, you’re gonna miss that pay raise that you hit about halfway through the year, when you start making more than 144,000, you’re not going to get that seven and a half percent your check. So that’d be wildly unpopular with both people that are currently making that amount of money or people who think they’re going to be able to make that amount of money, right? Or they’re going to lower benefits, which is going to be wildly unpopular with anybody. Because it will always be marketed by the political opposition, as it’s going to happen to everybody or they’re violating the public trust. And that has been known for a long time, everybody, a long, long time that this is coming. And they continue to not address it because of how politically unpopular it is. The solutions just aren’t going to be easy. And so, how do you deal with it? The need to be set aside 20% of your gross income. You need to be a disciplined investor. You need to not make rational decisions in what appears to be an irrational market. You’ve you’ve got to be able to put yourself and your family in that position. You guys are going to be okay. Regardless what happens with Social Security. Now, Cory, before we go, yeah, I’d like to paint a vision for everybody about Social Security. And that is what what I’d love to be able to do down the road is as our clients continued to retire and they’ve got their money built up, it’s it’s saved up that we just have a big party in Las Vegas. Okay. People fly in from all over. It’s cheap to get hotel rooms, and then everybody brings their Social Security in cash. Okay, now the big thing is we need to, we need to have at least 38 people come. And it’s because there’s 38 spots on a roulette wheel 36 numbers plus zero and double zero, right? Everybody takes their entire social security check and picks a number. And then the wheel spins. And wherever we will lands, one of us is going to win. And that payout, if let’s say Social Security is $30,000 a year, it’s like 36, or 35. To one depending if you’re playing at a regular casino or Indian Casino. I grew up in Las Vegas, guys, this is not like a regular trip I make. Right? So if you get like, you would win this truckload of money, like nearly a million dollars. And then we’re going to do is walk over to like the Ferrari dealership. And whoever hit it has to buy a quarter million dollar car. And then when they drive it, they just post photos to everybody else that was there when people ask them, what how did you get a Ferrari? Say it’s easy. So security.

We’re just gonna leave people wondering what in the world happened, because I think that’s going to be the best outcome we could have, for all of our clients, for all of you listening, is that so security ends up being like a nice bit of gravy on top. Because we don’t want to see our articles like this stress you out. We don’t want to see money, stress you out. volatile markets stress you out. Because you’ve been prepared for them. You know, it’s a Korea’s give me a slight tangent. Because I have a lot in my head about this. But imagine if you weren’t ready for the way you feel. After starting working out again. Yeah. And then working out. You start working out. And you’re sore.

Unknown Speaker 26:54

Like painfully sore?

Paul 26:55

Yeah. And what if nobody prepared you for that? Now think about those feelings. And you would just be freaked out, like my body is falling apart, I think I’m dying. I can hardly get out of bed. I am never doing that again. Well, the same thing happens with markets, the same thing can happen with what we read in the news, that if we’re not preparing ourselves, if we’re not training, not just mentally, training financially, to deal with everything that is going to come at us, because as investors, this Ukrainian Soviet Russia thing is, this is not the end of it. There’s gonna be something else. There’s gonna be space wars, someday we’re gonna be fighting over the moon, because we’re people and we’re flawed. This so security thing is going to come up again and again, taxes are going to come up again and again, more and more government control or lack of government control, whichever of those two stresses you out are going to come again and again. And what if you don’t train yourself financially to understand what this means for your money that we get battered about, by whatever the headline is, or whatever emotional trigger the media is working on having for us. And what we want here at sound financial group and here at the your business, your well podcast is just for you guys to be prepared for that. So it doesn’t ruin you stress you out doesn’t ruin your day. It doesn’t ruin your month. It doesn’t create disagreements within your household because if you find discipline, financial strategies and academic evidence to follow, you’re going to be fine. But you’re gonna be fine because you’re not stressed. So anything else for now?

Cory 28:44

It’s a great parting, thought, Paul.

Paul 28:46

Awesome. All right, everyone. We’re glad to have Corey back. And on behalf of our audience, Cory, we’d like to see that beard get down to like the top button on your shirt. Just let it go. I want full ZZ Top if we can get it out of you. Alright everybody. We hope that this episode as all our episodes have been a contribution to you being able to design and build a good life.

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