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THE WARMUP

There are a lot of variables in retirement that you can’t predict, but there are ways to plan for them. Ryan and Bob will also fill us in on the latest financial propaganda that piqued their interest and answer a few questions from the mailbag.

THE WORKOUT

[1:15] How long will you live?

• You need to construct a plan, keeping in mind the chances of living longer. The longer you live, the higher the risk of more medical costs.
• The cost of living will also go up over time.
• The equation isn’t just about you. Your spouse might also live longer and you need to be able to plan for all of these nuances.

[2:45] Interest rate changes

• Interest rates are currently at historical lows. Because of this, you have to plan on having income coming in from different sources. And because inflation might outpace certain conservative accounts, you need to make sure some sources of money will keep up with the increased cost of living.

[4:52] Future tax rates

• Tax rates are likely to go up in the future. You can’t control what the politicians will do but you can control your overall exposure to taxes.
• It’s not how much you generate on your portfolio; it’s how much you take home after you pay taxes on your accounts. That’s why you need a tax-efficient portfolio.
• Annuities are a bad fit for many. They give you income for life but are typically taxed at a high rate. Paying too much in taxes is a common symptom of a poorly planned portfolio.

Financial Propaganda

[9:18] Inverted yield curve

• The news is saying the inverted yield curve is signaling a recession, so you have to get out of the market right now.
• It’s only slightly inverted and when it comes down to predicting a recession, sometimes the inverted yield curve comes a year or two before the recession.
• The economy is in a good place right now with the lowest unemployment rate in 50 years.
• What really matters isn’t the U.S. yield curve, but the global yield curve.
• Realize that low interest rates are great for stocks and you should be fully invested.
• The small business optimism index hit an unexpected high this week, which is another good sign.

[13:13] Interest rates

• Jim Cramer of Mad Money came out with a prediction that he expects the Feds to cut their interest rates. You can’t predict where rates are going to go.
• A lot of money has not gone to the stock market but into bond funds. They are a risky investment with interest rates so generally low.
• It’s an important time to look at your portfolio and understand what you own.

Mailbag

[17:30] Hannah: Unprepared for retirement

• Hannah says she is supposed to retire next month but hasn’t done any planning yet. She needs to figure out Social Security options, pension options, Medicare options, and what she is doing the rest of her life. Should she push back her retirement date?
• The most important step is the first step–sit down and do some planning.
• Look at all of the different variables to optimize when the best time to take Social Security is.
• Articulate your goals and then come up with a strategy.

[20:36] Chuck: Risk right before retirement

• Chuck says he is not retiring for another five years and does not feel the need to be ultra-conservative with his money, but his wife wants to be more secure.
• Let your plan dictate how much risk you actually take in your portfolio. Why take more risk than you need to?
• Sometimes you have to take modest risk to achieve your goals and outpace inflation.
• This is something you need to address on at least an annual basis.

FEATURED QUOTE

“Because interest rates are so low right now, you can’t just depend on CDs paying 2%, or a Money Market fund at 2%, where you pay taxes on that..you’ve got to have income coming from different sources.” – No Payne No Gain Podcast

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