Latest / HPK Provident Advisors: The Weekly Bull / Shutdowns, Markets, and Your Money

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Shutdowns, Markets, and Your Money · HPK Provident Advisors: The Weekly Bull

0:16
SPEAKER_02: Welcome to Friday Live.
0:18
SPEAKER_02: Every Friday, me and one of my partners gets together and discusses the latest trends that are going on in the markets and the economy.
0:24
SPEAKER_02: So today we have partner David Harper joining us.
0:27
SPEAKER_02: I'm going to ask him some questions about his experience in the financial services industry.
0:32
SPEAKER_02: He's been around since 19lose the year, David.
0:36
SPEAKER_01: 1994.
0:38
SPEAKER_02: So he's seen a few things.
0:39
SPEAKER_02: He's been in a few bear markets.
0:41
SPEAKER_02: So this week uh we got some economic data, but the highlight was immature politics led to another government shutdown, number 20.
0:55
SPEAKER_02: I know it's not what we like to hear.
0:58
SPEAKER_02: So that happened uh, I believe midnight on Tuesday, and there hasn't been much progress on that front.
1:04
SPEAKER_02: Um, have you seen any positive things occurring in in interactions?
1:09
SPEAKER_02: It seems like they're just both uh being unwilling to negotiate.
1:16
SPEAKER_01: It seems like there's not a whole lot of reaching across the aisle from either case.
1:23
SPEAKER_01: Um eventually uh eventually the people have to come together and open up the government again.
1:33
SPEAKER_01: Um so uh it's worked out in the past, and there's no reason for us to believe that it won't be worked out here this time.
1:43
SPEAKER_01: And the next shutdown, and the next shutdown.
1:49
SPEAKER_02: Yeah.
1:50
SPEAKER_02: Um, and I believe the the main issue with this, I mean, there's obviously many issues, but it's largely revolving around health care costs and credits.
2:00
SPEAKER_01: Most of the healthcare costs, uh, we're talking about uh healthcare for coverage of persons who may not even be US citizens, uh, or uh reimbursing, you know, passing that through to the states.
2:18
SPEAKER_01: Some states are more giving of health care and some not so much.
2:25
SPEAKER_01: So there's there's this um inequity of some states giving too much and some states maybe not given enough.
2:35
SPEAKER_01: Um and Congress needs to come together to come to a real solution for these.
2:41
SPEAKER_01: And do you want to draw your battle line, uh, hold up your uh trench warfare for a time such as this when it needs serious negotiations, serious uh uh diplomacy?
2:56
SPEAKER_01: Um that's that's my take on it.
3:00
SPEAKER_02: Okay, and I'm sure everyone's wondering what this means for their portfolios.
3:04
SPEAKER_02: Um, so like I said, dating back to about mid-1970s, this marks the 20th occurrence.
3:11
SPEAKER_02: Um it they length they vary in length and time.
3:14
SPEAKER_02: The average one I think has been um four days long.
3:18
SPEAKER_02: Um, and during that period has actually averaged a positive increase of 0.1%.
3:23
SPEAKER_02: And in 86% of the cases, the stock market has finished higher one year later, 86% of the time.
3:30
SPEAKER_02: And that data is according to the Carson group.
3:33
SPEAKER_02: Um, so historically, it hasn't made much difference for the market.
3:37
SPEAKER_02: Um, we've been through this before.
3:39
SPEAKER_02: The last one we had was actually the longest one on history, which was that one that started in December of 23 of 2016 and went into January of 2019.
3:51
SPEAKER_02: Um, so in that scenario, the market did pretty well.
3:54
SPEAKER_02: But I mean, giving it context, that was also coming out of a bear market.
3:59
SPEAKER_02: So we had that large drawdown in October and the fall.
4:04
SPEAKER_02: And I think the bottom was probably around that day.
4:08
SPEAKER_00: Yeah.
4:09
SPEAKER_02: So how the stock market does has a lot more to do with what's going on in the economy, what's going on with earnings, um, how monetary and fiscal policy are, whether they're restrictive or expansionary.
4:23
SPEAKER_02: So those things are a lot more important.
4:25
SPEAKER_02: Government's gonna do their thing.
4:26
SPEAKER_02: Um we always have the potential for another debt, US debt grant downgrade.
4:32
SPEAKER_02: Um, sometimes that has an effect.
4:34
SPEAKER_02: It could keep the longer end rates higher.
4:37
SPEAKER_02: But as we can see, we're day three of this now, the stock market's higher than when they announced it.
4:41
SPEAKER_02: So far, not caring.
4:43
SPEAKER_02: Um, and that's kind of been the market's generalized opinion toward a lot of things lately.
4:50
SPEAKER_02: Um, it doesn't seem to care too much about tariffs, doesn't seem to care too much about the labor market stalling out, um, valuations.
5:00
SPEAKER_02: We're just enjoying the ride up for now.
5:03
SPEAKER_02: But um I think everyone should know that it will change at some point.
5:06
SPEAKER_02: News will start to get reflected.
5:08
SPEAKER_02: So just make sure your position for that.
5:11
SPEAKER_02: Um, if you want to stay fully invested, make sure you're okay with the drawdown you might occur.
5:17
SPEAKER_02: Um so I think the biggest thing, in my opinion, that the stock market is uh uncertain about with the government shutdown is we have a vacuum of economic data.
5:29
SPEAKER_02: We didn't get jobless claims this week.
5:31
SPEAKER_02: We didn't get non-farm payrolls today.
5:33
SPEAKER_02: And that makes me very sad.
5:36
SPEAKER_01: Anyone into withdrawal symptoms, Mike?
5:39
SPEAKER_02: I know, like I and it's it's at the absolute worst time.
5:42
SPEAKER_02: We're like on the verge of dipping into negative territory on job creation.
5:47
SPEAKER_02: We're averaging 29,000 a month uh based on the three-month moving average.
5:51
SPEAKER_02: We had a negative reading in June.
5:53
SPEAKER_02: So I really want to see that data.
5:55
SPEAKER_02: And I'm sure I'm not the only one.
5:57
SPEAKER_02: I know this probably creates a lot of difficulty for the Fed.
6:01
SPEAKER_02: Um, there's a 90% probability that we're gonna get two rate cuts this year, but if they're flying blind into the data, um it's gonna make their job even harder.
6:11
SPEAKER_02: Um now, with that said, there is other not all data's frozen.
6:17
SPEAKER_02: Um, like we still got ISM services today.
6:21
SPEAKER_02: Came in lower than expected.
6:22
SPEAKER_02: It's hovering with that contractionary level, just above 50.
6:26
SPEAKER_02: So not really good.
6:28
SPEAKER_02: Employment was a little light on that.
6:29
SPEAKER_02: Um, but on the flip side, if you look at ISM manufacturing, that was actually a slight improvement from last month, and the employment situation was decent.
6:38
SPEAKER_02: We also got data like the Challenger Jobs Report, which um that was not a good reading.
6:45
SPEAKER_02: Um, we're actually the lowest level since for layoffs or the highest level since layoff for layoffs since 2020.
6:53
SPEAKER_02: So, not exactly what we want to see.
6:55
SPEAKER_02: Um, besides that, we just have to look at the survey data.
6:59
SPEAKER_02: That's that's really all we have right now.
7:01
SPEAKER_02: So I'm gonna keep an eye on that and the markets and um just see how long the shutdown lasts, what effects it has.
7:09
SPEAKER_02: Uh the they say that every week that the government's closed, it takes about a tenth of a percent off GDP.
7:16
SPEAKER_02: So obviously the longer it goes on, the more of an economic impact it'll be.
7:20
SPEAKER_02: So we'll just keep an eye on that length of time and hope they come to their agreement soon and and move forward like adults.
7:28
SPEAKER_01: On a good note, that it usually when the government does reopen, they don't lose a they don't lose a paycheck, so to speak.
7:36
SPEAKER_02: That's right.
7:36
SPEAKER_02: They get they're guaranteed to get paid retroactively.
7:39
SPEAKER_02: But with that said, and actually I thought this point, and then I saw a news article like the day after.
7:46
SPEAKER_02: I think Congress shouldn't get paid during this time.
7:49
SPEAKER_02: I think they should have to pay penalties if the government shuts down.
7:53
SPEAKER_01: I think they should hurt, um, like the like some of the rest of us.
7:59
SPEAKER_01: Okay.
8:00
SPEAKER_01: Um, but because because of some of the uh um the government coming back into into and coming back in in action, that the that drawdown on the GDP recovers fairly quickly.
8:17
SPEAKER_02: Yeah, that's very good.
8:20
SPEAKER_01: Yes.
8:22
SPEAKER_01: All right, so like I said, you've been in this.
8:27
SPEAKER_01: And that's how most of the time uh we treat it.
8:30
SPEAKER_02: Um, so as as I was saying, you've been in this industry for a long, long time and have been through many different markets, including some very tough times, like the dot-com bubble and the 08-09 housing crisis, where we've had significant drawdowns on the SP 500.
8:48
SPEAKER_02: My question is, how do you keep your clients invested during those times?
8:52
SPEAKER_02: I know there's certainly panic happening, and the natural reaction is when you're losing money uh for people is to get out, but that's that's probably the worst thing you can do.
9:04
SPEAKER_02: So, what's your advice?
9:06
SPEAKER_02: What did you do in the past, and how can you help um, I guess, keep the clients on the course?
9:14
SPEAKER_01: You know, it's always been best when you're going up a roller coaster, that's when you make changes, that's when the the coaster is slower.
9:25
SPEAKER_01: You can prepare for so much comes in preparation.
9:30
SPEAKER_01: Um, so if there's you see risk in the market happening, the time to make changes and try to make that more palatable is when the roller coaster is going up, not get out of the roller coaster when it's on the hill going down.
9:47
SPEAKER_01: Um sometimes you can make some changes that don't hurt that much, that are still good in the strategy, but for all intents and purposes, you work on getting things prepared properly to begin with.
10:01
SPEAKER_01: So if there's too much risk, and I think we'll talk about this later, if there's too much risk, you can either avoid the risk, which is pretty hard to do, you can manage the risk, which we do a good job with, and you can transfer that risk.
10:16
SPEAKER_01: Transferring the risk is using a unit, annuities and so forth become very valuable.
10:21
SPEAKER_01: So during the dot-com bubble in 2006, 2007, uh, we started looking to investments that pay dividends, whether the market goes up or down.
10:32
SPEAKER_01: And we also use annuities uh very beneficially.
10:36
SPEAKER_01: So, like if a person had you know uh 500,000 into their IRA and they're gonna be coming close to retirement.
10:44
SPEAKER_01: Well, we thought, well, let's move 200,000, 250,000 over to an annuity which has guaranteed income, and then you you you can let the rest of it so the income from the annuity can cover, and the dividends can cover whether the market's up or down.
11:02
SPEAKER_01: Uh, and that worked out very well.
11:03
SPEAKER_01: So that's a much smoother ride for the clients to listen to our recommendations to do that when 2008 happened.
11:09
SPEAKER_01: Now, those that didn't, I uh it's not like I could go back to them and say, I told you so, but I told them so.
11:17
SPEAKER_02: Yeah, and we're certainly not advocates of putting the bulk of your money in annuities.
11:22
SPEAKER_02: We think it's important to have liquid assets that you have access to without having penalties taking out, but it does have a place in portfolios um for certain individuals, yeah, yeah.
11:36
SPEAKER_01: And uh and uh the other point I wanted to make is that think of your portfolio as a as a three-bucket approach, you know, things that you need within less than a year, uh for the first bucket, second bucket, two to five years, and buckets that five plus year is the last one.
11:54
SPEAKER_01: Well, you don't want a CD in your third bucket, that belongs in that first bucket.
12:01
SPEAKER_01: And if you are nervous about the market, well, increase the amount in your first bucket.
12:06
SPEAKER_01: If if we and you've done a great job of that, Mike, in managing our accounts.
12:11
SPEAKER_01: So if you see risk on the table, you know, you take money out of the investments and put it in cash or maybe some other bonds, but bonds have not been acting like bonds should be since 2022.
12:24
SPEAKER_02: No, it's a very interesting dynamic with bonds.
12:26
SPEAKER_02: There's certain environments where they're highly correlated to equities, and there's certain environments when they're low to negative correlations with equity, just depending on if inflation is a threat, um, whether you're seeing economic weakness.
12:39
SPEAKER_02: Um, in times of recessions, bonds tend to be a very good negatively correlated asset.
12:44
SPEAKER_02: Uh not all bonds across the board, but like higher grade quality bonds.
12:48
SPEAKER_02: Um, so they do have their place.
12:50
SPEAKER_02: But yeah, like you were saying, I do try to be very tactical with our portfolios.
12:54
SPEAKER_02: Uh, when things are getting expensive, valuations are high, uncertainties are increasing, and it seems like the market just like, well, nothing could go wrong.
13:03
SPEAKER_02: I think that's personally that's the time where I say, okay, let's raise a little bit of cash.
13:08
SPEAKER_02: I'm not going 100% cash, but let's just increase it a little bit to make the client's journey smoother and be able to take advantage of pullback opportunities.
13:16
SPEAKER_02: I love to pick up stocks when the broad market declines 10%.
13:20
SPEAKER_02: It's a great time to get in.
13:22
SPEAKER_02: Um, sometimes it's it's the wrong industry, but you have to make sure you're you're looking at something that will likely appreciate in the rebound.
13:32
SPEAKER_02: Um a lot of times all those assets get correlated on the downside.
13:37
SPEAKER_02: So um it's not necessarily anything fundamental going on with the specific company, but they all go down and cohort.
13:46
SPEAKER_02: So um, yeah, that's it, that's important.
13:48
SPEAKER_02: Can you talk to the annuity landscape has really changed over the last 20, 30 years?
13:55
SPEAKER_02: Um, where has that evolved from in the last 10 years?
13:58
SPEAKER_02: Like, where's what what what's the big theme right now, the structure of annuities?
14:04
SPEAKER_01: Okay.
14:05
SPEAKER_01: Annuities have changed so much.
14:08
SPEAKER_01: We are on at least the ninth version of annuities.
14:13
SPEAKER_01: Uh, understand that the very first annuity was established by Andrew Carnegie for retired teachers way back in the 18, you know, late 1800s.
14:23
SPEAKER_01: All right.
14:23
SPEAKER_01: Um I think uh okay, so the real annuities that we talk about from the IRS code, okay, those were set as a as a pension.
14:36
SPEAKER_01: You should look at uh an annuities as an as a personal pension, something that you can set aside, and you can never outlive that money once you start the income.
14:48
SPEAKER_01: Okay, that that income will last you as long as you possibly, as long as you are alive.
14:53
SPEAKER_01: Um, now there were some that were you know date stamp that it runs out after 10 years, 20 years.
15:00
SPEAKER_01: You have that option even now, but most of the annuities that we do, if you do an annuity with us, we expect you to turn that income stream on and live as long as you can.
15:11
SPEAKER_01: That's how you beat the house.
15:12
SPEAKER_01: Well, you're not gonna live forever, okay?
15:15
SPEAKER_02: But and you're saying turn the annuity income stream on, not annuitizing it.
15:21
SPEAKER_01: Yes, yes.
15:23
SPEAKER_01: Uh, and that's been a change.
15:25
SPEAKER_01: Uh before you could not get, and that was before about 2006, where you had a hard time getting an annuity and starting an income stream without giving up the principal, and that changed in 2006, and so that was very beneficial for us that people still had access to their principal when 2008 came around, but they had a guaranteed income stream based on the principal before it fell.
15:55
SPEAKER_02: Yeah, before when you annuitized it, you were essentially giving up your rights to that money in return for a guaranteed income stream.
16:03
SPEAKER_02: So that dynamic has really changed throughout the years.
16:06
SPEAKER_01: Yep.
16:06
SPEAKER_01: And there's there's annuities that are beneficial for leaving it as a death benefit.
16:13
SPEAKER_01: That used to be uh part and parcel between the the late 1990s and the early 2000s.
16:20
SPEAKER_01: Um that runs counter to I believe what the real definition for annuity is uh is to take your income during your lifetime, and we can always find more places to put your excess money if you have too much money, you know.
16:39
SPEAKER_01: Uh let the income stream go.
16:43
SPEAKER_01: Um now, so the thankfully, thankfully, the industry has moved a little bit away from uh just uh buying annuity and socking away for retirement.
16:54
SPEAKER_01: Because one tax-wise is not necessarily a good investment to leave to your beneficiaries, to leave your heirs because they get taxed at a higher level.
17:03
SPEAKER_01: Um take the income.
17:06
SPEAKER_01: Uh, and there's so many pieces now that give uh like a they'll add a bonus to the amount that you move in, sometimes up to 20%.
17:17
SPEAKER_01: And I've even heard one that went up to 30%.
17:19
SPEAKER_01: So if you have a hundred thousand that don't look at at when that money hits, they treat it as though it was 120 or 130,000.
17:28
SPEAKER_01: And then the the older you are, the higher the payout.
17:32
SPEAKER_01: Some uh there's some that's paying like 8.5 percent.
17:36
SPEAKER_01: Uh that's the one I got for my mother-in-law.
17:39
SPEAKER_02: That's hard to get guaranteed in the stock market.
17:41
SPEAKER_02: Well, there's no way to get that guaranteed in the stock market.
17:45
SPEAKER_01: No, no, uh, eight and a half percent uh is as high as I've seen it.
17:52
SPEAKER_01: Uh and I've been through some pretty high interest rates.
17:56
SPEAKER_01: I have not been, I started 1994, not in the 80s when it was double digit.
18:02
SPEAKER_01: Okay.
18:03
SPEAKER_01: So to be fair, this is as high as I've seen it in 20, 25 years.
18:10
SPEAKER_01: Okay.
18:11
SPEAKER_01: Um they haven't cut them down um thus far.
18:15
SPEAKER_01: The new the insurance companies have kept it at at that rate.
18:19
SPEAKER_01: Um, if interest rates continue to get cut, the Fed continues to cut, that might that that might change, okay.
18:28
SPEAKER_01: But when you have an annuity, you have a contract, it's they can't they have a lot of lawyers and actuarians on their side.
18:39
SPEAKER_01: Uh so if the annuity company doesn't develop the the the annuity packet correct, they're not in business anymore.
18:50
SPEAKER_01: So I've actually have seen and witnessed five annuity companies that don't write annuities anymore.
18:57
SPEAKER_02: Wow.
18:58
SPEAKER_01: Because they made a wrong tactical error.
19:00
SPEAKER_01: I mean they were thinking, well, interest rates are at six percent, we'll take our we'll take our uh the money from the client, uh, give them out six percent, and we can keep going.
19:12
SPEAKER_01: Well, from 2008 to what 2021?
19:18
SPEAKER_02: 2020 was probably the low.
19:21
SPEAKER_01: Yeah, uh, we were close to zero interest rates, and uh certainly below one percent.
19:28
SPEAKER_01: And if you're banking on something and making you six percent and paying out like that, and you're only making one percent, so there were a large there was like I said, and they were big insurance companies.
19:42
SPEAKER_01: Um, now they still survive, but they don't write annuities anymore.
19:47
SPEAKER_01: Because this now, if you have a concern about the guarantees that annuity offers, uh, I remember uh an annuity company that we used to deal with, and their credit rating started as a single A overnight because the Fed had changed the uh liability um uh the the protection that they that they need to hold in reserve uh went from 50 it went from 20 to 50 percent overnight.
20:17
SPEAKER_01: So if the insurance company has to have enough resources in reserve to cover their liabilities up to a percentage, um and that was changed overnight in the early 2000s.
20:31
SPEAKER_01: Uh and so I saw an insurance company, a duty company went from a rating of a single A to a single B, which is a three-step drop, you know, single A, triple B, double B, single B.
20:46
SPEAKER_01: And those guarantees that it offered were only as good as the company to back it up.
20:51
SPEAKER_01: Well, we held the hands of the clients and they were all made good, even with that with that circumstance, but we don't deal with any companies that are less than single A.
21:03
SPEAKER_01: Um, we don't.
21:05
SPEAKER_01: We've had opportunities and they've they've called us and said, hey, we could give you a high rate.
21:10
SPEAKER_01: Not interested.
21:11
SPEAKER_02: Yeah.
21:13
SPEAKER_01: If I have a guarantee for my client, I want to make sure that that guarantee is gold.
21:17
SPEAKER_02: So annuities certainly have their place in a couple different functions.
21:21
SPEAKER_02: Um, I really like this kind of stool that three-legged stool that Brian talks about, where in the investment world, you can have growth, you can have safety of principle, and you can have income.
21:33
SPEAKER_02: Now you can get two of those things in most products.
21:37
SPEAKER_02: And that's the case with annuities.
21:39
SPEAKER_02: You can get um safety of principle and income.
21:43
SPEAKER_02: And in the stock market, you can get growth and you can get income.
21:47
SPEAKER_02: You can't none of them do everything.
21:50
SPEAKER_02: So that's why we really advocate for a mix of the two.
21:54
SPEAKER_02: Um, if you're concerned about the market, it has its place.
21:58
SPEAKER_02: If you need income, it has its place.
22:00
SPEAKER_02: But you're not going to get as much growth as you will potentially in the stock market.
22:05
SPEAKER_01: Correct.
22:05
SPEAKER_01: Correct.
22:06
SPEAKER_02: And there's a lot of cool products these days.
22:08
SPEAKER_02: Um, I'm I'm not the annuity guy.
22:11
SPEAKER_02: If if you want details on anything or want to inquire about it, call our office, talk to David or Brian.
22:16
SPEAKER_02: But um, they've been doing more of the buffered ETFs lately, where essentially you're kind of waived the first percentage decline on the stock market, and and you can specify whether you want that to be 10%, 15%, 20%.
22:32
SPEAKER_02: Obviously, you're probably thinking, well, why don't why wouldn't I just do the 20%?
22:36
SPEAKER_02: Well, obviously, there's a trade-off.
22:38
SPEAKER_02: You're gonna get less upside and less participation in the market.
22:41
SPEAKER_02: So you just need a product that's appropriate for you.
22:44
SPEAKER_02: If annuities are appropriate for you, they're not for everyone.
22:47
SPEAKER_01: No, no.
22:48
SPEAKER_01: But where we see uh a big benefit for the annuities, okay.
22:54
SPEAKER_01: Uh when we go back to avoiding risk, managing risk, transferring risk.
23:01
SPEAKER_01: Again, it's very hard to avoid risk.
23:03
SPEAKER_01: You walk across the street, you're taking a risk.
23:06
SPEAKER_01: Okay.
23:07
SPEAKER_01: So uh plain fact, simple.
23:09
SPEAKER_01: Managing risk, some people are okay with market dips, and because they they've utilized and understand the three-bucket approach, first bucket, second bucket, third bucket.
23:21
SPEAKER_01: Um, but those people that get nervous about the market, they need to be in the market because they need the growth, but they want to have some buffers alongside of it.
23:31
SPEAKER_01: It works out well where in an nudity.
23:34
SPEAKER_01: One of the strategies that we like a lot is uh for retirement.
23:39
SPEAKER_01: If you have an IRA, okay, and you reach 73, you have to take a required minimum distribution.
23:47
SPEAKER_01: So if you have uh if you have a million dollars in your IRA, doesn't it make sense to move like 500 uh up to 500 into a guaranteed product?
23:58
SPEAKER_01: And when you have the RMD, most of uh required minimum distribution, most of the annuities pay more than what the required minimum distribution percentage is.
24:11
SPEAKER_01: So you use that, and for a couple of years, you can actually take all of your required minimum distribution from the income stream that the annuity provides.
24:22
SPEAKER_01: Let the other one let the rest of the annuity, let the rest of the IRA grow uh without without taking any withdrawals.
24:31
SPEAKER_01: We like that strategy a lot.
24:33
SPEAKER_01: It makes a lot of sense.
24:35
SPEAKER_02: Yeah, and and all of that allocation kind of depends on your situation and your investment objectives, where you are in life, how long of a time horizon you have, um, how much income you need, and what's your liquidity needs, or do you need to access this money?
24:51
SPEAKER_02: So all these kind of factor into whether an annuity might be appropriate for you.
24:54
SPEAKER_02: But definitely talk to your financial professional, give us a call.
24:58
SPEAKER_02: We'll be happy to answer those questions.
25:00
SPEAKER_02: Um, I got a couple more questions for you, David.
25:02
SPEAKER_02: Um so I've noticed being in this industry that many times people contribute to their retirement plans, 401ks, and for good reason, a lot of times the employer matches, so you're essentially getting free money.
25:16
SPEAKER_02: But commonly they're not they're not investing outside of there, they're not investing in non-retirement assets.
25:23
SPEAKER_02: Can you talk a little bit to that?
25:24
SPEAKER_02: Like, what would be a healthy mix of the two, and why why is it important to have non-retirement assets to go alongside with your retirement assets?
25:34
SPEAKER_01: Every retirement asset other than a Roth, well, even the Roth, they all have restrictions.
25:41
SPEAKER_01: You got to play by their rules, and most distributions are a hundred percent taxable, uh, except the case of a Roth.
25:53
SPEAKER_01: But you have to have the Roth for at least five years.
25:56
SPEAKER_01: Uh now you have access to the principal at any time, but it's why shoot yourself in the foot?
26:02
SPEAKER_01: You have it inside a Roth to grow tax-free, and when you take it out to be tax-free, that's the benefit of a Roth.
26:09
SPEAKER_01: Um, now I now I have seen people and we've come across very good savers that would have 80% of their portfolio in retirement accounts and yet only 20% in non-retirement.
26:24
SPEAKER_01: If they and if they're not 59 and a half, they uh they have some difficulty in accessing those retirement funds.
26:35
SPEAKER_01: There's some people that want to retire at age 55, and yet they keep socking away under their 401k and assets.
26:43
SPEAKER_01: And I said, you better be careful because you've got four and a half years to live off, and we're not even talking that you're eligible for Social Security.
26:53
SPEAKER_02: Yeah.
26:53
SPEAKER_01: Uh, because you you're not eligible for Social Security any sooner than 62.
26:58
SPEAKER_01: And there's some thoughts that perhaps that might be that might be extended.
27:02
SPEAKER_01: Okay, we don't we don't know that.
27:04
SPEAKER_01: We're just hearing.
27:06
SPEAKER_02: Yeah, I recently had a prospect in that situation.
27:08
SPEAKER_02: He wanted to early retire at 45 and has 1.5 million in retirement assets, but he doesn't have anything he can really access without penalty, so it's really a tough picture.
27:20
SPEAKER_02: Yeah, now there's there's certain things he can do to make that happen in the next couple years, but um it's it's really important to have a mix of the two.
27:29
SPEAKER_01: Absolutely.
27:30
SPEAKER_01: So I unfortunately uh it's easy to put to max out your 401k because you you want to uh get a tax break.
27:40
SPEAKER_01: Uh, and sometimes for the larger uh wage earner, that that's the only tax break they can get is max out.
27:48
SPEAKER_02: You might get a match and you don't think about it, it comes out of your paycheck.
27:52
SPEAKER_01: Yeah, but it's but don't don't uh neglect having money that's non-retetirement that you can have access to without restrictions.
28:04
SPEAKER_02: That's and if you have even more liquidity needs in the near future, we don't recommend having that invested in anything risky.
28:12
SPEAKER_02: That should be something that you know is going to be there in three months, six months, whether that's a money market or sitting in cash.
28:20
SPEAKER_01: Yes, very much so.
28:22
SPEAKER_02: So let's leave it with one final question.
28:25
SPEAKER_02: If you had to pick one thing that is the biggest mistake you see investors or clients doing, what would what would it be?
28:33
SPEAKER_02: I'm sure you can pick out a handful.
28:35
SPEAKER_02: There's there's so many.
28:36
SPEAKER_01: Can I say one of the biggest ones?
28:40
unknown: Okay.
28:40
SPEAKER_02: Yeah, just pick your favorite.
28:41
SPEAKER_02: Well, not your favorite, but the one you see most common, or or maybe I should say the most impactful.
28:49
SPEAKER_01: One that just pulls my hair out.
28:55
SPEAKER_01: Yeah.
29:01
SPEAKER_01: Panicking.
29:06
SPEAKER_01: Because it does a disservice to their the goals and objectives that they've laid out that we've made that we have planned for, and it just sort of throws their whole portfolio uh into um into a tailspin.
29:24
SPEAKER_01: If you um one of the worst things you can do in the market is to buy high and sell low.
29:33
SPEAKER_01: If and we try to avoid that at all costs.
29:37
SPEAKER_01: Uh there's four ways you can go in the market.
29:40
SPEAKER_01: You can buy low, sell high, that's gonna make you money.
29:44
SPEAKER_01: You could buy high, sell higher, will make you money.
29:48
SPEAKER_01: You can buy uh have the dividends reinvest and so forth, that's gonna make you money.
29:53
SPEAKER_01: But if you buy high and sell low, you're gonna lose money every time.
30:00
SPEAKER_01: Every time, and to try to hold people's hand, we have done a great job of holding people's hands as long as possible to let them know hey, this is your money, and there's a reason why we do bucket one, bucket two, bucket three.
30:17
SPEAKER_01: Okay, now if we need to transfer some monies from bucket three, I mean bucket two down to bucket one, we can do that.
30:26
SPEAKER_01: Okay, but let's be reasonable, you know.
30:29
SPEAKER_01: Um, you don't need to move all of your bucket two into bucket one when the roller coaster is going down.
30:36
SPEAKER_01: I'm sorry, I've I'm talking about stories that I have already talked about before.
30:40
SPEAKER_02: I can't bring them in, which I know it's a great point, and that's that's a fascinating thing.
30:45
SPEAKER_02: There's so many theories and books on the psychology of investors.
30:49
SPEAKER_02: It I mean, it's it's easy for it's an easy move to make, and and people like to take action to make it feel like they're controlling their situation.
30:57
SPEAKER_02: It's it's easy to buy more stuff and put all your money in at market highs.
31:02
SPEAKER_02: And when the market's down 20, 30 percent, to take it all out when people on TV are saying this is the next 08-09 crisis, like you need to double down, head for the bunker.
31:14
SPEAKER_02: And commonly, I mean, you know how financial news works.
31:18
SPEAKER_02: It's it's trying to get ratings.
31:19
SPEAKER_02: Um, headlines scare and gets people's attention.
31:24
SPEAKER_02: But just make sure, like you were saying in the beginning, make sure you're prepared for those events.
31:29
SPEAKER_02: If you have enough liquidity to cover any downturn where you don't have to necessarily take from that, you don't have to worry about it.
31:35
SPEAKER_02: Just remember that's your your bucket that's there for the long term for growth.
31:41
SPEAKER_01: Yes, yes, yeah.
31:43
SPEAKER_01: I remember these stories about uh uh people getting in an elevator in 1929 before the stock market crash.
31:51
SPEAKER_01: Okay.
31:52
SPEAKER_01: Uh I wasn't there, by the way.
31:58
SPEAKER_01: Uh there's a financial advisor who's they didn't call him financial advisors then, but he's uh he's a financial uh manager and he's in the elevator, and the elevator operator said, What do you think of this stock?
32:11
SPEAKER_01: You know, I could borrow money from up to 70, and I could buy this stock.
32:19
SPEAKER_01: He's he's he writes later and said, That's when I knew it was time for me to cash out some stocks and raise my cash position.
32:29
SPEAKER_01: And then October 2020, 19, 29 happened.
32:33
SPEAKER_02: Okay, yeah, and I say a similar thing when I see clients that have been sitting on the sidelines come to me now or a month ago and say, I want to put all my money in the stock market now.
32:44
SPEAKER_02: I say, ooh, I think it's getting a little too euphoric now.
32:48
SPEAKER_02: You're making me worried.
32:50
SPEAKER_01: Well, I'm one of the things I really like about your managing of the portfolios, Mike, is that when you get a uh a$200,000 drop in the bucket, you don't invest it right away.
33:01
SPEAKER_01: Now we put in a money market, it gets us four percent uh uh until you're there's a piece that you like that you want to buy, uh, and I that you invest it over a period of weeks, even months.
33:16
SPEAKER_01: But in the meantime, we're gonna get that four percent uh money from the money market.
33:22
SPEAKER_01: Uh it's a nice default to have, but don't in and I guess don't invest uh don't invest your money just for the investment's sake.
33:35
SPEAKER_01: There should be a purpose for why you invest, uh not yeah.
33:41
SPEAKER_01: Um everything in the in the portfolio is well thought out uh that Mike does.
33:47
SPEAKER_01: And we're very intentional uh about what we have and what we recommend.
33:55
SPEAKER_01: There's a reason why we do that.
33:58
SPEAKER_01: Uh and I know that uh Brian and I really like to do those financial plans uh because every investment decision should fit in that in that financial plan.
34:10
SPEAKER_01: Uh if we look at your family as a jigsaw puzzle, we want the piece to fit.
34:15
SPEAKER_01: And so what investment piece will take care of this right now?
34:20
SPEAKER_01: Um that's what I got.
34:23
SPEAKER_02: Yeah, that's all said.
34:24
SPEAKER_02: And if you want to utilize our services, any of those areas or all of those areas, which many of our clients do, whether it's asset management, getting a financial plan for yourself, um, maybe discussing whether annuity is appropriate for you.
34:36
SPEAKER_02: Feel free to check out our website.
34:38
SPEAKER_02: You can schedule an appointment directly on there or call one of our numbers.
34:42
SPEAKER_02: Uh this one's our Pennsylvania number, but it feeds through everywhere, 724-463-1331.
34:48
SPEAKER_02: Uh, we put out a lot of content.
34:49
SPEAKER_02: I'll just show you our blog posts real quick.
34:52
SPEAKER_02: Um, we try to get one out every day.
34:54
SPEAKER_02: I do the week ahead post on Monday, just talks about what I'm looking at in the markets and the economy, what potentially could affect the markets, and then just discuss um a little recap of what happened in the previous week.
35:06
SPEAKER_02: Uh, we do different things.
35:07
SPEAKER_02: David did one on gold on Tuesday.
35:10
SPEAKER_02: Brian wrote about a recent experience where he visited a bunker.
35:14
SPEAKER_02: Um, and the bunker is kind of cool.
35:16
SPEAKER_02: It was something created um by the government to in anticipation of a World War III or big, big downturn and meltdown of the country.
35:26
SPEAKER_02: And he ties that into uh people today where you know, whether it's they think the dollar's crashing or the economy is crashing, the government's doing this, government's doing that, putting us in the gutter.
35:38
SPEAKER_02: It's important to prepare, but make sure you're not going overboard with that.
35:42
SPEAKER_02: Uh, I mean, history tends to go on, and if those things do happen, we probably have bigger problems than whether you have a gold bar.
35:54
SPEAKER_01: We love savers, we really do.
35:57
SPEAKER_01: Uh, but you also have to live in the here and now.
36:01
SPEAKER_01: So enjoy your saving.
36:03
SPEAKER_01: We appreciate that.
36:04
SPEAKER_01: We applaud you for that, but don't go overboard.
36:07
SPEAKER_01: Enjoy, enjoy your life, enjoy your family, enjoy your grandchildren.
36:12
SPEAKER_02: Yep, well said.
36:13
SPEAKER_02: So keep an eye out for those blog posts.
36:16
SPEAKER_02: Um, David's also going to be doing a live seminar in Sarasota, I believe, November 12th.
36:22
SPEAKER_02: 12th.
36:22
SPEAKER_01: November 12th.
36:23
SPEAKER_02: And that that's going to be tailored toward uh independence in investing for women.
36:29
SPEAKER_02: Is that so?
36:31
SPEAKER_02: Make sure we don't have that event out yet, but we'll have that out shortly if you want to register for it.
36:37
SPEAKER_02: And then uh join us again next Friday.
36:40
SPEAKER_02: We'll be doing the same thing, different topics.
36:42
SPEAKER_02: Hopefully, the government's back open and we can have some visibility into economic data.
36:48
SPEAKER_02: Um, before we sign off, I'm gonna put on our disclosures.
36:52
SPEAKER_02: Um, before I do that, everyone have a nice week, and we'll see you next Friday.
36:57
SPEAKER_00: Thank you.
36:58
SPEAKER_00: It's offered through LPL Financial LLC, member FINRA, and SIPC.org.
37:03
SPEAKER_00: Advisory service is offered through LPL Financial LLC, a registered investment advisor.
37:08
SPEAKER_00: Brian Peluso, Michael Kutch, and David Harper are registered representatives of LPL Financial LLC.
37:15
SPEAKER_00: Content discussed is for informational purposes only and not intended as an offer or solicitation to buy or sell any security or investment strategy.
37:23
SPEAKER_00: Any opinions expressed are those of the authors and do not necessarily reflect the views of LPL Financial or its affiliates.
37:30
SPEAKER_00: All investments involve risk, including the possible loss of principal.
37:34
SPEAKER_00: This communication may include links or references to third-party websites.
37:38
SPEAKER_00: These links are provided as a convenience only.
37:40
SPEAKER_00: LPL Financial and its representatives are not responsible for the accuracy or content of such sites.
37:46
SPEAKER_00: Brian, Mike, and David, and HBK Provident Advisors may only transact business in states where they are properly registered or exempt from registration.