Latest / Money In Motion with Klaas Financial / The Emotion of Money

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The Emotion of Money · Money In Motion with Klaas Financial

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  Speaker 1: And if you have questions for our retirement planning professionals
• 0:02
  Speaker 1: from Class Financial. Love to have you join us this morning.
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  Speaker 1: Telefuh number to get on the air six SO eight
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  Speaker 1: three two one thirteen ten. That's six SO eight three
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  Speaker 1: two one thirteen ten. Love to have you join us
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  Speaker 1: this morning, and we'll be talking with CJ. Closs and
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  Speaker 1: Eric Schwartz of Kloss Financial. You can learn more about
• 0:17
  Speaker 1: Class Financial on their website class financial dot com. That's
• 0:22
  Speaker 1: Coss k l aas financial dot com. Great website. To
• 0:26
  Speaker 1: learn more about the team at Class Financial, there's separate divisions.
• 0:29
  Speaker 1: Listen back to this previous shows podcast. Also sign up
• 0:32
  Speaker 1: for the weekly Market Paul's newsletter that all available to
• 0:35
  Speaker 1: you at Closs Financial dot com. There telephone number six
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  Speaker 1: SO eight four four two five six three seven as mentioned,
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  Speaker 1: Joining us this morning our CJ Class and Eric Schwartz. CJ,
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  Speaker 1: how you doing this week?
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  Speaker 2: I'm doing great. How are you, Sean?
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  Speaker 1: I'm doing really really good?
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  Speaker 3: Eric?
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  Speaker 1: How have you been? Not too bad?
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  Speaker 3: It's been an eventful week, but we're hanging in there.
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  Speaker 1: I bet it's it's interesting times and we've got you know,
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  Speaker 1: I almost feel like we should call this week show,
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  Speaker 1: Money and Emotion this morning, because we're going to be
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  Speaker 1: talking about emotions and it's a it's is as much
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  Speaker 1: as you know, we're just a bunch of tough guys,
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  Speaker 1: and you know, emotion everything obviously is important. Obviously your
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  Speaker 1: security and financial security of your and your family and
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  Speaker 1: other things are really really important. And we're going to
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  Speaker 1: talk about about that wall at roller Coaster a little
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  Speaker 1: bit later this actually say a little bit later on
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  Speaker 1: this morning, a little bit later this this segment, because
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  Speaker 1: before we get to this week's conversation, we're actually going
• 1:31
  Speaker 1: to talk about the closs quiz question the week. We're
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  Speaker 1: going to do one this week on the program, a
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  Speaker 1: chance for you to win a fantastic prize from our
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  Speaker 1: friend zach Laws Financial. They provided a twenty five dollars
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  Speaker 1: gift card to the Cheesecake Factory. And before we start
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  Speaker 1: talking on this week's topic, let's actually take a look
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  Speaker 1: back at last week's show and get the class quiz
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  Speaker 1: question of the week and the answer there as well.
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  Speaker 3: Yeah, so thank you to everyone for listening as always,
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  Speaker 3: and congratulations to our winner from last week. And that
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  Speaker 3: was Jillioned from Minona and the question was true or false?
• 2:02
  Speaker 3: The US Department of Health says that a sixty five
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  Speaker 3: year old a seventy percent chance of needing some kind
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  Speaker 3: of long term care. And the answer to that was true.
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  Speaker 1: And that again last week's program, what really good duck
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  Speaker 1: Q and A last week and congratulations to Jillian. By
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  Speaker 1: the way, if you missed that program, important to listen back.
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  Speaker 1: You can always sat on over to Clossfinancial dot com.
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  Speaker 1: That's Coss k l a a s Financial dot com.
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  Speaker 1: Of course, I'll listen back to that in previous shows
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  Speaker 1: podcast as mentioned today, we're going to be diving into
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  Speaker 1: the wild world of investor emotions and you know, sometimes
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  Speaker 1: you feel like you're wallet's on a roller coaster, and
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  Speaker 1: we're going to be talking about how keep those feelings
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  Speaker 1: in check and also really understand your risk tolerance, aren't we.
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  Speaker 2: Yeah, this is an important topic, especially with what Eric
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  Speaker 2: was just mentioning in terms of the volatility of the
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  Speaker 2: markets here in the last week. The truth be told,
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  Speaker 2: we write these shows and kind of script everything out
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  Speaker 2: months in advance, so we did not know that the
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  Speaker 2: show around, as you called it, Money in Emotion, Sean,
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  Speaker 2: we did not know that this topic would be landing
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  Speaker 2: on such a volatile time in the markets. But listen,
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  Speaker 2: even the savvyest investors get jitters when money is involved.
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  Speaker 2: So what we're really talking about here is what is
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  Speaker 2: your personal risk tolerance? So Eric and I we use
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  Speaker 2: some different terms to describe this, but there is the
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  Speaker 2: kind of like quantitative aspect of your capacity for risk.
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  Speaker 2: So quantitatively, how much money do you need out of
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  Speaker 2: your portfolio, how much debt do you have, There's all
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  Speaker 2: these like quantitative factors to determine.
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  Speaker 1: Your capacity, but that is.
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  Speaker 2: Very different than your personal risk tolerance. And what we
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  Speaker 2: like to say is personal risk tolerance overwhelms every other
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  Speaker 2: measure of tolerance and for risk. So think of it
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  Speaker 2: this way. If I had one hundred million dollars and
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  Speaker 2: I only needed ten thousand dollars a year to live comfortably,
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  Speaker 2: I have a massive capacity for risk taking. You know,
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  Speaker 2: assumptively speaking, I could put all of that money into
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  Speaker 2: stocks and it really wouldn't matter because I have so
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  Speaker 2: much financial capacity for it. But that doesn't mean that
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  Speaker 2: I'm going to put it all in stocks because my
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  Speaker 2: personal risk tolerance may be very very low. So that's
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  Speaker 2: the concept of what we're discussing today is what is
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  Speaker 2: your risk tolerance, How emotional do you get when the
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  Speaker 2: market gets volatile, or what we call what messes with
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  Speaker 2: your chill level? So there's things like, you know your goals,
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  Speaker 2: This can mess with your chill level? Your goals, what
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  Speaker 2: are your dream vacations? How much do you want to
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  Speaker 2: have in a retirement nest egg. Your age can impact
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  Speaker 2: your your chill level in terms of am I really
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  Speaker 2: young and I don't care about market volatility? Or am
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  Speaker 2: I older and needing to live off my investments? How
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  Speaker 2: much wh investment income do you need on an annual
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  Speaker 2: basis in retirement? What's your overall wealth? What's your history
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  Speaker 2: with money? As a matter of fact, much like with children,
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  Speaker 2: we find that adults in retirement tend to have a
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  Speaker 2: personal risk tolerance that often is reflective of their history
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  Speaker 2: with investing or the history with money. Said another way,
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  Speaker 2: if there's anybody listening here who is a child of
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  Speaker 2: the Great Depression, now you would be older, by the way,
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  Speaker 2: if you're listening to me right now. But if you
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  Speaker 2: are a child of the Great Depression, you know you
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  Speaker 2: know exactly what I'm talking about. You probably, maybe not always,
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  Speaker 2: but probably have a very low investment volatility risk tolerance
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  Speaker 2: because you just don't trust that we're not going to
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  Speaker 2: run into another Great depression. And I say this because
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  Speaker 2: we work with or have worked with, so many children
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  Speaker 2: of the Great Depression that it is baked into your
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  Speaker 2: bones once you have experienced something like that. So basically,
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  Speaker 2: it's about how much risk are you willing to handle
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  Speaker 2: without losing sleep? And as we age, many of us
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  Speaker 2: will usually play it safer. But of course everyone's different,
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  Speaker 2: and let's be real, those emotional triggers can really sneak
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  Speaker 2: up on you and be challenging. So here's some investor
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  Speaker 2: personalities that are just simplified. A conservative investor personality would
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  Speaker 2: be like think of a cozy blanket, CDs, bonds, FDIC,
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  Speaker 2: ensured cash at your bank, things like that. A moderate
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  Speaker 2: investor might be somebody who wants to live a little
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  Speaker 2: bit in both worlds. I want to have some stocks
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  Speaker 2: for long term growth, maybe some bonds for middle term,
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  Speaker 2: and then I want to have enough cash to kind
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  Speaker 2: of cover a rainy day. That's what we would call
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  Speaker 2: somebody who's moderate. More aggressive investors would be wanting to
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  Speaker 2: load everything up into stocks. Somebody who likes to be
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  Speaker 2: either more risky or who understands their capacity risk capacity
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  Speaker 2: for risk and conservative think CD's bonds, moderate thinks a
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  Speaker 2: blend of stocks and bonds, aggressive think pretty much all stock.
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  Speaker 1: Talking this morning with CJ. Closs and Eric Schwartz. They
• 7:10
  Speaker 1: are we're retirement finding professionals from Class Financial. If you
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  Speaker 1: have a question, love to hear from you this morning,
• 7:14
  Speaker 1: get you on the air with CJ and Eric. Telphon
• 7:16
  Speaker 1: number six soh eight three two one thirteen ten. That's
• 7:19
  Speaker 1: six oh eight three two one thirteen ten. Don't forget
• 7:21
  Speaker 1: about the website coss financial dot com. That's coss k
• 7:24
  Speaker 1: l aa S financial dot com and their telephone number
• 7:27
  Speaker 1: six oh eight four four two five six three seven.
• 7:30
  Speaker 1: No charge for that initial get to know your appointment
• 7:32
  Speaker 1: at Coss Financial. It will be complimentary to you again
• 7:35
  Speaker 1: their number six oh eight four four two five six
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  Speaker 1: three seven. So, CJ, when you talk about some of
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  Speaker 1: those personalities, kind of those very simplified look at personalities,
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  Speaker 1: how do you know where as an individual you might
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  Speaker 1: fit into those? Yeah, that's the question, right.
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  Speaker 2: I mean, we're we're going through this at a high
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  Speaker 2: level of like things to consider around you, or what
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  Speaker 2: we called your chill level, or we're simplifying uh, these
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  Speaker 2: terms conservative, moderate, agg of when it comes to investing.
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  Speaker 2: But each of you listening to the show today you
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  Speaker 2: have to figure out And I think, really, this last
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  Speaker 2: week is a great litmus test for you to kind
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  Speaker 2: of pause and say where do I fall? Because truth
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  Speaker 2: be told, a lot of people come and meet with
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  Speaker 2: Eric or myself and they'll say, yeah, no, I think
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  Speaker 2: I'm good, I'm fine with market volatility, and I understand
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  Speaker 2: it's a long game, and YadA, YadA, and then a
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  Speaker 2: week like this happens and they're calling us four times right,
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  Speaker 2: and you go, wait, So what I mean by that
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  Speaker 2: is often people don't know their risk tolerance because they
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  Speaker 2: either don't remember the last market correction, or they're young
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  Speaker 2: and they haven't really experienced one yet, or let's actually
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  Speaker 2: take it beyond that, they really don't like the guy
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  Speaker 2: in the White House, right, So, meaning like, sometimes this
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  Speaker 2: risk tolerance thing can be a I don't like the
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  Speaker 2: president or I don't like the policies or whatever it
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  Speaker 2: might be, and that suddenly triggers something that causes poor
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  Speaker 2: patterns of behavior relation to the long term success. So
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  Speaker 2: what you have to figure out is where do you fit?
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  Speaker 2: And some things for you to consider as it relates
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  Speaker 2: to where you should should consider fitting is how long
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  Speaker 2: do you have until you need this money? What are
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  Speaker 2: some of your money dreams? Honestly, how much does losing
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  Speaker 2: money freak you out? If your portfolio drop ten to
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  Speaker 2: twenty percent, would you panic and sell? And finally, do
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  Speaker 2: you hate losing money more than you love seeing it grow?
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  Speaker 2: So these are just some high level questions for you
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  Speaker 2: to consider. But if you can, and by the way,
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  Speaker 2: for those who don't know you become a client of
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  Speaker 2: our firm. We actually walk you through a number of
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  Speaker 2: different questions to try to move towards a risk tolerance.
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  Speaker 2: Although I will tell you, no matter how many questions
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  Speaker 2: we ask people, the greatest test for risk tolerance is
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  Speaker 2: something like this last week. So really ask yourself some
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  Speaker 2: of these hard questions, and don't be ashamed if you
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  Speaker 2: come to the end of it and go, you know what,
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  Speaker 2: I just don't like investing in stocks. Fantastic, God bless you.
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  Speaker 2: I'm so glad you figured that out. Now you're gonna
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  Speaker 2: have to understand what that means, because there's some risk
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  Speaker 2: associated with not investing in stocks, But at least you
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  Speaker 2: have come to know yourself and at least you can
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  Speaker 2: stay the course and what you will do next.
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  Speaker 1: Really good perspective this morning as we talk with CJ.
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  Speaker 1: Closs and Eric Schwartz. They are our retirement planning professionals
• 10:26
  Speaker 1: from Class Financial website Class financial dot com. That's Coss
• 10:29
  Speaker 1: k l A as Financial dot Com telephone number six
• 10:32
  Speaker 1: soh eight four four two five six three seven. Don't
• 10:35
  Speaker 1: forget that first visit, that first apployment of Class Financial.
• 10:37
  Speaker 1: It will be complimentary to you again. They're number six
• 10:40
  Speaker 1: so eight four four two five six three seven. So Eric,
• 10:43
  Speaker 1: as CJ mentioned about that kind of that chill level,
• 10:46
  Speaker 1: which I love, I want you to know your chill level,
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  Speaker 1: could you just DIY your retirement.
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  Speaker 3: Well, you definitely could. We have we have a lot
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  Speaker 3: of choices out here, Sean, you know, and I think
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  Speaker 3: especially when people are young and maybe they don't have
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  Speaker 3: a lot a lot saved, yet they feel more more
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  Speaker 3: confident or there it feels like there's less at stake.
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  Speaker 3: I think, and I think when we when we think
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  Speaker 3: about d I Y I think we often think of
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  Speaker 3: like home renovations. At least I do, and you know,
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  Speaker 3: a lot a lot of people d I Y they're
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  Speaker 3: they're home renovations. And some are better at it than others,
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  Speaker 3: some are some are much better at it than others.
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  Speaker 3: And and often we can we can tell where people
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  Speaker 3: fall in that just by looking at it. But I
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  Speaker 3: don't think it's all that that different when you think
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  Speaker 3: of managing your investments and saving for retirement. I mean,
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  Speaker 3: if you really love managing your money and and you
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  Speaker 3: want to spend the time on it, by all means,
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  Speaker 3: go for it, but be very honest with yourself, you know,
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  Speaker 3: is this something that you feel confident doing. Is this
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  Speaker 3: something you feel like you are willing to put the
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  Speaker 3: time into. Because half hearted attempts, they can be very pricey,
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  Speaker 3: and even the smartest people get lost in the financial weeds.
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  Speaker 3: And you know, tax laws, state planning, selling major assets.
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  Speaker 3: These are all very complex, very very complex problems. And
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  Speaker 3: one thing that CJ was just talking about that I
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  Speaker 3: think is the most dangerous part of kind of diy
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  Speaker 3: ing your retirement is your emotional reaction to big swings
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  Speaker 3: in the market. And when it's your own money that
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  Speaker 3: you're you're talking about or you're thinking about, you don't
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  Speaker 3: always make the most level headed decisions. We'll say so
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  Speaker 3: by all means, if this is something you're interested in, gonuts,
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  Speaker 3: but be very honest with yourself and make sure that
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  Speaker 3: you're really committing to it, because at the end of
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  Speaker 3: the day, it's really about time. How do you want
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  Speaker 3: to spend your time? Do you want to spend it
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  Speaker 3: in managing your investments, staying up to date on tax
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  Speaker 3: laws and changes, and are you in it for the
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  Speaker 3: long haul? Are you willing to do this this over time?
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  Speaker 3: And are you willing to take your own advice when
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  Speaker 3: it's hard to make those decisions? Okay, so DIY is
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  Speaker 3: definitely an option, but good advice does buy you peace
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  Speaker 3: of mind. Okay, So working with advisor, it's kind of
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  Speaker 3: like having a financial GPS, and you know, it really
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  Speaker 3: helps you take the emotion out of decisions. I had
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  Speaker 3: somebody an advisor I worked with when I was younger
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  Speaker 3: say to a client, you love your money, but I
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  Speaker 3: like your money. So it really allows you to have
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  Speaker 3: a much more level headed decision making process around it.
• 13:35
  Speaker 3: So if you are looking for an advisor, ask around,
• 13:38
  Speaker 3: talk to your friends, talk to your neighbors, and anybody
• 13:41
  Speaker 3: who's happy with their financial advisor, they're going to want
• 13:44
  Speaker 3: to tell you about it, because it's not something that
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  Speaker 3: if you're just like, I don't know he or she,
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  Speaker 3: They're fine, they do it I need them to do.
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  Speaker 3: You're not going to be willing to share that with
• 13:55
  Speaker 3: other people. So anybody who likes their advisor is going
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  Speaker 3: to be happy to to tell you about it. Now.
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  Speaker 3: Questions to ask when you're when you're meeting with an advisor,
• 14:04
  Speaker 3: I think the obvious one would be what are your fees?
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  Speaker 3: What is your structure? How to you know? How do
• 14:10
  Speaker 3: I compensate you? And are our interests aligned in that process?
• 14:16
  Speaker 3: Have you worked with people like me? Okay, so we
• 14:18
  Speaker 3: say all the time on the show, everybody's situation is unique.
• 14:21
  Speaker 3: Everybody is different and different people need different levels of
• 14:27
  Speaker 3: financial advice or maybe types of financial advice. Maybe you're
• 14:31
  Speaker 3: a a State of Wisconsin employee in the you know,
• 14:35
  Speaker 3: the State of Wisconsin has a very complicated pension. Great
• 14:38
  Speaker 3: ask the advisor, is this something you've worked with before?
• 14:41
  Speaker 3: Do you feel comfortable giving me advice on that? Or
• 14:45
  Speaker 3: maybe you are former military, right, that's also a specialized group.
• 14:50
  Speaker 3: So ask these questions upfront and ask things like how
• 14:54
  Speaker 3: often do we meet? What does this look like? If
• 14:56
  Speaker 3: I am actually your client now. A lot of times
• 14:59
  Speaker 3: people will ask, especially potential new clients, you know, is
• 15:02
  Speaker 3: this really worth it? We certainly think so. And an
• 15:07
  Speaker 3: advisor can help you set goals, they can help you
• 15:09
  Speaker 3: make a plan, manage your risk, and if you actually
• 15:15
  Speaker 3: do seek out an advisor, you get all of these great,
• 15:19
  Speaker 3: great benefits. But surprisingly only thirty five percent of Americans
• 15:22
  Speaker 3: actually use one. So if you're in that sixty five
• 15:25
  Speaker 3: percent that don't, you might want to think about changing that,
• 15:28
  Speaker 3: especial as especially as we go through some of these
• 15:31
  Speaker 3: more volatile times we've seen over the last week.
• 15:34
  Speaker 1: And talk about some really good insight as we talked
• 15:36
  Speaker 1: this morning with Eric Swartz and CJ. Closs, and you know,
• 15:40
  Speaker 1: having the experience day in and day out and managing
• 15:42
  Speaker 1: this stuff. It's a really important day. If you've listened
• 15:45
  Speaker 1: to the program for a while saying, you know what,
• 15:46
  Speaker 1: I should probably reach out and give them a call.
• 15:48
  Speaker 1: Today is a great day to do. Just that Telful
• 15:50
  Speaker 1: number for class financial six soh eight four four two five,
• 15:54
  Speaker 1: six three seven. Don't forget that first get to know
• 15:56
  Speaker 1: you conversation. It's not going to cost you a thing,
• 15:58
  Speaker 1: it will be complimentary to you. On the telephon number
• 16:00
  Speaker 1: for Coss Financial six oh eight four four two five
• 16:03
  Speaker 1: six three seven. The website Coss financial dot com. That's
• 16:07
  Speaker 1: Coss k l a A S Financial dot com. We're
• 16:10
  Speaker 1: going to continue our conversation with CGN Eric. We will
• 16:12
  Speaker 1: do that next as Money in Motion with Coss Financial
• 16:15
  Speaker 1: continues right here on thirteen ten. Wui b A talking
• 16:18
  Speaker 1: this morning with our retirement planning professionals from Class Financial, CJ.
• 16:22
  Speaker 1: Coss and Eric Schwartz. You can learn more about Claus
• 16:24
  Speaker 1: Financial on their great website. I hope you've been there.
• 16:26
  Speaker 1: If not, get on in there today. Coss Financial dot com.
• 16:29
  Speaker 1: That's Coss k l a A S Financial dot com.
• 16:32
  Speaker 1: Their telephone number six o eight four four two five
• 16:35
  Speaker 1: six three seven. Don't forget no charge for that initial
• 16:38
  Speaker 1: get to know you appoyment at Coss Financial. It will
• 16:40
  Speaker 1: be complementary to you again their number six oh eight
• 16:43
  Speaker 1: four four two five six three seven. Talking this week
• 16:47
  Speaker 1: about investor emotions and talking about folks that may try
• 16:51
  Speaker 1: DIY and the benefits of working with an advisor and
• 16:56
  Speaker 1: H and Eric. Just before the break, we kind of
• 16:58
  Speaker 1: we're talking about some of the benefits of working with
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  Speaker 1: an advisor, and of course you see it. You guys
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  Speaker 1: understand this is there can be some you know, kind
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  Speaker 1: of crazy investor behaviors that we hear about. Let's talk
• 17:09
  Speaker 1: a little bit about that area of investing.
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  Speaker 2: Yeah, behavioral finance. Yes, we are not robots. We do
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  Speaker 2: have biases and histories that inform the ways that we behave.
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  Speaker 2: I will be the first to admit I often do
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  Speaker 2: not behave in rational ways, especially as it has to
• 17:31
  Speaker 2: do with teenage children. But with that being said, listen, everybody,
• 17:39
  Speaker 2: I know often you know, when we talk about you
• 17:41
  Speaker 2: might want to consider working with an advisor, it feels so,
• 17:45
  Speaker 2: you know, kind of selfish and focused on what's in
• 17:49
  Speaker 2: our best interest. Listen, I want to be the first
• 17:51
  Speaker 2: to tell you there are many good financial planning wealth
• 17:54
  Speaker 2: management firms in the Madison area. If you live anywhere
• 17:56
  Speaker 2: in this area or even northern Illinois, there are great firms.
• 17:59
  Speaker 2: It does not have to be us. If you work
• 18:01
  Speaker 2: with a good feebase wealth manager, they will more than
• 18:06
  Speaker 2: cover their cost over time in benefits to you. And
• 18:09
  Speaker 2: that is not just me saying that for somebody who's
• 18:12
  Speaker 2: in the industry. That is me actually having experienced it
• 18:15
  Speaker 2: as an individual. Myself, meaning getting into the industry as
• 18:19
  Speaker 2: a young twenty something year old and becoming licensed and
• 18:24
  Speaker 2: learning things and then being like, I think all the
• 18:26
  Speaker 2: academia is wrong. I can time the market and testing
• 18:29
  Speaker 2: it and doing different things on my own, and doing
• 18:32
  Speaker 2: this over twenty plus years, I can just say, oh,
• 18:35
  Speaker 2: my goodness, there are so many what I will call
• 18:39
  Speaker 2: common thoughts about the right ways to invest and plan
• 18:43
  Speaker 2: for your future that are.
• 18:45
  Speaker 1: Just dead wrong.
• 18:47
  Speaker 2: Let me repeat that, there's just so many common thoughts
• 18:51
  Speaker 2: about the right way to invest and plan for the
• 18:53
  Speaker 2: future that are just dead wrong. And again, it's not
• 18:58
  Speaker 2: me saying that as as somebody who's in financial services
• 19:01
  Speaker 2: that's a consumer. I'm like you. I jumped into investing
• 19:05
  Speaker 2: and tried different things, and just through working with hundreds
• 19:09
  Speaker 2: and hundreds of people and through my own testing of this,
• 19:12
  Speaker 2: found out, Wow, there are a lot of things I
• 19:15
  Speaker 2: do that don't work out well. Let me give you
• 19:18
  Speaker 2: some examples of biases that we have over confidence. So
• 19:22
  Speaker 2: we all think we're better drivers than we are, don't
• 19:24
  Speaker 2: we right.
• 19:25
  Speaker 3: As a matter of.
• 19:26
  Speaker 2: Fact, if you ask people who are out on the road,
• 19:27
  Speaker 2: do you think you're an above average driver? Do you
• 19:29
  Speaker 2: guys know that eighty five percent of people think they're
• 19:31
  Speaker 2: above average.
• 19:32
  Speaker 1: That's not possible.
• 19:34
  Speaker 2: That's not possible. Statistically similar with investing, do you think
• 19:37
  Speaker 2: you know what you're doing? High percentages of people who
• 19:40
  Speaker 2: are DIY. Yes, I do know what I'm doing. Why
• 19:43
  Speaker 2: is it that every single research study of the average
• 19:46
  Speaker 2: consuming or average a novice investor shows them losing money
• 19:50
  Speaker 2: on an average annual basis, and yet like eighty percent
• 19:53
  Speaker 2: of them say they're really good at it. You see
• 19:55
  Speaker 2: My point, over confidence is a bias. Number two would
• 19:59
  Speaker 2: be loss version. So if you were to well, most
• 20:04
  Speaker 2: human beings, their emotional reaction to a loss is three
• 20:09
  Speaker 2: times has three times the severity of the euphoria of
• 20:14
  Speaker 2: a gain. Let me repeat that, the emotional kind of
• 20:17
  Speaker 2: like strain on you of a loss has three times
• 20:21
  Speaker 2: the intensity of the euphoria of a gain. Is that
• 20:24
  Speaker 2: another way, as human beings, we just hate losing. Well,
• 20:27
  Speaker 2: that can be really challenging if you're in a volatile
• 20:30
  Speaker 2: market that requires you to stay the course over twenty
• 20:33
  Speaker 2: or thirty years, So loss of version actually works against
• 20:37
  Speaker 2: you in investing. Another one would be heard mentality. Oh
• 20:41
  Speaker 2: my goodness, Eric and I could talk about this one
• 20:43
  Speaker 2: item for hours on end. Herd mentality is this idea
• 20:48
  Speaker 2: of like, I'm not going to do anything until it's
• 20:50
  Speaker 2: like fully proven, which, by the way, that's a good concept. Yeah,
• 20:54
  Speaker 2: you don't want to jump into something brand new and
• 20:55
  Speaker 2: get hurt by it. Where we support that, but if
• 20:58
  Speaker 2: that plays itself out, bully, what that can be is
• 21:00
  Speaker 2: I'm not going to invest into the market until it's
• 21:03
  Speaker 2: like had ten years of really good returns, then I'll
• 21:05
  Speaker 2: jump in, also known as buying high. So listen, everybody,
• 21:12
  Speaker 2: these are real. This is not hypothetical. We watch it
• 21:15
  Speaker 2: play out every single day. Anchoring would be another one
• 21:20
  Speaker 2: anchoring yourself on prior beliefs. Listen, the market is dynamic,
• 21:25
  Speaker 2: technology is dynamic. The titans of the past are usually
• 21:30
  Speaker 2: not the titans of the future. Said another way, the
• 21:33
  Speaker 2: ten largest companies twenty years ago, I think only one
• 21:36
  Speaker 2: of them remains. Let me repeat that, the ten largest
• 21:39
  Speaker 2: companies twenty years ago, only one of them remains. Is
• 21:41
  Speaker 2: one of the ten largest companies, by the way, don't
• 21:44
  Speaker 2: quote me on that. It might be one or two.
• 21:45
  Speaker 2: It's something like that. But the idea being that if
• 21:48
  Speaker 2: you say I'm just gonna buy a blue chip stock,
• 21:50
  Speaker 2: company and just own it forever. Well, okay, I don't
• 21:55
  Speaker 2: know that that blue chip stock company will be around
• 21:57
  Speaker 2: twenty years from now. So there's so much subtlety in
• 22:01
  Speaker 2: investing that we just cannot suggest enough. Really really consider
• 22:06
  Speaker 2: working with a professional, even if it's just on a
• 22:08
  Speaker 2: fee for service basis where every few years you pause,
• 22:12
  Speaker 2: you meet with them, you pay a you know, an
• 22:14
  Speaker 2: hourly fee for their time, just to gut check that
• 22:17
  Speaker 2: your biases aren't overwhelming your financial plan.
• 22:20
  Speaker 1: Talking this morning with CJ. Closs and Eric Schwartz, they
• 22:22
  Speaker 1: are our retirement planning professionals from Clause Financial. The website
• 22:26
  Speaker 1: class financial dot com. That's coss k l aas financial
• 22:30
  Speaker 1: dot com. Great website resource to learn more about Coss Financial.
• 22:33
  Speaker 1: Also sign up right online to subscribe to that weekly
• 22:36
  Speaker 1: Market Pulse newsletter GIN that available to you at classfinancial
• 22:39
  Speaker 1: dot com. Or tell what number six oh eight four
• 22:41
  Speaker 1: four two five six three seven. No charge for that
• 22:44
  Speaker 1: initial gets to know you appointment at Coss Financial. It
• 22:46
  Speaker 1: will be complimentary to you again. Their number six oh
• 22:48
  Speaker 1: eight four four two five six three seven looks into
• 22:51
  Speaker 1: our conversation with CJ and Eric. We will do that
• 22:53
  Speaker 1: next As money in motion with Class Financial continues right
• 22:56
  Speaker 1: here on thirteen ten wu ib A talking with our
• 22:59
  Speaker 1: retirement planning for CJ. Closs and Eric Schwartz. Of course,
• 23:02
  Speaker 1: they come to us from Class Financial, the website Coss
• 23:04
  Speaker 1: financial dot com. That's Coss k l aas Financial dot
• 23:08
  Speaker 1: com art telph number six so eight four four two
• 23:11
  Speaker 1: five six three seven no charge, So that initial gets
• 23:13
  Speaker 1: no you appointment at Coss Financial. It will be complimentary
• 23:16
  Speaker 1: to you. Mentioned as well the website cossfinancial dot com.
• 23:19
  Speaker 1: A lot of great features on the website. One of
• 23:21
  Speaker 1: those is an opportunity to submit a question to be
• 23:24
  Speaker 1: answered here on the program as part of the Money
• 23:26
  Speaker 1: and Motion listener question corner. As a matter of fact,
• 23:28
  Speaker 1: William wrote in he said, I'm planning to retire next year.
• 23:32
  Speaker 1: My employer offers a traditional pension, but I'm also considering
• 23:35
  Speaker 1: rolling it into an IRA and working with a financial advisor.
• 23:40
  Speaker 1: I'm not sure which option makes most sense. What should
• 23:43
  Speaker 1: I be thinking about? And that question comes to us
• 23:46
  Speaker 1: from William.
• 23:48
  Speaker 2: Oh I love this, William. Uh yeah, so Sean mentioned this,
• 23:51
  Speaker 2: But everybody, you can go to our website, submit a question,
• 23:54
  Speaker 2: and your question may get asked on the show. So William,
• 23:58
  Speaker 2: thank you for doing that, And of course by doing
• 24:01
  Speaker 2: it this way gives us a little bit more time
• 24:03
  Speaker 2: to think about your question and be prepared for it.
• 24:06
  Speaker 2: But great question. So everybody, what William is asking here
• 24:09
  Speaker 2: is he didn't say it in his question exactly, but
• 24:12
  Speaker 2: his employer, it sounds like, is offering a lump sum
• 24:15
  Speaker 2: pension option. So they offer him a traditional pension that
• 24:19
  Speaker 2: he can retire and then generate a monthly income stream
• 24:23
  Speaker 2: for the rest of his life, or he can take
• 24:25
  Speaker 2: a lump sum to roll it over to an IRA. So,
• 24:29
  Speaker 2: just so everybody understands, in the world of retirement planning
• 24:32
  Speaker 2: here in the United States, there's two core types of plans.
• 24:36
  Speaker 2: There are defined benefit plans and defined contribution plans. Defined
• 24:42
  Speaker 2: benefits are often known as traditional defined benefit pension plans.
• 24:48
  Speaker 2: So define benefit would be a pension think Social Security. Right,
• 24:52
  Speaker 2: I get a monthly income stream for as long as
• 24:54
  Speaker 2: I'm alive, and then when I die the money's gone.
• 24:57
  Speaker 2: A defined contribution plan or things like IRA is four
• 25:00
  Speaker 2: to one, k's four oh three, b's set by raise
• 25:03
  Speaker 2: you know, so on and so forth. Think of it
• 25:04
  Speaker 2: as what is defined is the contribution, not the benefit.
• 25:08
  Speaker 2: The benefit is unknown because that's based upon how the
• 25:10
  Speaker 2: markets perform and how long you live, and so on
• 25:13
  Speaker 2: and so forth. So what William is asking here is
• 25:16
  Speaker 2: should I take the traditional defined benefit pension plan that
• 25:21
  Speaker 2: just gives me income for the remainder of my life,
• 25:24
  Speaker 2: or should I convert this into a defined contribution plan
• 25:29
  Speaker 2: where I have where I have other options. So, William, unfortunately,
• 25:33
  Speaker 2: my answer is going to be the same as it
• 25:35
  Speaker 2: always is, which is it depends. It depends on a
• 25:37
  Speaker 2: host of factors. But let me give you a few
• 25:40
  Speaker 2: things to think about. In the world of a pension,
• 25:43
  Speaker 2: the employer is taking on the risk of investing, of
• 25:49
  Speaker 2: making sure the income is there over the entirety of
• 25:52
  Speaker 2: your life, of the decisions that have to be made
• 25:57
  Speaker 2: around swapping investments or funding the pension. So again, in
• 26:02
  Speaker 2: the world of a traditional pension, the employer is taking
• 26:05
  Speaker 2: on that risk. You get a consistent income stream for
• 26:10
  Speaker 2: the remainder of your life, but you also don't have
• 26:12
  Speaker 2: much flexibility. William, Right, If you call out the employer
• 26:16
  Speaker 2: five years into retirement and say, hey, I need a
• 26:17
  Speaker 2: couple extra grand send it to me, they will laugh
• 26:20
  Speaker 2: at you. Right, So pension's really great from the standpoint
• 26:23
  Speaker 2: of you don't have to take on the risk of
• 26:25
  Speaker 2: the decision making. Not so great from the standpoint of flexibility,
• 26:29
  Speaker 2: and beyond that, when you die, there's nothing left over, right,
• 26:32
  Speaker 2: So that's that's another.
• 26:33
  Speaker 1: Big whoa, whoa, whoa, whoa, whoa.
• 26:35
  Speaker 2: That's I don't know that I want them rolling over
• 26:38
  Speaker 2: to an IRA. Good news is you get a lot
• 26:40
  Speaker 2: more flexibility. If you want two thousand a month, four
• 26:43
  Speaker 2: thousand a month, five thousand a month, you can do that.
• 26:45
  Speaker 2: But you also have the risk of investing the money,
• 26:49
  Speaker 2: of possibly running out of money, of making bad decisions
• 26:53
  Speaker 2: that could cause you know, long term harm. So it's
• 26:57
  Speaker 2: kind of six of one or a half dozen of
• 26:59
  Speaker 2: the other. What is it that you value? Now? For
• 27:03
  Speaker 2: any financial planner or accountant listening or actuary listening to me,
• 27:07
  Speaker 2: it's like, whoa, there's a lot more quantitative way to
• 27:09
  Speaker 2: go about making this decision. So, William, I'll leave you
• 27:12
  Speaker 2: with this final thought. If you were to work with
• 27:15
  Speaker 2: a firm like ours, the first thing we will do
• 27:19
  Speaker 2: is look at what's called the IRR, or what we
• 27:23
  Speaker 2: call the internal rate of return or the hurdle rate.
• 27:26
  Speaker 2: So William, think of it this way, your employer says,
• 27:28
  Speaker 2: we'll give you two thousand a month, or we'll give
• 27:30
  Speaker 2: you five hundred thousand dollars as a lump sum rollover,
• 27:33
  Speaker 2: How do you decide which is better? And what we
• 27:36
  Speaker 2: would suggest that you consider is actually creating a calculation
• 27:40
  Speaker 2: based upon your unique factors of life, expectancy, so on,
• 27:43
  Speaker 2: and so forth, whether or not the plan has a
• 27:45
  Speaker 2: cost of living adjustment known as a COLA, and then
• 27:48
  Speaker 2: actually run a calculation to say, if I roll over
• 27:51
  Speaker 2: the money into an IRA, what is the rate of
• 27:54
  Speaker 2: return that I will need to accomplish in order to
• 27:57
  Speaker 2: match the outcome of the pension. Let me repeat that.
• 28:01
  Speaker 2: If I take the lump sum rollover and I invest it,
• 28:05
  Speaker 2: and I create the same income that the pension would
• 28:07
  Speaker 2: have created for me, so call it that two thousand
• 28:09
  Speaker 2: dollars a month, what rate of return will I need
• 28:12
  Speaker 2: to accomplish in order to match the outcome of the pension?
• 28:17
  Speaker 2: Also known as the hurdle rate. If that rate is
• 28:21
  Speaker 2: like two percent, you might want to lean towards the
• 28:24
  Speaker 2: lump sum rollover. If that rate is eight percent, woo,
• 28:29
  Speaker 2: that's a big hurdle rate. I might want to leave
• 28:31
  Speaker 2: it in the traditional pension plan. Now there's other qualitative
• 28:35
  Speaker 2: and quantitative factors. There's things like will this company be
• 28:38
  Speaker 2: able to sustain this?
• 28:40
  Speaker 3: Do I?
• 28:40
  Speaker 2: Because that's another thing is pensions are a general liability
• 28:43
  Speaker 2: of the corporation, So if they have difficulty, is this
• 28:47
  Speaker 2: going to get pushed off to the pension benefit guarantee corporation? So, William,
• 28:52
  Speaker 2: I'm in over my head here. You can already see
• 28:54
  Speaker 2: determining whether or not you should take a monthly pension
• 28:58
  Speaker 2: or doing the lump sum rollover actually a quite complicated decision. Now,
• 29:03
  Speaker 2: Eric and I can do these calculations and meet with
• 29:06
  Speaker 2: people and give advice within thirty minutes, right, it's we've
• 29:09
  Speaker 2: done it so much that we can work through the
• 29:12
  Speaker 2: logistics and give you advice on it. But trying to
• 29:15
  Speaker 2: do this on your own as a consumer, it can
• 29:17
  Speaker 2: be a challenge. So so I hope that's helpful. William,
• 29:21
  Speaker 2: thanks so much for the question, and again, listeners feel
• 29:24
  Speaker 2: free to do the same thing and submit a question online.
• 29:27
  Speaker 1: And as you mentioned, CJ, pretty major decision as well.
• 29:29
  Speaker 1: You definitely want to work through that that all of
• 29:32
  Speaker 1: the aspects of it. That's a great thing. As we
• 29:34
  Speaker 1: talk with CJ. Closs and Eric Schwartz having that conversation
• 29:37
  Speaker 1: that gets to know your conversation at Coss Financial. Of course,
• 29:39
  Speaker 1: I got who's give a call six oh eight four
• 29:41
  Speaker 1: four two five, six three seven. That first appointment is
• 29:43
  Speaker 1: not going to cost you a thing again. They're telephon
• 29:45
  Speaker 1: number six so eight four four two five six three
• 29:47
  Speaker 1: seven and going to hold on to that telephone number
• 29:49
  Speaker 1: now because it's time for the Class Quiz question of
• 29:51
  Speaker 1: the week. It works like this. In just a moment,
• 29:53
  Speaker 1: I'll ask you the class quiz question leak. You will
• 29:55
  Speaker 1: then have thirty minutes from the interday's program to call
• 29:57
  Speaker 1: the Class Financial office right here in Madison at six
• 29:59
  Speaker 1: eight four four two five six three seven. If you
• 30:02
  Speaker 1: are the first car correct answer, win this week's prize,
• 30:04
  Speaker 1: which is a twenty five dollars gift card to Cheesecake Factory.
• 30:07
  Speaker 1: This week's Closs Quiz question week is this. There are
• 30:10
  Speaker 1: three simplified types of investors investor personalities fill in the blank.
• 30:16
  Speaker 1: They are conservative, Moderate, and blank telephone number six O
• 30:20
  Speaker 1: eight four four two five, six three seven. First cor
• 30:23
  Speaker 1: correct answer win this week's prize, which is a twenty
• 30:25
  Speaker 1: five dollars gift card to cheesecake factory again. It's COSS
• 30:28
  Speaker 1: Financials office here in Madison as well the website cossfinancial
• 30:31
  Speaker 1: dot com. That's Coss k l aas Financial dot com. CJ.
• 30:36
  Speaker 2: Eric.
• 30:36
  Speaker 1: It's always great hanging out with both of you guys.
• 30:38
  Speaker 1: You have a great day. Thanks Sean, Thanks Sean. Doctor
• 30:41
  Speaker 1: Marty Greer comes your way next here on thirteen ten
• 30:43
  Speaker 1: Wiba