Latest / Brian Thomas / Money Monday with Brian James

Transcript

Money Monday with Brian James · Brian Thomas

• 0:00
  Speaker 1: The talk station.
• 0:04
  Speaker 2: It was six if if you five garcied Talk station.
• 0:07
  Speaker 2: Happy Monday to you. Coming up the next segment, we're
• 0:10
  Speaker 2: gonna an abbreviated Money Monday with Brian James. Not because
• 0:12
  Speaker 2: we don't want to talk to Brian, because Vva Ramaswam
• 0:14
  Speaker 2: is going to join the program at eight twenty talk
• 0:16
  Speaker 2: about well his new running mate Rob McCauley and op
• 0:18
  Speaker 2: ed that he wrote the other day that I read
• 0:20
  Speaker 2: on the air was amazing, plus his fundraising. Zach Haynes
• 0:23
  Speaker 2: is going to join the program. Bottom the Art, the
• 0:25
  Speaker 2: Ohio State Senate candidate for District seven, earned the Americans
• 0:29
  Speaker 2: for Prosperity endorsement, so he'll join the program. Then in
• 0:32
  Speaker 2: the meantime, Brian James Smallworth Financial give it us some information.
• 0:35
  Speaker 2: I guess our retirement number change. Welcome back, Brian James.
• 0:38
  Speaker 2: It's always great talking with you on the morning show.
• 0:40
  Speaker 1: Absolutely, we'll do a minuscule Money Monday this morning to
• 0:43
  Speaker 1: make room for some other voices as well. But yeah,
• 0:46
  Speaker 1: happy New Year to you and everybody out there in
• 0:48
  Speaker 1: the listening world. Here, we kind of thought it would
• 0:50
  Speaker 1: be a good year to or a good time at
• 0:51
  Speaker 1: the beginning of the year here to just kind of
• 0:54
  Speaker 1: layout the what does it look like nowadays with inflation
• 0:58
  Speaker 1: for people who are thinking big picture around retire All right.
• 1:00
  Speaker 2: Well, we did see reduced inflation. We're no longer at
• 1:03
  Speaker 2: eight percent I guess last year, as you point out
• 1:06
  Speaker 2: in your notes, three percent. Not so bad. A little
• 1:08
  Speaker 2: bit higher than I guess the two percent, which is
• 1:10
  Speaker 2: the ideal figure, but not so bad.
• 1:13
  Speaker 1: Yeah, it's tolerable. Right, So with the Federal Reserve would
• 1:17
  Speaker 1: very very much prefer we want to be around two percent.
• 1:20
  Speaker 1: That's the goal to get the interest rates down, an
• 1:24
  Speaker 1: inflation down to a level that is sustainable over time.
• 1:27
  Speaker 1: We've been stuck at three percent for a long time.
• 1:29
  Speaker 1: But as you point out, we're not at nine percent.
• 1:31
  Speaker 1: I do not have people anymore talking about, oh my gosh,
• 1:35
  Speaker 1: we have to change our portfolio drastically because this nine
• 1:37
  Speaker 1: percent inflation rate is going to hang around forever. That
• 1:40
  Speaker 1: was transitory. The overall inflation was not, as we learned,
• 1:45
  Speaker 1: different different from what the Biden administration told us. For
• 1:47
  Speaker 1: a very long time. Inflation did hang around, but not
• 1:50
  Speaker 1: at those ridiculous levels.
• 1:51
  Speaker 2: Well, as we've had many conversations before, and what you
• 1:54
  Speaker 2: can expect on average over the life of your long
• 1:56
  Speaker 2: term investments, isn't it like eight percent is really kind
• 1:59
  Speaker 2: of where you over time.
• 2:01
  Speaker 1: Of course, it all depends on how aggressive you're gonna
• 2:04
  Speaker 1: be with your investments. I mean, realistically, if you look
• 2:06
  Speaker 1: at the stock market, it's averaged ten percent over thirty years,
• 2:09
  Speaker 1: and these are real numbers. They do take into account.
• 2:12
  Speaker 1: Of course, you know, the last thirty years include some
• 2:14
  Speaker 1: of the scariest years we've ever had, three of them
• 2:17
  Speaker 1: in fact, thousand and two, two thousand and eight, and
• 2:21
  Speaker 1: twenty twenty two, and as well as some of the
• 2:23
  Speaker 1: best years we've ever had. But if you smush it
• 2:25
  Speaker 1: all together, the stock market itself has averaged in the
• 2:28
  Speaker 1: neighborhood of ten percent. That doesn't mean you should throw
• 2:30
  Speaker 1: all your money in the stock market. That said, you know,
• 2:33
  Speaker 1: if you have a long term time frame, sure that's
• 2:35
  Speaker 1: an okay thing to do, as long as you understand
• 2:37
  Speaker 1: the roller coaster. Now, on the other hand, and what
• 2:39
  Speaker 1: we're really talking about today, if you are in a
• 2:41
  Speaker 1: situation where it's time to start drawing on that nest
• 2:43
  Speaker 1: egg and hopefully you'll all be there someday, then you
• 2:47
  Speaker 1: don't want to ride that roller coaster as much, because
• 2:49
  Speaker 1: you'll be sitting in a situation where the market may
• 2:51
  Speaker 1: have taken taken ten percent from your portfolio, plus you
• 2:55
  Speaker 1: need to withdraw four maybe five percent to pay the bills,
• 2:57
  Speaker 1: and that can dig us into a hole that sometimes
• 2:59
  Speaker 1: we can can't get out of.
• 3:00
  Speaker 2: Bran So how does one assess that withdraw raiding? I
• 3:04
  Speaker 2: note that you mentioned four percent that apparently was the
• 3:06
  Speaker 2: rule of thumb, So how do you reassess or currently
• 3:10
  Speaker 2: assess that if you're at this place.
• 3:12
  Speaker 1: Right, So let's go. Let's do a little history on
• 3:14
  Speaker 1: that four percent rule. That came from a study that
• 3:17
  Speaker 1: went from the that studied thirty year periods, assuming that's
• 3:21
  Speaker 1: kind of the average retirement length of time before end
• 3:24
  Speaker 1: of life expectancy, thirty year periods starting from the nineteen thirties,
• 3:28
  Speaker 1: so nineteen thirty to nineteen sixty, thirty one to sixty one,
• 3:31
  Speaker 1: thirty two to sixty two, and on and on and
• 3:32
  Speaker 1: on all through that time period. And the conclusion was,
• 3:36
  Speaker 1: if you withdrew four percent of your portfolio and the
• 3:40
  Speaker 1: market did what it did over those thirty year periods,
• 3:42
  Speaker 1: that's historical information. The four percent would never There are
• 3:45
  Speaker 1: no thirty year periods where that four percent would have
• 3:48
  Speaker 1: bankrupted you even in all with all the crazy stuff
• 3:50
  Speaker 1: that happened in those thirty year time periods. So that's
• 3:53
  Speaker 1: where that comes from. A lot of people have been
• 3:55
  Speaker 1: hanging their hats on that. It gets attacked every now
• 3:57
  Speaker 1: and then because of inflation concern or concerns that the
• 4:01
  Speaker 1: stock market is running too hot, we're relying too much
• 4:03
  Speaker 1: on history. But it still seems to be holding true.
• 4:06
  Speaker 1: You know, some people want to come back and say, well,
• 4:08
  Speaker 1: maybe I need to back off to three percent just
• 4:10
  Speaker 1: to be on the safe side. There's, of course nothing
• 4:12
  Speaker 1: wrong with that, bearing in mind that lifestyle is lifestyle
• 4:16
  Speaker 1: and that really does mean true sacrifices that you will see,
• 4:19
  Speaker 1: touch and feel in how you live your lives. But
• 4:22
  Speaker 1: at the same time, the whole point is, let's sit down.
• 4:24
  Speaker 1: Most people haven't even figured out what the lifestyle is let.
• 4:26
  Speaker 2: Alone, but rate does to it well. And how long
• 4:31
  Speaker 2: is any given person going to live too? Because the idea,
• 4:34
  Speaker 2: of course, you want this money to last you through
• 4:36
  Speaker 2: your retirement, and retirement quite often is the time when
• 4:39
  Speaker 2: people get hit with, you know, the biggest medical bills,
• 4:41
  Speaker 2: the biggest complications, the problems. You don't have any money
• 4:43
  Speaker 2: coming in the door, and how many years am I
• 4:45
  Speaker 2: going to be around on this planet to need to
• 4:47
  Speaker 2: be able to tap into my my savings. So it's
• 4:51
  Speaker 2: the levels of difficulty and coming up with the accurate
• 4:54
  Speaker 2: numbers seem to be almost insurmountable.
• 4:56
  Speaker 1: Brode. Yeah, it really does. And that's why I have
• 4:59
  Speaker 1: a job, frankly, because we have to simulate an awful
• 5:01
  Speaker 1: lot of different you know, I always walk people through that,
• 5:04
  Speaker 1: here's the honky dory outcome, here's everything you ever wanted
• 5:06
  Speaker 1: to do, and nothing bad ever happens. Again, that's our baseline,
• 5:10
  Speaker 1: and then next to that we can put in Okay, well,
• 5:12
  Speaker 1: let's pretend we have instead of three percent inflation, let's
• 5:14
  Speaker 1: pretend it's four percent or five percent something like that.
• 5:17
  Speaker 1: What happens there, and all we're doing is we're playing
• 5:19
  Speaker 1: with spending and time. Any financial plan is only looking
• 5:22
  Speaker 1: at those two things. When you truly boil it down,
• 5:24
  Speaker 1: there's a million different buttons to push and levers to
• 5:27
  Speaker 1: pull to illustrate that. But again, it's only spending and time.
• 5:30
  Speaker 1: That's all we're dealing with. So then right next to it,
• 5:32
  Speaker 1: we'll do a stress test which could be maybe we
• 5:35
  Speaker 1: have four or five percent inflation, or it could be
• 5:37
  Speaker 1: let's pretend the market punches us in the face right now,
• 5:39
  Speaker 1: that happened to anybody who retired in twenty twenty one.
• 5:42
  Speaker 1: They thought things were hunky dory, but then twenty twenty
• 5:45
  Speaker 1: two came along and took away possibly up to a
• 5:47
  Speaker 1: twenty percent of their portfolio for a brief period of time. Now,
• 5:51
  Speaker 1: for those who panic and sell out when that happens, yeah,
• 5:53
  Speaker 1: that's a permanent hit. You're not getting it back. On
• 5:56
  Speaker 1: the other hand, if you keep your head and you
• 5:58
  Speaker 1: understand market history and you can ride those things out
• 6:01
  Speaker 1: and still stay retired, you might not like it. That's
• 6:04
  Speaker 1: a different scenario, but it doesn't mean you can't afford
• 6:06
  Speaker 1: to take that hit. But the important thing is to
• 6:08
  Speaker 1: know what kind of hit you can take in the
• 6:10
  Speaker 1: first place, and most people don't well.
• 6:11
  Speaker 2: And one of the other choices people have to consider is,
• 6:13
  Speaker 2: you know, delaying retirement rather than when taking socials security
• 6:17
  Speaker 2: on the earlier side, you do end up with a
• 6:20
  Speaker 2: lot more by way of monthly pay. And if you
• 6:22
  Speaker 2: can kick it off to say seventy oh.
• 6:24
  Speaker 1: Absolutely you do. And yeah, so financial planning is easy
• 6:27
  Speaker 1: if your only goal is to poke the government in
• 6:29
  Speaker 1: the eye. Right, Some people come in and say, by God,
• 6:31
  Speaker 1: my plan revolves around me not taking Social Security until
• 6:34
  Speaker 1: seventy because I want as much money as that government
• 6:37
  Speaker 1: is ever going to give me. That's great. I will
• 6:39
  Speaker 1: say that in my thirty years of doing this, I
• 6:41
  Speaker 1: have a lot more fifty five year olds who say
• 6:43
  Speaker 1: that versus sixty five year olds. Our thoughts tend to
• 6:45
  Speaker 1: change over time, and I just I want my life back.
• 6:49
  Speaker 1: It's less about punching the government in my face, and
• 6:51
  Speaker 1: I just want my life.
• 6:52
  Speaker 2: I was laughing about that so hard because it seems
• 6:54
  Speaker 2: to me a moment in time ago, I wouldn't even
• 6:56
  Speaker 2: entertain the idea of discussing retirement, Like, what the hell
• 6:59
  Speaker 2: am I going to do? No, I'm probably gonna die
• 7:01
  Speaker 2: behind whatever job I'm going to do, is always my
• 7:03
  Speaker 2: philosophy at this particular point, die behind the microphone. But no,
• 7:06
  Speaker 2: I think about retirement all the time now, Bryan, a
• 7:09
  Speaker 2: little different.
• 7:09
  Speaker 1: You know, the more we age, the more we think
• 7:10
  Speaker 1: about it. It looks kind of cool, really is.
• 7:12
  Speaker 2: And then real estate and liquidity, I understand, and that
• 7:16
  Speaker 2: makes perfect sense. A lot of your clients have a
• 7:18
  Speaker 2: significant amount of money tied up in real estate, but
• 7:22
  Speaker 2: can you actually access it? And is it something that
• 7:24
  Speaker 2: you should factor in terms of your overall investments, Like
• 7:28
  Speaker 2: you've got a million dollars invested in the markets are
• 7:30
  Speaker 2: distributed to mutual funds and bonds and all that, And
• 7:32
  Speaker 2: if you've got a million dollars in house, you really
• 7:34
  Speaker 2: don't have two million to play with, do you No?
• 7:37
  Speaker 1: Exactly? Because that's hard to get to. You got to
• 7:39
  Speaker 1: keep the rain off your stuff, so you have to
• 7:41
  Speaker 1: have a roof over your head. There are ways to
• 7:44
  Speaker 1: do it, I mean you can. There are ways to
• 7:46
  Speaker 1: access that. The home equity lines of credit, by the way,
• 7:49
  Speaker 1: I think those are a good idea, even if it's
• 7:51
  Speaker 1: a just in case, because debt against your home is
• 7:54
  Speaker 1: probably going to be the best debt you can ever get.
• 7:57
  Speaker 1: Most people aren't comfortable with this, but when it comes
• 8:00
  Speaker 1: down to you, I'll give an example. So let's say
• 8:02
  Speaker 1: you figure out you need to buy a car, you know,
• 8:04
  Speaker 1: sooner than you thought you would, or something like that,
• 8:06
  Speaker 1: and you don't have the cash or what more happens.
• 8:09
  Speaker 1: More commonly happens is you know what, I don't want
• 8:11
  Speaker 1: to take anymore. Let's say you're at the end of
• 8:13
  Speaker 1: the year. I don't want to take any more tax hets,
• 8:14
  Speaker 1: I don't want to cause any more taxation. I really
• 8:17
  Speaker 1: want to push this into the next year. Right, you
• 8:19
  Speaker 1: could borrow fifty thousand dollars against your home. Let's pretend
• 8:22
  Speaker 1: that you're getting charged maybe six or seven percent on that.
• 8:26
  Speaker 1: Borrow fifty thousand dollars against the home in you know,
• 8:29
  Speaker 1: the November December timeframe to get the situation fixed, and
• 8:32
  Speaker 1: then in January February, when we're in a new tax year,
• 8:35
  Speaker 1: that's when you take the distribution and cause the taxation.
• 8:38
  Speaker 1: You know, we don't want that. But at the same time,
• 8:40
  Speaker 1: all you will have done in that case is borrowed
• 8:42
  Speaker 1: fifty thousand dollars and you pay again currently six to
• 8:45
  Speaker 1: seven percent interest on that, but only for a few months.
• 8:47
  Speaker 1: So you're really talking less than one or two percent
• 8:50
  Speaker 1: true hard dollars worth of interest. And that beats the
• 8:53
  Speaker 1: heck out of needing to finance things, you know, with
• 8:55
  Speaker 1: a credit card or you know, or borrowing from the
• 8:58
  Speaker 1: from the dealership for fixed amount of time. Well, there
• 9:01
  Speaker 1: are ways to tap into that. I think it's a
• 9:03
  Speaker 1: good idea to have a home equity line of credit
• 9:04
  Speaker 1: in your back pocket even if you never draw on it.
• 9:06
  Speaker 2: Well, isn't that how the uber rich manage their money
• 9:09
  Speaker 2: and avoid paying income taxes?
• 9:11
  Speaker 1: Yeah, don't sell your assets, borrow against them. Right, If
• 9:13
  Speaker 1: you want to play that game, then don't sell anything.
• 9:16
  Speaker 1: Figure out how you can borrow against them. If you
• 9:18
  Speaker 1: have a portfolio of securities outside of an IRA, you
• 9:21
  Speaker 1: can do margin loans, you can do portfolio loans. You
• 9:23
  Speaker 1: can borrow against those. Yes, there have to be payments made.
• 9:26
  Speaker 1: You are jumping through financial hoops to do this, of course,
• 9:29
  Speaker 1: But there's a reason that rich people get rich.
• 9:31
  Speaker 2: Brian James, very interesting and informative discussion we've had here.
• 9:34
  Speaker 2: As we end of the new year, consider that. And
• 9:36
  Speaker 2: of course, as I always point out, it's great to
• 9:38
  Speaker 2: think half a financial planner sitting on your side of
• 9:41
  Speaker 2: the table, one that knows you for douce youry obligation.
• 9:43
  Speaker 2: That way, you don't have to fret and worry about
• 9:45
  Speaker 2: these issues day to day. Let somebody like Brian do it.
• 9:48
  Speaker 2: Brian James, appreciate all worth loading you out every Monday.
• 9:51
  Speaker 2: We'll do this again next Monday. I hope you have
• 9:52
  Speaker 2: a fantastic week. My friend, you bet have a good week.
• 9:54
  Speaker 2: We'll talk to you Monday, age fifteen. Right now, if
• 9:56
  Speaker 2: if, if I have cares the talk station of the Quick
• 9:58
  Speaker 2: Word for my friends and Zimmer