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Retire Eyes Wide Open: Season 3 Episode 4

REWO S3E4: New Year, New Markets

Welcome to Season 3 Episode 4 of Retire Eyes Wide Open, hosted by Scot Landborg. 

In this episode, Scot gives insight on death and time with his Money Monologue, in our new segment, 5 Minutes on the Market, we're talking about our market outlook for 2024. We'll provide our comprehensive Money Rundown, we will go over common financial jargon that every investor should know in our Money with Murph segment, and answer Listener Questions.

To hear more episodes, CLICK HERE.

Episode Transcript


 SCOT: Welcome to Season 3, Episode 4 of Retire Eyes Wide Open. I'm Scot Landborg, Here with Steven Murphy.

Today we're talking about New Year, new markets, and our 2024 market and economic outlook. I'll share some reflections on death and time in our money monologue. We'll cover the top news in our money rundown. Money with Murph, we talk about common financial jargon, and we'll take your questions.

This is Retire Eyes Wide Open. 

Money Monologue:

And now for our Money Monologue, death and time. I had three clients die this year. Unexpectedly, all three women in their seventies. Passed away far too early, far earlier than expected than we expected than their families expected. This is not some slow moving target. It wasn't a cancer diagnosis with years of fighting. This was less than a couple months and gone.

None of us are promised a thing. We're not promised to live to 80, let alone 90, let alone tomorrow. Now, 2023 was a year that we did estate planning checkups with a majority of our clients. Man, was that important. And it definitely made it real with these clients that passed away.

How important is it to have estate planning things in order before you face the challenges or emergencies? But most of my focus after watching this, after watching this unfold was not about death, but about life. It's about the trend in financial planning to be worried about living too long. It's the concern with client after client.

Will I run out of money? Will I have enough? What if I need long term care? It's unbelievable. The real emotion that someone with $4 million that they still have, that they still have those same concerns. Will I have enough? Will I run out?

And yet I don't mention enough. As a financial advisor, what if they die three years from now? How would that change everything about those next three years about their life and about the planning that we do?

Planning for longevity is important. But so is planning for dying in the next three years. Richard Branson wrote, The brave may not live forever, but the cautious do not live at all. Are you being too cautious on how you live your life day to day? Are you so afraid of running out of money when you die that you're not living the life you want right now?

I met with someone this week, more income from Social Security and pension and reliable income sources than they need or than they want. No need to tap their investments at all. And yet, still really frugal, still self described as cheap.

When they travel, they mention that they pack food in their suitcase for the trip. It's a major challenge. And you have that nest egg because you haven't lived lavishly. Because you've been reasonable in your spending. Now, someone's asking you to spend more on yourself in retirement? Some clients never make that jump. It's hard for some clients to do that.

The happiest clients I work with, they start to open up about using those assets to support their goals. Maybe take another vacation, maybe flying first class instead of coach. Maybe it's paying for a family cruise or renting an Airbnb in Big Bear for the family to get together.

You may live to 95 years old. But it also might come to a screeching halt much sooner. How would you alter your life if you knew that was the case?

One of my favorite ways of handling that question actually came from a client. And I've got their Christmas card from a couple of years ago on my desk, front and center, their motto: Last best ten.

Last best ten. When they think about retirement, they think about making the most of their next ten years like it's their last ten years. I've never met another couple more committed to making lasting memories with their kids and their grandkids and their friends from family trips to Hawaii and international to Ireland to camping trips weekends with the grandkids. They are living their time focus on maximizing the short term.

Another great piece of advice comes from Jesse Itzler. He calls it Kevin's rule, and he recommends that every eight weeks, you put a mini adventure on the calendar, something you wouldn't normally do, like camping instead of staying at home, watching football on weekend. If you do that, you'll have six unique experiences every year that you wouldn't otherwise have had.

For me, I wanted a jet ski to Catalina with my dad. Now, I don't recommend this for everybody. It was an hour and a half ride each way. It was really intense, but it was awesome. Riding next to dolphins, jumping out of the water. When we got to Catalina, had a couple hours on Catalina to ourselves. Usually Catalina is really busy. It wasn't. We rented a golf cart, rode all around, and we had a jet ski ride back. But it was a great - one of those unique experiences, and it's local. Maybe for you it's a staycation in Temecula. Maybe it's a night at the Great Wolf Lodge with your grandkids. Maybe it's a new restaurant.

I can be a creature of habit too. There's a restaurant in Tustin in the office that we go to quite often. But in the interest of turning over a new leaf and trying something new, I jumped on Yelp and found a Michelin star restaurant just one block away from our usual spot.

It's called Chaak. It's been there for over five years, and I've never tried it. It's one of the only Michelin star restaurants in Tustin. It's awesome. It's fantastic. It's a great experience, but because I was stuck in my routine, I never experienced it. It was right there.

Maybe for you, it's a new restaurant. Maybe it's a dance class. Maybe it's a golf lesson. Maybe it's a singles cruise. Financial planning is important, and I would hope that the right plan helps put you at ease about the long term so that you can feel more free to enjoy the short term.

A good plan considers different scenarios about longevity, live long, live short, how much can I spend? It should give you confidence to live the life that you want. If you don't have a plan in place, it's normal to have extra fear about living too long about running out of money.

But once you have that plan in place and by committing to evaluate that plan year after year and to stay on track, hopefully you can focus your attention on the even greater fear, dying with regret, that you didn't take that family trip you wanted, or spend that extra weekend with your daughter. You try to save some extra money and didn't visit your grandkids out of state, or take that bucket list trip that you always wanted.

Make the most of this year. Make the most of 2024.

And that's my money monologue.

5 Minutes on the Market

And now for our segment, 5 Minutes on the Market. 2023 was a strong year for markets. S&P up 22, the Dow up 13, emerging markets up 4 and bonds up 2.3. January has started sideways. S& P up 2.5, the Dow up 1.2, emerging markets down 3, and bonds down 1%.

What's our outlook for the new year? What's our outlook for 2024? Is it going to be another strong year? Well, 85 percent of the technical indicators that we track are currently positive. It's a good sign. Also compelling is when the Federal Reserve cuts interest rates, historically, when there isn't a recession and they're cutting rates, it's usually a really good sign.

Now recently, '08 and '01, we saw the Fed cutting interest rates going into recessions. Those were difficult times for the market, but this is a little bit different. If the Fed is cutting and we're not going into recession, it's usually a positive. The market in 2024, we believe, is going to be driven by forces similar to what we saw in the 1970s.

When inflation was going higher, the market was going lower. And when inflation was going lower, the market went higher. Expect more of that in 2024. Inflation heating up would be a big negative, but we're not seeing that now.

We like the slow, steady move higher that we saw in markets last year. Since 1950, when it took the market over 12 months to reach a new all time high, when it did reach that new all time high, the market was positive a year later, 13 of those 14 times, on average, 15%. Also, following the year when the market is up 20%, since 1950, the following year, the market was positive 80 percent of the time. And although usually not higher than it was the year prior, still higher than it was at the beginning of the year.

From a technical standpoint, at the end of the year, we saw 90 percent of S&P 500 stocks above their 50 day moving average. Since 2000, stocks were then higher a year later, 98 percent of the time.

Is it a sure thing? No, but a good sign? Absolutely.

Next, let's take a look at where the top 20 firms on Wall Street think this market is headed for 2024. The biggest bull thinks the market's at 14%. The median think the market will be up 3%. The biggest bear thinks the markets will be down 12%.

Is that normal?

In short, no.

A bottom up 12 month price target historically has averaged 17%. Now it's only 11%. In short, forecasters think returns will not be as good this year as they were last year.

Now this is an election year. Is that good or is that bad?

The year before a presidential election cycle are some of the best years to be invested. Politicians will pull whatever levers they can to get re elected, and that often pushes markets higher. Keep in mind that Q1 of the presidential election cycle is often the weakest. And we tend to believe most of the gains this year likely happen in the second half of the year.

What's our commentary on the market?

We think the S&P is up 7 to 11 percent this year. Normal volatility, 10 to 15 percent decline along the way would be expected.

We think it's a great environment for buffered ETFs. If you don't know about them, you need to. These buffered ETFs have maturity typically less than a year. They're liquid, so you can get in and out of them anytime you want. They typically offer buffers of protection between 10 and 15 percent, and the upside will be capped at between 13 and 20 percent. Very interesting in a world where analysts think the market could be up as much as 14 percent, but could be down 12 percent. In fact, we prefer them to traditional equities in this environment.

We think small caps provide interesting opportunities, and we've got some exposure to small cap buffer ETFs, as well as small cap equities. We're adding some additional conventional equity and actively managed equity strategies are becoming more relevant again. Our average cap on the upside buffer strategies that we're utilizing is about 16%, our average buffer of protection on the downside right now currently is 12%. And we're preferring S& P buffers over NASDAQ.

Our average moderate allocation for IRAs, Has about 80 percent in buffered equity exposure at this time.

Now for more conservative clients, there's definitely some strong yielding opportunities out there. You want to be a little careful of bonds as the fed is forecasting three rate cuts, but the market's expecting six. Sounds like there could be a disconnect. There could be a little bit bumpy.

We're positive about the market going into 2024, but a friendly reminder that some level of volatility is normal.

Since 1928, a 3 percent decline happens at 7 times per year. A 5 percent decline happens 3.5 times per year. And a 10 percent decline, on average, happens every single year at least 1 time. We don't think this year is going to be any different.

We think the market will be higher by the end of the year, 7 to 11%, and we think we have the right equity strategy to take advantage of opportunities in this market.

Hope you enjoyed our 5 Minutes on the Market.

Money Rundown:

And now for our Money Rundown. Our Money Rundown segment is where we cover the recent news. There's a lot of media sources out there that are going to help give you updated information about the economy and the markets.

Our job is to help summarize and synthesize, help pick out a few stories that are most important to you as a retiree or an investor. Joining us today, financial advisor, certified financial planner, Steven Murphy. Welcome, Steven.

STEVEN: Thanks Scot. Glad to be here. All right, let's dive in. Our first story is conflict in the Middle East.

U. S. Airstrikes in Yemen and shipping issues in the Red Sea are causing many to wonder, are we on the verge of an escalation? Shipping container rates have soared as high as $10,000 amidst the conflicts. So it begs the question, will this contribute to another wave of inflation?

SCOT: Thanks, Steven. As we just talked about, I think inflation is the big thing to continue to watch the 2024.

It's going to help guide the Fed and how aggressively they start to cut interest rates. And I do think that energy price disruptions could have a part to play in the inflationary concern. I think some of the good news is we've seen some slowing of container shipping rates coming from China. So we're going to, it's a little too early to tell, in my opinion, about how this is going to impact the economy.

I think the good news is we have not seen a dramatic rise in the cost of energy. In fact, we've seen the price of oil come down. So while container rates have been higher in the short run, I think the U.S. has taken some action to try to alleviate that, and it's going to be in everyone's interest coming into an election year to try to make sure that inflation stays at a reasonable rate.

So that's something to continue to watch and to monitor. I'm not super concerned.

STEVEN: Our second headline: Potential for a government shutdown looms. It seems possible that the continuing resolution will keep the government funded until March. Should a potential government shutdown occur, should it be concerning for investors?

SCOT: Thanks, Steven. I think I was thinking there might be a government shutdown early in the year in January, but it's looking more and more likely that they're going to pass a bill to continuing resolution to fund the government till these March. In an election year, I would anticipate there might be some politics played around a government shutdown. So we'll have to see if that happens.

In the past, government shutdowns have not been a big driver in the markets. There's been some volatility. The bigger driver was the question of whether we were going to default on U.S. government debt. That was a much bigger driver. The U.S.' credit rating. Having that triple A rating with the rating agencies, I think, was more relevant.

So we'll have to see how it impacts the economy. Maybe it reduces GDP just slightly. If some of those government workers have to stay home, I know it impacts some people's planning to go to national parks and things like that. So we'll see, it's a pretty big risk that it's going to happen, but it typically hasn't been a big, big concern for the markets.

I think more concerning is going to be inflation than I am concerned about government shutdown.

STEVEN: And our third headline: Rate cuts are coming, but how many? The Federal Reserve has made it clear that they do intend to cut rates in 2024. Their forecast is for three, while Wall Street is forecasting six. So who is right, and why should investors care?

SCOT: Thanks, Steven. Yeah, I think this is a big issue to keep your eye on, whenever there's a disconnect from what Wall Street is expecting to have happen with what actually happens, it can cause some volatility in the markets. And like one of the analysts that we track very closely, one of the most bullish on Wall Street thinks most of your gains are going to come in the 2nd half of the year.

I think you've got some concerns here in the 1st half and one of them being a disconnect between these expectations and what actually happens. So, I think six is a little too optimistic. I'd be closer to three, I think, and where the Fed's going to be with cutting rates, but you never know.

We are in an election year, there's going to be a lot of pressure for them to be cutting interest rates, but I think they're going to be really data dependent on where inflation is. And I'm hopeful that inflation is getting reined in a little bit. So hopefully, we'll see more rates ahead. If you're seeing rate cuts and we're not in a recession, it's good for the markets and it's good for the economy, but there definitely could be some market volatility around the disconnect between what Wall Street is expecting what actually happens.

And that's our money rundown segment for the week.

Money with Murph:

And now let's shift over to Money with Murph.

STEVEN: Thanks Scot. For this Money with Murph, I'm particularly excited. So when I think of the segment I'm going to run for each episode, I really try and think of what is practical and what's worth you knowing.

Now, something I commonly see is clients hearing certain finance terms and jargon, and likely they've heard of them in the past, but really they may not know what they truly mean. And believe me, I understand that the finance industry loves to throw out terms to make themselves sound smarter. But my goal has been and always will be to try and minimize the jargon I use with clients and make the complex easy to understand.

And I think Scot would agree that that's the approach he takes as well. I think that's the most effective way of communication with clients. But that being said, there are definitely some terms that even if you don't want to hear them from me, you will hear them. And it may be beneficial to have a grasp on generally what they mean.

So I've compiled some common terms and jargons and their definitions that over the years, meeting with many clients, these are some of the common ones I see. And I put together a list of five for us to go through.

So the first one, bull and bear markets, why these types of markets were named after specific animals is beyond me. I'm sure there's some blog out there explaining why, but I've never searched it out.

So what they are, they both indicate performance of the stock market. Bull markets are stock markets that go up. People are happy. People are making money. There's no official definition here, but typically people consider it to be a rise of 20 percent or more in the stock market, and these typically last one to three years on average.

Bear markets are going to be the complete opposite of that. These are markets where stock prices are going down. Investors are losing money and they are typically also are defined by a 20 percent loss or more in stock prices.

Our next terms, traditional and Roth.

So traditional is commonly referred to as pre tax and Roth will be commonly referred to as after tax. So these are references to tax classifications and they can be applicable to any account. When I mean any account, your IRA, your 401k, 403b, 457, whatever it is, most plan options have a traditional and a Roth variation for you to choose from.

Traditional pre tax means that it reduces your income for the current tax year. And therefore, when you reduce your income, you're going to reduce your taxes paid. But this means that in retirement, when you take those funds out, those are going to be subject to income tax.

So Roth is just going to be the complete opposite of this. You fund these accounts and the tax year with after tax dollars, meaning that you're funding it with money that you will pay taxes on for that current tax year. But the beauty of it is that in retirement, you're gonna be able to take these funds out tax free, not pay a penny of tax on the contributions or the growth over that time.

Our third terminology, ETF. It stands for exchange traded funds. So to give some context, these are gonna be most similar to what you may think of as mutual funds. So there's just a couple of slight variations, but ETFs are publicly traded, so they allow you to purchase one share and get partial ownership of numerous companies that the fund owns.

They come in all shapes and sizes. For example, an S&P 500 ETF would allow you to purchase one share of the ETF, and get exposure to the 500 largest companies in America. Or there's, let's say an artificial intelligence ETF. And by purchasing that one share of the ETF, you're getting an exposure to numerous companies related to artificial intelligence.

Our next terminology, RMD. RMD stands for required minimum distribution. So RMDs are when the federal government forces you to take distributions out of your account in retirement. RMDs are applicable to traditional pre tax accounts only, whether it's an IRA, a 401k, a 457, 403b, whatever it is, if it's a traditional account, there's going to come a point when you reach a certain age and the government's going to start forcing you to take money out of those accounts, it'll be either age 73 or age 75, depending on the year that you were born.

And you're probably asking why, why would they make me take money out of my account? And that's because as you recall, when I previously stated traditional, you're going to get a tax deduction in the year in which you contribute. So Uncle Sam did not get a tax bill from you when you put those funds into the account and now he's ready to start collecting those taxes.

So he's going to force you to take funds out of the account that will be taxable, and in turn, you're going to pay taxes on those funds. They started about three and a half percent and they go up every year. And that is the amount that you're required to withdraw from your account.

Our final term, IRMAA.

So it sounds like a woman's name, but it's not, it's actually an acronym. It stands for income related monthly adjustment amount. This is a measure of your income from two years prior. That affects how much you and or your spouse will pay for Medicare part B and D payments in retirement.

So what does that mean?

It means that Medicare is going to look at, for instance, for your 2025 Medicare payments. They're going to look at your 2023 tax return. So we want to keep that in mind. There are certain levels of income thresholds. Every time you cross a threshold with your income, your Medicare payments will go up accordingly.

The first one currently is probably right about the end of the 22 percent federal tax bracket, which many of you are in. However, when it comes to Roth conversions, IRMAA brackets are definitely something we want to be aware of and make sure that we're not causing your Medicare payments to increase.

And that's five of the most common terms I hear clients not having a grasp on. There's so many more I could go through, but after meeting client after client, these are definitely some of the most common ones. If there's a term that you want answered, I'd be happy to do it. Shoot me an email and I'd be happy to see how I can help.

SCOT: And that's money with Murph.

Thanks, Steven. Yeah. Great segment. I think that the terms that you listed are really common for clients to not understand. I think ones that really jumped out to me, bull bear markets, ETFs, I'm always surprised how many clients don't know what ETF really stands for. And we saw that become much more common over the past decade as people have shifted from mutual funds that were typically higher fees and more and more to ETFs that are lower fee, more passive structure.

But there are active ETFs, there are passive ETFs, there are buffer ETFs, just a big family. IRMAA is another huge one that people don't think about when they are in retirement or approaching retirement. You don't really need to be aware of it until you're 63. You think it would be 65 because it's 65.

That's when you have to worry about Medicare, but Medicare is going to look at your income from two years prior to calculate your premiums. And if you're adjusted, you're modified adjusted gross incomes over I think 192 or 194, you could be paying more income for your Medicare premiums. So this is important terminology to know and to know how it fits in your overall plan.

I think with IRMAA and your income, when you get to Medicare, One of the biggest tips we have for people is if you're still working and you stop working, you're going to want to submit what's called the change of life event form to let social security and Medicare know, hey, I don't longer have this job. My income's way different. I don't want to pay that extra premium.

I think all important considerations, Steven, thanks for bringing up these important items.

That's money with Murph.

STEVEN: Thank you.

Listener Questions:

SCOT: And now for our listener questions.

If you want your questions answered during the show, go to our website, and click on ask a question.

STEVEN: Our first question, Scot comes from Craig. Craig asks over the last couple of years, there has been a movement about de-dollarization in international finance. Will it impact investments and should it be a concern in my financial decisions?

SCOT: Craig, thanks so much for the question.

It is a topic that's become much more in the news and much more relevant. What we've seen as countries have made it vocal that they'd like to move more and more away from the dollar. What we've seen is that actually hasn't been the case. Dollar's utilization and international finance is as high as it's ever been.

Where we have seen a decline is in the euro's utilization. So it's really been a de-euro situation, not a de-dollarization. So de-euro is what we've seen. Now, what I would say is. International affairs have to impact your overall plan when you're considering investments and where the dollar is relative to other currencies may make international investing more or less favorable.

I think the emerging markets relative to US markets as low as it's been in a long, long time, it's worth considering. But I think my biggest concern about US versus international has to do with, is there an institutional shift where international companies just aren't going to be leaders that they may have been in the past?

And has the emergence of say, the big seven companies of the S&P, are they in a position where they'll have a more dominant role in the decade ahead? And you might not see this cycle from U. S. to international that we've seen in the past.

Bottom line, de-dollarization, not super concerned about it in the short term as we haven't seen a real shift, but definitely should still be part of the conversation.

STEVEN: Sharon from Orange asks, I am considering adding new money into the market, but I'm concerned that with the run up last year, this may not be the time to invest into the S&P 500 index. Should I invest in a couple of stocks instead?

SCOT: Sharon, thanks for the question.

I think what we talked about today is that when the market has as strong of a year as it did this past year. It bodes well for the year ahead. So even though the market's already had a strong year going back to 1950, when the market's been up 20 percent or more in a year, that following year, 80 percent of the time, it's been a positive year for the market.

Now it hasn't been a year that's historically outperformed the year prior, but it has been positive 80 percent of the time. So I think that bodes well, there's a lot of reasons to be positive about the market going into an election year, positive after the market takes a year or more to reach all time highs.

There are a lot of positive reasons why you still could be an index investor. The question is what index do you want to be in and are there better opportunities? Maybe you want to consider buffered ETFs. Maybe you want to consider small caps, all different things you should think about.

Question about individual stocks, here's always individual stocks that can be attractive. You just have to be careful as a novice investor to not be too over allocated to one position and make sure you're informed about the fundamentals that company in that business. If you don't have the time to allocate to the homework to keeping up with these companies, then you're probably better off either hiring a professional to help you or using broader market indexes to get exposure to the market upside, but in short, Sharon, I wouldn't be concerned about just because the market was up last year that there's not growth ahead for 2024. I do think there's potential upside in the broader market in 2024.

Our next question, Steven, for you comes from Jenny in Mission Viejo. She writes, I'm a kindergarten teacher getting ready to retire, but I may want to stay busy in retirement. Am I allowed to work without affecting my pension?

STEVEN: Great question, Jenny. So you're a kindergarten teacher. Therefore, you're covered under CalSTRS. Pretty common question we get. There's gonna be two main parts of this question. So first part, you are allowed to work in retirement as long as it's in a non covered role.

So what does that mean? Essentially, you're just not working within a school system. So let's say you're working at Angel Stadium, Disneyland, you know, all the common retirement jobs, as long as it's not involved in the school system, you're completely fine. The other side of the coin then becomes if you work in CalSTRS covered positions, the most common one we see is substitute teaching.

There are going to be some limitations for that that you need to be aware of. The first one, you have to wait at least half a year, so 180 days after you retire, before you start working, you're gonna be subject to an earnings limit for 2023 2024 school year. It's about $50,000. And this amount changes every school year, but note, I said school year and not a calendar year, and it will update every school year.

Any amount over the earnings limit will be directly deducted from your CalSTRS pension. So don't get blindsided if one day your pension is lower than the previous month. And finally, just as a good tip, make sure you're keeping track. CalSTRS should keep track of it as well, but they have been known to make mistakes every now and then, have a little bit of a lackadaisical notice that you're approaching that earnings limit.

So just keep track of yourself. But overall, you're going to be fine.

Our next question comes from James, and this one's for you, Scot.

James says, I'm definitely afraid of the upcoming presidential election and people not accepting whomever is elected. Why should I just not pull all of my money out?

SCOT: James, thanks for the question. Over the past hundred years, there's always been a reason to not be investing in the market, whether it's a war, COVID, presidential election cycles, congressional election cycles. There's always a reason to not be an investor. And the beginning of last year is a great example.

There's a lot of concerns, a lot of questions. And if you were in CDs or in money market, you were better off invested in the market than in those conservative instruments. You left money on the table. So I think that's one of the concerns in a higher interest rate environment. And in an inflationary environment as your money needs to keep up and you need to get the growth that you're projecting for your long term financial security.

So I think how you invest, it needs to be part of an overall plan and overall strategy. There are environments where it makes sense to reduce risk. To add more money on the sidelines to add more dry powder for when there are opportunities, but it's got to be part of a comprehensive strategy. Can't be emotional. Can't be a gut feeling.

Oh, I just I'm worried about what's going to happen in the market and the economy. The facts and the data show that election years are typically great years for you. The market there's a lot of technical reasons why investing right now in the broader market makes a lot of sense.

And so you have to take that into account when you're thinking about your overall long term investment strategy, just pulling your money out and putting on the sidelines. If it's part of a plan, if it's part of a strategy, could make sense if you're de risking, but you need to have a bigger picture view and you have to make sure that you're not making those decisions just based on emotion and based on feelings.

It should be based on some technical, tactical, and part of your bigger picture and bigger plan. So, as far as the election and people not accepting it, without a doubt, that's going to happen and I think it's something you have to continue to monitor day to day. There can be bigger risks that we haven't foreseen to the market and to the economy.

I think the bigger thing to keep an eye on is inflation over this next year. If inflation comes back, I think the market gets hit, keep an eye on inflation, keep an eye on what the Fed is doing. Presidential election cycles do matter, but often they can be positive going into that presidential election year.

Next question comes from Laurie from San Diego. How do I know if my finances are on track? I feel like my current plan is just focused on investments and I have no idea where I am.

Steven, you want to take a crack at it?

STEVEN: Yeah, Laurie, this is a great question. And Scot, please, please add on when I'm finished.

This is a common question we get. Here at our firm, we take a very comprehensive approach to our finances, and one of the simplest things that we work with so many clients that came from other advisors is we find that nowhere did they ever write down what their goals are. So, a practice that we do with our clients is we want to write down, and put on pen to paper what our client's goals are, whether that be retiring at a certain age, I want to pay off my mortgage.

I want to relocate to a different state. You know, I want to have X dollars a month of net income, whatever those are, those are things that we're going to work through and come at it at a broad financial planning perspective. So many advisors, unfortunately, like what it sounds like Laurie may be having with her advisor, is just solely focused on the investments, and the investments are very important. Don't get me wrong.

You know, a financial plan is like a body and investments are like blood. There's no point, the body can't live without the blood and vice versa. But it's just a piece of what you need to have overall. So I think making sure that you have clear cut goals and making sure that you have a plan that's going to meet those goals and be able to, obviously we can't always see perfectly into the future, but having an idea of where you'll be X years down the road and is your financial plan on track to meet those goals.

Scot, do you have anything to add on that?

SCOT: Sure, Laurie, I think that it's a big misconception. that a financial plan is only good investments. It's not. It's a lot more than that. And a good, uh, we've got a philosophy here to plan first and invest second. And until you have a plan and a strategy, you shouldn't be doing any investing. You shouldn't be looking at how you're investing unless it's part of your bigger picture.

And some of the biggest areas you need to be thinking about with a plan is just what you mentioned, Laurie, is what, are you on track for your goals? Are you on, is your income on track for where it needs to be when you are done working? Where are you going to pull that income from and when? What's the tax status going to be?

How do you be as tax efficient as possible? How reliable are your investments? How much are you going to have to rely on those investments to provide for you for income in retirement? What's the tax classification on those investments, and where are you allocating those specific assets based on tax classification, all different things that are integrated and work together and building a comprehensive plan investments are a critical piece.

As Steven mentioned, they are very, very important piece, but they've got to be part of the bigger picture, and whoever you work with, or if you build a plan out yourself, your investments need to be part of your overall strategy and overall plan. If that's something you want to talk about more one on one, happy to do it with you.

Go to our website and happy to set up a one on one session with myself and with Steven, and we can talk about how we could build out a plan for you.


That's our show for this week. If you want your questions answered during the show, go to our website, That's Click on "ask a question".

If you want to sit down and talk more about your situation one on one, go to our website and click on schedule a consult. We're happy to help.

Go like us on Facebook to get our most up to date content, subscribe to our podcast wherever you listen to podcasts. We'll see you next time where I'll show you how to retire with your eyes wide open. Don't go into retirement with your eyes closed, go into it with your Eyes Wide Open. I'm Scot Landborg, here with Steven Murphy. We'll see you soon!

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