Don’t Show Your Spouse This Google Search

Apr 26, 2021 David Kennon

I was messing around on Google the other day and typed in: “Baby Boomer Retirement” These are the search results, in order: 1. Are We in a Baby Boomer Retirement Crisis? 2. One-third of baby boomers had nothing saved for retirement at age 58 3. Tough retirement realities for baby boomers 4. Lack of retirement savings haunts Baby Boomers 5. Baby Boomers Face Reality They Might Never Retire I’m not even kidding. Those are the first five search results. How could you not worry about retirement when you keep hearing this dismal news? But are Baby Boomer’s prospects really that dire? Today, the poverty rates among people 65+ is around 10 percent. Fifty years ago, in 1969, it was 20 percent. Nearly twice as much. Forbes recently published an article titled, The Graying of Wealth. In it, author Neil Howe writes, “The relative affluence of today’s elderly is historically unprecedented. Never before have the 75+ had the highest median household net worth of any age bracket. Today, the typical 80-year-old household has twice the net worth of the typical 50-year-old household.” Below is the data by which he reached his conclusion. According to the 2016 Federal Reserve Survey of Consumer Finances, here is the median net worth by age in the U.S.: Ages 55-64: $212,500 Ages 65-74: $266,400 Ages 75 and older: $254,800   Do you know what this means? The average American sees their financial status improve as they get older. This data is so counter-cultural it is almost hard to believe. The doom and gloom surrounding Baby Boomers and retirement is profoundly over-hyped. This kind of one-sided information dramatically skews the perception of most Americans nearing the end of their careers. For at least 50 percent of the population, these articles are completely irrelevant (I am literally getting upset as I type these words). Even more compelling data: Forty-eight percent of retirees are able to maintain their standard of living once retired. One-third of retirees have more money 20 years into retirement than on the day they retired. I had to dig to find this information. It required me to read government studies and surveys which are rarely cited. But the data is there. It is available for all to see. If it were up to me, these would be the first five results when searching the term “baby boomer retirement.” 1. The Majority of Baby Boomers Will Thrive Once Retired 2. The Bottom 25 percent of Americans Will Struggle Financially in Retirement, But What About the Other 75 percent? 3. The Elderly Are Wealthier Than at Any Other Time in American History 4. The Average Retiree Sees Their Net Worth Increase as They Age 5. Nearly Half of Boomers Will Not Have to Adjust Their Lifestyle Once Retired Now that is refreshing.   Be Blessed,   Dave

 

The Gold Scam

Apr 19, 2021 David Kennon

What follows is my opinion. Nothing more, nothing less. I don’t want the gold industry to come after me.   As an advisor for twenty years, I’ve seen a lot of terrible investments. If you can invest in it, I’ve investigated it. At this point in my career, I rarely see new products come across my desk.   Until now.   In my opinion, I have officially found the worst investment I have ever witnessed in my career. I have no idea how this is even legal.   Have you ever seen commercials or heard radio commercials or seen internet ads about buying gold?   “You can put your gold into your IRA,” they excitedly inform you.   “With all the uncertainty in the world right now, gold gives you a hedge against the stock market,” they exclaim.   “When the world descends into anarchy and ruin where money is worthless, gold will be the only thing of value,” they warn.   So how does this really work? Someone who actually purchased one of these investments came into my office and shared the statements. I finally get it.   I’ve always been very suspicious of the idea. Why would some famous (past-his-prime) actor be promoting these kinds of products on TV and the radio … endlessly? The idea of using physical gold in your portfolios is everywhere.   Here’s the deal…   Let’s say Susan and Larry buy $100,000 worth of gold. They are not technically buying gold, but they are buying “rare” coins made of gold. Some examples would be the Gold American Eagle Coin or the Patriot Gold 5th Anniversary Coin.   The idea is that by owning these coins you would have the flexibility of turning them into cash whenever needed. Who is going to walk around with a gold bar anyway? Coins make more sense, right?   Now, understand, it’s not like the coins are being sent to your house. They are usually held at the company from which you purchased them. Which seems to defeat the whole purpose of the safety of gold-in-hand, but I digress…   Now after Susan and Larry purchase their $100,000 in gold they excitedly wait for the value to increase. In fact, it does increase. During the first month alone gold increases by a whopping 5 percent.   They look forward to their statement so they can see all their gains.   At the end of the month, they receive their statement and are a bit confused. It shows that their investment is now worth $60,000. “There must be a mistake. We must be reading this wrong.”   They start reading the documents. They see pages and pages of tiny print, full of terminology they do not understand. So they bring in the paperwork to their friendly, local financial advisor (me).   Why did it reduce in value? After reviewing the statement, I am flabbergasted. The $60,000 value is accurate. How?   These big companies are buying the gold wholesale which means they are basically getting the gold at the spot price  When they sell you the gold, they sell it at retail. This “spread” can be as much as 17 to 33%.   The coins Susan and Larry purchased were worth $100,000. Or at least, the way the coins were originally “appraised” were worth $100,000. This is the problem.   Real institutional gold investors have no interest in coins. They are interested in one thing: the weight of the gold. The statement Susan and Larry were viewing, was accurate. If the coins were melted down into pure gold, the value was….$57,000 (plus the $3000 increase from the gold price appreciation).   It only gets worse. Who do you sell these gold coins to? Once you have come to terms with the fact that you got ripped off, how do you get rid of them?   Maybe the company who sold you the coins will buy them back. But there is nothing saying that they need to give you full market value for the coins. The value on the statement becomes even more useless.   But since you actually own the gold, you are able to go out on the open market and sell it anywhere right? Let’s take that path to its logical conclusion. You go to some gold purchaser in Tampa, coins in hand. The buyer is thinking, “These people have no idea what they are doing. They are stuck and they want to get rid of this stuff. I’m going to lowball them. Big time.”   So that’s it. Gold coins are not the same as gold. Real gold investors care about the weight of the gold, not the coin. The fees around these investments are insane. Investing in gold coins almost always ends up a loss. Here’s the dirtiest trick of them all. These gold sellers are incredibly smart. The industry is so profitable, they will do anything. Gold sellers have taken over Google searches. Go ahead. Search for “buying gold.” There will, of course, be lots of ads.   These companies understand search engines so well that they flood the internet with positive articles about gold. I couldn’t find anything about the secrets I’m revealing to you.   How scary is that? They have found a way to bury negative search results so deep that no one can find them. Not even me.   Unsuspecting people are doing their research from seemingly reputable sites, only to be completely conned. In my opinion, this is the worst, most underhanded investment opportunity I have witnessed in twenty years. If anyone has any gold they want to sell me, I’ll be happy to buy it at 25 percent of its value. Give me a call.   Be Blessed,   Dave

 

How Financial Advisors Make Money

Apr 12, 2021 David Kennon

Broker or registered representation? Investment Advisor Representative or Fiduciary?   Whew! Why does this have to be so complicated?   Whenever you choose to work with a financial advisor they fall into one of two camps: brokers and fiduciaries. Most people don’t know the difference, but it is important that you do!   Let’s start with broker relationships. Brokers are paid transactionally. If you are working with a broker and they put you into some sort of financial product, they are paid via a commission. If they move your money to another spot later down the road, they get paid again. It’s transactional.   In my personal experience, when working with a broker, people can’t help but think, “Sure, Bob seems like a nice guy and he certainly knows what he is doing, BUT…. is he using this particular product because he’s getting paid more? Is there some sort of financial kickback, lurking in the background, which helped him make his decision?”   In addition, whenever a broker suggests a change to an investment strategy you might say to yourself, “Is he doing this so that he can get paid again? Or is this actually in my best interest?”   Brokers are held to a “suitability standard” which means they are “required to implement an investment strategy that meets the objectives of the investor.” Notice that it doesn’t say, “Brokers have to put you in the absolute best investments for your situation.” It only says that it must at least loosely satisfy what you are looking for.   Am I splitting hairs? Let’s take a look at how fiduciaries must operate under the legal standard: “…the fiduciary standard simply means that the advisor puts their clients’ interests above their own. For example, the advisor is prohibited from making trades that may result in higher commissions for the advisor or his or her investment firm.”   The other big difference is how a fiduciary gets paid. An advisor entering into a fiduciary arrangement with a client is not allowed to receive commissions. Their compensation is not transactional.   Generally, fiduciaries are paid an advisory fee (usually around a 1 percent annual fee) which fosters a professional, long-term relationship versus a limited, transaction-oriented one.   How does the 1 percent fee work? Let’s say at the end of the year, you look at your portfolio’s performance and you see an 8 percent gain. In reality, the portfolio returned 9 percent. Most advisors bill (directly from the account) .25 percent each quarter to total the 1 percent.The fees are completely transparent and listed on your statement.   With a broker, it is difficult to determine their compensation, which usually consists of hidden fees that are difficult to translate.   Why is this important? Because, while working with a fiduciary, you never have to ask yourself, “Why is my advisor choosing this investment vs. that investment? Why is my advisor making trades in my account? Why is my advisor moving my money from one place to another?”   Within a fiduciary relationship, you are inherently on the same team. When you do better, they do better. The more your money grows, the more they make.   I’m not saying everyone needs to be working with a fiduciary. Broker relationships can still be beneficial to some people. But in my own personal experience, client relationships, where I am operating as a fiduciary, seem to be the most productive and meaningful.   So how do you find out if your advisor is acting in a fiduciary capacity? Just ask them!   Be Blessed,   Dave

 

Have You Turned Into Your Parents?

Apr 5, 2021 David Kennon

Are you worried you are going to run out of money during retirement? Do you feel an underlying sense of dread and unease whenever the subject of retirement planning comes up? You’re not alone.   I get pretty passionate when discussing this, because I’ve seen the same weary, anxious look on the faces of far too many good, hard-working people like you. Why is this whole retirement thing so darn scary? You shouldn’t have to live like this!   Retiring Baby Boomers are in the eye of the storm. Several different “fear factors” are converging together, all of them working to ensure you are as stressed as possible about your finances once you retire.   #1 Your parents were alive for the Great Depression. You are a product of your upbringing. You were told to “work hard and save, but never spend a dollar.” If you do spend any money the sky will fall and you will end up eating food scraps in the back alleys of downtown Sarasota.   #2 Pensions are a thing of the past. The golden age of defined benefit pension plans is long gone. No longer are people retiring to the security of a guaranteed pension.   Could you imagine getting a guaranteed union pension that covered all your bills?  Could you imagine knowing you earned a benefit that paid you money as long as you were alive?  Now, it is up to you to plan for your old age.   #3 The financial media is hysterically negative. This irresponsible fear-mongering affects everyone. It is hard to stay calm when a guy, in a suit, on a major TV network, is saying things like, “The worst crash of our generation is coming .”   Without the benefit of my professional expertise, I’d be scared too!   #4 Your “safe” savings choices aren’t working anymore. Interest rates are at historic lows. In the early 2000s you could have found a 5-year CD paying five percent without too much trouble.   But now, we are going on 15 years where CDs, money markets, and other “guaranteed” financial vehicles have been paying less than one percent. In many cases much less than one percent. Right now, nationally, the average interest rate on a savings account is .08 percent.   What does all this mean? Retirees, for the first time, are almost being forced to employ stocks and bonds in their retirement portfolio. What other choice do you have? Most people understand that getting .01 percent of their retirement savings is not the answer.   If you were living in 1981 right now you could walk into your friendly neighborhood bank and put your money into a three-month CD and get around 16 percent interest. Whoa! Who would even consider putting their money in the stock market if you could get 16 percent guaranteed at the bank?   Sadly, we are not living in 1981. But I have amazing news! You do not need to be scared of stocks and bonds. In fact, this unique interest rate environment might “force” you into utilizing the most powerful financial vehicle ever conceived by human kind.   So I want you to be encouraged. The four “fear factors” working against you do not have to sabotage your retirement. With a little bit of education and planning you are going to thrive!   Be Blessed,   Dave   P.S.   So far this year:   Bonds have returned -3.4% Stocks have returned +6.6%   Why do I bring this up?  “Conservative” bond portfolios sometimes lose money too.  That’s why a diversified portfolio of stocks and bonds are always appropriate- no matter your age.