The Four Most Dangerous Words

Aug 30, 2021 David Kennon

To quote Sir John Templeton, “The four most dangerous words in investing are: this time it’s different.” I’ll show you what I mean through a few colorful anecdotes. Robert Pinochle The year was 1930. Robert Pincohle had $10,000 invested in the stock market. (A lot of money in 1930.) Robert thought to himself, “We are in the middle of the worst economic downturn this country has ever seen.” He was right about that, but what he did next was a mistake. He thought, “This time is different. The markets are dangerous.” Robert took all of his money in cash and buried it in his backyard. Ten years later, in 1940, his $10,000, had he had kept it in the stock market, would have been worth $11,925. John Canterbury The year was 1940. John Canterbury had $10,000 invested in the stock market. He thought to himself, “We are in the middle of another World War. Countries are collapsing! The economic predictions are dire. This time is different!” John took the money in cash and stored it under the bed in his wife’s best Tupperware. Ten years later in 1950, his $10,000, had he kept it in the stock market, would have been worth $35,035. And his wife wouldn’t have had to re-buy all those containers! Earl Pickett The year was 1950. Earl Pickett had $10,000 invested in the stock market. He thought to himself, “The Communists have infiltrated our government. I’m pretty sure my neighbor Bob is a Commie. A Communist takeover spells disaster for our country, and the market. This time is different. ” Earl took the money in cash and hid it in his collection of Elvis Presley nesting dolls. Ten years later in 1960, his $10,000, if he had kept it in the stock market, was worth $44,694. Paul Kowalski The year was 1960. Paul Kowalski had $10,000 invested in the stock market. He thought to himself, “The stock market has been going up for nearly 20 years. We are due for a crash. This time is different.” Paul took the money in cash and hid it in the stuffing of his Day-Glo orange beanbag chair. Guess what? Ten years later in 1970, his $10,000, had he kept it in the stock market, would have been worth $21,959. David Malkin The year was 1970. David Malkin had $10,000 invested in the stock market. He thought to himself, “This country is falling apart. Vietnam. Oil embargoes. Hippies. This time is different.” David took the money in cash and buried it in his backyard, putting his Pet Rock on top to guard it. Ten years later in 1980, his $10,000 would have been worth $22,555 … if he’d kept it in the stock market. Bummer, man. Tom Chadwick The year was 1980. Tom Chadwick had $10,000 invested in the stock market. He thought to himself, “The Cold War menace is looming. Nuclear tensions are at an all-time high. Russian paratroopers could descend from the skies at any time. This time is different. ” Tom took the money in cash and buried it in his backyard. Ten years later in 1990, his $10,000, had he kept it in the stock market, was worth $36,813. Wolfgang Applebottom The year was 1990. Wolfgang Applebottom had $10,000 invested in the stock market. He thought to himself, “Saddam Hussein has us on the brink of war. Stocks are overvalued. We haven’t had a significant recession since the early 70s. This time is different. The markets are dangerous.” Wolfgang took the money in cash and stuffed it into his wife’s collection of Beanie Babies. Ten years later in 2000, his $10,000, had he kept it in the stock market, was worth $49,907. Worse, his wife’s McDonald’s International Beanie Bear would have been worth $10,000, except Wolfgang tore all the stuffing out to hide his cash. Bobby Bickleberry The year was 2000. Bobby Bickleberry had $10,000 invested in the stock market. He thought to himself, “The tech bubble is bursting. I’m hearing rumors of a long-term recession. This time is different. The markets are dangerous.” Bobby took the money in cash and stored it in a safety deposit box at the bank. Ten years later in 2010, his $10,000, had he had kept it in the stock market, would have been worth $11,500 (after two of the worst bear markets in U.S. economic history). Derek Johansen The year was 2010. Derek Johansen had $10,000 invested in the stock market. He thought to himself, “We just experienced a decade with two historically awful recessions. I am spooked. No more investing for me!” Derek took the money in cash and locked it in a fire-proof safe, which he kept in his closet. Ten years later in 2020, his $10,000, had he had kept it in the stock market, would have been worth $34,016. Maybe this time isn’t different. Maybe it’s time to embrace a financial vehicle that has had an almost uninterrupted string of success for decades.   Be Blessed,   Dave

 

David Kennon, founder of Kennon Financial, releases his third book, “You Never See a Trailer Hitched to a Hearse”

This book outlines how many Baby Boomers, often shackled by the fearful teachings of their depression era parents, are not spending enough of their savings early in retirement, and Sarasota author and founder of Kennon Financial, David Kennon is on a mission to stop retirees from sabotaging their own retired years.

August 23, 2021 14:03 ET | Source: Kennon Financial

---

• ---

• ...

Sarasota, FL, Aug. 23, 2021 (GLOBE NEWSWIRE) -- “For 20 years, I’ve sat down with thousands of retiring baby boomers to help them determine optimal timing for their Social Security benefits. From nearly all of them I hear the same refrain, ‘I’m worried I’m going to outlive my money.’ It doesn’t seem to matter whether they have $200,000 in the bank or $2 million, the dread is the same,” Kennon says.

I’ve also sat down with many people in their 80’s or 90’s to whom I always ask the same question, ‘what advice do you have for us that are just starting our retirement journey?’ And the answer is almost always the same. ‘Spend more money earlier in your retirement. By the time we realized that we wouldn’t outlive our money, we were too old to enjoy it!’

As outlined in Kennon’s new book, You Never See a Trailer Hitched to a Hearse, Kennon’s formula for a better life follows three steps. The first is to invest retirement savings in a diversified portfolio of stocks and bonds with at least half of the money in stocks. Second, take out 5% per year from those savings starting with the very first year of retirement. Last, spend the money. “When clients tell me they don’t really need the money, I still insist they begin withdrawals. I refuse to let them die with all of this money”, he says. “You deserve to enjoy the fruits of your labor. Spend the money.”

Kennon uses historical data to back up his recommendation. “One reference I use is a 30-year study by the Federal Reserve that tracked retiree spending and found, incredibly, that people, on average, were dying with about 60% more money than the day they retired. This is the biggest injustice facing the baby boomer population today,” Kennon says. “It’s painful to see the regret in the faces of people nearing the end of their life when they realize they missed their only chance to enjoy the money they worked so hard to save.”

Kennon notes that 87 years of economic history points to the same fact. Assuming the money is invested and working as outlined in his first step, people who withdrew 5% from their savings each year would have ended up dying with more money than they started with 100% of the time.

“It doesn’t matter if you retired in 1940 or 1960 or 1997. If you took 5% per year, 20 years later you would have ended up with more than you started with,” he says. “This isn’t my opinion, it’s purely historical data. The simplest way to understand it is this. If a diversified portfolio of stocks and bonds does not return an average of 5% between now and the end of your life, it is the first time in modern history that is hasn’t”.

Kennon says he spent three years developing his book, which he believes could radically alter the way Baby Boomers view their savings and spending for the rest of their lives. He also gets his message out by hosting a website, StopLivingScared.com, and his radio program, Dave Kennon’s Retirement Revolution.

“My overwhelming conclusion is that the transition from working and saving to retiring and spending is a stressful experience due to the intense fear of running out of money,” he says. “It doesn’t help when Baby Boomers watch the daily stock market coverage on television. The continuous fear-based rhetoric seen on the financial news adds to the depression era mentality from their parents. The profoundly affects their mental state, which in turn affects their decision about whether they can afford a new kitchen, take that vacation, spoil their grandkids, or support a cause they believe in.” 

Could Kennon’s message spread throughout the country? That’s his plan. “The country needs to start a national conversation about this terrible injustice,” he says. “It is causing so much needless worry, pain and regret.”

Check out David Kennon’s First Book, The Retirement Revolution.

Youtube Channel

Facebook

Linked In

Twitter

U.S News and World Report

CONTACT:

Company Name:   Kennon Financial
Contact Person:    David Kennon
Address:                 1 South School Avenue, PH Suite, Sarasota, FL 34237
Phone Number:    941-556-6307
Website Link:        https://kennonfinancial.com/

 

Best Funeral Ever

Aug 24, 2021 David Kennon

The Unexpected Story of Jim and Linda Powers   The details of this tale come from a few of my client’s stories, not one individual couple, and all of the names have been changed. But every single example I’ll give I’ve seen play out during my career.     John and Linda never considered themselves wealthy. They worked hard, lived below their means and saved what they could. By the time they finished up their careers, they found themselves living on $4000 a month of social security income.   With no debt and a habit of reasonable spending, the Powers found that Social Security alone easily covered their monthly budget.   The Powers had also learned to “pay themselves first” throughout their careers. They maxed out their 401k contributions and created a healthy savings account at the bank. Now retired, their net worth totaled nearly $700,000.   “Linda,” John asked, “When do we start spending this money? What is it for? We don’t really need anything.”   Linda smiled back, “John, I think this money was given to us for a reason. I don’t want to hoard this abundance and then die with a bunch of money. The kids would be appreciative, but I don’t think a large inheritance dumped in their laps is a good idea. You know Bobby. He’d be driving a Lamborghini in no time.”   Jim and Linda decided to take a stand. Instead of worrying about outliving their money, they put together a spending plan that would allow them to use the perfect amount now. Not too much, and not too little. Taking a stand and making a plan.   First order of business? Jim and Linda took their three kids and five grandkids to the Grand Canyon. After a week of family bonding, Jim and Linda found themselves at their kitchen table again wondering aloud….   “That was wonderful. I can’t believe how precocious little Suzie has become. Ok, so…… now what? We don’t need a new kitchen, we don’t have any real interest in traveling internationally. What do we do next?”   A lightbulb went off in Jim’s head.   “You know what? Our kids are all in tough financial situations. Between starting new careers, raising their own kids, and buying homes they’re barely balancing their budgets each week. Why don’t we give them a little money each month now, when they actually need it? When we pass away they could be retired! I think five hundred dollars a month for each kid could work. That’s $18,000 a year which fits perfectly into our financial spending plan.”   “Maybe they can afford special tutoring for little Suzie and tennis for Joey. That is a great idea!” Linda replied, getting excited.   The golden, and generous, years.   As Linda and Jim grew older their generosity continued. They began donating $10,000 a year to various charities, but did it in a different fashion. Each year, the entire family —  grandkids and all — gathered to discuss what causes they wanted to support. The seeds of charity and giving were planted in their growing family.   Their daughter-in-law lost her mother to breast cancer, so she always asked that some of the money go to research. Their son had a soft spot for children and “adopted” several kids from around the globe through a global outreach organization. Their other son preferred to keep it local, supporting mental health nonprofits in his city.   This generous and creative giving continued as the Powers grew older. Linda’s niece got involved in a nasty divorce and found herself debt-ridden and jobless. Linda helped her get through that trial. Their oldest grandson, Peter, had the opportunity to study Shakespeare in London for a summer. Without his grandparent’s help, Peter would have spent the summer playing video games and eating Taco Bell burritos.   The Powers tipped their servers generously. Sometimes they even left a 50% tip with a note that read, “You’re doing a great job. You work so hard. You deserve it.”   A legacy of living and giving.   As the Powers grew into their 80s they began to consider their legacy plans. Even though they had used a good bit of money during their retirement years, their net worth still remained at around $700,000 due to their portfolio’s investment gains.   Linda had her own lightbulb moment. “Jim, I have an idea. Let’s set up a plan to divvy up the money.  Instead of a lump sum now, why not give a little bit each year? We could also include a different message each year in the letter that accompanies the money.”   The money would always arrive December 1st, as a sort of Christmas present from heaven. With each annual payment a letter was included, written beforehand, that would instill an important value or share a vital life lesson.   Jim and Linda’s legacy would last long after they were gone.   The Powers both passed away in their late 80s. So many people attended their funeral they had to put extra chairs in the church.   One by one, people stood and spoke about what wonderful and kind people the Powers were.   But their son, Paul, stole the show.   “Mom and Dad,” Paul started, voice breaking, “were the most generous people I have ever known. Not only were they generous with their money but also with their time and wisdom. I learned patience and kindness from their everyday actions. I learned to support those in a time of need. They taught me that life was too short to worry, and that it was okay to pursue your dreams, loving people along the way.”   Paul became so emotional he had a had time speaking.   “I’ll never forget the time Mom and Dad had a repairman come to their house. He was clearly distraught and Mom couldn’t help but ask what was wrong. It had turned out that he had just lost his home because he couldn’t afford the rent after his son was diagnosed with leukemia. Without missing a beat Mom told him that she would pay the first six months’ rent at his new apartment. They even brought them meals from time to time during his son’s treatment.”   “Mom and Dad always reminded us what was important in life. They showed us that family, friends, and relationships should always be first on the priority list.”   For the Power’s final act of kindness, they had prepaid their wake — which was more a celebration of life.   They even had a band.   That’s a legacy. That’s a life. This story — and all the empowering, fulfilling, joyous stories I hear from my clients, inspire me every day. I hope this one inspires you, too.   Be Blessed,   Dave

 

How My Cousin’s Investments Went to Zero

Aug 16, 2021 David Kennon

I often hear people say to me, “I lost all my money in the stock market in 2008.” Or “I lost all my money in the stock market in 2001.” Really?!  Did the stock market go to ZERO? The facts: In the 2008 recession, the S & P 500 dropped over 37%.  Not quite all the way to zero, but it did drop 37%. But remember, markets temporarily go down and permanently go up. In 2009, the S & P 500 was up 27%.  In 2010 it was up 15%.   You had all your money back in a couple of years. In 2001 the S & P dropped 12%, and went down 22% more in 2002.   It then increased 29% in 2003 and 11% in 2004. It took about 3 years to get all your money back. So, how are these people “losing all their money?” What they really should be saying is: “I got some hot stock tips from my neighbor.  I then went ahead and started day-trading those stocks.  I was really good at it!  Then the stupid economy tanked and my stupid account ended up at zero.” Or they should really be saying: “I invested $100,000 in a hot, 5-star mutual fund that focused on startup tech companies in China.  Then the market crashed and I lost $70,000!  There was NO WAY I was going to lose anymore.  So I pulled all the money out.  I have been getting .001% interest on the money ever since.” That is what actually happens. People that have well-diversified, balanced portfolios are not going to lose all their money. Do we have a skewed view of economic history? Maybe. The fact is:  In the past 20 years we have seen two historically bad stock market “corrections.” From 2000-2001 the S & P 500 was down about 21% and in 2008 the S & P 500 was down 37%. So from 1942-1999 how many years were worse than those two examples above?  During those 57 years stretching from the end of World War II until the end of the century, how many times did the market go down in such a dramatic fashion? Once. But that is impossible! No.  Really. From 1973-1974 the market was down 40%  (by the way, it was up 37% in 1975). That’s it.  That is the only time. I mean, sure, the market was down 10% in 1957 and down 9% in 1962 and down 7% in 1977 and down 5% in 1981. But to have the market go down dramatically TWICE in the span of 8 years is exceedingly historically rare. The concept that the market is constantly “crashing” or saying that a crash is “due,” is really not painting an accurate picture of reality. Yes, two decades were tough in the past 100 years (the 1930’s and the 2000’s).  But the other eight decades basically saw tremendous and consistent growth. And even those two decades were not THAT bad. If you invested $10,000 in the S & P 500 in the year 2000, you would have ended up with $9090 in 2010. If you invested $10,000 in the S & P 500 in 1930, you would have ended up with $9922 in 1940. That doesn’t look like “all of my money” to me. Next time your neighbor or Aunt Jenny tells about how they lost all their money in the stock market, don’t let it infect your own thinking.  You don’t have the whole story.  And not knowing the whole story can be harmful to your financial health!   Be Blessed,   Dave

 

Annuities and Invitations to Free Steak Dinners

Aug 9, 2021 David Kennon

I’m sure you’ve heard the term thrown around before. Maybe you’ve looked into purchasing one yourself. Retirees are often pitched annuities at “free” steak dinners from financial advisors. But, if you don’t have a clear idea of what annuities are, or if purchasing one would fit into your financial plan, how do you know if you’re making the right decision?   Annuities come in all kinds of flavors, sizes, and colors. I would argue that annuities are the single most complicated product I see on the consumer financial market. I’m going to make this as simple as possible.   The definition of a pure annuity is actually pretty straightforward. An annuity is a contract that guarantees you a set amount of money each month for the rest of your life.   Social Security is a great example of an annuity. The federal government is guaranteeing you a check for the rest of your life. Once you die, the check stops. That is the very definition of an annuity. A teacher’s pension is another example of an annuity.   But the financial industry likes to take very simple concepts and make them incredibly complex. Here are some products insurance companies have created:   Immediate annuity Fixed annuity Variable annuity Equity Indexed Annuity   An immediate annuity is just like Social Security. Say you give an insurance company $100,000. They will then look at your age and gender and make a determination of how much money they are willing to give you each month for the rest of your life. If you are 65 you might get $400/mo. If you are 75 it might be $500 a month. The older you are, the larger the payment, due to the fact that you will probably not be collecting the benefit as long.   A fixed annuity is very similar to a CD. It will pay you a fixed amount of interest for a specified amount of time. For example: a fixed annuity from XYZ insurance company will pay you 3% per year for 5 years. After the five years are up you have access to your money again.   Variable annuities are complex products that allow you to invest in variable accounts —  similar to mutual funds. A variable annuity allows you to have certain monthly income guarantees while still investing your money in the markets. The prospectuses for these things are hundreds of pages long.   Equity indexed annuities are a hot topic, as I see them being sold at nearly every “free” steak dinner seminar in town. The sales pitch is: you can’t lose any money if the stock market goes down, and if the stock market goes up, you get some of the gains.   I’ve found that these products can have some issues. While you won’t lose any money if the markets go down, you are very limited in the amount of money you make if the market goes up.   These are the only kinds of investments that, when people come into my office to see me, I think to myself, “Uh oh.  They went to a free dinner.”   I would really stay away at all costs.   Before you buy an annuity, read this.   So now you know what annuities are. The bigger question is: Is one right for you? Here are a few things you should know about annuities before deciding.   Taxes.    Annuities are taxed in a rather inefficient manner. All growth in an annuity is taxed as regular income. Generally speaking, income taxes are higher than capital gains rates. Growth in stock prices is taxed as a capital gain.   Surrender Penalties.    Want some money out of your annuity? Not so fast. Many annuities charge you a significant penalty if you take more than 10% of your money per year. Most penalty periods can last anywhere from 5 to 12 years. Penalties for withdrawals in excess of 8% are common.   Fees.   Variable annuities have significantly higher fees than index funds and exchange-traded funds.   Age Restrictions.   You must be at least 59-½ to withdraw money from an annuity or the IRS assesses a 10% penalty.   So what do you do if you are pitched an annuity at a free steak dinner? Be wary, chew your food, and take your time. Of all the annuity owners I’ve met, about 5% of them actually understand what they own. Try not to listen to the hype.   Dave’s final take on annuities: meh.   Should you buy an annuity? My opinion, after 20 years of research is: probably not. It goes without saying that everyone is in a different situation, and for some it might be a good fit, but I’ve found there are much better alternatives to achieve similar goals.   It drives me nuts that annuities are generally sold using fear-based sales tactics. (Markets are going to crash horribly, you might run out of money, Wall St is rigged).   You want to make your financial decisions based on facts and data — not on fear.   My Type-A personality loves to understand investment options backward and forward. I can’t help but go back to the fact that a diversified portfolio of stocks and bonds has unparalleled historical success. Why reinvent the wheel? Why make something more complicated than it needs to be? Is it just so advisors can pitch those free steak dinners?   In the Retirement Revolution, we serve up facts, not fear. No steak knife is required.   Be Blessed,   Dave

 

How Much Longer Can the Stock Market Go Up?

Aug 2, 2021 David Kennon

Quick Note:   I’ve set up a program where you can get a personalized plan from me by just filling out some questions online.  I’ll be able to email back to you a financial blueprint (based on my beliefs, of course).   It will explicitly show you:   1. How much you can safely spend in retirement. 2. Whether or not you need to worry about running out of money. 3. Simple ideas to improve your overall financial situation.   It takes about ten minutes to fill out the questions.  Just click here.   Clients: This does not apply to you.  You have already been through this process.   —————————————————————–   I love to write articles to fight back the doom and gloom and the financial noise all around you.  Things are so much better than many of you realize.  I dislike writing articles with a negative tone.   With that being said…. I am upset.  The following article may contain a lot of bold, italics, and underlining.   I’m scrolling through my newsfeed this week, and the fourth article that comes up is:   “‘Very dangerous to buy stocks, bitcoin, investor David Tice warns.”   At first glance, this may be a very alarming headline for many of you.  Everybody is always a little skittish about their investments and, who knows, maybe this guy is on to something, right?   This article comes from CNBC which some feel is the gold standard in investing coverage.  This article could hold a lot of weight for many people.  But should it?   It begins by talking about how this investment manager, David Tice, predicted the stock market crash in 2008.  That prediction gave him some notoriety in the financial world.   He is what is known as a “bearish” investor.  Bulls mean the market is strong, bears mean the markets are weak.  So this guy is generally down on the prospects of the market.  That’s fine, he is welcome to his terrible opinion.   Let’s talk about his “amazing” powers of prediction.  Mr. Tice has been predicting a market crash every year for fifteen years. Was he right one time?  Yes.  Was he wrong fourteen times?  Yes.   Mr. Tice manages a mutual fund that bets the stock market is going to go down.  As Mr. Tice is always concerned about a crash, his fund reflects that philosophy.  Of course he collects fees off of his fund.  Last year he made 1.3 million dollars.  But I digress…   As the article continues, it shows off the fact that the fund is up 3% in the past month.  That sounds pretty good, but let’s look a little deeper look into his fund.  As I said, the fund does well in bad markets and poorly in good markets.   If you invested in his fund (AdvisorShares Ranger Equity Bear ETF) eight years ago, how would you have fared?  If you invested $100,000 in 2013 into his fund, it would now be worth $10,000.  I am not making that up.  The market always goes up over time.  Mr. Tice was wrong over and over.  How is this guy even being positioned as an expert? It would be hard to lose that much money even if you tried.   This is completely irresponsible of Mr. Tice and of CNBC.  These headlines are not harmless.  People like you make terrible decisions because of the “advice” from a guy who lost his clients 90% in the last eight years.   “Maybe he’s right,” some people across the country thought to themselves.  “I had better sell my portfolio.”  In fact, many people don’t even read the article.  They just see the headline.  If you are bombarded with enough of this stuff it is hard not to get worried.   Mr. Tice explains his poor performance.  Sure the fund is down 62% in the past two years.  But, “He acknowledges it’s tough to time the next major pullback, and he’s often early.”   So for thirteen years he has been telling his investors, “I may have been a little early on the scary prognostications, but it will happen.  I swear.”   How is there an article about this guy?  How is this a story?  Why should we pay attention to what this guy has to say?  Why??    I’ll tell you why.  It gets people to click.  I’m also pretty sure he pays CNBC to get the article published.   If CNBC interviewed a responsible investment manager he might say, “The markets may or may not go down in the near future.  It really doesn’t matter.  This stuff always comes back.  Stop reading about this stuff and go do something more important.”   So let’s finish on a positive note.  Between now and the end of your life, the stock market will return 5-10+%.  If it doesn’t, it is historically unprecedented. Even when the markets do have a major correction, they recover quickly.  Downturns in the market will, in no way, affect your long-term financial security. Be encouraged that by responsibly investing your money into a diversified portfolio of stocks and bonds, you will be able to live a better life than you probably realize. Be Blessed,   Dave