A Guide for Do-It-Yourself Retirement Investing

Nov 22, 2021 David Kennon

Jerry and Andrea Jones were your typical retired couple.  Those both worked physically demanding jobs so they celebrated their retirement each day.   Jerry was also somewhat of a worry wort.   “Jerry, we are not going to run out of money,” his wife pleaded, “You pay too much attention to this stuff.  And your investments!  You look at them on your computer every day.  I’m tired of your moods being dictated by those stupid accounts.”   “You don’t understand,” lamented Jerry, “This is our life savings.  If something happens to this money, we won’t be able to pay our bills.  This is a big deal.  I need to stay on top of things.”   “Oh!” exclaimed Andrea, “I didn’t realize that.”   So Jerry went upon his day as usual.  He went to his favorite website where he saw a headline that read The 1929 Stock Market Crash Caught Nearly Everyone Off Guard. Are We Headed for a Similar Fate?   “Hmmmm,” Jerry mused, “This is from Barron’s.  I’ve heard of them. Of my gosh!  What do I do?  Maybe a stock market crash really is imminent.  This is so stressful.  I can’t deal with this.”   Jerry slumped his head down on the table.  The day was already ruined and it wasn’t even 9:00.   “I’m going to take my mind off things by watching TV,” Jerry thought.  He flipped on the national morning show.  Big mistake.   They were interviewing some guy from Wall St. discussing the future of the stock market.   “Our analytics show that the market is oversold.  We don’t know when the market will correct, but the signs are all there.  These are unprecedented times.  We are due for a crash.”  (Does this guy have a crystal ball?)   Jerry felt a sinking feeling in his stomach.   “Ok.  Maybe I should put my money in something guaranteed like a CD or annuity,” Jerry thought.  “Sure I won’t make as much money, but at least I won’t lose any.  I will let things cool off a bit, and when the markets are safe again I will reinvest the money back in.”  (This thought process is incredibly common and incorrect on many levels.)   Jerry went about his day and that evening he checked his email box.  It was mostly junk mail.  “I must be signed up for 100 newsletters,” Jerry chuckled.   As he continued to peruse his inbox he saw an article his buddy Phil forwarded to him.  “Gold price: Here’s why the yellow metal could double, and the best ways to buy it.”   “Phil really studies this stuff,” Jerry thought.  “And I keep seeing these commercials on TV about how safe gold can be.  Maybe I should buy some of that. I don’t even know how that stuff works.”   For the day, the Dow Jones had lost 400 points or .5% of its value.  “I just lost $5,000 in one day!  I just can’t deal with this anymore,” Jerry cried out to the heavens.   Jerry slept restlessly, pondering a life where he’s living only on Social Security in subsidized housing, eating Ramen noodles every night.  “Andrea is going to kill me if I lose our life savings,” Jerry felt his blood pressure rising.   <end of story>   Does this sound like you or someone you know?   I may be exaggerating a bit for dramatic effect, but I know this story will resonate with quite a few of you.  You are surrounded by relentless noise about your retirement savings.  Everyone has an opinion.   What is the answer?  Is there an answer?   I believe so.  You need to find a fiduciary that you trust.  Sadly, this is not an easy thing to do.   If you have a trusted advisor, any time something alarming crosses your path, you can simply say, “My advisor handles that. I don’t even need to think about it.  He’s the professional.  If there is something I need to do he will tell me.”   I can’t emphasize this enough.  The more I live in the world of retirement finances, the more I realize no one can do this on their own.  Sure, there are some of you do-it-your-selfers out there.  But it is exceedingly rare.   And if you go at it alone, can you really trust yourself in your seventies or your eighties?  Can you really trust yourself to never make an emotional decision?  Do you really have the discipline to tune out all the noise?   Can you withstand the fear tactics?  Can you withstand the market temporarily dropping 20%?   I absolutely love my job.  I see people like you breath deep signs of relief each day in my office, as they pass on the responsibility of investing their money to me. I see their shoulders noticeably relax.   You don’t need to live in fear and uncertainty.  A disciplined approach to investing in stocks and bonds is a long-term strategy that works.  It’s been proven over 200 years.   The difficult part is finding the right person.  Whoever handles your money needs to be smart, reliable, and have the utmost integrity.   Even if you find this person, oftentimes they leave the business.  The turnover rate in the financial services industry is 95%.  Some of you have experienced being passed from one advisor to the next.   This is all to say that there is hope.  Many people don’t even know where to start.  Do you look someone up in the phone book?  I recommend you ask around to your friends and family.  I know it can be intimidating and uncomfortable, but you need to initiate that first meeting.   Often times it helps to work with an established advisor who has written a book called “You Never See a Hearse Pulling a Trailer.”  Which is available for $19.99 on Amazon.  LOL   Be Blessed,   Dave   Presenting: Ask Dave Anything I wanted to give back to the community.  So I’ve started scheduling short, free phone calls, where I will answer any financial questions you may have.  Spots go pretty fast.   Click here to get your spot

 

Baby Boomers’ Hidden Virus

Nov 15, 2021 David Kennon

Oversaving: An American Epidemic? There is an insidious contagion spreading itself across America. It seems to only affect adults, mainly those nearing retirement or already retired. Unchecked, this virus could sabotage the lives of countless Americans. What is it? Oversaving.   It may sound crazy, but the trend of oversaving is very real. According to a study by Sudipto Banerjee of the Employee Benefit Research Institute, 1/3 of retirees die with more money than ever.  It also found that, on average, retirees only spend 25% of their savings during their retired years.   Of course, about half of the country does not need to worry about oversaving. In fact, if anything, they should start to worry about saving more.  I’m talking to people who have saved at least $200,000 for retirement.  You don’t need to be a multi-millionaire to responsibly enjoy some of your hard earned savings.   Let’s look with a very personal example.   My grandfather, Papa, was a depression era baby (and an absolutely amazing guy). Papa was a school teacher in a small rural district and never made much money. My grandmother raised the kids and never worked. When Papa passed away at age 89 we were utterly shocked to discover that $900,000 remained in his bank account.   As we reviewed his bank statements, we realized he had saved money each an every month up until the month that he died.   When Papa was in his 60’s he desperately needed hearing aids. His hearing was getting so bad that he became embarrassed because he couldn’t understand anyone on the phone. After going to the hearing specialist, he was given two options. He could buy the clunky, old-fashioned hearing aids which Medicare covers. Or he could buy the cutting-edge version which allowed for better hearing. The cost difference was significant; thousands of dollars.   I’m sure you already guessed which pair he chose. The cheap ones.  Papa literally chose his own hearing over spending some of his savings.   There is no way I am going to let you make the same mistake. We don’t want you to be irresponsible with our spending. We just want to find the perfect balance between spending too little and too much. We need to start thinking about what money is for.   Why do people oversave? There are a lot of reasons people give for continuing to save during retirement, but they all really boil down to fear and misinformation. If you feel like you have to hoard every penny, you’re not alone and it’s not your fault.   Your parents survived the Great Depression. You’ve watched pensions disappear, mortgages rates skyrocket, and banks fail. It’s no wonder you feel safer saving every last dollar until you die.   But you don’t have to. You can spend money during your retirement. Listening to the mainstream financial news on TV, you might think that most retirees are dying destitute, but that is not the reality. Only 12% (source: 2015 Kaiser Health News) of Americans die with no savings remaining (only Social Security to live on).   What are the signs of oversaving? Oversaving has a few tell-tale symptoms to watch out for. If you are experiencing any of these, I advise you to read more Retirement Revolution articles and call me in the morning.   Symptoms of Oversaving You continue to work even though you have enough assets to retire comfortably. You worry about outliving your money, even though you have plenty of financial resources to live a long and fulfilling retirement. Once retired, you refuse to spend any of your savings because, well……you “just never know.” You feel like you’re broke, even though you may have hundreds of thousands of dollars in the bank. That money isn’t yours; it belongs to “retirement.” When your spouse suggests you splurge on an African safari, you spit out the water you were sipping on. A new way to think about retirement. Think about it. Many retirees and those preparing to retire are so preoccupied with saving, so worried about not losing any money, so afraid of running out of money during retirement, that they forget what the money is FOR. Your financial statements are not just made up of ink and paper. They represent much more: experiences, freedom, opportunity.   Imagine, millions of Americans who have worked hard all their lives, saved their whole lives, only to waste what should be the best years of their lives during retirement by never spending any of the money they’ve so carefully socked away!   You deserve an awesome retirement. But, you’re going to have to take it back.   You’ll have to take it back from the financial news that wants you to stay afraid, and the financial planners that want you to keep saving because their compensation is based on your account value.  You have to take it back from yourself, changing your mentality and embracing the idea that you can spend money during your retirement without fear.   That’s why I started The Retirement Revolution. I want to empower you to live the retirement you deserve.   Don’t believe the fear-mongers. Retiring is not as scary or uncertain as you may believe.   Instead of anxiously looking to the future, focus and prepare for the new life coming your way. Allow yourself to enjoy the fruits of your labor. Allow yourself to live the life you deserve.   Be Blessed,   Dave

 

Being Rich is Overrated

Nov 5, 2021 David Kennon

Betsy and Steve Berger were retired veterinarians.  Having read David Kennon’s book, You Never See a Hearse Pulling a Trailer, they viewed their retired lives with a sense of opportunity and encouragement.   In fact, they liked the book so much that they bought several copies and gave them to all their friends and family.   Betsy and Steve had a couple of important questions to answer.  How much money did they want to be leftover when they were gone? When were they going to start spending some of their savings? While they wanted the family to get some of their modest wealth, they also believed strongly in enjoying the money in their retirement accounts.  After all, they had saved that money all their lives into retirement accounts for their retirement.   After investing their money in a diversified and balanced portfolio of stocks and bonds, Betsy and Steve put together a plan.  With their $700,000 IRA, they knew they could safely spend 5% of the portfolio (or around $3000 a month).   Betsy and Steve always lived very frugally and kept a close eye on debt.  Now retired, they owned their house, cars, and paid their credit card bill each month.  Their monthly budget was quite low, and their Social Security covered the basics.   So they used the $3000 a month to check off their bucket list.   First was travel.  They rented a camper and traveled the country with their dogs.  “The U.S. is such a beautiful and diverse country.  We might as well check out the homeland before traveling abroad,” Steve mused.   Over the next couple of years, they hit all the spots:  A European river cruise, skiing the Alps, hiking up Machu Pichu, an African safari, and they even lived in a hut (called a yurt) in Mongolia for a month.   But after a few years, they grew weary of travel.  “There’s no place like home,” Betsy reflected, “I’m getting tired of traveling.  I’d rather be here than anywhere else.”   So they put the extra money into making their home perfect.  They started with a new kitchen and master bathroom.  Steve did some of the work which saved them a good bit of money.  A new deck, new windows, and new flooring followed.   One day, five years into their retired years, Betsy commented, “Now what?  We don’t want to travel, the house is just the way we want.  What’s next?”   “Well,” Steve chimed in, “I suppose we can just reinvest the extra money each month.  There is no point in buying things we don’t even need.  I guess I could buy a new truck, but there is nothing wrong with the one I have now.”   So that’s exactly what they did.  Instead of depositing money into their bank account each month, they just reinvested it into their portfolio.  They were destined to die millionaires.   <end of story>   “Why did you tell me this fascinating tale?” You may be asking yourself.   It’s because I’m seeing this exact scenario playing out over and over again in my office.  Clients see their portfolios going up more than they expected, their expenses are lower than they expected, and many of them are coming to a startling revelation:  Sarasota is paradise. People travel here for vacation.   So what do most people do?  They revert back to their old ways.  They save save save.   This is where I really struggle.  A veteran of the industry, I don’t have a great answer for this situation.  It is not my place to tell you what to do with your money.  It’s very easy to fall back into thinking, “Well, I guess I should continue to save because you just never know.”   This all comes back to a cliche.  “Money doesn’t buy happiness.”  But, man, that is the truth.   In my experience, most of you are happy with a nice simple house in a nice simple neighborhood.  You want to live a life where you don’t have to count every penny.  You want a life where you can basically do the modest things you want to do.   You will pretty quickly discover that the luxury of “doing what you want” wears off pretty quickly.   You may do a couple of things, and then say, “I guess, even though I can, I have no interest in actually doing it.”   In my experience, if you can bring $2000/mo into your household above and beyond your budget, you can do what you want.  Most people don’t want a $50,000 month-long Alaskan cruise.  Who wants to be away for a month?   So if you are bringing in $4,000 or $7,000 extra each month, you will not live a different life than the $2000/mo people.   These millionaires come into my office and pretty quickly find that their money can only take them so far.  Having $2,000,000 in your portfolio doesn’t feel too good when you are having problems with your kids.  Money cannot solve most problems.   I guess the point I’m making is this:  Being “rich” is totally overrated.  As long as you have enough to live, money makes almost no concrete change to your life and your happiness.  All I do is talk money with people like you every day.  I cannot emphasize this enough.  Relationships create meaning.  Not your portfolio.   Be Blessed,   Dave

 

Do You Have More Money Than Your Friends?

Nov 1, 2021 David Kennon

Somebody remarked to me this week, “Dave, I like the articles you write because you just say it like it is.  You don’t get all fancy or wordy.”   It reminded me.  I don’t like to read stuff that’s overly wordy either.  It seems that many articles I see contain 90% filler and 10% information.   So this week I am going to take things to a whole new level. Below you will find several concepts that I’ve talked about over the past few years- in as few words as possible.  I’m trying to take my entire planning philosophy and boil it down into a five-minute read. Are you ready? Let’s go!   1. Nearly one-third of the country dies with more money than ever.  This implies that many retired Americans are underliving and underspending.  Sound crazy? Just look at the data.   2. The media is your worst enemy.  With all the doom and gloom in regards to the economy and social programs, it is easy to fall into the trap of saying, “Oh my!  I might end up living in a van in the Walmart parking lot.” These fear tactics are completely twisting the reality of most retirees.  While, obviously, there is a portion in the country who find themselves in challenging situations, I would estimate two-thirds of you are in better shape than you realize.   3. Everyone is terrified of running out of money.  Everyone. I don’t care if you have $100,000 in the bank or two million.  I’ve met with literally thousands of retirees. This fear controls almost all financial decisions in your life (but it doesn’t have to).   4. Over the past twenty years I’ve looked under every rock for a solution to the question:  Where the heck do I put my money once I retire? The conclusion I’ve found is now abundantly clear:  A diversified and balanced portfolio of stocks and bonds. Period. End of story.   5. On that note.  Stocks are remarkably powerful.  Over any long period of time (10-20 years), they’ve basically always returned around ten percent.   6. Taxes are far lower in retirement than while working.  If you are retired and married, bringing in $5000/mo or less, you will pay no income taxes.  If you are single, the number is $3000/mo.   7. Inflation is not going to ruin you.  Social Security increases lock-step with the rate of inflation (this year your benefit will increase by 5.9% due to significant inflation.  Even if you haven’t taken your benefits yet, it still grows.)  In addition, spending naturally goes down as you age. From your late 50’s to your early 80s, spending goes down by 40%.   8. If you are invested in a diversified portfolio of stocks and bonds, it is reasonable to spend 5% of the original account value each year. If you retire with $100,000 you can spend $400 a month.   9. Retirement is not all about golf and sipping margaritas by the pool.  Once you retire you need to find purpose.  Make sure you plan ahead of time. Whether you volunteer, start a new business, help raise the grandkids, or serve your church- do not fall into the trap of complacency.  Purposeless inactivity is literally bad for you health.   10. Give with a warm hand.  Generosity is contagious. Inheritance is overrated.  It is far better to help your loved ones and others in need, while alive, than once you’re gone.   11. Presidential elections have no long-term effect on the stock market.  Politics and the stock market have almost no correlation.  I have no idea why.   12. Your friends have less money than you think.   13. Don’t buy into the hype.  No one on the planet knows if the stock market is going to go up or down this year.  Not Warren Buffett, not Jim Cramer, no one.   14. The most important factor once retired is not your savings, 401k or social security.  It is your budget.   15. Social Security is not going broke.  It just isn’t. Get it out of your mind.  I can go into great detail about why- but that is for another day.   Whew.  That was fun.  I hope you learned something.   Now go out there, grab the tiger by the tail, and proclaim, “I’m not going to live in fear.  I’m educated and ready to go!”   Be Blessed,   Dave   Presenting: Ask Dave Anything I wanted to give back to the community.  So I’ve started scheduling short, free phone calls, where I will answer any financial questions you may have.  Spots go pretty fast.   Click here to get your spot