Well, it’s the last pod before the “100th Episode Mega Celebration” and Dave gives us a hint about two superstars who may be making a surprise appearance (Spoiler Alert-It’s not true!) Speaking of celebrations, Steve points out that the markets partied like it was 1999 in January, but we’re hungover like it was 2022 in February. You’ll also hear a pretty darn positive, glass is “full full” spin on interest rates. All this and more on episode 99 of Plan For Life Now!
Steve:
All right. Welcome to Plan for Life now, episode number 99. Dave, you feel the anticipation building?
Dave:
I can. I can. And of course, episode 100 is going to be, well, there’s a lot of plans in the works. I, I don’t want to give away the plans because that’s not good. I’m gonna give you a hint.
Steve:
Okay.
Dave:
And I’ll give our, our listeners a hint. Um, and then you have to figure it out from there. Jay-Z and Beyonce
Steve:
<laugh>,
Dave:
And I’m stopping there.
Steve:
Oh yes. It’ll be something like that. Somewhere in between that and a normal episode somewhere in between that <laugh>, I don’t know, somewhere,
Dave:
Somewhere on that scale.
Steve:
Right. Well, I, I will say it’ll be slightly off of a normal episode and I want you to do this as well. I started to do it. And I can even share with you, I just thought, you know, I, I think I mentioned before I had in my mind this like ideal episode where we would go back and we would play epic clips from past episodes. Just wonderful, uh, segments that we had. Funny takes, uh, you know, maybe some predict, not predictions cause we don’t do predictions, but some comments that we had that were epically wrong. You know, that’s in my ideal world where I am working on the podcast full-time or we have a full-time marketing staff doing this,
Dave:
That sounds like we’d have a paid producer, right, who basically produces the podcast and then would have the time to do that type of research.
Steve:
So in the absence of that, and since I really don’t think that adds a whole lot of value, if we did have that, um, I was jotting down some notes about classic either podcast or radio, uh, you know, memories, things that we have. And I don’t want to go into them now cuz we, we don’t wanna spoil them for, uh, for episode 100. But I would ask you to do the same. And I can even share mine with you, um, you know, some just memories that we have from, let’s
Dave:
Do that. That’s perfect. Let’s do stuff like that. Okay. That’ll work. All right. That’ll be episode one. That’ll actually be fun. Okay, cool.
Steve:
Sounds good. Um, couple other things, housekeeping, if you will, before we get into some of the meat of it. Uh, I just wanted to mention our new website. We forgot to mention it. You and I both had said we were going to mention it on the last episode and we didn’t. Um, so just, just thought I would mention it. You know, most people might not notice cuz it’s not a drastic difference from before. But you know, I think it’d been five or six years since we had refreshed our, our website. So we went through that. So if you get a chance, take a look. Let us know what you think. Um, like I said, <laugh> you might not have even noticed cuz it’s a lot of the same, you know, sort of images, pictures of capital building, things like that. Um, pretty much the same overall format, but hopefully a little bit refreshed, a little bit newer than what we had there.
Dave:
Yeah, I like the new website. I I think it’s an upgrade. It’s exactly what it is. It’s an upgrade over the old one and, uh, what can I say? It’s professional. That’s what we’re looking for. It’s, you can get to everything you need to get to. I can get there. That’s how we tested
Steve:
<laugh>. I
Dave:
Can do it. You could do it.
Steve:
No, you say, uh, if Dave can’t do it. No, we can’t. We can’t have that needs to be Dave proof. Um, okay, one other thing here I wanted to talk about. Just a, a quick market update. You know, I, I don’t think most of the time we spend a lot of time doing market updates because you’re not tuning into this podcast to find out about, you know, what’s going on day-to-day. Because by the time you listen to this, probably a couple days old, but when there is so much going on, so much volatility, you know, I think it kind of helps to, to get an update as as to where we are. So January was a really good month to be an investor. You know, January, uh, the markets were up. I, I want to say s and p 500 was up seven or 8%.
I think the NASDAQ index was up maybe 13 or 14% in January. And uh, things have not gone quite as well here in February. Um, everything’s pulled back a little bit. S and p 500 still up 3.6%. NASDAQ’s still up 9%. But the point that I wanted to make, well, couple of points <laugh>, um, you know, first of all is this big question that everyone has is will we or won’t we go into a recession? You know, one of the the articles, uh, that I was looking at is hard landing, soft landing or no landing. You know, basically, are we gonna have a big recession, a small recession, or no recession at all? And I I, you know, we’re never gonna sit here and try to predict that cuz I don’t really know. Um, you know, everybody can, can have some sort of opinion. That sounds intelligent, but I just wanted to point out one thing that I, I thought was interesting, Dave, last year the best performing stocks were were what, what <laugh> they were energy, healthcare, utilities,
Dave:
Right?
Steve:
<laugh> and what were the worst performing stocks? And I’m sure you can list them off the top of your head.
Dave:
The FANG group and Heavy Fang related,
Steve:
Right? Anything, you know, the Facebook, Amazon, Netflix, Google, Tesla, you know, all of that. So not that one month or two months, you know, makes a whole year or even a, a strong trend. But I did think it was interesting to see that those more technology oriented stocks, those stocks that really have gotten crushed or did get crushed last year are off to such a good start this year. And uh, you know, it’s, it’s one of those classic things where some people will say, you know, they’ll look at results from last year and they’ll say, oh my gosh, why are we still invested in, you know, pick the, the category and last year of course there’s gonna be growth oriented stocks. And of course our answer to that is going to be that, well those trends do not continue forever. Um, just because they did poorly last year doesn’t mean they will necessarily do poorly this year. And also just because value stocks did really well last year doesn’t mean they will continue to do really well forever. So don’t want anybody to get caught up in that. You know, that very easy trap there of everything that did well recently will continue to do well.
Dave:
That’s weird. And my picture, my feeling of this year is, and it’s already going on, is this is for us, our clients mostly don’t even look at me, 61 year old guy. But a lot of our clients obviously is the interest rates and the interest rates and even, you know, where are these interest rates going? They’ve opened up a, a ton of investment opportunities that are as simple as you’re doing much better in your savings account if you shop a bit to CDs, to other investments that we do with our clients that the interest rates are real, the returns are real. And I feel that’s the story of this year and it was started last year and, and this year for investing is, wow. I can, and, and I was gonna ask you, how are bonds doing this year in general versus last year’s historic bad year?
Steve:
I mean, bonds got off to a really good start in January, so I wanna say in January the Barclays AG was up something like 3%. Um, you know, now year to date it’s a little bit closer to flat up just a little bit. So it, it, you know, it’s given back a lot of those gains there. But you’re right that, you know, that’s another thing that I had on my list to talk about. So let’s just talk about it now. Cause you bring up a really good point is that, you know, we’re seeing CD rates and rates on money market accounts and things like that that we have not seen since 2007. So when we talk about CD rates that we haven’t seen since that time period, I just saw over the past week or so, Dave, I just saw a one year CD above 5%.
That’s the first time I can say that I’ve seen that for a one year CD since 2007. So I think it makes sense and I mean we’re doing this with our existing clients but it, I think it makes sense for, for money that you don’t have to use right away, right? Cuz there are downsides to putting money in things like CDs cuz you’ve gotta lock that money up for some period of time. But I think it makes sense to, to take a real good look at the rate of return you’re getting on your safe money there. Right? And and I mean I would even extend this out. I’m pretty sure Dave, you’ve got a lot of accounts with Bank of America, right?
Dave:
I used to
Steve:
Oh you used to really <laugh>
Dave:
That’s but way well before now I basically have checking with them.
Steve:
Okay.
Dave:
Everything else is out
Steve:
Good. Well that was gonna be my point and not to, and not
Dave:
Cause they’re bad. Nothing to do with safety has to do with the uh, interest rates.
Steve:
Well that was what I was gonna say is, you know, I’ve got all our personal stuff with Bank of America. I’ve got, you know, business stuff with Capital One. You know, it’s neither here nor there. But my point is that with Bank of America, the savings account rates are still pathetically low And you know, I know some <laugh> senators who we won’t name here, <laugh>, you know, have come out and said, oh yeah, you know, banks need to start paying people more interest on, you know, on this and that. And I get it, you know, they’re saying, you know, they’re charging more interest on loans, they’re charging more interest on credit cards. You should be paying savings account rates more and fine. Maybe. But my point is that you as the consumer should have an eye on these things and say, hold on a second, I’m not getting paid on this money here. And I mean I’m, you know, I talked to somebody last week, I had a meeting, this was just one of my clients and they had over $400,000 in an account that was essentially paying them zero interest. I mean essentially zero.
Dave:
Right? That right. And this environment that is absolutely unacceptable.
Steve:
Right. So, you know, that’s my point is, is that CD rates, you know, are really good. Uh, you know, another thing that that, you know, we’ve been looking at with people more and more, and this is, you know, much less on people’s radar than CDs are fixed annuities. So if you’re not familiar with fixed annuities, you say, well what is a fixed annuity? Well, the fixed annuity a multi-year guaranteed fixed annuity, it’s sort of like a cd but it’s from an insurance company. Meaning you put your money there for a set number of years, two years, three years, five years, et cetera. And you get a fixed rate for that time period. And the big difference, I better say this now, the big difference, you don’t have F D I C insurance, right? So you don’t, you don’t have that F D I C guarantee that that makes us all feel good. Um, but you know, there are some, there are some other statistics about how rarely they they default and some other state insurance protections and all that. Um, my point is that there are some really good ways to get some pretty decent rates of return on your money now.
Dave:
Right. You know, I’d macro this whole thing out into, and you know, we’ve had a lot of talks about, I forgot how you put it, the a a cook that doesn’t eat their own food or a chef that doesn’t eat their own food. You, you wanna trust that chef or go to that restaurant. Well we’re certainly, we do. I do, you do what we recommend to clients. But the reality is you’re 43 and I’m 61. So what I do is much more mirrors what we recommend to the average client. Cuz I’m more like that and I really, when they, you see all these statistics about financial advisors and why it’s worth it to work with one. But part of it is hopefully other advisors besides us are re-imagining the 60 40 portfolio. The 60, yeah. The stock, you know, based asset. The 40 is more now really you, there’s a lot more we could do with the 40 besides just bonds. Yeah. And that’s what you’re getting at. You know, when you’re talking about the fixed annuities and we talk about other investments that you’re mixing that 40 part now, or at least I feel financial advisors should be to make it more of a, a hodgepodge of a bunch of a bunch of options. You’re, we’re able to diversify and interest rates have helped that these higher interest rates to really diversify the 40, um, which I think is beneficial, these interest rates for that.
Steve:
Oh, absolutely. And <laugh>, you know, and, and we were pounding that drum before last year because we said, look, the, the 40 there, it’s subject to a lot of interest rate risk, which came true. And, uh, it is just, it doesn’t have the div the same diversification benefits that it’s had for the past 30 or 40 years where interest rates have been falling. You know, I, I had a chart as I was preparing for this, looking at mortgage rates in 1980 at 18%, you know, all the way down through a year and a half ago, mortgage rates at 3%. Um, when you’ve got that sort of tailwind, sure bonds give you great rates of return because remember, bonds go up when interest rates are going down. But what do we have now? We’ve got interest rates rising and I just don’t think that the same old 60 40 really make sense. You know? Does that mean you don’t own bonds? No, no, no. That’s not what I said. You still have bonds in there, but that 40, you know, maybe is only 20 now and that that other 20, there are other ways that you should be diversifying within a portfolio there.
Dave:
Yeah. But again, comes back to the interest rates. That’s why I feel like this is the big story of the year. It’s just, it, it’s a, it, there’s so much to it, some negative certainly, but for positive for older clients, for our clients who will generalize have already, you know, their mortgage rate, let’s say for their current property, which is, you know, they’ve had forever. You’ve already locked in a lower rate as a general rule. So the interest rates on housing are not affecting you is what?
Steve:
Or they, or they have their house paid off
Dave:
<laugh>. And most of our clients, I’d say, I mean this is the vast majority of our clients, that’s why they work with a financial advisor. They’re financially concerned and they don’t have credit card debt or a lot of credit card debt. So interest rates in that aren’t really affecting them. But it is the ability to make money, uh, on, on things that before you couldn’t make any, you know, that that’s, that’s really there right now. And and to not take advantage of that is, is a mistake.
Steve:
Well what about sort of an offshoot, just while I’m thinking about it, what about the, this idea, this is one of those classic financial planning questions. You know, should I pay off my mortgage or should I just keep the money and keep investing more? Um, you know, I’ve got a $300,000 mortgage, I could stroke a check and pay it off and be done with it. But if I’m borrowing money at two and a half or 3%, you know what probably doesn’t make sense to do that? Well what about if now you’re buying a house and you’re getting a mortgage at five and a half or 6%, I think that equation has changed where it’s not as cut and dry. I mean, there are liquidity reasons why you don’t want to just pay it all off at once for some people. But I, you know, five and a half, 6%, I don’t think anything’s guaranteeing you that long term. So I think that calculation has changed,
Dave:
But the counterargument to that is most of our clients are the ones who are concerned about that when you’re retired. Right, right. And now you have a whatever, a 3% mortgage or a 2.8% 30 year fix.
Steve:
Yeah. And
Dave:
You have investments like you mentioned earlier. You get a cd we’ll say for for 5%. And there are other, you know, investments where you’re gonna make more and feel very comfortable in the investment.
Steve:
Right. That,
Dave:
That makes it a a no-brainer even though the fear is still there. Because you’re not sitting here, you’re not a financial advisor, you’re not sitting here worrying about all this stuff. You might not be as knowledgeable about all this as literate about this financial stuff. So the bottom line is you’re thinking, I just still feel like paying off my mortgage. It’s the same question you’re asking yourself that you were talking about because you’re just, you’ve always thought about that. Yeah. But now that the game has changed when your 30 year fix is low and all these other investment opportunities are high.
Steve:
Yep. Um, while we’re talking about interest rates, I, I have to retell this story here as, uh, I met with, uh, a guy from JP Morgan the other day and he was telling me this story. I just, I thought it was interesting and, you know, maybe it’s just a story they tell to <laugh> financial advisors, but you know, he was saying that JP Morgan and a bunch of the other big firms, the, you know, two big tofa kind of firms, the Black Rocks and the Goldman Sachs and all that, you know, they meet with people from the Federal Reserve on a regular basis just to kind of get a sense for, you know, what, what’s going on, what is the market seeing and all this. And he mentioned to me, he said, you know, one really telling thing in their mind and JP Morgan’s mind is the fact that in this Federal Reserve office, wherever they go to meet with them, I don’t know if it’s in New York or what, um, there is a portrait of Art Burns hanging in the Federal Reserve office. And if you don’t know who Art Burns is, and it took me a second to register cuz he’s not a name that just rolls off the tongue. And
Dave:
If you don’t know who he is, you are good. Continue to have a life
Steve:
<laugh>. Um, he was the Federal Reserve chairman through the first part of the 1970s, I think until 1978 or so. And he is credited with, you can say that in a bad sense, um, being the one who raised interest rates, right? Trying to fight inflation in the early seventies, but then turned around and cut interest rates because of some economic weakness and then raised interest rates and then went ahead and cut interest rates a little bit. Basically didn’t stay committed to that fight against inflation. So they’re telling this story, saying this is their belief that the Fed is not gonna get hung up on, oh, there’s a little bit of economic weakness, or the market is down, or maybe even we’re in a recession. The Fed is gonna try to take that lesson from the 1970s, not be the next art burns and stay committed to raising rates and keeping rates higher.
So for whatever that’s worth, I thought it was an interesting story. Uh, poor art burns, he gets, he gets dunked on there at the Fed, I guess every day. <laugh>. Um, so Dave, I wanted to talk about this article that was pretty much everywhere this study that, that was out here about, uh, you know, what do investors think they need to retire comfortably? And anytime I see one of these surveys that comes out, my immediate thinking or my immediate question is, you know, who’s doing the survey <laugh>, you know, what sort of acts do they have to grind? What’s their angle? And you know, who are they surveying? I don’t really know the answer for these. Um, it says the latest M L I V pulse survey and they, they are asking investors, how much do you need to retire comfortably? And I I maybe this idea of having a million dollars has sort of gone by the wayside, but for years and years, that was the thing. Oh, if I could have a million dollars, I could comfortably live off of that. You know, you had the Old Bear Naked Ladies song, um, you familiar with the song?
Dave:
Uh, I have a feeling when you mention it, I’ll remember the line
Steve:
If I had a million dollars. Oh, right,
Dave:
Right. That’s right.
Steve:
Probably a little, a little too young for our audience <laugh>. But ask your kids about it. Um, and when you take a look here, the survey of investors in the US and Canada, uh, 2.9% said they could retire off less than a million. 7.6% said a million. 31% said 3000042% said 5 million. And then there’s a handful of people here who say they need 20 million or more <laugh>. Um, so those are probably the people living on Wall Street or living in New York City and Manhattan working on Wall Street. Um, maybe they do if they’re gonna maintain that lifestyle. Um, so my initial, well actually Dave, why don’t you gimme your initial thought <laugh> and then I’ll chime. My
Dave:
Thought is it’s, it is done improperly. It’s always been done improperly. It’s, if I would do a survey, if you spend X amount a month, how much do you need to retire on? That would be a much more, uh, that would be something that would actually help people. The other way, it, it, it’s absolute waste of time. It’s all about what you spend a month. Hey, I spend this much a month, how much do I need to retire? That would be a survey that is worth looking at for the average consumer.
Steve:
Yeah, no, I, I totally agree. Because, you know, how does this make any sense unless you put it in that context that you said, you know what, we’ve got clients who, who, you know, unless they’ve got $25,000 a month coming in, they’re just, they’re not able to meet, make ends meet. You know, and then we’ve got clients who say, $3,000 a month, I’m good. You know, that that’s, that’s all I need. I, my house is paid off. I’m, I’m fine. So how do you differentiate between those on a survey like this? Um,
Dave:
That doesn’t even include having a pension or not having a pension.
Steve:
That was my next, that was my next statement is, you know, I think that the big differentiator, the first thing that came to my mind is we’ve got clients who have pensions of $150,000 a year. Right. $150,000 a year pension versus somebody with no pension. Uh, you know, that’s gonna be a difference of, I don’t know, four or $5 million depending on when you retire if you’ve got a pension versus not. So it, you know, I, I don’t know <laugh>, I don’t know how they, they did that survey there. Um, but if you talk about, you know, very generally and you say, okay, you don’t have a pension, you’re an average client of Dave and Steve who lives in the, well, a lot of ’em start off living in the DC metro area, you know, is an answer of between three and 5 million. Somewhat reasonable. Yeah. I think it’s somewhat reasonable, but I think you’ve gotta look at that and, and take the, is my house paid off? Do I have a big pension or at least a partial pension into account? Uh, because that might seem like a big number, but if your house is mostly paid off and you’ve got a pension of even, you know, 50 or $60,000 a year, um, you know, that could be a couple million dollars less that you need to have saved in retirement.
Dave:
Yep. Yeah. Well that’s why these things are just, you know, <laugh>. Yeah. We always say the same thing. The only way to really find out is to, is to either you’re very good at doing the calculators and all that stuff, or you work with a financial advisor and you go through the process of really digging in and then you’ll know exactly what you need and where you stand. I mean, the other way is like whatever,
Steve:
<laugh>,
Dave:
They’ve been doing a lot of that stuff. Plus I even look at average net worth and median net worth as a big issue in these things when I read these things, Hey, the average net worth of, and you might look at that yourself and say, oh my God, that’s not my net worth. And the average person roaming around my age has that. Well, averages throw in everybody your age. Yeah. And a lot of people your age, not a lot, but there are a number who are hedge fund owners and managers Yeah. And all that stuff. I find median net worth to be a better indicator of what’s going on in this country. Um, and that’s a, a whole other thing when people start comparing themselves with others and what they need and all that.
Steve:
That’s a good point cuz I, I, I don’t know the numbers, you know, for overall, but I know that Fidelity puts out these numbers where they say that the average four oh [inaudible] account balance is $117,000. Right? And you go, oh, well that’s terrible, but okay, fine, 117,000 and then they put out the median account balance and it’s $27,000. So, you know, it just shows you how skewed that can be because there’s a handful of people that have huge account balances, but then a ton that just have zero.
Dave:
But when you look at net worth, which is different, right? When you look at net worth for someone my age, let’s say 60 to 64, the average net worth is surprisingly high <laugh>. I’m, I’m feeling it’s somewhere in the neighborhood of 700, $800,000 average net worth, which you would say that’s pretty high for everybody. But then look at the median net worth and it’s a lot less than that when you start to take off the highest and the lowest and get into the median is more like, you know, in the threes or something like that. Which again, you might look at and say, wow, that’s really low for being my age. And but the reality is just as a comparative thing. Yeah. People, you don’t want to be freaked out is the bottom line.
Steve:
Alright, I think that’s enough for today. Everybody will leave, everybody wanting more highly anticipating that episode 100.
Dave:
I think episode one hunter’s gonna be fun. I like your idea to do it and we’ll do it.
Steve:
All right. Thanks for joining us. We’ll check in again soon.