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KJCE 1370AM>Audio on Demand>>WorthPointe Wealth Watch Podcast 5/31/14

WorthPointe Wealth Watch Podcast 5/31/14

Jun 1, 2014|

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Automatically Generated Transcript (may not be 100% accurate)

And for work quite well watch -- Christopher fans who. Partner and founder of worst point so we'll see. Tired of the same sales pitches disguised as financial advice Crist is a certified financial plan. Real facts about and this -- Good afternoon Austin, Texas this is your humble. Co host. For the -- foreign radio Morgan Smith certified financial planner and partner with the worst point. We're very excited to be within addicted are gonna talk about something very important. Retirement income and on that note electric introduce. Scott Nebraska hello how are you today we -- on top notch up himself who who who we missing. I was just about to say it seems Olympian here and I know I had. Hello cheerio are our own esteemed. Co host mr. Christopher bands like his home on the mountain probably had a investment conference. In Boston or something parts unknown parts unknown. And -- American or European road trip yes yes. Let's all right we have a great topic in we have -- information so we can now we can handle this yeah I think it's a really exciting. An important topic to. Two talking about it's retirement income and it every you wanna speak to. There really concerned about what's gonna happen in return and so it's really important in it at certain. There's a lot of misconception out there about return and and what it means I think there's a lot of fear out there is people get worried about content from about your retirement are thinking about it but it. I'm worried about that the market going down what do I do and he gets stuck so we're gonna talk. About the difference between told a return an income and today should be a great show I'm looking forward -- yeah he is. A lot of marketing going around on about the topic and in the red zone and none of these zones and when the pitcher number only kind of things so I think it get it confuses people they gets an anxious and well that all that. Marketing is on the side of the car were you know lift the hood. They they'll give you a peek under the they go and debt talk about -- really goes on out -- investment world. But first we're gonna go to our trust the new segment here with -- hard hitting embedded news -- Scott O'Brien. It's an interesting news I thought it was interesting anyway you know it's always news to me. And but he's the the US treasury. On the thirty year treasury bond is up about 12% this year. And her we had Ryan Leahy on -- -- lending a couple weeks ago and he was talking about what we try to pin him down. Yeah and all fairness to Ryan. He didn't let us an -- yeah I was. If you -- secure in the jive he's too Smart in -- -- -- in they did quotes and other people. We should we try to get him at least we ended. Predict that other people predict and he was according other people who are predicting that interest rates could be higher at least by the end the year I think. And but evidence of the contrary lately at least interest rates have at least a thirty year traders are gone down which means. The value of the bonds have gone up about 12% this year which is a pretty darn good -- -- -- to raising interest rates have gone down and NSA. Body twelve about twelve month low so that's a pretty good return and I don't think people -- of are thinking that's what's happening but as is normal people are seeing hearing other things on TV and reality is a little would -- Well let's suspend the assumption of everybody I speak with a -- like a give and interest rates are gonna go up interest rates are gonna go out. And yeah I'm sure one of these is this they will but we don't know when that's why we try to pinch Ryan down anyway last stuffed after it. What we're still in this news stuff we are embedded. News counts got a -- -- were you just embedded in Afghanistan really got that -- chief of station name for this year -- -- -- -- no no you know I and many years ago I had the American colonel Sanders. Entered Pritchard yes or in the kernel are good friends -- for awhile and I can't keep a secret and and their word at least be twelve. That's spices and now there are eleven so. I gave away the twelfth nauert so -- -- us. All that bad. So so no they don't let me keep secret side that was not me although it would be something I would do did this slip of the tongue but that was not me yeah I think here. The other OK FC fiasco fiasco. That was on the headlines of market and to the best it can and well again you know we're here with the -- warrant radio here again you can find us at -- point within. And to. We'd be happy to sit down talk review and maybe even a second opinion let's talk about this thing. First called retirement. -- when I speak declines about retirement it's like. I don't wanna be put out to pasture. That's not what I want but what are your thoughts on what retirement is first off reboot before we start talking about how to here income for. Yeah I try not even use the word anymore I'm not sure that you do and when you talk to clients I use a word I checked yes and when they want to make a work optional. And you can see their eyes light up because this really what -- thinking now is no one wants the idea that you were talking about they and in a rocking chair that this really people do that anymore. It says it's clear of the grandkids or or doing charity were corps traveling or doing something else. -- site some people the other day and there you know they're they're thinking that they want to make work optional sixty. But they wanna do something else they think she still wanna get paid but they wonder something they they issue -- -- worked twenty hours a week but do something they really like doing -- getting -- a little bit because American had been -- -- Social Security tiller 65 silly they need some income. -- person's social programs out there where. It you don't have to work as much prodigious. Get paid your debt but yes -- is right. Then but but they really -- in the idea that they that it was a work was optional -- and site I like that term I think it's it's a good way to think about it. Yeah I think there really people there's this old car concept of -- -- and that everything's got to stop in your whole life is gonna change in that doesn't necessarily -- it. You have to be the case I'm sure -- that your desk there working your boss comes up huge -- Works optional whole -- anything. Maybe get scared but really the concept of retirement. It's it's it's it's a way to kind of have more freedom and more flexibility in mid may -- To cure some of those dreams that that you had earlier on a -- that it's got sidetracked. I know -- my mom my mom is a teacher and she retired after 25 or thirty years and I think the week after she retired the neighbors said -- She rarely would you like to work the food bank and had. And would you like to work with the Children's Museum might -- sister willow is running that denies she was as -- -- -- be afterwards but -- -- enjoyed all those different things that she was getting involved and so it it was just a different stage and she -- has been in this -- when she was busy until she was -- five and start to slow down a little bit but. It was just different stage. -- gonna wrap up the segment here and take a break pretty soon but what we'd like to do is just TS and what what's the essential thing we're gonna talk about retirement people. Want income. Now the problem as people think of income as that there's two different perspectives on income. Into different areas when you think about Lincoln one as with your investment portfolio which is what creates income and an investment portfolio. Bonds and dividend stocks typically that's what we see an apparent right and then. The way the client or you know listening audience wants to take care of your retirement you want income. Coming in your bank every day or every month or every two weeks -- the case may be so you get. People tend to get those two concepts confused. And we're gonna talk about the best way to build a portfolio for income and generally talked about there's -- crazy constant Cold War returned. Great yeah. A wrong. And it. Boom. Okay. Between ramping government spending and uncertainty about our economic future most Texans are having doubts about their own financial future. Are you ready to take a serious look at your financial goals using the experience the only certified financial planner practitioner is it worth point. Would you like a second opinion on your current advisor who may be selling you investments and insurance for commission's -- worth when he radioed I've come to make an appointment or call 8885447. 760. That's worth point radio dot com 8885447760. Welcome back to work quite well watch giving you an unbiased people under the hood of wealth management. Investment and financial planning. Once again here's Christopher advanced life. Good afternoon Austin, Texas this is Morgan Smith along with Scott O'Brien -- -- life is out today we're talking about retirement income. Hand. This notion. Total return. Hands. Investing for income so look at what one of the problems that. Investors have is is that the Canadian common term which they do. And so that. Instantly. Gets them attracted to this idea of pay in order for me to get income. But I need do invest in bonds that are generating. Yield income. Or dividend stocks that are drew generating some kind of dividend to make my income because that's. That's what I hear. Things don't swing is -- must be done C. d.s CDs and and also you get older people are thinking bonds because there there Morsi from the small told. And you know that the flip side of the coin is. There's something called told a return. And we'll talk about that but what kind of discussions have you had with -- investors out there who will -- in Canada confusion on. On on. How to taking come out of performed. I had this yesterday. On the day in game he had. That was -- plants and it was not a plant say about it but he had he had bought. -- Higher dividend paying stocks utility stocks and told him stocks. And the problem was that some of it done okay but some -- had gone down he was still getting the dividend but the value of the stocks are going down. And he was -- rationalizing -- some getting paid quarterly dividends. Although the principles going down so his total return was not very good. But he was rationalizing I just needed the cash flow. And I was I had been over the last couple years and we had shift to -- money then did he really needed a good total return didn't really matter where he was getting his money to pay his bills. He just needed to did total return and I was trying to convince him that he is is really losing the battle because today is the value of his portfolio was going down faster than the income was coming and. Isn't that a big if it's kind of strange. It's interesting. Concept to win it when people -- -- I don't wanna sell any -- investments because -- I don't half Armenian war. But if those investments are growing really well you you do wanna sell -- spicy if their prices -- we'll talk about that later. So really I think where we can go where this is what we start kind of fall back and really kind of define what total return and it's so. We'll return can be used and into kind of concepts and one is measuring your performance. When measuring the performance the actual rate of return of an investment or pooled investments. I'm over a given period total return includes interest. Capital gains dividends. And distributions reload realized overtime period of time. Right you know in an all of those four what's the most powerful part of the well that's that's the point exactly so you've got this you've got to portfolio. That states that you've got your money in a safe. And you've got all of those tools that -- you get interest from bonds. You've got capital gains. Dividends and distributions. The most powerful tool arguably in May not even arguably. Is the capital appreciation. Of those assets rent. NY. That's because. Good question the bigger question hand what you start when you asked the why it's because. It's this whole idea of stocks. Over longer periods of time. Have outperform. Cash and bonds significantly. Over time and that really. Is your capital assets and you're capital gains in the portfolio so it's an income strategy. Instead of using all of those tools that you have in your portfolio it seems like an income strategy what they're saying as well let's forget about. The most powerful piece of the puzzle. And just utilized dividends or bonds -- doesn't quite make sense to me. When it's the only portion that's at any likelihood. Keeping you ahead of inflation which are now or a talk about a little later. Is. You know inflation is what's gonna eat away at your retirement over an extended period time. And capital appreciation is the only one of those. Aspects that you just mention of total return that has all but any likelihood of staying ahead of inflation. So even if the other ones could keep up with inflation you really need to stay ahead of -- place -- otherwise are buying power is gonna be diminished every year so. Let's think about this. If if you got a box over here and it -- -- it's an ATM. Do you really -- care about how the money's being generated or. -- what's your biggest concern how the money is being created. Or is your biggest concern. That you're gonna get money. Every month in return. Right right and we we we -- timeout as example earlier today is. But the guy who invests in commercial office billing for example. You get tenants. So us say he's getting income from those that building and so he's taking income and doing whatever he wants for the income. But there might be -- point where he needs to he needs to sell the building too because he needs the capital appreciation and to also spend so. Does he really care are wary. Got being and the money he get it he was getting come and get their money now he's at the cap appreciation now is he is its money right. Sure the proposition and here folks is really. Use all these tools in your box and the most powerful tool scalpel appreciation. To do. We give yourself the best probability. Of never running out of money and retirement that's basically -- attorneys basically and so you know let's talk about this I mean if you know and there's. A study from the organization for economic cooperation development in 2000 when the average age. Mortality rate they -- four men United States was 76. And woman. 81 so you're you're gonna need this money. For 2030 years at least. So what that equals at 2030 years from retirement. So really you really -- Put all the power. Of that asset capital appreciation to use which you kind of lose it for use in those income strategies a lot of people talk but I guess if you think. You're running out of money you -- maybe go to South Africa that has the lowest life expectancy rate of now 52 point six years. Got to try to get bit by mosquito and West Nile Virus and turn it but in this and I always tell people a couple things one this is currently this is the it's. The stats. But think about what will happen the next ten years in terms of medical advances in things that are. -- chronic disease things are diseases kill you now our image and chronic diseases. You know HIV aids. A while ago was that would kill you and now it's a cry it it is a chronic disease if you could I HIV aids now is it chronic disease in people. Lived into their sixties and seventies now with the HIV eights and he's too -- to use a death sentence and imagine in next. 1015 years of things that that would kill people today the breast cancer used to kill more people and has announced not knowing it's terrible that the postal dive from a wrist is much lower than used to -- OK so the big argument the fear of told return as I'm scared. That the stock market's gonna go down prime let's talk about it and then next segment how you can basically. Reduce. The those problems significantly. If you don't. Built your portfolio -- -- yes. I always -- Ten. Between -- government spending and uncertainty about our economic future most Texans are having doubts about their own financial future are you ready to take a serious look at your financial goals using the experience the only certified financial planner practitioner is it worth point. Would you like a second opinion on your current advisor who may be selling you investments and insurance for commissions -- worth when he radioed I've come to make an appointment or call 8885447. 760. That's worth point radio dot com 8885447760. Welcome back to work quite well watch giving you an unbiased people under the hood of wealth management. Investment and financial planning. Once again here's Christopher advanced life. Welcome back Austin this is Morgan Smith fans got -- Brian was reported radio you can find their son now we're points. -- And does so. Look at one of the fears of people have in the total return portfolio IE having a -- rule of her sniper who reporter with the help the allocation of stocks is. What if the stock market declines and it's a very good question because one of the golden rules that I have as an advisor. And on and that you should think about in anything you do from an investment standpoint is never be forced into position. We're used to have to sell an investment that's down on price so in the real estate market a lot of people -- leveraged. Prices went down they had to sell. What happens. People don't things do things right the stock market as prices go down and they're forced to sell because maybe they have to create some income. Well well what's the way to help really lower the probability that it happened to happen -- have so let's talk about recessionary periods. Since world where true that the shortest recession was about six months. And the -- recession with six months sixteen months excuse me so let's say. That you set -- enough cash and bonds. To take care of your income needs for a year twelve months -- split the difference team. Do you care with the stock market business. That over the next year. Then you you you picture cushion right if he has short term bonds and cash. -- -- Then you've taken that worry away or should not have to worry about because you have cash or cash equivalents sitting there. So that's a really important and point. In cash flow management and it's really more of a point of emotional. Management. And when people are scared about the market. Going down in the short term when they know over the long term historically it's gone up. If you can eliminate that fear. Then you really don't have anything to worry about. And I find that and a lot of clients that where with. Worth point through this last recession they didn't really wouldn't worry about it too much because they knew for those people taking income. There they were forced to sell investments that were down they still hold all the stocks. They were forced to sell those stocks for income because they had enough stable bonds and cash set aside. To. -- and and so those positions. That a good price and to keep their income cash would go. I think that in as part of the problem is knowing the facts and what's the truth as opposed to leave here on. Then in the media about and they they scare you and saying you know live the next market drop you -- lose 50% which is as crazy. As some of the stuff they get they get set on the radio and on Internet and and then in the media. It just meant to scare people into and into doing a wrong things in my opinion and it's just intellectually not true. And so mini which is why your clients on during -- recession -- in a crash you know they just didn't didn't panic because you laid out that what historically has happened and then they -- they stayed in their seats and they got -- Normal fairly quickly and and didn't. Yeah we don't want this beer commercial for any there there are other advisors. Doing that out there. Maybe not as many as I'd like to see but look at room. Listeners remember the golden rule. Make sure never force in the position that you have to sell an asset that's gone down in price. And you can combine that with the other golden rule is you have no business being in the stock market was you have at least to -- -- -- isn't. So so let's move on to dividends such east of coupons people wanted to have sponsor and they can't return because. I'm I'm conservative I'm older need low volatility but the risk was. Added that they're gonna run out of money so you needed at the stocks. So. But now she was a low interest rates a lot of people talking about different stocks and what elected to his reference a the air research paper that was -- a really Smart guy disguised. Jeff -- on holds a Ph.D. and atmospheric science. From the University of Colorado at Boulder and had. Yes in physics. And he worked for NASA for a number of years on mathematical modeling -- -- his research focused on simulations of complex chaotic processes. I guess. That's that's a good to see you and is the stock market I didn't think -- so we've got a complex and chaotic process here. So the bottom line with his -- research. Is that. Its conclusions ones was that total return Dorian -- have a higher expect to return. And -- your estimation of beer than income order or you to propose what does that mean well you've got more potential for growth through your portfolios. And which if if done right it will lower the probability of you. Running out of money if you using. Dividend income and in -- income strategy so pretty interesting. The study from a really sharp guy from NASA. And done. Also what he called over the safe withdrawal rates so you've heard or you can pull 4% -- 5% opera performed safely and not run out of money. The safe withdrawal rate. Was higher foot hole four total return proposed -- -- were for these income portfolios. So pretty interesting study. Obama select a set I think. It's into the conversation before was. Kind of a bond yield portfolio vs told -- return them which we like the total return proposed. Now because a low interest rates it's more kind of swayed toward these dividend yield strategies which. Don't tend to work is well news. Total return strategies and -- EA decided he'd just lose that capital appreciation portion which I think is. Is so crucial to staying ahead of inflation and and increase in the probability that you had to stay ahead. Any other thing is it -- these low interest rate environment I think you can be able careful about this 4%. Rate that they they throw out there acting would until rates go back up I think you'd be a little careful using F 4% -- you may actually -- the pullback -- that. And then you -- a lower rate. Well and if if Warren Buffett is a new benchmark for good investor. He is only paid a dime. There's that dividend since 1960. So yeah and he says he's very much into the idea that they -- depreciation is the the cornerstone to the portfolio. Well this is what a great discussion in just a touching on this and say at this idea of total return portfolio I think some the other things we can maybe talk about in future. The future programs are. Fiery and taxable accounts. On the one of the big advantages of total return is the long term capital gains -- rates applied. To that purses income tax rates you can have a you know hopefully a much lower tax burden homes on long term tax -- And so on that note we really appreciate you listen and we got another great program set up for your next week. And again this is Morgan's admittance got a Brian and our esteemed colleague Christopher have bands like. Out and hiding someplace that at times blew into kind of a big deal but that the act that was for Christopher. And again -- again you can find us -- worth point to radio dot com Twitter Linkedin FaceBook. Have a great -- Austin with the board and senior next week. Can -- say. -- changing. Is that it's okay. It's -- And.

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