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Welcome to Make your Money Matter, the show that aims to change the way we think about financial advice. So, you can make better decisions.

Brad Barrett is a managing director and partner at One Capital Management, a wealth management firm serving nearly 1500 clients nationwide. With over $2.5 billion in assets, they’re a group of advisors dedicated to ensuring their clients achieve their investment and retirement goals. And now here's your host Brad Barrett. [00:26.1]

Brad: Welcome to Make your Money Matter, the show dedicated to helping you create a better relationship with your money. I'm your host, Brad Barrett, and it's my goal to help you distill the best ideas when it comes to your finances so you can make more confident money moves. Here at One Capital Management, our mission is simple to help our clients and you listeners take control of your finances and build the life you deserve. Friends, today the challenge is no longer the access to information, but rather it's finding the right information, and more importantly, how that information applies to you. And that's my commitment to you here today on the Make your Money Matter podcast, because after all your money matters and knowing how to plan your financial future is vital to your financial success. [01:13.1]

And before we get started, if you haven't already done so you can go to our website at onecapitalmanagement.com. You can click on the media tab and there you can download and subscribe the, Make your Money Matter podcast. You can also download the podcast on any platform where you would otherwise download a podcast, whether that's Spotify, SoundCloud, the apple app on your phone or Google podcast. Leave us a review, let us know how we're doing, it's always good to get feedback. And as you heard me say each and every week, if you like the podcast, share it with someone you like, if you don't like the podcast, I guess share it with someone you don't like. But after last week's episode around the 16th amendment and Roth IRAs, I thought I'd take a little bit of a steer towards more topical, more relevant conversation, which is really going on lately. And it was actually in an article I was reading in Kiplinger's retirement planning magazine. [02:06.3]

It was actually titled; it was actually under the personal capital poll. Now, normally I like sharing more stories and more information that goes into the advising camp. But this week I wanted to take a step back and maybe share some of the things that this report found, because I think it's actually fascinating for many of us out there that sometimes don't talk about our finances and want to see what our peers or our colleagues or people around the nation are actually feeling. Are they feeling the same as I am about the economy about this tax hike discussion that's going on in the white house, about inflation, about geopolitical and political events? I mean, all of it. And I know and talk with many of our clients here and Maine, the reviews I've done in the past few weeks, that when I saw this poll, I really thought it was relevant. [02:54.8]

And with that, I really wanted to share with each of you. Now, the pandemic is essentially reshaping retirement for many people, I think right out of the gate for anyone listening, who is maybe near retirement, or even if you're in your twenties, thirties, or forties, and still in the accumulation phase of your life, you kind of start seeing the writing on the wall, maybe with talking with family members or peers that are maybe older or closer to retirement. And as I said, each week, the word retirement can't be lump summed into just those that are in their fifties or sixties. The word retirement really means being financially free. In other words, setting yourself up to where you want to work, if that's what you choose or not, meaning you have enough investments, enough portfolio, enough income coming in to support the life you want to live. You're retired. [03:48.4]

Now I have many clients that I've shared before who say they want to retire by the age of 40. What they're really saying is they may want to go back to work or choose an endeavor that suits them, maybe some entrepreneurial ship, maybe more charity focused, whatever it may be, they've set themselves up financially to be more free to do those things. So, when I'm talking about retirement today, and some of the stats here doesn't necessarily mean they're in the camp of fifties, sixties, or seventies, as we would normally traditionally think. So, when I say the statement and well actually, the start of this article starts talking about the pandemic and how it's reshaping retirement. And let's just cut to the chase, inflation tops, healthcare costs as the top concern. So those that would think otherwise that retirement is more on healthcare or longevity, which you may have heard this statement before and I've said it time and time again, that we tend to sadly spend our youth sacrificing our health for our wealth. And then once we reach fifties or sixties, kind of that crescendo of what we would consider NRA, normal retirement age, we then sacrifice our wealth for our health. [04:55.7]

So, a part of this podcast and a part of our advising here at One Capital Management, we'd like to make sure we shift some of the financial burden into the years that you actually can earn those and be more financially free for what you want to be doing. And that actually lines up with a lot of our discovery conversations we have, with our incoming clients and our review meetings with all of our clients here around how we want to be positioning the goals and the objectives, and then help refine those goals and objectives. So, I'm bringing that up to say that when I go through some of these stats here, inflation, actually tops healthcare costs. So, inflation hits us all. It's not just healthcare costs for fifties and sixties that become of concern because they're becoming more expensive inflation actually tops it. And many pre-retirees, many of those twenties, thirties and 40-year-olds are actually boosting their savings rate. So, the pandemic, as I said, has ultra-retirement plans for a lot of Americans and inflation again has emerged as the top concern. [05:54.0]

Doesn't shock me. There, I probably doesn't shock many of you listening here. But according to a new national poll of retirees and near retirees, this is the camp that is closer to retirement. And this was done by Kiplinger and Wealth Management from Personal Capital. So, one third of the respondents in the poll say the pandemic has convinced them that they will need a bigger nest egg for retirement and 36% believe it has lowered their current or anticipated standard of living. Now, nonetheless, most respondents that I was looking through here, and as I was reading this article, say, they're still confident that they will have enough income to live comfortably throughout retirement. So, among those who are planning to retire, let's say in the next five years. So, shifting gears for a second, those that are closer to retirement, more than 4 out of 10, 40% have already started saving more. Nearly one fourth have delayed their retirement date and a similar percentage say they now plan to work. Part-time in retirement. Right, there are the categories that when you start planning earlier in life, you can avoid those second and third categories where you either need to delay your goal of retirement. Whether that's being financially free by 40 or actually retiring when you're 65 or so, and, or having to work. [07:13.7]

One of the things I say quite often here in the practices, the two four-letter words in retirement, which is need and want. We want to make sure that we build a needs-based analysis when we're looking at wealth forecasting, essentially by doing that, we want to shift the options so, to speak to each of our clients, to be able to want to go back to work. I have a lot of retirees that I work with, or I should say those that are financially free and stop their career or whatever they working for, for maybe 20 or 30 years have plenty of financial resources that they need for their plan and they are choosing to go back to work. A couple of ones that I know right off the bat are Golf Marshall's, many of my clients like golf so they want to go work at a course, get involved, become a Golf Marshall. I know many in the middle of the United States that really enjoy the greeting aspect.I know that becomes sort of a pun nowadays, but they really do enjoy that, whether it's a Walmart greeter or something else, they want to be around people. [08:08.5]

And then there's a whole other camp that I know that are just, just dug in hard on the charitable side of things, getting involved in their church. All of that is really a blessing when you think about it, again being financially free to be able to do that. So, investors have largely, and this is kind of a true, I guess, overview they've largely stayed the course since early 2020, despite of all tile stock market. So, in this respondent’s group, most respondents by most, they mean 63% say their investment outlook has not changed since early 2020. Now you might be thinking, Brad, why are you mentioning such a short time period? Well, I mentioning that because this was largely around what happened essentially 18 months ago during the pandemic. So, 63% say their investment outlook has not changed since early 2020. Again, this is even after a sudden, but again, short-lived bear market that was, as we all have seen was fall by stocks, scaling to new heights. But more than one fifth, 20% say they have become more risk adverse after seeing how quickly the market can change. Only 13% report feeling more bullish about stocks. Now I'm going to stop there for a second. [09:22.3]

That actually shocked me 13% report feeling more bullish about stocks. And it might not shock anyone listening here to say that you're in that camp, right? You're like there, there is a lot of money being printed. The M2, our cash supply is just skyrocketing, we know we're in for some inflation coming up. We know we're in for higher tax hikes and by no, we can see the writing on the wall, I should say. But I was shocked to see 13% are actually feeling more bullish. I thought that'd be up more towards 20 or 30% because during volatile times, and when you look at the fundamentals, it still is a pretty healthy economy, which is shocking to some people to hear that. Now, one example of that, and this is not the only example you can look at from a fundamental standpoint, a lot of people look at price to earnings, earnings per share. One of the interesting ones I saw lately was the capitalized profits model. [10:15.7]

Now, normally you would do this to value a company, but if you look at the capitalized profits model on say the S&P 500, which is essentially taking the profits of the previous quarter, say Q3 here, sitting out of the word in the first week or so Q4 taking the profits of Q3 and dividing by the 10-year treasury. And even if we overestimated the 10-year treasury, let's say 2% the market to be fairly valued using this model would have to drop by 36% or inversely having an increase in the ten-year to around 2.7% to be at fair value. So, we are essentially still very well valued and a drop of even 36%. Again, according to this model would still keep us at fair value. So, the long-term effects of inflation are yet to be seen the long-term effects. I should say, of the M2 supply of money being printed lately have yet to be seen. So, building a portfolio with the diversifications and all the aspects that we do here at One Capital Management are really important, when you talk about some of these polls, we're talking about when it comes to their outlook for a bullish market, because reality is understanding volatility and essentially variability in the markets can be a really good friend to you if you know what you're looking at. [11:30.2]

So, I want to continue with some of these polls. In fact, I'm going to go through about six to seven different questions that were asked that I think were really important. And I'm going to talk about at the end. So, the first one, again, asked to this poll through personal capital poll and reported here by Kiplinger was, has the pandemic changed your current or anticipated standard of living in retirement? So, something you might be thinking about. And I thought it was a good question through this poll. And here's what the respondents said. 9% said, yes, significantly for the worst 27%. Yes, but only lowered it slightly 6% said, yes, my or our standard of living will likely be better than anticipated. And 58%. This is the majority 58% said to the question, has the dynamic changed your current or anticipated standard of living and retirement? 58% said, no, my or our anticipated standard of living remained the same. [12:29.6]

So, it's interesting there other respondents that a lot of them, the majority of 58% don't really anticipate a standard of living changing, which is interesting when you look at the concept of inflation. Now, before I go further here, I thought it'd be interesting to know the methodology behind this poll. The poll, which was conducted by a company named Qualtrics in late June, so a few months ago, it surveyed a national sampling of 772 people, age 40 and older. The median age was actually a little bit older, it was around 67. And these are all people who are fully or partially retired or who are planning to retire in the next five years. They also on average, had a net worth of at least a $100,000. And the median household net worth again, excluding primary residence was $422,066. They were all the respondents were equally divided between men and women. So, a few notes on that before we move forward, one, the sample size of less than a thousand can be debated. Again, I thought it was a decent enough poll to be taken, to discuss. And I thought the questions and the responses were interesting. [13:35.2]

The other one is the age. Okay. A lot of these were done with 40 and older, but again, the median age was 67. So, take that for a grain of salt as you listen to some of these, but for many people listening. And if you're younger than the median age or younger than the 40-year-old camp, remember that some of these are interesting as we look out over the next 20, 30, 40 years in planning. So, this should start shaping some more conversations with your advisor. Or again, if you haven't talked to your advisor about this, or don't have one reach out to one, because it's really important to start planning. So, you don't have some of these questions later, or at least someone you can talk it out with. [14:10.1]

All right heading into the second question. The question was asked, has financial turmoil during the pandemic change, how much money you think you'll need to retire comfortably? Here's what the respondent said. 33% said, yes, I think I'll need a larger nest egg. 9% said, yes, I anticipate needing less. And 59% the majority said it hasn't changed, I'm on target with savings. Interesting. Which camp do you fall into? Has financial turmoil during the pandemic. Maybe you've lost job, maybe your job got realigned, given everything going on, maybe your job and your company and what you were doing flourished, which many people have in different areas, somewhat unforeseen or the silver linings, and a lot of these things that have gone through the pandemic maybe you fall into that 59% camp. That's largely what I think a lot of these people fell into. But if you fall into the camp of, yes, I think I'll need a larger nest egg, talk to someone, build that plan, go through it with an advisor. [15:08.1]

All right, question number three. What actions do you plan to take in the next few years to achieve a bigger nest egg? So, here's what the respondent said. 62% said cut spending 41% said boost savings. 32% said, take a part-time job to boost income. 21% said, delay retirement work longer. And 14% adopt a more conservative withdrawal rate from savings. Okay. I want to say something about those latter three categories. A few minutes ago, I mentioned the concept of falling into the category of not wanting to delay your retirement or have to take a part-time job. And here at One Capital Management, I think anyone listening should know this, any client listening, that's our job and we do our planning with you. We want to make sure that you see all the facts. We go through your goals and objectives, and for those listening, who aren't working with an advisor, as you hear me each week say, it's really important to find that trusted advisor, seek that counsel. Because when I read these stats as an advisor for nearly 20 years, the 32% that say take a part-time job to boost income or the 21% that say delay retirement work longer, that saddens me. I'm going to be honest; it just breaks my heart. And it's one of the reasons why I've dedicated my life to being an advisor and why we as a firm have dedicated our lives to build a firm that serves clients to go through again, the discovery, the goals and objectives for each individual person. When you hear the words custom and tailored you, when you build that, it's really making sure that you seek all the things out for a client who's sharing this information with them. [16:48.3]

And again, it's not just numerical data. It's the qualitative stuff as well. The relationships, the interests, the hobbies, the values, those all matter, because if someone values their free time to go see grandchildren or go travel the world or see friends across the globe, whatever it may be and then they have to bend be in the 32% camp of feeling the need to take a part-time job to boost income. We don't want that. We don't want that kind of a plan. Now it's interesting, I've had a few calls from our radio show and from our podcast lately, from some younger individuals and they don't ask it exactly this way, but they're leading this way is how do I become what they think a millionaire is? Or how do I become rich or wealthy? And it's kind of equip, but I say it very plainly to them spend less than you make and invest the difference. And their response is kind of like, oh, and I go, I never said it was sexy. I never said it was going to be that much fun or glamorous, but it works spend less than you make and invest the difference. What happens there is when you get to your goal, whether that's 40, 50, or 65, whatever the goal is, you have to be financially free, AKA retiring or retirement. Then you end up not having to fall into these, some of these camps of the 29% of these respondents who said they want to either delay their retirement or the 32% again, feel the need to take a part-time job to boost income. Start today. Plan today. I don't care what age you are listening right now. The more that you spend less sounds almost counterintuitive, but the more you start spending less than you make and invest the difference, the richer, the wealthier you'll become. Said differently, the more financially free you will become. Now, as many of you know, planning is a lot more incumbent than just that, but it's a good place to start. [18:38.3]

So, I move on to the next couple of things and I want to go through these and I think they're important. What impact has the pandemic had on your retirement planning? These are, again, this is where the respondents were. Within five years of retirement, 41%, I'm saving more. 23% said I'm saving less 24% that I've delayed my retirement date and 24% I plan to work part-time in retirement. So, when I read this, when I add these two up, that's the two 24% categories, which is 48% have either said, I'm delaying my retirement date or feel the need to work part-time or retirement. That is where I want planning. And I want everyone to know that planning can help with those camps. The 41% that say I'm saving more. That makes a very generalization, I think, of the within five years, what impact has the pandemic had, that is smart, but it's also interesting to note that you want to make sure you categorize your saving. Are we maxing out traditional deferred compensation plans or traditional 401k plans? Are we maxing out your retirement vehicles as well as after tax savings? So, dissecting that 41%, I think takes that next step into planning. [19:45.4]

All right, the next one is interesting rate your top financial or economic concerns. Now the following is I'll read, we're rated very or somewhat concerned. So, rate your top financial or economic concerns. 77% right out of the gate, rising inflation. That is their top concern or very, or somewhat concerned. The next one right below it, not that far away, 74% is the cost of healthcare. Now, 71% say the financial strength of social security, that is an interesting large number. Something that's always been around and creeping up. But that's an interesting one to look at. 67% of the financial strength of Medicare kind of falls in the heels of social security, the strength there, 62% of the rating, your top financial or economic concerns is 62% say a recession within the next year or two, interesting. 56% say paying for long-term care and 49% another bear market and stock market volatility. So, it's interesting when these categories are placed, how of them responded again, rising inflation. So, it's interesting to note, when you look at inflationary periods, which again, with inflation is the general rise in goods and services or said differently it's too much money chasing too few of goods. So weirdly if you look at historical data, the term rising tide lifts, all ships, I've said it to some clients. This may be a bad analogy, but it's only one way to look at it. Now there's a lot more detail that goes into this. [21:13.5]

When you think about it this way in our left pocket, we'll be seeing inflation and it hurts. We'll see that at the gas pump at the grocery store, those kinds of places. On the other side, in our right pocket, we typically see, or historically has been a general rise in stock asset prices. Now that's not to say that we're going to see that the next five or 10 years, but something to note. So again, aligning your portfolio and your overall planning with your advisor is vitally important, because again, if you're like the 77% that have listed here as their top financial or economic concern being inflation, it's really important to talk through. So, one of the last things I want to go through when it comes to these, this poll was the question around portfolio mixes and the portfolio themselves for each of these respondents. Now, one of the questions was asked, how did the brief 2020 bear market and the stock market's return to new highs affect your investing outlook? [22:07.9]

22% said, it made me more risk adverse after seeing how quickly the market can change. 63%, the overwhelming majority said it had no impact on my investing outlook and 13% it may be more bullish and more comfortable investing in stocks. Now, I think many of you would probably not fall into a 13% cap and that's why it's relatively low, make sense, I understand their philosophy. What I'm actually intrigued by, which I think is really a good thing is 63% said that it had no impact on my investing outlook, which to me reads as they took it for what it was. It was a pandemic globally, the government, right or wrong, decided to shut it down, which has its impact on the economy. But the further outlook, the longer view didn't really make them knee jerk react. I think that's also a Testament to advisors out there and portfolio managers, making sure we're talking with our clients. I know I did that as an advisor. I know all my colleagues here at One Capital did as advisors to our clients, as well as our portfolio management team, staying true to what we see and it ended up being right. [23:11.8]

Now, we didn't, no one knew no one has a crystal ball. No one knew that we were going to have a V-shape recovery as quick as we were. But we also saw that it was impacted from out of left field. It was a shutdown. It wasn't some economic impact that was happening, whether it was inflation, kind of ruining its ugly side head or some geopolitical or political event, it was a pandemic. So, it was somewhat of an outlier, which is interesting when you look at it, when it comes to stock prices. So, I'm happy to hear and see that overwhelming majority again, around 63% said it had no impact. Because you want to make sure you have active management and rebalance, but it doesn't necessarily mean that all of a sudden you see something happen. You need to knee jerk and move off of your overall positions or move off of your overall strategy. And I'm assuming, I'm hoping that of that 63% they were seeking the counsel and the advisors had a lot to do with that. [24:00.6]

The next question was, have you changed your portfolios asset allocation, which is the mix of stocks or bonds or cash in your portfolio during the pandemic? Again, 69% respondents said, no, I kept my asset allocation the same. This is a big question we have as advisors here at the firm around when we set an allocation, how often do we change it? And here at One Capital Management, we are managing the portfolios with active management, with rebalancing strategies, but we're also not getting emotional around the economy, around the market, around our client's portfolios. We were able to take an objective and unbiased approach, which is what, why I preach so heavily on this. It's something that like my wife and I, we have our assets managed by the same portfolio manager here at One Capital Management that manages my set of clients’ accounts as well. I know I may know what I'm doing. I may have the experience in this space, but I'm still a human being. I still may, one day throughout a week, seeing volatility might react emotionally. And that's not what I want. That's not right for a portfolio. So, it's nice to see in this set of questions and this respondent's view that almost 70% said they kept their asset allocation the same. They're seeing it through, they know that the portfolio work and the diversification is there. [25:18.2]

And the last question was, what is the current asset allocation for your investment portfolio or ? Now, I thought this was interesting just to kind of take a note. This doesn't say too much, but just gives you the generalization again. Remember the median age for this group was 67. So, this is probably more for an older crowd necessarily. But what I found astonishing was that 26% had it in cash. Heading into an inflationary time period, we want to be very careful there. So, our allocation in our portfolios is usually set around 2% and we actively manage that with regards to our client's objectives and their planning. But again, we set a target for around 2%. So that is very high in my opinion. There is 9% set towards real estate. Again, this is in that 772 mix of people for this study, 15% bonds, 35% stocks. And there was 15% other. I'm assuming that others alternative investments, maybe commodities, things of those nature, but the 35% stocks and the 15% bonds was also interesting, right? Having that mix of some of those growers, some of those values, and looking back in the pandemic, the growth side of things have largely outpaced the value. But it's interesting to look as we head into this next five or 10 years, how we kind of start seeing those to settle out. [26:34.1]

So having a happy marriage between your growth and your value stocks, also your short-term bonds, making sure that we're duration is a real big topic when it comes to bonds. So again, this poll again was reported by Kiplinger's. I was reading it last week and I thought it was really topical. And I thought for many of my clients, I've been talking to many people who've called in, some our discovery meetings we've been doing, we've seen a lot of these questions and I thought to share it as this is somewhat of peers across the nation feeling the same things. So, with the conversation around the pandemic and it's reshaping of people's finances, maybe their goals and their objectives. I guess what I want to charge everyone with today is taking a look at how this has affected you. And if you have that counsel, that advisor, you're talking to, talk to them, go through it, figure out what works for you. But if you haven't had that counselor, you hadn't had that first meeting with an advisor and you'd like to call us, give us a call. You can call us at (805) 409-8150. You can also go on our website at onecapitalmanagement.com. You can find out more about our firm. You can actually set a meeting with myself or any one of our advisors to find that need that specialty that works for you. [27:44.3]

Thank you for listening to make your money matter before acting on anything discussed today. Remember speak with a financial advisor near you. If you're not sure where to turn and you'd like our help visit us at onecapitalmanagement.com for a complimentary retirement track review, or give us a call (805) 409-8150. And until next week always remember make your money matter. [28:08.1]

The information in this podcast is educational and general in nature and does not take into consideration the listener's personal circumstances. Therefore, it is not intended to be a substitute for specific individualized, financial, legal, or tax advice.

To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a final decision. [28:31.2]