Do you want a wealthy retirement without worrying about money? Welcome to “Retire in Texas”, where you will discover how to enjoy your faith, your family, and your freedom in the State of Texas—and, now, here's your host, financial advisor, author, and all-around good Texan, Darryl Lyons.
Darryl: Hey, this is Darryl Lyons, CEO and co-founder of PAX Financial Group, and you're listening to Retire in Texas. Thanks for tuning in. Remember, this information is general nature only. It's not intended to provide specific tax, investment, or legal advice. Visit PAXFinancialGroup.com for more information. [00:44.8]
So, today's show, I'm going to actually give you another top-10 countdown because I'm actually infatuated with top-10 countdowns, and the idea for me is to give you five money things to look for, specific items in 2023 that will impact you, and some will impact you more than others, and some will be direct and some will be indirect.
I need to make sure that you know what these money themes are, and I wanted to call them predictions because I thought that'd be cool, but they're pretty low-hanging fruit. I'm pretty sure they're going to happen, so I think they'd be pretty weak predictions, but I would just say that these are things that are likely going to happen in 2023 and I just want you to have an idea of how they could impact you, and so let's run through this.
Again, like I said, they're relative to money but they have a lot of nuances. The first one, I’ll just kind of go down the list here. No. 10 is what's happening in the work-from-home space, and the reason I mentioned this is so important and, specifically, let's say you're retired and you say, “Well, that doesn't really impact me.” It does impact your kids and your grandkids, and for that reason, I think it impacts you. The world is changing in such a way that people are no longer going to be tied to a metropolitan area to get the jobs that they wanted in the past. This is huge. [01:59.6]
Let me give you a few statistics here that I think are important.
26% of U.S. workers will work from home. 26% of U.S. workers will work from home, and a lot of this is happening in the high-income cities.
74% of Fortune 500 companies plan to reduce office expenses.
Here's another important one: 40% of remote workers reported that they would look for another job if they couldn't work remotely. The idea of having to commute for an hour, an hour and a half across towns and state lines to get a job that's just marginal at best is no longer acceptable.
The reason this is important is because I think it's going to bring families closer together once again. Here's the good news. Your kids and your grandkids don't have to be stuck in that city forever. Simply, I know it sounds simple, they just have to find a career path that would allow them to work remotely. Some careers won't, right? Some careers just won't allow it. [03:10.8]
The other thing that's important is, if you look at, I'm in the city of San Antonio, I'm really nervous about what downtown office space is going to look like going forward, and we saw USAA recently say that they're going to vacate downtown and I think this could be a continued trend. So, we may see future ghost towns of downtown or maybe it's vibrant to the degree that there's tourism, but office space is changing and I want to put that as my No. 10.
No. 9: I want you to know that your budget is getting tight. There's a great tool on the Wall Street Journal, WSJ.com, and you do have to have a subscription. I went on it and what it is is called an “Inflation Tracker”, and so what you do, they don't give you every specific item that you purchase, but you say, okay, on a regular basis, I purchase milk, I purchase eggs, I purchase blueberries, I purchase whatever you purchase. Then it shows you this specific price increase over the prior 12 months. [04:15.2]
So, I went ahead and did that. Here's some of mine. Gasoline was on there, but, I don't know, gasoline is a weird one. I kind of set that aside because it's very volatile. There's a lot of factors that go into that. Pets, I have a lot of pets, so my pet inflation is 2.83%. My chicken inflation, because we eat a lot of chicken, it's 9.19%. The household paper products up 2.57%. Bread is up 4%. Milk is up 4%. Coffee, we like coffee, 7%. The overall inflation number on average is about 6%, 6.8%, for our family. [04:54.4]
You think that's going to just go away. I don't see companies dropping prices necessarily, so there's this plateauing. You're not going to go back in prices, but you will plateau and that's why we're starting to see more the credit cards go up, because you're feeling that pinch, and people are starting to borrow from their 401(k)s and I'm starting to see more home equity loans, so those budgets are tightening. It's best if you can get in front of that and just start modifying behavior, cut the fat where you can, because it's going to get absorbed by these increasing prices.
Okay, so No. 8, the non-traditional college is going to become much more credible. The non-traditional. The brick-and-mortar, the Harvards, the Ivy Leagues, I think of even in Texas, Texas A&M, UT, TCU—got to mention TCU since they're in a championship game—that's still going to have its allure, don't get me wrong, because that's where the money's at, but I think there's going to be more credibility in the alternative higher education arenas. [06:09.8]
Part of this is just what I’ve been exploring for my kids and what college solutions might look like, and then also talking with their peers, and their peers are really much more flexible in how they get education and there's less of a stigma and less of a peer pressure. Some of them are just completely fine with doing an online program and not having, like we said, with the work, having to commute. They don't want to have to worry about an unnecessary commute. They don't want to have to worry about sharing a room with somebody. They want an education. They don't want to have to do it in a traditional way and it's going to save them hundreds of thousands of dollars.
I think before it might have been, you just don't have a real education. I think that's really changing and I think, if we look forward in five or 10 years, we're going to see that this was quite a shift in higher education and college. [07:03.1]
For example, I recently finished, I think some of you guys know, in the last two years, I finished my master's in legal studies wealth management through Texas A&M University, and I did it all online and I never went to the campus. Got an incredible education, it was very challenging, but I didn't have to take away the evenings with my kids to sit in a classroom for two hours.
It was a very efficient use of time, and what I had learned is that professors are beginning to adjust their style because it's a totally different way to teach, and so they're starting to adjust their style and the technology is starting to improve. There are some little nuances and a little gamification in that type of learning environment, so it's starting to become not only credible, but an enjoyable experience for college students, so we're going to see that change.
No. 7: This year we're also going to see people unretiring. This is already a trend with people who are no longer working or they were retired and they want to go back. They're going back for several reasons. First of all, we talked about inflation being a problem and that inflation creeping up, and of course, social security, you just recently got a social security check increase. [08:13.8]
But this just puts a lot of pressure on your ability to maintain a standard of living, so I think people are continuing to unretire not only for that inflation factor, but also just because of lifestyle. I think it can be lonely to just retire and do nothing, and Fox News and flowerbeds gets kind of old after a while, and you want to be a part of a community and you want to have a purpose. As far as I'm concerned, if you still have breath in your lungs, you still have a purpose.
I think if you're going to Walgreens, if you're going to H-E-B, if you're going to any grocery store, if you're going to buy lumber hardware, and you see somebody with silver hair and they're working there, you know already know this, but treat them with respect. They could be going back because they have to. They could be going back because they want to. Regardless, I think it's important to honor, really, all generations, but those that decided to unretire and go back, because I just don't know what kind of burden they're carrying. [09:09.7]
So, I just make it a point to be a little bit more kind when I'm out and about and I see a lot of people who may have unretired and are going back to make some extra bucks. But it's happening. It's a trend and it's a well-documented trend.
No. 6: I think we're going to see some diversification from the traditional investments. You have traditional investments being stocks, bonds, cash, and then you put those in a combination and you diversify it, and that's called a mutual fund or exchange-traded fund. Those are the traditional investments and they typically have reliability to the degree that you can look back historically at how they behave in certain market environments. They’re going to go up, they're going to go down, but through diversification, they generally don't go to zero. I've never seen a diversified portfolio go to zero. You may see a company or go to zero, like an Enron. Gosh, some of these tech companies really crashed this year, 50–90%. But when you diversified it, you ended up falling off the porch, not the roof. [10:08.1]
But the question in this new environment is we've got rising rates, some challenges in the stock market, in the economy in general, so what alternatives do we have? In 2022, there was this word that was often thrown around by the market called TINA, which stood for “there is no alternative,” and this year, I think the alternatives are going to be a couple. Let me mention some of them to you.
Check with your financial advisor because they have all kinds of risks and nuances, but structured products are likely going to be a solution for a lot of people. They're made by banks and they're built by banks around a basket of stocks typically. Let's say they use the S&P 500, which are the 500 largest stocks, and then the banks, they buy options and they marry these together. Options and stocks, and they marry it together, and then they package it in such a structure that the investor gets an agreement that says, “We package this thing in such a way that you're going to agree to the terms.” [11:10.3]
I'm making this up, but this is an example that if the stock market goes up 10%, you're only going to get 60% of the stock market. The investor says, “Why would I do that?” Because the bank then says, “You don't have to take as much on the downside. We'll share the downside risk. So, if the market goes down 50%, we'll share. You take 25, I take 25.” That's kind of the example.
That's an example about these products that there's thousands of variations of them, so don't get too anchored on that. But the main point is that the bank, through these agreements, they share on the up and share on the down, and so those structured products are probably going to be a better way to invest money rather than your money sitting on the sidelines in cash. It's going to be hard for a lot of people to put money in the stock market when there's a lot of noise, and so these will be a nice entry vehicle into the markets. [12:02.5]
That's one tool. That's an example of a tool. I think a lot of examples are going to be out there. I think we can see something called private debt that might be interesting. That's a whole nother conversation. But the bond market is creating some interesting opportunities. It's an uncomfortable time to invest in bonds, but that's usually the time to invest. By the time it feels good, the money will have already been made, so there could be some opportunities in private debt.
Then, we're having more and more people look at, revisit the annuities in times like these. They're just exhausted sometimes from the stock market, so they say, “Hey, put me in an annuity.” I think we're going to see as No. 6 here, it’s just diversification. Again, any of these things, they have complexity, so I always want to say that's why working with an advisor is important, and then limit the amount that you put in here so you don't find yourself making a mistake. But, yeah, non-traditional investments will be more and more. They'll be more in conversations about that. [12:58.8]
Okay, man, I'm not making good time, am I? You’re listening to Retire in Texas. We're, I guess, 13, 14 minutes in, and I'm about halfway, but I’ll try to move a little faster because I don't want to be long-winded. The problem is I like my job a lot. This is what I do, this is what God called me to do and I have been known to talk too much about this and I am not a talker. Yeah, I'd rather just sit around and listen to people, but when it comes to this stuff, that's how I'm wired, so here we go.
No. 5: Housing prices will go down. I don't know if it'll be across the country. It'll definitely be the West Coast. We're already seeing some of the pressure there because of all the layoffs. The tech sector overextended themselves. I'm going to suggest to you that they got caught up in emotions, overhired, overextended themselves, and so we're going to see that market cool from the housing market. [13:50.6]
We're wondering whether or not it extends to the southern states because of the supply-demand imbalance, meaning, the Federal Reserve is trying to raise interest rates to slow the housing market. The problem is there's a supply-demand imbalance. There's not enough supply for the demand of houses, and that's why the Federal Reserve is so challenged to slow down this economy, because of that supply-demand imbalance. But I still think that you're going to see housing, some housing prices go down. I just think that it may not be material, but it just seems a little inevitable to me when you think about the economics of it.
Okay, No. 4, this is good. We're going to start seeing that you can finally invest in CDs again. I got in this business in ’99 and CDs were very attractive, and of course, all my clients that I’ve talked to over the years, they always tell me about the Jimmy Carter CDs. Those were very attractive. Right now, it’s been a long time since we've even entertained CDs, but now you can get a CD for 4%, 4.5%, and so that's pretty good. You just have to be careful on some of the terms and trickeries, nuances, but other than that, hey, 4%. Not bad on a cd, right? I think that's going to be exciting to start being able to invest in CDs again. [15:02.2]
Then, No. 3: Bonds are going to be an attractive vehicle. I talked a little bit about that and I think we've just got to have to be careful about our entry point into bonds, but we're going to see bonds start to pay a little bit more. The way the risk market works is bonds are going to pay better than CDs. That's just how the markets work.
I'm just making this up off the spot, but if CDs are going to pay you four, then bonds are going to have to pay you six or seven, because they have to pay for risk. That's just the market is really, really good about paying for risk, and so for me to start seeing some bonds that are paying 5%, 6%, 7%, 8% again, as a financial advisor, that gives me a great tool to be able to help guide people in transition, specifically, those in retirement.
All right, No. 2: It's just going to cost more to borrow money and I just really need you to just pay attention to your credit cards, if you've got any. Those rates will go up. Don't miss payments. They're going to kill you. I'm seeing a lot more home equity loans, so just be careful there. Don't overextend yourself. I know you really want to redo your kitchen. I know it and I'm not telling you not to because I get it. Just see if we can find a way to maybe make a distribution out of your portfolio. [16:16.5]
We've done that plenty of times where you think you need to borrow the money, but if you take a withdrawal from your portfolio and we do it in a very efficient way, the withdrawal, even though it seems like a lot of money, it may not impact your overall plan. I think you check with your advisor before you go and sign a home equity loan, because rates are going up. Your credit cards are going up. If you’ve got an adjustable rate mortgage, make sure you pay attention to that, and if your kids have got one, you may just ask them, “Hey, have you gotten in front of this,” because when that rate adjusts, their payment could become too much, and so I want to make sure that you are aware that we've got some rates going up on across the board and they will continue to go up in the debt space.
All right, No. 1, and so these are the themes. Are they predictions or themes? What do you think at this point? They're more themes. I mean, if they're predictions, they're kind of weak predictions, but I do think these things are going to take place. [17:10.0]
This year, we're going to continue to see rising healthcare costs. I talk about this a lot because it's such a burden on the middle class and you just can't avoid it because of something called the silver tsunami, and a lot of you guys will say, “I am a part of that silver tsunami,” and I’ve got to tell you, based on the market last year, I'm getting a little bit more silver in my hair, so I'm becoming part of this silver tsunami, but still fighting father time, even though the guy is undefeated.
I still honor and respect the group of people that came before me, the greatest generation that ever lived. I guess that was the generation before the World War II generation. I guess their kids are now the silver tsunami. That's everyone over 65 right now. That's what they call the silver tsunami. Anyone over 65, that's a growing, growing population relative to the other groups. [18:02.5]
Let me explain it this way, because it's relative to healthcare. You can say, “What? People over 65, they're not growing.” They kind of are because there's a new group coming into that age group every year, and, yes, there are, of course, people dying off, but this group is so massive and there's not enough younger workers to be able to support this massive entry into this Medicare and chronic-care age. Acute care is when you break your arm and have a cold, but chronic care is “I need care to eat, bathe, rest, toilet transfer.” So, there's this huge group of people that are needing care and there's not enough people to support them.
This rising healthcare cost is, there's not finger-pointing necessarily. There's certainly inefficiencies, docs, hospitals, insurance companies, consumers taking responsibility. There's absolutely a leakage there, but the reality is just you can't fight this imbalance of workers supporting the silver tsunami. You just can't fight it. There's not enough people paying into the system to support the group of people that need the chronic care. There's just no way around it. [19:14.0]
I'm really going to encourage you, if you're in that space right now, to start becoming more comfortable with alternative sources of medicine. Make sure that you have a teledoctor or a telehealth resource that you can access if your doctor is not available, make sure you become comfortable with different prescription services that you have not used in the past.
You're going to have to have a little discomfort in doing things differently, because the system is going to get tighter, and let me say it this way, the lines are going to get longer and I want you to be in front of that, because the healthcare system just can't continue to support the number of people that have needs. [19:55.3]
I think you'll see a lot of that in 2023, and we haven't talked about it politically in a while, Obamacare hasn't come up in a while because we've had other issues, but it's ripe for a new conversation and so that's the one I'd say is the No. 1 money theme to watch out for in 2023. It’s the rising healthcare cost, and what you can do about it is start getting creative and comfortable in various solutions that might be out there.
Let me recap the top 10 as I'm closing this out here.
No. 10 is pay attention to the changing of the work environments, how that would impact your family dynamic, which would be really cool to get your kids and family closer to you and try to encourage that. Two, how that might impact communities, like a downtown area. It'll be interesting to see that. You may not care, but I think that's interesting to watch.
No. 9: Your budget will continue to get tight. We're not going to go back down in prices. We will likely plateau from inflation, but just don't pretend that the money is there. It may be there for you, but just if it's tight, there are tradeoffs. You might have to reduce spending somewhere. [21:06.8]
No. 8: Recognize that different education, higher education, is changing and that's all good and I'm encouraged by that.
No. 7: Unretiring. A massive amount of people are unretiring. Make sure to honor and respect those that are unretiring and in the workforce right now.
No. 6: You want to explore with your advisor different alternatives to investing.
No. 5: The housing prices, what I would suggest are likely going to go down, and then in the South, in Texas and South Texas, we may be in a good place where we won't see material difference.
No. 4: You might be able to enjoy better CD rates and you likely will.
No. 3: Bonds might be a good solution.
No. 2: Cost of borrowing is definitely going up, and No. 1, rising healthcare costs. Keep an eye on that in 2023.
Hopefully, this was helpful, a lot of information. Please shoot me an email at your convenience. I love getting feedback from you guys. I get a ton of feedback, I'm blown away, darryl@paxfg.com, and I’ll continue to put out content that could guide you, going forward. [22:09.3]
Thank you again for listening to Retire in Texas, and I want to make sure that you never forget, you think different when you think long-term. Have a great day.
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