Pure’s Principal, Marc Horner, CFP®, provides insight into how to get your finances in order.
Outline:
- 00:00 Welcome and Introduction
- 00:57 Financial Goals Through Life Stages
- 01:58 Budgeting and Spending Habits
- 07:07 Managing Debt Strategically
- 09:53 Emergency Funds and Bear Market Protection
- 15:40 Tax Planning and The Tax Triangle
- 19:49 Portfolio Consolidation and 401k Matches
- 31:52 Investment Basics: Cash, Bonds, & Stocks
- 34:58 Crypto, AI, & Emerging Technologies
- 38:12 Market Timing & Staying Invested
- 42:00 Asset Allocation & Diversification
- 43:38 Estate Planning Essentials
- 45:34 US vs International Investing
- 47:45 Income Alternatives in Retirement
- 48:52 Favorite Investment Ideas & Wrap-Up
Transcription:
(NOTE: Transcriptions are an approximation and may not be entirely correct)
Kathryn: Hello, everyone. Welcome to our webinar for getting Your Finances In Shape with our very own Marc Horner, our certified financial planner and Principal of Pure Financial Advisors. My name is Kathryn Bowie, and I’m the director of education. I will be here moderating and helping you out with your questions and giving as much grief to Marc as I possibly can.
Marc: Bring it on. Kathryn, bring it on.
Kathryn: Welcome, Marc. We appreciate you being here. How cold is it in Chicago?
Marc: I think when I woke up this morning, it was minus six, so yeah, the polar vortex is back here in Chicago.
Kathryn: Oh, wow. Well,
Marc: Don’t tell me what the temperature is in California. I don’t want to hear it.
Kathryn: I don’t think I will because I think it would make you very upset.
Marc: Yes, it would.
Kathryn: Most of us are here in San Diego; however, we have clients and people from all over. So I’m sure we have other people who are in cold weather, but we’re happy you’re all here. Thank you for joining us. We have a lot of people on the line, and I’ve put in that you can put in your questions, and in the q and a, we’ll get to as many as we can.
But we will just get going. And I’m also gonna give you a download. I’m going to put our new 2026 updated key financial data in the chat. It’s a great resource, so when I put it in there, if you haven’t already received it, go ahead and download that ’cause that’s a great resource.
So Marc Horner, our certified financial planner principal at Pure Financial Advisors. He has more than 25 years of experience and knowledge, and he’s just the gray
Marc: hair to prove it.
Kathryn: That’s right. The gray hair.
Marc: To prove it, Kathryn.
Kathryn: So he’s here to help us get in shape. So Mark, I’m gonna let you take it away, and I will be putting up the slides in just one moment.
All right.
Marc: Super. Sounds good. Looking forward to a blockbuster event, talking to all things financial planning. Very much. Absolutely want to make this interactive. So please do not be shy in putting questions into the q and a. Right, Kathryn, not the chat, correct?
Kathryn: Correct. Yeah. Now I’m gonna try to get this slide, get the correct slide here going. So please give me a moment.
Marc: While you’re doing that, Kathryn, I’ll give everybody an update that the Fed just came out before I stepped into the studio with their announcement that they’re keeping their interest rates steady. I think it was, I saw it was a 10 to two vote in favor of keeping interest rates right where they are, which I am personally thrilled that they’ve made that decision.
I don’t see a whole lot of reasons, with a steady unemployment rate and inflation still a little sticky, for the Fed to lower rates. So I’m glad they’re, I’m glad they’re sticking to their guns on that. And actually, we talked about this with clients in 2023, right after 2022, when the Fed raised rates a whole bunch of times, and it felt a little, what we talked about then was that it felt a little weird that rates had gone up.
So, quote high, but what they really have done is just gotten back to where they normally should be. You know, zero or near zero. Interest rates are not the way that the interest rate world is supposed to function. So it’s great to be getting some, even though we got a little bit of higher mortgage rates, it’s great to be getting some yield from our savings accounts the fixed income side of the portfolio.
So, so again, I hope they keep rates right where they are, and so we can keep getting some return from that fixed income side of the portfolio. Alright. Are we ready to roll, Kathryn?
Or is my smiling face? I think so.
Kathryn: Can everyone see my slides? I’m just hoping that everybody can see the slides.
Marc: I’m good. I got ’em.
Kathryn: Can y’all see those slides? All right, well then, you are off. Let’s go.
Marc: Let’s do it. Let’s do it. Oh, wait. We might have gone to the, might have gone to the PowerPoint, the inside PowerPoint.
Kathryn: Oh, okay. Hang on one second. Let me get rid of that. The back.
Marc: We’re back full screen. There’s my smiling face. Let’s skip over. Let skip over that. Excellent. Look at that handsome devil.
Kathryn: Phew. Okay, here we go. Take it away.
Marc: All right, so this is some of the stuff that we’re gonna cover today. The goal today is not to make everybody experts in financial planning, but just to revisit some topics that maybe you’ve covered in the past, or maybe some ideas that you haven’t, and see if that kind of generates.
Some ideas to, to revisit in your own financial planning, whether that’s with us here at Pure or elsewhere. So we’re just we love education and we love talking about these different topics. So this is some of the stuff that we’re gonna go through. Again, be liberal using that q and A button, and we will try and get to as many of those questions as we possibly can.
So we’re coming out, so we’re coming out oh, no, we’re coming out hot in two slides. So personal financial goals just tend to vary as we go through life. You know, you all, none of us really go through life on a straight line. And so when we’re getting started in our in maybe in our first job, it’s really more about building momentum in your financial plan and getting off to good habits.
And then financial planning changes as we go through life, and different priorities pop up. So the idea financial planning can have. This idea that it’s a one-and-done kind of experience, which it’s not. It should be, it really should be dynamic and ride along with you addressing new goals, new risks that pop up at different stages of life.
And that’s the twenties, thirties, and forties. The forties and the fifties, and then the u time of your sixties when you’re getting ready for retirement. So, unfortunately, the B word is part of financial planning. And I’m not even, I’m not gonna attempt to say that budgeting is something that I get excited about, even as a professional financial advisor.
But it’s just a fa it’s just a fact. The best created or best thought-out financial plan cannot overcome a spending problem. So if we spend more. We take in every, in any given year, that ultimately is going to end. It’s gonna end badly. So I’ll use myself and my family as an example.
What we do as far as budgeting goes is take a look at the year-end checking account to look at the total number that went out of the checking account each year. And so we’re, right now, we’re at the end of January, so you should have your bank statements from December. And so that’s one way to start to get an idea of where spending is.
And if you are like me, you’re gonna look at that number and say that. It cannot possibly be that I spend that much money. It’s gotta, there’s gotta be something else into it. And again, if you’re like me and dig into those numbers, you’re gonna, you’re gonna find out, oh, it be I’m spending that, that amount of money.
But really important to be honest with yourself about spending. And also resist the urge to go through the, to go through the various spending spending that goes on in a year and say, well, that’s a one time item and that’s a one time item, and I can take this out and I can take that out, and I’m not really spending as much money as I think I am.
There’s a remarkable persistence in quote, one time spending item. So fixing the brakes on the car this year. Maybe you won’t do that next year, but you might change, you might replace the tires. So just as you’re going through developing a spending plan or you’re thinking about getting ready for retirement again, just be realistic.
Resist that urge to haircut spending to make yourself feel better and set yourself up for happy surprises. Maybe if it turns out in the retirement that in fact, yeah, I am spending less. You’ve set yourself up for a happy surprise. One way to benchmark your spending is the 50, 30, 20.
Strategy. So what this means, what this guides us around is ballpark of how our spending should fall into different categories. So the roof over our heads keeping the grow, keeping the the fridge full. That should, in round numbers go to 50% of your spending, 20% should go to savings and debt.
And then the 30 and then 30% leftover for fun and experiences having a good time. We don’t live in a spreadsheet. We gotta make room for fun in the financial planning. Again, back to my experience, how I do this is I’ve got highlighters. That are different colors that, that generally line up with the categories that you’re looking at right now.
And I will go through periodically our own credit card statement or a bank statement and highlight different things to get to, to try and facilitate conversations with my family about our spending. So there’s a running joke in our household that when dad is sitting at the kitchen table with his highlighters out, look out go spend time with your, go spend time with your friends.
But you do have to, we do have to get a good, honest look at our spending as part of developing a financial plan. And little things matter. They don’t need, you know, you don’t need to make drastic changes to your spending to have an impact. And I, so that reminds me, I was on the ra on a radio show here in Chicago a few years ago, and we were talking, budgeting, and I made a comment like that, that you don’t need to make big changes.
And it was on the, so a radio appearance. I’m on the phone, I can’t you know, I can’t see people’s faces. And so the host of the radio show said that’s great, Marc. You know, can you give us an example? And without thinking, I just said, sure. Don’t put premium vodka in your Bloody Mary. And then my life froze for a second when I thought, you idiot.
You are on a serious business radio show here in Chicago, and you’re making flippant comments about Bloody Mary’s. Your media career is now over. And as that thought is floating through my head, I heard on the other end of the phone laughter. And that and that led into and that led into a broader discussion about the waste of money it is to put premium vodka into a bloody Mary with all the Tabasco and spices in it.
But it, the fundamental point is that small things can make a difference. So looking at subscriptions that may have crept into, that you’ve forgotten about that you don’t use getting those off of the spending off of your outta your spending habits, that stuff can add up over time.
So it’s important to take a look at this stuff, not every day, but, you know, but once a, but maybe once a year or so.
So debt is a reality for us all or most of us. And making sure that we are managing debt appropriately is another element of the financial planning process. Looking at the liability side of the balance sheet as well as the asset side of the balance sheet. Rule of thumb, common rule of thumb in financial planning is to put a list together of your debts along with the interest rate, and you start paying the higher rate first in order to get your debt down.
Nothing wrong with that at all. A wrinkle to that might be looking at the lowest balance first, and even if that’s not the highest interest rate in the debts that you might have paying, getting that balance paid off. And if that’s, let’s pretend that’s a credit card and that credit card closed, even if it’s not the highest interest rate there, there’s this sense of satisfaction that you can feel from getting a debt from whatever the balance is to zero.
And so I might encourage people to think about a, again, a wrinkle to not just by interest rate, but maybe by balance back to that idea of like building momentum. That’s gonna, as you’re checking off goals, that’s gonna encourage you to hit the next goal. So I think the biggest expense for most of us in any given year is gonna be taxes.
So, before we talk, before we tackle taxes, what questions, Kathryn, are there? That people might have.
Kathryn: Yes. Sorry about that. My, I was having technical difficulties.
Marc: No problem. Actually that top one. That top one what I was leading in with on Powell speech today.
Kathryn: So, oh yeah. Yes, go ahead.
Marc: Yeah. So could you comment on Powell’s speech today? That’s the Federal Reserve the head of the Federal Reserve. How is it going to affect the stock market, et cetera. Thanks. So, gr so great question. I heard a, I didn’t hear all of Governor Powell’s speech, but I heard a little bit of it.
And so the snippets that I heard was that. As I think I said at the beginning, when we’re going through our technical challenges unemployment rate has kind of steadied, inflation’s still a little persistent. And so for those reasons we feel that we should keep rates right where they are.
I think the stock market longer, I don’t know about today, it’s a coin toss one day to the next, but I think the stock market is gonna react well to that. I, again, I think it’s healthy for us to have interest rates where we are for the economy. It’s I don’t think we’re at onerous interest rates at all.
I think it might also demonstrate to the stock market that Powell can’t be, or at the moment, can’t be bullied or intimidated by some of the other people in Washington. So he’s affirming his independence. So I think it’s, I think it’s, I think it’s gonna be, I think it’s nothing but good things for the stock market.
Kathryn: Sounds good. Thanks.
Marc: Well, what other questions do we see?
Kathryn: How about is there a benchmark or rule of thumb for how much we should have in our emergency fund?
Marc: Oh, great. Que yeah. Great question. Great question. So yeah, benchmark would be somewhere between 12 and 36 months. Of our spending goal.
So back to the spending. In order to figure out the emergency fund balance, we gotta start with what our spending goal is. So somewhere between 12 and 36 months would be a decent rule of thumb, and an emergency fund doesn’t necessarily have to be sitting in your checking account.
It probably shouldn’t, it should probably be earning some kind of interest in in maybe a, in, maybe a money market account or maybe maybe some short-term bond investments inside your portfolio. And one of the reasons, one of the reasons for that is. Building up that emergency fund or your bear market fund is really an important part of the financial planning process, especially when we’re getting ready for and in retirement.
And the reason for that is when we go to, when we go into retirement we then retire from our job, which means we also don’t have a paycheck coming in anymore. And now we’re, now we’ve, we’re replacing that paycheck with this portfolio that’s moving around with the stock market and it just puts.
Much more pressure on a portfolio when you go through when you go through a bear market, some unpleasantness in the stock market, to then when the investments are going down in value to also be pulling money out of the portfolio. It’s a double whammy that can cause problems if not checked.
And so one way to combat that is to have an emergency fund for, to go ahead and use for your spending in retirement when the stock market is misbehaving. What that does is it removes pressure from the portfolio and leaves your growth portion of the portfolio alone to recover when the market misbehaves.
But yeah, rule of thumb, 12 to 36 months.
Kathryn: Now typically you hear three to six months. Why are you, do you say 12 to 36 months because you’re adding in the bear market? Fund as well.
Marc: I am, and I’m thinking more along the lines of so the three to six month rule is gonna come, is gonna come from if there’s unexpected healthcare issues or bills.
It’s more isolated towards unex unanticipated expenses. That 12 to 36 month period that I’m thinking about is more when the stock market just doesn’t do what it’s supposed to do, so that we can, again, leave that portion of the portfolio alone and continue to go out to eat and buy groceries.
And so since we’re talking
Kathryn: about
Marc: live our life
Kathryn: saving, sorry. So would it make sense to reduce or pause our savings in order to pay off debt faster?
Marc: Yeah. So the answer for that one to me is maybe, but probably not. So that’s another issue with with going through the, with going through questions here today.
We’re gonna, I’m gonna be talking in generalities with limited information. So if anybody’s fans of Joe and Big Al’s your Money, your Wealth Show, you’re gonna be familiar with the Spitball concept. And so that, I’m gonna be spitballing on some of this, on some of this stuff. Yeah, so, so, you know, maybe the challenge with deferring savings is you are putting on the shelf your single largest asset.
And that is time. The power of time in compounding your investments is enormous. And so if you end, if a person ends up coming into retirement with a paid off house, but not enough money to replace their paycheck, that’s not a plan that really works. But likewise, on the other end of the spectrum, if somebody comes into retirement with a truckload of debt, that’s gonna, that’s gonna be a problem.
So you, you really want to try and strike a balance and maybe model out some d some different scenarios. You probably need to do a bit of both.
Kathryn: Okay. And before we get to taxes, my spouse and I tend to argue when we talk about budgeting. Any advice?
Marc: Alright. Are you laying down on the couch for this one?
I think, yeah, I think I think, yeah, I think I just became a therapist.
Kathryn: That’s part of financial planning.
Marc: It is part of financial planning and I’d love to tell you that’s not an ex, that’s an experience that I’m not familiar with in my own house. That’s not true. My my, my wife will often accuse me of being in financial advisor mode when we’re having our own personal financial conversations.
So, I’d say, like most interpersonal conversations, it’s important to talk about money in a non-accusatory way. We’re in this to, we’re in this together, no starting sentences with what’s your problem and why’d you spend, so why’d you so much on, on this, that, or this, that, or the other thing. So recognizing that you’re a team at home and you’re trying to get to a place together and maybe listening more than you talk and, yeah.
Not making people feel guilty about their behavior. Let me know where I should send the bill for my psychiatric.
Kathryn: We have two ears, one mouth. Right,
Marc: right, right.
Kathryn: All right, well, let’s get back to your slides. Okay. And then we’ll come back to questions. Sounds good. Getting a lot of great questions, you guys, so thank you.
Marc: Okay. And keep ’em coming, guys. Okay, let’s go to taxes. So, taxes, single biggest single biggest expense and can’t what Ben Franklin famously said, right? You can’t two things. You can’t avoid death and taxes. So, it’s all about, it’s all about our after tax return. So what we keep is way more important than what we make, which is a very nice segue into the famous tax triangle.
So there’s three different, on anybody’s balance sheet, there are three different buckets, for lack of a better word, of of tax treatment. So one is gonna be. Tax deferred. So that’s gonna be like your regular IRA and your regular 401k, which, for which for most people, that’s gonna be one of the, that’s gonna be one of, if not the largest bucket.
Then there’s the taxable bucket. So that’s gonna be your investment account, your brokerage account, a trust account. And then there is the tax free bucket, which is the Roth 401k, and the Roth IRAs. These these all these three buckets have different taxation elements, and instead of going through a bunch of numbers, what I would prefer everybody to think about is the degree of your partnership with Uncle Sam.
So the tax-deferred bucket. Again, regular IRAs, regular 401k, you have a full-on partner with Uncle Sam. Uncle Sam is going to tell you through the required minimum distributions when and how much money you need to take out. And then he’s gonna tax that money at the worst possible rates, ordinary income rates.
And so there’s, I’d say you’ve got the least amount of control from a tax perspective because your partnership with Uncle Sam is the biggest. Then you go over to taxable accounts, still have a partnership with Uncle Sam, but now it’s been, now it’s been reduced. And so now you’ve got a little bit more control over how it is that you might pay your taxes.
So you can go, you can look at tax loss harvesting through the course of the year. There are different investment strategies, like direct indexing, that can generate attractive after-tax returns. And you’ve got the ability. To you can look at investments like mini municipal bonds and the fixed income side that are largely protected from income taxes altogether.
And then you can also, instead of paying rates at the worst possible rate and being forced to do so, you can target long-term capital gains rates, which are more generally more attractive than ordinary income. And then you got the holy grail of tax, the tax-free bucket where you don’t have any partners.
Every, every dollar that’s in that tax free bucket is yours. You’ve got control over when that comes out of that bucket, and you don’t pay any ordinary income taxes. So, so everybody should just have in their mind right now, the dollar. Just to put really a fine point on this back to the tax deferred bucket, which tends to be the largest regular IRAs, regular 401k plans.
If you get in your mind the dollar amount that’s in that bucket for you right now. Somewhere, depending on your tax situation, somewhere in round numbers between 20 and 40% of that is not yours. It’s ultimately going to, it’s ultimately going to Uncle Sam. Yeah. So, that’s another reason to think about financial planning from a tax perspective: how do I get maximum flexibility and control over my tax situation? And the time to be thinking about that stuff is sooner rather than later.
Once we pull the trigger, it’s not our choices aren’t gone after we retire. It’s just we’ve got a lot more time and options before we retire to try and get more of that, more build more flexibility into managing our taxes. So that’s an important element to be thinking about when you’re putting together your financial plan.
Alright. Portfolio, oh my gosh. View portfolio holistically. When’s the la when’s the, and somebody put in the q and A with the last time that some one of your friends, a high school buddy, you get to, you went out and played golf with, or you meet him for lunch, or you meet him for a few drinks after work that somebody used the word holistically.
I’ll tell you right now, the answer’s never. So if we, so we gotta get rid of these corporate words, Kathryn, for our next presentation. And I’m just giving you a warning right now, if I see bandwidth ecosystem thinking outside the box, that’s it. I’m storming outta here. I can’t take it.
Kathryn: I just need you to lean in. I need you to lean into it.
Marc: I refuse. Well, this one, I’m sorry. I refuse to lean in on my using made-up corporate words. Okay. So the idea about the portfolio revamp in general is that if you can keep track of your portfolio with three accounts or four accounts, don’t do it with nine.
So last night I was out to dinner with some of our clients, and my pleasant persistence has finally paid off. They’ve got two or three old 401k plan balances that are back at their, that are back at their former employers. And they conceded last night at dinner that, yeah, we gotta consolidate that stuff just to make it easier to keep track of.
So it’s easier to keep track of. In, in terms of managing your risk it’s easier on your heirs. So, unfortunately, tomorrow is promised to none of us. It, it’s for your family to dealing with estate issues, it’s just easier to keep track of things in one place is probably also an opportunity to save some money.
Speaking of saving some money, we gotta make sure it’s part of the plan that we are not leaving money on the table. So, as of when is this, as of May of 2024, according to Vanguard, around a quarter of us in the, so 23%, around a quarter of us. In the working world are leaving money on the table because we are contributing at a rate to the 401k plan that is not fully taking advantage of company matches.
So rethinking how to do that, I mean, you’re effectively turning down a raise. So rethinking how do I rejigger the budget a little to get myself up to take advantage of that free money that my employer’s offering me?
All right, before we go through a an example or a case study, what are there other questions, Kathryn?
Kathryn: Of course we have questions. We’ve got lots of questions.
Marc: We do love it.
Kathryn: Well, a lot of great questions, everybody. You guys are filling up the chat box with a lot of questions, and I just want you to know that we may not be able to get to every single question because a lot of these are extremely detailed.
So I’m gonna put in the chat right now. Come on in or have a zoom free consultation, free assessment, just conversation. If you’re a pure family member already contact your advisor. If not, then give us a call. Set up a free consultation. There’s nothing to be afraid of. We’re just gonna help you out and we’re gonna dive into your specific details and give you specific answers rather than these kind of high level, broad examples, as you will.
So let’s get to back to my questions here. Yes,
Marc: I’m looking. So, are treasury funds or treasury is a good place for emergency funds these days? Yes, and as our short term. So for those that aren’t familiar with that term, treasury funds or treasuries, those are those are fixed income instruments that are issued by the US government, so largely considered to be essentially risk-free.
So those are a good place as our short-term corporate bonds as, as well. So, yeah, so absolutely that’s a good, that’s a good place. And then there are, you know, there, there are money market funds these days that have got decent returns with where rate, with where rates are.
So that, no, absolutely that’d be a good place for emergency funds for those of us who are tired and trying to determine future tax flows. What’s a good estimate for a 60 40 portfolio for yearly gains losses? For data calculations over a 30 year retirement. I realize it’s only a guess as is every other input we use.
It seems that most of the standard guesses advisors use are a bit too rosy. I won’t disagree with that. And I would say with a lot of these questions, the answer to this one is it depends. There are investment vehicles that are more, that tend to be more tax efficient than others.
So for example, an exchange traded fund. That an exchange traded fund in general is gonna be a bit more tax efficient than maybe a high octane, actively managed high turnover mutual fund. So it’s really, estimates are really gonna depend on the nature of the portfolio. So what it is invested in and the vehicles it is invested in.
And then you’d have to go look at again, are there strategies like that direct in indexing that I mentioned, are there strategies we could use to help neutralize some of those taxes? So, I mean, the short answer is there, what is a good estimate for a 60 40 portfolio? It’s really hard to say.
Maybe impossible to say without looking at the particular investments. Gotcha.
Kathryn: What about the do you think the government might change the Roth IRA rules in tax distributions?
Marc: So yeah, the government Have your crystal ball. Yeah, sure. I’ll take out the crystal ball for sure.
So there’s always a chance I think I heard that in the movie, dumb and Dumber, right? There’s always a, I remember there’s always a, you’re saying there’s a chance, there’s always a chance that they could change that rule. I think that’s incredibly unlikely. I cannot imagine the I cannot imagine the public response if the government said, yeah, we told, I know we told you that you don’t have to pay income taxes on Roths, and you’ve already paid a bunch of taxes in order to get money into them.
Well, we changed our mind. We don’t have, we don’t have enough money, and so we’re gonna change that. I think that’s remarkably unlikely.
Kathryn: And that comes to the next question of about taking social security early because I’m worried about the government running out of money. What do you think? Yes. Kind of on that same, you know, would they ever get rid of Social Security?
Marc: Yeah. Similar. Similar. So again, I cannot imagine the public reaction to the government saying, yes, social security’s done because we’ve all paid into it. Your employer has paid into it in a match. That I don’t think that would fly for a second. What I do think about social security is that there’s gonna have to be some reckoning of some of these.
There has to be some sort of change to Social Security. So I, one that I could imagine would be, so I’m 56 years old. What I could imagine is that the government might say. Okay, Horner we know you’re not gonna like this, but you’re 56 years old. You’ve got more time to go to, to change your financial plan as far as your expectation for receiving social security benefits.
So your full retirement age is not gonna, what’s my full retirement age? Kathryn, put you on the spot.
Kathryn: 57. I’m sorry. 67.
Marc: 60. Boom, boom. So Horner, you now, your full retirement age is gonna be 72 or something to push it back,
Kathryn: but you don’t think that they could do that to someone of your age?
It would probably be your children, don’t you think? Or at least someone maybe in their forties.
Marc: Kathryn, are you familiar with the insatiable appetite our government has to raise
Kathryn: revenue? I know, but it took them like 40 years to just get it from 65 to 67. I can’t imagine.
Marc: So I will, yeah. So I will concede at 50.
At 56. I’m probably on the outer edge. The outer edge of who they might be,
but
Kathryn: maybe at 50. Yeah, you’re
Marc: right. But maybe at 50. Maybe at 50. So extend somehow extending the full retirement age for a group of people that still have time to, that still have time to recover or update their plan for that.
I mean, somebody who’s in their sixties and is on the verge of claiming Social Security, they tend to be voters. Older people tend to be voters. Politicians like their job. I think if they made an attempt to stick their hands in the pockets of people that vote and that will be upset. With this decision, again, I think remarkably unlikely.
I also think there should be a means testing in social security, you know, for, for people that sell their, you know, Mark Cuban should not be collecting Social Security in my opinion. I think the United States system has provided him plenty of benefit, and so there should be some level of means testing but that Social Security’s gonna run out.
I’m not, I am not worried about that.
Kathryn: Agreed. All right. So do you wanna want me to grab another question or do you wanna just get started? ’cause it’s,
Marc: yeah. Time’s clicking along. Time’s are clicking. I wanna, what I’m gonna, what I wanna do, actually these on these next two slides is, so here’s an example.
It’s that picture over there looks like American Gothic by SpongeBob Squarepants. I mean that’s the cartoon version of the American Gothic picture. Yeah. There’s a bunch of numbers. There’s a bunch of numbers on this page. Instead of walking through a both for time and just to keep this moving instead of walking through.
These various numbers. What I want to talk about instead, a couple of assumptions that are baked in so that the third line from the bottom spending, so they’re spending, John and Sally are spending 140 grand a year and they plan to spend 112,000 in retirement. And that apparently is 80%, don’t make me do the public math.
That’s apparently 80% of one 40. So 80% is a financial planning rule of thumb about spending in retirement. And I would just say I would just say in practice, having done this as long as I have, what I’ve noticed for clients that retire is that the first couple of years, or first handful of years of retirement spending is about the same.
Or maybe it goes down a little, but there’s not a, there’s not a 20% haircut on spending. And I think the reason for that is. We all have a bucket list and when we don’t have to go to work anymore and we’ve got more free time and maybe the kids are getting their lives off and running, we naturally go check off some of our bucket list items, which is totally normal.
So I think where this 80% rule of thumb comes from, it’s gotta be like the totality of retirement that you add all that, you add all that up. So I would just encourage everybody in their own financial plan to add a little spending nuance and don’t maybe resist the urge to, out of the gate of retirement plan for a spending reduction.
Maybe it’s the first five years you’re spending as much, but you’re you’re doing the things that you never got around to doing while you were working.
Kathryn: I’m gonna interject there as well. Yeah. That also, when I teach the retirement classes, we talk about if you hadn’t, maybe if you paid off your house.
Your expenses could go dramatically down. Or if your children, if you have adult children and they’re off the payroll, right, maybe you’re spending less. But for the most part, we’ve all grown accustomed to a certain lifestyle. And so if you’re planning on spending 20% less, where’s that 20% coming from?
Marc: And
Kathryn: that’s
Marc: really hard to do. Dialing back spending is really fricking hard to do. Forgive my language. So,
Kathryn: but I just wanted to put that in there, but yes, I agree. Yeah.
Marc: Yeah. It is very, it’s very hard to do. The other thing that’s not on this slide that’s full of numbers is, I don’t think it gets talked about enough.
Thinking about retirement is that there’s a different set of asset allocation beyond stocks and bonds, which, and cash, which we’re gonna talk about in a minute. But there’s the, how are you gonna keep yourself physically fit? What are you gonna do to keep your engagement with relationships in your life?
So, friends and family. What’s the game plan to keep your mind engaged? As you, when you leave work. And so I think it’s really important to think about, imagine what that, you know, what a week in retirement might look like. Not looking at your portfolio but how are you spending your time?
And there’s also, there’s another element, and that is after you, after a person’s been working for 30 or 40 years, and let’s pretend that this person, let’s use me as an example. So after, when it’s time for me to retire, after I’ve been working for 30 or 40 years, my wife has got her own life and her own stuff going on, and for me to expect to just retire.
And because I’ve got all this new free time on my hand that she’s gonna welcome me back into her own schedule, may or may not be true. And one client, in fact, related a story to me where early in his retirement, he’s sitting at breakfast with his wife and asked what the plans for the day were.
And she said, quite. Directly. Well, I’m going to lunch with my friends. I don’t know what you’re doing. So it’s important to have some of those conversations beyond just the numbers. So let’s keep this rolling. Kathryn, let’s skip over. Yeah, let’s skip over that. Skip over the next one.
The bottom line here on these charts is the, is it that if you, the longer you give your portfolio to grow the the less you can resist taking a permanent haircut from social security, the stronger in general your financial plan is gonna be. Yes. Let’s keep moving ’cause I wanna make sure that we have plenty of time for more questions.
Okay. Investment basics important to have goals and time horizons clearly articulated so that you can develop the right investment plan for the right goal. So a the investment strategy for something like retirement, when we’re first getting started outta work, which might be 30 or 40 years away, that portfolio should probably look a bit different than somebody who’s saving for a house that they might wanna buy over the next three to five years.
So let’s talk about the different, I think we’ve got the different elements of, yeah, our investment choices out there, they basically fall into three broad categories, cash, stocks, and bonds. And then asset allocation is a mix of those three that you put together according to your goals and risk tolerance.
We’ve talked a little bit about cash alternatives, high yield savings accounts, treasuries. As somebody asked about money market accounts, I, again, I, for me, I would put into this category as well. Really short term bonds. Bonds are basically debt. So Walmart might issue a bond to go build a factory, and so how that works is Walmart has to build a factory for a million dollars, and so they issue bonds.
So bond investors. Give Walmart the million dollars in to go build the factory in return. Walmart says, I’ll pay you back in 10 years, and in between now and then I’m gonna pay you a coupon payment. So that’s interest. And typically that’s every six years bonds come in, or excuse me, every six months.
Bonds come in all sorts of shapes and sizes. And one way to tell, the one way to gauge the risk on a bond is to look at the yield. So right now I think the 10 year treasury yield is something like four three or 4.3%, something like that. So if you’re looking at a bond investment that’s got a that’s got a yield that’s 7% right away, that should tell you that’s a higher risk investment.
But there are all sorts of different types of treasuries, which are issued by the US government municipal bonds, which are issued by municipalities. So cities, so there’s high yield bonds that are issued by companies. There, there are higher quality bonds that are issued by companies.
There’s emerging market bonds, there’s international bonds, there’s all sorts of all sorts of different types of bonds. So stocks, unlike being a lender to a company, when you own bonds, you, this represents ownership in a company. So, and those, again, take all sorts of shapes and sizes. So stocks in startup companies, I mentioned Mark Cuban.
That’s what the Shark Tank people are investing in. And then all the way out to mature companies like apple and Microsoft and companies. Companies like that.
Before we get into this, ’cause I’m gonna nerd out a little bit. I’m gonna financial advisor nerd out on this stuff. Kathryn, what other questions do we do? We have.
Kathryn: Okay. I love it when you nerd out. All right. Let’s, can you explain what’s going on with Japan selling US treasuries since you were talking about treasuries and what impact they may have on US debt and treasury yields, or what impact or risk will that have on these finances in 2026?
Marc: Alright, so I’m ashamed to admit publicly that I’m not up to date with the economic activity of Japan buying and selling us, US treasuries. What I have not, what I have not seen is you a curve
Kathryn: ball.
Marc: Yeah. Thanks, Kathryn. I really appreciate that. So, what I do know, what I do know is that I have not seen, I have not seen any activity in the treasury market that would suggest everybody, everybody across the world is running from US treasury debt.
So my guess on this is just normal course. Normal course stuff.
Kathryn: How do you feel about crypto? How does crypto fit? Is that another curve ball that fit into a balanced portfolio? That’s,
Marc: yeah. Yeah. That’s not a, that’s not a curve ball, but you’re not gonna, you, I don’t know if you’re gonna like my answer.
So, Charlie Munger, Warren B, may he rest in peace. Warren Buffett’s long-time partner. He talked about crypto as rat poison. One of my neighbors, one of our neighbors, they’re both FBI agents, and they told me this is dated, this is a handful of years ago, but they told me that by the FBI’s estimate, 80% of the activity in the crypto world is from organized crime.
And then my children told me that fake IDs that are purchased by high, by less disciplined high school students, certainly not my children, but those are paid for with crypto. So I’m just not much interested in an investment that is dominated apparently by organized crime and misbehaving teenagers buying fake IDs from wherever it is that they’re buying I or wherever they’re buying them from.
I would much rather be invested in something else.
Kathryn: Alright. And how do you think, or what do you think about artificial intelligence in an investment portfolio?
Marc: Yeah, so that for sure seems to be here to stay. What, how I would prefer to get access or exposure to artificial intelligence is not directly through artificial intelligence companies, but rather through the companies that are using it.
So the phrase “hyperscalers,” that’s gonna be the Metas, Amazon, Google, Microsoft, that, that are, they’re really trying to figure out the, where AI is going, how to make the most productive use out of it. You know, there was something, it’s really hard to pick winners in a in an emerging technology.
So, so for example, there, when the car industry first started in the United States there’s, now I think everybody’s familiar with, like, there’s the big three in the car industry. There were close to 2000 car manufacturers that started in the United States back in the early 19 hundreds.
So to try and play the investment game of from a pool to use the car industry to, from a pool of 2000 companies, I’m gonna try and pick the three that are gonna survive. I just, I prefer not to play that game. So I feel the same way about ai, get exposure. But do it through the people that know what they’re, do it through companies that are taking advantage of it, not necessarily direct AI companies.
Kathryn: Well, doesn’t that also just come into play the indexes rather than trying to choose?
Marc: Absolutely. Yeah. So you can get exposure, you can get exposure to ai along the lines that I’m talking about through boun, through a diversified mutual fund, through the, an exchange traded fund, back to that direct in indexing that we talked about.
So there’s lots of different ways to get exposure to it beyond just owning shares of, let’s say, Microsoft. Okay.
Alright. We got 13 minutes by my count left here. Kathryn, why
Kathryn: don’t you go on to market timing and then we’ll,
Marc: yep.
Kathryn: We’ll I’ll see on the flip side.
Marc: Okay. Sounds good. All right. Market timing.
So this, what this chart says is over a 20 year period, so 2001 to 2020, the s and p 500 to the left hand side return 7.5% and I’m gonna do some public math here. So, a 20 year time period, there are on average 200 trading days in any given year. So 20 times 200, that’s 4,000 trading days. If you miss the top 10 out of a sa, top 10 days, out of a sample of 4,000 days, your return got cut by more than half, and then it got worse and worse.
The more days that you, the more days that you missed the stock market the returns are lumpy. And if you. And you have to be present to win. So just like any good bingo game or high school charity event, you must be present to win. And so while it’s very tempting to to try and find a strategy that’s gonna step to the side when the market misbehaves, then get you back invested in time to reap the rewards, I’d love to be part of that investment.
It just does not exist. And so, and so just really important to stay invested. So I want you to remember that number 7.5 when we go to this next slide and get ready for the financial advisor nerd out. So remember that 7.5 number average annual return over a 20 year, over a 20 year time period. So slightly different time period, but still a lot.
So back to 1980. So what’s that? 45? 45 years? What this chart says is the gray bars. Are the annual return each year for the s and p 500, and I think there is one 7% number out of 45. One out of 45. So the, our industry unfortunately talks a lot about long-term average returns and and then people get invested and almost never experience the long-term average return.
It’s up 34. It’s down 23. It’s up 30, it’s up 20. It’s up 14 and so long-term average returns absolutely work out on a math basis over 20 years. But that long-term average only is in, it only matters if you were going to the moon for 20 years and not seeing any of this informa like daily information about what the stock market’s doing.
The other number on this chart is the red number, and that is in any given year, that was the low point in the s and p 500. So let’s go to the far right hand side of this chart. So that’s 2025 s and p was up at around 16%. And then you go down that column. At one point last year, the stock market was down 19%, even though it finished up 16%.
So there’s two fundamental takeaways here for me, and again, I love this chart. Absolutely love this chart. Two fundamental takeaways are long-term averages are. You almost never get them. So, so don’t hang onto them too much. And at some point, I’m gonna use the G word. You are basically guaranteed at some point in every single year to go through a period where you hate your stock investments because they’re struggling.
So it’s just it’s a rollercoaster that’s hard to stick with. I think it becomes easier to stick with it when you really understand what it is that you’re signing up for and then you build that diversified portfolio to try and compress the range of outcomes.
Alright, we got nine minutes to go, Kathryn. So asset allocation, again, mix of stocks, bonds, and cash. It’s gotta line up with your your particular goals, your risk tolerance, a portfolio that’s not gonna keep you up at night. Right. We talked about smoothing out the highs and the lows.
Diversifying across both. So within, so diversifying across stocks, bonds, and cash, but then also diversifying within stocks, bonds, and cash.
So this, yeah, this is, so, this is another reminder that we, as human beings, myself included, are just not wired all that well for the stock market. We just tend to go, we just tend to think when the stock market’s going up, that it’s gonna go up forever, and that we, and that when the stock market’s going down, that it’s going to zero.
And and I’ve developed a personal theory that the market is this evil animal trying to get us to do the wrong thing at the wrong time. So when the stock market’s going up, it’s saying. You better pile in. You better pile in. I’m going to the moon. Or when it struggles the stock market’s saying to us, I’m going to zero, and you’re an idiot if you stick with this.
So it, I think the market is constantly trying to play on our emotions. And that’s back where asset allocation comes in and really understanding how the markets work year to year.
Okay. Estate plan, boy. Yeah, we’re really ramping up the enthusiasm here. Alright, estate plans three core categories or three core elements to an estate plan. You got your will, which which kicks into place after you die. There are trusts and then there are he, and then there are powers of attorney, both healthcare and financial.
The basic idea of buying an estate plan is that if you don’t have one, you might be subject to probate. But it’s really more about maintaining control. So, so even so maintaining control over who’s gonna make healthcare decisions for you if you are incapacitated in some way, how would you, like, what would you like your legacy to look like?
Maybe after we’re gone? And so again, the idea is to, the idea is to create some control. How decisions and how decisions are made reviewing beneficiaries. That’s another part of the, another part of the of the estate plan process. Kathryn, please tell me we are not ending on a top.
Hallelujah. I did. I could not. Yeah, we’re not ending talking about death. So, so before we get to more questions, so the general idea some takeaways for us here today are important to create an investment plan that lines up with your particular goals and and risk tolerance. That the, that again, the perfectly designed investment plan.
Perfect. The perfectly designed investment plan that you can’t sleep with at night is not perfect. So it needs to line up with you staying diversified and and taxes are a massive can be a massive drag. And so important to be thinking about those and how it is that we reduce that drag on our portfolio.
Alright. Let’s go to more questions, Kathryn.
Kathryn: All right, well, just so everybody knows as I said, we’ve gotten great questions. We really appreciate how much everybody has been involved and interactive. So again, if you are part of the Pure Family, please reach out to your advisor and you can get that one-on-one help that you’ve always received.
If you are not yet working with a financial advisor here at Pure, then we encourage you to reach out and schedule a free assessment. Just a no obligation, no fee one-on-one comprehensive conversation with you to get your questions answered. So we wanna help you with your financial future, and we can do that because.
We’re here to help and we are financial planner, but
Marc: boom. Alright, let me answer this one. Kathryn, how would you, okay, go ahead. How would you advise about investing in US stocks versus eu? There you go. So that’s the European Union versus developing markets.
So that might that might be maybe em, so emerging markets, but let’s just talk about US versus international. So last year the international markets, so both developed and emerging markets, it was close to a double over the s and p 500. And that’s the first time in like 15 years that the, something like that, that that the international markets have outperformed the US and it’s really interesting to me to reflect on that for a second.
If we had a crystal ball a year ago. You knew for a fact that there was gonna be all the tariff talk that we’ve gone through this year. What would your appetite to be investing internationally be? My guess would be almost zero. And that would’ve been, that would’ve been a. 100% the wrong thing to, the wrong thing to do, you would’ve missed out on this rebound for the international market.
So it’s just it’s one in a long list of examples that I’ve experienced over my career that the market tries to get you to do the wrong thing at the wrong time. And often doing the opposite is the better move. And a disciplined way to do that is, is building, ’cause that’s way easier said than done, but about disciplined way to do that is by building a diversified portfolio that’s got us exposure, international exposure large, medium, small companies, different kinds of bonds, and then rebalancing that portfolio periodically so that you’re there to take advantage.
Or that you’re there to win when when things go the way that they did, like last year in the interna, in the international markets related to that, would you is it too late to be invested in the international markets? I would say absolutely not. Trends tend to last longer than we think.
So if you’re under invested internationally, that’s something to look at. How would you rank income alternatives in retirement, not including social security or pension? Yeah, that’s a good one. That’s a good one. Rob. What I have heard from clients. Who have retired have gotten part-time jobs.
They love it. Absolutely love it. So one of our clients is a retired chief financial officer, and he retired to Hawaii and he works in a golf shop a few days, a few days a week. And one of the, apparently this golf course is part of like five or six golf courses that this company owns. And they approached him one day about, Hey, we understand you used to be a chief financial officer and might you be interested in coming to work in the corporate office?
And with a smile on his face, he said, thank you very much. But I like checking people in and selling people golf balls and saying goodbye and not thinking of not thinking about that. So a part-time job could be an excellent income alternative in retirement, as well as giving, continuing to give one purpose.
It’s a natural, it’s a natural social net where you get to meet people. I think that’s a, I think that’s a great idea. What other, we got a couple more minutes
Kathryn: here. What about your favorite investment ideas? I know you kind of talked about some, but what are some others?
Marc: Yeah. Yeah, so just in general, I would say I’m a fan of looking for investment ideas in areas of the markets that haven’t done all that well recently.
And that could be either ex like explicitly not done well, like gone down in value or maybe done less well than other investments. And so I’d come back to that. International the international the international markets the, what the last 14 years have been large cap US dominated.
So I would probably also add small and mid cap companies, both in the US and inter and international, just because they’ve done less well than the biggies here in the us.
Kathryn: Probably the last question we can get to is for estate planning. Since you, I know you didn’t want to just end on estate planning.
You
Marc: No, we can’t end on estate
Kathryn: planning. Okay. Alright, we’ll
Marc: do
Kathryn: one more, we’ll
Marc: do
Kathryn: one more after estate planning. What political party is better for invest the investment markets? How about that one? If you don’t wanna end on estate planning, let’s get into the political.
Marc: Alright. That’s my fault. I set myself up for that one, but I’ll answer that one.
I’ll answer that one. So, you’re not supposed to talk about politics or religion and business. Here we go.
Kathryn: Absolutely.
Marc: So no matter, and we’ve looked at this research as well, no matter how much the donkeys might nay. The elephants might trumpet in the political world, neither one of them can lay claim to being better for the investment to being better for the investment markets.
The investment markets have this wonderful ability to look through the nonsense, however you choose to define nonsense in the political world, to look through the nonsense and deliver. So, the so we had one client when President Trump first got elected in his first term, they weren’t happy with that.
And so they went to cash in their portfolio and that was a huge mistake. We also had a client that was very similar when President Obama went into office that was likewise a very bad mistake. So the answer is neither of them, no matter how much they might proclaim otherwise.
Kathryn: Alright, well, we are out of time. Marc, thank you so much. You’ve got great information, great stories, and we appreciate you helping us shape up our get ready for 2026. So for all of you that are still with us. Please reach out to your advisor or to us. We would love to help you out with a no cost, no obligation conversation with a financial professional here at Pure Financial Advisors.
I’ve put the links in the chat, so click on that and we look forward to seeing you. You guys all have a wonderful day and try to stay warm, Marc.
Marc: Thank you, Kathryn. Thank you.
Kathryn: Thanks, everybody. Take care.
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