Joe Anderson
ABOUT Joseph

As CEO and President, Joe Anderson has created a unique, ambitious business model utilizing advanced service, training, sales, and marketing strategies to grow Pure Financial Advisors into the trustworthy, client-focused company it is today. Pure Financial, a Registered Investment Advisor (RIA), was ranked 15 out of 100 top ETF Power Users by RIA channel (2023), was [...]

Alan Clopine

Alan Clopine is the Executive Chairman of Pure Financial Advisors, LLC (Pure). He has been an executive leader of the Company for over a decade, including CFO, CEO, and Chairman. Alan joined the firm in 2008, about one year after it was established. In his tenure at Pure, the firm has grown from approximately $50 [...]

Does your portfolio fit the financial goals you have for retirement? When you look at your portfolio does it match the goals and the risk levels you are willing to take at this point in your life, or does it look like someone much younger or even older? Just tucking money away in a retirement account doesn’t mean you are maximizing the full potential of your investments. Financial professionals Joe Anderson and Alan Clopine take a look at guidelines for determining if your portfolio is optimized to produce the best results for you at any age. From your account balances to your asset allocation they give you guidance to help determine if you are on track.

Important Points:

(0:00) – Intro

(1:40) –Does your portfolio reflect you?

(2:50) – Retirement account balance by age

(4:00) – Target contribution rate

(7:20) – Dollar cost averaging

(9:00) – Cash in portfolio

(10:40) – Asset allocation in bonds by age

(12:40) – Asset allocation in stocks by age

(15:00) – Asset allocation investments by age

(18:20) – Reassess & Rebalance 20/30’s

(19:20) – Reassess & Rebalance 40/50’s

(20:40) – Reassess & Rebalance 60/70’s

(21:50) – Ask the Experts

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Joe: Interesting question. If your portfolio could talk, would it recognize you? Would it say, Hey we’re a perfect fit? Would it say, wow, you’re 60, I thought you were 30 or vice versa. Figure out if you have the right portfolio. Does your portfolio fit you? Figure it out today on Your Money, Your Wealth® folks. Joe Anderson here CERTIFIED FINANCIAL PLANNER™, President of Pure Financial Advisors. Of course, we’re back with the big man. There’s Big Al Clopine, CPA. Welcome back from vacation, sir.

Al: Yes, I had a good time Joe and it’s nice to be here.

Joe: We’re talking about portfolios and if they fit.

Al: Yeah.

Joe: If your portfolio looked at you. What would it say?

Al: I think it would say I’m young and vibrant.

Joe: That may be you’re taking on too much risk.

Al: It could be.

Joe: What we’re going to get into are averages of what people are doing and breaking it down to make sure that it fits you. That’s today’s financial focus.
One in four don’t really care if your portfolio fits or not. They don’t even look at their portfolio. They don’t even know if it’s diversified. Here’s another interesting stat: only 42% of you actually take a look and start rebalancing or maybe constructing an overall portfolio that’s right for your overall goals, time frames and what you’re trying to accomplish. Let’s break things down even further by bringing in the big man.

Al: Today we’re going to see if your portfolio fits. Let’s start out with how much you have. What’s your balance? What’s your current balance and how much are you saving? Is that enough? How much do you have in cash? Then we’ll get into asset allocation. Finally you’re going to need to rebalance, monitor. I want to say re monitor. That was a new word for me. I was combining the two words, Joe. That’s what you want to do.

Joe: Yeah, re monitor; it’s called reassess and rebalance. Reassess and rebalance. Let’s dive in real quickly. A lot of you always ask us, when you come into the overall office, Am I close to my peers? Let’s take a look. The average account balances about $112,000. You can take a look at your account balance and say, Hey, guess what? Look, honey, we have $120,000 so we’re above average. Trust me, this doesn’t mean anything whatsoever.

Al: No, it doesn’t because that’s just an average of all of us. If you look at different ages, you can kind of get a sense of where people are on an average basis per age. You can see as we get older, we have a little bit more. Joe I think we get up to $180, $170,000. That’s what average is. Is that the right amount? Not necessarily.

Joe: This is a good start. When you take a look and say, Hey, I’m saving money. In my 40s I have $100,000; 50’s, $160,000. If I’m in my 40s, 50s or 60s; let’s say you have $200,000 in your 60s, Al, how much income can that really produce?

Al: That’s about $7,000 or $8,000 a year. That’s not a lot.

Joe: $8,000 a year. That’s the average. What does that tell us that: there’s a lot of people that might need a little bit more help. This is interesting. This is maybe a little bit better guide when we’re talking about high level planning. If you’re in your 30s, you want at least 1 times your income. You start your career, you’re making $50,000 a year by your 30s, hopefully, you should have $50,000 saved. Now you get into your 40s, it’s 3 times. When you get in your 60s, it’s 8 times. If you have $100,000 salary, you should have about $800,000 of investable assets. But if we go back, it’s $182,000. We’re way off track here when we’re looking at averages. By the way, this is just a rule of thumb here too. This doesn’t account for fixed income sources, pensions. Maybe people wind down their spending quite a bit, or maybe they ramp it up.

Al: I think that’s well said. It really is just a rule of thumb. It gives you a guideline. In some cases, people have very high pensions, so you don’t need to have nearly as much saved. If you find that you are a little behind, and many of us find that to be true, then you need to increase your savings rate. So what’s the average rate? The average rate is 8.9%. That’s actually higher than it was. The reason it’s higher, Joe, is because we’ve got these auto enrolment plans on 401(k)’s, where you automatically get enrolled. You have to opt out if you don’t want it. That’s increased the savings rate, which is good but it’s still probably not enough.

Joe: It’s probably way too short because if you’re thinking, how much money should I save? The real answer is that you have to first forecast what you’re spending and then take a look at what you want to spend in retirement and work backwards from there. Most people don’t even come close to that type of planning. They’re saying, Well, if you’re 25, save 15% of your income; if you’re 35, 23 or 20% is a good gauge. What if you’re 60 and you haven’t saved a dime. This is still probably not going to get you there, but it’s a good start.

Al: A lot of people haven’t saved enough. If you’re in that boat, maybe you’re 40, 50, 60, you have very little saved. Get started now, you are going to improve your situation. Here’s a thought too, if saving 10%, 15%, 20% seems like too much, start with 1% or 2% each year and then keep adding a percent each year to where you get to where your 10% or 15% or 20% and then you really have something. This is true even if you start at 65. Whatever you save now is going to help your situation, better than what you would have been without saving.

Joe: I love that advice. I absolutely love it. Start with 1% increases, try even every quarter; Start saving 6%, next quarter trying to get it to 7%; the following quarter try to get an 8%. Maybe do incremental every quarter of 25 basis points. Always try to progress higher. You don’t miss the money once it’s out of sight, it’s out of mind. You just have to start. We’re here to help go to YourMoneyYourWealth.com. Click on our portfolio tracker. We’re going to track your portfolio and help you all the way through. Go to YourMoneyYourWealthcom. It’s our new special offer this week. We’ve got to take a break. The show is called Your Money, Your Wealth®.

Joe: Welcome back to the show. The show is called Your Money, Your Wealth®. Joe Anderson, CFP® and Big Al Clopine, CPA hanging out here talking about, does your portfolio fit? We talked about the average balances of retirement accounts and should you base your overall financial plan by averages? The answer is, absolutely not. Go to YourMoneyYourWealth.com. Click on our special offer. It’s our portfolio tracker. Al let’s see what the bright idea is.

Al: Practice dollar cost averaging, invest the same amount of money every period, regardless of the market consequences. Joe, would you say, is that a good idea? Bright idea?

Joe: I think it’s bright.

Al: It’s bright.

Joe: The future is bright with dollar cost averaging!

Al: Yes.

Joe: What does that actually mean? It’s like what you’re saving in your 401(k) account. Let’s say you have $200 coming from your paycheck and it’s going into your account. $200 every single week, every single month, whatever your pay period cycle looks like. The market goes like this throughout. You’re not taking a big lump sum when the market’s high or when the market’s low. You’re just averaging the cost of those investments throughout. It’s a really good strategy. Most people do it every day and they don’t even know it.

Al: I’ve got a question for you.

Joe: Yes.

Al: If you think about people in their 20s or their 60s, 70s, who do you think has more cash, as a percentage of their assets?

Joe: In regards to cash reserves or the portfolio itself?

Al: The portfolio.

Joe: In their portfolio, an 80 year old, I would think, would have a lot more safe money than a 20 year old.

Al: You would think so because they’re going to start withdrawing.

Joe: Absolutely.

Al: It turns out that’s not really the case.

Joe: Interesting. It’s almost the same.

Al: The same.

Joe: It’s almost identical. People in their 20s, what we mean by this; let’s say 401(k): If you’re in your 20s, you should have a lot more stocks because you can’t touch this money until you’re 60 anyway. If you’re in your 80s, 28% of people have money in cash, or safe money. It’s not cash in like real hard cold cash, it’s money market cash equivalents. Almost 30% of people in their 20s have that money sitting in cash. Do you think they’re trying to time the market or they’re just lazy or they don’t know what they’re doing?

Al: I would say they don’t know what they’re doing or there’s been a long bull market. The market’s at all time highs and maybe they’re concerned about investing.

Joe: If I’m looking at this, the portfolio doesn’t necessarily fit when I’m looking at someone’s portfolio in their 60s. If you look at someone’s portfolios in their 30s, they should look drastically different depending on their goals of the money. If it’s for retirement, a 30 year old has a lot more time for the money to grow if they’re retiring at a normal age. We’re going to get emails from like the fire people; Wait a minute, I’m retiring tomorrow.

Al: I think the next thing is 23%, is the average of everybody, their money in cash? The way you want to think about cash is for emergencies. Maybe if you’re a little older, money for distributions over the next year. What do you need for emergency funds? Usually, we recommend 3 to 6 months, maybe a year. Maybe 2 years if your income is really not very steady, but no more than that. You set that aside. Plus you may want to have cash if you want a down payment on a home, a few things like that. College expenses. The rest of your money, for the most part, should be invested in the market. Joe, what this is showing us is that a lot of people have a lot of their assets, liquid assets, in cash, which doesn’t really earn anything. In fact, we know over time it’s going to lose purchasing power.

Joe: Cash right now, you’re losing money safely if you have a lot of money invested in cash. You’re absolutely right, if you need the money in a couple of years, keep the money sitting in cash. We’re looking at more long term goals.
Here’s another interesting statistic that we saw from our friends at Personal Capital is that people in their 20s, 30s and 40s, their bond allocation still saves money. Now that looks pretty good, less than 5%. If I’m looking at 50s, 60s, 70s, they only have roughly 10% in fixed income. We’re out of balance here, just a little bit. Bonds help produce the income. They experience a higher expected rate of return than cash, but more people have cash than they do in bonds. So maybe they’re just confused on how their portfolios should look.

Al: We’ve talked to a lot of people that really don’t know what a bond is and how they work. The simplest way to think about it is that a bond is like a loan. In essence, you’re loaning your money to the government, you’re loaning your money to a company. That’s what a bond is. The company or the government pays you interest and eventually pays the loan back to you.
That’s the bond. Usually, there’s a term on a bond. What’s interesting, Joe, and I think some people know this is as interest rates fall, bond prices tend to go up and vice versa. We’re in a low interest rate market. People are concerned rates are going to go up and bonds are going to fall. So I don’t want to invest in bonds. That’s not necessarily true because the way that this works is that as long as your bonds are really long term, if they’re shorter term and mid-term, as interest rates rise, maybe the principal will temporarily go down. Your bond fund keeps replacing it with higher interest rate instruments where you get a higher rate of return. I remember Larry Swedroe, years ago, did an analysis; 30 years of rising and falling interest rates and people made money and bonds in either scenario.

Joe: This is your safety valve. When you need to take on risk. You look at that, your stock component, your bond component is your safety. Then if I’m looking here, look at this, this is interesting here, too. When we’re looking at the stock allocation of people’s portfolios. 85% in their 20s. 81, 82, 82, it’s almost identical across the board if you’re 20 or 70. Eighty, some odd percent of their money is in US stocks, while about 14%-ish is in international stocks 15 to 20%. It’s almost identical. This tells you that most people have a home bias. They understand U.S. companies, so they put most of their money in the US. However, if I’m looking at the global economy; yeah, the US is a big powerhouse; but you’re still missing out on really good global diversification with this small allocation towards really good international companies.

Al: What we’ve found over time is that the US market and the rest of the world does not always fall in sync with each other. Somewhat yes, but there have been long periods of time where the US has outperformed international and vice versa. If you have more of both, you have a little bit smoother ride. How much should you have? Everyone’s a little bit different, to me a better rule of thumb is maybe ⅓ international, ⅔ domestic. It could be more like 60% domestic, 40% international, something along those lines.

Joe: I think the reason for that is people just don’t understand, they say; Oh international stocks, I don’t want nothing to do with them. How many times can we hear that? Just educate yourself a little bit on different companies that are out there. Really good companies, maybe like BMW, heard of them? There’s a really good missed opportunity, I think for some people to really grow up through diversification. We’re at all time highs in the overall market. Now’s the time to really assess; Are you sitting appropriately for your goals? How much money do you have in stocks versus cash? Then with your stocks, how much do you have in the U.S. versus international? Make sure you are dialed in so you can accomplish your goals with the money that you’ve saved. Here’s a real high level hypothetical; for those of you in your thirties, this is not advice by the way, we’re suggesting or just chatting about probably 90% stocks. If I’m in my 30s for my retirement account, 90% stocks, 10% bonds cash. As I move into my 40s, it could be 80 to 100% still in stocks. When I hit my 50s, this is where we want to pull on the brakes a little bit. Then in your 60s and 70s. What we’re seeing is people in their 60s and 70s look like a portfolio in their 30s. We have people in their 30s that have a portfolio that looks like someone in their 60s or 70s. We kind of flip this out, get a mirror. Have your portfolio looked at to make sure that it’s lined up appropriately.

Al: You’re right. It’s important to say that these are rules of thumb. Everyone’s different. What it comes down to in retirement is how much cash flow do you need from your portfolio? Depending upon what you need, is going to dictate what the allocation should be. We know people in their 80s that are 100% stocks, and that’s just fine because it’s for their grandkids. They don’t need any cash flow from it. It just depends upon what your goals are.

Joe: That’s where taking a step back and doing the appropriate planning is so key. You can’t follow rules of thumb, you can’t read an article, you can’t read a blog, you can’t watch this TV show and say, Oh, I’m dialed, I got it in you. What you can do is go to our website at YourMoneyYourWealth.com. Click on that portfolio tracker and then that will give you the answers. I’m kidding, of course, but you can check it out. Go to YourMoneyYourWealth.com. Click on that portfolio tracker. We’re going to take a break. Shows called Your Money, Your Wealth®.

Joe: Welcome back to the show. Shows called Your Money, Your Wealth®. Joe Anderson CFP® and Big Al Clopine, CPA hanging out talking about does your portfolio fit? We looked at average balances of retirement accounts and then the appropriate asset allocation. How should the making of the portfolio look? It always boils down to your specific goals, but we can help you if you want to go to YourMoneyYourWealth.com. Click on that portfolio tracker to track your progress all the way through. Go to YourMoneyYourWealth.com. Click on the special offer this week and that’s our gift to you. Alan, let’s go to the bright idea.

Al: Don’t put municipal bonds in your retirement accounts, they’re tax exempt anyway, so you don’t get any extra retirement benefits. Joe, that seems like a bright idea, right?

Joe: Yeah, it is a bright idea. That’s the whole purpose of the bright idea. It’s not a question. It’s a statement.

Al: You don’t have to agree with it.

Joe: Some people might disagree with it because they’re like, Hey, if I can get a higher yield on a municipal bond, why not just put it in my retirement account? The issue is that some of you think, because municipal bonds will give you a tax free income, that if you put it in your retirement account that it will not be taxed on the distribution. That is absolutely false. Make sure that you have the right investments. If you want to select municipal bonds, by all means do. It probably doesn’t make sense because historically municipal bonds will give you a lower yield because they’re tax free. It’s a bright idea not to do it, Al.

Al: I would agree with you. Joe, let’s talk about what people should do in their 20s, 30s and so on. We’re going to start with 20 year olds, 20 to 30 year olds. What’s the most important thing? Start saving now. It’s very difficult. You just got out of college. You can hardly afford your rent payment. You want to buy that new car, you want to get that big screen TV, whatever it may be, but start saving now. Here’s a good goal is to work up to 15%, even if you start at 1%, 2%, 5%. You want to work up to 15 percent, even 20, if you can get there. The sooner you start saving, the better off you’re going to be in retirement.

Joe: It’s just now it’s reassessing. I don’t care what the averages say. It doesn’t matter. You have to look at your specific situation. And now just reassess; What do I need to do? Start right now. Start saving. Try to get to that 15 to 20%. Make sure that you have the right portfolio more towards growth versus safety.

Al: Also you tend to be in a lower income bracket when you’re first starting, in general, so you’ll want to favor the Roth accounts. Put your money into a Roth IRA, maybe using the Roth component of your 401K. You don’t get a tax deduction today, but all that money grows tax free.
So now you’ve had a little bit of time to save. Now it’s time to assess what you’ve got. Maybe you start with a portfolio checkup, see where you’re at, what’s your balance. As we said in the first segment we talked about a 40 year old should have three times their salary, the 50 year old five times. Do that math to see how you’re coming and if you’re behind, then you want to start saving a little bit more.

Joe: This is a really good way to get a quick checkup, a quick pulse. Am I on track? Look at your balance, look at your age and then just do some simple math. If you’re not on track, then you’ve got to take advantage of contribution limits. Take care of the matches. Take care of every savings opportunity that you possibly can just to get you caught up to some of these benchmarks.

Al: At age 50, we can save a little bit more. I know you’re still a youngster, but me, I can save more now. Anyway take advantage of those higher savings rates, create tax diversification. Here’s where you want to start thinking about it’s not just all your savings in a retirement account. Some might be in a Roth. Some might be outside of a retirement account. Take advantage of capital gains. Make sure you’re keeping growth in your portfolio. When you’re in your 40s and 50s, you’re still, in general, growing your portfolio so that you can retire in your 60s and 70s.

Joe: Then if we flip to 60s and 70s, it’s now, take another check up. Just keep assessing what we’re doing. If I’m in my 60s, I want eight times. I mean, that’s a big, aggressive goal that most people can’t get to. But at least, you know, there’s a timeframe. If you don’t want to go through in-depth planning, this is at least a good way just to check up. 70 year old, you’re going to want 10X. Now you’re broadening out your tax diversification, you’re transitioning potentially more into cash flow than in savings.

Al: This is where it becomes important to have that right asset allocation because you’re going to be taking money from the portfolio. It’s no longer 60. It’s no longer 80, 90, 100% in stocks. You want to have a lower amount so you can pull money out of your portfolio when you need it. The last thing you want to do is have your money in stocks, the market declines and then you have to take money out. At the same time, the market is low. It’s very hard to recover in that circumstance.

Joe: Let’s switch gears Al. Let’s go to ask the experts.

Al: Jonah from Oceanside asked, “We’ve been investing in stocks for two decades and we’ve done very well. My wife and I are in our 70s. Should we cash out now in case the market takes a major dip?” This would be a market timing type of question. Is that a good idea, Joe?

Joe: Jonah, a lot of people do this. I would say no. I would reassess your overall portfolio and make sure instead of saying, Hey, markets are at all time high. Make sure that you take a look. Do you have enough safety or fixed income in the portfolio to provide you the retirement income that you need for maybe 5 or 10 years. If you’re going all stocks and then, hey I’m in my 70s and let’s cash out and go into cash, well, you’re only 70. You have still a long retirement ahead of you, so you want to make sure that the portfolio is set up appropriately towards your goals. Is it a bad idea? Well, I don’t know, you’re preserving your capital, I guess. If you have a short life expectancy, then by all means.

Al: I think your point is right, which is we’re living into our 90s and so you still need to have growth. I’ll tell you something else, you could have made an argument to cash out in 2011, 2014, 2017. You can make an argument now. But the thing is, those that do miss out on market growth because the market tends to go up more years, then it goes down. You want to keep invested, but maybe you want to take the pedal off the gas a little bit, maybe have a little bit less in stocks, but don’t go all out.

Joe: You have to look at a glide path. If I’m retiring at age 70. The day before my 70th birthday, I don’t want to make major changes. You’ve got to slowly shift that portfolio to more of an income portfolio as you approach your retirement date. You know, 3 or 4 years ahead of time because the market can fall and drop at any moment. If you’re like, Oh, I was going to get more conservative in my portfolio, but that greed takes over and is like, Well, I just keep making money, I don’t know when to do it. Then fear kicks in like, Oh, now I’m going to sell everything and go into cash. You want to get rid of those types of emotions as you possibly can and have more of a balanced approach.
What did we learn today? Does your portfolio fit you? Are you on track with your savings? We looked at averages. Don’t worry about averages. You don’t want to keep up with the Joneses because they’re behind.

Keeping up with contributions. The sooner you start, the better off. You’re going to be looking at the right amount of cash, not cash reserves, but the cash sitting in your overall portfolio. Taking the right type of risks then reassess. Right now is a really good time to reassess. We’re almost coming into the new year again. Reassess, rebalance, get back on track. Thinking of getting back on track. Go to YourMoneyYourWealth.com. Click on our portfolio tracker to get you on track. We’re big on quote buying. I’m Joe Anderson. Thanks for watching! We’ll see you again next week.