Are You in the Retirement Redzone? How to Protect What You Have Saved

11.3.23: Audio automatically transcribed by Sonix

11.3.23: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer:
Any examples used are for illustrative purposes only, and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment, and is not a solicitation or recommendation of any investment strategy.

Producer:
Welcome to Money Matters with Mike, with your host, Mike Zaino. Get set for a full hour of financial information and economic news affecting your bottom line. Mike works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for, and he can help you too. So now let's start the show. Here's Mike Zaino.

Mike Zaino:
What's up, what's up, what's up? It's Mike Zaino coming to you from Fort Mill, South Carolina. Happy Saturday people. What a great time to be alive in these United States of America. Money Matters with Mike is a show designed to arm you with information and give you plenty of meat on the bone to chew on each and every week. And today we are absolutely bringing the heat again. On today's show, we're going to talk about the retirement red zone, explain exactly what that is, and teach you how to protect and grow your retirement savings as you near retirement. As always, I have the distinct honor and privilege of being joined by the one and only my co-host and producer extraordinaire, Mr. Matt McClure. Matthew, how are you doing today, sir?

Producer:
I'm doing all right, Mike. I'm kind of cold. It got cold this week, but it did. Otherwise I'm staying bundled up and doing okay. It's it's like it skipped fall and just went straight from summer to winter, you know?

Mike Zaino:
Yeah, well, hopefully it'll reverse its course by a few degrees. I don't mind the 60 degree, you know, afternoons, the 40 degree mornings. You don't know what. Especially in the southeastern United States, you got to dress for like three seasons every single day. Oh, yeah. Because there's typically a 30 or 40 degree temperature swing and but yeah, fall is definitely my favorite time of year for sure.

Producer:
Yours and mine both. And a busy time of the year. I know as well we're going to actually talk about that here in a moment. With a lot going on with Medicare. It's the annual enrollment period. Busy, busy time for folks to review their coverage and all that. So we'll talk about that coming up momentarily. And a lot of great stuff to get to. You know, you mentioned it at the at the top there, the retirement red zone. We'll also talk some about priorities and how your priorities have to change when you get into that retirement red zone, because it's not like, you know, you can't plan. Let's say if you if you want to retire at the age of 67, let's say if you if that's your plan, if that's your goal, okay, we'll let the age of 62, you can't plan the same way that you did at the age of 30, you know? Yeah.

Mike Zaino:
Absolutely true. That is for sure. Proper prior planning prevents pitiful, pitiful, poor performance, I should say. There we go.

Producer:
The old variation on the five P's. Well, folks, if you are intrigued by any of the things that we are about to talk about here on the show, we encourage you to find us. Wherever you subscribe to podcasts, go on Apple, Spotify, iHeart, audible, Amazon. You know anywhere you want to find a podcast. If you go there and you search for Money Matters with Mike, it will come up and that that is our guarantee to you or your money back, even though you didn't spend any money on it. So it's easy for us to issue that refund. But also you can go to our YouTube channel. We've got video highlights of the show there, new content uploaded each and every week. And don't hesitate to call Mike Zaino with your questions as well. 704 5601573 704 5601573. You can also go find him on the socials Money Matters with Mike on Facebook or just go to MoneyMattersWithMike.com. We like to keep it easy. It's everything as Money matters. With Mike, you just put a.com on the end and that is the website for the show. All right. So I teed this up just a second ago Mike. So let's get to this Medicare annual enrollment period. Wanted to remind our listeners about this to start off because it is super, super important.

Mike Zaino:
It absolutely is. So we are in the midst of the annual enrollment period, and that is going to go all the way through December the 7th. It will stop on December the 7th. And if you haven't changed anything, then you're going to be stuck with what you had. Okay. So by reevaluating your plan or plans each and every single year, you're going to likely find that you can save some money on some of your Medicare expenses. In fact, you know, a lot of savvy, savvy retirees, they actually perform a Medicare coverage check every single year, just in case they have the opportunity to save a little bit extra on their hard earned dollars, especially in retirement, because that's when we need to get them to go as. As we possibly can. So unless you're just absolutely loaded and you like paying more money, then you should probably get with me and do a Medicare coverage check just to make sure you're paying the least amount that you need to be paying.

Producer:
You might plan on winning the lottery between now and December 7th, but the odds of that happening are not very good. So yeah, contact Mike Zaino and get a free consultation of your entire financial picture. But you can also get steered in the right direction as far as Medicare goes. And all of that coverage and all those different options. Once again, MoneyMattersWithMike.com is the website. And also, folks, you know, anytime there is any sort of big event that happens or a big, you know, a busy time of the year, like we're not only in the annual enrollment period for Medicare, we're getting into the holiday season now there you know, are there is, of course, the tragedy that's going on over in Israel and all of that, anytime, any sort of big event in the news happens, people will come out of the woodwork and they will want to try and take advantage of that situation for their own financial gain. And I hate it. And so what we want to do, and I know Mike does as well, what we want to do is to give you just a couple of quick tips here, folks, to be able to avoid scams during this year's Medicare AEP. What are the those couple of tips here, Mike, for the listeners.

Mike Zaino:
So number one, you guys need to be aware of unsolicited contacts. So if you're getting a phone call from somebody you don't know, an email from somebody that you don't know, somebody knocking on your door going literally door to door, and any of those are offering Medicare related services. You should be on guard. All right. Not saying that all of them are scams, but, you know, especially during this year, you know, during this time of year and especially the elderly segment of the population not calling anybody 65 old, okay. But the senior population, they fall victim to more scams than any other age group. So, you know, beyond, um, being aware of unsolicited contacts, you have to make sure that you are keeping your Medicare card protected. Keep it secure. Always avoid sharing your Medicare number. I mean, years ago, they used to have your Social Security numbers on them, and now they just have a Medicare number. But you need to keep that Medicare number as guarded as you would your own Social Security number. So just again, we're coming into that time of season where a lot of folks, you know, just want to serve themselves and not serve others. Right. And there is a special place in hell for those folks. But be on guard coming, you know, during this as well as the holiday season that's upcoming.

Producer:
Yeah, absolutely. And it's a busy, busy time of the year coming up here. And so don't be too busy and let those kind of things slip by. You just be careful. Use caution. And if something looks off, if it looks a little odd to you, chances are it probably is. Just just do your homework there. Right? So we got plenty to talk about here in the show. Of course, our chat about the retirement red zone, what it is and kind of what it's all about, how you can change your priorities if you are in that time period of your life. Also, target date funds. That's going to be a big topic of conversation, you know, because retirement, it's not a one size fits all kind of a thing. And so we're going to talk about target date funds. We're going to talk about why they have really been underperforming here and what to do if those are part of your investment portfolio. We'll also talk about the retirement crisis. More people than ever worried about outliving their money these days and the retirement of yesterday. Boy, it's not the same as the retirement of today. We'll compare and contrast the two and tell you why you can't really prepare for retirement the same way your grandparents did. So that and much more as we go along here. First of all though, let's let's get into it, shall we? With our quote of the week.

Producer:
And now wholesome financial wisdom, it's time for the quote of the week.

Producer:
And this week's quote comes from Stephen Covey, who died back in 2012. But he was a renowned American author, educator, motivational speaker known for his influential work in the field of personal development and leadership. So he is a great guy to talk, to, talk to, to turn to for an inspirational quote for this week. And here it is. The key is not prioritizing what's on your schedule, but to schedule your priorities. Oh, I absolutely love, love that. And it really does bring some perspective to the way that you prioritize your life.

Mike Zaino:
It does. And you know, he was, I guess, most famous for his book, the. The seven Habits of Highly Effective People. And then he followed it up with the Eighth habit. And I have both of those books. I've read them countless times, you know, but that's kind of going to lead into today's meat on the bone, as far as you know. His quote, because I really do believe that this quote especially emphasizes the importance of organizing your life activities around what truly matters to you, rather than merely following a preexisting schedule without considering your most important goals and values.

Producer:
Hungry for something to chew on? Here's some meat on the bone.

Mike Zaino:
In the context of retire planning, whether it's in your 40s, your 50s, your 60s and beyond, the quote can be quite insightful, right? If you are in your 40s, you're likely coming to the peak of your career. You're also coming to the peak of your family responsibilities, and this is the time to map out your priorities when it comes to saving for retirement, rather than just allowing your salary to be spent on daily expenses and those non-essential items, you should make retirement savings an absolute priority. Okay, if you don't already have one offered through your employer, this might involve setting up a retirement account like an IRA, contributing to it regularly, and even consulting with a financial professional to ensure that you are on track to meet your retirement goals right by the time you reach your 50s, hopefully your kids are going to be a little bit more independent and you may have paid off a significant amount of debt. So this is a crucial time to actually reassess your retirement priorities, and you might find that you need to increase your retirement savings and consider the age at which you plan to retire. It's also a great time. Okay, a great time, folks, to start thinking about health care and long term care expenses during retirement. In your 60s, you're often in your final stretch right before retirement, and at this stage, this quote is particularly relevant. Okay, you need to schedule your retirement priorities, which could mean deciding when you want to retire, calculating your retirement income needs, and then fine tuning your investments for both stability as well as income generation.

Mike Zaino:
And you might also want to consider how you'll spend your time in retirement, whether it's pursuing hobbies, whether it's traveling, or whether it's spending more time with family. In fact, I am going to cancel all of our listeners to not retire until you have a plan specifically on how you are going to spend your time. Because from my experience, what I see in all of the thousands of people that I have counseled over my career is that when people retire the first couple of months, it's like a vacation, and then after that they start kind of twiddling their thumbs. They get a little bit bored. Okay, so even beyond retirement, guess what, folks? The quote is still applicable. Once you have retired, it is essential to design your priorities to make the most of your priority years. And that could include managing your finances wisely to ensure that your savings actually do last, maintaining your health through regular exercise and eating a balanced diet, and then prioritizing activities and relationships that bring you joy and bring you fulfillment. So the essence of this quote is to remind you that retirement planning should be a proactive and intentional process. It is not enough to simply go through the motions of life and hope for the best. When it comes to retirement, you actually need to take control and make your financial security, your financial well-being, and your personal fulfillment a priority as you move throughout life in your 40s, your 50s, your 60s and beyond. Matt, what do you think about that?

Producer:
Yeah, I love that. You know, I mean, you can tell a lot about a person based on and what's important to a person based on the things that they do each and every day, the things that they prioritize in their lives. And what is, you know, what they make important are going to be those things that they do first and foremost. And so that really does, you know, really help a lot of, you know, put a lot of perspective on it, rather, because unless you literally take the time and the effort to and make it a point to prioritize your retirement, then, you know, I'm assuming it's not that important to you, but it's got to be because you're not going to be working. You're not going to have that income from your job. So it's got to come from somewhere. And so. You need to prioritize making that a necessity, a priority in your life.

Mike Zaino:
Absolutely. In fact, I've said it time and time again. I'll say it again. You show me your bank account statements, you show me your credit card statements, and I'll show you where your priorities lie. Okay. If you show me your 401 K or your IRA statement, and I don't see a whole lot going in there. Case in point, right? Most people are barely doing enough to to match what their employer is doing, and they're not doing any, you know, any bit beyond. And so a lot of employers will match somewhere between 3 to 5%. Well, I've got a wake up call for folks if that is all you are saving for your retirement and investing in your retirement accounts, it ain't gonna last. It's not enough. Not with inflation the way it's going. Not with, you know, just life in general. Health care costs that are rising. You definitely need to be saving more and making it a priority. And the earlier you start doing it, okay, the longer amount of time you have for your friend, compound interest, not your enemy compound interest, but your friend compound interest to work in your favor and on your behalf.

Producer:
Yeah, and it absolutely can. And give yourself, as you just said, Mike, give yourself time for that to really be beneficial to you because you'll you will be shocked. Surprised in a very good way when you, you know, you look at your accounts later on. If compound interest has been your friend and you have had that long time horizon to let that let those accounts and vehicles, you know, for your retirement savings grow, that compound interest will really make a huge, huge difference in your life later on down the road.

Mike Zaino:
It will. And we want your future self to actually thank you and not kick you for what could have been. So just keep that in mind and make sure that you are making it a priority to schedule out where you plan to be in your 40s, 50s and 60s and beyond.

Producer:
And if you think that that sounds like a daunting task, folks, or if you, you know, if it's just sounds like it's too much for you, your could be very much right because you don't need to go it alone in your retirement planning. I know that that is true for me. I know that it's true for probably 99.999% of the people out there. Don't go it alone, don't do a DIY retirement, and certainly don't do a retirement based on hope. Because as you alluded to a minute ago, Mike Hope is not a strategy. So you need help and get it. And don't be afraid to ask for it. Just go to Money Matters with Mic.com. That's money matters with Mic.com where you can give them a call 70456015737045601573, and it's especially true if you are in what we call the retirement red zone. You know, we've been speaking a lot about priorities. And the retirement red zone is a specific period of time that you really need to have different priorities maybe than you've had before. It's a it's a time of change. It's a time of intense preparation if you are just before retirement. So it's it's really super important that you don't just have a stay the course mentality during that time, right? Mike?

Mike Zaino:
That is true. And for those of you who don't know what we're talking about when we talk about the retirement red zone, I want you to think of football just for a second. If you know we're in football season right now, it's right in the middle of the season toward the end of the season for college football. But you know, when when a team gets into the red zone, that means they're about to score. That means they're on the 20 yard line or beyond close. And you know, to get a touchdown or to be able to kick a field goal. Well, when it comes to retirement planning, individuals who are within the five years immediately before retirement or have just crossed over that line and are on the five years immediately after retirement, those people are said to be inside of that retirement red zone, and what we want folks to do is be able to score a touchdown versus a field goal. Why? Because there's more points when you score a touchdown. So if you come close or you fall within this range, you have a special need, a very special need to protect your hard earned retirement savings. As you shift your mindset from the accumulation phase where you have grown your nest egg, to the decumulation phase where you start to draw down on your nest egg. So any portfolio losses that occur within that ten year time horizon, they're going to have a significant negative impact on your future lifestyle in retirement, because you simply stand to lose much more than you ever did during your working years. And why is that? Well, when you. Retire. Guess what you can no longer do. You can no longer contribute to an employer sponsored plan, like a 401 K or a 403 B or a tsp.

Mike Zaino:
If you're a federal employee or a 457 or a Sep. If you're self-employed, you can no longer contribute to an IRA because you have to have earned income in order to qualify to do that. So again, you are shifting your mindset from building the nest egg in the accumulation phase to the drawdown or the accumulation phase. So for an example, if we were to have an extremely poor year in the markets and those markets returned a negative return of somewhere, whether it's 20%, 30%, 40% is a loss that is going to have a much larger effect. If you are in the retirement red zone, then if that loss had happened, you know, ten, 15, 20, 30 years before you retire, why is that? Well, if it happened 30 years ago, you got 30 more years to catch up. And so protection, once you are about to retire or have just retired, protection becomes paramount. And why is that again? Well, when you lose money in retirement and you are drawing down on retirement, your money won't ever last. And that is called sequence of returns risk. And so if you lose 20%, you have to gain 25% just to get back to. Even if you lose 30%, you have to gain 43% just to get back to even. And God forbid you lose 40%. Guess what, folks? You got to gain 67% just to get back to even. And those types of returns just are unheard of. They don't happen, and it takes a long time for you to make, whether it's 25 to 40 3 to 67%. Right, Matt. Yeah, I.

Producer:
Mean, that's going to be a very speaking of use, the term daunting task, a few minutes ago. That is definitely something that qualifies, to say the least, because, you know, you don't get those types of returns really, unless you are, you know, someone who wins the lottery. But that's going to be kind of the only the only way that you're going to get anywhere close to it. But yeah, you're absolutely right where, you know, you don't have if you're in that retirement red zone sequence of returns risk that you just spoke about is a very real thing. You have a shorter, as we refer to it, a shorter time horizon. So you don't have that time to make up for any of those losses. So yeah, 100%. You've got to have protection inside that retirement plan and have it built in. And that really is something that I think people will, will sort of think about and, you know, want to have maybe if they're someone who is just kind of played around in the stock market, maybe they've they've got an app on their phone, you know, and they've bought a couple of shares of this or that or the other. And, and that's just been their, you know, way that they have sort of invested. And then they've let their accounts and their 401 K or whatever just kind of play around. They thought, okay, well now, you know, things have been so volatile. I need some protection but don't know how to do it. Well, I know a guy who does. He's very good at it, as a matter of fact. And his name is Mike Zaino. You can reach out to him at Money Matters with Mic.com. Or you can call him (704) 560-1573. Yeah, there needs to be a flashing neon sign. It needs to be like. Like eat at Joe's. You know, the old sign with the big arrow pointing right to it? It needs to be like, you know.

Mike Zaino:
Blake Shelton on The Voice.

Producer:
Yeah, there you go. Right there it is. Just pointing right at yourself. Or you be like, what was it Reba mcEntire did not long ago? She brought. Oh, she brought out tater tots for her people. And I'm like, if you bring me tater tots, Mike, I'm working with you. That's all I got to say, that.

Mike Zaino:
That that might swing my vote as well.

Producer:
I'm always up for some potatoes, let me tell you. All right. So that is a look at the retirement red zone. Now, no matter what stage of life you are in, you might have heard of something called target date funds. And it could be something that's part of your portfolio. It also could be if you've just heard about it. And it's not part of your portfolio and you don't really you're not all that familiar with it. You could say, okay, well, that sounds like it's kind of a wonky sort of a thing that I don't know that I would necessarily want to fool with. But if you do have those in your portfolio, they could be very underperforming. Talk about this for a minute, Mike. What are target date funds and why have they been a lot of them underperforming?

Mike Zaino:
Well, I mean, ever since Congress enacted the IRS code 401 K in 1978. And yes, that is an IRS code. And that's why your four. 401 is named after the IRS code. Pensions have been offered less and less and less in the American workforce that use that a pension was called a defined benefit plan. Instead, they have opted for a defined contribution plan where the employee is contributing as well as maybe a portion is contributed by the employer. So the implementation of 401 plans marked a major shift in the responsibility of the retirement planning from the employer to the employee. So prior to this, in defined benefit plans, they had financial people that were managing the pension, okay, hedge fund managers that were managing the pension. And this is what those folks did each and every single day. They were experts at doing that. Well, contradict that or compare that with most employees have having little to no experience in matters of investing. Many gravitate toward those target date funds, which stick out among a multitude of investment options within the average Americans work based retirement plans. But don't be fooled by thinking that these funds are right for you. Just because you are planning to retire at a certain age. Okay, number one, a lot of folks make that mistake of thinking, hey, I should choose the date of when I'm going to retire. In fact, that's wrong. Okay? It should be the date where you think you're going to need the money. And most folks may not need the money for somewhere between 5 to 10 years after they retire. But the biggest reason that I tell people to beware of these target date funds is that every situation is different from everyone else's.

Mike Zaino:
Your situation is not the same as your next door neighbors, is not the same as your coworkers, and don't care if you're both planning on retiring in 2025 or 20 30 or 2035, or whatever that target date is set on. Your situations are different and so you should plan accordingly and set. So if we look at the last five years of performance, okay, the last five years from a major issuer of target date funds, we're talking about Vanguard, their target retirement 2025, their date of 2025. That fund had a loss of 6.1% in the last five years. If we look at their Vanguard target retirement date of 2030, that fund lost 2.5% in the last five years, and the 2035 fund lost 1.8% in the last five years. It's only when you go farther out to years 2040, 2045 and 2050 that you start to see a gain. Well, guess what, folks? The reason for the gain is because they're more heavily invested in the stock market. Okay? In comparison, the S&P 500 has increased 52.4% over the last five years. So when you look at those statistics, don't be fooled into thinking that a target date fund is for you rather than doing that, you know, and a lot of people don't know that they can actually do this. You can make an appointment with a financial professional. You can take in your plan administrators options. So whatever work for workplace plan that you have, you're going to get a book that shows all of your options. You could take that in and have a professional, you know, put together a mix that might better suit your individual situation.

Producer:
Yeah. Which is the goal of any retirement plan, I would say, is to have it be targeted to you, not targeted to a specific date. Right. Because, yeah, it's like, yeah, exactly. Optimized to your particular financial situation and your particular goals and that really, you know, we've got a list here of several things that are concerns about the target date funds here. And one of those, as a matter of fact, number one on our list, the top concern is that sort of lack of customization. It wants to be one size fits all. But that's not how life is.

Mike Zaino:
No mean that the one size fits all means that they likely are not going to align perfectly with an individual's specific financial goals, with their specific risk tolerance or appetite for risk or their needs. Right. They're lumping everybody who might plan to retire in a specific year into the same asset allocation.

Producer:
Yeah, and that's not right. Because, you know, you might have a friend who's the same age but your financial situation completely different than theirs. So. Needs to be customized. Another thing is fees. We talk about fees a lot because you're likely paying fees that you don't even know about and don't know how how much you're paying in fees, really. And this is another one of those situations where the fees can bite you, where it's not going to be pleasant to be bitten.

Mike Zaino:
Right. So 401 K plan administrators, they love target date funds. Why? Because they're lumping everybody in to that one target date. And because of that they have higher management fees, which is counterintuitive. You think they'd have lower management fees. And those higher fees can erode your returns over time, especially for long term investors. So fees are definitely something to be aware of when we're talking about, you know, those those target date funds.

Producer:
Yeah. It's not like they're you know going to the you know they're buying in bulk and passing the savings along to you or something like that. Like you would think it's kind of the exact opposite effect when they do that. Some hidden costs there. You know, a lot of target date funds could invest in other funds so that that means you're paying fees on top of your fees. Yeah.

Mike Zaino:
It's like layers of an onion. Right. And that can make it very, very, very challenging to actually understand the total cost of investing in a target date fund.

Producer:
And right along with that first point, the lack of customization comes the risk tolerance that is part of that fund or the that that may not match yours. You know, you could have a completely different risk tolerance than what that fund reflects.

Mike Zaino:
It can. And so you can have an overly aggressive portfolio or an overly conservative portfolio because you went with what everybody else did. And that kind of reminds me of, you know, my mom asking me as a kid, you know, you know, if little Jimmy jumped off the bridge, are you going to jump off the bridge too? When I got in trouble. Right. So, I mean, just because everybody else is in a target date fund does not necessarily mean it's right for you and your individual situation.

Producer:
Well, my friends did it. Well, that doesn't mean that you should, too. Yeah, I've been there before myself. Okay. So that's the risk tolerance portion. Now also limited investment control mean you don't have a lot of control over that particular fund at all.

Mike Zaino:
Yeah. You really don't. You have very limited control over what's known as the asset allocation. And that's typically set by the fund manager. So typically the way a target date fund works is that the closer you get to retirement, the less risk that you should have inside of that target date fund. But that lack of control can be extremely frustrating for those who desire a more hands on approach in managing their own investments for retirement.

Producer:
Yeah. Absolutely true. And they could be. You know, we've been talking about a lot of risk and the different factors that go hand in hand with risk. They could be potentially overly conservative in these target date funds as well.

Mike Zaino:
They can because as that target date approaches, what happens? The funds tend to become more conservative. And that might not be ideal for retirees who need to maintain or even grow their savings, especially if longevity is is a concern and all of your people tend to be like my wife's people and live well into their 90s, you got to plan for a much longer retirement at that point.

Producer:
Yeah. And especially if, you know, things like inflation continue to be a thing. You've got to keep up with inflation in your retirement portfolio.

Mike Zaino:
Right. So I do a lot of work with federal employees and they have their 401 K is called a thrift savings plan. And all of their target date funds are called the life cycle funds. They actually rebalance every 90 days. Okay. And so target date funds might rebalance and they might adjust their asset allocations at specific intervals like every 90 days. And that can just expose investors to market timing risks. If those adjustments don't actually align with what is going on in the market, they could sell low instead of buying low and selling high, right? So you got to be really, really, really wary of how much of your portfolio is in a target date fund. Yeah.

Producer:
And then also that kind of goes hand in hand with this last point about, you know, the concerns over target date funds, unpredictable returns.

Mike Zaino:
Right. So the performance of those target date funds can vary widely. And that can depend on the fund manager's decisions about the underlying assets inside of that target date funds. And some funds may even underperform. Their benchmarks, whether that benchmark is the S&P. For an example, I just I just rattled off right the last several years of of returns in comparison to the S&P 500 index.

Producer:
Yeah. And you saw how much more of a gain the S&P has seen over those years, right. Compared to those target date funds. It's a little bit ridiculous actually. It's a lot ridiculous.

Mike Zaino:
It is -1.82 -6.1 versus 52.4%. Which would you rather have Matt. I mean come on people, wake up.

Producer:
It doesn't take a rocket scientist to say, oh, I'd rather have the 50 plus percent gain than the, you know, single digit gain there. It's or even single digit loss there that a lot of those funds have seen over the last several years. So, you know, I mean, here's the bottom line, folks. If you are much more interested in that growth, that is. Well, that's not negative growth like a lot of those target date funds that Mike mentioned a few minutes ago. But if you are interested in protection and growth at the same time, I would encourage you to reach out to Mike Zaino get a free consultation. And when we say free, there is no cost. There is no obligation to continue working with Mike. It really is just something where you take a little bit of your time, and it could make a lot of a difference for you in your life and in your retirement. Go to Money Matters with Mic.com MoneyMattersWithMike.com or call 704 5601573. All right. So we're going to talk about something here Mike that I you know sometimes I, I hesitate there's certain words that I hesitate to use just because I don't want to freak people out. And that just I guess that comes from being in broadcasting for years. And it's like, you know, don't don't hype up something too much if it doesn't need to be hyped up and cause mass panic and all that. Right? So but I'm going to use this word because it applies here in this particular situation. It is the retirement crisis. And that crisis really is. And I say that it's a crisis because if you find yourself when you have, say, the free consultation, something like that, if you find yourself in that situation, like your future right now, unless you change things, it's almost like Ebenezer Scrooge. Unless you change things, you're going to end up like this. Unless you change things, you're going to end up with no money after a certain age. That is a crisis situation for you. And it's also the biggest fear of retirees as well, is running out of money in retirement.

Mike Zaino:
It is. And so as generations of Americans figure out who and what to blame for a faltering US economy, millions of Pre-retirees are facing dire financial challenges of their own. Okay, the United States is about to reach what is known as peak 65 in 2024. So just in a couple of months when the calendar turns. And that's because more Americans will reach age 65 in the same year than ever before. And guess what? Sadly, a majority of them are not fully prepared for their retirement because in addition to the Social Security crisis. And we will use that word again here, which could see benefits slashed by the as soon as 2033. So in nine years, in two months or even earlier, if budget stability is not achieved, older Americans today face several other obstacles in the way of a comfortable retirement. So baby boomers, right? The largest generation, they represent the first retiring generation where guess what, more than half of them do not have a pension to provide a portion of their retirement income. And that makes them the first generation where the majority has to rely on their own savings, their own financial efforts in order to prepare for retirement. And additionally, more than 10,000 people each and every single day are turning age 65 this year. So by 2024, that number's going to rise to 12,000 people every single day that are going to turn age 65.

Producer:
Matt, you'll always look at the numbers that we talk about, the baby boomer generation being just huge. And it is. But you know, really and think for the past few years it's been like, okay, 10,000 has been that number as you say, but it's going up to 12,000. It's only getting more and it's only going to be more of a problem for. For people who don't have that pension. And as you say, it's a majority of this generation. You know, that is really an eye opener to me. And I'm sure to people who are of that generation as well, like my mom, for example, she is of that particular generation. And, you know, I mean, she did she retired with no pension. My dad retired with with retirement savings, but not really with any sort of pension or anything like that. It was Social Security, it was some payments from the VA and it was some other things. But, you know, they were able to to piece together a fairly decent retirement, but at the same time they could have prepared so much better had they known what to do.

Mike Zaino:
Yeah, there's no doubt. In fact, my mom all right, my mom doesn't have a pension either. She's in her mid 70s and she's still working, partly because she likes to be mentally and socially engaged. And it puts a little bit of extra jingle in her pocket. But, you know, there's going to come a time where she's not going to be able to work. In fact, there was a new study from the Alliance for Lifetime Income, which is a nonprofit consumer organization that devotes themselves to educating Americans on retirement savings. Hm. I wonder where that concept is. Maybe it Money Matters with Mike. Anyway, these folks found out that 93% of consumers who diversified their portfolio with an annuity in 2022 were satisfied with the choice to establish what is known as a personal pension. So if you would like to see how a personal pension could fit into your retirement plan, pick up the phone. Give me a call (704) 560-1573. Email me Mike at MoneyMattersWithMike.com. Go to the website MoneyMattersWithMike.com. Contact us on the contact page okay. Just learn more. Number one educate yourself okay. And then schedule an appointment. Because what do we do. We help our listeners and our clients compare personal pension options so that they don't have to spend their retirement worrying about what's happening with the volatile stock market. Our number one goal is to help clients make informed decisions, financial decisions that leave them and their money safe and secure.

Producer:
That really is what it is all about. And you know what? As I like to say sometimes where the rubber meets the road, they say, so that is it. Go to MoneyMattersWithMike.com once again, or any of the other contact methods might just mentioned, and you can get yourself set up with that free consultation. And before the end of the show, we will of course, kind of go through a little bit of that process and what it is all about and what it's like. Okay, so, you know, we have talked a lot actually, about the retirement crisis. Just just now we talked about target date funds. And in that conversation, the kind of a theme if you want to string a theme through it has been that things are changing. Things are changing all the time. They are changing every day. And certainly things have changed since our grandparents were retiring or planning for retirement. So the bottom line here is that there are several reasons, and we'll run through several here in this next segment about why you cannot prepare for retirement the same way that your parents or your grandparents did. You just can't. And, you know, it's you know, there's several reasons here, but one of the one of the main ones to my mind, Mike, before we kind of go, go down this list, is that a lot of times that know products and, and, you know, other retirement vehicles like, say annuities, they change significantly over time. I mean, a lot of times when you hear people say badmouthing things like annuities, they're talking about those annuities that may be their parents or grandparents had, and they weren't all that great.

Mike Zaino:
No. They sucked. I mean, there's no other way to put it. In fact, you you would trade your money to an insurance company. They would charge you a fee to return your money to you. And then when you passed away, they kept the rest of your money. And if that doesn't suck, I don't know what does. Right. But old school annuities, like the ones that your parents and grandparents had, are not the type. The type, rather that are available in today's marketplace and financial arena. Yeah.

Producer:
Definitely not. And another thing, of course, that has changed. The first thing on our official list here is the changing retirement age. Yeah, that's definitely something that's changed over the years.

Mike Zaino:
Well, you know, we say the one thing constant is change, okay. And it used to be that people could retire at 65. And then it was 66. And then it was 66 and two, four, six, 8 or 10 months and 67. In fact, in the past, many retirees expected to stop working at a fixed age. Right. Well. Nowadays, retirement age is much more flexible, with some people working longer and while others may retire much earlier. So the retirement age, they could change the rules on us.

Producer:
Yeah, they absolutely could. And they have. And so if past is prologue it's going to change again. And kind of going hand in hand with that longer life expectancy. I mean one of the reasons why, you know, if you want to look at a non-financial reason for the retirement age, getting later and later, right, is the reason people are just living longer.

Mike Zaino:
Yeah, that longer life expectancy means that retirement savings has to last even longer. Okay. And that increases the need for more significant savings, more predictable investment strategies. And in fact, you know, we're going to get into this. But, you know, along with the changing retirement age and we're going to talk about Social Security. You know, when Social Security came around, you were supposed to have been dead for four years before you could even, you know, collect it. And people didn't collect it for very long because the life expectancy was 58. The average life expectancy. And now we've got people living into well into their 80s, well into their 90s, crossing over, becoming centenarians. And so because of that, you need your money to last as long as you do.

Producer:
You absolutely do, no matter how long you last. You want your money to last that long as well. And then, of course, as we mentioned before, big decline in the number of pensions out there offered by employers.

Mike Zaino:
Yeah, there are very, very, very few pensions being offered by major corporations. In fact, you know, unless you're working for a government state or, you know, federal, I don't know of many at all that that offer pensions. Well, in the past defined bench and, you know, pension plans or defined benefit plans, I should say were much more common. And they provided retirees with an additional guaranteed income stream in retirement. Well, because those plans are no longer as prevalent, that shifts the responsibility for retirement savings onto the individual. And most individuals are very with money if we just want to boil it down. But guess what? That's okay. I'm not very good with a drill and a pick, but that's why I go to a dentist when I have a toothache or need a cavity or a cap. Right? I'm going to go to the professional who understands this stuff. Yeah.

Producer:
The last time I did my own dental work was, I think, I don't know how old I was, but I was a kid and I tied a string around my tooth and slammed the door, you know, it was. Did you actually do that? I tried it, I had one tooth. I remember having one tooth as a kid that just would not come out. It was so loose but would not let go. And I tried it. It's still it still didn't work. And then literally one day I was sitting there, I was eating, I was eating a hamburger, I think after school one day and it just fell right out. I have no idea why it wanted to hang on for so long.

Mike Zaino:
I think I had one come out with corn on the cob.

Producer:
Yeah, there you go. You're like, wait a minute. Why? Well, you see this one up a few minutes ago, Mike, another concern here about, you know, reasons why people can't plan for retirement the same way that previous generations did. Those challenges with Social Security. And, you know, they go beyond just the fact that people are living longer. Although that, of course, is a great point, because a huge problem with Social Security is it was never set up for people to live as long as they do now, as you as you mentioned.

Mike Zaino:
Right? Because, I mean, those concerns about the program's long term sustainability have actually increased. Okay. The Social Security Administration has stated that the Social Security Board of Trustees now projects program costs to rise by the year 2033, so that taxes will only be enough to pay for about 75% of those scheduled benefits. And like I said, if nothing is done about the Social Security crisis, then that could be even sooner. So in my opinion, and this is just my opinion, the easiest way to do anything is to do what they've already done right. History is a good indicator of what might happen because it tends to repeat itself well. In the past, they've changed the retirement age, the full retirement age. They're actually talking about changing the initial retirement age, of being eligible to draw Social Security and moving it from age 62 all the way up to age 70, just to be able to claim Social Security and then obviously higher to wait for your full retirement age.

Producer:
Wow, what a huge change that would be. And just really a huge overhaul of that entire Social Security program. Health care costs kind of going hand in hand with Social Security. We talked about Medicare at the beginning of the show as well. Health care costs are on the rise.

Mike Zaino:
Yeah. And why is that? Because, well, increased life expectancies mean that you're going to get sick for a longer period, you know, or you're going to get sick guess more times over the course of your life because you're living longer, right? It's just the law of. Ridges at that point in time, and can add to the fact that the costs to treat people have become significantly higher, which is a huge financial concern to those who are already in retirement.

Producer:
It's like you're paying more per illness or treatment or whatever, and that's going to increase over time. And if you live longer, then you will have to pay more each time that you go for a longer period of time. It's just it's just a mess, basically is what we're saying. So you got a plan. You've got to plan for it. That's the bottom line that goes right hand in hand with this one. Inflation overall. And we have seen that in a big way these past couple of years.

Mike Zaino:
We definitely have. And that's why we used to call it the silent tax because people didn't really feel it when it was around 3%. People have felt it when it jumped up to 9.1% last summer. They're feeling it when it's in the 5% this year. And that's that's the inflation number that the government would have us believe. But as we spoke on a couple shows just in the past couple of weeks, the real inflation number is much, much, much higher. And what that is doing is eroding the purchasing power of your money over time, making it necessary to save even more and make sure that you're investing wisely in order to combat the effects on your retirement savings. Okay, because what you used to do and save during a 3% inflationary period is not going to be the same as what you should do in a 5%, a 7%, or God forbid we ever get back up into the nines again.

Producer:
It is not any longer the silent tax. It is like the standard up, jumping up and down, yelling and screaming, waving arms tax. It seems like these days. So globalization and economic uncertainty, you know, you think about, oh, something that happens half a world away that's not ever going to affect me. But we're all so much more connected these days. And that includes global the global economy and our nation's economy really being more interwoven with the economies of countries across the globe.

Mike Zaino:
So think for a second, I don't care if it happens locally, if it happens regionally, if it happens nationally or internationally. How much of that folks do you guys have control over? The answer is zero. None. None of it. Okay. And in a more globalized economy, economic and market conditions, they are influenced by events all around the world, which can lead to more economic uncertainty, making it that much more challenging to predict investment returns.

Producer:
Changing employment landscape as well. And a couple of different reasons for this. Just people's, you know, habits have changed over the years, even pre-COVID pandemic. But the pandemic itself changed the employment landscape quite a bit as well.

Mike Zaino:
It did. So I don't care if you're in the gig economy or if you are now working from home, right, you have much more increased job mobility and those two by themselves have changed the nature of work. So job stability and employer provided benefits might not be as reliable, which requires individuals to be much more proactive on their own behalf in their retirement planning. Absolutely.

Producer:
And, you know, and one more thing here on this that I wanted to highlight before we kind of start wrapping things up anyway, is that for years, for generations, the old 60 over 40 portfolio, that was where it was at when it came to retirement planning. You want 60% stocks, 40% bonds. That was great. And for a while it rang true. It really did. It really did work for most people, kind of as a general rule and guideline, but no more. It just had its worst year in generations. Yeah.

Mike Zaino:
Matt. So even the tried and true 60 over 40 portfolio that lost 17% last year, which was its worst performance since at least 1937, according to the Leuthold group analysis. And here's the funny thing even with a 14% gain in the S&P helping that strategy recover in 2023, both stocks and bonds have actually moved in tandem more over the past three years than any other time since back in 1997.

Producer:
And that is not good news for the 60 over 40 portfolio, because the whole idea was to have, you know, the 60% stocks, 40% bonds and those that would move completely opposite of each other. There was a seesaw effect to it. The the inverse correlation where one would go up, the other would go down, and vice versa, offering some protection against volatility. Well, that is not the case. Or at least it wasn't in 2022. And so what we would like to advocate is something called bond replacement. Replacing bonds with a product like a fixed indexed annuity, for example, which we talk about a lot, where you can eliminate a lot of that market risk and you can get good growth. Mike, if someone's interested in that, they might want to call get the free consultation. That's what I would encourage folks to do. What is that process like when someone gives you a call or goes to the website at MoneyMattersWithMike.com? What is the initial process like to get started on that road and explore something like bond replacement to really make a big improvement in your retirement plan?

Mike Zaino:
Yeah. So I mean, the biggest thing is for you to take action and whether that action is picking up the phone, sending me an email or reaching out on the contact us page on the website, it's just we want to have a discovery phone call, right? A 15 minute phone call where I'm going to get to learn a little bit about you and your current situation. You will get to learn about me and what I bring to the table, and how I can help you. And then if we decide we want to, you know, sit down together, that's how we'll do it. We'll sit down together. And whether that's in my office, whether that's on a virtual call where you're in your home and I'm in my office, or if you want to meet me at a Starbucks, like, it doesn't matter. Whatever you feel most comfortable with. But we're going to take a deep dive into your current financial situation. We're going to try to figure out, you know, any places where you might be lacking. If I see anywhere for improvement, what I'm going to do is I'm going to make some suggestions. And whether or not you take me up on those suggestions is absolutely up to you. But if your bond portion of your portfolio has been hemorrhaging, especially last year, we can help you delete the fees on that bond portion of your portfolio, which are, you know, often makes up between 40 to 70% of a pre-retirees portfolio or a retiree's portfolio. As Matt mentioned, we can help you completely eliminate both market risk as well as interest rate risk, and we can help you diversify your portfolio while still generating the guaranteed lifetime income that you need to live on in retirement. So again, you have to take the first step. You have to pick up a phone 704 5601573. You have to email me Mike at MoneyMattersWithMike.com or visit MoneyMattersWithMike.com where you can learn more, and you can schedule an appointment so that you can receive your free bond replacement plan.

Producer:
All right Mike. Well that is going to do it just about for the show this week. Boy it has come and gone very quickly here. We've got much more to talk about next week. So we'll actually save a lot of this stuff that was still on the agenda because boy we had jam packed at this time around. We'll save it. We'll come back to it next week and talk about a lot more. So I'm looking forward to that. Sir.

Mike Zaino:
Matt, thanks for everything that you bring to the show. Our listeners out there, thank you so much for tuning in religiously every single Saturday morning at 9:00 in the local Charlotte area. And if you're listening on podcast, we thank you just as much because without our listeners, we don't have a show. So folks, if anything on this show resonated with you, please share it with your friends, share it on social media and whatever you're doing this weekend. I hope you enjoy it to the fullest extent and as always, make it a great day.

Producer:
Thanks for listening to Money Matters with Mike. You deserve to work with a financial and insurance expert who can offer strategies for protecting and growing your hard earned money. To schedule your free, no obligation consultation, visit MoneyMattersWithMike.com or pick up the phone and call 704 560 1573. That's 704 560 1573 not affiliated with the United States government. Mike Zaino does not offer tax, legal or investment advice. Consult with your tax advisor or attorney regarding specific situations. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. This information is intended to be educational in nature and does not provide a guarantee or a specific result. All copyrights and trademarks are the property of their respective owners. AmeriLife assumes no responsibility or liability for the content of this message. The information contained herein is provided on an as is basis with no guarantees of completeness, accuracy, usefulness, timeliness, or the results obtained from the use of this information.

Producer:
Fixed annuities, including multiyear guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees, and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer.

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