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Episode 007:
Don't Let Fear and Greed Derail Your Retirement!
06.02.22
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(audio version is below)
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What is Episode 007 All About?
We’re baack! And this episode of The Retirement = Freedom Podcast moves us seamlessly from riveting to morbid with lots of light-hearted banter in between. Host Josh Bretl is taking us through risk – what it is, how to monitor it and why retirees often carry too much. The Dave is also debuting a new and catchy jingle (very likely to hit the pop charts) and giving us a powerful visual aid to explain exactly why Josh is way over-exposed to risk in the friendship department!
In a future episode Josh will deal with how to keep a cool head when the stock market starts a steep descent, but for now we’re focused on the role and risk associated with having a stock market portfolio. Over time, history has shown, the stock market is a great vehicle for growth. But as with so many things, timing is everything. Retirees don’t have the flexibility to wait out a downturn and long, slow recovery. So the answer is? Don’t put yourself in a vulnerable position!
Josh outlines three key points:
- Risk is about how much you’re willing to lose.
- Risk is identifiable and measurable.
- Most retirees are taking on too much risk.
If your financial adviser doesn’t specialize in retirement planning, then they are likely not monitoring your stock exposures and investment timing closely enough. We learn about what “sequence of returns” means in the context of your fixed income and ways to keep that all-important nest egg safe.
And, if all else fails, you can just double-click on the part where we give a big shout out to Tonic's "Soldier's Daughter," clearly a high-water mark (not) for 1990s culture.
Have you tried Cometeer Coffee yet? Click here to get $25 off your first order.
And if you’d like to learn more about or listen to previous episodes of the Retirement = Freedom Podcast, you’ll find them here.
Finally, click here to explore the services that FSR Wealth Strategies offers and schedule a discovery call with one of the team’s CPAs. When it comes to living your best life, it’s never too early to get started!
Josh's inherent risk for being friends with Dave
Talking Points
Is Tonic's "Soldier's Daughter" the defining song of the 90s? Definitely not, but hear Josh sing some of the chorus anyway!
The focus of today’s discussion is on risk – the kind that is inevitable and easier to manage when its well understood.
The goal of investing is growth, which is never a straight trajectory. There are going to be markets bumps and slides. You can’t let the down cycles freak you out! They’re integral to the risk and can in fact be anticipated and planned for.
When it comes to your market position and exposure, the question you have to ask is: How much are you willing to lose?
You are not at the mercy of the market. You can calmly and deliberately set parameters.
Beware Greed: It’s easy to get aggressive and take on too much risk when the market is taking a joy ride. But, as with all rides, the fun will eventually end.
The two facets of risk to consider:
- How much are you willing to take?
- How much are you actually taking?
Retirees should assess and redefine their appetite for risk annually – especially when a major life event has occurred.
The single biggest mistake Josh sees retirees make? Too much exposure to a stock market downturn. (Followed by poor tax planning as a close second …)
Why retirees need to limit stock market risk? They simply don’t have the length of runway that will likely be necessary to recover from a serious setback.
How to calculate risk: Josh's practice bases the assessment on a scoring methodology that identifies both current exposure and levels of risk his firm recommends at any given stage of life.
Why retirees tend to take on too much risk:
Reason #1: Sequence of returns risk, which follows a jagged and often unpredictable timeline:
- When you’re working, the order of returns (high versus low earnings periods) don’t matter tremendously. There is time for it all to average out.
- When you’re a retiree, a big negative year has a far greater impact on your overall portfolio in the near-term.
Reason #2: Safety forfeited for lack of monitoring. A market drop of only a few percent can drastically impact quality of life in retirement. So stay on top of it!
The Dave: A Risk Exposure Beyond Josh’s Control, including real-world examples:
A year ahead in high school, Dave had off-campus privileges and access to the car keys for Josh’s cool red convertible.
On a daily basis Dave left his Market Day breakfast burrito (no longer available for purchase) in the trunk of Josh’s car to decompose.
Other perilous Dave tendencies: Forgetting his wallet, wearing too much yellow, honking excessively and randomly.
Risk is identifiable and measurable: Whenever you take a risk, you have to identify whether it’s worth it or not. In the case of their 26-year friendship, the jury is still out.
Want to calculate Josh’s friendship risk exposure for yourself? Check out this vivid photo montage for the visual!
Quotable Quotes
“There’s risks up the wazoo. But we’re talking specifically about market risk – the ups and downs of the stock market and how it impacts someone’s portfolio and retirement.” (Josh)
“How much of your assets are you willing to lose? The funny thing is that people often don’t realize that they can choose. They can set that number.” (Josh)
“When the market goes up, the greed kicks in. And when it goes down, the fear kicks in.” (Josh)
“How much risk are you willing to take? You should probably update (your stock portfolio) at least once a year if not more often, as life changes.” (Josh)
“The big thing I tell everybody is, after you identify how much risk you want, let’s build a portfolio that you’re comfortable with and where you should be.” (Josh)
“A lot of (retirees) are taking more risk than they think and probably more risk than they should.” (Josh)
“If your financial adviser doesn’t specialize in retirees, then they’re not taking the whole picture into consideration.” (Josh)
About your Co-Hosts
A certified public accountant, Josh Bretl has spent the past two decades growing FSR Wealth Strategies into a firm that specializes in tax-focused retirement planning. Because taxes have the single biggest impact on how much you can spend in retirement, Josh is dedicated to developing individualized financial plans that extend and grow his clients’ retirement savings. Based in Elmhurst, Illinois, FSR Wealth strategically preserves and maximizes resources through tax-efficient strategies designed to fulfill retirement dreams.
Apart from producing and co-hosting The Retirement Equals Freedom Podcast, Josh's longtime friend Dave Schmidt is marketing director at FSR. He’s also a content provider and marketing adviser to local businesses and nonprofits. He’s also an advocate for t-shirts, all things 90s (especially the music), short walks and long naps.
Standard Disclaimer:
FSR Wealth Management is a registered investment advisor located in Elmhurst, Illinois. Information and opinions contained in this audio have been arrived at by FSR Wealth advisors. All information herein is for informational purposes and should not be construed as investment advice. It does not constitute an offer, a solicitation or recommendation to purchase any security. FSR is not providing legal, tax, accounting, or financial planning advice in this audio. These views are as of the date of this publication and are subject to change.
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