Hindsight Is 20-20

Transcript

John Stillman: Welcome once again to Wright Money Tips. I'm John Stillman, alongside Isaac Wright, president of Financial Dynamics and Associates, Chartered Financial Consultant, and the author of Navigate Your Way to a Secure Retirement.

John Stillman: You know, Isaac, we've often heard the phrase 20/20 hindsight. If I'd been thinking, I would have come up with some kind of retirement planning strategy called 20/20 foresight, which is where we're planning for people who are retiring in the year 2020, we want to have foresight for their plan.

Isaac Wright: (Laughs)

John Stillman: But I didn't think of that until ... I guess this is my 20/20 hindsight, I should have come up with something years ago called 20/20 foresight.

Isaac Wright: I'll say. You need to coin that term.

John Stillman: Yeah.

Isaac Wright: You've still got a little time here.

John Stillman: Well, we're talking about 20/20 hindsight today because just like anything in life, making decisions would be a lot easier if we had the benefit of hindsight at the time that we're making the decisions, right? So let's talk about some of the things that we hear from people who wish they'd done things differently financially speaking, earlier in life, when they're looking in the rear view mirror. And maybe it's too late for them to make changes, but maybe other people can learn lessons from their hindsight, if that makes sense.

Isaac Wright: Yeah, that does, and I think that's the way we should take the show today and the fact of, obviously, my experience of 20 years of having these kind of conversations, hopefully I can share a little bit of wisdom on how we've been able to help, let's call it define, the future of some of the things that we've seen as mistakes or people that have kicked themselves based on some of the things we'll cover here shortly.

John Stillman: So one of the things that we hear from people is, you know, I got scared after 2008, I put my money in cash, and now I'm kicking myself for missing a great decade in the stock market. Essentially people for the last 10 or 11 years have been invested way more conservatively than they should have been.

Isaac Wright: Yes. So, you have people that unfortunately have gone into the well of having maybe too much risk in their portfolio to begin with and then they swing that pendulum when have down, and let's call it hit that uncle point, of how much money they've lost. They can't even bear to look at their statements. And I want to say this, I know this is all of a sudden ten plus years later, I still find people bring this up. Even though we've had a great economy, even though we're maybe in a position where the economy will still do great.

Isaac Wright: I just want to be clear here that kicking yourself, of maybe, let's call it have money move to cash and not knowing when to get back in the market. Even if you missed a year or two of good returns, what this means to me is you didn't have a financial plan in place that had a time horizon and a stated goal. This is people that are investing money in many different investments based upon the winds of the day, or maybe just being sold a product. And I think that's where, if you work with a good financial and retirement planner, their job is to keep you from falling into the ditch.

Isaac Wright: And I would almost call this a situation where now all of a sudden, you're behind the eight-ball where you may have to save up a lot more money to have that same retirement lifestyle. If you'd have just left things alone, maybe trimmed a little bit, but I mean, we're finding people that made huge moves, and still had a, large deposits, let's call it, move from investments to cash that are still there today. Just never ever felt trustworthy enough to get back in the market, I guess.

Isaac Wright: So again, that's what we don't want to have happen, we want you to have enough return to keep up with your lifestyle, keeping up with inflation, that's hard to do leaving it in a money market, CD or cash.

John Stillman: So, learn from the mistakes of others on that. How about this one, Isaac? I wish we'd known how much risk we had in our portfolio before we took that big loss.

Isaac Wright: Well, that's kind of where people fell into 2008 (Laughs). You know, 2020 means to me, not going back and repeating this situation, this mistake. If you wish you'd know how much risk you have taken in a portfolio in the past during a bear market, don't let that be the same situation, shame on you twice if it happens again. So let's make sure you have a good, realistic approach of how much money you're likely going to lose if the market does take a hit.

Isaac Wright: I don't think people today, it's not about necessarily having a completely principle safe, it's just, hey, I understand that if the market's down 20, 30-plus percent, I may be down X, Y, Z. The problem is sometimes that X, Y, Z is never defined. So that's what I'm simply saying. We want to make sure that you have a risk-tolerance level that's being monitored and maintained. That's part of our Investments Cents Review here at our firm, and we're here to help you with this, so please let us know if we can help you with it. That's a big deal.

John Stillman: Here's another 20/20 hindsight that we hear a lot. You know, I didn't really understand my options with Social Security. I should have waited and started taking it later.

Isaac Wright: You know, for years, we've had people that, and again, our new office is right beside the Social Security office here in Chesterfield, we have people that just always, let's call it for one reason or another, had decided to go ahead and jump on their own Social Security benefit, where they could have taken their spousal benefit or been able to claim on their spouse if it was accomplished correctly and they had the right steps in place.

Isaac Wright: Some of the strategies, even though Social Security's been cleaned up and you can't do what you used to be able to do, there's still strategies out there that you can use to take advantage of a potentially larger amount of income. And we all want enough money, and as much as we can from the government, especially to be able to cover the lifestyle expenses that we foresee. So again, this 20/20 foresight, we want to start looking forward. And obviously, when it comes to Social Security, I'd even roll into this your pensions, if you're fortunate enough to have one, the investment side can compliment some of these things here.

Isaac Wright: But just know that Social Security, understanding and forecasting those options are still legitimate planning goals that you should have when it comes to your retirement.

John Stillman: We're talking about 20/20 hindsight, things that we hear people wish they'd done differently financially earlier in life. How about this, Isaac? I wish I'd put more money in a Roth IRA instead of saving everything in just my 401k.

Isaac Wright: Yeah, John, this is actually something I just taught a class on down here, over at John Tyler here, the last couple of weeks. Roth IRA money, and here's the deal, is Roth IRAs have been around for a while, I mean, you know, 20-plus years. The reality behind a Roth IRA is yes, you're getting the future growth of that money income-tax free if you play by the rules; However, we sometimes still like to take the quick hit of being able to save the money from a tax standpoint by putting it in a traditional IRA or a traditional 401k. Now people are starting to realize, hey, I may be very leveraged with a lot of money that's growing tax deferred, and maybe I should have put more money in a Roth IRA knowing that hey, we're in a pretty favorable tax environment now. But what is that going to look like in 5, 10, 15 years?

Isaac Wright: I mean, I don't have anybody that really is all excited of the fact that they're going to lower taxes again. I think if anything, you're going to see probably a result very different then that. But to the degree of when and how much, who knows? I just think that people need to know that when you're diversifying your investments, you need to have some tax diversification along with that just because of what I just covered.

Isaac Wright: So putting more money in a Roth IRA, absolutely we have seen a steam build towards that goal with families when it comes to not maybe putting more money in a Roth IRA, or if they have IRA money now, converting money to a Roth. So these are all good points, John.

John Stillman: Last one we'll mention today, Isaac, from the standpoint of 20/20 hindsight and your financial life. And this is, this rough, if you fall into this boat, but, I probably retired too early, now it's hard to make ends meet, I might go back to work.

Isaac Wright: No, I mean, I think it's a good one to wrap up on because if you retire to early, what that really means to me, and I don't know necessarily, this is not 100 percent of the time, but this is a high probability, you really didn't have a financial plan that took into consideration maybe the changing of your expenses and the forecasting of cash flow correctly.

Isaac Wright: And what we've done over many, many years, and myself personally, has created some good benchmarks for families to understand where that may fall when they transition into retirement.

Isaac Wright: And I want to say this, as we wrap here on a positive note, a lot of people are able to retire earlier than ever before because of the favorable economy we've had for the last ten-plus years. So I would say don't be scared of considering your retirement earlier than expected, but work with somebody that has financial experience, investment and planning experience towards retirement. That's all really what our firm does.

Isaac Wright: And so if it's not us, please find someone that can assist you on creating a financial plan to help you monitor and maintain it through your lifestyle and through these changes that will take place, specifically if you retire early or in your early stages of your retirement, those first few years after. Because that's where you can hold accountability and if there is a mistake, sometimes you have time to correct it. And unfortunately, sometimes people never really have that in the first place, and that's what led to number five here as our end, which is it's hard to make ends meet if you don't do it correctly.

Isaac Wright: So, John, this is again, good five bullet points today. We want to create, I call that 20/20 foresight, to play off of what you said at the beginning because, you know, instead of looking behind us, let's make sure that we are in a position to be able to take advantage of the upcoming year.

Isaac Wright: So that being said, if you have any concerns, questions about your finances, your financial future and where things stand on your road to your lifestyle plans, let us know. (804) 777-9999, right here in Richmond, we serve many families and we're here to help you in any way we can.

Isaac Wright: So John, I appreciate the time, love doing the podcast, loving the opportunity to create 10, 15 minute little blocks to help people along that road.

John Stillman: Our goal today is to help you avoid the 20/20 hindsight where you look back with regret. Let's help you get those decisions made correctly at the front end, so that your 20/20 hindsight is all peaches and roses and whatever other pleasant things we want in your hindsight.

John Stillman: Isaac, always a pleasure. We'll talk with you again soon. Again, if you'd like some help with all of that, the number to call (804) 777-9999. That's (804) 777-9999, and we'll talk with you again very soon right here on Wright Money Tips.

Announcer: Information is for illustrative purposes only, and does not constitute tax, investment or legal advice. Always consult with a qualified investment, legal or tax professional before taking any action.

Announcer: Advisor services offered through JW Cole Advisors, Inc., JWCA. Financial Dynamics and Associates, Inc, and JWCA are unaffiliated entities.