The Benefit Of Financial Hindsight
Jun 17, 2020
The phrase “knowing what we know now” is mostly worthless. Just think about that phrase in context of the coronavirus. Would we have done things differently in January or February “knowing what we know now?” Almost certainly.
Here are just a handful of the things that we'll discuss:
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Transcript
John Stillman: Hello, and welcome to Wright Money Tips. I'm John Stillman alongside Isaac Wright, chartered financial consultant and president of Financial Dynamics and Associates. Isaac, we're going to make your job really easy today, okay?
Isaac Wright: Hey, listen. You know I'm willing to work, but just to be clear, I'm also very good for efficiencies too. So please, carry on.
John Stillman: So, you did such a smashing good job with the recent radio show. We wanted to just take a conversation that you and I had on the radio a few weeks ago and let everybody hear that here, because let's be honest, not everybody is up on, what time is it on Sunday morning that the radio show airs?
Isaac Wright: Yeah, eight o'clock. So sometimes that may be not doable for some. But no, I see where you're going. I'm actually thinking of what the conversation was, because we had a lot of good feedback from it.
John Stillman: Yeah. So we were talking about the benefit of 20/20 hindsight, and how that's actually not a benefit because then it just makes you realize, "Oh, I should have done this thing differently." But we're going to talk about that in a financial context, and how to make sure that you're not looking back at decisions you made in the past and saying, "Oh wow. I wish I had done that differently." So here's our conversation from Isaac's Retire Wright Show. So many puns in the titles of your show, Isaac. We have the Retire Wright Show, we have Wright Money Tips. When your last name is Wright, there are things like this you get to do.
Isaac Wright: You can blame my dad.
John Stillman: Yep. So, wanted let you hear that conversation. Isaac, always a pleasure to talk with you. Hope you're doing well. And I have to let you know, I have to congratulate you because I saw in the news that you are on the list to be the world's first trillionaire. That's going to be... Oh, I'm sorry. I read that wrong. No, it's actually Jeff Bezos projected to become the world's first trillionaire by the year 2026. How about that?
Isaac Wright: Outpacing them all. I saw that on the news as well. A trillionaire. Lord knows he'll be richer than most countries as the pace of play is going with that guy.
John Stillman: Speaking of Jeff Bezos and him being worth a trillion dollars, I always hear people say things like, "You know, if you'd only invested $10,000 in Amazon back in 1997 and held onto it this whole time, do you know how much money you'd have?" Yeah. You know how many people did that? One person did that, and it was him, it was Jeff Bezos. So it really annoys me when people like to give us these 20/20 hindsight things. "If only you'd put this money in Amazon, back in 19..." Yeah. Nobody did that. It sounds great in theory, but the reality is we don't have the benefit of hindsight at the time. We only have the benefit of hindsight after the fact. And actually, there are a lot of things... When we say knowing what we know now, well, that's completely worthless, because... Just think about it in context of the coronavirus, Isaac.
John Stillman: Would we have done things differently in January or February knowing what we know now? Well, yeah. But just like with anything in life, we don't have that clear picture until after the fact. So I'm going to give you some scenarios, and I'm sure you've probably seen these people in real life, where knowing what they know now, yes, they would have done things differently looking back. But the reality is they did what they did, so how do we make the best of it moving forward? Like as an example, I'm sure you've seen this guy. The guy who got really scared after 2008, he invested way too conservatively after that. He took the hit, he moved to cash, and then he heard people talking about a double dip recession, so he just kept it in cash, and he left it there, and he left it there, and he missed out on a great bull run in the market from 2009 to 2019. I know you've seen that person.
Isaac Wright: No, that's a great way to line up today's conversation, John, because the things I want to cover today related to, for example, someone who went through the last bear market correction in 2008. And we've seen a very sharp decline in the first quarter of 2020 that led into a bear market. And here we are, just a couple of months later, recovering pretty strongly. Whether that recovery will last or not is yet to be seen, but I think making these large swath decisions of, "Hey, I'm moving all of my money to cash," or, "I'm going to take all of our money from cash and move it back into the market when I know the right time." First of all, there is no right time. Timing in the market really is going to be something that you're never going to be good at. I will just say that very straightforward. It's almost impossible to bat 1,000 when you're sitting there timing the market.
Isaac Wright: So what I've told people is this. Time in the market far exceeds and helps you versus timing the market. So for example, if you think about even recently, over the last few weeks, everybody can relate to this. Everybody in the news has talked about, "Be careful, we're due for a summertime double dip, we're going to hit maybe a scenario where we're going to be severely down." And granted, when you watch the market here or there, it seems to me that the market for the most part has held in there pretty well. But of course, that market can change on a dime. I think it's important for you to have a financial plan that relates to if the market takes a hit like it did in March of 2020, for example, where the market's down 30% in 22 days, you have to be able to put that in place to know that, "Hey, if I'm going into retirement, if I need this money as a goal for income, if I need lifestyle money for one time expenses, and all of a sudden that money drops 20 or 30%, is that going to change my lifestyle?"
Isaac Wright: That's an answer that you need to have before you get to that point. So, as far as hindsight goes, I think planning for that now makes very good sense. People that unfortunately in 2008, I was around during that time, had made too many bad decisions about worrying about the money in the short run for the next 30, 60, 90 days, went all to cash, never got back in the market, or if they did, they got back in way after the fact that the market recovered. So just keep that in mind. I think that's a great way to lead in today. We don't want you to have what I would call at least not a plan in place, because you can be at least at peace if you have a plan that's executed, that had probability behind it. But just going out there and throwing darts at a dartboard thinking, "Hey, I'm going to time the market." If you think that that's going to be your financial plan in retirement, well, good. It's your money. You do what you will.
Isaac Wright: But the families that we serve, that love being here at our firm, that enjoy the conversations and the relationship, want to have insight towards that answer. So if you have any concerns today, again, feel free to give me a call (804) 777-9999. Even here on Sunday morning, reach out. I can talk to you on Monday or Tuesday morning. Not going to put you on air, but a lot of times, and I'll say this, John, we have a nice section of calls from last weekend about some of the rule changes that took effect in 2020. So, just a huge amount of financial planning opportunities for those of you that want to take action and take control as we head out of this coronavirus situation, making sure that your money is in a good spot. So again, reach out. (804) 777-9999.
John Stillman: Again, (804) 777-9999. You can call or text that number, whichever is easiest for you. All right. So that was the guy who went to cash after 2008 and missed the bull run. Let's fast forward to the current situation. And we have maybe a couple who, they're getting really close to retirement, didn't realize how much risk they have in their investments, and then the pandemic causes the market to crash, and now suddenly, they have an understanding of how much risk they have. And fortunately, it has bounced back pretty well, but what if it had gone down and stayed down, and they were about to retire? Well, again, it's nice to know how much risk you had, but that doesn't do you any good after the fact.
Isaac Wright: Now let me say this to everybody listening. If you simply can just email your email address to us, we can put you on our webinar. We have a few other series that we've run here recently. But the reason I bring this up is if you think about how fast the market dropped in March, and I've said this a few times, I don't know if people are catching this, but the market dropped over 30% in 22 trading days. We just did a webinar for our clients that really, really got some great insight about why we do some of the planning we do. Because most of our families were down considerably less than that due to the strategies that we lay out. So I just want to say this, because for people that had money in market, or may be in a position where maybe you didn't lose 30%, maybe you were down 20%, or maybe you were down 40%, who knows?
Isaac Wright: But my question to you is this, were you prepared at the fact ... Let's call it, if the market and rebound as fast, were you going to be in a place that you were going to have to dig yourself out of to potentially maybe work longer? Were you in a place that you had to start considering whether or not maybe the definition of your retirement could have meant going into a part time job, or some other type of situation that you weren't even ready for? Most people really, and this is the sad thing, John, and I think most of y'all can relate to this, a lot of people are being furloughed right now. A lot of people are being let go, that whether they want to retire or not, they are being, in a way, forced to change and adapt.
Isaac Wright: So for all of you on the program, if you have a situation where you've been let go, if you've been furloughed, we've had a tremendous amount of contacts here at our office about how to handle the money that's left in your retirement plans through whatever company or job that you had, how to manage that properly. Investment management is such a key component for financial planning. It's not the only component, but it's something that, right now, I would say is front and center because of just the craziness we've dealt with in 2020. So all of this pandemic created situation, conversation, related to your investments. If you're unprepared or you're uncertain, again, let us know. We're here to help. But I think, John, let me just say the most things that we saw related to that market crash, I don't think many people were prepared for the fact of how fast that market went down over a short period of time. Thankfully, we've had some nice recovery here, but that's not guaranteed.
John Stillman: Again, that number if you'd like some help. (804) 777-9999. Another hindsight issue, Isaac, is maybe the lady who didn't really understand all of her social security options, and now looking back, she says, "Wow, I wish I had started this at a later age, now that I understand better how it works." I'm sure you've seen people in that boat.
Isaac Wright: Well, interestingly enough, what we found, and this has probably been ... And really this is problematic, what I'm about to say. But a lot of people know that social security changed their rules a few years ago, and we've even seen, to some degree, people come in saying, "Well, really, there's no social security planning I need to do, because I can't claim off my spouse anymore," or, "I can't do a suspend strategy," or, "I can't stop my social security and restart it." And again, that could be no farther from the truth. I think you still have opportunity if you're married, there's still a decent opportunity for restricted benefits and understanding how to build a claim off your spouse, potentially.
Isaac Wright: And if you can't do that, I think there's a lot of good conversation around waiting from 62 to 70 still, because you get a such a significant difference in your monthly check, related to your income and your lifestyle needs. This all has to be, again, a very significant part of your financial plan. Now, you may have made a fine decision with your social security, or you're about to bump up into retirement and you've got to make a decision on social security along with whether or not it's going to make sense for you to collect sooner or later. If you have what's called an offset, if you have a pension, if you didn't pay into social security for certain number of years, that typically falls under people that have government work and so forth. I think a lot of times, you have to be prepared for some of the changes that, when it comes to...
Isaac Wright: And again, social security is a big decision, because once you start collecting that income, you're basically going to be set with what you've collected in terms of how you've set it up, so you have very limited ways to be able to shift that around. So I just want people to realize, actually, it's more important to be able to have your social security in good order, because you have less opportunity to make some flexible changes that you did a few years ago. So again, I don't want people to look back and have social security as something that they collected and didn't even have a plan, or even discussed it with an advisor. That's kind of geared towards what we do here at our firm at Financial Dynamics. So we're all about financial planning leading to your retirement and lifestyle goals.
John Stillman: So again, Isaac, an easy day for you. Repurposing some old radio content. But I thought it was a good conversation, wanted everybody to hear it. And one more time before we get out of here, if somebody wants to reach out to you for help, what's that conversation look like?
Isaac Wright: Yeah, basically, we're going to talk to you about any questions, concerns you have related to your finances, investments, retirement, and really whether or not a relationship with an advisor makes sense, so not anything overly complicated at all. Feel free to give me a call at (804) 777-9999. But John, even though I think the content that we just covered here off of the radio show, very, very valuable going into the second half of the year here. And I hope everybody enjoyed it. So we'll do it again soon, man.
John Stillman: One more time, that number is (804) 777-9999. And we'll talk with you again very soon, right here on Wright Money Tips. Have a great week.
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: Advisory services offered through JW Cole Advisors, Inc. JWCA. Financial Dynamics and Associates, Inc and JWCA are unaffiliated entities.
Isaac Wright: Hey, listen. You know I'm willing to work, but just to be clear, I'm also very good for efficiencies too. So please, carry on.
John Stillman: So, you did such a smashing good job with the recent radio show. We wanted to just take a conversation that you and I had on the radio a few weeks ago and let everybody hear that here, because let's be honest, not everybody is up on, what time is it on Sunday morning that the radio show airs?
Isaac Wright: Yeah, eight o'clock. So sometimes that may be not doable for some. But no, I see where you're going. I'm actually thinking of what the conversation was, because we had a lot of good feedback from it.
John Stillman: Yeah. So we were talking about the benefit of 20/20 hindsight, and how that's actually not a benefit because then it just makes you realize, "Oh, I should have done this thing differently." But we're going to talk about that in a financial context, and how to make sure that you're not looking back at decisions you made in the past and saying, "Oh wow. I wish I had done that differently." So here's our conversation from Isaac's Retire Wright Show. So many puns in the titles of your show, Isaac. We have the Retire Wright Show, we have Wright Money Tips. When your last name is Wright, there are things like this you get to do.
Isaac Wright: You can blame my dad.
John Stillman: Yep. So, wanted let you hear that conversation. Isaac, always a pleasure to talk with you. Hope you're doing well. And I have to let you know, I have to congratulate you because I saw in the news that you are on the list to be the world's first trillionaire. That's going to be... Oh, I'm sorry. I read that wrong. No, it's actually Jeff Bezos projected to become the world's first trillionaire by the year 2026. How about that?
Isaac Wright: Outpacing them all. I saw that on the news as well. A trillionaire. Lord knows he'll be richer than most countries as the pace of play is going with that guy.
John Stillman: Speaking of Jeff Bezos and him being worth a trillion dollars, I always hear people say things like, "You know, if you'd only invested $10,000 in Amazon back in 1997 and held onto it this whole time, do you know how much money you'd have?" Yeah. You know how many people did that? One person did that, and it was him, it was Jeff Bezos. So it really annoys me when people like to give us these 20/20 hindsight things. "If only you'd put this money in Amazon, back in 19..." Yeah. Nobody did that. It sounds great in theory, but the reality is we don't have the benefit of hindsight at the time. We only have the benefit of hindsight after the fact. And actually, there are a lot of things... When we say knowing what we know now, well, that's completely worthless, because... Just think about it in context of the coronavirus, Isaac.
John Stillman: Would we have done things differently in January or February knowing what we know now? Well, yeah. But just like with anything in life, we don't have that clear picture until after the fact. So I'm going to give you some scenarios, and I'm sure you've probably seen these people in real life, where knowing what they know now, yes, they would have done things differently looking back. But the reality is they did what they did, so how do we make the best of it moving forward? Like as an example, I'm sure you've seen this guy. The guy who got really scared after 2008, he invested way too conservatively after that. He took the hit, he moved to cash, and then he heard people talking about a double dip recession, so he just kept it in cash, and he left it there, and he left it there, and he missed out on a great bull run in the market from 2009 to 2019. I know you've seen that person.
Isaac Wright: No, that's a great way to line up today's conversation, John, because the things I want to cover today related to, for example, someone who went through the last bear market correction in 2008. And we've seen a very sharp decline in the first quarter of 2020 that led into a bear market. And here we are, just a couple of months later, recovering pretty strongly. Whether that recovery will last or not is yet to be seen, but I think making these large swath decisions of, "Hey, I'm moving all of my money to cash," or, "I'm going to take all of our money from cash and move it back into the market when I know the right time." First of all, there is no right time. Timing in the market really is going to be something that you're never going to be good at. I will just say that very straightforward. It's almost impossible to bat 1,000 when you're sitting there timing the market.
Isaac Wright: So what I've told people is this. Time in the market far exceeds and helps you versus timing the market. So for example, if you think about even recently, over the last few weeks, everybody can relate to this. Everybody in the news has talked about, "Be careful, we're due for a summertime double dip, we're going to hit maybe a scenario where we're going to be severely down." And granted, when you watch the market here or there, it seems to me that the market for the most part has held in there pretty well. But of course, that market can change on a dime. I think it's important for you to have a financial plan that relates to if the market takes a hit like it did in March of 2020, for example, where the market's down 30% in 22 days, you have to be able to put that in place to know that, "Hey, if I'm going into retirement, if I need this money as a goal for income, if I need lifestyle money for one time expenses, and all of a sudden that money drops 20 or 30%, is that going to change my lifestyle?"
Isaac Wright: That's an answer that you need to have before you get to that point. So, as far as hindsight goes, I think planning for that now makes very good sense. People that unfortunately in 2008, I was around during that time, had made too many bad decisions about worrying about the money in the short run for the next 30, 60, 90 days, went all to cash, never got back in the market, or if they did, they got back in way after the fact that the market recovered. So just keep that in mind. I think that's a great way to lead in today. We don't want you to have what I would call at least not a plan in place, because you can be at least at peace if you have a plan that's executed, that had probability behind it. But just going out there and throwing darts at a dartboard thinking, "Hey, I'm going to time the market." If you think that that's going to be your financial plan in retirement, well, good. It's your money. You do what you will.
Isaac Wright: But the families that we serve, that love being here at our firm, that enjoy the conversations and the relationship, want to have insight towards that answer. So if you have any concerns today, again, feel free to give me a call (804) 777-9999. Even here on Sunday morning, reach out. I can talk to you on Monday or Tuesday morning. Not going to put you on air, but a lot of times, and I'll say this, John, we have a nice section of calls from last weekend about some of the rule changes that took effect in 2020. So, just a huge amount of financial planning opportunities for those of you that want to take action and take control as we head out of this coronavirus situation, making sure that your money is in a good spot. So again, reach out. (804) 777-9999.
John Stillman: Again, (804) 777-9999. You can call or text that number, whichever is easiest for you. All right. So that was the guy who went to cash after 2008 and missed the bull run. Let's fast forward to the current situation. And we have maybe a couple who, they're getting really close to retirement, didn't realize how much risk they have in their investments, and then the pandemic causes the market to crash, and now suddenly, they have an understanding of how much risk they have. And fortunately, it has bounced back pretty well, but what if it had gone down and stayed down, and they were about to retire? Well, again, it's nice to know how much risk you had, but that doesn't do you any good after the fact.
Isaac Wright: Now let me say this to everybody listening. If you simply can just email your email address to us, we can put you on our webinar. We have a few other series that we've run here recently. But the reason I bring this up is if you think about how fast the market dropped in March, and I've said this a few times, I don't know if people are catching this, but the market dropped over 30% in 22 trading days. We just did a webinar for our clients that really, really got some great insight about why we do some of the planning we do. Because most of our families were down considerably less than that due to the strategies that we lay out. So I just want to say this, because for people that had money in market, or may be in a position where maybe you didn't lose 30%, maybe you were down 20%, or maybe you were down 40%, who knows?
Isaac Wright: But my question to you is this, were you prepared at the fact ... Let's call it, if the market and rebound as fast, were you going to be in a place that you were going to have to dig yourself out of to potentially maybe work longer? Were you in a place that you had to start considering whether or not maybe the definition of your retirement could have meant going into a part time job, or some other type of situation that you weren't even ready for? Most people really, and this is the sad thing, John, and I think most of y'all can relate to this, a lot of people are being furloughed right now. A lot of people are being let go, that whether they want to retire or not, they are being, in a way, forced to change and adapt.
Isaac Wright: So for all of you on the program, if you have a situation where you've been let go, if you've been furloughed, we've had a tremendous amount of contacts here at our office about how to handle the money that's left in your retirement plans through whatever company or job that you had, how to manage that properly. Investment management is such a key component for financial planning. It's not the only component, but it's something that, right now, I would say is front and center because of just the craziness we've dealt with in 2020. So all of this pandemic created situation, conversation, related to your investments. If you're unprepared or you're uncertain, again, let us know. We're here to help. But I think, John, let me just say the most things that we saw related to that market crash, I don't think many people were prepared for the fact of how fast that market went down over a short period of time. Thankfully, we've had some nice recovery here, but that's not guaranteed.
John Stillman: Again, that number if you'd like some help. (804) 777-9999. Another hindsight issue, Isaac, is maybe the lady who didn't really understand all of her social security options, and now looking back, she says, "Wow, I wish I had started this at a later age, now that I understand better how it works." I'm sure you've seen people in that boat.
Isaac Wright: Well, interestingly enough, what we found, and this has probably been ... And really this is problematic, what I'm about to say. But a lot of people know that social security changed their rules a few years ago, and we've even seen, to some degree, people come in saying, "Well, really, there's no social security planning I need to do, because I can't claim off my spouse anymore," or, "I can't do a suspend strategy," or, "I can't stop my social security and restart it." And again, that could be no farther from the truth. I think you still have opportunity if you're married, there's still a decent opportunity for restricted benefits and understanding how to build a claim off your spouse, potentially.
Isaac Wright: And if you can't do that, I think there's a lot of good conversation around waiting from 62 to 70 still, because you get a such a significant difference in your monthly check, related to your income and your lifestyle needs. This all has to be, again, a very significant part of your financial plan. Now, you may have made a fine decision with your social security, or you're about to bump up into retirement and you've got to make a decision on social security along with whether or not it's going to make sense for you to collect sooner or later. If you have what's called an offset, if you have a pension, if you didn't pay into social security for certain number of years, that typically falls under people that have government work and so forth. I think a lot of times, you have to be prepared for some of the changes that, when it comes to...
Isaac Wright: And again, social security is a big decision, because once you start collecting that income, you're basically going to be set with what you've collected in terms of how you've set it up, so you have very limited ways to be able to shift that around. So I just want people to realize, actually, it's more important to be able to have your social security in good order, because you have less opportunity to make some flexible changes that you did a few years ago. So again, I don't want people to look back and have social security as something that they collected and didn't even have a plan, or even discussed it with an advisor. That's kind of geared towards what we do here at our firm at Financial Dynamics. So we're all about financial planning leading to your retirement and lifestyle goals.
John Stillman: So again, Isaac, an easy day for you. Repurposing some old radio content. But I thought it was a good conversation, wanted everybody to hear it. And one more time before we get out of here, if somebody wants to reach out to you for help, what's that conversation look like?
Isaac Wright: Yeah, basically, we're going to talk to you about any questions, concerns you have related to your finances, investments, retirement, and really whether or not a relationship with an advisor makes sense, so not anything overly complicated at all. Feel free to give me a call at (804) 777-9999. But John, even though I think the content that we just covered here off of the radio show, very, very valuable going into the second half of the year here. And I hope everybody enjoyed it. So we'll do it again soon, man.
John Stillman: One more time, that number is (804) 777-9999. And we'll talk with you again very soon, right here on Wright Money Tips. Have a great week.
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: Advisory services offered through JW Cole Advisors, Inc. JWCA. Financial Dynamics and Associates, Inc and JWCA are unaffiliated entities.
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