Let's Talk Money

Good morning everyone. Thank you for joining me beautiful June Saturday morning, and I appreciate you taking some time to listen in. Hopefully you are fitting outside, maybe doing some weird or drinking coffee on the porch. It's a beautiful day and a beautiful weekend ahead for Father's Day weekend, so good news for all those who are planning barbecues, picnics, spending some time with Dad outside

this weekend. Although its like we do have some heat coming up next week, so it's really starting to feel like summer as we approach the first official day of summer. Well, thank you again for joining me, and I look forward to spending the next hour with you. My name is Harmony Wagner.

I'm one of the wealth advisors here at Bouchet Financial Group. I am a Certified Financial Planner or a CFP, and I'm also a Certified Private Wealth Advisor cpw A and I've been working with Steve and the team here for almost eight years, working with clients on their portfolios, financial planning, and just

guiding them through the financial transitions of life. And it's a very rewarding part of my life is working with clients and working with the team here and also having the opportunity every now and then to speak with you all, our wonderful radio audience, So thank you for listening in. I know we have a lot of loyal listeners out there that tune in every week and maybe some folks who are tuning in for the first time. So regardless of where you fall,

welcome and thanks again. The phone lines are open today, so if you would like to ask a question, we have a situation you want some guidance or thoughts on, please call in. I'd love to hear what's on your mind. The phone number is one eight hundred Talk WGY one one hundred eight two five five nine four nine. I have plenty of things that I can talk about, but I would so much rather hear what's on your mind

and the questions that you have. All right, well, let's kick things off with a market recap, and it's mostly good news when we looked at the last week, so always fun to recap the highlights when when they're positive. We had a strong week for the S and T five hundred up one point six percent, even though yesterday was a little bit flat, slightly down, but still a very good week for the S and t na's death excellent week of three point two percent. We'll talk a little bit more about that

in a few minutes, but Apple being a strong driver of that. And then we had the Dow Jones, which was actually down about half a percent for the week. The markets are trading positively on some sides of cooling in the economy, but at a pace that the markets are seemingly feeling is just

right, and I think that the Fed would agree. We had a lot of economic news that come out this week from CPI report on Wednesday, the PPI Report on Thursday, and instead meeting and commentary on Wednesday afternoon is well, so a lot lots go on a lot for the markets to digest, but generally that was those positive news. Let's look for just a few moments

about Apple. Apple had a very strong week almost eight percent seven point, which for a company that size, means they added just under two hundred and forty billion in market value for the week, which almost sounds like a made up number. It's so crazy to think about just the magnitude of what that means for this company so large. A main driver for the stellar performance this

week was Apple's worldwide developers conference, which they hold each year. It was all weeks started on Monday, finished up Yashaday, although the main keynote I think was Tuesday. We saw the you know, most reaction to the stock price on Tuesday, but they had really unveiled their AI advancements, and Apples had actually been a little bit of a laggered earlier in the year. You know, it was one of the Magnificent seven stocks that had done so well

last year and then was trailing some of the others along with Tesla. It was really trailing for a good portion of the beginning of this year, and you know, I think what we're seeing is that some of the reason for that that lagging was people weren't sure exactly how Apple was going to keep up

with AI. That that seems to be kind of the general sentiment. There hadn't been a lot of discussion on it from Apple at the time, and so that that was a big factor, I think, and why the stock price was wasn't keeping up with some of the other big tech names that continued

to perform really strong this year. So Apple had unveiled some of their you know, AI progress, reported on what they're going to be doing, how they're going to be incorporating that into their business model and their products, and that was a really really positive thing for the stock price. You know, I talked a few weeks ago about how Dell had bad news on the AI front in their earnings call and it had led to the stocks the worst trading

day ever. This week we saw the flip side, you know, Apple coming out with good news in their AI developments and seeing the stock price shoot forward. So within the IT sector, it's feeling lightly like that's all anyone talks about or cares about. It is artificial intelligence, and tech companies are really rising or falling on, you know, how they're handling it, how they're incorporating it, how quick they're able to adopt it, how they're able

to you know, put their own spin on it. All those things. Another kind of interesting thing to note for Apple specifically, I think AI is going to push iPhone sales forward for them. You know, when you look at kind of the stats of current iPhone users right now, over forty percent of Apple devices that are in use are iPhone twelve or older, and another

almost thirty percent still have the iPhone thirteen. So these older devices people are holding on to them longer, you know, trying to make them, you know, extend their life without having to buy a new phone every year or two. They're really may be holding onto these older devices as long as they can make them work for their life. But these older devices do not have

the capability to be upgraded to AI software. So when we're looking at the pool of Apple users, and historically they are a very loyal bunch, there's this huge number of them who will need to upgrade their devices in the near future if they want to take advantage of the AI and just in general, right, we know, these iPhones they don't they don't last forever. After a certain point, the battery life, the ability to keep updating it just

can't keep up. So you know, people do tend to replace them within maybe two to three years. And so at some point there's going to be a large portion of Apple users that are going to have to buy new devices. So we may see AI kind of pushing that that along where people are. The demand is going to go up for for these devices that have the AI capability, and even just as the other older devices become obsolete don't work as well, there's a really large kind of backlog right now of people who

have older devices who will need to upgrade in the near future. So that is another kind of positive sign for Apple and in the stock price. And you know, we've held Apple and our client portfolios for for some time. Somewhat recently we purchased more of it in plant portfolios, so you know something

that we're very bullish on long term. And you know, we do certainly appreciate the role that Apple plays in our in our portfolios, in everyday life, even when you think about technology and just how it's everywhere, everywhere on a part of everything, and that seems to only be be continuing, let's talk about the economy a little bit, so I mentioned some of the economic

news that came out this week. We saw the CPI report come out on a Wednesday, and the inflation slowed for May, and let me tell you that was a relief after the last three consecutive months before that Bebruary. In March April inflation had actually bounced back a little bit off of some of the twenty twenty three slowing reports. So I think the Fed was a little concerned, to say the least. But we did have the CGI report on Wednesday

came out of three point three percent year over year. That was under the expectations of three point four percent. So that's good with inflation, yo, with one of the under expectations, and we saw its unchanged from April to May. Actually when you look at the months to month comparison, which is the first time in almost two years we've seen the inflation index not change from one month to the next. So the Fed is feeling good about that.

Investors are feeling good about that. The Fed now on Wednesday afternoon, they did not cut rates this month, which was exactly what was expected, and you know, they kind of actually suggested that they're looking to hold rates where they are for longer, saying that the first cut may not come until December and protecting only one cut for this year is what the Fed is saying.

No, you know, what are markets pricing And that's a little bit different perhaps, I mean, it kind of depends on how you look at it, but you know, markets may still be thinking that there could be two this year, but it'll of course always hinge on the continuing economic reports that

come out. On Thursday, we saw the Producer Price INDEXT come out measuring the cost of you know, goods and services kind of within the industry as opposed to to the average US household, and that actually unexpectedly dropped point zero point two percent last month. Economists have been predicting a point one percent rise, so to have it drop is another positive medication. Inflation is coming down. The first quarter surge that you know, had a little concern on the

Fed. On the Fed's perspective is, you know, not necessarily something that's going to be ongoing throughout the rest of the years. So we did see some some promising news there is it promising enough to you to predicate a rate cut, Probably not yet. And that's you know what Jay Powell agreed with as he you know, gave his speech. He highlighted that one good month isn't going to have them rushing to cut, especially when the economy is still

holding up really well, even with race elevated. Overall, the commentary, I would say was positive in his tone, although Jay Powell did refer to Defen's current policy as restrictive a few times, but it was really in the context of saying, you know, how well it's been working. We're still seeing a really strong economy, and we were saying, inflation cut down. That's you know, the two things that they were they were hoping to do,

and we're seeing it. Jobs are still strong, they have cooled slightly, but you know, still in the very solid position. Consumer spending same if it's cooling a little bit, but it's it's not worrisome. It's still very strong relative to you know, historical numbers. Equities are doing well, so as of right now, we're not seeing the economy is on the brink

of recession. So the ft is happy and they're comfortable. They're going to hold the course, stick to their anti inflation campaign and you know, as of right now they don't see a real reason to deviate from from their plans. So the markets did respond positively. As we said there, it was a good week for the S and T and the NADS, DAC and all really hinged on. You know, I think those that good economic data. Let's take a quick break, but we'll be right back right here on WGY

with more or less stock money. Don't go away. Hi there everybody, and thanks for saying move me through that brief message. This is Harmony Wagner coming to you on this beautiful Saturday morning. And I just want to thank you for spending the time to listen today. If you have a question or something you'd like to talk about, please call in. That phone number is one eight hundred talk WGY one A hundred eight two five five nine four nine.

Let's talk for a little bit about you know, some things that I've talked with clients recently about you know, what do we do in our portfolios? And I think it's great to look at the you know, macroeconomics themes that are going on, great to track the major market indexes, but what does it all mean for us, the average investors trying to do our best,

trying to do the right things in our own personal finances. And there's a lot of questions that I see kind of resurfacing for a lot of different people, and so I thought it would be a good time to talk about some of those because maybe some of our listening audiences thinking the same thing.

And you know, one conversation that I've had this week and over the last few weeks really is, you know, when it comes to the fixed income side of people's portfolios, the conservative, the you know part of your portfolio where you're you know, you're not looking for that equity related volatility. You're just looking really for you know that income and yield and simple protections. And there's of course many different options in there. The bond market is huge.

A lot of people don't actually realize that how much larger it is than equities market. But there's also you know, CDs, there's money markets, there's conservative alternatives. There's so many different things that can function in that side of the portfolio. And some of the ones that I think people have been really evaluating recently is money markets or and or you know, high yield savings accounts. Really those those types of conservative vehicles that have very high liquidity, you

know, no term, no locked in time frame. But right now, with rates being still elevated, they're they're paying a really nice yield, something that people didn't have to deal with. It wasn't a question for people a few years ago because the yields just weren't there. Now they are and those types of investments are can be really attractive, and a lot of folks are kind of weighing do I put my money in either a money market or a

high healed savans account. You know, somewhere in the high four to low five percent range as far as the rate that it's paying versus fixed income specifically treasuries, those are kind of considered the risk free asset because they're backed by a bus government so and they have a term as locked in. So that can be a pro or con depending on how you look at look at it,

and depending on the timeframe. You know, the rates are slightly different, of course, but they can be even trailing the money market rates a little bit right now, so you know, we just kind of have these conversations with our clients to kind of try to help them evaluate what the right call is for them. Some of the pros of the money market approach is

that high liquidity element. You're not really taking on any liquidity risk with your principle, no matter if you want to keep it in that money market for a year or a week. You can get your principle out without worrying about penalties, without worrying about am I going to have to sell it at a discount like you will with a bond or perhaps a brokeren CD. So you know, that's a big pro. Another another pro right now, like I

mentioned, it's hyrates. You know, we're seeing you right around that five percent range, give or take a little bit, but you can get five percent pretty easily in a high savings account or a money market fund where you can get your cash any time, but while it's in there, it's working

hard for you and there's no lock in periods. So you know that those are some of the main pros of the money market that I think is making them so so attractive to folks who have some cash where they you know, want to have it accessible kind of that emergency reserve, tight bucket within their personal financial house. The constant money market and you know, this is a little bit hard to exactly predict that. You know, so many things are in the financial world, but the rate can drop at any time, so

it's really hard to know when exactly that will happen. The downside to it is that once it starts happening, you're already running up again reinvestment risk, meaning that you're not going to have a month's time frame most likely where the

money market drops. It gives you that warning sign that maybe you should invest your cash somewhere else, and you can still get high yields in other other areas of the conservative market, like fixed income right when the rates drop, it's going to affect these both of these instruments, you know, simultaneously. So that is a little bit of the risk that you take keeping your money

in the money market. The rate could drop at any time, and when it does, you know you're going to be scrambling trying to reinvest at someone where you're still getting the same yield, and you know it's going to be very difficult to find, certainly with the same kind of risk profile. Now, let's, you know, switch to look at the other side. Compare money markets against treasuries. So the pro of a of a US treasury is

that the rate is locked in for the term. If you're going to purchase a two year treasury, you're going to receive the the rate that it's paying for that whole time, and then as long as you hold it to maturity, right, you'll get your principle back at the end and you'll get that that yields the maturity. Another pro is that they are state and local tax

exempt, so that can be an attractive thing as well. And even though the rates can be a little bit lower than the money market, when you look at the tax equivalent rate, because money market income will be fully taxable

at the state and local level as well as feteral. You know, you may for your own self, you have to look at your marginal state tax rate that you pay, but you got to look at that tax equivalent yield and say, okay, well, you know this might be paying me a little bit less in terms of the you know, the coupon rate that actually gets paid to me. But what's my after tax take home from this interest And you may find that it is just as attractive or even more so.

You know, especially for higher tax bracket individuals and families, the state and local tax rexemption can be meaningful. So that's something to be aware of as well. It's probably one of the more under advertised benefits to the treasuries,

but it is something to consider. The cons of a treasury, you do take on some of that liquidity risk, meaning that you have a term and if you are going to sell it before that the end of for maturity, before the end of that term, you can certainly do so in the secondary market, but you may take on some of that risk of what you're going to get back for You're not guaranteed to get your entire investment back. Now, typically if rates were to decrease, then you would get paid a premium

for your bond that's paying higher. So you know, when you're saying, hey, we're certainly not expecting the FED to increase rates any further, and we are expecting rate cuts in the future, you know, those seem to keep getting pushed out and the expectation of how many drops. But statistically it is likely that the next move of the FED will be a cut, not a hike. So kind of looking at where we are, the likelihood of you know, where we stand in the rate cycle, probably at the peak,

it is probably you know, the most likely scenario. So saying I think that rates are going to go down, it's you don't run into as much of that liquidity risk of having to sell your bond early if you unexpected they needed to cash right, you know, sudden you need liquidity, you have to sell that before maturity. As long as rates you know, haven't spiked since you bought it, you can probably sell it for for a premium. That's kind of how the nature of bonds work. But it is still

a risk that you need to be aware of. You're not guaranteed to get your principle back if you do not hold it to maturity. Another con as we've discussed, is that rates might not be quite as high as money markets currently. Depending on the term you know, you you may not be getting the five percent in a baham that you're getting in the money market. So that's what you're looking at when you're comparing, you know, the liquidity, the rates, and how long you can expect to get that rate. Especially

with the money market, it may seem more attractive. You're saying, oh, I have a liquidity, I have higher rates. That seems like a no brainer. It does seem like it at times, and it could be the right decision for you, you know, especially if liquidity is a primary goal of yours. It can certainly be a red decision for you. But you have to be aware that you know that rate is not locked in.

That can change week to week, months a month, and when rates start to come down, you know your bomb that you hold that it's locked in isn't going to drop, but your money market will perhaps quicker than then you expect. So those are kind of some of the interesting things to consider.

I was looking at a chart as well this week that showed the twelve month returns of different asset classes following a rate hype cycle, so from the date of the last the last interest rate increase, and then looking at the twelve months after that and just different types of asset classes. I didn't have money market funds on there. Actually I wish it, although I know the money market long term average is about two point seven percent, so what we're seeing

now is probably double the long term average. Just so you know, you're aware if you're planning and evaluating that to assume that at some point the money market rates will go down to around their long term average. Before this last reheake cycle, they were actually much lower than that. But but looking at you the twelve month performance after a rehike cycle, So some of the asset

classes that they looked at were six months CDs. So average return for six month CDs after a rehike cycle was seven percent, which isn't too shabby. You know, most people would say, hey, if I could get seven percent in my CDs, i'd be really happy with that, and I would agree. However, you compare it to the Bloomberg US aggregate, that's the bond index, that is, you know, what what is to bonds?

What the s ANDP is to stocks. The Bloomberg US aggregate is to bonds that average fifteen percent after re hike cycle of the year, so more than double the six month CBS, which is you know, interesting to see. The SMP was up twenty two percent on average and a sixty to fortyfolio whateverage ninety percent, So you know, either way, we've seen some of this, right, ri hikes haven't heard occurred in a while, so we're within that twelve months, you know, we're kind of in this window of the

post rate hike cycle experiencing some of this performance. We have seen great equity performance over the last year and a half now, so you know, we're certainly experiencing all this. But it is interesting to look at and to say, Okay, where do I want to be invested, And it really depends so much on your long term goals and perhaps for you your short term goals,

your near term goals. Right, each investor probably has some some in all categories, so that is an important element to it to consider what are my needs and to allocate your funds appropriately. So you know, we know that over the long term that equities are are the best asset class to be invested in. However, they come with a volatility that a lot of folks

aren't comfortable with at its full power. So, you know, having a diversified portfolio, including some fixed income and including some of these other you know options. When you know you may have a cash need, or you think you might have a cash need, it doesn't have to be known. If you think you might have it, then you know to prepare for it. Is wise by using cash in the bank as an emergency reserve, money markets,

treasuries where the term lines up with when you might need it. All of that, we're coming down to the news break here, but don't go away. We'll be right back with more or less talk money brought to you by Bouchet Financial Group, where we help our clients prioritize their health while we manage their wealth for life. Will be right back Hi there everyone, Thank you for staying with me through the news. This is Harmony Wagner joining you

today. I'm one of the advisors at Bouchet Financial Group a CFP CPWA and it's my pleasure to share this out with you. I hope that you're getting something interesting valuable from the conversation and it's something that you like to talk about.

Asked about one day hundred talk WGY one day one hundred and eight, two five five to nine, four nine before the break, we're talking a little bit about questions that people may be having at this point in time about their portfolio, their own personal financial situation, and about the difference between money markets and treasury specifically. I also wanted to talk about abonds. It's probably

been a while since you've heard people talk about these. Two years ago, like I, bonds were the only investment in the green, and so many of you may have been. In twenty twenty two. I think that was the most popular I'd ever seen them in my memory, and they're paying over nine percent at that time, if you remember. I want to have cut two components to them. They have a fixed component which stays the same throughout the time that you hold it, although it can be zero and it actually

was during twenty twenty two, so not nesly impacting your bottom line. And it talks what there is kind of a fixed component of it, and you know at other time periods, depending on you bought it, it may be higher than that. Of course, there's all that variable rate. So fixed rate sounds will stay the same throughout the life of you know, at eyebonds, as long as you hold it, the variable rate will change based on what is that really has come down a lot along with inflation, no surprise

there. So now that it's not paying as competitively as it was a few years ago. Uh, you know, I have a feeling that maybe a lot of our our listeners may be wondering what do they do at this point? Did they keep them, did they sell them? How does that all work? So I thought let's take a few minutes to talk about that. If you're one of those who bought it during the ibond frenzy of twenty twenty two and now you're saying, well, it's not really keeping up with other

investments now and I'm looking to maybe make a change. So with eyebonds, you have to hold it for at least one year, but after you've held it for that long you can sell it. However, one thing to notice that if you've held it for less than five years, you'll forfeit the last three months of interest. So if you've held it for twenty four months, you'll get twenty to keep twenty one months of the interest. When you cash it in. Some of the reasons that you might consider keeping it. It's

guaranteed to meet or keep the inflation rate over the time frame. Now that inflation right can be low. Right, we know the Fed wants to get to two percent, So I guess you have to ask yourself if you think of two percent rate over the long term is something you're happy with. But it is guaranteed to at least meet the inflation rate, meaning that it's better than cash in the sense that it's not going to lose purchasing power over that

time. It's also state and local tax exempt like other you know, US government bonds, so that is a benefit as well. We talked about that a little bit before the break, how to how to cage the impact of that. On the flip side, you know, there are reasons to sell as well. And the main one, which is probably causing a lot of people to consider it, is that rates have fallen dramatically along with inflation, which is a generally positive thing for everyone. That infliction is coming down except

ibond holders who aren't getting that nice nine point six two percent anymore. And if you feel, as most economists do, that inflation will keep trending downward. The case for I bonds as far as the rate is, you know, not the most optimistic. So depending on when you bought them, your rate now is probably someone in the three to four percent range for most folks who bought it in that twenty twenty one twenty twenty two timeframe, And that's

at this point low compared to some other conservative options. You know, we kind of talked a little bit about money markets and treasury rates a few moments ago, so you know, having that, especially some which are less than three percent, I think in the two point nine range, that's not not

as competitive anymore. Another reason to sell now is maybe you bought eyebonds when you felt there were no better alternatives, right that that was the case for a lot of people in twenty twenty two, when you know, stocks were down, bonds were down, and inflation was high, so you said, I'm going to buy a bond that's tied to inflation. But now you may feel differently. You may not feel that there are no better alternatives anymore.

You may be looking at some other alternatives that are more attractive to you for a number of reasons. So you have the option to cash out reinvest the proceeds into something else that's more attractive. You might be looking to lock in a yields on a treasury now before rates drop in the future. Maybe you need the cash for something and you're finding that eyebonds are the most ideal place

to access that. Those are all reasons that you might consider selling. So if you do find that, you know, you kind of way the pros and cons and you decide that selling your eyebonds is the right move for you. Just a little word of practical advice. The way the interest is calculated is if you hold one on the first of the month, you will get the interest credit for that month. There'll be no it's not pro rated.

There'll be no additional benefit for holding beyond. So you know, if you wanted to sell now, I might suggest why don't you wait till July first, get your July first interest, and then sell it. Usually selling it as close to the first of the month as you can is the best because you know, if you were to sell it now, you just missed out on two weeks and you're not going to get a pro rated interest month's worth

of interest for that. So that's how they work. As far as the interest accumulation, so you may want to consider selling on the first of the month or close to it. All right, well, I think let's switch gears here and talk a little bit more about kind of a overarching retirement planning topic. And this is something that I started talking about two weeks ago.

I was on the radio with my Katie Buck and we were talking about the four percent rule of you know, portfolio spending, portfolio distribution through retirement. And unfortunately, you know, this hour always does fly by, so we came up to the bottom of the hour and we hadn't had the chance to really talk through this in depth. But I think it's something that's probably of you know, wide interest. It's certainly something that is a well known concept

that many people are familiar with. So, you know, I'll kind of explain it real quick for anyone who may not be familiar with it, and then we'll talk a little bit more about it kind of, you know, from a financial advisor's perspective, I work with clients who are preparing for retirement, just in retirement every every day, almost probably every week at least, talking with folks who are in that situation, and that is of course a big topic. How much can I spend for my portfolio? What does that

mean for my future? So the four percent rule is kind of a simplified way to calculate how much you can take from your portfolio and retirement without running out of money. And of course that depends on so many things, how long you're going to live, how your portfolio is invested, and so on. But the general thought is that if I take out four percent of my portfolio every year, I can do that throughout all my retirement, even if

I'm retired for thirty thirty five years and not run out of money. And so that is kind of the the general pemis of it. Sixty one percent of financial advisors still use this rule and adhere to it pretty strictly when guiding clients. According to a survey that I was reading this week, which you know, I found, you actually be a lot, you know, over sixty percent of financial advisors. You know, personally, I think, as an advisor, especially at fiduciary, we have the obligation to tell our clients

what's in their best interest. And you know, I think if you had asked me, does the four percent rule work? The quick answer is yes. But as we'll discuss. You know, I think it may work a little too well, and I think you may run into a risk on the other side of the equation that a lot of people don't think about. So how do we test a rule like this, Well, first, we're going to look at history to see what has happened before and what would have happened

to our hypothetical portfolio had we followed this four percent rule. And we know that markets, of course won't repeat history exactly, especially when it comes to the sequence of returns. But you know, history is the best place we can look to say, what's a realistic way that the markets could perform over

a thirty year period. And when we look at you know, as many thirty year periods as we can, you know, those rolling periods and in recent history, and we say, let's say this person you know has a portfolio. The actual value of it doesn't matter for this this analysis. What we just say, let's say they took four percent every year, do they

run out of money? And in the in every thirty year rolling period from nineteen fifty to the present day, you could have taken four percent of your portfolio out and not depleted it. So that's four percent of your initial balance. I should I should clarify that. So that is a good thing, right, if we're saying does this work, it does. People are not going to be running out of money if they take four percent. Now, even if you weren't invested and you had that in cash under the mattress,

you could make it twenty five years because it's just simple math there. Uh So that shouldn't be too surprising that and you can you can make thirty years when you could make it twenty five even if it wasn't invested in a diversified portfolio. The interesting thing is if you look at the we're gonna wun this exact same analysis, right, We're good. Look at every thirty year rolling period since nineteen fifty. You know, the same hypothetical investor with the same

hypothetical portfolio. What if they do a five percent distribution rate? And when you look at that, there are only three three thirty year rolling periods where that would cause that investor to rund the money. Three is not a lot. I mean, think about how many. It's almost seventy five thirty year rolling periods. Right. The thirty years started nineteen fifty. The thirty years started nineteen fifty one and so on. Three out of almost seventy five is

a really low number. And I think, you know, I haven't looked into each of those three scenarios specifically, but you know, if you were to, I would imagine that if that person was willing to make some changes, they were a little bit willing to be flexible, and they're spending when when things weren't going well, that they could have avoided running out of money

by making some slight changes for you know, a period of years. So that kind of for me, I thought, put it in perspective, right, the four percent rule does work, So would a three percent rule, so would a two percent rule. Those would all work, meaning that you could take that out of your portfolio and you wouldn't run of money. But where do we test that on the upper limit? Because you know, what I think most people want to know isn't how do I not round of money?

I think most people on their own could penny pinch and you know, live off of ramen noodles and cat food and make sure that they did not absolutely run out of money and spend their last time. But what most people really want to do in retirement is maximize their utility. Utility is you know, the word for the joy, the satisfaction that you get from your wealth

and from using it in meaningful ways that enhance your life. That can be so many different things depending on who you are and what your values are. But maximizing utility is really a goal of a lot of people, and they

may not really understand that or be able to communicate it. But you know, as an advisor working with folks in the situation day in and day out, you know that is a real thing that we're thinking about is saying, we don't want to tell you what's the bare minimum that you can spend to

you know, not random money. We want to say, here's what you can do, and it's going to be safe and sustainable for you, and yeah, you might have to make some adjustments at some point, and will help you determine what you're willing to and and it's you know, such an ongoing conversation for us with our clients, but we want to help you understand, Okay, what's the upper range that I could take over an average thirty

year period without hurting myself because I want to maximize the joy, the satisfaction of using my wealth and meaningful ways during my lifetime. And most people, when you ask them, not everyone. A lot of people say, you know, either, I don't have a super strong desire to leave millions to my kids at the end of my life, especially because at that point they may not be in a situation where they need it as much anymore. They might be through the years of starting out, buying a home, starting in

career, having kids. They're probably going to be through that, you know, statistically speaking, by the time you pass away, they might be in their forties, fifties, sixties, so you know, kind of maximizing the use of your dollars during your lifetime, because most people don't think that leaving their kids a big check at their funeral is the ultimate goal of their portfolio.

So that is kind of the interesting thing when we are looking at this four percent rule, and especially considering that an overwhelming majority of advice you are still using this. Now. I wouldn't say that we totally throw it out, but it's a checkpoint for us and not the whole roadmap. So if a client says to me, hey, I have a one million dollar portfolio, I think i'd like to spend eighty thousand dollars a year. That's eight percent. That's gonna be a little bit of a red flag for me to

have a further conversation. Understand some things about their goals, their cash flow, needs, their situation, but it doesn't mean it it can't work for them on a short term basis, given they're aware of some of the risks there. But a lot of it depends on what are your legacy goals. You know, if you don't have a strong desire or you feel my kids are set, they don't really need a lot from me money wise at the

end of my life, then you can spend a little bit higher. You can, you know, run a little tighter, closer to the upper parameter because you're not as worried out leaving a certain amount left at the end of your life. If someone has an income stream that's going to kick in at a later point, you know, maybe some folks are retiring a little bit

early and they want to delay social Security to take advantage of that. Well, they can probably take a higher percentage rate early on, understanding that at some point I'm going to decrease my portfolio when Social Security starts and that you know, it won't be eight percent or you know, a high distribution rate for the rest of my retirement. So there are so many things that go

into it. It's such a big conversation. That four percent rule is not only you know, certainly an oversimplification, but definitely a very conservative number. And so I think it's something to really think about, and especially for folks who could be doing it on their own right and you may be living by that pretty strictly to consider, you know, what is the upper parameter?

How do I test it? Or do I need to work with a professional to you know, help me determine that and kind of plan out my retirement, my my finances so that I can maximize that utility. We're gonna go to a quick break here, but we're right back to close out the hour with let's talk money on WGY. Hi everyone, thanks for staying with me through that brief message. This is Harmony Wagner, whilst advisor at Pushe Financial

Group, joining you for this beautiful hour on a Sunday Saturday morning. We'll come up to the bottom of the hour in just a few minutes, but there is still time if you have a quick question for a phone call. So that number is one eight hundred talk WGY one eight hundred eight two five five nine four nine. Before the break, we were talking about the four percent rule, and you know, does it work? Does it work too

well? And I just going to want to close up that conversation station by you know, saying that I know it can be hard to hear general advice on the radio or read it online and to be able to apply it to your own situation. There are many different possible exceptions to the four percent rule or five percent rule, whichever one you like better. How do you know if you fit into one of those exceptions? And how much can you spend?

And how do you structure that to protect yourself? Right? You certainly want to be taking it from a sustainable perspective, you know, thinking about that, because of course you don't want to run run out of money at ninety, that's not the goal. However, I think you know you also don't want to have more money at ninety than you did at sixty five when you retired. That would also, you know, be a risk of you know, not getting that utility, of not getting that joy. Being so

conservative and restrictive that you miss out on it. And you know, something I found in practice is that a lot of people can manage a single risk on their own when you're looking at only one side of the risk equation. Right, if you are worried about only one of those risks, the risk of spending all your money, you can just run the opposite direction as far and as that as you can, and you can probably avoid that risk all by yourself, without you know, an advisor, without anyone else helping you.

That that's pretty easy to do. But it's harder, in my experience, to manage the competing risks on two sides. So you have a risk of overspending, but you also have a risk of underspending. And when you look at those two and how they play together, you realize, okay, I have a little bit more of a narrow window to walk a narrow tightrope here. That gets harder to do on your own, especially with the emotion that's involved in it, the fears, the concerns, all that. It's

harder to do that on your own. So if you're trying not to spend too much, you can probably guarantee that you don't spend too much if you've really you know, lived in your most frugal life, but you also won't be maximizing the utility of your wealth either, So trying to spend just the right amount is tougher to do with confidence. And so you know, I say that just to say, if you're worried about it, you know,

give us a call, engage with an advisor that you trust. The use of mind alone, I think you find is worth it to know that you're spending not just you know, not that you're not spending too much only, but that you're also spending enough and really maximizing the impact of your wealth that you've worked hard to build over your life. This kind of feeds into, you know, kind of behavioral finance, which i'll close the program with today

maybe your finance topic. And you guys know how much I love talking about this and the reasons behind the way that we act or don't act, and the things that make people sometimes make the wrong decision or make no decision even when they know the right thing to do. And one thing I've kind of sort of realizing, and I actually realized it because I had this tendency myself. So I'm absolutely preaching to the choir is this idea of financial perfectionism,

and as a recovering perfectionist, I really identify with that. It's this desire to do everything exactly right with the most perfect timing, and it kind of leads to a focus on over analysis. Financial perfectionists probably find, as I do myself, that they are perfectionists in other areas of your life as well. So if you're resonating with this, it's probably because you know you have this tendency, but it's this, you know, preoccupation with wanting to do

everything perfect so that you can eke out the absolute most right. So if you had cash to invest, you would not feel happy unless you did it at the absolute market low. And the difficulty is that is number one. It's it's not impossible because you could get lucky, but it's really impossible to know that you're doing that. No one can identify in the moment this with accuracy, you know, with without an element of luck. Okay, today is the market low. This is the lowest I'm ever going to see the

market again, and I'm going to invest my cash. People just don't know that, just like you don't know when the highest before a market correction. It's really impossible to identify that with accuracy, and certainly you could get lucky, but you're not lucky likely to be lucky many that many times not with consistency. So it can create this feeling that you know, even if you did really well, if you didn't do it perfect, that you may feel

like you failed. It can also create this paralysis by analysis where you have too many choices and it actually reduces your ability to act because you're trying to consider everything. You're trying to do exactly what's perfect, and you know that's that's just difficult to do. So if you're resonating with this and you're saying

that's me. I'm a financial perfectionist. You know what would be my advice to you, And this is what I would tell you know myself, if I could step outside and give myself a third party advice, is to focus on direction, not perfection. Are you moving in the right direction? If

most of us know what we should be doing right. If you have cash that should be getting to work in the markets, most of us know that we should just invest it because we're not that good to say, oh, the perfect day is going to be August second, and that's when I'm gonna invest my cash. We none of us know that, So focus on direction and saying, if I have cash to put it to work, I should

take that step towards putting it to work. Maybe I invest it all at once, maybe I do dollar cost averaging to manage some of that regret,

whatever it might be. But take a step in the right direction and forget about doing it perfectly, you know, really to recognize that you're not going to and to take that radical acceptance approach of you know, I don't have a crystal ball, and I'm not going to be financially perfect in my life, but also to be encouraged by the fact that you don't have to be financially perfect to like we've been talking about, to get utility, to get

you know, joy and satisfaction out of your wealth. You know, you if you save well, you're disciplines and you're spending you have a good sense of what your goals and your values are, you have a really good chance of being able to meet a lot of those, Whereas if you're so focused on doing it perfectly, you may find that you meet none of them because you were too paralyzed to actually act on it and we think about this, you know, in so many ways it can apply to to our lives,

not just in finances, of course, but in you know, our relationships, our careers, our passion projects, whatever it is. You know, it's it's so much easier to steer a car that's moving than one that's parked. So focus on moving in the right direction, taking those steps. And you know, especially when it comes to investing, you know, I'm so

amazed by just the information that's at everyone's fingertips online. It's so easy to know, you know, historical information and data driven approaches to pretty much anything

you can imagine. Financial, It's so easy to access that. So it just takes the ability to put your biases to the side, to put those ways that you think that actually cause you to behave in irrational ways, to set those to the side and start moving in the right direction, and to know that it might not be the perfect time, but it's better than missing the boat completely. So that's my behavioral finance spiel for the day and hopefully

something that you can identify with. Well, thank you so much everyone for tuning in for today's show. We'll be back here on WGY tomorrow. At eight am, so feel free to tune in in and hear another great broadcast. But until then, thank you for listening to Let's Talk Money, brought to you by Bluchet Financial Group, where we help our clients prioritize their health while we manage their wealth for life. Stay safe and healthy. Happy Father's

Day to all the fathers out there, Have a great weekend. Everybody