foreign
income show with Troy sharp the CEO and
founder of Oak Harvest Financial Group
I'm Mark Elliott you can always go to
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financialgroup.com Oak Harvest fg.com a
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time YouTube uh Troy sharp Oak Harvest
there you go I'm Mark Elliott glad
you're with us today of course any
questions you can always call the team
if you just say look I want to get I
want to talk to somebody I want to find
out where I'm at in my retirement
can I retire you know when can I retire
all of that
800-822-6434 is the number
800-822-6434 Troy you're throwing out a
scenario 1969 to 1999 the markets
averaged about 13 during that time he
said really for investors it was
probably an average a little over 11
percent and that was a super high
inflationary period in the 70s and 80s I
mean it was 18 inflation
um and it was double digit interest
rates at the bank put money in a CD get
12 14 really interesting time but you're
saying it was a great time when you're
averaging 13 over that time period
actual investors probably a little over
11 percent and there are scenarios
you're going to delve into to kind of a
kind of explain that a little bit Yeah
so bonds averaged about eight percent so
stocks a little over 13. if you had the
60 40 portfolio you average right around
let's call it 11 over a 30-year period
60 40 stock spawns inflation was running
a bit hotter than five percent so so we
started to get into the the multiple
scenarios there and this is an important
point because a lot of the
some of the parallels that we have today
are similar but there's absolutely an
entirely different Dynamic going on
across multiple fronts but
some of the similarities from back then
exist today and some absolutely do not
mainly the interest rate environment so
I want to look at this one example
though because I asked you mark I said
if if you could lock in over the next 30
Years average let's say you had a
million bucks
and you were pulling out if you can
average 11 and a half percent you can
safely pull out about seventy five
thousand dollars and your money should
last all the way until age 90.
assuming about a five percent inflation
rate so a cost of living adjustment of
about five percent
now I asked you would you take that 11
average annual return and you said yes
most people listening most people
watching on YouTube right now would say
yes Troy sign me up if I can average 11
over the next 30 Years with a 60 40
portfolio I would be happy as as as I
can be
the truth of the matter is and you know
this Mark the average rate of return is
completely irrelevant when you start the
distribution phase
now if you look at the actual the
chronological order of those returns
from 1969 to 1999. First the markets
went down in 69. then we had the market
crash of 73 and 74. we had a little bit
of a rebound after that then the market
came back again
at that what we call the linear
withdrawal rate so probably the best
time of that time period 69-99 would
have been the last decade of that 90 to
99 was great well the last 20 years of
of that so that's the point so if you
take out that withdrawal
you run out of money if you retire at
age 60 you run out of money by age 72.
so from let's call it 1982 1983 to 1999
probably the greatest 15 17 18 year
period in in stock market history
your accounts are worth such little
value you're not able to benefit from
The Amazing 20-year Bull Run that we had
so it's not about what that account
averages over that 30-year period it's
what are the returns that you experience
especially in the beginning years of
retirement but really throughout all the
years of retirement if you're taking
distributions
and the market is going down
that Compound Effect of
subtraction of value due to withdrawals
combined with Market losses is what we
call the sequence of returns risk so in
that scenario if you actually look at
the chronological sequence of returns
from 1969 to 1971 pulling out that safe
withdrawal rate you run out of money
your portfolio your one million dollars
is completely exhausted and you know at
that point you're you're 72 73 years old
and and looking for work ultimately or
just living off Social Security if you
did this same scenario instead of 69 to
99 and did like
82.09 then the next 15 20 years are
phenomenal the last 10 years are
terrible because of the last decade 2009
but because we were we started great
we're probably in great shape well we we
did we looked at it yes and you don't
even you don't have to cut out the bad
years there if you just flip-flop from
1999 through 1969 meaning if you look at
1999 being the first year of retirement
and then 98 being the second year the 97
being the third year and and reversed
sequentially go down there to 1969 just
reverse the order there that one million
dollars
keeping up with inflation taking 75 000
out a year increasing at five percent a
year because that was the inflation rate
over that 30-year period
that same one million dollars that you
started retirement with gets exceeds 10
million dollars towards the end of
retirement and then once you hit in
reverse order 7374 then 1969
gets down to about eight million dollars
but that's still eight times your
original deposit at that age in this
example you're pulling out more than
three hundred and fifty thousand dollars
of annual income you've pulled out
millions of dollars of income over that
30-year period combined and you're still
left with eight million bucks
so
same average rate of return if you go
from 1999 to 1969 it's 11 and a half
percent average Returns on a 60 40
portfolio stocks did a little over 13
bonds did a little over eight
but if you go in the correct sequence
from 1969 to 1999 I still average 11 but
that one million dollars is exhausted in
12 years whereas in that reverse
sequential order that one million
dollars is worth over eight million
dollars so the parallels are first we
have high inflation okay now I don't
expect eight percent inflation to
continue for decades I I doubt that
we'll have five percent average annual
inflation over the next 30 Years but
inflation is such a powerful concept we
ran an analysis recently and if you're
plus or minus point five percent on your
assumption for average annual inflation
rates a portfolio can exhaust up to nine
years sooner
just going plus let's say we average we
we assume inflation is going to be three
percent if 30 years from now it's
actually averaged three and a half
percent so our assumption was a half a
percent off
your portfolio could be expected to
exhaust nine years sooner due to that
extra one-half of a percent of inflation
being higher than projected so inflation
we can't control
it's but it is one of the most powerful
uh Lee in it impacts your retirement how
long your money will last how much you
spend more than any other Factor more
than rate of return more than to a
certain extent more than rate of return
obviously if you win negative 50
negative 50 negative 30 that'd be pretty
bad but it's a very very powerful
component of the overall outcome when it
comes to retirement planning and that's
why we need what we call the retirement
success plan it's a thorough process
that takes us from Step One risk
management risk planning investment
selection to step two generating an
income strategy how much income I'm a
big believer in seeing you spend as much
money as you can without the fear of
running out so I want you to have a what
we call a dynamic spending plan in
retirement I don't believe in the four
percent rule the four percent rule is
Antiquated in my opinion it was
developed in the late 70s when Bond
rates were much higher than they are
today similar to the story I just went
through from 1969 when when bonds were
from that 30-year period from 69 to 99
bonds averaged eight percent a year
that's because they were paying high
interest rates but also as interest
rates in the market environment came
down over that 30-year period
Bond values increased people had massive
capital gains on top of very high
interest rate payments or coupon
payments with their bonds we're in the
exact opposite environment now where
where rates are still relatively low
compared to where they were back then
but rates are increasing
and when rates increase your bond values
drop so we can't take research from the
late 70s early 80s and apply those same
general rules to your withdrawal
strategy today now I'm not saying you
have to take less a lot of academics
will tell you yeah well you need to the
new rule is two and a half percent or
three percent
now yes if you don't have a plan that
you're monitoring if you don't have a
dynamic spending plan if you don't have
if you're trying to do this yourself yes
I would say probably two and a half
three percent is a safe way to do it but
I want to see you spend more money not
less in retirement
we call it the retirement success plan
because retirement is about so much more
than just the X's and O's the money the
finances
it's how in my this is my opinion
how can we spend the time with the
people we love how can we enhance that
time how can we use money as a resource
to improve our lives to improve the
quality of our lives but to improve the
quality of the lives of the people
around us that we love that we want to
see have happy lives be taken care of
how do we do things together can we go
here can we spend time can I pay for the
kids to come can I pay for the the
grandkids to come what about the kids
spouses I want us all as a family to get
together can I afford that Troy is that
something that that I can do with the
money that I save for retirement not
just looking at the picture today but
extrapolating all these numbers out over
a 30-year period if I do that what how
does that impact me you know those are
the questions I want you to ask when you
come and sit down with an advisor here
because that's how we want to plan for
you we want you to spend more money in
retirement not less but we can't do that
without a dynamic spending plan and we
have clients that they're starting
distribution rate maybe five percent it
may be six percent but you can bet your
bottom dollar that we have a plan for
the back end so if things don't go our
way first we're going to adjust that
spending rate as time goes on based on
bull markets bear markets Etc but we
have a plan for the back end to make
sure that we have enough we call it
Baseline income planning from guaranteed
income payments to make sure that hey if
things don't work out I have 80 000 of
increasing income coming in no matter
how long I live or whatever that number
is so this is a dynamic spending plan a
step two of the retirement success
process we want to deliver you your own
customized retirement success plan but
you have to reach out Oak Harvest
financialgroup.com give us a call
1-800-822-6434 this is the retirement
income show from Oak Harvest Financial
Group so when we come back back Troy's
going to chat a little bit about the
secure act 2.0 do you understand the
moving Parts in that we'll explain right
after this
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