How a Balanced Portfolio Destroyed My Parents Retirement

Transcript

Mike:

You have a diversified, balanced portfolio and you feel real good about it while working very well for you, probably during your growth and accumulation years, once you hit retirement could be the death nail of your retirement. It could absolutely crush your financial security. And I’m gonna share with you why my mom and dad retired January 1st, 1999. They never made a ton of money, but they somehow put four kids through college. And when they retired, they had social security, a pension. And in my dad’s 401k, he add roughly $300,000 from his perspective, he’s like, look, basically I need this 300,000 to give me about $1,000 a month of income or set another way. That’s equal to $12,000 year. Now, remember when he retired in 1999, you know, with inflation today, if he was, that was like 20, some years ago now, 22 years ago today we’d probably have to double or triple these numbers to, you know, to have the same kind of scenario.

Mike:

When he went to the, his advisor, his advisor gave him the same advice you get today. If today you go to, you know, one of these big firms, they’re all gonna tell you basically the same thing. They’re gonna say, here’s what you should do. You should take that $300,000 and you should have a diversified portfolio where approximately the numbers may change a little bit, but approx, ultimately 60% is in some diversified mix of stocks. And the other 40% is in a diversified mix of fi, which stands for fixed income or bonds. That’s what the industry told my parents. It’s the same thing. They tell them today. It’s like, if hello to them today, they’re gonna tell you something pretty darn close to that. Here’s what happened to my parents. Remember they retired January 1st, 1999. And do you know what the stock market earned in 1999? It was like 20%, right?

Mike:

Had a great year. My parents at the end of the year, they’re like, wow, this is great. I took my $12,000 of income out of the account. And on top of it, you know, my balanced portfolio, not only did it generate income, but my 300,000 grew, they had something at that point, they call it three or something like that. Right. Do you remember what the markets did the next three years? In 2000 and in 2001 and 2002, do you remember what happened? Well, 2001, that was the.com crash. The NASDAQ, which is like that. That’s when Amazon went from over, I know these numbers are gonna be funny, cuz you’ll say, come on Mike. Really? Yeah. Amazon at the time had broken a hundred dollars a share today it’s like 3,500 or some crazy number. But at the time, a hundred dollars a share and went below 10 lost 90%.

Mike:

Right. That’s when like tech companies going under left and right doc then NASDAQ lost 75% of its value in like a year and a year and a half then 2001. Anyone remember nine? Yeah. What kind of impact did that have on the stock market? And then 2002, we had a recession in those three years, the stock market was down, you know, anywhere from 45% to 75%, the market got crushed right over, not fast. It was over three years. We started wondering if the market was ever gonna go up again. What was happening to my parents? Because remember what were they doing each of these years? It was like, well, we’re, we’re at three 20. Well, we gotta take out 12 K we gotta take out 12 K and we gotta take out 12 K right? We gotta take out $36,000 over those years. And we were having a loss loss loss. How much money do you think they had left over four years in retirement because remember the first year, 1999 was good year. Now we’re four years into retirement. Now think about this. My dad worked for 30 some years at state farm. It took him over 30 you years just to get to this 300,000 number up here. How much did he have? Four years in retirement?

Mike:

About 160 K basically about half of his money was gone, gone in four years, four years in retirement. And a lifetime of savings are vanishing in front of their very eyes. You know what they’re thinking? They’re thinking, holy crap are, we have to go back to work this portfolio. That’s not working. We’ve gotta make some changes. We know that over time we know the stock market over time, over time, it goes up, right? We know it goes up over time, but we also know that there are periods of time where it is flat for a period of time. We also know it can go down over a period of time, a solid retirement and would allow you to do this. It says, Hey, if the market goes up, check we’re okay. If the market goes sideways, check we’re okay. And if the market goes down, check, we’re still okay.

Mike:

That’s what solid retirement planning is. Remember? What do we do? We hope we hope for the best, right? But what do we plan for? We’re gonna plan for this guy down here. We’re gonna plan for the worst, a 60, 40 diverse five poor portfolio that the entire financial industry says, this is how you do retirement planning. Just build this pretty portfolio. It works. We can put a green check. We say at the market goes up. Yep. That works. But what did my parents learn? My parents learn that if the market goes down, uhoh doesn’t work. And in fact, they also learned if you get along like a 10 year period, like between 1970 to 1979, between 2000 and 2009, where the market goes flat for a long period, doesn’t work there either doesn’t work there either. Hey, here’s a retirement plan. It only works though at the market cooperate, that’s a pretty crummy retirement plan.

Mike:

And that my friends is this right here. That’s what my parents found out. And guess what? My parents were part of millions of American families that found that out in, you know, the early two thousands, you need a better plan than that. That don’t cut it at the end of the day, this diversified balanced portfolio. That feels good. Guess what folks? It only works. If the markets go up, when the markets start going, the other direction, you’re gonna be in a world of hurt. Learn from my parents, you know, go from here to here before you do something, don’t do that. You’re here now, whatever your number happens to be, do something now, right? Say, Hey, maybe I better take a, a second look at this and make sure that I’m good in all three of these environments. All right. That’s our message. This week. Hope you liked it. Talk to again, soon.

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