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The following is a transcript of Episode #48 of the Retire Happy podcast with Roger Gainer.
All episodes of the podcast can be found at Apple Podcasts, Google Podcast, and Spotify.
Roger: Having the strategy fit your why. So, if my purpose in accumulating wealth, saving money every month, and investing is to retire, then you have to be thinking building retirement income streams, not rate of return.
Clark: You\’re listening to \”Retire Happy with Roger Gainer,\” president of Gainer Financial & Insurance Services, Inc. Thanks for joining us. I\’m your host, Clark Buckner. With so much uncertainty in the world today, it\’s more difficult than ever to make decisions that can help you progress toward your financial goals. So, in this episode, Roger shares the first step in your journey to retire happy. He walks us through how important it is to know your why. Additionally, he explains why now is the time to start asking questions and making decisions. Because not making any decision is, in fact, making a decision. There\’s a lot to cover, so, let\’s dive in. And don\’t forget to head on over to gainerfinancial.com for more content like this. Enjoy the show. Roger Gainer, how you doing, man?
Roger: All right, Clark. Good to hear from you.
Clark: I always always look forward to our conversations here. In today\’s topic, we\’re gonna dive right into this, and it\’s the first step in your journey to retire happy. We\’ve had a lot of conversations about retiring happy, it\’s the whole show\’s purpose, and every time we have a conversation around this though I\’m always hearing something new or something, \”Oh, I haven\’t thought about that before.\” So, today, maybe we can cover some common questions that you get with your clients or prospective clients, we can talk a little about the why behind things and how to approach that, and just asking good questions, asking better questions. So, with all that said, what feels most on your mind to get started?
Roger: Well, I think, you know, you touched on it, asking questions, but who are you asking the questions to? The place to start is asking yourself questions. And if you have a spouse, have asking your spouse questions and vice versa so that you understand, \”Why the heck am I doing this?\” Okay, so, there\’s…
Clark: Why the heck am I trying to retire or why the heck am I saving? Why am I doing anything?
Roger: Yeah, \”Why am I saving? Why am I working?\” You know, I mean there\’s that whole fire concept of retiring, you know, in your 30s. You just starve yourself, you never buy anything and you save everything, you work like a dog. And then, you know, you\’re done at 35. Okay? Now, but that\’s somebody who knows why they\’re working like a dog, you know, because they\’re motivated to retire early. That\’s the fire, F-I-R-E, concept. It\’s very big in folks in their 30s and 20s is kind of where that all came from. But most people, you know, \”I\’m saving money because mom or dad,\” or somebody else, or \”I watched a show with Suze Orman and she said I\’ve gotta say five million dollars to retire.\” You know, \”And I\’m thinking, \’Oh, boy, that\’s almost impossible.\’ But I better save or it just might be you\’re at work and the person in the desk next to you says, \’Are you, you know, in the company 401k, there\’s a nice match, whatever,\’ and you say, \’well, I might as well do this just because.\’\”
And it\’s better than nothing, let me start with that. You know, there\’s an awful lot of folks in our country that don\’t save at all. And that\’s not gonna get you anywhere. But if you understand why you\’re doing something…so, for example, you know, I just talked about somebody who went to work and decided, \”Okay, I\’m gonna save money in the company 401k because there\’s a nice match. And it\’s easy, it comes out of my paycheck.\” And then I have a kid and I start thinking, \”Well,\” you know, \”I want my kid to go to college and I wanna help pay for college,\” and I just keep saving in that 401k. Well, if I\’m saving for college, that 401k isn\’t gonna help. Because odds are, when your student gets to college age, you\’re gonna be lower than 59.5 and you\’re gonna pay massive penalties and taxes to get money out of that 401k.
And people say, \”Well, I could just borrow.\” Well, borrowing…we\’ve talked about it briefly before but borrowing from your 401k is a very very high-risk option.
Clark: So, that basically is like debt against your retirement.
Roger: Yeah, you should not ever borrow against your 401k if there\’s any other way to finance something. That\’s one of those very few absolutes. I don\’t wanna take up time today to talk about, you know, why but if any of our listeners are curious why they shouldn\’t take a loan against their 401k, you know, give me a contact through the website. I just had somebody contact me, a few minutes ago, through our website. We\’re always happy to get questions.
But if, continuing with the example, \”I want my kid to go to college, I don\’t want him to take up a bunch of loans and graduate with a huge debt burden,\” but, you know, as we were talking just before we came on air, there\’s still an opportunity there. If I\’m gonna pay cash and I\’ve saved money, there\’s this thing called a Stafford loan. Stafford loans are for undergraduate students, there\’s a limit to how much you can borrow each year. And I highly recommend that people borrow that money because, while your student is enrolled in school, there\’s no interest charged on the money.
And remember last time when we talked about the five things you need to think about, you know, that you need to include in your retirement plan, and one of the things we talked about was the hierarchy of money. And number one is free money. We love free money. So, whether it\’s your match…
Clark: It almost sounds too good to be true. Free money?
Roger: Free money. So, if your student can get a Stafford loan and borrow at zero interest, it\’s like, you know, 2 years same as cash, you wanna go out and buy that sofa. And you got the money in the bank but they say, \”Okay, we\’ll give you,\” you know, \”0 interest for the next 2 years, you just gotta make a little payment every month,\” and, you know, that\’s free money. So, you get to keep your cash, you get to keep your options open, and you\’re gonna pay that thing off as soon as the free-money part goes away. But in the meantime, you got to earn interest on that money instead of giving it to the college or somebody else and they get the advantage of the money. You get the advantage of the money and then you get to keep that interest you earned and you pay it off.
And the other neat little thing is something called Gresham\’s law, that a dollar tomorrow is always gonna be worth less than a dollar today. And if you think about that, we have another word for that, it\’s called inflation. So, you know, the price of things tends to go up, it\’s been going up a little faster than we\’ve been experiencing here, in the last couple of months, you know, a little faster than the last few years. But inflation is really a constant part of our economic system. So, you wanna use as many of those today dollars under your control and not give them away to somebody else, if you can avoid it.
And that\’s where free money comes in. If somebody else is gonna pay for that tuition and some of the dorm costs and not charge me anything for that and I can keep my money for an emergency, I can earn interest on it, I can invest, I can use that money for opportunities…you know, what if I got laid off? That money could really come in handy.
Clark: Right. Now, on the flip side, is there a risk that maybe the money you are investing, you know, on the other side, like what if that doesn\’t grow or maybe, you know, the markets go bad? Does that make sense?
Roger: Oh, it absolutely makes sense. I\’m not suggesting that you speculate with the rent money but there\’s plenty of very conservative ways to earn 4% to 6% on your money. And, you know, if I have $20,000 and I\’m making 6%, you know, that adds up to a couple of thousand bucks over the 4 years my kids in school. And, you know, a couple thousand here, a couple thousand over there and pretty soon you\’re talking about real money. It starts to add up big time. So, that\’s what I\’m talking about is, you know, when you know your why, you get to make better decisions because you have perspective.
Same thing with retirement. You know, in my most recent blog post, I talked about somebody who\’s referred to me and we had a brief conversation, she was very concerned that her money wasn\’t working hard enough for her. Now, she\’s transitioning to retirement this year and her portfolio is somewhat aggressively invested. And her complaint was that there was some bond funds in cash, in the portfolio, that she felt was underperforming because it didn\’t make much money last year and the stock-based part made a better rate of return. So, \”Wasn\’t I in the wrong place?\”
As I told her, it\’s hard to say unless I know why you\’ve saved that money. Is that money for retirement? Then it probably is in the wrong place because the way you\’re set up right now, your portfolio is not generating income. So, it\’s not about rate of return as a measurement of how I\’m doing. This is one of the great traps is this notion of, \”I\’ve gotta beat the market,\” \”I\’ve gotta make X rate of return,\” \”I gotta make 10% or, you know, I\’m underperforming and I should feel bad.\” But, you know, if I make 10% for 15 years and then I lose 50% versus if I make 5% for 15 years and then I don\’t lose a dime, I\’m winning. That\’s the bottom line, you know, that\’s the bottom line. And so, it\’s not about rate of return, it\’s about, \”Why am I doing this? What is the outcome? What is the purpose?\” Because in and of itself, as we\’ve talked, you know, in different times in the past, money doesn\’t do anything. Money\’s nothing, you know…
Clark: No, that\’s wild. Money…I\’ve heard people even talk about…and you talk about money is not real.
Roger: No, money\’s not real. Money is a social compact. You know, if you stop and think about it, those little pieces of paper in our pocket are no different than the coupons that come in a Sunday paper. Okay? They\’re just pieces of paper and the only reason they have value is we all agree they have value. Same thing with gold, we\’ve talked about that before recently even. Gold only has value because we all agree it has value. It doesn\’t really do anything, it\’s a good doorstop, you know, limited use in electronics manufacturing, and it looks pretty and jewelry. But really, when you stop and think about it, gold is just a thing. Right? It doesn\’t feed me, it doesn\’t clothe me, it doesn\’t put shelter over my head, it doesn\’t keep me warm on a winter\’s night. It\’s just a thing. But we look at it as a store of value because we all agree it has value. And we\’ve made that agreement last four literally thousands of years. So, in a way, it\’s our longest running currency. But it\’s just a currency.
You know, I mean a bushel of corn has a real value. Right? We get to eat it, we can do things, you can distill it down and make, you know, alcohol out of it, burn it in your car, or use it as a fuel. So, it has an intrinsic, an actual value because it does something. But a share of stock doesn\’t do anything. A bond doesn\’t do anything. And money, you know, if you think about it, money is really just digits on a computer screen these days. And these digits move around, right? You do PayPal and Zelle and, you know, Apple Pay and all these different ways of not touching anything.
You know, there was a couple of restaurants in our area that opened during the pandemic and nobody touches anything. And the first time I went there, I walked up to the bar to buy a beer and I pulled out, you know, 10 bucks and I put it on the counter. She said, \”I can\’t touch that.\”
Clark: What?
Roger: \”We only take credit cards.\” So, you know, I mean because it\’s touchless, right? And so, you have a little one of those barcode things that you hover your phone over.
Clark: A little QR code thing?
Roger: A little QR code and the menu comes up and you push a couple buttons and you pay on that screen. And then they bring it and put it on your table. But nobody touches anybody. So…
Clark: Yeah, I mean money is…yes, I\’ve seen that happen too. Unless you have exact change, one place told me, I was like, \”Well, I guess I\’ll just use my credit card here.\”
Roger: Yeah, Well. And, you know, think about Bitcoin.
Clark: I was just about to ask you about cryptocurrency. And talk about money not being real, that has been wild to watch…all of cryptocurrency, Bitcoin especially.
Roger: Yeah. All, you know, what they are are electrons. And that\’s the value, I guess, of what stands behind those types of currencies is electrons. And that right there is…you know, we were trying to roll out electric cars and we have to increase the capacity to produce electricity to meet that demand of more electric cars. And now we wanna add cryptos to it?
I read an article, a couple years ago, that said if we were to replace the U.S. dollar with Bitcoin in the same amount, it would use all the electricity produced on the planet currently. So, we have to double the amount of electricity that\’s being produced in order to do that. Because it\’s electrons. So, I know we\’re kind of straying here but this is all part…
Clark: It\’s a good point though.
Roger: Well, I want people to have perspective on all these things that we get so uptight and serious about. Right?
Clark: It\’s really emotional, it\’s really stressful.
Roger: Well, exactly. And I\’ve always maintained that money should help you sleep better at night. You\’ve heard me say this multiple times. It should not keep you up at night. And so many people, because they don\’t know this why, they\’re doing things and they\’re not sure how it relates back to them.
Clark: Yeah, let\’s talk about that, why and the what, you\’re just saying. And when someone comes to you and they\’re asking, \”Hey, like what\’s my rate of return?\” I know that\’s, of course, a common question you get, \”what kind of rate of return can I get from this?\” and your response is what?
Roger: Well, first and foremost, my response is, \”Did we sell anything last year?\” Because if you don\’t sell what you\’re invested in, you didn\’t make a dime. So, I always get a kick out of it when people say, \”Oh yeah, my manager did great last year, I did 15%. I made 15%.\” And I say, \”Did you sell?\” And they said, \”Well, no,\” you know, \”I love all these,\” you know, \”I got Microsoft and I got Apple and I\’ve got Amazon, and boy, look at these companies. They\’re just going up like crazy.\” I said that you didn\’t make a dime if you didn\’t sell.
Your portfolio appreciated just like your home appreciates, right? Sometimes, you know, it goes up in value, we\’ve seen that in the last few years, but you didn\’t make any money, unless you sold that house. And it\’s a really important concept that people need to understand because you can lose it just as easily as you made it, quote unquote, right, because prices go up and down. That\’s just a thing that happens.
So, when somebody comes to me and says, \”Well, what did I make last year?\” usually, we\’ve gone through a lengthy process of identifying their why and making that the center piece of what we\’re doing. So, for example, if somebody\’s, you know, getting ready to retire in a few years, we\’re talking about building income streams. Because retirement\’s all about having the most income, keeping up that ability to keep pace with inflation, maintaining your buying power, and being able to plan for contingencies. So, as things come up, you\’re not having to detour and go down, you know, a stressed out rabbit hole trying to figure out, \”What do I do next?\”
You know, it\’s why if you\’re fully invested in stocks and that\’s your strategy for retirement, that\’s incredibly risky. Because pricing goes up and down but the need for income and the amount of income to keep food in the fridge and a roof over my head, that is constant. And, as we discussed previously, we have a system that\’s designed to include…what do you call it? Inflation. So, what I need from my portfolio in that sense, when I\’m retired, is I need a paycheck. Because I…
Clark: You need that money. You can\’t take a brick off your house, I\’ve heard you talk about…
Roger: Yeah, I talked about that a couple of podcasts ago. Right, you can\’t chip a couple of bricks off and run down to the Safeway or the Piggly Wiggly and say, \”Hey, here\’s 150 bucks worth of my house. I wanna buy dinner tonight,\” and they\’re gonna, \”sorry, that doesn\’t work for us. You have to convert it to, you know, the coin of the realm, which is the dollar.\” And it\’s the only thing we can spend when we go out there. So, how many dollars of income does your portfolio produce?
Now, I\’ve got a client right now, he says, \”Oh man, I\’ve made so much money in these tech stocks but, gosh, I don\’t feel like I can sell them because look at how much tax I\’m gonna have to pay.\” And his cost basis in that part of his portfolio is about $300,000 and it\’s worth about a million bucks right now. So yeah, that\’s big appreciation but he\’s completely stressed out about selling and paying tax on that, you know, that 200% appreciation on his portfolio. But the reality is he\’s retired. So, just because he owns Microsoft and he bought it really right, by not being clear on the why and focusing on taxes instead of outcomes he\’s like a deer in the headlights, \”I can\’t sell these things.\”
So, we\’re working on that kind of thinking and then coming up with a strategic plan for liquidating and minimizing the impact of taxes but turning those things into an income stream. You know, these are stocks, that I just mentioned, have been growing like crazy, over the last decade or so, but they don\’t produce much in the way of income. If they have any dividend at all, it\’s very very small. And so, owning that stock doesn\’t really help, you need a strategy to turn that stock into income.
Clark: Well, we also, back in, what, 2008, there was a big financial crisis. And a lot of people who had stock were hoping that they could one day sell that for their nest egg. But that all sort of disappeared in front of them. So, having the strategy up front is what you\’re describing is important. So…
Roger: Well, having the strategy fit your why. So, if my purpose in accumulating wealth and investing is to retire, then you have to be thinking building retirement income streams, not rate of return.
Clark: Boom. That makes sense. That\’s the message right here. So, with the time we have remaining, thinking about building the income streams and moving away from just the rate of return, what are some of these first steps? Right? The whole concept here is the first step in your journey to retire happy, which one of the steps you would suggest?
Roger: The first step…you know, it\’s funny how we seem to come back to this almost every podcast but that\’s why we invented and keep refining the thought organizer. So, even if you filled one out, you know, 4 or 5 years ago, it\’s nice to revisit. Because, you know, say, I\’m in my 30s and 40s and I\’m focused on college. So, now I\’m saving for college, and that\’s my why. And now my kids are done with college, and maybe I\’ve got a retirement account but my focus has now shifted and my why has become retirement.
So, for all the reasons we\’ve talked about earlier, you know, once you have that clarity, then you can start thinking about things like tax diversification to protect you in retirement. Right? Taxes go up, I need to be able to, you know, use the rules of the game, the tax code, to my advantage. And the only way I can do that is if I position myself properly ahead of time and I diversified under the tax code with the understanding that I want to minimize the tax on my income streams, on my risk management, those kinds of things that become very very important. Right?
When you\’re in your 30s and 40s, you wanna grow that money. \”Boy, do I wanna grow that money.\” And that\’s what we think about it. And the financial press and brokers say, when you\’re young, you need to be more aggressive. Right?
Clark: I mean you have that luxury when you\’re younger, right, they can bounce back. You don\’t wanna be gambling, rolling the dice when you\’re a year out from retirement. Right?
Roger: Exactly. Because you have no time to recover. So, the rationale to young folks is, you know, you can be more aggressive because you have time to recover from losses. While that\’s true, I still, you know, maintain that not losing money is the best way to win at all of this. But when it\’s about income streams, what is the risk? The risk is not missing out on the best appreciation days in the market, the risk is about, you know, running out of money once I\’m retired. The risk is about taking a 50% hit to my portfolio the year before I\’m gonna retire, or 2 years before I\’m gonna retire. You know, we didn\’t get back to 2007 levels in the stock market until just about 2013. That\’s almost 6 years. Well, if I was supposed to retire during that time frame, you know, I\’m starting in the hole. And then I\’m liquidating things at a bad time, right, because, you know, when we invest in things like stock, the whole point is to buy low and sell high.
And that\’s the other thing. If I have to sell, if my strategy is to cash in stocks each month regardless of where the market is, I\’m actually forcing myself to sell low. Because I have to sell every month. You know, it\’s the opposite of dollar cost averaging and that strategy will shorten the amount of time your money will last.
Clark: It makes sense, yeah. I mean because you don\’t wanna…yeah, I mean it\’s loud and clear and it can feel like a scary thought when you don\’t have an option, you have to do that. You kinda keep throwing coals on the fire to stay warm, in a way. So, anything else? I know you mentioned the thought organizer is something to maybe revisit, potentially. Or if someone has not ever filled out the free thought organizer on your website, what is that and how should someone fill it out?
Roger: Okay. Well, it\’s an exercise that only takes about 10 or 15 minutes to do. There\’s no wrong answers. If you have a partner, spouse, or significant other that you share financial responsibilities with, I encourage you both to fill that out separately and then get back together and compare answers. That way you understand where we have a difference of priority, a difference of why, difference of comfort levels. And you\’ll find that that\’ll reduce the amount of fighting over money that you do. Because couples fight over money, sooner or later. You know, there\’ll be a non-meeting of the minds in every couple I\’ve ever known. And, you know, that thought organizer can help smooth those differences of opinions, shall we say.
The thought organizer goes into a variety of topics. It helps you to prioritize what\’s really important for you and reflect on the things in your lifestyle that are most important and what your expectations are and what your comfort level is. Comfort with volatility, comfort with losses, short or long-term, you know, things like that.
So, when you clarify your thinking, then you can go back and look at the investing part and figure out if that\’s in alignment with those objectives that you\’ve identified through the thought organizer.
Clark: Hey, I love it. I love it. So, this has been, as usual, insightful and a good reminder to not have to walk that road alone, to have someone to go with you. And so, that\’s something you\’re regularly helping your clients out with. So, any final thoughts before we wrap up?
Roger: Final thoughts? Working with advisors, if it\’s truly an advisor, not just an investment salesperson, can really really be of great value. Because the right advisor for you will help you to stay on track towards accomplishing your why.
Clark: As always, Roger, I\’m looking forward to our next session.
Roger: Me too.
Clark: Roger L. Gainer, RICP, ChFC, California insurance license number 0754849 is licensed to sell insurance and annuity products in California, Illinois, Arizona, and Nevada. Roger L Gainer is an investment advisor representative, providing advisory services through HFIS, Inc., a registered investment advisor. Gainer Financial & Insurance Services, Inc. is not owned or affiliated with HFIS, Inc. and operates independently.
The contents herein are the opinion of the speaker and should not be considered as tax or legal advice. This podcast should not be considered a solicitation for investing or advisory services. Strategies mentioned are not a recommendation to implement or purchase those products or strategies. You should contact your own advisors as to the appropriateness for your specific situation.
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