Laura Stover, RFC® discusses the concept of time segmentation and its application in allocating retirement savings for a stable income during retirement. Time segmentation involves matching investments with the point in time when they will be needed to meet retirement income needs. This strategy provides clarity, comfort, and control over retirement income and helps mitigate the effects of market volatility.

We cover the four buckets of money in a time segmented approach and emphasize the importance of purpose-based allocation. The benefits of time segmentation include flexibility, optionality, and reduced risk capacity.

It's important to work with an income specialist to determine the best strategy for individual retirement goals. Key takeaways include the significance of purpose-based allocation, the four buckets of money in a time segmented approach, and the potential benefits of time segmentation in reducing the impact of market volatility and providing flexibility and optionality to long-term growth buckets.

Time segmentation is a strategy to invest for retirement and emphasizes its role in aligning investments with the point in time when withdrawals are needed to meet retirement income needs.

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Simple diversification used to be the go-to plan for a typical portfolio. A balanced plan of stocks, bonds, and cash would simply do the trick. But that type of diversification has been proven less effective in recent years with the abundance of market volatility. Today, Laura Stover, RFC® takes on financial guru Dave Ramsey's version of a Safe withdrawal rule.

As we approach retirement, our priorities begin to shift. While we still want to grow our money and stay ahead of inflation, protecting what we've accumulated and generating income become top priorities. Traditional diversification, which involves a mix of stocks, bonds, and cash, has proven less effective in recent years due to increased market volatility. A major risk retirees face is having a big market pullback at the same time they're withdrawing their retirement paycheck. This can lead to a negative sequence of returns To mitigate this risk, it is essential to divide assets among different baskets or segments. By separating assets into different time frames and corresponding risk profiles, investors can balance the need for income today with the potential for growth in the future.

It is important to stay informed about market trends and adapt your retirement strategy accordingly. Market volatility and economic conditions will continue to change, requiring investors to explore alternative diversification strategies and consider new factors when constructing their portfolios. By staying proactive and working with a trusted financial advisor, individuals can navigate the complexities of retirement planning and retire with confidence.

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Today Laura Stover, RFC® explores the concept of choice overload and how it can affect your investment behavior and retirement planning. With so many options and information available to us, it's easy to feel overwhelmed and unsure of the best path to take. But today we will provide you with tips and insights to help you navigate through this sea of choices and make informed decisions that align with your goals and aspirations.

Having more choices does not always translate to better decisions. In fact, research has shown that too many options can lead to decision paralysis or option paralysis. When faced with a multitude of choices, we tend to become indecisive and unsure of which path to take. This phenomenon has been observed in studies conducted by Stanford University, where researchers found that customers were more likely to make a purchase when presented with a limited selection of options compared to an extensive selection. Humans are simply not good at making decisions when they are overwhelmed with choices.

As investors, we are bombarded with information and tools that promise to help us make the best financial decisions. However, this abundance of choices can complicate rather than simplify our decision-making process. It can lead to biases and traps that hinder us from making sound investment decisions. Let's explore some of these traps and how to avoid them.

The first trap is inertia. When faced with too many choices, some investors choose to avoid making a decision altogether and do nothing. This can be detrimental to your financial well-being, as doing nothing is still a decision in itself. To overcome this trap, it's important to have a clear understanding of your goals and the purpose behind your investment decisions. By aligning your choices with your overall plan, you can overcome inertia and take action towards achieving your financial goals.

The second trap is naive diversification. This occurs when investors spread their assets among all available investment options without considering their goals, asset allocation, or cost. Naive diversification can lead to a hodgepodge of investments that may not align with your risk profile or financial objectives. To avoid this trap, it's crucial to have a well-defined asset allocation strategy that separates your safe investments from your growth investments. This strategy should be based on your risk profile and long-term goals, rather than simply picking a little bit of everything.

The third trap is opting for attention-grabbing investments. It's easy to get caught up in the latest buzz and choose investments based on what you recently saw on the news or heard from friends and family. However, this can lead to impulsive decisions and overspending on investments that may not be suitable for your unique situation. To avoid this trap, it's important to do your own research and seek advice from trusted sources. Look for content that is backed by reputable research and consider how the investment aligns with your overall plan and risk tolerance.

To navigate through the jungle of choices and make the best financial decisions, it's important to start with a process. This process should involve unpacking the industry jargon and deciphering the content of the information presented to you. Look for trusted sources and limit the number of options available to you. Focus on a few top options that align with your goals and consider the full range of alternatives. By narrowing down your choices and understanding the purpose behind each investment, you can make informed decisions that are in line with your financial objectives.

It's also important to have a strategy call with a financial advisor who can guide you through the decision-making process. A trusted advisor can help you unpack the information and provide you with a vetted selection of options that align with your goals and risk profile. They can also help you understand the implications and potential impact of each choice, ensuring that you are making decisions that are appropriate for your unique situation.

In conclusion, choice overload can be overwhelming and lead to poor investment decisions. By starting with a process, understanding your goals, and seeking advice from trusted sources, you can navigate through the sea of choices and make informed decisions that align with your financial objectives. Remember to focus on the purpose behind each investment and consider the implications and potential impact on your overall plan. With the right guidance and a clear understanding of your goals, you can make the best financial decisions for a successful retirement.

The future outlook for investors is promising, as technology continues to provide us with more tools and information to make informed decisions. However, it's important to stay grounded and focused on your goals. Don't get caught up in the hype or the latest buzz. Instead, rely on a well-defined process, trusted sources, and the guidance of a financial advisor to help you navigate through the choices and make the best financial decisions for your retirement.

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Laura Stover, RFC®, takes on the topic of interest rates today, and how they relate to your financial future. It is important to consider the historical context of interest rates. Over the past few decades, interest rates have been kept artificially low by central banks around the world. This was done in an effort to stimulate economic growth and prevent deflation. However, it was only a matter of time before rates began to rise.

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If we look back to the 1970s, interest rates were much higher than they are today, even 19% at one point. This was a period of high inflation and economic instability, and the Fed's actions were aimed at cooling down the economy and reducing inflationary pressure.

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In comparison, the current interest rates are still relatively low. While they may feel high for those who have only experienced the last 20 years of low rates, they are nowhere near the levels seen in the past.

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When the Federal Reserve raises interest rates, it aims to increase the cost of credit throughout the economy. This makes loans more expensive for businesses and consumers, leading to a reduction in borrowing and spending. The Fed funds rate, which is the rate at which commercial banks charge each other for short-term loans, has a direct impact on the cost of borrowing for individuals and businesses.

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Higher interest rates can have a negative impact on the stock market, as businesses may amend or pause plans for growth due to the increased cost of borrowing. However, it is important to note that the relationship between interest rates and the stock market is not always straightforward. In some cases, rising rates can actually be a sign of a strong economy, which can be positive for stocks.

​​In light of the current interest rate environment, it is crucial to have a well-diversified portfolio that can weather different market conditions. This means having a mix of assets that can provide both growth and stability. One approach to achieving this is through the use of a bucket strategy.

​The bucket strategy involves dividing your savings into different buckets, each with a specific purpose and time horizon. The first bucket is for immediate cash needs and should be held in liquid accounts such as high-yield savings or money market accounts. The second bucket is for intermediate-term expenses and can be invested in low-risk assets such as bonds or CDs. The third bucket is for long-term growth and can be invested more aggressively in stocks or other higher-yield investments.

​By diversifying your portfolio in this way, you can take advantage of higher fixed rates for your liquid bucket while still having the potential for growth in your long-term bucket. This approach allows you to balance risk and reward and ensure that you have access to funds when you need them while also allowing your savings to grow over time.

​​In a rising interest rate environment, we also discuss alternatives to traditional bank products. One option is a Treasury Floating Rate Fund (T-Flo), which is a low-cost, fully liquid investment linked to U.S. government debt. These funds can provide a higher yield than traditional bank accounts while still offering the safety and security of U.S. Treasury bonds.

​Another option to consider is a Multi-Year Guaranteed Annuity (MYGA), which is a type of fixed annuity that offers a guaranteed interest rate for a set period of time. MYGAs can provide a stable source of retirement income and can be a good option for those looking for a higher interest rate than what is currently available in bank CDs.

​Structured notes are also worth exploring as a fixed alternative. These notes are linked to the performance of an underlying asset, such as a stock or index, and can provide a higher yield than traditional fixed-income investments.​

While it is impossible to predict the future direction of interest rates with certainty, there are a few key factors to consider. The Federal Reserve has indicated that it plans to continue raising rates in the coming months, although the pace of rate hikes may slow down. Additionally, inflation is currently at historically high levels but is expected to decline in the months ahead.

​It is important to stay informed and regularly review your portfolio allocation to ensure that it is aligned with your risk profile and financial goals. Working with a qualified financial advisor can help you navigate the changing interest rate environment and make informed decisions about your retirement savings.

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Laura Stover, RFC® looks at the ongoing Israel-Hamas war and how it might affect interest rates and your financial future.. With ongoing uncertainty about the economy, wars in Europe and the Middle East, and protests at home, it's no wonder that Americans are taking a closer look at their financial plans. In particular, we will explore the potential impact of the Israel-Hamas war on the US, the implications for interest rates, and the threat of inflation. So, let's dive in and unpack these important topics.

One of the biggest questions on everyone's mind is how the escalation of the Israel-Hamas war could affect the US. Could it lead to a wider regional conflict? And what would be the consequences for the US economy? If the conflict deepens and other players such as Hezbollah and Iran become involved, it could send oil prices soaring. This, in turn, would lead to higher costs for gasoline and consumer products that rely on diesel and jet fuel for transport. The fear is that this surge in inflation could plunge the US economy into a recession and trigger layoffs.

Inflation is another major concern for Americans, and rightly so. Despite some reports suggesting that inflation is easing, prices are still rising, albeit at a slower pace. The current core inflation rate stands at 3.2%, down from 6.5% in December 2022. However, this is still significantly higher than the Federal Reserve's target of 2%. It's important to note that we have embedded inflation that is here to stay, and we are currently experiencing 40-year highs in prices. The average American is spending 3.2% more on groceries and facing rising gas prices. If the Israel-Hamas war escalates and triggers a surge in oil prices, the situation could worsen.

The Fed has been on a tightening cycle for the past 17 months, raising interest rates from 5.25% to 5.5%. They have hiked rates 11 times, the highest number in 40 years. The recent cool down in inflation has led to optimism in the markets, and it's highly unlikely that the Fed will start cutting rates anytime soon. They will likely stay the course and continue to monitor the situation.

Given the uncertainty surrounding geopolitical events and their potential impact on the economy, it's crucial to have a comprehensive retirement plan in place. This plan should address future higher taxes, rising healthcare costs, and market volatility. It should also include a strategy for generating income that isn't at risk. Capital preservation should be a primary goal for retirees, as they no longer have the luxury of dollar-cost averaging through contributions to their retirement accounts. By segmenting their assets for growth and utilizing a range of investment tools, retirees can better weather market downturns and protect their nest egg.

While we can't predict the future or control geopolitical events, we can take steps to protect our financial well-being. By staying informed, adjusting our plans as necessary, and working with a team of experts, we can navigate the uncertainties of the global landscape. It's important to remember that the past is not always an accurate predictor of the future, and each economic cycle is unique. However, by having a comprehensive retirement plan in place and being prepared for potential market downturns, we can better position ourselves for a secure and prosperous retirement.

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Laura Stover, RFC® discusses the Federal Reserve's Bank Term Funding Program (BTFP) today, a topic that is often overlooked but has significant implications for our economy.This program, which was introduced in response to the failures of banks earlier this year, has the potential to create new money and impact the value of long-term securities. Let's dive deeper into this issue and explore its implications.

To understand the BTFP, we first need to differentiate it from quantitative easing (QE). QE is a Fed open market operation that involves buying bonds out of the market to ease monetary conditions. On the other hand, the BTFP is a credit facility that allows bondholders to use their bonds as collateral for a loan. While both tools aim to add liquidity to the system, the BTFP specifically targets bondholders with heavy capital losses.

The BTFP is essentially a generous version of the old discount window, providing a direct loan from the Federal Reserve to banks. This program aims to prevent market panic and ensure that banks have the ability to meet the needs of depositors. However, if defaults occur, the BTFP could effectively become a form of quantitative easing.

One of the key concerns with the BTFP is the potential for inflation and interest rate spikes. With inflation running at its highest levels since the 1980s, focusing on financial stability could risk creating further inflationary pressures. Additionally, the BTFP's valuation of collateral at par, regardless of the actual value, could lead to a significant deterioration in the value of long-term securities.

Further, the BTFP raises questions about the need for such a massive backstop. While it was understandable during the financial crisis of 2008, the current economic climate doesn't seem to warrant such a program. The influx of liquidity through the BTFP, combined with the trillions of dollars printed during the pandemic, raises concerns about the long-term impact on the value of the dollar and the sustainability of our economy.

The Federal Reserve's Bank Term Funding Program is a significant development in our financial landscape. While it may not be as well-known as quantitative easing, it has the potential to create new money and impact the value of long-term securities. As we move forward, it's crucial to keep a close eye on the implications of this program and its potential impact on inflation, interest rates, and the overall economy.

By staying informed and working with a qualified financial advisor, you can navigate these uncertain times and make informed decisions about your retirement. Remember to consider all aspects of your financial life and ensure that your retirement plan is well-rounded and aligned with your goals. With careful planning and strategic decision-making, you can achieve the retirement lifestyle you've always imagined.

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Laura Stover, RFC® is discussing the recent decision by the Federal Reserve to leave interest rates unchanged and the potential implications for retirees and investors. We will also explore the ongoing efforts by the Fed to combat inflation and the impact it may have on the economy.

The Federal Reserve recently announced that it would be keeping interest rates unchanged at its October meeting. While the market initially responded favorably to this decision, there is still uncertainty about the possibility of rate hikes in the future. The Fed will meet again in December, and if inflation remains high, there is a chance that rates may be raised.

This week's featured article from The Washington Post titled "The Fed is Still Pushing to Get Inflation Down. Do People Feel it?" highlights the ongoing efforts by the Federal Reserve to control inflation. The Fed has been raising interest rates in an attempt to cool down an overheating economy and bring inflation back to its target of 2%. However, there is still uncertainty about whether these measures will be effective.

Fed Chair Powell acknowledges that there's still some mystery surrounding the matter.

The decision to raise interest rates can have significant implications for retirees and investors. Bonds, which are often a key component of retirement portfolios, are particularly sensitive to interest rate changes. When rates increase, the prices of existing bonds decline, as new bonds with higher interest rate payments become more appealing to investors.

Bonds are having their own 2008. That doesn't mean you throw the baby out with the bathwater, as they say. Stocks really didn't do all that well last year either. And stocks are starting to come back again led by that magnificent seven.

In light of the current market conditions and the potential impact of rising interest rates, it is crucial for retirees and investors to have a well-diversified portfolio and a risk management strategy in place. Traditional 60/40 portfolios may not be sufficient in navigating these complex market conditions.

You have to have stop loss indicators that are designed with a goal to mitigate downside risk and remove that emotion from the investing process. Your static 60/40 portfolio doesn't do that. Your target date fund doesn't do that. Your 401K, your 403b, many of your mutual funds are not actively managed with those types of algorithms and proprietary intellectual property with rules to help navigate through different market cycles.

When planning for retirement, it is essential to have a comprehensive income plan that takes into account the potential impact of interest rates and inflation. Relying solely on interest rates for generating income may not be sufficient. It is important to explore alternative options such as structured notes, index CDs, and annuities that can provide income guarantees and potentially higher returns.

We are making our world-class CPA's available to you, even at this busy time of year. You can call LS Wealth at 419-633-0955 or go to redefiningwealth.info.

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Laura Stover, RFC is solo today for a special episode as we cover this week's featured article from Kiplinger "Consistency Is the Key to Investing When You're Retired." We need to focus on consistent returns rather than average returns or market fluctuations. While volatility may be advantageous during the accumulation phase, it can be detrimental to retirees who rely on their investments for income.

We also are covering ongoing news events, such as the Israel-Mideast situation andthe debt ceiling. What effects could these events have on investing and retirement? As always, it's important to use non-correlated strategies and options to hedge against volatility and manage risk.

We hear from other financial authorities in today's show, including David Walker, the seventh comptroller general of the United States. His book questions whether we will still be a superpower by 2040, and he outlines several things he believes the US Government should do, especially as it relates to the ever-growing debt ceiling.

Today, you'll also hear from one of my favorite money managers, Jay Pestrichelli, discussing how he's looking at investments in 2023.

As always, it's important to have a solid income plan, addressing healthcare costs and taxes in retirement.

Link: America in 2040 - Still a SuperPower? https://www.amazon.com/America-2040-Superpower-Pathway-Success/dp/1665500840

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Laura Stover, RFC® is joined by guest co-host Darlene Tucker, CFP® today. This week's weekend brief comes from Forbes: "5 Predictions For An Economic 'Soft Landing' That Were Totally Wrong."

With a lot of uncertainty in the world, and now 2 wars going on, investors are asking what that means for their futures. Are we in for a soft landing? Before we answer that, Darlene and I look at some history - 5 times that media called for a soft landing, but got it totally wrong. This happened in 1973, 1980, 1981-1982, 1989-1991, and of course in 2007-2009. In each one of these examples, the "landing" was anything but soft.

Of course, past performance does not guarantee future results. But while some analysts are calling for a soft landing now, in late 2023, there are steps you can take to protect your portfolio and your retirement future.

Much of America's debt is in credit cards. Darlene reminds us that taking a good hard look at our spending habits can be helpful. And with interest rates higher than just a couple of years ago, that opens more opportunities for investment outside of just the stock market.

As always though, the very best thing you can do is work with a financial professional to create a plan that's individualized to your circumstances, like we do here at LS Wealth. Our contact info follows.

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In this week's Retirement Talk podcast, with Laura Stover, RFC®, and Michael Wallin, CFP®, we delve into the major advantages of separately managed accounts (SMAs), a topic that doesn't often make its way into the podcasting world. SMAs can be a game-changer for those nearing retirement or already in retirement.

SMAs offer direct ownership of investments, reduced transaction costs, and the potential for tax harvesting. These benefits set them apart from traditional mutual funds or ETFs, which are more commonly discussed in the financial world. Mutual funds, for example, are essentially a pool of investments shared among many investors, often with low minimum investment requirements. While they offer diversification, they lack individual control over the underlying assets. ETFs, on the other hand, are a hybrid of mutual funds with lower costs but less active management.

The key distinction with SMAs is that they provide personalized investment options tailored to your specific goals and preferences. You have direct ownership of the securities in your portfolio, which allows for more control over your investments and potentially better tax planning. This is especially valuable in the context of tax harvesting, where you can strategically sell assets to offset gains and minimize taxes.

However, SMAs may not be suitable for every investor due to their higher entry requirements. Typically, SMAs require around $150,000 to $200,000 per sleeve of the portfolio. For those with smaller portfolios, a blend of SMAs and other investment options, like ETFs, can be an effective strategy to achieve diversification and control.

We also touch upon the emotional aspect of investing. Emotional reactions to market news and events can lead to impulsive decisions that may harm your long-term returns. Having a well-thought-out investment strategy, as part of a comprehensive financial plan, can help you stay the course and avoid detrimental emotional reactions.

Lastly, it's crucial to remember that investment decisions should align with your overall financial plan, which includes income planning, tax strategies, estate planning, and more. A holistic approach to financial planning, as encapsulated in our six-pillar Life Arc framework, can help you make informed decisions and work toward a more secure retirement.

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