In this episode, I talk about 401K’s, and how you might allocate your portfolio. Retirement and what that means to you depending upon your age. How can an advisor help you?

Well, hello and welcome to another episode of the 1715 Treasure Coast Financial Wellness Podcast. My name is Thomas Davies and I am a wealth advisor here in Stewart, Florida. And I want to thank you for tuning in, whether you're watching on YouTube or listening in on the podcast. You know, in the comments section, if there's anything that you particular would like to hear about or something I can discuss with you, make sure to drop those comments and likes and we'll get some of those answers, questions answered for you.

Soon to be upcoming, we're going to have some guests on our show. We're going to have some CPAs, maybe an estate planning attorney, and some other fun guests just to make the show a little more entertaining and educational and informational for you. So with that, another wild week in the market, a lot of higher highs and lower lows and throughout the week it still ended up as a positive for the index, most of the indexes ended up positive for the week. So the question is, how did your portfolio perform this week?

And are you comfortable with the volatility in the portfolio that you have? We're certainly getting the volatility in the indexes and how is it affecting your portfolio? Are you able to handle that volatility? You know, maybe you're okay with it and maybe you're not, but these are some of the things that we look at as a financial advisor to question you and ask you how these things affect you.

So with that, we're going to get started here and this week's topics, we're going to talk about 401ks, retirement plans, and a couple of things about what a financial advisor can do for you. So anyway, here we go. 401k, choosing the right allocation in your 401k plan. How do you do it?

Do you throw it a dartboard? Do you just guess? Do you Christmas tree it? You know, how do you make those decisions in your 401k?

Most people that are not in the financial world look at it and say, oh my God, how do I choose the right investments? So some of you have financial advisors and you can reach out to them. My clients reach out to me and they say, hey Tom, how can you help me with my 401k? Is that something that you can do?

And absolutely I can do that. You know, we take a look and see what funds are available. Most of 401k plans are either made up of mutual funds or ETFs. So we look and see what's available in there to choose from.

A lot of it depends on your age, your risk, your time horizon, and then we do some research on the funds. So a question you may ask is, well, what kind of research do you do? Well, we use a system called Morningstar here at Davies Wealth Management and so we will put those ETFs into the Morningstar research and that will give us some idea of what those funds look like, what their histories look like, and how those funds are made up. That's something that you can do without having a financial advisor is going to Morningstar.com and right there they have a search window where you can put in the symbol of the ETF or mutual fund that may be in your 401k allocation.

They use a star rating on most of their funds, rating from one star being the worst and five stars being the best, but it's just another tool that we use here to help you research those ETFs and mutual funds and help you make decisions inside your 401k. So contact your financial advisor if you do have one and say, hey, I need some help with my 401k plan and if you don't have an advisor, like I said, you can go to Morningstar.com and do some research yourself. So Yahoo Finance is pretty good. You can do some research there or you're welcome to give me a call and I can help you there.

But most people with their 401ks, a lot of times they're asking their friends, parents, you know, or business associates and saying, you know, how do I do this? And it's usually one of the first things when you enter a new job that they ask you to do is sign up for the 401k. Now something, you know, questions that I get asked with this is how much should I put into my 401k? So generally I'm going to tell you that you want to max out your 401k.

This is money that's going, being tax deferred. It's not taxed, meaning the money comes out pre-tax out of your paycheck. A lot of employers nowadays will match that contribution that you put in. That is free money.

Take advantage of it. Whether it's 1%, 2%, whatever that number is. So you want to at least do what the company is going to match you with. You know, maybe it's 6% and that's 6% free money.

So you put in your 6%, the company puts in their 6%, and you're getting 6% of that match free. Now for me and my clients, we discuss this and we talk about, you know, should we do the max? But it really is kind of based on the individual, how they want to allocate, you know, their funds into the 401k. Now some of you may say, well, you know, I need every, you know, bit of money that I make and I really can't do more than I'm doing.

So you know, as I was younger growing up, you know, one of the things that I was always told is if you get a raise, let's say you get a raise this year and it's 2% or 3%, well take some of that, maybe it'd be 1%, 2%, and add that to your 401k allocation. You're probably not going to miss it. You know, it's great to get a raise, so you're still getting yourself a raise, whether it may be 1% or 2%, but at least take a little bit of that and add it into your 401k plan if you can. Like I said, you always want to do a match, if there's a match up to that match, whether whatever it is, 1% to 6% or however much the company is going to give you, free money, take it, you know, and then from there, you know, you really just kind of got to make a decision, you know, can I put the extra money into my 401k and does it make sense?

If there is no match, you also want to look at the funds that are available to choose from because you may do better outside in an IRA, a Roth IRA, or maybe even in an annuity that you're going to get better performance than inside that 401k plan, but that's something really to discuss with an advisor that can look inside that 401k plan that you're part of and see what funds are available to choose from. So that's a little bit on 401k plans, hopefully that's helpful to you. You know, you're always welcome to give me a call and, you know, we can help you discuss it and, you know, make a plan for you. So retirement plans, you know, that's probably going to be the next thing we're going to talk about along with 401k plans.

Did you know, I heard this the other day, that 43% of the population is either Millennials or Gen Zers, that's astonishing to me. That is a lot of people that are in that age range of being a Millennial or a Generation Z. So if you're in that category, you probably got 15 to 25 years of retirement and, you know, a good question is, well, gee, Tom, you know, I'm not going to retire for another 20 years and I've been told I should be, you know, the most aggressive that I can, but I'm scared, the market's down, what can I do? Well, the good news is, even though with the market being down and the Fed raising interest rates, there are some things out there now that, you know, you can get 5, 6, 7 or even 8% and they're relatively safe.

They're safer investments. You know, they're not going to fluctuate with the market, but the downside is if inflation is at 8% and it's only paying you 5%, 6%, that's right, you're losing to inflation. But over the long term, then this may be something that you can build a base with, you know, and if you're wondering what those products are, give me a call, we'll discuss them, I can tell you about them. I'm not going to go into deep dive into products, but I can tell you that with interest rates going up, there are some options out there for you, you know, who are risk adverse and, you know, you're able to get that 5, 6, 7, even 8% on your money annually and, you know, it's relatively safe.

It's not going to fluctuate with the markets and actually you can, you know, invest in the markets with no downside. So, you know, those are some of the things that the, you know, your Millennials and Gen Zers that are risk adverse, you know, that you can look into, give me a call, we'll talk about those products over the phone, I'm not going to do that today on the podcast. So with that, you know, for those of you that are at retirement or near retirement, hopefully your portfolios have become more conservative as you're getting closer to retirement or in retirement. You know, it's certainly been a difficult year in 2022 and if your portfolio is down with the S&P 500 over that 20% mark, your portfolio has not been conservative.

You know, most of the bond funds which are generally geared towards income and a little more on the conservative side are even down anywhere from 8 to 10 to 13% and that certainly doesn't feel good as you're nearing retirement or in retirement. So you know, those are some of the things that, you know, we talk about with our clients as they get older, their portfolio should become more conservative. Now this year has been a little bit more of an anomaly where everything has gone down. You have not been able to hide out in bonds whereas the equity markets have gone down.

The bond market has gone down with that. So I mentioned a little bit some of the silver lining with interest rates going up. There are ways to protect what you have. Maybe you've gone down and you're concerned about the market making lower lows which is certainly a possibility.

Some of the people out there think we're not done and the market couldn't go lower. Some of them think that we've already seen the bottom and we're going to go up towards the end of the year and that is what makes a market, a buyer and a seller. So if you are in retirement and you're not happy with where you're at or you're near retirement and you're not happy where you're at, give me a call. We'll take a look at a portfolio.

We'll see what you're doing. When you do retire, that income stream stops. So we want to make sure that that income stream stays consistent. Even if that portfolio does go down, your paycheck does not go down.

Let's take a look at it. Let's see what you're doing. There are options out there for you to invest in where your income will never change. It can actually go up and can never go down.

So those are some of the things that we look at in retirement for some of our clients. So the next question is, how can an advisor help you? Well, I'm just going to give you a high level overview today of some of the things that an advisor can do to help you. One of the questions that I got asked during the week, so I thought I would address this.

As an advisor, we have tools that we can help you research some of the funds and some of the products that are out there and help you make educated decisions based on the research available. So we're going to use those tools. We're going to crunch the numbers and we're going to come back and say, okay, this is what the research is showing us and we're going to help you make an educated decision based on the research that's available. And so that's one of the ways that us as advisors, we have tools that just the general public is not going to have or they're not going to go out and spend the money for.

So that really can make the difference. And I'll equate that to, I remember hearing about it, BMW and how they fixed their cars and they had special tools and the only tools that can be used to work on a BMW were these tools made for BMWs. Well, financial advisors are kind of the same way. We have tools that are made for financial advisors and for us to use to help you make those educated decisions.

Probably one of the big things that we do is we're able to look at your current portfolio, see the amount of risk that's inside of it using our tools that we have. You know, certainly those of you that are uncomfortable with what's going on in the markets and the way your portfolios are being affected, we can put that into our system and kind of, you know, come out with an analysis of, you know, is there too much risk inside your portfolio, you know, and are you taking too much risk? So you know, we look at those investments and, you know, then we also have that discussion of what it is you're trying to achieve, you know, inside that portfolio, you know, is it for needs, is it for goals, you know, is it retirement, you know, and what does retirement look like and, you know, are the investments inside that portfolio going to help you achieve those goals? So you know, that's one of the things that, you know, that we help you do.

You know, another thing is looking at what type of retirement accounts you have. Are they appropriate? You know, should it be a regular IRA, a Roth IRA, maybe an annuity might be right for you. Annuity is just another word for insurance, but what annuities can do, just like retirement accounts, is they can grow tax deferred, whereas in IRAs, you might be only able to put in so much money, whereas in an annuity, you know, it's somewhat unlimited.

You can put as much money in it as you want and it could be a nice place to get some of that tax shelter, you know, that a Roth IRA or a regular IRA is not going to give you above that $6,000 or $5,000 mark. So you know, once again, knowing some of the products, some of the tools out there, you know, those are some of the things that we can help you with. You know, one of the things that we do here is we meet with our clients on a quarterly basis at minimum. They get a weekly email letting them know what the markets are doing, along with a weekly performance report of the portfolio, and of course, you know, we answer the phone calls, the texts, the emails generally right away.

And you know, that's something that I know the number one complaint in this industry is that advisors lack of communication. So I pride myself, it's in my tagline, the highest of quality service that, you know, we get back to you right away, you know, we're going to have the answers for you. If we don't have the answers, we certainly will research them and get them right back to you. And I think that open line of communication is probably the most important thing that you can have with your client.

I like to do things in writing, that way there is no he said, she said. I will put it in writing what I'm going to do, how I'm going to do it, and you're either going to agree to that or you're not going to agree to that. But there won't be a discussion of, you know, well, you said you were going to do this and you did something else. It will either be in paper or it will be in an email.

So those are some of the things that how we work with our clients. You know, hopefully your advisor is working that same way. If not, certainly open to a discussion and see if you'd be a right fit for our firm. But those are some of the minimums, you know, how we treat our clients and how we work with them.

It's certainly been a difficult year, you know, and I expect a lot more volatility probably going into the rest of the year. It wouldn't be a surprise, October is notoriously probably one of the most volatile months, I think they said, over the last 50 years. So you know, it's going to be a bumpy ride. Once again, I hope you found, you know, some of this information useful.

I appreciate your comments, feedback, you know, and if I can answer any questions, leave them in the comment field or drop me an email, a phone call, however it is you want to get a hold of me and I'll certainly try to help you if I can. So with that, have a great weekend and we will see you next week at the 1715 Treasure Coast Financial Podcast. Have a great week and we'll talk to you later.