Do Market Highs Mean Good Things For Investors?

The stock market has hit all-time highs. That should be great for investors. Over the last few years, how many times have you heard the stock market has hit all-time highs? Probably a thousand times, sometimes you hear it twenty times in a day. Well, that should be great for investors. What we found is most retirees and soon-to-be retirees don’t feel like their portfolios have hit all-time highs. Do you? To understand the true effect of stock market high points, let’s examine the Standard & Poor’s 500 Index, the Dow Jones Industrial Average, and the NASDAQ, starting on January 1, 2000, and ending on December 31, 2018:

Based on this data, it looks like all three (3) major stock market indices did extremely well; and that is what the financial industry and your broker/advisor want you to think. It looks like a home run and makes you feel like all the risk you took was worth it because you made a ton of money. The problem is that these numbers are very deceiving. The following graph shows the actual compounded annual increases to all three (3) indices before any reduction for fees you would have to pay.

In January 2000, the Standard & Poor’s 500 Index was at 1,498. Then 19 years later on December 31, 2018, the Index was at 2,506, an increase of 1,008 points, which sounds like a huge gain. The problem is that’s only a 2.85% average compounded increase per year for 19 years. And it’s important to note this 2.85% average annual compounded increase includes the huge gains the stock market produced since 2009 in the longest bull stock market in history. If you think about all the volatility, you went through during these 19 years, all for a 2.85% average increase, ask yourself, if it was worth it? Did the risk equal the return? Was it worth going through two (2) separate approximately -50% market crashes for this type of growth? And maybe even more importantly, the 2.85% average annual compounded increase is without any reduction for fees. If you earned 2.85%, but paid 3% in fees like you may very well be, what was your real return? Right about -0.15%.

Then we can look at the Dow Jones Industrial Average. The Dow looked like it really made a lot of money. In January 2000, the Dow was at 10,940. Then 19 years later on December 31, 2018, the Index was at 23,327, an increase of an astonishing 12,387 points! Your brain right now is shouting “HUGE GAIN! HUGE GAIN! HUGE GAIN!” But alas, this isn’t the case. This is another example of financial illusion. The Dow had an average annual compounded increase of 4.06% per year for 19 years before any reduction for fees. How about the NASDAQ? The NASDAQ started in 2000 at 4,069 and ended on December 31, 2018, at 6,635. Looks like a big gain, but the NASDAQ had an average annual compounded increase of 2.61% per year for 19 years before any reduction for fees.

When retirees think about their assets, and what has happened to them since 2000, most people think they have done exceptionally well. Many thinking they have earned between 8%-12% on average every year. But to date, we have never seen one (1) person who has earned these types of returns during the time period we are examining.

Retirees think they have earned huge rates of return because:

  • The stock markets as outlined previously have hit all new record highs.
  • The index numbers look like they’ve made huge gains.
  • You have made some very big gains in individual years.
  • If you were working during this time period, your main growth was from your ongoing contributions.
  • You have recovered from large losses.
  • Your broker or advisor has told you that you have made huge gains.

Here is why you probably didn’t come close to getting an 8%-12% annual compounded rate of return:

  • The data shows the S&P 500 Index averaged an annual increase of 2.85% during the 19-year time period between 2000 through 2018, the Dow averaged 4.06%, and the NASDAQ average 2.61% per year, all before fees.
  • It’s very difficult to earn stock market rates of return, as we believe based on our research that less than 5% of all money managers can beat the stock market over any five (5) year-time period. DALBAR reported the average equity mutual fund investor earned 3.98% per year in stock mutual funds over the last 30 years ending December 31, 2016.
  • You had to pay fees, in many cases 3% or higher per year.
  • You lost close to -50% in 2000 through 2002 and then had to make a +100% gain just to recover, before you made any gain.
  • You lost approximately -50% again in 2007 through 2009 and then had to make another +100% gain just to recover, before you made any gain.

The majority of retirees we have met with to provide them a 2nd Opinion About Their Money stated that just recently they have finally gotten ahead from where they were before the stock market crashed in 2000 and again in 2008. This assumes they did not make any more contributions to increase their portfolio values.

Sit back and think about these questions: Have you ever wondered why your account didn’t grow as much as you thought it should? Did you ever lose far more than you ever imagined? Did it ever seem like the only growth you realized was from the additional deposits you were making to your accounts? Did it seem like a long time from when you lost money to when you finally recovered? Did you worry about your money? Did you feel confused about your money? For most retirees, if they are honest, they have to answer “yes” to all these questions.

We recently performed a rate-of-return audit for a new potential client:

 

  • In 2000, Bob had $1,500,000 in his portfolio.
  • By 2002, his portfolio was worth $810,000 after the 2000-2002 stock market crash.
  • By 2007, his portfolio was back up to $1,425,000.
  • By March 2009, his portfolio was back down to $785,000.
  • By December 2017, his portfolio was back up to $2,250,000.
  • Bob feels like he has made a huge rate of return, his portfolio value is now $2,250,000! He started with $1,500,000 and now he had $2,250,000!
  • Bob made a net 2.27% annual compounded rate of return.
  • Bob was sad to hear he would have made more money if he would have bought 5-year CD’s.

Join Us For An Educational Dinner Event

Claim your seat and join Peak Financial At Piatti on Thursday February 8th. You and a guest are invited to this educational workshop. Attendance is by invitation only, first time attendees age 55+, no financial professionals. Seating is limited!

Two Ways To Register:
To reserve your seats, call or text keyword PIATTI to 916-842-3372 (24/7).  Seating does fill up quickly, call or text now to secure your reservation. Please, arrive at 5:45 p.m. Doors will close at 6:00 p.m.

  • IS YOUR 401K & IRA IN THE RIGHT PLACE? We’ll discuss the 7 RULES TO LIVE BY FOR RETIREMENT SECURITY.
  • TAXES IN RETIREMENT: The tax implications of our latest administration and why you should act NOW!
  • REPLACING YOUR PAYCHECKS: Create dependable lifetime income from your assets – kind of like a PENSION.
  • RISING INFLATION: Learn to protect your investments and income from rising INFLATION.
  • RETIREMENT INCOME: Will your nest-egg be enough, and will it last, to maintain your current lifestyle in retirement?
  • SOCIAL SECURITY: Important changes and strategies to help maximize benefits for you and your spouse.
  • MITIGATING RISK: The BIG mistake most Americans are making with their retirement accounts… are you one of them?
  • LONG-TERM CARE: We’ll discuss solutions to increasing costs and skyrocketing premiums.
  • WRITTEN RETIREMENT INCOME PLAN: Why everything about your money needs to be in writing to succeed.

If you own an IRA, 401(k), 403(b), 457, TSP, retirement account, managed portfolio, brokerage account, or just have money in the bank, you don’t want to miss this educational dinner event!

  • This event is for those whom are Retired or Pre-Retired who have saved $500,000.00 or more for retirement. Please, no guests under the age of 55. Limit 2 reservations per invitation.

Location: Piatti, Sacremento

Driving Directions: 571 Pavilions Lane, Sacramento, CA 95825

Retirees Want Seven (7) Main Things From Their Money

With 10,000+ Americans retiring every day, there have been countless studies completed detailing what retirees want from their money.

There are many opinions and differing answers depending on the study and the participants. We have reviewed many of these studies, with some focusing on risk, some on investing, others on generating income, several on longevity, and many on the fears and concerns retirees have about their money in general. While all of the studies differed, we noticed a common core, basic similarities, in the results of the studies we reviewed. We found retirees want seven (7) main things from their money:

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Questions You Must Be Able To Answer To Have A Successful Retirement

Most retirees have not gotten answers to their most pressing questions about retirement from their current brokers, advisors, employers, or own research.

If you can’t answer basic questions about your retirement, how can you expect to succeed, feel secure, and feel confident you are making the right decisions about your money? You can’t feel good about it. If you can’t answer basic questions about your money, it means your plans for retirement are based on hope and luck. It means you are hoping you will be lucky, and things will work out. Your broker or advisor might seem to know a lot about your portfolio and managing the assets because that is what they mainly talk to you about. Your broker or advisor may say you are diversified, state they have great money managers, let you know you are positioned for good rates of return, tell you if you want less risk they can put a larger percentage of your assets in bonds, and will often confirm you can expect an 8%-10% average annual rate of return. However, when you ask the important questions about your money, they don’t have any answers. Moreover, your broker or advisor has never put your plan in writing. This means your current broker or advisor is comfortable with you basing your plans for retirement on hope and luck. Are you? In our 50+ years of experience, we have found there is certain data (see diagram on following page) you must have to build a secure plan and to be able to stop worrying about your money:

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What is a ‘Safe’ Rate of Retirement Income Withdrawal?

You need a safe rate of retirement income withdrawal to protect your financial security throughout retirement.

Plan Ahead So You Won’t Run Out of Money in Your Golden Years

What is a safe rate of retirement income withdrawal? What does the phrase “safe withdrawal rate” mean to you? Most people would answer, “the amount of income you can withdraw from your assets without the fear of running out of income during your lifetime.” This seems cut and dried. But you have to look at what the word “safe” means to different people.

“Safe” to some people might actually mean “safer than something else,” such as you stating that you are “driving safe” because you are going 80 miles per hour while everyone else on the road is driving 90 miles per hour, but the posted speed limit is 65 miles per hour. And then, “safe” to other people might mean the chance of anything negative happening is 0%. In planning for retirement, safe better mean safe, something you can count on for sure. Safe better not mean “kind of safe.”

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Do You Know One Thing Possibly WORSE Than a Stock Market Loss?

High investment fees can be absolutely devastating to your financial security – learn why now.

It’s Time for an Analysis of Assets to Beneficiaries 

In past articles, we shared everything you need to know about the very first step in creating a comprehensive written retirement income plan: the Retirement Income Projection. Next, we discussed the second step in your planning, the Income Tax Analysis. If you didn’t get a chance to read those articles yet, you can start here.

In this final installment of this series, we give you details about the third step in your comprehensive written retirement income planning: an analysis of assets to beneficiaries. Having a comprehensive written retirement income plan you can rely on is incredibly important to your financial health in retirement, so let’s take a look at this final step.

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Understanding The Two Stages of Money in Retirement

Did you know there are two different stages of money in retirement? Learn about both to better prepare for the future.

Making the Shift from Asset Allocation to Asset Preservation

At Peak Financial Freedom Group, we believe that the thing our clients want more than anything else is retirement security. Fortunately, we believe in seven rules to live by that will help you achieve it, and we’re sharing the first lesson here with you today. (If you want all seven rules right now, we detail all of them in our book, Momma’s Secret Recipe for Retirement Success.)

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10 Reasons to Use a Fixed Index Annuity

These ten fixed index annuity benefits can give you peace of mind – and a secure retirement income, too.

A Strategy to Guarantee You Won’t Outlive Your Retirement Savings

This content is excerpted from our book, Momma’s Secret Recipe for Retirement Success,” by Dan Ahmad, Jim Files, Jack Canfield, and others. The contribution below is from Robert M. Ryerson, CFP, CITRMS, CLTC.

Most of our clients share a common fear: running out of money in retirement. We often tell them that there are at least ten compelling reasons to consider putting some of their more serious money—money needed to produce guaranteed retirement income for life—into a fixed-income annuity with an income rider. Below, we’ll go in-depth on each of these fixed index annuity benefits.

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The Income Stream You Cannot Outlive

Would you like to create a retirement income stream that can never run out?

Discover the Holy Grail of Retirement Planning

The following content is excerpted from our book, Momma’s Secret Recipe for Retirement Success,” by Dan Ahmad, Jim Files, and Jack Canfield. The book is also full of valuable contributions from other leading professionals from around the world, including the below from Robert M. Ryerson, CFP, CITRMS, CLTC. He tells a tale of three very different investors, with the very same problem… and the safe and sound solution available to all of them.

It is common for retirees and pre-retirees to worry that they could run out of money during retirement. Some people literally fear there could be a day in their future when their income stops, and they end up poor. During my 35-plus years as a financial planner, the most common and pressing questions clients ask me are:

  • How can I retire and stay retired?
  • How can I guarantee I will avoid running out of money during retirement?

People know there are many factors that can cause their assets to run out and their income to stop before they die, such as large stock market losses or a chronic illness—they just don’t know how to protect themselves against such catastrophic events. The good news is that there are solutions available today for all of these risks and potential problems.

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Peak Financial Freedom Group
2520 Douglas Boulevard, Suite 110
Roseville, CA 95661

DISCLOSURE:

All of the information presented here is provided and intended to be used for general educational and informational purposes only and is not intended as a solicitation for you to buy or sell any financial product. None of the information presented is intended to give you specific tax, investment, real estate, legal, estate, or financial advice but rather to serve as an educational platform to deliver information. The ideas, thoughts, and strategies presented here are those of the Management Team and provide an insight to our views on Peak Financial Freedom Group, LLC. Every detail in this website is subject to change without notice. Seminar, radio shows, TV productions, book releases, magazine and book promotions are sponsored, promoted and paid for by Peak Financial Freedom Group, LLC.

2nd Opinion Package available to Qualified Retirees and Soon-To-Be-Retirees may include free consultations, a free retirement income plan, risk analysis, and fee analysis. In addition, a comprehensive written retirement income plan may be provided to those who complete the entire process. Qualified Retirees and Soon-To-Be-Retirees must have a minimum of $500,000 of investible assets such as IRA’s, 401K’s from past employers, stocks, bonds, mutual funds, bank accounts, money markets, CD’s, etc., but DOES NOT include real estate, businesses, limited partnerships, 401K/retirement plans that can’t be moved to another plan, and other illiquid type assets.

All investments involve risk, can involve the loss of principal, and unless otherwise stated, are not guaranteed. Past performance is no indication of future performance and such information cannot be relied upon regarding future potential gains. Nothing is directly or indirectly guaranteed by this information. The planning and ideas presented herein are not suitable for all individuals or situations. Hypothetical examples are used to explain concepts and are not indicative of potential results you could receive; past performance is not a guarantee of future results; and results are not indicative of any particular investment or income tax situation; your results will be different and could be lower or higher. Consult your financial professional before making any investment decision.

Insurance product features and benefits, such as guaranteed lifetime income riders, are subject to contract terms, limitations, fees, and the claims paying ability of the insurance company issuing the contract. The sale or liquidation of any stock, bond, IRA, certificate of deposit, mutual fund, annuity, or other asset to fund the purchase of any other asset including an annuity may have tax consequences, early withdrawal penalties, or other costs and penalties as a result of the sale or liquidation. Different assets can be complex and carry fees, costs, and surrender charges. If you place assets under management with Fiduciary Solutions LLC, we are paid an advisory fee from Fiduciary Solutions LLC and if you purchase an annuity through us, we are paid commissions from an insurance company.

2019(1), 2020(2), 2021(3), 2022(4) and 2023 (5) Five Star Professional Wealth Manager Award - Dan Ahmad and Jim Files have been nominated for and have won the 2019, 2020, 2021, 2022 and 2023 Five Star Wealth Manager Awards. Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. Once awarded, wealth managers may purchase additional profile ad space or promotional products. Award does not evaluate quality of services provided to clients. The Five Star award is not indicative of the wealth manager’s future performance. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or this publication. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by Five Star Professional in the future. Award winners represent an exclusive group of wealth managers who have demonstrated excellence in their field by satisfying 10 objective selection criteria. For additional information on the Five Star award, including a complete list of the 10 objective selection criteria and their research/selection methodology, go to fivestarprofessional.com.

Investment advisory services are offered through Fiduciary Solutions, LLC, a California Registered Investment Advisor. Insurance products and services are offered through PFFG Insurance Agency LLC, a licensed insurance agency (CA Insurance License #0N14013). Peak Financial Freedom Group LLC is a financial planning and umbrella marketing organization, which enables the provision of multiple financial services under one brand. Peak Financial Freedom Group LLC, PFFG Insurance Agency LLC, and Fiduciary Solutions LLC are affiliated entities with common ownership and control. Jim Files is licensed as an investment adviser representative with Fiduciary Solutions LLC (CRD # 1620449) and is a licensed insurance producer with PFFG Insurance Agency LLC (CA Insurance License #0F06511). Dan Ahmad is licensed as an investment adviser representative with Fiduciary Solutions LLC (CRD # 1491561) and is a licensed insurance producer with PFFG Insurance Agency LLC (CA Insurance License #0732913).

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