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Announcer: Can't get enough of Allworth's "Money Matters?" Visit allworthfinancial.com/radio to listen to the "Money Matters" podcast.

Scott: Welcome to Allworth's "Money Matters," Scott Hanson. Pat McClain, thanks for being with us. Yes. Both myself, my co-host here, we are both financial advisors, certified financial planner, charter financial consultant. We spend our weekdays helping people like yourself, and we broadcast this program on the weekends, hoping to be your financial advisor through the air and podcast, through your AirPods or whatever we got going on there.

Pat: Well, when you say we broadcast...

Scott: I don't know what that means anymore.

Pat: Terrestrial we run on some stations, but we...

Scott: Mostly podcast.

Pat: Mostly podcast.

Scott: Anyway, so glad you're with us. We've got a good program. We'll take calls as usual, talk about what's going on in the markets. And the NASDAQ is now in a bull market again.

Pat: It's crazy.

Scott: And a bull market is just, when the market rises 20% or more, they call it a bull, if it falls 20% or more, they call it a bear. It doesn't really mean anything, but it's just something that... But when I saw that headline this week, and obviously we watched the markets, we tell our clients to ignore the markets on a daily basis, because literally there's been studies show that the correlation between the frequency of you checking your statements, and your investments, and investment performance, there's a negative correlation. You think you might be doing yourself a favor, but you're not. Anyway, we're in the industry, we kind of have to do this sort of stuff. And so there's something awful that happened on Wednesday, or something of this last week, we hit... And I'm like, "It's just amazing...

Pat: How fast things change?

Scott: Yes. And you can't predict these things. Who would've predicted a few weeks ago that the markets would've had this much recovery? Well, maybe we'll hit more lows again this year. I don't know.

Pat: Yeah. Very well could. Well, you know, so I was thinking about exactly the same thing this morning. So I'm going to a conference, and they ask everyone going to the conference your prediction of what the markets will close at the end of the year. And I thought to myself...

Scott: This is an upcoming conference?

Pat: Yeah.

Scott: I hate those games.

Pat: And I thought to myself, "I'm not going to answer this question. I'm going to write in, it is ludicrous for any of us to believe that we know what the markets will close at the end of the year." And by the way, why does it matter? Why does the 12... You know what?

Scott: So you're not playing the game?

Pat: I'm not going to play the game. What's the point? Because my timeline isn't the end of the year. I don't need the money by the end of the year. I need the money for the rest of my life.

Scott: So that story reminds me, in... What year was this? Maybe it was 1998. It was before the... So this was a long time ago, right? I wrote a weekly column for the Sacramento Bee for like nine years. Sacramento Bee is the major newspaper in Sacramento region, and...

Pat: Was much more major back then.

Scott: That's correct. I used to subscribe. But they had a stock picking contest, where they picked four different professionals, and they asked me if I wanted to participate. I remember thinking, "Oh, gosh, I don't want to... Well, I might as well play along." If they say, "there's no such thing as bad PR," I'll play along with the game. I knew it was total luck, total luck. And so I picked, I think, four or five stocks or whatever. And the third quarter, the front page of the business section had the photos of us, I was in the leader board, right? Well, by the fourth quarter that came around, I wasn't. I don't know if I was second or third. I forget how I finished the year, but I wasn't number one. But just the way things...because it's like crap shit. But the way things worked, because they had that big spread on when I was... I had people for years later tell me how I won the stock picking contest.

Pat: By the way, we believe in broadly diversified portfolios. So anyone I've ever met that just has four or five stocks in their portfolio, I think, "You're out of your mind."

Scott: Yeah. And even these kind of stock games with kids in high school, I don't quite...

Pat: I explained that when my boys were doing it in their school, they had this... And they asked me what I thought, and I said, "Well, first I'm going to share two things. One is, it's make-believe, because your emotional reaction to a piece of paper is going to be much different than your emotional reaction to your own money."

Scott: Yeah. Which is your stored labor.

Pat: Which is stored labor. In fact, on our next week's program, we have a behavior psychologist that's going to talk about how people respond to their money. Anyway. But the markets, it's back-to-back NASDAQ. Even the broad markets, you know, VTI which is the total markets, you know, it's crazy. It's...

Scott: While we have some headwinds, there's still a lot of tailwind. And, apparently, we didn't have a recession the first half of the year, because I guess the definition's been changed. Anyway, unemployment's still very low. Maybe inflation will...

Pat: Gas...

Scott: Gas price has come down dramatically.

Pat: They have come down. Yeah. I worry a little bit about stimulus programs that the government keeps rolling now.

Scott: No, you're kidding. This inflation reduction act.

Pat: Which is what? Wait, the problem is, too much money supply now. So to fix inflation, we're just going to put out one...

Scott: It is a little disingenuous, and it happens on both sides where they have bills that they put a name that has nothing to do.

Pat: Yeah. And I don't care how anyone feels about green energy, or not green energy. This is the government picking winners and losers in industries at this point in time by subsidizing, right? Quite frankly, I get a kick out of Elon Musk criticizing the government...

Scott: It's crazy as he is.

Pat: Yeah. I get a kick out of him criticizing the government, and almost every business he has, has got huge government support. And I think...

Scott: That's how he's gotten government support. He's just playing the game. Right now people are caught onto it. I mean, the automobile industry, like, "What the heck's going on?"

Pat: Yeah, we need to get...

Scott: The woman who runs GM says, "I'm going to get a piece of this action and see if I can cut him out of it."

Pat: Good point.

Scott: It's kind of what happened. Same game, that's all. He was just...

Pat: Good point. Well, just remember, a well-diversified portfolio is going to go through ups and downs, and there will be lows, and there will be highs. But what you are interested is the long-term averages, long-term averages, In fact...

Scott: And if you made some choices four, six weeks ago, now you're scratching your head like, "Uh-oh, did I get out the wrong time?"

Pat: Yep. I mean, it's hard, and that goes back to your emotional reaction to the money.

Scott: Yeah. I mean, look at yourself in the mirror and be honest. The best thing you could do is be honest with yourself on where your strengths, and where your weaknesses lie when it comes to your investing. Because it's not easy. Look, it is not easy getting high return. You look at the studies of how individual investors do versus the broad market, they're always way down. And it's because it's not easy. It's not that it's very difficult to pick the winners and losers. The challenge is, it's the difficulty of staying in when it doesn't feel right, when it's scary, when you feel like there's risk, when you worry... You translate that into how it's going to impact your life, which it could, and then you make decisions.

Pat: Oftentimes that are irrevocable. Yeah. So...

Scott: Anyway, we love taking calls. If you want to be part of our program, you've got a question maybe about your own, how things are structured, how they should be structured going forward, or a financial planning related issue, you wonder if you're ready for retirement, or you've been retired, looking about going back in the workplace, or Social Security, or state planning, retirement accounts, 401(k)s, IRAs. Anything financially related, we love taking your calls and questions. And to be part of the program, simply call 833-99-Worth. We'll schedule a time that's convenient for both of us, all of us to take your call. 833-99-Worth will get you there. And let's go to the calls. We're starting out here with Pete. Pete, you're with Allworth's "Money Matters."

Pete: Hello, guys. I have a question. Is it appropriate to ask an advisor what he or she owns in their private account?

Pat: In their personal account?

Pete: Yes, sir.

Pat: Yeah. So, it may be...

Scott: It's funny. I was going to answer, "Absolutely." So, I would like to hear your answer.

Pat: Well, look, if your advisor is 40 and you're 65, it's not appropriate.

Scott: I would've disagreed with that, because it's appropriate to know at least if you find out your 40-year-old advisor is in cash in his 401(k), because he believes that the markets are going to take, that's some good information to know.

Pat: Okay. I'll give you that. But if your advisor is 40 and has an allocation...

Scott: A hundred percent in equities.

Pat: ...in equities, and they're recommending a equity position of 60/40 to you, because your timeframe is different...

Scott: What's driving you to this question, Pete?

Pete: Well, it's kind of like when I go and vote in a voting booth, I pick candidates that have the same views as me.

Scott: Yeah. All right. Well, then I think... I remember when I was... How old was I when I started in this industry? I was... This was, like, two years out of college.

Pat: When you were 25.

Scott: And I remember, his name was Keith, I'm not going to remember his last name, and he was retiring, and there was this investment. The minimum was $100,000 to be into this. And he asked me, "So, Scott, are you invested in this?" The same question, "Yeah. Are you invested in this?" And I said, "Well, to be very transparent, Keith, I don't have $100,000 yet." I was 26, whatever. I didn't have any money. Kind of broken at that time. But, no. It's not an inappropriate question. I think the bigger thing is to get an understanding of their investment philosophies, what they typically recommend to other clients. That gives you good idea of their viewpoint.

Pat: But it's not an inappropriate, right? A bulk of my own portfolio is managed by Allworth, right? It's managed by our investment team, and I am not involved in the day-to-day decision-making of that portfolio. The team is, the investment team.

Scott: Nor would you want to be.

Pat: Nor would I want to be. And then there is a portion of my portfolio that I invest individually, but it isn't the bulk of it. And so when...

Scott: Frankly, it's probably those areas where you're willing for that to go to zero. That's much more speculative type things.

Pat: And it's where I am in my station in life. But, you know, when I was younger... I'm 59 now, but when I was 40, I would say to my clients, "This is what I have my parents in. This is what I have my aunt in. This is..." Right? Which is a comparison to someone that, you know, I love dearly, who's part of my family, and this is how I treat their investments. I should treat my client's investments exactly the same, right. And I would use that analogy, because the clients were about the same age as my aunt, or aunt, depending upon what part of the country you're from, and my parents. So I would absolutely... I wouldn't shy away from the question.

Pete: Okay. No, I see.

Pat: Pete, I'll add to that one more thing. So I have clients that are in their late 70s, early 80s, and they know that they're going to leave a bulk of their estate behind for their children, and their children are the same age as I am. And so, our investment portfolio for them is exactly the same as mine for their children, because their children are exactly the same age as me. And I said to the client, "How about if I just manage the money the same way I manage it for myself, for your children, because they're in a similar station in life, and we're going to manage your money for your retirement a little bit different. And we keep them in two separate accounts so that you can actually tell the difference between the investment portfolios."

Scott: Did that help, Pete?

Pete: Yes. Yeah. I was just curious if it was appropriate, and it sounds like, yes.

Pat: Listen, I don't think there is an inappropriate question that you can ask your advisor.

Scott: I think that...

Pat: Maybe religion, sex.

Scott: Okay. Tell me about your first sexual experience, that's probably inappropriate.

Pat: Yeah. But anything surrounding money, I don't think it's inappropriate. I just don't. I'd be comfortable answering any questions.

Scott: Well, think about all the questions you've had over the years. All kinds of stuff. And I'd enjoy it. I mean, because appreciate the copy. One of our core values as an organization is transparency. We have honesty and transparency. We have six pillars, those are two of them, transparency and honesty. So I think it's fine. But what is interesting...

Pat: And simplicity and education, right? Let's not make things too complicated, and let's make it so that the investor can understand actually what's happening in the world.

Scott: But a good advisor is not one that's going to say, "This is what I'm doing for me, so therefore this is what I should do for you." A good advisor is one who understands what it is you're trying to accomplish, helps put together a financial plan around that and an investment plan to meet those financial objectives in one's life. And they're different for everybody. And I think one of the benefits of doing this a long time, you've encountered enough people over the years. Like, I picture these two clients, both retirement age, both multimillion dollar portfolios. One says, "Scott, why should I take any risk? What's the point? I've got plenty of money. If I earn nothing, even if I assume inflation, I've got plenty of money to maintain my standard of living. To me it makes zero sense for me to take any risk." Perfect. I said, "We talk about the pros and cons there." And I said, "Great. We build a portfolio for him that matches."

Pat: His objective.

Scott: I think of another one, I could picture the person in my mind, similar size account, "Scott, I've got way more money than I need. Why would I want to be conservative? Why don't I invest these dollars for long-term, for growth, and it's going to be that much more money to my kids and my grandkids?" Perfect. Perfect. That one's very aggressive. So neither one of those would necessarily be how I would invest for myself.

Pat: But your job is to invest for the clients.

Scott: I believe that's what it is. We're now in Pennsylvania talking with Mary. Mary, you're with Allworth's "Money Matters."

Mary: Hi. Hello. I own a small business, and I'm wondering what is the best way to kind of... Like, I'm trying to get rid of the credit cards that I have my overhead on. Like, the interest rate is, you know, astronomical, and I'm trying to figure out what is the best way to be able to buy stuff for my business, and not have a crazy high interest rate until I can pay that off. Does that make sense?

Pat: Yes. And how much money do you have on credit cards now?

Mary: It's like 7,000.

Pat: And how much money do you think you're going to need to put into the business in the future?

Mary: I'd say probably another 15,000.

Pat: And do you have... Tell me about your financial situation outside of your business? Well, let me ask this question, is the business making any money?

Mary: Not yet. I'm in my first year.

Scott: And how old are you, Mary?

Mary: Thirty-six.

Pat: Does the business have any revenues?

Mary: Yes, but it's small right now, because... I mean, I'm just starting out, and it's small. But, yeah. I'd probably make, I don't know, maybe $500 a month.

Scott: And how are you providing food on the table and a roof over your head in this time?

Mary: My husband works, so this is kind of a side hobby.

Pat: Okay. And tell us about the rest of your financial situation. Do you own a home?

Mary: Yes. We just moved and we just purchased another home, so now we are currently starting to pay off that mortgage. So, there's not much extra wiggle room.

Pat: Okay. And do you have any money in 401(k)s or IRAs?

Mary: I do not know that actually.

Scott: So here's the challenge. The challenge you've got is you've got a new business, which I think is great, right? You're 36. If you were 66, I'd be concerned. I look at this like, what's the worst thing that happens, right? The worst things that happens, Mary ends up with 20 grand of credit card debt, the business doesn't work out, they have to figure out how to pay it off. You're 36, you'll figure it out, right? And if it works out, now you might have a nice little business for yourself. So I don't know anything about the business. I don't know anything about you, but assuming it's a somewhat decent idea and you're somewhat good at it. I'm pro entrepreneurship and people trying things. But the challenge you've got is you've got a brand new business with no track record, you've got very little revenue, so...

Pat: You're using your personal credit.

Scott: Who would want to loan you any money?

Pat: The credit card companies don't know what you're doing with the money?

Mary: Right.

Pat: Are you taking cash advances, or you're buying product with these credit cards?

Mary: I'm buying product with it.

Scott: And how high is the interest rate?

Mary: I think it's like 12% or a little bit more than that. Maybe 14.

Scott: That's actually not that bad for a startup. I mean, if you think about...

Pat: The cost of capital...

Scott: ... there's publicly traded companies that you would recognize the name of that pay 12% interest rate, because of the situation they're in. It's not common, but that would consider some of the junk bonds that are out there.

Pat: Their capital isn't that high.

Scott: One, is you could look at an SBA loan, but you're not going to... It's too small.

Pat: Yeah. Too small. They're not going to... There's no one that's going to actually do it.

Scott: The second thing is looking at tapping some home equity.

Pat: But it doesn't sound like you have any, because you just moved into a new home. Is there any equity in the house?

Mary: We did have home equity, and then we transferred it over, and cut that off and went to a straight mortgage. So, as far as equity, I don't think I could get something like that.

Pat: What's the value of the home?

Mary: Oh, it's over 500,000.

Pat: What do you owe on it?

Mary: Like 265.

Pat: Oh, easy. This is easy. Just go get a home equity line of credit, and then just use that.

Scott: That's what I would do.

Pat: I did not expect that answer.

Scott: No, I didn't either.

Pat: I did not expect that answer.

Scott: I thought you're going to say we have 480.

Pat: Yeah. No. Correct. Correct.

Mary: No. We sold our other house, though.

Pat: Okay. Just go down to the bank tomorrow, today, ask for a $50,000 home equity line of credit, pay those credit cards out. Your interest rate on that should be...

Scott: Five or six, or something. I haven't looked at it lately.

Pat: ... six, maybe seven. It's an adjustable rate mortgage, you pay it off just like you would pay your credit cards off. But the payments won't be as large as on your credit card. Easy. Easy. Easy. And ask for 50,000, but don't use it all, and pay the credit cards off immediately.

Scott: One thing I think's important, Mary, is for you and your husband to really be honest and say, how far in the hole are we going to go before we throw in the towel?

Pat: Yes, right?

Mary: Right.

Pat: And maybe you and your husband sit down and say, "Maybe it's not 50, maybe it's 30, and at 30 we're done, right? If I can't make this thing work with a capital expense of $30,000, then I'm out."

Mary: Yeah. That sounds great.

Pat: Yeah, that's easy. It is not the answer I expected that you'd have that much home equity, but good for you. At 36 you're doing great.

Scott: Yeah. Yep. Congrats. Go for it.

Pat: Yeah. And by the way, it may be tax deductible, and your credit cards are not.

Scott: Yeah. Because it's a business of expense.

Pat: Yeah. I guess you could tax deduct the credit cards as well. I was just thinking about the home equity.

Mary: Oh, I didn't know that. Okay.

Scott: Well, the home equity's no longer deductible in and of itself, but if it's used for...

Pat: A business expense.

Scott: I think... Unless there's some caveat that says home equity. But it's not...

Pat: Yeah. It's not relevant.

Scott: Yeah, it's [inaudible 00:22:16].

Pat: Yeah. Easy, easy, easy.

Mary: All right. Thank you so much for your time.

Pat: All right. Thanks for listening to our podcast. And do us a favor, if you could go on the website and give us a review, hopefully positive. Our marketing people keep telling us, "You got to remind them to review the podcast." Because the higher the rankings, apparently...

Scott: The better it is...

Pat: ... as he says, we're going to hit the tipping point sometimes.

Scott: Okay. We've only been doing this 27 years.

Pat: It's coming.

Scott: It's good to be patient.

Pat: We're going to get known.

Scott: So as we talked with Mary, I just was thinking, like, I recall this couple. She was a client, remarried, and he had a new... I'm not going to say the kind of business because I don't want anyone to... It was a new retail shop in a new area of town, like, a new subdivision type thing in a new strip mall, or whatever. And he kept, like, drawing into his cash. And I remember I had sit down with him, he needed another 50,000 or another 40,000. But he's retired. He was in retirement age, had retired, had some money saved for retirement. He was, I don't know, late 50s, or 60s, or somewhere in there, as was she.

And over a two-year period I watched him dwindle his account down to just about nothing, and then finally close the doors on the business. And I had a conversation with them several times, like, "Hey, you need to have a line. You're not 30. We can't spend all these retirement dollars. You can't make this up. You do not have the timeframe to make this up, right? I don't care if it's your life dream. Like, what's the cost at this point?" And he did it. And you see that often though with people at retirement time. They buy franchises thinking they're going to make...

Pat: In this conversation, a friend of mine, 28 years old, had some money in an IRA. He calls me, he says, "Look, Pat, I'm starting this restaurant. I got $20,000 in my IRA. You're the third financial advisor I've talked to, and they've all told me I should not use that money in the IRA, because of the taxes and the penalties." And I said, "Oh, I'd use it in a minute."

Scott: Because he's in his 20s.

Pat: He was in his mid-20s, and I think he was 27, 28. And I said, "By the way..."

Scott: Look, we were in our mid-20s when we started our advisory business.

Pat: That's right. My point to him was...

Scott: I used credit cards to help buy some marketing. I had credit card debt when we started the business. It probably took me another year to get out of my credit card. I'm a financial advisor for crying out loud.

Pat: My point to him was, "Look, you're not going to pay any taxes because you're not going to make any money in the first year. So forget that. You get 10% in state penalty, 12.5%. Relatively low cost of capital." And his restaurant today, right, this is 30 years later, highly successful, unbelievably successful. And he reminds me, he said, "That was some pretty good advice." I'm like, "Well, what did you have to lose?"

Scott: Your best investment is in your career, or your business. Most people come into wealth not by luck, it's through becoming excellent at something or having a business.

Pat: Yeah. But remember, age does matter.

Scott: In your 20s, it's one thing. In your 50s, those dollars are sacred dollars. So we're up against the clock. We got to take a quick break. Again, if you want to be part of our program, I'd love to take your call. 833-99-Worth is the number. This is Allworth's "Money Matters."

Announcer: Would you like an opinion on a financial matter you're dealing with, whether it's about retirement, investments, taxes, or 401(k)s? Scott Hanson and Pat McClain would like to help you by answering your call. To join Allworth's "Money Matters," call now at 833-99-Worth. That's 833-99-W-O-R-T-H.

Scott: We're back with Allworth's "Money Matters," Scott Hanson.

Pat: Pat McClain.

Scott: You know what? There are times that... I really love the profession I'm in. There are times I'm like, "Why am I doing this?" Because it can be a really challenging industry. And there's times that I just love it. Well, I think what I love about it, it's the human nature factor that is the most fascinating about it. It's not necessarily the financial markets, but they're driven by...

Pat: They drive a lot of human... Yeah.

Scott: I don't know. It's a fascinating thing. Money is a funny thing.

Pat: And those are the times you feel good about it.

Scott: Tell us about when you feel like you don't like it. It is. You develop deep relations with lots of people. I remember...

Pat: But, they're kind of deep. It's not like you're going to their kids, you know... Well, although I shouldn't say that. I've gone to clients' children's wedding, but those were clients that turned into friendships over time. But, yeah. It's mostly rewarding.

Scott: I remember years ago when I was early in the business, and someone had been in the business a long time, he says, "What I like about the business," he says, "It's a very humbling business." He says, "There's nothing like losing a client's money, and facing the client. The feeling that you have when a client entrusts their portfolio, and it falls in value, and they're panicked and you've got to steer them through that," he says, "That's a humbling experience."

Pat: I would add to that, temporarily losing clients' money, because...

Scott: It gets easier if you've done it a long time, because when you're young, it's all history, and it's textbook, and it's knowledge, it's not wisdom. And when you've done it a while, you've lived through those seasons, you know that things come back, you know that the plans you put in place work. It's not...

Pat: Good point.

Scott: It's not nearly as nerve-wracking.

Pat: Yeah. Their temporary declines are not loss of money.

Scott: How you turn a temporary decline into a permanent loss of money is selling at the wrong times.

Pat: So, my third child works for a private equity firm in Los Angeles, and he calls it, "When you hit print." And I said, "What does that mean?"

Scott: Is that a term in the private equity industry or something?

Pat: I don't know if it is or not, but he says, "When you hit print." And I said, "What does that mean?" He said, "When you close out the trade, when you close out the trade." Oh. I'm like, "Okay."

Scott: Are they still printing them? I don't think so.

Pat: I don't know.

Scott: I don't think they're printing papers. Can you file this...

Pat: I've been doing this, you know, 30 plus years and my 24-year-old son gives me...

Scott: I've heard things like, "drop a ticket," and stuff like that, but...

Pat: Yeah. But I thought it was interesting. So I've been doing this for, I don't know, 35, 36 years. And my 24-year-old son's like, "Dad, when you hit print." And I'm like, "Well, I don't know what you're talking about." He looks at me like I'm crazy. Like, "What do you mean you don't know what when you hit print means?"

Scott: What kind of idiot father do I have? I thought he was an idiot, now it's confirmed. My son... I was in Santa Monica a week ago, Saturday, and he finished his cross-country bike ride.

Pat: We've talked about this. How did it go?

Scott: They finished. They all jumped in the ocean together. And...

Pat: Where did it start?

Scott: Savannah, Georgia. Six weeks later they finished in Santa Monica, California.

Pat: And this was how many children?

Scott: There were nine kids. Two young adult leaders, he and this other young woman.

Pat: Wow.

Scott: Yeah. They had like 82 flats or something like that.

Pat: You can imagine.

Scott: I think he's loving bikes.

Pat: Do you think he's changed? Have you spent enough time with him to realize...

Scott: You know, it's funny. Well, here's how one thing he changed. So he's home for a couple days, and then he's... He got home a couple days ago. He's going to leave in another day or two. So he wanted to ride this morning with me and I said, "Well, I've got an 8:00 commitment I need to be on, so we'll have to go, like, 5:45." He said, "Sounds good to me." And I'm thinking, "my son..."

Pat: You were like, "Where's Blake?"

Scott: I've never known you want to be up early. He was up early, all ready to go.

Pat: Is he a good rider?

Scott: After six weeks.

Pat: I know. Did he drop you?

Scott: He very much could have. He was being kind. We rode for a couple hours, we're close to the house, and he says, "Hey, let's spread it in the last few miles here." And I'm like, "Well, I'll try."

Pat: And by the way, Scott, how old are you?

Scott: Fifty-five.

Pat: You know, if you're a new listener, Scott is Mr. Adventure, right? That's these...

Scott: I hike 36 miles on Monday.

Pat: Right. In the Sierras, rides these bike rides where you go 24 hours without sleeping. Did the... What's that? Where you run for 100 miles in the mountain?

Scott: Interstates 100.

Pat: Yeah. It's just crazy stuff. And then your son kicks your butt. That's good to watch.

Scott: Yeah. The apple doesn't fall far from the tree.

Pat: Is that right?

Scott: Anyway.

Pat: All right. Well, I'm glad he got back safe, and onto the next adventure.

Scott: Onto the next. Hey, before we go back to the calls, we've asked one of our advisors to join us, Adam Peters. And Adam works out of our Denver office, one of our certified financial planners. And, Adam, welcome to Allworth's "Money Matters."

Adam: Thanks for having me.

Scott: Thank you. Just out of curiosity, how long have you been a practicing advisor? How long have you been...

Adam: This is my 23rd year...

Scott: Okay. A couple of years...

Adam: ...in this great industry.

Pat: And how long have you been with us?

Adam: A little over eight.

Pat: Perfect. Okay.

Scott: Wow, that's a long time. Sounds like about...

Pat: It seems much longer.

Scott: ...50. No. I'm sorry. Just kidding.

Adam: Eight wonderful years, if we'd all agree.

Scott: So, hey the reason we're having you on is, you're one of our presenters for a Social Security workshop coming up. Why don't you tell us about, as a financial advisor of 20 plus years, why you think this is such an important factor for people who've saved well?

Adam: You know, I think it's an important issue, one reason just being, people rarely invest or pay into something for 40 plus years. From the time a person's working career begins in their early to mid-20s usually till the time they start Social Security, which is no earlier than 62, I mean, they've paid into it for over four decades. So they want to see really how those dollars have been saved for them, and how that's going to work for them for the next couple of decades.

I think it's in part, a legacy mindset though. They've seen Social Security provide for their loved ones, namely grandparents and parents. So people want to envision how it's going to carry over for them when they start collecting. And now a lot of times those grandparents or parents also had a pension to rely on, which may be different for those entering retirement nowadays, but they still could kind of try and envision how that's going to help them and their family.

I think a real big reason though, why it's so important though is people know a little about how Social Security works, but not all the details. And they know that it's not looking great for the future, but they don't know what that means, right? And I don't know if any of us have read an article on Social Security in the last 10 years that's really painted a rosy picture for the future.

Scott: All the surplus funds?

Adam: Yeah, all that extra money. So we know it's not broke yet. There's still money in the Social Security Trust, but it is a broken system, meaning it's going to have to change, or need changes over time to keep it going.

Pat: And so, I was reading a couple months ago that the average person that applies for Social Security will do it as soon as possible, which is if they're not working at age 62, and if they are working as soon as they're eligible...

Scott: And these are oftentimes people that don't have a lot in the other savings.

Pat: Right. And I think to myself, "Well, this makes no sense, because how you apply for Social Security for both you and your spouse based upon your health, your life expectancy, makes a significant difference in what we would call the net present value of those flow of dollars." Right?

Adam: Right.

Pat: And I read the statistic and I thought, "This is just uninformed." And by the way, you're not going to get any of the information from the Social Security about the best way for you to file for Social Security. They're just going to tell you how much you're going to get.

Scott: Well, you can get some frequently asked questions and you can get the facts, but... I think, Adam, you'd agree. I mean, the important thing is that you make these decisions in conjunction with your rest of your financial plan, and you've got a 401(k), an IRA, a Roth, or maybe you want to look at convert it to Roth.

Adam: Yeah, absolutely. I think, there's misconceptions, and Social Security, as we know, it's a massive system. There's a lot of different ways of claiming strategies or starting benefits. But many people, and I've heard this from clients throughout the years, they've heard from so and so that, "Hey, I heard you're supposed to start at 70," or, "I heard you're supposed to start at 62," but they haven't really taken it beyond that. They don't know how Social Security works. They don't know the options. They haven't really taken the time to learn from a reliable source, like what are the options that are going to be best for them. And it can't just be kind of a blanket answer, right? I think, if it was all the questions that come up at Social Security workshops or in client meetings, by far the number one question I get is, "When should I start Social Security?" But it's usually asked, trying to find some sort of magic age that works for everyone, right?

Like, full retirement age, or some arbitrary age. That's really what they're looking for. But that's also similar to when they come to me and show a statement of their investments and say, "Can I retire?" And I tell those people just based on that limited info, "I have no clue if you can retire, because I'm not sure what you're spending. I'm not sure what your family situation is." And all of those. So there's no really one magic age for Social Security, just like there's no one magic number that everyone needs to meet for retirement to be comfortable. It does require a deeper dive into what's right for you, your family, what you're spending, all of those circumstances. And I just don't think people have taken those steps to figure out what's best for them.

Pat: And when you say take the steps, and I know the answer to this, tell the listeners a little bit how our software works in order to determine what the best time to take Social Security is.

Adam: In short, a lot of numbers are going to be run through and we do this for folks that work with us. So there's all these different times, let's say, a couple could begin Social Security benefits and you look at that and figure out, "Well, what does the math say to do?" And the math, a lot of times when you run all those figures, would show if you're healthy, if you have every reason to believe you're going to have a normal or long life expectancy, you might want to wait to take Social Security. But I think a lot of people just stop there.

So the numbers and running it, we do that quite well, we do that with all clients, but that can't just be the only thing you look at. If you're wanting to wait to take Social Security, we also need to see how much have you saved up, how much of your own money are you going to spend to wait to flip on Social Security at a later time. And I think a big driver for those that have been great savers, right? And we have a lot of clients who have been great savers. They've done well to put money away. The third thing they have to weigh with that decision is, what is the legislative risk, right? What is Congress going to do to change this before I begin?

And for those that have been great savers, it is a valid concern that Social Security could lessen or possibly even eliminate some of the benefits for really good savers. Because Congress or Social Security Administration feels that they've done a good enough job saving to provide their own means for retirement. So you really need to weigh all of those, and that's where this kind of workshop is beginning to help answer those questions.

Scott: Well, good. And I think... I mean, one of the things that we believe is that, the better one is educated, the better decisions they're going to make, right? So that's why we do these workshops. Like, we've done... Leading up into COVID, I think we had 10,000 people who registered for workshops that year. Live in-person workshops and COVID shut everything down. Most people are out living their lives. If you've gone out to dinner, or to a shopping mall, or the airport...

Pat: If you've been in an airport...

Scott: ... you'll really realize most people are out living their lives. If you're out living your lives, and you'd like to attend in-person, I think it's a great way to do it. And, Adam, Peter's going to be doing the workshop in Denver. We've got other... So, Adam, I appreciate you taking some time. And we've got... Yeah. By the way, Adam, I don't know if anyone's ever told you, you sound a bit like Adam Corolla on the radio, but...

Pat: And he looks...

Adam: I have heard that from 12 random people. So it must be true because none of them know one another. So...

Scott: Okay, because as I'm listening to you, I'm thinking...

Adam: I hear that, and I look like Ferris Bueller. So I guess, I'm typecast for that.

Scott: Thanks, Adam. So if you want to see Ferris Bueller and hear Adam Corolla... This workshop is Five Steps to Managing your Social Security. We've got them in Sacramento, Northern California, Sacramento region, August 24th, and 25th and 27th. In the Cincinnati region, August 25th and 27th, and in the Denver region, August 25th and 27th.

Pat: And where you'll get to listen to Adam.

Scott: They're in different parts of the city. And there's no cost for the workshop, but it's really designed for people who saved 500,000 or more somewhere in that, and are within five years of retirement. And by the way, least coming up in pre-COVID, it was our most popular workshop, and would often like fill up, so space is limited. And if you would like to learn more, or want to reserve a seat, allworthfinancial.com/workshop, or you can call 855-918-2181. And if you're listening and thinking, "Like, I'm not even close to those cities." We still have online resources on these things as well. So anyways...

Pat: allworthfinancial.com.

Scott: And let's go back to the phone. Hey, really quick before we go back, we're about to talk to, Earl. But we've got a session where we're coming in the studio for a couple hours next week, Thursday, August 18th. We'll be sitting in the studio for two hours doing nothing but taking phone calls. So, you're not going to have none of this banter back and forth or chit-chat about how much we like our kids, or that sort of thing. We're just like our kids at the moment. So it's just going to be taking some calls. So that's this Thursday, from Thursday the 18th from 3:00 to 5:00 Eastern, noon to 2:00 Pacific. Okay, this Thursday 3:00 to 5:00 eastern, noon to 2:00 Pacific.

Pat: I could probably go into Mountain Time. But you'll figure it out.

Scott: You'll figure it out. And if you can't figure it out, just pull out your iPhone and just look to see what time it is in. It's at 12:00 to 2:00 Pacific where we broadcast. The number you want to call at that time is 833-99-Worth. Again, 833-99-Worth this Thursday. So, all right. We're in Colorado talking with Earl. Earl, you're with Allworth's "Money Matters".

Earl: Hey, Scott, and Pat, how you doing?

Pat: Hi, Earl?

Earl: Hey, good to talk to you. Thanks for taking my call.

Scott: Sure. What can we do for you?

Earl: Hey, listen, my wife and I have both a life insurance for 100,000 on each of us, and that's $100,000 on each of us, and that's just a straight burial. But we're considering switching to a life insurance policy IUL with long-term care rider and put 100,000 on both of us, which would basically give us two and half years. I guess, if one of us got ill, which will be 4% per month. That's intern care. If we're in the house, I think it will be 3,000, a little less. So I'm just wondering because it's $140 difference in either. Is that a good place to put money? Because I'm going to retire in January of 2024. So, if I'm going to put in an extra $140 for the long-term care rider, would that be a good place also to put savings, or build up [inaudible 00:44:08]?

Pat: It may be. These policies with the long-term care riders, there's a 100...

Scott: Because, I think through this it's like... Insurance industry is so frustrating, and the particularly life, and annuities, and stuff because there are some really good products out there. There are actually some excellent universal life policies that are designed to pay for long-term care. And because of the way the policies work and some of the tax benefits, it's a pretty dang good way to buy it. My challenge with it is the way the insurance company sells it, and the conflicts that exist between a producer, insurance salesperson, and a buyer of the product. Because the salesperson has a financial incentive to sell the most expensive, the one that's going to pay the greatest amount of commission, right? That's what they're...

Pat: It doesn't mean that they're going to do that, but that's what they're incentivized to do. That's what their economics say.

Scott: That's right. And so sometimes I see... And some of these policies can be quite flexible in the way they're structured, and sometimes I see these policies like, "Ah, this thing was designed for a high commission, not designed for what's in the best interest of..."

Pat: And there's 100 different flavors of these life insurance policies with the long-term care riders on them. So what's the rest of your financial situation? How much money do you...

Scott: By the way, if I were to buy any policy like this, I'd buy it from a certified financial planner. They have a fiduciary duty. They can lose their CFP designation if they don't put a client's interest first at all times when they're recommending a product like this. So, at least one.

Pat: So what's the rest of your financial situation? Is your home paid for?

Earl: No, it's not. We've got 400 left on our home.

Pat: How much?

Earl: 400,000.

Pat: What's the value of the home?

Earl: 800.

Pat: And how much money do you have in savings?

Earl: In savings we've got 138,000.

Scott: How about in your retirement accounts? How are you going to... So, you say you're retiring next year, or before we hear, first of all, is you have a 400,000 mortgage. So where's your retirement income coming from when you retire?

Earl: Right. My retirement income is coming from the pension.

Scott: And how much...

Earl: It will be 3,900 a month.

Scott: And how much do you make now?

Earl: Right now I make 102.

Scott: And how old are you, Earl?

Earl: I'm 61.

Scott: So you make $3,900 a month, and you're making 102 now, and you've got 138 in the bank. And how much do you have in IRAs or 401(k)s?

Earl: Right. 401(k), I got 83,000, stock, I got 37,000, and in a brokerage fund, I got 18,000. That's my idea.

Scott: Look, you called me and asked me about long-term care. You asked my opinion. That is the least of your concerns. That would be on a list of 10, to me, number 10, 11 or 12. I question whether you have the ability to retire and stay in that house.

Earl: Right. Well, my wife is a teacher, so she has a pension also. So what I was also thinking, is I understand that, because I started saving kind of late, and investing sort of late. Now, I'm listening to your show I'm like, "Boy, I'm way behind..."

Scott: Well, you got a pension... Look, you've got a pension of almost 50 grand a year, that's equivalent to a lot of money saved.

Pat: That's a lot of money.

Earl: Well, actually 53 with my wife's included.

Scott: And what's your family income now you make? Is it 102 between you and your wife? Or you're 102 and she's...

Earl: I'm 110 and she's 1800 a month, which is...

Pat: Twenty grand.

Earl: Twenty grand. Yeah.

Scott: Are you both going to get Social Security?

Earl: Right. That was another one of my questions. Yeah. It seems like at this point if I was to retire as early, I wouldn't have to take it at 62. I mean, at 60 [crosstalk 00:48:30].

Scott: At first blush, Earl, just looking at your situation. Like, if you can defer retirement even a few years, to get that pension larger, have Social Security larger. And by the way, pensions have a tendency to accumulate a lot more later in the cycle. Significantly more than early in the cycle. And you're late in the cycle.

Pat: You work for the government?

Earl: No. I work for UPS.

Scott: Okay. I got to tell you, I question... Forget this long...

Pat: Is this a job that you can continue to do with UPS, or is it a job that's labor intensive?

Earl: No, I can continue to do it.

Scott: Okay. Here's what... Look, if you're my brother, Earl, I would implore you to go sit down with a good financial advisor, map out everything, right? You and your wife sit down and say, "Okay, here's all the stuff we have, here's what we would like retirement to look like." And they can run through a variety of scenarios. They can say, "Okay, great. You retire today. Here's what your income's going to look like for the next few years. Here's what it's going to look like 10 years out, 15, 20," right? Because the odds are, at least one of you are going to make it into your 90s statistically, based on your age.

Earl: Probably my wife. Yeah.

Scott: Yeah. And the thing that scares me is this $400,000 mortgage. If you said you had no mortgage on the home, ah, easy.

Earl: Right. And I was considering a reverse mortgage there.

Scott: Ah, it might be an option. It's probably a little bit over the limit, and you're a little young.

Pat: And you're a little young.

Scott: These are the kind of questions that I think you need to go through. You know, answering all those things. I think the concern that we have, you suddenly say I'm retiring, there's not quite enough money to make... Like, where are we going to make up the difference? We start drawing down some of the money that we saved, which isn't a lot anyway, right? And then we get ourselves some positions like, "Oh, crap there's just..." And you take Social Security early, which I would probably not recommend, right? You'd end up taking Social Security early. So that'll be a much lower amount. And then you find yourself, what if inflation continues and that $3,900 is worth 2 grand or 1500 in real purchasing power. Then we're like, "Now, it's not the paying for long-term care. It's how do we even pay for life?"

Pat: I'm going to share a quick story. One of my own relatives came to me and said, "I think I'm going to retire. What do you think?" And I asked the same questions, and I said, "Ah, maybe." You need to go get a financial plan done. My own relative. I offered to pay for it, because even in my own firm we don't give this stuff away for free. So I will pay for your financial plan, because I love you and I care that much about your retirement. And I can't answer the question for you. You have to go through the math. So the answer on the long-term care is don't make a decision on that, don't do anything. You need to sit down with a qualified advisor, either...

Scott: Someone who's not selling you a product, a fee-based advisor.

Pat: A fee-based financial advisor, and go through a financial plan and do "what if" scenario. What if I work until 2025 or 2026? Or what if I actually downsized my house and got rid of the mortgage? Or what happens if I do a reverse mortgage at the age of 66? What happens then? And that's the direction I would go, but I would not make a decision on the long-term care, or with life insurance stuff. That is insignificant in the big scheme of things.

Earl: Well, I'm just considering it because we are just getting ready to switch over.

Pat: I understand. Don't do anything.

Scott: I wouldn't switch over. I wouldn't switch anything right now.

Pat: Don't do anything.

Scott: Unless that person who's going to be trying to sell you the policy is also a fee-based, which I don't think so, financial advisor well equipped in these matters, I would hold off on that. You need to do the overall retirement planning first, but the plan is so important here, particularly in this situation...

Pat: Not the product.

Scott: We're out of time. It's been great being with you. This has been Allworth's "Money Matters".

Announcer: This program has been brought to you by Allworth Financial, a registered investment advisory firm. Any ideas presented during this program are not intended to provide specific financial advice. You should consult your own financial advisor, tax consultant, or estate planning attorney to conduct your own due diligence.