0:00:00 - Speaker 1

Discussions in this show should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions. Securities offered through registered representatives of Cambridge Investment Research Inc. A broker-dealer member, finra, sipc Advisory Services through Cambridge Investment Research Advisors Inc. A registered investment advisor. Cambridge and Greenway Wealth Advisory are not affiliated. It's time to dive into some insider secrets of investing and retirement planning To make your retirement as smart and as elegant as possible. This is Money Chic with Sherry Rash.

0:00:31 - Speaker 2

Hey everybody, welcome in to another edition of Money Chic, women and Retirement with Sherry Rash and myself, and we're going to talk about maybe going against the grain or just looking at things from a different standpoint than just the traditional way we hear about different financial ideas or concepts, because being a good advisor isn't always about winning a popularity contest or saying the same things that everybody else says. Sometimes it's well not. Sometimes it should be about giving the best advice for the individual situation. So that's the topic this week, sherry how you doing.

0:01:02 - Speaker 3

Doing good and kids are getting ready for back to school and looking forward to getting back into a routine.

0:01:07 - Speaker 2

That's right Back to school time, so I used to dread back to school shopping. The lists of the stuff from the school started to get so specific. It's very specific.

0:01:18 - Speaker 3

Very specific, which I guess it's. So all the kids are the same and they have the same stuff. But I did that back to school shopping last week. I started the day. I actually wrote a blog post about this. That's up on my website. But I started the day very excited, ready to go bang out the list, get everything done, from shoes to book bags, to supplies, and I went through all of the emotions cycle of emotions.

I then was getting anxious and then regretting how much money I'm spending, because my blog post was about your shopping, your spending personality, and I hit them all up, but it's extensive, the list is long. And it's of course, my children's favorite thing to do is back to school shopping.

0:02:03 - Speaker 2

Oh yeah, absolutely Well, if you want to check out that blog, by the way, go to Sherry's website, greenwaywalthadvisorycom. That's GreenWayWalthAdvisorycom. You can also check out more information about Sherry. That's GreenWayWalthAdvisorycom. Yeah, for us back to school into the long time ago, so I'm sure it's even more complex now. Let's talk about our topic this week. Let's peel back the curtain a little bit, sherry, on some of these opinions, some of these kind of mainstream ideas, and maybe it's the right idea, maybe it's not. Let's start with risk. So the appropriate amount of risk for a retiree or pre-retiree. We hear things like the standard 60-40 portfolio, for example. So you're going to have 60% at risk, 40% safe somewhere. That's the kind of tried and true and that might be just fine. But again, it may go against the grain for someone else to be like, no, I can't handle that much or I want more risk depends on your situation.

0:02:55 - Speaker 3

Or the old rule of subtract your age from 100 and how much you should have in bonds is part of falls into that rule as well.

Yeah, I generally don't subscribe. I actually feel I go against the grain every single day and just in the way I run my business with being a virtual advisor, trying to limit the jargon, having very real conversations, and so I am really going to enjoy talking about this today. But the amount of risk just because you have a 70-30 portfolio, you can come up with 100 different 70-30 portfolios and you're not going to have the same risk for each of those portfolios even though you have the same equity to bond allocation. A very basic example I use is Microsoft does not have the same risk as Tesla. They're both technology stocks, technology companies, but the risk is very, very different even though they're both equities and they both fall into that same category. So just because you shouldn't just have a certain amount of equities in the portfolio because you're certain age or just because you're a couple years away from retirement, you need to completely reduce the risk. It's just using risk appropriately in the portfolio.

0:04:20 - Speaker 2

Yeah, and I think that's where we kind of get hung up with often with the mainstream thoughts. Right, it's the stuff that we hear all the time, right? So you go to work, you do your 401k, you do a traditional 60-40 or a 70-30 and you know, Bob's your uncle, you're good to go, and that's not always the case. So I like the fact that you say you feel like you go against the grain on a regular basis. So this is a pretty good topic. Then this week on the show let's talk about life insurance. Let's move to number two here Appropriate use. I mean, many of us feel like life insurance is for our middle age of life. Right, we don't really need it when we're, you know, young, maybe 20 or whatever and then we don't need it again when we're in our 70s, for example. Many people feel like what's the point of life insurance as an older person, as a retired person? But might it go against the grain to look at reasons why it's useful and how it's used?

0:05:10 - Speaker 3

Generally speaking, you buy life insurance to replace your income if in the unfortunate event of your death. So young families obviously need a heavy amount of life insurance for both partners. I also see sometimes if one spouse stays at home to take care of the kids, they oftentimes have less insurance than the spouse or partner that is working, which I like to bring up, that that's not appropriate, because who's going to take care of the kids if the stay at home parent is no longer with us? So I would also argue that that person actually needs more.

0:05:49 - Speaker 2

That's a great point. Actually, I'm sorry, I don't mean to cut you off, but that's actually a great point because it is really costly. Right To bring someone in who you might need to do all those activities now, because the other spouse, the surviving spouse, is still having to work. So that's a great point.

0:06:04 - Speaker 3

Yeah, think about all the things the spouse that's at home or the partners at home that they do every day that's essentially going to have to be outsourced because the other person's still going to have to go to work. I bring that up a lot and many people don't realize that. They just think why need to replace the income?

0:06:20 - Speaker 2

Sure.

0:06:20 - Speaker 3

No, think about what the person does and quantify it.

Yeah, so that's usually what people think of when they think of life insurance is term insurance for that period of time that the kids are in the house, or for as long as you have the mortgage have the insurance for. But oftentimes and I feel like we talk about this a lot we get focused on leaving money to our children and you may not spend as much as you'd like in retirement or you're so nervous about leaving money to the kids that that's your focus. Life insurance may help to alleviate that focus. So instead, spend your money, use some of it on a life insurance policy and then you know, no matter what, your kids are going to get X amount of dollars after you pass.

0:07:08 - Speaker 2

Right.

0:07:09 - Speaker 3

And I would also argue I'd much rather be a beneficiary of a life insurance policy than an IRA, because a life insurance policy you don't pay taxes on, the IRA you do, and you have to deplete it within 10 years. So that's something I bring up to my clients that are hyper focused on leaving money to their kids. Instead of looking at just your investments to leave money to the kids, maybe life insurance could make sense for you.

0:07:35 - Speaker 2

Yeah, great point. So definitely some good points in there where looking at going against a grain might be the way to go. Let's talk about the house, because that becomes another obviously staple. We talk about the house a lot. We're always bringing up in different forms or fashion, but in this case, right, you know, it's whether it's not, whether they're not to pay it off. You're getting there, Obviously you're going to get there at some point. But it's like what is the what's the math dictate for how and when to pay off the house?

0:08:01 - Speaker 3

This is a big one, this is a big topic of conversation and I I do go against the grain for this, or at least I bring up the topic, and it does seem to make clients a little bit uncomfortable because it is so different than what we're traditionally trained to think Is to pay off the house, have no debt entering retirement, no mortgage, and although that does free you up cash wise in retirement, so it's not a bad idea to have no mortgage. That type of thinking made sense in the 80s when interest rates were in the teens right when today mortgage interest rates are low. Many people refinanced over the past couple years.

They have probably once in a lifetime low rates.

0:08:49 - Speaker 2

Oh, yeah, 3%, 2.75, whatever, yeah.

0:08:52 - Speaker 3

Yeah. So throwing that extra $500 to your mortgage to pay off that mortgage that you're paying 3% interest on, where you could take that $500 a month and invest it and historically the market's returned more than 3% annually Could that be a better use of your dollars?

0:09:13 - Speaker 2

Ultimately, the tummy rule kind of kicks in too with the house right, it's like look, I really just need to get this thing paid off because I can't sleep, then that's a different conversation. But if you're talking, about just, you know, going against the grain a little bit. Thinking about this from a mass standpoint, it may be worthwhile to look at things like that. So great points.

0:09:28 - Speaker 3

I like that it is an emotional conversation to. Is it just going to make you feel better to have? That mortgage gone, then okay, we can assign a dollar amount to that right. But I think everything needs to be up for discussion, yeah.

0:09:42 - Speaker 2

I'm popping too many toms when I think about the mortgage kind of thing, right so it's a different conversation. Okay, moving along nicely here. How about you know annuities? Oh, I said the A word right, so immediately there's some people that will just clam right up and go oh, I don't want to talk about them, don't want to hear about them, or whatever the case is annuities are definitely polarizing.

0:10:02 - Speaker 3

They're usually most advisors fall on one side or the other. They like them and they use them. Some may use them too much or you know, it's not the answer to everything and some will never use them, never say the A word and they pretty much don't exist. I think with annuities there has to be a happy medium. The annuity industry is evolving. It's. Annuities today are not what they were 25 years ago, but you have to understand what the annuity is. So, yes, they do run a little bit more expensive. Yes, there is limited liquidity for a handful of years after opening up the account.

There are rules to the annuity and as long as you understand the rule and it's very clear what the rules are and you have cash elsewhere, if something were to come up and you know what you're buying, it could work for certain situations. So definitely I don't think you should rule them out. I don't think you should rule out any product. I think any advisor that rules out a product because of their opinion may not be acting in the best interest of the client, because they really need to have an open mind to help solve that client's particular challenge.

0:11:16 - Speaker 2

Yeah, I would agree with you, and I think people get into that same boat too, where we just we lump them all in. There's so many styles of them and there's different uses. It's not the right tool for every situation, but it could be so. Limiting ourselves is never a good idea. Mutual funds is kind of the same conversation, so let's jump on that one Because, for example, like most of us will get a target date fund because it's easy, right. We go, we have a job, we got to pick something in this 401K. We don't know what to pick, right. That's kind of why they invented them. So we look at it, we go, oh okay, target date fund, here's the date that makes sense for me, and a lot of times these are, you know, mutual funds and many advisors are really starting to pull away from mutual funds and so maybe it's something that it's not the best fit any longer for your portfolio. They're also typically, you know, got a lot of fees.

0:12:06 - Speaker 3

Yeah, I mean mutual funds. If you want to get very diversified very quickly, or if you don't have a ton of money to invest in but you want to get started, mutual funds are a great place to start investing right, and I'm just if you want to invest, great. And. But I would say that there are other investment options out there that are more cost efficient, more tax friendly. For example, I use exchange traded funds, etfs, with the vast majority of my clients for a few reasons, but for those two in particular the cost and the tax efficiency. So there are more options out there now and it would definitely is worth it to explore with an advisor what fits your scenario and how to get yourself diversified but also cost effectively.

0:12:58 - Speaker 2

Yeah, and that's kind of the new. It's almost like the 2.0, if you will, because they act like a mutual fund but they trade like a stock right. The ETF, I mean? Yes, exactly.

0:13:08 - Speaker 3

I say, if a mutual fund and a stock were to have a baby, that's an ETF.

0:13:12 - Speaker 2

That's an ETF, yeah, exactly.

0:13:14 - Speaker 3

So think of the great things about a stock inexpensive, can trade during the day, tax efficient ETFs hold those same qualities. But then also with mutual funds you can get very diversified rather quickly. You can do the same with the ETF. So again going against the grain. I don't think any other advisor would use that description to describe an ETF. But I want to make things as simple as possible for my clients to understand.

0:13:40 - Speaker 2

No, that works, I like that All right. Final one it's the cash conversation. Much like the house, right. So people get very attached emotionally to our cash. I mean, we all, I guess, get attached to it, but you notice it like for the amount in the bank. So for many people it's like I got to see this certain amount, or I just don't sleep well at night, or whatever the case might be. And obviously the last several years you're making bupkus at the bank. So it's the norm, has been. Hey, let's get it out of there and do something else with it. Now that interest rates are ticking up, people are kind of curious about bank rates again. But historically they're never going to outperform inflation period, even normal inflation.

0:14:22 - Speaker 3

Right, and I mean it's going to take a long time for the banks to react to the rising interest rates in your bank account.

I mean with that rate that you're seeing. So this comes back down to you know, here's the rule of thumb, here's how much you should have, and the rule of thumb is generally three to six months of your expenses in the bank. When I explain that to clients, especially when they're going through my financial foundations program, this is one of the first things we talk about is how much should you have in the bank. I explain the rule and then I say how does that make you feel? Do you like that number? Does that number make sense? Do you want to see more? And then, if there's more, again it's a conversation. Well, if you have more in there, you're going to lose out on, you know, some purchasing power because of inflation and explaining the pros and cons. But again it just comes down to like the mortgage, a feeling.

0:15:18 - Speaker 2

Yeah, definitely, and I think that's where a lot of this comes in to play. You can kind of start with the traditional viewpoint that most of us are ingrained with or we hear enough times. But it may be worth it for your situation to talk with an advisor who's willing to look at going against the grain. And then, of course, are you, are you willing to look at going against the grain a little bit? Sometimes it could be just minor and sometimes it could be a larger kind of kind of piece, if you will. So certainly a good conversation this week to have on the podcast.

If you need some help thinking through some of these things, if you're not already working with Sherry, consider reaching out to her at her website, greenwaywealthadvisorycom. That's GreenwayWealthAdvisorycom. She's a financial advisor and money coach. And, of course, don't forget to subscribe to the podcast on whatever platform you'd like to do or like to use. It could be Apple or Google or Spotify, for example, type in money, chic, women and retirement in the search box, or just find it again at GreenwayWealthAdvisorycom. And check out Sherry's blog as well while you're there. As she mentioned earlier, the back to school blog is the one that's up right now. Sherry, thanks for hanging out and going against the grain with us. I enjoy it. Thank you, I always appreciate your time and we'll see you next time right here on Money, chic, women and Retirement with Sherry Rash.

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