Retirees & Pre-Retirees Preparing for 2026

Video Chapters & Transcript:

[Music] Howdy folks. Welcome once again. This is your doctor. Jeff Camarda along with Super CFP Anna Wonderlick. And today we’re talking about year end really anytime, but you know certainly uh New Year’s resolution kind of things for retirees and pre-retire retirees should do uh to prepare for the year ahead. So here are some critical things. The first to be aware of is the market, you know, sure has been on a tear for a long time and I presume it will be uh when you uh actually view this, but you want to take these lofty valuations with a grain of salt because as uh we’ve heard forever, what goes up must go down and we’ve been going off for a really really long time. But beyond that, some of the advice is a little more evergreen. you know, it makes sense to consider consolidating accounts, right? And what are some of the reasons? And if you’ve got, you know, accounts at XYZ brokerage and I got a 401k with my employer and I got some cash value life insurance and I got some money at E Trade and so forth, how do you keep up with all that stuff, right? Well, it’s impossible, especially if you’re not a financially minded person. Um, I’ll use an example. One time I was working with a a new client and they had five 401ks from different jobs spread out. One was their current employer. Um, you know, they’re telling me, “Oh, I think I’m, you know, moderately, you know, invested.” By the time we get the statements, they had $150,000 of their nest egg sitting in cash. And it had been like that for years, and they just hadn’t checked it. So, you know, it was a no-brainer to consolidate it so that we’re it’s being looked over. It’s all invested. the same which is very important and again you know constantly saying when you say invested the same you mean you have a consolidated plan all the pieces you know match each other correct right you’re not saying you’re not investing a certain way with you know your this account and then this other account’s way too aggressive right um so yeah consolidation is extremely important just so you’ve got everything you know one place and regard I mean that’s that’s something we’re real big on and we think we’re really good at it but so you can see everything on on one piece of paper as were and what the inter relationships are and gee whiz there’s too much cash here or you know what we’ve got you know too much in this one stock because it’s in the three accounts of this brokerage and this brokerage this and to really get the big picture so it can be you know risk controlled and and and more synergistically uh managed when when folks you know spread their money around different firms they often confuse that with diversification is that diversification no it’s obuscation why is it not diversification because likely a lot of the firms are holding similar funds that do similar things, right? Um, so just because you have funds at in a Fidelity S&P 500 funds and you have money in a Vanguard S&P 500 fund, they’re probably invested in the same almost certainly are identical, right? Yes. Yes. And again, you’re better off kind of consolidating to one place where then you can be diversified properly into different funds. Yeah. And one of the problems also with having multiple um advisors or or or brokerage accounts is people kind of lose sight of important things like rebalancing, tax reporting and performance. You know, would you say that it’s a law of the universe that most people overestimate their performance? Absolutely. They think they’re doing better than they are. Yeah. Because they’re not looking at it and or they don’t know what to look at or their their adviser saying, “Oh, we’re up 30%.” and he’s just maybe he he didn’t even look or maybe he’s got an ulterior motive. But when you have more than one vendor doing the the weighted uh portfolio performance tracking is beyond a skill of of most investors and probably beyond the skill of most adviserss. It’s a complicated problem. Um and having one uh platform that actually gives you as as ours does you know using the you know statements that give you time weight of return internal rate of return net fees and so forth that are really transparent and accurate is very very powerful but having stuff peacemeal all of that nobody knows not even the adviserss. Um, another thing that uh, um, even the article says that if you’re comfortable, you know, juggling accounts off the different platforms or think that you are. Yeah. Yeah. Likely your family isn’t. So, if something happens to you, you know, if your spouse or kids need to take over, it can be a real mess. And I’m sure you got a couple of horror stories you’d like to share. Yeah. I mean, handwritten account numbers that, you know, a child finds um, years later. I had that happen. Um, they were happy to find it, but then it all had they had to redo probate because they found this account that they didn’t know existed. Um, I mean, it’s it’s just and the opportunity cost that could have been sitting in cash at a bank somewhere. Fortunately, they found it before it’s turned over to the state of Florida or Wyoming or whatever, which is what happens if they can’t find the owner. That is a legal obligation. It it is cheats to the state, which mean we don’t know who it belongs to. We have to give it to the government. They can’t keep it. Yeah. Yeah. It’s it’s and again then you have people grieving your passing, right, which is already itself so emotionally taxing. And then they’re spending all of this time that they should be with family and and loved ones and they’re dealing with calling all these firms and doing all the different paperwork to try and figure out where everything is. Yeah. And when we’ve had, you know, kids call G whiz, you know, they have an account with us and someplace else. You know, where is a life insurance? We don’t know. you know, if you’ve got, you know, a dispersion of different vendors and advisors that don’t communicate, you know, we believe in total wealthare consolidation and, you know, and and and and putting everything together. So, you have one big picture. Not all firms do that. Stuff just gets lost, you know, which cost the family, you know, a lot of time and grief and and and frequently a lot of money. You know, another misconception is gee whiz if I have all the money one brokerage firm like Schwab who we use for institutional uh that the u um that it’s not protected you know and one one thing which this article I think really makes a mistake on they’re comparing cypic insurance which is what protects brokerage firms and FDIC insurance which is bank insurance which are different zip basically ensures that if they lose your securities they’ll make them If the securities are worthless, you’re getting worthless of securities. That’s what the insurance is. It’s not a dollar amount. Um, but still there’s plenty of insurance. I think Cypix, Securities Investment Protection Corporation, um, that the article says is half a million dollars per account type. Most firms buy private insurance to the millions, right? Yeah. Through like Lloyds of London or those other types of those firms, they all Yeah, they all have it. Yeah. So, so having very very large balances with one brokerage house, you know, is is not, you know, doesn’t exacerbate the risk, but having it all over the place may exacerbate the risk because you really don’t know what the overall risk tolerance is and how things balance. You know, use Anna’s example from before, I could have five different S&P 500 funds, you know, with different brokerage, but it’s all the same stuff. When the S&P 500 tanks, they’re all going down. There isn’t. It’s an illusion of diversification. Um so it’s better having everything in one place helps you to understand what you have and are things are balanced as the asset mix you know tuned for uh your what your goals and your preferences are and is it being tended with professional guidance to make sure it stays that way because if it’s not tended like a garden weeds sprout up all over the place and you know what may have been a beautiful plant to begin with really just becomes you know an ugly uh um an ugly uh profusion of foliage. Um the last thing you know to think about since we mentioned u um index funds we’re not you know we’ll not spend too much time on this episode but maybe in a future one you know one of the concerns these days with index funds is they are super concentrated in technology and particularly in just a handful of really valuable tech stocks. Would you like to expand on that madam? Yeah. So the I’ll use the S&P 500, but same for the NASDAQ and the other indexes, right? They look at when they build these funds, they look at the market capitalization of these companies to make up the funds. And since, you know, the Magnificent 7, Nvidia, Apple, Google have grown so much in their market cap and and how much they make up of those the S&P 500 index. Now you have some of these companies that’ll be, you know, seven, eight, nine% of of the index. And if they have an issue, right, there’s an overvaluation, there’s a bubble, there’s news item that causes them to correct, it’s going to pull the index down a lot more than, you know, 5 10 years previously. Yeah. And let me translate, you know, from your lofty fine financial mind what, you know, market cap means. So if we have an index say of two stocks A and B and they start out each worth a dollar, right? Uh so you you’ve diversified 5050 in each stock. Now stock A goes to $10, stock B stays at a dollar. Okay, you still own two stocks, but you know a 10 of the $11 is now concentrated in stock A. That’s what she’s talking about. And right now the S&P 500 even though it’s 500 names like half the value is in seven stocks. Yes. You know and most of the rest is in technology stocks anyway because technology you know drives everything these days. So that really is a false sense of diversification by looking at you know the number of names in the S&P 500. Yeah. And there’s a lot of problems with index funds that that we’ll tear into maybe in a future episode but that’s a pretty important one. Um any other you know year-end or I guess annual reviews that that uh retirees or pre-retirees should make you know as they tune up their planning what do you do you know like Q what you know when we you’re looking you know and across the year you have specific financial planning and wealth council agendas each quarter. So kind of what what do you do each quarter and you know how do you keep things together? Yeah I mean so so you know beginning of the year right that’s where we kind of review where everything is sitting. We take new fresh data, right? Everything from what’s the goal? Has anything changed? We look at the portfolios and the risk. Let’s say a client’s like, “Hey, I I want to retire this year.” Well, we’re going to go and we’re going to re-evaluate your risk tolerance because it’s probably changing if you’re making that big of a decision. And then we need to see if the way the portfolios have are set up and and allocated makes sense or we need to make adjustments because of that. Um the article also talks about you know if if one sector of the market’s doing really well for a year or two they might you know have increased their portion of the portfolio too much and need to be kind of reallocated back to a baseline. So that’s usually what we do in the first quarter and then throughout the year touch on other planning topics. Yeah. So in Q2 it’s you know retirement financial plan build up refresh retire plan look your retirement plan it gets all fast like everything changes all the time in life and if you had this is your flight path you know and uh and you’re in an airplane and flight plan you know and then the storms you know interceed or you lose an engine or you know you’re low on fuel or the airport’s closed you got to constantly adjust you know and so each year we look at that and fine-tune it to keep you on track where you want to go and at Q3 I think is estate planning and beneficiaries line up to make sure everything that laws change, your wishes change, people die, you know, to make sure everything is is lined up properly. And Q4 is, let’s see, your tax planning, asset protection, asset protection and, you know, and RMD planning and that kind of stuff. Yeah. And then it’s on to Q1. So, you having a robust process to keep you on track can make a huge difference in the outcomes. Yeah. Any concluding remarks, uh, Madame Super CF? I mean, yeah. What I’ll say, and I have conversations with clients about this a lot, right? Because, you know, maybe they have a play account or something like that and they’ve bought a NASDAQ fund or an S or one stock, Nvidia, right? And they’re like, “Oh my gosh, it’s killing it. It’s been so good for a couple years. Why don’t we add a large chunk of it to the portfolio?” And this this talks about why not. You don’t want to be extra, you know, concentrated in a certain position. There’s certain years where certain sectors of the market do better than others and and that’s why you have to be disciplined. When you you know when we say this is how we’re going to invest your funds, we have to stick with that. Even if tech is doing really really well, tech might do bad in a few years. I don’t have a crystal ball, but historically it’s probably going to happen. And we want you diversified in other places so that you don’t feel the impact of having all of your eggs in one basket. Could be devastating. Actually, I think that’s a good point to leave it. You may remember back in you know in ancient days the.com bust 2000 2003 tech stocks went down nearly 80% and took 15 years to recover and and in the uh as in the mid middle you know 2020s now tech stocks are valued about the same levels you know in a sobering piece in the Wall Street Journal last week remember Cisco Cisco Cisco you know which is one of the real highf flyers back then went down big time. It’s been 25 years or so and it’s finally broken even for what for the lofty heights that it was at, you know. So, so diversification, attention, and risk control protocols really can can save the day because nothing goes up forever, right? Absolutely. Any anything else? No. No. Well, thank you so much, Anna. Thank you all so much for watching. Until next time, this is Dr. Jeff Camarda, Anna Wonderlick, Super CFP. See you. [Music]