Common Mistakes in the Marketplace


Are you aware of the most common mistakes people are making as they near retirement? Do you know where to get answers to your retirement questions? Join our retirement planning experts as they discuss the most common mistakes they see people making as they near retirement.

David, set the table for us. What are we going to explore today?

We\’re going to talk a little bit about what\’s going on in the marketplace and the mistakes that we see people making as they approach retirement. We also wanted to share some intimate stories about a few of our clients whose experiences I think might register with a few of our readers. Obviously, all the personal information is kept confidential, but I feel that in sharing these stories, people will relate to the scenario and realize that they’re not the only people out there going through a similar situation.

And Bret, what direction you going today?

We\’re going to be talking about the worst possible time to retire. So, this was actually a headline that we had read a couple months ago, and I think it\’s something to review. It starts off talking about market performance, and the first few years of retirement determines the financial security throughout one\’s golden years.

At the end of August the ending of what had officially become the longest bull market in United State history. This means we haven\’t seen any kind of a real correction here in a long time. And there\’s a huge risk in that. I\’m going to reference a client that I met with last week and try to put the pieces together.

There\’s a risk that people have never worried about while they were working and that is sequence of returns, but this becomes very real in retirement. To better understand that concept, remember the market crash in 2008, or even back to the market crash in 2000. We were all 10 years younger, maybe even 20 years younger.

Which meant that we had 10 to 20 more years to make back any money that we lost.

Now, again, if I\’m sitting in front of a 65 year old, they were 55 or 45 years old at that time. What we’ve found a lot of times, is that we had time on our side. That was the biggest thing in the world, we had time on our side. Hopefully, we did not make changes to our portfolio at that point in time. And in fact, while we were working, we were probably back filling when the market was, \”Going on sale,\” . So, we were able to buy more stocks and more shares when they were on sale when the market was correcting itself.

This article digs deep into what we call that sequence of returns risk. I talk about it as the mathematician that I am. While we\’re working, it really doesn\’t matter the order of the returns that you gain on your portfolio. Again, three times two times one equals one times two times three. We get six no matter which order that happens in.

But when we enter retirement, and we start withdrawing money from our retirement bucket, because that\’s what we built it there for.  It absolutely does matters what order those rates of returns happen in. This is what this article goes into. Because of this 10 year run that we\’ve seen on the market, we\’re due for a correction.

It isn’t a matter of “if” but a matter if when.

We know form the market’s history that corrections are just a part of the cycle, that we know for sure. All we don’t know is when that correction will happen.

And what the article goes into is that we\’re due for a 20% correction. I don\’t know if it\’s going to be 20, 30, 40, whatever that number is. By definition, we have not seen a correction in over a decade now, and we’re due for one soon.

So we’re going to translate that into reality – talking about sequence of returns risk.

I met a couple last week, age 60 and 57. They had both retired. They had come out to a workshop and the very first thing that we went through is talking about social security. What we had identified for them was that they should delay their social security out to ages 70 and 69. So, that mean that they had approximately $1.4 million that they were going to be living off of. They had an expense of about $6000 a month.

But I had said, \”Don\’t touch your social security for the next decade.\” Why? Taxes are lower. We talk about social security taxation, your social security\’s going to be taxed like no other income you\’re ever going to receive for the rest of your life. So, they understood the impact of why.

They understood the impact of why delay on Social Security long term.

They said, \”We just need this $1.4 million to really last me during this first decade?\”

I go, \”Yeah. But that\’s what we\’re going to be living on during that period of time.\” Again, another part of the Thrive Retirement Roadmap Review is we start identifying what their risk level is.

They thought they were relatively conservative having a 50, 50 stocks and bonds out there. They thought, \”Things are good. I\’m balanced. I don\’t think I\’m crazy over risked.\” What we had shared with them was that their existing portfolio, the way it was constructed today, was that if they had gone through another market crisis like we saw in \’07, \’08, \’09, is that they would have experienced 30% correction. They said, \”Bret, this is what our portfolio looked like in 2008. It\’s not a big deal. Look, we still have the money. It grew from today.\” I said, \”Yeah, but you know what the big difference is? You didn\’t touch it.\”

But now we\’re talking about pulling out $70,000, maybe even $80,000 a year, when we talk about factoring in taxes. I go, \”If I got $1.4 million bucket of money …\” Some of that was cash. You\’re not really living on the cash. If we talk about pulling out $80,000 a year off that bucket of money, it doesn\’t sound like as big a deal because we only have to make it last 10 years. I go,

\”If we see a 30% correction, and we still have to pull out that same $80,000, it\’s a smaller bucket of money that that $80,000 has to come from.\”

Whereas opposed to us only taking out maybe 5%, 6%, now suddenly that number gets stretched to 7%, 9%, 10%. We would become concerned because now that money is going down at the same time the market\’s collapsing because we have to make a living. We have to have our standard of living.


Just so the reading audience can follow the details, 60 years old and 57 years old, that\’s right now in 2018. That\’s today. That\’s when the conversation\’s happening, just retiring.

Just retiring is not going to work anymore. I have to live on this bucket of money, right here. When we shared with them what their portfolio looked like today, and there\’s potential corrections, the questions that I asked to them was what resonates more with you? Your portfolio I just shared with you wasn\’t crazy aggressive but nevertheless that risk in there. Now we\’re shooting for 7% to 10% rate of return each year.

But you can see potential 25%, 30% corrections. Does that resonate more with you or would 4% to 7% rates of returns with no corrections, which one would you rather have?

They said, \”Bret, you just asked me one of those questions. How could I answer it any other way? If I could go 4% to 7% without any corrections I\’d go for that.\” I said, \”But that\’s not what your portfolio looks like today.\” We go through the conversation of sharing some different ideas and different asset classes of how to spread out some of that risk. They saw it right in front of them. We shared with them part of the Thrive Retirement Roadmap Review something called Money Tree Silver. It’s one of the software’s that we use, putting in there what happens if we see a correction every nine years of the magnitude of their portfolio.

It becomes a completely different outlook when you start back filling with all of the details, which are created from what the individuals provide. Is that a fair statement?

The thing that we’re really trying to get people to understand is that people don’t change. An example, Vanguard, which is one of the biggest do-it-yourself investments houses out there, talks about if you use a financial advisor you actually have a tendency to have an increased performance on your portfolio by 3%. That\’s coming from the biggest do-it-yourself-er firm out there. One of the main reasons they cite that is people don\’t change their behavior over time. What we try to illustrate how critically important it is that your behavior, your tendencies and routines have to change when you get into retirement for two reasons.

The first reason is you don\’t have time on your hands like you did to recover in the past. The second reason is you probably will be drawing money out of an account. If you\’re pulling assets out of a declining account it\’s going to exacerbate, make that account decrease a whole lot faster. Thus, making it even more difficult to respond. Behavior modification is what we bring in as an introduction concept. Then we basically enforce that by teaching people why you have to change the pattern so that you don\’t have the consequences of not changing. Does that make sense?

I mean, it\’s amazing to me at 60 years old, the plan today will not be valid at 70 years old.

To finish up the story, went back and made a couple minor adjustments. If you\’re okay with 4% let\’s go on the low end of 4% to 7%. Let\’s just turn those potential corrections off, just riding off in the sunset. I shared with them, \”You\’ve won the game. You can continue to play the game if you choose. You can still win but you could also lose.\”

Bret, while you were rattling off that example, the one thing that popped into my mind, \”Is that standard?\” If I\’m a reader absorbing that story, is that standard \”Oh my God, I\’m going to delay my Social Security to 70 and 69,\” or is that just specific to the example?

It was absolutely specific to the example. That\’s why when we talk about on the workshops, we try to give some stories as to help maybe relate. At the end of day, it\’s when people come in as part of that Thrive Retirement Roadmap Review. Everything that we do is customized to everyone\’s individual situation.

I think it is so important for everyone to understand that the individual report that I get from you is going to be different because the scenario and the circumstance is different.

Every single one is different. We customize our information to you. Everyone has to get a medical checkup every so often. There\’s certain ages where you have to start going for some fun tests when you\’re 50 or over. If you\’re reading this, maybe it\’s time to get a financial checkup. If it\’s been awhile since you\’ve met with anybody, then I would urge you to come in.

We focus on four main reports. The first of the four we talk about is Social Security maximization. Secondly, we do a risk and fee analysis on your current portfolio situation. Then, we run a tax clarity report, which illustrates how taxation can affect you in retirement. Finally, we do one overall stress analysis. I will also say, we really love what we do. We dig down into it and really get into it. At Thrive, we truly love working with people that we work with. Our clients are great. It\’s a great feeling to help people and enjoy what you do on a daily basis.

I almost feel as though it creates this starting point for most. Is that a fair statement?

For some, yes. Sometimes when they look at the paper we give them, they come in and they say, \”Ugh. I looked at this and I said, \’I can\’t believe I have to get all this together.\’\” Some people have all their information right away. They\’re so thankful that they came in, the ones that didn\’t have it together, because now they have everything on one or two pages. They have more clear idea of what\’s really going on.

A big question that people ask when they come in is, when they come in for their Thrive Retirement Roadmap Review is, \”Do I have enough money? Do I have enough money saved?\”, which might seem like a simple yes or no answer, but it\’s really not. The reason it\’s not is there are so many things that can affect your retirement – Rising longevity, rising healthcare costs, declining pensions. These are all things that are out there that are affecting people\’s retirement today.


When we sit down with people, we start going through asking them certain questions. We need an idea of how much you think you\’re going to need to live on a monthly basis. I always love sitting down with people. Sometimes they say,

\”Well, we think it\’s about $5,000.\” I say, \”You\’re sure about that?\”

They don\’t think, \”Oh, I\’m going to have to pay for health insurance, even with Medicare on my own.\” Sometimes I get an email while we’re working on their plans. They\’re like, \”We need to increase that number by about $2,000.\” We want you to include everything. We want you to include going out, spoiling the grandchildren, traveling. We want you to include everything, so we can get the whole picture. You want to enjoy retirement. We want you to enjoy your retirement.

That is one of the biggest bits of information that we start with. As we talk to people, and we sit down with them a second time, and we go over some of the reports that\’s discussed with people think, \”Oh, I was around when the market crashed, went down 50%. I remember that. I\’ll be okay.\” Then when you show them how their portfolio is situated now. When Dave and Bret show them what could happen, the look on their face is one of concern. When you say 10%, 20%, what is it in dollars, right? You can\’t spend percentage. You can spend dollars.

It\’s not a fear. It\’s not … It\’ to be self aware. I think that\’s the intention behind it. If you\’re aware, if you\’re in tune you can make better decisions and you can get on the plan so that you can properly answer the question.

Sometimes it\’s not that we\’re giving them bad news. Sometimes, after a stress analysis, their portfolio is in a great position. We\’re giving them confirmation.

I met with a woman the other day. This is the second time this has come in to visit with us. We ask questions. Are you married? How long have you been married? What is your spouse\’s Social Security and how much yours? The woman said to me, \”It doesn\’t matter. My husband was from another country.\” I happen to know some of these answers. He is a United States citizen now. They\’ve been married for a little over five years. She says, \”He doesn\’t even have enough credits to have Social Security income.\” Because we have dealt with this before, we understand that as long as he is married and he has proof of citizenship he will be able to get a spousal income on her Social Security benefit, which added about $1,500, $1,400 a month to their future for retirement. That\’s a big deal.

Through the work bit we do, we were able to inform them that they were entitled to an extra $1,500 a month, which was a drastic improvement to their cash flow on a monthly basis.

 If they never went through the Thrive Retirement Roadmap Review, they would be shorting and cheating themselves out of $1,500 a month of cash flow on a monthly basis going forward.

That they\’re entitled to. Just from a conversation.

That\’s the point that I want to stress to our audience. A few weeks ago, I was talking about this start of the fall, this intense focus on getting a plan together. Start the plan with coming to the workshop & having a conversation. In the conversation is where all the details are going to surface for sure.

Absolutely, I agree with you 100%. Like I said, get a financial checkup.


We met with another couple awhile back. When we got some of their information, I had noticed that they had a couple annuities that they were really happy that they bought. They can be great for your plan if there\’s a place for them. What they were shocked to find out was that he and she both thought that when one passes away, the income they were going to generate from that from the rest of their life, that\’s the reason why they bought it, that option was not chosen, or we\’re not really sure what happened there.

So when he passed away, he thought \”my wife will be set, she\’s going to continue to get that payment for the rest of her life\”. And it was important to them because he didn\’t even have much of a social security income because he was a city worker, so he was getting a pension. That made a huge difference, so we were able to help them out, and it might have been ten, fifteen years ago that you met with somebody. Things have changed in ten to fifteen years, that person\’s not around or they haven\’t reached out to you, we\’re here.

That\’s an example, just of a review right? A lot of times assumptions are made, because what gets said and what gets heard may be two different things; perception and terminology. So these folks that we were trying to help out were under the assumption that they were going to have what\’s called joint life income. That\’s when a spouse who has a contract, an annuity contract, and start getting income on that contract, if they were to pass away, the spouse would continue with that income. A lot of times that decision has to be made at the time of application and if it isn\’t understood clearly, this is what could happen. They thought they had it, and actually found out that they didn\’t.

David I\’ve come to the conclusion after just talking today and absorbing the information that if there are 10,000 people turning 65 on a daily basis, your services are needed by so many. It is so easy in simple terms to stub your toe and make a bad decision.

It\’s really easy, and it\’s just lack of information. Not knowing what questions to ask and if you do know the questions making sure that you get the right information.

Get the answers. Please do not be afraid to be wrong. As a matter of fact, I think it\’s in this environment, in this conversation, I think it\’s okay to be wrong. As a matter of fact, I think it\’s better to be wrong so you can correct it now.

I\’ve always said, what\’s right isn\’t always popular and what\’s popular isn\’t always right. Financial information is very challenging. No matter what topic you bring up in life; if you want to talk about God, politics, finances, baseball, whatever the topic is, if you look hard enough, you can always find something that will validate your position. That doesn\’t mean your position is right, but you can always find information that will validate that.

Like right now, if you happen to be oriented towards a bear market, if you think the Sword of Damocles is hanging over your head and this market\’s going to collapse, and interest rates are rising and bonds … all those types of things, you could find anything and everything that you want. If you believe this market\’s going to go to 50,000 on the DOW in the next four years, you could find that information. But that\’s all macro, and that you don\’t really have a whole lot of influence on.

[bctt tweet=\”\’What is right isn\’t always popular, and what is popular isn\’t always right\’\” username=\”ThriveFinancia1\”]

What can you do today to make sure that you are as bulletproof as possible – to make sure that retirement happens the way that you want?

I\’ll give you an example. To me a plan is everything. I\’m a researcher. I really like to know all the facts and I don\’t take things at face value.

So when we do this Thrive Retirement Roadmap Review, it is A to Z for people. Is it as deep of an analysis, is it as deep of a dive as we do for our actual clients? The answer is no, but what people walk out, that deliverable that we talked about last week, where you will understand everything. You will understand the right recommendation, now whether you follow it or you don\’t, whether it\’s perfectly applicable or its not, you will really understand what\’s the best math on how to take social security. Which of those 567 different election choices should you, and if you happen to be married, your spouse, take?




It\’s not going to run out of money.

People think that the Government is going to try and cheat people so they take these things that validate those decisions which again, aren\’t necessarily the best decisions.

People will walk out with a nice report related to their social security and get a good idea of what that math looks like. The next report they\’re going to get is they\’re going to get a snapshot.The reporting that we do, the analysis that we do on taxes, is very dynamic for our clients. They are calling us constantly, related to their taxes, because when you\’re going to make a decision that\’s going to have impact.

You want to have all those facts now, versus when it\’s too late.

And what I mean by that is you want to make those decisions in the earning year or the tax reportable year, not the year that you have no influence on the outcome. Meaning you want to make the decision between January and December of the existing year so that when it comes time to file, whether it\’s January, February, March or April, you already had the information, do it the right way. Does that make sense?

Makes sense.

Yeah, so that\’s a dynamic report. \”Well I need a new roof on the house\” or \”I gotta buy a car. I wanna take a big vacation, what bucket of money should I take that out of? And what will be the tax consequences of doing it? What\’s the most effective way to minimize taxes? Where should I take that money?\” We are able to provide our clients with confidence in their financial situation, whatever it may be.

When we do complimentary work, we do a snapshot of time in the future. There is a big question people have when they come to see us – \”What\’s going to happen at age seventy and a half?\” Because seventy and a half is that age that triggers these things called Required Minimum Distributions, and what we\’ve seen with people who have done a pretty good job, is that they\’re living life. They\’re going along; they get social security, maybe a pension, they don\’t really need to be touching their retirement assets, and now suddenly, they\’re forced to start taking money out of the retirement assets and they\’re worried about what that tax implication is going to be.

We are able to advance the timeline, go out to age seventy and a half, and create a static report of what taxes will look like in retirement. And two good things come out of that.

Number one is, for some people, they realize that they didn\’t know that they were going to pay taxes in the future. They are in this twilight zone today -they\’re not paying a lot of taxes because they haven\’t been able to take OR haven\’t had to take money out of retirement assets. But at age 70 they have to and now they\’re going to pay much higher taxes than they thought they would.

On the other hand, we have people who are setting aside money today to pay for taxes in the future that they\’re never going to owe. Meaning, when we did the analysis, they end up seeing \”I\’m in a four and a half per cent effective tax rate.\” There is a difference between marginal tax rates and effective tax rates. Marginal are the tax brackets that the IRS code talks about; effective tax rate is what we actually pay in taxes on the money. We educate people about that.

So they\’re setting aside 25% out of their social security, out of their pension, thinking that, that\’s what they\’re going to have to set aside.

Then, we come back and say \” No, it\’s only four and a half per cent, so drop it down to four and a half per cent, and that will improve your cash flow.\”

So that\’s what that report does and it is astonishing. It\’s astonishing the impact that people receive from that.

We\’ve talked about this next topic in the past. A lot of people have been conditioned to use this “golden rule”, called the 4% rule. This is a formula that was created back in 1994. A company called Morning Star came up with it.

But, in 2013, they actually revised the number from 4% down to 2.8%.

That rule basically tells you how much you can withdraw out of your retirement assets so that it\’s safe and your money will last at least 30 years. So, if you\’ve been banking on 4%, which is what most financial advisors still quote out there incorrectly, and you built your plan on that and now the number\’s only 2.8%, that\’s like a plane flying across the Atlantic Ocean with only enough fuel to go two-thirds of the way.

[bctt tweet=\”The golden rule has been stuck at 4%. But, in 2013, they actually revised the number from 4% down to 2.8%.\” username=\”ThriveFinancia1\”]

And then the last report is what Karen talked about. It is that fee and risk analysis of the portfolio using Riskalyze, which is just a phenomenal tool and really goes into deep detail. So even though it\’s a 30,000 foot overview, this plan that we do it still brings much more value than what most people experience with their existing financial advisors.

I think the level of information that is in the complimentary report, is worth the time to do it for sure. And then you can sit down and have conversation about the details that are in the report. Go back to Brett\’s example of two people that were not supposed to think about taking social security for another ten years or eleven years, based on the details.

Absolutely. It should start a conversation. Whether that conversation continues with us, or your existing advisor or yourself, it\’s important. I always tell people \”Look, you can\’t get a second opinion from the person who gave you the first one.\” 

It is absolutely worth coming in to talk to David Bezar, Karen Bezar, Bret Elam or another retirement planning expert at Thrive.

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