What The Wealth Retirement Podcast

Sailing Smoothly Through Market Fluctuations (89)

• Jonathan Bednar II, CFP • Episode 89

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What if there was a way to navigate the uncertainties of long-term retirement investments using past trends of the S&P 500 index? Don't let short-term market fluctuations deter you. The truth is, investing for retirement requires a marathoner's perspective, not a sprinter's. Join us as we unpack the weighted 30-year rolling average of the S&P 500, demonstrating why it's crucial to keep your eyes on the long-term prize. You'll be heartened to learn that historically, there have been more years of market ascent than descent.

We're also lifting the veil on the importance of informed decision-making and professional advice for securing a prosperous financial future. Learn about the range of services offered by firms like LPL Financial and how a licensed professional can make all the difference in steering your financial future. We're here to empower you with the knowledge to make informed choices and the confidence to face your financial future without fear. Tune in, and let's tackle the complexities of retirement investment together.

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Thanks for Listening!

Jonathan

Speaker 1:

Welcome back to what the Well. I'm your host, jonathan Bedner, certified financial planner, co-owner of Paradigm Love Partners in Knoxville, tennessee. Today we're going to get a. We're going to talk about a client question that we got recently and the question is how should I invest in retirement? Now, I originally created this podcast recording that you're listening to as a YouTube video on my what the Well YouTube channel. What I'm doing is I'm going to share the audio from that video that I created and I'm going to add some color to this, because I share a few graphics on this video and it's important to add some color to that. Take a listen and then I'm going to jump back in here in a few seconds to explain a chart and we'll dive into some more conversation around how should you invest in retirement and what you should be thinking about as you transition from your working career into early stages of retirement. Again, this is a video that I created on the what the Well YouTube channel. I will make sure that I link this video in the show notes so if you want to look in the show notes, you can find it there. If you go to YouTube and type in Jonathan Bedner how should I invest in retirement, or Jonathan Bedner, what the Wealth. You should be able to find the video how Should I Invest in Retirement there, but we will make sure we link it in the show notes. So, with that said, I'm going to jump back in here in a few minutes just to describe the chart that I'm showing on this graph.

Speaker 1:

Yesterday I was meeting with someone who's a couple years out from retirement and they're trying to figure out really what they need to do as these final few years before they quit working get some final ducks in a row and then start to kind of map out what their retirement income is going to look like. So, as we were talking, one of their question was and they had recently actually moved their investments to stable value, essentially to cash inside their 401k just worried about the market turbulence over the last couple of years, and so one of the questions they had for me is should they leave this money in stable value or should they reinvest it? And their concern was you know, I'm gonna retire in a couple years and I just don't want to take a lot of risks with this money before I retire. And what I wanted to point out to him was we're not looking at the next two years or 18 months before you retire. We're really looking at the next 25 or 30 years for you and your wife's lifetime. You know the remaining years that you have and what your goals and objectives are. So there's some things that I wanted to point out. I thought that I would share my screen and do a little bit of kind of talking around visually what I was trying to explain to them. Alright, I'm jumping in here real quick.

Speaker 1:

I want to provide some additional context in this as a chart being shown on this screen, and then we'll resume the the rest of the audio clip. So this chart came from a wealth of common sense and it's a good graphic that shows, going back to 1980, the S&P 500 returns On a year by year basis. Some years are up, some years are down, some years are up a lot, some years are up a little, some years are down a lot, some years are down a little. The year by year returns fluctuate Every year and it just you don't know what's gonna happen the next year. There's a lot of geopolitical events going on. There's a lot of events that just end up distracting us from our long-term focus, and I think this chart does an excellent job of Demonstrating why I think it's important to stay on track for the long term.

Speaker 1:

We can't time what happens Year over year, but when we look at the blue line in this chart, we can see that the rolling 30 year periods from 1980 to 2010, from 1981 to 2011, from 1982 to 2012 those rolling 30 year periods the market is averaged around 9 to 10 percent and when we look at that, one year like 2022 or 2028 can look really bad and it can almost feel Causes like helpless feeling. You don't know what to do. You don't know if next year is gonna be okay, if you're gonna make it. But when you actually zoom out, when you look at long term, is it? There are far more up years than down years. I don't have this counted, but probably Let me look. There's one, two, three, four, five, six, seven, eight down years out of the last 33, so you're talking about 75% of the time being positive and we have no guarantee about the future. But I Think it's important to come back to that blue line of saying I don't know what's gonna happen year to year. But if we look at history and we continue to believe in in inventions and the evolution of our society and Advancements in healthcare and technology, then I think there's a lot of hope and reason to be optimistic about the future. And that blue line rolling 30-year period of averaging 9 or 10%, I think goes a really long way to help reshape and rethink about how should I invest in retirement. So with that said, I'm going to let you finish this the rest of this video. But I did want to add some clarity to that chart and what I'm thinking about, since you can't see it visually here. So if you look at my screen, you'll see my tablet and I've got this chart on there from a wealth of common sense.

Speaker 1:

These are some great financial blog writers. They put a lot of data together and they pulled this chart that shows the yearly returns of the market I guess in this case it's the S&P 500, which is an index. You can't directly invest in that index, but this is the index, a broad market and this shows the annual returns going back to 1980. So you'll see all of these orange lines, like you see. Here are the yearly returns. The blue line that you see going across this middle is the returns, or the weighted 30-year rolling average. And so when you look at the returns year by year, you see a lot of volatility. You can see some years are really really high in return, some years are low, some are in the middle, some are barely positive. There's a lot of variance in some of these returns and that really drives some of the behaviors around his questions.

Speaker 1:

I just don't know what's going to happen over the next 18 months or two years, so I don't know what the right thing to do is. Should I stay in cash or should I be invested? And so while he, in this example, is looking at short term, what's going to happen with these orange lines? What's going to happen, as we can see here, in 2023? The year's not over yet, obviously, but so far the year is positive. We've had a pretty good year, 2023, but we don't know what's going to happen next year or 2025, just like we weren't sure what was going to happen last year or the year before, and so there's just a lot of uncertainty. There's a lot of noise around the market, the economy, what's going on. So it causes some uncertainty, some questions around what is the right thing to do. So what I wanted to point out to him is that, if we keep our eye on the ball.

Speaker 1:

I'm not so much concerned about the next two years. What I'm concerned about is you and your wife for the next 30 years, and that's where this blue line across the middle comes to play. That is the rolling 30 year average of the S&P 500. And you can see it's averaged somewhere between 9 to 10% over the last 30 years when you look at or rolling 30 years since 1980. So what that would mean is from 1980 to 2010,. From 1981 to 2011,. From 1982 to 2012. And so it's a rolling average. Here. That rolling average is somewhere between 9 and 10%. If we want to be conservative, it's 8% or so. So we don't want to get caught up on the immediate one, two, three years and the noise that's going on with rates, war on Ukraine, recession talk.

Speaker 1:

Any of the doom and gloom variables that really cause us to make emotional decisions can impact the long term progress we're making towards our retirement dreams. In this case, we have some additional things we want to do. We want to travel, there's a car that needs to be purchased, there's some legacy money we want to leave to their children, but most of all, we want to make sure that they have a comfortable retirement for the next 30 or 35 years or so, and so if we get too conservative and stay too conservative, we end up running out of Time and potentially running out of money, and that can be detrimental to the long-term success of your investments in your portfolio. We're living longer, technology is getting better, healthcare is getting better. Odds are this couple. One of them will live well into their 90s and it's it's possible that one of them could live even into their hundreds.

Speaker 1:

I've had several clients live into their hundreds and so again, I just want to kind of come back and show we're not trying to Time the market, we're not trying to make short-term, near-sighted decisions. We're trying to keep our eye on the long term, the, the end goal, what, what is the average and how is that going to impact us and when we do that? We actually are looking at that rolling 30 year period and we can have some Some confidence, and the past is not always the best barometer for future, but we can have some confidence that, no matter what the noise is today, no matter what the newest headline is, the fear mongering is that we're a consumption-based economy and we spend, and the more we spend, the more we export, the more that we create new technologies, the more that these companies continue to rise. Companies rise by their share prices and they're earning, so the more money they earn, the more their share price increase. It's important to think long term, not just near term.

Speaker 1:

All right, thanks for listening to the what the wealth podcast. I hope you enjoyed. This is again just a way to think about how I should invest in retirement. What should I be thinking about and how does the market or the s&p 500, the investments, impact my retirement and what my objective should be? So if you haven't already subscribed to the podcast, please do subscribe to the YouTube channel. Thanks for listening. Be confident retirement. Thanks for joining me on another episode of what the wealth. If you enjoyed the episode today, smash that subscribe button. It helps me more than you think. Also, if you found this episode insightful and a light bulb went off, share it your friend, aunt Judy, the random guy in the office who's always talking about investments.

Speaker 1:

Wealth isn't about just that you change. It's about our choices, chances and changing our financial futures. The information in this podcast is informational and general and nature and does not take into consideration the listeners personal circumstances. This podcast does not intend to be substitute for specific in financial, legal or tax advice. You should consult the approved qualified professional prior to making a final decision. Securities offered through LPL financial member. Finra SIPC. Paradigm wealth partners is the other business name for independent advisor Alliance. Investment advice offered through independent advisor Alliance, a registered investment advisor. Independent advisor Alliance and paradigm wealth partners are separate entities for LPL financial.