Investment Behaviors That Can Hurt Your Retirement

Are your investments keeping you up at night?

In this episode of Retirement Roadmap, Mark Fricks and Evan discuss some of the most common investment behaviors that can undermine retirement security. Many retirement mistakes aren't caused by a lack of information—they're driven by fear, emotion, and reactionary decision-making.

Join us as we explore practical ways to avoid costly investment mistakes and build a retirement strategy designed to provide confidence, stability, and peace of mind.

Topics include:

00:00 Introduction
01:03 Holding Too Much Cash Out of Fear
05:36 Timing the Market Instead of Staying Invested
09:49 Overreacting to Short-Term News
13:40 Ignoring Tax Efficiency in Withdrawals
16:04 Relying on the Market for Income
19:50 Failing to Rebalance Consistently
22:15 Neglecting to Adjust Strategy Over Time
24:45 Final Thoughts

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Call 770-980-9262 to speak directly with someone about your retirement planning needs.

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Advisory services offered through MasterPlan Retirement Consultants, Inc., a Registered Investment Advisor in the state of Georgia. Insurance, tax and commodities services offered through Fricks and Associates, Inc. dba MasterPlan Retirement Consultants. The aforementioned are affiliated companies.

Transcript

Welcome And The Real Problem

SPEAKER_01 0:16

Are your investments keeping you up at night? Hey folks, welcome back. Thank you for joining us. This is Master Plan Retirement Consultants Retirement Roadmap. My name is Evan. Joining me as always, retirement planner Mark Fricks. During this episode, we'll exam examine several common investment behaviors that may undermine your retirement security. Mark, we're going to be talking about a lot of preconceived notions, but also just general attitudes people seem to take with them into retirement that lead to some pretty common mistakes.

SPEAKER_00 0:49

Sometimes it's misinformation, sometimes it's old way thinking, a lot of times it's emotion. A lot of this is going to be emotion, actually. Absolutely. So a great topic, I think, and and we have some great examples of it. Sure. Things happening as well. So look forward to it.

Too Much Cash And Inflation

SPEAKER_01 1:04

Emotion is a perfect segue for the first topic. And we've had an entire episode on this first bullet point, and that is holding too much cash out of fear. Holding too much cash feels like safety a lot of the time, but we know that due to inflation, that can quietly erode your purchasing power over time.

SPEAKER_00 1:25

Yeah, so often we have folks come in and we'll be doing their financial statement, and there'll be a big chunk of money in cash. And sometimes it's it's I we didn't know what to do with it. We got an inheritance or whatever, and we just put it there and parked it there. And I said, when does that happen? Oh, four years ago or whatever it may be. Um and other times, like you said, it's fear of the markets, fear of not want knowing what to do with it. Um I think we've talked about the color of money before, right? We we label cash as yellow money. Yellow to me means caution, like a caution light. And so it feels comfortable, it feels good. Hey, all I gotta do is reach into that bank and pull out whatever I need, but you're losing money every year, purchasing power. And and so, and don't confuse cash with liquidity. Some of that money can be moved to something that's conservative, uh, liquid, available very quickly, but making certainly more money than inflation. So it it's very easy to fall into that trail.

SPEAKER_01 2:25

And not to talk down to our listeners or our viewers, but can you explain how purchasing power works and why we our our money is uh we are losing money in a cash position?

SPEAKER_00 2:35

Yeah, so you know, first of all, checking pays what, 0.05, if you're lucky, right? Uh what is inflation? Well, right now it's running above four percent over the last six or eight years. It's been in the four to six percent range. Uh people say, well, I have a high yield savings account. Yeah, they're paying three to four, maybe five, but inflation, those are always going to lag behind inflation. If you look at your high yield savings over the last six months to nine months, it's pulled back. And it's not paying what it was because inflation pulled back. And so if you're just sl continually falling behind and you look at a significant amount of money, whether it be 50,000, 100,000, or whatever it may be, um, you're just, I mean, we can run the numbers. You just see that gap getting bigger and bigger of what you should have versus what you really have. And so it it's um it it's critical, it's critical. It really is that you make some money on your money, put your money to work. I'm not saying throw it into penny stocks. I'm not saying throw it into some aggressive portfolio, but as you know, and as our listeners know, that that that are are loyal to the show, is we kind of stack portfolios. We'll have one checking, then we will have a savings backup, then we'll have a very conservative portfolio, then we'll have a little bit more uh moderate portfolio, so forth and so on. So that extra cash, and then you also have to consider, and we may get into this, the the tax implications too. If we're gonna make more money on it, should we shield some of that from taxes as well? So that's something else to think about. But sticking to this first bullet point is put your money to work.

SPEAKER_01 4:04

Yeah, yeah. And a cash reserve also tied to a specific time horizon tends to reduce your anxiety rather than amplify it. So if you know you're gonna need cash in the next six months, that's probably a reason to keep it into cash, or at least something that's extremely conservative, like money market or something like that. Um but then when you start to stretch it out, then you can say, well, let's let's make our money work for us a little bit better. You know, the portfolio I'm gonna use for two years out is gonna be more conservative than the portfolio I'll use for five years out. Um so the time horizon is important to consider, and just as you said, we are not saying not to have a backup of cash, emergency fund, things like that, but we see too often way overweighted in cash for most people. Um another point that you brought up that before we move on to the next um subject is liquidity. People think that cash that means they can get to it. If it's in the market, they can't get to it or somewhere else, and that's just simply not true.

SPEAKER_00 5:00

Right, right. And and uh the first thing we'll ask them when we see a lot of cash is what is the purpose of that? And they may say we're buying a car in four months or whatever. And like I said earlier, we we don't know what to do with it, but that's the first question is what is it for? Then we can determine, like you alluded to, where to put it, what's the time horizon, things like that. Maybe this cash can be divided into three buckets, one for the next six months to a year, one for one to two years, one for two years to five years, or whatever it may be. So again, it's it's not just a hey, let's move it somewhere or let's keep it where it is. It's gotta be more strategic than that.

Market Timing And Selling After Drops

SPEAKER_01 5:36

Yeah. Um point number two, timing the market instead of staying invested. We see that I I saw this this week. I've see I see it every month, possibly more than once, and that's I talked to somebody who uh recently had an old advisor who did this for them, which is crazy, but selling after a market decline. And that was an advisor. And that was an advisor who did that for some of their accounts. So selling after a market decline locks in losses and increases the potential of missing that rebound. Now, timing the market instead of say staying invested, there's a saying it's uh not timing the market, it's time in the market.

SPEAKER_00 6:14

Yeah, I think uh I don't know remember the statistic precisely, but uh if you miss like like during a course of a year, there are like five to seven days where the gains come typically. And so if you and I've got a graph that shows what if what if you miss the 10 days, what if you miss the 20 days? Now I will say this we we do do a lot of trading when there's changes in the environment, but it's not we're not moving to cash. Right. We're moving to a better position, just like when the Iran war began, the the saber rattling, uh, we had a lot of our money managers move from something like, I don't know, uh Walmart, maybe into Lockheed or something like that. That was more about making missiles and jets and things like that. And we've made a lot of money doing that. So it's not about switching positions necessarily if you know what you're doing, um, but it's about just collapsing into cash. More cash went in went out of the market between 2008 and 2010 than the history of the stock market.

SPEAKER_01 7:13

Yeah.

SPEAKER_00 7:14

So one of our worst years is when people just vacated, and they didn't vacate at the beginning. They vacated uh, you know, near the bottom. Yeah. And a lot of them, as you've seen, uh for years stayed in cash because they're scared to death because of what happened. If they had ridden through that, they would have broke even. I think it was like four years, five years later. And then we've had such tremendous growth since that time. If you've not been invested, you have missed hundreds of thousands of dollars of growth.

SPEAKER_01 7:38

Yeah. We've had a couple of clients call, and uh last year there's the the the big kind of shakeup. We had a bit of a market drop, and we've we had a couple of calls. There was a lot of uncertainty, and um there were a couple of folks we had to talk off the ledge a little bit, but again, um that's fear-based, and that's that's uh reacting off of emotion. And one of the ways to combat that is um, yes, we do need to adjust allocations, but adjusting them deliberately serve retirees so far better than jumping in and out based on headlines. And just as we mentioned previously, you have different buckets, different accounts with different um levels of risk, with different time horizons. If I've got a this is an extreme example, but if I've got a a Roth IRA or that is I'm not gonna need for 10 plus years because I'm I'm expecting taxes to be more uh to be higher in the future. So I want some tax-free money available. Um that's 10 years away that I'm gonna need that and maybe send an aggressive account. Well, if we've got a rocky month in the market, I'm not gonna divest that 10-year bucket when I've got 10 years of growth, when I know I'm gonna have a bounce back from this drop. So it's thinking more deliberately about what's the time horizon of each account, um, what is the goal, what is the purpose. Um there's a lot to think about.

SPEAKER_00 8:57

I'll tell you what else is really hurt is social media. I've got several clients that, you know, hey, I just saw this on my news feed. They say on June 19th, this is happening, uh, and you better be out of the market or in the market or in gold or out of gold or whatever. And it's just somebody trying to get clicks, is all it is. And and I'm not saying there's things happening, but but we're there's been things happening for the last 100 years. And it's just more technology, more things going on. And again, our money managers are using computer-driven programs and algorithms to make adjustments, but it's not based on a news feed. It's based on actual things happening in the market and and around the markets. And so uh it's so easy. I I have one client that probably once a month will send me a link and saying, Is this true? Do I need to do this or do I need to do that? And I'll look at it. And again, it's just somebody trying to get clicks or or subscribe to my bulletin or whatever it may be.

News Noise And Portfolio Checking

SPEAKER_01 9:50

Well, that's exactly our next bullet point, and that's over overreacting to short-term news. Um and just as you said, we definitely have a handful of clients who are are, hey, uh, did you see this article? Have you heard of this guy? Have you heard of this? Um that that would drive me crazy in retirement. Retirees who check their portfolios daily could feel more stress and could make more reactive decisions. And also uh part of us becoming retirement planners is to provide peace of mind for folks so that you don't have to worry about where your next paycheck is coming. You don't have to worry so much about what's going on with my money. You have because you have a written plan, you know the job of every account, you know the job of every dollar, you know how it's going to be used, when it's gonna be used, and you know the protections that the plan has put in place as well.

SPEAKER_00 10:41

I have a couple of clients that they keep this Excel spreadsheet, and every month they get their statement, they write down what that account was worth. And so they'll call me up and say, Well, it was worth five percent less than it was last month. And I said, Well, let's look at the last two years. It's up, you know, 32% or whatever it may be. You can't look at the, you know, it's almost like planning a journey of uh of a hundred miles and after three steps judging it. Yeah. I'm behind schedule. I've taken three steps and I'm about you can't do that. And again, it depends on the time horizon. I know that's important, but we're not going to get the volatility in the short term less risk as well. So it is something that you have a strategy, you look at the history of that portfolio, you look at how the money managers work, what their job is, and I love the fact that we use different portfolios not only because of time horizon, but because of different flavors of the market. Some markets this portfolio would do better, some markets this one would do better. So if you've got five or six of these, there's always something making more money than the other one as well. But this this short-term thinking reaction, that that's really part of our job. The reason I joke that we have a first floor office is if a client jumps out the window, they're gonna be okay. Yeah. So but it is a short-term reaction. And uh, you know, I get it. People have worked 40 years for this money, and they have strived and and worked and saved and been disciplined, and they don't want to see it evaporate overnight. But what we're doing is not gonna make that happen. What they're doing may make it happen.

SPEAKER_01 12:13

Yeah. So that's that's the issue. Yeah.

Complimentary Consultation Invitation

SPEAKER_01 12:16

Uh I do want to take a moment, folks, to um refer you to our website, masterplanretire.com. There you can schedule your complimentary consultations with us. It's an opportunity to discuss your retirement, your hopes, your dreams, your fears, and your goals, and get an Outlook 10,000 foot view of your own retirement. What does it actually look like? How does your money actually work for you? What are your strengths? Where are your areas of opportunity, of improvement? Um, and that's completely complimentary. So take us up on that. That's masterplanretire.com or call us at the office 770-980-9262. We have a website? Uh I believe so.

SPEAKER_00 12:55

I hope so. If you go to the website, there is a little button. I think it's green. Schedule now. I'm kind of colorblind, I'm not sure. But it says schedule now again, and our calendar pops open. And you know, don't be afraid. I I said this I think a show or two ago, and I realize when you make an uh an appointment with us, you're kind of revealing your financial soul. And I know that can be difficult because everybody has had failures. Nobody feels like they've done as well as they could have done. It's it's true for everyone. So let's let's take it from this point and see how we can do better. So don't be afraid to schedule that. Some of you have been putting it off. We we get calls all the time saying, your number's been on my dashboard for three you know three years, and and finally I'm calling you, or whatever. So uh yeah, be be proactive and take care of that.

SPEAKER_01 13:40

Excellent.

Tax Smart Withdrawals And RMD Planning

SPEAKER_01 13:41

The next bullet point: ignoring tax efficiency and withdrawals. This is a big one, and not as much attention is put on this by many people, even by some advisors. Um, not all retirement dollars are taxed the same. Taxable accounts, traditional IRAs, Roth accounts, each behave differently. Uh having a withdrawal sequencing strategy in place uh before RMDs, required minimum distributions could also make a huge difference. But knowing the tax environment you're in when you're making those withdrawals, um, it's incredibly important. And it's also complicated and it's different for everybody. The timing is different for everybody. Uh it requires strategic planning. This could be a whole show.

SPEAKER_00 14:26

And maybe even some of that before, yeah. And and and so there's so many things to consider. I'm just gonna throw in a couple of things you have to think about. Number one is what is like you just said, what is your tax situation this year? Because I'm a fan of spending down the IRAs early while taxes are still low. Does that mean we take out $50,000 when your income's $300,000? No, probably not. Uh so you know, we'll every distribution that comes through our office passes through Evan or I first to look at the best place. Maybe we've got an account that has really grown well. Well, let's take some of those profits out because now we're overloaded in that particular type of portfolio. So there's so many things to consider. That's why folks say, well, can I do my own distributions? I say, absolutely, sure money. Let me tell you why maybe you should let us help you with that, okay? And number one, we track it, but number two, being very strategic. You know, if you've got these 15 different areas where you can, you know, have somebody help you do better, think of the you know, the the difference it will make in your retirement long term if you fine-tuned all these areas. One of those areas, not so small, is like you said, distributions, tax-wise, growth-wise, portfolio-wise, all of that comes into play.

SPEAKER_01 15:37

Yeah, yeah. Well, you it just like uh your team analogy, if you make every player 10% better, you know, you've got you've got 11 football players.

SPEAKER_00 15:45

If you make every one of them just 10% better, your team's not over 100% better. And so every little piece of your retirement puzzle, which we're certainly not talking about all that today, uh, but that is a big one, distributions. And and again, everyone that comes through here passes by one of us to determine the best place to take it from. Yeah.

Sequence Risk And Income Sources

SPEAKER_01 16:03

And we've been talking a lot about the market, but this next topic is uh relying too heavily on the market for income.

SPEAKER_00 16:10

Yeah, this is called the sequence of risk of return. And so we've talked a little bit about this before.

SPEAKER_01 16:16

So it's risk of sequence of return.

SPEAKER_00 16:19

Risk of sequence. I say that by sequence of risk of return. There's a risk with a sequence of returns. AI will sort it out for you. Right, we'll send you a uh a free report. Um I can't say free, complimentary. So basically, um uh, you know, just imagine, you know, a lot of people say, well, the market averages eight percent a year. That is the average, but that doesn't mean it does eight percent every year. Right. One year it's gonna do eighteen, one year it's gonna do a negative twelve. And so that's why we are firm believers in not using the market for income. Uh imagine retiring in the year 2007. You're taking $25,000 a year out of your 401k, and the market dropped 56% over an 18-month period, and you're taking money out. It's it's it's it's not gonna work. You're gonna run out of money much quicker. So that's why we want stable areas to take income from. And then with the market being fluctuated, that's for those extra items, not the not the power bill, not the car payment. These are for things like I want to go to Europe, we need to repair the roof, things of that nature, those once a year, twice a year money that we can pull out and determine where to pull it from, as opposed to waking up every morning pulling up your Schwab account online saying, I hope it's up today because my check comes today, or whatever it may be. Trevor Burrus, Jr.

SPEAKER_01 17:38

Well, and we we also have heard the argument a lot before, well, I'm using fixed income securities. You know, I I know what I'm getting, I know, you know, I know this percentage, but even that is not um immune to economic swings. Trevor Burrus, Jr.

SPEAKER_00 17:50

No. Um I mean if you're buying individual bonds, yeah, they're gonna hold their value, but they're not liquid. So if you're taking money from some type of a bond portfolio, first of all, they just don't make money anymore. Uh our you know, the bond portfolios I look at are are are earning three to four percent. That's even with bond trading. Um but they can lose money. Uh you know, I bond accounts lost money definitely in 2022. Yeah. When the Fed raised rates very quickly. Um it killed uh existing bond prices and trading. And and other people talk about dividends. Hey, I'm I'm gonna put up a dividend account, dividends are gonna average three and a half to five percent. Well, number one is we can produce more than that using some of the tools we use. Number two is dividends aren't guaranteed. And when the economy gets bad, the market gets bad, dividends go down, some companies cut back on them because dividends are just basically a sharing of profits by the companies you own. Well, if their profits go down or disappear, they're not sharing profits with you. Right. Okay, so it's dependent again on the economy and uh whether we're in a recession or a bad market or whatever.

SPEAKER_01 19:01

Yeah. So making sure that um we have a withdrawal strategy and we're not relying on the market for guaranteed income because there is no guarantee within the market. If you need guaranteed income, there are other sources that you would need to go to for that purpose.

Rebalancing And Concentration Risk

SPEAKER_01 19:15

Um the next point is failing to rebalance consistently. And you already mentioned this previously too. You know, maybe you've had a really good market year, and so um this account has grown really well, but now you're way overbalanced in stocks, and then we have another market swing, and we haven't rebalanced and maybe moved some of that um back into another holding. Um you need to rebalance not all the time. Again, we're not watching the market, but without rebalancing, your risk is gonna drift with the uh with the economy and the market shifts. After bull markets, portfolios could become stock heavy. After downturns, people become too conservative. So systematic rebalancing may help maintain um the intended risk over time. And our portfolios, uh our portfolio managers do that already. They have systematic withdrawal um rebalancing built in.

SPEAKER_00 20:05

But I'll tell you where where it becomes very um strategic as opposed to systematic is uh recently a great example. We've we've had clients we put into gold and silver portfolios since 2014, 2015, uh really since 2010. And so since that time, depending on when they bought it, it may have doubled, it may have tripled, it may have quadrupled. Now instead of having 10% of their holdings in precious metals, they've got 25% in precious metals. Now I love precious metals, but that's too much in one category. It's kind of like the folks, and I respect you, please, but that have all their holdings in rental houses or rental properties. I think that's a great investment. But to have all that, I had a friend of mine that had 20-something investment properties and and lost most of them in 2008, 2009, 2010. And he came to me and said, You know what, you've been talking to me for years about having everything in that. I just lost it all, I'm starting over. And so uh that's a that's a rebalancing thing, you know. So it's too much of anything's not good.

SPEAKER_01 21:07

Yeah, 100%.

Updating Strategy As Life Changes

SPEAKER_01 21:08

Um couple minutes left, and that's perfect timing because we are on our last point, and it's neglecting to adjust strategy over time. Um that's why we make a written plan that is um dynamic. You know, life changes, your plan needs to change. Uh even a portfolio that made sense at age fifty-five or sixty-five might not be the same or the right the same fit, the right fit at 75 or 85. Um so making sure that your strategy is um evolving with your life.

SPEAKER_00 21:39

Yeah, clients have been been with us 10, 15, 20 years. Um you look back, you know, when we first started working with them, things are totally different. Age, needs have changed, um, goals have changed, maybe a spouse has passed away. I mean, anything. Sometimes it's just aging needs to become different, whether it be income needs or whatever. Uh so it is uh like you I think you've said before, it's kind of a kind of like the Constitution or it's a living, breathing document or whatever it may be. So um, but it is something that's got to be changed, and that's why we meet officially at least once a year to make those adjustments. Uh sometimes we'll meet more than once a year depending on needs and things of that nature, but it does have to stay in step. And also, you know, we have changes in law. You know, every year or two, it seems like we have a change in tax law or social security law or anything related financially. We've had Secure Act one, Secure Act Two, these all made changes in all kinds of retirement accounts and things of that nature. And so that also requires an adjustment many times. Yeah.

SPEAKER_01 22:42

And we write the plans to be flexible, um, but they are long-term full-life plans, but they are they have to be made flexible because life changes. Umce that plan is in place, we also make it as close to mandatory as possible to meet with our clients at least every year, if not more, um to see, okay, where do we need to adjust this? Um, what's going on with life? And we definitely have clients who are like, I'm set, uh I'm gonna RV for two years, I'll see you later, that's fine. Um, but we we really need to make sure that we're updating that plan, making sure we're checking in, are you getting enough income? Do you have too much income? Can we pull back a little bit? You know, how are things going? How's health? Um, you know, there's a myriad of different uh lifestyle changes that could happen, um, but making sure that we uh are adjusting where those changes were n were needed.

SPEAKER_00 23:35

Yeah, I really enjoy the annual reviews because it it I hear the things that have happening in their lives, the changes, some bad, some good, but it does, it's it's interesting to me uh to look at their plan and say, these are three things we could do that would really be powerful for you because of the changes. And so that makes those annual reviews very interesting. Plus, our clients become friends, they become very close to us, we know more about them than sometimes our kids do, financially, definitely. Uh so it's really interesting to get back and but see where they're at in their lives.

SPEAKER_01 24:06

Yeah, absolutely.

Final Takeaways And Closing

SPEAKER_01 24:07

Well, this has been a good episode, folks. Thanks for joining us today. Remember, go to our website, masterplanretire.com, to schedule your complimentary consultation.

SPEAKER_00 24:15

And then till next time, remember plan well and prosper. Take care.