Income in a Low Interest Rate Environment

By Dean Barber

March 25, 2021

Income in a Low Interest Rate Environment

Key Points – Income in a Low Interest Rate Environment:

  • Today’s Low Interest Rate Environment
  • Bonds Versus Bond Funds
  • Claiming Your Social Security
  • Taxes and Retirement Income
  • Bucket Strategies
  • Investing for Total Return
  • 24 minute read | 39 minutes to listen

With interest rates near zero and the threat of interest rates rising, we have a conundrum. The question we have to answer is: How do we get income in a low interest rate environment? Join Dean Barber and Bud Kasper as they examine how you generate income in a low interest rate environment.

Complimentary Consultation

Bonds Versus Bond Funds    Claiming Your Social Security Tax Reduction Strategies

Podcast Episodes: The Guided Retirement Show

Income in a Low Interest Rate Environment

Dean Barber: Thanks so much for joining us here on America’s Wealth Management Show. I’m your host Dean Barber along with Bud Kasper. Today we’re going to talk about a big problem in the retirement community. It’s a problem, Bud, that’s not going to go away anytime soon.

That is, how do we get income in a low interest rate environment? 

Today’s Low Interest Rate Environment

Now, we’ve been in a low interest rate environment for quite some time, but we’re in a little bit different situation today than we have been, say, over the last decade. The reason I say that is because we can go all the way back to the financial crisis, and we’ve been in a low interest rate environment ever since the financial crisis.

But the low interest rate environment that we’ve been in since the financial crisis has seen interest rates dropping more and more and more and more. Now, we’re starting to see those interest rates tick back up. 

The solution that people were using in the falling interest rate environment, even though it was a low interest rate environment, will not work in an interest rate environment that’s going from low to gradually moving slightly higher.

The Teeter Totter

Bud Kasper: Sure, and this goes back to the seesaw, teeter-totter, whatever you want to call it. When we see interest rates rising, the value of bonds goes down. Even though you might have income that’s coming in, the principal value drops. 

But if you own an individual bond, you know it will mature on a specific date, and you’re going to get a stated amount of income. Now there’s some comfort in that, but it does play havoc with the total return in a well-balanced portfolio.

Dean Barber: It can if you don’t understand what you’re looking at. If you understand what you’re looking at on a statement-

Bud Kasper: I know what I’m looking at.

Dean Barber: I know. Well-

Bud Kasper: You’re right across from me. [laughter]

Dean Barber: … my point is, Bud, that people when they look at a statement; when they look at an account value, they’re looking at what’s it worth today? When you own individual bonds, what it’s worth today is irrelevant unless you’re going to sell the bond today.

Bud Kasper: That’s right, or simply led it to maturity.

Individual Bonds

Dean Barber: That’s right, and by the way, we have a great article out called Bonds Versus Bond Funds. CFP®, Jason Newcomer, wrote it, so be sure to check that out. 

Bud, my point on individual bonds is that you have on the day that you buy that bond, as long as it’s a high-quality bond and the person you’re loaning the money to, the entity you’re lending the money to is strong financially. 

You have faith that they’re going to pay you back, and you have a known rate of return. A worst-case scenario if you hold that bond to maturity. They call that the yield to maturity, right?

Bud Kasper: Yeah, yield to maturity, right.

Dean Barber: Yes, you do that. Now, bond funds, it’s virtually impossible to have that known outcome.

Bud Kasper: That’s right.

Bonds Versus Bond Funds

Dean Barber: So, in an environment like this, people might say, “Well, individual bonds would be better than bond funds.” But not so fast, and we’re going to get into this type of discussion here in a little bit. 

But we need to back up a bit, Bud, because this problem is getting the income in a low interest rate environment has to begin with the financial plan. 

You can’t solve the riddle of how should you, the individual, how should you position yourself to get the income you need in this low interest rate environment until we go through the complete financial planning process.

Consider All of Your Income Sources

Here’s why. Bud, you know this, but our listeners may not. We have to define what your money needs to do. What’s the average return over time that your money needs to achieve overall for you to be able to take the money that you want and spend it every single month for the rest of your life while you’re in retirement?

Bud Kasper: In consideration of all income sources.

Dean Barber: That’s exactly right. Now, we can do that with our financial planning process, and some of the things that change what the money needs to do on average, a couple of really, really big ones, Bud, is how you claim your Social Security. 

Claiming Your Social Security

Now, people have probably heard us talk about this, and they may go, “Here we go, we’re going to talk about Social Security again.”

Well, Social Security’s a big deal. It’s a fixed source of income, and it is your money. How you claim Social Security can mean the difference between $70, $80, $100,000, or more of additional lifetime income by properly claiming your Social Security. Because the average couple age 62 will have more than 600 different iterations on how they can claim their Social Security, Bud.

Bud Kasper: That’s right. It sounds wild, but it’s true.

Dean Barber: It’s true. Now, what you do with that is you go, “We have a calculator that’ll run all of those different scenarios for you and will tell you here’s the optimum way for you and your spouse to claim your Social Security.” This is how you’re going to get the most out of the system, and you can show it different life expectancy ages.

If you live to 82, to 85, to 90, or to 75. Many factors have to be taken into consideration, but we can show exactly what that looks like. Now, don’t just go take that data and say, “Well, that’s how I’m going to claim my Social Security.” No, that’s not it. Okay, because we’re putting the puzzle together.

Social Security Strategies

Dean Barber: Now, what we have to do is we have to say, “All right, let’s take these top two or three or four different strategies for Social Security and let’s put those into the financial plan and combine everything else with it. 

Which one of those strategies, based on your own personal situation, will give your plan the highest probability of success? Which one of those strategies will take the most pressure off of the underlying investment?”

Bud Kasper: Right, and so in reflection of what you just said there, it becomes similar to what we’re talking about with bonds, in that it’s an income source. But how much you get in terms of total income, perhaps for the rest of your life, will be represented in how you select?

Make Sure Your Claim Properly

Dean Barber: Look, what we’re talking about here is very, very complicated. There’s no question that you need help here. This isn’t a do-it-yourself type of scenario, especially not in the world that we live in today with the threat of rising interest rates out there.

I want you to schedule a complimentary consultation by clicking here. A CFP® can visit with you by phone, virtual meeting, or we’re welcoming you to meet us in the office. 

While you’re here, check out the article Bonds Versus Bond Funds and a great educational video we have on Claiming Your Social Security presented by CERTIFIED FINANCIAL PLANNER™, Will Doty. You need to do this right because there are no do-overs in retirement, Bud.

Bud Kasper: That’s right, so be prepared.

Dean Barber: All right, so we’re going to talk more about how to get income in a low interest rate environment.

Podcast Reminder

As a reminder, you can catch your favorite financial show, America’s Wealth Management Show, on your favorite podcast app and listen to it without commercial interruption. So look for America’s Wealth Management Show on your favorite podcast app.

Social Security is the Foundation of Retirement Income

Dean Barber: So we’re talking about how to get income in a low interest rate environment. We talked about how, to understand what your money needs to do, you have to first go through the financial planning process. 

So, what we’re trying to do today is to walk you through the process of how you’re going to discover what your money needs to do for you to be able to get the income that you need to support the lifestyle that you want to have in retirement. 

We talked about the foundation of that financial plan as you head into retirement is proper Social Security planning. That’s a big deal.

Bud Kasper: Sure it is.

600+ Iterations for Claiming Your Social Security

Dean Barber: The average couple will have over 600 different iterations on how they can claim their Social Security. And the difference between the best and the worst is often an additional $100,000 or more of retirement income from the same Social Security over the same life expectancy with the same earnings history. It’s crazy to say that, but it’s true.

We put that into our calculator, run it through all the different iterations, and then we can show you, okay, here’s your best claiming strategy. Here’s number two. Here’s number three. 

Then, we plug those different claiming strategies into the financial planning program to show which one of those planning strategies gives you the highest probability of success.

Bud Kasper: It’s a look of wonderment when people are going through the financial planning process, and they realize that there are choices that have to be made to facilitate the type of retirement that they want, the income, of course, included with that.

Dean Barber: Exactly.

Don’t Just Blindly Claim Social Security

Bud Kasper: How are people doing this blind? Here’s what most people do. Dean, I’m not telling you anything you don’t already know, and that is, well, I’m not sure Social Security is going to be around. I’m going to take it as soon as I can and put it in my pocket. 

Well, okay. That’s your opinion. You’re welcome to it. But we have to be practical from the perspective of maximizing the income conservatively and applying what we know from a financial planning process to do what? Maximize the result.

Don’t Let Fear Make Your Decisions

Dean Barber: Right. But that idea of Social Security may not be there. So I better take it as soon as possible. Yes. There are threats that there may be some cuts in Social Security in the future. And we take all of that into consideration. 

What you need to do, though, is you need to see the different claiming strategies, right? How does claiming it, as soon as you are eligible for it, stack up to all different claiming strategies? 

In your financial plan, not just in a spreadsheet that says where’s my breakeven point, right? It has to be within the overall context of the comprehensive financial plan.

What About Taxes?

Bud Kasper: And once we’ve got that down, now, the question is, okay, we have this source of income. How am I taxed on this account?

Dean Barber: Exactly. And so that’s number two, right? Remember, we haven’t gotten to the investment yet of how we’re going to earn income because what we’re going to do is, through the financial planning process, we’re going to maximize Social Security.

Then we’re going to come in and say, all right, how do we get the income that we need based on what you have today into your checking account for you to spend and do what you want to do with the very least amount of taxes possible, right? That you have this uncanny ability to control taxes in retirement, unlike during your working years.

Distribution Strategies and Taxes

A good part of the financial plan will be creating that distribution strategy to pay as little tax as possible over your lifetime. Not maybe in one single year, but over your lifetime, because we know that taxes will be a matter of fact for the rest of your life. As long as you live in the United States and have money or make money, you’re going to pay taxes. The question is, how do we pay the least amount of taxes possible?

Learn More About Tax Reduction Strategies

Dean Barber: Now we’ve got a couple of great things on tax reduction strategies. We do a separate podcast called The Guided Retirement Show. I want to direct you to find that on your favorite podcast app or YouTube, and just look for The Guided Retirement Show, specifically episodes 3135181, and 2, all deal with reducing taxes.

We also have a special video that we’ve put out where JoAnn Huber and I, our lead CPA, talk about tax reduction strategies which you can find here

Don’t pretend to be the expert here. Don’t think that this is something that you’re going to be able to do on your own. Schedule a complimentary consultation. You can visit with one a CERTIFIED FINANCIAL PLANNER™. You can do it by phone. We can do it by Zoom meeting, or you can meet us in person. It doesn’t matter, but the consultation is complimentary.

By the way, we don’t have financial products to sell. We charge a fee for what we do. Once we understand what the work is that we need to do, we can quote you a fee of what that’s going to be. You can then make an adult decision of whether or not the fees are worth what you think we can do.

Bud Kasper: It’s worth your time, folks. I might add a little credit here as well to you, Dean. With the CFP® designations we have in the firm, and when we instituted our first CPA into the firm, it raised another level of expertise into the planning process. It has provided incredible results for our clients because of that tax overlay.

Get the CPA Involved in the Planning Process

Dean Barber: So now we know how to maximize our Social Security. And once we do that, then what happens is our CPAs look at the financial plan that our CFP® have created. They say, all right, from a tax perspective, how do we do this? 

What’s the right formula for your situation? Then, once the CPA gets that part done, we’re finally ready to start talking about investment strategy because we’ve solved the riddle of what your money needs to do to get the income you need.

The Bond Market Today

Bud Kasper: Right. To use an old saying from Greenspan, which was, we have a conundrum here; the issue that we have today is dealing with a bond market, which has very low-interest rates. The bond market, some people have said, is at the end of a 40-year run, meaning that bonds have dropped in interest rates.

As that has happened, what that has done is it’s limited the amount of income that we can derive from the income portion of a person’s plan. And so with that and understanding that with bonds, why do we buy them? We buy them first for income. Secondly, we also may have a capital gain, but also capital loss. And that’s why we’re talking today.

Right now, the bond market is suffering a little bit because of what’s going on with the Federal Reserve and how the market is interpreting this over a longer period than just a week ago.

Bond Market Example

Dean Barber: Let me give an example here, Bud, of what you’re talking about. So TLT is a ticker symbol for I-Shares 20 year treasury bond ETF, right? So last year, TLT gave a total return of 18.15%. Now, remember we were in the COVID crisis, and interest rates fell to the floor.

Bud Kasper: Fear.

Dean Barber: Okay. And when interest rates fall, the TLT will rise. There’s your capital appreciation that you just talked about.

Bud Kasper: They raise higher on the longer maturities and the shorter maturities.

Dean Barber: That’s right. And now, year to date, as we speak, that TLT is down by 12.63%. We’ve seen the 10-year treasury. I don’t know what the 20 is, but the ten-year treasury rise from a yield of 1% to a yield of 1.6%. And that’s caused that TLT to drop by 12.63%. So a 0.6% interest rate on the ten-year treasury, Bud, caused a 12.6% drop.

Where do You Get Income in this Low Interest Rate Environment?

That’s why we say, okay, where will we go to get income in this low interest rate environment? I will caution every one of our listeners right now, don’t rush to solve the problem by first looking at investments, though. You have to go at this in a very methodical way. And every single one of you will have a different conundrum that Bud talked about.

Dean Barber: And that is what does your money need to do? That’s a riddle that we have to solve. It’s like putting together a giant jigsaw puzzle. 

Once we do that, we go in and say, all right, what investment strategies will be most appropriate? So, schedule a complimentary consultation by clicking here.

You can schedule it right there. It’s a 15-minute phone call, a 30-minute phone call. Do you want to do a virtual meeting? Do you want to come in to sit down in person to visit for an hour? I don’t care. However you want to do it, we’re here to help you. 

Getting Income in a Low Interest Rate Environment 

Dean Barber: Today, we’re talking about getting income in a low-interest-rate environment, and we’ve been in that low-interest-rate environment for quite some time, but we’ve been in an interest rate environment where we’ve seen interest rates declining, and that up until January 1st of this year, where the ten-year treasury was at 1% and now is sitting around 1.6%. So it’s seen quite a ride. 

We’re going to talk specifically during this segment about bonds. And we’re going to talk about some specific bond ETFs. We’re going to talk about some specific individual bonds, and we’re going to talk about the different types of bonds, bond mutual funds, et cetera.

Your Plan is Specific to You, the Following is for Example Purposes

As we do this, please do not take anything that Bud and I are saying as an investment recommendation to buy any of what we’re talking about.

Bud Kasper: Right.

Dean Barber: Everything we do from an investment standpoint is done with a purpose and as part of an overall portfolio. 

Bud Kasper: And heavily vetted.

Dean Barber: Heavily vetted. Okay. So again, we’re going to talk about some specifics, but do not take it as investment advice. If you want us to tell you individually, how should you invest your money? 

We will take you through our financial planning process, show you how to maximize your Social Security, show you how to reduce your taxes over a lifetime. We can show you what your money needs to do. 

Then, we will show you how to make the most calculated approach to invest your money to get to where you want to be. We call that our Guided Retirement System™. 

You can understand what that all looks like, what it feels like, what it can do for you by scheduling a complimentary consultation here. Choose the office location you want to meet us at, select a time, and schedule the consultation.

Bonds: An Example

Dean Barber: Okay. We talked last segment, Bud, about the TLT, iShares 20-year treasury bond ETF. Up 18.15% last year, down 12.63% this year.

Bud Kasper: And I might even add as well, at one point it was up like 26-28%. Does that sound right, Dean?

Dean Barber: Yes. Yes, that’s right. It was up quite a bit higher than that at one point last year, for sure. 

Bud Kasper: Yeah, right.

The Interest Rate/Bond Teeter Totter 

Dean Barber: Because think about it, given the analogy a little while back about a teeter-totter. So if you can imagine bond values sitting on one end of that teeter-totter and interest rates sitting on the other end of that teeter-totter, as interest rates start to rise, bond values start to fall.

 Bud Kasper: Exactly.

Not All Bonds Are Impacted the Same

Dean Barber: So it has an opposite effect. Now, it doesn’t necessarily have that opposite effect on all bonds.

Bud Kasper: Right. Or to varying degrees. 

Dean Barber: Exactly right. Now, imagine that you’re sitting in the middle of that teeter-totter. Boring. Not much action.

Bud Kasper: Yeah.

Dean Barber: Okay. Those are your ultrashort bonds or your bonds that will mature in six months to a year, maybe 18 months. Those bonds are always going to trade closer to their par value, which is their maturity value. And the other thing’s going to happen is they’re going to have a little bit lower interest rate, in most cases.

Bud Kasper: Yeah. The same token, they probably won’t meet your income target using bonds as one of the sources.

Where Do You Put Your Money?

Dean Barber: But it could have the safety that you desire, because think about this, Bud. Money markets today, and CDs, just can’t get anything on them.

Bud Kasper: Yes, and have been that way for years now. Which has forced people to do what? Take more risk.

High Yield Bonds

Dean Barber: Right. Let’s talk about high yield, Bud, before going to some of these other different types of bonds.

Bond Ratings 

Bud Kasper: Well, when you talk about that, now we go to the rating agencies. So we’re talking about Standard & Poor’s, and Moody’s, and Duff & Phelps and some of the other ones. 

These are independent companies that evaluate the security of the bonds, meaning their ability to pay back your principal value to you once you buy those. But when we look at these, you’ve heard the term junk bonds before. That means that it is less than triple B. 

Bud Kasper: So you have AAA, AA, A, BBB, and then a under a BBB is what we call junk bonds. And where do you find a lot of those? In the high yield category. And high yield bonds have performed pretty well. 

It did pretty well last year, from that perspective. But we have that element, that volatility that a lot of people just simply can’t stomach inside their portfolios. So if that’s the case, what are my alternatives?

Back to High Yield Bonds

Dean Barber: Well, first of all, let’s talk about what high yield did over the last few years. To illustrate that, I’m going to go straight to, again, the iShares, iBox, high yield corporate bond fund, ETF, ticker symbol HYG, and that particular fund this year so far has a total return of a minus 0.25. 

So it’s down by a quarter of a percent this year. Now you compare that to the treasury, which is negative by 12.63% this year, there’s a pretty big difference. 

COVID’s Impact

Now last year, the high yield had a tough time during the COVID crisis. During March, there was a real liquidity crunch in the bond market, and a lot of pricing agencies priced those high yield bonds down to a point where they were trading at a discount.

Bud Kasper: Right. And the government had to step in.

Dean Barber: And say, “We’ll be the buyer of last resort.”

Bud Kasper: Yeah, exactly. 

Dean Barber: And so in periods where you have tough economic times or crises, if you will, those high yield bonds can sometimes act for a short period like stocks. So if you’re going to buy the high yield bond, you’re going to buy it for the dividend. So HYG right now has a dividend yield of 4.79%.

Bud Kasper: Which sounds attractive on the surface.

Dividends As Part of an Income Stream 

Dean Barber: It is attractive, Bud. And if you say, “Okay, well, what I’m going to do here is I’m going to clip a coupon. I’m going to get to take the dividend on this, and that’s going to support part of my income stream.” 

You have to understand that the underlying price per share will bounce around a little bit more. Now you’d say it bounces more than the 20-year treasury? No, not necessarily. If you look at the two next to each other on a chart, the 20-year treasury bounces around more than the high yields do. 

Bud Kasper: True.

Risk in High Yield Bonds 

Dean Barber: But you do have some risk of default on high yield bonds. Although it’s pretty small, but that’s why they act more like stocks in a tough economic environment.

Bud Kasper: That’s a fair comparison. No doubt.

Dean Barber: Now, last year, high yield didn’t do as well as the TLT. It performed at four and a half percent. In 2019 high yield performed at 14%. It was down 2% in 2018, and it made 6.07%. 

So total return of the last five years on high yield is 36.8%. That’s a total return over five years. And you compare that to the total return of the TLT over the same five-year period of 18.79%. 

So now, it wasn’t ahead the whole time. There were periods when the high yield was ahead. There were periods when TLT was ahead. Again, this is just some explanation of understanding what’s happening in the bond market, and not all of them are going to do the same things.

You Have Choices with the Bonds You Hold 

Bud Kasper: Yeah, no doubt I know we probably confused some people, though, these TLTs and IEFs and everything else associated with this, but what we want you to take away is you have a choice in terms of the bond portion of your portfolio. 

One of the other things you need to think about is how much do I need in bonds at this particular time, and is there an alternative outside of the bond market that we might want to turn to to help balance out our portfolio, let’s say, the remainder of this year. 

Dean Barber: Yep. And the other types of bonds that are out there, we’re going just to lay it out there really quickly. Mortgage-backed securities and floating rate debt. So if we’re going to say, what will perform the best in a rising interest rate environment? 

You want to find some bonds that are probably undervalued a little bit for no real reason, other than the fact that the pricing agencies had priced them down last year, and they still haven’t recovered. 

There’s a lot of that stuff out there still. And it’s attractive. The point is, not all bonds are created equal. Yes, bonds do need to be a part of most portfolios, but which bonds you choose will be the real decision-maker.

Investing for Total Return

Dean Barber: Bud, what you and I both agree on is that in this environment, to generate the income that our clients need to live the life that they want to live, we have to invest for total return, okay. 

When you invest for total return and have choppy markets, you have to have the right strategy. Because if you don’t, then you wind up selling assets at discounted prices, and you don’t want to have to do that, right? 

Bud Kasper: Exactly.

Bucket Strategy

Dean Barber: So what we want to talk about now is what we refer to as a bucket strategy. And the bucket strategy is no more complicated than basically saying, “All right, I want to have two to three years’ worth of income in a very safe, stable, low-risk type of investment, okay. And why do I want to do that? Because that’s where my income is going to come from every single month.

Dean Barber: Then I want a bucket that’s going to be out there and run, say, from year three to year 10. You’ve got a pool of money, and in that pool, you’re going to go for moderate returns. You’re going to have some fixed income in there.

Bud Kasper: Some growth.

Dean Barber: You’re going to have some growth in there, right? The balance of what you’re going to have in there will depend on the financial plan of what your portfolio needs to do. Then we design this for you.

Our third bucket is going to be that 10+ year piece of money. This is where we get to pretend that we’re ten years younger and we got this piece of money that we’re not going to touch for the next ten years, regardless of what happens. 

Now, it doesn’t mean that we’re not managing it. It just means that we’re not going to pull any income out of it. As that grows, as an example, last year, right, that growth portion, that 10-year plus bucket, may have had returns depending on how the position of anywhere from mid-teens to high 20% range.

Utilizing the Buckets for Advantages

Dean Barber: Okay, well, that’s more than what we need, so what’s the strategy there? The strategy then is to take the excess winnings and dump them back into bucket one so that we can have more income in that secure bucket. 

You do that on a year-by-year basis. You kind of relook at these things and say, “All right, did we get to capture some gains here in bucket two and bucket three? Let’s pull that back into bucket one.” Eventually, bucket one will have more money in there than what you need, so you can let those other ones ride a little bit further out.

Bud Kasper: Exactly right, and we refer to that as rebalancing the portfolio. It allows us to take the gains, realize the gains, and put them back, to do what? 

To serve what the current income need. And that current income time range could be one to three years. It depends on how we construct the portfolio or the financial plan for people at that time.

Market Cycles

Bud Kasper: It’s fun for people to understand. Everybody, I think, listening to us right now, Dean understands that we have market cycles. There are times when stocks are doing wonderfully. There are times that stocks aren’t doing well. And the same thing is in bonds. It’s in commodities and lots of different investment possible solutions that are out there.

Bud Kasper: But when you have the opportunity and if your mind can rest on the fact that you have this structured bucket strategy that is allowing you to preserve the capital you need, let’s say for two to three years, and the cycles are going to do what they’re going to do because the other buckets are getting, what? Time. 

We know over time, the averages will play into the total return of the combination of both income and the various growth buckets that are applied.

Managing Your Investment Buckets

Dean Barber: Exactly right. Now, so let’s talk about the management of those buckets. Even in the growth buckets, you have to be nimble. You have to have the ability to switch from one style of investing to another style of investing, depending upon what’s happening. 

A perfect example is this. If you look back over the last three years and we want to compare QQQ, which is-

Bud Kasper: Technology.

Dean Barber: Technology, right. It’s NASDAQ 100, and we want to compare that to IJT, which is iShare small-cap growth. Okay, you’re going to see that over that period, over the last 12 months, IJT returned 112%.

Bud Kasper: Yes, and I know that sounds crazy.

Dean Barber: Keep in mind, Bud, that’s coming off of the COVID lows. 

Bud Kasper: That’s right.

Dean Barber: And QQQ was up by 87.26%. So far this year, you see a big difference. The IJT is up 10.01, where QQQ is only up by 1.23. What we saw happening late last year was we started seeing a rotation away from technology, which has kind of been the darling for quite some time now over to small and mid-cap stocks, all right. 

You might want to take that and say, “All right, well, if we start to see that shift of that’s where money is flowing, wouldn’t it make sense then to overweight a little bit into the small-cap arena? And maybe we take some of the waiting out of the technology or the large caps?”

When to Exit 

Bud Kasper: Yeah, absolutely right, Dean. But one of the issues, and I’ll go back to that conundrum once again, and that is at what point do you exit those strategies? Because we know what the history is on technology. 

We know it’s been absolutely out of sight in terms of the cumulative returns. Whether you look at the one-year, three-year, five-year, ten-year timeframes, it’s so attractive. It’s hard to deny its purpose in a portfolio to whatever extent a person’s tolerance for risk is. 

Bud Kasper: But we know that these are changing. We’ve seen a rotation. We haven’t had a rotation for almost 11 years because large-cap growth, and growth in general, has been the best place to be for stock market returns. Now we go to where we are right now, and we’re starting to see a rotation into what we call value. 

So when you look at the stock market, and I know this gets a little confusing for radio listeners from that perspective, the issue is, do you want to be participating in value-based stocks, or do I want to be in growth stocks? There are times that you want both, and there are times that you may only want one, Dean.

It’s Confusing, Find a Guide to Help You

Dean Barber: It’s all confusing if you don’t know what you’re doing, right?

Bud Kasper: Right, and if you don’t have the plan to make sure that it’s going to make your dreams come true. 

Dean Barber: Well, between the two of us, Bud, we’re sitting on nearly 70 years worth of experience, and so I think we know what we’re doing. I encourage you to schedule a complimentary consultation. Let’s talk about what’s going on in your life, what your objectives are, and take you on a test drive through our Guided Retirement System™ so that we can show you how to get the most out of your Social Security, how to pay the least amount of taxes, and ultimately arrive at the question: How do I get income in this low-interest-rate environment?

Take Advantage of Your Opportunities

Bud Kasper: These are all opportunities, folks. And we want you to engage in the philosophy that we’re using on the radio show because it’s here to serve you, from an educational perspective, from a sense of reality as well.

Dean Barber: No doubt about it. I mean, we have fun doing it, and we’ll have fun visiting with you and getting to know you. If you’re doing everything right, we’ll make sure and let you know. If there are some things you can do differently, we’ll point those out to you as well.

Thanks so much for being with us here on America’s Wealth Management Show. I’m Dean Barber, along with Bud Kasper. Everybody stay healthy, stay safe. We’ll be back with you next week same time, same place.

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The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.