The Impact of Rising Interest Rates
Key Points – The Impact of Rising Interest Rates
- Inflation Remains Top of Mind
- Being Prepared for the Fed’s Hike(s) Is Pivotal
- How Will the Market React?
- The Federal Reserve and Bond Buying
- Looking at Your Financial Plan to Dictate What You Should Invest In
- 22 minutes to read | 38 minutes to listen
It’s been just over a week since Federal Reserve Chairman Jerome Powell announced a 0.25% hike of the Fed funds rate, and that six more increases have been penciled in for the remainder of 2022. The Federal Reserve’s goal with these moves is to slow down inflation, but what can we expect the impact to be from rising interest rates? Bud Kasper and Logan DeGraeve discuss the importance of making necessary adjustments to your portfolio in a rising interest rate environment.
Find links to the resources Bud and Logan mentioned on this episode below.
- Article: The Federal Reserve’s Monetary Policies
- Download: Retirement Plan Checklist
- Education Center: Articles, Videos, Podcasts, and More
How Will Rising Interest Rates Impact Portfolios?
Bud Kasper: Hello everyone! Welcome to America’s Wealth Management Show. I’m Bud Kasper. Dean Barber is out today, but Logan DeGraeve is joining me for a great show that we have in store. We’re going to focus a lot on what’s happening with the Federal Reserve, this rising interest rate environment, and the impact that it’s having on various portfolios.
More importantly, we’re trying to understand all these global events that are going on and the impact that it may have on us as well. So, Logan, welcome back to the show.
Logan DeGraeve: I’m happy to be here, Bud. Thanks for having me again.
Comprehensive Financial Planning Is Critical in Rising Interest Rate Environments
Bud Kasper: We have several topics that we think are very germane to what people would like to learn more about. Those topics include the Federal Reserve’s monetary policies. We had a 0.25% increase in the Fed funds rate. Is that going to be enough? The answer is no, but we’ll talk about the nuances with that.
We’re also going to talk about the Federal Reserve’s balance sheet and how that can impact markets. And then, what has history taught us and what things do we need to remember as we walk forward with the situation that we’re in right now? There is a lot to unpack when assessing rising interest rates.
Outside of that, I think there’s so much negative news that people get a little bit down. People are saying, “How in the world can we make money when we’ve got the Ukraine situation going on?” We have a huge amount of debt on the country. Even the debt on the Federal Reserve is $9 trillion. So, we have a lot of things that I think people need clarity on. And that’s what we’re going to provide.
Seeing Through Negativity in the News and Inefficiencies of Financial Salespeople
Logan DeGraeve: It is hard to watch the news right now. If you watch the news, there’s nothing but negativity. But that’s why you work with a CFP® Professional to help you navigate through these times. Let’s make sure that we’re just going back to the plan. That gives us comfort so that we have the clarity we need.
Bud Kasper: But the problem with that is the fact that most people don’t work with CFP® professionals. They’re working with financial salespeople. While they can do a pretty good job on portfolio development in terms of investments, they’re usually very ill-equipped in terms of the planning process. Therefore, there’s a huge void. It can be a big mistake with not understanding the implications of what financial planning can mean to the success of your retirement.
Logan DeGraeve: Right. And if you don’t know what you don’t know, that creates anxiety.
A 0.5% Rate Kickoff Could’ve Been More Beneficial
Bud Kasper: That’s right. We don’t need to be more anxious than we already are.
So, let’s start by talking a little bit about Jerome Powell. If you’re not familiar with his name, he’s the chairman of the Federal Reserve and Federal Open Market Committee, which makes the decision on what’s going to be happening with interest rates. As we know, they increased the Fed funds rate by 0.25%. Were you surprised by that, Logan?
Logan DeGraeve: I wasn’t surprised, but I wish they would’ve done 0.5%.
Bud Kasper: I’m in your camp as well. Policy that is created by the Federal Reserve has implications. If they’re late in the cycle of moving rates higher, then it means they’re going to have to make it up later. They included in their statement that there is the possibility of six more increases in 2022. That statement gave a lot of insight into the future of rising interest rates. If they do that, that’s going to add another 1.5% to the 0.25% that they already announced.
So, 1.75% would be the Fed funds rate at the end of the year. That’s a huge move. The fear that goes on with that is that the Federal Reserve could dry up the growth of our economy because of rising interest rates.
Logan DeGraeve: When they came out and said six more hikes in 2022, I was a little bit surprised. But to Bud’s point, why would we not just start with 0.5% to get to the issue of the problem a little bit sooner than later? The raising of rates should have been started last year, but it wasn’t.
The Decision of a 0.25% Initial Hike Wasn’t Unanimous
Bud Kasper: On a local and regional level, Kansas City Federal Reserve Chairman Esther George and St. Louis Federal Reserve Chairman James Bullard agreed that 0.5% should be the first move with these rate hikes. Esther George is a brilliant woman. Yet, the FOMC obviously elected to go with 0.25%. Every one of the presidents of the Federal Reserve banking system doesn’t gets to vote. They can have influence with it, but there’s a certain number that gets to vote on whether to increase or decrease rates.
Logan DeGraeve: I guess my kind of issue with it was that they raised rates last Wednesday and then came out Monday and said, “Hey, inflation is not in check. We’re going to have to be more aggressive.” Well, what changed in less than a week?
Bud Kasper: Exactly. We’ll see how the markets react to these rising interest rates. The markets are generally efficient, meaning they’re reading into this in advance. They have expectations, so that’s influenced by the amount of buying and selling that goes on inside the marketplace.
When Will the Troubling Times for Tech Be Over?
If we look at an individual sector, such as technology, it really got damaged since the first of the year. The question is, is it at a bottom? I don’t know, but I do know that technology will continue to move this economy into the future. If you are already owning technology, and let’s say you’ve had a 20% decline, which is huge, should you lighten up?
Logan DeGraeve: I’ve been having a lot of those conversations. I agree with you completely. What’s going to get us and the economy over the next five, 10, 15, 20 years? It’s going to be technology stocks. Bud makes a good point. We don’t know where the bottom is at, so make sure you are diversified in the risk that you are taking.
We’re Feeling the Impact of Inflation Everywhere We Go
Bud Kasper: The other thing that’s really hitting people is the inflation rate. Inflation is at 7.9% as of February. That’s a huge increase. And, of course, everybody’s feeling it at the pump, restaurants, and everywhere else. We’re going to dive into some of the issues that people are really having to contend with to try to determine what other moves might be necessary from their perspective. How can they live through this higher inflation factor without it totally disrupting the amount of money they spend, how they save, etc.
Logan DeGraeve: And how does it impact your retirement plans? That spending budget that you had three years ago isn’t what it was three years ago.
Bud Kasper: We need to talk about taxes as well. That’s another implication that draws down on a person’s ability to save or spend.
How Will the Markets Continue to React?
Logan DeGraeve: It all really does depend on what the market thinks with rising interest rates and everything else that is going on. Like Bud said, a lot of the market is efficient. The rate hikes have been priced in for a while, but there’s a lot more going on than just rising interest rates. That’s what we need to navigate. We knew going into this year that we were going to have rising interest rates. We knew there was going to be inflationary pressure, but now Russia invades Ukraine and that increases that inflationary pressure. What does that look like?
Bud Kasper: People hate fear and not having clarity associated with what’s going on. That’s where the Federal Reserve comes in, but the Federal Reserve is clearly stating that they’re behind. They need to catch up now in raising rates.
And you might say, “Why do they need to do it? We like it when interest rates are low. I can borrow money to buy a house lower. My gasoline prices are a lot less. Why in the world would they do that?” Well, if they don’t start to pull this economy back in, we’re going to have a much higher inflationary factor than what we’re living with right now. You don’t want that. You pull the economy back in by raising rates. We even have the possibility of stagflation, which we can talk about a little bit as well.
Controlling What We Can Control
Logan DeGraeve: Like Bud and I talked about earlier, we don’t know exactly what is going to happen with the stock market. And we don’t know what’s going to happen with Russia and Ukraine. But we do know our specific clients’ needs because we have done their financial planning. We know X-client needs X-dollars a month and how to do that in the most tax efficient way for them.
Bud Kasper: Exactly. One of the real problems facing retirees and investors is the bond market. It takes the brunt of the action of what the Federal Reserve is doing. When interest rates go up, the dollar value of bonds goes down.
We just had this 0.25% percent move and are probably going to have another move at the next FOMC meeting. By the way, these moves can be made any time and not just at FOMC meetings. We’ve had prior Fed chairmen who have announced moves between FOMC meetings. In those situations, they see that there’s more medicine that need to be applied to keep the economy moving in the right direction.
What’s Happening with the Bond Market?
As we see what’s going on here with these bonds, a lot of people are worried about it because they count on the bonds for security. If we go to 2020, the stock market was at its peak on February 19 at 4.8% before going down to its trough on March 30 due to COVID. It was about a 30.75% drop. Then, it came right back roaring back again.
We look at that scenario and logically ask, “Can that repeat for what we’re experiencing now?” Well, probably not. At least not with the speed that we had that year. But even though the stock market finished up beautifully that year, it was the bond market that had big changes.
Logan DeGraeve: In March 2020, we had a liquidity crisis within the bond market. A lot of people don’t know this, but the Fed is one of the biggest buyers of bonds. If there’s not liquidity in the market and there’s no one buying, there aren’t sellers. There are just people liquidating.
Bud Kasper: Bonds were terrific in 2020. You could have gotten a return anywhere between 6% to 15%. That was great. People anticipate that bonds are going to take care of them when the stocks won’t. It turned out that we had the recovery in the stocks and the bonds still held up for that period. But then, we went into last year and we’re now starting to see some of the angst in the bond market. And it’s continuing today.
Some Helpful “TIPS” Regarding Bonds
Logan DeGraeve: I tell clients that the way that we made money in bonds the last few years isn’t going to be the way we make money in bonds the next few years.
Bud Kasper: The question a lot of people are going to be asking is, “Why should I be in bonds?” That’s a very good question. We don’t see a whole lot of promise associated with traditional type of bonds when we’re talking about corporate bonds. Government bonds are going to react the same way. So, there’s no panacea associated with this.
If that’s the case, generally the rule is to be short on your maturity range. And if possible, you might want entertain looking at something called Treasury Inflation-Protection Securities (TIPS). Those are investments that appreciate in value as we see inflation go up.
Even though that we’re seeing rising interest rates, you always have the downside of the market that you have on bonds when they’re rising. But because these type of TIPS investments have a reset, they can get more income as they continue to raise the rates. Many times, that can be a place to hide.
Logan DeGraeve: TIPS have really done well over the last year with everything that has happened, which has been nice. And remember, not all bonds are created equal, so look at what bonds you hold and why you hold them. You should understand why you’re holding what right now.
When Can We Expect Stocks to Recover?
Bud Kasper: Exactly. If the Federal Reserve gets its act together and doesn’t have to increase any more than 1.75%, I think at some point— probably in the last quarter of the year or a little bit before that—you could see stocks start to recover again. The stock market wants to see the Federal Reserve understand what their responsibilities are. If they don’t, we’re going to be in something worse than that.
What Is on the Fed’s Balance Sheet?
Logan DeGraeve: Right. What I want to talk about now, too, is that people don’t really grasp what is on the Fed’s balance sheet. So, what is on the Fed’s balance sheet?
Bud Kasper: There’s $9 trillion worth of debt. You need to understand that the Federal Reserve’s power—what they can do to create a lower interest rate environment—is to buy bonds. If you’re buying a bond, you’re bidding the price of that higher. That’s good for bonds when debt is occurring.
In December 2021, the Federal Reserve changed its position. Instead of buying $120 billion worth of U.S. government bonds, they changed it to $60 billion. That was the first shot across the bow from the Federal Reserve’s perspective. They decided to reduce it because all that money is doing is adding more bonds to the $9 trillion of indebtedness. That’s not what we need.
The Federal Reserve’s Balancing Act
Logan DeGraeve: At the same time, it’s a delicate balancing act. If they unwind too quickly, then we get into an issue within the bond market. It’s a tough spot to be in, but the Fed can’t navigate it too quickly or too slowly. What does the Fed need to do to get things in order?
Bud Kasper: I’ll use a Dean Barberism with the Goldilocks theory. Is it too hot, too cold, or just right? Right now, it’s a little too cold. There are some changes that are taking place, but eventually, we hope to get it just right.
Let’s remember that the people on the FOMC are very bright. They want to do the best thing for the country, but they need to look out for us at the same time because what we’re experiencing now is the dark side of higher inflation.
Having Flexibility in Your Financial Plan
Logan DeGraeve: Bud just said the dark side, but not all this is completely negative news. We aren’t just saying that the bond market is going to be horrible. You need to readjust from time to time. There have been so many of our clients over the past few years that said, “The CDs I’m getting aren’t paying anything. There are individual bonds that I wish I could get.” Hopefully, we’re on a track where those become a little bit more attractive again to investors.
Bud Kasper: I like where Logan is going with that because that’s exactly right. We need to be flexible in our investing plans to understand where the favorability is and where it’s not. It’s OK to alter your allocation. A lot of people don’t want to touch it and just let it go. That can happen over time, but when you’re retired and when taking distributions out of those accounts, it’s more impactful in this case to go in and try to curtail as much loss as possible in that process.
Logan DeGraeve: Bud and I talk a lot about having a short-term, midterm, and maybe a long-term bucket of money. But that short-term bucket has basically become a liquidity bucket.
Bud Kasper: And there’s nothing wrong with that.
Logan DeGraeve: That’s just fine.
The Impact of Inflation Is Felt By Everyone
Bud Kasper: You bet. I want to jump back to one of the things that we’ve already talked a little bit about and that’s this very insidious thing that we know as inflation. We deal with it daily. When I paid $80 to fill my gas tank the other day, somebody had to grab me before I hit the ground. I’ve been in this industry for 38 years, so I’ve been through it a few times. It’s never pleasant, but it’s even more unpleasant today.
Logan DeGraeve: That’s right, Bud. And it’s hitting everyone. It’s not just the retiree. College students are feeling it.
Bud Kasper: The price of beer went up.
Logan DeGraeve: So did the price of fast food and many other things. Inflation was on the things that was touched on by LSA Portfolio Analytics President Brad Kasper in our recent article, The Federal Reserve’s Monetary Policies. Bud knows him very, very well. It’s a brilliant article.
Bud Kasper: Yeah. I happen to know him.
Logan DeGraeve: The article does a great job of explaining the goals of the Federal Reserve. There’s a quote from Brad it the article that really stuck with me. He says, “Inflation has been like watching paint dry over the last 10 years. We’re looking for some wage growth and wage inflation that suggests there’s more of an inflationary environment versus this ugly word of stagflation.”
I want to give Bud the ball here because he and I were talking about stagflation a little bit earlier. Let’s talk about stagflation and what it means.
Bud Kasper: I’m happy to address that. I want to start by saying that I think the likelihood of us going into a stagflation scenario is very low. But if you want to know the definition of stagflation, it occurs when there is a persistent high inflation. Well, we are starting that, right? Maybe that’s the first base that we’re turning on at that point.
However, stagflation also involves high unemployment. Well, our unemployment is at 3.8%, so we’ve got a pretty good thing there. That’s one thing that Joe Biden can really give himself some credit for. We’re not meeting the criteria of stagflation from an unemployment perspective.
The other component of stagflation is negative economic growth, but the economy is just growing beautifully. And if that’s the case and we can continue that, herein lies the question, what is the Federal Reserve doing with raising interest rates?
The State of the U.S. Dollar
Remember, the Federal Reserve has $9 trillion worth of debt and the nation has over $30 trillion. Every amount of additional debt that we pile on is weakening our dollar. That’s an incredible thing to think about. If we aren’t the currency of the world, what would be? Is it going to be the Yuan? Is China going to be the go-to currency? My answer to that is no. Is there any other currency that could take over? No, but ours becomes cheapened if we continue down this path. That’s the reason the Federal Reserve needs to step in on that.
The Pressure Is Still on Jerome Powell
Logan DeGraeve: If you look at what Bud is talking about, stagflation is a Federal Reserve policy issue. But there are a lot of other factors going into this. In the same article, Brad talks Russia/Ukraine inflationary pressure that we’re seeing. How does that affect policy? Bud and I said on the show about a month ago that we wouldn’t want to be in a situation that Jerome Powell is in right now. I still don’t want to be in a situation that Jerome Powell’s in right now.
Bud Kasper: No doubt about it. Even though stagflation will creep up in conversations from time to time, I think it’s an outlier at this point. Logan said it perfectly that stagflation is usually brought on by poor monetary policies coming from the Federal Reserve.
I just gave credit earlier about how smart these people are that are serving on the FOMC. Surely, they can see what could occur if they don’t get their act together and do it quickly enough so that we will still have economic growth in our future. That’s what everybody wants.
Can Jerome Powell Learn from the Rising Interest Rate Environment of 2018?
Logan DeGraeve: That’s what we’re looking for. Another aspect that I thought was interesting in our article, The Federal Reserve’s Monetary Policies, is how Brad referenced Jerome Powell’s previous experience as Fed chairman with rising interest rates. At the tail end of 2018, interest rates were rising too quickly. A lot of people will probably remember that equity drop.
I read an article this week where someone asked, “Why doesn’t the Fed just raise the Fed funds rate to 2% now?” It’s not that easy.
Bud Kasper: No. It’s a shock to the system if it comes too hard and/or too fast. It’s no different than the shock we’re seeing at the pump. People can’t believe that they’re paying this much for gas. While I complimented Biden for our low unemployment rate, his policy of shutting down the Keystone Pipeline—and more importantly not allowing us be independent oil producing country—was a mistake.
This Is a Marathon, Not a Sprint
Logan DeGraeve: I think what’s important to note about all this is that it is kind of like preparing to run a marathon. You just don’t start and run 13 miles on the first day. You need to build up to it. The point is you’re going to hear all kinds of news and noise over the next few months and it’s just not as simple as pressing a button to fix this.
Bud Kasper: Logan is exactly right. From our client’s perspective, we’re trying to do is give some insight about the things that they need to key on when listening to programs like America’s Wealth Management Show.
We need to keep this economy growing, but not overheat and have so much inflation. We can do that through the policy, but many times the timing of the policy becomes the critical factor as to whether it’s effective enough. Or does it take a longer period to get the correction back in play?
Logan DeGraeve: Bud made a comment earlier this week that made a lot of sense. There is a lot of hope from the Fed that we’re just going to grow our way out of this.
Bud Kasper: That’s a possibility, for sure. Let’s give credit to where credit is due. A lot of this has to do with corporations and their ability to manage their businesses in an effective manner, regardless of what interest rates are doing. There are adjustments that the CEOs and board of directors at some of these companies need to make to maintain their profitability. That’s their only objective. They want the company to be profitable so that their shareholders make money.
What Does the Impact of Rising Interest Rates Mean for You?
Logan DeGraeve: But we’re talking about a lot of different topics and we’re spending a lot of time focusing on policy. The bulk of our clients may not be as concerned about policy. What they’re saying is “Logan, what does this mean for me? What does this mean for my financial plan?” And that is the beautiful thing because a lot of this should have been anticipated last year or two years ago. The writing has been on the wall.
The Benefits of Stress Testing Your Financial Plan
Bud Kasper: One of the things that we do in sessions with clients is review other periods of history. We can go back to a high inflationary period and look at their portfolios and put them through that timeframe. They can see exactly how their portfolio would’ve reacted at that time. That’s a beautiful thing.
Logan DeGraeve: The better part of that, too, is seeing how the investments reacted. I was working with a client of mine this week and she was very concerned about inflation. I said, “Look, inflation is going to be when inflation is going to be. That’s out of our control. But I do know that I can stress test your financial plan and we can see 5% inflation for the entirety of your retirement period.” We’re talking 30-year periods here. Our plan went from a 99 to a 98. I told her that she was going to be just fine.
Bud Kasper: That means there’s 98% of assurance that she’ll have a success in her retirement plan. If you don’t have a plan, you need a plan. Logan and I will stand behind that.
Geopolitical Turmoil Is a Valid Concern
However, people are worried and rightfully so. Look at the Ukraine/Russia situation. In this day and age, are you kidding me that somebody needs more real estate than what they currently have?
Logan DeGraeve: That they’re destroying.
Bud Kasper: That is absolute insanity. That fool (Vladimir Putin) is insane. He gets my blood boiling when we see all this misery caused by one aggressive fool. Did I say that strongly enough?
The Perks of Tax Planning
Logan DeGraeve: I think you did. It’s a good point. We’ve focused on inflation and the Fed, but let’s think about wealth-eroding factors in retirement. Inflation is one of them and we’ve hit that one on the head. Let’s talk about another one that is out of our control as well—taxes. While taxes are out of your control, tax planning can make a world of difference.
Bud Kasper: Taxes are a huge wealth-eroding factor. Logan is right. However, controlling the amount of taxes that you pay within a given period is in your control. You can.find out exactly what we might be able to help you with to mitigate taxes. You want to get some of that money back that inflation has taken from you. Let’s do it because we can set up a plan that helps with your tax savings.
Logan DeGraeve: It’s so easy sometimes. It’s as simple as coming in and talking with a CERTIFIED FINANCIAL PLANNER™ Professional. They’ll ask questions like, “Why are you taking money from your IRA? Why aren’t you taking money from your brokerage account or something of that?”
And Why Tax Planning Is So Important
You need to anticipate those Required Minimum Distributions at age 72. RMDs are going to potentially change the taxability of your Social Security and the taxes that you’re paying in general. When you look at taxes, I always use the analogy of a train coming down the tracks. Taxes are inevitable, but that train is going to get closer and closer every year leading up to turning 72 or whatever big tax age that we have.
Do planning now. It’s not, “Hey, I turned 71. Come fix this.” No, we need to start doing planning. If you’re 40 years old, how you’re saving today and tomorrow is going to impact your distribution plan when you retire.
Bud Kasper: We can extrapolate into the future the amount of money that you’re counting on putting in and an expected rate of return and an expected inflation rate. We can really give you some confidence in what your outcome would be at that time and what we can alter. It’s amazing. You can see significant differences associated with that, especially if you can get Uncle Sam as far out of your life as possible.
It’s Not all Doom and Gloom
Logan DeGraeve: Let’s talk about some good stuff now because it’s all been negative. Let’s take it back to planning. So, we’re talking about inflation, taxes, but at the end of the day, the most important thing of having a financial plan is living out your goals and dreams and doing the things you want to do and have worked so hard for. So come in, tell us what those dreams are, and then let’s tailor a plan around that.
Why is that so important? One, it gives you confidence. But the second biggest thing is the last wealth-eroding factor is market drop and account portfolio drop. If you don’t have a financial plan, how should anyone you’re working with that’s managing your money know how it should be invested? They have no clue. You only need to take as much risk as you need to do to accomplish the things that you want to do. And that’s different for every client.
Eliminating Unnecessary Risk That Can Derail Your Retirement
Bud Kasper: That’s right. Why take that additional risk that could backfire on you and take you off the course that you planned for by doing a comprehensive financial plan? There are so many factors that we love to share, but it’s hard to share all of them in one episode of America’s Wealth Management Show.
Logan and I are going to have a great program for you next week as well while Dean is still out of pocket. The things that are top of mind for you are what we’re trying to focus on. We know that there is concern that everyone has about what’s happening with the Federal Reserve. How is all that going to impact you and what choices do you have? Should you be relocating some of your money into different places? Some of that should have already been taken care of prior to any kind of event like this.
Harvesting Your Gains
Logan DeGraeve: I feel very, very strongly about controlling the things that we can control. There are a lot of things that are out of our control in this business and the world that we live in. But you should be working with someone that is actively moving money from different buckets, different funds.
Last year, everyone made a lot of money in the market. It was a great year. Everyone was happy. So, in that longer-term bucket of money that you had that made 20%, 25%, whatever it may be, spend some of those gains and move them to a liquidity bucket. When I say liquidity bucket, what I mean by that is that’s safe. It’s a cash alternative. That’s where your income for the next year is coming from. That move should have been done in third and fourth quarter of last year so that the money you’re spending today and throughout this year—no matter what the market does—is just gains off your portfolio.
Bud Kasper: I like to refer to that as harvesting. You need to harvest at the right time. You’re not going to harvest after the seeds were just put in the ground. And you’re not going to get as much of a harvest if you’re late in doing that because it starts to erode. If that’s the case, it’s prudent. Remember what our objectives are in retirement. They are to have as much money as we need for the rest of our lives and possibly even leaving a legacy to our loved ones. It’s as simple as that.
We Can Learn from History, But History Isn’t Exactly Repeating Itself
Logan DeGraeve: Bud hit on something big there and that is stress testing the portfolio. Looking at history, what drawdowns can we expect? Because have something different right now. It’s not just drawdowns that we’re worried about. We also have the inflation piece.
So, this is different than the last two big drawdowns we saw in March 2020 and the fourth quarter of 2018. Those were our biggest drops lately. But what happened after those dropdowns? We recovered very, very quickly. What happens if they don’t recover very, very quickly next time and you have inflation and rising interest rates? What are you going to do from the bond component?
Bud Kasper: You need to make alterations. Nothing is in stone forever because events revolve around all these activities. We need to understand what is in the best interest of our clients at that point. I want to talk a little bit more about harvesting gains. It’s such a simple thing to do.
Let’s say that part of your portfolio made 20% last year. Did you leave it in there? Or did you just give it back or give half of it back—whatever the case may be—when you had the opportunity to carve that out and put it in your income bucket to keep moving?
Beware of the Financial Salespeople
There are so many radio shows that talk about income and how you should go about doing it, but most of them are selling annuities. And annuities aren’t totally bad, but you need to understand what you’re buying with those and that there’s commissions associated with that. In our company, we’re salary-based people. We don’t do any commission-based business. We get paid for the experience that we share with you and the planning process. You should be a little bit leery of some of the things that are out there that sound too good to be true because they probably are.
Putting Your Needs First
Logan DeGraeve: One thing to note, too, is just a lot of those investments are not liquid investments. There are penalties and things associated with that. We put your needs first. I encourage you to schedule a 20-minute ask anything session or complimentary consultation with one of our CERTIFIED FINANCIAL PLANNER™ professionals because they have the experience. They’ve had the education to not only talk to you about on investments, but taxes, insurance, and estate planning to make sure you have a good wrapper on everything.
Bud Kasper: It’s an opportunity. And there’s no cost to talk to us about that. I think that’s one of the hallmarks of what we do with making ourselves available for a conversation with you. We know that’s important. We know your family is important. And we know that there are concerns that you have. Let’s talk about those. We have a vast amount of experience and experts inside our firm to share things with you that could be very important to your future.
Ladies and gentlemen, thanks so much for joining us again on America’s Wealth Management Show. I’m Bud Kasper, along with Logan DeGraeve. We look forward to talking to you next week when we’re both back again to share more information about your world of money.
Schedule Complimentary Consultation
Click below and select the office you would like to meet with. Then it’s just two simple steps to schedule your complimentary consultation. We can meet in-person, by virtual meeting, or by phone.
Investment advisory services offered through Modern Wealth Management, Inc., an SEC Registered Investment Adviser.
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.