Quiver Financial News

The goal of The Next Investment Wave is to help you identify potential investing trends early.  If we were to use a baseball analogy, the meat of most investment moves is found near the bottom of the second inning or the top of the third inning. Our research over the past 6 months has caused us to believe that the next investment wave that investors may be able to lean into to create their next round of wealth may be found in the realm of commodities and basic materials.
With any long-term thesis, there needs to be both fundamental and technical factors present in order to fuel potential growth.  In this issue of The Next Investment Wave, we will explore why investors looking for a secular growth trend may want to keep fossil fuels and other commodities on their radar.
Short Term vs. Long Term
Oil prices have plunged by approximately 40% from their 2022 highs, causing doubt among many investors in the oil market bull thesis.  
The recent crude price decline reflects a tug-of-war underway between bullish structural factors and bearish temporary factors, causing us to ask, is this a buying opportunity within a longer-term structural bull market or the beginning of significantly lower oil prices led by reduction of demand as a result of a looming recession?
In the short term (1 week to 2 months), the tea leaves that many oil traders watch, like oil inventories, refining margins, and whether oil prices are in contango or backwardation do appear to give the impression that oil prices in Q1 of 2023 will be flat or possibly down slightly.  
Strong sentiment, increasing demand, geopolitics, and most importantly, supply-side issues that will take many years to fix.
Sentiment – Wall Street is Bullish
Many Oil market analysts believe oil prices are going higher.  For example, Jeff Currie, the global head of commodities for Goldman Sachs, has a $110 forecast for Brent Crude in 2023, while rival investment bank Morgan Stanley agrees, expecting Brent to top the $110 level by the middle of 2023.  
These analysts note several catalysts as dynamics in demand, supply, and geopolitical circumstances arise.
Demand Dynamics
Morgan Stanley probably summed up the demand dynamics best by stating, “We remain constructive on Oil prices driven by recovering demand from China reopening and aviation recovering amidst constrained supply due to low levels of investment, a risk to Russian supply, the end of SPR releases and slow down of U.S. Shale.”  
Being one that has traveled quite a bit the past few months, I can personally attest to the recovery in aviation as each and every airport I have been through has been very busy.  
While the airports and roads seem just as busy as they were prior to the Pandemic, it also seems China could be the biggest catalyst in 2023, as highlighted by the Wall Street Journal “The pent-up demand from China is going to be enormous,” according to comments by Energy Aspects director of research Amrita Sen.  Continuing with “China could swing demand by at least a million barrels a day, and that could easily make the difference between an Oil forecast of $95 to $105 versus $120 to $130.”
“Prior to the pandemic, China was the world’s third-largest consumer of liquified natural gas, second-largest oil consumer, and largest electricity consumer. Resumed manufacturing activity and overall energy use in China could help offset fears of recession-driven demand destruction” 
While demand seems poised to increase through 2023 (assuming there are no or low recession effects), it is the supply dynamics that seem to be part of the thesis that may cause a longer secular bull market in fossil fuel prices.
Supply Dynamics 
Due to poor energy policies of the past, there have been supply-side issues building for many years, and those issues don’t look to be changing anytime soon.   We see a future in which oil supply is constrained for years, necessitating higher prices and lower demand than would be possible during the oil market of the past decade, when supply was abundant. The bull case for oil rests on the constrained supply outlook, which will be evident in a supply deficit that surfaces whenever prices are low and the quantity of oil demanded by consumers ticks above the level of available supply.
Most oil companies plan to keep a relatively firm lid on output and investment spending for new production.  For example, Chevron plans to boost its capital budget by 25% next year to $17 billion; most of that increase is due to inflation and a ramp in lower-carbon investment spending.  Likewise, ExxonMobil plans to boost capital spending to $23 billion from $22 billion. However, it expects its production will remain flat on a per-day basis.  
Without a major demand disruption due to a large recession, demand seems poised to rise amid continued tight supplies. 
Geopolitics
The geopolitics of Oil has always been a hotbed of debate and speculation, and now it seems that many past issues are approaching an inflection point over the next 5-7 years.  
In our opinion, one of the cornerstones of Oil influence is the Saudis, so let’s start the geopolitical discussion there.  For decades Saudi Kings maintained political balance by doling out vital power positions to separate, carefully chosen successors. Positions such as Defense Minister, the Interior Ministry, and the head of the National Guard. Today, Mohammed Bin Salman controls all three positions. Foreign policy, defense matters, oil and economic decisions, and social changes are now all in the hands of one man.   The 2017 coup and rise of prince Mohammed Bin Salman (MBS) was significant in that MBS was backed by the Public Investment Fund (PIF), a fund comprised of trillions of dollars supplied by globalists Carlyle Group (Bush Family), Goldman Sachs, Blackstone, and Blackrock.  MBS gained the favor of the globalists for one big reason. He openly supported their “Vision for 2030”, a plan for the dismantling of “fossil fuel” based energy and the implementation of carbon controls.  In exchange for their cooperation, the Saudis are given access to ESG-like funding as well as access to AI advancements.
Also note, over the past few years, relationships between Saudi, Russia, and China have grown very close.  Arms deals and energy deals are becoming the mainstay of trade, and this has also led to a quiet distancing of the Saudis using U.S. dollars to trade oil.  Recently, the dominoes seemed to have been set with Saudi Arabia announcing at Davos that they are now willing to trade Oil in alternative currencies to the dollar. 
Not to mention from an age perspective, the current Saudi regime is at an age they could be viewing the next few years as their last hoorah to make as much money as they can from traditional energy sources before the world evolves and incorporates more and more energy alternatives.
Conclusions
The importance of the Saudi announcement and willingness to trade oil in alternative currencies to The Dollar, along with the continued strengthening alliance between East vs West, can not be overstated; this is the beginning of a global shift in reserve currencies similar to when The British Sterling imploded many decades ago which resulted in the rise of The Dollar to take its place as the “global petro currency.”
The consequences of this could be very devastating to the US economy. The ability to defer inflation by exporting it overseas is a superpower only the US enjoys. Currently, the Fed can print money perpetually if it wants to in order to fund the government or prop up US markets, as long as foreign central banks and corporate banks are willing to absorb dollars as a tool for global trade. If the dollar is no longer the primary international trade mechanism, the trillions upon trillions of dollars the Fed has created from thin air over the years will all come flooding back to the US through various avenues, and hyperinflation (or hyperstagflation) could be the result.
The effects of the dollar decline may not be immediately felt or become obvious for another year or two. What will happen is consistent inflation on top of the high prices we are already dealing with. Meaning the Federal Reserve will continue to hold interest rates higher, and prices will barely budge, or they may climb in spite of monetary tightening.
All the while, the mainstream media and government economists will say they have “no idea” why inflation is so persistent and that “nobody could have seen this coming.”
While this can sound dire and cause you to reach for a bottle of ludlum to numb the pain, there are and will be significant investment opportunities for those that are savvy enough to see the changes that are taking place in front of us.
If you are curious to know how your portfolio can Catch The Next Investment Wave in Energy and Currencies, click here to start a conversation.
Lastly, who knows what the introduction of #ChatGPT could have on the financial industry and its predictive capabilities for oil pricing.

Many retirees live on a more or less fixed income. Because of this, learning how to save money while retired can help you manage your personal finances. There are many actions you can take to minimize your financial output and help extend the life of your retirement savings.
Today, we’ll discuss some of the most helpful tips that can help retirees start saving and stop worrying.
Create a Budget
Creating a budget helps you understand how much money you spend. Knowing this can help you determine how much money you need. This is something you can actually accomplish before you ever retire. Creating a retirement budget early on can help you determine your savings goals for the retirement you want.
When creating a budget, it’s helpful to factor in things such as:
Fixed expenses
Essential spending (grocery stores, cell phones, etc.)
Non-essential spending (fun money)
Annual bills (taxes, etc.)
Healthcare costs
Emergency fund (“Rainy Day” fund)
Income (retirement benefits, social security, any additional income)
Some expenses, such as your electric bill, might require some estimating. For example, some companies might bill customers for electricity used while others bill at a fixed rate. Even at a fixed rate, you could still receive an end-of-year bill for overuse. It’s helpful to determine your average usage of bills like this based on prior years to help you create a more accurate budget.
If you choose to get more detailed with your budget, calculating potential inflation and other price increases over the years can help you figure out how much money you might need to be comfortable in the future.
Maximize catchup IRA and 401(k) contributions
When you get close to retirement (usually around age 50), you can make catchup contributions to your retirement plans. Catchup contributions raise the annual contribution limits for your IRA and 401(k) accounts to help you save more to prepare for your retirement. In 2022, those catchup contribution limits allow you to save an extra:
$6,500 for a 401(k)
$1,000 for an IRA
These catchup contribution limits go up often, usually annually. Maximizing your contributions (contributing the maximum allowable amount) every year can help you save more money and be more prepared for retirement.
Review your insurance policy
Retiring is a major life change. When life changes, your needs often change with it. Reviewing your insurance policy can help you in multiple ways. It can help you make sure that you:
Receive appropriate healthcare
Pay an affordable price
Have low fees associated with healthcare
Reviewing your insurance policy can help you find a policy that lowers costs for you across the board—and this is true whether you’re retired or not.
Purchase a Medicare supplement
Medicare is an extremely useful tool that helps pay for many costs associated with healthcare. It’s also an imperfect tool—it covers a lot, but not everything. Fortunately, many Medicare supplement plans exist to help fill in those gaps. Each of these plans covers different costs—copays, foreign travel costs, extended hospital stays, etc. So, it’s best to research the available supplement plans to help you find what works best for your needs and budget.
Downsize
Downsizing, in this instance, means reducing your assets and belongings to the essentials. To downsize, it’s helpful to take an extensive inventory of everything you have (from big items like your home and cars to everyday items like books). Then, you can make a separate list of everything you need.
What you get rid of is entirely up to you—if you want to keep that full bookshelf, do so! But finding things you can live without—especially ones that come with big expenses or bills—can help you save money in the long term.
If it helps, you can sell items you don’t need to help you earn and save even more money. And, once you have fewer things, you might find that you don’t require as much space as you thought you did. This can help you find a smaller, more affordable living space, should you choose to do so.
Downsizing also gives you an opportunity to find other ways for saving money around your home. For instance, you might find more energy-efficient lightbulbs that can reduce your electricity bill. Or you could realize there are several streaming services you pay for and rarely (if ever) use.
Consult your tax preparer
If there’s anyone who can help you save money on taxes, it’s likely the person who prepares them for you. Consulting with your tax preparer can help you determine how retiring might affect your taxes. In many cases, your retirement income might get taxed differently than your income pre-retirement. Your tax preparer can help you learn what to expect from your retirement taxes—and they might even find ways of reducing your tax burden.
Reduce debt
The debt you carry with you could limit your ability to spend money in retirement. Reducing that debt, whether before or after retirement, seems like a simple solution—but it could take some work. If you choose to pay it off as a lump sum during retirement, it would likely reduce your monthly costs. This would also reduce the amount you have in savings, but might save you money on paying interest on the bill over time. It might be helpful to refer to your budget and assess how much you have, how much you need, and how much paying off the debt might save you.
When reducing debt before retirement, you might also need to do some calculations. For instance, if your retirement savings grows at a faster precentage rate than your debt, you might choose to put your money into savings rather than pay a bill. If you choose to do so, you could do this for every source of debt you have before retirement—mortgage, credit cards, etc.
When choosing to save rather than reduce debt, it’s helpful to add that debt into your retirement budget. This way, you can more accurately estimate your retirement income—or even save enough to pay off your debt soon after retiring.
Invest Wisely
Investing your money can have many benefits over simply saving it. Money in a savings account usually either grows very slowly or not at all. Wisely-invested money can grow faster. If you’re unsure how to invest or are afraid to do so on your own, that’s okay! A financial advisor can help you find investments that work within your risk comfort level—just make sure to include their fees in your budget!

SUMMARY KEYWORDS
airbnb, people, real estate prices, rent, data, real estate, house, prices, short term rental, market, buy, home, starting, year, rentals, properties, justin, interest rates, patrick, investor
 
00:00
Hey, welcome to quiver financial news and our second edition of our real estate prices going to crash in 2023. It's January of 2023. And it's hard to believe, but it's been a whole six months since our first edition discussing whether real estate prices are going to crash within the next year. And since that video in the summer, we certainly have witnessed some of the some structural changes that have slowed the upward progress that we've been seeing in real estate prices of the last few years. rising interest rates have apparently pushed affordability to record extremes. At the same time, large industries, like the tech sector had been announcing layoffs accumulating to hundreds of 1000s of lost jobs. I'm Colby McFadden and I'm joined by Justin Singletary and Patrick Moorhead Gentlemen, welcome, mayor, he January and let's jump right in and start talking about residential real estate prices. And let's do it with the intention of helping the listeners know what really matters whether they're looking to be an investor, a buyer or seller, in this year of 2023 of residential real estate prices. So let's, let's get started by recapping what we had discussed back in June and July because Justin and Patrick, our timing was pretty damn good back then. If you look at the data, and we're gonna get into some of the data, folks, if you look at the data, really peak real estate prices were at that summer time and you know that between the third and fourth quarter of 2022. And since then we've definitely seen some softness. So before we jump into what we discussed six months ago, as a recap, and frame what we're going to talk about next. Justin Patrick, anything you guys want to touch upon? Or should I just share my screen and jump right in their
 
02:01
video cover that. So jump in.
 
02:04
All right, well, let's get in
 
02:06
very February, not January. Ah,
 
02:09
yeah, call him out on that.
 
02:12
I lost I lost that my January to you know, travel of funerals and COVID is, you know, he
 
02:18
turned 50. So the dementia is kicking in. It will
 
02:21
definitely, you know, like I they said a risk factor of COVID now was being over 50. And I'm starting to after having it for 10 days, I am starting to feel like I might have a little dementia. So bear with me because I've my face is pale and I had a piss poor attitude, that's
 
02:36
for sure. Well, your hair is turning gray or two. Oh,
 
02:39
geez. I was looking at I was looking at our video from two years ago. And I realized, oh, boy, my aging fast. I need to you know, get some vitamins in me or something. She's the gray hairs enough. Maybe I should get some of that. Gray for men. What is that that the stuff you can put in there and it just suddenly, just for man. Thank you, Justin. I see you've been using.
 
03:03
It's pretty sad that you know the name.
 
03:08
All right. So I'd love to make fun of Colby in his hair. Alright, so last last June, July, we we really had this conversation because we were getting a lot of questions from people about what do you think's going to happen in real estate and most of the year, we shied away from the conversation of real estate because the fundamentals behind real estate are essentially employment and interest rates. And when you have low unemployment, I mean, when everybody's fully employed and interest rates are low, there's really no reason to expect real estate prices to go down. However, since that timeframe, a lot has changed in both of those arenas. So we asked back in June and July have the fundamentals around real estate pricing change because we know that real estate pricing is focused around real interest rates and employment. But we did raise the question Is there another factor called Wall Street money, the i buyers, the short term rentals, the build to rent that really started to happen post pandemic does have an influence in certain markets. And we're going to talk about that a little bit later. Because we have a lot more data now than we did back in June and July about how those things have affected the market. We talked about had real estate prices reached max affordability because of where interest rates were headed. It does appear that since June July of last year, that that may be the case because we see a slowdown in housing prices. We see a slowdown in new listings when we get into the data, you're going to see that so it was a really timely time. It was a really timely time to ask that particular question because it does look like we have reached that Max affordability. And then does price volatility become regional. That was one of the concerns we talked about back in June and July is are we going to see a national decline, or will the national decline Be so kind of moderate. And then we get really bad declines and certain hot areas like Phoenix and Boise, Idaho and places like that that got real hot with both speculator money and Wall Street money. And then what we talked about also is what should you consider? What should you consider if you're a buyer or a seller, or an investor in residential real estate, we're going to update that now with a lot of data and give you some guidance. If you're a young person like Justin and Patrick, looking to buy a house to start a family. If you're an investor, who's older in life, let's say you're in your 70s, and you bought multiple pieces of real estate, and now you're trying to decide do I keep it? Do I sell it? Do I pass it down to my family? We'll talk about that. And if you're a new investor, if you want to continue to invest in real estate is 2023, the year to make a purchase, our real estate prices going to stabilize and go higher, or are they going to continue to crash? Those are all the things that we're going to talk about today. So Justin, Patrick, a lots happened since July. And so here's here's the numbers, right. So the typical home has definitely taking longer to sell since April the 2020. Now this is data that a lot of this data that we're going to go through came from articles that I grabbed from Redfin. Case Shiller different, different points of data. So definitely typical houses taking longer sales since April of 2020. Patrick, you threw this in here, this is a chart from the Federal Reserve, what's it showing us there?
 
06:35
So that's kind of the historical average of days on the market. So to look, we've been kind of overall trendline, declining to shorter and shorter days on the market. And it's very cyclical of going longer, you know, we just went through a wintertime period, which is going to have an effect on days on market. But we are now just at the historical average, do we shoot up to 100 days, 200 days on the market? I don't think so. But we could, since we overshot so much to the bottom. But if you look, you gotta look at the data for over the period, the history of the period to see that it's not that abnormal to where we're sitting for days on the market.
 
07:16
Yeah, it looks like it's a reversion to the mean. And that's probably going to be more of today's conversation is how markets do revert back to the mean. I think I've heard a lot of real estate people say that I think that 60 Day marker is kind of like the line between buyer and seller market. Is that what you've heard? Or is that what you understand as well.
 
07:38
I just think it's a you know, that's typical contracts that people have with, you know, an agent. So after 60 days, if the House hasn't sold, you know, a lot of sellers maybe get annoyed and they'll pull from that listing agent and and sit on the sidelines and relist potentially or reevaluate, pull it off the market reevaluate.
 
07:57
Yeah, I've read a few articles that that's you know, they the this, are you in a seller's market? Or are you in a buyer's market, there's really kind of determined by days on the market. And it's like, if, if houses are staying on the market, less than, let's say 60 days, then the sellers are in control. And as you start to get to 90 days, 100 days, 120 days for houses sitting on the market, then it becomes more of a seller's I mean, more of a buyers controlled market.
 
08:24
This is national average as well, too. I mean, go back to our original topic, this is drastically going to change to different areas in the US economy to what how long a property is on the market?
 
08:37
Sure, sure. All right. So so definitely the the evidence and the data since our last video is showing that houses are staying on the market longer. Pending Home Sales are at record lows down 31%. Year over year, I thought that was a pretty telling, you know, little tale there. And you threw this chart in here, Patrick, which I think is just a visual of the same thing. Is that correct?
 
09:03
For the most part, but it's showing that still 25% of the properties are going over asking. So I mean, it's not, you know, to list a property and then still get multiple offers to be able to sell over asking is still a 25% chance that that's going to happen. I think that's kind of telling in itself that we're not getting offers under asking or properties. You know, some are some aren't. But I mean, it's again, reverting back to the historical average,
 
09:29
average. Yeah, yeah, so softness, but definitely I don't think it would fall in the category of crash or panic by any means whatsoever. It's just definitely soft. new listings down 22% year over year. And then Patrick, you got something in here for us. Legally, another squiggly line
 
09:52
kind of talking about housing starts so new properties coming online. So new listings, new properties being listed that type of stuff. Have this is mainly for new product development coming out. But again, showing that it's reverting back to the mean, you know, we had a pretty good rise up from the bottom of COVID. And now it's just coming back and we're historical average we're right on par for what we've been doing. So all the articles out there about homebuilders, you know, giving drastic discounts and all that type of stuff. Home Builders are greedy, they over anticipated they overshot So sure, they're gonna have some properties that they're gonna have to reduce the price on because they over anticipated demand that was potentially out there.
 
10:34
Yeah, yeah, I'm reading articles of, of homebuilders, encouraging new sales by buying down mortgages. So that's interesting, where, you know, now if your mortgage is six and a half percent, they'll try and buy it down to three, and get your payment lower. So that's, that's encouraging. And so it's definitely an interesting time to be a home shopper, especially in the new home markets. Because it's not often that you see these guys actually give deals, housing supply is at 3.8 months versus 1.7 months in the summer. So that's that's telling right there that, obviously that houses are sitting on the market longer. More people have put some listings out there and they're sitting around, and prices need to find the right buyer is what it sounds like. So interesting. I definitely think all this data is more soft than Crash, that's for sure. So let's dig into it a little bit more Yahoo Finance, add an article out that I saved for us that really went over the Case Shiller home index from June to October showed a 2.7 decline today I saw an article come out that said that from July to November, it was a little bit over 3%. So it does seem that as the year has progressed, that some of the softness in data in real estate data has increased. The OSI register had kind of one of those clickbait type of headlines that said homebuying froze in LA in Orange County. In November, man oh, my God, it froze. Well, you know, what they were talking about is the Orange County Register said that plunging sales 44% to a record low. What they're talking about is in the month of December, which is typically a pretty bad month anyway, for home sales, because people are busy doing other things. You did see a plunge in sales. Not unexpected, but definitely was bigger than what we've seen in the records in the past. So definitely tells you that people lost interest in speculating around real estate and probably the only people out there buying houses and November and December were the ones that actually absolutely have to have a house. OC register also said it was the slowest November dating back to 1988. Well, yeah, that's when probably when the Rams were a good team to
 
13:04
to do things on all this data. One. This is all OSI. So it's regional. That is true, that 2.7 to 3% decline, I think has a direct correlation to the 3% increase that we had in interest rates. You know, if we didn't have that, I would like to know if we really had a three would have had a 3% decline if interest rates hadn't gone up. 3%?
 
13:27
I don't I don't think you would have I think interest rates are I think interest rates are the number one factor right now that have slow real estate down. I don't think the employment than the the new announcements of of layoffs over the last three months has really come through and affected the real estate market yet. And I think the Fed yesterday when the Fed raised rates 25 pips in and Jay Powell did their their, their their press conference afterwards. I think it was really telling that that the Fed is saying to us, we haven't gotten there yet. You know, we that we have it, they want to see the economy slow down, they'd love to do it without seeing the labor market break. But they're willing to allow the labor market to break, you know, they they need to bring inflation down, they need to get it sustainable. They need to get you guys I mean that there's a huge demographic issue going on. That's not solved. We're under housed. I mean, the but the bottom line is, is the US is under housed and the baby boomers are living longer, and they're not getting rid of their houses, you know, they're sitting on those things, and they're either giving them to their kids or they're dying with them. If they are getting rid of them. They're getting rid of them to pay for long term care. Right? But that's that money's still in sticky hands and then you've got this millennial generation. And you know, guys like Justin that are getting married and you know, you get married, you're gonna have kids, you're gonna have a house, the dogs all that stuff comes along. And so you have this ginormous, ginormous population of millennials coming into their 30s and 40s. And they're going to drive more demand in housing, and they're going to drive more demand and speculation and investing, because they're going to need houses, and they're going to need to make money and they're gonna want to invest in they're gonna want to make life like every other generation did. So,
 
15:23
I was just gonna think that all of that's correct. However, you know, there's not enough supply. You know, we there's definitely a demand for homes. But, you know, we're not making as much to be able to afford the home speaking about our kind of local areas versus other areas. So you know, being able to afford a home and not having the wage that you were once getting, or we that you would need to afford to home like that, you know, I think is pretty important that we're not seeing that, excuse me not seeing that either.
 
15:58
Yeah, well, to your point, Justin, like here, affordably the average cost is up 31%, over the past year, that and there was already high. You know, a couple of weeks ago, I was in Indiana, and I got I'm sitting in Indianapolis at a bar, and I'm looking around realizing everybody's young, everybody's in their 30s. Right. And, and I'm talking to everybody, you know, what do you do for a living? What do you and I'm trying to get to understand the local community. And I thought, Wow, what a great place to be a real estate owner, you got all these young people who can rent from you, I thought, boy, do I want to be a landlord around here. There's jobs, there's the salt of the earth, people, they seem to, you know, have their shit together. So, you know, I go to Zillow and start looking around. And I mean, even in Indianapolis, the cheapest house I could find was 550 600,000. And at today's mortgage rates, that means that those people in that bar I was sitting around with their mortgages, were going to be three grand a month, you know that, that means you got to be making nine or 10 grand a month gross in order to really qualify for a $3,000 a month mortgage. Right? Because Because your mortgage, your cost, your housing costs should be about a third of your income. So I to your point, Justin, that it makes it hard for me to believe that you guys and your generation, even in places like Indiana, that you think would be a $250,000 house is now 600. I saw $750,000 condos in Indianapolis. That which was shocking to me. It's got it just surprised me.
 
17:35
But I had I had that conversation with a client today that you look at the buyer pool. You know, granted, there's how many people in the country, but probably only 10% of the country can even afford the real estate that's out there because most are living paycheck to paycheck, so they don't have the savings to be able to even buy $100,000 home.
 
17:54
Yeah, yeah, you definitely I definitely think that. And we will get to in a couple of minutes when we get into the conversation about Wall Street money and speculation. I definitely think we're setting ourselves up for a 1999 type of situation, which was at the end of 1999 when Barney Frank was running the Senate, and the Democrats had control of things. Every constituent out there was calling up their senator talking about the wealth gap and not being able to afford homes. And that's when they changed a lot of the lending standards. Everything that set up to the oh eight bubble, you know, everything that set up that housing bubble from, oh, 3207 really got teed up in 1999, on the back of people not being able to afford. So I do think we're going to see that again. But it's going to be more more Gestapo style where I think governments are going to have to start to come in and regulate certain areas of real estate get speculator money out in order to bring prices down. Because when you look at here, here's what's happened in prices regionally since we had our last conversation back in the summertime, the year over year, national average has not gone down all that much. I haven't gone down at all really according to this. And I've seen numbers that have ranged from the national average being down 2% to being up 1%. So obviously on a national level, prices have softened or at least plateaued but they haven't dropped off a cliff. San Francisco has seen the biggest decline make sense, considering that most of the layoffs that we're seeing are from the tech sector. So it's down 11.4% But Patrick, you made a note here Yeah, but who cares? It's still up 31% from 2020.
 
19:49
Well, that was to the peak. Yeah. From from 2020 to the peak, it was up 31%. So we've only pulled back a little less than half
 
19:55
so Okay, so so it's helpful but not great. Los Angeles down 3% San Diego down to Vegas down two. I will say some of the data I'm seeing in Vegas recently seems like things are speeding up. They're Austin down for, again, an area with a little more tech presence. Boise down 3%, Phoenix Down 1.4. At all these numbers, the one that actually surprises me is Phoenix. I thought Phoenix would be down more. You know, I thought when we did this video back in June and July, knowing that we'd follow up to it, I really was thinking that Phoenix would be down double digits by now. But for whatever reason they've been able to hold hold the ground.
 
20:37
I thought that Vegas, you know, and again, I didn't put all the data and all of these to what they're up at. But I thought Vegas would have been down a lot more because they're, you know, booming with development and expansion and all that type of stuff. So I thought all the new home builders would have hit that area hot a lot harder. I know the Phoenix data there. They're short supply in houses big time. So that might be part of the reason for Phoenix.
 
21:02
Yeah, Phoenix, I think it's a lot of retirees moving in there. You got colleges. You got? Yeah, you got you got a lot of young California people going, you know, I think it just it just becomes one of those places that if you're a young person or a retiree, and you don't want to go to Palm Springs or Vegas, I think he ended up going to Phoenix. Yeah. We should have put Houston Texas up here. For sure. Justin, it would be interesting, I'll do some homework on that. So pending home sales. So you know, one leads into the other right where where you know, before prices really come down, you start to see the numbers and other areas pending home sales is tends to be one of those, you need to see pending home sales, you know, these numbers get really fat before prices start to decline. We're starting to see that the national average and pending home sales down 31% San Francisco, you've seen a big drop off and people pisted listing their homes down 44%. Same with Los Angeles and San Diego, Vegas, 61, Austin 55, Boise and Phoenix in their mid 50s. So you can definitely see that these areas that we've talked about the Boise is the Austin's the Phoenix is from a pending home sales, you've seen a drop off a cliff, I mean, when you're when you're dropping 40 50%, that's pretty significant. Granted, they're coming off of elevated numbers. But nonetheless, it's a good example of what we call reversion to the mean, where markets just don't go in one direction.
 
22:35
And some of that I think is headlines, you know, people selling that are selling their homes, because they want to take advantage of top dollar are now thinking that okay, prices are going to drop, I'm gonna wait, I'm just gonna write it out. I don't need to sell. Yeah, that has a little bit of effect.
 
22:50
Yeah, I'd imagine if you were somebody who wanted to sell five months ago, and you're not forced to sell that now you just say, Okay, I'll wait and see what happens later. I mean, because if you don't need to sell, why would you? Unless you're just doing unless you're trading up for another property, which when interest rates rise, like they have the trade up gets killed, right? Because nobody, nobody who I just talked to somebody yesterday and they go, Yeah, my mortgage is three and a half percent. Well, now if they want to get a new house, they got to get rid of a three and a half percent and go get a six and a half percent at chances. They're not going to do that. Because now they're going to have to get a smaller house or a cheaper house to offset the difference in rates. And I don't know anybody who makes moves that way, unless you're doing it in your retirement years. Most most people are making a trade up, not a trade down. So this is the thing that that I know, Patrick, you were saying earlier, when we talked and prepared for this that you're like, Yeah, I don't know if this is a great subject matter, you know, the short term rentals and the Airbnbs. Because, you know, how much do they affect the market? And I was thinking that way back in June and July as well, like I was thinking how, you know, we didn't have a lot of data. But now I'm starting to see a lot more about this. And I think this is what gets society moving and forcing, like I talked about what happened in 99 when people started reaching out to their senators and congresspeople, saying, hey, this wealth gap is killing me. My kids can't afford to live in the neighborhood that we grew up in. I can't even afford to live in it anymore. And a good example is between Christmas and New Year's. I rented a house down in Oceanside right on the beach. And for a mile stretch South Oceanside. I would tell you 50 60% of the houses are short term rentals. I was amazed as I walked that walk down the street, how many permits were on every single house and the place I rented was five units all five units were Airbnb or short term rentals which you know, five or six years ago that was five units was you know, a guy and his girlfriend renting a place to roommates maybe a couple that was newly married and they were on your leases or whatever it may be. Now that all that's been replaced with people who are just coming in for the weekend having a good time. Where did those people go? You know what now? Do they have to go move to VISTA to Fallbrook? Do they you know, where do those people go? So I've been paying real close attention to what's going on in this Airbnb and short term rental space and, and big pockets rental. I don't know who the hell they are. But they came up in my research, but they had something that just talked about vaako rentals, which is the one of the largest short term rental companies they just laid off a bunch of people, but vaako rentals are no longer generating the revenue investors expect. Basically, their margins have gotten tight and I keep reading that you know, the nights of stays that Airbnb is have really dropped off. You can you can go to a thing called Air DNA, which has all the stats around Airbnb and VRBO goes again from big pocket rentals. They should they gave an example of a lady by the name of Sabrina who wants rented her condo in Encinitas for $1,000 a night on a on a holiday. Now she's having to ask $275 at night so they're just basically stating that there's been softness in the short term rental market that probably is due to people's expenses right? Everything's more expensive. Maybe people are picking less vacations. I'm not sure what it is right but err DNA said Airbnb occupancy rates exhibited year over year declines. And again, from air DNA supply of Airbnb listings has served 23.3% year over year. So when I put all this together is you got a decline in demand. And you have an increase in supply because I will tell you, I have come across a lot of people the last two years, who've told me some silly shit like oh, yeah, you know what? I had a house in Midtown, I had a house in downtown Ventura that I was in the Airbnb zone. So I mortgaged myself up bought a house and midtown moved over there rented out my Airbnb place. And the price I've been getting from my Airbnb is enough to pay both mortgages. So like, That guy, I think is at risk. Right? Like I think it's that if you leveraged up your home to go speculate on an Airbnb, then yeah, maybe that person is at risk that if the market turns on him and their air b&b can't produce the income that they're going to have to get rid of it. I just don't know how many people are in that position. I think most of the people with Airbnbs at bottom with cash or they're in pretty good financial stability, but we'll see you know, like Warren Buffett said you never know who's swimming naked until the tide goes out. And so if the economy does slow down enough and people stopped going to Airbnb is like receiving this data and this continues for a longer period of time then you might start to see some of these people who speculated you know the starting to get nervous and starting to on load.
 
28:22
So do go back versus yeah
 
28:28
sorry sorry sorry.
 
28:29
The The reason why I say that I don't think overall for the real estate market this is gonna have effect is Do I think that Airbnb rentals and like you said the people that invested in are speculating things they're gonna get hammered? Yes. The your last point there of supply has surged. So of course if you have more supply it's going to be harder for somebody who was had it for a while to get it if somebody opens up an Airbnb down the street and offers a cheaper price. So that has impact on the price but Airbnb, if you think about it, it's mainly the smile states or the big cities, which is such a small percentage of the overall real estate you're in Indiana how many Airbnb E's do you think are in Indiana? You know, who wants to go there to for vacation or to rent or to think to do an Airbnb I'm sure there's some but not near as many as there in the OSI so I just don't think it's going to have even if they crash and people liquidate those properties. Is it going to have an effect? Yes. Is it going to cause a snowball I just I personally don't see that being a factor when it's such a small portion of people are people gonna get hammered for buying a property to Airbnb it? Yes, definitely.
 
29:41
Yeah, it definitely does not seem like the time to speculate like like it doesn't seem like the time to be a new Airbnb buyer and try new and what people were doing the last few years, but I'm not sure if it is the tipping point that causes the market to crash. I think all I think you need all these things to happen at once, which I don't think is is the reality at this stage?
 
30:03
I think you're, I think you're right, Patrick, in that sense. And I would just say that with Airbnbs, you know, you've got, you know, there for and to your point to Kobe, I think there is a decent number, we won't know until something actually shows, you know, shows itself or the tide goes out. But I think there's a lot of people that are highly leveraged for these things, I think they're going to be in big trouble, because I've noticed that, at least in the States, where they are pretty predominant, most of the housing complexes that have HOAs are shutting them down. Number one, I just read an article today that insurance is now charging double, if not triple to the people who own Airbnb is because now they have realized that their liabilities are a lot more. So somebody that was paying, you know, $1,000, for insurance, or whatever, you know, was paying double, triple that now. So it doesn't, I think all of the things that everybody you know, three, four years ago, you know, thought was a great investment is starting to slowly slip away, in some sense, it's going to become harder and harder. And I mean, all over here, at least in Orange County, I've noticed that the Airbnb market is drying up because of the HOAs. They're shutting them down completely. Yeah, the only in areas where they don't have any HOAs, that they're still able to do it.
 
31:24
Yeah, and I've seen two articles that go to the site of, you know, people bitching and moaning about things getting too expensive. And one of them so focused around New York, that there's, I don't, I don't know if they've passed this or if it's proposed. So so you'll have to do your own homework on this. But the idea was, if you wanted to offer an Airbnb, a short term rental, that you had to live on premise, which I could see that starting to be a trend in, and I saw something in New Orleans proposing the same thing. And so the attitude there is, hey, if you are living in your home, and you have a room you want to rent out, by all means you have every right to, but what they're trying to eliminate as the people buying a house or an apartment in New York, which is already, you know, under house, and just turning it into a rental purely just for that fact. So they're making these rules of, hey, if you're going to be do short term rentals, you got to live on premise. So I could see where that's going to be kind of become a bigger trend in certain metropolitan areas that that, you know, want to control this a little bit more. So I think that'd be a really interesting thing to watch as time progresses.
 
32:40
And that would be a huge hit to own, you know, because people that rent an Airbnb, they don't want to be sharing, you know, so that's gonna be a huge, huge hit to the people renting. So
 
32:49
yeah, it's a very clever way from a regulation standpoint, to really snuff something out, right? Because it's like, you don't kill it, you know, you don't you don't ban it. But you just now make it totally different than it was. It's like now. Now, if you want to run an Airbnb, you almost have to like run a bed and breakfast, because you gotta be there, check him and check him out, that kind of stuff. So very interesting, definitely shifts and changes. None of these things, support more speculation. I think that's really the point that people should get is that, that rising interest rates, the softness and employment that seems to be happening, and the changes around regulations, and Wall Street money kind of moving away from speculating in real estate, definitely does not support real estate prices climbing at 20% clips per year, like they were before, right? So so i det, you can definitely see these are all things as a result of the Fed trying to slow down the economy. It's starting to slow. So what do you do? Right? Like, what do you do if you're, if you're a guy like Justin, who's, you know, approaching a time in life where marriage and buying houses and things like that are part of it? Or even a guy like me, who would like to add another house into his portfolio as an investment property? What do you do? And I think back to what we talked about in June, and July still works, we talked about a recipe of hey, go look at what prices were at 2019 pre pandemic, and use that as your baseline? Because I think Patrick, you said earlier that, you know, even where we are now we're still what, like 30% Above these 2019 prices. Now
 
34:35
we'd have to we would have to drop 15 to 18% in order to just get back to our regional average of growing 6% a year.
 
34:44
Okay. So you could see, so the market would need to come down another 20% for us to really, you know, use, let's say 2019 as a baseline plus five 6% growth per year beyond that, and I think that's a good read. recipe like if I'm if I'm going to put an offer on a house, that's probably where I'm gonna go is I'm gonna say, hey, you know what, I'm just going to erase the last two or three years, pretend it never happened, throw my offer there, see what happens. So I think if you're if you're a person who needs a house, like, you know, you're gonna be renting anyway. And you're going to be renting for many years and you need a house, then yeah, you gotta be out there shopping. But I think you put your lowball your offers here, right? And you don't let your realtor scare you into chasing things.
 
35:34
If we I tell buyers, if you're buying a primary residence, think of it as a liability, not an asset, your primary residence is a liability until you go to sell it, then it becomes an asset. So you have to go in with that mentality, like you said at the beginning that you know, you're going to be in it for 1015 years. That's the liability aspect of it. It's when you go out the asset.
 
35:59
Yeah, every house I've ever bought, I bought with the attitude of, hey, if I needed to sit on this thing for 1015 years, could I if I needed to sit on it, could I rent it for what my costs are? And I've never, I just was never one that was a believer that you buy and sell and speculate. I know a lot of people do. And I'm God bless them. But I'm just not that guy. You know, so and and I also think, though, too, if you're a younger person, that this does become one of those times, you know, Justin, you had mentioned about affordability and things. You know, I tell the story all the time about you know, my kid, my parents were California kids, you know, they went to Wilson High School in Long Beach, that's where they met. And I was born in Kentucky, my brother was born in Pennsylvania. And then we grew up in California. How did that happen? Well, you know, as my parents were squeezing out babies, and my dad had to find jobs. And so he went to where the jobs were. And so the first job that paid him well was Pennsylvania, I had my brother, you know, then he got a job transferred to Kentucky because it paid more at me, then he got another job transfer back to California, because the job paid more, you know, he just went to where the money was. And I think that's no different for this generation. The problem with this generation now is they're so used to being able to do everything electronically, like everybody's gotten into this attitude of, hey, I'll just work from home, I don't need to move anywhere. But I don't think that's going to work in the next 10 years, I think people are going to have to do what other generations have done. And if they really want to own a home, they're going to have to move to make it happen. If you're an investor, so let's say let's take this from the other angle, let's say you're, let's say you're in your 70s. And you have a handful of houses that you rent out. And now you're getting to the point where you're tired of being the landlord, you're tired of getting the phone call for the for the leaky toilet or the the broken water heater, or whatever it may be. Well, this is probably the time then now where you step back, and you start to say, what what do I unload? What, what underperforming properties do I get rid of to make my life easier. And you do that while prices are pretty stable at this stage, because even if you're a seller, now you're still getting a good price relative to history. And if you're an investor that is, you know, on the other side, where you're saying, hey, I want to add more houses to my portfolio, or I want to start a portfolio of investment properties, I would say you got to keep your powder dry, because the data that's coming in seems to be getting worse. And after I watched yesterday's press conference with Jay Powell, it's obvious that the Fed is not done here. They, they, they they've slowed the economy enough, but they haven't gotten it to where they need to. So I don't believe that we're done with interest rates going higher. We might be there for a couple months. But I if this economy doesn't go into recession, and doesn't slow down significantly by the summertime, I think by fall, you could see the Fed kind of repositioning to continue to raise rates. And if that happens, then I think that next leg would really now start to kind of break the back of real estate and maybe people have a better opportunity. But my big concern is I always thought, you know, if interest rates rise, that real estate prices were really gonna go down. But you know, when I look at charts of real estate prices in the 70s, which was a period of time, the whole 10 years of the 70s, you had relentless rising rates. But if you notice, you know, the prices of real estate never crashed in the 70s. It just had this gradual increase every year. So going off of the thesis that interest rates will kill the real estate market. That doesn't seem to be the case when you look at the 70s I don't know if that's a good thing. parison
 
40:00
know when when, because when you look at the difference between the 70s. And now, I mean, when they were raising rates in the 70s, jet to debt to GDP was 30%. When you look at debt to GDP now we're 130%. So we're in a new all time, you know, never before experienced situation. And one of the other aspects of that you should always consider when buying a home is date, the rate, marry the mortgage, you know, the the rates are going to change, you can refinance all that type of stuff. You're stuck with that 30 year mortgage. So you're you got to be be with it for the long haul. So
 
40:39
data rate, yeah, got it. Yeah, sure. Sure. Makes sense. Yeah, yeah, you bring up a good point is is is our debt levels as a country are different? So how does that factor in and that's something that we should probably think through and use as a follow up for later in the year when we get more data on this? Anything else you guys want to cover? Before we wrap it up for everybody?
 
41:01
I mean, I'm good. I would just say buyers be patient sellers, like you said, COVID, now's the time, you're probably not gonna get a better price. And you would, you know, I mean, we're still 15 18% above where we were a few years ago. investor, I think people that are investing in multifamily. Those are good investments. Still, people are still renting storage units, I think it's still a good place. I would be wary of the Airbnb type of investment at this point, personally. And like you said, the dry powder. I think that's important right now of being patient to buy, because, you know, I think all the data is giving us the clues that, you know, better opportunities could be on the horizon.
 
41:44
Yeah. And you brought up a good point of people are still renting, I mean, rental rates haven't really, you know, they've started to kind of peter out and not increase anymore. But if you look at again, the historical data, even through 2008, rental prices did not waver, and they just kept going up. So I mean, people are still renting. It's because we're under supply. That's still gonna be a target.
 
42:08
Yeah, no, I think we didn't really touch on was that, you know, is that kind of that new thing that's popping up I've seen lately is that these homeowner, home construction companies are building these housing complexes that are built to rent. Which is kind of interesting, because I'm like, if you build them the rent, that's great, everybody, you know, the the people that own those homes, when assuming they can rent them all out? And I guess to me, on the flip side, if they can't rent them out, they could just turn around and sell them, right? Wouldn't that be the?
 
42:40
Yeah, yeah, that's the attitude of the Wall Street money. Because what's happened there is you have a lot of family office money, a lot of private equity money that has now gone in to this area of of build to rent, you build a community. And you're, you're you're there basically lease options to buy. So each person that comes in, they're renting with the option to buy the house, most of what I've read, and I haven't gone into this detail, but like in most things in life, it's kind of like leasing a car, it's not all that great. It's like, it's like, it's convenient and easy. But you know, if you think about if some guys from Wall Street are going to set it up, they're definitely going to set the contract and everything in their favor. So I think if you're somebody who's young, and that's the only way that you can get started is to do a lease to buy option through one of those, then you just got to pay attention to the contract and pay attention to the terms of the deal, and be a good consumer. I'm afraid on these build to rent communities. What I'm afraid of is is are there? Are there practices that are taking advantage of of people that don't know any better, you know, isn't a bad deal, you know, which I'm sure is going to happen. It always does. But that that I really where you see a lot of that has been in Phoenix and Idaho and places like that. It's just, it hasn't become a really big part of the market yet. But I do think it becomes more popular as time progresses and people need an alternative to finding a lower cost house. For sure. Well, I think he's you know, we can wrap it up. And I'll tell you what, you know, if you've got a 401 K or retirement account, one of the things people don't know about is one of the ways you can optimize your 401 K and your retirement account is if you have the right type of 401 K or retirement account, you sometimes can put alternative investments like real estate inside your IRA. Now there's all kinds of rules and all kinds of ways to do it right and wrong. But if you're curious to know how you can optimize your retirement portfolio include real estate within it, then reach out to us because we're offering a free portfolio analysis for the first five people who reach out to us as a $1,200 value because we dig deep into the portfolio and give you the best ideas of how to optimize your retirement so you can retire a little bit earlier. So gentlemen, let's wrap it up and like you said, it's not January it's February now and I appreciate your guidance time and we want to wish everybody a happy February and good Valentine's Day coming up you guys
 
45:35
Oh, yeah.
 
45:38
I guess that's how we're gonna end that myth.
 
45:42
The creepy man with the blue screen Yeah.

401(k) plans remain one of the most popular retirement plans available. They offer a variety of investment options, the potential for steady growth, and even some tax benefits.
While the government limits the amount of money you can contribute to your 401(k) account in a year, they regularly increase this limit to meet the cost of living.
And this year, we’re seeing the biggest 401(k) contribution limit increase ever.
401k increase 2023
The 401(k) contribution limit for 2023 is $22,500. This is up nearly 10% from 2022’s limit of $20,500.
The $22,500 limit also goes into effect for other defined contribution retirement plans, such as 403(b) plans and most 457 plans.
Those 50 and older will receive increases to their catch-up contribution limit, too. The new limit for these contributions increases to $7,500, up from last year’s $6,500. These two increases together mean retirement savers over 50 can contribute up to $30,000 to their 401(k) this year!
The large increase is actually thanks in part to inflation. 401(k) contribution limits have been indexed to inflation since 2007. So, while inflation can impact retirement in ways we don’t want, the sharp rise in inflation over the past year has given us the biggest 401(k) contribution limit increase ever.
Does employer match affect my contribution limit?
Many employers offer 401(k) match programs. When you enroll in one of these programs, your employer contributes their own money to your 401(k). How much they contribute depends on how much they offer to match and how much you contribute. Most employers match anywhere between 2-5% of your 401(k) contributions.
This is free money that goes directly into your account each time you contribute. As an added bonus, your employer’s contributions don’t count toward your annual contribution limit. So, even if you contribute your full $22,500, you still receive your employer’s matching contributions.
What about IRAs?
The contribution limits for individual retirement accounts (IRAs) will increase as well. In 2023, the IRA contribution limit is $6,500 (up from the previous year’s $6,000). The catch-up contribution limit for IRAs remains unchanged, holding steady at $1,000.
If you have a SIMPLE IRA, your contribution limit increases to $15,500, up from 2022’s $14,000. SIMPLE account catch-up contribution limits increase to $3,500, over last year’s $3,000.
Are there new phase-out ranges?
Phase-out ranges for IRAs are going up in 2023, too. These are income limits that affect the way you can contribute to your IRA plans. Phase-out ranges offer tax benefits to lower- and middle-income earners while preventing high-income earners from taking advantage of tax breaks.
Phase-out ranges affect Traditional and Roth IRAs differently.
Traditional IRA phase-outs 2023
Phase-outs for Traditional IRAs affect your tax deductions. Because Traditional IRA contributions are tax deferred, you can actually deduct your contributions from your taxable income. This could lower your income taxes for the year.
Traditional IRA phase-outs reduce your ability to deduct your contributions based on your annual income. The new phase-out income limits for Traditional IRAs in 2023 are:
$73,000-$83,000 for those filing taxes as a single individual
$116,000-$136,000 for couples filing jointly, if the one contributing to the IRA is covered by a workplace retirement plan
$218,000-$228,000 for couples filing jointly if the one contributing is not covered by a workplace plan, but their spouse is
$0-$10,000 for married couples filing separately
Each of these income ranges affects your deductions differently. Some may make full deductions, some partial deductions, with others making no deduction at all.
A tax advisor can help you more accurately determine how much your contributions impact your yearly tax bill.
Roth IRAs
Phase-out ranges for Roth IRAs impact your contribution limits. This is because Roth IRA contributions are post-tax. Because you pay taxes on your income before you contribute to a Roth IRA, your investment and earnings can both experience tax-free growth. Income limits help prevent the highest earners from using Roth IRAs to avoid a tax burden for their investment gains.
The 2023 phase-out ranges for Roth IRAs are:
$138,000-$153,000 for single filers and head-of-households
$218,000-$228,000 for married couples filing jointly
$0-$10,000 for married couples filing separately
Each phase-out range limits how much money you can contribute to your Roth IRA. The exact amount you can contribute depends on your personal income. A financial advisor can help you calculate your specific contribution limits.
What about COLAs?
Each year, the IRS increases the monthly benefits for Social Security recipients. These are cost-of-living adjustments, or COLAs.
This year, COLAs are going up to meet rising inflation. The COLA for 2023 is 8.7%. This raises the average Social Security recipient’s monthly benefit by about $146.

Later-in-life investing: What you should know.
So, you’ve left planning for your golden years to the mid-century mark — don’t worry. You’re not the only one.
Almost 1 in 4 boomers said they didn’t start saving for retirement until they turned 50 — and over a third of them still say they have no retirement savings at all, according to a 2022 survey from mortgage information website Anytime Estimate.
You still have options, so get yourself moving toward your retirement goals now.
When you save for retirement, the hope is to build enough wealth that you can live comfortably after you retire. As you grow older, you might find that your expected social security income might not be enough for you to retire. So, what happens if you don’t start investing until you’re close to retirement age?
If you find you’ve started your investment journey around the time your age is reaching the speed limit, it’s important to keep in mind two fundamental factors that help investors manage risk and find opportunities: Time horizon and risk tolerance.
Understanding these two concepts can help you beef up your personal finances so you don’t have to work longer before you retire.
What is a time horizon?
A time horizon, or investment time horizon, is the time you expect to hold an investment before selling it. Longer time horizons can offer a great value for investments. Because of this, Wall Street touts the virtues of being a long-term investor—and for good reason.
The masters of the financial universe have long known that the best way to mitigate risk is to have a long enough investment time horizon to allow an investment that may have declined in value to recover in price before having to sell. Let’s consider an asset that has the attributes of a quality company or investment. It’s possible that the value of that investment might dip. But, with a longer the time horizon, the more likely an asset will recover from a decline in price.
If you choose to wait to invest until later in your life (closer to retirement), this reduces the duration of your time horizon. Because of this, it’s helpful assess your risk tolerance before investing.
What is risk tolerance?
Risk tolerance is exactly what it sounds like: it’s the amount of risk an investor can comfortably endure. Understanding your risk tolerance can help when deciding which investments you choose to make. A professional financial advisor or certified financial planner can help you establish your risk tolerance and find investments that work within your boundaries.
Risk tolerance and time horizon can work well together when choosing your investment portfolio. For each investment, it’s helpful to figure out which investments fit within your risk tolerance level for the expected duration of your time horizon.
What’s the easiest way to start investing later in life?
The most important thing is getting started. For most people, opening a standard brokerage account is one of the easiest ways to get started. Finding a budget and consistently investing within that budget on a monthly basis can help build your portfolio more quickly.
Also keep in mind that if you have saved little for retirement and you have the extra savings or cash flow, you have options. You can always choose to max out your 401(k) plan contributions. And, whichever type of IRAs you use (Roth IRAs, Simple IRAs, etc.), you can use catch-up contributions to help build up your retirement accounts. And, if you are self-employed you may find some defined benefit plans can also be a useful tool for making up for lost time.
Remember that taking retirement savings distributions before age 59 1/2 can come with a heavy tax burden. So, leaving your money in your accounts can do more than just earn you more money—it can save you money, as well.
What are the benefits of investing later in life?
There’s one big, shiny benefit to investing later in life: knowledge. Typically, we humans mature and gain experience over the years. The more experience you have, the more you can bring a mature and knowledgeable mindset with you when making decisions that affect your retirement income. And, when interacting with financial institutions, experience can be one of the most valuable tools you have.
Take Warren Buffet and Peter Lynch, for example. They’re two of the best known and most successful investors of all time. They have decades of experience working the stock market, mutual funds, real estate and other investments to their benefit. They both have a wealth of helpful knowledge. And they’re both known to give the same small piece of investing advice: “Invest in what you know.”
The more experience you gain, the more you can know about what you want, how the world usually works, and what types of businesses are usually successful. Also, maturity often comes with the ability to think over a decision before making it rather than excitedly jumping in.
Maturity and experience can give you an advantage in identifying trends that may be like something you have seen before in life which can be valuable when managing your time horizon and risk tolerance related to investing and may help you reach your savings goals a little sooner than you imagined.

In the social media age, we’ve become increasingly connected to those around us. Because most people share only the positive details of their lives, it sometimes gives the appearance that everyone else is having fun or experiencing success while we’re at home, looking at our phones.
Because of this, the fear of missing out (FOMO) has become a common experience. The more common it becomes, the more it can find its way into other aspects of our lives. For investing, FOMO can have disastrous effects. The good news is, we can conquer FOMO and remain in control over our investment decisions.
But, in order to do that, we’ve got to understand what it is.
What is Investing FOMO?
FOMO is the anxiety that others might have rewarding experiences and you won’t. Because these experiences could happen anytime or anywhere, FOMO can often transform into the desire to stay connected to everything all the time. It sometimes manifests itself as a need to know everything that’s going on so you can always make the most rewarding decision.
So, it should come as no surprise that experiencing FOMO eventually found its way into the minds of investors. With so much at stake (life savings, future riches, infamy, etc.), it’s hard to watch others succeed while we struggle. They make it look easy, and we sometimes become jealous and resentful.
And once that happens, it can begin negatively affecting our investment decisions.
What are the effects of FOMO on investing?
FOMO is, primarily, an emotional response. Because of that, it can infect and seize control over our decision-making process. This can cause a string of negative effects on our investments, our personal finances, and our careers. Some of the most common effects FOMO has on investing include:
Reduced reason
FOMO often interrupts our ability to think reasonably. When we see others make successful decisions, we can feel the need to copy them to find our own success. When that urge to buy strikes us, it can present itself as a decision that (a.) will only have positive results, and (b.) must be made immediately.
Our emotions can surge dramatically and make us feel like we don’t have time to think about our decisions; all we can see are the results we so strongly desire. We hear about a stock, bond, or real estate investment that could help us succeed, and we immediately want in. Rather than taking a moment to think about the consequences, we make what often turns out to be a rash decision.
Increased risk
Understanding how much risk you’re willing to take is one of our retirement mastery principles for a reason: understanding risk is important for successful investing.
The decisions we make when experiencing FOMO are naturally riskier than decisions we make while thinking clearly. Part of the reason risk increases in these moments is that they occur at the wrong time. In fact, FOMO can force us to work against our own instincts and break one of the first rules of investing: buy low, sell high. Buying low helps us reduce the risk of bigger losses.
But consider when we might feel like we’re “missing out” the most. Usually, it’s when others are already experiencing success. We could invest in the same stocks they have. But, by then, it’s likely too late. The stocks that have helped them succeed are already at a higher price. In order to find the same success as them, we would have had to buy when it was low.
FOMO can cloud our judgment. And the more we chase the success of others, the more likely we are to make increasingly risky or desperate decisions.
Increased market volatility
To the market, one person experiencing FOMO is a drop in the bucket. When it happens on a bigger scale, it can have a much bigger effect. If a large portion of investors chase the same stocks to find success, it can affect prices. This can lead to volatility as stocks without a proven track record get repeatedly bought and sold. Across the market, prices can quickly rise and fall, causing more uncertainty among investors—and potentially even more volatility.
Reduced confidence
Having confidence in our ability to make positive decisions is a key aspect to finding success when investing. But, with a lack of strategy and due diligence, FOMO decision-making can lead to a string of failed investments. The more this occurs, the more it can damage your confidence.
The less we trust ourselves, the less likely we are to make successful investment decisions. This can snowball into a cycle of bad decisions and failures difficult for us to come back from.
What causes FOMO?
The way we consume information is a primary cause of FOMO. Every time we watch videos online, check social media or check up on the news, we experience a barrage of constant updates about what’s going on in the world. This can be a positive thing. For instance, as big as the internet is, we can always find our niche to learn more about the things that matter to us.
But when we do that, we can also open ourselves up to FOMO. When we focus on the things we care about, we often find stories about other people’s successes in that area. Examples of streams of information that can produce investing FOMO include:
News sites
I look at a lot of financial and investment news. Every time I visit one of these sites, there are always plenty of stories to consume. Some stories have stock tips or advice on how I should invest in the future. Some are profiles of investors who’ve made a lot of money by making the right investment decisions. Often, I find stories about a stock that’s taken the world by surprise and skyrocketed seemingly out of nowhere. These sites make it easy to log on, read a few stories, and think, “That should’ve been me.”
Investment forums
Many sites dedicate themselves to bringing people together to discuss any topic that’s meaningful to them. When you log on to investment forums, you can find a lot of helpful information about strategy, skills, and market data analysis. You can also find lots of people sharing their success stories or putting down others who haven’t been successful. If there’s a lack of moderation, forums like this can become a toxic environment that feels more like people patting themselves on the back, rather than offering helpful advice.
All of this can serve to make us feel less certain about ourselves and can cause us to compare ourselves to others.
Social media
News travels fast. When looking at social media, it seems like we can experience world events in real-time. When there’s a hot new investing tip, it can spread like wildfire. Seemingly good and trustworthy tips get posted on social media all the time. It can often feel imperative that we act on these tips immediately if we hope to beat everyone else acting on the same information.
Social media is also littered with success stories going viral, making us question our own life satisfaction and lending credence to otherwise unhelpful advice.
Meme stocks
The popularity of meme stocks continues to rise. The reason is simple: they can be fun to watch. They often start off as a joke (“What if we all bought this one cheap stock?”). As more people buy them, they can quickly appear to be successful. The problem with meme stocks is that it can be very difficult to understand which ones are actually successful and which are only successful because of a meme.
How can I conquer FOMO?
The thing about conquering FOMO is that you likely already have the tools to do so. And that’s great news, since conquering FOMO usually means fighting against your own emotional urges. It’s important to keep in mind that FOMO is something you experience yourself, and that means you get to decide how you choose to fight it. When you feel like you might be experiencing FOMO, consider these strategies:
Be honest with yourself
The first step in conquering FOMO is admitting that it’s taken hold. There’s no shame in feeling envious that others might have the success you want. In fact, this happens to pretty much all of us. Being truthful about how you feel can help you tackle the problem with a cool, reasonable head—which is something you’ll need to invest successfully.
Educate yourself
One of the best ways of beating FOMO is, coincidentally, one of the best paths toward being a successful investor: research. By educating yourself on successful companies, what makes them successful, their plans for future projects, etc., you can make more informed investment decisions. If you only make investments after researching a company or its stock performance, you can help reduce the risk of FOMO investing.
Research can also help you understand the entire market more thoroughly. For example, if inflation data points to rising costs and the Federal Reserve announces an interest rate hike, you can adjust your investment strategy to reflect the coming changes. Is everyone else selling? Study how to invest during a bear market.
Remember: the decisions are always yours. The more knowledge you have going into them can help you make betters.
Keep to the plan
Do you have an investment strategy? Maybe you only plan to invest in certain types of companies or only make investments that help you reach long-term goals. Whatever your plan was when you began investing, stick to it. This can help you avoid looking for quick money or making rash decisions. Before making an investment, you can ask yourself, “Does this fit into my plan?” Be honest about your answer.
Avoid “sexy” investments
New, successful stocks will always have a strong allure. Part of the allure of sexy stocks is the possibility of making a lot of money very quickly. However, the risk is usually extraordinary and could cause big losses.
For long-term goals, it could be better to make low-risk investments that could pay off well over the next few years or decades. Consider investments such as index funds. Mutual funds and exchange-traded funds (ETFs) that track indexes such as the Dow Jones and the S&P 500 might grow slowly, but they do so consistently.
Be patient
Part of the problem with FOMO is how often it convinces us to act on our impulses. However, impulsive investing isn’t usually a formula for success. Whenever you feel an impulse to buy a stock immediately (especially one you haven’t researched or have only learned about), try taking a day or two to make a purchase.
Overnight successes don’t happen often. When they do, they’re nearly impossible to predict. Because of this, you’re unlikely to miss out on a stock’s success by waiting a few days. You can use the extra time to research the stock and discover whether it’s an investment you’d actually like to make.
Accept that you might miss out
One positive way to deal with FOMO is to accept that there are opportunities you might miss. And that’s okay. There will always be more opportunities in the future for you to find success. No one can “win them all,” but you can still win.
https://quiverfinancial.com/blog/fomo-and-investing/
949.492.6900
info@quiverfinancial.com
501 N El Camino Real Ste 200San Clemente CA 92672

As we help people prepare for retirement, one big question comes up all the time: “How much will I need to retire?” Unfortunately, the exact amount needed is different for everyone. However, there are steps you can take to determine on your own how much you need to retire comfortably.
Why it’s important to understand how much you will need
Understanding how much you’ll need to retire comes with many benefits. Primarily, when you know how much you need, you can take steps to reach your retirement goals. By taking these steps, you can improve your ability to:
Retire on time
Having enough money to provide for your retirement can help you retire once you hit retirement age. This way, you get to decide for yourself how you spend your later years.
Generate enough retirement income
One of the most important aspects of preparing for retirement is ensuring you can generate enough income to sustain yourself. If you’ve figured out how much you’ll need, you can make sure you can afford your bills, your healthcare, and other important life expenses.
How to determine how much you need
Choose your desired retirement age
Once you figure out how much you need, you can compare that to how much you have. This can help you determine how much more you need to save. Using your own timeline for when you plan to retire, you can then plan out your best course for hitting your retirement goals.
Account for your needs
Again, every person—and their needs—are different. There are still some steps you can take to figure out how much you’ll need to retire on your own terms. The process requires deciding how you want to retire and calculating how much that might cost. These steps include:
Some retirement strategies suggest a specific amount you might need for retirement. The fault in this method is that it’s simply a guess. There’s no one magic amount that works for everyone. By calculating how much you’ll need for retirement, you take your own personal needs into account.
Depending on your birth year, your retirement age is somewhere between 66 and 67 years old. While that could change in the future, it sets a good benchmark. Some people retire early; some continue working for several years before they retire. The age you retire is an entirely personal decision. It’s important to keep in mind that your desired retirement age can affect how much you have to save and how long you have to do it—which is why it’s an important first step.
Determine your desired lifestyle
Once you retire, what do you want to do? You might want to travel. You could start a small business or invest your time in a favorite hobby. Maybe you’d like to stay at home, move to a new city, or enter a retirement community. What you do when you retire is up to you—and there are no wrong answers. No matter your planned retirement lifestyle, it comes with its own specific costs. Once you’ve decided your potential life after retirement, you can begin to calculate how much you’ll need to achieve it.
Create a retirement budget
Your living expenses, healthcare needs, and lifestyle costs all require income. With some research, you can determine what your chosen lifestyle might cost you. Using this, you can determine how much money you’ll need each month to sustain you. It’s helpful to create detailed, organized lists of expected expenses and their costs. The more specific your budget, the more accurately you can calculate your retirement savings needs.
Factor in inflation, debts, life expectancy, etc.
The unfortunate part of saving for retirement is that it asks you to become something of a fortune teller. Things like inflation, life expectancy, and your personal debt can seem impossible to predict. The good news is, there’s extensive research available to help you estimate these numbers. Internet searches can help you find the current life expectancy for your gender and location. Economists often release data on expected future inflation.
Calculating your personal debts might take more work. For instance, you might try to figure out whether you plan on moving to a new home or purchasing a new car close to retirement. When all else fails, financial advisors can help you more accurately calculate how economic changes might affect your retirement savings needs.
Alternate calculation methods
There are some other methods of calculating your retirement savings needs. While these methods might offer help creating an estimate, keep in mind that these methods don’t take your personal needs into account.
The 4% rule
The 4% rule is simple: take your desired annual retirement income and divide it by 4%. The result is how much you’d need in savings to receive that yearly income. Specifically, the 4% rule helps you understand how much money you’d need to save to sustain yourself for 30 years.
Retirement calculators
With a quick internet search, you can find several retirement calculators. These calculators ask you to put in information about your age, income, and needs. They then use this information to calculate how much you’ll need for retirement. Retirement calculators can also help you figure out how much you need to save each month in order to reach your savings goals.
Age method
The age method is less of a calculation and more of a guideline. Instead of taking your needs into account, it suggests generic retirement savings benchmarks based on your age. It frames these suggestions as multiples of your annual income. Different sources may suggest different amounts, but a typical age method chart might look something like this:
Salary x1 by age 30
Salary x2 by age 35
Salary x3 by age 40
Salary x4 by age 45
Salary x6 by age 50
Salary x7 by age 55
Salary x8 by age 60
Salary x10 by age 67
Again, these are generic benchmarks. Your actual needs might require a higher or lower amount of income saved for retirement.
How to build retirement savings
The great news is, with saving for retirement, you have many options. We’ll discuss some of the most popular options, but a financial advisor might have additional suggestions based on your income, goals, and capabilities.
Savings accounts
Savings accounts are simply accounts you hold at the bank. The amount you deposit into the account is entirely under your control. It’s important to note that savings accounts don’t grow over time unless you deposit more money into them. Though some accounts generate interest, it’s often a low amount that falls below inflation rates. This means that the longer your money stays in a savings account, the less it might actually be worth.
401(k) accounts
401(k) accounts are one of the most popular long-term retirement plans available. In fact, your employer likely offers a 401(k) option. With this type of account, the money you contribute gets invested in a way designed to grow slowly over time. The more you contribute, the more investments you can make, and the more your account can grow. 401(k)s have maximum annual contribution limits. In 2022, 401(k) accounts have an annual contribution limit of $20,500.
401(k) plans are tax deferred, meaning you don’t pay tax on your contributions. Effectively, this works as a tax deduction—lowering your taxable income by your contribution amount and potentially lowering your tax rates. Instead, you pay regular income taxes on 401(k) distributions when you receive them during retirement.
As an added bonus, many employers offer employer match options for your 401(k). An employer match option literally offers you free money. With an employer match, your employer matches a portion of your 401(k) contributions. This option might be opt-in, so consider researching whether your employer offers this to help maximize your 401(k) plan growth.
IRAs
Individual retirement accounts are another option for long-term retirement savings. Much like a 401(k), your contributions get invested so your account can grow over time. There are several types of IRAs you can choose from. Traditional IRA contributions are pre-tax, only getting taxed once you receive them as income distributions. Roth IRA contributions are after tax. With after-tax contributions, you pay taxes upfront. However, you get to receive your distributions as tax-free income. Which type of IRA you choose can depend on whether you’d rather pay income taxes based on your current income or retirement income.
Social security
Social security is, essentially, a tax you pay. You automatically contribute a portion of your income into social security. The basic idea is that the current worker base pays a tax that helps fund the retirement of current retirees. This can make social security potentially unstable and risky. If there are more retirees than workers, there might not be enough funds to go around. Still, when combined with other retirement accounts, social security can be an invaluable source of retirement income.
Traditional investments
If you’d like, you have the option of investing your money directly into the stock market or other investments. Investing in the stock market can come with high risks. Because of the intricacies of the market, success can require knowledge, experience, and patience. If you decide to invest your money this way, it’s highly recommended you hire a financial advisor. An advisor can help you develop an individualized investment strategy based on your risk tolerance level and money personality. They can also give you up-to-date investment advice based on current market trends.
What to do if you don’t have enough to retire
So, what happens if you’re approaching retirement and realize you don’t have enough saved up? If this is your situation, you have some options available to you.
Catch-up contributions
Many retirement accounts give you options for saving more the closer you get to retirement. These catch-up contributions raise the annual contribution limits to your accounts, allowing you to save even more each year before you retire. This way, you can supercharge your retirement accounts’ growth just before you’re ready to retire.
See Also: Later in Life Investing: What You Should Know
Continue working
If you don’t have enough money for retirement, you might choose to continue working. Though this option is less than ideal, it can help you continue to make contributions to retirement accounts before taking required minimum distributions (RMD). This can also help you take further advantage of your retirement accounts’ catch-up contributions.
Hire a financial advisor
When saving for retirement, a financial advisor is almost always a wise choice. If you’ve found you haven’t saved enough for retirement, a financial advisor can help you develop a plan to retire on your terms.

When they were first introduced in 1935, Social Security retirement benefits were a game changer. It ensured that retirees aged 65 and older could receive an income even after leaving the workforce.
Over the years, retirement options have expanded. New account options, new retirement protection laws, and new investment opportunities help workers supplement their Social Security benefits and create their dream retirement.
Regardless of these expanded options, Social Security remains the cornerstone of retirement for many Americans. Over the last few years, a lot of them have "unretired"—that is, they've returned to work after already receiving their benefits.
This begs the question: Does returning to work impact their Social Security?
The "Unretiring" trend
When the COVID-19 pandemic hit, it brought with it an uptick in retirement. In 2020 alone, 3.2 million more boomers retired than in 2019. It was the most boomers ever to retire in one year.
There were several reasons for this. Many boomers were laid off or forced into retirement. Others left the workforce because of safety concerns when facing an unknown virus. Those without a degree found it difficult to gain safer employment, such as positions that let them work from home.
In the years since our economy inched closer to a recession. Whether we're in one now (or soon will be) remains up for debate. Either way, inflation is on the rise and prices are going up. The stock market's current rollercoaster trend has affected many 401(k)s and other retirement accounts. The current worker shortage means there are many open jobs that need filling.
These conditions have helped many retirees decide to rejoin the workforce. In the last year and a half, 1.5 million retirees have gone back to work—many of whom had already begun receiving Social Security benefits.
How Social Security works
In some ways, Social Security works like a savings account: you put money in and, eventually, you take money back out.
But it's actually a little more complicated than that.
When you pay your income taxes, a percentage of your earnings goes into Social Security. But it doesn't go into a personal "account" or another fund that continues to build until you retire. Instead, the money you pay in gets used almost immediately—as income for current retirees and other social security recipients.
Then, when you retire, those working during your retirement pay for your Social Security payments.
Ideally, Social Security earns more tax money over time, as average incomes go up. This helps immensely, as they adjust retirement payments to reflect the cost of living.
It works like this: the Social Security Administration (SSA) considers up to 35 years of your highest annual earnings—that is, those years you paid the most into Social Security. They then index those earnings to reflect modern wage amounts. These calculations help them determine your monthly benefit.
Depending on your full retirement age (FRA), Social Security payments could replace around 35% of your pre-retirement income.
Does retiring early affect social security benefits?
You can start collecting Social Security payments five years before you reach your full retirement age. For those born after 1960, the FRA is 67 years old. This means you can apply for Social Security once you turn 62.
The idea of early retirement appeals to many of us. However, it comes with a downside.
When you receive Social Security before you reach 67, you actually receive lower payments. The payments become lower for each month you receive benefits before reaching your FRA. The SSA offers this handy chart to help you figure out how much retiring early could affect your benefit checks.
If you wait until 67 (or whatever your FRA is), you're entitled to your full retirement benefit payments.
Another reason to delay retirement
If you wait to receive benefits until after your FRA, your payments can actually go up. For every year beyond FRA that you delay retirement, you earn an 8% bonus to your Social Security payments. This bonus accrues each year until you reach age 70.
If your FRA is 67 and you wait to receive benefits until you turn 70, your payments could go up 24%!
Are you allowed to work/receive income during retirement?
The simple answer is "yes." It's perfectly legal for you to return to work and earn an income even after you've retired. However, the SSA sets income limits. These limits change every year and depend on whether you've reached your FRA. It's a system referred to as the "retirement earnings test."
If you retire before you reach FRA, the annual limit for 2022 is $19,560.
If you retire once you've hit FRA (or after), the annual limit for 2022 is $51,960. If you retire the same year you reach FRA, only the income you earn before retiring counts toward your limit.
As long as you stay below these amounts, you can receive your full benefits.
What happens when you earn above the limit?
Once you've earned above the annual limit, it affects your Social Security payments. If you've retired early, the SSA withholds $1 from your benefits for every $2 you've earned over the limit. If you've reached FRA, they withhold $1 for every $3 you earn over the limit.
To earn $19,560 in a year, you'd need to earn about $9.40 an hour and work full time (40 hrs/wk, 52 wks/yr).
If you live in a state with a $15 minimum wage (like California), working full-time would earn you $31,200. That's $11,640 over the limit and could cost you $5,820 in benefits.
Can my benefits go up by unretiring?
Actually, your benefits can go up by unretiring—on one condition.
If your annual income from work is one of the highest in your career, the SSA recalculates your benefits. This is because you're paying a lot more into Social Security. Depending on how much more you made (and contributed), your benefits might actually go up.
Creating a full retirement plan
As we've seen over the past few years, the economy can be fickle and unpredictable. That's why I always recommend that Social Security should only be one leg of a full retirement plan. Many retirement plans exist, such as 401(k)s and IRAs.
You can calculate how much you might need for retirement on your own or hire a financial advisor. Taking steps to ensure your dream retirement now can reduce your need to "unretire" in the future—and ensure you receive your full benefits!
#realestate #investing #stockmarket #bearmarket #recession #inflation #retirement #vacation #fun #information #bonds #interest

Find out what happened and what we predicted in 2022 for stocks, bonds and commodities in this highlight reel of all the Quiver Financial quarterly events where we provided outlooks for The Dollar, Metals, Oil, Interest Rates and Stock Markets throughout 2022.  So much happened in 2022 it was hard for us to trim our videos down to this 20 min. reel.  We didn't even get a chance to cover some of the asset classes we focus on like real estate.  Make sure you subscribe so you can stay up to date on what we see for 2023.
You'll get to see first hand how Quiver Financial called out the bear market in stocks before anyone else in the business. This is a must see if you are looking for actionable forward looking viewpoints on the five (5) investment categories that have the greatest amount of influence on your investments and retirement savings.
Advisory services offered through Quiver Financial Holdings, LLC a CA state registered advisory firm. Not intended to be investment advice. www.quiverfinancial.com 949-492-6900.

When creating your retirement savings plan, it's helpful to have specific goals. One such goal is when you plan to retire. Some of you might even have a specific date when you hope to retire. Target date funds are a popular retirement investment strategy that, as their name suggests, target a specific retirement date.
They're a popular option for 401k plans—and their popularity increases each year. According to a recent study by the Investment Company Institute, participants in their twenties had over 50% of their 401k funds allocated to target date funds. 65% of those hired within the past two years had investments in target date funds.
They're so ubiquitous that it's possible your employer signed you up for one as a default 401k option.
I believe that, when it comes to your retirement, you should make informed investment choices. So, let's look more closely at target date funds so you can figure out whether they're right for you—and what to do if they aren't.
The problem with target date funds
While target date funds offer some benefits, they come with some important drawbacks. These drawbacks can have serious effects on your retirement plans, including falling short of your goals. Since most retirees survive on a fixed income, not meeting those goals can have serious consequences, such as continuing to work beyond retirement age.
Here are six major drawbacks to target date funds you should consider when planning for your retirement.
One plan for all investors
Target date funds are designed to build toward a specific retirement date. That is literally their only goal. They don't account for your individual needs and goals. Your dream retirement is of no concern to the fund, making building toward it difficult, if not impossible.
It's a one-size-fits-all scenario. Unfortunately, retirement goals come in all shapes and sizes, making it unlikely that a target date fund would actually fit your needs. In those instances, there's a good chance that the fund will fall short of how much you need to retire, forcing you to make major adjustments to your plans very late in the game.
Extremely variable
If you search for specific holdings of individual target date funds, you might become surprised or confused that each target date fund has its own mix of investments, asset allocation, and growth rates. The variation between each fund is so great, if you don't choose a specific fund, it's impossible to predict what you're getting and what your retirement income might be.
Once you include other variables, such as management options and fees, it might feel even more difficult to decide which one might be best. This makes the possibility of your employer picking a plan best suited to your individual needs a little like finding a specific needle within a box of similar-looking needles all designed for a different use—without knowing which one you need to find!
All investments owned by one company
To be fair, target date funds do their best to offer a diverse portfolio. They usually include a variety of asset classes, including a mix of mutual funds, index funds, and both domestic and international stocks and bonds.
On the surface, this seems to meet the requirements for diversification. But here's a secret: each individual fund included in your target date fund is owned by the same company. Typically, this is the company providing the fund to you. So, in reality, your diversification options are severely limited. This can make finding the correct mix of investments to meet your goals more difficult than it needs to be.
No active management
One of the primary goals of target date funds is simplicity. This includes a simple management system. Most target date funds managers make minimal adjustments to your investments. Usually, these are timed maneuvers: as you get closer to retirement, the manager might move your money into safer investments.
Compare this to a financial advisor or other investment managers who can offer a more active, personalized service. They can watch the market and make in-the-moment adjustments to help you build toward your specific retirement goals.
Playing it safe
As I mentioned above, as you get closer to retirement, your fund manager gradually shifts your money into safer investments, even if you don't ask for it. However, this can have a significant impact on your retirement.
The last few years of your working life is a perfect time to catch up on your savings and make sure you reach your retirement income goals. In fact, many retirement plans increase your contribution limits once you hit 50 years of age. This ability to make adjustments to your retirement plans and maximize your earnings as you prepare to leave the workforce is an important part of later-in-life investing.
Unfortunately, the only plan target date fund managers have during this important period is to become more conservative. That's understandable, since it helps ensure you don't lose money right before retirement. But it also limits your ability to grow, which is something many of us need just before we retire.
Hidden fees
A big selling point of target date funds is that they come with a low expense ratio. And while this is true, it's only half of the story. A target date fund is usually a fund of funds: it's an overarching fund comprised of many mutual funds and investments. They also come with two layers of fees: the overall management fee and the fund-of-funds fee.
Here's another secret: target date funds are allowed to only show you the fund-of-funds fee. This gives them the opportunity to set a low fund-of-funds fee while keeping their larger overall management fee hidden from you until it's too late.
How a 401k rollover can help
Do you know how to perform a 401k rollover? It's the process of taking the money from your current 401k and reinvesting it into a new one. It's a simple process that you can accomplish in three easy steps!
If you currently have a target date fund set as your 401k plan and would like to change it, performing a rollover can help. First, you need to find your options. It might take a bit of research, but the payoff could be a better retirement. Some ways to discover your 401k options include:
Asking your employer
Looking them up on an employee portal
Logging into your account on the provider's website
Calling the provider directly
Once you find out whether you have 401k options beyond a target date fund, you can select the one that best suits your retirement goals and initiate a rollover.
Typically, you can only contribute to a 401k if your employer sponsors one. If you're self-employed, you might find a solo provider who offers the plan and account management you prefer.