Insights

Posted on June 7, 2019

The ABCs of RMDs (Required Minimum Distributions)

Blog

Wealth from Wisdom is a weekly radio show from Carson Wealth.

Paul West: Hey everyone. Welcome to Wealth from Wisdom. I’m going to talk about required minimum distributions – RMDs – with my co-host today, Scott Kubie. Scott, I’m Paul West. Just want to make sure you knew who I was.

Scott Kubie: Okay. I knew you from the last time I co-hosted with you.

Paul: Just want to make sure you didn’t change. You’re looking good man.

Scott : Glad to be back.

Paul: Scott is our Senior Investment Strategist. Part of the theme of the show today, we’re going to talk a little bit about required minimum distributions. So is that why we picked you?

Scott: I hope not for the age. I’m not 70 and a half or headed to 72.

Paul: Yeah. Possibly – not necessarily, but Scott, when you’re on the show, we were going to talk a lot about the markets, what we’re seeing, what we think is going to happen. One of my themes in the show I want us to talk about today is turning 70 or 70 and a half.

It’s a big milestone in your life. Actually. Any zero birthday as a milestone. 20, 30, 40, 50. All right, keep going, right? 80?

Scott: 50 was not as significant, it was getting too high up.

Paul: Well you’re halfway there. Okay. All right. Or a third of the way there, if you think like some people.

But you’re 70, under current law your required minimum distribution kicks in. Maybe you might’ve been seeing the news whether on TV or pops up on your iPad or your phone. They may change that to age 72, but let’s just operate under the current rules now when, when this happens, you’re forced, you do not have a choice. This is a law that you have to figure out and you have to answer to.

One of the things we talk about on today’s show is what is the best, I would say, time to do it of the year. Should you do it in January or June or whenever. December. Should you do it systematically? And we’re going to talk about that.

But the big thing is, what we want to avoid people doing, is forced to take this distribution when the market is down. So that’s something that we’re going to look at and let’s just talk about where we are. So Scott, we’re in June. Happy summer to you.

Scott: Thank you.

Paul: I know it’s not officially the summer.

Scott: It’s not yet.

Paul: But I’m telling you, everybody thinks this way. I shouldn’t say everybody. The majority of people: it’s past memorial day, so summer’s here. The pool’s open – lemonade, cold, refreshing cocktails, whatever you’re enjoying.

One of the things we have to think about is the market and what’s going on and what’s happening. And you know, one of my favorite things you do every single week, one of my favorite is S-Kubie snacks.

Scott: That’s all right. I will answer to that.

Paul: You love to put images up and kind of talk about what’s going on and what’s happening this week. So help with our listeners. Those images you do – the Scott Kubie images – the “Skoobie Snacks.” What are the Skoobie images of the week?

Scott: You know, there were no big anniversaries this week. One of them maybe depending on your point of view, but for most people, not so much.

75th anniversary of D-Day. The six of June. It was coming up this week, or now last week. Just an amazing story of all the people, not just the soldiers who gave their lives, but the French citizens. All the people. It was a year’s worth of planning to go into that – it was amazing and still there were challenges. So they were able to overcome those. I thought that’s worth remembering.

That’s worth remembering the great things in the great sacrifices people made. And then on the same sense of bravery, but didn’t turn out nearly as well. It was the 30th anniversary of Tiananmen Square as well.

Paul: I can’t believe that was 30 years ago. It’s a forgotten time, actually if you think about it.

Scott: Yeah. And it just never really materialized. In fact, it’s probably gotten worse since then, a lot of different ways. And so that’s been tough.

Paul: Is it true though that if you live in China and you Google, you can’t find imagery on this?

Scott: I don’t believe you can. If you’ve read 1984 from George Orwell just goes down the “memory hole.”

Paul: Interesting, you think of Google as this unabridged universe and wealth of data, but yet certain countries still take control of what you can do.

Scott: There were reports in China that they banned the image of Winnie the Pooh. Now you’re like, why? What did Pooh do? Well, it turns out that the police didn’t like that the president of China’s physique and Pooh’s physique are similar, so people started to use Pooh as a representation of him. He got banned for a little while over that.

Paul: That didn’t make Disney happy.

Scott: No, I’m sure not.

Paul: That’s why they started their own content division.

Scott: Well that might’ve been Netflix instead of the Chinese doing that.

Paul: But I think they’re bigger – Netflix, that’s for sure. Yeah. So those are they’re very visible images to me, Scott, I think about the picture of course for me. One of the most visible images is like Saving Private Ryan. Such a famous movie. The image of them coming off the boats and what happened. I will never forget the first time I saw that movie. And how intense that first 30-minute scene is.

Scott: Yeah. You hit that beach and that ramp fell and a lot of times people were shooting right in there and you were like, how can I get out of here? Because there’s nowhere to go. And there really isn’t all that much protection in there as well. That just had to be some harrowing minutes to ride into that beach.

Thank you again to all of our listeners. To you, if you’ve provided your service, any of your family members and all the people that we’ve lost before us. Thank you. On behalf of everyone in the United States and here at Carson. We appreciate your service.

Those are the things that we have to remember. And I know we talk a lot about Wealth from Wisdom is you’ve got to learn from your mistakes and always get better for the future.

Scott, earlier this week I was out in Newport Beach, California, visiting with some great families. I got a chance to meet some of the children and they had some friends that showed up at the place we were having dinner. One of them was getting deployed, and I was just thinking about the life they’re going through.

Here’s this person, and I think about this family. Their son’s getting deployed. He can’t say where he’s going and what he’s doing. So imagine. I am a parent of three children and I know you have children, Scott. Imagine if you knew your kid was going overseas but you didn’t know where and you didn’t know what they were doing.

Scott: It’d be tough. Really hard.

Paul: Yeah! We joke all the time about investing that we don’t have a perfect crystal ball, that we can only take the best information we have to make a decision. I can’t even imagine how much my brain would wander if I had a child that was somewhere in this world, most likely in a challenging situation and I didn’t know where they were or how to communicate.

Scott: Yeah. It’s tough. And it reminds us all that there are risks in the investing market, there are certain kinds of those, but they’re also just life risks. There are things that get put in front of you and things that are – it also reminds you to, investing isn’t just about investing, but it’s about how you can take care of your family and support them in difficult times and challenges that they run through.

It’s just a good lesson. I think that’s one of the reasons I like to harken back to some of those historical events as well, is remember that these bad things could happen and they can change the world in major ways. And I think it’s just good to remember that.

Paul: Yeah. So what else is new in this week in Skoobie pictures?

Scott: A great picture of the US Air Force, the graduation there and just have happy cadets. And it tied in well with the picture of the soldiers coming off the landing crafts as well.

The just the very tragic news that we saw the Virginia Beach, with another mass shooting, just seems to be that they come up so frequently at this point. A picture of the victims to remember that. Nobody expected that. Nobody went to work thinking that was going to happen.

It’s a tenuous, difficult world at times. It, I mean, we’ve made it so much safer than it used to be, but still, every once in a while it just kind of grabs up and grabs people in a way that just doesn’t seem fair.

Paul: Yeah, it’s gut-wrenching. Its heart-wrenching and tragic. I mean, there are many, many words we could use to describe it. But you know, Scott, it makes me sick to my stomach. I mean, certainly you hear about this and I get people have mental challenges and diseases and there’s a lot of challenges that we have to think through.

But if you spot somebody like that, try to help, try to do what’s best. But also, when we talk about living your life by design and not by default, and many of us think, oh, we’re in a bubble and we’re safe. We live in Omaha, Nebraska, we probably feel more protected than other places because we think the Midwest is safer. I believe it is, but it doesn’t mean it’s bubble-proof by any means.

And so one of the things that we’ll talk about today is how do you insulate yourself from bubbles? How do you protect yourself? I can’t share this enough. If you haven’t protected yourself by having your Will or your Trust updated, you’re making a huge mistake. If you don’t have a Power of Attorney.

Scott, if something happened to your family, and you became paralyzed or did something, who’s going to help you make decisions? Your wife, right? I hope you have a Healthcare Power of Attorney in place. I do for my wife Courtney.

But what happens if your kid goes to college and your kid gets in trouble or gets hurt or it goes to the hospital? Who can make the decision for them? Guess what? If they’re now age of majority: no one, right? Unless you actually have a Healthcare Power of Attorney for a college-aged kid.

That is something actually we’ve talked about here at the Carson Group. We have had several if not many of our clients go through with that. And I just shared this with you because that’s a great way to protect yourself. That’s a great way to protect your family.

And many moms and dads out there haven’t done it. It doesn’t last a long time. But could you imagine your kid’s in the hospital and there’s not a darn thing you can do about it? I can’t. How are you going to feel, how you’re going go through it?

So one of the things, and if you have questions on this, doing this on your own, on Legal Zoom or other areas is a bad idea. There are two pathways: you can either do fixed or variable, working with estate planning attorneys.

If you want advice on who to work with and how to do that correctly, that’s something we can do here at Wealth from Wisdom – (888) 419-8513. Don’t make a mistake. It’s one of the truths we see: building out your estate plan, which means your will, your trust.

One of the most avoided pieces we see, but actually, when you hear about Virginia and of those things, I’m telling you, everybody that has those plans in place feels relieved, not relieved of what happened to them, but they actually spent the time to protect their family. (888) 419-8513 you’re listening to Wealth from Wisdom.

How volatile is this market compared to historical times?

Scott: Slightly below average.

Paul: So, below average?

Scott: This year has been below average – slightly below average. When you look at it from the number of 1% moves. Generally speaking, we’ve seen fewer than, than average.

Paul: Then why in the world does everybody thinks it’s so volatile?

Scott: I have long thought that there are certain things that you could get up and say in front of a financial audience and no one would ever challenge you. One of those lines is: Wow, the market share is volatile right now!

I don’t think ever, maybe in 2017 when it was not volatile at all and it was the calmest year ever, maybe somebody would have challenged you. But outside of that, I think that people experience that. Of course, the other thing is they forget how volatile it was in the past.

And the fact is that a 1% move every week either up or down really isn’t all that abnormal when you get down to it.

Paul: Of course if we have a couple of days where it moves – that’s expected. That’s life. That’s why it is a market. It’s not rational, everyone. It’s not. So what happens with irrationality? Things happen in weird ways.

Scott: People herd too. I mean everyone says the Fed isn’t going to move. Then it turns out everybody says the Feds are going to cut two or three times. And so those big swings back and forth can really move the markets and big directions as well.

Paul: So folks, the market, you just heard it here. Just to remind you, this is why it’s called Wealth from Wisdom. The market is actually not more volatile here in 2019 at this point than historical averages.

So just realize that now, why do people say it? Interesting again – when did they say it? When the market’s had a couple of down days or a couple down weeks. Yeah. You don’t hear them say, “Oh, the market is volatile on the good side!”

Scott: In fact, in January and February there was these, some decent levels of volatility. It just happened to be that you were always making money and no one complains about that.

Paul: No, not at all. So talking about where people are making money or not, where do you see right now, what’s been some of the best performing sectors or sector year-to-date?

Scott: We’ve seen really the lowest risk sectors that have some tie to income production be the very best important areas. So real estate has been extremely strong. Utilities have done very well.

And then to some extent, consumer staples – the things that you buy every day, those sorts of companies that sell in the stores, the retail providers, they have done very well.

They don’t pay quite as high of dividends is the real estate and utilities markets too. But that low-risk nature has actually been a pretty positive period overall. Those have just done really well.

Year-to-date too, that’s probably more related to the downturn. If we stretched out year-to-date, information technology, while it’s been rough lately, has still had a pretty solid year, just got eclipsed by real estate finally as the top performing sector in recent weeks.

So even though it’s been rough lately, it has such a huge surge on that early in the year that really profited from that. And that’s one of the areas that we, we’ve focused too much on that short term and we forget the fact that that markets have actually done pretty well. And some of the volatile sectors have actually had good years so far this year.

Paul: Yeah. So I would put real estate and utilities, and I’m going to go out on a limb here, Scott. They’re not actually sexy pics, right?

Scott: They would be qualified as dull.

Paul: Boring or bland to people. So most people think about technology and healthcare and others are the high flyers and done really well. But really which ones are at the bottom end of the sector so far this year?

Paul: Yeah. You know, the space that we’ve seen though is healthcare.

Scott: Ah, interesting.

Paul: Yeah. So, there are two real reasons why. The first is that healthcare was one of the top performing sectors last year, did very well. So it had a bit of a lead. But what we’ve seen is some political pressure in that area. Both you remember there are I think 23 Democratic presidential candidates and there are 23 of them that are criticizing healthcare companies.

And so that does have some pressure. But what pushed it over the edge a little bit politically was a proposal that healthcare companies would actually have to disclose the discounts that they get between the hospitals and the drug makers and really open that up.

That was not viewed positively cause that was a Republican-led proposal. So they were getting it from both political parties. One of the things you look back on, the United States as a percentage of GDP, has some of the highest healthcare costs in the world.

And so that’s a real big issue for everybody that when you look at life expectancy versus those percentages of what we pay, we’re not getting a whole lot of extra boost in life expectancy. In fact, there are countries who spend less than we do that have higher life expectancy.

And so that’s just become a very popular political issue and certainly, one that everybody wants to shore the credentials up as we started looking towards campaign season already. It’s disturbing, but it is the reality where we are.

Paul: It’s only going to become more and more prevalent. Is it still at 23 candidates? I’ve lost track.

Scott: I think that’s the last count. A couple of weeks ago on the pictures I do, when the vendors came out, we showed all the Pantheon of all the Avengers superheroes up there and then right below it I refer to them as “the Revengers.” Which seems to have done pretty well. So if anyone on the audience wants to use that, you don’t have to quote me, you can just steal that line.

Paul: You don’t want it?

Scott: I do, but I kind of have control over it anyway.

Paul: So – Scott Kubie, Avengers versus Revengers!

Scott: I think it’d be interesting to see how that’s certainly starting to influence markets, to some degree, in a greater fashion.

Paul: Yeah. May was a challenging month here for all of us, Scott. That’s why I think everybody’s saying it’s volatile because it was a down month.

Scott: Every week was down as well. Every full calendar week, there was parts of the early part of May. They did peak fairly early in the month. It didn’t really go up a lot, so it felt like a very negative experience after a series of really strong ones.

But remember, as of a year-to-date last Friday, a week ago, it actually was up 10.7% and it’s actually climbed a little bit.

Paul: This is bigger than historical averages.

Scott: So it’s been a pretty good year. You know, even with the volatility in May, but we did see where the S&P has been done about 6.4% in May which tells you how well it did. We’ve seen other weaknesses as well, except in the bond market, which I think that’s one of the big stories is that bonds are up 4.8% so far this year, which is huge.

Considering the rates, that means there’s had to have been a lot of price appreciation because they don’t yield that much as anybody who’s living off the interest of them knows. So that’s a really dramatic change and really speaks to some of the reasons why you want to have diversified portfolios that have all your chips in those highest equity baskets, both cause boring stocks as we talked about doing well. Also some of the bonds also provided very nice cushion and in tough times make that ride a lot smoother.

Paul: Yeah, it is. It’s a big miss so far this year. People haven’t understood that bonds have performed actually extremely well. I’ll bring this up. So when I started the show, I talked about required minimum distributions and when’s the best time to retire and what does that look like?

But one of the worst times to retire, and I know it sounds really obvious here, so stick with me because it’s one of the most missed things is the worst time to retire is when the equity market’s declined.

Because what we found, and historical evidence showed this, your account balance on those first three to five years of retirement is the most important thing you have because that’s when you start drawing money. That’s when you need it.

If it goes down a lot, right when you need that to happen dramatically changes either two things: one, the likelihood of you not running out of money, and two, how much money you can actually enjoy your life with.

Scott: Jamie Hopkins, who’s is an expert in that space and a stakeholder here. One of the things he points out is that you actually spend more in those earliest retirement years. You no longer have the salary. You’ve got the biggest nest egg, so the biggest risk, and it’s your biggest expenditure time. All of those hitting at that same point.

Paul: Yeah. Most people don’t believe us on that, Scott. I’ll tell you why. So I watch behaviors, it’s one of the most important things I do. I explained this to people all day long. Like what’s the power? Why is Carson Wealth so highly rated? And why are you highly rated Paul? Why is the firm so highly rated?

It’s because it’s not about just the numbers, it’s about behavior. It’s about how we coach you. And better yet how we hold you accountable. Segment one, I tell you we’re going to hold you accountable and getting your will, your trust and your healthcare power of attorney set up.

Number two, I’m going to hold you to your asset allocation. Number three, I’m going to hold you on your spending and withdrawal techniques to make sure you’re making the right decision. And to your point, and to Jamie’s point, it is a huge mistake people make. Oh, I want to grow my 401(k) as fast as humanly possible so when I retire I have as much as possible.

So I’m just going to challenge you right now as a listener. If you’re going to retire in the next two years or three years, you better go as conservative as possible on your 401(k). I know you’re looking at me funny Scott, but I mean it’s something, I’m not saying it’s a decision for everyone.

I’ll give you an example. If you have $1 million right now in your 401(k), which isn’t abnormal to be a sixty-year-old and have $1 million. So if you go conservative and your 1 million goes to 1.1 million over the next two years versus if the market goes down 30% and you stay in your all equity allocation and now you have $700,000 versus $1 million or $1.1 million, is that change?

Scott: It’s a big change.

Paul: Absolutely. So you may say, oh well Paul, I want to get to 1.1 or 1.2 I’d love for you to get there, but what’s more important getting to there or your assuredness to actually be able to retire.

Scott: Yeah, I think that’s what that preretirement stage, those five-ish years before retirement, especially when you start to have a good idea of when you’re going to step out of the workforce. A very, very crucial period and a great time to get help if you haven’t already.

Paul: Don’t assume you should do it at the same time someone else did it. You need professionals to look at it. One of the things that good professionals do is do what-if modeling.

What if this happens? If that happens? What if they both happen? And what if all three things happen? And it’s like laws of probability. So Scott, if I’m going to ask you to roll the dice, what’s the odds of you rolling a one?

Scott: One in six.

Paul: What’s the odds of you rolling a six?

Scott: One in six.

Paul: Okay. What’s the odds of you rolling six the first time in a six again, the second time.

Scott: One in 36. Don’t keep going then the math will get a little tougher.

Paul: But here’s the point. How, how willing are people going to go to keep gambling and worrying about those things? They don’t think about it. So one of the things we specialize here is getting people ready for retirement.

So if you have questions for us, we love to talk through those. If you want to help getting ready for retirement. (888) 419-8513. Really, if you think about this, if you’re the type person that you want to get the most money you’ve saved inside your IRA 401(k) give us a call. (888) 419-8513 we’ll be right back.

Imagine this, we have a big downturn in the stock market and you’re forced to sell your investments at the worst possible time. So essentially you’re locking in your losses. What does that mean? You’re never going to get this money back again.

Hey, I’m Paul West. You’re listening to Wealth from Wisdom. Co-host today is Scott Kubie. Scott, let’s keep talking about what’s going on in the market in the world, how it affects your distributions, how it affects your life.

We spent some time talking about volatility and again, we’re not that volatile this year compared to historical norms. So get that word out of your language. You already know my feeling on this. I always feel like people say that the stock market’s volatile. I agree. Like you can see in front on a stage and people won’t disagree. Just like I can’t stand when I ask people, how are you doing? And they say, busy. It’s my least favorite word. Everybody knows that.

Scott: You get irritated.

Paul: I was starting to get ready. My hands are cringey now even thinking about it, forming a fist. Just live your life. I mean stop worrying about building your plan around what everybody else wants you to do. Do what you want to do and how you approach it.

So when I think about what we can offer you here on Wealth from Wisdom, it’s advice to help you make a right decision. But notice what I said: to make a decision, not sit around and do nothing, but to actually move forward.

I got to tell you, one of the things we do here, and I’ll share this with you, it’s a technique we do here at the Carson Group. We call it our Six Most. So every night before we leave as an employee here at the firm, or we don’t call them employees, we call them stakeholders. You’re supposed to write down the six most important things you can do tomorrow.

So, two reasons. One, when you come in in the morning, you know exactly where to focus your time. Two, it’s got a chance to work in your brain overnight. And you can sometimes even work those out in your brain. Three, another benefit I see is, if there was a reason why you couldn’t come in, your colleagues could pick up what was most important on your plate.

So why I share that with you is Scott, I love doing that just for multiple reasons. One, I feel more productive. Two, you know what I love doing, and I’ve got mine here with me, is crossing it off

Scott: It’s the best, isn’t it?

Paul: Yeah. I know you do one as well or I call it the honey-do list on the weekend, right? You just cross it off and it just makes you feel better knowing that you got something done. So what we want to help you on Wealth from Wisdom is cross those things off.

And one of the things that people spend a lot of time is talking about our trade policy, but I really, Scott, I’m not sure they even know what our trade policy is. And what people tend to do is take bits and pieces of what’s happening.

Then they combine them, but kind of like squish them together to form and render their own opinion. So here we are, we’re in the first week of June. Where are we on trade policy? I mean, what are you seeing right now? So we can kind of bring people to speed and ignore everything else you’ve heard. But where are we right now on the trade policy?

Scott: Well, last segment we talked some about how the market had gone down in May and really trade has been the biggest catalyst or at least the key catalyst to that.

Everything was pointing to getting to a deal with the Chinese, and then I think it’s pretty fair to say that the Chinese backed away from some promises that they indicated they were going to make.

And so, therefore, the president stepped in and, and raise the tariffs on that. My favorite quote on that, it comes from a New York Times columnist who leans a little bit left, but he’s talking about the president in a positive way. He says (from his own bias, these are not mine, so don’t, email me yet) he says, I’m not sure that Trump was the president the US deserved, but he was clearly the president that the Chinese deserved.

In a sense that going back, presidents from both parties have been very willing to let the Chinese continue to steal intellectual property from US corporations and basically not pay him for that. Whether it’s movies, but more importantly, designs of techniques and skills and patented things that would be very valuable that people spend a lot of time investing in that basically the Chinese will turn around and steal that and compete with you.

They do it for a particular reason, which we can delve into a little bit later. So that’s the one that really kicked us off. And then the last bit of pressure is there was a big surprise that the president announced that they were tariffs coming on against goods from Mexico.

Starting at 5% and then up to 25%. That was a big shock to the market for a couple of reasons. One, it came out of nowhere and people are sort of scratching their heads because they say, well, I thought we had a deal that we have agreed to that we haven’t ratified and we’re already changing the deal that we haven’t ratified between the countries. Even though the presidents, the countries have all agreed to it, they haven’t gone through the ratification process.

So that was really confusing because people were sort of anticipating that they would get that deal approved as part of the overall strength that the administration would show in trade, but they kind of undercut their own policy. The other one is that trade was used as a tool for a nonbusiness or nontrade activity. So this isn’t about the shipping of goods is about business, it’s about immigration.

But they introduced a tariff, which is a trade policy on that. And so the question is what other things could they do. Say with a different president, would they say that somebody isn’t cutting their carbon dioxide emissions as fast as we want. We’re going to slap a 10% tariff on their goods.

That becomes a great degree of instability for businesses to figure out how to invest if the tariffs can come on and off very quickly, you don’t know how to shape your supply chain. And that becomes a big challenge. And so that’s why we saw the market decline on that news.

Paul: Scott, I joke that people tend to just infer what the right answer is. They either say, oh, they’re for him or against him, they don’t know if they’re right or not. And what you’re bringing up here is a great case study on this: it could be right, but it’s different per country, right?

So I think people have to realize like most people when they’re in coffee cafe conversations. Oh, do you like the tariff deal or not? Well, for who? Right? That’s like, do you like stocks or not? Well sure do I like US stocks or foreign stocks? Do I like small cap or do I like large cap? Do I like value or do I like growth?

So you have to drill down to that next level. I think what we got to do is people stop saying, oh, you’re either for-or-against tariffs because there could be some, like you said, that are great or make sense, whether it’s China, some of them maybe that don’t make sense whether it’s Mexico. But I think we have to educate our listeners that it’s different.

And it’s just like advice. You could have two people both. So say you and our producer Meg and you both slid your statement across to me for $1 million each. All right. Good job. You’re doing awesome. Well, but let’s say you both had the same holdings. Does that mean it’s right for both of you?

Scott: No, no.

Paul: So same thing for tariffs. I would say is it doesn’t mean the same policy is right for the country. Each country has different relationships with the United States. So I just want to help educate people.

Another thing to educate people on is there’s a lot of credence put on a three-letter term called GDP. A lot of people monitor it closely. Also, I would say probably one of the bigger movers of the markets, wouldn’t you say, Scott?

Scott: Yeah. Certainly the premier expression of how the US economy is performing at this time.

Paul: So what’s that look like recently?

Scott: So the top, we just had a revision this week from where first quarter came out originally at 3.2 is just revised down to 3.1. It’s a very strong number. If s economy grew at 3% every quarter we will be growing like gangbusters and we would be concerned about inflation and not about the Fed lowering rates but that they’d probably be raising it at that point.

What we saw though as you look under the numbers that it wasn’t quite as strong, there was a lot of inventory buildup and certainly like one-time factors. So what we really saw was the economy growing at just a little bit below 2% that had some one-time factors that boosted up to above 3%. That’s one of the things that we always want to focus on at Carson is to get deep enough into the numbers that we understand where it’s really moving the market.

Paul: Yeah. I think it’s so important like GDP is an important number. I would say a number that everyone’s got to pay attention to is their own personal number. So Scott, we came up with a concept here and I want to share this with you. So that is our family index number.

What I mean by that is a lot of people say, hey, I want to earn 3% I want to earn 5%, 7%, 9%, 11% – yes, there are people that go higher than that. Now I have to talk them off the rational cliff. But that’s a whole different story.

But when I share this with you is: your targeted rate of return should be based on what’s important for you and your family. So that’s why we call it the family index number. I’d rather help the Kubie family and the West family target what’s their rate of return that’s going to help them maximize their life rather than just pick a number.

So one of the things we do is we actually run a free family index number analysis. If you’re interested in that (888) 419-8513. It’s confidential. And most people do it feel so much better knowing are they set up in a way that’s going to help them be successful? Or if not, what tweaks should they make? (888) 419-8513.

Hey, don’t forget, we’re also a fiduciary. Ask your advisor or your broker, are they a fiduciary? Get it and writing from them. We’re going to talk about the SEC regulation that happened earlier this week. You’re listening to Wealth from Wisdom.

You’re listening to Wealth from Wisdom. Today I’m joined by Scott Kubie, Senior Investment Strategist here at the Carson Group. I’m Paul West. We spent some time talking to you about what’s going on in the market. Spent some time talking about tariffs, spent time talking about investments and what we’re thinking. The lack of volatility, even though people think it is volatile.

Let’s next talk about something and I say it all the time. My favorite F word is “fiduciary” – have to be careful with that one, right?

Scott: Oh, I thought that SCC was coming for us for sure!

Paul: That’s for sure! So it’s just still amazing to me. All of your listening, very few of you truly know what the difference is between a broker and a fiduciary.

So the fiduciary has a legal and ethical obligation to do what’s in your best interest. A broker only has to do something that would be suitable for you. Suitable doesn’t mean best. Does not. Okay.

Just because it’s suitable for you to have cable TV, does it mean you need to have it? No. You could use Hulu, Sling – whatever! You choose what’s best for you.

Scott: It doesn’t mean the suit that you buy is suitable for you may be suitable for you, but it may not be the best-looking one for you.

Paul: It could be a lower cost one versus a four-figure one, whatever you want it to be. But so Scott, I’m going to tell you I’m bummed. I’m just bummed. So you all know we’re a fiduciary and you may think we’re pushing her best interest here.

I’m not, our job on Wealth from Wisdom is to educate people. And I almost said a bad word there because I get so passionate about this. The SEC had a chance to level the playing field and make people that are held to the broker standard come up to our standard as a fiduciary and they didn’t come through.

The new rule creates, well I’m going to call, a “best interest” standard. This is going to require your broker that they at least have to adhere to what’s called a best interest standard.

And what do they mean by that? Is that it’s basically a broker has to act in your best interest, but this means they just disclose conflicts and a light requirement to mitigate them. However, it’s not clear how much mitigation will actually be necessary. You know what that says to me, I’m going to go bury it in some extra long document and that’s going to suffice.

Scott: Yeah, I think that’s tough because they’ve now they’ve given them some words that they can sort of wrap themselves around and say, no, we’re acting in your best interest when it’s not nearly as tough a standard as a fiduciary has to face. And that’s almost a worse situation than we were in before where they couldn’t say they were working the best interest. They just had to say it was suitable.

Paul: Yeah. Well, here’s something I want you to ask your advisor. If they propose something and they say, Hey, I think you should do this. Ask them the following question. What’s the next best alternative to that? What’s your next best recommendation? Why? Okay, which one pays you more or less? You see what I’m saying here?

So those are questions I would be asking. By the way, if you ask me as a fiduciary, okay, I’ll give you my next best recommendation. Will I make more or less? Neither. It’s the same! So that’s why I’m always going to give you my best recommendation first because I have a legal and ethical obligation. I have no conflict with compensation, no conflict with commissions, get it in writing. I wished the SEC would have stepped it up. It doesn’t mean we’re going to give up the advocacy.

Plenty of people in our profession were in Washington, DC earlier this week trying to really fight for it. But it really confirmed that we’ve got a long way to go in this business. I think it’s great for firms like us at the Carson group.

I’d rather be vocal and out in front of this trend than being trying to keep any tailwinds they have going. Now, at the end of the day, all consumers are going to figure this out. It’s just like everything else in life. It wasn’t long before people finally said, man, this is really silly that I need to go to a brick-and-mortar store to get a VCR tape or a DVD. And if I don’t return it on time, I could hit with late fees. Right?

Scott: Meg asked what a VCR tape was.

Paul: I didn’t even say Beta, I was trying to even really be careful here,

But think about it. Those people realized they couldn’t handle it anymore, so people developed a new way. So I’m telling you right now, we’re at the forefront of this as advisors who behave as fiduciaries are. And so I’d rather be affiliated and working with them ahead of time than not because you make a mistake. We’ll keep updating you on what’s going on with this SEC rule.

I just give you an example. Think about sales competitions that reward trips, bonuses and other rewards that tend to prioritize growth over customer care, AKA think Wells Fargo and their scandals that have been very public.

How is that good for you? It’s not, so let’s just not beat around the bush on that one and what that is. But what I would like to keep talking about, Scott here is as we think about the market and what’s happening and what’s going on, One of the things that people ask us is about Fed rate hikes – is it going to go up or is it going to go down? So I’d love just to hear some of your current thinking related to that.

Scott: Yeah, one of the things we don’t see that it shifted even more than when the last report is that there’s been a really a big movement towards the expectations the Fed’s going to cut rates.

Chairman Powell was out and said that if we continue to have trade challenges that are causing the economy to slow – and we can delve into that for a second or two. But with the Fed watching that they’re paying attention to that. And the basic impression they left with is if things are good, slow enough, the Fed is going to cut rates at some point in order to do that.

And that’s clearly what the market would like it to do. The market had expectations that they were going to cut by at least, you know, 75% chance of a cut or more in September. And that’s even moved way past that now at this point where the market is clearly pricing in a Fed lowering interest rate. Because the economy seems to be slowing to some degree.

Paul: Yeah. So if they don’t do it, are we going to see a down?

Scott: Well, I think that’s a good question. You know, it’s almost now that if your good news comes out that shows the economy is not doing as poorly as people anticipate, then that may take some of Fed rake cuts off the table.

And so then the market will process: Would I rather have the rate cut or would I rather have the stronger economy? And then maybe they vote for the rate cut so that we could be in a situation where good economic news might actually push the market lower, which is hard for people to understand. But that’s part of the overall incentives that we created when we use interest rates and how that all requirement were into a required rate of return.

Paul: Yeah, for me, Scott, and I’ve talked about this and here’s my belief and I help a ton of families through just our entire Carson Wealth organization across the country. I really think there is this huge ceiling that just stops at 5% on mortgage rates.

And the reason why I say it, and I’m nodding and I actually was going to look right at my producer, but she already beat me to it. So, people that are Millennials, Gen Z’s, and others, they’ve never experienced the world where they’ve had to pay a mortgage over 5%, right?

So now if they like to flip houses or do things like that, could you imagine if I said, Oh Meg, our producer, it’s 6% or 7% you probably wouldn’t do it right? Not because it doesn’t make the right percentage. You’re probably a 3% or 4% today, but it’s because it’s a behavioral thing. I can’t pay more than five. I’ve never seen it more than five. I could never do it where Scott, I remember my first mortgage was eight and a half percent. That was double digits.

Scott: Yeah. You talked to people from the 70s and today’s rates now are just unbelievably low.

Paul: Yeah. So it makes a world of difference to people. But you know, and as I think about, many people are great savers and figure out what to do. But once you are a great saver, you have to figure out how to take action – you can’t keep saving and saving.

And I see a lot of people right now that have saved and have a ton of cash and don’t know what to do. There are strategies and ways to do that. If you want to hear one of them, we can talk about them confidentially with you. (888) 419-8513.

There are actually ways to not be correlated to the market to help you earn a good return. (888) 419-8513. Hey, Scott, great to have you on the show this week. Thanks for being here. Can you come back again?

Scott: Absolutely.

Paul: All right, will you have some more Skoobie images for me? All right, perfect. Hey, thanks for listening, everybody – you’ve been listening to Wealth from Wisdom.

Announcer: Okay. And here’s the legal Mumbo jumbo. The opinions voiced and wealth from wisdom with Rod Carson or for general information only, and are not intended to provide specific advice or recommendations for any individual to determine what is appropriate for you. Consult a qualified professional. All indices are unmanaged and may not be invested into directly. Investing involves risk, including possible loss of principle. No strategy assures success or protects from loss. Past performance is no guarantee of future results. Advisory services offered through CWM, LLC, an SEC registered investment advisor.

Share: