5 Keys to Retirement Investing - Pioneer Financial Consultants

All right, 98Q, Gray here with you, and we've got Matt Krieger from Pioneer Financial Consultants.

Matt, you ready to jump right in on air?

Oh, why have I?

What have I done?

I've made it so I can't hear you now.

Oh, there we go.

Hi Matt, let's try that again.

Can you hear me?

Much better, and I've got the birthday music going.

We are all out of sorts here on a fine Tuesday morning, but thank goodness you know what you're talking about.

Pioneer Financial Consultants, always there to help you with finances.

What have you got for us today, Matt?

Yeah, so today Gray I want to talk about five keys to investing for for retirement specifically talking about investing for retirement and like I said going through five Five keys to to investing for retirement.

All right.

Let's start with number one hit us with it Yeah, so, you know know that making decisions about your retirement account can seem overwhelming Especially if you feel unsure about your knowledge of investments.

However the following

basic rules can help make smarter choices regardless of whether you have some investing experience or are just getting started.

So the first key, and this is one that's certainly been a topic as of recently, is don't lose ground to inflation.

It's easy to see how inflation affects gas prices, electric bills, and the cost of food over time.

Your money buys less and less.

And certainly we're seeing that in the last couple of years as inflation has certainly been a key topic.

But what inflation does to your investments isn't always as obvious.

Let's say your money is earning 4%, and inflation is running between 3% and 4%.

That means your investments are really only earning 1% at best.

And that's not counting any other costs.

Even in a tax-deferred retirement account such as a 401k, you'll eventually owe taxes on that money.

Unless your retirement portfolio keeps pace with inflation, you could actually be losing money without even realizing it.

All right.

And ways to deal with that, I'm sure, are various and probably quite specific to the person.

If I had to guess, there's different answers to the same person asking that question.

Absolutely.

Absolutely.

And, you know, one thing I want to mention is what does it mean for your retirement strategy?

First, you might need to contribute more to retirement plan.

than you think, which seems like a healthy sum now will seem smaller and smaller over time.

At a 3% annual inflation rate, something that costs $100 today would cost $181 in 20 years.

That means you need a bigger retirement nest egg than you anticipated.

And don't forget that people are living much longer now than they used to.

You might need your retirement savings to last a lot longer than you expect.

And inflation is likely to continue increasing prices over that time.

And like you said, Greg, that answer of how does it affect you is certainly different for everybody, depending on your situation.

Right.

Different ability to input to retirement accounts, different risk tolerances.

It's going to be an individual tailored answer to that question.

How do I keep pace with inflation?

But before we get too bogged down in that one, I imagine we're on to key number two.

Yeah.

So the second key is invest based on your time horizon.

And your time horizon is investment speak for the amount of time that you have left until you plan to use the money you're investing.

Why is your time horizon important?

Because it can affect how well your portfolio can handle the ups and downs of the financial markets.

Someone who was planning to retire in 2008 and was heavily invested in the stock market faced different challenges from the financial crisis than someone who was investing for a retirement that was many years away.

because the person nearing retirement had fewer years left to let their portfolio recover from the downturn.

Now, that's comfy territory.

I actually, I understood everything you just said there.

So it's like, hey, well, I get that one.

That's, I got one of five, at least decently.

Absolutely.

Absolutely.

I'm sure many people remember the global financial crisis back in 2008.

And they said, if you're retiring then and we're heavily invested, that certainly have a different risk or a time horizon, excuse me then.

you know, someone who is maybe just starting out at that time.

All right.

So inflation's time horizon.

Are we on to three?

Yeah.

Yeah.

And number three

is, uh, consider your risk tolerance.

And this of course is something that's different for everybody as well.

Um, but it's another key factor in your retirement, uh, investing decisions is, is again, your risk tolerance.

Basically, how well you can handle a possible investment loss.

There are two aspects to risk tolerance.

The first is your financial ability to survive a loss.

If you expect to need money soon, for example, if you plan to begin using your retirement savings in the next years or so, those needs reduce your ability to withstand even a small loss.

However, if you're investing for the long term, don't expect to

and don't expect to need the money immediately or have other assets to rely on in an emergency, your risk tolerance may be higher.

And the second and just as equally important aspect of risk tolerance is your emotional ability to withstand the possibility of loss.

If you're invested in a way that doesn't let you sleep at night, you may need to consider reducing the amount of risk in your portfolio.

Many people think they're comfortable with risk, only to find out when the market takes a turn for the worst that they're actually a lot less risk tolerant than they thought.

And often that means they wind up selling in a panic when prices are lowest.

So it's very important, Greta.

Try to be honest to yourself about how you might react to a market downturn, and certainly not a plan accordingly.

Absolutely.

And I mean, if you ask a court what anxiety is worth, the answer is often in the millions of dollars.

So it may seem like, hey, I'll sleep a little worse in order to retire a little bit easier, but that may be a net negative overall.

Absolutely.

And

unfortunately, we see that a lot when we are in a market downturn that someone realizes, hey, maybe I don't want to take on as much risk as I had originally thought.

But again, we just want to be honest with ourselves.

And again, plan accordingly.

All right.

So I think that'll likely bring us to key number four.

Yeah, so number four is integrate your retirement with your other financial goals Think about establishing an emergency fund It can help you avoid needing to tap into your retirement savings before you had planned to Generally if you withdraw money from a traditional retirement plan before you turn 59 and a half You'll owe not only the amount of federal and state income tax on that

on that money, but also a 10% federal penalty and possibly a state penalty as well, depending on the state that you live in.

There are exceptions to the penalty for premature distributions from a 401K such as having a qualifying disability or withdrawing money after leaving your employer after you turn 55.

However, having a separate emergency fund can help you avoid an early distribution and allow your retirement money to stay invested.

So again, it's creating that financial plan to withstand some of those emergencies that undoubtedly will

certainly come up.

Right.

If retirement is your only financial goal, then you're probably missing a couple of pretty big other life events that may or may not occur, but absolutely have to be planned for.

And that should bring us to key number five.

Yeah, and key number five one that we've certainly talked about before, and that's don't put all of your eggs in one basket.

Diversifying your retirement savings across many different types of investments can help you manage the ups and downs of your portfolio.

Different types of investments may face different types of risk.

For example, when most people think of risk, they think of market risk.

The possibility that an investment will lose value because of a general decline in financial markets.

However, there are many other types of risk.

Excuse me, bonds.

face default or credit risk.

Bonds also face interest rate risk because bond prices generally fall when interest rates rise.

On top of that, investing internationally carries additional risks such as differences in financial reporting, currency exchange risk, and economic and political risk unique to the specific country.

So there are certainly a lot of different risks that we want to consider.

when diversifying a portfolio, certainly, because you certainly want to have a diversified portfolio, but there are risks that we need to consider, and they can get pretty deep as far as those different risks that are out there.

So the five keys then?

I mean, each one its own struggle, but combined at all and diversification, of course, is going to play a crucial part even as responses to the other four variables, it seems like.

Absolutely.

Absolutely.

And at the end of the day, participating in your retirement plan is probably more important than any individual investing decision that you'll make.

Keep it simple, stick with it, and value time as a strong ally.

It's certainly because the more time you have, the more time you have for the market and your investments to grow and that compounding interest that certainly we talk about.

often on the radio show.

I could feel it coming, Matt.

I've gotten to the point where I can sense it's like an ad coming up on YouTube.

It's like, oh, compounding interest, it's coming back.

So those five keys to retirement investment, we talked about inflation, the timing of it, the time horizon specifically, risk tolerance, integration with other goals.

And as always, another one of those titans of investment diversification.

And again, any one of those things could be, it could seem

overwhelming, but there are strategies, there are tailored solutions that exist for each of these, and each one a perfect reason to be in contact with Pioneer Financial Consultants.

Matt, hit us with that phone number, please.

Yeah, so our phone number is

715-748-3231.

715-748-3231 and ask Matt, hey, you talked about five things.

We need to break him down a little bit.

I know I would.

I held my own for a moment with one of the five.

So I'm going to be calling Matt before too terrible long and figuring out my retirement plan.

Matt, thank you so much for some time this morning.

We'll get you the recording here so you can get that up on the Pioneer Financial Consultants Facebook page.

Perfect.

Sounds good.

Thank you, Gray.

And enjoy

the...

Well, rainy weather

today.

Well, rainy, but it's the start of a cool week.

I think I can handle this if it keeps shaping up the way it is.

Thank you so much, Matt.

We'll talk to you Tuesday.

Sounds good.

Thank you.

That's Matt Krieger from Pioneer Financial Consultants.

And like I mentioned, you'll be able to listen back to this on their Facebook page, but we also put it up on our website too.

So if you missed it or if somebody you know should hear this, everybody should hear this.

Check it out on 98Qcountry.com and on that Pioneer Financial Consultants Facebook page.

We've got a word from sponsors coming up next and hopefully we'll be able to resolve some of our technical difficulties here.

But worst case scenario, a lot more country music coming up on 98Q.

Pioneer Financial Consultants is located at 882 East Perkins Street, Medford, Wisconsin, 54451, 625 Ellingson Avenue, Hawkins, Wisconsin, 54530, and 297 Northlake Ave, Phillips, Wisconsin, 54555, phone number 715-748-3231.

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