Ken Moraif
In today’s podcast, we are going to be talking about the four stages of your financial life cycle, and understanding what each phase is and how you invest and what your philosophy should be in each one of those stages is very important. So the question is, Which stage are you in, and where do most people fail.

Okay, so, Jeromy, today we’re going to talk about the four stages of your financial life cycle, and most importantly, where most people fail. Yeah,

Jeremy Thornton
absolutely. So I think four stages is a very good generalized kind of definition for each of them. In the first phase that a lot of people start out with, at least, is the earnings period, yeah. So what should my financial goals be during this earning phase of my life?

Ken Moraif
So the first phase, the earning phase, is, I guess it begins, you know, we need to begin at the beginning, you know, I think it begins with, like, your first job. And my first job was, I worked in a International House of Pancakes as a waiter, fancy, yeah, yeah. And even back then, I was very, very shy, you know, I didn’t, I wasn’t outgoing and all of that. And of course, you know, I was single and young and stupid, right? And I had a table full of pretty girls, and I decided to do my Elvis imitation for them. Yep, and the manager of the IHOP didn’t think that was in my job description. Go figure. And so he called me and he goes, Ken, I’m sorry to tell you this, but you we’re gonna have to let you go. And I’m like, what you didn’t like the invitation? You didn’t think it was good. I was like, I was doing Elvis really well. I was like, I couldn’t believe that he would fire me over I guess, I guess I don’t do a good Elvis invitation. So in that part of the earning period I didn’t have any money to set aside.

Jeremy Thornton
Was it? Was it? The question is, was, were you doing this Elvis impersonation for just this table and the rest of the tables you were helping? You

Ken Moraif
were normal? Yeah, yeah. Well, the other tables didn’t have four pretty girl sitting at

Jeremy Thornton
So, so you would go, you would help one table speak normally, yeah. And then they would hear this.

Ken Moraif
Well, I mean, I didn’t do the Elvis imitation like the whole time. It was like one, you know. Oh, okay, it’s not like every time I went to their table. Oh, you thought it was like

Jeremy Thornton
Elvis. As you walked over, you just transformed into your Elvis person.

Ken Moraif
I stepped out right, and the other tables were jealous, and they complained, manager, I think that’s what happened. I think that’s what happened now, now that I think about it. No, no. So, so, yeah, so the earnings period is, is really important. And you know, my my mom, kind of imbued in me, you know, kind of the 10% rule where you save 10% of everything that you make your and she always stressed, you save 10% of your gross income. Okay, so my mom was, like, very financially oriented, and so she was using terms like gross income with a 17 year old, you know, but gross income means what you earn before taxes. Gotcha, right? So it’s the gross number. And she always stressed that you should always save 10% of that number. And so what that does is that, hopefully, over the course of your life, as you increase your income, you’re, you know, you get a raise, or you get a new job, or you get a significant increase in your pay, right? It’s 10% of that new gross income, right? And the reason why that works is, let’s say you were making $50 and now you’re gonna make $100 this is an example. Well, the new $50 you haven’t been spending, right? You didn’t know what it was like to have that extra $50 yeah. So what if you just took 10 of that and set it aside and spent 40 of it. You’re still spending $40 more than you were before, absolutely, and so you don’t miss that extra, that 10 that just left. But it’s very important that you you know during those years that you save 10% that’s what my mom told me. And I did it throughout my life, right? And I still do it, yeah, right? It’s like a habit I can’t stop. You know, it’s like, Thank you, mom,

Jeremy Thornton
yeah. And, you know, saving money that early, it really depends on what you’re doing with it too, right?

Ken Moraif
Yeah. So, yeah. So during that period, you have years ahead of you, you know, if you’re 16, but. Certainly, if you’re, you know, I would say most people’s first real job is maybe in their 20s, and so, you know, saving that 10% ideally maxing out on your 401, K, doing all that kind of stuff. But how you invest it is important, because you have so much time ahead of you that you can buy and hold, you know, which is counter to our philosophy as a retirement planning firm, but in those years, yeah, being more aggressive, you know, leaning heavier towards stocks and equities and that kind of thing, and buying and hold. Just keep putting plowing money in. Keep plowing, plowing, plowing. That’s, that’s, that’s the way to go, yeah, for most

Jeremy Thornton
people, right? Yeah, in during that earning period, it’s kind of hard to say, like, year wise, like, How old will you be when you stop earning but how, what stage in your life, or total view, I guess, would that earning period kind of encompass that we’re talking about here.

Ken Moraif
When do you transition into the next yeah phase? Basically, I think the the earnings goes probably until you’re in your 50s. Okay, yeah, so majority of your line, but you know, it’s kind of like where you are in in your own self, there’s no age associated with it. In other words, you know, when you turn 50, you don’t suddenly go from, you know, earning and growing to a different phase, right? It’s where you are. So you know somebody who wants to retire when they’re 40, yeah, you know, they’ve transitioned into a different phase of their life, when they’re 40. So, so it’s not necessarily you know your age, it’s your where, where you are financially, yeah, and what your goal is as to which phase of the four life cycles that you are in,

Jeremy Thornton
gotcha? Okay? So earning phase, that’s probably going to be the majority of your financial life more than likely,

Ken Moraif
hopefully not, you know, because I’ll tell you something, it is possible and maybe even likely, that you could live more years in your retirement, wow, than the number of years you spent accumulating the money to retire on. Think about it, if you retire, let’s say when you’re 65 and right now, I think with all the advances that we have in technology and healthcare and all the rest of it, it’s not impossible to think that you could live into your 90s. Yeah. So you could be retired 30 years. That’s true. And that could be longer than the number of years where you were actually saving any kind of real money in a real job. So that’s the importance of the other side of the we’re going to get into that, I think, probably right, yeah, in one of these life cycles where you get into the retirement part, yeah, but yeah, that part right there, yeah, you have to think about your money is going to have maybe last longer than the number of years you spent, right, accumulating the money that you’re going to live on.

Jeremy Thornton
Absolutely. Okay, all right. Well, then let’s, move into the second step. Then the second step, I think, is going to be accumulation,

Ken Moraif
yeah, the accumulation phase. So this, this kind of is, is, is the same as your first job, you know, the earnings period. It’s like the second phase, if you will, of the earnings period, right? And so this is where, you know, you can really pin your ears back. You know now you’re getting into your 40s, probably, you know, your income is now higher than it’s ever been. You may be moving into, you know, a management or executive level. And so now you’re seeing your your income level really accelerate. And you know, you should be in your 40s, and you know, maybe even 50, you should be at the highest level of income you’ve ever had, and this is the time when you can pin your ears back and max out on everything you possibly can through work. It’s free money. Yeah, you know, I think I’m pretty good at what I do, but there is nothing I can do that is as good as if you fully fund the plans you can have at work. You know, for example, if you put money into 401, K, the first thing that happens in most cases is it is tax deductible, right? So let’s say you’re in the 28% tax bracket. Well, guess what? The government just gave you 28% return. You put $100 in you got a $28 tax deduction saved you $28 in taxes. Yeah, so you made 28% on the $100 you just put in, and that’s before you even invested it. Yeah, that’s pretty good. It’s pretty good. I can’t do that. Yeah, right. I’d like to, boy, that would be great. But no, that’s just not, you can’t do that. Then the next thing is, hopefully you’ll earn a return on top of that. Okay, and let’s say you earn, I don’t know, let’s go low. Let’s say you earned 4% Yeah, well, you had 28 now you got four. That’s 32% right? And on top of that, let’s say they match, okay, let’s say they match at 4% so I mean, the return on your money going into your 401 K, your retirement plans to work is astronomical. All gotcha, and it was designed to be. So yes, it’s one of the good things that Congress has done. Yeah, is that. So this is the phase when you max out on everything you possibly can. You’re putting as much money away, at a minimum. You should be saving 10% of your gross as I said, Yes, and you should. You probably should be, you know, more aggressive in how you’re allocating and how you’re putting your money aside. So, yeah,

Jeremy Thornton
financial goal for the accumulation phase is we’re accumulating specifically for retirement. So even, would it be pertinent to maybe cut a few things in life? So as you earn more money, people spend what they have. Yeah, right, they do money burning a hole in your pocket, yep. And I think it’s a good mindset to have, if you look at that retirement, hey, this is coming up soon, hopefully. And to say, let’s cut back just a little bit, here and there. Yes, we’re earning, we’re saving, hopefully, that 10% Hey, we’re matching, maybe adding just a little bit more. What can we squeeze out of that wage?

Ken Moraif
Yeah, that’s not grow the exercise that we so the the period where you’re starting to think in terms of being more conservative, in terms of how you know, putting, maybe accelerating, how much you can put in. It’s, you know, Bill Clinton, one of my favorite things he said is, it’s mathematics. You know, it’s, that’s what it is. It’s mathematics. So what you need to do is, you need to sit down and, you know, and we’ve talked about in previous episodes, your magic number, which is the amount of money you need to have to support your lifestyle for the rest of your life once you have retired. Okay, that’s what we call it. And in our view, that’s there’s a whole methodology, which we described in a previous episode. But the thing that you need to know is, what is that magic number? You know? How much money do I need to have, right? And where are you now versus that number, and how many years do you have before you want to retire to get to that number right? And that helps to determine whether or not you know you need to have one less pizza a week, you know, or you’re going to go out you know one less time, or you’re going to go with a three star vacation instead of a five star or whatever decisions you’re going to make. Some people, you know, if they want to hit that magic number on the date that they want, right, need to do that, right? There are other people that don’t, yeah. So there’s no cast in stone. Everybody needs to cut back. Yes. You know, some people, if they just keep doing what they’re doing, they’ll get there, right? So the first thing to do is to figure out you know what your goal is, and then once you know what your goal is, then you work towards it. I’ll tell you a quick thing here. So we’ll do a thought experiment. All right, let’s say that you’re on an airplane and you’re on an airplane and you’re headed from the Sahara Desert to Cairo. Okay, okay. So if you picture the map of North Africa, well the West is the Sahara Desert, and you go to the right to get to Cairo, right? So you’re in this airplane, and you’re going across the desert, and the plane crashes. That’s not good. No, it’s not good. So what you crashed in the middle of Sahara Desert. So what’s the first thing you need to do after you’ve made sure that everybody’s okay and you know you’re taking care of the wounded and whatever else, now, what’s the first thing you need to do? Remember your goal is to get to Cairo, right? So the first thing you need to do is you need to figure out where you are. Yes, yeah, okay. Because if you think that you are directly east of Cairo, when you’re actually south of Cairo, right? And you start heading directly east, or you’re, I’m sorry, you’re west of Cairo, yes. And you think you’re just a straight line eastward, and you’ll hit Cairo, but you’re south of that, you’ll never get there, right? So the first step is to figure out, okay, where are we? And then how do we now get to Cairo? So when you’re talking about your magic number, that’s your Cairo, right? Right. Now you’re in the desert, right? And so the first step is to figure out where are you now, right? Okay, and so what resources do you have? How are you invested? How much money do you have, and how much do you need to have when you get to that magic number? And what’s the disparity between the two? Yeah. And so that’s where you get into the planning that tells you whether you need to cut back on things or not. And, you know, it also brings up maybe you don’t want to cut back on anything, yeah, well, in that case, then maybe you push out your magic number, you know, a year or two or three or whatever, and you keep working because you like what you’re doing and you don’t want to

Jeremy Thornton
cut back. Sure, absolutely. Yeah, aggressive. I think most people look at the accumulation phase, especially having that goal in mind. Knowing where you’re at is great. And then it’s be aggressive in that growth. Um. To be aggressive in growing the safe haven of your investments, or your whatever you’re investing in. How do you kind of protect that, though, if we’re just growing and just dumping as much money as we can in there? Yeah, is there any way to really safeguard that at all,

Ken Moraif
yeah, Safeguard is a strong word, because in investing, there’s no absolutes, you know, there’s always like we do our best to mitigate and to, you know, to address something and give us the highest probability based on our research to get there. Yes, now that I said all because my compliance people are watching,

Jeremy Thornton
yeah? Asterix, yeah, yes, yeah.

Ken Moraif
But you know, so now we’re transitioning in this life cycle that we’re talking about. So you have the accumulation phase, right? But there’s a point that you get to where you’re within five years of your retirement. Okay? So once you get to that point, in our view, your your your way of thinking needs to change. Yes, it’s a different paradigm now, right? Because now you’re going into the the phase where, during these next five years, if something really bad happens to my investments, ie, I lose a ton of money, then your date that you wanted to retire probably will not be the case anymore. Yeah, you know, if you if your magic number was, I’ll say my favorite number, right, a million dollars, and you are cruising, and you’re getting into your you’re within five years, and you’re at 750 and you’re going to get to that million and boom, we’re going to get the magic number right. But then the next year, four years away, you lose half of it in a big, bad bear market. Well, now you’re down to 375,000 and so now you got to still get to that million to retire. You got problems. Now it’s very much. It’s so difficult to do that. So now what you’re going to have to do, maybe, is postpone your retirement and keep working. So those are things that we don’t want to have happen to people. So because of that, we think you should have a strategy to protect your principal from big, bad bears. You know, is spent and bear markets are drops of more than 20% you know, of your investments, you’re welcome. It’s

Jeremy Thornton
like there’s a lot of animals involved here. I don’t know how many bears I’ve seen in Texas, but

Ken Moraif
so, so, yeah, so, so having a strategy to protect during those five years, and certainly after that, the first five years of your retirement, but even beyond, we think, is paramount. So once you get into that, the second part or the last part of your the accumulation phase, you know you’ve been you’ve been putting money in. You’ve been aggressive. You’ve been maxing out on everything. You’ve built all this stuff, and now you need to protect that so that you can retire. You don’t want a big, bad financial storm, you know, to, you know, demolish your plans at the last second. Now, on our firm, because we specialize in retirement planning, that’s what, we have a very specific strategy that we use, and we call it invest and protect, right? And the strategy told us to sell in November of 2007 before the stock market crash of 2008 told us to stay out for all of 2008 and didn’t tell us to buy until June of 2009 so a year and a half almost, we were out of the stock market. The clients who followed our advice were and so we didn’t lose any money in a market that went down 57% right to trough. So it’s very important to protect against that, in our view. Yeah. And if you don’t have a strategy for that, then that last five years could, could be very unpleasant for you,

Jeremy Thornton
yeah, yeah, yeah. And that’s, that’s a great point. You accumulate all of this, and you’re being so aggressive, and then that really, that shift in your philosophy needs to change over to protection, right? You need to protect what you’ve earned and kind of shield it as much as you can. And I think that’s that is a very different kind of way of thinking even, you know, going back to childhood, you’re earning, you know, everything is just buy and hold,

Ken Moraif
yeah, yeah, keep it in. Keep going buy and hold through thick and thin, yeah. And you were rewarded for that when you’re younger, absolutely no. And it’s because while you’re younger, you know, you’re putting money in. And there’s this thing called dollar cost averaging, which means that as you put money in, you know when, when the investment, the price per share, whatever investment you’re putting in, goes down, and you’re putting money in regularly, you’re buying at that lower share price, so you’re getting more shares, right? And then when it comes back up, you’re back to where you were, but you’re buying. So over time, dollar cost averaging can help you, you know, to do well with your investing. The problem, though, is that that once you do retire, you know, we’re getting into the protection phase here. What happens now is you’re doing reverse dollar cost average, yes, because now you’re going to be taking money out, yes, to live on, right? And so if. Taking money out to live on, then what happens is, if the share price goes down, you have to sell more shares to get the same dollar that you need. And that’s a bad combination of spending money taking out more shares while it’s going down in value. And these bear markets can last. You know, the one in y, 2k lasted about two and a half years, right? 2008 lasted a year and a half almost. Some of them are shorter, some are longer, but they last a good, a good deal of time. And if you’re taking money out during that phase, you know you’re basically sinking your own ship. Is what you’re doing,

Jeremy Thornton
right? Okay, so we’re protecting it. We know of these downturns in market. They’re, on average, happening every how many years.

Ken Moraif
So Ned Davis research, which studies investor behavior, and, you know, investments etc, says that there’s there every 100 the last 100 years have been 33 bear markets. Wow. So there’s a net one about every three

Jeremy Thornton
years. Okay, okay, so more than likely it’s gonna happen again.

Ken Moraif
Well, yeah. I mean, if I were to ask you, Jeromy, between now and the rest of your life, yeah, what do you think the odds are we’re gonna have another bear market? 100% 100% Yeah. So if there’s 100% chance that there’s going to be a really bad financial storm that’s that potentially could be devastating to your retirement, to your planning, to your your portfolio. You know, doesn’t it make sense to have a strategy to address

Jeremy Thornton
that? Okay, so what? What should I do? What steps should I take?

Ken Moraif
Yeah, so once you get into that, that last five years right now you’re in, you’re starting to transition into the protection mode. Once you’ve retired, you’re in that protection mode. Yes, and I don’t want anybody to misunderstand, growth is important, but protection of principle is even more important when you get into that stage, right? Okay, so we haven’t abandoned the idea that we want to grow your money, because there is such a thing as inflation. Yes, there is such a thing as you’re going to be taking money out to live on, right? So we have to make sure that we’re growing enough to compensate for those things, right? But at the same time, we have to also understand, in our view, that protecting that nest egg is more important than all of that. You know, you have to, you have to understand that this is going to be the engine of your income for the rest of your life, along with Social Security. And so if you want that to be providing for you, you have to protect it. Yeah, yeah. And that seems eminently logical to me, right?

Jeremy Thornton
And asking, asking those questions and making sure that you have that right philosophy in that mind change, that mindset change is super important. And I think having an advisor or somebody that is taking care of your money knows that as well.

Ken Moraif
Yeah, our philosophy is not I would call, I would say that our philosophy of growth is important, but protection of principle is where we basically step into the game, if you will, is when people finally get to that point where they say, Okay, I’m going to be retiring with the next five years, yeah. Or they’re already retired, yes, okay, so, and particularly the first five years of retirement. So when people get into that decade, that’s where we step in, that’s that’s the part of your financial life cycle that we specialize in. That’s what we do. And so during that period, you know, I think it’s very important that you understand all the different strategies, such as protection of principal, such as, how do you structure your income once you’re retired? Because that’s going to have income tax consequences, when and how to take Social Security, you know, all the things that now are going to be coming your way, how to sign up for Medicare? Yeah, you know, Medicare is hilarious. It’s so complicated. You know, I’m amazed that millions and millions of people are on Medicare. But if you go through the process, anybody who’s gone through the steps, you know, on their website to sign up for Medicare, if you’ve gone through it like in one sitting, wow, you’re super human, you know, because it’s like, you know, man, I don’t even know how to answer that question. I got to stop here and go get something or whatever. So walking through that, so there’s a lot of stuff now that’s new and all that. So once you get into that fourth phase, which is the protection and decision making as to how to make your money last as long as you do right now, you’re in a different paradigm. Yeah.

Jeremy Thornton
Okay, so we’ve earned, we’ve accumulated. We’ve invested as much as we can to set us up for the rest of our lives, which could statistically speaking, be as long or longer than our earning and accumulation phase good for retirement. We then move into the shift into, okay, we’ve got to protect this, because this is what we’re going to live off of. What happens after that protection our fourth phase is legacy, right? And that’s. You know, that’s something that everyone thinks about, is like, what am I going to leave behind? Yeah? Am I going to do,

Ken Moraif
yeah, yeah. And, you know what we jokingly say, right? And I have to say jokingly, because, you know, on my radio show, money matters with Ken Moray, which I did for since 1995 for for many years, over multiple stations, I made the joke about this, and I inevitably somebody would get mad at me for saying it. Yeah, so this is a joke. Okay, I’m kidding. But we call retirement planning, you know, the art of giving to your greedy, unwashed, undeserving heirs, the fruits of your labor. And somebody always, like my heirs are not greedy, oh, so therefore they’re unwashed, right? Yeah, yeah, they’re still unwashed, yeah, they still need a shower, yeah? But they’re not greedy, so I’m kidding, but I think we all know what I’m talking about. And I actually may not be kidding,

Jeremy Thornton
yeah, you’re right, yeah, yeah, demanding, demanding on airs, right? Yeah.

Ken Moraif
So, so the art of passing on to your greedy, unwashed, undeserving heirs, the fruits of your labor, you know, is, is very different, depending on you know where you are in your life cycle, also, right? You know, I mean, when you have young kids at home, that’s far different than you know if you’re in your 70s or your 80s, or even if you’re in your 60s, and you’re starting to plan for when you are in your 80s or 90s, and you’re going to pass away, right? You know, you start thinking about things like, how do I help my spouse? You know, if you’re the the CFO of the family, if you’re the one that handles all the finances, you know, at that point, what happens if you’re the first one to go, Yeah, you know, how does your spouse How? How is he or she taken care of, you know? And there are some very specific estate planning things you can do for that, you know, you may want to set up different kinds of vehicles to leave the inheritance to your kids or your grandchildren in such a way that you protect them from themselves. Yeah, you know, it’s not unusual for kids to be, you know, you’re worried that if they inherit money, the first thing they’re going to go do is buy a Ferrari or something, you know, and blow it all. So you don’t want them to do that. Maybe they’re not good with money, and so you want to build in some protections for that, you know. Or maybe they have special needs, you know, we have clients whose whose children or grandchildren are incapable of managing the money for themselves, and they’re going to need somebody to help them with that. So you know, as you get older, the way that you do your estate planning is far different than when you were younger, because you’re exposed to more stuff, like kids who need help, like a spouse that may not be the financial person, plus tax laws change. Estate planning, you know, is a moving target, so there’s a lot that goes into that. But once you get into that fourth stage and you’re planning for, you know, after you’re gone, it’s an act of love, you know, you don’t need to do that,

Jeremy Thornton
right, correct? Yeah, I get you can just have all the money in a bank account, pass away, and then good luck

Ken Moraif
everybody. Exactly I have. And, you know, it’s your money, sure, and I’m not judging Sure, right, so, but I do have, we do have clients to say, you know, my work here is done. You know, I raised them. They’re out. If there’s no money left when I’m done, so be it. And you know what, I don’t care. I don’t want to take the time to plan any of this. And I tell them, you know, if you don’t plan then the IRS is going to be potentially your biggest heir. Yeah, you know, do you want that? And I’ve had people say, You know what, I don’t care. Yeah, you know, I’ve done my job. If they inherit even half of what I got. It’s more than I had when I started, right? So, you know what? So wherever you’re on the spectrum, right, of that, you know, from I don’t care, to we actually have clients who are way on the other end, okay, they actually want to reduce their lifestyle so as to leave a larger inheritance for their kids and their grandchildren, right? So, you know, and there’s nothing wrong with that either. It’s just what you want. Yeah, and what you want will determine how we plan that. But if you think about as you go through your life, you know, particularly those of you who are in that retirement age, you know you’ll sit you’ll I think you’ll understand what I’m saying when I say that, how you plan for you know, after you’re gone is different now than when it was when you were 4030, you know, and a little kid

Jeremy Thornton
absolutely know where you are and know where your goal is. And I think, I think that’s the a lot of times difficult for people to even know where they are. It’s like, okay, well, I don’t know, star charts, the Sahara Desert example, right? How do you figure out where you are? Your phone probably isn’t gonna work.

Ken Moraif
Why not? I don’t think so. I got a point there. Yeah.

Jeremy Thornton
So. So either you you know stars, or you really. Hope an astronomer. Is there

Ken Moraif
way to punch a hole in my story? Nobody thought of that.

Jeremy Thornton
So you either have an astronomer

Ken Moraif
or a cartographer or a pilot who can read the stars without their GPS, right? Yeah, I think there’s a few of those left.

Jeremy Thornton
I don’t know if airplane pilots would do that? Oh, they don’t. I don’t. I don’t think they’re piloting my stars very often in a plane.

Ken Moraif
No, but they should know how to do it. You know, that’s the thing, and that we’re totally off topic here. But if there’s a solar flare that wipes out the GPS, oh, yeah, nobody’s gonna know how to do anything, no. And you know, back 400 years ago, sailors could figure out how to go everywhere just by looking at the stars. Yeah, and I don’t know that there’s anybody that can do that now. I don’t

Jeremy Thornton
think I could get to work without my GPS.

Yeah, you know, in in so having, you know, knowing we are, knowing where you’re going, figuring out where you are, is so important. And so finding someone that can read the stars, Ooh, I like that one. Yeah, I think is paramount in kind of every stage of what you’re doing. You know when you’re earning maybe not as much, as long as you’re putting something aside now, as long as you’re taking steps towards that, but especially during the accumulation, I think having someone, even if you go online and maybe say, watch a podcast or something that can go a long ways to kind of figure out, like, oh, you know, this means something to me. That’s something that I should be thinking about, or I should be doing, and maybe that just is the fuel you need, or that spark you need to take those steps, but that protection, and then the legacy, especially having a stargazer there with you is so important,

Ken Moraif
yeah, and, and also, I think that when knowing which phase you are in, right? You should work with somebody that understands that phase. Yes, you know. So, for example, if somebody came to us and said, You know, I want to know about, you know what government sponsored college programs there are for kids, right? I have no idea. Yes, right? I mean, I could look it up, sure, but it’s not what I do every day. It’s not what I think about all the time. I mean, it’s easy to, you know, go online and find out and then say, Okay, well, here’s your answer, but it’s not something I specialize in. I’ve not done it for a long time. I haven’t been trained in it, and I wouldn’t know what all the nuances are that should be aware of. So depending on the phase of the life, the of your life cycle, you know, I think having somebody help you with that is a good idea, right? You know, even Michael Jordan, who I think is the greatest athlete and maybe and certainly the greatest basketball player that’s ever lived, you know, he had Phil Jackson as his coach, of course, you know, and you know, even somebody as great as Michael Jordan was, he still had somebody, you know, to say, you know, your jumper, you’re leaning a little off to the left, or you’re not taking a good first step, or whatever, little tweaks that help, of course, you know, and at his level, a little tiny change can make a huge difference, absolutely. And so, you know, it’s the same thing with your financial life. You know, as you go through your different cycles, having a financial coach, a financial advisor, and when you get into the last five years before you retire, having a retirement planner, not a financial advisor, a retirement planner, that I think is, is can can go a long way to help towards helping you to achieve your goals. Okay,

Jeremy Thornton
so we have the four phases, earning, accumulation, protection and legacy. Where do most people fail?

Ken Moraif
I think where the potential for failure is largest is where you have the least experience. You know you haven’t ridden the learning curve where it’s new to you and you don’t know what you’re doing, that’s when you’re most prone to make a mistake. Yeah, and so I would say that it is once you get into within five years of your retirement. Because you know, as I’ve said many times, you this is the first time you’ve ever retired likely, right? You’ve never done this before, right? And the rules in this world are so complicated, and they’re so different than what you’ve been doing up until now, right, that you could make a mistake. You know, I’ll use Social Security as an example. I use that because Social Security is incredibly complex. You know, there’s over 9000 combinations of how and when you can take Social Security. And so when you have that kind of complexity, you could make a mistake. And that mistake once made, you know, after a certain period of time, you can’t go back and change it, right? And so now you have to live with you’re. Getting 100 or $200 a month less than you could have gotten, and that is two or $3,000 a year. And hopefully you live 30 years now, we’re talking about $90,000 that you left on the table, right, because you made a mistake way back when, right, in an area that you had no experience with, right? So I would say that probably once you get into retirement planning, you know, it’s a specialized area. I would work with a professional who understands that, that specializes in that, and I would have them help you, and have you consider the parts, the things that could cause you. You know, I don’t know if fail is the right word. Maybe it’s, you know, that you make a mistake. But again, you know, I’m a tennis player, and the way you lose a tennis match is with mistake. I guess most guess most sports, right, right? It’s not how many points you score, it’s how many, how few mistakes you make, absolutely, and that usually wins a lot of stuff, yeah. And so not making mistakes, I think, is very important. So I would say that the cycle, the period of your life that you’re most prone to make a mistake which could cause a fail is that decade, the five years before you retire and the five years after you know that 10 years is probably the most important decade,

Jeremy Thornton
learning how to how to protect what you have, how

Ken Moraif
to grow it, but protect it, and understand that protection is more important than growing it. Yeah,

Jeremy Thornton
and maybe yeah to your point, maybe fail isn’t the right term. Maybe that’s when they’re most vulnerable. Yeah, because you can make a mistake at a job. Let’s, let’s, you know if you get laid off and you lose your job, hopefully you can find another one, so you have that opportunity to still grow and accumulate, whereas when you’re protecting, if you lose a portion of it, or you leave a portion of it on the table, something like that, that really you’re not earning as much, and you’re not accumulating as much, and so that really has detrimental effects for the next however long you’re going to

Ken Moraif
be retired, maybe permanent, yeah? If, yes, yes, yeah, that you may never recover from. So yeah, that’s that’s the most dangerous part of your life cycle, your financial life cycle, because you don’t have a lot of margin for error, in our view. And so making sure that you have proper diversification, you have a strategy to protect your principal, that you understand the impact of income taxes, making sure you’re properly insured, you know, and then your estate planning, the fail on that one would be, if you don’t do it correctly, and you create a family war, for example, you know, it’s amazing to me how people families will Get into a war. Yeah, over money, right? You know, when they’ve loved each other forever, you know, I’ve seen it so many times, yeah, where, you know, Mom and Dad pass, and then the kids go to war with each other. And estate planning, to a great degree, is organizing everything in such a way, explaining to everybody, so that when you do pass, they all understand what happened and why, right? And you’ve created rules. Now. You can’t eliminate everything, of course, you know, but hopefully you can go a long way towards, you know, keeping Family Harmony, which I think, if you’re going to do the estate planning, you love your kids, you love your grandchildren. That’s why you’re doing it, right? And that’s an important part also. But the most important part of all the cycles, I think, is that period that 10 years, five before five after retirement.

Jeremy Thornton
Yeah, so could you go into just briefly, why those that 10 year period is so important, and why that protection in and what are we protecting against? Like, what do you what do we really guarding that money from?

Ken Moraif
Yeah, so there’s a and we probably should do a podcast just on sequential risk that actually, that actually would be an interesting one to show people, you know, charts and why sequential risk is such a dangerous enemy during that decade, sequential risk is basically, when do you take a large loss? Okay? And the assumption behind that is that it’s an inevitability, right? In other words, we’re going to have a bear market, right? There’s, there’s a very, very high likelihood that’s going to happen, right? And so when, when, when it happens, or when is it that it’s most dangerous? Yes, right? Is it early in your retirement, or is it later in your retirement? It’s the sequence of it. So that’s why it’s called sequential risk, and the risk is most dangerous early in your retirement, or within that five years before you retire. Now, without going into the mathematics of it, right? Just think of it, you know, just intuitively you want to retire. And as I was saying, you know, earlier your magic number is a million dollars, and suddenly you take a big loss. You can’t retire now, yeah, right. So now you’ve got that’s, that’s a fail, right? Or if you are retired and you take a big loss, and if it happens within a decade, then the recovery from that is very difficult. If it happens like when you’re 80, then you’ve lived your whole life, all the way up to 80 without it. You know, this is a theoretical world, of course, and so you haven’t run out of money because of it, right, you know? And you’re 80 already, so when you take that big loss is very is a big deal. And that’s where sequential risk comes in. And so that’s why, philosophically, you know, we think that that decade is so crucial to have a strategy to address that absolutely.

Jeremy Thornton
So protecting from large losses is really the name of the game in that protection period and that 10 years being pretty much your your most vulnerable from that kind of of loss. What kind of philosophies or investments, ideals do we have, since that is something that we specialize in? What are our thoughts on that?

Ken Moraif
Well, we have a strategy that we’ve branded as invest and protect, and basically it is a strategy that is designed to help us to essentially, I’ll say, measure the momentum of the market and tell us when the momentum is against us. It’s the old thing when the trend is our friend, and we like to play with our friends. So when the trend is our friend, we want to be invested. But when the trend is no longer our friend, then we don’t want to be and so protecting principle is when the trend is going against you and having a strategy that can address that. And you know, sometimes people accuse us of being, you know, what’s the word I’m looking for? They think that we’re trying to, you know, time the market, you know, market timers. That’s not the case. Basically. Let’s say you’re sitting on a beach and you’re looking at the, you know, at the waves. Well, I can’t tell you which wave is going to hit the beach next, right? So I can’t time which wave and say, Okay, I’m going to be here, versus that. You know, there’s all these waves are coming. So you can’t, you can’t time the waves, but I can tell you if the tide is receding or the tide is coming in, right? So I can see that, right, all right. And so our strategy is designed to see if the tide is receding or if the tide is coming in. And so by doing that, you know it’s not 100% No, no strategy is but the goal is to protect against that downside during those terrible bear markets.

Jeremy Thornton
Absolutely people being vulnerable in that protection phase is just a reminder. Know where you’re at, have somebody that talks to you correctly or knows about that phase the most, and don’t go to a general practitioner for everything,

Ken Moraif
correct. Yeah,

Jeremy Thornton
that’s correct. Awesome. Well, thank you very much. Ken

Ken Moraif
Well, Jeremy, thank you, of course. So thank you for watching. Make sure you subscribe. Click on the button below that says, Subscribe. You don’t want to miss any of our delicious, wonderful content, and we’ll talk soon.