Author: Larry Tate

Does the financial news media help or hurt investors?

I am of the opinion they mostly hurt investors.

Let’s just take a look at some headlines from 2020 & 2021 and I will also put the value of the S&P 500 Index* next to each one for that day…truth be told I could take headlines from every week going back 30+ years and you would see the same things.

Dow Drops 600 Points on Global Growth Concerns (Wall Street Journal – January 30, 2020) – S&P 500 closed at 3283 points

Stock markets in biggest fall since 2008 (Guardian – March 9th, 2020) – S&P 500 closed at 2746 points

COVID-19 to Plunge Global Economy into Worst Recession since World War II (worldbank.org – June 8th, 2020) – S&P 500 closed at 3232 points

Unemployment Claims Remain Historically High (NYtimes.com – October 8, 2020) – S&P 500 closed at 3446 points

Stocks Drop as Dow Has Its Worst Week and Month Since March (WSJ.com October 30th, 2020) – S&P 500 closed at 3269 points

Stocks Drop as Wall Street’s Unease Stretches to a Fourth Day (nytimes.com – June 18th, 2021) – S&P 500 closed at 4166 points

Charts Spooking Wall Street (Bloomberg – October 29, 2021) – S&P 500 closed at 4605 points

Wall Street rocked by new COVID variant fears, Dow plunges over 900 points (news.yahoo.com – November 26, 2021) – S&P 500 closed at 4594 points

And where are we now as of 4/12/2022 –  S&P 500 closed at 4392 points

So, from the start of 2020 to the day I am writing this the S&P 500 index is up 34.85% – not counting dividends.  But what did the media try and do every step of the way – Scare the you know what out of you.  Did the market go up and down since the beginning of 2020?  Sure.  Is that abnormal?  Absolutely not!  It is completely normal.  The outbreak of COVID was a massive fear for most human beings, and rocked the whole world. But, we are working through it to this day, and the world is finding its new normal.

The real question I am trying to get people thinking about is: why does the media do this, day in and day out?  Are they bad people?  No.  But they are people and they are in business to make a profit.  Nothing wrong with that, but just remember what is going on when you watch or read the news.  They know BOLD statements get a lot more eyeballs than “the market is up (a lot) today or down (a lot) today or didn’t move too much today and this is perfectly normal and to be expected so don’t worry and get back to your lives”.  They can’t say that.  If they did, who would tune in day after day or buy their magazine, newspaper or investor report.  And if nobody was watching, reading or buying then they couldn’t sell advertising which is typically their main source of revenue.

Again, they aren’t bad people.  They are just trying to get as many people watching or reading so they can sell more advertisements and make more money and boost their ratings and on and on it goes.  They are not there to give investment advice and make sure you reach your financial goals.  They are not there to guide you on saving for your kids or grandkids college.  They are not there to make sure you can retire someday.  They are there to sell advertising and keep eyeballs attached to their stuff – to sell more advertising at higher and higher prices.  Again, nothing wrong with that.  Just be forewarned that the headlines and “experts” they bring on are there for ratings, first and foremost.  And scary predictions sell more than the simple truth.

The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. Please note an investor cannot invest directly in an index.

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results.  This information should not be relied upon by the reader as research or investment advice regarding any funds or stocks in particular, nor should it be construed as a recommendation to purchase or sell a security.  Past performance is no guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested. 
4673223/DOFU 5-2022

Retirement Plan vs. Retirement Income Plan

One of the questions I am asked the most lately is “what is the difference between a retirement plan and a retirement income plan?”

In my practice, I define “retirement plan” as a strategy to accumulate the wealth needed to retire at a certain age, with a defined income goal.  I work with people to identify their projected budget at retirement, how much they need to start saving today, where they should be saving those dollars and then recommend the investments vehicles that could work with those saved dollars.

Often times, the dollars don’t match their goals.  By that I mean, they have lofty ambitions and either don’t have the money they will need to set aside each month to realistically achieve that goal or they have the money but they don’t want to stop spending today to free up that money for saving and investing.  So we work through more realistic scenarios to find a happy medium.  Once a plan of action is decided on, then we work through where and how to invest the savable dollars they are willing to commit to their retirement plan.  For this work I charge a fee of $600.

When someone is close to or at retirement, then we start talking retirement income plan.  I define “retirement income plan” as a strategy to turn one’s lifetime of savings into income that is meant to last their lifetime.  In fact, I wrote a guide with virtually the same title – see the right margin of this site for how to get a FREE, no obligation, electronic copy of that guide.  So now we are using a different set of tools and strategies to not just focus on growing ones assets, but preserving them and making sure one doesn’t run out of money.  This requires a specialized skill set which I have studied and honed for over 20 years.

After spending about 25 minutes or so with someone on the phone, we can usually determine if a retirement income plan is a good fit at that time.  If it is, I get started crunching numbers to see what they can realistically spend in retirement.  Determine if there are any income gaps.  Educate them on strategies to increase their retirement readiness.  Work to find out which Social Security claiming strategy would be a good fit for them.  Provide advice if retirement is not in the cards at their desired stage based on their goals and spending habits.  That entails solving for how much more they need to save, how much longer they may need to work or show them how much they can afford to spend from their assets and let them decide if they can make it work if they truly want to retire right away.  For this work I charge a fee of $600.

I wish I could say that every person that comes to me is ready to retire right away and start enjoying their Golden Years.  Thankfully, many come in before they quit their job or make other irrevocable decisions with things like a pension plan.  Sadly, some come in after they are done working and ask how I can make a small sum of money provide a large income and do it for 30 years.

There are many other things that go into setting up a retirement income plan – such as cash flow, debt management, how the estate should be handled should they pass away, how will very large bills like assisted living, in-home or nursing home care be handled, etc. But in summary, I break the retirement income plan into 3 parts. An income plan, a tax plan* and an investment plan.

So there you have it.  Hopefully now you know the difference between a retirement plan and a retirement income plan – at least as how I define them.

All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Bank certificate of deposits are insured by an agency of the Federal government and offer a fixed rate of return whereas both the principal and yield of investment securities will fluctuate with changes in market conditions.

Separate from the financial plan and our role as financial planner, we may recommend the purchase of specific investment or insurance products or accounts.  These product recommendations are not part of the financial plan and you are under no obligation to follow them. 4673223/DOFU 5-2022

Is Stock Market Volatility a Bad Thing or a Good Thing?

Is Stock Market Volatility a Bad Thing or a Good Thing?

Spoiler alert – it’s a good thing.  There, I just saved you a few minutes of reading. : )

For the A students, let me elaborate.  Volatility is one of the key drivers of the historical higher returns of stocks.  People have to be rewarded for the bumpier ride that stocks usually take over say bonds or savings vehicles from the bank, like Certificates of Deposit (CD’s).  If it was always a smooth ride then there would be no need for the reward – historically higher returns – in stocks.  Everybody would want them if it was just a smooth ride up…but since it’s not a smooth ride the returns have historically been a lot higher than bonds and CD’s to reward investors for the volatility they had to endure.

Key point: volatility is in no way synonymous with risk.  Risk is when you could lose all your money, volatility is just the short-term fluctuations of an assets price.  You may be mistaking normal equity volatility for loss, which it isn’t, unless you sell in fear during a down market.  Obviously, one must consider their risk tolerance, and ability to handle these types of fluctuations in their investments.

Let’s look at history to show this – I will reference the S&P 500 index as my proxy for “the market”.

There have been thirteen bear markets with an average decline of 30% since the end of World War II[1].  The first one started on May 29, 1946.  That day, the S&P Index closed at 19.5.  Today, thirteen “ends-of-the-world” or bear markets later, the index value is 2813 – the day of my writing this.  Stocks are up nearly 144 times over those seven decades and guess what? Earnings are up nearly 144 times over that same time frame.

(To see a Fact Sheet on the S&P 500 index, put out by Standard and Poor’s, follow this link: http://www.spindices.com/indices/equity/sp-500 )

That’s a heck of a lot of volatility to endure since 1946.  Yet, if someone just left their money alone in an S&P 500 index fund their portfolio would be up nearly 144 times (gross of any fees and expenses)   So it’s not the volatility that creates a loss for investors, as just illustrated by their investment being up nearly 144 times, it’s their own behavior.  Selling is how a real loss is created, not riding out the volatility.

One more historical point.  The average intra-year decline since 1946 has been 13.8%[2].  There has been a 15%-20% decline on an average of one year in three.  The last one occurred in 2011 and was 19.2%.

Takeaway, markets are cyclical.  And those of us that BUY during corrections vs. sell, generally speaking, reap the rewards of volatility.  Because without that volatility, the returns wouldn’t have been as great.

So that is why volatility is a good thing and should be embraced if you are investing for the long term.  After all, it is one of the reasons for the historically higher returns.

[1]http://www.griequity.com/resources/InvestmentIndustry/Techdata/vanguard130yrsreturns.html

[2] https://am.jpmorgan.com/us/en/asset-management/gim/adv/insights/guide-to-the-markets/viewer   (Page 13)

Please Note: Links on this website are being provided strictly as a courtesy. When you link to any of the websites provided here, you are leaving this website. We make no representation as to the completeness or accuracy of information provided at these websites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, websites, information or programs made available through this website. When you access one of these websites, you are leaving our website and assume total responsibility and risk for your use of the websites to which you are linking.

The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. Please note an investor cannot invest directly in an index.

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results.  This information should not be relied upon by the reader as research or investment advice regarding any funds or stocks in particular, nor should it be construed as a recommendation to purchase or sell a security.  Past performance is no guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested.

4673223/DOFU 5-2022

The 3 Keys to Successful Retirement Preparation

The very first question you need to ask yourself when you decide to retire is, “What will it cost to continue to live the lifestyle I am accustomed to and WANT for the rest of my life?”  That may seem like a difficult question to answer, and it can be if you don’t go about it the right way.

The very first step to answering that question is to lay out your current expenses, including your household budget and any other basic, daily living expenses you have.  Once you have determined your household budget and other daily living expenses, the next important question should be…

“Where is the income going to come from?”

In order to retire safely and stay retired, I believe every retiree needs to consider the following 3 things:

  1. A Source of Income to Cover Expenses

This may seem obvious but you would be surprised at how many families I have worked with who didn’t account for the loss of some social security benefit after one person in the couple passes away.  Or, the reduction in pension income if the person who the pension is tied to passes away.  You will benefit greatly from a financial strategy that aims to create an income stream that you will not outlive no matter what, and one that can support your needs in retirement.  This will take care of the basic expenses that you will encounter in retirement (i.e. house payments, utilities, insurance, etc.)

  1. An Emergency Fund

You will need to determine the right amount of capital needed to account for any unforeseeable emergencies in your future.  The purpose of this surplus money is to be used in the event of an emergency such as medical expenses, natural disaster, car or appliance repairs, etc.

  1. A Strategy for Inflation

This may be the hardest part to prepare for, because inflation happens every single day…and we never know how much it will be year to year.  This can make it difficult to determine the exact amount needed to prepare.  However, this money is set aside to compensate for inflation over the period of your retirement.  It can be beneficial to break down your basic expenses and account for each one that will be affected by inflation.

Once you have identified these things, then comes the next step of putting a strategy together to accomplish everything.  Resources on that topic are throughout this website and also in my book, How to Turn a Lifetime of Savings into Income for Life which you can requested on the right hand side of this site.

As always, if you feel I can be of help on your journey please email or book a 25 minute phone session with me – a link to my online calendar/scheduler is also on the right hand side of this page.  I will do my absolute best to help and if I can’t, I will try and point you in the right direction.

4673223/DOFU 5-2022

Welcome!

Hello there!  Welcome to my website and thank you for stopping by.

I’m Larry Tate, a husband, stepfather, avid traveler and an owner and founding partner of Midwest Wealth Advisors. I’ve been a financial advisor for over 24 years.

I’m glad you’re here and I sincerely hope you are ready to:

  • Invest smarter
  • Make work optional in retirement
  • Strive to reduce your tax bill

Why I Started Midwest Wealth Advisors

Individuals are tired of financial advisors that are not fully focused on investor needs.

My goal is simple: Help educate and empower hardworking people like you and your family to prepare, implement, and manage every phase of your pre- and post-retirement life, helping to ensure your “Golden Years” are just that—Golden.

You didn’t build your retirement nest egg overnight. It took years of committed savings, choosing long-term gain over immediate gratification.

Now, you need attention, service, and guidance to see your strategy through, so you can enjoy every day of the retirement you worked hard for.

Midwest Wealth Advisors is a client-focused firm working with your best interests in mind. We deliver access to sophisticated portfolio management, personal relationships, and wealth management. We are dedicated to improving the lives of our clients both today and through their retirement.

I love my job.

I’m proud of my firm.

There’s a lot of bad advice out there.  And a lot of conflicting advice.

And even when the advice you can find is decent, there’s often too much of it for a retirement saver to sort out on their own.

You shouldn’t waste your time and energy trying to navigate through the best retirement and tax planning moves to make.

You should be able to gain access to proven strategies, in plain English, that help you reduce taxes, invest smarter, and make work optional in retirement.

That’s what I’m all about.

I created this website so you could learn a little bit more about me before we talk on the phone, see each other on Zoom, or meet in person.

Below you will see a few articles I wrote that I feel are always timely, and helpful, in pursuit of achieving your financial goals.

I’m here to teach you proven strategies (in plain English!) that will help you retire on your terms…and Enjoy Your Golden Years!

Thanks!

Lawrence(Larry) Tate