Ep. 246 – Don’t Gamble Your Retirement

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In this Episode of the Secure Your Retirement Podcast, Radon and Murs discuss why you shouldn’t gamble with your retirement. They compare how gambling in Vegas and retirement investing co-relates and why having an expert help you with your retirement strategy is important.

Listen in to learn about the risk and reward concept in retirement investing and how your age and life experiences will impact it. You will also learn how to avoid uncertainty and unpredictability with an investment strategy and the importance of a good long-term strategy and a diversified investment portfolio.

In this episode, find out:

• The risk and reward concept in retirement investing and how it changes as we age and through life experiences.
• How to avoid uncertainty and unpredictability with your retirement investment strategy.
• Instant gratification vs. having a good long-term strategy when investing for retirement.
• How having a diversified investment portfolio with a good risk management team allows you to avoid making emotional decisions.
• Understanding the psychological aspect of making/investing money to make better outcomes.
• The importance of having an experienced expert to help you with your retirement strategy.

Tweetable Quotes:

• “We’re helping clients layout and understand the rules of retirement, so their money lasts as long as they do.”– Radon Stancil

“Having a longer-term sound strategy rather than trying to chase a return every single day or year over year makes a lot of sense.”– Murs Tariq

Resources:

If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!

To access the course, simply visit POMWealth.net/podcast.

Here’s the full transcript:

Radon Stancil:	Welcome to Secure Your Retirement podcast. Today is a little bit of a different kind of episode that we wanted to talk to you about, and the reason why it’s a little different is Murs and I are at a conference in Las Vegas. Now, many people come to Las Vegas to gamble and they sit down. Last night we were down in the casino area and you see all these people and they’re doing all these different things trying to gamble. And for the most part, people gamble money that they can afford to lose. You do have folks that have addictions or problems with gambling, and they will even risk things that they should not risk because of that.
	But we thought it would be a little bit of a play on Las Vegas since we’re here and talk a little bit about maybe our retirement plan and our investing, particularly in retirement and how that correlates to this actual topic, investing of gambling. So Murs, you want to take the first one here that we were going to talk about?
Murs Tariq:	Yeah, yeah. And I think the idea of gambling in Vegas. So for anyone listening, I am not a good gambler. I will play poker with friends and that’s just for fun. But when I’m in a place like Vegas, I come to it with something in mind that I’m okay with giving up X amount of dollars. And so last night I went and just for fun, played on the blackjack tables and I said, “I’ve got 100 bucks and that’s all I’ve got to spend on gambling in Vegas,” because I just don’t like gambling. It’s something that I’m not good at. I don’t understand the games, I haven’t taken the time to get good at those things, but it’s something that I want to experience every now and then. So I did it and within 10 minutes, I lost my 100 bucks.
Radon Stancil:	Well, that’s what I was going to ask you. I was going to ask you, did you lose it or not? And man, you went through it in 10 minutes.
Murs Tariq:	I went through it pretty quickly. I can understand the addiction piece of it because for a moment there I was up and I was doing pretty good, and I think that correlates a lot to the stock market as well, where we got to have a bit of this… Conversations that we have with clients is all around risk and reward. And I think internally, we need to start understanding that as well, especially as we transition closer to retirement. Because like take me, I’m 36 and I’ve got I would say a pretty decent risk tolerance because I’m younger. I’ve got a lot of years ahead of me as far as my earning capacity, my ability to save. And so I’m okay rolling the dice here and there on certain investments or certain types of things. But as we get older and not necessarily the age aspect of it, but the aspect of the ability to earn and save starts to dwindle as we get older. That’s when we start to say, “Okay. Well, we’re getting closer to this figment of imagination of retirement that’s been in our eyes for so long.
	And now here we are, maybe five, 10 years away and we’re getting closer and closer to this thing that’s been built up so nicely in our minds of the perfect retirement.” And naturally, I think we start to adjust. So risk and reward I think is a big thing that we have to start understanding. And I think it changes over time through age, but also through life experiences. So take someone that could be… We have some clients that are in their 80s and they could be considered a rather aggressive investor. And if I ask them about their history or where they came from, a lot of times that person is a business owner.
	And then you can also have someone that’s in their 50s that is a very, very conservative investor, that doesn’t want anything to do with the stock market. And when you ask about their life experiences in their history, a lot of times the story is, “I got burned way too often by one or two different stocks or a 2008 cycle. I just don’t want to deal with it again.” So I think having that conversation and understanding what’s my risk and what is my potential reward and what am I comfortable with? Because when we’re investing, particularly in the stock market, in order to earn, there is a chance of loss. And so getting down into the nitty-gritty of what is that potential for loss? What are we willing, what are we comfortable with? And at the end of the day, what is going to provide someone peace of mind as they go into retirement? That’s how we start to talk about developing these risk managed investment strategies for our clients.
	So risk and rewards is a huge piece. And just like Vegas, it can be a lot of fun, but also there can be times where it’s not so fun.
Radon Stancil:	All right. We’re going to look at the second one here, which we’re going to basically is uncertainty. Now, when you come to Vegas, if you do what Murs did last night, he probably sat down thinking, “I am going to win,” but he was still uncertain. He probably doesn’t know how to play the game very well, doesn’t know exactly how he should go about the whole process. Well, that’s a thing that happens with folks and what their concerns are with retirement. They’re uncertain. They’ve never lived through retirement before. We only do it once. Most people, they retire and now they’re saying, “Well, how am I going to pay the bills? Where am I going to get my income from? How am I going to deal with taxes?”
	And so we feel that you can though with your retirement and your investment strategy have predictability and certainty. You’ll hear some people, maybe even in gambling, and they’ll say, “If you know how to play, you can actually beat the house.” And we’ll watch people sometimes who will gamble, and they are pretty good at it because they understand a certain set of rules around that. And we do the same thing. In our retirement planning firm, we’re helping clients lay out and understand the rules of retirement so that their money doesn’t run out before they are not here anymore. Their money lasts as long as they do.
	And then also, we also make even things like taxes and investment more certain because there’s a plan in place. So you don’t have to look at retirement and investing the same way you would the other avenue of gambling and being uncertain.
Murs Tariq:	All right, our next one is instant gratification versus just having a good long-term strategy. And I think the easy way for a lot of people to picture this one, it would be back in 2020 during the pandemic, there was a big uprising of this thing called meme stocks. Bed Bath & Beyond was a big one. There’s a couple of others that… This other term that got really developed is FOMO, which is fear of missing out. And so you would hear every day articles on Market Watch, Yahoo Finance, anywhere that you listen to news, they’re talking about these stocks and how people are just jumping in and riding on the coattails of this market, this particular stock going way, way up. And unfortunately, a lot of those investors got burned at the very end of it because of how the stock was volatile and people started cashing out and a lot of people lost money, and there was a bunch of issues around jumping in on the bandwagon on stocks.
	So what I’m getting at here is there is a lot of fun in making money obviously, and there is that instant gratification of day trading to a degree. What we truly believe in though is having a little bit more of a longer term view when it comes to investing. I think we’ve all heard the story of if you save a couple bucks a month and the power of compounding growth, that long-term strategy works because you’ve got time on your side. And so sticking with that to a degree and coming up with an overall plan, I think a lot of times Radon and I, we talk about the best way to structure retirement when it comes to investments as well as when it comes to an income type of strategy is we look at different buckets of money. Not all the money should be exposed to market volatility.
	So we call it growth and then we call it safety or our income buckets. And having a nice balance of that, to me, that’s a very good long-term strategy. We’ve got some money that’s not going to be making 20% a year. That’s our safety money. That’s our income place where we are going to draw our funds off of. And that’s a reliable place. If it makes 4% or 5%, 6% over the next 10 years or so, it’s doing its job because it comes with certain guarantees. We’re never worried about this money going down if the S&P has a bad year or it’s down 20% or 30%.
	And then on the other side, then when we have that piece in place, our income is covered for the next 10 to 20 years. Now with the rest of the money, we can go say, “Okay, let’s do this Vegas type of investment structure a little bit. Let’s take a little bit of a gamble on the stock market because our major needs for the next 10 to 20 years are covered.” So if the market’s down 20% in a year, it hurts, obviously, but it’s not hurting our actual retirement financial plan because we’ve got things thought out in a longer term structure. Over time, very likely, that growth bucket is going to make some money. But in-between, in certain cycles, are there going to be issues? Absolutely. Volatility is going to be here and it’s here to stay. So having a longer term sound strategy rather than trying to chase a return every single day or year over year in the long run makes a lot of sense in my eyes.
Radon Stancil:	Yeah. I’m going to jump down to our next topic here of diversification, and the reason why it plays on the topic you were just talking about, Murs, is that a good… What they’re going to call it savvy gambler, they say will spread their butts around multiple games or give themselves more odds by not just having one game that they’re going to play. We do the same thing, although we’re not gambling in our assets, we are using what Murs talked about, which is those multi buckets.
	So if you think about this idea, if I have a portfolio that’s invested in the market and it’s diversified across different aspects of the market, with a good risk management team in place where that you can prevent significant loss. And then on the other side you’ve got that bucket that’s going to provide my income, I’m not that worried. I’m going into it with a mentality that if the market’s down a little bit, I’m not bothered by it because I have all my income and safety coming in, I don’t have to stress. I can allow that to come back and not make an emotional reaction to something that we know over time the stock market’s going to go up. Sometimes though, that takes a little bit of time, but we know over time it’s going to go up. And so we don’t have to allow ourselves to get all emotional and sell out before we should.
Murs Tariq:	Yeah. And the next piece here I want to talk about is the psychological aspect of gambling or making money. And like I said earlier, it can be fun, it can be stressful, it can be not fun at all, and there’s periods of time where you’re going to have to deal with that in the stock market. Go back to my night last night on the blackjack table. Like I said, I came to the table knowing exactly the amount of money that I wanted to spend and I came to the table also knowing that if I lose this money, that’s okay, I just have to keep my mind straight that I’m willing to walk away. Sometimes people get stuck and they say, “I lost this and I know I was going to stop there, but what’s another 100 bucks?” And very quickly that psychological aspect can start to compound on you.
	So for me, what was happening yesterday at the blackjack table, I started great and I don’t really know what I’m doing, but I just started great. Part of poker, part of blackjack and gambling in general was just probability and odds. That’s what cards are. And so I started off pretty great. I maybe started to get a little big-headed that, “Hey, I’ve actually figured this out.” And the second I got there is when I started to lose money. And if I didn’t have that plan in place ahead of time, I could have potentially gone down a bad path.
	And so there’s this thing in investing and in the world of what we do called behavioral finance, that sometimes we do make bad decisions just based off of the things that are happening right in that moment. And that’s one of the things we want to avoid. Having a sound strategy in place before that bad thing happens lets you just take a step back and say, “Okay, well, we planned for this, right?” We developed this longer term investment strategy with these different buckets in mind because we knew at some point I was going to lose some money on the blackjack table or I was going to lose some money in the stock market because it’s inevitable.
	Over time, will we make money in the stock market? Yes, very likely, highly likely. That’s just how the history of the stock market has been. But now that we’ve got chips in different buckets, all of a sudden when we do have that tougher year in the stock market, we’re not as worried because we plan for it ahead of time. So going into investing, going into retirement with a plan of action and staying that course, I’m not saying we don’t make tweaks along the way, but staying that course and also taking the time to reevaluate makes your outcomes, I think way, way better. Because again, I could have sat at the table and just kept putting $100 bills in and that would’ve resulted in me losing every single dollar there, as well as some very tough conversations with my wife too. So I went to it with a plan and at the end of the day, I lost the 100 bucks, but I don’t feel bad about it because I knew exactly what I was doing.
Radon Stancil:	So I thought we could just wrap this up by this way. I know that some of these games are extremely complicated as well. If you walk in, there’s some that are simple, but if you’ve never gambled before or you’ve never played some of these games, it is very helpful if you were to utilize somebody who already knows how to play it and then they tell you how to play it. And if they guide you, it really helps you out, your odds in making sure that that works.
	And so in this idea of retirement… And by the way, we are not saying gamble in retirement. What we’re saying is don’t gamble, but also work with somebody who knows what’s going on. You take, for example, whether it’s Murs or myself or our firm, another firm, work with somebody who can tell you how to do something. How do you set up an income plan? How do you set up an investment strategy? How do I deal with taxes? How do I deal with Medicare and long-term care and social security? And by having that help, it just makes everything go so much smoother and it helps you to have peace of mind. You don’t have to worry, you don’t have to stress, and you can just do the things that are more important and that’s spend time with your family, have a good, nice retirement without all those things to think about. Anything else, Murs, before we wrap up?
Murs Tariq:	No, I think that sums it up. I think no one’s going to have the absolute perfect strategy. No one’s going to be able to make you money every single year. But there are advantages to having someone that’s got some experience, that knows how to navigate not just investing, but taxes, income strategies, withdrawal strategies, donation strategies, all these different things that I think are important to retirees, it is helpful to have that person in your pocket, just like you said, right?
	If I was to walk into the blackjack table knowing nothing about the game, very quickly, I’m going to lose my money. But if I have someone in my corner that’s coaching me along the way and helping redirect when there are issues, well, all of a sudden the whole game changes considerably. So it’s just some food for thought there.
Radon Stancil:	All right, if you’ve got any questions and you’d like to talk to us, feel free to go to our website, top right-hand corner, click on, “Schedule call.” Our calendar comes right up. We would love to spend some time with you, answering your questions, getting to know you. If you’re already a client, you got some questions, that’s good to talk to you as well. We hope you have a great week. We’ll talk to you again next Monday.