Join hosts Johnathan Rankin and Melissa Rankin as they discuss whether or not you should still invest in a 60/40 portfolio if you are planning for retirement. They will also answer the question, should your home be included in your retirement plan? Plus, will the housing market crash? All that and more on this episode of The Retire Once Show. A Retirement Podcast designed to help you get to retirement and stay retired.
Submit questions to the show at Retire@theoremwm.com
- Johnathan Rankin CRPC® CEPA®, Founder & CEO,
- Melissa Rankin - Wealth Management Advisor
- Theorem Wealth Management, Financial Advisor Dallas Texas
- Retire Once Show - 2022 Retirement Podcast Series
Listen and Subscribe
0:11 - Intro
3:03 - Is the 60/40 portfolio dead?
10:32 - How your house fits in your retirement plan
14:25 - Will there be another market crash?
14:38 - Recap
🎁 [ULTIMATE RETIREMENT TOOL KIT] https://www.theoremwm.com/retirement-toolkit-download
👍 [ HAVE QUESTIONS ABOUT RETIREMENT?] https://www.theoremwm.com/start-here
😁 [REACH OUT ON FACEBOOK] https://www.facebook.com/Theoremwm/
➡️ [CONNECT WITH ME ON LINKEDIN] https://www.linkedin.com/in/johnathan-rankin-crpc%C2%AE-cepa%C2%AE-4a908b4a/
1️⃣[RETIRE ONCE] https://www.theoremwm.com/retire-once-show
Hello, and welcome to the retire wants show. We are finallylive. This is episode one and we are live. We'll actually we're live. You'renot live, but we're, we're live doing it. So, uh, welcome to the retire onceshow. I'm your host, Jonathan Rankin. And I am joined by my lovely host. Hi,I'm Melissa Rankin.
Thank you for joining us. This is a retirement podcast thatis designed for retirement focus investors. Typically over the age of. And ourwhole goal is to help you get to retirement, but not just that, that's not goodenough. We want to help keep you retired and ease your mind about going throughretirement.
Exactly. So this is a conversational format where we'regoing to go through a number of different topics. And, uh, if you haven't hadthe opportunity to listen to our intro show on apple or Spotify on just theaudio portion, uh, feel free to check that out. Video that we're doing for theseries and I'm excited to be here.
I feel like we need a, I feel like we need the rock tointroduce us like you did the Superbowl. Oh yeah. I mean, those arms alone,those things were like as big as my waist, at least, at least. Exactly. So asyou can tell, this is going to be a little bit different than your traditional,uh, retirement podcasts.
You know, my goal as I were Melissa and I were warming upfor this, I told her, I said, we need to leave our NPR voices at home. Hello?Sure. Hello and welcome to the retirement one show. No, that's not what we'redoing. No, fuck. We realize that retirement should be fun. You know, we'vealways said, look, you're retiring.
You're not expecting. So the last thing we want to do istalk to you in a boring manner. We want to have fun while doing this becauseretirement should be fun. And, you know, I think retired, tired to get there.You should enjoy it. Absolutely. In retirement planning, shouldn't bestressful. So our goal is to really help, you know, have fun as we're goingthrough, you know, these, uh, these different topics.
And, you know, we're going to share a lot about who we are,you know, in our family, we've got two kids. Yeah, they are, they are crazy.They're crazy. They are three and four. So we've got our hands full to say theleast, but you'll probably hear about them from time to time as well. That'sright. Our son's name is Harvey.
He is the oldest. He is going to be five in March and ourdaughter, Emmy is her name's Emerson, but we call her. She is three, she'll befour in July. So you'll probably hear a lot about them over time. Uh, just alittle background on myself, you know, I'm the founder and CEO of theoremwealth management.
It's our wealth management firm that, uh, works withinvestors that are focused on retiring. And I've been in the business for about15 years. And, uh, yeah, I'm excited to be here, excited to do this podcast,excited to join my other half on this venture. So welcome. Yes. So you get tosee some marriage dynamics and retirement planning all in one.
So congratulations. This is going to be a good time, but,uh, all right. So where are we? Where are we kicking off episode one? So Ithink something that we need to talk about that, I mean, it, it seems relevantis the 60 40 portfolio. And I know that sounds like a, okay. What, so before weget into what that, I mean, is it still relevant?
What that entails? What is the 60 40 portfolio? So I thinkthat's a great place to start. The 60 40 portfolio has been a, really the standardfor asset allocation for retirement investors. For a long time, there's been alot of studies going back decades that have shown the risk return. Aspect ofstocks to bonds being a proper mix of 60% stocks, 40% bonds gave you the bestrisk adjusted returns.
And so that's why a 60, 40 portfolio was always looked at askind of the standard for how you should invest in retail. Okay. Didn't I readthough, I thought there was, there was, there was an article on the adviserperspectives about how it had just seen its worst, um, showing since March of20, 20. Yeah. A lot of people are saying that, you know, they, they think the60, 40 portfolio is dead.
There's a lot of headlines out there about that. So I thinkthat's, I think that's what the article was talking about. I had a really roughmonth in, uh, So if it's dead, what should we, what should we advise people to,to kind of be considering in place of it? So let's take a step. I don't thinkit's dead. I think it, you know, the way I look at it is that it made you lookat it.
Like the first time Harvey looked at us trying to send us ontimeout. Like when he looked at me, Hey, daddy, you go on time out and you justlooked at him kind of sideways. Like, yeah, no, that's not how it works. That'show the 60 40 portfolio made you look in, you know, in month, like Januarywhere you go.
It's not supposed to do this. I think what's going on isthat, you know, with how high valuations are right now in stocks. And obviouslythey've come down a little bit with this pullback we've seen, but also withinterest rates, you know, at extreme lows and they're starting to rise as youknow, the discussion with the fed about combating inflation is having.
You're seeing pressures on both sides. And I think peopleare looking at the long-term, you know, growth opportunity of the 64 toportfolio. And that's, what's coming into question, you know, for example, eventhe income you're getting on a 60, 40 portfolio is a lot less than what you'vegotten historically.
Now it's, you know, 2% or even less than that. Where in theseventies, eighties and nineties. 5% and above. Yeah. Sorry, I think six or sixand a half. Yeah. So it was, uh, now we're, we're in this pace where, you know,even large companies like BlackRock, you know, are coming out with forecasts ofthe 60, 40 portfolio.
And they're talking about, you know, for the foreseeablefuture, it delivering substandard know returns, even in that four to 5% range.Whereas historically it's been a lot higher than, you know, 4.5. Yeah. I mean,2% doesn't sound ideal to anybody. No, no. And that's just, and that's just theincome you're getting on the portfolio itself.
Not necessarily the growth. So you think for an incomefocused investor, if they've just been, you know, if you retired in the latenineties and you were getting 5% just income yield, that was, you know, I'vemade retirement a lot easier. And now to get that income, it's a lot more.Okay. So with that in mind, what, what should average Joe investor consider?
What are some alternatives, average, Joe or Jane will, uh,you know, we're going to be gender neutral on this podcast. So I, I think the,you know, what we're seeing now are, you know, the new, all the new goldstandard. Starting to add alternative investments into the mix. Things likeprivate equity or hedge funds, or even real estate investment trusts, justalternative investments that you know, are not your traditional stock andbonds.
And in fact, JP Morgan had their guide to alternatives andthey actually talked about 30% of the allocation should go into thatalternative sleeve because that gives you, you know, an uncorrelated asset typicallyto traditional stocks and bonds. Okay. It allows for a higher income yield. Ifyou're looking at real estate investment trusts, there's just a lot ofdifferent benefits to utilizing alternative investments now, as not saying it'sfor everybody, but that's what they're suggesting in their paper.
So with that in mind, what about people who, for example, Iknow a lot of people have their 401ks and they have, um, probably limitedoptions on what they can actually purchase or hold in there. What would you sayfor somebody like that? I think that's going, that is a very big concern movingforward. Is that the limitations and 401ks don't have things like alternatives.
I know some 401k plans out there have six or seven choicesand that's it. And so I think part of that is looking at your planspecifically, figuring out what does it, what exposure, if any, does your planhave to, you know, an alternative asset class, but then also. Doing a financialplan to make sure that alternatives fit what you're looking to do from aninvestment standpoint, do they does an alternative investment portfolio evenfit your retirement strategist?
It makes sense for you exactly. Because if it does, andyou're looking for that, some plans have the ability to do an in-service rolloverand roll money into an IRA where you might be able to get exposed. Yeah,outside of your 401k. So that's a little bit more flexibility than absoluteadministrator might allow or something like that.
Exactly. Now there, there might be more costs than yourtraditional 401k, but getting that exposure and having that, you know, thatoffset some of the costs might be a benefit. So I think that's an option for401k investors, but I do think that there's going to be over time, some sort ofchange to 401k investments where they've got.
Allow for alternative asset classes within those plans. NowI know some of the target date funds that are out there have a small allocationto, you know, some alternatives, but it's, those are few and far between, andit's not as common as what I think we are going to need to see moving. So the,the moral of the story there is to know what you're holding and to see what'sright for you.
So maybe just reevaluate. Yeah. Reevaluate, but make surethat, especially as we're seeing volatility right now, and, you know, I thinklooking at your asset allocation today, because it's probably gotten out ofwhack over the past couple of years, let's just say that, you know, two yearsago you were 60, 40, and the.
It had two years, two great years. And so now you look atyour portfolio and you're taking on 70 or 80% risk and stocks, as opposed tothe 60% that you were initially allocating yourself. So now that you have morerisk in your portfolio and you're seeing more volatility, I think reallyre-evaluating where you allocated today.
Because a lot of 401k investors, it's, I'm going to have aquarterly statement, quarterly statement, or we're just going to set it, forgetit. I'm not going to check it that often. So I think that's part of it. Um, Ialso think making sure you have a very comprehensive retirement plan, we talkabout that a lot and where you're going to hear about that a lot on this showwhere we really believe in financial planning and, you know, putting together avery detailed financial plan.
Putting asset classes in there to forecast. Should you havethat in your portfolio? You know, your investments and your retirement planshould work together. It's not your retirement plan over here and yourinvestment strategy here. You know, we worked together in unison. Exactly. Yourretirement plan should dictate your investment strategy.
Your investment performance shouldn't necessarily dictateyour. Okay. So speaking of your retirement plan, kind of with that in mind,let's shift gears a little bit. Um, we got a lot of questions about, um, shouldyour home be part of your retirement plans since we're talking about kind ofthe holistic picture, if you will, how does that fit in?
Yeah, we've I think we've gotten that question going backsince 2009, especially after the financial crisis and the housing. It is avalid question. I think. To really incorporate the equity that you have in yourhome, especially after the past couple of years where home values have gone updramatically.
And so I think, you know, before you factor that equity intoyour retirement plan, I really think you need to figure out what is your planfor that house? What is your plan? Are you, do you plan to stay in that house?Do you plan to move downsize? You know, what are you really looking to do?Because if you're just looking to stay in that.
And you don't plan on ever selling or downsizing. I don'tthink it's really appropriate to add that into a retirement plan. You can addit into your net worth statement, of course, but to base your entire retirementsuccess on the equity in your home, most people aren't going to necessarily tapinto that.
And when you do it's you, are you taking out a L you'retaking out a loan to do that reverse mortgage or things that used to be popularthat maybe aren't so relevant anymore. Exactly. So you're now you have thisinflated sense of, you know, retirement success. If you add it in there and yousay, well, you know, I bought my home and it was 300,000 when I bought it.
It's now worth 700, I've got $400,000 of equity. That's goingto bump my retirement success up quite a bit. Wait a minute. If you're stayingin the home forever, you're not really tapping into that. And I think by addingin a home to retirement plan that you don't ever plan to move out of, it reallycan create a false sense of retirement success.
So I think, and so on the converse of that, though, if youare planning to downsize or, or something like that or sell it, then you canconsider it in part of your retirement. But if. You're saying stay away fromkind of adding that in. Absolutely. If you're planning on downsizing or justselling it and renting, or, you know, anything, any changes with that propertythen yeah.
You can add that in there. And you know, I think adding andmodeling that in your retirement plan as well, because if you downsize, there'sgoing to be costs associated with the next place. Um, so all of the equity youhave in your home might go towards purchasing another place, even though it'sgood. So you'll have some difference there.
So I think making sure that you especially be true withinterest rates rising. I mean, and that's the thing is that, you know, withinterest rates rising, how many people are willing to get rid of a. Um,mortgage that they've got a two or two and a half percent loan on to go out andget a place that they've got a three or 4% loan on it.
So I think that speaks to, to the housing market in generalright now. I mean, the fact that, that there's such a limited supply, I mean,you were telling me the numbers just the other day, the homes that are actuallyfor sale right now. I think it was like 270 or 271,000, total us total homes,single family homes in the U S right now, which, you know, it makes us, itmakes me think.
I don't think we're ever going to buy another place wherewe're staying, where we're at. So was just going to say, should we just go outand sell our house, but what do we do? No, we're we're. I don't think you'regoing to, you know, people should make a, you know, a big major change justbased on, you know, the equity they have in their home.
I think it really comes down to what is your lifestyle? Whatdo you want to do with that property when you're thinking about adding thatinto your retirement, and that's something you should probably consider at anystage of where you're at, even if you're younger and not necessarily headedright toward retirement in the immediate future, but something that you shoulddefinitely consider as you're going through looking at your other investments.
Well, we'll edit this out obviously. Um, because we didn't,we got to go through the state of the housing market and then will we seeanother crash number? And then it was the Ben Carlson article in the letter.Oh, that's right. We're good. We'll just cut this shit out.
So with that said, you know, I would just say, we're notthat. Is there a lot of conversation about the height? You mentioned that highprices of the market, you know, are we going to where's the housing work today?And you know, the question we always get is are we going to see another crashor something like that?
Okay. So on that same note, something that we think aboutoften you and I talk about, we get questions about, are we going to see anothercrash? Are we on our way? Yeah. With housing values, you know, near all yo atall-time highs and the limits of. That question comes up quite a bit,especially with people who have maybe one, you know, a home and a vacation homeas well.
You know, they've got all this equity and I think the worrythere is, is this going to fall down? Like it did in 2006, 2007, 2008. And youknow, to that, I don't think we're going to see another crash like that. Youknow, I think. I think that really gave people a lot of PTSD going through thatbecause it's always been about, you know, when's the next crash coming, whetherit's in housing or stocks.
And now that, you know, housing values are going up, it'sreminiscent of what we saw in 2006. But I also think that now it's a little bitdifferent and I think there's a lot of reasons to why that is different. So, doyou think it's more stable? I think that prices, you know, I read a quote froma Fannie Mae economist that said, you know, he believes that prices are notgoing to, they're not going to go down, but they're not going to appreciate asfast as they have been.
I think, you know, I know you had pointed me to that BenCarlson article a couple of weeks. Yeah, that it blew my mind. There was anarticle that he wrote where he actually, um, showed a letter that he hadreceived. And I was just dumbfounded because we had actually received a similarletter. It's basically a letter from a realtor that you get directly to yourhome and they say, I have a home buyer.
Who's interested in a property similar to yours. I know thatyour house is not on the market. However, this well qualified buyer isextremely interested. Would you be willing to sell? And if so, at what price. Imean, you get a letter like that, and it's almost like a free ticket, if youwill. I definitely showed it to you.
It was like, w what are we going to do with this? What doesthis mean? What is this? And I told her, we're doing nothing with that, but itwas interesting to see that he had actually referenced something similar tothat. So that seems like a very common, albeit strange. And a legitimatepractice right now of trying to get people to sell well, absolutely because wetalked about how, how low supply is right now.
And that's going to continue to keep prices where they areand kind of avoid that big crash. I think everybody is thinking might happen ora lot of people are thinking might happen because we do have. Uh, low supply.We also have, you know, low rates still comparative two years ago, or even, youknow, I know a lot of our clients talk about mortgage rates in the eighties andthe double digits.
And so they, we also have more demand than we ever have. Youknow, now the millennial demand is really coming in play, you know, as we see.Yeah, everybody's heard about it. The millennial generation takes a littlelonger to do things. You know, whether kids get married and finished school,the amount of clients that I've talked to over the years that talk about theirboomerang child, you know, that graduates from college comes for a ride backhome.
And so now you think about it took them, all those peoplewho are living with their parents, essentially the boomerang children are nowout looking for. Yeah, now it will. Now they've probably had more time to, theyhad time to stay at home, save money. They were working on getting theircareer, establishing their career.
And now that they're probably in their late twenties, earlythirties, they're starting to enter into that housing market. So you've gotlimited supply, uh, and we're not building as fast as we were because of allthe supply, you know, the supply chain constraints with COVID. So we're notbuilding as fast as we were.
We've got qualified buyers much more qualified. I wouldthink. I mean, they're, they're hanging out at home in their parents' basement,saving money, building. Good credit. You would hope well, after, after 2008, Imean, financial institutions, they are very stringent on. Who's getting a loanout as you're not going to find someone that's, you know, making $50,000,that's going to have three or four homes like you saw back in 2006.
Right. They are just not giving homes away. Like they didthen. You've got all these different forces that are pushing that price rangeto stay kind of stable. And I don't know how long that's going to last, but Idon't see the oversupply like we did. And I don't see the over leveraged likewe did in 2006, 2007.
So I do think that we're going to see prices continue tostay elevated, where they are. They'll probably continue to slowly go up andappreciate, but I don't see this major correction coming or a major crash likewe saw in 2000. Okay. So we're not expecting anything like that. So again,don't rush out and sell your home for no reason.
No, you and, and Mel, you are not going to convince me tosell her home. I don't care again, when we saw that letter, I was, I was prettyimpressed. I was like, well, I think they're asking us what we want for it. Forcontext. Uh, we have 103 year old home that has this challenges. I call itcharm. She calls it challenges.
I think that it's, it's what you get an older home for, youknow, the creeks and the doors that, you know, sometimes open sometimes they'restuck closed because the house at the time it was built will say that that istrue. It was built in 1920. So, uh, older home and, you know, it's a. I, well,you're not going to get me to sell it just yet.
If you don't, maybe when the letter, I guess not exactlyeven where the letter. So on that note, uh, this is, you know, I think we'recoming to a close here just to kind of recap everything. I don't think the 6040 portfolio is dead to you. No, no, but I do think it makes you give it thatlittle, uh, oh look, we evaluate, I think you should take a look at your 401k,your portfolio, anything, and just kind of see where you're at.
I think that's the big takeaway on that is. No, what you'reholding and then for housing, what are we thinking there for housing? I guesswe're not selling our home and I don't think that we're going to see this majorcrash in the housing market. So. When it comes to adding that home into yourretirement plan, though, I think it's really dependent on what your specificintentions are with that property.
And does it make sense to add it in there or not? If youhaven't built out a comprehensive retirement plan, we'd be happy to help youwith that. Absolutely. We're going to link to everything we talked about todayin the description below. If you're watching this on YouTube or in the shownotes on apple or Spotify, you can head to retire once show.com.
And that'll link to everything as well. Uh, we can also, youcan also schedule some time for us to help you put together that retirementplan, but most importantly, what do we want them to do? Subscribe, subscribe. Imean, you know, subscribe to YouTube, Spotify, apple, wherever you are.Subscribe, you know, I saw that the, uh, the Superbowl had 112 million viewers.
So we're looking to surpass that. And so for the 113 millionviewers, uh, lastly, if you, if any view out there happened to know the super.Can you please direct her to our site because we actually need to talk to herabout, you know, we need her help on a, on a three and four year old sleepregression there.
So, uh, for the 113 million people listening to this,hopefully, uh, at least that many, uh, do us favor, hit the subscribe button onYouTube, Spotify, or apple podcasts, head to retire once show.com and get us intouch with the Supernanny. Uh, I'm Jonathan Rankin and Rankin. Thank you for joining us.
Registered Representative of Sanctuary Securities Inc. and Investment Advisor Representative of Sanctuary Advisors, LLC.– Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC. – Advisory services offered through Sanctuary Advisors, LLC., an SEC Registered Investment Advisor. – Theorem Wealth Management is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC. This communication has not been reviewed for completeness or accuracy, does not necessarily reflect the views of Sanctuary Securities, Inc. or Sanctuary Advisors, LLC., and is not a recommendation or endorsement of any product, service, or issuer. Third party posts do not reflect the views of Theorem Wealth Management or Sanctuary Securities, Inc. or Sanctuary Advisors, LLC., and have not been reviewed for completeness and accuracy. All further communications from this representative must be sent from and received by email@example.com. For additional information, please refer to one of the following consumer websites: www.FINRA.org, www.SIPC.org.
We’re here to help. Get in touch to request your personalized wealth strategy without cost or obligation.