Are you planning for retirement or already retired? Do you want to know why you should be more optimistic about retirement planning now than a year ago? In this video, Johnathan Rankin, the founder and CEO of Theorem Wealth Management, shares with you three reasons why he is optimistic about the future of retirement planning. With over 15 years of experience helping people achieve their retirement goals, Jonathan is confident that these reasons will make you feel better about your retirement plans.

The first reason is that you can finally get some yield. For the past 13 years, the Fed has kept interest rates extremely low, making it extremely difficult for retirees to invest in a low-risk, higher yielding income that also provided flexibility. Now that we are seeing inflation subsiding, being able to reduce risk overall without sacrificing portfolio yield is a huge benefit for people who are planning on retirement. This means that you can now achieve a low-risk yield like you would in a treasury bond or high-quality corporate bond, which can help maintain a more balanced portfolio over time.

The second reason is the bear market in stocks. This might sound counter-intuitive because portfolios are likely down for the year. But if you have a few years until you retire, this gives you the opportunity to take advantage of the stock market. After every correction, people always look back and wish they had done more during those times. Nobody knows what prices will do over the coming years, but at some point in the future, the market will hit a new all-time high.

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Read The Transcript

Let's just face it things haven't been great for retirement planning over the past year. We've had a market sell off we've had inflation at decade highs Now we have an aggressive fed who is likely to push the economy into a recession with their monetary policy. It has been hard. And it’s not like there have been many positive stories out there aside from the big SS increase. Instead there has been headline after headline about a retirement crisis, and how things have gotten so much more difficult for people considering retirement to the point where Congress wants to get involved. I’m not saying everything is rainbows and sunshine out there, but if you are planning for retirement in the next few years, one thing I will say is that I am a lot more optimistic about retirement planning now than I was a year ago. And in this video I'm going to share 3 reasons why I am optimistic about the future of retirement planning

Hey everybody I’m Johnathan Rankin, the founder and CEO of Theorem Wealth management and my firm and I have been helping clients plan and execute their retirement plans by focusing on 3 key areas in retirement, maximizing retirement income, optimizing investments and reducing taxes. If you are thinking about retiring or already retired, make sure you subscribe so you don’t miss any of our retirement videos or episodes of our retirement podcast called the retire once show.

For over 15 years I have been helping people achieve their retirement goals, and for 13 of those years there was one thing was very challenging about building investment portfolios for clients who were retired which leads me to the first reason why I am optimistic about the future of retirement. You can finally get some yield. Since 2009, the Fed has kept interest rates extremely low. This was great for helping with things like mortgage rates and overall economic growth, but for people who were retired it made things extremely difficult. Conventional wisdom says that as you get older and closer to retirement and even in retirement the more conservative your portfolio should become. And we see this with target date funds within 401ks. They are designed to reduce the allocation to stocks and increase the allocation to bonds as you get closer to retirement. This worked in the decades leading up to the 2008 global financial crisis, when the yield on the 10 year treasury was on average well above 4% and even topped 9% in certain years. And then, for almost 14 years, the yield never got above 4%. This made investing for retirement challenging. Clients were faced with a decision to make, accept a lower yield, tie up their assets into an income product like an annuity or take on more risk. There was not the ability to achieve a low risk, higher yielding income that also provided flexibility. Everywhere you turned, there were headlines talking about the search for yield because at the time, the only way to get a higher rate of income was to take on additional risk. Here’s a perfect example, money.com had an article about how retirees can live off their savings in a low-rate environment, and what were they suggesting? Dividend paying stocks. This isn’t me saying that dividend paying stocks are a bad idea, but I wouldn’t place that investment into the low volatility, steady income category. If you are building out an asset allocation of stocks and bonds, the stretch for yield into things like dividend paying stocks or even junk bonds that come with a higher yield increases the amount of risk your portfolio has to take. When rates are higher, getting a low-risk yield like you would in a treasury bond or high quality corporate bond can help maintain a more balanced portfolio over time. Now that we are seeing inflation subsiding, being able to reduce risk overall without sacrificing portfolio yield is a huge benefit for people who are planning on retirement. In fact, Morgan Stanley put out a piece discussing how investors will look to bonds in 2023, citing how bond yields have meaningfully increased. They discuss how this now provides investors an opportunity to earn decent income. While we might still be in store for further stock market volatility as the bear market plays out and possibly an economic slowdown or recession, being able to get back to an asset allocation that provides income and long-term growth while reducing volatility makes me optimistic about the future of retirement planning.

That brings me to the second reason I am optimistic about the future of retirement. The bear market in stocks. Now this might sound counter-intuitive because portfolios are likely down for the year. But if you have a few years until you retire, this gives you the opportunity to take advantage of the stock market. This reminds me of when I bought my first house. It was in the early 2010 in Phoenix AZ after housing prices had dropped and forclosures were all over the place. Luckily I was able to get a good deal on the house and prices eventually went up, but one thing was always on my mind for years. I wish I bought a different house. Nobody knew what prices would do over the coming years and it turned out that prices increased pretty significantly and even more in particular parts of the city. I always looked back and wished I had bought a different house in a different part of the city because it would have increased so much more in value. That is how I view bear markets like this. I don’t know when it will happen, but at some point in the future the market will hit a new all-time high. After every correction that I have worked through, whether it was 2008, 2018 and 2020, people always look back and wish they did more during those times. I know it’s not easy, in fact it is really scary in those moments because we never know how long the bear market will last and how deep it will go. We don’t know if we have seen the bottom yet or if there is more losses to come. This is not me saying that you should go out and start taking a bunch of risk, but one thing you don’t want to do is shy away from the market during times like this. When you look at the returns after a 20% plus pullback, they are positive 77% of the time. Even during bull markets stock market corrections happen almost every year. Most people are dollar cost averaging into their retirement accounts and take advantage of those times. The problem is that those corrections are typically brief as was the case in 2020 and 2018. But when you have a longer, more drawn-out bear market, you are able capture more of your savings at lower asset values and as things return over time, it can help compound the growth. It’s not easy to work hard and save and then watch that savings go down because of the market. But it is important to realize that market swings happen over time and trying to time the market can lead to under performance over a long period of time. In fact, JPM looked at how the average investor faired from 2002-2021 and as you can see, the average investor underperformed almost every asset class. Why’s that, because the average investor tends to chase momentum. They tend to get out of things that are underperforming before they recover and into things that are doing well before they pullback. That is why it is important to not deviate from your long-term savings and investing plan during times like this. In fact, that brings me to the 3rd reason I am optimistic about the future of retirement.

Next year you can save even more into your retirement accounts. The IRS raised the contribution limits by almost 10% for 2023. Which means that even if you are getting a late start to saving for retirement, you can now put away more money than ever before all while asset prices are lower. Every year I talk to hundreds of people who are planning for retirement. And for some, life just got in the way when they were younger and they weren’t able to save like they wanted to. That doesn’t mean that retirement isn’t possible. It is just going to take discipline to save. In fact. If you are 50 and haven’t started saving yet, in 2023 you will be able to contribute $30k to your 401k next year. If you maxed that out from when you are 50, to when you are 65 years old, and were able to get an average of 7% rate of return you would have over 750K by the time you are 65 years old. That doesn’t include any company match or additional saving in other accounts. Just because you got a late start, doesn’t mean that retirement isn’t impossible.

If you feel like the last year has gotten you off track to your retirement goals or you just don’t even know where you stand today. Use the link in the description to schedule some time with our team where we will build out a detailed retirement analysis for you at no cost whatsoever. Also, make sure you subscribe to the channel, so you don’t miss any of our weekly retirement videos or episodes of our retirement podcast call the retire once show.

So, to recap the 3 reasons why I am optimistic about retirement. Number 1 - You can now get yield in your investment portfolio without having to take additional risk and changing your asset allocation. Number 2 – The market selloff provides a better long-term buying opportunity for those that are saving for retirement and number 3 – you will be able to save more than ever before in your retirement accounts.

Hopefully you are on your way to a successful retirement and just to make sure you avoid any major mistakes and to help you with that, make sure you check out this video where I go over The 5 Worst Things To Do After You Retire – I’ll see you there.

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