Biggest Retirement Mistakes Pt2
Freddie: Many retirees make the mistake of going all in on cash or annuities, thinking it protects them, when in reality it could leave them vulnerable to inflation and long-term shortfalls. True retirement security means balancing safety with growth to preserve purchasing power. Today, we'll explore smarter strategies that generate income without taking on full market risk.
Leibel Sternbach is here with us today to talk about these strategies. Hello Leibel how are you today?
Leibel: Good, how are you?
Freddie: You mentioned the YFYA and I'm wondering what makes that ETF a smarter alternative for generating income without taking on a full market risk?
Leibel: Yeah, so the true guiding principles of YFYA and really how we manage clients' cash,
versus what you would typically do with like high yield savings. We wanna take on the least amount of risk, but to get the greatest amount of return. And we have a minimum amount of return that we're really looking for, right? We're looking to get inflation, at least keep pace with inflation and hopefully get 1 or 2% more after fees.
And that's really important after fees. Because when we look at money market funds, right? And we look at all the places where you can park cash, a headline number is okay maybe you'll get 4.2%, 4%, right? It's constantly coming down. But then when you look at the after fees number,
if you have a financial advisor and they're putting you into a high yield, a money market fund, you're like, oh, great, I'm getting, an institutional grade money market fund, right? Let's take 4%. The mutual fund is then taking, 0.4% of that. So now you're down to like 3.6, and then the financial advisor's taking their 1 to 2% on that, and now you're down to like 2%.
And when you're down to 2% and then interest rates come down another 1%, well, you're getting 1% on your money. Inflation's 2, 3, 4%. And if you're older than 60, it's probably closer to 9% for you. That's a lot of money that's a lot of losses to be having on your cash.
And so you need to be able to grow faster than that and that means taking on very controlled, measured risk. And in wild markets like this, it means hedging your investments a lot, right? Because like, oh, it's easy to go double down on bonds, but we've seen the bond market being extremely volatile, right?
With crazy swings both up and down. And you don't want to participate in that, right? This is your spending money. It can't move a lot because if it moves too much, then you have sequence risk. You're taking money when the market is down. You're compounding those losses. And so you want to take on the least amount of risk to get the greatest amount of return, and that is what we do for our clients.
That's what we do in the YFYA. It's this climbing up the risk ladder by the smallest steps necessary in order to beat inflation and get return that is significant. I
Freddie: don't wanna leave this topic without going a little deeper into why yields4u can be used as a part of a really tight retirement strategy
to do a couple things. One, to balance safety you just mentioned yield and long-term growth. Can you speak to that?
Leibel: Yeah, so YFYA is part of our money market strategy. And so, rather than talk about the ETF itself, let's talk about how we manage cash in general in retirement.
So how we manage cash in general, we like using a bucket plan strategy, right? Because the biggest thing that we can do we know about diversifying our assets across asset classes, right? You buy Apple and you have Tesla and right one goes up, one goes down, hopefully then 'em both go down at the same time and you kind of, mitigate your losses.
When we think about our investments over time, we don't really think about doing that, right? So what we introduced was this concept of time diversification, right? What you want to do is separate your spending money from your growth money from your midterm money. And what that does is it creates a level of shielding, right?
So it protects your long-term investments from the day-to-day volatility of the market. It protects you from having to take money out from the market when the market is down, which is the biggest thing that you can do to protect your long-term financial security and ensure that you don't run outta money in retirement is just to make sure
that when and how you take your income is in a way that doesn't compound those losses. And so having a short-term money bucket where you're earning inflation plus a little bit more, but the key over there is that you're never gonna go down by more than 5%. That's a metric that we use. YFYA is one of the tools that we use in that bucket.
It's kind of the retail version of what we do in that bucket. But then you also have, okay, so you put one to two years spending money there. That's great. Market can be down more than two years, right? It has done it in the past. It can and will do it again in the future. And when that happens, you need to have a plan.
That's why we like to have this midterm bucket where it's not no risk, but it's not a lot of risk, right? Because you wanna make sure that money grows. It needs to grow enough that it has an impact on your overall net worth, on your long-term financial security. But at the same time, you don't want it, kind of sitting in cash, so to speak, right?
You don't want it to not be growing just by inflation and keeping pace. And so you have this midterm bucket and those two buckets, that is the hardest investments to manage, right? Like growth is easy. Go open an S & P 500 fund, you'll be good. The question though is how are you gonna protect yourself from the next market correction?
How are you gonna make sure that you're keeping pace with inflation? And that's what those two buckets for, that is really where our bread and butter is managing those two buckets because that is a full-time job.
Freddie: Leibel, finally talk about the learning tools and the information.
We can find at yields4u.com.
Leibel: Yep. So on yields4u.com, I'm going to point you to two resources. So we have a free guide called the 3 2 1 Retirement Plan, and it's for three buckets, two strategies, one plan, and that is on our website. That goes through our entire philosophy of what I just discussed about the three bucket strategies, about the time diversification, how to build it for you.
We also got a really cool tool called the 60 second retirement calculator, or retirement plan. You could just go on the website resources 60 second plan. It'll pop up if you haven't been to our website before. It's constantly hammering you to go through this plan. 60 seconds all it takes you put in your basic financial information and it will spit out for you a one page plan for you of this is where you are today financially, this is what the future looks like.
Are you at risk? How aggressively do you need to invest your money? And then it'll also give you the recommended buckets based on our philosophy. And then there's a link at the bottom, obviously, to talk to us. If you wanna take that theoretical plan and figure out how does it actually work for you, right?
Because there's a big gap between a nice theoretical calculator and what it takes in your world and your life to make it actual reality. Everyone is different, right? No calculator online can ever predict, even with AI, all the nuances of what's important to you, what's not.
Although we are working on an AI thing if you want to go that route. So
Freddie: It's in everybody's lives these days. Yeah. Thank you so much for the great information and that website once again, in case you missed it, it's yields4u.com. We gotta leave it right there. And we've learned today that playing is safe with cash or annuities can leave your retirement vulnerable to inflation and income shortfalls.
Nobody wants that. The goal isn't to eliminate risk as Leibel's told us, but to manage it wisely with strategies that balance, stability and growth. Together with the right approach, you can preserve your wealth and stay ahead of rising costs.
