David Macchia joins Coach Pete to discuss The Constrained Investor and the importance of retirement income. They explore the decisions facing people whose savings need to support their day-to-day lives.

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Transcript

Automatically transcribed from this episode; timestamps are approximate.

00:00 Each and every week I talk to very interesting people and the most important part is that I shouldn't be the only one hearing it. I really feel that if these people make sense to me that everyone out there needs to hear it. So stay tuned folks and I hope you enjoy this newest weekly segment on Coach Business. Well folks this is the time of the show where we go out across the world and find someone who's made a difference to me or I think that's made a big difference in the financial world and it's really no exception this week. We have a return visitor. He hasn't been on the show for a while. We've had him on in the past talking about lifetime income and importance of making sure you have proper balance in your portfolio. He's from Boston. His name is David Macchia. David welcome in. Coach Pete thanks for having me. Now you've written some books too. I

00:48 mean you've been all over the place in the financial world. What's your most recent book? So it's called constrained investor. It's a timely topic and if you're not familiar with that term let me explain it. So in financial services we segment people. We base it on their amount of money they have invested. AUM it's called right and we have these neat categories of people. Mass market, high net worth, ultra high net worth. It's great when you're accumulating money but when it comes time for retirement it doesn't really work. So what constrained investor does, it introduces three client segments and any person can fit into one of these segments. There are underfunded investors, overfunded investors and constrained investors. My work involves constrained investors. Those are people who get to retirement

01:35 with money which is great but the amount of money they have isn't necessarily high compared to the level of income that they need to support their lifestyle. And when you're in that position it means you have to be very very careful on the investing strategy that you use to create income. Yeah very very important because if not you can end up on the wrong side of the curve so to speak. Wrong side of the curve and going broke with your income being reduced or eliminated. So what are some of the main obstacles that you see these days as far as getting in the way of people getting the proper plan they deserve for the rest of their life in retirement? So there's so many financial advisors in the United States but so few of them I would say are expert in retirement income planning. It's a different world than accumulating money. It's a different

02:21 set of disciplines financially. It's a different set of insights and skills and so you really have to look for an advisor who's schooled in that area. About five years ago there was a designation that I received called the Retirement Income Certified Professional, RICP. And that deals strictly with making sure people have the retirement income they need throughout retirement. Not just the first 10 years or 12 years or whatever some broker's Monte Carlo simulation told you is going to be but this is lifetime income that is structurally guaranteed. You can't lose it and it's always going to be there. How important is that for most anyone listening? It's the most important thing in the world for a retiree. There's no financial issue more important to a retiree than income. And the reason is this. In retirement it's your income that creates your standard of living not your wealth. People don't focus on that but it's all

03:10 about income. We had in North Carolina the other day we had the first five million dollar scratch off winner. You know they buy these little lottery tickets they scratch off. My relative one of my grandmothers my wife's grandmothers used to give us those scratch off tickets on Christmas every year. They were in our stockings we'd all scratch them off and no one won five million dollars. But he won five million. After taxes he got three million back and I read that he's got an income plan already established where he's never going to have to worry about income for the rest of his life. And his comment was he had no income before this. He basically had found some money and bought a lottery ticket. Sort of sounds like a Willy Wonka story. Not the way you want to go about it as a rule. But he walked into income and now he has income forever. But most people cannot depend on those

03:55 lottery tickets as picking the right stock or putting all the money on red on the roulette wheel. There are ways that are safer and more secure to make sure you have that guaranteed lifetime income aren't there? Well that's true and an annuity would be the ideal way. But I'll tell you one thing you should keep in mind right now. Everyone listening should. If you don't have the right kind of income strategy at a time when stock prices are falling that means you're exposed to what we call timing risk. That is the biggest scariest monster of a financial risk you can experience and it can eat up your income very quickly. So it's very very important to have a portfolio that's structured in such a way that you're protected against that kind of risk. You know there's so many risks out there affecting or potentially affecting our money yet when the average consumer hears some of these risks it glazes right

04:42 over it doesn't affect them in their mind they don't think. But when something like a tidal wave comes in and wipes out a bunch of things in the market we learn real quick how important these risks are to to basically identify ahead of time and make sure to have some preventive maintenance done so you don't have to fall for these. Well you know there's this thing called recency bias. Your memory is prejudice. It remembers the recent stuff right? Sure does. And we've had we've had a 14-year engineered fake bull market that the Federal Reserve has created that has juiced the price of stocks. Well it's seduced a lot of people into think that just keeps going including financial advisors. But you know we're coming to a reckoning point right pretty soon I believe. Well all right now let's talk about this. We have a bad let's say we do have a really bad market environment and let's say we have

05:28 a real bear market that lasts five or ten years. We're so used to seeing what we call a bear market is five or ten minutes these days or five or ten days. The market goes back goes down then it zips right back up. But what you're saying a lot of times is that the Fed has engineered this because they keep pumping more money into the supply and the money has to go somewhere so it goes to the market and supply and demand says we have more buying than selling the market goes up. But we have a lot of people on margin these days too so we can see accelerated downdrafts and then shorters get involved and we could see a real bad bear market for five or ten years and that's when the word annuity will come into a lot of people's minds and many people will try to get annuity after they've lost money. Many times I would argue it's better to get it when you're up in the market you're not up until you're out of course so liquidate some of those gains and get that money to place you can't lose

06:13 it again. Well that's right and I think you need to think about at least protecting a part of your essential expenses in retirement with income that's guaranteed. Again no retiree stops needing income. Yeah. That's something to never ever forget. Well and in the traditional retirement income people depended many times on CDs at the bank when CDs were paying a really high interest rate you could live on the interest rate but lately well I say lately maybe the last 10 or 14 years bonds have taken way too much of a of that workload and and you you wrote a post to the other day I saw it was the worst month in bond history a month ago. That's right and that's a very long history bonds are crashing and where else what else could you expect we got near zero interest rates so there was no place for bonds to

06:59 go except down. Well folks we're talking to David Machia he's the author of the constrained investor he's also a I consider him one of the one of the leading experts in income in retirement making sure you preserve protect and guarantee the money you're going to need to to uh to live a comfortable retirement not just get by in retirement. David you've done a lot of work lately uh educating women on the importance of income planning you want to talk about that for a minute? Yeah and really there's nothing more important because um because of demographics coach Pete women are going to inherit most of the available wealth assets well think about women you know they tend to be a little bit more risk averse than men and what we do know is they live longer than men and guess what again I go back to the same same idea

07:45 you never stop needing income if a woman is going to live to 95 97 100 102 right now there's a million people over the age of 100 in the United States wow in the next 20 years is going to be 5 million so if you live for a really long time which is quite possible that income must continue what are some of the key issues affecting women who were preparing for retirement now you know we say women behind every good man there's a good woman that's what you always say but we've been trying to behind a successful man as a woman who's been helping him all the way and many times though the women have have done a lot of work at the home and raising the children and don't get a lot of credit for that but here's a stat that women benefit on and you and I are in trouble women outlive men by about seven

08:30 years and a lot of men marry women a little younger than they are my wife is about six years younger than I am so she's got a 13 year gap of me not being around that she needs to have someone she trusts and she needs to have a plan she believes in to make sure that no games or gimmicks are played with her retirement money that's so true coach pete women need an income plan that's understandable that builds confidence that they can you know buy into and keep for a long period of time but I'll tell you something else it's not a not a good thing for the financial advisory business when the husband dies a boomer husband in seven out of ten instances the spouse the female spouse fires the male advisor within one year well and that tells us that the most men male advisors haven't been doing a good job and relating to the women and they have to do a lot better yeah and and so yeah if you don't feel

09:20 that connection is so of course when husband passes away uh the wife will move the money to someone they trust and respect that's what that's exactly right and there's no hesitancy women will definitely find an advisor that they can have an authentic relationship with they look for different things men men are all about roi you know they look at the the quick hit the quick profit women women are really focused on goals and values they want to be listened to they want to have an authentic relationship and if you are a financial advisor and you can relate to a woman on that basis and truly listen and truly care about her needs and her goals and aspirations you have a client for life when we talk about women and income i mean having an income plan gives that peace of mind i mean and many people especially as we get older we're searching for that peace of mind knowing that we're going to have certainty we call it a

10:09 financial fill-up strategy every single year a check will arrive to your mailbox regardless of what happens in the market didn't seem like a big deal when the market was going up like crazy but now that the market's teetering around how important is it for most everyone listening to make sure they have some money that can't be stolen from financial termites and market volatility it's 100 essential important again there's nothing more important because expenses never stop and and today we're inflation surging everything is becoming more expensive so the necessity for income is is never been greater will rogers always said it's uh he's more worried about the return of his investment than the return on his investment do you think a lot of people because we're in this 24 7 investainment generation where you can go to the internet uh you can get text all the time or you can go watch tv

10:58 24 7 tv networks all pumping the market have people forgot what the most important thing is they certainly have another will rogers anecdote i remember is i don't remember personally but i've read about it he said at one point invest in inflation it's the only thing going up it's so true these days now inflation a whole different story we've got about a minute or so left i mean uh let's talk about the inflation how important it is people to have an inflation adjusted and protected plan and then uh any kind of comments you'd like to make at the end well i think you need an investing strategy that blends safety and risk it's important to be invested in the market long term but at the same time you have to have a portion of your assets that are covered by safe investments especially in the early part of retirement because that's what protects you against

11:44 that awful timing risk right you need that you need a lifetime income component that's fully guaranteed for as long as you live and then you need exposure to stocks and if you have those safety parts of the strategy right you can you can durably stay invested in stocks because whether the market is going up or down or teetering or volatile it don't matter to you your income need has been secured you know doesn't that give someone a peace of mind i mean when we talk about peace of mind it's one thing to say it and talk about it but when you're actually in that situation when you really do have that offensive line around you and you're the quarterback and you're not going to get touched you're not going down your income's not going down and you even have a chance for it to go up but it's never going away what kind of feeling does that give people when they know they're they're totally protected and really nothing bad's going to happen i think it's the feeling of being

12:32 able to sleep comfortably every single night which is about everything for a retiree well we put a website together that's tying into what you've helped us with uh to to explain the importance of protecting uh what you have protecting wealth but also getting income from wealth and especially if you're a woman we've got woman wealth and income and it can be women or woman so we got both of the sites women wealth and income dot com go there and get uh get educated folks and uh and more importantly if you'd like to your very own plan put together right now we could do it for you the team can is ready for you right now 800-661-7383 is the number to call or text plan plan to 600 700 david's book again is called the constrained investor i recommend uh everyone pick a copy

13:17 up because david this can really be uh it's almost like paying 20 to get a million dollars worth of income in retirement when you think about it when you go to that read that book no i'd like to think that's exactly true it's a it's it's written in language that anyone can understand and it really gets to the heart of mitigating risks and making sure that your income lasts my uh grandmother used to hide 20 bills in certain books that was sort of her idea of making sure money was safe and uh that encouraged me to read you never know what i'd find a 20 bill in a book but again folks his name is david makia david we hope to have you on and again the future especially as we go forward working more to educate the women on the importance of having that wealth and income i'd enjoy it's my pleasure and uh folks we'll be right back after this