It’s a Mad Mad Mad Mad World

This comedy came out in 1963 and got rave reviews, I think we could have a 2021 sequel!  This morning I read an article on DOGECOIN INSANITY.  Dogecoin is a cryptocurrency that was started as a JOKE last year and was priced at a fraction of a penny, today it is priced at $.59  and is up 7000% in the past year.  It’s market capitalization of over $ 77 Billion which is more than Federal Express, Ford Motor and most all other companies.  How can something with no inherent value, no history, no products, no nothing be priced at $77 Billion?  Total insanity is my only observation.  When I started in the securities industry in 1977, I worked for a man who had been a stockbroker for 40+ years, thus he was a broker in the 1930’s and experienced and advised clients through the Great Depression.  He told me Dave, this is a very easy business, just remember “When everyone loves it sell it, when everyone hates it buy it!”  No truer words were ever spoken to me and Warren Buffet lives and dies from this mantra!  Be it Real Estate, Gold, Stocks, Bonds, Oil & Gas, Etc. they all go through periods of rising and falling.

As I write this month’s newsletter we’re currently experiencing a Trifecta of Bubbles!  We have a BOND BUBBLE (extremely low and non-existent interest rates), we have a STOCK MARKET BUBBLE and we have a REAL ESTATE BUBBLE!  For those of you with a short memory in 1999 we had the TECH BUBBLE, in 2008 we had the FINANCIAL CRISIS / REAL ESTATE BUBBLE.  If you go back in history you can read about all kinds and types of BUBBLES which all end quickly and sadly!

What does this have to do with Social Security?

When transitioning from the Front 9 (working careers) to the Back 9 (retirement) one goes from accumulating wealth to distributing wealth.  There are NO MULLIGANS and one must accept personal responsibility to manage one’s finances to last a lifetime and create a lifetime income for you and your spouse.  Social Security for many and most American’s will make up the bedrock and be the foundation for planning one’s retirement future, thus we will want to claim Social Security benefits at the most appropriate time in order to maximize benefits for an unknown and uncertain time frame.

Whatever your check is at 62 it is DOUBLE at age 70!

Once again due to COVID and all the ways it has affected our economy and finances as many as 40% of retirees will claim benefits ASAP which is age 62.  90% will or intend to claim prior to FRA (66 or 67) and less than 4% will wait until 70 before claiming!  The question is WHY would one work and pay taxes for 40 years to get $X when if you wait an additional 8 years you get $x times 2?

Create a BRIDGE

With the markets where they are today, with low or non-existent interest rates, with tax rates relatively low, with a Federal Government printing money and recording unprecedented deficits doesn’t make sense to draw down on Qualified Plans, continue working (Phased Retirement) or have the lower earning spouse claim benefits early (Hedging the Bet) or a combination of all 3?

Have a most excellent month and remember, I’m always here for you and your clients!

Dave Zander, CFP®