What Your Dad Got Wrong About Money (and What You Should Do Instead)

Here's what we now know. The stock market over long periods of time has been the most reliable wealth building engine in American history. Not gambling, not speculation, investing. The key word being long term here.

The danger isn't the market itself. It's a poorly constructed portfolio, no defined time horizon, and no plan for when it inevitably goes down because it does inevitably go down from time to time. That's exactly where a fiduciary earns their keep. Welcome back to the Retirement Fiduciary Podcast, a place where we have authentic, no BS discussions about retirement planning, investment strategies, and wealth management.

Whether you're approaching retirement or if you've already made work optional, this show is for you. Now, here's your host, Adam Koch, President, Portfolio Manager, and senior financial advisor at Libertas Wealth Management Group at LibertasWealth.com. All right, everybody.

Welcome to the Retirement Fiduciary Podcast, Father's Day edition. We're going to talk about what our dad got wrong about money and what to do instead. This one's going to be a little bit of fun. We're going to go through a bunch of different lessons that many of us, I'm sure, learned from our parents.

And just to be clear here, not everybody's dad was like this. Not everybody's dad said these things, but a lot of these things were stereotypes from the older generations, and I thought it would be fun to turn that into some education. Let's go ahead and jump into it here. First of all, happy Father's Day.

We all love dad, right? But let's talk about money here. Our dads grew up in a completely different financial era, and depending on how old you are, that era could be even more different and more conservative than what we're going to talk about today. But if you go way back, pensions were the norm.

You stayed at one company for 40 years. A savings account actually paid you something. Imagine that. The advice they gave us was rooted in real experience and genuine love, but the world changed dramatically and it keeps changing.

And following outdated advice in a new era can quietly cost us a retirement. Today, we're going to honor dad by doing something he'd actually respect, and that is telling the truth in this new era. Dad generation lived through the Depression the savings and loan crisis and a lot of economic uncertainties Cash for our parents and grandparents felt like the right answer at the time And for them sometimes it was. What they didn't fully account for is inflation.

The dollar sitting in a savings account, losing purchasing power every single year, and over a 20 or 30 year retirement, that safe money can lose half its real value. Today, we talk about inflation risk, sequence of returns risk, which are really two ways of saying that playing it too safe is still playing with fire when it comes to our retirement savings. If we look at debt as another issue that maybe our parents and grandparents had. Dads, grandfathers, they hated debt.

That instinct obviously comes from a great place. Debt feels like a burden, right? And owning your home free and clear feels like freedom. But here's where the math sometimes works against the conventional wisdom.

Now, if you're aggressively paying down a 3% mortgage, while your investment portfolio could historically be growing at a long term rate of return of 6%, 7%, or even 8%, depending on how aggressive you are, you may actually be giving up ground, not gaining it. The real question isn't, do I have a mortgage? It's, what is the cost of that mortgage versus the opportunity cost of that cash? It's a fiduciary discussion, not a gut feeling conversation, but it's something that we all need to think about depending on what the interest rate is on our mortgage, what the market looks like at the time, and of course, inflation, which has been changing quite a bit this past several years as well.

Now, never touch the principle, right? This is the rule that paralyzes retirees and never touch the principle was a way of saying, live on your interest and dividends and leave the nest egg alone. The intention was great. The execution in today's environment is tricky.

In a low to moderate yield world. Interest rates went up quite a bit. They came back down and leveled off here. But in the interest rate environment we're living in now, living purely off income often means taking on way too much risk, chasing yield or chasing interest rates, or living on far less than you should.

Modern retirement income planning is far more sophisticated than that. Strategies like dynamic withdrawal rates, total return investing, and bucket planning recognize that a thoughtful planned drawdown of principle can actually extend a portfolio life not shorten it And planned properly with the full financial plan we can actually front load our expenses at a time when we healthy and we should be spending this money right Which might mean we probably going to dip into that principle, but that's okay as long as we're front loading it.

And over time, we're not going to spend as much later in retirement. All of these are things that we need to keep in mind in this modern era. Now, social security. Our dads, in some of our cases, their grandparents, they came of age a time when social security felt like this rock solid promise combined with a pension which they don't exist anymore but back then combined with a pension it was often enough but here's the reality social security was never ever designed to replace your income it was just designed to supplement it so the average monthly benefit today is only around $1,900 a month and I think we all know that's not a real retirement that's a start and the claiming decision as to when to claim your Social Security income, whether you coordinate it with a spouse, how you factor in longevity, how long you're going to live.

All these things can mean a difference of hundreds of thousands of dollars over a lifetime. And most people spend less time on the decision than they do buying their car. Now, your dad, if your dad or grandfather lost money in the stock market, it doesn't matter if it was 1987, that's Black Monday, the dot-com bubble, which is 2000, 2001, 2002, or the Great Recession, 2007, 2008, and 2009. And it's been since then, by the way, since we've seen a real big crash.

But if your dad or grandfather lost money in one of those markets, there's a good chance he walked away with a scar. And that scar became a story. And that story became your family's financial philosophy. Here's what we now know.

The stock market over long periods of time has been the most reliable wealth building engine in American history. Not gambling, not speculation, investing. The key word being long-term here. The danger isn't the market itself.

It's a poorly constructed portfolio, no defined time horizon, and no plan for when it inevitably goes down because it does inevitably go down from time to time. That's exactly where a fiduciary earns their keep. Now, dad, I don't know about your dad. My dad was definitely a figure guy Very hands if it your grandfather it might sound the same but a lot of the greatest generation and boomers were They worked hard they improvised they adapted and for most of life challenges that served them beautifully Retirement doesn reward improvisation that same way anymore.

The decisions you make in the five to ten years before and after retirement, things like social security timing, Medicare enrollment, tax bracket management, required minimum distributions, all these things have compounding consequences. Getting them wrong isn't just a setback. Sometimes it can be irreversible. A fiduciary's job is to make sure you're getting all these decisions right the first time.

And by the way, many of these decisions you can't redo, but to get them done the right the first time with a real plan, not scrambling after the fact. Here's the thing. Our dads did the best they could with what they had, right? the advice they gave us was rooted in lived experience real life real hardship genuine love right we're not dismissing any of those things but what i am saying is that the world has changed life expectancies are longer pensions are gone health care costs are enormous and growing and the tax code is infinitely more complex than it's ever been the tools are better now too if you use them by the way but if your dad is still around maybe have this conversation with him and if he's not, honor him by getting your own financial house in order.

I think that's the best tribute there is. If you thought this was fun, if you got anything out of it, please, by all means, reach out with any questions. If you'd like a second opinion on your investment portfolio or retirement plan, or worse yet, if you don't have a plan and you would like to consider getting one, by all means, reach out, hit up LibertasWealth.com, click on that little button that says, see if we're a good fit for you, and we'll look forward to hopefully talking to you at some point with your future.

We hope you enjoyed today's episode. If you like a second opinion on your retirement plan or investment strategy, please head over to LibertasWealth.com. This podcast is for informational purposes only and should not be considered as legal, financial, tax, or as the basis for investment decisions.

Always consult a certified financial planner or a fee-only fiduciary advisor before acting on any ideas discussed.