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Retirement planning strategies: ‘Ride the wave, but have an eye for the exit’

Yahoo Finance’s Myles Udland and Brian Sozzi speak with Ken Moraif, Senior Retirement Planner at Retirement Planners of America, about how to plan for retirement and reach your financial goals.

Video Transcript


MYLES UDLAND: Welcome back to Yahoo Finance Live on this Thursday morning. Stocks right now trading at a record high as we saw a dozen times in the month of August. And when stocks go up with this kind of velocity, certainly most folks sit around and think, do I need to be changing or rethinking my retirement plans?

And joining us now to talk about that is Ken Moraif, senior retirement planner at Retirement Planners of America. Ken, great to talk with you once again. Let's just start with that question about the stock market, S&P is up 20% this year. We have doubled from the bottom in March of 2020. How do you talk through this kind of a market with a client of yours who might have a five-year horizon for retirement, might have a 30-year horizon for retirement, how do you break those two components down?

KEN MORAIF: Well, the important thing for us is that we work with people who are within five years of retirement or in that first five years of retirement, that decade. That decade is extremely important. In fact, we think it's the most important decade of your entire financial life because no matter how well you've done getting up to that, if you take a big giant loss, like 2008 or a Y2K or others, that that could impact your ability to retire or to stay retired.

So our philosophy is very conservative and so we believe in having strategies in place to mitigate against the downside. So the conversations we have with clients right now is we want to ride the wave as long as possible. But we always want to have an eye for the exit. We always want to have a strategy in place to protect against the downside.

As you know, our Fearless Forecast at the beginning of this year was that the Dow would hit 35,000. At the time it may have appeared to be a little ambitious but we've hit it. I haven't changed it. I think we are going to continue to see new all-time highs but I don't think it's going to be with the rapidity and the pace of increase that we saw in the first two quarters of this year.

BRIAN SOZZI: So Ken, what strategies have you put in place to protect a portfolio against any downside risk?

KEN MORAIF: Well, our strategy is proprietary. We call it invest and protect. And actually last year the day before the pandemic hit, our strategy signaled us that it was time to get our clients out. So it is one that is designed for people who are over 50. I would say that if you're younger than that you may have the time to play through these kinds of corrections and those kinds of downsides. But again, if you're within that decade, the most important decade of your financial life, we think that being conservative, diversified, with a strategy to mitigate against that downside is extremely important.

MYLES UDLAND: You know, Ken, for this demographic that you're mostly working with, a lot of these folks are going to have much of their wealth in their home. Perhaps they own it outright, perhaps they have a large amount of equity in the home, having lived there for a long time, so on and so forth. How does that fit into this kind of a plan, especially in this environment when folks perhaps had the opportunity to sell their home at a value, you know, they may have only been able to dream of five or seven years ago?

KEN MORAIF: You know, the equity that you have in your home is something that enables a lot of strategic decisions to be made. In some cases, rare cases with our clients, you may have someone who you know, is down to where the equity in their home is all they have. If that were to be the case, then you know, a home equity loan might be something that could be appropriate.

In other instances, which is more predominant, is our clients when they retire, they want to downsize. So they can sell their home, use the equity because right now home prices are ridiculously high. And so selling their home, downsizing to something that is more friendly to their lifestyle and taking the difference in what they sold for, and investing that to create income is a strategy they can use. So the equity in your home, there's a lot there.

The key thing, though, that we tell our clients is that when you retire so should your debt be retired. And so if clients, if you have a mortgage, we really encourage people to be debt-free, no car loans, no credit cards, no home loans, be completely debt-free. The reason why we say that is because you know, hopefully, we won't have another Great Depression or a really bad economic time but we have to plan for those things. We plan for the worst and hope for the best.

And so if something like that were to happen, the bank isn't going to say you know, I get it, your investments are not doing well right now, you don't have to make your mortgage payment anymore. I mean it may be. We've seen with the rent mitigation but it may not happen. You can't count on that. So not having any debt if bad things come you know, technically, you can live on very, very little, if you had to if you have no debt. So again, the mortgage in your house and the equity you have, there's a lot of planning opportunities there.

MYLES UDLAND: All right, we'll leave the conversation there. Ken Moraif, senior retirement planner at Retirement Planners of America. Ken, always appreciate the time. Thanks for jumping on.

KEN MORAIF: Well, thanks for having me.