In this episode of “Protecting and Preserving Wealth,” Jason Hosler and I discuss the firm’s commitment to protecting their clients’ financial futures. I begin by underlining the company’s longstanding dedication to protecting and maintaining money during global volatility, something many overlook.
Delving into my new book, “Moving to Tax-Free,” I underscore the practicality of tax protection in wealth preservation. Taxes, a significant lifelong expense for many, can be effectively managed to safeguard financial resources. Jason introduces the ‘Magnificent 7’—a group of high-performing tech stock investment strategies—highlighting its potential to prevent missing out on market gains, a practical approach to wealth preservation.
The discussion delves deeper into the concept of ‘Sequence of Return’ risk, which Jason explains as the danger of experiencing significant market losses early in retirement, potentially jeopardizing the financial stability of a retiree’s later years. We will describe our “PASS” system (Portfolio Asset Sequence System), which structures clients’ portfolios to mitigate risks associated with market downturns during critical withdrawal phases.
Another focal point is inflation’s role as the “silent killer” of the standard of living. Key strategies are discussed to combat its long-term erosive effects through diversified investment in growth-oriented assets. I will also touch on the importance of proper estate planning, including wills, trusts, and accurate beneficiary designations, to avoid future financial complications and ensure clients’ wishes are fulfilled.
We conclude by addressing the overarching goal of preserving wealth, not just for the clients themselves but also for future generations. We cannot emphasize enough the need to stay updated with changing tax laws and wealth transfer strategies, particularly in light of legislative changes like the Secure Act and Secure Act 2.0.
For more information about anything related to your finances, contact Bruce Hosler and the team at Hosler Wealth Management.
Call the Prescott office at (928) 778-7666 or our Scottsdale office at (480) 994-7342.
To listen to more Protection & Preserving Wealth podcast episodes, click here.
Limitation of Liability Disclosures: https://www.hoslerwm.com/disclosures/#socialmedia
Guest Profile
Jason Hosler holds Series 7 and 66 FINRA securities registrations. He brings a technological edge to our firm and helps many of our clients stay current in the fast-moving age of the internet.
Podcast Host
Bruce Hosler is the founder and principal of Hosler Wealth Management, LLC., which has offices in Prescott and Scottsdale, Arizona. As an Enrolled Agent, CERTIFIED FINANCIAL PLANNER™ professional, and Certified Private Wealth Advisor (CPWA®), Bruce brings a multifaceted approach to advanced financial and tax planning. He is recognized as a prominent financial professional with over 27 years of experience and a seven-time consecutive *Forbes Best-In-State Wealth Advisor in Arizona. Bruce recently authored the book MOVING TO TAX-FREE™ Strategies For Creating Tax-Free Retirement Income And Tax-Free Lifetime Legacy Income For Your Children. www.movingtotaxfree.com.
In the Protecting & Preserving Wealth podcast, Bruce and his guests discuss current financial topics and provide timely answers for our listeners.
If you have a topic of interest, please let us know by emailing info@hoslerwm.com. We welcome your suggestions.
*2018-2024 Forbes Best In State Wealth Advisors, created by SHOOK Research. Presented in April 2024 based on data gathered from June 2022 to June 2023. 23,876 were considered, 8,507 advisors were recognized. Not indicative of advisor’s future performance. Your experience may vary. For more information, please visit.
Transcript
Speakers: Bruce Hosler, Jason Hosler, & Jon Gay
Jon Gay:
Welcome back to Protecting and Preserving Wealth. I’m Jon Jag Gay, joined again by Jason Hosler and Bruce Hosler today. Good morning, gentlemen.
Jason Hosler:
Good morning, Jon.
Bruce Hosler:
Good morning, Jon.
Jon Gay:
What are we visiting about today, guys?
Bruce Hosler:
Jon, I want to talk to our listeners about our company mission which has been protecting and preserving wealth for many years now.
Jason Hosler:
I’m wondering if our listeners have ever considered all the ways we are working to protect them and their families.
Bruce Hosler:
The world right now seems like it’s in constant turmoil and I suspect that many of our listeners don’t fully realize all of the ways that we are working to protect and preserve their wealth.
Jon Gay:
I mean, there’s a reason that’s why we named this podcast Protecting and Preserving Wealth. And Bruce, I know recently you published your new book Moving to Tax Free. I’m going to guess that has a lot to do with our topic today.
Bruce Hosler:
Jon, it has some to do with it. Certainly, taxes are one of the biggest expenses that many of our clients will have throughout their entire lives. Protecting them from paying more taxes than they should is key to us helping protect their wealth.
Jon Gay:
I mean, clearly, we see that taxes are a big threat for all of our listeners. Jason, what other threats do you help clients and listeners protect against?
Jason Hosler:
Well, the last few years have been a perfect example in the investment markets. Think about the stock market and the bond market in 2022. We had the stock market pull back about 20%. We had bonds that were down big as well as interest rates rose at a historic pace.
That only happens about 10% of the time if you look back in the historical record. It’s not very often that you have both stocks and bonds losing at the same time. And then 2023, the markets came back.
But if you look at the structure of the markets as they came back and we had this term come up, the Magnificent 7, they were responsible for most of the returns that the S&P 500 had that year. If you look at the other 493 companies, they didn’t do that well.
Jon Gay:
And Jason, if I could jump in the Magnificent 7, those are those tech stocks like Alphabet that owns Google and Meta that owns Facebook, Nvidia and a few others.
Jason Hosler:
Exactly. And if you’re not invested in the right investments, you can miss out on those gains. So, it’s not just diversification, it’s being invested in the right places.
Bruce Hosler:
Sequence of return is also one of the biggest risks that our retirees face in the United States.
Jon Gay:
I have heard that term, but I think I and our listeners could both use a little bit of clarification here. Jason, what is sequence of return risk?
Jason Hosler:
So, sequence of return risk is the risk that a retiree runs early in retirement that they’ll have a few bad years in the markets that draws down their portfolio while for the first time they’re introducing a withdrawal.
And if you look at a 30-year retirement for example, and you have those losses later on, they would be okay. But if they have those losses early on in their retirement and their portfolio is taking withdrawals for the first time, their portfolio can draw down and it might not ever recover enough to sustain the full retirement.
So, sequence of return is that you have bad returns early in retirement and it does enough damage to your portfolio that you can’t recover and last an entire retirement.
Jon Gay:
The old cliche is buy low and sell high. This is kind of the opposite. If you have to withdraw when the markets are down, unfortunately you’re selling low.
Bruce Hosler:
That’s the whole risk Jon. Is that retirees cannot control the order or the sequence, the sequence of the return. So, if the sequence is poor when you first retire, let’s say you retire at 65 and 66, 67, 68, and those years the market is down, your portfolio may never recover from the market being down and you withdrawing income out.
You just retired. You got to take money out of your portfolio because you’re retired. And if you’re unlucky, you cannot sustain those drawdowns and your withdrawals at the same time and your portfolio may collapse early.
Jon Gay:
So, what can we do about it, Bruce?
Bruce Hosler:
Well, I saw the sequence of return risk early on, and so that’s why we created the PASS, Portfolio Asset Sequence System. And what that is, is literally we divide the client’s portfolio into two halves. The first half is the income they’re going to need for (years) 1 through 5 and 6 through 10. So, that’s income ladders that they will need when they first retire.
And then from years 11 through 20, that’s their growth side. So, the income ladder sides, those investments are invested in stable, income producing assets that if the portfolio of the whole market goes down, that’s their long-term portfolio. But their near-term money that they need is not affected. So, their income is stable.
And so, the Portfolio Asset Sequence System, it sequences when their portfolio generates the income and where they pull the money from in retirement.
Jon Gay:
I like it. Guys what are some of the other big risks besides sequence of return that our listeners are facing right now as we record this on May 2nd, 2024?
Bruce Hosler:
Well, certainly Jon, the silent killer that is destroying the standard of living of many of the people in the United States right now is inflation and it is insidious. It can devastate your standard of living, making it very difficult to just survive.
Jon Gay:
So, how can Hosler Wealth Management help our listeners and specifically your clients protect against this crazy inflation we’ve been seeing?
Jason Hosler:
Well, Jon, frequently we will set up people’s retirement income using the Portfolio Asset Sequence System, and clients have a stable value current income ladder for their near-term income.
This gives them the courage to invest the long-term portion of their portfolios in longer term growth asset classes like stocks, buffered ETFs, mutual funds alternatives like private equity that are invested for the long-term growth.
Those asset classes help protect our clients against the constant erosion of their buying power caused by the deflation of our currency. It shows up in the form of inflation.
Bruce Hosler:
It’s so important that we give our clients the confidence and the courage to invest in a portfolio that will provide long-term growth that they will need when the higher inflation rates affect their income. So, the longer they go, the more inflation has a dramatic impact on their standard of living.
Jon Gay:
So, we’ve talked about sequence of return, we’ve talked about inflation. What other types of threats can you help protect your clients from?
Jason Hosler:
Certainly, being there to provide clear guidance to our clients when they have important financial decisions to make. It’s so easy to make financial mistakes when you are planning for your retirement.
Jon Gay:
I’ve heard that only about 50% of people have a will or any kind of estate planning. I’d imagine that’s an area where people just really need some protection.
Bruce Hosler:
Jon, helping make sure people have their legal affairs in order is one of the key pieces of the work we perform. And it’s not just your will and your trust.
Everyone needs to make sure that they have their medical and financial powers of attorney in place. Even if they’re young, just in case their health should change, and they need their family to come in and advocate for them when they’re unable to do that when they’re in the hospital or when they’re incapacitated.
Jon Gay:
Absolutely.
Jason Hosler:
And the other side of that is making sure that people have all of their beneficiary designations properly established and put into place. We all have changes in our lives, and it’s important to make sure that for all of your various accounts, you have both, at least a primary and a contingent beneficiary named on those accounts.
Bruce Hosler:
One of the big areas where we find lots of potential problems is in titling their property or their assets correctly. Arizona’s a community property state, so there’s lots of advantages by having the right assets titled in your living trust if you have one, but primarily a full step up in basis for tax purposes, if one of the spouses dies, is the big benefit.
So, failing to have your assets titled properly can be very expensive for the surviving spouse. And also, we see some assets that are mistitled in the trust, even if they should not be, like the family car. That can become a big hassle to sell if one spouse dies and it is named in the trust.
Jon Gay:
I’ve got to imagine there have been situations, guys where you’ve had clients tell you that they’re glad you advised them to do something, even if they may not have been in favor of when they walked into your office.
Bruce Hosler:
Certainly, ideas that may be a perfect fit for one client may not be a fit for another client. And I think that is one of the key ways that we’re able to help protect and preserve our client’s wealth is that we’re able to create custom advice for their individual situation.
All of the advice we provide is specific to each client and their family and their individual needs. So, that keeps the clients from making big mistakes, choosing poorly, and it helps make sure they avoid decisions that are not in their best interest.
Jon Gay:
So, we’ve talked about some specifics so far. As we start to wind this down gentlemen, what about preserving wealth? Let’s zoom back out. What is that all about?
Jason Hosler:
Jon, one of the primary goals that many of our clients have, is to leave a legacy for their children. Helping our clients preserve their wealth for their children is one of the important pieces of work that we perform.
Tax laws are always changing and staying up to speed on all the wealth. Transfer strategies is an important piece of the work that we do.
Bruce Hosler:
With the Secure Act that was passed in the end of 2019, it has become even more difficult to leave an inheritance to your children in the most advantageous way. Keeping it tax free, asset protected, and able to provide an income stream that can last your children’s entire life, that can be a primary goal for many of our clients.
Jon Gay:
You mentioned the Secure Act and then since you’ve also had the Secure Act 2.0. That’s why it’s important for our listeners to always talk to somebody who’s on top of all the latest developments in this field.
Protecting and preserving wealth is a worthy mission guys, and I’m sure that our listeners appreciate the conversation today. If they want to get in touch with the team at Hosler Wealth Management, what’s the easiest way for them to find you?
Bruce Hosler:
Jon, they can reach us at the website, certainly at hoslerwm.com or call us at the office in Prescott at (928) 778-7666. In Scottsdale, they can reach us at (480) 994-7342.
Jon Gay:
Alright guys, really important stuff today. I’m glad we kind of took a step back and really let the bigger picture for folks. So, thanks for your time today and we’ll talk again soon.
Bruce Hosler:
Thanks Jon.
Jason Hosler:
Thank you, Jon.
Jon Gay:
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