Mark Elliot: Glad you’re with us today for The Retirement Income Show with Troy Sharpe, the CEO and Founder of Oak Harvest Financial Group. You can always go to the website to find out more, OakHarvestFG, OakHarvestFinancialGroup.com. Of course, always check out the videos on YouTube, over 300 of them now that Troy and the team have put together for you.
Any retirement financial questions you may have, there might be an answer right there in one of those videos. You can subscribe. There’s no cost whatsoever, but it’s really a kind of a cool thing. You’ve got a question about a certain area of your retirement maybe, just go to Troy Sharpe’s YouTube page and you will find that topic, I’m pretty confident of that. Just search Troy Sharpe and Oak Harvest.
There’s a lot of things going on, obviously, but one of the things you just did an interview with NewsRadio 740 KTRH, where you’re listening to this program right now, obviously, and you did an interview and it was talking about, “Hey, I’m 50 years old. I have X amount of money, how do I become a millionaire?” You have the nest egg calculators and all kinds of things on your YouTube channel, talk a little bit about your conversation about that, “I’m 50, how do I become a millionaire?”
Troy Sharpe: I work with Sally Adams a lot of times up here at KTRH, and Sally’s amazing. She reached out to me. She says, “Troy, I’m working on an article, working on something new for the station here, are you available?” I always love to help out because she asks great questions and the content is always really, really good. She reached out to me this past week and, “Troy, I’m working on– I’m in my 50’s. I feel like I’ll never make it to a million dollars. Will I ever be a millionaire? What are some of the things that I can do to help get there?”
Immediately, I went to our website here, we have this Retirement Nest Egg Calculator. If you go to Oak Harvest, just search Oak Harvest Retirement Nest Egg Calculator, or you can go to the website OakHarvestFG.com. Do this for yourself. I want you to input your data and see if you’re in your 40’s, if you’re in your 50’s, how much do you have saved now for retirement? Then we can start to input these other variables. When do you want to retire? How much can you consistently contribute each month for retirement? Then what is a realistic rate of return on those funds?
I want to talk about some of these variables. Then I want to talk about some things that you need to know or steps that you can take to improve the chances to get to that magic number that you want to be at. Here we go.
If, let’s say, you have $100,000 right now, you’re 50 years old. At 50, your maximum 401k contribution is $27,000 per year. Now, some of you are fully capable of making that contribution. Some of you may not be able to fully max out that 401k, but I just want to give you an idea here with some figures.
With 100,000 at 50 years old, you may seem like you’re far, far, far away from ever getting to a million dollars, but to get there what you’re actually looking to do is save about $2,000 a month at age 50. If you can average 7% growth in your retirement accounts, or this could be outside your retirement account, it could be in another investment vehicle outside of that 401k or your IRA.
At 7% growth, you’ll get to $1 million by age 65. 2,000 a month, that’s 24,000 a year. Over 10 years, that’s $240,000 that you’ll contribute. Starting with 100,000, that’s $340,000 total you will have put into that account. At 7%, by age 65, that will reach 1 million, so that’s what $660,000 of growth on top of the 340 that you’ve contributed over that time frame.
Let’s say you have a little bit more money starting out. Let’s say you’re at $250,000. If you can save that same 2,000 per month at age 50, growing at 7%, you’ll hit that $1 million number by age 60. If you go to the Retirement Nest Egg Calculator on OakHarvestFG.com, you’ll see a tab up top, you’ll see Knowledge Center, and then we have a calculator’s column. Then underneath there, there are a few different calculators. I’m looking at the Retirement Nest Egg Calculator.
A couple of things here. Play around with the numbers, play around with how much you can save per month, play around with what the annual interest rate is, play around with the anticipated retirement date. I do want to point something out. A lot of times when experts have a consensus on something, typically, you want to go in the different direction because groupthink isn’t always the best approach, but this is one of those instances where most “experts”, I say this with an air quotation, because forecasting the stock market is notoriously difficult.
The variance in stock market forecast, the accuracy of stock market forecasts compared to bond market forecast is far greater. These experts are actually pretty accurate when it comes to forecasting the bond market, so interest rates, bond performance, et cetera. When it comes to the stock market forecast over long periods of time, there is a huge deviation from what was projected 10 years ago to what actually happened, significant ton of inaccuracies, let’s say.
Take this with a grain of salt, and there is a lot of, I would say, headwind or challenges facing us over the next 10 years, but a lot of these experts believe best case scenario for equity returns over the next decade is nowhere near the 10%, 11%, 12% that many people may be assuming. 5% to 7% very well could be possible. We have some significant challenges in a higher interest rate environment with the current state of our country in regards to policy, in regards to a lack of growth that’s expected over the next few years, there are some challenges, there’s no doubt about it.
Now, the back half of this decade could be pretty good, but the next couple of years could really be challenging. This is why also having a plan is far more important. Now, should you not invest simply because we’re going to have challenges? No. If you’re in your 50s, that’s actually the best time to be contributing to your retirement account because when you buy assets at depreciated prices, your expected return on invested capital marginally speaking is far greater than when you buy assets when everything is doing really, really well.
There was, to take a little sidebar here, an excellent article, I think it was on MarketWatch and it was Betty bad luck. The gist of the story was Betty invested at the absolute worst times she possibly could invest over the past 35 years, I believe it was, starting in the ’80s.
She invested on the cusp of Black Monday in 1987, right before that, put her $500 into the market, completely crashed. Then, again, she invested in the early ’90s, right before a big market crash, stayed on the sidelines with the rest of her savings until about 2000, right before a three-year downturn in the market. Stayed on the sidelines again until 2008, decided to get back in, each time she invested about $500.
Moral of the story here is that every time she invested, the very next day she lost 30% to 50% of her money, essentially. Still to this day, though, she had only invested about $2,000, maybe $3,000 at the, very best, very worst time six separate occasions, and now today she has $17,000.
It’s a great story, it’s a fable but it gets the point across. That even if you invest consistently at the absolute worst times, if you can stay focused on staying in the market over long periods of time, history has proven that you have a very, very high probability of success. If you’re in your 50s and even just because it may be challenging over the next couple of years, your stocks or your funds will still be paying dividends. You reinvest those dividends. Those dividends will buy more shares. Those additional shares will spin off more dividends.
At lower prices, you’re able to buy more shares and accumulate more potential future wealth so when things finally do turn around, all that effort and all that reinvestment and all the investment, to begin with, accumulation of shares, it’s like the Chinese bamboo story.
If you haven’t heard the Chinese bamboo story, another great story where Chinese bamboo, it gets planted, and the roots for five years roughly start to grow underneath the surface, and you can’t see anything above the surface. The roots are just creating a very, very strong and stable base. Then, all of a sudden, these Chinese bamboo shoots get to be 30 feet tall, 50 feet tall, 100 feet tall, and that would be impossible if it wasn’t for that four or five-year period where you couldn’t see anything happening on the surface, but everything was bubbling underneath, the roots were growing, the foundation was being formed, the strength to support those 40, 50, 100-foot bamboo shoots was created from that incubation period in the first three, four, five years.
You are still in a great position to take advantage of this market downturn by continuing to invest, allow your dividends to reinvest. One of the things we talk to clients about because when we look at– First off, we’re a retirement planning firm here, but we do manage a lot of money for clients and investing in the stock market is very important for long-term capital appreciation and long-term security.
One of our core philosophies when it comes to investing in the market is to own good companies, blue-chip type companies that pay dividends, have a long history of paying those dividends, but they also have a history of increasing those dividends year after year after year.
In times like this, when our clients are getting their dividends spun off, they’re buying shares of that same company at much-depreciated prices, accumulating more shares than they would otherwise. The more shares that we accumulate, the more opportunity we have for wealth appreciation later when the market does rebound, but it starts with a plan. If you have too much money in the market, to begin with, and you’re in retirement or approaching retirement, the emotions, the anxiety can lead to bad decision-making. If you’re trying to go it alone, it can be really, really difficult.
1-800-822-6434, 1-800-822- 6434, Oak Harvest Financial Group. Check out the YouTube channel, check out the webpage, give us a call so we can help you out.
Mark Elliot: We’re halfway through the program. We got a lot more to get to. Stay with us. This is The Retirement Income Show with Troy Sharpe, the CEO and Founder of Oak Harvest Financial Group.
Voiceover: Oak Harvest Investment Services is a registered investment advisory firm. Troy Sharpe is an investment advisor representative and insurance professional. Investing involves risk, including the potential loss of principal.