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Dec 21, 2020

We’ve been spending a lot of time on the podcast discussing financial literacy and where the majority of people are falling short as it relates to planning and investing.


As we move forward this week, let’s start by talking about retirement concerns we continue to see. One of the biggest we’ve found is voluntary unemployment. The idea of giving up the career we’ve built and voluntarily give it all up to transition to a new chapter. Many times you might even be at the top of your game, and it can be a stressful and scary decision.


That’s why you want to as buttoned up as possible when it comes to your plan. The key question is to answer is how prepared and how knowledgeable do you feel today about retirement?


As we’ve pointed out before, a financial literacy quiz found that scores were actually lower in 2020 than they were in 2017. Many people did not pass the test and there wasn’t any section where scores were higher than 50%. That tells us that most people aren’t able to answer that question very well.


The good news is that many people in 2020 have at least been able to get a small preview into retirement because of the pandemic. Have you been able to spend less and be comfortable? Are you having trouble finding things to do when you’re at home all the time? These things have made people rethink retirement and whether they’re truly ready to transition.


So as you’re thinking more about that next chapter and what you need to do to get there, it’s critical that you get accurate information when it comes to finances. Whether that comes from us or other resources, you want to make sure you get it right. That’s why we’re clearing up a few misunderstandings on this show.


The first one we’ve seen comes with investing in bonds. Do you know how these change base on interest rates? Nancy will break it down on the show and explain exactly how the investment works and what causes the value to increase and decrease.


The next misunderstanding deals with small company stocks and dividends. Would you expect the yield to be higher or lower with a small company versus a large company? In general, the blue chip companies will pay a higher dividend because they are generating more revenue while the small company might have higher growth potential.


The third misunderstanding we want to clear up is actively managed funds and exchange traded funds. Only 28% of people in the survey knew the difference between the two, and most people will often lump them all into the category of mutual funds and assume they’re all the same thing. One big key is actively managed funds will have higher fees because someone is making investment decisions and managing the fund. You’ll want to compare the differences and understand the benefits of paying the higher amount for an actively managed fund, which we can help you sort through.


Hopefully this show will help you make better investing decisions, which is critical as more and more Baby Boomers move into retirement. We’re always here to help you with this so reach out and set up a complimentary consultation.


Use the timestamps below to hear a specific segment.


1:23 – A big concern we’ve found

2:40 – Financial literacy scores for 2020

4:52 – Being home this year allowed people to get a preview of retirement

5:58 – Clearing up misunderstandings

6:46 – Investing in bonds

9:07 – Small company stock

10:41 – Actively managed and Exchange Trade Funds

13:54 – Other categories of the financial survey that find

15:15 – Example of lifestyle changes that impact planning

17:23 – Make sure all of your affairs are in order


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