Today, Paul talks about some of the most common advertising techniques people use to sell you their high-commission insurance products. All of these sales pitches are deceptive and can be easily debunked with basic knowledge about how stocks generate earnings and what happens to stocks during periods of uncertainty and inflation. Listen along as Paul breaks down why it’s important to slow down and remember the basic principles of investing and the difference between real financial education and an elaborate sales pitch. Later in the episode, Paul shares an article that shows how many Americans actually have $1 million for retirement and what’s holding people back.
Want to cut through the myths about retirement income and learn evidence-based strategies backed by over a century of data? Download our free Retirement Income Guide now at paulwinkler.com/relax and take the stress out of planning your retirement.
Paul Winkler: All right, welcome. This is “The Investor Coaching Show,” and I am Paul Winkler. That’s what we talk about here: money, investing, all kinds of crazy stuff going on in the world of high finance. There’s so much stuff I don’t even know where to start, but that never stopped me before.
Okay, so yeah, we’re going to talk about a lot of different things today. There has been, well, of course, you have the market activity late in the week, things going on as far as, well, some of it was due to how they’re trying to figure out labor statistics, and man, that has been an entertaining thing, has it not?
If you are watching the news regarding that, you cannot help but be entertained. And I guess that’s the euphemism of the day. We’re just going to call it entertainment because we have this thing about Trump ordering the firing of the Bureau of Labor Statistics chief, who decided that maybe the statistics coming out of that organization weren’t exactly right, and we don’t like the numbers, so we do that.
Man, there is a firestorm of debate regarding that, and people saying, “Well, the numbers are rigged, the numbers are too low. It’s not really what’s going on.”
And what’s always entertaining to me is that it’s just something, there’s always something. I don’t know how many of you remember watching Saturday Night Live in the 1970s. It was Roseanne Roseannadanna, “It’s always something,” right? And it was.
There always seems to be something going on. And so many people will try to make changes based on what they’re seeing in the news in their investment accounts and do things to try to gear up for what’s coming next.
We’ve been updating data here in the office. There are a couple of workshops that we actually teach on taking income from an investment portfolio.
We actually have a whole thing on income that we do because of the investment firms out there you hear advertise. I’m on just pretty much everywhere. And then you get these things in the mail.
I get them, I don’t know about you. If I get them, I figure everybody else is getting them as well.
I’ve got this one, “Register! Financial Planning. Retirement 101: Planning for Success.”
And it’s all of this stuff that you’re going to learn by going. And they hold these things at universities and colleges. They’ll hold it at high schools and educational institutions. A lot of times, they hold these types of things there because the implication is that this is something that’s coming from an academic or an educational perspective.
And even though if you read the fine print, the fine print basically says, “Hey, this is not affiliated with the educational institution.” Whether it be like a university, one of them is a community college, another one is a university that this is being held at. And they’ll say, “This is not affiliated with them.”
But here’s what you’ll always see, almost always see — I mean, I say almost always; I haven’t seen this where it’s not the case yet — that there is insurance involved, insurance products, annuity products at these programs. And it’s how you’re going to get income.
For example, this one has “Social Security: Navigating Recent Changes Regarding Social Security.” Well, the reality of it there really hasn’t been any real recent changes.
But if I convince you that there are some really big changes, then you’ll come because you’ll be like, “Oh my goodness, Social Security, it’s a huge part of my income in retirement.” “Choosing the right filing time to minimize taxes and maximize benefits.”
And there are filing strategies that can be used. You can learn about how these changes are or how the filing statuses work, but the reality of it is how it does apply to you is such an individual thing. That’s nothing you’ll really learn at a workshop.
The other thing is “The market is uncertain.” “Today’s market is uncertain,” is what it says here. “What now?” Like they know what’s going to happen now, number one.
Number two, like the stock market uncertainty is something new. No, stock market uncertainty has been since, literally, we have data on the stock market and some of it is going back to the 1800s.
If you don’t have risk, you don’t get return. If I want something that is totally certain, like a Treasury bill, my rate of return will be the same as about the inflation rate historically.
Go back a hundred years, the rate of return of something that is totally certain is the same as about the inflation rate, give or take about 0.4%. And it’s pretty much it. After tax is negative, right?
So uncertainty is something that comes with the territory. And if you literally say, “I don’t want any kind of volatility at all whatsoever, any kind of uncertainty,” recognize that what is going to happen is you are going to get certainty in that your returns after inflation will be nothing, and you’ll probably run out of money for a totally different reason than you thought you were going to run out of money.
You think, Oh my goodness, I’m going to run out of money because the stock market is going to go down. Markets go up and they go down. There are ways of managing portfolios to mitigate that.
But that’s not what these workshops are about. These workshops are about “certainty.” “You can’t run out of money, we’ll protect you.”
And then they have, “Based on the claims paying ability of the insurance company,” which tells you that something could happen to the insurance company, or they wouldn’t have to put that in the fine print. Right?
Then you also have the issue of inflation risk, the risk that the dollar’s just going to keep going down in value. It’s something that is built into the system. And I’ve explained this before because well, why do we have inflation? Well, you don’t want deflation.
And it used to be that there was no inflation. You tied the dollar to gold or something like that. And that’s the gold standard.
You didn’t have inflation in the 1800s. It just didn’t exist. Prices were the same all the time and compared to the goods that you bought.
Well, when you look at why inflation exists it’s because if you have prices going up just a little bit even, then it gives the impetus for people to buy something today versus buying it a year from now because it’s going to be more expensive a year from now. So I might buy something right now, and if I buy something right now, companies make profits right now and governments get tax money right now.
Well, if you have deflation, then prices are going down and you say, “Well, gosh, I’m going to buy that thing next year because it’s going to be cheaper.” And that just puts the incentives all in the wrong area.
Now, when we look at inflation and say, “Well, what could happen? What could go wrong?”
Well, there are a lot of things. Fiscal policy can get really messed up. We see a lot of the things happening right now in financial markets and we see the government and what they’re trying to do.
But we have seen historically where it’s gotten away from them. And I gave an example last week.
There was a situation, and I won’t reiterate this, but I was playing audio from someone that was one of the higher-ups in the Fed, Federal Reserve, a former higher-up in the Federal Reserve. And the point that was being made was that back in time, if we look back through history when there has been influence, let me just put it that way, or attempted influence on Fed policy, that what happened is it ended up backfiring.
And that’s where we ended up with stagflation. We had inflation with a stagnant economy.
And you have hyperinflation you don’t want because that’s a real problem. When you have lots of inflation, you have a real problem on your hands because if you had, and we did, we had inflation in the neighborhood of 12%. What that means is your prices double every six years at that inflation rate.
Well, you think about that. How do you keep up if all of a sudden your expenses, your cost of living, are doubling every six years? You can’t if you have all fixed income investments that aren’t keeping up with this stuff, or things that are “safe.”
So hence, the reason that equities are stocks and we have equity markets for that reason, because who’s raising prices? Companies.
Hence, if you look back through history, if you look back when inflation was really, really quite bad, late 70s, early 80s, throughout the 80s, one of the things you notice is that stock market returns back at that period of time, they were phenomenal for markets around the world. You would have international stocks, international companies going up 70% in a given year. Bam, just like that. And the reality of it is, it was because you have to raise prices when you run a company or you’re going to die.
When I pay for stock, what I’m buying is the rights to the earnings. And if the earnings go up, because they have to go up, then you have a P/E ratio, a price-to-earnings ratio. Now that bottom number earnings goes up.
And of course, because those ratios tend to stay very, very similar throughout time. It’s not always the same, it’s sometimes a little bit higher, sometimes it’s a little bit lower. But that’s why. But the thing is that, as I’ve always said, when inflation rears its ugly head in the very, very beginning, you can have stock markets go down.
Because people say, “Well, why are we worried about it? Why are we worried about inflation? Why does the Fed worry about inflation? Why does anybody worry about inflation if it’s great for the stock market?”
Well, the reason is because in the short run it can go down. And that’s basically what’s been happening right now.
We’ve been having this debate. And not that the markets have been going down. I mean, year-to-date has been pretty doggone good, especially in international markets, especially in that particular market.
But here’s why. You go, “So why might this happen?” Well, if you have an expense that is going to be borne by a company and all of a sudden they are going to have to deal with higher expenses — whether it be due to the cost of goods that they’re buying, maybe it’s because of tariffs, it could because of taxes, it could because of whatever — if they have extra expenses, that is going to hurt their bottom line.
And matter of fact, there’s pressure. You just saw it this week on the pharmaceuticals. “You guys better bring your prices down compared to other countries around the world for these pharmaceutical goods.”
So you can have pressure from there. You can have pressure from the public. You can have pressure from the fact that people can do substitution effect. They can go and stop buying the products that they were buying in lieu of buying something else that is similar enough that they’re okay with it.
And that can give pressure to companies to keep their prices in check and lower. You can have your competitors decide that they’re not going to raise prices and therefore they are going to take market share from you. That’s another thing that can happen.
So you have a lot of things that can actually create this problem where companies don’t want to pass that on. And when they don’t want to pass it on, that means that earnings don’t go up right away. And when earnings don’t go up right away or they go down, stock prices can go down in the near term.
So hence, this is why we have this balancing act when you invest that you do want to own equities. Yes, you want to own big U.S. companies, you want to own small.
It’s interesting, one of the things we were doing is we were updating our income workshops. It has been really, really cool because I’ve been teaching my son how this works and he’s been looking at it going, “Wow, this is kind of cool.”
If you look at how this has actually worked applying the academic research over the past 80 years, research that we have, that we’ve applied here, it’s actually cool how it works in the income process. And that’s my income book that’s something that you can go check out on our website, paulwinkler.com/income.
You can see it advertised all over the place because I really want people to get out of the myths of income. There’s so many myths regarding income that I want them to understand this.
So you got annuities, real estate can be problematic because you’re running businesses. That’s what it is.
I wrote this little booklet where I’m walking through all these things, interest, target date funds. I’m walking through all of the different things that I typically hear people talk about when it comes to how to take income in retirement.
And I’m just refuting these things and at the very end, I go, “Okay, now there are methods of taking income. There is a method that has been borne out by the research.”
The research goes back to literally the year 1900 was when it was looked at. How do you take an income and what are the ways that you could do this? And it’s very, very intensely logical.
But we’ve been updating this data recently and I was surprised when I was looking at it — not really surprised. I kind of knew it was happening.
But if you look at the various asset categories, big U.S. companies and small and large-value companies and small-value companies, all these things I might have in a stock part of a portfolio, it literally wasn’t until in 1989 that that asset category actually had the highest rate of return of all the asset categories for large U.S. stocks.
They just had not been something that for a long, long, long time in the data, it just didn’t happen. But it’s something I want to have there because it can happen, as I’ve always said that.
And it did happen again in 1998. And then in the last 10 years, it was like five or four or five of them, it was the top asset category.
So it’s been a little bit more recently, and that’s lulled people into a complacency about big U.S. companies, which is what I also always talk about with target date funds. They’re overly weighted into that particular area.
So I’m talking about the income and I’m saying, “Okay, so you got all these stock asset categories that we want to have, but the reality of it is stock markets are volatile. They always have been. There can be volatility.” It can increase and decrease based on what’s going on.
So typically something that is backed by high-grade corporates, high-grade government bonds, AA, AAA-rated bonds, so that the ability to repay debt is super, super high. So we don’t worry about whether I’m going to get my money back.
As Mark Twain says, “I’m more concerned about the return of my money than the return on my money.” So he would’ve been a big fan of those types of bonds.
And then you want to have different maturities because different maturity types of bonds will actually respond differently to market movements. Short maturities will just always go up and are really not affected by stock markets.
But longer maturities tend to have a dissimilar price movement with the stock market, which leads to so much that I’ll talk about today regarding things that were thought to be moving or were thought that they would move in a dissimilar fashion with the stock market, and just the opposite has actually happened. This is something that I’ve talked about.
And there are a few things that I’m going to walk through today. I think it can be really fun. But you’ve got that.
You’ve got people saying, “Hey, why can’t we afford houses right now? Why can’t people afford houses right now?” There’s a debate about that.
And there was a funny article about it because I think it’s just really … I said, “This is silly, this is really silly, this debate about why people can’t afford houses.”
And I read it to my wife and I said, “What’s wrong with this article?” And she laughed. She said, “This is what’s wrong.”
And this is the last area that she pays attention to, I’m going to tell you. Yes, she lives with me, but she does not pay attention to this stuff. And even she got how bad this article was, written by a well-known financial publication. Then I’m going to walk through what really is happening from my perspective.
And then there’s another thing about how many Americans are actually retiring as millionaires, and it’s not what you’d think. What was their point that they were making there?
And of course, we have some of the, well, maybe a little bit of talk about the big, beautiful bill. Did a workshop on that this week. Paulwinkler.com is where you can find that workshop.
I think it’ll be posted pretty soon. I don’t know that it’s posted right now, but it will be posted pretty soon. Whole tax workshop, the implications of the bill and the things that I think you need to know. Evan and I did that workshop.
So got a lot to cover today. We will be getting into that.
There’s a new style of managing America’s debt too. That’ll be interesting. We’ll talk about that.
So, not as many Americans actually retire as millionaires as one might think. That was the premise of an article that I saw online this week. It says, “Many Americans dream of retiring with a million-dollar nest egg — Americans in general think you need about $1.5 million to retire — but the reality is starkly different.”
And they were looking at the Federal Reserve Survey of Consumer Finances, updated in 2022, released in 2025. Only about 2.5% of Americans actually have a million or more saved in retirement accounts, they basically said.
And it says the “figure might shock anyone used to seeing the financial media and their depictions of average Americans amassing enormous portfolio gains [over the past couple of years].” That’s what we typically hear the past couple of years. Now, here’s the thing that I often point out, is you may hear about stock markets doing well, you may hear about mutual funds having high returns.
There are different places that you can go and get this data. Morningstar actually tracks this data. DALBAR actually tracks this data as well. But what they actually look at is what the actual return of investors in these funds have been, what they’ve been versus what the funds have done. It’s a different number.
When you look at the number of what the fund’s return has been or the investment market has been — and I’ve seen the data doesn’t come back any different anytime that I’ve seen it, and I’ve been watching this data since the mid-1990s — you’ll notice that the return of the investor in the fund is drastically lower. And the reason being is that after markets really do well, people get really excited.
Everything seems great because all the news is really good. “Hey, everything’s going great. Look at this. Look at the stock market hitting record levels.”
And people get excited about investing when those are the news events that are coming out, “Everything’s going great.” “I want to be part of it.” FOMO, fear of missing out. “I want to be involved in this.”
But after markets go down, people go, “Oh man, this is really rough. Things are really quite bad.” And that is what we typically find.
So you take an investor and you say, “Well, what if an investor decides that they’re going to put money away and do it on a regular basis and they want to get to retirement?” And maybe they’re popping away, let’s say that they’re popping away about $10,000 a year. Let’s say that somebody’s able to do that level of investment, and let me bring it down a little bit because that might be a little daunting to somebody to be able to put that much away.
But let’s say that you have a situation where you’re putting money away, and you do it for your working lifetime, and let’s just take inflation out of it. And let’s say that it’s the same amount, and we’ll inflation-adjust the return numbers too.
You can’t say, I’ve heard people say, “Well, I get a 12% return on my money. And I’ll be a multi-gazillionaire.”
Well, you’ve got to look at what that return is after inflation. So typically what I’ll use if I’m really well diversified, 7 to 8% above inflation.
So if inflation is 3, the return would be, let’s say, 8 above inflation, it would be 11. Okay? If inflation is 5, then the return would be 13. If inflation is 1, the return would be 9.
So inflation-adjusting your accumulation number is a way to look at the number that is produced and say, “Could I live off it? Could I do something with that?”
So let’s say we take somebody and they put away $5,000 a year. After inflation, that’s about $1.3 million. So you look at that and go, “That’s how someone becomes a millionaire, is by doing that.” Right?
But let’s say you look at the average return of investors in stock markets according to DALBAR, and you say, “What was the return that they actually got?” Well, the actual return that they got brings them to about $244,000. Yeah, that is the difference. It is a huge difference because DALBAR actually goes in and says, “Well, what do investors actually do?”
And they find that after markets go up, they tend to buy, after markets go down, they tend to sell. So you look at the asset allocation investor, and it’s not very good. The numbers are really bad.
As a matter of fact, I’ve tracked this, like I said. I’ve tracked this since the mid-1990s. And when they did this study, when they first did this research back in the ‘90s, what they did is they looked at investors using investment advisors, brokers.
And then they looked at people that were using no-load funds, where presumably they weren’t using anybody to guide the process. They were equally bad. The reason that they did it that way at first is they wanted to show how much value the advisor added.
And that’s literally when I started this radio show, I would talk about that a lot, because I was like, “Look, the problem is the way people approach investing.” And it’s not just the public. It’s the investment advisors because the investment advisor’s trying to sell their investments.
How do they get you to buy? How do I get you to get excited about putting your money in this fund that I’m trying to sell or this investment vehicle?
If markets have been down, things have been looking bad, I’m going to appeal to your fear. I’m going to go, “Hey, look, things are really rough and you can’t afford to run our money. You can’t afford to invest right now because you could lose because here all this news is bad.”
So they push annuities, fixed-income investments, and things that have a fixed rate of return or things that appear to be “safe.” Then when markets look good again, markets are hot, things have been going really well, maybe a political party that you really like is in power, then you get excited about the stock market and what the future’s going to be.
Now I can really get you to buy mutual funds, and I can show you the five, 10-year track record on a fund and get you to buy it. Because people think 10 years is a long time.
“Oh, that’s a long time. I mean, it’s got a 10-year track record. This has got to be good.”
And they invest. And then, of course, what ends up happening is things fall apart, and then they go, “Oh, that wasn’t such a good idea after all, was it?” And this is a pattern that goes on over and over again.
So how many Americans actually retire as millionaires? The answer may not be what you think. It’s really low, according to this article.
But I would look at it and go, “It actually is what I would expect based on what I have seen in my historical performance of markets versus historical performance of investors in markets.” And this is why I think that becoming an informed investor helps people go, “I’m not going to constantly be looking for ways to knock it out of the park.”
I find a lot of younger people right now, they’re getting involved in a lot of meme stocks. That was an article that was talked about. I may get to that. And it was the meme stock craze right now and how that’s affecting things and how that might affect things and things that people are worried about regarding that.
And that drive to get rich. “I got to get rich. I got to do something really quick, and I got to strike while the iron’s hot.”
And people end up making big mistakes when they invest that way time and time again. Here’s the key. I’ve been doing this for 35 years. I’ve been doing it the right way for 25, 26, probably like 27 now, we’re about at 27 years that I’ve been doing this based on academics and evidence-based research.
It used to be they would stock pick between different stocks, and they would move money between different stocks. Now they’re doing it in entire markets because it’s easy to do that with ETFs. It has become a bigger problem.
And when are they going to learn? I don’t know that they ever will. I don’t know that they ever will.
But it doesn’t mean that you can’t avoid those problems. That’s what this show is all about. That’s what we’re all about around here.
Advisory services offered through Paul Winkler, Inc an SEC registered investment advisor. The opinions voiced and information provided in this material are for general informational purposes only and not intended to provide specific advice or recommendations for any individual. To determine what investments are appropriate for you, please consult with a financial advisor. PWI does not provide tax or legal advice. Please consult your tax or legal advisor regarding your particular situation.
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