E.A.S.E. into Retirement Podcast

with Tom Mosley.  
Impact of the BANK CRISIS!

Click on the video to watch the podcast. Full transcript is included below.

Tom Mosley:

If you’re in retirement, you may be sitting there and saying, “What kind of impact is what’s going on in the banking world right now going to have on my retirement?” Let’s go over some of the things that are happening right now. We’re seeing bank closures. In February of 2023, the first bank closed in America since 2008. That’s 15 years. I mean, we’ve had a pretty good run, but a bank closed in the Silicon Valley. The Silicon Valley Bank, SVB. It closed one day and there was a huge drop in the stock market, 750 points and then swooped in the FDIC and said, “We’re not only going to insure the deposits on the bank, but we’re going to also insure not just the 250, but we’re going to ensure all the deposits even over $250,000.”

Then a week later they came back and they said, “Oh, we can’t do that to all the banks,” because they’re realizing that not just that bank, but they’re having some runs on banks because banks are selling and there’s like the turning up the heat of the microscope on banks right now, and they put out even a list of 22 banks and said, “These regional banks are in trouble.” You need to look that up on the internet. Your bank may be on there. I’m not here to badmouth any bank, but they’re not going to bail out all of the depositors on future banks a hundred percent. They’re just going to go up to the FDIC level.

So one thing we know, for a lot of reasons, banks are in trouble. Now let’s talk about some of those reasons. There’s been federal rate hikes where interest rates have been drawn higher and higher and higher. What does that do to a bank? For them to stay competitive, they’ve got to offer more and more and more on money markets and CDs. That’s one good thing that you might be able to lock into a CD at a higher rate right now. The problem is if the Fed gets control of inflation and you’ve locked into a five-year rate at a really high 5% or four and a half percent at the bank, here’s the problem for the bank.

What if in one year the interest rates go back down and you’ve got a four and a half or a 5% CD, that that bank is going to have to pay out when real money is costing one and a half or 2% again, like it has for many years? Well, that’s going to again, put more pressure on the bank. So at best, there are a lot of things that are uncertain. There’s been some poor regulations. They’ve relaxed regulations, and what they found out is in the Wall Street Journal article I read a couple of weeks ago, the regulations have been there, but they’ve been regulating all the little bitty banks and the big banks, but the ones in the middle, they’ve sort of been overlooking and not regulating those middle size banks like Silicon Valley Bank, Signature Bank, two of the ones that went under water. Okay?

And there’s been some runs on the bank. What’s a run on the bank? Go watch It’s A Wonderful Life and see what happened to the savings and loan, as the guy used to call it on It’s A Wonderful Life, and Jimmy Stewart miraculously, instead of going on his honeymoon, he takes all the money for his honeymoon and he saves the savings and loan because there was a run on the banks. It’s symbolic of what happened during the depression. Well, we’re not seeing that. We’re not seeing that. But another reason is with the prices going higher, more money is being drawn out of the banks, so there’s less liquidity in the banks. So if there is a run on the bank and there’s lower liquidity because you’re using more money to buy groceries and to do the things, because of inflation, that you do on an everyday basis, that puts pressure on the banks.

And remember, banks historically kept about 3% of all the deposits on hand. So if there’s very much of a run on the bank, they could seriously be in trouble. It’s not like an insurance company that has to keep almost everything in safe and secure deposits. A bank only has to keep a available about 3%. So it’s a really, really crazy world out there in the banking industry. So if you’ve got money in the bank, let’s talk about it. The nice thing is, first, the nice thing is the reality is if you’ve got money in the bank, $250,000 of your savings is insured per depositor. Little tip, if you’ve got more than that sitting around in the bank, we call it lazy money. If you’ve got more than that sitting around in the bank, you might want to take everything over 250 and put it in another bank or another bank because then each of those banks would be insured up to $250,000 on your savings.

But if you’ve got 400, 800, I had a friend in 2008 and the bank that went under in Pasadena, I was coaching little league with this friend and his parents were heavily invested in that bank to the tune of about $900,000. They lost $650,000 in that closure of that bank in Pasadena in 2008. So everything over 250 is not insured. So be very careful about what you’re doing. So let’s talk about your money. You may have lazy money that’s sitting in the bank and instead of putting it in another bank, you might need to put it in other secure vehicles that are going to probably pay you more than you’re going to get paid out of a bank and may give you more of a comfort level with where they’re invested right now, since all of this banking trouble and the fur is flying. It might not be safe money if you’re in the bank, and I hope you’ve gotten that point so far.

Here’s the silver lining. You might find that you’re making more on your money markets. You might find that you’re making more if you’re buying CDs and you’re doing that, there may be other things that are insured by other entities rather than the FDIC where you could make even more than you’re making in the bank. Just remember, no matter what happens when a horrible storm comes through and drops torrential rain on an area like California this year, okay, when that happens, at least the drought is over. We might not like the rain, but we like the drought being over. So there’s always good things. You might find that your interest rates are up on the things that you’re invested in within that bank. You might get better on CDs, on money markets, and also you might find in fixed annuities that the interest rates that are being paid in those fixed annuities are higher than they’ve been. And you can lock a fixed annuity. It works like a CD. It’s not FDIC insured, but it is insured by the state guaranty fund.

You might find an annuity that will pay you a higher percentage than anything that you could find in the bank in a long term five-year CD, and they operate basically the same mechanism. It’s just insured by a different entity. So all of these things are important for you to check out. The key is having a retirement plan where all your money is not necessarily just sitting there in the bank. You need some in the bank, don’t get me wrong, but you also need a pot for income and where is my income coming from? And that needs to be pretty conservative or very conservative or even guaranteed so that you have guaranteed increasing income for life. There are options that you have there, and then you also need some money in the stock market because most of you are going to live a lot longer than your parents did, a lot longer than maybe you always thought you were going to live.

And if you take the short term view of it and you plan on living for a short term and voila, you find yourself living a long time, you may be on the short end of the stick when it comes to finances. You need a retirement blueprint that will address not just what you’re making right now and not just what you have right now, but through the years that will take care of you to give you that comfort inside to know that I have a plan that’s going to take care of me no matter how long I’m going to live. Hey, if you want information that we can help you or if you want to talk about this video, then email us info, I-N-F-O at mosleywealthmanagement.com, M-O-S-L-E-Y, and our phone number is (714) 421-4288. That’s (714) 421-4288.

Hey, the impact of the banking crisis on your retirement funds, it could hurt you. There’s the old saying, “It’s what you don’t know, can’t hurt you.” Yes, it can, and you need to know about it. Mike Tyson had a great saying too. “Everybody’s got a plan until they get hit in the mouth,” and you might have gotten hit in the mouth, not by Mike Tyson, but by some of these inflation or the banking crisis or interest rates or some of those things, you need an alternate plan or a better plan to help you navigate what’s going on. This purpose of this video was to talk about the impact of the banking crisis, and it has so many tentacles that touch in so many other areas that impact you in retirement. Give us a call if you need any of our help.

Speaker 2:

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