The Top 5 Rule Changes That Could Affect Your Investments in 2025, Plus Should You Invest During All-Time Highs?

Join Arsenal Financial advisors Doug Orifice and Jeremy Vaille as they open up their relaxed office conversations about various financial topics for everybody to hear.  This episode dives into the changes coming in 2025 that will impact retirement planning and savings strategies for both individuals and business owners. They jump into:

• The "Mickey D's Law" increasing 401(k) catch-up contributions for certain ages.
• Small businesses and 401(k) auto-enrolling employees.
• Roth contribution options are now available in SEP and SIMPLE plans.
• If you inherited an IRA in recent years, talk to someone!
• Social Security not only isn't going anywhere, it's going up!
• A new Mythbuster segment where Jeremy busts the myth of avoiding investing during all-time highs. 
• Then finish up with what Doug and Jeremy are looking forward to in 2025 and of course some dad jokes from Jeremy.

Learn more about Doug, Jeremy, and Arsenal Financial at arsenalfinancial.com or call (781) 335-9100.

Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. The information in this podcast is educational and general in nature and does not take into consideration the listener’s personal circumstances. Therefore, it is not intended to be a substitute for specific, individualized financial, legal, or tax advice. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a final decision.

Transcript

Doug: 0:04

Welcome once again to the Arsenal Money Clip podcast, where we are trying really, really hard to make a listenable podcast about money. My name is Doug Orifice. I'm a financial advisor here in Watertown, massachusetts. With me on the line is my buddy, my partner, my pal, who I was at a holiday party with last night for our firm, Jeremy Vaille, down in Norwell Mass. Jeremy, what's up, pal? How are you?

Jeremy: 0:28

Hey, good, it's Friday. I'm excited for the weekend. 

Doug: 0:32

You don't sound excited. 

Jeremy: 0:35

I'm all out of water, I'm all out of water. It's a late night.

Doug: 0:36

It was a late night. We'll start this by saying you know, there's a million reasons that we love being part of a small business, but our small business is also our second family. We are recording this in mid-December here, so it's holiday season. You might be listening to this in the new year. We're going to be talking about the new year, but, man, when you are part of a small business, it is a lot of fun. You get to write your own narrative, you get to develop a second family. It's been a good year for our team, hasn't it?

Jeremy: 1:02

Yes, it has. Added a new chess piece, which is great. Bring someone into the family. Continued to strive in a lot of different areas, so it was a good year.

Doug: 1:11

You know this is the sixth podcast that we've done. I don't think we've really talked a whole lot about our business, but maybe this is a cool time to give some shout outs. So our business is Arsenal Financial. We're a financial planning and investment management firm. We're a small business in America. We are a small business that has five fantastic human beings, well, at least four, and then I get to go along for the ride. But it's myself and Jeremy as financial advisors. We have another buddy who's a financial advisor, Chris Genitasio, who operates in downtown Boston. And then you know the true stars of our business, Heather Harris, who is our queen of operations, our nine-time MVP of Arsenal Financial. And we have a new employee who works in New Hampshire, Christine Donovan, who's just been phenomenal. So I don't know, man. I'm smiling this morning, even though it was a late night and I didn't get a lot of sleep. I am elated at the team we built.

Jeremy: 1:59

I think Chris might be the Juan Soto of ‘24.

Doug: 2:05

We can talk about Juan Soto, because he's not a Yankee, you know. Otherwise I wouldn't want to talk about it. Oh man. Well, the focus of today is next year.

Doug: 2:14

So the whole point of this podcast, right, is, we've said every time we're doing it and contrary to my son's opinion of Jeremy and I trying to be Bill Simmons, Joe Rogan, it's not what this is about. It's just about bringing our conversations and our thoughts around our meetings, our industry, investments, the economy, our coffee talk just out loud for a half an hour or so, right?

Doug: 2:39

So this time of year, you know, we're starting to wind things down, we're making sure that we're buttoned up for clients and really most of our energy, I think, is always forward looking. But we're really thinking about next year and we're talking about what to do for this podcast and we thought we might highlight maybe a handful of changes that people should be thinking about, because there's actually a surprising amount of new rules. Not really as how it applies to taxes, but more new rules for retirement planning, retirement plans. I don't know how exciting of a top five it's going to be, but we're going to try and make this top five as fun and enjoyable as we can and then, hopefully, for listeners, maybe you'll learn a few things about how 2025 for retirement planning will be a little bit different and there's some things that you can either A take advantage of or B some things that you have to do and be aware of if you're in certain situations. So, JV, should we get into our top five?

Jeremy: 3:26

I think so. I think so, and just to kind of set a little bit of context, a lot of these changes are from something called the SECURE Act. The SECURE Act 1.0 was originally signed in in 2019. And then SECURE Act 2.0 was an extension of that. That was signed in in 2022. So a lot of those changes that were presented or proposed in that legislation are now coming to fruition and being actual law that we have to comply with.

Doug: 3:52

Right, so why don't we start with number one? Should we call this the McDonald's law? (Jeremy: Yeah, yeah. I like that.) The Mickey D's law. Tell us about the Mickey D's law.

Jeremy: 4:02

Mickey D's law. All right, you're going to have to explain it to me.

Doug: 4:08

I'm talking about the supersize me, man. I love it. What's great about hanging out with you is you and I have our own language, and sometimes we out language each other and we're just like what the hell are you talking about, man? You know? What are you talking about?

Jeremy: 4:22

Which is great because Heather doesn't even know. She has no clue what we're talking about. We might as well be talking in Mandarin.

Doug: 4:30

Aliens, aliens.

Jeremy: 4:32

All right, supersize me catch up. I like it.

Jeremy: 4:34

All right. So in current legislation you can, once you're 50 years old, you can make a catch up contribution to your 401k. So that means the IRS has a limit on what you can put into your plan. But then, when you're 50 years or older, you're allowed to put an additional amount in there to essentially catch up for retirement savings. So the new provision is really very specific for ages (Doug: It’s extremely specific) Yeah, I don't know why they limited it to 60, 61, 62, and 63 year olds.

Doug: 5:06

It's well-intended, but it's odd, you know. But but well-intended, let's get into it.

Jeremy: 5:11

All right, If you're 60 to 63, you're allowed to put an additional 50% more into the catch-up which is now going to be a total of $10,000. So, let’s see, in 2025, the limit on your 401k is going to be $23,500. (Doug: If you're under age 50.) If you're under age 50. So just the contribution limit. And now if you're over 50, you can do $7,500 as a catch-up contribution. But if you're 60, 61, 62, or 63, you can do $10,000.

Doug: 5:43

Not 64 and not 59. (Jeremy: Right, just those four ages.) Very specific and weird. How this will be implemented across the board, across payroll companies, so on and so forth. Hopefully it should be fine and seamless. So I guess the bottom line is right is if you are in the bottom of the eighth inning, top of the ninth inning of your career, you are hopefully at the high point of your earnings. When you're 60, 61, 62, and 63, you get a chance to put in, well, it's going to be $33,500 is the max for that eight bracket.

Jeremy: 6:18

One more wrinkle to this. (Doug: Oh, do tell.) If you made more than $145,000 in the previous year, those have to be Roth contributions. 

Doug: 6:30

Oh, interesting, I didn't know that. Say that again.

Jeremy: 6:31

So if you made more than $145,000 in the previous year in OASDI or Social Security definition of wages, then those have to be Roth contributions.

Doug: 6:44

There is no way that this is going to be implemented smoothly. Absolutely no way, no way.

Jeremy: 6:57

Nope, and because of that they're allowing anybody under to have an option to do Roth deferrals. 

Doug: 7:00

So you know this is going to dovetail really nicely into us talking about 401ks in a bit right, because to a degree, I feel like 401ks have become much more user-friendly for participants, to a degree employer, over the last 10 years or so. I feel like, starting on January 1st 2025, maybe not as user-friendly and not as easy and plain vanilla to understand from a, what can I do? What do I have to do? What are my options? Which maybe speaks to getting some advice.

Jeremy: 7:34

Yes, the layers of complexity are continuing to build.

Doug: 7:38

So number one, the Mickey D's rule, which is, again, well-intended but weird If you're 60 to 63, you can make a supersized contribution to your 401k or 403b plan.

Doug: 7:50

I know we're going out of order from our list here, but I feel like this is a perfect segway to talk about number two, which is that there are some 401k changes specifically for small companies, right. I think who we're speaking to right now is, I guess what a third of our practice, right, is small business owners and people who are decision makers in small businesses. There's some things you have to be aware of, and you got to treat your 401k plan a little bit differently next year. So there's a few changes, and I think number one, if you have part-time people on the payroll, they will generally be eligible for your 401k. In prior years, you could exclude people who were underneath a certain amount of hours, but generally speaking, part-timers will be included. It's not all part-timers and we're not going to get into the minutiae because we want people to actually listen to this podcast right? Generally, part-timers are going to be eligible for a 401k plan starting January of next year.

Doug: 8:45

The other thing is you also need to auto-enroll people into the 401k. This is, again, well-intended, but I think this is important to know. If you're listening out there and you have a small business, you will be auto-enrolling people into your plan going into the future, starting next year. You want to check in with your 401k provider to make sure that the provisions and mechanisms are in place to do so. JV, do you want to know why I like auto-enrollment? (Jeremy: Why?) The I word. Inertia, path of least resistance. Like when my 12-year-old guy doesn't have something scheduled like baseball practice or whatever. It is inertia, right, he's just going to sit on the couch and play video games 

Jeremy: 9:29

Does address our behavioral finance topic right.

Doug: 9:31

Correct. We see a lot of inertia right, which is like let's just kind of keep doing what we're doing sort of thing, or keep not doing what we're doing. Especially if you're younger too and you're afraid to put money away that you can't touch for 30 years, I get it. Inertia, or the path of least resistance, is now defaulted into your 401k plan, whether you like it or not, which is good because it at least nudges people into a good behavior, and then doing nothing will mean you're saving, and doing nothing will mean that you're probably getting a match from your company, which is great. So doing nothing, you end up getting this head start for retirement. So I was pretty pleased at the overall change there in the law.

Jeremy: 10:09

The one thing that, you know and this is just anecdotally, but some of the third party administrators are setting the target at 10%. So it's not insignificant. Not like they're auto-enrolling you at 3%. It could be as much as 10%.

Doug: 10:23

Our advice and we're very hands-on with our clients who have 401k plans. And what's really neat in our world is we have great partners too, right? So there will be what's called the record keeper, which is like the investment provider. So for a lot of you out there, that's Fidelity or that's Vanguard or that's Voya or Empower, whoever it is. And then, yeah, Jeremy, you just mentioned a third party administrator. That's kind of the behind the scenes company that will write the plan document and file the taxes on the 401k plan, right?

Doug: 10:54

So I bring those roles up because if you're a small business owner, we know number one you have a million things going on. If you own or run a small business, you instantly have 25 jobs. Like going into next year if you run a 401k plan, just make sure that your partners, whether it is your investment provider, whether it's your 401k administrator or your financial advisor, is helping you communicate these changes with your employees too. It'll help eliminate some surprises and they're actually good changes too. Again, the spirit of a lot of this is that we want to get more of America saving. You know, as everybody questions the existence of social security, which we'll talk about in a little bit there's always going to be this push towards saving more, saving more, saving more and putting the onus on people to prepare for their own futures and not relying on social programs to pay your paycheck later on down the line.

Doug: 11:49

So pretty good changes. But I think understand the changes as a business owner. Make sure that they're being communicated. If you have a 401k provider, this is a good time to delegate too. Making a phone call, sending an email and say hey, you know, what should I be saying to my employees? Is there something that you can send out? And directing a lot of your employees to your advisors and investment providers and so forth. So, anyways, I think those are the two biggies, right? Am I missing anything there? 401k changes.

Jeremy: 12:10

The other is just that now and I don't know how much this is going to be adopted, but plan sponsors have the option to allow employees to elect the match to be Roth.

Doug: 12:20

Which, in theory, is cool for the person who is receiving the match, which is not cool for the employer because they can't write off the match, right? (Jeremy: Right.) So if we're speaking to small business owners out there right now, one of the incentives to having a 401k plan is generally tax reduction. If you've just recently implemented a 401k plan or you will be considering a 401k plan, there's tax credits available. In some cases you can almost ride for free from an administrative cost point of view on a new 401k plan if you're a small business. Really really cool. But yeah, to your point, if one of my biggest costs is matching costs and I can't deduct it, I don't know if I'm going to do it.

Jeremy: 13:05

You just hit on the second of my favorite two changes, and that being that startup tax credit. So can I just expand on that a little bit? (Doug: Crush it, let's go.) The current provision is that you get a startup credit if you open up a new 401k plan and it's currently 50% of the administrative cost, up to an annual cap of $5,000. And administrative costs can be a barrier or a hurdle to opening a 401k plan. That could be upwards of what a couple grand potentially in the first year, right. So the new provision is the startup credit goes from 50% to 100% for employers with up to 50 employees. (Doug: Huge.) So you can get a huge deduction in the first three years of having that 401k plan, which is great because it gets the ball rolling again. It's an inertia thing, right, so I love that provision.

Doug: 13:53

And you and I, most of our 401k plans and clients are those small businesses like us up to 50 heads, smaller businesses where we can make an impact and actually have some fun and build a relationship. I think we've also seen that businesses of those sizes, especially if they're doing well and growing, they're like oh man, I need to offer a strong benefit package, but there's a lot of costs between matching and administration. So, yeah, you're right, it's nice that they've been continuously rolling out some incentives, tax credits and removing some barriers to start a plan. So if you are a small business owner and this sounds like you don’t be afraid to kick the tires of considering a 401k plan, right. Hey, you want to talk about SEP and SIMPLES really quick too. There's this category of what we'll call junior 401k plans that I feel like we used to use more, but I feel like we're using less because 401ks are becoming user friendly. But why don't you hit on SEP SIMPLES and how those are changing a little bit. This is number three on the top five.

Jeremy: 14:50

And this is my number one favorite change. So SIMPLE and SEP are, yeah, like how you said, a junior 401k. This is really for a very small business. SEP is a Simplified Employee Pension Plan, so it's essentially a small business contributing to a retirement plan for the business owner and whoever works for that business. 

Doug: 15:12

You know what I always tell people about the SEP, not to interrupt you. SEP, self-employed person.

Jeremy: 15:17

Yeah, yeah.

Doug: 15:18

Because that's the best candidate. Doesn't mean self-employed person, but.

Jeremy: 15:19

Right, and prior to this year or this change, all those contributions had to be pre-tax. So the new change is that now Roth is an option in SEP and SIMPLE plans. In 2006, Roth was added as a feature to 401k plans and more plans have adopted that over time (Doug: Yeah, I want to say over 90%.) Yeah, it's very rare you see one that doesn't have a Roth option, right. So just a reminder Roth is an after-tax contribution that grows tax-free or tax-deferred, but then distributions are tax-free, whereas those pre-tax contributions are taxable.

Doug: 15:55

And I think the spirit of this right is the great American giant kick the can down the road. Which is, oh well, there's fewer tax breaks today, which hopefully means more tax revenue now if we have more people putting into Roths. But if you're on Doug and Jeremy's side of the fence, the Roth is just a better option for a whole host of our clients. Not everybody but if we're helping a client's adult child who's 26 and finally really hitting their stride in their career, has 30 years for that money to cook.

Doug: 16:29

Oftentimes, Roth is a great choice for them.

Jeremy: 16:31

And we've talked a lot about on here is just compound growth over decades and just the unknowns of tax law changes that are down the road and how historically relatively lowish tax environment compared to where we've been and where we potentially could be. So having the ability to tax diversify and have a pot of money that you can pull out of tax-free side-by-side to other kind of taxable income is a great flexibility feature.

Doug: 16:57

I want to jump off the highway really quick onto an unplanned exit and make a pit stop. For no real good reason I was nerding out and I was looking at historical tax brackets going back well over 100 years. And did you know as recently as the early 70s, the highest federal tax bracket was 70%? (Jeremy: Wow.) 70. (Jeremy: Unbelievable.) Highest tax bracket now is 37%, which seems god awful, but it's not 70%. And during World War II, when the government needed revenue to fight a war, highest tax bracket was 90%. So A, as you pointed out, it's a very, very forgiving federal tax environment right now, compared to 85 years of history.

Doug: 17:42

Secondly, $1.9 trillion deficit this year. For those who need like the whiteboard version of that, that is, spending by the government exceeds tax receipts by $1.9 trillion. We're actually hearing a lot about that right now because, like with this election cycle and the next four years has been a lot of focus on exactly that. Whether they can actually call that amount or shrink that amount, I don't know. You know. Good luck to you, Vivek Ramaswamy and Elon Musk. We'll see what happens there, right? But to your point, and to tether this back to the Roth, the math is broken right now and tax rates have to go up for some of us in the future. So I think you and I are always making the choice that it's our duty to assume with clients. They're going to face higher tax rates later than they do now.

Jeremy: 18:34

Even in dropping tax brackets in retirement right. Now, all of a sudden, you don't have your high paying job. Now you're just living off your distributions from your hard earned savings and Social Security that you have and you might still be in a higher tax bracket, even losing your job and having that income, than you were today.

Doug: 18:52

We see it all the time. So we've got three down. A couple more to go here. Let's hit this one really quick. Inherited IRAs. You sent me a mind-boggling chart. Talk about something that the IRS is going to have a really hard time monitoring, and financial companies are going to have an extremely hard time making sure that savers and investors do what they need to do. There was sort of like a, should we put it, a quiet period with inherited IRAs.

Doug: 19:21

From 2019 on, if I have this correctly, the rules on inherited IRAs changed, in which if you inherited an IRA from a relative that you are not married to, so a non-spouse, you have to empty the inherited IRA within 10 years. Quietly as part of that rule, you're supposed to continue to take distributions from that inherited IRA if the person you inherited it from was taking distributions. Anybody's head spinning yet? Good, let's have it spin even more, right. So, in other words, if you inherited your IRA from somebody who is age 73 or older, you're supposed to be taking distributions from that. Well, enter COVID 2020. There was a moratorium or a pause put on that rule, because there's a million things that went on from 2020 to 2021 that were sort of either stimulus related or allowing a bit of ease for families, right. So that was just one of those things that was a can kicked where it was like okay, you know what, you don't have to take a distribution at all in an inherited IRA. Just remember that you do have to empty that account in year number 10 from you inheriting it. However, on the mind-boggling chart that Jeremy sent me a month ago right, because we had to figure out for our business who we need to get things done for, right, if you inherited an IRA from somebody who was 73 or older, starting in 2025, you need to take a distribution, kind of continue the legacy of distributions that were being taken from that account if you have not taken one in the last few years. So, anyways, before people just like hit the pause button and start playing music right, because this is too confusing let's button it up with this. If you have inherited an IRA in the last five years and you inherited it from a relative that was older, take a hard look at it, ask questions to your accountant, to your financial advisor.

Doug: 21:09

Just make sure you're doing the right thing with it, because there's actually some penalties if you don't take your distribution that you're supposed to take. And there's been pretty awful communication about this and it's going to be very hard to monitor. And financial companies don't have a very easy way to calculate this either, because you know like 3x equals 6, right, we know x equals 2. Algebra is easy to figure out, so normal required minimum distributions are easy to figure out. There's too many variables going on for companies to kind of implement this at scale, so a lot of mistakes are going to be made and I think there's a lot of potential tax penalties here. So yeah, if you inherited a retirement account, be vigilant.

Jeremy: 21:51

That penalty, just for context, used to be 50%. So if you missed your RMD, that's a 50% whack. (Doug: Yeah, ouch.) Now it's down to 25%. And I think even less than that, if you can reconcile it quickly. But Douglas is being a little bit modest. In the chart, it's actually 13 pages of decision trees of ridiculousness. So it's not just a chart. There's a lot that goes into this thing. It sounds easier than it is, that's for sure.

Doug: 22:18

All right. Number five. This is kind of an easy one. Hey, JV, is there going to be Social Security next year? Is it going to disappear?

Jeremy: 22:25

A lot of questions about that and I'm going to say it's still intact, it's still going to be there next year.

Doug: 22:31

It's still ugly. The math is still broken. We're not funding it correctly. However, there are 70 million people in this country that are receiving Social Security benefits right now and that number is poised to go up by another two and one half percent in January. Inflation is on everybody's mind all the time. We've done six of these podcasts and we've talked about inflation every single time. It's a bee in the bonnet for almost all of our clients in many different ways, right. However, as prices go up, so does Social Security. Over the last four years, after you receive this bump in January, if you're a Social Security recipient, your benefit has increased 21.8% over four years. So, in other words, if you were taking a $2,000 a month payment in the very tail end of 2020, that payment is now $2,400. That's a good chunk of change.

Jeremy: 23:28

That's probably better than most people's jobs out there. (Doug: That's real money.) That's real money.

Doug: 23:30

And you mean in terms of increase, right?

Jeremy: 23:33

Yeah.

Doug: 23:34

Because I mean the wage increase this past year was 3.9%. That's a historical average. It has not been 3.9% over the last five years. So, yeah, your increases to Social Security are probably outpacing your increases of wages across America in the last five years.

Jeremy: 23:50

And the other thing. So when we're having that question of is Social Security going to be there? We know the math's broken. We talked about it last time. An easy way to put a little change to that would be to not add an increase. (Doug: Correct.) And we're still adding an increase which is going to be costly to the system, right.

Doug: 24:04

Because it's law, because it's law. So again, you and I make the decision to when we're doing the numbers for a client for retirement planning, we always assume an extremely modest cost of living adjustment for social security and it has not been extremely modest over the last four years. As a firm rule, we project forward social security increases at one and a half percent and it's up almost 22 over the last four. So there's your top five. Four of these deal with retirement accounts. So I guess let's put this on the back of the envelope.

Doug: 24:34

If you're a small business owner, make sure you huddle up with your team whoever that is, your investment provider, your administrator, your advisor, your accountant about how your 401k works. Just make sure you're making appropriate changes. Communicate with your employees. If you are in the eighth, ninth inning of your career and you're earning a good chunk of change and you're between age 60 and 63, you get an opportunity to add more money. There are more options to put money in after tax and then take it out tax-free. So there's more opportunity for the Roth, Bene IRA, inherited IRA. Proceed with caution. Ask your questions. That is not a set it and forget it sort of account. So be careful and go get some help on that. And Social Security you're getting a pay raise. 1, 2, 3, 4, 5. JV, I'm really excited today because it's Friday. Because have a fairly light schedule today. Because I get to hang out with you for a little while and our guy Matt Hanna here.

Doug: 25:27

Matt Hanna, thanks once again for helping us out with the podcast, but we got a new segment. God, I feel like a real podcast.

Jeremy: 25:33

I feel like the music should be going pew pew pew or something like that right. 

Doug: 25:37

Matt, you gonna put some music in. Oh yeah, he's giving us a little nod. 

Jeremy: 25:40

Mythbusters!

Doug: 25:42

JV's Mythbusters.

Matt: 25:44

That's it. What you just did there. I'm gonna like put that in reverb. Mythbusters!

Doug: 25:50

I love it, I love it.

25:52

[sound effects]

Doug: 25:57

JV's Mythbusters. Go for it. What do we got today? What's your segment? Explain to the humans and then let's hear today's Mythbuster.

Jeremy: 26:02

Alright, it's kind of born out of our last podcast, which was the reality check. So we're kind of taking these concepts, these, I guess you could say, hearsay out in the world that people have locked in as truths, and so we're going to break those down, take the myth and turn it on its head and see if it's true or not. (Doug: I like it.) So today's myth is that we shouldn't invest in all time highs when markets are at all time highs, and because we've had, believe it or not, and I just recently pulled the data 53 all time highs this year in the S&P already.

Doug: 26:35

Holy Smokes.

Jeremy: 26:36

Huge number right.

Doug: 26:38

I didn't know it was 53. (Jeremy: Yeah) I knew it was up there and over 40. 53 this year? Wow.

Jeremy: 26:43

So the data is this, and I'm getting this from JP Morgan, all time highs in 2024, 53 days S&P has hit an all time high. If you look back since 1950, that's 6.7% of the days the S&P closes at an all time high. (Doug: Wow.) So call it one day out of three weeks, trading days, right, you're hitting an all-time high. Pretty crazy right? (Doug: Yeah, never thought of it that way.) And the funny thing is, over that 74-year period, almost 31% of the time that high is a new floor. (Doug: Interesting and explain to people what you mean by a new floor.) So a new floor means that the market doesn't go below that by more than 5%. 

Doug: 27:23

Got it.

Jeremy: 27:24

So an all-time high that essentially never goes below that again. (Doug: Which sets the new standard for values.) Yes, sets the new floor for numbers to go up from there. So it's interesting, this chart also shows if you invest only on new high days, so on those 6.7% of days that reach a new high, and you only invest on those days, five years later your cumulative return is almost 80%. (Doug: Oh, that's fascinating.) If you invest on any day, so all the days, your cumulative return is only 74%. (Doug: That is a myth buster.) Isn't that crazy? So if you invest only on the high days, you outperform investing on every day.

Doug: 28:03

So let's pick that apart conceptually. When you're investing, when the market's at an all-time high, you are investing in a bull market. And let's put this caution flag out there. No guarantee that a bull market will stay a bull market. A bull market always becomes a bear market at some point, right. (Jeremy: Right.) But when you are in the middle and let's say the actual middle, the midpoint of a bull market, there's room to run. We don't know exactly where we are in this bull market. This bull market is currently 13 months old. Started really like the first week of November 2023. We don't know how long this is going to run, but you don't have to go too far back in history. Just go back to 1995 to now, or just the last 30 years. We've had several bulls that have run a while. So thank you, byy the way, that was a great MythBuster.

Jeremy: 28:56

I have more data. (Doug: Oh, you got more to go?) I need to tell you more. 

Doug: 28:59

Oh, let's go. Keep going, keep busting myths.

Jeremy: 29:01

It kind of dovetails into this other concept. Okay, if I don't invest in an all-time high, I want to wait for it to go down, right, because I want to buy in a dip. So I want to time the market. Everybody wants to time the market. We know this doesn't work. It's proven time and time again. And the numbers are this. Over the last 20 years, from 2004 to 2024, the S&P is up 9.7%. (Doug: On average.) So if you're fully invested yep, on average, if you're fully invested in the S&P, including reinvesting those dividends and everything, you're up 9.7%. If you miss the 10 best days, so that's one day every two years, you miss that day, you get almost half of that return. (Doug: Wow.) If you miss one day a year, the best day every year, you lose 71% of the return. (Doug: Wow.) And if you miss the two best days a year, you lose all the return. You're actually negative.

Doug: 29:52

So the message is what?

Jeremy: 29:55

Well, here's my question for you, Douglas. Do you think you can pick the best day of the year, the best market day of the year?

Doug: 30:01

I am in year 25, going on 26 of this odyssey, and I can tell you absolutely not and never will be able to.

Jeremy: 30:09

And you usually see and I'm not gonna say this is definitive, but when do you often see the best return days?

Doug: 30:15

You have a period of volatility in which the market has gone down and you have a bounce back day or a bounce back week, just when people feel the worst, just when people give up.

Jeremy: 30:27

And usually they're not thinking, oh, let's plow in after a minus 2% day, right? So yeah, it's just very interesting data. We already know conceptually that market timing doesn't work, but this data just proves it. So the myth of should I not invest when markets are at an all-time high and wait for it to come down? Busted. (Doug: Busted.) Busted.

Doug: 30:48

This is where we have another Matt Hanna effect. I love it. 

Jeremy: 30:52

Zoom zoom zoom zoom. Busted. 

30:54

[sound effects]

Doug: 30:58 

So the boring financial planning message is stay invested, don't get greedy, stay risk right. And then also going back to some of our other topics about 401ks earlier in this session, keep up good habits. Like investing every two weeks from your paycheck or investing every month into a brokerage account. Make it systematic and everything and take the emotion out of it.

Jeremy: 31:22

Good behaviors consistently over a long period of time.

Doug: 31:27

I love it. It's been a good session, a good podcast. You know we've talked about the future. We didn't prepare for this. I'm going to ask you the question, what are you excited about about 2025? Could be anything. Let's make it not work related.

Jeremy: 31:37

I always get excited at the new year because I'm obviously a planner. I like to plan for the new year, the new goals, and I, you know, I do the polar plunge every first of the year. So I kind of wash off the whatever of the previous year to start the new year fresh. It's a solo mission. I just go and I jump in and I jump out.

Doug: 31:58

You want to tell everybody where you do the polar plunge.

Jeremy: 32:00

I do it typically in Nantasket Beach, but any ocean we'll do. Any ocean in New England.

Doug: 32:11

So if you want to jump in and hang out with JV and his skivvies on January 1st you know it's at Nantasket.

Jeremy: 32:14

I'm going to shave off the little growth here and just get clean.

Doug: 32:18

For those who can't see JV like I can he's attempting to grow a beard right now.

Jeremy: 32:23

It's yeah, it's still an attempt for 40 some odd years now. But yeah, I just I'm excited to continue helping out our clients as best as we can and I'm excited about seeing my guy do some soccer, continuing to grow in that. I think we're going to explore some more individual sports next year, which I think will be good. (Doug: Cool.) So he's doing great in school and I'm just looking forward to seeing him continue growing and becoming a little man. (Doug: I love it.) How about you?

Doug: 32:49

So you know very well, and people who know me know that we have a house full of baseball fanatics. I've been drinking in baseball since I was a kid and that was passed to me by my dad and I am watching my son go through the pains of being an actual Red Sox fan right. So, like for those people who grew up around the 2003, 2004, Red Sox and the Tom Brady era, you've been spoiled as a sports fan here in Boston and my son loves baseball, loves the Red Sox. They have been god awful. You know, like just constantly mediocre and giving you just enough hope and then letting you down systematically, which is the Red Sox that I grew up with. So my son is actually taking on this new tradition of Red Sox disappointment, which is good. However, there's some excitement brewing. We get some great young players. We just made a trade for a new ace left-handed pitcher, Garrett Crochet.

Doug: 33:46

So my son's super excited about the Red Sox. Like I can't talk him down right now. Every day he comes home from school he's like did the Red Sox get anybody else? He's excited. So I'm really, really excited to go through all things baseball with him in 2025. But I got my seatbelt. I am ready for disappointment at any turn. Dude, I'm trying to prepare him too. I had to talk him off the ledge for three straight months last year and just be like this team is going to let you down. Daddy's kind of an optimist. I usually hope for the best and have a positive outlook on most things, except when it comes to this construct of the Red Sox. But even I'm starting to get fooled again. I'm getting kind of excited, you know. His excitement about this team is contagious. I love it. 

Doug: 34:28

As always, this has been fun. If anybody has questions about some of the new items that we've talked about for 2025, you are always welcome to reach out to us at Arsenal Financial. Oh my god, (Jeremy: Hold on.) Wait a minute.

Jeremy: 34:41

You missed the favorite segment.

Doug: 34:43

You know I get so excited about Mythbusters I forgot we didn't do our dad joke. What do you got?

Jeremy: 34:48

Daddy. All right, you're gonna love this one. You're gonna love it. (Doug: We're ready.) All right, what do you call a disinterested snowman?

Doug: 35:00

Indifferent the snowman. I mean it's got to be something with Frosty right? No, no. Matt, got anything. It's amazing that you constantly stump Matt. 

Jeremy: 35:13

Yeah, a snowboard.

Doug:  35:14

That's awful. I'm gonna tell my son that when I get home and he's literally going to punch me. And I will have deserved it.

Jeremy: 35:23

Yeah. Don't try to be cool. Don't try to be cool, bro, with your dad jokes. (Doug: Oh my god.) And one more, one more.

Doug: 35:34

What do we got?

Jeremy: 35:34

Which might be also relevant to you and holidays. What do you call a sleepy relative?

Doug: 35:45

Something dozer, bulldozer. (Jeremy: I do like that.) I don't know. What do we got?

Jeremy: 35:54 

A napkin. 

Doug: 35:58

That one's even worse. I'll tell him that too, and he'll be like I don't get it, dad. 

Jeremy: 36:04

Yeah, I know, I know, I know that one's a little. Nah, I don't like that one.

Doug: 36:10

Rip it up. (Jeremy: Rip it up.) This has been fabulous. If you've listened to our entire podcast, we're probably at what, six hours and 32 minutes about talking finance and just having a few laughs. I don't think it's that long. If you do have any questions, though, seriously feel free to reach out to us at info@arsenalfinancial.com. You can always call our office, 781-335-9100, where you may get one Heather Harris on the phone in Norwell, Massachusetts. Thank you for tuning in. Thank you for listening. Excited for the next one. We're actually going to have our first guest next time, right? (Jeremy: Yeah, yeah.) We're going to talk some college planning and we're going to have a college planning pro that we'll interview, and hopefully that'll be a good learning experience for everybody. JV, thanks, buddy, you have a great weekend.

Jeremy: 36:53

Thank you. You too.

Doug: 36:54

Matt Hanna. Thank you too. (Jeremy: Thanks, Matt.) See you everybody.

Matt: 37:00

Securities and advisory services offered through LPL Financial, a registered investment advisor, member FINRA SIPC. The information in this podcast is educational in general in nature and does not take into consideration the listener's personal circumstances. Therefore, it is not intended to be a substitute for specific individualized financial, legal or tax advice. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a final decision.