Preview:

Money market funds have been a go-to option for many pilots, especially during periods of rising interest rates. They offered a seemingly safe haven with attractive returns compared to traditional savings accounts. However, as the Fed begins to cut rates, the allure of these funds is being questioned.

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More About This Episode:

Today we’ll share insights on whether these funds still hold value in today’s economic landscape. Discover why chasing high-yield savings accounts might not be the best strategy and learn about smarter investment options. Plus, find out how you can get a free retirement toolkit to enhance your financial future.

Here’s what we cover in this episode:

0:00 – Intro

1:04 – Will money market funds lose popularity?

3:08 – Outpacing inflation

4:05 – Retirement toolkit

Watch the full interview on Wealth Warehouse: https://www.youtube.com/watch?v=kzGH5wXPDXQ

Resources:

Retire Pilots – https://retirepilots.com

Get your FREE Retirement Toolkit – https://bit.ly/3ZmZsaX

Pilot Tax – https://pilot-tax.com/

The Pilot’s Advisor Podcast is also on video. Watch & Subscribe on YouTube: https://bit.ly/3EIEBW2

Connect with Pilot-Tax: https://pilot-tax.com/

 

Episode Transcription:

(Note, this is an automated transcription. Please forgive any errors.)

Walter Storholt: Hey, it’s the Pilots Advisor once again. And on today’s episode, we’re talking about the recent Fed rate cuts. Do they end the recent popularity of money market funds? We’re going to ask Ryan Fleming coming up on today’s show. Hey, Ryan, welcome to the Pilots Advisor again. Today we’re talking about the Fed rate cuts and kind of an interesting little element of that. I mean, it’s always in the news whenever the Fed’s going to cut rates and all the drama over, is it going to be a quarter percent or half percent? Which direction is going to go? Oh, it’s going to stay the same. Um, kind of, kind of funny to see the drama that sometimes happens.

Ryan Fleming: It’s been the story of 2024 rate cuts, money markets. Oh, my Lord. Yes, yes.

A lot of people started seeing money market funds as a viable option

Walter Storholt: Okay, so we’re, we’re touching a nerve here. So, uh, a lot of people, as rates were going up, started seeing money market funds as a viable option. And now there have been articles and some recent commentary that the end of that recent popularity is upon us because of the cuts that have just started to happen and are predicted to continue to happen. So give us some background on why money market funds became so popular. And do you think it’s the end of that popularity now?

Ryan Fleming: Well, I think there’s a lot of factors that are involved in this, and before we talk about any of it, you know, we really have to evaluate the time horizon for that money and also your risk tolerance. However, with all that being said, I think that rates were so low for so long that as soon as inflation happened and the cost of capital was up, where they had to pay you 5% to get you to put your money into a quote unquote, high yield savings account. Uh, it was not, never a thing. But then suddenly everyone looks at, oh, uh, I’m getting 5% on my money. And I still look at it as, you’re going broke very safely because they’re only paying you that because they had to. They’re trying. That’s, that’s what the cost of capital is. Inflation was that high. You’re still going broke very, very safely at that, at that point. Um, the other thing to consider, as rates go up, if you look at the return on equities, they go up too. It’s all related to inflation. And so I look at it as a totally relative thing. Um, if you have your money out there that’s outside of a retirement account and you want to put it into a high yield savings account, I still think there’s better, better Ways, there’s better ways to have your, your money more diversified and let it work for you over the long term. With the caveat, like we said before, what’s your time horizon? What’s your risk tolerance? But yeah, I can’t wait till I don’t hear about High Yield Savings Accounts anymore. If I have a client that’s 30, 35, 40 and they got their money in a High Yield Savings account and it’s long term money. I mean really. And you know, it’s like almost like a CD they still make you. That’s still a thing.

Walter Storholt: Yeah. So it’s really, the popularity of them was kind of fool’s gold. It sounds like people were excited because we were so to 0% interest rates or, you know, getting 0.2% at the bank or something that the fact that you can get five now in some of these accounts, you’re like, oh, this is wonderful. But like you said, it’s all relative. But boy, if, if you had a dollar for every time somebody misunderstood these kind of relative, uh, things in the financial world, you’d be, uh, a very rich man.

Ryan Fleming: Yeah. When you think about us investing our money, if we’re talking about the basics of what we’re actually trying to do, yes, we’re trying to grow that money. But ultimately what we’re trying to do is outpace inflation because we know inflation and taxes are going to eat up our plan over the long haul. So we’re really trying to beat inflation. And when you’re putting your money into a High Yield Savings Account, you’re just locking it in at inflation levels. And so you’re not getting ahead. You’re, you’re treading water and you’re going nowhere. So it’s kind of like, hey, I’m flying an airplane and I’m going to turn into that 50 knot headwind. Well, guess what, you’re spinning your wheels. So if you really want to get ahead, you got to put some exposure out there and you got to let your money work for you. And that’s going to be outside of a guaranteed 5% high yield savings account. Especially in those times where, as we saw, interest rates are that high and inflation is a factor right now. And how are you going to beat inflation? Not just hang out with it.

Ryan Fleming’s free retirement toolkit helps pilots understand key retirement planning factors

Walter Storholt: Yeah, Uh, I want to talk a little bit about your retirement toolkit, Ryan, because these are the kinds of concepts that you’re talking about in the toolkit that people can get education about that pilots can get better awareness of the most important retirement planning factors.

Ryan Fleming: Right well, absolutely. And if you order my toolkit, you’ll get a free analysis. I highly recommend you take advantage of it. I mean, it’s free. Pilots like free stuff. Well, guess what? Maybe you, Maybe you think you’ve done a great job in your 401k over the last 10 years, but why don’t we check it out? Why don’t we compare what you’ve done to what I’ve done for my clients and see if there’s a better way? Doesn’t cost you anything. Seems like it’d be a smart thing to do.

Walter Storholt: Absolutely. You can get your free retirement toolkit that comes with that analysis. Other great educational materials in there as well. Fantastic starting point. In fact, it’s the starting point that Ryan recommends to pretty much all pilots, um, to take to begin learning more about retirement and your financial future. Just go to retirepilots.com to order that toolkit for free.

00:05:00

Walter Storholt: Uh, you can also find that link in the description of today’s show to make it really easy on you. But again, it’s the simple address of retirepilots.com and you’ll learn more about Ryan Fleming, the pilot’s advisor, while you’re at it. And you’ll be well on your way to a better financial future with more education, better understanding of your plan, and some of these forces that are happening out there in the economic world. And, boy, just learning from mistakes, Ryan. Or at least misunderstandings like, hey, 5% or whatever percent money market fund. Sounds amazing. Um, not necessarily in 2024. If it was 2020 and you wanted to, uh, get a 5% mark money market fund, you’d have been all about that, right?

Ryan Fleming: It’d be a whole different ballgame for sure. I mean, if the cost of capital was zero, basically nothing. And I could get 5%. We’re winning.

Walter Storholt: Yes, but not the case anymore, as Ryan laid out so well for us.

Ryan Fleming: I enjoy these special moments with Walter M.

So once Again, go to retirepilots.com. get your retirement toolkit. Ryan, thanks for the help today.

Ryan Fleming: Always a pleasure, Walter. I enjoy these special moments that we get to spend together.

Walter Storholt: Special moments. Great way to describe them. No doubt about it. We’ll see you next time, everybody. Right back here on, uh, the Pilot’s Advisor with Ryan Fleming.

Ryan Fleming: Fly safe.

Walter Storholt: M.

Ryan Fleming: Information is for illustrative purposes only and does not constitute tax, investment, or legal advice. Always consult with a qualified investment legal or tax professional before taking any action.