Ken Moraif, CEO of Retirement Planners of America, joins On The Move to discuss the impact of COVID-19 on retirement plans.

Video Transcript

- I want to bring in another guest now. Ken Moraif is CEO of Retirement Planners of America. And obviously, Ken, I would imagine you've got a lot of worried folks that you've been talking to recently, because if you are someone who's on the verge of or in retirement and you see the market decline like we have seen, your retirement is sort of melting away before your very eyes. I know you've been counseling people on principal protection. How do you even go about doing that at a time like this?

KEN MORAIF: Well, the most important thing is not to panic. And if you make a rational, objective decision that you need to protect what you have by getting out, then I don't consider that to be a panic situation. Now, as I've described on this show, we counseled our clients on March 10th to sell all equities. So we currently are out of equities. And anyone who is retired or retiring soon, in my opinion, should consider that.

What are the considerations that you take into account when you're looking at that decision? When we calculate a number for clients we call the magic number, which is how much money do you need to support your retirement, if you have that number, then it is important, in our view, to protect that number. So if you're going to see potential major losses here take us farther down, in our view, it is better to protect that than to let it go.

These are the same exact questions that we were asked in 2008 when, you know, our strategy also told us to sell in November of 2007. And during 2008, while the market was going down, people were saying, is it too late for us to get out. My answer was, is it too late compared to what? At the time when people were asking that, the S&P was down 20%. It ended up going down 57%.

So we need to, with people who are retired or retiring soon, I think it's important to know where is the amount of money you need to have to protect your lifestyle, because you can't replace that if you lose it. And at that point, you may want to make the decision to exit. Now, everybody needs to talk to their advisors before they do this, and get-- but make a rational decision. Don't make a panic decision.

- Ken, what about people who might move that money, if they pull out of equities, to money markets? Should they be [INAUDIBLE] dollars to back up its own money market funds. Do you worry that the money market funds may not be the place for you to park your money?

KEN MORAIF: You know, that's a very good question. In 2008-- or 2009, actually, after the crisis and everything else, we saw that money market funds were actually at risk. And the Federal Reserve stepped in to provide basically unlimited insurance for all money market funds. To not have to do that again, the government issued government bond money market funds so that they are now backed by the full faith and credit of the United States printing press.

And so therefore, that is where we are and where we would recommend to someone who was to say they wanted to get out, protect what they have, that they go into a government bond money market fund. The private sector money market funds, in my view, will be protected by the Federal Reserve, but right now, they're not, and we don't know.

- Hey, Ken. I have a question just on the concept of retirement right now. Assuming that the gig economy comes back in place, as people start to take Ubers again, use Airbnbs again, do you anticipate that the idea of retirement in general will kind of be upended? Will folks who retire from their 9 to 5 job end up having to pick up these second, third shifts, and really be hustling in order to kind of stay afloat and feel as though they have the livelihood that they originally anticipated going into retirement?

KEN MORAIF: That's a great question. And unfortunately, I think the aftermath of this crisis is that people are going to see the value of their investments significantly reduced, and therefore the income that they can get from those investments while they're retired significantly reduced, as well. So they're going to have to supplement that in some way.

You either-- it's math, you know? You have to either have enough income to cover your expenses from your investments or you have to reduce your expenses or go back to work and find additional income. So it's a math problem that you have to look at, just as inflows and outflows. But yes, I do think people are going to have to go back.

I'll tell you one thing that makes me very optimistic about all of this. And that is that, because we are a service economy, you know, right now people aren't getting haircuts. They're not doing-- you know, they're not going and doing a lot of the service things. But the moment it's safe to do it, they're going to start doing that again. And those jobs will come back very quickly.

So I'm very optimistic about how fast we'll get back up online. What I don't know is how long it's going to take. And unfortunately, I think it's going to take months. You know, even if today we said there are no more coronavirus infections, is anybody really going to go out and get a haircut or go to a restaurant the day they announce that? I think there's going to be a period beyond that. So it's a difficult situation.

RICK NEWMAN: Ken, Rick Newman here on the other side of the internet. What are you telling people about bond funds? Whether they're mutual funds or ETFs. We've had some people on our air saying, boy, these could be a screaming buy with the government now backing agency bonds, for example. Long-term treasury bond funds have actually been up during the stock selloff. So what should people think about that?

KEN MORAIF: You know, I think we have to be careful about looking only at our own economy and our own treasuries and our own bonds. One of the biggest concerns that I have is the global debt situation. There is-- there are massive-- billions and hundreds of billions of debt that is held in dollars by company-- countries outside of the United States. And if their economies collapse because of this virus, what could happen is that that debt could be defaulted upon, and that could circle the globe and come back to bite us.

So yes, I think what the treasury is doing in buying back bonds is a great thing. It's providing liquidity. It's a great thing. But again, for our people who are retired or retiring soon, it is way too risky, in our view, to even go into bonds. We think that just money market, government money market fund is the safest thing for right now. We need to live to fight another day, both physically and financially.

- Ken, it's good to see you. Stay well. Ken Moraif is CEO of Retirement Planners of America. Appreciate your time.