Can You Retire?

You're gonna do a really great financial future. Tom and Don are talking real money. Our goal when we retire is to have a pretty decent nest egg of money off of which we can live when we stop working, whenever we stop working, and that varies from person to person. But the reality is most people these days don't even consider a million dollars enough to live a decent middle-class life in retirement, uh, even with Social

Retirement Reality Check

Security. And we've got some interesting facts on how many people actually have that much money here on another exciting edition of the Talking Real Money Podcast with me, Don McDonald, him, Tom Cock, and you are lovely, lovely listeners out there across the fruited plains and uh overseas too. All over the place. So Tom's just over there smiling. I didn't know you could say I didn't know you could say fruited planes anymore. That's why I was kind of curious. You can't say that? I don't know. Did you read the disclaimer? I go into every meeting now with anybody and read the disclaimer first. Just I just read it. And they're like, why are you reading it? I don't know. I'm just saying. Is this like mirandizing the clients? Basically. So let me read this, then we can talk. So yeah. Wait a minute. Okay, okay, before we get to today's topic, I now need to know why. I don't know. It might be politically incorrect to say fruited planes. I don't know. I'm gonna leave it at that. So let's just leave it there. So I'm just gonna be. Are we talking about ripe with wheat? Yeah, which I'm my plants are not growing at all. It's 45 degrees this morning. It's this is just horrible. Worst spring I've ever seen. I'm gonna have to replant everything, I think. It's just sad. So sorry. Oh, I'm not even gonna tell you what what the temperature is gonna be here today. It's about 50 degrees warmer or so. Uh yeah, almost exactly. Yeah. Hi, again, welcome to Talking Real Money. We're gonna actually get

Millionaire Myth

on topic now. So here's some interesting data. We love interesting data. This is according to the Federal Reserve Board. Just this is sad, Tom. Just over half of Americans have actually have retirement investment accounts. That's a small number. Yeah. Yeah. That means that almost half don't have retirement accounts. And the the answer we often get here is, well, my employer doesn't have one. I work for a small business. Okay, then do an IRA. Yeah. Or maybe a Roth or something else. Yeah. Um that's a problem. I I think where the headline is pretty interesting because you mentioned a million dollars. If I had a million dollars. Which by the way, I just read in it's that was a hundred and a million today was about worth about a hundred and sixty-five thousand dollars in nineteen sixty-five. So you can run that any way you like. Anyway, the point is um not very many people even have the million. Three point two percent of American. No, no, no. Okay, let's do the actual okay. It's it's three point two percent of retirees. That's not of anybody. That's not of anybody. That's a higher number, but it's still not a very high number. But the more the scarier number is the median. The one you know where you draw down the middle? That's right down the middle, yeah. The average is skewed by people with big accounts. Yes. But the median splits it right down the middle, yes. Which is only two hundred thousand dollars. Which is really a hard number to retire. It's pretty small. Um and as you said, part of the problem is people don't even have an account. If you don't have an account, you're not gonna even have the two hundred. You're certainly not gonna have the million, right? You've got to have somewhere. As an aside, what absolutely fascinates me about this tiny little number is the number of investment advisors. And those accord depending on who you ask, there are about a million people who provide financial product sales and management and advice. Is that what it is, a million? About a million. It's the fact that almost all of them are chasing after the million dollar, many of them are only chasing after the five or the ten million dollar plus accounts. And according to this article and the Fed, the number of 401k millionaires in America, the number of people with with a 401k at a million or better, while it's a r was a record in 2024, it's still less than 500,000 people. That's a half a that's a half a client per advisor. Which really doesn't make for a great business. No, just so you know. I mean, it doesn't really work.

Saving Habits Matter

Uh but a few more things here, just to just to because you you wanted to mention the numbers. Um high income, it won't surprise you to know that high income households typically save more than people with lower income. You m wait, that's that's fascinating. Yeah, I know. That sort of reminds me of one of the factors of investing where the the the highly profitable companies tend to do better than the less profitable ones. According to the Federal Reserve, high-income households um have have saved about 800,000 and middle income households, which uh they didn't give us a definition of middle income, what that is today, um, about 80,000. So there's quite a disparity there. Um and then, and now we can finally get back at Don McDonald for telling all of you you don't need to go to college. Um a typical college graduate didn't need to. I just said everybody shouldn't necessarily do so. Yeah. All right. Uh because a typical college graduate has three times the median retirement uh savings as someone who graduated from high school. 141,000 versus 44,000. Well, again, in aggregate, that makes sense. Yes, it does make sense. Although I would be willing to bet that going forward that number is going to change. Uh given the uh the the the growth of AI and the like. It's gonna put a lot of lower level college grads out of work, and it's uh gonna benefit those who uh work with their hands. That's my opinion. Yeah, I and by the way, the other part of that is still people that uh graduated from college. We still have I don't think we've still resolved the the college loan issue. It's it's a big number. The amount of money that's been borrowed, how that's gonna get paid back, what that's all going to mean. That's not still been resolved, I don't think. So we'll see how that might play out, too. Um, homeownership. Turns out people own homes. Yeah, they they have more in their retirement accounts, too. All this stuff is fairly well intuitive. Yeah, homeown, it's all intuitive. Thank you. It's all just basic common sense. People who put have enough money to buy a house to put down a down payment, because remember that number is also starting to fall. Home ownership is becoming too expensive for a lot of people. We're seeing a higher number of renters. And if you have the money, you've saved the money for that down payment. You're likely somebody who saves more money and has more money to save. That's well put. Um, and then they go into some of the um 401k millionaires. You mentioned it's about half a million. Um, and that may have gone up a lot since they did this too, by the way, because the market has been zooming the last year, so that may be a higher number now. Uh all of this just points out a couple to me a couple of facts that should be pretty obvious, but I still kind of have to see this more with children of clients than clients. Because obviously, if you come and see us, then generally you've saved money. The people that don't have and saved money generally do not call us because I I I while I'm happy to help you, our clients are a little self-selecting. Exactly. Uh I have helped people that have no money and tell them here's what to do to get started. But I just mentioned that word. Um start. Do something. I at any age, set something. Someone was just telling me about somebody saving like, you know, $30 a month. I thought, well, that that's a small amount, but they're saving something. It's something. It's something. They're putting it aside for the future. Trevor Burrus, Jr. It's it starts to ingrain a uh ingrain a habit. It it you get used to saving, and then when you've got more, you save more. Because it takes a long time to even get to the million, which we believe is barely sufficient to keep you comfortable in retirement. Trevor Burrus, Jr. Yeah, remember the million, and we can argue the four percent rule or whatever, um should get you somewhere between forty and fifty thousand dollars a year of income. Correct. Without with a low risk of running out of money. Yeah. And and uh Fidelity says that on average, to get to a million dollars, this is why you need to start early. On average, it takes twenty-seven years of contributing to a retirement account to get you to that million dollars. Which I think is the most important number out of all of them. The twenty three. If you start at thirty, then you're gonna have a million barely by sixty. Yep. And so that's why we suggest saving something anytime you can save it. Save it for a child, save it for a grandchild, save

Invest, Don’t Speculate

it for anybody. But here's the second part, because there's a difference here between saving and investing that I also see an issue. Too much investing isn't investing. So people sometimes save and then they mess around with the money. They don't just set it aside in an index fund or long-term investment. They trade it, they buy something that comes along that seems like a great idea, um, and they blow it. I see this regulate. Uh or they get into something that looks really good for a short time and then it it it it really doesn't it doesn't pan out. Uh I'm talking about individual stocks here, right? I'm talking about sector funds and stuff. We really have drifted away from the term investing now. When you start by really, I mean when it comes right down to it, investing is a misnomer when it's applied to buying individual stocks, picking individual stocks. It's a misnomer when it comes to uh playing precious metals or cryptocurrency. Those aren't investments. Those fall under the more under the speculation category than the investing category. Totally agree. And again, and I've said this previously, if you know nothing, saving something and then just putting it, for example, in a global equity fund or a target date fund, either one is a great choice. It's taken care of, somebody's managing it for you, you don't have to think about it. But that brings me to the second point around all this. Even if you've saved for 27 years, you have to figure out a way, and this comes up from time to time, to leave it alone. Not just in terms of trading it, but also taking the money out because we our Don and our lives had crises around money where we said, I mean, we're lucky we're where we're we are. Totally. Yeah. Some of the business things. Exactly. Yeah, some things have worked and something hasn't. But you got to find a way that that money, that money for retirement is left alone. And I know people sometimes borrow against them with their phone. Okay, if you have to, but it should be the area of absolute last resort. You've got to let this, you've got to let it build because time, frankly, 27 years is everything. It really is. That's the average. Now, of course, you can exceed the average. Uh, you know, later in life, you can just start saving a lot more. And that helps. And we run into those people too that didn't do anything until 40, and now they're, you know, maxing out their 401ks, and they're doing Roth IRAs, and they're doing a brokerage account, all that kind of thing. But the message remains the same. It is. Start as early as you can, put away as much as you can, and be sensible with the way you you invest it. And this is another reason, and and that's absolutely perfect. And another reason that, as you know, we advocate, again, for young people that have any income, that even if they can't save it, if a grandparent can or a parent can, put it away for the long haul. Get it in there, leave it because you won't be there when they enjoy that money. But boy, will they remember you then. I guarantee it. They might even write a book about you. Which I'm loving, by the way. I love it. John didn't give me anything. He didn't give me anything, he didn't leave you his uh his canteen or anything from Battle of Shiloh or something like that. No, not a thing. I'm loving the book. Yeah, it's really good. The line on crossing. I'm thinking, actually, now having finished about half of it, that you and I should make the movie. That should be our next endeavor. Actually, that could be a really good movie. It could be a very good movie. Yeah. Uh the question is who you're gonna play and who am I gonna play. That's the topic. At my age, I'm gonna play corpses. I'm gonna play Grant, I decided, because I'm I started taking up cigars again. And whiskey. Well, we'll write him in. This is a movie. You don't always just take exactly what's in the book. You gotta write stuff in. So yeah. Okay. All right. I like the whiskey and the cigar thing again. That'd be kind of fun. So anything to make you happy, Tom. Thank you. I appreciate

Social Security Taxes

that. And uh and and we want to make you happy by answering your questions, which is one of the things we like doing most of all. And you can ask us questions, just go to talkingrealmoney.com and you can either type them in or you can speak them in. If you speak them in, they go on the Friday podcast. If you type them in, they either get read on one of these podcasts, or Tom will talk to you on the telephone. Telly's not the telly's the TV telephone. Yeah, I'd love going to the phone. Do you know that? We love talking to you as many times as we can, as many of you. But let's go to the middle of the country. I'm calling from Bellevue, Washington. I'm calling Bellevue, Nebraska. That's not a place that I that I was very familiar with, but there you go. And uh joining us from Bellevue, Nebraska is Greg. Hey Greg, how are you doing? I'm doing great. How are you, Tom? I'm just fantastic. Thanks for listening. Thanks for uh being part of the program. So, how can we help you today? Well, my uh my brother-in-law retired last year when he turned 65. And a couple weeks ago, I was talking to my sister, and I asked her if he'd started his social security yet. And she said, no. Her Edward Jones guy said that would be a bad idea because she was still working and her earnings would max out the social security earning limit for him and take away all of his social security. I didn't say anything to her at the time, but I'm pretty sure that's not true. It it here's the thing um that people do forget about, however, you will, if you have income, pay tax on your social security benefit. I think a couple, anything over $44,000 is taxable at about 85% of the benefit. So whatever the so there that that sounds like maybe what they're trying to tell them that, yeah, you're gonna pay some tax on it. I mean, the the fact on Social Security is that really, depending on the household, we're gonna want you to wait until full retirement age anyway, at least. Or conversely, Greg, and you already know this because you've heard us mention it a gazillion times, having a plan to tell you why it makes sense to take it a certain time. I mean, the the Ed Jones person should have that done. That there's there's uh a lot of ways to look at this. It should be run very carefully in that decision, so not sort of on a lark about the taxation of it. But yes, anything over as a couple $44,000, you're going to pay tax on that income. Not on all of it. I think it's 85% of it. But it so it wouldn't be taken away per se, but you'd pay whatever your regular income tax rate. So let's say, for example, it's you're in a 24% bracket. Now a quarter of the money that you're taking in, you're paying back in tax. So people do have a tendency to forget, yes. And in most instances, you do end up paying tax on Social Security a benefit, which paid into, but you got to pay tax on it anyway. It's a little, it's a little confusing. So and uh, you know, and and I'm not a fan of Ed Jones, you know that anyway, because they're not a full-time fee-only fiduciary. They do use actively managed, traditionally actively managed products, mutual funds and the like that that believe they have predictive powers and they charge a lot and they're tax inefficient, kind of all those things. So I'd prefer to see um, you know, your family go to an independent, fee-only registered investment advisor rather than Jones, but that's a personal decision, obviously. I'm I'm pretty sure that he's a friend of theirs. Yeah, this is what happens. I mean, and that's not a bad thing per se, but that should be a business relationship, is what we tell people, right? I mean, many of our clients become friends, but we started out because here's what we do, here's what we charge, here's how it works. Um, rather than you're a friend and you need to become, you know, one of my clients. Uh so and this is and sometimes the friendship thing gets in the way of a good business decision, right? I mean, you really sometimes, you know, Jones isn't doing right by or whoever, and you need to break up that relationship, but now that's the person I golf with every Saturday, and I don't really want to do that, or our friends see each other. I mean, all those kind of things. So that's you know, not optimal, I would say. Um, um, so that's but that's hard to break up, right? It's hard for you to jump in and go, you know, fire your friend and go to somebody else. Right. Really, really not an easy thing to do. So but those are those are the those are the short answers to all those. And uh boy, we sure do appreciate you uh you listening and being part of the program. Well, thank you very much. I enjoy it every every day. Thank you for that, Greg. You take care. We'll talk again. You do the same. All right, bye-bye. And wasn't that fun? That was just so

House Buying Limits

much fun. Now we move on to the less fun questions, the dead tree ones. Tom's got they're outside waving their arms at the time. He's got the little pile of dead tree pulp in his hand, and he's gonna read a printed question off of dead tree pulp when he could be using his computer or his iPad and stuff. You know, part of that is the the print is very small on the computer and the iPad and Do you know they have a setting where you can enlarge it? I have no idea. You know, I'd bear lucky enough to know how to do that. They have the old person. It's it's under accessibility for old people. Oh, like getting from here to there, that kind of accessibility. Okay, thanks. It's very helpful. Uh okay, so let's take a few of these. Okay, let's do it. Take any more heat for printing. Uh from Van Lear, Tennessee, which isn't your book just uh part of it's in Tennessee, I believe, right? Yeah, near Chattanooga. Yeah, right. I which again, uh please okay. Shameless pro plug. The name of the book again is The Line Uncrossed. Line Uncrossed. Good book. Available on book services everywhere. Everywhere. So do it. Uh let's make this thing a bestseller. What do you say? Oh, yeah. Uh I've been pulling out a lot of hope for that. This is mainly my my familial kind of legacy thing. I think I want to do one now about my dad because you inspired me. So all right. Get busy. It it took me about a year. Well, I have all the numbers, I have all the sta I have all the stuff, right? And I have his diary and that stuff from World War II. So I have I have the basics. I'm not a writer the way you are. It's so descriptive. Anyway, Daryl writes us from Van Lear, Tennessee. He says, My total monthly income is $2,156 from Social Security. I'm single and live alone. I'm 76 years of age. Is it possible to purchase a house with zero down and payments of only $400 a month? No. Yeah, it's literally No. Oh, okay. Let me let me qualify it a little bit. If you w wanted to move to some really blighted neighborhood in some inner city somewhere, you might be able to get a air. Well, let's run the number. I have four hundred dollars. That's $5,000 a year for interest and principal on a loan. And insurance and taxes. Okay, yeah. Sh you're right. Uh it's not a lot of house. Let's just put it that way. No. No. And it's hard to borrow when your income's so low. No, the only I I and it would only be if it was some sort of a special government assistance program to get people into blighted housing, which they do in some inner cities, where they'll practically give you the house if you just make you know payments toward upkeep and taxes. Because literally 400 won't cover your insurance and taxes in I would guess 99 percent plus percent of cases. I think that's right. Just insurance. I mean, I I know from I I have a huge amount of equity in my home, and uh I have a two and three quarter percent mortgage. And I know one-third of my mortgage, which is only a portion of what my house is worth. One third of my mortgage is taxes and insurance. They're gonna be one third of the payment. One third of the payment is taxes and insurance. Your insurance, though, is quite high compared to other places. You get all those crazy hurricanes piling through there, right? Both the real ones and the ones that play football. Exactly. So football's back. The NFL schedule. Not yet. Schedule has been released. Uh okay, Chris from I think I have this right, Rutfordton, North Carolina. I don't know the place. Rutherton. You know it? No, but it's I I know in North Carolina they're gonna pronounce

Teen Investing Gimmick

it Rud Ruthford. They're gonna they're gonna write Ruthford. I know. I'm sorry. Okay, that one's a tongue twister. I told you it was hard. All right. Um he's wondering about suggestions on using the Schwam. Schwab teen investor account. Because he's pointing out that yes, there's 529s, there's five thirties now. But what about the Schwab teen investor account as an alternative? Yeah, no. Um, here's the problem gimmick, gimmick, it screams gimmick. There is no such thing as a teen investor account. This is something Schwab invented. It's a joint ownership account where you and your child jointly own the account. You're the responsible party, the adult that needs to be on there to sign the paperwork. Uh and then it's designed to help teach your teen about and you can't see me because this is a podcast. Air quote investing. Wait, this is where you're going to get this is the angry part of the program right here. I can see the bile rising as you speak. Air quote investing. God's sake. What are they teaching us, Don? Please. Well, let's see what they teach you. One of the things they do right off the bat is when you set up the account, they give you 50 bucks if you take their stock investing course. I'm gonna do it. Oh, wait, do they give you 50 bucks? No. Okay. They put 50 bucks evenly between the top five stocks in the S P 500, thus encouraging you to own individual stocks. I wonder why Schwab wants to do that. Oh, let's look at the course you're gonna take. Okay, number one, investing 101. Stocks. They teach you how to buy individual stocks, how to trade stocks and pick stocks and become a stock trader picker. We hate that. Then they show you some things like okay, the power of compounding, that's nice. Basics, ETFs, that can be nice. Uh they also show you how to invest in cryptocurrency. Schwab's gonna have their own crypto product, I think, here pretty soon. Yeah. And and for example, their their their quick start to stock investing, they they distinguish between investing and trading. Doing your research and buying individual stocks, that's investing. Day trading stocks, they don't believe you should do that. Okay, so they're not pushing it to the extreme. But Schwab, come on, you guys actually know better than this. You know the best thing is gonna bore the teens to death because it's gonna be put your money in VT or A V G E and leave it the heck alone forever. Yeah, and what's wrong? Gamification's not good enough for Schwab? I mean, can't we? Well, it's it's responsible gamification. The bells and whistles don't quite go as loud as they do at Robinhood? Do I like that? Do I like this thing? No, because it is a Schwabby gimmick. Now we like Schwab. I have my account at Schwab. Do I buy and sell stocks in my account at Schwab? No, I do not. Tom, you have an account at Schwab, don't you? I do. Do you buy and sell stocks in your account at Schwab? No, I don't. Sorry, Schwab. This is r I Schwab doesn't love me. I'm not a great customer. I don't buy anything from them. I really don't there's really very little cost to me having my money. No, we're the kind of customers that don't make them any money. They need kids buying individual stocks. Well, they need people setting cash there and leaving it because they take that and use it. Yeah, so no. But they also need you buying individual stocks because when you're buying individual stocks, they're getting the spreads. That's right. They're getting those spreads. They're getting uh uh cash flow for order placement and all that kind of stuff. So they they gotta like the they've gotta keep money moving at Schwab. Money in motion makes money. It's not just money at rest makes money for the person who's investing. Trevor Burrus, Jr. That's true of all custodians, by the way. Yep. So that's it's a conflict of interest that exists. So that's our take on that program. I just think this is one of those things where it's it's a solution looking for a problem. There's all kinds of ways to invest for your young people. It doesn't matter what's going on. No, it's really not. It's it's truly something that their marketing department thought up and said, well, now if we can teach these kids when they're 17 or 18 to buy individual stocks, then they'll be doing it in their 20s and 30s and 40s and 50s. Because it's what they know. Yeah. And guess what? They will. We see them in their 50s and 60s and argue with them like, why are you doing that? Oh, because I know more than the market, because I researched these. Oh, yeah. That's what Schwab is going to teach you. They're going to teach you how to research the stocks, when to buy, when to sell. That's still trading. Yeah, it's it's nonsense. So do not use that program. Sorry,

Ask an Advisor

Schwab. Thanks for sending in those questions at talkingrealmoney.com. And if you have a bigger thing, like like maybe you want to teach your teen how to invest properly, maybe you know, bring them in to meet one of our advisors. Absolutely. We'll we'll set them on the right track instead of the wrong potentially wrong track. Yeah. Uh you do that by going to talkingrealmoney.com clicking on meet an advisor. We can promise you several things. One, there's no cost as long as we keep it under an hour. If it goes over an hour, then you're going to get a bill. No, I'm kidding. No, you don't get a bill, but if you decide to become a client, you get a bill. Well, yeah. Got to pay you, gotta pay me. We don't have to pay Tom. You gotta pay me. If you don't pay Tom, the podcast still goes on. That's a good point. You don't pay Don. But if you don't pay Don, there is no podcast. So pay Don. Okay, fair. Uh and and anyway, there's no cost, there is no high obligation, and there's no high pressure sales page. So there you go. You go to talkingrealmoney.com and you can ask the question. You can meet an advisor, do all that. Yes, you can. So do all that stuff and do keep listening and do keep telling people that we are here five days a week doing what? What are we doing? We're talking real money. The opinions and views expressed on this podcast were current on the date recorded. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice, including any forward-looking estimates or statements which are based on certain expectations and assumptions. Although information and opinions given have been obtained from or based on sources believed to be reliable, no warranty or representation is made as to their correctness, completeness, or accuracy. Information presented on the podcast is not personalized investment advice from Oppello Wealth. The views and strategies described may not be suitable for everyone. This podcast does not identify all the risks, direct or indirect, or other considerations which might be material to you when entering any financial transaction. Past performance does not guarantee future results, and profitable results cannot be guaranteed. We hope you realize that the information provided on Talking Real Money is for informational, educational, and hopefully enjoyable purposes only. The podcast is not trying to get you to buy or sell any financial products or securities. Instead, the program is provided as a public service by Appello Wealth, a fee-only registered investment advisor. See Appello Vox ADB party to A on our website for information regarding Appellate's fees and services. Appello Capital, L L C D B A Apello Wealth, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in the states where it is properly registered, or excluded or exempt from registration requirements. Registration with the SDC or any State Securities Authority does not imply a certain level of skill or training. Appello does not provide tax or legal advice, and nothing either stated or implied here should be inferred as providing such advice. Thanks for listening, and please visit talkingrealmoney.com for more information and important disclosure related to performance of any specific index or fund quoted in this podcast.