Ep. 1975: Put the Brakes on Buy Now

SPEAKER_02 0:46

Another show theme by popular demand. A concussion. Oh, I'm sorry. Heavy

Heavy Metal Opener

SPEAKER_02 0:52

metal. I have I now have a concussion from all the headbanging. Boom, boom. I mean, didn't that I mean yeah actually that one was kind of fun.

SPEAKER_04 1:00

Yeah, it it's the first time I've taken financial advice from Metallica. So yeah, that was kind of different for me. Sure. Okay, I'll give you that.

SPEAKER_02 1:09

And you know, when I was researching heavy metal music, I discovered heavy metal is not uh an all-encompassing genre. It there's different kinds of met uh heavy metal.

SPEAKER_04 1:21

Yeah, because you can get steel from Japan, you can get steel from the United States all over the world.

SPEAKER_02 1:26

Not from Canada anymore, apparently.

SPEAKER_04 1:28

Apparently can't get much from there. Not without paying

Fun Before Money

SPEAKER_04 1:31

a massive. That was too easy.

SPEAKER_02 1:33

Hello, everybody. Welcome to Talking Real Money, the show about, well, money. And uh I'm sorry, but if we're not having fun, I'm not doing it. Sorry. I know. Why don't they take themselves more seriously? They're a bunch of bunch of goof offs. It's like I was I'm watching Boston Legal, which I never watched in the old days. Tom McGuard. Great, great. Oh, I did. I love Boston Legal. Spader.

SPEAKER_04 1:56

Yeah.

SPEAKER_02 1:56

And uh, who's the old comedian who was in it? No, the old comedian. They have old comedians playing judges. All these old guys, they uh sh Shelly Berman. Shelly Berman plays one of the judges.

SPEAKER_04 2:09

I'd have to see him to know who that was. Well, Shelly Berman goes.

SPEAKER_02 2:12

I'm sick of the gibber jabber. Gibber jabber. You people don't take this seriously. I'm sorry. We we take the money part seriously. We really do.

SPEAKER_04 2:23

Is that what the is that the show where the judge would say Massachusetts, like that spell it all? I think it was. Anyway.

SPEAKER_02 2:31

I think so. And and they had like uh the guy from Laugh In. I'll take it seriously.

SPEAKER_04 2:35

Rowan or Martin.

SPEAKER_02 2:36

No, the the the guy who Artie Oh Artie? Artie's on there? Yeah, he's on there. Uh they got the disc jockey from WKRP guy.

SPEAKER_04 2:45

Oh. I guess I'd forgotten all those kids. He's the cool after Shatner and Spader, it's hard to remember everything.

SPEAKER_02 2:50

The cold laid-back judge who refuses to sit behind the bench. He sits on the railing. I don't remember that. It's just a star show.

SPEAKER_04 2:58

Where is it? Where is that? Where are you where are you watching it? Hulu. Hulu. Okay. Hulu. That'd be a great workout show for me. I love that. That'd be good. I'm tired of watching all the second rate documentaries on Netflix. They're getting a little tiresome.

SPEAKER_02 3:13

Oh my gosh. Yeah, they've you know, it's like, how many ways can you do World War II in color?

unknown 3:19

Exactly.

SPEAKER_04 3:20

And this time we're adding all colors.

Saving Comes First

SPEAKER_04 3:22

Yeah. Oh yeah.

SPEAKER_02 3:23

You know, we added extra colors. Hello, welcome to the show. I'm Don. That's Tom. Today's topic isn't investing. No. It's the precursor to investing. The saving of the money before you really have enough money to build a portfolio of some substance. It's only article in the Wall Street Journal, right?

SPEAKER_04 3:48

Yeah, it does. It's only about, I think it's half of us that save something, maybe less. It's a small number, still. I mean, and and we can sit here and tell you all about which funds to own, how to build the right portfolio for you, all that stuff. But if you haven't done the first part, as you said, it doesn't really matter. But the articles, the article's about the fact that, and I love this. Don Don does not, but I absolutely love it.

SPEAKER_02 4:11

Sometimes I I think it's a little preachy at times. But that's preachy.

SPEAKER_04 4:16

I think, yeah, I think it is preachy because the article talks about the subconscious nature, how how you psychologically deal with money, not how you practice. In other words, we can tell you all the right things to do, but will you do them? I'll give you a personal example. You've heard Don tease me many times about the the vacations that I take. And yeah, I probably take too many. And they're probably too expensive.

SPEAKER_02 4:40

They are extravagant. Yeah. I stay when I go on vacation, I stay at the town place suites by Marriott.

SPEAKER_04 4:46

And I wave to you as I'm going to be.

SPEAKER_02 4:48

And you're like at the five-star whatever it is.

SPEAKER_04 4:52

So yeah, okay. So I do that. I enjoy it. I like spending time with my family, all those things. But and I do this, I do make impulsive buys too that aren't good. So there's why do I do these things? Why, where's the psychology of that? What the article is talking about is how to create better habits, how to deal with these things that are uh under the subconscious that are keeping you from making good money decisions. And and this is about spending.

SPEAKER_02 5:22

That's right.

SPEAKER_04 5:23

I think that's fair. Yeah, I think that's fair. And it it's pretty interesting they're talking about uh not don't buy anything after 10 o'clock at night. I mean, nothing good happens after 10 o'clock.

SPEAKER_02 5:32

Nothing good happens after 10. I now see they've moved it back for uh for us aging baby boomers, because we don't even stay up till midnight anymore.

SPEAKER_04 5:40

I know.

SPEAKER_02 5:40

Not even I have a hard time on New Year's Eve staying up till midnight.

Friction Beats Impulse

SPEAKER_04 5:44

I haven't made that in a long time. Um so again, the practical side of all this, uh as somebody in the article points out, is the easier part, the behavioral is harder. So uh the word that they have come up with here that I think is kind of an interesting word is friction. Create friction. Make it harder to be impulsive, make it harder to uh to make these purchases, buy these things that you may or may not need, um, and some of the ways they suggest, uh and you've done this, I know, I've done it a hundred times. I see something at Amazon or something pops into my mind, like, oh, I gotta have that. I can do a purchase now at Amazon in five seconds, ten seconds, right? Because the credit card's all saved and click, click, click, and it's so on its way.

SPEAKER_02 6:29

It's there the same damn day.

SPEAKER_04 6:30

I know. It's crazy. Even in my house, which the first time is which is in the middle of flipping nowhere. I couldn't believe that one. It got fat, it got there faster than the old house.

SPEAKER_02 6:39

One of those lakefront cabins, they've turned into a hidden Amazon warehouse.

SPEAKER_04 6:43

They're probably just for Tom's purchases.

SPEAKER_02 6:45

They go, okay, wait, here's the kind of stuff he buys. We're gonna store it right here on site.

SPEAKER_04 6:49

Exactly. So she the the the author suggests removing the credit card from your wallet, both the physical wallet and your digital one. So that you actually have to stop and re-enter everything sort of slows you down. Can I hold on? I know you're going to have to ask.

SPEAKER_02 7:10

That makes sense. How can you enter it manually? You don't have the credit card anymore.

SPEAKER_04 7:16

She's got a suggestion for that. She thinks that instead of using a credit card, you should use a debit card. Here's why. In a debit card, the money comes right out of your account, right? Credit card, it's like, uh, pay that next month or two months, whatever it is.

SPEAKER_02 7:32

Yeah, no. You know, and you know our no protections with debit cards. No, the legal protections.

SPEAKER_04 7:38

Credit card, it's the bank's money. Debit card, it's your money. No question. So that's one. Um uh you know, and so that's and then having a daily limit, like no, can't go over this amount because I already spent this today. Right? That's the max I can do.

SPEAKER_02 7:52

Uh what about uh don't don't let's not go there. That's my limit. I'm not going over $2,000 a day. Let's not go there. We got a $200, I'm going, gosh, this room's getting expensive. We just went to New York for the funeral, and the the hotel room at Town Place Suites by Marriott was $490 a night.

SPEAKER_04 8:14

I think that's I think the place we're staying in Nashville, something like that. And it does come with a guitar and a and a cowboy hat, too. Um but and then also I think the other part is I I don't have them anymore. I gave those. I wore them about twice a year for a few years and never again, and they're gone. Um she also likes setting up a deals folder rather than just taking the like something comes in your inbox. Oh, I gotta have that. Moving those specifically to an email folder that you can review at over time rather than making impulsive buys. I like this stuff. I'll add a few more, by the way. Here's my take. Don't gonna say spend your money, which is fine, spend your money.

SPEAKER_02 8:56

No, no, no. It depends. It depends. As with everything, it depends. But go ahead.

SPEAKER_04 9:00

Yeah, okay.

Automate Your Savings

SPEAKER_04 9:01

I like the idea of making it hard to buy, but I also like the idea of making uh savings automatic. I save you do too, right? Money comes out every two weeks, gone. It's in your 401k. That's that, right? And so it's it's gone. She said gets really harsh. She says, delete apps, have daily limits, and don't use your phone to buy things. I think that's kind of harsh.

SPEAKER_02 9:25

And I'm not just financial fascism.

SPEAKER_04 9:28

It might be. It might be. Um, she also likes the idea of specific goals for each type of account, which I never really considered. So, for example, your retirement account, that's gonna fund your retirement. Your taxable account, that could fund the fun things. In other words, you set aside money for specific items. That's gonna buy a car, that's gonna buy a house. That's not bad. Um, I also like the pre-commitment to savings. In other words, you've committed that when you get a raise. Remember, remember those when you got a raise? Uh you're going to uh set aside this amount that's gonna be saved, right? The uh most of that raise because you're living on what you're living on today. You don't need the additional money that can be set aside. I love that, which I'm gonna do in 2027, assuming we get our humongous raise, right? Are they listening at headquarters? Um, you know.

SPEAKER_02 10:19

As you found out when you played the music for the CEO and he went, Oh, you have music on your podcast?

SPEAKER_04 10:23

There's a music on the podcast. The other one I still love, uh, and I always have, um, is writing things down, having a plan, having a spreadsheet, reviewing it semi-annually, not every day, not going through every expense, every moment, okay, that's a pain in the you know what, but to actually have something where you can look at it and say, here's what I was trying to do, here's where I ended up, how come it didn't work? And that goes back to the vacations. Next time I'll stay with Don, you'll know that then you'll you'll be suffering through my company.

SPEAKER_02 10:53

Don has plenty of flipping rooms.

SPEAKER_04 10:56

That's true, you do.

SPEAKER_02 10:57

Um well, because all the kids are gone. You know, I had plenty of flipping kids before. Now I don't.

SPEAKER_04 11:02

Right.

SPEAKER_02 11:02

Uh now I have rooms like this one, this room I'm in right now, this was Jake's bedroom.

SPEAKER_04 11:07

Yeah.

SPEAKER_02 11:07

I love that room. Now it's my audio room. Now it's your booth. Um I'm okay. I am not going to totally argue with you. Here's what I'm gonna I'm gonna I'm gonna

Save Young, Enjoy Later

SPEAKER_02 11:17

agree. What's the fun of that? On doing it. You need to control your spending in the early years, in your younger days, when you know you're starting to kind of feel your existence and and where what your place is in the world. And you know, the the the nice stuff seems very attractive, and it's uh you you might need a few little psychological guardrails around that to force yourself to start saving that money instead of spending it. As a matter of fact, speaking of music, I just created a new long-form song. I mean, just like I finished it yesterday. Got the band back together, did you? Call fifty for fifty at five.

SPEAKER_04 11:57

Fifty for fifty at five.

SPEAKER_02 11:59

Fifty for fifty at five. If you say fifty dollars a week for fifty years, at five percent a year, you're gonna have well over half a million dollars. Wow, it doesn't sound like it from the amount, but yeah, sure. Fifty for fifty at five. And uh I actually took it a lot a little farther. If you get ten, it's over three million. Wow. Put away a hundred and thirty thousand.

SPEAKER_04 12:21

That just shows you the power of compounding that people don't put it.

SPEAKER_02 12:33

Nom de musique. Nom de music. I'm gonna put it at the end of the episode so you can hear fifty for fifty. You'll be the first to hear fifty for fifty and five after the show. Tonight, fifty and five. In Tom's case, for his real If you have something about which you are passionate and it really does bring pleasure to your life, and you can afford it. You have you have the financial plan, you know how much you can afford to spend in the course of a year, you're not exceeding that spending, so you're not threatening your future financial success. Enjoy what you enjoy. If it is uh uh fixing up old cars, fix up old cars. If it's going on really nice vacations, go on really nice vacations. If it's you know, golf every day, join the country club or whatever that is. If you're passionate about something and it fits your financial situation, yeah, go for it. But if you can't, then that's where these things really come in handy. So they can't be blanket constructs, but they can be very helpful in keeping you on track and moving you forward in your financial life, particularly when you're younger.

SPEAKER_04 13:47

Yeah, I was just gonna get to that. So I mean, I think establishing great habits early on, huge. Work ethic, we already talked about that many times. Saving, we've talked about that. The spending part, harder to do because people are kind of built the way they are. I think one thing the article could do for anybody is make you conscious of these things that you could, again, make it more difficult to make impulsive purchases, more difficult to overspend. That's the purpose of all of this.

SPEAKER_02 14:15

I wish somebody had done that with my microphones.

SPEAKER_04 14:18

How many of those things you got now, anyway?

SPEAKER_02 14:20

Well, I keep a microphone, which is so stupid. It's so funny. I'll tell you a story. Um, you know, I do the short stories on lit reading that I've been doing since like 2018.

SPEAKER_04 14:30

Yeah.

SPEAKER_02 14:31

And I was trying out a new AI audio editing tool to improve my editing process on those so I don't spend as much time editing the audio because I don't get any I don't make any money off lit reading. It's pathetic. $400 a month?

SPEAKER_04 14:47

Well, now you don't need to now that you're a big author creating all those royal things.

SPEAKER_02 14:50

That's $500. That's that's less than $500 a month. That's about $400. So not getting rich for $300 helps. I something fascinating. I took an old story uh to and I ran it through this AI editing program, and it was uh Mark Twain's the you know, the jumping frog of Calaveras County, his first story, the first story he ever wrote. And I took my original reading of it raw with all the mistakes and I played it into this program, and it was pretty effective at at cleaning up the mistakes. But what I noticed is I had a couple of places where I went, oh, I gotta drop in some audio here, and I dropped it in from this mic that I'm on right now, and it didn't sound the same. It didn't sound as good. So I started racking my brain, I'm going, which mic did I record that on? And then I realized that I have been sitting here with probably the best mic I've ever owned, and I'm not using it because I bought new mics and just got used to those. So I need I need those constructs. I need that control on my mics, and uh AI is going to help me sell the damn mics at a loss, of course, because they're used, but I'm gonna sell them.

SPEAKER_04 15:58

Okay, so I just want to make sure I'm clear on this, because what I'm taking away from this is if I had a nice microphone, I would sound like you. That's what you're saying.

SPEAKER_02 16:09

Whatever you want to believe. Uh you just believe what you want to believe. Why do you think I I I got you the cheap mic? I went, it's not gonna help. Don't matter. But the nice thing about that mic that you're on right now is that you can carry that mic anywhere you go and record anytime.

SPEAKER_04 16:25

Oh, I do around the office all the time. It's intimidating.

SPEAKER_02 16:28

Yeah. Yeah. Sing songs, he's he's crooning in the

Listener Question Time

SPEAKER_02 16:32

hallway.

unknown 16:32

Ah.

SPEAKER_02 16:33

All right, it's question time. And Tom took one of your questions that you typed in at talkingrealmoney.com on the ask a question button form thing, and he actually picked up his phone and talked with you.

SPEAKER_04 16:47

From Tallahassee, Florida, Jonathan joins us on Talking Real Money. Jonathan, thank you for being part of the program. How can we help today?

SPEAKER_03 16:55

Yes, of course. Um, I'm a 47-year-old, and my wife and I have put some money together. Uh, we have end of it looks like a 403B and a Roth IRA, roughly around 380,000. We also will, if we work all the way till um 60, there's the promise of a pension that's worth just under 3,900 and maybe social security. So the questions I have is looking at our basically diversification to our 403B that we're putting money away in our Roth, we I have questions about diversification and fees associated with that. And I want to make sure that we get the most money and the most diversification for our work and our hard work of putting money away.

SPEAKER_04 17:47

Yeah, let's have a question. Let me interrupt you there real quick. So just to just to set the table a little bit, just and people may know this. I did you were very kind to write this in, so I did read it first. So now I want to make sure I get to your your high points. Just of just as a starter, before we even get to your question part, sure. Something to consider is uh because you do have Roth and you do have traditional, which is awesome because when you get to retirement, to having more than one tax type of portfolio makes sense. But here's the way I would start. I would look at the big picture and say, I want my stock to bond ratio overall to be fill in the blank. I don't know, you're 47, I don't know, 70, 30, 80, 20, whatever it is, okay? That would be starting place. And I might even take the risk quiz. We offer that free at talkingrealmoney.com just to make sure that your mindset, your emotions sort of fit that plan. Then I would at first I would fund, I would figure out the things to have in that Roth IRA, and those would be the riskiest assets. I would not have any bonds in the Roth IRA. I probably wouldn't have any U.S. large cap stocks like the SP 500. I would have the riskier things like small cap value and emerging markets and emerging markets value, the riskier assets. Why? Well, because we hope those go up faster. They grow, they're growing tax-free, remember, so it's even better. And the idea here is in the long term, and you should be thinking about the long term because you're young, um, you're getting that tax-free growth. So that's part one. Then in the qualified accounts like the IRAs, that would be the place to have the fixed income, the bonds, right? And and some of the the asset classes, we do not expect to be as strong of performers over the long haul, like US uh S P 500, that kind of uh, you know, the EFA, the international stuff like that. So that's a starting point. But go right ahead. You also had a question about the fees, I think, too.

SPEAKER_03 19:43

I do, I do. So what I'm I it's really hard to determine how I get feed. And I've tried different strategies, but I find it very difficult. And you know, what I'm hearing from you guys is that there are other places our index funds are low fees, they kind of follow the market. And in the long run, you can usually win out, depending, of course, how the market does, as opposed to actively manage fees. And the way that my my portfolio is kind of laid out is I've got, and I'm really not even sure how to interpret a lot of these things, but I've got a lot of equities, it looks like, some real estate, some fixed income, and then some guarantee, but a lot of equities broken out into different forms. So I'm wondering if a lot of those are actively managed and if those fees can be lowered by moving them into other accounts and still get good growth and maybe with my time gain more money in the long run.

SPEAKER_04 20:36

Yeah, so I see here that your your money's at TIA, is that correct? Yes. Okay. So TIA is going to have a list of index funds. I look at I the list you sent included some index funds, but even the index funds through a company called Nuveen, which is uh at the heart an insurance company, those are still more expensive than I'd like to see you pay in an index fund. For example, the Nuveen fund that I looked up, the other list you gave me, the large cap value index, is 30 basis points. That's still at 0.30. That's still a little bit more than I'd like to see you pay in an index. So the first thing I would do is go to my TIA account and I would see a list of all the potential index funds that are in there. Those are the ones you want to use. Then I would try to figure out how best to build a portfolio that is balanced. Let's say 60% of this stock portfolio goes to the US, 40% international. And then when we're balancing that out, I might try to divide it between the large and the small, both US and international, if you can. And then to make sure you have some that I do see you have some value in there, kind of split things up between the label growth and the label value. To keep it simple, just to divide those things up so that you have exposure there. But back to your original cost. So back to your original question. I like the feed. I think that's smart. Um I I'm it's the weekend for me almost, so I'm always thinking about the feed. Uh, but here's the thing here's uh that's Sorry about the bad dad joke. Here's the thing. Nuveen is not your best friend when it comes to this kind of thing because they have fairly high expenses. Um, I'm gonna be surprised if TIA doesn't have some other indexes in there that are going to be cheaper. Uh and if your Roth IR is held away, I would just simply take it to a major custodian, a Vanguard, for example, or a Schwab, and I would use, you know, something in the lines of a Vanguard fund, which is gonna be one-third the cost of these Nouveen funds. Uh much, much cheaper, still good, well diversified, that kind of thing. Um, so back to your situation. So I would go, I would go back to TIA, I would look at a list of all the funds, I'd want to use the index funds, I would look at the expense ratios there, I would build the portfolio of those before I even got into anything that was actively managed, which is more expensive. And some of these ones you have are actively managed and more expensive.

SPEAKER_03 22:53

And just to be on the same place, would you consider moving away from TIA? I believe my company allows me to use Vanguard as well for the 403. Maybe I could move into that.

SPEAKER_04 23:05

I would rather I would rather see you at Vanguard than at TIA, yes.

SPEAKER_03 23:09

Okay, okay. So maybe explore that option.

SPEAKER_04 23:12

I would look at that carefully. Yeah, they're gonna have they're gonna have the asset classes, they're gonna have every index, and they're gonna be less expensive.

unknown 23:19

Yeah.

SPEAKER_03 23:19

That sounds wonderful.

SPEAKER_04 23:20

Yeah, definitely. Okay, great. I love the fact that you're thinking about this before you're 50 because most people kind of wake up at 50 and go, wait, isn't there that retirement thing that's coming up here at some point? Um this is awesome. Um, I would be at 47, I don't know anything about your current tax rate, but I'd be plowing all the money I can into that Roth IRA. Remember, the Roth is going to give you that tax-free growth. Because if you did retire at 60 and you had a bucket full of that Roth, that'd be really great to retire in that circumstance plus the pension. I think you're headed to a really good place, Jonathan. I really do.

SPEAKER_03 23:53

Thank you so much. And I think if I'm seeing this right, the pension gives me a little bit of confidence because I feel like I could take riskier moves in my the the IRAs. Yeah, and I think that like that's gonna be there as a piece.

SPEAKER_04 24:07

I think that's true, however, however, the next likely major event in this stock market is a decrease because we've had these three great years. We've never had four straight years of double-digit growth in the S P 500. And right now it looks like we're gonna have it. That would be kind of unheard of. So I'm telling people, look, you should always be ready for the next bear market, but it really feels maybe sooner rather than later. Here's what I would do instead of just saying, look, because I have this pension, I can take more risk. I would take that risk quiz to make sure that my emotions can handle whatever markets may throw at me because you really want to know that right now when things are great, oh, it's easy. Everybody's happy, I can take a ton of risks, no problem. The casino spinning my way, et cetera. And then when the losing starts, that's when you find out. And I we tell us to our clients all the time, you got to be ready because when the market goes down and it will, that's when you really find out uh, you know, what your emotions are like in the bad times. And you gotta know that. Thank you, Jonathan, for being on the show. Really appreciate it. Thank you, Tom. Appreciate you.

Pension Payout Risks

SPEAKER_04 25:11

Take care, ma'am.

SPEAKER_02 25:12

However, for those that he doesn't get in it in touch with you or doesn't call you up, he will read those on episodes of talking real money off of sheets of paper that he printed out. And here is one of those sheets of paper read aloud to you, our lovely listeners, right now.

SPEAKER_04 25:31

From Horseshoe Bend, Idaho, James writes Hello, Tom. Love the show, keep up the good work. On a recent podcast, you answered the age-old question of lump sum versus annuity from a soon-to-be-retired teacher. I think Roxy and I did this one. After careful analysis. Yeah, the two of you agreed it was pretty much a 50-50 proposition. The one factor not addressed was the health of the pension system. In this case, the pension was an Illinois State Teacher's pension. This system is chronically ranked in the bottom ten in the nation and currently underfunded by over 50%. It's very probable this pension will make good with another taxpayer-funded bailout, but payment disruptions, clawbacks, and cola reductions are quite possible. We all saw what happened to the airline and auto worker pensions after various mergers, bankruptcies, and bailouts. The bottom line is to always consider the source of the pension when considering the lump sum option. Cheers, Jim. What we're talking about here is should you take a lump sum from, you know, as a payout, or should you annuitize that and take it into the future? So there's risk there, sure.

SPEAKER_02 26:39

This illustrates a much bigger point than I've been trying to make for decades. Literally decades. The promise you get on an insurance-related product, which an annuity is, that's what it is. It's backed by some insurance pool. Remember, all insurance is just a pool of money somewhere that they hope will make more money than they will pay out to the people who are receiving benefits from that pool of money. So, yeah, th this really illustrates the guarantee is only as good as the source. It's only as good as the company behind it, it's only as good as the country behind it. The state of Illinois has, as you mentioned, the ability to tax to save it. But the likelihood is that that alone won't save them from the forget this. As of last year, a year ago. $144 billion in unfunded liabilities. Wow. That's the state of Illinois? That's the state of Illinois' public pension. Um they already use current tax revenue to shore this thing up and pay benefits.

SPEAKER_04 27:57

Now that's not so unusual, but it's not healthy, let's put it that way.

SPEAKER_02 28:00

There's other things that are they're very unhealthy. So I gotta tell you, that to me would enter into the equation in a very big way. Uh if I had an Illinois pension and I was given the opportunity of a lump sum versus an annuity and they came out anywhere near a 50-50 proposition, I'd take the lump sum and take control of it myself. Trevor Burrus, Jr.

SPEAKER_04 28:21

You say 50-50 now.

SPEAKER_02 28:24

Based on your life expectancy and everything, it's like, okay, I'm gonna make out about the same either way.

SPEAKER_04 28:28

Trevor Burrus, Jr. But generally, what is true in these circumstances is if you take the lump sum, you invest it properly over the long haul, you end up with more money plus your liquid all that good.

SPEAKER_02 28:40

But you are taking on risk of a different kind.

SPEAKER_04 28:42

That's right. And some people don't ever want to do that because they don't trust the stock market. I get all that.

SPEAKER_02 28:47

But the other thing you could do, too, is take that lump sum and look at other more secure annuity options possibly.

SPEAKER_04 28:52

Well, that's true. That's true. And here's the other one that James you just mentioned. The fact that this is a municipal annuity payout, the odds are probably better than you than with a commercial one. Like you mentioned the airlines. I remember a pilot that was a client 25 years ago, and I think I think it was Delta, and he had just retired and his pension was cut in half when they went through bankruptcy. So it does happen. More likely in the, you know, the the private employers than the public ones. But I think that's a reasonable thing to bring up, James. Um I it would be hard to advise people to tell you, yeah, get your money and run. But boy, it sure sounds like it when you have a hundred billion plus that's unfunded. That's just I'm sorry to hear that. That's really irresponsible.

SPEAKER_02 29:39

That's half of the liability of the program is unfunded.

Factor Funds Debate

SPEAKER_04 29:41

That's not good. Uh, let's move on to Kyle from Springfield, Illinois. Okay. We're staying in the middle of the country. My wife and I are 30 years old and saving fairly aggressively for retirement. Currently holding index 2060 target date funds in 400 2060? Isn't that like 100 years from now or something? That's uh uh in their 401ks. That's good. VT, that's Vanguard's total world uh ETF in Roth IRAS and 6040 VTI VXUS in taxable brokerage. Thoughts on you're gonna love this one, exchanging VT and the Ross for A V G E or DFAW worth the switch and introducing some tracking error in comparison to the broad market. Quet that's the question. Um thanks for the entertainment and practical advice. During my daily commute, so should you sell VT and buy A V G E or DFAW instead of in the Roth?

SPEAKER_02 30:43

We're biased. Uh we believe that the science behind factor investing not only is robust, but just makes duh kind of sense. Yeah. As we discussed with David Booth. Sure. It's it's yeah, it's taking more risk, and if you take more risk, you should expect higher returns. That's it's a trade-off. It's just a simple trade-off. So if you're willing to add that, you're right, tracking error is the index.

SPEAKER_04 31:15

It's very dissimilar from a global index. So I wouldn't count and it wouldn't be a reason to buy or something.

SPEAKER_02 31:22

I think you're if you want just the the very traditional index product, you have those already with your 2060 because you're 90 percent stocks and ten percent bonds in that, and the stocks you're in are the total market, basically.

SPEAKER_04 31:38

And you're gonna have more large, you're gonna have more growth in those target date type of funds. Now, with the post-hax money and the Roth, you're gonna be focusing on smaller value, those sort of things, both US and international. So I kind of like the idea.

SPEAKER_02 31:52

Actually, yeah, if I was considering it, I would tell myself to do it. I would. I would tell me to do that. Did Tom just get very, very quiet? Oh, he's pointing at me. I couldn't see it because I was looking something up. See, we're we're not in the same place. Thank God for that. We're 3,000 miles apart, so I'm looking at the phone. I was rounding.

SPEAKER_04 32:20

Okay.

SPEAKER_02 32:20

I was rounding down.

SPEAKER_04 32:21

Always round up when you're rounding, not rounding.

SPEAKER_02 32:23

4,000. We're 4,000 miles apart.

unknown 32:25

Okay.

SPEAKER_04 32:26

It's the the the continent is expanding, I guess.

SPEAKER_02 32:30

And so I was on another screen looking something up. I was oh the Vanguard Target Date Fund. I was looking that up and I couldn't see it.

SPEAKER_04 32:36

2060.

SPEAKER_02 32:37

God to wrap the show, apparently.

SPEAKER_04 32:43

Not paying

Wrap-Up and Resources

SPEAKER_04 32:44

attention, sir. Okay.

SPEAKER_02 32:48

Please do a couple of entreaties. One, if you would like to get some help, it can be hard to find. And one of the reasons we started offering this free help was because so many of you would go to the local broker who goes to church with you or is a and and get just terrible advice. So we went, well, how can we help you get fiduciary advice when you're a do-it-yourself or you don't want to pay for it? How do you do that? How do we do that for you? Well, we went, Oh, why don't we just give it to you for free for a little while? No, we won't manage your money for free. Bad, bad, bad, bad, bad capitalist model. Yep. But you can go to talkingrealmoney.com, click on meet an advisor, and actually have a meeting with an advisor and go into it confident that you will come out with more information than you went in with. I I am confident of that. And I assure you, you will not be pressured to become a client or to buy anything. It's that simple. Then you can ask questions at talkingrealmoney.com using the ask a question form or the microphone button in the corner. Those, if you record your voice, those get answered on the Friday QA podcast that I do every week. And is there anything I missed, Thomas?

SPEAKER_04 34:02

No, you didn't. But we need more of the typed questions. We're running a little low. So please type away.

SPEAKER_02 34:09

Yep. Usually it's the other way around. You get like 40 typed questions. I know. Well, and okay, I looked back. We just finished August.

SPEAKER_04 34:18

That's right.

SPEAKER_02 34:19

August, I went back and looked at the chart going back to 2018. Yes. And August is traditionally our lowest listener month every single year. Get to that. Without further ado.

SPEAKER_04 34:31

Quit ignoring your money just because it's sunny and nice outside. That is no excuse. Come on.

SPEAKER_02 34:35

Come now, right about now, the interest starts to pick up after Labor Day, where we are right now.

SPEAKER_04 34:41

We're going to pay out a lot more interest here soon, so stay tuned.

SPEAKER_02 34:44

Yeah, so uh stick around if you like. We're done with the money portion of the program, well, the money talking portion of the program. And uh that uh then we have a musical interlude followed by everyone's favorite, my daughter reading the disclaimer. So stick around for that on Talking Real Money!

unknown 35:02

Money.

SPEAKER_05 35:30

Less than the sandwich you buy. It's a thing you will never once miss, and you never will wonder why.

SPEAKER_09 35:38

Pay yourself first before the rest, before the bills, before the fun. Because whatever is left at the end of the month is always, always none.

SPEAKER_06 35:49

Fifty a week for fifty is over five hundred thousand if you're patient, over three million if you can stand the ride. Fifty is a Friday, and a hundred and thirty size.

SPEAKER_07 36:13

Give up a little today.

SPEAKER_06 36:15

Take out a whole other light.

SPEAKER_07 36:18

Fifty for fifty at five.

SPEAKER_06 36:26

The dollar you plan at twenty-two has fifty years to grow. The dollar you plan at fifty-two has nothing left to show.

SPEAKER_08 36:37

It won't feel like anything at all. Not this year, not the next. It's a number and a boring account and a line you never check.

SPEAKER_06 36:49

50 weeks for 50, over 500,000 if you're paying. Over three million, if you can stand a ride. Fifty is a Friday. And a hundred and thirty size. Fifty four fifty at five. Fifty four fifty at five. Take out a whole other life.

SPEAKER_07 37:18

Fifty four fifty at five.

SPEAKER_08 37:26

Two of them same jobs, same towns, same fifty dollars to save. One of them started at twenty-two.

SPEAKER_06 37:35

One of them wanted to wait. Same market, same money, same weeks of work, same hands, same weight, same rain. And one of them finished with everything. And one of them started again. Give up a little today. Give up a little today. It's the smallest thing you will ever do. And the largest thing you will ever do.

SPEAKER_09 38:30

Over three million if you can stand the ride.

SPEAKER_05 38:36

Fifty years of Friday seven hundred and thirty fifty to fifty at the time.

SPEAKER_06 38:48

Get the fuck out today.

SPEAKER_07 38:51

Take out of the day.

SPEAKER_01 39:30

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.

SPEAKER_00 39:44

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.

SPEAKER_01 39:53

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 feature 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.

SPEAKER_00 40:26

See AppelloWealth's ADV Part 2A on our website for information regarding Appello's fees and services.

SPEAKER_01 40:31

Appello Capital, LLC DBA Appello 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 SEC 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.