Ep. 1995: The Homeownership Trade-Off

SPEAKER_02 0:33

All right, bring out the pitchforks and the flaming yard signs because today on Talking Real Money,

Real Estate Rethink

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we plan to probably make real estate agents unhappy with us again, which means Tom's daughter won't be talking to him anymore after today's program.

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But there's a long time between now and Thanksgiving. So we've got a couple months. Yeah, for the wounds to heal. Exactly. I'll be okay by then.

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So what do you think we're talking about today on Talking Real Money? Well, we're talking real estate. That's what we're talking about. The American dream of homeownership. Apparently, if you don't own a home, you're un-American.

SPEAKER_04 1:12

And what is the American dream, by the way? I gotta ask.

SPEAKER_02 1:16

I don't know. I mean, it changes, and it depends on who you're talking to. That's very true. What political stripe they might be of. It's it differs from person to person. But the one thing that I think we all agreed on back in the good old days, I don't know when those were either, is that Americans own their own homes because it's a good investment, Tom.

SPEAKER_04 1:39

Yeah, and well, okay, that's that's that's what they say. That's true. By the way, remember when the number seven was considered lucky? You know, roll of seven, all that kind of stuff. Yeah.

SPEAKER_02 1:52

Okay, well, that sounds like a superstition to me.

SPEAKER_04 1:54

Seven used to be, you know, that was the number you picked.

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Um seven percent interest rates.

SPEAKER_04 1:59

Ah, look at you. You're so astute. I I even overslept today and I still got that one right. But okay. So um the when the mortgage rates hit seven on average for a 30-year fixed mortgage uh recently, that was the let me make sure it's right. Before 2022, mortgage rates had only hit that seven going back to 2001.

SPEAKER_02 2:22

Oh, okay. But let's go back a little further.

SPEAKER_04 2:25

Oh, well, we could talk about that.

SPEAKER_02 2:27

Yeah, can we talk about the the 70s and the 80s? Yeah, exactly. When I bought my first house and the interest rate I paid.

SPEAKER_04 2:34

Yeah, I think I was, I think I've mentioned this before. I think I was at 13 or something. 13, yeah. It was rather expensive. Uh, and more people now considering adjustable rates. And the anecdotal evidence, I know some well I just front page article, Seattle Times today. Uh Kirkland, which is one of our fancies.

SPEAKER_02 2:52

Which was a couple of weeks ago when we recorded this because Tom's out of town for a little while.

SPEAKER_04 2:56

So fancier, one of our fancier uh suburbs uh along the lake, Lake Washington, here in the Seattle area, Kirkland home median prices. Now, okay, first you're gonna say, oh, that sounds tough. $1.27 million is the median price. Okay, this is a fancy place, but that's the lowest in two and a half years. Sales in the Northeast down 4% year over year. Uh experts calling 7% the foreboding psychological barrier uh that people are just gonna say, nah, I'm not gonna, I'm not gonna take out a loan. But you and you make a great point by by the way, Don, that uh seven percent historically, historically, is not outrageous. It's uh it's probably closer to average, right? In many ways.

SPEAKER_02 3:37

Yeah, it's it's in the median area somewhere.

SPEAKER_04 3:41

Um I think that's fair. But this all brings to mind this debate that uh the the we've carried on for a while. Um we're both homeowners, just so you know, and we both own several homes, as you may

Homeownership vs Investing

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know. I only own one. No, we've bought and sold homes at all. Oh, we've yeah, yeah, yeah. We have, we've done both. But um when things get more expensive this way, and it does make it's harder to borrow money at a cheaper 7% cost more, less house you can buy, all those kind of things. Then they get into this debate. Uh recent piece in the Wall Street Journal about owning a home is seen as a financial holy grail, but what if it isn't? That's the headline. This is something that we have said many times over the last decade or so. So give us your argument for not owning a home.

SPEAKER_02 4:31

Well, one of the biggest arguments for not owning a home is the fact that well, there are two there are two big ones. One is that homeownership on a dollar-for-dollar basis, on a cash basis, not mortgage. See, leverage messes up your numbers. So that there are two things. One, uh the returns on homes historically have been just about one per over a hundred years, just about one percent over inflation.

SPEAKER_04 5:00

So somewhere around four percent a year.

SPEAKER_02 5:02

Yeah, no, no, no. Coast to coast year over year. Not huge. Oh, and by the way, I did look it up. Uh I I don't have I don't have uh rates back beyond 1971, but I was able to find rates back to 71. Yes. And the uh median 30-year fixed mortgage rate, about 7.3.

SPEAKER_04 5:23

Again, this uh it's you and cry, you think they were, you know, burning somebody at the stake, but this is not the case. This is not a big deal.

SPEAKER_02 5:30

Let's go back to the earnings. What you would have made uh uh uh on a dollar in real estate, not not you know, if you were buying it for cash. And the lost opportunity costs of having all that money that you know that that million dollars if you have a paid-off mortgage tied up in a piece of property that's illiquid. It's that what could that money have made you in another asset like stocks or bonds? And you that's the comparison I think we neglect to make. And the reason is that leverage muddies the picture.

SPEAKER_04 6:07

The fact that you can borrow 80 percent or I guess 90, I don't I don't know how much you can borrow now.

SPEAKER_02 6:13

Typical number for higher priced houses is in the 80 percent range.

SPEAKER_04 6:17

Okay. So that means that uh a big move up, and according to Kay Schiller, home prices increased about 80 per 87 percent from December 2015 through December 2025. So you've with a lot of things.

SPEAKER_02 6:30

That was actually actually a very good period. Now let's look at that number. Uh that number means that it it sounds big.

SPEAKER_04 6:36

Yeah, but I got a bigger number for you to compare it to.

SPEAKER_02 6:39

But over over 10 years, that's um you know, six percent.

SPEAKER_04 6:44

Yeah, yeah, and uh which sounds great, but the SP 500 in that same period of time rose by 235 percent. And you could get your money tomorrow.

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So about three times more.

SPEAKER_04 6:56

Exactly. Um and yes, if you wanted to buy the SP 500 with leverage, you could do that too. I don't recommend it. We don't do it. We don't we don't know.

SPEAKER_02 7:03

It's funny, we don't recommend you buy stocks with leverage, even though it would in in an upmarket enhance their returns. And you know, you would think for a long-term investor, that would be a really good thing if they had a strong stomach. And and yet, when it comes to buying a house, we talk about it as an investment and we leverage ourselves to the levels that we haven't seen for stocks since the depression. Yeah, it it's huge since before the depression.

SPEAKER_04 7:27

Well, and leverage, you know, concentrating that wealth in a single illiquid asset is great going up, but it's also kind of harsh when it's gone down. Uh, and we've seen this it still feels like a long time ago, but 2008-2009 is not that long ago. Lots of people lost their homes. The real estate market plunged um for a variety of reasons, but the you can see that's painful. But but at the end of the day, if you're waking up and you're 30 years old and you have a good job and you have some money set

When Buying Actually Wins

SPEAKER_04 8:00

aside, you're trying to decide should I buy or should I rent? That seems to me the question at hand.

SPEAKER_02 8:06

Absolutely. And the answer to the question, because real estate that the real estate game is rigged a little bit. So it makes it a a good thing for those who are going to be in a home for a very long time. Because of the deductibility of mortgage interest, for example, and and many expenses, and the the favorable capital gains treatment that a primary home gets. There are so many major tax advantages that tilt the playing field in buying's favor that for loss if you plan to be in a place for as long as I've been in a place, it works. Thirty years, owning is a great deal. It is a great deal. It's a less good deal if you're in the point you're you're in a job that you think I'm gonna be moving from place to place, I'm gonna be moving from job to job, I'm gonna my locations are gonna change, I'm gonna want a bigger house in the future, I'm gonna want a smaller house in the future, I'm gonna want an upside, downside, downsize, whatever it might be. Moving a lot increases all of those purchasing expenses, all those real estate commissions and title fees and and uh mortgage insurance and all uh points and all this other garbage that reduces your returns on your investments that takes away some of those tax advantages. So it really comes down to owning is a long-term strategy. Makes sense. Short-term renting is much smarter.

SPEAKER_04 9:35

And okay, so what's long term? Five years, ten years? I mean, how long would you have to say you're gonna be somewhere to make it work? It's a while.

SPEAKER_02 9:41

It's certainly it's certainly more than five. I would say more than five. We it depends on per the person and the the cost of the house. Uh if you're you know buying a lot of very pricey houses, you're gonna have a lot of big commissions and a lot of extra fees, and those erode your value. They can't help, but it it's taking money off the table.

SPEAKER_04 10:01

Yeah. In fact, yesterday someone just here at my house. We're talking about he wants to move to Florida, and uh he's been looking around the housing thing there, but he found out it's really hard to get insurance. It's very expensive. Yeah, I don't know if I want to go do that because he looked at the cost of all that. Um, here's another one that I see come up all quite a bit too clients, uh kids is uh moving somewhere, gonna stay there four or five years, want to buy a house because I'll make a lot of money on that four to five years of appreciation.

SPEAKER_02 10:30

That's the part of the argument that I have a problem with. Because you're assuming that real estate always goes up. And I mean, yeah, it's eventually gone up, but it really hasn't gone up much more than the rate of inflation. It hasn't been a great total return investment. And again, the returns we've seen are primarily in rising markets due to leverage. I mean, for example, you put 20% down on on a uh on a home and you see a 10% increase in the value, that translates into a 50% profit on the cash. It looks great.

SPEAKER_04 11:08

Yeah. Remember, I did that on the home that I had owned for 20 years. The internal rate of return was not that great. But if I was a seller today, uh here's a couple things I would keep in mind. Um, I would be incredibly aggressive if I really wanted to sell with my pricing. I wouldn't mess around. That would be one thing.

SPEAKER_02 11:23

And with the buttons, that mindset where people aren't willing to pay me what the house is worth. Um no, you're not willing to price the house at what people believe it's truly worth. That's true enough.

SPEAKER_04 11:36

Presentation would also be big too. You know, we spent a lot of money, we sold our place a couple years ago, having all the all the furniture brought, all our stuff moved out. And it I think it helped. Um, and then you just said the key word, be prepared to be patient. But if I was a buyer, you maybe you if uh at seven percent should people be considering an adjustable rate mortgage?

SPEAKER_02 11:58

I never consider an adjustable rate mortgage. You wouldn't consider it a no, the risks are too high. What if what if inflation ignites and we have double digit rates? Your mortgage next year is gonna pop right up to where you can never count on the price of the the what it's gonna cost you. That's you can't count on that with renting either, but with an adjustable rate mortgage, those shocks can be huge and fast.

SPEAKER_04 12:24

Yeah, they can be very quickly. Uh very quick. Um, and then the other thing as a buyer, I guess I would be probably playing hardball about right now. Uh in basically any market, I'd walk in and say, here's what I think it's worth, take it or leave it, that's the way it goes. I I think you're in a good place, I'll put it that way.

SPEAKER_02 12:40

Oh, sure. When you have a uh a market like this, particularly those who have the means by which to pay cash or mostly cash. Yeah. If you're in a cash or mostly cash position because you've sold a bigger house and you're downsizing or whatever it might be, you're in a powerful position right now in terms of bargaining. You you can really get you can almost name a a reasonable price. You're staying in your place forever? Here's the problem. You get stairs. No, no, I I I you know I could put in a lift. You could live on the main floor or lift, okay. Yeah, that's true. Um they're not that expensive anymore. Uh but here's the thing. Debbie and I have we we've traveled the United States of America looking at all kinds of places, from the mountains of North Carolina to the Pacific Northwest, to the Northeast, to the Midwest, to whatever it might be. See the shining sea. And the problem is, despite the fact that we would not want to live in ninety-nine point nine nine nine nine nine nine nine eight percent of Florida, we did pick the one place that we like living.

SPEAKER_04 13:46

Yeah. And you've been there a long time and you got your pals there, and that's the way it works, right?

SPEAKER_02 13:50

Thirty years. I mean, I went yesterday I went to Chick-fil-A for lunch, the local Chick-fil-A, where, by the way, we've been going for 24 years.

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Everybody knows your name. Everybody knows.

SPEAKER_02 14:01

I walk in. It's like, Don, good to see you. You never come inside. I said, that's because I accidentally put pushed the button that said carry out instead of deliver to my car. So you had to get out and go in. I had to get out and walk in. And everybody's like greeting me. The owner's coming. He goes, you know, I gotta tell you how much we appreciate you and all the things you do for the community. I went home to Debbie and I said, We'd have to build all that again.

SPEAKER_04 14:22

Yeah. However, there are many chicken families that are angered by your overuse of that bird, but okay, that's right.

SPEAKER_02 14:29

I don't really care. I don't really care.

SPEAKER_04 14:31

So, yeah, and we're staying here too, by the way, just in case you're wondering.

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Are you?

SPEAKER_04 14:34

By the way, I think so. Yeah. I like it. I think at most it has like four stairs or something, so I think I can figure out how to do that.

SPEAKER_02 14:41

Yeah, but the your stairs are weird and dangerous.

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It's kind of like, oh, there's a stair, damn. Oh, you think that's why she got the place? Because she knows all.

SPEAKER_02 14:48

Oh, that when you're older, you're done. I'm done. It's over. Drag him out of the water. She's got all the the estate paperwork filled out properly in triplicate. Exactly. She's ready to rock and roll with boyfriend number one out there waiting for for you to

Portfolio Simplicity Debate

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go. Uh, got questions? Well, we have answers, and we actually take your questions in a variety of ways. You can type them up. You can speak them. If you speak them, they go to the Friday QA podcast. If you type them up, they go to Tom. He gets to print them. He loves that. And then sometimes he likes even more. He'll send you a note and say, Would you like to get on the phone and talk about this and we'll play it on the show so that we can have a conversation? Because sometimes the conversation helps some of these more complex questions get fleshed out. So uh, Tom, every now and again we'll get in touch with one of you and then he'll do this.

SPEAKER_04 15:41

Let's go to the phones. Uh, we're gonna go to Mylan, Pennsylvania. Not Milan, Pennsylvania. I prefer Milan this time of year, but we're gonna go to Milan, Pennsylvania instead, where Chris, who is a regular listener and has asked us questions in the past, and we appreciate your loyalty very much, joins us on the program. How are you, sir? I'm doing well. How about you, Tom? You know, I'm uh I'm just living the dream. I get to talk to Don McDonald every day. What could what could be better than that, really? I say that with that close to to uh to being you know frank with you. No, I'm kidding. It's Don's a pal, and uh we're we're happy to be working together. So, no, all is good here, and we love your question. So, what would you like to know about today?

SPEAKER_01 16:18

So, so last time we talked, I was focused in on uh my stock to bond allocation. So I'm currently at um uh an A B 20, you know, then eventually moving into uh a glide path to get a little more conservative as the years go by. Um I'm I'm tuning in on the on the equity side here lately. And um I currently have a handful of equity ETFs uh in my IRAs. And I I I hear you guys quite often talk about single fund solutions and things like that. So I my question is gonna lean towards am I overdoing it, am I overthinking those kinds of things, you know, between like just a US equity fund, an international equity fund, an emerging markets equity fund, US and international small cap value funds, things like that, versus maybe just one of the you know global funds. Um what's your thoughts on that?

SPEAKER_04 17:15

Yeah, this is this comes up time to time. So part one is how hard do you want to work, right? And how big the account. Now I happen to know how big your accounts are. So in your case, I think having multiple funds makes sense. When people are kind of starting out, accumulating, you're young, you're throwing money at a Roth, you know, I think a one fund solution is wonderful. And there's some great ones. You already, you've mentioned it before, Avantus, dimensional. They've got one funds that have the tilts in them that we like to small into value and have some of the other factors that we we think make sense. That's fantastic. Then when your portfolio gets a little bit bigger and you have different types of accounts, like an IRA and a Roth and a brokerage, those kind of things. Sometimes there's reasons to hold certain things in certain places. We've talked about this before, where the riskiest assets could go in the Roth, right? And you hope for the fastest growth there, it's gonna have the most ups and downs, but the fastest growth and you that grows tax-free. Makes sense, right? And then you put the fixed income into the traditional stuff, you know, like IRAS 401k, because interest paid there is not gonna have a tax ramification. And then the brokerage should be in stock. So that would be part two of all this. But to kind of the base of your question, does it make more sense to just own a one fund global solution, an AVGE, for example? Or does it, and as you mentioned, you've got all the Avantis funds here. You've got A V US, A V U V, these are individual funds, which that fund of funds owns, right? Um, there's the reality of all this. We really don't know because we don't know um what it will mean in 20 years. Will it made more sense to own the individual stock funds and rebalance them according to your plan each year? Or will it make sense to just let Avantis do all that work? Remember, the cost is very, very low for the global funds. Um, but here's the thing I would be looking at if I was getting ready to move into the withdrawal stage. Having more funds that way allows you to be more specific, more tactical, if you will. For example, um, in the last year, emerging markets have had a terrific run. I think the last year and a half they're up. I don't quote me on this, but I think they're up over 30%. So if I was going to withdraw money from that account, I would be selling some of that off because it's the thing that's gone up the most. Holding that individual A V E M as you do allows you to do that. If you had the global fund, one fund, you could not do that. You couldn't be tactical in which part of the fund you wanted to sell, right? Because you're just gonna sell shares in everything. So it creates some opportunity there. It creates some rebalancing opportunity, right? If things shift a little bit more and Avantis is gonna be very slow, I believe, to shift to more um international stocks, for example, you could be more tactical that way than they would. But that's the only real advantage. We don't know. Then this comes up. I've had chatted with my friend Paul Merriman about this because you know he has a 10 fund portfolio. And sometimes I say, look, is it gonna what's gonna work better? Your 10 fund solution or just having you know one fund with everything in it? And he's honest, really don't know. Um, my take is probably the 10 funder, just for the reasons I previously stated, is more practical for many people, especially in the withdrawal stage. But for people who don't want to work hard, I don't think you're one of them because I think you're a hard worker, I think it's a lot easier just to have the one fund. But uh what what's your take on that?

SPEAKER_01 20:23

So no, that all sounds good. And and I actually like the idea of being able to allocate the you know uh the the percentages and things like that across the handful of funds. I don't have a problem with that. I actually um am a numbers guy and things like that, and uh, you know, maybe once twice a year tweak things around and things like that. So that that doesn't bother me at all. I I guess we're my my big concern is uh like 10, I'm I'm sitting at five. I'm just wondering, am I missing anything between the US, the international emerging, and the small values? Is that enough? Or do I need to think, am I overdoing it or am I underdoing it?

SPEAKER_04 21:05

No, I think you're spot on in terms of the asset allocation and the percentages are very good too. Um, because you have emerging, you have emerging market small value, you have US small value, you have US, you have international developed. So, no, you've covered all the bases. I mean, there might be somebody who looks at it and says, well, you don't have enough in the momentum um uh or you know, one of the other factors. And yeah, okay. I don't know that I really like, you know, people that aren't in the business trading those because I worry that they're gonna make a tragic error of some kind that sometime tells somebody sell somebody at the wrong time. But no, I think this is a very good asset allocation, unquestionably. And I think the only other question you should ask yourself is can you pull the trigger when things are it's gonna be very counterintuitive? And that will come up, right? Where it's like, oh gosh, I'm the my pro my plan says I got to sell this fund, but this fund's going to the moon. I'm not selling this. Um, and so I would my admonition to you would be to make sure you have a discipline, you stay with. That discipline and you don't get caught up in whatever, whatever the whatever. I mean, right now everybody's saying sell your bonds, right? Because bonds have had a rough month. Um, you can't get caught up in that kind of thing. We know behavioral uh your behavior is a biggest part of uh uh of your returns. And you don't sound like that kind of guy, but that'd be my only other take. But no, overall your asset allocation is is really, really good.

SPEAKER_01 22:23

Well, excellent. Yeah. So the way I look at it is, you know, this time of the year is when I typically would rebalance and I just recently gone through that. So just keep uh chucking some money in there and then check it out next year and and tweak it around again.

SPEAKER_04 22:36

Yeah, no, you're again, you're making great decisions. Um, we love hearing from you, and we love seeing your your your advancement here because you've moved from more generic products to something a little more specific at Avantis, but uh, but this is all really good, Chris, and and we appreciate you listening and reaching out to us.

SPEAKER_01 22:53

Well, thank you. That is uh uh good to hear, and I appreciate all that you guys do.

SPEAKER_04 22:58

Can I say it already? Happy holidays. Oh God, that's killing me. But I'm gonna say it because the holidays are when I get my daughter back from college, so I'm already looking forward to that.

SPEAKER_01 23:07

So it's Oh, sure, sure, sure. Well, you're already starting to see the Halloween stuff out in the stores and things like that.

SPEAKER_04 23:14

So keep it away from me. I don't need any more of that candy. Chris, thanks for being part of the program. You take care.

SPEAKER_02 23:19

Then on the other hand, he also likes to take them, print them, and read them off of paper products, like printed eight and a half by eleven sheets of paper that he holds in his hand and then speaks the question like this.

SPEAKER_04 23:32

Yeah, like Robert writes us from Fuque Varina, North Carolina. Yeah, Fuque Varina. Did I get that right?

SPEAKER_02 23:39

I think so. Fuque Varena.

SPEAKER_04 23:41

Shocking. Uh, he writes the vast majority of my equity portfolios now invested in AVGE and AVG V. Oh. Oh, yeah. Okay, be careful the way you say that. Um AVGE holds 15 of Auntus funds, and AVGV holds seven. And the two funds completely overlap. My question is, wouldn't it make sense for me to switch into the positions in the 15 funds? First, I can honestly adjust the weighting of the individual funds in AVGE to a stronger weighting into value. I don't know that I would have a stronger value than what AVGE has. I'd have to look at that.

SPEAKER_02 24:16

But AVGV, though, is a much higher uh value weight. So basically what he's saying is, can I make something in between AVGE and AVGV? It sounds like yeah.

SPEAKER_04 24:26

Well he says, can I increase the I could increase the weighting of non-U.S. funds. I think AVGE is 75% U.S. weighted. You want more international.

SPEAKER_02 24:35

I do. I want more international.

SPEAKER_04 24:36

You're still on that kick, aren't you?

SPEAKER_02 24:38

I still believe that uh that that number is somewhere between that 35 and 50 percent where it's hovered for so many decades. Until now.

SPEAKER_04 24:57

Okay, continuing. Secondly, when market conditions change, I can pull from the funds that are still overperforming. For example, if the U.S. equity market experiences a correction, I can pull from funds that are less impacted. Right.

SPEAKER_02 25:10

I know that's the same. So that's the rebalancing thing.

SPEAKER_04 25:12

Yeah, I know from listening to your podcast you favor simplicity. I support that, but I'm retired and have nothing to do better to do, pardon me. Nothing to do. No, you said nothing better to do.

SPEAKER_02 25:22

Nothing better to do than readjust your portfolio. I can't imagine anything. There's a lot of things.

SPEAKER_04 25:27

There's other things that are far more interesting. Uh okay, it that always comes back to how hard you want to work to me. Because they're gonna do the work for you, but go ahead.

SPEAKER_02 25:37

But it's not that hard of work. It's really not, particularly if you use your computer to help automate the process, which you can do, and it's pretty darn easy to do.

SPEAKER_04 25:49

But the challenge there can be the the counterintuitive nature of having to make those trades.

SPEAKER_02 25:53

That's the big that's what I was gonna get to is the psychology of this whole darn thing. You must must have extraordinary discipline. Or or here's an idea. Use some of the agentic AI to automatically do that and then send the the the rebalance to you and say, can I pull the trigger on this?

SPEAKER_04 26:17

Because we've seen people not pull triggers.

SPEAKER_02 26:19

Right. Yeah, gotta you gotta pull the trigger. You gotta say, you cannot, you've got to know I'm not gonna say to myself, Well, I'm just gonna wait a little while until this market. He sounds like he's got the discipline because he was talking about withdrawing money from the things that had done better. Yeah, which is counterintuitive for most people. It is so he's he seems

Social Security Timing

SPEAKER_02 26:42

sensible. Yeah.

SPEAKER_04 26:44

Um okay, another question from Kent, Washington. Jeffrey writes, Hi, Don and Tom, here's my dilemma. I'm 66 and a half. I'll be 67 in February, my full retirement age. My wife just turned 66 and started taking Social Security at 65. Her amount is only 650 a month if she was a stay-at-home mom for a good portion of her life while she raised our four kids. When our youngest got in school, she started working part-time jobs. I was planning on taking Social Security at age 70, so that would give me roughly 3,900 a month as opposed to the 3,200 a month that I would receive at 67. But due to the spousal top-off benefit, my wife will get a nice bump. That's right. Um to approximately $1,600 a month. That sounds about right, because she filed before her full retirement aid, she will she will get a small decrease in what would have been half of your benefit. Um, since you can't claim the benefit until I'm taking Social Security, if my math is correct, by the time I'm 70, we'll miss out on approximately $149,000 in those three years. My $3,200 a month plus her $950 top-off amount per month, that he says will take until age 87 to pencil out in the positive. In other words, if they went ahead and claimed these now, he'd end up with more right up to the time that he's uh quite a bit older.

SPEAKER_02 28:03

Okay, I got the numbers. Okay. Yeah. Here's a couple of things. One, I I want him, I want it, I would want him to make sure he's right. Because if his FRA is 3,200 at 67, uh then her benefit would be 3,200, but nothing.

SPEAKER_04 28:19

No, her benefit would be 3200.

SPEAKER_02 28:20

I mean, his benefit would be 3,200. Hers would be 16, but it wouldn't be 16. If he's just using the raw number, she's going to get less than 16 because she claimed early. Yeah, but I I just want want to make sure his numbers back that up because his assumptions are all based on that sixteen hundred dollar figure for her. Because he would get she get an extra sixteen hundred. If he waits, he gets an extra seven hundred.

SPEAKER_04 28:45

Yep.

SPEAKER_02 28:45

And and she has to wait on that extra. We don't know if it is sixteen hundred. If it's sixteen hundred, then his math is good.

SPEAKER_04 28:55

Okay.

SPEAKER_02 28:56

I rent it all kinds of ways. If the sixteen hundred is the exact correct number for her in her situation, given that she took it early, if that is right, then it's yeah, it's that hundred and forty-nine thousand dollars. Bush puts his break-even about eighty-seven and change. But there's something you're not considering in all the math. That is the importance of leaving your spouse with a much, much, much larger benefit should you die ahead of her, which I know none of us guys like to believe this, but odds are we're going before them. Seems to happen.

SPEAKER_04 29:39

Uh, yeah, so yes. That's the big difference, right? It is. I I think for most people, the higher earner, if they can make it work, should wait until 70, because then one party or another, the survivor, will have that bigger amount. So that's what I'm doing in my house, et cetera. So I think it makes sense. I think you're spot on there, Don.

SPEAKER_02 29:58

Yeah, I mean, really, this is one of those situations where waiting until 70 may not be the best financial decision. Usually it is, almost always. But this is one of those cases. I'm not gonna say waiting until 70 in this case is automatically right, but there is a you know, there there's a cost to waiting. I I I get that. But that that uh you gotta figure out what her actual payment's gonna be. Find that out for sure from Social Security. Run those numbers again, make sure you're right. Um but remember that spousal benefit can be huge for her, particularly given how small her benefit is right now. I mean again, you're close on the numbers. You're really close.

SPEAKER_04 30:39

The thing is though, here that he doesn't another part he doesn't mention, other than the death of a spouse, is do you have other assets to make up that difference in that period of time so that you can wait, so that the the whoever survives has that much larger amount.

SPEAKER_02 30:54

Yeah, you can't just say my break-even is 87 and change, because that's not actually true because you've got to calculate in, which is hard to do just purely mathematically. You gotta calculate in what the benefit to her would be if you died at 73.

SPEAKER_04 31:10

Right. Premature. Well, premature, but yes, that would be exactly right. So correct. All right. Yeah. Um, and I want to say thank you. I have a lot of great conversations lately, so keep them coming. You know, fall is here. I'm not going in the lake anymore. Well, at least not voluntarily.

SPEAKER_02 31:24

Hold on, let me let me check it out.

SPEAKER_04 31:25

Yeah, fall. I know it's down to like 87 degrees at your place. Um turns out, it's kind of rainy, kind of cold, not going out in the water anymore. It's raining hot out there. So I'm looking for stuff to do in the afternoon. So call me. I'd be happy to chat with you about anything financially related. Really? So lonely. This is just pathetic as all get out. Well, no one else calls, so you may as well do it. So lonely. My daughter's off to college. Oh, there's that. Okay. I'm getting I'm finally getting over that enough. You have to bring it up. Thanks a lot.

SPEAKER_02 31:54

Yeah. Oh, you think I'm gonna let it go?

SPEAKER_04 31:57

Oh, you think this is gonna be a continuing thing now for a while? Okay.

SPEAKER_02 32:00

Fair enough.

SPEAKER_04 32:01

Dream on.

SPEAKER_02 32:01

Anyway, thanks for being a part of it. If you have questions, send them in at talkingrealmoney.com. Uh, we really appreciate all of those. And um set up an appointment to talk to Tom for free. I mean, he's gonna do it for somebody. Might as well be you. Go to talkingrealmoney.com, click on meet an advisor, and say, I'm here to keep Tom company. I'm gonna volunteer to babysit Tom for a while.

SPEAKER_04 32:26

Because Don won't.

SPEAKER_02 32:27

So Don won't do it. He's tired of the whole thing. Because Don is wants to give up custody. Don is just doing all he can to sit around in this here studio while the two of us are talking real money.

Disclosure and Disclaimer

SPEAKER_00 32:46

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 our subjects 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 Apollo Well. 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 Apello Wealth, a fee-only registered investment advisor. Please see Apello Wealth's ADB Part 2A on our website for information regarding Appello's fees and services. Apello Capital, L L C D B A 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. Apello 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.