March 29, 2024 • 36 mins
Time for a Friday Flight- our little sampling of the week’s financial news and what it means for your personal finances. There are a lot of headlines out there, but we boil them down to specific takeaways that will allow you to kick off the weekend informed and help you to get ahead with your money. In this episode we explain some relevant and helpful stories like: Daniel Kahneman vs Sam Bankman-Fried, banana prices, seeking after passive income via vending machines and house flipping, paying down points, keeping the mortgage, fabulous 401(k)s, rewards rug pulls, Robinhood is golden, & an annuity in search of a problem.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to Had the Money. I'm Joel and I am Matt.
Speaker 2 (00:03):
Today we're talking passive income plans, paying points and rewards
RUG polls.
Speaker 1 (00:27):
That's right. And when you say reward rug pole, what
we're referring to here are credit card rewards and so
on that note, I think we'll get to talking about
Robin hood Golds. That's actually one I'm excited about personally.
Speaker 2 (00:39):
Am I getting too extreme with the alliteration on Friday Flights?
Speaker 1 (00:42):
Man? No, okay, it's something for them to lash onto.
Speaker 2 (00:45):
J want another P followed by followed by P, Like
I just I don't know why I'm obsessed with that
sort of way of naming our Friday flight episode.
Speaker 1 (00:52):
It just flows, man. Before we get to the actual story, Zoe,
let's pull one out for behavioral economist Daniel Connoman.
Speaker 2 (00:58):
Yeah, so yeah, he passed at the age of ninety,
which is.
Speaker 1 (01:02):
That was yesterday? Long life? Was it Thursday? Wednesday? Say yeah?
Speaker 2 (01:05):
And I think it's just yeah, pour one out because
we talk about this regularly on the show, how personal
finance is.
Speaker 1 (01:12):
It's not all about math.
Speaker 2 (01:14):
We know that we're just irrational creatures as human beings,
and nobody highlighted that better than Daniel Conomy, and he
basically kicked off a whole new field of research.
Speaker 1 (01:23):
Well you say, like you enter into that conversation with
the assumption that we all know that, and the reason
we know that is because of Daniel Conomy, right, Like,
I feel like that that was one of his biggest
contributions was the fact that, like, we think we're rational,
we think we can be objective and look at all
of the different facts, but no, in fact, we are subjective.
It depends on our life experiences as to our behavior, right,
(01:43):
Like we're not.
Speaker 2 (01:44):
In our emotions and all sorts of things.
Speaker 1 (01:46):
Yes, we take shortcuts, we take cues from other people,
Like we just go with our gut sometimes as opposed
to receiving all of the information that's available to us
and making a perfectly rational decision.
Speaker 2 (01:56):
Gains aren't don't feel as powerful as losses do. And
and all of these different.
Speaker 1 (02:01):
Things in sand dollar amounts, right, and all.
Speaker 2 (02:03):
These things that he was able to highlight that really
inform I think at least some of what we talk
about on the show, because there are some things where
it's like, hey, this is math, or hey this is policy,
this is how this works. Maybe you should consider taking
advantage of this, or hey, the economic tide has swung
a little bit, and actually there's things to consider over here.
But there's also a lot to talk about on the
behavior spectrum, and that truly, so much of that goes
(02:23):
back to the discipline essentially that he founded.
Speaker 1 (02:26):
That's right. So, Daniel Conneman, thank you for all of
your work. SBF, no, thank you for all that you've done.
Did you see that his sentencing sentencing came through?
Speaker 2 (02:35):
I did, Yeah, twenty five years that. I can't tell
if that's fair or not enough, but I think it's fair.
He's one of the two. He did seem he had
like a slap on the wrist, like five years in
some community service.
Speaker 1 (02:45):
That wouldn't have been wrong. Yeah.
Speaker 2 (02:47):
Well, he was apologetic, and I think it seems like finally,
finally true. It's for a long time he was like,
what do you mean, I didn't do anything.
Speaker 1 (02:53):
It seems like he recognizes the harm that he caused
to lots of people, and so I don't know any
lesson that same at least he says he's acknowledging it.
That's true. Does he feel that way? He's not locked
away for seventy years, essentially for life.
Speaker 2 (03:05):
It's kind of like when I, you know, apologized to
my parents growing up when I did something and really
I just wanted to not be in trouble. May I
have a feeling that might be what he's doing. But
I'm glad to see white color crime doesn't get enough
punishment in this country. And so and so what SBF
did was terrible. It really impacted his thievery, essentially impacted
(03:25):
the lives of millions of people, and he deserves to
go away for a long time.
Speaker 1 (03:29):
That's true. Yeah, it wrecks the crypto markets. And on
that note, actually, next Wednesday, we're going to be speaking
with Marco from Whiteboard Finance about bitcoin. Yeah, so you
can look forward to that one. That'll be a fun combo.
Speaker 2 (03:41):
All right, but let's move on, mat, Let's get to
the Friday flight as sampling of stories we found interesting
this week.
Speaker 1 (03:46):
And inflation continues to.
Speaker 2 (03:48):
Kind of be a water cooler talk even though it's
died down a lot and we're not experiencing like, oh
crazy egg price is doubled in just two months, Nothing
like that's happening.
Speaker 1 (03:56):
But although egg prices are up because well it's Easter weekend.
That's true. Yeah, there's just all the demain hardy easter
egg hunts.
Speaker 2 (04:04):
I know, my mom dropped off fifteen for us, which
is really sweet of her, So we could.
Speaker 1 (04:08):
That four one k lo exactly.
Speaker 2 (04:12):
Well, I think especially for people in California, but really
anywhere there's a Trader Joe's, people are saying, uh, oh,
banana price has just went up. Trader Joe's they sell
they're like one of the only stores that sells bananas
and singles, and they're pricing went up the register, right, Yeah,
well I think it's actually like, right as you're walking
into the fruit fer style, yeah, and it's a great, great store,
but now you want your banana, there's twenty three cents
(04:33):
instead of nineteen cents. It was kind of like, in
my mind, kind of like the Costco hot dog exactly
that has remained at a dollar fifty and the bananas
were nineteen cents for twenty years, and so people are like,
you know, uh, I don't think they're revolting, but they're
a little concerned at least, and I understand that. But
obviously bananas are still incredibly cheap, just like eggs, even
if they go up in price twenty percent. It's one
of those things where it's still fast and more affordable
(04:56):
than a lot of other foods you could buy.
Speaker 1 (04:58):
Yeah, hopefully I can continue to enjoy my daily We
both have a daily banana with our coffee and a
bedtime banana lately. Now what are you talking about. It's
probably like the last thing you want, right, it's like
floadd with sugar.
Speaker 2 (05:09):
Well, now I need to tell them, sorry, too expensive.
Speaker 1 (05:12):
Well, so, you know, one of the reasons why historically
they've been cheap is because of the fact that bananas
are all clones of the same banana, one variety, right, yeah, yeah,
so the Cavendish I think is the name of it.
It's like, literally they're like stormtroopers. They're all it's like
the exact same banana, unlike apples that's just been replicated
over like decades, I guess. Which not to be an alarmist,
(05:33):
but that's why some folks are saying that there could
be like all of our bananas as we know it
could get wiped out because they are literally all the
same banana. And if there's a disease that hits Central
South America where there's like hundreds thousands of acres of bananas.
Then we basically would have to rebuild our bananas as
we know it from scratch new banana infrastructure.
Speaker 2 (05:53):
But yeah, like literally, which is frightening, which is kind
of crazy to think. So, and your bananas instead of
being twenty three cents, they're like eighty two cent piece.
Speaker 1 (06:00):
Yeah, So just saying that so that you that we
all appreciate our bananas while we still have them.
Speaker 2 (06:05):
And I understand Trader Joe's needs is a company that
needs to remain profitable.
Speaker 1 (06:08):
Yeah, all right, let's talk about passive income because your
next side hustle choice it might be running a vending machine.
The reason is because it's trendy passive income. It's the
quest and vending machines seem to be the current answer
for many hustlers out there, and there's been a rise
and interest. This is according to the Wall Street Journal.
There's a chance that it could be a profitable endeavor. Sure,
(06:32):
but before you go out there and drop a bunch
of money on whatever vending machine that you want to purchase,
I guess.
Speaker 2 (06:37):
Those fancy robotic ones where they get get the soda
and then they like tilt it sideway.
Speaker 1 (06:42):
Out that way, it doesn't get all carbonated and shook up.
I think those things are like seven grand? Are they really? Yeah?
Oh my gosh, no those It takes a lot of
front cost or even just like a bubble gum machine
before you do that. So much depends on the specifics
because when you dig a little bit deeper, the average
machine earns just over five hundred dollars a month. And
I'm not going to say that that's not nothing, but
(07:03):
it may not be this endless fountain of money like
you were imagining it to be. Yeah, but then on
top of that, that machine it needs to be restocked,
it needs to be repaired. If it gets tagged, you
got to show up and clean nothing clean, nothing off
though it would be the worst. But again, five hundred
dollars a month like that is just the average. It
makes me think of with real estate investing, there is
a wide spectrum of what it is that individuals are making,
(07:25):
and like real estate, location is key. And so when
you're talking about veny machines, the best machines they make
the bulk of their returns the machines that are well placed.
And if you are just getting into the game, it's
going to take you a while to be able to
snag contracts with the different business owners that would allow
you to have that prime real estate. Agreed.
Speaker 2 (07:45):
Yeah, No, you have to think about location in the
It's not just like boom. I got a vending machine
and it's just printing money. That's not how it works.
I had a friend, It's not like a crypto farm.
Speaker 1 (07:53):
Right.
Speaker 2 (07:54):
I had a friend who had a photo photo booth
and that was actually much better decision than a vending
machine because she had it in a record store and
it was one It was easier to maintain. There wasn't
as much to go wrong with it. You didn't have
to come by and restock every week or something like that.
It was more like once a month putting in new film.
Speaker 1 (08:14):
Non perishables. Right. I like that.
Speaker 2 (08:15):
It was a much easier business to run. So I
don't know, maybe for it, but it was in a
high traffic area in a really cool part of town.
Speaker 1 (08:22):
That's another.
Speaker 2 (08:23):
It was a selling point. And so I think if
you want to go to the vending machine route, I
don't know, maybe a photo booth route is better. People
are interested in that. They tap their credit card, pay
five bucks and get a film strip, and maybe that's
a more profitable way to go. I think this also
isn't for everyone. Right, And interestingly enough, in this article,
like the folks who have done well, they tend to
pivot from just having vending machines and they want to
(08:45):
become vending machine influenced.
Speaker 1 (08:47):
Where you see the footage of them and they got
this bucket, this giant bucket of quarters and it's just like,
oh my gosh, that so much money. Yeah, it's like
that scene from the Goonies where he goes and he's
like stealing all the money from the well. Still haven't
seen it? What I know, you've never seen the Goonies. Now, dude,
I need to Oh my gosh, it holds up. You
need to go back and see that. I will, I will,
so Okay.
Speaker 2 (09:04):
One of the guys they highlighted in this story, he
has over five hundred thousand YouTube subscribers and he's basically
teaching folks how to make money with vending machines. He's
making a lot more creating content than he is selling urias, soda,
empower rate and stuff like that. Right, And we talked
back in episode three fifty three, which I think of
as kind of one of our Cornerstone episodes, how passive
income is a myth, and we love the idea of
(09:25):
people having multiple sources of income and to be pursuing
what we called in that episode leveraged income, where upfront
effort pays off in more passive gains down the road.
But the truth is it takes time and work to
see those endeavors succeed. Just because vending machine investing is
hot right now, it's making the headlines, or you're seeing
more influencers on TikTok or Instagram or something pushing it,
(09:47):
that doesn't mean it's a smart move for you. Makes
me think mad of writing a book. And we have
friends who have written books and they say they make
between two thousand and five thousand dollars a month from
perpetual sales of that book. But they have to keep
pushing it, they have to keep marketing it, and it
took a heck of a lot of work up front
to write that book. So I think if you were
to pick their brain and say how's that passive income
(10:08):
coming along, they'd say, well, it's great that I put
in a lot of hard work at the beginning and
I'm reaping the rewards, but passive income.
Speaker 1 (10:14):
I don't know if that's what I call it. That's true. Okay,
So another investing trend that's tacking up is house flipping.
So basically, obviously we've seen rising home prices. Well, that
has led to an increased interest in flipping homes. And
it's not that you can't make money flipping a home, Folks, clearly,
clearly do this. I actually did this back in the
day when photography was a little bit slower. What year
(10:34):
was that that you twenty fifteen?
Speaker 2 (10:36):
Okay, yeah, and you did decently well with that house
flipping it.
Speaker 1 (10:39):
Ever, Yeah, Like, we entered into that thinking there's a
chance we might move into it ourselves. And honestly, that's
a strike against us because what that means is we
were making some decisions based on us personally as opposed
to thinking about it from a purely business standpoint. But
even still, it was a deal and we were able
to pounce on it, make it happen, knock it out
within a short period of time. That being said, please
(11:00):
be forewarned because the risks are much bigger when your
timeline shrinks. If you are looking to flip a home,
you got to know what you're doing, you got or
maybe you've got to have a really good relationship with
a contractor because you can lose money fairly easily. Transaction
costs are certainly a big reason why not to mention
the tax consequences of a shorter time period where you're
hanging onto that. And honestly, timing is a big part
(11:23):
of this as well, because I feel like, what do
they say time, Time heals all wounds. Yeah, well, time
can heal financial wounds, because the longer you're able to
hold onto that property, you're gonna see appreciation if it's
a long term investment. Probably where you're property where you're
renting it out, you're gonna see rents typically increase.
Speaker 2 (11:40):
But just if you make a mistake, time lessens the
severity that mistake.
Speaker 1 (11:45):
And so I think, whether it be vending machines or
real estate, you still have to think through what is
your unique advantage, Like there needs to be something, some
sort of almost unfair advantage that you have that allows
you to make a profit as opposed to you just
having an interest in doing that. And so when it
comes to.
Speaker 2 (12:03):
Or if you're a candy specialist, you're like, I know,
mister goodbar and kat like the back of my hand.
Speaker 1 (12:07):
Yeah, I mean like literally, like or connection with somebody
within the snack industry, or like I'm thinking about real estate,
Like maybe you are quite handy and you are incredibly patient,
and you don't mind living in a construction zone. Guess
what you are prime for an in house flip. Basically
where you live in the property, renovate it, live there
(12:27):
for at least two years, sell that thing without having
to pay any capital gains on that. That's key.
Speaker 2 (12:32):
That's key because that's one of the best things with
high transaction costs. If you're also paying tax on the profit,
it's hard to make it work unless you really really
know what you're doing and doing some of the work yourself.
But if you do the live in flip route, you've
got a little extra time on your side, and you're
reducing or eliminating essentially the tax burden.
Speaker 1 (12:48):
Yea, even if you're like, well, no, I don't want
to do that, Guys, I'm not very handy. Okay, Well,
you need to be really good at project management, and
you need to have a good network. You need to
have a bunch of great contractors who you can call
on and to manage that thing. All I'm saying is
that they're need or reasonably priced. Yeah, you need to
have some sort of unique advantage. And because if it
was as easy as all the influencers are making it seem,
whether we're talking about vending machines or real estate, everybody
(13:10):
would be doing it. And guess what, more and more
folks might be doing it, which means what it's harder
to make a profit, which is going back to my premise.
You still have to find some sort of unique proposition,
like something unique that sets your services or your products apart.
Everything's harder in redevrent then it seems on YouTube or
TikTok yep. That's also I guess a lesson here. All right,
(13:31):
let's continue talk about real estate for just a second. Matt.
Speaker 2 (13:33):
On that note, it's becoming more common for folks to
pay discount points in order to reduce the mortgage rate
that they're taking on when they're buying a home. Almost
two thirds of buyers paid more upfront to reduce their
interest rate, compared to only thirty percent of buyers in
twenty twenty one, when we were in a climate of
low rates. People are like, oh three percent, great, I
don't feel the need to buy that ratedown anymore. That's
(13:54):
pretty good. Yeah, and so that's a core in historic clothes.
Why would I do that?
Speaker 1 (13:57):
Right?
Speaker 2 (13:57):
Exactly that these are This is data from Freddy Matt.
But we would say paying for discount points is typically
a bad use of your money for multiple reasons. First,
often you don't lower the rate enough to produce a
great enough effect. So, oh cool, I'm saving forty dollars
a month, but it costs me five thousand dollars to
do that. Well, the math doesn't really add up on
that front, right. And then second, most buyers don't stay
(14:19):
at the home long enough to make the numbers work.
So you buy the home, you pay down the rate,
and then you move three or four years later. Well,
there's a really good chance that was money that was
ill spent, because it takes time for that discount for
the you know, when you buy those points down, for
that to actually pay off. Then third, even if you
do stay in the home long enough, you might not
hold onto the mortgage.
Speaker 1 (14:40):
Long enough to make it worth it.
Speaker 2 (14:41):
So even if you stay in the home for twenty years,
but you were finance refinance when rates go down after
something like four or five years. Well, and the projections
are the rates are going to go down?
Speaker 1 (14:50):
Who knows.
Speaker 2 (14:51):
We've always said be careful of basing your choices on
future hopes and dreams about what happens with the interest rates.
But still, if interest rates do go down and you
end up briefinancing, you're gonna wish you had saved that
four or five six thousand dollars whatever it is that
you used to pay down points because you didn't hold
onto that mortgage long enough to make it worth it.
Speaker 1 (15:08):
That's true. I think the biggest key is always is
to shop around with multiple lenders, right, and so what
that means is to not just go with a mortgage
lender that your agent recommends. So far, your agent even
super helpful, and they're they're lining everything up for you.
They're like, hey, I know a guy. Oh this is
how this works. Oh I've got a lender for you
to check out. Can you digitally sign these forms for me?
Not so easy? Yeah, you don't have to do what
(15:29):
they say. Keep that in mind. They could be the best,
but they might not be. You might be able to
get a rate that's lower even by like a quarter
or a half a point, perhaps by shopping around, and
then of course what you would want to do in
that case, you just pocket what you would have paid
in points instead. Because I think this is especially true
man as folks are more transient, As folks are living
(15:50):
in their homes for fewer and fewer years, it makes
it seems like a holdover, like the paying down of points.
It makes sense that this was something that folks did
back in like like the eighty in the nineties, even
when rates were sky high. Back then, rates were even
higher than they are now. And again, there just seems
to be this cultural shift that's taken place as folks
are I think moving to where the opportunity oftentimes is yeah,
(16:12):
not stay input. I think you're right.
Speaker 2 (16:13):
If you're going to do one of those two things,
shopping around with multiple lenders is going to be far
more powerful than paying points to reduce the mortgage amount,
and I think it's well more than worthwhile. I would
reach out to a credit union. I would also talk
to like a local mortgage broker who can shop with
a bunch of different banks on your behalf as well.
I think those are better ways to save money instead
(16:35):
of forking over more cash in order to reduce your
payment amount by a little bit, and again it might
be it might be worthwhile. It depends on the numbers
and how long you plan on being that home. So
I crunch the numbers, you're like, oh cool, if this
five thousand dollars, if I'm going to make it back
in lower payments over the course of eighteen months, twenty
two months, then it might make sense. But for a
lot of people, it's going to take a whole lot
longer to make that money worth it. Last, but not least, Matt,
(16:57):
there's I feel like there's been a lot more conversation
about whether or not retire you should pay off their mortgage.
The answer from a financial planning perspective has typically been yes,
But I feel like on that common wisdom has been
shifting to and keeping the mortgage around is offering more
financial flexibility and even higher returns without even having to
take on any additional risk. So when you don't even
(17:19):
have to look at the market. That's been the thing
I think over time, is like, well, can you earn
more money in the market than by paying off your mortgage, Well,
then invest instead. Well, if you can just save and
beat the rate of your mortgage. That makes it even
a much easier decision because.
Speaker 1 (17:31):
About a guaranteed return your money.
Speaker 2 (17:33):
Because when you're in your twilight years investing in the
S and P five hundred, well, that comes with a
whole lot of risk that you might not be willing
to take on either. You might want the sure thing
of mortgage payoff, But I would say keeping the mortgage
around is actually the more conservative approach these days, and
they're just downsides to being house rich and cash poor. Plus,
you can always pay that mortgage off when or if
(17:55):
savings rates decline. So, hey, savings rates go back to
two percent, and you had kind of money bank in
a high heeled savings account and your interest rates four percent, Well, okay,
maybe now it makes make sense to start to pay
off that mortgage more quickly. But for the time being,
if you're making five percent and your mortgage is three
and a half or four percent, I would just kind
of hold steady and pay it off as agreed.
Speaker 1 (18:14):
Totally. Yeah. This this also seems like a holdover from yesteryear,
where when we had mortgage rates that were crazy high.
Like that was a part of the financial plan for
retirees was to eliminate that house payment. But for all
the folks out there who were retiring that have thirty
year rates that they perhaps refinanced five years ago, things
were crazy low. Yeah. Uh, that's something that if I
(18:35):
were you, I'd be hanging on to for the rest
of my life, maybe even longer. In degree. To have
a mortgage that potentially outlive you while you're earning more
in savings and certainly in the market, it sounds crazy.
It's a no brainer. Yeah, But I think I think
you're right.
Speaker 2 (18:49):
As long as that money that's sitting there in savings,
you're not tempted to go and do other stuff with it.
If you hold it in reserve as liquidity and as
a financial backstop, I think that makes sense. All Right,
We've got more to get to on this episode, including
we gotta talk about credit card rewards.
Speaker 1 (19:02):
Matt.
Speaker 2 (19:03):
We really like credit card rewards, but some of the
richest credit cards might be losing their luster. We'll talk
about that and more right after this.
Speaker 1 (19:17):
All right, we're back. We will talk about credit cards,
and again I'm excited to talk about Robin hood gold. Baby.
I'm bullish if that is your You've got all your
investments under one Robin hood roof. Now, don't you No, No,
we're jumping the gun a little bit. We're jump with
the gun. But let's get to our ludicrous headline of
the week. This is from go Banking Rates. Headline reads
(19:37):
rich Dad Robert Kiyosaki reveals why the four one K
is a horrible retirement plan. Yeah, let's go ahead and
talk some more smack about Kiyosaki again, because in this
article he gives a lot of ridiculous information like it
it was such a straw man argument against the four
win K. For instance, he says that most funds in
a four to win K come with a two percent fee.
(20:00):
What kind of fees or what kind of funds are
you invested in? Because fees have come down precipitously. Some
of our fearits out there they have zero or close
to zero fees attached, like point zero three. Yeah, that's
a far cry from two percent. My friend, I don't
know what funds he's looking at. They must be incredibly exotic.
It's so freaking expensive. He calls the employer match an
(20:21):
illusion of additional income. And sure, he's right to point
out investing timelines right, like there are certain amounts of
time that you need to stick with an employer to
maintain the ability to keep that match. But clearly the
employer match enhances your ability to save for your future.
One hundred percent return on your money if you have
that perk, or at least fifty percent. Sometimes it's fifty
(20:42):
per sure, but he's discounting it completely fidelity their research,
their stats show that four to one K millionaires have
increased by forty one percent year over year, and so
in our opinion, we think the four one K, especially
with an employer match, is still the number one retirement
account that you should be considering.
Speaker 2 (20:58):
Mister Kiyosaki has I'm just going to use a reverential
term there. Even we've he's been predicting, you know, the
stock market crasher. He's basically said, oh, look it's things
are about to hit the fan, and you should you
should get out of the stock market and invest in
in I think he would say real estate, maybe even
precious metals. I'm not I'm not know hoose philosophy is.
(21:20):
But every time he predicts a market crash, the market
continues to rock it upwards. He has been consistently wrong
on that front. And then to say that you know,
all four four one k's are a bad investment when
the vast majority of Americans the way they achieve millionaire
status is through traditional retirement accounts is also just absurd.
And uh, maybe he has preferred ways of investing and
(21:40):
he's done just fine for himself, but to make it
sound like four all one k's are bad for you
and should be avoided completely is total nonsense.
Speaker 1 (21:47):
Yeah, and every point that he gave to refute four
one k's there was like the tiniest kernel of truth. Right,
It's so inaccurate, And what I hate is that it
can lead folks astray who don't know that. Oh no,
that literally should be the very first thing that you
do well.
Speaker 2 (22:00):
And they're like, oh, this dude sold five million books. Yeah,
I should probably listen to him. He knows what he
was talking to.
Speaker 1 (22:04):
Kyosaki is the original influencer. Yeah, think about it. He's
making more money, more of his fortune being rich to
poor dad as opposed to a renowned investor.
Speaker 2 (22:13):
Yeah, yeah, yeah, So I guess this just goes to
show be careful who you follow, who you listen to,
And is he writing about some things I've never even
read the book? Matt I know a lot of people
have listeners who I swear by that book.
Speaker 1 (22:24):
I used to recommend it. I don't really do that anymore.
Speaker 2 (22:27):
Seriously, Yeah, I believe it, and I'm sure that book,
especially that was written in a different time, and I'm
sure there's some good information in there for people, but
I don't It's not on my bookshelf. I don't plan on
reading any came soon, especially when he keeps giving just
ridiculous advice like this. On that note, though, the Labor
Department is attempting again to require financial advisors to be fiduciaries,
(22:47):
which basically means that they're legally required to make decisions
that are in your best interest. And you, as just
an individual living in this society, going to seek financial
help from someone, you might say, aren't they supposed to
do that to help me make good decisions with my money, Like,
don't they have to do what's in my best interest?
And the answer is no, they don't. And for some reason, Matt,
(23:08):
this one's become a political football.
Speaker 1 (23:09):
I don't get it.
Speaker 2 (23:10):
Why you have to be on a blue or red
team when it comes to wanting advisors to have to
offer advice that is in the individual's best interest. You
think we can all agree on that that the advisors
shouldn't be able to steer you towards products and investments
that enrich them at your expense. And it remains me
seen if this next attempt at creating a fiduciary rule
(23:31):
is going to be successful, but for the time being,
if you decide to hire a financial advisor, make sure
they hold themselves to the fiduciary standard themselves. So even
though they're not required to make sure that this is
an extra step they're taking. Xy Planning Network and Hello
Nectarine are two of our favorite sites, and the only
people listed on those sites are fiduciary sworn fiduciary. So
make sure you're looking out for yourself when you enter
(23:53):
into a relationship with an advisor. And maybe at some
point it will be the law of the land that
all advisors have to, you know, meet standard.
Speaker 1 (24:00):
All right, let's get to the rewards rug poll, because
the best credit cards out there might become less rewarding
really soon, so Visa and MasterCard and specifically the payment
networks that they oversee they're swipe fees. They have been
a significant expense for businesses for a long time. Well,
an agreement was struck this week allowing retailers to charge
(24:21):
more for accepting the different fancy credit cards out there
that have the higher fees.
Speaker 2 (24:25):
By the way, I think this was or a legal
fight that was around, had been around for twenty years.
Imagine that kind of legal flog. Well, yeah, and that's
the thing. There is an agreement, but it still has
yet to be it's not like finalized. Yeah, there hasn't
been like a resolution yet.
Speaker 1 (24:38):
So this is all. It seems like it's likely, but
we'll see. But we're just wanting to highlight the fact
that some of these upper crust credit cards that come
with the best perks that they are, it looks like
they're the ones that are being targeted essentially, any card
with the Visa Infinites or the MasterCard World Elite branding
on there, because every swipe of those top notch cards
(24:58):
can cost a retailer fifty cents more with every transaction,
which again let's take it back to the oh, yeah
it is I was going to say, the vending machines
sounds like nothing. You're like, oh, how are you gonna
get rich just fifty cents at a time. Guess what
It adds up really quick when you consider all the
different transactions that are taking place via credit.
Speaker 2 (25:17):
Cards throughout the world, and the retailer just takes it
on the chin. They don't know when you're making the swipe, well,
which card are you using? And how much more is
it costing me? They just feel it on the back hand.
Speaker 1 (25:26):
That's right. But now retailers do have the ability to
charge you more if you want to use that card.
They also have the ability to negotiate some of those
some of those whipe fees. But we'll see how it
all shakes out.
Speaker 2 (25:37):
Yeah, retailers, are they going to pass on the higher fees.
I feel like retailers probably won't want to change the
status quo because it feels like an aggressive sort of
thing to do to say, wait, what kind of card
are you using? Well, I'm gonna to charge you extra
for that. As a small business owner, you might you
run the risk of alienating your customers by taking that approach,
even if that credit card costs you more.
Speaker 1 (25:56):
You run the risk of bait and switch. Yeah, and
where you think is going to cost one and they're like, oh,
actually it's gonna you know, it's gonna cost you this
much more right?
Speaker 2 (26:03):
Even then, like, well, are customers going to accept the
new regime of paying more to use their preferred card?
I don't know that this, Like, even though this in
principle is something that's agreement that's been hashed out, in reality,
I don't know that businesses can actually enforce this without
doing harm for themselves. So we'll keep an eye on
this one. But I guess one takeaway is to make
sure you have more than one card, Like if you
(26:25):
have a Chase Sapphire Reserve, which is one of those
Visa Infinite cards, combine that with a more basic card
like the City Double Cash. I think that's a good
way to proceed, because then you end up going to
a retailer who does to ask which card you're using
before you before you swipe or tap. Sure, and if
it's gonna cost you more to use one over the other,
well then you can decide whether it's worth it or not.
But at least you have the option to use a
card and to keep the price.
Speaker 1 (26:46):
Down Sure, or you can just dump that Double Cash
card because you switch over to robin Hood Gold because
they're offering three percent unlimited on all transactions. True, So
this is a new fancy card that they're rolling out,
the Gold Card. They're actually offering a literal ten caret
Gold credit card to like the first I don't know how.
It's a limited quantity of folks, five thousand, I think people.
(27:06):
But if you if you get ten of your friends
to sign up, you get one of these and it's
legit gold and it's a working credit card, which is
kind of sounds terrible because like, if your wallet wasn't
already targeted, it's like, no, no, literally, I would just
melt the credit card. You can't do much with a
stolen wallet full of credit cards. But literally, there's one
in there that's made out of freaking gold. I think
(27:26):
I saw. You could even opt for the eleven hundred
dollars bonus rather than the actual gold card, because that's
what the card's worth. Oh my gosh, eleven hundred dollars.
Like literally, it's made of gold. But so let's let's
kind of talk. I want to provide a quick recap
because in the past we used to not be too
keen on robin Hood because they didn't offer retirement accounts.
All they had were brokerage accounts. Once they started offering iras,
(27:49):
both traditional and roths. My tune changed a little bit.
It's like, oh cool. Then they started offering a match.
No other brokerage out there has ever offered a match
unless most your employed by them, right, unless it was
your employer. Then they rolled out Robinhood Gold, where you
pay a little bit every month, or you pay annually
and they're gonna match you three percent on your IRA.
(28:09):
So that's when I started to think, oh, all right,
this is pretty interesting. Then earlier this year or into
last year, they rolled out the hey, any money that
you transfer over from a previous IRA, we will also
match three percent on that entire amount. Basically, at that point,
I was like, all right, this is almost too good
(28:29):
to be true, Like what's going on here? Was in
the mouth? I yeah, And now they reeled you in. No,
they just they set the hook with this three percent
cash back card. Because all of that, all of those
more premium three percent offerings that they were offering. You
have to be a Gold member, You got to pay
the subscription. You got to pay either five dollars a month,
which equals sixty bucks, which isn't terrible, or if you
(28:49):
pay annually it's only fifty dollars and so the fact
that there is literally no limit on the cash back
that you can earn with this credit card. Dude, I've
got to report back because you've got You've applied for it. Yeah,
I applied, and I wanted to highlight too that three
percent on the IRA match you have until the end
of April, so you've got about thirty days left in
order to make that happen. But uh, yeah, I haven't
(29:11):
pulled the trigger yet and done all that, but yeah,
I would ahead and officially joined Gold and I'll let
you know how it goes. Man, Yeah, please do it,
cause I'm all in. I'm like, holy, I truly see
it just like credit card rewards, where it's like, Okay,
this is a debt product. Why would you use this? Well,
it's like, well, if you use it responsibly, there are
benefits to be gained. And that's how I see the
Robin Hood app It's like, oh, yeah, you might be
(29:33):
tempted to trade individual stocks, but like we always say
on the show, if you are for the other ninety
five percent of your money fully invested within an IRA,
within a total stock market index fund or an SP
five hundred index fund, even up to five percent of
messing with some single stocks. That's not something we hate.
Speaker 2 (29:52):
Yeah, three percent cash back. No annual fee on this
card either, by the way, I mean grained you have
to pay the fifty dollars.
Speaker 1 (29:57):
Yeah, there's there's effectively an annual fee, but again there
are other benefits, the other benefits you get with it,
including like a five I think it's like five and
a quarter that they're paying on something like that within
their sayings as well. So so yeah, I feel like
you're right.
Speaker 2 (30:10):
I'm don't have my retirement accounts with Robin Hood, but
it's starting to look more appealing. It's definitely crossed my mind,
and I was kind of, I guess, waiting for you
to be the guinea pig test the waters.
Speaker 1 (30:20):
Let me know how it goes. Once all my money
gets siphoned off, I'll come back. What's Vlad in my
care with my hat in my hand.
Speaker 2 (30:25):
I's a fancy airplane with all of your money.
Speaker 1 (30:28):
No, that's not gonna happen.
Speaker 2 (30:30):
But yeah, the first card that we know of to
be especially no annual fee and offer three percent cash back,
it's pretty sick.
Speaker 1 (30:35):
Yeah, double cash that's been around forever and same thing
with the Fidelic Fidelity, so it's like again which also
has an investing tie in as well. But the fact
that they're they're up in at to three percent, baby,
that's yeah, it's attractive.
Speaker 2 (30:48):
This is going to create even more competition in the
credit card space. I think of that is a good thing. Yeah,
all right, let's get to our last story. Matt the
CEO of the world's largest investment firm, Black Rock. His
name is Larry Think. He has been going around this
week expressing concern over what he calls a growing retirement crisis.
Everything's got to be a crisis these days, right, Nothing
is just a problem or an issue to be resolved.
(31:09):
It's a crisis because if you don't call it a crisis,
it doesn't get the eyeballs, doesn't get the attention. Well,
with pensions being a thing of the past, with people
living longer, plus changes that obviously need to happen to
the Social Security program to secure its future, He's not wrong, Like,
there is a growing problem. I'm not going to call
a crisis. There is a growing retirement problem in the
United States. But he's also using his rhetoric to launch
(31:31):
a new product. Of course, of course, he's got something
to right. So it's a target date fund product, no
problem there, but with one marked difference, it shifts some
of your retirement funds into an annuity as you approach
retirement age. That provides then a more stable and predictable
stream of income in retirement. But but it's not without cost.
Speaker 1 (31:51):
These the and.
Speaker 2 (31:53):
There the details are somewhat unknown. Matn I was kind
of scouring Black Rocks site on this to figure out, well,
how exactly does this look like? And the specifics are
paltry right now, but it sure looks like from what
we can tell, this probably isn't the best thing for
most people.
Speaker 1 (32:09):
Yeah, And the key product here, or the key problem
to this product that they're launching, is the fact that
it is annuity based. They've got their pros and cons predictability.
That's certainly a pro right, that predictability is nice, But
the big problem is typically how expensive annuities are. The
high annual fees the sales charges because it's an insurance product,
those fees can be egregious. And then depending on how
(32:31):
early that transition happens, how quickly or how soon you
transition to annuities, your asset allocation Basically, it can have
a real impact on your overall level of wealth because
you're going to see less growth.
Speaker 2 (32:43):
And I think black Rock says that transition starts at
age fifty five, which sounds a little early.
Speaker 1 (32:47):
I think they said too, like you can you can
make that call whenever you want. So I think there
might be some folks who are thinking, oh, well, I
kind of want to retire early, so maybe I should
pull the trigger and make that happen even sooner, which
is actually kind of the opposite of what you need
to be doing if you're looking at an early retirement.
But our take is that he certainly diagnosed the problem correctly, right,
Like we even agree with mister Fink that the US
(33:08):
retirement age that it should rise certainly as life expectancy has.
That's something we've talked. We've talked about a few weeks ago, and.
Speaker 2 (33:14):
I think he points out the Netherlands as being an
example of doing this, that when the average lifespan goes
up in that country, well so does the retirement age.
Speaker 1 (33:23):
And we may kind of track each and we have
not touched our retirement age, like we talked about, why
do you think so security is a mess? My gosh,
that is why it makes sense to make these changes.
But expensive annuities de risking your portfolio too early, we
think that those are going to have harmful consequences as well.
And I think that one of the things that they're
going to be able to sell if assuming they launched
this product, they're going to be able to sell a
(33:43):
lot of it because there is an illusion of control.
You've got this false sense of security thinking that everything
is going to be all right, but nothing is perfectly
predictable because maybe you've.
Speaker 2 (33:53):
Got you're gonna say, nothing's gonna be all right, it'll
be off, It'll be fine, guys, it'll be fine.
Speaker 1 (33:57):
But like, let's just assume like you're assuming a certain
cost of living and who knows what prices and things
are going to be in the future. So even as
retirees are clinging to this as this I don't know
source of stability, like they're even that in and of
itself is moving within the tides of what we're facing
in our economy.
Speaker 2 (34:14):
Well, and that is kind of what social security is
supposed to be for us, right, is that known quantity,
that annuity Essentially that if especially the longer you wait,
the more money you're gonna get every single month, and
it's a known quantity that doesn't shift except for to
go up as the cost of living with those cost
of living adjustments. But in this case, you're who knows
exactly what you're paying. I would be curious to know
(34:34):
the details, and I'm waiting to see those released. How
much are you paying for that added security? And is
the price you pay too much for.
Speaker 1 (34:41):
What you're getting? Yeah, I'm I guarantee it this Not
only are the price is gonna be too high, but
the return is gonna be too low, So you're getting
hit on both ends. And I feel like we can
confidently not recommend it already. But honestly, I even have
an issue with like target date funds because like, in
my mind, that's sort of like the DII approach, because of, hey, okay,
this will moderately d risk over time. But even though
(35:02):
like I have a hard time swallowing the like, I
think the average expense ratio on our target date fund
is still half a percent. That's crazy, that's still that's
still really thinking out.
Speaker 2 (35:11):
With Vanguard or and Fidelity has two different target date funds,
by the way, one's expensive ones not if you're if
you're with our low cost firms, we're talking about essentially
point one percent. It's it's almost negligible.
Speaker 1 (35:22):
It's a lot smaller, but still point one is more
than three times more than point zero three, which is
infinitely more than completely free. And so I think there's
there's just there are ways of doing that, even manually.
And I know handling your finances and de risking over
time and buying more into bonds as you age isn't
for everyone, but I don't know. I would like to
think by the time that we get to that point,
after a lifetime of talking about this, and this is
(35:45):
part of why we have the show to talk about it,
by the time you are making some of these more
nerve racking decisions, that you have the confidence to do
something like that. Yeah, within your retirement years. But all right,
that's gonna be it for this episode. Buddy. We hope everyone. Hey,
happy Easter. We didn't even mention it's good Friday today,
so yeah, we hope everyone out there has a good Easter.
And we'll see you back here on Monday with a
fresh set of listener questions for you, no doubt.
Speaker 2 (36:08):
All right, that's going to do it for this one
until next time. Best friends are best friends out
Welcome to Had the Money. I'm Joel and I am Matt.
Speaker 2 (00:03):
Today we're talking passive income plans, paying points and rewards
RUG polls.
Speaker 1 (00:27):
That's right. And when you say reward rug pole, what
we're referring to here are credit card rewards and so
on that note, I think we'll get to talking about
Robin hood Golds. That's actually one I'm excited about personally.
Speaker 2 (00:39):
Am I getting too extreme with the alliteration on Friday Flights?
Speaker 1 (00:42):
Man? No, okay, it's something for them to lash onto.
Speaker 2 (00:45):
J want another P followed by followed by P, Like
I just I don't know why I'm obsessed with that
sort of way of naming our Friday flight episode.
Speaker 1 (00:52):
It just flows, man. Before we get to the actual story, Zoe,
let's pull one out for behavioral economist Daniel Connoman.
Speaker 2 (00:58):
Yeah, so yeah, he passed at the age of ninety,
which is.
Speaker 1 (01:02):
That was yesterday? Long life? Was it Thursday? Wednesday? Say yeah?
Speaker 2 (01:05):
And I think it's just yeah, pour one out because
we talk about this regularly on the show, how personal
finance is.
Speaker 1 (01:12):
It's not all about math.
Speaker 2 (01:14):
We know that we're just irrational creatures as human beings,
and nobody highlighted that better than Daniel Conomy, and he
basically kicked off a whole new field of research.
Speaker 1 (01:23):
Well you say, like you enter into that conversation with
the assumption that we all know that, and the reason
we know that is because of Daniel Conomy, right, Like,
I feel like that that was one of his biggest
contributions was the fact that, like, we think we're rational,
we think we can be objective and look at all
of the different facts, but no, in fact, we are subjective.
It depends on our life experiences as to our behavior, right,
(01:43):
Like we're not.
Speaker 2 (01:44):
In our emotions and all sorts of things.
Speaker 1 (01:46):
Yes, we take shortcuts, we take cues from other people,
Like we just go with our gut sometimes as opposed
to receiving all of the information that's available to us
and making a perfectly rational decision.
Speaker 2 (01:56):
Gains aren't don't feel as powerful as losses do. And
and all of these different.
Speaker 1 (02:01):
Things in sand dollar amounts, right, and all.
Speaker 2 (02:03):
These things that he was able to highlight that really
inform I think at least some of what we talk
about on the show, because there are some things where
it's like, hey, this is math, or hey this is policy,
this is how this works. Maybe you should consider taking
advantage of this, or hey, the economic tide has swung
a little bit, and actually there's things to consider over here.
But there's also a lot to talk about on the
behavior spectrum, and that truly, so much of that goes
(02:23):
back to the discipline essentially that he founded.
Speaker 1 (02:26):
That's right. So, Daniel Conneman, thank you for all of
your work. SBF, no, thank you for all that you've done.
Did you see that his sentencing sentencing came through?
Speaker 2 (02:35):
I did, Yeah, twenty five years that. I can't tell
if that's fair or not enough, but I think it's fair.
He's one of the two. He did seem he had
like a slap on the wrist, like five years in
some community service.
Speaker 1 (02:45):
That wouldn't have been wrong. Yeah.
Speaker 2 (02:47):
Well, he was apologetic, and I think it seems like finally,
finally true. It's for a long time he was like,
what do you mean, I didn't do anything.
Speaker 1 (02:53):
It seems like he recognizes the harm that he caused
to lots of people, and so I don't know any
lesson that same at least he says he's acknowledging it.
That's true. Does he feel that way? He's not locked
away for seventy years, essentially for life.
Speaker 2 (03:05):
It's kind of like when I, you know, apologized to
my parents growing up when I did something and really
I just wanted to not be in trouble. May I
have a feeling that might be what he's doing. But
I'm glad to see white color crime doesn't get enough
punishment in this country. And so and so what SBF
did was terrible. It really impacted his thievery, essentially impacted
(03:25):
the lives of millions of people, and he deserves to
go away for a long time.
Speaker 1 (03:29):
That's true. Yeah, it wrecks the crypto markets. And on
that note, actually, next Wednesday, we're going to be speaking
with Marco from Whiteboard Finance about bitcoin. Yeah, so you
can look forward to that one. That'll be a fun combo.
Speaker 2 (03:41):
All right, but let's move on, mat, Let's get to
the Friday flight as sampling of stories we found interesting
this week.
Speaker 1 (03:46):
And inflation continues to.
Speaker 2 (03:48):
Kind of be a water cooler talk even though it's
died down a lot and we're not experiencing like, oh
crazy egg price is doubled in just two months, Nothing
like that's happening.
Speaker 1 (03:56):
But although egg prices are up because well it's Easter weekend.
That's true. Yeah, there's just all the demain hardy easter
egg hunts.
Speaker 2 (04:04):
I know, my mom dropped off fifteen for us, which
is really sweet of her, So we could.
Speaker 1 (04:08):
That four one k lo exactly.
Speaker 2 (04:12):
Well, I think especially for people in California, but really
anywhere there's a Trader Joe's, people are saying, uh, oh,
banana price has just went up. Trader Joe's they sell
they're like one of the only stores that sells bananas
and singles, and they're pricing went up the register, right, Yeah,
well I think it's actually like, right as you're walking
into the fruit fer style, yeah, and it's a great, great store,
but now you want your banana, there's twenty three cents
(04:33):
instead of nineteen cents. It was kind of like, in
my mind, kind of like the Costco hot dog exactly
that has remained at a dollar fifty and the bananas
were nineteen cents for twenty years, and so people are like,
you know, uh, I don't think they're revolting, but they're
a little concerned at least, and I understand that. But
obviously bananas are still incredibly cheap, just like eggs, even
if they go up in price twenty percent. It's one
of those things where it's still fast and more affordable
(04:56):
than a lot of other foods you could buy.
Speaker 1 (04:58):
Yeah, hopefully I can continue to enjoy my daily We
both have a daily banana with our coffee and a
bedtime banana lately. Now what are you talking about. It's
probably like the last thing you want, right, it's like
floadd with sugar.
Speaker 2 (05:09):
Well, now I need to tell them, sorry, too expensive.
Speaker 1 (05:12):
Well, so, you know, one of the reasons why historically
they've been cheap is because of the fact that bananas
are all clones of the same banana, one variety, right, yeah, yeah,
so the Cavendish I think is the name of it.
It's like, literally they're like stormtroopers. They're all it's like
the exact same banana, unlike apples that's just been replicated
over like decades, I guess. Which not to be an alarmist,
(05:33):
but that's why some folks are saying that there could
be like all of our bananas as we know it
could get wiped out because they are literally all the
same banana. And if there's a disease that hits Central
South America where there's like hundreds thousands of acres of bananas.
Then we basically would have to rebuild our bananas as
we know it from scratch new banana infrastructure.
Speaker 2 (05:53):
But yeah, like literally, which is frightening, which is kind
of crazy to think. So, and your bananas instead of
being twenty three cents, they're like eighty two cent piece.
Speaker 1 (06:00):
Yeah, So just saying that so that you that we
all appreciate our bananas while we still have them.
Speaker 2 (06:05):
And I understand Trader Joe's needs is a company that
needs to remain profitable.
Speaker 1 (06:08):
Yeah, all right, let's talk about passive income because your
next side hustle choice it might be running a vending machine.
The reason is because it's trendy passive income. It's the
quest and vending machines seem to be the current answer
for many hustlers out there, and there's been a rise
and interest. This is according to the Wall Street Journal.
There's a chance that it could be a profitable endeavor. Sure,
(06:32):
but before you go out there and drop a bunch
of money on whatever vending machine that you want to purchase,
I guess.
Speaker 2 (06:37):
Those fancy robotic ones where they get get the soda
and then they like tilt it sideway.
Speaker 1 (06:42):
Out that way, it doesn't get all carbonated and shook up.
I think those things are like seven grand? Are they really? Yeah?
Oh my gosh, no those It takes a lot of
front cost or even just like a bubble gum machine
before you do that. So much depends on the specifics
because when you dig a little bit deeper, the average
machine earns just over five hundred dollars a month. And
I'm not going to say that that's not nothing, but
(07:03):
it may not be this endless fountain of money like
you were imagining it to be. Yeah, but then on
top of that, that machine it needs to be restocked,
it needs to be repaired. If it gets tagged, you
got to show up and clean nothing clean, nothing off
though it would be the worst. But again, five hundred
dollars a month like that is just the average. It
makes me think of with real estate investing, there is
a wide spectrum of what it is that individuals are making,
(07:25):
and like real estate, location is key. And so when
you're talking about veny machines, the best machines they make
the bulk of their returns the machines that are well placed.
And if you are just getting into the game, it's
going to take you a while to be able to
snag contracts with the different business owners that would allow
you to have that prime real estate. Agreed.
Speaker 2 (07:45):
Yeah, No, you have to think about location in the
It's not just like boom. I got a vending machine
and it's just printing money. That's not how it works.
I had a friend, It's not like a crypto farm.
Speaker 1 (07:53):
Right.
Speaker 2 (07:54):
I had a friend who had a photo photo booth
and that was actually much better decision than a vending
machine because she had it in a record store and
it was one It was easier to maintain. There wasn't
as much to go wrong with it. You didn't have
to come by and restock every week or something like that.
It was more like once a month putting in new film.
Speaker 1 (08:14):
Non perishables. Right. I like that.
Speaker 2 (08:15):
It was a much easier business to run. So I
don't know, maybe for it, but it was in a
high traffic area in a really cool part of town.
Speaker 1 (08:22):
That's another.
Speaker 2 (08:23):
It was a selling point. And so I think if
you want to go to the vending machine route, I
don't know, maybe a photo booth route is better. People
are interested in that. They tap their credit card, pay
five bucks and get a film strip, and maybe that's
a more profitable way to go. I think this also
isn't for everyone. Right, And interestingly enough, in this article,
like the folks who have done well, they tend to
pivot from just having vending machines and they want to
(08:45):
become vending machine influenced.
Speaker 1 (08:47):
Where you see the footage of them and they got
this bucket, this giant bucket of quarters and it's just like,
oh my gosh, that so much money. Yeah, it's like
that scene from the Goonies where he goes and he's
like stealing all the money from the well. Still haven't
seen it? What I know, you've never seen the Goonies. Now, dude,
I need to Oh my gosh, it holds up. You
need to go back and see that. I will, I will,
so Okay.
Speaker 2 (09:04):
One of the guys they highlighted in this story, he
has over five hundred thousand YouTube subscribers and he's basically
teaching folks how to make money with vending machines. He's
making a lot more creating content than he is selling urias, soda,
empower rate and stuff like that. Right, And we talked
back in episode three fifty three, which I think of
as kind of one of our Cornerstone episodes, how passive
income is a myth, and we love the idea of
(09:25):
people having multiple sources of income and to be pursuing
what we called in that episode leveraged income, where upfront
effort pays off in more passive gains down the road.
But the truth is it takes time and work to
see those endeavors succeed. Just because vending machine investing is
hot right now, it's making the headlines, or you're seeing
more influencers on TikTok or Instagram or something pushing it,
(09:47):
that doesn't mean it's a smart move for you. Makes
me think mad of writing a book. And we have
friends who have written books and they say they make
between two thousand and five thousand dollars a month from
perpetual sales of that book. But they have to keep
pushing it, they have to keep marketing it, and it
took a heck of a lot of work up front
to write that book. So I think if you were
to pick their brain and say how's that passive income
(10:08):
coming along, they'd say, well, it's great that I put
in a lot of hard work at the beginning and
I'm reaping the rewards, but passive income.
Speaker 1 (10:14):
I don't know if that's what I call it. That's true. Okay,
So another investing trend that's tacking up is house flipping.
So basically, obviously we've seen rising home prices. Well, that
has led to an increased interest in flipping homes. And
it's not that you can't make money flipping a home, Folks, clearly,
clearly do this. I actually did this back in the
day when photography was a little bit slower. What year
(10:34):
was that that you twenty fifteen?
Speaker 2 (10:36):
Okay, yeah, and you did decently well with that house
flipping it.
Speaker 1 (10:39):
Ever, Yeah, Like, we entered into that thinking there's a
chance we might move into it ourselves. And honestly, that's
a strike against us because what that means is we
were making some decisions based on us personally as opposed
to thinking about it from a purely business standpoint. But
even still, it was a deal and we were able
to pounce on it, make it happen, knock it out
within a short period of time. That being said, please
(11:00):
be forewarned because the risks are much bigger when your
timeline shrinks. If you are looking to flip a home,
you got to know what you're doing, you got or
maybe you've got to have a really good relationship with
a contractor because you can lose money fairly easily. Transaction
costs are certainly a big reason why not to mention
the tax consequences of a shorter time period where you're
hanging onto that. And honestly, timing is a big part
(11:23):
of this as well, because I feel like, what do
they say time, Time heals all wounds. Yeah, well, time
can heal financial wounds, because the longer you're able to
hold onto that property, you're gonna see appreciation if it's
a long term investment. Probably where you're property where you're
renting it out, you're gonna see rents typically increase.
Speaker 2 (11:40):
But just if you make a mistake, time lessens the
severity that mistake.
Speaker 1 (11:45):
And so I think, whether it be vending machines or
real estate, you still have to think through what is
your unique advantage, Like there needs to be something, some
sort of almost unfair advantage that you have that allows
you to make a profit as opposed to you just
having an interest in doing that. And so when it
comes to.
Speaker 2 (12:03):
Or if you're a candy specialist, you're like, I know,
mister goodbar and kat like the back of my hand.
Speaker 1 (12:07):
Yeah, I mean like literally, like or connection with somebody
within the snack industry, or like I'm thinking about real estate,
Like maybe you are quite handy and you are incredibly patient,
and you don't mind living in a construction zone. Guess
what you are prime for an in house flip. Basically
where you live in the property, renovate it, live there
(12:27):
for at least two years, sell that thing without having
to pay any capital gains on that. That's key.
Speaker 2 (12:32):
That's key because that's one of the best things with
high transaction costs. If you're also paying tax on the profit,
it's hard to make it work unless you really really
know what you're doing and doing some of the work yourself.
But if you do the live in flip route, you've
got a little extra time on your side, and you're
reducing or eliminating essentially the tax burden.
Speaker 1 (12:48):
Yea, even if you're like, well, no, I don't want
to do that, Guys, I'm not very handy. Okay, Well,
you need to be really good at project management, and
you need to have a good network. You need to
have a bunch of great contractors who you can call
on and to manage that thing. All I'm saying is
that they're need or reasonably priced. Yeah, you need to
have some sort of unique advantage. And because if it
was as easy as all the influencers are making it seem,
whether we're talking about vending machines or real estate, everybody
(13:10):
would be doing it. And guess what, more and more
folks might be doing it, which means what it's harder
to make a profit, which is going back to my premise.
You still have to find some sort of unique proposition,
like something unique that sets your services or your products apart.
Everything's harder in redevrent then it seems on YouTube or
TikTok yep. That's also I guess a lesson here. All right,
(13:31):
let's continue talk about real estate for just a second. Matt.
Speaker 2 (13:33):
On that note, it's becoming more common for folks to
pay discount points in order to reduce the mortgage rate
that they're taking on when they're buying a home. Almost
two thirds of buyers paid more upfront to reduce their
interest rate, compared to only thirty percent of buyers in
twenty twenty one, when we were in a climate of
low rates. People are like, oh three percent, great, I
don't feel the need to buy that ratedown anymore. That's
(13:54):
pretty good. Yeah, and so that's a core in historic clothes.
Why would I do that?
Speaker 1 (13:57):
Right?
Speaker 2 (13:57):
Exactly that these are This is data from Freddy Matt.
But we would say paying for discount points is typically
a bad use of your money for multiple reasons. First,
often you don't lower the rate enough to produce a
great enough effect. So, oh cool, I'm saving forty dollars
a month, but it costs me five thousand dollars to
do that. Well, the math doesn't really add up on
that front, right. And then second, most buyers don't stay
(14:19):
at the home long enough to make the numbers work.
So you buy the home, you pay down the rate,
and then you move three or four years later. Well,
there's a really good chance that was money that was
ill spent, because it takes time for that discount for
the you know, when you buy those points down, for
that to actually pay off. Then third, even if you
do stay in the home long enough, you might not
hold onto the mortgage.
Speaker 1 (14:40):
Long enough to make it worth it.
Speaker 2 (14:41):
So even if you stay in the home for twenty years,
but you were finance refinance when rates go down after
something like four or five years. Well, and the projections
are the rates are going to go down?
Speaker 1 (14:50):
Who knows.
Speaker 2 (14:51):
We've always said be careful of basing your choices on
future hopes and dreams about what happens with the interest rates.
But still, if interest rates do go down and you
end up briefinancing, you're gonna wish you had saved that
four or five six thousand dollars whatever it is that
you used to pay down points because you didn't hold
onto that mortgage long enough to make it worth it.
Speaker 1 (15:08):
That's true. I think the biggest key is always is
to shop around with multiple lenders, right, and so what
that means is to not just go with a mortgage
lender that your agent recommends. So far, your agent even
super helpful, and they're they're lining everything up for you.
They're like, hey, I know a guy. Oh this is
how this works. Oh I've got a lender for you
to check out. Can you digitally sign these forms for me?
Not so easy? Yeah, you don't have to do what
(15:29):
they say. Keep that in mind. They could be the best,
but they might not be. You might be able to
get a rate that's lower even by like a quarter
or a half a point, perhaps by shopping around, and
then of course what you would want to do in
that case, you just pocket what you would have paid
in points instead. Because I think this is especially true
man as folks are more transient, As folks are living
(15:50):
in their homes for fewer and fewer years, it makes
it seems like a holdover, like the paying down of points.
It makes sense that this was something that folks did
back in like like the eighty in the nineties, even
when rates were sky high. Back then, rates were even
higher than they are now. And again, there just seems
to be this cultural shift that's taken place as folks
are I think moving to where the opportunity oftentimes is yeah,
(16:12):
not stay input. I think you're right.
Speaker 2 (16:13):
If you're going to do one of those two things,
shopping around with multiple lenders is going to be far
more powerful than paying points to reduce the mortgage amount,
and I think it's well more than worthwhile. I would
reach out to a credit union. I would also talk
to like a local mortgage broker who can shop with
a bunch of different banks on your behalf as well.
I think those are better ways to save money instead
(16:35):
of forking over more cash in order to reduce your
payment amount by a little bit, and again it might
be it might be worthwhile. It depends on the numbers
and how long you plan on being that home. So
I crunch the numbers, you're like, oh cool, if this
five thousand dollars, if I'm going to make it back
in lower payments over the course of eighteen months, twenty
two months, then it might make sense. But for a
lot of people, it's going to take a whole lot
longer to make that money worth it. Last, but not least, Matt,
(16:57):
there's I feel like there's been a lot more conversation
about whether or not retire you should pay off their mortgage.
The answer from a financial planning perspective has typically been yes,
But I feel like on that common wisdom has been
shifting to and keeping the mortgage around is offering more
financial flexibility and even higher returns without even having to
take on any additional risk. So when you don't even
(17:19):
have to look at the market. That's been the thing
I think over time, is like, well, can you earn
more money in the market than by paying off your mortgage, Well,
then invest instead. Well, if you can just save and
beat the rate of your mortgage. That makes it even
a much easier decision because.
Speaker 1 (17:31):
About a guaranteed return your money.
Speaker 2 (17:33):
Because when you're in your twilight years investing in the
S and P five hundred, well, that comes with a
whole lot of risk that you might not be willing
to take on either. You might want the sure thing
of mortgage payoff, But I would say keeping the mortgage
around is actually the more conservative approach these days, and
they're just downsides to being house rich and cash poor. Plus,
you can always pay that mortgage off when or if
(17:55):
savings rates decline. So, hey, savings rates go back to
two percent, and you had kind of money bank in
a high heeled savings account and your interest rates four percent, Well, okay,
maybe now it makes make sense to start to pay
off that mortgage more quickly. But for the time being,
if you're making five percent and your mortgage is three
and a half or four percent, I would just kind
of hold steady and pay it off as agreed.
Speaker 1 (18:14):
Totally. Yeah. This this also seems like a holdover from yesteryear,
where when we had mortgage rates that were crazy high.
Like that was a part of the financial plan for
retirees was to eliminate that house payment. But for all
the folks out there who were retiring that have thirty
year rates that they perhaps refinanced five years ago, things
were crazy low. Yeah. Uh, that's something that if I
(18:35):
were you, I'd be hanging on to for the rest
of my life, maybe even longer. In degree. To have
a mortgage that potentially outlive you while you're earning more
in savings and certainly in the market, it sounds crazy.
It's a no brainer. Yeah, But I think I think
you're right.
Speaker 2 (18:49):
As long as that money that's sitting there in savings,
you're not tempted to go and do other stuff with it.
If you hold it in reserve as liquidity and as
a financial backstop, I think that makes sense. All Right,
We've got more to get to on this episode, including
we gotta talk about credit card rewards.
Speaker 1 (19:02):
Matt.
Speaker 2 (19:03):
We really like credit card rewards, but some of the
richest credit cards might be losing their luster. We'll talk
about that and more right after this.
Speaker 1 (19:17):
All right, we're back. We will talk about credit cards,
and again I'm excited to talk about Robin hood gold. Baby.
I'm bullish if that is your You've got all your
investments under one Robin hood roof. Now, don't you No, No,
we're jumping the gun a little bit. We're jump with
the gun. But let's get to our ludicrous headline of
the week. This is from go Banking Rates. Headline reads
(19:37):
rich Dad Robert Kiyosaki reveals why the four one K
is a horrible retirement plan. Yeah, let's go ahead and
talk some more smack about Kiyosaki again, because in this
article he gives a lot of ridiculous information like it
it was such a straw man argument against the four
win K. For instance, he says that most funds in
a four to win K come with a two percent fee.
(20:00):
What kind of fees or what kind of funds are
you invested in? Because fees have come down precipitously. Some
of our fearits out there they have zero or close
to zero fees attached, like point zero three. Yeah, that's
a far cry from two percent. My friend, I don't
know what funds he's looking at. They must be incredibly exotic.
It's so freaking expensive. He calls the employer match an
(20:21):
illusion of additional income. And sure, he's right to point
out investing timelines right, like there are certain amounts of
time that you need to stick with an employer to
maintain the ability to keep that match. But clearly the
employer match enhances your ability to save for your future.
One hundred percent return on your money if you have
that perk, or at least fifty percent. Sometimes it's fifty
(20:42):
per sure, but he's discounting it completely fidelity their research,
their stats show that four to one K millionaires have
increased by forty one percent year over year, and so
in our opinion, we think the four one K, especially
with an employer match, is still the number one retirement
account that you should be considering.
Speaker 2 (20:58):
Mister Kiyosaki has I'm just going to use a reverential
term there. Even we've he's been predicting, you know, the
stock market crasher. He's basically said, oh, look it's things
are about to hit the fan, and you should you
should get out of the stock market and invest in
in I think he would say real estate, maybe even
precious metals. I'm not I'm not know hoose philosophy is.
(21:20):
But every time he predicts a market crash, the market
continues to rock it upwards. He has been consistently wrong
on that front. And then to say that you know,
all four four one k's are a bad investment when
the vast majority of Americans the way they achieve millionaire
status is through traditional retirement accounts is also just absurd.
And uh, maybe he has preferred ways of investing and
(21:40):
he's done just fine for himself, but to make it
sound like four all one k's are bad for you
and should be avoided completely is total nonsense.
Speaker 1 (21:47):
Yeah, and every point that he gave to refute four
one k's there was like the tiniest kernel of truth. Right,
It's so inaccurate, And what I hate is that it
can lead folks astray who don't know that. Oh no,
that literally should be the very first thing that you
do well.
Speaker 2 (22:00):
And they're like, oh, this dude sold five million books. Yeah,
I should probably listen to him. He knows what he
was talking to.
Speaker 1 (22:04):
Kyosaki is the original influencer. Yeah, think about it. He's
making more money, more of his fortune being rich to
poor dad as opposed to a renowned investor.
Speaker 2 (22:13):
Yeah, yeah, yeah, So I guess this just goes to
show be careful who you follow, who you listen to,
And is he writing about some things I've never even
read the book? Matt I know a lot of people
have listeners who I swear by that book.
Speaker 1 (22:24):
I used to recommend it. I don't really do that anymore.
Speaker 2 (22:27):
Seriously, Yeah, I believe it, and I'm sure that book,
especially that was written in a different time, and I'm
sure there's some good information in there for people, but
I don't It's not on my bookshelf. I don't plan on
reading any came soon, especially when he keeps giving just
ridiculous advice like this. On that note, though, the Labor
Department is attempting again to require financial advisors to be fiduciaries,
(22:47):
which basically means that they're legally required to make decisions
that are in your best interest. And you, as just
an individual living in this society, going to seek financial
help from someone, you might say, aren't they supposed to
do that to help me make good decisions with my money, Like,
don't they have to do what's in my best interest?
And the answer is no, they don't. And for some reason, Matt,
(23:08):
this one's become a political football.
Speaker 1 (23:09):
I don't get it.
Speaker 2 (23:10):
Why you have to be on a blue or red
team when it comes to wanting advisors to have to
offer advice that is in the individual's best interest. You
think we can all agree on that that the advisors
shouldn't be able to steer you towards products and investments
that enrich them at your expense. And it remains me
seen if this next attempt at creating a fiduciary rule
(23:31):
is going to be successful, but for the time being,
if you decide to hire a financial advisor, make sure
they hold themselves to the fiduciary standard themselves. So even
though they're not required to make sure that this is
an extra step they're taking. Xy Planning Network and Hello
Nectarine are two of our favorite sites, and the only
people listed on those sites are fiduciary sworn fiduciary. So
make sure you're looking out for yourself when you enter
(23:53):
into a relationship with an advisor. And maybe at some
point it will be the law of the land that
all advisors have to, you know, meet standard.
Speaker 1 (24:00):
All right, let's get to the rewards rug poll, because
the best credit cards out there might become less rewarding
really soon, so Visa and MasterCard and specifically the payment
networks that they oversee they're swipe fees. They have been
a significant expense for businesses for a long time. Well,
an agreement was struck this week allowing retailers to charge
(24:21):
more for accepting the different fancy credit cards out there
that have the higher fees.
Speaker 2 (24:25):
By the way, I think this was or a legal
fight that was around, had been around for twenty years.
Imagine that kind of legal flog. Well, yeah, and that's
the thing. There is an agreement, but it still has
yet to be it's not like finalized. Yeah, there hasn't
been like a resolution yet.
Speaker 1 (24:38):
So this is all. It seems like it's likely, but
we'll see. But we're just wanting to highlight the fact
that some of these upper crust credit cards that come
with the best perks that they are, it looks like
they're the ones that are being targeted essentially, any card
with the Visa Infinites or the MasterCard World Elite branding
on there, because every swipe of those top notch cards
(24:58):
can cost a retailer fifty cents more with every transaction,
which again let's take it back to the oh, yeah
it is I was going to say, the vending machines
sounds like nothing. You're like, oh, how are you gonna
get rich just fifty cents at a time. Guess what
It adds up really quick when you consider all the
different transactions that are taking place via credit.
Speaker 2 (25:17):
Cards throughout the world, and the retailer just takes it
on the chin. They don't know when you're making the swipe, well,
which card are you using? And how much more is
it costing me? They just feel it on the back hand.
Speaker 1 (25:26):
That's right. But now retailers do have the ability to
charge you more if you want to use that card.
They also have the ability to negotiate some of those
some of those whipe fees. But we'll see how it
all shakes out.
Speaker 2 (25:37):
Yeah, retailers, are they going to pass on the higher fees.
I feel like retailers probably won't want to change the
status quo because it feels like an aggressive sort of
thing to do to say, wait, what kind of card
are you using? Well, I'm gonna to charge you extra
for that. As a small business owner, you might you
run the risk of alienating your customers by taking that approach,
even if that credit card costs you more.
Speaker 1 (25:56):
You run the risk of bait and switch. Yeah, and
where you think is going to cost one and they're like, oh,
actually it's gonna you know, it's gonna cost you this
much more right?
Speaker 2 (26:03):
Even then, like, well, are customers going to accept the
new regime of paying more to use their preferred card?
I don't know that this, Like, even though this in
principle is something that's agreement that's been hashed out, in reality,
I don't know that businesses can actually enforce this without
doing harm for themselves. So we'll keep an eye on
this one. But I guess one takeaway is to make
sure you have more than one card, Like if you
(26:25):
have a Chase Sapphire Reserve, which is one of those
Visa Infinite cards, combine that with a more basic card
like the City Double Cash. I think that's a good
way to proceed, because then you end up going to
a retailer who does to ask which card you're using
before you before you swipe or tap. Sure, and if
it's gonna cost you more to use one over the other,
well then you can decide whether it's worth it or not.
But at least you have the option to use a
card and to keep the price.
Speaker 1 (26:46):
Down Sure, or you can just dump that Double Cash
card because you switch over to robin Hood Gold because
they're offering three percent unlimited on all transactions. True, So
this is a new fancy card that they're rolling out,
the Gold Card. They're actually offering a literal ten caret
Gold credit card to like the first I don't know how.
It's a limited quantity of folks, five thousand, I think people.
(27:06):
But if you if you get ten of your friends
to sign up, you get one of these and it's
legit gold and it's a working credit card, which is
kind of sounds terrible because like, if your wallet wasn't
already targeted, it's like, no, no, literally, I would just
melt the credit card. You can't do much with a
stolen wallet full of credit cards. But literally, there's one
in there that's made out of freaking gold. I think
(27:26):
I saw. You could even opt for the eleven hundred
dollars bonus rather than the actual gold card, because that's
what the card's worth. Oh my gosh, eleven hundred dollars.
Like literally, it's made of gold. But so let's let's
kind of talk. I want to provide a quick recap
because in the past we used to not be too
keen on robin Hood because they didn't offer retirement accounts.
All they had were brokerage accounts. Once they started offering iras,
(27:49):
both traditional and roths. My tune changed a little bit.
It's like, oh cool. Then they started offering a match.
No other brokerage out there has ever offered a match
unless most your employed by them, right, unless it was
your employer. Then they rolled out Robinhood Gold, where you
pay a little bit every month, or you pay annually
and they're gonna match you three percent on your IRA.
(28:09):
So that's when I started to think, oh, all right,
this is pretty interesting. Then earlier this year or into
last year, they rolled out the hey, any money that
you transfer over from a previous IRA, we will also
match three percent on that entire amount. Basically, at that point,
I was like, all right, this is almost too good
(28:29):
to be true, Like what's going on here? Was in
the mouth? I yeah, And now they reeled you in. No,
they just they set the hook with this three percent
cash back card. Because all of that, all of those
more premium three percent offerings that they were offering. You
have to be a Gold member, You got to pay
the subscription. You got to pay either five dollars a month,
which equals sixty bucks, which isn't terrible, or if you
(28:49):
pay annually it's only fifty dollars and so the fact
that there is literally no limit on the cash back
that you can earn with this credit card. Dude, I've
got to report back because you've got You've applied for it. Yeah,
I applied, and I wanted to highlight too that three
percent on the IRA match you have until the end
of April, so you've got about thirty days left in
order to make that happen. But uh, yeah, I haven't
(29:11):
pulled the trigger yet and done all that, but yeah,
I would ahead and officially joined Gold and I'll let
you know how it goes. Man, Yeah, please do it,
cause I'm all in. I'm like, holy, I truly see
it just like credit card rewards, where it's like, Okay,
this is a debt product. Why would you use this? Well,
it's like, well, if you use it responsibly, there are
benefits to be gained. And that's how I see the
Robin Hood app It's like, oh, yeah, you might be
(29:33):
tempted to trade individual stocks, but like we always say
on the show, if you are for the other ninety
five percent of your money fully invested within an IRA,
within a total stock market index fund or an SP
five hundred index fund, even up to five percent of
messing with some single stocks. That's not something we hate.
Speaker 2 (29:52):
Yeah, three percent cash back. No annual fee on this
card either, by the way, I mean grained you have
to pay the fifty dollars.
Speaker 1 (29:57):
Yeah, there's there's effectively an annual fee, but again there
are other benefits, the other benefits you get with it,
including like a five I think it's like five and
a quarter that they're paying on something like that within
their sayings as well. So so yeah, I feel like
you're right.
Speaker 2 (30:10):
I'm don't have my retirement accounts with Robin Hood, but
it's starting to look more appealing. It's definitely crossed my mind,
and I was kind of, I guess, waiting for you
to be the guinea pig test the waters.
Speaker 1 (30:20):
Let me know how it goes. Once all my money
gets siphoned off, I'll come back. What's Vlad in my
care with my hat in my hand.
Speaker 2 (30:25):
I's a fancy airplane with all of your money.
Speaker 1 (30:28):
No, that's not gonna happen.
Speaker 2 (30:30):
But yeah, the first card that we know of to
be especially no annual fee and offer three percent cash back,
it's pretty sick.
Speaker 1 (30:35):
Yeah, double cash that's been around forever and same thing
with the Fidelic Fidelity, so it's like again which also
has an investing tie in as well. But the fact
that they're they're up in at to three percent, baby,
that's yeah, it's attractive.
Speaker 2 (30:48):
This is going to create even more competition in the
credit card space. I think of that is a good thing. Yeah,
all right, let's get to our last story. Matt the
CEO of the world's largest investment firm, Black Rock. His
name is Larry Think. He has been going around this
week expressing concern over what he calls a growing retirement crisis.
Everything's got to be a crisis these days, right, Nothing
is just a problem or an issue to be resolved.
(31:09):
It's a crisis because if you don't call it a crisis,
it doesn't get the eyeballs, doesn't get the attention. Well,
with pensions being a thing of the past, with people
living longer, plus changes that obviously need to happen to
the Social Security program to secure its future, He's not wrong, Like,
there is a growing problem. I'm not going to call
a crisis. There is a growing retirement problem in the
United States. But he's also using his rhetoric to launch
(31:31):
a new product. Of course, of course, he's got something
to right. So it's a target date fund product, no
problem there, but with one marked difference, it shifts some
of your retirement funds into an annuity as you approach
retirement age. That provides then a more stable and predictable
stream of income in retirement. But but it's not without cost.
Speaker 1 (31:51):
These the and.
Speaker 2 (31:53):
There the details are somewhat unknown. Matn I was kind
of scouring Black Rocks site on this to figure out, well,
how exactly does this look like? And the specifics are
paltry right now, but it sure looks like from what
we can tell, this probably isn't the best thing for
most people.
Speaker 1 (32:09):
Yeah, And the key product here, or the key problem
to this product that they're launching, is the fact that
it is annuity based. They've got their pros and cons predictability.
That's certainly a pro right, that predictability is nice, But
the big problem is typically how expensive annuities are. The
high annual fees the sales charges because it's an insurance product,
those fees can be egregious. And then depending on how
(32:31):
early that transition happens, how quickly or how soon you
transition to annuities, your asset allocation Basically, it can have
a real impact on your overall level of wealth because
you're going to see less growth.
Speaker 2 (32:43):
And I think black Rock says that transition starts at
age fifty five, which sounds a little early.
Speaker 1 (32:47):
I think they said too, like you can you can
make that call whenever you want. So I think there
might be some folks who are thinking, oh, well, I
kind of want to retire early, so maybe I should
pull the trigger and make that happen even sooner, which
is actually kind of the opposite of what you need
to be doing if you're looking at an early retirement.
But our take is that he certainly diagnosed the problem correctly, right,
Like we even agree with mister Fink that the US
(33:08):
retirement age that it should rise certainly as life expectancy has.
That's something we've talked. We've talked about a few weeks ago, and.
Speaker 2 (33:14):
I think he points out the Netherlands as being an
example of doing this, that when the average lifespan goes
up in that country, well so does the retirement age.
Speaker 1 (33:23):
And we may kind of track each and we have
not touched our retirement age, like we talked about, why
do you think so security is a mess? My gosh,
that is why it makes sense to make these changes.
But expensive annuities de risking your portfolio too early, we
think that those are going to have harmful consequences as well.
And I think that one of the things that they're
going to be able to sell if assuming they launched
this product, they're going to be able to sell a
(33:43):
lot of it because there is an illusion of control.
You've got this false sense of security thinking that everything
is going to be all right, but nothing is perfectly
predictable because maybe you've.
Speaker 2 (33:53):
Got you're gonna say, nothing's gonna be all right, it'll
be off, It'll be fine, guys, it'll be fine.
Speaker 1 (33:57):
But like, let's just assume like you're assuming a certain
cost of living and who knows what prices and things
are going to be in the future. So even as
retirees are clinging to this as this I don't know
source of stability, like they're even that in and of
itself is moving within the tides of what we're facing
in our economy.
Speaker 2 (34:14):
Well, and that is kind of what social security is
supposed to be for us, right, is that known quantity,
that annuity Essentially that if especially the longer you wait,
the more money you're gonna get every single month, and
it's a known quantity that doesn't shift except for to
go up as the cost of living with those cost
of living adjustments. But in this case, you're who knows
exactly what you're paying. I would be curious to know
(34:34):
the details, and I'm waiting to see those released. How
much are you paying for that added security? And is
the price you pay too much for.
Speaker 1 (34:41):
What you're getting? Yeah, I'm I guarantee it this Not
only are the price is gonna be too high, but
the return is gonna be too low, So you're getting
hit on both ends. And I feel like we can
confidently not recommend it already. But honestly, I even have
an issue with like target date funds because like, in
my mind, that's sort of like the DII approach, because of, hey, okay,
this will moderately d risk over time. But even though
(35:02):
like I have a hard time swallowing the like, I
think the average expense ratio on our target date fund
is still half a percent. That's crazy, that's still that's
still really thinking out.
Speaker 2 (35:11):
With Vanguard or and Fidelity has two different target date funds,
by the way, one's expensive ones not if you're if
you're with our low cost firms, we're talking about essentially
point one percent. It's it's almost negligible.
Speaker 1 (35:22):
It's a lot smaller, but still point one is more
than three times more than point zero three, which is
infinitely more than completely free. And so I think there's
there's just there are ways of doing that, even manually.
And I know handling your finances and de risking over
time and buying more into bonds as you age isn't
for everyone, but I don't know. I would like to
think by the time that we get to that point,
after a lifetime of talking about this, and this is
(35:45):
part of why we have the show to talk about it,
by the time you are making some of these more
nerve racking decisions, that you have the confidence to do
something like that. Yeah, within your retirement years. But all right,
that's gonna be it for this episode. Buddy. We hope everyone. Hey,
happy Easter. We didn't even mention it's good Friday today,
so yeah, we hope everyone out there has a good Easter.
And we'll see you back here on Monday with a
fresh set of listener questions for you, no doubt.
Speaker 2 (36:08):
All right, that's going to do it for this one
until next time. Best friends are best friends out
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