December 15, 2024 • 33 mins
Hour 2: New research finds that a big chunk of retirees still have credit card debt. That's not good!
Ask HTM: Should this listener get whole life insurance?
Real estate investors are being forced to sell because of market conditions. We talk about how to protect yourself as a real estate investor.
Ask HTM: How do you know when you've saved enough for retirement and can slow down your investing efforts?
Links: How to save money on travel
Ask HTM: Should this listener get whole life insurance?
Real estate investors are being forced to sell because of market conditions. We talk about how to protect yourself as a real estate investor.
Ask HTM: How do you know when you've saved enough for retirement and can slow down your investing efforts?
Links: How to save money on travel
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Kf I AM six forty. You're listening to how to
Money on demand on the iHeartRadio app.
Speaker 2 (00:07):
All Joel and Matt want to do is help you save,
invest and enjoy more of what matters. This is how
to Money with Joel Lar's Guard and Matt Altmics.
Speaker 1 (00:48):
KFI AM six forty live everywhere on the iHeartRadio app.
Speaker 3 (00:51):
This is how to Money. I'm your host, Joe lars
Guard and I am the other host, Matt Altmix. And
if you have a money question, we'll send it our way.
All you have to do is record your question on
the voice Memo app there on your phone and send
it over via email. You can find the simple instructions
at how toomoney dot com, forward slash ask. Now, it
is time for the ludicrous headline of the week, which
(01:12):
is from USA today. The headline reads, Grandpa, cut up
that card. A large share of retirees have credit card debts.
This is disheartening, Joel. The share of older Americans who
are clinging on to debt it continues to rise. There
is new research from the Employee Benefit Research Institute and
they found that six and ten retirees have some form
(01:36):
of debt and of those folks, the majority are still
hanging on to their credit cards and the debt and
the payments that go along with that specifically, which is
like there's a big difference between that and let's say
lower interest mortgage debt. If that was the case, Like,
if you know you're hanging on to a three and
a half percent mortgage, I'm fine with that. I'm cool
with the idea of keeping that around. But to have
credit card debt, especially in your retirement years, that is
(02:00):
a massive problem. And so this is a quick little story,
just quick little psa for folks, especially for folks out
there who have parents who might be in a situation
like this.
Speaker 1 (02:10):
M yeah, I would maybe proud and ask, or if
you're assuming that they do, or if you've heard them
mention it, talk about the importance of paying it off.
You don't want to lecture your parents, right, That's never
a good tactic to take, But ensuring that your parents
don't have loads of credit card debt or have access
to the help they need if they do, is important.
But man, it's not not just old people. So I
(02:31):
think something like fifty percent of American households have recurring
credit card debt in their lives. And while at Hub
just released new disppearing figures on the overall debt load
that we have in this country. It turns out that
the average household credit card debt has sur passed ten
thousand bucks. That's a scary amount of money to have in.
Speaker 3 (02:49):
Credit card debt. I have figures, man, Yeah, I don't
like it.
Speaker 1 (02:51):
And the new record, Man, we passed a trillion dollars
in overall credit card debt not all that long ago,
and now we're at one point three trillion. So it
just kind of continues to grow and fester. And I'm
not going to beat a dead horse. But credit card
interest rates are awful. They have not gotten much better
as rate cuts have started. Credit Cards can be a
great tool, we say this all the time if you
(03:13):
use them wisely, but you can ruin your finances if
you don't.
Speaker 3 (03:17):
Yeah. So for listeners out there keeping score, we're still
not fans of Ticketmaster. Sherwood News. They detail the many
ways that I did not know this, but essentially they
own many other businesses that feed into the main ticketing
business that you think of when you think of Ticketmaster,
and that helps to boost the profits at the expense
of their patrons, and so when it comes to these shows,
(03:40):
basically the ticketing only makes up a small percentage of
their overall revenue.
Speaker 1 (03:44):
Think of which they can claim and make it sound like, oh,
we're not bad, look at we only make this much.
Speaker 3 (03:49):
Money from ticket But they're making massive markups on the
different parking companies that they own, or like if you
go to a show and they've got lawn chair rentals,
booze trucks, things like that. Maybe you're not even a
fan of Booze, My Booze, you mean like forty dollars, margree,
if you want to spend that money, that's told that
that's on you. But what we're highlighting here is that
they have their fingers in all of these different pots,
(04:10):
and not even I was gonna say, not even Booze.
Liquid Death is like the face is the fancy water
like guess who owns a Guess who owns a steak
in Liquid Death? Live Nation charging stations If your phone
dies at the show that you can go to and
I need to quick charge, Yeah, they own a steak
in those companies as well. And the margins on those
products and those what seem like independent companies can be
(04:33):
fifty percent or more. And these prices that they charge
are astronomical and it is a part of the reason
that two factions of the federal government are going after
Live Nation right now, I guess similar to the airlines
we talked about last week, right, Like, you don't have
to partake in most of these different upgrades, but still
our gripe is with the monopolistic stranglehold, right because it's
(04:54):
almost like if you go to our restaurant and you're
you're saying, oh, all these menu items are so expensive. Okay, well,
you don't have to buy those menu items, right, But
it's as if Live Nation and Tickemaster, it's as if
they're the only restaurant in town. Like the big difference
is that you can go to another restaurant, But when
it comes to these venues, these artists they don't have
much choice when it comes to being able to put
on a show, and they have to. There is no
(05:16):
other choice, and that's where there's a breakdown in the
competition that's out there.
Speaker 1 (05:19):
Well, then Live Nation is using different incentives to try
to push you towards buying the things inside of the
concert venue. So for instance, hey, for a while out there.
You could have brought your own chair in, but now
that's disallowed because they have an incentive to promote you
renting one of their lawn chairs. That's like twenty bucks
for the evening or something like that. So there are
(05:40):
all these things that just make your concert going experience
so much worse, and so much of it comes down
to the fact that there's nobody else in the game
except for Live Nation.
Speaker 3 (05:50):
Joel. Let's talk about how more employers are offering a
four to one K match even when you don't put
any money into your four one K. How does that work? Well,
this is a benefit, but it's one that the Secure
Act two point zero that it made a reality this year.
Even if you don't contribute a dime to your four
win K, but you are paying on your student loans, well,
(06:10):
your company can opt to treat those payments as if
you're making four one K contributions, which would allow them
to then stock money into your four win K on
your behalf. And this is great because I think it's
true that there are a lot of folks who have
such a high student loan payment that they find it difficult,
if not impossible, to contribute towards their retirement, and this
simply ensures that if they work for an ever expanding
(06:33):
group of companies who are going to offer this benefit,
they're not going to be completely left behind when it
comes to saving up for retirement. Yeah.
Speaker 1 (06:39):
Yeah, I think this is good news. And Fidelity notes
that more than one hundred companies have now made this
benefit available to their employees, and they're some of the
bigger companies in the country as well. That still really
only covers a small percentage of the workforce. But again,
this is a new benefit, like this only became law
the law of the land starting at the beginning of
this year, and we're likely going to see adoption I think,
(07:01):
go up significantly in the coming years.
Speaker 3 (07:03):
It's like it's like when the four one K first
came into existence. It's not like everyone all all of
a sudden had a foty K. It's something that gradually
ramped the same thing with a Roth IRA. It'sorks are like,
who's this name? That what senator oh? Senator Roth did
this well, slowly over time it became our favorite individual
retirement account option. But it takes time for it to
gain some state.
Speaker 1 (07:22):
And it takes people kind of clamoring for that, asking
their employer, asking their HR department, Hey, which is why
we're talking.
Speaker 3 (07:27):
About it, for you to ask.
Speaker 1 (07:29):
Yeah, other companies are offering this. My friend works down
the street and he's got this, or or she's got
this available where or she works. Can can I get
that here? What's going on? And they might say, Hey,
it's in the works. Actually we know about this, we're
planning on offering it. But this is one of those
benefits that I think, especially for the younger crowd who
has loads of student loan debt, said like is going
(07:50):
to ask to be made available. And these are the
kind of benefits that go beyond just the headline pay
number that make a big difference in your overall compensation package.
Speaker 3 (07:59):
So that's right.
Speaker 1 (08:00):
Sure to check and see what sort of benefit your
current employer offers, or if you're in the job market, hey,
this is something you're going to want to at least
note whether that potential employer offers this kind of student
loan for one k match.
Speaker 3 (08:11):
Yeah, that's right. I am six forty. You're listening to
how to Money on demand on the iHeartRadio app. Don't
forget to sign up for the how to Money newsletter
over at howdamoney dot com slash newsletter Joel, let's hear
from another listener who I believe has a solid foundation
when it comes to the personal finance tenants that she's
(08:32):
lived by, but now she's considering taking some financial advice
from a friend.
Speaker 2 (08:37):
Hello.
Speaker 4 (08:38):
This is Molly from Indianapolis. A friend recently became a
financial advisor and is telling me that what I'm missing
in my retirement plan is a cash valued life insurance.
He also used whole life insurance or permanent life insurance.
His reasoning is that it's guaranteed payout, not based on
the market. Every financial book or podcast I've read or
(08:59):
listened to you has said term life insurance is the
financially responsible life insurance policy. Do you have any insights.
I'm not a beer drinker, but if you came to Indianapolis,
I take you to ash and Elms cider.
Speaker 3 (09:10):
Thank you very much. Bye, oh Man. We don't usually
drink cider, or I don't know, maybe you do. I
don't really ever drink, so I don't. I will say,
I think when I'm open to it, I like cider. Yeah,
it's just not something I seek out.
Speaker 1 (09:22):
Our friend Andrew brought us cider back one time from
sidery called an.
Speaker 3 (09:26):
Shows What was it was called ANXO?
Speaker 1 (09:28):
Is that how you say it? I think so that's
how many guests you say it. And I just remember
that sider being really good, particularly excellent. That might be
the only sider we've ever actually had on the show. Yeah,
But other than that, I had the siders I've tried,
I've not been terribly impressed with. But I would be
willing to try it. Try cider with Molly if we
ended up in her neck of the woods.
Speaker 3 (09:46):
Joel, you know actually that it is possible to diy
your own apple cider at home.
Speaker 1 (09:51):
Oh yes, I've heard it. You've you've done this before.
I have because I heard it was the mister Money
Mustache method, wasn't it?
Speaker 3 (09:56):
Indeed? Because this is like the most absolute cheapest way
to make a fermented beverage. And I've done this. But
you take a gallon of apple cider, dump a seventy
nine cent packet of champagne YaST in there. Uh huh
wait a couple of weeks boom. I'm not gonna say
it's delicious, but you got something to drink now, you
can impress all of your friends this holiday show you
show up to a party. Well, yeah, you still got
(10:18):
a couple of weeks. Yeah, you know, so, I don't know.
Maybe it's like a post post holiday New Year's Yeah, yeah,
take it to the New Year's party, Like, Hey, I
made this in my basement. Folks will look at you weird, Like,
as long as you drink it first. And I think
if I had a friend who did that, I'd give
it a I could have a taste to take. Yeah,
all right, let's talk about life insurance. Matt and Molly
has raised some red flags here, Like she said that
(10:38):
this person was a friend, but I am curious to know, Like,
how close of a friend are we talking about? Is
this person who offered her this advice which goes counter
to everything else she's ever read or heard with Think
more of an acquaintance, you know. If so, they might
be trying to steer you in a certain direction to
line their pockets. They stand to make a sweet commission
from the sale of this life insurance policy that she's describing.
(11:01):
Let's say that they're a really good friend, though instead
they're not just an acquaintance. They might just not know
any better.
Speaker 1 (11:07):
They might think that this is a good idea, but
not have the requisite knowledge to maybe so make a
good recommendation. That's a generous interpretation, Jool. Or they might
not have well, I'm just I'm trying to be generous.
They might have done enough exploration about where her personal
finances are currently to know that this isn't the best
move for Molly either. The truth is, the more complex
(11:28):
forms of life insurance they cost a lot more money,
and they make sense for a very small subset of people, right,
typically incredibly high income and net worth folks who have
done like everything else under the sun that they can
from a tax of advantage and investing perspective. So yeah,
maybe that's Molly, But for most people these whole life
policies just don't make much sense. Yeah, I mean, I
(11:50):
think what you bring up a good point as far
as being able to take advantage of all the other offerings. So, Molly,
have you fully funded your four oh win K, your
your HSA like we've recently talked about, because your friend
is you know, telling you that this life insurance isn't
dependent on market performance, and that shure does sound nice,
you know, at least in down years, But the stock market.
Speaker 3 (12:11):
It has been an overwhelmingly lovely place to be over
the course of history, so you know, let's say one
hundred years, but particularly in recent years.
Speaker 1 (12:19):
So you get that downside protection, but guess what you
also don't get typically in some of these more complex
life insurance vehicles.
Speaker 3 (12:25):
You don't get full exposure of the upside. I get
the upside, so you guaranteed returns are nice, but like,
what do you guarantee? And it's not nearly as nice
as what you're gonna earn in the market.
Speaker 1 (12:35):
Seen in Tommy Boy, I can guarantee a stake by
sticking a head up.
Speaker 3 (12:38):
I don't know. Yeah, that was a funny scene. But
you could do the same thing in a savings account too.
But you want that exposure while you were at least
in the wealth building years of your life, which I
believe you are, and you know over the course of
time you certainly want to tone that down a bit
as you get closer to retirement. But the premise is
already flawed. The ability to avoid not only what causes
(13:00):
the market to go down, but more often than not
causes the market to go up, that being volatility.
Speaker 1 (13:05):
Let's say you're a big Taylor Swift fan. And someone
says like, ye, here, I don't have to expose you
to a one on one hangout with Taylor Swift at
your favorite restaurant.
Speaker 3 (13:13):
You're like, no, no, I want exposure to that. What are
you talking about.
Speaker 1 (13:15):
It's amazing how people can sell something by saying, don't worry,
we'll prevent you having exposure to this, when what you
should be saying is why would I not want exposure
to that thing?
Speaker 3 (13:24):
I don't know why I came with that example of
Matt But if you're t Swift fan, yeah, if you are,
that sounds fun. Yeah, and what if Travis Kelsey's there too, right?
Speaker 1 (13:31):
But plus, this would take a massive diversion of resources
for you to be able to buy this policy. Right,
Whole life insurance often costs ten x what term life
insurance is going to run you. So instead of forking
over forty bucks a month for a policy that's just
incredibly sufficient, you might be forking over four hundred bucks
a month, and that is a massive difference in your
monthly budget, and it could prevent other meaningful financial goals
(13:53):
that you have. And term life yes, it only covers
you for the duration of time where you truly need coverage.
So you might not have coverage at some point in
your late sixties, your seventies, or your eighties, but the
goal is to not need coverage at that point in
your life. Right hopefully after a fifteen, twenty or thirty
year term whatever you'd beem sufficient for you, you're not
going to need a lick of coverage because your need
(14:14):
has gone away for insurance. Maybe you don't have minor
children who are dependent on your income anymore, or also
at the same time, like you've been a diligent saber
and investor, and because of that, you don't have the
need for as much insurance. You've essentially achieve financial independence.
You don't have any many people who are financially relying
on you. And it's this perfect scenario where your term
life insurance policy goes away. It's at the perfect time
(14:35):
because you.
Speaker 3 (14:36):
Don't need it anymore. You don't need it anymore. I
mean that's a great point as well, because I mean
I didn't hear her mention a number of dependents or
a partner who might be dependent on her income. And
if that's the case, this is a product that you
necessarily need, even though it's oftentimes on checklists of adulting
right when it comes to doing the smart thing with
your money, Like if you just have a dog, like
you don't you know, I'm sorry, you don't need life insurance.
(14:57):
Just make sure your total friend that like, hey, if
I were to die, my dog goes with you, okay,
And they're like yeah, cool, okay, cool. That's all you
have been able to avoid all the sort of unnecessarily
unnecessary expensive hoops and accounts to fund. And so that's
from a life insurance stand point. But if you're thinking
about it from a guaranteed income standpoint, don't forget social
Security that can act as retirement income that isn't linked
(15:21):
to market performance as well. I was recently talking to
a retiree a couple of weeks ago, and I was
really pumped to hear that they were their entire monthly
budget was based on what they were receiving in Social
Security benefits, which is awesome. Which meant that their ability
to let their investments, which they have a decent amount of,
continue to not only ride, but to be more aggressively
(15:42):
invested in the stock market than I would have expected
at their age. But they have reaped the rewards as
they've been able to let that money basically just continue
to ride. So just keep that in mind as well.
This doesn't need to turn into a whole Social Security
sort of additional point, but I wanted to mention that.
Speaker 1 (15:57):
But this is another thing like where something like annuities
get sold to people. And the truth is social Security
acts as an annuity for the majority of the population,
and so like, do you actually need that product in
your life? Well, probably not, because you have an annuity
coming your way. You have something that is going to
add like a ballast a fixed method of income for
you in those retirement years, So why add to that
(16:19):
and why deplete your market exposure? And that's actually something
you need so you can go your wealth in order
to have an enjoyable retirement. So you kind of want
a mix of all of the above. And life insurance
for most people is an important part of like preserving
their wealth. But you also want to make sure you
choose the right life insurance policy. And again we'll put
a link to an article about term life insurance, why
(16:40):
we think it's the best product for most people. And
guess what bonus fact, it's way cheaper. This is Joel
Larscard and Matt Ault Mix and you're listening to KFI
AM six forty how to Money on demand on the
iHeartRadio app.
Speaker 3 (16:53):
If you are over on Facebook and you want to
join a group of like minded folks who have money
questions and insight, please go ahead and join in the
how to Money Facebook group.
Speaker 1 (17:02):
Now, let's talk about real estate for a second. Real
estate investors are starting to do what they always want
to avoid. It's happening in higher numbers right now. And
the thing that every real estate investor doesn't want to
do is to sell, especially in a time where they're
forced to sell. And The Wall Street Journal profiled some
titans in the real estate industry who have been forced
(17:24):
to sell because of kind of new economic realities in
the housing market, particularly in the office market and work
from home. It's kind of torched their ability to make
money right now. That's the toughest part of the housing
sector these days. And in other real estate sectors, investors
have been forced to sell too because they were over leveraged,
(17:44):
or maybe because they made rosy assumptions that didn't turn
out to be true, or because they're financing wasn't as
good as they thought it was. Real estate can be
a great investment, but market dynamics or even just specific
personal issues can lead to hard times real estate investor.
And so what we have always said and what we'll
continue to say is if you opt to invest in
(18:05):
real estate, being forced to sell is one of the
worst outcomes. And predicting the pandemic that was impossible. Predicting
kind of the trend to work from home that was
also going to be an impossible thing to do, right,
You can't nobody had that kind of foresight. But having
the know how and the financial reserves to back you
up if your investment falls on hard times. Let's say
if rent's actually declined year over year for multiple years
(18:28):
on end, or you have vacancy in a rental property
that you own for longer than you assumed, right, that
is crucial to lasting over the long term. You've got
to have the financial backup. You can't just become a
real estate investor with no money down and no money
in reserves like that puts you You're living on the
razor's edge if that's the route you.
Speaker 3 (18:48):
Take, So recipe for disaster. And then on top of
the home price growth is slowing and if you were
counting on that explosive growth that we have seen over
the past few years, I think you're going to be
let down. And on a related note, friend of the show,
Nick Midjulie, he recently predicted and it's always fun to
see folks predict stuff because well, yeah, but he predicted
that that US home prices that they won't keep up
(19:10):
with inflation in the coming decade. And this is, you know,
despite what so many others in the real estate space
have predicted. And he might be true, we'll just see.
But real estate and influencers, real estate agents, they want
to make it sound like buying a home is always
a great idea, and it might be for you. You know,
it depends on where you live, depends on your financial situation,
(19:32):
which is what Joel just spoke all about. You need
to be in a solid position. It depends on how
long you plan on being there in that town, how
long you plan on owning that property. But it's certainly
not a slam dunk financial moves over the past decade,
I know exactly. And that's as but people have like
that short termism sort of and they they see, oh man,
housing home prices of skyrocket over the past three years.
(19:54):
I better jump in now while I can, But now
we're leveraged to the hilt and we've completely depleted our
casts or as it leads to a weak position.
Speaker 1 (20:02):
We have heard from listeners over the years who found
not too long ago, even where it's like, oh, man,
I bought a house because I was told that's what
I was supposed to do and it ended up not
being the best move for me.
Speaker 3 (20:13):
How do I get out of this?
Speaker 1 (20:14):
And the transaction costs are high in real estate, and
so it's a difficult thing to get out of without
losing your shirt if you're trying to do it in
short order. And Matt, we don't usually throw dissenting listeners
under the bus, but we had a Facebook comments or
recently in the how to Money Facebook group and he
basically said, worst advice ever to tell people not to
buy a home. And we're not telling everyone blanket, don't
(20:36):
buy a home. We're also not telling everyone blanket, do
buy a home. We're saying there's a lot of factors
to consider.
Speaker 3 (20:41):
There's a lot of nuance, Yeah, a whole lot to consider.
Speaker 1 (20:44):
Right, So, yeah, there's.
Speaker 3 (20:47):
Not a blanket.
Speaker 1 (20:49):
Home ownership is the way to wealth, or renting and
investing more is the way to build wealth. So much
of it depends on a bunch of you know, personal
and economic macroeconomic considerations before you kind of hone in
on the right path for you.
Speaker 3 (21:03):
Yeah, and this is coming from two dudes who have
done well in real estate. Like you would think like
that we would be on the train that we'd be
beating the drum of like everybody's got to own right,
multiple properties, But dude, it's not twenty ten, it's not
twenty eleven, not twenty twelve anymore. It's harder and harder,
not even called ownership, but it's even harder to get
a deal when it comes to investing in Really, yeah.
Speaker 1 (21:23):
We're not going just based on our lived experience in
real estate. We're going based on like market conditions, marketing conditions,
historical realities, and like potential the potential future of real estate,
which I think Nick Majulie is sober about the future
and not overly optimistic, which I appreciate. And the truth is,
we are still suffering from a lack of inventory in
(21:43):
this country, which is part of the reason that he
might be wrong about his prediction. And matt People are
actually starting to turn shopping malls into homes. That could
be one of the ways to increase supply. And it's
kind of this twofer because people aren't visiting malls. I
can't tell you the last time I visited the mall
that's actual not too far away from us. People aren't
going like they did twenty years ago. Spencer's in Hot
(22:05):
Topic just aren't attracting the foot traffic that they used to.
Speaker 3 (22:09):
Don't think it has the same ring that it did
in ninety five. No, no, it doesn't well. And even
just like the big stores that were the anchor stores, Macy's, JC, Penny's,
Sears right like a lot of this, I don't even
think Sears exists anymore. And then Jac nobody goes to
those other stores. And so those spaces and their.
Speaker 1 (22:25):
Adjoining parking lots are being turned into residential units, and
other developers are finding other creative use uses for those
spaces too, like hey, let's make like a slew of
pickleball courts and start charging people to come play the
game they're obsessed with. But as malls are floundering and
traditional retailers are folding and more of our shopping does
go online. Turning malls into apartments and condos. I don't
(22:47):
know that makes a lot of sense for me. Let's
repurpose these big buildings into something the way people are
actually going to use them.
Speaker 3 (22:54):
Now, Yeah, I will say. I think the biggest challenge though,
might be for them to convert these vast swaths of
in tear your square footage into units that people actually
want to live in, right, because it's like, think about
especially those big box stores on the It's one thing
of the smaller stores that connect, you know, like along
the balcony or whatever like that connect that like the
Apple Store or the Gap. Yeah, like these like, oh yeah,
(23:15):
that could be a dope place to live. I live
in what used to be the Sunglass Hut. But like
when it comes to these, just put me next to
the spar up. That's all I asked. Could you imagine
waking up every morning the smell the smell of Anti Ann's.
But these big box stores that have so much interior
square footage with no outside access, with like no fresh air,
(23:37):
Like that's some sort of like dystopian living arrangement right there. Man.
Like even even in Blade Runner he had a window.
Speaker 1 (23:44):
You know not to be smarts. The name of the
late Charlie Munger. Remember when he tried to create that
dorm room with like zero windows in it. Or you're right,
like you don't want to live in Nobody wants to
live there. There's a way to pull it off.
Speaker 3 (23:55):
This is what they do in like China, like some
of those massive building developments that nobody well, I guess
they're turning them down now because nobody like that. They
don't have the population. Yeah, it to live there, crazy
to think about. KFI AM six forty. You're listening to
How to Money on demand on the iHeartRadio app.
Speaker 1 (24:11):
We're glad to have you along for the show today.
By the way, if you're looking for the right credit
card for your wallet, well you want to be able
to use it responsibly. But if you do that, if
you pay your credit card on time and in full
every single month, well check out our credit card tool.
You can find that up on the website at howtomoney
dot com.
Speaker 3 (24:29):
It is now time for the Facebook Question of the Week,
which is from an anonymous poster who wrote, how do
you know when you have saved enough for retirement and
can slow down investing a little background. We have about
eight hundred thousand saved in retirement and other investment accounts,
and have about three hundred thousand in home equity. We
have about another forty thousand and saving his accounts. My
(24:51):
husband and I will both have pensions when we retire
next year at fifty nine and sixty one. Mine is
about twenty four hundred a month net and his is
about sixty five hundred a month net. We have two
car payments currently, but hope to pay those off soon,
and the only other debt is our house loan. Since
I retired early, I can no longer contribute to my
four or three B, but I do max out my
(25:13):
roth IRA. In addition, I invest in a basic security account.
I assume she's meaning securities account so aprepurchage. I'm working
now and have been focusing all my money into savings
and investments, But with our retirement accounts and pension and
eventually social security in the future, I'm curious if I
can slow down the investment and put that money elsewhere,
like vacation. Oh, that's like the most fun part of
(25:37):
the whole question. There is that last word. Yeah, all
the other things that you could spend money on other than.
Speaker 1 (25:42):
Must I like that she knows where she wants to
put the money, Like, hey, can I slow this down
because I want to funnel it over here? And this
is a great question, Matt, and I like it. When
it comes down to it, people who are listening most
of the head of money on it. It's a big
majority of the had of money on is in their thirties, twenties,
thirties and early forties, right, so they are not to
(26:03):
this point yet forties fifties.
Speaker 3 (26:05):
Who knows. I don't want to discriminate any clearly, who
are you know also nearing retirement age? Which I love.
Speaker 1 (26:12):
But this is why we don't talk about, oh, you
probably want to stop investing at this point, because it
just depends on the majority of people are speaking to
are have a long time rise and they are like, hey,
I've got a lot I want to accomplish over the
next you know, many many years and decades when it
comes to investing for retirement.
Speaker 3 (26:28):
They're still building that wealth.
Speaker 1 (26:29):
But the truth is we don't need to be forever investors.
Like that's not the goal either, because the goal is
to enjoy the fruits of our labors at some impoint
in our lives, and so it's not to max out
a roth ira necessarily when we're ninety three. It might
be for some people, but for most people it's not.
Speaker 3 (26:42):
Probably not.
Speaker 1 (26:43):
Yeah, and it's it's certainly okay to keep investing in
even in your retirement years, but it's not necessary. And
I think whether or not you choose to it depends
on your specific goals. Right If, like, generational wealth is
something that you desire, For instance, if you want to
hand down money to your children and you want your
children's children to benefit from it, you're probably gonna want
to keep stocking money away. But if not ceasing contributions
(27:06):
to accounts that are specifically designed to help you save
for retirement as you're retiring, that's probably a good idea, right, Like,
you don't need to be putting money into those accounts anymore.
I want to say the flip side of this, It
doesn't mean I'm not saying that you should cash out
all your investments once you reach retirement age, that you
shouldn't have investments anymore. No, I've seen the flip side
of this, coin Matt, where people are actually pretty good
(27:28):
savers and investors for many years and then they reach
retirement age and they blow their nest egg really quickly.
They worked decades to build it up, and they think,
wait a second, this is money aim for retirement.
Speaker 3 (27:39):
I'm retired, let me spend it all. Let's blow it.
Speaker 1 (27:41):
And the truth is retirement for most people is more
of an extended period of time and if you feel.
Speaker 3 (27:46):
A little more gradual, I think for most folks, like
most of yah. It makes me think of like as
you're driving down the road or whatever, you're on the
highway light turns red up ahead, you don't like slamm
on the brakes and throat into reverse, like you just
coast a little bit. And that's what we're talking about here,
And I think that's what that's anymous poster she's talking
about coasting. She's probably not going to want to be
proactively flooring it, you know, with her foot on the
gas where she's funding those accounts with the same fervor
(28:09):
at least, and it sounds like she is in a
great financial position. You know, she's got two solid pensions
and you're almost done with all debt there except for
the mortgage, and we don't know what you're spending. Looks
like that's my only sort of. I don't know's that's
the unknown, But my guess is that you too will
likely be able to live off that pension and come
alone potentially saying that it's more than one hundred thousand
(28:30):
dollars a year. So that's pretty great, Yeah, especially considering
that you don't have any additional consumer debt. But card
debt's going to be gone really soon. Yeah. I mean,
the problem though, is that we just don't know her
cost of living, right, Like we don't know if she's
living in the Bay Area, we don't know if she's
living in Manhattan, and it all a lot of it
comes down to your cost of living, and so I
would that's a huge part of the equation that we
(28:51):
don't have here, Like we've got a lot of the incoming.
Speaker 1 (28:52):
But it's a normal person with only a mortgage no
other debt is probably going to be fine entering those
retirement years. Nine thousand dollars a month on top of
having the essentially million dollar plus net worth is going
to be enough for most people to live really comfortably
in retirement.
Speaker 3 (29:08):
Right, But if you are not tracking your expenses, I
think this is a good argument though for tracking your
expenses and literally knowing how much you're spending every single year,
because I think that can just illuminate and shine a
light on what it takes for you to retire. And
there are certainly nerdy ways of going about this. That's
the kind of path that I like to go down.
And since you're the one posting in our Facebook group,
(29:29):
I'm assuming you are on the nearer side of things.
You like the numbers, but maybe your partner isn't. But
that we're getting towards the end of the year. In
a way I like to think about this is as
I'm getting numbers together to present to Kate and for
us to have good discussions over Christmas, like I'll say
something like, hey, we can retire an X number of
years were we to maintain the same type of lifestyle
that we've lived this past year. So put it in
(29:50):
terms like that where it's like, oh, okay, well I
know how I lived this past year. We're talking about me,
you know, trimming a little bit here, maybe increasing a
little bit here. But I think the ability to have
these conversations as a couple is highly dependent on your
ability to know what it is that you're spending every
single year, because Otherwise, if you don't know what you're spending,
you don't know whether to keep your foot on the
(30:11):
gas or to coast, or even to slam on the brakes, right,
because you might even find yourself years down the road
of having continued to invest in maybe you didn't even need.
Speaker 1 (30:18):
Right, Yeah, you might. You're flying blind to a certain extent. Yeah,
And I think Matt, she mentioned vacations right at the
very beginning. That's really important to note too that this
is going to be an added expense. Well, how much
of an added expense is it going to be? And
once the car notes are paid off, is it essentially
replacing car notes with vacation money, Because that's a great
way to do it, because hey, like you want to
spend one thousand bucks a month on travel, that's great.
(30:39):
You probably can afford to, right, especially as you get
rid of any sort of card debt. But make sure
you also know what you're adding into your life as
you hit retirements, because when you retire at this age, Matt,
there's typically for a lot of people they're pretty healthy.
There's a lot of people who are healthy fifty nine
and sixty year olds, and so when you're at that point, like,
you probably still want to spend money in a way
(31:00):
you might not want to win you're eighty, so make
sure you have a plan for potentially increase spending over
the next five or ten years as well. It's also
important and I want to stress this to not wait
too long to enjoy the money, or to not wait
too long. Yeah, and like invest more for extra security
when you didn't necessarily need to. And I haven't really
talked about this much on the show, but my mom
(31:21):
she was diagnosed with a really crappy type of skin
cancer recently, and we don't really know how much longer we.
Speaker 3 (31:27):
Have with her.
Speaker 1 (31:28):
We're hopeful, but we're also just not assured of anything
in this life right. We don't know that we're gonna
have decades to come like we thought we did. And
so I'm glad Matt that our family that would move
closer to them when they did when we did, I'm
glad that they were tired when they did. That was
a topic of discussion, like, well we could keep working
and secure a greater retirement for ourselves, does that make sense?
And we had these discussions and that entered into it.
(31:48):
I was like, I don't think it does make sense
for you to keep working like it's time for you
to enjoy the fruits of your labor, and I think
you've planned sufficiently well. Make sure you're not over indexing
to that, because this was before my mom's diagnosis and
that seemed like the right course of action, and now
post diagnosis, it makes.
Speaker 3 (32:03):
Even more sense.
Speaker 1 (32:04):
Oh yeah, right, yeah, And I just wouldn't trade these
past two years for them having a little more financial security.
I know they feel the same, So I guess I
would just encourage this listener to save, to invest, and
be prepared, but also know that it's possible to overdo
it and to miss out on some beautiful times in
those years when your health is still mostly intact. And again,
(32:24):
you're retiring incredibly early, which is awesome. And if we're
right about the pensions essentially being able to fund your
lifestyle moving forward, and your investments are just gravy on top,
it's totally okay to deprioritize investing and maybe to even
cut it out altogether. But more than anything, congrats on
setting yourselves up for a well funded early retirement. I
have a feeling this is going to be smooth sailing,
(32:47):
and that maybe there's cause to worry less than this.
Speaker 3 (32:50):
Listener is worrying. Totally agree, buddy.
Speaker 1 (32:53):
You've been listening to How To Money with Joel larscart
And and you can always hear us live on k
I AM six forty twelve to two pm on Sunday
and anytime on the iHeartRadio app
Kf I AM six forty. You're listening to how to
Money on demand on the iHeartRadio app.
Speaker 2 (00:07):
All Joel and Matt want to do is help you save,
invest and enjoy more of what matters. This is how
to Money with Joel Lar's Guard and Matt Altmics.
Speaker 1 (00:48):
KFI AM six forty live everywhere on the iHeartRadio app.
Speaker 3 (00:51):
This is how to Money. I'm your host, Joe lars
Guard and I am the other host, Matt Altmix. And
if you have a money question, we'll send it our way.
All you have to do is record your question on
the voice Memo app there on your phone and send
it over via email. You can find the simple instructions
at how toomoney dot com, forward slash ask. Now, it
is time for the ludicrous headline of the week, which
(01:12):
is from USA today. The headline reads, Grandpa, cut up
that card. A large share of retirees have credit card debts.
This is disheartening, Joel. The share of older Americans who
are clinging on to debt it continues to rise. There
is new research from the Employee Benefit Research Institute and
they found that six and ten retirees have some form
(01:36):
of debt and of those folks, the majority are still
hanging on to their credit cards and the debt and
the payments that go along with that specifically, which is
like there's a big difference between that and let's say
lower interest mortgage debt. If that was the case, Like,
if you know you're hanging on to a three and
a half percent mortgage, I'm fine with that. I'm cool
with the idea of keeping that around. But to have
credit card debt, especially in your retirement years, that is
(02:00):
a massive problem. And so this is a quick little story,
just quick little psa for folks, especially for folks out
there who have parents who might be in a situation
like this.
Speaker 1 (02:10):
M yeah, I would maybe proud and ask, or if
you're assuming that they do, or if you've heard them
mention it, talk about the importance of paying it off.
You don't want to lecture your parents, right, That's never
a good tactic to take, But ensuring that your parents
don't have loads of credit card debt or have access
to the help they need if they do, is important.
But man, it's not not just old people. So I
(02:31):
think something like fifty percent of American households have recurring
credit card debt in their lives. And while at Hub
just released new disppearing figures on the overall debt load
that we have in this country. It turns out that
the average household credit card debt has sur passed ten
thousand bucks. That's a scary amount of money to have in.
Speaker 3 (02:49):
Credit card debt. I have figures, man, Yeah, I don't
like it.
Speaker 1 (02:51):
And the new record, Man, we passed a trillion dollars
in overall credit card debt not all that long ago,
and now we're at one point three trillion. So it
just kind of continues to grow and fester. And I'm
not going to beat a dead horse. But credit card
interest rates are awful. They have not gotten much better
as rate cuts have started. Credit Cards can be a
great tool, we say this all the time if you
(03:13):
use them wisely, but you can ruin your finances if
you don't.
Speaker 3 (03:17):
Yeah. So for listeners out there keeping score, we're still
not fans of Ticketmaster. Sherwood News. They detail the many
ways that I did not know this, but essentially they
own many other businesses that feed into the main ticketing
business that you think of when you think of Ticketmaster,
and that helps to boost the profits at the expense
of their patrons, and so when it comes to these shows,
(03:40):
basically the ticketing only makes up a small percentage of
their overall revenue.
Speaker 1 (03:44):
Think of which they can claim and make it sound like, oh,
we're not bad, look at we only make this much.
Speaker 3 (03:49):
Money from ticket But they're making massive markups on the
different parking companies that they own, or like if you
go to a show and they've got lawn chair rentals,
booze trucks, things like that. Maybe you're not even a
fan of Booze, My Booze, you mean like forty dollars, margree,
if you want to spend that money, that's told that
that's on you. But what we're highlighting here is that
they have their fingers in all of these different pots,
(04:10):
and not even I was gonna say, not even Booze.
Liquid Death is like the face is the fancy water
like guess who owns a Guess who owns a steak
in Liquid Death? Live Nation charging stations If your phone
dies at the show that you can go to and
I need to quick charge, Yeah, they own a steak
in those companies as well. And the margins on those
products and those what seem like independent companies can be
(04:33):
fifty percent or more. And these prices that they charge
are astronomical and it is a part of the reason
that two factions of the federal government are going after
Live Nation right now, I guess similar to the airlines
we talked about last week, right, Like, you don't have
to partake in most of these different upgrades, but still
our gripe is with the monopolistic stranglehold, right because it's
(04:54):
almost like if you go to our restaurant and you're
you're saying, oh, all these menu items are so expensive. Okay, well,
you don't have to buy those menu items, right, But
it's as if Live Nation and Tickemaster, it's as if
they're the only restaurant in town. Like the big difference
is that you can go to another restaurant, But when
it comes to these venues, these artists they don't have
much choice when it comes to being able to put
on a show, and they have to. There is no
(05:16):
other choice, and that's where there's a breakdown in the
competition that's out there.
Speaker 1 (05:19):
Well, then Live Nation is using different incentives to try
to push you towards buying the things inside of the
concert venue. So for instance, hey, for a while out there.
You could have brought your own chair in, but now
that's disallowed because they have an incentive to promote you
renting one of their lawn chairs. That's like twenty bucks
for the evening or something like that. So there are
(05:40):
all these things that just make your concert going experience
so much worse, and so much of it comes down
to the fact that there's nobody else in the game
except for Live Nation.
Speaker 3 (05:50):
Joel. Let's talk about how more employers are offering a
four to one K match even when you don't put
any money into your four one K. How does that work? Well,
this is a benefit, but it's one that the Secure
Act two point zero that it made a reality this year.
Even if you don't contribute a dime to your four
win K, but you are paying on your student loans, well,
(06:10):
your company can opt to treat those payments as if
you're making four one K contributions, which would allow them
to then stock money into your four win K on
your behalf. And this is great because I think it's
true that there are a lot of folks who have
such a high student loan payment that they find it difficult,
if not impossible, to contribute towards their retirement, and this
simply ensures that if they work for an ever expanding
(06:33):
group of companies who are going to offer this benefit,
they're not going to be completely left behind when it
comes to saving up for retirement. Yeah.
Speaker 1 (06:39):
Yeah, I think this is good news. And Fidelity notes
that more than one hundred companies have now made this
benefit available to their employees, and they're some of the
bigger companies in the country as well. That still really
only covers a small percentage of the workforce. But again,
this is a new benefit, like this only became law
the law of the land starting at the beginning of
this year, and we're likely going to see adoption I think,
(07:01):
go up significantly in the coming years.
Speaker 3 (07:03):
It's like it's like when the four one K first
came into existence. It's not like everyone all all of
a sudden had a foty K. It's something that gradually
ramped the same thing with a Roth IRA. It'sorks are like,
who's this name? That what senator oh? Senator Roth did
this well, slowly over time it became our favorite individual
retirement account option. But it takes time for it to
gain some state.
Speaker 1 (07:22):
And it takes people kind of clamoring for that, asking
their employer, asking their HR department, Hey, which is why
we're talking.
Speaker 3 (07:27):
About it, for you to ask.
Speaker 1 (07:29):
Yeah, other companies are offering this. My friend works down
the street and he's got this, or or she's got
this available where or she works. Can can I get
that here? What's going on? And they might say, Hey,
it's in the works. Actually we know about this, we're
planning on offering it. But this is one of those
benefits that I think, especially for the younger crowd who
has loads of student loan debt, said like is going
(07:50):
to ask to be made available. And these are the
kind of benefits that go beyond just the headline pay
number that make a big difference in your overall compensation package.
Speaker 3 (07:59):
So that's right.
Speaker 1 (08:00):
Sure to check and see what sort of benefit your
current employer offers, or if you're in the job market, hey,
this is something you're going to want to at least
note whether that potential employer offers this kind of student
loan for one k match.
Speaker 3 (08:11):
Yeah, that's right. I am six forty. You're listening to
how to Money on demand on the iHeartRadio app. Don't
forget to sign up for the how to Money newsletter
over at howdamoney dot com slash newsletter Joel, let's hear
from another listener who I believe has a solid foundation
when it comes to the personal finance tenants that she's
(08:32):
lived by, but now she's considering taking some financial advice
from a friend.
Speaker 2 (08:37):
Hello.
Speaker 4 (08:38):
This is Molly from Indianapolis. A friend recently became a
financial advisor and is telling me that what I'm missing
in my retirement plan is a cash valued life insurance.
He also used whole life insurance or permanent life insurance.
His reasoning is that it's guaranteed payout, not based on
the market. Every financial book or podcast I've read or
(08:59):
listened to you has said term life insurance is the
financially responsible life insurance policy. Do you have any insights.
I'm not a beer drinker, but if you came to Indianapolis,
I take you to ash and Elms cider.
Speaker 3 (09:10):
Thank you very much. Bye, oh Man. We don't usually
drink cider, or I don't know, maybe you do. I
don't really ever drink, so I don't. I will say,
I think when I'm open to it, I like cider. Yeah,
it's just not something I seek out.
Speaker 1 (09:22):
Our friend Andrew brought us cider back one time from
sidery called an.
Speaker 3 (09:26):
Shows What was it was called ANXO?
Speaker 1 (09:28):
Is that how you say it? I think so that's
how many guests you say it. And I just remember
that sider being really good, particularly excellent. That might be
the only sider we've ever actually had on the show. Yeah,
But other than that, I had the siders I've tried,
I've not been terribly impressed with. But I would be
willing to try it. Try cider with Molly if we
ended up in her neck of the woods.
Speaker 3 (09:46):
Joel, you know actually that it is possible to diy
your own apple cider at home.
Speaker 1 (09:51):
Oh yes, I've heard it. You've you've done this before.
I have because I heard it was the mister Money
Mustache method, wasn't it?
Speaker 3 (09:56):
Indeed? Because this is like the most absolute cheapest way
to make a fermented beverage. And I've done this. But
you take a gallon of apple cider, dump a seventy
nine cent packet of champagne YaST in there. Uh huh
wait a couple of weeks boom. I'm not gonna say
it's delicious, but you got something to drink now, you
can impress all of your friends this holiday show you
show up to a party. Well, yeah, you still got
(10:18):
a couple of weeks. Yeah, you know, so, I don't know.
Maybe it's like a post post holiday New Year's Yeah, yeah,
take it to the New Year's party, Like, Hey, I
made this in my basement. Folks will look at you weird, Like,
as long as you drink it first. And I think
if I had a friend who did that, I'd give
it a I could have a taste to take. Yeah,
all right, let's talk about life insurance. Matt and Molly
has raised some red flags here, Like she said that
(10:38):
this person was a friend, but I am curious to know, Like,
how close of a friend are we talking about? Is
this person who offered her this advice which goes counter
to everything else she's ever read or heard with Think
more of an acquaintance, you know. If so, they might
be trying to steer you in a certain direction to
line their pockets. They stand to make a sweet commission
from the sale of this life insurance policy that she's describing.
(11:01):
Let's say that they're a really good friend, though instead
they're not just an acquaintance. They might just not know
any better.
Speaker 1 (11:07):
They might think that this is a good idea, but
not have the requisite knowledge to maybe so make a
good recommendation. That's a generous interpretation, Jool. Or they might
not have well, I'm just I'm trying to be generous.
They might have done enough exploration about where her personal
finances are currently to know that this isn't the best
move for Molly either. The truth is, the more complex
(11:28):
forms of life insurance they cost a lot more money,
and they make sense for a very small subset of people, right,
typically incredibly high income and net worth folks who have
done like everything else under the sun that they can
from a tax of advantage and investing perspective. So yeah,
maybe that's Molly, But for most people these whole life
policies just don't make much sense. Yeah, I mean, I
(11:50):
think what you bring up a good point as far
as being able to take advantage of all the other offerings. So, Molly,
have you fully funded your four oh win K, your
your HSA like we've recently talked about, because your friend
is you know, telling you that this life insurance isn't
dependent on market performance, and that shure does sound nice,
you know, at least in down years, But the stock market.
Speaker 3 (12:11):
It has been an overwhelmingly lovely place to be over
the course of history, so you know, let's say one
hundred years, but particularly in recent years.
Speaker 1 (12:19):
So you get that downside protection, but guess what you
also don't get typically in some of these more complex
life insurance vehicles.
Speaker 3 (12:25):
You don't get full exposure of the upside. I get
the upside, so you guaranteed returns are nice, but like,
what do you guarantee? And it's not nearly as nice
as what you're gonna earn in the market.
Speaker 1 (12:35):
Seen in Tommy Boy, I can guarantee a stake by
sticking a head up.
Speaker 3 (12:38):
I don't know. Yeah, that was a funny scene. But
you could do the same thing in a savings account too.
But you want that exposure while you were at least
in the wealth building years of your life, which I
believe you are, and you know over the course of
time you certainly want to tone that down a bit
as you get closer to retirement. But the premise is
already flawed. The ability to avoid not only what causes
(13:00):
the market to go down, but more often than not
causes the market to go up, that being volatility.
Speaker 1 (13:05):
Let's say you're a big Taylor Swift fan. And someone
says like, ye, here, I don't have to expose you
to a one on one hangout with Taylor Swift at
your favorite restaurant.
Speaker 3 (13:13):
You're like, no, no, I want exposure to that. What are
you talking about.
Speaker 1 (13:15):
It's amazing how people can sell something by saying, don't worry,
we'll prevent you having exposure to this, when what you
should be saying is why would I not want exposure
to that thing?
Speaker 3 (13:24):
I don't know why I came with that example of
Matt But if you're t Swift fan, yeah, if you are,
that sounds fun. Yeah, and what if Travis Kelsey's there too, right?
Speaker 1 (13:31):
But plus, this would take a massive diversion of resources
for you to be able to buy this policy. Right,
Whole life insurance often costs ten x what term life
insurance is going to run you. So instead of forking
over forty bucks a month for a policy that's just
incredibly sufficient, you might be forking over four hundred bucks
a month, and that is a massive difference in your
monthly budget, and it could prevent other meaningful financial goals
(13:53):
that you have. And term life yes, it only covers
you for the duration of time where you truly need coverage.
So you might not have coverage at some point in
your late sixties, your seventies, or your eighties, but the
goal is to not need coverage at that point in
your life. Right hopefully after a fifteen, twenty or thirty
year term whatever you'd beem sufficient for you, you're not
going to need a lick of coverage because your need
(14:14):
has gone away for insurance. Maybe you don't have minor
children who are dependent on your income anymore, or also
at the same time, like you've been a diligent saber
and investor, and because of that, you don't have the
need for as much insurance. You've essentially achieve financial independence.
You don't have any many people who are financially relying
on you. And it's this perfect scenario where your term
life insurance policy goes away. It's at the perfect time
(14:35):
because you.
Speaker 3 (14:36):
Don't need it anymore. You don't need it anymore. I
mean that's a great point as well, because I mean
I didn't hear her mention a number of dependents or
a partner who might be dependent on her income. And
if that's the case, this is a product that you
necessarily need, even though it's oftentimes on checklists of adulting
right when it comes to doing the smart thing with
your money, Like if you just have a dog, like
you don't you know, I'm sorry, you don't need life insurance.
(14:57):
Just make sure your total friend that like, hey, if
I were to die, my dog goes with you, okay,
And they're like yeah, cool, okay, cool. That's all you
have been able to avoid all the sort of unnecessarily
unnecessary expensive hoops and accounts to fund. And so that's
from a life insurance stand point. But if you're thinking
about it from a guaranteed income standpoint, don't forget social
Security that can act as retirement income that isn't linked
(15:21):
to market performance as well. I was recently talking to
a retiree a couple of weeks ago, and I was
really pumped to hear that they were their entire monthly
budget was based on what they were receiving in Social
Security benefits, which is awesome. Which meant that their ability
to let their investments, which they have a decent amount of,
continue to not only ride, but to be more aggressively
(15:42):
invested in the stock market than I would have expected
at their age. But they have reaped the rewards as
they've been able to let that money basically just continue
to ride. So just keep that in mind as well.
This doesn't need to turn into a whole Social Security
sort of additional point, but I wanted to mention that.
Speaker 1 (15:57):
But this is another thing like where something like annuities
get sold to people. And the truth is social Security
acts as an annuity for the majority of the population,
and so like, do you actually need that product in
your life? Well, probably not, because you have an annuity
coming your way. You have something that is going to
add like a ballast a fixed method of income for
you in those retirement years, So why add to that
(16:19):
and why deplete your market exposure? And that's actually something
you need so you can go your wealth in order
to have an enjoyable retirement. So you kind of want
a mix of all of the above. And life insurance
for most people is an important part of like preserving
their wealth. But you also want to make sure you
choose the right life insurance policy. And again we'll put
a link to an article about term life insurance, why
(16:40):
we think it's the best product for most people. And
guess what bonus fact, it's way cheaper. This is Joel
Larscard and Matt Ault Mix and you're listening to KFI
AM six forty how to Money on demand on the
iHeartRadio app.
Speaker 3 (16:53):
If you are over on Facebook and you want to
join a group of like minded folks who have money
questions and insight, please go ahead and join in the
how to Money Facebook group.
Speaker 1 (17:02):
Now, let's talk about real estate for a second. Real
estate investors are starting to do what they always want
to avoid. It's happening in higher numbers right now. And
the thing that every real estate investor doesn't want to
do is to sell, especially in a time where they're
forced to sell. And The Wall Street Journal profiled some
titans in the real estate industry who have been forced
(17:24):
to sell because of kind of new economic realities in
the housing market, particularly in the office market and work
from home. It's kind of torched their ability to make
money right now. That's the toughest part of the housing
sector these days. And in other real estate sectors, investors
have been forced to sell too because they were over leveraged,
(17:44):
or maybe because they made rosy assumptions that didn't turn
out to be true, or because they're financing wasn't as
good as they thought it was. Real estate can be
a great investment, but market dynamics or even just specific
personal issues can lead to hard times real estate investor.
And so what we have always said and what we'll
continue to say is if you opt to invest in
(18:05):
real estate, being forced to sell is one of the
worst outcomes. And predicting the pandemic that was impossible. Predicting
kind of the trend to work from home that was
also going to be an impossible thing to do, right,
You can't nobody had that kind of foresight. But having
the know how and the financial reserves to back you
up if your investment falls on hard times. Let's say
if rent's actually declined year over year for multiple years
(18:28):
on end, or you have vacancy in a rental property
that you own for longer than you assumed, right, that
is crucial to lasting over the long term. You've got
to have the financial backup. You can't just become a
real estate investor with no money down and no money
in reserves like that puts you You're living on the
razor's edge if that's the route you.
Speaker 3 (18:48):
Take, So recipe for disaster. And then on top of
the home price growth is slowing and if you were
counting on that explosive growth that we have seen over
the past few years, I think you're going to be
let down. And on a related note, friend of the show,
Nick Midjulie, he recently predicted and it's always fun to
see folks predict stuff because well, yeah, but he predicted
that that US home prices that they won't keep up
(19:10):
with inflation in the coming decade. And this is, you know,
despite what so many others in the real estate space
have predicted. And he might be true, we'll just see.
But real estate and influencers, real estate agents, they want
to make it sound like buying a home is always
a great idea, and it might be for you. You know,
it depends on where you live, depends on your financial situation,
(19:32):
which is what Joel just spoke all about. You need
to be in a solid position. It depends on how
long you plan on being there in that town, how
long you plan on owning that property. But it's certainly
not a slam dunk financial moves over the past decade,
I know exactly. And that's as but people have like
that short termism sort of and they they see, oh man,
housing home prices of skyrocket over the past three years.
(19:54):
I better jump in now while I can, But now
we're leveraged to the hilt and we've completely depleted our
casts or as it leads to a weak position.
Speaker 1 (20:02):
We have heard from listeners over the years who found
not too long ago, even where it's like, oh, man,
I bought a house because I was told that's what
I was supposed to do and it ended up not
being the best move for me.
Speaker 3 (20:13):
How do I get out of this?
Speaker 1 (20:14):
And the transaction costs are high in real estate, and
so it's a difficult thing to get out of without
losing your shirt if you're trying to do it in
short order. And Matt, we don't usually throw dissenting listeners
under the bus, but we had a Facebook comments or
recently in the how to Money Facebook group and he
basically said, worst advice ever to tell people not to
buy a home. And we're not telling everyone blanket, don't
(20:36):
buy a home. We're also not telling everyone blanket, do
buy a home. We're saying there's a lot of factors
to consider.
Speaker 3 (20:41):
There's a lot of nuance, Yeah, a whole lot to consider.
Speaker 1 (20:44):
Right, So, yeah, there's.
Speaker 3 (20:47):
Not a blanket.
Speaker 1 (20:49):
Home ownership is the way to wealth, or renting and
investing more is the way to build wealth. So much
of it depends on a bunch of you know, personal
and economic macroeconomic considerations before you kind of hone in
on the right path for you.
Speaker 3 (21:03):
Yeah, and this is coming from two dudes who have
done well in real estate. Like you would think like
that we would be on the train that we'd be
beating the drum of like everybody's got to own right,
multiple properties, But dude, it's not twenty ten, it's not
twenty eleven, not twenty twelve anymore. It's harder and harder,
not even called ownership, but it's even harder to get
a deal when it comes to investing in Really, yeah.
Speaker 1 (21:23):
We're not going just based on our lived experience in
real estate. We're going based on like market conditions, marketing conditions,
historical realities, and like potential the potential future of real estate,
which I think Nick Majulie is sober about the future
and not overly optimistic, which I appreciate. And the truth is,
we are still suffering from a lack of inventory in
(21:43):
this country, which is part of the reason that he
might be wrong about his prediction. And matt People are
actually starting to turn shopping malls into homes. That could
be one of the ways to increase supply. And it's
kind of this twofer because people aren't visiting malls. I
can't tell you the last time I visited the mall
that's actual not too far away from us. People aren't
going like they did twenty years ago. Spencer's in Hot
(22:05):
Topic just aren't attracting the foot traffic that they used to.
Speaker 3 (22:09):
Don't think it has the same ring that it did
in ninety five. No, no, it doesn't well. And even
just like the big stores that were the anchor stores, Macy's, JC, Penny's,
Sears right like a lot of this, I don't even
think Sears exists anymore. And then Jac nobody goes to
those other stores. And so those spaces and their.
Speaker 1 (22:25):
Adjoining parking lots are being turned into residential units, and
other developers are finding other creative use uses for those
spaces too, like hey, let's make like a slew of
pickleball courts and start charging people to come play the
game they're obsessed with. But as malls are floundering and
traditional retailers are folding and more of our shopping does
go online. Turning malls into apartments and condos. I don't
(22:47):
know that makes a lot of sense for me. Let's
repurpose these big buildings into something the way people are
actually going to use them.
Speaker 3 (22:54):
Now, Yeah, I will say. I think the biggest challenge though,
might be for them to convert these vast swaths of
in tear your square footage into units that people actually
want to live in, right, because it's like, think about
especially those big box stores on the It's one thing
of the smaller stores that connect, you know, like along
the balcony or whatever like that connect that like the
Apple Store or the Gap. Yeah, like these like, oh yeah,
(23:15):
that could be a dope place to live. I live
in what used to be the Sunglass Hut. But like
when it comes to these, just put me next to
the spar up. That's all I asked. Could you imagine
waking up every morning the smell the smell of Anti Ann's.
But these big box stores that have so much interior
square footage with no outside access, with like no fresh air,
(23:37):
Like that's some sort of like dystopian living arrangement right there. Man.
Like even even in Blade Runner he had a window.
Speaker 1 (23:44):
You know not to be smarts. The name of the
late Charlie Munger. Remember when he tried to create that
dorm room with like zero windows in it. Or you're right,
like you don't want to live in Nobody wants to
live there. There's a way to pull it off.
Speaker 3 (23:55):
This is what they do in like China, like some
of those massive building developments that nobody well, I guess
they're turning them down now because nobody like that. They
don't have the population. Yeah, it to live there, crazy
to think about. KFI AM six forty. You're listening to
How to Money on demand on the iHeartRadio app.
Speaker 1 (24:11):
We're glad to have you along for the show today.
By the way, if you're looking for the right credit
card for your wallet, well you want to be able
to use it responsibly. But if you do that, if
you pay your credit card on time and in full
every single month, well check out our credit card tool.
You can find that up on the website at howtomoney
dot com.
Speaker 3 (24:29):
It is now time for the Facebook Question of the Week,
which is from an anonymous poster who wrote, how do
you know when you have saved enough for retirement and
can slow down investing a little background. We have about
eight hundred thousand saved in retirement and other investment accounts,
and have about three hundred thousand in home equity. We
have about another forty thousand and saving his accounts. My
(24:51):
husband and I will both have pensions when we retire
next year at fifty nine and sixty one. Mine is
about twenty four hundred a month net and his is
about sixty five hundred a month net. We have two
car payments currently, but hope to pay those off soon,
and the only other debt is our house loan. Since
I retired early, I can no longer contribute to my
four or three B, but I do max out my
(25:13):
roth IRA. In addition, I invest in a basic security account.
I assume she's meaning securities account so aprepurchage. I'm working
now and have been focusing all my money into savings
and investments, But with our retirement accounts and pension and
eventually social security in the future, I'm curious if I
can slow down the investment and put that money elsewhere,
like vacation. Oh, that's like the most fun part of
(25:37):
the whole question. There is that last word. Yeah, all
the other things that you could spend money on other than.
Speaker 1 (25:42):
Must I like that she knows where she wants to
put the money, Like, hey, can I slow this down
because I want to funnel it over here? And this
is a great question, Matt, and I like it. When
it comes down to it, people who are listening most
of the head of money on it. It's a big
majority of the had of money on is in their thirties, twenties,
thirties and early forties, right, so they are not to
(26:03):
this point yet forties fifties.
Speaker 3 (26:05):
Who knows. I don't want to discriminate any clearly, who
are you know also nearing retirement age? Which I love.
Speaker 1 (26:12):
But this is why we don't talk about, oh, you
probably want to stop investing at this point, because it
just depends on the majority of people are speaking to
are have a long time rise and they are like, hey,
I've got a lot I want to accomplish over the
next you know, many many years and decades when it
comes to investing for retirement.
Speaker 3 (26:28):
They're still building that wealth.
Speaker 1 (26:29):
But the truth is we don't need to be forever investors.
Like that's not the goal either, because the goal is
to enjoy the fruits of our labors at some impoint
in our lives, and so it's not to max out
a roth ira necessarily when we're ninety three. It might
be for some people, but for most people it's not.
Speaker 3 (26:42):
Probably not.
Speaker 1 (26:43):
Yeah, and it's it's certainly okay to keep investing in
even in your retirement years, but it's not necessary. And
I think whether or not you choose to it depends
on your specific goals. Right If, like, generational wealth is
something that you desire, For instance, if you want to
hand down money to your children and you want your
children's children to benefit from it, you're probably gonna want
to keep stocking money away. But if not ceasing contributions
(27:06):
to accounts that are specifically designed to help you save
for retirement as you're retiring, that's probably a good idea, right, Like,
you don't need to be putting money into those accounts anymore.
I want to say the flip side of this, It
doesn't mean I'm not saying that you should cash out
all your investments once you reach retirement age, that you
shouldn't have investments anymore. No, I've seen the flip side
of this, coin Matt, where people are actually pretty good
(27:28):
savers and investors for many years and then they reach
retirement age and they blow their nest egg really quickly.
They worked decades to build it up, and they think,
wait a second, this is money aim for retirement.
Speaker 3 (27:39):
I'm retired, let me spend it all. Let's blow it.
Speaker 1 (27:41):
And the truth is retirement for most people is more
of an extended period of time and if you feel.
Speaker 3 (27:46):
A little more gradual, I think for most folks, like
most of yah. It makes me think of like as
you're driving down the road or whatever, you're on the
highway light turns red up ahead, you don't like slamm
on the brakes and throat into reverse, like you just
coast a little bit. And that's what we're talking about here,
And I think that's what that's anymous poster she's talking
about coasting. She's probably not going to want to be
proactively flooring it, you know, with her foot on the
gas where she's funding those accounts with the same fervor
(28:09):
at least, and it sounds like she is in a
great financial position. You know, she's got two solid pensions
and you're almost done with all debt there except for
the mortgage, and we don't know what you're spending. Looks
like that's my only sort of. I don't know's that's
the unknown, But my guess is that you too will
likely be able to live off that pension and come
alone potentially saying that it's more than one hundred thousand
(28:30):
dollars a year. So that's pretty great, Yeah, especially considering
that you don't have any additional consumer debt. But card
debt's going to be gone really soon. Yeah. I mean,
the problem though, is that we just don't know her
cost of living, right, Like we don't know if she's
living in the Bay Area, we don't know if she's
living in Manhattan, and it all a lot of it
comes down to your cost of living, and so I
would that's a huge part of the equation that we
(28:51):
don't have here, Like we've got a lot of the incoming.
Speaker 1 (28:52):
But it's a normal person with only a mortgage no
other debt is probably going to be fine entering those
retirement years. Nine thousand dollars a month on top of
having the essentially million dollar plus net worth is going
to be enough for most people to live really comfortably
in retirement.
Speaker 3 (29:08):
Right, But if you are not tracking your expenses, I
think this is a good argument though for tracking your
expenses and literally knowing how much you're spending every single year,
because I think that can just illuminate and shine a
light on what it takes for you to retire. And
there are certainly nerdy ways of going about this. That's
the kind of path that I like to go down.
And since you're the one posting in our Facebook group,
(29:29):
I'm assuming you are on the nearer side of things.
You like the numbers, but maybe your partner isn't. But
that we're getting towards the end of the year. In
a way I like to think about this is as
I'm getting numbers together to present to Kate and for
us to have good discussions over Christmas, like I'll say
something like, hey, we can retire an X number of
years were we to maintain the same type of lifestyle
that we've lived this past year. So put it in
(29:50):
terms like that where it's like, oh, okay, well I
know how I lived this past year. We're talking about me,
you know, trimming a little bit here, maybe increasing a
little bit here. But I think the ability to have
these conversations as a couple is highly dependent on your
ability to know what it is that you're spending every
single year, because Otherwise, if you don't know what you're spending,
you don't know whether to keep your foot on the
(30:11):
gas or to coast, or even to slam on the brakes, right,
because you might even find yourself years down the road
of having continued to invest in maybe you didn't even need.
Speaker 1 (30:18):
Right, Yeah, you might. You're flying blind to a certain extent. Yeah,
And I think Matt, she mentioned vacations right at the
very beginning. That's really important to note too that this
is going to be an added expense. Well, how much
of an added expense is it going to be? And
once the car notes are paid off, is it essentially
replacing car notes with vacation money, Because that's a great
way to do it, because hey, like you want to
spend one thousand bucks a month on travel, that's great.
(30:39):
You probably can afford to, right, especially as you get
rid of any sort of card debt. But make sure
you also know what you're adding into your life as
you hit retirements, because when you retire at this age, Matt,
there's typically for a lot of people they're pretty healthy.
There's a lot of people who are healthy fifty nine
and sixty year olds, and so when you're at that point, like,
you probably still want to spend money in a way
(31:00):
you might not want to win you're eighty, so make
sure you have a plan for potentially increase spending over
the next five or ten years as well. It's also
important and I want to stress this to not wait
too long to enjoy the money, or to not wait
too long. Yeah, and like invest more for extra security
when you didn't necessarily need to. And I haven't really
talked about this much on the show, but my mom
(31:21):
she was diagnosed with a really crappy type of skin
cancer recently, and we don't really know how much longer we.
Speaker 3 (31:27):
Have with her.
Speaker 1 (31:28):
We're hopeful, but we're also just not assured of anything
in this life right. We don't know that we're gonna
have decades to come like we thought we did. And
so I'm glad Matt that our family that would move
closer to them when they did when we did, I'm
glad that they were tired when they did. That was
a topic of discussion, like, well we could keep working
and secure a greater retirement for ourselves, does that make sense?
And we had these discussions and that entered into it.
(31:48):
I was like, I don't think it does make sense
for you to keep working like it's time for you
to enjoy the fruits of your labor, and I think
you've planned sufficiently well. Make sure you're not over indexing
to that, because this was before my mom's diagnosis and
that seemed like the right course of action, and now
post diagnosis, it makes.
Speaker 3 (32:03):
Even more sense.
Speaker 1 (32:04):
Oh yeah, right, yeah, And I just wouldn't trade these
past two years for them having a little more financial security.
I know they feel the same, So I guess I
would just encourage this listener to save, to invest, and
be prepared, but also know that it's possible to overdo
it and to miss out on some beautiful times in
those years when your health is still mostly intact. And again,
(32:24):
you're retiring incredibly early, which is awesome. And if we're
right about the pensions essentially being able to fund your
lifestyle moving forward, and your investments are just gravy on top,
it's totally okay to deprioritize investing and maybe to even
cut it out altogether. But more than anything, congrats on
setting yourselves up for a well funded early retirement. I
have a feeling this is going to be smooth sailing,
(32:47):
and that maybe there's cause to worry less than this.
Speaker 3 (32:50):
Listener is worrying. Totally agree, buddy.
Speaker 1 (32:53):
You've been listening to How To Money with Joel larscart
And and you can always hear us live on k
I AM six forty twelve to two pm on Sunday
and anytime on the iHeartRadio app
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