June 1, 2025 • 32 mins
Southwest is officially charging for checked bags as of this week. That policy change should cause us all to reconsider our loyalty to a particular airline.
Ask HTM: Nate has a frugal vs cheap about buying razors.
The big beautiful bill is gonna change things on the tax front in a big way! HSAs, in particular, could get a whole lot better.
Ask HTM: Bri wants to know how to choose the right target date fund inside of her retirement account.
Ask HTM: Nate has a frugal vs cheap about buying razors.
The big beautiful bill is gonna change things on the tax front in a big way! HSAs, in particular, could get a whole lot better.
Ask HTM: Bri wants to know how to choose the right target date fund inside of her retirement account.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Kay if I am six forty you're listening to how
to Money on demand on the iHeartRadio app.
Speaker 2 (00:07):
Do you want to live well without drowning in debt?
Joel and Matt have you covered? This is how to
Money with Joel Lar's Guard and Matt llmakes.
Speaker 3 (01:07):
KFI am sixty live everywhere on the iHeartRadio app. This
is how to Money. I am Matt Altmans.
Speaker 1 (01:14):
And I'm Joel Larscar. Don't forget to sign up for
the how to Money newsletter. You can find that up
at how tomoney dot com slash newsletter.
Speaker 3 (01:20):
But let's talk about travel and vacationing because Southwest has
officially made their change. Paying for check bags started on Wednesday,
much to our shigrin that being said, if you bought
a ticket before that deadline, you will get to enjoy
free check bags one more time.
Speaker 2 (01:38):
That was me.
Speaker 3 (01:38):
That was me, yeah, But moving forward, it's going to
cost you thirty five dollars for that first bag, forty
five dollars for the next. Sounds like typical airline. It's
like fee structure right here man, everybody else, it's certainly
gonna make uh. That was like our favorite reason. One
of the reasons to go with Southwest, specifically the free
check bag. That's that's how you get the nice beer haul.
(02:00):
That's right when you are flying from from other cities,
which was something that you got to do one last
time from Texas.
Speaker 1 (02:05):
And I'm not usually a huge checked bag guy. I
don't like the check bags unless I'm checking for beer
or I'm going on my annual backpacking trip, in which
case I'm bringing a lot more than I normally do
my giant backpacking bag. And so in this case to
fit all everything you need tell your little con back.
I wish it's like a real man living off of
the off the land. At that point, there's there's more
(02:26):
you need for that.
Speaker 3 (02:27):
In addition to that, though, basic economy fairs are going
to be implemented, which will replace the want to get
away option that you've gotten used to see. It's really
hard for me to hear the one to get away.
Every time I would see I would think of that
Leny Kravitz song, the I Want to get Away. I
get that I get from the nineties, But then to
twist the knife even further, flight credits are going to
(02:48):
expire within six months before they actually never expired. You
could just hang on to that. So but that means
if you cancel a trip, this is something you got,
you got basically added to the calendar that hey, we
to make sure that we utilize those credits in order
to not lose those credits.
Speaker 1 (03:04):
That was one of the greatest perks of being a
Southwest customer was, Hey, you know what, I cancel that
trip and I can use those points anytime into the future.
The six month thing is real drag. All these things
are a big drag, and it should, I think, reduce
the loyalty you feel. If you've been someone who's like,
I fly Southwest because they're great, and I'm sure they'll
(03:24):
still be great in some ways, there's a lot of
reasons to be less loyal and just shop for the
lowest fare, and Southwest was pretty competitive unfairs, although not
always the lowest, of course. But I think this just
should push all of us more in the direction of
shopping and being less loyal to any airline in particular.
And I think that's just been more and more of
(03:46):
the case in general too, especially as airlines are saying, ah,
it's less about how frequently you travel on us, It's
more about how much money you're spending. So if you're
the kind of normal person who flies a few times
a year, then shopping around makes even more sense than
being loyal because you're not going to get rewarded for
your loyalty at airlines nearly as much these days. And
(04:06):
then pack light two because I think I would love
to see more folks avoid checking bags all together. I
know it's not always possible, especially like on my backpacking
trip right, but I think it is more possible than
most folks think to avoid checking a bag. So whatever
airline you're on, Southwest included, now think about the added
costs that checking a bag is going to add to
(04:28):
your life, and hopefully you can travel lighter.
Speaker 3 (04:31):
That's right, buddy, And as is usual in our Friday flight,
we have our standing tariff updates. Heavy terraffs against the
EU were threatened and then pulled back. We can talk
about before tariffs. By the way, we talked about shrinkflation
and how much money the government was going to infuse
into our bank accounts via the stimmy money, egg prices.
Egg prices that was a little bit more recent, which,
by the way, I feel like we've seen those prices
(04:52):
come back down. Actually but this rebounding nature of Trump's
terraffs has been true of essentially, I mean, honestly, every
trade policy threat that the Trump administration has made where
he says that terrorists are God's gifts of the world,
but then in reality that they only seem to be
used as like this blunt instrument in order to force
other countries to negotiate. Whether or not it's working is debatable,
(05:16):
but it's working for some investors who are participating in
taco trading, and so the acronym stands for Trump always
chickens out. Thus the taco and enjol. Some investors are
making their investment decisions based on terror threats that don't
actually materialize. They're making money. This is something that I
feel like we were alluding to this when it came
to Terra's the first time around, when it's just like,
(05:38):
you know what, there's a whole lot of talk, but
let's actually see if this pans out as something that
gets implemented. By the way, we would not recommend for
folks to participate in taco trading. This is a pure speculative,
casino gambling like mentality. It is not how you grow
your wealth over the long run. Yeah.
Speaker 1 (05:57):
But that being said, I mean, do you remember I
think when President Trump truthed out, hey, now's a good
time to buy, and he was spot on because he
controls the lever essentially of what's gonna happen with the
economy with a lot of these tariffs. And so if
you listened to the truth and you bought at that
very moment of time, you would have done quite well
(06:18):
for yourself. We've seen man like a twenty plus percent
run up in the stock market since then. So I
get why people are saying I'm gonna trade on this
because it sure looks like I'm seeing a trend here
which is threatened tariffs that don't actually come to pass,
at least not in any significant manner. So when the
stock market freaks because of the proposal, then and I'll
buy in at the low side, and I am richer
(06:41):
because of the comeback of that stock or specific industry experiences.
Speaker 3 (06:46):
That's right, buddy.
Speaker 4 (06:47):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 3 (06:54):
By the way, you can always find more money saving
information over at howtomoney dot com. We now have a
question from a listener who he's in a shopping conundrum. Man,
he wants to know what you would have done in
his situation.
Speaker 5 (07:07):
Hey, Matt Joel, this is Nate from Texas and I
had a frugal or cheap moment pop into my life
the other day that I thought you guys might have
some fun discussing. So I was due to buy more
shaving razors, and typically I buy the twelve pack, which
is the largest size they offer, because you know, Bolk
prices lowest cpu and those usually cost just under forty
five dollars. While I was looking around, I noticed there
was another twelve pack of the very same brand, but
(07:29):
a slightly different model, in a spot marked for twenty dollars,
And at the time, I thought to myself, there's no
way that's right. Plus it's not my usual model. I'll
just go for the devil, I know. And it was
only after I got home that I realized I almost
certainly could have gotten the twenty dollars ones and gotten
the store to honor the price even if it was wrong,
and it probably would have been the exact same experience
(07:50):
for me shaving. So had the thought occurred to me
and I did that do you guys think it would
have been frugal or cheap. On the one hand, you
could argue it was frugal, they made a mistake and
I was simply seizing the opportunity to save a few
bucks on a ridiculously expensive but necessary purchase. On the
other hand, I could see the argument that it was
cheap since I knew that it was kind of ripping
off the company and someone had obviously made a mistake.
(08:12):
Although again you could argue that after I did that,
the manager probably would have sent someone to correct the price.
So I'm curious what you guys think the right answer
would have been in that situation.
Speaker 3 (08:21):
Thanks for all you do, man. I always love a
good frugler. Cheap Nate's got some shopping regirts. It's like
I should have done it. I should have done it.
Speaker 1 (08:28):
Can't live your life looking at the rear of your mirror.
But we will offer some advice here. I one, I
gotta say, I love that Nate is buying in bulk
here of course. Yeah, so when you buy more razors,
when you buy like the three pack or something like that,
you're you're definitely overpaying per razor.
Speaker 3 (08:43):
Well, that's all they sell at Aldi. So that's three.
That's all I think.
Speaker 1 (08:46):
So okay, but I will say, and we should get
to that. Are you still using the Aldi razors right now?
Speaker 3 (08:51):
Okay? The Li Kira cur brand. It sounds French. Yeah,
it doesn't feel French. Are they? Are they inferior there?
Speaker 4 (08:59):
Okay?
Speaker 3 (08:59):
They I don't know if I'm gonna recommend those razors,
okay to folks like it's not honesty because you you
say all good things about all theie typically I was
trying them out, and it's not that I can't get
a close shave. I feel like when I shave with them,
I'm able to get a nice, you know, close shave
or whatever. But it's I've noticed that I've been nicking
myself more often. So I don't know if that's because
(09:20):
the quality of the blades aren't as high as before that.
I had Harry's, you know, the Harris razors or whatever,
and I'd been using those razors for like a couple
of years, and I'd never cut myself to those better
with those, Okay, So it seems very clear. I don't
know if it's the fact that the Harries there's like
five blades or something like that. Versus three blades. I
don't know what's what's up with the Aldie brand, But
(09:41):
that being said, I don't know if I can recommend
the Aldie ones.
Speaker 1 (09:44):
It's good to know, Yeah, okay, so I do think
I'll do it buying more in a time typically, even
if you're buying the name brand, and that I'll help
you save a little bit. But I think also it's
where you buy matters, right, So if you're buying in
bulk at costco versus maybe another store, you could save
more buying your cost. It might be more than a
twelve pack. I think sometimes they sell like twenty and
thirty packs of razors, so maybe you're set for like
(10:05):
razors for.
Speaker 3 (10:06):
The rest of your life many years.
Speaker 1 (10:07):
Yes, I think too, despite your run in with these
Aldie blades and then them not being the best personally,
I'm I'm often willing to try and experiment with a
cheaper make or model on stuff, yep, just to see
if it holds up or if it's good enough. And
then you know what, Luckily everyone can learn from my
mistake and avoid the Licura brand from all. At least
(10:28):
with Aldi though, right, they've got the double guarantee, so
you can take it back to the store and be like, hey,
this wasn't great. Yeah, well so if there's a return policy,
that's pretty generous. So that raises a whole other aspect
of Nate's question, which I personally think he's overthinking it. Okay,
like he's seen and I don't know if like my
has my virtue expired?
Speaker 3 (10:45):
Joel, like, do I need to be more? Did it
ever exist? It's a better question do my ethics need
to tune up? I see a deal? So if I
see something marked like that on the shelf and I'm
pouncing like I am one saying oh yeah, nope, I
mean it's a no brainer, even though it might be
a model, it sounds like he was like, Okay, well,
it's just not something that I've used before. Not necessarily
(11:05):
that it's an inferior model, it's just something that was different.
But he seemed to think that he didn't want to
take advantage of a mistake.
Speaker 1 (11:13):
Perhaps, I mean kat taking advantage of mistakes. So here's
so it makes me think of our conversation not too
long ago with Scott Kuyes, who runs Going, which was
formerly called Scott's Chief Flights and Scott's all about helping
people get the best airfare deals possible, and we specifically
talked about mistake fares, and we asked whether people are
getting fired, right if one of those mistake fares goes
(11:35):
out and people get that like four hundred and eighty
dollars round trip to get to Tokyo or something like that,
is someone getting fired because they pressed them wrong button?
He said, no, typically not. I don't think so. But
those mistake fars are they're often short lived, but they're
the best deals out there.
Speaker 3 (11:50):
I don't know if that's the confidence that Nate's looking for, Like,
I don't think they're getting fired, but maybe they're getting fired.
Speaker 1 (11:55):
I think just because someone made a mistake doesn't mean
you don't book the deal. It's fair game, right, And
Scott's obviously telling all his followers, hey, that there's this
great deal out there. I think it's different maybe if
this was a placement issue, because that could be if
it was just like literally on the wrong spot on
the shelf. That could have been an employee, or that
could have been a shopper putting the thing back in
(12:16):
the wrong place, and then you're like, but it was
behind the twenty dollars sign but that's obviously that was
clearly reserved for another item, a different razor. I will
say this though, you know, because it's a slightly different model.
It could just be something that didn't work in the marketplace.
They tried it out. They threw it against the wall
to see university, That's what I think. And they're saying, okay,
now we're discounting it heavily to get rid of it there.
Speaker 3 (12:35):
And there are whole.
Speaker 1 (12:36):
Businesses built around this model to sell things at a
discount that just didn't work. Yeah, there's big lots, right,
there's I've been getting ads lately, Matt, for this this
website that sells discount snacks because guess what, maybe it
was no old Joel likes snackies, because maybe they were
the chips or the oatmeal bites or whatever it is,
(12:58):
or the Dave Chan noodles, the two versions that people
was at Dave Chan's what's his name? The uh Yeah,
it's like the two kinds that nobody wanted that are
sold at half price, and normally you wouldn't be able
to get him that cheap, and that this is just
the kind of thing that happens in the marketplace all
the time. It's like, this is a failed product, we'll
sell it for cheaper over here. It's like I used
(13:19):
to be willing to pay for the chili crisp, but
these are the chili chunks. I don't know if that's right. Honestly,
it's exactly like that. Like they're like, well, we'll test
this product out, it doesn't work, and then they have
to sell it to a discounter.
Speaker 3 (13:31):
These are the chili chewies. That's right. No, I totally agree, because, uh, like,
maybe it's just a color. Maybe they're like, oh, guys,
you know what, we thought that the blood red razor
handle with the blood red razor heead. We thought that
that would sell like hotcakes. Sounds cool. And it turns
out that dudes don't like looking at a aggressively red
razor when they're looking for a smooth, cool shave in
(13:52):
the morning. Maybe the market doesn't like the tied eye
raisor see a little too wacky, I would losers. I
guess we're gonna have to mark it down just to
get it off the shelves. Yeah, yeah, I totally agree.
I think there are all sorts of different reasons like that.
That would lead up manufacturer to drop the price in
order to you know, move that product. What if it
was the you know, the lotion strips on the heads
of the razor.
Speaker 1 (14:11):
Yea.
Speaker 3 (14:12):
What if they're like, oh, we want to try out
some new sense it's like hot dog flip. They're like,
what does this smell like? I'm at the carnival or
the fair. Yeah, I don't. I don't like these razors.
And Nate could have been all over this deal. He
could have also had a face Nathan.
Speaker 1 (14:29):
He'd impressed a lot, a little combo with Nathan's hot Dogs,
little Joey Chestnut representation on the.
Speaker 3 (14:35):
An incredible crossover.
Speaker 1 (14:36):
Although no, they're not friends anymore, Joey Chestnunt and Nathan
hot Dogs.
Speaker 3 (14:40):
He yeah, he like walked out of the most recent sponsorship. No,
he didn't compete at the most recent one. They wouldn't
let him.
Speaker 1 (14:45):
I don't think because he he was sponsored by Age
hot Dog or something like that.
Speaker 3 (14:51):
I don't get into the free competition drama.
Speaker 1 (14:54):
Joel All right, well, I think one other tip here
for for Nate. What Yeah, one, I think if it's
if that's the price that's reflected, like take advantage of
the deal and sometimes even stock up because it's likely
just something that wasn't as appealing to most people and
you're willing to dig what others are zagging or literally
just paying full pressure the razor they're used to. I
(15:15):
would also say this, don't forget about what makes a
razor last longer and really the biggest thing that you
have under your control. I mean, it's going to dole
over time in some ways because you're shaving your face
with it, but if you dry it off afterever use
that can extend the life of the blade. And so
the truth is water makes the blade deteriorate. So even
(15:36):
if you buy the nicer blades, taking care of them,
dry them off. Some people Matt even use like a
blow dryer to dry the blade off, like ten seconds
with a blow dryer.
Speaker 3 (15:44):
That sounds like a cheap move right there. How much
electricity are you using? Yeah, I don't know. Just going
to dry it off on the towel, Yeah, dry it
off on the towel. You're wearing a T shirt right
when you're shaving, Like, you're not wearing your fancy clothes
at least not me. Wipe it on the towel.
Speaker 1 (15:54):
It's on your ways unless you're James Bond shaving in
a tuxedo. Just yeah, give it a little quick try,
because that's going to give you more time, more shaves
with each razor that you use. So I've even seen
some folks say math that they get nine plus months.
Speaker 3 (16:09):
Out of a razor. I was meeting with my harys.
Really were you getting nine plus months? Well, that's briefly
talked about this like last year, a couple of years ago.
That's when I realized, well, and here's the thing though,
I never was nick and myself, so I was never bleeding,
so I didn't think that they were that they were dull,
But I realized after the fact, like once I finally
moved to the new razorhead, I was like, oh, this
is what it feels like when the razor actually cuts
(16:29):
the hair as opposed to like pull them all out,
which is which is what was happening. There's a whole
lot less hair.
Speaker 1 (16:34):
Tugging going on as I was shaving. So all right, hey,
we got more money saving information to get to.
Speaker 4 (16:41):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty if.
Speaker 3 (16:47):
You're on Facebook.
Speaker 1 (16:49):
By the way, you want to join a group of
like minded folks who have money questions, who have money insights,
please go join the how to Money Facebook group.
Speaker 3 (16:56):
All right, So we briefly mentioned the NAGA accounts element
of the big beautiful bill that barely passed the House
last week. The reason, or I would say, one of
the reasons there's so much focus on this is because
the tax cuts and jobs at will sunset at the
end of this year. That, in addition to the fact
that the GUP has rolled all of their they put
(17:17):
all their eggs in one basket, all the hopes of dreams.
This one basket is the BBB. Yeah, but let's discuss
a few of the other potential changes that would impact
your personal finances if it were to pass the Senate
and get signed into law. One of which is that
hsas could get even better, doubling the allowed annual contribution.
If that remains, that's going to mean you can funnel
even more money into that triple tax advantage account, which
(17:39):
is fantastic.
Speaker 1 (17:39):
And I think there was a change in the law
that basically said, oh, you can use your HSA for
more things in including a gym membership, which is kind
of cool. So HSA could be getting a heck of
a lot better soon.
Speaker 3 (17:51):
Then it begs a question, Okay, well, what if you
decide to implement your own gym at your own house
and therefore by equipment. Maybe maybe child tax credits would
be bumped from two thousand to twenty five hundred dollars.
Speaker 1 (18:02):
Per child, which makes me want to have more children.
Speaker 3 (18:04):
Yeah, there's a higher standard deduction for folks who are
sixty five and older, and the EV tax credit would
be repealed at the end of the year as well,
And there's of course plenty more that's included. But we
will continue to cover this as things move along or
not move along. Maybe as it gets sent back after
the Senate perhaps makes makes some changes as well, but
(18:25):
we'll keep folks posted well.
Speaker 1 (18:26):
Taxing different types of earnings differently is a big part
of the proposal too.
Speaker 3 (18:31):
It's right specif we like no.
Speaker 1 (18:32):
Tax on tips and overtime pay. That's not something that
we love though, and I think the domino effect of
this getting baked into tax policy could have annoying cast
gaming consequences, right, including more requests for tips. Think about
if you are an industry that thrives on tips. You're
gonna want to find a way to get customers to
(18:55):
funnel even more money in tips your way because they're
tax free dollars coming into your bank account. And so
I think it's it's just interesting that we're prioritizing or
saying that different ways you earn income will be taxed differently.
We already say that to a small extent, but we'd
be making that an even wider gap. And I just
(19:15):
I don't love the precedent that sets and on the
tipping thing. American's already frustrated by the frequency of tip
requests that we experience in modern day modern days, right,
and so how people are going to react individually to
being asked for more tips and then for bigger tips.
That's going to be interesting to watch because I feel
like we're already experiencing of a tipping rebellion happening right now.
Speaker 4 (19:37):
Man.
Speaker 1 (19:38):
I mean, I was buying a pizza the other night and.
Speaker 3 (19:41):
The check I was going to go pick it up.
Speaker 1 (19:43):
They're not delivering it, and check out They're like, hey,
do you want to do like a fifteen, twenty or
twenty five percent tip? And I was just shocked. That
felt pretty uncouth to even ask that. When I'm going
to pick the pizza up, It's different if you're delivering
it to me. And I think those are the kind
of things that a lot of Americas are just kind
of frustrated by with tipping culture right now, it's like
everybody's asking for a tip. That might only get worse
(20:06):
if the no tax on tips becomes a reality.
Speaker 3 (20:09):
Yeah, the Big Beautiful Bill also is going to have
an impact on student loans as well. The new plan
would be to take the alphabet soup of repayment plans
down to just two, which I would say would make
it easier to understand, but also it's going to make
it a bit less generous. And so essentially, the more
you borrow, the longer that you're going to have to
pay it back, up to twenty five years for folks
(20:31):
who are borrowing over one hundred thousand dollars, which we
would not recommend. By the way, the income based plan
ties your payment to a percentage of your income, so
basically a sliding scale that requires you to pay a
lot less if you make less. And the bill would
also eliminate subsidized student loans as well as forbearans and deferments,
which actually might not be necessary given the way the
(20:52):
income based plan is structured. So it's not necessarily perfect,
but student loan plans will be easier to understand in
the way that the structured could help camp down tuition inflation. Again,
whether or not this remains as it is currently written
after the Senate takes a look at it, that's of
course going to have an impact as to the implementation
of the new student loan rules moving forward, where.
Speaker 1 (21:15):
The kind of state and local deduction thing will land.
That's another thing that's that's like a really important piece
of this legislation, and that's kind of being battled right
now as well. So yeah, we'll keep our eyes on this,
and it is just fascinating to see that there's a
lot of changes that could really impact your finances and
your taxes in particular moving forward. So I'm sure we'll
(21:37):
have more discussions on this soon.
Speaker 3 (21:39):
Yeah, that's right.
Speaker 4 (21:40):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 3 (21:46):
Don't forget to sign up for the how to Money
newsletter over at how toomoney dot com.
Speaker 1 (21:50):
Slash newsletter. Matt let's get to a question from a listener.
She's asking about investing in target date funds. She's got
kind of a nuanced question on this.
Speaker 6 (22:00):
This is Bri from Illinois. I have a question about
my four oh one K I currently have it invested
in a target date fund where it says I'm going
to retire when I'm sixty four, but my current goals
are to retire when I'm fifty five and probably work
part time after I retire. I'm wondering if I should
switch my investments over to a target date fund of
(22:23):
retiring one i'm fifty five, or if I should just
keep it where it is. And if I'm switching it,
should I look at the market conditions and kind of
time it according to that I have a Fidelity account
and I'm thirty six years old. I really appreciate your feedback.
Speaker 3 (22:40):
Thanks all right, Bri, thank you so much for sending
your voice memo in and man target date funds. Let's
talk about them because they can be an excellent choice,
especially if you are with one of the low cost providers.
Fidelity specifically, they are one of those low cost providers
sort of here, and I'll explain why, because they offer
two different kinds of target date funds, one that is
(23:04):
actively managed and it actually comes with a much higher
expense ratio, and then another that is passive and is
index base. It's easy to get tripped up when you're
looking at those Fidelity target date funds, Matt, because they
both named incredibly similarly. Simply, I just wish they would.
Speaker 1 (23:21):
Change the branding on those so that people could understand
the difference. But you actually have to click through and
look at the expense ratio show you know you're looking
at the right.
Speaker 3 (23:28):
One, and it's I guess I don't want to completely
throw Fidelity under the bus. The actively managed fund, like
if you're a browser site and perusing it, is under
like the actively managed section, but the actual name of
the fund. They are both called Freedom like whatever, like
let's Freedom thirty five or whatever. But the one that
charges a much lower rate has Freedom let's say Freedom
(23:49):
Index twenty thirty five or whatever, as opposed to just
Freedom twenty thirty five. Make sure you choose the index
r the one with the index, because that the actively
managed comes with that. I mean, I think it's around
a half a percent higher expense at least that's associated
with that, So this is something like ten x higher expenses,
significant difference, So keep it out for that, or let's
(24:09):
talk about target date funds in general. And the point
really with the target date fund is, I don't know
matter if you remember those infomercials the Ron po Peal
rotisory cooker where he's like, set it and forget it,
and then he would yell that out and the crowd
would yell it back at him. I watched a lot
of infomercials when I was a kid class I loved participation. Yes,
(24:30):
so good.
Speaker 1 (24:31):
So that's what a target date fund is for most
people is like literally a simple choice and then you
never have to rethink it the rest of your life
and it will automatically, uh, you know, your dollar cost
averaging into that that one fund for life, and then
the holdings inside of that fund will change over time.
I think what I love about this, And maybe it's
(24:51):
because my brain power is already lacking in some ways,
but but what you have to bring to the town
experiencing cognitive decline, come on, it's coming. But like the
brain power you have to bring to this decision is minimal,
which we're all for. We talk about simplicity, Like, as
long as the choice is simple and you understand why
you're making the simple choice, that can be the best
(25:12):
move for you. Like you don't have to overcomplicate things.
All you gotta do is toss cash in regularly, and hey,
over the years, you'll see compounding returns. The only real
negative thing though, that I would have to say about
target date funds is to watch out for those high expenses,
right because the Fidelity funds that's one example of that.
But then also when you're talking about with other non
low cost brokerage firms, the expense ratios on target date
(25:35):
funds can be egregious and also just one of the
things they could be too conservative actually for younger investors,
so breed just know that one hundred percent stock portfolio
is likely to outperform a target date fund over decades.
So even if we're just talking about a target date
fund that's way off in the future, like twenty sixty
or twenty sixty five, exactly, that is less conservative, right
(26:00):
because you've got many decades until you reach retirement. Those
are still more conservative than an all stock portfolio. In
something like a total stock market or an S and
P five hundred index few.
Speaker 3 (26:10):
Totally and Bri is in her thirties. For younger investors,
they are not aggressive enough. You want that volatility, and
like even because not just because volatility is fun, but
because it leads to better it leads to higher returns. Yeah,
because you're exposing yourself to that volatility. And even if
you are looking at a target date fund with bond
exposure of like that's minimal, something like nine to fifteen percent,
(26:32):
that is still too bond heavy, at least in my
personal opinion. And yes, that tends to smooth out the
ride when that market volatility is high, but it also
reduces those returns over time. So for instance, vou vanguards
s and P five hundred ETF it has returned over
ninety percent over the past five years, while Vanguard's twenty
(26:53):
sixty five fund has returned sixty percent over that same time.
So to given a significant difference in.
Speaker 1 (27:00):
A given month or two, you might be talking about
negligible differences. But once you time expand that time horizon,
like you're saying even just five years, which in breeze
time horizon, like that's still not a whole lot of time,
the gap can grow significantly. It compounds in Matti I summer.
The first person who told me about investing basically praise
target date fund funds to the max, and so I
(27:23):
was like, okay, all right, target date funds must be
the way to go. And then I started doing my
research and I listened to more people, and I ended
up switching out of target day funds into like total
stock market type fund index funds.
Speaker 4 (27:35):
One.
Speaker 3 (27:35):
The cost are a little bit lower, but that wasn't
the real reason. It was.
Speaker 1 (27:38):
Hey, I think, especially given my age, I'm just too
conservative right now. Even though it feels like I don't
know the gap is maybe it's not significant, But in reality,
over the last ten years, I've done a whole lot
better by being invested in those index funds than I
have by being invested in a target date fund. If
I'd kept it the same, my net worth would be smaller.
So I think over the long more stock exposure is
(28:02):
good and you've got time on your side to endure
drawbacks without batting an eye. If you were let's say
fifty six, it'd be a different conversation. Let's talk about
let's get to the heart of breeze question though, mat
which target date fund is right for her, And you
might think that the answer is straightforward, and for most folks,
I would say it probably is. You're picking the target
date fund that has the date closest to when you're
(28:24):
likely to retire, because not long after you retire, you're
drawing down on those funds. But I'd also say this,
it's not just about when you're planning on quitting. It's
actually more about when you think you're going to need
the money you've been saving up, like when or are
you going to actually tap those funds? So just because
you quit your job, well, I don't know, you might
(28:44):
have other sources of income, just like Brie said, she said, Hey,
I'm going to probably be working part time. Let's say
you're a real estate investor. Well, yeah, are you actually
going to need to tap those funds, Brie when you
quit your main full time job or because you still
have income, are you going to be able to keep
investing even after you retire quote unquote from full time work.
So my guess is you're still going to prioritize investing
(29:07):
and growing those dollars at least to some degree. And
if so, I would likely go with something further off
like the twenty sixty five target date fund, so that
you're you are investing more aggressively because you're not actually
going to be withdrawing those funds.
Speaker 3 (29:24):
Immediately upon retirement.
Speaker 1 (29:26):
We're thinking about more your draw down timeline than like
you're I'm retiring from full time work date totally.
Speaker 3 (29:32):
And realize too that what we're actually recommending here is
for you to do the opposite of what it is
that you're asking, because you are currently set up to
retire at age I think you said sixty five, but
you're instead thinking about retiring at age fifty five, and
so what you're asking was that so she's like thirty six,
so she's saying about retiring in age fifty five, so
twenty years from now. So what you're considering moving too
(29:55):
is a twenty forty five fund, And so it sounds
like you're currently in a twenty fifty five fund and
you're like, Okay, should I move it to a twenty
forty five fund, But what we are actually recommending is
for you to definitely not do that, but to actually
do the opposite. Not to go from a twenty fifty
five to a twenty forty five, but to go from
a twenty fifty five fund to a twenty sixty five fund,
something that is or something that does have a longer
(30:17):
runway in order for you to have that exposure to
the stocks, which is going to lead to higher returns
for you. So that's I think that's the most important
thing here. Is Like, naturally you think, oh, I'm going
to retire early, therefore I need to be looking at
a fund that is targeted for that date. But especially
given your case, the fact that you're talking about this
(30:38):
only being a partial retirement, you don't necessarily you have
that flexibility to not tap those funds and for you
to essentially weather any any ups or downs in the
current market.
Speaker 1 (30:49):
And I do think that desire to retire early Matt
actually means you should probably be even more aggressive right
now because it means you're investing for an even longer
time horizon from a drawdown perspective. So instead of a
traditional like twenty five year retirement, so you retire sixty
five and you need that money until you're ninety, well
(31:11):
you might be talking Brie about a forty year retirement here.
Speaker 3 (31:14):
So I think the.
Speaker 1 (31:16):
Goal to grow your nest egg, well, it's even more
important in these years when you're farther away from needing
that money totally.
Speaker 3 (31:24):
Yeah. So, like as we're talking about risks, it's not
something that you want to completely take off the table.
You still want stock exposure in retirement, and in a
target date fund, you'll have roughly fifty percent stock exposure
once you hit that retirement date. Anyway, Interestingly enough, the
twenty fifty five and the twenty sixty five target date funds,
they actually look really similar right now if you compare
(31:45):
their portfolio allocations, almost the exact same. But that being said,
I think the twenty fifty five fund will get conservative
more quickly in the coming years. So I think this
is a case of horseshoes. You're not going to nail
it exactly, but I do think a twenty sixty five
fund will get you closer to where you want to go,
(32:06):
And if you do want to make any changes, I
think looking to more stock heavy options over the next
decade is probably the move that I would make. You
asked about timing the market, I wouldn't necessarily worry about that.
I would just continue to dollar cost average into the market.
If you are uncomfortable this is within a retirement account,
So you're not going to get taxed for you to
(32:26):
sell and so, but that being said, if you're uncomfortable
selling and moving in a different direction, maybe just future contributions,
put those towards the twenty sixty five or even at
twenty seventy fund.
Speaker 1 (32:37):
Yeah, that's exactly right. We've got a lot more to
get to on today's show. You've been listening to How
To Money with Joel Larsgard. You can always hear us
live on KFI AM six forty twelve pm to two
pm on Sunday, and anytime on demand on the iHeartRadio app.
Kay if I am six forty you're listening to how
to Money on demand on the iHeartRadio app.
Speaker 2 (00:07):
Do you want to live well without drowning in debt?
Joel and Matt have you covered? This is how to
Money with Joel Lar's Guard and Matt llmakes.
Speaker 3 (01:07):
KFI am sixty live everywhere on the iHeartRadio app. This
is how to Money. I am Matt Altmans.
Speaker 1 (01:14):
And I'm Joel Larscar. Don't forget to sign up for
the how to Money newsletter. You can find that up
at how tomoney dot com slash newsletter.
Speaker 3 (01:20):
But let's talk about travel and vacationing because Southwest has
officially made their change. Paying for check bags started on Wednesday,
much to our shigrin that being said, if you bought
a ticket before that deadline, you will get to enjoy
free check bags one more time.
Speaker 2 (01:38):
That was me.
Speaker 3 (01:38):
That was me, yeah, But moving forward, it's going to
cost you thirty five dollars for that first bag, forty
five dollars for the next. Sounds like typical airline. It's
like fee structure right here man, everybody else, it's certainly
gonna make uh. That was like our favorite reason. One
of the reasons to go with Southwest, specifically the free
check bag. That's that's how you get the nice beer haul.
(02:00):
That's right when you are flying from from other cities,
which was something that you got to do one last
time from Texas.
Speaker 1 (02:05):
And I'm not usually a huge checked bag guy. I
don't like the check bags unless I'm checking for beer
or I'm going on my annual backpacking trip, in which
case I'm bringing a lot more than I normally do
my giant backpacking bag. And so in this case to
fit all everything you need tell your little con back.
I wish it's like a real man living off of
the off the land. At that point, there's there's more
(02:26):
you need for that.
Speaker 3 (02:27):
In addition to that, though, basic economy fairs are going
to be implemented, which will replace the want to get
away option that you've gotten used to see. It's really
hard for me to hear the one to get away.
Every time I would see I would think of that
Leny Kravitz song, the I Want to get Away. I
get that I get from the nineties, But then to
twist the knife even further, flight credits are going to
(02:48):
expire within six months before they actually never expired. You
could just hang on to that. So but that means
if you cancel a trip, this is something you got,
you got basically added to the calendar that hey, we
to make sure that we utilize those credits in order
to not lose those credits.
Speaker 1 (03:04):
That was one of the greatest perks of being a
Southwest customer was, Hey, you know what, I cancel that
trip and I can use those points anytime into the future.
The six month thing is real drag. All these things
are a big drag, and it should, I think, reduce
the loyalty you feel. If you've been someone who's like,
I fly Southwest because they're great, and I'm sure they'll
(03:24):
still be great in some ways, there's a lot of
reasons to be less loyal and just shop for the
lowest fare, and Southwest was pretty competitive unfairs, although not
always the lowest, of course. But I think this just
should push all of us more in the direction of
shopping and being less loyal to any airline in particular.
And I think that's just been more and more of
(03:46):
the case in general too, especially as airlines are saying, ah,
it's less about how frequently you travel on us, It's
more about how much money you're spending. So if you're
the kind of normal person who flies a few times
a year, then shopping around makes even more sense than
being loyal because you're not going to get rewarded for
your loyalty at airlines nearly as much these days. And
(04:06):
then pack light two because I think I would love
to see more folks avoid checking bags all together. I
know it's not always possible, especially like on my backpacking
trip right, but I think it is more possible than
most folks think to avoid checking a bag. So whatever
airline you're on, Southwest included, now think about the added
costs that checking a bag is going to add to
(04:28):
your life, and hopefully you can travel lighter.
Speaker 3 (04:31):
That's right, buddy, And as is usual in our Friday flight,
we have our standing tariff updates. Heavy terraffs against the
EU were threatened and then pulled back. We can talk
about before tariffs. By the way, we talked about shrinkflation
and how much money the government was going to infuse
into our bank accounts via the stimmy money, egg prices.
Egg prices that was a little bit more recent, which,
by the way, I feel like we've seen those prices
(04:52):
come back down. Actually but this rebounding nature of Trump's
terraffs has been true of essentially, I mean, honestly, every
trade policy threat that the Trump administration has made where
he says that terrorists are God's gifts of the world,
but then in reality that they only seem to be
used as like this blunt instrument in order to force
other countries to negotiate. Whether or not it's working is debatable,
(05:16):
but it's working for some investors who are participating in
taco trading, and so the acronym stands for Trump always
chickens out. Thus the taco and enjol. Some investors are
making their investment decisions based on terror threats that don't
actually materialize. They're making money. This is something that I
feel like we were alluding to this when it came
to Terra's the first time around, when it's just like,
(05:38):
you know what, there's a whole lot of talk, but
let's actually see if this pans out as something that
gets implemented. By the way, we would not recommend for
folks to participate in taco trading. This is a pure speculative,
casino gambling like mentality. It is not how you grow
your wealth over the long run. Yeah.
Speaker 1 (05:57):
But that being said, I mean, do you remember I
think when President Trump truthed out, hey, now's a good
time to buy, and he was spot on because he
controls the lever essentially of what's gonna happen with the
economy with a lot of these tariffs. And so if
you listened to the truth and you bought at that
very moment of time, you would have done quite well
(06:18):
for yourself. We've seen man like a twenty plus percent
run up in the stock market since then. So I
get why people are saying I'm gonna trade on this
because it sure looks like I'm seeing a trend here
which is threatened tariffs that don't actually come to pass,
at least not in any significant manner. So when the
stock market freaks because of the proposal, then and I'll
buy in at the low side, and I am richer
(06:41):
because of the comeback of that stock or specific industry experiences.
Speaker 3 (06:46):
That's right, buddy.
Speaker 4 (06:47):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 3 (06:54):
By the way, you can always find more money saving
information over at howtomoney dot com. We now have a
question from a listener who he's in a shopping conundrum. Man,
he wants to know what you would have done in
his situation.
Speaker 5 (07:07):
Hey, Matt Joel, this is Nate from Texas and I
had a frugal or cheap moment pop into my life
the other day that I thought you guys might have
some fun discussing. So I was due to buy more
shaving razors, and typically I buy the twelve pack, which
is the largest size they offer, because you know, Bolk
prices lowest cpu and those usually cost just under forty
five dollars. While I was looking around, I noticed there
was another twelve pack of the very same brand, but
(07:29):
a slightly different model, in a spot marked for twenty dollars,
And at the time, I thought to myself, there's no
way that's right. Plus it's not my usual model. I'll
just go for the devil, I know. And it was
only after I got home that I realized I almost
certainly could have gotten the twenty dollars ones and gotten
the store to honor the price even if it was wrong,
and it probably would have been the exact same experience
(07:50):
for me shaving. So had the thought occurred to me
and I did that do you guys think it would
have been frugal or cheap. On the one hand, you
could argue it was frugal, they made a mistake and
I was simply seizing the opportunity to save a few
bucks on a ridiculously expensive but necessary purchase. On the
other hand, I could see the argument that it was
cheap since I knew that it was kind of ripping
off the company and someone had obviously made a mistake.
(08:12):
Although again you could argue that after I did that,
the manager probably would have sent someone to correct the price.
So I'm curious what you guys think the right answer
would have been in that situation.
Speaker 3 (08:21):
Thanks for all you do, man. I always love a
good frugler. Cheap Nate's got some shopping regirts. It's like
I should have done it. I should have done it.
Speaker 1 (08:28):
Can't live your life looking at the rear of your mirror.
But we will offer some advice here. I one, I
gotta say, I love that Nate is buying in bulk
here of course. Yeah, so when you buy more razors,
when you buy like the three pack or something like that,
you're you're definitely overpaying per razor.
Speaker 3 (08:43):
Well, that's all they sell at Aldi. So that's three.
That's all I think.
Speaker 1 (08:46):
So okay, but I will say, and we should get
to that. Are you still using the Aldi razors right now?
Speaker 3 (08:51):
Okay? The Li Kira cur brand. It sounds French. Yeah,
it doesn't feel French. Are they? Are they inferior there?
Speaker 4 (08:59):
Okay?
Speaker 3 (08:59):
They I don't know if I'm gonna recommend those razors,
okay to folks like it's not honesty because you you
say all good things about all theie typically I was
trying them out, and it's not that I can't get
a close shave. I feel like when I shave with them,
I'm able to get a nice, you know, close shave
or whatever. But it's I've noticed that I've been nicking
myself more often. So I don't know if that's because
(09:20):
the quality of the blades aren't as high as before that.
I had Harry's, you know, the Harris razors or whatever,
and I'd been using those razors for like a couple
of years, and I'd never cut myself to those better
with those, Okay, So it seems very clear. I don't
know if it's the fact that the Harries there's like
five blades or something like that. Versus three blades. I
don't know what's what's up with the Aldie brand, But
(09:41):
that being said, I don't know if I can recommend
the Aldie ones.
Speaker 1 (09:44):
It's good to know, Yeah, okay, so I do think
I'll do it buying more in a time typically, even
if you're buying the name brand, and that I'll help
you save a little bit. But I think also it's
where you buy matters, right, So if you're buying in
bulk at costco versus maybe another store, you could save
more buying your cost. It might be more than a
twelve pack. I think sometimes they sell like twenty and
thirty packs of razors, so maybe you're set for like
(10:05):
razors for.
Speaker 3 (10:06):
The rest of your life many years.
Speaker 1 (10:07):
Yes, I think too, despite your run in with these
Aldie blades and then them not being the best personally,
I'm I'm often willing to try and experiment with a
cheaper make or model on stuff, yep, just to see
if it holds up or if it's good enough. And
then you know what, Luckily everyone can learn from my
mistake and avoid the Licura brand from all. At least
(10:28):
with Aldi though, right, they've got the double guarantee, so
you can take it back to the store and be like, hey,
this wasn't great. Yeah, well so if there's a return policy,
that's pretty generous. So that raises a whole other aspect
of Nate's question, which I personally think he's overthinking it. Okay,
like he's seen and I don't know if like my
has my virtue expired?
Speaker 3 (10:45):
Joel, like, do I need to be more? Did it
ever exist? It's a better question do my ethics need
to tune up? I see a deal? So if I
see something marked like that on the shelf and I'm
pouncing like I am one saying oh yeah, nope, I
mean it's a no brainer, even though it might be
a model, it sounds like he was like, Okay, well,
it's just not something that I've used before. Not necessarily
(11:05):
that it's an inferior model, it's just something that was different.
But he seemed to think that he didn't want to
take advantage of a mistake.
Speaker 1 (11:13):
Perhaps, I mean kat taking advantage of mistakes. So here's
so it makes me think of our conversation not too
long ago with Scott Kuyes, who runs Going, which was
formerly called Scott's Chief Flights and Scott's all about helping
people get the best airfare deals possible, and we specifically
talked about mistake fares, and we asked whether people are
getting fired, right if one of those mistake fares goes
(11:35):
out and people get that like four hundred and eighty
dollars round trip to get to Tokyo or something like that,
is someone getting fired because they pressed them wrong button?
He said, no, typically not. I don't think so. But
those mistake fars are they're often short lived, but they're
the best deals out there.
Speaker 3 (11:50):
I don't know if that's the confidence that Nate's looking for, Like,
I don't think they're getting fired, but maybe they're getting fired.
Speaker 1 (11:55):
I think just because someone made a mistake doesn't mean
you don't book the deal. It's fair game, right, And
Scott's obviously telling all his followers, hey, that there's this
great deal out there. I think it's different maybe if
this was a placement issue, because that could be if
it was just like literally on the wrong spot on
the shelf. That could have been an employee, or that
could have been a shopper putting the thing back in
(12:16):
the wrong place, and then you're like, but it was
behind the twenty dollars sign but that's obviously that was
clearly reserved for another item, a different razor. I will
say this though, you know, because it's a slightly different model.
It could just be something that didn't work in the marketplace.
They tried it out. They threw it against the wall
to see university, That's what I think. And they're saying, okay,
now we're discounting it heavily to get rid of it there.
Speaker 3 (12:35):
And there are whole.
Speaker 1 (12:36):
Businesses built around this model to sell things at a
discount that just didn't work. Yeah, there's big lots, right,
there's I've been getting ads lately, Matt, for this this
website that sells discount snacks because guess what, maybe it
was no old Joel likes snackies, because maybe they were
the chips or the oatmeal bites or whatever it is,
(12:58):
or the Dave Chan noodles, the two versions that people
was at Dave Chan's what's his name? The uh Yeah,
it's like the two kinds that nobody wanted that are
sold at half price, and normally you wouldn't be able
to get him that cheap, and that this is just
the kind of thing that happens in the marketplace all
the time. It's like, this is a failed product, we'll
sell it for cheaper over here. It's like I used
(13:19):
to be willing to pay for the chili crisp, but
these are the chili chunks. I don't know if that's right. Honestly,
it's exactly like that. Like they're like, well, we'll test
this product out, it doesn't work, and then they have
to sell it to a discounter.
Speaker 3 (13:31):
These are the chili chewies. That's right. No, I totally agree, because, uh, like,
maybe it's just a color. Maybe they're like, oh, guys,
you know what, we thought that the blood red razor
handle with the blood red razor heead. We thought that
that would sell like hotcakes. Sounds cool. And it turns
out that dudes don't like looking at a aggressively red
razor when they're looking for a smooth, cool shave in
(13:52):
the morning. Maybe the market doesn't like the tied eye
raisor see a little too wacky, I would losers. I
guess we're gonna have to mark it down just to
get it off the shelves. Yeah, yeah, I totally agree.
I think there are all sorts of different reasons like that.
That would lead up manufacturer to drop the price in
order to you know, move that product. What if it
was the you know, the lotion strips on the heads
of the razor.
Speaker 1 (14:11):
Yea.
Speaker 3 (14:12):
What if they're like, oh, we want to try out
some new sense it's like hot dog flip. They're like,
what does this smell like? I'm at the carnival or
the fair. Yeah, I don't. I don't like these razors.
And Nate could have been all over this deal. He
could have also had a face Nathan.
Speaker 1 (14:29):
He'd impressed a lot, a little combo with Nathan's hot Dogs,
little Joey Chestnut representation on the.
Speaker 3 (14:35):
An incredible crossover.
Speaker 1 (14:36):
Although no, they're not friends anymore, Joey Chestnunt and Nathan
hot Dogs.
Speaker 3 (14:40):
He yeah, he like walked out of the most recent sponsorship. No,
he didn't compete at the most recent one. They wouldn't
let him.
Speaker 1 (14:45):
I don't think because he he was sponsored by Age
hot Dog or something like that.
Speaker 3 (14:51):
I don't get into the free competition drama.
Speaker 1 (14:54):
Joel All right, well, I think one other tip here
for for Nate. What Yeah, one, I think if it's
if that's the price that's reflected, like take advantage of
the deal and sometimes even stock up because it's likely
just something that wasn't as appealing to most people and
you're willing to dig what others are zagging or literally
just paying full pressure the razor they're used to. I
(15:15):
would also say this, don't forget about what makes a
razor last longer and really the biggest thing that you
have under your control. I mean, it's going to dole
over time in some ways because you're shaving your face
with it, but if you dry it off afterever use
that can extend the life of the blade. And so
the truth is water makes the blade deteriorate. So even
(15:36):
if you buy the nicer blades, taking care of them,
dry them off. Some people Matt even use like a
blow dryer to dry the blade off, like ten seconds
with a blow dryer.
Speaker 3 (15:44):
That sounds like a cheap move right there. How much
electricity are you using? Yeah, I don't know. Just going
to dry it off on the towel, Yeah, dry it
off on the towel. You're wearing a T shirt right
when you're shaving, Like, you're not wearing your fancy clothes
at least not me. Wipe it on the towel.
Speaker 1 (15:54):
It's on your ways unless you're James Bond shaving in
a tuxedo. Just yeah, give it a little quick try,
because that's going to give you more time, more shaves
with each razor that you use. So I've even seen
some folks say math that they get nine plus months.
Speaker 3 (16:09):
Out of a razor. I was meeting with my harys.
Really were you getting nine plus months? Well, that's briefly
talked about this like last year, a couple of years ago.
That's when I realized, well, and here's the thing though,
I never was nick and myself, so I was never bleeding,
so I didn't think that they were that they were dull,
But I realized after the fact, like once I finally
moved to the new razorhead, I was like, oh, this
is what it feels like when the razor actually cuts
(16:29):
the hair as opposed to like pull them all out,
which is which is what was happening. There's a whole
lot less hair.
Speaker 1 (16:34):
Tugging going on as I was shaving. So all right, hey,
we got more money saving information to get to.
Speaker 4 (16:41):
You're listening to How to Money with Joel Larsgard on
demand from KFI AM six forty if.
Speaker 3 (16:47):
You're on Facebook.
Speaker 1 (16:49):
By the way, you want to join a group of
like minded folks who have money questions, who have money insights,
please go join the how to Money Facebook group.
Speaker 3 (16:56):
All right, So we briefly mentioned the NAGA accounts element
of the big beautiful bill that barely passed the House
last week. The reason, or I would say, one of
the reasons there's so much focus on this is because
the tax cuts and jobs at will sunset at the
end of this year. That, in addition to the fact
that the GUP has rolled all of their they put
(17:17):
all their eggs in one basket, all the hopes of dreams.
This one basket is the BBB. Yeah, but let's discuss
a few of the other potential changes that would impact
your personal finances if it were to pass the Senate
and get signed into law. One of which is that
hsas could get even better, doubling the allowed annual contribution.
If that remains, that's going to mean you can funnel
even more money into that triple tax advantage account, which
(17:39):
is fantastic.
Speaker 1 (17:39):
And I think there was a change in the law
that basically said, oh, you can use your HSA for
more things in including a gym membership, which is kind
of cool. So HSA could be getting a heck of
a lot better soon.
Speaker 3 (17:51):
Then it begs a question, Okay, well, what if you
decide to implement your own gym at your own house
and therefore by equipment. Maybe maybe child tax credits would
be bumped from two thousand to twenty five hundred dollars.
Speaker 1 (18:02):
Per child, which makes me want to have more children.
Speaker 3 (18:04):
Yeah, there's a higher standard deduction for folks who are
sixty five and older, and the EV tax credit would
be repealed at the end of the year as well,
And there's of course plenty more that's included. But we
will continue to cover this as things move along or
not move along. Maybe as it gets sent back after
the Senate perhaps makes makes some changes as well, but
(18:25):
we'll keep folks posted well.
Speaker 1 (18:26):
Taxing different types of earnings differently is a big part
of the proposal too.
Speaker 3 (18:31):
It's right specif we like no.
Speaker 1 (18:32):
Tax on tips and overtime pay. That's not something that
we love though, and I think the domino effect of
this getting baked into tax policy could have annoying cast
gaming consequences, right, including more requests for tips. Think about
if you are an industry that thrives on tips. You're
gonna want to find a way to get customers to
(18:55):
funnel even more money in tips your way because they're
tax free dollars coming into your bank account. And so
I think it's it's just interesting that we're prioritizing or
saying that different ways you earn income will be taxed differently.
We already say that to a small extent, but we'd
be making that an even wider gap. And I just
(19:15):
I don't love the precedent that sets and on the
tipping thing. American's already frustrated by the frequency of tip
requests that we experience in modern day modern days, right,
and so how people are going to react individually to
being asked for more tips and then for bigger tips.
That's going to be interesting to watch because I feel
like we're already experiencing of a tipping rebellion happening right now.
Speaker 4 (19:37):
Man.
Speaker 1 (19:38):
I mean, I was buying a pizza the other night and.
Speaker 3 (19:41):
The check I was going to go pick it up.
Speaker 1 (19:43):
They're not delivering it, and check out They're like, hey,
do you want to do like a fifteen, twenty or
twenty five percent tip? And I was just shocked. That
felt pretty uncouth to even ask that. When I'm going
to pick the pizza up, It's different if you're delivering
it to me. And I think those are the kind
of things that a lot of Americas are just kind
of frustrated by with tipping culture right now, it's like
everybody's asking for a tip. That might only get worse
(20:06):
if the no tax on tips becomes a reality.
Speaker 3 (20:09):
Yeah, the Big Beautiful Bill also is going to have
an impact on student loans as well. The new plan
would be to take the alphabet soup of repayment plans
down to just two, which I would say would make
it easier to understand, but also it's going to make
it a bit less generous. And so essentially, the more
you borrow, the longer that you're going to have to
pay it back, up to twenty five years for folks
(20:31):
who are borrowing over one hundred thousand dollars, which we
would not recommend. By the way, the income based plan
ties your payment to a percentage of your income, so
basically a sliding scale that requires you to pay a
lot less if you make less. And the bill would
also eliminate subsidized student loans as well as forbearans and deferments,
which actually might not be necessary given the way the
(20:52):
income based plan is structured. So it's not necessarily perfect,
but student loan plans will be easier to understand in
the way that the structured could help camp down tuition inflation. Again,
whether or not this remains as it is currently written
after the Senate takes a look at it, that's of
course going to have an impact as to the implementation
of the new student loan rules moving forward, where.
Speaker 1 (21:15):
The kind of state and local deduction thing will land.
That's another thing that's that's like a really important piece
of this legislation, and that's kind of being battled right
now as well. So yeah, we'll keep our eyes on this,
and it is just fascinating to see that there's a
lot of changes that could really impact your finances and
your taxes in particular moving forward. So I'm sure we'll
(21:37):
have more discussions on this soon.
Speaker 3 (21:39):
Yeah, that's right.
Speaker 4 (21:40):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 3 (21:46):
Don't forget to sign up for the how to Money
newsletter over at how toomoney dot com.
Speaker 1 (21:50):
Slash newsletter. Matt let's get to a question from a listener.
She's asking about investing in target date funds. She's got
kind of a nuanced question on this.
Speaker 6 (22:00):
This is Bri from Illinois. I have a question about
my four oh one K I currently have it invested
in a target date fund where it says I'm going
to retire when I'm sixty four, but my current goals
are to retire when I'm fifty five and probably work
part time after I retire. I'm wondering if I should
switch my investments over to a target date fund of
(22:23):
retiring one i'm fifty five, or if I should just
keep it where it is. And if I'm switching it,
should I look at the market conditions and kind of
time it according to that I have a Fidelity account
and I'm thirty six years old. I really appreciate your feedback.
Speaker 3 (22:40):
Thanks all right, Bri, thank you so much for sending
your voice memo in and man target date funds. Let's
talk about them because they can be an excellent choice,
especially if you are with one of the low cost providers.
Fidelity specifically, they are one of those low cost providers
sort of here, and I'll explain why, because they offer
two different kinds of target date funds, one that is
(23:04):
actively managed and it actually comes with a much higher
expense ratio, and then another that is passive and is
index base. It's easy to get tripped up when you're
looking at those Fidelity target date funds, Matt, because they
both named incredibly similarly. Simply, I just wish they would.
Speaker 1 (23:21):
Change the branding on those so that people could understand
the difference. But you actually have to click through and
look at the expense ratio show you know you're looking
at the right.
Speaker 3 (23:28):
One, and it's I guess I don't want to completely
throw Fidelity under the bus. The actively managed fund, like
if you're a browser site and perusing it, is under
like the actively managed section, but the actual name of
the fund. They are both called Freedom like whatever, like
let's Freedom thirty five or whatever. But the one that
charges a much lower rate has Freedom let's say Freedom
(23:49):
Index twenty thirty five or whatever, as opposed to just
Freedom twenty thirty five. Make sure you choose the index
r the one with the index, because that the actively
managed comes with that. I mean, I think it's around
a half a percent higher expense at least that's associated
with that, So this is something like ten x higher expenses,
significant difference, So keep it out for that, or let's
(24:09):
talk about target date funds in general. And the point
really with the target date fund is, I don't know
matter if you remember those infomercials the Ron po Peal
rotisory cooker where he's like, set it and forget it,
and then he would yell that out and the crowd
would yell it back at him. I watched a lot
of infomercials when I was a kid class I loved participation. Yes,
(24:30):
so good.
Speaker 1 (24:31):
So that's what a target date fund is for most
people is like literally a simple choice and then you
never have to rethink it the rest of your life
and it will automatically, uh, you know, your dollar cost
averaging into that that one fund for life, and then
the holdings inside of that fund will change over time.
I think what I love about this, And maybe it's
(24:51):
because my brain power is already lacking in some ways,
but but what you have to bring to the town
experiencing cognitive decline, come on, it's coming. But like the
brain power you have to bring to this decision is minimal,
which we're all for. We talk about simplicity, Like, as
long as the choice is simple and you understand why
you're making the simple choice, that can be the best
(25:12):
move for you. Like you don't have to overcomplicate things.
All you gotta do is toss cash in regularly, and hey,
over the years, you'll see compounding returns. The only real
negative thing though, that I would have to say about
target date funds is to watch out for those high expenses,
right because the Fidelity funds that's one example of that.
But then also when you're talking about with other non
low cost brokerage firms, the expense ratios on target date
(25:35):
funds can be egregious and also just one of the
things they could be too conservative actually for younger investors,
so breed just know that one hundred percent stock portfolio
is likely to outperform a target date fund over decades.
So even if we're just talking about a target date
fund that's way off in the future, like twenty sixty
or twenty sixty five, exactly, that is less conservative, right
(26:00):
because you've got many decades until you reach retirement. Those
are still more conservative than an all stock portfolio. In
something like a total stock market or an S and
P five hundred index few.
Speaker 3 (26:10):
Totally and Bri is in her thirties. For younger investors,
they are not aggressive enough. You want that volatility, and
like even because not just because volatility is fun, but
because it leads to better it leads to higher returns. Yeah,
because you're exposing yourself to that volatility. And even if
you are looking at a target date fund with bond
exposure of like that's minimal, something like nine to fifteen percent,
(26:32):
that is still too bond heavy, at least in my
personal opinion. And yes, that tends to smooth out the
ride when that market volatility is high, but it also
reduces those returns over time. So for instance, vou vanguards
s and P five hundred ETF it has returned over
ninety percent over the past five years, while Vanguard's twenty
(26:53):
sixty five fund has returned sixty percent over that same time.
So to given a significant difference in.
Speaker 1 (27:00):
A given month or two, you might be talking about
negligible differences. But once you time expand that time horizon,
like you're saying even just five years, which in breeze
time horizon, like that's still not a whole lot of time,
the gap can grow significantly. It compounds in Matti I summer.
The first person who told me about investing basically praise
target date fund funds to the max, and so I
(27:23):
was like, okay, all right, target date funds must be
the way to go. And then I started doing my
research and I listened to more people, and I ended
up switching out of target day funds into like total
stock market type fund index funds.
Speaker 4 (27:35):
One.
Speaker 3 (27:35):
The cost are a little bit lower, but that wasn't
the real reason. It was.
Speaker 1 (27:38):
Hey, I think, especially given my age, I'm just too
conservative right now. Even though it feels like I don't
know the gap is maybe it's not significant, But in reality,
over the last ten years, I've done a whole lot
better by being invested in those index funds than I
have by being invested in a target date fund. If
I'd kept it the same, my net worth would be smaller.
So I think over the long more stock exposure is
(28:02):
good and you've got time on your side to endure
drawbacks without batting an eye. If you were let's say
fifty six, it'd be a different conversation. Let's talk about
let's get to the heart of breeze question though, mat
which target date fund is right for her, And you
might think that the answer is straightforward, and for most folks,
I would say it probably is. You're picking the target
date fund that has the date closest to when you're
(28:24):
likely to retire, because not long after you retire, you're
drawing down on those funds. But I'd also say this,
it's not just about when you're planning on quitting. It's
actually more about when you think you're going to need
the money you've been saving up, like when or are
you going to actually tap those funds? So just because
you quit your job, well, I don't know, you might
(28:44):
have other sources of income, just like Brie said, she said, Hey,
I'm going to probably be working part time. Let's say
you're a real estate investor. Well, yeah, are you actually
going to need to tap those funds, Brie when you
quit your main full time job or because you still
have income, are you going to be able to keep
investing even after you retire quote unquote from full time work.
So my guess is you're still going to prioritize investing
(29:07):
and growing those dollars at least to some degree. And
if so, I would likely go with something further off
like the twenty sixty five target date fund, so that
you're you are investing more aggressively because you're not actually
going to be withdrawing those funds.
Speaker 3 (29:24):
Immediately upon retirement.
Speaker 1 (29:26):
We're thinking about more your draw down timeline than like
you're I'm retiring from full time work date totally.
Speaker 3 (29:32):
And realize too that what we're actually recommending here is
for you to do the opposite of what it is
that you're asking, because you are currently set up to
retire at age I think you said sixty five, but
you're instead thinking about retiring at age fifty five, and
so what you're asking was that so she's like thirty six,
so she's saying about retiring in age fifty five, so
twenty years from now. So what you're considering moving too
(29:55):
is a twenty forty five fund, And so it sounds
like you're currently in a twenty fifty five fund and
you're like, Okay, should I move it to a twenty
forty five fund, But what we are actually recommending is
for you to definitely not do that, but to actually
do the opposite. Not to go from a twenty fifty
five to a twenty forty five, but to go from
a twenty fifty five fund to a twenty sixty five fund,
something that is or something that does have a longer
(30:17):
runway in order for you to have that exposure to
the stocks, which is going to lead to higher returns
for you. So that's I think that's the most important
thing here. Is Like, naturally you think, oh, I'm going
to retire early, therefore I need to be looking at
a fund that is targeted for that date. But especially
given your case, the fact that you're talking about this
(30:38):
only being a partial retirement, you don't necessarily you have
that flexibility to not tap those funds and for you
to essentially weather any any ups or downs in the
current market.
Speaker 1 (30:49):
And I do think that desire to retire early Matt
actually means you should probably be even more aggressive right
now because it means you're investing for an even longer
time horizon from a drawdown perspective. So instead of a
traditional like twenty five year retirement, so you retire sixty
five and you need that money until you're ninety, well
(31:11):
you might be talking Brie about a forty year retirement here.
Speaker 3 (31:14):
So I think the.
Speaker 1 (31:16):
Goal to grow your nest egg, well, it's even more
important in these years when you're farther away from needing
that money totally.
Speaker 3 (31:24):
Yeah. So, like as we're talking about risks, it's not
something that you want to completely take off the table.
You still want stock exposure in retirement, and in a
target date fund, you'll have roughly fifty percent stock exposure
once you hit that retirement date. Anyway, Interestingly enough, the
twenty fifty five and the twenty sixty five target date funds,
they actually look really similar right now if you compare
(31:45):
their portfolio allocations, almost the exact same. But that being said,
I think the twenty fifty five fund will get conservative
more quickly in the coming years. So I think this
is a case of horseshoes. You're not going to nail
it exactly, but I do think a twenty sixty five
fund will get you closer to where you want to go,
(32:06):
And if you do want to make any changes, I
think looking to more stock heavy options over the next
decade is probably the move that I would make. You
asked about timing the market, I wouldn't necessarily worry about that.
I would just continue to dollar cost average into the market.
If you are uncomfortable this is within a retirement account,
So you're not going to get taxed for you to
(32:26):
sell and so, but that being said, if you're uncomfortable
selling and moving in a different direction, maybe just future contributions,
put those towards the twenty sixty five or even at
twenty seventy fund.
Speaker 1 (32:37):
Yeah, that's exactly right. We've got a lot more to
get to on today's show. You've been listening to How
To Money with Joel Larsgard. You can always hear us
live on KFI AM six forty twelve pm to two
pm on Sunday, and anytime on demand on the iHeartRadio app.
Popular Podcasts
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.
The Clay Travis and Buck Sexton Show
The Clay Travis and Buck Sexton Show. Clay Travis and Buck Sexton tackle the biggest stories in news, politics and current events with intelligence and humor. From the border crisis, to the madness of cancel culture and far-left missteps, Clay and Buck guide listeners through the latest headlines and hot topics with fun and entertaining conversations and opinions.