Animal Spirits Podcast - Everything You Need to Know About Retirement (EP.168)

Episode Date: September 18, 2020

On this show we do a deep dive on everything retirement-related including how much you need to save, how much is enough, what happens when you get a late jump on retirement planning and much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

This episode of Animal Spirits is sponsored by Naviplan by Advocent. Built on the most precise calculation engine in the financial planning market, Naviplan empowers advisors to cater to their services to any client, from simple goals-based assessments to advance cashable planning analysis. To see how Naviplan helps model some of the concepts and strategies discussed on this episode, visit advicent.com backslash animal spirits. And also be sure to check out the show notes for both of our blogs, where Advicent has been producing some great videos that go along with these as companion pieces.

Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. Michael Battenick and Ben Carlson work for Ritt Holt's Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's Wealth Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. the clients of Ritthold's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben.

Why do you think scary retirement is a lot? I love it. Go ahead. That was kind of my Jiminy Glick, Martin Short. We all do this. That's part of the podcast. Your voice has to go up eight octaves to start. Why do I think what?

You know what's something people say on podcasts a lot? The new thing to say instead of it's a great question is, there's a lot to unpack here. There really is. So why don't we unpack what you're about to ask me? Why is it that scary retirement statistics don't do anything to help people save more? I know exactly why. Why? That's tomorrow's a problem.

Yeah. I mean, it is hard when you're 20 or 30 years old to think about yourself when you're 60s nearly impossible. So we always talk about the Seinfeld bit. What does he call? Today, Guy, Tomorrow guy? Yeah. You know, I don't respond anymore to the sale things that you used to see. Like, whenever I would ever see these things, I always usually around.

holiday time, you'll see no payments till March. You know, you know, how stupid do they think people are where they go, oh, March? It'll never be March, you know? Let the guy in March worry about it. I'm not going to worry about it. He'll have some money then. And I do that actually with my own body. You ever do this late at night and you're watching TV and I stay up late because I'm night guy. Getting up after five hours sleep? That's morning guy's problem. That's not my problem. I'm night guy. Night guy always screws morning gun. So these numbers are from the Federal Reserve. Can we trust these numbers? I hope so. This is a survey of consumer finance data, so I'm always usually pretty good. These are as of 2016, so things might be a little better. The median retirement

savings for someone in the 56 to 61 age range was $21,000. What this means is half of all people in the age range of 56 to 61 have less than $21,000 saved for retirement. If you go down to the 50 to 55 age range, it's like $10,000. So less than half of people have $10,000 saved for retirement. I think it's very simple. I think people generally aren't great savers. I think that's part of it. But I think the real reason people don't have a lot of money is because most people don't make a lot of money. I don't think it's that complicated. If you're making $70,000 a year and you have a family of four, there's not that much fat to cut. It's hard to save. I think today, more than ever, it's probably hard to save. There's a lot of things going against

you. First thing is, people are living longer. You have to save more money to plan for a longer retirement. In the past, people's retirement plan was, I'm going to die. There was no retirement plan. So this is from that Robert Gordon book. The rise and fall of America? Yeah, the rise and fall of American growth. And he said the labor force participation rate in 1870 was 88% for those in the 65 to 75A group. Anyone who lived in their 80s, more than the rise in their 80s, more than that than half of them still worked. Your retirement plan was death. So yeah. So people didn't plan for retirement in the past, even if they did live to old age, if not as many people did back then. What about, does you have it like in 1950? Yeah, it grows from there. But even then, in the past,

I mean, our grandparents were planning for what a 10 to 20 year retirement at this stage. If you're retiring at 60, you could live for a very long time. So one of the stats from the Social Security said a couple of retiring today at age 65 has a 50% chance of at least one of them living to 92. So you just have a longer time here, and we don't have very good role models. So our grandparents' generation, a lot of them had pensions that they could rely on. So what do we have one generation to look at that's really had to prepare for retirement kind of on their own? Who's that our parents? Yeah, I'd say the baby boomers are probably the first one that have more or less been on their own. Correct. I forget the study, but we spoke about this in the past

that there's like a myth that everybody used to have a pension. Obviously, pensions have all but disappeared. But I think it was, was it one in seven workers? It was hardly everybody. I forget what the numbers were. Yeah, it's not as big as people assume. And the ones that did have it, it didn't cover their full retirement. It was bigger than it is today. We have in 1975, 22 percent of older received income from a pension. It peaked in 1990, 1982 at 38 percent of people. Oh, wow. That is pretty high. Okay. So it's higher than it is today, but that's not everyone. You throw on that everyone term. So actually, for most people, their pension plan is Social Security. So we say half of people have less than $21,000 saved for retirement. I think

the number is half of all senior citizens get 50% of their income from Social Security. And around 25% of them rely exclusively on Social Security. So around a quarter of seniors today. Is it just going to permanently be the fact that the next generation, takes care of the last one. So our grandparents, their retirement plans, was either Social Security, pension, and I guess some of them made money. But a lot of grandparents these days are in assisted living homes and who takes care of that? They're kids. What else is the answer? Yeah, pretty much. For a lot of people, there is no answer. Older people, their kids can't financially bear the burden. So this is definitely one of the big topics. Like, how do we take care of older people

with no money. Yeah, for sure. And I think for other people, there is a cohort who's never going to be able to save that. I think that's always going to be the case. I don't know what percentage of the population is, but it's true. For other people, I think for some of them, either it's too far into the future to care, especially when you're young, or there's just so many uncertainties involved that people get overwhelmed. So it could be the number of fun choices in the workplace retirement plan or the fact that how much should I save and how long do I need to save and how long I'm going to work and what's Social Security to be and what are my taxes going to be. and I think people get bogged down in all the minutia and then they just don't do anything. I'll figure it out later. I don't want to deal with it now because it's an easy problem to push off. So I think there is some of that too. And what's scary is I gave a stat a few years ago. I think the median retirement balance today could have been accomplished by investing. I forget the exact number, $6 a month. So it wasn't because people were poor investors. It's because people didn't save. And again, I'm not wagging my finger at them.

For a lot of people, saving is just never in the cards, depending on how much money you make. That's the thing. If you look at what the returns have been for the past 40 years, in U.S. stocks and bonds, they've been phenomenal. And we still have a retirement crisis. So guess what? It's not the investing side of the equation that matters as much as the personal finance side and getting people to save or somehow helping people to save and maybe even forcing them to save. Let's talk about that. We'll get into the whole, how do you even nudge people? But when do you think is a good time to start planning for your future? I know the obvious answer, but let's go beyond like the just contributing to your 401K. That's the place to start.

I think when you're first starting out and you aren't just entering the workforce, I think the most important thing you can do, don't even think about planning for how much you're going to need and what percentage of your portfolio you're going to draw down. Like, who cares about that stuff? Because it's meaningless at this point. Just start saving whatever you can. It could be $25 a month or $50 a month or $100 a month, whatever. I think you just have to start developing those habits and giving yourself small wins.

so you slowly start to just see progress. That's all I would do is just slowly ramp it up. And would you say at that point when you're beginning, the investment choices that you're making are almost besides the point? Right. As long as you start those habits and get into a good saving frame of reference, your investment strategy can evolve over time. And for most people, the default option for a 401k now is a target date fund. And I think those are one of the biggest leaps forward that we've made for the individual investor in terms of making that a default option. And I think it is for something like 80 or 90% of 401Ks now that if you make no selection, they will opt you into a target date fund.

And I think just giving you a diversified, low cost mix of funds, I think is a win. Have you gone through the planning process yet with any of our advisors? Have you done that? For me personally? Yeah. No, not specifically. I have specific questions, but I haven't done through the whole planning process. I did that a year or two ago with Bill Sweet.

It was cool. obviously the projections are completely bogus because I'm 35 years old. We're projecting out 30, 40, 50, 60 years and beyond. But it's nice to at least see a path. And all of the assumptions that you make, whether it's your savings, your investment returns, the great thing about having a plan is that you can go back and expected returns turn into actual returns and then you could adjust if necessary. So here's something I did at like age 30. And this is not something that I recommend everyone do, but I put in some assumptions for if I save X percent of my money of my income and I see returns in A, B, or C path, here's what my balance will look like

at age 33 and 35 and whatever. A is Nicola, B or the Q's, and C is a triple lever in SPY. Yeah, but then, like you said, then you update based on actual information and what's happened and you say, I'm either doing better off or worse off than I thought based on reality, because is anytime you punch up a retirement calculator and you say, I'm going to earn 7% a year, it shows you what happens if you earn 7% in and out every year, which is not what happens. So it's never going to work that simply. And so you just have to update as you go. And that's why the initial plan is useless.

It's the process of continuously planning that is helpful. And so just updating your priorities as you go. One of the nudges that we spoke about a few years ago, and I'm going to have a hard time tracking this down. but I think there was a study done by the University of Michigan that showed people a version of themselves aged 30, 40 years. And that helped to nudge them to retirement. Because, again, the idea of taking care of yourself 30 years to now, it's just a hard concept to wrap your arms around. If you look at an older picture of yourself, they age you. The other thing is, and I was reading this in the recent Vanguard every year puts out this, How America Saves Report, because

they manage as a plan sponsor $1.3 trillion in 401K plans. And it's always a really good report. Even though employers aren't providing pensions anymore, they can still help. So they showed if you have automatic enrollment into a plan, your savings rate for your employees is 56% higher than if you don't. So people have to opt out of it instead of opting in because it's so hard to opt out. You've seen a lot of those studies from Richard Thaler and people like that. And they showed even for younger people who don't make a lot of money, so they found employees under the age of 35 who make less than $50,000 a year have a savings rate that's twice as high as people who aren't auto-enrolled. So just simply putting those people in. So let's say your

company offers the basic match for 401k is you put in 6% and we'll match 50 cents in the dollar, so we'll give me 3%. Right there, you get a 9% savings rate, which is pretty good. That's got to be above average for most people. But if someone is trying to set that, what would you say is a decent target goal for your savings rate, even if you can't reach that right away? Throwing out the fire people that try for 50 or 70% of their income. I don't know. It's 10% a reasonable number? I think my goal for people is always double digits. If you can get double digit savings rate for retirement, I think you're doing better than the average person by far. And if you count the company match in there, if you can get it to double

digits, I think that's a huge win for people. I think that's a good goal. So it has to be automated. We said this before. You're never going to save what's left over. You have to spend what's left over. Yes, exactly. You have to save first. That's like the best part about, and unfortunately not everyone has access to a 401k plan. I think that's the best thing about it is it's convenient. So that money never actually hits your paycheck. If you put a 10% savings rate, that's 10% is taken off just like taxes right off the top and you never even see it hit your checking account. So I think that's one of the best parts about those plans. One of the big questions, unanswerable question, But a good question to ask is, how much is enough?

Yeah, that's certainly impossible. This isn't one of those questions he asked, well, I have $3 million. This is for everyone. Like, are you talking about in the planning stages of how much should I even plan for? Because there's health care costs to think about and how long I'm going to live. And so those are the unanswerables. But I think a lot of it has to do with your lifestyle. If you think about it this way, I like to back into this, like an invert.

So if you have a high savings rate, you're going to have to replace less income in retirement. So the higher you save now, the less you're spending and thus the less you're going to have to replace because people try to figure out what's my replacement going to have to be from my portfolio. So I think that's one way to think about it. I mean, the other way to think is how much debt do you have is your mortgage can be paid off by the time you retire. I think there's all these questions you have to ask yourself before even coming up with anything close to approaching a number and then what your standard of living is and how much you spend? So for me personally, at 35 years old, how the hell do I know? what my lifestyle is going to be in 30 years, how much I'm traveling, how much I'm spending, whatever, whatever. But I think the point is that you don't need to have a specific number. I guess you just have to have a sort of loose target. And again, the closer you get there, like at age 50, I'll have a much better idea what my goals are at age 65 than I do today. But this is why it's important to at least have some sort of loose plan in place and strive towards some goal, even if it's not a specific hard number.

Right. Think about how much your priorities have changed just from having kids. Oh, my God. Yeah, of course. Well, at 35, I'm supposed to have two times my salary saved according to... So this was from a fidelity study that was put out a few years ago that really made everyone mad. And they said, they gave an idea of... I'm still pissed. At age 30, you're supposed to have saved one times your salary? How? They also said at 50 years, supposed to have six times. And then at 67, their goal is 10 times your salary. How many self-help tweets do you need to send a day to have two times your salary at age 35? And I actually think for most people, it's probably more realistic to save later in life.

So the BLS actually put this together. They put this together for every age group. So they did 25 to 34, 35 to 44, and they broke it up in 10-year increments all the way up to 75 and older. And they found they not only did income, but they found expenditures too. And J.P. Morgan did something similar. And they found that your peak spending years for expenditures, this is across the whole United States, is 45 to 54. And then actually your spending goes down. if something like healthcare goes up, you figure the older you get, eventually you're not going

able to travel and spend as much. So you're going to be, even in retirement, your consumption is going down. Well, let me ask you a question. So this is great information to have. And I think you should probably assume that you're going to be like most people. Your spending habits are going to fall in those ranges. How realistic is it for the average person to sit down and do this on their own. Certainly, like, there are absolutely people that are analytical, that are number oriented, that are planning focused, that can 100% do it on their own. But for the average person, can we really expect them to do this? Well, that's another reason why this is so difficult for people. It's like, you can't learn from mistakes on this. And you can't go back and say, all right, now this time

I'm going to save it at age 25, even though I didn't do it the first time, because you get one shot at this. So if you don't start saving early and you realize at age 45, I have not planned for retirement enough, you have to play catch-up. So William Bernstein- Well, hold on. Before we get there, I think that the good news is that we've spoken a lot about the challenge that investors have going forward with not cheap stocks around the world, certainly the United States, with low interest rates and bonds. It's just going to be hard to play catch-up on the investing side, unless you're knocking it out of the park with specs and whatnot. But the good news is that there are more pieces of software for personal finance than there have ever been, obviously, whether it's mint or better mint or

personal capital or whatever. There are so many tools that the person who I just mentioned that might not be super analytical to open up a spreadsheet and do it on their own, there are so many tools they could use today to start. You can open an account in five minutes on your computer or on your phone, whereas in the past you would have had to go to someone's office and fill out a bunch of paperwork. So the barriers to entry to saving today are much, much lower. And it's much easier to automate these things. And you can auto-escalate your savings in your 401k overtime. You can automatically rebalance your portfolio. You can do automatic contributions. That stuff just wasn't really available to people in the past. So all those things, you can take so many decisions out

of your own hand today. And that is a huge part of it. It's just getting started. And so wouldn't you say that's one of the big regrets that people will always have in their 50s or something is I wish I would have started saving earlier. So in one of his books, William Bernstein said, he talked about his goal is at least 10% of your salary should be saving. So he says, each dollar you do not save at 25 will mean two inflation adjust to dollars that you would need to save if you start at 35, four if you begin at 45 and eight if you start at 55. Since a 25 year old should be saving at least 10% of his or her salary, this means that a 45 year old will need to save nearly half of his or her salary. Again, to reach some 25 times whatever goal that's probably impossible for a lot

people. But that's just the idea of how important it is. Even with small amounts of money, even if you're not making a lot, it can have a huge difference because the compounding all comes at the end for people. So my dad used to tell me about compound interest. My dad was a dentist. He doesn't know anything about finance. But he used to tell me about that. And by the way, I didn't save any money as a young person, probably because I didn't have a job. I had no income. But how do you get a young person? How do you get that to sink in? I think it's tough. I think it either grabs you or it doesn't. Yeah, probably. And that's why I think you just have to help someone automate it and turn it on once and then forget about it. I think that's the thing for,

because a lot of people are never going to compare about all the planning details and they'll just constantly say I'll figure it out later. But the one thing you can do is just set up everything once. There's like the Peter Drucker line, why make a hundred little decisions when we can make one big one? So make that one big decision first and then figure the other stuff out later. Just start saving. That's the biggest part of it. I saw this thing. I was poking around London. club this morning. And I saw this piece of software. I haven't checked it out. So whatever, but it's called trim. And the idea is that they'll lower your internet cable and phone bills and other stuff. So they will look at, I guess, what your bills are and somehow negotiate for you. I don't know if it

works or not. But to me, that sounds so cool. Obviously, this had did not exist for previous generations. This is just one example. There's a million things like this out there. Right. The choices are nearly endless, which is double-edged sword, but there's a lot of other options on the personal and especially when you're first starting saving, probably for your first decade or two, the biggest growth you're going to see in your portfolio is not from your investment returns. It's from your saving. It's from the amount you put in every year. So even though that's not performance, quote unquote, but it is how you grow your balance over time because it takes a couple decades for compound and you actually do anything for you. So for those

people who do get a late start, and obviously there's a lot of them, and I can definitely empathize, especially for people who have kids and want to spend their money on kids. But I think where you can really play catch-up is, let's say you're in that 45 to 50 range and you finally have kids out of the house and hopefully off your payroll because they've gone through college. Isn't that the time that you supercharge your savings because the kids are out of the house? And so for a lot of people who have put it off and put it off and maybe done a little bit and not enough. You can get the catch-up provision. So the 401k, I think, gives you an extra $6,500 a year. IRA, you can do an extra $1,000 in catch-up. Isn't that the time

where, again, your savings rate is going to matter even more than how much risk you take? And I'm sure there are probably going to be a lot of people who decide, okay, I've waited too long. Now I need to Robin Hood this thing and try to shoot the moon. But again, I think the biggest thing of that stage is just really ramping up your savings, even if you're doing it later in life. Yeah, I think there's probably a ton of people in that category. And if you can't do that, unfortunately, especially for everyone in the middle class, housing is going to play a huge role for people because that's just their biggest financial asset. Hang on. Sorry, before we just get to the housing part, I think you mentioned this briefly,

but one of the probably really dangerous things is that on top of supercharging their savings, which is doable, they probably do try to shoot the lights out. I want to say they, I'm sure this is a small percentage of people that do this. But it's very easy. and understandable, how people that feel left behind can be like, you know what, I'm going to take a shot. I'm going to start trading options and being more speculative. The other thing is it's going to be people that are going to have to work longer. So Charlie Ellis wrote this book a few years ago that was pretty good. It's called Falling Short, the Coming Retirement Crisis. And he did a study where he looked at what the savings rate required would be to have a 75% replacement rate. So

replacing 75% your income. And he looked at, he said, basically, starting at age 25, rather than 45 cuts the annual required savings rate by about two-thirds. Or on the other side, delaying retirement from 62 to 70 reduces the annual savings rate by more than two-thirds as well. So if you didn't start earlier, guess what? You're probably going to have to work longer, but you get a double whammy there of it allows you to maybe put off Social Security for longer, which grows the balance of that. It allows you to save more money, and it allows your money to compound more because you're both putting more in and you're not taking it out. So that's probably not a great, not something people want to hear, but that's probably what the alternative is

going to be to work longer because people are living longer. So there are solutions that just for some people, it might not be what they want to hear. Well, let's talk about just like this retirement concept. Do you think that you're going to turn it off one day? No. I'll probably be blogging until I'm 95. I don't know. I think that a lot of people, a lot of young people do say that. Oh, I'm never going to retire. How the hell do you know what you're going to feel like in 30 years? Like right now, do I want to retire ever? No, I'm 35. How do I know how I'm going to feel when I'm 65? Right. But yeah, you don't know what your body or your brain is going to do or what your employer's going to do. Maybe at 65, your employer says, you have one of the highest salaries here, we're getting

rid of you. So you could have no choice but to stop working through no fault of your own. So it is a good plan, but it might not, it's one of those things that might not follow the path you think it's going to. Didn't Rick Edelman say something along the lines of with people's life expectancy continuing to increase that people are going to have like multiple careers and are just going to be forced to reinvent themselves and work longer than they expected to? Yeah, but don't you think most people when they get to that age, though, they go the other way and want to retire earlier? So my dad, I think his whole plan all along was worked to 65 or 67 and then all of a sudden one year out of nowhere, he said, I'm retiring. He was 61 years old. Surprise us all and said,

I've had it. When I have enough money, I'm out. And he just stops cold turkey. So I think more people probably when they get to that age think in those terms than the other way around, even though it is easy to say when you're young and have a lot of energy that I'll work until I'm 80. If you told your dad when he was 51 that he was going to retire when he was 61, he would have said, nah. Right. Exactly. Yeah. And then we just don't know because one of the things that can happen is you're getting ready to retire and a bear market comes along and completely changes your plans. Yeah, so a lot of it comes down to timing and timing luck and what your returns were.

And so unfortunately, if a lot of people, it is, it's kind of luck of the draw. Why don't we talk about sequence of return risk? Okay. So this gets into everyone's favorite thing in terms of retirement planning for all the nerds. This is kind of the other side of it. So I actually got an interesting email from someone recently who said, I appreciate all your thoughts on personal finance and saving and the importance of saving. And he said, you know.

Is there a butt coming? No, no, no. He just said, I figured all that stuff out pretty early, and I actually was a diligent saver, probably frugal to a fault. I saved enough money. My wife and I have more than we could ever need. I can't turn it around the other way and become a spender. And I think for some people, that is a hard way to think about things in terms of the accumulation phase is fine. Now what? And I think that there's going to be a lot of baby boomers who hit that phase in terms of financial advice and go, okay, setting aside whatever percentage of my salary was easy, I put it in the stock. market or a 60, 40 portfolio or whatever. And now I have this pile of money. Now what do I do with it? There's taxes to think about how much can I spend, how much I'm going to spend on health care, all this other stuff. You're going from an accumulator to a consumer. Yes, totally. That's a hard battleship to turn around. What percentage of the population is so fortunate that they need to be convinced that they could spend their money? I don't know, but it's certainly part of it. So I don't know. You can't please everyone, I suppose.

and everyone else, they're going to have to do something with their home. So the middle class, the majority of their financial assets, so 80% of the population has their home makes up 65% of their financial assets. So, I mean, I don't know, go long, reverse mortgages in the coming years because that's the kind of stuff where people are going to have to tap their equity somehow if they don't have enough money saved. Yeah, I think that's the obvious gap between work and running out of money. I get questions all the time from people asking, should I do the CFA or the CFP? And I guess a lot of it depends on what you want to do. But I just think the need for financial advice in the years ahead is going to explode with

a number of baby boomers we have that have some money or financial assets and are going to need advice on what to do with it. Don't you think that's just going to be, continue to be an issue for the years ahead? Yeah. Am I going to be okay? Can I buy this vacation home? Can I take this trip? Can I Buy an RV. That's the question. Am I going to be okay? That's why people pay for financial advice. True. And there never is a yes, 100% you're going to be okay because we don't know what's going to happen. But you can look at a range of outcomes and give people either, no, you need to work for five more years. You're not even close to reaching your goals. Or you know what? Yeah, you can probably retire. You're a pretty good shot of doing this and you've definitely accumulated enough assets. So that's part of it too.

Let's talk about the 4% rule. This is basically the rule of thumb. that once you retire, you should comfortably be able to spend 4% of your portfolio and not run out of money. Thoughts? The 4% rule is to retirement planning as the 6040 portfolio is to portfolio management in that it's something people love to argue about, but no one in the world actually does it and follows it to the letter of the law. I think you're right. I think it's a good concept. It's a good starting point. Unrealistic because I don't think basically that's saying that you need to get to what, 25 times your salary? Good luck with that. Yeah, 25 times your expenses because backing that out, that's 4%. So that's the idea of thinking about it. But that's after

you include social security income and maybe any pension income in there. So take that out. But that's the idea. And the idea is over 30 years. If you started off with 4%, and then you increased it by the rate of inflation, then you should have a hard time running out of money. And even in the worst case scenarios, this thing has worked pretty good. I've done the numbers on this starting in, you know, what if you retired in 1929 or 1973 or even 2000, even it hasn't been 30 years yet. Honestly, most of the time, you actually end up with a higher balance the majority of the time than you would have going in because guess what, most of the time financial assets go up over time.

Where is the spot where you get to the danger zone? Is that 6%, 7%. Yeah, that's pretty high. Well, then the other danger zone is the timing of the sequence of your return risk. So if you retire and you have most of your money in stocks, And you have a bare market and you're trying to spend that money. You're behind April twice now. So a lot of it depends what your portfolio looks like. Don't you think that that's still one of the, that's still one of the reasons to own bonds? People say, why do I own bonds?

Yeah. Like for a retiree, yeah, it's really unfortunate that you're not going to be getting anything from bonds, anything much at this point. However, if you're living on your portfolio and you're drawing it down in a bare market in March of 2020, you're like pouring gasoline on the fire in reverse. You can't get that money back. You sent me a podcast to listen to yesterday with Corey Hofstein and the guy on the other end of the podcast. What was his name?

Chris Sidial. He actually said he thinks in the coming years, I didn't think about this. Because yields are so low, target date funds are actually going to have to increase their exposure to equities. I never really considered, but I think that's a real possibility. So obviously those low yields for current retirees is one of the biggest problems. I mean, don't you think if 10-year treasury bonds were paying 5%, how many more people would have their money just flooding into bonds these days. Millions. Right. So unfortunately, you have to invest in the markets as they are. Tens of millions. That makes it a little harder. Oh, wait. Let me ask

a question. While I'm on that topic, what was that number that I actually was proven it is a real number? How many people retire every day? 10,000 baby boomers retire every day. That's a real number. I called bullshit, but apparently it's accurate. Yeah, because there's 70 million plus baby boomers. So over a 19 year period, there's technically probably going to be 10,000 retiring every day. So from an investing standpoint, that's a difficult position to be in as a retiree when you have no yield whatsoever to speak up right now. So people are either going to be forced to take more risk, forced to work longer, forced to save more, or forced to cut back on their lifestyle in retirement. There's really no other option. The key thing that you keep saying

is forced to. That's real. Yeah, it is. Unfortunately, unless you have so much money that you could do whatever you want, you are going to have to make tough decisions. There is no moving to the beach and living off the interest anymore. Unless you move to, what was that a couple that emailed you a few years ago? Where did they move? Latin America. South America. And they found the cost of living was so much lower there.

That was their way to make their money work last longer for them. I believe the fire people call that geographic arbitrage. Yeah. That's a good one. So, yeah, I guess looking at it through the lens of who has it harder, a young person, who has all these uncertainties facing them and doesn't know where to start versus an older person who has way more in financial assets but has no yield to take on right now. I mean, don't you think it's much, much harder for the older person because they actually have to deal with the here

and now and actually start making some tough decisions where the young person still has much more time to have course corrections and adjust and make changes and moves as they see fit. Without a doubt. So speaking of young people, we're young. We are a long, long time. away from collecting social security. Are we still going to be podcasting when we're collecting social security? That's possible. Yeah. At that point, Spotify is going to be paying our social security or something. Is social security going to be there? Is what I'm getting at? Yeah, I've talked about this. It'll be there in some form. But I mean, if you were a young person and you planned your finances for having it not be there, are you going to be a better place? Yeah.

Great. Probably. But again, that's something that a lot of retirees are going to have to use as the main source of income, probably, going forward. Any books on the topic? You mentioned the Charlie Ellis one. That's more of a macro. That's not like a how-to book. Any books on saving for retirement that you would recommend to either new investors, older investors?

Best one I always tell for younger people is I will teach you be rich by Ramit Sati. I think that's just getting started. And his whole thing is not getting into the minutia. It's getting the big stuff right. So I think if you can get like three or four big things right, You're fine. I think if you can get a double-digit savings percentage, right, boom, you're good. That's it. I'm with you. I think that focus on your savings and automate your savings. And if you could save 10% for your entire career, you're going to be in a pretty good place. If you're getting to the point where you're debating the tax minutia of, should I use a Roth 401K or a traditional 401K?

Yeah, you already won. Yeah, you've already won. If you're trying to figure out, well, should I have 10% in small cap value or 5% or negative 13% these. days, I guess. Then, yeah, you're doing way better. So if you get the big stuff right, that gets you 90% of the way there, I think you're doing okay. And especially for young people, it's the only thing that matters is start saving now. That's it. All right. Advicent has been doing great videos on these evergreen topics that we've been recording. We'll throw the video up on our sites. Thank you very much for listening. Animal Spiritspod at gmail.com and we'll see you on Wednesday.

You know,