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Untucked Episode 91

Click here to listen to our discussion about bonds, their performance, and their place in your investment plan.

Click here to listen to the full Untucked Episode 91. You can also listen on Apple, Spotify or Google podcasts.

Ep 91 Bond Market

Meghan Tait: [00:00:00] Um, so today we’re going to talk about an article written by Ben Carlson, um, who has a blog called The Wealth of Common Sense. The article’s titled, The Worst Bond Bear Market in History. Um, with long term bonds in a nearly three year decline, we’ve often gotten asked, specifically this year, why we continue to own them.

Today we want to discuss the reality of bonds, their relationship to interest rates, and why certain, why certain investors should continue to

Jeff Mastronardo: own them. So I was kind of Interested in this topic because I’m just I’m not tired of it. I’m just I guess tired of it I’m tired of getting the question from clients like bonds are so bad They’ve been and that’s and that’s very recency bias.

Like they’ve been so bad the last 24 months Or 18 months or however, whatever the time frame is like, why do we even have them? Like what are we doing? Shouldn’t we get out of them because I don’t see any hope for them in the near future And I happened to be in a client [00:01:00] account yesterday and I looked at one of like that aggregate bond funds or just kind of a total market bond fund or something or an intermediate term bond fund.

And I saw that in the cost basis it was down like 15%. I’m like, wow, that’s a lot. And I went back to see when it was purchased. I’m like, oh my God, it was bought in 2014. It’s like almost 10 years ago and it’s negative 15. But then I realized all dividends, all interest were reinvested over that time. So.

It’s really not down 15%. I didn’t go back to add up all the interest, but bonds pay interest every month. So I mean, that fund is definitely up. Bonds are definitely up over that decade, right? You would imagine. I haven’t like done, done the research in the back, like I haven’t gone back, but over the last 10 years.

Bonds are positive.

Mike Traynor: Total return, yeah. Just because you gotta count the interest. Sure. So

Jeff Mastronardo: total return bonds are up. And we’re in this time frame now where interest rates have [00:02:00] skyrocketed which drove bond values way down. So they’re at losses from when you bought them if you bought them a year and a half ago.

So is now the time to get out? Get rid of bonds? And just park your money in a 5 percent money market instead of bonds? Okay, so

Mike Traynor: I would say no, uh, because, you know, interest rates are going to go up. Interest rates are going to go down. It’s the most common thing that people, a lot of people say. They have conviction in what interest rates are going to do and there is nothing more unpredictable than interest rates.

Literally, it’s the hardest thing to predict. Professional, amateur, or anything else. There’s so many factors that go into what drives interest rates up or down. Um, and the reason to own bonds is not whether they’re recently up or down. It’s because they are the counterbalance, [00:03:00] typically, to stocks in a balanced portfolio.

If that’s what you believe in, that’s what you do. Um, most times when stocks go one way, bonds go the other, or don’t go. Anywhere or vice versa. And that’s, that’s the whole point of having it’s diversification, et cetera, et cetera. Um,

Jeff Mastronardo: Lots of

Mike Traynor: people will just take what happened to your point about recency bias, observe that interest rates have gone up and just say, well, they’re going to continue to go up.

So bonds are going to continue to go down. So why do we have, um, If and when the opposite happens. For whatever the reasons. And you own bonds, you’re going to be pretty happy because interest rates go down. Bond prices go up just like they went down. That’s just math. So to me, it’s just that simple. Um, it’s not at all about looking at what has recently done what you would do the same thing with stocks.

You don’t say, well, stocks have [00:04:00] been shit for the last 18 months. So why do we have them? Right?

Jeff Mastronardo: Well, let me, let me ask you this. If bond, if interest rates stayed exactly where they are now for the next three years, wouldn’t you get higher than money market yields on bonds? Yeah.

Mike Traynor: If you own… So that’s why you own them.

If you own… Again, I guess the answer is it depends because it depends on what the… You know, what longer term bonds are paying versus intermediate or

Jeff Mastronardo: short or whatever.

Mike Traynor: But generally speaking, yes. Especially if you have like corporate bonds that are paying hard. Like, so yes. You

Jeff Mastronardo: can’t hold a money market at 5 percent and then take risk by taking debt in a company and get paid less over a longer period of time.

Correct. It just can’t happen. The market doesn’t work that way. Right. And I just don’t understand why people don’t understand that. Am I just blinded by… They’re like our, our, our clients and investors emotion. I

Meghan Tait: not blind. I don’t think you’re [00:05:00] blinded. I think they’re looking at their bank paying five and then they see the performance of their, the bond portion of their account being off.

And it’s like, why wouldn’t I just swap them? Right. Why wouldn’t we just do that instead? I don’t

Jeff Mastronardo: think you’re blinded by anything. I guess I’m feeling this way because I really never had to feel this way before. Like over the last 20 years, if money markets were paying 5, you obviously wouldn’t sell your stocks to go there because over the long term stocks are going to do better.

Right. There’s no question they’re going to outperform money markets. And bonds have always kind of held up over the last 20 years because interest rates went down. And I’ve never had to really defend them. Until until today.

Meghan Tait: Yeah, but then just remember all of the other factors at play today, which again, I would argue I’ve always been in some version of themselves, but people are [00:06:00] nervous and scared and there’s uncertainty.

And I think it’s just there’s an element of right money, market funds, banking products that. Provides assurance. So I think it’s more psychological capital than anything. So you’re saying I haven’t had to defend them I don’t know that it’s bonds specifically, right? It was stocks last year. It’s like I can go get five at in safe money Right.

I don’t, I don’t know if I can tolerate the, the ups and downs in the volatility. And I think that’s, at least in my, that’s more so what I’m, what I’m dealing with or what I’m hearing.

Jeff Mastronardo: And I think it just takes time for people to start, if they even pay attention to it, which I would say 80 percent of investors don’t.

Like if you have half your money in bonds and you grab your year end statement this year and you look at the, the total income generated in your, in your account, it’s significant. Right? Like you have a high yield from those, from the bonds that you own. So I think it might just take time for people to [00:07:00] start realizing that, that they, they do pay interest instead of just looking at, you know, the value and how that’s changed.

Yeah, I agree. Yeah. And I think

Mike Traynor: the problem was last year still, which was unprecedented in so many ways in which stocks were down anywhere from 10

to 30, depending on what kind of stocks. And then bonds were down, you know, 10 to 15. Yeah. Never happened before. That’s a, that’s hard to take. Especially for people who expect the, what normally happens to happen, which is that, Oh, well at least the bond like 2008 bonds held their held serve while stocks got pummeled.

That didn’t happen this

Jeff Mastronardo: time. So last year, like. Um, we, we said that it was kind of like, it’s never happened before to that degree. And it was to that, to that, a length of time, because obviously stocks and bonds move the same way a lot of times, but never for that long of a [00:08:00] duration. Is that correct? And that’s severe.

Yeah.

Mike Traynor: The double digit declines in both asset classes is just like unheard of.

Jeff Mastronardo: So now is when like all the articles start cropping up that like 60 40 is dead balance portfolios are dead because that’s like. It’s so easy to pick on that at this point. We all kind of disagree with that, that that stuff is dead.

Yeah. Yeah. And like every other conversation that we’ve had when it was the other way around, when people were questioning stocks, my follow up question, after I defend bonds, when people say, should we get out of bonds? I defend why we want to keep them, but then say, like, what else would we do? Like, what else are people looking for?

You know what? Yep, we should get out of bonds and we should, um, use an income. Our income play and our safe play is going to now be Bitcoin. Like, it can’t be stocks because now you’re just 100 percent stocks. You can’t park it in cash because then you’re going to miss the run up of bonds if [00:09:00] and when interest rates go down.

And over the next 3 years or 4 years or 5 years you’ll probably be worse off sitting in cash. Yeah, because some

Mike Traynor: people would say, well then why do we, if cash is paying 5, Sell all the bonds and just have everything in cash and stocks. That’s great. So long as nothing changes and what you just said would be the good example.

If interest rates go from, I’m using round numbers, they go from five to two. Well, now your money market’s paying two and the bonds that you ditched have appreciated significantly and you missed

Jeff Mastronardo: all of it. So I’m going to play devil’s advocate. I’m the advisor. I’m the, or I’m the client. I’m the investor.

I’m going to say to you, I’m going to just keep it all at 5%, and when the Fed meets, if they raise it 25 basis points, then we’ll, or if they drop the interest rates, 25 basis points, I’ll jump. We’ll jump back in bonds then nine times out of 10. If you go to the client and say, Hey, they dropped points, uh, interest rates, 25 basis points.

Let’s go do that bond move that you talked about. What are they going to [00:10:00] say? No, no, no.

Meghan Tait: I’m getting five on

Jeff Mastronardo: my mind. They’re not going to do it. So you’re going to, and, and then you have to have faith that they’re going to continue to cut. Rates, which who knows?

Mike Traynor: Yeah, it’s again, the most unpredictable thing, no matter how many, how confident people are in writing about it and talking about it.

It’s silly to try to predict the direction of interest rates in the short or intermediate term. In my opinion,

Jeff Mastronardo: it all comes back to like, investing is boring. Just pick your strategy. Stick with it. Don’t change it. Like unless something. Unless someone figures it out and there is some formula that comes along that solves the mystery of What’s going to happen in the future?

But today like no one’s figured it out Yeah, people just don’t want to hear it.

Meghan Tait: I think in in their defense that they’re being the [00:11:00] people like Over the last almost 24 months now, it’s, it’s sucked to hear, like, I, I know it’s what we’re supposed to say, I know it’s what we’re supposed to do, and I feel convicted in that, um, but it sucks, like, it’s been ugly, and, and to say, like, it will get better, um, I think it’s just, we’re reaching a point in time, you said this in a meeting the other day, like, we’re reaching a point in time where I think people are kind of hitting breaking points.

Um, and that’s, I think, normal from a, from a human, you know, behavior standpoint. It’s why we exist. To make sure that, you know, bad decisions aren’t made at these times, but I’m trying, I think we’re all trying to have a little bit more kind of empathy as it relates to like where investors are today compared to, you know, 12 months ago compared to 24 months ago.

Like the [00:12:00] change over the last two years has been. Or three years, I should say. It’s been, like, dramatic.

Jeff Mastronardo: So, September and October I’ve heard. Because I felt like people were starting to feel better. Yeah. Because the stock market was doing well. Yeah. Through the first half of the year, and then so quickly they gave it all back.

Mike Traynor: But it kind of wasn’t. Like, I mean, last year was last year. Last year was, everything was down. Nowhere, nowhere to hide. This year is, I think I just read where more than half of Stocks and just using the collective group stocks are down over 10 percent year to date more than half. Yeah, that’s bad but yet you have like the magnificent seven or whatever they call the stupid tech stocks that are just Still up huge and there are so they’re so massive that they’re dragging Certain indices like higher and they’re kind of masking what’s going on underneath.

I think that that is real and people [00:13:00] Maybe feel that, um, because certain funds or certain investments they have are not up. And, uh, and, and certainly I think if you’re like a stock picker, I

Jeff Mastronardo: can’t imagine what you’re dealing with. Yeah, small and mid caps are kind of

Mike Traynor: struggling this year. Yeah, big time. Um.

And value too. Like everything other than big tech is, is.

Jeff Mastronardo: I mean, it’s, it’s needed though. Like, I mean, we, we’re not going to get the four or five years consistently of good markets unless you have pain points like this. And it sucks. It’s brutal personally to watch your investments go down. It’s brutal to talk to clients all day that are just still disappointed after 18 months.

I mean, they’re, they, they have faith and they believe and they’re hanging in, but it’s, it’s awful. It’s, it’s miserable to go through it with them and for them when they look to you as, They’re professional and you said it, Meg, like we got to have that empathy. We have to be convincing in a meeting, [00:14:00] like the reason we’re not going to move to a money market and you have to trust me, Sally and John, is that you’re going to stay in bonds and believe me, three, four years from now, five, you’re going to be better off by owning those bonds and they have to feel that conviction or they’re going to like.

They start scratching their head and then they start worrying more and then they start losing sleep and like that’s our job to be Empathetic and it’s good to hear you say that because I start to like it’s hard. It’s hard to keep that as an advisor every day all day When it’s just hey, look, you know We’re only we’re only up three percent this year, but hey, it’s better than being down 20 like we were last year and they’re like, yeah Nobody’s leaving the meeting high fiving man.

It’s tough

Mike Traynor: Yeah, and I I think I still think one of the hardest things to remind people ever talk about is just that you got to disconnect the geopolitical stuff and the corrupt politicians and all the other things you want to point [00:15:00] to from The markets and the investments because they are, I mean, it’d be stupid to say they’re not related, but they are, they’re, they’re not related because it’s always the case that you have big stuff going on in the world and the tendency to just very simply look at the, the impact it has on the investments and say, what are we doing?

I mean, things are going to shit. So why are we, why are we doing

Jeff Mastronardo: this? That stuff is part of the market, but it’s not the market, right? The market’s way bigger than

Meghan Tait: that. Yeah. I feel like, yeah. This year more than I can remember recently, like the asking for predictions questions come about like, what are you feeling?

What are you thinking? What are you guys seeing? I’m feeling pretty

Jeff Mastronardo: shitty right now, John. Don’t push me.

Meghan Tait: You know, and, and like, again, you want to, we’re in it too. Like all of this affects us personally, professionally, like, and, and there’s of course shit to worry [00:16:00] about and be concerned with. Um, so you don’t want to dismiss or diminish those feelings, but like there, there isn’t a prediction.

Like there isn’t a, an answer to that other than I don’t know. And again, I feel like if there are two years of just really tough markets, the I don’t know is harder for people to accept.

Jeff Mastronardo: Good advisors will give you the, I don’t know, but this is what we’re going to do about it. And this is

Mike Traynor: our plan. Which is why so many advisors. Uh, succumb to that temptation and they have an answer is like, here’s what we’re going to do. We’re going to rotate out of this and into that. And we’re going to, and it’s just some made up activity that makes it seem to me.

That’s an easier thing to do.

Jeff Mastronardo: Oh my God. It’s way easier. And it makes people feel so much better. Right. Yes. I talked to my person, man. They I mean the reasons they gave me for why interest rates are going to go this way and what we’re going to do about it And the [00:17:00] changes we made whoo. I feel so much better and nine times out of ten.

They’re worse off because of it Yeah, we see

Mike Traynor: it all the time. Yeah. Yeah

Jeff Mastronardo: All right,

Meghan Tait: things will get better right? Hey clients,

Jeff Mastronardo: you can still bring your bond questions to me I promise I won’t lose it

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Untucked Episode 90

Click here to listen to our discussion about Dave Ramsey and the reality behind his claims.

Click here to listen to the full Untucked Episode 90. You can also listen on Apple, Spotify or Google podcasts.

Episode 90

Meghan Tait: [00:00:00] Want to get into Coach’s Corner? Let’s do it. Uh, so there was a clip, I don’t know that it went viral on Twitter, I mean it made its way onto my Twitter, but, um, it is a clip of Dave Ramsey making the statement that it’s not hard to beat the S& P 500. I guess Dave has some sort of like, quasi podcast radio call and show where people call in with their situation and look for advice.

And we’ve obviously made our feelings on the Dave Ramsey’s, the Susie Ormans of the world very clear. Uh, but we wanted to maybe tackle that statement in particular and why it’s just. Irresponsible,

Jeff Mastronardo: so what are I should have done this research prior to today? What are Dave Ramsey’s qualifications? What does he think?

What

Mike Traynor: does he do? He doesn’t have any qualifications at all from a Professional standpoint. He’s literally just a [00:01:00] guy who’s written some books launched a radio show and talks to the American public via those platforms and, um, tells them what to do with their money. He, I mean, very, in a general sense,

Jeff Mastronardo: not financial advice.

Meghan Tait: So people will call into a show and give a, you know, 15 second summary of their situation. I have X amount in student loan debt. I want to buy a house. I make this much and I have this much credit card debt. And he tells them what to do.

Jeff Mastronardo: And that’s

Meghan Tait: allow what? Yeah. And is also extremely critical of people’s situations.

Mike Traynor: Yeah. And so, yes, he, in his defense, he, he consistently tells people to don’t ever get yourself in credit card debt. Um, don’t spend more than you make those kinds of basic things that [00:02:00] so he like

Jeff Mastronardo: basically tells people like. Breathe air and drink

Mike Traynor: water. Yeah. Yeah. Captain obvious for sure. But he also, um, on the other side of things, way overstates the impact of what you will have if you invest over time.

Uh, cause he uses expectations of probably like 12 plus percent returns. Um, he doesn’t, he, he, he advises. Anyone and everyone, no matter their age or situation, to have everything in stocks. Um, and he’s, and he’s really a douchebag about how he treats people and talks to people and ridicules them for their, the situations that they’ve gotten themselves in, which is probably the most off putting thing about the guy, in my opinion.

Jeff Mastronardo: I completely agree. Okay, I’ve seen a little bit of him and that’s what I’ve taken

Meghan Tait: away. So there are people who subscribe to his philosophies and as Mike said, a lot of it is like anti debt and most of the time in, in a good way, like paying down credit card debt, attacking high interest debt or whatever, [00:03:00] but there’s, you know.

Pay let’s accelerate our mortgage payments, even though we have a two and a half percent mortgage. It’s like there’s not a lot of I’ll say he’s very black and white. I guess maybe a good way to put it

Jeff Mastronardo: So in this in this clip, he basically tells his co host that He’s averaging most years and and averages most years he gets 13 percent per year on his investments and Averages about 12 to 13 percent per year because it’s not hard To beat the S& P 500 because the S& P 500 is just an average

Mike Traynor: of the market.

Which it’s not, but that’s what he

Meghan Tait: said it was. That’s what he said. That was the clip that he said. Yes.

Jeff Mastronardo: So yeah, explain. I was, I was a little scratch in my head when he said the S& P is an average of the market. What did he mean by that?

Mike Traynor: We don’t know. Okay. Okay. So, he’s wrong. I highly doubt he’s averaging 12

Jeff Mastronardo: or 13 percent. Unless his average is [00:04:00] over like a, maybe a one or two year period. And he’s also wrong because it is not easy to beat the S& P 500. I mean, I think Vanguard did the research and found that like 80 percent of professional money managers don’t beat the market consistently over time. Isn’t that true?

Mike Traynor: Yes. And the more time goes by, the worse it is, the worse the record

Jeff Mastronardo: people. So how can he make that statement like that information is there?

Mike Traynor: Yeah, well, that’s the thing. I mean, right. He does it. So I pulled up another clip just out of curiosity because I don’t He’s not on my, he doesn’t come across my feed.

Good for you. And in one of them he was railing against people who have expensive car payments. They bought cars that are out of their range. What’s it, what they should be driving. Let’s say he was yelling about people that have a thousand dollar monthly car payments and sell that car, get rid of it, invest that into stocks.

And in [00:05:00] 20 years you’ll have over a million dollars. That’s simple. Like that’s, that’s how he’s talking in this, um, radio show or whatever. And then when you, if you actually look at what he’s claiming, it would require returns that are outrageous for that to turn into a million or more dollars in 20 years, because you’re investing.

240, 000, I guess that’s what it is. Right. Um, and then the market returns would compound that into, not a million, it’s way less than that. It’s still decent. Sure. It’s still directionally the right advice, like don’t spend, don’t blow your money on a ridiculous car payment when you could be investing it.

That is correct. But to make the claim that you’re going to be a, you know, millionaire or a multi millionaire if you just do this is ridiculous. So what we’re

Jeff Mastronardo: trying to like prove or establish in this coach’s corner is what?

Meghan Tait: [00:06:00] Is that beating the market, one, is not easy, shouldn’t be considered easy, and that candidly, like, the goal or attempt to do so is probably unnecessary for most people.

If most people build, a financial plan that’s reflective of their means, their income, their lifestyle, and their goals, getting market returns, getting what the market will give you, is probably enough.

Jeff Mastronardo: It’s most definitely enough.

Meghan Tait: Again, I mean, there’s exceptions where people need to bet it all to get it all back, but like, that’s not

Jeff Mastronardo: a plan.

That’s not a strategy. Like if you live within your means, build a solid financial plan and just get market returns, that’s the best you can do. without just getting flat out lucky. Yeah. So this, this, the fact that this guy makes a statement, it’s what’s wrong with this industry. Because people listen to him and they’re like, Oh, [00:07:00] well, like he’s, if it’s easy, how come my people aren’t doing it?

How come I’m not doing it? Let me hire him. Let me hire that person that says they can beat the market consistently.

Mike Traynor: Yeah. And just another thing that’s so irritating about him and his style and his whole MO is that he. The way that he talks to people, he, you know, he’s this guy from, I don’t know, Kentucky or somewhere, and he’s, he’s just, you know, good old boy who just is talking about how simple and easy it is, and this is what I did, and this is how I’m a multi millionaire.

This is why I read menus from left to right. Up and down the price list. It’s one of his little, which is so cringy, right? And, um, but if you peel back the onion and you look at him and his enterprise that he’s built, which is to make money, the guy apparently makes 30 or 40 million a year from this platform.

He’s currently in the middle of being sued for 150 million by some, [00:08:00] uh, a group of. Listeners, I’ll say, who, um, got completely hosed by one of his sponsors, which was one of these timeshare exit companies. And if you know anything about exiting a timeshare, it’s, it’s impossible. And companies that try to sell you hire us and we’ll get you out of it.

They’re scams and they’re frauds and they’re stealing your money and these are the kind of people that pay him to be on his Program as a sponsor because guess who the audience is it’s millions of people who are buying the shit that he’s selling Yeah, so

Jeff Mastronardo: wow. Yeah, I know that that’s pretty miserable. I did a little research.

Yeah. Thank you for that Yeah, I just think just get the market and stay within your means do the right thing You’ll you’ll that’s that’s the best you can do and unfortunately you start engaging with these people people like this and it’s just I think it leads to poor. Poor expectations and poor

Meghan Tait: results.

And when we say getting the market that’s acknowledging that there’s [00:09:00] gonna be shitty years in the market. Yeah, right. We’re not we’re not saying get the market and avoid 2022 like the suggestion is not that you can time the experience or it’s It’s that you have to, again, build a plan with contingencies.

So if bad markets happen, you have plan B or plan C or something. But like when we say get the market, it’s, we’re being very specific in that. Like that includes the down years. It includes the investments that are down and includes the asset classes that are down for maybe periods of time that make you uncomfortable.

Jeff Mastronardo: You can’t get the market without getting 2022. Right. You can’t. Because if you try to, you’re going to miss part of the upswing. Yeah. You have to just stay in it. There is no ins and outs because ins and outs typically leads to underperformance. You got it. Unless of course you’re Dave Ramsey.

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Untucked Episode 88

Click here to listen to us discuss what having $5M in retirement looks like

Click here to listen to the full Untucked Episode 88. You can also listen on Apple, Spotify or Google podcasts.

Untucked Episode 88 $5M in retirement

Meghan Tait: [00:00:00] Uh, so for Coach’s Corner, we’re gonna talk about an article from the Wall Street Journal called, Here’s What a 5 Million Retirement Looks Like in America. This was shared, uh, by a client of ours. Um, it’s a profile of four couples or, or people, individual people in different parts of the country with roughly 5 million in retirement savings each, and it just, their income expenses and gives us a sense of their retirement lifestyles.

Was there anything about any of these people specifically or the article more generally that stood out to you guys? I think the

Jeff Mastronardo: majority of people that we meet that are millionaires or multi millionaires, it’s like across the board, all of them are like, I never could have imagined I would have amassed this much wealth.

Yes. Like all of them say that. And then they have trouble spending that wealth because they’ve just saved and saved and saved. Um, [00:01:00] if you can accumulate 5 million bucks, And I’m thinking of like a normal suburbia lifestyle, I think you are, you, you’re well set. Like I don’t think you have much to worry.

Assuming it’s like, you have a house, maybe a small condo at the beach, Um, you can probably live a very, very comfortable lifestyle. Assuming that. Your lifestyle is fairly normal. You don’t have these high aspirations of like leaving each kid 3 million bucks or anything like that. Just taking care of you and your partner for the rest of your lives.

I think 5 million is absolutely

Meghan Tait: plenty. And you’re saying that for like Someone retiring today,

Jeff Mastronardo: right? Someone retiring today, right? They want to drive BMWs. They want to go to the beach. They want to travel. They want to just live an unbudgeted lifestyle. I don’t see how 5 million can’t do that for them.

Mike Traynor: I don’t know if I agree.

I think a couple things. 5 million is very different if it’s in your 401k and IRA accounts. [00:02:00] And 0 outside of that, or if the 5, 000, 000 is really all in after tax money because let’s say you sold a business or you just saved it, it’s a very, very different number because of the tax piece of it. But also 5, 000, 000 can, can safely, roughly generate 200, 000 a year in cash flow without having to worry too much about running out of money.

So even if that was give

Jeff Mastronardo: or take, even if that was all IRA, you net one 50 at the low end.

Mike Traynor: Yeah. So if you’re taking like expensive vacations, driving BMWs and like in the current world, the cost of life has skyrocketed. I would worry that maybe it’s not enough. It’s enough for, for someone who’s lived a frugal life and is going to continue to do that for the most part and maybe not be called upon to help a kid or something in a big way financially.

I, I don’t, [00:03:00] five million isn’t what it used to be for sure. Like, and I think it’s, the answer is it just depends. It just depends.

Jeff Mastronardo: I mean, I feel like 80, 90% of the people that have that, that are the people that you and I are describing, I don’t think it depends. 4% gives you 200, 000, net 150, 000 if it’s all IRA plus probably another 30, 000 to 50, 000 of social security is 200, 000 a year.

Easily. No mortgage. Yeah, cars, going out to eat, travel, but you don’t have to keep that 5, 000, 000 until you’re

Mike Traynor: 90. Yeah, yeah, yeah. But you’re saying no mortgage and you’re saying, you know, lots of… Previous expenses are off the books now. That’s the huge difference. Yeah, I

Jeff Mastronardo: mean, well, obviously every person every couple every individuals Circumstances completely different.

I’m just talking about like the average retired client that we see live on about 150 to 250 a [00:04:00] year Depending. Most of their homes are paid off. They want to drive nice cars. They want to travel. Like a 20, 000 to 40, 000 travel budget per year. Dude, I think, like, unless they wanted to leave the 5 million to their kids.

You take your 4% and you spend it down over the next 30, 40 years. And yeah, you can live a pretty rockstar lifestyle. Even if you had a mortgage, I think like I’m accounting was spending down the 5 million, which by the way, none of them would want to do. Right. Right. None of them will be comfortable with it.

Right. But in reality you’re either going to do that or you’re 5 million bucks. Who the hell wants that?

Meghan Tait: Yeah. And I think the purpose of this article. Um, and it’s probably a combination of what you’re both saying, is that like because they have five million, their lifestyle has not dramatically changed than what it was to accumulate five million, so they haven’t like gone, okay, now I have this amount [00:05:00] of money.

I’m going to take the. Super expensive vacation. I’m gonna buy the newest nicest cars. I’m gonna buy the second home, right? They’ve maintained Most of what at least based on the article that you know the information they shared most of the lifestyle decisions and choices that got them to this point, but they’re also like I mean, some of them have pensions, right?

Some of, like, there’s social security. One of these people is still working. So there’s other factors beyond the retirement that’s like, is five million enough for these people? Probably, right? Assuming nothing big or different than what we shared, but I think it was more a look into like, And you said this yesterday, Jeff, it used to kind of be like the million bucks, right?

it felt like a million bucks was a mark in which if you got there you were set you were set and We know that that’s not the case and is five million the new bogey Maybe maybe not for these [00:06:00] people it’s sufficient. But again, there’s pieces of their plans pensions specifically that Aren’t going to exist for retirees beyond this day

Mike Traynor: and age.

Yeah. And I think that’s, yeah, I’m glad you brought that up because that’s rare. Um, most people have to figure whatever I save plus social security is it. There’s no other source of income because the value of a pension is enormous. We see it with our clients that have it. So maybe that’s where I’m kind of leaning towards.

It needs to be ratcheted higher. And five seems like your points, right? Jeff, like for those, so for those who lived reasonably frugally their entire lives while they saved, invested and accumulated the five, they’re likely not going to change their spending habits very dramatically. Because that’s just who they are.

You don’t turn, you don’t go from a frugal saver to a buying three vacation homes and traveling, you know, six months out of the year and [00:07:00] ripping through five million bucks in no time. That just doesn’t happen. If

Jeff Mastronardo: you bust your ass with a savings platform. To accumulate five million dollars, you’re not gonna have any idea how to spend five million dollars.

Yeah, I agree Yeah I mean it’s just because when you think about like I think about my personal life and what we make and then where it all goes And I’m like, Oh my God, what’s going to have, what’s going to happen when I don’t really care to accumulate non IRA money. I don’t have to put money in a 401k.

I don’t have to fund 529 plans. I don’t have to pay for life insurance. There’s a lot of categories of savings that happen. And you get accustomed to like, okay, well I make 150. But you really, you really don’t, you’re putting 20 to 401k, you’re sending kids to college, like when that all gets behind you, 150 goes a lot further when you’re retired.

Mike Traynor: Yeah, that’s, that’s a good point. Um, most definitely.

Meghan Tait: I, I mean, I thought it was interesting, but you know, the different parts of the country, like The [00:08:00] couple living in Bozeman, Montana, or the couple, which is, I know it’s Montana, but it’s a very popular kind of, I’ll say, touristy destination, so cost of living there is going to be more expensive.

Irvine, California, the cost of living there is going to be more expensive, but then you have a couple in Cary, North Carolina. We spend 130 grand a year, right? Like there’s influences beyond even just our intentional spending or savings habits that impact this too, right? A lot of our clients who live and work in the kind of Philadelphia or surrounding areas.

You know who decide to move typically move to lower cost of living areas Not every not all of them, but but most of them and that changes things Obviously, there’s health like there’s a lot of variables that aren’t detailed in this In these profiles, but it it was interesting I think if someone’s looking for like a do I fit this mold or am I similar to this person?

it maybe [00:09:00] gives them like a persona to attach to

Jeff Mastronardo: that cost of living thing really hits home when you’re watching like HGTV and are like Johnny and Sally are buying a house in Danbury, North Carolina. They put it on the screen. You’re like, oh my god It’s like a five million dollar mansion. Like it’s a hundred Yeah