Ben Carlson: Everything You Need to Know About Saving For Retirement

Welcome to the new Retirement podcast. Today we're going to be talking with Ben Carlson, the Director of Institutional Asset Management at Ritholtz Wealth Management, about whether we're in a bubble, how to invest in a bubble, and his new book, Everything youg Need to Know About Saving for Retirement. Ben was also the ninth guest on our podcast, so we appreciate him coming back now that we're after our. Just after our 50th episode. So with that, Ben, welcome to our show. It's great to have you join us.

Good to be here. Steve.

How was 2020 for you personally, and did you have any kind of huge takeaways from the year now that we're through it?

Yeah. I mean, it's all relative, I guess. So for us, it was fine if, you know, we have some young kids. So that was always tricky. But I think the thing that I learned the most, especially in the harrowing days of March when things were really getting crazy, talking to our wealth management clients, one of the biggest takeaways was how little it seemed like money meant. At that point, we were ready to talk about the markets and what was happening. And it was almost secondary to when we talked to our clients because they just wanted to. They were checking in on us to make sure we were okay, too, just like we were checking in on them. And we were, of course, telling them our thoughts and what our feelings were and how we were positioned and how we were thinking about what was going to happen next and just how the plan was working and how we plan to proceed. But it was almost like thinking about the markets was just not nearly at the top of people's mindshare. So I think it put things in perspective in terms of what really matters. And a lot of people worried about their health and their family and their jobs or whatever it was. And so it seemed like thinking about the markets was just way, way down the list for a lot of people. I think it put things into perspective for a lot of us.

Hmm. And do you think people have kind of kept that perspective? I mean, how did that affect the psychology of, you know, your team and also your. Your. Your clients?

I don't know if people become numb to it after a while or they get used to it, because I remember, I. So I, I, I listened to a podcast interview in, like, late February, and this epidemiologist guy was saying, listen, we could be heading for 100 to 200,000 deaths from this. And that, like, shook me to the core. Like, I can't even imagine what it's going to be like, if that happens, and now we're, we're double that. And obviously there are people worried about it, but there are also people who are sort of numb to it. So it's hard to imagine how this, this stuff, it just our reaction to this stuff. It's hard to gauge when you're dealing with humans. And I think we're barraged with so much information and news these days that sometimes you only have enough mind share for worrying about one thing at a time, whether it's yourself or the world at large or whatever it is. And so I think some people have the ability to compartmentalize and move on and some people are probably still stuck in that mentality. I think one of the interesting things will be like when things really do open up and we've crushed this and everyone's vaccinated or however it happens and you know, hopefully 6, 9, 12 months or whatever it is, you wonder how many people are going to be stuck in the mindset of the pandemic and it's going to be hard for them to open up and get back out. I'm hoping most people are going to be like that, but you could have something like that happen from this where they're, they're stuck in that same mindset.

Yeah, I know. Morgan household did some writing about just how these huge events affect generations, especially younger people. So people that grew up kind of during the Depression or people that grew up during the Great Recession 2008, it changes their psychology. They become more frugal, they take less risk. Will we see that coming out of 2020?

So far the opposite is true of this generation. Right. And that's the difference between the. I wrote about this and, I don't know, April and May, maybe. Like the biggest difference between now and the Great Depression is back then the government either didn't have the ability or didn't think they had the ability to throw so much money at it and they went the opposite way and almost made it worse. Whereas this time I think we basically stopped a Great Depression in its tracks. We had the worst quarter over quarter GDP fall in history. And so for, I don't know, four to six weeks, we basically were in a depression. And then the government threw so much money at it and the Fed stepped in and helped the credit markets function again that they stopped it in its tracks. And yeah, I think what you saw is people saw that backstop and they got some money and they said, okay, it's completely changed the risk. So wouldn't it be crazy if this whole thing, this huge crisis, that this is something that people are going to remember forever if they're old enough to know what's going on, that it could change their risk profile and make them want to take more risk, which is, there's no way anyone would have predicted that going into it.

Right, right. It's like the Greenspan put for the market that used to exist and now is there kind of like a put for like, okay, well, if everything gets too bad, government's going to print some money and ship me some dollars so I can keep going.

Yeah. I don't know how you put that genie back in the bottle after it's been open. I mean, it's, I guess political will is part of it, but once you start sending people checks, you know, and you're deciding between two candidates, who are you going to vote for? The person who's going to give you money. The person who doesn't want to.

Right, right.

Yeah. I think it's going to be hard to put this one back.

Right. Yeah. And it's also amazing, you know, back to, back to Morgan. You know, he wrote again recently about, like, there's basically an extra trillion with a T dollars in bank accounts now since the beginning of the pandemic. His recent article definitely reoriented me. It was like, all right, incomes are up, savings are up, debt is being paid down, household balance sheets are in a much better place. For many Americans now, people in the service economy, they're facing huge job losses that may not be coming back, which.

Is hard to reconcile. And we saw that a lot in April and May when the stock market really started taking off and we had clients saying, listen, there's 10 million people unemployed. How is it possible that the stock market could be performing so well? And it's hard to reconcile that in your brain that there's so many people who are hurting in businesses that are hurting and individuals depending, you know, and a lot of it is just came down to luck. You know, it really, it just depended on what industry. It wasn't like you chose to have this happen to you. And unfortunately, some people have just, you know, gotten lucky into the stick, and some people have gotten the short end of the stick from all this, for sure.

Well, I think another big thing that's happened is so back in 2018, when you were first on the podcast, the 10 year treasurer was like 3%.

Right.

And people are like, wow, that's, that's so low. And, and now it's been hovering around, it's heading back up but it was, you know, got down around 1%. And that's the backdrop for, you know, kind of how we finance everything, right. Houses, cars, you know, businesses. And, you know, how do you, how do you see that kind of playing into, you know, where we are in the economy and where it might go from here?

I think in March it got down to like 35 basis points or something. I mean, I thought it was possible rates could go like if this kept going. I thought it was rates were going to go negative and I think if they didn't step in it, they might have, which is kind of wild to think about. Yeah, people have been predicting rates are going to rise for years and years and they're finally taking up a little. It's funny that people think that rates rising from 50 basis points to 1% is a lot, but I guess it's all relative these days. But from our perspective, as me working for a wealth management firm and being on the investment committee, that's the main thing I've been worried about for, I don't know, 12 to 18 months because, I mean, the stock market is the kind of thing where it's been shown to come back. And even when it crashed, I was not nearly as worried about the stock market as the bond market because the bond market is more controlled by math. You have your starting interest rate and obviously things can change based on the movement of those rates. And the volatility is going to be different, but over five to 10 years, your starting yield is a pretty good predictor of what your future returns are going to be. And that lowers the hurdle for everyone and it sort of brings everything down. So whether people like it or not, if they want to earn something above the rate of inflation, they're going to have to learn to live with some volatility and accept it. And there's always going to be risk trade offs. So it would be great if we could go back to the world of 5 or 6% treasury yields. I'm sure a lot of retirees would appreciate that and it would make their lives a lot easier in terms of investment in retirement and portfolio planning. I don't know, it could be a long time before we ever get back there. You never say never, but it's unfortunate. I did a presentation a few weeks ago for a group and I said, I think this is possibly the hardest market environment ever for people in terms of their prospects of what to do now, because US stocks have done so well and people are worried about that. And then bonds, obviously they've done well, if you held them because rates have fallen, but it's like a now what? Eventually those low yields are going to turn into future lower expected returns. So it's, it's not the easiest environment in terms of looking forward. Even though things have been pretty good in the past.

Yeah, no, I definitely like a huge insight that I had this year, which is kind of ridiculous, it took so long. But it's like, yeah, you know, bonds can keep, bond prices can keep going up as long as rates keep dropping. And the question is we're seeing negative real rates in Europe and probably going to, we're seeing them worldwide. So as long as they keep going down, if you're, you know, the prices will keep going up. And I mean, I saw a headline recently, I think there was like a 0% mortgage or negative mortgage in like the Netherlands or something like that recently around a reef for retail people.

Yeah, I mean that's, that's the offset is that if you're a borrower and especially for young people who are now rushing into the housing market in droves, you know, that's a good. If you're locking in a fixed rate mortgage, I mean, isn't it possible in 10, 15, 20 years, maybe even sooner, people are going to look back and say, oh my gosh, you guys were getting to 2.2%, 2.5% mortgage rates for 30 years. That's the opposite side of this coin. So a lot of it depends on whether you're a lender or a borrower. I think the other thing people worry about so much with rates is that they worry, well, if and when rates go up, my bonds are going to get killed. But if you're a bond investor, eventually you want those rates to go up because that translates into higher future returns. You get a short term pain by taking some losses on your prices and your principal in the meantime. But eventually, if we get to a healthier place, we would expect and want rates to rise. So if they get back to even 2% or 3%, which doesn't sound like much historically, but for now it would be, I'm sure a lot of people would take it eventually. That hopefully means a good thing because you can earn some better returns on your capital from your fixed income.

What do you think? Before we move on to the bubble topic here, what do you think drives this? What will make it let rates start heading back up consistently?

Well, I mean, the hope is, if you're going by the textbook answer, if we get some higher economic growth that would push inflation up a Little bit. And then rates would naturally have to rise, because that would make sense from the equilibrium perspective. The monkey wrench in the situation here is fiscal and monetary policy. So the fiscal policy side of things is kind of like a tug of war because the government spending so much money, you would think eventually, and let's say we get everyone vaccinated and we have this big shot in the arm from demand, because people are out there spending money doing things that they haven't been doing for the past years. I know. I can't wait to do stuff we've been putting off that could translate into a booming economy, potentially, if we have a few trillion dollars sloshing around from the government. The other side of the equation is the government still has to borrow money to pay for that. Obviously, you know, they don't control the long end of the curve unless they start buying those, but they control the short rates. So, you know, could we get in a situation where the government really want and the Fed wants to keep rates low? I think that's. That's the monkey wrench here. But again, yeah, eventually you'd hope we get to a healthy place where it's okay for rates to be higher because we have higher growth.

Yeah, right. Well, hopefully we'll get there, you know.

Yeah.

I mean, we're definitely in uncharted territory, so it's kind of incredible. All right, so let's talk about bubbles a little bit before we jump into that, would you? You. You wrote a piece about why bubbles aren't always bad and they're sometimes good. We'd love to get your context on that.

Yeah, so I wrote a piece and it was going back to one of the. Actually one of the more underrated bubbles in the day. And they actually called it a manias from the 1800s and the British railway bubble. And they, you know, when trains came on board and the early to mid-1800s, it was this brand new technology. And like all new technologies, people get super excited and they extrapolate and people want to invest in it because they think they can become rich. And people went crazy for these projects. It was interesting. It wasn't like the British government was making all these railway projects. It was the actual citizens who were investing in this stuff. And it was private projects. And they ended up building so much railway that 90% of it still constitutes the train tracks that are in the UK it was this huge bubble and people lost all their money. After seeing 500% gains, like always happens, people just extrapolated to the future and went crazy but it turned into all this investment in the infrastructure and they were so far ahead of all these other advanced economies at the time. And the bubble worked out for them. Same thing happened in the dot com bubble in the 1990s where we had all these fiber optic cables laid down and it was eventually a good thing and it kind of laid the groundwork for the Internet. So bubbles aren't always bad. They have a bad connotation because of course eventually they're going to pop and people are going to lose their shirts. But a lot of good innovation can come out of them because you have this over investment and that's kind of what happens. And then because people get too excited and it seems to happen with almost every new technology, which I think kind of makes the case that because technology is such a part of our daily lives now and it's such a bigger part of the economy and frankly the stock market, I think that maybe makes the case that we could just see more booms and busts happen in a quicker time fashion in the market. Because technology is just so interlaced with everything now. And people are going to extrapolate. Think about a company like Tesla where people are extrapolating what they're going to do in the future and giving them that price now. I think it's kind of fascinating to watch because people are saying we're not going to wait around for this to happen. We're going to price it in now and see what happens. And I think you could see that a lot more these days. And I think that just means things are happening faster, markets are happening faster. And I think things. We're going to see so much more volatility from that, I think in both good and bad ways.

Yeah. One thing that I've been thinking about is historically, you know, we have these bubbles and you know, they're generally caused because humans are emotional creatures and there's generational learning, right. So and it used to take, and the business cycle used to be longer. So you'd have people, you know, the tulip mania or whatever it is that gets people the British Railway thing, that gets people really excited. They over invest, they feel a ton of pain, they learn their lesson and they're like a generation's like, wow, okay, I'm not going to fall for that bubble thing again. But now what's happening I think is we're seeing these cycles and what I've been watching is like, hey, yeah, people see corrections. In March we saw a correction of like 32% and then like 30 or 45 days later, it's like so fast. Like it's over. We're back. So now people are learning lesson. Like there's a floor.

We had a full market cycle in 10 months last year.

Right.

I mean, yeah, I agree. And I think that could be here to say this just because information is so much faster. The barriers to entry for investing have been broken down. I mean, it was so much easier for people, you know, just invest on their phone when they were sitting at home. Then in the past, you would have had to go to your local Schwab, you know, branch to fill out some paperwork to get in, you know, open an account or whatever. And now you can just do it on your phone. And I think that that does mean that things are just going to happen faster in terms of cycles.

Yeah. But you know, fundamentally, like things can't get kind of go up to the right forever.

Right.

So you feel like there's going to be a comeuppance at some point here and there's going to, you know, people are going to learn their lesson. I know that. Like my, I have a, you know, a son in college. He's coming back. He's, you know, he's like day trading. He's like, I'm investing. He's like, yeah, like, you know, I just, I look at the, you know, I don't even really look at the fundamentals. I just kind of look at the momentum. I'm like, I'm like. He's describing what he's doing. I'm like, so you're momentum trading, you're day trading? He's like, no, I'm investing. I'm like, you're day trading. That's what's happening here. He's like, I made 100% in a month. I took my 400 bucks and I made it 800 bucks. You know, he's like, give me all your. Give me five grand.

Like, yeah, yeah. I go, I go back and people, I go back and forth on this. Whether it is it's a good thing or a bad thing, because it's a good thing that we're getting so many more young people interested in this stuff. Is it a bad thing that they may be develop bad habits? It's hard to say. But I mean, you know, hopefully if you get into the game a little bit and you realize like, okay, I can't keep this up forever now. I need to develop some better long term habits and skills. Hopefully a lot of people will eventually realize they can't keep that up forever. And want to, you know, get to the more long term.

I said on the podcast we do, we do the Michael Batnik like, hey, listen, here's, here's some painful lessons that you can learn. And you know, tons of people have kind of thrown themselves into the line of fire to try and make tons of money, but they also get, get crushed. So what's your, what's your case for us being in a bubble now? Like, what are some of the indicators that to you that say, okay, that maybe things are getting a little bit frothy?

I mean, the, the stuff that. The parallels to the 90s are pretty striking. I don't think people have been arguing this calling for a tech bubble for years and years now, and they've been wrong, obviously. I think frankly a lot of the people in the technology industry have been proven right to have more of an optimistic bent about the world. But I mean, yeah, the stuff like day trading and seeing penny stocks go crazy and see the volume in some of these stocks and especially the young people and the call options and that sort of thing surely makes it think like there are certainly pockets of bubbles or froth or euphoria, however you want to say it. It's hard for me to say that it's anything like approaching the 1990s because you still do have a lot of people who are skeptical. You see massive flows into things like fixed income from probably retired investors who just need that ballast for their portfolio. So it would be hard to say that things have gone completely haywire. And even if you look at the overall stock market, the S and P, it's not like it's going crazy. There's parts of it that are going crazy in segments, but it's not necessarily the whole market. It's just going bananas. And the fact that interest rates are so much lower now than they were then. So it's hard for me to say this is a rip roaring bubble. But on the other hand, the s and P 500 is up 16 out of 18 years. One of those down years was 2008, which was 37, 38%, and the other one was 2018 when stocks fell 4%. So it's been a pretty darn good run here. So whether it's a bubble or not, investors should prepare themselves eventually for a sideways market or something maybe a little more prolonged than we had than a four week bear market. That's just the sort of stuff that happens in the stock market.

Yeah, for sure. And there's also a narrative of like, hey, you know, long term there's kind of long term prosperity ahead of us if we don't screw ourselves with the climate too badly. But like there's a lot of amazing things with technology and AI and like communications stuff like this, things that can happen so fast all over the world. And we're educating and bringing people online in a much bigger way and lifting people out of poverty. So there's definitely like a huge bull case that, you know, maybe we're kind of entering the next golden age and we're, we're actually on the front end of that and we don't. Maybe Elon's right.

The crazy thing about the dot com bubble is we had to go through that dot com crash but everything people were saying back then basically came true. Right. Even though we had to go through the crash and have a shakeout. So maybe you'll have these shakeouts in pockets of the market that get like electric vehicles or green energy that maybe people take it too far and you have some shakeout in the companies that maybe shouldn't be there or got a little too far over their skis. But you're right, a lot of that stuff is, is going to be helpful. And you look at people for years were calling the fang stocks the bubble. And I think that's been basically debunked because they more or less grew into their crazy prices. Their fundamentals have kept up. My Michael Bag, he mentioned he did a post last night where he looked at the free cash flow yield or the free cash flow growth for those companies over five years. They're at these huge market value. Market caps are averaging like 20% a year in free cash flow growth. So those companies actually grew into it. And now I think it's almost like people got bored with those and they're like, all right, I don't need you anymore. Microsoft and Netflix, we're moving on to the next thing and now that's when things ramp up and that's how it happens, I guess.

I'd love to see his analysis on what it will take for Tesla to grow into its, what is it, like 800-900 million billion dollars market cap? It's a great company. I bought solar panels and two power walls in our house and had a great experience. Love the products and you know, now think about getting an electric car because it all kind of goes together. Totally makes sense. But they manufacture cars, right? And, and other stuff. But there's still a lot of like growth that has to happen to kind of get even close to this.

And that's always the hardest question to answer as an investor is what is priced in? Because even if a company is growing their bottom line at 20, 30% a year, if investors are expecting to grow up 40, that, that's the, you know, the delta there. That's the difference where, you know, expectations in reality could diverge from the price. So that's, that's always the hardest question to answer. It's like, well, what do people actually expect from this?

Yeah, right. Okay, so one last question. Just since we got it, we gotta mention bitcoin. Since it's been kind of. Well, it had quite a run. I think it approached 40,000. Now it's back to like 32. And I was like, well, we didn't have a coup, so I guess the price of insurance against the coup, you know, went down. But what do you think about what's happening there and where that could go?

I think from someone who just loves studying human behavior and behavioral psychology, I think bitcoin and cryptocurrencies are the most fun asset that there is to follow because there's just so much going on there where you have people who are just these true believers and you have other people who just want to come in and get rich and you have these shifting narratives from that it's going to change the world to. No, actually it's going to be this next currency and it's going to take over the US Dollar. No, actually it's going to be the next gold. And I think it's just fascinating to see it develop. And now you're seeing all these institutions come in. And I think the thing that the true believers, that's going to really make them angry is Wall Street. Now that it's got its teeth in on this thing, you're going to see this thing just financialized from a product perspective where people, they had futures for it, but now borrowing against it in lending it and shorting it and all these different things. Wall street, now that it's becoming more institutionalized and that institutional money is coming, they're going to try to make this the next digital gold and use it for a variety of different ways. And I think that's going to be really interesting to see because once that big money comes in, I'm not smart enough to know what that means for the price. But they don't just come in and then leave right away.

Right? Yeah. The market cap of, you know, Bitcoin is what, 4, 3, 400 billion? I don't know. I think the whole market cap for, I mean, sorry, the Whole market cap for crypto I thought was like 500 billion or something like that. And then bitcoin's the biggest part of it. But yeah, it's still basically tiny compared to the overall economy. And so what happens there, you know, how does that do those fund flows affect this?

But to the point of a market speeding up, I mean that's the fastest market that we've ever seen. Probably right from inception to growth phase to crash. And some of the crashes they've had, for instance, if it's going to be the next digital gold. Gold had a 70 plus percent crash after it peaked in the 80s because it had this huge run up in the 70s from the inflation and getting off the gold standard and all that. But it took 30 years to make that money back. Bitcoin has an 85% crash and it makes the money back in a few years. So that shows when you get something like this. That's why I think in terms of technology speeding the markets up, this is the perfect use case for that scenario. And seeing how quickly things can shift in terms of narratives and markets moving. I think just watching it as a spectator, I think it's just one of the most interesting and fun assets there is to follow, no matter how you feel about it.

Right. Well, let's use this to segue into what people can do to hedge themselves in this uncharted territory that we're in. Do you think people should hold some crypto? And what other moves can people make when they're the way that I view.

It as I'm still more or less a boring investor. Set an asset allocation. Think long term plan for your own circumstances. But I've certainly come around especially in recent years on if you want to have a portion of your portfolio carved out to just go crazy and go nuts, I don't see a problem with that. 5%, 10%, whatever you're comfortable with. And if you want to buy crypto or penny stocks or go trade on Robinhood and have fun and scratch that itch just so you can leave the rest of your portfolio alone, I'm fine with that. I'm someone who never likes to go to extremes and I wrote about a piece about this recently that I'm never going to be one of these people that just puts all of my money into a single stock and watches it go crazy. That's just not in my DNA. Some people have that personality. It just was never me. And so I'm more along the lines of thinking. And we do this with clients too. We'll say, hey, take 5% of your portfolio and do whatever you want with it and have fun. And that way, you know, the rest of your investment plan is sort of set on autopilot and more rules based and more thoughtful. And then this other piece you can go crazy with and trade options or whatever it is. So that's kind of the way I think. And I think crypto fits in that bucket for people. Obviously it is an extremely volatile asset to the upside and the downside. You saw it dropped 20%, you know, effectively overnight. So that's the kind of thing you have to think about there. And I think if you're going to do it, let's say you wanted to have a certain percentage in it. Like, I don't know, people say 1 or 2% maybe. Let's say you go up to whatever, five, whatever you choose. I think because it's so volatile, actually from a portfolio management perspective, it could actually be helpful if you're actually disciplined and rebalance. So when it has these huge runs and it goes from 10 to 40 in a few months, if you have some bands on it and you go, okay, I set it at 5% of my portfolio, now it's at 10 because it's lapping everything now I need to trim back. And then when it crashes again or whatever, if it goes further, then you buy it. So I think that's a good way to place some rules around it instead of just trying to think you're going to put all your money into it and become a billionaire overnight or whatever.

Yeah. So this is the case for maybe having a robo that oversees all of your assets and especially if things are moving super fast, fast, that kind of rebalance.

Would it shock you if in five years bitcoin is in robo advisors or target date funds? I don't think it'd be too surprised if a small piece.

Yeah, no, I don't think so. I think our view is that future is people are going to have assets all over the place. They're going to have all kinds of assets and they're going to need to look across not just equities, bonds, but yeah, if it's crypto cash, if it's home equity insurance products, they're going to look across this or human capital and be kind of thinking more strategically about how they put those things together. But being able to keep an eye on it and understand how the outside world, taxes, interest rates, market movements is affecting that, I think people are going to need help kind of keeping all this stuff Organized because people's lives are getting more complicated, stuff is moving faster.

And the double edged sword of this is, I think it's great especially for individuals. Like if you think about it, the institutions are just now coming to bitcoin. Retail has been and obviously the people who got in early because they were the tech people, they own the majority of it. But retail has really been pushing this and driving this and the same thing for all these other places. So you could now invest in art through a company like Masterworks or Fundrise lets you do direct real estate investing. And some of these, that rally road where you can invest in a car, I'm not saying that's for everyone, but the fact that you now as a retail investor have the option to do that stuff, it's great on the one hand because the barriers to entry have come down, but it's tough on the other hand because there are just so many options. So you can go crazy and have this just mishmash of funds or strategies in your portfolio and you haven't thought through how does it fit within my overall plan and do I need these? So I think there's never been a better time to be an individual investor. But you also have to be a little more thoughtful because in the past you just didn't have these options for sure.

Yeah, yeah, no, I mean, I don't know if you want to share anything more. I do see that you do some like with your site, I think you have some sponsors where you have these alternative assets people can buy. I mean I've seen it out there, but I don't, I don't know too many. I mean I know the only people who own art and fancy car, like cars that are, you know, could be appreciated in value are people that have like 50 plus million dollars or 100 million bucks.

You know, because it's, and honestly the way that I look at something like art and I'm obviously not an expert on it, we talked to them and I was kind of interested so I kind of played in it. I put some money in just to kind of play around and get a better understanding of it. And I mean basically the whole thesis from my perspective is there's a lot of really rich people out there with just not a lot of places to put their money. Frankly, it's almost like a play on, I mean it's almost too bad because we saw what happened to the pandemic where you could almost see it coming, where inequality was going to get worse. And I almost don't know what To, I don't know how they fix it in a situation like that where they had to just throw money at this thing. And of course, if you own financial assets, you did better. And then we have these lower income people in the service jobs that lose their jobs and you could just kind of see it coming. That inequality was going to get worse through almost no fault. It was anyone's fault. It just sort of happened. And I feel like something like the art market, you're almost betting on inequality in these ultra wealthy people that just in a way it's almost like Bitcoin where there's this narrative attached to it like, why would a piece of art be worth something? Well, it's because a lot of rich people want to make it worth something. So that's kind of my view of it. Now, do people need something in their portfolio? No, but I mean, could it be a diversifier? If you're looking at that and obviously the interest rate market, the interest rate levels, I think maybe push people out into stuff like that. So I think you have to do a little bit of more due diligence and think a little long and hard about this stuff because you're investing in illiquid stuff that you can't sell right away. But I think it is interesting that we now have the access to this stuff. Right?

I mean, every asset is kind of getting pushed up. There is a ton of liquidity out there and it's happening across the board, Right. It happens also in companies. And even as a small company, we see it. We're seeing more investors, more private equity guys call us, hey, what are you doing? Looks pretty interesting.

I mean, that's the other side. I mean, couldn't you also see, I don't know. I know Vanguard is pushing into this. I think in a few years Vanguard will have a 5% sleeve to private equity in individual target date funds or something. I think that's kind of stuff too. That is just all this stuff is going to be ubiquitous. And so investors I think are going to need even more guidance in terms of do I really need this? How does it work? Because a lot of this stuff is just harder to understand, right?

Well, it's definitely pushing out. I mean it used to be kind of Goldman would go to their really wealthy clients and say, hey, we're going to do this special private equity stuff and we're going to get you into these companies that no one else can get into. But now you see like as a venture person, you know, or in this community, you see Fidelity like Oh, Fidelity took a huge chunk of Uber or something like that. So they're definitely. I mean, pre ipo, right. They're coming in and going earlier in these companies to get exposure to this stuff. All right, well, look, let's move on. Let's move on to your. Onto your book. So you wrote this book, everything you need to know about saving for retirement. And so why'd you write it and who's it for?

Yeah, so this is kind of the opposite of what we've been talking about. This was breaking it down to the basic building blocks. So we actually, through our business, we have a 401k arm that helps people manage their 401s and administers them. And the guy who runs it, Dan La Rosa, kind of had said in an offhand way, I love all the content you guys produce, and you're talking about the markets and what's going on and giving deep dives and helping explain it better. But I have just regular, normal 401 investors, and I know that they're not going to listen to a bunch of podcasts about finance in the markets. They're just not interested. And they have other stuff going on in their lives, and they just need the basics just help them understand so they're not constantly tinkering with it or they're stopping saving because, you know, whatever, the market's down, they just need to know the basic building blocks. And I said, all right, because, you know, the way I feel about it is if you can get the basic stuff down, you're 90% of the way there pretty much right, give or take. And then the other stuff, you can kind of fill in as you go. So it's, it's, it's more of a personal finance book than it is about investing. And so I, I told Dan, like, all right, maybe I can write a little white paper. And the more I got into it, the more I realized it probably had to be a book. And so I ended up being around 100 pages and ended up self publishing it so we could have some control over it. But it's, it's just, it's meant for young people are those people who really don't have their finances in order, need to understand how important it is to just save. And I kept coming back in this point from all the numbers I was running in the book, just how much more important saving is than investing for the majority of people. Because when you look at the retirement balances in the country, the number I started the book with, the median retirement balance for people 55 to 60 in this country is like $21,000, meaning half the people have less than that. Right. So for most people, it doesn't matter what stocks or bonds they're picking. They just need to start saving and put the money away. And then you worry about the investing stuff later. And so my whole goal was it's hard to get people outside the world of finance to read this. So hopefully people in finance will see this and know someone in their life that they can give it to and say, you know, I have a son or a daughter. And so we've been kind of gifting it to clients, children, saying, you know, I want to get them interested and get them started, started. And so that was the whole idea and really the importance of getting your personal finances in order before you ever figure out what your investing strategy is going to be.

Yeah, no, it's true. Savings is like high savings rate. It's like the one thing that after 50 podcasts, people are like, that's what everyone has to do. I think one of the challenges is that people, especially people that are more sophisticated and can save. Some of them that are younger, if they get into things like Robinhood, they're getting like this dopamine hit of like, oh, I can make money trading this other super risky stuff. And they're like, who wants to? You know, so when I, when I go out and be like, hey, you know, here's how it works. Save money, buy index funds, keep your fees low, you know, diversify and do that for, you know, 15 to 20 years. And you know what, you're probably gonna be pretty wealthy and be fine. Right? And that's the best mathematically proven way to do this. And they're like, that sounds like, so boring. And like, you know, why would I do that?

You know, And I. And I get a lot of so people, I think the hardest thing, especially for young. And those are the ones I really want help because they still have time. And I have a whole chapter in the book about if you got a late start. But the young people, it's hard if you're 25 years old to picture yourself in 40 years. What am I going to say for retirement for. In 40 years? I have no idea if I'm going to be able to retire, what it's going to look like if I'm going to want to. So the way that I frame it for young people is especially just giving yourself more options. So when you're young, you have the ability to take some more risks, maybe with your career or maybe moving to a new city or whatever it is, could be for a relationship, whatever it is. But if you give yourself a little bit of a financial buffer and put some money aside and save, that can allow you to take some more risks that you maybe wouldn't be able to take otherwise. So it's not just about saving and planning for retirement, although that is important, especially when you can compound over decades and decades. But it's also about the here and now of giving yourself some more opportunity to take a risk here and there that you might not have taken otherwise.

Yeah, for sure. We were talking about this yesterday in this podcast with JL Collins and we were talking about what's your favorite manifesto? And I looked at his list and I was like, it's the one about FU money. I mean I definitely, I had heard that early in my career and I was like, wow, that that's a great idea. I would love to have some FU money. And it's been super helpful personally and I tell my kids about it. Like, you want to have control, you know, you want to be able to not be beholden to everybody else and.

Not maybe not working a job you don't want to. That's kind of soul sucking. Or not work with people you don't want to like. That's, that's the goal, right? For I think for a lot of young people too, they see that I, I hear from young people all the time and they have like coming right out of college, they have life so much more figured out than I ever did. Like, they know the type of companies they want to work for, they know the people they want to, they know the type of companies they don't want to work for. Saying, I would never work for a company like this. And I never had that figure. It took me a long time to come to those conclusions. And the fact that they haven't figured out young, that's great. But unfortunately sometimes it takes time. So I think you have to give yourself the option of getting there and taking a little time and again having some options and maybe like taking a lower paying job because you have a high savings rate just so you can get some better experience or whatever it is. I think just taking some allow you to take more risks and have more options is the idea.

Right. So can you kind of summarize the top things that you think. I mean, so high savings rate, right. What would you like for people getting started that are kind of like zero to early 20s, what should they be doing and getting to get set up.

Right I mean, so my goal is I want everyone to have a double digit savings rate. That's like the goal, like, if you can do that. I mean, the great thing about having a high savings rate, not only that, it, it gives you a margin of safety in the meantime, is that you're placing less money when you become financially independent. Right? The higher your savings rate, the less you have to replace for a life, for your lifestyle. And the other thing is, I'm not saying most people can get there right away because when you're young, you're probably not gonna have that much of a salary. You could have some student loans, you're paying high rent, maybe they needed in the past. And I talk about, in the book, I, coming out of school, I made a very low salary and I started saving like $50 a month into a target date fund. So part of it is, I think just getting those small wins, even though, I mean, saving $50 a month is going to get you nowhere financially, but it helps develop good savings habits so that as you progress in your career and you make a little more money, you can slowly increase to get to your goal. So even if you can't hit my double digit savings rate goal right away, start saving and developing those habits because it's going to be a lot harder to develop those habits later on in life. So if you're used to saving, and the biggest thing for me is just automating it and just having it come out automatically out of every paycheck or on a monthly basis or whatever it is. So you never even have to plan on that. And I think the way to view it for young people, how I frame it in the book, is you saving like a Netflix subscription, right? So every month it's like a bill. So $200 is going to go to my Vanguard IRA or whatever. And I'm not ever going to think about spending that money because it's on autopilot and I'm pretending that it's a bill that I have to pay. My savings is part of just my financial ecosystem. So I never even pretend that I have to save it because if you go with the mindset of, all right, I have my paycheck and I'm going to spend everything there and whatever's left over at the end of the month, that's what I'm saving. That just never works because eventually you're going to spend it all or you have this fleeting willpower and something will come up. So if you just save it off the bat and spend whatever's left over. That's easier than trying to micromanage and figure out whether everything you're spending on is worth it or not.

Yep. Right? Yeah. No, I think it's great. I mean, I think one thing what I'm listening to is like people have to get some big things right. So one is like also debt. And unfortunately for a lot of kids, like, you know, they're going to college, they're making this, or their families are making these decisions. And historically like with student debt, it's exploded. And I know like in our family we're like, hey, we really don't want you to have a huge amount of student debt. And so that guided our oldest to like, we should really think about state public universities, which we did. And that's made it a lot more affordable. But I have friends that you know, hey, my daughter's going to USC and you know, she's in a fraternity and you know, it's like 80, $90,000 a year. And I was like, God, I mean, I can't imagine biting that off.

I think that's, that's a good way for parents to have that, start having that conversation with their children when they're young. Obviously it's hard to as an 18 year old to understand this stuff, but if you can lay it out and say, listen, if you go to community college for two years and then a public school, it's all paid for, you're coming out with no debt. If you go to a public university the whole time, you wouldn't have to get a part time job to help pay for it. If you go to a private school, you know, we're going to pay up to X amount but you're going to have to cover the rest of the loans and you're going to come out and then here's what your monthly payments could be. So I think it's a way to start that conversation again. It's hard for an 18 year old to know enough to make those decisions, but I think it's important for parents to at least acknowledge that and talk with them and be upfront with them about, okay, here's what we can afford or here's what makes sense and here's what we're willing to pay. I think that's a good way to get that first conversation about finances out of the way and get them thinking about that stuff.

Yeah, well, unfortunately it's not easy to see this, but you know, you hear then you have people that have gone through this and then they come out and they have Six figures in debt. And they're. And you're hearing these stories like, well, you know, I'm 25 years old, I've got $130,000 in debt. And you're like, that sounds pretty freaking daunting. And then they're spending a huge amount of their early life cycle, not saving and investing, but trying to dig out of that debt hole, which is really hard to do. And that forces them to delay buying a house or maybe having a family or everything else. So it does start with some of these giant decisions around debt early in your life. And it's a whole family that is involved in that process.

Unfortunately, I talk about this in the book. There's not a lot of great financial role models for people because if your parents have bad financial habits and they're in credit card debt and they didn't save, they're setting a bad example for you, whether they know it or not. And frankly, the whole retirement concept is so new still. I mean, my grandparents were basically came up during World War II era and sort of fought in World War II, that type of thing. That generation is one of the first that really thought about the concept of retirement. But they were thinking they're going to live for what, 10, 15 years maybe, and probably had a pension. And now you're talking. People who are retiring in their 50s could have four or five decades. And so there's so much more that goes into the equation now if you're having to go for two, three, four decades, whatever, and have your money last. And this gets back to our original topic of accepting volatility. Even if rates weren't lower, if they're a little higher, you'd still have to accept some volatility if you wanted your money to grow because you have two or three decades. So balancing that out is much harder than it was in the past because you just didn't need your money to last so long in the past, which is a good thing. Obviously, we're living longer, healthcare has improved, technology's improved, but you still have to. There's more that goes into the planning process than it was in the past.

Yeah, unfortunately. I mean, there's such a huge gap between, you know, the original number you gave, what, 21. You know, people have $21,000 as they're heading into retirement, and, you know, people think, oh, you know, having a few hundred thousand might be good. You know, the reality is you may need over a million dollars and claim Social Security smart, intelligently and manage your costs and try to avoid still catastrophic Health care, stuff that could kind of go beyond, you know, what you, your, your core insurance. So, yeah, so from your book. So like, smart decisions, save money, build a process. That all sounds, you know, fantastic. And then how about, you know, any, any big moves people should consider as they head towards retirement? You know, I think you mentioned there's some stuff on Social Security in here and you know, being smart with your 401k.

Yeah, I mean, like the one thing people always ask is like, how do I know I'm ready to retire? Like, what's my number? People want to have this number in mind just to understand, like, okay, once I hit this number, I'm good, right? And I can. And I've heard a lot of people say, do I sell it all and I sit in cash? That way I know I have enough money or whatever it is. And of course, unfortunately, with rates where they are, that's pretty tough unless you have a huge nest egg. But the way that I like to think about that, can I retire? Question is, you back into it. Instead of thinking like, okay, I'm going to do the 4% rule and think about it in terms of what your lifestyle is and how much do you spend, how much do you need to retire, how much do you spend per year, how much is it going to grow? Is it going to fall? And surprisingly, I actually looked at some numbers they have. The government has some really good data on this through the Federal Reserve or the bea, and they look at how much people spend by decade and it tends to peak in your 50s and then slowly crests and goes over. And as you get older, you're not going to spend the same in retirement. So by your 60s you spend the most in 70s, it goes down, in 80s it goes down even though as healthcare costs increase. So I think you have to be just realistic about what your lifestyle is and what you want it to be. And so for some people, that could mean changing expectations in retirement if they don't have enough saved and they want to retire earlier. For other people, that might mean working longer or working part time in retirement, whatever. But part of it is just understanding your own lifestyle and your spending habits. And as you're closer to retirement, you can plan that out better than someone in their 20s or 30s who's so far away and doesn't know how their priorities are going to change.

I mean, I think there is going to be a future of kind of mini retirements, sabbaticals starting earlier in life as people realize the most important asset you have is your Time and your health. And I think more people are seeing that and you don't get it back. And so you can save your whole life. Then you get to 75, something happens, and suddenly you lose the time. And so why not, if you're 50s or 40s, you want to take a sabbatical, maybe you should do it. And just.

And that's something that I've certainly changed my mind on since I had kids. So I have young kids and I've always been sort of this diligent saver, and I've had to change my mindset from being a saver to actually like, let's enjoy it now. My kids are young. They're not going to be young forever. What's the point of having a big bank account when I'm in my 60s, if. Why not enjoy some of it now? So I think there has to be some balance for other people that just spend everything they have. They have to change that mindset the other way. But for me, it was just, yeah, you have to enjoy some of it now. And I think, especially young people, I think their mindset is going to be different in retirement. Like, you talk about mini retirements, but also maybe continuing to work on stuff that they care about, maybe changing jobs. Because some of the research I found was that, like, the people who retired and then just immediately stopped and just went to the beach and read books all day when they had nothing to look forward to and they shut their brain off completely. They said, the person who did that versus the person who still did stuff and tried to work and think and had something to look forward to. The people who just retired and did nothing actually died at a younger age than people who kept having something to strive for and do and kept their mind busy. So I think people in the future are going to have a different concept of what retirement is compared to it was in the past, for sure.

I think one of the big keys to happiness is purpose. And the purpose is about having something larger than yourself that you're working on. And a lot of people lose sight of that. I see that in the fire community too. People, they're so focused on like, hey, I want to get to financial independence, retire early, okay? And then they get there and they're 45 years old, and if they don't haven't thought about it, then they get depressed. If they haven't thought about what to do next, they can get depressed and be like, okay, now I'm kind of aimlessly wandering around here.

That's what you can get Lost in all the financial talk is like, what am I going to do with myself and my time? And there's only so many trips you can take or books you can read, or time you can spend on the beach. You have to do something with your time and keep yourself active, for sure.

Well, one of the things I say, we talked about dark fiber earlier. I feel like the human capital of people over 50 or people that get to retirement but are still pretty healthy and you know, doing stuff is, is like the next dark fiber. It's, it's this underutilized resource. I mean, we see it in our community. We were having people in our community that are like, hey, I can help you with cybersecurity, I can help you with sales. You know, they're, they're like, look, they're interested in kind of what's happening. And I, and I think you're going to see that across a lot of companies and kind of initiatives in general. All right, well, look, I know we're kind of coming up on the hour here, so I just wanted to, as we, as we wrap it up, as you look forward, you know, any big changes you see for your business or yourself as you sit in the intersection of wealth and technology to some degree.

One of the things we're really focusing on this year, like most wealth managers, we work with high net worth individuals. We're trying to move downstream and work with people who might not meet the specific minimums of wealth management firms. And technology allows you to do that these days, but they still want to talk with someone who can answer their questions. And I think you're seeing a lot of young people who get to a certain stage where they're either making more money or they starting to have some assets. And so we're trying to start to move more into that space and just help people who may not need a full service wealth manager, but maybe still would like to be able to talk to someone and have some questions answered. I think that's the biggest thing for all people. No matter how much money you have saved or how much your income is or what you're doing is a lot of people just want to know that they're going to be okay or that they're on the right track or the right path and have a plan. And so I think for a lot of people, that's the biggest part of it is just knowing that they have a plan that they can follow and the understanding that things are going to change and their plan is going to have to change too. So that's kind of something that we're focusing our energy on.

Nice. How big is your firm right now? Because you guys have done a great job. I mean, I think it was like you were approaching a billion dollars, maybe blunt through that.

Yeah. So we've seen some incredible growth since I started. So I think I started. We had 150 million under management. I think last year. We ended the year about 1.5 billion. Yeah, it's going well. And I think a time like last year in March especially, is when you get a lot of people reaching out. People rarely want to change their advisor or portfolio during a bull market when everything's going well. It's when things start to fall apart that they realize that either their current advisor doesn't have a plan for them or didn't, like, think that maybe this is in the range of possibilities, or they're doing it themselves and they realize, I just don't have. I don't want to handle the stress that comes with doing this on my own. And so you get a lot more people reaching out during a time like that, which makes sense. That's when people start paying attention to this stuff more when things go bad.

Yeah. And just as we wrap up, how are you going to. How are you scaling? So if you're going to handle people that have less wealth, how are you going to, like, what kind of tools and services are you going to use to support them?

So for the investing side of things, from an operational perspective, we partnered with Betterment and utilize their technology where we can build our own portfolios using the own funds that we choose, but use their technology for rebalancing and tax loss harvesting and their Robo Advisor technology. But then also pair that with a financial advisor who can help people create financial plans and. And answer some questions that they might have. And that. That audience or that that client base definitely skews younger, for sure.

That's cool. It's good. I mean, I think we definitely need more technology out here because it's hard. I mean, it's. It's hard to find the scarce resources, the people who know what they're talking about. Right. And there's so many people that need support out there to make better decisions. All right, well, look, Ben, thanks for being on our show. This is fantastic. And Donna Robeson, thanks for being our sound engineer for folks listening. Appreciate your time. And if you made it this far, definitely check out A Wealth of Common Sense Ben's site, and you can find him there on Twitter as well. You can find his new book Everything youg Need to Know About Retirement. And for us, you know, you can follow us on Twitter or check out our Facebook group or check out our tools and servicesewretirement.com so thanks a lot and have a great day.