Shannon McLay is on a mission to clean up the dirty end of the financial planning pool. The Financial Gym founder has seen it all – advisors offering whole life policies to young savers with no children, and people just beginning saving thrown into annuities over a 401k at work. Today we talk about what to look out for in the financial world, how some of the popular buzzwords like “fiduciary” won’t help you much anymore, and what to ask a potential advisor so that you know you’re headed in the right direction.
Before that we share a big headline about the Chinese stock market. Things haven’t been going well in China, while the US market is roaring. Is it time to maybe look overseas with some of your money? How do you think holistically about buying low? We also share a TikTok minute sharing a new way to look at student loans.
But of course, that’s not all. Doug throws out a great trivia question and we take an interesting call from a Stacker in need. FIVE great topics on today’s episode!
FULL SHOW NOTES: https://www.stackingbenjamins.com/financial-fitness-with-shannon-mclay-1470
Deeper dives with curated links, topics, and discussions are in our newsletter, The 201, available at https://www.stackingbenjamins.com/201
Enjoy!
Our Headlines
- China Selloff Leads to Record $38 Trillion Gap With US Stocks (Yahoo! Finance)
- Investors Fleeing China Are Going Big in Japan (Wall Street Journal)
Our TikTok Minute
Shannon McLay
Big thanks to Shannon McLay for joining us today. To learn more about Shannon, visit Financial Planner: The Founding of The Financial Gym. Listen to her hit podcast, Martinis and Your Money Podcast on Apple Podcasts.
Doug’s Trivia
- How much does the average person’s wage increase after they add a workout routine?
Better call Saul…Sehy & OG
- Stacker Paul has a question about optimizing his investments and what financial order of operations he should prioritize.
Have a question for the show?
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- Check out The 201, our email that comes with every Monday and Wednesday episode, PLUS a list of more than 19 of the top money lessons Joe’s learned over his own life about money. From credit to cash reserves, and insurance to investing, we’ll tackle all of these. Head to StackingBenjamins.com/the201 to sign up (it’s free and we will never give away your email to others).
Other Mentions
- TOP 25 QUOTES BY JOHN TEMPLETON (of 131) | A-Z Quotes (azquotes.com)
- Financial Advisor/Coach | The Financial Gym
Join Us Wednesday!
Tune in on Wednesday when you’ll learn how making small, but powerful changes to your money can help you build wealth on a dime with author and financial educator Kimberly Hamilton.
Written by: Kevin Bailey
Miss our last show? Listen here: Can I Control The “Suck” In My Life and Maximize the Upside? (Plus your health and wellness questions answered!) SB1469.
Episode transcript
We doing a toast here.
Toast. I love toast. Mm
toast. Mm. Carb loading in the morning for the wind.
Oh, coffee toast. Coffee toast. You know, it’s funny, my, my stomach just rumbled there as I lift my glass. Let’s do a toast. Why don’t you guys raise those mugs? What are you doing? Displaying it? I have no idea what Doug’s doing.
I feel like he’s crowning. That was my brown trout
circling. The target.
Oh no.
Nobody wants to see your brown trout now. It appear the brown trout is appearing. No,
no, it’s fricking Monday morning. Just raise your damn glass. That’s I did. I did that. Oh, I know, but you’re making my stomach what appeared turned.
That’s what’s really happening. Brown trout on behalf of the Men and Women making podcast in mom’s basement. Even that retro bait dug and the men and women at Navy Federal Credit Union, here’s to our troops. It’s ghost stacks and Benjamin shall we Thanks everybody without the brown trout
references.
What nobody knows is that whenever you, you say that every time, let’s go stacks and Benjamins. I say, thanks everybody. And OG salutes,
not really. That’s kinda the one finger,
but, but nobody knows that. He’s saluting the guy who probably honors our troops more than anybody else. People watch this. Nobody watches a Monday episode.
That’s not about words, it’s about actions. Okay. Okay.
I guess you should have called. I did call earlier when using the phone. Earlier. When was that?
Or
later? When then I, uh, left. Left a message. A message. What number did you call? 2 4 9 0 5 6 7 8. I can’t hear you. You’re trailing
off. And did I catch a niner in
there where you’re calling from a walkie-talkie?
No, it was cordless. Mm-Hmm. You know what? Don’t, not here. Not now.
Live from Joe’s mom’s basement. It’s the Stacking Benjamin Show.
I’m Joe’s mom’s neighbor, Doug, and today you’ll learn the dirty industry secrets that you should know before you hire a financial advisor. With the creator of Financial, Jim Shannon McClay, in our headline segment, stocks are selling off in one huge market. Should you be buying, we’ll dive in for our TikTok minute, maybe a new perspective on student loans plus a stacker who had.
Better just call Saul, see hi and og and then I’ll share some healthy trivia. And now two guys who’ve been power lifting together all morning to bring you the strongest personal finance around. I’m sorry, I just, I pictured you guys in those like little string tank top shirts and it’s, that’s ’cause we were, it screwed.
It screwed It screwed me up. And you were all, it’s ’cause we were really Alright, we’ll back that up a little bit. And now two guys who’ve been power lifting together all morning to bring you the strongest personal finance advice around. It’s Joe and oh Ju
G.
Hey there. Stackers. Doug Wright. We are here too. Po You are. You are. It’s Monday morning. So glad you’re here with us. You found us. Sit back, relax. Welcome to the show that dares not just to cover one topic. No. We’re gonna educate you on probably four different things today. Man. The bar is high. We got Shannon McClay here talking about the dirty underbelly of financial planning and so much more, including, I think it’s
that dirty.
I shower every day, well, every other day.
Mostly OG thought the exact same thing. I thought you were gonna say when you said dirty under, what was the next word you thought was coming? OG pants
Belly. No. Are you kidding me? Really belly.
Unbelievable. You would think about dirty underpants, Mr. Brown Trout. I tried to
cut to the commercial, but I think, I think we still got the words in there.
Less pure humor, please. We’re just trying to move this ahead. Maybe.
Maybe,
maybe og you got another good joke.
Yeah. Okay. So there’s a monk, a priest. Rectum damn near killed him.
That’s a doozy. And we’re
back. We got Shannon McClay here. But first, a big headline.
Hello Darlings. And now it’s time for your favor, part of the show, our Stacking
Benjamins headlines. Our headline today comes to us from Yahoo Finance. This is written by Yahoo. You remember those commercials? I’ve fish noy.
Sorry, nevermind. Carry on. I’m just in my own little world over here. I’m just excited ’cause QuickBooks support help fix my problem today. And I’m on cloud nine.
It is incredible. Uh, something else incredible. China’s selloff leads to a record $38 trillion gap with US stocks. And uh, this piece reads the value of China’s stock market has never been this far behind that of the us.
As the losses continue to pile up in a seemingly relentless equity route. The value of China’s stock market has never, never been, never, never before. They had a stock market. I know isn’t never a big word. The market capitalization of the US stock market’s now $38 trillion. That is a lot of money, though, greater than that.
U-S-A-U-S-A Hong Kong and China put together a fresh record. According to data compelled by Bloomberg, uh, China offers value, but catalysts are just not there. Said Michael Leon, chief Investment Officer at Foundation Asset Management Hong Kong. Meanwhile, the US market has momentum and equity on its side Growing divergence comes to steep losses.
Paint a troubling picture, global investor sentiment toward the world’s number two economy at the same time, US stocks of IT record highs powered by a mega cap technology rally amid optimism. The Federal Reserve will cut interest rates this year and navigate a soft economic landing. Oh gee, you know it’s funny, I was in an online forum.
Some investor was talking about international stocks.
Why would they talk about that in
that forum, though? I’m sure that’s the exact topic of the forum you were in, but carry on
wondering about international stocks and why anybody would invest in these things. First of all, L let’s go that way. Is this more evidence that maybe I should be tilting even further toward the US and away from international stocks?
I think it’s a great example of how you don’t have any idea what actually is gonna happen at any point in time relative to investment performance. I mean, it wasn’t just a year ago that we were in the middle of, oh my gosh, this is gonna be a major recession and the entire global economy’s gonna crater and yada, yada yada.
Market was down 20%, the end of 20, 22, 23. It went up mostly in the last, you know, quarter of 23. Which again, just proves the point that you can’t time it out exactly right. I think it’s a great time to look at your portfolio from a rebalancing standpoint and decide does it make sense to rebalance? If you’re trying to pick and choose different economies in different countries, I think you’re gonna miss it.
I think being diversified by having a little bit of your money in China and a little bit of your money in Brazil, and a little bit of your money in, you know, any o every other economy for that matter, is where the, is where the wind happens. Not by trying to exclude or only include certain different
economies, this doesn’t mean then that it’s time to go heavy into Chinese stocks.
I mean, when stocks are down, it seems like, heck, man, let’s load up. China’s not gonna be horrible forever, will they?
But that’s the point. You don’t, you don’t have any idea, right? We could’ve said the same thing in the late eighties and early nineties about Japan. Oh, it’s down, down 30%, it can’t get worse than this, and it just stayed there for a long period of time.
I think there’s a lot of demographic stuff going on in China too that people are, are somewhat concerned about. But if you look at the, the world through the lens of productivity and where does the productivity come from, obviously the vast majority of it comes from the US but the Chinese economy has about the same output as the Canadian economy when you look at it in terms of, you know, investment output.
So your portfolio of China stocks should be about the same weighting as your portfolio of Canada stocks. But yet for some reason we look at China and go, wow, I gotta, you know, I gotta have an overweight there or whatever. It’s a big economy relative to the rest of the world. Yes. But relative to, you know, each individual place, it still represents a small percentage and everything else is just trying to be market timing, which you could be successful at if you get it right.
But also I,
I know we generally don’t do a lot of macro stuff here, but I am curious about your thoughts, either of you on. General economic impact if China continues to shrink, if its economy continues to shrink, do you feel like we’re have a large enough domestic economy, both from a production and supply line standpoint and other trading partners that we’d be insulated from that?
Or do you see a big impact to us macro economically if they continue to go in the,
I don’t think any of that actually matters because think about it from the company standpoint inside of those organizations or inside of those countries, right? So what is their responsibility? The the, the companies that are producing goods and services in those economies that are doing well or not doing well, have a duty to their shareholders and defacto to themselves, because most of them are large shareholders of their own companies.
So they’re gonna continue to try to find ways to produce their goods and services in a manner that produces. Success for their company. And you’re seeing some of those things already. Some d you know, different things I should say. For example, apple transitioning a bunch of production from China to India because Apple goes, Hey, we can get a better deal, we can have a better outcome for our shareholders, for our, you know, stakeholders if we do it in this way.
So I don’t worry about any of those things because I just believe that all of those people that work at all those organizations are super focused on being productive in their own regard. And if that means, I, I know people who have moved their companies from one country to another, their production facilities from one place to another over the last 20 years because.
Economically, it made more sense to produce it in this place or this place. And that could be the same. You could say the same thing about the United States or Mexico, or China or India or Canada or the us. There’s, there’s always gonna be give and take, you know, with different exchange rates and tax rules and all that other sort of stuff.
And so all those really smart people are gonna try to make really good decisions about their individual company’s results.
You also look at from a macro perspective too, that uh, if we are getting supplies from China for pieces of things that Americans are buying in an economy where companies are struggling, it seems like we would have a better chance of securing better pricing from those, from those companies, which should be a good thing.
You know what’s amazing OG is is that you mentioned Japan. This is a piece from the Wall Street Journal investors fleeing China are going big in Japan. Guess what’s big in, guess what’s big in Japan? Doug, uh, Japanese cosmetics and pop culture have long been hot items in China. Japanese stocks less so.
The fact that this is beginning to change. Chinese individual investors are piling headlong into Japanese shares as their own market flags, both the sign of the times and a big hint as to why Japanese stocks are suddenly doing so well in general. That’s a phrase. Oh gee, you haven’t heard in forever Japanese stocks.
Doing well and again makes it very difficult to predict what’s gonna happen next, like
really well. That’s the whole point of all of this, I think is to, is to recognize that unless you’re trying to do the market timing game, which again some people are successful doing and some people are not, most are not, I should say.
Then your allocation to different places, no different than your, than you think about your allocation to big companies or small companies in the United States. Your allocation to countries should be based on what they produce, give or take toward the global economy. Not like, well I think that, you know, the demographic shift in this country is gonna affect this.
Therefore, you know, once you start using the words, I believe we believe our economists think sometimes you start reading that sort of stuff. It’s just somebody’s guess. That’s just, you might as well just replace that with the word guess. My guess is, and that’s fine. Your guess could be correct or you could just do it easy and own one to everything and not even worry about it.
All this discussion, we’ve had so much discussion about China being strong and now China’s weak. All these discussions about Japan being a stagnant stock market, Japanese stocks getting stronger. Just reminds me of old guy Sir John Templeton. Oh gee, sir. John Templeton was, for people that don’t know, a British American investor, philanthropists founder of the Templeton Prize, if you’ve ever heard of Templeton Mutual Funds, but some great Templeton quotes.
It’s nice to be important, but it’s more important to be nice. Like Templeton would always take a phrase and would turn it around, and of course he’s, he’s best known for saying, if everybody else is looking right, you look left. He says, you wanna become really wealthy, you must have your money work for you.
I like that one. Self-improvement comes mainly from trying to help others. Think about that. If you wanna help yourself, go help somebody else, it’s impossible to produce superior performance unless you do something very different. That’s totally og The Templeton Way was. Can’t do what everybody else is doing if you want superior results.
What he didn’t say though was that being different also can come with some big risks.
Yeah. Well, and back in the day, their big thing was having people on the ground in emerging economies, which made them successful. And back 30, 40 years ago, that helped in terms of information distribution. Right. If you had a person in that community that could say, well, I’m watching this factory being built.
Yeah. You know, I’m watching the, the, the widgets come out of the factory versus now everything is, is, is so uniformly distributed in terms of information that from an efficiency standpoint, you don’t gain a ton by investing a bunch in that local, you know, feel, which, which was kind of their mainstay for so many years.
I wanna end on this Templeton quote, bull markets are born on pessimism. Think about this, when everybody else is pessimistic, that’s a great time. That’s when the bull market’s coming, grow on skepticism, mature on optimism, and die in euphoria. When everybody’s high fiving themself, the bull market’s dead.
Yeah, we will link to more fun from John Templeton and also from these pieces on our show notes page, and also in the 2 0 1 where Kevin Bailey from our team dives deeper into all the topics we talk about on the show. It’s always free, and you can find it at stacky Benjamins dot com slash 2 0 1. Hey guys, time for our TikTok minute.
This is the part of the show where we shine the light on a TikTok creator who is either brilliant or air quote. Air quotes. I said that last week too. Air quotes, brilliant. Doug, do you think this is air quotes? Brilliant.
Here’s what I’m gonna do in 2024, because for the, it seems like the last many, many episodes, OG has turned the tables and says something is gonna be totally genius.
No
you’re not. No you’re not.
So I’m flipping the script. I think this one’s gonna suck. Swamp water.
Well, this is sucks. A brown trout. This is, uh, swamp water. Your brown trout swims in. Is that where we’re I Don’t. Oh man. Neil Brennan. Fantastic comedian. But of course there’s a lot of truth guys in comedy.
And, uh, maybe a new take on your student loans. Realize early on that these, these student loans are basically small business loans and the business is you. And you’re maybe not such a great business. Look, if they call them small business loans, no 18-year-old kid would ever get the loan. ’cause it’s a bad idea for a business.
If you had to go to the bank, to the small business desk and ask you like, yeah, I’m gonna need $150,000, they’d be like, all right, what’s your business idea? All right, here’s the idea. For the
next four years, I’m
gonna get blackout drunk,
but also
I’m gonna get a degree in sociology.
They’d be like, get the out of our bank. Really? That’s fine. I will. But just know that I did have a way to pay you guys back. It’s gonna give you $80 a month. For the next 240 years.
It’s, it’s actually
pretty funny. I’m happy to be wrong on that one. ’cause that was pretty funny. And it’s a great, it’s a great perspective.
That’s exact the guy’s right?
Oh, Neil Brennan, I think for the win right there. And yet, if you actually
do walk into a bank and say, could I have $150,000 for this business idea? They’re like, no, but we’ll give you $150,000 to go get blackout drunk in breed sociology. Would you like one of those? Instead?
You’re like, no, I just want, that’s an option. I need, I, I need a little help with my McDonald’s franchise. You know, I’m gonna go make a million dollars. Nah,
nah. Coming, coming up next. Shannon McClay is a long time, uh, financial advisor. She is the owner of a great company called The Financial Gym, where OG back when they had a physical space, we actually had a meetup with a bunch of stackers in Manhattan.
She was so nice to host us, New York City. Yeah, Shannon expanding nationwide and is on the show to talk about the, the difference between bad advice. The number one person I like talking to about all the bad advice we’ve heard and all the slimy financial advisors out there is Shannon McClay and, uh, Shannon, Shannon is always happy to shine a light on some of the ugliness out there in financial planning world and help point you to, uh, very much like OG does toward, uh, maybe safer water.
So, Shannon coming up next, but as a way to get there while she comes down to the card table. Doug, uh, what’s today’s interview question?
Hey there, stackers. It’s your old pal neighbor Doug. You know, we’re almost a month into the year and I’m proud to say that I’m still keeping up with my New Year’s resolutions. I’ve been going to the gym three to five times a week every week. Well, it, it, they were those two weeks, but I only went once. And, uh, oh yeah, there was that one week where I didn’t go at all.
But you know, other than that, I have stuck to a really strict regimen. I, I would’ve gone more than that, but I’ve been helping Joe’s mom a ton, which is its own kinda workout. Not like that. God, whenever I do make it to the, oh, whenever I do make it to the gym, I like to focus on all the things no one ever thinks of, so I can build muscles.
Everyone else overlooks to warm up. I do three laps around the inside of the gym while kicking a medicine ball ahead of me, and then I do 30 to 40 reps on the neck machine, both sides. The main workout depends on whether I’m focusing on glutes or pecs that day. Then for my cool down, I walk an entire mile backwards on the treadmill.
Kinda like that idea I got from OGs neighbor. You should see the looks I get from both women and men whenever I hit the gym. It’s like they’ve never seen a man’s butt look so good in jeans. Today’s trivia question is, how much does the average person’s wage increase after they add a workout routine? Is it a six to 10%, B, 15 to 22%, or C?
Not at all. I’ll be back right after I iron my sleeveless. Barry Manalow concert T for tomorrow’s workout.
Hey there, stackers. I’m Future Blue Jeans model and guy with the strongest neck in Texarkana, Joe’s Mom’s neighbor, Doug. I’ve been thinking I’m such a natural at the gym. I should get into personal training on the side. It seems selfish not to share my talents. Today’s trivia question is, how much does the average person’s wage increase after they add a workout routine?
Is it a six to 10%, B, 15 to 22%, or C? Not at all. The answer. Prioritizing your body doesn’t just increase your overall health, it also increases your overall wealth. Adding a consistent workout routine to your schedule can increase your income by six to 10%. At the rate. I’ve been adding ankle muscle with all this backwards walking, I could be a millionaire by June.
And now here to teach you the dirty secrets of the personal finance industry. It’s today’s mentor, Shannon McClay.
I’m so happy she’s back in mom’s basement with us. Shannon McClay ISS here. How are you?
I am so great to be back, Joe. Thank you for having me.
I told everybody ahead of time that there’s nobody I like talking dirt about the, uh, financial planning industry more with than Shannon.
I know, because we both have, we’re in it, we’re like two insiders who were in it, who were like, what the hell is going on here? And then we got out. It’s always so nice to talk to somebody else who, who saw it, who knows. It makes you feel less crazy, you know? ’cause you know, there’s so many people there who think it’s great.
You would think though, that we would have, you know, be shaking enough and be horrified enough about the industry. I. We’re both ProAdvisors still.
Oh yeah. The right advisor. I’m pro the right advisor. The problem is they’re a very small percentage of the population, in my opinion.
Well, let’s go there.
Before we go to who the rights advisor is, let’s talk about some of the bad advisors. ’cause that’s what everybody wants, right? Let’s do the dirt, worst financial planning you’ve seen. Okay,
so I have so many stories. I’m like, which, which one? Okay. We have a client who is 30, she’s 34-year-old woman doing well, you know, in her business.
She came to us like probably she came to the financial in five years ago and at that point we weren’t doing investing and she was building her business. She had about $2,500 to save a month. And we’re like, great, here’s what you could do. Go in a robo-advisor. You know, ’cause she had, she had emergency fund already set.
Now we’ve gotta prepare for all the other things coming up. So she said, oh, my family has a financial advisor. Why don’t I ask them who I can work with? We’re like, okay, great. You know, use your family advisor. So we check in, she has a check in a quarterly review. Two quarters later, she’s like, okay, I have, uh, worked with the guy.
Here’s what he set me up in. So $2,500 a month of this woman’s money is going to a whole life insurance policy. But why did I know this is where this system go? She’s a single woman. Like I said, she was in her late twenties and you know, you know these things. Once you start it, it’s like the mafia. You can’t get out because you’re not gonna get cash value for at least what, four, like, five, 10 years?
Something like that. Like when you look at their table. So you’re in for a while. We had client a whole other stories. But anyway, so we know she’s in, once she start, once you start the policy, you’re in, you’re in. We were like, okay, that would not be what we would’ve suggested, but fine. You got your guy. So then a year later, you know, she’s still with us.
We’re helping her on the coaching side and the business side. She’s like, my advisor’s showing me an investment. What do you think pss? It’s another freaking. One of these things like, ’cause she’s got more money. Her business grown. It’s like he’s suggesting she puts another $900 into that. We were like, no, for all the re blah, blah blah.
And she was like, okay. Um, a year later she comes back to us ’cause I guess, you know, she meets with him yearly. She’s like, here’s what he’s telling me to do. It’s a structured settlement plan, Joe. So she wanted advice. Oh yeah. Her accountant told her to open a sep IRA, ’cause she’s got her, her business told her to put, so it’s retirement savings for this woman in her early thirties.
And he suggests a structured settlement plan. We review it even, first of all, the prospectus or the information is, there’s no disclosure language anywhere. I’m like, this should be red flags, right? ’cause anything that’s registered or like monitored by the SEC or FINRA or whatever, that’s gonna have disclosure language, no disclosure language.
And then there’s a part of it that says average returns over times 6%. This is this woman’s retirement account. She’s 30 years old and he’s suggesting she puts something in that’s gonna earn her 6% over the next 30 something years then And be illiquid. Yeah. Emli and all the other things. Right? Right. So I look, I’m like, finally I’m, I’m so angry at this guy.
’cause now three times he’s like gonna gotten bubbled up to me. So I look him up on broker check. By the way, people, if you have a, a broker, somebody or a financial advisor, financial planner, somebody you’re dealing with, if you go to broker check just Google Broker check. It’s a FINRA site. You can look up their name and look up if they’ve had disclosures or any kind of issues.
So I look him up. pss, it says he’s been banned from the industry. Banned. I’ve never seen banned. Yeah. You and I both know there’s disclosures.
Not supposed to be selling anything.
Yeah. Oh, well he’s still, he’s still active. ’cause all these things are insurance products. He’s still active in Florida, like Florida State and the insurance side.
It still says he’s act. ’cause I went there ’cause, and I’m like, what? Literally this guy’s been banned and, and here’s my issue. How are you banned from finra? Securities products, but you can still keep selling life insurance insurances. Don’t do the two, regulators not
connect anywhere. That is incredible, by the way, for people that don’t know what’s a structured settlement,
it’s when people are suppo, like owed money that goes into a trust.
So like they won a lottery or they have, uh, some kind of deal where they’re, they’re guaranteed funding from like a lawsuit or something like that. It, they’re guaranteed a future stream of payments for whatever, like, again, lottery or some kind of structured deal. But you can’t get a lump sum. And so if you have, if you’re entitled to this future flow of funds, you can sell those future fund flow of funds to somebody else and get cash upfront.
But it’s very structured. There’s a lot of these, there’s all this like money to, you know, Joe, you and I both know this, whenever you hear structured. We know that that means money to whoever’s structuring it, and it means you’re screwed to who is ever buying it.
Well, a popular thing that I think maybe a lot of our stackers know is that artists will do this with their catalog.
Right. This was the whole Taylor Swift thing. Her, her music got sold beyond her reach, uh, to a guy that she hated. So she went and remade all her music. He actually bought her catalog. Kind of a similar thing there with the, because he’s buying the income stream that these. Songs provide. And then the whole life insurance policy, frankly, A, it locks you up.
B, it’s forever. Mm-Hmm. It can be a good thing for the right person who is incredibly conservative and thinks they need insurance. Mm-Hmm. Forever, which is 0.01% of the universe, uh, people. But from a 27-year-old woman who
is no children, not married, no children. Doesn’t
fit the box. Yeah. No. What’s even worse about this woman, Shannon, is that her parents rely on this guy too.
Yes. Yes. So multiple generations getting screwed. Yeah. By this product hacker. Yeah.
And then he’s still reaching out to her and this is the reason why I looked him up on broker check. ’cause she forwards the email and I was like, this guy doesn’t even have a signature. It’s coming from a Gmail account.
Like what is happening here? Like, none of this is above board. And this is the thing that’s so frustrating to me, Joe, that you know, his name is Hot
Broker one twenty6@gmail.com.
Here’s the thing that’s so crazy to me, and all of this is, that frustrates me on behalf of all the millions of Americans who deal with people like this, is that there’s so many things that are quote, legal, you know, but not necessarily right, or like really in the investor’s best interest that, that investors don’t know, or like clients don’t know.
Like we, we are telling this woman, it’s, it’s wrong, but she doesn’t know. She’s trusting on the people in the industry. Yeah. To guide her. Like that’s why she has an advisor. So you feel like because you have an advisor, you’re protected, but like, I can’t even tell you how many. We have another client who also, he hadn’t, he was putting $900 a month into a, a whole life insurance policy.
He was 31 at the time. No kids are married. And I asked him, I’m like, why are you doing this? He’s like, I have a friend who works for Northwestern Mutual, and that’s all you need to hear. I honestly didn’t even need him to say that. I, I, I knew, I was just like confirming what was going on. But, so I said, okay, well let’s try to get out of this.
Let’s you know, do you have cash value? Like, ’cause this is not a good thing for you. And he calls, he finds out he has zero cash value. He’s been putting $900 a month for the last two year or year and a half, 18 months. In this thing, he has zero cash value, so now he’s gotta make the Sophie’s choice, right?
Do I keep putting $900 a month into this thing
or pay these huge surrender charges? Or,
or do I walk away? Yeah. Because he has enough money that like, or he is like, or just walk away and I’ve lost what, whatever, $900 times 18 is and he walked away.
Probably a smart move over the long
term, sadly. Yeah, he’s been fine.
He’s recouped it like he went into a brokerage account and, and invested the 900 into the, the stock market and he’s fine. But like, he had to make that call. I mean, how horrible. Right? It’s like, again, a friend of a friend, he thought it was a good thing. And I said, how, and, and I understand when people, I hate hearing how people say.
I don’t know why I signed up for it. It seemed a little, I, it seemed a little too good to be true. I said, look, they are trained, people who sell this are trained. It’s almost like a cult too. They’re like, ’cause they really believe it, that they are trained on how to sell these products. And I’ve personally had them sold to me.
And I remember sitting through one of these things thinking like, oh my God, yeah. Why am I not doing this? Yeah. $25 a month. Like, and all of a sudden my like spidey senses were tingling. And I was like, wait, can I see the returns to, you know, like the structure? And I realized that the IRR on this product between whatever age I was 30 and 60, the IRR, the internal rate of return on it was like 2%.
Mm-Hmm. But from 60 plus, ’cause once you’re closer to dying, they start paying you more. And from that point on it jumped. But I’m like, okay, so I’m gonna earn 2% for the next 30 years.
Forever. Yeah. Yeah. Sounds, uh, like a great, like a great deal for somebody. Maybe not me, you know? Uh, the worst one that I saw.
I had these lottery winners hire me. Mm-Hmm. Because they thought something was bad. Here’s what was going on. He took the money from their lottery winnings. He put it into annuities. And by the way, not one annuity, Shannon. Not one. Which is funny because they could have taken it as an annuity directly from the Right.
The lottery, right. The state. Yeah. So he takes it because for everybody that doesn’t know an annuities, like a pension. And so I
call it a private
pension. Yeah, yeah, it is. So he tells him, Nope, take the lump sum annuities, have these commission breakpoint where the advisor gets paid less. Well, not advisor, the salesperson gets paid less if they go over that break point.
Mm-Hmm. So the commission goes down if it’s, you know, $30 million in annuity. So these people have like 30 different annuities, Shannon. Wow. Just annuities all over the place so that he could max his commission. Oh, no, no, no. It gets worse. Oh no. Then, and these annuities all have surrender charges. Yeah. He sets up income streams from those annuities every year, including surrender charges.
These people are paying surrender charges every year to take money outta these initial annuities and put them into different annuities. My god.
Bam. It’s like an annuity pyramid scheme. I have
never, 16 years as a financial planner, Shannon, I never once, besides this time told somebody they had to sue somebody.
And I said this is, I’m sorry, this is a lawsuit. Like this is clearly a lawsuit. Just absolutely horrible. I’ve, you said people get sucked into this a lot. I wanna ask about a term that a lot of people I think, that don’t know better. Mm-Hmm. Tell people to ask. I wanna ask you about interview questions here in a second, but first I wanna discuss this word.
Mm-Hmm. Fiduciary.
Oh, I knew, I knew that was a word you were gonna say. I knew it. It is an important
word. Yeah, but what’s wrong with the whole fiduciary thing right now? Ah,
so here’s my issue with fiduciary. Nothing against CFP, but they have done a really good job marketing that CFP board has done a really good job marketing on behalf of all their people who they charge money to get the CFP designation.
They have done a really good job marketing about a fiduciary ’cause if you have a CFP, you are a fiduciary. You can be a fiduciary and not be a CFP. You could be an advisor of Merrill Lynch and be a fiduciary. But here’s what I hate about the fiduciary thing. The standard is still really low. Like the, the fiduciary standards, like you’re supposed to do something in the best interest of the client.
But what I’ve seen and what, what the SCC with FINRA allow is a pretty wide range of
acceptable. That right there, Shannon is my problem. Yeah.
We
say at the gym that our, our trainers are your bff, your best financial friend. We said we’re taking the FF standard. So for our investments and our investment portfolios, all of our advisors, myself included, will have money in them and we will be paying the same 1% fee.
So we’re not even doing the best thing for you. We’re also, we’re all in it together. Right. That’s really important to me. ’cause I know like when people are like, are you a fiduciary? I’m like, yeah, I’m a fiduciary. But by the way, you have no idea that that standard is like bss.
It has no teeth. No. It should have
teeth.
It should. I totally agree. Like the way I get the intention of it, and it should be, but what can happen in practice with a fiduciary is still a lot of stuff that doesn’t sit well
with me. Yeah. So stackers here is right. We’re not saying that being a fiduciary is bad. We’re saying that. You can ask that question all you want and people will openly lie to you.
Mm-Hmm. Just openly lie to you. Or they’ll tell you that, oh, well, you know, and squirm around it. Mm-Hmm. That’s not a que. And by the way, we assume people are fiduciaries. In the CFP defense. I love this commercial from CFP, which will lead to how do we interview people, but listen to this, Shannon. People might remember this commercial.
Let me talk to you about
retirement. 401k is the most sound way to go. Let’s talk asset allocation. Sure. You seem knowledgeable, professional. Would you trust me as your financial advisor? I would. I would indeed.
Well, let’s be clear here. I’m actually a dj. No way. I have no financial experience at all. That really is you.
If they’re not a CFP pro, you just don’t know. Find a certified financial planner professional who’s thoroughly vetted at let’s make a plan.org. CFP. All right. So CFP has has, but they do have a point there. People are judging this guy on his sales pitch, right? Yeah. He says the right terms. He does. He makes the right move.
He’s wearing a suit. Yeah. If you can
say jargon with confidence. Then, yeah, I, I totally know what that commercial is like. He just said jargon confidently.
But it happens all the time. And there were so many times when, and don’t get me wrong, I, I think I was really good at my job, but people would tell me, well, you’re the only person I talked to.
I didn’t talk to anybody. First of all, what interview questions should we ask? The people aren’t asking.
The one I love is, how do you invest your own money and can I see your investment portfolio? I love that one. ’cause when I was at Merrill Lynch, I saw it all the time. Guys would invest their own money one way and in certain products and like laddered CDs and stuff like that.
And then they would invest their clients and, you know, see share funds and like structured notes and all these things that I know have a lot of fees in them. And I was like, okay, do your clients know? And, and I would say to them, like, how, how do you sleep at night? Like, how do you. How do you do this? And obviously they slept really fine and they were okay with it, but it never sat well with me.
And I, I would tell clients to ask me that. I said, because this is a person who’s investing your money. And I would say, I don’t think they have to have a lot of money. Right? They could black out their investments or they could be transparent and say, I’m building wealth, or I don’t have it. But that person’s thinking about for themselves.
Like why would they do something differently for you? And I, because I just see it all the time. And that’s why I said it’s really important for us here to eat what we’re serving because I want you to sleep at night. I’m not gonna sleep at night ’cause I’m gonna worry about your portfolio, but that’s not your job.
And this is the thing that frustrates me. People hire a financial advisor because they need help or whatever. Or a lot of times we saying we’re hearing this from clients, they also really wanna be educated too. Sure. You know, they wanna know what’s happening. Especially the younger generations, they wanna know.
And what I’ve seen is that advisors don’t really wanna educate their clients or a, maybe they don’t know how, ’cause they’ve just been reading the script so long and maybe they don’t even know what they’re saying. Yeah. But two, they have this fear that if their client knows more that they don’t need them.
And what I say is our clients actually need us more. The way I think about it, and I’m telling our clients is like, look, if we’re gonna invest for you, we’re driving the car. We’re, we have discretionary authority in accounts. We are driving the car, but we want you next to us, like we want you as our ride or die.
We want you in the front seat. We wanna explain where we’re going to, whatever degree you want, but we want you to learn and know because we know that even though you’ll know everything that we’re talking about, you’ll understand asset allocation, why we’ve got dividend paying stocks in here or not. We want you to know that that doesn’t mean you wanna drive the car.
Yeah. Just because our clients have knowledge and they get what’s happening, doesn’t mean they still wanna drive the car. They want us to
do it. I love that analogy. I used to use a similar one that, you know your money’s like your sheep. I’m a good shepherd, but they’re your damn sheep. They’re not my sheep.
Yeah. And so you gotta know how this works. And if, by the way, if I get hit by a bus tomorrow. I want you to be better off with your sheep than before I arrived. We had a guy in town who always said that he wanted to educate clients. And then in the early days before I knew him really well, we’d go to lunch.
’cause he was one of the few people I knew who was in the industry when we moved to Texarkana. Mm-Hmm. And he would just constantly complain about his clients were calling him, asking him how stuff worked. And I’m like, didn’t you say you wanted to educate
people? Yeah. If you teach people how to fish, and this is the thing we’ve been doing at the financial gym for the last 10 years, we’re educating them on their investments.
Like we haven’t been investing for them, but we’ve been educating them. And what happens is when we’ve had huge market disruptions the last few years, our clients aren’t calling us crying. Our clients are like, it’s on sale now. I should buy it. Right? Yeah. Because we’ve educated them. You, you know, there’s a lot of advisors out there when markets go wacky and it’s scary and the, there’s a lot of volatility.
Great
time to sell annuities. Yeah.
There’s always, it’s always a always be selling annuities, right? There’s things, people who feel like that, but, but those are the times when the clients are calling the advisor ’cause they’re stressed, because they haven’t been prepared for what’s gonna happen. And, and they’re stressed out.
And if you just advise your client, like we tell our clients, it’s putting your money on a rollercoaster. It is not in a checking out. You are gonna, it’s gonna go up and down. It is supposed to. That is how investing works. And some rollercoasters are more extreme. There’s some that are in between and some are kitty coasters.
But like, it’s gonna happen. And so you just have to prepare for that. Especially younger generation like Gen Zs and millennials. This demographic has a lot of financial headwinds and under investing and not going aggressive enough. And these early stages when they need to because they’re afraid is not a good look.
They need to be
aggressive. Yeah. You should be afraid of the fact that your money’s not gonna be enough. Yeah. Not afraid of the rollercoaster. What I love is that, and I think you’re focused to use that rollercoaster analogy, is advisors telling you what type of rollercoaster you’re on. Yeah. And that it’s, okay, this has been tested, this is a time tested rollercoaster.
You’re not gonna die on this rollercoaster. And, uh, we’re gonna, you know, thousands of people make it through this rollercoaster every year.
The only way you die, just like in a regular rollercoaster, is if you jump off too soon. Jump off.
Yes. I’ve had those thoughts before. I mean, I’m, I’m not even talking about the stock market ’cause I’ve had those too, but on a real rollercoaster, I’m like, I just want to, can I get off?
Why did I do this? Yeah. Why did I do this? Usually about three quarters of the way up that hill. Right. You’re like, holy cow. Yeah. Exactly. What did I do
to
myself? What should I have already handled before I go looking for advisors? We get this question all the time, Shannon, like, do I need to have some of the basics down?
Do I, what should I have known ahead of time? Yeah,
I mean for me it’s what are you reaching out to the advisor for? Why do you feel like you needed a third party there? Are you looking for financial planning, like somebody who’s gonna put all the pieces of the puzzle together for you? Or are you looking for somebody who’s just gonna invest, they’re just gonna do one piece of your puzzle and you’ve got the rest of the piece together?
And then also, what monies would they invest and how, because you know, a lot of times people are like, oh, retirement, there’s other investment opportunities, but other than retirement accounts and how are we planning for that? And for us, I don’t love paying somebody 1% just to manage your investments. I don’t feel like that’s a great use of somebody’s money.
But now if you’re paying 1% and they’re gonna look at all the puzzle pieces and be true financial planners and say, I’m gonna. I’m gonna worry about insurance for you. There is good insurance, there is insurance. At the right times. I’m gonna think about how you’re saving. I’m gonna think about how much you should be making.
I’m gonna help you plan for where you’re going, all this kind of stuff. If you’re doing that, then yeah, that person’s doing a lot of work for you, and I think that fee is worth it. But again, what do you need them to do? And can they do that? I, I’ve talked to a number of people in this process as a, of us setting up our RA that have said to me, I wanna bring my money to you guys once you open the doors.
Because I’ve asked my advisor, especially the last few years with inflation going up, a number of people have said, I’ve asked my advisor for help with budgeting. And they’ve said, no, we don’t do that here. Wow. Okay. Well there are advisors who will help you with budgeting. I think that’s really important to understand when you’re going into the relationship, what are you expecting out of it?
And I think you should expect a lot of the relationship.
That’s a good point. Lots of advisors do different things to be clear about what you’re actually getting for the money. Mm-Hmm. It drives me crazy when I see people say, well, the first thing you get to ask is what they charge. And the first thing to ask is, what do I get?
Yeah. And then do the fee and go, okay, is this a reasonable number? Because to your 0.1%, for some people I, I know people that are screwing people when they charge 1%. I know other people that are delivering so much service that 1% is a phenomenally low fee. Right. Phenomenally low. ’cause they’re adding to the bottom line.
That brings up another topic. By the way, as you were talking when you were talking about there are good insurance products. I think generally for me, you know, we talked about these bad advisors, that one advisor you talked about at the top of this discussion. Really people that lead with product, I think are people you need to avoid.
Yeah. Right. If they start answering your question with, oh, we got this product, you’re like, what do you know about me? Yeah. Like start with process.
Right. We, I, I said, um, we had one client say that, that she was talking to a guy and he was like, yeah, and we’ll, we invest in Tesla. And she’s like, okay, I could buy Tesla on my own.
You know, like, okay. That’s so great. I’m gonna love that. I mean, some of the stories I’ve been hearing, ’cause we’ve, I’ve been talking to some of our clients about this is, is crazy. What I say is. We’re financial planners. At the end of the day, we’re looking at all the pieces and stuff and I said, I like to think of our adult lives like a road trip from New York to California and New York is starting out and California’s retirement.
It’s our job to get you from New York to California, make all the stops along the way you wanna make and live in the house you wanna live in. When you get to California, part of the process is knowing what stops are we gonna make. I say, if you wanna have a kid, kid is Disney World. That is Orlando. That is the ultimate expensive off the beaten path.
Detour to California. I have one of those. I did one trip. I’m good. But like, great. Okay, we wanna do that. Well, maybe we’re not gonna see Seattle. Maybe we won’t see Chicago. But as long as you know, and I’ve told you and you’re prepared, then great. You wanna start a business. Okay. That might set you back up to Vermont.
You’ve got student loan debt. Maybe we’re starting in Canada. I don’t care where you’re starting. It’s where you wanna go. And having a good financial planner and somebody who is driving the car and knows all the things that come together. I tell clients, we want you to get you to financial independence, which is Colorado, right?
Like let’s not try to get to California, let’s get to Colorado and then have fun. To your point, Joe, it’s like what is a product gonna do if you don’t know where somebody’s going? And that’s what I tell clients. I can’t invest for you. I can’t give you any advice if I don’t know where we’re going on this road trip.
’cause that’s half the battle.
That’s why all the stories we shared at the top were about square pegs, round holes. Well, that and people ripping people off. I guess I, I guess maybe a little bit, and by the way, as a side note, I will still state here for the record, Shannon, people don’t even know we’ve talked about this.
You don’t like Disney ’cause you did it wrong. I’m, I’m just, I’ve told you that 30 times. You did it wrong. I know. And you still blame the mouse. It’s not the mouse’s fault that you messed
it up. She was so upset that I called Disney the seventh circle of hell because all it’s as hot as hell in the summertime.
’cause it’s the swamp all. Well, there you go.
Wow. You went to Florida in the summer and
all it is is parents and kids breaking down all day long. That’s all.
It’s, we’ll fight about that later. Shannon, you have been. In the financial gym as, as the company that doesn’t handle money for other people. A lot of people don’t know what an RIA is, but now you will be handling money for people.
Uh, why the change?
Honestly, because our clients have been asking for it. So up to this point for last 10 years, I say we’ve been backseat drivers. You know, we just, hey, you know, in the, in the journey, we’re like, here’s an idea. And when it comes to investing, we’ve just had to send our clients off to robos or.
Their parents we’re calling them the Gary’s, their parents, Gary, or having to do it themselves and making some questionable choices. And we’ve just had to sit in the backseat, kinda like, Hmm, I wish they would let us drive the car, and our clients have been asking us for it. So we’ve spent the last 10 years building our client’s wealth, helping them overcome, get outta debt cycles.
Start having first generational wealth or you know, building their own wealth. And it’s a natural next stop is like, can you manage my wealth or help me with this because I don’t wanna drive the car in this part of it. Like I’m driving it in the rest of my life. Like I’m, you know, saving, I’m doing my job, I’m doing all these other things.
Can you drive the car? So it’s honestly been out of massive demand from our clients
and I think it’s uh, wild that this is the last stop for you where financial planning was first. Because the biggest misunderstanding that I see well in our own basement Facebook group is people going, well, I can beat an advisor with an s and p 500 phone.
I’m like, you clearly don’t know what an advisor does. Mm-Hmm. Because you’ve been doing financial planning forever and having zero to do with the s and p 500 or an
index. I saw this when I was at Merrill Lynch and this is why I left Merrill for the gym. ’cause I would do plans for people and I would say, okay.
Here’s what the market’s gonna give you. Let’s just say six to 7% on average over time, I need you to be saving, right? And here’s what you’re gonna do. And what I would say is like, so if I’m asking you to save a thousand dollars, your investment portfolio is gonna make what? 60 to $70 a year? If I could get you to save a hundred dollars a year, that’s a 10% return.
If I could get you to save 500, that’s a 50%. Like having the money is the hardest part. The investing is easy. I just met with clients, they’ve been my clients for seven years. They came to me because they were doing it on their own. Their husband invested in a penny stock with their retirement accounts and a brokerage account went to zero bankrupt, right?
Yeah, yeah. Company went bankrupt. So they, I think they lost, officially lost. It was something like 70 or $80,000. Oh, no. Close to divorce. Right. So they, they joined the gym. We get things in line, shoot, they put the pieces in place. They started with 300,000 in net worth. These are two W2 employees. They don’t have a business.
They’re just doing the thing. Parents with two kids, we just checked in. Seven years later, they are up 1.6 million in net worth. Wow. In seven years. And you know what a large contributor is? That is me as their financial planner. Not letting them spend as they’ve had raises and putting more money in over time and having the money to put in.
That’s been half the battle. Not, I mean, yes, they’ve been getting market returns ’cause they’ve been investing it, but Yeah.
But that’s not the driver. Nope. I can’t tell you how many times I’ve met people and they’re like, oh, I got this phenomenal investing strategy. And then I ask, oh, that’s Fanta. Like, you know, not thinking it’s really Fanta fantastic, but, but just wanting to keep the conversation going and go.
Yeah. That’s great. How much money are you doing it with and people? Oh, just, you know, just getting ready to start saving money. Yeah. Huge driver. Huge, huge driver.
Yeah. Saving money is my phenomenal is the Jim’s phenomenal investment strategy. That’s how we
feel. That’s such, such a driver. Yeah. Uh, how do people get ahold of you guys if they wanna dive in?
If they want more?
Yeah. Financial gym.com. You could schedule a free warmup call to learn more about either our coaching or advisory or both. And our warmup call, I always say our warmup calls are free of cost and judgment, so just let us know and, and that nobody, it’s our, our, I love our warmup call team.
They’re our current clients, so it’s a way for them to make side hustle money and oh, who knows our product more than our clients using it. So they are not incented to sell, they’re just incented to tell you about the business.
I love the terminology you use, the warm up call. Yeah. I, I love how all of this is all thought out to be warm and friendly.
Something that the financial industry frankly, is not lacking. Yeah. Could, could maybe have a little more of Shannon McClay. Thanks for hanging out with us and mentoring us on finding good advisors. I appreciate it. Thank you, Joe. Hey, this is Lou Ello from W DW Radio, and, uh, when I’m not at Walt Disney World or sharing my passion for Disney World or eating, I am Stacking Benjamins.
Big thanks to Shannon for hanging out with us. og word fiduciary means nothing so
discouraging. Well, again, it doesn’t mean nothing. It just is used incorrectly all the time. So
yes, and some real ugliness
there. It doesn’t make it bad, but it’s, uh, everybody uses it wrong. So till the SEC or somebody actually gives a crap about definitions and starts, you know, there’s a guy that advertises here in Dallas on TV all the time, and like literally he uses that word.
I. Then in the next ad talks about all of the, uh, uh, bonus annuities that you can buy. Don’t get me wrong, you could be a fiduciary and sell annuities, but I’ve never met one who does. In theory, they exist. It’s like a, you know, the Lochness monster or Yeah, you know, a black swan. Supposedly they’re around.
But, um, he’s not spending money on, on TV to advertise annuities, to not get a commission. Like it costs a lot of money to have an ad on tv. Dude wants to get paid. Can’t do both, buddy. Can’t be both, which
goes back to great advice. You know, the discussion has to be around strategy, not around, uh, and making you smarter, not around, around product.
Hey, time for one stacker. Who’d better call sa. See, hi and og. This is the part of the show where we help a stacker in need. And today we are going to help out. Paul. Hey Paul. Hello,
baseman nerds. This is Paul and I have an order of operations question for you. My employer puts a percentage of my salary into a 4 0 1 A account, and additional contributions into that account are not allowed from me, but I have access to an HSA of 4 57 B of 4 0 3 B, and then my Roth IRA.
Across those four accounts, I could sock away $57,150 in total, according to the 2024 limits. While I technically could max out all these accounts, I don’t want to live quite that frugal of a lifestyle. You gotta enjoy the journey, right? I have been and plan to continue to max out the Roth IRA and the HSA account.
After that, it’s my understanding that it is better to fund the 4 57 B over the 4 0 3 mostly because if I retire early or leave my current employer, I can access that money penalty free. I have a stable employer, so I’m not really concerned about their solvency and the funds in the 4 57 accounts being at risk.
What do you think about the order of HSA Roth IRA, then 4 57 B and then the 4 0 3 B. If I end up being able to fill the 4 57 B, do you think I should consider something outside of these options like a regular taxable brokerage account? I appreciate your thoughts on this and all that you guys do. Oh, and Doug, if you want this torso is willing to support Doug 2024.
I will be traveling to a few states and a few countries this year between now and November.
Fantastic. Oh, you know what, Paul, we will definitely support you supporting Doug with a run, by the way, for people wondering what that’s all about. When you call in, we send you some swag. Normally it’s the greatest money show on Earth shirt, but Paul, we are proud to have a candidate who just, uh, what is, what’s the tagline?
Doug not crooked at all. Yes, there it is. Very much a straight arrow when it comes to heading to the buffet.
Everybody knows they can trust me.
He’s a straight arrow. To the refrigerator. Yeah. Uh, OG Paul getting granular about these different accounts. Let’s start here. He starts off with the Roth IRA out of all these.
So this is the one that really has the backwards taxability, meaning that not a big tax relief plan today, but a tax shelter that’s going to be tax free forever, as long as he follows the Roth IRA rules. So do you like starting there?
Well, I think we have to acknowledge a, one thing that’s different about, uh, about his situation here versus other people’s is that the vast majority of people who have a workplace retirement plan think 401k require contributions in order to get company matching contributions.
And what he said at the very beginning was, was that his organization gives matching contributions without him having to do anything. Oh yeah. So that’s kind of why this is a little screw your than I. The normal way, which is you gotta put some money in your workplace plan and then, you know, do the rest later.
So what he’s saying is, is that Mike, you know, his company contributes money to the matching program, which is what the 4 0 1 A is. That’s basically the match account for his retirement accounts. So they’re putting money in there regardless of whether or not he puts any money in the workplace plan. So he’s taking their free money and then he is putting money in the Roth IRA.
Obviously the Roth IRA is taxable already. It’s already after tax money and that money’s gonna be tax free for life, knock on wood, until Congress changes it, which they haven’t yet. I don’t think they will, but you never know. And HSA, of course, is used for healthcare expenses and we talk a little bit about having, uh, the ability to use it for additional things post 65, you know, without penalty.
So those two places work out to be depending on if you’re, if you’re single or married, anywhere between, I. $11,000 and 15 or $16,000 a year. So then the next question is, is where should I put the rest of the money? Should I put it in the 4 0 3 B or should I put it in the 4 57? And again, the, this is kind of unique.
You don’t see both of these things very often, but in this unique case, he actually can do both retirement accounts. He could literally put $23,000 into the 4 57 and $23,000 into the 4 0 3 B and max out a Roth and max out an HSA and get a company match. So a lot of people would look at that as being pretty, pretty awesome.
Yeah. You know, oh shucks, I have to, you know, defer more money, but you know, you have to work on cash flow. And that’s what he’s talking about. Like, I could do it, but I don’t wanna be that frugal. And what he’s boiled down to here is the difference between a 4 0 3 B and a 4 57. Really the biggest difference is, like you mentioned, the liquidity in terms of the penalty free access.
If it’s pre-tax account, you’re always gonna pay taxes on it. When it comes out, it’s just whether or not you pay a penalty on when it comes out before 59 and a half, there’s a 10% penalty after 59 and a half. There’s not for a 4 0 3 B for a 4 57, no 10% penalty as long as you retire. So to his point, it offers a little bit more liquidity.
The downside is that that 4 57 isn’t your money, it’s the organization’s money. So if they go belly up or get sued or whatever, it’s part of the organization’s assets and could be taken away and no one thinks that it’s gonna happen. I can’t think of an example in which it has because it’s usually government entities or public school systems or whatever, but I can think of scenarios that it could happen.
There was a viciously awful school shooting in Texas several years ago. Such that they just, you know, shut the school down. They, they demolished the school. And it became news again here lately in Texas and maybe nationally because the, the feds finally released their report and there’s all these failures of the first responders to, to do what they’re supposed to do.
And now you’re seeing a lot of lawsuits being added to the already big lawsuit calendar, you know, with the people in charge and the school district and that sort of thing. This is not gonna be an inexpensive settlement, and it shouldn’t be. But if you’ve got a 4 57 as part of that school district, that money is part of the school district money.
You know? So I can see scenarios, I haven’t seen it yet, but I can see scenarios where this money could be affected by outside influences. So you have to know that that’s what you’re getting into.
Well, here’s, here’s the question. You know, he likes the 4 57 better than the 4 0 3 B because of his, uh, flexibility.
But is the 4 0 3 B completely inflexible? If he decides to go early, can he still get at some of that money?
Yeah, I mean, ultimately you can always get your retirement money without a penalty if you’re actually retiring. So the IRS doesn’t care that you take your money out of your retirement accounts.
They care that you take it out when you’re not supposed to. So if you’re retiring, you’re 45 and you’re like, no, I’m retired. There’s a provision for how to take money out of your workplace plans without a penalty because you’re retired. There is the ability to do it. It’s a lot less paperwork to do it out of 4 57.
The last thing I would say about it is this. Usually the investment choices or the investment companies between these two are vastly different. 4 0 3 Bs habitually annuity products, generally speaking doesn’t make ’em bad, but does make them a little bit more expensive. Four 50 sevens are generally mutual fund products.
Doesn’t make ’em bad. Generally a little bit more expensive than, you know, an ETF, low-cost portfolio. So I think that’s another consideration here is to look and see. I. Which investments select which pool has a better cost profile because they’re both probably gonna suck, but you have to figure out which one sucks less.
I think personally because of the liability issue, all things being equal, I would probably lean on the 4 0 3 B because it’s my money. I don’t ever have to worry about it going away for some obscure reason. And if I do retire before 59 and a half, I can have access to it with a little bit of paperwork that doesn’t scare me.
So given the choice I take 4 0 3 B uh, if everything else was about the same.
I love just looking in on your thought process on that, because there’s so many different factors. And uh, Paul, I hope that was helpful because really, and I love the question of what’s my order of operation, if I do have these different, uh, things, these different levers that I’ve explored and that I can, can go to, which one makes sense to use first, second, third?
It’s a, it’s a great question and well, and I’ll give you
one, uh, I was gonna say, I’ll give you one other idea is let’s say that for example, you’re 40 years old and you’re thinking, well, I’m not really thinking about early retirement, but 55 would be great. Why not do your contributions mostly into the 4 0 3 B and just enough into the 4 57 to provide you with that 55 through 59 and a half fee flexibility.
You know, you could back into, how much money do I need from 55 to 59 and a half? Start saving that now and say, well, I’m gonna, instead of doing all my money in the four through B, or all my money in the 4 57, say, well, I’m gonna put. 80% my four three B, and 20% my 4 57 so that when I retire 55 I’ve got that four year bucket ready to rock and roll.
So there’s a lot of different ways to kind of cut this up, you know, depending on costs and your flexibility and, you know, that sort of thing.
Awesome. Thank you for the question, Paul. If you’ve got a question for us, head to stacky Benjamins dot com slash voicemail and uh, we will answer your question as well.
And Paul Moms Frank Gertrude is going to send you a code so that you can head to flying pork apparel and pick out your own Doug 2024 campaign shirt and wear that proudly man as you, uh, as you rock your Stacking Benjamins wear. Uh, maybe it’s some campaign rallies.
Imagine how great it’ll feel when you get the knowing glance for you’re wearing your Doug 2024 T-shirt out and about and somebody’s like, Hey.
And when you realize somebody else knows that little inside. Who Doug is. That’s a feeling that cannot be beaten.
You know, the other feeling that cannot be beaten is the feeling that you’ve got great financial help in your corner. And that’s, and that’s
why it’s made the worst. No, that actually is one of the better segues you’ve done.
I’m thinking, man, did I serve that up well to him? That was pretty good. Impressive.
Uh, if you are here, not because you need to make better financial decisions at the stacky Benjamins dot com slash og, and that leads to his team’s calendar and, uh, is the road to better financial outcomes in, uh, 2024 in the future.
Stacking Benjamins dot com slash og. And now it’s time before we say goodbye to wander out on the back porch and talk about our community. L Lots of people Doug talking about some of our recent shows. A discussion, first of all by Dolly Karen brings up, we had some trivia about Dolly Parton Mm-Hmm. About how amazing her book program is.
Dolly Parton. Announced that for her employees pursuing higher education, they would be covering tuition, costs, fees, and books for everyone in her organization. Of course, there was another discussion about Dolly and our trivia, which was on the number of books that her organization’s given away. And some of our stackers have actually received books from Dolly’s organization.
Stacker Andy, who lives in Vermont, says, Dolly Parton’s Imagination Library’s a great program enrolled. Kids receive a book every month till their fifth birthday. Their paperback editions printed for the program. Summer Classics like a little engine that could, some are new titles, they’re often are printed in English and Spanish.
It’s fun to annoy my kids by reading the Spanish text. Apparently, apparently Andy’s not that great at the Spanish. And man, we had, we had a few, uh, a few stackers. Nathan says, it’s a great program. Got books for the last five years, but no books from Neighbor Doug. Dolly, send them books. You’re not Doug.
Maybe you need to work on that. I’m not. I still have to read them all. KT says my son gets a book every month. He’s two and a half years old now. Our little engine that could was hard back and the first book he received, we enjoy reading them. And uh, Ashley says we enrolled our son in this when he’s born in September.
Looking forward to reading him the books, free books from from Dolly Parton’s organization.
Yeah. Another great discussion that’s happening in the basement, Joe, is regarding a Friday episode from a couple of weeks ago with, uh, where Maggie Tucker was our guest and we talked about cost of living in, uh, city versus maybe not a city out in the burbs or out, out in the country.
And that really got a lot of people talking about different pros and cons of it. So that was a. Really fun discussion to watch happen in
the Yeah, I was super happy because when I picked the piece, which, uh, Carrie mentioned was, Carrie mentioned what I mentioned, which was, the piece was a little light, right?
It was basically don’t, don’t live in the city. And I kind of took exception to that. And I don’t even live in a big city, but I was like, really? I was hoping that that would resonate. And I’m glad with a lot of our stackers that, that it did. But truly, oh gee, this is about, you have to take advantage of where you live.
Like if you’re gonna live in a place, don’t just live there. You know, like drive in your driver. Live there. Yeah. Live there, damn it. Right. Be a part of that. Don’t just live there. Don’t just be there. Live there. Community. Carrie said she lives in San Francisco, which Doug? Uh, you call San Fran. Yeah. ‘
cause everybody calls it San Fran.
Yes. Yeah. But you’re supposed to call it ssf. It was, that’s what all the, that’s what all the cool people
could say. Yes. And Jane, Jane points that out. That, uh, Doug you Doug. You messed that up. It was funny. I was listening to the Lions game last week before the big game last weekend with San Francisco.
The big Lions
fan couldn’t even make it to a Barer, his own house to watch the game. Instead was just driving around listening to it on the old AM seven 60
W-J-R-I-I-I-A, I like listening to Dan Miller, number one. I think he paints a fantastic picture. He is great at it. But second was, I was on my way home from a nice getaway weekend in Houston and, uh, made sure that I was on the road.
They don’t have
any, you know, they
probably do. I did wanna get home any later. I wanted to get my kid going. So you’re talking
about two weeks ago when they played the Bucks?
Yes. Okay. When they played the Buccaneers at the end of the game. Lomas Brown, their color commentator, said everybody we’re going to San Fran.
And I immediately thought, Jane’s gonna hate you because nobody calls it Sam Fran Lomas, except everybody. And everybody on the show was calling it. So maybe it’s the Detroiter in this, I don’t know. But back to this piece, Carrie said that, you know, she lives very nicely on, uh, $35,000, $36,000 a year in 2022.
Lived on $36,000 last year. She spent a whopping 41,000. She actually said she’s gonna cut back from 41,000 living in a high cost living area like San Francisco. Wow. And she loves it. Wow. Gotta live where you, where
he lives. I think you gotta have experiences on both ends of that. I would suggest trying 40,000 a month just to see what you think about that lifestyle.
Give it a whirl for a year, then decide,
Hey Carrie, why don’t you just fomo the just, or just YOLO this fomo. There you go, FOMO and yolo. But why don’t you just yolo this and, and, you know, next month, just go ahead and blow the annual budget and then see how it feels. Yeah. See how much I did learn that when I was in Houston, I went to the Museum of Fine Arts and do you know how much great art around the world was created by people that were into debt by their eyeballs?
Like I felt like as I was reading about so many artists, they’re like, yeah, uh, he had to sell this painting so he could get food to live. It’s amazing how some of the greatest pieces in history were created outta desperation. That’s the power of compounding. Yeah. So Kerry, what we’re saying is if you blow 40 grand in a month, you might be in the Museum of Fine Art after that.
Thanks to everybody who participated in that. By the way, if you want to join our little community online, it’s the Stacky Benjamins basement. If you just go to stacky Benjamins dot com slash basement, you’ll see a URL there or a link that will take you right to our Facebook group. You’ll apply to get in, and, uh, we’d love to have you join the chat too.
All right. I think that’s gonna put a pin in it for today. On Wednesday, the amazing, Kimberly Hamilton, who I met at this year’s FinCon joins us. She’s gonna talk through the amazingly personal experience of, of buying a house and different for everybody. But there are some rules if you’re gonna be a homeowner that you should follow.
And Kimberly’s gonna walk us through some great financial. Management tips while we talk about buying a house. So whether you’re looking for better ways to just manage your money or you are thinking about buying a home, we got you covered on Wednesday and more, and the joke off is back Doug on Wednesday, of course.
Ah, the next round. Yeah. Alright, that’s gonna do it for today, except this Doug. What’s on our to-do list? Well, Joe,
what’s been stacked up on our to-do list today? First, take some advice from Shannon McClay. While the fiduciary question sounds great, you’re gonna have to dig deeper. Does the advisors start with a process?
How do they work towards helping you think better about your goals? Those are keys to winning, and you need advisors who help you win and not just who are selling products. Second, the Chinese economy looks like a buy because it’s low. Stocks are low for a reason and better to know that reason and think what could go wrong rather than trust that you’re going to be right while all the pros think the opposite.
So what’s the biggest to-Do never ever tell Joe’s mom, you think you could bench press her? She won’t let you try, and she’ll somehow take it as an insult when you reassure her that you can lift a woman of her size. It’s not a great phrase to use.
Thanks to Shannon McLay for joining us today. You can find out more about the financial gym@financialgym.com. We’ll also include links in our show notes at Stacking Benjamins dot com. The show is The Property of S SP podcasts, LLC, copyright 2024, and is created by Joe Sulci High. Our producer is Karen Rein.
This show is written by Lisa Curry, who’s also the host of the Long Story Long podcast. With help from me, Joe Kate Yakin, Karen Rein, and Doc G from the Earn and Invest podcast, Kevin Bailey helps us take a deeper dive into all the topics covered on each episode in our newsletter. Call the two oh one.
You’ll find the 4 1 1 on all things money at the 2 0 1. Just visit Stacking Benjamins dot com slash 2 0 1. Wonder how beautiful we all are. Of course you do, but you’ll never know if you don’t. Check out our YouTube version of the show Engineered by Tina Eichenberg. Then you’ll see once and for all that I’m the best thing going for this podcast.
Once we bottle up all this goodness, we ship it to our engineer, the amazing Steve Stewart. Steve helps the rest of our team sound nearly as good as I do right now. Wanna chat with friends about the show later? Mom’s friend Gertrude Stacey Doe and Julia Garib are our social media coordinators, and Gertrude is the room mother in our Facebook group called The Basement.
So say hello when you see us posting online to join all the basement fun with other stackers, type Stacking Benjamins dot com slash basement. For more interactive fun, join us on Instagram. Every Tuesday and Thursday for our Instagram lives, Kate Yakin and Joe host those weekly. Not only should you not take advice from these nerds, don’t take advice from people you don’t know.
This show is for entertainment purposes only. Before making any financial decisions, speak with a real financial advisor. I’m Joe’s Mom’s Neighbor, Doug, and we’ll see you next time back here at the Stacking Benjamin Show.
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