Money Talk with Carl Stuart

Carl Stuart and Jimmy Maas discuss essential retirement planning strategies and emphasize the critical role of painting stock market exposure through a diversified portfolio, as well as practical debt management and saving strategies.

The full transcript of this episode of Money Talk with Carl Stuart is available on the KUT & KUTX Studio website. The transcript is also available as subtitles or captions on some podcast apps.

KUT Announcer: Laurie Gallardo [00:00:01] This is a special broadcast of Money Talk with Carl Stuart. He is not live this week so he’s not able to take your call. Text anytime though and your question could be answered on a future episode. Carl Stuart is an investment advisor representative of Stuart Investment Advisors. Now, here’s Carl.

Carl Stuart [00:00:23] Welcome to Money Talk. I’m Carl Stuart and you’re listening to KUT 90.5 and the KUT app. If you’re a first time listener, Money Talk is a broadcast about the world of financial and investment planning, where you always determine our agenda by calling or texting, but not today. Not today. We have a special broadcast today, where Mutt and Jeff, I mean, Jimmy and Carl are here. And Jimmy has a long list of what looks to me like extremely intelligent, thoughtful and provocative questions.

Jimmy Maas [00:00:58] So many questions, Carl.

Carl Stuart [00:01:00] So few answers, Jimmy.

Jimmy Maas [00:01:03] So, I thought we’d just talk about some broad, broad retirement goals within the context of where I think most of us are. We are probably, by and large, you know, this is not everyone’s situation, individual, but you know we’re probably going to retire in Texas, by in large in the state of Texas. So, within those parameters, how important is it to have realistic goals for- you live, how should we anticipate dramatic changes in our lifestyle after we retire? Or what is the idea of, I mean, some of us have very romantic ideas, like what’s going to happen when, you know, that day our job finally sunsets and we don’t have to work for somebody else, but who knows? Like, tell me, what are our expectations? Really rea-

Carl Stuart [00:01:55] Really, really important question. And frankly, in my career, professional experience, a lot of people don’t really get down to planning this until about the day before they retire. So it’s really important. My colleague and daughter Lindsay says this this way, when you retire, there are three segments. There are the go-go years, when you have good and you’re able to travel and do neat things. Then there’s the SLOGO years. And then there are the no-go years. And each of those has different expense characteristics. As you might imagine, it’s the first and the third that typically are the most expensive. When you’re in a slow-go year, if you own your home without a mortgage, you don’t have any other credit card or automobile debt, you’re on Medicare and you have sufficient savings plus social security. That’s probably, from a financial standpoint, the least stressful time. But what we encounter, and I’ve certainly encountered in my 47 years, is magical thinking. My wife is a retired therapist. She says the therapist’s joke is denial is not just a river in Egypt. And a lot of people are in denial. We live in a consumption-based society. 80% or 70 plus percent of the All of the economic output, the so-called gross domestic product, is based on consumption. We have ample supply of credit card debt availability, and everywhere we turn, we are encouraged to use that and to spend money. And what I’ve learned is that during our working lifetime, it’s easy to fall into the trap of, I make this much money, and at the end of the month, I’ve got all my bills paid, everything’s fine. That’s what I call an income statement approach. You’ve got revenues, you’ve got expenses, and if your revenues slightly exceed or equal your expenses, everything’s fine. The problem is when you retire, your revenues decline, but your expenses are still there. And so- If anything, they might even go up. They may even go, and so I think planning ahead, there are two or three things to keep in mind. I think we start with the psychological or emotional and move to the financial. The psychological or emotional is, are there things I want to do or things I want to accomplish that I haven’t had, frankly, the time to do during my working career and the pitfall that you don’t want to fall into. Let’s just say you’re a golfer. I’m looking forward to playing golf Monday, Wednesday, Friday, and Sunday, because what the data indicate is you’ll do that for a few weeks and then It’s really. One of the things… That becomes your job. Yes. The thing you enjoyed about golf was, first of all, it didn’t happen very darn often, and you were really looking forward to it. Right, right. And now it happens all the time. Exactly right. Snooze fast. That’s right. So thinking of the people, the psychologists who specialize in this talk about not retiring from work, but retiring to something. Whatever that is. So it really demands a level of self-awareness. What are the things that keep me jazzed or emotionally positive that I find interesting? It’ll actually stimulating, emotionally satisfying to put fancy terms on it. Describe those activities and then think about, do those activities come with a price tag? Because A common activity is I’d love to travel and I’d love to fill in the blank to Sub-Saharan Africa, to France, to Australia, whatever, or a railroad trip across Canada, all those things. It’s smart and it’s helpful to do some work online and put a price tag on that and say that is something that I want to do when I retire. The other thing is to look at your annual expenses, and a lot of us don’t do that, really make a list of the annual expenses of what you spend every month and say, how much of this amount is going to go away when I retire? And come up with some projected annual revenues that you need to just plug that hole without having those special. Uh… Trips in special things you want to do right

Jimmy Maas [00:06:47] Because those are going to be, you’re going to deplete some to take those, to do that special thing or whatever, that reward for yourself, but you’re also going to have day-to-day ongoing expenses that will slowly drain that pot of money that you have.

Carl Stuart [00:07:05] The other thing is, um, we’re all familiar with the term life expectancy, but what I’ve learned is there’s the difference between life expectancy and longevity. Life expectancy is a phenomenon, a mathematical calculation, taking all the people in the population, uh, and then, and, and breaking that down by gender and determining life expectancy. But the listeners to KUT and specifically to Money Talk, are a different slice of that. We have access to good healthcare, and we have good habits. We tend not to abuse tobacco. We tend to not abuse alcohol. And so our longevity is a much longer or bigger number than our life expectancy. And as a result of that, we have to design our savings and investing to reflect that. So it’s not uncommon for me to get a call or a text on Money Talk, which I might add is held every Saturday here on KUT 90.5 just for people to know that, gee, I’m 63. I’m going to retire in two years. I need to really put the brakes on the what what’s in my 401k or in my own, my own investing, but I can’t afford, it’s a common phrase. I can afford a big decline. We’re in a war, Ukraine’s going on. We have all kinds of problems in the country. I can’t afford to take another hit like I did in 2022 or like I didn’t during COVID or whatever the case is. Huge mistake for most investors. Unless you have millions of dollars that you can put in the bank and not worry about, you need to think about the fact that if you’re a female and you’re in your 60s, plan on living into your 90s. Because it’s plausible. And you need to know that. That’s why, for so many people, I recommend that they don’t take Social Security at full retirement age, but they take it at age 70. Because if they live to 90, that full retirement age monthly benefit between their full retirement age, let’s just say it’s 67 and 70, grows at 8% a year. There’s no investment you can make with a guaranteed 8% per year. Unless you have extenuating circumstances, you think you have a short life expectancy, you have life-shortening disease, whatever the case is. So you want to postpone that. So what that means is if you do that and if you retire at 65, you’ve got five years where you’re not planning on taking social security, you’re going to have to draw them in a greater fashion from your savings and investing than if you turned on social security even though not taking it in my. Scenario is probably the prudent thing to do.

Jimmy Maas [00:10:02] I have a question for you that’s kind of off topic. You do this every day. Is it invigorating or depressing thinking about yours and your clients demise all the time?

Carl Stuart [00:10:15] I suspect, I don’t mean to sound like I’m a doctor because I’m not, but I suspect that doctors, just picture yourself as an oncologist, for example. You lose a lot of patience. And you love your patients, but there has to be some emotional distance for you to be able to get up in the morning and practice your skills. So, sure, we’ve had, last summer we had 15 people pass away. Uh… Our oldest she was a hundred and two we went to a hundred birthday party so uh… Yes that occurs and but

Jimmy Maas [00:10:49] At the same time, she lived to 102, so you’ve just talked about the math. It’s got to be somewhat exciting that there’s quite a bit of runway for me and others.

Carl Stuart [00:11:03] These people had invested prudently, one of the big anxieties is I’m going to run out of money. Well, that’s why you start when you’re young and you craft a strategy, whether it’s in your 401k or your own, so that you can be prepared for that. I see it’s time for us to take a break. It’s a great time for you to not call or text, but to stick around because Jimmy and I will I’ll be back.

Jimmy Maas [00:11:29] Money Talk airs every Saturday at five o’clock on KUT News 90.5 FM on the KUT app and at KUT.org. This podcast is produced by KUT and KUTx Studios as part of KUT Public Media, home of Austin’s NPR station and the Austin Music Experience. We are a nonprofit media organization. If you feel like this is something worth supporting, set an amount that’s right for you and make a donation at supportthispodcast.org

KUT Announcer: Laurie Gallardo [00:12:01] Welcome back to a special edition of Money Talk with Carl Stuart. Just a reminder, he is not live this week, so he is NOT taking calls for this show. Now back to Carl, joined by KUT’s Jimmy Maas.

Carl Stuart [00:12:16] Welcome back to Money Talk. I’m Carl Stuart and you’re listening to KUT 90.5 and the KUT app. A special broadcast this afternoon. I’m here with my good friend, Jimmy Moss. Jimmy, what were we talking about?

Jimmy Maas [00:12:29] Well, we were talking about being, uh, realistic about, um, my retirement. You are, I’m sorry, I am sorry. Our retirement. Yes. I’ll fully show you to say that. I was segment fried, came into the studio. I’m, I, I I’m not living in a mansion in the whole country already. I’m probably not going to live suddenly there when I’m 70. Um, yeah, that’s, that should be more realistic. Yeah. I mean, our retirement goals. So. Uh, asset allocation, this is, um, you know, we, we accumulate stuff over time. Like we change jobs. We, uh, you. How should we allocate or portion the allocations?

Carl Stuart [00:13:14] There is a rule of thumb in the financial planning world that’s been around for a long time and like all rules of thumbs that doesn’t mean that it’s guaranteed and it doesn’t mean it’s right for everybody but you got to start somewhere. So at the high level the rule of thumb is a properly constructed portfolio and I’ll come back to what that means. Kent, you can take 4% of the previous year ends value. Not run out of money. Okay, so here’s the ugly math of that. That means that you would want to have a million dollars to generate forty thousand dollars of income. Two million for eighty thousand dollars. Three million for a hundred and twenty thousand dollars. It’s big, big numbers. That’s a lot of money that I’m going to guess a lot people don’t have saved up. I guarantee you In fact, I must say… Probably I’ve said this somewhere every, I don’t know, every year or somewhere, but maybe on Money Talk, there’s an old financial planning joke. That sounds pretty, that’s like an oxymoron, but nevertheless, let me proceed. There’s these two fellas- I’m already laughing. There’s two fellas in a coffee shop in East Texas. And one turns to the other and he says, well, Ralph, I’ve got the perfect retirement plan. And he says this, but he says well, what’s that? He said, I’ve got my money and I am gonna spend it and die penniless. And he says, really? He said yeah, long as I’m dead by Tuesday, it’ll all work out. So that’s the problem. So if you hold- I mean, it’s a plan. Yeah, it is a plan, that’s true. Technically that’s a plant. Because if you think this through, here’s the three things that we should know. How long are we gonna live? What’s gonna happen to the cost of living? And what’s going to be the return on our retirement investments. The problem is we don’t know the answer to any of those. And as a result of that, we have to make some assumptions. One assumption I’ve already talked about, which is we’re going to live a long time. The second assumption is the cost of living is not going to suddenly flatten out because I’m retired. So we have have some realistic annual inflation number in there, right? And that’s the cost living. And we have to have. Reasonable and prudent expectations for the return on our investments. This is the big deal because if you think let’s just use three percent as the inflation number, okay, that means for you to take out four percent and inflation is three percent, four and three is seven. You know I was a math major in college so you want to be making seven or more. Now can you do that by putting it Certificates of Deposit. Treasury securities, money market funds, money market accounts, the answer is a resounding no. And this is the hardest part for people to understand as they get older. They want to get more conservative. One of the problems in retirement planning, I’m going to dig into the weeds, this is a big deal. This is the advent of something called target date funds. They may even be in the KUT 401k. The idea was… When 401ks were invented, they’re called the fine contribution plans, people were given a menu of investments, they didn’t know what the heck to do. So they left it in cash, big mistake. Or they put it all in company stock. Then I remember when Enron failed, and people’s retirements went to zero. Yeah, a lot of examples of that.

Jimmy Maas [00:17:02] Oh, yeah. MCI WorldCom. Oh, oh, yeah, yeah

Carl Stuart [00:17:04] Yeah, yeah, yeah. Through the years. Exactly. So, the retirement plan investment people, the people at Fidelity, for example, they said, we have a great idea. You pick a date, a retirement date, and we’ll manage that portfolio in stock and bond funds so that it’ll be there when you’re 65. So you do that, then as you approach, as you get 50, then 55, and then 60 and 65, they put more and more in bonds and less and less in stocks. And the problem with that, I’ve already touched on earlier, is you end up at 65 with a really conservative portfolio and you’re gonna live another 20 years. And you’re in trouble. So there’s two things that you can do about that. You can game the system by saying, I’m gonna retire in 2030, but I’m going to tell the 401k I’m gonna retire 2045. So they’ll keep it more oriented to the stock market. Or you can select your individual stock and bond funds. That’s, of course. Up to you or up to your advisor. But asset allocation must have for retirement a healthy contribution to the stock market. As I say, because it’s true and I say it all the time when people say to me, I’m worried about the stock markets, it’s just gambling. I said, no, no it’s not. I said, stock market is participating in human innovation. Again, I’ll quote my colleague and daughter Lindsay who pointed out that the iPhone didn’t exist until 2007. And so, yes, we’ll have bad years. Periodically, we have bad year, but human innovation shows up in the value of public companies. So you need to be on that train, and because you don’t know when it’s gonna slow down or run off the tracks or speed up, you need a have a solid permanent allocation. So in that 4% withdrawal deal was maybe 60% in stocks. They’d be 65% in stocks, and that scares people, particularly if we have a down market. They go, you can’t be serious. I just lost 20% of my 401k. Yes, you did, but the fact is, over time, if you want your money to grow faster than the rate of inflation, you either have to go out and buy rental properties, which is impractical and it’s hard work, or you need to be invested in the stock market. So those are the two asset classes based on American history. Which have outpaced inflation. Rental properties, because rents tend to go up most years, not recently, but most years. And so the underlying value of the house goes up because it generates more income.

Jimmy Maas [00:19:41] Yeah. Now the stock issue, maintain your place on the train to continue your metaphor. You stay there when it takes off again. If you get out, you might be standing next to the train and neither of you are moving for a long time, but eventually the train will Yeah, and you’ll be stuck. Yeah So like if we, there’s been some recent headlines that have scared a lot of investors, you know, pick one. So many. So they, if you stay in the market, you stay in the game, you stand a chance of gaining back whatever you may have lost. If you lost 20%, That 20% could come within. You know a few million computer orders on Monday, you know, yeah, and yeah, it’s hard to say when exactly that’s going to to Come again, but you have to be there in order to get it back

Carl Stuart [00:20:38] In fact, there’s a lot of data that show that when the market returns to positive, it doesn’t go up nice slow times, it goes up violently. There’s this amazing phenomenon happening.

Jimmy Maas [00:20:52] That’s what I’ve met with the computer orders on Monday.

Carl Stuart [00:20:53] On Monday. Yeah. Well, I know, but you’re kind of an insider. I’m trying to help the general public.

Jimmy Maas [00:20:56] I’m sorry. Thank you. I apologize for, I don’t know. Again, it’s my retirement that I’m so worried about.

Carl Stuart [00:21:04] Set COVID hit, middle weekend of March, we closed the economy of 2020. Stocks collapsed and they were back to where they were when the economy was closed in 43 days. Now, let me give you another bad case example. We now call it the dot-com bust. That’s looking at the rear view mirror. We didn’t know that was going to occur. We had five. Last to my knowledge in my lifetime and for sure the only time that we had five consecutive years where the stock market was up double digits every year and it had to do with telecom and the internet and it was fantastic and it peaked in March of 2000. It hit the bottom in September of 2002, that’s a long time, but then it came roaring back. Until the global financial crisis in 2008, started in September of 2007, finished in March of 2009, came back again. So we have to have realistic expectations about these inevitable declines that are because things are going on that we don’t know. If everybody knew that we were gonna have COVID, then they could have sold all their stocks and waited until the vaccine came out. I mean, that’s ridiculous. You can’t do that. So asset allocation, lean in. I’m not gonna call it risk, lean into human innovation. That’s the big lesson. And the great thing about not having all that money to invest at one time, if you are in a regular job with an employer sponsored plan or on your own, put money away every pay period and increase it over time. So we suggest if you’re getting a job and you’re just graduating, let’s say from the University of Texas. And you go to work for a corporation that has an employer-sponsored plan, and they have what’s called a match of 4%. That’s sadly, it should be more, but that’s the common one we see. You should be darn sure that you contribute 4% of your compensation to get their 4% because again, high math, that’s 100% return. And then what you should do every year is raise that by 1% until you are up, and it’s It’s painless because you don’t feel it because it’s 1% a year. And you do that. If you change jobs, don’t go back to the four. Do at the level you were doing at the previous employer. The objective is to get it to 10 to 15. Now the earlier you start, actually the funny thing is, it’s math, if you wanted to you could say the earlier start the less I have to put in because I have so much time. The problem is… You get hooked on that level of consumption, going back to my earlier comments, and you’re stuck at 4% the rest of your working career, and you don’t have enough money to retire. You just don’t enough money retire. So start with your first job that, and if you don’t have an employer sponsored plan, either open a Roth IRA or an IRA, because that’s got $7,000 or $8,000 maximum, which is probably a lot more than 10% of your… And do it that way. See, start early. The other side of it is, if you start early, the magic of compounding is remarkable. I mean, I’ve got charts that show what happens if you started at age 23 with $10,000 of savings. If you wait till you’re 33, I’m making this up. You gotta have 15, and at 43, you gotta have 25. Just because you didn’t have time on your side. You just don’t have a time on yourself.

Jimmy Maas [00:24:47] How much is debt working against us as we do this calculus?

Carl Stuart [00:24:51] It’s working very, very aggressively against us.

Jimmy Maas [00:24:54] I’m talking about revolving debt. I know exactly what you’re talking about. Not something that is asset-backed, like a car loan or something like that.

Carl Stuart [00:25:01] There’s most people, if they have debt, they have automobile debt and they have credit card debt. A lot of people rent because of the cost of housing, but if they don’t and they have a house, fine. So if you think about it, when you owe money on a credit card, the stuff that you bought is consumed. There’s no long-term value to a $5 latte from Starbucks. And so what happens is that you are- Contentment. Yes, right. And you’re paying between 20 and 30% interest for contentment. That instant gratification. That’s right. Welcome- Sugar rush. That’s correct. Welcome to America. So what happens is that’s the first one to go after, because there’s no underlying asset. You make that point. I get miles. I get miles with mine. Yes, you do. Congratulations.

Jimmy Maas [00:26:01] I got five miles with my latte. It was delicious. And I can go this far to the next ticket.

Carl Stuart [00:26:12] Now, it’s not that owing money on your vehicle is a wise thing to do, because it deteriorates over time, depreciates, you’re never going to sell it for what you paid for it, and so that’s the next one to crunch, because your debt, I remember, I have a good friend here, I won’t name him, if he’s listening, he’ll know who he is. We have several families in central Texas who have been car dealers that are in their third generation now, and you know their names, and one of them’s a friend mine. And I asked him, I didn’t say who it was, and I’m not going to, don’t run through the names and make me deny it, they’re lied to our listeners. So what happened is, I said, what’s been the, he’s grubbing the business, he is in his late 60s, I say, what has been the change, what have been the changes in your career? You’ll enjoy the first one, he said, the first was when I was a youngster, everybody in our business knew that cars built in Detroit, that the transmission would fail in three years. It was guaranteed. Or a certain mileage, whatever, a certain mile. And everybody knew you had to have it replaced. That worked until guess what? The Japanese showed up and started making really durable cars at very popular prices and Detroit had to wake up. The other one, he said, is financing. He said, what we experience is someone bought, I’ll just use the Texas favorite, a Suburban or a Ford 150, and they got a five-year note, which is amazing. And they come in, they’ve had it for two years and they want a new one, a new vehicle. And we say, well, we can’t do that. And why is that? Because your note outstanding is worth more than what the vehicle’s worth. You said, do you know what they do? They go down the street to the other dealer and get a seven-year note. So they’re always in debt and all they’re ever doing is extending the maturities. So the good thing about cars today, I drive cars for at least 10 years. And if you have to finance it, and you finance it in five years, here’s what you do. When year six hits, you are so accustomed to making that payment, keep making the payment, but make it to yourself. If you have, if you, if have to, I don’t know, make a joke with yourself, a game, open a separate account, open a Jimmy Moss auto account, and dump that payment in there, and let it grow, so when then, five years from now, when it comes time to buy a vehicle. You are gonna put more cash down than you ever would before, and you own that guy 10 years, and by the time the next vehicle comes around, you are in a cash position because you have put that money away. The reason people are so good, great at thinking about home ownership is because it’s a forced savings. You don’t get to choose. You make that mortgage payment or you lose the house. And so the interest you pay over 30 years is a massive amount. But it eventually goes away and now you’re left with the value of the house. So that’s the last debt you pay. Here’s the tricky one. I got this question recently. Which do I pay first? Credit card debt, student debt, or not my mortgage because you don’t have a choice. Let’s make up the third one. Auto debt, students debt, credit card debt. I said, well, the way I think about it is the student debt has a really potentially really high return on investment. Because we know, depending on your chosen career, that the return on a college education is a positive number over a lifetime. So if you have to choose, make that the least that you pay, and let’s get these other ones that don’t have any real residual value.

Jimmy Maas [00:29:52] Yeah, that’s critical. You mentioned one thing you said, home ownership, not, you mentioned this earlier, and we’re sort of picking that up before we go to break, you said renting out homes can be cumbersome, but it is. Real estate is a pretty worthwhile venture has been in recent history here in central Texas. So when my buddy comes to me and says, Hey, I got a line on a house. How tempted should I be? Because I mean, it’s hard to look at, you know, friends and neighbors who’ve, know, made a killing on because they happened to

Carl Stuart [00:30:36] because they happened at the right time. Yeah, well, let me remind you that.

Jimmy Maas [00:30:41] Addition to your own house.

Carl Stuart [00:30:45] That the key to your comment was recent times. In the late 80s and early 90s, it felt like everyone I knew was in the real estate market, the doctors, the lawyers, the dentists, the architects, the CPAs, and I couldn’t stand it. I said to my wife, I’ve got to buy a rent house. And two buddies and I bought a renthouse on East 32nd walking distance from University of Texas at Austin. And everybody said, don’t worry, Carl, God isn’t going to make another acre. And there’s always 50,000 students, you can’t lose. So we bought this house and the rent was $1,600 a month, the market collapsed, and when we sold it, the rents were $800 a month. Now, the mortgage did not drop by 50%, nor did the upkeep, nor did insurance or anything else. And I was reminded of that old joke about the boat owner’s two happiest days was the day she buys it and the day he sells it. But the big deal back then, But when your kid goes to UT, buy a condo. And then four years later when she graduates, sell it and you’ll make money on it. The condo market collapsed around here. And so it’s not always a good investment. Sure.

Jimmy Maas [00:31:58] But the last 25 years, save for the last, we’ll say 2000 to, oh, let’s see, 2004 to 2022. That was a pretty golden era of real estate investment.

Carl Stuart [00:32:11] But what would happen if you happened to, if this broadcast was coming from Southern California, where people’s homes were less than the mortgage. I’m not opposed to it. I just think you have to realize real estate is a long cycle investment. So when it goes down, it goes down for a long time because supply and demand has to come into equilibrium and you need to be living in a growth area. My hometown has gone from 16,000 people when I graduated high school to 9,000 people. There’s no real estate investment in that town that would ever have made you money because demand collapsed, okay? It is literally just housing here. That’s exactly it. So I’m not opposed to it, but the other thing that people who do well in rental properties want, they have plenty of cash flow to service the debt or they own it for cash. And secondly, they have a control-type personality. It’s like being a do-it-yourself investor for stocks and bonds, mutual funds. If you have the personality, then that’s a huge factor because if you don’t, you gotta pay somebody else to do it. And there goes some of your profitability. It’s now time for us to take a break. A great time for you to not call or text because it’s just Jimmy and me today. We’ll be back.

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KUT Announcer: Laurie Gallardo [00:33:56] Welcome back to a special edition of Money Talk with Carl Stuart. Just a reminder, he is not live this week, so he is NOT taking calls for this show. Now back to Carl, joined by KUT’s Jimmy Maas.

Carl Stuart [00:34:13] Welcome back to Money Talk. I’m Carl Stuart, and you’re listening to KUT 90.5 and the KUT app. A special broadcast this afternoon. My friend Jimmy Moss and I are here. Jimmy, what were you gonna talk about? All right, well, we have.

Jimmy Maas [00:34:28] Believe it or not, only gotten to two of my questions. Well, you know, that’s because I can bloviate forever. And I learn something new every single time I talk with you, and we’ve talked a lot, so this is fascinating. Government, for lack of a better word, government programs, we’ll call it. Government retirement programs. We’ll start with what a lot of folks are on here in the state capital. State pension, employee retirement system, teacher retirement system. That is going to give people some comfort when they reach retirement age, but You can reach that retirement age at, you know, the ripe old age of 50. And then what do you do then? But how do you handle that, that disbursement? And how, how, is, how do we strategize around that?

Carl Stuart [00:35:34] Excellent question, and what I call an evergreen question. I actually had something like this in a recent broadcast. So let’s just back up and say, these are called defined benefit plans. And the reason is, the employer defines your future benefit income. And it’s mandatory, you have to put money in, and your employer has to put the money in. Nobody gets to choose, okay? So it’s a forced savings plan. And they invest the money, you have nothing to say about it. And when you qualify, typically through a number of years of service, and chronological age in some cases, you get lifetime income, no matter how long you live. You can choose, let’s say you’re married, you can choose it for your life only, for your wife and your spouse, and you have lifetime income. Now, the liability, your responsibility, lies with the University of Texas, the Employees Retirement System of Texas. The police fund, the firefighters fund, the county and city fund, okay. One thing they all have in common that we all ought to ask ourselves, why don’t they have that at IBM or why don’t t they have it at Dell or why don’t the have that a Tesla or why won’t they had that at Samsung. Because they used to, not those companies, they used too, but it’s such a huge liability that all the private sector said, we’re not gonna do this anymore. And so that was the end of the defined benefit plan in the private sector. My father worked in a hydroelectric power plant until he qualified. And some of our listeners won’t know one of these names of these vehicles. But when he retired, his defined benefit payment plus Social Security allowed him to go from driving Chevrolet’s to driving Osmo bills. Yeah, yeah, yeah. Fine Corinthian leather. Exactly right. And that’s Ricardo Montalba. We should be playing trivia here. Ha ha ha ha! And, so… Uh, IBM said, we put a draw the line in the sand. Everybody who’s who’s been, who’s starting work after today, you’re going to have a 401k. Okay. So the beautiful thing about the defined benefit plan is you can’t mess it up. The challenge is you also don’t get to make it grow faster than the rate of inflation. And that’s money talk for this afternoon. As always, I want to thank Mark for being our producer. Thank you for listening and be sure next Saturday to tune in to Money Talk.

KUT Announcer: Laurie Gallardo [00:38:15] You’ve been listening to a special edition of Money Talk with Carl Stuart. Carl Stuart is an investment advisor representative of Stuart Investment Advisors. And this is KUT and KUT HD1 Austin.

This transcript was transcribed by AI, and lightly edited by a human. Accuracy may vary. This text may be revised in the future.