Real Estate Happy Hour Show Episode 34
Watch the Real Estate Happy Hour Show - Episode 34!
In Episode 34 Collier Swecker & David Arnette talk about how Elon Musk Continues to Dream Big and use Capitalism to make the World a Better Place | How Underemployment is Affecting More Recent College Graduates | Is Your Retirement Savings Enough Money to Get You Through Your Longer Retirement Years | And the guys Answer a Viewer Question about the Effect that Mortgage Insurance plays on the Interest Rate a Bank Offers when they are seeking out a new Mortgage. Of course, there the guys will talk about the stock market and everybody’s favorite - College Football Picks!
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Collier: (Music in the background) Welcome to the Real Estate Happy Hour Show!
David: Man we’re back! It’s October aw no, November 1, I’m sorry.
David: Halloween yesterday, that’s the last day of October.
Collier: It was, it was! And hey Sailing, hey, why are we listening to this? (Music in the background)
David: Oh, this is a little criss for cross.
Collier: Look, yeah right, oh yeah.
David: I’ll be sailing away.
Collier: You’ll be sailing away next week, what ship?
David: We’re sailing away on the Reflection.
Collier: Celebrity Reflection.
David: Celebrity Reflection.
David: Man, that’s gonna be nice looking forward to that, so I just want.
Collier: Man, your, your staff will be here right?
David: One of, oh yeah everything will be covered here, I just want to.
Collier: Oh, you just want to rub it in, it’s what you wanted to do.
David: Just wanted to let everybody know, that we’re excited about that right?
Collier: Oh, oh yeah, the world’s excited about you getting to go in nine days you’ll be in what? Central America?
David: Grand Cayman.
Collier: Oh yeah? Great diving spot.
David: Cozumel, Costa Rica.
Collier: Costa Rica?
David: Costa Maya.
Collier: Man, you’ll be on all the Costas.
David: A lot of Costas.
Collier: Maybe you won’t come with everybody coming up, you know that way if you need to.
David: I might, I might have to just skip.
Collier: Don’t get kicked off the boat ‘cause you played the roulette a few times.
David: Yeah, that’s right, that is right so, so, that’s what we’re doing, next week yes, they was Halloween there.
Collier: Man! What a, hope y’all had a great Halloween, I mean the candy this year, better than most years, people didn’t skimp.
David: They didn’t?
Collier: No raisins in the box, as your, in the basket, whatever you call it.
David: What about the, what about the pretzels? Did we have any pretzels?
Collier: No pretzels, no apples either with a razorblades, which I know you’re fond of.
David: Oh, we don’t want those they’re dangerous.
Collier: No, no, no, not as many Nerds, I know a lot people like Nerds like yourself.
David: Yeah, I do, I do.
David: One of my favorites and added to Reese’s.
Collier: Yeah, yeah and you know the other one that I don’t understand is have seen this like, do we have to bastardize every candy bar? Like, I like Butterfinger, you know just a regular old Butterfinger, but now they put a peanut butter Butterfinger.
David: They gotta, they gotta.
Collier: But it’s not good!
David: Jumpstart sales somehow, right?
Collier: (Laughter), I mean I guess you could put peanut butter with everything right?
David: Man so, what happened last night is, you know obviously in perfect, in typical fashion we were last minute to the, to the.
Collier: Costume game?
David: To the costume ideas so we had to make some adjustments on the fly, that ended up as bumble bees.
Collier: As bumblebees so, this guy is sitting there, you were wearing a onesie.
David: Onesie, bumblebee onesie, it was nice.
Collier: Man! Man oh man, I mean it was very, it was hey.
David: Good times.
Collier: Courtney looked amazing, ravishing, you looked like a dude.
David: In a bumblebee suit.
Collier: In a bumblebee suit.
David: (Laughter), yeah.
Collier: Yeah, yeah, so.
David: That’s pretty much what it was.
Collier: So I mean, absolutely and the cool is you didn’t well, the only thing that would’ve looked cooler on you and one of them blow up things, you know the ones that have the little engine in or air?
David: Yeah, yeah.
David: The Stay Puff Marshmallow Man from “Ghostbusters”?
Collier: Yeah, Stay Puff Marshmallow Man.
Collier: Man, oh man.
David: Karen knows all about the Stay Puffs, she was a.
Collier: Oh, was she there?
David: She was a Ghostbusters, she was there, she was a witness to the bumblebee.
Collier: Aw yes and she saw you shake it right? Well hey, as we get into this man talk, Elon Musk is making news again, we’ve talked about him before.
David: Yes, it’s all this, it’s all this headline the guy now is trying to bring broadband to the world and it’s just it’s amazing, I mean.
Collier: When you say broadband, you mean Internet?
David: Internet service right, like high-speed Internet service to the world, it’s just crazy when you see this guy get involved with something and we think about, what do you think about doing you know, when you were growing up, as a career?
Collier: Well I mean, astronaut but I knew that wasn’t gonna happen.
David: I mean, what kind of problems?
Collier: I never really tried to solve problems.
David: What kind of problems did you plan on solving on a daily basis? This guy is building a tunnel in Los Angeles, he’s bringing Internet to the world, electric cars, solar panels.
Collier: Yeah, solar panels, he’s big on space acts.
David: Space travel, I mean.
Collier: The guy I mean, probably.
David: Thirty sixth.
Collier: Thirty sixth.
David: Yeah, thirty sixth richest man in the world.
Collier: Yep, worth about 22 million dollars.
David: Billion, billion.
Collier: Billion, sorry, all right billion, sorry.
David: 22 billion.
Collier: That’s a big difference.
David: Billion, yeah, he’s not doing much with 22 million.
Collier: Twenty two millions like you, twenty two billion.
David: Billion, yeah.
Collier: Oh, but you what’s interesting as we were looking through this stuff as you know, what drives people and you know I was reading a lot in his bio, about you know he was bullied in school, but very driven to find a better way of doing things you know, he was catching a lot of pressure from his folks about you know, just doing what everybody else did right? Not solving problems probably, but going to school in South Africa, just stay here and he, I thought it was a great quote that he had, regarding moving to the United States and he said: “I remember seeing that America is where great things are possible, more than any country in the world”.
David: Yeah, yeah, I’ve read some stuff about him, I know, crazy work ethic, you know he’s, I’ve also recently read that he had fired a bunch of people for, for being slow, that’s another thing, he is.
Collier: (Laughter), ah.
David: He is crazy I think, I forget what it was.
Collier: Hey, he probably fired you for wearing a bumblebee outfit, but I’m just saying.
David: Yeah, more than likely but, but yeah he’s been very difficult to work with from what I’ve read, he slept in his office when he was younger.
Collier: And he wonders and he also says what, he’s been through three marriages essentially?
David: Yeah and he will, he will crank deadlines up if you think it’ll take you.
David: Two weeks, he’ll make you do it in a week, I mean or less.
Collier: But it’s working! It’s changing the world!
David: It’s working, it’s working.
Collier: And it’s changing the world as we know it, really I mean because what , the thing is he’s solving real problems.
Collier: That are out there and much like I think Steve Jobs did, you didn’t know you had the problem until he starts telling you that he’s about to solve it.
David: Right, right.
Collier: And then you go hey! I guess I’m excited.
David: Yeah a lot of mazy things, two degrees physics and economics, so, it was part of the original company that turned into PayPal, that’s where he made most of his early money, right?
Collier: That’s crazy and to think, and when you go over that list like you said, Solar City, Tesla, The Boring Company, all these companies that, that we’ve heard of which is crazy. Hey Kar! You know so, I think that, that Elon is one of those guys and he in his, don’t give his you know, everybody we talked about Donald Trump occasionally here, his don’t give a stuff meter, it’s off the charts.
Collier: Elon’s much of the same, right?
Collier: He doesn’t care what you, I mean they’re trying to get the dude for smoking weed and he does not care, right?
David: Yeah, he smoked weed on a podcast, .
Collier: Yeah, on a radio podcast that has no visual really, right?
David: I think that, that they tried to take him out some rolls of Tesla, he doesn’t care.
Collier: Oh no.
David: He doesn’t care what you do to him. Man, let’s see moving on, many grads underemployed after college so, so, how did you find this story?
Collier: Well, looking through a number of areas that we look at every week, including Money Magazine this month, Wall Street Journal that I read every day, Wall Street Journal’s been talking about this, and you know I’ve been trying to find reason into our real estate market, wat’s happening to us all right? and, and why are we so slow right now and a lot of it is people are running into some financial issues not relative to mortgage, but relative to their families, right? They’re making enough to get by, but that excess is not there and one of the reasons that they’re talking about is what we call underemployment, special with those twenty-somethings, those early 30’s, they’re getting their career going. And what underemployment really is the, oh well let’s give you the, what would you say? The dictionary definition is the underuse of a, of a worker due to a job that does not use the worker’s skills or is part-time, in other words, what you and I are right? If you buy that, no David’s an engineer from Georgia Tech and he is in essentially finance, and mortgages and you’re so, in other words. If we were looking at a new fresh graduate coming out and he’s an engineer and he has to go work at Wendy’s that is an underemployed.
David: Yeah, we basically, basically not qualified for the job that you may be qualified for, you can’t find the job that you may be qualified for so, a lot of this between you know, 2008 and 2012 when we had the market crisis with the housing market and everything and anytime the economy falters, companies get scared, they tighten.
Collier: That’s right.
David: Hiring, obviously.
David: Because that’s a big source of overhead so, it happens and that, I think what’s driving this now is be, these are college grads that are now underemployed because they are, I think the number of, or, or the volume of people going to college now.
Collier: That’s right.
David: It’s higher than it’s ever been.
Collier: Wait, and you look it, you look it in different industries too, you look it in somebody coming out say, with a Liberal arts degree can’t find employment so, they go wait tables right? That is, that is gotta be factored as underemployment, there not making what they are and of the interesting stats about underemployed individuals, they are college graduates recently. Is it the average college graduate that’s working in their field is making about 46 thousand dollars of late, counter that to the person that is what we would say underemployed or not working within their chosen field, is about 36 thousand so, it’s a real difference maker and you multiply that times the number of people work seem underemployed, it makes a massive difference in the economy.
David: Yeah, I think you know, you got employment rates so the overall unemployment rate is low right now.
Collier: People are finding jobs.
David: Yeah, people are finding jobs, but I think we’re having so many people graduate college, that there’s not, those college level, there’s not as many college level jobs as there are people graduating.
Collier: Well, the good news for you is that as an engineer, you are the least likely of all the degreed programs.
David: To go.
Collier: To have a problem.
David: To go without employment.
Collier: To go without employment within your chosen profession, at 29%, David, the worst degree you can get and come out and get a job in your field is culinary and personal services.
David: Yeah, personal and culinary services.
Collier: I could’ve told you that!
Collier: Couldn’t you?
David: Obviously, culinary makes sense what that is, but personal services.
Collier: But some of your best chefs around here, I don’t, maybe they went to chef school whatever, but some of them probably didn’t do anything.
Collier: They barely got out of high school, but just have God’s gift and God’s talent is cooking.
David: Yeah, next one was Homeland security and law enforcement, which I think is interesting that this is even an, the, the say, a degree.
Collier: Well, I think you know, I think a lot of these people go into this law enforcement and these type careers, thinking is gonna be CSI, right? (Laughter).
David: But, it’s so specialized I think it goes to the point that we’re making that so many people are going to college now, that we’ve got all these added specialized degrees that is creating more colleges, right?
David: More opportunities for college, I think there’s a lot of money there obviously, they’re making a lot of money.
Collier: There sure are!
David: There’s a lot of student loan debt there, which is another problem too.
Collier: Wait, now counter that with ten thousand dollars less.
Collier: In salary, that you would, of course when you went to that college and you went to that guidance counselor, they were all “Oh you’ll make 46 thousand”.
David: Yeah, so you have more people.
David: Going to college, more people getting into debt and more people coming out and not getting the job they want right?
David: So, you’re getting hit on both sides, more debt less income.
Collier: And you know, one thing I thought about was a few weeks ago, when you and I talked about how many kids are living at home?
Collier: Right, so you’re going home and see he’s already ready right? Two more years pay for college, comes home.
David: Oh yeah.
Collier: It is, isn’t it?
David: Of course!
Collier: That’s the way the American way now right? But I, one of the things was this thing was talking about how it affects people’s motivation and calls it depression and other things like and it’s young people. And so, I guess what I’m trying to say is that a lot of this is tied back together, right? I mean, it’s one big full circle, with this generation that’s going through this of graduating college and not finding in the employment the satisfaction that they want out of their employment.
David: Yeah, absolutely! And when you come out of that kind of debt and you don’t have, you know you’re not moving right into the job that were planning on, with the income level that you’re planning on, it just starts.
David: To cause problems right from day one.
Collier: Let me ask you this, ‘cause I mean, some people may be wondering too, I mean you being, going through the hard work that you had to, ‘cause I mean, I’m quite certain my college experience was a little different than it is academically for sure, but what led you to go from on one hand, being an engineer, to now being in finance?
David: Well, I think just the draw of the mortgage business, the numbers deal, the personal finance, I’ve always been interested in personal finance.
Collier: Right, right, right.
David: I think it is one thing that, is not taught in schools and nobody really talks much about so, I enjoy that part, I just enjoy that part of the business. It ties in also with the stock market you know, investments and things in general.
Collier: I mean, you are a numbers guy.
Collier: So, I guess as an engineer you like seeing how things happen.
David: Yeah, yeah that, yeah, and it’s a, engineers do a lot of process optimization, a lot of work in factories and things like that you know, managing processes or face getting.
Collier: And you’ve been so successful here, I mean it’s so funny that, one thing to keep in mind is a lot of these people you know, when we see these stats about unemployment, underemployment, those type of things, is that in some ways, folks like myself that you know, that I’m in sales, have 2 Law degrees and all that and yet, I’m actually considered on a lot of these things unemployed, right? I mean work for myself.
Collier: Underemployed, right, so in the statistics.
David: I mean, those that know you might think you’re unemployed.
Collier: Partially true, a little crazy, but I didn’t wear a bee outfit yesterday either.
David: Well, I was good looking in it.
Collier: No, Courtney was good looking in it, you, you looked like a bee.
David: She made look better standing next to her.
Collier: You sure, she sure did! That is for sure (claps hands).
David: Well man, let’s move on block bee, our next, next question.
Collier: Yep, yep.
David: Next segment was.
Collier: We had a, we had a listener, reviewer, whatever you wanna say another word, in a podcast, we can say both right? Anyway, had a question come in I thought it was good enough to hey, make the show. So, the question was, and this is them talking: “I see sometimes when I’m getting a mortgage quote, that the loan officer says I can get you 4.75 interest rate, with mortgage insurance and I can also get you 5.25 without mortgage insurance” and I think it’s a great question, wait why is that question even possible? Why don’t you just give ‘em one rate and be done?
David: Well, it’s just the difference in the products, the difference in how you want to set it up and typically you know, this is, it’s called lender paid mortgage insurance, so basically, that additional premium that we get on the delusory 4.75 and five to quarter obviously, should make sense that the lender’s gonna get more money at a higher interest rate, right? Overtime, if you’re paying more interest, then the bank’s gonna make more money.
Collier: Got ya.
David: So, the difference in premium there is gonna go to pay off the mortgage insurance in one long sum, instead of you paying it monthly so, for example you put 5 percent down you might be paying that mortgage insurance monthly for let’s say, 7 or 8 years.
Collier: Right, right.
David: Depending on, if you make any additional payments and things like that.
David: So, let’s just say you make your regular payment you know, you’re paying that monthly for a while, now this is just one long sum, so it’s a different amount, so they have you know, they’ve done the math, they know what the payoffs are, they know what makes sense.
Collier: The risk is in them early, it sounds like to me right? ‘Cause if they’re paying this all this mortgage insurance off at one time, they’re just praying that you don’t pay this loan off.
David: No, because well, I don’t know, I don’t know that that matters but, ‘cause they’re receiving the mortgage insurance anyway so, the mortgage insurance is still on the loan.
Collier: Or either way.
Collier: Even under the tradition.
David: Yeah, the mortgage insurance is still on the loan so, the bank’s not taking any more risk, it’s just a different way of paying for the mortgage insurance so, the mortgage insurance is still there.
Collier: What are we looking it? Like, if so when they have this and we, this is a typical spread of about a half point.
Collier: Yeah, what is, what does that mean to somebody?
David: And that’s probably and it depends on the loan amounts, but let’s say, you know, you do the break evens a lot of times and I usually calculate these numbers at 5 percent down you know, we’re looking at 10 percent down, 15 percent down and if you’re putting 15 percent down, you’re a little bit closer to the time where your mortgage insurance will fall off.
Collier: So, I may not wanna do it.
David: So, it probably makes sense to keep the monthly because after it falls off you’ll have a lower rate.
Collier: So, is my lender, when you do lender paid mortgage insurance, does that mean, I, a mortgage payment that actually can be less than when I get the mortgage insurance? Added to.
David: Yeah, that’s the, that’s the benefit of it.
David: It’s that the mortgage insurance, the monthly payment is less so, instead of paying the 4.75 with mortgage insurance, your payment is actually less with the 5.25 without mortgage insurance.
Collier: Very interesting, right? So.
David: But you do the break even and you figure out that it is typically about 13 to 15 years.
David: Where you’ll break even with the lower mortgage payment so, you can either take the benefit of 15 years.
David: Through the end of the mortgage or take the benefit upfront from day 1 and since most people don’t know what’s gonna happen in 13 to 15 years, they’d rather take the lower monthly payment upfront so, we see this a lot with the 5 percent down options.
Collier: And, and so, is just going back ‘cause we really are big on people’s finances, is it a good, would you do it? And when is a person, when do you advice someone to go ahead and have a higher interest rate and have a lender pay a month?
David: Well, you gotta look at the overall scenario and do the math but typically, this is gonna look a lot better with better credit scores ok? So, 740 and above 768 hundred this is gonna look a lot more attractive, because remember that premium that we gotta build in, it’s to cover the mortgage insurance and the mortgage insurance is gonna be more expensive, if you have a lower credit score.
Collier: Ok, gotcha.
David: It’s a lot higher risk, and the mortgage insurance is gonna be more expensive if you put less down so, that’s why the 10 percent and 15 percent models look different, all right? We’re gonna do the math on each one of them, 15 percent probably monthly is gonna make more sense, 5 percent lender pays better make more sense, the 10 percent is in the middle of personal preference, if you do the numbers on the side.
Collier: Which you won’t, ‘cause I think, I think from the outside looking in being on the sales side of this whole process, is that (very short pause) I think people focus way too much on rate.
David: Yeah and I think, I think that’s funny because you know, a lot of people will hear that 5.25.
Collier: Oh my God!
David: I don’t want that, that’s all there is now.
David: They’re not thinking about the benefits, you get the benefits for 13 to 15 years, how half, the first half of the mortgage you’re doing better with a higher rate.
Collier: And one thing to remember too is that, especially the folks that are on their 20’s and 30’s, you’re in your earning years, you, you should or you might be underemployed but, the increasing in (inaudible) so, it might help you actually.
David: Yeah and hardly anybody knows what are you, if you’re gonna be in the house 13 to 15 years, who knows?
Collier: And it drives me to think, they listen to their parents the thing is, a lot of these people listen to their parents who had their stuff paid off for years and their condition to own on interest rate alone, I’m not saying don’t listen to your parents by golly, Amanda listens to her parents, I listen to mine sometimes, um.
Collier: (Small laughter) you know?
David: Well, well I just wanna say that the most, the best financial decision is to go with the monthly and get aggressive on the multi-payments right? To get rid of the mortgage insurance.
David: That’s the best way, but not everybody can do that, not everybody has the option to do that, not everybody wants to do it, maybe you wanna defer those monthly savings into something else so you know, it’s, it’s money and there’s moving parts and it’s a lot of numbers so, interest rate is not the only thing, it’s pretty much the bottom line.
Collier: That’s the take away from today, interest rate not the only thing.
David: Yeah, you gotta look at the whole picture and, and break you an analysis and do some numbers.
Collier: You know, I had a question before I got over here about current interest rates, what are they right now?
David: Well Freddie Mac and I look at this usually every week before we get on the show, because it’s the safest place to go, that has a mortgage market survey and today November 1st they published the average 30 years rates 4.83.
Collier: Not bad.
David: And 4.23 on a 15 year fixed.
Collier: Gotcha so, 15’s were still in the low 4’s, and the Jumbo’s have gotten a lot easier for you guys too, right?
David: Yeah and I’ll tell you, in a, I actually wanna point out what they, that sometimes this’ll, this’ll assume usually about a half, a little about half a point in fees ok? On these rates that.
Collier: So, they’re assuming, I mean, I mean make sure to clarify that, you’re saying that you’re gonna be charged a half percent origination fee to get that fee.
David: Yeah roughly.
David: They average the rate that averages the fees, so anyway, but I’ve seen a couple of you know, as we pass things along Fairway is a big company ok? Our mortgage companies are large companies, we have.
Collier: Around the country.
David: Four hundred branches all over the country, and so, whatever hostility I’ll see something they share it, and this week we’ve seen a couple of estimates come across, from different companies talking about you know, no points or, or low rates and, and I saw a couple of estimates worth 3 and 4 points, I don’t.
Collier: We’re back.
David: I don’t ever see it in our market.
Collier: We’re back, yeah.
David: But, it’s out there so.
Collier: When he says a point, that’s one percentage point so, in other words 1 percent of the loan, of the price you get.
David: Yeah, so, so you got a hundred thousand dollar loan.
David: And 3 points is 3 thousand dollars.
David: And that’s just 1 fee, that’s just one part of your closing cost, that’s not even nearly all of them so, it’s just really important when you talk about mortgages, when you talk about rates, when you get surprised at what your rate is now, you gotta look at the fees.
Collier: Well, I, I don’t think you can compare it, one of the biggest things is that the ways I can advise you ‘cause I’m on the consumer side of this stuff you know, I’m with them not with y’all you know, I mean I’m looking at it from their perspective usually.
Collier: From the buyer’s perspective, and one of the things I can tell you about a lot of the online lenders, one of their MO’s if you will is to give you these um, estimated sheets that look phenomenal! Only problem is they haven’t factored in real numbers from our area, like how much insurance is, how much um, the taxes are.
David: Well, yeah and I just think it’s funny that you know, they would, before you get to that estimate sheet they’ll send you emails saying you know, no points or saying no MI, which is deceptive, you know they.
David: It’s a deceptive thing until they give you the breakdown and you’ve got all the numbers in front of you, you’ve got an interest rate total cash to close closing costs, everything and you don’t really what you’re getting into and I think a lot of people think.
Collier: I missed that point, I think you’re right, well moving on to the next topic about um, is your retirement going to last?
David: Man, I love this one, this was, this was an article in this month’s Money magazine, it’s got, this fella named Orville Rogers on the cover ok? Orville is a 100 years old, matter of fact I looked him up on Facebook last night, I send him a message.
Collier: A message on Facebook, did you really?
David: Yeah, I send him message, on Facebook, I don’t think he’ll, he’ll reach out to me, but I told him.
Collier: He’s a very spry hundred.
David: Told him I was trying to be harmless, but you know.
Collier: (Laughter), wait, wait, wait, wait, what were you assuming he would think?
David: Well, I, I said I’m reading your article, I’d love to.
David: I’d love to discuss.
Collier: That’s good, I’m harmless!
David: Your retirement savings more, he’s probably like yeah right.
Collier: Yeah right.
David: Yeah, but this guy ok so, 100 years old, he retired at 60, he was a pilot so, he had to kinda do things a little bit differently.
Collier: Hey, did you notice, well it’s really funny, did you notice the year he retired? He’s like 1978.
Collier: And I’m like, that’s my whole life!
David: Yeah, yeah, he’s been, he’s been retired just kicking you’re your whole life.
Collier: Yeah, yeah.
David: But, the article starts off talking about how more and more people are actually living past a 100 and you know, the 100 plus they caught it since.
Collier: Scenarios yeah, yeah.
David: A population growth by 8 fold by year 2050’s so, that means they’ll be 8 times as many people living past a hundred in 2050 so, right now for a 65 year old couple today, there’s a 50 percent chance that one of you will make it to 92, so basically.
Collier: I hope it’s me, I hope it’s me.
David: Yeah, by remaining.
Collier: Just saying, I’m not sure men do really, yeah.
David: But typically, is the woman.
Collier: Yeah, yeah, it’s usually the woman.
David: You know so, what they’re getting at is that for a long time financial planners have you know, 65 was kind of the target for retirement.
David: And they tell you to plan it for 30 years, right?
Collier: ‘Cause you weren’t gonna live that long anyway.
David: Yes so, 65 to 30, 30 is 95, so now, if we got more and more people going past a hundred then obviously, you gotta change your retirement planning a little bit.
Collier: Yeah, and when you sent this over you know, I was reading the article and one of the things I found interesting was that, basically, what most people do is they wait till they’re 65, 70, and go hey! I’m in great health! Oh-oh (laughter) what am I gonna do now?
Collier: Right? If I live beyond that and I just took away a lot of hey, I better start planning right this moment.
David: Yeah, yeah.
Collier: As opposed to waiting till you’re 70.
David: It’s funny, I think one of quotes in there was, in the late ‘70s, early ‘80s, they said you know, everybody was just dying in their boots ‘cause you know.
Collier: I mean normal.
David: You just worked, you just worked till you died, ‘cause they weren’t living that long.
Collier: Right, absolutely.
David: They weren’t planning on being in retirement, not working for 20-30 years, that was, that wasn’t even a thing.
Collier: Right, right, just hanging.
David: But now, they, they point to fewer American smoking and dying of tobacco related diseases, which I thought was a big deal, cancer death rate has plunged 26 percent the high 1991.
Collier: Now these prior are correlated, I would think.
David: Oh yeah they gotta be, I mean just the, just the difference in the whole, the idea around smoking right now, average savings of workers 60 to 64 with the 401k, a hundred and ninety five thousand right now.
David: So today that means, the average person between 60 and 64 buys a hundred and ninety five thousand at 401k, now is that enough to last? What 30, almost 40 years? Probably not.
Collier: And I think most of you watching, are about to get a wake-up call based on their numbers, now some of y’all aren’t, I mean I know there’s some people here that go hey, I’m, I’m great! But.
David: Yeah, the point is, you know we’ve got some.
Collier: Let’s look at these numbers, I mean ‘cause they’re fascinating is that you know, a healthy 30 years retirement is you need you planned under this traditional model.
Collier: Twenty, when you turn 65 I’ll say that’s the number.
David: 65 times.
Collier: Twenty five times your annual expenses so, you’re living on a 100 thousand dollars now you need 2.5 million.
David: Your annual expenses, yeah, yeah, and I think another way to look at it was that at retirement you need 10 times your annual salary so whatever, you’re accustomed to making, you need 10 times that at retirement to make it.
Collier: Right, right, so if you, under my scenario you have very good taste, (laughter).
David: Yeah, in expenses (laughter).
Collier: I mean, yeah, yeah.
David: And this says this jumps to 30 times, if you want a 40 year retirement, I mean so, it’s just important to start early, so it’s basically if you need a 100 thousand dollars then you need to have 2.5 million by the time you retire.
Collier: Right, and so one of things too here, 40 year olds should already have so, if you’re 40, if you’re 40, you should have 3 times your salary in savings already, in other words if you’re making a 100 thousand dollars a year, you should have in your 401k in retirement plans about 300 thousand dollars, now when you get to 45 it jumps to 4 times that amount, when you get to 55 you need to have 7 times so, if you make a 100 thousand you better have 700 thousand and you know that, all this can be omitted, but what they’re saying is that, that’s to know you’re in the right track.
David: Yeah, yeah, and I thought, I thought some other things that was, was very important along the same line they have 5 benchmarks ok? Five benchmarks for retiring early, the first one was to start early and they’re saying by 25, the ace 25 and I think these are nice little markers along wherever you’re at in life, you can kinda listen and say you know, if you’re doing some of these, but by 25 investing 401k, be invested somehow, now you know, most 401k companies will or, or they’ll start you out recommending 3 percent.
Collier: Oh yeah.
David: But, the recommended is actually 10 to 15 percent.
Collier: Well, and the 3 percent is based generally on the match that’s done by your employer.
David: Yeah so, you definitely want at least get the maximum match that’s free money so, definitely get that, start by 25, number 2 was triple your savings so, by 40 you’ll have at least 3 times your income and I know you talked about that, a few other and few other numbers there but, number 3 playing for your health, this is a big one by 55 ok? You need to have a plan for long term care, they say one of the biggest things that knocks retirees out is health care.
Collier: Yeah, I can tell you as a Tax attorney when I was practicing, that was one of the biggest ones if you looked at people, because here’s the thing folks, 50 percent to 2 thirds of you are gonna need at some point long term care. Now, never ever and I mean never buy long term care insurance in your 50’s but, the minute you turn 60 make sure you have a long term care policy, because unless you wanna go to the County-run nursing home.
Collier: Or be a complete burden right?
Collier: You, you better plan now and you’re going to, and here’s the problem, you wanna go to these private places, they’re going to make you.
David: It’s expensive.
Collier: If you want Medicare to kick in, they’re gonna make you drain your assets.
David: Yeah, I think, I think the numbers I was looking at, somewhere 4 to 7 thousand dollars a month for this long term care so, that’s number 3 about 55 working on that. Number 4, decide on social, your social, social security strategy so, at 62 you need to determine the best time to get your social security now, I know there’s some retirement calculators out there that can give you advice or help you with this by plugging some numbers in, how much do you have now, how much do you have at 62 um, can you afford a way till 65, 68, 70?
Collier: And one thing to remember, that this article really talked about was a lot of these calculators have not been updated for anything other than the traditional 30 year window.
David: Yeah, it had a lot of negative things to say about the standard calculators, the retirement calculators.
David: That they do not take enough things into account so, yeah definitely it looks some of that stuff up and figure that out. Number 5 was to go debt-free you know, by retirement makes sense, zero debt at retirement, zero.
Collier: Hey, that’s what I.
David: Zero high interest debt, I mean it just does.
Collier: Hey, who went for college he would be right?
David: Yeah, it does, I mean because your, your income is limited so, why would you pay for interest?
Collier: Absolutely! You know one thing, playing along the lines of what you were talking about when they, when they merge the 2 exercises on retirement savings, they’re so right when they say it’s hard to get started because they call it present, it’s a scientific term called present bias, which means the human tendency to do, deal with.
Collier: What’s happening now twice as heavily as what we, what might happen in the future in other words, I you know what? I’m not ready to go the gym yet.
Collier: I, I, I need to really, I gotta go up to Walmart today and I gotta get some stuff done and with my savings is you know, this summer I’m going to have to send Suzy to camp so, I’m.
David: Yeah, yeah or how many people today are more worried about spending at Christmas than they are saving for 401k next year or this year.
Collier: Right, right and I think I talked about this before but you know, earlier last year I remember I was thinking to myself the minute I went from, we, we were the traditional person talking in here when we were 3 percent savers in the 401k, and every time I thought: Man! Going to 5 percent’s can be tough, but once we bit the bullet we got to 10 percent, right? It was easy because I didn’t even know the difference.
Collier: Right? But you were in, well she works in a little bit different in the way tens of max goes out to give you the other 8, getting here or there but, it was, it never affected us because mindset wise it was never our money.
Collier: And it was deferred.
David: Yeah, you don’t see it so, so you can make that adjustment pretty quickly, that’s, that’s the important thing to do is to get started early, and even, even talk to other people, talk to your spouse, talk to friends you know?
David: Maybe someone can help you.
Collier: And you know it’s really a shame too, ‘cause everybody’s into being satisfied and having that, I mean I can, I never heard my father go: Man! This job just fulfills me, right? I mean that, that maybe yours did, I don’t know, but, but that just never even a thought.
David: Right, right.
Collier: In that generation but, now that, now we have that people getting to their mid-50’s and going: I need a job that fulfills me, that doesn’t pay as much, the question that they raised was had you already prepared? So in other words, if you.
Collier: Don’t like what you do, stay in it as long as you can and you get to your mid-50’s if you plan right, ‘cause what’s gonna happen is you’re gonna have to make sure you saved a little bit more back when you were in your 40’s so.
David: Yeah, or 30’s.
Collier: That you can.
David: Or late 20’s.
Collier: There you go.
David: I mean, by the time you’re in your mid-50’s, if something happens and these younger people coming up there’s, there’s technology changes, all businesses are changing right? So, who would be better to have the job? Somebody younger that understands the technology more? So, get ready for that before you get there. So, they’re talking about when people get laid off and then they come back into the workforce.
Collier: That’s right.
David: They’re coming back on a much lower salary than they would prefer and even.
Collier: Well, that’s right.
David: Even for the job that they want, let’s say they want to just you know , bartend at 50 on the beach right? Because they just enjoy that, now that’s a different situation but, I’m talking about people who are trying to come back to the workforce, and they are not making as much as they can so, they want you to plan for that stuff now and figure out, work with some of these retirement calculators, plug in the numbers and say OK at 50, yeah I’m gonna go work on a bar on a beach making a lot less money, I’ll be making this much money so, how much do I need to make and save now?
Collier: You’re talking the plan.
David: I mean.
David: How much do I need to make and save now to get ready for that?
Collier: Absolutely! And one thing I also wanna mention was you know a lot of folks, I’ve been asked a lot you know, there’s a lot of good folks that are very well versed in financial planning, really from North Western Mutual, all these guys they really know but, if you’re going for a really, a full financial plan, I think you can utilize all those guys, ‘cause there’s no better disability insurance, life insurance than North Western Mutual. That said, if I was choosing a financial planner to pull it all together for me, only go with fee only where they are a fiduciary of yours, where you pay them an hourly rate whatever their rate is and that their advice is not tied to the investment that you’re in, because I think right now, think of these investments that have 55, 60, 70 percent commissions and you’re telling me that’s a good investment for me? If there was, I mean it’s just not.
Collier: Good and quite frankly.
Collier: You can with Fidelity, Schwab um, TD, Ameritrade.
Collier: All of them have these, these index funds, those types of things that you can just jump into.
David: Yeah and I know, I’m sure it’s tough for people you know, listening to figure out, but there’s a lot of things to think about how can they sit through all this information and all these fees and how do they know when they’re getting charged, when they’re not getting charged? What they’re making? It’s a lot to think about but, just do your homework.
Collier: Well, in worst case scenario you know, I love what Clark Howard always says: When in doubt just plow everybody to retirement into Vanguard, Fidelity or Schwab, target date retirement fund that has, their, their risk factor, how much, how weighted are they in stocks, bonds, those type things, now take all the risk out of it! I mean you know if, if you know Drew Brown is watching us now, once he gets his retirement account going right? He’ll, he’ll just put 1000 dollars in there, they’ll wait it out for him right? They’ll say OK we’re gonna put it in XY&C and as he gets older, the risk lowers.
Collier: Right? As he gets older, he gets closer to 65, more bonds less equities.
David: Yeah and I do, I gotta apologize to Brad Charles, I know you asked to wear the bumblebee suit on the show today.
Collier: (Long sigh), yeah.
David: I wasn’t sure that was gonna be a good idea so, I apologize Brad, but I.
Collier: Better known as Ziggy.
David: But listen, I wanna, I wanna get back to it, it comes down to save as much as you can and then save some more.
David: And start early, life happens, things happen right?
Collier: And, and one of the other takeaways that, I think it’s very important is don’t run from stocks, we, what’ve we seen this last week, we’ve seen a roller coaster right? I did like today though but, you can’t outpace inflation and inflationary increases in costs of goods and services by just being impassive investments your, your vanilla stuff, the stuff.
Collier: Online savings accounts, now I’m gonna do it you’re not gonna outpace inflation.
David: Yeah, which means you know, inflation is expected to grow at what, around 2 to 3 percent per year.
Collier: Something like that.
David: If it gets higher than that, then we have other issues so, if the cost of goods is going up at 2 to 3 percent and your money is not making more than that, then you’re breaking even.
Collier: Yes, oh not now.
David: Just, just to explain that to people, make sure they understand it you know, if you’re not making 2 to 3 percent a year then you’re actually losing money right?
Collier: Yeah, and I’ll take it back to real estate I mean, ‘cause it is what we are, we’re a big deal and we are the Real Estate Happy Hour!
David: We’re kind of a big deal, yeah.
Collier: Yeah, we’re kinda one no but if you, I went back and looked, we, we paid for our house that, I mean my wife is dying to get out of by the way, but we’re paying too much down on the mortgage rate, you know what I mean?
David: Of course!
Collier: But, I’m losing this battle by the way but, I looked at, we paid 245 for a target 280, 285 now for the house right or whatever, I looked at the cost of that dollar or the value of that dollar in 2006, when I bought the house and said what is that, what is that dollar worth in today’s money? That 245 thousand is worth 295 thousand today so, I was looking there going: Woo! We are gonna make 40 grand on this house, but folks let me tell ya, in real dollars and cents guess what, I lost 10 right? So, and we see that with most people with houses right?
Collier: They’re really making you think, we’re just getting a refund on the inflation.
David: Yeah, that’s the up and down of the market and obviously, 2006 was one of the worst times as far as value you get in, because you did have part of the.
Collier: Bottom of the peak.
David: Shark drop, and then it’s working its way back ever since but.
Collier: But, yeah.
David: I mean, that’s part of that, that market.
Collier: So you know, I think you know just the big takeaway here is, is starting planning now because technology, everything is allowing people to live so long and you know we get it, a lot of our viewers that we have are 30, 40 years old and it’s not too late. If you’re in your 50’s it’s not too late, to, to just do something right?
David: Yeah, I think that what he’s saying is it’s the time to plant an Oak tree was 20 years ago?
Collier: (Laughter), yeah.
David: Second best time now?
Collier: That’s exactly right!
David: All right so, you should’ve started 20 years ago but, the second best time to start is right now huh?
Collier: Well and hey, while we’re talking about stocks I do have 2 stock tips and hey, he didn’t even have one for today, I have 2! and 2 of them for ya, Disney DIS, the tech resemble right? Disney has already banked in the ESPN, ESPN I you don’t know, is blowing up it’s a colossal mess, they’re turned into liberal rag it’s just, it’s awful. But they, what was happening was they were buying everybody else’s content, they, they had no original content like Netflix and everybody else does right? They were leasing SCC football, SCC basketball.
David: Can’t believe the way he’s talking about ESPN.
Collier: Well I love it, I like ESPN but anyway, they’re paying a 1 and a half, Disney paid and probably Disney owns ESPN so that’s why they’re together right? but hey, every time you know we went to Disney last year, and I just sat there and looked, I mean they’re not blinking at these prices at these, at these parks, they’re not blinking.
Collier: Which is amazing, but they pay a 1.5 percent dividend the other one’s at folio the property management, law firm, software company, APPF good company, but by the dip, it has dipped, standing at 58 dollars a share was as high as 95.
David: Yeah, one, one theme that I wanted to kind of point out here is that there is a lot of stocks that have been beat up lately and a lot have, have come down recently, a few of, a few safer names, that have been on the upswing for the last several months: Clorox, Procter & Gamble, obviously Johnson & Johnson.
Collier: Talking about Clorox.
David: Clorox, I know Clorox now, now, they’re, they’re not up to much on the year because there was a drop from January to roughly May.
Collier: How’s the trim line?
David: Some of these in name but, the trim line is definitely up.
Collier: Yeah, that’s a funny thing you know, I look at all this crazy stuff, he looks it like all this technical stuff and I’m like I don’t even know what I’m looking at.
David: It makes sense.
Collier: Well moving on to the best part of the show, I think this is hey you want everybody’s favorite, the college football picks! We are what, week 8 in the season?
David: Yeah and we got.
Collier: And over in Alabama are back this week!
David: And Georgia Tech is back too.
Collier: Well, we didn’t put them in here.
David: Penn State plus 10 and a half at Michigan.
Collier: Man! I’ll tell you what, we’re gonna find out real quick if Michigan’s for real, they’re 10 and a half point favorites at home, in the big house, I’ll take Michigan.
David: That sounds good, Missouri plus 5 and a half at Florida.
Collier: This a trap city ‘cause I know I say all the time and I’m usually right on the track games but, 5 and a half should not be here, Missouri can score a lot of points usually, but this should not be 5 and a half points.
David: Yeah, I think Florida’s gonna cover that.
Collier: This is a trap game, yeah I agree as for.
David: You’re taking Florida?
Collier: Yeah, I’ll take Florida.
David: Georgia minus 9 at Kentucky, man as much as I’d like to see Georgia lose.
Collier: I’ve been wrong these past few weeks with Georgia.
Collier: But man.
David: I gotta take Kentucky at home.
Collier: (Long sigh).
David: They’re gonna get it done.
Collier: But you’re getting 9 points right? (Smacks lips) you’re getting 9 points so, I’ll take the dogs just to be different, I’ve lost on twice in a row how can I lose again? I mean wow!
David: So we had an off week, so what did we work on in practice, you feel like?
Collier: Through Auburn?
David: Texas say an in plus 4 at an Auburn.
Collier: We, we were going through the roster of how much we’ve paid every player and you know, we’re trying to find out where we can trim the payroll.
David: Trim the payroll, I think I.
David: I think Gus is just, he just set this whole season up for his last late, late season heroics that blew somebody up, that surprised everybody before.
Collier: Oh, was it Gomez?
David: Yeah, I think it was Gomez.
Collier: Yeah, oh, oh and we acted the best was Guzman, I mean he was the best thing ever.
David: Ray had 170 yards.
Collier: Oh, that’s huge!
David: So, Chitanos low should be healthy.
Collier: Yeah, Booby!
David: Booby went low.
Collier: And guess what? A&M is gonna not only cover, they’re gonna win the game because the odds makers just got this wrong, you have an, an incredible head coach in Jimbo Fisher, who know how to coach and you have a completely, talking about Booby wet low, a boob of a coach and that’s all.
David: Well, I think they’ve finally, they’ve finally figured out the running game and A&M is gonna stack the box and force Studem, to do something which I don’t think probably.
Collier: Which, I’ve, I’ve never seen a coaching staff ruin a player, now onto the game of the week.
David: Man! 1 versus 3 Alabama?
David: This is the smallest line they’ve had all year minus 15!
Collier: Listen, listen, let me just tell ya.
David: At LSU?
Collier: Alabama’s covering the 15 in the first quarter.
David: First quarter?
Collier: First quarter.
David: They’re gonna come out on fire!
Collier: Well they, at they.
David: LSU will fight back.
Collier: They’ll fight back!
David: In the second quarter.
Collier: They can’t, hey.
David: And Alabama puts them away in the third to its back on the bench in the fourth, what do you think?
Collier: Yes, I mean, well.
David: Does he play the stack in the fourth quarter?
Collier: Until proven otherwise!
David: Has he played the stack?
Collier: Why would you be dumb right? So I mean as an Auburn guy, I can’t believe I’m saying that but, I’m not gonna say the RD word but, no chance for LSU, no chance.
David: I’m telling ya.
David: It’s gonna be a good weekend and I hate that, I hate that I’m not gonna be here with you next Thursday.
Collier: You’ll be back in 2 weeks?
David: (Cough) no.
Collier: No so, in those 2 weeks we may have a guest, I’ll be here but remember, the podcast go to apple podcast, go to your front where there’s Android, iPhone.
David: Android’s a great phone, don’t say it that way.
Collier: Yeah well, go to google broadcasts, podcast, Stitcher radio, Spotify, we’re everywhere!
David: We’re a big deal! Just, just look for the Real State Happy Hour anywhere.
Collier: I mean, we’re worldwide.
David: We’re all over the place!
Collier: I mean, we’re kind of, this, this is thanks to you!
David: To great fans like you.
Collier: Oh yeah, all right we’ll see you, I will see you ‘cause you’ll be cruising the high seas.
Collier: All right well, don’t get in trouble while you’re out at sea.
David: Oh no.
Collier: And take some spending money, you’ll need it.
David: I’ll need it.
Collier: All right, y’all have a great week! And enjoy the rest of your week, have an awesome week!
David: See you guys!