transcript

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Speaker 4:
[00:33] Today on the show, we're going to talk about a couple of things. One is, Wes, I know you've studied what makes someone happy in retirement. But a lot of people get to retirement and they're suddenly unhappy. And you're going to share with us one of those reasons and how we can avoid that.

Speaker 5:
[00:48] Yeah, sometimes what can get us to the financial side of retirement freedom keeps us from having retirement happiness.

Speaker 4:
[00:56] And later, gosh, I feel like we're getting so many mixed messages all the time about the economy, what's really going on, you know, and you're going to sort of lay out for us what your opinion is and what you're seeing and how you...

Speaker 5:
[01:11] Mixed messages is the right way to put it.

Speaker 4:
[01:13] Yes. And of course, we're going to take your questions.

Speaker 5:
[01:16] Well, let's start with this, Christa, which is, I think of this topic as figuring out a way to re-channel your ambition. Because if you really think about the... I talk about getting to these retirement green zones. I mean, we know in America, we need to get to certain asset levels. We want to get to a million dollars in liquid assets. We want $100,000, let's say, in retirement income. And this is from research, but it's hard to argue that having that financial base isn't important. Of course it is in retirement and having the freedom to continue to live the way you would like to live. And we want to make it clear that we're not going to make it clear that we're not going to make it clear that we're not going to make it clear that we're not going to make it clear that we're not going to make it clear that we're not going to make it clear that we're not going to make it clear that I mean, not everybody has it. And the folks that do it are the ones that are super diligent, super persistent, and really hard work. That is the biggest ingredient. So in order to get into that financial green zone for folks, it really takes a large dose of work and ambition and work and ambition.

Speaker 4:
[02:35] And discipline.

Speaker 5:
[02:35] And discipline and perseverance, et cetera, and grit. And it takes, and you'll do it just for a little bit. You do that, and if you end up financially successful, 99.9% of the time, it's because you had those traits, and you did it for a really long time. So you worked hard and you had this ambition, you worked hard and you had the ambition. And then you get financial freedom. Then you're able to save, and you're investing, and you get to the point where you're in the financial green zone. And then it's really hard for a lot of folks to turn that ambition off. And there's a really interesting article from a writer who writes for the Wall Street Journal, who when she retired, and I see this all the time, whether it's consultants or writers or any industry, you feel as though you say, okay, I'm done working supposedly, and I've got my money saved, and I'm going into retirement. But something still nags in the back of your head that says I still have to produce. And I get a writing opportunity and a job. And now I can't say no to that, because you just can't turn it off, because it's what got you successful to begin with. So families or people will find themselves a year, two, three in the retirement, and their plate is just as full as it was when they were working, and they don't need the money. But they can't turn off that ambition switch, and there is a really very large factor of guilt too. So when you're a producer, a productive person forever for 40 years, 50 years, the thought of not earning and not saying yes to the next project, to the next to the board that someone wants to be on, and the help here to consult, and to the mentor here, the next thing you know, you can be just as busy because your own ambition has kept the lights on. They have that drive and ambition. Then what I'll see folks do is they're looking around, and some peers have moved on, and they're living a happy retirement, and they're gardening in Maine, and they've turned on their creative pursuits. But you say to yourself, well, I can't go pick up guitar lessons because that doesn't pay the bills, didn't pay the bills for so many years. So I feel guilty doing that, and gardening doesn't help my career, and it doesn't increase my bank account, and being a painter, a dancer, anything creative, photography, has this inherent thought of, well, it's not making me any money. So the article that prompted this was really tight. It was titled How Lowering My Ambition in Retirement Made Me a Happier Retiree, which is kind of a funny way to look at it. I think of it as not necessarily just lowering your ambition, but re-channeling the ambition to say that I can still work hard, but I sacrifice time with my family and time for things that really maybe inherently brought me more joy than work did. But the stories and this author has done the same thing, is that they have re-channeled that ambition into the things that they always wanted to do. So the author wanted to be a dancer, but she didn't start until she was 71.

Speaker 4:
[05:47] Wow.

Speaker 5:
[05:47] So during a jazz class at the Julliard School, had open dance classes for seniors.

Speaker 4:
[05:52] Oh, that's cool.

Speaker 5:
[05:54] And even though she thought it was frivolous to do, it ended up being the activity, the core pursuit, super activities, where I call these, that kind of brought her out of this being locked into producing and work. And once she did that and she shed the guilt of, say, well, I know this is not going to make me any money, but she started to have that enjoyment and it kind of freed her up to say, all right, I am not going to take on new projects. I am actually stopping work. I'm going to enjoy the retirement savings that I spent 40 to 50 years saving. And now you can call it lowering ambition. I call it re-channeling her ambition into areas that she loves, that really kind of feed her soul. And even though it doesn't make money, she's now a much happier retiree for it.

Speaker 4:
[06:46] I love that. All right, let's go to some questions. This one's from Justin in Illinois. Wes says that one of the keys of a happier retiree is having your house paid off or pay off in sight. I live in a high property tax state and currently pay $12,000 a year in property taxes.

Speaker 5:
[07:03] Where is he? What's the state?

Speaker 4:
[07:05] Illinois.

Speaker 5:
[07:05] Illinois.

Speaker 4:
[07:07] I anticipate that when my house is paid off in 15 years, my property tax will be close to $20,000 a year. That feels like a mortgage. Does your research show greater happiness in lower property or income tax states?

Speaker 5:
[07:21] Justin, I wish I had got that granular. I didn't ever ask a question about property taxes, but they're very real and it's a very big deal. And there's a giant dispersion in America with property taxes. You so happen to live in arguably the number one most expensive property tax state. The state of Illinois isn't famous for this because, and not in a good way, Illinois property taxes are in the 2% range. So guess what? I'm just doing the backward math here. You're saying my primary home is going to probably be worth a million bucks by the time I get to retirement. Time is 2%. It's 20 grand a year. It is like a mortgage, Christa. Now, there are states that are nowhere near that. There are states that average a half a percent. So that in a state like in Alabama or Louisiana, ironically, Hawaii is a really low property tax state, but they get you in a lot of other ways too. So that's not a fair comparison. But in a lot of states, you'd be paying five grand a year in taxes. You're not in one of those states. So you can look at this two ways. It's even more important for you in the state of Illinois to be able to have no mortgage by the time you retire. And property taxes are just a fact of life. Every state has property taxes. No state has zero. There are some exceptions for individuals with, let's say, veterans. There are some exceptions where you can get your property taxes to zero. And some states are really low with property taxes. But it's pretty much just a fact of life. In the state of Georgia, as an example, and there are a lot of states in the United States that do this as well, certain counties will give you a break when you get to retirement age. So at age 65, you stop paying the school portion of your property taxes, which when I opened my property tax bill, that's a giant piece of the equation. Even if your kids are long out of school and they're off in college, you're still paying those school taxes which are part of the property taxes. Some counties give you a break for that. But in your state and your particular county, which I don't know, it probably doesn't happen. So you're stuck. I would say that, Justin, it's even more important to have that mortgage paid off. My research shows that you want mortgage to be either mortgage pay off with insight when you get to retire.

Speaker 4:
[09:47] And he said that, but he feels like he's still going to have a mortgage with these taxes. So that is, yeah, that's the problem.

Speaker 5:
[09:54] The only thing you can do is, the best thing you can do is A, not have a mortgage. It helps even more if you're in Illinois. And start looking around. Maybe it's time to explore another state.

Speaker 4:
[10:07] Alex in Michigan says, I have a choice of taking a $58,000 lump sum pension or getting $411 a month for life. I'm leaning towards taking the monthly payments. What do you think?

Speaker 5:
[10:20] Let's do some math, Alex. It's the 6% test is what we're looking here. That's kind of my starting point to say whether you take the monthly amount, the pension, or the lump sum. So we just take the monthly amount, 411 times 12 is $4,932 a year. Or you could take the lump sum, $58,000 divided by $58,000. Ooh, 8.5%. Wow, that's pretty strong. The payment is pretty strong. So it weighs...

Speaker 4:
[10:57] The monthly payment?

Speaker 5:
[10:58] The monthly payment versus the lump sum is pretty good because it's 8... Think of it this way. It's almost $5,000 a year or $50,000. $5,000 a year on $50,000 is 10%. Now, in your case, it's actually... The real math is 8.5%. Hard to quote, guarantee yourself 8.5%. So even though I like the flexibility of having the whole $58,000, I would be leaning much more towards taking that monthly amount, the pension amount for life, as long as you do it with a period certain. Because the last thing you want to do is have a pension amount, and something happens to you, you die in five years, then they get to keep all the money. So you want, when you elect these pension amounts, make sure they have at least a minimum amount of years that they get paid out. So that at least you get your money back. And you can have a joint pension that also covers your spouse. But then that goes into a little bit deeper financial planning if that's important or if that is essential to the plan. But I'd be leaning towards all else being equal, and I know there's other factors, taking the annual amount over the lump sum.

Speaker 4:
[12:05] Scott in Washington says, when one begins taking withdrawals from their retirement accounts, whether RMDs or otherwise, is it best to do equal amounts each month or a lump sum as late as possible? I.e. sort of a reverse dollar cost averaging method or leave it in the market as long as possible?

Speaker 5:
[12:22] Scott, market history would say, leave the money in the market as long as you can before you are forced to take it. Because 71 percent of years are positive in the stock market. So technically, if you are looking at market history, you would lean towards, say, just take your RMD at the end of the year. That way, the whole amount gets to also market growth, January through November, and then you take it in December. However, those are just averages, and you can easily end up in a situation where the markets are not good, and at the end of the year, the market is down 10 or 15 percent, and then you have to take your RMD, and what you're doing is you're pulling money out of the market when it's down. So, on one hand, I would say later is better on average. On the other hand, it can work against you. So, what I like to do is have RMDs come out every single month. That spreads out the withdrawal. It takes away that timing of the market, and it also doubles as a paycheck. And psychologically, Scott, I think in retirement, it's a big positive, and it's really helpful to create an environment where you feel like you're getting a paycheck. Replicating what it was like to be working, having money come in, same thing in retirement. When you're distributing money, it's, in my opinion, really good to recreate the feeling of getting a paycheck. So, I like to do it monthly. In places like Schwab, as an example, we'll do auto RMDs so that at the end of the year, they calculate your new number, they recalculate what it needs to be every month, and then just adjust. So, if it was $1,800 a month last year, now it's $1,932, they just put it on auto, adjust, and I really like doing it that way, too.

Speaker 4:
[14:12] Okay. We're going to take a quick break, and when we come back, you're going to talk the economy, and we'll take more of your questions.

Speaker 5:
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Speaker 5:
[15:53] Wes Moss along with Christa DiBiase here in studio to talk about the economic recovery that not everyone feels. You called it mixed messages. What do you mean by mixed messages, Christa?

Speaker 4:
[16:06] I mean, people are saying the economy is absolutely in the toilet. And then some people say the economy is doing great. You know, we hear all these record earnings reports and all of the stuff. But, you know, groceries are so expensive, eating out. I mean, there's just, with inflation and everything else going on, I think it's very confusing.

Speaker 5:
[16:25] That is the confusion, is that, let me give you some economic stats. So it's an interesting environment where you hear good economic numbers and companies are doing well and the stock market is doing well. But then we know that there's a huge portion of the country that feels like this is a terrible economy and jobs have not been overly strong recently. We did have one recently strong job report, basically it's been flat for a while, for the better part of a year. So it is mixed messages. Is it good or is it bad? And I think the answer is that it's both. Here are some statistics I think are very telling. In the fourth quarter of 2025, US corporate profits rose 26 percent. So companies getting way more profitable. They're squeezing out more net profit for every dollar revenue they come in. But at the same time, GDP grew at 4 percent. So companies up 26. The economy only expanded 4 percent. Still not terrible. Think about it over a longer period of time. Since 2019, nominal GDP is up 43 percent. So that's just think of GDP as the total economic pie of the United States expanding by 43 percent. Again, pretty good. But corporate profits during that same six-year period, up 73 percent. So companies, again, think of the multi-trillion-dollar US stock market, are 73 percent more profitable than they were, but the economy is only 43 percent bigger. That's, I think, part of the disparity is that what is artificial intelligence done and technology done and not adding all that many jobs for expansion. What's done is it's squeezed out more margin. And that's the word you get, you hear thrown around on Wall Street all the time. Margins, margins, margins are at an all-time high. That means that companies are squeezing more out. And where are they getting that? Well, they're charging more, which is hurting the consumer because they have to charge more because of inflation. So their input costs are more, they pass it along to the consumer. The consumer is still kind of hanging on for dear life. They're still paying for what they need. And that just makes it that much more profitable through AI, logistics, and making smarter, faster decisions for companies. They're able to be more profitable because they've also raised prices and they're more efficient all at the same time. Now, I also don't think it's a jobless recovery. I've heard of this as it's been a jobless recovery. If you go back and look where jobs were in 2019, so right before the pandemic, there were about 150 million people employed in the United States. 150 million. Today, we're up just around 159 million. So we've added 9 million people to the labor force working jobs, not just looking for jobs, but actually working. So we've added 9 million jobs over the past several years. Counter that with the rate of wages have barely kept up with inflation. Now, let's also again go to the stock market. We also know that companies have raised dividends at almost twice the rate of inflation. So if you've been an investor and you're letting your money pay you, the amount you're getting paid from dividends has risen dramatically faster than inflation. But if you're working, your wages haven't risen from inflation. What does that do? It just makes the folks that own a bunch of assets in the stock market able to stay ahead of that inflation wage, while people that don't have a whole lot invested are struggling that much more. So it gets back to we hear about this K-shaped economy because it is to some extent. If you've got a bunch of assets and you own a home, that's appreciated and done well in the stock market, done well in the real estate market. It's the folks that have not been able to get started in that, that feel way more pinched and way more squeezed. I think, Christa, this is a mixed economy.

Speaker 4:
[20:38] Right.

Speaker 5:
[20:38] And two things can be true at the same time. It's a great economy, a great stock market, but it's not a great economy, a great stock market for everyone.

Speaker 4:
[20:45] Okay. We'll go to some questions here. This one's from Donna in Alaska. She said, late start Lisa here, 57.

Speaker 5:
[20:52] But her name is Donna.

Speaker 4:
[20:53] Her name's Donna. But you said late start Lisa in a prior show.

Speaker 5:
[20:57] Yeah. I like that late start Lisa.

Speaker 4:
[20:59] Starting late on your retirement. So Donna says she's 57 with your $20,000 in my retirement account. I have $500,000 in assets. What do you recommend to help me create a retirement plan and leave money for my grandchildren? I have no debt.

Speaker 5:
[21:14] So Donna, you're worried about your grandchildren. I'm worried about you, Donna. I want you to figure out how to make this thing work because, and I don't know exactly the numbers here because you say you have under 20K, but then you have 500K. I'm wondering if you've got 20,000 in income, and you've got $500,000 in other assets, maybe part of that's home equity, maybe that's retirement accounts. And here's the math that lights up in my brain immediately. You're 57. In 10 years, you'll be 67. 10 years is a number we can work with. Just looking at the rule of 72, if money goes up by 7.2% over 10 years, money doubles. So that means that your 500K in assets, depending on where they are, could be worth about a million dollars by the time you're 67. Now, you are also in the state of Alaska. You get probably a little bit of money per year from the permanent fund, which I'm not even going to count that because I think it was only something like a thousand bucks last year. It can be a lot more than that, but that's not going to help. But you will likely have social security that is significant at age 67. And if your assets are at close to a million dollars, then that should be plenty. And I don't think you'd be asking a question about your grandchildren if you didn't think you were going to be in good shape too. So for the grandchildren, Donna, there are a couple of things you can do. The UGMA or the UTMA account are basically custodial brokerage accounts for anyone that's under the age, who's not an adult. So if you've got a five-year-old grandchild, ten-year-old grandchild, you can get them set up with a custodial account. They can own a broad stock index, and it can be worth a large amount of money by the time they're 18 or age 21. So that I would encourage you to do, which will help set your grandchildren up. I think the other thing that one of the themes this year, that has really emerged to me, and it's because we're in this economy where some people feel like they have a lot and some people don't, the only answer long-term for Americans, more Americans to participate and have financial freedom is to start earlier. That's the only thing we can control is time.

Speaker 4:
[23:41] Right.

Speaker 5:
[23:41] And you getting them started, Donna, at a young age, even with a small custodial account that's $1,000 or $5,000, I think that's tremendously helpful to them in the long run.

Speaker 4:
[23:55] But wouldn't you say, don't do that unless you're maxing out your retirement savings and doing as much as you can, because there are no, as Clark always says, there are no scholarships for retirement. So you can't sacrifice being able to care for yourself in your older age to take care of your grandchildren.

Speaker 5:
[24:11] Yeah, it just depends on where this $500K is. It really does. If that's in retirement assets and it's invested, that should stay invested and she should be in good shape over time.

Speaker 4:
[24:24] Okay. Danielle in Texas says, my husband and I are contributing to our $2,529 plans, but we're also concerned about over contributing. They'll only be able to convert $35,000 to Roth IRAs if they forego college or get scholarships. So we're instead saving the bulk for their college and my solo Roth 401K. I'm self-employed. I won't quite be 59 and a half when the oldest is 18, but we'll use the 529s and just cover any overage out of pocket until I reach that age. This is in addition to our maxed out savings for retirement. What's your take on this strategy? Should we be concerned about over saving and 529 plans? Is there somewhere other than my solo Roth 401K where we should put the money?

Speaker 5:
[25:06] You know, Danielle, it seems like the timing on your strategy can work. It seems like you're going to be able to... The 529s get them far enough along until you're able to use the Roth, and maybe there's a one-year underlap before you can really use it. But you're right. I think a couple of takeaways here for our listeners. The 529 plan now is more flexible than it's ever been. So the rules changed and they loosened up the rules on how you can use it. One, you can convert 35 of that to a Roth over a period of time. Two, it's kindergarten through 12th grade to college now, so there's more flexibility. You can even use 10 grand of the 529 funds to repay student loans. So it's way more flexible. We had a question, I think, a week or two ago of someone going back to pilot school, and the dad was going to use some of the 529 plan for himself to go back to school. So there's more flexibility, which is I wouldn't be worried about that. That's a good thing. On the solo Roth 401K, if you just had a regular Roth, remember you can take your contributions out regardless of your 59.5. But you've got a solo Roth 401K. So the IRS uses the pro rata rule for that. So it's not as easy, you can't just take your contributions out. But it makes me think, though, you probably can do a 401K loan from your own Roth 401K, your solo Roth 401K, up to half the $50,000 or half of the value, and then you pay yourself back. So check with, and you probably set up your own solo Roth 401K, and I bet you it has a loan provision. So that could also get you, if you need the money and you're only 58.5, check and see if you can just give a loan to yourself, and that can be that bridge money for the kids.

Speaker 4:
[27:06] Okay. Mark in Florida says, Wes, here's a question I have for you that I've heard many financial people share, but I don't know how it happens. You said before that the federal government floods the economy with millions or billions of dollars. How does our government put money into the economy? I've heard it said they just print more money. How does it actually get into the economy?

Speaker 5:
[27:27] It does sound crazy. It's funny. That conversation comes up all the time in the investment world. And it's funny. People who are in the investment business still check themselves when that comes up because it does seem inconceivable. But the answer is yes. Literally, the Federal Reserve creates new money when they want to. What do they do? They don't print new money. It's not like they go to the printing press. They just add a zero to an account, and now they've created more money in their ledger. And I know it sounds crazy, but first of all, they do that, but then they have to get the money into the system. That's the area that I think people don't really think about. So the Fed literally creates money digitally, they don't print it, and then they help push the money into the banking system so that it can ripple out in the economy. And how do they do that? So let's give an example. Say the total, I'm just going to use round numbers here, 1.1 trillion. The total economic money pie, let's say, is a trillion dollars. Then the Fed says, we want to grow it by 10 percent. So they inject 100 billion. Now the whole system is 1.1 trillion, not a trillion. To do that, they don't save up 100 billion, they don't use their own money that they already had, they just create the 100 billion. Then it goes into the market when they buy 100 billion dollars worth of treasuries. So the market, they buy 100 billion dollars worth of treasuries. Those bonds and securities, the cash for the treasuries go to these institutions. Now the banking system has extra money. They have 1.1 or 10 percent more money to be lending out. And then that makes lending more open, more available, more bank loans. So the money finds its way out into the system and stimulates the economy. By the way, also can create inflation. But the Fed creates it in order to get it into the system. They buy bonds from institutions and then the money gets in the banking system and eventually gets loaned out to give more economic liquidity to the system.

Speaker 4:
[29:43] Professor Moss.

Speaker 5:
[29:45] I don't know if that even makes sense. It's hard to even fathom. Christa, always a blast. Thanks for being here. And if you'd like to find me and the Retire Sooner team, it's easy to do so at yourwealth.com. That's y-o-u-r, yourwealth.com. Have a wonderful rest of your day.

Speaker 3:
[30:02] Hey y'all, this is Mallory with the Retire Sooner team. Please be sure to rate and subscribe to this podcast and share it with a friend. If you have any questions, you can find us at wesmoss.com. That's wesmoss.com. You can also follow us on Instagram and YouTube. You'll find us under the handle, Retire Sooner Podcast. And now for our show's disclosure. This is provided as a resource for informational purposes and is not to be viewed as investment advice or recommendations. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. The mention of any company is provided to you for informational purposes and as an example only and is not to be considered investment advice or recommendation or an endorsement of any particular company. Past performance is not indicative of future results. Investing involves risk, including possible loss of principle. There is no guarantee offered that investment return, yield, or performance will be achieved. The information provided is strictly an opinion and for informational purposes only, and it is not known whether the strategies will be successful. There are many aspects and criteria that must be examined and considered before investing. This information is not intended to and should not form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment, tax, estate, or financial planning considerations or decisions. Investment decisions should not be made solely based on information contained herein.