00:01
Peter Dunn
Hey, it's me. Hi. Welcome to the Pete the Planner show. I'm your host, Pete the planner. As you will learn today on this episode of The Pete the Planner Show, I'm on 2 hours sleep to help get through. This is my good friend, my coworker, my sharer of a namesake, Damian Dunn. Hello, Dame.
00:25
Damian Dunn
Hello, Pete.
00:26
Peter Dunn
So here was the plan. I was like, you know, I'm going to go speak in Des Moines on Wednesday, then fly to Phoenix, speak in Phoenix on Thursday, and then take a red eye home so I could be here for the show and soccer games for the kids for this evening. So I executed on that plan. What I did not account for was that since time has passed and I am now an older man post pandemic, I cannot sleep on a plane like I used to be able to. So I'm running on fumes, my friend. So nothing like a good radio show where the only thing getting me through is your smile, Dame. And the cooled, harsh taste of Miguel. So thank God for Miguel. Thank God for you. Hello, Dame.
01:11
Damian Dunn
How many of those you got sitting on standby just off Be?
01:15
Peter Dunn
That would be a heart attack. Very. So I only recommend one a day.
01:22
Damian Dunn
Those are rookie numbers. You got to pump those up.
01:24
Peter Dunn
I know. Hello, everyone. Rick Swink. Good to be with you again. Danza. Hi. Hope you're well. Hope everyone's well. All right, so, Dame, I am not in a hurry. Nothing there's nothing hurried about my experience today, but I will note I'm fighting a different clock, and that is the clock of energy today. So I think we'll probably just vominos, if you know what I mean.
01:50
Damian Dunn
Okay.
01:53
Peter Dunn
I will tell you one brief story before we get started. So tales of the Road. I'm in Phoenix last night, and I am at the gate to get on my plane to La. So then I can take the red eye home from La. And I'm standing, getting ready to get on the plane, and this guy walks by, and he looked incredibly familiar, so much so that he looked so familiar, it almost didn't make sense as to what was happening. And it turns out it was Aaron Paul, who was the actor that played Jesse Pinkman on Breaking Bad. So he's the younger guy on Breaking Bad. So it's sort of weird when you see a celebrity or someone, you've watched their show, and you've watched it for seasons, he's in front of you, and it's like, am I currently in Breaking Bad? It's a very weird thing because he looks exactly the same.
02:51
Peter Dunn
The character looks like him. There's no prosthetics or anything like that. And so he's on my plane, and he's sitting a row in front of me the entire flight. People were coming up from the back to talk to him. The lady next to me on the flight pulls out her iPad and starts watching breaking Bad. Various people are, like, just coming up to him, and it made me so sad. But other than the fact that he was incredibly nice and gracious to everyone, he was like shaking people's hands, bowing his head in. Just my theory on being, like, a hardcore celebrity, like a really popular person. Like that. It's just got to be hell. The fame has just got to be hell. I mean, it's late at night in Phoenix. Dude doesn't have sunglasses or a hat or a mask. It's just him. And people are coming up to him nonstop.
03:46
Peter Dunn
Nonstop. And I was like, I think it's interesting to have seen him, and I'm talking about it here on our show. But, man, people really took the chance to talk to him. Do you have thoughts on that whole? Like do you talk to someone like that, given that everyone else does? What's your vibe here?
04:07
Damian Dunn
No, that would be uncomfortable for me, let alone the person that I'm talking mean. They're just mean. You know, this Pete stardom hasn't changed you at all. You just did the same person that you were as you were in high school. Probably only a little bit better jokes. If it's natural. And there's a reason to have a small conversation with somebody, sure. But am I going to go out of my way to talk to somebody that I don't know, star or otherwise? Probably not.
04:43
Peter Dunn
In my wheelhouse well, based on how much I fly, I tend to get upgraded to first class. Not because I'm buying first class, but because I have a lot of airline miles. So I'm in first class, he's in first class, and people are just coming to use the bathroom in first class so they can walk back and talk to him. It was just very OD. Anyway, so that's the only interesting thing that's happened to me in the last 48 hours.
05:05
Damian Dunn
Anybody throw off any good one liners as they were walking by just to try and get a laugh out of them?
05:10
Peter Dunn
Probably I had my headphones on because I can't tolerate any of that. So let's do a show. I have to say, I'm kind of excited about all three topics today. I find them to be interesting and let's see what we can do with them. And let's see if I can remember them when I start the show. So it's with that I need to set my clock. You ready to go, buddy?
05:32
Damian Dunn
Yes.
05:33
Peter Dunn
All right, in three, two, one. This week on The Pete the Planner Show we answer your money questions. Here's how the show works. You email us. Askpete@petetheplanner.com that's. Askpete@petetheplanner.com. And here's what we will do. Sometimes we'll just leave your emails, sit in the box for months. Or we'll answer them. And beyond that, what we'll do is we'll bring our own topics to this here financial radio show. And by we, I mean Damian Dunn, vice president of advice at Your Money Line. Hello, Damian.
06:01
Damian Dunn
Hello, Pete.
06:02
Peter Dunn
Good to be with you. Fair warning to all of our people here today. I'm on 2 hours of sleep coming off of a red eye, and of which Ted this morning said, how was your pink eye? Which I think he sort of missed how all of that works. Alas, here we are mustering enough strength to bring people everything they need to know about their financial lives. Dame I saw a headline the other day that read, adjustable rate mortgages demand doubles as interest rates hit the highest since 2009. And this is disconcerting to me because, number one, the adjustable rate mortgage is among my least favorite financial products. And so when the demand for it spikes at a period of time in which there is thought that interest rates are going to keep going up, help me understand how this is not a horrible piece of news that has popped through.
06:55
Damian Dunn
Not only are interest rates projected to go up, but Pete, I think it's reasonable to think that maybe home values go down.
07:07
Peter Dunn
We never want to hit the it's a perfect storm of housing, but this is a problem. Can you explain to those who don't understand what an adjustable rate mortgage is?
07:18
Damian Dunn
Yeah. So let's say you want to buy that shiny house on the corner that has the white fence and the nice porch and you just don't have quite enough money to make the payment on a traditional mortgage. Well, what are you going to do? Well, you know what? You might be able to find a little bit better rate. An adjustable rate mortgage, an Arm, they'll give you a better rate, and you'll make that payment over maybe a three year period or a five year period. But that interest rate is going to adjust at some point. It could be at different periods of time. It could be at the very end of the period. But that interest rate is going to find its level with what interest rates are in the future, and you may not be able to afford that payment then either. People often get into these products to think, you know what?
08:03
Damian Dunn
I can't now, but I will in a few years. I'll be able to afford that normal mortgage in a few years, or I'm going to move on to a different house. And I don't want to put principal into it. I just want to basically sorry, that was a different product that I was thinking of there for just a second.
08:16
Peter Dunn
Interesting.
08:17
Damian Dunn
Another favorite product of ours. It's a way to afford a house that you may not otherwise be able to afford in a more conventional mortgage product. Not a great idea.
08:29
Peter Dunn
Yeah, that's what concerns me here is not only are people making a bet that three years from now interest rates will be lower, they're ignoring the fact that their payment will naturally be higher because of property tax increases, because of insurance increases. And don't forget as you just mentioned, people will also use this artificially low rate to push the limits of what they can afford. It's just a bad idea. How do you think housing prices play into this? Because I agree it is conceivable that three years from now that housing prices are exactly the same as to what they are now or that they've slowed down a little bit. How do you think that plays in.
09:12
Damian Dunn
First? My assumption or my guess on what housing prices are going to do over the next three years? I would guess in many markets they're lower than what they are right now. I think demand dries up, interest rates go higher and we see coming to terms with some of this inflation that we've had in housing prices. How is this going to play into the rates that people choose or the mortgage products that people choose in their home buying selection process? People still have this desire to be homeowners. Maybe not as much as they did in years past but those people that want to be homeowners are going to try and find any way they can get their foot in the door. And if that means that they're going to take on potentially risky mortgages or not as advantageous or consistent payments mortgages, they're going to do it.
10:11
Damian Dunn
We've seen it before. We saw it gosh. I remember mid 2000s people were telling me arm is the only thing you should be doing right now. Arm is the only thing you should be doing right now. No it's not. Settle up. Be happy with consistency of your mortgage payment. Don't try and outsmart the room on this.
10:29
Peter Dunn
The average contract interest rate for 30 year fixed mortgages with conforming loan balance increased to 5.37% from 5.2% and that is the highest rate since 2009. I think another angle to this and I want to be careful here and respectful I can't imagine being a mortgage expert and recommending an Arm to someone right now because it's one thing for a consumer to seek out an Arm. It's another thing for a lender or a mortgage broker to say, you know I know you're struggling to afford based on these interest rates. Why don't we take a look at an adjustable rate mortgage because they're trying to get the deal done. And the way that a person would frame that is they're saying well I'm helping the person accomplish their goal to buy a home. To be fair, anytime you're talking about financing anything, whether it's a college education, a new car purchase, a home purchase, the goal isn't to make the purchase.
11:29
Peter Dunn
That's not the goal. The goal is to make a purchase that makes sense. And sometimes a salesperson involved in financing will remove themselves from that duty that I'm bestowing upon them to help a person understand if the deal itself makes financial sense and then that's how they're able to not feel culpable for what's going on. I'll say this dame 5.37%. If we just take a very deep breath, that's still a really good interest rate. I mean, it's a shockingly good interest rate. I think the last time I refinanced it was last year. I think I'm on a tenure now at 2.75. Now, that's just a stupid interest rate. My first interest rate on a home back in 2000 was 8%. Yeah. I didn't have very well established credit as a 22 year old with a college degree one month out of school, but I had an 8% loan.
12:25
Peter Dunn
5.37% is not bad, and in fact, I think as interest rates rise, that will help cool off the market, the housing market, in a good way.
12:36
Damian Dunn
You know, one thing I don't know that you may know the answer to, and you could just look like the genius this morning.
12:40
Peter Dunn
Unlikely, but go ahead.
12:43
Damian Dunn
Are there different commission rate schedules for Arms versus conventional loans?
12:48
Peter Dunn
I don't know the answer to that, but I'm going to make a very uninformed guess. You got to think so. Yeah, you got to think so because the bank is protected. It's all about risk, and so the risk falls. Well, I guess the other side of that is if interest rates go lower, trying to think through this, not a good thing to try to think through on the amount of sleep that I've had, I'll note this and what we're talking about really next segment, is the pending idea of a recession. And so it's one thing to choose an adjustable rate mortgage because interest rates are rising. It's a whole other thing to do that absent the idea that we might be coming towards a recession. And it's also worth noting a recession is a solution to a problem. No one likes hearing that. Every time I say it, I cringe myself.
13:48
Peter Dunn
But it is true a recession solves an overheated economy, and that's what's about to happen in my estimation. We're going to talk a lot about that on the next segment, but I'm willing to give a very big sweeping generalization to into this segment. I would recommend an Arm, an adjustable rate mortgage to 1% to 2% of potential buyers of a home and probably no one else. And if you're thinking, oh, well, I'm likely in that one to 2%. No, you're not. I think it is a really bad risk decision to get an adjustable rate mortgage. And if that's what you have to do to afford a home, you can't afford the home. And you take that in light of what's about to happen in terms of the economy, it is a bad decision that we would hope that you will prevent yourself from making.
14:41
Damian Dunn
I agree. I don't think there's any reason right now for people to jump into an Arm.
14:49
Peter Dunn
I like it fixed or nothing. Any interest coming up after the break? Are we headed towards a recession? That's next. I'm Pete the planner any interest. That was good. Was that?
15:00
Damian Dunn
No, it's just my natural abilities coming through.
15:07
Peter Dunn
How you did? Good. What's your week been like?
15:09
Damian Dunn
Busy. Yeah, it's been interesting. Exciting, stressful. I mean, I'm losing my hair. I don't know if you can tell, but it's been fun.
15:21
Peter Dunn
I like that. I told a slightly inappropriate joke to kick off my gig yesterday in Phoenix. I was speaking to the plan sponsor, Council of America. So it's very large businesses. It's a conference where they talk about how they can make their 401K better, but I mean, the likes of Disney, Viacom, big Microsoft companies there. And so, of course, I go up. I'm on a stage. I have a microphone. Lights are on. It's hard to just go, oh, thank you for having me. My presentation is on. Like, I step onto the stage. You got a mic. There's lights. You just got to have an opener, right? Well, it's an old one that I've probably told in the show, but it was the perfect audience. So let me share my joke with you. I went up and I said, I can't tell you how good it is to not be on a zoom call with all of you right now.
16:18
Peter Dunn
And everyone's like, yeah, we're here at a conference eating hard candy. Like, people are excited. And I said, conferences are happening. I'm back on the road. And it's nice. One of my favorite things to do. So now I'm sort of going into joke mode. Hello. One of my favorite things to do is when I'm on the road is to sit at a hotel bar and have my dinner and just people watch. And since during the pandemic, I finished Netflix and Hulu, what else am I going to do? And People Watch is the ultimate reality show. So I was in New Orleans last week, and I was at a hotel and having some crawfish, and I see these two people start to talk at the bar a couple stools down. And they clearly did not know each other prior to this, but they were certainly getting to know each other.
17:03
Peter Dunn
So much so that I was beginning to text my wife updates on this new drama unfolding in front of us. I'm going to call it quick time out. So this is me really going through it just like this to this group of this room where I'm giving a financial presentation, by the way.
17:20
Damian Dunn
Perfect.
17:20
Peter Dunn
I'm comfortable with this. I am fully comfortable with it. But it's an interesting enough build up that people are like, okay, well, where's this going? And so I said and things were let's just say they were getting closer. And this is not the first time I've seen these sorts of things being on the road, being a business traveler. But it escalated to the point that the guy stood up very boldly, and he said just above a whisper, what do you say we get out of here and go make some bad decisions. And of course, I panicked. I panicked. I was like, they're going to go upstairs and take out 401K loans. Yeah, there's the joke.
18:02
Damian Dunn
Did it get the desired reaction?
18:04
Peter Dunn
Perfect room. Sometimes the perfect joke meets the perfect room. And when else are you going to use that joke? Better than that.
18:15
Damian Dunn
Oh, no, that was perfect. You had them in the palm of your hand for the rest of the presentation.
18:20
Peter Dunn
Oh, I did. It is kind of good to back on the road. You and I were talking before went to air today. What's weird is two years have clearly passed since I've been on the road a lot, and I'm now not 42. I'm 44 years old. It's funny, man. I feel like the age of being on the road, being able to take a red eye, being able to sleep in any bed. Oh, man. I'm coming out of the recession. Not in fighting shape, if you will.
18:50
Damian Dunn
You have to have Mrs. Planner just let you go sleep at some random hotels every other weekend for a while just to get back into game shape.
18:58
Peter Dunn
I think as long as they took the kids, she wouldn't mind. All right, Dan, let's talk recessions. Hello, everyone. Red has joined us. Hello. Lee with a great joke. Look at that. We'll even put it up there for him. I want to make a camouflage joke. I just can't find any get a all right, you ready to go?
19:16
Damian Dunn
Yeah.
19:17
Peter Dunn
In three, two, one. Back on the Pete the Planner show. Dame. I think a recession is coming. Yeah. No, I feel like it's coming and I want to talk through it, and we're going to talk through who we think it will impact the most. And I want to share with you why I think it's going to happen and why ultimately it's a good thing, but as we're living it's going to stink. Okay, so first I'm going to go back to this idea that when you have a recession, it is often a solution to a problem. The problem right now is that inflation is so incredibly high and the Fed is trying to get control so that consumer prices don't keep escalating to the point of the economy crashing. Because of that, no one can afford anything. So what they're going to do is they're going to raise interest rates, which will slow down the economy, because businesses will not borrow money and make bigger investments to grow the business.
20:23
Peter Dunn
So then theoretically, you're going to see consumer demand fall a little bit, which theoretically should begin to solve the supply chain issues, and it will solve the inflation issues over time. But the challenge here is because there's been this temporary inflation for so long now that it's gone on for eight months, you think we've been in a really nasty inflation environment for eight, nine months. Yeah.
20:52
Damian Dunn
We were talking about at the end of last year.
20:54
Peter Dunn
Yeah. So what has happened is that has sort of gone on too long. So it's going to take a while to re steer the ship away from inflation. So what's going to happen is the Fed is going to keep putting interest rate rise raises which will contract the economy. The economy will not produce as much output. A recession is simply a contraction. It's when a gross domestic product falls, grows. And so that is a recession. And it's coming because it has to, because we have to solve this inflation problem. And then the key here is how big of a recession is it? Is it one, two, three quarters or are we going to fall into some level of a depression? That is like an escalating term. Clearly. I don't think we're going to get to the point where we stack a bunch of quarters on and we're in the midst of a depression, but I think we're going to have a mild recession that's going to cool off the economy.
21:55
Peter Dunn
That is my opinion. I'm curious if you line up any different on that.
21:59
Damian Dunn
I don't see any way that we're going to avoid a technical recession. Two quarters with negative growth. We've already had one. It wasn't huge. And based on what I'm reading, some economists would say they're not really all that worried about it because of some of the factors that go into calculating that number. But I don't see any way that we don't find another negative quarter or that we're in the midst of another negative quarter right now. The one concern that I have well, one of the concerns that I have in this area is that when we're talking about changing interest rates and trying to slow things down, those are macroeconomic policy changes. Macro policies usually take twelve to 18 months to really see how they shake out. It's not something where they announce it and then all of a sudden we know what the final result is going to be.
22:47
Damian Dunn
Two weeks, four weeks later. It takes some time for everything to find its level and really know what we're playing by. So if the Fed comes out and either aggressively or just incrementally increases rates over a number of meetings, it may be a while before we figure out what the end result of those changes are. So do they potentially overshoot and raise rates too far and then they have to yoyo them back in a little bit to try and find that happy medium? I don't know. But I would be dishonest if I said that I am a little nervous about the aggressive stance that the Fed is taking on raising interest rates.
23:31
Peter Dunn
Yeah. And also note here, you and I are giving our opinion a lot of times we give a very informed opinion, an experienced opinion. I'm going to stop short of saying I have an informed, experienced opinion about this. I'm just giving you my opinion, what I think is going to happen and what I also think is interesting here, and we're not going to get political, but I think that the stimulus packages that we had to try to solve the immediate challenges of the Pandemic, they're going to have an impact. And now they had a positive impact, a very positive impact as they happened, right? They kept the economy afloat, they kept food in people's mouths. But I think what we're seeing is to some degree that stimulus overheated the economy where demand was outpacing supply, and then you throw in the supply chain issues on top of that, you look at the student loan moratorium going on and now there's this escalated talk once again of student loan forgiveness dame.
24:43
Peter Dunn
All of that has also contributed to people having extra income to pump into the economy, which is demand side, and then you have the supply chain issues. So what I'm saying is a lot of the things that we did as a country to solve the immediate financial cris that was March and April of 2020 is partially why we're in this situation now.
25:09
Damian Dunn
There will be no shortage of studies and papers written on what we've just experienced in the last three years. Going forward, it will be studied and ad nauseam to try and figure out how economic policy can influence and impact a society at large, basically.
25:29
Peter Dunn
Yeah, that's a good point. Because the other thing is here what I'm not saying is it was a mistake because I don't feel like I have enough credibility to say it's a mistake. I think this is a really incredibly complicated issue that when it gets too political and it gets too polarized, what one side will say is it wasn't a mistake, and the other side will say it is a mistake. And I'm not sure it's that simple. This reminds me of doing a home repair project, like when I made a change out a toilet valve a few months ago and the problem grows, the project grows because you solve one issue and then there's a consequence to solving that issue and then it keeps going and it escalates. And yeah, maybe somewhere along the way you did something less than ideal, but then you're just simply solving the problem in front of you and it's hard to figure out what the third problem down the road is going to be.
26:23
Damian Dunn
How many trips to the local hardware? Okay.
26:27
Peter Dunn
Four. Yeah, so it's a pretty good metaphor. There were four. While we're on it, I know you and I had planned it about talking about which age band will be affected the most via this recession, and we can certainly do that. We have a couple of minutes left. I also want us to weigh in briefly with another prediction of since the student loan topic has heated up so much. Once again, student loan forgiveness and you and I are nerds so we've been slacking each other all week making predictions while our coworkers look on in, I don't know, disbelief. You and I are like, no, this is what's going to happen. I want you to lay out not what you think should happen because we don't have time for that. I want to know what do you think is going to happen? If you want me to go first, I would be glad to.
27:16
Damian Dunn
I think there will be $10,000 of forgiveness offered because that's what the President has said he's been interested in from the jump. I think that's going to be ten grand.
27:29
Peter Dunn
I think it will be ten grand and I'm trying not to get out of hand here. I think it's great that will provide some sense of relief to people who have less than $10,000 of student loans. You know what I mean? The point of forgiveness is to clear up an obligation. But based on the average student loan balance, what is likely to happen is a, it's not going to provide a lot of relief to those people. It's not going to change their payment. They're not even making a payment right now. So it doesn't solve that cash flow issue. Now that could arguably cool off the economy a little bit, which is sort of nice. When the student loan payments start back up I know this sounds terrible, but when student loan payments start back up, that's going to help cool down the economy in a good way.
28:24
Peter Dunn
Final thing I'll note though, it's just going to increase the price of college. That's all it's going to do. So I'm not being skeptical. I'm just saying I agree with you. I think it's going to be $10,000. I think it could be a little bit more based on income based repayment, but we will see. Coming up after the break, should you choose a time to retire or a date? That's next. I'm Pete the planner. With the 2 seconds that I tried to explain what that segment was about coming up, I missed the mark and said something that didn't make sense, but I was already 4 seconds over. Alas, who cares?
28:57
Damian Dunn
Apologize to our person at the radio station.
29:04
Peter Dunn
I understand why people who are really into politics and really associate with a particular side of the aisle love to get behind these economic arguments. I totally get it. Where I always sort of get lost listening to the arguments, though, is that I think people oversimplify the solutions to very complicated problems and then that's where it just becomes really insincere.
29:34
Damian Dunn
I understand and I believe that everybody wants the right solution. They want what's best for the country as they see it. The problem is we see things vastly differently depending on what part of the country you live in, what your background is, and that's part of this whole process. And as frustrating as politics is, for many people, myself included, it's a necessary. Evil at this point. And so I am very happy to let people who are interested in doing those things do them. And I will stay the heck out and just complain from the sidelines in small groups.
30:22
Peter Dunn
See, I think there should be some level of student loan forgiveness. I am in support of that. I'm not sure what it looks like, but I also feel that the timing of this does suggest that a decision needs to be made in this area prior to an. Know, I think Mitt Romney came out this week and suggested that, and people are all like, clutching their pearls like, no it's not. It's know, you can think that there should be student loan forgiveness like I do, and also acknowledge that the reason it needs to get done is because it was a campaign promise that needs to be delivered on. They're not a mutually exclusive thing. Both things can be true. So that being said, that doesn't make me skeptical of student loan forgiveness, but I am also willing to acknowledge that they go hand in hand. And I'm not mad about just it's okay.
31:30
Peter Dunn
You don't have to line up with one side's argument all the time. You can feel both ways. It's okay.
31:36
Damian Dunn
It's not what Twitter tells.
31:37
Peter Dunn
Oh, Twitter. Let's not start on that.
31:41
Damian Dunn
I think forgiveness is an option. I think there are other options that I would love to see pursued more vigorously. Eliminating the interest rate, eliminating accrued interest on student loans right now, letting people just pay back principal. But all of those potential ideas and solutions don't do anything to stem the root of the cause. And until we can figure out how to get the cost of the education in control, we're going to be revisiting this process, this topic, maybe every election cycle.
32:19
Peter Dunn
Yay. Yeah, I'm with you. I think the perfect solution involves waiving interest rates, keeping them at zero, restarting repayments, and then eliminating accrued interest. I also think the model that public service loan forgiveness provides is where you make 120 payments based on income based repayment, and then the remainder of your balance is waived. I think that's a really good general option for everyone. The problem, naturally, is that there's no immediate relief for anyone with any of those solutions. And so they just don't seem appealing. People want immediate relief, good, bad, or otherwise, and they're not going to get it with what I think solves the problem.
33:07
Damian Dunn
Yeah, capitalized interest I think, should be eliminated from this whole process too. I think that's just horrible, predatory, and it needs to be done with immediately.
33:19
Peter Dunn
I was at a nerd festival at this convention in Phoenix for people who love to talk about this sort of stuff. And I was talking to a guy afterwards, and he and I were talking about, okay, so let's say we're talking about retirement. So let's say you got someone in their 50s or 60s now that has not created stability in the early parts of their career. So now they are unstable heading into retirement. How do you solve that? That's an interesting question, but I said I'm going to dismiss that. I'm going to park it to the side now, and I'm going to say this, that the issue, to some degree, involves Social Security because so many people are running to the finish line at age 62 or age 67 simply by moving the finish line to 72 for, like, any like, think about this. Anyone who's currently not born.
34:04
Peter Dunn
And last week we discussed whether that makes you dead or simply not born. It all fits together. The show. Let's say there's someone watching the show right now that has a baby in their being. I don't know how this works. I don't know what parts to talk about. Let's say you are pregnant. I believe that's the term, yeah. How hard would it be for Congress right now to just agree to just be like, 72 is retirement age for anyone minus years old. That's all you have to do. That alone begins to address this. It's such low hanging fruit. It's shocking. And that's not shocking, but it's mind numbing as to how something like that is so obvious and just simply based in math and not politics and doesn't affect anyone who's alive. Why can't even they get there of beginning to solve the issue of retirement by simply moving back Social Security age?
35:01
Peter Dunn
I don't understand that.
35:02
Damian Dunn
Well, because that would cost them votes. Pete.
35:07
Peter Dunn
We'Re not going to talk politics. Okay, what are we doing here? Okay, describe this so I don't sound.
35:16
Damian Dunn
Like I sounded it's more beneficial for someone to think about retiring during a window of time versus a more narrow period of time. Whether it's a specific day or a quarter or a year, windows often offer more flexibility and confidence in your retirement.
35:34
Peter Dunn
In three, two back on the Pete the Planner show, dame, a wise man once said, it is better to target a window of time for retirement as opposed to a very specific date. That wise man is you. This is your topic. And I thought, yeah, let's talk about this because back in the day when I was a financial advisor and when you were a financial advisor, what people tended to do was to try to, like, let's choose a date to work backward off of, all right, August 23, 2031. Let's work backward off that date. And there's some sense in that because it becomes a math equation, and, yeah, behavior is involved and habits are involved, but from the outset, it's math. It is like, okay, well, this is how much you got to put in at this interest rate, and this is how much you can distribute.
36:27
Peter Dunn
And there you go. What you're suggesting, Dame, is maybe there's a better way not choosing August 23 of 2031, but what sort of window are we talking about how big is the window that you're suggesting?
36:40
Damian Dunn
I would suggest that window could be as big as three years to account for any number of things. Could account for a change in expenses in your household, could account for poor market conditions. Could account for a need for a few extra dollars in those retirement funds to come up. Maybe need to delay Social Security a little bit. Any number of factors could influence when you want to retire and when it's optimal for you to retire. The whole financial planning industry is based off of finding a specific day for somebody to retire. What that does, though, is sets you up to have to always consistently go back and look at is it actually feasible during that time? What I haven't seen and what I would love to see developed make a note of this, Pete, is that we could find develop a piece of software that says, all right, you are now 50 years old.
37:41
Damian Dunn
You want to retire sometime between the ages of 64 and 67 and then start looking at all the different parameters what your Social Security benefits are going to be, what your estimated retirement funds will be based on any number of scenarios, adverse sequence of returns or just normal markets, health conditions, how long your life expectancy is going to be after you retire at any one of those dates and throw just all sorts of variables at it. And yes, there will be a ton of data to go through, but you'll be able to make really wise decisions. If I retire at 64 and figure that the economy is a little skittish right now, what happens if we have two really bad years after I retire versus what if I just work those two years and delay Social Security two years, add to my retirement funds, not draw down on my retirement assets?
38:37
Damian Dunn
How different do things work if I just work a little bit longer and change my retirement plans?
38:42
Peter Dunn
What I like about this idea is that let's say you do it the old school way, which is August 23 to 2031. You're choosing a date, and that date is approaching, and the market is not doing great and inflation is high, and you make the decision, you know what? That's not going to happen. Then there's this sort of purgatory feeling of, well, when is the right time? I would think it becomes all consuming. Right? It feels like a loss. It feels like a failure. This thing that you've saved for 40 years, all of a sudden you're chasing. Whereas if you said, hey, my window is anywhere from August 23, 2031 to October 15, 2034, right? And so that way when you approach, all you're doing is like, you know what? It's not going to be the earlier part. It's going to be the later part.
39:38
Peter Dunn
I think it takes a lot of pressure off someone. So I think I'm down for this. I like this three year window. I'm wondering where it goes as skew does it go? Askew via Procrastination, where a person, because they've got that window, says, well, I got a little bit more time. Maybe we're going to increase our lifestyle a little bit more now because we can always delay retirement. What's the downside of this?
40:01
Damian Dunn
Potentially, you could run into some issues, whether it's procrastination, whether maybe you experience that sequence of adverse returns during that three year period, and now you're really stuck. Your three year period just became a six year period, but you'd rather be in that position rather than having retired and having to reenter the workforce. I will note full disclosure, picking a date still works for one group of people. Can you guess who that group of people is, Pete?
40:33
Peter Dunn
People with a pension.
40:34
Damian Dunn
Yep. Pension and Social Security. If that's going to fund your retirement, you can still pick a date. It doesn't matter. You're going to have your income delivered to you regardless of what happens externally. So if you're in that position, go forth and pick a date. But everybody else who has variability in their retirement projections, income, expenses, health, whatever the case may be, do yourself a favor and don't put the pressure on yourself of picking a specific date. Leave it more flexible.
41:06
Peter Dunn
We've revisited this idea over the years on this show of the hardest thing you will ever do financially is to retire successfully. And it's a lot because of this very conversation, because as you're approaching a single date or even a window and inflation is hot, the market's not health conditions, it is so hard. And so what I find people do, and this is anecdotal, but I'm sure the data supports it is people say this is too hard to think about and to plan through. So we'll just see what happens. Here we go. Dame, what percentage of people adopt the cross the fingers, let's see what happens. Because this is so complicated. Like, let's say working adults, what percentage of people adopt the we'll figure it out. What percentage?
42:04
Damian Dunn
It's a really interesting question because, you know, there's tons of people who retired just that very way.
42:12
Peter Dunn
That's true.
42:13
Damian Dunn
In fact, a lot of them are probably successful. They figure it out as they go, and they adjust their expenses and do the best they can without the guidance of a financial trained financial advisor. But what percentage of them do that? I bet it's higher than you, and I would guess in reality.
42:33
Peter Dunn
Yeah. And I think to your point, which is smart here, just because people adopt thee, we'll figure it out as we go. That's not necessarily negative because there are people that can pull that off. I think, once again, the number of people who can pull that off are different from the people who think they can pull it off. I would say 65% of people, 65% to 70% of people don't actually work backwards off of a retirement date or window. I think they just throw money in the ocean and see what happens.
43:07
Damian Dunn
That's probably a fair estimate. The one thing that I will throw into this conversation that I think fits I read an article. It wasn't an article. It was a Twitter thread.
43:18
Peter Dunn
Oh, my gosh, don't ruin the show. Come on.
43:22
Damian Dunn
They were talking about the term retirement and whether or not that would survive going forward or whether it's going to change to something else. And the common theme was financial independence. You often hear it in fire, but it made me think that might be a better way to think about that period of our lives going forward, instead of just simply retiring, hanging up the work gloves or the tie or whatever you're going to walk away from, but just establishing financial independence, because that could happen at any period of your life. Maybe you hit the lottery or develop an app or come up with a new plastic end on a shoestring. I don't know. But that may be the better term for us to think about going forward instead of just old school retirement.
44:13
Peter Dunn
Yeah, that idea has been creeping up for the better part of 15 years. And what's weird about it I tend to agree with you in most cases, especially about this, it still hasn't caught on. It is so hard to reframe. I keep talking about this conference I was at this week. The idea that we can't even reframe the 401K correctly over the last 40 years is proof how hard this is. The 401K was created in 1980 by a retired benefits consultant by the name of Ted Benna. And the whole point of it was to give highly compensated people a means to save even more for retirement. And the only way he could pull that off logistically was to have lower income people also contribute to the plan so it didn't become top heavy. So 401K wasn't even designed for the masses to retire. It was designed for highly compensated people, and we've not been able to reframe that.
45:07
Peter Dunn
So it's with that little piece of history, we head to a break. Coming up after said break, biggest waste of money of the week and the news right here on the Pete the Planner Show. I'm Pete the planner.
45:18
Damian Dunn
If Ted Bena didn't own a billboard somewhere with his name, his picture, the name of his company, and a slogan benefit on somewhere, I don't know how that never came to fruition.
45:29
Peter Dunn
He was a retired benefits consultant in Philadelphia. So the story goes. In 1978, there was a congressman from Oregon, senator Olman can't think of his first albert, maybe Albert Ullman, and he created sort of the structure for the 401K within tax code. And around 1980, Ted Bennett was looking for a way to have one of his clients be able to throw additional fringe benefits at their top. People he found this piece of tax code and he didn't manipulate it. He just interpreted it in a way that created the 401 at the same time. Boy, this is not interesting to anyone. But I find it interesting. In 1974, there was a change in how pensions were really thought about. So between 1974 and 1980, these two factors of the piece of legislation which is sort of known as ERISA 1974 and 1980 ted Benna's 401k discovery that essentially ended pensions because companies said oh, we can shift the onus of retirement planning away from the company and to the employee.
46:46
Peter Dunn
And we'll make a contribution. And our highly compensated people can even have more benefits. And so that was sort of the six year short evolution. And what we have not figured out in the last 42 years is how to successfully retire people in that situation. Because went from certainty. A pension was certainty. And now with a 401K, there is no certainty. And just by its name, a pension is a defined benefit plan. You define what the benefit will be. That is certainty. And a 401K is a defined contribution plan. There's nothing certain about it other than there is going to be a contribution made or there is not. And so you talk about trying to reframe financial independence and retirement. I agree. But we can't even reframe the was my stomach and you're my ear muted.
47:46
Damian Dunn
Annuities solve all of this. Pete.
47:50
Peter Dunn
Can you hear my stomach?
47:51
Damian Dunn
No.
47:52
Peter Dunn
Oh, good. Isn't it weird? Every once in a while it seems like I know what I'm talking. Like it's like, wow, he must really be tired because he did not make a joke and he just like dropped.
48:01
Damian Dunn
Knowledge stream of consciousness and you're just letting it go.
48:04
Peter Dunn
It takes me to be exhausted to be serious.
48:07
Damian Dunn
Good to know.
48:09
Peter Dunn
Yeah. Okay, let's do the show in three, two, one. This week's biggest waste of money of the week right here on the Pete the Planner show is the Pixie selfie drone. Every event is now not complete without an honorary what that's? The copy. Okay, Dame, I'm going to read this again. This is the worst piece of copy I've ever read in my life. Okay, you ready? Every event is now not complete without an honorary period. That's got to be a typo, right?
48:58
Damian Dunn
That's got to be a typo.
48:59
Peter Dunn
Every event is now not complete.
49:02
Damian Dunn
You know what they forgot?
49:03
Peter Dunn
What?
49:03
Damian Dunn
Selfie. Honorary selfie, even.
49:08
Peter Dunn
Every event is now not complete.
49:12
Damian Dunn
Yeah, absolutely. But they forgot a word in there.
49:15
Peter Dunn
Snap's new Pixie helps capture the moments outside of arm's reach. The easy to use miniature flying drone features a built in camera and four preset flight paths. With the push of a button, the drone will float orbit, follow you around, snapping selfies as you go. After the flight, Pixie will wirelessly transfer pictures to your Snapchat memories where you can edit them to your liking before posting it's rechargeable battery can run up to eight flights, but can be paired with multiple batteries for extended use. Dame, what do you guess the Pixie selfie drone costs?
49:59
Damian Dunn
So it's not controlled by anybody, it's just push a button and it does it by itself.
50:04
Peter Dunn
Right? Yeah.
50:05
Damian Dunn
I'm going to guess that's.
50:11
Peter Dunn
Dame. Dame, are you looking stuff up?
50:15
Damian Dunn
No, it was one of my stories that I had.
50:17
Peter Dunn
It was?
50:18
Damian Dunn
Yeah.
50:19
Peter Dunn
You're kidding me. No.
50:21
Damian Dunn
You want me to read what I was going to.
50:24
Peter Dunn
Mean? Here's the thing. Yeah, go ahead.
50:27
Damian Dunn
Technology has once again discovered a new way to replace the outstretched arm.
50:32
Peter Dunn
Did you write that copy?
50:33
Damian Dunn
No, I wish I did, though. That's great. On Thursday, Snap unveiled a selfie game changer in the form of a yellow mini drone called Pixie. The quarter pound Pixie retails for 229 99 and promises to be your very own personal flying Michael Bay. The gadget launches out of a user's palm and travels along one of four preset flight paths, capturing video and still images wirelessly transferring them to Snapchat memories. In terms of battery life, pixie is not equipped for Atlantic crossings on a full charge. It needs to be plugged in after five to eight flights. Snap's not planning on a Pivot to unmanned flight, though the company did say it's selling a limited number of units while supplies last in the US and France.
51:12
Peter Dunn
Do you think the selfie will ever die? Do you think it's a trend that will die? Nope. Man, we're so vain. Pete the planner thinks selfies are vain.
51:22
Damian Dunn
I get my marketing team on that so we can get that out on social.
51:25
Peter Dunn
What's in the news this week?
51:28
Damian Dunn
It's one of the most recognizable outfits in American movie history. The blue and white checked gingham dress of a young Judy Garland wore as Dorothy in the classic 1939 movie The Wizard of Oz. For decades, one of the versions of the dress Garland wore in the movie was assumed lost at Catholic University of America, where it had been given to someone in the drama department in the early 1970s. But the clearing out of some office clutter last year led to the finding of the dress in an old shoebox, and now it's headed to the auction block. The costume goes up for sale at Bottoms and May 24 in Los Angeles, where the presale estimate is.
52:09
Peter Dunn
2.5 million.
52:10
Damian Dunn
800 to 1.2 million. If it was an NFT, it'd probably be double that.
52:16
Peter Dunn
You know the NFL wide receiver for the Chiefs about ten years ago by the name of Dwayne Bow?
52:22
Damian Dunn
Yes.
52:23
Peter Dunn
The greatest fantasy football league team name of all time was Somewhere Over Dwayne Bow. And so every time I think of Judy Garland, I think about somewhere over Dwayne Bow.
52:38
Damian Dunn
Pete, what's one piece of Hollywood memorabilia you would love to have?
52:41
Peter Dunn
Oh, that's a good question. I mean, I got to think it's going to be something from like star wars or Top Gun, maybe. My favorite movie, though, is Spies Like US. And so the best scene in Spies Like US with Dan Aykroyd and Chevy Chase is when they're sitting for their GLG 20 exam to become diplomats. And Chevy Chase comes in with a fake arm and a sling, and he has an eye patch. And so I would like the eye patch or the sling from Spies Like US. Very odly specific. What do you think?
53:17
Damian Dunn
I went with Hollywood in general, so I went with a TV show that I will still pull up on Netflix on occasion. I haven't recently, but magnum Pi.
53:29
Peter Dunn
You want the mustache trimmer?
53:31
Damian Dunn
No, I would love to have that 308 GTS that he drove around. There were three.
53:36
Peter Dunn
I think you just want a Ferrari, that's all.
53:38
Damian Dunn
No, I want one of those Ferraris. And now they are grotesquely expensive right now. But you know what? I would settle for the helicopter that TC. Flew to that paint scheme on.
53:49
Peter Dunn
The great show.
53:50
Damian Dunn
Amazing.
53:51
Peter Dunn
You and I obviously the same age. It's weird that you and I could watch that show. That show was for adults. It wasn't for nine year old boys, yet we liked it. So I wonder how great it is for an adult to watch. You ever watch those shows with your kids? Like, they get something out of it, but you get something completely different out of it. I assume magnum pi. Was the same.
54:12
Damian Dunn
Yeah, I still watch them on occasion, and they hold up today. They still hold up.
54:20
Peter Dunn
How chauvinistic is the show? Is Tom Selleck creepy in retrospect? Is he sexist? Because sometimes that cool guy character can be like, hey, babe, come on. You know what I mean? Or does it?
54:34
Damian Dunn
I mean, a little of it's. It was a period of time, man.
54:40
Peter Dunn
It's like watching Blazing Saddles now. You're just like what?
54:44
Damian Dunn
Does anybody admit to watching Blazing Saddles anymore?
54:47
Peter Dunn
What else is in the news?
54:50
Damian Dunn
Raises and promotions at work are keeping some prospective MBA students from enrolling business schools that used to receive workers looking for executive training, often with their company footing the bill, are increasingly competing against companies and the job offers and bigger pay those companies are dangling to entice young professionals to skip school and keep working. The biggest recent wage increases went to young employees, making it harder for them to walk away from work into an expensive degree for the two years it takes to go to school full time. Pete, that's something that I don't think we had considered with all of the headwinds that college enrollment faces in the coming years. Increased wages, competing for MBA students wasn't on my radar.
55:32
Peter Dunn
Yeah. I mean, the National Basketball Association, as Ted said on this show, the NBA stands for national basketball. Yeah, I did not account for that. That's a little bit weird.
55:47
Damian Dunn
Yeah. And obviously there are way more undergrads than grad students in colleges but still, it's going to take a chunk out of their bottom line, I would think.
55:57
Peter Dunn
I may have shared this with you earlier this year, late last year. Okay, I'm trying to choose my words here. I never personally, for me, saw the value in an MBA until the last year of my would have. I wish I had an MBA so bad because for me and this is where Mrs. Planner and I tend to, this is where she becomes especially disappointed in my perspective. I always viewed education for someone that does what I do as a means to be able to get your first job and then you make your path. Right. And that's what I've sort of done. But if I had an MBA and I was able to apply that knowledge to what I do on a daily basis, oh, my gosh, my life would be so much easier. But I'm playing catch up, trying to learn all those things.
56:45
Damian Dunn
Yeah, I can see how that would have benefited you. Too late.
56:48
Peter Dunn
Too late. I'm not going back. Yeah, I know. People go back at, like, 44. They're like, I'm going to go and take this Harvard Business course. I'm like, I don't know. That's not for me. Danza does point out something quite interesting in the comments. Slightly older than the Dons, the Greatest American Hero was a show that worked for adults and kids. I totally agree. And it's got one of the greatest theme songs ever. I love that show. It was weird, but I really liked it. Dame, one last story. Do you have time?
57:17
Damian Dunn
Yeah. Fidelity is going to put Bitcoin in their 401K plans. It's going to be kind of expensive to do it, but yeah, you could put up to 20% of your four hundred and one K at Fidelity into Bitcoin. Yes. It can be lower. The company can make it lower, but they're going to cap it at 20.
57:33
Peter Dunn
Oh, boy. I don't know. I mean, look, when it's all said and done, I'm just going to be this old guy that's against new trends. Like the computers are fad. I mean, that's where I'm at. But I think putting crypto inside of a 401K is just against a fiduciary responsibility.
57:53
Damian Dunn
If you're going to use 401K as a retention tool, you got to do it for younger people.
57:56
Peter Dunn
That's all we have time for this week. Send you good vibes, because good vibes are all that's in the budget. I'm Pete the Planner, and this certainly was something that's just a bad idea.
58:08
Damian Dunn
It's not great.
58:10
Peter Dunn
I'm going to go. Not because I'm in a hurry, but I'm out of energy. Dame, I don't think I'm going to talk to you until Monday.
58:20
Damian Dunn
It was great seeing you. Glad you're home safe. Go to bed.
58:23
Peter Dunn
I'm going to take PTO, which doesn't really happen, so I'm going to go do that. Is it PTO? Shouldn't we have a policy as a business that if you take a red eye, that the next day isn't PTO?
58:36
Damian Dunn
Yeah, I thought, well, we don't do we had some.
58:39
Peter Dunn
We do now.
58:40
Damian Dunn
We had something about traveling four days and the fifth day was off, or something like that.
58:44
Peter Dunn
Anyway.
58:46
Damian Dunn
Can we petition to rename PTO just for you? So it's Pete's time off and then everybody else uses some other acronym.
58:52
Peter Dunn
DTO, dame's time off.
58:54
Damian Dunn
Yes. I'm not going to say I'm special enough for my own, but yeah, sure.
59:02
Peter Dunn
All right, y'all. Thanks for being with us. Eat your vegetables. I don't know. Stay, getting money.
