Today on Radical Personal Finance, live Q&A. Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge, skills, insight, and encouragement you need to live a rich and meaningful life now, while building a plan for financial freedom in 10 years or less. After a long time in the desert with no Friday Q&As, Friday Q&A is back.

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Trey, welcome to the show. How can I serve you today, sir? Hey Joshua, thanks. I have a question that's really kind of about balance, I guess, and it's probably a question that's going to be different for each person. I wondered if you might have a framework to think through it.

I'm 28 years old. My wife and I have two low six-figure salaries. We're both working at a company called Greenville, Texas. We're both working at a company called Greenville, Texas. We're both working at a company called Greenville, Texas. We're both working at a company called Greenville, Texas. We're both working at a company called Greenville, Texas.

We just have a really good situation right now where we both like our jobs and I want to keep working, but there's also a lot of things I want to do and would like to have more free time. So I just wondered how you balance that for somebody like me who's young and has had some pretty good early success, doesn't want to mess that up, but also wants to enjoy my youngness.

Do you have children? Not yet, but that's probably coming in the next year or two, board one. And do you, what are some of the kinds of things that you feel like you'd really love to do? If you won the lotto and had a couple million bucks sitting in the bank, what are some of the things that are on your list that you think would be really interesting to work on?

Well, I would like to be more entrepreneurial and there's nothing about my current situation that's really keeping me from doing that other than in my spare time I like to go and play. So for example, right now, I just about 10 minutes ago left out of my small town in Texas, Panhandle, and I'm going to New Mexico on my motorcycle right now for the weekend just by myself.

So I'd like to do more stuff like that, but more of a longer, slow travel where I could take, you know, bring my wife with me and the dog and just kind of explore more. What else? Well, I'd like to spend more time with my friends and family. We're all spread out kind of all across the state.

Texas is a big state. Yeah, I like woodworking. I've got a lot of hobbies, playing music. I'm one of those guys that has broad interests and will probably never master any of those things, but I kind of like bouncing back and forth. I've always got something going on. Does your wife have ambitions or aspirations outside of her job that she would like to pursue?

She's blessed with contentment. Don't you really wish for that sometimes? I really do. No matter what I'm doing, I always feel like I should be doing something else. Yep, understood. Well, let's talk it through. So as I see it, there's almost nothing wrong. There's almost never sitting down and earning money and saving money, especially if you guys can earn a couple hundred thousand dollars a year.

I don't know how much you're spending a year, but if you're spending a small fraction of that and saving a lot of money, it's hard to find any 35-year-old who would look back and say, "Man, you should just walk away from that." It's hard to find a 45-year-old. I would encourage you.

I don't know how much you open up with your money with other people, but take some personal friends and people that you admire, maybe somebody who's 35, somebody who's 45, somebody who's 55. You've got to have relationships of trust to do this, but ask them about some of the things that they appreciate and some of the things that they would miss.

I would bet that if you were able to talk to a dozen people, I would guess that the majority, the consensus would be if you've got a spot where you can sit in, make a couple hundred thousand dollars a year. I don't know how much you guys are spending, but let's say $50,000 a year.

You can live great on 50 grand if you don't have a bunch of debt, 50, 80 grand, something in that range. You could save $100,000 a year. I think it's hard to find somebody who would say that you shouldn't do that because what will happen if you'll do that for a few years and get to the point where you've got a half a million dollars in the bank, maybe a million dollars in the bank, and you can do that by the time you're in your early 30s, you can do that before you have children.

As long as you're not stupid, you pretty much for the rest of your life will never have to make a decision based on money, which is a very compelling form of financial freedom, to not have to think about money. And so it's hard to walk away from something like that.

And the challenge of being 28, you're more mature than, of course, you were at 18, but the challenge of being at 28 is you look around and you think, "Well, I got to go now." And most people who are 35 or 45 or 55 would say, "Bro, a couple of years.

Keep that up for a couple of years and have a half a million bucks in the bank." And then from then on, everything is simpler. And I think that that's a good way to start. And so I would be very hesitant to recommend to somebody in your situation that you leave that.

When you have an opportunity to earn as much money as you're earning, when you have an opportunity to save a lot of money, when you have an opportunity to live inexpensively and stabilize everything, it's hard to suggest walking away from that. Now, what are some other mitigating factors though that would be things that you would walk away from it?

Well, a big one is going to have to do with what is your overall investment plan and your investment kind of picture. It's one thing to be doing what you're doing, working some jobs that take a good amount of time and to be stashing that money with a purpose.

And that's really something that you're going to need to get pretty quickly as a purpose. What am I going to do with this money? All right, I got 150 grand in the bank. Great. What's this money for? Is this for opening a business? If so, then as soon as you've got the money set aside, then you start working on opening the business.

Is this for investing in something, investing in stock or investing in real estate or investing in elephant hunting rifles? What am I going to do with the money? And then go for it. Let's say that you had a vision, that your plan for wealth is that your family is going to be involved in the automobile business.

And you've discovered that your dream would be to build a chain of successful automobile dealerships in Texas. Well, you could do that and you could make a lot of money. Or maybe you're riding a motorcycle. So let's use a Harley Davidson, right? Your dream is to open a Harley Davidson franchise.

Well, you could do that and that could be a very profitable business, could be a wonderful lifestyle business that you might really enjoy. But you should pursue it as soon as you have the money. And so then you would have a goal for the money. Now another example would be, let's say that you want to become an independent real estate investor.

And so you do the math and you say, "You know what? If we had six or seven houses that we owned and if they were paid off, that would be enough money to make us financially free." And so now you have a clear goal that over the next five years, we're going to buy five houses.

And so you need $50,000 a piece for down payments. Now you've got a clear goal and you can see how you could build it quickly. That gives you a sense of purpose when you're in that working period of just earning money and saving it. If you have a clear purpose that is driving you, then it doesn't feel like you're spinning your wheels.

Where you do start to feel like you're spinning your wheels is if you just say, "These jobs are okay, but they're not a big dream of ours. They're okay. And we've got to wait until we have $2.5 million in the bank and then we're going to be financially independent and we're going to quit." That's a harder, much longer road to stick with.

And so I would encourage you to lay out some clear goals, especially goals that include the money. Now what are some other extenuating factors? If you do have a clear entrepreneurial vision of something that you want to do, I would encourage you to do it sooner rather than later.

There are a lot of businesses that you can build that are very, very profitable, very, very rewarding, very much worth your doing, but they take a lot of energy in the beginning. And sometimes they take money, sometimes they don't, but they usually take a lot of energy in the beginning.

And it's going to be easier for you to invest that energy when you've got more fire in the belly in your late 20s, early 30s, than it will be in your late 30s, early 40s. It seems like many people start to lose some of that fire in the belly.

It becomes harder to do the long hours necessary, and it's especially complicated when it comes to children. So what I would start with is an analysis of what do I think is going to be the best lifestyle for me? Do I think that entrepreneurship is going to be the best lifestyle for me?

Do I think that employment is going to be the best lifestyle for me? And then really invest myself until, especially at this age where you're relatively unencumbered, into maximizing all of the opportunities. With what you said, wanting to do a little travel, wanting to spend time with family, et cetera, I don't see why you can't do that and keep a job and start a business on the side.

And I think that if you really invest at this time, your 35-year-old self will thank you. Your 45-year-old self will thank you. I know that there's a sense in which many people would say, "Well, you only live once. You got to take advantage of it." I don't buy it so much.

I've never regretted how hard I've worked when I was younger. And I think that if you were to go out and talk to people, I think a lot of people would say, "Bro, if you're making some money, buckle down to it and make and save as much as you can.

It's hard to see why you would regret that at this phase of life." Yeah, that makes a lot of sense. We've got some sort of intermediate term goals and it doesn't take a lot of money. I've been shopping for a mobile home park because I flipped a house once.

I've always been interested in real estate and took that money and didn't really make money, but I learned a lot. So that's part of that money that we've got set aside now. But I've been shopping for multifamily real estate for a while and have in the last 18 months or so really decided that a mobile home park is what I want to own.

And I've put in a couple of offers this year already. I haven't gotten one yet, but I hear what you're saying. I think that just a few hundred thousand dollars more really probably opens up a lot. What I would say is if you're feeling dissatisfied with your job, the great thing is you make a hundred thousand dollars.

The great thing is also you can make a hundred something thousand dollars working in something that's closer to the direction you might want to go. So maybe you're working in the medical device field, but you're like, "This is not for me." Well, go get a job in the real estate field.

Go become a real estate developer. And get yourself a job starting so you start to get some exposure and put yourself in a position where you can make a six-figure salary as a real estate developer while also simultaneously getting yourself closer to your area of investment focus. The other thing I would just encourage you not to waste is this time period where it's easy for you to maintain a dual income household without any or at least without many negative effects.

If your wife is well employed and she's got a hundred thousand dollar income and she's content in her job, that gives you the ability to pivot to almost anything else without thinking much about the money, assuming that you can live on a hundred thousand dollars or less. So that's a freedom that you don't have at another phase of life.

And so if you start having children and if she's home taking care of the children, that freedom goes right out the window and it's much more difficult to make those career moves. And so if you're interested in real estate, if you have an interest in getting closer to it and you feel like your current job is kind of a dead end, then I would do all of the above at the same time.

So I would say my goal is to become an investor in mobile home parks. So how can I get a job that's going to get me closer to that and how can I get a job that's going to make me more money? And so if you're making a hundred thousand dollars now, what could I do that would move me into the real estate business with a hundred and fifty thousand dollar salary or more but also allow me to get closer to the business so I can start to make more connections, etc.

And so I would try to maximize all of those. The point is there are times in life where you have things pretty easy and you're in one of those times right now. You have basically unlimited time. You have basically almost unlimited financial freedom, right? Not a lot you can't buy if you wanted to buy it.

You don't have the ability to live on your investments for the rest of your life, but that's about it. And so you want to maximize those times. And I got to imagine that most of my listeners who are a little older are kind of nodding their head. I think there's a phrase that we have in English, "Youth is wasted on the young." And I look back and I just think about, "Man, why did I not do more when I was young?

Why did I not read more? Why did I not learn more? Why did I not try more jobs? Why did I not try more businesses? Why did I waste so much time?" And I was more productive than almost anybody that I know. But still I look back and I just think, "I wasted so much time." And so what you want to do is not waste this time because it's precious to have the freedom that you have.

And if you and your wife continue to pursue the path of having children, you go into a period, about a 20-year period, where you're much more constrained. Now it's not a bad thing. It's a wonderful constraint, right? I don't regret it a bit. But it is a constraint and it's a lot easier to manage that time period if you got more money in the bank, more investments, more businesses that you built during your 20s.

Fair enough? Fair enough. I appreciate it. My pleasure. Thank you for calling in, Trey. All right, we'll go to Chuck in Georgia. Chuck, welcome to the show. How can I serve you today, sir? Hey, Joshua. Good evening or good day or whatever. I don't know where you're at, so I'm just going to keep it simple.

Hey, unlike your other caller, I'm looking forward towards retirement. I see that light coming closer and closer as you age a little bit, right? So it's easier to save the money when you're younger and all that kind of stuff. But then when you start contemplating that you have to actually spend the money without an income, then you're thinking about how do you conserve the money, right?

So one of the things that I came across was by a guy named Nelson Nash with a whole life infinite banking and all that kind of stuff. And I knew that you had some information because you were working in the insurance industry. And I'll explain. My understanding of it is that you basically create a contract, you have an account, and you treat it like a passbook savings account, and you're basically paying yourself back perpetually.

So I didn't know what your take on it was and what's the actual pluses and minuses of this strategy or I don't know. How old are you? I'm going to be 52. And when you're thinking about, Nelson would call it an infinite banking concept. When you're thinking about applying the infinite banking or bank on yourself as another kind of brand name of the business concept, are you thinking about doing this on yourself, buying a bunch of whole life policies for you and then using them as a form of retirement income?

More of a preservation and also to maybe possibly extend onto the rest of my family. How much money do you have saved? Probably about, well, it depends. You mean just strictly in retirement or in cash or what? Total net worth. We'll get to the distribution in just a minute.

Total net, I'm guessing probably about 800. And how much of that is in retirement accounts? About 500. Well, it depends. It varies with the stock market. And then about $300,000 in cash savings accounts or other investments or is that in home equity? How much of that? What's the 300?

Where's the other $300? That's towards rentals. Okay. Rentals and equity. So how much is your annual income? I'd rather not say. So here's basically my approach. I'm kind of a middle ground person. I believe that that's the accurate place to be is a middle ground person. Meaning that I'm not entirely opposed to whole life insurance, which is what the infinite banking concept is built on.

It's built on overfunded cash value life insurance policies, whole life insurance policies. I'm not an anti whole life insurance person. I own whole life insurance. I like whole life insurance. I plan to buy more whole life insurance in the future. I believe that it's an extremely useful financial product.

So I'm not entirely opposed to it. However, I think that those who are frustrated by whole life insurance are often right. From my experience as one who formerly sold life insurance, including whole life insurance, it's often oversold. And because it's such a complex financial product, it's very easy to misunderstand and to overstate.

And the biggest problem that you face as a consumer, not being a life insurance agent, is that you don't know what you don't know. And so you might think that you understand with anything. The power comes in being able to ask the right questions. And so that's where an expert comes in.

An expert knows the right questions to ask. So specifically with regard to you, if you said, "Joshua, I have some whole life insurance that I bought when I was younger," great. Go for it. If you said that, "I have a ton of money and I want to put some money into a whole life insurance policy," fine.

That's also fine. But at your level of net worth, and unless you're – I'm going to assume that you're making something like a six-figure income, but unless it's multi, multi-six figures, at your age and at your level of net worth, I don't see much of a role at all for permanent life insurance.

Where you need to start – are you employed or self-employed? I'm employed. Okay. So if you're employed, where you need to start is with the qualified plans that are available to you. You want to start with your 401(k)s and your IRAs. And so max those things out. Those – assuming any kind of normal performance in stock market returns, assuming that we're not in a catastrophic, you know, Mad Max zombie apocalypse scenario, which is exceedingly unlikely, then you're better off starting with your 401(k)s.

And so you want to max your 401(k)s out. You don't want to start putting lots and lots of money into life insurance. You want to max your 401(k)s out. In addition, you don't want to take any money out of your 401(k)s. The money that's in your 401(k)s is far superior from a tax perspective than the money that you would put into some kind of infinite banking life insurance policy.

So you keep the money in the 401(k)s. That takes care of half a million dollars of your $800,000 net worth. That leaves us with $300,000, but you said that money is invested in rentals. The rentals, assuming reasonable performance on your part as an investor, the rentals are a far superior asset for you than life insurance.

The rentals are leverageable, very easily and safely leverageable. The rentals have the potential generally for a much higher return than you would get with a life insurance policy because of your ability to kind of mix the business side and the pure investment side into the mix. And it's just going to be a better all-around investment for you with more opportunities.

And so that's going to take care of assuming that 200 of the 300 is invested in rentals and maybe you got $100,000 in cash. I don't see the place in your scenario for a whole life insurance policy. I'm not opposed to it in all scenarios, but if you were younger, if you had more money or if you were making more money and we had more excess cash flow, those would be signs where I'd say, "Okay, maybe some of it could go into whole life insurance." But the problem, biggest problem of whole life insurance policies are that you got to put money into them when you're young based upon the mortality tables.

If you start a policy at 52, the numbers do not work until you're in your 80s and 90s. That's different than if you start one in your 40s or 30s. The numbers work a lot better the younger you are because it's life insurance. Other big thing is the expenses.

All of the expenses come out in the early period, which makes them dramatically underperformed. So you need a very long time horizon on a policy. And then number three is you're going to have mediocre performance. It's going to model more what you would get in a fixed income portfolio than in any kind of more aggressive portfolio.

And at 52 with an $800,000 net worth, you don't need to be investing in fixed income. You don't need safety and stability at this point in time. You need opportunity. And so if there's something that you're uncomfortable about, let's say you're uncomfortable with the stock market. Well, fine. That's a separate question.

But I still wouldn't go to life insurance. I would go to another asset class. Or let's say you're uncomfortable with real estate. Fine. There are lots of things you can invest in. Life insurance locks you into a stable return, but it's generally going to be a return more analogous to fixed income.

And you don't need that right now as I see it. So it's more like just like an annuity kind of like when people had their pensions, they were actually annuities. And you just get a fixed income. That's kind of, I don't know, boring. So when you buy a life insurance policy, quick explanation.

When you buy a life insurance policy, you have two options. You can either invest into the, buy a policy that's value is driven from the company's general portfolio. And so usually when we use the term whole life insurance, that's usually what we are referring to is it's built on the company's general account.

So let's say the company has $150 billion and they're investing this $150 billion. This is the money that they're depending on to pay claims with. That's called their general account. Well, because the life insurance company's investment managers have the legal and moral obligation to manage that portfolio for stability.

What they've done is they've taken an actuarial expectation of their policyholders expected dates of death and they've modeled the returns of that portfolio so that it makes sure that they can always pay out death claims because the number one job of a life insurance company is not to build cash values, but to pay death claims.

They've got to have money to pay death claims. And so they invest that money in a more stable way. The vast majority of it is usually invested into fixed income investments. Could be national debt, US treasuries. It could also be corporate treasuries, AAA corporate bonds, things like that. Then what they do is they usually play on the edges with some other types of investments where they think they have a competitive advantage.

A big one that life insurance companies rely on is large commercial real estate investments. Maybe there's a local real estate developer who's going to come along and who is going to come and build a mall in your local area and they need a $250 million mortgage. Well, a natural fit for that is a life insurance company.

Life insurance companies love to buy malls and write mortgages on malls and buy skyscrapers and things like that. But those mortgages are just around the edge. They still got to make sure they match the portfolio to fixed income. Now they also maybe have a small stock portfolio or a small private equity team, things like that that they're working with.

But it's smaller because they have to pay death claims. And so what that means is if you're going to compare your returns in that portfolio in the company's general account, you would generally compare that not to the S&P 500. You compare it to a fixed income portfolio because that's what it is functionally.

It's a fixed income portfolio with a little bit of real estate, with a little bit of private equity, maybe with a few stocks on the edge. Now that's investing into any kind of general account portfolio investment, a whole life insurance policy, something that's invested in the company's general account.

Now the other side is you can purchase a life insurance policy that has some form of variable account. So you can, this is called a variable account or a sub account. And so the way this works is let's say you go to the life insurance company and you say, "I don't want your fixed income portfolio.

What I want is a stock portfolio. And with my stock portfolio, I really want to be able to invest in mutual funds. But can I do that inside of a life insurance policy?" The answer is yes. You can buy a variable whole life insurance policy or a variable universal life insurance policy.

All of these are possible for you. And then your money is segregated into a separate account. And when you segregate the money to a separate account, you become responsible for the returns. Problem is this, what can you invest the money into? Well, unless you've got tens of millions of dollars and you can set up your own life insurance company to run your own offshore life insurance policy with a fund manager managing it just for you, which you can do, but you don't have enough money to do that, then you're basically stuck investing in mutual funds.

So what you do is you take mainstream mutual funds and then you add a life insurance policy on top of them and you own those mainstream mutual funds. Problem is it's an expensive way to do it. You've got the expenses of the funds and now you've got the expenses of the life insurance policy and now you have a less favorable tax situation because the tax situation in your 401(k) is much more favorable for your mutual fund portfolio than it would be in the life insurance policy.

Because what you do is if you own stocks inside of a life insurance policy, you take a capital gain asset that could be deferred inside of a 401(k) and a 401(k) would still be an ordinary income asset or it could be owned as a capital gain asset, which is superior, and you transform this capital gain asset into an ordinary income asset.

And that's where life insurance is very unfavorable. Because the values in the policy grow and if you take them out, not in the form of a return of premium and not in the form of a policy loan, but you actually take a distribution, now you have income tax as ordinary income.

And so it just doesn't work in your scenario. All of the facts of your situation are wrong is the summary. Okay. Well, I appreciate your input there because like you said, you don't know what you don't know and I don't know too much about insurance. I know how to buy stocks and REITs and all that fun stuff, but I'm just looking at my options as I'm closing in on a traditional type retirement.

So what I would recommend you start with is start with a business or job or form of income that you won't want to retire from. That's always your most powerful solution that you want to focus on first is can I have a job or a business or a form of income that I'm not going to want to retire from?

And you can do that at 52 years old, you can completely transform your life and you can build any kind of business that you wouldn't want to retire from. You want to travel the world, get a job that either pays you to travel the world or build a business that allows you to travel the world.

Have something that you don't have to quit, have something, build something that you're going to be excited to do when you're 80 years old and 90 years old and 100 years old. So start with that because that doesn't require a lot of money. Then back that up with an investment portfolio that is going to make you financially independent much more quickly and it's not going to be life insurance.

If real estate is good to you, it might be real estate. If you have some other kind of thing that you like to invest in, there are many other things possible. But start with that low hanging fruit and then if in time you decide if you need life insurance, buy term life insurance.

At 52 years old, you can buy very inexpensively level term insurance which is what you should be buying at 52, 10 year policies, 15 year policies maybe if you still have obligations to your family that you can't meet. And then if at some point in time you want to own a small whole life insurance policy for some reason, that's fine.

As a burial policy or part of your estate plan, that's fine. But that should not be a high priority for you at this stage in your financial plan. Okay. I think you hit all the nails with the head of the hammer there. Good. So yeah, I appreciate your time there and it's kind of funny because your previous caller was on one end of the spectrum, I'm on the other.

Was I right in my advice to him from your 52 years old? From my 52 years old, yeah, absolutely. The more you could plug away when you're younger, you build the momentum when you're older. And I was already thinking your advice anyway where I was like, "Hey, well maybe I need a different career." And I planned when I was in my 20s to say, "Hey, I'll change careers at 50." But I just haven't, kids happen and I haven't really decided what I want to do when I grow up.

Yeah. I would tell you, I mean your most fruitful area of thinking and hard work right now is going to be with regard to your career. At 52 years old, you're young enough that you're not facing a lot of discrimination in the marketplace. That'll change when you're 62, right?

In 10 more years, you start to go and apply for another job, you're going to start to face a much more significant age discrimination. It's tough for 60-year-olds and 70-year-olds in the marketplace. But at 50, you're still young enough that you're not facing much of that. So what you need to do, what I would encourage you to think about is number one, think about – and we don't have time to go into your career right now – but think about your career and make sure you're in a career where your age will be an asset, not a liability.

So if you are a professional chairman of the board, right? Your job consists of being on the boards of publicly traded companies. Your age is not a liability. Your age because you need wisdom, right? You need insight. And that wisdom and insight often comes with age. If you are a senior architect over a large firm or you're a senior trial lawyer who has junior attorneys who are doing most of the day-to-day work but your brilliant legal mind can be applied, the age is not a bad thing.

You can do that work when you're 85 years old. You're not just limited by that. On the other hand, if you are engaged in something that's dependent upon your physical body, you're a carpenter or you're a tile setter, you're a grave digger, well, that kind of work gets really hard to do when you get older.

So you need to look at your career and say, "Am I going to be able to do this as I get older?" And if not, you need to adjust. Number two, you need to develop for yourself a reputation that will support you as you face increasing levels of age discrimination.

What you want to make sure is you never get yourself in the situation where you're going in and applying for a job or you're trying to keep your job and they're looking down and saying, "This dude is 60-something years old and we got another guy over here that's 40 years old, has all the same qualifications.

Why would we not hire the 40-year-old guy who at least has some chance of staying with us for 20 years and we could probably get cheaper than the 60-year-old guy?" And so you've got to transform yourself if you're not already. Again, if you've already done this stuff, great, but you've got to transform yourself from a commodity in the marketplace that gets more rusty as you get older to an extremely valuable gem that's getting shinier and brighter as you get older.

So you've got to build a brand somehow, an appropriate way to your career where you become more sought after as you get older. Third thing to consider is you want to make sure that you don't put yourself in a situation where you're anxious to get out of your job and anxious to get out of your career because at 52 years old, you have almost no friends that are retiring early.

But if you're 67 years old, many of your friends will have retired and then you're sitting down and looking at your job and saying, "Well, I don't want to do this job anymore," and all my friends are sitting out, they're stand-up paddleboarding and they're golfing and they're traveling the world and I'm doing this stupid job and I want to retire.

Rather, what you want is you want to develop a job and a career that gives you an appropriate level of freedom and flexibility so you can go and stand-up paddleboard and you can go and travel to Europe and you can do the stuff that you want to do but within the context of something that's keeping you engaged.

And I'm convinced that there are tons of these careers out there, things that you would really enjoy doing, things that engage you. And it could be as simple as teaching school. I've told the story many times about somebody who was so inspirational for me. He was a friend of mine, a client of mine when I was a financial advisor.

He was a client of mine who was running a landscaping company but he decided he wanted to close his landscaping company. It was profitable but he closed his landscaping company, went back to college at night, he and his wife both, they went back to college, finished his college degree and got a job as a high school history teacher and he wanted to teach high school history.

And in their situation, it was basically the perfect financial plan because he wanted to teach high school history, he wanted to have the opportunity to impact young people in a close way that a history teacher can do. He wanted to travel during the summers and so he had three months off to travel every year.

He had his retirement taken care of with a government pension from the school board and it was the kind of thing where he and his wife had a great lifestyle. They would go to school together every morning, go to school at the end of the day. He didn't have the – he could leave at 3.30 every day, start at 7.30.

It was a very agreeable schedule and it was a great plan. It's the kind of job that he didn't want to retire from but yet he did still have the retirement plan if he needed it because it provided enough benefits that he was excited about it. So that's at the kind of lower earning side but just to show that you can build a lifestyle that provides you with everything that you need.

Now if you're an executive, your role may be different. So the key is build a career that's going to give you the freedom and the flexibility that you need and that you crave so that when your buddies who do retire from their jobs say let's go to Aspen for the weekend, well, you get on an airplane and go and make sure you have the financial ability to do that.

But you'll have a lot more fun than them because then when they come back from their week in Aspen and they got to sit down and say, "Well, what's on CNN today?" You have the ability to say, "I don't care what's on CNN. I'm doing this thing that's important to me.

I'm working on this major issue or I'm building this thing or I'm solving this problem or whatever it is." And so you want to build a career that you're engaged with and there are so many options out there. But if you do that, it will radically transform your life expectancy because people who are engaged with the future and have a vision of the future that's bigger than their past, they live longer and they're happier for that.

It will also dramatically engage your finances. And I'm not being a smart aleck with this. I mean it. If you compare the financial impact, the legacy that you can – of money that you can – the amount of money you can spend and the amount of money that you can save, the amount of money that you can give, the amount of money you can give to your children, the amount of money that you can invest into something and you add another 15 years of happy work life onto your lifespan and you say instead of retiring at 65, I'm going to retire at 80, just run the financial calculations.

That's stunning, the impact. And so there are some presuppositions, right? We're assuming that you could build a career that you would be excited about doing at 80. But I'm convinced that for the majority of people, that should be a primary plan. Some people really want to retire. Fine. You can do it.

But I think that for the majority of people, if you can build and use your financial stability to move yourself into a phase where your future is bigger than your past and you're excited about the next few decades because of the impact you're going to have, the work you're going to have and as your responsibilities as a father fade into the distance and you start to just have more interaction with your grandchildren but it's much more relaxed and it's not such the day-to-day pressure, that's the secret to really winning in life and really winning with money in my opinion.

So consider that. Chuck Liddell Thanks a lot there, Josh. All right, Chuck, have a great day. We move to Talmadge in Utah. Talmadge, welcome to the show. How can I serve you today, sir? Talmadge Hey, Joshua. Can you hear me okay? Chuck Liddell Yeah, sounds great. Go ahead. Talmadge Okay.

So I guess just to give you a little background, 20 years old, graduated high school in 2018 and I returned recently from a mission trip in Ecuador, had to come home early because of COVID-19 and so I have about six months that I wasn't planning on having just before school starts up.

So I found a job through a friend and I've been working in a sales job in California. The awesome thing about it is the rent is paid for. So my own expenses are food and transportation and earning potential is pretty high. Just from the two months that I've been here already, I think this summer I can make upwards of $20,000.

But I want to decide how I need to move forward with my education. I haven't taken any college classes yet. And my main question for you is maybe if we could walk through just some of the benefits and the drawbacks of moving away from the conventional college experience of just being on campus and going to a university versus online, like maybe through a community college, which would be a lot cheaper.

That's kind of what I'm trying to think about right now. Pete Will you be funding your college classes? Talmadge Yes, I will. Pete Okay. So in a moment I'll give you an episode number and what you want to make sure to do is to go back and listen to the show that I did on the specific benefits of college.

And I'll give you that episode number here in just a second. But in that previous podcast, which is probably an hour or so long, I talk about the various benefits of college. And this is a hard question to answer because there's so many different ways. Here it is. It's episode 227.

So right down 227, initially released August 10, 2015 called the five benefits of college and radical ways to exploit them. And so let me go over those five benefits with about a few minute kind of intro for you and then give you some texture on this. As I see it, I see five major benefits of college.

The first benefit is fun. College is fun, right? It can be super fun. About the college environment is, you know, many people, I don't think the most successful people but many people if you ask them, what is the most fun time period of your life? A lot of people will say college because you have a lot of people your age, many of whom are going to share your interests, maybe your perspective, your worldview, some of your life experience.

Many of those people are thrust together in this interesting community environment with many of them have very little responsibility, right? My only job is to go to class for 15 hours a week and study. I mean that's an exceedingly tiny workload. And so it's a lot of fun. And you're in an environment where people have no responsibilities, they have no children, they have no jobs.

And so it's super fun. Hey, you want to go to the beach today? Let's do it. You want to ditch class today and go skiing? Let's go. You want to go to Florida this weekend? Man, I'm ready. You know, it's fun. And then all of the college raunchy living is certainly available.

And so it's fun. That's the first thing. It's fun. Number two perspective of college is personal growth. Second benefit of college is personal growth. And there are lots of ways that college can be a time of intense personal growth. You take classes that maybe you're not accustomed to. For some people, they go away from home for the first time and they have to learn how to adult.

There are lots of benefits of personal growth. Number three is certification. The actual acquisition of a certificate that says you have a college degree. I think it's valuable, very valuable and important. I'm not convinced it's as valuable from an income perspective as many people think, although it is truly still valuable.

If you were to look at the mass market out there and say, how do people, you know, what is the lifetime earnings? It still is the case that people who have a college degree earn more money. Where I think it is particularly benefit though, a college degree is particularly helpful is during hard times.

And my observation is during times of high unemployment, during times of a weak economy, that's where you're really glad you can put on your resume if you're going applying for a job, I got a college degree. It's one of those things. If you were to go back and look at the data that we have from the Great Recession in 2009, you see that the people that were the hit the hardest in that period were people without a college degree.

People with a college degree didn't have that bad of an unemployment rate, but people without a college degree had a really bad unemployment rate. And you see a similar thing happening right now in the United States as we're in this current recession. People who are at the lower levels of the job space, the income space, those are the people who are experiencing just a horrific unemployment rate right now.

Now the pain of that has not yet set in in the United States because of the generous unemployment payments that many of those unemployed people are having. But if those extra unemployment payments stop, it's going to start to get really severe. But so certification matters and certification is a benefit of a college degree.

Number four is education. And so I distinguish and disconnect education from certification. Certification is a credential, and apologies for the sniffing in your ears, friends, but that's where we are today. Education is the knowledge that you gain. The certification is the piece of paper. So just a simple example, right?

I'm studying right now for a foreign language exam, and I have zero application for the certification. I don't need the certification. I'm trying to get a DELE C2 exam in Spanish. And so that's my goal is I want to get the certification. I have no need whatsoever for the certification.

I'm not going applying for a job saying, "Hey, look, I'm a C2 Spanish speaker." I'm not doing anything. It's just a piece of paper. The education is what matters. And so I could be just as good with my grasp of the Spanish language as anybody else, whether I have the certification or not.

But for me, the certification is something that I'm using to provide motivation for my education. And also then it gives me one more piece of paper that if I ever needed it, if I ever needed a backup plan, I can say, "Look, I'm a certified C2 Spanish speaker. I know what I'm doing." And so if I add that to all my other certifications, now I'm distinguished in the marketplace.

But don't be confused. There's a big difference between certification and education. But in the college environment, you can often receive an education, and you can become well educated in the college environment. And for some things, there's really no substitute. There's really not. For some things, you've got to be in that college environment, that classroom environment, to make sure that you've got the holistic, well-rounded education, but not all.

And then number five is connections. And so the big benefit of college is connections. Those connections can be social connections, just your social, your sphere of friendships and acquaintances. Those connections could be romantic, right? The thing that I appreciate the most about my undergraduate college degree is my wife.

I met her in college. And that's a normal story, is that many people meet their spouse in college. And it's a wonderful benefit. And I'm not scared to recommend somebody go to college just for that. In the United States especially, college is a very important sorting mechanism for people, especially from a spousal perspective.

And this is traditionally how college in the United States has functioned. It's functioned as a way of sorting society out, of separating a certain class of person out and distinguishing that these are the college folks. And what happens is, from a simple connection perspective of just simply propagation of your kind, that's an important thing.

Because when people are in that environment, it's likely that a man and a woman who are both in this elite college, they're coming from a similar class. They're coming from similar intellectual experiences, similar intellectual ability, similar points of education, similar worldviews. And so those people come together, they marry, and they start to have children.

Their children naturally will be part of that class. Their children naturally be part of that general functioning. The children will have a higher IQ because mom and dad have a higher IQ. And it just kind of sorts things down. And so throughout the American history, college has been a very important sorting mechanism in the society.

And then when you think about the effects on just even your family tree, the term that a sociologist would use would be homogamy, which has to do with the inner breeding of people who have like characteristics, that's one of the most influential things that you see in American society right now, is that highly educated, very intelligent people meet in college.

They're from the same social class. They make a connection, they marry, and then it starts to lead to these different societies because of just the homogamous effects of their marriage and of their procreation. And so that's a type of connection that's very, very important. So access to the dating pool can be helpful.

And then of course there are career connections. There are colleges where you go there exclusively for the career connections. If you go to an elite level, you know, a Harvard University, Harvard Business School, you can't go to Harvard Business School, get accepted to Harvard Business School, do the minimum, and then come out and not expect to be offered many, many job offers in the upper level of the corporate environment.

And many people reflect back on the relationships that they developed in college and those connections as being the most influential things for them in their career. Now this varies depending on the particular place, but there's a reason why every Supreme Court justice in the United States has a law degree from Yale or Harvard, right, or these elite level law schools.

It's the connections that you build. And so those connections are indisputably important. And so what I talk about in that show, that was an overview, but what I talk about in those show is the fact that you can gain these benefits from college. You can also gain these benefits without college.

And so a lot of the actual application is going to come down to what do you actually want and envision from your life? What career paths are you interested in? What types of work do you want? And what are the colleges that are on your radar? There is a world of difference between going to an unknown college versus a name brand college.

Now I'm not convinced the name brand college is still worth it, but if you're going to compare – let's use three ones, okay? What's the name of a community college near where you live now? Salt Lake Community College. Salt Lake Community College. What's the name of a kind of a mid-tier state school or kind of just a mid-tier college there in the Salt Lake area that's not a community college, just kind of an average school where people go to college?

Utah Valley University. Okay. Utah Valley University. So let's use that and let's use Harvard University or Stanford or one of these kind of big name brown – sorry, name brand, Brown University. So let's use Harvard, right? That kind of the creme de la creme, the upper class of society.

I don't think there's much of a difference between your going to Salt Lake Community College and Utah Valley. There's just not, unless there's some special career that you're involved in and there's a professor at Utah Valley that has connection, that's active in there. Doesn't matter, right? Doesn't really matter.

And for that matter, I would say there's not really much of a difference between going to Salt Lake Community College versus any random accredited online school where it's just all online. But there is a world of difference between going to Utah Valley and going to Harvard in terms of the overall experience.

Those are very different experiences. Now they come with very different price tags, but a lot of the advisability of you're choosing one school or another is going to come down to what specific career are you interested in or what area of study do you care about. Those are the things that are going to make a big, big difference in your life.

So go back and listen to episode 227. And what I'll tell you is basically this. I'm a little short on time. I welcome you to call back next week and we can talk more details, but I want to take the next caller before I run out of time today.

But what I want to tell you is this. If I were in your shoes and I were self-funding college, what I would probably do is first I would have to start with my career. And let me ask, do you have a burning specific career ambition that drives you at night?

No, I honestly don't. That's kind of what my goal for college is, is to find out what direction I need to take. Fair enough. I would not go to an expensive name brand university unless I had a specific driving ambition as to why I needed that university. If my goal in life is to be the next Supreme Court justice that's going to change the world of Supreme Court law in the United States and that's my career ambition, I'm going to go to Harvard Law or Yale Law, no question.

I'm going to do whatever is necessary to get into that because that's where those people come from. I can't go to a random third tier law school and expect to actually do that. I'm going to go to Harvard or Yale Law and I'm not going to compromise. And if I got to go $200,000 in debt, I'm going to go $200,000 in debt because that's my clear ambition.

Lacking that, I'm not going to be an idiot and go into tens of thousands of dollars of debt without a specific career ambition. And so here's what I say. Number one, if you listen to episode 227, you'll hear me talk about the fact that I believe the vast majority of those five benefits of college can also be achieved without college.

If you're interested in fun, get yourself an apartment where there's lots of other college students where they're going to Salt Lake Community College or Utah Valley or wherever. Get yourself an apartment in the same apartment complex and start working out at the gym and you'll meet all the college students and you'll have access to all the social circles without the need to go to class every day.

There's nothing special about it. You can get invited out to the bar. You can go to Florida for the weekend. You can go skiing on the weekend. All of that stuff happens just with having friends and fun. And frankly, you could probably have more fun because you don't have to show up at class at 8 a.m.

For personal growth, when you're around a college environment, you could take advantage of a lot of the personal growth environments. You could audit the classes if you want to. You can go and you can go to the student meetings. I knew people when I was in college who weren't enrolled at the school, but you would never know that because they were always there and they were always around.

They just didn't happen to be enrolled in any classes. Even to the point of being on sports teams, there was not the official sports team of the university, but there were some people who would go and would work out with one of the sports teams and whatnot. Certification. Certification of a college degree, I think, is where there's kind of an end run, a runabout.

And education can happen, but there's plenty of education available, right? You can take college, you can take Harvard University school classes on iTunes U. And so if there's something special about that, you can do it on iTunes U. And connections, what I talk about on that show is you can build connections today better than at any time in history without the need to actually be at the school.

So trying to balance the range of time and cost, what I would do, if you were my son, what I would encourage you to do is I would say, "I believe that it's worth it if you are cognitively competent, if academics are not a struggle for you, I believe that it's important and worth it for you to be able to check the box that, yes, I have a four-year college degree." Four-year college degree, check.

I did a show on how to immigrate to Canada as a recent example. Well, it makes a huge difference if you can check a box on your express entry profile to Canada to say, "Look, I have a four-year college degree," or, "I have a master's degree." But it doesn't matter what university that's from.

It just matters that you can check the box. So what I would do is I would use one of the low-cost online schools, and I would do classes online, and I would get the fastest, cheapest four-year college degree that I could possibly get. And depending on your level of cognitive ability, you can get that in probably a year and a half of work, a year, two years, something like that, and your total price tag would be under $10,000.

Now I can check the box that I've got a four-year college degree. Now what? Well, what I would do with any of those schools, if I wanted a name-brand school or if I discovered an area of interest that I really wanted to pursue, I would do that for a master's degree.

Because if you say, for example, "Look, I have a degree from Utah Valley College, but I have a Harvard MBA," no one thinks about the fact that you have Utah Valley. They just think about the fact that you have a Harvard MBA. This is why the community college strategy is so powerful.

If you go to community college for two years, and then you go to Utah Valley, nobody looks down and says, "Oh, you went to Salt Lake Community College." They look down and say, "You went to Utah Valley." They just acknowledge the fact that it all builds. And so I would get a lot of the low-end classes done just as quickly and fast as possible.

I would go ahead and just do a four-year college degree. Now while I'm doing that, I would be really investing deeply in my education, and I don't believe that going to college is in any way an efficient way to figure out what you want to do in life. A $15 book, a biography of a famous person, a book about a certain subject, a career book is a whole lot cheaper than enrolling in some class you got to go to three hours a week that you may or may not ever need.

And so I would dedicate myself to reading. I would dedicate myself to career profiles. I would dedicate myself to exposure. I would spend time in online communities. I would do things like you're doing right now, calling me, chatting every week, "Hey, here's the things I'm thinking about." I would dedicate myself to these things until I figure out a specific area of interest.

And then once you've figured out that specific area of interest, go from there. If you just want money and you're doing well in sales, go with it. You don't just get the college degree at night, so you've kind of covered that certification need, but do sales. And you can make hundreds of thousands of dollars a year in sales without a college degree.

You can have the college degree sometimes just to get the job, but you don't need to go and spend waste tens and tens of hours in a college classroom is the point. So it's a complex answer because it's a complex issue. It's not either or, but I would not, if you were my son, I would encourage you get a degree, do an online school where you can do it all at night, do it on your schedule, get it done, year and a half, two years, you should be able to finish that bachelor's degree under 10 grand.

Do that while you're working a full-time job, live somewhere with a fun environment around people that inspire you. And then while you're doing that, educate yourself in the areas where you might want to go. And if at some point the college degree seems like a really important piece of that, then go ahead and go to an expensive name brand school if it's really a crucial part of your career plans.

>>Toby: Okay. Yeah, that definitely makes a lot of sense. And thanks for helping me think through that. Kind of a crazy time, lots of decisions to make, but... >>Joshua: It is. >>Toby: Thank you so much. >>Joshua: Cool. My pleasure. All right. For our last call of the day, we go back to Texas.

Welcome to the show. How can I serve you today? >>Joshua: Hi, Josh. I've been taking your advice for a couple of years now and implementing that in different ways. Appreciate all you do. >>Toby: Thank you. >>Joshua: My question today is I'm working on helping my dad who is 79, retired, and has a portfolio with some...

He's got about a half a million dollars right now in some municipal bond funds, and he's got about another $200,000 to $300,000 kind of in cash. The goal of all of this is to kind of just create income and try to maximize income, and so I'm looking to help him with a strategy to best do that and looking at how to diversify some of that income so that it's not all moving in tandem with the stock market, for instance, but dividend paying stocks may be a part of that.

I'm thinking about... You've got me thinking about peer-to-peer lending a little bit. He's not crazy about real estate. He's sold a rent house. He still has a rental condo unit, but wanted to get your thoughts on how to approach this focusing on income primarily. >>Steve: How much are his living expenses?

>>Joshua: Probably $50,000 a year. >>Steve: How much is his security income? >>Joshua: I don't know. >>Steve: Any guesses? $30,000 a year, $1,500 a month, something like that? >>Joshua: Yeah. Yeah. >>Steve: Okay. So the first thing to do... >>Joshua: He's got a pension. >>Steve: How much is the pension? Any idea?

>>Joshua: I think it's about $2,000 a month. >>Steve: Okay. So that plus the Social Security should come close to covering his living expenses if your numbers are accurate. Do you think that's about the case? >>Joshua: Yeah. >>Steve: Okay. So the first step is you need to find out about his living expenses.

Let's assume $50,000 a year for the sake of conversation, but you confirm those through whatever means you can find out. Number two is you find out about his current sources of income. If he's got a pension of $2,000 a month, that's $24,000 a year. If he's got Social Security of, I don't know, $1,500 a month, we're up to $3,500 a month.

We're up to what, $38,000, $40,000 a year? So there's only about a $10,000 spread or a $10,000 lack if those numbers are accurate. So what you want to do is first analyze those numbers because those numbers are going to make all the difference in the world in terms of what he needs to do.

If he didn't have a pension, if he didn't have Social Security, and he needed to spend $50,000 a year to maintain his lifestyle, that's a very different investment question than is him needing $10,000 a year from a $700,000 to $800,000 capital base. So you need to nail down those numbers and then ask this question, "What is my investment goal?" So what do I mean?

Your dad might be the kind of person who's just steady, relaxed, has a great lifestyle, loves where he lives, loves how he lives. You said, "Dad, I'm going to make for you $10,000 of income a month." You'd say, "What would I do with the extra $5,000? I just need $5,000." He wouldn't spend the money.

It would just sit in the bank account. On the other hand, maybe he would. Maybe if he had more money, it would totally transform his lifestyle. He'd buy a Winnebago. He'd start going back and forth all around the United States or he'd spend summers in Europe. Maybe he would spend the money.

So you got to get clear on what do you need the money for? What's the goal of the money? And would you spend the money? So let me pause for a moment. If your dad had more income, would it affect his lifestyle? Is there anything that he would do that he's not currently doing if he had more money?

Not dramatically. No. No, he would probably be more generous with his kids and grandkids and his church maybe, but no, he's not going to take off all around the world and change his lifestyle in any big way. He's pretty steady, conservative guy. So, the first thing to do is you want to look at the portfolio and you want to think about how do we meet this income?

You said he has a rental condo that he also has? Yes. Okay. So, I'm going to guess, just an educated professional guess here. I'm going to guess that if you sit down with these numbers and you ask him, if he's got a $2,000 a month pension, if he's got social security from a normal working life span, which the reason I know that he's got that is because he's accumulated $800,000.

That's very unusual for retirees to accumulate $800,000. That means that he earned a decent wage. He was frugal with his money. To your knowledge, is he debt free? Yes. Okay, debt free. So, he needs $50,000 a year. If he's got a rental condo, a pension, and a normal social security wage, he's probably got at least $40,000 if not $45,000 or $50,000.

So, now the question doesn't become, how do we draw income from a $700,000 nest egg? The question becomes, what do we do with the $700,000 nest egg that's going to properly provide for our goals? If your dad needs income and he doesn't want to take investment risk, he could do something like buy an annuity.

That's where if he wanted maximum income, he said, "I don't want risk." He's investing in municipal bonds because he's concerned about risk. I would sell him, if I still had a life insurance license, I would sell him a variable annuity. A variable annuity is an awesome solution to a situation like this.

You say he wants more money, he's going to spend more money. An immediate variable annuity, he gives the insurance company, I don't know, $300,000, $500,000. The insurance company, they invest it into a portfolio of mutual funds. The insurance company will make a deal with him and they'll say, "Listen, we'll give you a check every single month for the rest of your life.

You will never outlive that money. We'll put the money into a 60% or 80% stock fund, 40% bonds. He's got social security and a pension and he's debt free. That covers most of his living expenses so he can afford to do that." Your dad would be getting thousands of dollars every single month for the rest of his life and that would go up every single month basically for the rest of his life depending on the performance of the stock market, but he would never outlive the money.

If his number one goal is to spend more money, that would be the way to do it because it eliminates the risk of him running out of money. There would be some investment risk depending on what specific investments he put into that variable annuity, but the annuity would elegantly solve an income problem like that.

Doesn't get him involved in more real estate, very, very simple, just has lots of money. But in your situation, that's not the right solution because he doesn't need the money. He's not going to spend it. So now what does he want the money for? Well, you got some choices.

If he's going to give the money away, then you want to ask him, "Does he want to give the money away now or does he want to give the money away when he's dead? And to whom is he going to give the money?" So if his goal is, "I want to give the money to a charity, to my church," something like that, I would encourage him not to do that.

When he's dead, I mean. I would encourage him to start doing that while he's alive. One of the big dangers if someone doesn't need money is they start giving it away when they're dead. Better to give it away while you're alive and you can be sure that people are accountable for it.

Now the balance, of course, is how much money does he need as an emergency fund? How much money can he give away? But if he's just going to keep this money and give it away, then maybe he gives away some of it now. Maybe he invests the money into people now.

Maybe he's charitably inclined, but he says, "I'm going to do it now." He's going to have it invested into kids' experiences. He might invest it in, or sorry, his grandkids' experiences. Maybe he does go ahead and buy the RV so that he can take the grandkids around the country.

Maybe he does. Maybe he buys a lake house so that you and all the children can have a place where we really want to do that. Maybe he buys a beach house. There are many options there depending on the vision. Now if we come back to the investment perspective, let's say he says, "All right, I don't need the money now.

I want to give the money away when I'm dead. I'm not going to give it away now. I want to have the money as a backup fund. Maybe I need some kind of ongoing care and I need the money. I can't just get rid of the money and I don't need the income." Well, now we're going to go back and say, "What is the risk that you're concerned about?

Are you concerned about the loss of principle or are you concerned about the loss of purchasing power?" The frustrating situation that we're in right now, especially and including with a muni bond portfolio, is the interest rates stink. Doesn't mean that there's no reason to buy bonds, but if interest rates go up, bond prices are going to fall.

So we've got some significant risk there. Are interest rates going to go down? Basically what a bond portfolio can do for you right now is it can basically assure you the preservation of your capital so that you can take advantage of the next opportunity because the rate you're getting on your money stinks.

And if rates go up, your bond values go down. So you kind of got a problem here, which moves us in the direction of a more aggressive investment portfolio that's actually going to have a return. And so the biggest thing that retirees, the biggest mistake retirees make is they're often concerned about the volatility of a portfolio rather than having income that actually keeps pace with inflation.

And I'm more concerned about having income that keeps pace with inflation than I am about the volatility of a portfolio. My aunt called me up a couple months ago and she was worried about stock markets plummeting thousands of points every day. We're all, I'm not, we're all worrying, legitimately so, right?

Our worries and our fears about the current economic situation, in my opinion, are well placed. Just because the stock market has come roaring back doesn't mean that our fears are not well placed. And she calls me up and says, "Joshua, what do I do, right? I've got X amount of dollars invested.

It's in the stock market. I don't know what I should do." So I talked her through it, right? At the end of the day, I talked her through this analysis and it was exactly the same thing. Like a similar situation to what your father is in so many ways.

And I said to her, I said, "Listen, you've got income. You don't have debt. You can be frugal and live on the income that you have, the income sources that are stable." I said, "Don't touch the money. Just leave it alone." But the benefit, if somebody stays in a stock portfolio that has a higher expectation of return, is they have the benefit of the potential of having far more money that can keep up with the pace of inflation and possibly leave a lot more money behind.

So if your dad is 79 years old, and let's say we do a 20-year perspective, and let's say he doesn't spend the money, right? Put in 20 for our end. He keeps $200,000 to $300,000 on the side as his emergency fund, and we've just got a $500,000 portfolio. So we'll put $500,000 as our present value.

Let's put no contributions, so no payments. And let's compare a 3% return to a 7% return. Well, 3% return in 20 years, he's got $903,000. A 7% return, he's got $1.9 million. That's a huge difference when you're talking about leaving money behind for a charity. Do you make a $900,000 bequest to a local church or a $1.9 million bequest to a local church?

Do you make a $900,000 contribution to a trust fund for your grandchildren or a $1.9 million trust fund for your grandchildren? And those kinds of differences are achievable if he moves in the direction of an aggressive portfolio. So I've complicated the answer to demonstrate what he needs is he needs a financial advisor.

He needs to sit down with somebody and talk through and say, "What are your goals? What do you actually want to do with the money?" And then try to find, after you find out the goals, then try to find some kind of solution that will fit that. At the end of the day, maybe it is muni bonds and cash.

Something wrong with it. But I want to make sure that he's really clear on why he's doing that because to me, there's a big cost to missing out potentially on that $1 million. If you're trying to give money away, again, it's valuable to give away that $1 million. I think it's easier to educate somebody and show them with math what I've just done, hopefully, here in public, to show them with math that they don't need to be worried about market volatility.

If your dad's portfolio had been $500,000 of stocks and it had dropped down to $300,000 of stocks, and if he had stuck with it, like I got my aunt to do, then the blip in the stock market over the last few months wouldn't have affected him because his pension would have still come in, his social security would have still come in, and maybe his rent would have still come in.

He would have, of course, a couple hundred thousand dollars of cash on the side that he could still keep invested. Volatility is not something that someone in his situation should be concerned about. It's not. He shouldn't worry about it. What he should be concerned about is that his investments are actually going to help him achieve his financial goals, whatever they are.

In conclusion, if he needs income, if he wants to spend money, I think a variable annuity would be a great solution to provide him with a little bit of excess income. I would probably do a hybrid. He sounds like he doesn't need a lot of income, but I would do a hybrid, maybe a couple hundred thousand dollars into a variable annuity.

The reason it's got to be a variable annuity is you want that annuity payment to keep pace with inflation. Buying an annuity would give him the benefit of making sure that he has an income stream that he'll never outlive, but that income stream can participate in the performance of mutual fund investments, stock market investments, so that it can keep pace with inflation and it'll reflect what happens with the overall market performance.

If he needs some more income and he doesn't want to buy more rental houses and whatnot, I would think that some amount of money, and at 79 years old, the mortality tables will work really well, I would think some amount of money into a variable annuity would be a good solution.

Then I would keep a significant amount of money in cash, but he probably doesn't need 300 grand in cash. 100 or 150 would be more than enough for him to do whatever he needs to do. Then I would try to put the rest of it into some kind of longer term investment.

Now that could be a couple of things. It could be the market, if you have a good thing. It'd be fine for him to buy an index fund. I'd be fine if the numbers that we said were true, and if he bought, let's say put $200,000 into a variable annuity, so he has another $1,500 a month of income, whatever the numbers of the annuity company would come out to be.

Now he's got plenty of income. I would be fine if he just put 300 grand in a stock market index fund. That would be a good tax efficient solution, very tax efficient to leave behind. If he doesn't want to invest in stocks, then I would think about some kind of long term speculative low maintenance real estate option.

So maybe he buys farmland. Something like that could work out. Could have minimal management needs. He's not dealing with a lot of toilets and things like that. But if you invested the money strategically, maybe that could work out. And then if he's leaving it behind as an inheritance, then it would be a very tax efficient thing to do.

If he invested $300,000 into raw land or farmland, again, I don't know if that's a good investment where you are, but let's say you could find $300,000 of farmland or raw land. The characteristics of that kind of investment would be really nice for his situation, because it wouldn't create income.

Or if the income did come in, it would be modest. Most of the growth in it would be capital gains, because he doesn't need the income. Remember, in my kind of play scenario here, he doesn't need the income. So we don't want to create income if we don't need it.

What we want is capital gains. And if he owns the farmland, he doesn't have this money in a 401ks, he just owns it. I'm assuming because he has muni bonds. Is that correct? That the $500,000 is not inside of a qualified account of some kind? Correct. Okay. So he buys farmland.

It's a capital gain asset. He pays $300,000 of farmland. That farmland grows over the next 20 years, and it's worth $1.2 million. He dies 20 years from now, and he leaves that $1.2 million to somebody or something, family trust, children outright, grandchildren outright, local church, whatever. Now, that's going to be a step up in tax basis.

And so all of the gain from the $300,000 to the $1.2 million, the $900,000 of gain is going to be received totally tax free. And yet the whole time, he's got that safe asset. So there are several investments that could work. Hopefully there are some creative ideas to get you thinking about the type of attributes of an investment that would be good for him that he would actually need.

Okay. Where do you get pricing on variable annuities? Talk to an insurance agent. Yeah. You just want to talk to an insurance agent. So with a variable annuity, what you want to do is you want to talk to the high level companies, the A-ranked companies. And so my standard, I'm a little biased because I used to work for one of the big mutual insurance companies, but my standard is start with the big mutual insurance companies, call a New York Life agent, call a Northwestern Mutual agent, call a Mass Mutual agent, maybe a Guardian agent.

The reason why those are important is unlike insurance that's largely brokered in the business, the insurance agents that work for those big traditional life insurance companies, they're trained a little bit better on insurance products. And so an annuity product like that is going to be better. All of those companies mentioned, New York Life and Northwestern Mutual are going to be the best.

Mass Mutual, also good. Guardian, also probably pretty good. And all those insurance companies are going to have vanilla, simple, variable annuities that are available. And so what you can do is you can't get... So those you put in the principal and you don't get it back, right? They look at your mortality and they promise you income based on the principal you put in, your mortality, and a little bit of market fluctuation.

Exactly. So you write a check for $250,000, you'll never see the $250,000 again, but the insurance company promises you that you're going to get a monthly payment every single month for the rest of your life. Now, there are about 70 different options that the insurance agent will go over with you as far as what those payments look like.

So again, there's options of variable versus fixed. There are options of guarantees. Do you want a guaranteed return of your $250,000 over time, even to your beneficiaries? Or are you willing to give that up for a higher monthly payment? What portfolio do you want the money into? And so that's the insurance agent's job where they'll model those things and walk you through the options.

But that's... Yeah, yeah. But correct. I would start with some phone calls there and then see what the insurance agents have to say. Okay. Cool. All right. Awesome. Very good. Thanks for helping your dad and I appreciate you doing that. It's one of the biggest things and just kind of last public service announcement that I would say is while you're doing that with your dad, make sure that you are facilitating this kind of open communication between you as a family.

Because one of the things you want to take care of, be careful for is elderly people are often abused by scams in the financial business. And so it sounds like you've got a good open relationship. One of the most valuable things that you can do is cultivate that good open relationship.

If possible, I would ask my dad to make a commitment to me and say, "Listen, please don't do anything with money that we don't talk about. Don't invest in anything. Don't do anything with money." You have to have a good relationship and mutual trust for him to do that.

But that way you can help to protect him from being taken advantage of by the sharks that are out there in the financial business. In addition, while you're doing those things, think through account access, supervision, etc. Because it just becomes – it's generally demonstrated. It becomes more difficult for us to make good decisions with money as we get older.

So in addition to what you're doing, just cultivate that open relationship and that way you'll be able to be an advocate for him. That's it for today's podcast. Thank you all for listening and I'm glad that you're here. If you'd like to join me on next week's Friday Q&A show, go to patreon.com/radicalpersonalfinance.

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