Welcome back to Portfolio Rescue, where it feels like there are an endless number of portfolios that need to be rescued, maybe including my own. We always appreciate your questions, comments, and feedback. Remember, email here is AskTheCompoundShow@gmail.com. Today's Portfolio Rescue is sponsored by Liftoff, our automating investing platform, sponsored by Betterment.

This is from Investopedia this week, Duncan. "Usage of digital advice tools dipped for the first time this year to 21%, down from 28% in 2021, according to Parameter Insights. The biggest shift took place among investors with high levels of net worth. People with a net worth of over $500,000 declined from 38% to 15%.

Even those with $50,000 of assets, it went from 24% to 21%. So, the reason people gave was that they want personal advice. They want to talk to someone. They don't just want digital. Which makes sense, especially in a bear market. And as luck would have it, for our automated platform, we have advisors on staff that talk to people.

So, Matt Lorius, who's been on this show before, he'll be on the show again in the future, he heads this up for us, and he talks to all the people in Liftoff. Some people don't really want to. He reaches out to everyone and talks to them if they have questions about their finances, their venture plans.

So, it's not just automated investing. There's also a component where you can talk to someone. So, go to liftoffinvest.com to learn more. And Matt's great. Shout out, Matt. Yeah, great guy. He was on this show when I lost power in my office. That's why I told him he can never come back.

He's bad luck. I was talking to an investor this week just about what's going on in the markets. And long-term investor, he says, "Listen, I'm not looking to panic and sell. I understand that this happens." But he said something along the lines of this. He said, "Listen, I'm not going to sell.

I'm a long-term investor. I know that sometimes you just need to hang on during these periods. I'm just really sick and tired of losing money." And this is the problem with prolonged bear markets, is they just slowly but surely beat you down. And sometimes you just have to be patient.

So, I think especially with this, John, throw up the inflation chart. This is the last time the Fed put us into a recession. Inflation got to almost 15% in early 1980. And I looked back at the monthly inflation figures from then. So, it peaked at like 14.76%. We're going out two decimal places, because that's what we do here.

The next month, it came in at like 14.73%. Then the month after that, it was 14.4%. Then 14.4% again in June. So, four months after the peak, inflation was still pretty high. And that's kind of where we are now. I think it's been three or four months. And it seems like it's just going down dreadfully slow, right?

It was 9.1%, and then it's like 8.6%, and 8.2%, and it's really, really slow. And eventually, in the '80s, inflation started falling in chunks, but it took a while. It didn't go below 4% for three years after the peak. So, it took a long time. So, I mean, it's possible we have to be patient.

The bear market right now is approaching 10 months, right? It peaked on the very first day of the year. For many individual stocks, it's longer than that. There's this overly scientific term called time dilation. And I think that applies here. It's just that your sense of time changes based on specific events.

And I think when you have actual money at stake, the time -- because if you look back at any historical market data or backtest, like a three-year bear market looks like a blip. 1987 crash looks like a blip. All this stuff over 50, 60, 70 years looks like a blip.

But when you're living in it, 10 months can feel like 10 years, right? So, I mean, patience is always a virtue for long-term investors. But I think that patience is seriously put to a test when you have a prolonged bear market. Like, the March 2020 crash was bad, but it lasted a month.

This one's going on month 10. And the problem is, I am confident this one is going to come to an end. They all do. Every bear market in history has come to an end. I just don't know when that will be, and that's the hard part for long-term investors right now.

You just don't want to get to the point where you just throw your hands up and say, "That's it. I'm done." And that's what happened to a lot of people in 2008. That was 18 months from peak to trough. And a lot of people who sold at or near the bottom in early 2009 just said, "I can't take it anymore.

Day after day, month after month, I'm seeing..." I think the S&P 500 was down for six quarters in a row. Right now, it's down for three in a row, and that feels awful. So I think it's just easy to get ground down, unfortunately, in these markets, and that's the thing you've got to watch for these days.

If we were on financial television, we'd say that's capitulation, right? Isn't that the word they always use? Yes. That's what everyone always looks for, is capitulation. I don't know what that actually looks like. I've never seen it before. There's no bell for that sort of thing, either. But that's the thing.

People throw up their hands and say, "Alright, that's it. I'm out." And I think maybe people have been trained that they just don't do that as much anymore. Not everyone. A lot of investors just stay the course. It's tough, though. So, staying with the bad news, let's get into our first question, which is right along these lines.

Wathen: Yeah. So, first up today, we have a question from Eric, who wrote, "Hey, guys. Ben comes off as a relatively optimistic person when it comes to the markets. Can he give us his most bearish or worst-case scenario for the stock market right now? I'm worried the worst is yet to come." Well, thanks, Eric.

This is what we want to talk about today. Lewis: This is a pretty fair assessment. I am typically a glass-as-a-half-full kind of guy. I think it's disposition. I think a lot of your personality, whether you're optimistic or pessimistic, I think a lot of that comes with how you're born and the people you spend your time with.

I've always been kind of a glass-as-a-half-full kind of guy. My worst fear as I grow older is becoming one of these old people, like all the boomers these days. The people who have been investing for 50 or 60 years, the professional investors, they're all just uber bearish. They have been for years.

So, I hope that never happens to me. I don't want to become a perma-bear. I do think when it comes to long-term investing, you have to balance out being long-term optimistic with being short-term realistic. For me, that means I'm still a long-term optimist, but I have the understanding that things in the short-term can get really bad sometimes.

Right now, they're pretty bad. That's just how things work. So, setting aside things like hyperinflation or the collapse of the dollar, or some of these crazy things, or an alien invasion, whatever, let's walk through some realistic worst-case scenarios right now. So, obviously, I think by far the biggest risk right now is a policy error by the Fed and central banks around the world.

I think that's probably the one that has the highest probability of happening. So, there was this case study done, I think it was like 2011. They looked at eight Israeli judges who granted parole to people who were in jail, convicted felons. And the researchers found a pattern in their decisions after following them for a while.

I think they did like a thousand cases of parole. And they said that two-thirds of all parole requests were granted in the morning. But then, as you got closer to lunch, it basically fell to zero. And then, after lunch, it went back to two-thirds. And then, by the end of the day, it fell to zero again.

And they're thinking, "Why did that happen?" Well, before lunch, they were hungry. Early in the morning, they just had breakfast. They were fine. By the end of the day, they're probably hungry again and ready to go home. And then, after lunch -- and so, there are things outside of our control that can impact our decisions.

We're all human. There are outside factors that impact our decisions. And with the Fed, I think that might mean letting ego get into their decisions. So, they've been getting slammed for months by pundits, saying, "The Fed was behind the eight ball. They missed inflation. They thought it was transitory." They've been getting crushed.

And so, if you don't think that they're going to look back and say, "Well, we're going to show them. We're going to prove our credibility here," and that they could overstep their bounds and raise rates too high, or take us into a nasty recession just because they've been getting crushed, I mean, that's a human thing to show.

No, we're going to show you who's boss here. So, I think a policy error is a real possibility. Something that goes hand-in-hand with that would be if interest rates and inflation keep rising. Obviously, we're recording this on Thursday morning. Inflation came in higher than expected, again, today. If rates shot up immediately, the stock market went down, who knows how that'll all shake out.

All else equal, my research shows the stock market tends to see above-average returns when inflation is either low or falling. It shows below-average returns when inflation is high or rising. If we get another inflation print where things aren't getting better, that's a real risk. And if inflation continues to stay high, and that forces the Fed's hand to increase rates even more, that's certainly a risk.

And I think the other one is just something geopolitically that no one expects. They say during a bull market, the market climbs a wall of worry. I think it's much easier to shake things off when things are going well. But in the midst of a bear market, investors are on edge and just looking for a reason to hit that sell button.

So, consider the 2000 to 2002 bear market. John, throw this chart up. The S&P peaked in early 2000. This is after the dot-com crash. It was down almost 30%. This is right up until September 10th. Then 9/11 happened, and we had this huge fall from there. And the S&P fell an additional 33% from 9/11 on.

Now, to be fair, stocks got hammered right after 9/11. Then they staged a vicious bear market rally and fell again. And you also had a recession there, and WorldCom and Enron, those scandals. So, it was like you already had the implosion of the dot-com stocks, but then you added on 9/11.

You added on WorldCom and Enron. And then, of course, a mild recession. So, I think adding even more panic or uncertainty to an already panicky market is a problem. Now, you could say the war in Ukraine was that outside event. It already happened, right? Maybe it wasn't going to be as bad, and then that happened, and that made inflation worse, and that pushed the Fed's hand, and all these other things.

So, now, since I am a glass-half-full guy, people always think a black swan has to be this negative situation. Unexpected. What if we have a positive black swan? What if inflation just falls off a cliff in the coming months? What if somehow the Fed is able to thread the needle and orchestrate a soft landing?

I'd put that in the low probability category, but you never know. What if earnings don't fall as much? What if the war abruptly comes to an end? So, I think all these things could lead to better-than-expected outcomes. So, it's not just good news that causes a bear market to come to an end.

It's better-than-expected news, or just less worse news. So, I had to bring it back to glass-half-full, because that's who I am. But those would be my biggest worries right now, is that inflation stays high, the Fed pushes way too far, interest rates keep rising, and that keeps hammering the stocks, and we see a 12-18-month bear market instead of a 10-month bear market.

Is it an oversimplification to say that if inflation on the next print backs off a bit, that the market's going to turn around? Based on that data? I mean, it depends how off-size investors are and what the expectations built in are. Obviously, last month, when inflation came in hotter and the stock market fell 4-5%, people were expecting it to be a bunch better than that.

So, a lot of it is, I don't know, maybe at this point, people just have decided maybe inflation will stay high, and it'll take a little bit of an improvement to see that. So, a lot of it depends on what the expectations are that are built in at this point.

So, it's difficult to say. But, I mean, we've been having so many big down days lately. The best and worst days always happen in a bear market. So, it's not going to surprise me if a little bit of better data sees a 4-5% one-day rally. That typically doesn't mean good news, but that's the kind of thing I think we're probably setting up for.

Got it. So, there's hope. Sure. Sure. Yeah. Like you talk about capitulation, they never ring a bell at the bottom. There's never a headline that says, "Oh, the bear market's going to be over now because this happened." Even in March 2020, when things turned around, people were saying, "There's no way all this government spending can stop a pandemic," and blah, blah, blah.

So, even if the government did do something and the Fed did pivot, or whatever it is, a lot of times people are going to be trying to talk you out of it at the moment because it feels better to be negative during a bear market. It always does. Right.

Right. Yeah. I mean, it doesn't make me feel great. I don't know what you're seeing in Michigan, but here in New York, I mean, people are raising prices, but restaurants and bars are still very full. I went somewhere recently that jacked up prices by 20% and made a dent in their business.

When I go to the apple orchard on the weekend with my kids, it doesn't feel like a recession. It's packed with people. Restaurants, too. Yeah, you're right. It's still... I thought that was a joke, but you're being serious. I'm being serious. This is what you do in the fall.

These farms all get you to spend an ungodly amount of money on apples and cider and God knows what else. Instagram photos. All right, let's do another one. Okay. Up next, we have a question from Charlie who writes, "Does the 40 and the age-old 60/40 equity bond portfolio mean only real bonds?

Would an equity dividend-producing portfolio that provides supplemental income work for the fixed income side of the portfolio? Are there any situations that come to mind where this strategy would be recommended over the traditional 60/40 portfolio?" Good question. This one comes up a lot, especially from retirees in recent years.

First of all, there are no hard and fast rules in this. I don't think anyone, there's no real person alive who has their entire net worth in a 60/40 portfolio. It's just, I think it's kind of like a straw man thing. It's an easy benchmark and something to talk about, but no one actually has that.

People also hold cash. They have real estate. They have other kinds of stocks. They have value stocks and growth stocks. A few people actually own US stocks and US bonds in a 60/40 portfolio. So sure, a dividend strategy could make sense as part of that allocation if you understand the pros and cons.

So you should have higher expected returns with a dividend portfolio than bonds, but expected is not the same thing as guaranteed, but you get the point. Unlike fixed income where the income is, well, fixed, dividends can increase over time. So you could see an inflationary bump in your income, which is nice.

In fact, there's a bunch of blue chip corporations and they call them the dividend aristocrats. So I think that's if you increase your dividend without fail for 25 years in a row. So a company like Procter & Gamble has done this for like 66 years in a row. 3M I think is 64.

Coca-Cola is 60. Johnson & Johnson is 60. Pepsi is 50. Colgate-Palmolive is almost 60. So it's companies, and these companies are loathe to cut because they think that that sends a wrong message to investors that, oh, the cashflow is not there in these businesses. So I think if you add in some price appreciation, that sounds like a pretty good deal.

The problem is, dividend stocks are still stocks. So when the stock market falls, these stocks tend to fall as well. So John, throw up the chart of dividends. I looked at the four biggest dividend funds, ETFs, and looked at where they stand in comparison to the S&P and the NASDAQ this year.

So the NASDAQ is down 34%, S&P's down 24 or something. All these dividend funds are down less than the market. There's varying degrees because some of these strategies are different in how they orchestrate these. Some of them pick dividends that are growing. Some pick dividends that have been growing for a certain amount of years.

Some of them pick certain yields. But they're all doing better. So the good news is, a dividend strategy, if you're picking a basket of dividends, tends to fall less than the market when the market is going down. On the other hand, it goes up less than the market when the market is rising.

So you'd expect to have the lower beta. That's what we call that in finance terms. So I just think it's important to remember that this is for a diversified approach. If you pick any one stock, we've talked about GE here in the past, AT&T, a company like Verizon. These are higher yielding stocks that have gotten hammered for the price and so it didn't matter what the dividends were.

So I've, sure, I've seen many investors in recent years use dividend as a go-between for stocks. So they may take 5 to 10% from stocks and 5 to 10% from bonds and have a 10 to 20% allocation to dividends. I just think you have to understand that the dividend stocks are still stocks.

So while they have some characteristics they share with bonds, there's still some risk there. I do think one of the best parts about a dividend strategy is it's just simple. It's easy to understand. These are big blue chip companies. They pay out dividends on a regular basis. Those dividends could increase.

You just have to remember that they're still stocks. So yeah, I mean, if you can understand the pros and cons, I don't see why not, why you can't add an allocation to them. Yeah, I guess the aristocrat, the beauty of that is that they know they'll be dropped from some ETFs and things like that if they ever, if they cut or if they break that pattern.

Yeah, these companies, they'll borrow to pay dividends so they don't have to cut because that is, they could lose an investor base that relies on them to, and I think some people also say, "I'm just going to focus on the income from these companies because it's not going to drop as much during a recession or if earnings drop." But yeah, I know a lot of, no one in 2021 wanted to own dividend stocks.

This year they do. Yeah, yeah, that's why I was just saying in the chat, they're suddenly very popular again, it seems like. All right, next question. All right, up next we have a question from Corey. "My wife and I are in the process of saving up to buy our first home.

I hate myself because obviously I wish we would have bought something 12 months ago when mortgage rates and housing prices were lower. I find myself constantly checking mortgage rates and I just don't understand why they keep going up so much. Last time I checked, the 10-year was still below 4%, but the 30-year mortgage rate is above 7%.

Why are mortgage rates so much higher than bond yields?" I think last week someone called themselves an idiot for buying a house right now and this week someone says they hate themselves. Yeah, just remember, this is not your fault. The timing is just awful, unfortunately. I've been thinking about this one too, though.

We were talking about this internally a couple weeks ago. So interest rates are up across the board, but it feels like mortgage rates have gone up way faster and way higher than government bonds or anything else. So John, let's do a chart on, I looked back at 10-year treasury yields versus 30-year mortgage rates and these definitely have a relationship.

You can see they follow a pretty close pattern there. Mortgage rates are higher than treasuries, there's a spread there, but it's a pretty strong relationship. So the average spread over the past 50 years or so, this is going back to 1971, is 1.7%. So 30-year mortgages average 1.7% higher than 10-year treasury yields.

So the 10-year right now is right around 4%. So in an average environment, you would expect to see mortgage rates at 5.7% if we're tracking that long-term average. They're actually more than 7%. So they're way higher. We're talking like a 3% difference right now. So why is this the case?

Why are mortgage rates so much higher than treasury yields? We don't know for sure, but I have some thoughts. I think one of the problems is the volatility of rates is making things way worse. We're seeing these massive swings day-to-day because of the Fed policy and the macro environment and the Fed pulling back from buying bonds.

So that's certainly not helping here. In fact, the highest and lowest this spread has ever been actually came during the last time the Fed was hiking so aggressively. So in 1980, for about a week, because rates were moving so much and they were trying to throw us into a recession, 10-year yields were higher than mortgage rates by a couple basis points.

Ten weeks later, mortgage rates were 6% higher than the 10-year. So that's when mortgage rates were almost 16% and the 10-year was 10%. It tells you how different things are from today. So interest rate volatility isn't helping matters. The other thing is, the Fed was buying mortgage-backed bonds. And they were effectively directly buying these mortgages through bond purchases.

And them getting out of that market in the past few months has to have a huge impact on the volatility of these mortgage rates, the speed of which it's going up. And unfortunately, with today's inflation print, I think we could probably see 8% mortgage rates. I think that's probably coming.

7% happened pretty quick. These are longer-term rates, so they're front-running the Fed a little bit. I think 8% is probably not out of the realm of possibilities. Obviously, 3% mortgage rates led to a lot of unhealthy behavior in the housing market, and that was unsustainable. If I was like the housing czar, I would like to see them at 5.5%, more like that long-term average.

If they hug the 10-year a little bit, that would make more sense to me. Maybe if I got rehired by the Fed after they fired me, I would say, "Let's just make it 1.5% higher than the 10-year for mortgage rates. We're setting that. That's it. That's the line. 1.5% higher.

Whatever the 10-year does, mortgage rates are going to track." So yeah, I'm obviously worried about what it's going to do to the housing market. But I feel for people who are constantly tracking these and worried about what's going to happen and how far they're going to go. Your best hope, which I've been saying for months now, is unfortunately a recession where you can then refinance at lower rates.

It just depends on how high they go and then how low they go, if that happens. Yeah, I mean, the mortgage aspect, I think, is where it impacts the most people in a very, very tangible way compared to a lot of what we talk about. Yeah. Unfortunately, it means a huge number of people are being boxed out of the housing market right now, because housing prices are up and rates are so much higher that it's just a double whammy upon affordability.

Also, it looks like the market just went green. So, that's good news. No, never mind. Any bottom calls or anything you want to say? Lewis: Just remember, the feeling you have today of this massively bad, negative news, pessimism, everyone is bearish. That's what you feel when markets are -- this is the feelings you're going to get.

You're never going to know. I mean, would 10% or 15% more from here surprise me? No. But if this is peak pessimism and the market kind of peters out for a while and goes back up, that wouldn't surprise me either. These are the feelings you get during a bear market, and they just compound interest.

They build on each other, and it just gets worse and worse. What did you say before we got on here? You said, "I'm not having any fun." How many people are having fun right now? Hall: Yeah. No. No. For sure. Okay. Let's see. Up next, we have some college questions.

My daughter is a high school senior that just got accepted into her first choice for college. Congratulations. We're very proud of her, but now we have to start thinking about filling out all the FAFSA forms and such for student loans. I don't have a financial advisor, so I'm feeling pretty overwhelmed by the process.

Where do I even start? What do I need to know to make sure we don't miss out on something that could help cover some of her tuition bill? Lewis: All right. Thanks to the viewers for providing some good news here. Got into college. Guess what? His daughter is not worried about a recession right now.

Honestly, I don't think I even realized that the economy existed when I was in high school or college. I paid attention to nothing. I didn't know what was going on in the stock market. I was just blissfully ignorant. Hall: I graduated into the GFC, so I was aware. Lewis: Okay.

I think I graduated in 1999. 2000, I guess. So, I top-ticked the market pretty good. We've shared this before from Ron Lieber that the average discount for a first-year full-time student is more than 50% off the list. But I have no idea how you get to that point where you get those discounts.

Let's bring in someone who actually does know what they're talking about here. Tony Isola. Tony works with us at Ritholtz. Tony is our expert in education, 529 plans, and all these things. Tony, I've got to be honest. I don't even know what FAFSA means. I just know it deals with student loan paperwork.

So, where does this person start if they have no idea what they're doing? Tony Isola Well, first of all, I think this is a cool thing to talk about because unlike the markets and the day-to-day nonsense that goes on, there's a lot of things you can control with college planning.

A lot of things. And the problem is, people don't know the rules of the game. And they play by someone else's rules that's designed to extract a lot of money from them. So, first of all, with the federal financial aid form, that's what this FAFSA thing is, you fill it out, right?

A lot of people will say, "I'm not going to get any money." No, you fill it out. Here's why. Number one, it doesn't matter how much money you make, you're automatically eligible for the best loans out there, which are the direct student loans from the government. They have the best terms.

So, even if you have a lot of money, you might want to save that money for graduate school, right? Like you want to manage your debt properly. There aren't many good loans out there for graduate school. So, if you can use these good loans for undergrad school, even if you have money, it still makes sense to save that cash for the more expensive things to come.

That's number one. Number two, if you want to bring up the chart, I gave a chart. There you go. Basically, what they look at, and we'll just look at the federal method because there's another method, but I don't want to get into that. Basically, the biggest thing for these loans are your income.

If you have a lot of income, you're not going to get what they call needs-based money, which means money that you need because you don't make a lot of money. But the good thing is most schools, it's a buyer's market. Most schools offer merit aid, which means, "Oh, I have a high SAT, ACT, whatever," and they will give you money.

They don't fill their classes for the most part. They need to entice you. Right. Sorry to jump in here. My dad is on the board for his local college that he went to in Grand Rapids here, Aquinas, and he says that they're looking at the demographic trends and seeing fewer and fewer high school seniors graduate every year.

Colleges, you're right, they're competing for people these days. Absolutely. Here's the deal. You could flex on the financial aid form. It sounds obnoxious, but if you put that you have a lot of assets and wealth, what they do, here's how they look at it. The system is messed up, I mean seriously messed up, but the way they look at it is, "Wow, these people couldn't afford it.

We would rather give $10,000 to five rich kids than $50,000 to one poor kid," right? Yeah, which is unfortunate. Do you think that it's worth it if you're confused here and you know your daughter has three choices or whatever, or she figured out which place she's going to go, you call them up and say, the Office of Financial Aid, and say, "Can you help us here?" This is what you do.

Most people, what they don't understand is, like a portfolio, you need to create a diversified list of schools. I have software where I can basically tell you how much you're going to get. Even if you apply to a school that you don't want to go to, but you know you're going to get a lot of money from them, you could use that as leverage.

Now you can go to your top choice school and say, "Hey, I love you guys, but Mount Holyoke or whatever offered me $25,000 a year to go. How could I turn that down? You guys offered me $15,000. Is there anything you can do to help?" And guess what? It works.

My two sons are in college right now. Last year, when we filled out these forms and did all this stuff that the questionnaire asked, I did the same thing. We went back to a school. I would say within a half an hour, I sent an email. They gave us $5,000 more.

$5,000 a year is $4,000. My whole thing is people hate negotiating because it makes them uncomfortable, but that's the thing you have to do, right? No, but here's the deal. You don't say you're negotiating because that's kind of obnoxious. So what you do is you call up and you kind of attach the award letter from the other school and just kind of be super nice about it and say, "You know, it's a game.

They kind of know you're going to do that, but you don't want to come too heavy-handed like you're buying a car." Come on, Tony. I get my cable bill decreased every year. I know how to negotiate. Yeah, yeah. So you'd be nice about it. I knew you were going to say that.

Yeah, and the point is there's a ton of money out there and people don't understand. For instance, they'll chase private scholarships. The average private scholarship might be $3,000 or $4,000, and it's for one year. You have schools out there. If you do the research- So you're saying that you get a better discount with a public university?

Well, it depends. The public schools are cheaper to begin with, so I would say the opposite. I would say when you look at those private universities that have that ... No one pays the sticker price. They do that on purpose. Like I said, it's a 50% discount. So, Duncan, let's do the next question that is kind of on the other end of the spectrum here.

Yeah. Okay. Looks like that question was from Steve, by the way. This one's from Mark. "My wife and I are about to have our first child, but we're starting later than most. I'll turn 40 and she'll turn 35 by the time our daughter arrives. Should I prioritize a 529 or making 401(k) contributions beyond my employer match?

My thought is that the 401(k) funds will be available when I'm 59 and a half and my daughter is 19. My wife will receive a public sector pension a few years later. I realize that this is one of those 'already won the game' questions, but I can't find anything that's clear one way or the other." All right.

So, unfortunately, Mark's daughter is going to be born into a bear market. She's never going to know what a bull market felt like. So, there's nowhere to go but up from here. So, okay, Tony. So, the thing that I've always heard here is you put your oxygen mask on first as a parent and you take care of yourself first.

But I also know, as someone with kids, it's hard to tell a parent that they shouldn't put their child first. So, how does this shake out for you? There's a lot of things you could do. First of all, you can go in the middle. Do a Roth IRA. Because, A, you can take money out of a Roth for college expenses.

And if you don't need it, you could use it for your retirement. So, you can kind of say, "All right, this is like the college fund, but it could also be my retirement fund if that doesn't work out." Secondly, there's a lot of states that offer tax breaks and offer credits and matching programs.

So, like in New York, for instance, if you put in up to $10,000, you get a tax break from the state tax, which is 8%. So, it's kind of like you're getting an extra $800 to put into a college fund if you just do that. So, if your state is very favorable in the 529 they offer, that's another thing.

And there's nothing wrong with doing both. You could maybe do like 80/20. "All right, 80% of my savings is going to go to retirement and 20% is going to go to college." And to your point, planning for what colleges breaks are going to be in the future is really hard.

It's probably almost harder than planning for retirement for people. So, the Roth gives you some wiggle room. Absolutely. And it also could ease your conscience, right? You're kind of like, "Oh, I'm not being selfish because I could always take money from that Roth to give to my child." So, I think personally, that's the best of both worlds.

And it's funny because a lot of times I get this question. I'm always like, "Well, what happens if we don't use all the money in the 529?" It's like, "Is that your biggest problem in life?" I don't understand why people are like, "Oh, I'm going to have to." What are you talking about?

I always get that question all the time. I'm like, "Come on." By the way, so, Sean in the chat here says that I'm like the dad in the Christmas story, always trying to get a good deal on the Christmas tree. I'm going to have to bring those negotiating powers to the Christmas tree this year.

I want to say one more thing here, just to mention for our audience. So, the Wall Street Journal had an article this week that the sky-high IBON interest rate is coming down to earth. They say it's probably coming down from like 9.6% to 6.4% beginning November 1st. So, that 9%.

Because they measure it on six-month inflation, because it's a six-month at a time, and inflation actually over the last six months has been a little bit lower. I know you wouldn't know that from the headlines. But it sounds like by November 1st, it could drop a little bit. So, get those IBON purchases in before then if you want that 9.6%.

Right, Tony? Maxfield Absolutely. I have some. But you know what? I tried to put in more, and I had to change my bank. It's a nightmare. I just gave up. I was just like, "I can't handle this." They were making me print out things and mail them. Lewis I'm glad you mentioned this.

I had someone recently ask, "The only way you can get IBONs is through Treasury Direct, right?" Maxfield It's not a good user experience. Lewis All right. Thanks, Tony, for giving us his information on colleges. We always appreciate that. Next week's show, Cullen Roche is going to be on here to tell us everything about the Fed.

I'm going to include some of my own questions there. Send us some questions. Remember, it's AskTheCompoundShow@gmail.com. Leave us a question or a comment in the comments here. Thanks, everyone, for watching live. We'll see you next time.