149: Ask an Advisor #4: College Edition (ft. Kate Newland)

Welcome to The Invested Dads Podcast, simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments, here are your hosts, Josh Robb and Austin Wilson.

Austin Wilson:

All right. Hey, hey. Welcome back to The Invested Dads Podcast, the podcast where we take you on a journey to better your financial future. I am Austin Wilson, Research Analyst at Hixon Zuercher Capital Management.

Josh Robb:

I’m Josh Robb, Director of Wealth Management at Hixon Zuercher Capital Management. Austin, how can people help us with this podcast?

Austin Wilson:

Well, first of all, we would love it if you’re not subscribed, if you would hit that subscribe button so you get a new episode every single Thursday. We would love it if you would visit our website and sign up for our weekly newsletter to get notified when those new episodes drop with some highlights and show notes and things that are going on in that episode, as well as a direct link to listen to it. So, we would love it if you would do those things. So, Josh, what do we have going on today?

Josh Robb:

Yes, today, we are joined with another guest and today we are going to be talking to our intern, which we’ve done some in the past with our marketing interns. Today, we’re talking with our finance intern.

Austin Wilson:

That’s right.

Josh Robb:

So, Kate Newland is with us, and she is going to be asking us some questions. Again, like always, an open book, whatever you want to know.

Austin Wilson:

Finance, not finance.

Josh Robb:

But first, Kate, tell us a little bit about yourself.

 

[1:25] – Kate Newland Introduction

Kate Newland:

Yeah. Hey, so my name is Kate Newland. I am Hixon Zuercher Capital Management’s first ever finance intern.

Austin Wilson:

First ever means trial and error.

Kate Newland:

Yeah.

Austin Wilson:

She’s the Guinea pig.

Josh Robb:

What do we do with this intern? She’s been very gracious with me and working through as we learn the process of having a finance intern.

Kate Newland:

Yeah.

Austin Wilson:

Well, you haven’t missed her up too bad because she was willing to come on the show.

Josh Robb:

Yes, that’s right.

Kate Newland:

At the end of this year, I’m going to be graduating from Ohio Northern University.

Josh Robb:

Polar bear.

Austin Wilson:

Go, polar bears.

Kate Newland:

Yup. Go, P bears.

Josh Robb:

That’s what they call them, the P bears?

Kate Newland:

P bears. Yeah.

Austin Wilson:

That’s a funny name.

Kate Newland:

But yeah, that’s me.

Josh Robb:

Where are you from? Are you from the area?

Kate Newland:

Yeah. I am about an hour from Findlay, Ohio. I’m from Lakeview, Ohio.

Josh Robb:

Okay. I won’t hold that against you.

Austin Wilson:

I give her a hard time. I’m from a local area like Indian Lake Area called West Liberty.

Josh Robb:

Yeah. So, you guys are rivals?

Austin Wilson:

No, we weren’t really rivals. Well, we’re in track against Indian Lake and stuff like that. My dad worked at Russells Point Honda. So, we were up there all the time.

Kate Newland:

I’m familiar.

Josh Robb:

There you go.

Austin Wilson:

Yeah, what’s the pizza place I told you about?

Kate Newland:

Woody’s?

Austin Wilson:

Woody’s.

Josh Robb:

Woody’s.

Austin Wilson:

Woody Burger. Oh, my goodness. So good. I love Woody’s burgers. I love it.

Josh Robb:

There you go.

Austin Wilson:

I don’t care what I say.

Josh Robb:

For Austin, anywhere you go, the reference point is the city or town name. It’s like, “Where is that food place or at that restaurant?”

Austin Wilson:

Absolutely. So, Kate, you have prepared some questions. We don’t know what they are at all. This is actually completely live for Josh and I and this floor is yours. So, yeah, take us away.

 

[2:57] – Thoughts on Robo-Advisors

 Kate Newland:

Alrighty. So, my first topic is about robo-advisors.

Austin Wilson:

Yes.

Josh Robb:

Ooh, I wish I had a funny joke.

Austin Wilson:

AI of the future.

Josh Robb:

That’s right.

Kate Newland:

Yeah. So, I guess my first open-ended question is, what is your guys’ opinion on robo-advisors?

Austin Wilson:

Can Josh be replaced with low-cost advising?

Josh Robb:

Yes, I can.

Austin Wilson:

Yeah. So, I mean we both probably have similar opinions on this. I think for some people, especially young people starting out with very simplified financial goals, it can be very useful, because it’s generally quite affordable. It makes dollars-cost averaging very simple through already pre-orchestrated models. As long as your financial situation at the time that you’re doing that is very, very simple, you don’t need a lot of tax planning or income planning or specified instances like that. It can work. You’re not going to get tailored to you recommendations because you’re going to fit a bucket. That bucket is generally very okay when you’re young and adding money. That’s my opinion, Josh. Maybe elaborate a little bit more.

Josh Robb:

Yeah, I’ve always had a problem with the term advisor with that, because the robo-advisor, where they do their best and where I think they are very valuable is in asset management. So, when it comes to choosing investments, rebalancing, all the pieces that are involved in managing your investments, a robo-advisor actually does a very good job, because they’re on some programmed allocation and program schedule. So, when you add new money in, it knows where it should put it in because it looks at overweights and underweights. It does its job because it’s all rules based. Very easy, very simple.

Where I think it falls short is that because it is automated when it comes to giving advice, which an advisor should be doing, that’s where you’re going to see the shortcoming. So, robo-advisors, I don’t have a problem with if you need very simplified rules-based investing. So, if you are not one to panic when things go down, a robo-advisor can be beneficial. What we found, especially this last downturn, is that when things got rough and people had been using this type of investment and they needed to talk to somebody, there was no one on the other end to talk to and they needed reassurance. Am I doing the right thing? You push buttons and you get answers, but they don’t get somebody there. That’s the shortcoming.

So, will robo-advisors replace advisors? No, but I will see people who are maybe at this stage where they don’t need long-term planning yet where they’re young and there’s a lot of other things they’re doing and they’re not really focusing on that piece. It could come in handy or if you’re someone who likes to do a lot of it yourself, but you just need a little bit of help when it comes to choosing when and how and rebalancing, things like that, a robo-advisor would fit into that, because you’re again helping choose that stuff, but then letting something automate the ins and outs.

So, robo-advisors, I don’t have a problem with. I don’t see them as competitors to our industry when we’re talking financial advisors, because they’re not going to help you really with tax planning. They’re not going to be helping you with the estate planning. Those are the things that you miss out on. So, that’s why advisors seem a little weird to me because the robot’s not really advising you.

Austin Wilson:

It’s just a robot.

Josh Robb:

It’s using algorithms and programs to allocate you and there’s nothing wrong with that if that’s what you’re looking for. I’d actually know advisors who use that as their management piece and then they’re the ones giving you the advice everywhere else. So, I’ve seen it merge together where they’re using that automated piece to invest, but then also being the physical advisor to help you through the tough times as well as planning.

So, yeah, I think they’re a neat tool that over time as they enhance and grow it, you’re going to see more adoption of that, but it’s not going to replace a person, especially when things get volatile. Because even when you look at Robinhood, if you get people just the ability to do things and you have some training to help them, when things get rough, they do like to talk to somebody to help them through that. That’s the piece that’s always missing in that.

Austin Wilson:

Josh, your job is secure.

Josh Robb:

It’s close.

Austin Wilson:

I know. The robots haven’t taken over yet.

Josh Robb:

Not yet.

Kate Newland:

Have you guys experimented with robo-advisors?

Josh Robb:

We actually have. So, we did look at the option for either accounts below our minimum or people just starting out. Again, it was a hybrid where it was really just the asset management piece. We would still be the ones giving them advice, but then to actually put them in investments, choose the underlying holdings, we’d use a lot more passive or index based stuff for that, but then that would be the rebalancing. That would be automating that piece. So, we looked into it from there. What we found is if we were already going to do all the advising work, they might as well just be a full client with us, because cost wise, it wasn’t saving them much if they’re going to be paying for the advice. They might as well just have us manage it. At that point, it was like, “Well, are we making any money off of it when it’s below our minimum and you look at cost to run our firm?” So, we did briefly look through it. Again, with technology advancements, we may circle back around, but for right now, we don’t use it in any of our applications.

Austin Wilson:

Personally, in a prior life, when I just started out of college, I was not working here and I did have a Roth through Betterment or something like that. It was simple, easy to use, easy to set up. It wasn’t what I wanted to do long-term, but it worked for what it was.

Josh Robb:

So, it’s like the step up between do it yourself and then you add just one layer of a little additional help. So, it’s like I want to choose everything. And then if you’re like, “Well, I don’t know if I know exactly what I want to do,” that’s the next step up. It’s like, “Oh, someone will at least help me in this program to say, Hey, if this is your risk-tolerance, here’s what you should own.'” So, it’s that next step up. So, yeah, there’s a spot for it for sure.

Kate Newland:

Yeah. So, Austin, you mentioned Betterment. So, what other type of robo-advisors are there out there?

Austin Wilson:

That’s like the biggest one that comes to my mind.

Josh Robb:

Betterment is the one we looked at. So, the big custodians, a lot of them have offshoots of those.

Kate Newland:

Yeah, like Fidelity.

Josh Robb:

Yeah, Fidelity. Vanguard, I think had some stuff there for quite a while.

Austin Wilson:

I even think like Goldman Sachs, Marcus’s Branch has their own style.

Josh Robb:

So, a lot of the big banks and custodians, those have some automated piece that if people want to step up from a free account where they’re managing to have that a little help, they usually offer something. Betterment is the well-known one. We use a risk tolerance software called Riskalyze, which helps us figure out what your ability to tolerate risk is. They actually had one that they were experimenting with on their own as an option for advisors as well. I mean there’s a ton out there to choose from.

Austin Wilson:

Oh yeah, there’s this one app called Personal Capital where you can load all your accounts.

Josh Robb:

Oh, yeah, they have one.

Austin Wilson:

You load all your accounts. Well, it’s free to use that part, but they do have that robo-advisory management side of things and sometimes even personal stuff on the side that’s an in between as well. So, yeah, I think it’s becoming very popular, because for a financial institution, once you build the algorithm or whatever, it doesn’t take a lot to manage it. So, it’s a very low cost way to gather assets and get even relatively small expenses from the client. Well, it adds up if you have a lot of clients.

Josh Robb:

I would say if someone listening is thinking about that, start with where your assets are at. So, look at wherever you’re currently investing and see if they do have an option, because it’d be a lot easier to utilize them if you’re already happy with where you’re at to see if they offer something like that. Yeah.

Kate Newland:

Okay.

Josh Robb:

Good.

 

[10:21] – The Guy’s Opinion on Cryptocurrency

 Kate Newland:

So my next topic is cryptocurrency.

Austin Wilson:

Ooh, awesome. My favorite, man.

Kate Newland:

So I guess open-end question again, what’s your opinion on it?

Austin Wilson:

I don’t think the technology is going anywhere. Well, they’re calling it like a crypto winter right now, where cryptocurrencies in general have sold off 60, 70, 80%, sometimes more, sometimes 90%, 99 point some percent. So, a lot of the easy money, the retail money has been flushed out of the system. So, only the hardcore people are still holding it or buying it at this point. The technology, I think, is only going to be growing. I think something that’s particularly exciting is the Ethereum merge from proof of work to proof of stake. That’s going to be happening in September of 2022, where it’s going to become a lot more environmentally friendly, where you won’t have to spend big bunches of energy to mine new Ethereum.

You’ll be able to do it through a sticking process, essentially putting up your ether to validate the blockchain. That was a lot of big words in one sentence, but that’s something I’m particularly excited about. As far as an “investment,” I still think it’s rather speculative, although even more hardcore crypto people think it’s stupid not to. I’m like, “eh.” I don’t think it’s going anywhere, but we’re still way early. So, there’s going to be a lot of risk and I still consider it more of a speculation than an investment at this point. That being said, I dabble myself, I’ll put that on record, but not a lot in consideration of my overall financial picture. I keep everything in line with risk and keep it a very small amount of my assets. So, I mean I think the space is fascinating, but I have not bet the house on it.

Kate Newland:

Hmm.

Josh Robb:

There you go. Being a compliance officer, I like regulation and that is an unregulated area right now. Cryptocurrencies has really no overseeing government institutions. So, we have the SEC regulating our industry. So, there’s been some concern with that, because as that-

Austin Wilson:

Stablecoin.

Josh Robb:

Yes, it was not stable apparently.

Austin Wilson:

It was unstable.

Josh Robb:

But there has been issues where maybe somebody who had a lot waited to the price, went up and dumped, and they were the ones propping the price up in a sense. Well, there’s no one regulating that and it’s not illegal, because there’s no regulations to fall back on. So, until there’s some structure there, it’s going to be hard for most investors to be comfortable in that area. That’s where I fall is yes, I think it’s here to stay long term. Which coins are going to be the ones that last? It’s hard to say.

So, from that standpoint, I fall in the same boat is that we don’t discourage people, but we strongly encourage them to minimal invest in that. Make sure it’s not a make or break for your overall financial plane. If you’re comfortable with the volatility, I can’t say don’t go in there, but you got to understand that some of those coins, you could go down to zero. It could go to zero and there’s some risk involved and you got to be careful with that.

Austin Wilson:

And go in with a long time horizon, because this year is proof that you can lose 60, 70% of assets in a couple months. If you believe in technology, that’s great. It’s still just may take years, get back to where it was. Who knows?

Josh Robb:

You could still bet on the wrong coin and the technology could last.

Austin Wilson:

That one’s done.

Josh Robb:

Yeah, so just be careful is what I say.

Austin Wilson:

That’s a really good point.

Josh Robb:

Be careful.

 

[13:41] – Favorite Cryptocurrencies

 Kate Newland:

Okay. One last question regarding cryptocurrency, do you guys have a favorite cryptocurrency?

Josh Robb:

Oh, yeah. So, it depends on how you’re asking that question. Do I have a favorite in that they have some fun names out there, because anybody can create this. I mean that’s the other weird thing about it is you can make your own coin and call it the cake coin, and everybody would be-

Austin Wilson:

That could really take off.

Josh Robb:

… scrambling around for that. They’re very minimal entry point for that. That being said, I think long term, it’s those early movers. So, you got Bitcoin and Ethereum are the two big ones. So, asking about a favorite coin, I think Ethereum because of their ability to adapt and change has a leg up on Bitcoin who’s stuck in how they process things, but I’m not saying you should invest in any of those. That’s always the caveat, right?

Austin Wilson:

Yeah, that is.

Josh Robb:

This is not investment advice, but when it comes to it, I would say what you need if you’re dabbling in it is volume, trade volume. Meaning that if I do want to sell something, there’s enough people out there to buy it that I can get rid of my investment anytime I want. So, those bigger coins do allow you a little bit more volume that if I have a couple hundred dollars of investment at any point in time, I could sell that and have somebody out there to buy it.

Whereas some of these smaller coins that are new have less volume and I could actually be drastically moving the price if I ever decided to divest out of there if I had a significant holding in there. When it comes to favorite coin, I don’t have one necessarily. There was some funny named ones, but in general, I think ones with high trade volume give you at least the best flexibility to come in and out as you make your decisions.

Austin Wilson:

Yeah, I mean, I would echo what Josh is saying. I guess favorite to me means a couple things because there’s a lot of different technology behind it. I would say there’s a couple categories of cryptocurrencies and one is the digital store value category. To me, that’s always going to be Bitcoin. There’s only ever going to be 21 million Bitcoin. It’s going to be like a “digital gold”. It’s a very finite resource and it becomes harder and harder to get the rest of the Bitcoin every single year as the halving occurs. So, I think that as far as a store of value, Bitcoin will be the king player of that space. However, when it comes to transactions, that’s where Ethereum comes. Ethereum is a much cheaper and easier way to digitally transact on the blockchain.

When it comes to things like NFTs, which is a whole another ballgame, and we’re not going to get into that. We actually have a whole episode on that where you can listen to our opinions on NFTs. But when you think about the NFT universe, that’s essentially based on the Ethereum blockchain. So, that’s an upcoming and growing space as well. Transaction wise, I think Ethereum’s probably the most exciting. Store value wise, I think it’s Bitcoin. Neither of those are recommendations, but again, like Josh said, the more established players, in my opinion, are going to be the ones to last through things like this crypto winter we’re in right now.

Josh Robb:

By the way, a couple, there’s Garlicoin.

Austin Wilson:

Garlic Coin?

Josh Robb:

Garlicoin, but it is based off of garlic bread. They wanted to create a coin off of the love of garlic bread.

Austin Wilson:

It’s delicious.

Josh Robb:

And then there’s Mooncoin, which I found this one interesting. There’s 384 billion coins out there of Mooncoin.

Austin Wilson:

That’s it.

Josh Robb:

The reason though that number’s there is they calculated that’s the number of millimeters between earth and the moon. That’s how they came into with the number of coins they have available.

Austin Wilson:

Obviously Dogecoin.

Josh Robb:

Yeah. Yeah. I mean the shiba inu coin, which is another one. There’s a TrumpCoin and a PutinCoin, which are both out there hanging out. There’s a Potcoin and then the Dogecoin. So, yeah, there’s some fun ones out there.

Kate Newland:

Did you guys ever invest in Dogecoin?

Austin Wilson:

I never had a penny in Doge. You?

Kate Newland:

Maybe a little bit.

Austin Wilson:

That’s all right. This is a judgment free zone.

Josh Robb:

Speculation, right?

Austin Wilson:

It’s speculation.

Josh Robb:

There’s nothing wrong there.

Austin Wilson:

Some people made a lot of money on it.

Kate Newland:

Yeah, some people did. Some people not so much.

Austin Wilson:

That’s right.

Josh Robb:

Which is okay. Again, if it’s within-

Austin Wilson:

You didn’t need it.

Josh Robb:

… it’s a learning either way.

Austin Wilson:

That’s right. So, tax-loss, there you go.

 

[17:40] – Dad Joke of the Week

 Kate Newland:

Yes. Okay. Well, now, I have my dad joke of the week.

Josh Robb:

Oh, boy, we’re excited.

Austin Wilson:

We’ve been waiting since last Thursday for this.

Kate Newland:

What do you call two monkeys that share an Amazon account?

Austin Wilson:

Oh, that sounds funny.

Josh Robb:

I got an answer, but I’m going to let you say it.

Austin Wilson:

I don’t even know.

Josh Robb:

I do.

Kate Newland:

Prime mates.

Josh Robb:

There you go.

Austin Wilson:

Prime mates.

Josh Robb:

Prime mates. I like it.

Austin Wilson:

That’s hilarious.

Josh Robb:

I got it. There you go. That’s good.

Austin Wilson:

Do you guys know that there are like 100 Amazon Prime accounts in the United States?

Josh Robb:

Wow. Of 300 and some million people? That’s impressive.

Austin Wilson:

Isn’t that impressive?

Josh Robb:

Wow.

Kate Newland:

It is.

Josh Robb:

That’s a lot.

Austin Wilson:

I have an Amazon Prime account.

Josh Robb:

I have an Amazon Prime account.

Austin Wilson:

Your family probably has an Amazon Prime account, or you do?

Kate Newland:

Yup.

Austin Wilson:

So therefore, there you go. There’s three out of three. So, I use it all the time. I love Amazon.

Josh Robb:

Yes. In fact, actually, we were on vacation this last week and we had to have a neighbor pick up some packages that got delivered, so they weren’t just sitting out. It just never ends. Even when we’re gone, we got stuff showing up at our house. What is happening? It was toilet paper. We have an automatic-

Austin Wilson:

Oh, of course.

Josh Robb:

… delivery. It’s so nice.

Austin Wilson:

Well, when you have that many kids, you go through it.

Josh Robb:

Just anything you could automate.

Austin Wilson:

Subscribe and save.

Josh Robb:

I know, right?

Austin Wilson:

You save Like 20 cents a roll.

Josh Robb:

You do. Things you think about when you become-

Austin Wilson:

That’s right. Or like wipes and diapers.

Josh Robb:

Yeah. Oh, it’s crazy.

Austin Wilson:

Yeah.

 

[18:59] – How to Open a Roth IRA

 Kate Newland:

Okay, so my next topic is IRAs. So, if I wanted to open a Roth IRA, what’s the best way I should go about doing so?

Josh Robb:

Yeah, good question. So, couple rules for the Roth IRA first as we walk through it.

Austin Wilson:

Define it. Individual Retirement Account.

Josh Robb:

Yes. IRA stands for Individual Retirement Account. The Roth IRA, the Roth piece is a newer caveat to the IRA that they allow you to put money in after you’ve paid tax on that money. And then as a result, since it’s already been taxed, it grows tax-free for the rest of the time it sits in that IRA. When you take it out, no tax is owed.

Austin Wilson:

It’s great.

Josh Robb:

So, a couple rules is one, to open a regular Roth IRA, you have to be 18 years or older. So, we’re just going to assume you’re an adult, 18 years old. You can open one up at any time in your life no matter what. To add money to it, you have to have income. You have to have earned income, meaning from a job. So, as a result, you can put in as much as you earn or $6,000, whichever is less. So, if you only earn $4,000, that’s the most you can put in. If you earn $12,000, you can put up to $6,000 in. So, the lesser of the two of those and it’s per person. So, IRA, individual retirement account, each person can have one of these tied to your social security number. So, the idea there though is its money that’s going to be growing without tax forever for as long as you own this. It’s a great vehicle.

So, how do you go about doing that? Pretty much any custodian, meaning where you would hold these accounts, will allow you to open it. It’s very simple. Thus, questions are pretty much exactly the same as any other account type. They just want your name, address, social security number, those type of things. And then the contributions that go in, again, I mentioned you have to have income. The custodian doesn’t know or care. It’s when you do your taxes is where that matters.

So, opening a Roth IRA is pretty simple. You just go to wherever you want to. There’s Fidelity, Schwab, TD Ameritrade. There’s all these custodians out there. Vanguard, like I mentioned, Goldman Sachs, anywhere you want to open an account. The process is very straightforward. Nowadays, online, you can do it. Just clicking a button really quick.

Austin Wilson:

I bet in five minutes; you can have one opened.

Josh Robb:

Oh, yeah. Once you open it, then ideally, you want to link it to a bank account so you can make contributions into it. We always say automating things is great, making those habits in place. So, the best way of doing this is setting up a reoccurring contribution. So, let’s say you want to put 500 bucks a month in. That gets you to $6,000 for the year. That’s a great way of maxing it out. So, you just say, “Hey, every month, I get paid on the first of the month. Hey, on the fifth of the month, move $500 over there” So, you make your monthly contributions in while you’re getting paid. That’s how you do it. And then investing it makes the most sense. If it’s going to grow tax free, you’d love to earn some money on it instead of just having it sit there.

Deciding how to invest it is where an advisor would come in to say, “Hey, what are my goals? When do I think I’m going to use this? What tolerance do I have for the market?” That’s then it would help you decide how to invest it. But the cool thing is if you put in let’s say $6,000 that first year and you just never touch it and then when you’re way out in retirement, it’s now $1 million. You don’t owe any tax on that, because you pay tax on $6,000, but now you have $1 million, and the rest of that money is tax free. So, that’s the cool thing about it. So, the younger you are, the more advantage you have that Roth can give you from a tax-free standpoint.

Austin Wilson:

As far as your investment choices go, if you open up one just to manage yourself, you can really invest in anything you want, whether that be individual stocks, theoretically bonds, mutual funds, or ETFs. If you’re going to be dollar cost averaging, like what Josh mentioned, where you’re periodically putting money in, a very easy vehicle to be doing that is through the mutual fund vehicle where you can buy $500, dollars, not shares a month, and automatically buy the same fund proportionally and automatically reinvest the dividends back into the fund as they come in. There’s a lot of things you can do to make it just go automatically once you set it out.

Josh Robb:

Yup. The big thing is, like all IRAs, they’re designed for retirement. That’s the R in the IRA. So, they have some rules in place that if you touch some of this money before you’re 59 and a half, which is what they’re using for retirement age, there’s some penalties involved. So, with the Roth, there are some caveats. Since you’ve already paid tax, you’re always allowed to take your money back out. So, if you put in $6,000, you could take $6,000 back out and there’s no penalty. But if you ever take out earnings, that’s where they’re going to start penalizing you.

But again, any money you put in there, think, “I should not need this until retirement.” That’s the mindset you should have with a Roth IRA. There’s some caveats there for first home purchases and education stuff, but more often not, we advise or encourage them to try not to touch that. You can only put $6,000 in a year. So, if you take that money out, you lose that chance to grow. You can’t put it back in later.

Kate Newland:

So earlier, we talked about robo-advisors. If I were to open a Roth IRA, should I open it through a robo-advisor or should I go through a custodian? What’s your guys’ opinions on that?

Josh Robb:

It just depends on how involved you want to be. Do you want to be the one choosing what’s in there or do you want someone else to be doing that? That’s really the only difference between the two is if you say, “You know what? I’m not comfortable making all those decisions on my own,” then you’ll want some form of advisor, whether it’s a robo-advisor or a financial advisor or whoever it is. You’ll want someone to help you along the way.

If you say, “You know what? I feel pretty good about choosing my investments. I’m going to find something big and diversified and not worry about trying to be too picky, choosing individual stocks, things like that,” then you could do it yourself and just buy some big index fund that’s buying the whole market and you don’t have to worry about it. So, it just depends on how involved you want to be. There’s really no wrong answer there. Again, it just depends on your tolerance. If you say, “I’m going to be busy doing other things and I don’t want to have to worry about this,” then an advisor, whether it’s a robo or a real advisor, would be beneficial.

Kate Newland:

Got it.

Josh Robb:

But if you say, “You know what? I enjoy this. I would like to be paying attention and choosing and buying and selling,” then you can do it yourself. In that case, you just open one up for yourself. Whereas if it’s a robo-advisor, you’d have to go to wherever that robo-advisor is and open it there. So, just the difference. No right or wrong answer there.

Kate Newland:

All right.

Austin Wilson:

Agree.

 

[25:06] – You Haven’t Made a Financial Plan Before Retirement: What Should You Do?

 Kate Newland:

So what should you do if you are getting close to retirement age and have very little knowledge of the financial industry and have no retirement accounts or investment accounts?

Josh Robb:

Oh, that’s a good question. Unfortunately, that happens a lot. We see that often. By the time people get past all the craziness of life, raising kids, doing all those things, and they finally have time to look around and start thinking, it’s late in life. So, the first thing you need to do is start educating yourself, so you understand the why behind everything. Advisors are great. Financial advisors are great because they can help with that process. But again, if you’re a do it yourself and you’re wanting to just learn on your own, there’s a lot of books out there that provide really good help. There’s one actually sitting right in front of you to help stack your microphone while we’re talking to you.

Austin Wilson:

That is a good book.

Josh Robb:

It’s called Simple Wealth, Inevitable Wealth. Nick Murray’s authored that. But that’s one that it just walks through the reasons why investing matters and compounding is helpful, those type of things, but there’s a lot of really good books out there that just help you understand why. And then once you get the why, you then have to start saying, “Okay, how can I do that? What are the options available? Do I have retirement options at work?” Maybe there’s a 401K there that you just never used that you can start getting into. Or do I have to invest outside of work? Do I have other assets that I can use to help get me started?

Maybe I have rental income from different things and that’s an investment. Just maybe you never looked at it that way to actually start putting your mind around your overall picture. Once you do, you may realize you’re better off than where you really thought. But in general, it’s educating yourself and then just getting a plan. Once you start getting a plan in place, that’ll then tell you the “What do I need to do? Where am I going?” Then you work back to what I need to do now to get there.

Austin Wilson:

I would jokingly say and I say this with all jokes, that if you have no accounts and you’re thinking about retiring, so first of all, social security’s realistically not probably going to do it. Second of all, hope for family money.

Josh Robb:

Yeah.

Austin Wilson:

Marry well.

Josh Robb:

Wanting to retire, once you get your plan, you’ll see what does that look like, because I always say anybody can retire at any time. You just may not like the lifestyle that that affords.

Austin Wilson:

You might live on the street.

Josh Robb:

But the idea there is if you say, “I want to retire soon,” that soon will then be directed by the plan to say, “Well, how soon can I retire if I really get serious right now?” So, you could start at any point in time. What you said about social security is right, is that it’s designed to just cover the minimal so that you’re not destitute, right? Most people use social security as a portion of their retirement, but it should not cover 100% of your retirement. It’s not designed to do that.

Austin Wilson:

The living style would be very low.

Josh Robb:

Yeah, I think the max you can get is like $4,000, something like that. I mean, it’s not a lot per month that you can get out of social security, even if you put the max amount in every year, which means you were a high earner. It means you probably have a high lifestyle standard, which means it’s not enough for you.

Austin Wilson:

Which means you hopefully were saving.

 

[28:09] – How Much Should You Contribute into Your IRA

 Kate Newland:

Okay. So, how much of your income should you be contributing to your IRA monthly?

Josh Robb:

Yeah. So, in general, whether it’s your IRA or 401K or any retirement, the rule thumb was 15%. But because people are living longer, it’s working its way up to 20%. We encourage that 20% number. It goes back to when we were talking about budgeting in our budgeting episode, I said, there’s a 50-30-20 high level budgeting. 50% of your budget should be towards your fixed expenses, things that you have to do, mortgage or rent, utilities, those type of things. 30% goes to your discretionary spending, which is all the fun stuff you want to do or things that vary, so food, things like groceries, eating out, and then that 20% is your savings. So, that’s the high level budget that you can use.

So, that 20% number is the target I think you should use. It really depends on, again, where you’re starting. If you’re young, the more you save, the better it’s going to be. But you don’t have to save as much if you’re just looking at a standard lifestyle and timeframe. If you’re 40 or 50 and just getting started, that saving number’s going to have to be higher, because you’re playing catch up.

Austin Wilson:

You’re thinking 20% pre-tax or post-tax?

Josh Robb:

If you’re putting in a 401K, that’s your pre-tax money. The 20% is really post-tax in that when you look at your budget, you’re budgeting off of post-tax money. So, it’s really 20%. But if you’re factoring in your pre-tax 401K, most of the people use that number. So, you’re somewhere close to there. It’s not going to move the needle too much. But in general, if you’re budgeting using the 50-30-20 and you’re looking at it as your take home, that’s after tax.

 

[29:50] – The Guys’ Favorite Stocks

 Kate Newland:

So, I have one last question.

Josh Robb:

Bring it.

Kate Newland:

What is your favorite stock and why?

Austin Wilson:

We’re going to also reiterate; these are not recommendations.

Josh Robb:

Yes.

Austin Wilson:

Josh, you just knock our socks off.

Josh Robb:

Oh, man. Favorite stock.

Austin Wilson:

Best ticker. Oh, what Josh likes.

Josh Robb:

I love a good ticker. I love a creative ticker. Like for instance, Cedar Point or Cedar Fair, the owner of Cedar Point, their ticker is F-U-N, fun. That’s a great ticker, right?

Kate Newland:

That’s a great ticker.

Josh Robb:

But when I look at favorite stock, I think it’s going to be Microsoft for me. They make a product that people need, and it’s Word, Excel, all the stuff that you want, Windows, everything that you think of in a computer, especially business related. They pay a dividend and they have the new software as a service, which means you have to pay subscription, which means they’re getting money every year from everybody, which as someone who pays it, you’re like, “Ah, frustrating.” But for a company, it’s great revenue.

So, from a long term, they’ve been able to adapt as technology has changed from big PCs to laptops to tablets to be able to take their software and incorporate it. I mean, it’s on my phone, right? It’s everywhere. That’s a company I like. You get non-investment recommendation.

Austin Wilson:

Exactly.

Josh Robb:

I like this stock.

Austin Wilson:

I’m glad I let you go first, because that gave me time to think, because I really had two in my head and I might say them both. I don’t know. I would say my favorite stock right now probably is Amazon.

Josh Robb:

Amazon, because of all the monkeys living together that are primates.

Austin Wilson:

Primate. When you look at what the business does, obviously as a consumer, I love their retail eCommerce business. Now, that’s not a great money maker for them, but from a consumer standpoint, it’s fantastic. But from a money-making standpoint, from a growth standpoint, their Amazon Web Services product is state of the art. It is growing very quickly, and it is extremely profitable. It’s really what the big companies go to when they’re looking for web service products. So, that’s probably my favorite stock. Now, close second, again, neither of these are recommendations, Disney.

Josh Robb:

Disney.

Austin Wilson:

I’ve been bullish on Disney. I like Disney. In fact, I’ve liked it for a long time, but they are the content kings of the world.

Josh Robb:

They have everything.

Austin Wilson:

They own Marvel, they own Star Wars, they own everything.

Josh Robb:

ESPN.

Austin Wilson:

ESPN, Disney+, Hulu, and then with their streaming services. And then you’ve got the parks. The parks are cash generating machines, as Josh knows.

Josh Robb:

Cruise ships.

Austin Wilson:

Cruise ships, everything. So, I like Disney too. It’s not my favorite, but it’s right up there. Those were the two I was going back and forth between.

Josh Robb:

There you go.

Austin Wilson:

Amazon’s mine. Kate, we’re going to turn this on you.

Josh Robb:

What about you?

Austin Wilson:

What is your favorite stock?

Kate Newland:

Oh, boy. I would probably have to say Apple.

Josh Robb:

Yeah, that’s a good one.

Austin Wilson:

You’re an Apple product user.

Kate Newland:

I am an Apple product user.

Austin Wilson:

Sorry, Josh.

Kate Newland:

They know how to suck the money from their consumers-

Austin Wilson:

That’s great.

Kate Newland:

… without them knowing it.

Josh Robb:

Oh, yes.

Austin Wilson:

I know.

Kate Newland:

Yeah. This make a lot of money. They do very well.

Austin Wilson:

Yeah.

Josh Robb:

Yes, they do.

Austin Wilson:

You’re going to get that new iPhone that’s coming out this September?

Josh Robb:

They have a lot of cash.

Kate Newland:

We’ll see.

Josh Robb:

They have a lot of cash too. So, from a stability standpoint, they can ride some volatility without too much worry.

Austin Wilson:

This whole year’s been crazy for the stock market and a lot of stocks are down, down, down, down. Well, Apple is not far. It’s rebounded very well. It’s not far from its all time.

Josh Robb:

There you go.

Austin Wilson:

So again, not a recommendation, but thank you for your opinion.

Kate Newland:

Yup.

Josh Robb:

Yes, good choice.

Austin Wilson:

As an Apple consumer, I mean, I go to the store and eat apples, right?

Josh Robb:

Yes.

Austin Wilson:

Apple product consumer.

Josh Robb:

Ah, there you go.

Austin Wilson:

I live in the Apple ecosystem and I like to poke Josh because he rebels against Apple as he’s looking at an iPad.

Josh Robb:

I have one.

Austin Wilson:

He has one. It’s okay. Well, Kate, that is super exciting. We’re just thankful that you were able to take some time to join us for this episode and we’re thankful for what you do here at the firm for us.

Josh Robb:

Yes.

Austin Wilson:

We just couldn’t do it without you. It’s absolutely wonderful. So, thank you for taking care of all the fun back of the napkin, back end of morning star systems, fun things that you do, because it’s a hard job and you’re doing great at it. So, thank you for what you do.

Kate Newland:

Thank you. Thank you for having me on the podcast.

Josh Robb:

Also, remember, follow us on social media, Instagram, Facebook, Twitter, all the fun stuff for theinvesteddads.com. We try our best to post things on there and we’re getting better at it, I’m going to say.

Austin Wilson:

That’s right. That’s right.

Josh Robb:

We have reels now.

Austin Wilson:

They’re not fake.

Josh Robb:

I don’t know. Apparently, they’re on there. But check them out, join us, and follow us along. And then if you have any questions, like Kate brought some great questions today, shoot us an email and we’d love to answer this for you on a future podcast.

Austin Wilson:

All right. Well, until next Thursday. Have a great week. Talk to you later. Thanks. Bye.

 

Thank you for listening to The Invested Dads Podcast. This episode has ended, but your journey towards a better financial future doesn’t have to. Head over to theinvesteddads.com to access all the links and resources mentioned in today’s show. If you enjoyed this episode and we had a positive impact on your life, leave us a review, click subscribe, and don’t miss the next episode. Josh Robb and Austin Wilson work for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin, or any podcast guest are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions.

Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.