Speaker 1: Joe Larsgard, who is host of how to Monday, how
Speaker 1: to Money Sundays twelve pm to two pm here on KFI,
Speaker 1: and his social address at how to Money.
Speaker 2: Joel.
Speaker 1: Good morning, Joel, morning Bill. We're such happy campers. Here
Speaker 1: is a story. And the way it works is because
Speaker 1: I'm incredibly lazy. I don't come up with the stories.
Speaker 1: I ask Joel, Okay, what do you want to talk about?
Speaker 1: What's in your wheelhouse? And if I like it, we
Speaker 1: talk about it. If not, I say, now we're going
Speaker 1: to do something else. In any case, a story about
Speaker 1: Amazon that one in eight wardrobe purchases comes from Amazon.
Speaker 2: Now a quick aside.
Speaker 1: I happen to be married to someone who lives for
Speaker 1: buying from Amazon and buys clothes, and we'll buy three
Speaker 1: different sizes and fifteen different colors.
Speaker 2: And returns ninety percent of the boxes.
Speaker 1: And and I'm serious, I had to get an extra
Speaker 1: garbage pant. I had to get an extra one of
Speaker 1: those garbage cans just for recycle because of the boxes
Speaker 1: that I have to take apart and put together.
Speaker 2: I mean, it's crazy.
Speaker 1: So the point is it's costing us all money.
Speaker 2: But how is that possible?
Speaker 1: Because I'm paying for you know, the Amazon Prime, and
Speaker 1: I get free obviously, free returns, et cetera.
Speaker 2: So how does it cost you money if I'm paying
Speaker 2: for it?
Speaker 3: Yeah?
Speaker 4: All right, So that's a good question, and one your
Speaker 4: partner is not alone in that Amazon obsession. And it's fascinating,
Speaker 4: like this status came out that like, people buy way
Speaker 4: more clothing on Amazon than they even do at Walmart, right,
Speaker 4: and think about Walmart has these physical stores and an
Speaker 4: online presence all around the country, and people are buying
Speaker 4: more than twice as much on Amazon than they are
Speaker 4: via Walmart, both physical and online. And so it's just
Speaker 4: it's crazy to think about that. And Okay, how why
Speaker 4: is this costing us money? And I think it's exactly
Speaker 4: what you refer to with the Amazon Prime. It's like
Speaker 4: frictionless and people are like, I mean, I wasn't planning
Speaker 4: on buying a new skirt or a new T shirt
Speaker 4: or some shorts or some socks or whatever it is today,
Speaker 4: But my goodness, it's so easy. And I was on
Speaker 4: Amazon anyway, and it feeds me, It fed me this thing.
Speaker 4: It popped up and I'm like, yeah, I was about
Speaker 4: to check out, but yeah, I guess I could use
Speaker 4: some new socks, throw them into the cart, you get
Speaker 4: them shipped to your house, and for most people, amazing
Speaker 4: if your spouse actually does make those returns, Bill, I
Speaker 4: have to make the returns at my house because nobody
Speaker 4: else is doing it, and sometimes if I don't do it,
Speaker 4: it doesn't get done and you're stuck with that.
Speaker 3: Good.
Speaker 4: So, I just think that frictionless reality that Amazon has
Speaker 4: created in so many of our lives has led to
Speaker 4: just consuming more, buying more stuff, and buy stuff that
Speaker 4: we otherwise wouldn't have bought.
Speaker 1: Okay, fair enough, But how again, I'm going to ask
Speaker 1: the question, I am paying for the service of being
Speaker 1: able to return, how does it cost me? Or how
Speaker 1: does it cost you money? Because I'm doing it and
Speaker 1: paying for it.
Speaker 4: Okay, so when you're making those returns, it there's a
Speaker 4: cost to the retailer.
Speaker 3: Right.
Speaker 4: So even if you're buying stuff and let's say your
Speaker 4: spouse buys in a bunch of different sizes, a bunch
Speaker 4: of different colors and says I'm probably gonna keep twenty
Speaker 4: percent of it.
Speaker 3: And I'm going to return the rest.
Speaker 4: Well, the return looks like it's free for you if
Speaker 4: you drop it off at the right place, you jump
Speaker 4: through the right.
Speaker 3: Hoops, and you have a package correctly.
Speaker 4: But and so that feels all nice and good, but
Speaker 4: it's obviously it's put into the price of the items
Speaker 4: that we're buying. So everything that we buy costs more
Speaker 4: because of the friction list returns also that we're able
Speaker 4: to get. And it is nice where it looks like
Speaker 4: it's free, but it is. Of course, it's functionally put
Speaker 4: into the price of the goods that we're buying.
Speaker 1: Yeah, mean, that makes sense, But that's second, third tier
Speaker 1: down the road, and it just sort of disappears. And
Speaker 1: let's say I'm buying a twenty dollars item where twenty
Speaker 1: dollars normally would am I? Am I paying twenty two
Speaker 1: dollars for it? Is it a substantial amount? Is there
Speaker 1: real money involved in this?
Speaker 2: Yeah?
Speaker 3: I mean I think so.
Speaker 4: There's Actually there's another interesting story I saw in the
Speaker 4: New York Post this week, and what they were saying is,
Speaker 4: like the way that people in the United States have
Speaker 4: gotten accustomed to making returns, many of them have gained
Speaker 4: the system. And so it's not even just the fact
Speaker 4: that you can return something you decided you didn't want.
Speaker 3: It's that people are.
Speaker 4: Saying are essentially trying to cheat the system, returning stuff
Speaker 4: that they otherwise wouldn't be able to return. Some people
Speaker 4: are taking items out of electronics, returning the now unusable,
Speaker 4: unworkable electronics, and retailers aren't catching it. And so I think,
Speaker 4: what this is what's going to happen because of fraudulent
Speaker 4: returns and because of the growing number of overall returns
Speaker 4: which which eats into the bottom line of retailers. I
Speaker 4: believe in the very near future, similar to dynamic pricing
Speaker 4: for tickets that we buy, you're going to have like
Speaker 4: dynamic return policies. So there's gonna be one return policy
Speaker 4: that Bill Handle is held to, and there's another return
Speaker 4: policy that I'm held to by certain retailers based on
Speaker 4: the way I have returned goods that I've purchased from
Speaker 4: that retailer in the past.
Speaker 1: Well, so it's interesting, and again this is because of
Speaker 1: my experience here. When a product is let's say you
Speaker 1: return a product that's defective, it's the honor system because
Speaker 1: you're returning a product you don't like it, and so
Speaker 1: you call the retailer and they say keep it. Just
Speaker 1: keep it, well, refund the money, just keep it. And
Speaker 1: it really is an honor system. It's much like you
Speaker 1: know at offices where you have those little boxes of
Speaker 1: candy bars and snacks, where they say it's a buck
Speaker 1: and it's the honor system. There's no way to check.
Speaker 1: And I'll tell you what I do, and people have
Speaker 1: seen me on the show. What I do is I
Speaker 1: grab a candy bar and take money out of the box.
Speaker 3: See you're the problem. You're the problem here.
Speaker 2: See okay, good enough, Joel.
Speaker 1: We talk a lot about retirement because, first of all,
Speaker 1: you you rightly are concerned about.
Speaker 2: It, because it is no fun being old.
Speaker 1: No one wants to put the address of a dumpster
Speaker 1: when receiving Social Security checks. And there is a general
Speaker 1: rule of four percent. I mean, at the end of
Speaker 1: it all, when you retire, you should pull out four
Speaker 1: percent of your savings, retirement plan, etc. And that theoretically
Speaker 1: keeps you going forever until you die. Actually, the secret
Speaker 1: is to know exactly when you're going to die, and
Speaker 1: if you can calendar it, you spend all your money
Speaker 1: until that last day.
Speaker 2: That's the magic.
Speaker 1: But let's talk about that four percent rule because frankly,
Speaker 1: in my life. I'm looking at the five percent rule
Speaker 1: and I plan on doing that with my retirement when
Speaker 1: I do, so, tell me what's going on and tell
Speaker 1: me how wrong I am.
Speaker 3: Yeah.
Speaker 4: I mean, if you go see a psychic, you're right
Speaker 4: and you can find that exact date of death. It's
Speaker 4: so much easier to plan for retirement. But because we
Speaker 4: can't or I haven't met anybody that can accurately predict
Speaker 4: that yet, kind of have to like do your best
Speaker 4: and go buy rules of thumb. And this four percent
Speaker 4: rule of thumb has been around now for many decades.
Speaker 4: And this guy, Bill Bengen, he did like a bunch
Speaker 4: of studies about market returns and inflation and longevity, and hey,
Speaker 4: how long will you pull your portfolio last your entire
Speaker 4: retirement if you're drawing down four percent of it? And
Speaker 4: that's basically what was the magic number that he found
Speaker 4: was like, with inflation and potentially inconsistent market returns, the
Speaker 4: vast majority of people are going to be okay taking
Speaker 4: four percent of their overall portfolio out every single year.
Speaker 3: And and so that.
Speaker 4: Has been kind of it's interesting because it got rounded
Speaker 4: down even the original rule he had found that it
Speaker 4: was like four point one five percent, but he rounded
Speaker 4: it down to four just because it was it's gonna
Speaker 4: stick in people's minds better. Well, he has gone back
Speaker 4: to the drawing board and ran more numbers, and you
Speaker 4: said five percent. Actually it's closer to five percent now,
Speaker 4: according to Bill Bengen, he says, four point seven percent
Speaker 4: is what you can more likely take draw down from
Speaker 4: your portfolio every single year in retirement and not run
Speaker 4: the risk of exhausting it.
Speaker 2: Yeah, and that leaves, and then the principle is left.
Speaker 1: You start with a million dollars, you pull out five percent,
Speaker 1: that's fifty thousand dollars a year. Add so security to that,
Speaker 1: let's say three thousand dollars a month. Now you're an
Speaker 1: eight thousand dollars one hundred grand a year. I mean,
Speaker 1: you're going to be fine at one hundred thousand dollars
Speaker 1: a year. I mean that really, you can really do
Speaker 1: a nice job with your dumpster at one hundred thousand
Speaker 1: dollars a year. But you know the other issue. I
Speaker 1: talk to some money people and they say, you may
Speaker 1: want to take out more initially because at the end
Speaker 1: of your life, as you get older.
Speaker 2: You're not going to spend as much money.
Speaker 4: Well, that's the other thing. There's so many things to
Speaker 4: factor into this. That's why this is also like a
Speaker 4: rule of thumb, not an actual hard and past rule.
Speaker 4: And there's just so many different things that that people
Speaker 4: have to consider when they're trying to figure out, well,
Speaker 4: how much will I need for my retirement portfolio.
Speaker 3: I think this is good news on a couple fronts.
Speaker 4: If you can delay social Security, it means you need
Speaker 4: even less because you're going to get a bigger Social
Speaker 4: Security check. And on top of that, it means you
Speaker 4: actually might have to save up less than you think.
Speaker 4: I mean, sometimes people get those numbers from the retirement
Speaker 4: company commercials, the broker's firm, saying your magic number is
Speaker 4: four million dollars, that's how much you need to save up,
Speaker 4: and I think it boggles people's minds and like, I'm
Speaker 4: never going to get there. And when you realize that
Speaker 4: you can take a larger percentage of your portfolio every year,
Speaker 4: you know, keep most of that principle intact, and survive
Speaker 4: retirement incredibly, well, then it means you can, instead of
Speaker 4: trying to save up more and live life high on
Speaker 4: the hog with just more money coming in, you can
Speaker 4: just deprioritize how much you need to have in reserves
Speaker 4: when you reach retirement, which might sound like terrible advice
Speaker 4: from someone who wants you to have a great life
Speaker 4: in retirement, but for a lot of people, what that
Speaker 4: means is skimping out on life in the here and now,
Speaker 4: spending less on these of release. Yeah, and so you're
Speaker 4: investing so much for those future years, and then you're like,
Speaker 4: am I actually going to be alive to enjoy them?
Speaker 4: So I think this should give people a little bit
Speaker 4: of a sigh of relief. Yeah, maybe I can spend
Speaker 4: something close to that upper four low five percent range
Speaker 4: in some of those retirement years, not run out of money,
Speaker 4: and not feel like I have to break my back
Speaker 4: during those working years to a mass even more than
Speaker 4: I actually need.
Speaker 2: Yeah.
Speaker 1: My mother died at ninety eight, and her retirement plan
Speaker 1: was terrific. She ran out of money when she was
Speaker 1: about eighty five, but she had a secret retirement plan
Speaker 1: named Bill Handle and let me tell you when you
Speaker 1: know what. When she passed away, I became fairly wealthy
Speaker 1: because I didn't have to pay one hundred thousand dollars
Speaker 1: a year to support her. But hey, that's the other issue,
Speaker 1: and we'll do that probably in the next few weeks.
Speaker 1: If you need care in your elder years assisted living,
Speaker 1: you are screwed beyond unscrewed.
Speaker 4: Oh that's another subject for another day. Is long term
Speaker 4: care insurance and when does it make sense? Because it's
Speaker 4: quite expensive and the average person doesn't have the money
Speaker 4: to fund a long term care plan because of how
Speaker 4: expensive they gotten. The premiums have gotten out of control,
Speaker 4: and for some people it's necessary, but for others it's not.
Speaker 3: So we could definitely talk about that one of these days.
Speaker 1: Yeah, my mom lost it at ninety three. She was
Speaker 1: in so serious de men. She didn't know where she
Speaker 1: was and I kept her at that place. I should
Speaker 1: have put her on the sidewalk. She wouldn't know the difference.
Speaker 2: Okay, we're done, John, damn right.
Speaker 1: I am Joel this Sunday twelve to two pm here
Speaker 1: on KFI. He's at How to Money, Joel. Catch you
Speaker 1: over the weekend, Joel, Take care.
Speaker 3: Thanks Bill,