Speaker 1: Welcome to another episode of the Chicks on the Right
podcast where we talk to our friend and sponsor of
the show, Zach Abraham from Bulwart Capital Management, and today
we are going to talk about a little component of
the one big, beautiful bill that recently just passed and
that Trump signed, and it included this little provision where
every baby born between twenty twenty five and twenty twenty
eight gets a thousand dollars Trump account set up by
the federal government. And what the projections are, at least
according to Fortune magazine, are that if parents chip in
a little bit, maybe a few hundred bucks a month,
that over time, assuming the market does what the market
does when it behaves, that could potentially grow into like
one hundred grand by the time these kids reach twenty
one years of age, and maybe even as much as
two million dollars by retirement. Are those figures accurate.
Speaker 2: Yeah, they are. And it's it's like, behold the power
of compounded interest, right, So they are in Compounded interest
is a really interesting thing because, you know, you think
it's just kind of basic mathematics, everybody can understand it.
But there's been like behavioral studies done on this that
the human brain has a very hard time comprehending compounded.
Speaker 3: My brain on the problem.
Speaker 2: Okay, yeah, no, I I well I most people do.
Most people do, because it's just we live in a
linear world, and you're right, it grows exponentially and it
just kind of throws you off. But I mean, if
you think about this, so you know, if you gain
seven percent a year, get your money doubles in like
tenure in ten years. On thought, if you crank that
up to like I believe, right around ten percent a year,
I believe you're doubling your money every six and a
half years something like that. Seven years. No, it's yeah'd
it'd be seven years. Yeah, because a rule ten, So
flip it around, yeah, seven years. You know, if you
start looking at fifteen percent, it's more like five years,
four and a half, five, five, five and a half
years somewhere in there. And so you start, you start.
It's like the old adage. You know, this one always
blows people's mind. Okay, if I give you, you've got
two choices over the next thirty days, I'm going to
give you a million dollars or I'm going to give
you on day one one penny and we're going to
double that amount every single day. What would you rather have?
Would you have the for thirty days one penny that
doubles every single day, or do you want the million bucks?
Speaker 3: I would totally take the million, which is why I suck.
Speaker 2: And you're like, I just got a million bucks.
Speaker 4: Yeah, sure, I just want to make sure that the
people are represented here, just want to make sure.
Speaker 1: So I am not answering that way is because I've
heard this before.
Speaker 2: Yeah, you know what's funny is and I do this
for a living, and even I heard it the other
day and or I was, I was, I was talking
to one of my kids about it or something, and
I was like, wait a second, is that right? I
had to go back again and just run through the
math real quick because it it just catches you off guard.
But and don't hold me to this, but I believe
the number is right around seven and a half eight
million dollars if you were to double a penny every
single day. So when you're putting those distributions in every
single year, and people are like, oh, the stock market
won't continue to go up over the long run, Yes,
it will, if for no other reason other than just inflation. Right,
Meaning some of the stock markets that went up the
most last year were economies that aren't doing well. Right,
it's inflation, So it's inflation's just driving the price of
it up. But yeah, I mean when you're talking about
starting with one thousand dollars and if you keep contributing,
you know, it's what I tell parents about setting up
wroth iras for their kids, right, Like, if let's say
the kid and God willing, right, let's say by the
time the kid's thirty years old, he can't contribute to
a wroth anymore. But if you've started off and kept
contributing to a wrath every single year, you know, it's
not that difficult to have a wroth. By the time
your kid is sixty years old, it's worth three to
five million bucks. And remember that three to five million
bucks has no tax liability, right, So yeah, it is.
And it's something I just tell young people all the time,
which is just and I know everybody says it and
you get tired of hearing it, but I think that
you and I, but all three of us can agree
that life happens so much faster than you think it's
going to.
Speaker 3: Oh my god, Yeah, yeah.
Speaker 2: Right, and every single thing in my life where I
looked at that and I paid a price at some point,
I look back at it now and I think two things.
A thank god I did and B that price was
nowhere near as expensive as the payout right, like meaning
it delivered multiples of what the price was, right, And
so you know, telling those people, look, it's not complicated.
If you keep sucking a way and you've got a
pile of money that's growing at double digit returns on
average for a long period of time, you're gonna wake
up in the not too distant future and have a nice,
nice stack adult.
Speaker 4: You know, is like, this is probably a really dumb
question because we have a couple like the people, and
I hope they're not listening to this, but our savings
bond's like completely useless?
Speaker 3: Like is that something you would never ever say?
Speaker 4: Hey, as b a baby's born, get them a saving
time seriously, are they are they useless?
Speaker 2: Or well, here's what I would say. I would just say,
the primary purpose for a saving bond like a T bill,
like a money market account, right, is stable return. When
we're talking about a child, right, how like how much
volatility can that kid deal with? Infinite, right, Like it
doesn't matter. So what I would do is I would
just say throw it in you know, the S and
P five hundred, or throw it in the All World
Stock Index or something like that, because, yeah, when you're
the reason that we go down the down the road
to savings bonds and CDs and things like that, is
you know, know your risk podcast right risk management meaning
you know, like I always tell our clients like, oh,
look what what I think is the right portfolio for
you only works if it's a portfolio you can live with, right,
meaning it's got levels of volatility, because if you have
a portfolio that's too risky, what inevitably ends up happening
is when you get a bump in the road, the
people freak out and pull it precisely the wrong time. Right,
So when you were flipping around looking at a kid,
that kid isn't going to need that money for a
really long time. That kid's not checking their account, right,
nobody else is. So literally, what you want to do
in a scenario like that is you want to introduce
as much risk as you possible.
Speaker 3: Yeah, which is fine.
Speaker 1: They always have they always have those age related retirement plans,
like those fun groups for age depending on where you
are in your retirement journey. Yes, they're riskier, and then
they get more less risky the older you get, which
makes all kinds of sense.
Speaker 2: Yeah, And what I would tell people if a little quick,
free piece of advice here if you can, and if
you know what you're doing, Look those funds that you're
talking about. We call them target date or target portfolio funds.
I was actually I worked at a company that was
kind of one of the lead positions in developing these funds,
and I was on a team that actually developed them.
So I'm very familiar with how they were. They sound
really cool. Those funds were invented so investment companies could
take advantage of cash balances. So what used to happen
is about sixty five to seventy percent of people that
contributed to a four oh one K would never actually
allocate the money. It would just sit there in cash. Okay.
So the four oh one K companies got wise to this,
looking around, going, boy, that's a lot of money that's
not getting a fee, right, we got to get that invested.
So they came up with these target portfolio funds, and
the argument was it's a set it and forget it
because the fund is going to adjust you over time. Right,
great in theory. Those funds gained pop popularity in the
early two thousands during a forty year period of time
where interest rates only went down. So interest rates clearly
don't just go down, as we've realized now, they go
up to and when they go up, bonds get slaughtered.
And so what I would tell people is a you'd
be better off just buying again an index fund for
the S and P five hundred and eighty percent and
a US bond ETF for twenty percent.
Speaker 3: The other thing, oh, sorry, go ahead.
Speaker 2: Well the other thing is you're all you'll also save money.
So if you can stay away from those target date
and portfolio funds, do it, use use just regular ETFs
And yeah, don't see much.
Speaker 1: But with these, with these baby accounts, the fact that
it's just like a three year window of kids that
are going to be advantaged in this way, do you
I mean, how do you feel about that? Is that?
Because I feel like there's going to be a whole
bunch of people who are having babies, I don't know,
in January first of twenty twenty nine, who are going
to be pissed that they don't get to participate, right,
Is it just like a is it like a pilot
to see like if this works? And how will they know?
At what point will they know this is a good
thing for America? We should do it across the board.
Speaker 3: Yeah, we have to wait twenty years to see.
Speaker 5: Yeah.
Speaker 2: Well yeah, and that's that's why. Look, I don't I
don't think any of those kinds of things are a
bad thing. Right. For instance, it's so frustrating right now
to me because whenever we talk about solving problems, we're
not really talking about solving problems right when we when
we sit here and have a conversation about the big
beautiful bill or spending or social security, we're not really
addressing any of the issues that are gonna get you know,
that are going to really impact us long term, Like,
for instance, this kid savings program should be part of
comprehensive social security reforms. Right what we should start doing
is doing a savings deal like this, because we know
that kids being born today are not gonna get anything right,
like what we think of social security being today right now?
But hello, the incalcitrant nature of our Congress and the
inability to do anything. You know, the flip side of
you turn around and look at Trump. Oh, Trump's illegally
deporting people. Da da da da da, And you sit
there and go, look, I think even Trump would acknowledge
to you, and he has we need comprehensive immigration reform. Hey,
you're not going to get it. It's not going to
get through Congress. Right, So if it's not going to
get through Congress, what is Trump left to do? He
has to do what he is constitutionally mandated to do,
which is enforced federal law using existing laws. He doesn't
have a choice. And I'm not saying that he's right
or wrong. That's not my assessment. My whole point is simply,
you've got all of these issues that we're currently confronting,
and we throw something. And again I'm not against the
baby accounts. It just frustrates me because I feel like
we're rearranging deck chairs, right, Like, do we need something
like this? Absolutely? And we need it full time, And
we should have more things that incentivize born people And
I don't care what color, just people that were natural
born citizens to have children, right, Like, go look at Europe.
It's not xenophobic. To sit there and say, several of
those cultures are getting ripped apart. And I was talking
to a buddy of mine that's from Greece. He goes,
you walk in downtown Athens, and he goes, and he goes,
and he's Greek, his wife's Argentinian. He's a good buddy
of mine. My wife's black. You know, we're like at
least raist people in the world. And he Goeszac but
it's just a fact. He goes. You walk down downtown
Athens and it's all black. It's all smallies, right, Wow.
Speaker 3: So our birth rate is like way low, yeah, and.
Speaker 2: It's tracking toward Europe's ironically, So if you want to
look at where we're headed demographically. Now, I think there's
still a lot of differences between US and Europe, but demographically,
go look at Europe.
Speaker 3: I mean, that's where we're at it, it's what's coming and.
Speaker 2: And and that's what frustrates me because I'm like, do
I like the idea absolutely? I think it helps for
financial education. I think it gets parents thinking about saving
for their kids. It gives them a start. Also, if
we're gonna get rid of things like social Security, not
get rid of it, but drastically tailor it. You need
to start doing things like this to take advantage of
the time you've got.
Speaker 5: Right, because if we're because if we're talking about kids
not getting Social Security forty years from now, we can
do things that are relatively inexpensive today that'll make it
so they're going to be even better off.
Speaker 2: But what it takes is comprehensive addressing of the issue.
Speaker 3: And I just Congress it's going to do that.
Speaker 2: No, they just know it, and I don't see it
changing anytime soon because it doesn't matter. Trump could come
out and say I have found the secret to living
two hundred years and end poverty right now globally, and
they'd be like, no, no, no, no, that's Orange yeah
and Marlago and you know, yeah, so and then to
be fair, right, there's plenty of people on the right
that would spurn any idea coming out of the left.
It's just hard to take any of those ideas seriously
when they're telling you when a man can decide he's
a woman and just walk into a lasta you know
what I mean. So it's like they're like, well, that's compromise,
and I'm like, well a compromise between here and insanity
is still insane, right, So you know I need you
to put on your basic human hat or order for
us to.
Speaker 4: Have It'll say, interesting though, to see, like in the
next fifteen to twenty years, what happens to those accounts though,
even though it is a three year kind of a test,
if you will, and Trump and his well, his fan
if he's not around to see it, but his family's
run to see it'll be like that was kind of
part of his legacy.
Speaker 3: Which is kind of cool.
Speaker 4: And yeah, and that's part of his deal, is he
wants it to be part of his legacy, which is
also kind of cool.
Speaker 2: Yeah. Well, and like I said, that's that's why I
and that's what I hope this is. I hope and
it seems logical to me that this would be the case.
But I hope this is kind of the first salvo
in the attempt at approaching this social security issue, in
the long term debt issue and the demographic issue, the
negative birth breaker. If that is part of it, and
there's more to come, I love it. But to your
guys' point, you know, if it's just three years, I
don't really it'll be good for those kids. But I
don't really see what it would make it diffen. It's
really large, you know.
Speaker 4: Yeap, I need to make sure our middle kid hurries
up and has a kid in the next three years.
Speaker 1: I get them on and that came on the stick. Well,
these are the kinds of things that we know we're
going to get good information from you about. And you
also offer people information in different formats like your webinars
that you have once a month or even more often.
I think is it once a month on four?
Speaker 3: Yeah?
Speaker 1: Okay, yeah, but you ask us to daily doses of information.
How do people get in on that?
Speaker 2: Yeah? So we do every day do our Daily Dots show,
which is try to keep it between twenty five thirty
five minutes where we discuss everything pertinent that happened that
day in the world of economics and finance and politics,
if it, if it intertwines, and you can find that
at Know Your Risk Podcast. We're on YouTube. You can
find the video feed there. You can go to Know
Your Risk podcast dot com. You can sign up for
the free webinars at Bolwarkcapitalmanagement dot com which I think
you didn't you guys attend one? Did were you one?
Speaker 3: Or no, no, webinar.
Speaker 2: Did I know, we just did one on one consultation.
Speaker 3: Yeah, we have one consultation. Yeah, you're just my guy.
Speaker 2: Well there you go, there you go. That's right right
back at you, lady, right back at you.
Speaker 1: Yeah so much, Zach.
Speaker 3: We appreciate it.
Speaker 2: Yeah, always, thanks for having me fun as all.
Speaker 4: Thank you.
Speaker 2: Investment advisory services offered through Track Financial LLC and SEC
registered investment advisor. Investments involve risk and or not guarantee
past performance.
Speaker 3: Doesn't guarantee future result TREKT twenty four, two forty four