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The Covid Retirement Boom


On a previous podcast, we talked about Unplanned Retirement. You can check it out here:







Unedited Transcript:

Ross Marynell  01:01

man, I feel well well one that's that's quite a compliment for what's actually growing on my face right now. But I do feel like I should be in the movie Super Troopers. I don't know if you've ever seen that movie or not, of course. But look, this is our Halloween. This is our Halloween edition. And we had a little business business group meeting this morning and I did attend his Magnum PI. So I'll do my best to put a little facial hair on but it's a struggle.

Michael Baker  01:31

Absolutely, man. Well, you look you look the part so tell me you had a joke. You wanted to tell me about candy corn? Let's hear it.

Ross Marynell  01:40

So so I don't know if it how many of our listeners follow Mike leach head football coach of Mississippi State on Twitter, but he's a must follow. He's got a pretty dry sense of humor. But sometimes he'll bring he'll bring some funny so he had a great image he said how to eat candy corn. Are you ready? Three steps. One open the bag. To pour candy corn into trashcan. Three eat a Reese's Peanut Butter Cup.

Michael Baker  02:10

My man's so

Ross Marynell  02:12

what's the favorite candy? Halloween candy in the baker household?

Michael Baker  02:16

favorite candy? That's tough because the kids the last two years have come home with a hall of candy. Ridiculous. I would say favorites are probably Reese's Peanut Butter Cups. Can we get little chalk little pieces of chocolate like Hershey's Kisses are great. They love suckers. So like Blow Pops Dum Dums we really don't let them have the gummies mostly because gummy candy tastes delicious. But our dentist hate it. And they were like negative on the gummy stuff. So that typically disappears. But yeah, most of like any of the chocolate stuff any of the suckers that kind of stuff kids are bad at what about you guys 

Ross Marynell  03:10

Yeah, so they love all the hard candy. They're they're the Jolly Ranchers now which is probably just as awful for your teeth as a gummy. And then anything chocolate. So again, neither household we're going to follow Mike Leach's candy corn strategy, over bag, throw in the trash and go get a Reese's cup. 

Michael Baker  03:28

So hey, let's not a way to go.

Ross Marynell  03:32

Is not so let's jump into a couple of things. So wanted to start with this this headline. So if people were paying attention to financial news this week, they might have seen hurts. So if you remember the car company car rental company that fell into bankruptcy trouble last year, bankrupt, placed a big order for 100,000 Tesla cars today. And Tesla's market cap this was according to Barron's gained $175 billion in value from the Hertz order which they calculated at about a $4 billion order. I just thought that was funny because I was pulling up in white charts just looking at hertz market cap and then their overall rental and leasing services category. So this is the rental and leasing services category and white charts with a market cap of all of the businesses that fit that category of $176 billion. So essentially, with this one order Tesla could buy the entire market cap of the the leasing rental and leasing category and white charts.

Michael Baker  04:41

Something smells fishy. It's crazy.

Ross Marynell  04:47

It's it's Wow, that would include like United rentals, u haul Hertz. I mean, there's several businesses there. And so yeah, it's it's quite optimistic that there has to be some assumption that this will be a Continuing pattern that they get fleet orders that this becomes something standard as as rental companies began to transition to EVs, and that that could be possible. But the optimism around that market cap swing is is a little stunning.

Michael Baker  05:21

Yeah. Tesla is one of those companies that I think you know, befuddles a lot of people be like that word befuddles, because like, I've heard it described as a religion. And, you know, we've met people that are all in on Tesla. I've seen charts where Tesla has larger market cap than like the other automakers combined. You know, they got an s&p, so they're listed in the s&p index. Now, there's just a lot of stuff going on there, it's gonna be real interesting to see how that story continues to play out with all these other companies I know are planning to break into the Eevee market will I guess the story will be will Tesla's brand loyalty hold through and continue to spread? When you know Ford has the F 150. Lightning, you know, truck out and a lot of these other you know, companies start producing EVs, we'll see if it's if it's been if it's truly all Tesla, or if it's just people thinking, hey, Tesla is the number one vehicle brand in the game right now. But some of these other some of these other companies are going to be coming on and attacking or going after that market share. So it'd be interesting to watch that for 

Ross Marynell  06:43

sure. Yeah, I agree. That was that was some big headline news this week. Also, a great article came across our desk, it was titled The COVID retirement boom, I thought maybe we could just jump into this a little bit. But the headline from this story this came from, I think, was the St. Louis Fed Federal Reserve. Yep. This is the headline, Michael. So it says, As of August 2021, during the COVID 19 pandemic, slightly more than 3 million people likely retired earlier than they would have otherwise. And so we have experienced this a little bit within our own practice, with a number of people coming to us this year that were within their retirement window. So within, let's say, one to two years of their projected retirement, that we're looking for a good opportunity to set sail from work, and just go ahead and launch into retirement. And a lot of people have picked this year, and in the back half of this year. And so within our own practice, we've seen this, this take root this is seems to be a reality. And in a lot of ways, I understand it, because people have seen their their portfolio portfolios and their net worth rebound from the lows of the COVID draw down in the stock market in March of 2020. It locally where we are in the Carolinas home values have continued to appreciate as we receive people from other states, people moving from places like New York, New Jersey, Illinois, California, you name it, people are kind of coming here, whether it's weather related to get next to their grandkids to pay less taxes. There's a number of reasons but it's push home prices up. So people who are looking to potentially downsize and get into a smaller home or to more of a retirement destination, take advantage of those home prices this year. And I also know and talking with people we work with, people were reluctant to go back to the office and go back to that traditional sort of nine to five existence, they just spent 1618 months out of it. And they don't want to go back. I think like, look, I don't have to go back. 

Michael Baker  09:02

I think that's a big part of it. When you've there, obviously, we're talking about multiple factors here. But I think that a lot of people did not want to go back to the office. I think a lot of people did not want to go back to the commute the pressure of you know, being you know, hemmed in all day. And, you know, I think of companies, some companies have been very lenient with their workforce saying, Hey, we figured out how to work from home. And, you know, maybe they're going to be a little more flexible, allowing people to work from home. Other companies have been itching to get their people back into the office. So I think it's, of course, it's a combination of multiple factors, right? You have people who are, you know, making money still being able to contribute money to their 401 K's the stock market has rebounded significantly So people who remained invested and we're continuing to invest have been rewarded for all of that. And, you know, a lot of people were like, look, I want to know, now if I can make this work. And in some cases, there's probably been people offered severance packages, because companies like they do in the time of economic crisis, companies look for ways to trim fat, they look for ways to downsize their workforce, or, you know, when it's cheaper for them to offer severance packages, and consolidate versus just continuing to have people on payroll, because, you know, they carry insurance benefits and liability insurance and all kinds of other things for these folks. But I think I'm in agreement with you, I think a lot of people, they just started looking at their account balances, they've been at home for, you know, a year, and they just are done. Mentally, they just, you know what, I'm ready. I want to know if I can do this. And so the chart you're referencing, we'll put it up on the website, and in the link to it on the show. But the chart shows a graph of just the trend line for you know, baby boomers, especially in retirement, and there's a little this little blip where it, we have excess retirement. So you know, so they were counting for I think, was it 3 million? Is that what you said? Correct? Yeah, over 3 million people over what would be the normal trend have retired. And I would expect that may even continue into next year, simply because we're not done with this yet. You know, there's still more stuff coming. So I would expect that to I would expect that to continue in my opinion. 

Ross Marynell  11:43

So we know that as the senior staff, right, some of these retirees been in corporations, 3035 years, they have an understanding of how the business operates with our role was they there's going to be a void, that that is going to take some time to fill within those organizations to replace the work that those valuable employees can do. And we're starting to see. So really, we need to see our younger generation step into those roles quickly and get their feet under and because we already have we know we have a labor shortage. We talked about it in the last podcast, we know there's open vacancies across the board. And you're right, I think a lot of these corporations are going to have to bend to to allow people to work a more flexible schedule to be able to fill those positions and retain those employees. But it's going to come at a price. You know we're losing expertise in some of our most key industries. And so how long will it take for us to regain our footing from a labor perspective, and not slip backwards from a productivity standard? Because we are losing some very, very talented people to retirement this year. And it's going to have some level of effect now, how quickly can we get those those jobs filled is still yet to be seen. Right. And that will probably have a large impact on how quickly we get products moving again, hopefully we can get inflation under control, and in get shelves stocked, but we're gonna have a lot of work to move this stuff around. 

Michael Baker  13:21

Yeah, it's gonna take some time to heal. Because there there are many things happening at the same time you have people who've retired, yet people who left the workforce because they they wanted to take care of their kids. And they figured out, you know, what, we actually like homeschooling, or we actually like, you know, our new normal. And so we want to change the routine up and people that have left the workforce and are looking for maybe a job where they can work remote, and they haven't just re entered the workforce yet. You know, there was a lot of stimulus money they got put out, people were given last year, people were given access to their 401k IRA accounts to take a basically a tax free distribution COVID related distributions of the head COVID are, I mean, very broad, like if you had COVID, if you were married to somebody had COVID, if you had to take care of somebody who had COVID, you were eligible to take one of those distributions. And you either could spread the tax liability over three years or you could repay it. So a lot of people were given access to capital that they normally didn't have plus they were given stimulus money. And I think some people just content to say, You know what, I don't want to go back to what I was doing. And I'm going to look for something that's the right fit for me. And then you've got like you said, the the boomers that were ready to be done, but maybe have we're going to try to stick it out another year or two. And they decided you know what, now this is this is the time I'm going to go I do think I do think that this could bear fruit in the long run. I think that there are a lot of younger people who We'll now have opportunities to maybe move up and get promoted, and move into, you know, better paying roles or roles that have more responsibility. And as people move up, that may open up opportunities for some of these millennials to get, you know, better paying jobs, or to move into roles where it's not entry level type employment, but that takes time. And, you know, we're gonna see how companies deal with this, you know, because they're obviously there are jobs available, but they're still not being filled at any, you know, type of exponential rate. So it's going to be interesting to see how this inflection point in our labor market continues to impact things in the years ahead.

Ross Marynell  15:42

I agree. And I would just, I would just say, you know, to, to any folks listening, that are considering retirement or a little earlier retirement than they had normally planned. Sit down and really think through your retirement income distribution plan. How will you bridge any healthcare coverage gaps? If you're retiring before you're eligible for Medicare? What would your retirement income plan look like? How much cash flow do you need? Do you have a pecking order of how that income will be distributed from your savings? Just Button up your retirement income plan have that you're really sort of crystallized. And before you make that ultimate decision, because it does put all of the things in motion that we've been waiting for for 3035 years of working. The other day, you get that last paycheck is the day we you've got to be ready to have your retirement income plan kicked in, in in emotion. 

Michael Baker  16:32

Absolutely. We actually Ross, if my memory serves me correctly, we actually recorded a podcast called early unplanned retirement, where we talked about a lot of these things for people that are being forced into retirement or opting for early retirement. So if you're listening to this show, go back find our episode that we recorded called early, unplanned retirement, I believe that was the title of it, we'll make a link to it as well. But in that that's all we talk about is for folks that are leaving the workforce, early things you need to be thinking about because retirement and your retirement years are definitely different than your wealth accumulation years from from an income perspective. So we want to make sure you get that right. What's next, buddy? What you got?

Ross Marynell  17:14

Well, one, let's just take a quick break and and put a little appreciation on you for spending the first 15 minutes of this podcast. Having pretty serious conversation, we have to look at my face with this ridiculous moustache. I'm very proud of you.

Michael Baker  17:28

I thought you're about to give out a shout out of appreciation to the Atlanta Braves for making the World Series buddy. You know, 

Ross Marynell  17:36

oh my gosh. 

Michael Baker  17:37

Is there nobody in baseball besides people living in Texas that are not pulling for the Braves to win this thing? Especially after the Astros there all the scandal with him potentially cheating and winning the last time around?

Ross Marynell  17:50

Yeah, so my neighbor calls him the Asterix. 

Michael Baker  17:53

Yeah. Well, I thought about that the other day. I was like one I was like, man, it's awesome for this area. Obviously in the Carolinas we don't have a professional baseball team. So many, many of people, myself included, grew up kind of, you know, pulling for watching the Atlanta Braves. And now this The Braves haven't been to a World Series since the late 90s. So this is long overdue for this fan base people out here really like super pumped about it. It's a big deal and I just thought how how appropriate that there's a there's a true villain because I know a lot of people were really upset about the the way things played out with the Astros So Go Braves 

Ross Marynell  18:36

Go Braves it definitely feels like a Braves town. Lot of Braves fans in in the neighborhood and around this area. So we're rooting for you. And I certainly hope that they win. Alright, so we've had some interesting tax proposal talk come up over the last few weeks we've we've held back a little bit on sharing just to see what actually materializes into the ultimate plan. If they get if the if Congress gets pulled together and gets a spending plan passed. So the President was speaking just moments before we began our podcasts. So I was tuning in a little bit to that. But for the first time we well, I mean, recently, because this was just a few days ago, Janet Janet Yellen took the stage and talked about taxing unrealized capital gains. I know that's been around for a little while and resurfacing. I don't know that it has the legs to get into any proposal right now. And I thought just looking at all the tax talk that's been thrown around regarding the spending plan. There was a great article by Clifford Asness. He wrote it in the Wall Street Journal, who said the title of his article was Biden's real tax target isn't the super rich and he goes on to make the case case that a lot of the tax proposals would really affect the higher incoming wage earners, versus the super rich billionaires who make the majority of their net worth through equity. And so we seems like we talk about proposals to tax the billionaires and sometimes just fall right back to taxing the ordinary income earners. Now. It To be fair, we're talking about taxing the very high ordinary income earners. So think about your your sports athletes, or television show personalities, etc, that may make millions of dollars a year that already pay a pretty substantial federal state and local income tax. Any kind of short thoughts on the tax talk that's been circling the last few few days. Regarding the spending plan, Bill, 

Michael Baker  20:59

I don't know if I have short thoughts, I'll try to be my first of all, I will say, this is something that I am coming to believe more and more with all of my being is one of the greatest just miss truths, or lies, outright lies that is being told by everybody in DC, is when they when they pass these monumental pieces of legislation is that they that they're paid for. And that's on both sides, both parties do this. And how can you say something is paid for when the next administration could come right in and change everything, and flip the program around or take whatever you were using whatever mechanisms you were using, and reverse it. And that's just been this tug of war that continues to happen. And I think that's been part of the problem with the Democrats bill, because they've come out and they said that they were going to make sure it was fully paid for. And lo and behold, they can't get there. They can't get there. And that's why these numbers these crazy, just off the wall, not thought through policy proposals when it comes to tax keep coming to the surface. I mean, I can't even go into the ways that I feel like taxing unrealized capital gains of billionaires would be a bad thing. You know, it know that a lot. We only have a handful of billionaires, you know, relative to the overall population. But the way that that policy was being presented was just it was bad policy, you know, when you have good policy, even if we disagree philosophically about what the policy supposed to do, if it's written if it's written well, and if it's good policy, that's one thing when it's just, hey, you know what, here's an idea. And that seems like the amount of thought that went into it. But what I will say is this, you were right, Biden came up today, he's getting ready to leave the country. So they still don't have a deal done. I mean, here it is. It's October 28. They still have not voted on anything. Nothing has happened yet. And they're scrambling because quite frankly, the clock is running out for them to get something done, they can't get something done sooner sooner than later. All of this stuff may or may die, or people are going to have to make difficult votes in an election year. And we both know that that's not one thing that politicians like to do. But I was just reading through a few things, it looks like the Believe it or not, it looks like the increase in the ordinary income tax rate may not be in the bill, the increase in the long term capital gains tax rate may not be in the bill. Even the estate tax exemption being lowered doesn't look like it's going to be in the bill. At least it wasn't laid out today. So I'm really interesting to see the actual legislation when they craft it, and they put it out there. But on the whole, it looks like this is a huge, huge difference. From what we were thinking they might try to pass a couple months ago, we thought they were going for everything increase in increase in the top, you know, capital gains, excuse me increase in the top wage rate, compressing the next bracket to make more people go into the top bracket, increasing long term capital gains, we thought a lot of stuff was going to happen. And I would say this is probably not even going to be a blip for the most part unless they come out with something really different from what he laid out here. So I would say as far as people being worried about that the tax policy, this this shouldn't be anything to be concerned about in my view.

Ross Marynell  24:50

Yeah, I think we is let's wait and see. I don't want to to dive in too much because we don't know what will become a worthwhile discussion. And based on what gets passed or doesn't get passed. And so it's not, it's not great to just stoke the fears of people listening either when we don't really know what's going to happen. And I think it's wise to just be calm and patient and see what actually materializes. But it looks like some of the big talking points are not going to be a part of it, as you mentioned, so I'm not sure how much else we should really share on that topic right now. Maybe just wait and see what happens over the next few days there pull together a spending plan, which potentially could be voted on as early as today, but most likely, probably next week?

Michael Baker  25:30

Well, I think there's I think there's two, I think there's a couple of things that we should make clear. One is, if you remember, there is a bill that is in the house. That's more of the infrastructure bill. And that's the bill that they can't bring. Pelosi has not brought to the floor for a vote. Last time we recorded I don't believe they had the votes. But they're saying they don't want to vote on that bill until they have a bill. Their bill, the House bill in the Senate. And it looks like that bill is the one that Biden's referring to today was the you know, the Wall Street Journal calls it a $1.85 trillion dollar social spending and climate package, which is way off of the three and a half trillion dollar number. So what's going to be interesting to see is if with now the president getting up and basically stumping for this package, if that moves the house to go ahead and vote, or if the House members continue to hold their position that they're not going to vote on the Senate bill until the Senate votes on their bill, because we kind of have that standoff right. But these these are two very different things. One, the bill, it's in the house is more infrastructure related. The one that the House wants the Senate to vote on is just looking at here, a break down of and the Wall Street Journal breaks it down over 500 billion for clean energy climate investments, 400 billion for childcare and preschool 200 billion for Child Tax and earned income tax credits because they want to extend those tax credits for people home care housing, each have 150 billion 130 billion for ACA credits 100 billion a year for immigration. So it's gonna be interesting to see like, if this thing gets carved up more, or if the Democrats you know, as a whole are simply just tired of fighting with each other. And they say, let's just pass these things so we can get some legislative wins before we have to go visit our constituents next year, which I think probably what's going to happen. So I saw this article from Ben Carlson and Ben writes about this kind of stuff from time to time, I've seen it. I've seen it on Michael baton ex blog as well. But it is the title of the articles ownership inequality in the stock market. And so he breaks it down, and it has a few charts. But he says the data is kind of depressing. Where the top 1% now owns nearly 22 trillion in stocks and funds, which represents almost 54% of the total ownership. He says the top 10% owns 89% of the stock in the country, meaning the bottom 90% of people in the country own just 11% of the stocks. And he goes on to break down, you know, financial assets. But, you know, this is one of the reasons why I think people can sometimes think about, you know why there can be a disconnect between what's happening in the stock market and what's happening in the overall Mainstreet economy. And, you know, we we, I should say this, I want people participating in our markets, because I think there are a lot of great things that happen with capitalism is not perfect. There are a lot of bad things that come with. But if you look at the other economic systems out there, I think capitalism, you know, free market capitalism overall, is head and shoulders above the alternatives. But people are not, there are a lot of people that are not participating. You know, we have one of the greatest wealth creation, vehicles out there is the stock market. And I think about this from time to time when I'm having thoughts to myself, but I'm thinking, you know, most people, and this isn't knocking people, but most people in our country are don't have the ingenuity and the genius of a Bill Gates and Jeff Bezos, myself included, right? There's some people out there that they're so smart and they create things and they become extremely, extremely wealthy, wealthy beyond what we can imagine. But the stock market itself allows us regular folks to tap into that. You know, you get to invest and be part of Microsoft story. You get to be part of Apple Store. You get to be part of it. Tesla's story if you want to, you know, and there are a lot of people that for whatever reason, I think could participate in some way, and they choose not to. And we see that bearing out in the numbers. And So therein lies a huge problem, because we have people in our country that while living here is great, and there are a lot of benefits to being a, you know, living in the United States. They're not participating in our economic system. And so when we have policies like tax policy, or, you know, other things, they're two very different worlds. But you know, and so that's, that's a real, that's a real issue, I think, what are your

Ross Marynell  30:40

what do you I agree, the numbers are, are the numbers. And I would say, though, the one thing that's changing, and it may take a little time for those for the stock ownership numbers to pick up steam with our lower middle class, income participants, but it's never been easier to buy a share of stock, you could open up a trading, you know, trading account at Robin Hood, or Schwab, or any any number of platforms, you can buy a stock without a ticket fee, so there's no charge to buy. You can buy fractional shares, if you don't have $1,000, to go buy a share a Tesla, you can go buy a fractional share, and you can get started. So it's it as far as the technology and the access, it's been as easy as ever, for new participants to get started. And we're seeing newer participants come through channels like Wall Street bets, and we go through the Reddit threads and coming up with new and different ways to to attack them market. Some, you know, for financial professionals may not agree with but whatever they're they're out there pushing the buttons and they're trying to be clever, and they're looking for an angle. And at least they're participating. And so it's it's important, it's hard to convince people to do that if the resources are limited, because what we know is it takes time, it takes patience, and consistency. And so for most people, wealth creation through the stock market doesn't happen overnight. And it's it's a yearly, it's a decade, decades long process. If you don't give yourself the time to still allow that to happen. It's difficult to see the true results.

Michael Baker  32:23

I heard, I heard a quote the other day, and I mean, we think is nobody, nobody can create more time, but everybody can waste time. And you know, we tell people, sometimes I say this in workshops, time can be our enemy, or it can be our friend. And there are a lot of people I feel like believe they've been left behind. And so they're either taking one of two paths, they're either I can't get involved, because you know, I don't have the time it takes for the market to work for me, or they're going into the crypto world and they're speculating and you know, wanting to be overnight billionaires. But I would say that there's still there's still lots of time for you to invest even Ross, think about this. Even someone who's 60 years old, who's healthy. And if they, you know, they obviously don't have time to do the wealth accumulation, that you know, a 25 or 30 year old would have. But if they wanted to invest some money, if they're healthy, I mean, their life expectancy is 25 to 30 years, you know, now, if they, if they, you know, weren't expecting to use those funds, but they wanted to maybe put some money aside, and we've, we've, we've seen some people that have had a little bit of money that we've worked, we've, you know, help some people along the way, that they set aside a little piece of money and say, Hey, this isn't for me, this, we're going to invest this, and this is going to be for my grandkids. And you know, they plan on you know, their their grandkids inheriting this money. Obviously, it's there if they need it, but they've set it aside and say, Look, I want I want to invest this money and give it 20 years to grow. And it'd be a gift for my grandchildren when they're, you know, either graduating college or when, when they, you know, inherited from me, whatever, whatever. So, but I saw those numbers, and it did it did kind of just give me pause. Because from time to time people ask us like, what's going on? And there are a lot of people right now I feel like have some angst about the market and what the market is doing, what's going to happen and you know, any day now the shoe is gonna drop. And I'm thinking to myself, well, institutional money, and the top 10% of people in America overwhelmingly own our stock market. And if those people are doing okay, and if those people are still having positive cash flows, yes, there are some macroeconomic risks out there. But you know, you got millennials that are now working and putting money in a 401k I mean, it's, this is a this is a boat that I feel like people should want to be on. And I feel like it could be a mistake for people just pulling out just because of short termism and their own you know, availability bias about like what they think is going to happen because of you know, what's happening in their own world. If that makes sense. 

Ross Marynell  35:17

It does is a good way to wrap for us to wrap up today. It's never too late. You can always come in and participate in the markets. Alright, buddy, I need to go find a sharp razor. It's time to shave. We'll give me a sharp blade and take care of this up.

Michael Baker  35:32

You've been looking at yourself and you're like, I got to get rid of this thing. Oh, it looks good though. Magnum was good though. Magnum P I. Alright. Well, hey, for anyone who, for anyone here has been listening to us. Thank you so much for tuning into the show. Give us a shout the money huddle at VC planning comm if there's a topic you want us to discuss on the show? If not, thank you for listening. And as always, we will talk to you next time.