Jason Hartman and investment counselor Doug start today’s show comparing how much money the average 20, 30, 40, 50 and 60-year-olds have in their retirement savings. The numbers and discrepancies are frightening. To finish the show Jason hosts guest Laurence Kotlikoff, William Fairfield Warren Professor and Professor of Economics at Boston University. They talk about how his software, Maxifi, helps people who are planning toward retirement. Laurence explains the intricacies, assumptions that many people don’t make when factoring in their savings.

Investor 0:00
This market specialist was able to tell me the absolute lowest rent they’ve ever rented in a particular neighborhood within a certain parameter. And that number was great. It was within $50 of what they were telling me even record the lowest number to get great return terrific results. And then the other thing about having people applying and keyed up and lined up to rent your properties right away just because that marketplace so huge and so many people, that just gives you a sense of confidence that you’re gonna have a very good cash flowing property without a great deal of risk is going to sit vacant for a month or two months and that sort of thing.

Announcer 0:33
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer, and entre printer who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:23
Welcome to episode number 1209. We’re here with you five days a week. And today we’ve got part two of our guests, Laurence Kotlikoff, the conversation is really interesting. And I brought Doug back for the intro portion with me today because we were really on a roll yesterday on a lot of tangents, talking about the retirement crisis and the real economy versus the Wall Street economy, the real economy versus the smoke and mirrors economy, Main Street versus Wall Street. They are different. And that’s important to know Doug, welcome back.

Doug 1:57
It’s great to be back Jason.

Jason Hartman 1:58
So retired. crisis we talked about arisia. Yesterday, we talked about all of these different things. You were, I think we got off on our last tangent when you started talking about how important it is to think about how taxes will affect you and your retirement plans. Right?

Doug 2:16
Exactly, exactly. Because what we were starting from was an investor pedia article that was talking about savings by decade, in other words, you know, by people who are in their 20s versus 30 versus 40s. And where we took that was some people who I know very well who’ve been successful, and we were talking about how there aren’t a tax bind, because they end up having required minimum distributions or rmds from their IRA. Well, another thing that’s going to happen is that at some point, one of them is going to pass away. And as soon as that happens, they’ll go from married filing jointly to just a single file married anymore, right at that point, their tax brackets go up through the roof. And so how I think that comes back to your tax planning is that You need to a save and invest enough so that you will be able to have a reasonable retirement. But also be do it in a way that you’re not going to get utterly destroyed by taxes. If you end up with enough assets to where you can, in fact, retire in the way you want. Now, there are a number of people like myself, I don’t really ever intend on quote, retiring. I know you never intend on quote, retiring,

Jason Hartman 3:24
retirement is overrated. I could have done it well over a decade ago, but I chose not to.

Doug 3:30
Well, and because a lot of people that you know, when they become permanently inactive, their minds rapidly atrophy. And so I think it’s really important to be engaged in some sort of value generating activity, essentially indefinitely. But it would be really nice if you didn’t have to do it working for the man, you know, so that at some point, you could do it on your own terms, which I think is what you’ve accomplished. That’s, of course what I want to accomplish that that’s what I would assume that most sentient beings would want to accomplish

Jason Hartman 3:59
well Working for the man the man is just all my customers and I love

Doug 4:04
it. They don’t they don’t they don’t bother

Jason Hartman 4:05
me very much. So I like working for the man in my case,

Doug 4:09
except for the fact that tell you that you go on too many tangents and we need to stick to the topic.

Jason Hartman 4:13
I probably do that. But you know, my mind is atrophying I’m getting old. I’m close to retirement. So you know, you gotta give

Doug 4:20
me a pass, folks. I’ll give you a break on this one, Jason. But I think that, you know, in addition to thinking about how much you save for retirement, you also think about how you save for retirement. And that’s actually where you know, because I know that a lot of the conversations you have about real estate and income property aren’t bad at superior performance. Yesterday, we talked about how it’s more firmly rooted in reality, but it’s also very tax efficient. And the intricacies of the tax efficiency can get really, really important when you start getting into some kind of retirement scenario, where you’re trying to carefully manage how much income you recognize for the purpose of calculating taxes. Real Estate Investments give you a lot of flexibility in that regard and a lot of advantages in that regard that most people don’t really understand until quite a ways down the road.

Jason Hartman 5:11
Yeah, right, right. And then they see these beautiful benefits that they get and, you know, really realize how it’s been such a great wealth creator for them. Okay, so let’s look at some numbers of these different decades. And let’s see, you know, how we’re doing now. You know, we’ve all heard this stuff about how people are, are in trouble, but this is sort of a the mainstream population and it’s not tragically bad. I don’t think they’re ready for retirement, but it’s not as bad as it would be. So let’s look at the 20 somethings, okay. They don’t Yeah, they don’t have to think about this too much yet. But how are they looking done?

Doug 5:48
Let’s see. So I think they were saying that the 20 somethings, they typically have a quite a bit of student loan debt and your average monthly student loan payment was around $393. Right? per month, and they were saying that they had an estimated median amount of about $16,000. saved up for retirement. Yeah,

Jason Hartman 6:07
that’s not good. Given given that they’ve got the student loan burden, and that student loan will last for a while, those are long loans.

Doug 6:15
Yeah, they’re gonna have negative net worth for quite a while. And one thing that was actually kind of interesting is semi unrelated but still funny tidbit, I read an article saying that a number of 20 somethings and millennials have intentionally put off retirement savings because they believe that global warming will destroy the planet before their retirement age.

Jason Hartman 6:36
Oh, my God, what a lame excuse that is. It’s like, well, so live it up now. Yeah. Hey, I want to tell one of our favorite millennial listeners, Lisa. Lisa. I didn’t say that Doug did so get on his case. She’s always giving me a hard time making fun of millennials. Sorry, millennials. Hey, listen, I have tons of millennial friends, you know, but you pick on your own generation too. It’s not just me. So

Doug 7:00
Okay, my observation about millennials has been that

Jason Hartman 7:05
you’re almost a millennial yourself. I’m technically

Doug 7:07
a Gen X, but I’m at the absolute end of the table barely

Jason Hartman 7:11
made it in. Yeah,

Doug 7:12
they’re limited in, they have my observation about millennials has been that the best and brightest Millennials are some of the best and brightest people I’ve seen or heard of period,

Jason Hartman 7:22
hey, they had all the advantages. They grew up with computers, and we didn’t

Doug 7:26
get all exactly. But they use millennials as some of the most useless people. It’s period. Well, it’s almost like the extremes are getting more extreme.

Jason Hartman 7:37
It is kind of an extreme thing. And that’s why you can’t stereotype of course, and you know, one of the things that we talked about at the last, not the last meet the Masters, but the one before that, when john Burns was on stage, talked about how, you know, you can’t really even characterize it by these generational cohorts that the demographers use and he likes to do it by decade. You know, if you’re Born in the 60s, if you were born in the 70s, if you’re born in the 80s, the 90s, you know, then because it’s too big of a spread, really, you know, that’s one of the things about it, but that doesn’t really answer the question about the brilliant ones and the useless ones at the same time, too. So,

Doug 8:15
exactly, yeah,

Jason Hartman 8:16
yeah. Okay. However, the 30 somethings doing they’ve got about $45,000 saved, it

Doug 8:22
looks like right 30 somethings are getting a little better. Yeah, one of the things that I said in the article was, and it’s funny because even these articles, they’re all still tilted toward equity investing, saying, Hey, you know, if you’re 30 something, you still have time to weather some downswing. So you don’t have to be too conservative your investment choices, and presumably that’s saying, Hey, you know, you can you know, you can go buy a market index or an aggressive market index, because you know, you have time to go through a few corrections, but that you could also just as aptly say, you know, if you pick up a few properties in the 30s, you have a long time to wait for two year to let those things amortize. It You about 10 you get in your 50s and 60s, those properties to be performing pretty well.

Jason Hartman 9:04
Okay, so let’s just talk about that a moment. This was the big boring idea that we talked about at the last meet the Masters conference, okay? And the big boring idea is amortization. And it is amazing, Doug, I mean, look at there are more sexy and exciting things about income property than amortization. Obviously, that’s why it’s called the big boring idea. But, you know, on some of the graphs that you you did research for, it’s amazing how significant that is when you get into your number 10. So if you’re 30 today, you know, you’re the millennial we’re talking about, by the time you’re 40. And folks, believe me, it’ll be here faster than you think I am amazed. By pretty quick. 20 years goes by really quick to it’s shocking. I mean, I remember

Doug 9:51
you get some calls yesterday will go by even fat. Yeah, I believe in kids involved. It’ll go by fast. There

Jason Hartman 9:58
you go. There you go. So Time goes really fast, you’ll be 40 before you know it, okay? And that amortization really adds to your return on investment. And there’s a hybrid strategy on this because a lot of you like our refi till you die strategy, and I love it myself. I think it’s great. But the hybrid strategy is, and we don’t know how it’ll play out, because it just depends you have to make the judgment at the time and nobody can predict the future. So you might leave your first loan on your property and let it amortize, and refi honestly, second loan to pull cash out, or you might not do the refi to die strategy at all, you might do it on part of your portfolio, not all of your portfolio, you might not do it at all, or you might refi everything and get the refi to die advantage. So it’s either one or the other or a hybrid. You can do a hybrid in between the two strategies, which may well be the best who knows Well, you know, we can only judge at the time in the future. But I’m

Doug 11:04
staying on amortization for just another second. The thing that I liked the most about it is that it has a warren buffett feature to it, which is that it requires absolutely no effort or action on the part of the owner or the tenant. Yeah, it happens by itself automatically, whether you do anything to keep it going or not. And that is truly utterly beautiful. Because Because the you know, as I’ve gotten older, not that I’m old, you know, my kids would say different, but I’ve gotten older, I’ve gotten to where I really appreciate things that don’t have to be complicated. Because you know, right. You know, a lot of times you get people who are, you know, who are smart and ambitious, and they like to think about how smart they are because they can understand things that are really complicated. But if you get things that work and are really simple, that’s excellent, because trying to remember how a lot of complicated things work is really hard to do.

Jason Hartman 12:00
Why

Doug 12:00
simple, it’ll get a lot easier to manage.

Jason Hartman 12:02
A lot of people with advanced degrees are their own worst enemy, you know, or people that are really smart can be their own worst enemy, because some of the best things like income property are really pretty simple. I mean, you can fine tune it and tweak it and make it more complicated. And, you know, I’m guilty as charged over here. Okay, I do that, you know, and we do it on the show. We talked to all about it, but it’s really pretty simple asset class. So overall, now, by the time people get into their 40s, though, this is where they seem to hit the danger zone, right? Because in the article it says, statistically, most Americans are dangerously behind at this point, with an estimated median savings of only $63,000. And now they’re in their 40s. So this is starting to be when it’s urgent, and by the way, I don’t know what you think about this or anybody listening who’s been to our conferences and our other live events and But I would say that our average client who’s buying properties through our network is probably right about their mid 40s. It seems to be that people really, I mean, the ones that wake up and way sorry for the ones who don’t, but the ones who wake up, they usually wake up like in there, right about the time they turn 40. And they think, hey, look, the government’s not going to be there for me. I’ve watched my parents age. I know older people now, you know, Drew, who’s been on the show many times one of our clients and one that’s really teaching people a lot about self management. I was at his house one time and he was meeting this guy for lunch, who was like a retired da that worked with his wife and I said, Well, you’re meeting this guy at Chipotle a for lunch, and he’s like, 75 years old, and you’re like, 30 what are you hanging out with him for? And Andrew said something really funny. And he and he said, Oh, he’s a good friend of mine. You know when you’re over 30 doesn’t matter how old anybody is anymore. That was pretty cool. No, I just thought it was kind of a mismatch. Like that doesn’t seem like your peer group. But yeah, so here we get in danger in the 40s. Right?

Doug 14:09
Well, I would say danger and opportunity. Because 40s typically are when you get into your peak earning years, and in days gone by that they were also the time when your kids if you were having kids, were starting to get to where they were getting toward college age, and they were starting to move out. So in your 40s and 50s, a lot of times is when you can do your most aggressive wealth accumulation if you really focus on it.

Jason Hartman 14:33
Good stuff. That’s definitely the time. Most of our clients come to us. They’re in their 40s. And they want to start piling up income properties. Many of them do, you know, like we’ve had on the show, I mean, Dave and Gina or one of the recent client case study interviews we did and, and they are just piling up a bunch of properties, I think, I don’t know we published that episode recently. I think he said they had 26 stores now and they only started with us, like three years ago. I mean, wow, that’s that’s impressive. really is. That’s pretty rapid. Yeah, it’s awesome. Good job. And we have many other clients that are taking the bull by the horns and really doing good stuff like that. So congrats to all of you. Okay, in the 50s. So now, people in their 50s, what does their picture look like

Doug 15:17
that 117 grand, which is not a ton?

Jason Hartman 15:21
No, not when you’re in your 50s it’s not? Because you are getting really close now.

Doug 15:27
Yeah, you’re getting there and 60s. I think it’s about 172,000, which is really not that much. Because, I mean, again, yeah, it’ll all depend on the rate of returns, you can earn. But even when you’re looking at, say, traditional equity rates of return, which are run 8%. And in my view, I think that’s unsustainable over the long term. That’s topic for another day, but you’re even if at 8% rates of return, you need way more capital than that if you’re going to maintain even modest lifestyle, and that’s assuming that Social Security is around

Jason Hartman 15:58
Yeah, and yeah, While Social Security’s bankrupt obviously we know that but they keep paying for now. So one of the things that is really depressing about this and you know, this article is a financial services industry publication, right. It’s the wall. You know, it’s one of the many mouthpieces for the vast Wall Street conspiracy. Okay. One of the really depressing things is the last paragraph in the 60 somethings. Do you want to read that? I mean, sure. Okay.

Doug 16:28
Yeah. 60 somethings, yeah, median savings for 60. Something says 172,000. Right.

Jason Hartman 16:33
But below that the next paragraph?

Doug 16:35
Oh, yes. Where it’s a debt decade, you can start receiving Social Security average monthly benefit is $1,413 a month,

Jason Hartman 16:43
right. But you passed over the middle sentence, and that’s the one I want people to hear. That’s the one that depresses me. It says most seniors find this meaning social security to be a significant source of monthly income. And it goes on to say that the Average Social Security benefit in 2018 was 1400 dollars per month. Wow. That’s, that’s considered a significant source of monthly income. Isn’t that depressing? It is.

Doug 17:15
Because you think about it. That’ll pay for rent on maybe a C class. C class property.

Jason Hartman 17:25
With one band and

Doug 17:26
yeah, with with one bedroom in the upper Midwest. Yeah.

Jason Hartman 17:31
Well, I can tell you because I own a C class apartment complex in the Midwest. It’s up. Yeah, absolutely. Right. Absolutely. Right. So yeah, that’s pretty sad. Doug, let’s wrap it up and get to part two of Laurence Kotlikoff. closing thought

Doug 17:47
closing thought is plan smart and you’re going to make it

Jason Hartman 17:50
good advice. Let’s go to part two of Laurence Kotlikoff. And here we go.

Jason Hartman 18:02
It’s my pleasure to welcome Laurence Kotlikoff back to the show. He is a professor at Boston University, a very renowned economist who has probably done more study and research on our unfunded mandate problem that we will talk about today. Can’t wait to dive into that again. And he’s also a software entrepreneur and he’s got some great software tools to help planning for all of this stuff. Is the future inflationary deflationary stagnation, airy. And then what do we do about it?

Laurence Kotlikoff 18:31
I certainly would not buy long term US Treasury bonds that are not inflation indexed, right? I wouldn’t mind taking long term corporate bond, I want to buy any bond denominated in dollars beyond a couple years in terms of maturity, and I’ve, you know, steadfastly stayed away from such securities personally, ever since I started seeing this problem. Okay, because I think we will print money and I don’t think it’ll do much for us, but it will happen. Yeah,

Jason Hartman 18:56
okay. So that’s inflationary is sort of a net That sounds like so what do we do about it? I mean, planning becomes even more important. Last time you were in the show, we talked about your software that helps divorcing couples divide assets, which is really quite a bit more complicated than it, it seemed before I took a look at your software. And you’ve got some other software that helps people plan for the future. And in many ways, with a great degree of detail, talk to us about that.

Laurence Kotlikoff 19:26
Yeah, I’ll do that. Let me just say right before I get into that, there’s a website called purple plans.org www purple plans.org, where I talk about what I would do if I were running the country to fix the $239 trillion fiscal gap. fix those 30 how to fix healthcare, how to fix taxes. How to fix banking, anyway. Sure. well.org

Jason Hartman 19:49
Why is it purple? why there was like a mixture of red

Laurence Kotlikoff 19:51
and blue. Okay. Oh, okay. Gotta

Jason Hartman 19:53
go. Okay. calling a Democrat. Okay, good. Okay, so planning for the future. What do we do?

Laurence Kotlikoff 19:59
Well, we each need To have a long term financial plan, I think anybody who’s a grown up would understand the importance of that. But I’ve been spending the last 34 years, actually now it’s number 3035 years, 36 years now,

Jason Hartman 20:14
later than you think, okay,

Laurence Kotlikoff 20:16
it’s now not yet 36 years ago, I started this company, we have a tool called maxify. com. It’s ma exci. Fit calm. It’s a financial planning software tool that helps you figure out based on economics principles, how to have a secure living standard into the future, and also how to safely raise your living standard, and also how to invest your money to limit the riskiness of your living standard. So economics is all about your living standard, because we’re into trying to have you have a smooth level of consumption a smooth lifestyle through time because we don’t want to be partying today and start eating cat food. We’re rolling around Hmm, that’s not our objective in life. Nor do we want to start today and party when we’re 90. We might not even make it tonight we want to balance it out. Right, we have a smooth path, right? So conventional financial planning tools don’t give you a smooth plant path, the first thing they ask you is how much you want to spend in retirement? Well, my answer is I’d like to spend a billion dollars a day in retirement. It’s a stupid question because you know, you can only spend based on what your resources are. Our software realizes that we ask about how much you guys how much you’re earning now. And in the future when you’re retire, how much assets you have regular assets, retirement account assets, and you know, other kinds of questions about your assets, your off the top expenses on housing, so forth. And then we figure out the smooth living standard path per household member. We say, okay, we’ve taken all that information and we’ve used really smart algorithms that I developed based on my Economic Research Program to figure out in about a half a second how much you should spend, such as you can keep on spending it every year for the rest of your Okay, now we have your living standard path. And then the program will Robo optimize that it will look at Social Security benefit collection strategies and how to deal with your retirement accounts so that you don’t pay more taxes and you need to, to get your living standard. From here to here. The software is also dealing with your cash flow issues because your living scanner may not be perfectly smooth. If you, for example, have a big inheritance coming in the future. You’re living standard will jump up at some point when you get that inheritance. So because you can’t borrow against it, so you have the bills to pay like a mortgage and college tuition. You have to have a Living Center down here and it will jump up. So the software is really great in dealing with that issue. That’s very important for about literally, I got

Jason Hartman 22:47
I got I gotta interrupt you because I have a big idea here. You just made me think of something. Remember how they used to sell vehicles, and now they still do light like a life insurance thing I invested in one of those and money on it. It was it was a scam. But here’s another financial instrument Wall Street. Are you listening financial innovation? Here you go. How about a loan against a future inheritance? The millennials would love this. They could eat avocado toast all day long, never be responsible. And then they could borrow against him in the air. It’s it’s like a reverse mortgage, you know?

Laurence Kotlikoff 23:25
Yeah, I think that would happen if the courts would enforce it. Yeah.

Laurence Kotlikoff 23:30
It’s a good idea.

Laurence Kotlikoff 23:32
The legal system around you letting this happen.

Jason Hartman 23:34
Yeah, yeah. Well, and here’s the reason it can’t happen, by the way, because number one, it would be an incentive to kill people. But so is life insurance, really. And number two, basically, if your parents had to contract away the inheritance and could not change their will, or their living trust, you know, then you wouldn’t treat them nicely until the end. So you know, no, that wouldn’t be a very good deal for them.

Laurence Kotlikoff 23:58
Yeah, We’re back to smoothie or living standard, raising it. And by the way, you can tell the program that you think so screening benefits are going to be cut in your taxes raised. So that’s part of the, you know,

Jason Hartman 24:10
the software so you can put in your projected inflation rate, I suppose. Yep, yeah. Okay.

Laurence Kotlikoff 24:15
So the program is going to tell you, okay, here’s how much to save this year. And every year in the future, here’s how much to spend, here’s how much life insurance to buy. So your survivors have to the dollar, the same living standard, and then it’s going to raise your living standard. And then it’s also going to say, Okay, tell us about how you’re investing your assets. So we set up a base plan for how you’re going to invest. And then we compare that with a risky strategy and a safer strategy. And then what we do is we run what are called Monte Carlo simulations, which are we run let’s say, you’re running the program, the software is going to run 500 trajectories of your living standard based on the returns you would get on your assets that you’re holding, let’s say in your base case, then we say okay, Let’s feed all those trajectories. If you’re living, Stan, first of all, we show you what they look like, how spread out they are. And then we say, let’s plug those into a mathematical function that, that trades off, you’re being happier if you get to consume more, but also, you’re being less happy if you’re with the downside risk. So it kind of trades off risk and return and economists as expected utility. So what we do is we show you the expected utility from your base plan from investing in a more risky way, investing in a safer way and you get to buy by playing around with this tool, you get to see what’s the optimal portfolio for you to hold given your degree of risk aversion. Hmm. Interesting. Interesting. reaganomics has been saying to do for decades, really modern portfolio theory and economics started in the 1950s. So we have like 60 years, and this is the first tool that actually is bringing economic portfolio recommendations or Economics portfolio analysis recommendations to the public in a simple [email protected]

Jason Hartman 26:07
That’s really interesting how long you know, it just begs the question, it sounds complicated. How long does it take to input one’s data and set it up? So they can find out the answers?

Laurence Kotlikoff 26:17
Well, the program works like TurboTax. So it’s very easy interface. How many of you copy this still take a look? So it just, you know, first question is, what’s your name? You know, are you married? What’s your spouse if you have kids? So it’s question by question. So it’s a wizard, it holds your hand. And then actually, if you enter the inputs, which might take you a half an hour, if you have your information about your assets may take you a little bit longer. But how long does it take to go see a doctor to have an annual checkup right now, right? At least an hour. So you do this and then you hit, you know, producing a report based case report, and it shows you by holding your hand, here’s your lifetime budget, here’s all your resources. Here’s how much you’re going to get to spend on a lifetime. faces on discretionary spending. And by the way, in the next slide is going to show you how to spend it evenly smoothly. So you have a smooth living standard per household member. And so it’s walking you through the results holding your hand. So it may seem like it’s complicated because it’s designed by an economist, but we actually had real designers you interact with the public,

Laurence Kotlikoff 27:22
not just you ivory tower, folks, right? It’s not Yeah,

Laurence Kotlikoff 27:25
it was this user interface to develop a non economist. Yeah. And so it’s actually a very user friendly was written up about last August in new york times they did a writer wrote an article about what to do five years before retirement, he and it was a big article, and it said, the first thing to do five years from retirement, is to buy maxify planner and run it. Yeah, that’s great. You know what, any other program?

Jason Hartman 27:51
Yeah, yes. You know, what’s kind of interesting about this in talking to you about it is that most of these programs and Reports and projections, and really the financial planning community in general, are built around this concept of frugality. Right, you know, save for retirement. What what I think some listeners might discover this won’t be true for all but you know, maybe a little less than half or so of at least my listeners I got a pretty sophisticated crowd. I think they will discover that they might not be spending enough money and enjoying life enough. You know, that’s that’s an interesting take, right? There’s nobody has done lifetime budgeting for them.

Laurence Kotlikoff 28:31
Yeah, say well, how much do they spend right up to the maximum age of life? We don’t we plan for people to live it to the default values 100. So we’re not focused on your dying early so you need to save more, right? Yeah, the financial industry is engaged in so many different types of product sales efforts when it comes to their software and the way they do their financial planning and has, it really bears no relationship to consumption smoothing to this idea of having a new standard and then safely raising it. It’s actually giving you advice. It’s pretty much the exact opposite of what reg economics recommends. Yeah,

Jason Hartman 29:09
yeah, that’s really interesting. Because a lot of people, though, you know, to just look forward to maybe the great next technology that’s coming for life extension, you know, we might have too much life left at the end of the money, that’s most people will have that problem. But, but then it’s sort of a good problem to have in a way, I guess. But

Laurence Kotlikoff 29:29
there’s a problem. No, yes, sir.

Jason Hartman 29:31
Yeah, yeah. But some will? Well, I mean, I’m just saying it’s good to live longer, right, you know, generally, but some will find out that they really need to enjoy today a little more. I think that’s the interesting thing about this,

Laurence Kotlikoff 29:43
even if they plan to live to 100 or 110. You know, it could change the maximize your life. But yeah, it’s lots of people that are over saving, because they’re overly scared about their finances, but no, no, but we have lots of other people that aren’t under saving because they think so screen is going to be bigger than is they think their retirement account money is gonna last longer, but they forget about the taxes that are due on it. The program is super careful about taxes, and federal and state. Medicare Part B premiums are really a big issue for older people have. And then also, of course, you’ve got all the associated benefits or 11 different benefits is the program calculates,

Jason Hartman 30:21
yeah, yeah, Good stuff, good stuff. You know, one of the things that people need to think about is, when should they start taking their social security? Should they take it as soon as they can? Or should they wait a little longer and get a higher amount? You know, these are all big questions.

Laurence Kotlikoff 30:34
Yeah, the program is optimizing over those choices. So if you say you’re going to pass away at at a program to think differently about if you say that your maximum age of life, you’re absolutely convinced you’re going to die that date and before that date, the program is going to decide, you know, may have you take your benefits earlier, rather than have you wait till 70 you’re going to a much higher number. Probably about 3 million people that can get free spousal benefits of the On their other spouse takes advantage someone early in order to get them going on getting the free spousal benefit, because they’re still grant, your grant grandfathered under the old says treaty law, it was pretty funny 15. And so the software will figure all this stuff out and sit and tell you here’s what to do.

Jason Hartman 31:16
That’s great. So it’s maxify calm, right,

Laurence Kotlikoff 31:18
ma si.com.

Jason Hartman 31:20
All right, Larry, thanks, again, for joining us. It’s always great to talk to you. And we appreciate that just a closing thought on the economy or where it’s going or what people should do anything.

Laurence Kotlikoff 31:30
Yeah, the economy is doing pretty well. But, you know, I’m not seeing a lot of real wage growth, which is what we’re hoping for, because the economy is based, you know, workers have not seen major wage increases for decades. Yeah. 41

Jason Hartman 31:44
years. And

Laurence Kotlikoff 31:46
so even though the unemployment rate is low, which is great, you know, our real incomes are not rising. So we have lots of productivity growth, but it’s not going to the typical worker. It’s going to the super rich Yeah,

Jason Hartman 31:59
well It’s the winner take all society problem that the C class executives are keeping all the money for themselves. And

Laurence Kotlikoff 32:06
there’s another resource called Kotlikoff dotnet called you’re hired a Trump playbook for fixing America’s economy. It’s a book it’s a free [email protected] just download it. There’s a tax reform there. I’ve got a different one I purple plans outward. But the tax reform at this book on this book, which is a game called you’re hired, rather than you’re fired right here, right? Yeah,

Jason Hartman 32:30
I get I get it. I get the reference asked is

Laurence Kotlikoff 32:32
the rich to pay their fair share of taxes by taxing their consumption? So it talks about having a progressive consumption tax, the National

Jason Hartman 32:40
Sales Tax idea,

Laurence Kotlikoff 32:42
yeah, but just for this, the rich, you know, you’re consuming more than, like, $250,000 a year. You have to pay taxes on your consumption.

Jason Hartman 32:50
Yeah. And yeah, that’s work. That’s I’ve always debated that and you know, that’s topic for another show. But would you reduce consumption when you get people that are just hoarders and misers? Then Then I don’t know. You know, it’s

Laurence Kotlikoff 33:02
complicated. The super rich. The reason President Trump has not revealed his tax returns is that he hasn’t paid any taxes. Yeah, this is not unusual for people who were super wealthy and we suppose you,

Jason Hartman 33:15
I believe it. I mean, look, Trump’s a real estate guy, you get depreciation, it’s the best tax write off in the world, right?

Laurence Kotlikoff 33:20
Here’s an even, you know, suppose I’m not a real estate, but I have a billion dollars. What I do, Jason, is I just go borrow, let’s say I have it in stock. Okay, and what my billion dollars worth of stock and the stocks are appreciating, and I don’t wanna selling them because I have to pay taxes on capital gains. So what I do is I borrow against the stock, I pledge the stocks, so I borrow to consume, I can borrow as much as I want against these stocks at a low rate. And then when I die, I leave the stocks to my kids who don’t have to pay the capital gains taxes because basis steps I’m stuck on basis. You know, that’s the way the rich do it.

Jason Hartman 33:55
Yeah, yeah. Well, and they do other things. They have offshore accounts and they have captive insurance. companies and they do all kinds of things that are so complex. It’s it’s, you know, they pay lawyers and accountants hundreds of thousands of dollars a year, if not more, to set up these vehicles because it’s worth it. There’s an incentive, you know, since

Laurence Kotlikoff 34:13
it’s time as our economy will not suffer the rich pay their fair share.

Laurence Kotlikoff 34:19
Certainly the country in general needs tax revenue like crazy. So

Jason Hartman 34:22
well, this is all complicated stuff. And I’d love to debate this more. I do want to have you back to talk about the big con. Okay, so let’s do that for sure. All right, good. All right. Laurence Kotlikoff. Thanks for joining us.

Laurence Kotlikoff 34:33
Yeah, my pleasure. Thank you.

Jason Hartman 34:36
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Jason Hartman 35:17
any episodes. We look forward to seeing you

Jason Hartman 35:19
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