This week, we’re talking about retirement planning with Joe Saul-Sehy, co-author of Stacked and co-host of the Stacking Benjamins podcast, and Brenton Harrison, financial planner.
In week one of this two-week discussion, we cover:
- The basics of tax-advantaged retirement accounts — and why Roth IRAs may be particularly attractive to the resource-thin.
- Similarities and differences between target date funds, index funds and ETFs.
- Time horizon & risk tolerance.
- Why investor behavior is often more of a concern than investment fees.
- Socially Responsible Investments and ESG investing.
Listen today, and be sure to subscribe to or follow the podcast to join us for next week’s episode when we’ll be covering things like annuities, life insurance, ABLE accounts and finding the right financial advice when you’re raising an autistic child.
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Show Notes
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Get Stacked: Your Your Super Serious Guide to Money Management by Joe Saul-Sehy & Emily Guy Birken
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Listen to Brenton’s previous episode with Jillian Zacks, Esq. on Supplemental Needs Trusts
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Full Episode Transcript
Brynne: Welcome to Mom Autism Money. This week, we’re talking about retirement planning with Joe Saul Sehy and Brenton Harrison. You’ll remember Brenton from season one, episode two, where we talked about supplemental needs trusts. He’s a financial advisor who spent over a decade, empowering people to take control of their money.
He teaches strategies for overcoming the burden of debt, juggling family and money, and establishing a financial foothold for those who were never taught the principles of financial literacy. His work has been featured in publications such as Business Insider, USA today, CNBC and Forbes. Brenton and his family reside in Nashville, Tennessee.
And Joe is the creator and cohost of the stacking Benjamins podcast and co-author of Stacked: Your Super Serious Guide to Money Management. It’s a fun, approachable book that teaches you the basics of building a solid financial foundation with a good chunk of the book, actually dedicated to investing for the future. And in the show notes, there’s actually a link for the book and it’s an affiliate link which helps support both Joe and this podcast.
So Joe was a financial advisor for 16 years and has represented American Express and Ameriprise in the media. He is a current board member at large of the Plutus Foundation and former board president and board member of Partnership for the Pathway. The Stacking Benjamins show was called the best personal finance podcast by Kiplinger and Lifehacker has listed the shows as one of the top 10 and 2021. Joe and the Stacking Benjamins team have won five Plutus awards and the academy of podcasters best business podcast award. The stacking Benjamin show is created in Joe’s mom’s basement in Texarkana, Texas, where Joe lives with his spouse, Cheryl and their cat Cooper.
We actually split this episode into two because our conversation was so great, we had trouble stopping. So in today’s episode, we’ll be covering taxed advantage, retirement accounts — the basics kind of 101 stuff, things like why Roths might be a more comfortable match if you’re resource-thin. We’ll talk about target date funds, index funds, ETFs time, horizon, risk tolerance, investment fees versus investor behavior.
And we’ll also delve into socially responsible investments for a little bit. So we pack a lot into a short period of time. And when we come back next week, we will all four of us be talking about annuities, ABLE accounts and how they may or may not fit into a retirement plan, the super important topic of life insurance.
We also talk about how to find the right financial advice when you’re raising an autistic kid. So that’s all stuff we’re going to talk about next week. And this week, next week, this is true every week, but anything you hear us talk about today is not meant to be financial or investment advice for your personal situation.
In fact, in this episode, we talk about how important it is, especially for us as parents of disabled kids, to sit down with a certified financial professional to address the nuances of all of our personal circumstances. So anything we say today is for entertainment purposes only. Though we do hope it will inspire you to research and reach out to professionals who can help you get on the best path towards your own unique financial future.
All right, let’s talk to Brenton and Joe.
(whooshing sound)
Brynne: All right, everyone. Welcome to Mom Autism Money. We are going to be talking about retirement planning when you have an autistic kid today. And Joe and Brenton, I’m just wondering if you can tell us a little bit about your experience in this space.
Brenton: Well, you know, mine kind of came, I would say by accident.
Uh, I’m a financial advisor in the Nashville area, work virtually. But when I started in the industry, I was not at a large shop and I wasn’t really in a position where I was working with a consistent clientele of people who had had financial advisors or had a team of people around them who were helping with legal problems there or anything like that.
Most of my clientele were people who had never been in a position where they’d had professional advice. So as a result of that, when you are the advisor and they’ve never had an attorney, they’ve never had a trust company help them. You end up having to be the one to kind of figure out all that stuff on the fly.
So early in my career, in many situations, I found myself trying to figure out, okay, what exactly does this person need? Let me try to be the resource or the conduit, because trust, especially in this community is hard to come by. So when you have someone who’s looking to you, they’re not necessarily going to easily trust four or five other people.
They’re looking for that one person to try to coordinate things. So I became that person and through the course of being in those situations over and over again, over a number of years, you start to develop some capacity. So that’s how I got into the space.
Joe: Yeah. And I’ll second what Brenton’s saying about just the mess of different advice that’s out there.
There’s so much, uh, frustrating advice because especially when it comes to how to make sure that your, your investments are protected. There’s lots of people selling products that really just want you to buy whatever their product du jour is. So I was a financial planner for 16 years before moving over to the financial media space.
Initially that wasn’t my goal. My goal was to sell my company when I was 40, because I had a friend who said that he liked being a financial planner, but he didn’t love it. And he had other mountains to climb. And that really resonated not just with me, but with a lot of other people, especially when, after he left our company.
It turned out. He was — that wasn’t a euphemism, like he, wasn’t doing some analogy. He went and climbed Mount Everest twice and climbed most of the tall peaks around the world. And he’s just been such an inspiration. So at 40 I decided that I would sell my financial planning business and I would become a high school teacher and a track coach could do what I love to do because those were my mountains.
Well, during that time, as I was taking classes, I was in shorts and a t-shirt teaching people about money online. That blog grew into a podcast, which became the stacking Benjamin show. We’ve been doing that now for a decade. So I get to teach money stuff, but especially in this area, I think it’s incredibly important to have good advice.
There’s so much to know most of the advice that I see out there is kind of, uh half-truths so putting together a cohesive plan, I agree with Brenton is pretty hard.
Brynne: Absolutely. Absolutely. So when we’re talking about saving for retirement, one of the first tools that you want to turn towards, generally speaking, at least, are those tax advantaged retirement accounts.
Things like 401(k)s. If you work in education, which a lot of women do, or nonprofit spaces, you might see something more like a pension or a 403(b). Self-employed, you might have a SEP IRA. And I’m wondering if you can tell us a little bit about what those are, how they work and the pros and cons of each.
Brenton: For the typical person, I try not to get into the details of like, oh, the 401k versus the 403b versus the backdoor Roth IRA. To me, I would rather people know the core principles. When you put money into a traditional retirement account or a Roth retirement account, one of the biggest things that you have the benefit of is as the money grows, you don’t owe taxes on it year after year after year.
So when you’re comparing that to some other forms of investments, that’s a really big deal. Hey, if this account started at a dollar and it grows to a million dollars, I don’t owe any taxes on it until either when I was putting the money in, in some situations or when I was taking the money out.
So it’s a way to have money growing without getting nickel and dimed along the way that can be really beneficial. Now when you have access to all those accounts at work, regardless of the type, one of the benefits that you have is payroll deduction. To me, when you strip, you know, human behavior down to its most simple form, we forget about things that are automated.
So when you have someone who’s trying to save and the payroll is being deducted, Hey, this is coming out of my check every two weeks. After a certain period of time, you just start to spend around it. And that in most cases, is a lot easier to do than having to have the self-discipline to say every two weeks, I am going to manually put money into an investment.
Joe: And I absolutely love that because of the fact that so many people, they will get into the nitty gritty of this. And they’ll look at the fees in an account, or they don’t trust their employers. So they won’t want to put it in through their employer, but Brenton nailed it. The key to any wealth building is automation.
It’s not discipline. Everybody talks about discipline. It’s not discipline it’s automation. Save your discipline for things that are going to help you with your family, with things you value, with your work, whatever it might be. This is all automation. I will — there’s one distinction I think people are going to need to know as we dive into some of the programs that are out there, a lot of the plans out there are what are called defined contribution plans.
And some are called defined benefit plans. Brenton, I don’t know about you, but I hate these terms. We just, we start getting into spaghetti, but you really got to know the difference between these two. And it’s really easy. Defined contribution just means this: you know what’s going in. Which means we’re not sure what’s coming out.
What’s coming out depends on how you invest it, what you do. So when you hear defined contribution, that means that X amount that we’ve defined is going in. And then we invest it. Defined benefit is the opposite. We generally, sometimes we’ll put money in ourselves, but a lot of time an employers’ putting money. We’re not really sure how much is going in, but we know exactly what’s coming out.
And the reason that’s important is a lot of times money coming out of a pension won’t count in some of these calculations. So defined benefit plans sometimes won’t count where sometimes defined contribution plans like the 401k, 403b, SEP IRA, where you’re taking your money, you’re putting it in — sometimes those will count. So I think that’s, man, that’s spaghetti, but I think that’s a distinction you gotta know.
Brynne: Absolutely. If people aren’t offered those accounts through work — when you have a disabled child, maternal income tends to go down. The gap actually doubles when that disability is autism. And so we have a lot of moms who aren’t necessarily able to work within a traditional work environment.
They may be working for themselves from home. They may be working part time. And so what we end up seeing with that is a lot of people who maybe aren’t offered these retirement accounts through work. I think on that end, is that where we start looking at the Roth accounts? Is that where we start looking at IRAs, whether they be Roth or traditional?
Joe: Yeah, I think so. And the frustration here obviously is that the amount of money you’re allowed to put in these plans requires that you actually make at least enough money to show it on your income taxes, to be able to put that amount in. So traditional and Roth IRA, definitely where you go.
For most people, I think the Roth is better for two reasons. First of all, it’s never going to be taxed again. The bad news is, is that you’re not going to get any tax break today, but the good news is if you follow some fairly simple rules, that money won’t get taxed again. So this truly is just your account.
A traditional IRA, you get the benefit of a tax advantage today. The bad news is, is as that interest grows, and if you’re listening to this and you’re in your thirties, let’s say you may have a lot of interest in gains that are in this account. Well, that, that truly is a joint account. You know, the interest is a joint account, not with anybody you love, but with your Uncle Sam in Washington, who’s sharing all of that interest later on.
So I’ll usually forego the tax break today to get the tax-free truly my own interest. I get to keep it all later. The second thing I like about the Roth is that the money that you put in it, you can take out. So that money becomes pretty flexible. So if you’re not sure if you actually have the resources to save into one of these accounts, a Roth IRA, you can put into knowing that at least the principle that you invested, not the interest there’s rules around that. But the principle you invested you’ve got some flexibility around those dollars. I don’t know if, Brenton, if you agree with all that.
Brenton: Yeah. You know, such a great point about the tax deduction and foregoing it. When you have a Roth account, you know, to me, it’s not just that if you have the Roth, you are going to be able to live off of that money without paying income taxes in retirement.
It’s also that the tax deduction, most people are getting is not as significant as they might believe. Like if you’re making crazy money then sure. If you’re throwing just tons of money into a 401k, you might have a tax deduction that’s meaningful. But we also see people who are like, okay, you know, I understand that you, in theory that tax deduction is valuable, but let’s look at it.
It saves you $300 on your taxes. Now that’s not to devalue $300, but when you look and say, yeah, but 30 years from now, you’re going to have to pay income taxes on all that money. Typically you’re not foregoing as big of a deduction as you might think. There are some scenarios where it can be worth it, but most of the time it’s because they have something else going on.
As an example, we might have a client that has federal student loans and some payment plans for federal student loans are based off of things like your adjusted gross income. And when you put money into those traditional retirement plans, that tax deduction actually lowers your adjusted gross income.
So like, Hey, I put money into my retirement account. It lowered what I paid in taxes. It also lowered my student loan payment. That would be a scenario where I’d be okay with someone saying, this is what I’m choosing to do. But if someone isn’t in that situation, I would prefer the Roth. And there are so many things that go into it.
But again, if you’re not doing this with the help of a professional, some of it is just as simple as, do you want to pay your taxes now? Or do you want to pay it later? How much do you plan to put in this account? And then that narrows down the options from what you can choose.
Brynne: Absolutely. Absolutely. One thing that when I was, this was a very long time ago that I was in, like, I was not self-employed, I was in a traditional work environment.
Right? I elected to put money into my retirement account, offered through my employer, but that’s not where it ends. I mean, you can’t just like put money into this account. You actually have to then go ahead and direct your investments and say where you want that money to go, where you want it invested.
Otherwise, at least my experience was my money was sitting there for a couple months. So it was getting taken out of my paycheck, technically getting put into the account, but like it wasn’t actually getting invested. So I’m wondering if you can tell us a little bit about that process, like with HR or how people can kind of figure out the options that HR might present them with.
Joe: Well even, Brynne, even more than that, I think that people, they get to this investment part, and this is where we, for lack of a better term, just freak out. Cause there’s, there’s so many different things we can do. It all seems so confusing. And this is where the best thing to do, I think, even before you go to HR is think about your goal.
When am I going to need this money? And this is where there’s some, some at least a little bit of planning that comes in, because I feel like when I used to meet with people when I was a financial planner, and now even when I talk to our listeners of our podcast, people, there’s so many different options that you see people getting rich on crypto.
You know, these, 8-bit pictures of trees, these NFTs. Like, you know, you see all this stuff and you get this fear of missing out. So what’s the best thing to do with my money? Well, if you begin with the end in mind, if you start, when you think you need the money, the cool thing is then you take all this huge wide range of investments that are out there and it narrows it down to the few types of investments that historically have done well over that timeframe.
And the cool thing, there is two things. Number one is you save a lot of time because instead of trying to research everything, you only have to research this narrow band of types of investments that do what you need. And then the second thing is, is that it also means these opportunities out there might be good.
They might be bad and it doesn’t matter. They’re just not for you. Which is great that I can say, Yeah, that sounds great. But this doesn’t meet my timeframe. Doesn’t meet my goal. And that fear of missing out kind of goes away. I would definitely start there. And then to directly answer your question, when it comes through work with HR, they’ll have some stuff for you to fill out, they’ll give you, they’ll give you booklets that will show you all the different investment options that are there.
Sometimes there’ll be five or six, sometimes there’s 50, but when you get those options, then you can start to compare and contrast the option. s
Brenton: Yeah, I think that spot, you know, that’s spot on. It used to be, uh, you know, back in like the Enron days where you had people who were putting almost every dollar of their 401k into Enron stock, that there was a lot more risk involved in terms of the consumer and participating in those plans.
Well, stuff like that happens. You make legislation for the bad apples. Not, you know, for the people who are in the majority. So now there’s a lot more risk from an employer’s perspective in what they offer in a 401k. You know, if they are not seen as doing their due diligence and being good fiduciaries, they can be sued.
So now you, even if you have that plan that has 50 options, there’s probably going to be some where you can pick the year closest to when you would want to retire. And you’ll find an option in that plan, could be investment fund, ABC 2045. And that 2045 means the year 2045. If that’s closest to the year that you want to retire, it’s designed, now you can talk about whether it’s designed well, but theoretically it’s designed so that the further you are from that year, it will be invested in more aggressively. But the closer you get to that year, that target date, it will become more conservative. So you can kind of talk to the people at your job to figure out is this the right fit for me?
If I don’t want to do this, what are my alternatives? But what you shouldn’t find that you might’ve found 15 years ago is like, Hey, here’s this single stock, you know, company A and I can put 100% of my 401k. That’s just not how things are now.
Brynne: Absolutely. And this gets into, I have some spaghetti questions for you guys. Joe, you talked a little bit, and you too, Brenton about time horizon, just figuring out when you’re going to retire when you need this money.
And I think that another thing for time horizon, too, that we’ll probably get into a little bit later is just this whole idea that as you’re building your savings, as you’re deciding whether to save it, save it or invest it, I think looking at some of those goals and especially with disability, some of those large expenses that can come up much quicker maybe than the general population has to worry about that time horizon piece is going to be pretty important about when you need your money back.
I feel like another huge part of it that again, you touched on Brenton and Joe was just that risk tolerance piece. And I’m wondering if we can talk about that a little bit, particularly as it applies to families who are raising autistic kids.
Joe: I hate, I always have, I’ve hated the risk tolerance question because I don’t think it’s the first question. We treat as the first question.
In fact, in those things that you get for work, you get this cool risk tolerance quiz. My question has always been, who cares how much risk you feel like you can take before you know how much risk you need to take to reach the goal? Cause the question isn’t about how risky are you? The question is, is what risk do you need to try to take?
And most of us don’t know the answer to that question. So if I’m, if I’m looking at this retirement goal, it’s a very simple equation. It’s X amount of money times Y return equals the goal. And that gives me three levers I can play with. Let’s say that Brenton needs to save $5 to reach his goal and he needs an 8% rate of return to get that goal.
He’s got three choices. If he doesn’t have five bucks, he’s got $7, let’s say, that he can save toward the goal. Well, maybe now he can, back that amount of risk he takes to get the return he needs? Maybe he can back that down and take less risks. Or maybe he’s only got $3. If he’s got $3, maybe he needs to take more risk or he needs to find more money in his budget.
Of course the third thing he can do is he can change the goal. Right. So once we know those things, then I think we ask ourselves the question, am I prepared to take the risk it’s going to take to meet that goal? And once I know that once I know that, then I take the risk tolerance assessment.
Brenton: Yeah. You know, sometimes when I’m meeting with clients, you get to an impasse where they’re, they’re asking you for things that are not possible with the variables in front of you.
So, you know, you’ll have someone who says I’m 30 years old. I never save anything. And I want to retire at 40 off of a hundred percent of my income, but I don’t want any risk. It’s like, well, that’s not an option. That’s not an option.
Joe: No, it is. You just, you just show him that. I bet you come back to the table with lottery tickets.
Brenton: Right. You know, so, and then you start to have the conversation when, when you’re in a space, whether it’s what we’re doing right now, where someone could hear something they don’t like, and they can say, well, there’s another podcast out there who might confirm what I want to be true, even if it’s not actually true.
Well, the same is true with commoditized advice. If I’m sitting with a client and there’s five other financial advisors who for a fee, will tell them that what they want is possible, even if it’s not – it is kind of tough to have those conversations, but it’s exactly right that you have to have an understanding of what’s possible giving what you’re willing to do.
If you want to meet certain objectives, they might require more risk than makes you comfortable. And that conversation has to be had. You cannot say, Hey, I want to retire off, you know, a hundred percent of my salary at 45. And when you put money in the market, you decide that you’re a conservative investor, unless you’re throwing just an ungodly amount of money in the market, you are going to have to be comfortable with certain amounts of risk.
And you also, you asked a question about time horizon, sometimes that factors into the risk tolerance as well. You might be an incredibly aggressive investor, but you might be saving for something that you have to spend five years from now. It’s like, okay, well, that’s a little different. Now you might need to dial it back because this is money for a down payment of a home or starting a business.
And you can’t afford to take the risk that six months before you need that money, the market goes in a nose dive and you’re invested in the most aggressive thing you could possibly find.
Joe: That’s a great point, because if you look at 10 to 15 years out, the stock market over those longer timeframes historically has been a fairly conservative place to be meaning that you usually reach your savings goals, maybe 5, 6, 7, 8%.
If your goal’s in that range, the stock market it got you there. But if, if you’re looking at a one-year time horizon, the stock market’s like a casino. So definitely not a great place for a one-year goal, but for a 15 year goal, it’s a much, much better place to be. What do you think about people focusing, Brenton, on expense ratios?
Brenton: It’s a conversation. I bring it into the conversation when I’m talking about, well, are you likely to do this if, you know, if you’re not working with a person? Or if you’re not working with somebody who knows how to direct the investments? So we have people who come in and they say, oh, I’ve heard that index investing is the way to go.
I’m a big fan of index investing, low fees and things of that nature. And you know, a year later we’ll talk to them and we’ll say, oh, how did that go? Did you put money in those index funds? Like, oh, well, no, I just haven’t gotten around to it. I was like, well, I’d of rather you paid a fee and had somebody make sure they do it for you.
When it comes to the investment itself, I am a person that believes that over a 30, 40 year time horizon, there’s not going to be many human beings, if any, that are going to just beat what the market will naturally do. So I try to keep my client fees as low as possible, unless I can articulate a reason as to why it makes sense to pay an individual or a team of human beings.
Yeah. So that’s typically with my philosophy on it.
Joe: Yeah. And I, and I haven’t been a financial planner in a long time, but I really agree with that. I feel like ever since I changed over to the financial media side, 12 years ago, the discussions around fees and fees and fees and fees and fees and fees, it’s an overstated discussion.
Because too many people do nothing because of fees. I think it’s better to be 90% there by getting into the wrong fund and doing something than it is to save so much money on fees cause you never invested in anything. Like, like we need to talk way more about behavior and less about fees.
But still, all things being equal, if I can get the same. If I know I will get the same thing. I want to do it less expensive. But as an example, and Brenton, you see this all the time in the media, people will say the first thing you ask a financial advisor is what do they charge? No! That’s not the first question. The first question is what are you going to do?
Because I could be comparing a big wheel to a Cadillac. You know, a big wheel costs very little money, but I got a pedal myself and it, man, it’s not gonna make it up that hill. Cause I’m, don’t have very strong legs versus the Cadillac. I’m gonna ride in comfort, but often people will, then they used to do this at me.
They’d come into my office. What do you charge? Like, why don’t we talk about exactly what you would get for it first and then let’s make a very important decision. If two people offer the same, definitely go with the one that charges less. But I think it’s like, you know, we talk about on our podcast dragons that you need to fight.
Because we’re always fighting different things that are out there. The fe dragon, I think is really dragon number three or four, where the behavior dragon is a number one.
Brenton: That’s so that’s so timely. Especially to me, when I look at I’m kind of straddling the fence of like the financial media versus, you know, one-to-one financial advice.
And when we talk about this particular audience, one of the things that is so pressing to me is when you look at financial media, I think there’s this extreme that says there is no value to paying for advice when you can technically do these things yourself. But that operates off of a couple of assumptions that are not always true.
One of those assumptions is that you have the time to build that knowledge base. And we know that if you’re listening to this podcast, there’s a high probability that you do not have the time to go and find the knowledge that’s necessary to be able to replace human advice. And I wish that was a part of the conversation more where even if it’s not something I have a child with autism, it could just be, I’m extremely busy.
And yes, there is the possibility that I could do this on my own, but there’s not a high likelihood that I will. And I wish that it was a part of the conversation more. Do you have the time to acquire and accumulate this knowledge? The other part of the conversation that I don’t think people value in the way that they should.
Is I’ve been doing this now for 13 years and some change. I probably meet with 10 people a week. That is a lot of different scenarios that I can pull from when it comes to seeing how financial decisions play out in people’s lives. So it’s not just a matter of if A happens then B. It’s like, well, actually I’ve seen A happen 500 plus times.
I’ve seen almost every way that it could conceivably play out. You only get to see that for your individual finances. There can be a benefit to paying someone who has seen the other 499 scenarios. And I do wish that was a part of the conversation.
Brynne: Absolutely. Now while we have you two here for free, though, let me ask you, um, you mentioned index funds and this is something I’m familiar with, but I’m not sure if our entire audience might be.
And I’m wondering if we can just talk about just very generally what an index fund is, uh, how it varies from an ETF and how people should kind of be thinking about those different types of mutual funds.
Brenton: Sure. Sure. So an index, well I’ll start with what an index is, and then we can get to an index fund.
An index or a market index, is a segment of the market. It is particular companies that fall within a certain segment of the stock market or the bond market. The one people are probably most familiar with is the S& P 500. Those are essentially really large US companies, but you have other indices that follow different segments of the market.
There are bond indices. There are indices that track just companies from certain foreign countries. So whatever it is that you’re thinking about in terms of a specific segment of the market, you can probably find an index that has companies inside of it that adhere to those specifications. When you have an indexed fund, you are essentially investing in, it could be an exchange traded fund. It could be a mutual fund. There are a bunch of different type of index funds.
But what they do is instead of paying a team of individuals to make a bunch of investment decisions on when you buy and sell and which companies you buy and sell, they instead are just tracking the returns of that index.
So when you have an S&P 500 index fund, you’re basically putting money into an investment that simply tracks the returns of those 500 companies that are a part of that index.
Joe: And the exchange traded fund. This is where people run into more of that spaghetti we were talking about earlier. Exchange traded fund is kind of a hot buzzword right now.
And people assume that ETF or exchange traded fund equals index fund because when exchange traded funds first came out, they were all just based on indices. Well, now we’re seeing, because the industry has learned that it’s a buzzword, the industry is bringing out all kinds of active exchange traded funds.
So it’s not an apples apples comparison. It could be an apple and an orange. If you have an exchange traded fund, that might be an index fund. It might not, it might be something, something different. So if you’re after index funds, you want to make sure that your ETF that you’re in actually is an index ETF, not an active ETF, or if you’re after an active ETF, of course, then, then go for it.
By the way, exchange traded funds versus mutual funds because we get this question a lot. People wonder, you know, okay, I’ve got this index, it could be mutual fund. It could be an exchange, traded fund, all things being equal. What should I do? Mutual fund industry has made it really easy for you to put money into a fund on a monthly basis.
If you’re going to save automatically, hook it up to a bank account. We’re not quite there yet with ETFs. So if you’re looking to automatically drip money into an account, a mutual fund is generally the easier way to go. The ETF you’re going to have to go on and trade. There are some brokerages now that willrade on your behalf once a once a month or a week, or whatever, whatever time period that you have. I believe that’s coming by the way that we’re going to see that much, much more often in the future, but we don’t, we don’t have it yet.
However, if you get the two cause there’s upsides and downsides of both of these, the ETF also gets some tax advantages though, that mutual funds don’t get. There’s some general rules that ETFs have for tax advantages, but you know what?
I kind of agree with what Brenton said earlier that we overplay these tax advantages a lot of the time. I think we’re going to make a bajillion dollars. You might save a couple bucks by using the ETF versus the mutual fund. I would do whichever is easiest. So wherever you’re at, if the mutual fund will let you put money in every month and that’s what you want to do well, then go get a mutual fund.
I haven’t seen anybody ever retire, or not retire and go, ‘The reason I didn’t retire is because I paid that 0.02% more in fees.’ That’s not why they don’t retire.
Brynne: No. Absolutely. Absolutely. There’s another buzzword I’m thinking we should probably touch on, too. In recent years, socially responsible investments, those have become way more popular, way more in demand.
Historically, they’ve acted one way. I’m not sure if they’re going to continue acting that way as we have more of these options on the market, but I’m just wondering if we could just touch on that really quick.
Brenton: I don’t want to seem as if I’m not socially responsible. However, I see a lot of people who say they want socially responsible investing who don’t know what the term means.
And I almost compare it to someone who goes to the supermarket and says, I want organic eggs, or I want free range eggs, or I want pasture raised eggs. To me, what do those terms mean? If you know what they mean, then maybe you do want organic free range, pasture raised eggs. But if you’re just looking at it because the packaging looks healthier for you?
Well, you know, dig under the hood a little bit more to figure out and what you’re investing in. I don’t have a problem with the concept of socially responsible investing, but what is socially responsible mean to you? Do the research to figure out what that means in that particular fund as well, because it may not align with what you’re looking for.
We don’t have a ton of clients who do it. A lot of times when they say they’re socially responsible, you tell them, well, that means that this particular stock won’t be in there. And they’ll said, okay, I’m not that responsible anymore. To me, I just want people to have a full understanding of what they’re investing in before they make the decision.
Joe: It’s it’s so funny Brenton that you say that because we did a whole episode of the Stacking Benjamins show on egg marketing and what that has to do with investing. But we literally did a whole episode on that and it was funny. It was off of a life hacker article, which talked about this issue. And as an example, they talk about chicken, you know, about fertile from fertile chickens.
Well, that means that the chickens had sex. It means nothing, nothing at all. Yet we think that it means stuff. I’ll say this though, when it comes to socially responsible investing or they also call it ESG investing, you know, there’s that old Jeff Foxworthy thing. You’re a redneck if or, you know, you’re a redneck if. You know you’re talking to an old advisor if, they think that socially responsible investments underperform just regular day-to-day investments. Because, well, the last few years, and we don’t know if it’s going to remain the same, a lot of socially responsible funds and a lot of ESG funds have done very well and have actually outperformed the S&P 500.
So we’re starting to see that. Activism in corporate boards is having some fruit, which is a good thing for all of us. But I also totally agree with Brenton that, and this is again where the spaghetti is, ESG or SRI, socially responsible means so many different things to so many different people. And so what are you after? Are you after for better corporate governance?
Are you after not having tobacco in your portfolio? You know, uh, a tobacco company might have phenomenal inclusion in the workplace, right? So you’re investing in a cigarette company that has great inclusion. So it means something different. So, uh, I love the idea of going after it, but there’s definitely some digging you need to do.
And the good thing is if an advisor tells you though, that those are lower performing investments, back when I was a financial planner, they were. And that was the sad thing is that we’d look at some of these funds with clients and man, if you wanted to get a way lower return, Ah, it, it just, you know, it was, it stunk both ways.
Cause there are people that are very passionate about their beliefs, but they were going to have to sacrifice maybe some of their retirement to get it. So where do you come down? And it’s a, it’s a great values discussion to have, but luckily I think we need to have that less and less now.
Brenton: Yeah, we, uh, I’ll never forget.
I was talking to a friend of mine. I was at their house and. You know, without bashing on any particular company. This is just the, the organization that delivered the package. But we’re talking about, we had a local grocery chain here whose employees went on strike because they were having some trouble unionizing.
And the person I was talking to said, I’m not going to that grocery store. They’re not letting their employees unionize and they’re on strike and I’m supporting the strike. And as we were talking about it, I looked outside and I said, well you have an Amazon package out there. I’m like, you are aware that they’ve had some unionization issues of their own.
I was like, you know, again, this is not calling you a person who’s hypocritical or anything like that. It’s just, if you’re going to do something and commit to it in anything, do the research to figure out and what you’re, you know what you’re actually committing to.
Brynne: So we’re going to come back next week to talk about things like life insurance, ABLE accounts, annuities, and a few other topics, I think.
But before we go, I’m just wondering if you guys can tell us a little bit about what you’re up to and where people can find you.
Joe: I have a brand new book called Stack, co-written with a great friend, Emily Guy Birken who has four other books, one of which is The 5 Years Before You Retire. She’s a great writer.
And, uh, we had a lot of fun writing it and it is a book that’s meant to be a basic guide, begins with stacking your first Benjamin into building a stack of Benjamins into protecting your Benjamins and then building stacks upon stacks of your, of your Benjamins, which, uh, two things on that. Number one is we have a book tour coming.
Hopefully we’re coming to a city near you, stackingbenjamins.com/stacked. And we’re going to try to have financial influencers from each city. So you can get to know some of the other voices out there, but stackingbenjamins.com/stacked. And of course you can tell, we use the word stack a lot. We have our Stacking Benjamins podcast, which is every Monday, Wednesday, Friday, wherever finer podcasts are distributed.
Brynne: Only the finer ones.
Joe: Only.
Brynne: And guys, for those of you listening, I know a few of you have reached out to me like after you read The Feminist Financial Handbook. And first of all, thank you so much for that. It always means so much to hear back from you. But another thing I want to point out here real quick while we’ve got Joe with us.
You’ll probably recognize Emily’s name. She wrote the forward for that book. So if you enjoyed that forward in particular, you should definitely check out that book. Her and Joe did something just so fun and so amazing with it. So I highly, highly recommend.
Joe: Thank you so much.
Brenton: And you can find me at brentonharrison.com.
I’m also on YouTube. If you type Brenton Harrison Financial Advisor, you can find my channel on YouTube. Uh, we do a lot of general financial advice and wellness videos and educational videos. So hopefully that might be a fit when you’re trying to find those foundational elements. On social media. I will tell you, I, for years, I’ve been the old man in the cave who just avoided it, but I’m coming out of the cave.
Joe: Uh, I thought that was my territory.
Brenton: So on Instagram, you can follow me @wealthanchors. We actually just started the page. I was literally shoved into it. We’re going to make sure we have good content for you there as well.
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Brynne: Thank you so much to Brenton and Joe for joining us today. And we are so excited to continue the conversation next week.
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Joyce: Bye.