#50 – Latest Market Trends, Inflation Update, And Bill Belichick’s New Coaching Salary

Jeff Lloyd [00:00:30]:
I don’t know. Maybe I’m going to watch a little basketball. We’re going watch a little NFL.

Wes Moss [00:00:36]:
There’s plenty of NFL. There’s plenty of NFL, but it’s, you know, it’s just not the same. You go through the fall is college football and when that starts to wind down, you just know it’s all we’re really headed into winter. It’s okay. Basketball season is right around the corner. We had a lot of economic news this week, but we were targeting late in the week, Jeff Lloyd said to me, what is the I said, we talking cpi, ppi, the producer price index, consumer price index, jobs report, inflation deflation, new all time highs. Which one do you think is the most important? He goes, you know what the most important story of the week is? What is it?

Jeff Lloyd [00:01:17]:
Well, they, they have a new head football coach in Chapel Hill for your Tar Hills Wesley, little guy by the name of Bill Belichick.

Wes Moss [00:01:25]:
You mean Chapel Bill?

Jeff Lloyd [00:01:26]:
Chapel Bill. That’s a great nickname. That’s really good.

Wes Moss [00:01:29]:
But yeah, what was there was another one. It was like Bill Chapel Hillicheck or something.

Jeff Lloyd [00:01:34]:
Bill Hillicheck, Bill Halacheck.

Wes Moss [00:01:36]:
But it is kind of amazing. I mean this was it also played out over the course of the whole week. It was, I remember last weekend it was like a weird rumor that’ll never happen. And then by the, I think Thursday night or something or Wednesday night, it was, whoa, we’re getting Chapel Bill and he’s coming with a 400 page playbook to the University of North Carolina, which is a big deal for Tar Heels. It’s been a long time since we’ve had this much football fanfare. I was a little surprised at the contract. I almost thought, I guess I was a little off on what, what coaches make. I think now because nil money players are making a million, 2 million, $5 billion.

Wes Moss [00:02:17]:
And that’s just going to, if there’s anything you could bet on, if you could, if you could invest in the average amount of nil deals and what they’re going to do over the future, I think it’s going to grow much faster than the rate of inflation. But I thought college coaches would be making more. I think that’s only relative because players are now making a couple of million dollars a year. But he’s going to be a top 10 paid coach at. What’s the list look like?

Jeff Lloyd [00:02:43]:
Yeah, his contract, he signed up for five years. $50 million. Back of envelope math. That’s 10 million a year. That’s pretty.

Wes Moss [00:02:51]:
It’s five. I thought it was three.

Jeff Lloyd [00:02:53]:
I think it was initially reported as three, and then the details emerged that it came out at five years.

Wes Moss [00:02:59]:
That’s a half a decade of Belichick.

Jeff Lloyd [00:03:01]:
And it wasn’t just his contract alone. He also had some demands for the NIL money that UNC and the Collective was going to pledge. And I think last year maybe it was like 4 million.

Wes Moss [00:03:14]:
That’s. That’s nothing in the NI.

Jeff Lloyd [00:03:16]:
And so quintuple that he’s commanding $20 million dedicated to nil to go into the portal to go get the players, get the talent back to Chapel Hill.

Wes Moss [00:03:26]:
So all that NIL money is that. I know some of it is. I’ve gotten some emails where there. It looks like essentially you’re donating to an NIL fund. Is that come mostly from the alumni or is that from the school itself?

Jeff Lloyd [00:03:41]:
I think it comes mostly from alumni and also probably comes from some pretty big donors. I bet you had some. Some big wigs on campus that pledge. You know, maybe six, seven figures.

Wes Moss [00:03:53]:
It’s got to. Right? So. And I don’t know, it’s. I don’t know if it’s standardized yet, but remember, it’s like something like the Champion Circle at Michigan. It was Larry Ellison who came in and essentially said, we got to get the number one recruit in the country for the University of Michigan. And they did. I think Bryce Underwood and they. I don’t know exactly how much he’s getting, but Ellison, the founder of Oracle, who, you know, takes these two to $3 million sailboats out, flips them over, just puts another one in the water.

Wes Moss [00:04:21]:
He’s a multi billionaire. His newest wife, I think it’s his fifth wife. Fourth or fifth wife. Turns out she went to Michigan. She’s a huge fan. She said, we want this recruit. And next thing you know, he’s a donor to the Champion Circle. It’s an amazing thing of how quickly NIL has just changed college football so dramatically.

Wes Moss [00:04:45]:
And it’s actually not slowing down. It’s almost ramping up.

Jeff Lloyd [00:04:49]:
How long has it been around now?

Wes Moss [00:04:52]:
Seems like it’s only three years. Two, three years. Yeah.

Jeff Lloyd [00:04:55]:
And there’s just so much money associated with, with nil money associated with how much these coaches are getting paid. I mean, we looked at the top 10 highest paid coaches. Number 10, Mark Stutes from Kentucky makes over $9 million a year. Bill Belichick, North Carolina, 10 million. He’s tied for sixth. You got Dabo Sweeney, number two on the list, making over 11. Do you know who number one is on that list?

Wes Moss [00:05:25]:
Of course.

Jeff Lloyd [00:05:25]:
And I think a lot of our listeners, we all know would tell you he is worth every penny. And of course, we’re talking about Kirby smart making over $13 million a year at Georgia. And I, I would say he’s worth it too.

Wes Moss [00:05:39]:
I think that we’re just going to see these numbers all go higher now. It’s like you’ve, the dam is broken and the money flowing into college.

Jeff Lloyd [00:05:46]:
Pandora’s box is open.

Wes Moss [00:05:49]:
Next year. We’ll probably hear of a coach at 15 million. A couple of years from now it’ll be, I don’t know, 20 million. It wasn’t that long ago that the Wall Street Journal did an article about the trajectory of the billion dollar athlete. Do you remember that? Were you here for that show where it was, I think, Luca Doncic. How do you say his name? Yeah, the Mavericks player, Doncic. They essentially looked at his trajectory and said he gets a couple new contract renegotiations. He could end up earning $1 billion.

Wes Moss [00:06:22]:
And who was it? Was it the Mets guy?

Jeff Lloyd [00:06:24]:
The Mets just paid for Juan Soto.

Wes Moss [00:06:26]:
This past week, signed a $750 million contract.

Jeff Lloyd [00:06:32]:
Three quarters, three quarters of a billion. Yes.

Wes Moss [00:06:35]:
To play baseball again, outpacing inflation just by a little bit.

Jeff Lloyd [00:06:41]:
We have a couple of shocked faces here in the studio right now after announcing that figure.

Wes Moss [00:06:47]:
These salaries are at all time highs.

Jeff Lloyd [00:06:49]:
Jeff Lloyd, they keep ticking up, don’t they? New high water marks.

Wes Moss [00:06:53]:
We going with this.

Jeff Lloyd [00:06:55]:
Well, another week, another new all time high for the market. The NASDAQ hit 20,000 for the first time in its history.

Wes Moss [00:07:04]:
This week, a new incremental all time high. And we’ve, we’ve had about 57 of them now for the S&P 500. And remember, they come in clumps. They’re a little bit nerve wracking. When you hear, oh, the market’s at a high, aren’t I supposed to buy at a low, not at a high? And that is a very fundamentally sound way to think about markets. What’s ironic about the momentum, if you will, when it comes to that is that they come in clumps. These all time highs. I don’t know if there’s ever been a year this is now.

Wes Moss [00:07:37]:
We haven’t looked at it this way. Every single year that’s had an all time high hit, it’s never been less than six of the four of them. So you’ve never had a year where there’s just one all time high. Not two, not three. But the minimum all time high in any given year is four. And then you go all the way to the record. 1995 there were 77 all time highs. 2017 there were 62 all time highs.

Wes Moss [00:08:07]:
1964 there were 65 all time highs. And then of course we can go years where we have no all time highs. That’s the one repeating number. But once you break out of a decline and then a recovery and you finally get back to where you were, your old high water mark, the market tends to make a real series of these. And it’s not uncommon to see 30, 40, 50, 60 all time highs in a year where we’re making them. And that’s what 2024 really has been all about. All time highs. We hit them early in the year and it hasn’t stopped this year.

Jeff Lloyd [00:08:42]:
And just think about last year. You know how many all time has we had last year in 2023?

Wes Moss [00:08:47]:
0. 0. I stand corrected. As I look at this data. 1, there was a 1 sneaky all time high in 2022. It was at the very beginning of the year and then it came down. That’s why we didn’t have then, we had none the next year. And then this year we’re making up new ground.

Wes Moss [00:09:02]:
So 2021 was the only year there was only one all time high. The year before 2021 there were 70 of them. So by and large all time highs come in these big bundles, multi dozen.

Jeff Lloyd [00:09:15]:
And it’s funny, I know we’ve talked about it here on the show, but when you hear or read about the market hidden all time highs, it’s almost like there’s a negative connotation that people put to that. Well, does that mean the markets run too much? Does that mean the market’s too expensive? Should I sell now? Like there are all these negative connotations associated with that. And what we’ve been saying mostly throughout the all year is it’s a good thing. They tend to kind of come in bunches. And the market historically performs better after hitting new all time highs.

Wes Moss [00:09:51]:
Right. I mean it takes a lot to get to an all time high. A lot of things have to go right underneath the surface to get to the point where we’re making incremental gains. The other thought here is that if you. I call this the Feast and famine chart. And that if you take percentage return categories and you make a bar graph of it, so negative 20 to negative 30, negative 10 to negative 20, negative 10 to 0. And on the other side of the bar chart, 10 to 20, 20 to 30, 30 to 40% returns in any given year. And you give every year its own Lego brick, if you will, and you stack them up.

Wes Moss [00:10:26]:
It’s interesting that here we are in a year that is close to The S&P 500 was up almost 30%, not quite, which sounds abnormally high. That’s a big number, but it’s actually a lot more common than we might think. S&P 500 has finished with a total return of above 25%. Think of it. That’s a big year for the value of companies in America to go up by a quarter. It’s happened 26 times out of the last. Call it 96 years. So it’s happened 27.

Wes Moss [00:10:57]:
Almost 30% of the time we’ve had a big year like that. And then when we have bad years, there’s several of those as well. There’s three years where we were down 20 to down 30. There were a couple years we were down 30 to 40. And these are annual returns. So of course, we’ve had plenty of negative 50% over the course of time, just a few in the short last 25 years or so. But it’s not all that common for the market to hit its normal rate of return. We average out to this 10, 11, 12% rate of return, depending on the average.

Wes Moss [00:11:33]:
We’re looking at dow S&P 500. But the vast majority of the time we’re way above that. Or of course, there are plenty of times when we’re below that. And that’s why we end up with these averages. Lots of 25 positives, several 25 negatives. That’s how we arrive at this. Call it 10, 11% rate of return over the course of time. We are going to.

Wes Moss [00:11:57]:
We’ve got to talk about inflation. Coming up, ppi cpi, that’s Consumer Price Index. And the producer. So more of the industrial side of the inflation complex. And then wages. What about wages? Have they kept up with inflation? We’re going to do that after weather, traffic, then more Money Matters right here on wsb straight ahead. Good morning and welcome to Money Matters here at Sunday Morning. We got two Hours back because college football season’s taking not a complete hiatus this weekend, but we’re waiting for the big bowl games.

Wes Moss [00:13:02]:
I know there’s, I think of it as a new bracket, but it’s really bowl games. It’s. Could they make it less confusing?

Jeff Lloyd [00:13:07]:
Are they bowls? Are they playoff games? Are they both?

Wes Moss [00:13:10]:
I guess they’re both.

Jeff Lloyd [00:13:11]:
A little bit of confusion on my side.

Wes Moss [00:13:13]:
How about this for confusion? Producer Price Index and the Consumer Price Index. How are we doing on those? Jeff Floyd, what are the numbers from this week?

Jeff Lloyd [00:13:19]:
Those are two key measures of inflation. We’ve got both those reports this past week. We got the cpi, the Consumer Price Index. Year over year, prices were up 2.7%. And the PPI, which reflects prices from the perspective of the seller or the producer rather than the buyer, was up 3% from the same time last year.

Wes Moss [00:13:44]:
So we think of that as input costs. Right. The Producer Price Index. This is a measure of you’re making a product, you’ve got 14 different or 150 different components. What’s the manufacturer, what’s the producer of the clothing, the cars, what are they paying for components? And of course, the reason we watch PPI is that it’s a flow through ultimately to the consumer, not 100%. Right. Companies don’t necessarily pass all of their inflation on. And we’ll probably be talking a lot about tariffs in 2025.

Wes Moss [00:14:15]:
The question is, you have a tariff, something gets more expensive, does it all go to the consumer or does a portion of that higher cost get absorbed by the seller, if you will, and then a portion similar with PPI and cpi, it’s not a complete pass through. I think that we continue and the Fed meets this coming week, there is a high probability that they’re going to lower interest rates again. And I think if this number, and it’s because we’re at, we’re in this two range now, we’re still kind of middle to high twos. The mandate for the Federal Reserve is 2% inflation. They want a little bit of inflation because it’s healthy for the economy. We don’t want too much and we’ve lived the last couple of years with way too much inflation. We’re now at 2.7%. That’s still probably benign enough for the Fed to cut rates again, probably a quarter of a percent.

Wes Moss [00:15:07]:
And then there’s a probability next year it’s a relatively high probability we’ll get another interest rate cut or two. But it’s so far out into the future, even though there’s A lot of metrics that show what the market’s looking towards. I don’t see rates going down dramatically next year, at least where we are today. Again, strong economy. We’re not going to lower rates all that much. We don’t want to reheat up inflation. And that’s what the Fed’s trying to do. We want to keep a solid job market.

Wes Moss [00:15:36]:
Remember, dual mandate, full employment or maximum employment price stability. That means we want a little bit of inflation, not hyperinflation like we’ve just lived through. Now, wages. If you go back and look at the common man cpi, which is these are the things that Americans must have, right? You don’t need six smart TVs, but you do need food. You don’t need four Lamborghinis, but you need energy. You don’t need a palatial mansion with two swimming pools, but you do need shelter, et cetera. So it’s shelter, clothing, utilities, insurance. That’s up 20% since 2021.

Wes Moss [00:16:15]:
Wages are only up 16%. So Americans are still feeling like they’re behind from a wage perspective because costs have continued to surpass that. We’ll see where we head in 2025, the new year. And really, Christmas is right around the corner. Which reminds me, we have to talk about the Santa Claus Rally at some point. You’re listening to Money Matters. We’ve got news, weather, traffic, the More Money Matters right here on WSB. Straight ahead.

Jeff Lloyd [00:16:53]:
It’S WSB’s Money Matters with.

Wes Moss [00:16:55]:
Wes Moss, certified financial planner and chief investment strategist from Atlantis Capital Investment Advisors. Wes talks to you about investing and saving for the future. Good morning and welcome to Money Matters Sunday morning. Great to be here in studio. Jeff Lloyd along with me, host Wes Moss here every Sunday morning. Are we going to get a Santa claus rally? Jeff Lloyd, we got 10 days ish till Christmas. What’s the Santa Claus rally? Where did it come from? Was it in fact invented by Kris Kringle?

Jeff Lloyd [00:17:30]:
You know, we didn’t get a Santa Claus rally last year. Let me, let me explain what the Santa Claus Rally is. It is the last five trading days of the year and the first two of next year. And a guy named Yale Hirsch, who is the founder of Stock Traders Almanac, first coined the Santa Claus rally back in 1972. And what it said was those seven days have historically shown higher stock prices almost 80% of the time.

Wes Moss [00:18:03]:
There’s no way we know exactly why. It just, we know it happens. We know historically it’s a pretty strong period of time. Seven Solid trading days, but we don’t know exactly why.

Jeff Lloyd [00:18:15]:
And during the 70 years in between 1950 and 2020, the rally occurred 57 times and the S and P on average grew by 1.3%.

Wes Moss [00:18:25]:
Okay, so it’s still a nice little.

Jeff Lloyd [00:18:26]:
End of the year, beginning of the year.

Wes Moss [00:18:28]:
I love it. And there’s no the reasons behind it. Right. If you ask and try to figure out why, why do we have this stretch that’s so positive? And you see people tend to invest their holiday bonuses.

Jeff Lloyd [00:18:43]:
Really?

Wes Moss [00:18:44]:
Do you get your holiday bonus before Christmas and then you put it to work? I don’t buy that one year end bonuses usually come in January. So I don’t know if I buy that one. The general sense of merriment around Christmas, maybe.

Jeff Lloyd [00:19:02]:
Christmas spirit, people in Christmas spirit. I can see it.

Wes Moss [00:19:05]:
Buying stocks because you’re in a holiday mood.

Jeff Lloyd [00:19:08]:
I’m in a good mood. I’m going to go buy stocks.

Wes Moss [00:19:10]:
Okay. And then what was it? What’s the other reason that people point towards. This one is true. It’s a quiet period of time. And this is where I think it probably has. There’s more to it. I think this one actually can maybe explain it is that if you think about the quietest time of the year, maybe minus the early July for Independence Day, and there’s some really quiet days there, but people are off during the holidays and it’s a big stretch. So I think it’s a.

Wes Moss [00:19:41]:
Maybe you could point towards slightly lower volume. So money that does go to work, it’s pushing the market up maybe a little bit more. That’s just my. That’s my thought. And then of course, another theory and this one I kind of buy into as well. People do tax loss harvesting earlier in the month of December. That means they’ve sold some of their losers, they generate some cash and they have to put it back to work before the end of the year. If you’re a fund, let’s say, and your mandates to be mostly invested and you’ve made a bunch of sales, you’ve got cash in a, in a giant mutual fund, then you’ve got to put that money back to work.

Wes Moss [00:20:14]:
So I could see that moving markets a little bit. You pick your number. So we just listed five reasons. I’d say the answer is number three, four and five, but not one and two. General merriment, extra cash needs to go to work end of the year. I don’t know. I think that’s where we land.

Jeff Lloyd [00:20:31]:
No, I think so. And it’s not necessarily those Year end bonuses going to work.

Wes Moss [00:20:34]:
Have you guys watched that Christmas? It’s the new Christmas movie.

Jeff Lloyd [00:20:39]:
No, I’ve never. This is the first time I’m hearing about it that Christmas.

Wes Moss [00:20:43]:
It’s called that. Or maybe it’s this Christmas. Well, it’s one I haven’t heard either that Christmas or this Christmas. And it’s not about the Santa Claus rally, but it is. It is about the, the guy that is. It’s so. It’s animated. It’s a mix between Pixar.

Wes Moss [00:21:00]:
I don’t know who exactly does the film. I do know the people behind it are the folks that produced Love actually, which is a. It is a great Christmas movie, right? I mean. No, Nobody dislikes love, actually. They even make a joke about love actually. The kids. There’s this routine that the kids have to go do every Christmas and they have to go for the Christmas walk and the Christmas brunch and then they have to do the dishes and then they have to watch the, quote, boring Christmas movie and they show a clip of Love actually. So they’re kind of making fun of themselves.

Wes Moss [00:21:32]:
And then not to give away the movie, but the parents happen not to be home, so the kids get to do whatever they want on that day. And the voice is the dad in succession. Whatever. And he does the. Oh, it’s McDonald’s.

Jeff Lloyd [00:21:45]:
It’s Brian Cox.

Wes Moss [00:21:46]:
Brian Cox. Brian Cox. He does the.

Jeff Lloyd [00:21:49]:
Oh, the McDonald’s commercial.

Wes Moss [00:21:51]:
Yeah, he’s the guy that sings the bom bom bom, whatever. So he’s great. And he’s Santa Claus. I’d say it’s really good. Is it an instant Christmas classic for the kids that surpasses Elf or the Grinch who Stole Christmas? No, but it’s. It’s pretty darn good for a brand new Christmas movie. That’s all I’ll say.

Jeff Lloyd [00:22:11]:
Is Elf your top holiday movie?

Wes Moss [00:22:14]:
No, no, absolutely not. Number one is Chevy Chase. Number one.

Jeff Lloyd [00:22:19]:
National Lampoon’s Christmas Vacation.

Wes Moss [00:22:21]:
Christmas Vacation.

Jeff Lloyd [00:22:22]:
That’s my favorite.

Wes Moss [00:22:23]:
No movie even comes close besides the original stick figure puppet oriented Rudolph the Red nosed Reindeer. That to me is still number two. And then Grinch is number three. The only thing I would say about these new modern movies, and they’re animated, but they’re almost overly realistic. I noticed they’re driving. They have a VW bus thing and they’re driving through this town and it almost looks like it’s real. So it’s almost. I don’t know, it’s hard for my mind to wrap around it.

Wes Moss [00:22:58]:
The only thing I don’t love about that type of animation is the faces are so kind of perfect and there’s not as much emotion on them. It’s a little, I don’t know, I find it a little harder to connect to these. I don’t know what you even call them. They’re not Claymation, they’re not the Rudolph thing, and they’re not Pixar. It’s something. Maybe it’s the more realistic animation, maybe it’s artificial intelligence. It looks like the filters you see on social media, the characters look like they have the cat filter on the big eyes, the perfect faces. But Brian Cox brings it home.

Jeff Lloyd [00:23:33]:
I also do want to give a special shout out to Home Alone. That’s one of my favorite Christmas movies.

Wes Moss [00:23:39]:
Top 10. That’s a top 10.

Jeff Lloyd [00:23:41]:
It’s, it’s a good one too.

Wes Moss [00:23:42]:
All right, so we didn’t get the Santa Claus rally last year. Maybe we get it this year. This is kind of interesting. These are targets. This is where Wall street comes out. They break out their notepads, their iPads, and they give predictions for the future, which can be difficult. The about where the market’s going to be.

Jeff Lloyd [00:24:06]:
Yeah, they’re giving their forecast for the s and P500, where it’s going to their year end price target for next year. So where is the s and P500? Where are they thinking it’s going to end at the end of 2025?

Wes Moss [00:24:21]:
All right, so today we’re, let’s call it, we’re roughly around 6,000. So if we got 600 more points to that throughout the course of next year, that’s up about 10%. And if you go through the targets and these are all the big banks and investment firms, you’re looking at bnp, Goldman Sachs, Morgan Stanley, Barclays, bank of America, it’s a dozen of them. And they’re giving their year end 2025. So a year from now, where do they think the market’s going to be? And they base this on where they think earnings are going to. So they look at S&P 500 companies, they look at earnings growth rates and they say, well, this is what companies are saying. Are they going to achieve it? If earnings grow, let’s call it 8 to 12%, then you could see stock prices reflect that earnings growth. Again, it’s all about earnings.

Wes Moss [00:25:11]:
It’s always about earnings. And then stock prices to some extent will go in that same direction. Not perfectly, but in that direction. And the targets here are anywhere from 6,300 to a little over 7,000. You average them out, you get 66.81, which is a 9.7, let’s call it 10%. So strategists kind of across Wall street are signaling they think it’s going to be a pretty decent year. Well, it’s actually an average year, but still would be a positive year nonetheless. Interesting that not one of them is lower than where we are today.

Wes Moss [00:25:47]:
So that’s interesting. Let’s go back to last year, though. So last year this time, and we, I don’t think we did this on the show, but last year this time, the s and P500 in at the end of December, here we are in 2024. So December of 2023, it was at about 4700. And the estimates were for again, this is a long list of banks. Ubs, Citigroup Deutsche Bank, Goldman Sachs, Stifel, Wells Fargo, anywhere from 4,200. This is the target for now, where we are today. Well, that one was a little off.

Wes Moss [00:26:24]:
Here we are at 6,000, all the way up to the highest was 5,200. So they were all low. The entire list was way low. And the collective list last year was looking at only a 2% gain for 2025, or I’m sorry, they were only looking for 2024 this year. So interesting, right? You get the smartest people, arguably these are Harvard, Princeton, Yale, North Carolina MBAs. And they’re maybe they’re from Auburn MBAs, they’re on Wall Street. They’re the smartest people out there, and they’re big teams of them, and they’re the most prestigious banks. And they were collectively off Trump.

Wes Moss [00:27:10]:
They were just way wrong. So they essentially collectively said the market’s not going up in 2024. And it went up. We’re not at the end of the year yet, but let’s call it 25 to 30%. So they couldn’t be more wrong. So I don’t take a whole lot of stocks when it comes to their predictions, and there was no pun intended, even though you would have punned it on purpose. But I don’t take a whole lot of stock. And what they’re saying about stocks not to say next year can’t be a good year, 2025 could be a really good year, could be a great year.

Wes Moss [00:27:43]:
But just to try to say it’s going to be up 9.7%, that in itself is a, is a preposterous thing to say because there’s so many variables that happen. I think that we more practically would look at over, over longer periods of time. What are we going to do over the next three years? Then I could start to say, well, as long as we have earnings growth of 6 to 10%, then the market should do pretty well. It should be up in that double digit range. We’ll see. But just interesting. So they were totally wrong last year. Maybe there’ll be some reversion to the mean and they’ll be a little more accurate in the year ahead.

Jeff Lloyd [00:28:20]:
Certainly it’s interesting going back to the end of last year and seeing where we are now just from the perspective of what all these quote unquote Wall street experts were predicting for the year ahead. And like you just said, that the highest price target for all these firms was at 5,200 by the end of this year we’re already above 6,000 right now. I wish I had it in front of me. I don’t. I wonder when we actually crossed over 5,200 for the first time last year. Maybe I’ll do a little digging.

Wes Moss [00:28:52]:
They were wrong early is what you’re saying at the break.

Jeff Lloyd [00:28:56]:
These price targets, they’ll kind of continue to change throughout the year. Just because Wells Fargo says we’re going to be above 7,000. They might revisit that in March, April timeframe, bring it up, bring it down. You know, they’re kind of moving targets.

Wes Moss [00:29:11]:
And if we go to historical drawdowns, on average from 1928 until through last year, through this year, the average drawdown was 16.3%. That has not changed all that much. That’s the average drawdown or negative return in the middle of intra any given year on average over the course of history. That’s the pain that we, that we have to endure to get these long term, 8, 9, 10, 11% rates of return. But they’re not yearly. They’re over time. We got to run weather, traffic. Then more Money Matters right here on wsb.

Wes Moss [00:29:50]:
Straight ahead.

Jeff Lloyd [00:29:54]:
It’s.

Wes Moss [00:30:21]:
Good morning. Welcome back to MONEY matters. It’s Sunday morning. Good Sunday morning. Thank you for being with us. I’m your host Wes Moss along with co host Jeff Lloyd in studio. And I think we spent a little bit of time talking about the Santa Claus rally and the newest Christmas movie. It was at least it was number one or two on my Netflix, I think it was Netflix and the kids wanted to watch it.

Wes Moss [00:30:43]:
So we watched that Christmas pretty good. Maybe not a top 10 Christmas movie of all time, but certainly worth. Don’t throw things at me if you don’t like it, but it’s pretty. If you have kids, you gotta watch it. The bigger news this week, Jeff Lloyd in the ever watch we have on the economy and inflation and jobs, we had two inflation numbers this week and they’re both okay. They weren’t super high. It’s still, still Goldilocks. They’re not low.

Wes Moss [00:31:16]:
We didn’t get down to 2%. We’re not over three. We’re. Well, PPI was right at three. But the CPI, the one that again maybe more watched than PPI or the producer price index, 2.7%. That means. What does that mean for you? It means that the Fed will probably continue to lower rates at least a little bit at their next meeting coming up. This week.

Wes Moss [00:31:37]:
Yeah, this week.

Jeff Lloyd [00:31:38]:
It’s this week. And if you look at the probabilities for a 25 basis point quarter of.

Wes Moss [00:31:45]:
A percent cut, pretty high.

Jeff Lloyd [00:31:47]:
They’re about 98% right now. So not a, not a slam dunk. But chances are that’s what they’re going to do at the meeting this next week.

Wes Moss [00:31:53]:
Now what that will do, the immediate effect of that and I think this is important and this is also I think a great example of how low rates goose the economy. Imagine you’ve been sitting money in a money market and you’re thinking I had 5% a year, I’m not overly motivated to move it. And then now it’s been, then it was at 4,7 and then now it’s been at 4.5, it’s still 4.5. Now they lower again, it goes to 4 and a quarter and they lower again, it goes to four. Now what does that make you that you think, wait a minute. And we’ll take that even to a more extreme. Let’s say rates are 2%. Do you want to now take that capital out of the money market and put it to work, invested somewhere? And that’s another very real world way of thinking.

Wes Moss [00:32:36]:
If I’m okay to sit money in a money market for a while, as long as it’s giving me, quote, something, but it starts to drop into the 3 range and the 2 range again because the Fed is lowering interest rates. That’s, you can see how that will push money out into the economy. It’ll get invested in stocks, it’ll get invested elsewhere because people are looking for a higher rate of return. So it’s again, I think a good example, real life of how that can impact the economy. And you as you’re thinking, hey, wait a minute, what’s my money market paying? Well, it’s still pretty good But a couple more fed fund cuts and your money market in 2025 might not look as good. We’ll see. To be determined as far as the list is concerned. Jeff Lloyd, what’s the number one culprit category in inflation?

Jeff Lloyd [00:33:27]:
We’ve talked about this item quite a bit on money matters, but the most expensive, at least from a year over year increase in price. Eggs.

Wes Moss [00:33:36]:
Come on.

Jeff Lloyd [00:33:37]:
37 and a half percent more expensive now than they were a year ago.

Wes Moss [00:33:42]:
I’m over eggs winning this every time. I’m New England Patriots. It seems like every month it’s eggs. It’s eggs. It’s eggs.

Jeff Lloyd [00:33:50]:
How about some real life inflation?

Wes Moss [00:33:52]:
We gotta run.

Jeff Lloyd [00:33:52]:
Okay, we gotta run. Should we’ll come back at the beginning of the hour with some real life inflation that hit my wallet this past week.

Wes Moss [00:34:01]:
Oh, that’s a good tease, Jeff Lloyd. We’re going to run to news, weather, traffic, the more money matters right here on 95.5ws. If you’ve ever done a Jane Fonda workout or if you remember as a kid, Rocky running the steps and if Michael keaton is still Mr. Mom to you, then guess what? It’s officially time to do some retirement planning. It’s Wes Moss from Money Matters. Weren’t those the good old days? Well, with a little bit of retirement planning, there are plenty of good days ahead. Schedule an appointment with our team today@yourwealth.com. that’s why you are your wealth.com.

Wes Moss [00:35:05]:
it’s WSB’s Money Matters with Wes Moss, certified financial planner and chief investment strategist from Atlantis Capital Investment Advisors. Wes talks to you about investing and saving for the future. Good morning and welcome to Money Matters. Here it’s Sunday morning. Welcome. Thanks for stopping by. I’m your host, Wes Moss. It’s just that we’re not used to doing the 10 o’clock hour because we don’t have bulldog brunch this weekend.

Wes Moss [00:35:31]:
But we do have Money Matters. Back to two hours. Jeff Lloyd in studio as usual. Great to have you here.

Jeff Lloyd [00:35:39]:
Good to be here. Missing some college football this weekend. I know we had a game yesterday. Army, Navy, we got NFL today. But I’m ready for some college football playoffs. We did talk about the dogs. Number two, we back in it.

Wes Moss [00:35:54]:
And we did talk about the biggest story in college football. It’s not the dogs, it’s Belichick coming to the University of North Carolina with a 5 year, $50 million, $10 million a year contract. Takes the nil money from 4 million, which doesn’t sound like a lot anymore. A year ago, that sounded like a lot, all the way to $20 million. So they’re going to be calling. If you’re a UNC alum, you’re going to be getting emails that are asking you for money.

Jeff Lloyd [00:36:24]:
The bill is due.

Wes Moss [00:36:25]:
The bill is due.

Jeff Lloyd [00:36:26]:
The bill is due. Come on, Chapel.

Wes Moss [00:36:28]:
Bill is in town. Now, I teased to that. I don’t know if you caught that, Jeff Lloyd, but you teased to inflation. You teased to higher prices. It came from an email that was asking you for more money. And I get the. It’s when you told me that it was the very first email that I saw when I opened my email. So I got it, too.

Wes Moss [00:36:50]:
And this is a great example of a lot of different things economically. One, you’re gonna talk about the numbers and then we’ll talk about what we. The trend of what this means.

Jeff Lloyd [00:37:00]:
Yeah. So we got the consumer price index figures from the government this past Wednesday. We also got the producer price index inflation figures last Thursday or this past Thursday.

Wes Moss [00:37:12]:
Your typical eggs always at the top. Yeah, eggs are up 37%.

Jeff Lloyd [00:37:16]:
37 and a half percent overall.

Wes Moss [00:37:18]:
I like the ham numbers better. Up 2.2%. That’s okay, that’s.

Jeff Lloyd [00:37:22]:
That’s a little more manageable. That’s healthy. Healthy inflation.

Wes Moss [00:37:27]:
Beef steaks up 5. I’ll take it reasonable, but 37% for eggs Mal producer. Mally. It seems to think it’s because of some national diet trend, is that people eating more protein. Well, then she’s not in her head.

Jeff Lloyd [00:37:42]:
Yes, that’s exactly what I mean.

Wes Moss [00:37:44]:
Then beef would be up 30. That’s protein, isn’t it? I think it’s because they’ve had a hard time getting their hands on chickens.

Jeff Lloyd [00:37:51]:
The avian flu.

Wes Moss [00:37:52]:
Yeah.

Jeff Lloyd [00:37:53]:
Is wreaking havoc for the chicken and eggs industry.

Wes Moss [00:37:55]:
Corn feed, you got flu. Chickens. This is less chickens. That’s why.

Jeff Lloyd [00:37:59]:
Anyway, so there are a hundred items listed in cpi, from hundreds to sugar to gas, to watches to rent or shelter to health insurance, daycare, TVs, pet services. But I got a real life inflation email from YouTube TV.

Wes Moss [00:38:23]:
YouTube TV.

Jeff Lloyd [00:38:24]:
YouTube TV.

Wes Moss [00:38:25]:
Yep. What was. How much more do they want from you?

Jeff Lloyd [00:38:28]:
It said we’re updating our monthly price from 72. 99amonth to 82, 99amonth. Now that’s $10. But that’s 14% more than what I was paying. That’s real inflation.

Wes Moss [00:38:43]:
That’s one. It’s one year.

Jeff Lloyd [00:38:45]:
And I have to say. And.

Wes Moss [00:38:47]:
Well, arguably, technically, it won’t show up until next year. You won’t see that in the numbers until. Well, no, it’ll. Because you pay that monthly. It’ll show up.

Jeff Lloyd [00:38:59]:
It’s starting January 13th of 2025.

Wes Moss [00:39:02]:
So it actually will show.

Jeff Lloyd [00:39:02]:
So not yet.

Wes Moss [00:39:03]:
It’ll show up.

Jeff Lloyd [00:39:04]:
I know that inflation is coming. It’s coming and it’s been coming for a while now. Back when YouTube TV was first launched, this was back in February of 2017. Do you know how much it costs per month?

Wes Moss [00:39:16]:
I want to say something like 39.

Jeff Lloyd [00:39:18]:
Like $39, 34, 99amonth.

Wes Moss [00:39:21]:
Yeah. And this to me is the bigger trend of these massive behemoth companies that know they’re offering you something that you’re gonna. That’s good and you’re just gonna get hooked on. I’ll remember the first time I heard about YouTube TV. I was, I was actually playing golf and I was complaining about my cable bill that had just gone. Just stacked on, stacked on stacked, hundreds of dollars. And I was saying, hey guys, I think I’m going down to cable Internet only. And I wanna go subscription TV only.

Wes Moss [00:39:55]:
And I remember one of my buddies goes, YouTube TV. He goes, YouTube TV. It’s 34 bucks a month. You can pretty much watch anything you want. Nothing’s excluded. And I did it. Now, I will say the first year it was. There was some kinks in it.

Wes Moss [00:40:11]:
There was a. I remember watching. It was like a club. It was maybe a national championship game. I remember a Clemson football game. They couldn’t handle the streaming so they actually, there were some quality issues. And that was basically it. The starting the next, I think in 2018, 2019, it was, it was fine.

Wes Moss [00:40:28]:
So this is a great example of them having the war chest to underprice what they know is going to be worth a whole lot more money. And they do it for a long time by a couple of years. And then 34, then it’s 44. You still don’t notice it. Then it’s 54. Well, it’s been 79 for the past year. Now it’s going to be almost 90. So they just boil you.

Wes Moss [00:40:56]:
They slowly boil you until. Wait a minute, I’m not. Now that’s 80 bucks or 90 bucks. And the other subscriptions have gone up and the next thing you know, now you’re locked in just like I was when it was cable. It was stacked on top of stacked on top. And here we are. And now I’m stuck.

Jeff Lloyd [00:41:13]:
I mean, it might flip flop. Is cable going to be cheaper now moving forward?

Wes Moss [00:41:17]:
I don’t know. I don’t know.

Jeff Lloyd [00:41:19]:
But I kind of like to think if you think back to 2017, you’re paying 34.99amonth. That’s kind of like YouTube TVs, get in the door price.

Wes Moss [00:41:28]:
Yeah.

Jeff Lloyd [00:41:29]:
Get you in the door, get you subscribed, get you on that auto renew. And then I’m not saying it happens slowly, but over those seven years, the price for a monthly subscription is up 137%.

Wes Moss [00:41:45]:
Yeah, that’s real. That’s real. Real life inflation. Now, it’s not a necessity. Right? Of course you don’t need to have YouTube TV. Well, if you want to stay any bit of connected to the world, you got to have tv. Right. So if you look at the common man index over the.

Wes Moss [00:42:00]:
Which is that really essentials? Only if you take from the cpi, Jeff, you just mentioned there’s hundreds of items and there’s dozens of categories. But if you just take food, shelter, clothing, utilities, insurance, we think of that as the necessities. And look at what inflation has done there since 2021. It’s a 20% rise in what we need to be buying and the necessities wages though only up 16. So we still, what we’re bringing home from our employers collectively as a country still is not kept up. And that’s a probably. If you had to select one word that encapsulates the results of the election, I don’t know of a better word than inflation because that’s it made America feel behind. Remember the studies in 2023 and 24 that said we’re in a recession when we were growing 2 or 3% GDP? Wait a minute, that’s the opposite of a recession.

Wes Moss [00:42:55]:
But don’t tell that to Americans because they feel they. If you feel like you’re a recession in a recession, might as well be in a recession. And that’s how 50% plus of America felt even though we were growing at 2 to 3%. And it’s because of this right here. It’s because of wages not keeping up the money. You bring it in, it’s growing slower than everything around us. And that is a tough spot for America to be in. So the Fed’s trying to cure that.

Wes Moss [00:43:20]:
They’ve at least brought down the rate. They haven’t done anything to solve the past inflation. It builds. And unless we get deflation and prices get cheaper, which collectively is very rare and is not going to happen unless you’re looking at flat screen TVs, it’s not going to get any better. So the only way to fight against that not the only way, but one of the main ways to fight against that, of course, is to invest in areas that can inflate along with inflation at a higher pace. Publicly traded equities, of course, that’s probably the category we talk about the most. Real estate’s probably number two, the commodity sector, if you’re in energy, oil, any sort of commodities, that can be a nice hedge against inflation. And that’s why we invest, to protect our purchasing power and one of the.

Jeff Lloyd [00:44:04]:
Better hedges that we’ve seen over time from a public equity standpoint, investing in dividends. And we know going back to, we ran a study going back to 1870, so we’re going back over 150 years. Average inflation rate is a little bit over 2%. Average dividend growth 3.7%. So almost double the rate of inflation with dividends.

Wes Moss [00:44:29]:
Say that. Wait, three point.

Jeff Lloyd [00:44:30]:
Say that number again, 3.7. That was the average dividend growth over that time. Almost double the rate of inflation, which was a little over 2%.

Wes Moss [00:44:41]:
Well, okay, so that’s long, long, long, long term. I was just looking at dividends per share in the S&P 500 over the last call at 20 or 30 years or so, and it’s been closer to 6 to 7%. The companies within the S&P 500 have raised the dividend, but guess what, we’ve had more like 3% inflation. So it’s still somewhat double whether you look at a short term period of time or a really, really long period of time. Now that brings us to something we have done in a long time here on Money Matters that I used to love to do. Then we kind of got away from it and now we’re going to be bringing it back and that is answering questions. I’ve done a bunch of shows over the years with the Clark Howard team. I’ve known Clark and been buddies with him for really since I’ve been to WSB, call it 15, 16 years.

Wes Moss [00:45:32]:
Also, we’ve worked with Clark’s producer, Krista Dibias for many years now. Krista has helped us launch our podcast several years ago, the Retire Sooner Podcast. And I’ve been helping answer some of the investment questions on Clark’s podcast. And I’ve been doing that now for the past year off and on, helping him filling in if these questions get a little more specific. And we just started doing that. So starting in 2025, right around the corner, I will be once a week or so and I don’t know if that we’ll have this perfect schedule but that’s the way it’s supposed to be. I’ll be on Clark show with Krista Answering, having a whole show dedicated to the investment questions that come in and there are a ton of them, which is great. And they’re from all over the country.

Wes Moss [00:46:23]:
There’s it’s Alabama, Texas, Pennsylvania, Oregon, Alaska. They’re from all over the place. And some states have some nuances that are pretty interesting. So I wanted to bring that up here one because that’s something new that’ll start in 2025. I’m also going to be having Krista on the show here on Money Matters doing that same exercise because think it’s fantastic to get your questions and or Clark’s questions and answer them live here on the air. So of course, starting in 2025, right around the corner, you can email us questions or you can go to our website, YourWealth.com say, hey, love this answered on the air and we’ll do it. And we will do one of those when we come back from break. We’ve got weather traffic.

Wes Moss [00:47:10]:
Then a question all the way from a state employee in Alaska which has some really fascinating nuances to that state and the economics behind it. We’ll answer that question when Money Matters returns. Stay tuned. Good morning and welcome back to MONEY Matters here. It’s Sunday morning and we before we went to a quick break, we talked about answering questions. We have a great one from Alaska that has fascinating implications. And just because we’re here in Georgia doesn’t mean that’s not an interesting question. And some of it applies to most, I think of us listening here on Money Matters.

Wes Moss [00:48:12]:
So we’ll do a shorter question. Jeff Lloyd, if you can ask it, we’ve got one coming from Gerald.

Jeff Lloyd [00:48:19]:
This is from gerald in Alabama. Two questions. First, I’m retired with a 403B and a 457B with my old employer invested with Transamerica. Both funds have been doing okay with a mix of stocks and bonds. I am 69. I plan on leaving.

Wes Moss [00:48:36]:
You’re 69 or Gerald? 69.

Jeff Lloyd [00:48:38]:
Gerald. Okay, Gerald. Gerald is 69. He plans on leaving the funds alone until he has to start his RMD at 73. Does he need to be converting them into anything now or wait until the year he has to start taking? Second, he has a small pension in Social Security. He has a little left over after all his bills. What is the best thing to invest? Put his money in.

Wes Moss [00:49:05]:
All right, Gerald from Alabama, here’s my thought and this is a good question for the Season we’re in. It’s the end of the year. And what are. What if you’re 73 or you’ve already, let’s say, and you’re, you’re. You’ve got to take an RMD this year or you were already in the RMD treadmill and you had to take it because they’ve raised the age for it and you’re already doing it. You got to do it by the end of the year. Right. The required minimum distribution.

Wes Moss [00:49:29]:
And it in itself is something that you gotta keep track of. And it’s a big penalty if you don’t do it. So if you don’t take your. What’s required by the IRS, then you’ve gotta pay a 50% penalty, which is massive. So if you need to. If your RMD required minimum distribution is $10,000 and you don’t take it, owe the IRS another five grand. So it’s a really big penalty and it’s around, particularly your first year, it’s around 4% of the value. And I’m rounding here of all of your IRAs.

Wes Moss [00:50:03]:
So imagine if, like Gerald has a 403B and a 401K and imagine he added, had another 401K somewhere else from an old job and he has all these different retirement plan accounts. Well, your required minimum distribution amount comes from all of them combined. So in order to do this, you have to keep track of all of them and add them up and make sure that you’re logging into different accounts and then distribute. Now, you don’t necessarily have to distribute from each one as long as you’ve distributed the total amount that needs to be distributed. But it gets confusing. And I just, I see it. Here we are at the end of the year, I see it. And people scrambling and worried, wait a minute, is there’s another retirement account that you’re not helping me with? Is it somewhere else? And I don’t.

Wes Moss [00:50:51]:
So the answer is very simple here. You got to consolidate. Gerald needs to consolidate them into one, I think a one retirement account. That makes his life a lot easier. Secondly, I don’t see any immediate need to, particularly four years out, for him to do anything differently that’s not already his appropriate investment prescription because his RMD is coming up. Sometimes I’ll get the question, hey, should I put some money in cash so that I have it for my rmd? The answer is I don’t think so. I think that you don’t need to change your investment strategy, philosophy or allocation just because RMDs are coming up. In fact, a lot of people will take a monthly amount that satisfies their RMD so they can keep their money working for them and invested over time.

Wes Moss [00:51:37]:
And that’s a question from Gerald in Alabama. We’ve got a of newsweather traffic. Then we’re going to go to another question, this one from Alaska right here on Money Matters. Straight ahead.

Jeff Lloyd [00:51:57]:
It’S WSB’s Money Matters with.

Wes Moss [00:52:00]:
Wes Moss, certified financial planner and chief investment strategist from Atlantis Capital Investment Advisors. Wes talks to you about investing and saving for the future. Good morning and welcome to Money MATTERS here at Sunday morning. Thank you so much for tuning in your host, Wes Moss, along with the great Jeff Lloyd, co host who joins me in studio. We just wrapped up a question that used to be the almost the only thing we did on Money Matters back in the day, as my children would say. And we’ve been more topical over the last couple of years. And starting next year, starting in 2025, I’m going to be bringing in Krista Dibias, who is and maybe that’s why we mess up her name. KRISTA dibias, dbs who is and I call her Dibiase.

Wes Moss [00:52:49]:
It’s Krista Dibias. And I’ve been helping Clark show with some of the more investment heavy financial planning questions and been doing that for off and on here and there for a year or so. We’re going to do that more regularly starting 2025. So I’ll be on his podcast, the Clark Howard Podcast, throughout the call it once a week, a couple times a month, answering more of the questions from his listener base and then some of them really translate to money matter. So I kind of wanted to bring in some of the more interesting ones and we can talk about them on the show as the topics. And that’s exciting. So that’ll be in 2025. So you’ll actually hear Krista right here on the radio again.

Wes Moss [00:53:29]:
She grew up in radio. Clark was on radio forever and now he’s podcast primarily. So she’s going to be boomeranging to the radio studio, which is pretty cool. And she is one of the great producers of financial content in the nation. And I’m excited to have her back on radio and bringing really interesting questions that I think really and the reason I think I’ve gotten a lot of feedback over the years, people like to hear questions is because there’s a little bit almost every question, there’s a little bit of you in that question and whether it’s not maybe it’s not. You’re not. That same question isn’t burning in your mind today. It might one day.

Wes Moss [00:54:10]:
And you may have already thought about this question in the past and you think, oh, wait a minute, that reminds me of something tangential. And that’s why I think questions are really helpful. So if you’re tuning into money matters and you’re looking for to be a happy retiree and to be on the right track, then I think these questions will help. So we’ll start. Here’s another example of a question and I was fascinated by it because I had to do a little research to figure out because this happens to be in a far, far away place.

Jeff Lloyd [00:54:39]:
This question is coming from Vanessa all the way from Alaska. She asks. Both my husband and I are state employees with no pension. Since our state doesn’t participate in Social Security, we will not receive Social Security benefits when we retire. Both of us are in our late 40s. Since we don’t have any fixed income when we retire, how would we allocate our retirement funds? Should we do anything different than those who at least part of their annual expenses covered by fixed income. We have had this concern for quite a while and even lost some money getting in and out of bad annuity products.

Wes Moss [00:55:19]:
Vanessa, what’s she doing?

Jeff Lloyd [00:55:21]:
Currently we don’t have any annuity or insurance products other than term life insurance.

Wes Moss [00:55:27]:
Okay. So there’s a couple of really interesting things when it comes to the state of Alaska is very unique, particularly in this situation where if you’re a state employee, you don’t get any Social Security. I mean that I don’t. There may be some other states that are like that, but that was a little eye opening to me. So think about every state employee. They don’t get a Social Security period. That’s a big part of retirement planning. So that’s what she’s worried about.

Wes Moss [00:55:51]:
That’s what he or Vanessa and her husband are worried about. But way back in 06 they went from and the whole world’s been doing this over the past 30 years, but in 06 they did it. The state moved from a defined benefit plan, which is a good old fashioned pension. You define the benefit, which is the monthly amount to a defined contribution plan, which is, hey, guess what, you get to define what you are going to contribute to your retirement. So it’s on you. Now we’re not giving you a pension and it doesn’t mean they don’t match. And that’s one of the upsides of Vanessa’s situation in Alaska. But again no Social Security for state employees, and they’re one of the very few states that do that.

Wes Moss [00:56:33]:
Now, the non state employees generally do have Social Security. So this is just for the state employees. So that’s a big hurdle or a big challenge, let’s say, for Vanessa and anybody that is. Think about this. We had years where a big chunk of the nation, a big percentage of the nation had pensions, and then we lost those as well. So we’ve been, hey, how do you make up for that? Again, defined benefit, defined contribution, our own savings. Same thing with Vanessa. She’s losing something that.

Wes Moss [00:57:02]:
Where she doesn’t have Social Security, that income stream, she’s gonna make it up. One thing that is very unique about Alaska is they have something that is a little bit like Social Security. It’s called the permanent fund. I remember learning about this in my early years in the investment industry, thinking, what a great name for a fund, the permanent fund. And my recollection that was that it was essentially from the oil money, that there was so much oil revenue in the state and it was a tough place to live, and it was expensive. So it’s a way to be able to stay in Alaska and live. And it’s called the permanent fund. And they call it the.

Wes Moss [00:57:40]:
The pfd, the Permanent fund dividend. And essentially anybody at any age like you can be one is, I think as long as you live there for a year, as long as you’re one, you’re. You’re a year old or older in the state of Alaska and you’ve been there for a year, you get a dividend from the permanent fund. It’s like, it’s something like $80 billion fund. And most people in Alaska get it. Two years ago, it was 1300 bucks. Past year was $1700. So it’s not that different than Social Security.

Wes Moss [00:58:09]:
It’s not as much. Most people’s Social Security is a little bit more than that, but it’s not a small amount either. So that’s. That makes up some of the gap for Vanessa. And again, she’s got big inflation risks. She doesn’t have social. It’s one less income stream, meaning that that doesn’t go up with inflation because she doesn’t have it. So she’s.

Wes Moss [00:58:28]:
She’s at risk for inflation. And Alaska isn’t cheap. Right. The only thing there that’s cheap is housing, and that’s inexpensive in the state. The median home price and lasts a lot less than the country. From what I can tell, it’s in the $250,000 range versus over 400 for this median the United States. So housing is cheap, but food is through the roof, utilities are through the roof, transportation through the roof. Those are all really expensive.

Wes Moss [00:58:59]:
So if you start thinking about, well, all right, she’s got to make this up. Where does she need to get to? Well, the happy retiree we know from our research needs to, and these are inflation adjusted numbers, they need $700,000 liquid money. That’s the median. The means, about one and a quarter million. And the good news about Vanessa is she, it sounds like she has some time, right? Did she say how old she was?

Jeff Lloyd [00:59:24]:
They were both in their 40s.

Wes Moss [00:59:26]:
All right, so let’s see, if she’s 40, she’s got 25 years to get to that same savings. Now she probably has some savings now, but if she were starting from scratch at age 40 with 6% rate return, thousand bucks a month at a 6% rate of return over that period of time gets you to about $700,000. The math works out pretty well. Now, it’s a long, It’s a long. That’s, that’s like a marathon slash. Iditarod, which I believe they do in Alaska. It takes about 1500 bucks a month. If she was able to do that 25 years, 6% rate of return gets to about a million.

Wes Moss [01:00:01]:
So she can still do this, but it’s much more on her than, it’s even more just on her and her husband to do so. Again, number two on our list for happy retirees. Financial habits, pay off the mortgage. Three multiple streams of income. The PFD does that right out of the gate and her investments have to do the rest of the income stream. So here’s the. I would say the good news is that if you’re part of the Public Employees Retirement system in Alaska, I think they call it PERS and TRS, just like TRS here, Teachers Retirement System. They make you put in 8% of your income.

Wes Moss [01:00:40]:
The good news is they give you a pretty big match. So they, they match anywhere from 5 to 7%. So if think about that. You put in 8, they put in 7. Now you’re at 15% and that’s huge. There is one layer on top of that. Call that the icing on the cake is they have a separate plan Alaska for the state employees. It’s called a 457 plan.

Wes Moss [01:01:00]:
It’s a lot like a 401k plan there. She can save up to another 23,500 bucks. Once she hits 50, the number goes up even higher today. That’s 31,000. And when you’re within three years of retirement, these are some of the new 401k rules happening next year. You’re going to see some of these limits go up again. This is particularly for a 457, but if you’re within three years of retirement in Alaska for this plan, you can double that amount. The 23,000 doubles to 47,000.

Wes Moss [01:01:36]:
Now, granted, she probably can’t save that much, but the limits are very high and I think that’s important for everybody to know. Starting next year, the limits start to, they continue to go up. So that’s something for all of us to consider when it comes to our 401k plans, our 403b accounts. I think from an investment standpoint, Jeff Lloyd as you’re nodding your head over there for Vanessa, that she should probably be, she’s gonna, she’s probably better off with a more stock heavy portfolio. One, because she’s in her 40s and she’s young. Two, it’s on her to make these investments really work and it’s, it’s less likely to do so. She’s ultra conservative and just picks the stable value fund inside of her retirement account. So I think that for her, she needs to be an equity investor.

Wes Moss [01:02:26]:
She needs to utilize the DC plan that they have to find contribution and probably use that supplemental plan, a 457 plan, to get to the point where she’s got enough money that she doesn’t need anybody else. She doesn’t need Social Security. She’s not going to get it unless she moves to the private sector. But she will get a payment from the permanent fund. Now, hopefully the permanent fund is actually permanent fossil fuels, whether we like it or not, not going away anytime soon. I don’t know if they continue to fund the permanent fund in Alaska, but it’s a lot of money already. 80 billion is going to go a long way to continue to give people checks. And that’s part of her income stream.

Wes Moss [01:03:07]:
That is one income stream that in you can retire sooner than you think. The book about happy retirement and what the happiest retirees. No, we say, we say multiple streams of income. It’s one of the key financial habits of happy retirees. I never added in the pfd. JEFF LLOYD well, I never put that in there. Never in the book.

Jeff Lloyd [01:03:29]:
You talk about Social Security being one now. There’s a lot of talk whether that’s going to be here forever. But I kind of like this permanent fund dividend that Sounds a lot better.

Wes Moss [01:03:43]:
Sounds a lot better, doesn’t it?

Jeff Lloyd [01:03:44]:
Sounds like it’s not going anywhere and Social Security is not going to go.

Wes Moss [01:03:47]:
There are no guarantees in this world. But when you say permanent, that sounds like it’s going to stick around for quite some time. We are not going to stick around past the 11 o’clock, but we’re still here for a little while. We have weather traffic coming up and then more Money Matters right here on wsb. Stay tuned. Good morning and welcome to Money Matters here at Sunday morning. You’re tuning in to WSB Radio. I’m your host Wes Moss along with Jeff Lloyd, co host for Money Matters.

Wes Moss [01:04:45]:
And again, starting in 2025, right around the corner, we’re going to be doing more Q and A. We’re going to be bringing Krista Dibias here into the studio into the show to ask questions. I’ve been helping Clark Howard do that over the last year off and on. I’m going to be doing that more regularly in 2025. So working more with Krista, they get just flooded with financial questions and they’re kind enough to ask us to help answer those questions. And I think some of them relate so well to the audience here. Just like the Vanessa in Alaska, even though we’re here in Georgia. One thing that does apply to everybody through that question, that reminds me and Jeff, we just looked this up throughout the break to get the new numbers for 2025, there’s a whole new category, right? You’ve got your 401k max.

Wes Moss [01:05:34]:
If you’re up to 50, then you’ve got a booster starting at age 50. And now starting next year, 2025, there’s a booster. Booster. If you’re at 60 plus, what are those numbers in 2025?

Jeff Lloyd [01:05:48]:
Yeah. For 2025, max contribution to a 401k, $23,500.

Wes Moss [01:05:54]:
That’s quote the normal.

Jeff Lloyd [01:05:55]:
The normal. Now if for employees age 50 and over, you can do a catch up for 7,500 additional dollars.

Wes Moss [01:06:03]:
All right, so now we’re at 31,000.

Jeff Lloyd [01:06:05]:
Now we’re at 31,000 if you’re 50 plus. Now for employees age 60, 61, 62 and 63, they have a higher catch up contribution limit and that’s 11,250 instead of that.

Wes Moss [01:06:22]:
So they really have, did they have to throw a 250 in there?

Jeff Lloyd [01:06:26]:
They did. You know, inflation adjusted they couldn’t make.

Wes Moss [01:06:29]:
It a round number. So now that’s 34,750. Well, that’s easy to remember. It’s 23,500, it’s 31,000 and it’s 34,750.

Jeff Lloyd [01:06:43]:
No wonder we always have just rolls off the tongue.

Wes Moss [01:06:46]:
In my mind, the 401k contribution is still 15 grand just because it’s obviously not, but that’s what it used to be and then it continues to go up and up and up for inflation.

Jeff Lloyd [01:06:56]:
So you can just a nice round number.

Wes Moss [01:06:59]:
It’s a nice round number. And I think that we would all be better off if these rules were just nice round numbers because we would remember them. So the good news is you can defer more of your income into a retirement Savings account. Remember 401k. One of the great things about it, yes, it grows tax deferred over time, but it comes off the top. So if you’re making $100,000, you put $10,000 into a 401k, then you’re taxed on 90, not 100. That’s why they call it pre tax money. And it’s getting to be really significant.

Wes Moss [01:07:33]:
It’s a big number now. So the again the pendulum has continued to swing towards the responsibility is on. You define contribution, you get to define it. There’s no more defined benefits, which we’re good because companies don’t want to define any retirement benefits for you. They want you to be the master of your own retirement. And that’s what we’re here on Sunday morning mornings to help with. With that, you can find me and Jeff Lloyd, easy to do. So@yourwealth.com you can email us your questions, you can reach out and say, hey, we’d love some help, we’d like to meet, we’re happy to do so.

Wes Moss [01:08:10]:
You can find us again@yourwealth.com that’s y o u r wealth.com Jeff Lloyd and everyone tuning in. Have a wonderful rest of your Sunday..