Joe Larsgard, who is host of how to Monday, how to Money Sundays twelve pm to two pm here on KFI, and his social address at how to Money.
Joel.
Good morning, Joel, morning Bill. We're such happy campers. Here is a story. And the way it works is because I'm incredibly lazy. I don't come up with the stories. I ask Joel, Okay, what do you want to talk about? What's in your wheelhouse? And if I like it, we talk about it. If not, I say, now we're going to do something else. In any case, a story about Amazon that one in eight wardrobe purchases comes from Amazon.
Now a quick aside.
I happen to be married to someone who lives for buying from Amazon and buys clothes, and we'll buy three different sizes and fifteen different colors.
And returns ninety percent of the boxes.
And and I'm serious, I had to get an extra garbage pant. I had to get an extra one of those garbage cans just for recycle because of the boxes that I have to take apart and put together.
I mean, it's crazy.
So the point is it's costing us all money.
But how is that possible?
Because I'm paying for you know, the Amazon Prime, and I get free obviously, free returns, et cetera.
So how does it cost you money if I'm paying for it?
Yeah?
All right, So that's a good question, and one your partner is not alone in that Amazon obsession. And it's fascinating, like this status came out that like, people buy way more clothing on Amazon than they even do at Walmart, right, and think about Walmart has these physical stores and an online presence all around the country, and people are buying more than twice as much on Amazon than they are via Walmart, both physical and online. And so it's just
it's crazy to think about that. And Okay, how why is this costing us money? And I think it's exactly what you refer to with the Amazon Prime. It's like frictionless and people are like, I mean, I wasn't planning on buying a new skirt or a new T shirt or some shorts or some socks or whatever it is today, But my goodness, it's so easy. And I was on Amazon anyway, and it feeds me, It fed me this thing.
It popped up and I'm like, yeah, I was about to check out, but yeah, I guess I could use some new socks, throw them into the cart, you get them shipped to your house, and for most people, amazing if your spouse actually does make those returns, Bill, I have to make the returns at my house because nobody else is doing it, and sometimes if I don't do it, it doesn't get done and you're stuck with that.
Good.
So, I just think that frictionless reality that Amazon has created in so many of our lives has led to just consuming more, buying more stuff, and buy stuff that we otherwise wouldn't have bought.
Okay, fair enough, But how again, I'm going to ask the question, I am paying for the service of being able to return, how does it cost me? Or how does it cost you money? Because I'm doing it and paying for it.
Okay, so when you're making those returns, it there's a cost to the retailer.
Right.
So even if you're buying stuff and let's say your spouse buys in a bunch of different sizes, a bunch of different colors and says I'm probably gonna keep twenty percent of it.
And I'm going to return the rest.
Well, the return looks like it's free for you if you drop it off at the right place, you jump through the right.
Hoops, and you have a package correctly.
But and so that feels all nice and good, but it's obviously it's put into the price of the items that we're buying. So everything that we buy costs more because of the friction list returns also that we're able to get. And it is nice where it looks like it's free, but it is. Of course, it's functionally put into the price of the goods that we're buying.
Yeah, mean, that makes sense, But that's second, third tier down the road, and it just sort of disappears. And let's say I'm buying a twenty dollars item where twenty dollars normally would am I? Am I paying twenty two dollars for it? Is it a substantial amount? Is there real money involved in this?
Yeah?
I mean I think so.
There's Actually there's another interesting story I saw in the New York Post this week, and what they were saying is, like the way that people in the United States have gotten accustomed to making returns, many of them have gained the system. And so it's not even just the fact that you can return something you decided you didn't want.
It's that people are.
Saying are essentially trying to cheat the system, returning stuff that they otherwise wouldn't be able to return. Some people are taking items out of electronics, returning the now unusable, unworkable electronics, and retailers aren't catching it. And so I think, what this is what's going to happen because of fraudulent returns and because of the growing number of overall returns
which which eats into the bottom line of retailers. I believe in the very near future, similar to dynamic pricing for tickets that we buy, you're going to have like dynamic return policies. So there's gonna be one return policy that Bill Handle is held to, and there's another return policy that I'm held to by certain retailers based on the way I have returned goods that I've purchased from that retailer in the past.
Well, so it's interesting, and again this is because of my experience here. When a product is let's say you return a product that's defective, it's the honor system because you're returning a product you don't like it, and so you call the retailer and they say keep it. Just keep it, well, refund the money, just keep it. And it really is an honor system. It's much like you know at offices where you have those little boxes of candy bars and snacks, where they say it's a buck
and it's the honor system. There's no way to check. And I'll tell you what I do, and people have seen me on the show. What I do is I grab a candy bar and take money out of the box.
See you're the problem. You're the problem here.
See okay, good enough, Joel.
We talk a lot about retirement because, first of all, you you rightly are concerned about.
It, because it is no fun being old.
No one wants to put the address of a dumpster when receiving Social Security checks. And there is a general rule of four percent. I mean, at the end of it all, when you retire, you should pull out four percent of your savings, retirement plan, etc. And that theoretically keeps you going forever until you die. Actually, the secret is to know exactly when you're going to die, and if you can calendar it, you spend all your money until that last day.
That's the magic.
But let's talk about that four percent rule because frankly, in my life. I'm looking at the five percent rule and I plan on doing that with my retirement when I do, so, tell me what's going on and tell me how wrong I am.
Yeah.
I mean, if you go see a psychic, you're right and you can find that exact date of death. It's so much easier to plan for retirement. But because we can't or I haven't met anybody that can accurately predict that yet, kind of have to like do your best and go buy rules of thumb. And this four percent rule of thumb has been around now for many decades.
And this guy, Bill Bengen, he did like a bunch of studies about market returns and inflation and longevity, and hey, how long will you pull your portfolio last your entire retirement if you're drawing down four percent of it? And that's basically what was the magic number that he found was like, with inflation and potentially inconsistent market returns, the vast majority of people are going to be okay taking four percent of their overall portfolio out every single year.
And and so that.
Has been kind of it's interesting because it got rounded down even the original rule he had found that it was like four point one five percent, but he rounded it down to four just because it was it's gonna stick in people's minds better. Well, he has gone back to the drawing board and ran more numbers, and you
said five percent. Actually it's closer to five percent now, according to Bill Bengen, he says, four point seven percent is what you can more likely take draw down from your portfolio every single year in retirement and not run the risk of exhausting it.
Yeah, and that leaves, and then the principle is left.
You start with a million dollars, you pull out five percent, that's fifty thousand dollars a year. Add so security to that, let's say three thousand dollars a month. Now you're an eight thousand dollars one hundred grand a year. I mean, you're going to be fine at one hundred thousand dollars a year. I mean that really, you can really do a nice job with your dumpster at one hundred thousand
dollars a year. But you know the other issue. I talk to some money people and they say, you may want to take out more initially because at the end of your life, as you get older.
You're not going to spend as much money.
Well, that's the other thing. There's so many things to factor into this. That's why this is also like a rule of thumb, not an actual hard and past rule. And there's just so many different things that that people have to consider when they're trying to figure out, well, how much will I need for my retirement portfolio.
I think this is good news on a couple fronts.
If you can delay social Security, it means you need even less because you're going to get a bigger Social Security check. And on top of that, it means you actually might have to save up less than you think. I mean, sometimes people get those numbers from the retirement company commercials, the broker's firm, saying your magic number is four million dollars, that's how much you need to save up, and I think it boggles people's minds and like, I'm
never going to get there. And when you realize that you can take a larger percentage of your portfolio every year, you know, keep most of that principle intact, and survive retirement incredibly, well, then it means you can, instead of trying to save up more and live life high on the hog with just more money coming in, you can just deprioritize how much you need to have in reserves when you reach retirement, which might sound like terrible advice from someone who wants you to have a great life
in retirement, but for a lot of people, what that means is skimping out on life in the here and now, spending less on these of release. Yeah, and so you're investing so much for those future years, and then you're like, am I actually going to be alive to enjoy them? So I think this should give people a little bit
of a sigh of relief. Yeah, maybe I can spend something close to that upper four low five percent range in some of those retirement years, not run out of money, and not feel like I have to break my back during those working years to a mass even more than I actually need.
Yeah.
My mother died at ninety eight, and her retirement plan was terrific. She ran out of money when she was about eighty five, but she had a secret retirement plan named Bill Handle and let me tell you when you know what. When she passed away, I became fairly wealthy because I didn't have to pay one hundred thousand dollars a year to support her. But hey, that's the other issue, and we'll do that probably in the next few weeks.
If you need care in your elder years assisted living, you are screwed beyond unscrewed.
Oh that's another subject for another day. Is long term care insurance and when does it make sense? Because it's quite expensive and the average person doesn't have the money to fund a long term care plan because of how expensive they gotten. The premiums have gotten out of control, and for some people it's necessary, but for others it's not.
So we could definitely talk about that one of these days.
Yeah, my mom lost it at ninety three. She was in so serious de men. She didn't know where she was and I kept her at that place. I should have put her on the sidewalk. She wouldn't know the difference.
Okay, we're done, John, damn right.
I am Joel this Sunday twelve to two pm here on KFI. He's at How to Money, Joel. Catch you over the weekend, Joel, Take care.
Thanks Bill,