Solo 401(k)s, Target Date Funds & Coverage Gap with Jack Towarnicky

[0:05] JD: We are gonna have a real bad. [0:08] Chad: You're gonna have a really, really bad time. [0:11] JD: Sir, this let me up. Hit me up. You're gonna have a real bad time. Welcome everybody to another episode of Retireholics. My name is Jay Dizzle. I'm joined by Silent J, Nerdy Chad, and everybody's favorite retire holic robe guy. I was gonna sing a song today. I had this nice little John Cougar Melon camp tune lined up. Think so. Good. No, no. Jack and. Jack and Diane. [0:46] Chad: But I've do it J.D. [0:48] JD: i'm gonna. I wanna put a few finishing touches on it. And I've replaced Jack and Diane with Nevin and Fred and there's some great lyrics happening but you're just gonna have next time. So let's fill that need, let's fill that want with the beautiful tunes of the wheel of Ice. Let's spinach. I'm going to kick off the show. [1:10] Justin: Here we go. [1:23] Chad: Look at all those marks. How is that possible? [1:25] JD: God, Jesus. Okay, we got a lot to cover, so Silent J, take it away. Intro our guest please. [1:36] Justin: Hold on, I'm gonna get this out of the way now [1:40] JD: you got some acro sense. No, you can't. [1:42] Justin: Nope. [1:43] JD: You can't pre fund your. I can do whatever the I want. [1:46] Justin: This is my segment. Mark, shut up. [1:48] Chad: No, no, you. [1:49] JD: That. None of those counted. [1:50] Justin: Justin, that was just for fun. Anyways, I. I don't know how to put this, but our guest is kind of a big deal. People know him, he's very important. He has many leather bound books in his apartment. Smells of a rich mahogany. He's an independent erisa Benefits Compliance and Planning Consultant. He's of council at Kohler and Fitzgerald, board member of The Presbyterian Church USA Board of Pensions and member of ERISA Attorney Counsel for EPSA part time though. Ladies and gents, please welcome Mr. Jack Tarnicki. [2:31] Chad: Jess, I don't feel like you made up anything there. That was. You kind of just read a bio that was weak. [2:36] Justin: Went right off the cuff. [2:38] Chad: Chad. [2:41] JD: Jack, I usually don't do this, but I do want to warn you the way this, this show works, if you use any acronyms or initialisms, my name aside, you must drink from your penalty drink. That should be your hard alcohol. I by the way, reached up into the cabinet with my eyes closed and said whatever I grabbed is what I was going with. So I can't remember the last time I've taken a swig of Jameson. [3:06] Justin: Oh, that's good stuff, man. [3:07] Chad: Is it? [3:08] JD: Chad's got a little Honey, Jesse James. I've had this one for a while here and. And so just watch out for those acronyms, Jack, because they can be dangerous. Brandon, let's get right to it. Let's do headlines, [3:26] Chad: which is just basically the entire show. Hey, J.D. there we go. [3:31] Justin: Mark. [3:32] JD: Yes, sir. [3:34] Chad: Justin asked you on your LinkedIn post for a word of the episode. [3:39] Justin: Oh, no one responded. [3:40] Chad: He said you needed a word of the episode and you said you're in. So are you going there tonight? Are we tabling that? [3:47] JD: Sure, let's. We can add a word to everything. We will go with. Let's look for something that's reoccurring. Let's go with. This was always a hard one. How about investment? Any iteration of investment. And what do you mean? No like count yet. Like, like investing or investments. [4:16] Justin: Okay, I don't like that. Damn. [4:18] JD: All right. Yeah, that's not good. [4:23] Chad: Look what Mark's drinking. [4:24] JD: Son of a. Okay, here we go. Let's. The first article comes to you from the national association of Plan advisors, which basically 80% of our articles come from there. And it is titled John Paul Morgan. No, I don't know what the guy's name is. What up? John Paul Morgan. Chase expands offering with new Solo K. Chase and Veswell have a solo K. Our good old boy, Aaron Shum. I have got a couple questions for you guys first and I'll. And I'll kick it to Jack. But what I want to first for the audience listening in. It's a 350 setup. It's 450 per year and it's 50 basis points. I'm assuming 15. Sorry, did I say 50? 15 basis points. I'm assuming it's international. International. God damn. JD Institutional Share Class of funds. But that's not really disclosed or shown on the website. But I'm just assuming that. But I would love to see what the investments you can choose in that program through Veswell are. My question for you, Jack, and then for the rest of you is Solo Case. This is not something I spend a lot of time thinking about in my life. But I know there's a lot of solopreneurs. Is that how you say that? Out there across the country and they would love to sock away or the ones that are doing well, at least, you know, 70K and maybe their spouse is working for them so they could kind of double up on that stuff. So I'm sure it's well sought after. Should Solo case Jack have advisors at the helm in a. Not a similar way but in Some way shape or form like a 401k plan does or should these things just be like left to the people that are signing them up and then they should go straight to a Chase or a Schwab and be left to their own devices. What should the advisor role be in a solo kf Any? [6:32] Jack Towarnicky: I don't know. But I would think of a solo 401k plan as comparable to an individual retirement plan individual retirement account on steroids. I make an argument that when you have your own self directed individual retirement account, you should be the person responsible for deciding whether or not you need assistance in terms of selecting investments. At the same time, I think the Solo 401k, while potentially more complicated, it could have a directed brokerage account in it as well. And so to the extent that you're going for something beyond index, investment choice index funds, I think you probably should be well advised to at least consider [7:29] JD: an advisor getting some help. That was pretty fucking well said. Okay. Not only has Jack come to play the Acrosyn game, he's also come to give intelligent and thoughtful responses. This is going to be brand new for a lot of our people tuning in this type of high quality stuff. [7:47] Chad: Wait, time out. [7:48] JD: Hold on ahead, Robbie. [7:50] Justin: I rung him up twice. [7:52] Chad: Sorry Jack, the word. You did it right? [7:55] JD: Is he, is he playing the word game or is that just for the [7:58] Justin: four numb skulls that do this on a weekly basis? [8:02] JD: Yeah, he's playing the word game. He's got to watch. I wasn't sure I did. I don't know. I don't know. [8:06] Jack Towarnicky: Yeah, I, I have to be honest. I don't know what the word game is. [8:11] JD: So no, I, we. [8:12] Jack Towarnicky: The thing is. Let me, let me finish. The thing is is that you guys have this on Thursdays at 4:30 Pacific Time and normally I'm singing in the goofy church choir so I can't ever be here. Only because the church choir doesn't practice on Thursdays in the summer. Am I here? So all we did, what is the word game? [8:36] JD: All we did was simply add and I will drink the word or any derivative of the word investments to the. To the initialisms and acronyms. Chad, tell me about the solo K industry. Clearly Chase thinks it's something it needs to get into to make some money or what have you. They've got access to a lot of people that bank with them privately. I'm sure they can go after them best well is involved in this. But I want to know what does the industry look like? Like vendors, like is there A lot of vendors offering solo case and then on Jack answered very intelligently in terms of why the person setting up the solo K might want to seek some financial advice. But I want to ask you on a higher level, is this something that advisors should be looking to help clients set up and potentially get paid? Okay, elaborate. Tell me more. [9:36] Chad: So, so let me let's break it down real quick into three different areas. One, you have the the document support in setting up the plan and let's, let's acknowledge the difference between what Jack said and what we're talking about right now which is that these plans are under the governance of the Employee Retirement Income Security Act. So there are some rules that they have to abide by. So the first side of this is setting up a document. They say in that release that you can go online and you can set up your document. Guys for who have been doing this as many years as I've have, how many times have you taken over a solo K where the setup is immediate entry, immediate eligibility, no waiting period, no safe harbor for non high lease. They've hired three or four people. Nobody's talked to them about bringing those people into the plan they've been funding. They're over 250k and they're always wrong JD they are always wrong. So start with the document side. There's a mistake there from the put my money in something that will earn me money side as my way of getting around. [10:41] Jack Towarnicky: Wow. [10:42] Chad: Put my money in something that will earn me money side. Who's offering these plans? It's only mutual fund families so American [10:50] JD: funds and and, or, and or brokerage companies. [10:56] Chad: I was going to go there next but you were talking record keepers so so record keeper side there aren't vest wells really doing this. It's just your. Well a census is offering their own in house kind of solution to a couple broker dealers but, but record keeper said it's only mutual fund family so to Jack's point yeah man. Most of these solo case should not be going to a packaged product. They don't need it from an and access to something that will make them money side of things. What they do need is the third part from a financial advisor perspective. Most of the solo KS that I see that we end up taking over they went directly to Schwab, they went directly to JP Morgan, they went directly to TD Ameritrade back in the day they wrote a quick doc and then they, and then they put that money inside a brokerage account and that money sat in cash for 70% of the time that it was in that brokerage account, Nobody ever helped them build a portfolio. Nobody ever helped them put that money. [12:01] JD: Okay, so you're simply, you're, you're, to summarize, you're making the argument that an entrepreneur that's just him or herself and their spouse setting up a solo cake can make some mistakes in the process. And 95% of the time, yeah, and your, your first one about immediate eligibility and everything. And this is where I want to go to Jack, because he's, this is like where his brain is. Jack, is it still true, like, there's no such thing as a solo K really? Right. It's, it's still a 401k plan in every way, shape or form. It just so happens to not have employees. Is that, is that an okay statement for me to make? I, I thought my dad taught me that a long time ago. Like, it's, it's just a regular old 401k plan. There just happens to be no NHC and no, no non owners. [12:52] Jack Towarnicky: Yes. I would say that it is just the same as another 41k. What I've never figured out, and I wish that they would differentiate. I would love to see the Department of Labor separately account for solo 401k plans. I haven't seen them do that actually. [13:13] JD: Like, name them and give them a category and start to like, like we [13:17] Jack Towarnicky: have multiple employer, we have single employer plans. Can we have solo plans as well? The other thing is, would one of you guys pick up the phone and give Senator Cassidy a call and remind him that there is such a thing as a solo 401k before he runs off and decides he's going to add all kinds of new requirements? Well, Senator Cassidy from Louisiana, he's introducing legislation all over the place. He's a nice guy. He's a physician. He's a nice guy. [13:49] JD: He's a physician. [13:51] Jack Towarnicky: But the reality is, is that he, you know, the majority of people in America, I shouldn't say the majority. Every person with wages in America is eligible to contribute to an individual retirement account, and only about 12% of Americans with wages actually do. So he's out there thinking of new mandates, lowering the eligibility age to 18, things like that. And so again, somebody, if you guys are gonna focus in on this very small employer marketplace, including the solo 401ks, be great if somebody got to the, the good senator and let him know what was going on. [14:36] JD: Well, I'm the coolest jets. I also feel like I need a little more time with secure 2.0 before they start throwing more at my industry. Like we're still dazed and confused by all the stuff we have to comply with right now. I think at a certain point giving us more options. [14:55] Jack Towarnicky: So you can look at if you go out and this isn't an acronym, it's a 401k specialist.com look at for a couple of articles posts that I had there about Secure 2.0. Most of the stuff in Secure 2.0 and again, I know it's an acronym, but it's also the name of the legislation. [15:15] JD: No it's not. 2.0 is not an acronym. [15:20] Jack Towarnicky: It is as well as the name. [15:22] JD: Both Frederic told us on this very show that Secure 2.0 is not an acronym. And I'm sure the chat bar can back me up on this. I'm gonna send you a full. Yeah, we'll let you know. [15:34] Jack Towarnicky: Well then, then. Okay then I got that wrong. But my point is is the majority of the stuff that's in there, especially all the crap that's liquidity that's in there is, is just worthless. And I wish that the IR Internal Revenue Service and the Department of Labor would, you know, never issue guidance and so that most people wouldn't adopt the voluntary stuff. [15:57] JD: Yeah, I just mean dealing with the long term part time, dealing with these new over 145000 broth, all this crap is like we really need to like shore all that up before you start throwing more stuff at us. [16:11] Justin: Jd, by the way, you owe a drink and you're not doing it. That's disappointing. [16:16] Chad: Okay, thank you JD before you move on, let's, let's. You asked the question which none of us answered, which is should advisers be paying attention to this space? General answer for me is yes. I think you have, you have an opportunity as an advisor to get some assets under management to support a line of business that people are not paying a whole lot of attention to. And then I'll say maybe selfishly, most of these owner only opportunities are great fits for cash balance combination plans. [16:47] Jack Towarnicky: True. [16:48] Chad: They're making good money. They're consultants only. They're trying to find a way to shelter. And if you have someone and you're not just going online to write a doc, you have someone that spends a little bit of time with that business owner and shows them the opportunity for tax savings, you can get a very happy client that is sticky for you from an advisor perspective by opening up this box they didn't know existed. [17:08] Jack Towarnicky: So can I ask who's actually active in the combination plan marketplace. [17:14] JD: Because I don't know as. As a. As record keepers or as. I mean third party administrators. We. We've probably got what, over a hundred of them right now and actively sell them all the time. Cash balance. [17:31] Jack Towarnicky: Yeah. As a record keeper, as a service provider. [17:34] Chad: Most Jack, most of them. Most of them. The 401k will land with a record keeper. But the cash balance side of it, since it's a pooled account, we usually go into a brokerage set up with the advisor. [17:49] JD: Brokerage has. Yeah, the advisor's brokerage. Yeah. [17:52] Chad: Right. [17:52] Justin: Let's say maybe what half of the. The major record keepers do offer the assets. [17:59] Chad: Yeah. But they don't get half of the plans. Like I was saying, they offer. You know, they have a solution. [18:07] JD: Nobody does. [18:08] Jack Towarnicky: So I was. I was wondering who's big in the. In the. In the. In this particular marketplace, mostly the third party administrators. [18:16] Chad: It's mostly the tax document folks like us that are sitting down and looking at a plan and saying hey, you guys could save a lot more. [18:24] JD: I don't think. I don't. I don't think a nationwide avoid or a hand. Fidelity really laid a stamp stamp on this in any way, shape or form. You've got all across the drink all across the country helping advisors set up. And to Chad's point, the pool for the cash balance is primarily going to like whoever their broker. Dealers brokerage account is or whatever, you know. And they're putting it over there and hopefully choosing the right type of. What did you call it Chad? Things you put your money into make money option to do that. Let's move on. I was not intending to spend this much time on solo case, but whatever. Yes. [19:05] Justin: Sorry, we gotta address this. Tony called it out. Everything I'm seeing Too it is 2.0 is an acronym. [19:12] JD: That is not true. [19:14] Justin: Hey, [19:16] JD: all right, we're gonna. Let's. Let's put a pin out. We'll come back, we'll debate this later. [19:21] Jack Towarnicky: So. So one more. [19:23] JD: Just because you put it in chat K doesn't mean that it's true. What? [19:26] Jack Towarnicky: Jack, one more question about small good sales pitch. [19:29] Chad: There's. [19:30] Jack Towarnicky: Are any of you guys doing group of plans? [19:34] JD: Fuck no. [19:36] Jack Towarnicky: Okay, tell me what you really think. [19:38] JD: Okay, let's move on. No, and no maps and no pooled employer plans either. Because Jack, those are all spawned from the devil. Okay, let's move on from another article from the national association of Planet Buyers. Again, go figure. The title of the article is growth in micro 401k market set to Take off. Now, we have talked about this before, so I'm not going to go back into the whole concept that over the next five years we're going to have this tidal wave of startup 401k plans coming our way. And that's what a lot of this article is about. And that's fine. But I want to focus on a smaller subset in this article that talked about, kind of led to the, the conclusion that maybe we are kind of solving this coverage gap or narrowing it in some significant manner. From the article, I will read from it after I burp. It says, in fact the number of 41 plans has already grown significantly in recent years. The report notes approximately 150,000 new 401k plans were added between 2018 and, and 2023, with nearly 2/3 of these plans added in 2021 and 2023. Much of this growth is from employers starting new plans, which is one of the key goals of the Act 1.0 and the Act 2.0 to help close the coverage gap. So my, this is not, I guess, not a question. Do you think that that's significant? 150,000 plans over 2018-2023, Jack, do you have any like barometer for that? Whether that sounds like good, bad or indifferent? Because they're claiming this is good. [21:36] Jack Towarnicky: So the last set of reports to the Department of Labor on the form double nickel double zero. [21:45] Justin: You're good. [21:45] JD: You can say that one. You're good at this. You might be one of the best we've had. [21:51] Jack Towarnicky: It shows that there were in 2022, shows that there were 670 some odd thousand defined contribution plans with about 120 million accounts of which about one out of every five accounts was a term vested account. In terms of adding 150,000, that would be a 20% increase over five years. There are 3 million employers is my understanding, in the United States of America. So depends upon what you put in your denominator to decide whether or not that's significant growth. That is more growth than we saw in the last five years. So there's nothing, nothing bad about that. [22:45] JD: God, I love you. Do you know that what I did was exactly what you just pulled off the top of your head. So in prep for the show, I myself went back and tried to look at the last 10 years and how many plans we brought on every year. And Jack just pulls this shit off the top of his head. Yeah, those numbers line up with everything I pulled in 2014. Ten years before 2024, we had just over half a million plans. 545,000. And then in those years to 2015, 2016, we added like, I don't know, a couple tens of thousands. Like 20,000. Then we added like 15,000. By the time we got to 2018, we had 588,000 plants. It was very kind of slow rolling. And so to go from 588,000 in 2018, which is what this article is talking about, to north of 700,000 plans, my 2024 number was somewhere in the 715,000 plans range. I feel like, okay, there's some growth, but I'm going to be the pessimist like I always am, which is like. But is that really, like solving the problem? It doesn't. [24:05] Jack Towarnicky: First of all, the premise of the article is crap. We do not have a coverage problem. Everybody took advantage of the individual retirement account. The median savings that employees and their employers make each year, the median across employer sponsored plans is less than the individual retirement account. [24:30] JD: Well, you're saying we don't have a gap because they have an option. [24:32] Jack Towarnicky: We don't have a coverage gap. We have a motivation gap. [24:36] JD: Oh, yeah, fair. Okay. [24:37] Jack Towarnicky: All kinds of gaps, right? We surely don't have a coverage gap and we haven't had one for 44 years. [24:44] JD: I can't wait to hear you, Chad. Go ahead. What are you about to say? [24:48] Chad: Employees are over 50% more likely to participate in a plan where the deduction happens. Another payroll. [24:54] Jack Towarnicky: It's another bullshit comment. The reality is. No, it's really true. If you look at when we had voluntary individual retirement accounts in the early 1980s where you could have a payroll deduction, individual retirement account. Nobody signed up. I used to work at Tenneco because [25:17] Chad: pensions were the primary driving factor. [25:19] Jack Towarnicky: No, these were people. These were people who were not eligible to join the savings plan at that point. And we're not. [25:25] JD: By the way, not everyone had a pension back then. That's another misnomer. [25:28] Chad: Well, there was a lot less things to spend money on in the 80s than there are in 2025. [25:34] Jack Towarnicky: Bottom line is that when we offered access to payroll deducted individual retirement accounts that did not include an automatic enrollment like what we have in Secure Choice in California. [25:47] Chad: What's your point? [25:48] Jack Towarnicky: Nobody signs up. [25:50] Justin: It's. [25:50] Chad: It's not just Secure Choice or Cal Savers in California. It's. It's. All of the state mandates essentially have auto. [25:56] JD: Don't forget, by the way. [25:57] Chad: Don't forget. [25:58] Jack Towarnicky: But that's not a, that's not a coverage issue. That's not a Coverage. [26:01] JD: Yeah, you said that very well. [26:03] Chad: That's an engagement issue. Now I'll argue two ways. Like to me, if we're saying people are more likely to participate if the deduction happens via payroll, and we're saying that people are more likely to participate if it's an automatic enrollment component where they don't, they don't have to take action. We, but we know both of those things are true. Whether it was, it held true in the 80s or not. We know that people are more likely to save money if it happens via payroll and they're more likely to participate if there's auto features in then the term. I think you're picking on the term coverage being the issue. And I could argue with that. Everybody has an opportunity to save, but we know they're more likely to save if they do it in this capacity. That's the issue. The engagement issue is what exists. [26:48] JD: I don't know. I think you've been drinking the 401 Kool Aid a little bit, which is okay. Nevin says in the chat bar that state run plans have opt out percentages north of 35%. Like people are declining. You know those state run plans, that's a pretty decent number. [27:04] Chad: As someone who has been live and in color with a lot of those JD In California, I can tell you, and maybe nobody wants to hear this, especially in legislation, a lot of employers are telling their employees not to opt in. Yeah, they're telling them to go. [27:19] Jack Towarnicky: They'd have to tell them to opt out. Right. [27:21] Chad: That's, that's what I mean. They're telling them to also. Do you really think all these employers [27:26] Justin: are automatically enrolling these folks? Yeah. [27:30] Jack Towarnicky: Well, any new 401k plan that they add today they would have to add automatic enrollment to. [27:37] JD: True. And I think that, that now that seems like really smart to me. And, and Jack, I love that you said we do not have a coverage gap problem. That was spot on. Everyone's got an opportunity to do something whether it's the individual retirement accounts or whether they have access to a foreign. [27:55] Jack Towarnicky: I like what we do have. What we do have with the individual retirement account is a liquidity issue. And so I'm sure Nevin will know the number better than I will. But about somewhere between 20 and 35% of all the money contributed to state mandated IRAs like the one in California has already leaked out of those particular programs. Did I say really? [28:21] JD: Yeah, you said individual retirement account, meaning people are leaving employers. [28:27] Jack Towarnicky: Well, even those who are enrolled who are, who don't Opt out. Their contributions that they put in somewhere around one third of all that, somewhere between a quarter and one third of all those monies have already leaked out of those programs. [28:43] Chad: Meaning they came to like an individual retirement account upon. [28:46] Jack Towarnicky: No, a distribution. [28:48] JD: Distribution. [28:50] Jack Towarnicky: Well, no, they're Roth monies. So the contributions, they're just contributions coming out are coming out tax free. And in fact, if you look at California's education and marketing material, you'll see that they actually say this is like an emergency account if you need it. [29:06] JD: Yeah, well, here's the thing. It's going to sound really asshole of me. You can't force human beings to save that are not motivated to save on their own. And let me be less and be like they're struggling. They go paycheck to paycheck, they gotta cover their bills. And if they feel like they can cash out a $750 check and go buy a fucking TV, they'll, they'll do it. You know, like, see that's, that's the [29:34] Jack Towarnicky: problem with individual retirement accounts and that's that they don't have any good liquidity provisions. They couldn't. It's too bad you wouldn't be able to do a loan like you can in a 401k plan. And they're. [29:51] JD: Jack, would you be a fan of taking 401k plans, individual retirement accounts, state run plans and being like more gnarly in terms of not allowing people to gain access to that money until they reach retirement? [30:06] Jack Towarnicky: Okay, so I have in my history, I got rid of hardship withdrawals in my last plan sponsor role and put in place 21st century plan loan functionality loans. So, you know, what does that 21st century crap look like? Electronic banking. [30:25] JD: Right. [30:26] Jack Towarnicky: It looks like line of credit structure and it looks like behavioral economics prompts to encourage repayment to prompt people to repay the loan. Most loans are repaid when a loan is not when a. Except when it's defaulted. And that's typically less than 10% of them. The loan is not leakage. It just becomes a fixed income investment in the plan. So yes, as opposed to allowing people to take money out of their individual retirement account whenever they wanted to, which you can. Yes. I would prefer that the code be amended to allow them to take loans. [31:07] JD: And Justin Chattermark was, I guess a drink for now was secure 2.0. No, we're not changing the rules. Was it more about forcing people to keep money in their plans or letting them have access to the money in their plans? Because I would argue it was all [31:29] Jack Towarnicky: about letting Money out. [31:30] Justin: Yeah. Self verification. [31:34] JD: And no offense now, no offense to people who've been abused or in a hard situation or in a disaster or all the different reasons you can get money secure 2.0 really like opened it up to get access a lot more. Okay, this is good. I like you, Jack. I really do like you. You know what I like best about you? And I want you to continue to do it. And I'm sure the chat bar does too. You interrupt me anytime you want, bro. Like, I do that to our guests all the time. You're kind of taking a power move right now. Your head's bigger than all of ours. [32:10] Jack Towarnicky: I'm looking something up to stick in the chat box. So I like it. [32:13] JD: I like it. Okay. This is actually the one I wanted to talk about. Let's check back in on Senator Warren. I forget where this article comes from, but Senator Warren not content with empowers response on private markets. This little drama gets even juicier because we've got a new characters in this story. Little news brief out there that Voya in partnership with Blue Owl is now going to offer private investments in their record keeping situation. And now apparently Donald Trump is going to do an executive order that will clear the path for private investments in 401k plans as well as don't get all your, don't get all upset in the chat bar as well as cryptocurrency. But let's stick with Senator Warren for a moment. She wrote back so in power. And who is that? Ed Murphy. Am I getting that right? Is that Ed Murphy that wrote back to first name. How come Devin's in the Devin? I just, I just suckered him into saying it again. So yeah, so Ed Murphy did respond to Senator Warren's request and tried to make his argument for why private investments were important to the retirement plan space. Most of his argument was about how these were unique investments that could provide potentially a higher by the way, I've done the I word a couple times, a higher rate of return for these participants and to really a lot right now kind of modernized the 401k. Senator Warren responds by saying that he did not do a good job of that. She noted that studies suggest that private market investments have consistently underperformed as compared to publicly traded indices. I'd love to see that information because everything I've looked at has told me that they over the last 5, 10, 15 years have actually done pretty well these private investments. But then her last comment I thought was the great one. She went on to add to this is in response to Ed Murphy and Empower rather than Share a survey depicting support for investment in private markets. I ask again that you answer my questions on how venturing into private markets will affect your clients by Friday, July 25, 2025. So there's this, this battle going. I will suck up on the drinks. Jack, where do you stand on this fight which is by the way, gotten very explosive in our industry on private investments and 401k plans or retirement plans. [35:10] Jack Towarnicky: So to start with the again, they're going to avoid the acronym. The Employee Retirement Income security Act of 1974 doesn't preempt other federal laws and I'm assuming that would include securities laws. I'm no securities attorney. I really doubt they're going to throw suitability over this side. I really doubt that that's what they're going to do, especially when it comes to rank and file workers who at best are not investment savvy. And so if you think of what suitability requires, you know, a reasonable basis, customer specific and quantity, the bottom line is, is that just like most people who put money in things that will make them money in their individual accounts, doesn't seem to make much sense when you look at. [36:06] JD: Okay, so Jack, let me, let me [36:08] Jack Towarnicky: stop those who would want to do the same thing in their 401k accounts. [36:12] JD: So let me stop you and see how you think about this version of it. Though crypto aside for a second, my understanding with the private equity or the private investments is currently the plan is to use these in small slivers inside of target date funds or manage accounts. So this is not a situation where we're going to say to the 50 employees, hey, here's your investment options and would you also like to choose this private equity to invest in? No, no, no, no. This is simply going to. The money manager themselves is going to say, hey, instead of, Instead of putting 15% diversified emerging markets and 10% in technology, I might like to slide 5% into these private investments to kind of boost our performance. Do you still against that concept? [37:04] Jack Towarnicky: So you still only get two points for a slam dunk if that's all you get. Look at intel vs Suleiman, recently completed six year litigation. When intel stuck private equity into its target date funds six years now, they ultimately prevailed. But I'm here to tell you as a plan sponsor, if you're litigating, you're losing. Doesn't make any difference if you win. Don't give a care about that. If you gotta, if you gotta go to court. [37:38] JD: Okay. [37:38] Jack Towarnicky: Screw around. And this went all the way to the Supreme Court and back. Okay, well, back up to the circuit. [37:44] JD: I'm sorry for everyone listening and I've made this point before, but. And I'm not challenging you just to challenge you, Jack, I understand your prudent perspective. Especially like putting yourself in the shoes of a fiduciary or a plan sponsor to make decisions that don't get them sued. I. I totally get that. But as an industry as a whole, we need to evolve. And if alternative investments can help us provide better solutions to our clients over the long haul, we need to continue to look for those types of improvements. Don't shake your head at me for a second. Hang on. I like to. [38:26] Jack Towarnicky: I like I just defaulted some guy making $30,000 a year into his target date fund. Yes, this is his first contribution to A K plan. What sliver do you want? In the private equity market? [38:41] JD: Whatever might boost that target date's performance for him over the next three, five, ten years. [38:46] Jack Towarnicky: And hindsight tells you that hindsight tells you that whatever this has done in the past is going to be repeated in the future. Why would I take this risk as a plan sponsor or if I were the plan investment fiduciary? Well, why would I take that risk? [39:04] JD: Well, I got news for you guys. It's happening. [39:07] Chad: It's happening. [39:07] Justin: Oh sure. [39:08] Chad: And it's being forced. So why is it being forced? As an equally good question, there's There, there is a reason as to why it's being pushed both by the. The high end powers. [39:19] Jack Towarnicky: $12 trillion. That's. It's under management charge more access. [39:24] Chad: Right, Jack? It's access to those big dollars fees. [39:28] JD: Yeah, well that. Okay, [39:34] Chad: Sorry, go ahead, Jess, and then I'll make. [39:35] Justin: No, I was, I was saying that same point. What was she saying in the article? 20 times that the fee or 6 times the fee? I feel like it was 20, but [39:42] Chad: it seems high up to 20 times. But that can be inflated. And, and fair enough. But never asked the question. [39:49] Justin: Last time we talked it was not much over what. [39:52] Chad: Yeah, and that's Jack's point. It's like why. Why take on the additional risk? Why be an early adopter to something like this? And I' not denying all those, but I'm also supporting JD's thoughts of we can't continue to just do the same old stuff. [40:05] JD: Got news for you guys. [40:06] Chad: And we have to be open minded. [40:08] JD: Voya's gonna dip into this. Empower obviously is at the center of this. Those are two very Large record keepers. So. And those people are not idiots. Now you're saying that this is about money and I, I do agree the [40:22] Jack Towarnicky: are they gonna pay the fiduciary insurance premium? Well so they're going to take on the liability. If they're going to do that, well that's a different story. [40:32] Chad: But this is. So Jack, let's ask J.D. [40:34] JD: nevin's question. I can get sued these days for having a frickin index fund that underperformed the active market. So don't go down. You get sued for anything for good [40:46] Jack Towarnicky: reason, bad reason, no reason whatsoever. But let them sue the other guy first. [40:52] JD: Okay, well there's always to my earlier point Jack, there's always got to be that other guy that's got to push for some of this of evolution. I am a fan of private equity and private investments in terms of the opportunity that it provides to invest in things that are not publicly traded on the stock market and again in a prudent asset allocation manner. We've always learned over time that slivers to certain alternative assets can really help smooth out the path of some type of asset allocation. And so I don't think we should snub our nose at these new opportunities. [41:32] Jack Towarnicky: So one last comment and then I'll shut up. Median tenure of American workers has been less than five years for the last seven decades the average employee averages in quotes has been has had at least 12 different employers by the time they've reached age 53. That's a lot of turnover. [41:57] JD: Yes. [41:58] Jack Towarnicky: That's a lot of money coming and going. That's a lot of money moving from the plan to an IRA or to a different employer sponsored plan. [42:07] JD: Are you talking about liquidity or why does that matter? [42:10] Justin: I got you Jake. [42:11] Jack Towarnicky: Investments aren't the same in every plan. There's money moves post separation. [42:17] JD: Right. [42:18] Jack Towarnicky: And so if liquidity is an issue, [42:21] JD: which I don't think it is. [42:23] Jack Towarnicky: Yeah, then you have an issue. [42:25] JD: I don't think liquidity is an issue. I think liquidity is an issue. When I myself take a million dollars and go invest in private equity, my money's locked up. But the way these guys are going to run a target date fund or a manage account they're going to take into effect the liquidity is their risk as they choose their investments, not the participants risk. And I'm just saying in the future if FOIA is doing this and empowers doing this, a lot of target day funds eventually because these brave men and women were willing to step out and do something different they'll all be that way. Hackler says Rom, if they were at [43:00] Jack Towarnicky: risk, that'd be great. Be fine. [43:02] Chad: Watch. [43:03] JD: Good news is this thing's on YouTube and it's recorded. And I will be laughing in fucking 10 years when you guys are looking at how these things are built. [43:10] Chad: Let me, let me ask the question that Nevin, that Nevin asked. How does a fiduciary committee carry any oversight over what sliver of private equity is put currently? [43:22] JD: They don't look at a Target Date fund and say, oh, we're concerned. Let me see the 5% emerging markets. No, they don't. [43:29] Chad: I know, but if that's the world we're going to get into, where we're going to talk about slivers going to something that's alternative and risky, I do think it's different. [43:37] JD: Different? They already slivers in alternative investments. They already do just private equity. No, but that's no different than some other asset class. Asset classes go up, asset classes go down. No one can predict when, how, where or what. So it's just another asset class, for Christ's sakes. You know, we won't even get into crypto because that gets a little more difficult. But we will move on. I love this subject so much. Yes, Jack, you look like you have to say something. Go ahead, do it. [44:11] Jack Towarnicky: I'm just wondering. I'm just wondering. I just looked at and I stuck the link out there on the chat. Just wondering how the department is going to deal with the selection of target date investments or target date funds when it comes to updating the QDIA regulations. [44:29] JD: Oh, you'll definitely drink for that. [44:31] Chad: That's two for Jack. [44:34] JD: My, my answer would be the risk of the Target Date fund, which is what you're stating now is, is a approved qualified default investment alternative. The risk of that fund is not going to go up in any significant manner because of the sliver that we've discussed so many times. So it's irrelevant. It doesn't change. It hasn't become a more risky fund. If that was true, then the same would be true if you had a target, a fund that decided to put a tech, put technology in a sliver or diversified emerging markets or health science or some other fucking sector that, that might be more volatile or have a higher standard deviation. That's all of those. That's not how it works. [45:19] Chad: Let me at least make one point on all that, jd. All of the things you just stated have, have governance and, and some transparency because they've been in our space for A long time. Private equity at this point is kind of a, a hidden area when it comes to disclosures, when it comes to actual expense. And so I'm not sure you can truly put those two things in the same bucket there. [45:44] JD: Well, I will jump on your side of the fees. I, I do think that we, we all don't know what happens under the hood right now of target date funds or managed accounts. There are operating expenses, there are administration expenses. They pay the managers of these funds to make decisions and we all don't really look under that hood and understand what that is. But to your point, Chad, I'm sure it's available to us somewhere in today's day and age. And when it comes to private investments, obviously that's going to be a little more difficult. And I do, I am concerned about the fees and that will these just be hidden to us in some way, but these fees inevitably are going to be netted from the returns. And so last point, because I can do this sometimes as host of the show, we'll move on. But the, the, the responsibility and the risk will lie with the managers of the manage account service and, or the target date funds. And, and they're in the business of trying to do well to win more clients and win more assets. They're not going to do something that they think will hurt them in the long run. Now can they fuck that up? Sure. Okay, let's, let's, let's lighten the mood, even though I don't want to and less. Jack, a long time ago, I come up with a lot of creative things in life and I was just sitting around kind of in a Buddhist moment, balancing on a stone, and I came up with this really cool game. It's called the no Dope Game. And it's. The way this game works, Jack, is I'm going to bring up a pop culture thing, just a general life thing, and I'm going to ask you if you're. Nope. On it or you're dope on it and you're going to tell me why. And I really want you to, you know, go deep with this. Like tell us how you really feel about this thing. [47:55] Justin: The first equity in, in 401k. [47:58] JD: How do you overdo the first one? Good one, Justin. The first one is Sporks. Are you, are you into Sporks? Are you not into Sporks? You know, the old spoon and fork combo? [48:13] Jack Towarnicky: So I am into Sporks. And from experience camping with my son when he was with the Boy Scouts. [48:22] JD: Perfect. You're nailing this game. [48:25] Justin: Heart string right there. [48:26] JD: Like everything else you're nailing on this show. Yeah, that was. That was very, very. [48:29] Justin: I want to say no, but I can't because of that. [48:32] JD: Yeah, you can. Tell us why you hate them, Justin. Tell us why you hate sporks. [48:36] Justin: I just like things separated, you know, I like. I like. You know, my spoon is for super. So you wanna. [48:45] JD: You want a peanut butter and jelly sandwich just in halves, so you don't want it together. [48:49] Justin: Like, say, I wanna. I can't. You know, I'm gonna eat soup with. With my spoon and then I'm gonna go to, like, a salad. I don't want the soup on my salad. You know, Use another sport, dude. [48:59] Chad: JD have you ever seen the movie [49:01] Justin: I don't have a Spoon and a Fork in that case, dumbass. [49:03] JD: What movie? [49:04] Chad: The Accountant. When you open the drawer, there's one knife, one fork, and one spoon. That's Justin right there. He's like, I got this for this. I got this for this. [49:16] JD: I would ask you this question, but I know that everybody in Missouri uses sporks, but. So we'll go straight to Rogue Guy. Where are you at on this scene? [49:26] Justin: This. This is an easy one. I mean, obviously Jack nailed it. But let me. Let me take you guys back in time as to why we should all love sporks even more. Go back in time when Taco Bell used to be purple and teal and those really cool colors and they weren't all vibey and weird like they are now. And remember, ordering an Inchurito, it came with a spork. That right there was an incredible combination. [49:54] Chad: Cannot be beat. Sporks rule. [49:58] Justin: That's all I have to say. Might I add, you did have the best Taco Bell out of anyone in the country. [50:03] Chad: In the country in Pacifica. [50:05] Justin: Yeah. Yeah, you're right. [50:07] Jack Towarnicky: I sure did. [50:07] Justin: Let's look at the sports we got in elementary school, Jack. [50:12] JD: This one happened to me, literally today. I was at the grocery store and I don't know. Yeah, I guess the chopper's talking about it. Maybe I am in a negative state of mind today. I'll accept that I was. I was in line behind this person, and they needed to pay for what they had purchased, and they paid in exact change. I stood there waiting as they gave dollars and quarters and dimes and God knows what they were trying to add up to pay this person. So paying an exact change are you nope or dope on this? [50:51] Jack Towarnicky: I'm a nope on this one. Long ago, my Same son was the boy Scout. Came up with a concept about how he would get rid of the penny. And so anything that's exact change because of taxes and everything else, you need pennies. So I've been trump. I've been a trump. Try to get rid of the penny. Yeah, but, you know, the. The. If you think about it, like, you get these little participation cards from Kroger's or from whomever, and if they keep this huge record of all the crap you buy, and all they need to do is load it with a dollar, and then whenever you swipe it, you can, you know, essentially round up or round down or take the money off that card, and so they don't ever have to do change. Be done with. [51:44] JD: I haven't done no per dope on the roundup or round down, but I. I do kind of like that. Chad, I didn't ask you about the spork. So how do you feel about paying an exact change? [51:56] Chad: I'm fine. I'm fine with it. It's not something I do. I don't carry cash. I don't pay in cash. I use the card and earn points for everything. But if someone's walking around with change, go ahead and use it. [52:07] Justin: Only been something that's changed since. Pun intended. Covet. [52:12] JD: Yeah. You just don't. [52:13] Chad: Nobody wants to handle change. [52:15] Jack Towarnicky: It hasn't changed since COVID That's pretty good. [52:19] Justin: It's only been something that has changed since we didn't have tap to pay. [52:23] Jack Towarnicky: It changed. Yes. [52:25] JD: Maybe if. Maybe if I bought stuff with actual money, money would have more meaning to me, and I would. Yeah. [52:32] Justin: Not all of us have black cards, jd. Jesus Christ. [52:36] JD: I mean, I definitely didn't buy my two lambos with cash. Okay, let's go to the next one. Okay. No. For dope. Jack on. You know, you're in a. To me, this is in a public restroom. Even though my toilet at home does this, we all know I have a very fancy toilet. The automatically flushing toilet. You know, you. You do your. Your. Your deal, and then you get up, you're in your little stall, and it's like it's not your job to flush it. It just needs to recognize that you're done and you're leaving. Leaving. And it flushes on its own. Are you. Nope. Or dope on this, or would you rather have a lever? [53:16] Jack Towarnicky: I may. Whatever this one is. I guess that's the dope version. [53:20] JD: Yes. [53:21] Jack Towarnicky: The reality is, is that there's probably no place dirtier in all of America than the bathroom In a public stall, if you will. And so the fewer things that I can touch, the better things are. And the last thing I want is somebody who failed to flush when he left the stall before. [53:44] JD: Good point. I didn't think about that one. I did nothing. Spoken like a true fiduciary. Justin, do you like it when you're sitting on that toilet and you're not done yet, and somehow the thing just decides that you've left and wants to flush while you're sitting there? And it's loud? [54:01] Justin: Sometimes you need a courteously flush. J.D. you know I'm always on a tight schedule. I need efficiency. I don't have time to reach back and touch the handle. And to Jack's point, what if someone missed on their wipe, went to flush, and there's some residue left over on the handle? Like, you just don't want to deal with that. [54:18] JD: Mark, what about if you're sitting in that public toilet and you get up to walk away because you're done, and you don't hear the sound of the flush? Do you have concerns of like, well, do I need to go back and find that little button to hit, or do I. Do I trust the. The technology? [54:37] Justin: Well, I'll go back to Justin. Buddy, a tight schedule. You take dumps that take 30 minutes on average. [54:44] Chad: Buddy, it also matters. [54:46] JD: How many times does an automatic flush sit on that. [54:51] Justin: That toilet becomes a bidet for you. [54:54] JD: We gotta move on because Nevin's. Nevin's making fun of us. [55:00] Jack Towarnicky: Is this a question we would have done at Gutfeld? Is that. [55:03] JD: No. But if anyone knows the real history of retireholics, we used to talk about poo, pooing and peeing a lot. Okay, last one. And this also happened to me today, Jack. My daughter poked her head in my office and said, hey, will you. Will you smell my shoes? Asking someone else to smell something like your dirty tennis shoes? No. BER. Dope. And then we'll take off. We'll go to the next subject. [55:38] Jack Towarnicky: I. I guess it's. It's a one of both. I guess it depends upon who's asking and what they're asking me to smell, so I can't answer that one. Exactly. If it were my daughter and she said, smell the shoes, I probably would have said, yes, I'd be the dope. [55:57] JD: I did. I stuck my nose right into her dirty shoes. [56:00] Jack Towarnicky: And if it was something else, probably. [56:03] Chad: What's the benefit, guys? What? What? [56:05] JD: I'm her father. [56:06] Chad: She asked, what. What are you gonna tell her? It smells okay. Honey, I told her. [56:13] JD: I told her it smelled like wet laundry that had been out too long. [56:17] Chad: And she said, what value does that bring to her? What vibes? Just put a dryer sheet in it and move on. If you're worried. [56:23] JD: Jack, you wrote an article a couple years ago titled My Qualified Default Investment Alternative is better than your Qualified Default Investment Alternative. You smartly use the acronyms for that title. I really enjoyed reading this article. I think you wrote it back in. Or not wrote it. The. The story you're telling is about a plan sponsor committee back in 2005, which I believe you were sitting on. I think this is a true story, right? You're part of this? [57:01] Jack Towarnicky: Yeah, very much so. [57:03] JD: And this was for everyone listening in. This was pre Pension Protection act and pre qualified default investment alternatives. And you know, very early on, and you all had wanted to make a decision about what would be your default choice. And you looked at money markets, you looked at guaranteed investment contracts, you looked at target date funds. And then you, in this article bring up something. I'm going to be totally honest. And we'll see if Chad's as dumb as me. I was never aware of a tdm. Chad, do you know what a TDM is? [57:40] Chad: I do after reading that article. And it makes perfect sense. But no, I didn't prior to that. [57:45] JD: This. So you all as a committee decided that this Target Date model, if I'm getting that right, would be a more prudent choice than the Target Date Fund. And Jack, elaborate. Tell us more about this. Tell the audience what you all are thinking and, and what you've come to understand about all that. [58:09] Jack Towarnicky: Thanks. So I. I could spend a long time on this, but to. To make it as straightforward, I'll just give you a couple of what I consider to be the top attributes. The first one is, is that the target date model is totally transparent. So you can see the underlying investments. And it matched up very well with the. I forget what we used to call it the open architecture of the core investments. [58:47] JD: And can I ask Jack. And you owe for the I word. But. But they're transparent because are the. The. The I word things. [58:59] Jack Towarnicky: The. [59:00] JD: The options on the core menu. Is that what's being. [59:03] Jack Towarnicky: Exactly. [59:04] JD: Okay, continue. [59:05] Jack Towarnicky: Not all of them. So we would bring in a third party to establish the glide path and the landing point. And what would happen is, is that once a year we only rebalanced once a year. And you would see the allocation in advance and get a notice and then you would see the allocation after the transfer. And so at least five times each year on each quarterly statement, as well as as part of the rebalancing effort, you would get a confirmation. Here is how your monies were allocated across the core investment. Sorry, another one. Investment options. Well, don't say it again. Anyways, the positive thing here is that every quarter you would have the plan investment fiduciaries. Again, I said it again. There we go. Sorry. You would have these guys and gals evaluate the performance of the core choices. And as a result, you would essentially have confirmation that the underlying choices inside the allocations were as good as what you were offering to people who are making their own decisions. So you concentrated assets also, instead of having 15 core choices and 12 target date funds, 27 different choices, you would end up with just the 15. [1:00:58] Chad: This is principal pushed this heavy during early 20s, early 2000s, into the 2010s. Right. Like, this was their principal view that. [1:01:09] Jack Towarnicky: Yep. Yeah. They did the same thing in. Yeah. In their own employee plan, which is where this was. It was in Nationwide's employees plan plan. Now, it wasn't something Nationwide was pushing. It's just what we did in the. [1:01:25] JD: Oh, well, breaking. Breaking news. You're talking about the Nationwide plan. This was the. [1:01:31] Jack Towarnicky: Is that what you're saying for employees at Nationwide? Yeah. [1:01:35] JD: Do you know, Jack, that they're on your side? [1:01:38] Jack Towarnicky: Last I heard, yeah. I still have a lifetime of savings in that plan. I'm still very proud of it. [1:01:46] JD: Oh, well, I heard they're going huge on private. Private investments and crypto, so you might want to take a look at that. [1:01:53] Jack Towarnicky: Well, you know, I'm kidding. [1:01:55] JD: I'm kidding. Nationwide. Don't send me the email tomorrow. Okay. [1:02:00] Jack Towarnicky: So the first thing is, is that it's totally transparent. The second thing is, is that what it allows is a tremendous amount of personalization. So. Because all it is is your regular everyday asset allocation transfer process. That's all this is. It's nothing more than that. It's just something that's preset. What you can do is you can have the model essentially vary by year of birth, by sex, and even by, like, marital status. [1:02:41] JD: How much sex you're having has an impact on your. [1:02:45] Jack Towarnicky: Which sex you are has a difference, obviously, in terms of mortality. Anyways, the point is, is that you could have somebody. 2. Two different people who both joined the plan on the same day were both defaulted into this particular investment who have totally different circumstances, and they're five years apart in age in your typical circumstance. And. And they. It's not the right investment for either one of them, but it is the default in this instance at least you'll get a lot closer to their own personal circumstance. The other thing, third thing is that the target date model applies to all assets in the plan. So you don't have what some people call mixed use investing where they would. You would see this in a lot of plans where the target date fund is a separate investment choice and people could put 25% of their account balance into the target date fund and then turn around and do things in the other 75% of assets that were in fact in conflict with the target date fund. So there's no mixed use investing. And I can go on and on and on. [1:04:08] JD: Can I. Can I ask to kind of exist to prod you a little bit? Was this also kind of anti target date fund vibe? I mean, was this like. No. Okay. [1:04:24] Jack Towarnicky: No, it was, it was essentially mimic the target date fund without actually, you know, you think about target date funds, for example, and you see these funds have tactical allocations. You see them, they have, they're heavily weighted in, in equities when individuals are reaching their mid-50s or mid-60s even, because they're trying to outperform the next guy with the nominal same target year. You know, you look at the 2020 target date funds. In 2020, most of the largest target date funds had equity allocations. And where's Ron when I need him? Would have equity allocations between 55 and 60% and 30% of the money was allocated to fixed income investments. And only maybe 5% would be in, in cash equivalents. And did people know what was in that target date fund? No, they didn't know that. They didn't know what bets, you know, scarier, scarier. [1:05:39] JD: In 2020, I think it was even the, you mentioned the 2045 fund, but it was like the 2020 funds and the 2025 funds that took some massive hits, you know, when all that stuff was happening and those people were caught off guard because I guess that's another problem with some of those target day funds is the misunderstanding by the public of them thinking like that. It's something that it's not somehow. But so Chad is, is obviously in the Target Date Model vs Target Date Fund battle. The target date model was fucking obliterated literally by the target date fund, which had won over the last, you know, 20 years. It's. It's dominated and has massive amounts of assets under management and continues to make the people that run them fat and happy. Will we ever change or is. Are we in target dates Forever. I know people love the idea of manage accounts. Some people but it seems to me that target day funds have a pretty solid grip on our industry. [1:06:53] Chad: I think my my thought and as I heard you and Jack talking when we first came on the air there was a lot of comments back and forth of did people actually know what they had? Do they know what they have? Will they know what they have in a target date fund or a target date model? Yeah, Jack, there is more transparency when it's the underlying core menu. But the average person saving their money doesn't look at the core menu. They don't understand what mutual funds are from a general sense. And so JD I think the reason why target date funds have succeeded is because they're easy. Hey, here's the date in which you want to retire. Go ahead and pick it. We'll do the rest. [1:07:35] Justin: Well [1:07:37] JD: they promoted the out of them too. [1:07:40] Jack Towarnicky: So can I ask what the word retire means? [1:07:44] Chad: It's different for every person you ask. [1:07:46] Jack Towarnicky: Right. So when you say the target date is the retirement date, it's getting 5 [1:07:53] Chad: is what most are going to say. I'm sorry, 60 are going to say when you turn 65. [1:07:58] Jack Towarnicky: Why would it be 65 if all these people don't actually commence payout at 65? [1:08:05] JD: Jack, how old are you? [1:08:06] Jack Towarnicky: Jack, I'm a little older than 65. [1:08:09] JD: And you're not fucking retired yet. You, you obviously five bro. 65 years. But everyone's supposed to retire at 65. [1:08:18] Chad: I think there's a lot of people like where you're coming retire but Evan, [1:08:22] JD: did you hear that? Did you hear that? No. Yeah. [1:08:25] Jack Towarnicky: I'm sorry Chad, what'd you say? [1:08:27] JD: No, no, Jack, obviously Chad picking this up. But Jack, obviously you're talking totally right. You cannot make these things individualized for everyone. But they just trying to handle the great masses as best they can. But go on Jim. [1:08:41] Chad: No, that's exactly what I was going to get at. [1:08:42] Jack Towarnicky: Why aren't we using the required beginning date? [1:08:48] JD: Required beginning date of retirement when they [1:08:51] Chad: have to start making money. [1:08:53] Jack Towarnicky: Yeah, that's the one thing we know for sure that at the required beginning date unless they're still working, they're going to start taking the money. [1:09:04] Chad: I've never heard that or thought about that. [1:09:07] JD: That's a great actually I'll jump on that bandwagon. [1:09:09] Chad: Like I don't think people tell you why. [1:09:11] JD: I'll tell you why Jack. [1:09:12] Chad: Taking required minimum distribution. If they think about when I retire that's more exciting. [1:09:16] JD: We cannot get participants to cooperate with us. And give us any information. So we're never going to know what is individual about them. All we know is the year they were born, how much money they what. That's not true. You think participants are keen to like fill out risk tolerance questionnaires and tell you about their life? [1:09:40] Chad: No, I think ask your partner in crime, Tony Davis, how much access to data we're all going to have here in a short time period. The ability for artificial intelligence to actively monitor all kinds of prior information as well as social media and what pictures you have posted and where you've worked and you're gonna get a ton of information. [1:10:01] JD: I gotta know this leaf house saying Nevin says that Todd Cading is created a personalized without talking to people. To me that's an oxymoron. Is that the right use of that word, Jack? I don't know. That doesn't make sense. You can't have personalized without talking to people. Unless like Chad says, just because I know what you bought at Target and what street you live on doesn't mean I know when you want to retire and how much your retirement is going to cost. [1:10:27] Chad: But no, I'll say to the overall topic that we're having here is that I think target date funds have succeeded because they seem easy and there was a ton of money behind marketing them and tracking something like retireview with principal back in the day where you were using the underlying core menu and then you had to, you had to create sub portfolios and you had to track those sub portfolios and when you made an investment change the core menu, it had to relay into all of those managed accounts. That was difficult. Sorry, I shouldn't have said managed accounts, Jack. I apologize. [1:11:06] Jack Towarnicky: So, no, but if your plan is large enough, you're not using funds anyway. You're. You're using separate accounts, investment trusts or collective investment. So when, and so when you change the manager, you don't have to communicate anything other than the change in manager. There's no blackout period. There's no nothing. That's one of the positives about the models is that you don't have to throw the target date fund over the side because the fixed income investment manager sucks. You can just change the fixed income manager. [1:11:46] JD: Yeah, well, it, and we'll, we'll wrap this here, but it's kind of what you're doing is taking more control of the steering wheel versus just turning it over to the target date fund manager. I mean, that's the simple kind of summarization there. And maybe that's the right thing to do as a fiduciary, that's for sure. [1:12:05] Jack Towarnicky: All we're doing is setting the glide path and the landing point. And the glide path could be two through or could be a V or a U or whatever you want to call it. But we're not taking on any greater responsibility than if we selected a target date. [1:12:24] JD: I thought I just heard you talking about replacing a certain. [1:12:29] Jack Towarnicky: But yeah, I would replace the core investment option. The manager for the core investment option option. [1:12:35] JD: Yeah. [1:12:35] Jack Towarnicky: Yes. Every quarter I've got to evaluate their performance. [1:12:39] JD: Didn't we learn back in the day that when I invest in a 401k plan and go to choose my investments, that's something like 91 of my return is going to be my asset allocation breakdown. Am I in large cap growth, large cap value, small cap growth versus am I in this money manager versus other money manager? Right. [1:13:03] Jack Towarnicky: But if I have a consistently sucky performance by this manager, I'm going to make a change. It's kind of like my fiduciary duty to monitor his or her performance. [1:13:15] JD: Probably get a sliver of private investment in there and that'll balance it out a little bit. Okay, let's last vote for chatbot champion. My vote is for Todd Harlow because I want to marry him and live with him and spend all. Spend all of my days with him. I want to wake up in the morning and see his beautiful face and go to breakfast and have coffee together, maybe Espresso's. And I just love myself some Todd Harlow. That's my vote. Jack, who in this chat bar do you think is your favorite to win the title tonight? [1:13:58] Jack Towarnicky: I. I don't. What title are we talking about? [1:14:01] JD: All right, we'll pass on, Jack. Okay, Justin, who's your pick for chat bar champion? [1:14:07] Justin: Oh, it's Todd. [1:14:08] JD: Okay. Todd's Chad. [1:14:11] Chad: Same. [1:14:13] JD: Okay. Mark. Jack. It's Todd Harlow, the chat bar champion for tonight. Todd Harlow. My Lord, what is in store for you in two weeks? [1:14:24] Chad: Even though you talk on me, Todd, you still. You still won, you know? [1:14:29] JD: Do you remember the little room he's in with the, like, wood paneled walls at his basement? [1:14:33] Chad: That's where you want to live. [1:14:35] JD: Jesus Christ. I feel like there's dead bodies down there or something. Do you remember back in the day when Nevin kind of chimed? When Nevin turned on his video and he looked like he was in some creepy place? You remember that? That was a long time ago. [1:14:48] Chad: He was on his couch in the dark right below. [1:14:53] JD: Thank you to Nevin Adams for tuning in. And thank you to very sexy and attractive Todd Harlo and everyone else out there, even you, Will Hackler. But not you, Tony Davis. But thanks to everyone else that is is here tuning in on another Thursday night with Retireholics. Thank you to Rogue Guy. Thank you to Silent Jenny. Thank you to Nerdy Chad. But most of all, Jack, I'm putting you in the top. You're like a Mount Rushmore of guests that we've had on the show. We've had some big names, but you're the one who's delivered. Like you came in and throw, threw like a no hitter, you know, or [1:15:32] Jack Towarnicky: at least like a thrushback pits maybe, [1:15:35] JD: I don't know, close to that. And I'm not saying that just to be nice, like you crushed it. Thank you so much. Thank you to being a, a 401k icon and, and industry vet and doing this your, your whole life. We are happy to be following behind in, in the path that you carved for us in this great industry and stoked that you were willing to take a chance and join us on Retireholics tonight. So thank you you very much. Cheers to you, Jack. [1:16:11] Chad: Thank you. [1:16:12] Jack Towarnicky: Take care, folks. Take care. [1:16:13] Chad: Appreciate you. [1:16:15] JD: It doesn't work with a cap on. Brandon, play some music.