Target Date Fund Flaws: Ron Surz on Sequence Risk

[0:00] JD: Foreign? Sure. How that intro makes me feel like I don't know if it's very political or superhero or whatever it is. Welcome everybody to another episode of Retireaholics. Yes. In case you didn't notice, it's Thursday and it's time to talk about some 401k shiznet. [0:28] Mark: Oh, man, that's a great idea. You remember that song by Rebecca Black says it's Friday. We need to have one that says it's Thursday. [0:35] JD: Thursday. [0:36] Mark: Why haven't you done that? [0:37] JD: Dude, I'll try to do one. All right. The coming weeks. All right, let's see a little bit of a mix up here. Just Housekeeping. Housekeeping. Housekeeping. Justin is still in Italia and Chad is at a softball game. I know most of you are thinking that they've been fired, but it's not true. They'll be back next week. You'll see them. I needed someone smart to fill in for nerdy Chad, so that person wasn't available. And then I found good stuff. [1:13] Mark: Boom. [1:16] JD: For that I'm just gonna. [1:19] Mark: Just. So he. He who shall not be named on. Over on the side there knows. I'm just going to call you Steve, okay? [1:27] Josh: Better than what people usually call me. [1:28] JD: Robbie. So we've got a special, special fill in with. With Mr. Josh here. So that's good. Let me. Let me intro the guests and we can get started with all this. This fun and hijinks. I'll drink for this. He's the president of Mark. If you can keep a tally for me. He's the president of the ppca. I don't know what the fuck that stands for. [1:51] Mark: Brandon. [1:51] Josh: Yeah. [1:51] Mark: Brandon, don't. Don't do it. While he's going, let's just. Let's just tally him. [1:56] JD: Solution. He is the co host on the Baby Boomer Investing show. A podcast. Yeah, he's written books, Josh. He's written books just like you. You're not the only one that writes fucking books. One of them is titled Fiduciary Handbook for understanding and selecting Target date funds. You guys and your creative book names, man, that's. That's that one. [2:22] Mark: Does that, does that even fit like on the side of the book where you know when you get it from a library? [2:27] JD: What it looks? [2:28] Ron Surz: Yeah, it does. Yeah. [2:29] JD: He teaches financial education at both Learn Formula and Age Sage. So he's kind of like giving back a little bit, teaching people about things. That's cool. He sat on a bunch of fancy boards. I don't know what that's like with nails. He's an outspoken critic of Target Date funds, a repeat contributor to numerous financial publications including 401k specialist mag. But not limited to bottom line is, in my opinion, he's one of those old school guys, you know, that loves his craft, gets his hands dirty, gets deep into the details. A true professional who has learned what he's learned through experience and hard work. And I'm claiming there's a lot of value in that. He's the creator of Sir's Style Pure, which. That's a steezy name, bro. I saw that on your website. [3:22] Ron Surz: Yeah. You've done your homework. Thanks, jd. Thank you. [3:25] Mark: The one unlike you, Ron unlike you, JD has a lot of time on his hands. [3:32] JD: One the only Ron Sirs. [3:34] Ron Surz: Thank you. Thanks. Before to be here, before we move [3:38] Mark: on, I always like to point this out because it helps kind of navigate a little bit of this. I see Barbara Sirs in our chat bar. Is that. Is that the one and only. Is that. [3:49] Ron Surz: That's my bride and my sister's on Kathy Turkey only she's watching too. Should see her in the chat. [3:55] Mark: All right, well, hopefully they chat it. Hey, by the way, just so they know they can win some stuff if they chat, so. [4:01] Ron Surz: All right, cool. [4:02] JD: What a setup. Mark, let me, Ron, take you through some of the games we're going to play today. We're going to be playing Acro Sense. So if you say any initialism or acronym, then you must drink from your penalty drink. Looks like you got a little bit of Jack Daniels there. I'm sipping off some Grey Goose and grapefruit. Mark's got something and who cares, Josh? Doesn't matter. In that game, chat bar champion, Ron, you will vote for someone in that chat bar that you would like to send to the finals. Whether they're the most creative, the funniest, or whether you're married to them and you have to vote for them. Whatever it is, you'll get a vote. Finals, and then you out there in the audience, you know you're going to vote for. For the freaking winner. Chap. Our champion, last week's winner was Webby. And so, Webby, I don't know if it's been delivered yet. If it hasn't, it should be there any minute. [4:55] Mark: Can't wait. [4:56] JD: It's Kentucky Fried Chicken, my dudes. Four drumsticks, four breasts, four wings, all original recipe, of course. A large Mac and cheese, a large coleslaw, a large mashed potato and gravy. A large something else that I forget. Eight biscuits, one gallon. Yes, one gallon of Mountain Dew. And 12. Count them, Webby, 12 chocolate chip cookies. Okay, [5:34] Ron Surz: that's so generous of you. [5:35] Mark: What is the calorie count on that? [5:37] JD: I'm just. [5:37] Josh: And one heart. [5:38] Ron Surz: One heart attack, Webby. [5:39] Josh: I think it's. [5:40] JD: I think it's between it. It's on the website. It's like 7,500 calories or something. Okay with that. Let's get to it. Headlines. Brandon, play me some headline. Stable fund focus and another excessive fee suit. It looks like not principal Prudential is in the sights of a lawsuit on excessive fees. And unlike a lot of these other lawsuits we've seen, this one seems to be focused on the stable value fund, which I thought was pretty interesting. They make some complaints that they've seen other Prudential stable value funds that have better returns. Maybe I can ask Josh this or. Ron, you can chime in if you want to if you feel like you know something here, but isn't a stable value fee at Prudential always going to get the same return just minus whatever fee structure they put on it, or do they actually have different stable values that they would offer different clients? It's just a share class thing, right? [6:50] Ron Surz: I would think so. I think they'd be pretty comparable one to the other. But it's not. It's not something I'm really familiar with. [6:57] JD: I mean, I always figured out of the game. [6:59] Josh: I've been out of the game for a while, but yeah, there was. I mean, I think they have. That is a spread product they have, isn't it? I think it is their guaranteed income fund and they would just dial up the. [7:08] JD: That's what I'm talking about. Yeah, but, yeah, yeah, they're going to try to, like, if they can get you 3% in a circuit mark in a certain market environment, but they need to layer on one and a half, then you're only going to get one and a half return and that. And that's how they build those. [7:22] Mark: That's how most do it. [7:23] Ron Surz: Right. [7:24] Mark: I mean, that's no different. [7:25] Josh: So now with the plaintiffs firms, it's interesting. They've literally brought lawsuits against every single possible investment option, I think. [7:33] Mark: Right. [7:34] Josh: That could be in a 401k plan. [7:36] JD: Well, I feel like a stable value one will at least be a. A pretty straightforward conversation in that courtroom. You know, I mean, it's. It's got a pretty specific goal that is trying to do. And the fee structure should be pretty transparent. But anyways, it's. It's a different lawsuit for sure than than we've seen out of most of them. They even go on Josh, Mark, Ron, to mention float, which you don't hear a lot about. And they add that to their lawsuit and float. For everyone listening, you know that that period of time in a distribution where the money hasn't hit the participant's account, but it's still sitting with the vendor and they're making some returns on that. So check it out. It's at the national association of Plan Advisors. Another lawsuit written by the one and only Mr. Nevin Adams and stable value. Maybe we talk a bit about that later today. But let's go to the next headline. Auto portability big move. Major record keepers form a consortium with the something clearinghouse. Retirement Clearinghouse. Okay, did you read this? Anybody here read this? Because I popped around the Internet. Josh did. I'm not sure what I think about this. You've got Fidelity, Vanguard, and. How do I pronounce it? A light. Light solutions that are part of this thing. And based on my reading, what they're trying to do is create a really quick, efficient way for when a participant leaves an employer, their 401k money can follow them to their new employer. You know, they won't leave it behind or that record keeper [9:20] Josh: or, or cash out. I think this is like I was pumped about. I think this is. I'm excited to see how it gets implemented. I hope other record keepers do join it because it's. They can. I think this is. I think this is great innovation. I think the most impressive thing is that Fidelity and Vanguard agree to be in the same club. That's what surprised me the most. But I think this could be, I do think this could be great to make it more seamless for people when they are mobile between jobs and not making it such a pain in the neck, obviously how it gets so ends. But I think this is a great thing. [9:57] Mark: I'll be, I'll be the, the naive dumb one here. What are they doing that's so innovative, Josh? [10:03] JD: Well, right now, Mark, you got to, you got to fill. [10:06] Mark: I didn't ask you, jd. [10:09] Josh: I mean, the devil's in the details, but. So I probably can't answer that. What they talked about in the, in the article, [10:21] JD: they didn't really. [10:22] Josh: I don't think they dove into like, hey, this is exactly how it's going to work. [10:26] Mark: Okay. [10:26] Josh: I'm assuming this retirement clearinghouse is going to be kind of the, you know, all roads lead and facilitates all this. But, you know, the more record keepers can work to, to make it like bring the easy button. I think is. I think is good. I think it's good. [10:42] JD: So, yeah, the answer is going to be. The answer is going to be tech over paperwork, Mark. They're going to build these. [10:49] Mark: Oh, boy. See what happens when you go to. You go to Miami and you don't have a good connection. Great. You're fine. [10:55] Josh: You're fine. [10:56] JD: They're going to build the. The connectors, and you'll be. To have that money come over quickly. One thing I think that stands in the way of it. It'll be interesting to see how many record keepers join up. Do record keepers want, right. Participants to move their money? I would think they kind of like hanging on to that cash and might not be the most eager partners to join into that. Or am I just. So here's. [11:19] Josh: So here's. [11:20] JD: So here. [11:20] Josh: Here's the cat. Like, here's what I would say. Maybe I'm speculating, but if you in the wirehouses years ago, created the broker protocol, and what it was was that they were, you know, Merrill and Smith Barney and Morgan Stanley and ubs, right? They were all poaching each other's advisors. [11:43] JD: By the way, I'm drinking for Josh tonight, okay? I was like, I don't even want to. I don't even. [11:48] Mark: I don't even see him on bol.irs. [11:50] Josh: like. But what they did is they created the broker protocol. And essentially the. The wirehouses were like, we're spending all this money fighting each other when we. When people change seats. Let's create this protocol that, you know, we'll all agree that to make it more seamless, you take my advisor. I take your advisor. Like, let's stop making kind of the attorneys wealthy, and let's. Let's make this a little bit more seamless from that perspective. I kind of think that's probably this with the record keepers. Like, why would fidelity. You think they want to keep assets, but maybe they think, like, hey, we're going to get as much or more than what we're going to let go. And that could be. That could be the answer. [12:32] JD: Could come back the other way. If I have any Internet problems, I apologize. Pick up for me, Mark, or everyone. I'm in Miami. Here we go. We'll get Ron involved on the last headline because it's right up his wheelhouse. Ron, I want your thoughts. Giselle and Tom Brady are lawyering up. [12:54] Ron Surz: How did Shaji know? [12:55] JD: Yeah, give us your thoughts on this, Ron. I mean, you feel bad for Tom. You feel bad for Giselle, who's Who are you siding with? [13:03] Ron Surz: Well, no, no, divorce is easy. So I feel sorry for both of them. [13:07] JD: Well said. [13:09] Ron Surz: How did I get to be my wheelhouse? It's really strange. [13:12] Josh: Maybe, maybe Tom was on, you know, something like this, was talking about his sex life and she got mad and said, here's the papers. [13:21] JD: There you go. When you're like the all star quarterback, famous chiseled jaw, good looking Superman guy, and you're married to Giselle, the supermodel from Brazil, and you guys have all the money in the world and everything at your fingertips and you can't make your marriage work. That's, that's a scary thought for me. But maybe all those things make it even tougher. I don't know. [13:48] Ron Surz: They could make it tougher. [13:49] JD: They really could make it tougher. [13:51] Ron Surz: Yeah. [13:51] JD: Apparently the news is that she's upset that he won't retire. So I get that you've won all these Super Bowls. You've made a great career. Why can't we just settle down and raise our kids? Come on, Tom, you blew it. [14:02] Josh: Tom was in a target date fund that had too much equity at the target date and he's still working. [14:09] Ron Surz: There you go, Josh. [14:10] JD: Let's, let's, let's set the mood for, and get into the real discussion tonight. So to correct me if I'm wrong on some of these things, usually when inflation starts to creep high, you know, these days, in the modern days, the Fed can, you know, work to help that by increasing interest rates to kind of slow the economy. But typically when we face a recession or a stock market is going downwards, the Fed can lower rates to help the economy and the markets. Well, here in this spot with COVID we were at zero interest rates right before COVID started. And so for the first time ever, you got Covid. They flood the country with money. We have these high price earnings ratios with companies. The stock market kind of recovers after, after the big Covid downturn, dumbasses are out there. Venture capital, private equity, investing in companies like Guideline and human interest at like stupid valuations even though they don't turn a profit. And then here we go, we get what's called a double whammy, a point where stocks and bonds are going down together and we haven't seen that historically. And it creates a new situation that apparently a lot of these target date funds are struggling with. Because as we're going to talk to Ron here about their strategy in a 2020 fund is one where they maybe got 45% in stocks and 55% in bonds and they're surprised some smaller, smaller cash equivalents. And so they're hitting the worst of all worlds. Right. Like nothing's working out for them. Before we head into the underlying investments, I think it's important for us to talk about. You had an article out today around sequencing of risk returns. [16:13] Mark: Right. [16:13] JD: And this is something that we've heard from Kitsis before where maybe we're getting it wrong as an industry. I saw a piece that you put together, you called it two through and you. And I was with Josh when I read it, I'm like, what's he talking about? And then I saw the U is is your glide path. So, Ron, you're a believer that the risk that retirees face like five to 10 years before the retirement date and five to 10 years after the retirement date is crucial. And if they take a big hit in that period, the sequence of returns is going to mean that they may run out of money. Tell us more about this sequence of returns that you wrote about today. [16:55] Ron Surz: Sure. So you've had other guests who have talked about it and retirement researchers are united that this risk exists. And the idea is that there's this. You already said it, J.D. there's this time period when if you're unlucky, the only thing that's going to give is your standard of living because you're going to give up your paycheck. You try to go back into the workforce, but that money is going to be really hard to make back. So people who are near retirement only have so many years left to try to recover. But we have not seen anybody concerned about seek as a return risk for the last 13 years. So the last time anybody cared was 2008. [17:39] JD: The only time we start talking about this stuff is when the markets. [17:42] Ron Surz: When the market goes down. Exactly. And this time that's on 2008. Bonds sort of even made things better because while the stocks were down, you know, 40, 50%, bonds were actually up. So it really cushioned the blow. And just to put the, the numbers in the right slots, the average target date fund at the target date is about 55% and risky assets. So this is not 40, 45 is 55. And most of the balance of those assets are in long term bonds. So now when you've got stocks going down and bonds going down together, we're seeing something that easily could be worse than 2008. So Mark, I saw the last show and you sort of said, but you know, these target date funds, they made people really wealthy because They've been taking the risk and that risk has been rewarded. Stock markets over the last 13 years are up 600%. Bond prices doubled. So sequence of return risk people got through this risk zone safe and they were lucky. Right now, virtually all of our 78 million baby boomers are in the risk zone. 78 million people, $60 trillion are in this risk zone. So to put that in perspective, target date funds right now are three and a half trillion dollars and there's 37 million people in them. So there's, there's no surprise. This, this, these warning signals were flashing. Now they're bright red. [19:12] JD: I think the big has though is so one. Let's, let's, let's set the record straight. Like. So this, this U glide path curve you're talking about is not used by all of the target dates. [19:25] Ron Surz: No, it's just me. I'm the only one using. [19:27] JD: Yeah, they're using what we're accustomed to as a classic glide path. [19:31] Ron Surz: Yes, that's right. [19:32] JD: This classic getting more and more conservative. And so why, if, if this strategy seems to make sense and when you hear about it first, it seems to make sense. Right. Geez, I don't want to take a big hit close to retirement. Why are the target date funds not utilizing this type of approach? [19:47] Ron Surz: Yeah, well, my article actually has a quote that I can't remember who I quoted anymore, but he basically says because it's not profitable for the fund companies, so it stocks and it's not profitable [19:59] JD: because utilizing this U base curve would mean more investments toward cash and. [20:05] Ron Surz: Yes, exactly. [20:07] JD: And those would not have the same type of revenue that even fixed income would, would have, let alone equities. [20:14] Ron Surz: That's perfect. So if you want to control for seasonal return risk, you want to be very safe. And bonds aren't safe anymore. So it means basically cash. And the Federal Thrift Savings Plan is, is a good example of a fund that's protecting a sequence of return risk. The largest savings plan in the world, $800 billion, has 70% in the government guaranteed G fund, only 30% risky assets. And they have the problem that I got sided with early on with my, I patented my design. People would say my clients can't live on treasury bills. They're going to try to live another 20, 30 years. And T bills are paying 1%. That's not going to work. So Michael Kisses and Wade File. You had kisses on the show. They did serious research on trying to solve what should the glide path be in retirement now, many people take their money out when they retire. But there's still a fair amount that do stay in the plan. And their research says, and this, this really dovetails right into sequence return risk. You start out retirement really safe, like no more than 20, 30% in risky assets, including risky bonds. And then because you know you can't live on that, that treasury bill return you re risk and that creates the [21:28] JD: U shape now is counter to like everyone's historical. [21:34] Ron Surz: But you know, Michael Kisses points out and this, this I thought was a revelation. He goes, you know, so you guys are telling me this is wrong, but you guys use a bucket approach. And what do you tell people in retirement? In the bucket? You tell them to spend the bonds first, don't you? [21:49] Mark: Right, right, right, right, right, right, right, right. [21:51] Ron Surz: So what does that do? [21:52] Mark: I was going to say kick it, [21:53] Ron Surz: but yeah, you could do that too. But the, the underlying thing there is, you know, equities are going to zig and zag, but if you give them a long enough run, they'll, they'll be fine for you. [22:03] JD: Ron, let me ask a question from the chat bar Webby pointed out someone said those is a good point. If I'm on this, this you glide path and, or this Kitsa strategy of the, of getting more aggressively invested for that retiree later in their retirement, the question was well, can I as a, as the Target day fund, can I make up some of that revenue then? Because now I'm taking this 70 year old, you know, 75 year old and I'm getting them into a much higher equity exposure and I can make up some of my money that way and a little bit. [22:35] Ron Surz: Yeah. So for you start retirement say around 65 by the time you're 90 in the kisses model, you've now gotten back up to where Vanguard is. So Vanguard is a through fund. They level off at 45% equities at about 70 years old and you get back up to around 45 when you're 85 years old. So you, you do start to recover some of those revenues that you might be giving up. But that I think gets to the whole reason that target date funds are designed the way they are. They're designed for profit. If you, so I'm, I'm, I have two master's degrees and I consider myself a financial engineer. When I set out to design my glide path, I had a criterion that I thought everybody would identify with and that criterion was don't lose the participants money. Yeah, I thought that would be a good thing. Financial engineering for that is there. [23:30] JD: But Ron, what you're up against is. That seems great. But in the real world, it's. What is your one year, three year, five year? [23:38] Ron Surz: Exactly. You know, the last 13 years have been misery for my design. So I shine in 2008, I lost 4% when the industry lost 30. I shine in 2011, I shine in the first quarter 2020, I'm shining now. But my bright lights are, you know, just so sporadic that if you put it all together, you put it all together for the last 14 years. I push with the industry with a lot less risk. [24:04] JD: You push with them. Right. And performance live. Because I'm thinking if I'm, if I'm T. Rowe or American Century or whomever, I don't want to wait for those little bright lights that happen every 12 years. Right. I gotta. [24:16] Ron Surz: Well, but, but, but you, you only retire once. You're only in the risk zone once. So. No, T Row actually wrote a rebuttal too, and they pretty much acknowledge we don't, we don't care about things. Return risk. This article is all about that. We don't care. And the reason we don't care is because we're gonna, we're gonna bring you up to your target date with a lot of money. So you can lose some of that [24:38] JD: because you can wear, you can wear the down market because you've, you've accumulated such wealth. [24:43] Ron Surz: Right now, the reality that is very well documented. There's two things that matter in terms of how much wealth you accumulate. What you contribute, your savings and what you earn on that. The earnings on those savings tend to matter when you save in the early years, the last 20 years of your savings. Experience matters. The amount you save, how much you're putting in matters much more than what you earn on it. So when you get to this, we've [25:13] JD: always known that as an industry. Right? [25:15] Ron Surz: We've sort of known it. But you know, the zero price thing is sort of. No, no, no, no. We've made you rich with our, with our great returns. And that's not true. So this once you've saved that at [25:27] Josh: the end of the. And Ron, I totally agree with government been posting about this. A fair amount is that everybody wants to talk about investments. I mean, the problem we have, I would argue is that like savings rates are too low. You can. [25:41] Ron Surz: And they are. Yeah. [25:43] Josh: Out of a savings deficit. Yeah. From, from that, you know, from that. [25:48] Ron Surz: The SEC actually wrote a report on that. The report is. [25:52] JD: Bring them up, Mark. What I do securities and Exchange Commission. No, that was wrong. [26:00] Mark: I didn't see that One. [26:01] Ron Surz: Oh, I said that was Brandon. So am I supposed to do this? [26:04] JD: Yeah. [26:05] Ron Surz: You guys can't see us. [26:06] JD: Just a little. Just a little sippy sip. Just a little sippy sip. I hear you. And I. And we're. I'm going to ask both of you guys some questions a little bit. [26:14] Ron Surz: J.D. we lost your sound. I lost it. [26:18] JD: Can you hear me now? Can you hear me? [26:19] Ron Surz: Can you hear me? [26:21] JD: I hear you. And I. And I understand that protecting Granny's money at retirement is what Granny wants and it's so important, but we can. [26:32] Ron Surz: I lost the sound. [26:33] JD: Oh, no. [26:34] Ron Surz: Oh, I see it. [26:35] JD: You got it. We cannot ignore the fact that we are in a, in a capitalistic way marketplace. And these are products. And the people that are running these target date funds are going to want their products to look the most attractive they can look. And it seems to me that chasing performance numbers is always going to be a thing. [26:58] Ron Surz: Yes. [26:59] JD: So we're, we have to understand that when we're, when we're going to have this type of conversation, that's not going to go away. I understand that savings rates are important and that's a big deal, but it's almost like a separate conversation. So let me ask you this, though. We, we knew that interest rates were going to go up because they were at zero. They had no other place to go. I don't think we knew at what extremity, what, how extreme it was going to be when the Fed got involved. And they do it so quickly, but we knew that bonds were going to take a hit at a certain point. Were target date funds worried about that three years ago? Four years ago? And then here's what a lot of people are saying in the chat bar last week, Ron, is what's the alternative to the bonds that, that and I mentioned, like a 2020 fund has, like, some of them have 55% in fixed income in their portfolio. What is the alternative? Are they supposed to shift from 55% in that fixed income to like, to these cash equivalents you're talking about? I don't know if they have access to this guaranteed G. Fun thing. [28:05] Ron Surz: No. Only at the TSP has the G fund. [28:09] JD: Last week was, okay, fine. Ron. [28:12] Ron Surz: Yeah. [28:12] JD: Where are they supposed to invest it [28:15] Ron Surz: so you could get exotic. But I don't think you can do that in a target date fund. So, I mean, so I think that the closest thing you can do is to at least shorten the duration of your bond portfolio. [28:26] JD: Now, that won't make your one year type of stuff or. [28:30] Ron Surz: Yeah, one to five year instead of 15 to 20 years or whatever you're doing. No, that at least mitigate the. What you know is coming. [28:38] Josh: Are you, Ron? Are you. Are you using, like, the five to one year tips? When I looked at your glide path, it looked like on your glide path, you're at, like, zero equity at the target date. [28:49] Ron Surz: You look like it's very close to it. Yeah, you did look about. [28:52] Josh: It looked about 60 tips and about 40, roughly. Treasury. [28:57] Ron Surz: Treasury bills. Yes. [28:58] JD: Are you guys. [29:00] Josh: Sorry, JD. [29:01] Ron Surz: Oh, I did the tips. It was my fault. Yes. The tips are intermediate tips. [29:11] Josh: Are you using, like, the one to five here? Are you actually using long dated tips where you've got. [29:16] Ron Surz: No, no, I'm not. And I will. Oh, my God. We put that in quotes. That's too bad. [29:25] JD: All right, just say the words, man. Don't worry. We're gonna. Ron's gonna catch up once he finishes. [29:30] Josh: Here's a tip, jj. [29:31] Ron Surz: Throw up off camera, buddy. I will say this. There's. There's a. Another, you know, highly regarded firm, Dimensional Fund Advisors. Dfa. [29:39] JD: Yeah. [29:40] Ron Surz: And they end mostly in tips at the target date. I said again. But there's. There's our lab. Rod. [29:46] Mark: You owe so many drinks. [29:48] Ron Surz: I know, [29:50] Josh: but their strategy is their target retirement income. [29:53] Ron Surz: Exactly. [29:54] Josh: So they're trying to actually protect against volatility of an income stream. So their strategy is an interesting. It's kind of similar to what yours looked like in some ways, without the. [30:05] Ron Surz: It's. It's reinforcement. Except. Yes. But they're sort of tailoring it to people staying in the plan and that don't. Not many people actually do that. And second, when you've got the longer vehicle in there. Say the word, you're. You're exposing yourself to the likelihood that real interest rates will go up. So I'm gonna say it. Tips will go down when real interest rates go up the longer the maturity. [30:35] JD: But you also have to drink for it. [30:37] Ron Surz: All right. Okay, here we go. [30:40] Josh: Like the whole bottle, Ron. [30:42] JD: Yeah, I know. A couple swigs. Got it. A few more swigs, I won't be [30:47] Ron Surz: able to talk anymore. [30:48] JD: I hate to compare the performance, especially in such a weird year. You know, the tip. [30:54] Josh: Jt Just compare the tip. [30:55] JD: Where all these things are happening. [30:57] Mark: Doesn't count. [30:58] JD: So what your. Your strategy of. Of using these. These other options versus fixed income is down like 5%, 6% this year versus some of the 2020 funds are down more like 13, 14. [31:13] Ron Surz: No, they're 17 and a half percent. You. You spoke about. [31:16] JD: Oh, that's right. [31:17] Ron Surz: Middle August. Yeah. Through the end of September. The 2020 funds for the competitors, the industry in General is down 17 and a half percent. [31:27] JD: And all of them, really, they all pretty much mirror each other. [31:29] Ron Surz: They do. That's right. [31:31] JD: They're almost clones of. Of each other and what they're doing. JD's getting your stats wrong last week. No, I nailed the 17. That's what I said last week. Out of those numbers. [31:44] Mark: Yeah. Webby, as a usual member of the chat. Chat bar, you should know we make up our statistics thing. [31:51] Ron Surz: Yeah. [31:51] Josh: The Vanguard Target Retirement Fund was down. It's a 70% fixed income, 30% equity was down 15.89% through September. The TSPL income fund. [32:07] JD: I'll drink. [32:08] Josh: Was down 6. [32:09] Ron Surz: Yeah. [32:12] JD: So mission accomplished. That's fine. But let me ask you this. This is the first time our stocks and bonds have gone down together. So surely, Ron, you can't be asking us to reconfigure Target Date funds like this when this time will come and go. And we will move on to regular markets in the future where when stocks go down, bonds will protect those. And the original methodologies would work. You're not asking us to, like, completely uphaul this whole thing now and change it for this weird anomaly that we're living in right now, are you? [32:50] Ron Surz: No. So I said before 2022. I started saying this 14 years ago. So when I designed my. My Target Date fund, it was. It was. I was working with a professor, and he goes, you know, this is not like what anybody else is doing. And he goes, but it's right. And I showed it to the corporate consulate of federated investor Gene. Gene Maloney, who was at a lecture talking about fiduciary responsibility. He goes, holy cow. This is. This is the DOL. Should know about. Oh, here we go. The Department of Labor should know about. [33:32] Josh: I'm looking at. I'm looking at the chatboard people. I'm looking at the chat bar. [33:37] JD: Sorry. Okay. [33:38] Ron Surz: Okay. [33:38] JD: I wanna. I wanna play a game. [33:40] Ron Surz: I don't know how to put this. [33:41] JD: You said earlier, Ron, but can I [33:44] Ron Surz: make kind of a big deal? [33:46] JD: Jb. Yeah, go for it. [33:48] Josh: The interesting thing is. And Ron, you're. I would say you're. In terms of implementation, Right. The research from Wade and, And Michael. It's sound when you. [33:58] Ron Surz: When it is, [34:01] Josh: you're like a lone wolf crying into the desert with this strategy. And the challenge I would have is, like, how much have you implemented your strategy? Because I think the Target Date Fund, like, you don't Want to look very different. You don't want to look as good as possible. I would argue it's the other way. Is that most. [34:19] Ron Surz: If you're going to make a difference. [34:21] Josh: Most target date fund providers don't want to look super different than everybody else. [34:27] JD: Very. Too risky. They're very. [34:29] Ron Surz: Yes. [34:30] Josh: And so. So how much. How much success have you had in terms of telling or. Or convincing plan sponsors to buy into your strategy and actually deploy it and implement it? [34:42] Ron Surz: That's. That's. You bring out the pain, but I'm going to share the pain with you. So I showed my design to David Hand, president of Hand Benefit and Trust in Houston in 2007, and David liked it so well. Yeah, Dave was a great guy. So he put the Hand Benefit Trust Target Date Fund into my design, and that was roughly $60 million for the next 10 years. So I ran $60 million. No, it's not Chumpchain. Three years ago, I started working with a large union, the Office of Professionals International Union. That's one of the largest AFL CIO unions. So that's only about $10 million in target date funds. The Hand Benefit Trust fund closed last December because I was losing the performance horse race. And I can show you all sorts of things that won't surprise you a little bit. [35:38] JD: That horse race went December last December last December. [35:41] Ron Surz: December last year. So feel my pain. But the good news is the Q sips, the registrations, all this stuff is still sitting there. [35:53] Mark: And was that one. Did I hear one? [35:56] JD: Yeah. [35:57] Mark: Okay. [35:58] Ron Surz: Registrations. What did I say? [36:00] JD: I don't even know what it stands for. I'll drink for about Q sips. [36:04] Ron Surz: Oh, Q sips. Oh, yes. Okay, I said it again. So those. [36:10] Mark: Not good at this game, Ron. [36:11] Ron Surz: I know. [36:13] JD: Okay, so. Wow. [36:14] Ron Surz: Why don't I just finish the whole bottle? No. [36:16] JD: So, yeah, you're gonna have to. Yeah, they shut down the whole thing. But it's because of everything I was bitching about earlier because of performance, you're not looking good in. In the more recent performance. [36:28] Ron Surz: Right. So that pendulum, I think, is beginning to swing. And will it be over in a month like it was in 2020? I don't think so. And I think there's a whole bunch of reasons. I wrote an article that is not in 401 specialist. It's called the Rest of the Story, and it's about the things that you won't see on the news. It's like the Fox News version of what you think you know, but you don't. But there are all sorts of threats and reasons to think that this market fall so far is just the very beginning of what we're going to see. [37:00] JD: And then can I package this up for you though? Is that you told me earlier that you had almost created a wash in performance with the more riskier target date funds over a longer span, meaning you didn't look as sexy in the high markets, but when those moments of down markets came, you caught back up and all, all the horses kind of got even in the race. Me then Your point is, J.D. if I can get even in the race over a long period of time, but also protect against this big crash of a sequence of returns early in retirement or right before retirement, then that's mission accomplished. And this is what you're so proud of. It was working and a sucker got shot down. And so your answer to Josh's question is, is I've failed in the regard of getting true implementation and it's just not, it's not catching on. No one's, no one's picking it up. [37:54] Ron Surz: No. I need a partner and I thank you for letting me be on the show because part of the challenge is getting the word out. But I will say this. We have Never, ever had 78 million people all in the risk zone at the same time. Those, those are the baby boomers. And that's why you mentioned my educational program. We've been reaching out to boomers to just tell them they need to look. And I have, I'm in a fairly affluent area here and I talk to my friends and I say, are you comfortable with your, your current acid mix? And almost everyone says, yeah. I have this advisor and he's a genius. He's made me a lot of money. So I say, so how much do you have in equities? I don't know. How much do you have in long term bonds? [38:39] JD: I don't know, but he's a genius. [38:42] Josh: I actually don't think it's the affluent. What's interesting here is I think who's at risk is not the affluent. The wealthy, right? They've got, they can lose some advisors and they've got the, they've got probably the assets to be able to weather it. It's not the low end of the spectrum, like the really low income. When you look at savings rates, they [39:02] Ron Surz: don't have enough to lose. [39:03] Josh: That's right. And Social Security makes up a really high percentage, probably 70, 80% of their retirement income. It's really in that middle folks that don't have enough, you know, to, to Kind of self insure their portfolio, if you will. [39:20] Ron Surz: That's right. [39:21] Josh: They also don't, you know, they, they still. [39:23] JD: That's enough. [39:24] Josh: They [39:26] JD: come. [39:27] Josh: That's who's kind of at risk. And I would say that sequence of, sequence of return risk. I'm not sure 2008 or 2020 are good examples because they were more like they were hard down, but they were more like V shaped recoveries. It's more of like 2000, 2001, 2002, where you've got this kind of extended bear market. And who knows, we could be in that. We could be in that right now. That seems to be where sequence of return risk really gets a challenge. Not a one year bear market, but more of like an extended bear. [39:58] Ron Surz: Exactly. [40:00] JD: All right. [40:00] Ron Surz: Yeah. [40:01] JD: Well, speaking of boomers, I thought we could play a game today. It's called the no for dope game and it's the boomer edition. Okay, I'm waiting for my graphics. All right, brandon. All right. I like my graphic, but I don't like it that much. Have you ever seen the kids, kids on the Internet, Ron, they talk a lot of smack about the boomers. Okay, boomers been a trending topic these days. I'm going to throw up a couple Twitter posts from some of these younger crews complaining about older people and we'll have a small discussion. Brandon, throw one of those suckers up. [40:55] Ron Surz: Ouch. [40:57] JD: Olivia out on Twitter says, why are boomers obsessed with younger generations not knowing cursive? You know what, hook up your own tv, Claudia. Ron, are you nope. Or dope on knowing cursive. Is this something that your thumbs up for some should people know cursive? [41:19] Ron Surz: I'm nope. [41:20] JD: Good for you. You can always explain why, but next time. [41:24] Ron Surz: Well, I think I'm nope. Because I can, I can read [41:31] Josh: the [41:31] Ron Surz: regular writing rather than the curse is just fine. So as long as you can read it, it's good. [41:36] JD: Mark, I don't know where you're gonna go on this. Are you pro or anti knowing how to, to write incursive? [41:45] Mark: I think any form of writing is kind of dumb these days, but. And I think the chat bar has already said it, like, what if you become some famous person, you gotta sign an autograph, you know, like what are you gonna do? Spell it out and just, just write your name. Although, you know, I will say autographs are kind of dumb because like, you know, someone's name always looks like a big line. So maybe they writing their name in like all caps. So I don't give writing stupid. [42:14] JD: Josh, Cursive. No, burdo, cursive is dope. [42:19] Josh: My kids go to a school where they teach. They. [42:21] Ron Surz: All the. [42:22] JD: All the kids in them, they do [42:23] Josh: have to learn how to do. How to write cursive. [42:25] JD: How close is your school that I [42:27] Josh: think writing, whether it's writing cursive or just writing in general is a lost art, and so I think it's dope. [42:36] JD: Okay, good for you. How close is your kids school to your country club, you privileged son of a. Okay, let's do the next Twitter post. Put up another one. Brandon, why are boomers obsessed with typing? What did I put? This one. Oh, the dots. Oh, this one. Close to home. Okay. That's why I put this. I do this. [43:00] Mark: I love doing this. [43:01] JD: I do this all the time. Instead of using a comma, I. Yeah, Brandon will attest to this. Okay, Ron, the dots. Are you. Are you for them or against them? Nope. Or dub. [43:13] Ron Surz: I see. I get emails from this one guy who does that, and it's annoying to me. [43:19] JD: You don't. [43:19] Ron Surz: Yeah, see, so I'm a nope. [43:22] JD: And you're not referring to me because I haven't sent you. [43:24] Ron Surz: No, it's not you. No, Josh, he's probably on this call. He's going to know exactly who he is. [43:29] Mark: It's just. It's his style. [43:30] Ron Surz: You sort of get used to it. It's like, why are all those dots there? [43:33] JD: I don't get it, Josh. Are you. Are you into this or not? [43:39] Josh: I didn't even know this was a thing. [43:42] JD: Oh, I use it obsessively, like, everything I write. [43:46] Ron Surz: I'm catching up. [43:48] JD: Thank you, Ron. Thank you. The retired gods are smiling upon you. [43:53] Josh: Ron, are you pulling straight out of the bottle? [43:55] JD: All right, Mark. Josh doesn't give me any context. [43:57] Ron Surz: Okay, so I see that. [43:59] JD: Are you down on the dot, dot, dot, Robyn? [44:02] Mark: Oh, 100%. I do. I mean, not so much in email or anything, but I do it in text constantly. As a matter of fact, I pretty sure I just text someone an hour ago with, like, 75 dots. So I love it. [44:15] JD: Whoa, whoa, whoa. How many can you. But you only do them in. In groups of three, right? [44:21] Mark: No, you know, I. [44:23] JD: Funny, I use. [44:24] Mark: If it's more dots, it's almost like I'm adding an element of, like. Wait for it. Legendary. You know, like, here it comes. I do this a lot. Hey, dude. Like, a lot of dots means, like, I probably have a lot to say. If it's hey, dude, then I have something quick to say. So the dots actually mean it's kind of my mood. [44:44] Josh: My. [44:44] JD: You know, I like that you're making me feel better. The same way you told me that I could wear shorts and flip flops. Now you tell me I can use the dots, and it makes me feel really good. [44:54] Josh: Robbie, if you spent as much time hunting for new business as you do thinking about your strategy with the dots, bro, you would be retired. Right? [45:05] JD: You know what else you can do? [45:06] Josh: And you could be in one of Ron's funds. Dude. [45:09] Mark: Dude, you know, I, I, I, I prefer to just really live silently and not have to do a lot of work. [45:17] JD: So, Josh, how many. How many plans have you sold this year? Hey, Mark, how many plans have you sold? Oh, yeah, that's what I thought. [45:25] Mark: So many I can't count. Yeah, just because I can't count that high because I'm dumb. [45:30] JD: You can also end your sentence with some dots. [45:34] Mark: No, you can't. No, no, no, no. [45:36] JD: Because it's a cliffhanger. It's, like, more to follow. Like, you don't, you know. [45:41] Mark: Yeah, but okay. No, I agree, but then you got to follow up. [45:46] JD: Yeah, sure, sure. But it's a more to follow kind of thing. It leaves them hanging. Brandon. Let's. Let's see what else some smart young people on Twitter have accused the. The boomers of. Why are older people so upset? This is how Michelle would say it. Wait, why are the older people so obsessed with telling you what time it is when they leave you voicemails? By the way, it's so. Oh, I drank for that. I, I did that to you today. I left you a voicemail, and I said, hey, bro, it's like, 2:10, like, so apparently, I do that, too. Ron, are you. Do you do this? Do you tell people what time it is when you're leaving a voicemail? [46:26] Ron Surz: Nope, they don't. [46:28] JD: Good for you. [46:29] Ron Surz: It's today's date, but that's it. I don't do that. I do have something. [46:34] Josh: Do people still leave voicemails? [46:37] Ron Surz: Yeah, I do. [46:37] Josh: I don't even check my voicemails ever. So, like, just text me, bro. [46:42] Mark: Wow, that's, like, the rudest thing I've ever heard anyone say that. [46:47] Josh: My voice. I'm surprised you left one, JD because people are always like, your voicemail is full. And I'm like, that's exactly right. [46:53] JD: Oh, no, it was available. I left one. And I remind you what time it was as I was doing. So Ron does not do this. Ron is a very hip boomer. [47:03] Ron Surz: I have something related to this that you might have picked up on. But maybe not. It goes the other way. So when you say thank you to a boomer, what. What do they normally say? [47:12] JD: Oh, geez, you're welcome. [47:14] Ron Surz: Yeah. When you say thank you to a millennial, what do they normally say? [47:20] Josh: I don't know. [47:20] JD: What would you say, Mark? You'd be like, yeah, whatevs, bro. I don't know. [47:25] Mark: I have no idea. [47:26] Ron Surz: You're gonna. Now that I've told you this, the next time you go to a restaurant and you thank the waiter, waitress, listen for this, they're gonna say, of course. Of course, you're welcome doesn't exist anymore. [47:38] Mark: Oh, I say that all the time. Yeah, of course. [47:42] JD: Yeah, of course. [47:43] Mark: I think because you're kind of. You're kind of saying back to them like, yeah, that. [47:46] JD: That's what I do. [47:47] Mark: I'm a nice person. [47:48] Ron Surz: Exactly. Yeah. There's no more you're welcomes. It's all of course. [47:51] Josh: Yeah. [47:51] Mark: It's actually better than you're welcome. [47:53] Ron Surz: Okay. It's fine. [47:56] JD: Now, Ron, you're such a progressive, you know, hipster boomer, but tell the truth. Like, do you Velcro your remote to your coffee table? Or do you have trouble with like. No, Mark, I'm gonna ask you about the voicemail, and then we'll move on. Do you leave. Do you leave a time and a date stamp on your voicemails for them verbally? [48:19] Mark: Is that for me? Sorry, my, my. [48:21] JD: Fell out with yourself. Be honest. [48:23] Mark: Do. [48:24] JD: Do. [48:24] Mark: No, no, no, I do. I do not. I think it's. I. I think I laugh when people get. I. I get it from time to time from people. Namely, like, you know, probably some family members who are in that category. But no, I mean, no, it's dumb. [48:40] JD: And the reasoning is they see that on their phone, they know what time and what date you called on. [48:46] Mark: Well, now, think of it this way too. A lot of time, like, you hear someone's voicemail from back the. The recording would say, hey, I'm not coming to the phone. Leave your name, your number and time you called and I'll get back to you or something. But, like, that was before everything told us of everything that existed that you just did. It's in my phone. I know what time you called me. [49:08] JD: And have you not. Rogue guy just perfectly described what it is that is frustrating about a boomer they are not embracing. They want to live in the 20, 30 years ago. [49:23] Mark: Right. [49:23] JD: You know, they want to tell you that they walked uphill in the snow to school and they drank water out of a Hose and, you know, all that kind of stuff. You old people. Let's get to some serious stuff. Brandon, play. Play the old drunk stock tips graphic. [49:44] Mark: I'm gonna have to be really quick with this. I gotta jam. [49:58] Josh: I'm taking notes, Roby. I'm taking notes. Let's go. [50:03] JD: Lowercase email addresses. Everyone has lowercase email address. What are you talking about? Psycho drunk stock tips. Hey, everybody. We started this segment on April 28th of this year and the Dow Jones was just south of 34K at the time. The Dow Jones now has slid a negative 12% since that day. And it's been a volatile slide, down the 12% of negative headlines and everything. But not Rogue Guy. No, not Rogue Guy. He has not experienced this downturn in the market. He told you to buy Netflix at $199. It's now 240 people. He steered you right. He told you to buy. That was the right thing you needed to do. Apple at 142. And Apple went on a tear. Everyone was calling it like the safest place in the stock market for a while. It's gone through some rough patches recently, but still up from when Robey told you to buy it. He argued violently with Mr. Aarons about Twitter. And Grant Aarons was saying, do not touch Twitter. Stay away from it. Do you remember how pissed off he was, Mark? [51:23] Mark: Oh, yeah. [51:23] JD: And Mark said no. He stuck to his guns and all of that disaster. And he said, no, y' all should buy Twitter. And it was at 43. Twitter is up 15% since rogue guy told you to buy it. Okay, Home Depot. He told you to buy that. It was at 260. It closed at 2, 6. Excuse me. It was at 269 when he told you to buy it. It closed at 290 today. He doesn't always tell you to buy. He's not the buy, buy, Buy guy. Sometimes he tells you to sell. He told you to sell layered superfoods at 2.02. It's down. He told you to sell. Peloton, it's down. By the way, Peloton is down to 8.83 and just laid off 500 people. Was in the news today or yesterday. So the times he's told you to sell, he was right. The Times he told you to buy, he was right. The guy's a stock market genius. If you haven't figured this out yet, Mark, I'm not going to give you PE ratios. Yes. I'll drink for that. I'm not going to give you Market valuations. I'm not going to give you any of that stuff about this stock today because I know that the Oracle doesn't need it. That's not what your methodology is built on. It's built on magic is what it's built on. So the stock, right, is Tesla, Josh. It's Tesla. It's Tesla, buddy. What do we do? What do we do with Tesla? It's been. It's been beaten down. [52:47] Josh: Don't say a word. [52:47] Mark: Don't say we're. [52:48] Josh: Just buy it. [52:48] Mark: Just buy it. [52:49] Josh: Done. [52:49] Mark: Bye. [52:51] JD: Great. You weren't kidding. Going quick there. You heard it here. You heard here, people. Mark says, buy Tesla and gives you absolutely no reason to buy it. Except for the fact that he's rogue guy and he does those things. All right, chat bar champion. Mr. Itzo, your vote for chat bar champion is whom? Man, I'll come back to you. Come back to me, Robe guy, your vote for champion. [53:19] Mark: I'm going to give my vote and I'm going to sign off. It was lovely having you on the show, Ron. Thank you, Josh. Great to see you. Chop, our great job tonight. I know I've been hard on you in the past, I really have. There are a lot of good ones out there today and I think you guys will cover most of them. But I'm going with Mr. Sampson. Jim. Great job, Jim. Later, party people. [53:40] JD: See you later, Roby. [53:41] Josh: I just bought Tesla and after hours trading. Roby. [53:44] JD: Thank you, buddy. [53:45] Mark: Get it, buddy. Get it. [53:47] JD: Josh, I have a fund that I'm buying everything Mark tells me to buy and I'm keeping in a nice little E Trade account. Ron, your vote for Chop, our champion. Is it your wife or is it someone else? [53:59] Ron Surz: Well, no, it should be my wife, but I haven't seen her chatting, so that wouldn't be a fair vote. But I. I've seen my sister and so I'll vote for Kathy. Kathy Hartioni. [54:08] JD: Okay, I was just about to commend you for not using nepotism. [54:13] Ron Surz: Well, I'll pay for that later, but yeah, okay. [54:16] JD: So did you get that, Brandon? It's his sister. Yes. Kathy psyched you you could win some stuff. Josh, you're not our champion. [54:26] Josh: I'm gonna go with Samson. [54:28] JD: Okay, two votes for Samson. That's nice. I am going to throw. [54:33] Ron Surz: Oh, but won't he. [54:34] Josh: I just saw Lonnie is in and [54:37] JD: he said it's so for president. [54:39] Josh: Now I'm wavering, but I'll go with Samson. [54:42] JD: Stick with Samson. [54:44] Josh: I will never vote for Hackler. Sorry, Bud. [54:47] JD: And. And Daniela just backed me up. I was going to vote for Daniella and then she just wrote kiss ass. So, Daniela, Moises, my vote for chat. Our champion. Now it's up to you out there in the audience. Pick the winner who will get all the prizes and cash, which is, you know, code for. [55:05] Josh: And calories. [55:06] JD: Code for calories delivered to their house next week. And I believe next week is going to be. You'll. You'll see Justin and Chad back in the mix, people. So I know you've missed them dearly. Oh, your sister's gonna win. God, yeah. Really? I think so. [55:28] Ron Surz: She's a nice lady. [55:30] JD: Kathy. Kathy. [55:33] Ron Surz: Oh, look at this. [55:35] Mark: All right. [55:35] Ron Surz: How cool. [55:36] JD: Well done. You won, chap. Our champion for tonight. So, Kathy, if you could private message me or. Or Ron's got my email and yes, send me your. Your physical address. You'll forget all about this. And then next Thursday night, a bunch of food will arrive at your front door and you'll be like, what the is this? And then you'll remember you are a chat bar champion. [55:59] Josh: Did Kathy post a single time she's the first person to ever win chatboard [56:03] JD: champion without posting, without commenting? Probably. Yeah, probably. You know what that shows? It shows how cool the chat bar is. Or they're like, I don't want to get from JD next week. I'm over it. Ron, we do stick around for an after show. You don't have to if you don't want. [56:21] Ron Surz: Yeah, sure. Yeah. [56:22] JD: But we can talk a little more. But thank you so much for. For spending time with us today. So thank you for a drink for that. Thank you for filling in for Chad, and thank you to everyone out there for your. Your comments, your chats, your. Your participation in this debate. It'll continue in a little bit in the after show. I am saying goodbye from Miami. I'll be here for the after show, but Brandon, play us out with a little tune.