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Ask Ric Edelman
Answers from the nation’s most successful financial advisor
Ask Ric Edelman
Answers from the nation’s most successful financial advisor
Ric’s answers to questions submitted by others
Ronn asks: Hi I would like to learn how to trade cryptocurrency for short-term profits. What is the best avenue to learn how to do this?
Ronn | Ric Responded September 15, 2023
I don’t know. I don’t know anyone who’s ever done that successfully. I wouldn’t recommend that you try.
Jonathan asks: Hi Ric, I know that you championed the sea change from commissions to the fee-based model that has become so common.
New organizations like Facet are now advocating for flat-fee CFP advice and investments rather than the AUM model. From their website, "We believe unbiased advice can't exist when your planner or advisor is incentivized to sell you a product or keep your assets in a particular account. Our flat membership fee generally ranges between $2,400 and $8,000 per year".
How do you see this impacting the industry? Is this another sea change in the making?
Jonathan | Ric Responded September 14, 2023
I don’t believe so. There has always been a small group of advisors and pundits who advocate for flat-fee, retainer or hourly rates instead of the AUM model (a fee that’s a percentage of the account value). The folks opposing the AUM fee claim that it’s unethical, and creates a bias. They don’t claim that it’s necessarily cheaper. The bias argument is bogus – it’s nothing but a defamatory remark to win business against their AUM competitors.
I could just as easily offer a contrary view, and this comes from decades of experience as a financial advisor. I’ve seen lots of flat-fee advisors at work, and in far too many cases, I’ve seen their “objectively” dissolve into “indifference.” Since their fee isn’t based on managing assets, they don’t really care if you invest as they suggest. They have no incentive to make sure you open that account, fund it, and keep the assets invested. And since their comp is not affected by your gains and losses, they have little care about whether your account rises or falls in value. AUM-fee advisors, though, care greatly: their comp rises when your account rises, and their comp falls when your account value falls. They thus have a great incentive to help your money grow – and this perfectly aligns with your interests, too, far better than others.
Does your doctor call you daily to make sure you took your meds? If your doctor’s comp was based on your compliance with their recommendations, I bet you’d be getting a lot more attention from your doc than you do.
This is what makes capitalism the greatest economic system in the world: when used properly, it aligns interests rather than creating conflicts.
And by the way, I’ve met and trained tens of thousands of advisors over the course of my career – commission-based advisors, fee-based, AUM-based, you name it. And I can tell you this: you’ll find honest, ethical advisors in every camp. It’s not the fee schedule that determines integrity, it’s the advisor. So choose the advisor you like best, and the fee schedule you prefer. Then move on.
Luisa asks: OMG I feel so sorry for Robert Nelson. Perhaps he is a hypochondriac. He is investing so much money into preventing aging and death, I think he thinks he is never going to die. With him having so much money, I wonder what will happen when the inevitable happens. I have a feeling that his relatives will never get a will or a trust to guide them. I can only hope that his wife talks some sense into him.
Luisa | Ric Responded September 14, 2023
I think you’re right – he seems overly fixated on – and fearful of – his death, and he seems to be doing extreme things to prevent or delay it. But if he succeeds, we’ll all benefit, so go for it, dude!
I do hope his expectation of living forever doesn’t prevent him from engaging in estate planning – even if medically he can live to 300, he could get hit by a bus or trip on the stairs at any moment. Estate planning is the responsible, mature thing to do – a message for all of us, not just billionaires trying to live forever.
Wayne asks: I just listened to your podcast about the Social Security crisis. Very Good; Thank you. I listen to your podcast every day as I'm driving. Maybe we should be looking at another problem, that there are 7.2 million young men between 18 and 54 who are not working and not looking for a job. They must be receiving handouts from the Government. If they were working think how much more would be added to the Social Security Fund each year. The Government itself has created its own problem! If we were to consider this SS problem in light of your conversation with Ken Dychtwald, it becomes evident that this is a complex problem.
Wayne | Ric Responded September 13, 2023
You raise a valid point, Wayne – and it’s not limited solely to the SS crisis. More broadly, having so many young people out of the workforce is bad for them, and bad for society. I think we all can list the issues, and none of them are good.
Now, I’m not necessarily saying that these folks aren’t working because they’re lazy. Sure, that’s the case for some. But for many, they are denied opportunities – some because of discrimination, others because of unhealthy upbringing, others due to substance abuse. Some can’t work due to mental or physical health issues. So, yes, we need to fix this, for doing so will generate lots of benefits – and helping solve the SS crisis is just one of many.
Ken asks: I recall that you stated and predicted last year that bond funds will experience significant losses in 2022 because rising interest rates due to inflation will always lower the value of bonds (and vice versa).
If you still had clients, is it accurate to say that you would have recommended moving from bond funds to money market funds in early 2022 and when interest rates are forecasted to decrease (not expected until after 2024) you would recommend moving from money market funds to bond funds?
Ken | Ric Responded September 12, 2023
Yes. I was frequently explaining on my podcast throughout late 2021 and early 2022 that the idea is to sell long-term bonds and move to short-term Tbills or cash. And that, as interest rates peak, it will again be a great time.
Bob asks: Just read your piece on Social Security and wonder if maybe I should claim benefits ASAP at the ripe old age of 65 rather than wait until 66 and 8 months? If benefits do get cut somewhere between 2030 and 2033, starting benefits today might lower what I could receive in another 20 months, but if they cut benefits, the number of years I'd have to live for the break even point for waiting for full-retirement-age or later might be ridiculously long? Maybe politics in America has always been as divisive as it is now, but there is so much posturing and waiting until the very last minute to fund budget resolution or to deal with any problem, and everything is played out in the media as if to see what are winning and losing arguments and who will get the blame for whatever the outcome is. I remember budgets used to get submitted to Congress and then it got shaked and baked and ridiculed and scorned, but there was a process. Now, everything gets funded, nobody cares about the deficit and the fight is just how much something gets increased by and when some politician wants a luny 6% increase for an item and the opposition says they are willing to give them a 3% increase, it gets reported as a cut even though it was still more than they are receiving right now. I could never cut it as a politician, that's for sure.
I always wondered why Medicare taxes are put on earned income no matter how much a wage earner makes but Social Security taxes have an income cap. Do you know?
Finally, do you ever receive any feedback from clients, or people in general, that they ended up regretting their decisions to either claim Social Security benefits early or they waited too long hoping to maximize their benefits to some degree but then wished they took the money earlier?
I just turned 65, the former full-retirement age, and now, for me, it's 66 and 8 months. I wonder, if what I could earn right now would be spot on to what I would get if 65 was still the full retirement age or the SSA actually does cut the benefit that actually penalizes early claimants?
As always, thank you for all your previous advice either from your books or TV appearances and I enjoy reading your podcasts.
Bob | Ric Responded September 11, 2023
There are a couple of misconceptions here, Bob. First, 66.8 is your “full retirement age”, not 65. Neither of those dates are meaningful, however. There are only two dates that matter: age 62, and age 70. At 62, you can start to college SS benefits. If you do, you’ll get less than if you wait until age 70.
Each year from 62 to 70, the monthly benefit rises; whenever you start, that benefit is locked for life. So, starting at 62 means you start collecting 8 years sooner, but the amount is dramatically less than if you wait until 70. If you think you’ll live into your 80s, 90s and 100s, then definitely wait until 70. (65 and 66.8 are just interim dates, along with every other month between 62 and 70. The SSA’s use of “full retirement age” is highly misleading.)
Second, don’t let worries about the coming cut in benefits (which you heard me discuss on my podcast) alter your decision about when to start benefits. All SS benefits are increased annually based on inflation, so starting now doesn’t do anything special for you.
As for your tax question, there is never a legitimate answer. The response is always “because Congress says so.” Tax law is a political act, enacted to extract the maximum revenue at the minimum objection (to allow lawmakers to get re-elected. Never look to logic for answers to questions such as yours.
George asks: While recently watching a video focusing on options for a 401K left at an old job, one option was moving it to a rollover IRA . During the video the narrator suggested borrowing from this IRA for education was one of the positives about this option. My main question is borrowing for high school education allowed in this scenario ? I may be in an unavoidable yet unaffordable situation very soon with my special needs child so I'm trying to cover all the bases before we pull any triggers. Thanks for the advice. I'm a frequent listener to your podcast and a longtime fan.
George | Ric Responded September 7, 2023
The host of that video is uninformed. You’re not allowed to borrow from an IRA. (You can borrow from a 401(k), but it’s not recommended.)
Focus on the R: retirement. The IRA is not meant to pay for education, houses, cars or anything other than retirement. I realize you’re facing challenges, but turning to the IRA for anything other than your own retirement is not the answer.
Talk to a financial advisor who can delve fully into your situation. I can provide a referral if you like.
Ralph asks: Eliminating menopause???? I am not sure we should be cramping Mother Nature's style (sorry about the bad pun). Advances in medical science is one thing, but that is a bit too much for me.
Ralph | Ric Responded September 7, 2023
I’m not sure delaying menopause is any different than using contraceptives. But not sure either of us gets a vote here. This is for each woman to decide, not men. We’ve had too much of that already.
Bill asks: Based on what Per Peter Zeihan (Geopolitical Strategist) says here, is Bitcoin dead: the following by Peter Zeihan on August 31, 2023...
With all the buzz around central banks starting digital currencies and one of these entities controlling all transactions, I think it's about time I burst everyone's bubble...
Fintech has blown up because it slims down the traditional money transfer process and removes some of the associated fees, meaning you can transfer money faster and cheaper. However, the Federal Reserve will wipe out most fintech startups within the next five years with their service - FedNow.
FedNow allows for the instantaneous clearing of funds when transferred using the Fed as the intermediary. Oh, and it's functionally free. Put the hype for this or that financial product - whether crypto or otherwise - to the side for a minute and dwell on how said systems might compete with free, immediate, and from the source. Queue the gnashing of teeth.
What we're seeing in China is different from this. They've married digital currency to social currency scores, making Orwell look alright. This could never happen in the US, but if China continues down this road, its entire financial space will be under the government's thumb. Any dynamism left in the Chinese economy will be stamped out fairly quickly if this continues.
Bill | Ric Responded September 2, 2023
I’m not familiar with that gentleman, and haven’t read/heard his content. I’m struggling to make sense of the clip you provided. I do agree that FedNow is an important project that will have lots of implications, but I fail to see how that has anything to do with bitcoin. Bitcoin is an asset, like stocks, gold and real estate. All of these are stores of value; people buy they because they believe that they will retain (and increase in) value. The Fed prints money, like cash. Cash and stores of value peacefully coexist; in fact, they support each other.
Many people continue to believe that bitcoin’s sole purpose is a replacement for money. It’s not. It’s a store of value, alongside all other stores of value. Saying bitcoin is dead because of FedNow suggests a basic misunderstanding of crypto.
Mark asks: Hi Ric, I've been a follower and client or yours for over 10 years. I came to your firm after I reached Dave Ramsey's Baby Step 7 (Invest and give generously). I am highly disappointed that you chose to throw Dave under the bus in your recent podcast. What happened to innocent until proven guilty? I came to your firm because I followed Dave's plan to get out of debt and eventually needed better financial planning advice. Like your podcast, we have to do our due diligence before investing in a "celebrity " endorsed product. I believe so much in what Dave Ramsey teaches that I buy his books and give them away to folks that can benefit from it. I given my time to lead his classes. Overall, I think that has so much more to offer than the couple of petty things that you mentioned in your podcast. I expect more from you Ric!
Mark | Ric Responded August 30, 2023
Thanks for your email. I didn’t say Dave Ramsey was guilty. I said he’s been sued by dozens of listeners. I’m just the messenger! We’ll see how the case goes. But please don’t dismiss serious allegations merely because you’re a fan. Blindly following anyone without regard to their actual behaviors often leads to bad outcomes. By the way, so far you’re the only one to come to his defense. Thanks again
Lowell asks: Should I worry about the US dollar being replaced by digital currency?
Lowell | Ric Responded August 27, 2023
No. Digital money is the same as paper money – except for the medium. Whether you use paper currency or digital currency, it’s the same. All that matters is the issuer. Right now, the Fed issues paper currency (via the Bureau of Engraving and Printing). If the Fed were to issue a CBDC – central bank digital currency – it would be the same for you as the paper currency you currently use.
But if you were to use currency provided by a third party, then you’d have to wonder if that currency is as safe as the currency you get from the Fed. Bottom line: you don’t need to fear digital currency. And if you need proof of that statement, just consider this: you already use digital currency, in the form of your debit and credit cards, Apple Pay, PayPal, Venmo and Zelle. Your financial life is already digital! Think about it: your income is direct-deposited to your bank account, and you pay bills online. When’s the last time you used cash for anything other than tips to valet attendants or gifts to street beggars?
Welcome to the digital age.
Leslie asks: After today's long anticipated BRICS pow-wow, to launch a new global digital currency, to be backed with gold and other commodities, do you anticipate that the price of gold will escalate and stay up? After all, why are banks and nations, especially the BRICS nations, stockpiling gold?
Leslie | Ric Responded August 25, 2023
I’ve never been a big fan of gold, but that has not prevented me from having it in my portfolio. Investing isn’t about buying what you like and avoiding what you dislike. Successful investing is about having an exposure to every asset class and market sector. It’s all part of diversification, and when you engage in rebalancing, dollar cost averaging and tax loss harvesting, you are likely to enjoy higher returns and lower risks over long periods than if you only buy what you like and avoid what you dislike.
Even if you were to conclude that current events translate into price appreciation for gold, how much gold would you buy? When would you decide to sell it? Questions like these vex all investors who try to beat the market by picking winners. Many try, but very few succeed on a consistent, long-term basis.
Leslie asks: What happens, to block chain currency or assets, if our electrical grid goes down in a major way, (as neither the "powers-that-be", nor moneyed private citizens have taken the initiative to harden it, BEFORE a catastrophe), should a coronal mass ejection, (CME), or an unanticipated satellite mishap, related to friend or foe, take it down...?
Leslie | Ric Responded August 25, 2023
If power grids worldwide suddenly collapsed due to a major event, such as a solar flares or nuclear war, I’d say that the last thing you’d be worrying about is your bitcoin. I wouldn’t allow such concerns to prevent me from living my live – or investing in the way I need to invest.
This point was perhaps best made by Woody Allen in Annie Hall. While a child, he grew depressed after reading that the universe s expanding and will someday apart. His exasperated mother tells the doctor, “He stopped doing his homework!” and the boy says, “What's the point?”
Don’t be that boy. It will prove to be very expensive.
But if you want to learn how to build a strategy to protect yourself, read Chapter 46, “How to Prepare for Economic Collapse” in my award-winning #1 best-seller, The Truth About Money.
Jeremy asks: On 8/18 podcast you talked about S&P 500 index as being Cap Weighted and recommended Equal Weighted instead. Would the same recommendation apply to NASDAQ QQQ Cap Weighted index. Do you recommend an Equal weighted one? What percent of core portfolio equity do you recommend for these for a growth oriented medium risk plan?
Jeremy | Ric Responded August 25, 2023
As you heard on the podcast, I am a fan of equal weighting, for all the reasons mentioned. And while that concept therefore applies to all investments, it’s not available in every case. And we’re talking about indexed investments, not actively managed ones. In those cases, it’s a moot point, as you’re relying on the fund manager not only to select the investments but to determine the weighting for each one. When I worked with BlackRock to create the iShares Exponential Technologies ETF (symbol XT), I insisted that it be equal weighted.
Regarding overall allocation – which is, after all, a weighting question – I can’t say as it depends on the circumstances of the individual investor, and I know nothing about yours. This is why there’s no substitute for meeting with a financial advisor, and I can refer you to one if you like and you’re willing to work long-distance (via zoom).
One observation: you mentioned “growth” for a “medium risk” portfolio. Those terms are mutually exclusive. I mention this because investors often lay down criteria that are conflicting, and the result is a schizophrenic portfolio whose construction is almost certain to fail at satisfying the investor. A good advisor can help you determine what truly matters to you and create an allocation model that is more likely to deliver what you’re looking for.
Mike asks: Some of your recommendations, although great, are not timely. I.E, the timing of investing with them.. I just turned 78 and worry about the timing. Thanks for all your (free) help!
Mike | Ric Responded August 25, 2023
Not timely? Not sure I understand that. Whenever I mention a particular ETF or other investment opportunity, I’m not suggesting that you buy it today and sell it tomorrow for quick profits. My show is focused, as its title says, on the future…and I’m talking about long-term trends. So, sure, an ETF I like might have fallen in the recent past, and/or it might fall in the short-term future. But over the next decade and beyond, I am confident that it will deliver the returns you want and need. Nothing is certain, and past performance doesn’t guarantee future results, as it says on page one of every prospectus. There are risks with every investment – even bank accounts – and that’s why you should diversify your investments, and make all investment decisions based on your own circumstances – ideally with the help of a talented financial advisor.
All that said, based on your age, I can understand why you might not think you have decades to patiently wait for the returns that might eventually be obtained. (I could argue that you maybe have much longer than you think, based on innovations in health care coming from exponential technologies, but I know nothing of your health or financial situation.) So, it might make sense for you to invest only a little into riskier investments, or even none at all. A financial advisor can help you figure all that out, and if you like, I can refer you to one.
Stephen asks: During your 8/13 podcast with Matt Barthel, you had a discussion about the range of services that investment advisors can/should provide. In a future show, can you have a more in depth discussion about these services, the ones that every advisor should provide (investment advice, financial planning, risk tolerance assessment, etc), and other advisor services that many investors are not aware of and are not using. I think this topic could be really interesting for both investors and advisors.
Stephen | Ric Responded August 25, 2023
Sure, good idea – I’ll do this on a podcast in September. Look for that!
Judy asks: Have you updated your 20 jobs that are projected to see the most growth in the future (newsletter May 2019)?
Judy | Ric Responded August 24, 2023
No. There hasn’t been a need. The list appears in my NYT bestseller, The Truth About Your Future. While there’s been a little movement in the list, the trends that the list reflect (published a few years ago) remain intact. Bottom line: avoid occupations that can be performed by AI and robots. Focus on jobs that involve thinking, creating, communicating and managing. And be prepared to return to school periodically, to learn new skills that will keep you viable and desirable in the workforce. Lifelong education will be the norm.
Anthony asks: Hello Ric . My question is do you think that week have a possible perfect storm in the horizon for Bitcoin, specifically in March and April 2024 when the SEC could possibly give the go ahead for Blackrock's ETF for BITCOIN, and the four year anniversary of halving of BITCOIN ?
Anthony | Ric Responded August 17, 2023
Perfect storm? I think you mean the opposite – stars aligned. Yes, there are lots of great developments underway. You mention only two: the halving in 2024, and the spot bitcoin ETFs (which might come to market any day, not necessarily in 2024). I’d add: new legislation on stablecoins (and PayPal’s introduction of one), Ripple’s victory in its lawsuit against the SEC, the likelihood that the SEC will also lose its case agbainst Grayscale, Coinbase winning approval to trade futures…the list goes on and on. I did a podcast on the ETF situation last week – go to DACFP.com to view it – and am releasing a white paper on it on Monday, too.
Dana asks: Hello Ric . Mr. Edelman, I recall (while you were on KNX News Radio - Los Angeles) trying to promote financial literacy in high school at a national level. I could not agree more. With about 50% of Americans about $500 away from financial disaster, the need is apparent.
Are you still advocating? Is there a reference you can refer me to? To my way of thinking, in today's world [and for the future!] financial literacy is as important as the three "Rs" - if not more so. A one semester course that could change student's lives forever. Not to mention the teacher's! Reading, writing and arithmetic may not bankrupt one, but financial illiteracy can and does keep many in poverty.
Dana | Ric Responded August 17, 2023
Yes, I still advocate financial literacy. Less than half the states require that high school students complete a personal finance class. There are many organizations working hard in this area: National Endowment for Financial Education, Institute for Financial Literacy, American Savings Education Council, Jumpstart Coalition for Personal Finance Literacy. All are worth looking into.
Ric’s answers to questions submitted by others
Ronn asks: Hi I would like to learn how to trade cryptocurrency for short-term profits. What is the best avenue to learn how to do this?
Ronn | Ric Responded September 15, 2023
I don’t know. I don’t know anyone who’s ever done that successfully. I wouldn’t recommend that you try.
Jonathan asks: Hi Ric, I know that you championed the sea change from commissions to the fee-based model that has become so common.
New organizations like Facet are now advocating for flat-fee CFP advice and investments rather than the AUM model. From their website, "We believe unbiased advice can't exist when your planner or advisor is incentivized to sell you a product or keep your assets in a particular account. Our flat membership fee generally ranges between $2,400 and $8,000 per year".
How do you see this impacting the industry? Is this another sea change in the making?
Jonathan | Ric Responded September 14, 2023
I don’t believe so. There has always been a small group of advisors and pundits who advocate for flat-fee, retainer or hourly rates instead of the AUM model (a fee that’s a percentage of the account value). The folks opposing the AUM fee claim that it’s unethical, and creates a bias. They don’t claim that it’s necessarily cheaper. The bias argument is bogus – it’s nothing but a defamatory remark to win business against their AUM competitors.
I could just as easily offer a contrary view, and this comes from decades of experience as a financial advisor. I’ve seen lots of flat-fee advisors at work, and in far too many cases, I’ve seen their “objectively” dissolve into “indifference.” Since their fee isn’t based on managing assets, they don’t really care if you invest as they suggest. They have no incentive to make sure you open that account, fund it, and keep the assets invested. And since their comp is not affected by your gains and losses, they have little care about whether your account rises or falls in value. AUM-fee advisors, though, care greatly: their comp rises when your account rises, and their comp falls when your account value falls. They thus have a great incentive to help your money grow – and this perfectly aligns with your interests, too, far better than others.
Does your doctor call you daily to make sure you took your meds? If your doctor’s comp was based on your compliance with their recommendations, I bet you’d be getting a lot more attention from your doc than you do.
This is what makes capitalism the greatest economic system in the world: when used properly, it aligns interests rather than creating conflicts.
And by the way, I’ve met and trained tens of thousands of advisors over the course of my career – commission-based advisors, fee-based, AUM-based, you name it. And I can tell you this: you’ll find honest, ethical advisors in every camp. It’s not the fee schedule that determines integrity, it’s the advisor. So choose the advisor you like best, and the fee schedule you prefer. Then move on.
Luisa asks: OMG I feel so sorry for Robert Nelson. Perhaps he is a hypochondriac. He is investing so much money into preventing aging and death, I think he thinks he is never going to die. With him having so much money, I wonder what will happen when the inevitable happens. I have a feeling that his relatives will never get a will or a trust to guide them. I can only hope that his wife talks some sense into him.
Luisa | Ric Responded September 14, 2023
I think you’re right – he seems overly fixated on – and fearful of – his death, and he seems to be doing extreme things to prevent or delay it. But if he succeeds, we’ll all benefit, so go for it, dude!
I do hope his expectation of living forever doesn’t prevent him from engaging in estate planning – even if medically he can live to 300, he could get hit by a bus or trip on the stairs at any moment. Estate planning is the responsible, mature thing to do – a message for all of us, not just billionaires trying to live forever.
Wayne asks: I just listened to your podcast about the Social Security crisis. Very Good; Thank you. I listen to your podcast every day as I'm driving. Maybe we should be looking at another problem, that there are 7.2 million young men between 18 and 54 who are not working and not looking for a job. They must be receiving handouts from the Government. If they were working think how much more would be added to the Social Security Fund each year. The Government itself has created its own problem! If we were to consider this SS problem in light of your conversation with Ken Dychtwald, it becomes evident that this is a complex problem.
Wayne | Ric Responded September 13, 2023
You raise a valid point, Wayne – and it’s not limited solely to the SS crisis. More broadly, having so many young people out of the workforce is bad for them, and bad for society. I think we all can list the issues, and none of them are good.
Now, I’m not necessarily saying that these folks aren’t working because they’re lazy. Sure, that’s the case for some. But for many, they are denied opportunities – some because of discrimination, others because of unhealthy upbringing, others due to substance abuse. Some can’t work due to mental or physical health issues. So, yes, we need to fix this, for doing so will generate lots of benefits – and helping solve the SS crisis is just one of many.
Ken asks: I recall that you stated and predicted last year that bond funds will experience significant losses in 2022 because rising interest rates due to inflation will always lower the value of bonds (and vice versa).
If you still had clients, is it accurate to say that you would have recommended moving from bond funds to money market funds in early 2022 and when interest rates are forecasted to decrease (not expected until after 2024) you would recommend moving from money market funds to bond funds?
Ken | Ric Responded September 12, 2023
Yes. I was frequently explaining on my podcast throughout late 2021 and early 2022 that the idea is to sell long-term bonds and move to short-term Tbills or cash. And that, as interest rates peak, it will again be a great time.
Bob asks: Just read your piece on Social Security and wonder if maybe I should claim benefits ASAP at the ripe old age of 65 rather than wait until 66 and 8 months? If benefits do get cut somewhere between 2030 and 2033, starting benefits today might lower what I could receive in another 20 months, but if they cut benefits, the number of years I'd have to live for the break even point for waiting for full-retirement-age or later might be ridiculously long? Maybe politics in America has always been as divisive as it is now, but there is so much posturing and waiting until the very last minute to fund budget resolution or to deal with any problem, and everything is played out in the media as if to see what are winning and losing arguments and who will get the blame for whatever the outcome is. I remember budgets used to get submitted to Congress and then it got shaked and baked and ridiculed and scorned, but there was a process. Now, everything gets funded, nobody cares about the deficit and the fight is just how much something gets increased by and when some politician wants a luny 6% increase for an item and the opposition says they are willing to give them a 3% increase, it gets reported as a cut even though it was still more than they are receiving right now. I could never cut it as a politician, that's for sure.
I always wondered why Medicare taxes are put on earned income no matter how much a wage earner makes but Social Security taxes have an income cap. Do you know?
Finally, do you ever receive any feedback from clients, or people in general, that they ended up regretting their decisions to either claim Social Security benefits early or they waited too long hoping to maximize their benefits to some degree but then wished they took the money earlier?
I just turned 65, the former full-retirement age, and now, for me, it's 66 and 8 months. I wonder, if what I could earn right now would be spot on to what I would get if 65 was still the full retirement age or the SSA actually does cut the benefit that actually penalizes early claimants?
As always, thank you for all your previous advice either from your books or TV appearances and I enjoy reading your podcasts.
Bob | Ric Responded September 11, 2023
There are a couple of misconceptions here, Bob. First, 66.8 is your “full retirement age”, not 65. Neither of those dates are meaningful, however. There are only two dates that matter: age 62, and age 70. At 62, you can start to college SS benefits. If you do, you’ll get less than if you wait until age 70.
Each year from 62 to 70, the monthly benefit rises; whenever you start, that benefit is locked for life. So, starting at 62 means you start collecting 8 years sooner, but the amount is dramatically less than if you wait until 70. If you think you’ll live into your 80s, 90s and 100s, then definitely wait until 70. (65 and 66.8 are just interim dates, along with every other month between 62 and 70. The SSA’s use of “full retirement age” is highly misleading.)
Second, don’t let worries about the coming cut in benefits (which you heard me discuss on my podcast) alter your decision about when to start benefits. All SS benefits are increased annually based on inflation, so starting now doesn’t do anything special for you.
As for your tax question, there is never a legitimate answer. The response is always “because Congress says so.” Tax law is a political act, enacted to extract the maximum revenue at the minimum objection (to allow lawmakers to get re-elected. Never look to logic for answers to questions such as yours.
George asks: While recently watching a video focusing on options for a 401K left at an old job, one option was moving it to a rollover IRA . During the video the narrator suggested borrowing from this IRA for education was one of the positives about this option. My main question is borrowing for high school education allowed in this scenario ? I may be in an unavoidable yet unaffordable situation very soon with my special needs child so I'm trying to cover all the bases before we pull any triggers. Thanks for the advice. I'm a frequent listener to your podcast and a longtime fan.
George | Ric Responded September 7, 2023
The host of that video is uninformed. You’re not allowed to borrow from an IRA. (You can borrow from a 401(k), but it’s not recommended.)
Focus on the R: retirement. The IRA is not meant to pay for education, houses, cars or anything other than retirement. I realize you’re facing challenges, but turning to the IRA for anything other than your own retirement is not the answer.
Talk to a financial advisor who can delve fully into your situation. I can provide a referral if you like.
Ralph asks: Eliminating menopause???? I am not sure we should be cramping Mother Nature's style (sorry about the bad pun). Advances in medical science is one thing, but that is a bit too much for me.
Ralph | Ric Responded September 7, 2023
I’m not sure delaying menopause is any different than using contraceptives. But not sure either of us gets a vote here. This is for each woman to decide, not men. We’ve had too much of that already.
Bill asks: Based on what Per Peter Zeihan (Geopolitical Strategist) says here, is Bitcoin dead: the following by Peter Zeihan on August 31, 2023...
With all the buzz around central banks starting digital currencies and one of these entities controlling all transactions, I think it's about time I burst everyone's bubble...
Fintech has blown up because it slims down the traditional money transfer process and removes some of the associated fees, meaning you can transfer money faster and cheaper. However, the Federal Reserve will wipe out most fintech startups within the next five years with their service - FedNow.
FedNow allows for the instantaneous clearing of funds when transferred using the Fed as the intermediary. Oh, and it's functionally free. Put the hype for this or that financial product - whether crypto or otherwise - to the side for a minute and dwell on how said systems might compete with free, immediate, and from the source. Queue the gnashing of teeth.
What we're seeing in China is different from this. They've married digital currency to social currency scores, making Orwell look alright. This could never happen in the US, but if China continues down this road, its entire financial space will be under the government's thumb. Any dynamism left in the Chinese economy will be stamped out fairly quickly if this continues.
Bill | Ric Responded September 2, 2023
I’m not familiar with that gentleman, and haven’t read/heard his content. I’m struggling to make sense of the clip you provided. I do agree that FedNow is an important project that will have lots of implications, but I fail to see how that has anything to do with bitcoin. Bitcoin is an asset, like stocks, gold and real estate. All of these are stores of value; people buy they because they believe that they will retain (and increase in) value. The Fed prints money, like cash. Cash and stores of value peacefully coexist; in fact, they support each other.
Many people continue to believe that bitcoin’s sole purpose is a replacement for money. It’s not. It’s a store of value, alongside all other stores of value. Saying bitcoin is dead because of FedNow suggests a basic misunderstanding of crypto.
Mark asks: Hi Ric, I've been a follower and client or yours for over 10 years. I came to your firm after I reached Dave Ramsey's Baby Step 7 (Invest and give generously). I am highly disappointed that you chose to throw Dave under the bus in your recent podcast. What happened to innocent until proven guilty? I came to your firm because I followed Dave's plan to get out of debt and eventually needed better financial planning advice. Like your podcast, we have to do our due diligence before investing in a "celebrity " endorsed product. I believe so much in what Dave Ramsey teaches that I buy his books and give them away to folks that can benefit from it. I given my time to lead his classes. Overall, I think that has so much more to offer than the couple of petty things that you mentioned in your podcast. I expect more from you Ric!
Mark | Ric Responded August 30, 2023
Thanks for your email. I didn’t say Dave Ramsey was guilty. I said he’s been sued by dozens of listeners. I’m just the messenger! We’ll see how the case goes. But please don’t dismiss serious allegations merely because you’re a fan. Blindly following anyone without regard to their actual behaviors often leads to bad outcomes. By the way, so far you’re the only one to come to his defense. Thanks again
Lowell asks: Should I worry about the US dollar being replaced by digital currency?
Lowell | Ric Responded August 27, 2023
No. Digital money is the same as paper money – except for the medium. Whether you use paper currency or digital currency, it’s the same. All that matters is the issuer. Right now, the Fed issues paper currency (via the Bureau of Engraving and Printing). If the Fed were to issue a CBDC – central bank digital currency – it would be the same for you as the paper currency you currently use.
But if you were to use currency provided by a third party, then you’d have to wonder if that currency is as safe as the currency you get from the Fed. Bottom line: you don’t need to fear digital currency. And if you need proof of that statement, just consider this: you already use digital currency, in the form of your debit and credit cards, Apple Pay, PayPal, Venmo and Zelle. Your financial life is already digital! Think about it: your income is direct-deposited to your bank account, and you pay bills online. When’s the last time you used cash for anything other than tips to valet attendants or gifts to street beggars?
Welcome to the digital age.
Leslie asks: After today's long anticipated BRICS pow-wow, to launch a new global digital currency, to be backed with gold and other commodities, do you anticipate that the price of gold will escalate and stay up? After all, why are banks and nations, especially the BRICS nations, stockpiling gold?
Leslie | Ric Responded August 25, 2023
I’ve never been a big fan of gold, but that has not prevented me from having it in my portfolio. Investing isn’t about buying what you like and avoiding what you dislike. Successful investing is about having an exposure to every asset class and market sector. It’s all part of diversification, and when you engage in rebalancing, dollar cost averaging and tax loss harvesting, you are likely to enjoy higher returns and lower risks over long periods than if you only buy what you like and avoid what you dislike.
Even if you were to conclude that current events translate into price appreciation for gold, how much gold would you buy? When would you decide to sell it? Questions like these vex all investors who try to beat the market by picking winners. Many try, but very few succeed on a consistent, long-term basis.
Leslie asks: What happens, to block chain currency or assets, if our electrical grid goes down in a major way, (as neither the "powers-that-be", nor moneyed private citizens have taken the initiative to harden it, BEFORE a catastrophe), should a coronal mass ejection, (CME), or an unanticipated satellite mishap, related to friend or foe, take it down...?
Leslie | Ric Responded August 25, 2023
If power grids worldwide suddenly collapsed due to a major event, such as a solar flares or nuclear war, I’d say that the last thing you’d be worrying about is your bitcoin. I wouldn’t allow such concerns to prevent me from living my live – or investing in the way I need to invest.
This point was perhaps best made by Woody Allen in Annie Hall. While a child, he grew depressed after reading that the universe s expanding and will someday apart. His exasperated mother tells the doctor, “He stopped doing his homework!” and the boy says, “What's the point?”
Don’t be that boy. It will prove to be very expensive.
But if you want to learn how to build a strategy to protect yourself, read Chapter 46, “How to Prepare for Economic Collapse” in my award-winning #1 best-seller, The Truth About Money.
Jeremy asks: On 8/18 podcast you talked about S&P 500 index as being Cap Weighted and recommended Equal Weighted instead. Would the same recommendation apply to NASDAQ QQQ Cap Weighted index. Do you recommend an Equal weighted one? What percent of core portfolio equity do you recommend for these for a growth oriented medium risk plan?
Jeremy | Ric Responded August 25, 2023
As you heard on the podcast, I am a fan of equal weighting, for all the reasons mentioned. And while that concept therefore applies to all investments, it’s not available in every case. And we’re talking about indexed investments, not actively managed ones. In those cases, it’s a moot point, as you’re relying on the fund manager not only to select the investments but to determine the weighting for each one. When I worked with BlackRock to create the iShares Exponential Technologies ETF (symbol XT), I insisted that it be equal weighted.
Regarding overall allocation – which is, after all, a weighting question – I can’t say as it depends on the circumstances of the individual investor, and I know nothing about yours. This is why there’s no substitute for meeting with a financial advisor, and I can refer you to one if you like and you’re willing to work long-distance (via zoom).
One observation: you mentioned “growth” for a “medium risk” portfolio. Those terms are mutually exclusive. I mention this because investors often lay down criteria that are conflicting, and the result is a schizophrenic portfolio whose construction is almost certain to fail at satisfying the investor. A good advisor can help you determine what truly matters to you and create an allocation model that is more likely to deliver what you’re looking for.
Mike asks: Some of your recommendations, although great, are not timely. I.E, the timing of investing with them.. I just turned 78 and worry about the timing. Thanks for all your (free) help!
Mike | Ric Responded August 25, 2023
Not timely? Not sure I understand that. Whenever I mention a particular ETF or other investment opportunity, I’m not suggesting that you buy it today and sell it tomorrow for quick profits. My show is focused, as its title says, on the future…and I’m talking about long-term trends. So, sure, an ETF I like might have fallen in the recent past, and/or it might fall in the short-term future. But over the next decade and beyond, I am confident that it will deliver the returns you want and need. Nothing is certain, and past performance doesn’t guarantee future results, as it says on page one of every prospectus. There are risks with every investment – even bank accounts – and that’s why you should diversify your investments, and make all investment decisions based on your own circumstances – ideally with the help of a talented financial advisor.
All that said, based on your age, I can understand why you might not think you have decades to patiently wait for the returns that might eventually be obtained. (I could argue that you maybe have much longer than you think, based on innovations in health care coming from exponential technologies, but I know nothing of your health or financial situation.) So, it might make sense for you to invest only a little into riskier investments, or even none at all. A financial advisor can help you figure all that out, and if you like, I can refer you to one.
Stephen asks: During your 8/13 podcast with Matt Barthel, you had a discussion about the range of services that investment advisors can/should provide. In a future show, can you have a more in depth discussion about these services, the ones that every advisor should provide (investment advice, financial planning, risk tolerance assessment, etc), and other advisor services that many investors are not aware of and are not using. I think this topic could be really interesting for both investors and advisors.
Stephen | Ric Responded August 25, 2023
Sure, good idea – I’ll do this on a podcast in September. Look for that!
Judy asks: Have you updated your 20 jobs that are projected to see the most growth in the future (newsletter May 2019)?
Judy | Ric Responded August 24, 2023
No. There hasn’t been a need. The list appears in my NYT bestseller, The Truth About Your Future. While there’s been a little movement in the list, the trends that the list reflect (published a few years ago) remain intact. Bottom line: avoid occupations that can be performed by AI and robots. Focus on jobs that involve thinking, creating, communicating and managing. And be prepared to return to school periodically, to learn new skills that will keep you viable and desirable in the workforce. Lifelong education will be the norm.
Anthony asks: Hello Ric . My question is do you think that week have a possible perfect storm in the horizon for Bitcoin, specifically in March and April 2024 when the SEC could possibly give the go ahead for Blackrock's ETF for BITCOIN, and the four year anniversary of halving of BITCOIN ?
Anthony | Ric Responded August 17, 2023
Perfect storm? I think you mean the opposite – stars aligned. Yes, there are lots of great developments underway. You mention only two: the halving in 2024, and the spot bitcoin ETFs (which might come to market any day, not necessarily in 2024). I’d add: new legislation on stablecoins (and PayPal’s introduction of one), Ripple’s victory in its lawsuit against the SEC, the likelihood that the SEC will also lose its case agbainst Grayscale, Coinbase winning approval to trade futures…the list goes on and on. I did a podcast on the ETF situation last week – go to DACFP.com to view it – and am releasing a white paper on it on Monday, too.
Dana asks: Hello Ric . Mr. Edelman, I recall (while you were on KNX News Radio - Los Angeles) trying to promote financial literacy in high school at a national level. I could not agree more. With about 50% of Americans about $500 away from financial disaster, the need is apparent.
Are you still advocating? Is there a reference you can refer me to? To my way of thinking, in today's world [and for the future!] financial literacy is as important as the three "Rs" - if not more so. A one semester course that could change student's lives forever. Not to mention the teacher's! Reading, writing and arithmetic may not bankrupt one, but financial illiteracy can and does keep many in poverty.
Dana | Ric Responded August 17, 2023
Yes, I still advocate financial literacy. Less than half the states require that high school students complete a personal finance class. There are many organizations working hard in this area: National Endowment for Financial Education, Institute for Financial Literacy, American Savings Education Council, Jumpstart Coalition for Personal Finance Literacy. All are worth looking into.
Ric’s answers to questions submitted by others
Marsha asks: I can't quite determine which has the higher intelligence--Congress or a screwdriver.
I worked for the Federal Government and am a military retiree.
I also worked 6 other parttime jobs (sometimes 2 and 3 jobs at a time) where social security was deducted from my paycheck. I wanted to save for retirement and live comfortably.
But now, I am being penalized for all my good work, all because I worked for the feds. Anyone retiring from, say, IBM or Walmart, doesn't have to give up social security benefits. But why do I?
I would like to see this issue, lasting for decades now, addressed
Marsha | Ric Responded September 15, 2023
I get your frustration, Marsha. It’s a common refrain among federal employees – you suffer a reduction in SS benefits. But that’s because you also get a pension. The Government Pension Offset exists because Congress recognizes the fact that you’re paying into one system but getting benefits from two. That’s unfair to private-sector workers (and also unaffordable for the government). So, your SS benefits are reduced. There was a bill in Congress last year to eliminate this but it went nowhere.
Ronn asks: Hi I would like to learn how to trade cryptocurrency for short-term profits. What is the best avenue to learn how to do this?
Ronn | Ric Responded September 15, 2023
I don’t know. I don’t know anyone who’s ever done that successfully. I wouldn’t recommend that you try.
Jonathan asks: Hi Ric, I know that you championed the sea change from commissions to the fee-based model that has become so common.
New organizations like Facet are now advocating for flat-fee CFP advice and investments rather than the AUM model. From their website, "We believe unbiased advice can't exist when your planner or advisor is incentivized to sell you a product or keep your assets in a particular account. Our flat membership fee generally ranges between $2,400 and $8,000 per year".
How do you see this impacting the industry? Is this another sea change in the making?
Jonathan | Ric Responded September 14, 2023
I don’t believe so. There has always been a small group of advisors and pundits who advocate for flat-fee, retainer or hourly rates instead of the AUM model (a fee that’s a percentage of the account value). The folks opposing the AUM fee claim that it’s unethical, and creates a bias. They don’t claim that it’s necessarily cheaper. The bias argument is bogus – it’s nothing but a defamatory remark to win business against their AUM competitors.
I could just as easily offer a contrary view, and this comes from decades of experience as a financial advisor. I’ve seen lots of flat-fee advisors at work, and in far too many cases, I’ve seen their “objectively” dissolve into “indifference.” Since their fee isn’t based on managing assets, they don’t really care if you invest as they suggest. They have no incentive to make sure you open that account, fund it, and keep the assets invested. And since their comp is not affected by your gains and losses, they have little care about whether your account rises or falls in value. AUM-fee advisors, though, care greatly: their comp rises when your account rises, and their comp falls when your account value falls. They thus have a great incentive to help your money grow – and this perfectly aligns with your interests, too, far better than others.
Does your doctor call you daily to make sure you took your meds? If your doctor’s comp was based on your compliance with their recommendations, I bet you’d be getting a lot more attention from your doc than you do.
This is what makes capitalism the greatest economic system in the world: when used properly, it aligns interests rather than creating conflicts.
And by the way, I’ve met and trained tens of thousands of advisors over the course of my career – commission-based advisors, fee-based, AUM-based, you name it. And I can tell you this: you’ll find honest, ethical advisors in every camp. It’s not the fee schedule that determines integrity, it’s the advisor. So choose the advisor you like best, and the fee schedule you prefer. Then move on.
Luisa asks: OMG I feel so sorry for Robert Nelson. Perhaps he is a hypochondriac. He is investing so much money into preventing aging and death, I think he thinks he is never going to die. With him having so much money, I wonder what will happen when the inevitable happens. I have a feeling that his relatives will never get a will or a trust to guide them. I can only hope that his wife talks some sense into him.
Luisa | Ric Responded September 14, 2023
I think you’re right – he seems overly fixated on – and fearful of – his death, and he seems to be doing extreme things to prevent or delay it. But if he succeeds, we’ll all benefit, so go for it, dude!
I do hope his expectation of living forever doesn’t prevent him from engaging in estate planning – even if medically he can live to 300, he could get hit by a bus or trip on the stairs at any moment. Estate planning is the responsible, mature thing to do – a message for all of us, not just billionaires trying to live forever.
Wayne asks: I just listened to your podcast about the Social Security crisis. Very Good; Thank you. I listen to your podcast every day as I'm driving. Maybe we should be looking at another problem, that there are 7.2 million young men between 18 and 54 who are not working and not looking for a job. They must be receiving handouts from the Government. If they were working think how much more would be added to the Social Security Fund each year. The Government itself has created its own problem! If we were to consider this SS problem in light of your conversation with Ken Dychtwald, it becomes evident that this is a complex problem.
Wayne | Ric Responded September 13, 2023
You raise a valid point, Wayne – and it’s not limited solely to the SS crisis. More broadly, having so many young people out of the workforce is bad for them, and bad for society. I think we all can list the issues, and none of them are good.
Now, I’m not necessarily saying that these folks aren’t working because they’re lazy. Sure, that’s the case for some. But for many, they are denied opportunities – some because of discrimination, others because of unhealthy upbringing, others due to substance abuse. Some can’t work due to mental or physical health issues. So, yes, we need to fix this, for doing so will generate lots of benefits – and helping solve the SS crisis is just one of many.
Ken asks: I recall that you stated and predicted last year that bond funds will experience significant losses in 2022 because rising interest rates due to inflation will always lower the value of bonds (and vice versa).
If you still had clients, is it accurate to say that you would have recommended moving from bond funds to money market funds in early 2022 and when interest rates are forecasted to decrease (not expected until after 2024) you would recommend moving from money market funds to bond funds?
Ken | Ric Responded September 12, 2023
Yes. I was frequently explaining on my podcast throughout late 2021 and early 2022 that the idea is to sell long-term bonds and move to short-term Tbills or cash. And that, as interest rates peak, it will again be a great time.
Bob asks: Just read your piece on Social Security and wonder if maybe I should claim benefits ASAP at the ripe old age of 65 rather than wait until 66 and 8 months? If benefits do get cut somewhere between 2030 and 2033, starting benefits today might lower what I could receive in another 20 months, but if they cut benefits, the number of years I'd have to live for the break even point for waiting for full-retirement-age or later might be ridiculously long? Maybe politics in America has always been as divisive as it is now, but there is so much posturing and waiting until the very last minute to fund budget resolution or to deal with any problem, and everything is played out in the media as if to see what are winning and losing arguments and who will get the blame for whatever the outcome is. I remember budgets used to get submitted to Congress and then it got shaked and baked and ridiculed and scorned, but there was a process. Now, everything gets funded, nobody cares about the deficit and the fight is just how much something gets increased by and when some politician wants a luny 6% increase for an item and the opposition says they are willing to give them a 3% increase, it gets reported as a cut even though it was still more than they are receiving right now. I could never cut it as a politician, that's for sure.
I always wondered why Medicare taxes are put on earned income no matter how much a wage earner makes but Social Security taxes have an income cap. Do you know?
Finally, do you ever receive any feedback from clients, or people in general, that they ended up regretting their decisions to either claim Social Security benefits early or they waited too long hoping to maximize their benefits to some degree but then wished they took the money earlier?
I just turned 65, the former full-retirement age, and now, for me, it's 66 and 8 months. I wonder, if what I could earn right now would be spot on to what I would get if 65 was still the full retirement age or the SSA actually does cut the benefit that actually penalizes early claimants?
As always, thank you for all your previous advice either from your books or TV appearances and I enjoy reading your podcasts.
Bob | Ric Responded September 11, 2023
There are a couple of misconceptions here, Bob. First, 66.8 is your “full retirement age”, not 65. Neither of those dates are meaningful, however. There are only two dates that matter: age 62, and age 70. At 62, you can start to college SS benefits. If you do, you’ll get less than if you wait until age 70.
Each year from 62 to 70, the monthly benefit rises; whenever you start, that benefit is locked for life. So, starting at 62 means you start collecting 8 years sooner, but the amount is dramatically less than if you wait until 70. If you think you’ll live into your 80s, 90s and 100s, then definitely wait until 70. (65 and 66.8 are just interim dates, along with every other month between 62 and 70. The SSA’s use of “full retirement age” is highly misleading.)
Second, don’t let worries about the coming cut in benefits (which you heard me discuss on my podcast) alter your decision about when to start benefits. All SS benefits are increased annually based on inflation, so starting now doesn’t do anything special for you.
As for your tax question, there is never a legitimate answer. The response is always “because Congress says so.” Tax law is a political act, enacted to extract the maximum revenue at the minimum objection (to allow lawmakers to get re-elected. Never look to logic for answers to questions such as yours.
George asks: While recently watching a video focusing on options for a 401K left at an old job, one option was moving it to a rollover IRA . During the video the narrator suggested borrowing from this IRA for education was one of the positives about this option. My main question is borrowing for high school education allowed in this scenario ? I may be in an unavoidable yet unaffordable situation very soon with my special needs child so I'm trying to cover all the bases before we pull any triggers. Thanks for the advice. I'm a frequent listener to your podcast and a longtime fan.
George | Ric Responded September 7, 2023
The host of that video is uninformed. You’re not allowed to borrow from an IRA. (You can borrow from a 401(k), but it’s not recommended.)
Focus on the R: retirement. The IRA is not meant to pay for education, houses, cars or anything other than retirement. I realize you’re facing challenges, but turning to the IRA for anything other than your own retirement is not the answer.
Talk to a financial advisor who can delve fully into your situation. I can provide a referral if you like.
Ralph asks: Eliminating menopause???? I am not sure we should be cramping Mother Nature's style (sorry about the bad pun). Advances in medical science is one thing, but that is a bit too much for me.
Ralph | Ric Responded September 7, 2023
I’m not sure delaying menopause is any different than using contraceptives. But not sure either of us gets a vote here. This is for each woman to decide, not men. We’ve had too much of that already.
Bill asks: Based on what Per Peter Zeihan (Geopolitical Strategist) says here, is Bitcoin dead: the following by Peter Zeihan on August 31, 2023...
With all the buzz around central banks starting digital currencies and one of these entities controlling all transactions, I think it's about time I burst everyone's bubble...
Fintech has blown up because it slims down the traditional money transfer process and removes some of the associated fees, meaning you can transfer money faster and cheaper. However, the Federal Reserve will wipe out most fintech startups within the next five years with their service - FedNow.
FedNow allows for the instantaneous clearing of funds when transferred using the Fed as the intermediary. Oh, and it's functionally free. Put the hype for this or that financial product - whether crypto or otherwise - to the side for a minute and dwell on how said systems might compete with free, immediate, and from the source. Queue the gnashing of teeth.
What we're seeing in China is different from this. They've married digital currency to social currency scores, making Orwell look alright. This could never happen in the US, but if China continues down this road, its entire financial space will be under the government's thumb. Any dynamism left in the Chinese economy will be stamped out fairly quickly if this continues.
Bill | Ric Responded September 2, 2023
I’m not familiar with that gentleman, and haven’t read/heard his content. I’m struggling to make sense of the clip you provided. I do agree that FedNow is an important project that will have lots of implications, but I fail to see how that has anything to do with bitcoin. Bitcoin is an asset, like stocks, gold and real estate. All of these are stores of value; people buy they because they believe that they will retain (and increase in) value. The Fed prints money, like cash. Cash and stores of value peacefully coexist; in fact, they support each other.
Many people continue to believe that bitcoin’s sole purpose is a replacement for money. It’s not. It’s a store of value, alongside all other stores of value. Saying bitcoin is dead because of FedNow suggests a basic misunderstanding of crypto.
Mark asks: Hi Ric, I've been a follower and client or yours for over 10 years. I came to your firm after I reached Dave Ramsey's Baby Step 7 (Invest and give generously). I am highly disappointed that you chose to throw Dave under the bus in your recent podcast. What happened to innocent until proven guilty? I came to your firm because I followed Dave's plan to get out of debt and eventually needed better financial planning advice. Like your podcast, we have to do our due diligence before investing in a "celebrity " endorsed product. I believe so much in what Dave Ramsey teaches that I buy his books and give them away to folks that can benefit from it. I given my time to lead his classes. Overall, I think that has so much more to offer than the couple of petty things that you mentioned in your podcast. I expect more from you Ric!
Mark | Ric Responded August 30, 2023
Thanks for your email. I didn’t say Dave Ramsey was guilty. I said he’s been sued by dozens of listeners. I’m just the messenger! We’ll see how the case goes. But please don’t dismiss serious allegations merely because you’re a fan. Blindly following anyone without regard to their actual behaviors often leads to bad outcomes. By the way, so far you’re the only one to come to his defense. Thanks again
Lowell asks: Should I worry about the US dollar being replaced by digital currency?
Lowell | Ric Responded August 27, 2023
No. Digital money is the same as paper money – except for the medium. Whether you use paper currency or digital currency, it’s the same. All that matters is the issuer. Right now, the Fed issues paper currency (via the Bureau of Engraving and Printing). If the Fed were to issue a CBDC – central bank digital currency – it would be the same for you as the paper currency you currently use.
But if you were to use currency provided by a third party, then you’d have to wonder if that currency is as safe as the currency you get from the Fed. Bottom line: you don’t need to fear digital currency. And if you need proof of that statement, just consider this: you already use digital currency, in the form of your debit and credit cards, Apple Pay, PayPal, Venmo and Zelle. Your financial life is already digital! Think about it: your income is direct-deposited to your bank account, and you pay bills online. When’s the last time you used cash for anything other than tips to valet attendants or gifts to street beggars?
Welcome to the digital age.
Leslie asks: After today's long anticipated BRICS pow-wow, to launch a new global digital currency, to be backed with gold and other commodities, do you anticipate that the price of gold will escalate and stay up? After all, why are banks and nations, especially the BRICS nations, stockpiling gold?
Leslie | Ric Responded August 25, 2023
I’ve never been a big fan of gold, but that has not prevented me from having it in my portfolio. Investing isn’t about buying what you like and avoiding what you dislike. Successful investing is about having an exposure to every asset class and market sector. It’s all part of diversification, and when you engage in rebalancing, dollar cost averaging and tax loss harvesting, you are likely to enjoy higher returns and lower risks over long periods than if you only buy what you like and avoid what you dislike.
Even if you were to conclude that current events translate into price appreciation for gold, how much gold would you buy? When would you decide to sell it? Questions like these vex all investors who try to beat the market by picking winners. Many try, but very few succeed on a consistent, long-term basis.
Leslie asks: What happens, to block chain currency or assets, if our electrical grid goes down in a major way, (as neither the "powers-that-be", nor moneyed private citizens have taken the initiative to harden it, BEFORE a catastrophe), should a coronal mass ejection, (CME), or an unanticipated satellite mishap, related to friend or foe, take it down...?
Leslie | Ric Responded August 25, 2023
If power grids worldwide suddenly collapsed due to a major event, such as a solar flares or nuclear war, I’d say that the last thing you’d be worrying about is your bitcoin. I wouldn’t allow such concerns to prevent me from living my live – or investing in the way I need to invest.
This point was perhaps best made by Woody Allen in Annie Hall. While a child, he grew depressed after reading that the universe s expanding and will someday apart. His exasperated mother tells the doctor, “He stopped doing his homework!” and the boy says, “What's the point?”
Don’t be that boy. It will prove to be very expensive.
But if you want to learn how to build a strategy to protect yourself, read Chapter 46, “How to Prepare for Economic Collapse” in my award-winning #1 best-seller, The Truth About Money.
Jeremy asks: On 8/18 podcast you talked about S&P 500 index as being Cap Weighted and recommended Equal Weighted instead. Would the same recommendation apply to NASDAQ QQQ Cap Weighted index. Do you recommend an Equal weighted one? What percent of core portfolio equity do you recommend for these for a growth oriented medium risk plan?
Jeremy | Ric Responded August 25, 2023
As you heard on the podcast, I am a fan of equal weighting, for all the reasons mentioned. And while that concept therefore applies to all investments, it’s not available in every case. And we’re talking about indexed investments, not actively managed ones. In those cases, it’s a moot point, as you’re relying on the fund manager not only to select the investments but to determine the weighting for each one. When I worked with BlackRock to create the iShares Exponential Technologies ETF (symbol XT), I insisted that it be equal weighted.
Regarding overall allocation – which is, after all, a weighting question – I can’t say as it depends on the circumstances of the individual investor, and I know nothing about yours. This is why there’s no substitute for meeting with a financial advisor, and I can refer you to one if you like and you’re willing to work long-distance (via zoom).
One observation: you mentioned “growth” for a “medium risk” portfolio. Those terms are mutually exclusive. I mention this because investors often lay down criteria that are conflicting, and the result is a schizophrenic portfolio whose construction is almost certain to fail at satisfying the investor. A good advisor can help you determine what truly matters to you and create an allocation model that is more likely to deliver what you’re looking for.
Mike asks: Some of your recommendations, although great, are not timely. I.E, the timing of investing with them.. I just turned 78 and worry about the timing. Thanks for all your (free) help!
Mike | Ric Responded August 25, 2023
Not timely? Not sure I understand that. Whenever I mention a particular ETF or other investment opportunity, I’m not suggesting that you buy it today and sell it tomorrow for quick profits. My show is focused, as its title says, on the future…and I’m talking about long-term trends. So, sure, an ETF I like might have fallen in the recent past, and/or it might fall in the short-term future. But over the next decade and beyond, I am confident that it will deliver the returns you want and need. Nothing is certain, and past performance doesn’t guarantee future results, as it says on page one of every prospectus. There are risks with every investment – even bank accounts – and that’s why you should diversify your investments, and make all investment decisions based on your own circumstances – ideally with the help of a talented financial advisor.
All that said, based on your age, I can understand why you might not think you have decades to patiently wait for the returns that might eventually be obtained. (I could argue that you maybe have much longer than you think, based on innovations in health care coming from exponential technologies, but I know nothing of your health or financial situation.) So, it might make sense for you to invest only a little into riskier investments, or even none at all. A financial advisor can help you figure all that out, and if you like, I can refer you to one.
Stephen asks: During your 8/13 podcast with Matt Barthel, you had a discussion about the range of services that investment advisors can/should provide. In a future show, can you have a more in depth discussion about these services, the ones that every advisor should provide (investment advice, financial planning, risk tolerance assessment, etc), and other advisor services that many investors are not aware of and are not using. I think this topic could be really interesting for both investors and advisors.
Stephen | Ric Responded August 25, 2023
Sure, good idea – I’ll do this on a podcast in September. Look for that!
Judy asks: Have you updated your 20 jobs that are projected to see the most growth in the future (newsletter May 2019)?
Judy | Ric Responded August 24, 2023
No. There hasn’t been a need. The list appears in my NYT bestseller, The Truth About Your Future. While there’s been a little movement in the list, the trends that the list reflect (published a few years ago) remain intact. Bottom line: avoid occupations that can be performed by AI and robots. Focus on jobs that involve thinking, creating, communicating and managing. And be prepared to return to school periodically, to learn new skills that will keep you viable and desirable in the workforce. Lifelong education will be the norm.
Anthony asks: Hello Ric . My question is do you think that week have a possible perfect storm in the horizon for Bitcoin, specifically in March and April 2024 when the SEC could possibly give the go ahead for Blackrock's ETF for BITCOIN, and the four year anniversary of halving of BITCOIN ?
Anthony | Ric Responded August 17, 2023
Perfect storm? I think you mean the opposite – stars aligned. Yes, there are lots of great developments underway. You mention only two: the halving in 2024, and the spot bitcoin ETFs (which might come to market any day, not necessarily in 2024). I’d add: new legislation on stablecoins (and PayPal’s introduction of one), Ripple’s victory in its lawsuit against the SEC, the likelihood that the SEC will also lose its case agbainst Grayscale, Coinbase winning approval to trade futures…the list goes on and on. I did a podcast on the ETF situation last week – go to DACFP.com to view it – and am releasing a white paper on it on Monday, too.
Dana asks: Hello Ric . Mr. Edelman, I recall (while you were on KNX News Radio - Los Angeles) trying to promote financial literacy in high school at a national level. I could not agree more. With about 50% of Americans about $500 away from financial disaster, the need is apparent.
Are you still advocating? Is there a reference you can refer me to? To my way of thinking, in today's world [and for the future!] financial literacy is as important as the three "Rs" - if not more so. A one semester course that could change student's lives forever. Not to mention the teacher's! Reading, writing and arithmetic may not bankrupt one, but financial illiteracy can and does keep many in poverty.
Dana | Ric Responded August 17, 2023
Yes, I still advocate financial literacy. Less than half the states require that high school students complete a personal finance class. There are many organizations working hard in this area: National Endowment for Financial Education, Institute for Financial Literacy, American Savings Education Council, Jumpstart Coalition for Personal Finance Literacy. All are worth looking into.
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