The moderator for this year's Q&A with the experts panel is my good friend and Bogo Head's conference team member Mel Turner. Many of you know him as Tom, which stands for the other Mel because the two of us is very confusing. Mel is a retired airline pilot. He's a fellow Marine who flew A4 Skyhawks over South Vietnam and Laos. He has flown all over the world and his last assignment is flying Boeing 757 and 767s out of Philadelphia to Europe. While his employment was as a professional pilot, his application was the world of finance. He bought the first mutual funds in 1978 and made his first investment in Vanguard in 1978. Jack Bogo continues to be his financial hero. He's read hundreds of books on the subject and was thrilled when he ran across the San Diego chapter of the Bogo Heads. At 8608 he decided to jump into the certified financial planning program and a UCLA where he finished seven of the eight classes while maintaining an A average. He sees his mission now as returning his good fortunes and good Bogo Heads fashion by helping others with their finances. When not traveling he resides in San Diego with his wife Kathy and spends about four months a year in Maui. Please welcome my good friend Mel Turner. Well welcome to all the first-timers. Welcome here for all other people that have been here before. Welcome back. We hope you enjoy the the conference that's here. So I asked for questions to everybody. I got 22 pages, single space questions, hundreds and hundreds of questions. I went through them. I apologize that all of the questions aren't going to be available. I tried to get ones all levels of expertise from beginners to advanced from people just starting out to people that are in retirement. So I hope it covers the spectrum. I had to look over overlook some of them. Peggy you can I've given your question to Mike Piper for Social Security so you can see him if you can work your way through the crowd that surrounds him wherever he travels in the place. I'm not going to be able to answer the questions about how to finance your remodeling project or or how to invest if there's a nuclear holocaust. That's a true that's a true question that I received. So although I'll ask a question I asked all the panelists to go ahead and go ahead and respond and interact with each other. This year it was different. Last year it was like technical questions like how does an IRA operate and the rest of that. This year there was more behavioral and discipline and you know and emotional kind of things that was interesting in the questions. So the panel we're very fortunate to have them. We're all here to honor Jack of course and we're here to learn something but as you learn something hopefully you'll take it out and help other people. One more note everybody here pays the same. The panelists paid $275. I paid $275 as Mel pays $275. There's only one person that doesn't pay. Guess who that is? So our first panelist is a co-founder of Efficient Frontier Advisors and author of several successful titles on finance and economic history. My favorites, the Pillars of Investing. Please welcome the real Boga head favorite Dr. Bill Bernstein. Our next panelist is a Morningstar director of personal finance and a senior columnist at Morningstar, one of the better financial interviewers that I've ever seen. Please welcome Christine Benz. Next on the panel is Jonathan Clemens. This is our next panelist. This is the first Boga head conference that hopefully it won't be his last. He's an author at the Wall Street Journal, a former author at the Wall Street Journal and a Boga head favorite and just on a personal note I have to say that Jonathan inspired me. He inspired me so much that I have a four-inch binder of stuff that he used to do in the Wall Street Journal from 1997. I've saved it and I thought I was the crazy one and somebody walked up and said you know I have a binder his stuff too. So please welcome Jonathan Clemens. Our next panelist is a CFA and professor of retirement income, a PhD program for financial and retirement planning at the American College in Brentmore. Please welcome Dr. Wade Fow. Next panelist is a Missouri CPA and the author of several books, 11 books, a blog of oblivious investor or award-winning blog. He's also does digital books. My favorite is Social Security Made Easy, but please welcome Mike Piper. Our next panelist, I ran across a quote, he says my professional goal is to never be confused with Jim Kramer, but our next panelist is a founder of Wealth Logic. He's an author and contributed AARP financial planning magazine, the Wall Street Journal. Please welcome Alan Roth. So the first question is in honor of Taylor Larmore. He sent me an email and requested that I submit this question. So this question is for him. You know how we always bump into somebody that's 20 to 25 years old and we've got like 15 to 20 seconds to be able to influence him. His question is for the whole panel, what is a single most important financial advice you would give to a new investor? I can put this in Twitter form, minimize expenses and emotions, maximize diversification and discipline. People aren't as smart as they think they are and using a very simple portfolio instead of trying something fancy is perfectly fine. And I think I'm just going to reiterate what two other panelists said. If somebody asked me for financial advice, go and buy a target date retirement fund with expenses below 20 basis points. Contribute to it regularly and hang on to it for the rest of your life and you'll be very happy. Well, I'll follow up with that. Would you recommend a target date retirement fund or a wife's strategy fund or build a three portfolio fund? If it's somebody starting out, target date retirement fund where you don't have to actually worry about three different parts of the portfolio seems like a very good idea. That way you're not going to get on nerve because U.S. stocks have a bad year and foreign stocks have a good year and you think about swapping around. If you buy that target date fund, all you have is a single share price to look at each day and that's going to hide a lot of the mess that's going on underneath the hood. Plus, a target date retirement fund is going to rebalance for you every year. You don't have to worry about that part of it either, which you would have to with a three-fund portfolio. Just to accentuate Jonathan's point on that, we have this investor return data, which is dollar-weighted return data that looks at the timing of investors' cash flows, and the goal is to capture investors' actual return experience. What we see when we look at the target date universe is a really beautiful thing in terms of investors buying these funds and staying the course and really capturing the returns that they earn. We've been puzzling over why that is. It might just be something to do with the 401k setting, where a lot of target date buyers are 401k buyers, and so they have their investments on autopilot. But whatever it is that's working for target date funds, it appears to be really good from a behavioral standpoint. I would underscore the virtue of that one-stop vehicle, certainly for accumulators. The only thing that I would add to that is, if at all possible, don't ever look at your account balance. Someone else should to make sure that no one's committing fraud on it, but you shouldn't know what it is. One, I mean, it's a minor point. One thing I like about the life strategy funds relative to the target retirement funds is that they force you to think about your personal risk tolerance a little bit. You have to actively choose whether you want a more aggressive allocation or a more conservative one. That said, I have no qualms whatsoever about recommending a target date fund to somebody if it's low cost. I'm sure that Alan is going to compete vigorously for being the most controversial person on this panel, but I'd like to at least get an early head start. I think that when you look at services like Betterment and Wealthfront where they're charging you 25 basis points or more in order to get a portfolio of index funds, and all they're offering you over and above a target date retirement fund is tax loss harvesting, why would you pay that 25 basis points? A lot of people who are enrolling in Betterment and Wealthfront are people in low tax brackets. Anyway, often they're buying within retirement accounts. It seems to me like anybody who's drawn to Betterment and Wealthfront would be a lot better off buying a target date retirement fund that begins with the letter V. I hate to agree with Jonathan after what he just said about them. But even at 25 biffs, they have to add some complexities to them, and now they're getting into factor-based smart beta types of things, which is not a free lunch. And guess what? Large cap growth has been the strongest performing part of the market, not the smart beta hasn't been so smart lately. Okay, the next question was asked by four different people, so I'll just combine them into the same, and there's a little fear out there. Stock markets are hitting record high interest rates or record lows. So this is from Trey Parrish and Steve Bruns. He says, the main dollar question for every retail investor who is asking, with the stock market all times higher, interest rates all time low, cash returning 1%, endless market optimism, no fear, where should investor put capital? It's easy to say, stay the course when you look back at eight years of a bull market, his quotes, but come on, in 10 years, am I really going to get any material returns? First of all, interest rates are not at an all-time low. You could go back to 1980, you could earn 12% on a CD, Treasury, guess what? Inflation was 15%. So I've always argued the purpose of fixed income isn't actually income. It's the stable part of your portfolio. Who knows what equity returns will be in the future, but stick to an asset allocation. If you can't be right, at least be consistent. Yeah, I mean, there are a couple of different ways to look at that. Let's assume we're now at the 10th anniversary, pretty close of the last market high, right before the global financial crisis. Stocks have still been the place to be over the past 10 years, even starting from that point. The S&P has returned, I think, something like 7% annualized. Since then, the worst case scenario is foreign stocks, which returned maybe 2%. That's still better than bonds, or at least better than short bonds and CDs. That's one way to look at it. Another way to look at it is if you're rebalancing, you're probably doing some selling of stocks right now. Even if you're in a saving process, if you're using a value averaging path and just keeping yourself at a fixed allocation, as you put money in, you're probably just putting new money into bonds right now. I don't really see that there's much of an issue, at least in the long term. Your starting point in building a portfolio is the global market portfolio. The global market portfolio is roughly divided into four components, US stocks, US bonds, foreign stocks, foreign bonds. I would say that if I was wearing my market strategist hat, which I don't wear comfortably, you could argue that three of those four are relatively expensive. The one area of the global markets that is not so expensive are foreign stocks. What I would say is, if you're massively overweight in any one of those four sectors, in terms of three of them, US stocks, US bonds, and foreign bonds, you could have an unhappy outcome. Make sure that you own at least a portion of who spread pretty widely among those four, so that if one of them has a really bad outcome over the next 10 years, you're not too unhappy and you don't end up with the retirement you don't want. I just mentioned, too, about how the problem changes a little bit. When you get to retirement and you start taking distributions, that will really amplify the impact of investment volatility. At this point with the market run-ups, you may be ahead of schedule. As Bill says, if you've already won the game, stop playing. If you are getting to the stage where you're going to be taking distributions from your assets for retirement, this is a good opportunity to think about locking in some of those gains, moving some of that into individual bonds to cover short-term retirement expenses, or even simple income annuities that will provide that lifetime income. Yeah, I would agree with that. I write a lot about this bucket approach. I know some of you agree with it, some of you don't agree with it, but the basic idea is, if you are looking for cash flows from your portfolio in this very low yield environment, your best source of cash flows, if you're retired, if you have equities in your portfolio, are hiding in plain sight and that's selling some of your equity position down and filling up some of the positions in safer assets. I think that strategy makes a lot of sense. There's often this temptation when we have these little bouts of market volatility and we haven't had many recently at all, but people sort of rush to say, everyone should sit tight, no one should sell. I think, you know what, in the past few years when we've had these little shocks in the market, use those as impetus to sell as kind of a wake-up call of what it can feel like when things are falling. I apologize if I'm stating the obvious here, but when expected returns are low, asset allocation only goes so far to solve the problem. Often what you need to be thinking about is saving more if you're in the saving stage or spending less if you're in retirement. Asset allocation can help, but think about other things too. I hesitate to utter the word social security in Mike's presence, but there's another thing here which is on set. I think it's obvious to everybody up here, but just to state the obvious, which is that before you buy a tips ladder, before you buy an annuity, spend down your retirement assets so that you can defer social security until 70. That is the best annuity that money can buy. The next question has with over-weighting different asset classes. Four different responses or five different questions about this. Joel Goodman says, does investing in dividend aristocrats provide some kind of a downside protection? Trey wants to know, why don't I buy some high dividend stocks to protect myself? Steve Alulio says, how would you allocate emerging markets as a percentage of your total international assets? In fact, I think Jonathan wrote an article endorsing emerging markets, and from Brent Huntsburger, is there a value premium still? And if yes, how would you convince an investor of that? They're all about over-weighting different sectors of the market. How do you feel about that? Gosh, well, let me do the last two, which are emerging markets and then factor tilts. Emerging markets, the conventional wisdom is that about 10% of your equity portfolio, so if you're 60, 46% of your total portfolio should be in emerging markets. I've always thought that's a little high. And the thing I like to say about emerging markets stocks is the nice thing about them is that from time to time, they get to be really cheap. This is actually one of those times. There's still probably the least expensive segment of the equity markets around the world. So I mean, I think now is the time to maintain a good weighting in emerging market stocks. Factor tilts, again, that's almost completely an imponderable. It's a risk premium. And it's probably more of a risk premium now than it ever was. And the risk is that you're going to underperform the market, which in fact value stocks have done over something like the past 10 years. And the other problem is that everybody else is chasing that factor as well. It was the case 20 years ago, there was really only one company that chased it well, and that was DFA. Now there are other companies that do it. So there's more capital that's thrown up against it that's thrown into it. And I think the returns are going to be lower. And so I think that whatever advantage the factor tilt had over just owning the total stock market is less than it was. I think it's still there, but I'm less enthusiastic than I was about 20 years ago. Hey, Bill, can I ask you a follow-up question on the EM issue? Because I have heard this that EM emerging markets may be cheap relative to the rest of the world. But I guess the thing I wonder about is if we're concerned about the US market maybe being a little expensive and potentially subject to some volatility. I mean, since when does emerging markets not tumble when the US market tumbles? That's my concern about recommending that people look at EM. That's a good point. There is no question that if the S&P 500 goes down 5% tomorrow, the emerging markets indexes will be down by a lot more than that. And if that's your definition of risk, then they are certainly riskier and that's certainly a concern. I view risk in a very sort of spoky and sort of manner, at least I try to, which is long-term risk. So that when I look at say the 10-year period, the most awful 10-year period you could possibly imagine, which would be the one between let's say 2000, well 1999 and 2008. It's a 10-year period. You had two awful bear markets in there. And you found that emerging market stocks, although they tumbled something like 65 or 67% from top to bottom from 07 to 09, over that whole 10-year period, emerging market stocks had triple-digit total returns, all right, whereas the S&P 500 lost 20%. So I think that in the short term, you're right about valuations. In the long, over the very long term, if you're looking at long-term risk, I think valuations are what drive risk. And that valuation risk in emerging market stocks right now I think is a lot lower than it is in U.S. stocks. In other words, I think we're set up for another period that may look like from 1999 to 2008. So are you saying we should overweight emerging markets or keep our allocation the same? I'm saying that perhaps 10% of your total equity portfolio is not appropriate right now. And if they do really bounce back, you should probably look to trimming that back. Boy, is that a non-bogal-head thing to say. You know, I may be disagreeing in public with the smartest guy on the planet. But, you know, I charge $450 an hour to tell people that I don't know the future, and it's really good advice. I did not know that international was going to outperform the U.S. this year. And if I had had a crystal ball knowing what's going on with North Korea right now, I would have avoided the Korean stock market. And South Korea, I think may be the single best-performing emerging, well, depending upon whether you call it emerging or developed markets, because the vanguard emerging market doesn't have South Korea. But predicting the future is a really hard thing to do. And like I said, small-cap value that the factor tilting more money has poured into cap-weighted indexing, even on a percentage basis than what Vanguard calls, I'm sorry, what Morningstar calls fundamental index, strategic beta, smart beta, in other words. So money tends to flow to whatever has done better. And that consistency is incredibly important. And again, that means you have to sell. I had to be buying international in spite of what Jack was telling me. And Jack, I think the world of you. But, you know, just stick to owning the world and owning, I would say, three out of four of those sectors. I still think international bond, even with Vanguard's product, is expensive. Just to put a quick plug in for emerging markets. I mean, the reason that I'm such a fan of emerging markets, and I would encourage people to have at least a market weight-holding is because of demographics. And as people say, demographics are destiny. If you look at the U.S. economy, historically we've had 3% real economic growth. One-half percent of that has come from increasing the size of the civilian workforce each year. And the other one-half percent has come from productivity gains. We already know what the story looks like for the years ahead. It's about 0.5% a year in terms of growth in the civilian workforce versus 1.5% over the past 50 years. That means that we're going to lose one percentage points out of economic growth.  You know, economic growth is going to be slower. We're going to get something very close to 2% long-run economic growth, not the 3%. And all the political promises in the world are not going to make any difference to that. By contrast, if you look at emerging markets, their demographic problems lie roughly 60 years into the future. I don't know whether I'm going to be out of emerging markets by then, but I think I will be gone from this earth. So at least for the rest of my life, emerging markets seem like they should have a permanent part of my portfolio. Okay, thanks. The next question is going to be aimed at Dr. Wade Fow since he studies this subject. Studies show that people are not saving up enough. This is from Mel Turner. I think I know that guy. He says, average savings accumulated at 65 is around $100,000. Defined benefit plans are being phased out. Only 14% of the people are covered. Average workers contribute half of what they should be contributing. Social security is unsustainable. The Center for Retirement Research at Boston College states 53% of the working age households were at risk of having inadequate retirement resources. So what's the outcome of this? How does this end? Yeah, that's a great question. And I do tend to focus more on the people that have been saving. But in terms of solutions for the Americans who haven't been saving enough as they should have been, part-time work to the extent that that's possible will help to fill some of the gap. And then the two major assets for American households are their social security benefits and their home equity. And they just need to really make sure that they make good decisions on both with at least the high earner generally delaying social security to 70. And then with home equity, just thinking about how to, for example, would they reverse mortgage, be able to include that as part of the retirement income plan and help support some retirement spending from that. Otherwise, it is going to be tough. A lot of Americans will simply be living on their social security benefits. And at some point there may be some cutbacks, although I think it's way too dramatic to assume zero social security benefits in the future, as I know is a common rule of thumb for planning. But no, it's going to be tough and people will struggle. Anybody else on the panel have an opinion about how it ends? Bill, you studied this kind of stuff. Yeah, not well. Thanks. You mentioned the Center for Retirement Research. That's Alicia Menel's group at Boston College. And they've had this at risk index for the past three decades. It started out somewhere around, what, 33 or 35% were at risk. Now it's 53%. And if that sounds bad enough, you have to realize the algorithm they use to arrive at that number, which is they assume that when everybody retires, they take all their retirement assets and they annuitize them. And it also assumes that they reverse mortgage their homes. So that at risk percentage is almost certainly much higher than 53%. So it doesn't end well. This is sort of an alternative universe within the bounds of this room. But outside of this room, it's not going to be pretty at all. I read somewhere that there's going to be three trends. People are going to work longer and you've already seen that. The other ones are going to turn to annuities as you start to panic because they can guarantee the income and reverse mortgages is probably the third one. So here's a question from Ron Mason. And it was also discussed at our last San Diego Boglehead meeting. It has to do with how much an emergency fund says usual amounts three to six months of expenses, although some people are saying they have even a year or two years of cash, how do you determine the amount that should be kept? And should you consider your Roth IRA as an emergency fund? I can take a stab at that one. Three to six months is the I remember that's the rule of thumb I learned in the CFP coursework. But the fact of life is that for higher income earners, people with more specialized career paths, I think it makes sense to take that hire because it will likely take a longer time to replace that higher earning more specialized job if it's lost. And another group that I think needs to think about this emergency funding is the gig economy workers, which is I'm sure we all know someone who's working as a contractor is not a full time employee somewhere. And if you know any of these folks, chances are, you know that they can have long work interruptions that when they are working that they their work may be very lucrative, but they may have long periods where they're out of work. So that constituency too, I think, should think about having a larger cushion certainly than three to six months. Regarding the idea of whether a Roth IRA could be used in sort of a multi tasking way, this is something I've written about. I think it actually can be a neat idea for a young accumulator to think about the having at least part of the emergency fund stashed within the Roth IRA. Best case scenario, you never touch it, but it's there and can be tapped without penalties or taxes if they need it. So it's something to think about. I think you just need to think about what that money gets invested in. And so if that's your plan to stash part of your emergency fund in the Roth IRA, you need to make sure that that money isn't in long term assets that if you needed to invade it in a pinch that you wouldn't be selling stuff or run the risk of selling stuff when it's down. I think the answer is it depends. And if you're a tenured professor at a university, a federal employee have a very stable job, you need less than if you're working for a startup company where your employment may end in any day. As far as Roth, and by the way, it's not cash, it's access to cash that you need for that emergency. And on the Roth, I mean versus living under a bridge, yes, I would tap the Roth, but the Roth is the last money you want to spend. Just a few quick comments on this four things. One is we always talk about emergency funds. It's not an emergency fund, it's an unemployment fund. Any other financial emergency you can think of, you cover it.   Second, we're talking about covering not replicating your income, but replicating your living expenses.  Figure out what your fixed living costs are each month, and then you keep three to six months of that depending upon the risk of your human capital, which Alan just mentioned. Third, as we grow older, we tend to accumulate assets in our regular taxable account. At that point, if you've got three, four, $500,000 sitting in your regular taxable account, what's the point in having a separate emergency fund? I'm not sure there is any point at that juncture. And four, and this is actually, I guess, some heat on this, but I'm not sure why given that an emergency fund is really an unemployment fund, why anybody who is retired would have an emergency fund. What job are you going to lose? Anyone else? Okay, the next question is similar to the one that Tater asked and it's from Stuart Halpert. And it just happened to us the other day. Kathy likes the aisle and I like the window. And the guy that's set between is 26 years old. And he said, where are you going? I'm going to an investment conference. And boy, it set him off. He starts talking about expense ratios. And the next thing he starts talking about, I'm buying stock now. And I made money here and I made money here. And I said, do you know the stock market goes down sometimes? But he 26, he'd never seen it go down. It was only up. And I just went through my head, what do I say to him, you know, to convince him. So this is from Stuart Halpert. He says, this is a toughie. If you have to make an elevator pitch, that is, you have about 45 seconds or less to sell passive investing at as compared to active investing, better known as a dark side. What do you say? So consider yourself coming down the Empire State Bill. You take as much time as you want. But if you give some feedback on that, I would say your odds are about the same as being obese, smoking three packs of cigarettes a day and living to age 100 over your lifetime on the active investing. Mike, what would you say to him? I mean, I would just turn to what Jack always says. The math shows that the average low cost passively managed dollar will and must beat the average actively managed dollar.  That's all there is to it. Sort of along the same lines. I mean, the logic is brutal. Before costs, investors collectively match the performance of the market averages. After costs, investors collectively must earn less. If you hold down your costs, you're going to lag the market by less than other investors are incurring the huge expenses charged by actively managed funds. And thus, over time, compounded, you're going to accumulate far more money. You have to add one more thing to that, which is the comeback to that is, but yes, I'm going to pick only the best active managers and you have to know the comeback for that as well. But 45 seconds in an elevator, I try to avoid doomed people. So I wouldn't even make the effort. Well, there's also an idea too that people are used to thinking you have to pay more to get quality. And that's just simply not the case in investing. And so maybe to try to chip away at that notion that there's really no such thing as an expert who can pick investments better than the index. So you're really just wasting money at that. You don't get better quality by paying more when it comes to investing in finance. Christine, what would you say? Well, maybe to offer a little bit of a contrarian view on costs. One thing that certainly costs matter, but we find that when we look at the lowest costs, say quintile of active funds, actually, that you have a fighting shot at beating an index. So it's just cost matter, whatever product type you choose. And certainly ETFs and TIFs have lower costs. So that's a nice simple way to run a portfolio. But if you choose the subset of low cost active funds to look at that, you probably have a fighting shot at doing reasonably well too. Anybody else? Okay, the next question comes from a lady geek. And I put the question in, there she is right here. I put the question in, and then I said, you know, that's a silly question. And I took it out, and then I started thinking about it. And I figured that lady geek knows more than I do about what's going on on the forum and what's being discussed. The question has to do with cryptocurrency. Does everybody know what that is? Like bitcoins and blockchains and all that kind of stuff. So the question is, from lady geeks, is the popularity of cryptocurrency in the boggle has formed has exploded exponentially within the past month. We have a number of forum members who are enthusiastically helping investors on the appropriate amount for their portfolio. Unfortunately, new investors are assuming this activity means they should hold cryptocurrency in their portfolio. To stem the tide, we put a 5% recommendation. Can you elaborate on the role of cryptocurrency in people's portfolios? I'll give my opinion. It's going to be the last person holding the bag. So what do you think? I just bought Bitcoin. Let me explain. I wrote about it for AARP. And as I was learning how to buy it and the like, I really felt like I needed to actually buy it to make sure that everything I was writing was accurate. And by the way, my 200 dollars is now worth about 250. 250.00. What do I think it'll be worth in five years? Probably zero. But it does solve some problems. I mean, really, there's 2.3 billion people that have smartphones, but not bank accounts. There's no 4% commission that the credit card company charges. There will never be more than 21 million Bitcoin. On the other hand, there's over 1,000 cryptocurrencies. Who's to say, I can't invent Rothcoin, and that does better than Bitcoin. So I personally am not going to buy more than what I bought, but it's not a completely baseless item either. Does Morningstar follow cryptocurrency? No, not yet. In fact, I was just thinking we had a thing going around the office a couple of weeks ago. It was some internet joke about like, your own craft beer could be named after your grandfather's profession plus some concept that you don't understand. And one of my colleagues said, Candyman Bitcoin. We just don't feel like we have our arms around it. It's not to say that we would never cover cryptocurrencies in some fashion, but I don't know that anything's on the radar in the near term. I'm definitely not at all an expert in cryptocurrency. General principle I follow, though, is that I'm not eager to add anything new to my portfolio ever. I'm happy to watch it and learn. So happy to hold zero. Probably will be happy to hold zero for another decade, and then we'll see. Yeah, there's another thing here which goes on said, which is that people get confused by Bitcoin and they you're not able to separate out the asset itself, which is almost certainly a bubble from the technology, the blockchain technology, which may or may not prove to be extremely important and transformative. But you're not going to profit from that by buying Bitcoins. So with that, I'd like to go back to a subject that you touched on, but it wasn't a direct question. Four people ask about it. Tim Song, Joel Goodman, a simple sauce from the Boglehead forum, but I'm going to read Andrew Jacobs' question. I'm going to direct it at Jonathan first. He says, in Bogle's mutual funds, Mr. Bogle explains why international investing has risk and perhaps investors should keep their money on US stock. It concerns me that virtually no other passive investing author agrees with Mr. Bogle. Can you expand more on the risks that Bogle discusses and if international stocks and bonds are even necessary? Sorry, Jack. So we go back to the market portfolio. Four quadrants, US stocks, US bonds, foreign stocks, foreign bonds. I do not hold the global market portfolio even though as an indexer, arguably I should, because the global market portfolio reflects the wisdom of all investors worldwide. They've voted with every security they bought and sold and decided that this is the fairly valued collection of securities that you ought to have. As a US investor who will retire and buy wheelchairs and early bird specials and nursing homes in US dollars, I am not willing to have quite that much foreign currency exposure. When I build my portfolio, I focus on just three of the four. I don't own global, I don't own international bonds. I just own international stocks, US stocks, and US bonds, and these days I own them in roughly equal amounts. If I do that, I end up with about 30% foreign currency exposure, which I think is a bit high. But once I get to retirement, I intend for it to be somewhat lower. So I do believe that there is currency concerns in investing too heavily in the international markets, which is why I don't own international bonds, but I also do believe that including international stocks in a portfolio not only adds importance to diversification, it not only gives you exposure to a part of the global financial markets, which is arguably cheaper than the other three major sectors, but finally, and this is one thing that doesn't really keep me up at night, not very much does, but the one investment concern that sits in the back of my mind is what's going to be the next Japan. If you were a Japanese investor in 1989 who had a strong home bias and you were fully invested in Japanese stocks, a quarter of a century later you would not be a happy camper. On the off chance that the US market turns out to be the next Japan, which I don't think it will be. I think it's a very low probability, but we talked about Pascal's wager earlier today. We have to think not only about probabilities, but also about consequences. If perchance, the US stock market turns out to be the next Japan, I do not want to have too many of my eggs. I don't want to have the majority of my eggs in that particular basket. Yeah. The thing that I like to say is I can't predict the future. Therefore, I diversify and I live by that, and the only problem with that is that diversification works whether you want it to or not. What I mean by that is in the past 10 years that foreign diversification hasn't worked well, but if you believe in mean reversion, that means that your odds are pretty good going forward, which is also based on valuations. So, Alan, what's your opinion on this? I have half the amount of stock that's recommended by Vanguard. I have zero international bonds, and half the amount of international stock. Is that wrong? I do own Vanguard international bond, but really the same thing as Bitcoin. I stuck my toe in the water when it first came out, and I haven't bought any more of it, but I wouldn't only buy Colorado stocks. Therefore, I argue we shouldn't only buy U.S. stocks. We should also own some international. I overweight the U.S., and if I had access to a low-cost index fund to buy stocks in companies from other planets, I would do that. Jack, can you launch that, please? One point I would make on this whole thing is, and we've looked at this at Morningstar, is this issue of country of domicile as being the organizing principle behind what gets classified as a U.S. stock and what's a foreign stock? As we all know, many of these companies, whether U.S. or foreign, are very global. It's feeling more and more like a vestige of a bygone era to be looking at country of domicile when deciding what's a U.S. or foreign company, which I guess is a long way of saying that I think the more diversified you can be, the better because the organizing classification system for foreign versus U.S. just isn't very useful. So the next question is aimed at Bill Bernstein, since he studies this. This is from Brent Hunsburger. He's a financial writer. In fact, could I have a raise of hands? How many people are in like the financial business, advice, manage money, write for it, and just curiosity? Okay, it's quite a few. But Brent writes, and I know you asked Jack of this, so Bill, if you give your response, a lot of discussion that a point can be reached where there's too much investing. Is that possible? Well, if you're an economic historian, you'll say, of course, you get to something that's a very obscure term called a periwig society where everybody is a rentier where they own bonds or stocks and they just collect income. And Jack writes about this, and he writes about this very eloquently. I don't know what the percent of S&P earnings are for financial services companies, but it's on the order of what, 20, 25%, something like that? Yeah. Jack nods. He says, yeah, that's about right. And that's too much. All right, the job of the financial sector is to reallocate capital. And it is not healthy to have that part of your economy be that big. I mean, think about a society in which 90% of corporate profits and of income comes from finance. That's going to be a pretty miserable and cruel place. So yeah, you certainly can have too much finance. And I think we have too much finance right now. I mean, if the entire financial industry was replaced by Gus Slaughter clones, the industry would be about 99.5% smaller. Anyone else? The next question is aimed at Mike Piper. This is from Abjit Ditar. I'm sorry I pronounced your name incorrectly. He says, I have a 401k at work and I don't know what to do. Should I dump $18,000 in the first day of the year or should I space $1,500 a month? If you have the cash flow earlier, it's better. Well actually, before you dump in your $18,000, you should find out how the company matches your contributions because some companies will match based on the total amount as of the end of the year and others will match pay period by pay period. So if you put in your $18,000 on January 1, you may find that you miss out on the match for all the other subsequent pay periods. Super good point. Totally wrong what I just said. Could I have that in writing? Everybody's got an opinion, right? So this is from, the next one's from Victoria. F, she writes on the forum quite a bit. It has to do with fixed income. It's going to be aimed at Alan. I say, thanks for giving us an opportunity to ask a question. Here's my question. What are the best current strategies for fixed income securities? CDs, tips, tip funds, bond funds, short-term, long-term, intermediate, and how do you feel about brokered CDs? Yes. My portfolio, by the way, it's roughly 45% equities, 55% fixed income. And by the way, fixed income so far this century has beaten global stocks. So when it comes to, and of my fixed income, I have roughly 2 thirds in CDs. So there's two strategies. Strategy number one are banks like Ally Bank or Sally May Bank that are paying what a total bond would pay. And then they have a five month for Ally, six month for Sally May early withdrawal penalty. So if interest rates ever go up, it's a way of having a put the right to sell it back. And the second strategy that I use that's probably only about 25 or 30% of the CD strategy are brokered CDs purchased on the secondary market. And the sweet spot tends to be in the neighborhood of a seven, eight year duration. And those yield an extra 40, 50 bips over the market. I was meeting with John Emmerichs at Vanguard yesterday. And I said to him, you know, because he manages the quant active strategy group, if he could beat the market by 40, 50 bips, would he consider that successful? And his answer was yes. Well, the CD strategy does beat the total bond by probably 50, 60 bips per year with a little bit less risk. So that's my strategy on fixed income. I was on a global indexing panel a few months ago in California, and I was going over that idea. My other two panelists, one was arguing for high yield bonds, aka junk. And the other one was arguing for safe dividend stocks like Eastman Kodak and General Motors.  I think you're right on Jonathan on me being controversial, but this is a friendly group. A follow up to that, Stuart Halber wants to know, what about my low risk fixed income? Should it be tips, treasuries, or investment grade? Seriously, yes. All of them. Okay. No junk. So this is for Bill Bernstein. This is for all my taxable investors in the highest tax bracket. Do you have an updated asset allocation for taxable Ted? He's the lucky guy to have this problem. He's in the highest tax bracket. What do you recommend on fixed income? For fixed income, again, I think that the taxable bracket is not really that relevant. It's really more important that you diversify. The lion's share should be in CDs and in treasuries. If you're really high income and you have a very large amount of assets, Allen's strategy of doing brokered CDs in the secondary market is going to be very hard work because those are generally very small lots. But if you've got the time and nothing better to do, it's a good way of earning with 50 or 60 extra bips. And then what part do munis play? We have a 40% limit in our practice on munis, no matter how much assets you have. They may be a little more tax efficient, but they're also riskier as well, particularly in the teeth of the financial crisis. So it's really your income and your tax bracket really don't impact that very much. I think the strategy is the same for everybody. Any other comments? This is from Joel Goodman again.  What has been the most interest of articles that you've written and which one has generated the most disagreement with your readers? So when I was at the journal and even with my own site now, if I'm feeling a little down and I want some audience appreciation, I'll write either about money and happiness or about how I've helped my kids financially and the page views just light up. It's like crack cocaine. I feel so good by the end of the day. In terms of controversial stuff, one of the pieces that I remember from recent years was a piece where I wrote about why you shouldn't have a budget. And basically the argument was as long as you're saving enough, it doesn't really matter how you spend the rest of your money. I was really surprised. I got a boatload of hate mail on that. It seems that just having a budget is a sign of virtue and if you're not doing it, you're a wayward individual and you're destined for hell. I would say annuities, bank on yourself whole life type of schemes, gold. That's where I get the most amount of hate mail and the occasional threat to be sued if we don't take it off the site or withdraw it or something like that. I don't do it to make people mad and I'll admit, by the way, if paying my kids college tuition were having you all come to a free dinner seminar to sell you something with all the upside of the market, no downside risk, I would do it and I would probably think I'm a force for good and you guys will be so sorry when the market goes down. Back in late 2011, Vanguard chained the allocation and their life strategy funds. It used to have an active management component and they got rid of that so it was all passively managed and the cost went down as a result. I switched at that time from having a DIY allocation of index funds to putting 100% of our retirement savings into the life strategy growth fund. That was probably both the most disagreed with article as well as the one that people got most excited about. There were so many people who thought this is something you spend so much time on and you're just punting, you're just putting it in this one fund of funds and calling it a day and then there were other people who thought that was awesome. They were looking for permission to do the same thing and I had just given it to them basically. Yeah, the one that probably got the most positive review was the one where I, it was an article I wrote in the journal which has already been quoted is to stop playing the game. Once you've won the game, you stop playing it. The one that got the most vehement reaction by far wasn't one that I wrote but that I was quoted in and I was asked to comment on the portfolio of a prominent political person that was very heavy in precious metals equities. I said that it was one half step from a cellar full of canned goods and nine millimeter rounds. And for some odd reason that got a lot of negative political comments but I can't talk about that anymore. Christine, how much have you put out a lot of information? Oh, thank you. I would say of the things that I've written that have gotten the most positive feedback probably the things that I've done around the topic of elder care helping my elderly parents through their final years and dealing with dementia with my dad's dementia issues and the financial and the many other implications of something like that. I think there's a lot of pent up demand for people to share their experiences. So there was a lot of feedback on what I wrote but also just people wishing to share their own experiences and learn from one another. So that was and has been a great learning experience for me. In terms of areas that are the most contentious gold certainly as one I don't tend to write about it really at all. Anything around social security and anything that gets people into that quasi political zone would tend to set off food fights not so much at us but a lot of sparring among our users. In terms of a piece that I would say generated a lot of constructive discussion. One was about the role of social security and your asset allocation whether social security should affect your asset allocation in any way. There was a lot of great discussion there with people favoring different approaches to that particular issue. How about an article that created hate mail? You know I don't, nothing jumps to mind really. I can't think of a good example. I certainly do receive my share of feedback both negative and positive but I can't think of any one topic that generated a lot of negativity. It's hard to hate Christine it really is. I'm a much easier target. Wait how about you you've done some controversial retirement withdrawals things. Yeah wait so the most popular article I wrote was a really dry piece just reviewing statistics on how long people live past 65 so I have no idea what drives reader interest. It's really hard to predict in advance what's going to get more paid views versus something else. But yeah with controversial topics a lot of it relates to the investments world still hasn't caught up with how retirement changes and when you take distributions how that amplifies the impact of market volatility so much of it is based on assuming an 8% rate of return every year or something like that and it doesn't link the assets to the liabilities the fact that you have to match those assets to liabilities. So when I try to explain how simple risk pooling with a simple income annuity is a cheaper more efficient way to meet retirement expenses that can generate a lot of controversy. Anything I do with regard to the 4% rule and I really just got started with that because I looked at the international data and the 4% rule only worked in the US and Canada and there were 18 other countries where it didn't work so that got me started on that kick but that people really want to have faith in the 4% rule and so I get out some negative comments in that regard. What about increasing your asset allocation as you age past retirement? Yeah so the rising equity glide path I never meant to really be advice for people to use in their portfolios it was more just the point that with lifetime sequence of returns risk you want the lowest stock allocation when you're the most vulnerable to losses and that's at the retirement date and as a natural consequence of spending conservatively a lot of people may just see their stock allocation increases in retirement it works as a risk management strategy because worst case scenarios for retirees are bad market returns early in retirement good market returns later and that's exactly what the strategy would protect but I understand there's a lot of behavioral concerns about trying to implement it and so when people point that out to me I can accept their their criticism in that regard. What do you recommend as an allocation somebody right at retirement and how high do you take it back up after retirement? Well that's really just depends on a case-by-case basis about their risk tolerance and risk capacity but the examples we were looking at were things like rather than keeping 60% stocks throughout the whole retirement period started at 30% and increased it back up to 60% so you know something in that ballpark I think would be an appropriate way to represent that strategy. Anyone else? Yeah I just would amplify on that a little bit which is I tend to separate people out into a sort of a spectrum so all the way at the the right side of the spectrum is the person who's only got five or ten years of residual living expenses saved up in other words they can fund the retirement with fixed income assets for five or ten years and those those people are are in very deep yogurt and should probably pretty much anuitize everything they have after they spend down to get that social security at 70 you know and you know someone who's got 30 or 40 times their residual you know income which is probably going to be a lot of people in this audience can probably you know own a very big chunk of equity because that money really isn't theirs it's going to go to their heirs and then finally you've got the person all the way to the other side of that spectrum who has you know some ridiculous amount of assets you know 60, 70, 80, 90, 100 times their annual living expenses and that person is in the Warren Buffett situation they can put almost 100% of their assets into fixed income because just the dividend yield alone even in the worst case scenario is going to see them through if they're that risk tolerant the number of people who have both that risk tolerance and the amount of assets is is vanishingly small though I meant stocks I'm sorry yeah that's what I meant to say yeah sorry anyone else the last question there's going to be two more questions and then we're going to have the panel just to pass on words of wisdom that they learned over the years I mean after all we look at our portfolio they live with their portfolio they do it all day but the next last question is about long-term care insurance I remember five years ago we asked the question to Bill Schulzeis his answer was I don't know what do you think and that was that was his answer and he wouldn't go any farther than that so what I'm going to do is bring it up again what do you what do you think about long-term care insurance when should you buy it how much should you buy what's your opinions on that it's tough if you don't have a lot in assets you shouldn't buy it if you have a lot of assets you should self-insure it is pure insurance and I believe in insurance the the problem is you can't buy a policy outside of a hybrid which has other problems where the rates are fixed and so many people are coming to me after paying for 10 years getting a 50 100% increase and they don't know what to do because now they're 10 years closer to needing it so it's a very tough call and we tend to think of how much we're going to pay when we're in you know long-term care but we fail to think about we're no longer going to need a house a car insurance eating out traveling etc so you have to take that into account and then long-term care you know covers a nursing home there are things that we're going to need in between probably that aren't covered so it's a very tough call I don't have it there are four options to fund long-term care self-funding Medicaid which is by far the biggest provider of funding the traditional long-term care insurance and then the hybrid policies that connect long-term care with either life insurance or an annuity and I do one area to emphasize it I know a lot of people plan strategies to protect assets to be able to qualify for Medicaid and I think that may be a mistake with demographics I what if I if you can afford to pay for your long-term care you probably are going to feel pretty bad if you're in a situation where you're in a Medicaid funded long-term care facility so I would caution people again specifically trying to plan strategies so that Medicaid would pay for their long-term care the traditional long-term care insurance has had a lot of problems policies today should be in better shape because part of the problem was just interest rates coming down so much and staying at low sustained levels the insurance companies hadn't made a plan for that as well as just the lapse rates were were not as high as insurance companies were expecting so today's policies should be priced better in terms of not seeing as many premium increases and just as you can't wait too long to get long-term care insurance because at some point you may no longer qualify I the rule of thumb sweet spot tends to be around age 50 to start thinking about that but certainly younger or older could still be appropriate John what's your opinion on it I really hate the long-term care question because I just don't think there is a good solution the the good solution is to be a bogal head save a lot of money index and make sure they have more than enough assets so you don't have to buy long-term care insurance that that is the good answer for people who are in that difficult spot between maybe 300 000 and a million dollars in assets who needs to need to consider long-term care insurance you know I would hold your nose and buy either traditional or hybrid policy but I find it really tough to recommend policies because you know this is an area where once again the insurance industry has not covered itself with glory I've had so many emails from people over the years bought long-term care you know held it for years and then the insurance companies come along and asked for a premium increase that they simply cannot afford and you know I don't want to be responsible for for people ending up in that bind I wish that we could get to a point where there was a long-term care insurance product that people could buy that I could happily recommend yeah I do this annual compendium of long-term care statistics and one number really jumped out at me and I don't have the specific but it was something like that 10 years ago there were 50 companies selling long-term care insurance now I think they're like eight so there are simply companies getting out of that business all to all together many companies and since when is that sort of environment ever good for consumers so the hybrid products Ellen you you mentioned them and they seem to be coming on strong and replacing the straight long-term care policies I'm curious have you done any work on those because I haven't examined them in detail but it seems like they're kind of tricky to cost compare and not as transparent as they could be I have and and a hybrid comes with a whole life component and it's just an annuity right I mean those are the two types so so they're just extra fees in there and then as I tell my clients what they're really doing when they're buying long-term care is protecting money from their errors against the fact that they may spend statistically very unlikely especially for men to spend you know 10 12 years in a home so what they're really doing is protecting their kids protecting their errors and that's not the main purpose of the portfolio and I also point out that statistically speaking since the insurance companies and the agents expect to make money they're likely to leave more money to their errors if they don't have it yeah let me let me just go around and ask the other panel members Alan I think threw out a figure that implicitly said at them at a million dollars of assets you don't need long-term care insurance or maybe Mike did I forget which of you did those you okay well the bottom line is is that do other people agree with that is do they do the other panel members think that a million is sufficient to avoid long-term care insurance I don't I think that you would need more and I always share my personal experience on this front which is that I my dad needed long-term care which we had provided in in the home for several years and then eventually determined that it was going to be a better setting for safer setting for him to be out of the house in a long-term care facility but at that point my mom had developed a care need so we had to my parents had been advised to self fund long-term care and they they were fine in the end but we had two long-term care funding needs going on at the same time and that can happen legitimately with with married couples where they need care delivered in two different settings so that's another thing to keep in mind that I think those thresholds are the rules of thumb for when you'd want to self fund long-term care I think that people should set the bar a little higher than than maybe what had been used in the past can you give me a number I can't bill really but I would be nervous about setting one million as an appropriate threshold to think about self-funding yeah that's that's what I was going to touch on that's implicit in what Christine is saying is the threshold definitely has to be higher for a married couple and Wade was talking about this a little bit earlier is that Medicaid will step in at some point and for an unmarried person that's not so it's a better situation being Medicaid provided care rather than a married couple because for one of two people in a married couple to qualify for Medicaid the couple has to spend down their assets and there's some protections for the other spouse but they're limited so if spouse A needs long-term care and has to spend down their assets to qualify for Medicaid spouse B can be in a bad situation yeah right and just one other comment about couples because women tend to live longer you have some risk-sharing within the household but it's often the wife takes care of the husband the husband dies then the wife needs long-term care after that so she's really in a more vulnerable position and so when you're thinking about any sort of long-term care protection to have that in mind as well and and the wife is likely to live longer in long-term care so there's an argument that if you're going to buy it especially if the two spouses are the same age or the wife is younger to buy more for the wife and you could easily go through a million dollars number one you can spend that down to 300,000 before you go into the home and therefore you might not have enough so it's hard to say and it all also depends on how nice you want the nursing home to be okay the last question has two parts to it one is how do you encourage young people to take an interest in financially becoming financially secure it's more of a motivational question since your writers you're always motivating people the second one since this is an advanced group most of us have made it we become financially financially independent how do you give assets to a younger generation without decreasing their ambition well warren warren buffett put it very nicely he said he wanted all of his descendants to have enough money to do anything they wanted to do but not enough money to do nothing and and that's that's that's good advice basically what he's saying is you pay for for education a good way to give money to children is you can endow them you can give them a fair amount of of assets and have them have substantial portfolios but they have to know that you're watching and they have to know there's more money behind that coming from you when when you pass away and you're going to watch and see how well they steward the first aliquot when they're eight years old you have them help you write a book called how a second greater butte wall street you know it is really hard to convince people that they need to save and probably one of the biggest ahas in my practice which should have been obvious is people that came to me saying can i retire those that thought oh my gosh i'm i'm pretty sure i can in two years had maybe a fifty thousand dollar net worth those that said i'll never be able to retire in some cases had tens of millions of dollars and it's the fact that those that weren't concerned about retirement never learned to defer spending and you can invest like warren buffett if you're not saving anything you're not going to get to retirement so i don't have a particularly good answer to how you get somebody to change behavior you know the client that comes to me that hasn't saved anything needs a psychiatrist or psychologist not not me i've um i've written a one of my monthly newsletters this year uh was devoted to this whole topic of ambition uh partly because uh i see what's gone on with my kids and i see what's gone on with a number of their friends um all grew up in comfortable upper middle class households and you know almost universally they are not driven to make money and i look at that and i think okay maybe that is the privilege that comes with an affluent society that you know we raise kids that for which you know making money is not their their uppermost concern i've sort of made my peace with that but what i worry about is kids who have no ambition so even if you're not driven to make dollars at least you should be driven to make the world a better place and fortunately my kids you know even as they are not driven to make money do seem to be driven to make the world a better place just you know my my daughter works for an education nonprofit my son is getting a phd in middle east history at Yale um neither of them will be rich i worry more about their friends graduate from college i i hear this again and again and they you know they graduate from top universities you know harvard jail princeton and then they just drift two years traveling the world only to return to become a barista and that really concerns me not because they're not doing anything with their lives what concerns me is and i hope that you all feel the same way that there is great pleasure to be had in working hard at something that you think is important and you find challenging and you're passionate about and they're missing out and that really bothers me and i'm not sure how to inculcate that ambition other than to talk constantly at home about how wonderful it is to work hard at something that you think is important you know they don't have to go out there and want to make multimillion dollars but if they they want to you want them to go out there and want to change the world mike um so there was a two part question uh as far as getting young people interested in investing um i guess it depends how young we're talking about if they're just out of college and they still don't quite get it i don't really know what to say but um i've told this story a number of times uh it's what my mom did with me um when i was eight or nine maybe she gave me or maybe maybe suggested i bought it with some savings i don't honestly remember but it was a share of practer and gamble stock and we went to the grocery store and we um bought or not not bought but looked at all the different practer and gamble products there and there's a million right i mean a ton of things you see in your house or in your friends houses and kind of explained that anytime somebody buys one of these things now as a shareholder you're gonna earn a little money and it was so tangible so concrete and um it was a big thing for me and uh i'm like tearing up talking about it um so it was a big deal i thought it was the neatest thing in the world and we didn't talk about mutual funds or the fact that the share price goes up and down it was just you own this business a small small piece of it and when people buy the products you can make some money and that's powerful and i i thought that was so cool yeah just you know one or two more things on the spending side um you know your your kids learn from example i mean if you know you're driving a 20-year-old honda and are living in a small house uh you've done your kids a service if you're driving a beamer and living in a McMansion you probably doomed them uh and and i i had thought i had done everything that i could possibly do to make my kids frugal and i thought i pretty well succeeded until i read a column that jonathan wrote which he gave me two extra little wrinkles that i hadn't thought of and i kicked myself for not thinking of which is number one you give them all their allowance through an ATM card so they're not asking you for money and when the money is gone from the ATM account the bank account it's gone i have to wait until next time and the other one was which was even more brilliant was to give them a dollar every time they made made do with water uh at a restaurant instead of buying the soda okay we at the end of it we appreciate you giving your time in all your words of wisdom and all your investment knowledge you've each got one minute to give us a gem just something that you've learned over the years that you think is really valuable that you'd like to pass on if we could just go down the panel with christine could you start it sure um i guess the uh point i would make or one piece of wisdom is um even though a lot of folks here in fact most of you here maybe do it yourself type investors get some help as you get older get some sort of an investment buddy whether it's a trusted adult child who you think is reasonably financially savvy or whether you take the step of hiring some sort of a fee only financial advisor just get some help to keep your plan on track in case for whatever reason you're unable to do it yourself i think that's my one piece of advice yeah that's great advice and i think really most of the wisdom i've received about investing came from the bogelheads community so i don't really have much to tell this group i could probably talk longer to to other groups but you know keep it simple low cost and and focus on the long term the one thing that i missed that i wished that i realized way way too late is that the risk of owning stocks depends upon how old you are uh so that if you're very young and you're constantly adding money and you're constantly saving stocks are not risky at all because at some point you're going to wind up buying very low and you'll wind up doing very well on the other hand for the reasons that wait explained uh if you are you know someone who is is is is in the distribution phase then stocks are three mile island toxic dangerous is all heck uh and i wished that i had understood that at a much earlier age so i'm sure that you all imagine that that we who write write for you that actually is completely fallacious um we solely write for ourselves and every time i write on the topic it's because i'm thinking about it my own life and one of my hobby horses in recent years has been this notion that the distinction between working in retirement ought to disappear it's horrible separation what we should start to think about is how we can have lives where as i was mentioning earlier we can engage in activities that we think are important we're chat we find challenging we feel we're good at they were passionate about and how we can do that throughout our lives and that doesn't change when we retire the only difference is we don't have to worry about whether that work comes with a paycheck so as you approach retirement don't think about how you're going to play golf or sit on a beach or travel i mean all those are fine things to do think about what you're going to do with those years that's going to give you a sense of purpose it's going to get you out of bed in the morning and that you are going to be passionate about and will make your days feel fulfilling i would say beyond the low cost diversification keep it simple stupid whenever i violate that policy in life i i tend to regret it and that includes investing um resist those instincts of what i think is going to happen based on whatever the political environment is whatever country is going on etc and then three make sure you're not having any fun with investing if you're starting to enjoy it you're probably doing something wrong not only should it not be it should actually be painful i would love to tell you that i confidently bought stocks in 2008 to rebalance but boy it hurt like heck don't assume that what people who you think are experts are going to be wrong sometimes just a minute ago a question was directed directly to me about 401k contributions and i got it 100 wrong and jonathan jumped in fortunately and you know covered for me but that'll happen it happens in articles and major publications you'll see things about taxes or social security that just aren't right so before you make any irreversible decisions double check things um check with more than one source and similarly to flip it around sometimes you'll be the one making the mistake so double check your own conclusions right i mean if you decide something there's a good chance that that there's some information you haven't considered so again before making any big decisions that you can't switch double check both double check your own reasoning and double check whatever sources you're relying on so let's have a hand for the panel and we start back up the one o'clock one o'clock in here


Welcome back. The National Assembly has tasked the Revenue Generating Agencies of Government in Nigeria to produce three trillion, narrow annually. Now this was revealed by the Senate President Ahmed Lawan. He emphasized that they need to improve the internally generated revenue of the federal government. He said the Senate will be stiff on generating more and more revenue in order to ease borrowing. Now the Senate President urged agencies who can't meet up with the target to reach the Senate in order to get solutions that will enable them to meet the target. Also, Senator Solomon Adiola, the Chairman of the Committee on Finance, asked the federal government to minimize borrowing but to fund projects in Nigeria. We have joined in us to discuss this. Olajede, an economist and Björdung, show me a political analyst. Good evening to you gentlemen. Thanks for being part of this particular discourse. What's that with you, Bola Hon? Good evening to you. Good evening. All right, Bola Hon, over time we have talked about this issue of internally generated revenue at different fora. Right now the Senate is actually taking it very seriously and it is tasking revenue generating agencies to get about three trillion dollars to the federal government's boss annually. Some people seem to think this is like a toll order. In your opinion, do you really see this particular objective as something that is achievable, judging by the body language and of course the histories that we've had with revenue generating agencies in the country? Well, I'm glad that the National Assembly is pitching in on this. And that is because it may be new in the political discussion or in the policy generated, but it is not new to some segments of the government. For example, I am aware that the budget office of the Federation has been trying to see how they can make something like this happen. So you have revenue generating agencies of government who has not been entirely transparent with the money they're remitting to the federal office. Some of them are also having that there are legal issues with some of that because if the law says you generate revenue, but you spend revenue, you spend part of it for your own operations. Where do you draw the lines? And those are those ones that are constrained by certain legalities. We need to look at those laws and see if they are resending it for any amendment. Otherwise, if you say I can generate the money by most, I can spend it as well. I might as well generate it and spend it and give you the change. The alternative is the money that comes in goes in first, I remit it then, you give me money for the one that I will use for my operations. It's not a hand on hand, but is it possible? Yes, it is possible. We have a lot of this revenue generating agencies that are not pulling their wheels right now. Alright, let's start trying to break it down because over time, when we talk about revenue generating agencies, what comes to mind first is agency soldiers and the Nigerian customs service, the immigration, the maritime, you know, NAFDAQ and of course we have the tax collectors, the Federal Inland Revenue Service, FIRS. Let's talk about them for one minute, you know. Over time, we've been talking about how to, you know, get more people into the tax net. But what we see when it comes to policy, the federal government bring that up, different policies that would actually, you know, impose more tax on the average resident. How do we begin to, you know, know where to draw the line and meet up some sort of a balance so that we can generate, you know, this required revenue in terms of taxation for the federal government and of course not break the necks of Nigerians. One of the very important part of generating revenue from taxation is that the people who win the most, the top earners, should be made to bear their fair burden of the taxation. As it is in Nigeria today, that category of earners, they are not carrying their weight. You take the US as my favorite example, the top 1% earner in the US pay almost 40% of the entire personal income taxation in that country. How much do our own top earners, how much do they pay? If you go and ask for the tax records of some of the people that are contesting for gubernatorial, for presidential election in this country today, spending billions, ask them to let us know how much they are paying taxes for the past three years. You will be embarrassed. So the top earners are not paying is one of the problems. The second part is what you mentioned, which is bringing more people into the tax net. And I think there are a lot of effort that are going on in that space. Some of them are being done via the banks. Remember there was a time we were asked to go and update your KYC information with the banks. You know, people felt it was also going to cost some trouble and the mellowdown on that. But a good way to bring more people into that tax net is via their bank account. Another way is all this other identification that we are collecting left and right. But you see there is a bigger problem. And that bigger problem is the capacity to even collect. As we speak today, while people are saying they are overtaxed, some of these taxes in very significant amount never reach the government office. So they are collected, but they don't get to the government office. So they disappear in between the collector and the government regime. So the efficiency of collection is a very important part that we must also bring to bear if we are going to revoke the transition revenue in this country. Otherwise, that guy that comes to ask you for a radio license of $50,000 and he is given $5,000 without receipt and he goes away. I know people today that they are not access that they will pay to government and they will say there are no receipts, no revenue receipts. I don't want to point to this specific example I encountered very recently about $10,500 with no receipts, no revenue receipts. So we have to be able to collect efficiently to revoke our tax collection. Otherwise, it's the same belt, the same narrow belt of people who are in structured employment that will continue to carry the tax burden of this country because they don't have an option. It is deducted from their salary before you give them the net. So they pay automatically. All right. Thank you, Bologna. We also have a Biodo show me joining us in this course. Good evening to you, Biodo. Good evening. All right. Let's get your frank opinion concerning this issue of internally generated revenue. As it is right now, Sanity is un-tasking revenue generating them agencies to remit at least $3 trillion annually. Given what we know of these agencies and judging by the fact that over time they always want to come up with excuses, do you think that these agencies can meet up with this target and again, have they actually been very transparent when it comes to the revenues they generate to the federal government coffers? Well, there are two angles to this issue. In the first instance, we are referring to agencies of government and prostitutes. One, are they desiring the agencies we want to collect revenue? Are they desirable or are they so close to needs? I will tell you exactly where. If you go through the Orozias report, which recommended that over 200 federal government agencies are simply one go for the boys. They are duplication of existing agencies. Half of the funds which we are trying to look for now to generate revenue through the agencies are actually being used currently being expanded on this duplicity of agencies, which in any case needs to be spread. The National Assembly got its focus wrong from day one. It's not about generating new money. The first thing is first, we need to eliminate wastage within the system. Where you have duplication of agencies, where clearly it has been identified in the Orozias report, with the federal government, what they need to do is to first streamline the existing agencies. They will be saving at least 1.5 trillion naira out of the 3 trillion they are looking for. That's the first starting point before moving to charge those agencies to generate more revenue. Now, in relation to agencies which are in existence, and then they are expected to generate more revenue. We also need to get the balance right when it comes to revenue generation. One, let me give you, I'll give you two copious examples. One is customs, and the other is fiscal and urban planning development. Both are revenue generating agencies for governments in Nigeria. If you tax imported goods so much, it will get to a point that more of the goods supposed to be delivered to Nigeria will be delivered to neighboring countries, like Benayantogu, Ghana. They will benefit from a low tariff on imported goods, and Nigerians will bring them in anyway, under the Ekwa Treaty. Don't forget there's freedom of movement at goods, you know, of people and goods for three months. These goods will be brought into the country. And therefore, if you are not competitive, if you overprice yourself or you pressure the agencies to charge so much, you will end up realizing that you will not get that revenue, because yes, you get a high revenue, but you won't get enough people to pay that revenue, because they will have diverted all their goods to neighboring ports. In the case of fiscal and urban planning, if you increase the cost of approved planning, you know, to get approval for building properties, if it becomes prohibitive, what you realize is that at the end of the day, people are not able to complete their houses. Now, what happens to the land use charge, which are supposed to be collected on all the new opportunity that we know over that period of time. So it is not a state court issue to say, oh, Senate can save, we want to generate three trillion, because you cannot just decree, it is not what you can decree, it's a function of the economy. And because it's a function of the economy, they need to take account of certain variables, you know, before they can do, say what they're saying, they have to eliminate waste from the system while making efforts to generate more revenue. People tend to focus more on income tax, personal income tax, but that's not the biggest revenue generated, the generation for the country. What about the company tax? What is happening to it? We have had of companies going billions, and then later government end up settling this thing behind it closed, or we know it, but then some other cases. And then they are settling for it, you know, you know, there is huge problem within the country, not only in terms of the waste, in terms of generating revenue, even in terms of arbitration, when there's a All right, thank you. Beaudu, we'll come back to you. Let's talk to Bologna. I need to get more reactions for you. Beaudu has talked about the issue of not just generating revenue, he talked about how it is a function of the economy. He also talked about the need for the elimination of wasteages and the scrapping of redundant agencies.  Over time, looking at all of these agencies, how do you rate their capacity? I'm talking to you now, Bologna, and do you also agree with Beaudu's postulation about eliminating wasteages and, of course, not wanting to duplicate these existing agencies? Well, wasteaging governance, or in the bureaucracy, is on the expenditure side of things, mostly. After we have generated the revenue, what do we spend it on? That is where that goes to. But from the generation of the revenue units, which is where all this agency you're mentioning come into a place, the agencies themselves, we've had calls about even how they spend money. Remember when I first started on this topic, I spoke about the fact that the law enables this agency to spend money too, so they collect revenue, they spend it on their own operations. Now, if you look at some of the budgets presented by these agencies, you will see the more reason why a lot of Nigerians say there are a lot of wasteage, wasteages that are going into those expenditure. So all sort of items are budgeted for, sometimes at ridiculous prices, and we need to be able to deal with that. But that is on one side, like I said. The real areas of emphasis is collection efficiency, which is not there, as we speak. Corruption that is involved in that collection in itself, the minister showed me, he had spoken about how some things are settled out of the normal prescribed way that we're supposed to set some of these things. It has been going on, it is still going on. We also have issues of exemptions in which certain organizations will leverage on what is going on, on certain interventions to seek. All right, we seem to have lost them. Wallaha will try and reconnect with him shortly, but then will try as much as possible to do more discourse on this particular issue, because it is something that affects all of us as a people and, of course, as a nation. We'll take yet another break, and when we return, I'll be giving you my take. Now, one of the responsibilities of our leaders, especially that of the president and the governor, is to protect the lives of the people who voted Himohar into power. However, these days, some of the decisions our leaders take seem selfish. For the longest time now, the country has been grown in under the weight of insecurity. The kidnappings, killings, looting, and more have caused many Nigerians to cry out like never before. Several political and security stakeholders have called for state police, not because they want to seize power from the central government, but because they believe it would help out. It was reported that three weeks into this year 2020, almost 500 Nigerians had lost their lives. The majority of them from Niger state. Every day, we wake up to news and report about kidnappings and killings, and we think all is well. No, all is not well. At least if state police it is rejected, something even more serious should be created to ensure the security of the country receives sanity. You can continue to hold Nigerians and their safety to ransom, because you want to hold onto power. Take lessons from countries like Burkina Faso and Mali, our African neighbors. And to the issue of internally generated revenue for the government, it is one that has resounded over the years. We cannot continue to make budgetary allocations hinged on revenues from debt sources. If we keep this up, over time the nation may just be more engaged in the future of its citizens. This step taken by the National Assembly is one done in the right direction. Just how do we fund over 17.126 trillion Naira 2022 budget? Another government had taken steps to get more revenue from taxation through the finance law of 2021, but we cannot continue to overburden the citizens without commensurate returns. They should rather plan on bringing more people into the tax net. However, if we need to task revenue generating agencies to look inwards, I feel the lawmakers should be commended. And that's plus politics. I am Justin. I'll cut on your return again tomorrow. Bye for now.