Thank you so much for your comment! The counter argument that I would make is, typically, annuities make sense for individuals who have exhausted all other forms of tax-incented savings (i.e. maxing out employer retirement plans, IRAs, etc.). In your example, you are comparing using a tax-deferred vehicle (the annuity) versus a taxable investment account. In order to do a true apples-to-apples comparison, you would need to use a tax deferred vehicle such as an IRA, 401k, 403b, etc. Once you do this, the current Federal/State/Capital Gains taxes no longer come in to play. Thanks again for your comment!

Although, I am not always pro – annuity, I thinks its important for clients to understand the details behind the details.

The reason for my post is I thought this was a great show, but I’d like to highlight something I felt was missing from the show. I am a fellow CPA Financial Planner who now lives in Chicago and I would like to first say you did a great job Bo. The only thing I thought could have been highlighted more was the risk of Disability to people of our younger age. Not only how important it is to get the group stuff many employers provide, but to also talk about the risks of the group plans and their tax issues. For me, this highlights why it’s a good idea to fully look into the risk of disability. I bring it up because I was surprised to see you jump to Life Insurance before you covered disability for younger people.

Don’t want to write a novel so I’ll end it with that, but good show Bo and I know you can’t please everyone all the time. You did a great job with the time frame and subject matter covered, but I felt a small touch on Disability for your listeners who may not know the dangers of disability would have topped off the discussion.

I have to completely agree with just about everything Bo said. It is impossible to understate the importance of starting early. My wife and I started saving right after we got married and have continued to do so ever since. It was slow going at first since you are still accumulating, but one day you look at the portfolio statement and it’s hundreds of thousands of dollars. It’s an unbelievably comforting feeling knowing that you can deal with just about any problem that comes along without worrying about how you are going to pay for it.

I would also second Bo’s comment about the importance of health insurance. Things can happen to a perfectly healthy person that are completely out of their control. Last year I was bit by a bug and developed a skin infection on my foot. It ended up requiring a heavy dose of antibiotics and a short stay in the hospital. I would not be surprised if that would have cost more than $10,000 without health insurance. There is no way you could have predicted something like that happening and a simple problem like that could devastate a young person’s finances.

Keep up the good work and please let Bo do more of these types of shows. Thanks.

Also, you briefly mentioned something I always think about when people discuss the whole “If you missed 10 best days in the market…” in respect to market timing. I always think “What if you missed the 10 worst days?” You briefly mentioned that and wrote it off as unrealistic. I do agree with you that staying the course is a better choice, but do you have any numbers on what returns would be if you missed the bad days?

Love the podcast. I’m a little confussed on the debt to gdp numbers. I just saw a cnbc slide show on the biggest debtor nations which gives very different numbers. Here is the link http://www.cnbc.com/id/30308959/?slide=1
According to this list, the US is #20 on the list with a debt to gdp of 96.5%. Ireland is #1 with a debt to gdp ratio of a whopping 1312%. Maybe I’m missing something simple. What do you think?

Gerry

David

1. Know what you want. – I would agree with this. Go around and test drive and check out the different models and see what you like and don’t like.

2. Once you know what you want you can use the web to find all of the dealerships that sell the type of car you want. For example I purchased a Honda Accord and I obtained the Name and FAX numbers for all the dealerships that I was willing to drive – I figured I could drive up to 200 miles for a deal.

3. I sent a FAX to all of the dealerships telling them the make and model that I wanted down to the floor mats. I directed them to send their price (that being a drive off the lot price to include any dealer/handling fees) to a email address. Once I got replies from all of them, I responded to all of thanking them for their prices but that I had obtained a lower price and telling them what I had been bid. A couple responded back with even lower prices.

4. I took the lowest price and since I am a AAA member I called their car buying service. I understand that there are warehouse clubs with the same service that you can check out. He gave me a price and when I told him I had already beat that price he did some homework and was able to beat it by $50. Not much but everything helps. AAA also has a service where you can pick up the car from the AAA office rather than the dealership.

I have done this FAX pricing a couple of times, I find that these often get sent to the fleet manager and that is where you are going to get the best price. I came across the site http://www.fightingchance.com/ and he wrote a book that is out of print but I found it at my local library – Car buyer’s and leaser’s negotiating bible W. James Bragg ISBN 0375720677 where he talks about what he calls the FAX attack. Doing about the same thing as what I did. I think that the book is out of print but check your library.

Using the FAX and email allows for you to negotiate without emotional involvement. It also eliminates the annoying phone calls. I agree that you should have your financing lined up before you go. I had an interest rate from my credit union but I choose the dealer financing because at the time Honda was doing a lower interest rate special.

From time to time I stop at a dealership lot but I really get annoyed at the games that they play. I like being able to stand back and just let them bid on the price that they are going to sell me the car for. It puts me in control not them.

Have fun.

David

Neuroeconomics is like investing dessert for us investor geek types. Give it a shot.

Nick

I would disagree a little about the “don’t negotiate on-site” recommendation. For many people that probably is good advice, they will get too emotionally involved. For those of us who can be cold and calculating and are willing to spend the time, doing it on-site has the benefit of them not wanting to see you leave. If you do it on-site and make it take a long time, you have then also tied up so much of their time (that they weren’t using to sell cars to other customers) that they are going to be more likely to give you what you want then to see you leave and have wasted a few hours of their time. On the phone, you can ask for what you want, have them say “no” and be done with the whole thing in 15 minutes. They don’t have as much invested either so it’s easier to let you go.

My wife and I once spent almost an entire day at a dealership waiting for them to give us what we wanted. We even had to take a break for lunch. But in the end, we got what we wanted by simply sitting in the sales office and making them go through the back and forth game until they gave in. We were non-emotional and very patient. After several hours it was worth it to them to not see us walk out and go home without a car. Granted, that wasted an entire day of our time too, but if you keep your car a long time, then giving up one day of your life every 10 years in order to save thousands of dollars isn’t a bad trade off.

The extent that some people will go to save what amounts to a tiny amount of money is amazing. You mention the guy who takes the red pepper flakes from the pizza place. He is expending so much time and effort doing that when an entire jar of them would cost you a couple of dollars and last for years. Same thing with the person who took huge amounts of napkins from the fast food place. A giant bundle of store brand napkins costs a few bucks and would last ages.

As you mention some of the activities really do get close to outright theft. Regardless, taking far more than you need and will use (for example all the napkins), just has the effect of raising prices for everyone, which of course makes the tightwads’ job even harder. So in one sense they are actually hurting themselves in the long run.

True story of a real tightwad. There is a woman in our neighborhood who had a garage sale a few years ago and was trying to sell a huge number of ketchup and other condiment packets she had taken from various Atlantic City casinos. It’s one thing to take extras and actually use them yourself later, but to try to sell them for a profit? It boggles the mind how someone would try to justify that behavior to themselves.

I agree! This is a very great post.. I have learned a lot with this. Thanks!

Where is that article about real estate?

I’m interested in starting to buy rental property to rent out to earn income.

Can you provide that article? I would love to read it.

Thanks.