Retirement Planning with Banzai

Today we are once again joined by Alex Kay, CEO at Banzai, a financial education partner with First United. Alex discusses the topic of retirement planning and how you can use helpful tools like Banzai to be better prepared for retirement. Listen in for more and find these powerful financial education tools at MyBank.com/education

Transcript

Announcer: Welcome to the “What Matters Most” podcast, presented by First United Bank & Trust. That’s MyBank. Visit us today at mybank.com.

Eric: Hello, and welcome to “What Matters Most,” the podcast all about finances, community, savings, and security for you, your family, and your business. This podcast is brought to you by the helpful folks at MyBank, First United Bank & Trust. I am your host, Eric Nutter. And in today’s episode, “What Matters Most” is retirement and specifically financial education surrounding retirement. And for this helpful discussion, I am thankful to be once again joined remotely today by Morgan Vandagriff, CEO at Banzai, a financial education partner with First United. Morgan, how are you doing today?

Morgan: I’m doing great. It’s good to be back on my favorite personal finance podcast, Eric.

Eric: Well, yeah. I try to mentally keep track of who has been a multi-episode guest, and you’re up there. You’re in the upper echelon of multi-visits. So I really appreciate you and helping me and helping our audience to better understand the tools that we have available through Banzai on our website at mybank.com/education. And today we’re talking a little bit about retirement. And why don’t you give us…set the stage for us? Why are we talking about retirement? What’s the situation in this country as it relates to retirement?

Morgan: We’re talking about retirement, Eric, because, you know, over the last 50 years in the United States, we’ve seen a really profound societal shift that I don’t think gets enough discussion. You know, depending on the age of your listeners, you know, either their parents or their grandparents retired into a completely different environment than those of us in the workforce today will encounter. They may have retired into a world where social security took care of a larger percentage of their needs than it’s expected to for those that are of working age today.

But most significantly, a really large percentage of working Americans in earlier generations, you know, had access to a lifetime pension when they retired, which basically meant, and I’m not trying to overplay it, but for many people, retirement was taken care of. You know, you went to work, you stayed at the same company for your entire career. And when you got out, you know, when you hit retirement age, that company thanked you maybe with a gold watch, if you were lucky but also with a lifetime of payments. You couldn’t outlive them. They might not have been exceptionally generous but they were, you know, often, typically enough to live on.

And so it was just a part of, you know, personal finance that earlier generations didn’t have to give much thought to. And now you go to, you know, the world that we live in today, and that arrangement that I just described is very rare. Those that still have a pension recognize, I think, just how lucky they are to have one. And then there’s the rest of us who are responsible for a do-it-yourself retirement system. And that doesn’t mean it’s undoable. It absolutely can be done but it does require a lot more thinking and a lot more engagement than, you know, we asked earlier generations of American workers to give to it.

Eric: Right. Yeah, to your point, I mean, pensions are all but a thing of the past. And then even for a lot of people, they think of social security as something that won’t be there when I come to retirement age.

Morgan: Yeah, that’s right. It’s a real concern. And frankly, you know, there are some arguments to be made that the concern that social security is going completely broke, that that’s overstated. It seems likely that there will be some money there but it is a good open question as to how much, you know, and it’s probably not the right wall to lean your ladder on. You don’t want to plan. Unless you’re expecting to live in extremely ascetic existence, you know, that would only be possible in certain areas of the country, I would not plan on social security answering all of your…you know, being [inaudible 00:04:37]. That’s fair to say.

Eric: Right. Like, how much do you like ramen noodles is the question.

Morgan: Yeah. How much do you like ramen noodles and how much are you willing to move to, you know, an extremely low-cost corner of the nation and what type of housing are you willing, you know, to be in. You know, it’s all questions you need to consider before deciding not to save for retirement.

Eric: Right. Well, and so what I’m suspecting this is leading us to is the question of how early is it…or is it ever too early to be thinking about retirement? And I’m guessing the answer is, nope. We should be thinking about it basically as soon as you join the workforce.

Morgan: Yes. You should be. I recently had the opportunity to speak virtually to a high school investment club in suburban Chicago. And they were asking me questions about it. I think the right approach because it was driven home to me again, and speaking to these students who, you know, ranged from 15 to 18 years of age, and retirement is just impossibly far away. I mean, you know, think about yourself at that age, Eric. And, you know, it’s a time of where you feel like you’re in an eternal youth. But the benefits of starting to save for retirement, you know, with your first job, they’re just indisputable.

I mean, you know, you see lots of, you know, graphs saying, like, “If you start saving for retirement at age 30, you’ll have this much more money than if you wait until age 40.” Well, if you want to see a really impressive graph, take a look at what happens if you start saving for retirement at 21 versus 30.

Eric: Right, exponential growth.

Morgan: It really is. I mean, it’s astonishing. And this is not meant to discourage or depress any of your, you know, listeners who have not saved for retirement that are above 21 years old. You know, you can have a perfectly happy and comfortable retirement if you’re starting a little bit later but you sure have a leg up the earlier you start. I haven’t fully worked this out in my mind but I think that a real important way to encourage those who are quite young to do it is to draw attention away from the fact that it’s for retirement and just tell them that, you know, they are saving in a really special type of account. And it’s special because, you know, the Congress has issued special tax regulations surrounding it.

And, you know, if they’re enjoying day trading on their Robinhood app, you know, using a regular taxable account and they saw that tax bill at the end of the year, well, they’re not going to get that when they put money into this special kind of account that’s a 401(k) or an IRA. And, you know, there are some guardrails in place to discourage them, of course, from withdrawing that early. You know, but I think if it’s…you know, instead of saying, “You’ve got to deprive yourself today so that you’ll have money, you know, decades down the road at this time that you can’t even fathom,” you know, just indicate like this is the best way to save.

Speaking of 401(k)s, so many employers, including Banzai, you know, provide an employer match. You know, and those comes in all different kinds of shapes and sizes. At Banzai we match 100% of the employee contributions up to 5% of their salary. So basically, you know, when you pitch it as you are leaving free money on the table if you don’t put this, you know, this money aside for retirement, in my experience, that’s been a lot more effective as a way to encourage them to sign up than, you know, speaking to them about what life’s going to be like in their 70s because they just can’t relate. And I don’t blame them.

It’s just not how their brains are wired. You know, you’re 21 years old, your grandfather, you know, is in their 70s potentially, you know. You know, it seems that it was a lifetime ago, literally, you know, when they were your age. And so I’m supportive of like, you know, any effort to increase foresight and to help people recognize, “Hey, yes, you will retire someday.” But I think there are also some nice shortcuts that we can use. Like point out the company match, and, you know, “Hey, if you contribute $100 a paycheck or however much it might be, you know, and your company is going to give you that same amount of money but only if you participate in this,” that tends to get people…you know, get their notice.

Eric: Exactly. It’s optimistic to me, or I see it optimistically that…because you mentioned some kids putting their money into a Robinhood, you know, day trading stocks, I cannot imagine what that would have looked like when I was a teenager. Like the idea that that would have been a thing where I would have, you know, went and mowed some grass and then threw money into stocks, wasn’t even a thing. So the fact that kids are even that engaged in their finances, that they’re hustling, they’re trying to day trade, that they do have some engagement with finances to the extent that, you know, they should be open to these conversations and thinking further out than just the right now and thinking about retirement.

Morgan: That’s right. Yeah, that’s right. I mean, we’re talking about retirement, Eric, but I’m strongly of the camp that, you know, this remarkable phenomenon…you know, we’re speaking in early May 2021, the remarkable phenomenon that we are seeing, you know, of increased retail participation in the stock market, there are definitely…you know, it’s definitely not all great but I think it is a net positive. And I think, you know, speaking to the topic of our conversation today, I think it’s a net positive for people’s attitude towards retirement savings.

I really hope…unfortunately, I’m sure somebody is but, you know, I hope not too many folks are, you know, day trading their IRA balances on Robinhood.

Eric: Me too.

Morgan: But to the extent that this is a way to get young people involved in and engaged in like the markets that they will need to be, you know, participating in to ensure that they can retire, I am all for it.

Eric: Exactly.

Morgan: You know, there are definitely dark sides to this. There are.

Eric: Sure. And as there are with everything.

Morgan: And for some people, this is not going to end well. But, you know, the less mysterious financial markets are, the more likely it is that people are going to choose to engage with them on their own, which is exactly what we need them to do.

Eric: Exactly.

Morgan: You know, as the CEO of Banzai, we’ve got 50 some odd employees. You know, the particular demographic of our employee base right now is…skews fairly young. And, you know, we’re a financial education company, so I feel personally responsible to have our employees taking care of their retirement. And it’s interesting to see what motivations help them to do that and what motivations don’t and, you know, the excitement that some of them feel about the theme of investing right now, it’s helping, it’s not hurting.

Eric: Mm-hmm, yeah. So on the Banzai tool, which you can find at mybank.com/education, there’s a whole topic related to retirement and there’s tons and tons of calculators, coaching courses, educational articles and videos, things like that. Do you have anything that you’d like to spotlight or any topics that you think are of particular interest to our listeners?

Morgan: I love the calculators and the coaches that focus on illustrating how much you can have, you know, if you start saving now because the fact of the matter is, you know, if you’re any more than five minutes away from retirement, it makes…you know, regardless of how much you have saved, if you’re not currently contributing towards a retirement savings plan of some sort, it makes sense to start. And starting today, you know, statistically speaking is better than starting tomorrow. And that’s not a prediction of where the market’s going, Eric. I’m just talking about, you know, statistically, at large, you know, this probably doesn’t hold as much power, you know, in an era of such low-interest rates, but I believe it was Einstein himself who was said to have marveled at the power of compound interest.

Eric: Absolutely.

Morgan: And regardless of where you are, you know, young, or middle-aged, or, you know, even in the latter part of your career, life is going to be so much better if you start now. And so we’ve got resources available through, you know, mybank.com/education, as you mentioned, that we’ve put together and are making available through our partnership with First United Bank & Trust that, you know, can help you see that. If you’re 50 years old and you don’t have any money saved for retirement, and you feel so depressed when you hear our conversations, you know, about the power of starting when you’re 21, that’s understandable.

But like go onto the website and go into some of the retirement calculators and compare, you know, what you will have if you start saving now versus what you’ll have if you kick the can down the road another few years. And I think you’re going to be, you know, pleasantly surprised and hopefully, you know, properly motivated to get started now. And so that’s kind of what I’d like to highlight. I mean, as you said, there are lots of resources. We hope all of them are helpful to people.

And I hope that, you know, the type of listener who has subscribed to a personal finance podcast like this one, you know, you guys, this might be preaching to the choir but, you know, if you’re not currently saving, you know, please go check those resources out. I think they’ll give you all the reason you could ever hope to have to, you know, to fill out that form at your employer or to, you know, go online to the broker of your choice and open up an IRA, you know, or even to go in and speak with an advisor at the bank about your options. You know, the point is to do it today. Don’t delay further in, and we’ve got tools to help you recognize that.

Eric: Absolutely. Well, and it might even…for some of our younger listeners, it may even inform, you know, looking at the benefits list when you’re looking for a job because if… You know, we mentioned some of the things that are more rare now, you may want to look at those and understand the full scope of the benefits you’re getting when you’re applying for a job at a particular place to see how that’s going to affect you long-term in retirement.

Morgan: Yes, that’s exactly right. You know, and there are, by the way, I mean, there are still, you know, a few ever-shrinking categories of businesses that will provide you with a pension. And I do think that sometimes when they’re analyzing their job prospects, folks, you know, young people especially, you know, do not…

Eric: They don’t think about it, right.

Morgan: …recognize just how remarkable that is but, you know, operating under the assumption that that’s not an option, yes, by all means. I mean, you know, companies aren’t required under the law in the United States currently to, you know, offer any sort of retirement plan. Now, fortunately, most do. They feel that it gives them a competitive advantage but the details and, you know, the fine print of that retirement plan, they vary immensely. And that’s actually a really good point, Eric. My advice to my children as they get older and start considering their job prospects is going to weigh very heavily, say, yeah, look at if they give you a free lunch in the company cafeteria, that’s great, you know, if they give you three and a half weeks of vacation versus two, that’s wonderful, but to me, you know, a well-funded retirement plan like beats either of those two things, you know, hands down, combined.

Eric: Exactly, yeah. And to your point, it’s hard, especially younger, when you’re younger to fathom the enormity of that or the impact of that over a longer period of time. And so using some of these calculators that can show that to you can be immensely beneficial because you can kind of see it and feel what that’s going to do to you in retirement age.

Morgan: Yeah. And can I actually toss something else out there, Eric, while we’re talking about this?

Eric: Sure.

Morgan: So, you know, I think more than most CEOs, and it’s not…this isn’t to say I’m special. It’s just the nature of our company. We are a financial education. So more than most CEOs, I take kind of a personal interest in whether all of our employees are participating in the 401(k). And, you know, as everybody knows, at least I hope they know, you know, it’s not mandatory. We can’t make them participate. That’s not how the world works. And, you know, so I kind of take it as a personal affront and I’m even a little ashamed to admit it on a podcast that we have employees, invariably young employees, you know, that…and I’m happy to say not very many but we have employees who do not participate in our 401(k).

And there are, you know, notwithstanding our literal pleading, you know, with them to sign up. And, you know, we talked a little bit more about, you know, this retail investing phenomenon, making people more confident to invest in markets. And that’s great but not everybody feels that. And kind of the message I’d like to share is that, you know, in any retirement plan worth its salt, there’s going to be, you know, more conservative investing options.

Again, I can’t speak to every single employer but generally speaking, there’s…regardless of how you feel about investing, if you’re convinced that the market’s going to zero tomorrow in most well-structured and retirement plans, there should still be some option where you can safely put your money away, even in that cited circumstance. So sometimes people, you know, will not want to participate in the 401(k) because they say, “Well, I don’t want to invest. This is all some sort of scam, you know.” But even if that’s really how you feel, there are still options you can save for retirement that are really important, you know, and that’s really important for you to do where you will not lose all your money.

The way that we deal with retirement in America is far from perfect. There’s so many better ways so, you know, things that we could do to improve the approach. But, you know, there are ways you can save for retirement, I promise you, you know, where your money’s not going to get, you know, stolen or go to zero. And that’s just not a good reason. And I hear it far too often from people. They don’t trust the system. And, you know, you can take a lot of risks with your retirement savings but you don’t have to.

Eric: Right. No, that’s very well said.

Morgan: I’ll get off my soapbox there but I feel, you know…

Eric: No, I think it’s a great message. And I think to kind of pair with that, you know, whether you’re trusting or untrusting of the system, the tools like Banzai offers that you can find, as we mentioned several times, mybank.com/education, you can do some of this research on your own. You can kind of look into it yourself but you also can reach out to advisors. We have advisors at First United that you can reach out to. You can go find a local advisor that can help talk you through the options you have so that you’re not…you don’t feel alone in it. And they can also find what matches your risk tolerance so that you’re not just going at it kind of on your own and feeling like you have to make all these major decisions for your life. These advisors can really, you know, help steer your finances so that you’re prepared for retirement in a better way.

Morgan: Yeah, that’s exactly right. And you know, a good advisor can make all the difference, and Banzai partners, you know, with more than 800 different community financial institutions. You know, for a variety of reasons, we don’t partner with big…with the really big financial names that you’ve heard of in the United States. And one of them is that we just find that, you know, the smaller, you know, community-based banks like First United Bank & Trust are more aligned with, you know…their value system and the way they see the world is more aligned with the way we see the world than some of the big institutions.

And so I would echo what you just said, Eric. If this is something that is overwhelming… You know, and, you know, we’ve got all these calculators online and so on that are hopefully helpful, but for so many people, like having somebody to kind of hold their hand through the process, and somebody they know is looking out for their best interests, like an advisor at your bank. You know, a lot of people just can’t get, you know, their retirement savings where they want them to be without that kind of help. And so if that is you, you know, listener, please, you know, wherever you are, go find that type of assistance because in a lot of cases, there’s just no substituting for that human touch and that human expertise.

Eric: Exactly, exactly. Morgan Vandagriff, CEO at Banzai, thank you again so much for joining me today. I really appreciate your thoughts, your insights, and your advice on this topic of retirement.

Morgan: Eric, thank you. I really enjoy being on here and it’s a topic I’m passionate about, as you can tell. So thank you.

Eric: Absolutely. Yeah. I look forward to having you again. That brings us to the end of our show. You can always find more episodes by visiting mybank.com/podcast or find us on your favorite podcast app. You can also leave feedback, ask questions, or request a topic for us to discuss by sending an email to podcast@mybank.com. Thanks for listening. We’ll be back next week with more helpful content but until then, we wish you the best in focusing on what matters most to you.

Woman 1: Do I have enough money to retire?

Man 1: Is my family protected if something happens to me?

Woman 2: Is my plan getting me where I’m going?

Child: Are you ready if I want to be a doctor?

Announcer: When it comes to money, we all have questions. That’s why First United Wealth Management has a team of experts ready to listen and provide solutions. First United Wealth Management.

Man 2: First United, my bank for life.

Announcer: Member FDIC.

Eric: Equal housing lender. This recording is for informational purposes only. Any references in this recording to any person, organization, product, or service does not constitute or imply the endorsement, recommendation or affiliation with First United Bank & Trust. First United is not responsible for your use of the information mentioned within this podcast. Please consult legal or tax professionals for counsel as needed.

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