← The Clark Howard Podcast
The Clark Howard Podcast
10.06.25 Calculating Retirement / Housing Innovations
00:36:01
Calculating Retirement / Housing Innovations
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- [00:00]
Podcast Sponsor/Announcer
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- [00:38]
Clark Howard
It'S great to have you here on the Clark Howard Show. You know, our mission is to serve you with advice and information that empowers you so you make better financial decisions in your life. Today's Show A recent TikTok video claimed to show how teenagers could set themselves up to have $4 million in retirement with a little help from their parents in their early 20s, late teens, early 20s. But how can you actually tell if that's really something you should be focusing on? How do you get to where you have enough money saved for retirement? We have a new tool that can help also today, something I've always been obsessed with. I mean this is an always is modernizing the way we build houses in the United States. And there are some very exciting developments I want to share with you. I think this extreme housing shortage in the United States. We just need to be smarter and get us to where we can build houses quicker, better and more affordably the technologies they are already. Talk about that later. Okay, so TikTok video, sometimes they just catch fire and I love that this one did. It's done by a young real estate investor who ran the numbers, did some assumptions and came up with this thing on this video that you can have $4 million if you start doing certain things as a teenager. What are those things? Well, you work part time while you're in high school, you save the money you make working part time. And I'm really abbreviating what the video is. And then don't go to college, get a job, stay under your parents roof and save $25,000 a year being subsidized by your parents by living in their house, eating their food and get to where you put enough money aside that that money compounded over the years will become $4 million by the time you're at retirement age. If you take the assumptions in the TikTok video and you accept that the return on the money is going to be 10% per year invested in index funds or target retirement funds, that the math does work out if you jump through every hoop that he shows you in the TikTok video. And it's been such an attention getter and it requires that parents subsidize your life essentially so that you can do this and you have to deprive yourself of pretty much everything so that you have the 25,000 to go in. Okay, so that's an extreme case, but it is true. And I had a math formula I came up with decades ago and it was, it was when there was a show on TV called who Wants to be a Millionaire? I think. Is that what it's called? And so I called this thing who Wants to be a Millionaire. It was about how saving a relatively small sum by a teenager getting a job when they were 16 and for seven years saving so many thousand dollars from the job, not that many thousand, that based on the same 10% assumption as the TikTok video, that you'd end up a millionaire never saving another penny simply by investing those seven years of money. I remember it was $2,000 a year, I'm trying to remember. And that was a really popular thing with people, the whole idea you too can be a millionaire. And so the idea is all attention getting, but the facts are the facts that if you can get a kid first working because so many kids don't get jobs anymore as teenagers, if you can get a kid working when they're a teen, when they don't have all the expenses they're going to have as an adult. And saving money today would be money going straight into a Roth IRA and put money aside as a teenager and as a young 20 something. Yes, you can easily end up with millions of dollars way down the road. Even if you never save another penny for retirement past your early 20s, it's a fact. The hard part, getting people in that mindset, because most people really don't historically think about focusing on saving for retirement till their 40th birthday. But the beauty of doing so younger is you get two or three more times that your money doubles in value. And that time of money compounding over time in investments is what creates the long term wealth. So yes, it's true. And I've got a new investment growth calculator that's far more sophisticated than the old thing I did that was a static analysis. Put in this much money for this long for seven years and you'll end up with the million dollars down the road. Now we've got an investment growth calculator for your individual situation@clark.com to see how much wealth you can create. And let me say something to you talking about saving money as a teen and let's say you're 37 and you've never saved a penny. That's just the fact. And at 37, if that's when you start, that's when you start. And that's when you start the process of building financial security by saving money moving forward. Because the whole point of this investment growth calculator is to see wherever you are right now in your life, whatever resources you can afford to put in, what kind of financial security will that create for you later in your life? And how long do you need to do that to create that financial security? I started this won't shock anybody. I started an IRA when I was a teenager in the Wayback Machine and it's just because I was always that way about living on less than what I make. And anybody who's heard my life story knows about my dad losing his job when I was a teenager and it turned out that my parents had not done a good job saving money. And that so impacted me and affected from when I was a teen how I handled money the rest of my life.
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Caller/Listener
And that calculator is called our Investment growth calculator@clark.com Jeff in Minnesota wrote in with this one My wife and I are planning a vacation to Kauai and have used several of your money saving strategies. We were flexible on dates, tracked fares with Google flights, and booked our preferred flights when prices dropped. About 10 weeks prior to our desired dates. I reserved a rental car through Costco Travel right after booking flights and recheck often for price drops. Here's where I'd love your advice. After picking our dates, we eventually decided on a specific vacation rental. The unit was listed on both Airbnb and Vrbo, but Vrbo was $500 cheaper, so I proceeded to complete the transaction there. During the booking checkout process, I noticed the rental contract came from a local property manager. A quick Google search showed I could book directly with them for $380 less than VRBO, about 10% savings. Reviews were excellent on both Airbnb and VRBO platforms, and since you've said Airbnb and VRBO don't offer much help when things go wrong, I booked directly to save the money. Did I take on too much risk or was this a savvy move? Or to put it another way, am I a true Clarky or do I stink?
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Clark Howard
There is a risk involved with this. Let Me say something that in Hawaii, more than most anywhere else, it is common that there are absentee owner landlords of condominiums all over the Hawaiian Islands, principally owned by people in California, Oregon and Washington State. It's like a big thing that people in those three states heavily have bought investment properties in Hawaii over the decades. And so there's a whole industry of meaningfully sized management firms in the Hawaiian Islands that manage rental properties for these owners. And they handle the, the cleaning, the maintenance, the repairs. They act as kind of like the landlord representative. If you have a problem, it's where you go get your keys. So they're kind of one stop shops for both sides of the transaction, the person staying in the property short term and the people who own it. All right, so the problem is if you don't pay through, as long as you're certain you're actually doing your deal with the actual management company, because there's a whole different thing where people spoof. Being the management company, you should be okay. But you give up the protection of your money that you have through the Airbnb platform or vrbo, protecting you from a spoof, from a scam. As long as you verify it, it really is who you say it is. There's a very low risk way to save some of the money.
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Caller/Listener
All right, Dave in Connecticut says so. True Clarkey.
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Clark Howard
That would make you a true clarky. Although years and years ago when I rented a condo, I did get a spoof email from pretending to be the landlord and it was not the landlord offering me a discount if I did it through them. And there were certain telltale signs that I was able to tell it wasn't real. Today it's easier for you to validate that you are dealing with the actual management company in Kauai.
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Caller/Listener
Well, you're a real clarky, Jeff. And all the other steps you took too. Dave in Connecticut says, I never have anyone drive my car, but there are instances where sometimes it's unavoidable. When shopping for a car with a trading car, a dealer will take your trading car for a test ride. If during the short test ride, something mechanical happens or the salesperson gets into an accident, who is responsible for the repairs or. Or the accident, Especially if the salesperson caused it, does it all come back to the car owner's insurance? Is it a good idea to ask to go on the ride, the test ride, with your trade in, they're not.
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Clark Howard
Going to let you go on the test ride. Typically, a lot of dealers, because of this liability risk, no Longer take a vehicle on a test ride, they come over and they're looking for certain things. The, you know, used car appraiser buyer should be experienced enough that he or she is evaluating the vehicle without taking it on a ride. But if they do, there's dual risk here. Yes, you potentially end up with a problem where the insurance is following the car and your own insurance may have to get involved. But also the dealer has insurance for the liability risk if while a vehicle is in their care, they cause a problem. Now you brought up a really interesting thing though that would deal with the damage to the car. It might deal with some of the liability if they injure somebody while they're in your vehicle. But you being able to prove that the used car appraiser who caused the mechanical problem for your vehicle while they were taking it on a test drive, I don't know how you'd ever prove that.
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Caller/Listener
No. Kate in Oklahoma wants to know what brand of dash camera you recommend.
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Clark Howard
So I recommend that whatever deal is available on a dash cam with the, with the capabilities you want. Most of us with a dash cam just want simple video in the event we're in an accident and somebody tries to claim that an accident was your fault, not theirs. I told the story on the podcast before in YouTube show where Krista was in a wreck and the at fault person tried to say it was her fault. Police officer watched the video she had in her built in dash cam which because she drives a Tesla, there's a built in video system. The officer saw the video and told the other person, told the guy, hey, I don't know what you're talking about. I just watched what happened. You're the guilty party, you're the at fault. So if you're just looking for a simple dash cam, 20 bucks, buying it online, maybe 25 bucks on Amazon, on Walmart.com on eBay, wherever you want to buy one. If you're looking for one that's really sophisticated, let's say you are an Uber Lyft driver, you want one that's recording video of your passengers as well as what's going on outside. Those get to be pricier. Costco tends to sell a very good one most of the time that shoots the inside and outside. And they can become very sophisticated, shooting at multiple angles, having more than one in a vehicle. It all depends how much you're looking for. But if you're just looking for a basic dash cam, you don't need to do a lot of research. You just buy one for like 20 bucks. They all record clear enough video to prove generally who's going to be at fault in an accident. Coming up ahead, I promised about six months ago that I was going to go to see a housing development that was built all in components, trucked into a site and lifted in place in Brooklyn. Well, I did it. I'm going to tell you what I learned, what I saw, and also what else is going on that we're going to be able to make housing more more affordably and make it quicker and better than what we're generally doing in the US right now. I believe it through my heart, my soul, my head, you name it, that we're on the cusp of a new era that's going to deal with our housing affordability in the U.S. did you.
- [16:39]
Don McDonald
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- [17:38]
Podcast Sponsor/Announcer
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- [19:57]
Clark Howard
I had read a couple of stories about an apartment complex geared towards people 55 plus that was being built in Brooklyn. I'm just fascinated with this as a method of building. It cut the building time in half and reduced the building cost by 30%. And so I said, you know, next time I'm in New York, I'm going to go see this. So I didn't. And then the time after that I was in New York, I didn't. And then the next time I did, I took two subway trains, a bus and then walked the rest of the way to this new apartment development in Brooklyn. It was so interesting because it looked just like any other new construction apartment building. We'll pop some pictures up on our show notes and what's funny is that the apartment complex still they haven't completed the landscaping but it's all occupied, people living there. And I'm wandering around it and this man comes out of the building and he says, excuse me, can I help you? Thought it was some kind of intruder or something. I didn't go in it, I was just outside. And I explained to him why I was there. And he turned out to be the property manager. And I said, was it really interesting watching it being built? And he said, I wasn't here then, I've only been here for three months. I said, have you noticed problems with the units because. And I explained to him how it was built and he's suddenly all interested. He had no idea that this building he managed was built in a factory truck to the site, lifted in components room by room by crane and put in place. And he was like, wow, nobody ever told me this. It was so unremarkably normal. And all they did, it's called Bethany Terraces or something, all they did was they built it pre plumb, pre wired, pre did the kitchens, all that. They put them, the components on trucks, they lifted into place, hook them together. It's far more energy efficient and it doesn't look like a run of the mill thing. I showed my wife Lane, who was smart enough not to go on two subways, a bus and a walk by the way it was raining too. She was smart enough not to go. She said, that's really ugly. I said, you think it's ugly? She did, but I thought it was fine the outside and I only got to see the lobby inside. He, he wouldn't take me and show me apartments. But anyway, the reason I went is I believe so much that we have continued in America to do what we do and how we do it. And I'm really excited about a startup called Reframe, Reframe Systems, which is using micro factories and they have developed software I've read and Fast Company, they've developed software that they're able to build two local code. I've talked in the past about how crazy it is in the United States that we're the only developed country that doesn't have a national building code. And so it's hard to get economies of scale doing mass production when you have to comply with local building codes. Well, Reframe said we're not going to change the political environment about the lunacy of building codes in the United States. So we're going to write software that allows us to conform automatically and have our robots program is they build to conform to local building codes and they build these micro plants to be able to build inside. They're able to build with a fraction of the number of people is normal and then they do the thing where they truck to the site like the apartments I saw in Brooklyn, lower the cost, build them more energy efficiently and potentially build structures that are better and their technology is based on being able to do very creative architecture. This is just one thing of the kind of things we should be doing. A lot of people who are still talking about how much better and more affordably you can build using concrete to do so. I don't know if you've seen any of the stories about the new method of concrete that reduces energy costs of a home by up to 90% for heating and cooling. There's so many things we can do. Even the new paints that are being experimented with that on an existing house can reduce the energy needed for heating and cooling by an enormous percent. So, you know, I believe so much that we can tackle the affordability and availability of houses in the United States by modernizing how we do it. It doesn't solve everything, but it can solve a big part of it. And it's just hard because we alone of all developed countries have built homes, buy Roth the way we do stick built on site with subs coming in and this sub didn't show up, so the next sub can't come till that one shows up and all that. The inefficiency of how we do so and the beauty of the newer methods of building homes is they deal with the shortage of construction workers that we have in the United States that is so severe. So my belief is that this is an industry just ripe for modernizing and we just need to get going with it.
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Caller/Listener
Okay, this first question actually kind of goes back to the top of the hour when you were talking about saving for retirement. Donna in North Carolina says, I have a good problem. My 20 year old son has been saving his income while living at home and taking classes online from a state accredited college. He plans on attending a university for the next two years to obtain a four year degree in computer engineering. Recently he expressed interest in investing his savings. That part which will not be used for college. And we'd like to help guide him. I thought asking you for opinions would be a good place to start. Right now he has it all in a savings account at a local bank. No money market or investment accounts, et cetera. My husband and I have been suggesting he diversify, but we're not sure what would be best for him at such a young age. We know some investments are better for a young person versus an older person. Our son is a game developer for one of the largest gaming and creation platforms and has been saving his income for four years. He is. Well, he has well over $100,000 to quote unquote, invest. Where should he begin?
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Clark Howard
My goodness, my goodness. Wait, how old? 20. 20.
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Caller/Listener
20.
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Clark Howard
Okay, Donna. Wow. Okay, first things first. This year, in each year moving forward, I want him to take from his earnings the as has to be current year earnings as a game developer. Seven grand Roth IRA right away. Roth IRA means money that will be set aside by your son that will grow for him the next 45 years. He may not need to work that long. Puts that money into a target retirement fund for the last year by maybe 2065, 2070, something like that. Put the money in the target retirement fund. Do it at one of the ultra low cost companies, Vanguard Fidelity. Just start with those two. That's fine. Either of those. The rest of the money is very, very obviously conservatively put aside. It should only be in a parking space. Only a part of it should be in a parking space. If your son has intermediate longer term goals, let's say he's saving so much money, he finishes, gets his engineering degree, he gets his job, he wants to buy a home. He's already in a position with the money. He's got to be able to put a substantial down payment and buy a home. I mean he is setting himself up with his industrious work habits, incredible savings habits. But I really like for him to start learning about basic investing. Basic investing, which is where you put money in. Absolutely without doubt the Roth IRA automatic for him every year. Beyond that, when he gets a job 401k one of he's got that savings mentality, save the max the employer allows in the 401k going again into the target retirement fund in the Roth version of the 401k. Other than that, he can hold on to money based on the goals he has. If it is for in his 20s buying a home, it's okay if he leaves the money in savings for that. But if it's longer term beyond what he can save in a Roth save in a 401k, he could do an investment account and learn how simple index funds work. That's where Fidelity would be a really good place to look at their zero funds. Fidelity zero funds as a way to build wealth for purposes other than way down the road for retirement for things 10 or more years down the road. The fact that he's making money living on less than what he makes and has built up wealth, that's what gives him all the options, all the choices.
- [30:35]
Caller/Listener
Karen in Virginia says, I'd like to know your opinion about the very best way for small landlords to receive rent payments. Everyone wants to pay with payment apps, but those have a lot of risks to. Checks in the mail have different risks. If we're going to accept payment electronically, we'd prefer to be on a desktop computer and not on a smartphone. Giving them bank account numbers so they can direct deposit seems risky too. So what's a small landlord to do?
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Clark Howard
Okay, this is a great question. So Karen, a lot of people are small landlords with the same questions issues. First of all, it's not terrible as a landlord, the risk is borne by the tenant, not by the landlord. For them to pay rent by Cash App or Venmo, it's a very safe thing for you to receive money that way. I don't necessarily recommend it to tenants, but they like to pay that way. And so I think that's absolutely fine for you to receive rents. With either of those, you'll get a 1099 at the end of the year. If rents total more than $20,000, you report the rental income anyway. So that's not an important detail for you. There is an alternative. There are a lot of companies now that provide services to landlords for being a landlord. A lot of it's a package of freemium business model. A lot of things they offer free. Other things you have to pay for, other options you might have to pay for. If you even did whatever search engine you use, Google or whatever you said landlord, small landlord payment services or something like that, you'll see one after another after another after another that offer a package of services to landlords like helping you with the lease that you do for a tenant, the disclosures you have to give, and whatever state you're in collecting rent where you don't give up your account number to the tenant for them to direct deposit. It goes through this third party service for receiving rents. And that's how you're able to. You have to trust that third party service. But you receive rents that way from your tenant. They may even do billing for you. If a tenant doesn't pay on time, they automatically start dunning the tenant for the rent plus the late payment fees. There are a variety of these kind of services available to landlords. Whatever seems best to you, go for it. But if it's just simply receiving rent, it's not a problem. Doing Venmo or Cash App and Adam.
- [33:18]
Caller/Listener
In Florida says Clark, I noticed one of your favorite stepchildren, Fidelity, has 529 accounts. How does Fidelity's 529 stack up against some of your favorite step state 529 programs. Should I move my child's money from Utah to Fidelity?
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Clark Howard
Okay. I love that. Nobody's ever called them my favorite stepchildren. Yeah, that's cute. The Fidelity 529 plans are very decent. They may depending on the plan. Fidelity manages a number of state 529 plans. And most of them are lower cost, not necessarily lowest cost. If you do all your stuff with Fidelity, you check the expense ratios and make sure it'll say which state plan Fidelity wants to put you in. You can look on my 529 plan guide and check it out to see if the expenses are low enough for that plan that it would be okay to move to it. The Utah plan is a great plan. It would be a better plan with how much lift tickets cost now if they threw in incentives of free lift tickets for deposits of so much money. But they don't do that. So the plan you choose to go to doesn't need to remain Utah. And if Fidelity has a really low cost plan that you'd be happier being in, you can move the money pretty easily from one 529 plan to another. And just remember this. We're talking about differences in degree. Going from like the plan from one plan to another. Like from one with Vanguard to one with Fidelity or something like that. The big risk with 529 plans. And this is something you've got to know. Never, Never, not ever. No exceptions. Never do a 529 plan that involves a commission salesperson putting you in the plan. You take something that's great, using it to save for a child's college, to turning it into trash. Don't do it. You only want to be in a 529 plan. That is what's known as direct sold. No salesperson involved in the process. Adding an enormous layer of fees and commissions that erode the benefit that you've worked hard to save for your kids college. And let me say this, I'm not any salesperson. Salespeople do great work in so many different professions. Unfortunately, so often in investments, they end up being the problem, not the solution. That's why you don't want to buy commission products through a salesperson for investing. The incentives are wrong in the marketplace. That commission salesperson is looking out for themselves, not you. They may also look out for you, but there's too much conflict of interest there because their best interest is served by putting you in what earns them the most commission, not what earns you the best return. And that's why I'm so fiercely opposed to you ever doing investing with a Commission. Salesperson and 529 plans, because they are already structured, should never, ever be bought through a salesperson. Period. End of story, end of podcast, end of YouTube show. And what it's about is what it's about every time you being empowered with knowledge so you can save more, spend less, and never get ripped off.