WEBVTT NOTE This file was generated by Descript 00:00:19.166 --> 00:00:20.816 Riccardo Stewart: Hey, I wanna welcome you guys back to another 00:00:20.816 --> 00:00:23.816 episode of the A-W-M-N-F-L Podcast. 00:00:23.966 --> 00:00:27.116 My name is Ricardo Stewart, and I'm your host, and I'm joined with my 00:00:27.116 --> 00:00:31.196 friend, the professor, the mayor, and the truth, also known as Jeff 00:00:31.196 --> 00:00:33.746 Lock, Sam Acho, and Zach Miller. 00:00:34.106 --> 00:00:34.436 Guys. 00:00:34.436 --> 00:00:39.026 Today I want to tackle something that many people are a part of. 00:00:39.611 --> 00:00:40.781 But have no idea. 00:00:41.021 --> 00:00:41.471 Right. 00:00:41.771 --> 00:00:46.181 And primarily as it talks, talking about investments and, and the, the topic I 00:00:46.181 --> 00:00:48.581 want to talk about today is target funds. 00:00:48.581 --> 00:00:51.201 But before I jump into that, um, I'm gonna just start with the story. 00:00:52.151 --> 00:00:55.331 Growing up, two restaurants we would go to as a family if it was like a 00:00:55.331 --> 00:01:00.281 birthday, if it was somebody got baptized or some sort of like special occasion. 00:01:00.401 --> 00:01:02.081 Two places we would go to as a family. 00:01:02.081 --> 00:01:05.951 One is Sizzler and the next one would be Hometown Buffet. 00:01:06.161 --> 00:01:06.671 Right? 00:01:07.121 --> 00:01:08.351 Would love to go to those places. 00:01:08.351 --> 00:01:13.931 Two places the Stewart Family does not go to now is Sizzler and Hometown Buffet. 00:01:14.321 --> 00:01:14.681 Right? 00:01:14.921 --> 00:01:16.151 And go, what the heck happened? 00:01:16.151 --> 00:01:16.991 It was good for you. 00:01:17.291 --> 00:01:19.266 Why is it not good for your kids now, you know? 00:01:20.201 --> 00:01:24.011 Growing up, we knew what, we knew we had, the resources we had and 00:01:24.011 --> 00:01:25.631 you know, we trusted the brand. 00:01:25.931 --> 00:01:28.391 'cause no matter what city we were in, we would find those two 00:01:28.391 --> 00:01:30.671 places and we, we trusted the chef. 00:01:30.911 --> 00:01:33.221 So we didn't think about what ingredients were going in there, 00:01:33.221 --> 00:01:35.141 where was this meat from and so forth. 00:01:35.321 --> 00:01:38.201 But now, quite honestly, I know better. 00:01:38.861 --> 00:01:42.011 And now that I know better and my taste buds are a little different. 00:01:42.101 --> 00:01:44.021 No shade, but we ain't going there, you know? 00:01:44.516 --> 00:01:50.516 Um, I say that to, to just kind of introduce us to this, this idea or 00:01:50.516 --> 00:01:52.736 this topic called target date funds. 00:01:52.946 --> 00:01:56.336 And particularly as it relates to the NFL athletes, because many are either 00:01:56.336 --> 00:02:00.896 a part of it, um, and they have no idea or they, they know it's a target 00:02:00.896 --> 00:02:04.316 date fund, but they don't know if there's anything that's best that, 00:02:04.316 --> 00:02:06.176 that, um, that they could be a part of. 00:02:06.176 --> 00:02:09.236 And so the questions I have is what is a target date fund? 00:02:09.446 --> 00:02:09.806 Um. 00:02:10.196 --> 00:02:12.206 Who's it important for and so forth. 00:02:12.206 --> 00:02:13.706 And so I'm gonna jump in with you guys. 00:02:13.706 --> 00:02:16.826 And first Sam, when's the first time you ever even heard of 00:02:16.826 --> 00:02:18.926 something called a target date fund? 00:02:19.226 --> 00:02:21.956 Sam Acho: Well, I'm a part of the, the former group, Riccardo the first group 00:02:21.956 --> 00:02:24.506 that you talked about, the group that was going to Sizzlers and Hometown 00:02:24.506 --> 00:02:26.366 Buffet and didn't know any better. 00:02:26.366 --> 00:02:29.786 I played nine years in the NFL and I don't remember even hearing about 00:02:29.786 --> 00:02:32.096 what a target date fund, which either means one of two things. 00:02:32.096 --> 00:02:36.506 Number one, um, my advisor wasn't sharing with me the information 00:02:36.716 --> 00:02:38.096 or number two, I wasn't educated. 00:02:38.096 --> 00:02:40.196 I didn't even know what they may, they might say, yeah, yeah, 00:02:40.196 --> 00:02:41.066 you're in a target date fund. 00:02:41.066 --> 00:02:41.996 I'm thinking, okay, great. 00:02:42.176 --> 00:02:42.716 You're awesome. 00:02:42.716 --> 00:02:43.196 I trust you. 00:02:43.196 --> 00:02:44.126 You're at this big firm. 00:02:44.126 --> 00:02:45.236 Okay, thumbs up. 00:02:45.731 --> 00:02:49.151 It wasn't until I joined AWM and started getting some of this education from guys 00:02:49.151 --> 00:02:53.201 like Zach Miller, the Truth, and Jeff Lock the professor of realizing, Hey 00:02:53.201 --> 00:02:55.811 Sam, this is what a target date fund is. 00:02:55.991 --> 00:02:59.351 This is why you need to know about it, and this is why I'm gonna be a part 00:02:59.351 --> 00:03:01.631 of educating you on why it matters. 00:03:01.826 --> 00:03:04.316 Riccardo Stewart: Yeah, so almost three minutes into this podcast, 00:03:04.316 --> 00:03:05.936 some of you might be thinking, okay. 00:03:06.446 --> 00:03:10.076 Hopefully they'll even explain what a target date fund is. 00:03:10.106 --> 00:03:13.316 And at that, I'm just gonna go ahead and direct it towards the professor. 00:03:13.556 --> 00:03:14.486 Um, not the professor. 00:03:14.486 --> 00:03:14.966 My bad. 00:03:14.996 --> 00:03:15.566 The truth. 00:03:16.151 --> 00:03:16.661 Zach Miller: There we go. 00:03:17.216 --> 00:03:17.606 Riccardo Stewart: The truth. 00:03:17.996 --> 00:03:19.946 What is a target date fund? 00:03:21.041 --> 00:03:25.301 Zach Miller: So simply it's a single investment solution, usually 00:03:25.301 --> 00:03:26.531 in like a retirement account. 00:03:26.531 --> 00:03:30.281 So think like your 401k, maybe an IRAA lot of times. 00:03:30.821 --> 00:03:35.801 Places they, they want you to save for retirement and they don't 00:03:35.801 --> 00:03:37.091 wanna just leave you in cash. 00:03:37.091 --> 00:03:39.731 So that's happened when I was an N-F-L-P-A guy. 00:03:40.181 --> 00:03:43.241 Um, we voted actually to have. 00:03:43.841 --> 00:03:48.401 The investments, the default option, go into the target date fund rather 00:03:48.401 --> 00:03:49.661 than just have it sit in cash. 00:03:49.691 --> 00:03:53.081 'cause so many guys don't get advised on their NFL benefits that 00:03:53.081 --> 00:03:54.731 it's better for it to go into that. 00:03:55.181 --> 00:03:57.791 And so all it does, it automates those investments. 00:03:57.791 --> 00:03:59.351 It kind of, as you get older. 00:03:59.956 --> 00:04:02.536 That target date fund I was in was like 2050. 00:04:02.986 --> 00:04:06.736 As I get older, it's supposed to convert that from stocks, kind of risky 00:04:06.736 --> 00:04:10.456 assets into the more conservative, uh, less risky assets like bonds. 00:04:10.456 --> 00:04:13.246 As you get closer to retirement and you don't have to do anything, 00:04:13.246 --> 00:04:14.926 you just put it in that one fund. 00:04:15.456 --> 00:04:17.166 Riccardo Stewart: I'm glad you said that, that it was something 00:04:17.166 --> 00:04:20.076 that you guys voted on because it's better than just sitting in cash. 00:04:20.076 --> 00:04:24.246 Because if I give the analogies of Sizzler and then Hometown Buffet, 00:04:24.246 --> 00:04:26.976 you might think, okay, this must be the worst thing in the world. 00:04:26.981 --> 00:04:27.991 And so Sam. 00:04:29.801 --> 00:04:32.531 What are some advantages of having a target date fund? 00:04:33.311 --> 00:04:35.381 Sam Acho: of the advantages of a target date fund is pretty much 00:04:35.381 --> 00:04:36.911 what Zach just talked about. 00:04:36.911 --> 00:04:40.721 It's this idea of setting it and forgetting it, so it's very easy and 00:04:40.721 --> 00:04:45.821 simple for an advisor to, uh, put it, put money in a target date fund, and 00:04:45.821 --> 00:04:47.141 then just not even think about it, right? 00:04:47.141 --> 00:04:50.171 You put your money into a target date fund, and then by the time you're 55 00:04:50.171 --> 00:04:52.391 or 65, you're getting ready to retire. 00:04:52.391 --> 00:04:53.081 You've had it there. 00:04:53.081 --> 00:04:54.551 You don't touch it, you don't think about it. 00:04:54.866 --> 00:04:58.316 So that that makes it very easy for even a group of advisors who say, Hey, we're 00:04:58.316 --> 00:05:01.826 gonna put all of our clients' money in target date funds, and then all of a 00:05:01.826 --> 00:05:05.216 sudden I got all these clients and it makes it very easy to try to manage. 00:05:05.426 --> 00:05:08.696 Now, one, just quick aside, and, and we talked about this a little bit offline, 00:05:08.996 --> 00:05:12.596 is the history of a target date fund Initially, Zach, you mentioned it. 00:05:12.956 --> 00:05:17.156 The reason why target date funds were even created is that 401k 00:05:17.156 --> 00:05:21.686 providers were getting sued because people's money was put in just cash. 00:05:21.686 --> 00:05:22.586 They're saying, Hey, just cash. 00:05:22.586 --> 00:05:24.536 I actually want to be able to help my investments grow. 00:05:24.941 --> 00:05:28.991 So Zach made that, that example of even the N-F-L-P-A saying, Hey, let's do a 00:05:28.991 --> 00:05:32.891 target date fund because it actually allows a little bit of growth, but 00:05:32.891 --> 00:05:37.151 it, but it protects the provider when it comes to that idea of liability. 00:05:37.151 --> 00:05:41.231 So there might be a better way to invest your money, but the provider doesn't, 00:05:41.231 --> 00:05:42.791 may not want to give you that better way. 00:05:42.941 --> 00:05:45.521 'cause they don't want to be liable for too much risk. 00:05:45.731 --> 00:05:49.421 So that's why a target date fund was created. 00:05:49.571 --> 00:05:52.361 And earlier you heard about some of the advantages of a target date fund. 00:05:53.706 --> 00:05:54.216 Riccardo Stewart: Bad. 00:05:54.246 --> 00:05:58.386 So there are some good, but as we know, it ain't always good in the hood. 00:05:58.386 --> 00:06:01.806 So the professor, what are the disadvantages? 00:06:02.941 --> 00:06:06.456 Jeff Locke: The one primary disadvantage is just the cost of 'em. 00:06:06.696 --> 00:06:11.046 So you're not the one picking all the different investments within 00:06:11.046 --> 00:06:12.816 that target date fund, right? 00:06:12.816 --> 00:06:17.316 And some of those investments could have really high fees, so you're kind of 00:06:17.316 --> 00:06:21.846 stuck with whatever the provider decided was gonna be in the target date fund. 00:06:22.026 --> 00:06:23.016 Might not be best for you. 00:06:24.296 --> 00:06:27.056 On that same line, like the target date fund might not be 00:06:27.056 --> 00:06:28.406 best for your financial plan. 00:06:28.676 --> 00:06:33.266 For most financial plans we build for active NFL players, the target date 00:06:33.266 --> 00:06:36.146 fund doesn't make a whole lot of sense 'cause a lot of the investments you 00:06:36.146 --> 00:06:39.716 have in the target date fund, we're actually gonna invest in other types 00:06:39.716 --> 00:06:43.766 of accounts that are more accessible for some of the investments while 00:06:43.766 --> 00:06:48.926 letting the money in the target date fund account grow more rapidly. 00:06:49.646 --> 00:06:52.376 So it's typically what you give up is you give up growth. 00:06:52.781 --> 00:06:54.281 By being in the target date fund. 00:06:54.611 --> 00:06:59.231 Quick example is like say you have $100K in your NFL 401k or some other account, 00:06:59.681 --> 00:07:01.151 you're not touching this money till 60. 00:07:01.281 --> 00:07:04.031 You got 35 years for this thing to grow, right? 00:07:04.031 --> 00:07:10.091 The difference in a 7% versus an 8% return is almost $500K A 7% to 00:07:10.091 --> 00:07:15.341 a 9% return is almost $1 million of difference in the actual growth you're 00:07:15.341 --> 00:07:21.731 gonna get just by a 1% or 2% difference in return in the account, and that's. 00:07:22.301 --> 00:07:26.021 For having a team to customize the investment, not just to 00:07:26.021 --> 00:07:28.556 the target date fund can really help you out in the long run. 00:07:29.686 --> 00:07:32.236 Riccardo Stewart: Man, that's, that's really helpful, especially 00:07:32.236 --> 00:07:33.646 when you put the numbers to it. 00:07:34.186 --> 00:07:39.196 Zach, when it comes to the target date fund, is this something that 00:07:39.256 --> 00:07:43.876 you have or you would recommend to a high net worth NFL athlete? 00:07:44.356 --> 00:07:44.806 Um. 00:07:45.191 --> 00:07:46.301 Why or why not? 00:07:47.216 --> 00:07:48.356 Zach Miller: Absolutely not. 00:07:48.356 --> 00:07:51.566 I mean, you, you gotta start thinking like you're gonna be worth tens of 00:07:51.566 --> 00:07:55.826 millions of dollars and it would be foolish to have a target date fund, 00:07:56.666 --> 00:07:59.066 which they're not bad in themselves. 00:07:59.486 --> 00:08:03.386 They're bad in the context of if you're very wealthy, target date 00:08:03.386 --> 00:08:04.946 is the opposite of what you want. 00:08:05.396 --> 00:08:10.646 You do not want something that's automated or not customized to you. 00:08:10.646 --> 00:08:15.176 At AWM everything we do is customized, so you wouldn't want something 00:08:15.176 --> 00:08:18.491 that had bonds locked away from you when you as an NFL athlete. 00:08:19.271 --> 00:08:22.991 You need that protective reserve, those bonds, those safe assets, you 00:08:22.991 --> 00:08:25.751 actually need those in your taxable account where you have access to them. 00:08:25.961 --> 00:08:29.981 If they're locked away in a retirement account where you can't even withdraw 00:08:29.981 --> 00:08:34.961 that money without penalties till 55 or 59 and a half, that's you're not 00:08:34.961 --> 00:08:37.046 setting yourself up for success and. 00:08:37.871 --> 00:08:42.491 The problem is NFL guys, we, we just have very different liquidity needs or 00:08:42.491 --> 00:08:44.111 when we need our cash is way different. 00:08:44.111 --> 00:08:45.851 Like careers are so much shorter. 00:08:46.151 --> 00:08:50.831 We have way bigger, we need way bigger amounts of, of kind of protective 00:08:50.831 --> 00:08:55.331 reserve type money, safe money that has to be accounted for outside of it. 00:08:55.661 --> 00:08:57.551 And then you just cost yourself a ton of growth. 00:08:57.551 --> 00:09:01.481 You want those retirement accounts, like Jeff just said, to be compounding, 00:09:01.481 --> 00:09:03.461 to be growing as fast as possible. 00:09:03.611 --> 00:09:04.961 So you've gotta load them. 00:09:05.286 --> 00:09:07.866 With the highest expected return assets. 00:09:08.076 --> 00:09:11.796 Think you're taking risk in the, in the short term, but over the long 00:09:11.796 --> 00:09:13.476 term, you're actually more risky. 00:09:13.476 --> 00:09:16.356 If you had, you were too conservative in those accounts, you need them 00:09:16.356 --> 00:09:19.446 to grow, not just for your own money, but for generational wealth. 00:09:19.446 --> 00:09:23.346 If that's your goal, those accounts should be working in the highest return assets. 00:09:23.466 --> 00:09:27.336 So you want that customized with all that, all your taxable money, all 00:09:27.336 --> 00:09:31.956 your money you have in other accounts, you want it actually to be, um. 00:09:32.021 --> 00:09:36.731 Uh, in the same game plan and not just running its own automated play. 00:09:37.121 --> 00:09:39.371 Um, that an advisor's not even looking at. 00:09:39.431 --> 00:09:42.671 Um, so for people without advisors yes, makes total sense. 00:09:42.971 --> 00:09:46.181 If you don't have an advisor and you just have a retirement account, 00:09:46.211 --> 00:09:49.301 then yeah, you can do it a target date and you'll be all right. 00:09:49.301 --> 00:09:52.961 But for someone with a kind of wealth and NFL player does, just doesn't make sense. 00:09:53.221 --> 00:09:57.031 Riccardo Stewart: Yeah, let me, let me leave this with you guys. 00:09:57.091 --> 00:09:59.701 Um, jump in free for all. 00:09:59.701 --> 00:10:02.131 Whoever wants this question and that is. 00:10:02.501 --> 00:10:06.221 If I, if I find out I have a target, a target date fund, right? 00:10:06.221 --> 00:10:08.981 I listen to this podcast and I go back and I check and I go, I do. 00:10:10.031 --> 00:10:11.171 What are my options? 00:10:11.321 --> 00:10:13.271 Like, what do I even do with that? 00:10:15.356 --> 00:10:16.166 Jeff Locke: I will go first. 00:10:16.256 --> 00:10:16.766 Uh. 00:10:17.651 --> 00:10:20.321 So if you're an NFL player, you see the target date fund in 00:10:20.321 --> 00:10:22.631 your NFL 401k or your cap plan. 00:10:23.321 --> 00:10:25.421 Cool thing is that's a tax advantaged account. 00:10:25.451 --> 00:10:30.041 You could go in there, you can change the investment, no tax impact, get it 00:10:30.251 --> 00:10:32.231 ramped up for growth for the long term. 00:10:32.801 --> 00:10:34.481 Easy fix, right? 00:10:34.571 --> 00:10:36.641 You have a target date fund in some of your other accounts, 00:10:36.671 --> 00:10:38.261 maybe like a brokerage account. 00:10:39.401 --> 00:10:42.581 One, if you're with an advisor, you need to make a phone call and be like, why 00:10:42.581 --> 00:10:44.471 the heck am I in this target date fund? 00:10:44.981 --> 00:10:46.001 'cause now you gotta figure out. 00:10:46.676 --> 00:10:49.766 The tax impact of getting out of it and into something that's better for you. 00:10:50.696 --> 00:10:52.736 So there's options to get out. 00:10:52.796 --> 00:10:54.536 They're easy to get in and out of. 00:10:55.226 --> 00:10:57.476 It's just you gotta start asking the questions, especially 00:10:57.476 --> 00:10:58.376 if you have an advisor. 00:10:58.376 --> 00:10:59.756 Why the heck am I in these things? 00:11:02.876 --> 00:11:04.106 Riccardo Stewart: Zach, would you have anything to add to 00:11:04.106 --> 00:11:05.106 that or is that pretty good? 00:11:05.151 --> 00:11:06.231 Zach Miller: Couldn't have said it better. 00:11:06.686 --> 00:11:07.226 Riccardo Stewart: I love it. 00:11:07.226 --> 00:11:07.826 I love it. 00:11:08.006 --> 00:11:11.126 So to wrap it up, target date funds, there are some advantages, 00:11:11.156 --> 00:11:12.236 there's some good things to 'em. 00:11:12.236 --> 00:11:14.636 The reason why they came about was for a good reason. 00:11:14.996 --> 00:11:17.006 But if you are high net worth. 00:11:17.681 --> 00:11:18.461 L athlete. 00:11:18.551 --> 00:11:21.161 You gotta find things that are customized to who you are, not 00:11:21.161 --> 00:11:22.301 just what's good for the whole. 00:11:22.451 --> 00:11:26.051 Sizzlers might have been a good thing to eat when I was the four for the 00:11:26.051 --> 00:11:30.221 14-year-old me, but for the 42-year-old me, I know too much and I gotta have 00:11:30.221 --> 00:11:31.781 something that's catered to what I like. 00:11:32.051 --> 00:11:32.411 Right? 00:11:32.411 --> 00:11:33.281 You like what you like. 00:11:33.641 --> 00:11:35.591 Hey, if there's anything that you heard today and you want more 00:11:35.591 --> 00:11:39.041 information on, you would like to talk with one of us, please just 00:11:39.041 --> 00:11:41.321 send us a text or shoot us a call. 00:11:41.501 --> 00:11:44.606 Our number is 6 0 2 9 8 9 5 0 2 2.