Larry Kotlikoff:  "Maxifi" Your Retirement Planning

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[Music]

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foreign

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with annuities where every single week I

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welcome a celebrity guest expert that

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can help you maximize chapter two of

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your life listen learn laugh and love

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every minute of the most unique

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Financial podcast on the planet let's

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get to it

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[Music]

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welcome to fun with annuities I'm your

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host Stan the annuity man America's

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annuity agent yes I am licensed in all

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50 states and represent pretty much

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every carrier out there today's guest

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was a referral from a long-term guest

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Terry Savage that has been on our show

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many many times and people love it when

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she's on me she said Stan you've got to

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get Larry on you got to get Larry on so

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I'm chasing him down he's a very busy

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guy but let me give you some background

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and pedigree and then I'm gonna start

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throwing the ball to him and letting him

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score his name is Lawrence kotlikov

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let's call him Larry he's he's a

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renowned economics professor at Boston

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University he's a New York Times

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best-selling author the the book that he

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wrote is called money magic which is an

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economist secret to more money less risk

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and a better life sounds good to me he

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also has a podcast called economics

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matter on all major podcast platforms

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just like fun with annuities he has a

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newsletter that you can sign up for and

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all of the things I'm getting ready to

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give you he's going to have that

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permanent page on our site where you can

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go to those links and go straight to his

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newsletter and straight to his podcast

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and straight to buy his book and all

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that stuff he's also in his spare time

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for gosh sakes president of maxifine.com

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which

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let me put it in layman's term to you

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that is the only personal financial and

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retirement software

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that in my opinion is powerful and and

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both accurate enough to calculate your

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highest sustainable living standards

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starting today but with a plan to not

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only maintain it but raise it for life

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sound good you better believe it and I'm

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going to have that um link on as well he

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also

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um founded maximize mysocialsecurity.com

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which is what Terry Savage was talking

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about which is also a state-of-the-art

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software that helps you choose the right

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Social Security benefits at the right

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time and covers literally covers all

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cases benefits and rules he has a couple

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more things that he's done esplanner.com

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Etc but you know obviously Larry is a

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busy busy guy Larry thank you so much

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for joining us on fun with annuities uh

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Stan my my pleasure did need to correct

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one thing which is the the book that uh

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is the New York Times bestsellers called

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get what's yours the secrets to maxing

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out your Social Security it's joint with

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Paul solman who's a um PBS NewsHour

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economics correspondent and

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anyway that's the get where it's yours

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it's special agree with the the new book

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it hasn't made the best salary list but

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after this uh all right okay so I gave

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him the new book but there's another

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book as well and we'll put that on there

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and uh you know my my assistants that do

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all this background research and the

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pre-meeting show I'll have to get on

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them a little bit but you're a busy guy

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um

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I kind of want to start at the Social

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Security I know that's not

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I really like what you're doing on on

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the maxify I love that but let's talk

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about social security the site that you

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have because a lot of my viewers are

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either thinking about that and I they've

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heard me say so many times that you

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can't hate all annuities because you

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already own one it's called Social

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Security which is the best inflation

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annuity on the planet but give us the

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kind of the impetus and why you started

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maximize my socialsecurity.com

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so we actually started the other tool

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which became what's called yes plan or

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Economic Security planner or companies

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called Economic Security planning Inc so

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we turn that into a um online program

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from a download program and that's

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called

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maxify.com maxify planner and then we

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grab the social security code from that

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tool and put it into a separate

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Standalone program called maximize my

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social security.com and the reason um

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we developed that tool and the reason I

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wrote this book at which yours with my

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co-authors is that social security has

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13 benefits so that seems like a small

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number they have a

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1278 I believe uh rules about those 13

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benefits in their handbook and then

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there's hundreds of thousands of rules

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about the

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2720 I know it's actually 2728 rules

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that's it 2728 rules about the 13 but

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then hundreds of thousands of rules

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about the 2728 rules so the thing is

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like Beyond complex and how does a book

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about social security become a

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bestseller when it's all about the rules

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well Paul is very funny he feels pretty

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funny I'm pretty nerdy somehow work

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together but it's really if people don't

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know about this very fundamental thing

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that's the Bedrock of their retirement

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and it's absolutely an annuity that's

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inflation indexed and you have the

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ability

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it's it's

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um doesn't seem like an investment

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vehicle but you have the ability to make

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it bigger or smaller by making decisions

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so for example if you take your

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retirement benefit at 70 at 76 percent

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higher than if you take it it's at 62

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and when you give up eight years of

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benefits you're paying for a higher

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stream so you're in effect buying an

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annuity from Social Security eight years

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or the premium of loss benefits or

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premium and there's enormous uh that's a

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fantastic deal you can't buy real

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annuity on the market right now that's

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inflation indexed yeah so for Mo we did

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I just did a study with the Atlanta fed

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uh and uh another co-author that shows

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that the typical American household is

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leaving 182 thousand dollars on the

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table by not optimizing their social

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security decisions so for you know we

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have the software for 39 bucks you can

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get it right right and if you compare

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what you think you're is you want to do

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versus what uh the software would say I

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have a friend just lives right around

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that neighbor okay uh because the Wall

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Street Journal is doing an article they

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wanted to find somebody who'd actually

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taken their benefits too early or early

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to talk to them and so I was talking to

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him yesterday see if he would be

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interviewed by them he agreed uh

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Arthur's his name great guy smart guy

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computer software engineer he tells me

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uh well he took his benefit at 60 five

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and then they figure that it would be

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not much different than if he waited I

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said well Arthur would have been 40

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higher had you waited he said don't know

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don't tell me that I said yeah it would

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have been 40 higher I've adjusted for

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inflammation

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and

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uh so he made a mistake if had he known

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that he would have done the right thing

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so this was the you know impetus to try

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and uh help people not just with their

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lifetime planning but uh with this very

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very critical thing where so many people

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are screwing it up I mean you have 90 of

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people should be waiting Beyond 60

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Beyond when they retire to collect

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uh only about 10 are so why is that is

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it just poor education

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um educating people on on the right

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choices

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why do you believe that's the case I

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think people are

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um

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uh making two big mistakes here and

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partly it's uh they're helped in this in

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these mistakes by the Social Security

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Administration itself because if you go

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to an office and you say I want to wait

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I'm signing in for Medicare for example

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I had another co-author who went there

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he said I just want to sign up for

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Medicare I'm going to wait till 70 to

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collect my Social Security the lady

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started screaming at the top of her

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lungs you have to take your benefit now

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you have to take your benefit now

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because if you don't and you die

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tomorrow you will lose your money you'll

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lose out you'll never get anything on

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all those contributions and

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uh the fact of the matter is if you die

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tomorrow you're going to be in heaven

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you're not going to need money you're

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not going to be kicking yourself the

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real danger here is is that you're going

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to be is that you live to 100 and you're

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starving eating cat food so the real

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risk is love you know living a long time

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it's not dying early and kicking

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yourself and if you die early your

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spouse will collect your widow's benefit

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or whatever so so the uh so there's that

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screw up and enforced by Social Security

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and then there's also

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the fact that people think they're going

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to die on time at their life expectancy

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so if you go to ssa.gov Social

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Security's website you're going to find

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this life life expectancy calculator

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this is like going to

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um suppose you went to

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uh a Travelers some insurance company

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installing homeowners insurance and they

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had a calculator showing you the average

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loss from a fire you would not you would

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not buy any fire Insurance you'd say hey

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this premium exceeds the average loss no

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way am I gonna but everybody does Buy

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fire insurance for the catastrophic risk

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sure annuities are in life in Social

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Security's case

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for most people waiting till 70 is going

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to give you catastrophic coverage

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because you're going to get this highest

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possible benefit uh right through age

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100 so it's dealing with the okay so

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then the the third reason really here uh

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it's not just the misdirection from

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Social Security on you know but you need

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to take it not and not lose it you need

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to think about dying on time which is

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ridiculous you know nobody's going to

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die on time you can do it it's just not

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a good strategy yeah yeah

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the third thing I think is that people

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don't want to jinx themselves I think

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there's some Superstition here that they

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they worry if they really think

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seriously about living to 100 that they

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will actually die tomorrow and they're

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superstitious and consequently they're

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they're all making the wrong decision so

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you're leaving 182 that's the medium

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we've got people leaving we found in

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this study of about 6 000 American

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households it's a survey a data from the

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Federal Reserve uh called the survey

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consumer finances ran 6 000 people

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through our maxify.com tool

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been 182 that they're leaving the median

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has to say half half the people are

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leaving more than 182 000 on the table

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we found one couples leaving lost close

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to a million bucks at high arms

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obviously by not to I mean this is such

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a good deal it's like finding bucks you

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know dollar bills and huge Stacks right

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on your front stoop and not picking them

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up that's what's going on here so for 39

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someone can go on maximize

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mysocialsecurity.com and punch in play

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around and find real answers based upon

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this customized situation right and yeah

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and then the other thing that Terry and

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I are I've been writing about uh what I

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call Social Security horror stories

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that's what I would write in in Forbes

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because I was I wrote for them sure that

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would be the title Social Security

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Horror Story this this month and it

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would be about some person being clawed

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back a huge amount of money because just

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made a mistake and the worst case was a

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lady who that I've heard of this lady

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who's called back for three hundred

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thousand dollars she's disabled

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she becomes disabled she tells Social

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Security uh she has just written a book

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and she's getting some royalties she

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just tried her hand at writing a

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children's book she's getting some roles

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they say don't worry you can still get

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your disability benefit because

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royalties are not labor income

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and then 10 years later she gets a bill

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for 301 thousand dollars

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and she's the royalties have run out

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she's living just on and and the reason

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is that she went to a couple libraries

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and got a 1099 for

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probably the parking or the travel the

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gas okay so Social Security decides 10

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years of disability benefits were wow

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whatever some number

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um and then she appeals and then the

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judge says well there's true two

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criteria that we can waive this of claw

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back one is that has to be our mistake

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it was our mistake secondly you have to

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be poor

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so

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I looked at your cable bill

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and you have a lot of channels on your

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cable plan I read the administrative

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wall judges statement so I know for sure

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this was what he said I'm not making

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this up I'm going to deny you because

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you have you're clearly not that poor

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nobody that can be that poor and have

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that many k uh stations on their cable

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plan this lady was disabled she couldn't

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really walk this is all she had in her

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life was watching TV

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that this is uh this is where uh this is

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really a horror stories where Terry and

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I are working on a book called social

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horror stories which we're going to be

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putting out in the fall and I think

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that's great because people can then

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glean a specific instance that's going

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to be closed to them I'm talking to

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Larry kotlikov who is economics

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professor Boston University New York

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Times bestseller podcast host of

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Economics matter or newsletter writer

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and the president of the economic

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security planning Incorporated and has a

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lot of stuff underneath that but I

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wanted to Pivot I want to go back to

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maximizing my Social Security they said

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before we do let me just make the

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connection with this the software to

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what I was just saying about the horror

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stories sure the software can be used to

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figure out what you should be getting so

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you can make sure that you're not

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getting overpaid and that which they're

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going to call back and then of course

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you still have to be care I mean

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uh there's still cases where you get

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called back

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uh uh because you're treating your you

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aren't including in the software the

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fact that you're

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you're uh royalty income is actually

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labor income but then also if you're

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getting underpaid the software can help

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you with that and also if you have been

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collecting for a while you can go back

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and see what you should be getting so

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all these ways of the software is really

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good for checking to make sure you're

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not getting going to get a callback

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letter like we've got like close to a

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million people getting callback letters

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just in a year or a couple years in

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terms of the numbers it's it's math it's

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not in one year it's about a quarter

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million this year wow I mean if you add

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them up there's about a million there

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who are actively dealing with callback

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letters it's worth the 39 to do it I

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wanted to Pivot because all of my

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clients I like to find out a little bit

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more about them we had Wade foul on and

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and much moleski and we're asking a

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little bit different questions they're

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not used to I'd like to know about you

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nobody wakes up in the morning go you

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know what

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um I'm gonna work on Social Security I

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mean give me some of your background

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where you came from when you grew up and

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what what led you to this point where

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you wake up every single morning and you

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literally are doing things that are

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helping the public can you give me that

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story quickly as opposed to all of these

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other great things that you've done I'd

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like to know about Larry kotlikov the

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kid where he grew up where he went to

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school and then how this all happened to

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get you here

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okay sure so

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um I grew up in Pennsauken New Jersey my

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dad and his brothers had the first and

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last department store in Camden it's a

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family store uh

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he got Parkinson's my mom was working uh

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we all got into college because she was

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working at Penn we were able to get

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tuition paid for us but I had to work

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basically 40 hours 60 hours a week

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during college to get uh because the

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store was collapsing and they didn't

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have my parents didn't couldn't support

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us

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and then

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um

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I got into Harvard uh I got I was

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thinking about becoming a uh a doctor

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and then I came face to face with a frog

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and in uh that was dissecting and we had

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to kill the Frog and bring it back to

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life massage it so I killed again and it

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was like kill revive kill revive for

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hours and write down each case at that

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point I walked out of the room and said

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I'm going to be an economics major and

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the economics was interesting because

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it's rigorous you got this mathematical

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rigor you got this Theory and then you

16:50
also have the ability to help

16:52
society and individuals and I got

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interested when I was in grad school and

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I worked not just on kind of big

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macroeconomic issues but also in

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personal finance are people saving up

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are they buying enough life insurance

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and that got me into

17:08
after I got out of grad school to start

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doing programming or to figure out

17:14
gee we have the status set and we have

17:16
information about how much life

17:18
insurance people are holding

17:20
can we figure out what they should be

17:22
holding that required in effect building

17:25
a financial plan for these people and

17:30
and uh not required figuring out what

17:33
they're going to spend every year and

17:34
their taxes and their cash flow

17:36
constraints so that was the origins of

17:39
of building the software for the public

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maxify planner.com the so I guess I've

17:45
always been interested in uh I got into

17:48
economics because I thought

17:50
uh I could help people or I could help

17:53
Society not just myself

17:55
and my uncle was an academic and it's a

17:58
sociologist I think that influenced me I

18:01
had great teachers I got into Harvard

18:03
through

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some clerical error and I was sure I was

18:08
literally thought this was a mistake

18:09
somebody had made a mistake that they

18:11
admitted me and I because I wasn't like

18:13
the top sat or GRE

18:16
or I did I you know very high grades in

18:20
college I had a great a professor who

18:23
actually just made a connect he was had

18:25
just come from Harvard I think he called

18:26
up the guy in charge of admissions at

18:28
Harvard the professor and said take

18:31
these three kids and because nobody no

18:34
school like Harvard would take three

18:36
people from Penn they take took one

18:38
person from Chile one person from India

18:41
one person from Iran

18:43
three people from Penn just doesn't make

18:45
any sense but he had he was a brilliant

18:48
guy he had a close connection with the

18:49
admissions director we get in we all did

18:52
fine one's uh one person is a professor

18:55
at Chicago a full Professor so

18:59
and then I just started working on these

19:01
different issues around personal finance

19:04
but also bigger questions like carbon

19:07
Taxation and uh how you fix the banking

19:11
system I ran for president actually I

19:13
don't know if if your staff picked this

19:15
up but in 2016 against Clinton and Trump

19:20
Iran as a writing candidate and I did

19:23
this not to win because I didn't think I

19:24
was going to win it was delusional but

19:28
I thought it was important for

19:30
economists to spell out exactly how to

19:33
fix all our problems the Social Security

19:35
System the Healthcare System the tax

19:37
system the education system uh the

19:41
welfare system the whole thing and we

19:44
economists have Solutions and they're

19:46
not complicated they're simple so I put

19:48
together this platform and there's a

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book on my website at kotlikov.net

19:52
called You're hired it's not you're

19:54
fired but it's called You're hired lists

19:57
all the uh which goes through you know

19:59
how to fix everything and if you go to

20:02
Larry kotlikov.substack.com there's a

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condensed version in like two pages I

20:07
say how to fix the entire country and

20:09
when one Fell Swoop

20:11
include you know it's doable and

20:14
economists uh agree who are not

20:16
political we're not we're not political

20:18
if you're if you're connected to a

20:21
political party and you're an economist

20:23
you basically lost your your right to do

20:25
economics your license in my view

20:27
because I agree with that I mean it's

20:29
it's I agree with it that's that is

20:31
fascinating so so you've been this is a

20:34
passion you get up in the morning and it

20:36
really is driving you how long is it

20:37
software doesn't happen overnight

20:40
um software's like a 10-year overnight

20:42
sensation how long is it I mean how long

20:44
has it taken you and I know you're

20:45
always tweaking and improving but from

20:48
start to implementation into you know

20:50
handing it over to the public how long

20:52
would that take

20:53
that we first get a prototype going that

20:56
was good enough to sell was about five

20:58
years starting in 1993. so the company

21:01
has been around for 30 years and this is

21:03
for anybody who's a do-it-yourselfer but

21:06
the software is as easy as Turbo Tax to

21:08
run it's kind of wizard to take you both

21:10
programs takes you through says here's

21:13
what you want to do here's what we think

21:14
you know Robo optimizes your decisions

21:17
over retirement accounts and Social

21:18
Security and then you can manually do

21:21
like growth conversions and think if

21:23
they're or decide whether or not to

21:25
marry Joe or Sally

21:28
or whether to downsize your home or how

21:31
long to retire a lot of these questions

21:32
conventional software can't address

21:35
because it's got the it's got a bait and

21:37
switch

21:38
sales

21:40
product sales of methodology

21:43
fundamentally it's not connected it's

21:46
not really trying to help

21:47
you the household you the consumer are

21:51
you the you're the customer it's really

21:52
trying to help the person you came to

21:54
see

21:55
it's built that way and and not that all

21:58
the financial planners are out to to um

22:02
you know rip off people it's just that

22:04
that's the software that they're kind of

22:06
stuck using and they were using the CFA

22:09
this the cfp all these curriculums era

22:12
curriculums none of them spend five

22:14
minutes

22:16
uh telling anybody about the economics

22:19
approach to financial planning which is

22:20
completely different and gives you

22:22
completely different recommendations

22:24
which are common sense like

22:26
I'm not going to ask you Stan how much

22:29
you'd like to Target to spend in

22:30
retirement because guess what you can

22:32
only spend what you've got right what

22:35
you've got not your aspirations to spend

22:37
a billion dollars a day right just want

22:40
to know what you've got and then I'm

22:41
going to use the software to figure out

22:43
take out all your taxes and all your top

22:45
off the top expenses on housing and

22:47
college tuition what your discretionary

22:50
spending can be and allocate that

22:53
through time in a way that your Living

22:55
Center per household member is fixed and

22:58
that you don't violate any cash flow

23:00
constraints that's what the software

23:02
does it's based on sophisticated

23:05
algorithms that we learned in economics

23:07
but I put some things together we got a

23:09
Pat I got a patent for the methodology I

23:12
was going to ask that yeah I'm assuming

23:14
it did okay iterative dynamic

23:16
programming is for those who are real

23:18
Geeks out there is what you know what

23:21
we're doing here so it's it's just to be

23:24
a little bit geeky here the idea of

23:26
iterating to a solution when you have

23:28
like lots of equations what are called

23:31
simultaneous equations X is a very

23:33
complicated function of y y is a very

23:35
complicated function of X well the way

23:38
these guys gaussen Seidel mathematicians

23:42
like 1780 and Basel Germans in

23:45
Switzerland they said well let's just

23:47
plug in a value for a guess for x and

23:50
we'll come back use that equation get a

23:51
guess for y and plug in I guess for y a

23:54
different guess for y and get a new

23:56
guess for x and get and then take these

23:58
new guesses and plug them back into

24:00
those equations and go back and forth do

24:02
some dampening and get to a solution and

24:06
see and for a lot of problems these

24:08
things will converge as you go back and

24:10
forth to the right answer you get a

24:13
solution to the two equations the next

24:15
one is by both

24:17
so Newton had a method that he came up

24:19
with which requires when you have

24:21
millions of lots of lots of equations is

24:25
just beyond any computer but these guys

24:28
galston say oh to Seidel said let's do

24:30
something simple so we have a very kind

24:32
of state-of-the-art what's called

24:34
dynamic programming algorithm three

24:36
programs that are using this old

24:38
technique

24:40
uh to iterate back and forth so we got

24:42
kind of modern

24:44
mathematics modern algorithms and an old

24:47
algorithm and they work together uh so

24:51
that's to me kind of a beautiful

24:54
solution to use the old and the new to

24:57
get uh to an answer and it always works

24:59
the system this we've not had any cases

25:02
where our program never works for

25:04
somebody

25:05
that's fantastic let's let's kind of um

25:08
pivot because we're not pivoting too

25:10
hard because it's it's all correlated to

25:12
what you're doing maxify.com I'll have

25:14
all this on my site

25:16
m-i-x-i-f-i.com

25:18
maxifypeplanner.com which is

25:21
a pretty interesting personal

25:24
you know planning retirement software

25:26
I've been with Dean Witter Morgan

25:27
Stanley Payne Weber UBS done that for a

25:30
long long time and now I'm you know the

25:32
mythical stand the annuity man but I do

25:34
have a lot of pedigree on that side of

25:36
the table and I have seen it all

25:39
um

25:40
what's interesting about what you've

25:42
done here is

25:45
the calculation on not only your highest

25:48
sustainable living standard starting now

25:51
but

25:52
how to maintain that and and actually

25:55
raise it can you

25:58
dumb it down for us out here Larry and

26:01
kind of explain how that's work how that

26:03
works okay so economics deals with

26:05
uncertainty in two ways one is we

26:08
we do something called a certain

26:09
equivalent analysis where we make very

26:11
conservative assumptions to adjust for

26:14
risk yes I think on average I'm going to

26:16
earn 150 000 a year but I'm going to

26:18
bias my input here to make it a hundred

26:21
thousand just to adjust for risk just

26:23
like we adjust the stock for risk we

26:25
risk discount stock dividends risk

26:29
adjust them to get the price so this is

26:32
all throughout finance that certain

26:34
equivalent method so once so when you

26:37
run our program uh it can run in two

26:40
ways one is uh this way where you put in

26:43
conservative assumptions so also about

26:44
rates of return that you're going to

26:45
earn the program will give you a

26:48
baseline living standard then you can

26:50
hit a tool that will Maxima optimize it

26:53
it'll figure out the optimal Social

26:55
Security and retirement account uh which

26:58
were all decisions to lower your

27:00
lifetime taxes to raise your living

27:03
standard because if your your benefits

27:04
go up and your taxes go down that level

27:06
of your Living Center can go up so

27:08
that's free money that's money magic

27:10
that's where the title of the book came

27:11
from that this tool can make money magic

27:13
and then there's other then you can also

27:17
manually optimize over like Roth

27:19
conversions or downsizing my home or

27:23
moving to Texas where there's no state

27:25
income tax or just working longer or

27:27
marrying Joe who makes three times what

27:30
my current husband makes you know they

27:33
do you know does it pay to divorce

27:36
um and the divorce algorithm love it yes

27:39
and then and then we have the other

27:42
reports in our program deal the other

27:45
way with uncertainty that economics

27:47
deals with which is just to see what

27:48
happens uh as people go along and adjust

27:51
in light of what's happened so this is

27:55
um we this is where we do Monte Carlo

27:57
simulations sure and we show you

27:59
trajectories of your living standard we

28:01
take you standard you look like you're

28:03
about 45. yeah yeah right okay

28:07
how about 59. yeah okay so we take you

28:12
in let's say 59 we say okay we've got

28:15
your resources

28:17
um let's figure out can you tell us uh

28:20
an interest rate as you know basically

28:22
you're spending Behavior you want to

28:24
spend as if you're always going to earn

28:25
let's say two percent real or one

28:27
percent real something conservative we

28:29
figure out using our deterministic uh

28:33
calculations exactly what you're going

28:35
to spend uh assuming you want to have a

28:38
smooth living standard into the future

28:40
uh and then we we mark down your living

28:43
standard this year at 59 then we to go

28:45
and say let's take uh Now we move you to

28:48
age 60 we know what your assets are we

28:50
take draws of your returns you tell us

28:53
what your portfolio is going to be and

28:55
now you're at 60 we do the same thing we

28:56
figure out your living standard so now

28:58
we start generating a trajectory of your

29:00
living standard and we do 500 of these

29:03
trajectories and that's Monte Carlo

29:05
simulations so you're seeing your living

29:08
standard in front of you if you invest

29:11
this aggressively and spend this

29:12
aggressively you get to see the upside

29:15
and the downside outcomes and then you

29:18
can see whether that's too much downside

29:19
risk or whether you're fascinated by the

29:22
upside potential and

29:25
and of course if you have all this takes

29:27
into account like things like Social

29:29
Security or other sources of resources

29:31
that are safe that may be safe annuities

29:34
there might be a single life annuity

29:36
that you might or immediately annuity

29:37
that you have

29:39
and of course inflation is incorporated

29:41
so you can run it with high or low

29:44
inflation and

29:46
and you can get a feeling for whether

29:48
this works for me

29:51
where it's not a simulation of

29:54
will I go broke if I keep spending some

29:59
desired fixed amount from retirement

30:03
through the end of my life that's what

30:05
the traditional software out there is

30:07
doing it's running the probability of

30:10
your eating cat food and trying to

30:12
minimum you know say that lower and yeah

30:16
by putting this riskier things you can

30:18
make it lower but also it raises the

30:19
probability if you're going eating the

30:21
cat food for a longer period of time

30:23
the probability that you actually end up

30:25
eating quack cat food goes down but the

30:28
probability that you'll start to have to

30:30
eat cat food that you go broke earlier

30:33
in life goes up uh if you invest in

30:36
other words risk is not free now the

30:38
other way I'll just say one other thing

30:40
here which I think is uh important which

30:44
is that we have this other way of

30:46
running Monte Carlo simulations which uh

30:49
do the following which I think is really

30:51
important for the middle class and for

30:53
your your viewers to understand it's

30:56
called upside investing and so it's not

30:58
it's it says

31:01
if if you're concerned about having your

31:04
living standard decline but you still

31:06
want to be in the market here's a tool

31:08
to do that a way to think about that

31:10
which is you put a certain amount of

31:12
money in the stock market you decide how

31:15
much to put in there

31:16
you tell the program how much is there

31:18
right now how much you're going to add

31:19
to it when you're going to start

31:21
withdrawing when you're going to stop

31:22
stop withdrawing and then the program

31:24
does this deterministic planning

31:27
assuming that all your other assets are

31:29
put into tips inflation index bonds so

31:32
it's basically stocks and tips but the

31:34
key thing is it has you spend nothing

31:36
out of the stocks it says

31:39
I want we're going to treat those stocks

31:41
as if they're lost and 100 and this is

31:44
going to establish a Florida or living

31:46
standard and then we run Monte Carlo

31:48
simulations and as you start withdrawing

31:51
let's say you say you're going to start

31:52
withdrawing at 60 and gradually until 75

31:56
you know take out a 15th the 14th the

31:59
13th of what's in the market in the

32:01
stock market in your pot there as

32:03
whenever you take a which role you the

32:06
program has you put it into tips so now

32:08
you can raise your floor so you have

32:10
this living standard floor and upside to

32:13
the living standard is pure upside risk

32:16
so this is something nobody else has has

32:20
kind of developed in Wall Street which

32:22
is just upside investing having upside

32:25
riskier Living Center no downside risk

32:27
and

32:29
that's I think what most most people

32:32
don't want to go to sleep at night at 73

32:35
worried about the the stock market

32:38
crashing and they're life crashing

32:40
no I no I agree with that I haven't been

32:42
on the side of the table this is very

32:45
refreshing

32:46
um just to hear

32:48
the thinking behind it and it's not a

32:51
group that's been hired to push product

32:52
or push an agenda or push a strategy or

32:55
push something The Firm wants to do I've

32:57
seen those products what's the

32:58
difference between the maxify

33:00
maxifyplanner.com maxify.com and the

33:03
esplanner.com or is that one in the same

33:05
because I was doing my research on that

33:07
so es planner was the download version

33:09
we had for years before the web really

33:12
took off we're such an old company we

33:14
had to download software we so that's no

33:17
longer in existence got it because we

33:20
you know we moved it into the online

33:22
program and uh

33:25
but uh

33:27
yeah but

33:28
uh it's we're not a company that works

33:31
but it takes advertising we don't have

33:34
any good we're not assigning people to

33:36
go find a real an agent we don't have

33:39
any of those deals we don't take any

33:40
advertising on our website good this is

33:43
you know the academic instinct which is

33:45
you stay clear Wall Street it's not just

33:49
the Instinct it's the requirement no I

33:51
agree that's the reason I'm doing I only

33:54
do contractual guarantees my motto is

33:55
you own an annuity for what it will do

33:57
not what it might do I think what you're

33:59
doing dovetails nicely into our

34:01
strategies because what you're doing

34:03
is is a very high level on the other

34:05
side of the table with Investments Etc I

34:08
think it's very unique my question is

34:10
how

34:12
how has the advisor Nation accepted it

34:15
or they do they see it as I'm sure some

34:17
love it but do most see it as a threat

34:21
or do most even see it

34:24
it's hard for us to get seen by the

34:26
advisors because we you know when we try

34:29
and run ads we get front run by big

34:32
companies like Fidelity or tuber price

34:34
or

34:35
like even if you if you put it into your

34:40
browser the name maximize my Social

34:42
Security somebody's ad will show up in

34:44
front of our Tool uh the uh same thing

34:48
happens with Stanley nudity man my click

34:50
makes it makes a lot of money for Google

34:52
I mean just someone ties in Stanley

34:54
annuity man I think they're paying like

34:55
20 something dollars a click but the

34:57
point is I don't understand where you're

34:59
headed is they type in this and that's

35:02
the reason we're going to have a link on

35:03
our site where you can go Direct

35:05
um people are front running a little bit

35:07
there's that's for sure there's that

35:09
there's the fact that the uh if you work

35:12
for a big company like Fidelity you're

35:14
forced to use e-money for example sure

35:16
you cannot use anybody else's software

35:19
so there's that there's that and then

35:22
there's a lot of people that have been

35:23
even if they're small firms who were not

35:26
connected with a big eye uh or gal

35:29
company uh sure they they uh have all

35:34
their data in e-money or money guy Pro

35:36
they're used to it converting to us it's

35:39
not that big a deal but there hasn't

35:42
because uh

35:45
I don't understand this you know because

35:48
financial planners can do so much more

35:50
for their clients I can take a typical

35:53
person and with Social Security

35:56
optimization with retirement account tax

35:59
minimization with these other decisions

36:02
I can rescue people's retirement we have

36:06
we have so many people coming into

36:07
retirement with so little money

36:09
we they have to make the best out of the

36:12
resources and

36:14
if I'm a financial planner I've got two

36:16
options I can actually do find a real

36:18
financial planning with this tool which

36:20
is the only one you can use to do it and

36:23
make

36:24
you know make something magical happen

36:27
out of very little or I can

36:32
uh

36:34
you know try and beat the market

36:36
and I was on your site earlier the

36:38
maxify maxifiedplanner.com site with

36:41
maxify.com it's 109 to get in and then

36:44
after that it's 89 a year for you to run

36:47
it yourself and for people that listen

36:50
to my podcast and that are my clients in

36:51
all 50 states

36:53
high IQ do-it-yourselfers this is right

36:57
in your wheelhouse listeners okay and

36:59
viewers and this we're all in all major

37:01
podcast platforms we're also seen on the

37:03
fun with annuities YouTube channel

37:05
um I would advise you to go take a look

37:07
at this because I mean it has

37:09
comprehensive planning you can run

37:11
unlimited reports it works on anything

37:14
you have all devices browsers it doesn't

37:16
matter they figured it out and I think

37:19
it's a very

37:22
it's a breath of fresh air and something

37:24
that you need to look at and Implement

37:26
instead of having whatever software The

37:29
Firm that you're with or you know online

37:32
firm or walk-in marble floor firm uses

37:36
why not use this why not do a comparison

37:39
quickly I think you're going to be very

37:41
very shocked on the Simplicity of this

37:44
and I think that's the biggest Kudos I

37:46
have to you and your team is

37:48
you know Steve Jobs always said simple

37:50
is complex man you have taken the

37:53
complex and really have

37:55
made it simple and dumbed it down for

37:58
you know the person out here that's been

38:00
working hard all their lives don't

38:02
really have time to be an economics

38:04
professor and learn all this but you're

38:06
handing to them on a plate for not that

38:09
much money and you can you know if

38:11
you're sitting here running your basic

38:12
plan it's going to take a half a second

38:14
we have this thing uh it's running on

38:16
Amazon web servers high security in

38:19
terms of privacy

38:21
and it's amazing it runs in half a

38:24
second when I first started developing

38:25
developing this I thought it would take

38:27
three years to run one case and we the

38:30
combination of great engineering this

38:33
patented methodology and the hardware

38:36
uh it's made how quickly it works but

38:39
then you can run side by side

38:40
comparisons okay what if I uh sell the

38:43
house moved to Tennessee where there's

38:46
no state income tax buy a place that's

38:48
actually bigger for less money from

38:50
because I'm moving from Connecticut and

38:53
uh but I take a few you know now I'm

38:56
gonna have to fly my kids here three

38:58
times a year uh will I be ahead uh and

39:02
my friends to spend time with me and my

39:05
mansion in Tennessee

39:07
and you know how much of it further

39:10
ahead will I be well you see immediately

39:12
here's my lifetime spending doing this

39:14
the discretionary spending

39:16
uh here's my lifetime spending doing

39:18
that staying where I am you see the gain

39:21
immediately in dollars uh

39:25
the housing of course is part of the you

39:27
know you've improved your housing but

39:28
you've also dramatically improved

39:30
potentially your lifetime spending why

39:32
do I you know this may sound like I'm

39:35
speaking out of kind of a hypothetical

39:37
where I haven't seen this happen for

39:39
sure but I'm talking to you from a 303

39:43
year old house that we bought during

39:45
covid my wife and I in Providence

39:48
yeah we bought it for um

39:51
uh

39:53
what was it just I think it was a 650

39:57
000 dollars

39:58
the the it's

40:01
40 bigger than the place we left in

40:03
Boston which we sold for 1.3 million

40:06
um to go to BU

40:07
um 35-minute commute

40:10
well a little bit longer but anyway

40:14
um

40:16
so we looked you know we use our

40:17
software to figure out whether this

40:18
actually made sense and it's

40:22
you know we're living a small 960 square

40:25
foot condo the prices went crazy we just

40:28
got out in time before they crashed sure

40:30
now we bought this thing where the

40:32
prices in Rhode Island in in Providence

40:35
or a third of what they are per square

40:37
foot in Boston that's the kind of thing

40:39
you can compare

40:41
uh we just used the software the other

40:43
day to buy a townhouse to take some

40:45
money out of our retirement account life

40:48
my IRA pay taxes on it make a down

40:52
payment to buy a townhouse around the

40:55
corner to try and be Diversified outside

40:58
the stock market

40:59
and so we did the you know here's a

41:01
profile where we don't do it here's a

41:03
profile where we do do it doesn't make

41:05
sense given all the complications here

41:06
because if you withdraw money right I'm

41:09
not on Medicare because I'm still

41:11
working but if I were on it would affect

41:13
my Irma attack my Medicare Part B taxes

41:15
would affect it is as it is it's going

41:18
to affect this year's taxes but also

41:20
lower my future taxes because I'm going

41:22
to be withdrawing less right

41:24
so all the entire time had the federal

41:27
and state Rhode Island and Massachusetts

41:30
taxes because I have to pay taxes in

41:32
both places and federal taxes it's all

41:35
being calculated in half a second and

41:37
you have a side-by-side comparison

41:39
here's one column and here's another we

41:42
found it made was going to increase our

41:43
lifetime spending by 167 thousand

41:46
dollars we bought the place it's under a

41:48
conservative assumption about

41:50
appreciation sure we financed it at six

41:52
and a quarter all this gets included and

41:56
including the capital gains tax on

41:59
selling it after 10 years which is what

42:01
we assumed

42:02
you can't do this with other stuff so

42:04
instead instead of the the

42:06
quote unquote advisor giving their

42:08
opinion I mean you're you're running

42:10
numbers into this I got a question for

42:12
you we got a few more minutes because I

42:13
know you got to run to another event

42:15
because you are a busy guy and I

42:17
appreciate you being on and want you to

42:18
be back on because I want to dig back in

42:20
a little bit more on the Social Security

42:22
side because my I guarantee you after

42:25
this goes live we'll get the thousands

42:28
of emails going why didn't you ask this

42:29
ask him this but my question

42:33
um for someone like you and I'm a

42:35
creative as well and a lot of other

42:37
areas

42:39
um

42:40
are you what's the new thing for you

42:43
right now or is there a new thing or is

42:44
it just perfecting all of the things

42:46
that you've already done what are you

42:47
waking up now what's what's getting your

42:49
attention and your energy right now

42:53
well you know first of all keeping out

42:55
keeping the company alive we're doing a

42:56
lot of research with the FED but the FED

42:58
actually is on budget crunch right now

43:00
so we have to try and we're going to try

43:02
and raise uh Capital to to get you know

43:05
to do more marketing and advertising so

43:07
all those kind of business type stuff

43:09
but if you ask me where's the future of

43:12
financial planning

43:13
it starts with our software but it it

43:16
says let's automate more decisions like

43:19
Roth conversions for example which are

43:21
uh but then uh

43:26
so there's that and then

43:29
there's more uncertainties to

43:31
incorporate like your earnings

43:32
uncertainty Stan so I could

43:34
ask you about your entire history of

43:37
earnings which you could

43:38
you know tell me about

43:40
not just the stuff that is covered from

43:43
the Social Security record but the

43:44
uncovered cheering tears and then I

43:47
would have a Time series of your

43:49
earnings so I would be able to kind of

43:50
discern what kind of the average trend

43:53
of your earnings is but also the shocks

43:54
the deviations how much kind of risk

43:56
you're facing sure and I could

43:58
incorporate that as part of the Monte

44:00
Carlo to say okay you're not you're not

44:02
just facing

44:03
rate of return risk real return risk but

44:06
also earnings risk which is a big thing

44:08
and then there might be some other risks

44:10
that now you know that might we have

44:13
always attention here between making

44:14
things

44:15
you know incorporating more things and

44:18
then making it too complex for people to

44:20
follow right versus not so

44:23
so these things will always be you know

44:25
optional do you want to you know the

44:27
basic thing won't have it but then

44:29
you'll be able to check a box I mean in

44:32
the settings to turn it on

44:35
so debate you know it'll be a the

44:37
default will be probably to have it off

44:39
but then if you want to explore this so

44:42
I'd like to get where I'm coming from is

44:45
100 Years of economic research on

44:47
Personal Finance it's not like like I

44:49
The Economist developed this methodology

44:52
for our software just on my own right

44:55
like the contrary economics says exactly

44:58
what to do it's like a blueprint how to

45:00
do it is what I did figure it out how to

45:03
do what but this but

45:05
economists have been working on Personal

45:07
Finance since

45:08
around 1920 or Irving Fisher developed

45:12
the life cycle model of saving

45:15
key economists worked on the economics

45:17
of annuities and life insurance in

45:21
particular in Israeli intercoms

45:24
you know Bob murden and other people got

45:27
the Nobel Prize and finance for work on

45:29
portfolio choice

45:31
so we have this methodology called

45:33
expected utility maximization that says

45:36
look you have all these trajectories

45:37
under this plan of Monte Carlo outcomes

45:40
and then we have all these under this is

45:42
this plan how do we compare them and we

45:45
have a way to do it in a mathematical

45:47
way it's called expected utility you

45:49
look at your average happiness and the

45:52
the difference between money and

45:53
happiness has to do with the fact that

45:55
you have diminishing marginal happiness

45:58
from consuming more and more Stakes at a

46:00
given setting it's it's diminishing

46:02
returns to extra consumption but so

46:04
you're much more concerned about the

46:05
downside than the upside that's risk

46:07
aversion so when you incorporate that

46:09
you get and that's actually in our

46:11
software right now uh wow we're actually

46:14
you can you can take your base portfolio

46:17
plan investment strategy compare with

46:20
let's say a safer one versus a riskier

46:22
one and see which one does better on an

46:25
expected lifetime utility basis telling

46:27
the program how risk-averse you are

46:30
and the risk aversion connects to this

46:32
satiation so we have actually got

46:34
everything that he could the

46:36
fundamentals of economic financial

46:38
planning all of it right including life

46:40
insurance we figure out to the dollar

46:42
how much life insurance somebody needs

46:44
to maintain a living standard of their

46:46
survivors if they make it to their

46:48
maximum age of life so I've actually

46:50
taken economics Theory

46:53
extremely seriously and said I'm going

46:57
to do it exactly the way the profession

46:59
says it has to be done

47:01
so that somebody like and I refer to Bob

47:03
Merton he's the Isaac Newton of Finance

47:06
he's done such fundamental work on

47:08
option pricing I got the Nobel Prize for

47:11
that with work with Merton and Fisher

47:14
black and

47:16
Bob loves the software and my goal was

47:19
to be able to get it to take it to Bob

47:21
Merton who uh Paul Samuelson said was

47:24
the Isaac Newton of Finance he quoted

47:26
that's a quote from him before he passed

47:28
away

47:30
and because he's done so much to fund my

47:32
work if he likes this then I know of it

47:35
I've done something for all these years

47:37
he loves it that's funny being the

47:39
marketer that I am I'm listening to this

47:41
and I you know I my my gift is to

47:45
simplify everything and to make sure

47:47
that the public understands I think your

47:49
biggest hurdle and you know this is just

47:51
you know showing people the value and

47:53
and there's actually a point where I saw

47:56
the price of it

47:57
and I'm thinking that might I mean

47:59
people look at that and go you know

48:01
you're going to hear Larry and then

48:02
you're going to go to the site and then

48:03
you're going to see the small price

48:04
you're like what wait a minute so here's

48:06
my tagline don't you don't have to use

48:07
it if you want to it's so much so simple

48:11
for so little and yes it is too good to

48:14
be true because I always say if it

48:15
sounds too good to be true it is every

48:16
single time not here so there's a bunch

48:19
so much for so little amount of money

48:22
um I mean so much so simple so so for so

48:26
little I think that's

48:28
the way that I would synopsize the work

48:31
that Larry and his team have done

48:33
because they've taken

48:36
enormous amount of data and simplified

48:40
it and then they're not charging a lot

48:42
for the consumer to use it for

48:43
themselves it's insanely cool and good

48:47
and I'm proud that I'm going to be able

48:49
to promote it through my channels to to

48:51
my people as well we got a couple more

48:54
minutes later I'm certainly going to

48:55
have you back on if you'd be so gracious

48:56
to be back on in the future I love

48:58
talking to you but what I would like

49:00
what I do with my guess I'll tell them

49:02
this beforehand is we do a mic drop

49:04
moment so Envision yourself as Larry

49:06
kotlakov mainstream rapper you're in

49:09
front of all these people you're gonna

49:10
say one

49:12
really cool thing to synopsize this up

49:14
I'm going to count you down from five so

49:17
might drop moment a true Superstar Larry

49:21
kotlick off if you've well you got to

49:23
listen to this one twice because it was

49:24
a lot and once again I'm going to have

49:26
all of these links on my site where you

49:30
can go and just easily click and get to

49:32
where you want to get to so here we go

49:35
Larry in five four three two one go

49:40
you want you'd like a Minecraft moment

49:43
give me give me a walk away statement

49:45
that's unbelievable no pressure

49:48
uh economics well uh Incorporated in our

49:53
software maxify.com can

49:57
make you free money safely uh because

50:02
uh it's out there to be had and because

50:06
this because we can't do these kinds of

50:09
calculations in our head we need

50:11
sophisticated software and the program

50:14
can put it all together and find me and

50:17
make money magic that's the title of my

50:19
book that's that's what the software is

50:21
doing it's making money magic

50:23
that person is Larry kalikov he is an

50:26
absolute Superstar and we're glad that

50:29
he's in the financial services business

50:31
from the standpoint of helping people

50:33
not trying to sell stuff

50:35
but I want to thank everybody on all

50:37
major podcast platforms for joining me

50:39
and watching us on the fun with

50:41
annuities YouTube channel I will see you

50:44
next time

50:46
foreign

50:49
[Music]