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The episode features Len Penzo's annual sandwich survey, where he compares the cost of ten common sandwiches to analyze inflation and highlight the savings of packing a lunch versus buying from a restaurant. This year, peanut butter and jelly overtook bologna as the cheapest sandwich, with the average sandwich price dropping 11% from the previous year despite overall higher costs since 2021.
The headline segment discusses how financial planners view home equity in retirement planning, given the potential for slower home price appreciation in the future. The hosts explore scenarios like downsizing or using reverse mortgages, emphasizing the importance of not relying solely on home equity for income and maintaining diversified, growth-oriented investments throughout retirement.
A caller asks about the strategy of staying fully invested in stocks until age 50 before shifting to bonds for retirement. The hosts critique this approach, advocating for maintaining equity exposure well into retirement to benefit from continued growth and rising income opportunities that outpace inflation over the long retirement years ahead.
Key Episodes Takeaways
- Len Penzo's annual sandwich survey provides a relatable and tangible way to track inflation over time, with this year's results showing a temporary 11% drop in sandwich prices despite overall higher costs since 2021.
- Financial planners caution against over-relying on home equity for retirement income, as housing costs may not diminish as expected, and diversified, growth-oriented investments are needed to maintain a rising income stream throughout retirement.
- The hosts advocate for maintaining significant equity exposure well into retirement, rather than shifting heavily to bonds at age 50, to benefit from continued growth opportunities and income streams that can outpace inflation over a longer retirement horizon.
- Companies have strong incentives to innovate and adapt during economic challenges, as executive and shareholder wealth is tied to corporate performance, driving efforts to sustain profitability.
- Diversification across sectors and asset classes provides exposure to overall economic growth, rather than attempting to time specific segments, supporting a case for maintaining a broadly diversified equity portfolio throughout retirement.
- Tracking personal inflation rates over extended periods is important, as the impact of rising costs can persist even when there are temporary reprieves in specific categories.
- Making sandwiches at home can provide substantial cost savings compared to restaurant meals, even when benchmarked against the famous McDonald's Big Mac as a reference point for assessing value.
- Fear of loss should not prompt overly conservative investment shifts, as the opportunity cost of missing out on potential growth can significantly impact the ability to maintain a rising income stream throughout retirement.
Top Episodes Quotes
“Back to your McDonald's example. All those people that are sitting around that big boardroom and wherever their headquarters is in Illinois or someplace, they're all looking at their balance sheets. Their balance sheets have a lot of McDonald's stock, and they're like, oh, my God, what are we doing, guys? We got. We got to really, like, this is. This means life or death to me. I have $100 million of reasons, if you're the CEO or whatever, to get this freaking right.“ by Og
― This quote illustrates the hosts' perspective on why companies like McDonald's have strong incentives to adapt and find solutions during challenging economic times, as the personal wealth of executives and shareholders is closely tied to the company's performance, driving them to innovate and sustain profitability.“The price of those sandwiches is still 24% higher in 2021. So you still feel the pain, even though it's 11% lower than last year. Last year, the average sandwich at $1.56 was 47% higher than the price in 2018.“ by Len Penzo
― This quote from Len Penzo highlights the persistent impact of inflation on consumer prices, even when there is a temporary reprieve, reinforcing the importance of tracking and understanding personal inflation rates over longer periods.“The whole idea of diversification is you get all of the returns of the economy all the time. It just happens to happen in different orders.“ by Og
― This quote succinctly captures the hosts' rationale for maintaining a diversified equity portfolio throughout retirement, as it provides exposure to the overall growth of the economy across different sectors and asset classes, rather than attempting to time specific segments.
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Episode Information
The Stacking Benjamins Show
StackingBenjamins.com | Cumulus Podcast Network
8/7/24
What's the most fun way to look at inflation? Well, even though it might not be fun to watch your wallet disappear at the grocery store, it is VERY fun to watch trends in food costs over time. Len Penzo began his annual sandwich study to just prove that packing your lunch is cheaper than buying food at a restaurant. He also wanted to show just how much money you could save to either pay down debt or invest. Instead, many years later, Len's sandwich study is always compared to the classic "Big Mac" study, where they track the price of a Big Mac. We prefer Len's study because making a sandwich is healthier, cheaper, and also maybe a little more fun. So today we'll compare the cost of ten sandwiches and see which one is this year's champion...but more importantly, we'll see if your grocery bill has gone up or down from a year ago.
In our headline segment, your home is your castle so it probably holds LOTS of cash value that you may want to tap into during your retirement years. How do financial planners look at home prices that might not rise as quickly in the future as they have in the past? We'll chat about housing, selling your house for retirement, how people navigate selling and "downsizing" in real life, and much more.
Of course, we still take a call from a Stacker on our Better Call Saul....Sehy and OG segment. Plus, we always leave room for a helping of Doug's trivia.
FULL SHOW NOTES: https://stackingbenjamins.com/len-penzo-2024-sandwich-survey-1556
Deeper dives with curated links, topics, and discussions are in our newsletter, The 201, available at https://www.stackingbenjamins.com/201
Enjoy!
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