 Thanks everyone, and welcome to Working Together on ThinkTech Hawaii, where we discuss the impact of change on workers, employers, and the economy. I'm your host, Cheryl Crozier-Garcia, inviting you to join in the conversation. You can call in to area code 415-871-2474 or tweet us at thinktechhi. Recent articles in print media and online have sent waves of fear throughout the community. Specifically, these articles have discussed the fact that people simply aren't saving enough for their retirement. This is creating an underclass of older people who live in poverty, older workers who may want to retire but are financially unable to do so, and putting stress on children who may be raising their own children and simultaneously having to provide financial assistance to their parents. Rising costs, stagnant earnings, and low interest rates make it difficult for people to build sufficient financial resources to protect them from misfortunes that might occur. Today's guest has some great ideas about stretching those saving dollars. Dr. Sharad Dodd is a finance professor at Troy University. He's done portfolio management, and he's worked in other aspects of financial management. And today, he's going to share his wisdom about how we can build those nest eggs and prepare for a happy, secure retirement. Welcome, Sharad. Thank you. Thank you very much. Thank you for joining us. Thank you for having me. I read those articles, and I'm sure you've seen them too, in your professional journals and even in just sort of mainstream media. And my initial fear was that, gee, I wonder if I'm saving enough. And there was a formula that I was taught as a young undergraduate student. You might have been taught the same formula that said, pay yourself first, and pay yourself 10%. So you take the first 10%, stick it in the bank somewhere, and you save that. And I've been doing that my entire adult life. But it looks like, when I look at the totals on my various investment accounts, that I don't have enough money to retire. Am I in the minority, or is this a legitimate fear? That's definitely a formula that even I was taught, but I think that formula is sort of dated because I don't think that's enough. And there's all kind of challenges that we face today as far as student loan costs now. We face different type of retirement programs and generations before us, whereas there were a lot more matching type plans with generations before us. But now you see a lot of companies don't match. Or if you're making above a certain amount, they won't match. So there's lots of challenges there. I think you also have challenges where people are looking for that type of financial literacy or assistance or wanting to jump into the market, but don't actually have an understanding of what they're jumping into. So it's lots of different challenges that we face today different from the generations before us or that old formula that we were referring to. I think the other thing too is that our past generations, our grandparents, our parents maybe, were accustomed to retirement plans that were defined benefit plans. The defined benefit plan is virtually dead. You can't find one. Now they're defined contribution plans. Now on the one hand, that's good because you know exactly how much your employer is putting in on your behalf, if anything. On the other hand, though, it's bad because the employee is forced to bear the responsibility for investments over which they may have no say, portfolios where they don't get to choose which vehicles they get to use. So as we as employees and people that have to be self-sufficient in our retirement, as we age, what can we do to be sure that we are continuing to put away enough so that we're not eating cat food and collecting food stamps as senior citizens? Well, one of the big things I think that people tend to forget and one of the rules that were part of the older generation and still exist today is the biggest asset or the largest asset that anyone has is time. And so the earlier that you're able to start, the longer you have time to generate those returns or grow your future cash flows for the future. I do examples in some of my investments classes to where I show students, if you're starting, you know, because one of the things students will say is, well, I don't have enough money to invest. And so I do an example. We're just putting $3 a day away. So if you save that $3 a day at the end of the year, that's about $1,095 or $1,295 that you're putting into an investment account. And we use the average, so the S&P 500 or the Dow. So we just use this average over the last since 1928 all the way to 2016. So we use that average interest rate over that period of time. And we look at how it grows if you're started investing that $3 a day at 20 years old, retired at 65, leaves you about $1.2, $1.4 million if you're averaging that rate of return over this period of time because of the compounding interest and other things that we talk about. And then I also show where if you're starting at 40 years of age and you want to retire at 65 with that same amount of 20-year-old, well, how far you're behind or how much you would have to pay into that, it wouldn't be $3 a day. It'd be like $30 a day. Or more, I think more, I think it ends up being like a thousand something or, but to even catch up to where those 20 years that you missed of investing. So a lot of times I think we forget that time is one of those things that we have to take advantage of. And to me, I think it's very important, even though we don't do this as a nation or in our high schools, we don't teach finance or this type of investment. We start with maybe accounting where you start learning the debits, the credits of the assets liability side, the financial statements, but you don't really get into understanding investments or compounding this interest over time. And I think it needs to start at a younger, even younger age because of all the challenges that we're facing today. Now, let me ask another question regarding those investments. You mentioned sort of averaging out the interest rate over the last 28 years and using that average to determine right around how much you would be earning on your money at any given time. But the interest rates are so low. I mean, I look at what my bank sends me in terms of a statement every month, and I say, shoots, man, I might as well spend this money because it's certainly not growing. I mean, it's not shrinking, but it's not growing either. And so how do we make that determination? How do we incentivize ourselves to save when we see .07 percent, I mean, less than one percent interest? Well, I think the other thing about planning for retirement is understanding just how we talk about diversification with portfolios so that if you have something, if all your stocks in your portfolio follow the market, then when the market goes down, your whole portfolio is going down. If you don't have defensive type of stocks, gold and other type of precious metals or other type of things that move the opposite of the market, which you're using that to diversify your portfolio to sort of mitigate some of that risk that you're facing, I think the same thing needs to be applied to retirement. And what I mean by that is a savings account is good, but just understanding what the tool or what that purpose of a savings account is for, it's more for liquidity. So it's something where you're not taking a lot of risk. So in finance, we always talk about the risk return. So if there's not a lot of risk, then there's probably not going to be a lot of return associated with that asset. So in a savings account, and I tell students this all the time, because once they start to understand, oh, so I need to have savings account, I need to have my checking account, those are liquid money, market, mutual funds, CDs, more short term, more liquid things that are not going to pay or give you that interest rate that you're anticipating or that you would like to see, then you have more midterm type of investments, maybe your investment accounts, your different shorter term or when I say intermediate 10 years, 20 years out, even longer than that, now you're talking about your 401Ks, your IRAs, your Roth IRAs, those type of vehicles that you're looking for is a long term investment. So each one of those places are going to have different types of interest rates that you should be expecting. So a savings account, if you're thinking, well, I should just save more and put more in my savings account, your future cash flows are not going to grow as much because like you said, they're paying .02, .03, .04 percent at the most you'll probably see. Now another way, so that's in real estate and owning your own business, all these are different retirement type of vehicles for you to have for later on in life if you need to cash one of these things in or liquidate one of these assets so you can have that cash or let that grow. So that diversification in retirement also should be applied just like it is in your portfolios. So what I'm hearing you say is you probably should not put all your eggs in one basket and that you need a combination of many different kinds of investments or at least a sufficient variety to be able to overcome shortcomings in the market as well as being able to exploit increases in the market or growth in the market. Correct, correct. And being in those different markets, I mean, again, it goes a step further in understanding what these assets are serving the purpose of these assets so because I hear that a lot like, well, I just need to save more. Well, that's not going to grow your future cash flows like you would like or even if you start getting into mutual funds or people, you know, you get a broker and they they put you into mutual funds, understanding or your expectations of the growth of that mutual fund is something that's a diversified type of asset. So it's not going is is minimizing the risk because it's diversified. So it's also going to minimize is not maximizing your returns. So you're not going to get those returns unless you're taking those type of risk. Are you an international type of mutual funds? Are you in tech type of mutual funds? Things that are more risky that have more volatility generally or you're going to see the returns that you know, you expect or the ones that you think about the 10 percent, the 8 percent, the 15 percent type of returns. Now, what do you do with someone like me who is incredibly risk averse? Right. Because I am, I, I feel differently about losing interest than I do about losing principle. Right. Yeah. And, and I, and I, and that's a very key point because I think the type of money that you're taking those type of risk with need to be extra. You need to have your basis covered. So a lot of times, even when you talk to advisors, they want to make sure that you have the right insurance, that you're protecting the assets, the principle that you already have, that you're not taking risk with that, that that's always there for you to fall back on. I think bonds and newities, those type of things are more safe, safe securities are safer type of assets where you can protect your wealth. Now, again, safer, less risk, less growth, but it's going to be there. So I think that needs to be the base of any investment portfolio that anybody has. Then with extra, if I want to play $50 here or, you know, every month or every six months or higher, you know, whatever your budget is, then that's the risk that you're taking with those equities and the more risky type of securities. But that, you should never use that as, you know, that's my basis. I'm taking all these risks, but I think also in the short term, because of when we talk about millennials investing, I think millennials have, you know, as far as what the internet has brought to us is we have different apps now that we can use. We don't necessarily have to go into a brick and mortar type of place. So I think finding those savings accounts that pay higher interests are generally going to be on those online type of resources. Now you do, because there's a risk, you don't think you can trust them or you haven't seen them. You're not talking to anybody, which is what we're used to. But if you go to a brick and mortar, like Bank of Hawaii, Regents Bank, US Bank, any of these banks are going to have those .02, .03, .04 percent interest rates on your savings account. If you use American Express, they also have a savings bank. It's not a physical location, but it's online. American Express is a reputable name. It has a strong name brand. They pay .95 percent on your savings accounts. Wow. And I think because of recent market, you know, how the market's been doing, they have a thing where they're paying 1.05 percent right now. Terrific. So if you're looking at increasing those safety, the safer type of assets, the less risky, you want to grow your money, but you want it still to be safe. I think we have to get out of that thinking of brick and mortar and using some of the technology or some of the resources that we have, but making sure they're still reputable. Speaking of technology, we need to do a bit of housekeeping. So we are going to take a break and introduce you to some of the awesome programming here on Think Tech Hawaii. And then we will be back to working together. And Dr. Sherrod Dodd in 60 seconds will be Aloha. My name is Steven Philip Katz. I'm a licensed marriage and family therapist, and I'm the host of Shrink Rap Hawaii, where I talk to other shrinks. Did you ever want to get your head shrunk? Well, this is the best place to come to pick one. I've been doing this. We must have 60 shows with a whole bunch of shrinks that you can look at. I'm here on Tuesdays at three o'clock every other Tuesday. I hope you are too. Aloha. Welcome back to Working Together on Think Tech Hawaii. I'm Cheryl Crozier Garcia, and we are chatting with Dr. Sherrod Dodd about building financial security and protecting our family's financial resources. Welcome back, Sherrod. Thank you very much. Now, we were talking during the break about two sort of foundational areas of a stable financial picture. Traditionally, these were things that we were told would facilitate financial security. And those two things were owning your home and college education. Now, that may have been true in the past. How true is it today, given what we know about new housing starts and other kinds of sort of mega economic factor? I think owning your home is a great resource to have, but I don't think that's something that everyone comes into growing up. Or once they graduate from high school or going into college has, I think that's something that a lot of people try to acquire, or it's something that may be passed down. But to say that you're starting out and you have your own house that's paid for, that's not everybody that fits into that mode. I think the second thing that you also mentioned, the education point, even we have various economic studies that look at education being the one thing that the best way to fight poverty, because it gives you so many opportunities. And I'm a witness to that as far as being from Omaha, Nebraska, going to the South at 18, playing baseball, going from undergraduate to my master's degree, losing my parents and my sister and my whole family, passing away during my doctoral program. But having that conviction to stick with it and to see it through allowed me opportunities to where now I've been a professor for nine years. I've taught at Mississippi State University during my doctoral program. I've also taught at Troy University for the last seven years. I've taught overseas. And so I've taught in Malaysia twice. I've taught in Vietnam. I've taught in UAE Dubai, or Jabal, Saudi Arabia. And these are opportunities that I may not have had if I didn't stick with it or go do the education or believe in it to where these opportunities would have come traveling to these different places. So all that opportunity that has provided me in the growth as a person financially is all because of education. Well, yes. But let me offer kind of an alternative hypothesis. In addition to the education, you made some specific choices about what to study, where to study, and how to pay for it. And these factors, I think, can also affect your financial health. I mean, you mentioned your program where you had only two PhD candidates, yourself and a classmate at a given time. So the university is kind of limiting the number of PhDs that will enter the job market at any given time. And that's a good way to keep employment highly competitive and high paying. By decreasing supply, you tend to increase demand. So how does the person choose? I think because I have a lot, especially, that's a great question, because I have family members, cousins that are now getting ready to go off to school and they're facing those type of challenges. Where should I go? Which one is going to be the most cost effective? Which one is going to provide me the opportunity? I think a lot of times, definitely being in that local state that you're in saves a lot of money. If you look at the in-state versus out-of-state tuition, out-of-state tuition has sometimes doubled, even tripled, what the in-state tuition is. But I also think you have to seek opportunity. So applying for out-of-state or maybe where a program is that has scholarships or that has funding for you at different places. Cast that net and see, and your in-state is always a great place to be or to fall back on if none of these others work out or they don't have the program. But just going to a place just because or spending lots of money just because you want to go to that school or to that state or to that place, a lot of times could be very costly as far as in the future. And for me, I think we talked about before, for my doctoral program, when I was doing my master's program, I wanted to do my doctorate degree. I went up to my professor after one of my classes said, and this may sound funny, but I said, I could do what you do. No, I've said that to professors. And he said, if you're really serious about it. I mean, we're going through the semester and you saw how involved in going and talking to him and just involved in my assignments I was. So he said, if you're serious about what you said, we also offer a PhD, a doctoral program, where we pay for you to go. So I was able to take advantage. Being from Nebraska in the school in Alabama, being able to get my doctoral degree paid for, but that's because of that outgoing effort and finding out and talking to, using your resources, talking to your professors, talking to local business leaders in the community, getting involved in the community. That has provided lots of opportunity for me. I've been on the board of directors of a tennis association back in Columbus, Georgia. But that's because I was reaching out saying, how can I help you guys? How can I help this? I've only been here four weeks now, but I've already joined the Waikiki Yacht Club and showed my interest in there. I've joined the Rotary Club here, the USTA Tennis Association here, and various just community, but that's all about getting out there, meeting people in the community. If there's some community service event, I'd love to get involved into that, just to meet people, talk to the people, so people can see who you are, see what you're about and you can see. And a lot of times that sparks opportunity. What do you do for the kid who, you're fortunate because not only was there a demand for people with solid finance, education and experience, but you were also good at it. What do you do with the kid who is not good at some of the more attractive, more lucrative profession? I think what you have to do is find your profession, I mean, find your passion. And one of the things my mother always told me is be the best at whatever it is you, if you wanna be a garbage man, well, be the best garbage man and have plans on having your own garbage company or your own line of trucks that you're running. You have to have those type of ambitions and those type of goals if you want to be that person you're dreaming or the person you're expecting that you can be. And so, I think that's always been my guiding force is being the best I can be and in doing something you have a passion for. And so for me, financial literacy is something I do, I do that for free. Again, since I've been here, I've done a seminar at Tripler Medical Center on investing in retirement. And so I did that for their ICU and PACU units there. Again, I've been asked to come back whenever they have another career fair day I have, you know, being on this show, having this opportunity to take advantage of this platform just to push and talk about financial literacy. I've done it for various student organizations, community organizations back in Georgia. So it's something that I just found that I have a passion for. And just like you said, I would hear people say this all the time is, well, you gotta do something you're passionate about. And as an undergrad student, only passion I had was playing baseball. Here you go. I just wanted to play baseball, play sports. And so going, again, that education being that base, that foundation provided me to find what my passion was. And I mean, I had a sense of it. I knew in high school that I wanted to be in finance, but we didn't have finance classes. So I never still didn't know exactly what that meant. But going to undergrad, my mother would say, well, do something in computers. Computers are the future. I do something with accounting. Everybody needs accountants. And I was like, no, I want to do finance. I don't know what that means, but I want to do finance. And so for my undergrad, I was in finance. My master's was in finance. Stuck in my doctorate was in finance. It's just something I stuck with, started to develop a passion to see, okay, this is all what entails, and find my niche within that field. So I think, especially talking to if the high schools students are listening, you may not know exactly what it is, but you do know what you like. You do know things that you'd like to do. So you have to stick with it, find that passion in a long way. Like I said, do those things as far as community, as far as just pushing yourself, as far as providing a foundation of education, getting involved with your profession. If you know that's something you want to do, just finding an internship, going out and talking to these companies just to say, I work for free. I just want to be around it, get involved. People see your hard work, see your dedication, and you will be rewarded for that. So it sounds like you are building an argument for being willing to take calculated risks in order to attain whatever goals you set for yourself, be they financial, professional, personal, sports related, all of those things. I think the question then becomes, how do we prepare ourselves to make that calculation? How do I figure out as a person of my age in my profession, that continuing in this profession is meaningful versus getting out before the market changes and finding something that could be more lucrative, more long lived, et cetera? Because frankly, when you were 16, you thought you'd be playing pro ball. I thought I'd be on Broadway. Neither one of us is doing those things. And yet somehow we manage to live lives of satisfaction and some very deeply held joy. For me, that has been going back to that diversifying yourself and understanding that, not just applying to portfolios, not just applying to retail or retirement, but also applying that to life. I've worked odd job, done these type of thing. I was a server at a restaurant, which was a very fun job because to me, I got to meet new people and have different conversations every night, every single table that I went to. So that was even a form of networking and meeting people in that city to say, oh, you're a college student and having that conversation with them. So I think you have to look at these things as opportunities. But like you're saying, on that path to finding what your passion is, I think you'll do other things that you'll have as fallbacks. That's why education needs to be a foundation that you have. And so from that, if you wanted to be an actor, if you wanted to go into sports, if you wanted to do these other things, nobody can guarantee, just like an investment, I wouldn't guarantee you any rate of return. I wouldn't guarantee, for stocks, I wouldn't guarantee you what your profit is gonna be. I can give you all kind of estimations, whether that's quantitative estimations or whether that's what I think it's gonna be. But I can't guarantee you, and I think that path of life is not something that's guaranteed to anybody. I think you just have to give yourself that diversification, those options along the way, but also have that foundation in mind. Yeah, well, it sounds to me like what you're saying is that we need to be able, not only to calculate risk, but that we are not going to have any return at all if we're not willing to step out in trust and in belief and in faith, really, that it is possible for us to attain the kinds of financial freedom that we'd like. Definitely, I mean, and I'm not sitting here saying I've never had my doubts even on the paths that I've chosen. I mean, I remember even going through the dissertation, sleeping in the office, thinking like trying to get finished with it and thinking just like, what if this doesn't panel? What if I don't pass that final? What if I don't? So there's a lot of self doubt along the way, but underneath all of that, you have to have faith or something that's pushing you, something that you're holding on to, whether it's the values that your family has instilled in you, whether that's the faith that you have in religion, whether that's just the belief that you have in yourself or maybe even a loved one. A lot of times, those provide a base and a foundation to help push you. Well, Sherrod, thank you so much for taking the time to join us. It's time for us to go, but we'll be back in two weeks to talk more about working together. This is Think Tech Hawaii and I'm Cheryl Kersher-Garcia. See you in two weeks. Bye-bye.