How This “Financial Ethicist” Plans for the Future of Retirement

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Today’s guest, financial professional and author of ⁠The Future Poor, Jonathan Grimm, believes the post-1945 version of retirement planning (stockpiling as much cash as possible for 40 years and praying you can leave paid work) isn’t going to work for much longer.

But as a financial “ethicist,” Grimm’s unique approach centers the social determinants of health and begins from the belief that we should figure out what’s best for people—and work backward from there.

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Mentioned in the Episode

• Median household income in the US (Census.gov)

• The Money with Katie Show episode with Grace Blakeley

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Jonathan Grimm:

It hits at the both/and aspect of, we have to do both. We have to really understand our context and make plans that really fit and match the current context as opposed to using plans or strategies that may be from 1980, where it’s like, we are not in the 1980s economy anymore. Things are different. We mentioned wages. Wages are pretty flat for a while, so that changes the dynamic. And so we have to recognize the context and then make plans and strategies that are appropriate for the context. And we need people to take responsibility and do things. We can’t be inactive when it comes to our financial lives.

Katie Gatti Tassin:

I think there’s a broad sense in American life today, even among those for whom it’s going pretty well financially that something isn’t working; that something about the status quo feels unsustainable, like our solutions for life’s problems just are not going to scale for much longer.

Today I’m sitting down with Jonathan Grimm, a financial advisor from Altadena, California who’s ringing the alarm that the US’s impoverished population is going to keep growing. Now if your ears perked up at the word Altadena because of the LA fires earlier this year, you are correct. Jonathan and his family lost their home in the Eaton fires around the time that he was finishing this book, an experience which he says solidified his perspective on the importance of leaving an individualist culture behind.

Importantly, his vision, he believes is more conducive to human flourishing than the old way ever was. And this is a good thing, because to Jonathan, that old way will imminently cease being viable for large portions of the population. The old way or our current retirement paradigm began in 1945, around the same time you may notice that Dalio pointed out our most recent world order began. Jonathan says, our big mistake right now is planning for tomorrow with yesterday’s information.

Now, this was an interesting read in conversation for me because I think Jonathan and I saw eye to eye on many of the problems and diverged just slightly when it came to the scale and scope of solutions, but I was still really eager to talk to him about some of the obstacles that came up for me while I was reading. And as I’m sure you’ve gathered by now, I am interested in the work of anybody who is confronting these challenges in an honest and clear-eyed way.

The backbone of Jonathan’s ideas and the math in this book, he essentially looks at median wages, median income. He looks at what a poverty level retirement looks like, and he’s essentially putting the puzzle pieces together and saying, okay, well, just based on the numbers, really everybody but the top 20% or 25% of Americans are going to be living in poverty in the next however many decades if trends continue the way that they are, which sounds really bleak and scary, but I actually think you will find this conversation quite uplifting.

So with that said, enjoy this discussion with Jonathan Grimm.

Well, Jonathan, thank you so much for being here and welcome to The Money with Katie Show.

Jonathan Grimm:

I’m glad to be on this with you.

Katie Gatti Tassin:

So something that jumped out to me about you is that you have a very interesting background. You have a master’s in theological studies and you write that you see your work as synthesizing philosophy, history, finance, ethics, and the political direction of our country. I was initially drawn to you, frankly, because of your inclusion of ethics in your work. I think that that’s a really understated and under-discussed element of personal finance and finance, more broadly, what we owe one another. And it’s interesting because I grew up Catholic. I went to Catholic school my entire life, and it’s only relatively recently that I have realized that the moral compass that I learned about every single day in school teachings about caring for the poor, and selflessness, the golden rule, that these things are still incredibly dominant for me in my spiritual center. They’re influential for the way that I see right from wrong. And you write about how all major religions essentially preach a lot of these same things. You talk about universal ethics and you’ve called yourself a financial ethicist. What does that mean to you?

Jonathan Grimm:

So I look at it from kind of two perspectives. One, I work in the financial industry. So we have a lot of rules that sometimes get labeled with ethics, and that’s true. They are unto sort of an ethical good or something that’s right. But I’m more concerned with working backwards from what is good for people and then figuring out what works well to make that happen. So we have laws like best interest laws or I’m a fiduciary by law, so I have to do everything in your best interest. So it’s things like don’t steal from old people. That’s a rule. There’s an ethical frame of why that’s probably the rule.

But what we do is in the financial industry is oftentimes we don’t know exactly how to define and work backwards from what is really, really morally good for people, what really works for people, and then back ourselves into the things whether it’s products or approaches or ways of doing things that then really help make that outcome happen.

Katie Gatti Tassin:

So your book, The Future Poor, it essentially portends the collapse of our nation’s retirement system as we see it. But this is a future that you see as acutely troubling for people who are currently under 50 years old and earning less than $150,000 per year. I know that our listeners are going to be wondering, is that individual income or is that household income that we’re talking about?

Jonathan Grimm:

Yeah, that’s a good question. It’s a question I get asked a lot and it’s by individual and there’s a reason for that.

One is, the household incomes in this country are pretty low. So in the median is $80K, so that means 50% of households make less than $80K, and then looking at 16.5% or so of household incomes equal $100-150K. So that’s a pretty big portion of households in this country that make less than $150,000. So I look at that and go, okay, that’s a majority of people are living household wise under $150,000. That creates a margin issue in people’s disposable income, which they can then allocate to savings or other financial tools that could be beneficial. So that’s one aspect of why I chose that number.

A second aspect is what I kind of consider economic vulnerability. And I think this is something that I’ve picked up in some of your work or in your book where we’ll take women, for instance, women have a different economic vulnerability than say me, but that puts me in a different economic situation or an economic vulnerability that say a single mom might be in. So then that creates a system where I look at it and go, okay, so $150K to me is a little bit of a threshold for what a household probably requires. A lot of times we get in the habit of thinking, oh, we’ve made it to $100K of income, but $100K does not go as far anymore as it used to. Oftentimes as we get into some of those higher income earning levels, then people start thinking they’re more okay, as opposed to thinking, what is the trajectory that this income level actually is putting me on? Is it working? Can I save in a way that can make this sustainable? That’s where that number comes. So it is primarily individual, but it can also be applied to household.

Katie Gatti Tassin:

Is the “$150K under 50” cutoff the cutoff because, under that income today in the United States, you will not be able to afford to save an adequate amount of money? Is that how you’re getting there? I know that you kind of back into this with 4% rule, okay, if you’re saving this much, if your income is this much as your spending is this much, then you’re just moving those puzzle pieces around. But is that the underlying dynamic that you’re looking at?

Jonathan Grimm:

For me, the numbers work out to roughly, it’s a $30,000 a year individual savings problem that we have in order to make the old retirement model of exiting the workforce at 65 and living off your assets. And so that’s when I take that and go, okay, so if it’s $30,000 a year per person, and I use some of the basic tools that we use in the industry, time, value, money, run, some average returns, actual rates of returns time, and that’s where the numbers sort of lands for me on a static level.

And so then when you incorporate into that the variability of our lives and the things that happen, that’s why that number to me stands out. And so that’s where I look at it and go, okay, who is able to do that in order to make that equation work of saving $30,000 a year per person? And if you take that, what I said about the 50% of households make less than $80K, that’s 60% of your, that’s a huge percentage of your income, and you’re like, holy moly, that just takes a lot. And so then do people have the margin in the system to make that happen?

Katie Gatti Tassin:

Yeah, well, it feels like you’re looking at wage trends, you’re looking at what people need to retire, and you’re simply going, these numbers actually just don’t add up. The trajectory that this is on is not going to work. You essentially talk about what a poverty level retirement is, and you say that, hey, I mean per the 4% rule, retiring with $511,000 in today’s dollars is a poverty level retirement because that translates to about $20,000 per year in income.

And so when we look at that financial planning fact, and we couple it with the fact that in the age group 51 to 64 right now, only the top 20% of those people have more than a hundred thousand dollars. You say that, yeah, okay, this is not going to be good, and it’s only because of the trajectory that we’re on, it’s only going to keep moving in the wrong direction.

And I thought it was interesting that you noted in the book that when you explain this to people in your life and you essentially lay out these numbers for them and go, all right, the top 20 percent’s great. Everyone else things are not looking so hot. You often hear some variation of the following, I hear you, but isn’t this just a personal savings problem or isn’t this a work ethic problem? Isn’t this just that people are spending on unnecessary things? Isn’t this that people are using credit cards too much? Oh, well maybe people should buy a home.

So in short, people essentially say, couldn’t this issue just be solved with some different choices? What do you say to that?

Jonathan Grimm:

That is always sort of the first thing that pops up because we call it personal finance, and so we think of it very much in terms of an individual personal finance. I go work, I make money, and I decide how I spend that. I maybe have some leftover or not, then I decide what to do with that. So it feels very personal. It feels very much like it’s within our control.

And I make an bold statement in the book where I say, in the future, poor that maybe only 17% of your financial situation are your successes. And I intentionally do that for a couple of reasons, but it usually gets a divided response, and it’s oftentimes one of the things that sometimes gets me in trouble. In my mind, it splits into two ways.

On the one hand, I find so many people that come to me and are like, thank you for acknowledging that there’s things outside of my control that affect my financial situation. So many people don’t recognize that I’m so anxious about my money because as much as I’m trying, eggs are outrageously expensive, and gas keeps going up and my health insurance is crazy. And so there’s this sense of relief that people have when I acknowledge in there that hey, there are things that are at play. We live in an economy, there are things that happen.

And on the other hand, you get the people that stick up their hands and go, what about personal responsibility? People need to make better choices. They’re not doing good things with their money. We always hear about things like coffee and avocado toast and that old narrative that if people just didn’t do those, then they would be fine. And then you have the people that are like, well, if I didn’t spend $6 a month on coffee, then I would have 70 bucks. What am I going to do with that?

I think of what it does. It hits at the both end aspect of we have to do both. We have to really understand our context and make plans that really fit and match the current context as opposed to using plans or strategies that may be from 1980, where it’s like we are not in the 1980s economy anymore. Things are different. We mentioned wages. Wages are pretty flat for a while, so that changes the dynamic. And so we have to recognize the context and then make plans and strategies that are appropriate for the context, and we need people to take responsibility and do things. We can’t be inactive when it comes to our financial lives.

And so that dynamic of trying to bring both of those together, and it’s oftentimes really, really, really hard. And one of the ways that I’ve heard it framed is in the sense of trying to understand what’s easier to fix or to point the finger to. And oftentimes it’s people. I think Kathyrn Edwards who you had on a while ago, the economist talks about this often of it’s easier for us to place the blame on people and to go fix yourself, do stuff. And not fix the systems or the other things that might be systematically in the way of people getting ahead.

And so what I try and do is go, hey, we got to take advantage of all this. We got to take good financial advice, good individual financial stuff. We also have to match that with a current context and bring both of those into the light and do something that actually will work for people.

Katie Gatti Tassin:

There is an element too, because I think that sometimes personal responsibility actually looks different than we might assume. Personal responsibility is budgeting your income. It’s knowing how much you’re making, what’s going in, what’s going out. Prioritizing accurately personal responsibility is also standing up for your community and contributing collectively. That also that does take personal responsibility. And so I think that there is sometimes this weirdly narrow interpretation of individual responsibility means things that only impact me.

There’s a great quote from another person we’ve had on in the past, Grace Blakeley, who says that whenever she gives talks, people will be like, okay, I get it, but what can I do? And she’s like, the problem is in the question. It’s not what can I do? It’s what can we do? What can we do collectively? What can we do together? We kind of have to get out of that frame of mind that the only solutions that are within my control are the ones that I can execute fully alone in my atomized financial life.

We will get right back to my conversation with Jonathan after a quick break.

Another part of the book that I found really provocative in a fun way was this idea that maybe our traditional vision of retirement isn’t actually the best idea for most people. I think that that’s going to trigger a lot of people in the financial planning space.

Because you note that four in 10 Americans actually report deriving a great deal of engagement, enjoyment, meaning, and identity from their work. I do count myself among them. I think about my work as a craft. I want to get better at it. I do it because I enjoy it as much as because it pays me.

But this is something that came up a lot while I was on my book tour where people would say, hey, it seems like your ideas are geared mostly toward younger women or women that are in the earlier innings of their career rather than the latter innings. And they are because the earlier you start, the more effective all of this advice is going to be. But they would say, what about my mom? She’s in her late fifties. She went through a divorce, she has nothing saved. What should she be doing right now to prepare for retirement? And my answer was always, at this point, the most important thing to do if you are in that situation is to find work that you can be paid to do that you really enjoy doing. Because it essentially struck me while reading your book that is essentially what you’re proposing, not just for those who might not be able to access a traditional retirement in the tap out at 62, 65 years old, but maybe for everybody. And so I would love if you could talk a little bit more about how that became integral to your vision for the future.

Jonathan Grimm:

Yeah, honestly, it was looking at the past in that retirement is something that’s really brand new in the course of human history, at least the way we do it, where we essentially, for the first time in human history after World War II, people were able to optionally exit the workforce and live off their assets. I mean, the times were very different. The economic situation was very different, and the supporting structures were all there to make that happen. But this is my, I call it my popular idea of not retiring. It’s another thing that gets me in trouble.

Katie Gatti Tassin:

Everyone’s like, shut up, Jonathan.

Jonathan Grimm:

Yeah, I know, I know. And for me, it really is, and I hope I acknowledge this, there is this sense that we do want to move away from meaningless labor into something that’s not that, for sure. And retirement seems to be the option as opposed to what you’re talking about is meaningful work. And I do think the move from meaningless labor to meaningful work is a key component.

And we see in the statistics around people that enjoy work, that increases with age. I think the correlation is much more correlated to age than actual income and wages, although I’m sure that wages play a correlation. There is a correlation that people over 65 actually really enjoy work. They report some of the highest job satisfactions of any age demographic. And so that was one thing that kind of caused me to scratch my head. And then in looking at some of this stuff around global health data on retirement, on seniors, I for some reason decided five, six years ago, let’s put retirement under the microscope and ask if is it good that we built this way?

And in looking at it, I was like, it was clear to me that yes, after the Great Depression of World War II, people wanted a little bit of a break. There was a couple of decades where it was like, oh, we’re finally on the other side and can rest. And so then that makes sense. And then you still have really short life expectancies and things like that that sort of are in the mix. But long-term, going back to question one around ethics and what’s good for people, I started looking at it and going like, oh, there’s this long list of things that are associated with the human experience of retirement.

And the list is anxiety, loneliness, isolation, depression, sedentary lifestyle, shorter life expectancy, increased health issues. The list goes on, declining health, faster onset of mental disorders like dementia and Alzheimer’s, extra familial burden, additional resource need.

And I thought, huh, is that what I want? Yeah. And is that good for us to put people on a path towards that and have we built the right systems and structures and made it feasible for if that is the path, are we doing it in a way that doesn’t result in that long list of, so that’s where I started really questioning is this good? And how does retirement create drags on individuals, on family systems on society in the terms of economic, psychological, the physical drag on people that have to care for elderly parents or things like that. And I was like, this is not the vision of retirement I see in the ads of me and my spouse in our sixties sitting in a field in bathtubs or golfing or travel.

Katie Gatti Tassin:

I think that might be a Cialis ad, actually.

Jonathan Grimm:

It might be. So I was like, okay, well what do we do instead? And then I was like, okay, well what have we done in the past? And that sort of opened my eyes as well as in the professional sense of financial advising and planning allowed me to go, okay, if retirement to me seems to be a problem, what if we just took it out of the equation and opened ourselves up to something else, which I think is very different than the rest of the industry.

Most of the industry is still so fixated on, the goal is 65 and exit, and most of the planning and strategies and the philosophies are all geared around that and making that happen. So I kind of said, well, let’s just set that aside for a while and see what else we can do. And that really opened up my eyes to what I hope is a much better and different pathway forward, as well as just a different model of thinking about how we do things as advisors, especially if it really is true that nine out of 10 of us aren’t going to actually be able to do it. So then what do we do that’s beneficial for people instead?

Katie Gatti Tassin:

That last point feels critical to me of like, we might want to defend that current approach or a retirement paradigm, but if we are going to do that, there has to be some sort of reckoning about the fact that the numbers are not shaping up in such a way that that’s going to be reality for most people for my generation and below.

The other thing that is occurring to me is that as we’re talking about an earlier era of post-war America, that life expectancy has also changed pretty dramatically. If you were retiring in your fifties and sixties, as I know some people want to do and are working toward that, you do have decades and decades of time ahead of you to theoretically not be working. And I think that the reality that I see when I just kind of anecdotally survey the adults that I know who are in that phase of life, many of them are still working in some capacity for enjoyment. The ones that are enjoying themselves and are having a positive retirement experience are still engaged in their communities in some way. And so that feels like that important distinction between meaningless labor and meaningful work that it feels like what you’re saying is the shift that would have to happen in order for that new paradigm to replace the old one is that meaningful work would have to be way more common than meaningless labor. Nobody wants to do meaningless labor until they die.

Jonathan Grimm:

No, no. That’s usually what people say when I talk to them about this initial response. So you just want me to work to die and it sounds awful. And it’s like on one hand I’m like, yes, because work does so much for us in addition to income, which you’ll probably need, but the social connections, the purpose, the activity, the engagement, the psychosocial dynamics of being in groups with people, the electrochemical exchange that happens between us, that’s necessary. Those are the things that stave off all of the bad stuff of depression and mental illness and decline in health and things like that. So there’s this sense of can we get a renewed sense of work being good as well.

I think we’re in a really cool time in human history where I talk about my grandfather who worked the same factory job for 45 years, and those days don’t exist anymore. And the exciting thing about that is we have a lot of mobility. We can do a lot more different things. We can self-select into meaningful work in different ways. I mean, you’re an example of someone that did that, and I think younger people today are not so tied into, oh, I just have this W-2 job that I don’t like.

They’re looking at the numbers the same way a lot of people are and going like, okay, you want to pay me $60K to do what? Let’s see if there’s a way I can make $60K doing something I actually like. And sometimes it’s even making less money and same amount of money and less time. There’s all these different trade-offs that people are doing and really exploring, which is really, I think it’s really awesome and I think it is part of what will help people in the future and sort of help transform this narrative. So I’m pretty excited, but it is, we’re in a really big paradigm shift in a number of different areas, and this is one that I really see.

Katie Gatti Tassin:

What I’m hearing and what was clear to me in reading was that you do take a much wider view of what sort of components there are within a rich and flourishing, thriving life. I think sometimes in the financial services industry or in the personal finance media ecosystem, it is pretty narrowly focused on line go up more money good.

Jonathan Grimm:

Yeah, exactly. Exactly.

Katie Gatti Tassin:

You ground your work in the social determinants of health. And this is something that I’ve been spending some time with this year because I find that in America, and particularly right now, we are much more adept at discussing personal health than public health. And I think that this is the same distinction between what can I do versus what can we do? But to me, poverty is the biggest health crisis of our time, the biggest public health crisis. There was this famous 2016 JAMA study that found the difference in life expectancy between the richest 1% and the poorest 1% in America is 15 years and we have since had a pandemic. So I have hunch that it’s probably worse now, but that to me far outstrips any other personal health life expectancy metric. So tell me more about why the social determinants of health became so central for you in your work.

Jonathan Grimm:

Yeah, it was really from an ethics standpoint and an ethics background of thinking what actually makes us healthy and what are the factors that might not be money that really contribute to what makes the world go round, what makes people function and taking that very seriously and the World Health Organization commissioned a huge study and you talked about universal ethics.

One of the things I love doing is finding things that I can map onto different cultures or when they study things that happen in China, in India, the US in Europe, then you’re like, okay, I think we’re getting closer to something more broadly that can be applicable that we need to take really serious. This is telling us something about humanity itself. I do think there’s some social good, and the more we can find things that we can all work together on issues, the better off we’ll be.

But the social determinants of health really narrowed down to five main categories and where these are present, then they transcend things like genetics and other factors that we normally attribute to individual health. And they essentially, the list goes economic stability. It’s not like massive amounts of wealth, but just if you have economic stability and you’re not going backwards. Access and quality education is one of the components. Access and quality medical care. Built environment, which that’s things like roads, hospitals, infrastructure, grocery stores that you actually have a way of moving and operating in society. And then the last one is the study of community context that’s having deep social connections and relationships.

And so where those five things exist, you find radical change in people’s health, their life expectancy, their wellbeing, their mental health. And so then I looked at that list and said, huh, have we been doing a good job of these here? Most everyone looks at the list and says, this seems kind of obvious. And then when we look at our current context here in the United States, most everyone kind of has this general sense that these all kind of aren’t working the way that I think they should.

So what does that mean as far as outcomes for us? We have medical is—one big thing where I think we’re the only western country that has medical debt and medical bankruptcies, education. We could go on and on about issues there. We have things called food deserts in our country, which just is nuts given how much food and wealth we have. And then community context, I’m a big fan. Are you familiar with Robert Putnam’s work on Bowling Alone?

Katie Gatti Tassin:

Oh yeah.

Jonathan Grimm:

Okay. So studying that for the last 30 years is really eye-opening to see, okay, we need to be in community somehow, some way, shape or form. And yet time and time again we just continually retreat and then we continue to have this movement away from those things into something that’s not sustainable for our health. And so those things became really big, especially since all of them touch money in some way, shape or form. And we really have to expand our thinking from the financial world of going, no, these are the things that also are included. So how do we participate in making these things happen? As well as what’s your budget?

Katie Gatti Tassin:

Are you familiar with Eric Klinenberg’s book Palaces for the People?

Jonathan Grimm:

I am not. I’ve heard the name.

Katie Gatti Tassin:

I think you would enjoy it. He talks a lot about a couple different communities that he studied where there were investments in building up the library system as well as public green spaces where he essentially looks at the effects on human and collective community, psyche of having empty lots of blight, effectively overgrown, some structure that’s falling apart that probably is just not very pleasant to look at, but also tends to attract crime and other things that you don’t want in a community. And they essentially went to these different neighborhoods and rebuilt them as community gardens or green spaces or places where people could spend time together. And the results were pretty incredible.

And I think those two things built environment and community context are very closely related. I think when we look at, there’s that joke that always makes the rounds online of like, oh, Americans are obsessed with college and their college years because it was the last time they lived in a walkable community with all their friends. It’s like I do think that there is something to that for sure to. So when we talk about the fact that some of it feels obvious, and yet there is this glaring contradiction for many of us when we look around at how most people live, I was very curious when I was reading about what you felt like the solutions were, what do we do about this?

And so when I got to that section, I have to admit, it actually did not go where I thought it was going to go. And so I do want to challenge a couple things that came up and talk through this with you. So before we talk specifics, you note that there are a couple institutions that you see as pivotal to moving forward. So lay those out for us.

Jonathan Grimm:

So in the book I lay out five economic pillars that made retirement work, and then I also pair that with five social pillars that help make the whole system go, whether that’s retirement or just our general wellbeing. So when you put all those things together, then you get a really robust thing. And some of that is understanding that we need different structures for different things and that different structures can provide different benefits.

So I start with, I talk about family. Family is really important and I make some distinctions that can be like mom, two kids and a dog. But I think family is an expanding context, especially in our culture in western world where people are self-selecting into new versions of family and family’s taking on different forms. So I take a broader approach on that word, and I think of things like the government. The government plays a role in our economic lives, and so what is their responsibility and what parts do they play? I talk about education not only from thinking in terms of social determinants of health, but education. I mean like you just mentioned, college oftentimes provides our last walkable environment or things like that as well as so much of our development as people, especially at the critical times, come from our time in high school, whether it was a specific teacher that really influenced us or a coach. And it’s the first place where we sort of start to encounter the world outside of our family.

And I talk about corporations call that work business that’s sort of twofold. One, they tend to be the economic engine of production, which is great as well as they provide jobs and community and all of these other things. And then the last one is the importance of faith communities. And I take a broader definition than just church on Sunday, and there’s a lot of ways that we can engage in intentional community with each other in different places, but historically, church and religious affiliation tends to be a central community gathering place. And so to me that those five make up what I call the five social pillars and then looking at how have they helped and how have they backed away from us as people over time?

Katie Gatti Tassin:

I want to get into a number of specifics around the sub bullet points here.

Jonathan Grimm:

Yeah, you got some pushback for me, which I love.

Katie Gatti Tassin:

I have some pushback for you, Jonathan, and I’m excited to talk to you about it. So where I started to diverge was the discussion in particular of things like education in corporations. And I’ll tell you what I mean. I think if you haven’t read the book, you might be like, what do you mean? How could you possibly disagree with the fact that education matters?

Jonathan Grimm:

Yeah, my logic is infallible.

Katie Gatti Tassin:

Infallible. So starting with education first, the recommendation that you made for the educational piece of this is financial literacy being taught in schools, and I agree that financial literacy needs to be kind of more commonplace here. But what I thought you were going to say when I started that section was, oh, we need to ensure that everyone can receive a quality education.

We know that that’s just not the case in the United States. Something like 60% of Americans read at a sixth grade level, 20% of US adults cannot read. So I agree that financial literacy is important, but I see it as a minor component of what is ultimately a much larger access problem when it comes to the education system in the us. And so I’m curious, do you see that differently or what was the thinking there of the scale and the scope of how you see that as being where you would start?

Jonathan Grimm:

Yeah, I completely agree with you that it is a massive thing and that there’s multiple levels that create the impact on how education really helps shape our health. So I have three kids in the fall. I’ll have a middle schooler, a freshman in high schooler and a senior in high school. I think one of the main things I was thinking is these guys haven’t learned anything about money or taxes. So I think that was probably very much on the forefront of my mind.

And the second one, I’ve worked at a few places in my life that have unsustainable business models, and I think when I look at higher education, I think to me it’s one of the biggest unsustainable business models. I also think the profession I’m currently in now might be another one. It’s not a sustainable business model for most advisors if they’re still trying to do some of the same old stuff just because there’s been such consolidation around the top 5% of earners.

I was looking at higher education thinking there’s part of it that’s going to take care of itself because they’re not going to have people coming. People are already not wanting a hundred thousand dollars of debt for a degree they won’t use and that won’t create economic mobility for them. So I think we’re already starting to see the cracks. I don’t know if I was in a space of being like, I don’t know that I need to address it to that level. Although on the one hand, I do think the student loan stuff that emerged out of the 1980s and that affects so many of the sub-50 might be worth some extra exploration. And I know other people have done deep dives into that, but I do agree with you that it’s a serious thing that needs serious overhaul on a number of levels. I just think that was where my mind was at.

Katie Gatti Tassin:

That totally makes sense. That was really the first point where I was like, I don’t know that I’m thinking about this, or I kind of thought you were going to take that somewhere else. And so I was just curious about what led you there as opposed to a broader overhaul. We really are talking about a matter of scale. It’s one thing saying we should put financial literacy in middle school is a completely different scale of solution than we should overhaul the entire education system in the US because something about this isn’t working. And I think that you could spend an entire other hour talking about what is the cause for that.

I think that’s something that has always interested me is the way in which we fund public education in the US. I kind of looked into this a couple years ago. I was like, it’s really weird that we do this based on property taxes. The obvious outcome there is that rich neighborhoods are going to have good schools and poor ones will always be under-resourced. And when I did some digging, it was like, that’s sort of how other countries do it, but other countries also tend to try to balance that a little bit more by rather than having it be literally neighborhood by neighborhood, it’s they collect all the money and then just distribute it equally so you don’t have these super unequal outcomes in the system that is theoretically the basis of a meritocratic belief system. You are disadvantaging people from the jump if you have rich neighborhoods have really good schools and poor neighborhoods have struggling schools.

Jonathan Grimm:

That speaks to so many issues that I think we have with some of the ways that things were built. You can see historically over time when the majority of people were much more closer in their economic status back in the post-World War II era, then those sorts of ways of doing things make a lot more sense because it essentially has a greater level of equity because more people are in the same spot. But then as that changes and the system doesn’t, then it creates those imbalances that only perpetuate further imbalances.

You mentioned the studies about poverty being the health crisis and shortening life expectancy. You see life expectancy correlated with the ability to read and all these other things that all start to become very crystal clear that, oh, if we don’t do things the right way, this doesn’t end well for people.

Katie Gatti Tassin:

We’ll get right back to this conversation after a quick break.

I do want to talk about corporations. I think that something that you said that did land with me was essentially it’s easy because of the power imbalance in society to kind of lay all the blame at the feet of corporations and kind of make it this antagonistic us versus them story or narrative, but that the only way forward is going to be cooperation.

And so you had noted that Fortune 500 companies alone profit between $1.5 and $2 trillion per year, right? This is profit, this is after expenses. This is after everyone has been paid, $1.5 to $2 trillion annually, the top 500 companies. And so your recommendation was that corporations should allocate even just like you kind of did this little thought experiment of, hey, if they just took 1% of that and put it in employees retirement funds, that would make a big difference.

You also mentioned that they should be providing financial resources as far as investment advisors or planners go to their employees so that people have access to financial professionals who can help guide them. And I had that a similar reaction of, okay, agreed. And it feels like the role that corporations need to be playing is just paying people more.

The median income in the US is as we’ve discussed, half of that $150K cutoff. And so I think I struggled a little bit with the idea of, okay, we’re going to give people investment advisors, but those people really don’t even have the money to invest. What do you think about that pushback? I want to tease out how you see corporations in this equation.

Jonathan Grimm:

It’s an area that I struggle with too in terms of thinking about providing advisors to employees for the very same thing you just said. What do we do with people that don’t have a lot of disposal income? I don’t know that most of us in the financial industry really know what to do. Our solutions are based off of lots of money and being able to play with lots of money.

Katie Gatti Tassin:

Oh yeah, a hundred percent.

Jonathan Grimm:

So what do you do with if you sat with a client so to speak, and we have a hundred dollars a month extra, what do I do? Most of us have no idea. And then there’s also no incentive within the industry for that type of business because most of us get paid by some sort of money being under our management or put in products or people paying us for our services. So there’s some of those things that do make it challenging.

I think corporations have tremendous power and potential in ways that I don’t know if they see and know if they can really champion them because they don’t sit on a balance sheet as clearly as other things. I’ve run thought experiments and I’ve done this professionally in different places where let’s pay people more and see what happens.

And in one sense you’re like, well, that’s more money out. And you’re like, yes, it’s more money out. I get that. Will it result in more money in? And balance itself out? And those things are oftentimes really, really hard. They oftentimes are the unseen or the unquantifiable or you can’t just look at cost of goods or tariffs or what’s the labor cost? What’s the healthcare cost? You oftentimes can’t put numbers to them, but there’s an intrinsic sense that when corporations do better for their employees, they increase retention loyalty, they increase the desire for people to want other good people to work there. That might not be a clear line on the P&L, but it is a real sociological sense that that does exist.

And I also argue that one of the things that I think we’ve missed is the former labor secretary, Robert Reich has a whole course on wealth and poverty. And one of the big things he talks about is the shift between stakeholder capitalism, which is essentially the idea that everyone that is participating in touching this product, call it an iPhone, from the manufacturing to the Apple sales floor, to Tim Cook and beyond, everyone has a stake in this thing to the user that’s using it. So everything we do should be unto making sure that all the stakeholders have value and find value. And by and large, that’s the way America worked up until essentially 1980. And then after that, you shift into shareholder capitalism, which is the shift that, no, what matters most is making a profit for our shareholders. And you can understand the logic and thinking behind both.

But I’ve wondered if instead of keeping those two things or at odds, what if we put them together? Would we actually create better shareholder value by taking a bigger approach than just $1.5 to $2 trillion a year that ends up at the bottom of the spreadsheet and thinking then would there be better brand loyalty?

Most of us already pretty loyal to certain products in certain places, but would we end up creating a better system and a better economic system as well as help keep creating a purchasing class in our country that is 100% necessary for all these corporations to stay in business? And so that’s sort of the big picture of how I think in some ways corporations could help. And then I’ll just sort of bring it back to the advisor thing in business, I’ve met with so many companies and people that never meet with anybody. You get employed, you go to HR, they hand you a packet and say, what do you want for your retirement? And there’s nobody besides the HR person, maybe a friend in the cubicle or someone at the water cooler that has any help. And we statistically find the more likely people have someone that they can meet with to enroll or automatic enrollment radically changes people’s savings rates and behaviors.

And part of it was maybe for some self-serving purposes and knowing that this is a huge gap in the financial industry, there’s so many plan providers that absolutely do nothing with the employees and the employers that they service. And in some cases it’s millions of dollars that they manage and they never show up. And so in one sense for me, it’s like I’ll meet with everybody and talk to them about their plans and help them understand that could be really good for business in providing a next level thing. So there is a little bit of a selfish motivation, but I also do rest on my ethics and moral convictions that I do think that would really be beneficial for people to have someone that they could go to. So I’m trying to put all those things together in one sense and try and tap into corporations have massive amounts of resources that they could bring in me for a fraction of the per person cost than a single person could. So that’s a bit of the thinking and the narrative that goes along with corporate responsibility for me.

Katie Gatti Tassin:

There are two components here. There’s what we are trying to achieve and how we actually go about achieving it. By that, I mean how do we sell that to other people? How do you get people on board with that and the economy is an ecosystem. So I think if you zoom out really far, and I think back on stories about Henry Ford, he did raise wages and I think give people more time off, not because he was a benevolent boss, but because he recognized that his laborers were also consumers. And in order for people there to be enough people to buy your product, there have to enough people in society that have the money to buy your product.

And so if you structure an economy under this shareholder capitalism framework where over time you see more and more wealth concentration at the top where I believe the top 1% gets, I don’t know, somewhere between 15 and 20% of all income right now, high earners are not spending the vast majority of their income. They are consumers for sure, but a lot of that income is sitting in assets. And so you’re not going to see a lot of growth from a consumption and purchasing power standpoint if the vast majority of humans in your ecosystem don’t have any extra money to spend. That’s not long-term good for an economy.

But what’s funny to me about this differentiation between shareholder capitalism and stakeholder capitalism is that as we’re describing the tenets of stakeholder capitalism, which sounds a lot better, everybody has a stake, everyone has value, everyone here needs to be considered, all their opinions need to matter. They need to benefit from this too. The little Karl Marx in my head is being like, that’s socialism. You are describing socialism, but that’s a bad word in America

Jonathan Grimm:

It is.

Katie Gatti Tassin:

Stakeholder capitalism sounds like something more people could probably get on board with, even if the underlying mechanics are more about distributing ownership and not having this distinction between the laborers who are doing all the work and the owners who are benefiting from the value of those assets rising in price.

Jonathan Grimm:

Yeah, I mean I always have debates about capitalism and socialism and for me it’s all about how do we keep production going and oftentimes both inhibit production in some way, shape or form. I look at Apple and go, you want to sell a new iPhone to me every single year? You don’t want me to skip generations, which is what I do now. So what are you going to do to make it so that I am more likely to do that?

Katie Gatti Tassin:

We’re going to change the color and add another, we’re going to add the fifth camera to the back.

Jonathan Grimm:

Yeah, it’s like, okay, you didn’t iterate, you didn’t iterate well enough. But if there’s some sort of economic value and social value that I’m deriving from making that purchase, I am way more likely to do it. And we’re very simple creatures that way. If there’s social and economic value we’re in. And so if that’s the case, and that’s why you see a lot more companies moving to more corporate responsibility things more cause oriented because they know that consumers require more than just a good product.

Katie Gatti Tassin:

How do you think about climate in that perspective? I know that you do talk about climate in the book. That is also an element of this, of just the long-term sustainability in general of what we are doing and the kind of underlying growth assumptions that power all of it.

Jonathan Grimm:

Yeah, there are so many factors at play that make us feel more connected or that a company is operating more with a stakeholder mindset and the environment and the climate is one reduced packaging makes people happier, not having so much waste knowing how companies are allocating the resources. Are they doing things here that are climate-wise very good, and then outsourcing all of their production to someplace that is climate-very terrible. And so that’s where having a better global understanding and those things just matter a whole lot.

I think corporations really, if they return back to a real understanding of these things, I think they’ll actually set themselves up for the shift back into the more stakeholder mindset. And I think that’s what I love about younger people. They’re much more concerned with that, and then corporations are going to have to adjust and adapt and they’ve had a good run in a certain way, but again, it’s not sustainable if they’re not willing to start playing by the new consumer basis rules. So I’m excited about it, but I know it shift and we have to do these ebbs and flows through different time periods and things like that. So

Katie Gatti Tassin:

I just love everyone is going to the title of the book and how you just joke that it’s like, yeah, The Future Poor, more people are going to be poor in the future and I’m excited about the solutions that we have ahead of us.

Okay, so we’ve talked education, we’ve talked corporations. My final little piece of pushback kind of straddles the line between the faith piece and the government piece. And so you write a little pitch for a hypothetical faith community. You call it money church. And you say, imagine that this was something that was offered to you and how beneficial this might be to your family, your community, et cetera. And it says, we help provide for medical needs. We help pay for college. We are actively supporting disadvantaged areas and social programs provide a diverse group of people to form supportive friendships for every stage of life, and we will ensure your economic stability no matter what.

And as I read that, I was like, that sounds great. And much of what we’re describing this faith community doing is just what other high-income countries governments do. So this is obviously, I think a suggestion for, hey, think about your community and how we could come together at this smaller scale and provide these things to one another. This is a little bit more within our control, especially in the next four years than overhauling the federal or state governments, but you clearly believe in the importance of collective action. That’s clear. I want to understand why you locate the responsibility or the appropriate center for fulfilling those needs in church rather than in state.

Jonathan Grimm:

The way I see it, I think it’s fundamentally understanding that both serve different roles in how we get essentially back to the social determinants of health, which that pitch is essentially a social determinants of health pitch. So when I think about faith communities, and I’m a pastor’s kid, so I’ll be upfront, I grew up in the church, I have a master’s in theology, all of those sorts of things. But for me, and this is an area where I might get in trouble, but the magic of it isn’t doctrine and the rules, it’s the community. And a lot of people like to think that it’s the doctrine and it’s our strict beliefs or it’s our way of doing things. And I think there’s some of that that can be helpful in a lot of ways that can be really problematic. And I mean we’re seeing some of the problematic aspects of Christian nationalism and things like that creeping into the political sphere.

But when I look at faith communities from a social connection standpoint and the value that they have, it does get back to where do we go to get this interpersonally? And so I think there’s a few things like one, it’s intentional and voluntary, and so these are relationships that you build and form with other people on a regular basis that are voluntary and intentional, and I think voluntary and intentional primarily works better than coercion and unintentional or random, and I think they’re interpersonal and close government’s distant, I don’t know, government, and so government makes laws and does things. I see them on the TV sometimes. Sometimes I really scratch my head. Other times I’m like, yay, good job.

It’s not interpersonal and close enough for the daily needs of life or the things that pop up or the ways that we care, feed clothes, do the things of the daily that keep people sustained. I also think there’s a sense at which faith communities have the ability and we have the ability if we form them to insource progress rather than outsource progress.

Katie Gatti Tassin:

What do you mean by that?

Jonathan Grimm:

So we can insource so much by working together with people that we’re close to as opposed to outsourcing it to another, the government to take care of it. I think we need both because we need both to play their part and to create a whole economy and a whole system. If I had to choose one, I would choose insourcing with other people for the long haul and to be there with me in my time of need than outsourcing to someone I don’t know or a system that I don’t really have control over or that makes its own things.

Then the last thing that I really feel, I always have this question, do I want the government deciding what is ultimate good for people and for me? And I think that gets back to the ethics conversation of, I think ethics is much better done in live interpersonal work than theory, and it’s good to have theories and it’s good to have things written down and good to have rules or things like don’t take from old people or don’t embezzle money. These things that we need law and order in a way, but we also need something interpersonal where we go, this is what’s good for people and I’m going to work on behalf of the good of myself and others in relationship with other people and really live in the daily of what are people going through and what do people encounter and what needs are they facing? My friends have X, Y, Z needs. What do I do to kind of help? How can I be a part as opposed to, ah, you’re in trouble. Well call your local senator or apply for a government program.

I think there’s something much more tangible and real that can get to by the interpersonal community. And I think historically faith communities have served a role and my hope is that they return in a lot of ways to good ethics and this real sense of what makes us healthy.

Katie Gatti Tassin:

So some of what you’re describing to me reminds me a little bit of the principles of mutual aid networks. So there’s this self-balancing effect where it’s very direct, it’s within your community, you see a need, you fulfill it. There isn’t a bureaucratic process that must be followed. It’s truly a very simple, this person needs food or money, give them food and money. And it doesn’t have to be complicated. It feels like sometimes when we talk about this, and again I’m going to invoke Grace Blakeley, it feels like conceptually we pivot between two options. There’s either you kind of let the corporations have all the power and run roughshod and hope that they do right by us, versus you give the state all the power and hope that the state does right by us and you outsource a lot of the power to them. And I have found her discussions about this secret third option, which is essentially this decentralized distribution of power that in a sense, it does kind of feel like that’s what you’re describing here.

What I’m picking up on is it feels like there are a few principles here that are kind of guiding values for you, the voluntary, the intentional, the closeness, right? I think for me, what I see the value in those things, I also balance that with values that matter to me, which are essentially scalability and efficiency. And so I think the shortcoming that I fear when we’re talking about maybe a company or a local organization fulfilling that role is that without calling for a fundamental shift in how we treat college or healthcare in this country, how prohibitively expensive those things are, we might just really be pooling our resources on the demand side and continuing to subsidize private profit and private gain in areas of our economy that are effectively public needs.

And so I look at that and I go, okay, if scalability and efficiency are my two top priorities in the way that my brain works, it seems just simpler and cheaper and more efficient to strive for a world where public goods are publicly owned and that you can still have private options. I worry about pooling our resources just to continue paying those ever prices.

But I do think, I like that. Something that I really like about your approach is that even though you didn’t use this word, that there is sort of a decentralized and distributive property to the power and the community aspect of how these problems are being solved. And there isn’t one all-powerful institution that can kind of with the snap of their fingers, change everything for everybody.

Jonathan Grimm:

Yeah, I agree that there isn’t one, and I don’t even know if having one would be good. You sometimes see that when you have a leader that runs their own direction and it usually doesn’t go well. Also, in studying lots and lots of history, it doesn’t seem like governments ever do production really, really well. And so we need creativity outside of the bounds of government to do production and to create and to innovate and to push into new areas. And we also need government to make sure that they don’t do that in a way that is harmful. So you have these checks and balances within the ecosystem and leveraging each for what it’s really, really good at. Government’s really bad at making money.

Katie Gatti Tassin:

Well, I guess because that’s not really their job.

Jonathan Grimm:

And so it is either taxation or printing. And so neither one of those are economically viable for an entire system to operate based solely on that. You need some other means of production that is creating money, value and things like that to help make the system work really, really well. And so I think if we can get back to some of the ways that each of these players are really important and the roles that they play, I think we could get back to some of the states of more economic stability that we’ve seen at different times in the past and more broadly so than just a smaller and smaller percentage of people feeling economically stable.

Katie Gatti Tassin:

Something that you brought up on a financial planning note specifically that I found really interesting was this idea that those with annuitized income in retirement, would it be fair to say that a social security check is a form of annuitized income? It’s like a guaranteed payment that’s not determined by market performance. I know you’re probably talking about annuities, insurance, things of that nature, but just so that the audience has a sense for the difference here between an income that you’re going to get no matter what the market is doing versus an income that is dependent on this asset up or this asset is down.

Jonathan Grimm:

Yeah, I think of social security to me is a public pension annuity is more like a private pension.

Katie Gatti Tassin:

Oh, okay. Good distinction.

Jonathan Grimm:

Because pension usually makes more sense and how to classify and label them. So then you have corporate pensions, so where that’s what, there’s not many of those and you have government pensions for teachers and government workers, military pensions. So you have these different places that then provide you income in your post-work years.

Katie Gatti Tassin:

You report that the data suggests that people who have that type of income report feeling more satisfied basically than those that are just having to rely on their equities essentially or their bonds. And so you advocate for buying some form of permanent life insurance.

And as a strident member of the personal finance community, I must tell you, my hackles really went up when I read this. I’ve seen all the calculations of like, hey, buying term, invest the difference that’s going to net you more money later. But I thought it was interesting that you actually kind of took that argument head on in your work and you tied the case for permanent life to your broader argument about the benefit of pooling resources and collective benefits to be gained.

 I did not get the sense that you were arguing, oh, you’re going to end up with more money. It’s not about maximizing the amount of money possible. It’s about creating a different type of income entirely. Because I have been skeptical of this on the show in the past, I wanted to talk to you about why do you think this is a good idea? How do you think about this in the context of your broader argument?

Jonathan Grimm:

Yeah. Well, I am so excited for this question because it is one that comes up and all the conversations around permanent life insurance are just, to me, they’re wild. And so you have the people on one side that are like buy term, invest the difference. Permanent life insurance is a scam and it’s crap. And you have the other people, they’re like, it’s the greatest thing in the world. You can bank on life insurance and all these other strategies and the ways people talk about these tools. And so it’s either a magical tool or it’s a piece of crap.

Katie Gatti Tassin:

Yeah, we’ve definitely taken the piece of crap route before. So I’m like, let me offer the other side.

Jonathan Grimm:

And I think most of it out there is. And there’s a few reasons.

Most people, especially the people that sell them, don’t really know what they are or how they work. And a lot of the companies that provide them, they’re not good. So it gets its bad stigma for a reason. So one of the things that oftentimes happens in the life insurance, especially the permanent life insurance conversation, is it ends up being a debate about which tool is better. And normally the debate goes, it’s got death benefit, yours doesn’t. Or this has 8% return, yours gets 5%, eight’s better than five.

And so that’s where most of the conversation around it sort of lives. And part of that’s probably a selling on the basis of people trying to sell it want to make it seem better than it is. And so they’re trying to get you to put money there as opposed to somewhere else. And so it ends up devolving into this really weird thing. Again, this ends up, people end up on both sides of the spectrum.

One of the reasons why I’m so excited about this question is this is the question that opens up a whole paradigm shift I find with people in how we think about finance and think about money. And I do think there’s real value in pooled resources, and I make that very clear just because most of the values that we get are most acutely felt with pooled resources, car insurance, health insurance, taxes. These are things that when people pool their money together and there’s a good money manager behind it, they can make more money for the pool than anyone could do on their own. The problem is no financial tool in my mind, no financial tool is a miracle tool. And so they all have holes with them. So this sort of opened up a whole world of rethinking how do we think about money instead of the way things have been done and do something that works better?

But one of the things that happened for me was understanding, oh, there are different types of money, and this is usually a weird conversation for people because people think, well, no, there’s just money. And the goal is to have more of it. It’s like, no, there’s different types. So I even use the S&P 500 fund. We all tell everyone, get an S&P 500 fund. Pick your favorite: Vanguard, Schwab, Fidelity, they all have them.

What we don’t tell people and don’t understand is we don’t ask people, how do you want to own that fund? And depending on how you own it radically changes its effect. And the main thing is when it’s time to use that money, is it the right type? Did you put it in the right place? And so this caused me to throw off a lot of stuff. We tend to go, well, let’s try and get you a lot of money by a certain time period. Okay, so let’s figure out what we think probability might work out to get you that amount of money. I looked at it from what do people need money for throughout their entire life and what financial tools do that really, really well. So for instance, an S&P 500 fund in an HSA versus a Roth versus a 401(k) versus a 529 versus an annuity versus life insurance versus the list can go on and on. When you own it in those different places, it radically changes the type of money it is when it’s time to use it.

And that’s where all the problems are is when it’s time to use your money. Is the market down? Bad time to use your money. Is the tax situation bad? Bad time to use your money. Are you 35? Bad time to use your 401(k). So this is where I started really sort of reshaping an entirely different model.

And I really have one of your previous guests, Ray Dalio, to thank thinking of this heavily influenced by his holy grail of investing, which people, it’s pretty famous. If you have 20 non-correlated assets, then you essentially reduce your risk exposure to zero and you maximize your profits. So I said, what if we did that different? What if instead of distribution within the equities world or bonds and stocks world, what if we did it with financial tools? What if someone had 10 different financial tools? Would that reduce their actual financial risk to zero and maximize their money?

But essentially I was looking at, okay, if you have just a 401(k) that gives you one type of money, and so now you’re exposed to all the risk of when it’s time to use that money that particular tool has. So then what if you layered on another one? Well, now you’ve reduced your risk and actually for the different things that life has, you’ve actually increased your probability of success. And so I don’t look at it and go, oh, life insurance, the best mutual funds suck. I’m pretty agnostic. It’s like, no, they’re all tools and I want to make sure you

Katie Gatti Tassin:

Have different ways to create income.

Jonathan Grimm:

And when it’s time for the job, do you have the right tool? And so then instead of trying to hit that random target of when that’s going to be, you do life insurance. Now there’s a bunch of different ways to do that, but that particular tool does that job very, very well. Even in terms of inheritance. It’s thinking in terms of probability of someone needing long-term services and support, which primarily skews to women needing that in their senior years and going, okay, what’s the easiest and most efficient way to have a half million dollars for that particular job that you have a high likelihood of happening as opposed to just a generic, let’s try and get you income. And it’s like, what do you need it for? And then what’s the best way? How do the taxes work? Is this thing usable before you’re 60 or not? And then mathematically figuring out with those probabilities in there of things happening in life, when you put together a whole host of tools, you actually create a better financial outcome for the long run.

Katie Gatti Tassin:

I feel like the layering of the different tools, it’s sort of akin to in chapter six of my book Rich Girl Nation, I talk about how these different investment vehicles in particular the a traditional 401(k) or any other sort of pre-tax, tax deferred account, a Roth account, and a taxable regular schmegular brokerage account, because they are all taxed and treated differently, that if you understand all the different rules that determine how and when those accounts can be used, they’re essentially just puzzle pieces that you can learn to put together in more efficient ways and that you do really maximize your flexibility by using all three of them. And so I outline my strategy of here’s how I would, if I’m really using the tax code as my guide, here’s how I would layer these.

And so the sense that I’m getting is you’re kind of adding a permanent life insurance production of income to that mix and saying this is a tool that is good for some things. So in the book, you outline the keys for finding a good provider around for at least a hundred years privately or mutually owned rather than publicly traded. Anything else I’m missing or anything else you would highlight? You did say that much of it is crap out there.

Jonathan Grimm:

Yeah, there’s some reasons for that. One, when you look at who’s going to be a money manager for you, you want long track record. And if you look at some of the largest mutual life insurance companies, a lot of them have been profitable for 100, 150, almost 200 years. And so you’re like, okay, they must be doing something right. If they’re profitable during things like the Civil War, each World War, pandemics, the great recession of ’08, how did these guys still make a profit when everyone else was being bailed out? And so that’s usually a good indicator.

And then that also shows that they’ll be able to fulfill their commitments, the mutual side. And just because it has mutual in the name—I always tell people, just because it has mutual in the name doesn’t mean it’s mutual. And this has to do with, you got to understand how the money is flowing and how they manage money and return profits back to you. And so that’s where mutual companies tend to provide profits, and they’re called dividends for a reason, just like dividend stocks where a percentage of the profits are given back to the shareholders. Large life insurance companies do the same. And oftentimes you can find those in other insurance products as well, not just life insurance. They do ’em with annuities where they continue to add to your guaranteed income in the future. They do ’em with long-term care, they do ’em with all kinds of other products where the company itself is building the stability and infrastructure and making money so that they can give some of that money back to you and beyond just the contractual obligations of a death benefit or things like that.

And then the other thing that I always tell people is they have to be carefully constructed. I think pretty much from every carrier. If you get a vanilla whole life, if you get one of those and it’s not carefully constructed and you understand the mechanics of it, don’t get it. I spent a lot of time teaching people about how life insurance actually works. And then you can become smarter than the agent in a lot of ways because most agents don’t know the intricacies and don’t know how they work.

And I always tell people too, don’t be afraid because usually that’s a commission product. Sometimes the best product for your financial life is a commission-based product. I always tell people term life insurance is a commission product, and if you were to die in the next five years, do you want a Robinhood account or a million dollar term life insurance? More than likely, it’s the term; it does that particular job really, really well. But if you were to say, I don’t want it because it’s a commission product, you might disadvantage yourself.

So there’s a few things to do in that scenario. And anyone that is listening to this, I will review life insurance complimentary because part of what I want to do is get people out of really bad stuff because that will free them up to either enter into something better or get them into something that will serve the actual objective of what they’re trying to do and accomplish much better. And that invitation is open.

Katie Gatti Tassin:

Wow. Thank you.

Jonathan Grimm:

I will review that. It takes years to actually understand life insurance in its real technical form. Understand how the contracts are set up, how they function, how the IRS treats them, how the government makes laws around them, their limits, their pluses, their minuses. They function more like a checking account than an investment account. So it’s why I never compare them to an investment because they’re not, they’re private contracts. And so take them out of that completely because that’s not fundamentally what they are. They’re a completely different tool. And so that’s also where sometimes if you look at them through the perspective of investment returns, they don’t hold up because they’re not for that. They’re very different use, very different case.

But when you combine that with other things, then you create robust plans that I think make people more resilient to what life actually has in store. And it’s just one, I list about 25 different tools that would create a complete financial life, even if it’s a little bit of money in them, they hedge against different things that can happen and that life brings. So that’s part of a different model that we’re operating under.

Katie Gatti Tassin:

Very Dalio of you.

Jonathan Grimm:

And we had to develop our own software because nothing out there does it all had to answer the question of how do we help the future poor? So that’s really behind it all. That’s the mission. I got to have something to offer. I can’t just say, well, hey everyone, it’s bad out there. Sorry, that wasn’t satisfactory.

Katie Gatti Tassin:

Amen. You and me both. Well, Jonathan, thank you so much for joining me. This was truly such a pleasure and it is always really fun to talk to someone else who is thinking about these problems in much the same way, I think.

Jonathan Grimm:

Yeah, it was my pleasure.

Katie Gatti Tassin:

That is all for this week, and we will see you next week for a proper Rich Girl Roundup party. Our show is a production of Morning Brew. It is produced by Henah Velez and me, Katie Gatti Tassin with audio engineering and sound design from Nick Torres. Devin Emery is President of Morning Brew and additional fact checking comes from Scott Wilson.