In this podcast, Motley Fool analyst Nick Sciple and host Ricky Mulvey discuss updates from Apple's Worldwide Developers Conference, and what they mean for the tech giant's customers and investors. Plus, they look at how Cracker Barrel is trying to reinvent itself.
Then, Motley Fool host Alison Southwick and retirement expert Robert Brokamp check in on the state of retirement. Got a question for Alison and Robert? Email it to [email protected].
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on June 11, 2024.
Ricky Mulvey: It's not artificial intelligence, it's something else. You're listening to Motley Fool Money. I'm Ricky Mulvey, joined today by Nick Sciple. Nick, good to see you.
Nick Sciple: Great to be here with you, Ricky.
Ricky Mulvey: I think there's one main story, and that is the WWDC conference from Apple. There were parts before they started talking about the thing that is not artificial intelligence, even though AI, that's the main part that's grabbing people's attention. There are a few updates in the iOS for what we'll call the warmup portion, a few things that I'm excited for as an Apple user, and I don't want to do a list of everything they announced. But what are some of the updates that stand out to you from this?
Nick Sciple: Sure. You want to call it the opening act. It used to be the iOS was the exciting thing. For me, if I'm being honest, being able to filter screenshots out of the Photos app is going to be useful to me because they clog up all my photos in a big way. Maybe more practical things, messaging over satellite seemed pretty cool. If you're somebody who likes to go offshore boating or anything like that, you can text your family when you're on the way back, even though you're off the grid. I think that's pretty cool. Someone who uses the iPhone email app, automatic categorization, digest view for all your emails from one vendor, I think that's going to be super convenient for me when I can't remember when I bought that thing, what's the tracking number? Lots of really practical, simple improvements that aren't going to be world changing, but I think it's going to make your experience a little smoother, which I think is really the theme of this whole event.
Ricky Mulvey: Or if you're in a mountainous area and you don't have cell service, it's going to be a lot nicer to send a text or an iMessage via satellite. I think for me, the game changer, Nick, is the send later feature. Sometimes I'm on Mountain Time, I work with a lot of people on East Coast Time. I often have thoughts and ideas around 6:00 PM their time, 7:00 PM their time, and it's going to be nice to send a text to them at 9:00 AM their time. I'll shout out the nodding feature for AirPods, where you can accept a call with a nod or a shake of your head. I think that's pretty cool. Apple is also maybe killing some of the smaller apps with their list of new features. I've seen a lot of takes that apps like AllTrails, which is a hiking app with a premium service, one that I use, might be killed by the new Apple Trails feature, and also Grammarly, which is another app I use. Checks your writing, offers suggestions to make things more grammatically correct, maybe more professional, more casual. Are you buying that these smaller apps are going to get killed by the updates that Apple just announced?
Nick Sciple: I think in some cases, I am. This is a theme of the iPhone going back for years and years. I remember when people used to ride around with the GPS in their car, and now they just ride around with their iPhone really gobbling up lots of different applications the iPhone's able to do. Really a reminder that a product that can do lots of things is always going to be a threat to a product or a service that can only do one individual thing. Apple really controls the default on these platforms, and often the default tools are in a position to win. So I think AllTrails in particular are going to be in a tough spot. Why use this tool that often has some features you have to pay for when you can use the native Apple Maps app and use things just fine. I think Apple's Passwords app is a potential threat to 1Password, potentially a threat to lots of other smaller password apps out there. They've got a Tap to Pay application that is going to allow you to quickly transfer cash between friends that potentially could be a threat to Venmo. Listen, this is something that you see every year at the WWDC Apple, this big juggernaut adding simple improvements, for it, onto its tool that seem very practical, but for another business is really world changing. It's testament to the size of Apple and really the power of the default, which Apple really controls.
Ricky Mulvey: I agree with you on most of that. I think Venmo is the one where I'm going to disagree a little bit, just because for many people, Venmo already is the default for payments. The QR code works well enough and when you need someone to pay you, sometimes they don't need an iPhone. I think that might be a little bit safer than some of the other ones here. Apple kicked off with some spatial computing updates. Hey, don't forget, they have a Vision Pro out, and now they have version 2.0 for that software. What do you think of that? Have you checked out the headset?
Nick Sciple: I still have not checked out the headset myself. I do have a Meta Quest sitting collecting dust in a cabinet somewhere. I'm by no means an early adopter when it comes to this spatial computing revolution. We're really still at that early adopter stage. The WWDC announced intentions to launch the product in countries in Europe and China later this month. Apple's still working to create content that really leverages what the Vision Pro can do. Just that little content creation piece reminds me a little bit if you think about early HDTV where there was one channel on cable that actually showed HD content, when eventually HDTVs became mainstream. Maybe that'll happen for the Vision Pro, but it also reminds me of 3D TVs. If you remember, there was a little bit of content that you could get for those platforms purposefully made. Those never really took off. We're still in the early adopter stage for the Vision Pro. Excited to see continued innovation there, but not something I'm going to pick up until we're well into the mass market.
Ricky Mulvey: New listeners may not know, and those who have listened for a while probably know that Nick, behind him right now, has a photo of the Alabama Crimson Tide football team. I think they're going to get you on live sports. I think that's how they're going to sell you at some point, is when you can watch Alabama football at whatever yard line you would like to when they're playing a team like LSU. We'll see.
Nick Sciple: Get me in the huddle or integrate it into the NCAA football game. It's going to come out here in about a month or so, and maybe that will get me on there.
Ricky Mulvey: We've done some warm up before. We got to Apple Intelligence, that's what people were waiting for, is how Apple is going to approach AI. They've been pretty coy about it in previous earnings calls and presentations. They don't say artificial intelligence, and in fact, in this one, they don't say artificial intelligence, they say Apple Intelligence. It just happens to have the same letters as the one you already know. A more holistic approach than just one app, a lot of focus on privacy is what they were spelling out. What do you think of the presentation on Apple Intelligence?
Nick Sciple: First and foremost, Apple is fantastic at branding, in addition to being a great consumer technology product company, one of the best marketing firms really in the world, and they really did as much as they could to differentiate Apple Intelligence from the "AI" in square quotes you hear discussed all the time. CEO Tim Cook said this is "A new personal intelligence system that makes your most personal products even more useful and delightful." Apple focusing on AI applications that are useful to the customer more so than pushing technology for its own sake, which is really the entire history of Apple, the Steve Jobs playbook. Also interestingly, and again, right back to Apple's strategy, leveraging its access to the data on your iPhone, which other AI tools lack access to. They talked about leveraging your personal contacts to perform calculations and services on your iPhone. So Apple Intelligence will help you minimize and organize your iPhone notifications, provide writing tools that can help you rewrite and proof read content or summarize texts for you. That's really the threat to Grammarly we talked about earlier. Not just going to be available in native Apple apps, but really across third-party apps across the platform. Really taking something that you could go to Grammarly and access that service, and now it's everywhere on the iPhone. Integrating image and GIF generation tools into apps where you can make a GIF of your friend, which I think is a little bit weird. But all these things are just on the margin improving the usefulness of the iPhone. A lot of this processing is going to occur on device, which improves privacy, which is something central to Apple. They are going to send some more complex requests to Apple servers. However, the goal of that is to only send the specific data for that request to preserve privacy, and I think also is going to be able to allow Apple to wall off access to some data that other companies might like to use to provide some services. I think all these changes are going to make the iPhone more useful, but I think the question remains whether it's going to drive Apple device sales, particularly the iPhone, higher, which is an area Apple has struggled with recently.
Ricky Mulvey: Let's talk about the partnership with ChatGPT with Siri. This is the one that I raised my eyebrows at just a bit because you have this company that has a large stake in it by Microsoft, and it seems like Apple has a lot of engineers there that could cook up their own chatbot in-house. Why do you think Apple is going with OpenAI to integrate ChatGPT with Siri?
Nick Sciple: From the way the updates to Siri were described, it sounds like Siri is a more tailored, likely smaller AI model built around the specific functionality on the iPhone, searching, cross referencing, performing tasks across apps. Apple doesn't say this specifically, but you could read between the lines that a lot of things that are lumped under Apple Intelligence are a series of smaller, more tailored AI models around specific tasks on the iPhone. But as Apple put it at the presentation, there are other AI tools that can be useful for tasks that draw on "broad world knowledge" or other specialized domain expertise, i.e., broader or more specialized AI models. ChatGPT currently the market leader, the first company that Apple is working with, but it's not going to be the last one. Apple has said they're going to add other AI models over time. I think it's acknowledging that Apple Intelligence is limited to the use cases it described, limited to helping make the iPhone an easier device for you to use, making it a more seamless tool, and it will do those things super smoothly, while other tools might be better at cutting edge tasks or more creative tasks, and they're going to integrate access to those tools in a privacy friendly way. I think it's Apple acknowledging what it's good at and what other platforms might be a little better at and doing that in a user-friendly way.
Ricky Mulvey: I think the main theme of Apple's presentation on Apple Intelligence is we have all of your data, and we're going to do cool things with it, and you can trust us to keep it private. On this, Apple is up about 3%, the stock is touching all time highs. I think one theme we're seeing play out with this is that the trillionaire companies seem to be dominating the artificial intelligence game. Do you think that's fair? Is this one where you expect to see the massive companies is pretty much the only winners in this?
Nick Sciple: I wouldn't say that these massive companies are going to be the only winners in AI. I do think these massive companies like Apple are in a great position to distribute AI technologies because of the way that they touch the customer, because of their large data infrastructure. But that said, Apple, Microsoft, Amazon, others are making deals with companies like OpenAI and Anthropic, and making massive investments in those companies as well. There's hundreds of AI companies that received investment in 2023 alone. So I think it's still to be determined who, if anyone, will dominate the AI market. I do think, though, that the way Apple is positioning itself in AI is very interesting. The market has sniffed out or indicated that Apple is behind on hard AI research, doesn't have a large language model that's directly analogous to what OpenAI or Anthropic and others have. But I think Apple's focus on personal intelligence and privacy, using Apple's access to the iPhone data, I see that as Apple trying to extend its existing moat that it has in the iPhone into this other new technology area of AI, limiting competing apps' access to data to build similar products, using privacy concerns as maybe an excuse to do that, maybe it may be a legitimate concern to do that. I think that puts Apple in a very interesting competitive position that mitigates risk that AI disrupts Apple's business and allows it to, even if, say, OpenAI becomes the leader with cutting edge AI technologies, Apple is just going to integrate with them in a way that allows them to preserve their existing model. So I wouldn't say that these trillionaire companies are dominating the cutting edge of the market, I will say that Apple, in particular, I think is well positioned to survive and thrive no matter where the market goes.
Ricky Mulvey: You think Apple showed they're serious about AI though?
Nick Sciple: I think they showed they're serious about using AI in a way that's relevant to their consumers. I think they're serious on making the iPhone the most useful tool they possibly can, and they're going to leverage AI to further those goals.
Ricky Mulvey: Just in time for the next story. Nick's dog has entered the chat, entered the Zoom screen. I know you can't see him, but that's important for me to tell you, the listener. Cracker Barrel is looking to rebrand. How about that for a transition, Nick. Cracker Barrel is looking to rebrand. The stock is down 73% over the past five years. CEO Julie Felss Masino said in the latest earnings call, "Historically, Cracker Barrel has made limited changes to our design aesthetic, and we've probably relied a little too much on what was perceived to be the timeless nature of our concept." I don't want to laugh at the company, but I do think reinventing Cracker Barrel, Nick, is no small task. I think the first most important question is does Cracker Barrel need to have just less stuff out when you go in their stores and you wade through the stuffed animals and the board games, and the various trinkets on your way to the table?
Nick Sciple: Maybe. It's fair to say Cracker Barrel hasn't modernized its look over time. That said, it's in the name, Cracker Barrel Old Country Store. So we've got the old country store stuff, we've got the old plow, the old Coca Cola sign, the old gas pump, that sort of thing. That look is part of its cachet, it's its business model. It's an off an interstate side restaurant with an attached gift shop that uses that cachet to attract customers and really the gift shop really makes the business special and differentiated from regular old restaurant. Cracker Barrel's core customer base, though, is aging. 43% of its customers are over age 55. If you change your look to appeal to this younger demographic or change with the times, you could risk alienating those existing customers, you could risk changing that little kitchy thing of pulling over to a Cracker Barrel and looking around.
Nick Sciple: It's damned if you do damned if you don't situation for Cracker Barrel. It's existing customers are aging out, and you need to modernize, but if you alienate your existing customers, you kill the cash cow. It's a tough position for Cracker Barrel to be in, and as we'll discuss, they've been in a tough position for a while.
Ricky Mulvey: I'm going to give you the turnaround plan. They're updating lighting, they're offering more comfortable seating. We're putting new things on the menu. How about some bee sting chicken tenders, which are hand-breaded and coated in a new sweet heat honey glaze,? Also green chili corn bread, banana putting, a focus on carbs, sugar, and fried protein. They're also doing some more media spend. You analyze stocks for a living. Are you buying this turnaround plan?
Nick Sciple: [laughs] I'm not buying the turnaround plan from Cracker Barrel. I think the difficult thing is, I'm not sure if Cracker Barrel even knows what its problem is. It's tried lots of things over the years. I tried fried chicken. It tried selling alcohol pre-pandemic, tried to invest in Punch Bowl Social, diversify its business. Punch Bowl Social then immediately turned around and went bankrupt. Now it's recently brought in a new CEO in response to activist pressure, and her next task is let's try to change the store's aesthetic. I think, for me, it's a company that's rudderless. It's expanded as far as it can go. We've got 661 stores across 45 states. It's all the states except Hawaii, Alaska, Washington, Vermont, and Wyoming. Three of those states ban billboard advertising, which is really the key advertising media for Cracker Barrel, so unlikely for them to expand there. Besides that, had limited success outside its core Southern and Midwestern markets. It's got the demographic problem I mentioned earlier. I think this is a business that just needs to get smaller, needs to squeeze the cash it can from its existing business, cut cost where parts of the business aren't performing, and just acknowledge, this is a business that's not going to be bigger 20 years from now than it is today, and that's OK. But it should be a cost cutting-cash return strategy, in my opinion.
Ricky Mulvey: If you have an activist plan for Cracker Barrel, please email us. The email is [email protected]. I would love to hear your plan. Nick Sciple, appreciate you coming on, and thanks for your time and insight.
Nick Sciple: Happy to be here with you, Ricky. Excited to come on anytime you need me.
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Alison Southwick: Retirement is the number one financial goal of most Americans. The culmination of decades of work and saving. How are retirees faring? How much do they spend? Do they have enough income to cover the bills? What does that color of bath scrubby on their golf cart mean? Are they even happy? Well, today, we're going to pull together research from a number of sources to give a status report on retirement in America. First up, when do people retire? When you ask the typical worker when they plan to retire, the most common response is 65. It's been fixed into our collective consciousness for decades, probably because it was the age at which you received Social Security when the program was first introduced in 1935. Of course, nowadays, you can claim it even earlier. Sixty-five is the age when most Americans become eligible for Medicare. But is it really the age when most people retire?
Robert Brokamp: Well, the short answer is no. Around 50% of people retire a year or a few sooner than they expected due to health issues, or job loss, or just being done with a rat race. Only around 10% of people retire later than they expected. As for the average retirement age, you'll get different answers from different sources. Surveys from folks like MassMutual and Gallup say that the average age is 62. The Center for Retirement Research at Boston College says that 62 is indeed the average retirement age for women, but men retire at age 64. In my opinion, there are two takeaways from this. One is that when you run your retirement numbers, either by using online tool or working with a financial planner, you'll be asked, what age do you think you'll retire? You'll come up with a figure, but then you should probably knock that down by a couple of years so that you factor in the possibility that you won't work as long as you think you will. Then secondly, on average, women don't have as much retirement security as men due to all kinds of factors, starting with lower lifetime earnings and a longer life expectancy. But the other is that women tend to retire at younger ages, which may not be the right move.
Alison Southwick: Let's move on to the main source of income for American retirees, Social Security. Now, the earliest most workers can file for Social Security benefits is age 62. However, the longer they wait, the bigger their benefit, up to age 70 or the full retirement age if claiming spousal benefits. Bro, when do most people file for Social Security benefits?
Robert Brokamp: Well, according to the Social Security Administration, the average benefit-claiming age in 2022 was 65, but that average obscures the fact that 62 is the single most popular claiming age. Approximately a quarter of new applicants file at age 62 with the second most popular age being 66. The problem with claiming at age 62 is that you'll be receiving the smallest benefit possible. Study after study has found that claiming Social Security at 62 is likely a mistake and that most Americans should delay at least until their full retirement age or to age 70 if they can. Now there are circumstances when claiming earlier makes sense. There are claiming strategies for couples with a big difference in their lifetime earnings when the lower-earning spouse claims their own benefit early, but then gets a bigger spousal benefit when the higher-earning spouse claims close to or at age 70. People with health issues that would result in a below-average life expectancy might decide to claim early as long as it won't reduce a surviving spouse's benefit. Then there are situations when people just need the money, and they have no choice but to claim early, and I totally understand that, but for most people, delaying is the right move if they can. As for how much retirees get from Social Security, the average benefit is around $23,000 a year per person for all beneficiaries aged 65 and older, this represents about 30% of their income. However, approximately 40% of retired 65 and older beneficiaries rely on Social Security for half or more of their income.
Alison Southwick: That's the average Social Security. But how much total income does the typical retiree receive?
Robert Brokamp: Well, let's look at the consumer expenditure survey from the US Bureau of Labor Statistics, otherwise known as the BLS. The latest figures are for 2022. Due to higher incomes, you would bump these up a little bit to put them in today's numbers, but basically, we reach our peak earning years between the ages of 45 and 54. In 2022, the average income figure for households was $129,000. Once you move down to 65-74 aged households, that number goes to 61,000, and then for the 75-and-older households, it's a shade under 50,000. As we age, our income and our expenses go down, and there's a bit of a chicken-and-egg debate, which one is causing the other. The answer varies by household, but there's no doubt that older people just don't spend as much. The kids have left home, the mortgage gets paid off, and people just don't do and buy as much as they used to when you get into your older years.
Alison Southwick: Now, those figures are for the entire US, but a recent study published by SmartAsset showed that retiree income varies wildly by geography. The study is based on analysis of 2022 BLS data for 345 of the largest cities in America. Now the average retirement income in the included cities was 52,000, almost $53,000, but Bro, it turns out that our retired neighbors are doing better than most.
Robert Brokamp: Yes, Alison. You and I both live in Northern Virginia, which has some of the best-off retirees in America. According to SmartAsset, these are the five large cities with the highest average retiree income. Number 1, Arlington, Virginia, with a bit over $90,000 a year. Then comes Cambridge, Massachusetts; The Woodlands, Texas; Berkeley, California; and Alexandria, Virginia.
Alison Southwick: Hey.
Robert Brokamp: I know.
Alison Southwick: Home sweet home.
Robert Brokamp: One of the offices of Fool HQ. Here are the five large cities with the lowest average retiree income. Elizabeth, New Jersey, at a little over $38,000; then Kansas City, Kansas; Hartford, Connecticut; Brownsville, Texas; and Hialeah, Florida, with a little over $33,000.
Alison Southwick: Now, we touched on Social Security, but where does the rest of that income come from?
Robert Brokamp: According to a recent report from the Federal Reserve, here are the percentage of retired households aged 65 or above that receive income from various sources. The number one source, again, is Social Security. Ninety-two percent of retirees get money from Social Security. Next comes pensions, and that is the classic defined benefit pension, but also withdrawals from a plan such as a 401(k), that's 64% of retirees. Interest dividends or rental income, 52%; wages, salaries, or self-employment, 26%; and then government assistance other than Social Security, 5%. What's most interesting to me is that around one in four retired households are still getting some money from work. For many, that's because only one spouse is retired, the others still working, but others are doing what has come to be known as a phased retirement, easing into retirement by continuing to do part-time work, which, of course, gives them some of the benefits of retirement because they have more free time, but it also provides some of the benefits of working, including that it may enable them to delay claiming Social Security if that's the right move for them.
Alison Southwick: Let's move on to our last category, which is retiree net worth. Keep in mind net worth is all that you own, including your house, cars, and stuff, minus all that you owe, such as your mortgage or auto loan. How are retirees doing, Bro?
Robert Brokamp: Every three years, the Federal Reserve publishes the results of a comprehensive survey of American household finances. The most recent version includes data as of the end of 2022, little bit beginning of 2023. Since then, home prices have gone up around 10%. The S&P 500 has gained 35%. So keep that in mind as I read the median net worths and retirement savings of retirement-age households. Starting with the 65-74 age households, median net worth of $410,000, median retirement savings of $200,000 for the 75 and older crowd, median net worth of about $335,000, and retirement savings of $130,000. One of the biggest takeaways for me from the Fed study is that home ownership is a significant driver of wealth in America. The median net worth of US households that own their own home was around $400,000, much higher than the $10,000 median net worth for renters. For many Americans, their home is their biggest asset, and they may need to find some way to turn their home equity into cash in order to retire.
Alison Southwick: It's time to wrap this up. What's the final verdict, Judge Bro, on how the typical US retiree is faring?
Robert Brokamp: Well, I think these numbers will seem low to many people, and they certainly are for too many Americans. Survey after survey that has asked older people about their financial regrets has found that most people wish they had started saving sooner and had saved more. I'm sure we've all read articles with these types of stats in them saying that America is facing some retirement crisis, especially when you consider that many, if not most, people will need some long-term care later in life. I certainly won't argue with any of that. However, there are experts who do and who believe that, actually, most retirees are doing fine because most retirees are perfectly content on much less income than they needed when they were working, and a large portion of that income is provided by Social Security. Who's right? Well, we can maybe get a hint by seeing whether retirees are happy. Are they content on lower incomes, or are they miserable living on so much less than what they had when they were working? MassMutual recently published the results of its 2024 retirement happiness study, which pretty much aligns with other studies I've looked at. The study surveyed both pre-retirees and retirees and asked the retired folks this question: Which best describes your level of happiness in retirement compared to before you retired? Sixty-seven percent said they were much more happy or somewhat more happy relative to when they were working. Only 8% said they were less happy. The happiest retirees were more likely to socialize, exercise, travel, and engage in various hobbies. Most of these are activities that can be done without spending a lot of money, depending on how you do them. I'll also add that almost half of retirees who are less happy said that retirement had made them lonelier. The bottom line, everyone's unique. Each person should analyze their own circumstances, make sure that they'll have enough income to provide the retirement that they want. There's no question that millions of Americans should be saving more and should probably work a little longer than they may prefer. But it's also true that many retirees are perfectly happy to live on less than what they needed when they were working, in some cases, much less, but they value having more free time over more spending, which I think is a perfectly fine trade-off.
Ricky Mulvey: If you have a question for Alison Southwick and Robert Brokamp, email us at [email protected]. That is podcasts with an S at fool.com. They will be recording a mail bag this coming Monday. As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell anything based solely on what you hear. I'm Ricky Mulvey. Thanks for listening. We'll be back tomorrow.
