Bogleheads® Chapter Series –Discussion Part II: Advice for Pre-Retirees and Retirees (audio only)

00:00:00.000 | [music]

00:00:01.820 | Welcome to the Bogleheads Chapter Series.

00:00:04.540 | This episode was hosted by the Bogleheads Pre and Early Retirement and Retired Life

00:00:08.860 | Stage Chapters and recorded February 21st, 2024.

00:00:13.460 | The presentation features an open discussion on the Bogleheads Conference Panel Discussion

00:00:17.820 | on Advice for Pre-Retirees and Retirees found on the Bogleheads YouTube channel.

00:00:23.520 | Bogleheads are investors who follow John Bogle's philosophy for attaining financial independence.

00:00:28.140 | This recording is for informational purposes only and should not be construed as personalized

00:00:32.340 | investment advice.

00:00:33.740 | To talk about, I just posted in the chat a link to an interesting thread that just started

00:00:40.700 | on the forum about the concept of a rising equity or a bond tent approach in retirement.

00:00:48.940 | That's the Wade Fow and Michael Kitsis study, which has been somewhat controversial.

00:00:53.700 | I'm not going to go into detail about the concept there other than the fact that some

00:01:00.060 | of us that are doing Roth conversions in retirement, at least in early retirement, end up forcing

00:01:06.780 | ourselves into a rising equity glide path.

00:01:10.060 | That's certainly happened with me because my IRA is 100% bonds and as I'm doing substantial

00:01:15.260 | Roth conversions in the early years of retirement and then having 100% converting those fixed

00:01:21.540 | income to 100% equities in my Roth, that's shifting my asset allocation higher and higher

00:01:28.100 | in equities.

00:01:29.460 | I'm also spending down the CD ladder that I had created for early retirement.

00:01:34.100 | I've gone from about a 50% equity allocation when I started retirement into about a 64%

00:01:41.380 | equity allocation now.

00:01:43.340 | It'll probably, depending upon the market, continue to rise, but it's an interesting

00:01:48.260 | concept to read up on both the concept of a bond tent, which may or may not be useful

00:01:53.500 | to minimize sequence of returns risk.

00:01:56.740 | It's still a relatively new concept and we don't have any long-term data as yet, as far

00:02:02.860 | as I know from Michael Kitsis or Wade Fow, on how well it holds up, but it's certainly

00:02:07.140 | something to consider as you approach and prepare for retirement or are already in retirement.

00:02:12.660 | Can you give us a quick what's a tent?

00:02:15.620 | What does that mean?

00:02:16.620 | Well, the idea basically is to increase your bond allocation, fixed income allocation as

00:02:21.940 | you approach retirement much higher.

00:02:23.660 | He used to say typically that you would want to have increasing bond holdings as you move

00:02:30.380 | through retirement with age, was it age minus something in bonds, 100 minus your age in

00:02:37.940 | bonds or something to that effect, and that your bond allocation increases in retirement.

00:02:46.680 | But Michael Kitsis and Wade Fow did a study where if you start off with a very high bond

00:02:51.100 | allocation and do the reverse, where you basically spend that down in the early days and let

00:02:56.740 | your equity allocation rise, that that may provide some protection if you have a poor

00:03:02.820 | sequence of returns situation in early retirement.

00:03:08.540 | There are arguments for and against it.

00:03:10.460 | I don't know how many people practice it.

00:03:12.040 | Is there anybody here on this Zoom who have played around with that and are putting it

00:03:18.220 | into practice?

00:03:19.220 | If I can be so bold, I'm doing that exact thing.

00:03:23.420 | I'm doing an 80/20 portfolio, and I've been heavily into bonds and heavily into cash.

00:03:31.540 | And to tell you the truth, I took a bath in my bonds.

00:03:35.740 | With rates increasing, my bonds took a dive.

00:03:39.340 | The cash has been pretty nice.

00:03:42.340 | I get their CDs and their money market accounts, and they're just strictly interest earned.

00:03:51.260 | So you tell me, what am I doing wrong?

00:03:55.660 | Well, last year was like a hundred-year storm as far as the bond market and what happened.

00:04:04.260 | In retrospect, it makes perfect sense because of the rapid rise of interest rates by the

00:04:09.740 | Fed.

00:04:10.740 | So what happened is expected.

00:04:13.900 | But the fact of the matter is if people stay the course and just hang on and let the bond

00:04:18.660 | market recover, it's partially recovered, it'll take some time.

00:04:23.260 | But it's unlikely to happen again.

00:04:25.900 | In fact, if and when the Fed starts lowering rates, the reverse should occur where we start

00:04:31.660 | seeing that the market price of bonds is going up, and we'll get further recovery from that.

00:04:38.420 | The key thing to know, and I think a lot of people aren't aware of this, that the expected

00:04:41.940 | return from a bond fund is basically whatever the yield to maturity is at the time you purchase

00:04:48.940 | shares in the fund.

00:04:50.660 | So if the total bond market has a yield to maturity of, say, 4.5% now, whatever it is,

00:04:59.860 | if you hold it at least for its duration, which is about six to seven years, and then

00:05:05.340 | some, barring any huge changes in interest rates, you should get that return long term.

00:05:12.580 | So starting at this point, we should see pretty good returns from the bond funds, total bond

00:05:17.120 | market fund, if you hold on to it.

00:05:18.940 | And then you may get additional return as interest rates fall and bond prices go up,

00:05:24.940 | and the market price of the bond fund will go up as well, giving an additional yield

00:05:30.580 | for you if you sell it.

00:05:31.820 | - Okay, now let me throw you one more curveball.

00:05:35.460 | Big picture time, I was 80/20 stock, 80% stocks, 20% bonds.

00:05:42.020 | My stocks and my stock funds have been doing spectacularly.

00:05:47.780 | They're doing really well.

00:05:50.060 | My bonds stink.

00:05:52.480 | They're terrible.

00:05:54.140 | Being in retirement, I was under the impression that the bonds were not going to move very

00:05:59.620 | much.

00:06:00.620 | It was going to be my opportunity to keep it steadfast.

00:06:05.500 | This cash, I subscribe to that bucket theory.

00:06:09.380 | I put a little bit everywhere so that in fact, as I'm in retirement, the cash is not going

00:06:16.700 | to move one way or the other.

00:06:18.780 | The cash, meaning my bonds, are not going to move one way or the other.

00:06:22.140 | Well, I found out the exact opposite is true.

00:06:24.980 | I'm not interested in being in bonds for a long period of time.

00:06:28.820 | I want the stability of cash.

00:06:32.220 | Now you tell me, am I thinking wrong?

00:06:34.620 | Am I doing something illogical?

00:06:36.900 | Hell.

00:06:37.900 | - Well, right now, obviously, cash has a pretty good yield, but you have interest rate risk.

00:06:45.500 | As interest rates fall, if you're in money markets or short-term T-bills, what are you

00:06:49.340 | going to do with that money when it matures?

00:06:51.780 | Whereas if you're in a bond fund long-term, you'll reap some of the benefits, but the

00:06:57.860 | bonds are there for ballast, as Jack Bogle would say.

00:07:01.820 | Although we didn't expect, we should have known that this could and would happen, but

00:07:06.020 | we were so lackadaisical and comfortable that bonds were going to maintain their value all

00:07:12.740 | the way through, but there's no way that low interest rates would have been maintained

00:07:16.660 | to this degree.

00:07:17.660 | They had to go up sooner or later.

00:07:20.980 | The fact of the matter is, though, if you look, the bonds fell, what, 17%, I think,

00:07:24.660 | maybe, total bond market, but they didn't fall as much as stock funds did.

00:07:27.420 | The total stock market fell worse.

00:07:29.880 | There's less volatility in the bond market.

00:07:31.580 | We just got hit hard for one year.

00:07:34.620 | There's a lesson learned.

00:07:35.620 | I'd be curious to hear feedback from everybody here as to how they have handled that.

00:07:39.500 | A lot of us have a significant portion of our portfolio in bonds, and how did you all

00:07:45.020 | handle this situation last year, and to some extent, this year?

00:07:49.100 | Yeah, Mel, you have your hand up.

00:07:52.620 | Do you want to speak to this?

00:07:59.020 | You're muted.

00:08:01.140 | There you go.

00:08:09.020 | Good hearing you, Mel.

00:08:10.020 | Muted again.

00:08:11.020 | Let's move over to Laura, and we'll get back to Mel after this.

00:08:17.100 | Yes.

00:08:18.100 | I'm about to retire at the end of this month, and my ASA allocation is 50/50.

00:08:25.100 | I chose, and I work for the federal government, so I chose to put my bond allocations in the

00:08:34.540 | G fund, in my TSP, and mostly I bonds, small smattering, a double E bonds, and the reason

00:08:45.020 | I picked those vehicles for my bonds is because my understanding that they would not lose

00:08:54.300 | principal regardless of what the interest rates did, and I found that to be true, especially

00:09:01.260 | when all the bonds were dropping in value.

00:09:04.340 | My I bonds did very, very well, as well as in some cases, I was making over, like a little

00:09:12.500 | over 10% on some of my bonds, but I've been collecting those I bonds for about 15 years

00:09:20.540 | in anticipation of one day retiring, and if I retired in a bear market, I would have someplace

00:09:28.900 | to go that for sure would not lose its value, and in the case of I bonds, would at least

00:09:35.620 | keep up with inflation, and for some of those I bonds that had a fixed rate above zero,

00:09:42.460 | it would be even a little better than inflation, so that's my only comment.

00:09:48.400 | You know, the one thing I've heard, and I don't dabble that much in bonds, but one thing

00:09:51.940 | I've heard is let's say I get a double E bond at 5%, and then the next day, magically, CDs

00:09:57.460 | are paying 7%, although I may not lose principal, and it's redeemed at the full face value of

00:10:04.420 | the bond, technically, I could get 7% somewhere else, so I'm technically kind of losing money

00:10:11.300 | even though it doesn't look like it.

00:10:12.780 | I think that's the general argument there, so just to bring that up.

00:10:18.660 | Except that, you know, they can make, you know, you don't know for how long they'll

00:10:23.500 | make 7%.

00:10:24.500 | No, you're right.

00:10:25.900 | You're buying a contract, yes.

00:10:28.220 | It's not buying 10% for, you know, indefinitely.

00:10:31.300 | Yes.

00:10:32.300 | Yeah, and I'm not arguing either way, but that's what I've heard.

00:10:35.180 | Jim, do you have a comment?

00:10:37.300 | Yeah, I've taken a different approach.

00:10:40.020 | I start off with the concept that stocks and equities will perform much better over time

00:10:48.780 | than bonds will.

00:10:49.980 | If you look at history, that has largely been the case, and theoretically, bonds are in

00:10:55.880 | there to stabilize things.

00:10:58.060 | However, it's clear, I think, if you do the math behind bonds, that if you're in a rising

00:11:04.100 | interest rate environment, which we did experience these last couple of years, then the value

00:11:09.980 | of the bonds will go down.

00:11:13.420 | In a like manner, if you're in a declining interest rate environment, the value of bonds

00:11:20.260 | will go up just because of math, everything else being equal.

00:11:23.940 | I personally have been very heavy in stocks, 80, 90%, but recently with the Fed talking

00:11:31.900 | about lowering interest rates, I've upped my bond percentage to about 20, 22%.

00:11:40.560 | As far as bonds that pay 4%, somebody mentioned that earlier, well, that's hardly keeping

00:11:45.460 | up with inflation.

00:11:46.740 | That's not doing you a whole lot of good as far as an investment is.

00:11:50.500 | If you think about insurance, yeah, there's some insurance there.

00:11:53.340 | I did an analysis.

00:11:55.500 | This is before interest rates started rising.

00:11:58.080 | If I was better off having money in cash that I would use if the stock market went kaboom

00:12:05.560 | versus bonds, and leaving more money in stocks and having a pot of cash, which I would call

00:12:14.140 | on if the market really tanked so I wasn't selling in a declining stock market, came

00:12:22.140 | out far better than bonds because it takes less cash to generate cash you can take out

00:12:27.540 | than it does in the value of a bond.

00:12:31.700 | Bonds have their place, but I think that unless you're really interested in safety, tends

00:12:38.140 | to not be nearly as good as a much more aggressive equity portion.

00:12:44.060 | Okay.

00:12:45.060 | I just put this up.

00:12:46.180 | I'm no expert at this.

00:12:47.420 | Somebody showed me this the other day, and I'll put this in the chat.

00:12:51.420 | What I did was I said, "I want to go from 1990 to 2024, but I could change that if somebody

00:12:57.180 | wants me to."

00:12:58.380 | I started with 10,000, and then I told it I wanted the U.S. stock market or the total

00:13:04.100 | U.S. bond market.

00:13:05.420 | I could pick treasuries and different things.

00:13:08.460 | I just took this total U.S. bonds, and in this portfolio, I have 100% in the U.S. stock

00:13:17.180 | market.

00:13:18.180 | It doesn't really say what, S&P 500, whatever, and then this is that 100% in portfolio number

00:13:23.740 | two, so you guys can set this up yourself, and if I click Analyze Portfolio, and then

00:13:30.820 | this is I think the blue is the stock.

00:13:33.860 | Yeah, there's the stock market.

00:13:35.580 | That's from 1990, and you do have a very steady climb on the bonds, and then you have this

00:13:41.300 | little problem here, as Alan and Scott were talking about, but that's in the chat if you

00:13:48.220 | want to play around with that and change the times.

00:13:52.380 | It also tells you your worst year in the stock market, so down 37%, and the worst in the

00:13:58.780 | bond market, and this was 13 and a quarter percent, so it's kind of interesting.

00:14:07.300 | Okay, Jim, so Scott, how long of a period was this?

00:14:14.340 | Were you like a lot of stocks a long, long time ago, and you did this over a long period,

00:14:19.020 | or was this recently?

00:14:20.140 | And you're muted, Scott, if you could unmute.

00:14:26.940 | Still muted.

00:14:31.940 | I'm sorry.

00:14:32.940 | There you go.

00:14:33.940 | I have a few windows open, and so I'm there.

00:14:38.780 | Yeah, I have a very short timeframe.

00:14:40.940 | I've been looking at the bonds for roughly say the last year or so.

00:14:46.460 | I'll give you a for instance.

00:14:48.380 | I can change this date if you want.

00:14:50.060 | Let me change this to the date range you're talking about.

00:14:53.940 | What should I do then?

00:14:54.940 | 20?

00:14:55.940 | Yeah, do 2020.

00:14:56.940 | That's fine.

00:14:57.940 | 2020 to 2024, and then I've got the 100%, 100%, and I'll hit add those here.

00:15:03.340 | Oh, I know exactly where you're at.

00:15:04.940 | Okay, cool.

00:15:05.940 | And then this gives me this, which you probably lived through, right?

00:15:09.300 | Yes, that's exactly what I'm dealing with.

00:15:11.620 | So for instance, the S&P 500, the VOO, I'm getting 24% return in the last year, whereas

00:15:20.100 | my bond fund, I'm maybe getting 4%, 5% when I'm looking at it just in the last year.

00:15:29.180 | And look at, I mean, here we're talking $10,000 to start, an initial dip.

00:15:34.540 | This must have been the COVID downturn, right?

00:15:38.620 | Right when COVID started, I think?

00:15:41.540 | Okay.

00:15:42.540 | And then now we're still below the line here.

00:15:45.300 | We're at 9,600 versus this one.

00:15:48.820 | But obviously, we could have a bigger correction than this, and we'd be wishing we had bonds,

00:15:53.700 | right?

00:15:54.700 | That's exactly right.

00:15:56.540 | And for me, being a newbie, as far as the retirement thing, I just retired.

00:16:02.060 | I don't want to lose any money, period.

00:16:04.000 | And I'm familiar with the stocks going up and down, I can handle that.

00:16:07.980 | But I'm trying to equate whether just to keep that money in cash or to put it in bonds.

00:16:14.260 | I don't want to look long-term, I don't want to have a five-year window for bonds.

00:16:20.220 | I want to be able to have that money, that cash available to me tomorrow.

00:16:26.340 | Yes, Alan?

00:16:29.020 | Yes, well, I think you need to look also, remember, a couple of points.

00:16:33.900 | Number one, we want to look at our overall portfolio return.

00:16:36.660 | Don't just focus on the equity returns and the angst that we're not getting that elsewhere.

00:16:41.920 | We want to look at how the whole portfolio is performing for us and making sure we have

00:16:46.020 | enough to live on.

00:16:48.980 | And we want to run out of life before we run out of money and be able to sleep well at

00:16:54.460 | night.

00:16:55.460 | So we have to look at the two together and accept what the combination gives you.

00:17:01.980 | And again, even looking at the bond market, it went down, it dipped down, it's slowly

00:17:06.020 | recovering.

00:17:07.020 | So we'll be OK.

00:17:08.980 | Those who stay the course and don't try to time the market and don't bail, just as when

00:17:13.080 | equities are falling, you don't want to bail and sell at the lows, you likewise don't want

00:17:17.320 | to do that with bonds, unless you are taking advantage of it as a tax loss harvesting opportunity,

00:17:22.340 | which is another thing we can delve into.

00:17:25.140 | That's something I did in my taxable account.

00:17:27.180 | As bonds fell, I had some municipal bond funds that took a beating also, and I sold them

00:17:32.540 | and tax loss harvested to get some benefit there.

00:17:37.540 | So even when the market is volatile, certainly when bonds are volatile, there are some potential

00:17:41.340 | opportunities in a taxable account to benefit from that.

00:17:45.660 | But the bottom line is we want to stay the course long term.

00:17:48.780 | And if necessary, you can kind of build a liability matching bond portfolio that ties

00:17:54.140 | into the time when you need the money.

00:17:56.840 | You may have a combination of short term, say, treasuries, and then some intermediate

00:18:01.780 | term treasuries.

00:18:04.100 | Feds tend to advise against holding long term bonds because of their increased volatility,

00:18:10.500 | but some folks still do.

00:18:12.420 | But if you kind of split up your bond fixed income holdings between intermediate term

00:18:18.020 | bonds, short term bonds, and then some cash as well, certainly with good yields now, that's

00:18:23.900 | reasonable, and you're further diversifying and just stay the course and rebalance.

00:18:28.780 | That's what I tried to do.

00:18:30.260 | Okay.

00:18:31.260 | Thank you, Alan.

00:18:32.420 | Mel, do you want to say something?

00:18:36.740 | Let's see if this...

00:18:38.180 | Can you hear me on this one?

00:18:39.180 | Yes, perfectly.

00:18:40.180 | Okay, good.

00:18:41.180 | My other computer, the speaker wasn't working.

00:18:45.260 | When Scott said he simply doesn't want to lose any money in bonds, there are several

00:18:51.220 | ways he can do it or a combination of the two.

00:18:53.980 | One is build a treasury ladder, buy an auction, and hold a maturity, and you will not lose

00:19:00.780 | any money.

00:19:02.020 | You may lose spending power, and another way to cover that is to buy your allocation

00:19:10.380 | of I bonds.

00:19:11.380 | So a combination of the short term at the present time, short term treasuries, bought

00:19:16.260 | an auction, held a maturity, and I bonds should cover him, and you won't lose a penny on either

00:19:22.180 | one.

00:19:23.180 | Okay.

00:19:24.180 | Okay.

00:19:25.180 | If I could be so bold, I love what...

00:19:28.060 | I think her name is Christine Benz over there at Morningstar talks about in the different

00:19:32.780 | bucket strategies, and so I have a huge bucket of stocks.

00:19:36.940 | I'm used to stocks.

00:19:38.540 | I'm familiar with stocks.

00:19:40.380 | I've been invested in stocks for 50 years.

00:19:44.020 | I'm used to that.

00:19:46.060 | The bond situation, I'm relatively new in the bond thing.

00:19:49.620 | I've been doing the bond for roughly a year, two years, three years.

00:19:53.860 | Bonds have been losing money like crazy lately.

00:19:56.740 | I've been taking a bath in my bonds.

00:20:00.100 | Then I have a whole bunch of money market or CDs or online savings accounts, and they're

00:20:09.180 | not losing any money on a monthly basis, and the interest I'm getting is 4% or 5%.

00:20:18.500 | I'm having trouble sleeping at night knowing that my bonds are being affected so dramatically

00:20:25.140 | whereas I've been doing really well in the stock market for the last, say, 10 years I've

00:20:31.620 | been doing really well.

00:20:33.260 | Now I'm taking a bath in the bonds, and with my limited experience in the bond market,

00:20:40.500 | losing money year after year, I'm really...

00:20:45.140 | I'm hesitant.

00:20:46.140 | I'm having trouble sleeping at night knowing that I have 20% of my portfolio in bonds that

00:20:52.380 | I've been taking a bath, and you're telling me I just need to ride away, just stick with

00:21:00.780 | it.

00:21:01.780 | I mean, if the Fed announced tomorrow that the interest rates were 1%, wouldn't you be

00:21:06.260 | just...

00:21:07.260 | Yeah.

00:21:08.260 | You'd be whole like tomorrow morning, right?

00:21:09.260 | That's right.

00:21:10.260 | You're absolutely right.

00:21:11.260 | I don't think it's going to happen, but it would.

00:21:14.260 | Scott, did you hear that you can buy treasuries at auction and hold a maturity and you will

00:21:21.180 | never lose a penny?

00:21:23.020 | You can also buy I bonds, which will give you inflation protection and you'll never

00:21:27.580 | lose any money.

00:21:28.900 | So there's two solutions right there, and then you can sleep at night.

00:21:34.460 | It's also good to hear, Scott, that it's 20%, not 80% either, right?

00:21:40.500 | I'm sorry.

00:21:41.500 | I missed that.

00:21:42.500 | You said...

00:21:43.500 | I think you said it's 20% of the portfolio, right?

00:21:47.180 | Correct.

00:21:48.180 | Correct.

00:21:49.180 | 20% of the portfolio is in bonds.

00:21:51.500 | Yes.

00:21:52.500 | And from a diversification point of view, and as Alan was saying earlier, what age minus...

00:21:57.220 | What was your number, Alan?

00:21:59.220 | I think it's 100 minus age is one of the rules of thumb, I believe.

00:22:03.980 | Now let me be brutally honest with you guys.

00:22:07.540 | I've been 100% in stocks for 50 plus years.

00:22:12.100 | I've ridden the wave.

00:22:13.580 | I've been exposed to back when the market dropped 50% in 2008, I rode it out.

00:22:19.980 | I didn't move.

00:22:20.980 | I didn't lose a dime.

00:22:22.740 | I stuck with it.

00:22:24.980 | I'm used to things like the stock market going up and down.

00:22:28.940 | You rode this.

00:22:29.940 | This is what you rode.

00:22:30.940 | You were the blue line.

00:22:31.940 | Oh, yeah.

00:22:32.940 | I rode it.

00:22:33.940 | I rode it.

00:22:34.940 | But the red line's not so bad either.

00:22:35.940 | I mean...

00:22:36.940 | You guys are killing me.

00:22:37.940 | Jim, if you can show- There's people that live through the depression

00:22:45.180 | that wish they had some money in bonds probably, if they were solvent.

00:22:48.620 | I don't know.

00:22:49.620 | Jim, can you create a third portfolio there on Portfolio Visualizer, a 60/40 portfolio

00:22:54.740 | of equities and bonds to show you what that does?

00:22:59.420 | Yeah.

00:23:00.420 | I think I can go 60 here.

00:23:01.420 | Do you want 60 on the market and 40 on bonds?

00:23:04.300 | 60 equities, 40 bonds, and then- Okay.

00:23:07.340 | That should do it.

00:23:10.140 | And then that gives us that.

00:23:13.180 | And that's the orange line, I believe, right?

00:23:15.300 | Right.

00:23:16.300 | Yeah.

00:23:17.300 | Portfolio.

00:23:18.300 | I got it.

00:23:19.300 | I got it.

00:23:20.300 | Yeah.

00:23:21.300 | I got it.

00:23:22.300 | So, as somebody said in the comments, there's no free lunch.

00:23:23.300 | And there's some other comments about cash.

00:23:25.700 | Although it's paying great now, when interest rates drop, you're not going to get that.

00:23:30.100 | People also commented that VOO is high return because it's high risk.

00:23:34.780 | Is VOO this Vanguard thing?

00:23:37.820 | Is it?

00:23:38.820 | Yeah.

00:23:39.820 | This is VOO.

00:23:40.820 | Yeah.

00:23:41.820 | So, I like that curve too.

00:23:45.380 | But look at this.

00:23:46.380 | You got some things like this.

00:23:47.380 | Hey, I was there.

00:23:48.380 | I felt it.

00:23:49.380 | It was there.

00:23:50.380 | You get to take the good with the bad, right?

00:23:53.380 | But, you know what, see, the thing is, I'm used to that with stocks.

00:23:58.060 | I want that to happen with stocks.

00:23:59.740 | I'm not going to lose any sleep.

00:24:01.700 | But the bond market is something that's new to me that is killing me.

00:24:06.060 | Yeah.

00:24:07.060 | It's new to me.

00:24:08.060 | I mean, I get the same feelings.

00:24:09.060 | Let's see.

00:24:10.060 | Jim, do you have another comment?

00:24:15.020 | And you're muted.

00:24:18.860 | Okay.

00:24:23.420 | Anything else, Scott, before we move on?

00:24:26.020 | I don't know if we can give you anything that would make you sleep better other than Mel's

00:24:30.340 | advice.

00:24:31.340 | I mean, the bucket strategy is cast in stone.

00:24:36.740 | That's a good one.

00:24:37.740 | Some of it in bonds, some of it in stocks, and some of it in cash.

00:24:43.380 | Yeah.

00:24:44.380 | In fact, if I do what Alan was talking about here, let me go right to here.

00:24:49.220 | And you were saying 80-20, right?

00:24:51.980 | That's what I'm at right now.

00:24:52.980 | Let's put this 80 and 20, okay?

00:24:57.780 | And then I'll hit this.

00:24:59.620 | So now that's not so bad.

00:25:03.660 | I mean, you could do a lot worse, I think, don't you think?

00:25:08.820 | I know it's not what you want, but it's not so bad.

00:25:12.380 | I'm being retarded as a bitch.

00:25:17.460 | Okay.

00:25:18.460 | David, did you have a comment from Detroit?

00:25:20.900 | Yeah, I think so.

00:25:22.660 | I think, I mean, this conversation is really focused on some extraordinary times we've

00:25:26.780 | had in the past couple of years in terms of specifically the bond market.

00:25:30.980 | And I guess my thinking is that what's happened in the past few years is interesting to learn

00:25:37.700 | from, but we need to be looking forward and understanding what the nature is of the different

00:25:42.340 | things we want to be invested.

00:25:44.300 | And I think, so I want to be forward-looking, first off, and second, I think maybe it sounds

00:25:50.140 | like some lessons have been learned here, right?

00:25:52.180 | So if something about your asset allocation is causing you to lose sleep, I think that's

00:25:56.020 | a red flag that says maybe your asset allocation doesn't suit your risk tolerance.

00:26:02.260 | And so, yeah, so let's just understand what happened in the past and that we've gone through

00:26:07.100 | an extraordinary couple of years here and think strategically going forward.

00:26:13.380 | Okay.

00:26:14.380 | Thank you, David.

00:26:15.580 | And Jean, do you have a comment?

00:26:19.140 | Yes.

00:26:20.500 | Like Scott, I was heavily in stocks and as I've gotten into retirement, I moved to bonds.

00:26:25.940 | And before I totally got into bonds, I started to study bonds and realized that not all bonds

00:26:31.180 | are equal.

00:26:32.180 | And going back to Mel's message, Treasury bonds and I bonds are a whole lot different

00:26:38.980 | than municipal bonds and corporate bonds and junk bonds, and there's all kinds of bonds

00:26:45.620 | out there, Scott.

00:26:46.620 | What are you invested in?

00:26:48.740 | Oh, you're muted, Scott.

00:26:53.060 | Go ahead.

00:26:54.060 | Unmute yourself.

00:26:55.060 | I'm in T-Bills.

00:26:56.060 | I mean, I'm as golden as I possibly can get.

00:27:01.340 | I'm not buying any I bonds, I'm not buying any junk bonds, I'm not buying anything other

00:27:08.860 | than Treasuries.

00:27:09.860 | Short-term, long-term?

00:27:10.860 | I think I can pick Treasuries here.

00:27:14.940 | Right now, I'm in, gosh, not long-term, medium-term and short-term.

00:27:20.140 | Okay.

00:27:21.140 | How about if I just call it intermediate-term Treasury here?

00:27:24.420 | There you go.

00:27:25.420 | Okay.

00:27:26.420 | So, and that would be 20% here, 80%-

00:27:29.460 | Intermediate is anywhere from four to eight years or something?

00:27:33.540 | What is the duration of those?

00:27:35.380 | No.

00:27:36.380 | The bond market I'm looking at is five years is the maximum, five years is the maximum.

00:27:44.180 | Which one do you guys think I should pick here?

00:27:49.540 | That's short-term.

00:27:52.060 | Five years maximum.

00:27:53.060 | I think Mel, Mel, come on on, come back, come back to us, Mel.

00:27:58.980 | Yeah, you're short-term, you start to hit at the five to six years, you start to hit

00:28:05.940 | the intermediate.

00:28:06.940 | Right.

00:28:07.940 | So, he's right at the cutoff point.

00:28:09.820 | All right.

00:28:10.820 | I'll pick short-term.

00:28:11.820 | He's long on short-term.

00:28:12.820 | I'm going to pick short-term.

00:28:13.820 | Intermediate.

00:28:14.820 | All right.

00:28:15.820 | And are you, you're in strictly Treasuries and you're having, and you're having trouble

00:28:19.620 | sleeping at night?

00:28:20.620 | Yeah.

00:28:21.620 | Ambient, ambient.

00:28:22.620 | I'm looking at my S&P 500 and I'm getting 24% return, and I'm looking at my Schwab

00:28:30.180 | bond fund and I'm getting 4% return.

00:28:34.700 | But there's your problem, Scott, don't buy a, don't buy a fund if you cannot afford to

00:28:42.140 | lose any money.

00:28:43.940 | Correct.

00:28:44.940 | Individual bonds, buy Treasuries and hold them to maturity.

00:28:49.620 | You will never lose a penny.

00:28:51.980 | Treasuries, yeah.

00:28:54.540 | Bond funds have a high, high fees.

00:29:02.780 | This orange line, Scott, I just want to make you sleep better at night.

00:29:05.980 | This orange line, a lot of people who are paying high commissions, high fees, and are

00:29:11.220 | invested in the wrong stuff are not getting anywhere near this orange line.

00:29:15.500 | So you should sleep better than you are.

00:29:18.220 | Okay.

00:29:19.220 | So to get the orange line, what do I got to do?

00:29:23.100 | That's what you're doing.

00:29:24.100 | Treasury direct.

00:29:25.100 | You're not blending the 20, you need to blend the 24% you're getting in your market, stock

00:29:31.820 | market stuff with your 4% you're getting in the bond.

00:29:35.580 | That's what this is doing.

00:29:37.060 | This is the stock down here, the bonds in the red and the stock market generally in

00:29:42.660 | the blue.

00:29:43.860 | And because you're 80/20, you're 80% closer to that line.

00:29:49.420 | And you have the diversification, which when the Fed lowers the interest rate to 1% tomorrow

00:29:53.620 | morning, you'll be completely opposite on this topic.

00:29:56.140 | Well, you can see the volatility though.

00:29:59.700 | What you're doing is adding volatility.

00:30:01.440 | If you see that the yellow line more or less parallels the blue line, because they're primarily

00:30:06.380 | equities compared to the lack of volatility of the red line.

00:30:10.780 | So it's a matter of risk, how much risk and volatility you're willing to accept to allow

00:30:15.900 | yourself to sleep well at night.

00:30:18.540 | We're all individuals.

00:30:19.540 | We have to decide that for ourselves.

00:30:21.180 | So backing up big time, I am used to volatility.

00:30:26.260 | I want to take advantage of the stock market.

00:30:29.260 | I want to get that 24% return.

00:30:32.220 | I want to get that 50% return.

00:30:34.740 | I can handle, I'm keeping 20% of my portfolio, roughly five years worth of cash, living expenses.

00:30:44.180 | I'm not working anymore.

00:30:46.300 | I want to be able to have five years worth of income that I can just access tomorrow.

00:30:52.780 | So what you're telling me, I'm not going to find that in the bond market.

00:30:55.380 | I got to put that in CDs and mutual funds.

00:30:59.140 | If you put it in CDs, you don't have immediate access to it without paying penalties.

00:31:07.940 | So you can, a penalty is a loss.

00:31:11.460 | So if you-

00:31:12.460 | - Once again, you heard somebody else mentioned having a tree, having a CD tree, have something

00:31:18.380 | that's going to mature in five years, have something that's going to mature in four,

00:31:22.860 | three, two, one.

00:31:25.300 | - Okay, so that I have access to, you know, 10,000 bucks a month that I can play with.

00:31:31.220 | - So you can do that with CDs, or you can do it with treasuries.

00:31:36.700 | Take your pick.

00:31:37.700 | - Yeah, but once again, the treasuries, I'm not doing well.

00:31:42.380 | You know, when I'm getting-

00:31:43.380 | - What do you tell, Scott, what do you tell somebody that went full into the market right

00:31:48.540 | here and dropped this much versus the guy who bought bonds on that same day who rode

00:31:55.700 | right through this blip?

00:31:59.180 | As I think David mentioned, we've got extraordinary circumstances going on in the last few years

00:32:04.580 | here.

00:32:05.580 | - Okay.

00:32:06.580 | - Do you have a Vanguard brokerage account?

00:32:11.220 | - Yes.

00:32:12.220 | - Okay, you can buy treasuries with no problem, no cost, and you don't have to deal with treasury

00:32:18.520 | direct right from your brokerage account at Vanguard.

00:32:22.700 | - Okay, do I have to do 10,000 bucks at a pop?

00:32:27.380 | - You can do 1,000, you can do 5,000, you can do 100,000, you can do 10 million.

00:32:34.380 | - Okay.

00:32:35.380 | Big picture time, guys.

00:32:37.580 | Let me ask them, point blank.

00:32:39.780 | That 20% that I would allocate towards bonds, what if I pull that 20% out and put it in

00:32:46.740 | mutual funds, put it in money market accounts, put it in CDs?

00:32:54.100 | - Well, the CDs aren't gonna be available to you without paying a penalty if you need

00:32:59.140 | it right away.

00:33:00.140 | You mentioned that.

00:33:01.140 | - I do that tier thing.

00:33:02.140 | Let's just reuse some round numbers, that 20% let's say is a million bucks.

00:33:07.860 | Let's put $800,000 in four years, a CD that lasts four years.

00:33:16.620 | Then let's put another $100,000 in a one-year CD, you follow me?

00:33:23.380 | And put the rest in a mutual fund that I can access next month without a penalty.

00:33:30.260 | - Not without a loss though, which is what you wanna avoid.

00:33:33.340 | - What kind of a loss am I gonna get in a money market?

00:33:36.460 | - You've already experienced it, Scott.

00:33:39.220 | - How?

00:33:40.220 | Where?

00:33:41.220 | - The whole problem is you've already experienced it and you can't handle it.

00:33:45.860 | So you gotta work around your inability to handle losses in bonds.

00:33:55.100 | - If I can interject, Jim, I think we probably ought to move on, but one thing I wanna say

00:34:00.540 | is just as a little disclaimer to remind everybody that this meeting is for informational purposes

00:34:04.820 | only and should not be construed as personalized investment advice.

00:34:09.060 | We can't delve into extreme detail for everybody.

00:34:12.100 | We're just gonna talk in generalities and basics.

00:34:15.180 | But if there's anybody else who has a little bit different perspective regarding bonds

00:34:18.580 | and how they handled the downturn last year, we'd like to hear from you.

00:34:21.940 | Otherwise, I think we perhaps ought to move on.

00:34:24.900 | - Okay.

00:34:26.060 | Anybody else, raise your hand if you wanna speak about bonds.

00:34:28.780 | Okay, well, we'll move on.

00:34:33.060 | Thank you, Scott, for sharing that with us 'cause it was good discussion.

00:34:37.300 | The next topic is pre-retirees, traditional or Roth retirement contributions.

00:34:44.260 | Well, I think on the video they said not everyone had access in their early days if they're

00:34:49.140 | retiring now to Roth accounts.

00:34:53.100 | And now they had a discussion about whether you should be contributing to a traditional

00:34:57.140 | or a Roth.

00:34:58.140 | And I forget if it was Mike Piper or somebody said, they always base it on if you could

00:35:03.740 | predict your tax rate today versus when you retire, that should be part of your guidance.

00:35:10.140 | Does anybody have experience with that?

00:35:12.620 | Maybe they've switched from traditional to Roth and they're not yet retired.

00:35:17.220 | Anybody there?

00:35:18.220 | David from Detroit.

00:35:19.220 | - Yeah, actually, I've sort of gone through sort of my thought process on that as I look

00:35:25.100 | forward to retirement.

00:35:26.620 | And so I'm in my sort of wanna expect the sort of peak earning years.

00:35:32.340 | So one, you know, sort of, if you'd asked me 10 or 20 years ago, you know, where I would

00:35:36.700 | be at this point, I'd say, oh yeah, I definitely wanna be, you know, contributing pre-tax.

00:35:40.860 | But then as I look forward and, you know, actually, so now that I have like line of

00:35:44.380 | sight to what cash flows might actually look like at, you know, a future retirement time,

00:35:49.860 | I realized that those, that RMDs, you know, wind up catching up with me in a couple of

00:35:54.740 | decades should I still be around.

00:35:56.980 | And so that changes the math entirely.

00:35:59.940 | But even though I'm at my peak, you know, salary earning years, that income for me is

00:36:07.100 | gonna wind up being, you know, substantially less than what my income might be in RMDs

00:36:13.540 | would likely be or my projected to be at that time.

00:36:16.100 | So even though I'm at my peak earning years, I have completely shifted and put nothing

00:36:21.100 | into pre-tax savings anymore and I'm actually converting, you know, hundreds of thousand

00:36:31.160 | dollars over these next three years while the current tax cuts are in place.

00:36:37.040 | So I've had to completely shift gears.

00:36:38.720 | That's a purely personal situation, but I mentioned it because it's contrary to what

00:36:45.460 | sort of one might intuit if one looks at this from a couple of decades back, right?

00:36:50.860 | I'm at a place where one would expect to be really definitely abusing that tax deduction,

00:36:57.460 | but it turns out it's small potatoes compared to what I'd be facing at RMD time.

00:37:04.420 | And somebody commented on one of the other calls that having high taxes at RMD time is

00:37:10.260 | a good problem to have, means you've got some money.

00:37:14.780 | Probably the kind of problem we'd always to have.

00:37:16.980 | And so Leslie, do you have a comment on that or you want to talk about your situation and

00:37:21.180 | you're muted.

00:37:24.180 | Okay, Jean.

00:37:29.380 | I've been, I've been taking RMDs for several years and now that I have the hindsight, I

00:37:40.500 | would have done it differently.

00:37:42.180 | I would have taken my nest egg and divided it in half and had half in 401ks and the other

00:37:48.740 | half in after-tax monies because when the RMDs hit, they hit hard and you're just creating

00:37:56.860 | a huge tax bomb.

00:37:59.340 | And that applies, and yes, it's a nice problem to have, and it applies to those people that

00:38:04.540 | were steady savers.

00:38:05.540 | You know, they started their IRAs when they were 25 or 30 and they saved every year the

00:38:12.100 | maximum amount.

00:38:14.520 | When you get there, you've built yourself a tax bomb.

00:38:18.060 | Second thing is, is I believe this is a lower tax season than we'll see in a while.

00:38:22.900 | So it's better off to pay the taxes now.

00:38:25.020 | Okay.

00:38:26.020 | It makes sense.

00:38:27.020 | I think Alan, you talked about the RMD alternatives with charity or something last call.

00:38:32.540 | You want to mention that again?

00:38:34.540 | Well, they're qualified charitable, what they call them, QCDs, Qualified Charitable

00:38:42.020 | Distributions, I think.

00:38:43.540 | I haven't done those, but you can donate from your tax deferred account to a charity and

00:38:51.220 | that will count towards your RMDs.

00:38:53.900 | Perhaps somebody who's doing that or Mel can provide details on that.

00:38:57.700 | But one thing I'll add, it was Mike Piper, in fact, who commented primarily deciding

00:39:02.340 | between Roth versus traditional contributions while you're still working.

00:39:08.860 | And as he pointed out rightly that a lot of us retirees never had Roth contributions as

00:39:13.460 | an option in our working days.

00:39:15.220 | So now's a good time for us to be doing those Roth conversions and also to consider, as

00:39:21.860 | David did, to put more money into a Roth, especially if you were in a, expect that we'll

00:39:27.780 | have favorable tax status in the future.

00:39:32.620 | But if you have a match in your IRA or 401k, I should say that is reasonable to at least

00:39:37.860 | contribute as much to get the match.

00:39:39.620 | You don't want to turn away from free money and thereafter put more money into a Roth

00:39:44.580 | if it's appropriate tax wise.

00:39:49.140 | The other group of people who need to be thinking about whether they're about consider putting

00:39:55.220 | money into Roth instead of a pre-tax are those with pensions.

00:39:59.680 | And you mentioned sort of the previous generation that was more likely to have a pension and

00:40:06.100 | less likely to have access to Roth 401ks, for example.

00:40:11.500 | But especially those in the middle who had both, for those who've had access to a lot

00:40:17.100 | of pre-tax contributions and also have a pension who may not be drawing down investments early

00:40:22.580 | on in their retirement, then those, when one is receiving maybe a couple of pensions, a

00:40:29.620 | couple of social securities, when one hits RMD age, a lot of those returns from investments

00:40:36.300 | can really wind up stacking on to create higher income levels and tax brackets than anticipated.

00:40:42.740 | Yeah.

00:40:43.740 | If I can interject one thing, it's helpful.

00:40:46.100 | I believe it's Swab.

00:40:47.100 | I was looking for the URL.

00:40:48.100 | I don't have it in hand.

00:40:49.100 | But I think Swab has a free online calculator for RMD payouts, and you can plug in where

00:40:53.940 | your current tax-deferred account is and some other key information, and it'll project out

00:41:00.140 | what your RMDs will be in the future.

00:41:02.820 | So you can kind of use that as a gauge as to whether you want to continue contributing

00:41:06.740 | the maximum there or perhaps shift dollars towards Roth or otherwise.

00:41:11.500 | And that's a useful modeling tool.

00:41:14.320 | You do have to make some assumptions on what the return will be.

00:41:18.380 | But if you're typically primarily fixed income, as many of us are, we're predominantly fixed

00:41:24.420 | income, you can kind of model it pretty well what the future return will be and then see

00:41:28.740 | what your RMDs will look like years later.

00:41:32.460 | Yeah, Alan, Keith, go ahead here.

00:41:36.980 | I was just noticing in the chat, there's a couple of comments right after Keith.

00:41:41.020 | I'll make some comments that might get some discussion going that's in the chat right

00:41:44.380 | now.

00:41:45.380 | Go ahead, Keith.

00:41:46.380 | Yeah.

00:41:47.380 | So I'm kind of in the situation that David from Detroit was describing, have a pension

00:41:53.140 | and I'm a few years away from collecting Social Security.

00:41:56.700 | I want to get to at least full retirement, if not a little bit later.

00:42:00.780 | And what scares me is having to take RMDs.

00:42:04.140 | So as I mentioned, I think when I talked earlier, I'm going through and doing Roth conversions.

00:42:10.980 | I didn't have the opportunity to have a Roth 401(k) that I could contribute to until the

00:42:17.180 | last month of my 30-year career.

00:42:21.580 | And so it was way past.

00:42:22.780 | I had advocated for it for about 10 years and the company never did it until I literally

00:42:27.580 | had one month to go till I retired and I wish I had that option.

00:42:32.260 | And I look at it from two perspectives.

00:42:34.420 | Number one is just having the ability to put that in tax after tax.

00:42:42.340 | But to me, it's really the flexibility because you don't know what kind of situation you're

00:42:47.460 | going to be in later on when RMDs happen.

00:42:53.020 | Between my pension, Social Security, my wife will get a spousal benefit.

00:42:59.340 | And then having to do RMDs, I think it was Jean that mentioned, it can hit you pretty

00:43:05.020 | hard.

00:43:06.300 | And so I'm kind of taking the pain right now and doing Roth conversions and paying the

00:43:12.180 | tax on it, but I wish I had the opportunity to do it while I was working.

00:43:16.660 | So I have two working adult kids with 401(k) plans and I tell them, do Roth if you can

00:43:26.660 | and make sure you're contributing to your Roth IRA so that later on, no matter what

00:43:33.260 | fiscal policy there is and tax rates there are, you'll have the flexibility, more flexibility

00:43:40.500 | than someone like myself that has to do Roth conversion.

00:43:44.180 | So I like that and the fact that I'm doing something that I know right now what the tax

00:43:51.940 | rates are so I can plan with a known, known, so to speak, as opposed to not knowing what's

00:43:58.980 | going to be like when it comes to Roth conversions.

00:44:02.020 | I just prefer to make decisions based on things that are factual rather than guessing what

00:44:07.900 | it's going to look like in the future.

00:44:09.820 | I think the diversification aspect there is really important.

00:44:14.860 | And I think he and I, this is David, we've both learned a lesson that having some more

00:44:19.580 | money toward the Roth side might've been helpful in retrospect.

00:44:23.140 | But don't forget, depending, there's lots of people online here, people are earlier

00:44:26.860 | in their career, especially, that what you certainly don't want to do is be in a situation

00:44:32.700 | where you're pulling out funds out of your Roth, out of a Roth account in retirement

00:44:37.980 | for your first dollar, right?

00:44:39.780 | Because those for married filing jointly today, your first $27,700 are tax-free.

00:44:48.220 | And then for some portion after that, you're only paying 10%, which is almost certainly

00:44:51.300 | less than you're paying today.

00:44:52.860 | And so you want to plan on having money in both accounts.

00:44:57.900 | Gene has said 50/50, Keith has said he wishes more on the other side, but I think tax diversification

00:45:02.740 | was also mentioned in the round table.

00:45:06.780 | And I think that's sort of what we're talking about is it's not all or nothing, but I think

00:45:12.060 | at some point you need to start projecting future cash flows and that's where everybody

00:45:16.980 | alluded to.

00:45:17.980 | You need to have plans and you really need future cash flows.

00:45:20.500 | I found that new retirement was the calculator that put me on the path of understanding where

00:45:26.860 | I might be and help me sort of understand what the right mix might be for my situation.

00:45:33.580 | If I can just add really quick before you go to Marion, I think the tax comment that

00:45:43.940 | David made is very important.

00:45:45.660 | For those of you that are five or 10 years away from retirement, I personally used TurboTax

00:45:53.260 | for a long time.

00:45:54.700 | So I saw the hard numbers that I was entering and thinking about.

00:45:58.620 | I have two friends that are near retirement and they both have somebody else do their

00:46:02.860 | taxes for them.

00:46:04.260 | So they don't really think about tax consequences and moves they might want to make.

00:46:09.760 | And now that they're thinking about retirement and they're asking me my advice, one of the

00:46:14.500 | things I say is get familiar with how things are taxed because there are smart ways and

00:46:20.740 | not so smart ways to spend in retirement, certain money that you want to spend, others

00:46:27.100 | that you don't, depending on whether it's a taxable account or not, and just understand

00:46:31.740 | how things are taxed and where money is coming from and how it affects your individual tax

00:46:38.060 | situation.

00:46:39.060 | And that can be thousands of dollars a year difference in an available income, depending

00:46:46.900 | on how you handle certain things.

00:46:49.380 | So for those of you that are five or 10 or 15 years away, and you're just maybe starting

00:46:54.220 | to think about it, my advice is to at least get familiar with taxes and how they work

00:47:01.060 | and how it's going to affect you so that you start making the right decisions now and don't

00:47:07.420 | put yourself in a situation where in retirement, all of a sudden you're paying more taxes than

00:47:12.940 | you thought you were or needed to because it affects it more than I think people realize

00:47:18.660 | when they're working and they're busy with their work lives.

00:47:21.340 | Okay.

00:47:22.340 | Thank you, Keith.

00:47:23.340 | Miriam.

00:47:24.340 | I agree with what Keith just said.

00:47:26.700 | I agree with that.

00:47:28.900 | One thing on the forum, many will say that it's good to go into retirement with equal

00:47:34.740 | amounts in your taxable account, your 401k, your pre-tax account, and your post-tax account,

00:47:45.220 | your Roth account.

00:47:46.580 | Have equal amount in each more or less because as David mentioned, when you get into retirement,

00:47:52.740 | each account has different, there are different things you can do with each account, pre-tax

00:47:58.460 | money, post-tax money, and your taxable account.

00:48:01.780 | It gives you flexibility and especially for our kids.

00:48:06.340 | For our kids now, they can put a lot of money into those Roth accounts.

00:48:11.380 | They can pack it into those Roth accounts, but not to neglect the pre-tax accounts.

00:48:18.940 | For example, my kids, they can have their 401k be pre-tax and then they can max out

00:48:29.700 | their Roth IRA, which is now $7,000 a year.

00:48:34.860 | That's a pretty good chunk into your post-tax.

00:48:36.740 | By the time they reach retirement, they will have a big chunk in the Roth IRA already,

00:48:44.340 | which we did not have because there were no Roths when we were accumulating money.

00:48:52.340 | It's good for them.

00:48:53.340 | Also, for the kids, when they put it into the 401k, remember that money is not taxed,

00:49:00.340 | so their income tax is lower.

00:49:02.940 | They have a lower income tax because the 401k is not taxed, therefore, they have a little

00:49:09.940 | extra money.

00:49:11.120 | They can then put that over into their Roth IRA.

00:49:15.680 | That's how that can work.

00:49:16.680 | Yeah, kind of like investing the tax savings, you're saying.

00:49:21.000 | Yeah.

00:49:22.000 | Anyway, for me, it was interesting.

00:49:24.800 | I kept investing in my regular traditional IRA before there were Roths.

00:49:29.800 | By the time Roths were born, I had this huge, well, a large traditional IRA.

00:49:37.760 | I just kept investing even though I could not deduct it.

00:49:41.120 | What was nice is that by the time I converted, really only about 50% of my conversion was

00:49:48.760 | taxable because the rest had already been taxed when I put it into the traditional IRA.

00:49:56.440 | Even if you're in the position I was in, hope is not lost, you can still do a nice conversion

00:50:03.720 | into your Roth IRA and not pay a giant amount of taxes now, a huge amount of taxes now.

00:50:09.520 | Okay, thank you.

00:50:11.160 | We have a caller, or not a caller, but we have a person named 14056, if you'd like to

00:50:16.600 | go ahead.

00:50:17.600 | Yeah, this is Pat.

00:50:19.740 | Right now, they're telling a lot of young people just to go into Roths right away.

00:50:24.200 | I'm talking about people graduating from college because they said your income for many jobs

00:50:30.000 | is never going to be lower than it is right now.

00:50:33.840 | Just keep doing that.

00:50:35.340 | Right now, I think my company now will also match Roth 401ks.

00:50:41.040 | Right now, I'm about 50% pre-tax, 50% post-tax.

00:50:48.200 | My issue right now is I really need to not take Social Security until full retirement

00:50:55.400 | age.

00:50:56.400 | I want to work indefinitely.

00:50:57.760 | I work on call as an editor, and I'm part-time on call, and I'm really, really enjoying it,

00:51:06.220 | but there seems to be no good time for me to do any kind of conversions or whatever.

00:51:13.260 | I'm starting Medicare in July, and I don't really want to do anything that's going to

00:51:18.460 | ... What is it?

00:51:19.460 | The Irma?

00:51:20.460 | You know what I mean?

00:51:21.460 | Yes.

00:51:22.460 | It's like somebody can't say, "Oh, wait until you retire," because I'm happier when I'm

00:51:27.420 | working.

00:51:28.420 | I'm single, and I have friends and everything else, but just somehow making money, even

00:51:33.860 | if it's a small project, it gives my life structure, so I'm just really kind of struggling.

00:51:40.220 | Somebody was talking to me about ... Apparently, I'm pretty well set.

00:51:45.380 | I was told that they did a Monte Carlo, and I should be able to live the rest of my life

00:51:52.340 | with no problem.

00:51:53.520 | I can't bring myself to spend my money.

00:51:56.140 | For 32 years, or actually closer to 35, I've been investing and reinvesting dividends and

00:52:03.180 | capital gains, and it got me to where I am now, and now I have a cash flow problem because

00:52:08.340 | I'm really heavily invested.

00:52:09.780 | I could take money out, but I hate doing it, so I'm just kind of stuck.

00:52:14.140 | I have to figure out what to do, but I can't spend my own money.

00:52:19.060 | That's a common problem that they talked about that on the ... What did you say, Alan, last

00:52:24.120 | time?

00:52:25.120 | Either you fly first class, or your heirs are going to fly first class, right?

00:52:29.160 | You said that.

00:52:30.160 | I love that one.

00:52:31.160 | Right.

00:52:32.160 | I'll throw in something.

00:52:33.160 | I'm just putting this in the chat, but just to reiterate, for those of you who can, having

00:52:37.800 | the majority of your bonds in the tax-deferred account may be beneficial, because the slower

00:52:42.200 | growth of the bonds will help moderate your future RMDs, because if you have more of your

00:52:48.000 | equity holdings in a taxable brokerage with favorable long-term capital gains tax rates

00:52:54.000 | or a Roth with no taxes, have your main growth occurring there, and slow down your tax-deferred

00:53:02.080 | growth by having most of your bonds, if not all of them, in that account.

00:53:06.560 | That's another way to control future RMDs long-term.

00:53:11.160 | And Leslie, did you have a comment?

00:53:12.480 | Your hand's up.

00:53:13.480 | I do.

00:53:14.480 | Sorry, I had issues with my microphone.

00:53:18.440 | One thing that I've learned over the last couple years is my company allows us to max

00:53:24.400 | out the IRS pre-tax savings, so $23,500 plus the catch-up, and they'll match that.

00:53:33.480 | And once we hit that IRS limit, they allow us to put money in post-tax dollars up to

00:53:41.040 | the IRS limit, which is now close to $76,500.

00:53:47.320 | That money can be immediately rolled over into our 401(k) Roth.

00:53:53.960 | So it's a mega backdoor Roth concept, but that's the way where I'm putting a large amount

00:54:00.440 | of money into the Roth to kind of spearhead what everybody's been talking about, trying

00:54:06.360 | to be able to maximize our taxes when we retire.

00:54:11.680 | But so anybody who works for a big corporation, you know, double-check.

00:54:15.000 | I would say I've actually done some education for our employees, and I would say 90% of

00:54:21.680 | them did not even know that this benefit, and I considered a benefit, existed.

00:54:28.120 | So for super savers, it's a way to get the pre-tax savings as well as get money into

00:54:34.720 | the Roth environment.

00:54:36.720 | Okay.

00:54:37.720 | I'm just going to ask Margo, if you wanted to get on, you know, at least speak to it.

00:54:44.440 | You mentioned in the comment about psychologically on a hard time having, having a hard time

00:54:48.960 | spending money that you've so diligently saved.

00:54:52.080 | Could you maybe express your comment audio-wise?

00:54:57.640 | You mean me?

00:54:58.640 | 1-4-0-5-6?

00:54:59.640 | Well, it came up in Margo on the chat.

00:55:04.180 | I was addressing it to you, to 1-4-0-5-0-6, but I just personally, I'm like known as El

00:55:13.600 | Chifador among my family, and I just have a really, really hard time spending money.

00:55:18.000 | It's so hard for me.

00:55:20.400 | And I like, you know, comparison shop for everything, and it just, it got to a point

00:55:24.000 | where I had to realize, like, this is not productive.

00:55:26.080 | This is not a good use of my headspace, a good use of my, like, limited time on earth.

00:55:31.600 | It's just not what it's meant to be used for.

00:55:34.400 | And I read, I can't remember where I read it, but it said, I can't remember now where

00:55:39.400 | I saw this, but it said, if you have a hard time enjoying or employing money productively,

00:55:45.280 | a great way to begin to get over it is to, you know, find a cause that you're passionate

00:55:50.440 | about and donate whatever amount is like a little bit painful.

00:55:54.840 | Psychologically, like, that's a good idea.

00:55:57.840 | Yeah.

00:55:58.840 | Right now, I'm, I'm turning 65, I don't even know what's going to happen to me.

00:56:06.120 | I don't have long term care insurance, I probably can't get it.

00:56:09.880 | I instead of trying to sell stuff, I do donate like to a lot of animal shelters have a thrift

00:56:17.240 | shop.

00:56:18.240 | And I like getting rid of this, it's really easy to get rid of this stuff, knowing it's

00:56:21.560 | going for the animals.

00:56:23.240 | But, but right now, I still have an issue that I don't know that, you know, they say

00:56:29.400 | I'll be okay.

00:56:31.320 | But if I end up in long term care, either dementia, God forbid, you know, it's not going

00:56:38.640 | to be easy, because by the time I'm old enough, you know, we could be paying a heck of a lot

00:56:43.940 | of money.

00:56:44.940 | So I really can't, you know, right now, I have to really keep a tight rein on my own

00:56:50.360 | money right now.

00:56:51.560 | I understand.

00:56:53.400 | One more comment from the, from the chat, I was wondering if Matthew Heaney could speak

00:56:58.520 | to some of the issues about not wasting space in the lower brackets and smoothing out the

00:57:05.160 | marginal rates.

00:57:06.160 | I think you made comments about that.

00:57:07.400 | I've seen a few comments in the chat.

00:57:09.200 | Are you still here, Matthew?

00:57:17.640 | Okay.

00:57:21.500 | So I think, actually, Alan, you've already touched on this tax efficiency of drawdown

00:57:25.480 | strategy, right?

00:57:28.880 | Which is this topic here.

00:57:30.680 | Not, not per se, I guess I'd like to hear other folks' thoughts, other than, as Maria

00:57:39.240 | alluded to, having tax diversification is key and having, you know, three buckets, relatively

00:57:45.960 | well balanced, it gives you options, depending upon what the future tax situation is that

00:57:51.240 | you find yourself in.

00:57:52.240 | Historically, I know they say that draw from your, your taxable brokerage first, and then

00:57:59.360 | you go to the IRA or tax deferred, and then leaving the Roth for last.

00:58:05.000 | But there's times, as I think Wade Fowl alluded to during that round table discussion, that

00:58:10.240 | there are times that you may want to switch that up a bit.

00:58:14.520 | It has to be, you know, it's an individual situation and you have to decide what's best

00:58:19.280 | for you and your tax situation.

00:58:21.660 | I'm not a tax expert by any means, so I'm curious to hear other folks' opinions.

00:58:28.580 | Would anyone like to speak about tax efficiency drawdown strategies and what you're using?

00:58:36.320 | Okay.

00:58:39.980 | So I guess the next topic was pay off the home mortgage before retirement.

00:58:45.360 | Anybody chose that or chose to go the other way, mortgage to the hilt?

00:58:52.200 | Okay.

00:58:56.660 | You know, I'll just say, Jim, I'm a big believer in having, you know, known things that to

00:59:06.000 | deal with.

00:59:07.000 | So to me, and, you know, we paid off ours, we don't, I didn't want to have a mortgage

00:59:13.920 | in retirement because what if something else happened that it needed to be piled on top

00:59:19.160 | of that?

00:59:20.400 | You know, I have adult kids and, you know, help them a little bit to get on their feet

00:59:25.580 | that maybe I didn't think about 10 years ago.

00:59:30.100 | You know, as you get older, obviously you start to have more health issues, whether

00:59:33.640 | it's just co-pays or whatever.

00:59:37.820 | And so for me, less debt, the less debt, the better is what I aimed for.

00:59:43.720 | So when those unexpected expenses came up or just maybe wanting to travel and the difference

00:59:50.600 | between being able to travel and not, it would be a mortgage payment that I'm a big believer

00:59:56.480 | in and having as little debt as possible when you go into retirement.

01:00:05.040 | And you sleep better, right?

01:00:08.160 | Absolutely.

01:00:10.280 | And Jean, would you like to make a comment about that?

01:00:12.800 | Yeah, before I retired, I paid good money three different times to go out.

01:00:18.320 | And I always ask that question, the financial advisor, should I pay off my house?

01:00:22.680 | Should I pay off my house?

01:00:23.680 | And I constantly got the advice of no.

01:00:26.680 | Now of course, I'm in retirement and I see it would be very handy to have it all paid

01:00:30.240 | off.

01:00:31.240 | It would require less monthly output of cash every single month.

01:00:37.000 | So I am now an advocate for pay it off.

01:00:41.240 | The only con to that would be, let's say you had one of those really bare bones mortgage

01:00:46.160 | rates of two, I don't know what the lowest it ever hit recently, but like say two and

01:00:50.840 | three quarters or something.

01:00:52.860 | And as Scott was talking about interest rates and CDs, there would be a big marginal difference.

01:00:59.720 | And I think that's partially what's going on in the housing market.

01:01:03.740 | People with those mortgages say, if I sell this house today and buy this other house,

01:01:08.600 | I'm going to trade it two and a half for a seven.

01:01:11.820 | So there's that going on.

01:01:13.880 | I have a 3% mortgage, so I am one of those people.

01:01:17.560 | And I still see the advantage to having it paid off.

01:01:20.520 | Oh yeah, I agree.

01:01:21.920 | I agree with you.

01:01:22.920 | I'm in your camp, but this is, I'm just saying what other people might say.

01:01:26.000 | Jo, do you have a comment on this?

01:01:27.720 | I think that's the wrong way to think about it is compared to the open market rate, because

01:01:35.560 | that's always going to fluctuate.

01:01:37.680 | This really fixes your cost in retirement and it's your number one expense, well, it's

01:01:44.520 | actually number two.

01:01:45.520 | Taxes is your number one spend and your house payment is number two.

01:01:50.840 | So it controls number two, and I'm all for controlling the top five spends that you have.

01:01:58.680 | And the sleep at night factor is nice.

01:02:02.080 | I totally agree with you on that one.

01:02:03.680 | So I think the professionals just don't really have a clue yet because they haven't retired.

01:02:09.800 | Yeah.

01:02:10.800 | Hey, Jo.

01:02:11.800 | Yes.

01:02:12.800 | One thing we did, we noticed a fair time before I was ready to retire that just adding a little

01:02:22.280 | bit of extra principal to the mortgage greatly reduced the duration.

01:02:30.040 | And that was a very good feeling of being able to just make some extra payments on it

01:02:38.280 | that greatly reduced it.

01:02:40.360 | Then about the time I was retired, we did pay it off and I slept much better.

01:02:47.120 | I just felt very good then that it was totally paid off and that was out of the way.

01:02:53.920 | And most people will find in retirement sometimes the property tax goes up.

01:03:01.080 | So even though you don't have the mortgage payment, you do have non-insignificant property

01:03:09.300 | tax payments.

01:03:10.300 | Yeah.

01:03:11.300 | And insurance, if you're in an area where insurers are getting out, like some areas

01:03:15.760 | of Florida, I think you could have a lot more homeowners insurance than you had before.

01:03:21.880 | All the insurances are going up, but even in areas, we're in Alabama, which is not a

01:03:27.440 | particularly other than tornadoes, but anyway, but still, we see that going steady climb.

01:03:36.840 | Thank you.

01:03:37.840 | You're welcome.

01:03:38.840 | I noticed in the chat from Margo, Kim, and Carolyn, the opposite about the good rate

01:03:45.760 | mortgages that they have and the fact that they can pay them off whenever they want.

01:03:49.760 | Does any one of you guys want to comment on that?

01:04:00.300 | This is Carolyn.

01:04:01.300 | Go ahead, Carolyn.

01:04:02.300 | Yeah.

01:04:03.300 | I would just say nobody's giving me money at 2.875%, so I'm going to keep my mortgage

01:04:10.520 | and just pay it off as usual.

01:04:14.000 | If I needed to pay it off, I could, but I sleep fine at night with the mortgage.

01:04:22.840 | Good.

01:04:23.840 | Okay.

01:04:24.840 | Anyone else?

01:04:25.840 | This is Kim.

01:04:26.840 | Yes, Kim.

01:04:27.840 | I think my comment was really related to how "money managers" being paid, and they generally

01:04:35.040 | don't want you to take money out to pay off the mortgage because it reduces their income

01:04:40.320 | for charging you based on assets under management.

01:04:43.120 | They would never do that, would they?

01:04:46.320 | Maybe.

01:04:48.440 | That's a very good point.

01:04:49.440 | Yes.

01:04:50.440 | I'm going to take a controversial idea right now, and I have a proponent of Dave Ramsey,

01:04:57.640 | and he talks about paying that thing off to sleep better at night.

01:05:03.720 | It's a hard sell when you're paying 2.75%.

01:05:07.200 | Yeah.

01:05:08.200 | I just wanted to ask Leslie, who has her hand up, if you really have your hand up and would

01:05:14.720 | like to say something, or is that just stuck on right now?

01:05:19.040 | Okay.

01:05:21.600 | Let's move on to Joe.

01:05:22.600 | Joe, you have a comment?

01:05:23.600 | No.

01:05:24.600 | I hadn't taken my hand down.

01:05:29.000 | Okay.

01:05:30.000 | There's a DC, username DC.

01:05:31.960 | Go ahead.

01:05:32.960 | Yeah.

01:05:33.960 | Can you hear me okay?

01:05:34.960 | Yes.

01:05:35.960 | Okay.

01:05:36.960 | Go ahead, Joe.

01:05:37.960 | Yeah.

01:05:38.960 | I'm in the process of paying down our mortgage, and I'll explain my reasoning on that.

01:05:44.560 | We have 2.99% mortgage.

01:05:48.520 | It's a decent amount of money on there, say about $70,000, but we're going to pay that

01:05:53.240 | down before we retire, even with the lower rate.

01:05:57.480 | Our reasoning is based on our ages when we retire, so I'll be going on ACA or Obamacare

01:06:05.280 | for about 4 years.

01:06:07.200 | My wife's going to be on Medicare, but she's also going to collect her Social Security

01:06:11.180 | at FRA.

01:06:12.180 | She's older than me.

01:06:13.720 | So our reasoning is let's pay it down because I want to keep my income low when we first

01:06:18.360 | retire so I can qualify for ACA subsidies.

01:06:21.920 | Okay.

01:06:22.920 | We want to keep our Social Security taxes low, so I want to keep my income low, so I don't

01:06:27.280 | want to be paying a mortgage once I'm actually retired, so that's our thought process.

01:06:32.280 | That's an excellent idea.

01:06:33.560 | So if you were to take -- if you had to pay all that out of 401(k) or something, draw

01:06:38.200 | down, that would be income, and that would affect your ACA subsidy, which could be substantial,

01:06:44.880 | right?

01:06:45.880 | Right.

01:06:46.880 | Okay.

01:06:47.880 | Very good comment.

01:06:48.880 | Sonny?

01:06:49.880 | I was going to say, yeah, I'm in the process of retiring, and I have a 2.5% rate and a

01:06:58.160 | decent-sized mortgage, but my cash portion and my short-term bond portion, there's more

01:07:03.840 | than enough there to pay that down.

01:07:05.920 | So I don't really have an issue sleeping at night, but I can pay it off whenever I feel

01:07:09.800 | like it.

01:07:10.800 | Let's say two or three years down the road, rates go back down and end up back at -- you're

01:07:15.760 | looking at 1% or something in terms of savings rate, you can just pay it off at that point

01:07:20.280 | where I'm making 5% now in savings or a CD.

01:07:23.840 | Okay.

01:07:24.840 | So that's my view.

01:07:25.840 | Yeah.

01:07:26.840 | Very good.

01:07:27.840 | Let's see.

01:07:28.840 | Our next topic was funding ratio tool for retirement readiness.

01:07:34.800 | I don't remember what they said about that.

01:07:37.840 | Anybody remember what that topic was about?

01:07:39.760 | I say, Jim, if I can interject, there's a good comment from Maggie Wood about this.

01:07:46.280 | Is anyone considering selling their house and downsizing and/or renting in retirement

01:07:52.740 | and also throw in the concept of geographic arbitrage, moving from a higher cost of living

01:07:57.360 | area to a lower cost of living area during retirement?

01:08:00.840 | If anybody would like to address those options.

01:08:04.720 | Carolyn, go ahead.

01:08:11.320 | Yes, I've thought about that, and I'm kind of looking at it two ways.

01:08:18.680 | So my younger retirement years, I'm going to stay where I am.

01:08:21.760 | I purposely bought a ranch and remodeled it and plan to kind of stay here for that first

01:08:31.840 | 15, 20 years when I'm more active as a retiree.

01:08:37.500 | And then I will probably downsize from there and go somewhere where more kind of independent

01:08:44.860 | living situation for seniors because I'm single and I don't have kids.

01:08:50.560 | So I think at that point, you know, I'll be ready to kind of slow down and it'll probably

01:08:55.440 | be someplace like Vegas or somewhere warm and low taxes.

01:09:01.480 | And what area of the country are you from now?

01:09:03.360 | I'm in Michigan.

01:09:04.360 | I'm in the Detroit area.

01:09:06.360 | Okay.

01:09:07.360 | All right.

01:09:08.440 | Thank you.

01:09:09.440 | Sam?

01:09:10.440 | I don't, my, our house here in retirement is only 900 square feet, so there's no way

01:09:18.480 | down to downsize unless we move to a tiny home, which with our aching osteoarthritis,

01:09:26.560 | we can't even climb up the stairs nowadays.

01:09:32.320 | My neighbor next door, he's a millennial, just starting with the first home buyer program.

01:09:41.320 | He says that, yeah, we will, we need to live in a bigger house.

01:09:45.520 | I'm going to move.

01:09:47.400 | If we end up later in retirement, we still live in this house, which is the same size

01:09:54.720 | as my house, 900 square feet.

01:09:57.400 | That is a failure for us.

01:09:59.440 | He said, "Uh-oh, here we are."

01:10:03.840 | It's paid for, 900 square feet, but it's paid for.

01:10:08.080 | And you sleep well at night?

01:10:09.800 | Certainly.

01:10:10.800 | There you go.

01:10:13.120 | That's all that matters.

01:10:15.120 | I want to thank that person who says that he is, his strategy is to pay off the house

01:10:23.140 | so that the, for Obamacare purposes, great idea.

01:10:30.940 | I didn't think about it.

01:10:31.940 | Very good idea.

01:10:32.940 | Yes.

01:10:33.940 | Yes.

01:10:34.940 | That is, that is good.

01:10:35.940 | That is a good one.

01:10:37.120 | One idea we heard on a previous call a long time ago on a Obamacare discussion about subsidies

01:10:44.120 | was somebody actually took out a home equity because they needed cash for daily living,

01:10:51.300 | and it ended up, it was better than taking money out of their 401(k) to ride through

01:10:57.680 | from like 62 to 65.

01:11:00.700 | So that was an interesting strategy.

01:11:04.760 | Okay, I think we can move on to the next topic.

01:11:14.660 | Back to the funded ratio concept.

01:11:16.080 | I don't even know what, I'm sorry, but I don't know what that is.

01:11:18.640 | If anybody can help me with that.

01:11:21.440 | It's the same analysis that pensions use to see basically how well capitalized they are

01:11:31.480 | for future obligations, and I think, I don't, I think it might have been Wade Fow who said

01:11:38.720 | that, it might have been Mike Piper who has a calculator online or a spreadsheet where

01:11:44.740 | you can plug in your data and see what your funded ratio is.

01:11:51.960 | I'm not that familiar with it.

01:11:53.720 | Maybe somebody with expertise could speak to that.

01:11:56.400 | Anyone?

01:11:57.400 | I'll see if I can look it up.

01:12:01.720 | Oh, if not, let's, let's move on to the next topic.

01:12:06.760 | Let me get my cheat sheet here.

01:12:09.800 | Retirement contribution when one spouse is still working.

01:12:14.220 | So this, I guess the assumption here is one spouse retired, the second one is still working.

01:12:21.560 | And I think it belongs to, I'm not sure if Carolyn said it or Sam said it about the

01:12:27.280 | Obamacare subsidies could be significant if you're, you know, in that pre-retirement age.

01:12:36.360 | Does anybody have any comments about making retirement contributions with one person retired

01:12:41.000 | and one working in a two-person family?

01:12:45.120 | Jeanne?

01:12:47.120 | As I recall, they summarized that one with the only advantage was if there was an age

01:12:55.720 | difference between the couple, one was putting it into a 401k and the other was drawing it

01:13:02.640 | out of their IRA.

01:13:06.000 | And if there was a significant age difference between the couple, it could be an advantage.

01:13:13.520 | Otherwise it was a wash.

01:13:14.520 | Yeah.

01:13:15.520 | It kind of sounds like putting in one pocket and taking it out of the other.

01:13:17.920 | That's what I recall the conversation ended up with, because I was really listening to

01:13:21.600 | that one for some friends of mine.

01:13:24.400 | Okay.

01:13:25.400 | Let's see how we're doing on, it's 825.

01:13:31.480 | The next topic, spend more now and also work longer.

01:13:39.240 | Maybe we could take a show of hands of people who are actually retired right now.

01:13:44.280 | Just hit that show, raise hand if you could.

01:13:48.040 | And I think we have 64 people on the call.

01:13:51.600 | And I'm seeing about 6, 7, 8, 9, 10 and 11, 12, 13, 14, 15, 16, 18.

01:14:07.520 | Okay.

01:14:08.960 | So about 18.

01:14:09.960 | So maybe a third.

01:14:10.960 | Okay.

01:14:11.960 | If you could lower your hand and let's say you're going to retire in the next five years,

01:14:17.040 | raise your hand like we have about 10, 11, 12.

01:14:33.040 | Okay.

01:14:34.440 | And the people that are between 18 and 24, I don't think we have many, but we're open

01:14:41.960 | for everybody.

01:14:42.960 | And, you know, if anybody wants to get advice as a younger person, feel free to ask.

01:14:47.640 | We have a lot of experience here.

01:14:53.120 | And who on this, who on this call has had a lot of trouble spending money now that they

01:14:58.640 | are retired and are not accumulating, anybody?

01:15:04.720 | You can just raise your hand if you want.

01:15:06.880 | Mary, would you like to speak on that?

01:15:12.800 | Or Joe?

01:15:15.040 | Or Keith?

01:15:16.040 | We, I mean, we have to withdraw more RMD than we have any need to spend.

01:15:26.120 | Plus we have social security and we just, we're satisfied with the way we live, which

01:15:35.600 | doesn't really cost that much.

01:15:37.360 | We have our house paid off, don't owe anything on cars.

01:15:41.400 | We don't have an extravagant, we do eat out, but we don't eat out extravagantly and it

01:15:46.920 | really doesn't take that much money.

01:15:49.320 | We're in a fairly low, we're in Alabama, which is fairly low cost of living area.

01:15:55.480 | Taxes are fairly low.

01:15:57.720 | And so, you know, we have much more than we need, but we have, don't, you know, kind of

01:16:08.120 | that thing of we've saved and, you know, I still look for bargains, I still use coupons.

01:16:14.240 | I still, you know, look, you know, you can't get over that.

01:16:20.080 | You've been trained for 50 years, right?

01:16:23.320 | Yeah.

01:16:24.320 | Or 70 years.

01:16:25.320 | Right.

01:16:26.320 | And, you know, it, you, but, you know, I say I'm frugal and I have a friend who's cheap.

01:16:35.760 | So he's worse than I am.

01:16:38.240 | I think that's my favorite thread on the, on the site is that what frugal thing did

01:16:43.220 | you do today?

01:16:44.220 | You know, where the guy's gotten 50 days out of the same teabag, you know, that stuff just

01:16:49.000 | getting so excited, you know.

01:16:51.940 | Well, this, my friend, the one I call cheap, one of the local pizza places had that if

01:17:00.560 | you paid a certain amount, you could have a slice of pizza every day for a month and

01:17:07.280 | he bought it and then, then would just drink water, wouldn't even buy a drink when he went

01:17:15.200 | in.

01:17:16.200 | And did he get pizza almost every day?

01:17:18.720 | Yes.

01:17:19.720 | Yes.

01:17:20.720 | For a month.

01:17:21.720 | Great.

01:17:22.720 | That's great.

01:17:23.720 | Okay.

01:17:24.720 | Thank you.

01:17:25.720 | Mel.

01:17:26.720 | Yeah, a number of years ago when I was doing Forbes column, my editor got in touch with

01:17:35.300 | me and asked me about, she was getting ready to retire and she was really concerned about

01:17:42.560 | going from having a salary to not having a salary and not having money coming in and

01:17:49.200 | happened to start to spend down.

01:17:52.800 | And I told her that I had a problem with that.

01:17:58.960 | And I thought it would be a good subject for an article.

01:18:02.880 | So I interviewed a lot of the Bogleheads and I was not really surprised, but I found out

01:18:09.960 | that there were a lot of people who had a serious problem transitioning from saving

01:18:16.960 | to spending.

01:18:18.480 | So I did a column on that and it's still available on Forbes, it's called Shifting Gears, Going

01:18:25.480 | from Saving to Spending.

01:18:28.880 | And it is basically a real problem that a lot of Bogleheads said they had.

01:18:36.680 | And I knew that I had the same problem.

01:18:38.600 | So yeah, there's the article.

01:18:40.800 | It's still up.

01:18:41.800 | It was 10 or 15 years ago.

01:18:45.200 | But you might look through that and see that if you do have a problem that you're not alone.

01:18:52.720 | I was really amazed to find out that I wasn't the only one.

01:18:57.960 | Yes, it's a common theme.

01:19:02.720 | Somebody said on the last call, I think they, you know, you basically get, you know, make

01:19:06.320 | yourself a paycheck and whether you give it to charity, as somebody suggested, or you

01:19:10.480 | buy something you want or help somebody out, just you got to spend it.

01:19:15.760 | Keith?

01:19:16.760 | Yeah, I'll second what Mel said.

01:19:19.720 | It was extremely difficult.

01:19:21.280 | You know, you're used to looking in your checking account and seeing that direct deposit from

01:19:26.400 | your paycheck every couple of weeks.

01:19:29.040 | So you feel okay with buying some things here and there, and then all of a sudden you don't

01:19:34.200 | have that, even if it's investment income or a retirement.

01:19:39.240 | And I'll just throw out there that some people making comments about frugal.

01:19:43.400 | I came across, for those of you that are on Facebook, there's something called, there's

01:19:47.840 | a group called Everything Frugal on Facebook.

01:19:51.960 | And I joined it maybe a month ago.

01:19:53.960 | And it's kind of interesting.

01:19:56.680 | It's a lot of the same kind of talk that we have here, but it's more related to spending,

01:20:02.640 | being better for spending decisions, finding ways to save money, not necessarily on the

01:20:08.380 | investing side, but more on, hey, I'm doing this and how can I save an extra $50 here

01:20:15.720 | and there.

01:20:16.720 | So for those of you that like to call yourselves frugal or cheap and are on Facebook, it's

01:20:22.240 | called Everything Frugal, and it's kind of interesting.

01:20:24.800 | And there's a lot of people make comments and they'll give their advice, maybe something

01:20:29.620 | they did.

01:20:30.620 | And I've picked up an idea here a couple of times on utilities and services and things

01:20:37.600 | like that.

01:20:38.600 | So it's kind of interesting.

01:20:39.600 | - Okay.

01:20:40.600 | I put a link in the chat for anybody that needs it.

01:20:42.880 | Sam?

01:20:43.880 | - Hi, Keith, I disagree for going to Everything Frugal for us who are already frugal because

01:20:53.280 | it will, the opposite of the antidote to being frugal.

01:20:58.920 | In the Boglehead conference, Mike Piper say the antidote is to get counseling.

01:21:07.240 | Ouch, pay a psychologist, it's not that much, Mike Piper says, to get counseling.

01:21:13.480 | And he even does it because if you worry about not having enough money or what, anyway, Joe,

01:21:26.800 | I agree with Joe that to give yours, no, for Jim, I agree with Jim, give yourself a paycheck.

01:21:38.480 | So that, yeah, otherwise, I mean, you think about like our safe withdrawal rate is, we

01:21:49.880 | already set it for 3% and then it ends up being a lot less than that.

01:21:55.840 | Could you believe it?

01:21:56.840 | We can't even reach 3%.

01:21:59.200 | - And if the market does well for a while, it's going the opposite way, right?

01:22:04.840 | - Yeah.

01:22:05.840 | - If we only knew how long we were going to live, it would be very simple.

01:22:11.840 | - I think there's a website for that, it'll tell you exactly.

01:22:15.960 | And then last comment about to Joe, I say that the cost of living for his lifestyle

01:22:27.120 | is satisfied.

01:22:28.120 | And the only thing that he spends is eating out, well, I don't even eat out, Joe.

01:22:37.360 | I cook all the food myself, thanks to YouTube, literally.

01:22:45.440 | And with COVID, we really cut that back and we spare no expense on groceries, that's for

01:22:50.960 | sure.

01:22:52.040 | But we really enjoy cooking now.

01:22:54.680 | Okay, Alan, thank you, Sam.

01:22:58.560 | - Yeah, these are all great comments.

01:23:00.800 | I too have suffered with this, being a longtime individual living, my wife and I both living

01:23:07.200 | well below our means, and it's very hard to break that habit in retirement.

01:23:11.880 | But one thing that I have found useful in initiating a step in the right direction is

01:23:16.960 | focusing more on creating memories with our friends and families, say, trying to take

01:23:22.040 | vacations and paying for the kids to come along.

01:23:25.360 | And those are the long lasting things that you want to hang on to anyways that bring

01:23:30.680 | you joy and can reflect back upon much more so than buying things.

01:23:36.380 | So focusing on experiences and creating memories with family and friends is one way to kind

01:23:41.680 | of break the mold and dip your toes into spending a little bit more money.

01:23:45.480 | And over the last three, four years, what we've done is an Airbnb in a central area

01:23:51.160 | and paid for all of our kids to come and spend.

01:23:54.120 | We bookend two weekends and the week in between they come whenever they can, all expenses

01:23:58.920 | paid and we just hang out and it's been wonderful.

01:24:02.280 | And no guilt whatsoever in spending the money there.

01:24:07.720 | - Thank you, Alan, yes.

01:24:10.760 | And Ray, do you have a comment on that?

01:24:13.840 | - Hi, this is Raj, yeah, one way for us to deal with that problem is to gifting to the

01:24:23.080 | kids that 18,000 to one person from one of us.

01:24:29.200 | So that's about 36,000 to each kid and we have got two kids.

01:24:32.520 | So this way, we just have started giving them for the last several years now.

01:24:40.160 | So that is one way we deal, we dealt with our problem, like in difficulty, spending

01:24:47.040 | our money.

01:24:48.040 | - And you get to see the benefits, right?

01:24:50.400 | - Yeah, yeah, they seem to like it, they enjoy it.

01:24:54.800 | And we like them, like enjoying themselves.

01:24:57.600 | - Oh, that's great.

01:24:58.960 | Versus if you were gone and they get it, you wouldn't see it.

01:25:01.640 | - Right, with a warm hand rather than a cold hand.

01:25:04.240 | - Yeah, as Alan said before, I told that to a lot of people in the last couple of weeks.

01:25:09.040 | - Okay, let's go back to where we were at here.

01:25:15.360 | I think we got one or more.

01:25:18.320 | How often to take distributions, does anybody have any strategies on distributions?

01:25:24.080 | And are you talking about like, I don't know what they were talking about on the call,

01:25:28.600 | was it monthly or yearly or what was the issue here?

01:25:33.120 | - Yeah, I think that was it, whether to take it like the beginning of the year, the full

01:25:36.520 | year's worth or divide it up monthly.

01:25:39.400 | - Does anyone have any strategies that they're using?

01:25:43.400 | - Yeah, we usually take my wife's at the beginning of the year and I save mine for November or

01:25:53.200 | December because I pay 100% of our taxes from the previous year, have it withheld so that

01:26:01.800 | I don't have to do the quarterly estimated taxes, which I did for 40 years.

01:26:12.400 | And it's considered to be any tax that's withheld is considered paid equally throughout the

01:26:19.720 | year.

01:26:20.760 | So you get rid of the estimated taxes.

01:26:26.200 | So that's the way we do it.

01:26:27.400 | I know how much, I know that I've got enough in my RMD because it's fairly large to cover

01:26:35.480 | the taxes of the previous year, plus have some leftover.

01:26:39.560 | So after I do my taxes for this year, I'll know how much I have to take from my RMD later

01:26:47.440 | in the year.

01:26:48.880 | I don't bother to take it now because I can, I can adjust it over the course of the next

01:26:54.520 | six, eight, 10 months and get 5% or whatever.

01:26:58.720 | And then I send it in at the end of the year.

01:27:00.600 | So that's my strategy.

01:27:03.160 | - Okay, thank you.

01:27:06.980 | And finally, we have some, people can talk about the tools that they're using for retirement

01:27:12.360 | planning.

01:27:13.360 | I think we touched on this a couple of weeks ago also.

01:27:15.840 | Somebody earlier in the call mentioned new retirement.

01:27:18.440 | Is anybody else using any other tools?

01:27:23.920 | I think, Alan, you mentioned that Mark Zorrill, what was the thing you mentioned last time?

01:27:29.320 | - Well, yeah, there's Mark Zorrill at PlanVision.

01:27:31.840 | He uses eMoney Advisor.

01:27:33.520 | It's a relatively low cost way to access that tool and his expertise.

01:27:40.520 | He has now, I think he has three, oh, three, Mark Zorrill, Jason Lynch, and somebody else

01:27:46.040 | that I believe that just joined their team.

01:27:49.120 | For people who need a little more sophisticated modeling, even for basic modeling, it's a

01:27:54.920 | worthwhile approach.

01:27:56.680 | Also, I personally really like Empower, formerly Personal Capital.

01:28:04.080 | I think it has very fundamental but useful retirement modeling tools that I found very

01:28:09.600 | helpful.

01:28:10.600 | And I actually am a client of Mark Zorrill's as well, and I've consulted with them a couple

01:28:15.520 | of times more or less just to confirm that I'm on track.

01:28:20.720 | One individual I'll mention, a YouTube individual you're probably all familiar with or should

01:28:26.240 | be, and that's Rob Berger, who's been to the Boglehead Conference the past couple of years.

01:28:31.640 | He served on the panel last year, I believe, or 2022.

01:28:36.040 | He's excellent giving no-frills, objective advice from his website and YouTube channel.

01:28:42.080 | And he said that he's going to start focusing, he's already building an online resource of

01:28:49.840 | all the available tools for financial, personal finance and retirement planning.

01:28:56.280 | It's very rudimentary at this point.

01:28:58.600 | One of his recent YouTube videos, he goes into a little bit more depth explaining what

01:29:02.240 | he's going to do with that, but that'll definitely be a resource to keep your eyes on as he'll

01:29:07.000 | be listing the pros, the cons, and delving a little bit into the details of each of these

01:29:11.880 | tools.

01:29:12.880 | And they're all a little bit different.

01:29:14.920 | The one thing I might add is that remember that when you're using any online tool, there's

01:29:19.400 | usually embedded assumptions either that were built into the program or assumptions you're

01:29:24.000 | making.

01:29:25.000 | And we don't know the future.

01:29:26.560 | We do not have a crystal ball.

01:29:28.600 | So take everything, all the output with a grain of salt, because it could be that you're

01:29:33.920 | putting garbage in and getting out garbage results.

01:29:36.280 | It's probably useful to have at least two, perhaps three different resources that you

01:29:41.320 | consult and see if they're roughly within agreeing with one another.

01:29:46.000 | And even so, I still would be willing to change, adapt as your situation changes.

01:29:51.960 | Okay.

01:29:52.960 | Thank you, Allen.

01:29:55.000 | There's a bunch of tools here.

01:29:57.680 | I'll put this in the links.

01:30:01.120 | Keith, do you want to talk about tools?

01:30:03.560 | Yeah.

01:30:04.560 | I would just, you know, for me, you know, I guess I'm just thinking about calculators

01:30:10.240 | just to make sure that I was on track.

01:30:13.640 | Fidelity did the 401(k) at the company that I was at.

01:30:18.040 | And they had, I've mentioned this before, they had a tool where you could either make

01:30:21.360 | it more kind of general, you know, five or six inputs, or you could go and put in all

01:30:28.840 | of your expenses literally line by line.

01:30:32.080 | I actually found that to be very helpful.

01:30:34.280 | And I dug out all of our bills and said, okay, how do I feel that this is going to change

01:30:38.940 | in retirement?

01:30:41.260 | And was able to get a more manageable number in terms of what the expenses were going to

01:30:47.440 | look like versus the income that I was going to generate.

01:30:51.640 | And then I kind of bounced that against the Monte Carlo simulation that Vanguard has.

01:30:58.900 | And there was a third one that I use that escapes me.

01:31:01.160 | It might've been Kiplinger.

01:31:03.360 | And so when I used all three of those and all three of those came back positive, that's

01:31:09.100 | really when I felt more comfortable and kind of taking that plunge and feeling like I was

01:31:15.920 | on the right track.

01:31:18.320 | So like you mentioned, Jim, you know, you do, or Alan might've mentioned it, you do

01:31:22.560 | several of them.

01:31:24.320 | And if all of them kind of give you the same answer, that's probably, you know, something

01:31:29.840 | that you can not necessarily bank on, but at least feel comfortable with it.

01:31:34.440 | And I would just mention also in terms of planning, you obviously need to be realistic

01:31:40.200 | with your inputs.

01:31:41.200 | You know, a lot of them will ask you, what is your expected return, et cetera.

01:31:46.840 | You want to be realistic in terms of what you're going to put in there, because just

01:31:51.120 | a variation of a percent or two on your return can have a fairly significant impact on what

01:31:58.160 | your numbers are going to look like.

01:32:01.420 | And then also with your expenses, you know, everything showed the rule of thumb being

01:32:06.560 | something like 70% of your expenses in retirement is what you can calculate.

01:32:13.120 | And I found that to be incorrect.

01:32:16.240 | Ours was closer to like 90 or 95% of what we had pre-retirement.

01:32:22.880 | And so if I had used the 70% number that the benchmark or the rule of thumb was, I would

01:32:29.920 | have been a little more off in my numbers.

01:32:32.480 | So be realistic with those numbers.

01:32:34.940 | If you can find one that breaks down expenses by line, that's going to be more accurate

01:32:40.320 | than using that 70% benchmark.

01:32:43.280 | Okay.

01:32:44.880 | Thank you, Keith.

01:32:45.880 | Jean?

01:32:46.880 | Ah, very cool, very cool comments there.

01:32:51.560 | In the last meeting, there were several tools mentioned, and I made a list of them, and

01:32:57.240 | I sent them to Lady Geek.

01:32:58.920 | And so we're going to post what I found, what I captured out of the chat with this

01:33:04.840 | meeting on your website.

01:33:08.080 | So there was 10 tools mentioned, and I had no idea there was that many tools out there.

01:33:14.000 | So Alan, you brought up a couple I don't think that are on my list.

01:33:18.020 | Maybe I'll send you the list too.

01:33:20.720 | And you can add to it, and then we'll post it with this meeting so that people could

01:33:23.800 | find tools.

01:33:24.800 | If I can interject, Rob Berger is so thorough in how he is approaching this.

01:33:30.680 | I was going to suggest to Lady Geek that maybe rather than us trying to replicate that on

01:33:36.320 | the Bogleheads wiki, which is lacking, since it's constantly got to be updated, it might

01:33:43.320 | be one instance here where it might be better just to refer everybody over to Rob Berger's

01:33:47.480 | website.

01:33:48.480 | I think where he's building this tool repository in the chat.

01:33:52.660 | Has he got the list available now?

01:33:58.500 | Yes.

01:33:59.500 | I just put in the chat, Jim, if you want to share your screen, click on that link for

01:34:04.640 | the Rob Berger tools, and you can just show them what's up there thus far.

01:34:10.960 | Great then.

01:34:11.960 | Yeah.

01:34:12.960 | Because see, I went looking for tools and couldn't find anything.

01:34:16.280 | Is it on the, is this it here?

01:34:19.600 | Is this what you're talking about?

01:34:20.600 | Yes.

01:34:21.600 | I'll put that link in the chat.

01:34:22.600 | Cool.

01:34:23.600 | It's in the chat.

01:34:24.600 | Yeah.

01:34:25.600 | Then I won't bother to send it back to Lady Geek.

01:34:29.840 | I'll tell her it's already done because all the tools on my list, I could see they're

01:34:34.400 | on there.

01:34:35.400 | Cool.

01:34:36.400 | Thanks.

01:34:37.400 | I didn't know.

01:34:39.240 | And I think we have videos on the site.

01:34:41.320 | You can find them where we went through a number of retirement tools.

01:34:44.680 | They've all probably been updated since then, but at least it gives you some tools to take

01:34:49.720 | a look at.

01:34:50.720 | I'll put this in the chat also.

01:34:53.160 | Great.

01:34:54.160 | I had no idea that there was a list that you could go to, and if I had known that, I wouldn't

01:34:58.880 | have wasted my time.

01:34:59.880 | Later.

01:35:00.880 | One thing I can add that's very important, I know a lot of people are fearful of using

01:35:05.360 | online tools, especially if you're, it's an aggregator or you're linking your personal

01:35:10.120 | accounts.

01:35:11.120 | And that's very important to think about security and so forth.

01:35:14.280 | There are tools that you can download and just do everything locally on your computer.

01:35:18.760 | There are others where you can manually enter in information without having a link to your

01:35:22.740 | accounts.

01:35:23.740 | And then there are others like Empower, formerly Personal Capital, and I think New Retirement

01:35:29.400 | and others that you actually can use one of the aggregators and link to your accounts.

01:35:35.120 | It doesn't mean you have to, but you certainly need to be aware of what the security risks

01:35:40.360 | are.

01:35:42.360 | With Personal Capital, Empower, you actually can manually enter everything in.

01:35:47.000 | A lot of people are not aware of that.

01:35:48.920 | I don't know about, I presume New Retirement as well offers that.

01:35:53.720 | I signed up for New Retirement, and you can manually enter or link.

01:35:58.600 | And for security reasons, I manually entered.

01:36:01.040 | Yeah.

01:36:02.040 | So that's an important consideration with any of these tools.

01:36:05.040 | Uh-huh.

01:36:06.040 | Uh-huh.

01:36:07.040 | Agreed.

01:36:08.040 | Okay.

01:36:09.040 | And I think I was going with Rod Berger.

01:36:11.640 | It's Rod Berger.

01:36:12.640 | Somebody pointed out.

01:36:14.160 | And this is the site here.

01:36:15.160 | Rod Berger.

01:36:16.160 | Great.

01:36:17.160 | Thank you, guys.

01:36:18.160 | I think this is a great resource, because I had no idea there was that many resources

01:36:22.480 | out there, and I needed some help.

01:36:24.480 | So it was really, I wanted to help others with it.

01:36:28.840 | Yeah.

01:36:29.840 | And there's the old, what is it called?

01:36:31.800 | FireCalc?

01:36:32.800 | I haven't looked at this in a while.

01:36:34.440 | Mm-hmm.

01:36:35.440 | Yeah.

01:36:36.440 | FireCalc was one that hit the list.

01:36:37.440 | Yeah.

01:36:38.440 | So if I would like to spend $40,000 a year, and I have a $1 million portfolio, let's say,

01:36:45.640 | and I want to go 30 years, I think what this thing does is it simulates some split between

01:36:52.520 | the S&P and bonds for 30 years with all the returns from the different years, like through

01:36:57.760 | the depression and all that.

01:36:59.920 | And it says, "These are all your glide paths."

01:37:02.160 | So in this case, I've got a very small percent here chance that I would run out of money.

01:37:09.240 | These cases below the red line, and it looks like there's three cases below the line.

01:37:14.680 | And I think they give you some results.

01:37:17.000 | They're saying at 123 possible 30-year periods, you, I don't know where the results, six cycles

01:37:24.940 | failed out of the 123.

01:37:26.720 | And it actually included, how far back did it go?

01:37:32.040 | It's got some historical data.

01:37:33.520 | I don't know how long it goes, but it's kind of like a sequence of returns, like you started.

01:37:38.360 | If this was the day the Great Depression started possibly, the purple line might be that.

01:37:44.960 | And then maybe during the '70s, you did bad again, and then you did better in the '80s.

01:37:50.840 | But that's the whole thing.

01:37:51.840 | It just wraps around the various years sequentially, I believe.

01:37:56.840 | And there's a number of tools like this that we reviewed.

01:38:00.080 | But once you start, and it usually falls in line with a 4% withdrawal thing, right?

01:38:06.440 | I'm sure this is some of the baseline that everyone's come up with, to have come up with

01:38:11.920 | 4% withdrawal rates.

01:38:14.600 | It also points out that if everything goes well, you might end up with $6 million instead

01:38:21.480 | of being broke.

01:38:22.480 | Yeah.

01:38:23.480 | Big split between the two.

01:38:26.480 | Yeah.

01:38:27.480 | Big difference.

01:38:28.480 | Yeah.

01:38:29.480 | I mean, this is where a thing that's probably accurate to very little, even though it's

01:38:36.280 | very precise, to seven decimal points.

01:38:40.480 | Okay.

01:38:43.220 | Anybody else have tools?

01:38:44.220 | If you want to, you can put them in the chat.

01:38:47.080 | Raj has his hand up.

01:38:48.520 | Oh, yeah.

01:38:49.520 | Raj, go ahead.

01:38:50.520 | Sorry, I missed you.

01:38:51.520 | I had a question about people who use the empower.

01:38:56.760 | I have trouble deflecting those questions, those phone calls, which keep coming to me

01:39:02.200 | whenever I put my portfolio in the empower, and I wanted to have some clues how to go

01:39:08.600 | about it.

01:39:10.280 | I've been using it for six years.

01:39:11.760 | They called me twice.

01:39:12.760 | I said I'm a do-it-yourselfer, not interested in their services, and I've never gotten another

01:39:16.720 | call from them.

01:39:17.720 | Gee, for some reason, they keep calling me and I have to get down.

01:39:21.760 | You can change your phone number on the, put in, some people use a Google number, or I

01:39:26.720 | think you have to have a phone number in there, but don't make it your primary one and you

01:39:30.880 | can just block the, use your mobile number and block it.

01:39:34.080 | Okay.

01:39:35.080 | Maybe.

01:39:36.080 | Okay.

01:39:37.080 | Well, that's a good one, Alan.

01:39:40.000 | Another small piece of information I have is I use a new retirement and I have Fidelity

01:39:48.080 | as my broker and Fidelity, you cannot really connect to the new retirement.

01:39:52.680 | You have to have like, put it, put the numbers manually, you cannot really connect the Fidelity

01:39:58.620 | thing.

01:39:59.620 | So, okay.

01:40:00.620 | So Fidelity blocks it?

01:40:02.520 | No, Fidelity doesn't connect with new retirement.

01:40:05.400 | Okay.

01:40:06.400 | Interesting.

01:40:07.400 | You cannot really.

01:40:08.400 | So you have to put all your totals like, you know, manually.

01:40:13.080 | So would you do that monthly or how long would it take you?

01:40:17.720 | Like, you know, you would do it maybe every six months once you are here, you don't have

01:40:23.800 | to do it.

01:40:24.800 | I don't do it like monthly.

01:40:26.800 | And how long does it take you every six months?

01:40:29.800 | Like, you know, depending on how many accounts you have, maybe if you have eight account

01:40:35.320 | or 10 accounts, like IRA, Roth IRAs and taxable.

01:40:39.520 | So those numbers you need to put it in.

01:40:41.760 | It takes me two hours.

01:40:44.040 | Okay.

01:40:45.040 | How about you Raj?

01:40:46.040 | How long does it take you?

01:40:47.040 | No, it doesn't take me that long.

01:40:48.880 | Maybe an hour at the most.

01:40:53.840 | Yeah, it might be worth it for the security risk.

01:40:58.020 | I don't trust anything anymore.

01:41:00.080 | I don't either.

01:41:01.080 | Yeah.

01:41:02.080 | Yeah.

01:41:03.080 | I wouldn't put all my information in that way.

01:41:05.640 | Okay.

01:41:06.640 | We're going on almost two hours here.

01:41:08.160 | So does anybody have any other topics they'd like to talk about?

01:41:11.720 | If they do, I see Sam has their hand raised.

01:41:14.480 | Go ahead, Sam.

01:41:20.400 | Like for example, in new retirement, how is it different than just the, I'm using Excel

01:41:28.760 | spreadsheet and just entering it in here.

01:41:31.720 | What does it do more than just doing like what I do?

01:41:38.600 | I already know that I can retire.

01:41:40.480 | Well, I am retired.

01:41:41.960 | So what, what is this for?

01:41:52.400 | And I would suggest you watch one of the YouTube videos that demonstrates all the features

01:41:57.640 | of new retirement or any other tool there.

01:42:01.000 | They're far, they're all very in their sophistication, but there's a lot more than just a spreadsheet.

01:42:06.480 | But one thing I'll add that I like what I most like about the empower tool is that it

01:42:12.240 | breaks down your holdings into their actual sub asset classes.

01:42:17.360 | If you've got a balanced fund, it breaks it down into whether it's bonds, stocks, large

01:42:21.920 | cap, small cap, you know, and so forth, breaks all your bonds down to the appropriate sub

01:42:27.640 | classes.

01:42:29.320 | And it shows you your entire portfolio, the actual true asset allocation.

01:42:35.680 | Whereas something like the Vanguard, for instance, Vanguard portfolio watch is horrible.

01:42:39.760 | It just may classify their small cap value fund is a hundred percent small cap value

01:42:44.760 | when in fact it's a mix of mid cap and small cap, and it's not all value.

01:42:49.820 | So I find that tools that can do a much more sophisticated breakdown versus a spreadsheet.

01:42:58.000 | And I've got a custom spreadsheet myself that I've toyed with, but I can't get it to break

01:43:03.440 | down all my holdings that are, have mixed classes.

01:43:08.080 | So I'd like to see that and help me rebalance, but there's a lot more they can do just Monte

01:43:13.240 | Carlo analysis and Charmin, you know, spending strategy.

01:43:17.920 | Some of them new retirement, I think has a Roth conversion tool as does e-money advisor

01:43:22.440 | can model Roth conversions, but you have to use the plan vision service because they need

01:43:27.600 | to customize that for you.

01:43:29.680 | I'm sure as these tools become more and more sophisticated, they'll all veer off into different

01:43:34.120 | directions with some overlapping features and some that are unique to each tool.

01:43:39.940 | Thank you, Alan.

01:43:42.520 | That is useful.

01:43:43.520 | Yeah.

01:43:44.520 | So it seems that you do slice and dice where I only have one fund, total stock market index

01:43:54.560 | fund period.

01:43:55.560 | That's a good one.

01:43:57.800 | That brings up a very important point that we didn't discuss.

01:44:00.440 | If you don't mind me bringing that up is about how, how we should try to simplify our portfolio

01:44:05.320 | as we enter into retirement, both by consolidating accounts as, as best we can, and then simplifying

01:44:12.000 | our holdings.

01:44:13.040 | Because if we have, if we happen to have a spouse, significant other who might ultimately

01:44:16.880 | inherit a complicated sliced and diced portfolio they may not be comfortable handling that.

01:44:23.800 | And as we get older, we don't want to necessarily spend as much time.

01:44:27.060 | Those of us on this, on this zoom are probably for the most part, you know, personal finance

01:44:31.920 | geeks, but our, our significant others may not be, nor our kids.

01:44:37.520 | And simplifying things and make it understandable and also including your plans and, and philosophy

01:44:44.000 | in your investment policy statement for others that may need to deal with it after we're

01:44:49.400 | incapacitated or no longer here is other, another useful step.

01:44:54.920 | That's something I'm working on.

01:44:57.020 | So there's a lot more to consider other considerations as well to make our lives simpler and the

01:45:01.600 | simpler our overall finances and portfolios are, as we enter in retirement means we'll

01:45:06.880 | have more time to spend on other activities, such as figuring out how to spend our money.

01:45:12.160 | Okay.

01:45:13.360 | Or going to therapy to spend your money.

01:45:17.960 | Thank you.

01:45:18.960 | You're welcome.

01:45:19.960 | Thank you, Sam.

01:45:20.960 | How about 14056?

01:45:21.960 | Try not to throw rotten eggs at me, but I've been toying with the idea of getting an annuity.

01:45:32.160 | And for a couple reasons, it's going to force me to take out the money and I have a cash

01:45:35.680 | flow issue.

01:45:37.320 | And also I can, if I do it with my 401k, I could start to peel down some of that, you

01:45:45.480 | know, nastiness that's going to hit me when my R and D kicks in.

01:45:50.680 | I had two people bring up two things.

01:45:53.600 | One person said the only annuity they would consider was a SPIA, S-P-I-A.

01:45:58.980 | And then another option was a fixed index that would, and either of these could be like

01:46:04.240 | just 10 years rather than a lifetime.

01:46:07.060 | So I'm going to throw it out.

01:46:08.720 | And if there's any annuity that you guys think is not as nearly as odious as the others,

01:46:16.320 | please let me know.

01:46:18.360 | No, I think Wade Fowler has talked a lot about the fact that you can't really annuitize yourself.

01:46:26.280 | So, you know, and I think the recommendation is usually for the SPIA, isn't it, Alan?

01:46:34.560 | Yes, single premium immediate annuity, which is the simplest, lowest commission, lowest

01:46:41.480 | cost approach, which in some instances is very reasonable.

01:46:47.200 | Would you, right now, you know, I can't imagine myself living like my dad did who died at

01:46:53.640 | 99 and he was going to the gym at age 97 three times a week.

01:47:00.420 | But would you consider like if I did like a five-year or a 10-year or something just

01:47:05.320 | to kind of see how it goes?

01:47:06.880 | And I don't know, you know, I visited somebody who wanted to see me put around $650,000 in

01:47:14.760 | a lifetime annuity and, you know, yeah, believe me, I wasn't going to hand over my money without

01:47:20.800 | really studying this.

01:47:22.440 | But I started to think that maybe, and I did a calculator, you know, I can't remember who

01:47:28.640 | it was, whether it was a Fidelity calculator or whatever.

01:47:32.200 | There's an intermediateannuities.com or something.

01:47:35.460 | And I thought like, you know, a SPIA with 10-year SPIA seemed like it was kind of like

01:47:42.480 | an okay idea.

01:47:46.960 | That might have been where I went.

01:47:47.960 | Yeah, this is it.

01:47:48.960 | Yeah, that's where I exactly where I went.

01:47:52.600 | Okay.

01:47:53.920 | To help you, Marilyn Dower did a one, I think, one hour, one and a half hour overview on

01:48:03.020 | annuities and we recorded it is on the Sacramento Bogleheads YouTube channel.

01:48:11.520 | And he did a wonderful job explaining all the annuities, pros and cons.

01:48:16.760 | And I think he's no longer on the call, so he probably wouldn't speak about the fact

01:48:21.000 | that we've got it recorded and it's a wealth of information.

01:48:25.220 | Thank you.

01:48:26.320 | And I think this is the Wade Fowl article or something about it.

01:48:30.160 | Yeah, right here.

01:48:31.680 | I'll put this in the chat also.

01:48:33.400 | One thing important to note is that, of course, annuities nowadays don't offer any cost of

01:48:39.920 | living adjustment, which is a bit of a concern, but instead of buying a single, if you're

01:48:44.880 | going to purchase an annuity, especially a SPIA, what you could do is instead of buying

01:48:48.680 | one single one is kind of build a ladder of two or three annuities at various times.

01:48:54.560 | And that way you may get some inflation benefit from that based upon the current market conditions

01:49:00.280 | and interest rates.

01:49:01.280 | Split it up instead of one lump sum, divide it into three and divide it up over a period

01:49:06.200 | of time to purchase them.

01:49:08.080 | So then maybe I should start with like a five year and kind of see how it goes and make

01:49:13.680 | it small.

01:49:14.680 | But you know, you can make it so small that what they're really giving you every month

01:49:17.880 | is not is chicken feed.

01:49:20.200 | Well, and then Harry Sitt, the finance buff, also does a lot of conversation about annuities.

01:49:27.120 | And I think he talks about laddering annuities, Alan, to your point.

01:49:33.120 | So that might be another resource for you.

01:49:35.400 | Thank you.

01:49:36.400 | Okay, Sam, did you have another question?

01:49:41.720 | Yeah, back to Alan talking about simplifying our accounts.

01:49:47.380 | In addition to simplifying the number of funds, like me only holding one index fund for stock.

01:49:56.480 | And then you go so we can simplify the number of the brokerage account, like for example.

01:50:05.200 | But if I put everything into Fidelity, then it will be big.

01:50:15.160 | Instead of diversifying the risk between Vanguard and Fidelity and Merrill, it will be all in

01:50:23.880 | Fidelity and if Fidelity goes under, I'm done.

01:50:28.600 | What do you think?

01:50:29.600 | Fidelity, any of these brokerages, they don't hold the assets.

01:50:33.440 | There's another holding company.

01:50:35.520 | So there's no risk there in losing everything.

01:50:38.460 | The bigger risk would be if there's a breach, a security breach, and you lose access to

01:50:44.880 | your account for a while until that's rectified.

01:50:49.080 | That's a bigger concern.

01:50:50.480 | So it's always a good idea to have some other bank account, checking account, maybe another

01:50:56.000 | account somewhere outside of a brokerage.

01:50:59.080 | I personally have no qualms about holding all my money at Vanguard, although it turns

01:51:04.000 | out for another reason I have some money at Fidelity, but what are everybody's thoughts

01:51:08.280 | on that?

01:51:09.280 | That's oftentimes posted on the forum and that's, I think, not a valid concern about

01:51:15.040 | Fidelity or Vanguard or Schwab or anybody else going under and losing your assets there.

01:51:24.400 | No, but somebody made a comment.

01:51:26.600 | I think Margo made a comment about the concern about the long-term annuities and the solvency

01:51:33.160 | of the company.

01:51:34.880 | And I think there's some kind of cross-insurance between these companies.

01:51:37.840 | I don't understand it all because they really don't want the word to get out that annuities

01:51:41.960 | don't pay out and they're just liquidate and screw everybody over.

01:51:46.880 | Does anybody know about that?

01:51:49.020 | Maybe Mel knows about it?

01:51:50.840 | I was told that the annuity actually has a little bit of an insurance policy.

01:51:55.960 | The annuity companies, the insurance companies have insurance policies, not a ton, but some.

01:52:03.400 | Well, it's a state issue and it varies from state to state.

01:52:08.560 | Typically it's around $250,000.

01:52:12.620 | So it pays to go with different insurers and it pays to make sure that you stay under the

01:52:22.020 | amount that you're guaranteed by the state, especially if you're going out a little bit

01:52:28.820 | on the risk, the companies are ranked and the lower the ranking, the higher the payout

01:52:38.880 | normally is.

01:52:39.880 | But a lot of people are tempted to go down on the risk scale and on the safety scale

01:52:45.500 | and will buy to get a little more.

01:52:48.140 | And in a situation like that, you want to make sure that you stay under, know what your

01:52:52.620 | state policy covers and stay under that.

01:52:57.780 | So Mel, are you saying if I was in a state where it's limited to $250,000 and I plopped

01:53:02.080 | down a million bucks and they went insolvent tomorrow, they'd give me back the state guarantee

01:53:08.300 | or I'd only get $250,000 back?

01:53:12.320 | That is a possibility.

01:53:13.320 | Now, of course, you've always got the other thing where the other insurance companies

01:53:18.000 | come in and buy the ... But the problem is, is that as with some assets, there's still

01:53:27.060 | assets to be had by whoever takes them over.

01:53:30.020 | But in this case here, they got a half a million or a million dollars and if they've already

01:53:36.080 | blown it, there's not really a lot of assets for them to take over because all they're

01:53:40.560 | taking over is debt, the annuity to pay out.

01:53:45.480 | So I would say that either go with top rated companies if you're going to go over the insurance

01:53:52.840 | amount or stick with the lower, if you're going to go down on the risk scale or safety

01:54:01.240 | scale, buy from mobile companies.

01:54:06.280 | And there's nothing wrong because somebody mentioned it before, I'm not sure whether

01:54:09.160 | it was you or Alan, but one of the ways to offset inflation is to buy one today and buy

01:54:19.360 | another one a couple of years from now and a couple of years from now, instead of putting

01:54:23.800 | it all out right now, unless you feel that this rate is as good as you're going to get.

01:54:30.760 | In other words, if it's an exceptional period where the rates that they're paying is extremely

01:54:36.200 | high, then you may go for it.

01:54:38.600 | But if the rates are low, you might buy some today and some a year or two from now and

01:54:45.080 | some a year, a couple of years after that.

01:54:48.000 | So you're laddering it, which also helps to offset inflation and gives you a safety feature.

01:54:55.800 | Okay, thank you, Mel.

01:55:00.560 | Somebody had posted, I think Matthew posted in the chat about a comparison of fixed index

01:55:05.760 | annuities and bonds by an article by Wade Pfau and Alan Roth there.

01:55:13.160 | I posted that in the chat here, he did.

01:55:15.880 | Well, just to, now Wade of course is associated with the insurance industry, so there's always

01:55:23.260 | that possibility, something you have to keep in mind.

01:55:26.660 | I did a six-column series at Forbes on annuities, which are still up and people can search for

01:55:35.900 | them and go through the whole series and it goes over all the different types and the

01:55:42.780 | things to look out for in that.

01:55:47.160 | So all you have to do is search for Forbes Lindauer and it should bring them up.

01:55:55.940 | I wanted to say that Taylor Laramore has two SPIAs, single premium index annuities.

01:56:04.660 | I think, Mel, I can't remember, I think he bought one, his first one in his 70s and his

01:56:10.740 | second one maybe in his 80s and he's now, he just turned 100 years old and they're still

01:56:17.400 | paying him.

01:56:18.400 | And in fact, his son told me that every year Taylor gets a letter from the annuity company

01:56:24.880 | and says, "Are you still alive?

01:56:27.880 | Are you still there?"

01:56:28.880 | And he asked to sign the letter and send it back.

01:56:31.880 | Yeah, Taylor is one of the ones that really made out on it.

01:56:36.780 | I heard rumors that they fired the guy that wrote him.

01:56:42.200 | [Music]