Bogleheads® on Investing Podcast 060: Jonathan Clements on “My Money Journey,” host Jon Luskin
00:00:00.000 | Welcome to the 60th edition of the Bogleheads On Investing podcast.
00:00:14.720 | Today our special guest is Jonathan Clemens.
00:00:17.640 | I'm John Luskin and I normally host our Bogleheads live show for the folks of Twitter.
00:00:22.320 | I am taking over for the normal host Rick Ferry while he takes a summer sabbatical.
00:00:37.600 | Please allow me to introduce Jonathan Clemens.
00:00:40.280 | He is the founder and editor of Humble Dollar.
00:00:43.760 | He's also the author of a fistful of personal finance books, including My Money Journey
00:00:48.400 | and How to Think About Money.
00:00:50.960 | Clemens spent almost 20 years at the Wall Street Journal, where he wrote about personal
00:00:54.960 | finance.
00:00:56.440 | Some announcements before we get started on today's episode with Jonathan Clemens.
00:01:01.160 | This episode of the Bogleheads On Investing podcast, as with all episodes, is brought
00:01:06.640 | to you by the John C. Bogle Center for Financial Literacy, a nonprofit organization that is
00:01:12.320 | building a world of well-informed, capable, and empowered investors.
00:01:17.360 | Visit boglecenter.net where you'll find valuable information, including transcripts
00:01:21.560 | of podcast episodes.
00:01:23.960 | And at boglecenter.net/donate, you can make a tax-deductible donation to support the mission
00:01:30.240 | of improving financial literacy.
00:01:33.800 | Another announcement, registration is currently open for the 2023 Bogleheads conference.
00:01:39.200 | This year's conference is on October 13th through the 15th in Rockville, Maryland.
00:01:44.160 | We'll have some phenomenal personal finance and investing rock stars who will be attending
00:01:48.360 | as speakers, including Charles Ellis, Paul Merriman, Clark Howard, Barry Ritholtz, Wade
00:01:56.040 | Fow, and more.
00:01:57.920 | And of course, Boglehead's favorites, the normal host of this show, Rick Ferry, Christine
00:02:02.720 | Benz, Dr. Bill Bernstein, Mike Piper, Alan Roth, and much more.
00:02:08.320 | Go to boglecenter.net/2023conference to see the full lineup and to register.
00:02:14.520 | We have less than 100 spots remaining, so make sure to grab your spot at boglecenter.net/2023conference.
00:02:23.920 | And finally, a disclaimer, the following is for informational and entertainment purposes
00:02:28.120 | only and should not be relied upon as investment or personal financial advice.
00:02:33.500 | And with that, let's get started on our interview with Jonathan Clements.
00:02:38.200 | Jonathan, welcome to the Bogleheads on Investing podcast.
00:02:41.880 | Thank you for being here.
00:02:42.880 | Hey, John.
00:02:43.880 | It's great to be with you.
00:02:44.880 | Thanks for having me on.
00:02:46.360 | Let's start with your new book.
00:02:48.200 | Tell us about your new book.
00:02:49.680 | I have this new book out called My Money Journey.
00:02:52.920 | It's a collection of 30 essays written by various people who have in the past written
00:02:58.000 | for this website that I've run for the last six and a half years, humbledollar.com.
00:03:03.240 | One of the specialties of the site is people talking about their own finances.
00:03:09.360 | A lot of the writers for the site are essentially people who are keenly interested in personal
00:03:14.200 | finance, but they wouldn't necessarily be considered financial experts.
00:03:19.240 | So what I say to them is, you may not be an expert on the financial world, but you are
00:03:24.120 | an expert on your own life.
00:03:26.580 | So if you write about your own life and the financial experiences you have, you can do
00:03:30.520 | so with authority.
00:03:32.400 | So against that backdrop, when it was suggested that we do a book, I said, "Well, okay.
00:03:37.600 | Let's all write about our financial lives," and that's what the book is all about.
00:03:41.480 | It's 30 people talking about how they've reached financial freedom or how they're endeavoring
00:03:46.540 | to reach financial freedom.
00:03:48.080 | I think it's a unique book in this regard.
00:03:50.680 | Most of the time, we don't talk honestly about money.
00:03:54.080 | People will tell you about their religious beliefs.
00:03:55.920 | They'll tell you about their political beliefs.
00:03:57.640 | They'll even tell you about their sex lives, but they will not tell you how much they're
00:04:02.320 | worth or how much they earn.
00:04:04.280 | One of the things you'll find in My Money Journey is that people are brutally honest
00:04:08.360 | about their own finances.
00:04:10.180 | People do talk about how much they earn.
00:04:11.440 | They do talk about how much they're worth, and I think it's refreshing for people.
00:04:14.800 | In a sense, it's also inspiring, but a lot of people struggle with their financial lives.
00:04:20.120 | They worry whether they're on track or not, and what you'll see from the book is that
00:04:23.520 | people make financial mistakes, and yet they can still achieve financial freedom.
00:04:26.840 | Well, why don't you tell us a little bit about your money journey?
00:04:32.040 | So among the 30 essays, one of them is My Money Journey.
00:04:36.440 | It's about how I got to where I am today, which is 60 years old and semi-retired.
00:04:42.920 | And when I look back on my financial journey, it really seems to be a story in two parts.
00:04:48.040 | The first two decades or so was one of being super frugal and very much in a routine, striving
00:04:57.480 | towards financial independence.
00:05:00.920 | And the period since has been one of a lot of turmoil in my life where I've tried my
00:05:06.240 | hand at a variety of things, in part because I could afford to do so, thanks to the financial
00:05:11.600 | freedom that came from my earlier frugality.
00:05:15.520 | But it was that earlier frugality that built the financial base that I rest on today.
00:05:20.520 | So during those 20 years or so, it was a time when I was at the Wall Street Journal, writing
00:05:25.920 | my personal finance column, living out in the New Jersey suburbs, living in a house
00:05:30.560 | that was really far less expensive than I could afford.
00:05:33.940 | And because that house was so much cheaper than I could really afford, it allowed me
00:05:37.380 | to save great gobs of money.
00:05:40.200 | And like so many other people who reach financial freedom, it wasn't about being a smart investor
00:05:45.680 | that got me there.
00:05:46.960 | It was about being a great saver.
00:05:49.160 | It was about being the sort of person we refer to as a fire person today, financial independence
00:05:55.000 | retire early, except it was before the fire and ocean even existed.
00:05:58.080 | It was just being super frugal and saving great gobs of money every month.
00:06:02.800 | Frank Curzio: Anything else you'd like to share about your new book?
00:06:05.480 | Will Barron: One of the things that people who read the book will discover is not only
00:06:11.360 | is frugality a common theme, but the other thing that really jumps out is the influence
00:06:16.800 | of people's upbringing.
00:06:18.160 | So many people talk about the influence of their upbringing on their financial habits.
00:06:23.520 | If you're a parent, this is truly scary.
00:06:26.680 | When you as a mother or father talk to your kids about almost anything, it's like you're
00:06:31.840 | holding a megaphone to their ear.
00:06:34.480 | They hear everything at 10 times the volume they hear anything else that they hear during
00:06:38.920 | their lives.
00:06:40.040 | And so some of the people in the book talk about how they struggle to overcome the money
00:06:45.380 | messages that they got from their parents.
00:06:48.000 | Others talk about how those money messages really set them on the right course.
00:06:53.040 | But either way, whether you're reacting to what your parents said or you're following
00:06:57.740 | what your parents said, the parental influence is really enormous.
00:07:01.040 | And you see that in so many of the essays in the book.
00:07:04.540 | Certainly as a relatively new parent, that gives me pause, but my wife and I think we've
00:07:09.160 | got relatively frugal disposition, so it's probably a good thing for future of our daughter.
00:07:14.160 | Say this to you, John, yes, being frugal and teaching your kids to delay gratification
00:07:19.640 | is a great thing, but you can overdo it.
00:07:21.880 | One of the stories that I've been telling lately is about my two kids.
00:07:26.000 | I have a 34-year-old and a 30-year-old.
00:07:29.240 | And my 30-year-old just got his PhD, seven years living on a stipend of $30,000 a year.
00:07:36.800 | He spent much of those seven years living abroad, doing a lot of traveling and so on.
00:07:41.460 | So over the seven years, he got, roughly speaking, $210,000 in the stipends.
00:07:49.480 | And he managed to save something in the six figures.
00:07:53.560 | When Henry told me this, it's like, "Whoa, maybe I emphasized the frugality a little
00:07:58.200 | too much."
00:08:00.680 | Maybe he would have enjoyed the seven years somewhat more if he'd been a little bit more
00:08:04.720 | carefree with the stipends that he got every year.
00:08:07.040 | Yeah, it's certainly possible that on the same side of the coin going forward right
00:08:10.800 | now, he'll have a lot more freedom and flexibility to do what he wants, right?
00:08:13.760 | Similar to your own journey.
00:08:15.480 | That's true, but still, I would say in terms of my own financial journey, when I look back
00:08:20.480 | at that initial 20-year period where I was living out in the Jersey suburbs in a house
00:08:24.600 | that was smaller than I could afford, in which I didn't really like that much when I held
00:08:30.220 | the purse strings very, very tightly.
00:08:33.040 | In retrospect, I probably would have enjoyed those years more if I had been a little freer
00:08:38.360 | in my spending.
00:08:39.360 | Now, in my defense, we don't know until the end of the financial journey how it's going
00:08:44.280 | to turn out.
00:08:45.280 | In retrospect, my financial journey has turned out very well, but when you're starting out,
00:08:49.840 | you don't know whether you're going to get hit with frequent bouts of unemployment.
00:08:53.280 | You don't know whether you're going to have problems with medical costs.
00:08:58.040 | You don't know what sort of family turmoil you're going to face and so on.
00:09:01.960 | I had some of that, but not to a huge degree.
00:09:04.960 | And so as a consequence, I ended up saving far more than I needed to for retirement.
00:09:09.680 | But for others, even if they're diligent from the get-go, if they get hit with financial
00:09:13.400 | setbacks in one way, it's kind of another, maybe despite their frugality, they'll only
00:09:19.360 | just make it to retirement with the sort of money that they want.
00:09:22.640 | I can't help but think of a quote by Morgan Household, "Save for no reason."
00:09:27.480 | And I think it's fine to save for no reason.
00:09:30.240 | When I think about what it takes to have a happy financial life, I think there are three
00:09:35.640 | pillars and one of the key pillars of a happy financial life is not having to worry about
00:09:41.440 | money.
00:09:42.440 | If you are diligent about saving and you know that if bad things happen in your life, you
00:09:47.520 | won't be wracked with financial anxiety, that is a huge source of happiness.
00:09:52.680 | I say to people this all the time, money may not buy happiness, but not having money can
00:09:58.400 | buy you unhappiness.
00:10:00.180 | So money takes away that anxiety and that's huge.
00:10:05.080 | Until you've lived with too little money, you don't realize how great it is to have
00:10:11.040 | a bank account that's relatively full.
00:10:13.080 | Jonathan, anything else you'd like to share about your new book?
00:10:17.120 | One of the things that comes through in the book as well, and this is maybe not a huge
00:10:21.080 | surprise, but one of the things that comes through in the book is that even if people
00:10:24.560 | try all kinds of different investment strategies early on, almost all of them ended up as indexes
00:10:31.080 | in the end.
00:10:32.460 | So many people early on made financial mistakes, they dabbled in individual stocks, they dabbled
00:10:39.040 | in options, they thought they knew which way the market was headed and gauged in a little
00:10:43.080 | market timing, but eventually they settled down, become financial adults and started
00:10:48.800 | indexing.
00:10:49.800 | And that coupled with the frugality and the great savings habits is what allowed them
00:10:54.480 | to reach financial freedom.
00:10:56.360 | It's so hard as investors to stay on track amid all the noise, all the temptations based
00:11:02.900 | on this market pundit's prediction or this person's screaming about this great individual
00:11:08.600 | stock or this hot, aptly managed fund, all these distractions that can lead you to derail
00:11:14.080 | your financial life.
00:11:15.520 | But if you can ignore that, if you can do the right thing, which is save diligently,
00:11:22.040 | put it into a diversified portfolio of index funds and keep it up for 20 or 30 years, good
00:11:26.560 | things will happen.
00:11:28.080 | I think about how Rick Ferry describes the investor's journey, which is born into darkness
00:11:32.920 | and then you find index funds.
00:11:35.720 | It's true.
00:11:36.720 | There is much more to managing a financial life than saving an index fund, but certainly
00:11:42.480 | on the portfolio side of things, those are two key components.
00:11:47.080 | I mean, obviously there's much more that you need to worry about, insurance, estate
00:11:50.960 | planning, find the right home, thinking about when to claim social security and so on.
00:11:58.280 | But on the investing side, between good savings habits and index funds, those two together
00:12:04.120 | are magic.
00:12:05.120 | Let's jump to some questions from the Bogleheads community.
00:12:09.720 | This question from Lifsoft from the Bogleheads forums writes, "One thing I've often wondered
00:12:15.760 | about is why people like Mr. Clements himself are still working and not off backpacking
00:12:22.080 | somewhere."
00:12:23.080 | Yeah.
00:12:24.080 | I looked through the questions on the Bogleheads forum and that one jumped out at me.
00:12:29.080 | I would say, when it comes to retirement, there are two different things that you have
00:12:35.320 | to say, "I have enough of."
00:12:38.120 | One is the obvious question, which is, "I have enough money," but the other question
00:12:42.600 | you have to answer yourself is, "Have I done enough?
00:12:45.200 | Have I done enough with my career?
00:12:47.320 | Have I done enough for the world?
00:12:48.840 | Have I had enough accomplishments?"
00:12:51.920 | And I think for a lot of people, even if they decide that they want to quit the workforce,
00:12:56.880 | they are not done doing, there is so much more they want to continue to do.
00:13:01.880 | And that is part and parcel, in my mind, to a fulfilling retirement.
00:13:07.800 | You need that sense of purpose after you leave the workforce.
00:13:12.080 | So for those who continue to work for money or who leave the workforce but continue to
00:13:18.800 | work hard at volunteer jobs, these are people who have said, "I haven't done enough for
00:13:24.360 | the world yet.
00:13:25.360 | I need to continue to do things that I think are important, that I'm passionate about,
00:13:29.800 | that I find challenging, that I think I'm good at."
00:13:32.540 | And I think that's a wonderful thing.
00:13:33.540 | I mean, we as humans are not wired to rest and relax.
00:13:38.120 | We humans are wired to strive.
00:13:40.560 | We are the great, great, great, great grandchildren of our hunter-gatherer ancestors.
00:13:44.760 | They didn't sit around thinking, "Hey, let's take the day off and we'll see whether there's
00:13:49.800 | enough food tomorrow."
00:13:51.180 | They survived because they strove relentlessly to secure a shelter and secure more food.
00:13:57.840 | And we, within us, carry those instincts.
00:14:01.000 | We want to continue to strive.
00:14:03.480 | And it's a great source of happiness.
00:14:05.400 | So when I was talking earlier about having enough money being one of the pillars of financial
00:14:10.360 | happiness, knowing that things are going to be okay, even if bad times strike.
00:14:14.320 | So the second pillar is being able to spend your days doing what you love.
00:14:18.040 | And what we tend to love doing is things that give us a sense of purpose.
00:14:23.280 | One thing I think about is a little meme that Rick Ferry often shares often on Twitter,
00:14:27.600 | which is "Financial Independents Remain Employed" for that FIRE acronym.
00:14:33.920 | That's cute.
00:14:37.200 | Let's jump to another question from the Boglatz community.
00:14:40.560 | This one is from a user named GreatToBeOutdoors from the Boglatz forums, who writes, "Why
00:14:45.320 | aren't books that are written about personal finance and financial independence required
00:14:48.880 | reading in an academic setting at an early enough age to make a real difference?"
00:14:53.520 | I think it's unfortunate that that's not the case, but I'm not convinced that it would
00:14:58.040 | make a huge amount of difference.
00:14:59.600 | I know there's a big push right now to teach personal finance more heavily at the high
00:15:05.080 | school level, at the college level, and so on.
00:15:08.280 | But studies suggest that even if you teach people about personal finance, it doesn't
00:15:13.480 | stick for very long.
00:15:14.840 | Instead, what tends to work is just-in-time education.
00:15:18.800 | When you go to allocate the 401(k), you're given a sort of catch-up course on how to
00:15:25.080 | invest sensibly.
00:15:26.080 | Or when you go to get the mortgage, you have a catch-up tutorial on what's involved in
00:15:31.120 | getting a mortgage, and how much this is going to cost you, and what the risks and different
00:15:34.720 | types of mortgages are, and so on.
00:15:36.920 | So I think even if we had a huge effort to teach personal finance at the high school
00:15:41.360 | and college level, probably for 80% of the people who take those courses, it will go
00:15:46.920 | in one ear and out the other, and it won't make a difference to the financial decisions
00:15:50.880 | they make two or three years down the road.
00:15:53.240 | Instead, to influence them, they need education at that moment when they're making those decisions.
00:16:00.960 | Let's jump to a question from Jordan from Twitter asks, "I've been reading a lot lately
00:16:09.400 | about what the Bogleheads say about SPIAs, and that is Single Premium Immediate Annuities.
00:16:16.160 | And for those who aren't investing nerds, that just means we give the insurance company
00:16:19.840 | a big pot of money, and then they give us a monthly payment for life.
00:16:23.800 | So that's a SPIA.
00:16:25.140 | And then also TIPS ladders for guaranteed income when in a drawdown phase in retirement.
00:16:31.320 | And again, for those who aren't investing nerds, TIPS ladder is just going to be a series
00:16:35.480 | of U.S. government bonds that mature over time that provides income for us to live in
00:16:41.600 | retirement."
00:16:42.600 | Jordan goes on to say, "It seems to be either a love-hate kind of thing for those subjects.
00:16:47.880 | Are there a place for these SPIAs or TIPS in retirement?"
00:16:52.480 | And so my answer to that is yes, absolutely, though we are talking about two completely
00:16:57.040 | different animals.
00:16:58.040 | I mean, building a TIPS ladder could cover 30 years of retirement costs and with a pretty
00:17:04.760 | much guaranteed stream of income, Alan Roth has done an excellent analysis on this that
00:17:09.400 | it's got a reasonable amount of publicity.
00:17:12.080 | The problem is, what if you live longer than those 30 years?
00:17:14.840 | And that's what you get with the Immediate Fixed Annuity.
00:17:18.840 | You get this stream of income that will last as long as you do.
00:17:23.440 | And for years, for years, I've talked about Immediate Fixed Annuities, how they are different
00:17:29.880 | from other annuities, how they are not this evil insurance product.
00:17:34.720 | I think I may have made two converts over the years.
00:17:37.440 | I mean, it's just been such a hard sell.
00:17:40.300 | It's not like insurance agents are cheering for people to buy these products.
00:17:44.840 | With a Immediate Fixed Annuity, the insurance agent's commission might be 1%.
00:17:50.360 | They are not out there pushing it because they don't make very much money from selling
00:17:54.080 | Immediate Fixed Annuities.
00:17:55.080 | In fact, there's almost nobody out there who seems to want people to buy Immediate Fixed
00:17:58.960 | Annuities, except for me.
00:18:00.920 | And the reason I think they're great is that one of the biggest risks in retirement, maybe
00:18:07.080 | the biggest risk, is outliving your money.
00:18:09.800 | There are only a few ways to hedge that risk.
00:18:11.840 | The number one way is to delay Social Security till age 70.
00:18:15.840 | That's what I plan to do.
00:18:17.120 | And anybody who's in reasonably good health, I'd encourage them to do that as well.
00:18:21.880 | That'll give you the best annuity you can buy, this inflation-adjusted stream of income
00:18:25.760 | backed by the government, and it's at least partially tax-free.
00:18:29.000 | But if that alone is not going to comfortably cover much of your retirement expenses, I
00:18:33.200 | think there's a good case to be made for buying an Immediate Fixed Annuity.
00:18:36.720 | And I'm certainly planning to do that.
00:18:38.480 | I'm not fully retired yet, but when I reach the point when I do, I'm certainly going to
00:18:43.240 | think about putting at least a portion of my portfolio into an Immediate Fixed Annuity,
00:18:47.760 | probably with an eye to at least covering my fixed living costs.
00:18:52.600 | With that SPIA, that Single Premium Immediate Annuity, I'm going to give this insurance
00:18:56.880 | company a big pot of money, and then they're going to give me an income stream for life.
00:19:01.920 | It is the right way to think about insurance, and it's a great way to manage that longevity
00:19:06.600 | risk, the risk that we're going to live longer than maybe our assets would provide if we
00:19:11.280 | invested in a stock and bond portfolio.
00:19:13.680 | A lot of folks are worried about inflation.
00:19:16.480 | With that approach, hey, this payment, it's not going to increase for inflation.
00:19:20.000 | Fortunately, there is research that we even talked about on the last episode of the Bogleheads
00:19:25.160 | on Investing podcast, where retiree spending decreases on a real level over the years.
00:19:31.160 | And that's just an early way of saying, after inflation, we're still spending less in retirement.
00:19:36.480 | One of the things that I mentioned to people often is you happily stay with your employer
00:19:41.280 | for 20 or 30 years to get this traditional pension.
00:19:45.240 | You're willing to make that sacrifice, and yet come retirement age, you're not willing
00:19:49.280 | to take $100,000 or $200,000 out of your portfolio and use it to buy the same income stream.
00:19:55.120 | So you're willing to sacrifice 20 or 30 years out of your career to get a pension, but you're
00:19:59.000 | not willing to sacrifice money out of your nest egg to get the same thing.
00:20:02.720 | It doesn't make any logical sense.
00:20:05.600 | And then also, and I see this a lot when working with folks, there's going to be the financial
00:20:10.520 | nerd of the family, and then we're going to have the more normal spouse.
00:20:14.440 | So we want to think about, "Hey, what sort of investment plan are we setting up in that
00:20:20.280 | worst case?"
00:20:21.640 | For those households out there where we have the financial nerd of the family, and then
00:20:25.080 | the more normal person, what happens when that financial nerd isn't able to manage that
00:20:30.200 | household finances anymore?
00:20:32.140 | That SPIA is pretty great.
00:20:33.240 | That money, it shows up into your checking account every month.
00:20:37.200 | It is zero maintenance.
00:20:38.360 | So for our non-financial spouses, SPIA can also be a really great fit just for that reason.
00:20:44.360 | And just to add onto that, which is even as you think about an immediate fixed annuity
00:20:49.960 | to provide that guaranteed lifetime stream of income that makes your financial life that
00:20:54.920 | much simpler, folks should also think about how else they should simplify their financial
00:20:59.280 | life as they approach retirement age.
00:21:01.560 | So John, I don't think this is any great secret.
00:21:04.280 | I think I'm substantially older than you.
00:21:06.680 | I'm on the cusp of retirement and I'm thinking about ways that I can simplify my finances.
00:21:11.640 | I obviously have no problem handling it now, but will that be the case 15, 20 years down
00:21:16.240 | the road?
00:21:17.240 | So I'm striving to have fewer credit cards, fewer checking accounts, deal with fewer financial
00:21:23.000 | firms, and I'm also looking to simplify my mutual fund portfolio.
00:21:27.720 | I have over the years owned sort of more specialized funds, small cap value, large value, stuff
00:21:34.000 | like that.
00:21:35.000 | I think that as the next decade continues, I will probably look to either ease out of
00:21:41.040 | those positions, perhaps eliminate them entirely, because at some point I'm not going to want
00:21:46.440 | to deal with it.
00:21:47.440 | And I might not be capable of dealing with it.
00:21:49.760 | Absolutely.
00:21:50.760 | On Bogleheads Live episode 36, we had Mike Piper on speaking about one of his books,
00:21:56.200 | After the Death of Your Spouse, and that was a huge theme there as well.
00:21:59.640 | Simplify, simplify, simplify, to quote Mike in that episode.
00:22:03.400 | I'll link to that in the show notes for our listeners.
00:22:07.360 | Mike made a similar point with respect to simplifying your investment portfolio.
00:22:12.360 | I know that he personally uses one single mutual fund, a balance fund, roughly 80% stocks
00:22:17.820 | and 20% bonds, rebalances automatically.
00:22:20.980 | Now he has all his money in tax advantaged accounts, so tax efficiency is a little bit
00:22:25.020 | less of an issue for him, but gosh, that makes it very easy.
00:22:29.380 | Just one single mutual fund.
00:22:31.940 | Everything is in that.
00:22:33.480 | Set it and forget it.
00:22:34.480 | You don't even have to think about it.
00:22:37.520 | Let's jump to another question from the Bogleheads forums.
00:22:40.360 | Username JPM writes, "The way of the Bogleheads, live below your means, seek safety and diversification
00:22:47.080 | rather than market timing, invest consistently and with taxes in mind, keep investing fees
00:22:52.600 | low, time is your friend so use it, avoid acting on impulse and emotion as they are
00:22:57.120 | your enemies.
00:22:58.320 | Does he know of any comparably successful approaches for the non-financial professionals?"
00:23:04.840 | The short answer is no.
00:23:06.720 | Those are the key components of a sensible portfolio.
00:23:12.160 | We can quibble about the details, what should be your precise asset allocation, how should
00:23:17.040 | you diversify, how frequently should you rebalance and so on, but yeah, those are all the key
00:23:23.080 | components.
00:23:24.080 | The other thing is, Jack Bogle and many other people have said investing may be simple and
00:23:29.000 | it should be simple, but it isn't easy.
00:23:31.560 | The really tricky part is not only getting yourself to do it, but then staying the course
00:23:36.160 | thereafter.
00:23:37.160 | As we were mentioning earlier in the podcast, there are so many temptations to stray, but
00:23:42.880 | if you can resist those temptations to stray and continue to do the right thing decade
00:23:47.100 | over decade, and that is a great list that the writer included, good things will happen.
00:23:52.600 | Certainly with respect to that broader financial planning approach, I'm going to 100% agree
00:23:56.440 | with you, Jonathan.
00:23:57.440 | I can't think of anything similar.
00:23:59.100 | And then with respect to the investing piece, one thing that makes low-cost index funds
00:24:04.920 | so great is not necessarily that we get to invest in the stock market, it's that we are
00:24:09.900 | able to invest in a diversified manner at low cost simply and easily.
00:24:17.440 | I can't think of another way you can invest simply and easily at low cost that is also
00:24:23.320 | diversified.
00:24:24.320 | So, let's think about private equity.
00:24:26.600 | Let's say you do private equity yourself.
00:24:29.360 | That's going to keep your fees low, right?
00:24:30.520 | You go out, you find companies, you invest in them, but the catch is it's really hard
00:24:34.520 | to be diversified that way.
00:24:35.780 | You have to invest in hundreds of companies.
00:24:38.360 | Meb Faber talks about this a lot, I'll link to some resources in the show notes where
00:24:42.920 | he does that.
00:24:43.920 | He'll say, "Hey, private equity could make sense if you keep your fees low, but now that
00:24:49.280 | means you're doing it yourself, you're not using a money manager, and therefore getting
00:24:52.760 | diversification is quite hard."
00:24:54.520 | I believe Meb invests in perhaps 300 companies, so you've got to go out and you've got to
00:24:59.040 | look at more than 300 just to get the level of diversification he's gotten in his approach,
00:25:05.560 | and it's going to be the same thing for real estate.
00:25:07.280 | You can invest in real estate directly, that's going to keep your fees low, there's no money
00:25:10.840 | manager between you and your money, but now you've got to invest in a lot of properties,
00:25:14.840 | and that takes a lot of money because you can't buy just part of a property, you've
00:25:19.520 | got to buy the whole thing.
00:25:20.520 | Now, certainly, there are private equity funds and there are real estate funds, and you can
00:25:23.600 | get diversification there, and they're passive as well, but you can't get low costs there.
00:25:29.960 | Index funds are so fascinating because we can invest at low cost, be diversified, and
00:25:34.720 | it is a leave it alone approach.
00:25:36.120 | I don't know of any other investment where you can do that.
00:25:39.640 | Just picking up from that point, John, I had a chance to look through your request for
00:25:44.320 | questions on the Bogleheads, and one of the things that was put there was like, "What
00:25:48.240 | is Clemens' biggest financial mistake or biggest financial regret?"
00:25:53.000 | And gave that question a lot of thought, maybe it's particularly pertinent to me right now,
00:25:57.760 | so my biggest financial mistake or my biggest financial regret doesn't relate to my portfolio,
00:26:02.120 | I'm super diversified, I've tried to keep costs low, I've kept an eye on taxes, instead
00:26:06.800 | my regrets or my financial pain has all come from real estate.
00:26:11.380 | I've owned four houses over the course of my lifetime.
00:26:15.200 | One was a big success, and the other three have been, to use a technical phrase, royal
00:26:21.040 | pains in the ass.
00:26:22.400 | And it is an illustration of why index funds are great, so many other ways of investing
00:26:29.120 | are awful, which is that this real estate is a big undiversified bet on a single piece
00:26:34.880 | of property, and when it goes well, it can go really well, and when it goes badly, it
00:26:39.760 | can be dreadful.
00:26:42.320 | Right now, I'm in the middle of renovating the latest home that I bought, had it thoroughly
00:26:48.400 | inspected when I bought it, there was no sign of any major problem.
00:26:54.160 | The kitchen was gutted about four weeks ago, it was the beginning of the remodeling project.
00:27:00.520 | Your usual standard Philadelphia row home, and what the contractor discovered when they
00:27:05.640 | ripped out the kitchen and all the wallboard and so on, is that at the right-hand backside
00:27:12.320 | of the house, there is no load-bearing wall, no load-bearing wall, period.
00:27:18.960 | So suddenly the cost of this renovation has gone up by 12 or 13% because they have to
00:27:25.840 | repour concrete floor and rebuild a wall to support the back right side of the house.
00:27:30.400 | I, as a buyer of a home, who's typically ignorant, and even with the help of an inspector, had
00:27:37.160 | no idea, nor did the contractor, until they tore out that wall.
00:27:40.640 | But that's the danger of making a big undiversified bet, and that is what real estate is.
00:27:47.040 | Let's jump to another question.
00:27:48.220 | This one is from Vogelfangau, who writes, "I've been a regular reader of Jonathan since
00:27:53.600 | his Wall Street Journal days and never missed his weekly Humble Dollar newsletter.
00:27:58.040 | My question is, if he had the power to change one past column or piece of advice from his
00:28:03.000 | Wall Street Journal days, what would it be?"
00:28:05.960 | I would say that over the course of my journalistic career, there are three things that I regret.
00:28:14.360 | One is in thinking about some past columns that I wrote, even though I avoided getting
00:28:19.360 | into the prediction business, I don't think anybody can predict what's going to happen
00:28:23.480 | to the markets in the short term.
00:28:25.360 | I think the only reasonable assumption is that a globally diversified portfolio will
00:28:30.240 | go up over time, but that doesn't tell you anything about the short term.
00:28:33.960 | Nonetheless, at various times, I feel like I wrote about different parts of the financial
00:28:38.760 | markets with more or less enthusiasm, because I imagined I knew something that was unknowable.
00:28:44.720 | I may not have made a prediction in those columns, but the reason I wrote those columns
00:28:48.920 | was because, in my head, I thought I did know something.
00:28:53.080 | And second, related to that, was I think that over the course of my career, I spent far
00:28:57.720 | too much time talking about stock market valuations.
00:29:03.200 | And at this point, looking back over the past four decades, I have to say, and this sounds
00:29:08.480 | like a sort of completely butt-ignorant thing to say, but I have to say that at this point,
00:29:13.860 | I would have been much better off over the course of my career just ignoring all these
00:29:18.480 | stock market yardsticks, these valuation metrics, because they are not predictive.
00:29:24.140 | Even if you know everything about the Shiller Ratio, P/Es on forecasted earnings, trailing
00:29:30.800 | earnings, book value, the Q Ratio, whatever it is, the Tobin's Q, it's not going to tell
00:29:36.560 | you where the market is going.
00:29:38.120 | And yet, I spent way too much time writing about these things that, nothing more than
00:29:44.080 | intellectual noise.
00:29:45.920 | I did a paper on dollar-cost averaging that looked at the question, "Hey, markets are
00:29:50.200 | expensive.
00:29:51.200 | Should I be dollar-cost averaging?"
00:29:52.680 | I did that paper in 2017 using 2016 data because people were concerned about market valuations
00:29:58.640 | then.
00:29:59.640 | Can you imagine if you thought, "Hey, the market's expensive."
00:30:02.440 | Back in 2017 and didn't invest in stocks for that reason, you would have missed out a lot.
00:30:07.040 | So I think one takeaway from that is, yes, markets are expensive, but that doesn't mean
00:30:12.540 | they can't continue to go on to be even more expensive.
00:30:16.880 | - One of the basic asymmetries of the markets that's worth keeping in mind is that the most
00:30:21.560 | the stock market can lose is 100%.
00:30:24.600 | Very few have ever managed to achieve that, except maybe the Russian market of late.
00:30:28.760 | But the potential gains are unlimited.
00:30:31.000 | You don't know how high the sky is.
00:30:34.080 | So bailing out on the way up because you think the market is expensive can turn out to be
00:30:39.240 | a huge mistake.
00:30:41.060 | I've been writing about the financial markets since 1985.
00:30:46.240 | And from the earliest days, the old-timers were saying, "Oh, this rally we're in, we
00:30:52.200 | could be going back to the 1970s anytime now."
00:30:55.120 | And then of course, the 1987 stock market crash came along to confirm that, yes, they
00:30:59.960 | were right to be fearful, and they've continued to be fearful ever since.
00:31:04.880 | If I had listened to the old-timers decrying the sky-high valuations, I would never have
00:31:12.060 | owned stocks over the past four decades, because every year it looks unattractive and best
00:31:17.900 | based on valuations, and yet the market has continued to rise.
00:31:21.540 | - I think about what is the worst case with respect to a globally diversified portfolio?
00:31:26.740 | That's to say, if the market does go to zero, then your portfolio is going to be the least
00:31:32.020 | of your concerns.
00:31:33.300 | So it makes it hard for me to figure out a situation when it's ever the right reason
00:31:37.940 | to sell out.
00:31:38.940 | Because if the global society does not collapse, then you want to stay invested.
00:31:43.340 | And if it does collapse, then there's no real benefit to selling anyway.
00:31:47.100 | Either of those situations, I can't ever think of a reason why it makes sense to sell if
00:31:50.460 | you have the right mix of stocks and bonds for you that matches your personal goals,
00:31:54.700 | et cetera, et cetera.
00:31:55.860 | - If the stock market went to zero, what do you imagine bonds are going to do?
00:32:00.140 | They're also going to zero.
00:32:01.480 | We are facing economic apocalypse, and nobody will be able to make interest payments on
00:32:06.100 | their bonds.
00:32:07.100 | At that point, probably the only thing that will save you are canned goods and ammunition.
00:32:12.260 | Think about economic apocalypse, yeah.
00:32:14.260 | Get out of everything.
00:32:15.340 | But if you think that the economy will continue to grow, then stocks are the place to be.
00:32:20.820 | And I do believe that to be a stock market investor, you need to be an optimist.
00:32:25.620 | Every day, almost 8 billion people around the world wake up and say to themselves, "How
00:32:31.520 | can I make my life better?"
00:32:33.640 | And the human energy that is unleashed drives the growth of the economy, leads to improving
00:32:40.160 | productivity.
00:32:41.160 | And we all benefit from that.
00:32:43.080 | That is what trickles through to the stock market, and it's why the stock market rises
00:32:46.640 | over time.
00:32:47.640 | And if you have any doubt about that, just think back to 2020 and the pandemic.
00:32:52.520 | Faced with this economic shutdown, faced with this virus that we knew very little about,
00:32:57.600 | somehow people managed to go on.
00:33:00.520 | Restaurants moved their tables out onto the street.
00:33:03.160 | Companies figured out how to get employees to work from home.
00:33:05.800 | The amount of innovation that occurred because of the pandemic was huge.
00:33:10.360 | And of course, the biggest innovation was the discovery of a way to vaccinate people.
00:33:16.360 | We developed a vaccine in record time, extraordinary scientific achievement.
00:33:23.120 | If you have any doubt about the stock market, think about that period and the human energy
00:33:29.560 | that was unleashed, and that should make you optimistic about the future.
00:33:34.000 | And then the final thing I regret, I now have less enthusiasm for target date funds than
00:33:40.280 | I did 10, 20 years ago.
00:33:43.640 | And it's simply because I'm at a different point in my life.
00:33:46.720 | When I thought about target date funds initially, it's like, this is a great solution for people
00:33:51.400 | who are saving for retirement.
00:33:53.680 | And I still believe that's the case.
00:33:55.020 | If you're in a 401(k) plan and you're not sure what to do, putting all the money into
00:33:59.380 | a target date fund is a great solution.
00:34:02.480 | Hopefully it'll be one of those ones that are built around index funds, kind of out
00:34:05.640 | of Vanguard or Fidelity or Schwab.
00:34:08.160 | But even these funds that use actually managed funds, for probably the majority of investors,
00:34:13.600 | are a better option than anything else they might get up to.
00:34:16.600 | But as you approach retirement, which is where I am today, and I look at these products,
00:34:21.860 | they look much less attractive for a couple of reasons.
00:34:25.080 | One is when you decide to sell, you're selling out of the entire fund.
00:34:29.620 | You can't choose whether to throw money from the bond side or the stock side of the portfolio.
00:34:34.140 | But the other thing that I find myself more critical of is the glide path of these funds.
00:34:39.640 | I mean, they do become amazingly conservative as you get into retirement, down to 30% stocks.
00:34:46.820 | And I don't think it's wise for somebody who is 75 years old to be a 30% stock.
00:34:51.840 | Could be a lot of life ahead of you and a lot of inflation ahead of you.
00:34:54.840 | I believe that you should have more in stocks in order to make sure that you have the portfolio
00:34:59.760 | that will carry you into your 90s.
00:35:02.520 | The way target date funds are structured today, they just don't fit the bill.
00:35:06.520 | So yeah, they're good for people early in their career.
00:35:09.040 | I wish I'd been less enthusiastic about them and caution people more about the dangers
00:35:13.280 | as you approach retirement and get into retirement.
00:35:15.680 | I 100% agree.
00:35:17.560 | They are great on the way to retirement, but once you hit retirement, certainly you want
00:35:21.400 | to reevaluate them for precisely that reason.
00:35:24.680 | It might make sense to even increase the amount you have in stocks once you hit that first
00:35:29.200 | day of retirement.
00:35:30.640 | Wade found Michael Kitsis, they've done some work on this.
00:35:33.480 | I'll link to that in the show notes for folks who want to check that out.
00:35:37.720 | And certainly when you are looking for those target date funds, Vanguard has some great
00:35:41.320 | low cost ones.
00:35:42.320 | Fidelity and Schwab, they actually have two varieties.
00:35:45.320 | They do have a low cost index fund variety and they also have a higher fee active management
00:35:50.600 | variety.
00:35:51.600 | Most Bogleheads know which one is going to be the better fit for them.
00:35:56.460 | This question is from username unwittinggulag from the Bogleheads forums.
00:36:00.360 | To what extent is financial independence quantifiable, accumulating 25 times one's annual expenses
00:36:07.600 | or 50 times versus is it purely subjective being a feeling that one already has enough?
00:36:16.480 | So in terms of financial independence, you don't necessarily need 25 times your annual
00:36:22.880 | expenses because at least a portion of that is going to be covered by social security
00:36:27.140 | and you may also have a pension.
00:36:29.400 | What you want as a rule of thumb is 25 times whatever you need in addition to the money
00:36:36.080 | that you're going to get from social security, from a pension, from any income annuities
00:36:40.660 | that you're the beneficiary of.
00:36:42.380 | So yeah, as a rough rule of thumb, 25 times, not a bad guideline.
00:36:46.120 | I would be happy with that.
00:36:47.760 | And for those who aren't investing nerds, you might be wondering why 25 times?
00:36:52.040 | Well, because that gets you a 4% withdrawal rate.
00:36:55.960 | Why 4%?
00:36:56.960 | Well, that is the research that Bill Bengen created showing, hey, you could take 4% out
00:37:03.360 | of your retirement portfolio, adjust it for inflation each year and not run out of money
00:37:09.160 | after 30 years.
00:37:10.720 | We interviewed Bill Bengen on episode 35 of the Bogleheads live show and we also interviewed
00:37:15.960 | Christine Benz on episode 37.
00:37:18.200 | That takes a little bit of a different approach to answering that same question.
00:37:21.680 | I'll link to all that in the show notes so folks can check that out.
00:37:25.720 | So the Bengen research has been subject to some controversy over the years and people
00:37:30.480 | say, well, you can withdraw more than 4%, less than 4%.
00:37:34.720 | You could follow a different method rather than stepping up every year with inflation.
00:37:38.600 | But as a rule of thumb running up to retirement, I think it's as good as anything else out
00:37:43.560 | there.
00:37:44.560 | And once you get into retirement, I think most people will probably do something somewhat
00:37:49.700 | different from Bengen's rule.
00:37:50.840 | I mean, I find it hard to believe that there is a single sentient human being who will
00:37:54.920 | sit there and increase their portfolio withdrawals every year by the inflation rate, no matter
00:37:59.560 | what's going on in the financial world.
00:38:02.280 | Nonetheless, as a basic rule of thumb, I think Bill Bengen's work is excellent.
00:38:07.620 | And 25 times the income that you need over and above what you're getting from social
00:38:12.440 | security and other guaranteed income sources is a good rule of thumb.
00:38:16.400 | Certainly to echo your point, Jonathan, is 4% the right answer?
00:38:19.920 | We can't know, but it is certainly a reasonable answer.
00:38:24.080 | One thing that people who haven't been kicking around for as long as I have should know is
00:38:29.280 | that before Bill's research came along with suggestible withdrawal rates were all over
00:38:33.960 | the map.
00:38:34.960 | 6%, 8%.
00:38:35.960 | I heard 10% was an okay withdrawal rate.
00:38:39.280 | Bill with his research didn't at least introduce a note of sanity into this discussion.
00:38:46.000 | Imagine retiring and trying to use a 10% withdrawal rate.
00:38:50.280 | I don't know what this flavor of cat food these people were eating by their late seventies,
00:38:54.200 | but it must've been a pretty ugly retirement.
00:38:56.560 | Absolutely.
00:38:57.560 | And then I'll add no matter what medium you choose for making that spending approach to
00:39:03.160 | retirement, 4%, something less, something more, you always want to reevaluate it regularly.
00:39:08.800 | That's going to be way more important keeping an eye on it, adjusting as needed than whatever
00:39:12.540 | initial plan you start out with.
00:39:14.960 | Yeah.
00:39:15.960 | I think it's one of the things with retirement is there's this end of history illusion that
00:39:20.160 | as of retirement, everything's going to be settled for the rest of your life.
00:39:23.000 | And the fact is once you get into retirement, there will be constant upheaval just as there
00:39:27.960 | has been constant upheaval in your life up until that point.
00:39:31.520 | And that means that not only will you have upheaval in the financial markets that will
00:39:35.000 | make you rethink your financial strategy, you may find that whatever house you thought
00:39:40.000 | you were going to live in for the rest of your retirement is not going to be the house
00:39:42.980 | that's going to work for the longterm.
00:39:45.160 | You may discover that you move for retirement, that wherever you ended up isn't the right
00:39:49.720 | place.
00:39:50.720 | There are all kinds of decisions that you're going to revisit through your retirement years.
00:39:54.240 | The world does not stop the day you stop getting a paycheck.
00:39:58.060 | This question is from a user named Rad Audit from the Bullguards Forums who writes, "I
00:40:03.120 | believe it was Clements who related the story of when he was writing for a financial column
00:40:07.080 | in a newspaper, and he asked the question, 'Why don't we just tell them to invest in
00:40:11.560 | the S&P 500?'
00:40:13.120 | His editor said, 'Okay,' then asked, 'What are you going to write about next week?'"
00:40:17.320 | So actually that was not my story.
00:40:19.520 | The time I heard that story was from Greg Spears, who actually writes for Humble Dollar
00:40:25.240 | and helps me with the editing of the site.
00:40:27.080 | Greg used to work for Kiplinger's Personal Finance, and he traveled up to Valley Forge,
00:40:32.960 | met Jack Bogle, and wrote about the S&P 500 for Kiplinger's back in the mid-1990s.
00:40:41.800 | He used the analogy that if investing is a 100-yard dash, buying an index fund is like
00:40:46.480 | starting on the 10-yard line.
00:40:48.480 | You're just starting way ahead of everybody else.
00:40:51.120 | And so he wrote this story, Kiplinger's ran it, then his editor said, "That's it.
00:40:56.080 | That's your last index fund story, because if we ran that story every month, nobody would
00:41:00.200 | ever buy the magazine again."
00:41:02.120 | So Greg went on to work for Vanguard.
00:41:04.000 | He worked there as a senior writer and editor for a few decades until his recent retirement.
00:41:10.240 | My story about indexing, or my joke, is always that there are only 20 personal finance stories,
00:41:17.920 | which means that by the time I left the journal and written 1,000 columns, I'd written each
00:41:21.940 | of those 20 stories 50 times each.
00:41:24.840 | Now Jason Zweig, who I've known since the 1980s and I consider to be a good friend,
00:41:30.000 | claims that he made that comment as well.
00:41:32.080 | So we debate about who actually made the joke first, but essentially it's the same joke,
00:41:35.880 | which is there's only so much sensible advice that you can give about personal finance.
00:41:40.960 | As a writer about personal finance, you are reduced to trying to take this advice, which
00:41:46.920 | the earlier question talked about, living below your means, diversifying, keeping costs
00:41:50.880 | low and so on, and finding some way to make it sound fresh and interesting every week.
00:41:55.760 | So yeah, everybody should own total market index funds.
00:41:58.600 | It's great advice, but if you're going to say that regularly, you've got to find some
00:42:01.840 | new way to say it, or you're going to quickly be out of a job, and you'll probably bore
00:42:06.200 | your readers.
00:42:07.200 | I think about that investing piece, and really it is simple.
00:42:11.360 | There's not much more to it than get the right mix of low cost index funds, hold them forever.
00:42:18.200 | There's so much more to financial planning that can be more complicated.
00:42:23.000 | I wish I could figure out a way to get folks more interested in those other areas, making
00:42:28.080 | sure that they have the right insurance coverage, making sure they have their estate planning
00:42:31.760 | done.
00:42:32.760 | Super boring compared to investing, at least for some folks.
00:42:36.400 | Yeah, when I think about the financial world, I really think about it in three buckets.
00:42:42.280 | So there is this investing piece, which we talk about endlessly.
00:42:47.000 | People spend all day staring at CNBC, and it is information without insight.
00:42:53.080 | I mean, there is no way that you are going to add anything to your portfolio's performance
00:42:58.460 | by taking in all of this useless information.
00:43:02.960 | And then there are these two other parts that you can focus on.
00:43:06.060 | One is everything else, what I would call personal finance, estate planning, when to
00:43:11.520 | claim social security, insurance, buying the right size home.
00:43:16.040 | All of these are areas where you can add so much more value than you can add by fiddling
00:43:21.120 | around with your portfolio.
00:43:22.800 | And yet, these are the topics that barely get covered in the financial press, and certainly
00:43:27.880 | don't get covered on financial TV, but this is where you can add true value to your financial
00:43:34.040 | life.
00:43:35.040 | And then the third bucket is really this whole area of money in the mind.
00:43:41.060 | How do you use your money to have a happier financial life?
00:43:45.460 | What does money mean for you?
00:43:46.800 | What are you going to do with your money once you reach financial freedom that's going to
00:43:50.480 | give you this sense of purpose?
00:43:52.480 | This is a whole area that has only lately come onto people's radar screen, but I think
00:43:57.440 | it's such a rich area and there's so much to be learned and so much that we can add
00:44:01.620 | to our financial life by thinking about what money means to us and how we can use money
00:44:07.800 | as a tool to make our lives better.
00:44:10.700 | Everybody should own total market index funds, be broadly diversified, save diligently, blah,
00:44:14.720 | blah, blah, blah, blah.
00:44:16.080 | But what are you going to do with all that money?
00:44:18.020 | How can you do it in a way that's going to enhance your life?
00:44:22.080 | Because that is what money is all about.
00:44:23.960 | It's about having a better life, about having a happier financial life.
00:44:28.600 | How are you going to take this nest egg that you've massed over your lifetime and make
00:44:33.560 | sure that you have a rich retirement that is filled with friends and family, that is
00:44:38.600 | devoted to things that you care deeply about?
00:44:41.840 | These are much more important questions than whether I should switch from this total market
00:44:46.040 | index fund to that total market index fund to save one basis point.
00:44:49.280 | Jonathan, you're going to be attending the Bogleheads Conference this year.
00:44:55.120 | This will be my fourth Bogleheads Conference.
00:44:57.920 | And on the Saturday, there's an investing panel, so I'm going to be there.
00:45:03.400 | And then on Sunday, Bill Bernstein and I are going to be in conversation, so I'm looking
00:45:07.920 | forward to that.
00:45:08.920 | He's got a new edition of The Four Pillars of Investing coming out, and I wrote the foreword
00:45:13.400 | for that.
00:45:14.400 | If people haven't read The Four Pillars of Investing or they want to see the latest version,
00:45:18.320 | I'd really encourage them to pick it up.
00:45:19.920 | Bill did a complete makeover on that book, and it's a great read.
00:45:22.760 | Absolutely.
00:45:23.760 | It is a classic.
00:45:24.760 | I'm certainly looking forward to reading the new version.
00:45:26.920 | Jonathan, thank you so much for joining us today.
00:45:29.520 | Any final thoughts before I let you go?
00:45:33.200 | One of the things that I would encourage people who are a little further along in their financial
00:45:37.880 | journey, which I am at age 60, is to think about your portfolio and what you're going
00:45:45.140 | to leave behind because it becomes a question of what are you going to use during your lifetime
00:45:51.160 | and what are you going to end up bequeathing?
00:45:53.120 | In my case, I've reached this point where it's like, okay, everything that I have in
00:45:57.240 | my Roth accounts, I'm probably not going to spend during my lifetime.
00:46:00.760 | So I'm going to invest this money for the benefit of my children, and as a consequence,
00:46:08.020 | the risk profile of those dollars is completely different.
00:46:10.600 | I'm not going to be spending it during my lifetime, so that is 100% stock money, and
00:46:15.600 | because I don't want to worry about it, I've stuck it all in the Vanguard Total World Stock
00:46:19.900 | Index Fund.
00:46:21.220 | I'm just going to let it ride between now and whenever I shuffle off this mortal coil.
00:46:26.060 | So for those who are further along in their financial journey, I do think it's worth thinking
00:46:29.020 | about how much you're going to spend during your lifetime and what's going to be left
00:46:32.500 | over for others.
00:46:34.160 | And once you've made that decision, I think an additional question you want to ask yourself
00:46:38.980 | is what do you want to give now and what do you want to give upon death?
00:46:42.900 | If you're going to give it to charity, I would encourage you to give it now.
00:46:46.180 | You might as well see the benefit of your generosity today in your own lifetime.
00:46:50.860 | With your children, it's a judgment call.
00:46:52.580 | To the extent that you think you can give them money, it's not going to dent their financial
00:46:56.900 | ambition.
00:46:57.900 | I think it's valuable to do.
00:46:59.500 | I remember the financial stress I had in my 20s when I had absolutely no money, so you
00:47:04.060 | could actually make your kids' lives much better by giving them some money now.
00:47:08.760 | But also, there's a trade-off.
00:47:10.300 | You don't want to give them so much that you dent their financial ambition.
00:47:14.940 | I know this is a sort of a first-world problem and maybe a first-world problem for people
00:47:19.060 | of relative affluence, but it is worth thinking about.
00:47:22.540 | It's certainly something that I think about a lot at this point in my life.
00:47:26.940 | Thank you, Jonathan.
00:47:27.940 | I know that we certainly touched on that topic with Mike Piper.
00:47:31.460 | He discusses a bit of that in his book, More Than Enough.
00:47:34.300 | Hey, which generation should you give money to?
00:47:37.540 | Your children or grandchildren?
00:47:39.820 | Giving it to that younger generation might make a bigger impact.
00:47:43.100 | Your children might already be financially set by the time you pass and leave them your
00:47:47.820 | assets.
00:47:48.820 | I know everybody's probably already got this message, but along with Bill Bernstein's book,
00:47:53.140 | Mike Piper's new book, More Than Enough is well worth reading.
00:47:56.180 | I thought it was excellent.
00:47:57.180 | Well, Jonathan, thank you again so much for joining us and look forward to seeing you
00:48:02.060 | at the Bogleheads conference later this year in October.
00:48:06.100 | It was great to talk to you, Jon, and yeah, I look forward to seeing you and everybody
00:48:09.940 | else from the Bogleheads who's going to be there down in Bethesda.
00:48:13.500 | And that wraps up our interview with Jonathan Clements.
00:48:17.040 | Don't forget that there are still just a few slots remaining to register for the 2023 Bogleheads
00:48:23.900 | conference.
00:48:25.020 | Go to boglecenter.net/2023conference for more information.
00:48:30.140 | I'll be back next month returning as guest host for the Bogleheads on Investing podcast,
00:48:37.220 | interviewing Cody Garrett, who specializes in working with early retirees just a few
00:48:43.340 | years out from retirement.
00:48:45.980 | So if you're interested in the FIRE movement, financial independence, retire early, as we
00:48:51.420 | touched on during this episode, you'll want to check that out.
00:48:56.020 | Until next month, you can check out a wealth of information for do-it-yourself investors
00:49:00.260 | at the John C. Bogle Center for Financial Literacy at boglecenter.net and check out
00:49:05.720 | bogleheads.org, Bogleheads Twitter, Bogleheads Wiki, the Bogleheads YouTube channel, Bogleheads
00:49:13.460 | Facebook, Bogleheads Reddit, the John C. Bogle Center for Financial Literacy on LinkedIn
00:49:19.300 | and local and virtual chapters.
00:49:21.580 | And to you listening right now, yes, the person who is listening to this podcast, I'm talking
00:49:26.740 | to you this very second.
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00:49:45.820 | investors.
00:49:46.820 | Thank you again for checking out this episode of the Bogleheads on Investing Podcast.
00:49:52.540 | Until next month for our next show, have a great one.
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