(audience applauding) Okay, we have 10 times as many questions as we're gonna get to. I want you guys to be aware of that from the beginning. But the good news is this is day one. None of these guys are going anywhere. So hunt them down over the next few days and we'll try to get everything answered as we can.

All right, let's get started. Define market timing. I reduced my bond duration prior to the Federal Open Market Committee raising rates. Is that market timing? Should I buy long bonds now and wait for rates to go down? If market timing doesn't work, how does prime cap and capital opportunity beat the market?

Anyone wanna volunteer for that one? Yes, that is market timing. And this is one of the problems that we all, most of us don't believe in market timing, but we use it and that's a hard one because market timing can be systematic by some sort of following a trend, following line of some sort.

Or it can be what we call the ICSIA market timing system. I can't stand it anymore. And the moment it becomes an emotional decision, remembering there's always a pile of good news about any trade and a pile of bad news. And so as a market timer, you're fighting trying to figure out which is more powerful.

So I'm not an advocate of it, although half of my portfolio is market time. - You're gonna have an allocation between stocks, bonds, cash, real estate, and you're gonna stick with that. And if you're supposed to rebalance, you rebalance. And if you deviate from that because you see something out there in the economy or interest rates of the Fed or China or Middle East or whatever, and you're gonna make these decisions saying, I don't like what I see out there, I'm gonna change my asset allocation in some way, that's market timing.

- Okay, let's do the next question. We're gonna do this one rapid fire. We're gonna go across the stage. We'll start with me and go across. Here's the question. If you got a kid with a Roth IRA, should they be putting it in a target retirement fund or a total stock market index fund?

- Yeah, so generally Roth money, from what I've seen, is the last money that anybody ever spends. It generally goes to the kids because it goes to them tax-free. And then they have 10 years of which to distribute the money tax-free. So it's generally 100% equity. - This may sound like a commercial.

One of those three free books, two of those three free books are focused on target date funds. And what we do recommend is you look at the implications of a target date fund and 10% small cap value. (audience laughing) - I will say that if you're going to do small cap value and you actually believe the premium is actually gonna happen, that putting it in a Roth is not a bad idea.

- I would say, woo, all stock portfolio because it's probably going to be an addendum to their own retirement account, which is probably in a target date fund anyway. - Yeah, I'm pretty much agreeing. The whole issue of asset location would suggest that with the Roth, that would be where the stocks and the small cap value, if you're gonna have it, would be best positioned.

- Is mine on? - Nothing different here, total stock market index. You said it was for the child, right? Like an 18 year old. Yeah, absolutely, I'd go 100% stocks. - I'm the different voice up here, apparently. My kids are in target retirement funds. And I'll tell you the reason why.

- Come see me afterwards. (audience laughing) - I'll tell you the reason why. I'm managing about 50 investment accounts, between 34 529s for nieces and nephews, between our own retirement accounts, between my kids, we each have three accounts. It's a lot of accounts. So I'm looking for simple solutions.

And the benefit of a target retirement account is I get a simple solution. And when they inherit it, they will have a simple solution. If they forget about it for 20 years, it's fine. They've got US stocks, they've got international stocks, they've got a very tiny amount of bonds.

You really think total stock market's gonna dramatically outperform a portfolio that's 90% stocks? No, probably not. So that's why I chose it. It's one of those questions, probably doesn't matter that much, to be honest. Okay, next question. This one's from Mary Beth Franklin. Is there a reason one of us should not wait until presumably 70 to collect Social Security benefits?

I agree for married couples that splitting the difference, you're hedging your bets. Have the one with the bigger benefit wait 'til 70, have the other spouse, if he or she's not working, claim early at 62, bring cash into the household. If they are working and subject to earnings restrictions, wait 'til full retirement age.

Okay, here's a more controversial question. What's the amount of cash or cash equivalent one should have on hand in retirement? Recommendations are all over the map. - Well, you do wanna have some sort of liquid contingency fund, and whether that's cash or whether that's some other buffer asset, something, it's hard to give a specific recommendation.

Usually you hear like six months, something along those lines, but can't really get any more specific than that. You definitely do need something. - I'm gonna say the amount that lets you sleep at night, and so I've seen those numbers be all over the place. For high-income spenders, I've seen people that need to have $200,000 in cash set on the side, it's just what makes them feel comfortable, and people that are comfortable with 10,000, as long as they have their defined paycheck coming in.

- My wife and I, at the first of each year, we take out 5% of whatever we have for retirement, and that's our money for the year. But on the other hand, the retirement, the buy and hold part is 50% bonds and 50% stocks, and a lot of the bonds are short-term.

So they aren't cash, but they are the same as cash, and so I think that you should, when you can, keep that cash working at something better than the return for cash. - Yeah, so there's a difference between philosophy and strategy, right? Philosophy, we're all bogleheads, we all believe you should have some sort of an emergency fund.

I don't like to call it an emergency fund. I like to call it a reserve fund, because emergency fund is too, I don't know, dramatic for me. So how much should you have? This is strategy, which means strategy is individual. I don't know how much you should have. I mean, it all depends on you.

What's your situation? How much cash do you need? I mean, are you doing RMDs? I mean, a hundred different things. Are you covered, are your expenses covered by Social Security and maybe a pension of some sort? Do you need to have a lot of cash? Or maybe you wanna spend a lot of cash.

So strategy is individual. And how much you have in a reserve fund when you're retired is really an individual decision. I don't think there's any rule of thumb that can cover that. - I like the idea of years, because if you have a year like 2022 when stocks and bonds are down, well, you withdraw from the cash.

So I like the idea of having two or three years worth, but there's obviously a cash drag to that. All right, next question, cybersecurity. Any quick questions to reduce the risk of financial accounts being compromised by cyber criminals, i.e. multi-factor authentication, diversifying among multiple companies or accounts, et cetera.

- I'll tackle that one because we have to deal with those regulations. I mean, anything that has multi-factor, I would turn it on. So if you can have a, where it sends a text message and you have to put that code in, or a Google authenticator app that you can add to the account.

So you have to put a six digit code in every time you log in. I think that's the most effective thing and really educating yourself on what not to click on. And so we had an employee for a while who would click on, I mean, he could fall for every email that came in that you shouldn't click on.

And so, understanding that, just don't click on stuff. You would never put your account number in from a link that you would click on in an email. You would always go directly to that website to log in. So educating yourself is one of the biggest ways you can prevent those things from happening.

- Is it okay to have all your money at Vanguard? - Say yes. - Anybody disagree with that? All right, next question. Let's start with you on this, Wade. And if anybody else wants to weigh in, they can. How do you balance conversions from your IRA to your Roth account with Medicare increasing due to tax increase from additional income in that year?

- That question probably came in before the session, but indeed, you definitely want to be paying attention to those IRMA brackets. And then I didn't really get a chance to elaborate on the assumptions. I was basing it on this year's IRMA brackets, even though the tax won't come until two years later.

But the issue is you don't know what those brackets will be two years later. So I treat it as a conservative assumption that if I stay under this year's brackets, and then there's a little bit spare capacity where if the last day of the year markets went up and then my RMD is a little bit higher than expected, I still, hopefully the brackets will be higher two years later.

But I try to manage based on this year's brackets. If you don't want to go over that bracket, make sure you're not getting too close. And if you're in the RMD phase, pay attention at the end of the year because you don't know what your RMD is gonna be for the next year until December 31st, the market closes.

- Rick? - I would also agree with that because you know the IRMA brackets are now gonna go up every year. So if you use the current ones, you're gonna be on the safe side and you'll have a little more wiggle room. - Pass that down to Rick. He's got a comment on this.

- I'm just gonna give a shout out to Stephen Chin if you're here and newretirement.com. Good software, good software for helping figure this stuff out. It does, very inexpensive. You just sign up for a subscription. It's really good to help you. Gives you data points, gives you more information.

So just a shout out to Steve, did a good job on that and newretirement.com. - Herbert Franklin, this one's for you probably. And this is kind of the counter argument to wait 'til 70. Are social security benefits payments actuarially adjusted? Is there really a benefit to waiting 'til 70?

- Well, social security benefits are actuarially fair if you live 'til average life expectancy. And you do get this bonus of these delayed retirement credits of 8% a year. Back before the social security reforms, those delayed retirement credits were 3% a year. No one in their right mind delayed going to 70 because at the time, interest rates were 18%.

So when they came up with the concept of, hey, let's make the delayed retirement credits gradually increase to 8% a year, it's a huge bonus. If you can afford to wait, it really is worth it. - And just to add to that, to those actuarial calculations were done in 1983 and people are living longer now.

And also with the high earner, where that benefit will last for the joint lifetime of the couple, that's a different calculation. The actuarial calculations from social security were based on single people. - Okay, next one's a question for me. How much in rental properties is too much as a percentage of net worth?

I think a reasonable amount of money to have in real estate is zero to 80%. So it's a very wide range. If you're more than 80, I think that's too much. And the second part of the question is, can real estate risk be diversified away by buying properties in multiple regions?

You can diversify away some of your risk by doing that, but certainly not all of your real estate risk. All the real estate in the country and in the world can tank at the same time. All right, this one's for Wade Pfau. How can I make a tax map?

- Well, it can be done in Excel spreadsheets. The preferential income part isn't too rough. The IRMA brackets are pretty straightforward. You're gonna have to spend the most time getting those social security tax torpedoes under control 'cause it is a multi-step calculation. But you can ultimately do that in Excel where you're just looking at, okay, here's the ordinary income column, and then you have to keep track, not just of the federal income tax brackets, but when the IRMA surcharges happen, the stacking of preferential income on top of that.

And the hardest part, for sure, the social security, the percent of your social security benefits that would be taxed. - Mm-hmm. - There is software you can use that advisors subscribe to. I don't see why you couldn't subscribe to it either. We use HolistaPlan. There's also another one by Covissium.

And so, I just don't know if it's gonna be cost-effective, but you can run your own tax projections. And HolistaPlan does an outstanding tax map. - And the tax map idea, yeah, Covissum, that's the one that's, what I'm doing is the most similar to. - Okay, we're gonna do about two more questions here, 'cause I know we're just slightly over time.

This one, how is social security claiming strategy affected by possible future insolvency of the trust fund? Let's just do a show of hands on this one. How many people on stage think that there will be no social security payments being made in 10 or 15 years? Okay, I think that answers that question.

How about, how many people on the stage think that the benefits may be a little bit lower than what people were expecting? - Depending on the generation. - Yeah, okay. All right, and let's do this one here. - Can I just say something really quickly? - Sure. - We can only act under current law.

We don't know what Congress is gonna do. If you need the money, grab it early, and you know it's gonna be reduced. But if you are taking a benefit early out of fear of what might happen 10 years from now, that is like selling your stocks in a down market.

And we all know that no one in this room cashes out when the mark goes down. All you do is guarantee that you have locked in a loss. - Okay, and we're gonna end on this one. If I can read it here. Is this the time for a around 70-ish year old couple getting Social Security at seven to consider seriously buying a deferred income annuity with our bond funds?

- Yeah, I wanna get back to philosophy, strategy, discipline, the three key things that make you successful. The Boglehead's philosophy is not against annuities. Whether it works for you when you're a strategy or not is really unique to your situation. So I actually can't answer that question unless I knew the whole situation.

- Go ahead, Dana. - We use something we call a coverage ratio. So we look at how much of your cash flow is covered by guaranteed sources of income already. And if that's under 50%, it's when we bring up a discussion around do you want additional guaranteed income? Is that important to you?

And so that could be one metric that you could look at. I completely agree with what Rick said, right? It's so personal. The other issue is cognitive decline. So we have seen strange things. Once we had the spouse of a client who was ordering things off of QVC and burying them in her backyard.

And it took the husband months to figure out where, it was like $3,000 to $4,000 a month, months to figure out where was this extra money going. And so, you know, a deferred income annuity could protect you against yourself. And I know that sounds like a strange thing to say, but it is absolutely guaranteed.

And if the older you was prone to falling for investment fraud or making some strange decisions, it does offer some additional protection. And I don't hear that talked about all that often. - And as a preview for tomorrow, Jim and I will have a session together where we'll be able to unpack that some more too.

- Yeah, for sure. Annuities can be very useful, particularly those that barely have enough or almost have enough. That can be a great way to fill that gap. All right. Well, this has been Bogleheads University. This is not supposed to be part of the conference, even though you all showed up a day early and came to it.

So thank you for your attendance. Thank you to these wonderful people who out of the goodness of their heart. (audience applauding) (audience cheering) Came out here for the most part at their own expense. Most of us are paying our own conference fee as well, just like you are, and are just here out of the goodness of our hearts to share this information with you.

Thank you to you guys. That's been wonderful. Thanks to everyone for coming. The party starts at five. It's in the room next door. It's cocktail hour. That's the traditional start to the Bogleheads conference, but it's been wonderful to share the afternoon with you. And thank you everyone for showing up early.

(audience applauding) (audience cheering) (upbeat music)