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Speaker 1: Welcome to How to Money. I'm Joel, I'm Matt, and

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Speaker 1: today we're talking about how to Retire with Christine Benz.

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Speaker 2: Yeah. So retirement is a topic that we actually talk

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Speaker 2: about all the time here at How to Money, but simultaneously,

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Speaker 2: we probably don't talk about it nearly enough. And so

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Speaker 2: what do I mean by that, Well, we are oftentimes

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Speaker 2: discussing retirement through the lens of investing, right. We're talking

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Speaker 2: about spending less so that you can invest more for retirement.

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Speaker 2: We're talking about maxing out your roth IRA for retirement.

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Speaker 2: We're typically approaching retirement from our personal point of view.

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Speaker 2: And given that we are millennials, although geriatric millennials, we

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Speaker 2: honestly we might not cover the nuts and the bolts

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Speaker 2: in the particular that go into actually retiring maybe as

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Speaker 2: often as we should, and we definitely don't do it

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Speaker 2: as well as Christine Benz, who is a longtime contributor

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Speaker 2: to Morning Star. She's Christine is the director of Personal

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Speaker 2: Finance over there at Morning Star. She's the author of

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Speaker 2: the new book How to Retire. She's a personal finance nerd.

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Speaker 2: We're really excited to be talking with her. She's quoted

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Speaker 2: everywhere I mean literally all the publications she is oftentimes quoted.

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Speaker 2: She's even quoted in the Hottomuny newsletter or on the

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Speaker 2: Hotto Money podcast. Time of time, it's a Christine. We

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Speaker 2: are honored to have you join us today.

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Speaker 3: Well, Matt and Jill, I am so honored to be here.

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Speaker 3: Thank you so much for having me on.

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Speaker 1: Of course, of course we're so excited for this conversation.

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Speaker 1: But the first question I have to ask you is

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Speaker 1: what you like to splore John? Matt and I we

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Speaker 1: splore John Kraft beer. We've got a fancy IPA in

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Speaker 1: front of us.

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Speaker 2: Right now, and join one now. Yeah.

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Speaker 1: I mean, it's not worth talking about money if you

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Speaker 1: can't drink beer at the same time.

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Speaker 2: So what is that for you?

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Speaker 1: What do you like to splore John, Christine while you're

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Speaker 1: still doing the smart thing you're saving an investing for

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Speaker 1: your future.

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Speaker 3: One of my favorite things is architecture. And I live

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Speaker 3: in a now one hundred year old prairie school home

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Speaker 3: that was designed by someone who worked for Frankloyd. Right wow,

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Speaker 3: so when I so cool and I love it. I

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Speaker 3: love architecture, residential architecture, especially so living in a home

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Speaker 3: that is kind of a piece of art is for

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Speaker 3: me a splurge. And it's also you know, to be honest,

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Speaker 3: when you're talking about house, is this old? They need stuff, right,

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Speaker 3: They need a lot of TLC. And so when we

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Speaker 3: moved in here now like more than fifteen years ago,

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Speaker 3: we hired an architect to help us kind of put

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Speaker 3: it back together to the way that it was when

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Speaker 3: it was originally designed. So put in a lot of

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Speaker 3: the original not original, but replicate a lot of the

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Speaker 3: original design features. So when I think of like something

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Speaker 3: that's been super expensive but has brought me a ton

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Speaker 3: of joy, it's just like researching all of this stuff,

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Speaker 3: learning about it, improving my own house, but also just

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Speaker 3: like it opens you up to the fact that there's

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Speaker 3: this living art all around you. So every time I

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Speaker 3: go to a city, I make a point if I

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Speaker 3: have time, of trying to at least do a drive

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Speaker 3: by on some of these places and then sitting outside

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Speaker 3: and lurking for a while and soaking in the architecture.

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Speaker 3: But anyway, that's a costly little hobby, but nonetheless one

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Speaker 3: that I just just really really enjoy. It's a rabbit

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Speaker 3: hole for me.

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Speaker 2: It should be no surprise too, that you are a

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Speaker 2: fan of residential architecture, given the fact that you are

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Speaker 2: into personal finance. You're not drawn to corporate finance, You're not.

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Speaker 2: There's something that when it gets really tangible and something

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Speaker 2: that feels like I can live there. It's just practical

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Speaker 2: in such a way that makes life more interesting. And

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Speaker 2: obviously you do that incredibly well when it comes to

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Speaker 2: talking about personal finances.

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Speaker 1: And by the way, Matt and I used to live

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Speaker 1: in like nineteen twenties bungalows and we miss we miss them,

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Speaker 1: and when we moved, we were like, we have to

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Speaker 1: live near old houses because they're just there's something special

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Speaker 1: about old houses. The architecture, Yeah, I never see it

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Speaker 1: never sits as well. I enjoy it all the time,

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Speaker 1: every time we walk by those beautiful old homes.

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Speaker 3: Yeah, No, definitely. And the residential thing. One of the

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Speaker 3: reasons I love it so much is just that there's history,

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Speaker 3: that there's like personal history there. So I guess I

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Speaker 3: never linked it up to my career, but I do

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Speaker 3: love that aspect of it. Like you can read about

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Speaker 3: these families often. You know, if it's a big, big,

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Speaker 3: fancy house, there's some really dramatic story about oftentimes how

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Speaker 3: the family lost its fortune, but there's some historical drama

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Speaker 3: usually wrapped up in the beauty of the houses.

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Speaker 2: Well, they're narratives that go along with the houses, and

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Speaker 2: it just makes it so much more interesting. And yeah,

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Speaker 2: I think we could go on for a while, but instead,

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Speaker 2: actually I would like to. It's maybe a weird place

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Speaker 2: to start our conversation with you, Christine, but let's start

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Speaker 2: by talking about your failings. Oh but now.

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Speaker 1: Let's to turn our guests off at the very beginning.

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Speaker 2: This is only because you wrote about this, you made

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Speaker 2: this public and a piece for Morning Star. But just

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Speaker 2: being honest about your imperfections, it's just so refreshing. I

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Speaker 2: think it can be a significant help, I think for

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Speaker 2: young investors in particular. But can you share some of

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Speaker 2: the mistakes that you share that you wrote about there

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Speaker 2: in that article.

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Speaker 3: One certainly, if I think of like the biggest probably

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Speaker 3: thing that has cost my husband and me in terms

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Speaker 3: of our investing, it's that we for many years had

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Speaker 3: kind of this barbell thing in our portfolio where we

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Speaker 3: had a cash a bunch of cash, and then you know,

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Speaker 3: our long term portfolios were mainly invested in stocks and

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Speaker 3: cash of course, with yields up recently, that's you know,

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Speaker 3: not a big deal. But during this period where interest

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Speaker 3: rates were very very low and went lower, bond investors

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Speaker 3: are beneficiaries in an environment like that. They have to

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Speaker 3: settle for lower yields too, but they get you know,

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Speaker 3: the bonds prices improved during a period like that. Holding

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Speaker 3: all cash, you know, is a real loser in a

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Speaker 3: period with any inflation at all. So I see that

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Speaker 3: as kind of a bigger, you know, kind of an ongoing,

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Speaker 3: ongoing failing. I have trouble getting super excited about bonds,

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Speaker 3: even though I know I should have more more of

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Speaker 3: them as I age, but that's been something with some

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Speaker 3: opportunity cost. I would say, yeah.

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Speaker 2: Well, you talk about though that there's a way though

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Speaker 2: that you can justify that because of the peace of

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Speaker 2: mind that it gives you. And I mean that's something

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Speaker 2: that we oftentimes will steer folks towards. Is hey, like,

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Speaker 2: what is it, like, what kind of strategy, what approach

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Speaker 2: is going to allow you to sleep better at night?

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Speaker 3: Well exactly, And I do think that people sometimes underrate

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Speaker 3: those peace of mind allocations on the road to optimizing,

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Speaker 3: you know, they want to do everything that the textbooks

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Speaker 3: say they should do, but there is something to be

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Speaker 3: said for putting a little bit more weight on peace

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Speaker 3: of mind. And that's how the cash has always felt

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Speaker 3: for us. We had a close family member a couple

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Speaker 3: of years ago who was moving out of her home

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Speaker 3: and needed like the equivalent of a bridge loan, and

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Speaker 3: it was really nice to be able to help her

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Speaker 3: move into her new condo, just effectively buy it for her,

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Speaker 3: and she paid us back when she got the proceeds

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Speaker 3: of her of her home. But that was just such

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Speaker 3: a beautiful example of like doing something that helped someone

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Speaker 3: that we love, that knowing we have the funds to

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Speaker 3: do things like that gives us peace of mind. So yeah,

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Speaker 3: it's not something that you know, I lose too much sleepover,

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Speaker 3: but certainly, if I were to look at the Ledger,

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Speaker 3: having a more fully invested safe portfolio probably would have

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Speaker 3: been a better thing to do.

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Speaker 2: That's cool.

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Speaker 1: It is like that was like a life optimization route

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Speaker 1: instead of a purely portfolio optimization approach, And I think

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Speaker 1: I think there is a lot of merit to that.

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Speaker 1: I'm curious too, Christy, You've been writing about personal finance

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Speaker 1: for a long a long time. I would say Matt

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Speaker 1: and I since we started the podcast, our beliefs haven't

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Speaker 1: necessarily changed significantly over these years, since the since the

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Speaker 1: advent of How the Money, but I think in some

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Speaker 1: ways maybe some of the things that I believe have

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Speaker 1: become less entrenched. How have your personal finance views changed

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Speaker 1: over the course of your career?

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Speaker 3: Well, interestingly, I started at morning Star as part of

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Speaker 3: our fund research team and then eventually headed up our

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Speaker 3: US fund research team. And so this is like the

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Speaker 3: nineties when I started in this job, and active funds

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Speaker 3: were the place to invest for the most part. Index

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Speaker 3: funds were sort of a niche category. ETFs weren't even

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Speaker 3: created yet at the time I started working on mutual funds.

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Speaker 3: So I certainly had a much more active portfolio than

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Speaker 3: I do today, with more active holdings. I still do

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Speaker 3: actually have some active holdings in my portfolio, but that

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Speaker 3: was a much bigger share of my portfolio, and I

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Speaker 3: think I devoted certainly more mental bandwidth to selecting active

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Speaker 3: managers and thinking about what they were doing than I

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Speaker 3: do today today. I mostly put all that in my

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Speaker 3: two hard pile, and I have been trying to focus

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Speaker 3: more on a minimalist low cost index based portfolio. But

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Speaker 3: that's been a major area of evolution, which really mirrors

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Speaker 3: the evolution of investors writ large over the past couple

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Speaker 3: of decades, where we've seen just this avalanche of flows

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Speaker 3: to index products away from active funds. People really see

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Speaker 3: the light on the virtue of keeping things simple. You

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Speaker 3: get a lot of diversification through core index funds at

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Speaker 3: obviously at very low cost. And it turns out that

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Speaker 3: all of our research on active versus index at morning

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Speaker 3: Star points to index funds being very very competitive, if

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Speaker 3: not more than competitive with active funds in many core categories.

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Speaker 2: That's right. Well, while you're talking about active portfolios, one

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Speaker 2: of the things you read about one of the mistakes

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Speaker 2: that you said, do as I say, not as I do,

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Speaker 2: But I think this one's worth mentioning. Sounds like some

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Speaker 2: of my mom would tell me that. But you mentioned

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Speaker 2: just how you're overweighted with specific companies, in particular the

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Speaker 2: company that you work for, and so can I guess

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Speaker 2: just talk about that a little bit, because I think

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Speaker 2: there is a tendency for a lot of folks just

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Speaker 2: to continue doing whatever it is that they have been doing,

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Speaker 2: and oftentimes they can find themselves in a position where

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Speaker 2: they've they've got oh wow, either redundancy in their portfolio

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Speaker 2: or in your case, more eggs I guess are in

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Speaker 2: the same basket. That basket being your employer.

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Speaker 3: Yeah, such a good point. And yeah, I think inertia

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Speaker 3: is the underrated behavioral tendency that many of us have,

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Speaker 3: where you know, you're busy, you don't spend that much

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Speaker 3: time managing your financial affairs, which I have to say

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Speaker 3: I don't really like, you know, maybe a couple hours,

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Speaker 3: eight hours at the most a year, I would say,

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Speaker 3: just not much at all, and that's mostly by design.

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Speaker 3: But then there are things that fall by the wayside,

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Speaker 3: like selling employer stock in a timely fashion. My husband

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Speaker 3: and I started to work with a financial plan and

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Speaker 3: are just on a couple of projects that we wanted

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Speaker 3: help with, one of which was this employer stock issue

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Speaker 3: where you know, at a certain point then it becomes

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Speaker 3: this big tax headache to unload a lot of employer

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Speaker 3: stock if it's done well, as my company stock has done.

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Speaker 3: So we wanted to work with her on, you know,

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Speaker 3: trying to get out of that position in a tax

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Speaker 3: efficient way, and she she just kind of looked at it,

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Speaker 3: and she was like, what is going on with this?

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Speaker 3: Like why have you know, how has this gotten to

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Speaker 3: be such a large position? And I would say the

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Speaker 3: answer is inertia. So it's been a work in progress.

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Speaker 3: I have been trying to sell on a regular schedule.

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Speaker 3: It's not that I, you know, am wedded to having

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Speaker 3: a lot of employer stock. I completely understand the thesis

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Speaker 3: that you shouldn't have a lot writing on your employer

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Speaker 3: stock because you you have a lot writing on your

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Speaker 3: employer and you know their their financial wherewithal your job

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Speaker 3: depends on it, so you don't want your portfolio depending

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Speaker 3: on it too. So been trying to lighten up a

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Speaker 3: little bit there, but it's it's a work in progress.

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Speaker 1: You mentioned how like so morning Star, which you part

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Speaker 1: of what happens at morning Star is you rate funds right,

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Speaker 1: and so it's got yelp kind of vibes. But for investors,

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Speaker 1: which is yeah, can you talk about how the ratings

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Speaker 1: are determined? And oh you want to know how the sausages?

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Speaker 2: May?

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Speaker 1: I did, And I'm also curious to know about how

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Speaker 1: important because you mentioned the cost and I believe I

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Speaker 1: don't remember how many the years ago this was This

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Speaker 1: might have been like ten years ago or something that

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Speaker 1: morning Star released something saying, hey, guess what, the cost

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Speaker 1: of the fund matters more than the morning Star rating.

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Speaker 1: And I remember, like, wow, morning Star wrote that.

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Speaker 2: I couldn't believe.

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Speaker 1: It, but it was like incredibly honest and and deared

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Speaker 1: me even more to what you guys do. But can

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Speaker 1: you kind of can you talk about that for.

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Speaker 2: A little bit.

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Speaker 3: Yeah, it's a good question. And there are multiple rating

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Speaker 3: systems that we have, So the main one that people

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Speaker 3: know is the Star rating, which is a quantitative measure

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Speaker 3: that looks at how a given mutual fund or exchange

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Speaker 3: traded fund has balanced risk and return relative to other

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Speaker 3: funds that do sort of the same investment style. So

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Speaker 3: it's quantitative, it's backward looking. My colleague Jeff Battak, who

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Speaker 3: I've worked with on our podcast The long View, heads

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Speaker 3: up all the ratings, so they've made some tweaks to

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Speaker 3: give costs an even higher It's an even bigger component

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Speaker 3: of the rating system than it wasn't in the past.

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Speaker 3: But of course costs are very much part of returns

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Speaker 3: that you measure as well as the way that we

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Speaker 3: measure risk. So that's the Star rating, and then we

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Speaker 3: have another rating that may be a little less familiar,

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Speaker 3: but frankly, I think is kind of better if you're

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Speaker 3: trying to judge a funds measure, and that's called our

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Speaker 3: Metalist rating, and that's the one that is derived from

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Speaker 3: our analyst team, where they take into account expenses, have

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Speaker 3: a very heavy weighting. They look at a little bit

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Speaker 3: at past performance, but of course we know past performance

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Speaker 3: isn't especially predictive. They look at strategy, kind of the

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Speaker 3: stability if it's an active fund, the stability of the

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Speaker 3: management team, the quality of the fund management company. So

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Speaker 3: it's just it's much more holistic than the star rating.

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Speaker 3: So I would say for people who are trying to

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Speaker 3: do like quick and dirty due diligence, I would rather

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Speaker 3: that they look at those qualitative ratings because there's more

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Speaker 3: going on there under the hood than is the case

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Speaker 3: with the star rating, which is just a kind of

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Speaker 3: a backward looking snapshot. In fact, frankly, sometimes I shudder

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Speaker 3: a little bit when I'll meet someone who'll say, yeah,

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Speaker 3: I just allocated my four to one k, I went

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Speaker 3: all into five star funds, and I'm kind of like, yikes,

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Speaker 3: I hope you did more than that, and I think

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Speaker 3: that the analyst ratings are a really good counterpoint.

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Speaker 1: So you don't want that to be the only metric.

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Speaker 1: Just the star rating that can be a helpful guide,

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Speaker 1: but go deeper.

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Speaker 3: Than that exactly, and you know, sometimes it can even

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Speaker 3: be a little bit of a contrarian signal. I would

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Speaker 3: think that the star rating can be because it is

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Speaker 3: just backward looking. You're going to have times where a

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Speaker 3: fund has perhaps been taking a lot of risk relative

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Speaker 3: to its category piers. So for an example, would be

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Speaker 3: some sort of a core fund that has completely been

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Speaker 3: loading the boat with Nvidia and the other you know,

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Speaker 3: magnificent seven companies that would certainly be at the top

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Speaker 3: of its peer group in the very recent past. But

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Speaker 3: sometimes that's actually an indication that there's risk going on,

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Speaker 3: you know, when the fund has absolutely killed its peers.

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Speaker 3: So my hope is that people would do a little

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Speaker 3: bit more due diligence before selecting funds and putting money

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Speaker 3: in them.

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Speaker 2: So, as you talk about due diligence, this makes me think,

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Speaker 2: I mean, we were just talking about bogo Heads conference

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Speaker 2: before we hit record, and do you think for the

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Speaker 2: vast majority of folks listening or folks, or maybe who

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Speaker 2: are just getting into investing, for first time investors, that

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Speaker 2: they could potentially look to something as simple as a

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Speaker 2: total stock market index fund, something as simple as what

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Speaker 2: warm Buffett might say, where he's just like, hey, if

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Speaker 2: I were to pass, I want I forget ninety was

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Speaker 2: that Susan his wife? I figure which one but all

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Speaker 2: of her holdings should just be moved over to the

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Speaker 2: S and P five hundred. How I guess what I'm

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Speaker 2: asking here is how much would you recommend for different

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Speaker 2: types of investors to kind of dive into the wheeze

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Speaker 2: and to figure out and look at the ratings and

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Speaker 2: look at the cost and look at past performance as

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Speaker 2: they're trying to determine what they should invest in.

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Speaker 3: The simple solutions are in many cases some of the

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Speaker 3: best solutions. So certainly the total total market index is

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Speaker 3: a great place to start. My bias would be a

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Speaker 3: little bit more toward like a total global like a

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Speaker 3: total world stock index, especially given how well the US

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Speaker 3: has done relative to non US. I'd rather see investors

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Speaker 3: just starting out who want an all in one equity

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Speaker 3: fund go go global. In my opinion, it's a global

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Speaker 3: world that we're living in. And you know, we do

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Speaker 3: see periods of reversion where trends that have been really

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Speaker 3: pronounced reversed themselves. So global. I also love target date funds,

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Speaker 3: and it's so interesting to me how in the asset

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Speaker 3: management industry, especially among advisors who are selling more complicated solutions,

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Speaker 3: they love to hate on target date funds. And I'm like,

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Speaker 3: we do this research where we look at dollar weighted

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Speaker 3: returns effectively, you know, sort of marrying the timing of

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Speaker 3: investors purchases and sales with the returns that they're actually

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Speaker 3: able to earn, and target date funds have been some

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Speaker 3: of the most effective vehicles from that standpoint. So when

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Speaker 3: people buy target date funds, they're often dollar cost averaging

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Speaker 3: into them through their four oh one K plan and

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Speaker 3: then they just kind of keep making those contributions. They

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Speaker 3: don't pan excel and it may be that they're just

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Speaker 3: investing in the context of a retirement plan, so they're

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Speaker 3: not super hands on, but it may be something to

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Speaker 3: the fact that you have multiple asset classes bundled together,

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Speaker 3: you can truly be hands off. But it's a very

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Speaker 3: benevolent picture that we see in terms of actual investor

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Speaker 3: outcomes that investors tend to capture most of their target

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Speaker 3: funds returns. It truly is, in my view, something that

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Speaker 3: you could be quite hands off with. And when we

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Speaker 3: look at a lot of people saving for retirement, they're busy,

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Speaker 3: they have other things going on. I love the idea

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Speaker 3: of a one stop solution that they could wake up

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Speaker 3: when they're fifty three and be like, oh, you know,

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Speaker 3: behind the scenes, this has been gaining ground and then

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Speaker 3: also de risking itself a little bit, which I might

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Speaker 3: not have thought to do, been too busy to do.

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Speaker 1: So I love that is some of that hating inside

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Speaker 1: of the industry is that because target date funds are

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Speaker 1: a threat to some of the people inside of the industry.

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Speaker 1: I mean, like you said, it's incredibly simple and in

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Speaker 1: the case at least a Vanguard Fidelity Schwab, incredibly low

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Speaker 1: cost if you pick the right target date fund. So

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Speaker 1: is in one of those things where target date funds

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Speaker 1: are are really hitting the nail on the head for

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Speaker 1: the average person, making it super simple. But then that

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Speaker 1: means they don't need the help of an expensive CFP

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Speaker 1: or something like that.

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Speaker 3: Yeah, absolutely, I think that's part of it. I think

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Speaker 3: for many years you had investment advisors, financial financial advisors

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Speaker 3: who styled themselves as investment pickers. You know that they

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Speaker 3: really added value with you know, very fancy complicated asset

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Speaker 3: allocation strategies or selecting you know, specific funds or individual

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Speaker 3: stocks or whatever. And it's definitely a threat to them

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Speaker 3: the idea that you'd have this low cost, all in

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Speaker 3: one product. So whenever I see someone making disparagement, disparaging

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Speaker 3: remarks about target date funds, I always sort of look

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Speaker 3: for what the motive might be, because.

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Speaker 2: I think what maybe what you put your finger on. Joel,

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Speaker 2: was the first pushback against AI or the algorithm, like

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Speaker 2: right now we've got the doc workers. It was the

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Speaker 2: actors last year pushing back against against that. The OG

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Speaker 2: pushback against algorithms and AI were fund advisors as saying, well, no,

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Speaker 2: you can't eliminate us. We are necessary. But Christine, so

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Speaker 2: far we've kind of been talking about investing and I

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Speaker 2: guess personal plans generally speaking, but we really do want

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Speaker 2: to I guess, dive more into the weeds of retirement,

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Speaker 2: and we'll get to that more. Right after this. We're

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Speaker 2: back in the break.

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Speaker 1: We're still talking with Christine Benz talking about how to retire.

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Speaker 1: And let's actually kind of get into that. The book,

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Speaker 1: the new book that Christine just put out is called

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Speaker 1: How to Retire, And Christine, first off, I kind of

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Speaker 1: want to start off like a thousand foot level here.

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Speaker 1: It feels like our general societal perception of retirement is changing.

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Speaker 1: Like the way we viewed retirement fifty years ago was

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Speaker 1: one thing, and now part of it's the fire movement. Right,

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Speaker 1: there's like a million things that have gotten No pensions

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Speaker 1: don't really exist for the average person anymore. Do you

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Speaker 1: agree that how we think about retirement is changing?

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Speaker 2: And how so? How would you define retirement? Yeah?

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Speaker 3: Well, absolutely so. Do you put your finger on what

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Speaker 3: has been the seminole shift in funding retirement over the

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Speaker 3: past several decades, which is that most workers will retire

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Speaker 3: without the benefit of a defined benefit plan a pension plan.

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Speaker 3: That's a change from fifty years ago, and so the

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Speaker 3: onus has been increasingly put on individuals to fund retirement

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Speaker 3: for themselves. They'll have social Security, but to the extent

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Speaker 3: that they want income beyond what they'll get from social Security,

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Speaker 3: it's on them. And unfortunately, you know, when you look

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Speaker 3: at the data, you see that a lot of workers

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Speaker 3: have not really been able to do that. I'm always

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Speaker 3: struck by the reports that look at four one K

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Speaker 3: balances and so you see the averages and sometimes they

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Speaker 3: get reported out and they look kind of encouraging, and

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Speaker 3: then you look at the so you see the average

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Speaker 3: balances for one case, then you look at the medians

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Speaker 3: and it's like, WHOA. So wealthier people who have been

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Speaker 3: able to save and aggressively they're doing just fine. But

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Speaker 3: you've got a lot of people who have not saved

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Speaker 3: for retirement, and so they're not that you know, they

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Speaker 3: haven't taken part in the stock market's recent gains. It's

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Speaker 3: just it's just been difficult for them. And I often

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Speaker 3: think back to this something Jason Swig said on a

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Speaker 3: TV show that we're both on, where he said, it's

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Speaker 3: like the pension system was like people were on a bus.

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Speaker 3: They're all getting to their destination. When they get there,

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Speaker 3: they can file off in an orderly fashion. With the

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Speaker 3: system that we have today with four one K plans,

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Speaker 3: it's like you've got all these drivers on the road.

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Speaker 3: Some of them don't have licenses, some of them don't

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Speaker 3: know where they're going, and so of course it's chaos.

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Speaker 3: And there have been some improvements in the system to

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Speaker 3: make a little easier for people who aren't steeped in

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Speaker 3: investing matters to make smart decisions like automatic enrollment like

436
00:23:31,240 --> 00:23:37,000
Speaker 3: target date funds. But that's been one of the huge changes.

437
00:23:37,080 --> 00:23:40,200
Speaker 3: And then sort of a happier change I would say

438
00:23:40,280 --> 00:23:42,680
Speaker 3: is that people are beginning to kind of rethink what

439
00:23:42,760 --> 00:23:48,280
Speaker 3: retirement is. Increasingly people are working longer. When you look

440
00:23:48,280 --> 00:23:50,840
Speaker 3: at the data on that, though, you see that the

441
00:23:50,880 --> 00:23:56,000
Speaker 3: ability to work longer does disproportionately accrew to higher income,

442
00:23:57,000 --> 00:24:03,800
Speaker 3: more highly educated people versus the broad population. So wealthier,

443
00:24:04,040 --> 00:24:08,399
Speaker 3: more educated people are healthier, and they're able to work longer,

444
00:24:08,440 --> 00:24:11,760
Speaker 3: and they probably need to work less, but they're able

445
00:24:11,800 --> 00:24:13,439
Speaker 3: to work longer. But that's sort It.

446
00:24:13,440 --> 00:24:15,400
Speaker 1: Might be working from a laptop more too, which makes

447
00:24:15,440 --> 00:24:17,080
Speaker 1: it a little easier to extend your career.

448
00:24:16,880 --> 00:24:21,639
Speaker 3: Lifetime exactly exactly the knowledge type worker, where you're able

449
00:24:21,680 --> 00:24:24,120
Speaker 3: to work from a laptop, you're able to work from

450
00:24:24,160 --> 00:24:28,080
Speaker 3: different locations. It just affords you a ton more flexibility

451
00:24:28,119 --> 00:24:32,600
Speaker 3: and a lot more ability to kind of balance quality

452
00:24:32,640 --> 00:24:37,280
Speaker 3: of life considerations. So that's a huge dimension of it.

453
00:24:37,359 --> 00:24:40,240
Speaker 3: But overall, I would say that's a happy trend in

454
00:24:40,320 --> 00:24:44,679
Speaker 3: retirement that I think people are in some cases retiring earlier,

455
00:24:45,480 --> 00:24:47,760
Speaker 3: but they're continuing to kind of stay in the game,

456
00:24:48,240 --> 00:24:51,960
Speaker 3: and it turns out that's really good for us. Laura

457
00:24:52,040 --> 00:24:55,399
Speaker 3: Carstensen in the book, she's a researcher at Stanford, and

458
00:24:55,480 --> 00:24:57,680
Speaker 3: I just love the conversation that we had. But she

459
00:24:57,760 --> 00:25:00,520
Speaker 3: said the way she said work is good for us,

460
00:25:00,800 --> 00:25:03,680
Speaker 3: the way we work in this country is all wrong.

461
00:25:04,160 --> 00:25:06,680
Speaker 3: That we work too hard. You get people coming into

462
00:25:06,720 --> 00:25:10,119
Speaker 3: retirement they're so burned out that all they feel like

463
00:25:10,200 --> 00:25:13,000
Speaker 3: doing is watching TV, you know, because they're just like,

464
00:25:13,600 --> 00:25:18,199
Speaker 3: you know, exhausted, and that's not good. So I do

465
00:25:18,320 --> 00:25:21,760
Speaker 3: think we need to rethink retirement. I've been thrilled to

466
00:25:21,760 --> 00:25:23,760
Speaker 3: see the fire movement, but I would like to see

467
00:25:23,800 --> 00:25:29,280
Speaker 3: even older adults who are still working explore opportunities to

468
00:25:29,800 --> 00:25:33,720
Speaker 3: kind of stay engaged with whatever they liked about their

469
00:25:33,760 --> 00:25:36,639
Speaker 3: work and potentially do some of that stuff a little longer.

470
00:25:37,080 --> 00:25:39,920
Speaker 2: Yeah. I was having a discussion with some friends recently

471
00:25:40,160 --> 00:25:42,280
Speaker 2: and we kind of got onto the topic of talking

472
00:25:42,320 --> 00:25:45,240
Speaker 2: about work and what the sort of paradigm that kind

473
00:25:45,240 --> 00:25:47,080
Speaker 2: of came up that somebody presented was like, well, there's

474
00:25:47,080 --> 00:25:49,800
Speaker 2: a difference between taking more of a I get to

475
00:25:49,880 --> 00:25:52,240
Speaker 2: work like I get to continue to work sort of

476
00:25:52,280 --> 00:25:56,840
Speaker 2: attitude versus I have to continue working. And I almost

477
00:25:57,080 --> 00:25:58,840
Speaker 2: I kind of feel like it's a false dichotomy. I

478
00:25:58,880 --> 00:26:01,800
Speaker 2: almost think that you could continue to do the same

479
00:26:01,800 --> 00:26:04,240
Speaker 2: sort of work, but it's more of a psychological shift

480
00:26:04,400 --> 00:26:07,000
Speaker 2: because I think essentially the same work can be done.

481
00:26:07,480 --> 00:26:09,320
Speaker 2: And if you feel like that this is something that

482
00:26:09,359 --> 00:26:11,959
Speaker 2: you have to do, well, yeah, you're going to operate

483
00:26:12,000 --> 00:26:15,040
Speaker 2: maybe from a more underprivileged position, but if you think

484
00:26:15,080 --> 00:26:16,439
Speaker 2: about it sort of like you're saying that this is

485
00:26:16,480 --> 00:26:18,199
Speaker 2: something that is good for you, this is something that

486
00:26:18,240 --> 00:26:20,600
Speaker 2: I get to do. Nothing has changed on the surface

487
00:26:20,640 --> 00:26:23,720
Speaker 2: at all, but everything has changed under their surface, like

488
00:26:23,720 --> 00:26:25,639
Speaker 2: on the heart level. What are your thoughts on totally?

489
00:26:26,000 --> 00:26:28,280
Speaker 3: Totally. Michael Finka made the point in the book that

490
00:26:28,359 --> 00:26:30,639
Speaker 3: he said, if I told you you had to go

491
00:26:30,720 --> 00:26:34,320
Speaker 3: out onto a field and chase a little white ball

492
00:26:34,359 --> 00:26:35,680
Speaker 3: around with a stick.

493
00:26:35,400 --> 00:26:37,199
Speaker 2: All day, kind of sounds like work, don't it.

494
00:26:39,200 --> 00:26:44,879
Speaker 3: So the whole mindset approaching working longer is something that

495
00:26:44,960 --> 00:26:48,520
Speaker 3: you embrace doing because it turns out that it gets

496
00:26:48,520 --> 00:26:51,359
Speaker 3: you out of the house, it gets you engaged with people.

497
00:26:51,440 --> 00:26:53,680
Speaker 3: If you're lucky. It gives you a sense of purpose.

498
00:26:54,480 --> 00:26:57,680
Speaker 3: All of that stuff is really good for you. And

499
00:26:58,200 --> 00:27:00,680
Speaker 3: if you're kind of choosing to do it, maybe you're

500
00:27:00,840 --> 00:27:04,080
Speaker 3: altering your hours a little bit. That's I think, really

501
00:27:04,119 --> 00:27:05,040
Speaker 3: really empowering.

502
00:27:05,400 --> 00:27:05,840
Speaker 2: Yeah.

503
00:27:05,960 --> 00:27:08,000
Speaker 1: So in the first chapter of the book, you talk

504
00:27:08,040 --> 00:27:11,439
Speaker 1: about visualizing your life in retirement and a lot of

505
00:27:11,440 --> 00:27:15,000
Speaker 1: our listeners, let's say the average listeners in their thirties,

506
00:27:15,320 --> 00:27:18,200
Speaker 1: why is that crucial to retiring well? And how should

507
00:27:18,280 --> 00:27:20,639
Speaker 1: people who are maybe kind of more on the front

508
00:27:20,760 --> 00:27:24,840
Speaker 1: end of saving and investing and even like conceptualizing their

509
00:27:24,840 --> 00:27:28,560
Speaker 1: own retirement. Why is visualizing what life is going to

510
00:27:28,560 --> 00:27:30,400
Speaker 1: be like thirty years down the road. Why is that important?

511
00:27:30,560 --> 00:27:32,719
Speaker 3: Well, I think it's important on a number of levels.

512
00:27:32,840 --> 00:27:35,960
Speaker 3: One of them one of the reasons is that it's

513
00:27:36,119 --> 00:27:38,879
Speaker 3: as you approach retirement, thinking about what you want to

514
00:27:38,920 --> 00:27:42,080
Speaker 3: do helps inform some of the choices you make in

515
00:27:42,119 --> 00:27:45,840
Speaker 3: the years leading up to retirement. So again, Michael Finka

516
00:27:45,960 --> 00:27:49,960
Speaker 3: talked about visualizing your in retirement lifestyle and the example

517
00:27:50,000 --> 00:27:52,639
Speaker 3: he gave from his own life is that he really

518
00:27:52,680 --> 00:27:56,600
Speaker 3: loves to hike. He likes to do some pretty strenuous hikes,

519
00:27:56,720 --> 00:28:00,159
Speaker 3: and he wants to keep doing that in retirement, and

520
00:28:00,240 --> 00:28:04,399
Speaker 3: so you know, coming into his fifties, being in his fifties,

521
00:28:04,480 --> 00:28:09,680
Speaker 3: he wants to maintain implement healthy habits that will allow

522
00:28:09,800 --> 00:28:13,439
Speaker 3: him to pursue that hobby for longer in retirement. So

523
00:28:13,480 --> 00:28:15,639
Speaker 3: we all have different things that we love that we

524
00:28:15,720 --> 00:28:18,400
Speaker 3: want to do. You know, we want to take advantage

525
00:28:18,440 --> 00:28:20,719
Speaker 3: of our free time in retirement to do more of

526
00:28:20,760 --> 00:28:23,480
Speaker 3: that thing. Well, you may have to put in place

527
00:28:24,040 --> 00:28:28,359
Speaker 3: some habits and other structures to help ensure that you

528
00:28:28,400 --> 00:28:31,320
Speaker 3: can actually do those things. And then Michael makes the

529
00:28:31,359 --> 00:28:34,400
Speaker 3: excellent point that you know a lot of people do

530
00:28:34,440 --> 00:28:37,000
Speaker 3: come into retirement with sort of pent up demand for

531
00:28:37,480 --> 00:28:42,880
Speaker 3: relaxation activities, but you need kind of the counterbalance for that,

532
00:28:43,000 --> 00:28:44,960
Speaker 3: and it doesn't have to be paid work at all,

533
00:28:45,040 --> 00:28:48,640
Speaker 3: but just something to give you a sense of purpose

534
00:28:48,760 --> 00:28:51,640
Speaker 3: to get you up in the day. And his point

535
00:28:51,720 --> 00:28:55,720
Speaker 3: is that it's all about balance, right, that you might

536
00:28:55,800 --> 00:28:58,480
Speaker 3: have some leisure activities that you really love, but they're

537
00:28:58,600 --> 00:29:01,800
Speaker 3: all the better if you've accomplished something, and we all

538
00:29:01,840 --> 00:29:04,240
Speaker 3: have that on certain days where you know, the leisure

539
00:29:04,280 --> 00:29:05,880
Speaker 3: at the end of the day is so much better

540
00:29:06,320 --> 00:29:09,920
Speaker 3: if you've accomplished several things on your checklist for the day,

541
00:29:10,440 --> 00:29:13,680
Speaker 3: or if you come into vacation having had a really

542
00:29:13,720 --> 00:29:18,160
Speaker 3: grinding work schedule, that vacation feels so well earned and

543
00:29:18,160 --> 00:29:20,640
Speaker 3: you just enjoy it more. That's kind of his point

544
00:29:20,640 --> 00:29:23,280
Speaker 3: that you need to bring that mindset into retirement. You

545
00:29:23,320 --> 00:29:27,400
Speaker 3: need to relax from something. So that gets back to

546
00:29:27,480 --> 00:29:30,720
Speaker 3: this idea of having purpose. For some people that might

547
00:29:30,800 --> 00:29:33,400
Speaker 3: be work, but it might be you know, volunteer work,

548
00:29:33,440 --> 00:29:36,760
Speaker 3: community service, whatever, have some things that give you a

549
00:29:36,800 --> 00:29:37,520
Speaker 3: sense of purpose.

550
00:29:38,000 --> 00:29:40,080
Speaker 2: I love that. Yes, striving after that balance I think

551
00:29:40,160 --> 00:29:42,239
Speaker 2: is so important. It's something that I think we're like

552
00:29:42,280 --> 00:29:44,240
Speaker 2: as young folks. You're we're not that young, I can,

553
00:29:45,160 --> 00:29:48,640
Speaker 2: I know, but like as what's upon a time young person, Yeah,

554
00:29:48,680 --> 00:29:50,800
Speaker 2: I think maybe. I guess it's just the inability to

555
00:29:50,800 --> 00:29:53,240
Speaker 2: connect with the desires of us when we are going

556
00:29:53,280 --> 00:29:56,400
Speaker 2: to be older. And I underestimated my desire to continue

557
00:29:56,440 --> 00:29:59,400
Speaker 2: to be fruitful and want to continue to do something

558
00:30:00,040 --> 00:30:02,040
Speaker 2: that provides that value. But one of the things that

559
00:30:02,040 --> 00:30:03,640
Speaker 2: struck me in your book was a lot of the

560
00:30:03,640 --> 00:30:05,840
Speaker 2: folks that you talk to, they spend a surprising amount

561
00:30:05,880 --> 00:30:10,400
Speaker 2: of time talking about how retirement impacts their different relationships

562
00:30:10,800 --> 00:30:13,360
Speaker 2: and so how should we jew should we think about that?

563
00:30:13,440 --> 00:30:17,080
Speaker 2: And I think working longer not only can that probably

564
00:30:17,080 --> 00:30:19,880
Speaker 2: help out, like you discussed in providing not only more

565
00:30:19,880 --> 00:30:22,600
Speaker 2: money and not only more purpose in life, but also

566
00:30:23,400 --> 00:30:24,600
Speaker 2: more fulfilling relationships too.

567
00:30:24,720 --> 00:30:28,200
Speaker 3: Right, Definitely, I loved that so many of the people

568
00:30:28,240 --> 00:30:30,719
Speaker 3: touched on relationships because you know, we have so much

569
00:30:30,840 --> 00:30:35,040
Speaker 3: data on human happiness and what makes people feel like

570
00:30:35,080 --> 00:30:38,320
Speaker 3: they've had a successful life, and it all comes back

571
00:30:38,360 --> 00:30:43,480
Speaker 3: to relationships. Who loves you, who you love, feeling loved it.

572
00:30:43,760 --> 00:30:46,440
Speaker 3: It's I mean, it sounds cheesy, but it's everything right.

573
00:30:46,640 --> 00:30:51,320
Speaker 3: And we discussed how relationships change a little bit as

574
00:30:51,320 --> 00:30:54,719
Speaker 3: we age, and this is speaking of sort of traditional

575
00:30:54,800 --> 00:31:00,440
Speaker 3: aged retirees. The data on older adults and relationship is

576
00:31:00,480 --> 00:31:04,240
Speaker 3: what we see is that the relationship networks tend to

577
00:31:04,280 --> 00:31:07,000
Speaker 3: winnow down a little bit, that people have fewer friends.

578
00:31:07,040 --> 00:31:09,960
Speaker 3: And some of that is for sad reasons that maybe

579
00:31:10,000 --> 00:31:12,560
Speaker 3: people have died or moved away or whatever the case

580
00:31:12,640 --> 00:31:15,600
Speaker 3: might be, but some of it it's actually self selected.

581
00:31:16,760 --> 00:31:20,080
Speaker 3: And Laura Carsonsen at Carstensen at Stanford talked about this

582
00:31:20,280 --> 00:31:26,680
Speaker 3: that people self select into smaller friendship networks as they age,

583
00:31:27,120 --> 00:31:29,360
Speaker 3: that they may cast off some people that I think

584
00:31:29,400 --> 00:31:33,000
Speaker 3: she calls them peripheral others. And an example would be

585
00:31:33,120 --> 00:31:37,560
Speaker 3: like your your kids friends' parents, who might have been

586
00:31:37,600 --> 00:31:40,440
Speaker 3: perfectly fine people to hang out with at the soccer

587
00:31:40,480 --> 00:31:44,120
Speaker 3: game or after the soccer game, but you decide at

588
00:31:44,120 --> 00:31:45,920
Speaker 3: the end of the day, they're not, you know, my

589
00:31:46,080 --> 00:31:51,400
Speaker 3: closest friends. And so people tend to become closer to

590
00:31:52,400 --> 00:31:55,800
Speaker 3: the people who really get them, the people who you know,

591
00:31:55,840 --> 00:31:59,320
Speaker 3: when you walk away from that meeting with that person,

592
00:31:59,360 --> 00:32:02,200
Speaker 3: you're kind of why on air because you feel so understood,

593
00:32:02,280 --> 00:32:05,920
Speaker 3: you feel like you totally get them. That's what people

594
00:32:05,960 --> 00:32:10,479
Speaker 3: tend to self select into smaller relationship networks. But and

595
00:32:10,520 --> 00:32:13,840
Speaker 3: her point is that that's just fine. But her counterpoint

596
00:32:13,880 --> 00:32:18,200
Speaker 3: is you should also be kind of, you know, diversifying

597
00:32:18,240 --> 00:32:20,800
Speaker 3: your friend network as you age that you don't want

598
00:32:20,840 --> 00:32:23,000
Speaker 3: to end up with a lot of same aged friends,

599
00:32:23,280 --> 00:32:25,760
Speaker 3: you should put yourself in a situation where you are

600
00:32:26,160 --> 00:32:29,120
Speaker 3: meeting people of different ages in an effort to kind

601
00:32:29,120 --> 00:32:30,720
Speaker 3: of diversify that friends network.

602
00:32:31,320 --> 00:32:34,400
Speaker 1: That's I feel like that's a societal something we've like

603
00:32:35,200 --> 00:32:37,160
Speaker 1: it's a reality of our current society, the way it's

604
00:32:37,160 --> 00:32:38,440
Speaker 1: set up. So much of the time as we are

605
00:32:38,520 --> 00:32:40,959
Speaker 1: hanging out with peer groups and we're not hanging out

606
00:32:41,000 --> 00:32:42,520
Speaker 1: with people of different age groups, And do you think

607
00:32:42,560 --> 00:32:44,360
Speaker 1: there's a lot, a lot of downside to that? On

608
00:32:44,480 --> 00:32:46,800
Speaker 1: multiple levels. I kind of love that my next door

609
00:32:46,840 --> 00:32:50,160
Speaker 1: neighbor is ninety nine and like that just when the

610
00:32:50,240 --> 00:32:51,840
Speaker 1: kids hang out with her or when we see her

611
00:32:51,840 --> 00:32:53,959
Speaker 1: out walking to the mailbox, like there's something really special

612
00:32:54,000 --> 00:32:58,880
Speaker 1: about that relationship. On the sad side of relationships, you

613
00:32:58,880 --> 00:33:03,160
Speaker 1: mentioned that too, you talk about how divorce impacts retirement considerations,

614
00:33:03,160 --> 00:33:06,360
Speaker 1: because that is from a money perspective and from a

615
00:33:06,600 --> 00:33:09,720
Speaker 1: relational perspective that can have really detrimental effects.

616
00:33:09,960 --> 00:33:14,600
Speaker 3: Definitely, divorce is a financial killer, gene Chatsky often a

617
00:33:14,600 --> 00:33:18,680
Speaker 3: financial killer, I should say. Gen Chatsky talked about women

618
00:33:18,960 --> 00:33:22,200
Speaker 3: and aging and retirement in the chapter I did with

619
00:33:22,240 --> 00:33:28,080
Speaker 3: her and divorced women. Single women are among the least

620
00:33:28,360 --> 00:33:33,000
Speaker 3: well off retired people in our society, So there's definitely

621
00:33:33,040 --> 00:33:38,280
Speaker 3: a financial dimension. But loneliness is also a component of

622
00:33:38,320 --> 00:33:42,719
Speaker 3: this as well. That people who are not saying all

623
00:33:42,760 --> 00:33:45,320
Speaker 3: divorced people are lonely. That's certainly not the case.

624
00:33:45,080 --> 00:33:45,240
Speaker 2: But.

625
00:33:46,680 --> 00:33:50,880
Speaker 3: People who have a partner have someone looking out for

626
00:33:51,000 --> 00:33:54,960
Speaker 3: them oftentimes do have that kind of built in companionship,

627
00:33:55,000 --> 00:33:58,280
Speaker 3: which it turns out is pretty good for us. Interestingly,

628
00:34:00,400 --> 00:34:03,600
Speaker 3: married men tend to be happy kind of regardless of

629
00:34:03,600 --> 00:34:07,920
Speaker 3: whether they're happy in their marital relationship, whereas women who

630
00:34:08,000 --> 00:34:12,000
Speaker 3: are married are only happy if they're also happy in

631
00:34:12,040 --> 00:34:15,560
Speaker 3: their marital relationship. If that makes sense. It seems like if.

632
00:34:15,400 --> 00:34:16,880
Speaker 2: Men still have football or something.

633
00:34:17,239 --> 00:34:21,520
Speaker 3: I don't know, men are apparently better able to compartmentalize.

634
00:34:21,560 --> 00:34:24,080
Speaker 3: I think is the point that if their marriage isn't happy,

635
00:34:24,080 --> 00:34:27,399
Speaker 3: they're able to say they're still happy. But women kind

636
00:34:27,400 --> 00:34:30,400
Speaker 3: of have their marriages and their feelings about their marriage

637
00:34:30,400 --> 00:34:32,360
Speaker 3: is more intertwined with their happiness.

638
00:34:32,680 --> 00:34:34,919
Speaker 2: It makes sense. I guess I have not really thought

639
00:34:34,920 --> 00:34:36,600
Speaker 2: about that before, but I feel like something I'm going

640
00:34:36,680 --> 00:34:40,279
Speaker 2: to continue to chew on. Christine. Earlier, you touched on

641
00:34:40,680 --> 00:34:43,959
Speaker 2: social security, so it's clear that to a certain extent

642
00:34:43,960 --> 00:34:46,919
Speaker 2: we should be counting on that. But how should your health,

643
00:34:47,000 --> 00:34:51,560
Speaker 2: how should your age impact when retirees or potential retirees

644
00:34:51,960 --> 00:34:55,080
Speaker 2: should opt to take their Social Security benefit.

645
00:34:55,360 --> 00:34:59,640
Speaker 3: It's a good question. So certainly, if you feel like

646
00:34:59,680 --> 00:35:02,080
Speaker 3: you have some reason to believe you'll have a shorter

647
00:35:02,160 --> 00:35:05,719
Speaker 3: than average life expectancy, that gives more weight on the

648
00:35:05,760 --> 00:35:09,400
Speaker 3: idea of claiming earlier rather than waiting until later. But

649
00:35:09,520 --> 00:35:14,080
Speaker 3: people who are of average health or better, you know,

650
00:35:14,120 --> 00:35:16,880
Speaker 3: people who have longevity on their side, should think about

651
00:35:16,880 --> 00:35:19,880
Speaker 3: delayed filing. And the main benefit is that social Security,

652
00:35:19,920 --> 00:35:24,160
Speaker 3: of course, is a lifetime benefit. Most of us have

653
00:35:24,200 --> 00:35:26,319
Speaker 3: no other benefits that are coming in the door that

654
00:35:26,360 --> 00:35:30,240
Speaker 3: will last our whole lives. Our portfolios certainly won't unless

655
00:35:30,280 --> 00:35:32,719
Speaker 3: we take pains to make sure that they don't, but

656
00:35:32,800 --> 00:35:36,120
Speaker 3: social Security will just keep on coming. And so that

657
00:35:36,320 --> 00:35:41,160
Speaker 3: is the value of trying to enlarge that eventual benefit,

658
00:35:41,280 --> 00:35:45,160
Speaker 3: because if you think you'll have average life expectancy or

659
00:35:45,200 --> 00:35:49,720
Speaker 3: longer than life longer than average life expectancy, that benefit

660
00:35:49,760 --> 00:35:53,120
Speaker 3: will continue throughout your lifetime. And then whether you're married

661
00:35:53,239 --> 00:35:58,600
Speaker 3: or unmarried also figures in. Single people often should delay

662
00:35:58,680 --> 00:36:04,239
Speaker 3: social Security, but so should married people. When if you

663
00:36:04,280 --> 00:36:06,640
Speaker 3: have a partner who is younger than you and that

664
00:36:06,680 --> 00:36:09,640
Speaker 3: partner is going to be reliant on your benefit after

665
00:36:09,680 --> 00:36:12,759
Speaker 3: you pass away. That suggests that if the goal is

666
00:36:12,800 --> 00:36:19,560
Speaker 3: to help enlarge the total couples lifetime benefits, that delaying

667
00:36:19,920 --> 00:36:23,959
Speaker 3: really benefits in that situation as well. So sometimes someone

668
00:36:24,040 --> 00:36:27,080
Speaker 3: might say, oh, I'm not in great health, but if

669
00:36:27,080 --> 00:36:30,279
Speaker 3: they have a younger partner, it still might make sense

670
00:36:30,320 --> 00:36:34,440
Speaker 3: for the older, less healthy partner to delay.

671
00:36:35,000 --> 00:36:36,960
Speaker 1: The nice thing about social security is that it's a

672
00:36:37,000 --> 00:36:40,120
Speaker 1: known quantity, right, and once you get to the point

673
00:36:40,160 --> 00:36:42,120
Speaker 1: where you're ready to tap it, you know how much

674
00:36:42,120 --> 00:36:45,239
Speaker 1: money is coming in on a monthly basis. The tough

675
00:36:45,239 --> 00:36:49,160
Speaker 1: part about your portfolio is you never know what's going

676
00:36:49,200 --> 00:36:50,879
Speaker 1: to happen with the stock market in a given year,

677
00:36:50,920 --> 00:36:53,560
Speaker 1: and if you experience a down year or two in

678
00:36:53,600 --> 00:36:56,920
Speaker 1: a row, when you reach retirement, you might not know

679
00:36:56,960 --> 00:36:59,000
Speaker 1: exactly how much you can take out, or you might

680
00:36:59,040 --> 00:37:02,960
Speaker 1: be two ten to start actually selling some of those positions.

681
00:37:03,920 --> 00:37:06,239
Speaker 1: Annuities are one of those things that people purport as

682
00:37:06,280 --> 00:37:08,520
Speaker 1: like a solution to that problem. And I feel like

683
00:37:08,560 --> 00:37:10,759
Speaker 1: we're seeing kind of a resurgence and annuities right now,

684
00:37:11,160 --> 00:37:14,080
Speaker 1: but a lot of the annuities are incredibly fee laden.

685
00:37:14,440 --> 00:37:17,600
Speaker 1: How do you think about the role of annuities, what

686
00:37:17,840 --> 00:37:19,880
Speaker 1: the role they should play in a person's retirement.

687
00:37:20,239 --> 00:37:23,319
Speaker 3: Yeah, First, I would say that social security is a

688
00:37:23,400 --> 00:37:25,360
Speaker 3: type of annuity. We don't really think of it that

689
00:37:25,440 --> 00:37:27,799
Speaker 3: way or talk of it in that way, but it

690
00:37:27,880 --> 00:37:34,160
Speaker 3: is exactly that, right, It's a lifetime income disbursement. It's

691
00:37:34,480 --> 00:37:37,400
Speaker 3: the most beautiful type of annuity. You can't find one

692
00:37:37,440 --> 00:37:39,439
Speaker 3: like this on the open market where you have an

693
00:37:39,440 --> 00:37:42,440
Speaker 3: inflation adjustment that actually goes along with what's going on

694
00:37:43,000 --> 00:37:47,840
Speaker 3: with CPI. So that's another reason why I would say

695
00:37:48,200 --> 00:37:51,919
Speaker 3: check out enlarging your Social Security benefits before you even

696
00:37:52,000 --> 00:37:56,640
Speaker 3: consider looking at any type of annuity, because Social Security

697
00:37:56,719 --> 00:37:59,680
Speaker 3: is better than anything that's out there from insurance companies.

698
00:38:00,120 --> 00:38:02,239
Speaker 3: Art there, see how far it gets you, and that

699
00:38:02,440 --> 00:38:05,719
Speaker 3: one concept I like to keep in mind in relation

700
00:38:05,880 --> 00:38:09,440
Speaker 3: to this type of income is look at your fixed

701
00:38:09,600 --> 00:38:13,959
Speaker 3: income or you're fixed spending as closely as you can.

702
00:38:14,200 --> 00:38:15,960
Speaker 3: Try to kind of map it out for say the

703
00:38:16,000 --> 00:38:18,960
Speaker 3: first ten years of your retirement at least, so look

704
00:38:19,000 --> 00:38:23,080
Speaker 3: at your housing costs, your tax costs, insurance and so on,

705
00:38:23,800 --> 00:38:29,000
Speaker 3: and ideally you would try to align those outlays with

706
00:38:29,840 --> 00:38:33,000
Speaker 3: your fixed income sources like what you would get from

707
00:38:33,040 --> 00:38:35,799
Speaker 3: Social Security, and maybe social Security you'll get you all

708
00:38:35,840 --> 00:38:37,880
Speaker 3: the way there. If you say, have say a paid

709
00:38:37,920 --> 00:38:41,640
Speaker 3: off home, and you're not spending a lot, but if

710
00:38:41,640 --> 00:38:44,160
Speaker 3: you find that there's a little bit of a shortfall,

711
00:38:44,800 --> 00:38:48,360
Speaker 3: that's potentially a good place to investigate an annuity to

712
00:38:48,440 --> 00:38:53,600
Speaker 3: help meet those spending demands, and that way you just

713
00:38:53,640 --> 00:38:57,600
Speaker 3: have to worry a lot less about your portfolio, about

714
00:38:57,640 --> 00:39:01,239
Speaker 3: making sure your portfolio lasts a lot of research from

715
00:39:01,320 --> 00:39:04,560
Speaker 3: our team and other entities who has looked at portfolio

716
00:39:04,600 --> 00:39:07,440
Speaker 3: spending has found that if you can be variable with

717
00:39:07,520 --> 00:39:10,920
Speaker 3: that spending based on what's going on with your portfolio's performance,

718
00:39:11,200 --> 00:39:14,319
Speaker 3: that that helps you spend more over your lifetime. But

719
00:39:15,160 --> 00:39:19,280
Speaker 3: I think you're in a better position to withstand variable

720
00:39:19,320 --> 00:39:23,600
Speaker 3: spending from your portfolio if you've taken steps to enlarge

721
00:39:24,040 --> 00:39:27,680
Speaker 3: the lifetime income stream that you get from Social Security

722
00:39:27,760 --> 00:39:31,000
Speaker 3: and or an annuity. So that's kind of the way

723
00:39:31,040 --> 00:39:33,600
Speaker 3: I look about look on it when I think about

724
00:39:33,600 --> 00:39:36,600
Speaker 3: my own retirement plans, which I'm not planning to retire

725
00:39:36,640 --> 00:39:39,520
Speaker 3: anytime soon. I just think it's a really elegant way

726
00:39:39,600 --> 00:39:44,960
Speaker 3: to address household cash flows. So that plan, that's how

727
00:39:45,000 --> 00:39:46,520
Speaker 3: I plan to approach it for us.

728
00:39:47,160 --> 00:39:51,520
Speaker 2: In chapter eleven, the individual who's highlighted there is you, Christine.

729
00:39:52,440 --> 00:39:55,080
Speaker 2: You actually discuss bucket strategies and so can you explain

730
00:39:55,160 --> 00:39:57,160
Speaker 2: what tho aw? I can explain why you are so

731
00:39:57,280 --> 00:39:58,160
Speaker 2: fond of that approach.

732
00:39:58,320 --> 00:40:01,719
Speaker 3: Yeah, I was talking to Al Davinski, who was a

733
00:40:01,719 --> 00:40:05,200
Speaker 3: professor of financial planning and had his own financial planning practice.

734
00:40:05,560 --> 00:40:08,520
Speaker 3: It's still up and running, but he's largely retired about

735
00:40:08,520 --> 00:40:13,319
Speaker 3: how he managed his retired client's portfolios, and he said

736
00:40:13,320 --> 00:40:17,319
Speaker 3: that he just bolts on this cash bucket alongside a

737
00:40:17,360 --> 00:40:21,480
Speaker 3: long term total return portfolio. And his point to me,

738
00:40:21,560 --> 00:40:23,959
Speaker 3: which a light bulb went off in my head, because

739
00:40:24,000 --> 00:40:26,840
Speaker 3: he said, I find that it really gives my client's

740
00:40:26,920 --> 00:40:30,120
Speaker 3: peace of mind with the long term portfolio that I'm

741
00:40:30,160 --> 00:40:33,719
Speaker 3: managing for them. They don't second guess the decisions that

742
00:40:33,800 --> 00:40:37,359
Speaker 3: I'm making. They know that they have their cash flow

743
00:40:37,440 --> 00:40:40,160
Speaker 3: needs set aside. And so I think his thought was

744
00:40:40,200 --> 00:40:43,719
Speaker 3: to have maybe one to two years worth of portfolio

745
00:40:43,760 --> 00:40:48,120
Speaker 3: withdrawals just set aside in cash at all times throughout retirement.

746
00:40:48,760 --> 00:40:51,439
Speaker 3: And so I've kind of taken that concept and run

747
00:40:51,440 --> 00:40:53,920
Speaker 3: with it because I think it's a it seems to

748
00:40:54,000 --> 00:40:57,560
Speaker 3: work from a behavioral standpoint, and B I think it

749
00:40:57,640 --> 00:41:01,200
Speaker 3: helps get people to a sane place in terms of

750
00:41:01,200 --> 00:41:06,560
Speaker 3: what is an appropriate acid allocation giving given my proximity

751
00:41:06,600 --> 00:41:09,319
Speaker 3: to needing the money. So I think of kind of

752
00:41:09,320 --> 00:41:12,439
Speaker 3: a simple three bucket structure where you've got maybe two

753
00:41:12,480 --> 00:41:15,960
Speaker 3: years worth of portfolio withdrawals in cash. So if you're

754
00:41:16,000 --> 00:41:19,480
Speaker 3: taking like four percent of your portfolio, that's eight percent

755
00:41:19,560 --> 00:41:22,680
Speaker 3: of your total portfolio with those two years, and then

756
00:41:22,760 --> 00:41:26,680
Speaker 3: maybe another five to eight years in sort of a

757
00:41:26,760 --> 00:41:30,880
Speaker 3: high quality bond portfolio, maybe short and intermediate term bonds,

758
00:41:31,280 --> 00:41:34,960
Speaker 3: maybe a little bit of treasury inflation protected securities, and

759
00:41:35,000 --> 00:41:37,480
Speaker 3: then the remainder of the portfolio could go into a

760
00:41:37,520 --> 00:41:41,839
Speaker 3: globally diversified stock portfolio. But I think it's a nice

761
00:41:41,880 --> 00:41:45,600
Speaker 3: way to kind of back into a sensible acid allocation.

762
00:41:45,960 --> 00:41:50,359
Speaker 3: Acid allocation, to me, oftentimes seems really black boxy, and

763
00:41:50,440 --> 00:41:54,040
Speaker 3: really the I think a key way to inform it

764
00:41:54,120 --> 00:41:57,320
Speaker 3: is to think of the proximity of needing your money,

765
00:41:57,840 --> 00:42:02,440
Speaker 3: and you know what sorts of investments stand up to

766
00:42:02,560 --> 00:42:05,880
Speaker 3: that time horizon that I have in mind. So we

767
00:42:06,040 --> 00:42:08,239
Speaker 3: know that stocks, if you have a really long time

768
00:42:08,280 --> 00:42:12,839
Speaker 3: horizon of more than ten years, they're extraordinarily reliable. You know,

769
00:42:13,160 --> 00:42:17,280
Speaker 3: like more than ninety percent of rolling ten year periods

770
00:42:17,280 --> 00:42:20,440
Speaker 3: they're positive. But if you shrink that time horizon too

771
00:42:20,560 --> 00:42:23,919
Speaker 3: three years or five years, they're too risky. They're too

772
00:42:24,040 --> 00:42:27,759
Speaker 3: variable if you're spending horizon is so short, and that's

773
00:42:27,880 --> 00:42:32,319
Speaker 3: kind of the basic intuition behind how much you would

774
00:42:32,360 --> 00:42:34,440
Speaker 3: decide to drop into each of those buckets.

775
00:42:34,640 --> 00:42:36,759
Speaker 1: Yeah, it seems like not having enough cash at that

776
00:42:36,880 --> 00:42:40,719
Speaker 1: point when you're reaching retirement could be incredibly anxiety inducing.

777
00:42:40,880 --> 00:42:44,480
Speaker 1: And yeah it stinks to look and say, oh, man,

778
00:42:44,520 --> 00:42:47,200
Speaker 1: look the market's been crushing it, but I've been overweight cash.

779
00:42:47,360 --> 00:42:49,640
Speaker 1: But think about the if the opposite were true, you know,

780
00:42:49,760 --> 00:42:52,239
Speaker 1: and you'd be so thankful that you had as much

781
00:42:52,440 --> 00:42:56,480
Speaker 1: set assigning cash as you did as if the market was,

782
00:42:56,719 --> 00:42:59,200
Speaker 1: you know, on a downtrend. We've got a few more

783
00:42:59,280 --> 00:43:00,680
Speaker 1: questions we want to get to you with you, Christine,

784
00:43:00,719 --> 00:43:04,680
Speaker 1: including you know, one of the old adages in retirement

785
00:43:04,719 --> 00:43:08,040
Speaker 1: advice is pay off your mortgage. Does that still stand?

786
00:43:08,520 --> 00:43:10,080
Speaker 1: Is that still true? We'll talk about that and more

787
00:43:10,160 --> 00:43:10,719
Speaker 1: right after this.

788
00:43:18,440 --> 00:43:20,279
Speaker 2: All right, we are back from the break talking with

789
00:43:20,400 --> 00:43:24,480
Speaker 2: Christine Ben's of Morning Star. You've probably seen her byline,

790
00:43:25,000 --> 00:43:27,480
Speaker 2: her author title there, and some of the articles we

791
00:43:27,520 --> 00:43:31,320
Speaker 2: oftentimes will reference. But Christine, before the break, Joel mentioned

792
00:43:31,360 --> 00:43:33,440
Speaker 2: the mortgage. So let's talk about housing because that is

793
00:43:33,480 --> 00:43:35,759
Speaker 2: a it's a big old expense or it can be

794
00:43:35,800 --> 00:43:37,960
Speaker 2: a big old asset, depending on where you are in life.

795
00:43:38,600 --> 00:43:41,160
Speaker 2: What do you think about paying off a mortgage, because

796
00:43:41,760 --> 00:43:45,160
Speaker 2: certainly getting aggressive paying down a mortgage rearly that makes

797
00:43:45,239 --> 00:43:46,799
Speaker 2: less sense if you know, let's say you've got a

798
00:43:46,840 --> 00:43:49,319
Speaker 2: sub three percent mortgage. Let's say you've got two point

799
00:43:49,320 --> 00:43:51,920
Speaker 2: seventy five mortgage these days, Ye, that's not something you

800
00:43:51,960 --> 00:43:55,200
Speaker 2: should likely be prioritizing. But talk about housing. What it

801
00:43:55,239 --> 00:43:57,440
Speaker 2: looks like to have a payoff house and should you

802
00:43:57,480 --> 00:43:59,239
Speaker 2: see that as a bucket You know, we're talking about

803
00:43:59,239 --> 00:44:01,880
Speaker 2: your bucket system there earlier, but talk about housing here

804
00:44:01,920 --> 00:44:02,360
Speaker 2: for a second.

805
00:44:02,440 --> 00:44:04,959
Speaker 3: Yeah, it's such an important question, and I think one

806
00:44:05,000 --> 00:44:07,640
Speaker 3: that really bears down on a lot of people as

807
00:44:07,680 --> 00:44:11,719
Speaker 3: they kind of hurtle toward retirement. It's kind of a

808
00:44:11,880 --> 00:44:15,319
Speaker 3: moving target in terms of whether to pay off a

809
00:44:15,360 --> 00:44:18,239
Speaker 3: mortgage in my view. So when my husband and I

810
00:44:18,280 --> 00:44:20,879
Speaker 3: paid off our mortgage, which was probably like ten ten

811
00:44:20,960 --> 00:44:23,560
Speaker 3: years ago or so, we had a two point eight

812
00:44:23,600 --> 00:44:26,080
Speaker 3: seventy five percent mortgage, and I remember my husband was

813
00:44:26,120 --> 00:44:29,120
Speaker 3: so proud of it because he had like at the

814
00:44:29,239 --> 00:44:32,279
Speaker 3: time and now, of course mortgages have gone lower, but

815
00:44:32,320 --> 00:44:36,640
Speaker 3: at the time it was very low mortgage. But simultaneously

816
00:44:36,680 --> 00:44:39,720
Speaker 3: we did have the fun sitting in our vanguard account

817
00:44:39,880 --> 00:44:44,880
Speaker 3: from you know, bonuses or whatever earning like, and Vanguard

818
00:44:44,920 --> 00:44:47,880
Speaker 3: pays pays well on its money market accounts, but it

819
00:44:47,960 --> 00:44:51,319
Speaker 3: was still earning well less than that mortgage rate. So

820
00:44:51,480 --> 00:44:54,399
Speaker 3: to us, you know, knowing that we didn't have any

821
00:44:54,440 --> 00:44:58,520
Speaker 3: imminent need for those for the cash, we we did

822
00:44:58,560 --> 00:45:01,080
Speaker 3: pay off the mortgage. But right now you point to

823
00:45:01,120 --> 00:45:05,560
Speaker 3: something that I think is pretty stark. Where we've seen

824
00:45:05,680 --> 00:45:09,359
Speaker 3: yields go up really nicely on savings instruments. They've maybe

825
00:45:09,360 --> 00:45:11,360
Speaker 3: come down a little bit as interest rates appear to

826
00:45:11,400 --> 00:45:14,200
Speaker 3: be going down, but they have generally gone up nicely.

827
00:45:14,719 --> 00:45:18,480
Speaker 3: And many people are here with very very low mortgages,

828
00:45:18,960 --> 00:45:21,560
Speaker 3: in which case it probably makes sense to hang on

829
00:45:21,719 --> 00:45:27,560
Speaker 3: to the mortgage. And that's especially true because you know,

830
00:45:28,040 --> 00:45:30,719
Speaker 3: you probably do have other things that you could use

831
00:45:30,920 --> 00:45:35,040
Speaker 3: your funds for. And yeah, the math just doesn't add

832
00:45:35,120 --> 00:45:39,839
Speaker 3: up in terms of prepaying the mortgage to get rid

833
00:45:39,920 --> 00:45:42,640
Speaker 3: of it, even though that does provide some peace of mind.

834
00:45:43,600 --> 00:45:45,520
Speaker 3: But again, peace of mind is part of this too.

835
00:45:45,560 --> 00:45:48,520
Speaker 3: If you really do want to try to reduce your

836
00:45:49,320 --> 00:45:53,080
Speaker 3: fixed spending coming into retirement, it's hard to argue with

837
00:45:54,200 --> 00:45:56,239
Speaker 3: a mortgage paydown. And the other thing I would say

838
00:45:56,280 --> 00:46:00,160
Speaker 3: is that you know, it's usually like pretty financially well

839
00:46:00,200 --> 00:46:03,560
Speaker 3: people who are grappling with this decision. There's probably no

840
00:46:03,760 --> 00:46:07,000
Speaker 3: like super wrong decision. Could you optimize it a little

841
00:46:07,040 --> 00:46:10,360
Speaker 3: bit more by hanging on to the mortgage and investing

842
00:46:10,400 --> 00:46:15,800
Speaker 3: in safe securities? Yeah, but you know, it's it's probably

843
00:46:15,840 --> 00:46:18,880
Speaker 3: going to be fine in either instance. The thing that

844
00:46:18,920 --> 00:46:23,480
Speaker 3: I often take that that I dispute is just when

845
00:46:23,480 --> 00:46:26,360
Speaker 3: people say, well, you can earn more investing in the market,

846
00:46:26,840 --> 00:46:30,440
Speaker 3: and then you can you know, paying down your it

847
00:46:30,480 --> 00:46:32,600
Speaker 3: helps you more to invest in the market. And my

848
00:46:32,800 --> 00:46:36,560
Speaker 3: point there is, well, yes, but you're totally comparing apples

849
00:46:36,600 --> 00:46:40,440
Speaker 3: and oranges, because the mortgage paydown is kind of a

850
00:46:40,480 --> 00:46:46,640
Speaker 3: guaranteed return on investment equivalent to your to your interest rate,

851
00:46:46,719 --> 00:46:48,960
Speaker 3: less any tax breaks that you were getting to carry

852
00:46:48,960 --> 00:46:52,640
Speaker 3: that mortgage, whereas, of course, you know, investing in stocks

853
00:46:52,760 --> 00:46:56,919
Speaker 3: is way more variable. Your long term returns may be better,

854
00:46:57,000 --> 00:46:58,920
Speaker 3: but it's it's by no means guaranteed.

855
00:46:59,400 --> 00:47:03,120
Speaker 1: The savings mortgage comparison makes more sense, the investing mortgage

856
00:47:03,120 --> 00:47:04,520
Speaker 1: comparison makes less sense.

857
00:47:04,680 --> 00:47:07,120
Speaker 2: A quick follow up too, what about folks who are

858
00:47:07,120 --> 00:47:09,880
Speaker 2: sitting on that paid off home, perhaps or even not

859
00:47:09,920 --> 00:47:11,800
Speaker 2: even fully paid off, but you know, they've got a

860
00:47:11,840 --> 00:47:13,799
Speaker 2: whole lot of equity there in that home, and they

861
00:47:13,840 --> 00:47:16,920
Speaker 2: are nearing retirement, they are looking at their fixed income sources.

862
00:47:17,000 --> 00:47:19,920
Speaker 2: They're not seeing enough to sustain their lifestyle. What are

863
00:47:19,920 --> 00:47:21,920
Speaker 2: your thoughts on reverse mortgages We.

864
00:47:21,840 --> 00:47:24,160
Speaker 3: Talked about them in the book. I happen to think

865
00:47:24,200 --> 00:47:27,440
Speaker 3: that they have been underutilized, And of course there are good,

866
00:47:27,800 --> 00:47:30,840
Speaker 3: good reasons in many cases why they've been underutilized, because

867
00:47:32,080 --> 00:47:35,840
Speaker 3: some reverse mortgages in the past especially were very high cost.

868
00:47:36,520 --> 00:47:40,480
Speaker 3: But I think it's a shame if older adults really

869
00:47:40,560 --> 00:47:43,839
Speaker 3: do short shrift their own qualities of life when they're

870
00:47:43,880 --> 00:47:46,400
Speaker 3: sitting on a lot of housing wealth. And this is

871
00:47:46,480 --> 00:47:50,680
Speaker 3: particularly true, you know when say California, other really high

872
00:47:50,719 --> 00:47:53,560
Speaker 3: cost parts of the country, where you have people who

873
00:47:53,560 --> 00:47:56,400
Speaker 3: have been in their homes for many, many years and

874
00:47:56,520 --> 00:48:00,480
Speaker 3: a lot of their wealth is in the house, they

875
00:48:00,560 --> 00:48:05,920
Speaker 3: should look at an opportunity to liquefy that wealth in

876
00:48:05,960 --> 00:48:09,200
Speaker 3: some way, either by you know, moving somewhere else, or

877
00:48:09,239 --> 00:48:11,600
Speaker 3: if they want to stay put because it's their community

878
00:48:11,640 --> 00:48:14,120
Speaker 3: and that's where their family is and so on, they

879
00:48:14,160 --> 00:48:20,080
Speaker 3: should think about tapping that equity through some sort of

880
00:48:20,120 --> 00:48:21,040
Speaker 3: reverse mortgage.

881
00:48:21,280 --> 00:48:23,720
Speaker 2: Do you think it's more of like an emotional hurdle

882
00:48:23,800 --> 00:48:26,279
Speaker 2: or roadblock that keeps folks from doing that, because like

883
00:48:26,320 --> 00:48:28,520
Speaker 2: their entire life, this is something that they've been You've

884
00:48:28,560 --> 00:48:29,919
Speaker 2: been doing the opposite, but then all of a sudden

885
00:48:29,960 --> 00:48:31,560
Speaker 2: you're somehow supposed to flip the switch.

886
00:48:31,719 --> 00:48:34,319
Speaker 3: Absolutely, and a lot of it is that people do

887
00:48:34,440 --> 00:48:37,719
Speaker 3: want to pass that asset to their kids. They like

888
00:48:37,800 --> 00:48:40,440
Speaker 3: the idea of that. You know, they subsist off the

889
00:48:40,480 --> 00:48:43,560
Speaker 3: investment portfolio, but the home is the asset that our

890
00:48:43,640 --> 00:48:47,160
Speaker 3: kids will inherit. I think if many people were to

891
00:48:47,200 --> 00:48:49,520
Speaker 3: ask their kids, their kids would probably say, well, I'd

892
00:48:49,520 --> 00:48:52,320
Speaker 3: probably rather inherit investment assets from.

893
00:48:52,200 --> 00:48:55,240
Speaker 2: You than take the money. I'll take the cash.

894
00:48:56,040 --> 00:48:58,759
Speaker 3: So yeah, there's a lot tied up in all of this.

895
00:48:58,840 --> 00:49:03,000
Speaker 3: And of course reverse mortgages didn't do themselves any favor

896
00:49:03,320 --> 00:49:04,640
Speaker 3: for a while. It was just a little bit of

897
00:49:04,719 --> 00:49:07,560
Speaker 3: a wild West, and many of the products were pretty

898
00:49:07,560 --> 00:49:12,120
Speaker 3: crummy and bad for consumers, so they have a bad

899
00:49:12,200 --> 00:49:14,200
Speaker 3: name in a lot of consumers' minds.

900
00:49:14,280 --> 00:49:16,680
Speaker 1: Yeah, talk to us about the four percent rule for

901
00:49:16,719 --> 00:49:18,799
Speaker 1: just a second, Christine, because that's like one of those

902
00:49:19,719 --> 00:49:23,200
Speaker 1: what seems like an iron law of retirement is Oh,

903
00:49:23,239 --> 00:49:25,440
Speaker 1: if I just take out four percent of my portfolio

904
00:49:25,560 --> 00:49:28,600
Speaker 1: each year, every year, then I'll never run out of

905
00:49:29,239 --> 00:49:33,400
Speaker 1: out of assets across the course of my whole retirement.

906
00:49:33,880 --> 00:49:36,000
Speaker 1: So that's nice to know. But then you hear the

907
00:49:36,080 --> 00:49:38,480
Speaker 1: Dave Ramsey of this world say, oh, no, no, you can

908
00:49:38,520 --> 00:49:40,759
Speaker 1: take out eight percent, And then other people are saying, no, no,

909
00:49:40,840 --> 00:49:42,799
Speaker 1: you need to be even more conservative, and we're talking

910
00:49:42,840 --> 00:49:46,799
Speaker 1: closer to three percent, and we're talking about like significant

911
00:49:46,800 --> 00:49:50,680
Speaker 1: differences and what people can pull out from their retirement

912
00:49:50,719 --> 00:49:53,520
Speaker 1: assets every single year. If we're in a big, big

913
00:49:53,600 --> 00:49:56,439
Speaker 1: enough window between three and eight percent, right, that's gonna

914
00:49:56,440 --> 00:49:58,799
Speaker 1: have a significant impact on the way they're able to

915
00:49:58,920 --> 00:50:02,600
Speaker 1: live and what their retirement years look like. So conservative

916
00:50:03,000 --> 00:50:04,960
Speaker 1: or liberal, like, what are your thoughts on the four

917
00:50:04,960 --> 00:50:07,400
Speaker 1: percent rule and how people should think about that?

918
00:50:07,880 --> 00:50:10,279
Speaker 3: William Bengen came up with a four percent rule. I

919
00:50:10,560 --> 00:50:13,279
Speaker 3: sometimes call it a guideline. I do think it's a

920
00:50:13,440 --> 00:50:16,960
Speaker 3: great starting point for thinking about this. So for people

921
00:50:16,960 --> 00:50:20,200
Speaker 3: who are say fifty, and looking at their portfolio and

922
00:50:20,239 --> 00:50:22,680
Speaker 3: trying to figure out if they have enough, it's a

923
00:50:22,719 --> 00:50:27,440
Speaker 3: great quick and dirty starting point. But I do think

924
00:50:27,480 --> 00:50:30,719
Speaker 3: that it's probably kind of a straw man at the

925
00:50:30,840 --> 00:50:34,720
Speaker 3: end of the day, because it assumes that someone wants

926
00:50:34,840 --> 00:50:38,120
Speaker 3: kind of like a fixed paycheck in retirement, that they're

927
00:50:38,120 --> 00:50:41,319
Speaker 3: just going to spend the same amount rotely throughout this

928
00:50:41,480 --> 00:50:43,960
Speaker 3: twenty five or thirty year period or whatever it is.

929
00:50:44,280 --> 00:50:47,080
Speaker 3: When we look at the data on how older adults spend,

930
00:50:47,200 --> 00:50:50,479
Speaker 3: it's not how they spend. That spending actually does tend

931
00:50:50,480 --> 00:50:53,680
Speaker 3: to decline through a lot of the retirement life cycle,

932
00:50:54,120 --> 00:50:56,800
Speaker 3: and then it flares up for some older adults later

933
00:50:56,880 --> 00:51:00,520
Speaker 3: in life. So it just doesn't pass the snow tests

934
00:51:00,520 --> 00:51:03,840
Speaker 3: from the standpoint of how people actually live and spend

935
00:51:04,239 --> 00:51:08,120
Speaker 3: in retirement. So there's that dimension, and then another issue

936
00:51:08,200 --> 00:51:11,919
Speaker 3: is that it's just really suboptimal to spend the same

937
00:51:11,920 --> 00:51:16,360
Speaker 3: amount year after year without wavering. I was talking to

938
00:51:16,480 --> 00:51:18,400
Speaker 3: John Geiton, and I talked to him in the book

939
00:51:18,400 --> 00:51:20,640
Speaker 3: about this, where he said, you know, kind of a

940
00:51:20,680 --> 00:51:25,319
Speaker 3: four percent guideline is equivalent to your setting out on

941
00:51:25,400 --> 00:51:28,840
Speaker 3: a road trip and you're saying that I'm in a

942
00:51:28,880 --> 00:51:33,879
Speaker 3: car with no mirrors, no brakes, no windshield wipers, And

943
00:51:33,960 --> 00:51:36,000
Speaker 3: if I asked you what speed limit you'd want to

944
00:51:36,040 --> 00:51:38,279
Speaker 3: go at, well, you'd say, you know, I don't know

945
00:51:38,400 --> 00:51:42,160
Speaker 3: ten miles an hour. You know, you would want to

946
00:51:42,200 --> 00:51:44,480
Speaker 3: take it really, really slow. That's kind of what the

947
00:51:44,520 --> 00:51:48,520
Speaker 3: four percent guideline is. It's built for kind of a

948
00:51:48,560 --> 00:51:52,400
Speaker 3: worst case scenario where you're never making changes. But guess

949
00:51:52,400 --> 00:51:55,600
Speaker 3: what as a retirement, As a retiree, you actually do

950
00:51:55,680 --> 00:51:58,360
Speaker 3: have the ability to make changes. You have the ability

951
00:51:58,400 --> 00:52:01,360
Speaker 3: to take withdrawals down in a year like twenty twenty

952
00:52:01,400 --> 00:52:04,880
Speaker 3: two when stocks and bonds both fell and it turns

953
00:52:04,880 --> 00:52:07,960
Speaker 3: out that's good for your portfolio. And you also have

954
00:52:08,040 --> 00:52:11,680
Speaker 3: an ability to give yourself raises if things work out

955
00:52:11,719 --> 00:52:14,960
Speaker 3: better than kind of the worst case scenario that's built

956
00:52:14,960 --> 00:52:17,960
Speaker 3: into the four percent guideline. So I like the idea

957
00:52:17,960 --> 00:52:23,040
Speaker 3: of people being somewhat flexible. Which specific flexible system they

958
00:52:23,120 --> 00:52:25,760
Speaker 3: use kind of depends on what they're trying to achieve,

959
00:52:25,840 --> 00:52:29,520
Speaker 3: but ideally, if they've done their homework to line up,

960
00:52:29,840 --> 00:52:33,680
Speaker 3: they're fixed spending with fixed sources of income like social Security,

961
00:52:34,000 --> 00:52:38,319
Speaker 3: that gives them more ability to be flexible with their

962
00:52:38,400 --> 00:52:40,359
Speaker 3: eventual portfolio withdrawals.

963
00:52:40,640 --> 00:52:42,759
Speaker 2: Yeah, I gotta be adaptable. That makes sense too. Like

964
00:52:42,800 --> 00:52:44,520
Speaker 2: you said, as far as that spending in retirement, there's

965
00:52:44,520 --> 00:52:46,040
Speaker 2: only so many times that you can go to Munich

966
00:52:46,239 --> 00:52:48,400
Speaker 2: in Paris, Like right, Like, I'm not going to keep

967
00:52:48,400 --> 00:52:50,360
Speaker 2: doing this every single year, guys, I'm going to switch

968
00:52:50,360 --> 00:52:52,520
Speaker 2: it up. I'm go go chase the white ball with

969
00:52:52,520 --> 00:52:56,160
Speaker 2: a stick perhaps, which I don't know. Is that actually

970
00:52:56,160 --> 00:52:58,280
Speaker 2: more affordable than than European vacation?

971
00:52:58,320 --> 00:52:58,680
Speaker 3: Maybe not?

972
00:52:59,000 --> 00:53:01,399
Speaker 2: Yeah, they're not. We really appreciate you taking the time

973
00:53:01,440 --> 00:53:04,160
Speaker 2: to talk with us about your new book, How to Retire.

974
00:53:04,440 --> 00:53:06,759
Speaker 2: Where can folks find that and learn more about you

975
00:53:06,800 --> 00:53:07,360
Speaker 2: and what you're up to.

976
00:53:07,640 --> 00:53:09,480
Speaker 3: They can find the book at any place where they

977
00:53:09,520 --> 00:53:13,399
Speaker 3: would normally buy books, Amazon or local bookseller if you've

978
00:53:13,400 --> 00:53:15,799
Speaker 3: still got one. In terms of what I work on,

979
00:53:16,120 --> 00:53:19,080
Speaker 3: I'm on Morningstar dot com all the time doing videos

980
00:53:19,160 --> 00:53:22,560
Speaker 3: and articles. I also work on a podcast of my own.

981
00:53:22,560 --> 00:53:26,520
Speaker 3: It's called The Longview, which is an interview format podcast.

982
00:53:26,760 --> 00:53:29,680
Speaker 3: And yeah, it's been It's been really fun to talk

983
00:53:29,680 --> 00:53:31,000
Speaker 3: to you guys. I appreciate it.

984
00:53:31,239 --> 00:53:31,560
Speaker 2: Awesome.

985
00:53:31,600 --> 00:53:33,760
Speaker 1: We've enjoyed it too, Christine. Thank you for joining us today.

986
00:53:33,920 --> 00:53:36,880
Speaker 1: Thank you all righty Matt that that was a great combo.

987
00:53:37,480 --> 00:53:38,840
Speaker 1: I do think that if you were going to come

988
00:53:38,920 --> 00:53:41,360
Speaker 1: up with like a mount rushmore of personal finance folks,

989
00:53:41,640 --> 00:53:44,680
Speaker 1: Christine Benz would be in high consideration to be. Oh, yeah,

990
00:53:44,840 --> 00:53:46,960
Speaker 1: she's she's been around a long time to an amazing

991
00:53:46,960 --> 00:53:48,239
Speaker 1: work and it was just such a joy to get

992
00:53:48,239 --> 00:53:50,320
Speaker 1: to talk to her today. No, she yeah, she's fantastic.

993
00:53:50,360 --> 00:53:52,640
Speaker 1: She's been doing this for so long now. She's an

994
00:53:52,760 --> 00:53:56,080
Speaker 1: og personal finance money nerd and certainly glad we got.

995
00:53:55,960 --> 00:53:57,960
Speaker 2: To talk with her today. But was your big takeaway

996
00:53:58,239 --> 00:53:59,600
Speaker 2: from our conversation about retirement?

997
00:53:59,680 --> 00:54:01,920
Speaker 1: So this is something we brought up briefly, but it's

998
00:54:01,960 --> 00:54:04,000
Speaker 1: always something that's fascinating with me. I just appreciate morning

999
00:54:04,040 --> 00:54:06,279
Speaker 1: stars honesty and one of the things she highlighted that

1000
00:54:06,280 --> 00:54:09,440
Speaker 1: they've changed the scoring over time of their Star system

1001
00:54:09,520 --> 00:54:12,600
Speaker 1: and the way that they rate funds to incorporate costs

1002
00:54:12,719 --> 00:54:16,600
Speaker 1: even more they costs they weighed heavier that how expensive

1003
00:54:16,600 --> 00:54:19,960
Speaker 1: your fund is or inexpensive, it is matters so much

1004
00:54:20,160 --> 00:54:23,319
Speaker 1: in the overall performance of your investment portfolio. And so

1005
00:54:23,600 --> 00:54:27,120
Speaker 1: I just appreciate that transparency from Christina from morning Star,

1006
00:54:27,520 --> 00:54:29,480
Speaker 1: and I think for all how to money listeners, it

1007
00:54:29,520 --> 00:54:31,799
Speaker 1: means going back, what are the funds you're investing in?

1008
00:54:32,000 --> 00:54:34,200
Speaker 1: Are they with some of our low cost favorites? Are

1009
00:54:34,239 --> 00:54:37,799
Speaker 1: you getting the bargain basement rates which thanks to Jack

1010
00:54:37,880 --> 00:54:42,040
Speaker 1: bocl Like, we have access to incredibly diversified funds that

1011
00:54:42,080 --> 00:54:44,719
Speaker 1: cost next to nothing at a bunch of these low

1012
00:54:44,760 --> 00:54:47,600
Speaker 1: cost investment houses. But if you don't pay attention to

1013
00:54:47,600 --> 00:54:51,000
Speaker 1: that one thing, you'll be shocked if you run the

1014
00:54:51,080 --> 00:54:52,880
Speaker 1: numbers and how much you might be missing out on

1015
00:54:53,280 --> 00:54:56,640
Speaker 1: ultimately in retirement funds. So pay attention to those costs. Yeah,

1016
00:54:56,640 --> 00:54:59,879
Speaker 1: the fund ratings are cool. I appreciate that they do that,

1017
00:55:00,160 --> 00:55:02,200
Speaker 1: but the cost is likely even more important.

1018
00:55:02,239 --> 00:55:05,000
Speaker 2: It's a large ingredient that goes into that rating because

1019
00:55:05,040 --> 00:55:07,400
Speaker 2: the yeah, the performance of those different funds that varies

1020
00:55:07,480 --> 00:55:09,920
Speaker 2: year to year, but that expense ratio, that thing is

1021
00:55:09,960 --> 00:55:12,120
Speaker 2: fixed and so you're paying that no matter what. Well,

1022
00:55:12,120 --> 00:55:13,799
Speaker 2: my big takeaway is going to be when we're talking

1023
00:55:13,840 --> 00:55:16,759
Speaker 2: about work and retirement overall. And she said, I can't

1024
00:55:16,800 --> 00:55:20,640
Speaker 2: remember which guest it was that shared this lesson with her,

1025
00:55:21,080 --> 00:55:23,280
Speaker 2: but she pointed out how work is good, but how

1026
00:55:23,320 --> 00:55:25,680
Speaker 2: it is that we work is bad, and she's talking

1027
00:55:25,680 --> 00:55:28,520
Speaker 2: about burnout, and I think the ability for us to

1028
00:55:29,000 --> 00:55:32,440
Speaker 2: find ways to scale back the intensity of the work

1029
00:55:32,560 --> 00:55:34,080
Speaker 2: and maybe not. I don't even want to say that

1030
00:55:34,080 --> 00:55:35,759
Speaker 2: because it makes it sound like, Okay, yeah, you have

1031
00:55:35,840 --> 00:55:38,360
Speaker 2: the luxury to be able to work less. I'm not

1032
00:55:38,360 --> 00:55:40,880
Speaker 2: even talking about working less, but finding ways to incorporate

1033
00:55:40,960 --> 00:55:43,680
Speaker 2: some of the healthier aspects some of the other factors

1034
00:55:43,760 --> 00:55:46,600
Speaker 2: of life that make life sustainable. Does that make sense? So,

1035
00:55:46,719 --> 00:55:52,200
Speaker 2: like the ability to prioritize getting enough sleep, some exercise, relationships,

1036
00:55:52,440 --> 00:55:55,000
Speaker 2: your mental health, Like all of these other aspects are

1037
00:55:55,080 --> 00:55:58,560
Speaker 2: that are so important that oftentimes get short changed because

1038
00:55:58,600 --> 00:56:01,040
Speaker 2: we have elevated work on this pedestal.

1039
00:56:01,080 --> 00:56:02,680
Speaker 1: Yeah, you might not feel the need to bail out

1040
00:56:02,680 --> 00:56:05,040
Speaker 1: of work quite as early. You might not be like, oh,

1041
00:56:05,080 --> 00:56:07,279
Speaker 1: sixty two, I can't make it past that point. You

1042
00:56:07,360 --> 00:56:10,040
Speaker 1: might find that you have more years available and actually

1043
00:56:10,040 --> 00:56:13,200
Speaker 1: more energy to dedicate torture work. If you don't have,

1044
00:56:13,680 --> 00:56:16,040
Speaker 1: you've taken care of your antagonistic of a relationship towards

1045
00:56:16,080 --> 00:56:16,640
Speaker 1: in the here and now.

1046
00:56:16,640 --> 00:56:19,360
Speaker 2: So totally all right. You and I enjoyed a Strangest

1047
00:56:19,360 --> 00:56:21,880
Speaker 2: of Places, which is a beer by a Pure project.

1048
00:56:21,960 --> 00:56:23,920
Speaker 2: This was a collab with great Notion.

1049
00:56:24,200 --> 00:56:25,960
Speaker 1: Yeah, well your thoughts, Well, I like that they call

1050
00:56:26,000 --> 00:56:28,799
Speaker 1: it a murky India opinions instead of a hazy Yeah,

1051
00:56:28,920 --> 00:56:30,680
Speaker 1: so you got to come up with a different terminology.

1052
00:56:30,760 --> 00:56:33,000
Speaker 1: So I do appreciate that. One of my buddies in

1053
00:56:33,000 --> 00:56:35,399
Speaker 1: California was saying, oh, pure project, you got to try

1054
00:56:35,440 --> 00:56:36,560
Speaker 1: some of their stuff. So I saw it on the

1055
00:56:36,600 --> 00:56:38,279
Speaker 1: shelf when I was out there. I picked this one up.

1056
00:56:38,680 --> 00:56:40,840
Speaker 1: I really enjoyed it. I thought it was kind of lush.

1057
00:56:40,880 --> 00:56:45,000
Speaker 1: It had like some lemony characteristics. So this was an

1058
00:56:45,080 --> 00:56:48,080
Speaker 1: IPA that I gotta say, said, totally have one can.

1059
00:56:47,880 --> 00:56:50,400
Speaker 2: Of I'm glad you picked it up. It wasn't my favorite, okay.

1060
00:56:50,600 --> 00:56:52,480
Speaker 2: It's something about it, like almost taste it a little

1061
00:56:52,480 --> 00:56:54,080
Speaker 2: old to me, like it really it was kind of

1062
00:56:54,120 --> 00:56:56,040
Speaker 2: flat like it. Maybe that's what you call lush.

1063
00:56:56,120 --> 00:56:58,279
Speaker 1: Perhaps this was can just a couple of months ago,

1064
00:56:58,320 --> 00:56:59,520
Speaker 1: so let's didn't be that old, okay.

1065
00:56:59,560 --> 00:57:02,000
Speaker 2: So we all have our different favorites. This one was.

1066
00:57:02,120 --> 00:57:03,719
Speaker 2: It was tasty. Glad we got to enjoy it, but

1067
00:57:03,719 --> 00:57:05,960
Speaker 2: it wasn't my absolute favorite, but still glad I got

1068
00:57:05,960 --> 00:57:07,600
Speaker 2: to share this one with you, buddy. Can't win them all,

1069
00:57:07,640 --> 00:57:09,600
Speaker 2: can't win them all. Yeah, that's gonna be it for

1070
00:57:09,680 --> 00:57:11,319
Speaker 2: this episode. You can find our show notes up on

1071
00:57:11,320 --> 00:57:14,680
Speaker 2: the website at howtomoney dot com. And so until next time,

1072
00:57:15,000 --> 00:57:17,040
Speaker 2: best Friends Out, Best Friends Out,