 Welcome to the Bogleheads Chapter Series. This episode was hosted by the Bogleheads pre and early retirement and retired life-stage chapters and recorded February 21st, 2024. The presentation features an open discussion on the Bogleheads conference panel discussion on advice for pre-retirees and retirees found on the Bogleheads YouTube channel. Bogleheads are investors who follow John Bogle's philosophy for attaining financial independence. This recording is for informational purposes only and should not be construed as personalized investment advice. Talk about just posted in the chat a link to an interesting thread that just started on the forum about the concept of a rising equity or a bond tent approach in retirement. That's the way Fow and Michael Kitsch's study, which has been somewhat controversial. I'm not going to go into detail about the concept there other than the fact that some of us that are doing Roth conversions in retirement, at least in early retirement, end up forcing ourselves into a rising equity glide path. That certainly happened with me because my IRA is 100% bonds and as I'm doing substantial Roth conversions in the early years of retirement and then having 100% converting those fixed income to 100% equities in my Roth that's shifting my asset allocation higher and higher in equities. I'm also spending down the CD ladder that I had created for early retirement. So I've gone from about a 50% equity allocation in when I started retirement into about a 64% equity allocation. Now it'll probably, depending upon the market, continue to rise, but it's an interesting concept to read up on both the concept of a bond tent, which may or may not be useful to minimize sequence of returns risk. It's still relatively new concept and we don't have any long-term data as yet as far as I know from Michael Kitsch's or Wade Fow on how well it holds up. It is certainly something to consider as you approach and prepare for retirement or are already in retirement. Can you give us a quick, what's a tent? What does that mean? Well, the idea basically is to increase your bond allocation, fixed income allocation as you approach retirement much higher. He used to say typically that you would want to have increasing bond holdings as you move through retirement with age, was it age minus something in bonds? 100 minus your age in bonds or something to that effect and that your bond allocation increases in retirement. But Michael Kitsch and Wade Fow did a study where if you start off with a very high bond allocation and do the reverse, you basically spend that down in the early days and let your equity allocation rise that that may provide some protection if you have a poor sequence of returns situation in early retirement. There are arguments for and against it. I don't know how many people practice it. Is there anybody here on this Zoom who have played around with that and are going to get into practice? If I can be so bold, I'm doing that exact thing. I have a, I'm doing an 80-20 portfolio and I've been heavily into bonds and heavily into cash. And to tell you the truth, I took a bath in my bonds with rates increasing my bonds, took a dive. The cash has been pretty nice. I get their CDs and their bond market accounts and they're just strictly interest terms. So you tell me, what am I doing wrong? Well, last year was like a 100-year storm as far as the bond market and what happened in retrospect, it makes perfect sense because of the rapid rise of interest rates by the Fed. So what happened is expected, but the fact of the matter is that people stay the course and just hang on and let the bond market recover. It's partially recovered. It'll take some time, but it's unlikely to happen again. In fact, if and when the Fed starts lowering rates, the reverse should occur where we start seeing that the the market price of bonds is going up and we'll get further recovery from that. The key thing to know, and I think a lot of people aren't aware of this, that the expected return from a bond fund is basically whatever the yield to maturity is at the time you purchase shares in the fund. So if the total bond market has a yield to maturity of say, you know, 4.5% now, whatever it is, if you hold it at least for its duration, which is about six to seven years, and then some, barring any huge changes in interest rates, you should get that return long term. So starting at this point, we should see pretty good returns from the bond funds if total bond market fund, if you hold on to it. And then you may get additional return is interest rates fall and bond prices go up and the the market price of the bond fund will go up as well, giving an additional yield for you if you sell it. Okay, now let me throw you one more curveball. Big picture time I was 80 20 stock 80% stocks 20% bonds, my stocks and my my stock funds have been doing spectacularly. They're doing really well. My bonds stink. They're terrible. Being in retirement. I was I was under the impression of the bonds were not going to move very much. It was going to be my opportunity to keep it steadfast. This cash, you know, I subscribed to that bucket theory. I put a little bit of everywhere so that in fact, as I'm in retirement, the cash is not going to move one way or the other. The cash, meaning my bonds are not going to move one way or the other. Well, I found out the exact opposite is true. I'm not interested in being in bonds for a long period of time. I want the stability of cash. Now, you tell me am I am I thinking wrong? Am I doing something logical? Hell, well right now, obviously cash has a pretty good yield, but you have interest rate risk as interest rates fall. If you're in money markets or short term T bills, what are you going to do with that money when it matures? Whereas if you're in a bond fund long term, you'll you'll reap some of the benefits. But the bonds are there for ballast as Jack Bogle would say. So there, you know, although we didn't expect we should have known that this could and would happen. But we kind of were we're so lackadaisical and comfortable that bonds were going to maintain their value all the way through. But I mean, there's no way that low interest waste would have been maintained to this degree. They had to go up a time sooner or later. So the fact of the matter is, though, if you look, the bonds fell, what, 17 percent? I think maybe total bond market, but they didn't fall as much as stock funds did. The total stock market fell worse. So there's less volatility in the bond market. We just got hit hard for one year and there's a lesson learned. I'd be curious to hear feedback from everybody here as to how they have have handled that. A lot of us have a significant portion of our portfolio in bonds and how did you all handle this situation last year and to some extent this year? Yeah, Mel, do you have your hand up? Do you want to speak to this? You're muted. There you go. Not hearing you, Mel. You did again. Let's move over to Laura and we'll get back to Mel after this. Yes, I'm about to retire at the end of this month and my asset allocation is 50 50 and I chose and I work for the federal government. So I chose to put my bond allocations in the G fund, then my TSP and mostly I bonds of small smattering a double e bonds. And the reason I picked those vehicles for my bonds is because my understanding that they would not lose principle regardless of what the interest rates did. And I found that to be true, especially when all the bonds were dropping in value. My I bonds did very, very well as well as in some cases I was making over like a little over 10% on some of my bonds. But I've been collecting those I bonds for about 15 years in anticipation of one day retiring. And if I retired in a bear market, I would have someplace to go that for sure would not lose its value. And in the case of I bonds would at least keep up with inflation. And for some of those I bonds that had fixed rate above zero, it would be even a little better than inflation. So that's that's my only comment. You know, the one thing I've heard and I don't dabble that much in bonds, but one thing I've heard is let's say I get a double e bond at 5%. And then the next day, magically CDs are paying 7%. I although I may not lose principle and it's redeemed at the full face value of the bond. Technically, I could get 7% somewhere else. So I'm technically kind of losing money, even though it doesn't look like it. I think that's the general argument there. So just to bring that up, except, except that, you know, it can make, you know, you don't know how long for how long they'll make 7%. No, you're right. You're buying, you're buying, yes, for an, you know, indefinitely. Yes. Yeah. And I'm not arguing either way, but that's what I've heard. Jim, do you have a comment? Yeah, I've taken a different approach. I start off with the concept that stocks and equities will perform much better over time than bonds will and if look at history, that has largely been the case. And theoretically bonds are in there to stabilize things. However, it's clear. I think if you do the math behind bonds that if you're in a rising interest rate environment, which we did experience these last couple of years, then the value of the bonds will go down in a like manner. If you're in a declining interest rate environment, the value of bonds will go up just because of math, everything else being equal. I personally have been very heavy in stocks, 80, 90%. But recently with the Fed talking about lowering interest rates of up my bond percentage to about 20, 22%. And as far as bonds that pay 4%, somebody mentioned that earlier. Well, that's hardly keeping up with inflation. That's not doing you a whole lot of good as far as an investment is. If you think about an insurance, yeah, there's some insurance there. I did an analysis. This is before interest rates started rising. If I was better off having money in cash that I would use if the stock market went kaboom versus bonds in and leaving more money in stocks and having a pot of cash, which I would call on if the market really tank. So I wasn't selling in a declining stock market came out far better than bonds because it takes less cash to generate cash. You can check out that it does in the value of a bond. So bonds have their place. But I think that unless you're really interested in safety tends to not be nearly as good as a much more aggressive equity portion. Okay. I just put this up. I'm no expert at this. Somebody showed me this the other day and I'll put this in the chat. And what I did was I said I want to go from 1990 to 2024, but I could change that if somebody wants me to. And I started with 10,000 and then I told it I wanted the US stock market or the total US bond market. I could pick treasuries and different things. I just took this total or total US bonds. Okay. And in this portfolio, I have 100% in the US stock market. Doesn't really say what, you know, S&P 500, whatever. And then this is that 100% in portfolio number two. And if you so you guys could you can set this up yourself. And if I click analyze portfolio and then this is I think the blue and the stock. Yeah, there's the stock market. That's from 1990. And you do have a very steady climb on the bonds. And then you have this little problem here as Alan and Scott were talking about. But that's in the chat if you want to play around with that and change the times. And it also tells you like your worst year in the stock market. So down 37% and the worst in the bond market. And this was 13 and a quarter percent. So kind of interesting. Okay, Jim, you're so Scott, how long of a period was this? Were you like were you like a lot of stocks a long, long time ago? And you did this over a long period or was this recently? And you're muted, Scott, if you could unmute still muted. I'm sorry. There you go. I have a few windows open and so I'm there. Yeah, I'm I have a very short timeframe. I've been looking at the bonds for roughly say the last year or so. I'll give you a for instance. I can change his date if you want. Let me change this to the date range. You're you're you're talking about what should I do then 20 do 2020. That's fine. 2020 to 2024. And then I've got the 100% 100% and I'll hit analyze here where you're at. Okay, cool. And then this gives me this, which you probably lived through, right? Yes. That's exactly what I'm dealing with. Yeah, for instance, you know, the S and B 500, the VOO. I'm getting 24% return in the last year. Whereas my bond fund. I may be getting 4% 5% when I'm looking at it just in the last year. And look at, I mean, here we're talking $10,000 to start an initial dip. This must have been the COVID downturn, right? Right when COVID started, I think. Okay, and then now we're still below the line here. We're at 9600 versus this one. But obviously, you know, we could have a bigger correction than this and we'd be wishing we had bonds, right? That's exactly right. And for me being a newbie as far as the retirement thing, I just retired. I don't want to lose any money, period. And I'm familiar with the stocks going up and down. I can handle that, but I'm trying to equate whether just to keep that money in cash or to put it in bonds. I don't want to look long term. I don't want to have a five-year window for bonds. I want to be able to have that money, that cash available to me tomorrow. Yes, Alan? Yes. Well, I think you need to look also remember a couple of points. Number one, we want to look at our overall portfolio return. Don't just focus on the equity returns and the angst that we're not getting that elsewhere. We want to look at how the whole portfolio is performing for us and making sure we have enough to live on and basically not and we want to run out of life before we run out of money and be able to sleep well at night. So you have to look at the two together and be and accept what the combination gives you. And again, even looking at the bond market, it went down, it dipped down, it's slowly recovering. So we'll be okay. Those who stay in the course and don't try to time the market and don't bail just as when equities are falling, you don't want to bail and sell at the lows. You likewise don't want to do that with bonds unless you are taking advantage of it as a tax loss harvesting opportunity, which is another thing we can delve into. That's something I did in my taxable account as bonds fell. I had some municipal bond funds that took a beating also and I sold them and tax loss harvested to get some benefit there. So even when the market is volatile, certainly when bonds are volatile, there are some potential opportunities in a taxable account to benefit from that. But the bottom line is we want to stay the course long term. If necessary, you can kind of build a liability matching bond portfolio as ties into the time when you need the money. You may have a combination of short term, say treasuries and then some intermediate term treasuries. Bogleheads tend to advise against holding long term bonds because of their inquiries volatility, but some folks still do. But if you kind of split up your bond fixed income holding between intermediate term bonds, short term bonds and then some cash as well, certainly with good yields now that's reasonable and you're further diversifying and just stay the course and rebalance. That's what I tried to do. Okay. Thank you, Ellen. Mel, do you want to say something? Let's see if this. Can you hear me on this one? Perfectly. Okay. Good. My other computer, the speaker wasn't working. When Scott said he simply doesn't want to lose any money in bonds, there are several ways he can do it or a combination of the two. One is build a treasury ladder, buy an auction and hold a maturity and you will not lose any money. You may lose spending power. And another way to cover that is to buy your allocation of I bonds. So a combination of short term at the present time short term Treasury's bought an auction held a maturity and I bonds should cover him and you won't lose a penny on either one. Okay. Okay. If I can be so bold, I love what I think her name is Christine Bands over there at Morningstar talks about and the different bucket strategies and so I have a huge bucket of stocks. I'm used to stocks. I'm familiar with stocks. I've been involved. I've been invested in stocks for 50 years. I'm used to that the bond situation. I'm relatively new in the bond thing. I've been doing the bond for roughly a year, two years, three years bonds have been losing money like crazy lately. I've been I've been taking a bath in my box. Then I have I have a whole bunch of money market or CDs or online savings account and they're, you know, they're not losing any money on a monthly basis and the interest I'm getting is four or five percent. I'm having trouble sleeping at night knowing that my bonds are being affected so dramatically where I whereas I've been just I've been doing really well in the stock market for the last, say, 10 years. I've been doing really well. Now I'm taking a bath in the bonds and with my limited experience in the bottom market losing money year after year. I'm really I'm hesitant. I'm having trouble sleeping at night knowing that I have 20 percent of my portfolio and bonds that have been taking a bath and you're telling me I just need to ride the ride away just stick with it. I mean, if the Fed announced tomorrow that the interest rates were one percent, wouldn't you be just you'd be whole like tomorrow morning? Right. You're absolutely right. I don't think it's going to happen, but it would. Did Scott hear that Scott, did you hear that you can buy treasuries at auction and hold a maturity and you will never lose a penny? You can also buy I bonds, which will give you inflation protection and you'll never lose any money. So there's two solutions right there and then you can sleep at night. Well, it's also good to hear Scott that it's it's 20 percent not 80 percent either, right? I'm sorry. I missed that you said I think you said it's 20 percent of the portfolio, right? Correct. Correct. 20 percent of my portfolio is in bond. Yes. And from a diversification point of view and as Ellen was saying earlier, what age minus what was your number Ellen? I think it's a hundred minus age is one of the rules of thumb. I believe now let me be brutally honest with you guys. I've been a hundred percent in stocks for 50 plus years. I've written the way I've been exposed to back when the market dropped 50 percent in 2008. I wrote it out. I didn't move. I didn't I didn't lose a dime. I stuck with it. I'm used to things like the stock market going up and down. You wrote this. This is what you wrote. You're the bull. Yeah, I wrote it. I wrote the red lines. Not so bad either. You guys are killing me. Jim, if you can show that live through the depression that wish they had some money in bonds probably if they were solvent, I don't know. Jim, can you create a third portfolio there on portfolio visualize or a 60 40 portfolio of equities and bonds to show you what. What that does. Yeah, yeah, I think I can go 60 here is you want 60 on them on the market and 40 equities 40 bonds and then okay. That should do it. And then that gives us that and that's the orange line I believe, right? Right. Yeah, portfolio. I got it. Yeah, I got it. As somebody said in the comments, there's no free lunch and there's some other comments about cash. Although it's paying great now when interest rates drop, you're not going to get that. People also commented that VOO is high return because it's high risk. Is it VOO this Vanguard thing? Is it? Yeah, that's one of those. This is VOO. Yeah, so I like that curve too. But look at this. You got some things like this. Hey, I was there. I felt it. It was there. You get to take the good with the bad, right? But you know, see this thing is I'm used to that with stocks. I want that to happen with stocks. I'm not going to lose any sleep, but the bond market is something that's new to me that is killing me. Yeah, it's new to me. I mean, I get the same feelings. Let's see, Jim, do you have another comment? And you're muted. Okay. Anything else, Scott, before we move on? I don't know if we can give you any anything that would make you sleep better other than Mel's advice. The bucket strategy is cash system. That's a good one. Some of it in bonds, some of it in stocks and some of it in cash. Yeah. In fact, if I do what Alan was talking about here, let me go right to here and you were saying 80-20, right? That's what I meant right now. Let's put this 80 and 20. Okay. And then I'll hit this. So now that's not so bad. I mean, you could do a lot worse, I think. Don't you think? I know it's not what you want, but it's not so bad. Being retired is a bitch. Okay, David, did you have a comment from Detroit? Yeah, I think so. I think, I mean, this conversation is really focused on some extraordinary times we've had in the past couple of years in terms of specifically bond market. And I guess my thinking is that what's happened in the past few years is interesting to learn from, but we need to be looking forward, understanding what the nature is of the different things we want to be invested. And I think, so I want to be forward looking first off and second, I think maybe sounds like some lessons have been learned here, right? So if something about your asset allocation is causing you to lose sleep, I think that's a red flag that says maybe your asset allocation doesn't suit your risk tolerance. And so, yeah, so let's just understand what happened in the past and that we've gone through an extraordinary couple of years here and think strategically going forward. Okay, thank you, David. And Jean, do you have a comment? Yes. Like Scott, I was heavily in stocks and as I've gotten into retirement, I moved to bonds. And before I totally got into bonds, I started to study bonds and realize that not all bonds are equal and going back to Mel's message, you know, treasury bonds and I bonds are a whole lot different than municipal bonds and corporate bonds and junk bonds and there's all kinds of bonds out there, Scott. So what are you invested in? How are you muted, Scott? Go ahead and mute yourself. I'm in T-bills. I mean, I'm as golden as I possibly can get. I'm not buying any I bonds. I'm not buying any junk bonds. I'm not buying anything other than treasuries. Short-term, long-term. I think I can pick treasuries here. Right now in not long-term, medium-term and short-term. Okay, how about if I just call it intermediate-term treasury here? There you go. Okay, so and that would be 20% here. And intermediate is anywhere from four to eight years or something. What is the duration of those? No, but the bond market I'm looking at is five years as the maximum, five years as a maximum. Then which one do you guys think I should pick here? That that's short-term. Five years maximum. I think Mel, Mel, come on on, come back. Come back to us, Mel. Yeah, you're short-term. You start to hit at the five to six years. You start to hit the intermediate. Right. He's right at the cut-off point. All right, I'll pick short on intermediate. All right. You're in strictly treasuries and you're having trouble sleeping at night? Yeah. Ambient. I'm looking at my S&P 500 and I'm getting 24% return and I'm looking at my Schwab bond fund and I'm getting 4% return. But there's your problem, Scott. Don't buy a fund if you cannot afford to lose any money. Correct. Individual bonds by treasuries and hold them to maturity. You will never lose a penny. Treasury. It's at some range. Yeah, bond funds have high fees. This orange line, Scott, I just want to make you sleep better at night. This orange line, a lot of people who are paying high commissions, high fees and are invested in the wrong stuff are not getting anywhere near this orange line. So you should sleep better than you are. Okay, so to get the orange line, what do I got to do? That's what you're doing. Treasury direct. You're not blending the 20. You need to blend the 24% you're getting in your stock market stuff. With your 4% you're getting in the bond. That's what this is doing. This is the stock down here, the bonds in the red and the stock market generally in the blue and because you're 80-20, you're 80% closer to that line. And you have the diversification, which when the Fed lowers the interest rate to 1%, tomorrow morning, you'll be completely opposite on this topic. Well, you can see the volatility though. What you're doing is adding volatility. If you see that the yellow line more or less parallels the blue line because they're primarily equities compared to the lack of volatility of the red line. So it's a matter of risk, how much risk and volatility you're willing to accept to allow yourself to sleep well at night. We're all individuals. We have to decide that for ourselves. So backing up big time. I am used to volatility. I want to take advantage of the stock market. I want to get that 24% return. I want to get that 50% return. I can handle, I'm keeping 20% of my portfolio roughly five years worth of cash, living expenses. I'm not working anymore. I want to be able to have five years worth of income that I can just access tomorrow. So what you're telling me, I'm not going to find that in the bond market. I got to put that in CDs and usual fund. You put it in CDs. You don't have immediate access to it without paying penalties. So you can, you can, a penalty is a loss. So if you once again, you're heard somebody else mentioned having a tree, having a CD tree, have something that's going to mature in five years. Have something that's going to mature in four, three, two, one. Okay. So that I have access to, you know, 10,000 bucks a month that I could play with. You can do that with CDs or you can do it with, with treasuries. Take your pick. Yeah, but once again, the treasuries, I'm not doing well. You know, when I'm getting there, what do you tell Scott, what do you tell somebody that, but when I'm full into the market right here and dropped this much versus the guy who bought bonds on that same day, who rode right through this blip. You just, as I think David mentioned, we've got extraordinary circumstances going on in the last few years here. Okay. Do you have a Vanguard brokerage account? Yes. Okay. You can buy treasuries with no problem, no cost, and you don't have to deal with Treasury Direct right from your brokerage account at Vanguard. Okay. Do I have to do 10,000 bucks at a pop? You can do a thousand. You can do 5,000. You can do 100,000. You can do 10 million. Okay. Big picture time guys. Let me ask him point blank. That 20% that I was allocate towards bond. What if I pull that 20% out and put it in mutual funds, put it in money market accounts, put it in CDs. Well, the CDs are going to be available to you without paying the penalty if you need it right away. You mentioned that. I do that tier thing. Right. Let's just reuse some round numbers. That 20% let's say is a million bucks. Let's put, you know, $800,000 in four years, a CD that lasts four years. Then let's put another $100,000 that in a one year CD. You follow me and put the rest in a mutual for back and access next month without a penalty. Not without a loss though, which is what you want to have a loss. I'm not going to get in a money. You've already experienced it. Scott, the whole problem is you've already experienced it and you can't handle it. So you got to work. You got to work around your inability to handle losses in bonds. If I can interject, Jim. Yes, I think we probably ought to move on. But one thing I want to say is this is a little disclaimer to remind everybody that this meeting is for informational purposes only and should not be construed as personalized investment advice. We can't delve into extreme detail for everybody. We're just going to talk in generalities and basics. But if there's anybody else who has a little bit of a different perspective regarding bonds and how they handled the downturn last year, we'd like to hear from you. Otherwise, I think we perhaps ought to move on. Okay, anybody else? Raise your hand if you want to speak about bonds. Okay, well, we'll move on. Thank you, Scott, for sharing that with us because it was good discussion. The next topic is pre-retirees, traditional or Roth retirement contributions. So I think on the video, they said not everyone had access in their early days if they're retiring now to Roth accounts. And now they had a discussion about whether you should be contributing to a traditional or a Roth. And I forget if it was Mike Piper or somebody said, they always base it on if you could predict your tax rate today versus when you retire, that should be part of your guidance. Does anybody have experience with that? Maybe they've switched from traditional to Roth and they're not yet retired? Anybody there? David from Detroit? Yeah, actually, I've sort of gone through sort of my thought process on that as I look forward to retirement. And so I'm in my sort of want to expect the sort of peak earning years. So one, you know, sort of if you'd asked me 10 or 20 years ago, you know, where I would be at this point, it's oh, yeah, I definitely want to be contributing pre-tax. But then as I look forward and, you know, actually, so now that I have like line of sight to what cash flows might actually look like at, you know, a future retirement time, I realize that those that RMDs, you know, wind up catching up with me in a couple of decades should I still be around? And so that changes the math entirely. So even though I'm at my peak, you know, salary earning years, though that income for me is going to wind up being substantially less than what my income might be in RMDs would likely be or my projected to be at that time. So even though I'm at my peak earning years, I have completely shifted and put nothing into pre-tax, into pre-tax savings anymore. And I'm actually converting, you know, hundreds of thousand dollars of these next three years while like while the current tax cuts are in place. So I've had to completely shift gears. That's a personally personal, a completely personal situation, but I mentioned it because it's contrary to what sort of one might intuit if one looks at this from a couple of decades back, right? Yes, I'm at a place where one would expect to be really definitely abusing that tax deduction. But it turns out it's small potatoes compared to what I'd be facing at RMD time. And somebody commented on one of the other calls that the having high taxes at RMD time is a good problem to have means you've got some money. Definitely the kind of problem with always to have. And so Leslie, you have a comment on that or you want to talk about your situation and you're muted. Okay, Jean. I've been taking RMDs for several years and now that I have the hindsight, I would have done it differently. I would have taken my nest egg and divided it in half and had half in 401ks and the other half in after tax monies because when the RMDs hit, they hit hard and you're just creating a huge tax bomb. And that applies. And yes, it's a nice problem to have and it applies to those people that were steady savers. You know, they started their IRAs when they were 25 or 30 and they saved every year the maximum amount. You've when you get there, you've built yourself a tax bomb. Second thing is, is I believe this is a lower tax season than we'll see in a while. So it's better off to pay the taxes now. Okay. It makes sense. I think Alan, you talked about the RMD alternatives with charity or something last call. You want to mention that again? Well, they're qualified, turtle, what they call them QCDs, qualified, turtle, what distributions? I think I haven't done those, but you can donate from your tax deferred account to a charity and that will count towards your RMDs. Perhaps somebody who's doing that or Mel can provide details on that. But one thing I'll add, it was my Piper, in fact, who commented primarily between decided between raw versus versus traditional contributions while you're still working. And as he pointed out rightly that a lot of us retirees never had Roth contributions as an option in our working days. So now's a good time for us to be doing those Roth conversions and also to consider, as David did, to put more money into a Roth, especially if you were in a expect that will have favorable tax status in the future. But if you have a match in your IRA or 401k, I should say that is reasonable to at least contribute as much to get the match. You don't want to turn away from free money and thereafter put more money into a Roth if it's appropriate tax wise. The other group of people who need to be thinking about whether they're about consider putting money into Roth instead of a pretext are those with pensions. And you mentioned sort of the previous generation that had was more likely to have a pension and and less likely to have access to to Roth 401ks, for example. But if especially those in the middle who had both, you know, for those who've had access to a lot of pre-tax contributions and also have a pension who may not be drawing down investments early on in retirement than those, you know, when one is receiving, you know, a pen, you know, maybe a couple of pensions, a couple of social securities, when one hits RMD age, you know, you know, a lot of those returns from from investments can really wind up stacking on to create higher income levels and tax brackets than anticipated. Yeah, if I can interject one thing is helpful. I believe it's Schwab. I was looking for the URL. I don't have it in hand, but I think Schwab has a free online calculator for RMD payouts and you can plug in where your current tax deferred account is and some other key information and it'll project out what your RMDs will be in the future. So you can kind of use that as a gauge as to whether you want to continue contributing the maximum there or perhaps shift dollars towards Roth or otherwise. And that's a useful modeling tool. You do have to make some assumptions on what the return will be. But if you're typically primarily fixed income as many of us are for predominantly fixed income, you can kind of model it pretty well with the future return will be and then see where your RMDs will look like years later. Yeah, Ellen, Keith, go ahead here. I was just noticing in the chat. There's a couple of comments right after Keith. I'll I'll make some comments that might get some discussion going that's in the chat right now. Go ahead, Keith. Yeah, I I'm kind of in the situation that David from Detroit was describing have a pension and you know, I'm a few years away from collecting social security. I want to get to at least full retirement, if not a little bit later. And what scares me is having to take RMDs. So as I mentioned, I think when I talked earlier, I I'm going through and doing Roth conversions. I didn't have the opportunity to have a Roth 401k that I could contribute to until the last month of my 30 year career. And so it was way past. I had advocated for it for about 10 years and the company never did it until I literally had one month to go till I retired and I wish I had that option. And I look at it from from two perspectives. Number one is just having the ability to put that in tax after tax. But to me, it's really the flexibility because you don't know what kind of situation you're going to be in later on when when RMDs happen, you know, between my pension, social security, my wife will get a spousal benefit. And then having to do RMDs, I think it was Gene that mentioned, you know, it can it can hit you pretty hard. And so I'm kind of taking the pain right now and doing Roth conversions and paying the tax on it. But I wish I had the opportunity to do it while I was working. So I have two working adult kids with with 401k plans and I tell them do Roth if you can and make sure you're contributing to your Roth IRA so that later on, no matter what fiscal policy there is and tax rates there are, you'll have the flexibility, more flexibility than someone like myself that has to do Roth conversion. So I like that. And the fact that I'm doing something that I know right now what what the tax rates are. So I can I can plan with a known known so to speak as opposed to not knowing what's going to be like when it comes to Roth conversions. I just prefer to make decisions based on things that are factual rather than guessing what it's going to look like in the future. I think the diversification aspect there is is really important and you know, I think he and I this is David we've you know, we've both learned a lesson that having some more money toward the Roth side might have been helpful in retrospect, but don't forget that depending there's lots of people online here, people are earlier in their career, especially that you know, you certainly don't want to do is have to be in a situation where you're you're pulling out funds out of your Roth out of a Roth account in retirement, you know, for your first dollar, right? Because those very for married filing jointly today, you know your your first $27,000 are $27,000 $27,700 are tax-free and then for some portion after that, you're only paying 10%, which is almost certainly less than you're paying today. And so, you know, you want to plan on having money in both accounts, you know, Jean has said 5050, you know Keith has said he wishes more on the other side, but I think tax diversification was also mentioned in the in the roundtable and I think that's sort of what we're talking about is it's not all or nothing but but I think at some point you need to start projecting future cash flows and that's and that's where everybody alluded to it depends and you need to really need to feature cash flows. I found that new retirement was the of the calculator that put me on the right put me on the path of understanding where I might be and help me sort of understand what the right mix might be for my situation. If I can just add really quick before you go to to Marion, I think the tax comment that David made is very important for those of you that are five or 10 years away from from retirement. I personally used Turbo tax for a long time. So I saw the hard numbers that I was entering and thinking about I have two friends that are near retirement and they both have somebody else do their taxes for them so they don't really think about tax consequences and moves they might want to make and now that they're thinking about retirement and they're asking me my advice, you know, one of the things I say is get familiar with how things are taxed because there are smart ways and not so smart ways to spend in retirement, you know, certain money that you want to spend others that you don't depending whether it's taxable account or not and just understand how things are taxed and where money is coming from and how it affects your individual tax situation because that can be, you know, thousands of dollars a year difference in an available income depending on how you handle certain things. So for those of you that are five or 10 or 15 years away and you're just maybe starting to think about it, my advice is to at least get familiar with taxes and how they work and how it's going to affect you so that you start making the right decisions now and don't put yourself in a situation where in retirement all of a sudden you're you're paying more taxes than you thought you were or needed to because it affects it more than I think people realize when they're working and they're busy with their work lives. Okay, thank you Keith, Maryam. I agree with what Keith just said. I agree with that. One thing on the forum, many will say that it's good to go into retirement with equal amounts in your taxable account, your 401k, your pre-tax account and your post-tax account, your Roth account have equal amount in each more or less because as David mentioned, when you get into retirement, each account has different, there are things, different things you can do with each account, pre-tax money, post-tax money and your taxable account. It gives you flexibility and especially for our kids, for our kids now they can put a lot of money into those Roth accounts. They can pack it into those Roth accounts but not to neglect the pre-tax accounts. For example, my kids, they can have their 401k be pre-tax and then they can max out their Roth IRA, which is now $7,000 a year. So that's a pretty good chunk into your post-tax. By the time they reach retirement, they will have a big chunk in the Roth IRA already, which we did not have because there were no Roths when we were accumulating money. So it's good for them. Also for the kids, when they put it into the 401k, remember that money is not taxed so their income tax is lower. So they have a lower income tax because the 401k is not taxed, therefore they have a little extra money. They can then put that over into their Roth IRA. Anyway, that's how that can work. Yeah, kind of like investing the tax savings, you're saying. Yeah. So anyway, for me, it was interesting. I kept investing in my regular traditional IRA before there were Roths. By the time Roths were born, I had this huge, well, in large, traditional IRA. I just kept investing even though I could not deduct it. What was nice is that by the time I converted, really only about 50% of my conversion was taxable because the rest had already been taxed when I put it into the traditional IRA. So, you know, that even if you're, you know, you're in my position that you were in the position I was in, hope is not lost. You can still do a nice conversion into your Roth IRA and not pay a giant amount of taxes now, a huge amount of taxes now. Okay, thank you. We have a caller or not a caller, but we have a person named 14 056. If you'd like to go ahead. Yeah, this is Pat. Right now, they're telling a lot of young people just to go into Roths right away. And I'm talking about people graduating from college because they said your income for many jobs is never going to be lower than it is right now. And just keep doing that. And right now, I think my company now will also match Roth 401ks. Right now, I'm about 50% pre tax 50% post tax and my issue right now is I really need to not take Social Security until full retirement age. I want to work indefinitely. I work on call as an editor and I'm part time on call and I'm really, really enjoying it, but there seems to be no good time for me to do any kind of conversions or whatever. And I'm starting Medicare in July and I don't really want to do anything that's going to what is it the Irma? You know what I mean? So it's like somebody can't say, Oh, wait till you retire because I'm happier when I'm working. I'm single. And you know, I have friends and everything else, but just somehow making money, even if it's like a small project, it gives my life structure. So I'm just really kind of struggling. Somebody was talking to me about apparently I'm pretty well said I was told that they did a Monte Carlo and it's I should be able to live the rest of my life with with no problem. I can't bring myself to spend my money for 32 years or actually closer to 35. I've been investing and reinvesting dividends and capital gains and it got me to where I am now and now I have a cash flow problem because I'm really heavily invested. I could take money out but I hate doing it. So I'm just kind of stuck. I have to figure out what to do, but I can't spend my own money. That's a common problem that they talked about that on the and what did you say Alan last time either you fly first class or your errors are going to fly first class. Right? You said I love that one. Right. I'll throw in something. I'm just putting this in the chat, but just to reiterate for those of you who can having the majority of your bonds in the deferred tax deferred account may be beneficial because the slower growth of the bonds will help moderate your future RMDs because if you have more of your equity holdings in a taxable brokerage with favorable long term capital gains tax rates or Roth with no taxes have your main growth occurring there and slow down your your tax deferred growth by having most of your bonds if not all of them in that account. That's another way to control future RMDs long term. And Leslie, did you have a comment your hands up? I do. Sorry, I had issues with my microphone. One thing that I've learned over the last couple of years is my company allows us to max out the IRS free tax savings. So $23,500 plus the catch up and they'll match that. And once we hit that IRS limit, they allow us to put money in post tax dollars up to the IRS limit, which is now close to $76,500 that money can be immediately rolled over into our 401k Roth. So it's a mega backdoor Roth concept, but that's the way where I'm putting a large amount of money into the Roth. To kind of spearhead what everybody's been talking about trying to be able to maximize our taxes when we retire. But so anybody who works for a big corporation double check, I would say I've actually done some education for our employees and I would say 90% of them did not even know that this benefit and I considered a benefit existed. So for super savers, it's a way to get the pre-tax savings as well as get money into the Roth environment. Okay. I'm just going to ask Margo if you wanted to get on, you know, at least speak to it, you mentioned in the comment about psychologically on a hard time having having a hard time spending money that you've so diligently saved. Could you maybe express your comment audio wise? You mean me 14056? I came up with Margo on the chat. I was addressing it to you to 14056 but I just personally I'm like known as El Chippador among my family and I just have a really, really hard time spending money. It's so hard for me and I like, you know, comparison shop for everything and it just I got to a point where I had to realize like this is not productive. This is not a good use of my headspace. A good use of my like limited time on earth. It's just not what it's meant to be used for and I read, I can't remember where I read it, but it said, I can't remember now where I saw this, but it said if you have a hard time enjoying or employing money productively, a great way to begin to get over it is to, you know, find a cause that you're passionate about and donate whatever amount is like a little bit painful psychologically. Like that's a good idea. Yeah. Right now I'm turning 65. I don't even know what's going to happen to me. I don't have long-term care insurance. I probably can't get it. I instead of trying to sell stuff, I do donate like to a lot of animal shelters have a thrift shop and I like getting rid of this. It's really easy to get rid of the stuff knowing it's going for the animals, but right now I still have an issue that I don't know. They say I'll be okay, but if I end up in long-term care on either dementia, God forbid, you know, it's not going to be easy because by the time I'm old enough, you know, we could be paying a heck of a lot of money. So I really can't, you know, right now I have to really keep a tight reign on my own money right now. I understand. One more comment from the chat. I was wondering if Matthew Heaney could speak to some of the issues about not wasting space in the lower brackets and smoothing out the marginal rates. I think you made comments about that. I've seen a few comments in the chat. Are you still here, Matthew? Okay. So I think actually, Alan, you've already touched on this tax efficiency of drawdown strategy, right, which is this topic here. Not per se. I guess I'd like to hear other folks thoughts other than as Miriam alluded to having tax diversification is key and having, you know, three buckets relatively well balanced. It gives you options depending upon what the future tax situation is that you find yourself in. Historically, I know they say that draw from your taxable brokerage first and then you go to the IRA or tax deferred and then leaving the Roth for last. But there's times as I think Wade Fowell alluded to during that roundtable discussion that there are times that you may want to switch that up a bit. It has to be, you know, it's an individual situation. You have to decide what's best for you and your tax situation. I'm not a tax expert by any means. So I'm curious to hear other folks' opinions. Would anyone like to speak about tax efficiency drawdown strategies and what you're using? Okay. So I guess the next topic was pay off the home mortgage before retirement. Anybody chose that or chose to go the other way? Mortgage to the Hilt. Okay. You know, I'll just say, Jim, I'm a big believer in having, you know, known things that to deal with. So to me and, you know, we paid off ours. We don't, I didn't want to have a mortgage in retirement because what if something else happened that needed to be piled on top of that? You know, I have adult kids and, you know, help them a little bit to get on their feet that maybe I didn't think about 10 years ago. You know, as you get older, obviously you start to have more health issues, whether it's just co-pays or whatever. And so for me, less debt, the less debt, the better is what I aimed for. So when those unexpected expenses came up or just maybe wanting to travel and the difference between being able to travel and not would be a mortgage payment that I'm a big believer in and having as little debt as possible when you go into retirement. And you sleep better, right? Absolutely. Gene, would you like to make a comment about that? Yeah, before I retired, I paid good money three different times to go out. And I always ask that question financial advisor, should I pay off my house? Should I pay off my house? And I constantly got the advice of no. Now, of course, I'm in retirement and I see it would be very handy to have it all paid off. It would require less monthly output of cash every single month. So I am now an advocate for pay it off. The only con to that would be let's say you had one of those really bare bones mortgage rates of two. I don't know what the lowest that ever hit recently but like like two and a three quarters or something. And as Scott was talking about interest rates and CDs there would be a different a big marginal difference. And I think that's partially what's going on in the housing market. People with those mortgages say if I sell this house today by this other house I'm going to trade it two and a half for a seven. So there's that going on. I have a 3% mortgage. So I am one of those people and I still see the advantage to having to pay it off. Oh, yeah, I agree. I agree with you. I'm in your camp but this is I'm just saying what other people might say. Joe, do you have a comment on this? I think that's the go ahead and I'm sorry. I think that's the wrong way to think about it is compared to the open market rate because that's always going to fluctuate. This really fixes your cost and retirement and it's your number one expense next to it. Well, it's actually number two. Taxes is your number one spend and your house payment is number two. So it controls number two and I'm all for controlling the top five spends that you have. And the sleep of sleep at night factors nice. I totally agree with you on that one. So I think the professionals just don't really have a clue yet because I'm a retire. Yeah. Joe. Yes. One thing we did we notice a fair time before I was ready to retire that just adding a little bit of extra principle to the mortgage greatly reduce the duration and that was you know a very good feeling of being able to just make some extra payments on it that greatly reduced it then as about the time I was retired we did pay it off and I just felt I slept much better. I just felt very good then that it was totally paid off and that was out of the way and most people will find in retirement. Sometimes the property tax goes up. So even though you don't have the mortgage payment you do have non-insignificant property tax payments. Yeah and insurance if you're in an area where you know insurers are getting out like some areas of Florida I think you could have a lot more homeowners insurance than you had before. All the all the insurances are going up but in areas we're in Alabama which is not a particularly you know other than tornadoes but anyway but still we see that going you know steady climb. Thank you. You're welcome. I noticed in the chat from Margo, Kim and Carolyn the opposite about the good rate mortgages that they have and the fact that they can pay them off whenever they want. Is any anyone of you guys want to comment on that? Okay so this is Carolyn. Go ahead Carolyn. Yeah I would just say nobody's giving me money at 2.8 but 75% so I'm going to keep my mortgage and just pay it off as usual and I could if I needed to pay it off I could I could but you know I sleep fine at night with the with the mortgage. Good. Okay anyone else? This is Kim. Yes Kim. I think my comment was really really related to how quote money managers being paid and they generally don't want you to take money out to pay off the mortgage because it reduces their income so charging you based on assets under management. They would never do that would they? Maybe. That's a very good point yes. Controversial idea right now and I'm a proponent of Dave Ramsey and he talks about paying that thing off to sleep better at night even under it's a it's a hard sell when you're paying 2.75% Yeah. I just want to ask Leslie who has her hand up if you really have your hand up and would like to say something or is that just stuck on right now? Okay. Let's move on to Joe. Joe you have a comment? No I had taken my hand down. Okay. There's a DC username DC go ahead. Yeah. Can you hear me? Okay. Yes. Yeah. So I'm in the process of paying down our mortgage and I'll explain my reasoning on that. So we have 2.99% mortgage. It's a decent amount of money on there. You know, say about 70,000 but we're going to pay that down before we retire even with even with the lower rate and our reasoning is based on our ages when we retire. So I'll be going on A.C.A. or Obamacare for about four years. My wife's going to be on Medicare but she's also going to collect her social security at F.R.A. She's older than me. So our reasoning is let's pay it down because I want to keep my income low when we first retire so I can qualify for A.C.A. subsidies. We want to keep our social security taxes low. So I want to keep my income low so I don't want to be paying a mortgage once I'm actually retired. So that's our thought process. That's excellent idea. So if you were taking if you had to pay all that out of 401K or something drawdown that would be income and that would affect your A.C.A. subsidy, right? Okay. Very good comment. Sunny. Yeah, I'm going to be in the process of retiring and I have a 2.5% rate and a decent size mortgage but my cash portion and my short term bond portion there's more than enough there to pay that down. So I don't really have an issue sleeping at night because I can pay it off whenever I feel like it. Let's say two or three years down the road rates go back down and end up back at you look at 1% or something in terms of savings rate. You can just pay it off at that point where I'm making 5% now and savings or a CD. Okay. That's my view. Yeah, very good. Let's see our next topic was funding ratio tool for retirement readiness. I don't remember what they said about that is anybody remember what that topic was about? I said, Jim, if I can interject there's a good comment from Maggie Wood about this is anyone considering selling their house and downsizing and then and or renting in retirement and also throw in the concept of geographic arbitrage moving from a higher cost of living area to a lower cost of living area during a retirement if anybody would like to address those options. Carolyn, go ahead. Yes, I've thought about that and I'm kind of looking at it two ways. So my younger retirement years I'm going to stay where I am. I a ranch and remodeled it and planned to, you know, kind of stay here for that first, you know, 1520 years when I'm more more active as a retiree and then I will probably downsize from there and go somewhere where more more kind of independent living situation for seniors where because I'm single and I don't have kids so I think at that point you know I'll be ready to kind of slow down and it'll probably be someplace like Vegas or somewhere warm and low taxes. And what area of the country are you from now? I'm in Michigan. I'm in the Detroit area. Okay. All right. Thank you, Sam. I don't my our house here in retirement is only 900 square feet. So there's no way down to downsize unless we move to a tiny which with our aching osteoarthritis we can't even climb up the stairs nowadays. My neighbor next door is a Millennial just starting with the first home buyer program. He says that yeah we will we need to live in a bigger house. I'm going to move if we end up later in retirement we still live in this house which is the same size as my house 900 square feet that is a failure for us he said oh here we are it's paid for 900 square feet but it's paid for and you sleep well at night certainly and I want to go that's all that matters I want to thank that person who says that he is his strategy is to pay off the house so that the the for for Obamacaper was this great idea I didn't think very good idea yes that is that is good that is good one idea we heard on our previous call a long time ago on a Obamacare discussion about subsidies was somebody actually took out a home equity because they needed cash for daily living and it ended up it was better than taking money out of their 401k to ride through from like 62 to 65 so that was an interesting strategy okay I think we can move on to the next topic back to the funded ratio I don't even know what I'm sorry but I don't know what that is if anybody can help me with that it's the same analysis that pensions used to see basically how how well capitalized they are for future obligations and I think I don't I think we might have a wait file who said that might have been some Mike Piper who it has a calculator online or a spreadsheet where you can plug in your your data and see what your funded ratio is I'm not that familiar with it maybe I'll somebody with expertise could speak to that anyone I'll see if I can look it up if not let's let's move on to the next topic let me get my cheat sheet here retirement contribution when one spouse is still working so this I guess the assumption here is one spouse retired the second one is still working and I think it belongs to I'm not sure if Carolyn said or Sam said it about the Obamacare subsidies could be significant if you're you know in that free retirement age does anybody have any comments about making retirement contributions with one person retired and one working in a two-person family Jean as I recall they summarize that one with the only advantage was if there was an age difference between the couple one was putting it into a 401k and the other was drawing it out of their IRA and if there was a significant age difference between the couple it could be an advantage otherwise it was a wash it kind of sounds like putting in one pocket and taking out the other that's what I recall the conversation ended up with because I was really listening to that one for some friends of mine okay see how we're doing it's a 25 the next topic spend more now and and also work longer maybe we could take a show of hands of people who are actually retired right now just hit that show raise hand if you could and I think we have 64 people on the call and I'm seeing about six seven eight nine ten and 11 12 13 14 15 16 18 okay so about 18 so maybe a third okay if you could lower your hand and let's say you're going to retire in the next five years raise your hand it's like we have about 10 be 11 12 okay and the people that are between 18 and 24 how about that I don't think we have many but we're open for everybody and you know if anybody wants to get advice as a younger person feel free to ask we have a lot of experience here and who on this who on this call has had a lot of trouble spending money now that they are retired and are not accumulating anybody you can just raise your hand if you want Mary would you like to speak on that or Joe or Keith we I mean we have to withdraw more R&D than we have any need to spend plus we have Social Security and we're satisfied with the way we live which doesn't really cost that much we have our house paid off don't know anything on cars we don't have an extravagant we do eat out but we don't eat out extravagantly and it really doesn't take that much money we're in a fairly low we're in Alabama which is fairly low cost of living area taxes are fairly low and so you know we have much more than we need but we have don't you know kind of that thing of we've saved and you know I still look for bargains I still use coupons I still understand completely you know you can't get over that you've been trained for 50 years right yeah or 70 years yeah right and you know but you know I say I'm frugal and I have a friend who's cheap so he's worse than I am I think that's my favorite thread on the on the site is that what frugal thing did you do today you know where the guy's gotten 50 days out of the same teabag you know that stuff just gets so excited you know look this my friend the one I call cheap one of the local pizza places had that if you pay the certain amount you could have a slice of pizza every day for a month and he bought it and then then would just drink water wouldn't even buy a drink when he went in and did he get pizza almost every day yes yes for a month great that's great okay thank you Mel yeah a number of years ago when I was doing Forbes column my editor got in touch with me and asked me about she was getting ready to retire and she was really concerned about going from having a salary to not having a salary and not having money coming in and having to start to spin down and I told her that I had a problem with that and I thought it would be a good subject for an article so I interviewed a lot of the Bogleheads and I was not really surprised but I found out that there were a lot of people who had a serious problem transitioning from saving to spending so I did a column on that and it's still available on Forbes it's called shifting gears going from saving to spending and it is basically a real problem that a lot of Bogleheads said they had and I knew that I had the same problem so yeah there's the article it's still up it was 10 or 15 years ago but you might look through that and see that if you do have a problem that you're not alone I was really amazed to find out that I wasn't the only one yes it's a common theme somebody said on the last call you basically get to make yourself a paycheck and whether you give it to charity or you buy something you want or help somebody out you got to spend it Keith? I'll second what Mel said it was extremely difficult you're used to looking in your checking account and seeing that direct deposit from your paycheck every couple of weeks so you feel okay with buying some things here and there you don't have that even if it's investment income or retirement and I'll just throw out there some people making comments about frugal I came across for those of you that are on Facebook there's something called there's a group called Everything Frugal on Facebook and I joined it maybe a month ago and it's kind of interesting it's a lot of the same kind of talk that we have here being better spending decisions finding ways to save money not necessarily on the investing side but more on hey I'm doing this and how can I save an extra $50 here and there so for those of you that like to call yourselves frugal or cheap and are on Facebook it's called Everything Frugal and it's kind of interesting and there's a lot of people make comments and they'll give their advice and I did and I picked up an idea here a couple of times on utilities and services and things like that so it's kind of interesting okay I put a link in the chat for anybody that needs it Sam? Hi Keith I disagree for going to Everything Frugal for us who are already frugal because it will the opposite of the antidote to being frugal at that conference Mike Piper say the antidote is to pay get counseling ouch pay a psychologist it's not that much Mike Piper says to get counseling and he even does it because it's if you worry about not having enough money or what anyway Joe Joe I agree Joe that to give yours no no for Jim I agree with Jim give yourself a paycheck right so that yeah otherwise otherwise I mean you think about like our sacred droglade is we already set it for 3% and then it end up being a lot less than that would you believe it we can't even reach 3% and if the market does well for a while you know it's going the opposite way right yeah if we only knew how long we were going to live it would be very simple I think there's a website for that I'll tell you exactly and then last comment about Joe I say that that the cost of living is for his lifestyle is satisfied and the only thing that he spends is eating out well I don't even eat out Joe and cook all the food myself thanks to you literally yes we with COVID we really cut that back and we spare no expense on groceries that's for sure but we really enjoy cooking now okay Alan, thank you Sam yeah these are all great comments I too have suffered with this being a long time individual living my wife and I both living well below our means and it's very hard to break that habit in retirement but one thing that I have found useful in initiating a step in the right direction is focusing more on creating memories with our friends and families saying crying to take vacations and paying for the kids to come along and those are the long lasting you know things you want to hang on to anyways that bring you joy and can reflect back upon much more so than buying things so focusing on experiences and creating memories with family and friends is one way to kind of break the mold and dip your toes into spending a little bit more money and over the last three four years what we've done is there's an Airbnb in a central area and paid for all of our kids to come and spend we bookend two weekends and the week in between they come whenever they can all expenses paid and we just hang out and it's been wonderful and no guilt whatsoever in spending the money there thank you Alan, yes and Ray do you have a comment on it hi this is Raj yeah one way to one way for us to deal with that problem is to gifting to the kids that 18,000 to one person from one of us so that's about 36,000 to each kid and we have got two kids so this way we just have started like you know giving them for the last several years now so that is one way we deal we dealt with with our problem like you know in difficulty in spending your money and you get to see the benefits right yeah yeah they seem to like it they enjoy it and we and we like them enjoying themselves versus if you were gone and they get it you wouldn't see it with a warm hand rather than a cold as Alan said before it's a lot of people in the last couple weeks okay let's go back to where we were at here I think we got one or more how often to take distributions is there anybody have any strategies on distributions and are you talking about like I don't know what they were talking about on the call was it monthly or yearly or what was the issue here yeah I think that was it whether to take it like the beginning of the year the full year's worth or divide it up monthly does anyone have any strategies that they're using yeah we usually take my wife's at the beginning of the year and I saved mine for November or December because I pay 100% of our taxes from the previous year have it withheld so that I don't have to do the penalty quarterly estimated taxes which I did for 40 years and it's considered to be any tax that's withheld is considered paid equally throughout the year so you get rid of the estimated taxes so that's the way we do it I know how much I know that I've got enough in my RMD because it's fairly large to cover the taxes of the previous year plus have some left over so after I do my taxes for this year I'll know how much I have to take from my RMD later in the year I don't bother to take it now because I can over the course of the next 6, 8, 10 months and get 5% or whatever and then I send in the end of the year so that's my strategy okay thank you and finally we have some people can talk about the tools that they're using for retirement planning I think we touched on this a couple of weeks ago also somebody earlier in the call mentioned new retirement is anybody else using any other tools I think Alan you mentioned that Mark Zoral what was the thing you mentioned last time well yeah there's Mark Zoral in plan vision he uses e-money advisor it's a relatively low cost way to access that tool and his expertise he has now I think he has 3 total 3 Mark Zoral Jason Lynch and somebody else that I believe that just joined their team for people who need a little more sophisticated modeling even for basic modeling it's a worthwhile approach also I personally really like empower formerly personal capital I think it has very fundamental but useful retirement modeling tools that I found very helpful and I actually am a client of Mark Zoral's as well and I've consulted with them a couple of times more or less just to confirm that I'm on track one individual I mentioned a YouTube individual you're probably all familiar with or should be and that's Rob Berger who's been to the Boglehead conference the past couple of years he served on the panel last year I believe or 2022 excellent giving no frills objective advice from his website and YouTube channel and he said that he's going to start focusing he's already building an online resource of all the available tools for financial personal finance and retirement planning it's very rudimentary at this point one of his recent YouTube videos he goes into a little bit more depth explaining what he's going to do with that it's going to be a resource to keep your eyes on as he'll be listing the pros the cons and delving a little bit into the details of each of these tools and they're all a little bit different the one thing I might add is that remember that when you're using any online tool there's usually embedded assumptions either that were built into the program or assumptions you're making and we don't know the future we do not have a crystal ball so take everything all the output with a grain of salt because it could be that you're putting garbage in and getting out garbage results it's probably useful to have at least two perhaps three different resources that you consult and see if they're roughly agreeing with one another and even so I still would be willing to change, adapt as your situation changes okay thank you Ellen there's a bunch of tools here put this on I'll put this in the links Keith do you want to talk about tools? Yeah I would just you know for me I guess I'm just thinking about calculators just to make sure that I was on track Fidelity did the 401k at the company that I was at and they had I mentioned this before they had a tool where you could either make it more kind of general five or six inputs or you could go and put in all of your expenses literally line by line I actually found that to be very helpful and I dug out all of our bills and said okay how do I feel that this is going to change in retirement and was able to get a more manageable number in terms of the expenses were going to look like versus the income that I was going to generate and then I kind of bounced that against the Monte Carlo simulation that Vanguard has and there was a third one that I used that escapes me it might have been Kiplinger and so when I used all three of those and all three of those came back positive that's really when I felt more comfortable and kind of taken that plunge and feeling like I was on the on the right track so like you mentioned Jim you know you do or Alan might have mentioned it you do several of them and if all of them kind of give you the same answer it's probably something that you can not necessarily bank on but at least feel comfortable with it and I would just mention also in terms of planning you obviously need to be realistic with your inputs you know a lot of them will ask you what is your expected return etc. You want to be realistic in terms of what you're going to put in there because just a variation of a percent or two on your return you have a fairly significant impact on what your your numbers are going to look like and then also with your expenses you know everything showed the rule of thumb being something like 70% of your expenses in retirement is what you can calculate and I found that to be incorrect. Ours was closer to like 90 or 95% of what we had pre-retirement and so if I to use the 70% number that the benchmark or the rule of thumb was I would have been a little more off in my number so be realistic with those numbers if you can find one that breaks down expenses by line that's going to be more accurate than using that 70% benchmark. Okay. Thank you Keith. Gene. Ah very cool very cool comments there during the last meeting there was several tools mentioned and I made a list of them and I sent them to Lady Geek and so we're going to post that what I found what I captured out of the chat with this meeting on your website. So we had like there was 10 tools mentioned and I had no idea there was that many tools out there. So Alan you brought up a couple I don't think that are on my list maybe I'll use the list too. And you can add to it and then we'll post it with this meeting so that people could find tools. If I can interject Rob Berger is so thorough in how he is approaching this I was going to suggest to Lady Geek that maybe rather than us trying to replicate that on the Boglehead's Wiki which is lacking since it's constantly got to be updated it might be one instance here where it might be better just to look at Rob Berger's website and I put the link of where he was building this tool repository in the chat. Has he got it in the chat already? Pardon me? Has he got the list available now? Yes I just put in the chat Jim if you want to share your screen click on that link for the Rob Berger tools and you can just show them what's up there thus far. Great then yeah because I went looking for tools and couldn't find them. Is it on the is it here? Is this what you're talking about? Yes. I'll put that link in the chat. Cool. It's in the chat yeah. Then I won't bother to send it back to Lady Geek I'll tell her it's already done because all the tools on my list are I could see they're on there. Cool. Thanks I didn't know. We went through a number of retirement tools they've all probably been updated since then but at least it gives you some tools to take a look at. I'll put this in the chat also. Great. I had no idea that there was a list that you could go to and if I had known that I wouldn't have wasted my time. One thing I can add that's very important I know a lot of people are fearful of using online tools especially if you're an aggregator or you're linking your personal accounts and that's very important to think about security and so forth there are tools that you can download and just do everything locally on your computer there are others where you can manually enter in information without having a link to your accounts and then there are others like Empower formerly personal capital and I think new retirement and others and you actually can use one of the aggregators and link to your accounts. That doesn't mean you have to but you certainly need to be aware of what these security risks are with personal capital Empower you actually can manually enter everything in a lot of people are not aware of that I don't know about I presume new retirement as well I signed up for new retirement and you can manually enter or link and for security reasons I manually entered Yeah so that's an important consideration with any of these tools I agree Okay and I think I was going with Rod Berger it's Rob Berger somebody pointed out and this is the site here. Great thank you guys I think this is a great resource because I had no idea there was that many resources out there and I needed some help so it was really I wanted to help others with it. Yeah there's the old what is it called FireCalc I haven't looked at this in a while Yeah FireCalc was one that hit the list. Yeah so if somebody said I would like to spend $40,000 a year and I have a $1 million portfolio let's say and I want to go 30 years I think what this thing does is it simulates like the some split between the S&P and bonds for 30 years with all the returns from the different years like through the depression and all that and it says these are all your glide paths so in this case we got a very small percent here chance that I would run out of money these cases below the red line and looks like there's three cases below the line and I think they give you some results they're saying at 123 possible 30 year periods I don't know where the results six cycles failed out of the 123 and it actually included how far back did it go it's got some historical data I don't know how long it goes but it's kind of like a sequence of returns like we started if this was the day the Great Depression started possibly the purple line might be that and then it maybe during the 70s you did bad again and then you did better in the 80s but that's the whole thing it just wraps around the various years sequentially I believe and there's a number of tools like this that we reviewed you know once you start and it usually falls in line with like a 4% withdrawal thing I'm sure this is some of the baseline that everyone's come up with to have come up with 4% withdrawal rates it also points out that you know if everything goes well you might end up with $6 million instead of being broke yeah big split between the two yeah big difference yeah so it's this is where a thing that's you know it's probably accurate to you know very little even though it's very precise you know to 7 decimal points okay anybody else have tools if you want to you can put them in the chat Raj has his hand oh yeah Raj go ahead sorry sorry I missed Jim I had a question about people who use the emperor I have trouble deflecting those questions those phone calls which keep coming to me whenever I put my portfolio in the emperor and I wanted to have some clues how to go about it I've been using it for 6 years they called me twice I said I'm going to do it yourself or not interested in their services and I've never gotten another call from them for some reason they keep calling me and I have to get down you can change your phone number on the phone and some people use a google number or I think you have to have a phone number in there but don't make it your primary one and you can just block the user mobile number and block it okay maybe okay well that's a good one Alan another small piece of information I have is I use the new retirement and I have fidelity as my broker and fidelity you cannot really connect to the new retirement you have to have like put the numbers manually you cannot really connect the fidelity thing so okay fidelity blocks it no fidelity doesn't connect with new retirement okay you cannot really so you have to put all your totals like you know manually so would you do that monthly or how long would it take you like you know you would do it maybe every 6 months once you are here okay you don't have to do it I don't do it like in monthly and how long does it take you every 6 months like you know depending on how many accounts you have maybe if you have 8 accounts or 10 accounts like IRA Roth IRA and taxable so those numbers you need to put it in 2 hours okay how about you Raj how long does it take you it doesn't take me that long maybe maybe an hour at the most yeah it might be worth it for the security risk I don't trust anything anymore I don't need for that yeah I wouldn't put all my information in that way okay we're going on almost 2 hours here so as anybody have any other topics they'd like to talk about if they do I see Sam has their hand raised go ahead Sam like for example in new retirement how is it different than just I'm using Excel spreadsheet and just entering it what does it do more than just doing like what I do I already know that I can retire well I am retired so what what is this for I would suggest you watch one of the YouTube videos that demonstrates all the features of new retirement or any other tool they're far they're all very in their sophistication but there's a lot more than just a spreadsheet but one thing I'll add that I like what I most like about the empower tool is that it breaks down your holdings into their actual sub-asset classes if you've got a balanced fund it breaks it down into whether it's bonds, stocks, large cap, small cap you know and so forth breaks all your bonds down to the appropriate sub-classes and it shows you your entire portfolio the actual true asset allocation whereas something like the Vanguard for instance the Vanguard portfolio watch is horrible it just may classify their small cap value fund as 100% small cap value when in fact it's a mix of mid cap and small cap and it's not all value so I find that tools that can do a much more sophisticated breakdown versus a spreadsheet and I've got a custom spreadsheet myself that I've toyed with but I can't get it to break down all my holdings that are have mixed classes so I'd like to see that and help me rebalance but there's a lot more they can do just Monte Carlo analysis and retirement you know spending strategy some of them new retirement I think has a Roth conversion tool as does e-money advisor can model Roth conversions but you have to use the plan vision service because they need to customize that for you I'm sure as these tools become more and more sophisticated all veer off into different directions with some overlapping features and some that are unique to each tool thank you Alan that is useful yeah so it seems that you do slice and dice where I only have one fund total stock market total stock market index fund period that's a good one that brings up a very important point that we didn't discuss if you don't mind me bringing that is about how we should try to simplify our portfolio as we enter into retirement both by consolidating accounts as best we can and then simplifying our holdings because if we have if we happen to have a spouse significant other who might really inherit a complicated sliced and diced portfolio they may not be comfortable handling that and as we get older we don't want to necessarily spend as much time those of us on this on this zoom are probably for the most part you know personal finance geeks but our our significant others may not be nor our kids and simplifying things and make it understandable and also including your plans and philosophy investment policy statement for others that may need to deal with it after we're incapacitated or no longer here is another useful step that's something I'm working on so there's a lot more to consider other considerations as well to make our lives simpler and the simpler are overall finances and portfolios are as we enter in retirement means we'll have more time to spend on other activities such as figuring out how to spend our money or going to therapy to spend your money thank you you're welcome thank you Sam how about 14056 try not to throw rotten eggs at me but I've been toying with the idea of getting an annuity and for a couple reasons it's going to force me to take out the money and I have a cash flow issue and also I can if I do it with my 401k I could start to peel down some of that you know nastiness that's going to hit me when my R&D kicks in I had two people bring up two things one person said the only annuity they would consider was a SPIA SPIA and then another option was a fixed index and either of these could be like just 10 years rather than a lifetime so I'm going to throw it out and if there's any annuity that you guys think is not as nearly as odious as the others please let me know no I think Wade Fowler has talked a lot about the fact that you can't really annuitize yourself so you know and they I think the recommendation is usually for the SPIA isn't it Alan yeah single premium immediate annuity which is the simplest lowest commission lowest cost approach which in some instances is very reasonable would you right now you know I can't imagine myself living like my dad did who died at 99 and he was going to the gym at age 97 three times a week um but would you consider like if I did like a five year or 10 year or something just to kind of see how it goes and I don't I don't know you know I visited somebody who wanted to see me put around 650 thousand in a lifetime annuity and you know yeah I believe me I wasn't going to hand over my money without really studying this but I started to think that maybe and and I did a calculator um I can't remember who it was whether it was a fidelity calculator or whatever there's there's an intermediate annuities com or something and I thought it was like you know a spia with 10 10 year spia seemed like it was kind of like an okay idea that might have been where I went yeah this is it yeah that's where exactly where I went okay to help you Mel Lindauer did a one I think one hour one and a half hour overview on annuities and we recorded it on the sacramental Bogo heads youtube channel okay and he did a wonderful job explaining all the annuities pros and cons and I think he's no longer on the call so he probably wouldn't speak about that we've got it recorded and it's a wealth of information thank you and I think this is the way to follow article or something about it yeah right here I'll put this in the chat also notice that of course annuities nowadays don't offer any cost of living adjustment which is a bit of a concern but instead of buying if you're going to purchase an annuity especially a spia what you could do is instead of buying one single one is kind of build a ladder of two or three annuities at various times and that way you may get some inflation benefit from that based upon the current market conditions and interest rates split it up instead of one lump sum divided into three and divided up over a period of time to purchase them so then maybe I should start with a five here and kind of see how it goes and make it small but you know you can make it so small that what they're really giving you every month is chicken feed well and then Harry Sitt the finance buff also does a lot of conversation about annuities and I think he talks about laddering annuities Alan to your point so that might be another resource for you thank you okay Sam did you have another question yeah back to Alan talking about simplifying our accounts in addition to simplifying the number of funds like me only holding one index fund for stock and then you go simplifying the number of the brokerage account for example if I put everything into fidelity then it will be big instead of diversifying the risk between Vanguard and fidelity and Merrill it will be all in fidelity and fidelity goes under I'm done what do you think fidelity any of these brokerages there's another holding company so there's no risk there and losing everything the bigger risk would be if there's a breach a security breach you lose access to your account for a while until that's rectify that's a bigger concern so it's always a good idea to have some other you know bank account checking account maybe another account somewhere outside of a brokerage I personally have no qualms about holding all my money at Vanguard although it turns out for another reason I have someone at fidelity but what are everybody's thoughts on that that's oftentimes posted on the forum and that's I think a not a valid concern about fidelity or Vanguard or Schwab or anybody else going under and losing your your assets there but somebody made a comment I think Margot made a comment about the concern about the long-term annuities and the solvency of the company and I think there's some kind of cross insurance between these companies I don't understand at all because they really don't want the word to get out that annuities don't pay out and they're just liquidate and screw everybody over does anybody know about that maybe Mel knows about it I was told that the annuity actually has a little bit of an insurance policy the annuity companies the insurance companies have insurance policies not a ton but some well it's a state issue and it varies from state to state typically it's around $250,000 so it pays to go with different insurers and it pays to make sure that you stay under the amount that you're guaranteed by the state especially if you're going out a little bit on the risk the companies are ranked and the lower the ranking the higher the payout normally is and a lot of people are tempted to go down on the risk scale and on the safety scale and we'll buy to get a little more and in a situation like that you want to make sure that you stay under know what your state policy covers and stay under that so Mel are you saying if I was in a state where it's limited to $250 and I plopped down a million bucks and they went in solvent tomorrow they'd give me back the state would guarantee or I'd only get $250 back that is a possibility now of course you've always got the other thing where the other insurance companies come in and buy the buy the is is that with some assets there's still assets to be had by whoever takes them over but in this case here they got a half a million or a million dollars and if they've already blown it there's not really a lot of assets for them to take over because all they're taking over is debt the annuity to pay out so I would say that if you're going to go with top rated companies if you're going to go over the insurance amount or stick with if you're going to go down on the risk scale or safety scale buy from multiple companies and there's nothing wrong because somebody mentioned it before I'm not sure whether it was you or Alan but one of the ways to offset inflation is to buy one today buy another one a couple years from now and a couple years from now instead of putting it all out right now unless you feel that this rate is as good as you're going to get in other words if it's an exceptional period where the rates that they're paying is extremely high then you may go for it but if the rates are low you might buy some today and some a year or two from now a couple years after that so you're laddering it which also helps to offset inflation and gives you a safety feature okay thank you Mel and somebody had posted I think Matthew posted in the chat about a comparison of fixed indexed annuities and bonds by article by Wade Fowle and Alan Roth there I posted that in the chat or he did well just to now Wade of course is associated with the insurance industry so there's always that possibility something you have to keep in mind yes I did a six column series at Forbes on annuities which are still up and people can search for them and go through the whole series and it goes over all the different types and the things to look out for in it so all you have to do is search for Forbes Lindauer and it should bring them up I wanted to say that Taylor Laramore has two spias single premium index annuities I think Mel I can't remember I think he bought one his first one in his 70s and his second one maybe in his 80s and he's now he just turned 100 years old and they're still paying him and his son told me that every year Taylor gets a letter from the annuity company and says are you still alive are you still there and he asked to sign the letter and send it back yeah Taylor is one of the ones that really made out I heard rumors that they fired the guy that wrote him