 I am thrilled to kick off this panel discussion by introducing our panelists here today. We've got three great individuals who work on various aspects of retirement planning. On my, on your far left is Rob Berger. Rob is the founder of robberger.com and the financial freedom show. He has a YouTube channel where he has interviewed a lot of folks, he's interviewed me. I know he's interviewed a lot of people who work on retirement planning. He has also published a book called Retire Before Mom and Dad. And Rob, it was a fairly early retiree and often writes about how he was able to achieve that and how he manages drawdown during a fairly long time horizon. John Luskin is here in the middle of our three panelists. John, many of you know, does a lot for us in the Bogleheads community. He holds, hosts the Bogleheads Twitter spaces where he has managed to land some amazing guests. And I believe those are all recorded for posterity. So if like me, you're not sure how to operate Twitter spaces, you can not replay them. He also is the producer of the Bogleheads Live podcasts. And John is a certified financial planner. He's fee only, advice only. And last but not least, Steve Chen is here to my immediate right. Steve is the founder and CEO of New Retirement, which is a fabulous resource, great website, financial planning platform that includes some, do-it-yourself software for retirement planning, articles, podcasts, access to CFPs, importantly. They will help you find a CFP that matches what you're looking for. So we thought for this session that we would dive into some of the big questions that cross our minds as we approach retirement and as we move into retirement. So at the top of the list, I thought we would kind of think about people in the 55 to 65 year range, the pre-retiree range. And one thing that they might be thinking about is how to think about spending in retirement, how much you'll spend in retirement. There are these rough rules of thumb like the 80% income replacement rate. But I think a big question for people embarking on retirement today is with inflation as it is, how should I think about how much I'll actually spend in retirement? Steve, you want to take that? Sure, thanks, Christine. So I think for a lot of our users, they definitely, when they're preparing our measuring expenses, taking a close look at what they're actually spending, breaking it down, building budgets. They have a good handle on what's happening. And then as they transition, I think a big consideration is, are they going to make any giant gear shifts? So if they're thinking about relocating, will that change their expected expense ratio? Like I live in California, if I was going to move to Florida, would my cost of living be lower? My tax rate from a stating of tax perspective would be different. So that kind of factor would go into it. I think at a high level, what Michael Kitzl says and some of the research he's posted about spending in retirement, it does tend to decline over time. So I think on average, people can expect that their expenses will decline about 1% on a real basis every year. So about 10% per decade. And if you step back, and I think a lot of people are really, hey, I'm planning on having the same spending rate at 85 as I have at 60. And the reality is that for most people, that's not true. You're gonna be spending a lot less at 85. You're gonna be traveling or moving less. Typically, your costs will be generally lower. So you shouldn't necessarily over-save and over-optimize for long-time horizons and think about using some of your spending more earlier to enjoy your human capital. So David Blanchett did some research on this, the retirement spending smile. So folks can check that out and talks about that phenomenon. Spending does decrease as you move through retirement. In those earlier years, those go-go years, you're gonna wanna travel, you're gonna go out to that fancy restaurant. But then as you get older, you're not gonna wanna do that stuff. And maybe it's just gonna be at the soup plantation for you at that point. So spending on a real basis does decline throughout retirement. Now related question I get from a lot of folks is can I retire? And then my question to them is gonna be, well, how much are you spending? And a lot of folks don't necessarily know the answer to this. And this is where I asked them to, all right, now you've gotta go out and do some homework. You've gotta track your spending, figure out what you actually are spending, what you're spending it on. Now this doesn't have to be a harder, difficult process. There's a couple, or gosh, there's more than a couple. Great financial tools that can help you with this process. Mint.com is a free tool that can help you track your spending. It can categorize your spending. You need a budget.com is also a popular tool. It's not free, it's $12 a month or something nominal like that. And I mentioned those tools because those are a couple of tools that the folks that I work with, a lot of do-it-yourself investors, a lot of bulkheads seem to like a lot. So that's gonna be a big part of the early steps of retirement planning, figure out what you're spending and figure out what categories you're spending is in and that's gonna help you with your retirement planning. Okay, so another question on our list was social security. And my guess is that many most of you were in Mike Piper's great session earlier where he talked about the various dimensions of developing a social security strategy. But one thing I wanted to pick up on, I was looking on the boards where we asked people for questions. So on the Bogleheads forum. And a great question came up is that I think a lot of people understand why they should delay social security. But the question is, how do you bridge those years from when you retire to when you eventually begin claiming benefits? Where do you go for those funds? I guess Mike somewhat addressed that, but maybe you all can talk about that. And also what those funds should be invested in in the years that you are drawing more heavily upon your portfolio than you might later on when social security comes online. Rob, maybe you wanna tackle that one? Well, I take a, I don't know if it's a controversial view, I don't feel that it is, but in terms of where you should invest your money, even as you're spending it, I kind of view you should have an asset allocation. I think for most retirees, it's in the 50 to 75% range for stocks. And that's a gross generalization that won't apply to countless situations. But when we think about safe withdrawal rates and that sort of thing, if you go back to Bill Bingen's work and Guyton Klinger and others, that's generally where they say your stock allocation should be. And I think that's true, even if you're 60 and you're taking out money before you take social security when you're 70. And I'm just a big believer and you pull the money out, maybe it's gonna come from dividends and interest in a taxable account first, and then maybe you're selling shares and whatever accounts make the most sense from a tax perspective. And then you're just rebalancing. Others might wanna hold more cash just to have some level of comfort. And that becomes, I think, just a personal decision, as long as it doesn't become too much cash in which case, other than in 2022, might weigh on the portfolio a bit, but I think it comes down to a lot of personal preference at that point. Okay, so I wanna follow up on that because there was another question on the boards about in-retirement asset allocation, what that should look like. And this question was starred and asterisked by several users, so I wanna make sure we get to it. The question is, if someone has, say, a pension and social security that is supplying much of their income needs, how should the portfolio be invested? How do non-portfolio income sources like social security and pension affect what the asset allocation should look like? Anyone? Yeah, can I, I wanna just back up one second to talk about the social security timing questions. One thing a lot of our users talk about is using that window. So they're delaying social security to try to maximize their lifetime income, protect their spouses, all that good stuff. But they're also, it creates, many of them, if they have the opportunity, they can engineer their income levels over multiple years and they're trying to create this window where they can do Roth conversions. And so in an ideal world, they walk into that environment with taxable, tax deferred, and tax exempt, and then they're essentially trying to move money between tax deferred and tax exempt and leverage their taxable account to pay the taxes and survive in that window. But if they're, I think the interesting perspective is that if you get to a certain level assets, you can really, and you look across long enough time horizons, you can really start to engineer your tax situation in a much more meaningful way. So you just wanna touch on that point. Okay, so in retirement asset allocation in the presence of non-portfolio income sources, how they relate to one another. I'm happy to try. So there's one theory that says you maybe try to calculate the present value of these guaranteed incomes and maybe that should be part of your fixed bond or fixed income portfolio. I think there's some merit to that, but for me, the starting point is fine, you've got whatever sources of guaranteed income that covers a certain amount of expenses, what's left? How much do you need to spend beyond that? And what percentage of your portfolio does that additional expense represent is how I like to think about it. Because if the answer to that is 4%, so even after the guaranteed income, I need to take, let's say 4% on my portfolio in the first year, then I'm still at that 50 to 75% stock range. Unless maybe, again, there's countless exceptions. Maybe it's 4%, but a lot of that is for wants, not needs. So maybe that's your fund money and your guaranteed sources of income pay the utility bills. So there could be a lot of variation there, but if you're gonna still need 4% from your portfolio, I think that really should, in my view, that should drive the asset allocation decision. And if the answer is, yeah, it's not that bad, I only need one and a half or 2% of my portfolio, then frankly, at least from a surviving retirement, the asset allocation at that level probably doesn't matter much. I wanted to talk about annuities and we had a lively discussion about annuities at our lunch table, so I wanna recapture some of that magic. But annuities are starting to get more interesting, more interest, especially as yields are higher and that in turn helps enhance annuity payouts. So maybe as a starting point, we could talk about who is the best candidate for some sort of an annuity product, and then I'd also like to talk about when, how much, and what types. Well, first things first. So first, I know a lot of folks, they hear the word annuity and they cringe or they get terrified and they wanna run screaming, but annuities themselves aren't the issue. The issue is high fees and complexity, so it's not necessarily that all annuities are bad, it's that those annuities that are high fee and complex, those are bad, those are the ones that we generally wanna run screaming from. Same thing when it comes to mutual funds, high fee, complicated mutual funds, really fancy active management strategy with high fees, that's what we wanna run screaming from, it's not all mutual funds entirely. So when it comes to annuities, simple low-cost annuities can be a reasonable approach for some retirees, specifically a single premium immediate annuity, you're creating your own pension. You're gonna put in a lump sum once and then you're gonna get a monthly income payment for life. And depending upon your goals and what your preferences are, that could be reasonable for you. So if you don't like managing a portfolio, then a single premium immediate annuity can be reasonable. If you are very risk averse, if you don't like seeing the value of your investments decrease, then maybe a SPIA is right for you. So you wanna look at your personal goals, your personal preferences to figure out if a simple low-cost annuity could be appropriate. One more consideration in buying a SPIA, that longevity. So if you're really concerned about outliving your money, SPIA can be a reasonable approach. Yeah, I agree with that. Just to refund this a minute, I think you have to think about insurance. I mean, an annuity is an insurance product. It's not an investment product. And so if you're using it, think of it like insurance. So if you're buying a SPIA, you're essentially ensuring I wanna have a certain quality of life. If you wanna layer that annuity on top of your social security. And if you wanna buy a deferred income annuity, some people call it longevity insurance. You're basically hedging out, hey, I might live a long time. One strategy some people are thinking about, but I think almost no one does okay, I could buy a deferred annuity at 60, have it kick in at 85 when I'm not expected to be alive. So you can actually get quite a lot of income for a pretty low cost, but it does constrain your planning window because then you only have to plan for a set amount of time. So there's a purpose for insurance. You're essentially leveraging your mortality credits, you're mutualizing your risk. It's very different than being an individual investor and trying to like manage your portfolio for an unknown inflation and longevity horizon. Yeah, I think it's important to understand why you want the annuity in the first place. So like you mentioned in some cases, it's longevity. You're afraid you'll live to 110. And that's one kind and that could dictate the type of annuity or the amount you put into an annuity. But for others, it's really just part of retirement planning from the very beginning. It's not so much a fear of longevity, but it's just a comfortable way to manage your portfolio. So for me, for that kind of person, the ideal candidate is someone who, one, has not under-saved for retirement in the first place because if you have an annuity won't save you. You haven't over-saved for retirement because if you have, you don't need an annuity, but you're somewhere in the middle and 2022 scares you to death and you're not sleeping well at night. It may make really good sense to annuitize a part of your portfolio. On the other hand, maybe you're very comfortable in 2022 and you haven't lost any sleep and you're gonna rebalance and you're like, bring it, I got whatever you can bring me, I can take it, except for 8.2% inflation. But other than that, you can handle it, then annuity might not make sense, particularly if you're thinking about the quests to family members or charities or that sort of thing. Well, Rob, I wanna pick up on something you just said, which is inflation in relation to annuities, that if we continue to see fairly high inflation, it eats away at the purchasing power from that income stream that you're able to earn. So should that turn people off annuities? How should they think about that, protecting their purchasing power if that's the goal of the annuity? Yeah, I don't think it disqualifies an annuity and I'll just say right up front, I'm not an expert on annuity pricing. But the interest rate environment and inflation is obviously gonna affect the pricing of annuities. So it's really a question of evaluating the pricing under the economic circumstances that we have. If I were going to do that personally, I would hire someone to help me with that analysis. Obviously not someone who was gonna actually sell me the annuity. But yeah, I mean, I think it's a good question, but it's all gonna get factored into the pricing of annuities at some level. But whether it's any particular annuity is a smart purchase is just gonna depend on countless factors, I think. One related topic on this is you can actually dollar cost average into annuities and hedge out the interest rate movements over time if you wanna do it. So if you're committed to that strategy, one thing is you're accumulating and then when you go to transition, you have a five-year window or something and you start buying layers of income over time if that's what you wanna do. Yeah, it's certainly not gonna be a one for one, but we talked about, hey, spending decreases in retirement. So yes, you have some risk of losing purchasing power from those annuity payments, but you're probably gonna spend less money in retirement anyway now to manage that inflation risk maybe it doesn't make sense, but all your money into the annuity if you're still gonna have a portion of your money in a stock and bond portfolio and that stock portion in the long-term hopefully is going to grow more so than inflation and that can help you with that tail end of that spending smile when you get really to an advanced age and then you have those higher medical expenses that's when that inflation adjusted part of your portfolio, those stocks can help manage those expenses. Okay, and I wanna hit on that topic of higher healthcare long-term care costs in just a second, but before that, before we leave annuities I wanted to ask a question that came from squirrel1963 on the Bogleheads Forum. At what age should someone annuitize? That's a fantastic question. The first thing that comes to mind is gonna be that fragile decade that's a term by Wade Foward does a ton of research on retirement planning that fragile decade is gonna be those five years before and those five years after retirement. And the reason why it's that fragile decade is you generally want to avoid having a stock market crash at that time. Now certainly we can't avoid that so we have to figure out what it's gonna be our risk management tools and doing that and having that annuity payment come in at that time is gonna mean you don't need to take as much out from your portfolio now being flexible with spending can also help manage risk at that time as well. Yeah, I mean not to be self-serving but I think this is an example of where we think people should build their financial plans and talk to a fiduciary who's completely independent about these kinds of decisions because I mean every situation is unique. It's hard to answer that question, right? There's like a million different variables that are happening around you and your family and what you think the future's gonna hold and your asset size and so forth. So I mean I think thinking through where you're at what could happen, where you wanna go, what might happen and then intelligently hedging those risks out is a good conversation, a good use of capital. Doesn't mean signing up for like a 1% financial advisor that's gonna take that for life. You can get a flat fee or fee only financial advice just like you talk to your CPA these days. I wanna add one more note on annuity 101 is that this is an insurance product. This is not an investment and on average when you buy insurance you lose. So if that's not a prospect that you're comfortable with, consider that in the decision to purchase an annuity. Now in the rare event that you have prolonged life expectancy more so than what the actuaries of the insurance company think you're gonna live until then certainly can come out ahead. But generally you're gonna buy insurance to manage risk not to come out ahead financially. So I want to move over to a perennially hot button issue in relation to retirement planning which is spending, safe spending. So let's just use the 4% guideline as a starting point for this discussion Rob. I'm hoping you can start here and also just to keep everyone following along. Let's talk about the 4% guideline, what it holds, what it means. Maybe you can even give an example of how that would translate into cash flows. Yeah so the 4% rule comes initially from a paper by Bill Bingen in 1994. And what he tried to determine was as a percentage what's the most you can spend from a portfolio in the first year such that you then adjust that amount whatever it happens to be a million dollar portfolio and let's say it's 40 grand that you can adjust it by CPI each year thereafter in retirement. And the goal was to live 30 years with money still in the bank and then you could die. And so he looked at it from 1926 to 1976, yeah to the 1976 I think. And he found the amount you could take out each year and still last for 30 years of course varied from year to year significantly. Some years you could take out eight or 9% in the first year. But the lowest which I think was 1966 was 4%. So that kind of gave us the 4% rule and since then there's been just a ton of research. Michael Kitzis took it back to 1871 and so far the worst the lowest is 4%. It comes from we'll call it the late 60s at why because of the inflation that I think everyone in this room remembers it's about in the 70s and into 81, 82 and the stock market returns just crushed retirees very difficult time to retire. But so that got us the 4% rule. So when we think about managing sequence of risk one way to do it is to start with a very low spending percentage and if we follow the history it's 4% and of course the big question is whether the 4% rule is still valid today. Do you want me to dive into that or should I stop talking? No, please. Okay, so my view is it's still as valid as it's ever been. It certainly has I think some limits as to practical application. I've only met one person who ever told me that in retirement they actually followed the 4% rule and that person's name was Bill Bingen. He told me that about two months ago. I think as a practical matter most retirees just they don't think about it that way. It might be good for planning but at least even in 2022 I think it's still valid. Now could we have a decade of 8% inflation? Sure, I guess we could. And could the stock market go sideways for a decade and could it turn out that I don't know 2019 and gave us the 3.8% rule? Sure, that's very possible. But at least so far what we're experiencing as difficult as it is kind of pales in comparison to the decade or more that folks that retired in the late 60s had to live through. And I don't have an opinion as to whether that will repeat itself. I have no idea but I still think it's as valid as it's ever been from a planning perspective. Yeah, I think Carson Jeske who's early retirement now. I think he's like a 3.3% safe withdrawal rate. And I feel like that's in the range. I mean in general like all of us are definitely the Bogot folks are betting on the long-term productivity of the US economy that it's gonna kind of keep generally going in that direction and you wanna be generally betting on that and if that persists we'll be good. I mean I think the thing that keeps me that I think about or if you really zoom out is did demographic trends in our country lead us down the path of Japan which had a really long run bad return scenario because I think mainly driven by demographics although we don't have we don't face the same thing here. We just have to be careful about continuing to grow our productive population. I think the 4% rule of thumb is fine but what I encourage folks to consider is that hey Bill Bengin he wrote this paper a few decades ago and he got 4% more recently. He's done some more research. He added small cap value to his portfolio and now it's 4.5% or 4.7%. Bill's not the only person to look at this question. A lot of folks have looked at this question. They all have come up with their own unique answer. Wait, Val, he got 2.4%. Christine Benz and her team, they did a rather let me give some context. So Bill Bengin right historical looking performance. Christine Benz and her team, they put some numbers into a computer. The computer made up some simulations and the computer said, hey it's actually 3.3% if you can accept the 10% failure rate. And if you can't accept the 10% failure rate now you can only take out 1.9% correct me if I'm wrong on that number. So that's to say whether you choose 4% or 4.5 or 1.9 or the Geitenklinger model which is a variable distribution strategy which says, hey market does well, you're gonna spend more market is poorly, you're not gonna spend less. I think all those are fine right whether you use historic based on that state withdrawal rate whether you use the Monte Carlo simulation that's all okay but you just wanna look at it regularly. That's gonna be more important than whatever strategy you choose don't go forward blindly every single year not making any adjustments to your plan. Yeah, thanks for that all of you. I wanna follow up, it does seem like within the research about safe withdrawal rates there's convergence around that idea that you should be variable if you possibly can make adjustments and there are all sorts of methods for making those adjustments. Any favorites if someone is going to employ a variable strategy? I'll tell one quick story about a guy I just interviewed this guy named Joe Cune. So he's a quick backstory, he was a plant manager and then he retired at 54 and it started making YouTube videos and anyway became kind of YouTube famous. You can check him out. I was doing a quick podcast with him and what he's done is he's got a bucket strategy but he has four years in cash. So we were talking about the situation. He's like, well yeah, if things stay volatile for another two and a half years I'll start getting nervous. Now that's a huge cash allocation but he's basically sitting tight like okay whatever I'm just gonna keep spending my money and then he's got a bucket and a balance fund and he's got the rest and 100% equities and that's how I managed it. Now he lives in Evansville, Indiana cost of living is lower and everything seems to be fine. So I mean, that's a one kind of massive you know, longer cycle market timing variability approach. Yeah, a couple of thoughts here. It's very difficult to know if things are going poorly. We may feel that they're going poorly, you know like in 2022 but you know, if you look back at 1966 there was nothing going on in 1966 really that would have said, oh my goodness this turns out to be the worst time to retire since the Civil War because the things that made 66 so bad hadn't happened yet and it turns out if you retired in 1974, which was inflation was bad stock market was bad, you actually did okay. And if you retired in 73, you barely made it. There's one year difference which can be a little unsettling, I suppose but it seems to me that kind of like along what John had said, I really think it's important to continue to evaluate your spending and using whatever tools that you use and there are plenty of great ones out there including new retirement but whatever tool you use to have an understanding of based on Monte Carlo analysis simulations how your retirement is looking as you move through it. If you know, it's difficult to come up with rules of thumb but if you're actually calculating your withdrawal and determining what percentage of your portfolio you're taking out in a given year even if you started at 4% as inflation goes up and maybe the market goes down you could be at 5% the next year or 6% or 7% and as you get into those numbers of six or 7% to me that's when you should at least be taking a serious look at it. Does it mean that we're in 1966 and we're going straight down? No but to me the six or 7% range is sort of the canary in the coal mine and I wanted to start taking a real look at my spending and at least that's for my approach to it. Yeah, in so far as hey the markets down should I spend less? How much less should I spend? Well, you can get really geeky with this or you can keep it really simple. For example, on the really geeky front to give an example, Wade Fowell again he's done a lot of research on this and he has a buffer asset strategy which says hey if the markets down instead of spending for my portfolio I am going to take money out of home equity of my home, wait for the market to recover, pay it back and to determine whether it's the right time to do that or not you have to project what your portfolio balance is gonna be over time. So that's a pretty key way to do it. Alternatively, hey the markets down maybe this year I'm not gonna take that big vacation. Maybe I'm gonna wait till next year to buy a new car. Maybe I'm gonna wait till next year to do a home remodel. So you don't necessarily have to take a really complicated approach to hey markets down maybe I'll spend a little bit less. John, I wanna pick up on something you just said which is the reverse mortgage idea. There's been a fair amount of research in that space. Alicia Monal for example has looked at how home equity is underutilized in a lot of households where people are dying with a lot of housing wealth that might have improved their quality of lives. I'm wondering if the panel has any thoughts on the role of home equity potentially funding retirement needs and it seems like that's especially relevant for people who live in very high cost places where their real estate assets have escalated in value very quickly anyone? Yeah I mean I think it's a huge factor essentially for everyday Americans half their wealth is in their house and it's largely untapped. So I think there is definitely a huge opportunity and there's different ways you can do it. I mean in my family my brother's essentially done a synthetic reverse mortgage by buying my mother's house in advance and then subsidizing it and between him and I basically he's gonna get that house and that's how it works, it's fine. We did it inside the family. Other families can't necessarily do that but there are products, the reverse mortgage has gotten, it has a bad reputation. It's actually gotten highly regulated so the government's done I think a pretty good job of regulating out a lot of the negative features and making it a much more accessible product. I'm actually curious if it'll start getting more widely adopted and for mainstream folks because of what's happening in the equity markets right now will people start to think more widely about that product? So a couple of thoughts on this. So insofar as the strategy, hey access to that home equity spent from it during those market drawdowns that there is a component of insurance to the strategy that's to say, well firstly not all reverse mortgages are created equal, the home equity conversion mortgage insured by the federal housing administration that is gonna be probably the best tool for accessing this strategy for using the strategy in that with this particular type of program you pay a lump sum and I wanna say it's five figures for upfront insurance cost to the federal housing administration and now you get to access a line of credit on your home. So that's not a small fee but this is something you wanna consider as a risk management tool. Is this necessarily gonna generate the greatest amount of wealth over your lifetime? Maybe not but that's not what we're doing. We're doing it to manage risk not necessarily to have the most money. Okay, so I have one more question that I definitely wanna ask and then we wanna open it up for questions. We'll put the mic in the middle of the room here. So my question is about long-term care and how people should address the risk of long-term care in their plans. We've all seen that the traditional long-term care insurance market has been incredibly troubled. So what's the solution? Who should self fund long-term care? Who should purchase insurance and what do you think of the hybrid type products? Yeah, I mean definitely long-term care has a bad rap because the insurance company has wildly underpriced the product and then proceeded to jack up premiums on a lot of folks and a lot of folks dropped their coverage which is terrible and they then left the market. Products are I think getting better but it's and I think it's, I mean at a high level it's like if you don't have a lot of money you can just spend your assets down and go on Medicaid. If you have a lot of money you can self insure if you're in the middle that's where this product makes sense. I do think the hybrid product's an interesting idea but I don't have direct experience I think like the idea of combining an annuity or potentially a death benefit with long-term care coverage makes sense as long as you feel very confident that you understand the product, the pricing is good and I think you also have to understand that when you get this product you have to pass a test around it's they're called ADL's activities of daily living and so in the past you could get this product and they could say, okay well actually John it looks like you can dress yourself and bait yourself so we're not gonna pay this benefit. You have to understand how that test is administered and how your rights for claiming the benefit. Yeah going back to insurance 101 again this is a risk management tool on average you buy insurance you're gonna lose but that's not why we buy it we buy it to manage risk. Insofar as what products to buy now you've got the two options you've got plain villain insurance you hit annual premium and then you'll have a bucket of money that you'll be able to access if you qualify for benefits those two of six daily living activities or you have cognitive impairment that's simple easy to understand and then there's the more complicated financial product. So earlier I talked about hey if something's complicated generally you wanna run screaming from it and that's gonna apply to these long-term care hybrid policies too. Ideally you wanna get that simple insurance product those more complicated products are really only a last resort resort if you don't qualify because of underwriting requirements for a more basic simple insurance coverage and then if you are looking at that decision I consider folks to take a lot of time to think about that is this really the right product for you and then in making that decision and getting advice on that decision figure out who's advising you on that that's to say don't ask the insurance salesman if you should buy long-term care insurance get advice from someone who has expertise in the area that doesn't have that conflict of interest. This is a practical point this is what we did the benefits for long-term care insurance are quite limited I think I mean they're gonna give you a dollar amount per day maybe a hundred bucks for a period of time and so what we did was said okay well if we actually used up all of these benefits what would that number be and can we self-insure? Now of course the answer to that may be yes maybe no but I would encourage you to at least do that math I can help inform the decision. One note I just wanna add on that certainly there's an argument for self-funding right hey you've got the money maybe you don't need to buy insurance coverage here's an argument I heard from an insurance salesman right so take this with a grain of salt with respect to even if you do have the resources to be able to afford that coverage yourself consider when that day comes you might be inclined to not pay for professional services trying to do some of that in-house yourself that's gonna be that survivor not the surviving spouse but the spouse that's more abled right and how is that gonna impact their quality of life so I can certainly see the argument there but of course again that's also the argument being made by an insurance salesman. I have a follow-up question on that and I just want to reiterate we do have a mic here in the middle if people have questions feel free to queue up I wanted to ask about the people who might have life insurance and whether that can in some cases be transferred or switched into a product a hybrid product that covers long-term care I know that sometimes that can be an elegant solution if someone has some sort of a permanent life insurance product John you're nodding can you talk about that? Yeah I've only ever actually been remotely involved in helping the client with this once but if the question is hey I'm gonna pay five grand a year to buy a new span loan policy or if I can take an existing whole life insurance policy and then change that into an existing whole life insurance policy with long-term care writer certainly that can be more cost effective than shoveling out five grand a year every year forever. So a follow-up question on the topic of long-term care I'm guessing a lot of people in this room probably fall into the self-funding category where they've probably amassed sufficient assets where they feel that they could absorb a long-term care shock. So a question on that front is how do those funds get invested assuming they're earmarked for long-term care and also how do you right size that allocation that you're setting aside or do you even need to how should people approach that if they're in the self-funding camp and Rob maybe since this is your approach maybe you should. That's an interesting question I haven't thought about whether I should change my asset allocation in the event that we have to spend a lot on care. I've certainly factored it into potential expenses and we can cover it. At least off the top of my head I don't see asset allocation changing. I mean I suppose in theory you could earmark some amount of money that says okay we're gonna put this aside for the event eventually for long-term care if that ever happened but even then it would be a tricky allocation because you don't know when it's gonna happen. Could be tomorrow or it could be 20 years from now. So I think for me I would probably just stick with my overall asset allocation and then just know that I've got the assets to cover it if that should come up. I wanna ask about the bucket approach to retirement allocation. We had a good conversation about this at lunch and I just like to get the panel's thoughts maybe you can each address the question of whether you think it's something people should use whether you think they should avoid it. Whoever wants to jump on that one. I mean I think that if you like back to Carson Jesky he definitely believes that it's inefficient he should just stay completely invested and write it out and so forth but. The bucket strategy okay sure yeah I mean basically what you're doing is you're setting aside a bucket of money for near-term expenses some period of time it could be a year it could be two or three or in this other guy's case four years which is a pretty long time and so you're not getting any market returns on that money but you're sleeping better at night so it's a drag essentially on your portfolio. So but I think from a simplicity and behavior and psychological perspective it really works because people are like okay I have a set of money it's like my checking account I can live on this essentially they're creating a paycheck like a punch in the G your long paycheck all at once timing when they take that out which they can control. So if you load it up for 2022 at the end of 2021 or whatever the latter half you'd be good to go and you're feeling like a genius and so some folks do do this and if they stay active and they have a long period of time I mean they sleep all at night and it works for them but it may not be the absolute perfect performer over time but maybe you're dealing with a lot of stress because you're trying to manage that and it's somewhat complicated too. Yeah pros and cons to any investing approach the strategy it can stick with is likely better than the one that you can't if a bucket strategy sounds great to you then certainly that can be reasonable. Now cons being you're gonna have that cash drag so maybe that means you're gonna have a smaller investment return and likely that'll be the case on along the timeline because cash historically hasn't done as well as intermediate term bonds over the long term but again that's less important than as a strategy that you can stick with and if that's the one that sounds appealing to you then certainly that can be reasonable. So there's a lot here but I won't go into all of it because of time I think there's different issues with the bucket strategy and why you wanna use it if the question is you wanna keep a certain amount of cash before because you wanna feel comfortable then that's fine, right? I mean as long as it's not too much and whether you call that a bucket strategy or not or it's just money in your checking account and then you've got your portfolio over here that was sort of the father of the bucket strategy Harold Levinsky that was his idea two buckets one for cash he started at two years it was too big of a drag on the portfolio so he ended up taking clients down to one year which by the way is what Bill Bingen did, right? He pulled a year's worth of income out of and his assumption is analysis model so really not much different than that and I think that's a certainly reasonable approach I think where I get to have trouble with it is if we start to have multiple buckets and we start to do our asset allocation by years of expenses rather than percentages which is how I started to think about it when I started getting to the retirement phase and for me personally I just found that harder to actually implement to know when to go from one bucket to another it was just easier for me to have whatever cash I wanted and then a 70-30 portfolio or whatever it's gonna be but others might find the bucket strategy easier there might be just the opposite so a lot of it just comes down to personal preference but I would always think about even if you use a bucket strategy what is your percentage asset allocation? I wouldn't lose sight of that if you're gonna go with the three or even more complicated bucket strategy. Okay, hi. I've read actually it was a Michael Kitsi's article that there's a possibility that you can look at annuity as part of your fixed income asset portfolio not to annotate it, you know you'd sell it afterwards but as a good source of income in terms of comparatively I'd be interested to hear what your thoughts are. Yeah, there's a guy, he's V. Bodie that I know he's an economist and he talks about life cycle finance so one way you can think about your portfolio is you think about your expenses and what do you have to spend just your needs and then your likes and then your wants and if you cover your needs with social security and annuities then theoretically you can take more risk with the rest of your portfolio so that is one strategy is you basically try to hedge out the stuff that you have to have make sure you're fully covered and then you dial up the risk and the rest of it and hopefully you get very good long run returns. Yeah, that's certainly an approach that I think a lot of people follow you do have to do the calculation and there's some assumptions in term including the discount rate to figure out present value so that can just get a little dicey but the thing I would say though is I would still look at how much I need to pull out of my portfolio after the annuity check comes in and what percentage of my portfolio is that and what is my asset allocation of that portfolio without considering the annuity I personally feel more comfortable running through that analysis at least as part of the process even if for your overall asset allocation you wanna view an annuity as part of the bond portfolio which is certainly a reasonable and logical I think thing to do but I would still wanna know because if I'm pulling 4% out of just the portfolio and because I'm considering the annuity as part of fixed income I have some allocation that say outside 50 to 75% in stocks which maybe you wouldn't but if it was outside that range it would at least be something I'd wanna think about am I too far outside that range that at least history tells us could be wrong in the future but history tells us is the range we wanna have if we're somewhere around that initial 4% withdrawal rate that's how I think about it Hi, my question touches on several topics you brought forward so just what a great panel we've all thought about the 4% rule and several of you mentioned how many of us are in the position of having at least, well mine is about half of my overall wealth is in my house and I'm really loathe to take out a reverse mortgage they've had such terrible, I really don't wanna do that but my question is this as I have to laugh I'm so far ahead of the 4% with my withdrawal just for living expenses that I don't have to calculate that to see where I am it's way above that as my portfolio is going down both because of withdrawals and because of this last year my house value is skyrocketing and I still have a big mortgage so my question is, do you think a home equity line of credit would be useful so that I could in effect increase my mortgage temporarily borrowing money admittedly a line of credit is at a higher rate than a traditional mortgage do you think that would be advisable sort of hoping, waiting for the market to turn around so that then I can start repaying that mortgage and the line of credit? Yeah, that's a great question I mean, if you ask Wade Fowle that's basically what he's saying he's saying either through a HELOC or with a Hecum which is a home equity it's basically a reverse mortgage is a government backed version you can also get a line of credit to make that available to yourself and then potentially engage in that and essentially you could draw from that to cover your expenses instead of selling off of your depressed portfolio and then you're waiting essentially for the market to recover so you have to have confidence and the patience to wait for the market to come back and that comes back to kind of the emotional side of managing your own behavior and feeling like you've got enough of a window to for this to come back I mean, I think we've gotten conditioned to markets coming back really quickly and now we'll see I mean, personally, I don't look at my opinions but yeah, I think it's a potential strategy but you really should consider forecasting it out over the long time horizon Yeah, so I'm very nervous about it this strategy gives me the heebie-jeebies if I'm gonna, you know that's a very technical term so because first of all, you're borrowing to invest which is effectively what you're doing now some could say you're doing that like you don't pay off a mortgage but you're doing it while in retirement not when you're 30 and are working and have income, you know, earned income and if it's a home equity line of credit you're subjecting that to interest rate risk, right? If interest rates keep going up so to me that would be for me would be like the option of maybe last resort I that would make me very uncomfortable I would think more about depending on the circumstances downsizing even maybe you don't wanna leave the home I know or maybe you're already downsized or you know, but for me that would make me very uncomfortable to start borrowing out of a home equity line of credit so that I could keep more money in the market in retirement that would, I think it could work out but it could also end pretty badly I think. Okay, thank you. Hi, I'm Vijay from Ann Arbor, Michigan planning to retire in five to seven years question for Steve I used a new retirement, fantastic tool but maybe I'm lazy and ignorant I'm unable to use the full potential of the tool but however Rob Burger made a video and I'm able to use the tool as far as you know, by following Rob Burger's video so my question is are you guys going to collaborate and make few more of those so that people like me can benefit? Yeah, thanks for the feedback. It's a team effort. I would say we started it with power planners and that's informed what the product does and we are working very hard to make it simpler and easier and more accessible we're building our own health and classes and we believe them we're really here to try to bring literacy and planning to the mass market that's why we've built kind of like turbo tax equivalent and price it in a low cost way but yeah, there's a ton to learn there's a ton of, there's a million edge cases a million edge cases, it's so hard that's why it's such a hard problem and no one's really solved it and yeah, no, I mean I appreciate that Rob has building videos to make it more understandable so thank you very much for doing that. I, well in my case, my wife is the brains in the family and I don't know if there's any correlation but she has no interest in this financial stuff, okay? Let's assume that we have plenty of money we're not at any risk of being near the edge. She currently has an IRA that has maybe 10% of our assets and she's got a financial advisor for that. If I kick the bucket, I know exactly what's gonna happen and I don't want that to happen he's gonna suddenly have 10 times as much money. I'm wondering if you guys have any suggestions that actually work on how to do this transition other than simplifying as much as I possibly can are there any other techniques or anything else that you can suggest? So that if I pass away first that she has some other alternative to a 1% charge on our assets. Yeah, so first things first, if you haven't done this already make sure you've got all those estate planning documents in place, right? Will, Tress, Power of Attorney, and then so that's the formal estate planning stuff and then it sounds like you also have a big need for an informal estate planning document which goes by many names, emergency letter, side letter of instruction and what you're gonna do is you're gonna list out everything that's not listed out in the wills to trust in everything else, which is to say, honey, here's the name of our estate attorney, here's the name of our tax preparer, here's where all our accounts are and how to access them. She got all that. That's not the problem. Perfect, so it sounds like we have a need for a financial advisor who's gonna do the asset management or maybe an asset. He's a great guy. Yeah, exactly, yeah, that's, yeah, that is the issue. So, gosh. So the relationship component aside, because that's a whole, another can of arms, we need someone to manage the portfolio in your absence. So it sounds like if you want to go the portfolio route then possibly transitioning now to a more competitively priced asset manager via. Like Vanguard or something like that. Yeah. A company that starts with V, sorry. Yeah, yeah, no. That's fine or a flat fee, right? You want to find a flat fee asset manager you're gonna know exactly how much you're paying to the dollar and that can help you decide if that's a reasonable price to pay. So taking those actions now, and again, that's gonna be, oh, looks like, okay. Yeah, just real quick, I agree with John. I mean, there's a definite movement now for a flat fee fee only advice and it exists out there. And if you frame it up for your wife or your family to say, okay, well, 1% it's 20,000 a year, right? Or what the number is and what does that buy and would you rather pay your friend here 20 grand or give it to the grandkids or fun college or something like that. I mean, you frame up the alternative, but there's definitely, you know, you should be able to find a fiduciary advisor you can play on an hourly basis, just like you pay a CPA, right? Or a lawyer. So I would look more widely and try to have that discussion now. I agree with the risk. Thanks. So, super quick. I know we talked about the 4% rule. Bill Bangan, we're gonna have Bill Bangan on the Bogleheads live show this December. So if you want to ask Bill Bangan, father of 4% rule, maybe now the 4.5% rule, your questions, make sure to check that out. You can follow the Bogleheads on Twitter for dates and times. Thank you. So thank you so much, Rob, John, Steve. Thanks for being here. We're going to take a 10 minute break or I guess like eight minutes now and we will reconvene in this room and Rick Ferry will be interviewing Dr. Burton Malkiel. Thank you.