A (3:30)

But the challenge is people often have trouble anticipating what their expenses are going to be. And so there are really two routes that people take. One is people will look at their current expenses as an approximation. The other, and we see this more commonly in retirement calculators, is that a lot of online retirement calculators will say either 70% or 80% of your current salary is what the standard online retirement, which is a little flawed because it assumes you're living on most of your current salary. But you know, you go online and go to almost any retirement calculator and that's the way they're designed.

B (4:10)

Yeah. The good news is on both of them, there's a little research behind these things. So the 70 to 80% where that comes from is actually looking at us spending data in retirement versus what people are making beforehand. And what you see is people spend about 70 to 80% over time on average. Now when you dive into those averages, you then start to learn a little bit more, which is you actually have people when they retire, especially in the first five years of retirement, are spending over 100% of what they were spending pre retirement. So you actually get a group of people that start spending more than they ever have before. They're doing the trips that they never took, they're buying nicer things, they're trying to enjoy life. But overall what you see is actually a steady decline in spending, especially adjusted for inflation over time, is that spending declines. You don't spend the same when you're 65 as you do when you're 85. You do tend to spend less the longer you are in retirement. But those 70 to 80% kind of research analyses are really done as like a fixed spending, which kind of mistells the story that yeah, you might spend More at the beginning, but you're probably going to spend less over time. So how are you going to kind of fund or live the lifestyle you want early in retirement, but also kind of manage things as they slow down later on?

A (5:31)

Hmm. How would a person plan for that? Because it sounds as though when you first enter retirement, you're really trying to plan for two things. You're trying to plan for increased spending higher than what you're currently spending, higher than you're currently making, in fact. And simultaneously you're also navigating the potential for sequence of returns risk.

B (5:52)

Yes, a sequence of returns risk is the big topic and it's one of the biggest risks from a math standpoint for any type of distribution to a portfolio. Right. It's the biggest risk outside of just time horizon would be probably the secondary one. Because if you need to make money last for 200 years, it completely changes the formula. When you look at that, I often describe this as trying to hit a moving target in the wind. And that's really retirement planning. So the target is whatever you want to do the way you want to live your lifestyle that's unique to you. It's also moving because we don't know when you're going to retire or how long you're going to be in retirement. And then the wind are all the things that are going to change. So sequence of returns risk. If we get bad returns in the first couple years of retirement, that has such a detrimental impact on our plan that it's hard to recover even over 20 plus different years of living in retirement because we have to take money out when our assets are going down. So we kind of get both the, well, we're spending these and we're spending them when the values are declining. And from a mass standpoint, that's really hard to recover from over time. So you see is the research around that, at least in the United States, found that about a 5050 portfolio of US based stocks and government bonds, you could spend about 4% of a portfolio and not run out of money at any historical 30 year time period.

A (7:18)

Right. That's Bill Bengen's research.

B (7:19)

That's Bill Bengen's 4% research, which was funny because he was not out to show that. Which is always one of the funny things that people get wrong about this. And there's actually a little meme of me, I hold up this sign that says it's not a rule. And funny enough, somebody tagged me in again this week and I think it's from like 15 years ago. But it's not the 4% rule, it's a 4% finding. But it really only worked in the United States over those time periods. If you go and look at other countries, the US had such an outperformance in the equity markets that it worked here. But if you do it in Europe, it doesn't work, it fails. If you do it in Asia, it fails. It just didn't work globally. So it is kind of a small subsection that this 4% finding even worked. It doesn't guarantee that it works in the future. Although the flip side of that argument is 96% of the time, if you take 4%, you will not run out of money. I think it's 70% of the time, you'll have your entire portfolio left over at the end. So if you start looking at it in different ways, and it's a very safe way to spend your money, in fact, you almost never run out. And if you make small adjustments, meaning you're willing to cut your spending up or down, you can actually move it up by about 10%. If your portfolio moves about that much, it really doesn't run out. And so that whole notion is relatively new in the retirement space, which we would call adaptive based planning. And adaptive means you actually will move up or down your spending based off of the funding of the rest of retirement. And in those situations, if you are willing to cut back your spending, most people will make it through retirement. I think that's more based on reality, is that people are adaptive. If the markets drop, guess what we do. We spend less money. We actually don't do this constant inflation adjusted spending. It's not reality. I've always had this issue with that research too. It assumes that inflation can run up back to 1970s level, but people are gonna spend the exact same amount of money inflation adjusted. Well, at no time in history when inflation runs up that high do people spend the same amount. Everyone cuts back on spending regardless of how wealthy you are. Right. Even billionaires get worried and don't invest and spend the same way they did, not during lower inflationary time periods. So that part, it's math, but it's not based off of human interactions and our behavior.

A (9:53)

Well, and Behngen himself has also recently modified the finding up to 5%.

B (9:59)

Yeah, if you look at other things too, you take international, a broader investment mix because the first one was very limited on investment mix too. Right. We were only looking at U.S. large cap and U.S. bond. I mean, people do invest that way, but that's not what I would say is a standard investment philosophy. And then if you look at some research, Wade Pfau was another one that did a lot of this post, Bill bangin's work and Dr. Michael Finka, handful of others. What they said too is if you layer in the other assets that people typically have, life insurance, housing, wealth that are less market correlated, there's some research that shows it can be in the 6% and doesn't run out. If you're willing to tap say lending on your home during down market years, that has a huge impact. So reverse mortgages, lines of credit, those kind of tax free withdrawals from home equity, super powerful to weather those storms. Cash value life insurance, same thing, you might be able to use that or borrow against the policy. And that can extend the life of these portfolios too. So if you're a regular person, you probably have other assets outside of just your investment portfolio. So how do you layer these into your retirement plan? I think is crucial and something that's always been part of my research, my work, the way we teach this to advisors is look at everything that somebody has.

A (11:26)

I want to talk through some of the additional challenges in retirement that you elaborate on that we don't often hear starting with. And nobody likes to talk about this, which is probably why we never hear about it. Silver divorce.

B (11:39)

Ah yeah, Silver divorce.

A (11:41)

So tell us about the risks.

B (11:42)

Yeah, so silver divorce has risks and I guess positives too, right? But nobody really likes talking about this one. It's not a popular topic, but it is happening a lot. The baby boomer generation in particular has seen a spike in later life divorce. It's very counter to most of the popular phrases and knowledge that you hear about divorces is that you often hear that millennials, oh, they don't stay married, they get divorced all the time. If you actually adjust for ages and length of time being married, millennials are getting divorced at lower rates than the baby boomer generation got divorced at. Baby boomer generation is actually the highest divorced generation we've ever seen. And it comes to a surprise to most people, but that is still continued to carry through later into life. So you are seeing a lot of individuals over 60, 65, 70 get divorced. The challenge with that often is we're splitting up assets when we plan for a retirement and saved for retirement with a lot of shared costs. And when you split up, that's the biggest risk is that all of a sudden we now need two houses, we now need two health care plans for long term care. We can't rely on our spouse to perhaps provide some of that unpaid care, which is the number one way that long term care is provided in the United States is by a family member unpaid, about 70% of it. So as we start to split up assets and lifestyles and go more independent, you actually see one good thing here too is the happiest cohort in the entire country is recently divorced women over 65 who are grandmothers. So we talk about the money part, but they are actually happy. Like you're not just seeing, oh, everybody's sad and divorced, that you're seeing people make very purposeful lifestyle changes and they're enjoying it. But the risk of what happens in 30 years financially is a new thing for this cohort. You also have to become educated then on your finances. The majority of what I'll say older American couples still have a primary decision maker around finances. It's really not a shared responsibility. And when you test on literacy rates on couples that say, hey, we have a shared responsibility, what you find is one tends to actually have financial literacy and the other one has close to zero. It is probably not true. The other very interesting thing is when you ask couples, you often get this very interesting answer where one actually says they're the primary financial decision maker. The other spouse then says, right, it's a shared responsibility. You don't usually get couples that say, we share responsibility or we're both say that they're the primary. Most of the cases you get couples that say, I'm the primary and we share it. Which is very interesting because obviously there's some mismatch of this conversation going on. And it is true because then when you look at, right. The understanding levels, the one that says, I am the primary decision maker on our retirement finances is the more knowledgeable, financially literate individual. The other one tends to really struggle with retirement income literacy questions. This has been a ongoing literacy survey that's been done by American college, I think, going back to 2013. And so it's not a flash in the pan one look at it. It's been a decade plus of reviewing this data and doing the survey over and over again, and that has continued to hold true. So Silver divorce is real. We have to plan for it. And I think the challenges remain. You know, what does this look like in 20, 30 years? Because when we go back to the 80s and 90s, we didn't see a lot of this after age 60 divorce. It was pretty uncommon. And it's becoming more and more common today.

A (15:44)

There are a couple of things that you just said that are quite notable. One is the notion that there will be couples in which one member of that couple says, I'm the primary decision maker, and the other member of that couple says, oh, no, we share the decisions equally. That is a recipe for arguments. We also know from research that money is the number one topic that couples argue about. And lack of agreement on who makes the decisions, who has decision making authority, and how those decisions are made seems to be a root of financial arguments. So it isn't even about the substance itself, but rather about the process and the authority.

B (16:24)

Yeah, you can get a lot deeper into this part and like, why are all these things the way they are? Most financial decisions and the way we process financial information, the majority of it is actually emotional. Right. Like our emotional side of our brain is taking over for financial decision making. And so when you think about why is it causing fights? Because this is emotional, emotionally driven area. Right. Like, we're not just saying, hey, this plus, this provides this much income in retirement. It's this plus, this creates some risk, doesn't alleviate another risk, and allows us to live this lifestyle that we never agreed upon. And so there's a lot of conflict in there because that's all emotionally charged. And you might have had one person, especially in the baby boomer generation, less so today, where maybe only one spouse was the outside, the home worker and the majority of their retirement savings came from one of the two of them. Well, and that's a great recipe for a lot of conflict because they're going to have a sense of ownership over those assets and not always feel that they need to interact with their spouse about the decisions of how to invest, how to spend it. And that does create a lot of conflict. So the more you can talk about this earlier, the better. Our households in general, the United States, aren't great at talking about money at young ages with our children, on how we budget, how we earn money, how we share responsibilities. When I talk to people, most people tell me, well, we didn't really talk about this when I was a kid. In our house, it's pretty rare that people tell me, oh, yeah, we had big budget conversations. We were involved, the parents were open about how much they made. You often hear, I lived my whole life and never knew how much money my parents made. And they just get a gauge on compared to the people I know. What's our lifestyle like? Does it seem similar or better or worse around the people that we live with? And that's kind of how you gauge, like, how did my parents do.

A (18:31)

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B (22:06)

Elder abuse is growing at a exponential and very scary rate today. And it's often family members. And that's the ugly truth about elder abuse is the majority of it his family members or other close friends and trusted partners. When you think about advisors, accountants, CPAs, doctors, other medical professionals, you are rarely seeing true elder abuse coming from total strangers. With the caveat that financial elder abuse of true scams out there are are starting to grow from, you know, AI and foreign actors. But it often, interestingly enough, doesn't land under the technical laws of elder abuse in a state. Elder abuse in a state is usually you are targeted because of your age, whereas a lot of the online scams are impacting our elder community because they're not prepared for how these different online scams are being perpetrated. I've dealt with some where they're really just mass scams, but our senior population is falling for them more often than more digitally native younger individuals. The scary part about this is this destroys lives. It destroys people's health. You see stories coming out of Florida where there's been drug rings that have gotten involved and gone to the assisted living facilities and distributed out really harmful drugs and taken this money from the senior citizens that are living there.

A (23:42)

Wow.

B (23:43)

And Florida's had to put a lot of additional rules in on how do we claw back this money, how do we go after these criminals? So you have the family ones, but criminal circles have developed to specifically target this group of people and It's a topic that unless you experienced it in your own family and saw it, people don't talk about this.

A (24:03)

Right.

B (24:04)

Even financial advisors rarely bring this up with clients ahead of time. And I think that's a big missed best practice is we should be addressing this as a risk in retirement and in general. Right. How are we going to address this if something comes up? Where? If I'm your trusted advisor, what are you giving me permission to do if I get worried about you? Can I contact your kids? Can I contact your attorney? Who am I allowed to bring in? There's some loose rules around when an advisor knows this is happening that they should report it. But it's really a state by state philosophy and set of laws. So often I'd say advisors are unaware. But I think having the conversation and getting permission from clients that this is a real risk. And how are we going to adapt and move if something happens? You should do up front.

A (24:59)

What's interesting about what you've just said is even when I was asking the question, what was in my head are the scams that you hear about from the FBI, you know the telemarketing scams, the grandparent scams where they say hey, your grandkids in jail, please wire us some money for bail. Those common scams that you see the postings on the FBI website or the ICC? Is it the ICC's?

B (25:22)

Yeah, that's one of them.

A (25:24)

Right.

B (25:24)

Even the OCC, FCC. So all of our three letter government organizations. The Fed's gotten very involved recently too because a lot of the wire movement of money has now become an issue. And you typically get that notice if you use Zelle or any banking app like do you know this person? Is this fraud? Because they've seen such an uptick in that. Yeah, the one about your grandson has been arrested or a recent one has been. They got in a really bad accident and we need to take them to the hospital, but we can't find their insurance and we need to make sure there's enough money to pay for the ambulance. Because a lot of seniors are aware that ambulance rides in different areas of the country are very expensive. So they will literally be like, oh no, they need medical attention and you send somebody into a panic and then they send the money and then they're wait a second, should I have really sent that? Because they do a lot of online scrolling too, which is very interesting. So they'll learn the kids names, where they live, where they go to school, because the grandparents will post, oh, I'm so Proud of my grandson for getting into Pittsburgh and playing football there. And I've even heard one where it was a hockey team, and they called them and said that he got hurt playing hockey and we need to. You know. And they're like, well, my grandson is a hockey player. He is away on a hockey trip. I'm aware of. Like, that's so detailed. But they pulled it all from online. Right. It was all public, and. And they did end up sending money over, and so those have gotten very, very complex. The scary thing that's coming next is the fact that audio is going to be replicated in the future. I could do it today. I could go onto your podcast, take your audio, and if I knew your family members, I could call them with you as the person talking. Right. Not sound any different, and say, I really need help to your parents. And it would be you. And they'd say, well, of course, because they love you. And they would wire money to you or give you their credit card information because you say, hey, I dropped my wallet. I can't find it. I can't get home. Can you give me a credit card? I need to be able to book this Uber and put it in. And there goes tens of thousands of dollars in seconds, right?

A (27:34)

Yeah, it's rather terrifying. Do you have any tips for what people can do to put some safeguards in place?

B (27:42)

One of the first things around all theft and fraud is it's going to be inbound coming to you. So when you're getting requests for payments, a link sent to you, a call in the future, you really have to verify all those things, which means you have to be able to call or go find the website online, see what their call number is. Don't trust any calls that come into. Don't trust any emails that come into. As scary as it is with emails, really sophisticated, you know, scammers can now actually mask an email address, making it look like an official email.

A (28:20)

That actually happened to me once somebody masked my email address and started emailing people. I have been impersonated on social media many, many. I mean, literally hundreds of times right now. Yeah. No, truly, truly. Like, I'm, I hate to say, normalized to being impersonated on Facebook and Instagram because it's commonplace that in any given week there would be two or three fake accounts pretending to be me.

B (28:45)

Yeah.

A (28:46)

But it was actually really surprising to me the first time that my email was spoofed. That was a new one.

B (28:52)

Yeah, that's relatively new, but that's going to become more and More commonplace. And that's scary. What you are seeing, though, is email banners, now that you can add, that'll say this is actually an external email or. Right. This shows signs of phishing. And that'll be things like that can still pull. Even if the email is masked, it will still recognize that. So some of the, I'll call it defense technology to protect money is getting better. But we are really behind where the scammers and elder abusers are on this. So that is a scary part of the world. There's a lot of stuff going on here, so we're a little bit over on the side. But if you go talk to the largest providers, say like a vanguard, they're getting millions of attacks a day of people trying to steal your money. And they have entire situation room in which they're trying to defend against these. Now, these are mostly foreign actors, right? So you think about United States, biggest international enemies, and they're constantly throwing attacks at our financial institutions. China has been in the news about this, but they're doing now a kind of like capture and store and break later approach. What we think of today is very secure data transfers. The interesting part about those are you can actually capture the information. It's just encrypted. And there is no technology on the planet today that can break the encryption. However, China has now taken an approach where they are going to capture all encrypted data that's moving. And we didn't mask encrypted data being transferred. So when you're sending encrypted data, you can actually download, you can capture it. It's moving kind of freely through the web because our assumption was it's nonsense, it's not usable. But they have now taken the idea that we're going to capture all of that and store it, and then eventually, guess what's going to happen. Quantum computing and AI is going to get to the point that we can crack this. That is a very scary future if that comes to pass. Now there's people that argue that might be 300 years away, but then there are other tech people that said, well, people told us that we couldn't do things today that would be 300 years away, seven years ago. So we haven't been very accurate on the speed of this transformation. But those types of strategies, right, there's not a lot that an individual can do. So you have to control what you can control, which is back to inbound requests for money. Always verify, no matter how secure you think that caller or whoever it is, I don't pay things that way. If it's in an email, I go to the website, I make sure I go find the website, you know, the banking website or the vendor, log in there and pay the last piece here. And I think we'll do some other stuff, but is use credit cards over debit cards. I just, I think that's underrated advice that too many people don't know. Getting your money back from credit cards is still relatively easy. They've got good fraud prevention. There's times where they can stop the money. Debit cards, usually the cash has been moved, it's gone, it's not coming back. So that's why it can take months, years, and you don't always even get the money back. Especially if it was a mistake on your end and you sent payment to the wrong person, that's pretty much gone using a credit card. In those situations, though, sometimes it can take four or five days for the money to actually move. So when you realize, wait, that wasn't the person I was supposed to send it to, you can contact your credit card, put a fraud requests, and they can stop the payment ahead of time and you'll really not be out the money. So I think that's really important in this future world is be careful of how you're sending money. You, when you go out and you buy the gift cards and then give the gift cards to them versus giving them your credit card number, that's one of those reasons. Because they can use that immediately. There's no way to stop it and pull it back. And so that's a big scam out there too. So a couple things be very wary of, trust of things inbound. Verify everything. Use credit cards over debit cards. Think about, is this money recoverable if you send it out there?

A (33:03)

Right. And that's part of the reason that scammers want wires.

B (33:06)

Yes. Yeah, wires. And crypto. Because crypto is almost impossible to get back today too. It's not impossible. The FBI and some other organizations have gotten some crypto back, but they tend to be like massively large. Right. Fraudsters, where they're finding hundreds of millions. If your 50,000 goes out, you should just think about that as gone.

A (33:29)

Okay. If we are really bumming ourselves out about things that could go wrong in retirement, let's talk about cognitive decline.

B (33:37)

Well, cognitive decline fits right in with what we just talked about is most elder abuse starts to occur when your facilities start to decline. The hard part about cognitive decline is the fact that you don't know it's occurring, when it's occurring, if everybody could recognize it and you say oh wow, like I'm starting to suffer from cognitive decline, you could protect yourself very well. But often you don't notice it as the individual. It's just small things at first. Things slip off, you forget names, you forget times, places, dates where something might be. But it snowballs very quickly. And then those small miscues really open up that door for, for people to take advantage of this decline, interestingly enough. And again, it's kind of one of those areas where the research and the medicine and the treatments are getting better. You even have assisted living facilities and long term care facilities that have specific cognitive decline wings to help people actually live a better life. So these are good things, right? Like we have improvements coming along here. I'm also very excited about the positives of technology. Self driving cars, AI telemed, where somebody who's early suffering from some cognitive decline can still live an amazing lifestyle. And that excites me a lot. Where somebody probably shouldn't be driving a car, forgets where they're going. But with self driving cars and GPS built into everything, people can live a better lifestyle moving forward. So we don't want to scare everybody. There's a lot of good that's occurring here, but it is a huge risk. And if you look at one of my favorite sayings, which is health is wealth, the best thing you can do is stay active, stay in communities, stay engaged. There is a ton of research that talks about cognitive decline and how much that increases the moment you retire. That people who work longer push off cognitive decline because you're engaged in complex tasks and decision making. And as soon as those start going away and you get stuck into a routine, mundane task situation where your brain doesn't have to kind of continuously rewire itself every night, recategorize things, cognitive decline starts to occur. Now there's real diseases that also come into play. And working longer doesn't always just push off disease. We understand that part, but you can control some of this. So the healthier you live, the more you take care of yourself. Earlier on, staying active and staying mentally engaged. And that could be volunteerism. If you don't want to keep working, then find those ways to stay part of the world and keeping your brain moving. Because if you let that go, your health starts to decline very quickly and you don't live the quality of life that you probably want to.

A (36:29)

I've also heard people say that the way in which travel can help stave that off is that you are taking in novel stimuli, near novel stimuli. Particularly if you go to a foreign country where some of your basic assumptions about how things work, even the shape of electric plugs, the metric system, you know, I mean, all of these basic assumptions get upended. And so because your brain needs to constantly readjust for that, it's. It's basically a workout for your brain.

B (36:57)

It is, and that's a perfect example of it, is that when we go to sleep, our brain recategorizes everything at night. But if there's nothing new to recategorize, it has no work to do. And so your point of going to a new country and traveling where you don't know the currency, you don't know how to convert things, you don't know the language as well, you don't know how the day even looks there, that the sun rises and sets in different places at different times than where you live. Your brain has to re categorize all of that every night. And so those new stimuli or complex decisions that your brain is dealing with are very healthy for it. It's just like moving muscles, continuing to move your brain and having it do those rewirements are very important. But there are other ways to do that. You don't just have to travel to another country. You can volunteer. And if you're cleaning up a new site or you're giving out food and you're engaging with people, Reading has been super powerful for people. Right. Read new books, read about new people, continue to stress test really your brain in different areas to stay engaged, pick up hobbies, play sports. Sports are always different. Right. Every time you go play pickleball or tennis, you do have to move different ways at different times, different strategies for different teams. And all of that is super helpful for your brain.

A (38:19)

Yeah. You know, I've never taken dance classes and recently started. I feel like it's more of a cognitive workout than it is, you know, I mean, it's a physical workout too, but for me it's just. It's a cognitive workout.

B (38:31)

Yeah. Where do you step? When do you step right? You probably start dreaming of different steps, like left, right, left. Spin in your mind now.

A (38:39)

Yeah, yeah, exactly. It uses a different form of intelligence that I'm unaccustomed to, and that's a

B (38:45)

great version into, like, visualizations and athletes. And sports are a great example of that. I was a swimmer, and I grew up swimming with Michael Phelps, and Bob Bowman was our head coach, and I swam on NBAC in Baltimore. We always put out great Olympians. But I was not. I went and wrote books and got designations.

A (39:06)

Yeah, you became a cfp.

B (39:07)

Yeah. That was always my joke is Michael went and collected gold medals and I collected designations. So very different pathways. But one of the great benefits I got out of being around such a great coach and other great people who adopted his process and went on to excel was that we often talked about visualizing our races and visualizing where we wanted to be in the future. So we always looked at, in say, five, 10, 15 years, where do you want to be when you're wrapping up college? Do you want to be an Olympic swimmer? And Michael Phelps always talked to, you know, his visualization was about breaking Mark Spitz's single Olympic gold medal record. And then when you work back from that, so you actually set that anchor out there in the future, that visualization, and you work back from that to set your goals. Not starting today, going to the future. And the other thing was I would visualize every stroke I took in my race. So I'd know exactly how many, how I'd hit the wall, where my hand would be on the turn, how long I'd be underwater. And you'd think through every little piece of it. That just helped you be so much better. But the funny part about that is when you get really good at visualizing it. I think most of my memories now of swimming are actually my visualizations of it, not the actual races. And it's super interesting to think back that, like, I have these very vivid memories, but it was more of the visualization work that I actually did than the actual races, which always seemed to go by in a blur. But I have very solid memories of me sitting behind the block thinking about the race, but then the race itself. Right. You're just going on autopilot from your visualization. And it's a super powerful way to be more successful anywhere in life. Athletes use it, but I think the greatest business people and leaders do a great job on using visualization to say, this is where we're going. We're going to be number one in whatever we do, and this is the pathway that we're going to take to get there.

A (41:13)

I forget who it was. I was talking to somebody recently who was talking about how the important piece is to visualize the process. So it's notable to me that you talk, you know, you didn't visualize standing on a podium with a medal around your neck. You visualize the process of the strokes you were going to take when your hand was going to hit the wall, the amount of time you would be underwater.

B (41:35)

Yeah.

A (41:35)

Yeah.

B (41:36)

I mean, I personally think you should do both. But you are right. Like the process of visualizing it. Right. Like hearing the beep, which foot are you pushing off of first? Right. How do you hit the water? Where's your head? The whole process of engaging in it. There's a decent amount of research that shows that when you visualize the end and then work backwards from the process that those are the people that actually are most likely to follow through with changes. So if you say you want to make a big change in life, the odds are nine to one you do nothing. There's a whole TED Talk about this one too, so if anyone wants to go look at it. But 9 to 1 odds that if you want to make a big change in life, people do not act. Now, as soon as you set a long term goal and build a process of visualization that basically flips on its head and almost everybody, then almost nine to one makes a change. Now does everybody get there? No. But they do make a change.

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Start filing today in the Credit Karma app. Continuing with the theme of retirement, aging, how to plan for our senior years when we imagine, you know, you talked about how your spending is different at 65 than it is at 85. Often when you think of yourself at 85, the term frailty comes to mind. With that term comes the assumption that we might need some long term care. You talk about how these concepts should not get conflated. Can you elaborate on that?

B (44:45)

Absolutely. The idea of long term care and frailty, often people think these are just the same thing and they're very, very different. So frailty risk in retirement is this whole idea that you're not going to be able to do all the things you once were able to do. That's going to happen to everyone, right?

A (45:06)

Yeah. You can't climb on the roof and clean the gutters.

B (45:08)

Correct. And you probably shouldn't have been doing that before, but when you're 85, you definitely shouldn't be doing that. Right. The risk of falls becomes so dangerous. You shouldn't be climbing up on ladders at all. Those things should go away. But the problem with that from a lifestyle perspective is you've always changed the lights, you've always put up the Christmas tree and put your star up there. You've cleaned the gutters, you've mowed the lawn, you've weed whacked around the house, you've trimmed the trees. But at 85, you shouldn't do that anymore. It's dangerous, it's not worth the risk. But then who does it? Do you have family members and kids or neighbors that are willing to step in in an unpaid way, or do you have to outsource that to somebody and hire lawn care people and hire a gutter cleaner and hire somebody to put up your holiday trees and decorate them and put lights on your house. And those all have costs. And that's why a lot of people say, I'm not gonna outsource it because I don't wanna spend the money. I've always done this. For 65 years I've put up the lights on the house. And that's because that is a true habit at that point. Acknowledging that you can't do it anymore is also acknowledging that you might be physically or mentally on the decline part of your life. Then all of a sudden you go to those rabbit holes of how much time do I have left? And it's this acknowledgment of our mortality. And we tend to be a denying society. We don't want to talk about our mortality and how it's coming. And we can't do the things we used to be able to do. And so a good retirement plan addresses this and we actually add some increased costs for home care and those types of events later on so that the person has been given permission that you actually are planning for this as a spend and you can talk about it as an increased aspect of life that you get to spend more time doing other things. But if you don't have the other things you enjoy doing, whether it's reading or games, spending time with family, that becomes a really big challenge. So you have to marry together. What does life look like? What do I get enjoyment from? Also with our health decline and our ability to do things and the finances to be able to support it, and if we are missing any one of those things, then we just keep trying to do it. And it puts our own safety and health and retirement at risk versus long term care. Long term care is a very specific healthcare type of event where we now need assistance with at least two activities of daily living and that tends to be mobility, getting ourselves dressed, eating, all of those things, basic activities. Not I can't climb up on a ladder and clean the gutters. That's frailty risk. You just shouldn't be doing that. That's an above and beyond thing. But you can still manage your life and feed and go shopping and dress yourself and wash yourself. Those are the activities of daily living that actually trigger long term care needs. There's a lot of research on this. One of the most popular stats, and it's an old stat though, is about 70% of people in retirement will need some help with long term care at some point in time. So it's the majority. Now. Most of that ends up being our spouses or loved ones providing that care in an unpaid fashion. But the real risk in retirement and long term care isn't that family members will step in and provide some help. The real risk is if you need to go to a facility for long term care. And that's actually what most people think about is these long term care facilities that are all over the country. At this point, the average costs of a year stay in those are over $100,000. That is frightening for somebody who might only have $100,000 saved for retirement and Medicare does not. One of the biggest misconceptions about the details of retirement and healthcare is that Medicare helps cover this. Medicaid can help cover long term care, but not in the facility that you choose. You will be in a Medicaid facility which will not cover everything there and even some of the small qualities of life like A phone in the room might not be covered. So you often need other assets then to support the lifestyle you want to live. And Medicaid won't kick in until you've essentially spent down all of your assets and income. That will then help cover long term care costs. And so if you think about the first spouse going into a long term care facility for three to five years could deplete over half a million dollars of savings very quickly and leave the second spouse in a really tough spot to maintain their quality of life. And that's when I look out there at the long term care and retirement crisis talk. I don't think we have a retirement crisis at all in the United States. I think we are going to generally be fine. But I do think we have a budding long term care crisis here in a lot of states. It is now representing nearly 50% of the state budget is going to Medicaid for long term care costs. We have very little long term care insurance being placed out there anymore. Medicare doesn't cover this. People don't have enough save for the type of care that they want. And as families continue to get smaller, we will have fewer and fewer people able to provide that unpaid care for our aging population. Right? Smaller families, less people nearby. And we even talked about silver divorce where spouses aren't going to be able to provide it. Then you need to figure out who is your care provider and have money saved for that event.

A (50:58)

Tell me more about why you don't think that we're going to have a retirement problem. It's clear why we do have a long term care problem. But why is it that you don't think we will have a retirement problem? Especially given the headlines that we so often see saying, you know, the average 55 year old has only X amount saved for retirement or the average 50 year old has only X amount saved for retirement. You see these very frightening headlines that seem to indicate that most people are woefully unprepared.

B (51:28)

Well, I think the first thing that's always fair to say is this is a future prediction, right? Like we're trying to predict what might happen in the future future. If you look today, we really don't have a retirement crisis with our seniors and that's proven out by the fact that our senior retirees are happier than the rest of our population. Right? That's. I look at that, it's like, look, we talk about the money all day, but if they're happier than the rest of us, that's okay, right? I don't I don't call that a crisis. Our senior retired population is the happiest group of people in the entire world. So when you look at that, that's a good thing. When people retire, on average, they're happier than when they were working. These are good things. So when I look at that, if that metric were to fall below, then I say, okay, we start to have a retirement crisis. When people are less happy in retirement than they were before they were retired. That's really how I gauge a crisis. Other people, you could gauge it in some other fashion. I don't know what the other metric is. Often it's people don't have enough money to maintain the same quality of life that they had pre retirement. But when they define quality of Life, it's that 70 to 80% of pre retirement income that they can't maintain. But if somebody says, well, I'm happier because I'm just spending more time on the free pickleball court and I don't need to spend money to go to the movies and out to dinner, well, it's irrelevant then to me whether they had 80%. They only have 60, but they're happier with their new lifestyle. Well, that's a great outcome. So that's what we're living in today. Now, the risk of that is the biggest risk, I should say, of retirement crisis in the United States would be a failure of Social Security, Medicare and Medicaid. For the vast majority of Americans, about 62%, the majority of their retirement income comes from Social Security. For about one third of the United States population, it is effectively all of their retirement income comes from Social Security. They have no savings. To your point, right. About a third of the population does not save for retirement. So they can't live a lifestyle without Social Security and Medicare being there. If those systems fail, then yes, we do have a retirement crisis and we will see it. What I have kind of put my own stance on around this one is I don't think that there are any politicians that I'm aware of that are willing to let those systems fail today. I don't think you get reelected if, you know, if our entire 50% of our senior population who vote at a higher percentage than other people lose their main source of income, I think you're voted out. I also can't give a lot of good examples of any time in history when the government has fixed a problem a decade before it actually breaks. So people are like, aren't you worried it's going to run out of money in 2033, 34. I'm like, yes, I would love to see that solved today. It's easier to solve the further out we solve it. But I ask people, give me one example of when the government solves something a decade before it broke. Just one. If you have one really good example, let's go from there. I never come up with a big policy thing that the government has solved a decade ahead of time.

A (54:43)

Yeah. We didn't solve Y2K in 1990. Yeah.

B (54:46)

No. And we didn't solve health care before it became a problem with Affordable Care Act. Right. Like, and then you have to have modifications that. Anyway, but that was reactionary. There is good policy out there that's being developed that can fix the Social Security mass funding area. But right now, nobody really seems willing to use their political capital to make these hard decisions because it's still eight, 10 years away. But we will do it.

A (55:15)

Yeah. Well, they're saying 2032 right now, so it's starting to get uncomfortably close.

B (55:20)

Yeah. I mean, 2032. But that, again, I will say that is if you make absolutely zero changes. You know, it's not, hey, let's just move some money from one side to another and refund it. The other thing is that the Social Security funds are not real funds. And I think that's another really important thing to remind people. This is just government spending. It's an accounting metric on how we account for the funds that have come in. But there aren't actual dollars sitting in Social Security funds. It's just a giant pool of money that the government has and can reallocate via Congress at any time they feel like it. The other thing that the government has at the United States level is we have the ability to tax at an unprecedented amount and control that. States don't have the ability to solve, say, Medicaid, because you can just leave California, you can leave New York, you can leave Virginia and go to a different state. The government, though, if you're US Citizens, can you leave to another country? Yeah. But that doesn't really solve this Social Security problem. Right. It's.

A (56:26)

Well. And. Well, as a US Citizen, even if you do live in another country, you're still taxed in the United States, Correct?

B (56:32)

Yeah. So it doesn't really. You don't have the same ability to kind of avoid taxes there. And we're at really a corporate tax rate and individual tax rates that are at historical lows. So I do expect tax rates to go up in the future, and I believe that that will be one of the biggest solves for Social Security. But that's really the caveat. I think people are saving a decent amount. We have more money being saved on average than at any other point. We have the most amount of wealth that we've ever accumulated as a country than at any other point. I think there's a lot of unknown on how technology and AI will impact the future. But most people aren't, I'd say creating that as the retirement crisis. It's mostly that we feel people are under saved en masse if Social Security fails. But I don't expect Social Security fail. I think it's too important. And if it did fail, it would essentially tank the global economy because of how much this group spends and how large it is. I just don't see that being the decision that any group of politicians make.

A (57:36)

You mentioned that you believe that tax rates in the future are going to be higher. Is that an argument for prioritizing Roth contributions right now? Even if you are in a high income phase of life?

B (57:48)

It is an argument for that. I am a big fan of Roth and one of my previous books, one of the reviews of it was the book's great, but the guy talks about Roth too much and I just want. It was like if I do another edition of this, I'm going to put that right on the front because like that was a criticism. But I loved every aspect of that criticism because it was true. And then funny enough, it's really played out to be true since then because that's about I think 13 years ago. And all you've seen for the past 13 years is a more and more prioritization of Roth savings. You see that grow. I think more money gets put into Roth IRAs directly now than traditional IRAs. People have seen the value of having this tax free growth inside of there. And all I can do usually is explain what I do myself in my 401k. My contributions are Roth. I'm in the highest tax bracket currently. And I still believe in general that Roth is a better long term vehicle. And in short, the research kind of shows if you have a long enough time horizon, Roth will be the best vehicle regardless of tax bracket. But you kind of need regardless of tax bracket. Like a 30 to 35 year time horizon where you're going to keep money in there, but if you run it out long enough, Roth will always outperform every other aspect, including brokerage accounts. For as strong as they are, the reallocation of assets inside of those has a drag that Roth does not see. So there's very few scenarios in which Roth is not seeing somewhat beneficial. That does not mean everybody should always be in Roth. Like, sometimes people hear that and think, well, you think everybody should be in Roth. Like, no, no, no, no, no. Just in general. Roth in comparison to anything else is better. But that doesn't mean you should have it all the time. Like, my favorite food is fried chicken. It does not mean I should eat fried chicken every single day for every meal. That is a terrible decision. So if you're in a high income tax and high tax year, that could be a bad time to be in Roth. If you have zero taxes, probably not a good time to do Roth or traditional deductible. You probably should be thinking about brokerage accounts because there's no tax benefits for you either way. So having max flexibility is going to be more important. But as you run that out, if you believe tax rates will go up in the future, there's really no scenario in which Roth is not the best decision. The short answer is pay the taxes today at a lower rate versus a higher tax rate in the future for pushing off any taxes or taxable growth.

A (60:28)

What should a person do? So there are many people who are listening to this who plan on retiring within the next, let's say five years. And so they are currently at a career peak, but they see, you know, five years from now, they see their income going to zero or near zero. Should they still be investing in Rothschild?

B (60:47)

Yeah, this is a great question, and again, comes down to the individual. But what you often see around there, if they're doing tax deductible contributions, say in their 401k or IRA, are they going to plan on converting these in a couple years? If that's the answer, you actually get kind of a weird mix, which is how much time will you have in this conversion window to get things converted? How much money do you have and which tax brackets might conversions push you to? That's a very complicated set of facts versus, you know, if you're already doing Roth, I don't think there's any harm in continuing to do Roth. And so you could just keep it going. Now, if you think you're going to convert. Beth Pinsker and I actually just talked about this, she works for marketwash, that there's a good argument that if you think you're going to do conversions, stop doing tax deductible contributions earlier because we're just going to have to reconvert these coming up. The other thing about conversions that gets a little tough is do you have the cash outstanding elsewhere? Because if you have to do a Roth conversion, and for those that are unaware of it, it's taking a traditional deductible account, say your 401 or your Iraq, moving the money to a Roth and paying taxes on that at the time of conversion. But often people look at it and say, okay, I'll pay my 22% tax out of the conversion. In that situation, it's actually not that beneficial to do this. You typically want cash in your bank or somewhere else you're paying the conversion on. So we'll just use $10,000 so that you can take $10,000 out of your IRA, convert it to a Roth IRA, but move a full $10,000 over the back end. Math is essentially you've actually increased the amount of tax advantage assets you now have. It's not equivalent. You were supposed to pay $2,200 of taxes and that's really what you owned then after tax inside of an IRA. But now you really took those $2,200 of taxes and got them inside of a Roth by paying the taxes from an outside account. So you have more tax advantaged money than you had before. That's the reality of that situation. So if you can pay the taxes from outside, Roth conversions are very beneficial. And your scenario is a really real one that people have to make that decision is I'm going to retire in the first couple years of retirements before I have required minimum distributions. I should think about doing what we would call bracket bumping conversions. So convert as much money up to the next tax bracket as possible. That's often a good rule of thumb. So if you're in a 22% tax bracket, use that up. Try to use up as much as that as possible before you get to the next tax bracket over a, say, you know, five to seven year time period.

A (63:45)

What should a person do? Let's say that you live in New York or California, you live in a high tax state and you are in the future planning on moving to a lower tax state state. Should that be part of the Roth decision making?

B (63:58)

Yeah, your total amount of taxes should be part of the decision making. There are some states that don't do not tax qualified plan or IRA distributions at all. Right. The retirement benefits are not taxed. So if you're moving to one of those states, you might want to consider waiting to convert till you get there because that could be an extra 6 to 10% in taxes you are not paying. That's really hard to overcome by converting early if you can save 10% by waiting another five years. The hard part with that one though is that you might think you will be moving to a new state at lower taxes. You don't move or you move and that state raises its tax rates. Which happens. Right. We've seen over the last couple of years a flurry of states increase their state income taxes or other taxes because they are all struggling with revenue. I shouldn't say all, but many states are struggling with revenue and that is always something that can change year by year. So it's a good thing to factor in. But you can't always 100% bet on it that that is going to work out. So I think just keep that in your mind. But it is definitely a factor and should be considered.

A (65:15)

Earlier you used a term I've never heard before. You use the term frailty risk. I've heard many discussions around frailty. I've never heard anyone actually use the phrase frailty risk. And it reminded me of another term that I often like to make fun of, the phrase longevity risk.

B (65:31)

Yeah.

A (65:32)

But I make fun of it only because longevity is generally a goal, not a risk. But please can you talk to us about longevity risk?

B (65:41)

Yeah, longevity risk. I say a similar thing is I actually don't view it as a risk. I look at it as a risk exacerbator. So longevity, to your point, is a goal and a great thing, but it is a risk exacerbator. It increases the likelihood of almost all of our other end of life risks, long term care. The longer we live, the more likely it is that we will have a long term care event. The longer we live, the more likely it is we'll have some type of cognitive decline. The longer we live, the more likely we're going to run out of money. The longer we live, the more likely inflation will be eating away and eroding our purchasing power. The longer we live, the more likely it is we're going to see multiple down market cycles or a global pandemic, or a war, whatever else it is. So longevity in and of itself is not a bad thing. It just broadens the amount of possibilities that can occur where you have all these different risks out there. It increases the likelihood that we will run into any or all of them. That's really the challenge with longevity from like a risk perspective, the living a long time. The challenge with that is it makes the formula for how much money we need every year very complicated. If anybody remembers, and probably begrudgingly so, when I bring this up, like solving for algebraic equations back in the day when we had like one unknown variable, right. You just had X and you just had to solve for X. You're like, oh, I know how to do this. You probably still know how to do it today.

A (67:11)

Right.

B (67:12)

But when you added like X, Y and Z, you were like, ah, like this got kind of hard.

A (67:18)

Yeah.

B (67:19)

Because the multiple unknown variables, sometimes it's actually impossible to solve for a single variable. Right. We might have a variation of outcomes and you probably remember that, oh wait, it could be two possible numbers for these variables and that's a real thing that starts to occur. So if we don't know how much money we need every year, we don't know what inflation is going to be and we don't know how long we're going to live, it becomes an equation with lots of different potential outcomes. Which is why in the financial planning world we do probability based modeling around this, because we can't predict where this is going to end up. But we can show you 100 different variations of this. But the longer that timeline goes out, actually the wider that those deviations get, the closer in you are. Well, there's only so much that can happen between now and the end of the day. Right. Like there are a lot of things, but it's pretty narrow in comparison to what are the number of things that can occur over the next 40 years. And that's really a great example of longevity or longevity risk, however we want to talk about it. But you're right, longevity is a goal and a good thing. The risk that longevity creates though, is that all the other risks could be more detrimental.

A (68:36)

So longevity itself is not a risk. Longevity is a risk multiplier.

B (68:42)

Yes. And even just when you think about like longevity is not a problem, it's the fact that our money might not make it with us that's actually the problem. So. So it's a multiplier of the likelihood we will run out of money. But just living a long time is not the problem.

A (68:58)

How does this map with discussion around the human lifespan potentially becoming longer than we've ever seen it before? And that may not happen for everyone. Like there may be a K shaped distribution, but for a certain cohort we might start to see unusually lengthy lives beyond anything that even our financial planning models have factored for.

B (69:23)

Actually, there is some modeling around this because of trusts, interestingly enough. Right. Because I work at a trust company, we actually model things out hundreds of years inside of trust distributions because we do have to make trusts last sometimes for multiple generations. And you know, our trust company is almost 200 years old and we are still operating under an original trust that was created before the city of Wilmington was actually founded in Delaware. So outlasted, I think almost every. There's only a handful of constitutions in the world that are actually longer than that. So you can model this. It does become very challenging. And what you often see then is more of a percentage of asset spend that does not adjust for inflation. And so you can have a very big decline in purchasing power. If we have these elongated lifestyles where you start living 200 plus years. This gets us to a whole interesting area of conversation though, of like, what does the future really look like with AI and disruption in jobs and robotics, Potentially the ability to regrow organs. Singularity events. Where I saw this last couple months, I think it was, was it a fruit fly or a fly? They replicated all the neurons of its brain into a computer system and it actually inside the system moved and reacted as a fly would without training it. And so that's been arguably the first replication of intelligence actually in any situation. And super, super interesting. Now, you know, I don't know that anybody's like fact checked. Did they not actually teach it or whatever? But this mapping of brains is just starting to occur and what they kind of showed with that research was it's a matter of scale and efficiency to map intelligence and decision making. Not that you can't do it, it's just that a fruit fly brain has only like X amount of neurons. And even like a mouse is something like 800 million times more than that. Like it's just a huge jump to the next thing. But that's just scale. And what we have shown is like, humans are at least very good at scaling technology. Like, it's one thing we're good at with computing is we've scaled it very quickly. Those things bring up all types of wild conversations of, you know, what happens if you can move people's decisions and cognitive aspect into devices? What does that look like? So there's a lot of big questions coming around on those regards and there's differencing of opinion on can you really extend the human life out that long. There's some that believe the person who will be live to 200 has already been born. There's others that say we've actually kind of reached our max on longevity and it'll move a little bit and we'll move the average up, but that we're not going to see people living to 200 years. We're going to kind of be in this range that we're in and that the top end range hasn't really moved a lot like that. That's the flip side argument is we're not seeing the oldest person in the world every year break the previous oldest person in the world record. That that group is still kind of in a relatively small amount. The number of 100 year olds have gone up, up substantially. Right. I think it was somebody. Was it USA Today used to do the birthdays of Everybody that was 100.

A (72:51)

Oh yeah, I remember that. Yeah, that's right.

B (72:54)

And they. Because there's too many now. So that became a real thing. But the populations also exploded in the world. So there's a little bit of the like, well yeah, there are more people living longer. But if you go back and account, it's very interesting. I think this was Social Security and Society of Actuaries. If you went back to like the 1920s and accounted for somebody who made it past age 35, the life expectancy didn't move a whole lot. And there were non smokers. That was the other factor. Smoking really messed up longevity and average ages for a while. Because to your point about the K curve, we have some groups in the population that have increased vaping and smoking and the projections now are they will have a declining life expectancy over average. Again, that has been such a trail runner down at the bottom, which is why life insurance and health coverage always ask are you or have you been a smoker? It was one of the biggest determining longevity factors out there. As smoking rates have declined, we have seen the bottom end of the K curve kind of pull back up and that's what moved most of the averages up. But if you kind of exclude that and somebody made it past 35, didn't die early, longevity hasn't moved that much. We're still about the same as we've been for almost 100 years.

A (74:13)

Haven't obesity and fentanyl, haven't those also been the two major things that have kind of pulled life expectancy down?

B (74:18)

Yes, obesity's a big one, you know. Fentanyl. Yes. During COVID life expectancy dropped too for a year. Right. The average age declined because we lost a lot of seniors during 2020. So you did see a tail off there for a year, but I think that's renormalized back out. Obesity is a big concern. I think that one, you know, what are we eating? How are we eating? How are we moving? Alcohol consumption is dropping, which will be interesting to see. You know, what does that do it's having an economic impact where the wineries out in California are dumping grapes this year. I think one of the old Kentucky whiskey ones had to shut to distilleries this year. So we're seeing especially young people too drink less and less alcohol compared to any previous generation. There's interesting arguments about if that will actually have the opposite effect on longevity and will actually the decline in drinking will decrease longevity because it's one of the biggest drivers of socialization across the planet. And as we see people become more isolated and less social, that we do also know has a huge impact on longevity.

A (75:29)

You know, I, I just saw Brian Johnson, the Live Forever guy. He recently posted a study that showed. Oh, it was the Harvard study. The 80 year.

B (75:38)

Yeah, the Harvard.

A (75:38)

The 80 year longitudinal Harvard study that showed that more important than any other factor, more important than wealth, education, exercise habits, more important than literally anything was the strength of your social relationships. That was the 80 years of longevity research. And that was their finding was your tie into the social fabric was the single most important determinant of lifespan.

B (76:02)

It's very interesting, right, because when you layer that back on to if we lose these potentially somewhat damaging but socially beneficial drivers like getting together for happy hours and drinking and weddings and alcohol's found its way into every culture in the entire world for humanity, right? We've been drinking alcohol since as long as we can realize that berries fermented into it. And it's been a big driver of social culture. Now it's gone away in some cultures, it's come back, it's modified to other things. But a way to bring people together has been very interesting. There's some other arguments there that social lubricants of whatever it might be, sports, athleticism, doing things together, adventuring alcohol lowers down, right? Which your social inhibitions with other people and that you can create better bonds with people and that there's some articles. I don't know if I'd call this research, but why treaties and when countries used to come together, they used to have big parties and drink and celebrate because there's this nefarious mission to we're gonna lie to you and like come destroy you after this peace agreement that it would come out from all of the kind of partying together over weeks. So it's a very interesting thing. I've talked to actually private equity partners that say they don't do deals until they drink with the owners. Because same thing, they wanna see how they react, how do they socialize. And so that's a Real thing that is still used today in the business world is like, how do these people react when they're not putting on a facade when you're going to have limited interactions with somebody. So very interesting conversations around all this, but I really don't drink that much anymore. Just so the audience and like, is this guy selling us like alcohol now? I, I gave up most of it up years ago. But it does have a social impact as these things change, change.

A (77:57)

I've talked to people who've done a lot of business in Japan, for example, who've talked about the heavy drinking culture there in, in specifically in business contexts.

B (78:05)

Yeah, it's not the only way to do it. Right. But it has been a way that humans have done it for thousands and thousands of years. So it has always found its ways into celebrations, marriages, coming togethers of countries and, you know, for a reason. Right. It obviously we have found benefit in it. And going back to that other study, it's interesting too that if you look at the top 20% of most active people, alcohol has no impact on longevity. It does have a big impact on the mass population, but then once you start looking at how active they are. Right. Inactivity, obesity, once you layer that back in. But it's very interesting that the top 20% of most active people drinking has almost no impact on their health or longevity. But it does have an impact. If you stay inactive, it's got a really detrimental impact on your physical health.

A (78:58)

Right. Given that socialization is so important, community is so important. What advice? What observations? How can we incorporate that into our lives and take action on it?

B (79:10)

One of the things we talked about before was that retirees tend to be happier than the general population. With the caveat that there is a group of people who become more depressed in retirement. But when you look at that group, it is almost entirely driven by the fact that they are isolated, they don't have communities, and that they lost their purpose and meaning when they left work because that was providing them people, somebody to talk to, structure, meaning a purpose every day to get up. And when that goes away, they didn't figure out how to replace that in their lives. And so I often talk about this concept called accidental communities versus purposeful communities. Accidental communities end up being most of our communities. They accidentally happen. You take a job and then the people you happen to sit with on the first day, on whatever floor become your community. They become your friends at work, but you didn't choose them, they just were a part of your team. And same thing often happens Even going back to college, whatever dorm room you got put in that became your friends and your community, they were accidental. As you move later in life, what you see is you don't have kids on sports teams and become friends with their parents anymore. You're not going to a new office where you're meeting new people. And that if you need to replace those accidental communities in retirement, you're going to have to do it purposefully. It's also an amazing thing because you can finally say, you know what, looking back, Like, I didn't love all of that community, that I was part of it because it was accidental and I was surrounded by it. But they were all big gamblers and they'd go to March Madness out in Vegas every year. And I never once enjoyed it, but I did it because it was my community. Well, now when you're kind of free in retirement to choose your own community, you can say, I don't want to live here anymore. I want to move. I want to go to a new church or pick a new religion, or, I want to only hang out with these people that I used to know from work. I don't have to hang out with everybody. And it allows you to be purposeful on the type of values that you want to have in your life and what communities emulate those values. And so I think it's a very powerful time. But often people don't sit down and make these purposeful community decisions because it's

A (81:31)

like communities of circumstance versus communities of choice.

B (81:33)

Correct and purposeful communities. That's your point. You get to choose them. And when you're in retirement, it is such a change in your life that is a great time to do this without the social pressure of, I'm leaving this other community. Which is why I think people get stuck in these for so long. Because once you've been friends with somebody for 30 years, it's very hard to say, we're not going to hang out anymore. I'm just going to ghost you. But when you retire, you can say, I'm moving over here. Like, we're really going to miss you. Whether you're going to miss them or not, you can then go make those decisions without the, well, I can't believe that they don't talk to us anymore. It's totally socially acceptable in retirement to make a very big change on how you're going to live your life. And nobody's going to blame you for it. Maybe your kids, but outside of them, everybody else gives you more grace at this moment. Because if you're going into the office every day and you're close with the group you work with. It's really hard to then say like, I'm not hanging out with any of you anymore, but I'm going to show up to work and we're going to be part of the same team for the next 10 years. That doesn't work well. But when you retire, you can reassess. Do I still want to reach out to them or do I want to find somebody else? Do you want to pick up a new sport, a new hobby that aligns with how I want to live my life?

A (82:53)

You know, one of the challenges that some people have in developing communities in retirement is that oftentimes retirement is the time in which a person will move geographically to a different state. So for maybe you've spent your working career living in New Jersey or Wisconsin and you are just done with winter. And so you decide that you're gonna retire to Arizona, but you don't know anybody there, you're gonna retire to Florida. We see a lot of people do that. You don't have your community there anymore. And so those moves or geo arbitrage, you decide both for the sake of novel adventure and for the sake of saving money, you're going to retire to Thailand or Costa Rica. And now you're in a Thailand, you're in the opposite time zone. So it's hard to even have a phone call with the people that you know and love back home.

B (83:42)

And your community should be a driver of where you want to live in retirement, right? That should be one of the factors because what you do see often is that people move early in retirement, first couple years and they say, you know what, we just didn't like this place. We vacationed here a couple times and it was great. But that's different than living somewhere. And so I even talk about test driving retirement locations. So maybe see if you can go live there for six months first and say, do I like this place? Do I feel like I can find a community? Or do culturally I don't fit here. And so I've seen people move to Hawaii and hate it, right? They're too far away from their loved ones and move back in retirement. So we've had clients do that and they thought Hawaii was their forever home. It's beautiful. And they picked a great place and they built their new house and then they spent three years there and said, we're done with this, we don't know anybody, we're not creating a new community. We want to go back often. Unfortunately, you can't buy your old house back, although it has happened. I've even heard that where they've been able to rebuy their old house. But you can make that decision and come back and it's okay if you went and tried something and it didn't work out, give yourself grace on that. But you should test drive these things as much as possible. And vacations don't count. I always bring that up. Just because you vacationed somewhere does not mean that you would like to live there.

A (85:08)

We began this by talking about some of the risks and the bummer topics around retirement. But let's talk about a good life, a good end of life, a good retirement, a good what can you share to end this on a positive note?

B (85:23)

Yeah, well, it's funny, the reason I wrote this recent book was to make retirement more fun. And then we talked about all the scary things today. But that's the whole premise of why I go out and talk to people is retirement should be the most fun, enjoyable and purposeful part of our lives. That we're the most free we'll ever be to decide how we want to spend our time, where we want to spend our time, and with whom we want to spend our time. And all three of those are important. If you envision retirement, think about what you're doing, where you're doing it, and with whom. It's not just for a lot of people, a solo adventure, but for some it is. And that's what they're looking forward to. If you want retirement to be the most fun it can possibly be. We talked about health. Take care of yourself today too. It's not just something you can flip the switch on. Once you get to retirement, think about your communities, who you want to be around, invested in, and be purposeful about it. Choose that community. Don't just live with the accidental ones that you have. The other one is do actual retirement planning. Know what you can spend your money on. Because if you want to live this great life of travel and go see the world but you didn't save anything, that becomes really challenging. Not impossible, but really challenging. So make sure that your savings and your income for retirement are aligning with the goals that you have for it. But I also believe retirement is a journey. It's not an endpoint. We often talk about it like you got to retirement. No, you started retirement and you should be retiring to something, not from something. If you're not ready to go live that next lifestyle, spend time figuring out what that is. I Think as much as you can, go live in a different area for a little bit of time, as much as you can, phase into retirement to and gradually slow down at work, figure out what things you want to give back and volunteer with. That's when you're ready to retire, not just because you don't like work. So retirement is an amazing time that you can sketch whatever life you want and build it the way you want to build it. But it does require planning, it does require being purposeful, and it does require hard conversations about these topics that people often like to avoid, about mortality and decline in life and the loss of loved ones. Whether it's a divorce or they pass away, these are all real parts. My dad died when I was 8 years old and I've lived in a mindset of how temporary life is, my whole life. But to me it's really important because it's also what makes life so beautiful is the impermanence of all of this, that there will be change and you can make a new decision. You can go do something fun and happy after something bad happens. That sequence of returns, risk, sure, that's scary, but you can adapt and get through that and then live a beautiful life on the other side of it.

A (88:17)

Thank you for spending this time with us. Where can people find you if they'd like to learn more?

B (88:21)

Well, thanks for having me on. It was an absolute blast of a conversation from a social channel. I am on Instagram and LinkedIn. Retirementrisks on Instagram and LinkedIn's Just Jamie Hopkins. If you type it in I should pop up. The main website is bmt.com there's a contact Me link on there, so you can click on that if you want to reach out.

A (88:46)

Thank you. Jamie, what are three key takeaways that we got from this conversation? Key takeaway number one, your retirement number is not the right thing to focus on. Most people have a magic number in their head. One million, two million, three million. Whatever it is, they treat that number like a finish line. Jamie says that's the wrong frame. What actually matters is the income that your savings can generate relative to the lifestyle that you want to live. So if you want to live a lifestyle that's going to cost a million dollars a year, well, then even a $10 million portfolio is not going to be enough. But if you want a lifestyle in which you're living on 50,000 or 60,000, you might be able to do that with a $1 million portfolio. And yes, I know the 4% rule says 1 million equals 40,000. But we talk about the 4% rule as well. It's not a. As he says, it's not actually a rule. It's a finding. And while we shouldn't throw it out, we should understand it with more depth and nuance before we build a retirement around it. But all of that is to say there is no magic number. So stop chasing a number and start planning around income.

B (89:58)

Yeah, the no magic number is this whole idea that people get fixated on some savings number that they came up with at one point in time and they just can't move off of it. So for some people, it's a million dollars, $10 million. It really doesn't matter what the number is. But that's not the right thing to focus on because often what people lose sight of there is really. It's not the savings number. But what income can you generate in retirement to meet the lifestyle that you want to live?

A (90:27)

That is the first key takeaway. Key takeaway number two. Scammers already know more about you and your family than you think. Scams generally, and elder financial abuse in particular, is growing fast. Some of it is what we imagine a stranger cold calling a confused grandparent. But actually, the majority of elder abuse comes from family members or from trusted advisors. The scams that do come from strangers are now more and more sophisticated. So scammers will look at social media to learn grandkids, names in schools and sports teams, and lots of details about a person. And that's before we even get into AI voice cloning.

B (91:12)

I could go onto your podcast, take your audio, and if I knew your family members, I could call them with you as the person talking, not sound any different, and say, I really need help to your parents. And it would be you. And they'd say, well, of course, because they love you, and they would wire money to you or give you their credit card information because you say, hey, I dropped my wallet. I can't find it. I can't get home. Can you give me a credit card? I need to be able to book this Uber and put it in. And there goes tens of thousands of dollars in seconds.

A (91:45)

Finally, key takeaway number three. Your home equity might be your most underrated retirement asset, because a lot of people think of retirement planning as just managing their investment portfolio. And Jamie says that's too narrow. Your assets, like your home equity and the equity in all of your rental properties, as well as tools that you can use to tap at that equity, such as reverse mortgages, tools that are not correlated to market swings that you can tap strategically if there's a recession or if there's a down year, if there's anything that's going to put you at risk of sequence of returns risk. This can meaningfully extend how long your money lasts. And so that's why there's some research that suggests that a withdrawal rate that's as high as 6% becomes sustainable once you factor these in. Which is why earlier I said if you want a lifestyle that costs 60,000 a year, a $1 million portfolio might be sufficient.

B (92:44)

If you're willing to tap, say, lending on your home during down market years, that has a huge impact. So reverse mortgages, lines of credit, those kind of tax free withdrawals from home equity. Super powerful to weather those storms. Cash value life insurance, same thing. You might be able to use that or borrow against the policy. And that can extend the life of these portfolios too.

A (93:08)

Those are three key takeaways from this conversation with Jamie Hopkins. If you'd like to learn more we're going to be writing a lot more about real estate in the coming weeks. We're going to be writing about personal residences. We're going to be talking about the housing market in general. We're going to be talking about real estate investing. We're going to be covering all elements of of this topic. Go to affordanything.comnewsletter that's affordanything.comnewsletter we will be writing more shortly. So again, affordanything.comnewsletter if you enjoyed this episode, please share this with your loved ones, your liked ones, your friends, your acquaintances, your frenemies. Share it with all the people in your life. It's the most important way that you can spread this message and also open up your favorite podcast playing app. Hit the follow button and leave us up to a five star review. Write a few words, share what you enjoyed about it. Share what you learned. Share how it's helped you. Thank you again for tuning in. I'm Paula Pant. This is the Afford Anything podcast and I'll meet you in the next episode.