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- [00:01]
A
Welcome to Money for the Rest of Us. This is a personal finance show on Money. How it works, how to invest it and how to live without worrying about it. I'm your host, David Stein. Today is episode 545. It's titled Burnout, Breaks and the Courage to Spend with David Bach. This week on the show, I visit with David Bach, a former financial advisor and the author of 12 national best selling books with more than 7 million copies sold, including the Automatic Millionaire which is being re released in a 20th annual anniversary hardcover edition. David shares how at age 9, he was attending his father's investment classes and by 13 he was teaching his friend's parents about municipal bonds. We discussed David's advisory career and what led to his first book, Smart Women Finish Rich, and how at age 46, burned out and exhausted, he took a mini sabbatical that helped him reset his work and his life. We also talk about why he and his family moved to Florence, Italy when David was 53. They only planned to stay nine months and six years later they're still there. What's intriguing about this episode is that while David is known for saving early and often, most of our conversation revolves around not being afraid to spend. Spend the money to take a mini retirement or sabbatical. Spend the money by taking Social Security at age 62 instead of waiting. We even discuss David's proposal for a 12% flat tax on retirement distributions. Something I didn't necessarily agree with, as you'll hear in this episode. I hope you enjoy this conversation I recorded earlier this week with David Bach.
- [01:43]
B
Well, David, thank you for joining Money for the Rest of Us and your book, the automatic millionaire. Been 20 years and I'll admit I haven't read the book, but I've looked at it dozens and dozens of times because it came out in 2004. The title was always attractive. You know, at the time I was an institutional investment advisor, spending a lot of time in the airport. But the COVID of two empty beach chairs, I assume the beautiful Caribbean. But it was, it always called to me, it's like, yes, that that's the goal, to be on the beach.
- [02:13]
C
That's what I want.
- [02:15]
B
Exactly. So as part of that then I did read part of the 20th anniversary and I learned something that in the back you have a new Q and A section which was pretty fascinating to me. And in that, well, let's, let's talk about that because I did not realize that you, your father was a financial advisor. You worked with him for 10 years. Where was the bot group located?
- [02:38]
C
Yeah, well, so the Bachelor was located in Morgan Stanley. I mean, I know you have your whole family in the business. I just got to see your son, meet your son, who's in. Working backstage here with us virtually. I started going to my dad's investment classes at the age of nine. So my father was a financial advisor. Back in the day, they called them stockbrokers. My dad worked at a company called Jay Barth and Company. My dad built his business teaching investment classes. So he taught retirement planning classes in the, in the Bay Area. We lived in San Francisco. The Bay Area.
- [03:05]
B
Oh, you were in the Bay Area. Okay.
- [03:06]
C
And so he taught these classes in the East Bay. And he would, he would dress me, you know, mom would dress me up at nine years old in a suit and tie. She would get the night off. Dad would take me to the investment class. I would sit there for two hours, be a good boy, listen to him teach. And I would hand out the flyers, you know, like the worksheets in the front of the class. And, you know, you sit in the back of the room at nine years old, and then we go to dinner and, you know, we talk about what he taught. And so by the time I was, you know, like 13 years old, I was teaching my friend's parents why they should be buying municipal bonds and not, not CDs. I, you know, literally sitting at my friend's house in the, mom is renewing a CD and I'm like, you know, Mr. And Mrs. Jones, you shouldn't be buying CDs. Those stand for certificates of depreciation. And right now you can be buying a triple A ready municipal bond in California. And in your tax bracket, that would be a tax equivalent yield of. And they would just look at me like, wait, what? Who's, who brought this kid? Who is this kid? So, you know, I grew up in a, in a very, it's a very different way to grow up. But I was lucky, right? Because we talked about investing at the dinner table. And so, you know, I always say, you know, the Automatic millionaire, I've got 7 million books, books out around the world. But the Automatic Millionaire was my most popular book. It's a book I launched on Oprah 20 years ago. And at the end of the first show, Oprah turned to me and she's like, they should teach this stuff in school. And I said, oprah, I know. I said, you know what's tragic, honestly, about the Automatic Millionaire, which has sold over 2 million copies now, and it's coming out as a hardcover 20 year anniversary edition no one should need this book. This book should have been taught to you. Everything inside the Automatic Millionaire. You should have learned the basics of financial planning before you graduated high school. And they don't teach us in school. And so people are basically set up for failure financially. And you and I are, we come from the industry. But if you don't grow up with this stuff, you go off to school, you get credit cards, you get in credit card debt, you borrow money for college, and you start off in a hole and you don't even know how to get out of the hole, much less know how to save and invest for retirement. So the system's kind of rigged. And what I've spent the last 30 years doing besides being in financial services, because my, the bot group was at Morgan Stanley. When I retired from Morgan Stanley in 2001, I basically dedicated my life to teaching people to be smarter with their money. I decided to go out and help millions of people instead of work with a hundred really wealthy clients. I just felt like my life, I was supposed to do more than just work with 50 to 100 high net worth individuals. And you know, I'm, I'm actually still doing it. I'm still teaching people about money.
- [05:37]
B
So you're on that. So you were probably early to mid-30s. It, it mentioned in the back of the book that you moved, I guess from the Bay Area to New York City.
- [05:47]
C
Yeah.
- [05:48]
B
So is Automatic Millionaire your first book? So did you just.
- [05:51]
C
No, no, no, it's not. I mean, the first book is Smart Women Finish Rich. I created a course that was the first book for women and money back in 1993, because I came into the business with my dad. And you know, my, my dad was like, look, I'm going to mentor you, but all you need to do the first month in the business is sit in on my meetings, take notes and don't talk. That's all. You know, just listen. Right? We'll talk after the meeting. And so I had my yellow pad of paper and I would take notes and ask him questions. Meeting. But I sat in three meetings over three weeks with three separate widows. And those three meetings, in every single meeting where the husband had died suddenly, these widows were saying to my father, Marty, you know, Jim told me if anything happens to me that you take care of me. And my dad would be like, yes, we've got everything handled. And he would start explaining to the wives what the money was invested in, how they would be getting their dividend checks, how they would be investing. And I said to My dad at the end of those three meetings, like, dad, I don't, I don't understand this. Like, I went to all your investment classes, right? Like, where were these, where were where? Why are these women clients asking you how to read brokerage statements? And my dad turned to me and he said, well, you know what? You're not. Everybody's like your grandmother. Because I had learned actually how to invest first from my grandmother. And my grandmother, who started with nothing at 30, became a self made millionaire by investing. And he said, your grandmother is not the norm. The norm. We have a lot of older clients. Mostly it's the men who are in charge of the money. And many cases that's been delegated to the husband and, and, but they trust us and we're going to take care of them. And I said to my dad, that's a really bad system. You know, if all these men are dropping dead and you have all these older clients, then for us to be doing all these meetings back over and over and over again with widows, teaching them about money makes no sense. And I had lunch with my mom and I told my mom, my mom had been in the business. Your whole family's in your business. My mom had been in the business. I took my mom to lunch, I told my mom, what's going on. I asked my mom, do you know what's going on with the family money? And she said, yeah, your dad manages it all. And mom, this is what I'm talking about. I said, what are you going to do if dad dies? And she's like, well, you're in the business now. You're going to help me. I'm like, mom, that's not the way it should be. And so I'm explaining this to her. And then she goes, you know, it's not just about, about men dying, it's also about divorce. She's like, all my, she's got all these friends. She's like, they're all getting wiped out financially by divorce. And I said, well, I think I'm going to teach a class on women and money. And my mom goes, oh, that's a good idea. You teach that class, I'll help you put together the mailer. My mom was always the one helping us do the mailings, and I'll invite my friends too. And so we sent that mailer out and we had 225 women want to come to the first seminar. And I started my career off by teaching seminars for women and money. And so I wrote, I taught that seminar over and over again all over the Bay Area. And then from there did smart Women Finish Rich? And then took a half a million women through that seminar program by teaching financial advisors how to teach that class. And then we created a program for couples and money called Smart Couples Finish Rich. So the Automatic Millionaire was actually my fourth book.
- [08:52]
B
So you moved to New York then when. Cause you left the Bay Area and moved to New York. Because this kind of gets into. Some of. You want to talk about sort of mini vacations.
- [08:59]
C
Yeah.
- [09:00]
B
Sort of micro retirements, et cetera. What prompted that move to New York?
- [09:04]
C
So I, you know, back in the day. Because the world changed, Right. Like what you and I are doing right now, I'm in Florence, Italy. You're in. You're in Arizona, right?
- [09:12]
B
Tucson.
- [09:12]
C
And, you know, and we're doing this over zoom. But in the old days, you had to get on a plane and go to New York to do media. So I would fly to New York to do television shows for three minutes. And at the time, the biggest TV show that I was doing was the View with Barbara Walters. And. And that at the time when I was doing the View, they were, you know, what happens when you do a television show back in the day? If they like you, they invite you back. But it's a lot of flying back and forth to go on TV for three minutes. And I went on the View, and Barbara Walters was actually in the segment, which was a rare thing. She didn't usually do the money segments. And I came on stage with her, and the segment usually was three minutes, four minutes. But it's Barbara's show. And she just kept going. She just kept talking to me. And we were on for like eight minutes. And then they had to go to a commercial break. And it was the greatest segment I'd ever done. And when I got done with the segment, she turned to me after the sh. After the segment, she's like, you're really good at this. You should really do this. And I. It kind of gives me chills thinking about it. But I. I got back in the limo to go back to the airport, and I said to my wife, I just had the greatest show of my life. I was just on the air for eight minutes with Barbara Walters, and she's like, she thinks I should really do this. And I think we should move to New York so I can really do this. The only way I'm going to really reach millions of people is to live in New York City and be able to go on TV all the time. And my wife said, okay, well, if you want to do it, then let's go. And so, I mean, it was a bigger process than that, but I transitioned.
- [10:34]
B
How old were your kids at the time?
- [10:35]
C
I didn't have any yet.
- [10:36]
B
You didn't have any?
- [10:37]
C
So I was married. My wife was also a financial advisor. I mean, it was actually a big deal. I had to sit down with my family and discuss this with them and, you know, tell my dad I wanted to leave the business and go live in New York and teach people about money. They flew me to Newton. Not my parents, but actually the president, Morgan Stanley flew me to New York to meet with him to say, are you sure you want to do this? You've got a great career here. Are you sure you want to leave? But I said, you know, I really want to. I really want to dedicate my life to teaching people more about money. And he's like, okay, if you leave, then we'll hire you to teach all of our financial advisors to teach more people. So I ended up doing a whole tour across the country with Morgan Stanley and doing smart couples finish rich talks all over the country. But that's what led me to New York. And, you know, it's funny how life works, but I had not been able to get on the Today show. And the first week I moved to New York, the Today show booked me, and then they booked me over and over again. Because what I. What you. What I found living in New York is that if they like you, they'll have you on over and over again. You solve a problem. But they don't want to. They don't want to have you fly all the way across the country because they want the ability to cancel you last minute because if there's a news break, they got to change things. So it's no big deal. When you're downtown, you're just getting in a car, but if you're getting on a plane and you're flying 3,000 miles, it's a much bigger deal. That's what started it all.
- [11:51]
B
So then, you know, in the background of Automatic Millionaire, it mentions this idea of micro retirement, sort of mini retirements. Many retirement. The. Your first one's at 46. So tell us a little bit about that, because that was.
- [12:05]
A
That's an interesting age, because that was.
- [12:06]
B
The age that I left my investment career. And we spent three months traveling as a family with our kids and in Asia and Europe. So at 46, what. What was that? You know, what led to that? And kind of. You didn't mention where it Was. I mean, you're welcome to share that too. That we hope.
- [12:21]
C
Yeah. Well, so I was living in New York City at that point. I had two kids and I had been working like my entire life really hard, probably like you, really hard. And two things happen at once. I was. And it's, it's just, it's. It's interesting to have this conversation now because I don't. This is not a typical conversation for. I have on podcasts, but because I just came from Arizona, I just did this event with Joe Polish. I just, I just spoke at the Genius Network event last week in, in Phoenix. And my mentor was a guy named Dan Sullivan. He runs a program called Strategic Coach. And I tell this because Dan introduced me at the keynote event last week. Okay. So I had been in this business program for 20 years, and part of this business program was a way, how do you 10x your income? So, like so many entrepreneur programs, what do you need to do to 10x the business that you have? And I had done that. I had 25x my income. So I was in a new coaching program, kind of like the advanced coaching program, looking at how do I 10x my business again? And that was the whole day's assignment. We sat down with these worksheets laying out how I would 10x my income. And I did this whole plan. And it was a ten year plan. And as I worked on the ten year plan, I then asked myself a question, David. And the question I asked myself is, what was I going to do at the end of the 10 years? And I thought, and I thought, well, I take a year off. And I went, well, God, I take a year off. Well, I don't really need to wait 10 years to take a year off. What if instead of 10xing my income, I 10x my free time? And so I took the entire half day's worth of work on this giant worksheet, I flipped it over, I crossed it all out, and I started asking myself a question. What would it take for me to take a year off? I didn't know what I would do with the year off. I just wanted the year off, then I'd figure it out. And so I spent the whole rest of the day on that plan. And I came home later and just randomly, my wife asked me, what do I want for my birthday? My wife's a big birthday planner. And I said, you know what I want for my birthday, honey, I want a year off. And she goes, what do you mean? Like, like you won't write another book okay, you wanna write a book next year? I go, nope, don't wanna write a book. She's like, well, okay, well, what about the Today Show? Are you gonna keep doing Today? Want to do the Today Show? I'm not. I love the Today show, but I want to keep. I'm not. I'm going to not do television anymore. Well, what about your speeches? I go, no, I'm not going to do speeches. What about your office? You have all these employees. Yeah, I don't want to go there either. She's like, I don't understand. What do you mean? I'm like, I want to not work for a year. She goes, well, what would you do? We just had this conversation, by the way, like, two days ago. I was reminding her of this story. And I go, honey, I could do what you. I could. I could wake up in the morning, I could get the kids off to school. I could take them to school, then I'll go to the gym, then I'll have lunch with friends, and then I'll run a few errands and I'll pick them up. Like, what you do? And she goes. She goes, you know, it's not as easy.
- [14:54]
B
I bet that one ever. Well, yeah.
- [14:56]
C
She goes, actually, she goes, it's not as easy as it looks. I go, I'd like to find out. So then she said, well, can we afford for you to take a year off? And I go, you know, I think we cut back on a few expenses. And she goes, wait, wait a minute, sec. I didn't say anything about cutting back on expenses. I want to know. Can. Can you take a year off without us changing anything? And I said, yeah, I can. And then she said, well, how long could you not work for? And I told her, and she's like, well, then. Then there's a dumb conversation. Take a year off. So it actually was a very scary decision to make, but I had to go a whole year forward because my calendar was so booked. And then I made the decision to take the year off. And that changed my life because I didn't know it at the time, but I was burnt out. And I've talked about the fact that a lot of times people talk about recharging your batteries and taking a break. Didn't recharge my batteries. It gave me a brand new phone, it gave me a new battery. And it didn't take a year. It took about. About three months. The end of three months, I was. I had gone from being exhausted, not able to sleep. I still would wake up. You Know, I was. I was going through the motions of doing what I always did. Wake up at 5am, go to the gym, go to my journal, work out, go do the TV shows, do all things I always did, but that wasn't fun anymore. And after 90 days of taking a break and I just felt. I just felt amazing. It was like somebody gave me a miracle pill. Literally, like a miracle pill. Like this was the pill. All you needed to do was take a break. And then all this creative energy came back to me. And by the end of nine months, I was super fired up to work again. And then I became vice chairman of a financial service company which today is known as Edelman Financial Engines, one of the largest RAs in America. And then I updated four of my books. And then I went out and started another Ria & Co founded a company that today has $40 billion under management. But I did all this stuff, and it was all a result of getting a rebirth. And the rebirth came from simply taking a break. And they call that a sabbatical, by the way. You can call it a mini retirement or a sab, but if somebody's listening to me right now and they're in their 30s or their 40s or their 50s, and they're tired and they're tired of being tired, you know what happens is you think you're getting older and that's why you're tired. And often the reason you're tired is you're actually burnt out and you don't know it. And doctors will go, well, you're depressed. Here, take this medication. Then you're just. Then you have a whole nother issue. But in many cases, if you can just get yourself a break, it can change the direction of your whole life. Now, in Europe, where I live, they just call this a summer.
- [17:25]
B
They call it August.
- [17:26]
C
That's right, they call it August. I mean, it's hilarious how pissed off Americans get when they hear that. But that's called the summer. In Europe, people don't work in August, and many people don't work for the whole summer. And now I've lived in Europe for six years, so I've learned a whole nother lifestyle. But money is a tool to free you to live your best life. And one of the saddest things I've learned as I've gotten older is too many people wait too long to get to that golden moment. I read an article today saying the average American wants to retire at 63. And it's too early. And, you know, people should be working until they're 70. And I'm like, I don't know if these people read the real data and have ever worked with clients who retire, but in America, the health expect. The health expectancy age, not the life expectancy age. The health expectancy age in America is 63. 63 is the age the World Health Organization knows that in the United States, the average person will get sick and have an illness that will permanently change their life. By the way, that's really bad because that's, it's 67 in Europe, but in the US it's 63. And you know, I've, I've worked with these clients that do, you know, they save all this money and then they, they retire at 65 and then they get cancer and then they die at 67. So, you know, not only do you need to be taking care of your health, but there's a lot more to this whole game of retirement than money. There's health. Health's the most important thing. You know, when you have your health, you have everything. The saying that a man with, with, with money who has his health has a thousand wishes and a man without is really the truth. And so I ended up moving to Italy earlier. I ended up retiring in many ways younger than I probably originally planned to, but it's because of that.
- [19:05]
B
Well, right. Yeah. We've taught what we taught for years. How many for the rest of us is live like you're already retired, try to structure life now that you don't want to retire from. And maybe that's part time, but the idea is because, you know, as I see your life, because I, I watched you via Instagram on, you know, structure this life, knowing you had gone to Europe, I think you were planning on going for nine in Florence, Pandemic hit you, but you've never left.
- [19:30]
C
Yeah.
- [19:31]
B
So to tell us about that, like it's been six years now and how have you structured your life? You know, typical day, but just sort of that process because I think, you know, we have a lot of listeners in their 50s that, you know, are kind of going through those same things that, you know, I went through in my mid-40s or whatever. And so share a little bit about that.
- [19:49]
C
Yeah, well, so how did, how did I make the decision, first of all to move abroad? It. I think I was 52. I was traveling the country doing retirement planning talks. Actually, they were, they were really client. There were talks for our clients. So our financial, My client was a financial advisor who's an ria. They have clients who've retired I would go around the country and do talks about the, you know, basically a fireside chat with David and I talk about the economy and I talk about how to, you know, enjoy your retirement. But the most important conversation I would have with all of our retiree retired clients was the next 10 years of your life should be the best 10 years of your life. And what too often happens in retirement is that people wait to enjoy their retirement. They're retired and they're not even enjoying their retirement. Retirees have a hard time spending money and the biggest reason is they, they're afraid of running out of money often. And so I would talk about, you know, it's a very well known concept, but there's basically three stages of retirement. There's stage one, which is considered the go go stage. That's usually your 60s. Most people retire in their 60s. It's the first decade, it' best decade. You're healthy, you have your family, you have your spouse, hopefully you have your friends, you have money, you have time, you have all these things all come together. Then the second stage is in your 70s and it's the slower go stage because some people start to pass away, you start to lose friends, you start to lose your health. And so it's a slower go decade. And then in the 80s, often it's what I call the, the, the, the won't go decade. Other people call it the no go decade, but I call it the won't go decade because what happens is usually who won't go anywhere is the husband because his health has gone down. I watched this happen in my family. My mom's 83. My dad passed away last year, but my dad passed away at 84. So he lived a long life. But he really stopped going anywhere in his late 70s and because he wasn't in good health. So his, his won't go decade happened in the 70s. And I would talk about this on stage and what happened at one of my events and this was a life changing moment for me is I signed books and took pictures with clients for like an hour. And the last couple who waited for me was older and didn't, didn't look super happy. And this sweet woman put her hand on me and she whispered in my ear and she said, david, how old are you? And I said, I'm 52. She said, can you afford to retire? And I said yes. And she's like, can I give you some advice? She's like, don't wait for your 60s to enjoy your go go years, because I'm 65, and my husband's 67. He just retired. We both have stage four cancer. Our doctors have told us we have less than a year to live. We didn't get to enjoy these 60s at all. So she's like, if I can give you any. And we're taking pictures and I'm signing books. She's like, if I can give you any advice, if you can do it, do it now. I mean, it gives me chills still thinking about it, because I can see her face. And I came home and I said to my wife, after some other conversations, I think we should move abroad for a year. I think we should move abroad for a year and take the kids out of school and move them abroad so they get out of the bubble of Manhattan and let's just go have fun for. For nine months. Let's go in. Let's go in. Our older son was going to be a sophomore, and so that was the plan. We'll just go for nine months. And I knew I could do it because I'd already taken one break before. So we planned that break, and we moved to Florence, Italy. We went through a whole process of deciding where we wanted to go live. And, you know, we got to Florence, Italy, and, you know, my wife turned to me after. I don't know, after being in Positano on the Amalfi coast and Forte de Marmi and then living in Florence for, you know, four or five weeks, she's like, I don't want to go back to New York. I'm like, but the kids have got to go back to New York. They got to go back to school. And then my older son came to me, who was in 10th grade, and said, hey, dad, is there any way you can work from here? Because I don't want to go back to New York. I'm happier here. And then we were like, okay. So we stayed. And, you know, I don't think we thought we'd stay forever, but we're here six years later, totally 100% changed our whole life. So it's been an. It's been a beautiful journey. I highly recommend to people who are interested in moving abroad that they try it, especially for retirement. It's the ultimate arbitrage. The ultimate arbitrage is make your money in United States and then move abroad and enjoy it. You know, there's two fa. There's actually two phases to investing, and for retirement, there's save and Invest. That's stage one, and there's spend and enjoy, and that's stage two. And if you're here in your 50s right now and you've done a decent job of saving and investing, you can move abroad so much easier and live a lifestyle that is so much better probably than the lifestyle that you have have for half the price.
- [24:14]
B
How's your Italian?
- [24:15]
C
It's so great question because my kids are fluent but I barely speak Italian. Now that's on me because I just haven't made a huge effort and I live in a city where everyone speaks English. But I have, you know, if it's that's the answer. Kids are fluent. Parents, not so much.
- [24:31]
A
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- [27:31]
B
Get just tired of, of travel? I don't know how much you travel now to sad or even the sitting on a plane, going for a meeting and giving a speech. Did you find that draining at times?
- [27:41]
C
You know, I think back in the day, I don't know, I think I've always loved travel, actually, and I, I get such a rush from teaching and being on stage that I really always enjoyed it. And I've actually traveled a lot this year. Now, this, now this year I've traveled a lot for fun. But I do think, I do think travel's changed. You know, it's, it's, it's, it's harder to travel today, right. Just because of all with going in the airport and the security and everything, but in general, kind of like to be on the move and then I like to be in one place. I need both. I need, I can't just be on the ground. Like, I've been home for a week and I was planning on going nowhere for the next five weeks. And then my buddy yesterday said, you know, the mountains are opening on the 29th. I'm like, really? They have enough snow to open. I'm literally getting messages right now. I'm holding my phone up. I'm like, huh? Really? Okay, well, maybe we should go ski next week. So, you know, and then I'll go spend the winter in Verb. I'll spend a good part of the winter in Verbier, Switzerland, skiing. So, I don't know, it's fun. Fun.
- [28:33]
B
Okay, that makes sense. Well, so, yeah, when I, when I joined my institutional advisory firm and I was an analyst and, you know, and these consultants would talk about how, how bad travel was and make it sound really hard. And then, so then when I started doing it it's like I'd much rather be on the road than in a cubicle. And it's, it's not that bad.
- [28:51]
A
But I hear what you're saying because.
- [28:52]
B
Then I, I traveled so much that you kind of get used to, you're there a week, like, where's the next trip? Because you're, it's almost like your internal clock is ready to move on.
- [29:01]
C
Yeah.
- [29:01]
B
Then the next thing. And that's, that's been probably the biggest adjustment since I quit that, that life 12 years ago is we travel longer now. So we'll travel, but we're, you know, none of this fly across the country for three minutes or an hour meeting.
- [29:14]
C
Yeah.
- [29:15]
B
Now if we're going out the country, like we were just in New York, New Jersey. We're there for a month.
- [29:19]
C
Yeah.
- [29:19]
B
So spend time with my sister and just like do slow travel, make it more meaningful and deeper. And that, that's what's worked well for us. Us in, in Phoenix, you, you introduced, I might have been at that conference, but you, you introduced this concept of a 12% flat tax or, or big idea. That's what you called it. Can you, can you talk a little bit about that? Let's, let's have a conversation on that.
- [29:42]
C
Well, let me, I'll give, so I'll start by giving out people the website. You can go to IRA flattax.com. that's IRA flattax.com. what happened, David, is as I was updating the automatic millionaire, I was looking at all the stats on wealth. The stats on wealth are unbelievable. Like in 20 years we've gone from having 8 million millionaires in America to 24 million millionaires in America. We've gone from having $11 trillion in retirement accounts to having 45 trillion in retirement accounts. That's like one out of every three American dollars is basically in a retirement account. Money in America is in two places. It's either in a retirement account like a 401k plan or an IRA account or it's in home equity. That's primarily where all the wealth is. I've always said there's two primary escalators to wealth in America. It's real estate estate and it's the stock market. And by the way, right now if you are not in real estate or the stock market, you are being left behind. I mean, that people talk about this K shaped economy where, you know, half the economy is doing well and half the economy people aren't doing well. It's not true. Two out of ten Americans are Doing well, the ones that are invested. Seven out of ten Americans living paycheck to paycheck. But I just digressed, okay, so I look at these retirement accounts and it hit me, why is this money sitting in these retirement accounts and why is it not coming out? What I didn't know is, is how much of it isn't coming out. I had this hunch for the last five years because I'm in the business and I know how retirement planning works. If you have a financial planner and you've done any real financial planning, all financial planning defaults to taking out IRA money last because you don't want to pay taxes on it. You don't want to pay ordinary income tax. So what I realized was most people are not taking money out of their retirement accounts until the age of 73. That's the RMD age acquired mandatory distribution age. And now it's going to go to 75. What I didn't know until last year because I couldn't get the answer to this question is I didn't know how many people were waiting. Once ChatGPT Deep Research came out, I went to ChatGPT Deep Research and I started asking questions, how many people wait to take out IRA money? And the answer came back 83%. So then I went back and started asking myself the question, what would happen? And then I started using all the a, all the language models. You ran all the sewer language models. What would happen happen if instead of paying ordinary income tax on distributions out of retirement accounts, what would happen if we created a tax policy, an eight year window. Everybody listen closely. By the way, if you're in your 50s or your 60s or your 70s, you're going to like this idea. What would happen if the government created an eight year tax policy that would let you take your money out of your retirement account? It's optional at a flat tax. And we ran it three ways. We ran it at 10%, 12% and 15%. What would happen and what the language models came back and said is a lot of things could happen happen. Trillions of dollars would come out of these retirement accounts. Trillions would go into the economy because the money would move around. It'd go into all kinds of things. It go into insurance and annuities and cryptocurrency and buying second homes and helping kids buy their first house. It would stir the economy. It would raise the GDP of America by a quarter of 1%, maybe as much as 1%. It would pull forward a trillion dollars worth of taxable income into the government sooner. But the biggest thing it would do is it would allow baby boomers to start to enjoy their retirement more and it would encourage people in their 50s to also save more out. Because you'd have this eight year window where you'd have a tax arbitrage. You'd know you could get a deduction now and you could take it out within this eight year window at a flat tax. So on iraflattax.com, we've run this whole analysis through. We, we ultimately narrowed it down to three language models. We used ChatGPT, Gemini and Perplexity. We created a notebook LM so people can go on the website, they can read the white paper, they can listen to a podcast on it and they can play with the stuff that we did. Because my goal is to put this IDE idea out to the public and ultimately get this idea in front of the people that are in politics, like President Trump to take a look at this. Because our country needs ideas right now. You know, they're literally like running around looking for ideas. Last week it was a 50 year mortgage. Last week it was give people $2,000 back of tariff credits or refunds. You know, the last week they were having the heads of all the financial services company come over to the White House to talk about what do we do about inflation. Our country needs new ideas. And I think this is a super simple idea. There's somewhere 11 to 20 trillion dollars of baby boomer money sitting in IRA accounts not being used because you have 73 million baby boomers and the bulk of them do not want to pay ordinary income tax. There are people, David, that would rather die than pay ordinary income tax. Now it's funny when I say that because people will laugh, but. So my idea is, let's try something new. Create an eight year tax window. Give people this option to take it out at a flat tax and see what happens, happens.
- [34:30]
B
So when I read the white paper, you know, one of the things, you know, as a, you know, most of my institutional clients are university endowments. And a big aspect of that is intergenerational equity. That's why endowments have spending policies. They spend 4 or 5% so that the money is there 30 years into perpetuity. The generation, this eight year window that would benefit. One reason the wealth compounded so much is the stock market valuation. I mean stock, global stocks over the past 40 years appreciate at 10% per year, but they also doubled in valuation. So you have this generation that had this huge tailwind of the stock market coming out of the 80s, which is, and this is the same generation that generally had defined benefit plans and then most don't have now, you know, the Gen X and younger, but they haven't tapped into their IRA because in many cases they would have been able to cover much of their expenses through their pension and through Social Security if they've started taking it. And they're also the ones that have the biggest home equity because they also benefited from that. So I could see, when I first saw this, I thought, okay, this is a rolling eight year window, so younger generations would benefit from it. But it almost seems like this is a helpful gift to people that are already very wealthy. And there might be other tools, annuities.
- [35:46]
A
For example, to get, if they're afraid to spend, go buy an annuity and.
- [35:49]
B
Then you can lock in that guaranteed income. So how do you address maybe that criticism on that side?
- [35:55]
C
Yeah, well, so first of all, let's go back to the criticism of retirement accounts in general. General, right. There's, there's $45 trillion in retirement accounts. And if you take somebody who wants to criticize retirement accounts, they're going to say that the only people who benefit from retirement accounts are people who are wealthy. And that's, let's just call it what it is.
- [36:11]
B
No, I agree.
- [36:12]
C
So, so you have a, so the Automatic Millionaire is a book that teaches people how to become millionaires on ordinary income. And there are millions of Americans who have saved 100, 200, 300, 400, 500amonth and they now are millionaires. And it's because they've been saving money automatically for decades. And the market's which by the way, when I wrote the Automatic Millionaire and I said you can make 10% annually in the stock market and that's what it had done for 80 years, people criticized me. You can't make. And it's been better than 10% the last 20 years. Right. So you know, the last five years it's averaged 15%. So is that going to continue? I have no idea what I, what I know is this, the reason money's not coming out of retirement accounts is nobody wants to pay taxes. And so the people who have to take money out of the retirement accounts to live, they're already taking it out. So the reason I looked at the idea of an year window is that's how tax policy gets changed. No, like you look at the last Trump tax policy, it was eight years. Now they renewed it, but they tested it for eight years. Right.
- [37:12]
B
Well, the deficit impact. Right, because it looks Less expensive that way. I got you. That makes sense.
- [37:16]
C
Yeah, but, so, so the re. But the reason I, in my mind, because again, I'm just throwing this idea out. I'm not running for office. I'm not a lobbyist. I'm not, I'm not running for politics. I heard today Ted Cruz might be throwing his hat in the ring. I'm, I'm like apolitical. I'm throwing this idea out because I, I think there's a lot of money here that could be moved around. You know, my grandmother used to say that money is like manure. You leave it in one place, it starts to stink. You spread it around, things start to grow. If people, you take someone who doesn't need the money. Let's say you've got a retiree who's, I mean, let's, let's say they're 65 and they have a million dollar IRA account, which there's a lot of these people. That person who doesn't need the money is not going to all of a sudden pull the money out and go buy a car, a Ferrari they're going to take. What will happen is if they're in a balanced portfolio that's 60% stock and 40% bonds, their financial advisor is going to say, well, look, I don't know what to tell you, but the reality is it's a pretty good opportunity. You're going to pay 12% in tax instead of 35% tax. We can move the account into your taxable portfolio. We can leave it exactly like it is. Then you can decide later what you want to do with the money. That's what most people will end up doing. They'll simply move, move it from a IRA account to a taxable portfolio. But then you know what their kid who's in their 30s or their 40s, who needs help with the down payment, maybe instead of waiting to inherit the money, they'll help them buy their house. Now that'll create a whole new market for first time home buyers. Maybe somebody who actually is curious about buying cryptocurrency and doesn't want to put cryptocurrency in their IRA account, they'll think about buying cryptocurrency. Maybe they'll buy a second home. Maybe you'll give more money to charity. I don't know what will happen. I know this, what's happening now is this money's just piling up and it's going to go from 45 trillion to a hundred trillion within ten years. And I think the good News was we created these retire. I spent 30 years of my life encouraging people to use retirement accounts. It's been my whole life's work. So it's ironic that I'm sitting here now talking about, well, how do you take it out? But I also am the guy that's like, that's the point. The point of saving all this money was to have this money set aside so that someday you could enjoy it. It wasn't to just look at your brokerage account online on a statement and watch these numbers grow. Because for some, these numbers are just getting to be ridiculous. And so do you think it.
- [39:30]
B
Is it fear or is it more.
- [39:32]
A
They're afraid to spend it, or it's.
- [39:34]
B
It's the psychology of if they pull it out, they have to pay taxes. So then the balance is smaller, so then it doesn't look as big.
- [39:42]
C
It's taxes.
- [39:43]
A
You don't think it's fee.
- [39:44]
C
Nobody wants to pay tax. No, no, it's that fear's behind it. Right? Like, if you look at the white paper, I mean, the white pair analyzes what are the biggest four reasons that people. People don't want to. What are the biggest four reasons that people have a hard time spending money in retirement? It's actually a phenomenon. Like, the one thing my dad taught me early in the business is that we have to help our clients spend their money. Because they did. The money just piles up. The people who have spent 40 years saving investing have a hard time depleting their assets. They don't deplete it. They just don't spend money. Right. Like, we would sit down retirees and be like, guys, you want to take your family on a cruise? Go on the cruise this year. Year. Like, what are you waiting for? Don't wait five more years. Take the cruise with your family. Now. It's the same thing with Social Security. If you don't need Social Security, you should take Social Security early. We would say to our clients, take the Social Security early. Take your 2000, 3000, 4000amonth and just go enjoy it. Take travel first class. Buy your kids a gift. Why would you wait? Or you could invest this money also, and you'd still come out ahead. But we have programmed people into financial numbness. And everyone's like, oh, we know. Wait for Social Security. It'll be worth 8% more every year. And it's like, oh, God, you're kidding me. The only people who should wait to take Social Security are the ones that desperately need the money. It's not fair. It's just true. So if you don't need, if you don't need Social Security, the moment you can take it, you should take it. Let me tell you, I'm sitting here at 59 on two days. Two days on 59, at 62, I'm taking the money. If there's an, if there's a new RMD rule created, that's a flat tax, not an RMD rule. If they change this to a flat tax, if this happens, I'll take the money out early. I already know what my account's going to be worth at my rmda, right? My financial advisor ran the analysis. I am going to have an eight figure retirement account. Okay? Not unusual that the size of my retirement account, if I live to be in my 80s, is just silly and I don't need the money. But if you let me take the money out and I don't edit a flat tax instead of ordinary income tax, I'm taking it out sooner and then the money's gonna get spread around. So the number one reason people are not taking the money out is they don't want to pay ordinary income tax. All they have to do. Now, the key with this white paper, which is interesting, is that the white paper analyzed three rates. 10%, 12% and 15%. And there's a different cost to the government, by the way, depending on the rate, right? So at 15%, it's almost neutral because the government's budgeted on how much they're expecting someday to get. The average person who pulls money out of retirement account is paying 22% in taxes. But that's average. You have a lot of people who aren't paying taxes at all on their retirement accounts because, because they're in a really low income. So not everybody's paying a huge amount in order income, income tax. It's the ones who have a high income in there when they're retired are the ones that are not taking it out. So this is a gimmick is what it is. It's a tax gimmick, but everything's a tax gimmick. The reason the money went into retirement accounts is it was a tax gimmick, right? We'll give you a tax deduction. The reason the, the Roth IRA was a tax gimmick, hey, let's get people to pay tax. You know, let's get people to pull money out of their IRA account, pay all this tax, and then we'll give them this huge carrot where it grows tax free forever. I mean, it's hard to believe People do that, but now there's two and a half trillion dollars in those accounts. So this is just an idea with a limited window that now's the right time to do this idea though, because in another eight years these baby boomers are another 10 years older. And the other thing is it's very flawed, I think how the government is budgeted for these, for these RMDs because when people die, these IRAs get inherited. So you know, the bulk of IRAs are going to be inherited by women. The wives, they're going to live longer. So, so what's been, what's been budgeted for the RMD may not be accurate. And K can inherit these IRA accounts. So in a lot of ways this money is getting put into these tax sheltered accounts and it's not coming out for decades. And so I, I, you know, if you know Trump, let me know because I'm trying to get this in front of Trump.
- [43:34]
B
Yeah, he isn't, he hasn't been on yet, so we don't think interviews.
- [43:39]
A
Well David, thank you.
- [43:40]
B
No, it's an intriguing idea and I, I appreciate you willing to, to put it out there and do the work analysis and it's certainly been enjoyable discussing. I definitely appreciate your views on Social Security. It certainly seems something that we've thought a lot about, but the idea sabbatical, I, I, it's something I've done and we've done as a family and so no, this has been delightful. But I appreciate you being on our show.
- [44:02]
C
Thank you.
- [44:02]
B
Great.
- [44:04]
C
First of all, I appreciate you having me on the show and I just want to tell you that I listened to one of your podcasts today. I listened to actually your Tax Muni ETF podcast and I think you do really nice work. So as somebody who's listened to a lot of financial content over my lifetime, I really enjoyed the podcast that I listened to before I came on your show today. So I appreciate the work that you're doing.
- [44:24]
B
I appreciate it. Great. Thank you, David.
- [44:26]
C
Thank you. Have a great day.
- [44:28]
A
I hope you enjoy this conversation with David. You may be missing some of the best money for the rest of us Content Our weekly Insider's Guide email newsletter goes beyond what we cover in our podcast episodes and helps elevate your investment journey with information that works best in written and visual formats. With the Insider's Guide, you can discover investing in economic insight provided only to our newsletter subscribers. Unlock greater investing confidence with high value snippets from our premium products plus membership and asset cap. Further connect with the money for the rest of us, team and community. And when you sign up, we'll also send you our exclusive Investing Checklist to help you invest with more confidence right away. You'll also get our introductory email series on eight essential investment principles that, if followed, can make you a better investor. We'll also share our recommendations for podcasts, episodes, articles and books. The Insider's Guide is the best next step to get the most out of your investment journey. If you're not on the list, go to moneyfortherestofus.com and subscribe right there on the homepage. Everything we shared in this episode is for general education. We've not considered your specific risk situation. We've not provided investment advice. This is simply just education on money investing in the economy. Have a great week.
- [46:10]
B
Sam.