When Do You Need to Change Your Savings Rate?

Summary

Money Guy Show: Episode Summary - "When Do You Need to Change Your Savings Rate?"

Hosted by: Brian Preston and Bo Hansen
Release Date: March 24, 2025

In this engaging episode of Money Guy Show, hosts Brian Preston and Bo Hansen delve into the crucial topic of determining the optimal times to adjust your savings rate. Through insightful discussions and real-life listener questions, they provide actionable strategies to help listeners optimize their financial plans and achieve their wealth-building goals.

1. Adjusting Your Savings Rate in Your Mid-30s

Listener Question: Brit M asks if starting to save in the mid-30s necessitates increasing the traditional 25% savings rule to "catch up." (Timestamp: [01:06])

Discussion Highlights:

Assessing Personal Goals: Brian and Bo emphasize that the necessity to increase savings depends on individual retirement goals, desired retirement age, and whether one has access to pensions or other guaranteed income sources.

Bo Hansen:

"Ultimately depends on what your goals are. When do you want to retire? Are you going to retire at age 65?" ([02:23])
Time as an Asset: They reassure listeners that starting in the mid-30s is still advantageous due to the power of compound interest over time.

Brian Preston:

"30 is still young. Mid-30s is still young because you still have time on your side." ([02:42])
Employer Matches Enhance Savings: Highlighting the importance of employer-sponsored retirement plans, they discuss how matching contributions can significantly boost overall savings without solely relying on personal contributions.

Brian Preston:

"If your income, household income, is under $200,000, you can count that. Employer match." ([04:04])

2. Expanding Your Emergency Fund as You Approach Retirement

Listener Question: Tanvir inquires about the appropriate time to increase the emergency fund when nearing retirement. (Timestamp: [09:04])

Discussion Highlights:

Transitioning Needs: Bo explains that while a 3-6 month emergency fund suffices pre-retirement, retirees should aim for a more substantial 12-24 months to cushion against unforeseen expenses and market volatility.

Bo Hansen:

"When you get to retirement... we do think that your emergency fund needs to expand to somewhere between 12 to 18 to maybe even 24 months." ([09:18])
Emotional Preparedness: Brian underscores the psychological shift from saving to spending, highlighting that a larger emergency fund can prevent panic-induced financial decisions during market downturns.

Brian Preston:

"Anybody who's gone through retirement will know what I'm talking about is that there's a transition period and if I can give you a little margin in your life through that, extra cash reserves, it's just going to insulate you." ([12:19])

3. Navigating 401(k) Matches and Vesting Schedules

Listener Question: Faith P. asks whether to skip the 401(k) match if she expects not to stay long enough to be vested. (Timestamp: [12:37])

Discussion Highlights:

Understanding Vesting Schedules: Brian advises listeners to thoroughly understand their employer's vesting schedules, differentiating between immediate vesting in safe harbor 401(k) plans and gradual or cliff vesting in others.

Brian Preston:

"Make sure you understand the difference between matching as well as profit sharing contributions because those can have different vesting schedules as well." ([15:37])
Maximizing Employer Contributions: Even with uncertain job tenure, contributing enough to receive the employer match is recommended to ensure personal contributions are fully vested and working for the individual's financial growth.

Bo Hansen:

"If you're working at an employer that offers it, I'm going to go ahead and try to max out the match just in case I don't end up changing because I don't want to look back and be like, man, thought I was going to transition in one year." ([14:03])

4. Managing High-Growth Investments: When to Sell Your Winners

Listener Question: Kevdog Millionaire seeks advice on when to sell a highly successful investment that has grown to 40% of his portfolio. (Timestamp: [16:25])

Discussion Highlights:

Emotional Impact of Winning Stocks: Brian and Bo discuss the psychological challenges of managing substantial gains, emphasizing the importance of not allowing emotions to dictate selling decisions.

Brian Preston:

"If this is a healthy thing... if it's just a percent or so. So it's not that Big of a deal. And it doesn't impact my happiness so much." ([19:49])
Implementing Structured Selling Strategies: They advocate for strategies like dollar-cost divesting, where a set percentage of the investment is sold periodically to reduce exposure without entirely abandoning the position.

Bo Hansen:

"What I would say, Kev, and then let you fill in some gaps, Bo, is that if this is... you need to implement a non emotional divestiture type of strategy to get you at the end point you want to be at." ([21:26])
Maintaining Portfolio Balance: The hosts recommend steadily reducing the proportion of high-growth stocks to maintain a balanced and diversified portfolio, thereby mitigating risk and preserving gains.

Bo Hansen:

"Implement a non emotional divestiture type of strategy to get you at the end point you want to be at and then you constantly reassess..." ([21:26])

5. Behind the Scenes and New Offerings

Beyond addressing listener questions, Brian and Bo share exciting updates about their offerings:

New Financial Order of Operations Course: They announce the launch of an improved financial course, now available at a reduced price of $49. Existing course participants receive the new version for free as a gift.

Britt:

"The new and improved financial order of operations course is live. Go to learn.moneyguy.com with the new and improved price..." ([25:06])
Group Discounts and Gifting Opportunities: The hosts encourage listeners to take advantage of group discounts and the ability to gift courses to friends and family, fostering a community of informed investors.

Brian Preston:

"We have group discounts. We've also designed this course with the thought for groups so that you can actually, you know, essentially have a teacher's edition..." ([25:46])

Conclusion

In this episode, Brian Preston and Bo Hansen provide valuable insights into optimizing savings rates based on individual financial circumstances and life stages. From adjusting savings in your mid-30s to managing high-growth investments and understanding 401(k) vesting schedules, the hosts offer practical advice to empower listeners to make informed financial decisions. Additionally, the introduction of their enhanced financial course underscores their commitment to educating and supporting their audience on the journey to financial well-being.

Key Takeaways:

Personalize Your Savings Strategy: Adapt your savings rate based on your unique goals, retirement timeline, and income sources.
Expand Emergency Funds Pre-Retirement: Transition from a 3-6 month to a 12-24 month emergency fund as you approach retirement.
Maximize Employer 401(k) Matches: Always contribute enough to receive employer matches, understanding vesting schedules to optimize benefits.
Manage High-Growth Investments Rationally: Implement structured strategies to reduce emotional decision-making when handling significant investment gains.
Leverage Educational Resources: Take advantage of new courses and group learning opportunities to enhance financial knowledge and community engagement.

For more detailed strategies and personalized advice, visit learn.moneyguy.com.

Summary

Money Guy Show: Episode Summary - "When Do You Need to Change Your Savings Rate?"

Hosted by: Brian Preston and Bo Hansen
Release Date: March 24, 2025

1. Adjusting Your Savings Rate in Your Mid-30s

Listener Question: Brit M asks if starting to save in the mid-30s necessitates increasing the traditional 25% savings rule to "catch up." (Timestamp: [01:06])

Discussion Highlights:

Assessing Personal Goals: Brian and Bo emphasize that the necessity to increase savings depends on individual retirement goals, desired retirement age, and whether one has access to pensions or other guaranteed income sources.

Bo Hansen:

"Ultimately depends on what your goals are. When do you want to retire? Are you going to retire at age 65?" ([02:23])
Time as an Asset: They reassure listeners that starting in the mid-30s is still advantageous due to the power of compound interest over time.

Brian Preston:

"30 is still young. Mid-30s is still young because you still have time on your side." ([02:42])
Employer Matches Enhance Savings: Highlighting the importance of employer-sponsored retirement plans, they discuss how matching contributions can significantly boost overall savings without solely relying on personal contributions.

Brian Preston:

"If your income, household income, is under $200,000, you can count that. Employer match." ([04:04])

2. Expanding Your Emergency Fund as You Approach Retirement

Listener Question: Tanvir inquires about the appropriate time to increase the emergency fund when nearing retirement. (Timestamp: [09:04])

Discussion Highlights:

Transitioning Needs: Bo explains that while a 3-6 month emergency fund suffices pre-retirement, retirees should aim for a more substantial 12-24 months to cushion against unforeseen expenses and market volatility.

Bo Hansen:

"When you get to retirement... we do think that your emergency fund needs to expand to somewhere between 12 to 18 to maybe even 24 months." ([09:18])
Emotional Preparedness: Brian underscores the psychological shift from saving to spending, highlighting that a larger emergency fund can prevent panic-induced financial decisions during market downturns.

Brian Preston:

"Anybody who's gone through retirement will know what I'm talking about is that there's a transition period and if I can give you a little margin in your life through that, extra cash reserves, it's just going to insulate you." ([12:19])

3. Navigating 401(k) Matches and Vesting Schedules

Listener Question: Faith P. asks whether to skip the 401(k) match if she expects not to stay long enough to be vested. (Timestamp: [12:37])

Discussion Highlights:

Understanding Vesting Schedules: Brian advises listeners to thoroughly understand their employer's vesting schedules, differentiating between immediate vesting in safe harbor 401(k) plans and gradual or cliff vesting in others.

Brian Preston:

"Make sure you understand the difference between matching as well as profit sharing contributions because those can have different vesting schedules as well." ([15:37])
Maximizing Employer Contributions: Even with uncertain job tenure, contributing enough to receive the employer match is recommended to ensure personal contributions are fully vested and working for the individual's financial growth.

Bo Hansen:

"If you're working at an employer that offers it, I'm going to go ahead and try to max out the match just in case I don't end up changing because I don't want to look back and be like, man, thought I was going to transition in one year." ([14:03])

4. Managing High-Growth Investments: When to Sell Your Winners

Listener Question: Kevdog Millionaire seeks advice on when to sell a highly successful investment that has grown to 40% of his portfolio. (Timestamp: [16:25])

Discussion Highlights:

Emotional Impact of Winning Stocks: Brian and Bo discuss the psychological challenges of managing substantial gains, emphasizing the importance of not allowing emotions to dictate selling decisions.

Brian Preston:

"If this is a healthy thing... if it's just a percent or so. So it's not that Big of a deal. And it doesn't impact my happiness so much." ([19:49])
Implementing Structured Selling Strategies: They advocate for strategies like dollar-cost divesting, where a set percentage of the investment is sold periodically to reduce exposure without entirely abandoning the position.

Bo Hansen:

"What I would say, Kev, and then let you fill in some gaps, Bo, is that if this is... you need to implement a non emotional divestiture type of strategy to get you at the end point you want to be at." ([21:26])
Maintaining Portfolio Balance: The hosts recommend steadily reducing the proportion of high-growth stocks to maintain a balanced and diversified portfolio, thereby mitigating risk and preserving gains.

Bo Hansen:

"Implement a non emotional divestiture type of strategy to get you at the end point you want to be at and then you constantly reassess..." ([21:26])

5. Behind the Scenes and New Offerings

Beyond addressing listener questions, Brian and Bo share exciting updates about their offerings:

New Financial Order of Operations Course: They announce the launch of an improved financial course, now available at a reduced price of $49. Existing course participants receive the new version for free as a gift.

Britt:

"The new and improved financial order of operations course is live. Go to learn.moneyguy.com with the new and improved price..." ([25:06])
Group Discounts and Gifting Opportunities: The hosts encourage listeners to take advantage of group discounts and the ability to gift courses to friends and family, fostering a community of informed investors.

Brian Preston:

"We have group discounts. We've also designed this course with the thought for groups so that you can actually, you know, essentially have a teacher's edition..." ([25:46])

Conclusion

Key Takeaways:

Personalize Your Savings Strategy: Adapt your savings rate based on your unique goals, retirement timeline, and income sources.
Expand Emergency Funds Pre-Retirement: Transition from a 3-6 month to a 12-24 month emergency fund as you approach retirement.
Maximize Employer 401(k) Matches: Always contribute enough to receive employer matches, understanding vesting schedules to optimize benefits.
Manage High-Growth Investments Rationally: Implement structured strategies to reduce emotional decision-making when handling significant investment gains.
Leverage Educational Resources: Take advantage of new courses and group learning opportunities to enhance financial knowledge and community engagement.

For more detailed strategies and personalized advice, visit learn.moneyguy.com.