B (3:29)

And I think that, I think that the awareness of this, first and foremost, of everyone's acutely aware that you could run out of money, that's big. That's the number one fear going into retirement is, am I going to outlive my money? What does that mean for me? What if I pass away? Then my spouse outlives their money. What does that mean for them? There's just this gigantic fear. And that fear leads to people being very frugal. It leads to them not doing things. It leads to things that in some ways you look at. Like, you know, thrift is a virtue in some ways. In many ways, the ability to be disciplined is a virtue. The ability to live within your means is a virtue. So all these things are really, really good things until they're taken to the extreme. In the extreme example we'll see all the time with clients is clients who have lived so far within their means, and then they get to retirement and that just becomes a way of life, it becomes a lifestyle. And they say they are so used to saying no to things that we have to show them what they're on track for. That look, you're retiring at 62 or 65 or whatever it is. You're projected to have so much more money when you pass at 90 or 95, assuming you make it that long. Is that your goal? And they say, no, of course not like that. Of course it's not my goal to die with $30 million or 40 million or 50 million. I think they don't fully believe quite yet that that's truly what they're on track for. Cause that just seems absurd. But that's to your point, Ari, that compounding doesn't stop when you retire, assuming you're still invested the right way and markets do what they do. Compounding doesn't stop when you retire, especially when you consider retirement might be 30 plus years. That's a long time for compounding to work itself out. And people are so acutely aware of running out of money that they forget the other what's going to become big regret, which is I missed out on life. I missed out on what I could have done. And so there's this financial tension with this life tension and what you can do with it. Of how do you. We'll talk about guardrails. Of how do you make sure that you're not overspending? There. There are ways to look at this. Of how do you make sure you're not overspending such that if you continue doing this, you'll run out of money and have a very bad rest of your life. But also how do you not underspend to the point that your portfolio is just going to continue growing and your regret's not going to be that you ran out of money, but your regret is going to be still painful, which is, what if I had taken those trips when I had my energy to do that? What if I had retired earlier because I knew I had the means of supporting my retirement lifestyle and could have spent more time with friends and family? What if I had given more? What if I had spent more? What if I had taken that money and invested in my health? How much healthier could I. So there's just the regret of, yeah, on paper, doesn't sound horrible to pass away with a lot of money. And it's not like a lot of clients have legacy goals and things they want to do beyond themselves. And so I want to be mindful of that too. But I think it's all about intentionality. It's all about intentionality of how do we use our dollars in a prudent way. So we're okay today and in the future, but also such that we minimize any potential regrets we might have because we didn't do the things that we otherwise could have.

A (6:31)

Beautifully said, but what do you say? I'm going to pretend to be the client here. What do you say if a client says something like this? James, I get that you're excited about the numbers and the graphs and the guardrails, but look, I just don't care about that stuff. I'm going to run out of money. I know you're telling me these graphs and numbers look good and you're confident in them, but I just don't know what to tell you. I have this feeling that something could go wrong. And I'm really worried because if I retire at 55, I don't have Social Security for a while. I don't know when I'm going to turn it on. I don't have a pension that doesn't start till when I'm 65. So maybe I should just not spend from now until that pension gets turned on because I think that's just going to put me in a way safer spot.

B (7:14)

Yeah. A lot of this is a more of a general principle. When fears are more generalized, they are more all consuming. It's that whole principle. Once you name your fear, define your fear, you start to realize sometimes the absurdity of it. So it's Ari, what would that look like? I get it. Running out of money and not having the means to work anymore to pay the bills. That's a terrifying thought. What are you going to do? Let's walk through how would you run out of money? Let's logically work through this. I would walk through an exercise with you to see what has to happen. How much do you need to be spending for that to happen? What needs a sure World War three could come and the stock market goes to zero. The stock market's not your biggest concern at that point. Okay, so like that's like you can worry about that, but not from like a retirement planning standpoint or we have another Great Depression type event and every like there are some things like there's no guarantee that anything that we're projecting in terms of growth rates or asset projections is going to happen. There's a very, very, very high likelihood based upon history, based upon how things work, based upon when you just look at where does the value of the stock market come from. But I think that once you start to more narrowly define what is that specific fear, the fears start to Subside.

A (8:40)

I have a potential title for this episode, which is called Head Trash, which is. You just explained it. That's just head Trash. And I think I. If a client just heard you say, right, there you go. You're right. I. I guess I won't run out of money if. If I technically did run of my. There be way bigger problems in the world. And the big risk that I see, there's two risks. The risk you run out of money and the risk that you underspend and get really mad at James and I because we didn't make this episode for you. And you're 80 going, hey, James, Ari, why didn't you tell me? I should have spent more when I had my energy and my health. And that example I gave of someone who's 55 retiring, worried about spending money because they don't have a pension that turns on till they're 65. The risk is they underspend, become 65 with a pension that covers all of their needs, and now their health isn't in a good spot because they didn't take care of themselves or worked a job that was stressful or did something else that the rest of their retirement is not going to happen the way they want it to.

B (9:35)

Yeah. And I will say, like, this is why we do planning is, because it does help you to define what that might look like. Like it. If you had any projections, if you. I don't care how big your portfolio is, say it's $10 million. That's a big. That's objectively a big portfolio. And you're about to retire and you're 55, to use your example. So you're not living on Social Security. You're not living on a pension. You're living on the dollars that you have saved up. So you're going to go from saving money and building your portfolio to now spending it down. That's objectively a scary thing to think about, like spending on my money. What if I run out? I might have another 40 plus years of living. Well, until you run a projection and you say, okay, well, look, here's your spending, because I know you are and I know what you want to spend. And we've built in some margin here of what if there's a health event? What if there's an unforeseen emergency?

A (10:21)

What like here's by a soccer team, you know, what if you have to.

B (10:25)

Buy a soccer team? What if those things come into play? I know what it's going to cost year by year for you to do what you want to do. I know what that's going to represent year by year as a withdrawal rate from your portfolio. When I can, when I can show you, for example, that Ari, you're projected to spend somewhere between one and a half to two and a half percent of your portfolio value the first 10 years. Okay, now, like, let's relate that back to those fears. That's, that's a very sustainable withdrawal rate. And obviously we go through a deeper conversation of how much your portfolio support based upon dividends, based upon how old you are, based on how long it needs to last, based on a number of things. But until you have the clarity of actually seeing what does your portfolio need to do, what do withdrawal rates look like? And you can compare that to something like something that's relatively safe for safe meaning. Here's our benchmark for if you're at or below this in terms of spending or withdrawal rates or whatever, we feel really good, because here's what this is based upon. Then you get that clarity. And it goes from being as a vague, unknown sense of I just might run out of money to, oh, okay, I see. Like, I would really, I would have to buy a really expensive soccer team. I would have to way overspend the market, would have to go, you know, down 70%, and in which case I would just go back and get another job. So financial planning is designed to explore those really bad what ifs so that we can have contingencies because at the end of the day, we don't know what's going to happen.

A (11:53)

I have two examples for you. The first is, as many of you know, I love to play soccer to an unhealthy degree. I know I should play maybe two days, a week or three days, but I love it. So I play more than I should. And I had to get a hip procedure done. And I know I could have watched a surgery on YouTube of the exact surgery I was going to get done. Maybe I would had more confidence because I would have known the tool they used. But look, I would be unconscious at that point when the surgery's happening and I don't want to watch it. I'm just trusting the surgeon. So a lot of you are like, look, I think I just need an advisor, the right one that I trust that's going to give me the confidence beyond the what if scenarios and projections. So that's some of you at the same time. James, how many times have you heard the following? And I'm curious how often you hear this, because I get this more than I would have thought. I'm really scared to retire because up until this point, when markets go down or things aren't going well from news or neighbors, I just add more money to my 401k. I am still working. So if God forbid, something happens, I have new dollars to put in. I'm scared when markets go down, I don't have new money to put in. And so it's almost like, hey, I've got one go at this.

B (13:01)

Yeah. And we'll acknowledge that like that. Yeah. That's the importance of having a financial plan, of having a strategy, of having some contingencies of what you should only retire once, unless it's by deliberate choice. Because you go back to work and you're Michael Jordan and you retire and you decide you're not done yet and you go, keep playing. But you should not have to go back to work because of a lack of planning, because you feel so that we're not here to say it's not a scary thing, it's not a big undertaking to get a plan in place to do this. That's. It is a scary thing. But the right planning can ensure that you. I shouldn't say ensure. We can't guarantee anything. For us, the right planning can minimize the chance of you ever running out of money while at the same time minimizing the chance of you having a ton of regrets looking back one day because you didn't spend money on the things that you should have spent money on.

A (13:58)

Yeah. James getting a lot better at Jiu jitsu. He's not telling all of you this, but if you do not accept his recommendation to retire, he will put you in a chokehold. That is how that works now, at root. No, I'm just kidding. But it's not easy. If it was easy, everyone would retire. I would argue if it was really easy, everyone would retire early. But that example that we just went through of, hey, if I'm not adding new money anymore, it's scary. Well, that's another example as to why you don't just plan well. But we'll tell clients, imagine markets go down and you do a Roth conversion, which is not the topic of today's episode, but imagine you do something like that. Well, it's kind of like adding new money. You're just doing it in a different way where the growth is tax free after the fact of doing this conversion. So I'm not going to go through the details of that today, but there are strategies that give you confidence and knowing that you have these Levers or trade offs. A lever such as maybe I spend less other times, which once again, today, we want to make sure all of you are thinking through these trade offs. Sometimes, and I know myself, I'll be mad at a client, not legitimately angry, but I'll be like, look, you told me you did not want to die with $10 million, James. And because of that, I'm going to ask you to either go take another trip or you're going to give more to your child for that wedding, which is more important to you. And that's weird because up until this point, James, the reason you have what you have is because you've been a good saver. So for me to ask you to flip a light switch and all of a sudden be an incredible spender, well, that's not logical.

B (15:30)

Yes. I think the way people should look at it is how can you minimize regret? There's multiple types of regret. The risk of sounding redundant, you're going to regret if you run out of money and you're 80 years old and to go back to work or just live on Social Security. You're also going to regret not doing some things if you were on the extreme side of you never spent money in retirement. You never, you know, lived a little and did money with your, you know, I told a story, another podcast I was doing. Charlie Munger just passed away last year at the age of 99. Warren Buffett's partner. And he's been interviewed and this is like a few weeks before his death. I think he died with billions of dollars. He incredibly wealthy and he died doing what he loved, thankfully. I think he really enjoyed doing that. But they asked like, what do you like? Looking back, I forget the exact question, but something like, what would you have done differently? Or what? I don't remember the exact question, but his answer was, I wish I could go back and catch a 200 pound tuna. I don't have the health anymore to do that. I've got all the money in the world to rent out every single fishing boat and have the. I don't have that anymore. I have money, I don't have time. And so when we can look at financial planning not just as the allocation of financial resources, but also the allocation of how we spend our time, how we spend our energy, how we spend our talents, using finance as a tool to help support that, you're going to have a richer experience. When you don't just view it as to take hoard, hoard, hoard, save, save, save, invest, invest, invest. There's great way. It's good to do up to a point. It serves you up into a point. And at some point we have to realize what is money for? Ideally money is for consumption, money is for the exchange, you know, being able to do things we want to do, have the impact we want to have in the. Anyways, I'm starting to go in circles at this point, but how do we just go into retirement the eyes wide open that there's not just one regret which is running out of money. We're all acutely aware of that. There's the other regret of not doing what you could have done because you, you were either too fearful of doing it or whatever the case might be, but you look back and are upset that that's the case.

A (17:48)

And it's one thing, if you're not in a position to do it, we will be the first people to tell you, I'm sorry, you don't get to go buy this boat and you don't get to go get a 200 pound tuna unless once again the trade off. Unless you don't want to send your children to this college. Like it's all about trade offs and we don't get to make the final call. It's of course your money at all times. But the last story I'll leave you with and then James, if you have anything else is I had someone that came to me and I like called them out on it and they were 56 and they had saved, invested really well, they had about $8 million. And they said I want to make sure my spouse is okay. And I said who doesn't? And they said look, I want to make sure my health's not in the best state, but I want to make sure we get to move to this community because I think we're just going to be a lot happier for the next 10 years. And I said awes, awesome, tell me about your health more. So he's telling me about his health and he doesn't know how long he's going to live, but it could be 15 years, could be 20 years. It's safe to say his spouse is going to outlive him. And he was just kept telling me about his spouse and his spouse. I said hey, what about you said moving into this community, what, what might that cost? And he said about $800,000. I said would that be the nicest home in the community? He said no, that, that's the 1.8. I've never spent 1.8 million on anything. I just couldn't do that. And I said, you could do it. It would be hard, I'd argue, be very hard, but you could do it. And how much of a different experience would that add to your community? And he said, really wouldn't change it that much. It's just a really nice home. I said, then great, don't go buy this home just because it's 1.8 million. If you felt it would add to the quality of your life or your wife's life while you were here, that's something to consider. So we're not saying go spend frivolously. We're saying spend on things that matter most to you so you don't look back and go, why didn't I catch the tuna?

B (19:39)

Yeah, why didn't I catch a tuna? Exactly. It's a good way of looking at it. So it's a delicate balance. And to your point, not everyone has the luxury of this trade off. Some people, you just. It's like Maslow's hierarchy of needs. You gotta meet the foundational needs first and a lot of people haven't met those. So the trade off is you do have to keep working, you do have to live within your means, you do have to live on a really tight budget because that's all you have the means for. The problem is when we see people who have the financial resources that get them well beyond that point, they're beyond the point of safety and well being, but they're not living into the next phase of that because their, their mindset is still trapped in the I gotta meet my basic needs and it's preventing them from living more is is the way we're seeing it.

A (20:23)

So well said.

B (20:24)

All the trade off, as you say, delicate balance. Neither options are good options. But what can we do to minimize regret on either side? Focus on that. Prioritize that you'll be making better decisions as you move into retirement. So where can people find you, Ari, if they want to know more about Ari and soccer and all the cool things you're doing.

A (20:42)

If you want to see me try to catch a, maybe a two pound tuna if I have a better chance. Early retirement. Ari on Instagram. And if anyone wants to see you put anyone in a chokehold. Where do they find you on Instagram?

B (20:53)

Well, they find me on Instagram. Amecanole. I need to do a better job of being better and active on there. I don't have any choke hold pictures. You know, I haven't actually done jiu jitsu since our son was born five months ago. Now, so I gotta get back to it. It's just the mornings are a little bit more hectic and chaotic, which is usually when I would train. So I'll get back there and I'll take a picture and post it. But find me on Instagram James Knoll company page Root Financial, LinkedIn, James Knoll and then, you know, for those people who don't know, we're both at Root Financial so you can find root financial.com is our company where you can go if you're looking to find an advisor to help you do some of these things that Ari and I talk about on these podcasts in a more hands on way. So that's Root Financial social media. I think that's it.

A (21:35)

I think that's it. I think we covered it all.

B (21:37)

Awesome. See you guys next time Listening See you next time. The information presented is for educational purposes only and is not intended as an offer or solicitation for the sale or purchase of any specific securities, investments or investment strategies. Investments involve risk and are not guaranteed. Any mention of rates of return are historical and illustrative in nature and are not a guarantee of future returns. Past performance does not guarantee future performance.

A (22:02)

Viewers are encouraged to seek advice from a qualified tax, legal or investment advisor professional to determine whether any information presented may be suitable for their specific situation.

B (22:12)

Hey everyone, it's me again. For the disclaimer, please be smart about this. Before doing anything, please be sure to consult with your tax planner or financial planner. Nothing in this podcast should be construed as investment, tax, legal or other financial advice. It is for informational purposes only. Thank you for listening to another episode of the Ready for Retirement podcast. If you want to see how Root Financial can help you implement the techniques I discussed in this podcast, then go to rootfinancialpartners.com and click Start Here, where you can schedule a call with one of our advisors. We work with clients all over the country and we love the opportunity to speak with you about your goals and how we might be able to help. And please remember, nothing we discuss on this podcast is intended to serve as advice. You should always consult a financial, legal or tax professional who's familiar with your unique circumstances before making any financial decisions.