B (2:51)

You will convince yourself, oh my God, Andrew, I can't retire until I'm 68. That's what the spreadsheet says. Or I would look at it and say like, well, no, you've been way too conservative every single place you could be. And I think you could retire at 55.

A (3:11)

Oh, what's up everybody? And welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of MasterMoney Co and today on the Personal Finance podcast, we're going to be diving into retirement with Jesse Kramer. If you guys have any questions, make sure you join the Master Money newsletter by going to MasterMoney Co newsletter. And don't forget to follow us on Apple Podcasts, Spotify, YouTube or whatever podcast player you love listening to this podcast on it. If you want to help out the show, consider leaving a five star rating and review on Apple Podcast, Spotify or your favorite podcast player. Now today we're going to be diving into retirement with Jesse Kramer. And now most people think retirement planning is about the math. They want to pick the right withdrawal rate. They want to think about Social Security and make sure they're picking the right timeline. They want to pick the right assumption when they're thinking about rate of return. But after talking to thousands of different people about money, I've realized something. The biggest retirement mistakes don't come from bad math. They come from fear. They come from assumptions. And they come from decisions that look right on paper and but feel wrong in real life. Today's conversation is about the difference in the gap between spreadsheets in life, but it also is looking at when you need to make sure you trust the math, but also when you need to make sure you're making the right decisions. And so today Jesse and I are going to be diving deeper into things like Social Security and when to take Social Security and some of the considerations that you should have about Social Security. We're going to talk through Roth conversions and when is a bad time to do a Roth conversion and when is a good time to do a Roth conversions. We're going to talk through the rate of return and why having a 12% rate of return assumption could be dangerous. And also having too low of a rate of return assumption could be dangerous. And where the happy middle is when you are retirement planning. Also, we're going to be diving into spending and how people should think about spending in retirement and how to plan for your spending in retirement, even if you are younger. This is an action packed episode and I am so excited to welcome Jesse. Jesse is the author of the Best Interest Blog, which is a fantastic read if you have not checked that out. In addition, he also hosts the podcast Personal Finance for Long Term Thinkers. And so we're going to dive deep into some of these concepts and really figure out exactly what's going on. So without further ado, let's welcome Jesse back to the personal finance podcast. So, Jesse, welcome back to the personal finance podcast.

B (5:36)

Andrew. Thanks, man. Excited to be here.

A (5:38)

We are pumped to have you here because last time we were talking about the bucket method and talking about different ways to kind of think about retirement, but this, we're going to be really diving deeper into retirement and some of the mistakes people make. Some of the things we need to think about when it comes to Social Security, we're going to talk about some of the, the things that we need to think about when it comes to Roth conversions, why the rate of return assumptions are getting kind of out of hand right now. And so I'm really, really excited for this episode because we're going to be loading you up here with a bunch of different questions that I think people are going to absolutely love on this show. But before we dive in, if people didn't hear you on the last time you were here, can you give us some of your background, kind of what you do and talk through, just kind of how you got into finance in general?

B (6:18)

Yeah, yeah, totally, totally. Well, it's great to be back. And yeah, retirement topics probably my favorite thing to talk about. So, but, but the background, my, I've got a couple degrees in mechanical engineering. I worked in aerospace engineering for seven years, got really interested in my own finances, started a blog, eventually started a podcast. So, you know, I, I love what we do here. Right. I love talking to an audience and helping educate them. And then eventually I realized I kind of wanted to help my audience even more. So I switched careers. I'm no longer an engineer. Now I work as a financial planner. So that's, that's the long and short of it. I still write every week. I still, I produce three podcast episodes a month. And, and then I, I work with people kind of professionally, individuals and families, helping them with their retirement plans.

A (7:02)

Absolutely. That's the. It is just such a cool story. If you guys haven't heard the other episode, too, I highly encourage you to kind of check that one out, because these are going to coincide together. They're going to really mesh together really well. And Jesse is one of my favorite people in the finance industry, for sure. And I think this is going to be a really, really fun one to into. So as we go through this, I want to kind of start off with Social Security. I have a lot of friends and a lot of family members who come to me asking me questions about Social Security. And it is a big, big topic for a lot of people out there right now where their parents are trying to think through, hey, maybe I need to take Social Security early. Maybe I need to take it later on down the line. What do I need to be doing where I've had, you know, even people who are thinking about this right now kind of thinking through, okay, how do I figure out this problem? Do I take it early just so I can capture that money? Do I think about taking it later so that can have that increased income coming in and going through that? So a lot of people think of Social Security as somewhat of a math problem when it's really not fully a math problem. So can you kind of talk about, you know, how people should start to think about Social Security specifically when it comes to, you know, their lifestyle and how they really need to optimize that decision?

B (8:07)

Yeah, totally. And. And I think you. You just hit on something there, Andrew, which is this terrific, like, foundation, or maybe it's like an umbrella. I'm not sure which side of it it lies, if it's above us or below us. But the idea is it. It kind of encompasses a lot of this financial planning conversation, which is that the numbers can point a certain direction. And I think it's 100% important that we all understand where the numbers point us. But at the same time, our human brains, which sometimes are very rational, other times are a little irrational, sometimes emotions kind of push us one direction or another, where maybe a spreadsheet wouldn't. But. But the point is that for. For everybody out there, there will be times where a mathematically suboptimal decision might make you better, that it's worth taking that into consideration. And it's even arguably very much okay to make a slightly mathematical suboptimal decision in order to make you feel so. So so much better. And Social Security can be. Not always, but can be one of those decisions. So I Think a cool place to start this, though, Andrew, is just this interesting fact. We'll start with a fact which is that the average American retiree will have somewhere between 300,000 and 600,000 doll for retirement by the time they pull that retirement trigger. Which, you know, again, we're talking averages here. Some people we know will be multimillions, some people, you know, $100,000 is a lot, but the average 300 to $600,000. And I would make the argument that the average American's Social Security benefit, if they really tried to figure out how that benefit will pay them over time, that their average Social Security benefit is worth at least that much. So Social Security has as much value to them as their decades of retirement saving did. And I think it needs to be treated really importantly for that reason. But here's a little pop quiz, Andrew, both for you and for the audience you might have seen on your pay stub before this acronym where maybe it'll say Social Security, but the acronym is oasdi. And the quick pop quiz you can pause for five seconds is what does OS OASDI stand for?

A (10:19)

I'm thinking I have no idea, to be honest.

B (10:21)

Yeah, it's okay. It's, it's Old Age Survivors and Disability Insurance. That's, that's the technical name for what we call Social Security, old age insurance, survivor's insurance, and disability insurance. We'll, we'll forget about the Survivors and disability insurance right now. It's really nice. It's there. It's basically because, you know, back in the Great Depression, if you had a working husband and a stay at home mom, and the working husband died in a factory incident, we as a society decided we want to be able to support the stay at home mom and her kids. So that's the survivor's insurance part, and disability insurance is kind of related to that. But the old age insurance is the thing that we care about mostly now. And as retirees. And the only reason why I bring that up is because I do think it's important that we think of Social Security as longevity insurance, as old age insurance. I think it's important we ask that question that, like, hey, if I do live till 85 or 90 or 95, and maybe some of this money that I have saved in my 401, actually, I end up spending more of it than I was anticipating because I've lived so long, will I still be okay then? Right? That's longevity insurance. And if we think of Social Security through that lens and that lens alone, you really Want to delay claiming your Social Security as long as possible till age 67, 68, even 70, if you can afford to. But I've thrown a lot at you. I'll pause right there. I mean, does that trigger any interesting rabbit holes you want to chase down?

A (11:46)

It does, because I think overall that's the biggest question most people ask up front, too, is they just don't know when to claim it. They don't know why they need to claim it, you know, either early or later on. And so they're thinking through this problem, and there's a lot of different, you know, lifestyle things they need to think through. Whereas. So I kind of want to talk about this in a couple of different directions. So when we look at, you know, thinking about when we want to claim, so we're looking at maybe later on down the line, we want to claim so we can get the. Either the higher amounts and. Or kind of what we're looking at in terms of what our lifestyle is and some of these other things. How should someone who's approaching, you know, Social Security age, they're getting closer to that age. Maybe they're five years out, maybe they're two years out, and they're trying to decide what the best decision for them is. How can they actually start to think about this and what are some of the big considerations that they need to have in order to make the educated decision?

B (12:33)

Yeah.

A (12:33)

Yeah, okay, great. Great question.

B (12:35)

Foundational question. So maybe I'm. I'm preaching to the choir here. Maybe everybody already knows this fact, but the earlier you claim, the smaller your benefit will be, right? And so the whole point of delaying is that you get a much bigger benefit. But then you ask yourself, you're like, well, maybe I'm of poor health or maybe I have a family history that most of my relatives end up dying early. So if I delay claiming Social Security until age 70 and all my relatives died at age 74, what's the point of collecting Social Security for four years, even if it is a bigger benefit? So that brings up this topic that they call the break even age, which is, as the name would imply, it's how long do you need to live for a certain claiming strategy to actually pay off? And basically that age ends up being in the upper 70s. Maybe it's age 80, 78, 79, 80. And so again, the idea there is if you know you're going to die before age 78, 79, 80, you want to claim Social Security as early as you can. If you know you're going to live beyond age 80. You delay the problem, of course. I mean, it's so funny to say, but here you are at age 62, you have no idea when you're going to die. But that's where a big part of financial planning is. You make the best assumption you can with the, with the facts that you have here at hand. Maybe you build a little conservatism in here or there, but, but all you can do is just make the best decision possible. It's almost like playing poker. It's like, listen, you make the best decision possible not knowing what your opponents have, not necessarily knowing what card is going to come from the deck next. But if you do that over time, and you always try to have the probabilities in your favor in the long run, that ought to compound and you end up in a good spot. So similarly, if I'm sitting there two, three, five years away from retirement, I would ask myself questions like, sure, family and personal health history. Do the odds seem to be stacked in your favor or against you as far as how long you might live? That's a great question to ask. A second one would be, do you have enough money saved up to actually delay Social Security in the first place? Right. Some people are listening right now and they're like, yeah, I want to retire at age 62. And boy, if I don't claim Social Security, I'm going to be eating cat food starting at age 62. Okay, well, that right there points to a few things. Maybe retiring at 62, maybe you actually need to work a little bit longer. That's possible, but, but if you are just dead set on retiring, okay, it sounds like you probably need to claim Social Security to, to make ends meet there, whereas other people are like, yeah, I don't really need it right away. I have enough to saved up to live off of. Well, that could be a good reason then to delay and build that longevity insurance into your financial plan. There are a few more things that we can consider too. I think if you're married, for example, that's a really, a really big consideration because the way that spousal and survivor benefits work in the Social Security world basically means that let's say you're married to a spouse, especially if one of the two of you has a much higher earnings record than the other. So one of you maybe just made a lot more money in your career than the other one. All else being equal, the lesser earning spouse probably wants to claim Social Security pretty early on, and the higher earning spouse wants to delay and, and the reason why is because when the first spouse dies, that, that, that higher earning record will live on. Maybe I, I, I explained, maybe I said that a little bit awkwardly, but

A (15:59)

basically that makes complete sense because really what you're looking at there is, is basically that the higher earning, you know, potential, the one that, that earned more throughout the entire lifetime, that is the, the Social Security benefits that'll live on, you know, beyond them, whereas the first one is going to end up going away at some point in time.

B (16:14)

Exactly right. Exactly right. So now it's not just about how long the one spouse will live. Now you're saying how, how long will the, the second spouse live? And now that's where you say, oh, well, when you have two people, when you have two lifespans to think about, odds are one of them is going to live to that 85, 90, 95 range. And, and you want to have that much bigger benefit to, to support them for that, that longer lifespan. So anyway, there's a little bit of nuance there and that's what the math would point to. But these are all good things. I think those are the major things that I would consider. I think that lifespan itself, longevity, like I said before the crystal ball, it'd be nice if we knew exactly how long we were going to live. But we can make some educated guesses and then make the best decision that, that we can with those, with those assumptions.

A (17:03)

Now one thing I'll ask too, because I think these are fantastic reasons to kind of think through and a lot of us need to think through our lifestyle situations like, and what Jesse's saying here is kind at what's happening right now within your lifestyle. And then we can start to make some educated decisions. And as we start to think about this, I know the optimizers that listen to this podcast are going to ask this question, so I want to kind of talk through this with you as well. What do you say to the people or what is the thought process when it comes to folks who maybe built up their portfolio enough where they have enough money to live on, they have enough to do kind of some of the things that they want to do. And so they're starting to think about Social Security as somewhat of a bonus when they get into retirement. And so when they get to that retirement age and they're thinking about Social Security, a lot of them will say, especially the optimizers, should I just take it early and invest the difference? Should I just invest the difference, put those dollars into the market and see if it can grow, have you ever looked into that data and what do you think about that?

B (17:53)

Yeah, I, I have. And that's, that's one of these topics, Andrew, that I feel like this could come up later too. I feel like in this financial planning world, the more we get into the details, I feel like sometimes the more people struggle creating a true apples to apples comparison. And this is the perfect example of one where I've seen these really compelling arguments made on both sides of this decision. Meaning, do you claim Social Security early and just throw it at the market, just invest that money? Because the argument would be, oh, it will grow more in the stock market, then my benefit will grow by delaying it. Roughly speaking, your, your Social Security benefit grows on average about 7 or 8% per year. Every year you delay. And, and someone would say, oh, well, I just invest. And it grows at 10%, right? And 10%'s more than 7 or 8%. So. But the, the really important thing that I would point out and, and for what it's worth, I'll just, I won't bury the lead anymore. I fall on the side of don't do that debt, don't claim early just to invest. And the reason why is that the, the. By delaying your Social Security, the government is guaranteeing you a 7 or 8% higher payment for every year you delay. It's, it's guaranteed. This will trigger a whole side conversation about the, the, you know, whether we can count on Social Security when you and I retire. Andrew, I, I get it. That's an important conversation. We'll save that one for another day. But the point is, the stock market or any other investment out there with some risk might historically have provided a 10% annual return, but it's not guaranteed. It came with some volatility, and over the short run, it might not be even close to that 10%. And who knows if the future will resemble the past? These are all important questions. So it's almost like, do you pay off your mortgage or do you invest? The question is, would you rather have a guaranteed x percent or a variable return that maybe is higher than X? Would you rather have a guaranteed 8% return by delaying Social Security or a variable 10? And when I look at that from a, from a risk and return point of view, something called risk adjusted returns point of view, I like the idea of having that guaranteed 7 or 8%. So that's why I'm in favor in that case of, of delaying Social Security, thinking of it as longevity insurance.

A (20:13)

And I would agree, because if you look at this, you're you're always, especially when you're financial planning, you're always trying to look at the, the best case scenario and the guar scenario. And there is one guaranteed scenario when you're looking at these two considerations. And so the one that is guaranteed is going to be delaying, especially if you don't need that cash right up front, that is going to be the one that will give you that guaranteed rate of return. Because you can think about this. What if we had 2009 happen again? Or what if some big crisis happened and the, the market took a dip, which is very normal. Every 10 years we see that dip. And so the first couple of years that you're retired, the market took a dip and you're trying to figure out, okay, what do I need to do next? That's the last headache that you really want to have is having to worry about some additional things instead of just delaying it and utilizing that money later on down the line. So there's other considerations, I'm sure, like people who want to travel more and utilize that early on. There's the other things you can think about based on your own situation. But I think it is really, really important to look at this. And the great point that you made up is if you are married, you also have to think about this in a different way. And most people need to make sure that they understand how the system works, they understand how the Social Security system works. Are there any resources that you have or, you know, where people, if they want to dive deeper into their Social Security, can, can I kind of look into. I know a lot of times I tell people to go to SSA.gov and kind of look and make sure you make an account there, especially if you're getting closer to that age, because you can start to see how much you're going to expect based on your living expenses. You can kind of move the, the needle around and see, you know, how much you would earn based on your earning experience and all that kind of stuff. But are there any other resources that you encourage people to go look at?

B (21:46)

Yeah, I mean, I think the, the challenging part sometimes about the government websites, it's almost like looking up tax laws on the IRS website is like, of course it's, it's written in some sort of like legalese way that just seems like, wait, I, I need an example to help me understand this. And so I will say, and I've dove into some of the details, dived, dove in, but, but there's a gentleman out there named Mike Piper who I know, is I think, in our industry, considered one of the foremost kind of leading Social Security experts. And I think he's even written a couple books about Social Security. He's, he writes a blog. I, I, we can maybe look it up in post. I forget the name of the blog off the top of my head. I think it's like Oblivious Investor or something like that. But he's done a lot of really good research on explaining various Social Security scenarios. And so he's one who I would lean on. Yeah.

A (22:35)

Awesome. That's fantastic. And I think for most people out there, it's kind of understanding, you know, again, how the system works, but then understanding what the impact of your decisions are and kind of looking at and making the best, most informed possible decision you can when you're thinking about your specific scenario. So I think that is a great one. And so I want to shift gears here to now Roth conversions, because Roth conversions is a big part of retirement for a lot of, a lot of folks out there. And you and I have kind of talked in the past where we've talked about, hey, Roth conversions could be overused and they can be underused in a lot of different situations. So can you kind of talk about when people should consider Roth conversions and then after that we can talk about when people should not consider them?

B (23:13)

Yeah, totally. Totally. So, you know, I, I would imagine that it's funny this, you know, the podcasting world, People here who, who are motivated enough to listen to podcasts about optimizing their personal finance have probably heard of Roth conversions before. But the thing, the, the way I think about them, and, and I'll ask you, Andrew, and I'll, I'll ask the audience too, is that, you know, I want you to imagine every year between right now and, and when you die and whether you know it or not, right, you'll pay taxes each of those years, and you will have a marginal tax rate during each of those years, meaning that last final dollar that you earn that you pay tax on. It might get taxed at 22% some years, maybe some big year, you hit a home run and you'll be taxed at a 32 or a 37% marginal tax rate. But also those tax rates might change in the future, and of course, we can't know that. So the idea is that, that there is this series of tax years that lie ahead of us. We just don't know exactly what they're going to look like. We do know, though, that some of them are probably going to have some higher Rates, whether because of our earnings or because of federal tax laws. Others are going to have lower rates again because of our earnings or federal tax laws. And so the question is, what if you could decide and you could say, like, you know, those years when I have really high tax rates, I'm going to intentionally do something to not make as much money during those years and when there's high taxes, and instead I'm going to move that money from the highest tax years into the lowest tax years, or at least I'm going to try. And if that's something we could do, I think most people would try to do that. And that's exactly what Roth conversions are for retirees. In this case, the idea is that a retiree is intentionally trying to move money from, from a higher tax year to a lower tax year, thereby lowering, minimizing, optimizing their lifetime tax bill. And so for that reason, it's really, they work best. And I think that's what we wanted to talk about first here, Andrew, was, was when they work best in general, during someone's earliest retirement years, they have no real work income during that year anymore. They probably haven't started Social Security yet. Another reason to potentially delay Social Security. Going back to topic number one, if they have a pension, maybe they haven't even started their pensions yet because some pensions only kick in at a certain age. The point is, those earliest retirement years oftentimes have a very low amount of income. And if we look at the way that retirement plays out, we know that eventually will change. Eventually we claim Social Security. Eventually we maybe start collecting a pension. Eventually these things called required minimum distributions RMDs kick in on all of our traditional retirement assets, all those assets that, you know, Uncle Sam said you can delay paying taxes on. Sure. Save Money in a 401k. When you're young, you should. It's an awesome thing. I won't charge you any tax. But listen, eventually when you retire, I'm going to start charging you tax. And even if you want to hoard that money throughout retirement, I'm not going to let you, says Uncle Sam. Eventually I'm going to make you take a required minimum distribution out of your accounts, out of your IRA's 401s, and I'm going to collect tax on that. So for all these reasons, retiree income we know tends to go up over time, whether the retiree wants it to or not. And for that reason, you say, hmm, maybe I'm going to take some of that, those future RMDs and I'm actually going to intentionally realize them early on in retirement at a lower tax rate through this thing called a Roth conversion. Once the money's in the Roth account, not only does it grow tax free, but then you withdraw it tax free in the future, you never pay taxes again. So rather than paying, I don't know, a 24% marginal tax rate on my Roth conversion when I'm 75, I'm gonna pay a 10% marginal tax rate in, when I'm 50, in my earliest retirement year. And I've just saved 14 cents on the dollar there. Right. And that's pretty cool. So anyway, that's my two cents on. The best times to do Roth conversions tend to be early in your retirement years. But I also have a couple examples queued up of some, some interesting stories that I've had from listeners about bad Roth conversions. And I'm happy to share those, too.

A (27:17)

And that's what I would love to hear, because for most people listening right now, one of the things that I want you to think about is, you know, well, how do I make this consideration? So, like, for example, last Thursday, me and my CPA just went through this. We run this, we run these numbers every single year towards the end of the year to just to think through. Okay, okay. Should we do Roth conversions this year or where do we need to look? Where do we need to put more dollars in order to reduce our marginal tax rate? And so we look at this in a bunch of different scenarios. And for most people during your working years, the likelihood of you wanting to do some big Roth conversion is most likely not going to happen because you have or are earning a lot more. Whereas like Jesse saying early on in retirement, you're not earning anything, you're not earning money specifically. Maybe, maybe you have some sort of side job or maybe you're doing a little consulting or whatever else else, or if you are literally earning nothing, then this is a great time to think. Consider a Roth conversion based on your situation, because you can reduce some of the taxes there. So this is just a big, big difference that I think a lot of people need to think through. It's not like you can just do this at any given time, and it's a good idea. And so, Jesse, kind of talk through, and let's think through kind of some of the, the stories that you have of clients who possibly kind of went through this process and maybe made some bad Roth conversions. What happened there.

B (28:25)

There. Yeah, yeah. So there's two stories because they're both from 2025. And I'll, I'll do, I mean, a quick one of my favorite type of episodes to do, Andrew, is my, my AMA episodes, right? Audience, my audience members will send me financial planning questions. And I just, it's, it's like a little mixed bag of different questions and answers, different styles, and, and I just, boom, I work my way through four or five questions. And both of these scenarios came from AMA submissions from my, from my audience. The first one, this, this woman, very successful professional career, very interested in kind of this early fire, financial independence, retire early movement. And so that's how she had heard of Roth conversions. She had a lot of money saved up pre tax. So her traditional 401k, traditional IRA and she's also earning a lot of money right now. And basically her argument was, hey, Jesse, I have enough money in my bank account and I have enough money through my salary to pay the tax bill from these Roth conversions, right? So here I am in my highest earning years. She's making whatever, she's an attorney, she's making 4 or $500,000 a. Her marginal taxes are the 32, 35% tax bracket. And her argument was, well, I could pay the taxes right now. I have enough money to pay the taxes right now. Why don't I just do that? And the simple answer is, you know, if you were to project for her, if you were to build a little financial plan and say, okay, she's gonna retire in the next five years, well, what does that first year of retirement look like for her? Where is her income coming from in that first year of retirement? And just like the thing we talked about a couple of minutes ago, just like the example, the answer was, oh, she really, Grace doesn't have any income in her early years of retirement. And if she just waits to do these same Roth conversions till then, Instead of paying 32, 35 cents, 37 cents on the dollar right now, she's going to pay 10 cents, 12 cents, 22 cents on the dollar in a few years. And going back to where we actually started this conversation, like, listen, if it's going to make her feel really, really good to start some Roth conversions right now, and she goes in with eyes wide open and knows that she's paying 35% instead of 12% and she's okay with that. At the end of the day, it's like, it's her money, it's your money. Everybody like, you know, do what makes you feel good. But in that case, the spreadsheet was so stark, right? It was so clear the difference, it was black and white. And so that was the first example of just like, hey, if, if I were you, here's the reason why I would not do any Roth conversions right now during your highest earning years of your career. And I would just wait until early retirement. Retirement. And, and I think she would have been much, much better off for it. So that's, that's the first example. The second one is, is a really, I just like the story a lot. This, this gentleman was retired. He was like two years into retirement, sitting on again a very large pre tax, like you know, 401k. He's never paid income tax on it. And he knew RMDs required minimum distributions were coming for him eventually. And basically his argument was like, listen, Jesse, I've heard Roth conversions are good. I'm just going to rip the Band Aid off. I'm going to convert this $2,000,000 401k all at once over to Roth. I, I don't want to do it over 15 years. I'm a doer. That's, that's, that's my personality and I'm just going to do it. And when I answered his question where his situation, I thought to myself, like, you know, like if we, if we zoom out from finance, like, it's a good trait in my opinion to be that person's like, you know what, I see a problem here, I'm going to go fix it it, I'm just going

A (31:47)

to go do it.

B (31:48)

I'm going to bite the bullet. I'm going to grab the bull by the horns. So I admired that in this gentleman, but I basically said like, hey man, when you do a $2 million Roth conversion, you are effectively realizing $2 million in income all in one tax year. And any way you cut the cake, you are like 1.5 of that $2 million is going to get taxed at 37% at the federal level. And there's no reason to do that again. The spreadsheet was so clear, it's like, listen, just spread this out over and you'll be so much better off for it. And it might not feel quite as good because you're not ripping off the Band Aid all at once. But trust me, when you see the tax math, it might make you feel a lot better. It might make the Band Aid pain or whatever it is feel a lot better for you. So those are the two examples that come to mind as far as people hearing that Roth conversions are great, which often they are great, but then misunderstanding how to best apply Them.

A (32:42)

And I think this is a great, great example. Example. Both these examples are great examples of when it comes to. A lot of people will say, well, personal finance is about the math. It's about the psychology. When you're thinking about Roth conversions, it kind of is about the math. This is the one where these are the situations. We're sure you have some lifestyle decisions and things like that, but when it comes to making these pretty much cut and dry black and white decisions where you can see your taxable rate that you're going to have when you do some of these conversions, this is where you make the decision based on the math is by looking at this. Unless there is some other scenario where you really need to make that happen outside of that, I think it's really a big deal to make sure that you kind of reduce this rate. You're going to save so much more over that timeframe. And Roth conversions are a beautiful thing. They're a great thing that you, you have the ability to do. And it's a great option for a lot of folks who want to retire early. It gives you flexibility and all these different things. But just making sure we do it at the right time and are educated about it is very, very important. So I think that's just a huge, powerful lesson from this because you're right. I mean, people in the fire movement right now, we talk about this all the time. And so people take this information without having the education exactly how to do it right and, or thinking through the tax situation. And I think that's just huge for most people out there. So. So overall, for most folks, do you think they should start to really consider this when it comes to, you know, early on in retirement, that's kind of the optimal time that you've seen for a lot of folks out there is thinking through it that way. Obviously there's other scenarios out there, too. But is that kind of the. The number one time frame that you've seen some of your clients or, or people in the process past look at this.

B (34:12)

Yeah, I mean, as far as the number one average time frame, it absolutely is. It's the early retirement years. There's really no two ways about it in that. In that way, like you said, there are corner cases. One of my favorite corner cases is, you know, if someone's maybe our age, Andrew, you know, but. And they're like, you know, I'm going to go take a extended sabatical for, for a whole year. I'm just going to take off work. I'm going to Find myself, I'm going to travel the world. And you're like, oh, well, are you going to have an artificially low income during that year? Okay, that might be an interesting opportunity to do some sort of tax planning. RO conversion being one of many tools in a tax planner's, you know, quiver. But yeah, all else being equal, the time to start thinking about it is a few years ahead of when you might be early retired or a few years ahead of when you're retired in general. Because those early retirement years, you might want to earmark for some, some Roth conversions.

A (35:01)

Perfect. And I think that's a huge, huge thing for a lot of folks to just consider as they think about this because I know we have a lot of optimizers who, who listen to the show, so they're going to love that. And I think that's absolutely amazing. So next I want to dive into return assumptions. So return assumptions are something that we see thrown around all the time on social media. You see it on podcasts, you see it on YouTube videos where people are saying just a wide range rate of return. Where people will say, you know, you hear people like Dave Ramsey who will say 12% for mutual funds. And we can get into that if we want to. You see people say things like 6 or 7% and you know, you see a wide range in between. The most common that we see, and we talk about this even here, here is we'll say 10 rate of return looking at the historic S&P 500 average. But if you're doing your planning, a lot of times you want to be way more conservative than that because the last thing you want to do is over assume when you're looking at your own retirement. So let's talk about return assumptions and why they are dangerous if you go way too high, especially when you're doing your financial planning and kind of thinking about, hey, how much do I need to be saving for retirement? How much do I need to be investing so that you don't A, end up with a portfolio that is less than you need. But B, also let's think about it in a way where it is just something that long term we know that in the future we have no idea what's going to be happening. We don't have that crystal ball. And so for a lot of folks out there, we want to make sure that we have the right and proper rate of return when we are doing our cut and dry planning. So can you kind of talk about return assumptions and why they can be dangerous if they're Too high. And then how should we plan for them?

B (36:33)

Yeah, I mean this is, I think, let's think about that average retiree that has half a million dollars. Maybe the average listener here we know is, is, you know, everyone here is above average. So our, our listeners here, Andrew, are million dollar retirees. And all of a sudden you realize, oh, return assumptions are a multi six figure assumption, at least that we build into our financial plans. And, and, and just the biggest reason why is because, you know, if you, you just break out a calculator, you, you build a spreadsheet and you do 10%, you know, 1.1 raised to the 30 30th power. Because that's how compound, compound interest works, right? It's, it's, it's exponential. So that's why we raise it to the, the number of years that we're investing. So if you do something like 10% for 30 years, 1.1 raised to the 30, and then you compare it to say 1.08, that's 8%, 1.08 raised to the 30. And you look at the difference in the final value, value. It is unbelievable. Just, you know, compound interest, as we know, is this unbelievable kind of silent force in our financial planning lives. Well, differences in compound interest, similarly, the differences are huge. And so that's the reason why, you know, whatever your return assumptions are, they make such a big difference in your financial plan in helping you understand what's the smartest thing that you ought to be doing with your money right now so that you can get to those goals of yours in the future. And so, right, we can dive into a little bit of maybe the good, the bad and the ugly of return assumptions. I think one place simply to start is just to understand the difference between, because I might use these terms right now, the difference between what they call nominal returns and then real returns. And it's a little confusing if you aren't familiar with it. So basically nominal is the number that you see on the paper. It's, you know, hey, the S and p went up 12% this year. Great. That meant that your nominal return was 12%. You had 100 doll. Now you have 112, 12% nominal returns. But then sometimes you have to say, oh, but inflation was 4%. And so it's not like my spending power went up 12%. Right? My spending power went up the 12% growth minus the 4% for inflation. Maybe it only went up 8%. In that case, 12 minus 4. So that's the real return that we call it. And when I'm thinking 20, 30, 40 years out in the future, I care about nominal returns, but really I care much more about real returns. I care about my clients, my audience, myself. I care about my spending power will increase over time. And so that's why what you said, Andrew, earlier, was that 10% number for the S&P 100%, I think, I think that's a great starting point where it's, it's 10% nominal. And then if you look, you know, over time, inflation, you might average to 2 and a half or 3%. So you say, oh, okay, 10% nominal, sevenish percent real return. And the only reason why I bring that up is because I think, you know, I think half of the confusion is if you're sitting here in the DIY online space, if you're listening to the podcast, you're reading the blogs, half the confusion is that some people are talking nominal and they say, oh, 10% per year. And other people are talking real returns and they say 7% per year. Well, okay, those are big differences. Technically they're saying the same exact thing, but if they aren't clear with one another, they might be talking past each other. And then to make matters worse is some people will hear 7% per year, and then they'll think, oh, right, but have I accounted for inflation yet or not? Maybe. I don't think I have. So I'll take seven, I'll subtract three. Now I'm left with 4% per year. Well, that person just unknowingly counted inflation twice. And so that's another. It's just, it sounds simple, but these again, if you compound 4% per year and you compare it to 10% per year, it's night and day. So it's so important to really understand what assumptions are you making and why are you making making them.

A (40:21)

And there are a couple, a couple of things too. I've seen people in the past where they will miss misplan, basically based on just thinking through nominal, nominal versus real. And they'll go through and they'll put the assumption of nominal into, you know, their investment calculator, whatever, I'm an investment calculator nerd. Where I love to just play with the numbers all the time.

B (40:39)

Yes.

A (40:39)

And then all of a sudden they end up at a point in time where they realize, you know, oh, shoot, my buying power is just getting eating away every single month. And I didn't, I didn't factor in inflation. And so this is the big thing that I think a lot of people need to consider. So sorry, catch off there, but that's, that's kind of like the big thing I've seen a lot of folks do and they get to the end and all of a sudden their buying power isn't there. So understanding this early, to everybody listening right now is very, very important. This is a multi million dollar decision to just understand what Jesse is saying right here.

B (41:05)

Yeah, yeah. And then I, I want to, I, I will come back to Mr. Ramsey, I promise. But first, you said something, something a couple minutes ago, Andrew, that just really triggered this thought for me. And you talked about just the levels of conservatism that we choose to build into our financial plans or not, the levels of conservatism we choose to build into our investment returns or not. And I wrote an article a couple years ago and it was called the Crushing Cost of Conservative Retirement Planning. And I painted this example where I remember thinking there were five different categories I thought of. It was like investment returns, it was tax rates, it was inflation returns, it was spending assumptions. In retirement, there are five different things. And I thought of these three different retirees. One of them was kind of like middle of the road, trying to be realistic. The other one was like, listen, I'm conservative. I'm just going to be conservative everywhere I can be. And the other one was like a little bit aggressive, right? And so the conservative person, they're like, you know what? I'm not going to assume 10%. Like Andrew just said, I'm only going to assume 8. I'm not going to assume 3% for inflation. I'm going to assume 4. People tell me tax rates aren't going well. I'm going to assume that tax rates are going up. Right? That's the conservative thing to do. I'm going to assume that I spend more in retirement because I'm just, I'm scared of overspending, blah, blah, blah. And the point is that if you make a conservative assumption everywhere you look, especially in this world of financial planning, not only do they add, they actually probably multiply. Your conservatism will multiply together and next thing you know, the gist, the point of this article was I built this very, very kind of run of the mill retirement scenario for my listeners, for my readers, I should say, where it's like, okay, I could relate to that. I could see why that's a realistic person facing retirement. And my argument was that if you make conservative assumptions everywhere you look, you might be postponing your actual retirement date by at least a decade. It's crazy. It's scary. Like you will convince yourself, oh my God, Andrew, I can't retire until I'm 68. That's what the spreadsheet says, says when then where I would look at it and say like, well no, you've been way too conservative every single place you could be and I think you could retire at 55. And so the point is that, and I've gotten some good feedback on this from some other people, My recommendation if you want to be conservative, my recommendation is to at first use only the realistic numbers. And then once you've done all your multiplication and you get to your final, final answer, only then do you add a little bit of conservative conservatism on at the very end. So instead of multiplying your conservatism together at every single step, you only add it at the very, very end.

A (43:43)

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B (47:14)

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A (47:43)

It does. And I think that's a wise thing to do because for a lot of folks, just being over conservative or overly aggressive in any scenario is drastically going to change these numbers. I mean it really, really will where it'll change your timeline, it'll change when you can retire, and it can get you in a situation that you don't really want to be in. Here's an example of this. I just had a conversation with some people who have been talking about wanting to retire over the course of the last eight years and year after year, a year they have been saying they want to retire. Five years ago they could have retired. Four years ago they could have retired. And really what it's coming down to is they have more than enough money, more than enough assets, more than enough cash flow coming in to be able to retire. And a lot of it came down to one word, which is fear. It's that fear that they don't understand or know when they can retire because they are. There's all these unknowns about how much will they spend in retirement even though they have everything paid off in their life, or how much will they actually need need in order to retire. These people specifically are looking at this scenario and they would easily be able to draw down $30,000 every single month. They don't even spend close to that and they still are fearful about retirement. And I think for a lot of folks out there, if you are overly conservative and or honestly overly aggressive, it can be coming down to this one word of fear for a lot of folks out there. So have you kind of seen that across any of your clients where they just are overly conservative because of fear and they're just trying to make sure that they don't mess something up 100%.

B (49:10)

And it's so human. Right. It goes back to these ideas of loss aversion that I know you've talked about before, of just, you know, that losses hurt more than gains feel good. Right. And so we want to do things that avoid losses. We don't want to touch the fire, we want to avoid pain, we want to avoid embarrassment, feeling stupid. And yeah, and certainly I think for most retirees we want to avoid going back to work, we want to avoid having to ask our kids if can move in because we ran out of money. Totally, totally makes sense. But at the same time, of course, I would argue, well, don't you want to avoid working five extra years that you never would have had to? Don't you want to avoid this fact where you basically scrimped and saved and you didn't live the life you wanted to live? And then only when you came to die, you realize that you have $5 million on your balance sheet at your deathbed, and you could have done all those fun things 20 years ago when you had the vitality to do them. I mean, those are worth considering, too. But the problem is it's hard to think of those kind of upsides. I think we're all wired a little bit to think of what's the downside risk. What's the worst that could happen. It's hard to think of, well, what's that best that could happen that actually triggers some regret because now you realize you're in so much of a better spot. So part of it is that reframing part of it is just trying to slowly but surely show and tell. I saw a quote recently. There's no better teacher than examination.

A (50:35)

Absolutely.

B (50:36)

So it's explaining examples to people or even using their own situation as an example to themselves. Like, hey, you've now been retired for three years. And I know for these first three years, you've been really hesitant to spend your money. You've been really hesitant to draw down on your portfolio. In fact, you've only been drawing 1% of your portfolio per year, and that's nowhere near enough. And look how much your portfolio has grown. Like you. Can I show you that you could have lived this awesome life for the past three years and you'd still be in an amazing spot. And now that you know that, I would recommend that you. You consider living that way going forward. I think it's terrific. And. Oh, you made me think of something, Andrew, where this is a funny example, it doesn't have anything to do with finance, but imagine you're driving down the highway, right? You're driving down the interstate, whatever. Who are the two most dangerous drivers on the road? I would argue traffic's doing 68, right? And some guy flies by you at 85. Okay, he's presenting a dangerous situation. But you know what else is actually kind of dangerous? It's that grandpa in the left lane who's doing 50. And I will say for any traffic engineers out here, hopefully you're nodding your head because speed alone isn't a cause. Of accidents. It's differentials in speed and. Okay, that's a separate story. But my point is that being overly conservative, actually, it might make you feel safe, but it's creating risks that you might not even be aware of. And that grandpa who's doing 50 when everyone else is doing 70. Yeah, I know he thinks he's being conservative. He's actually creating more risk than he's aware of. And I think that same thought process, although maybe his retirement doesn't affect mine in the same way. Not like it would on a highway. But his point that he's being conservative is actually putting himself in danger. Same thing for retirement planning.

A (52:25)

I absolutely love that example. It's the easiest way to kind of think about the differences between the two and how they're both dangerous because they truthfully, truthfully are. And I think that is just a great example for people to kind of nail that home. And then, last thing I'll ask on this is talking about just those people who come up with these high rates of return, where I've seen folks from, you know, all over the place from like a 12% rate of return. I've seen like some of the bitcoin bros. Out there saying 20% rate of return where they'll, you know, just throw out all these, these crazy numbers. Numbers. What do you say to that? And what do you think about that?

B (52:54)

Yeah, I mean, 20% Bitcoin Bros. I mean, some of it has to do with, with Shomi and some of it is like, I, I know in, in the case of cryptocurrencies, I mean, there have been some that have grown that much. I still, that's, again, it's probably a whole entire episode. I have a lot of reservations about someone putting too much money into cryptocurrency simply because as far as, you know, what are the economic underpinnings that kind of prove to me? I can't convince myself, Andrew. I guess that's what it comes down to. I can't convince myself that it will continue to compound at these unbelievable rates forever. I just don't understand the economic rationale, why that is. Okay, separate story. Let's go back to the stock market because that's what I do understand. And you mentioned some people earlier who they say, oh, well, these mutual funds over here compound at 12% per year. Um, I, I think that the best there, there's a couple ways to kind of break that down, tear that down. And one would be that, well, if that's because of someone being an excellent stock picker there's this idea called reversion to the mean. And it basically says that it is extremely, extremely hard to be an excellent stock picker consistently over time. And so you might have a short run where actually your stock picking is beating the market. It's very, very hard to have a long run where your stock picking is beating the market. And what's even hard, harder is for kind of average Joes, even average Joes who know what they're doing to identify that stock picker who's going to be superior over time. It's like, it's like layers of difficult challenges there. So that's one idea. And that's why it's often just better to say, you know what? I'm going to accept the average. I'm going to just take the average. I'm going to pay a really low fee for it. That's called an index fund, usually, right? And I'm just going to accept that fact and move on with the rest of my financial plan. I'll try to optimize. I'll try to be better in other areas, areas not in the stock picking area. But then there is a second problem that I know has occurred before with some very famous radio personalities where it's just a math mistake. They're just making a simple math mistake. And actually, in preparation for us talking here, I just plugged a couple numbers into a spreadsheet. Very, very simple numbers. Imagine I had a portfolio that grew 20% in year one, and then it, it actually dropped 10% in year two, and then it dropped another 10% in year three. Now we're sitting here, 20% up, 10% down, 10% down. We can all do that in our head. That's 0, plus 20, minus 10, minus 10. Well, the problem is that in investing math, right, what we just did there was called the arithmetic mean. But, but in investing math, we have to do something called the geometric mean, which means we have to multiply, right? I had $1. I didn't add. I multiplied it by 20%. And then I multiplied it by minus 10 and multiplied it by minus 10. And if you actually do that, the compound, that's. That's how comp. Compounding works. It's multiplication. That simple example didn't end up back at $1. It actually ends up at 97 cents. You actually lost 3%. Plus 20, minus 10, minus 10. I would encourage anyone to do it in a calculator right now. And the problem with some personalities I've seen out there is they look at market history. Or they look at the performance of their mutual fund of choice and they just average the performance over time. Which will always, just the way the math works is it will always, always, always give you a larger return than if you had done the compounding math. Compounding math. The geometric mean always ends up looking slightly lower than the arithmetic mean. Always. It's just the way the math works. And so that's just a simple mathematical error. I think when you're talking about really famous personal finance personalities, I know they've been shown the correct math, right. They have a big enough audience that someone out there is like, hey, you're making a basic math error. The fact that they are still quoting 12% per year here, I think it's a mistake. But the point is, for our audience who cares about their own financial plans, it's incumbent upon you to, you know, teach yourself the math, understand the math, believe the math that you're putting together and, and make sure that your math reflects reality exactly.

A (56:56)

That's one of the most important things is, especially when you want to kind of run the numbers when it, when it comes to your own portfolio, you got to get it as accurate as you possibly can again, so you don't make these mistakes of either overestimating and, or even underestimating. And that range is just a huge, huge, huge gap that a lot of people are looking at here. So that is a, that is a perfect segue into kind of. One of the last things I want to talk about here is some of the stuff that retirees get wrong. And it comes down to, you know, thinking about their spending and it thinks, thinking about kind of how they're going to, to think through the process of how much are they going to spend in retirement. So what do you think most retirees, you know, misunderstand about their spending? Or how would you tell a retiree who is approaching retirement age? Maybe they're five years out. And you know, we know those five years before retirement are really important for planning purposes and kind of thinking through what needs to happen there. So what should retirees consider when it comes to spending in retirement so they don't over underestimate there?

B (57:51)

Yeah, it's, it's so funny. It's like we've talked about some really awesome nuanced, like not 101 topics, almost like 201 level topics today like Roth conversion, Social Security claiming strategies like, okay, there's a little bit of nuance here and, and you, you have to dive into the math a little bit when it comes to Social Spending, it does go back to a little bit of a 101 topic. And I will have conversations with uber successful people cruising into retirement, millions of dollars saved. They seem to have everything going for them. And I'll say like, hey, in order for us to really understand kind of the health of your retirement plan, we need to understand what you spend. And they're like, well, I don't know, I have no idea. It $10,000 a month, is it $50,000 a month? Not really sure. I know that my bank account goes up over, over time. Great. So we know they're spending less than they earn. That's a good start. But, but when it comes to, you know, there is a difference between spending 10,000amonth, 12,000amonth, $18,000 a month, big difference when it comes to the 4% rule or whatever kind of safe withdrawal rate you want to assume in your retirement. Well, it's a fraction. It's, it's spending divided by portfolio. You need to understand your spending to really do that math. And so the thing I'll say that's again very simple and 101 is yeah, you can do all the nuanced, deep dive, interesting conversations you want. Just like we've had earlier, you still need to understand the basics, the simple stuff of what your spending is. At least you, you need to understand going into retirement what your spending looks like. And not every retiree does that, Andrew. But then to your point, a really, really helpful exercise is trying to understand again as best you can without your crystal ball, because none of our crystal balls are working that well, is to understand how your spending might change, change during retirement. Part of that is very personal meaning, hey, you know your life, Andrew, better than I know your life. You know, oh boy, I've got four daughters and they're all going to get married over the next 10 years. And my wife and I, we agreed that we would help our daughters pay for their weddings. Those are going to be expensive. Okay, that's really important to know. You might know that you and your spouse really love travel. You're going to be spending a lot on travel. Maybe you're going to be spending a lot more than the typical retiree spends on travel. That's great to know because then you can take that personal nut knowledge, then you layer it on to just some broadly well accepted retirement facts like in general, spending actually goes down in retirement. Again, not for everybody, but it does in general. We know though that healthcare spending actually goes up in retirement and we can reasonably model how it goes Up. Another really interesting assumption is that inflation affects retirees actually a little bit less on average than it affects the average American, which is another just kind of interesting, peculiar fact. So the point is that it's really important to know your spending today so we can get a really good, accurate baseline for your financial plan. It's also important that you understand how your spending might change over time. And then on top of that, you can layer how spending generally changes for retirees because, like, I don't know what a person's going to spend in 10 or 15 or 20 years. But that's where some of those general principles do come into play to help us model how spending might go up or down over time.

A (61:03)

And I think that's really, really important for a lot of folks to, to just think through it. And I want to kind of. Here's a consideration that I, I don't know if you have any takes on this, but we're trying to think through. Okay. Well, a lot of people will say that's great for someone who's getting closer to retirement age because they kind of know their, their situation. They know, you know, they have their house paid off, or maybe they don't. They have this mortgage, but they have all these situations where maybe they have older kids and they know what those expenses are going to be. But what about me? I'm 20 or I'm in my 30s, or I'm in my 40 40s, and I'm trying to plan out for my future in my retirement of how much I'm going to be spending in my 60s. And I'm trying to build up this portfolio, and I'm trying to allocate dollars towards that. What do you say is the best option for folks who are younger? Trying to plan this out? Because I know, for example, me in my 20s, I was super frugal, and I think it built the financial foundation that I had. But then as time went on, I got married and I started to spend a little more. Then I had kids and I started to spend a little more. Then you get this mortgage and you, you have, you know, somewhat of a healthy lifestyle, inflation, you start to spend a little more. And so for a lot of people out there, they're trying to think through, well, I just don't really know exactly how much I'm going to spend in retirement. What would you say to them to, to help them kind of plan that out? Because this is a huge, huge question that we get a lot here. And I know for a lot of folks, they are really Wrestling with this.

B (62:17)

Yeah, yeah. That's such a tough one. That is such a tough one. Because just like you said, I mean, even in your example of your own life, Andrew. Right. I would argue you that the way that your spending has changed has been solely just due to, you know, personal decisions, personal lifestyle. Those decisions didn't necessarily have to happen. I mean, you wanted them to happen. And you were in a position where you're like, yeah, I can now afford this, and for my own sake, for my family's sake, I'm going to now afford this. But I could also make the argument here and say, well, listen, Andrew, you, you could have stayed uber frugal the entire time. It was an option. And that makes me think of this idea that I don't know exactly if money buys happiness, but I do know that money buys flexibility and that usually flexibility leads to some happiness. Right. So one thing I'll say is that especially for our younger listeners who are thinking 20, 30, 40 years out in the future, and it's so hard to know what's going on, rather than picking a single specific number, instead, pick a range of numbers, build that flexibility into your range of numbers and say, you know, here's what I'm spending now. Here's what my picture perfect retirement might look like in terms of spending. Maybe I'm spending more than I'm spending right now, but at the same time, maybe I'm going to look at the conservative side and say, you know what? Life's okay. I'm okay with my life right now, and if I only only got to spend this much forever, I'd be okay with that. So maybe that's the other bookend of your range of outcomes, your flexibility in retirement. Yep. Yeah. Yeah. What, what does that make you think of?

A (63:47)

Because I think, I think overall, I think that's, that's a great point because I think having that flexibility of that range is, is really powerful. One exercise that we do every single year is we kind of run our retirement number on a yearly basis. And kind of the, the reason why we do that is because our lifestyles are going to change over and over again. And so we're kind of looking at our current spending and just trying to think through some of those considerations, like will you have a mortgage or, or some of that stuff, and you're trying to plan it the best you possibly can. And so as people's lifestyles begin to change, change, you know, if you run that number on a yearly basis and kind of think about it, adjust your contributions to retirement accounts or adjust your contributions to your taxable brokerage or whatever else you're doing, you can kind of start to make those decisions. Slowly turn up the dial or slowly turn down the dial. Instead of getting 10 years down the line where you're having to make all these drastic changes. So it's almost something where you can kind of slowly turn the heat up or down at times and you still have that range and place that helps you based on thinking through. Okay, well, I'm, I'm okay. Like Jesse's saying, spending, you know, at the bottom end of this range, this is fine for me. I'm okay being there. You know, I still get to do some of the things that I want to do. I may not be able to do every single thing that I want to do in life, but I still get to do that stuff. And really, if I turn the dial up a little bit more, I can be in the upper end of this range and I'm going to be really happy about that. Now obviously we don't know what economic factors are going to happen. We don't know what the inflation rate's going to be, but we're going to, to try to make sure that we get as close as we possibly can and what we think is going to happen there. So that's kind of what I do a lot of times every single year is I'll get to, and this is one like my year end checklist. We just did this stuff, so it's top of mind but I'll think through. Okay, I'm going to look at my retirement number here and I'm going to see what's changed. So a lot of times I'll increase my contributions to my retirement account based on the inflation rate. I'll start to adjust just little things like that so I can just slowly change the dial so I don't have to like rip a band aid off 10 years down the line.

B (65:31)

Yeah, I, I, I, that's, I think that's the perfect way to do it. I don't, I'm not sure what the other options are. You know what I'm saying, Andrew? Like, I don't know how someone could otherwise do because so much can change over time. Just think about your previous 10 years in your life and how much has changed over time. It's almost like, you know, you're, you're sitting here in New York City, you know, you have to take a road trip to San Francisco. Okay, Google Maps don't exist. It's not going to tell you Every single turn. But you know, in my funny little example that's coursing through my head is every four hours you get up to stretch your legs, you look at your map, you look at your compass and you go, okay, we kind of need to adjust direction now. We kind of need to adjust. And so you, you get there. Don't get me wrong, you're going to get there. But you course correct over time, just like you said in your example, between lifestyle changes, between success of your business and your career, between how markets do, how your investment performance does like, these things, whether you like it or not, are going to push your, your course one way or another. And then it's up to you to pause every once in a while, see where you are, see where you want your future to be. And then, you know, you turn your wheel accordingly, you dial your wheel accordingly, as you said. So I think that's the only way to do it, and I think that's a great way to do it. And I think that's kind of the nature of financial planning.

A (66:48)

And I think that's the most fun part is that you get to kind of choose your own adventure at this point in time. And it's one of those things that, you know, every single year you make these minor tweaks. And if you want to decide, well, actually, you know what, I'm going to accelerate this as fast as I possibly can, then you can make those choices. And maybe, you know, you want to accelerate it for three to five years, maybe you want to have some big chunks that you're throwing into the market over the course of those three to five years because you're having some high earning years. Then a couple years down the line, maybe you have kids and you want to travel, you want to take them to Disney World, you want to have them have these cool experiences and so you adjust that spending slightly and you can do some really cool stuff with this even when you're young. And I think a lot of young people just don't think through, you know, know, think through their retirement in the, in the way that they can actually just tweak this every single year. And they're already working towards that number where they can have the best, most thriving, optimal retirement if they just start to think about it early enough and start to make those tweaks. So I, I love this and this is some of my favorite stuff to talk about. So, so I, this has just been so fun thus far, Jesse and I, I really appreciate you coming on here. So can you tell everybody out there where they can learn more about you, your podcast and your, your newsletter, everything else that you have have going on.

B (67:53)

Thank you, Andrew. This has been an awesome conversation. Always, always a pleasure to come hang out with you. Yeah. As you alluded to, I kind of have these three, three parts of my trident, three parts of the project. The podcast is called Personal Finance for Long term Investors because again, it's kind of retirement focused or it's about this, this long term view. Optimizing your financial plan. Optimizing your retirement plan. The blog is called the best Interest. As in an investment in knowledge pays the best interest from Benjamin Franklin. So the website there is bestinterest blog, blog. And then I, if you're on the blog, you can sign up for my weekly newsletter, which I just, I send all my recent content. I also try to compile some really good stuff I found on the Internet and I send that every week so that my, my kind of email audience gets that, that constant drip of really helpful retirement knowledge.

A (68:41)

That is wonderful. We will link all of those up down the show notes so that you guys can check that out. Jesse, thank you so much again for coming on and I can't wait to have you back on here again.

B (68:48)

Hey, man, a real pleasure and happy holidays to you and the audience.

A (68:51)

Yes, thank you. You too.

B (68:55)

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