White Coat Investor Podcast #450: When You Win the Game, Stop Playing with Bill Bernstein
December 18, 2025

Episode Overview

Main Theme:
Host Dr. Jim Dahle welcomes renowned author, neurologist, and investor William (Bill) Bernstein to clarify and dissect Bernstein’s signature advice: “When you win the game, stop playing.” The episode explores what that phrase really means in practice, especially for high-income professionals approaching or in retirement. Topics span from defining “enough,” the mechanics of constructing safe portfolios, changing dynamics in annuities, the validity of popular investing strategies, reflections on market history, and practical, philosophical advice for life after financial independence.

Key Discussion Points & Insights

1. Defining “When You Win the Game, Stop Playing”

• What It Doesn’t Mean:
  It does not suggest selling all your stocks once you reach your retirement goal.
  (Bernstein, 04:53)
• Bernstein’s Definition of “Winning”:
  Winning means accumulating enough safe assets (Treasuries, TIPS, SPIAs) to cover all essential living expenses—groceries, housing, insurance, a basic car, but not luxuries.
  • 25 years’ worth of basic expenses in safe assets is suggested.
  • Any excess above these needs can remain invested in risk assets (stocks), used for discretionary/bequest spending.
    (Bernstein, 04:53 – 06:25)

2. Safe Asset Types & Practical Construction

• Preferred Safe Assets (In Order):
  • TIPS ladder (Treasury Inflation-Protected Securities)
  • SPIA (Single Premium Immediate Annuity)
• Social Security and Pensions should be counted first.
  (Bernstein, 06:25)
• TIPS vs. TIPS Funds:
  • Building a TIPS ladder can be complex but is “fire-and-forget.”
  • If complexity is a deterrent (or for heirs), TIPS funds are a reasonable alternative. Avoid TreasuryDirect (cumbersome access, problematic if incapacitated). Use brokerage firms for tax-sheltered money.
    (Bernstein, 13:45 – 15:39)
• Tax Considerations:
  • TIPS best held in tax-advantaged accounts; otherwise, short-term treasuries preferred in taxable accounts.
    (Bernstein, 15:39 – 16:49)

3. Liability Matching Portfolio (LMP)

• Definition/How To Construct:
  Calculate annual necessary expenses not covered by secure income (e.g., Social Security); multiply by desired years (usually 25). That’s your LMP, constructed from TIPS ladders and/or SPIAs.
  (Bernstein, 17:02 – 18:27)
• Who Might Not Need This Approach:
  • Those with large guaranteed pensions (“pension aristocrats”).
  • Those with extremely low burn rates (can live on <2% of portfolio; might not need any bonds). (Bernstein, 10:26 – 12:53)

4. Withdrawal Rates and Safe Spending

• It’s About Burn Rate, Not Absolute Wealth:
  • The risk is about withdrawal percentage. A 5% burn rate is risky, regardless of portfolio size.
    (Bernstein, 19:17 – 19:34)
• Early Retirement Example:
  • At 55, plan for a 40-year horizon. A truly safe withdrawal rate for this span: about 2%–2.5%.
    (Bernstein, 20:47 – 21:39)
• Critique of “Leaving Money on the Table” With Safe Assets:
  • “Five out of six times you will do better with stocks... But... five out of six times when you play Russian roulette, you win.” (Bernstein, 20:01)
  • Don’t risk basic needs for upside you don’t need.

5. Critiques of Asset Allocation Strategies

• 3–5-Year “Bucket” Approach:
  • Testing 3–5 year safe buckets + 85% stocks, starting 1966, fails badly if withdrawal rates exceed ~4%. Sequence of returns risk is very real. (Bernstein, 31:52 – 32:30)
• Small Value Tilting:
  • Works with a very long horizon, more robust internationally than domestically recently.
  • “I think that a small value tilt… is maybe a 55:45 bet… I am [willing], but I'm prepared for it not to pay off.” (Bernstein, 34:15 – 34:39)
• 100% Stocks—Especially for Young Investors:
  • On paper, makes sense for young professionals with large “human capital,” but few have lived through truly severe, grinding bear markets. Emotional risk is real.
  • “There are some things that cannot be explained to a virgin either by words or with pictures.” (Bernstein quoting Fred Schwed, 42:38)

6. AI, Market Cycles, and Financial History

• Bubble Warnings:
  • Current AI-led boom shares bubble characteristics.
  • Massive capex risks: Chips depreciate faster than “ice cream on a hot summer afternoon” (Bernstein, 24:58); cost structure/returns likely unsustainable without extraordinary profits.
• Returns Forecasting:
  • “Expected return = dividend yield + earnings growth.”
  • Forecast ranges are wide; “Ten-year returns don’t mean anything.” Historical data can vary widely based on when periods start/end. (Bernstein, 28:46 – 31:14)
• Financial History Is Key:
  • “The most dangerous times... are when there’s plenty of blue sky out there.”
  • Learning the lessons of market history (good and bad) is critical for temperament and successful investing. (Bernstein, 50:10 – 50:46)

7. Philosophy of Life After “Enough”

• More Than Enough:
  • Once you cross into “more than enough,” focus on values: giving, enjoying time, relationships.
  • Reference: “More Than Enough” by Mike Piper—both values and estate planning.
  • “If you think that money is to buy stuff, then you’re going to have a miserable retirement. The money is there because it buys you time and autonomy...” (Bernstein, 36:04)
• On Consumption Smoothing:
  • Criticizes it as “neuropsychologically illiterate” due to the hedonic treadmill. “If you get used to flying first class when you’re 35, by the time you’re 50 you’re going to want to fly private, and that is the road to bankruptcy.” (Bernstein, 39:55)

Notable Quotes & Memorable Moments

| Timestamp | Speaker | Quote | |---|---|---| | 04:53 | Bill Bernstein | “The real hard part is how you define won the game... for your basic living expenses... twenty-five years of those expenses paid up, you start taking risk off the table.” | | 13:45 | Bernstein | “Setting up a TIPS ladder is complex... At the back end once you’ve set it up, it’s fire and forget.” | | 15:39 | Bernstein | “I only buy TIPS in a brokerage account and I only do it with my tax-deferred money, I don’t put them in a taxable account...” | | 20:01 | Bernstein | “They’re absolutely right—five out of six times you will do better with stocks than with a liability matching portfolio of safe assets. But... five out of six times when you play Russian roulette, you win.” | | 34:15 | Bernstein | “I think that a small value tilt to your portfolio is maybe a 55:45 bet... I am [willing], but I’m prepared for it not to pay off.” | | 42:38 | Bernstein | (Quoting Fred Schwed) “There are some things that cannot be explained to a virgin either by words or with pictures.” | | 50:10 | Bernstein | “I’ve changed my opinion dramatically—which is [financial history] matters even more… The most important key thing you take away from financial history is that the most dangerous times... is when there’s plenty of blue sky out there.” | | 36:04 | Bernstein | “If you think that money is to buy stuff, then you’re going to have a miserable retirement. The money is there because it buys you time and autonomy to do the things you really want to do.” | | 39:55 | Bernstein | “If you get used to flying first class when you’re 35, by the time you’re 50 you’re going to want to fly private, and that is the road to bankruptcy.” |

Important Timestamps by Topic

• Defining “Stop Playing” and Safe Portfolio Construction: 04:53 – 10:26
• TIPS Ladders, Practical Setup: 13:45 – 15:39
• Tax Considerations on TIPS: 15:39 – 16:49
• Liability Matching Portfolio Deep Dive: 17:02 – 19:17
• Sequence of Return Risk, Withdrawal Rate Guidance: 20:01 – 22:12
• AI Market Bubble Discussion: 24:58 – 28:46
• Return Forecasting and Valuations: 28:46 – 31:14
• Small Value Tilting: 32:53 – 34:42
• Philosophical Advice After “Enough”: 36:04 – 39:41
• Consumption Smoothing Critique: 39:55 – 40:29
• 100% Equities for Young Investors: 41:47 – 43:28
• Learning from Financial History: 50:10 – 50:46
• Closing Wisdom: 52:59 (“When you're fresh out of training, live like a resident.”)

Summary & Practical Takeaways

• Define your “enough” by funding basic expenses with safe, risk-free investments for 25 years; above that, keep growth assets for wants/bequests.
• Build safe portfolios primarily with TIPS ladders and/or SPIAs (if available), after calculating your real “burn rate”.
• Don’t underestimate sequence risk; 3-5 year “buckets” offer far less protection than a full liability-matched ladder, especially for high withdrawal rates.
• Be wary of projections based on past outperformance, especially when market valuations are high, and seek historical perspective before taking big risks.
• After reaching “enough,” prioritize autonomy, time, and relationships over material consumption.
• Resist 100% equity allocations unless personally tested by real, prolonged market downturns; emotional pain in losses is different than in simulations.
• Study financial history: overconfidence is greatest when everyone is optimistic. Crises and bear markets recur and must be expected.
• “When you're fresh out of training, live like a resident.” (Bernstein, 52:59)