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If retirement was just about money, it would be easy, or at least it would be easier. Today, we'll go beyond the math
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problem of retirement. We'll talk about the life problems of retirement, about
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the parts of retirement that your spreadsheet simply can't see. Welcome to Personal Finance for long-term
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investors, where we believe Benjamin Franklin's advice that an investment in
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knowledge pays the best interest both in finances and in your life. Every episode
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teaches you personal finance and long-term investing in simple terms. Now, here's your host, Jesse Kramer.
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Welcome to Personal Finance for Long-Term Investors, episode 136. I'm Jesse Kramer. By day, I work at a
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fiduciary wealth management firm helping clients nationwide. You can learn more at bestinterest.blog/work.
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The link is in the show notes. By night, I write the best interest blog and I host this podcast. I also put out a
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weekly email newsletter. And all of those projects help busy professionals and retirees avoid mistakes and grow
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their wealth by simplifying their investing taxes and retirement planning. Today is well today is a little bit of a
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rewind episode. Uh I'm speaking to you right now from from early March. It's
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March 3rd as I speak into this microphone. But I know that this episode is going to come out in early April and
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I know that between now and then my wife and I are welcoming our second child into this world. So, to make my life
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just a little less hectic over the coming weeks, I made the executive decision to replay an old episode, a
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very popular old episode. This is going back more than two and a half years ago to episode 62 when I sat down with Fritz
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Gilbert from the Retirement Manifesto blog. And Fritz is also the author of the book Keys to a Successful
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Retirement. And before we play that awesome episode, here's a quick review of the week, a new review of the week
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from Doug GB. Doug said, "Excellent product, five stars. I have listened to
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most of the podcasts and appreciate the factual and balanced approach taken. I find them very informative and
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thoughtprovoking. Thanks for sharing your insights. Well, Doug, thank you for the kind words. I'd be happy to send you
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a super soft podcast t-shirt. So, please drop me an email to Jesse at bestinterest.blog so I can get that
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t-shirt sent out to you. And with that, everybody, on with the show. Thank you for listening and enjoy the episode. I
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saw a headline recently stating, "Most people don't understand life expectancy
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data." Which means they don't understand the fundamental aspect of retirement
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planning. How long will you live? After all, a 20-year retirement is drastically
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different than a 30-year retirement. So, let's answer that question right here
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now. How long will you live? So, first we can look at the data. As of 2020, the average American male born in 2020 lived
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for or will live for 74.5 years. And the average American female, the number is 80.2 years. So, let's round those for
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the sake of ease. Men live for 75 years. Women live for 80 years. But there's
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more to this question today than just that plain data. Because let's imagine
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you're 55 years old and let's say you are planning your retirement. How long
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should you plan for? Well, we can go back and think to those numbers before. 75 for men, 80 for women. So, if you're
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55 today, then men should plan for a 20-year retirement. Women should plan for a 25-y year retirement. Maybe you
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want to add a few years on there as a buffer cuz after all, you know, if those are the averages, half of people live
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longer than average. So, maybe you add five or 10 years of buffer and that's
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how you get to your retirement timeline. But that's actually not quite the right
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approach. Now, I like the buffer aspect of it, but if you're 55 today and you
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think that the average 55year-old lives to 75, that is not the right way to interpret this data. And it's important.
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So, the average death ages 75 and 80, we said they account for all deaths at all
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ages, including all of the unfortunate deaths that can occur before the age of 55. Once you've hit age 55, you've
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already avoided all of those premature deaths. You've avoided all the deaths
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that drag the average down to 75 and 80. Meaning that your most likely age of death will actually be above average.
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You've already avoided the premature deaths before 55. And that fact, that statement that I just made, that's
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backed up when we look at the Social Security Administration's actuarial data
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set. And it helps us see this truth in action. The average 55-year-old man today will live another 24 years to age
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79. That's four years above the the average that we talked about for all males. The average 55-year-old woman,
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she'll live another 28 years to age 83. Again, that's 3 years above the average
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for all women. So maybe you haven't planned much and and now you're sitting
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down, let's say you happen to be listening to this podcast, you're sitting down at age 65 to figure out
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your retirement. 65-year-old men have on average another 17 years of life left and women another 20. They'll live to 82
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years old and 85 years old, respectively. That's huge. Every year matters in retirement planning. The
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difference between dying at age 74 versus 79 versus 82, that's a really big difference. And as we already talked
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about before, you might live longer than those averages. So, as a really quick example, the average 55-year-old
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American man has the following, we'll call them death age probabilities. There's a 64% chance that that man will
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live to at least age 75. If you're 55 years old, you have a 64% chance of living to age 75. What do you think the
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probability is living to age 80? The answer is 48%. How about to the age of 85? The answer
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is 30%. And finally, for a 55-year-old man, the odds of living to age 90, that's about 13%. Now, 13% is small, but
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that's nothing to ignore. That's a 1 in8 chance. 1 in 8 55year-old men will live
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till age 90. So, in short, the lesson here is that you can't look at the average life expectancy for all people.
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Instead, you have to look at the average life expectancy of people your age and then probably bake in some conservatism
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on top of that because there's a 50% chance you'll live longer than the average. This is just a simple but vital
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financial planning tip. And now on the topic of financial planning for retirees, we're going to pivot to a
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recent listener question sent in by Lawrence. Lawrence wrote, "Dear Jesse, my wife is 70 and I'm about to turn 70
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and we've been retired for eight years. And even with the tough market in 2022,
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our portfolio is up 40% from when we retired from about 3 million to 4.2 million. I can't bring myself to spend
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more. We spend exactly what we want to spend. But now I'm wondering, what if we
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die with these millions instead of putting them to some sort of good use?" So ask any retiree or any financial
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planner who works with retirees. They will tell you that most retirees struggle to change from a saver to a
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spender. They've built decades of strong savings habits. They have years of frugality and budgeting and buy and hold
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investing. And it's hard to flip that switch overnight from saving to spending. So, as a real example, there's
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a great data set that Michael Kitsus published to show retiree savings that actually went up during the 2000s. The
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2000s were this famously bad time to be invested in the market. And certainly some people who were invested did see
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their accounts go down throughout the 2000s. But what this data set shows is that especially for people kind of at
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the middle to the upper end of wealth brackets, they gained money during the 2000s. They they saved more than they
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ever had saved before. Now, another part of this particular chart that's scary is
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that the bottom two quartiles or the lower 40% of retirees have zero assets. They are living exclusively off of
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social security and their pensions. the third quartortile. So that's from people
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from 40% to 60%. They have less than $100,000 in assets. Those two stats right there are pretty scary and pretty
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sad. So a lesson that I take away from this that I hope to impart on you guys is to save early, save often, and to
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stay the course. We have to go back. Why is it the case that at least for the top
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40% of people in this study, their portfolios grew during some of the worst times in market history? and that for
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the average retiree, portfolios tend to grow in retirement. Well, the reason is actually pretty simple. It's because
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most of the time standard retirees and retirement planners are vastly oversaving. They're saving too much and
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they're spending too little. For example, we can take a look at the 4% rule. The 4% rule was created to avoid
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uh retirement failure. Running out of money is retirement failure, and that we can all agree is a pretty bad thing. But
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here's an absolutely crazy stat. The 4% rule over the course of historical back
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tests has been shown to more likely quintuple or 5x someone's retirement portfolio than to deplete it by $1.
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That's just crazy. the the average retiree using the 4% rule, if they retire with a million bucks, they're
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more likely to die with $5 million than they are to die with less than $1 million. That 4% rule, and I've said it
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here on the podcast before, it is outrageously overconervative about 90% of the time. It just so happens that
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like 2% of the time the 4% rule has actually been shown to be too aggressive, which that's a whole other
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different conversation about why the 4% rule is a a coarse tool, but certainly not a fine tool. But anyway, let's get
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back to today's topic. The required conservatism to avoid retirement failure
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that is vital in about 5% of test cases. if you saved less. So, if you use say a
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a 5% rule where you you retire with 20 times your annual spending needs instead of the 4% rule where you retire with 25
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times your spending needs, you are more likely to fail. You're more likely to
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fail if you use the 5% rule instead of the 4% rule. So, for better or worse, retirement planners first rule of thumb
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is the 4% rule. And what we're talking about here today with Lawrence with his
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question, Lawrence, who's now lived off of retirement funds for eight years and
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he's seen his nest egg grow from 3 million to 4.2 million. He's an example
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of that overconervatism, but he's the example of someone who maybe could or should have been using
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the 5% rule or the 6% rule instead of the 4% rule. Or at the very least, Lawrence could have retired a few years
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earlier and used the 4% rule to great success. But now, as we sit here, eight years into Lawrence's retirement, it's
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too late for that. It's time that Lawrence can't get back. Let's pause
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that little diet tribe for now and really go to address the meat of Lawrence's excellent question. What if
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he dies with these millions of dollars instead of putting them to good use? Now, first and foremost, Lawrence should
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go work with a fiduciary, CFP, financial planner, and an estate attorney. Lawrence should discuss his options and
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his preferences for this money while he's alive, but then also after he passes away. Questions like, how do you
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want your assets to positively change the world? Who in your life is most important to you, and do you want to
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leave some of your assets to? Are there any charities that you want to leave assets to in some way or a bequest to
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your university to your alma mater and to leave a scholarship to future young bright minds? These are the types of
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questions to ask and then answer. The next point I would make to Lawrence is to not let society force you into
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spending your money on yourself. If you derive joy from helping others, I'm sure
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there are terrific philanthropic uses for your money while you live. The next one, Lawrence, if you have children or
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grandchildren, remember Warren Buffett's thoughts. Leave them enough money so
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that they feel they could do anything, but not so much that they could do nothing. In other words, if you leave
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your kids, say, $500,000 each, that's enough money that they could do a lot of
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interesting things with it, but that's not enough money so they could sit around for the rest of their life and do
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nothing. Leave them enough money so that they would feel they could do anything,
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but not so much that they could do nothing. And the next one is something I call running the McDonald's tests on
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your favorite things. So, the McDonald's test, real quickly, as a quick aside, it
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comes from a story of a client who I'm actually working with at work, where one
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of his favorite things to do is uh literally to go eat burgers and fries. It's like his favorite meal. We were
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talking about it one time, and this gentleman is a multi-millionaire. So, I asked him, I said, 'Oh, cool. Are there
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any like, you know, great burger and fry restaurants that you've been to recently? And his answer was, "No, not
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really. I just I like McDonald's." My response to this gentleman was, "Well,
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that's totally fine if if you like McDonald's, if you like the flavor, if
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it's convenient for you, I mean, I'm not going to talk you out of it, but you're
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sitting on a couple million dollars. So, if you want to, you could take a road trip to any burger and fry restaurant in
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upstate New York and spend an afternoon, spend a weekend getting there and go have a terrific five-star burger and fry
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meal and maybe that would actually be more enjoyable to you than McDonald's.
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So, this gentleman thought about it. We ran the numbers and I showed him how it was totally within his financial plan to
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do so. And it ended up being a terrific recommendation for him. He really enjoys
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the fact that now he takes these road trips on a regular basis to go eat burgers and fries all over upstate New
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York. I call that running the McDonald's test where you take something in your
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life that you really enjoy and you ask yourself, do I have the financial means to actually pursue this passion even
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more than I already am? To Lawrence who asked today's question, to Lawrence who
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is worried about dying with millions of dollars, run the McDonald's test on your
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favorite things in life. Trust me, one of the principal duties of financial professionals, albeit a subjective and
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hard to measure duty, is to imbue confidence in their clients to spend money. It's called cash flow planning.
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When you do cash flow planning for a client, you're telling them that they should be confident in a certain amount
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of income, but for retirees, it's really a certain amount of expenses that they'll be making throughout their
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retirement. You should spend money. You should enjoy the fruit of your labors. You should trust the math. You should
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trust your portfolio and enjoy your life. Now, if you do that and you still have lots of money left over, you need
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to determine while you're alive and while you're mentally spry, you need to
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determine what you want to do with that leftover money. So, Lawrence, work with a CFP, work with a estate attorney, and
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enjoy these golden years of your life. Here's a quick ad, and then we'll get
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back to the show. I love getting your questions and some of you ask me questions about the wealth management
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firm I work for in Rochester, New York. Others ask about the Best Interest blog and this podcast, Personal Finance for
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Long-Term Investors, which operate without advertising, without pushy sales, and with no payw walls. How can
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the blog and podcast stay afloat without me dumping my own money into it? Well, to answer both those questions, I want
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to point you to episode 78 of Personal Finance for Long-Term Investors. I intentionally recorded episode 78 to
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shine light on those topics and inform you how you are actually helping and can continue helping these projects carry
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forward. So if you've ever been curious about the business of my blog and podcast or if you're curious about my
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day job in wealth management, please check out episode 78 and let me know what you think. All right, so now let's
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throw it over to a really fun conversation with a really fun guy, Fritz Gilbert, who I mentioned before.
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Fritz Gilbert is the creator and author of The Retirement Manifesto, widely considered one of the best retirement
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blogs on the internet and winner of numerous awards and accolades. Fritz also wrote the book Keys to a Successful
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Retirement, which is a top-selling financial book on Amazon. I really enjoy Fritz's ability to cover both the the
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hard financial topics, but also the soft lifestyle topics for his retiree readers. And I'm really excited to share
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his fun viewpoints here today on the Best Interest Podcast. >> Fritz, I was listening to you on a a
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recent Morning Star podcast. Excellent podcast. We will throw a link in the show notes for everybody. But Fritz, you
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mentioned a statistic that had to do with how pre-retirees tend to focus on financial matters, but that postretirees
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end up thinking a lot more about lifestyle matters in retirement. So, I'm just curious, how did you first learn
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about that? And and when you first learned about it, how did you react? And then, what exactly are the the main
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issues that you think that postretirees really are thinking about? >> Yeah. Wow. What a great leadoff
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question, Jesse. First of all, happy to be on your show. I love your content and
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uh I I really enjoy being on. But it's interesting. You know, I've gone through
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the retirement transition. I've been retired 5 years now. I've been writing
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for eight. So, I started writing three years before I retired. And at the time, like everybody else, I was very much
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focused on the financials. And if you read the first year of my posts, almost every one of them were financially
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related, right? It's it's what you're focused on in your working years. You're
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just when can I retire? Don't obsess on when you can retire. enjoy the journey
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as well. You know, that's my biggest caution to the fire community, which I I
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was a member of, I'd say. I was 55 when I retired, so I was kind of late fire,
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but still fire. And the one concern I have with that lifestyle is you can get so obsessed on when can you achieve fire
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that you forget to enjoy the present. So, that's just a a word of recommendation or advice, I guess, to
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the younger folks that are on the journey. But regardless, you're focused on the financials. you have to be
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because you know you're not going to be able to retire until you get the financials in order and you're looking
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at the retirement calculators and you're trying to figure out the, you know, 4%
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safe withdrawal rate and all that kind of stuff. That's natural. And what I say
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is that's necessary, but it's not sufficient. So, when did I first discover that reality that you have to
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focus on the non-financial as well? And I would say that was probably about a year or two before I retired. I'd been
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writing for about a year, paying a lot of attention to the topic, doing a lot of research, writing a post every week.
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The more I read from people who had traveled the journey before me, I started seeing more and more about the
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importance of the non-financial stuff. I'm like, "Yeah, yeah, yeah, okay,
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okay." You know, you it takes a while to be convinced, but I listened to the
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stuff I was reading and I I applied it and I started writing posts about the non-financial side. You know, we moved
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to a cabin up in the mountains, so we had a pretty major lifestyle change. And we started thinking about it quite a bit
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about a year before I retired. We really knew, okay, we're good to retire. June
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of 2018, you know, this was like in 17. Okay, June of 18, we're out. We know
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we're good. But I still had a year to go. So rather than just continue to refine the numbers, they're they're kind
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of what they are at that point. Yeah, you're still investing. You're looking
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at returns. You're trying to build up your cash, you know, for the transition,
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but essentially it doesn't get you a lot more benefit to continue to grind on the
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numbers. So, I spent that last year starting to really focus on the non-financial stuff, which we can talk
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about. But what it really hit home is as I went through my retirement transition,
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it was incredibly smooth. And I started reading more and more research about the
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highest correlation they found for people that have a successful transition to retirement. It's a huge transition.
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You know, don't underestimate how big of a change it really is, and a lot of
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people struggle with it. But the research has shown that the people that have the most successful transition are
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those that have spent the most amount of time planning and not just planning on the financial stuff, but they've
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recognized the need to focus on this non-financial area. So that's really and
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that's what my book's all about. It's the, you know, keys to a successful
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retirement. And it really focuses on the things you should think about as you're
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preparing for retirement that will help you have a better transition. It's a
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hugely important topic and it's not something most people realize and eventually you will, right? If if you
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don't think about it at all, you hit retirement, you'll go through what what
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I like to call it, Eric Waggle came up with the term or he used it in his book, the messy middle, you will have a rocky
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transition, it's not uncommon. And that's what that article in the the Morning Star podcast was about, these
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blind spots that we discovered, right? >> And a lot of people struggle with that
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transition. And most of the reason that they struggle is because they didn't
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realize the importance of this non-financial stuff. You figure it out in time, but it's a lot easier if you
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think about it on the front end. Yeah, you you just mentioned a term there, Fritz, blind spots that I I want to come
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back to and see if there are any specific blind spots that that you and Eric have found. It's an interesting
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concept because I'm 33, so I've got some time ahead of me, but I think of it as,
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you know what, I know what a weekend feels like. Transitioning into a weekend isn't a big deal. I've taken some even
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two week vacations before. Maybe a little planning goes in there, but really transitioning to a vacation then
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transitioning back to work, not that big of a deal. So, it's like what what would
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the big deal with retirement be? All it is it's a transition into free time. I I
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don't see what the big deal is. I've done it before, but obviously there's
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there's more to it, right? >> Yeah. And how do you summarize it? I I talk about how it's kind of like
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marriage or having a kid or, you know, some of these major transitions in life, you can't really appreciate it until
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you've actually gone through it. And I was obsessively curious about what it
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was going to be like. I I really was. >> Now I'm retired five years. And I guess
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the biggest thing I would say is nothing at all like a vacation. And and the reason is because it never ends. You
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know, vacations, you're always thinking about going back to work. You know, it's
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a little break, so you're really enjoying it. You're savoring every minute cuz, you know, you've been
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looking forward to this for six months and you booked your flights, you know, six months ago and blah blah. But
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retirement is day after day after day after day after day after year. you know, it's years and years of this
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>> and initially, yeah, it's like a vacation and there's that honeymoon
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period where it's just euphoria. You don't have the alarm clock. You're
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ecstatic. You know, I never have to go back to work. This is amazing. And that's really a nice period. And almost
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everybody experiences that. But when the reality sets in is is after you've been
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retired, it varies for most people. I'd say 6 to 18 months is pretty much the
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norm. And you start realizing this is my life now. You you start losing appreciation for the freedom. I losing
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is probably too strong a word, but you start recognizing that there's more to
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life than just being free. And you have to find those things that really keep you motivated and and you know, feel
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good about yourself and productive. And a lot of those things you get from work that you don't realize you're getting
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from work, you start missing. And you start realizing how important they are in your life. And that's when that quest
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to kind of fill in these non-financial areas really becomes important because it's those areas that really turn it
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into a a really enjoyable phase of life. I'm I'm loving retirement. Best years of
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my life, but it's because I've been very diligent in in the way I approached it.
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And all the research I've done since, probably by accident as much as anything, but the things I've focused on
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have turned out to be pretty important things to help with the transition. Fritz, I was telling you before we
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recorded that I've I've listened to maybe six or eight podcasts that you've
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been on in the last in my last week podcasts that you've been on over the last couple years. And for what it's
00:23:53
worth, it sounds like you love retirement. Your your your joy comes across in your voice on every podcast.
00:23:58
But I think it's important to emphasize that what you had just said is that it
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didn't come without work. It didn't come without preparation. you you had to sit
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down and think about it, prepare, and and maybe now we can transition back into some of the blind spots that many
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retirees have going into retirement. Blind spots that it sounds like for the most part you thankfully prepared around
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and and they weren't blind to you, but what are some of these common blind spots that can affect retirees?
00:24:26
>> Yeah. And and probably a little bit of context would be would be of value, I
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guess, to the listener. Eric approached me. He's another blogger and he's he's
00:24:33
an author. he's written a book and he's more of a financial coach I guess for
00:24:36
retirees and he said hey I'd like to do a survey you've got a big audience can
00:24:40
can we reach out to your audience and do a survey and what his goal was was to get a population of pre-retirees and a
00:24:47
population of retirees postretirees ask them the same questions and compare the results I was like I love that Eric what
00:24:53
a great concept and let's see where they differ you know so there's a whole
00:24:57
article about it there's there's a there's actually like a 50page study
00:25:00
that you can link to on my blog if you just look up blind spots on my blog you'll find you. You can put a link in
00:25:04
the show notes. >> We'll do. Yeah, we will link that. >> Yeah. But the two biggest takeaways if I
00:25:08
think about it now without looking at the study, but just what's stuck in my
00:25:11
mind now, you know, several months after we've completed the work. The first one
00:25:15
is the um reality that a lot more people struggle with the transition than they think they will. If you ask
00:25:23
pre-retirees, I'm rounding the numbers. I don't know the exact ones. I could
00:25:26
look them up. Doesn't matter. roughly 25 30% of pre-retirees think yeah it's
00:25:31
going to be a pretty major transition you know whatever but let's say 70% are
00:25:34
like yeah it's going to be a piece of cake or you know I'm not worried about
00:25:37
it >> compare that to the people that have gone through the transition and over 50%
00:25:42
of them say boy that was a tough transition so and that goes to my earlier point recognize how big this
00:25:48
transition really is and prepare for it because that's one of the things that
00:25:52
people that haven't done it yet tend to underestimate how big of a change it'll
00:25:56
be in your The second one I would say that sticks in my mind, and this goes to the
00:26:03
non-financial benefits that you receive from work. People don't tend to recognize this. You know, you think
00:26:09
about your paycheck. Oh, my paycheck's going to be over. I've got to be financially independent. Absolutely
00:26:14
true. But there are also probably five or six non-financial benefits that you get from work that most people don't
00:26:22
really think about. One is obviously you got your relationships at work. You know, even even when you're working from
00:26:27
home, you're still on Zoom calls. You have a relationship. You're texting your
00:26:30
co-workers. You know, you you're involved with other people every day, common interests, you're working on the
00:26:35
same projects, whatever. You've got a sense of purpose, you've got objectives
00:26:38
from your boss, you've got deliverables, you get achievements, you you nail a
00:26:42
presentation, you feel good about it, you get some feedback, maybe, you know, it's rewarding. You have a sense of
00:26:47
identity. You know what what do you do, right? Everybody asks, you know, oh, I'm
00:26:50
a X, right? You're you relate to what your job is as your sense of identity.
00:26:54
It's those types of things. The biggest blind spot that surfaced in the study
00:27:00
was not too many people that were still working expected that they'd miss their
00:27:04
co-workers. You know, maybe again 20 30%. But if you look at the people that actually retired, almost 60% actually
00:27:13
missed those relationships. And as much as you think, oh, we'll keep in touch,
00:27:16
the reality of it is you really don't. You might have one or two particularly
00:27:20
close people that you keep in touch with a little bit, but everybody says, "Oh,
00:27:23
we'll keep in touch." And nobody does, right? It's just a reality. So, the
00:27:27
importance of building relationships with people outside of your workplace that will continue postretirement is
00:27:33
probably one of the biggest lessons that I took away from study. the social aspect, the identity aspect, the
00:27:38
positive feedback aspect, but that is loneliness in retirement is is kind of what you just touched on there that we
00:27:45
get these friendships, these social bonds at work that often times disappear in retirement and transitioning from
00:27:51
loneliness. There's actually some interesting data when it comes to depression in retirement, which I found
00:27:57
surprising. What What is that data? >> Yeah. And and this is kind of surprising. I I wrote about this when I
00:28:02
was getting ready for the transition. I think I've written three posts about
00:28:05
depression in retirement. My most recent one was a couple weeks ago and and it was why 28% of retirees are depressed
00:28:11
and it focused on some studies that were done that really tried to quantify it. 28% is a pretty legitimate number. Yeah.
00:28:17
>> Which is high. You know, if you look at somebody asked me, well, what's how's
00:28:20
that compared to the population as norm? I was like, oh gez, I missed that one. I
00:28:22
should have put it in the post. So, I did some Google searches. Looks like it's about maybe 10%.
00:28:27
>> So, 10% of the general population are depressed. 28% of retirees are depressed. That's a huge number, right?
00:28:32
One of the biggest factors, which is kind of outside of your control, is those that are forced into retirement
00:28:38
earlier than they planned tend to have the highest rate of depression. So, okay, what are you going to do about
00:28:43
that? You could argue it, but the takeaway to me, and I put this in the article I published today about why 72%
00:28:50
of retirees are happy, right? In that study, I include or in that article, I included a study that showed 56% of
00:28:57
people are forced into retirement earlier than they plan. Huge number. So you're naive if you think I can work
00:29:03
till I'm 65. I'll be fine. I don't have to worry about it. 56% of people don't
00:29:08
get to the date that they wanted to get to. >> So the takeaway from that is be prepared
00:29:14
earlier than you have to be just in case. And if you still love your job and you want to keep working for a while,
00:29:19
that's fine. But to be dependent on your job and suddenly lose it can be a real
00:29:25
trigger into depression in retirement. The other thing that I found article I published today was the nine traits that
00:29:33
the happiest retirees tend to have in common that aren't as common among the
00:29:38
depressed retirees. And those are things like we're talking about now. A lot of
00:29:42
them are focused. There were three that were financial and from the top of my head it was having at least $500,000 in
00:29:47
assets, having your house paid off and having multiple sources of income. Okay, those are those are, you know, we could
00:29:53
talk about those, but to me, the more important ones were the six non-financials,
00:29:57
and they were actually shown in some studies to have a higher correlation to retirement happiness than your economic
00:30:04
situation. So, again, it goes back to the importance of these non-financial ones. And the characteristics of the
00:30:10
happy retirees were um a sense of curiosity. You know, they're they're really willing to try new things. They
00:30:15
they they are exploring a sense of purpose. a lot of reference to Wes Moss' work, which he's done a lot of work on
00:30:21
happiness and retirement and you know the difference between happy retirees have an average of 3.6 core pursuits and
00:30:29
depressed retirees have like 1.9, right? So it's it's double the number of things
00:30:33
that you're you found that keep you engaged. Friendships, relationships, we talked about that. The happiest retirees
00:30:40
have close to four close friends. The unhappier ones have less than two. So, you know, it it's really good research
00:30:47
and it and it helps people that are planning for retirement think about what are the drivers that I need to be
00:30:53
working towards in addition to the financial elements to maximize my chances of falling into the happy camp
00:31:00
as I call it. Fritz, let me just take a step back because I'm thinking to myself
00:31:04
and I'm thinking of some of our younger listeners when you were saying earlier
00:31:07
that a lot of times it was 56% of retirees actually were forced to retire earlier than they desired to. What are
00:31:16
some of those forcing functions? Is it is it a mean boss who pushes them out or is it is it something else?
00:31:22
>> Well, there's there's I would say three main things. One is, you know,
00:31:25
downsizing. People go through downsizings at work and that happens unfortunately. So that that's a
00:31:29
percentage. That's kind of the one you'd think of immediately. But the other two
00:31:33
are a bit more surprising. And one is, and they're both kind of related. They're they're health related. One is
00:31:39
either you you've got a parent that you need to take care of that is taking more
00:31:43
time than you can afford, so you have to quit to take care of a a spouse or a a parent. The other one is personal
00:31:50
health. You know, you get into a health situation and you're and you're no
00:31:52
longer able to work. So those three probably account for 80 90% of the reasons. Unfortunately, the downsizing
00:32:00
one is a risk to everybody. You know, you can argue the health one is somewhat inside your control. I know you focus on
00:32:05
exercise. I focus on exercise. Do what you can do. >> And the reality is most of us as you get
00:32:10
into your later working years have parents that are getting older. And a certain percentage of parents require a
00:32:17
lot of care. And you know, some kids just my my wife, she was a stay-at-home mom fortunately, but she ended up giving
00:32:23
full-time care to her mom. We were lucky that we were in a position to be able to
00:32:27
do it. some people aren't so fortunate. So yeah th those are probably the biggest factors and again let me let me
00:32:34
address your earlier your earlier you started talking about younger listeners and and one thing I would encourage
00:32:38
younger listeners to do on the whole topic of retirement is focus on maximizing your savings rate automating
00:32:46
everything and every year that you get a raise let's say you get a 3% raise increase your savings 2% you know in
00:32:53
your 401k or in outside mutual funds whatever but schedule that so that that's automated and it happens on the
00:33:00
same date that you get that increase in pay. So what happens? Okay, you get 1% more in your take-home pay. You feel
00:33:06
like you got a little bit of a bump. You know, feels pretty good, but you just increase your savings rate by 2%. So if
00:33:12
you do that year over year and force those savings and live on the rest, minimize debt, obviously how you
00:33:18
prioritize your money, you know, pay off your debt, build your emergency fund, those are all good pieces of advice. But
00:33:23
the biggest thing is find a way to gradually over time increase your savings rate every year and just don't
00:33:30
worry about it. You know, track your net worth once a year. That's all I did and
00:33:33
it was fine. Track your net worth. Don't obsess on this stuff. Enjoy life as you
00:33:36
live it and and just give it time because you know you got anybody can retire in 15 years. Mr. Money Mustache
00:33:42
got a great article on that depending on your savings rate. But that's 15 years,
00:33:47
right? That's a long time even for a more aggressive saver. Don't spend your
00:33:51
whole life in your late 20s, early 30s through your 40s thinking about retirement. Enjoy it now. Enjoy your
00:33:57
family. Enjoy your kids. Take nice vacations every year. Use all your vacation time. Right? That was one of my
00:34:02
big things I was working. So many people burn burn vacation days. Don't do that.
00:34:06
They give them to you for a reason. They don't, you know, they don't care. Take
00:34:09
them. It's self-imposed. If you feel like you can't take your vacation, so
00:34:12
take it and and enjoy life and and save as much as you can save. find a way to increase it and you know wake up in your
00:34:19
late 40s and start looking at the numbers. >> I like that for a couple reasons, Fritz.
00:34:23
One reason why is I I'm slowly making that transition personally from from if
00:34:27
I look at myself 5 years ago where I was, you know, looking at my spreadsheets or looking at my budget
00:34:33
multiple times a week, you know, tracking, paying attention and tweaking savings rates, rerunning spreadsheets to
00:34:39
see if I could increase it here or there. It did get a little obsessive. It got a little tiring. And in the long
00:34:43
run, did it give me any benefit? Not really. >> Yeah, there's nothing I can do. There's
00:34:48
nothing you can do about what the stock market is doing. All we can do is choose
00:34:52
to whether we whether we buy on a monthly basis or not. I mean, that's all the decision-m we have in our power. But
00:34:58
the choice to increase your savings rate every time you get a raise, that's a
00:35:02
phenomenal choice. It's well within your power, >> but it only comes up once a year. So, so
00:35:08
there's no need to obsess over it. Personally, I do uh end of the month. I'll just look at my budget, make sure
00:35:13
everything's good, we're good to go. But if someone said quarterly, a couple
00:35:16
times a year, once a year, whatever, that's fine. Yeah. >> As long as you're it's somewhere in the
00:35:20
background and you realize that at some future date you're going to kind of sit
00:35:23
down and put in some work. >> Yeah. And and you know, in fairness, I think probably most of the people that
00:35:27
listen to your content, listen to, you know, read blogs, etc. They they they pay attention to this stuff. The the
00:35:32
caveat I would say is if you don't pay attention to this stuff and you've got a
00:35:34
big debt problem and you can't get out and you're, you know, you're spending
00:35:37
more than you make year on year, month on month, you're just digging yourself
00:35:40
deeper. Those aren't the people we're talking to, right? These are people that
00:35:43
are responsible that are that are working their way through the journey and they're saving and they're being
00:35:47
responsible. Those are the people that don't get caught up in the obsession about it. It's easy to do. I I did it
00:35:52
myself at times and uh and I learned to your point other than keeping an eye on your asset allocation. You think of a
00:35:59
bare market, a bare market of your age, best thing that could possibly happen. You want the doubt to fall 90%. You want
00:36:04
it to crater, right? It would be it would be death to me, but it would be it would be nirvana for you. You want a
00:36:11
bare market, right? So, you got to get your head out of thinking about, oh, my net worth, my net worth growing. No, you
00:36:16
just want to buy by by continue to buy every month. I had a couple bare markets later in my career and I I doubled down.
00:36:22
I said, you know what? I can take I can take four months and just jack it to my savings because I know the market's
00:36:27
really down right now. Right? You've got to counterintuitive against that fear. A
00:36:32
bare market is a great thing. A a big long-term rally is not really what you want right now. You want to buy cheap
00:36:38
and give it 30 years until you need it. So >> totally I I I was trying to preach that
00:36:42
to the all the, you know, the 24 year olds out there who in 2019 were so excited that their two-year investment
00:36:49
track had had such positive returns. And it's it's good that they got enthusiastic for investing. It's good
00:36:55
that they could see that simple investing strategy into index funds was yielding these big returns for them. But
00:37:02
it was also to important to point out a this is pretty abnormal. you know, 20% a
00:37:07
year for four years in a row is pretty abnormal. >> And then B, if you actually zoomed out
00:37:12
to the time you retired, this wouldn't be what you wanted in terms of when you
00:37:18
were buying. Exactly. >> Here's a quick ad and then we'll get back to the show. I send a free weekly
00:37:23
email to thousands of readers that shares two simple things, just two. The first are my new articles and podcasts
00:37:29
so you'll never miss when I publish new content. And the second is my favorite
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financial content from other corners of the internet so you can see what's been
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helping me the most. >> But Jesse, I don't want another email. >> I hear you. I make this newsletter
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00:38:01
free weekly email that thousands of people like you are already reading, a free white paper to help you plan for
00:38:06
retirement, and you can sign up for free at bestinterest.blog. But it's interesting, Fritz, so you're a
00:38:11
big DIYer. >> Yeah, >> I was and still am a a really big DIYer. So much so that now I'm kind of doing
00:38:18
some of this work professionally and and helping people who don't want to be
00:38:21
DIYers do some of their financial planning work. But I understand that at least once kind of as you were gliding
00:38:27
into retirement and it might have been more than once you did sit down with a CFP simply to doublech checkck some of
00:38:33
your numbers, some of your thought process. So I'm just wondering >> what was that process like for you in
00:38:39
terms of the decision to sit down with a CFP and just get everything double-checked and then actually
00:38:44
logistically what was it like you know to have that help? I have been a DIYer my whole life and and I've always been a
00:38:50
I call it a passionate hobbyist in this stuff. You know, I back when they had real magazines, I used to read Money
00:38:56
Magazine and Kiplingers and all, you know, all the print magazines. I mean, I've studied this stuff for for decades
00:39:00
now. >> So, I I was knowledgeable about it and I just enjoyed it as a hobby. And that was
00:39:04
fine, you know, for the first well I I started 22 and I retired at 55. So, 33 years and for, you know, the first 30
00:39:11
years that was fine. It was sufficient. My reason for reaching out to a CFP as I
00:39:17
got close to finalizing my decision on when to retire was, you know, let's be
00:39:23
humble and let's not assume we know everything. You know, CFPs and professionals that do this for a living,
00:39:29
they see hundreds, if not thousands of clients. They they have a process. They they go through it with a different set
00:39:36
of perspectives than than you and I possibly can. There's value in that, right? and and having somebody look over
00:39:43
what you've done. And and I should say earlier in my career, we had a we had a
00:39:47
thing with Vanguard, a 401k, and you could do a once a year check up with a CFP. So, I did that a couple times and
00:39:52
they were always like, "Yep, you're on track. You're doing well." You know, and
00:39:55
allocation looks good. Savings rate looks good. You know, the basic stuff was was good. But my concern was the
00:40:00
transition from accumulation and building your wealth through the career into positioning yourself for the
00:40:08
withdrawal of those assets in retirement, which is something obviously I'd never done before. So, it wasn't an
00:40:15
area that I had experience. It wasn't an area that I'd gotten feedback from
00:40:18
Vanguard that I was in good shape. And I felt like having a guy that walked many
00:40:24
people through this transition is worth the effort. So, the process was good. you know, they they have I think all of
00:40:29
them kind of have the same process. You know, you send them all your assets. You
00:40:32
send them your spending estimates. You know, they work through their they always have kind of a little
00:40:36
presentation they do at the end that shows if you're on track or whatnot. And
00:40:39
my biggest thing was, am I missing anything? I I knew I could retire 54 or 55. And I was leaning towards 54, but I
00:40:48
also kind of had in the back of my mind, I wouldn't mind doing one more year just
00:40:52
to kind of pad everything. I'm a conservative guy, you I always estimate a little high in my expenses and
00:40:58
estimate a little low on my returns. I always try to get some padding in there. So having a a professional look at and
00:41:04
say, you know what, you can make it out by 54 if you want. You'd be able to do
00:41:07
that. I still decided to go to 55, but having a professional that kind of looked over everything and and could
00:41:14
talk to me about some of the things that maybe I hadn't thought about. Turns out
00:41:16
I I hadn't really missed much. I mean, I was pretty on track, but having a third
00:41:21
party verify that is is money well spent. I recently saw just a really quick social media post from a gentleman
00:41:29
named Peter Lazerov who's a kind of young upand cominging I think he's a CFA
00:41:34
so he's more on the investing side than maybe the planning side but one of the
00:41:38
things he said is like just this this kind of hidden value in doing what you did is what he called objectivity and
00:41:44
the fact is you know Fritz you're you're so into your own personal situation as
00:41:49
you should be as we all hopefully should be but sometimes it is nice to have a third party come in with fresh eyes with
00:41:55
no sort of personal relationship to you and just say, "Hey, I'm an objective
00:41:59
third party here. Here's what I see and maybe it's a little different than what
00:42:02
you see." >> Yeah. And and I think the other the other value you can get and not not so
00:42:06
much from a one-off, but why in my mind it justifies paying somebody to to, you know, help you on your financial
00:42:12
planning is really more on the behavioral psychology side of it. If you panic in a down market, if you have
00:42:19
total stress is market volatility, which is a reality, there's always market
00:42:23
volatility. I was always like, "Hey, the market's down. Great. I'm going to
00:42:26
increase my investments," right? I never worried about that. But human nature is
00:42:30
to worry about it. And the worst thing you can do is sell after a downturn, right? And then you got to figure out
00:42:34
when you're going to get back in and you lose the upturn and it's it's suicide.
00:42:38
And having a professional guide you through those market downturns if they make you really uncomfortable can save
00:42:44
you a ton of money over the long term because that's when you'll get slaughtered if you make a big mistake in
00:42:50
your asset allocation due to market volatility. That's probably the biggest individual mistake people can make and a
00:42:56
professional will typically help you avoid making those kind of mistakes. >> Exactly. Another quote that I recently
00:43:01
heard is that behavioral finance is the last frontier in terms of if you look at
00:43:08
the various services that a a good financial planner will provide a client like financial planning has been solved,
00:43:16
right? Like we know what the tax code is, we know how spreadsheets work, there might be some complicated math involved,
00:43:21
but there's nothing new happening there. portfolio management diversification. We
00:43:25
all know the studies on active versus passive management and and why sometimes you know why a certain stock or bond
00:43:31
allocation makes sense. That math has been solved. But behavioral finance is something that
00:43:36
>> as far as we can tell human brains will remain irrational for from now to the
00:43:41
end of time. Exactly. And there will always be a need for an objective, calm professional to step in and say, "Hey,
00:43:48
now's not the time to panic." >> Yeah. And and I I guess the last thing I
00:43:51
would think about on this side, one of the things that brought value to me doing this, I guess just a confirmation
00:43:57
that we were ready was for my spouse, right? She she knew I was doing this stuff and and she kind of pays the bills
00:44:02
and I do the longer term stuff. It works well, but you know, she trusts me and she's like, "Yeah, good." But, you know,
00:44:07
getting confirmation from an expert brings confidence to those that aren't really managing it day-to-day as well.
00:44:14
So there's, you know, you got to think about the relationship and the whole household, not just you as an individual
00:44:18
if you're managing your investments. >> Totally. And that that happens to me
00:44:22
once in a while, too. It happens to us. A DIYer will come to us and they say, if
00:44:28
I get hit by a bus tomorrow, just so you know, I've informed my spouse to come
00:44:32
talk to you. So, you know, here's here are my numbers. Here's my plan. Here's
00:44:36
what I've done. Sometimes they they want to sign on and work with us. Sometimes
00:44:41
they just say like as an FYI, if I get hit by a bus, you're going to get that
00:44:44
next phone call. And it's important to have that backup plan in place. So, let's talk about that glide into
00:44:50
retirement one more time. I love this quote from your book, Fritz. You encourage your readers to make a
00:44:56
decision early in the process that you're going to approach retirement with optimism, curiosity, and gratitude.
00:45:04
>> Real quick, can we dive into those those three words? Optimism, curiosity,
00:45:08
gratitude. I know you've already you've already mentioned curiosity a couple
00:45:10
times in this episode so far. >> Yeah. And and really this came from 3 months before I retired. I I wrote the
00:45:16
ten commandments of retirement. It's actually hanging on my wall back there.
00:45:19
And and they were really kind of my guiding principles on how I wanted to live life in retirement. And the
00:45:26
interesting thing as I looked as I thought through it and wrote the post and wrote the ten commandments and and
00:45:30
look at it even now 5 years later. The interesting thing to me is how many of those are mindset related. And really
00:45:36
having a positive mindset going into this, it it's almost a self-fulfilling prophecy like many things in life,
00:45:43
right? And and the good thing is all those those three things you just mentioned, those are all mindset related
00:45:49
items. And the mindset is something that for the most part we have control over,
00:45:54
right? We can choose to be negative or we can choose the glass is half empty, the glass is half full. It's your
00:45:59
choice. And making a decision that you're going to look at things from the optimistic and not polyiana unrealistic,
00:46:07
but just choose to look for the good in life can go a long way. Right? So that was kind of the basis for those for that
00:46:15
quote. And then the specific things about curiosity. You've got to fill your time with things
00:46:21
that bring you purpose and bring you how are you going to find those? Right? You
00:46:24
you're suddenly 100% responsible for it. You've always had somebody telling you
00:46:28
since you were four or five years old. You've always had somebody telling you
00:46:31
what to do and how to fill your day. Suddenly, you're responsible for it. And
00:46:36
the best way to do that is to listen to your curiosity, pursue things that interest you, take the first step. And
00:46:43
I've got just a myriad of examples of of people that have done that. And you just
00:46:48
start. My blog is one, you know, I just started writing a blog just out of curiosity. And it's turned into a major
00:46:54
purpose in my retirement. That purpose now is bringing fulfillment and reward and recognition and sense of purpose and
00:46:59
all those things we talk about. But it all started with pursuing curiosity. You know the other thing I would say about
00:47:05
gratitude, you know, recognize if you're able to retire earlier than average,
00:47:10
you're a very blessed person, right? I mean, how can you not be thankful for
00:47:14
that? And what I found is as you make that transition from your working years to what am I going to do with my time?
00:47:22
finding a way to take that time to help other people and and be gracious that you're in a position where you don't
00:47:28
need anybody else's help, but guess what? Now you're free. You can help other people. So, we started a charity,
00:47:33
my wife and I, and Freedom for Phto. We build fences for free for low-income families that have dogs on chains. and
00:47:40
the reward of not only being outside with a group of volunteers doing the physical labor and having that sense of
00:47:46
community of like-minded volunteers, but more importantly seeing the help that you can inject in a community is
00:47:52
rewarding beyond work. Again, that comes from the mindset and pursuing things and
00:47:56
seeing where they lead. That's awesome, Fritz. That's awesome. You might know
00:48:00
this by now, but my wife and I, we foster dogs, so we're big dog people. >> Yeah, I saw that in your email. Yeah, I
00:48:05
was going to mention that. Yeah. Yeah, that's awesome. We're both dog guys, so
00:48:08
yeah, that's cool. Well, first, this has been excellent, and I I'd love to put a
00:48:11
a stamp on this last question for you, and it's very much in line with what we've been talking about, but my typical
00:48:18
listener is probably in that 25 to 40 range, but that means that their parents are in that 50 to 70 range. So, if you
00:48:27
had one quick tip to give to a child of a pre-retire and then a second quick tip
00:48:34
to give to a child of a postretire, what would those tips be? >> You know, I've done hundreds of podcasts
00:48:41
and I've never had that question. That's that's a very good question. The first
00:48:44
thing that came to my mind when you said that is when I talked about depressed versus happy retirees. The chances of
00:48:50
depression are four times higher if you're divorced than if you're married.
00:48:53
Now, if you get remarried one time, the odds are the same. You're okay. But if
00:48:58
you're if you're divorced, the odds go up. What changes the odds for a divorced
00:49:03
person is how strong their social network is. And as a child, you are a key piece of that social network for
00:49:11
your parents. So, number one, support them. You know, be encouraging, show an interest, ask them what they're going to
00:49:18
be doing. You know, share a podcast with them. Say, "Hey, I just listened to this
00:49:21
guy. You know, you might be interested in him." You know, share resources. help
00:49:23
them find they're struggling with the journey whether they tell you about it
00:49:26
or not. Everybody's anxious about retirement. So try to find a way to have that discussion with them. And the other
00:49:33
thing is, you know, I'm thinking now more people that are into retirement, encourage whatever they're discovering
00:49:39
and whatever they're, you know, experimenting with, encourage them to continue to pursue their dreams and and
00:49:45
live a great life. The other thing at some point as they start getting older, make sure you have the discussion with
00:49:50
them about legacy and estate planning and things like that. A lot of kids don't. I had it with my dad before he
00:49:56
passed and it was very helpful because I heard directly from him what his wishes
00:49:59
were and after he passed. Having his input on what, you know, he would like us to do with the estate and things like
00:50:07
that gives you freedom after the fact to like we we built a uh we built a warehouse. We bought four acres next to
00:50:15
our property and we bought a big barn. But I did that because I know my dad was saying, "Look, you I know you're
00:50:19
financially set. If you receive any money from me, you might not, right? We might have spent it all. Who knows? But
00:50:24
if you get any money from me, I want you to spend it. I want you to do it for something that brings good purpose in
00:50:27
your life." And hearing his voice in the back of my head, even after he was gone,
00:50:32
was really helpful, you know, to help encourage you that that's an okay thing
00:50:38
to do. That's what he would have liked. So have that discussion with them about
00:50:41
their wishes for you, you know, after they're gone at some point. So yeah, stay engaged with them. If you've had
00:50:47
arguments with them and you've kind of got a distraught relationship, get over
00:50:51
it. You know, once they're gone, you're going to regret it if you don't. So, you
00:50:54
know, bury the hatchet, find a way to make amends, take them out to a nice dinner and say, "Look, I know we've had
00:50:58
some rough patches, but you know what? I really want to reestablish our relationship together." Because to a
00:51:04
parent, there aren't too many things in life that matter more than your kids.
00:51:08
And based on my experience, I've been a child and I've been a father. Parents
00:51:12
probably love their kids more than the kids realize. So give your parents a break and and make the first step in
00:51:18
reestablishing a rapport if it's, you know, gotten week and and make the effort to call them every week. Take the
00:51:23
time. Yeah, I know it's a hassle. It's Sunday. I'm off work. I don't want to
00:51:25
talk to mom and dad. Talk to mom and dad. Take the time to call them after you listen to this podcast. Call mom and
00:51:31
dad and just touch base with them. It It's worth it. >> I love that answer, Fritz. on a couple
00:51:36
of the estate planning things listeners you can go back to episode 55 the title was conversations with aging parents and
00:51:43
was all about that kind of topic >> but uh I really like that Fritz where you know most of those tips most of
00:51:49
those conversations had to do with the non-financial side of retirement and that really is such an important thing
00:51:54
so Fritz Gilbert of the Retirement Manifesto thank you for coming on the Best Podcast
00:52:00
>> hey Jesse I really appreciate it love your show and love what you're doing and
00:52:02
I'm really honored to be on it I appreciate it very much >> thanks for tuning in to this episode of
00:52:07
Personal Finance for Long-Term Investors. If you have a question for Jesse to answer on a future episode,
00:52:12
send him an email over at his blog, The Best Interest. His email address is [email protected].
00:52:19
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00:52:32
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00:52:36
for Long-Term Investors. Personal Finance for Long-Term Investors is a personal podcast meant for education and
00:52:43
entertainment. It should not be taken as financial advice and it's not prescriptive of your financial
00:52:48
situation.