Carving Out a Robust Retirement Spending Plan

So you’ve scaled the mountain, built the nest egg, and maybe even shouted “I’m done!” across a pristine beach… now what?

In today’s Stacking Benjamins episode, Joe Saul-Sehy convenes a roundtable of heavy-hitters to tackle the most misunderstood phase of money management: decumulation—a.k.a. the art of spending what you’ve worked so hard to save. Whether you’re staring down retirement or already deep into your golden years, you’ll hear candid, practical insights from three financial thought leaders who specialize in making your money last.

Joining Joe are Dana Anspach, retirement planning expert and founder of Sensible Money, Karsten Jeske (aka “Big ERN” from Early Retirement Now), and Frank Vasquez (aka Uncle Frank), host of Risk Parity Radio. Together, they bring decades of academic research, professional experience, and plain old common sense to questions like:

• What’s the real safe withdrawal rate—and why does it depend on more than just spreadsheets?
• Should you chase simplicity or embrace complexity in managing retirement funds?
• What role do annuities and guaranteed income play in reducing late-life anxiety?
• How do you plan for cognitive decline without spiraling into existential dread?
• What’s the difference between spending confidently… and spending carelessly?

You’ll also hear why lumpy expenses, long-term care surprises, and behavioral quirks can trip up even the best-laid plans—and how to bulletproof your strategy now.

And yes, we get nerdy. Risk parity, sequence of return risk, and portfolio glidepaths all make guest appearances—but always with your favorite Stacking Benjamins charm and plain-English style. Because retirement doesn’t need to be scary… but it does need to be intentional.

• Why your investment approach needs to evolve once paychecks stop
• The strengths and blind spots of the “4% rule”
• How emotions (not just inflation) affect safe withdrawal strategies
• When it makes sense to annuitize, and when it absolutely doesn’t
• How to adjust for cognitive decline in your financial plan (and still maintain autonomy)
• The “spend conservatively early” myth—debunked
• Tips for managing healthcare and other unpredictable late-life costs

Whether you’re a retiree, a pre-retiree, or a spreadsheet-loving financial independence buff, this deep-dive episode will give you the confidence to manage the second half of your financial life like a pro.

This isn’t just about stretching your dollars—it’s about building a life worth spending them on.

So grab your planner, pour a cup of whatever says “retirement-ready” to you, and let’s get smarter (and maybe just a bit weirder) about your golden years.

Deeper dives with curated links, topics, and discussions are in our newsletter, The 201, available at https://www.StackingBenjamins.com/201

Enjoy!

---

• 

• 

• 

• 

• 

• 

---

Our Topic:

Strategies and pitfalls in retirement portfolio withdrawal

During our conversation, you’ll hear us mention:

• Retirement spending
• Withdrawal strategies
• Sequence risk
• Asset allocation
• Behavioral finance
• Annuities
• Guaranteed income
• Cognitive decline
• Portfolio simplicity
• Tax efficiency
• Cash reserves
• Bucket strategy
• Social Security
• Pension planning
• Market timing
• Risk tolerance
• Investment complexity
• Longevity risk
• Required minimum distributions
• Tax-deferred accounts
• IRMAA impact
• Emotional investing
• Power of attorney
• Intergenerational planning
• Financial advisor value

---

Our Contributors

A big thanks to our contributors! You can check out more links for our guests below.

Frank Vasquez

Another thanks to Frank Vasquez for joining our contributors this week! Hear more from Frank on his show, Risk Parity Radio, at Risk Parity Radio – Podcast – Apple Podcasts.

Learn more about Frank by visiting his website at Home | Risk Parity Radio.

Dana Anspach

Another thanks to Dana Anspach for joining us. To learn more about Dana and her firm, visit her website.

Doc G

Another thanks to Karsten Jeske for joining our contributors this week! Hear more from Karsten on his show, Early Retirement Now with Karsten “Big ERN” Jeske, Ph.D. CFA at Early Retirement Now with Kars… – Richer Soul – Apple Podcasts.

Learn more about Karsten by visiting his website Early Retirement Now – You can’t afford not to retire early!

---

Join Us on Monday!

Tune in on Monday when we discuss how you can lean into AI.

---

Miss our last show? Check it out here: The Shocking Retirement Hack That Has Nothing to Do With Money (SB1697).

Written by: Kevin Bailey

Episode transcript

STACK 06-20 Decumulation -steve

[00:00:00] Doug: He got me invested in some kind of root company. And so then I got a call from him saying, we don’t have to worry about money no more. And I said, that’s good. One less thing.

[00:00:17] Doug: Live from the basement of the YouTube headquarters. It’s. The Stacking Benjamin Show.

[00:00:32] Doug: I’m Joe’s mom’s neighbor, Doug. And what’s the best way to take money from your portfolio during your retirement years? We are talking d Cumulation with three top minds from the retirement planning community, from how to frame your retirement spending to setting up your assets for the most success and all the way to safe withdrawal rates.

[00:00:52] Doug: We are covering as much as we can cram in today. That’s right. No trivia challenge, no game show, just a guide to help you plan out how to rethink that retirement years portfolio and spending plan. And now a guy whose spending plan is all focused on exploring the world, it’s Joe Saul. See, hi. 

[00:01:16] Joe: Hey there, stackers, and happy Friday to you.

[00:01:18] Joe: I’m super excited that you’re here with us, Doug. You got that right? I, as you’re listening to this, am just ending, what I’m sure is gonna suck as we record this, I’ll just be coming home from Greece, which I, ugh, I don’t know how I’m gonna even do that, but I am, uh, not there yet as we record it because we’ve got this important discussion about retirement.

[00:01:39] Joe: So let’s meet our contributors. Let’s start with the closest thing to a regular that we have on this Bill. Dana SBAs here from Sensible Money. How are you, Dana? 

[00:01:50] Dana: I’m doing great, Joe. And this is one of my favorite topics. As you know, I love all things that have to do with decumulation, that word that oftentimes they tell us we’re not supposed to use because it sounds so scary.

[00:02:04] Joe: Oh, but, but you know what’s funny, Dana, if you do it wrong, and we’ll get into this a little bit, it can be scary. 

[00:02:09] Dana: Absolutely right. You, you work hard to save this nest egg and then one day you’re supposed to draw it out. And I have very sophisticated people I’ve worked with that honestly, they get terrified about taking that first withdrawal.

[00:02:21] Dana: So it is scary no matter how well you do your planning. I think fundamentally it’s scary. 

[00:02:27] Joe: I think in this case a little bit of fear is good ’cause you really need to plan how to change your portfolio, which we’ll dive into today. By the way, the million dollar question, Dana, for people. That are not hanging out with us on YouTube.

[00:02:39] Joe: You’re always walking and talking. You’re not walking today. What’s going on? 

[00:02:42] Dana: I’m not, I needed a break. I am planning for a big hiking trip in the Swiss Alps and uh, I’ve had enough walking for a while. 

[00:02:52] Joe: She’s like, and cut. I’m not gonna do it. Generally people that are new to the Stacky Benjamin show, Dana’s on like a walking treadmill.

[00:03:00] Joe: Like walking, uh, walking desk or walking. Yeah. And I, and I’m 

[00:03:02] Dana: actually sitting on that treadmill on a stool right now that tells you my feet have had enough. I need a break. 

[00:03:09] Joe: Perfect. Well, and and these next two gentlemen, let’s start with a guy who I’ve known for a few years. We met at a campfire outside of San Diego.

[00:03:19] Joe: They call him big er. He’s Karsten Jetski from Early Retirement Now Karsten Jetskis here. How are you man? Thanks for having me. I’m doing great. I’m getting ready to travel soon too. So we’re all traveling. So we got the Alps, we got Greece. Where are you 

[00:03:32] Karsten: going? We are doing two, or actually three big trips.

[00:03:36] Karsten: We’re gonna do a cruise to Alaska. Uh, also spend a few days in the Olympic Peninsula, then fly to Asia for four weeks and come back to home again for a few days. And then we take another trip, we fly to New York City and then take a cruise ship from New York to Nova Scotia, Greenland, and Iceland, and then fly back from Revic and uh, check out the Blue lagoon there too.

[00:03:58] Karsten: And, uh, so it’s gonna be pretty packed summer. So what are you doing, man? I mean, you were never home. Yeah, I mean, and uh, we were thinking about, uh, basically renting out the place, but there’s HOA rules against that, so can’t do that. Oh yeah. Or at least I won’t tell it publicly. So if I ever do it, I have to keep it a secret.

[00:04:15] Joe: That is the perfect money nerd thing, though. I was thinking about Airbnb. Yes, but I can’t, like, our first thing is that I’m gonna enjoy my vacation. The first thing is, is how can I go on vacation and profit from it? At the same time. That’s, uh, and, and now for, because it’s your first time here, all of our uber nerds in the financial independence, retire early space, know what you do, but tell everybody else in stacker land karsten what you do as, uh, big earn.

[00:04:41] Karsten: Right. So I started blogging in 2016 and I blog a lot about safe withdrawal rights, but it’s not the only thing. So it’s not like I’m a one trick pony. I do some other stuff too. I just write about anything in personal finance. I write sometimes some economics commentary too. So option trading is probably maybe my second favorite topic to talk about, but that’s a whole different story.

[00:05:03] Karsten: But, uh, yeah, I mean, my background is in finance and I retired from that, but of course, you, you can never. Let go of that hobby. So you’re still involved? I still look at the market every day. It’s, it’s almost like reading People magazine, right? Uh, so you keep up with your gossip here and there and, and for me it’s like a people magazine, but with stocks and inflation reports and GDP numbers and uh, so that’s very sexy stuff.

[00:05:26] Karsten: That’s my hobby. 

[00:05:27] Joe: Very sexy stuff 

[00:05:29] Karsten: for money 

[00:05:29] Joe: nerds. You know, Carsten, actually, the only reason I had you here was to chide you for writing at Early Retirement. Now about calling me a small cap value fanboy. Oh. 

[00:05:38] Karsten: Oh, okay. I wanted to have 

[00:05:39] Joe: you here to chide you for that. 

[00:05:42] Karsten: A fanboy of anything. I’m like, 

[00:05:44] Joe: what the hell, man?

[00:05:44] Karsten: I thought I, I don’t know how I put you into this camp. Maybe you had some comment on some Facebook thread somewhere where, where I misread something you said there, so I apologize for that. I said 

[00:05:54] Joe: you should have some small cap value. And all of a sudden it’s like I have Duran Duran posters, but they’re small cap value decorating mom’s basement here.

[00:06:04] Joe: Yeah. And another guy who got called by you, a small cap value fanboy, I think he’s the host of Risk Parody Radio. He and I have been in the same room like 57 times, but we’ve never, ever actually shaken hands, so it’s about time. Frank Vazquez is here. How are you, uncle Frank? I am doing well. I’m doing well.

[00:06:22] Joe: Well tell everybody about risk parity radio because you take this topic we’re talking about today and you deep dive. 

[00:06:29] Frank: Yes. Well, it’s my retirement hobby. I started it in 2020. All we talk about are, uh, portfolio strategies, particularly for do it yourself investors who are in their decumulation phase. I end up having lots of conversations with listeners.

[00:06:47] Frank: I, it’s a solo podcast. It’s just, it’s just me and Mary. It’s, it’s not commercial, but we do support a charity that I also sit on the board of which it takes up a lot of my time, which is called the Father McKenna Center. We are having a matching promotion for the Father McKenna Center. ’cause one of my listeners decided to donate, put up $15,000 Sweet to get other listeners to match.

[00:07:10] Frank: And so we are, uh oh, I love that we’re pumping that now. And, and the money’s rolling in. So, uh, it’s a great charity. It port’s hungry and homeless people and Washington, DC and has about a thousand volunteers every year with, uh. They’re high school students and college students mostly. So 

[00:07:27] Joe: that’s fabulous, Frank.

[00:07:29] Frank: Yeah, that’s fantastic. Those two things are integrated with with what? And by the way, doing 

[00:07:33] Joe: and, uh, risk Parity Radio, I think is the only podcast with more sound effects than the Stacking Benjamin show. 

[00:07:39] Frank: Oh, yeah. Well, I. I, I learned from you. I learned from the best. 

[00:07:43] Joe: Let’s stop, keep going. Stop, stop, stop.

[00:07:46] Frank: Yeah, no, I and my listeners now like send in their emails designed to get one, a particular one. A perfect. Of course, one of the most favorite ones is Homer Simpson saying, you have a gambling problem, which is what I play whenever somebody starts talking about leverage. I’m like, 

[00:08:05] Joe: whenever Hear Carsten talking about options.

[00:08:07] Joe: That’s what you play right then? Yeah. Well, he has a gambling problem too. 

[00:08:12] Karsten: My favorite one is, I award you zero points and may God have mercy on you. I might say that a few times today, 

[00:08:21] Joe: and Dana, I accidentally assumed everybody knows what you do, but I skipped over that. But you work specifically with people that are either entering this phase or they’re in this accumulation phase.

[00:08:32] Dana: Yes, so my company, sensible Money, works almost exclusively with people transitioning into retirement. We wish people would start working with us five to 10 years out from their retirement date, but oftentimes it’s, you know, the year before, three years, four days before. Yeah. And so we work with the people who wanna delegate, or people who have been do it yourselfers, and then the complexity of retirement.

[00:08:57] Dana: It, it does get more complex at that point, and so they decide maybe it’s time for them to delegate. I’m a big fan, though, you know, whether you do it yourself or want someone to help you do it or delegate, it’s all if, if you’re following good principles at the root of it. Good advice is good advice. 

[00:09:15] Joe: I’m thinking with the three of you.

[00:09:17] Joe: We’re gonna get some great advice today for our stackers. Whether you’re 35 and you’re just beginning to think about this, it’s great to know ahead of time where you’re headed or you’re there. Now we’re gonna have a great discussion, so can’t wait to dive in with Dana, Carsten and Frank, we’re gonna kick this off in just a second, but we’ve got a couple sponsors that make sure we can keep on keeping on and you don’t have to pay a dime for these wonderful people that we bring to you today.

[00:09:43] Joe: So we’re gonna hear from them. And then let’s talk Decumulation phase. I should, we should play some, Dana, some music based on the fact you said that scares people. 

[00:09:54] Dana: Uh, yeah. Do we need like Halloween scary music? 

[00:09:56] Joe: Yeah. C Come on Steve, give us that music.

[00:10:12] Joe: Well, I think to really kick this off, Dana, let’s start with you because you have to kind of define this with regular people when they walk into your office, you know, maybe they’ve been saving for a long time and they’re, they’re like, okay, I just do more of the same. When somebody first walks into your office and they’re on the cusp of retirement though, what’s the first thing you want them to understand about changing their portfolio so they can start spending down their money?

[00:10:36] Dana: Yeah, I think one of the first things to know is that what got you here may not be the best portfolio to get you there. Portfolios are constructed with goals and objectives in mind, and a portfolio for accumulation is built around a certain set of risk and return metrics. And a portfolio built for sustainable cash flow will actually have a different set of metrics.

[00:11:00] Dana: So there’s an analogy I use sometimes around sports cars, or actually more than sports cars. I am still in a Ferrari portfolio. I am currently a hundred percent equity. I’m more than 10 years from retirement. I’m comfortable with equity risk. I wanna maximize returns for a given level of risk, and I’m very comfortable with risk.

[00:11:21] Dana: But as I get closer to retirement, my portfolio will change. And what should it look like? So using a car analogy, you could go with an economy car, right? You could say, well, that’s maximum fuel efficiency. Maybe that’s more conservative, right? I’m gonna use the least amount of fuel along the way, and I wanna see if I can maximize what I leave to airs one day.

[00:11:42] Dana: But that portfolio may not be the right one to get you through stormy weather. And so the one I like for retirement is more like the SUV. And it may not be the most fuel efficient, it may not be the fastest, but you don’t know what kind of weather you’re gonna encounter. You could have a big storm, you could have mud, you could have snow, you could have rain.

[00:12:03] Dana: And so you need a portfolio that can get you through all kinds of terrain. And thinking that way is different. And I find that some people struggle with making that shift. They still wanna go find the latest stock or the latest way to boost their returns, and that may not be the right lens to view retirement through.

[00:12:21] Joe: I love that analogy because we also don’t know where the journey’s gonna head. I mean, we don’t know what terrain is coming ahead and we’re gonna dive into that in a second. I wanna ask before we get into numbers and planning though, about this emotion. ’cause there’s really frank, there’s an emotional shift that happens here.

[00:12:38] Joe: You and I at conferences, we see these people that suffer from one more year syndrome, right? Yeah. I mean that’s an emotional thing. How hard is it for somebody to shift from this? I’ve been saving my whole life mindset into a spending mindset. 

[00:12:52] Frank: It varies from person to person, but uh, Morgan Howell has actually an interesting term for this.

[00:12:57] Frank: He calls it frugality inertia, and it’s gonna be featured in the book he’s got coming out, which is about the art of spending money. It’s coming out in October. 

[00:13:06] Joe: I love it. Frugality, inertia, 

[00:13:08] Frank: yes. That pertains particularly to people who have spent most of their life saving money and just changing their focus and changing their.

[00:13:17] Frank: Goals, if you will. I, I think is very difficult for a lot of people, particularly if they’ve been really good at saving money because you kind of, you feel better watching the number go up. Sure. But it can become like this idol that you just worse, oh, numbers gotta go up and, and that’s what’s important.

[00:13:35] Frank: I’ve seen your presentations about a guy just sitting in front of the TV watching C-S-N-B-C all day long. Oh God, yeah. That’s not, that’s not a good way to live your retirement. That you need to come to a conclusion in your head that you actually do have enough and stop with that. And then start focusing on how can I best deploy or spend these resources over the rest of my life to usually maximize relationships is what you’re really trying to do.

[00:14:00] Joe: A hundred percent. And Carsten, I love the point that Frank made. You know, when you’re looking at safe maximum withdrawal rate, you can tell somebody, I remember when I was a financial planner, I could tell somebody that I’ve calculated this out and you’re gonna be okay. But watching your number drop from month to month to month to month to month still manages to scare the hell out of people.

[00:14:22] Karsten: Yeah. And that’s why everybody’s afraid of, of retirement. So the analogy that I would use is you are in a canoe, and if you are accumulating, you are paddling downstream, right? Sometimes the stream just takes you, you don’t, you don’t even have to paddle. Sometimes you paddle, which would be your contributions.

[00:14:40] Karsten: And uh, retirement is like, you are now paddling upstream and there’s a waterfall behind you. Okay? Yeah, you could stop paddling and it will take you backwards and you kind of cross your fingers that, uh, you die before you go over the waterfall. It’s exactly 

[00:14:55] Frank: comforting. 

[00:14:57] Karsten: And that would be the, the analogy, and this is why it’s so scary in retirement, right?

[00:15:01] Karsten: Because it’s the same asset market. It’s the same tools that you use, you use the same stock portfolios, the same stock mutual funds, the same bond mutual funds as during accumulation, but by shifting around, uh, from accumulation to Decumulation, that’s where the scary part starts. And I also believe that, I mean, a lot of people don’t retire because, yeah, I mean, they’ve heard about the 4% rule and they kind of, sort of agree with it.

[00:15:26] Karsten: I’ve actually had some success in telling people, look, I’ve run these retirement simulations and you would’ve survived the Great Depression or the 1960s and seventies, and if you survive that, you’re going to survive the next garden variety recession too. And there were some people that retired and they said, yeah, I mean, I, I wasn’t quite sure, but Big Earn said, I’m, uh, I’m good to go.

[00:15:48] Karsten: And uh, then they did retire. So I think in some way the math sets you free and makes you confident to retire, whereas trying to wing it, which is what some people do, and some people do it in our community, in the fire community, and they can afford it, right? Because they’re still making money off of their blog and everything.

[00:16:07] Karsten: Uh, they don’t even have to withdraw much from their portfolio. And then they tell people, oh, oh, don’t worry about it. I’ll do 4%. And, and everything falls into place. Yeah. But the average typical person, right, the 99% of fire enthusiasts, they still have to take money out of their portfolio. And that’s a big step.

[00:16:23] Karsten: And so as, as I said, so the math sets you free and at least it helps for some people, maybe not for everybody. I 

[00:16:28] Frank: think that’s important. That idea of stress testing, I’m sure you probably used that Dana too, saying what is, let’s look at the worst times to retire and see what would’ve happened with this plan.

[00:16:37] Frank: We’ve, uh, come up with. 

[00:16:40] Dana: Yeah, I mean, the math does set you free. I’ve never used that line before. I like it. I think there’s some inherent biases in math that people don’t understand when it’s simple math, like the 4% rule. And unfortunately, as you start to use more complicated math, that may get you better answers.

[00:16:56] Dana: It becomes more challenging for people to understand the math. 

[00:16:59] Joe: Yeah, a hundred percent. And I’m gonna wanna cover the 4% rule cover. Actually what this idea, frank of risk parody even is safe withdrawal rates. But before we get to any of that, Carsten, you said surviving the seventies, are you talking about surviving a bad market or surviving disco?

[00:17:16] Joe: Like which, what are we, what are we referring to here? Stand alive. Frank’s like what? Disco died. Whatcha talking about? 

[00:17:25] Frank: It’s 

[00:17:26] Karsten: all coming back. It’s all coming back. It is. Yeah. So I mean, obviously I was talking about, and, and again, it’s the late sixties, early seventies. Sure. It’s the Great Depression, uh, who knows what’s ahead for us, right?

[00:17:37] Karsten: Because we have very expensive equities and, um, just when people get complacent, right, and they say that, oh, well, now we don’t have to worry about any, uh, blow up in the stock market anymore. That’s when things get the most, the most dangerous, right? So in some way, my blog. Is a little bit of a countercyclical blog, right?

[00:17:56] Karsten: Where if the stock market drops a lot, then everybody wants to book me on the, on the podcast. And so is fire finished now. And that’s actually when I tell people, well, now we have the least to worry about, right? Because the stock market is already down. I mean, as as we are recording this, we are actually close to the all time highs again.

[00:18:13] Karsten: But normally when people want to talk to me is when the stock market is 20, 30% down. And then I tell people, yeah, I mean, now is a great time to retire and the 4% rule is super safe because what are the odds that we tag on another great depression on top of the, the 20% drop already? So well, but still 

[00:18:28] Joe: Carsten, we did it a history show a couple weeks ago.

[00:18:31] Joe: Mm-hmm. And we were talking about some of these long periods that we went through. Right. And you know, you have these people out there that always say, buy the dip, or don’t worry, it’ll come back. Right. And in some of these big time, long, long, long downturns, I mean, there was good news and bad news. The good news is it came back but in one stretch.

[00:18:49] Joe: It came back 16 years later, like, I can’t imagine data going, I got some good news. You hang in there for 16 years, you’re gonna be back to zero. That is ugly. But I wanna bring in these terms that we’ve been throwing around. Frank. Let’s talk risk parity. So risk parity often seen as this alternative to the, you know, traditional like 60 40 portfolio.

[00:19:08] Joe: Another rule of thumb portfolio, right? Why might somebody consider risk parody during their decumulation period? 

[00:19:16] Frank: Uh, well, to go with Dana’s analogy, I’m, I’m trying to build a Toyota for runner to take into retirement. Basically, the colloquial use of risk parody now is for a portfolio that is focused really on what is called Ray Dalio’s Holy Grail principle, which is a principle of diversification, looking for the most uncorrelated assets to combine.

[00:19:44] Frank: So a basic idea from those principles would be. Looking at our bonds in our portfolio, what kind of bonds do we wanna have? And so your question is, well, what kind of bonds are less correlated to all the other things we have, which are mostly stocks? The answer is US treasury bonds. So those are the kinds of bonds we would wanna have, and that would be the kind of choice we would make on that.

[00:20:04] Frank: So it puts a preeminence on the diversification of the assets themselves and combining them in that way. So these portfolios typically have a stock allocation, a treasury bond allocation, and then some allocation to alternatives, which usually, well, let me go ahead. Lemme 

[00:20:24] Joe: make a statement, Frank. Can you tell me if this is right or not?

[00:20:27] Joe: So instead of a portfolio where you have more money in cash to manage risk, a lot of cash, you’re managing risk by keeping money in things that have the ability to grow, but matching them with things where it’s like an engine, one part goes up, one part goes down. So you’re not sing the portfolio even though you’ve got more, uh, more upside potential.

[00:20:48] Frank: Yes, exactly. So I want an asset allocation that’s like my four wheel drive and one that’s like the fog lights, so that when looking at a portfolio over a span of years, there’s always something that’s going up in it. Not just sitting there in cash, but always going up. The reason cash causes a problem goes back to Bill Benin’s research in the 1990s, which was if you have too much cash in a portfolio, it tends to cause what’s called a cash drag, and that number seems to be around 10%.

[00:21:19] Frank: Once you start going over that, your safe withdrawal rate generally declines, and what I try to build is portfolios that have the highest. Historical and projected safe withdrawal rates. Um, I’m, that’s, that’s the ultimate goal. 

[00:21:33] Joe: And I’m laughing Frank, because back when I was a planner, people would come into my office and I, I would be like, why do you have so much cash?

[00:21:39] Joe: And they go, because I want to be safe. And I said, well, you’ve got some good news. You’re safely not gonna achieve any goals. 

[00:21:45] Frank: Yeah. You’re, you’re, you’re, you’re, you’re gonna be very safe for the next five to 10 years, but 20 years, hence, uh, you may have a growth problem or another problem going on there.

[00:21:54] Frank: You’re gonna 

[00:21:54] Joe: safely buy less bread for the rest of your life. Yeah, 

[00:21:57] Frank: yeah. No, but it’s, but it’s interesting. One of the other things you said, you know, you might have as long as a 13 year downturn. Yeah. The difference between this kind of portfolio is specific to that, that if you look at, say, a 60 40 portfolio or a simple stock bond bogle head thing that will have a drawdown say from 1999 to 2013 of like 13 years, if you take a portfolio, a risk parity style portfolio, the maximum drawdowns you’re gonna see are three to four years.

[00:22:27] Frank: And instead of having a 40% decline, you’re gonna be looking at more like a 20% decline. Both of those things play directly into a higher, say, withdrawal rate. So that’s if you’re, if you’re just looking at portfolios, if you know what their maximum drawdowns are in terms of length and, and in terms of depth.

[00:22:48] Frank: You know, whether that’s going to be, is that an SUV or not? That’s what the SUVs look like. 

[00:22:53] Joe: I love the analogies. I like the SUV, I like the canoe. The canoe scares me with the waterfall a little bit. But, but like, we, like, we open with, 

[00:23:00] Frank: at least you get a paddle. 

[00:23:03] Joe: Yes. I like, we open with, you need to get a little more scientific here though.

[00:23:07] Joe: And so having that waterfall behind you, if you’re not scientific, I think there’s a, you know, there’s kind of a safe here. All right, Carsten, let’s go to you. Dana brought up the 4% rule. So you’ve done one of the deepest dives in safe withdrawal rates in history, I think, what do most people get wrong when they hear this 4% rule?

[00:23:24] Karsten: So first 4% rule is not gospel, it’s not written in stone anywhere. I think the 4% rule has to be customized in at least two dimensions, right? First is your personal preferences, right? Your parameters if you retire today. And you’re in your early thirties and you don’t expect any social security, any, any supplemental income, you probably have to take down the 4% rule because just because your horizon is much longer, you don’t expect any supplemental cash flows.

[00:23:53] Karsten: Again, and I’m not talking about the fire influencers, what I’m talking about every day, early retirement enthusiasts, they might retire in the mid to late forties, early fifties. They have social security around the corner. Uh, if you factor in future supplemental cash flows like social security pensions, if you can factor in something like a spending reduction, right?

[00:24:15] Karsten: I mean, you have the go years, the slow go years and the no-go years. Uh, especially a lot of the high income and high net worth early retirees, right? They might retire and have a retirement budget of 150 or $200,000. Well, they’re probably gonna scale that down when they’re later in, they’re 7 75, 80 years old, and may not be true for the early retirees who retire at age.

[00:24:39] Karsten: 28 with $500,000 in the Stockport for them, it might go the other way around. They might spend more as they age. But I’m talking about are, wait a 

[00:24:46] Joe: minute, wait a minute. Hold on. I gotta stop there for a second. Are you implying Carsten, that a 28-year-old with half a million dollars, who promises you they’re happy?

[00:24:55] Joe: Sleeping in a tent in the woods for the rest of their life might change their mind later? Is that what you’re inferring? 

[00:25:01] Karsten: Right. I mean, maybe they will not sleep in the tent anymore when they’re 67. So I, again, I’m walking out on Olympia 

[00:25:07] Frank: eating a steady diet of government cheese and living in a 

[00:25:10] Karsten: van 

[00:25:11] Frank: down by the river.

[00:25:13] Karsten: Right. Sorry 

[00:25:14] Frank: to interrupt you. 

[00:25:16] Karsten: It had to be said Frank. So. You customize your withdrawals and you factor in some of these personal parameters, uh, boom. Your withdrawal rate might go up quite substantially. You might go from maybe the mid threes to the mid fourths. Uh, and then the other way you want to customize your retirement is looking at, uh, market conditions, right?

[00:25:35] Karsten: You have a very different safe withdrawal rate. If the cape ratio is at 30 versus at 12, uh, equity valuations matter. Uh, the probability of a big market blowup is a lot. Worse in today’s Cape environment than, uh, if the market has already fallen and the cape is in the single digits. Okay, hold on a second, Mr.

[00:25:54] Joe: Jetski. Because either a, I’m gonna have to edit that out, which I’m not gonna do. I’m saying this because, because for our stackers, all of a sudden you just said cape ratio, like, it’s like it’s nothing. Just threw this out there. If your cape is this, what the hell does that mean? What are you talking about?

[00:26:10] Karsten: Cape is the cyclically adjusted price earnings ratio. So it’s a valuation measure. Uh, how many multiples of average past earnings is the s and p 500 trading at right now? So in the high cape ratio, say in the high twenties, uh, or thirties, seems expensive and has higher probability of a big recession on bear market around the corner.

[00:26:30] Joe: So this is a, this is a risk measure. This is a measure of risk in the market. 

[00:26:33] Karsten: Um, it’s both, it’s a risk and a valuation measure, right? Sure. So it’s a risk measure in the sense that, so in, in some way, I mean, some of the calmest markets have been around the time when the cape was really high. But it’s kind of the calm before the storm, obviously, right?

[00:26:48] Karsten: So, uh, before every major market blow up, uh, the Great Depression, uh, the Cape was I think at just about 30, uh, right before the.com bust. It was about 40. Uh, and right now I think the original Shiller cape is somewhere in the mid thirties. I have a blog post where I do a few adjustments to make it more comparable across time.

[00:27:06] Karsten: Uh, but it’s still historically in some of the, the highest percentiles of, of historical valuation observation. So, and again, I’m not predicting that the market will blow up tomorrow. Uh, what people will tell you, and I have worked when, when I worked in the industry, these valuation measures are terrible at timing stock versus bond allocation say over the next quarter or year.

[00:27:28] Karsten: But they are actually extremely highly correlated with equity returns, say over the next 10 years and, well, 10 years, that’s exactly this, this danger zone. If you have a bad bear market during the first 10 years, uh, right out of the gates in retirement. That’s what’s called sequence of return risk. So that’s exactly the timeframe, uh, where you want to be careful early in retirement.

[00:27:52] Karsten: And so it correlates so beautifully. I, I once presented a chart at the economy conference, uh, a few months ago where you have a, uh, where I plot the earnings yield. So it’s one over the cap ratio versus the subsequent 30 year withdrawal rate. And you have a correlation of 0.8. That’s just insane, right? So something that is observable today has a correlation with how the market works out tomorrow.

[00:28:15] Karsten: Maybe not the buy and hold portfolio, but the retirement portfolio. 

[00:28:19] Joe: Let me see if I can put my arms around. Hold on car. Lemme see if I can put my arms around what you just said. High cap ratio means we probably should expect a lower rate of return from our portfolio over the next several years. And we can’t predict that today.

[00:28:30] Joe: We can’t predict that tomorrow. But using a more conservative number is gonna be a better idea because of some sort of version of the mean. Right, right, exactly. Gotcha. 

[00:28:40] Dana: But you know I few thoughts cross my mind while you were saying that one, was it Bears emphasizing that that ratio is referring to the s and p?

[00:28:49] Dana: So if you have a globally diversified portfolio. That rationale may not apply to you as much as if you truly just owned the s and p. And so there are many other sectors in the market that have different valuations. Um, much lower valuations in the s and p right now doesn’t guarantee us anything, but it just, I see the media and, and sometimes us as professionals talk so much about the s and p and that’s 500 stocks in a globally diversified portfolio with a few.

[00:29:19] Dana: Broad index funds could have exposure to 13 or 14,000 stocks across the us. So, but it’s highly correlated. You have to keep that right. 

[00:29:26] Karsten: It’s, it’s highly correlated. So, uh, when I worked in the industry, for us, the US market was the s and p 500. Because you have s and p 500, you have the most liquid market in options in futures.

[00:29:38] Karsten: And I can see that people would complete the portfolio with basically the, the Russell 2000 and have some additional mid cap at small cap stocks. And then on top of that, just because you have lower multiples in other countries doesn’t mean that they are particularly safe, right? I mean, if we go through another bear market in the us our Cape goes from 30 to 15 and the European cape goes from 20 to 10, right?

[00:30:03] Karsten: So it’s not like the European capes that are 20 right now, that they are so much safer than our. Domestic cape. So I, I see that. Yeah. I mean obviously there’s, uh, and, and by the way, the best time to diversify internationally was yesterday. It was actually end of the year last year. Right. Because there was a pretty nice recovery Yeah.

[00:30:21] Karsten: Of some of the underperformance in, in international. So German stocks, I’m from Germany originally. I’m very happy that, uh, German stocks made up a little bit of that lost ground. But I mean, you look at some of the GDP numbers from our neighbors and from other, uh, large, even developed countries, uh, I mean, they haven’t grown.

[00:30:35] Karsten: I mean, Germany has hardly grown since 2017. 

[00:30:38] Joe: Sure. Well, you look at that long stretch, right? The long stretch where Japan didn’t grow. I mean, every country has their own issues. It’s so funny. Karsten, you always give me so much to grab onto because. There are times, and Carsten knows this ’cause we fight at conferences, like there were 30 things in there that I just wanna wring your neck, my friend.

[00:30:57] Joe: I just Absolutely. I just absolutely love it. Hold on just a second, Frank. Sure. But the thing that’s interesting though to me is what you said about the beginning of the year, I mean this case that Dana, that you’re talking about, about diversification. I remember at the beginning of the year in all of these online forums, people saying, should I dump all my international stocks?

[00:31:15] Joe: Which is maybe the perfect reason to load up on international stocks is because everybody else is talking about dumping them. And so we did a show back in January about the whole case for international and then one again, two weeks ago about how to build that in for all the people that might have done that.

[00:31:31] Joe: Frank. 

[00:31:32] Frank: Yeah, just a, a few thoughts. I, I agree with Dana that to the extent this is a problem, it is best addressed by diversifying the portfolio better. I. If you do a very simple thing, which is split your stock allocations into growth and value, whether they’re domestic or international, that itself will have a profound effect on making your retirement portfolio better.

[00:31:58] Frank: Because what you see is in years like 2022, when the growth stocks were down over 30%, you had the value stocks. Some were down 10%, some were up 10%. If you have an allocation like that, that is. Really well diversified. What you end up doing then is selling the thing that does better, buying more of the thing that did low when you rebalance the portfolio and you get a rebalancing bonus out of it.

[00:32:26] Frank: And that has been especially true. And the last really bad period that we have in our lifetime is retiring at the end of 1999. And the problem there was that you saw market goes down for three years straight, but if you held value stocks in that, there were years that it went up. That it really solved this problem.

[00:32:48] Frank: And if you hold that kind of an allocation, your cape ratio, your ratio and your portfolio is going to be lower. It’s just a more stable SUV like allocation to it. 

[00:33:01] Joe: Again, more reason to apply little signs to this. Yeah. Versus just hit it head on. 

[00:33:06] Frank: That’s why you don’t want to just be holding the s and p 500, right.

[00:33:08] Frank: As your allocation. 

[00:33:09] Karsten: Well, the s and p 500 has growth and value. Yeah. But it has in half shares. Well, hold on guys, we’ll get 

[00:33:15] Joe: into, okay. We’ll get into your ideas for portfolios here in just a second because I do want to, 

[00:33:20] Frank: I did have one other follow up on that, um, which is the idea that you can use the cape ratio to predict things has been a big failure for the past 15 years.

[00:33:28] Frank: It really has been a huge failure and everybody that’s tried it spot, whether it’s Vanguard, it’s on spot on, or cars and again or any No, no, no, no. I’ve shown, 

[00:33:38] Karsten: I mean, no, see, you, you can’t just pick one single date. There’s a whole cluster of dots in a scatter plot. Right. Actually, what it looks like you picked is 2011, but you predicted, and in 2011, you 

[00:33:49] Frank: predicted 10 years ago that this was gonna be a bad period and that we won the best period.

[00:33:53] Frank: No, I didn’t. 

[00:33:54] Karsten: No, I didn’t. First, 10 years ago. I wasn’t blogging 10 ago. Wait a minute. 

[00:33:57] Joe: Hold on a second, Frank. Let’s give Karten a chance here. Hold on. 

[00:34:00] Karsten: So, 10 years ago, I, I wasn’t blogging and it goes back to exactly what I said. The cap ratio is a terrible variable for timing stocks versus bonds or timing stocks for the next, uh, few years.

[00:34:12] Karsten: But there has been a huge correlation between valuations and subsequent 10 year returns and valuations and subsequent 30 year retirements. And you can just pin it at with 150 years of data, and then you just cherry pick a few dots here and there. So 2011 is the one dot that you brought up, and I think that, and because it must have been in a podcast in 2021 and 2011, uh, the Cape ratio wasn’t particularly outrageous.

[00:34:36] Karsten: And then on top of that, right, I mean you picked the 2021, which was just the recovery out of the pandemic, right? If you had taken 2010 and the bottom of the pandemic, uh, would’ve looked. Perfect. Again, let’s, so I think there’s a, let’s get, yeah, let’s get 

[00:34:52] Joe: back on track because, because we are so far down Cape ratio rabbit hole, which is exactly what you, you brought the sub Joe and then, you know, 

[00:35:01] Karsten: you know the amazing, the amazing thing is this is so we 

[00:35:04] Dana: can make the data say whatever we want.

[00:35:07] Dana: The amazing 

[00:35:08] Karsten: thing is also the logical inconsistency that Frank who says that there is mean reversion between value stocks and growth stocks, right? Value stocks do better than growth stocks, but there’s no mean reversion for the index as a whole. I 

[00:35:21] Joe: think the 

[00:35:21] Frank: point there, and then we’re gonna diversification the lack of on, it’s not mean reversion.

[00:35:25] Frank: You 

[00:35:25] Dana: want a distention, Joe, I 

[00:35:27] Joe: know I told you guys I was gonna bring a group of people who felt passionately about this and that’s exactly what we have. We’re gonna talk in the second half about how to set up the portfolio and your different feelings about how to set up the portfolio, because I got one other thing here.

[00:35:43] Joe: We’ve been talking about the safe withdrawal rate and the amount that we take out of a portfolio, and the assumption here, especially when people begin, is that this is gonna be a set steady thing, and yet we know, Dana, that life is lumpy. Like you’re gonna have these years when maybe you wanna take the trip, maybe you wanna be karten Jetski and go on three vacations in the same summer, or maybe you’re gonna buy the RV or the second home, or whatever it is.

[00:36:08] Joe: How do you factor Dana, this lumpiness. Into your withdrawal rate? 

[00:36:14] Dana: Yeah, I think it’s not only lumpiness that has to be factored in, but it’s also time. And so, you know, if we start with lumpiness in the go-go years of retirement spending often is lumpy. Matter of fact, I just heard a term in JP Morgan’s, uh, you know, annual retirement report called Oh sure, yeah.

[00:36:30] Dana: Spending Volatility. And I hadn’t actually heard that before, but they talked about the amount of spending volatility that they see in the data in someone’s early retirement. And it’s true, you have these big lump sums that occur. People sometimes move, they buy new houses, they decide they wanna gift their child or grandchild money.

[00:36:52] Dana: They decide they wanna take up an RV or Winnebago or a new hobby. You know, all kinds of things that maybe they didn’t have time to think about before retirement. Maybe it’s the big remodel they’ve been putting off, or, you know, building that new patio or porch. So spending volatility is real. We account for it by using what I call the lifetime 4% rule.

[00:37:13] Dana: So we’re projecting somebody’s withdrawals over their projected longevity and taking the present value of those withdrawals and creating a ratio. And I call it the lifetime 4% rule, because if I drop in an auto purchase or a down payment on a new home or funding the, you know, new wedding for my son or daughter, um, some of these big lumpy expenses that we see routinely, I can drop those in and see does it change the lifetime ratio to a degree that I would be worried about the plan.

[00:37:49] Dana: And most of the time the answer is no. Now, there are times where if I had these lumpy expenses and I dropped in. You know, too many of them, and too frequently that lifetime ratio would go down to a level where I said, Hmm, you know what, the 80-year-old, you might be in trouble if you do all of this early in retirement.

[00:38:09] Dana: So I like that stepping back 30,000 foot view of, of some metric that encompasses these withdrawals over your lifetime, not just on a year by year basis. But the other factor that I often see missing is time. We think in two dimensions of withdrawal rate and ending portfolio value. But what if I’m 75 today?

[00:38:29] Dana: You know, what if I’m, I had an an 84-year-old who recently passed away, and for the last five years, her number one question to me was, tell me, Dana, how much can I give away this year? That’s what she wanted to do to grandkids, to charitable endeavors that she was interested in. And so it was always, well, how much can I give away while preserving enough that if I need assisted living or long-term care, I can still cover those costs.

[00:38:54] Dana: And so her withdrawal rate was much higher than 4% because we had time as a factor. Sure. And there was a, a shorter time horizon. 

[00:39:02] Joe: If somebody knows that 10 years from now I have this one big expense and I know I’m gonna do it, do you just not even factor that in and put it in its own like bucket its own spot and then not even include that?

[00:39:14] Dana: We actually do factor it in. We use it in our model. We have a column we call lumpy. Like 

[00:39:20] Frank: that’s, that’s a technical term. 

[00:39:26] Dana: It’s, and the reason we put it there, I’m probably turning bright red. It’s so, you know, but the reason we put it there is because we wanna be able to calculate the monthly spending that we all use to budget on, and then we, we wanna be able to separate out those lumpy expenses because we put them in there, but they don’t always occur in the year where we put them.

[00:39:46] Dana: Right. We, we build in auto purchases, but a lot of times people, eh, I’m not ready to buy a new car yet, or I’m gonna do it a year earlier. Or they might say, I have three sons and I wanna contribute to their weddings and you know, I’m gonna drop in these expenses every other year. But they get there and no, none of them are getting married yet.

[00:40:03] Dana: And so 

[00:40:04] Frank: I don’t like who they’re marrying. They’re not getting That’s right.

[00:40:10] Dana: But that’s what we call it, the lumpy column. 

[00:40:12] Joe: Mm-hmm. But I like that because I don’t know, when I was a planner, if you use terms like lumpy, they get it. Yeah. It’s when we use the highbrow terms that people don’t understand what the hell that we’re talking about. 

[00:40:23] Frank: Yeah. There is some interesting data on this, but it is so personalized that that’s why you need to do a plan.

[00:40:29] Frank: But if you look at the general population and the last research from the RAND Corporation shows that the average retiree is not increasing their. Spending at the rate of inflation. It’s between CPI minus one and CPI minus two. And that’s an average. So half the people are, are spending even less. Um, and half the people are spending more.

[00:40:49] Frank: And it’s, uh, seems invariant over even economic, uh, how, how much money you have, 

[00:40:55] Joe: which means it’s very much gonna be based on you. 

[00:40:58] Frank: Yeah. What you’re saying. So for instance, our experience in the past five years is we’re spending less nominally mm-hmm. Than we did at the beginning. Mostly ’cause of these pesky kids are gone.

[00:41:08] Frank: Yeah. Making their own money. 

[00:41:11] Karsten: See, I’m afraid of the opposite, at least for a certain time. I think the older my daughter gets, the more expensive she will be. That’s true. Your expenses will typically. So in terms of college, uh, marriage, helping with down payment. That’s definitely my radar screen and I agree.

[00:41:27] Karsten: So I think what, what really matters is as long as you get the average spending, right, I think you should be safe. I once did some simulations where I looked at somebody a million and a half portfolio, $60,000 annual withdrawals, and then I looked at, well, what if this person flips a coin the first year and then that determines, you spend $72,000 in the first year and then 48 and the second, and you keep alternating, and then $120,000 and $0, 120 and zero.

[00:41:50] Karsten: So also average $60,000. How much of a difference would that make in your final balance? I mean, it’s indistinguishable. The distribution looks the same. There might be a level of lumpiness where probably it might make a difference or there might be a level of, maybe also a correlation where it, and persistence, where it might make a difference.

[00:42:09] Karsten: Right? For example, if you spend twice of your budget for eight years and then zero for the next eight years, and then these eight years exactly. Coincide with the down market. That probably would make a difference. But I mean, as long as the fluctuations in my expenses are faster moving than the global economy and, uh, the market cycle and the business cycle, I think there’s absolutely nothing to worry about at least.

[00:42:33] Karsten: So I, I have a block post. It’s called When to Worry, when to Wing It. I think it’s part 47 of my series. If you wanna check that out. Given a plug here, 47. 

[00:42:42] Joe: That is, that is such a carted thing to say right there, part 47 of 182. 

[00:42:47] Frank: He makes a good point though, that he does, typically you’re spending, for most people that I’ve known or seen is it peaks when your children are in college.

[00:42:55] Frank: And so, Joe, you’re right there. No, no, 

[00:42:58] Joe: no, no, no. My kids are 30 and and I’ll tell you, Frank, to your point. When my son was a senior in high school and we found out what the, what the bill was gonna be for room and board, especially the food at the University of Texas. I was so happy Frank to write that check.

[00:43:15] Joe: ’cause I knew the way my kid ate and I was like, university of Texas is gonna lose money with my kid. 

[00:43:21] Frank: Circumstance too, that it’s like, sure, you were costing money over there, but you weren’t eating on us out of a house and home when you were here. Know 

[00:43:29] Joe: it’s so well because, and I would tell clients that sometimes Dana, that a lot of that was cost transfer, right?

[00:43:34] Joe: I mean, they’re saving all this money for college, for their kids. And yet, you know, the kids go to college and all of a sudden they have money in their checkbook they didn’t expect. Do you see most of your retirees spend less money than they think they were going to, or more money than they thought they were going to?

[00:43:47] Dana: I would say on average I see people spend less than what we have projected in the plan. 

[00:43:52] Joe: Well, that’s good. We tend, you’re being conservative. 

[00:43:54] Dana: We are conservative, so we have factored in Medicare Part B premiums. We’ve factored in these lumpy expenses that they perhaps didn’t put in their budget. I’ve heard people say, well we just bought our last car, you know, right before retirement.

[00:44:08] Dana: And I’m like, I don’t think that’s gonna be your last one. And so I just did this, you know, the last major home repair. It’s like, I don’t know that that’s gonna work that way. So we have factored in these things that people forget. To factor in, to Carson’s point, our average, if you were to factor in an average, well it’s already including all of those things.

[00:44:31] Dana: So in general, people tend to spend, yes. Now I’ve had some surprises. People who didn’t consider their hobbies. One gentleman comes to mind, he was into hunting and camping and fishing. And so immediately upon retirement he wanted a new camper van and a new truck to pull the camper van and all his new gear.

[00:44:47] Dana: And it was a substantial lump sum that we hadn’t factored in. And his portfolio was less than a million and it impaired his funded for the remainder of his retirement. You know, there was many years there where I, I was nervous. Other cases, people who move right upon retirement, oh, I’m gonna, you know, buy this house now instead of that house.

[00:45:08] Dana: Often, it’s just the timing of those things. You know, we have a certain portfolio structure where bonds are maturing for anticipated cash flows. So if they surprise us with a big lump sum expense when the market’s down, now we are required to take that big lump sum out of equities. And so the timing of those surprise expenses are where I have seen things put someone in a, in a less than desirable position 

[00:45:32] Joe: where the time horizon changes because of just life happening.

[00:45:36] Joe: Yes. 

[00:45:37] Dana: Yeah. And life changes. You don’t retire and everything happens just according to the plan. Yeah. We look at it way 

[00:45:43] Joe: too much like retirement’s a finish line. 

[00:45:45] Dana: It’s not, 

[00:45:46] Joe: in many ways, it’s a starting line, right. For this whole new, new adventure that you’re going on. Yeah. 

[00:45:52] Doug: We’ll be back with more of our special retirement portfolio planning episode in just a moment.

[00:46:01] Joe: I wanted to start with a 4% rule and a little bit about safe withdrawal because I truly, in this discussion has made me believe it even more that starting with how you want to spend money, I think, versus what can I safely spend? And don’t get me wrong, I think calculating safe withdrawal rates really important, but I think it’s thing number two, I think we get, especially mega geeks in the community, get so obsessed with how much can I spend versus.

[00:46:28] Joe: Here’s what’ll make me happy. Can I afford to do that? Like if I start there and then go, okay, and plus I can do more, I can do whatever. Like how safe is it for me to do that? I think is a much better because I mean, what I’m hearing is we’re all so much different. We’re all across the board different. So even more of the SUV, I think if we handle it that way, uh, or, or the bigger paddle for the canoe, depending, depending on which, which analogy we wanna use.

[00:46:54] Frank: Yep. I want an outboard motor. That’s right. 

[00:46:58] Joe: I wanna get into some questions about portfolios though, to drive this guys, because we are starting to disagree on portfolios. I wanna hear more of that disagreement. No, I’m kidding. What I really wanna do though is, is I wanna talk about these things because Frank, we just started on really risk parity and you were talking about the differences between if we just get a little bit more scientific about this asset class versus that asset class, I.

[00:47:19] Joe: You guys mentioned this idea of sequence of return risks where if I retire and things go to hell right away, that is a big risk that the certified financial planning community has warned people about. You know, you retire on the wrong day. How does a risk parody portfolio handle that differently than the traditional person would handle it?

[00:47:40] Frank: So yeah. Let’s talk about a period, like say you retired at the end of 1999. If you were holding a portfolio that was just like the s and p 500 and a and a bond fund, your portfolio would’ve been underwater, at least for the next decade. Uh, it might have come out a little bit. Sure. Um, but would’ve been underwater for the next decade.

[00:48:00] Frank: Right. A portfolio, a risk parity style portfolio with a much more diversified holding is going to only be down, say, four years max. Out of that. It’s gonna be down a lot less. I mean, I can give you, all of this plays into what the safe withdrawal rate is. There’s a relationship here that the reason you have a safe withdrawal rate, that’s a 4% for these two fund portfolios and not five, is simply because of these worst case scenarios.

[00:48:28] Frank: ’cause it’s a worst case scenario. It happens to be in the late sixties for, for that at least. 

[00:48:33] Joe: So these different portfolios fit different conditions better. 

[00:48:36] Frank: Yeah. And I also, I I you mentioned sequence of return risk. I think we need to be the audience. I, I really want them to understand what the real problem is here.

[00:48:44] Frank: Because oftentimes I hear people say, well, I’ll just have two or three years of cash and that’ll take care of my sequence of return risk in case the market goes down in the next two or three years. That’s not the problem. Any portfolio is gonna be fine if it’s just like one year out of three. The problem is these bad decades.

[00:49:03] Frank: So whatever your, the sequence of return risk you need to solve for is not two or three years. It’s 10. It’s a 10 year bad decade, either like the seventies, the thirties, or the early two thousands. And so if you are designing a portfolio, you at least have to deal with those three things. And if you’ve dealt with those three things, you’ve probably dealt with 99% of what you’re likely to see.

[00:49:26] Joe: The big question, I think, Frank, in everybody’s mind is, where am I taking money from? Let’s say that I’m taking money out in a risk parity portfolio. Am I changing that all the time? Am I changing it up as I go, as I’m, um, rebalancing? Am I rebalancing now money out, so I’m rebalancing out to spend the thing that performed best over the last period?

[00:49:46] Frank: Yeah, you’re basically selling high and buying low. It’s very simplistic management. It’s very, it’s very elegant actually. So you can do it one of two ways. Basically, you could. Every year say, okay, I think I’m gonna spend this for the next year and add a little bit more onto it at rebalancing time. Carve that off.

[00:50:05] Frank: When you rebalance the portfolio to put it back to its original allocations, you’re taking cash out of it at the same time, putting it in a pot and then just spending that for the next year, it outta there. Or what we actually do is look at, at it every month and sell the high thing. Yeah. So right now we’re selling lots of gold.

[00:50:22] Frank: I’ve been selling gold for the past year and a half. Yeah. Um, because it keeps going up. 

[00:50:25] Joe: You’re selling whatever the driver is in that condition. Yeah. And then as the condition changes, whatever’s 

[00:50:29] Frank: doing the best gets sold. Gotcha. Which contributes to the rebalancing of the portfolio. And, and then you have to do less rebalancing.

[00:50:35] Frank: The idea is to minimize the number of transactions, which also helps you on the tax side. And to not make this complicated, not have to have 15 different rules just to manage your portfolio. You’ve referred to this, I think in your conversation with Paul, it’s like, yeah, it’s like this tree and you go pick the money off it every month and like selling whatever it is, and then you leave it alone and you’re not monkeying with it or trying to do strange things with it.

[00:51:03] Joe: Well, you see people become, to your point, I mean they, they become victims of their own complexity. Of the more complex it is, the more you’re gonna blow yourself up. And 

[00:51:10] Frank: I think this is important. The more complex something is to manage, the less likely a do it yourself or in particular is going to handle it.

[00:51:20] Frank: Agreed. Um, and that is the problem with some, some complicated things involving buckets or ladders or things like that. You don’t have an advisor that’s helping you with that. Chances are you are setting yourself up that you will have to make ad hoc decisions during the management of it. You have to have a plan that covers all eventualities or covers all possibilities in terms of how you’re gonna take money out of this.

[00:51:43] Joe: That’s where I get frustrated sometimes by the question, like, I will answer the question for people over on afford anything. And I’m like, but there’s no way that you actually are gonna do this. This will fail. And people will look you in the eye and they’ll assure you, no, no, no, that won’t fail. And then eight months from now they’re like, what kind of hell have I created for myself?

[00:52:03] Frank: Yeah. So if you take this portfolio that’s maybe a, a lot of, uh, do it yourself portfolios are just like the same pile of stocks have always had and a big pile of cash, and they think that that’s gonna cover their sequence of return risk, there’s a chance that that cash could all run out. Then what do you do then you sell when it debt because the stock market was down for three years in a row.

[00:52:23] Frank: If you haven’t fought through all of the possibilities and built that into your management plan, you’re going to have problems and. The reason I manage our portfolio the way we do is because we want it to be a, a simple management. We just want to get in the forerunner and drive it and, and press the four wheel drive button when we need it, or turn on the fog lights and not have to be wondering, oh, this, this sports car is gotta stop.

[00:52:50] Frank: I, I need a, I need a ladder. I need some buckets of sand. I need this other stuff. It can get really complicated once you try to fix a. Substandard portfolio or suboptimal portfolio by bringing in all of these extra, I, I call them buckets, ladders, flower pots and houses and pie cakes and other, it’s all kitchen and gardening implements.

[00:53:14] Frank: I always hear people talking about, it’s like, let’s just just put those away. Stop, stop. Just take all those away and get yourself a good portfolio and a, and a plan you can manage and do that and, and not be fooling around with the, 

[00:53:27] Joe: we’ll save that for another day, Frank, because I actually think that’s a simpler way to go, as you know.

[00:53:32] Joe: But Dana, when you’re setting up your portfolio for income, do you take it in a similar way that Frank does and how does, how does tax location play into this, my Roth, my pre-tax, and my brokerage stuff? How does that work itself out? 

[00:53:48] Dana: Well, it gets far more complicated, as Frank was saying. It’s interesting ’cause I’m, as I’m listening, I’m thinking, well, how.

[00:53:55] Dana: Often we all apply the same concept, but the way the answer we get to might be different. And so we use a concept on our portfolios called minimax. It’s what mix of assets created the best outcome in a worse case scenario, when you look historically at various asset classes and you look at the longer timeframes, you know, seven to 15 year timeframe, certain mixes of asset classes had a, you know, much lower drawdown than other mixes.

[00:54:28] Dana: And so a traditional portfolio that’s. Goal is to maximize return for a given level of risk. Measured typically by standard deviation, is gonna have a very different asset mix than one that is looking at, if I have to draw money out over 10 years, well which portfolio still gave me the most left at the end, in a worst case, 10 year period.

[00:54:50] Dana: And so we do that through an investment partner, asset dedication. It’s a firm out of San Francisco that builds these specific portfolios. But it’s the same concept. Frank’s talking about getting, it’s exactly the same concept. 

[00:55:02] Frank: It’s a different solution to the same problem, 

[00:55:04] Dana: different solution to the same problem.

[00:55:06] Dana: Now we do love ladders and so buckets, whether you wanna call ’em, 

[00:55:10] Frank: well, you are actually an advisor who can handle the thing for the client. Yes. And so you’re dealing with somebody that wants you to do that. And I, I, I’m talking to do it yourself, investors. That Yes needs something simple. If I had 

[00:55:24] Dana: all my money in an IRA or a Roth, the strategy you’re talking about, Frank sounds amazing, right?

[00:55:30] Dana: It’s, it’s automatically rebalancing perhaps on a monthly basis. And I don’t have to worry about taxes within that. Fantastic. But we often have households that have eight different accounts. They might have trust, each have an IRA, they have a Roth, they may have a 401k. Well, now we’re trying to rebalance across this entire household, create the most tax efficient outcome in the process.

[00:55:50] Dana: And those taxes when you’re in retirement, suddenly impact all kinds of other things, like how much of your social security is taxed and your Medicare premiums. And we have Roth conversions to think about. So. For us, being able to step back and looking and look at the portfolio within context of the financial plan means, okay, we have to align each account to the cash flows that it needs.

[00:56:12] Dana: And so we will use income ladders within that paired with this mini max portfolio, this portfo equity portfolio that, that is designed to hold up best under a worst case scenario. 

[00:56:25] Joe: See, and that’s interesting because I feel like I’m on one end and I feel like Frank’s on the other end. Uh, when it comes to the latter strategy, I feel like Dana’s kind of in the middle.

[00:56:34] Joe: But what’s funny about that is that I think if I’m pulling money from a different asset class every month, Frank, it’s more confusing for a do it yourselfer than if I just have a simple, this is my short bucket, this is my mid bucket, this is my loan bucket. And to your point, I think it’s not as efficient.

[00:56:51] Joe: I think it’s nowhere near as efficient as what you’re doing. But I think if, if I take the average person, if I take my mom for example, and I tell her to look at her portfolio once a month and pull the thing that did the best, I just completely lost her. Like, she is gone. She is. Bye-bye. Gone. So maybe for the person in our community who likes looking at it every month, it’s way, way, way better.

[00:57:13] Joe: But for my mom, short bucket, mid bucket, long bucket is a strategy. She’s not gonna blow 

[00:57:19] Frank: up. Yeah. This is where we, you need to separate what is purely a financial tool from a psychological tool. Exactly. And that’s what really what’s going on here. And I think people get confused as to what a psychological tool.

[00:57:32] Frank: Yeah. And think it’s a financial tool. So they think that a bucket strategy is going to solve sequence of return risk. And it doesn’t. And it doesn’t. Yes. On the good chip lollipop, you just go and rearrange the lollipops. They’re still gonna taste the same. They’re, 

[00:57:47] Joe: where does he come up with these? I have no idea where the hell he comes up with all these, 

[00:57:53] Frank: the 

[00:57:53] Karsten: nonsensical ravings of a lunatic mind.

[00:57:56] Karsten: I have two comments. So first of all, I’m not a huge fan of the bucket strategy either, especially not if it’s marketed as something that can improve your results. Uh, because my philosophy is that, I mean, we want to arrive at some kind of a strategic asset allocation, right? How much do you want have a stocks, bonds versus cash?

[00:58:14] Karsten: I look at what kind of portfolio would’ve been most robust among all the different things that the economy would’ve thrown at me, and I would start. All of the bad recessions in the early 19 hundreds, 1929, uh, 1960s, 1970s, uh, and two thousands and something like maybe a 75, 25 portfolio, uh, 75% stocks, 25% bonds, or maybe you want to go super save and do 60 40 would’ve done reasonably well.

[00:58:41] Karsten: It wouldn’t have done perfectly all the time. And you can come up with some strategies that would’ve done phenomenally well in the seventies and in the two thousands. But then these strategies also would’ve done very poorly in the 1920s, thirties, forties. Uh, and as a risk parity, uh, is actually that one strategy that I don’t particularly care about it.

[00:59:00] Karsten: And risk parity had, it had its heydays and golden years, if you think about it that way, in the two thousands. And then everybody was talking about it. I was, uh, working at BNY Mellon Asset Management at the time, and everybody was kind of intrigued by that idea. And we were never particularly intrigued because it was, uh, actually quite, uh, low tech.

[00:59:18] Karsten: You, you go from. The innovations of the 1960s of a mean variance portfolio optimization. And then you throw out half of it, the mean part and all is left is the variance. And then you work around with the variance. And then you got this super lucky run in the two thousands, right? Stocks recovered very nicely out of the.com.

[00:59:38] Karsten: Bonds were on this multi-decade, uh, run. And then commodities also did phenomenally well, right? And then commodities the last few years, commodities outside of gold, right? The gold is that one special asset that has these very nice correlations, both in demand side and supply side recessions. But commodities are a very low expected return asset and they have very high volatility.

[01:00:02] Karsten: And I mean, I look at some of these ETFs that are marketed to unsuspecting retail clients. I mean, for example, uh, crude oil, right? If you look at the crude oil spot, price has been the same as 10 years ago. Crude oil costs $60 in 2015, and it costs $60 right now. And what was the annualized return of the U-S-O-E-T-F, which is the crude oil fund is minus 9%.

[01:00:27] Karsten: Not overall minus 9% annualized. So putting something into this overly hyped asset class called commodities, I think you’re just gonna say this crap. Crap, right? Everything that’s marketed at retail clients, which is probably 

[01:00:42] Frank: why I wouldn’t ever hold something like that, so I don’t know why. 

[01:00:45] Karsten: Yeah. But you were holding it as part of the commodity index, and then on top of that No, I, 

[01:00:49] Frank: I, you don’t know what I hold and this is 

[01:00:51] Karsten: really the, the backward looking bias.

[01:00:53] Karsten: You know, I am actually looking at your returns and they’re actually quite underwhelming over the last five years. So a lot of this hyped stuff of overpriced and, and ineffective products like managed futures, leveraged ETFs, commodity ETFs. This high dividend yield ETFs, right, where they kind of sneak in principle, uh, liquidation through covered calls selling.

[01:01:15] Karsten: So it’s uh, really a lot of garbage is sold at retail client and then it’s sold with this aura of exclusivity, right? This is something that only hedge funds know about, and only private wealth clients at Goldman Sachs have until now been in the loop on this. And I tell you a secret and you can come along with me.

[01:01:35] Karsten: With risk parity and all of these exotic ETFs. So I personally don’t believe in that. And, and just going back to your earlier point, I’m talking about two different 

[01:01:42] Frank: things though. ’cause I don’t do that. I prefer simplicity. I don’t do that. So stop talking about things. It’s like, if you’re gonna talk about it, let’s talk about the a hundred year data set.

[01:01:51] Frank: And I’ve given you this portfolio. Let’s not go 

[01:01:53] Joe: there. 

[01:01:53] Frank: Okay? Let’s 

[01:01:53] Joe: not go there at all. What I am interested in, because we heard what Frank likes, we heard what Dana likes, Carsten enough about what you don’t like. You’ve thrown a lot of fireballs, 

[01:02:02] Karsten: right? Uh, what do you actually like? So what do I like?

[01:02:06] Karsten: Simplicity. I like broad indexes. So something like anywhere between 60 and 70% equities. The rest, uh, in bonds, uh, and again, in bonds don’t get carried away. Oh, well, uh, 40% government bonds is too boring. Uh, now I’m going to throw in high yield bonds or preferred share or something like that. Right? That becomes much more risky.

[01:02:26] Karsten: And you, you introduce a lot of, uh, equity beta through the back door. What I think is the most robust portfolio with simulations, something like a a 30 to 50 year retirement horizon, maybe some modest final, uh, portfolio value at the end of the retirement horizon. So something like a 75, 25, 70 5% equities, 25% intermediate.

[01:02:47] Karsten: Uh, US government bonds seems to be the best performing and sometimes you can come up with some special situation if you believe that, for example, small cap value stocks are going to add 8% returns again, uh, like they did in the 1920s and thirties. Uh, yeah. Then, then you throw in small cap value. But I, I swear personally prefer that you up there.

[01:03:08] Karsten: The block was, I published in June, I think. I think 

[01:03:10] Joe: Carsten’s just here to just throw lob Malta cocktails at everybody. 

[01:03:14] Karsten: I just throw mullet of cocktails. That’s it. Anyways. You like to keep it simple. The simplicity, that’s the easiest to sell. That’s the easiest to manage. And by the way, I would do the same thing, right?

[01:03:23] Karsten: You would rebalance occasionally. Um, you don’t have to do it every single month. How much of a difference does it make if we rebalance every month, every quarter, every half a year, every year there’s a final value. Distribution looks extremely similar, depending it does. Really as long as you rebalance, at least occasionally, right?

[01:03:42] Karsten: If you let it completely just run into infinity. That might create some problems in the long term, but as long as you occasionally rebalance, uh, there’s no harm by doing it, uh, more frequently or less frequently. So, I mean, it’s, it’s exactly as Frank said, I mean, it’s, it’s intuitive, right? I look at what looks like is a little bit, and, and you, you look at your fidelity statement, right?

[01:04:03] Karsten: And it says, well, my target is 75% and currently my, my equities are 75.6%. Well, then you take it out of equities and, and vice versa. So I think this, this rebalancing you don’t even have to do much. Rebalancing. Some of the rebalancing is simply done by taking it out of the pie slice. That is the biggest at that time.

[01:04:21] Karsten: Well, that’s 

[01:04:21] Joe: what Frank was talking about earlier. 

[01:04:23] Frank: Yeah. 

[01:04:23] Joe: You know, selling the thing that’s. Doing well. I wouldn’t read out 

[01:04:25] Karsten: the 

[01:04:25] Frank: whole portfolio every month. 

[01:04:27] Joe: Guys, I wanna ask another question before we say goodbye, which is Dana as the CFP here. I wanna ask you, and then gentlemen, feel free to chime in on this.

[01:04:36] Joe: We haven’t talked about the things that a lot of the salespeople talk about when they talk about retire. We haven’t talked about it at all, right? We haven’t talked about annuities. We haven’t talked about guaranteed income strategies. These are the things that people are being fed a diet of every day.

[01:04:55] Joe: Where does an annuity or some guaranteed income stream fit into the Dana SBA strategy? I. 

[01:05:01] Dana: It’s interesting because you make decisions for different reasons. And so when I think about social security as an example, in today’s world, with all of the media saying it’s gonna run out and people wanting to claim earlier because of this, it is the decision you can make that hedges what we call longevity risk, the risk of living long.

[01:05:20] Dana: And it also provides inflation adjusted income and it’s one of the only decisions you can make that really helps protect against that risk. So you need to look at that decision differently than anything else. Look at your 

[01:05:31] Joe: social security decision. 

[01:05:32] Dana: Yes, and I, and the reason I bring that up in context of what you just said is because it is an annuity, that is what Social security and, well, I was 

[01:05:39] Joe: gonna say, Dana, just before you move on, if you have a pension then same thing.

[01:05:44] Joe: Ditto. 

[01:05:45] Dana: In some cases, some pensions, uh, aren’t. Okay, inflation adjusted. Some are, um, some pensions have some built in factors where it benefits you to claim them later. Sure. And some don’t. You should claim as early as possible, so you really have to look at that again, another decision. 

[01:05:59] Joe: Yeah, 

[01:05:59] Dana: another decision.

[01:06:01] Dana: But it can hedge a different risk. And same with an annuity. So where I get frustrated is, you know, annuities are framed as an investment alternative. And there are a ton of research out there that shows, you know, if you add annuities to your portfolio, it can help prolong the length of your portfolio, actually help pass along more assets to errors.

[01:06:21] Dana: And all of those things are true, but it’s really a risk decision. And ultimately, if we have a truly. Horrible economic outcome. I wonder, you know, how secure will those insurance company guarantees be? And so that has to be factored into that, that equation. But where I do think annuities come into play is behaviorally.

[01:06:45] Dana: When you look at David Blanche’s license to spend research, when people have guaranteed income, they are more comfortable spending and going out and doing some of the things that they wanna do. So when we’re factoring in annuities, one, we’re looking at a set of metrics, something called coverage ratio.

[01:07:03] Dana: How much of someone’s spending is covered by guaranteed income? But there’s also a lot of behavioral decisions. I like framing things red, yellow, green, like green. You gotta do this red, don’t do this. And so many of these nuances are yellow, is having some of your money annuitized going to help you. Feel more comfortable spending.

[01:07:23] Dana: If you’re someone that feels a lot of reluctance, are you gonna be able to take that extra vacation or do some of those extra things? Then maybe it has a place in your portfolio. I love that 

[01:07:32] Joe: it comes down again to the behavior, because my biggest frustration with these deferred annuities, Dana, is not the fees which can be egregious and it’s not the way that they’re sold and marketed with all these bells and whistles.

[01:07:46] Joe: It’s the fact that because they are last in first out, every study I’ve seen shows people don’t take the money out. They don’t spend the money inside the annuity because they’re afraid of the tax. 

[01:07:57] Frank: That’s, that’s the horrible thing about variable annuities. 

[01:08:00] Joe: Yeah. It’s way worse than the fees. You know what I mean?

[01:08:03] Joe: Like the fees are horrible. Like, don’t get ’em that. But the fact is you’re gonna put the money in, you’re never gonna take it out. I 

[01:08:08] Dana: can’t tell you how many clients we’ve had that purchased those elsewhere. And one of the first things we do is say, Hey, you need to turn that income on now. Good. Um, in many cases, the right decision is to turn the income on early and as soon as possible.

[01:08:22] Dana: Not in every case, but in a lot of cases, that is the right way to use the product. Once those are even more 

[01:08:27] Frank: horrific if you leave them to somebody else on the tax side. Right? Oh, it’s, yeah. Yeah. Then we got the B ba bomb. 

[01:08:34] Joe: Okay. There are so many things that people need to think about. I love the framework here that it clearly is not one size fits all.

[01:08:41] Joe: I mean, we have not talked about Medicare planning. We did not talk about require minimum distributions. We didn’t talk about the fact that if you have a strategy that is, uh, defer, defer, defer what that might do with Irma, this ant Irma that I don’t even like, uh, so 

[01:08:59] Frank: frustrating. That’s a problem for you.

[01:09:00] Frank: You have too much money 

[01:09:02] Joe: that that is, that is that truly is. Don’t get me wrong, Irma, Frank, to your point, is a good problem to have. Right? And just a good guess what you’re, you’re gonna pay more tax ’cause you have more money. But there are so many things. But I think we set up a good framework here. I wanna ask all of you one more question, which is biggest misconception that you wish you could erase?

[01:09:25] Joe: Frank, let’s start with you. People start to go into the accumulation phase. What’s the biggest misconception?

[01:09:33] Frank: So there’s so many.

[01:09:37] Frank: I think what I see right now with do it yourself investors, their biggest misconception is the way to deal with all their problems is to have a big pile of cash. That will solve their problems in some way. Either whether they think they’re a sequence of return risks or some other thing. And that’s really all they need to do is like, I’ll just sell, some of my stocks, have this big pile of cash that’s, you know, three or five years or something, and then I’m, then I can just ride off into the sunset.

[01:10:08] Joe: It’s so funny how you, how people think that that’s the solution. It creates a whole nother slew of problems. 

[01:10:13] Frank: Yeah. Yeah. And I think a lot of it today is because we’ve had such good stock markets for so long that a lot of the people retiring now have not experienced a multi-year downturn and how bad that can be, not only on the number side, but on the psychological side of it.

[01:10:31] Joe: Sure. Yeah. Carsten, same question for you, but before you answered, there was something that we skipped over that I wanna, I just wanna make clear to everybody. Well, when I said I like the bucket strategy, it has nothing to do with it being the most efficient. Right? It has zero to do with that. In fact, I’ve said very publicly, it is nowhere near the most efficient.

[01:10:47] Joe: My fear with do it yourselfers is that you’re gonna blow yourself up. That is my biggest fear, is that I’ve seen so many plans that go sideways because Frank, to your point, we just put all these, you know, spaghetti into the plan thinking it’s better, it’s better, it’s better. And to your point, simplicity I think is the reason why I like that.

[01:11:05] Joe: But, uh, Carsten, same for you. What’s biggest misconception besides now the one Frank mentioned, which is cash? 

[01:11:12] Karsten: I think one misconception is that, again, it goes back to this bucket strategy that people think that they can time the market, right? Because this is what a bucket strategy implicitly tries to do.

[01:11:22] Karsten: Oh, I don’t have to sell my equities if we go through a bear market, I liquidate my cash first and then my bonds. But that becomes now a timing problem, right? You have to time when to replenish the cash and bond bucket again, the average retail investor is horrible at timing the market, right? I mean, in some way it’s, it’s actually worse than just randomness because randomness, at least you have a 50 50 chance if you are getting your emotions involved and, and you’re trying to rebalance and you lose your nerve when the market is, so it’s basically you’re selling low and buying high.

[01:11:57] Karsten: Simplicity works best and, and again, I don’t fault the bucket strategy. I think it’s a starting point. And if you arrive at the same asset allocation that seems pretty robust everywhere else, that’s fine too. But don’t expect any miracles. And in the best possible case, it’s a kind of a crapshoot. And in the worst possible case, you actually lose money by overreacting and and letting your emotions get in the way.

[01:12:21] Joe: You bring up a great point, which is, you know, the point that we didn’t say, which is a point that I think we need to articulate, is that every strategy has an achilles heel. There is an achi, and if you think your strategy doesn’t have an Achilles heel, you even looked hard enough. ’cause I think the key is to not think I have the perfect strategy.

[01:12:38] Joe: It’s to think I know what the Achilles heel is. My strategy. And I love how, I love how Karten, I say the bucket strategy, and you immediately go, we got a time. Which brings up you don’t, you don’t do that, but that’s a whole nother podcast. Dana, save us. What’s, what’s the, what’s, what’s yours? 

[01:12:56] Dana: You know, I think we underestimate the cognitive changes that we might experience as we age.

[01:13:03] Dana: And I’m in the midst of writing a new book called Living Off Your Acorns. It’s your guide to the four phases of retirement. So I’m talking about Prego and then go, go slow, go. Mm-hmm. And no go. And right now I’ve been interviewing a lot of our clients in their late eighties around this logo, A no go phase.

[01:13:22] Dana: And. I have seen cognitive changes occur as early as the late sixties. You know, when someone’s in their late sixties, and then if you read the Wall Street Journal and Warren Buffet announcing he’s finally stepping down as CEO, he said at 84, I’m finally feeling my age. We only hope that will be us. Right, right.

[01:13:42] Dana: If we’re managing our own portfolio and if we have a spouse that’s not financially sophisticated, right. What happens if those cognitive abilities change? And are we even gonna recognize it? Because the part of the brain I’ve learned that causes those changes is the same part of the brain that generally governs our self-awareness.

[01:14:00] Dana: And so not only can we be experiencing these changes, we, we are not, we don’t aware, see that our decision making, we don’t see it. And so in a pitch for the financial advisory community, it’s one of the reasons that in the decumulation phase financial planners and advisors add so much value is you have that advocate with you through all of those phases.

[01:14:22] Dana: And if you’re married, you have a spouse that has someone to turn to. Also, 

[01:14:25] Joe: you bring up a great point. I saw that in my clients. And it’s difficult to bring up. I was very happy when I saw family members begin to come to the meeting with them. Yes. Which was great. And there were times when I would just suggest that it wasn’t my job to call a family member, but it was my job to say, you know what, why don’t we have your daughter meet with us too?

[01:14:43] Joe: You know, have you ever thought about that? We’ll do some intergenerational planning. Like how, how do you work around that, Dana? ’cause that’s a tough conversation to tell your client that, um, that it might be time. 

[01:14:53] Dana: Yeah. I mean, I’ve done the same and, you know, ask people to set up a family meeting. In many cases, I’ve had people recognize it in themselves and let us know, Hey, I’ve been diagnosed and we just want you to know so you can be aware of, you know, if we request anything odd.

[01:15:08] Dana: That is good. 

[01:15:08] Joe: But that’s the, in my experience, that was the exception. Somebody, ’cause it took some, um, I don’t know if it’s bravery or what to say. I’m, I’m slipping. 

[01:15:18] Dana: Yeah, it did. It took a lot of bravery and it was relatively early in, in this person’s early seventies, you know, it wasn’t where we might expect to see it.

[01:15:27] Dana: We’re in a situation right now where we have specifically asked someone to find a power of attorney and have basically said, if you can’t locate someone who can act in this capacity, we are gonna need to terminate our relationship. We don’t wanna do that because I don’t know what this person might do, but we’ve been getting conflicting instructions and then, oh, I changed my mind and then, oh, I’m suffering from this particular medical condition, which is the reason I’m acting like this.

[01:15:53] Dana: And we’re like, well, what are we supposed to do? And so that’s a case. Wow. Where, you know, that’s all we can do is wow, just say, you know, we really need you to find a power of attorney and we can send them the Schwab form that enables them to talk to us and act on your behalf. And, you know, if you can’t do that.

[01:16:13] Dana: Ultimately, you know, we’re in a pickle here, right? As a firm, what are we supposed to follow this person’s request or not? And what’s our liability? 

[01:16:22] Joe: Yeah. The liability thing, I think could be real. I can see the, the family member later on saying, Dana, you should have, you should have seen this. You should have.

[01:16:31] Joe: Yeah. Yeah. Ugly, ugly. Thank you guys for this episode. This has been a fantastic discussion and truly proving that this is not a one size fits all problem. Let’s talk about what you’re doing in those amazing places you work. Uh, let’s go ladies first. Dana, what’s going on at Sensible Money here at the end of June?

[01:16:53] Dana: Well, I don’t know that we have anything immediately upcoming, but we are doing our next webinar in August. It’s on planning for healthcare in retirement. This might be our third or fourth annual, uh, webinar on this particular topic. It’s on August 28th. You can find it on our website. If you scroll down, you’ll see our upcoming free webinar and, and register for that.

[01:17:16] Dana: And also, I’m excited to announce I have started writing for Fritz Gilbert’s blog, the Retirement Manifesto. 

[01:17:23] Frank: Wow. 

[01:17:23] Dana: My first joint post with him went out about two weeks ago and my next solo post goes out, I think in the upcoming weeks. And so I, it’s super exciting and I will be blogging about my own thoughts on retirement.

[01:17:35] Dana: I’m 54 this year. I want a very slow 16 year transition to retirement at 70 is what my plan is. But I, I, you know, had a, an experience on vacation last year that kind of brought it home for me of like, it was no, never. I’ll never retire. Two. Oh my gosh. One day I actually will retire and I really need to think about what this looks like for me.

[01:17:59] Joe: Wow. So we’ll send people to the retirement manifesto as well. That is really cool, Dana. Congratulations. 

[01:18:06] Dana: I’m looking forward to 

[01:18:07] Joe: it. That’s super fun. And when do we expect the book, by the way? 

[01:18:09] Dana: I’m hoping the book will be out in the fall. I’m doing this big hiking trip and then I’ll get the book wrapped up as soon as I return, and then it’ll depend on, you know, how quickly they can get it through editing and formatting and all of that.

[01:18:20] Joe: It is sad you weren’t walking today, but I totally understand it. She’s gonna get all the walking she can do. Let’s go to Carsten next, ma’am. What’s going on at early retirement now, my friend? 

[01:18:29] Karsten: Yeah. So I’ve, uh, slowed down my publishing after 62 parts of Save withdrawal rates. Uh, it’s kind of, you have almost written about everything you needed to write about.

[01:18:39] Karsten: Yeah. So I’m busy with my retired life here. So as we are recording this, my daughter is, uh, finishing up before a summer break, and then a few days after this goes live, I’m gonna be on a roughly two month trip this summer. So multiple different locations, Alaska cruise, flying to Asia for, uh, a month about, and then, uh, taking another cruise from East Coast, from New York City, uh, via Nova Scotia all the way to, to Iceland and back.

[01:19:05] Karsten: So are you 

[01:19:05] Joe: taking a vacation from your vacation? We 

[01:19:08] Karsten: need a vacation after the vacation, so, but I mean, in some way, I mean, it is a life here, so comfortable. Uh, I mean, it is a little bit like a vacation. It’s like a retirement home here. So my, my wife and my daughter are. Very sweet. And, uh, so it’s, uh, I’m, I’m, uh, kind of resting before, uh, this, this, this long trip.

[01:19:26] Karsten: So, and then after too 

[01:19:28] Joe: resting by fighting with us. Nice job. Right, right. Yeah. And we will link to early retirement now, because if you haven’t been there, your stuff is evergreen. These are pieces that you can dive in and, uh, that’s the intention too. Yeah. Yes. And if you’re a money nerd, you’re gonna find so much to love at early retirement.

[01:19:44] Joe: Now, especially the part where he calls me a small cat fan boy. Uh, and now he’s gonna write about what a moron Joe is with. 

[01:19:52] Frank: Yes. He awards you no points to make God have mercy on your soul. 

[01:19:58] Joe: Uncle Frank, glad we got in the same damn room together. Well, virtually, at least, you know, it’s about time we had you over at Mom’s Basement, but what’s going on at Risk Parity Radio?

[01:20:05] Frank: Okay. As I mentioned before, uh, we are on a, uh, fundraising campaign, a charitable campaign. Yeah. So I’m, I’m very blessed by our listeners. Um, I don’t have a large audience, but they’re, they’re wealthy and generous. And they’re 

[01:20:18] Joe: passionate. 

[01:20:19] Frank: Yes. So one of our listeners has put up $15,000 for the Father McKenna Center, and we are to match.

[01:20:26] Frank: And so we’ve been, uh, this just started last week. We’ve already got some good donations, but I’m hoping to get some more, and even from your audience. But what I really would like your audience to do is start following the Father McKenna Center on Instagram or on Facebook. It’s spelled V Father, M-C-K-E-N-N-A.

[01:20:48] Frank: It’ll be the nicest thing you have in your Instagram feed because what you will see is people helping other people, particularly, uh, high schoolers and college students once you see what we do there and how nice it is. And that’s why my listeners like it. It’s, it’s very efficient and it, it’s actually on the campus of a high school.

[01:21:08] Frank: We’re the only high school in the country that has a soup kitchen and homeless shelter next to it. 

[01:21:13] Joe: That’s fabulous. Where are you at, Frank? I don’t even know where you are. 

[01:21:15] Frank: Uh, Washington DC area and the Father McKenna Center’s on North Capital Street. Uh, you can see the capital from there. It’s also the closest homeless shelter from the Capitol.

[01:21:24] Frank: So I would invite your audience to follow that. And then also to donate to the Father McKenna Center. They go to their website, go to their donation page. When you fill it out, there’s a little box there that you can like dedicate it or something. And if you put Stacking Benjamin’s match or match or risk parity radio match, it’ll get counted for this matching campaign within the next month or so.

[01:21:46] Joe: Fantastic. And we’ll make sure we note that also on the show notes at stack Benjamins dot com. That is so awesome and it goes well for everybody that missed Wednesday show. We had the creators of a great documentary called Join or Die, about the fact that, uh, joining a club, you’re 50% less likely to die this year than if you don’t join.

[01:22:06] Joe: And yet we increasingly are isolated. The number one group that, uh, commits suicide is men over age 70. We tend to retire and isolate. So, uh, talked about that on Wednesday. If you missed that, go back and listen to that. And then today we play in the money. So great stuff guys. Thank you so much for being with us Stackers.

[01:22:26] Joe: Thank you. And Doug, you got it from here, man, which we have learned today. 

[01:22:30] Doug: Well, Joe, here’s what’s stacked up on our to-do list for today. First, this won’t come as a shock, but begin with the end in mind. When you know what type of spending you’re looking at, you are more likely to avoid mistakes. Second, special products like annuities.

[01:22:47] Doug: While they may help people who aren’t investment savvy, generally the fees inside most annuities make them unattractive. However, if there’s longevity in your family and annuity can help you control the risk that you may outlive your funds. Put the big lesson. Don’t play games with Frank. That guy’s a former lawyer, and the threats he can lay down.

[01:23:10] Doug: Brutal. Hey Frank, ease up on me, dude. We’re just playing. Go fish chill. Thanks to Frank Vasquez for joining us. You’ll find his podcast, risk Parody Radio wherever you are listening to us now. Thanks to Carsten Jetski for joining us. You’ll find his [email protected]. And of course, thanks again to Dana Ock for joining us.

[01:23:36] Doug: Dana can be [email protected]. This show is the property of S SP podcasts, LLC, copyright 2025, and is created by Joe Saul-Sehy. Joe gets help from a few of our neighborhood friends. You’ll find out about our awesome team at Stacking Benjamins dot com, along with the show notes and how you can find us on YouTube and all the usual social media spots.

[01:24:00] Doug: Come say hello. Oh yeah, and before I go, not only should you not take advice from these nerds, don’t take advice from people you don’t know. This show is for entertainment purposes only. Before making any financial decisions, speak with a real financial advisor. I’m Joe’s Mom’s Neighbor, Duggan. We’ll see you next time back here at the Stacking Benjamin Show.