Latest / The Personal Finance Club Show / The 4% Rule, Roth vs Traditional, and Index Fund Salesmen | Ep 5

Transcript

The 4% Rule, Roth vs Traditional, and Index Fund Salesmen | Ep 5 · The Personal Finance Club Show

0:15
Welcome back to the Personal Finance Club show.
0:17
How's it going, Jen? Fantastic.
0:19
How are you Jer? Great.
0:21
Do you own any Bitcoin? I don't.
0:24
You don't. Have you ever been messaged by
0:27
scammers on the Internet? Oh yeah, for sure.
0:31
Like a lot, right? And so I want to tell a story
0:35
that I literally have never told.
0:38
I told to like some close personal friends in very private
0:40
settings, but has never been public before.
0:42
And the reason it's never been public is because involves some
0:46
illicit activity on my behalf. And so I guess I'll premise this
0:51
whole story with saying, maybe this is fictionalized, maybe it
0:54
didn't happen, maybe any activities that I did that might
0:58
be illegal. Is this a story I'm telling you?
1:01
Not true. And if they are true, I think as
1:05
a listener, you might understand why I did it.
1:07
But it's about scammers in Bitcoin.
1:09
So this was this was back in 2019.
1:12
So this was six years ago. On Instagram, there's just this
1:15
like wave of scammers who would message you and basically try to
1:20
convince you to send them Bitcoin.
1:21
And, you know, they wouldn't say send me Bitcoin.
1:24
They'd say, you know, I'm a crypto investor or I'm a forex
1:27
investor and I'm an investor money.
1:29
And and I don't know why they targeted me.
1:30
You know, I think that they were just kind of like randomly going
1:33
after people's accounts who they found, but they basically would
1:36
pretend to be this expert investor, show you these like
1:39
fictitious returns. They might even direct you to a
1:42
real website that they made that looks like an investment
1:46
website. And then through the website
1:47
you, you know, at the end of the day, what happens is you send
1:50
Bitcoin to them and then they disappear and it's like
1:52
impossible to track and all that.
1:54
And so I had a kind of attrition of messing with them.
1:58
I would just play along, play dumb joke with them, you know,
2:03
make them jump through stupid hoops to, you know, try to keep
2:06
the scam going and pretend to be an idiot, whatever it was.
2:10
But invariably at some point they would say, OK, send me the
2:14
money and then I would say, OK, I sent it or whatever.
2:17
And then it would end because they'd say I didn't get it.
2:19
And then they would figure out that I was just messing with
2:21
them. And I, and I, I'd also like to
2:22
mention that I've learned more about scammers since then.
2:26
I know a lot of them aren't, aren't like inherently evil
2:28
people themselves. They're like maybe traffic
2:31
people or disadvantaged people who are being forced into this
2:35
labor by, you know, some even especially more evil people.
2:39
And, and I also think the scams have shifted over time and it's
2:42
more AI. But I think at the time it was
2:44
like actually a lot of like young people, not in the US who
2:47
were just trying to like steal money from Americans through
2:50
this, through this method. And I didn't like that.
2:52
I and, you know, no matter what sob story you gave them, if you
2:55
said I'm a single mom and this is means the whole world to me
2:57
or whatever, I'm sick, I'm dying.
2:59
They would still just steal your money.
3:01
So I, I felt very little sympathy for them from my
3:05
perspective at least. So anyway, one such day I was
3:09
messing with one of these scammers and I kind of got to
3:11
the end of the rope and I said, OK, I'll send you the money.
3:14
And I was like, I don't know, do here because I'm not going to
3:16
send you the money. I was on the drive.
3:18
I remember having this epiphany where I said, wait a minute, I
3:22
think I can steal money from the scammer and I have certain
3:26
skills, you know, like that Taken movie where it's.
3:30
Liam Mason's yeah. He's like has certain skills, I
3:33
have certain skills too. They're much nerdier skills.
3:37
The two skills that I have are like deep knowledge of personal
3:40
finance, deep knowledge of products design and pretty solid
3:45
graphic design skills. And So what I decided to do was
3:51
tell him that I sent the money. But what happened is when I sent
3:55
the money using Coinbase, which is the, you know, the website
3:59
where I keep my crypto, I have very little by the way, like,
4:01
you know, 10 grand or so. I'm, I'm going to tell him that
4:04
Coinbase blocked the outgoing sending of Bitcoin.
4:09
And what I did is I went to Photoshop and went and took a
4:12
screenshot of Bitcoin, created a new dialogue that does not exist
4:15
in Bitcoin. It says this sending of Bitcoin
4:18
has been blocked due to suspected fraudulent activity.
4:21
You can't send this Bitcoin address unless they send you
4:25
money first, proving that they're a trusted wallet.
4:28
Oh, no, Jeremy. And it's literally The funny
4:31
thing is it's the exact same scam that they run.
4:34
They say, oh, you've got a six, you know, a different scam,
4:37
like, oh, the Nigerian Prince has like a $6 million thing.
4:40
You just have to send them $1000 to release the money.
4:43
So like, it's the exact same scam.
4:45
It's like you have to send me money to release the money.
4:47
And you know, they're asking for like 5 grand or something like
4:50
that. So I, so I said, OK, I think
4:52
it's 25 bucks actually. So I said, OK, you have to give
4:55
like half of a percent of what you're asking for.
4:57
And I looked very professional. You know, like I said, my
5:00
product design, my graphic design, my finance knowledge, it
5:04
looked like it was like a real screenshot from Coinbase.
5:08
And then I took my grainy cell phone and bad lighting crooked
5:11
and took a picture of the screen as though I didn't know how to
5:14
take an actual screenshot of a screen.
5:16
Then sent it to him and, you know, he pushed back.
5:20
He's like, what is this? Like let me try a different
5:22
address, yada, yada, yada. And I kept, you know, creating
5:26
screenshots as necessary. And then lo and behold, this
5:30
guy, he thought $5000 is coming his way if he just had to like
5:33
release and, and it didn't even like the screenshot said as soon
5:36
as you receive the $25, the $5000 will automatically be
5:41
released. So he thought he was dealing
5:42
with like Coinbase to automatically release the $5000.
5:46
And so on this day in my I get a little Ding on my phone, a
5:52
little bit of Bitcoin comes my way.
5:54
I've successfully stole money from a scammer.
5:57
And then I did it again to another one and it was like 25
6:01
bucks or so each time I actually looked it up right for this
6:03
episode to to Fact Check myself or maybe this whole thing's
6:06
fictionalized. I plead the 5th if anyone ever
6:08
asked me to, you know, testify against myself.
6:13
But that was back in 2019. Bitcoin's up 10X and cents.
6:16
So I think I now I have about $550 that was sent from scammers
6:20
back in 2019. Why would you make me an
6:24
accomplice in this crime? This is crazy.
6:26
Accomplice, you can turn me in, I think when's the what's the
6:30
statute of limitations on overseas Bitcoin theft?
6:34
I feel like this is probably one of the more and this is if
6:36
someone who is trying to steal from single mothers, dying
6:40
people with cancer patients, no sob story gave would stop them
6:43
from stealing money. I think that, you know, and and
6:46
frankly, like I, I partially did for entertainment, not to make
6:50
money. It wasn't that much money still
6:51
isn't, but I did to like dissent, disincentivize them
6:55
from stealing, right. They're the ones they're the
6:57
jerks. They're the they're the jerks
6:59
that are going and stealing from people all the time as a living.
7:02
Like if they realize there's people out there wasting their
7:04
time and fighting back, maybe they'll not do that, you know?
7:07
So that's my. Next time just block hang up
7:10
like come on. You no fun, Jen.
7:14
Yeah, well, I'm not a criminal. My CPA, at some point, he's
7:19
like, where did that money come from?
7:20
Because you have to like, you have to account for your crypto
7:23
like gains and losses. And I was like, oh, that was a
7:26
gift from a friend. Screaming.
7:30
OK, well, I would like to quickly move on to our next
7:33
segment and get out of this murky territory.
7:40
Explain it like I'm 5. Explain it like I'm 5.
7:43
Has nothing to do with stealing crypto.
7:45
It's a much more light hearted topic.
7:49
What are we? What's, what are we covering
7:50
today, Jen? OK, so you teach people how to
7:53
invest successfully. So let's say they do everything
7:56
you told them to. They've got all this money,
7:58
investments, and they're ready to retire.
8:01
Let's hear today's question from our guest * Matteo.
8:06
What is the 4% rule? Thank you Matteo.
8:11
What is the 4% rule? If you don't know, Matteo is my
8:13
4 year old. He's adorable.
8:15
He's not 5, so I'm not sure this answer will make sense to him.
8:19
But I did meet someone recently. Jen and I were at an event in LA
8:22
and a young woman, correct me, it feels weird to even call her
8:26
a woman. She was like 18 or 19 girl teen.
8:30
And she said I've been working my whole life and I don't want
8:33
to work forever. And I, you know, I did the old
8:35
person thing, like, Oh my gosh, your life hasn't even started,
8:37
yada yada. But Tino Turkret, she was
8:40
working hard. She'd been working from 13.
8:42
She was making a lot of money now as an influencer, which is
8:46
what, you know, 19 year old zoo in Lai guess.
8:49
And what she's really asking is like, I have income.
8:53
I don't want to be doing this forever.
8:54
Like, can I live off of this somehow?
8:56
And the answer is is yes. And that's what the 4% rules and
9:00
the 4% rules says, hey, if you take all this money, the savings
9:04
from your income over the years, you're saving, saving, saving,
9:07
investing, investing, investing. If that Bank of investments
9:11
grows big enough, you can take 4% of the starting amount.
9:16
Let's say your investments grow to 1,000,000 dollars. 4% of that
9:20
is $40,000. That means you can take $40,000
9:23
out every single year, even increasing it for inflation, and
9:27
never really risk that $1,000,000 running out.
9:30
So so you have $40,000 of infinite free income.
9:34
That's with a million. You know if you can live off of
9:36
$40,000, that means a million is your number.
9:39
If you need $80,000 then 2,000,000.
9:42
If you need 100,000 dollars, 2.5 million, whatever it is.
9:45
But the 4% rule is basically looking at the historical
9:50
volatility, inflation, dividends, growth of stocks and
9:55
bonds and figuring out how much can you safely pull from it
9:59
every year. I like to think of the extremes.
10:03
1% would be too low. That's too safe because you
10:05
could put 1% in a savings account and it would last 100
10:08
years, right, Even with some interest longer than that.
10:11
So that's too conservative. You know, no one's to live 100
10:14
years past the time that they acquire this amount of money.
10:17
So 1%'s too low 10%, which is the historical growth of the
10:21
stock market. Maybe that might make sense
10:23
except for if you start taking out 10% per year and then you
10:26
have a bad few years of the stock market, you could get in
10:28
the situation where you've taken out too much and then the
10:31
original nest egg does deplete and then you're back into a bad
10:34
situation. And so a 4% kind of matches the
10:38
gut check. It's somewhere between one too
10:40
low, 10 too high and then this thing called the Trinity study,
10:43
which like looked at, you know, all these different decades and
10:46
historical growth and volatility and yadda, yadda, yadda,
10:49
basically came across 4%. Now the now the authors of the
10:52
Trinity study are even saying that's a little bit too
10:54
conservative. It's more like 4.5 or 4.6%.
10:57
But you know, if the younger you are, the more reason you might
10:59
not want to be pushing it because maybe the future isn't
11:02
going to pan out like the past has.
11:04
And so the 4% rule is a perfectly good rule of thumb to
11:08
say, Hey, this is what I can officially FIRE financial
11:12
independence, retire early FIRE. This is when I can live off my
11:16
investments forever. So it's that 19 year old who
11:18
said, hey, I don't want to work forever.
11:19
You don't have to. You can get to a point where
11:21
you're nesting if you keep saving.
11:23
She was actually making a lot of money per month.
11:25
She was living below her means, no names, no specifics, but she
11:28
she was putting away a lot, but just basically putting into a
11:30
savings account. If you put into investment
11:32
accounts, then you can live off the growth.
11:35
And another cool thing that investments do is dividends.
11:37
So right now if you buy a total U.S. stock market index fund
11:42
like VTi, it's paying about a 2% per year dividend.
11:45
That means without selling any shares, it just is creating cash
11:49
deposit automatically to your bank account.
11:51
And so that's 2% of your 4% right there.
11:54
And the other 2%, you just sell a few of the shares and the
11:57
remainder of the shares will go up in value enough to never
12:00
actually deplete. And so it's really nice to nice
12:04
position to be an end and if you can get your investments big
12:07
enough to live by the 4% rule, you can live off your money
12:10
forever. I love it.
12:13
Thank you so much. And it was really inspiring to
12:16
see so many young people looking to invest and actually see their
12:20
money grow. We were kind of expecting to be
12:23
hanging out with a bunch of influencers who were just
12:25
worried about buying Lamborghinis and Birkin bags,
12:27
but they really wanted to know. They were curious.
12:29
They also wanted to hang out with Jeremy, make videos with
12:32
him. So it was fun and inspiring at
12:34
the same time, So. It was a small crowd though, so
12:37
maybe you know the the Lamborghini salesman who's
12:40
coming next week will have a packed audience and we have the
12:44
spattering of of money wise young investors who showed up.
12:48
Yeah, maybe. OK, Mateo, I hope that answers
12:50
your question. Thank you again for calling in.
12:52
Let's move on to our next segment, Money Money.
12:57
Can I ask a dumb one? Are you asking a dumb question?
13:00
Are you asking a dumb person? We may never know, but let's ask
13:03
this one. OK, so this question is from
13:05
Amanda. Now listen, like I said last
13:08
week, y'all's questions are too long.
13:10
So Amanda, love you down. We cut your question like by
13:15
it's, it's a quarter of your original question.
13:17
We answered your first one. We're going to try to answer
13:19
your first one. So Amanda asks what are the
13:22
implications during retirement of having some of my current
13:25
contributions to my 4O1K as traditional and some is Roth?
13:29
I understand that we would owe tax on the traditional 4O1K
13:32
distributions and other employer match, but are there other
13:35
things that would trigger limit effect or disqualify us from?
13:41
I always like to put things in perspective and there's like big
13:45
deals and there's small deals, big deal.
13:48
Don't bury yourself in debt. Live below your means.
13:52
Invest early and often. That's the big deal.
13:54
If you do those things, you'll be in great shape.
13:58
Choosing between Roth and traditional investments in your
14:01
4O1K is a small deal. Not only is it a small deal, but
14:04
it's impossible to know the perfect answer ahead of time
14:08
without knowledge of the future because it requires knowing
14:12
what's going to happen to tax brackets in the future, what's
14:14
what tax bracket you're going to be in the future.
14:17
You know, things like that where you can't perfectly decide now,
14:20
but I'll still give you the answer.
14:22
But broad strokes, if you are not getting into a bunch of
14:26
debt, living below your means, earning well, saving, investing
14:30
along the way, you're going to be in great shape.
14:32
So you don't need to kill yourself over these small
14:33
decisions. That said, there's three main
14:36
types of tax statuses in investments. 1 is a regular
14:41
taxable account. So if I go to Fidelity and I
14:44
click open up brokerage account and put money in and buy shares
14:48
of VTi and ETF, that is just the regular old tax status.
14:52
Which means if I do that or if I buy a gold bar and stored in my
14:56
basement and then those things go up in value, the government
14:58
is going to want a piece of that when I sell it on a capital
15:01
gain. The second one is Roth.
15:05
If you put money into a Roth 4O1K or IRA, then you're never
15:08
taxed on the gains ever again. And so it's kind of like, I like
15:12
to think of it with the analogy of seeds.
15:14
If you are paid in seeds with a taxable brokerage account out of
15:19
your paycheck, like less, you get paid 10 seeds, you pay
15:22
income tax on your seeds. So you pay 3 seeds and you have
15:25
7 seeds remaining. You plant those 7 seeds, it
15:27
grows to 7 trees and the government says hey, you just
15:30
got one from seeds to trees. We go out to those trees and
15:32
we're going to take two trees and now you have 5 trees.
15:35
That's like the normal tax they ask.
15:37
With a Roth, you still pay income tax.
15:40
Your 10 seeds of paycheck go to 7 seeds, but then the trees are
15:44
never harvested from the government, so you get all 7
15:46
trees. Later on you never taxed again.
15:48
The last status is traditional. With traditional you don't pay
15:51
tax on your income. So let's say you paid 10 seeds.
15:55
All 10 seeds can go into a traditional 4OK or IRA, but then
15:59
when they grow and they're harvested, when you take the
16:03
withdrawals out, then you do pay the government based on that
16:06
income. And so your, your 10 trees
16:08
become seven trees. And so it's like Roth 7 trees,
16:12
traditional 7 trees, taxable brokerage account 5 trees.
16:16
And so both Roth and traditional are better, you know, better tax
16:21
treatment than just a regular old investment account, but
16:25
they're slightly different. And so those are the three types
16:27
of buckets. Having both or having all three
16:31
has some nice advantages. It's like, let's say you have
16:34
some Roth, have some traditional.
16:36
What that does is it gives you some flexibility to choose which
16:40
bucket you withdraw from in retirement.
16:43
So like, let's say you have a very, very low income year.
16:45
Let's say you're 60 years old, you you're retired and then for
16:51
one year you have 0 income, 00 income.
16:54
There are there's a level income tax under which you owe 0 income
16:57
tax. And so you could pull from your
16:58
traditional investments and even though tax is owed, that tax
17:03
rate will be 0. And so that's a nice way to pay
17:05
no tax when you earn the money because it goes in tax free
17:08
because it's traditional and no tax remove with when you
17:11
withdraw because you're in a very low income year.
17:14
If you are in a very high income year, like let's say you sell a
17:18
bunch of stock in a taxable account and you have a bunch of
17:21
income or you know, whatever it is, then you could say, OK, I
17:24
don't want to touch my traditional because that would
17:26
be taxed a high tax bracket at a high rate.
17:29
I'll pull from my Roth. And so having the two buckets
17:31
kind of gives you some opportunity to maybe do some
17:33
like arbitrage and like, you know, staying under the low tax
17:36
bracket if you can. That said, there are some other
17:38
you, you asked about trigger limit effect.
17:40
I don't really know what all those words mean in your
17:42
context, but there are some other implications of investing
17:45
in a traditional account. 1 is that when you put money into a
17:49
traditional account, the government has never been paid
17:52
income tax on it. And the government doesn't like
17:54
that. And so they have this thing
17:56
called RM DS, required minimum, minimum distributions.
18:01
That means at age 73, they force you to start taking money out.
18:06
And so that could be a negative impact because like, let's say
18:09
you're in a high tax bracket because you still are killing it
18:11
in your 70s. Now you get forced to, you know,
18:15
subject your withdrawals to this high tax bracket against your
18:20
wishes. And you know, for young people,
18:22
you're like, Oh my God, 73 might as well be, you know, a million.
18:26
But like, my parents are in that age range and they're very
18:29
concerned about their RM DS, right?
18:30
That's like something that becomes a big deal when you're
18:32
that age. Another thing is Social
18:33
Security. After a certain age when you
18:35
start taking Social Security, some Social Security may be
18:38
taxable if you have enough, enough other income.
18:41
And so if you're pulling money from your traditional because
18:43
you want to, you need to or because of the RM DS that could
18:46
cause your, your Social Security become taxable, which is another
18:48
implication. Another one is Medicare
18:50
premiums. Again with Medicare when you are
18:53
old, you get basically government sponsored health
18:56
insurance. You have to pay more for that
18:58
and it gets complex beyond the scope of this podcast if you
19:01
have a lot of other income. And so basically, if you put, if
19:04
you put all your money into traditional to lower your tax
19:07
burden while you're working, you might be increasing your tax
19:10
burden later due to these reasons.
19:13
RM DS, Social Security, Medicare premiums.
19:16
All that said is it's still not that huge of a deal because you
19:19
don't, you know, they're both, they're both preferred to
19:21
taxable brokerage account. You don't know which one's going
19:24
to be better. I think there's lots of reasons
19:26
to like Roth. You know, three out of there,
19:31
Jen, me and Vivian, Shane, all the Pfc employees, we all do
19:34
Roth contributions because we want to never ever pay tax
19:38
again. And it kind of insulates you
19:39
from all future tax hikes. Let's say Social Security is
19:42
going insolvent and then they want to come after, you know,
19:45
high income earners that Roth is protected.
19:48
Who knows? I mean, there could be World War
19:50
Three and they could just drain our accounts or something.
19:52
I don't know. But based on the stability of
19:55
the government as we hope it continues to exist, that, you
19:58
know, Roth is predicted from future tax hikes.
20:00
All that said is there's a calculator if you Google
20:03
Nectarine calculator, Nectarine is our flat fee financial advice
20:08
marketplace. We can find a flat fee financial
20:10
advisor and we have some cool calculators on there.
20:12
So if you Google Nectarine calculator, there's an advanced
20:16
retirement calculator that lets you put in Roth, traditional and
20:21
taxable contributions. And then you can see how it
20:25
affects your likelihood of a successful retirement, how it
20:27
affects your total growth of investments, how it affects your
20:31
income in retirement. And so it's nice to play with
20:33
the numbers and I think you'll probably see it's not going to
20:36
make or break you, but for sure you are going to pay tax on
20:39
traditional when you pulled out. And more generally speaking,
20:43
we're talking on Nectarine. Amanda, you asked a very complex
20:47
question. And when I saw this, I was like,
20:49
Jen, this is a lot for a podcast and I've been yapping a lot on
20:53
your question already. It's probably worth tossing down
20:55
with the financial advisor. And you know, Nectarine like has
20:59
flat fee financial advisors. So these are advisors who don't
21:02
sell any products, don't earn commissions, and don't charge
21:04
you a percent of your assets. Instead, you just pay them by
21:07
the hour or by the project, which is my preferred way to
21:10
hire a financial advisor. I always have been pitching this
21:13
to people for years. This is how you should pay
21:15
financial advisors. They always said, how do I find
21:18
one of those? I always said, I don't know
21:21
because I can't find them myself.
21:22
And so that's why we built Nectarine.
21:23
So we have a great resource for that.
21:25
So that's my answer. Amanda, Jen, how long when it
21:29
was that? But I'm always, I'm always, I'm
21:31
always trying to become less long winded and it's not going
21:33
well. Listen, for once, I'm I'm
21:35
blaming Amanda, you know, like we, we really, you tried, you
21:39
know what I'm saying? And I feel like maybe she needs
21:42
to go check out Nectarine, but hopefully we got like, you know,
21:44
a little bit into her question and she can take it from here.
21:48
So good job. Let's get into our next segment.
21:54
Scroll Patrol. Scroll Patrol.
21:58
All right, Jeremy, I am scared. I feel like you might be mad at
22:02
me for picking this one, but I did it on purpose and maybe once
22:06
you open it you'll see why. And hopefully you'll either be
22:09
mad at me for picking it, or you'll feel vindicated when you
22:12
can refute it. As a reminder, Jen has seen this
22:14
before. I'm giving my honest, authentic
22:16
reaction to Washington for the first time and I'm clicking play
22:19
now. Here is.
22:20
Exactly why the 4% rule doesn't work.
22:23
Number one, it's based on past returns, not future needs.
22:26
Nostalgia is not a retirement strategy #2 it assumes no major
22:30
life changes. Like, say I don't know, divorce,
22:33
illness, or moving to Vermont to raise goats and #3 it doesn't
22:36
account for your actual spending patterns.
22:38
It's just a theoretical model built in the 90s based on worst
22:41
case scenarios. It's not a rule.
22:43
It's definitely not a plan. It's a guess, just like
22:46
everything else in life that we pretend to know and don't.
22:49
And if any of this is helpful, check out the episode of the
22:51
podcast where I analyze the 4% rule and all of its nuance and
22:54
glory. OK, so that was Tyler.
22:56
I know him. He's he's a good guy.
22:58
He's a good content creator. He's putting out good stuff.
23:00
And you know, he's saying, you know, it's kind of funny in this
23:03
episode about the 4% rule, he's saying it's not a good rule.
23:06
And I think all three of his arguments, they're basically
23:09
boiled down to we don't know the future.
23:12
And he's right. We don't, You know, he, he could
23:16
have said argument #4 an asteroid could hit the Earth
23:18
tomorrow and blow Earth into smithereens.
23:21
And where's your 4% rule now? And of course that's true.
23:25
We can all, we could make that argument about literally
23:29
anything in life. And of course it's true that
23:31
this is based on history because we can't based on the future
23:33
because no one knows the future. So we do the best we can.
23:35
But like I said, I think it it passes the sniff test for me,
23:38
which is 1%'s too low, 10%'s too high.
23:42
Looking at historical inflation, volatility, growth of the
23:46
market, bond returns, that's where you come with 4%.
23:50
Is it guarantee? No way.
23:53
Is it an entire financial plan? Yeah, probably not, He said It
23:56
doesn't account for changes in your spending patterns.
24:00
True. But you know what people say
24:02
when I ask them how much money they're going to spend in
24:04
retirement, they say I have no idea.
24:07
Of course you don't know. And so I actually have a problem
24:11
with and, and you know, even Amanda, God bless her from our
24:15
previous segment, I kind of have a problem with people being
24:19
overly specific about projections like, oh, I'm going
24:23
to like put one extra dollar in Roth or I'm going to make it a
24:26
3.98% rule or 4 point O 3% rule. That's not, that's not going to
24:31
happen. None of that's going to happen.
24:32
We need to know ballpark, are we doing great or we do not.
24:35
You know, if you need to withdraw 15% of your portfolio
24:38
to retire, you are not going to make it.
24:40
If you need to withdraw point O 3% of your portfolio, then
24:44
you're probably a billionaire or whatever.
24:45
If you're around 4%, then you're probably pretty close.
24:48
And you know, no guarantees, but it's not a bad starting point.
24:52
And so, you know, for I grade these scroll patrols from an A
24:56
to an FA is like a plus. Pfc great, great advice.
25:00
F is like bad advice. I guess, like AB, you know, I
25:03
think it's a little bit kind of like just throwing a wrench in
25:07
things when you know, introducing complexity when it
25:11
doesn't actually benefit the the individual.
25:13
But for sure, like I said to Amanda in the last episode, like
25:17
if you're eyeing early retirement and really want a
25:20
more detailed look at tax statuses, withdrawals, which
25:24
accounts, how to get to accounts before you're 59 1/2, things
25:27
like that, you know, you're probably going to go beyond the
25:29
4% rule. If you're in your 20s or 30s and
25:32
you have 10 or 15 years of working at least left, you got a
25:36
target. Keep going.
25:38
And you don't really need to get any more specific than that for
25:40
now. So that's what I say.
25:41
I give it AB Tyler. OK, shout out Tyler taking it
25:46
easy. I actually do want some.
25:49
I mean, I think that's, I think that's actually pretty good
25:51
advice. It's it's ABI want some really
25:52
good advice. I shouldn't be like, I don't
25:54
want to I, I feel like we need to protect the scientific
25:57
integrity of scroll patrol. But if you, if you find some
26:00
really good advice, I think that's, you know, this isn't
26:02
just like Jeremy Trash's Internet advice.
26:04
I think maybe it's me giving him a maybe this is great advice.
26:07
Maybe it's bad advice. We'll see what the next one is.
26:10
We love it. Send it if you see any advice
26:12
you want us to review or Jeremy to blind review, then send it to
26:16
podcast@personalfinanceclub.com. All right, let's get into our
26:20
last segment of the episode. Jeremy had time today.
26:25
You recently made an Instagram post titled You will Never Meet
26:30
an Index Fund Salesman, and you had one comment that said half
26:34
the personal finance world dedicates their lives to selling
26:36
index funds with posts like these.
26:39
Jeremy, Thoughts. So Jen and I kind of disagreed
26:44
about this commentary's intentions.
26:47
I think that he was actually saying that in a positive way,
26:49
which is the personal finance community has the best interest
26:54
and heart of of their audience and they're doing what they
26:56
think is the right thing. But I actually do kind of hear a
27:00
sentiment like this. And and so just to step back for
27:02
a SEC, this post saying you'll never meet an index fund
27:06
salesman. What I mean by that is you at
27:09
some point in your life are going to get sold life insurance
27:12
by an acquaintance or online or something like that because the
27:16
life insurance salesman makes a living from Commission.
27:20
The more expensive crappy High Commission insurance they sell,
27:25
the more money they make. This is like this weird inherent
27:27
conflict of interest, which the worse they do for their clients,
27:31
the better they do because there's more profit to be taken
27:35
from the product they sell. You index funds don't have
27:39
salespeople. You literally they don't exist
27:43
because there's no profit to be taken.
27:44
Like there's the fees are so low.
27:47
A person couldn't make a living selling an index fund or if they
27:49
did, it would be like a higher Phoenix fund and you wouldn't
27:51
want to buy that one. You want to go with the lower
27:53
fee option. And so I actually do hear this
27:55
sentiment a lot, which is something like, Jeremy, you
27:58
don't sell any of these products.
27:59
How could you? You don't know what you're
28:00
talking about. You couldn't possibly be
28:02
licensed to do these things or whatever.
28:04
And my answer is like, yeah, of course I don't sell these
28:06
products. That gives me an unbiased base
28:09
from which to, you know, look at them.
28:12
And I, you know, I'm not an index fund salesman.
28:15
I'm not a financial services salesman.
28:16
I'm not a life insurance salesman.
28:19
I'd consider myself a serious hobbyist and I deeply look at
28:23
each of these things and try to understand them because I like
28:25
doing it. And I find tons of merit to
28:28
index funds and I find little to no merit to High Commission life
28:32
insurance, for example. And so if I thought High
28:36
Commission life insurance was great, I would be doing it.
28:39
I would be buying it, I'd be recommending it because I don't
28:41
make money from anything. I'm just saying what I think,
28:43
which is like a great way, because I'm not sponsored, don't
28:45
earn commissions, all that with the exception of Nectarine.
28:48
And so of course there's a conflict of interest there.
28:50
And so if I'm suggesting a financial advisor and I say
28:53
Nectarine, of course that's a conflict of interest.
28:55
But beyond that, I don't, you know, have any reason to
28:57
recommend a, any product or the other.
29:00
So, so I, I kind of do consider myself a index fund salesman.
29:04
I don't earn a Commission. I don't make money from it, but
29:06
I think it's the right thing, which is why I always talk about
29:08
it. Amazing.
29:10
OK, yeah. And maybe it's a tone thing.
29:13
You can't tell tone from text or comment and then.
29:17
I I do know who wrote this comment though, and he's he was
29:20
he wasn't being possible. He had the insider's scoop.
29:22
That's not fair. You know I'm.
29:24
Yeah. I'm going in blind.
29:26
It's my show, so it's not. To be fair, I guess it's just
29:28
your show too, but. Yeah, hey, I was kidding.
29:31
OK, On that note, that is all the time we have for you on
29:35
today's Personal Finance Club show episode.
29:37
Thank you for listening and we'll see you again next week.
29:40
And don't forget to follow the 2 rules of Personal Finance Club.
29:43
Rule #1 Live below your means and rule #2 invest early and
29:47
often. The Personal Finance Club show
29:50
is produced by Jeremy Schneider and Jed Mundia, music by Essa
29:53
Balu and Homie. Send your questions to
29:56
podcast@personalfinanceclub.com. The Personal Finance Club Show
30:00
is Co hosted by Jeremy Schneider who is a co-owner of Nectarine
30:03
and SEC Registered Investment Advisor.
30:06
The views expressed on this show are those of the hosts and
30:08
guests and do not necessarily reflect the views of Nectarine.
30:12
Please refer to hellonectarine.com for all
30:14
relevant disclosures. This podcast is for
30:17
informational and educational purposes only and should not be
30:20
construed as personalized investment advice or a
30:22
solicitation to buy or sell any security.
30:25
Listeners should consult their own financial, legal or tax
30:28
professionals for advice specific to their situation.