Mindy: Bill Yount just did it. After a 10 year journey to catch up to fi, he ran the numbers and discovered he’d made it. Now he’s adjusting his portfolio to preserve wealth instead of building it. So how is Bill going to draw down? That’s what we’ll be talking about today.
Mindy: Hello, hello, hello and welcome to the Bigger Pockets Money Podcast. My name is Mindy Jensen and with me as always is my already caught up to fi co-host Scott Trench.
Scott: Mindy that intro was fiery. I’m so excited to have Bill on from catching up to fi once again. We are going to discuss the moment he found out he achieved financial independence. We’re going to discuss his decumulation strategy. We’re going to talk about the comprehensive financial plan that he’s built and the way he found his planner who manages his assets but does not charge an assets under management fee, which we are big fans of avoiding uh here at BiggerPockets money that assets under management fee. So super excited for this discussion. Bill, welcome to Bigger Pockets Money.
Guest: Scott, Mindy, as always, it’s great to talk to you. Yeah, it’s weird being caught up to fi. I’ve been catching up to fi for nine years and I’m not sure what to do with it now.
Scott: For those who are unfamiliar, Bill’s journey is as a doctor catching up to financial independence. um and I think you realized uh Bill in your 50s that you were not on track to have a comfortable retirement the way things were going and made a sharp pivot around those eight or nine years ago to get to where you’re at today. You did have that higher income and also the higher spending that goes along with being a doctor and I’m excited now to hear about the transition into financial independence. So, can you tell us a little bit about what happened in the last maybe year or so when you kind of learned that you were financially independent?
Guest: Yeah, Scott, you’re right. in 2016 or so when I was around 52, I kind of woke up to we’re not ready. And over the last eight or nine years, my wife and I’ve been working very hard to get to fi and I didn’t think it was going to come for the next two or three years, but for my 60th birthday, which was just recently, I promised myself for retirement readiness checkup with a financial advisor. Yes, I am a trader to the DIY movement. I decided to engage with a a fee only flat fee, advice only planner to see, hey, where am I? Because I’m not a spreadsheet guy and I’m not as good at drilling down on the numbers and I wanted a second opinion on, okay, how much longer do I have to go? Uh or am I there or where do we stand in this fog of fi? And low and behold after a meeting or two and inputting our data and expenses from Monarch which we use to track our expenses and I know you support as well, he came back to me with the stress test plan and said, yeah, you have a 100% chance of success if you stopped work tomorrow. And I kind of sat there blankly staring at him going, no, that math can’t be right. I just don’t trust the math.
Scott: So that’s awesome. What walk us through what that math looked like at the highest level. We don’t need to get the specific numbers. We do know that you’re kind of in that uh chubby fire range, I think that’s safe to say in here and but but tell us about, you know, what that process looked like and what were the factors that led to you having 100% chance of success with this financial plan.
Guest: Yeah, I mean, we had to drill down our expenses basically. How much were we spending a month? And I tracked our data for the last two or three years in Monarch. And then thankfully, my advisor uses Monarch with all of his clients, so it was seamless to just upload the data to him. We went into it and tweaked it, drilled down on average monthly and annual expenses. and you know, our spend was, you know, roughly around 18,000 to 20,000 a month. and then we just looked at our nest day based on the 25 times rule and a portfolio that we’re going to talk about to get there with a safe withdrawal rate of 5%. And he said, yeah, you have a huge chance of success in the portfolio that we will, you know, construct with you. And I was like, wait a minute, this doesn’t make any sense. I’m not ready. I’m going to work tomorrow. I have no plans to stop working. you know, what do we do with this power of FI now? I’ve been a little confused since then. It’s only been a month or two that I found out, and nothing has changed. It was kind of whoopy, we’re there. But then at the same time it was big whoop because life doesn’t change overnight, right?
Scott: So walk us through what was the portfolio that you had going into this conversation with the financial planner?
Guest: We took back our money from a private bank back in 2015-16 and put it in vanguard and basically, for the most part, we’ve been in a three fund portfolio, 85% stocks, 15% bonds and cash, split between uh US and international with about a uh 70 30 ratio. And we sort of lived there. I I become victim to a little bit of tracking error following and market timing and made all these mistakes because I was having remorse that we weren’t doing as well as maybe some others were, but in spite of all the mistakes, sticking to that kind of portfolio, the market cooperated, basically, other than 2022 and with a 40% savings rate, we had gone from a single digit savings rate to 40% within about a year but it did not change our lifestyle as much as we thought it would. And so using that really powerful lever of a savings rate and decreasing your lifestyle and decreasing your expenses simultaneously, we got there a lot faster than I thought we would.
Mindy: I got to stop you right here and ask about this savings rate change. You were at a single digit savings rate, you went up to a 40% savings rate, but it didn’t change your life. So something changed. Did you cut things out that you were not really excited about or how did that change from single to 40?
Guest: A couple things. My wife went back to full-time work. So the income did increase which enabled a lot of it. We downsized our house, which was the big doctor house. We got into used cars and out of the leases and new cars. We did all the big rock moves that I think people as late starters should make in order to, you know, pull both levers, reduce, no, lifestyle deflate and then inflate income and use that extra income to just throw at your savings rate. And uh it it worked great. I mean, at 40%, um we got there faster than we thought we would.
Scott: Nice. it’s so great about those moves that because there’s nothing special about them. Yes, you guys earned a higher income in a general sense, but that was your baseline beforehand. The fact that you deflated, you intentionally reduced the cost of your life and you started with the big items, housing, transportation, I presume your discretionary expenses also got under more control as part of this process, made it straightforward to go from a single digit savings rate to a very high one, and the money piles up and it works. And now all of a sudden you’re you’re rich and it’s kind of like, what do I do with these new riches and how do I actually uh retire and and and set up my portfolio. So congratulations and it’s awesome to seeing it takes time but but seeing the power of these moves play out to freedom in your life.
Guest: Well, this is our message to all those late starters out there that feel that, you know, I got started late, I can never catch up and it’s always a good time to start. It’s always a good time to catch up to fi. You will only sleep better at night and have more financial security. So in the journey is for almost anybody 10 to 15 years, if you can leverage a 30 to 40 to 50% savings rate or live on one income and invest all of that and throw it into predominantly equities for 10 years and then glide down to retirement, anybody can do this. We’ve talked about this before when Becky was on with me, when Jackie was on with me, Uh you can go from 50 to 60 and broke to retired in 10 years. You’ve just got to be very intentional about it. The formula is tried and true. We followed the formula and we got there. It’s not a miracle, it’s math.
Scott: One of the things that I think is really interesting about your situation is, you’re kind of have to share your numbers with Mindy and I. We’re not going to discuss the specifics of your net worth or anything like that or spending on the show here today, but we can say, I think safely that your portfolio was not so large relative to your spending that you would be able to survive with 100% chance with an all equity portfolio. So, walk us through what your portfolio looked like before this call with the financial planner and what they’re recommending or what you’re going to be switching to as a result of this to achieve this 100% success rate.
Guest: Yeah, I mean, I’m not saying that people should have 100% success rate. I mean, I think honestly 75 to 80% is what you need to work with. You are at risk of underspending at 100% success rate on these software and we can talk about that too. Uh so yeah, it may be reassuring but actually it’s reassuring in a false sense because as we know in our community, spending can be a problem. People go to Ramit Sethi to learn how to spend, you know, uh and Brandon Ganch and Mindy and Carl, they’re all they they’ve all become fi and it’s like, okay, what do I do with this fi? What do I do with this wealth? And how do I spend it? So 100% chance of success is not necessarily a success in the truest sense. You know, the guard rails are somewhere, okay, if you have an 80% chance then you’re monitoring your spending on an annual basis and making adjustments because no plan is perfect and no plan is they’re all false as soon as you make them. But you know, where is that sweet spot? So, yeah, it was really nice to hear that we, you know, could meet it based on our current spending and it also brought up the the concept of, okay, how do we give to future generations in our children now that we have fi and we have money more than we need. How do we help our kids grow their wealth? So a lot of questions came up when we found out we were fi. Your question, however, was what kind of portfolio did we move to?
Guest: And we went from a three fund portfolio to, you know, a six to eight fund portfolio known as a risk parity portfolio. I actually specifically sought out an advisor that specializes in using risk parity portfolios with his clients. and I had to use AI to find one. These are unicorns. These are a rare breed, but they do exist. And you know, our friend Frank Vasquez has been on your show talking about risk parity.
Scott: Well Frank would be so proud by the way, yes.
Guest: I know. well, he is and uh and I drank the Koolaid. not only because we went on vacation together to South Africa, but uh you know, the math works and you once you dive into it and look get curious beyond three funds, you’re like, I can still DIY it and I only need to diversify at retirement. And I think this is important for people to uh look at because there’s a simple path to wealth. and that is one, two, three funds, all equities and then transition. But when you get to that pivot point of 80 to 100% of your fi number, you really got to focus on the simple path to wealth preservation. Can you tolerate the volatility of a stock market crash? how do you ameliorate or limit that volatility so that you’re not seeing deep and long drawdowns that could potentially cause you to have to work longer. So I was turning 60 and I was worried that if we have a 30% correction now in my current portfolio, I’m going to have to work longer. So I need to do something a little different to modulate that.
Mindy: Welcome back to the show. Because you are catching up to FI, instead of having a more steady savings rate over the course of your entire career, did you feel pressure to stay in the higher growth opportunities than to kind of diversify into the safer funds as you get closer to retirement age? Because I’ve heard so many different scenarios recommended, but like, oh, you shouldn’t be all in 100% stocks, you should have a bond portfolio too. But 15% as you are getting closer to, you know, traditional retirement age seems a little low based on the 4% rule, based on, you know, traditional retirement advice in general. Did you feel like you had to be in these higher risk, higher return investments because you had started later?
Guest: This mindset thing and mentality of investing is very interesting and I’m a bit of an emotional investor. I’m not good at the discipline of math maybe say as Scott is and I could never be 100% equities. I just couldn’t sleep well at night doing that even as a late starter and that is the sort of typical formula. But as a late starter at 52, I was like, I can’t do 100% equities. I just can’t tolerate that kind of roller coaster. So I went 80, 85, 15 for about eight, nine years. That’s what I could tolerate and bonds may be a bad word in this community, but you know, we do need to have sort of some balance to our portfolios where we’re able to sleep at night and we’re able to tolerate a 20 or 30% drawdown. And for me, that’s where we sat. Uh everybody’s different. They have a different set point. But going beyond a stock bond portfolio at the sort of pinnacle of FI, that’s what I started looking at. Okay, what kinds of bonds, what kind of bond funds, what kind of alternatives do we need to have to a portfolio to have what we call uncorrelated assets that are diversified across all market seasons or weathers, meaning growth versus recession, meaning inflation versus deflation. We’ve been living in a low interest rate growth environment or in one of the quadrants of market environments for 15 years, but the weather is going to change and we need to plan for future storms in the marketplace and for me, risk parity was the answer to that.
Scott: So risk parity talks about this this theory of having a relatively large number of uncorrelated assets that are going to behave differently at different market conditions. And the golden ratio portfolio is a specific allocation using the Fibonacci sequence or the you know, the golden ratio to to apply various percentages to these asset classes. But they’re all different. You can make a large number, an infinite number of permutations of this risk parity portfolio. What did you end up going with specifically in your situation?
Guest: Well, I worked with my advisor because everybody has to add their own spice to these portfolios. The the four basic rules of portfolio construction are one, the Holy Grail principle by Ray Dalio where it’s like you have to have uncorrelated, diversified assets. And number two, you’ve got to have a macro asset allocation across stocks, bonds and alternatives. and then number three, It has to be simple enough to manage. And people get stuck on doing simple first. Simple comes in the third position because yeah, the simple path to wealth is one or two or three funds. Well, risk parity is only five or six funds and it’s imminently manageable by an individual should they choose to. And number four, you add your own flavor, sort of a Bruce Lee principle, like take what is useful, discard what is useless, and add a little something that’s your own. And in discussion with our advisor, we came up with what I call my Optimist Prime portfolio, which is uh along prime number theory and we fundamentally have 16% in US large cap growth, 16% in US small cap value, a 50/50 split between US growth and value. 6% in international growth and 6% in international value. So that’s a total allocation of 22% growth and 22% to value across international and US borders, which is about a 77%, 27% split between US and international. So the equities total 44% of the portfolio. I do throw in 1% of Bitcoin because you know what, it’s down now and I was willing to take a little bit of a market timing flyer on that one. After that, we have 30% long-term treasuries and held in one ETF as far as recessionary insurance or ballast. And then in the alternative classes, I have 11% in a gold ETF and that’s not just market timing because gold has boomed this year and I’m not just chasing returns. and we have an episode we dropped just the other day on our podcast catching up to FI with Frank on the history of gold as an asset class, which I wouldn’t encourage folks to listen to. And lastly, there’s 11% in what something called managed futures, a little complicated to talk about maybe in this podcast, but it’s an asset class that is trend following related to interest rates, uh currencies, gold commodities uh that is a little bit more actively managed. Oh, and then there’s 3% cash.
Guest: The point here is it’s not complex. it is simple. it is uh across asset classes diversified and it shouldn’t be as intimidating as maybe the name risk parity is to people. We can embrace the simple path to wealth. I think in and moving forward, now that we’re have access to financial technologies that are cost effective that hedge fund managers used to use back in the 90s like Ray Dalio, we maybe need to evolve our thinking that maybe there’s a, you know, a better way to preserve wealth than just derisking a stock bond portfolio by reducing stocks and increasing bonds or cash.
Scott: What is the historical return profile of this type of portfolio and the historical standard deviation volatility of this portfolio relative to the S&P 500?
Guest: When you back test these portfolios and I encourage people to do so at sites like portfolio visualizer, portfolio charts or portfolio, three sites that people that uh create and manage these portfolios often use, you find that the drawdowns for a properly balanced risk parity portfolio are less than 20% and where you’ll see 30 to 50% with a typical stock bond portfolio say a 60/40. And then at the same time, the draw downs are shorter. They’re more like two years as opposed to three to five years. So you you know, as a late start, you can’t afford to have a big big long drawdown or the lost decade of the 200. Here you’ll have a portfolio that’s working in all markets, it’s not going to have the big drawdowns, it’s not going to have the high highs. you’re not going to grow like 100% stocks would grow, but even better, you’re going to gain more on the bottom end where you don’t have the big losses. So the margin in which your volatility operates is narrower than the volatility of a typical stock bond portfolio.
Guest: and it provides I think security. You won’t blow the top off of things as as 100% stocks would do in a big bull market, but the losses are where you’re in trouble and you’re mitigating your losses.
Scott: If the stock market is going to return 10 to 11% nominally over a very long period of time, maybe 7 or 8% real in real terms, would I expect something closer to like 6 or 7% in terms of growth from this portfolio but with much less volatility? or how how do you think about comparing the the the growth prospects of the a a two?
Guest: Yeah, you’ll see them vary between 7 and 8%. You’ll take a couple percent off the top, but uh I think it’s a small price to pay once you’ve reached fi to maintain fi and to uh not become unfi because you were taking on too much risk.
Scott: Unfi.
Mindy: That sounds unfun.
Mindy: Okay, Bill, Scott and I have been very recently talking about the order of operations on the decumulation side. I’m wondering if your financial planner gave you any guidance as to which accounts you should be pulling from first because looking at your account balances, it looks like you have a traditional 401K, you have Roth IRAs, you have HSAs and you have taxable brokerage accounts to be pulling from. Like where did they suggest you pull from in what order?
Guest: It’s going to be the taxable brokerages first using long-term capital gains and then it’ll be your traditional IRAs or 401k second and then uh your Roth accounts. But you’re going to hold, you’re looking at your portfolio in total in whole and so I don’t have, you know, the same asset allocation each account. Actually, we’re holding the bonds and the gold and the managed futures in the traditional account. So they’re going to grow more slowly and you want to grow your Roth account and your taxable brokerages more quickly. That’s where your growth assets go and your more stable secure insurance-based assets are typically in your um pretax accounts.
Mindy: What’s in your HSA?
Guest: In the HSA is all small cap value.
Scott: Okay. I would imagine that compared to somebody who was not catching up to FI, it wasn’t, you know, a late starter as I think you describe yourself on on the journey to to retirement here, you have a much lower relative balance of your wealth in a 401K or tax deferred account than a counterpart who maybe was contributing and maxing out their 401k for their entire career, working career. Is that true first of all?
Guest: Actually, as far as percentages go of our total net worth to on about 60% is in pre tax actually.
Scott: Okay, so I’m I’m dead wrong on that front.
Guest: The reason that is actually is because as we were independent contractors that had 1099 income and were able to use solo 401Ks. And so for example, this year with super catchups in the 60 to 63 range, I can put $81,250 in my solo 401k. and so I’ve been, you know, putting in large amounts of money into our solo 401ks and my wife as well, who’s also uh high income professional. So our savings rate has been able to go significantly into the pre-tax arena.
Scott: There’s an endless debate in the retirement community, uh early retirement whatever around the right order of operations to withdraw. Why are you not thinking about RMD suppression as a primary goal given what you just said there? Why is that not top of mind?
Guest: Well, I read Cody and Sean’s tax book. I mean, the tax bomb is not as big of a nightmare as we think it is. We actually did tax projections through um using right capital, the software that my financial advisor uses and my taxes are going to drop dramatically uh in retirement uh into, you know, the sub $20,000 range from over $100,000 range of of taxes. So it it’s not as big of a deal as you think it is. You’ve got to model it out and you can do that and I encourage all DIYers to actually double check their plans with the appropriate financial advisor so that they know where their blind spots are, if they’re right, if they’re wrong before you pull the plug. It’s been really powerful tool for us to have done this. And then we learned that taxes weren’t going to be that big of a deal when we modeled it out as we thought. And then when you put your lower growing assets in your pre-retirement, then they won’t balloon to those numbers necessarily that where RMDs become more of a problem and you put your higher growth in your tax optimized accounts.
Scott: Love it. I did not realize you were able to use the solo 401k, which is super powerful and we don’t get to talk about it enough here on bigger pockets money, but it is something that actually we started uh using this year with my wife and it’s like, whoa, you can put a lot in here and defer taxes in an incredible way.
Guest: Yeah, I mean Sean wrote the book on that one too. I think he has a book on the solo 401k, so I would encourage folks to go read that if they have the ability to use a a 401k.
Mindy: Yeah, you have to have self-employment income and you can’t put more away than you made in your self-employment income, but if you have the ability to, it is a powerful wealth generator.
Guest: If we couldn’t have done that, then it would have gone into taxable. I mean, that’s just where it would have had to have gone.
Mindy: So Bill, you have reached financial independence. Are you going to keep working?
Guest: That’s actually the question now. You know, I’ve been complaining about my job for years and years and years, and my wife says, now that you’re fi, you cannot complain about going to work anymore. This brings up the whole discussion of identity, meaning, purpose, connection, and then not over identifying with growing your wealth and your money and a number. And I’m a physician and I provide value in what I do. There are lots of aspects of the job as an emergency physician that I don’t like, say nights, weekends, holidays or long shifts, but to completely go cold turkey on that would be really hard. And the way I’m looking at life now, it’s kind of like, you know, dials on the thermostat or rheostats where I’m going to hopefully over the next two to three years, dial down the active income, dial down the time at work and I’m uniquely able to do that because I work shifts. and I can negotiate less numbers of shifts say per month. So that I can dial that down and then turn up the passive income dial slowly. So for me it’s not going to be a cliff. It’s a process. It’s a glide path of going to work. I may get to the day where I’m just fed up and say, you know what, today’s the day. I’m going to give my 90-day notice and I’m not doing it anymore. And when it becomes onerous to go to work and spend my time for money as opposed to spending my time for life, then I need to focus on spending the time on life and not on earning any more money.
Mindy: What does your family makeup look like? Do you have kids at home still or have they flown the coop?
Guest: Well, that’s interesting. Uh we have a boomeranger. Uh we have our kids are twins, they’re 26. One’s at home, figuring his life out, uh, and we’re happy to support that within our means to do so. The other one’s out in the world and is 95% figured his life out. But now that we’re fi, we’re also focused on things like, okay, you know, we can provide a roof and food for a while while somebody’s in between jobs or whatever’s going on there. But now I’m thinking about now that we’re fi, how do we help them build wealth in their own constraints. They they’re, you know, they’re in the 50 to $60,000 a year entry level salary positions and with inflation as we’ve seen it, the cost of living and housing, I am scared to death for how people this my kids’s age are going to build wealth over the next couple of decades without growing their income aggressively as we’ve talked about in prior episodes for Barb for example. a so we’re focused now on, okay, what can we do with our wealth to help them build wealth and and not let say their Roth accounts go unfilled or their HSA accounts, which they have access to go unfilled because they don’t personally have the cash flow to fill up those buckets that don’t roll over from year to year. We’re going to look at actively giving. I call it a tax optimized living giving plan for family generational wealth. It’s something that I now am very focused on because part of the reason to continue working is to, you know, help my kids retire earlier themselves in some way and not lose out on compounding in their 20s.
Scott: So what does that look like in practice, Bill? What what what are you planning on doing?
Guest: Well, we look at our kids and you know, if they can save 10% of their income and put it in their wth, that’s great. And then we’re going to look at, okay, can we fill up the rest of that bucket for them this year because they have the active income to do so, but they may not have the cash flow resources to fill up that bucket. So we’ll top it off and match them and they have skin in the game. And then because of an odd quirk of health insurance hack in tech, we were in the Farm Bureau plan here in Tennessee and only about five states have access to this and we underwrote into this insurance outside of the ACA um and the exchange uh and it’s a very low cost high deductible plan. They turn 26 this year and they migrated or grandfathered into their own version of an individual farm bureau underwritten plan with no pre-existing conditions. and so all of a sudden they have access to an HSA account that they can’t fund, but it it behooves us to help them fund that uh because, you know, they don’t have to have earned income to do that. So you can fill up that retirement bucket for them if you have the resources or at least put something in it to, you know, not lose these tax advantages to build wealth early. And then if there’s any additional, we can throw it into their taxable brokerage. It would enable them to save primarily into their pre-retirement. You know, they can focus on doing their work plan and we can help them with their other accounts. And at the same time, why not engage the rest of the family? We’re doing it for education. why not engage grandparents or boomers that, you know, are going to die with more net worth than they ever had. Why not encourage them to give while living and help their grandkids build their wealth. These are the kinds of things I’m thinking about.
Mindy: The gift tax exemption for 2026 is $19,000. So doing quick math, $7,500 is your Roth IRA contribution limits for your kids who are 26 and the single contribution HSA, the limit is 4400. So adding that up, we get to 11,00 1900, but we still have 7100 leftover in that $19,000 gift tax exemption if you’re just going straight across the board. So being able to give these this money to your kids is so generous and so beneficial to them. My kids unfortunately don’t have jobs right now. I’ve got a 18-year-old in her first year of college and a 16-year-old in high school and they don’t have any taxable income, so I can’t contribute to a roth for them. and they’re under age for their own health insurance plan, so they are under mine, so I’m not giving them that. but as soon as they have the the taxable income, we are planning on helping them contribute to their Roth IRA is helping them max them out because it’s no fun to save for retirement when you’re 16 years old. You’re like, oh great, look at all this money that I don’t get to spend for 40 years.
Guest: Yeah, my kids are 26. Um they’re getting a little bit of a late start themselves. I mean, honestly, they, you know, succum to our mentorship of dysfunction of lifestyle inflation. So recovering your kids from being natural spenders is a challenge. And therein actually is another advantage of our financial advisor. sort of I’ve set them up with their wealth building machines in their Roth, HSA and taxable brokerage and automated into a wealth building all equity portfolio. They’re using Monarch for example to track all their expenses to budget and then one of the requirements is after about three, four months of doing this, they’re going we’re going to pay for them to sit down with our advisor and have him go through it and have in an unemotional dis this connected way that isn’t the parent lecturing to their kids, they’re going to hear, oh, okay, yeah, my dad did set me up okay, but I can do this and this and this and here I can do this with my spending. Okay, I get it. So the light bulbs will hopefully go off but in more of a proactive educational way where you leverage the advisor as your ally and your kids own financial literacy journey.
Scott: So when you think about your retirement spending, do you plan on annual gifts to your adult children as part of that retirement spending and do you consider that flexible or fixed spending in the way that you are planning out your retirement?
Guest: Uh very good question and this is something I think everybody should do and should be considering as part of their retirement spending budget plan. For us, the way I’ve decided to do it is, should monies be available at a financial review at the last part of the year, we will lump sum uh whatever amount we feel comfortable and appropriate in January of that year for their Roth or HSA. Pre-planning also for what they’re contributing that year. and then we can top it off at the end of the year. It won’t be dollar cost averaged in. I’m looking at it as a lump sum. Yes, we have it. The market’s done well, we’re doing well, our plans on track. This works in stress testing the plan because this is a flexible portion. If if we need to protect ourselves, then the giving may go away. That may be the a buffer, so to speak in the spending. You know, we use sort of a a 3-1-1 plan for the 5% withdrawal rate. 3% of it is sort of the keep the lights on expenses. That’s your fixed. 1% of it ends up being kind of your comfort expenses, travel, etc. And 1% of your safe withdrawal rate is your luxury expenses. The giving falls into that category, for example, in addition to sort of over the top first class seats, type travel. And for our 311 rule, we’re actually uh only about 50%, not 60% of our monthly budget is met. So we’re well under that 3% needed for to keep the lights on. So we have more flexibility there. But when you’re building these plans, you have to think about, okay, do I want to help them with a down payment on a house and when is that going to occur? Do I want to help them with a wedding as a bolus lumpy expense, when is that going to occur? Do I need a new roof and will that potentially occur in the future? So there’s, you know, there’s your monthly expenses, but then there there are those variable big expenses that you kind of have to lock into the retirement expense plan so that you know, okay, I can meet that expense or I can pull that away if I can’t meet it. It was funny because I had to kind of imagine, all right, so when will my son, who’s dating this woman for a year now, potentially get married? Well, we would need to have this many thousand dollars to contribute to a wedding in four years. So I’m going to guess that he’s going to get married in four years. My other son, not in any relationship, well, maybe he’ll get married in 10 years. So we need this sum in 10 years and then we inflate it in today’s dollars to that day. It’s kind of fun to imagine, okay, I need a new roof in 10, 15 years, so I need, you know, that kind of bolus in in that time. So future planning for expenses is very different than sort of planning for current monthly, annual expenses because there are things that come up that you may not have planned for.
Scott: Is your house paid off?
Guest: It is paid off.
Scott: Do you consider that in part of your retirement projection planning, tapping into the wealth in the home at any point in your retirement journey or is that excluded from this analysis?
Guest: It’s excluded. It’s all nest egg based and not net worth based. The way I would look at the equity in the home is catastrophically, it could be reverse mortgage for long-term care for one spouse should one spouse predecease. So the house does play into that in a sort of emergency long-term care insurance. but we’re self-insuring for long-term care and that’s built in to the plan.
Scott: How are you thinking about when to take social security and and is there any kind of dynamism to that decision given how other parts of your portfolio move over the next couple years?
Guest: That’s a great question and that was part of um the plan we put together with our advisor and it’s based on a matrix that you get basically from using opensocialsecurity.com, Mike Piper’s website. And it’ll take the ages 62 through 70 for your spouse, and I’m I’m married, and for me 62 through 70 and it’ll give you sort of optimal times to take social security and what you will get for that. I mean, mathematically optimal is for us to take it both at 70, right? You get the longevity insurance of a, you know, basically lifetime inflation adjusted annuity of maximum social security payments. Only about 10% of the US population actually waits till 70. Majority are taking it much earlier. Our full retirement age is 67. And so, and it depends on your health. You know, my wife has had health significant health concerns and if you think your longevity is at all affected then taking it earlier may make complete sense. There is sort of, you know, life experiences of needing and wanting to take social security. And then I think we get too caught up sometimes in optimizing it to the nth degree mathematically. I mean, it makes sense for say the more the higher earning spouse like myself to wait till 70 so you have a a great robust spouse benefit. But if you’re financially independent, is that really necessary? Heck, I even know somebody that’s didn’t put social security into their plan and now they’re like, okay, it’s going to be there. but I’m going to take it at 62 and invest it for a legacy plan for my kids. I’ll just take it and then just put it in 100% equities because I’m investing it for the next generation over this time because I don’t need it. So there’s many ways to look at it. Not that I recommend investing your social security check, but you know, there are some people that are fire that don’t need it and can think of creative ways to use it.
Scott: Can you tell us about how you selected this guy, this financial planner and why you went with I it sounds like a flat fee or advice only in this case advice only, they’re not managing your investments, I imagine in this scenario rather than than some other model.
Guest: Oh, actually, I used AI, believe it or not because I did a very specific prompt looking for a flat fee, advice only, but uh planner that specifically specialized in risk parity portfolio construction and management. And this is a good topic of conversation because I am now pro advisor, but you’ve got to do a very deep dive for the one that meets your financial, emotional, personal and life planning goal needs. I found one, Brian Monogue of Cardinal Financial that is a unicorn. There’s only a handful that came up on the search for risk parity portfolio based advisors. and we are going to let him manage our investments for several reasons. One, I’m not interested in managing our investments. I don’t have the bandwidth, I want to focus on life rather than the money. Number two, my wife has absolutely no interest in money. She just wants it to show up in the checking account when she wants to spend it. And so she has no real acumen to manage or self-manage our money. So I need somebody to ensure that if I predecease her, it’s a seamless transition for her. Number three, cognitive decline. You know, I make mistakes. I I need somebody looking over my shoulder uh to make sure that I don’t make a mistake with big dollar amounts. It’s a sleep factor. I I’m offloading this stuff at this point and I welcome it. And the good news here is, you don’t have to spend as much as you think for the value of an advisor. I found an advisor that is flat fee, $8,400 a year, 700 bucks a month for comprehensive financial planning and investment management. That is cheap. if you go search the search the flat fee advisor arena. It’s going to be between 10 and $20,000 depending on complexity fees and that’s not uh in an AUM advisor at a 4 or 5 million portfolio, that’s $40 or $50,000 a year. So say I have, for example, a $5 million portfolio, my cost of an advisor on the typical model would be $50,000 a year. Well, I’m paying $8,000 a year. You can find these things out there and there’s huge advantages to doing this. So I I don’t want people to swear off, oh the advisor space is horrible and you can find these people. You just really got to search hard.
Scott: Thank you for for sharing that. That’s a it’s a really important issue today and I think that a lot of people are going to be like, hey, I’m I’m starting to get this numbers are pretty big here and I’m like pretty good at money but not so good that I’m feeling like I don’t want a real expert to kind of look at this. So thanks for sharing that and and how you found this person.
Guest: I’ll give you an example here. I as soon as I found out I was fi, I canceled our life insurance policies and my disability insurance, okay? We didn’t need him anymore. okay? I’m self-insured. our our two million life insurance policies and one disability insurance policy and canceling them, uh that was about 8 or 900 bucks a month. I’m paying less for a financial advisor, so I’m basically swapping out disability and life insurance for the insurance of having a financial advisor. There is no, there’s actually a net gain in our monthly budget. So if you look at it that way, it might make more sense.
Mindy: I love how you broke down those fees because in our community, we are primarily DIY people when it comes to our financial position. And I personally have missed some fairly big accounts like specifically the 529 plan for my kids. I’ve missed out on contributing to those because I didn’t know. And you don’t know what you don’t know. So having somebody be able to look at your entire financial situation, compare that with your goals and say, here’s what I think you should do. can be so beneficial. I mean, that definitely would have covered the 8,400 that I would have paid if I had done it. Um but as a DIY person, you come to this this page and you’re like, $8,400 never mind, I’ll just continue to do it myself. And I think there’s a lot of value in having a professional look at your specific situation and compare it with your specific goals because everybody’s different.
Guest: Yeah, I mean, there are a lot of blind spots out there. and I think in navigating your 60s with all the moving parts of social security claiming, Irma, Medicare, Roth conversions, there’s a lot of moving parts here with how to realize and take income so that you optimize, you know, your subsidy for healthcare as well. And it’s hard to keep all this stuff in your head at the same time. My advisor’s job is to do this. And yes, and the great part about it is we collaborate. He’s not just plugging me into his system. We are dialoging. I’m bringing my information to the table, which is not intimidating to him and he actually enjoys it better because we speak the same language. So I think, you know, DIYers are uniquely poised to find the right advisor to collaborate with uh so that they’re not just feeling that they’re being constrained or limited uh in what they want to do. So you know, not that I’m raw raw all advisors, but it’s a tool in the toolbox that people really need to assess uh to optimize if you’re into optimizing your financial life, well worth the cost if you if you do it right. You you retire once in your life but for potentially. When I leave my job, I can’t go back. it’s there is no going back for me. So I have to try and get that right and it’s good to have somebody else looking over your shoulder saying, yeah, you’ve got a 100% chance of success here.
Scott: All right, we’re going to draw down for a minute here and we’ll be right back after this ad break.
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Scott: Let’s jump back in. I think that that makes perfect sense with the way I view the journey of personal finance, right? of just self- education, learning, you know, all all these things. Ideally getting some of the playbook handed to you via to some of the right answers, the versions of right answers around, hey, max out your 401K, take the match, you know, complete a basic order of operations if you’re going to be investing passively in particular here in long-term investments like passively managed index funds. And then at various points in that journey, consider the advice of an advice only financial planner, the the maybe make like I’m 35. I’m not going to hand my money over to a financial planner to manage a portfolio passively. There are, you know, there are various things, real estate and other other parts of my portfolio that I feel very comfortable with here. but a review from an advice only financial planner makes a lot of sense for me. And I think that the wisdom that you show here, you know, as you’re as you’re approaching traditional retirement age to say, hey, I’m I’m you’re you’re clearly very capable of managing your portfolio today uh and all these things, but you’re planning for tomorrow and that’s where you’re getting the the person to this person you trust locked in to manage your assets for the long term now. That’s that’s super wise. I it is not something I’ve really considered until I started reading the the book list that Frank recommended for me six months ago. I finally got to it this weekend, started picking them up. So but it’s just a perspective I didn’t have.
Guest: Well, the advantages is too, I mean, especially if you have a spouse who’s not the CFO of the household. Uh you sit down together, you go over this together, it’s a platform to unemotionally talk about what are our goals, our dreams, and how are we going to make our help our get our money to do that. And then if you pass away, it’s seamless for them. You’ve got to create the relationship before you pass. It shouldn’t be an emergency. Okay, how do I pay the bills? How do I get money into the account? How when do I rebalance and how do I rebalance? It it becomes seamless. So to me it’s an insurance policy. It’s really no different than insurance. And you just got to pay the right price for that kind of insurance.
Mindy: What else should we ask you about here before we adjourn, Bill? This has been a fascinating conversation.
Guest: our journey is late starters is no different than the early starters other than that we, you know, have a constrained time frame and can’t take advantage of compounding. We can get there in 10 to 15 years. Jackie, my co-host did it. Becky Heptic, my co-host did it. Both of them did it in sort of the 10 to 12-year time range. We want to inspire all of your listeners, as we’ve done with have done with other episodes that, you know, dig in, dig in now, listen to BiggerPockets Money, listen to Catchingup to fi. Uh find a mentor to help you along the way. Find an advisor if you need that too and pay for it. It’s it’s money well spent. But and then do the work, save the savings, earn the money. And then when you get to that point of I’m almost there, I got really nervous. I was like, you know, we were in that little uh AI fear bubble back in November and I’m watching a week or two market slide and I knew it was time to transition when I couldn’t watch it. I couldn’t take on that. I was not going to do well with another 20, 30% correction and I needed to transition my portfolio to a more conservative one. So I find help doing it. The two days that it took to do it were very nerve-wrecking. I’d never seen money fly around in different directions like that before, but we got there. The dust settled and instantly I felt better. I’m like, okay, I can take whatever the market throws at me now. I can go to work and I can be a better doctor because I’m financially free and I’m not I don’t have to be here. I can be more present. There were a whole host of things that FI does for you that have absolutely nothing to do with the money. The money is the least important thing here once you get there. And then you start to think about I’m 60, okay, how many more I mean, Brad Barrett talks about I have 18 summers with my kids and you after your kids turn 18 year have spent 90% of your time in your life with them. Well, that comes back again when you turn 60 and you’re retired. You got to focus on I have 10, 20, 30 more years. I may have 10 more international trips in me. How am I going to maximize for life? and how am I going to focus on that now that the money is taken care of.
Scott: This is just awesome. Uh your your philosophy and the perspective you bring in here and and of course, it’s also awesome that the money story turned out the way it did in that you were able to accomplish this goal, get that weight off your shoulders and see make that shift from accumulation to preparing for traditional retirement. So I’m looking forward to hearing what you do with the next couple of years uh as you transition into full retirement, what those trips look like. and I uh hope that you continue to do catching up the FI for a long time to come to help a lot of other people go through the many stages of this journey and the emotions that must be attached to each of them that only you can really empathize with fully.
Guest: Well, I think catching up to five will last because it’s it’s it’s a chronicle of the journey really and it’s it’s going to continue. Jackie and I are committed to, you know, reaching, you know, a million more people for example that are outside of the FI bubble that need to hear the message you’re putting out there and that we’re putting out there that it’s possible. It’s not only possible, it’s a healthier way of living, it’s a balanced way of living and uh you know, join us on this great journey, meet these people. We’re going to continue doing what we’re doing. It hopefully lasts beyond my quote end of plan as we say in the uh life planning arena. Uh so yeah, we’ll we’ll be talking and I’ll check in with you on this journey more.
Scott: Well Bill, thank you so much for coming back on the Bigger Pockets Money podcast and sharing uh this next phase of your journey. This is really, really fascinating, really, really helpful. Thank you.
Guest: Yeah, it’s a very exciting time of life. Thanks for having me, Scott and Mindy.
Mindy: Bill, thank you for sharing your caught up to fi journey because I think it’s I think it’s really important to check back in with our guests and, you know, see how far they’ve progressed. And the fact that you did reach fi, I’m really, really curious to see how much longer you’re actually going to be working and what that looks like. All right, Bill, thank you again for your time and we will talk to you soon. All right, Scott, that was Bill Yount, host of the Catching up to FI podcast and I am so excited about his story. Yay, Bill, you made it to fi. Woohoo!
Scott: Yeah, congratulations, Bill. Thank you so much for coming on the show and I just like I I loved everything about this episode. There’s the pride, I think in the the hustle that translated to financial success and enabling him to to reach his target. The I don’t even know what to describe it, the the household leadership. He’s still, he’s he’s growing his wealth, supporting his retirement with a huge success rate, earning a high income and setting his kids up for financial success going forward and looking at the ways to to begin those transfers to the next generation, at I think a really great time in their lives, and that will make the big the biggest difference. I think that he’s super wise to be transitioning his portfolio from that accumulation to a decumulation portfolio. This is a drum I keep beating and will not stop here at BiggerPockets money. I think that uh too many people think that they’re financially independent but uh if the market were to drop, they would be, you know, they’re all in stocks and that that’s not what any research around retirement, earlier otherwise supports. I’m super excited that he’s made that transition and I love the fact that he was able to find a financial advisor to do that that doesn’t charge one of those AUM fees, which I think is a huge hurdle for me to get over personally. I wouldn’t be able to do that.
Mindy: I love so many aspects about his story. Now I want to encourage him to explore what else is out there. Yes, he wants to work longer because he’s still enjoys some aspects of his job. I just have so many friends who have retired who say, oh, I wish I would have retired a year ago. I wish I would have retired 10 years ago. I absolutely love that he is thinking about helping out his kids now that he has reached financial independence. I think that’s a great goal. I think that the one of the best things you can do for your kids is to help them get started in their life without having a lot of debt if that’s available to you. I love that he’s thinking ahead.
Scott: Yeah, absolutely. I’ve already started thinking ahead with my kids, but that has not really uh progressed past 529 plan contributions to this point. So we’ll have to I’ll have to get more advanced than that over time and if anybody has any suggestions, let me know. I think there’s a philosophical and then uh a decision to make about how and when to transfer wealth to the next generation and then the optimization of that philosophy at a practical sense. and I don’t think I’m I’m there yet on the philosophy, much less the optimization in a practical sense.
Mindy: I’ve often thought that maybe I could just put money into an account for them without telling them. The gift tax is $19,000 for 2026. Your kids are significantly younger, Scott, so you could even tell them then they wouldn’t really understand what it meant. But you could just say, hey, Katie, I’m putting $19,000 away for you and she’ll be like, okay, thanks dad. Or maybe not. Maybe she’ll be like, hey, let’s play dolls. Then every year you’re putting this money away, you’re putting it into an after tax brokerage account for them, maybe. I haven’t thought this through clearly, but that’s a way to set up your kids.
Scott: I’m contributing heavily to 529 plans and we are well on pace to fund college education. So that that’s where I’m at now and otherwise, generally speaking, building wealth that would, you know, at least for now, in theory, pass to them. In the meantime, their shoe collection is not going to produce a very good ROI, but produces a very high smile ROI.
Mindy: All right, Scott, should we get out of here?
Scott: Let’s do it.
Mindy: That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench. I am Mindy Jensen saying farewell, Bell.
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