Mindy: Welcome to the BiggerPockets Money podcast, where we interview Mark Troutman from Mark’s Money Mind and hear about his money story and how he found balance on the journey to FIRE. Hello, hello, hello. My name is Mindy Jensen and with me as always is my fair and balanced co-host Scott Trench.
Scott: Great to be with you and always on another level recording podcast with you, Mindy.
Mindy: You know, sometimes these are really spot on and sometimes these are super spot on, Scott, I love it.
Mindy: Scott and I are here to make financial independence less scary. Less just for somebody else. To introduce you to every money story because we truly believe financial freedom is attainable for everyone, no matter when or where you’re starting.
Scott: That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, start your own business, or follow a common-sensical path that will get you to FI and, uh, support the good life on the way, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams.
Mindy: Scott, Scott, Scott, we have a new segment on the show called the Money Moment that helps you on your journey to financial independence with a money hack, tip, or trick. Today’s money moment is, do you need a new major appliance, but you want to save some bucks? Stores like Lowe’s and Home Depot have a scratch and dent section where you can get your brand new appliances at a discount. Why? Because it has a minor scratch on it. Maybe it’s got a minor scratch on the side, but if you pick right, nobody will ever know, because who sees the sides of the appliance? Do you have a money tip for us? Email moneymoment@biggerpockets.com.
Mindy: All right, Scott. Today we’re talking to my friend Mark Troutman. He is, I met him at CampFI a hundred years ago, and he is a wealth of information about all sorts of things regarding financial independence and money in general, investments in general. He is a delight to talk to and I am so excited to bring this show to our listeners.
Scott: Yeah, well, I mean we learned a lot from, uh, Mark today. He’s absolutely brilliant and very sophisticated, very technically sharp with money. Um, you know, had had some setbacks and I think some really good, um, and some and some personal loss, and I think had some really good perspective on both the journey to FI and and um what to do with FI once once you’ve gotten there.
Mindy: Yep, I think this show is the kind of show that you should make plans to listen to once and then like on your drive in, and then listen to it again when you can take notes because there’s a lot of things that Mark shares that you’re going to want to write down.
Mindy: Mark Troutman runs the website Mark’s Money Mind where he writes and educates about, well, money. Today he’s on the show to talk about his journey to financial independence and finding balance along the way. Mark, welcome to the BiggerPockets Money podcast. I’m so excited to talk to you today.
Guest: Oh, it’s great. I’m glad you invited me and I’m looking forward to it.
Mindy: Mark, let’s start off with your money story. Where does your journey with money begin?
Guest: Well, it’s a long one because I’m 57, so there’s quite quite a big time frame in there. But um, basically, um, my wife and I kind of stumbled upon the idea of financial independence before it was kind of a thing. Um, so this was back in the uh mid-80s. Um, and we kind of did a lot of the wrong things initially. Uh, we had credit card debt. We had paid for our wedding with credit cards. We were, I was leasing a car. There were a whole bunch of uh errors that we were making. And then, um, eventually I read a book uh The Wealthy Barber and The Millionaire Next Door, and those two books were very influential in our kind of shifting to a money mindset that made more sense for us. Um, so we got out of credit card debt, we started saving. I think the Wealthy Barber talks about saving, you know, 10% of everything you make. Um we decided to make that 20%. Uh so that was one of our big um benefits right there out of the gate after we paid off our credit cards. Um and then also, um, when I got a job, so I started working on Wall Street in 1987 during the stock market crash, as a matter of fact, I was sitting on the margin desk when that happened. So that was an enlightening event. But um, about three years later, I was, so I kind of moved from company to company, but three years later, I was hired by a chief financial officer to come in and help work on a mutual fund uh as a security analyst. And he said, ‘Look, I’m giving you a big raise to come over here, and I highly recommend you max out your 401k um, and you’ll, you know, you’ll benefit from this later in life.’ Um, and you know, um, he’s also suggested invest 100% in equities, which I did. And then I went home and I said, ‘Uh, Marge, do you…’ and that’s my wife’s name Marge. ‘Do you have one of these 401k things? They sound kind of interesting.’ And she’s like, yeah, I think we have one of those. And I said, well, you need to max that out too. So basically, when I got my new job, I did not um, suffer kind of a reduction in pay because of the boost. So it was a way to kind of max out the 401k without really taking a hit from a net paycheck standpoint. And those, that decision alone made us both 401k millionaires when we both uh retired. So that was probably one of the biggest influential events of my life. Um, and then there was another kind of funny one. We were big skiers, we would go to Vermont and ski every weekend. And uh, we were reading this magazine, you know, we’re our our vision was, we could, we’d retire in Vermont and just buy a little house and you know, ski every day and how do we do that? And uh, we came across a ski magazine and and and somebody actually found this article because I referenced it in a blog post and somebody actually dug up the article. It was called Bums Rush, it was in a ski magazine in March 1989. And and it was this couple living out of their car and they had this motto, earn little, spend less, invest the rest. And the light bulb just kind of went on. We’re like, whoa, that’s it, that’s all you really need to do. Except we’re not too keen on this little part. So we said, well let’s switch this around to make some, save and invest, so put savings first, and live on the rest. And then we basically just live by that motto going forward. We were never uber-savers, you know, we saved in the neighborhood of say 30%, you know, was I guess our average over our lifetime, so we weren’t like 50%, 70% savers. We did have pretty high incomes, not, you know, crazy high, but pretty comfortable um incomes. So, it was basically just do that, fast forward, you know, 20 plus years and there we were, financial independence and then actually found the financial independence community after I retired and said, hey, there are other weird people like us out there.
Scott: So, can you give us an idea of like the relative scale of your of your incomes and your savings during this this two-decade period to to financial independence?
Guest: Yeah, so, I mean, you know, this was back in the 80s. I think we both started off. I think my first job was like 25,000. But when I made that move, um, I got a raise from, I think I was up to 36 at that point, but my my move went to 50. So that was that $14,000 increase was what that, uh, manager said, hey, look, bank that. At the time, the max was 12,500. Ultimately, I kind of grew into an income of kind of the low 100s over time. So I was a portfolio manager of a mutual fund, but not the kind that you hear about on TV that are making millions of dollars. So my, you know, I I would say my base salary was somewhere in between 125 and 150 for most of my career, and I would occasionally get, uh, you know, some small bonuses along the way. Uh my wife was in and out of work. So, now, she, worked very diligently before our daughter was born and shortly after our daughter was born making, you know, high, you know, close to $100,000, but then stopped working and actually we ended up, um, doing, uh, kind of a live-in flip which we didn’t even know that was a thing, but that’s what we were doing. And she, uh, quit her job and became kind of the GC for that project. So she was not making that, uh, her entire, you know, uh, life. And then once we moved to Colorado in 2008, she got a a job here locally just making, I think it was like 25 or 30,000 initially and eventually grew into the 40s but nothing significant.
Mindy: How did you discover this without all of these blogs to tell you what to do, Mark? I I doubt your story because I’m the the live in flip Queen and you didn’t do a live in flip before I did.
Guest: Uh, yeah, I did cuz I’m older.
Mindy: You’re only just older than me. You didn’t become FI without reading Mr. MoneyMustache. Come on, Mark.
Guest: I actually house hacked too, which is kind of funny looking back. We did a whole…
Mindy: You can’t house hack if you didn’t read Brandon Turner’s article.
Guest: I know. So what happened was, um, we, you know, as we were trying to get our credit card debt under control and so forth, we were renting an apartment um that was a really crappy place but we had fixed it up and it was it was pretty nice. But um my mother-in-law um had a recent divorce and got the house in the divorce but no like um stipend or anything like that. So she really needed to sell the house. It was a big house. So we said, well we could move in with you, pay you some rent, help you get this house ready for sale, uh and then you can cash out and and um potentially have some resources to live off of because basically it was social security and the equity in the home was all she really had. Um so, when she sold the house, she was quick to say, oh, I’m just going to buy another house. I’m like, whoa, whoa, whoa, don’t do that. We’re going to buy a house. Why don’t you come live with us? You put the down payment on the house, uh and then when you move out, we’ll pay you back. So effectively, we took the mortgage out on that house. I think it was $279,000 house. She put $100,000 down, and this was back in the day where you had to kind of roll your gains over, um, otherwise you had to pay tax on it. So that was the old rule. It wasn’t the 250, 500 exclusion like it is now. Um so basically, she had a pretty smart accountant and said, well she is technically gonna buy the house and then gift you um your ownership share back and use it against her lifetime exclusion, um so therefore, you know, it goes as a gift to her, but there’s no tax consequence. She had to reported gift tax. So it was basically a house hack where we got a free down payment, we made the mortgage payments, and then when she moved out, we just, you know, refinanced it. But that was kind of our attempt at house hacking without knowing what it was.
Mindy: I love everything about this story because you did it on your own. I was, of course, joking about not really doing any of this because you hadn’t read somebody else telling you what to do. And I want to point out that there’s a lot of creativity, legal creativity within the financial space if you just do a little research, dig into the tax laws and look into what is accomplishable if you just think outside the box. And here Mark had nobody telling him all about the live-in flip, and he just did it anyway. And he had nobody telling him about house hacking. I actually house hacked too back when it was called having a roommate, um, and I lived with my brother and that’s all house hacking is, is just a cute name on top of being called having a roommate or owning extra properties. Um, and you did uh you became financially independent before Mr. Money Mustache ever like did his blog. And that’s just you being frugal and saving because some guy told you to invest in your 401k and, you know, you don’t have to follow these specific rules because somebody else said something. If something feels right, if you want to try this road or try that road, that’s how we get all these fun little terms, uh because somebody tried it and threw a catchy name on it. So I love that you’re doing all this stuff because that’s just who you are.
Scott: Could you give us um some sense of a of the of the summer summary of the journey here. You started in in you said 1987 on the on the desk of on on Wall Street. What year did you retire and what did your portfolio look like at that point in time? And how and in in beside besides the 401k and this house move, were there any other consequential moves that you made?
Guest: Yeah, so um, from the real estate perspective, all we really did was primary homes. We never owned rental property or anything like that. The the second home we did was a foreclosure and it was a live-in flip. That was the one where I said my wife was kind of the GC for two years and it was this crazy, you know, pie in the sky idea that we were going to buy this 5,000 square foot house because on paper it was super cheap per square foot and we were going to make it into this, you know, colossal party house and it ended up being like six bedrooms, five bathrooms with a pool and three acres. And it was basically two houses on attached to each other, a colonial and a and a cape and we lived in one side and renovated one side and then switched. And at the end, we were like, we’re fine with one of the sides, we don’t need both. So we ended up selling that. But so we did make a few, you know, good steps on the real estate side, but it wasn’t through rental real estate. Um the rest of it has all been just financial assets. So between the 401k and then also saving in our brokerage account when it was, you know, over and above the limits of the 401k contributions. Um, and more lately, it’s been, you know, converting, you know, from traditional to Roth and so forth. Um, but basically I retired at the end of 2015 at the age of 50. And the the goal was not a number, it was an age. So I had an age goal. I said, I want to stop working when I’m age 50. Um, when I look back now based on kind of what I live at, and I say I now because my wife did pass away, um but um when I look at what I live on now, my financial independence number was probably in my mid-40s somewhere. I just wasn’t really aware of it. I wasn’t calculating it. I was focusing on I want to stop working at 50. Actually, in 2008 when I was what 43, I went in and actually quit my job to move to Colorado and I had said to myself, I wasn’t really thinking financial independence at the time. I was just thinking, I didn’t want to live in the New York City area anymore, I wanted to move to Colorado. My daughter was in third grade. This would be the time to do it. I wasn’t really sure what I was gonna do, but I knew I’d have enough leeway to make that decision and, you know, kind of figure it out. And we always said, well we can move to Crested Butte and ski for a year and if we don’t like it, I don’t think we’ll turn around and say, well that wasn’t a good idea. I think we will have fun doing it. And actually when I went in and quit, kind of using the JL Collins FU card which I didn’t know that’s what it was at the time. Um, but uh, they said, whoa, wait a minute, can you keep managing the fund for us from out there? And I said, yes, but under these circumstances, I only want to do certain things, I don’t want to do other things. And so I basically kept doing that until 2015 and actually just ended up padding the resources. So, I’m, you know, further along and, you know, more comfortable financial independence figure than I was say in my mid-40s. So I live a probably a nicer lifestyle than I would have if I truly stopped in my mid-40s. And so when I did retire, it was 100% equity. I wasn’t thinking about, you know, sequence of return risk, I wasn’t thinking about any of this stuff. I was like, oh, just looks like a pretty good amount of money, I should be good. Then I started diving into Big Ern and the 4% rule and all these things and saying, whoa, maybe I should, you know, scale it back a little bit. Now I’m like 80/20 and I’m comfortable with that. And actually the income from my portfolio exceeds what my annual expenses are. So effectively, it’s in essence a uh, perpetual portfolio at this point.
Scott: Mark, how how old are you now?
Guest: Um, 50, I will be 58 in October.
Scott: Awesome. And what is a day in the life like for for Mark? What’s like a, uh, we’re recording this on Tuesday, August 1st. What is, what is a Tuesday in Mark’s life?
Guest: So it was 1:00 when we started and I took my shower at noon, after eating a late breakfast and drinking my coffee and reading the Wall Street Journal, which is something I do every day. Um, I just really like to keep tabs on what’s going on, not because I trade or anything, I don’t do any of that, I’m a pure index fund investor. But I do get my news from that source. So that is what I do every morning. But uh, usually the mornings are coffee, Wall Street Journal, listen to a bunch of podcasts, think about what am I going to do for the day, and then the afternoon’s up to me. So that’s kind of my life. And then I do a lot of traveling and, you know, CampFI events and financial independence events. I’m going to, you know, Bali with Amy Minkley and her group this year. So doing a lot of things like that in the community.
Scott: Mark, you also look like you’re in fantastic shape. What do you do for fitness out here in Colorado?
Guest: So it’s funny, I have a a friend Roger Whitney who’s the Retirement Answer Man podcast host. I don’t know if you know him, but um, we I’m also part of his kind of rock retirement group. But um we have a challenge this year myself and and him uh that we are going to row 2,000 meters a day every day for the entire year. So that’s 730,000 meters. Um I don’t do it religiously every day, but every day I do row, which is most days is 5,000 so that I can stay ahead, especially if I’m traveling. So that’s one of the secrets is just getting on the rower every day for half an hour. Walking my dog, so having a dog who walks me, which is great. And then living in Crested Butte, um Colorado where there’s plenty of hiking and biking and stuff like that. It’s pretty easy to be active.
Scott: Any anything to do in the winter?
Guest: Oh yeah, avid skier. That’s why I live in a ski town.
Scott: Awesome. So that that that’s a I think a pretty good picture of your life. There’s traveling, great health, uh a great great healthy outdoor activities and all that kind of stuff, and then lots, you’re still really engaged in the in the financial independence community. It just sounds like such a wonderful way to spend um uh uh a lot of days. So let’s talk about uh the the transition between working and could I’d love to hear about two transition points as well in the context of that. So we know what life’s like now. What was it like, you know, in the year leading up to the move to Colorado. And then again in the shift from the kind of negotiated work environment that you created when you moved out to to Crested Butte, and then the the transition to full retirement.
Guest: Yeah, so it’s kind of interesting. So I was um working in the money management field. Obviously, I was the equity portfolio manager. I was the only equity kind of guy in the in the company. Um and everybody else was in fixed income. Um and they were primarily mortgage backed securities. So this was going back to like 2006. And we would have these board meetings, I would get up there and do my little thing about, you know, here’s the equity fund and this is what I did and so forth. And then they would get up and talk about their fixed income fund. And around that time, I was just like, this doesn’t sound great. You know, these mortgage situation and all these types of loans that they have in the portfolio and they’re talking about CDSs and how they’re triple A even though underneath they’re not really that great. I was like, you know, this doesn’t really sound great. And here we have this, you know, house that we’ve just completed that’s, you know, way too big for us. I said, let’s just sell that house. It’s not right for us. And my wife said, well what do what do you think we should do? And I was like, well we can look around and see if there’s another house, or we could just rent. So that’s what we did. We sold our house in 2006, we rented and it’s funny, the person that bought it, he still owns the house. So obviously he’s made it work, but it was a nationwide 90-10 piggyback loan. Um and when you’re in New York and we were in New York, you actually sit across the table and I’m looking at all the documents and I’m like, this is why we’re selling the house because look at this. The person was I think 25 years old, had just started his own business and I’m like, what is he doing buying an $850,000 house? But he still owns it and obviously he’s done well. So good for him. But it was just kind of like this is the kind of loans that they’re giving out today. And my wife was working in the mortgage industry as well and they were, you know, seeing Liar Loans and all kinds of crazy stuff. So anyway, so we sold the house, we moved into a rental. It was kind of like, well, you know, our daughter’s, um, you know, at that point first and second grade and we’re not really sure we want to live here. Taxes are super high. We were living in Warwick, New York where taxes are extremely high. I think our taxes were close to 25,000 a year, something like that. It was just insane. Um, and we were just like, you know what, if we’re going to make a change, let’s do it now. So I just walked in and, you know, kind of quit, kind of thinking maybe they would make a deal or something, but I had, I, you know, we had this discussion like if they say pack your bags, see ya, leave, here, give me your computer kind of thing. They didn’t. Um but that was the shift in mindset and we’ve always kind of lived life on our own terms and I think that’s one of the benefits, especially after my wife has now passed away, that I’m fortunate that we did, that we kind of lived this life of balance the whole way. Uh so then we moved to Crested Butte and just kind of uh I did the work that I had to do. I wasn’t working more than I needed to, um kind of living almost like a semi-retired lifestyle but still getting paid. Um and then eventually just said, all right, I really don’t need to work anymore and so I think I’m done. And there were some, you know, um situations at work that I was not, you know, um personnel situations that I wasn’t as keen on that I just said, you know, I’m I think I’m done.
Mindy: You’ve mentioned the word balance several times, which is uh a little close to home for me personally. People in the FI community seem to have this all-out race to get to FI and and you know, they don’t save 10% or 20% of their income, they save 75% of their income and it seems like it’s this push to get to FI, and they don’t really enjoy the journey. I know that that’s true for me and my husband and it’s true for a lot of people. Um, I’ve heard from a lot of people recently saying I didn’t enjoy the journey and now I have this kind of rather large pile of money and I don’t know what to do with it. Um, how did you find balance on your way to FI?
Guest: Well, I think the benefit was not knowing about FI. Because I think if I did have all these podcasts and all these people to compare myself to, we probably would have been saving at a a very extreme rate. We actually raced cars for a period of time. We would not have been doing that because that was not an inexpensive hobby by any means. We would certainly not have been doing that. We also would go, it’s funny because I read the book Die with Zero and he talks about this island St. Bart’s. Well, that’s where we used to go all the time for vacation. That was literally where our family went on vacation every single year. Now, we did it economically, off season, you know and so forth and we found really good deals but we certainly weren’t skimping on where we were going and we would fly first class and the way we were doing that was using points. So we were kind of doing the whole points thing. At the time, you know, United was flying direct from New York to St. Martin and and you could buy an economy seat for like $300 round trip and then use points to upgrade to first class and it was a really kind of good loophole at the time. You can’t really do that as much anymore. Um but we were living a great life. You know, we looked back, my daughter who’s now 23, we looked back and we we had some really good times and and I kind of tell people that you know my wife passed away uh two years ago now. She had she was diagnosed with cancer about four years ago. And you know, had we not done all of those things, we would have missed out on a lot of life events that we couldn’t go back in time and and replace. And frankly, I’d be sitting on just a larger pile of money. I think of like a what is it uh Scrooge McDuck, you know, from uh Bugs Bunny sitting on a huge pile of coins and bills and whatever, but I’d be the most depressed person I think I would, you know, you would know because I would have missed out on all these things that I can’t go back in time and replace. So I kind of, you know, suggest to people that, hey, it’s great to go for financial independence, you can do it, you don’t have to do it in five years or 10 years. Enjoy the ride because you can’t replace that ride down the road, no matter how much money you have.
Mindy: Okay, so the enjoy the ride comment is really really powerful. However, what about people who have a terrible ride? You alluded to uh personnel issues that you weren’t so keen on. And we’ve all worked for that horrible boss where you’re just like, I can’t believe I have to go in and face this person again every single day. So how do you balance I hate my job because of personnel issues with I don’t necessarily want to do this death march to fi to quote Carl.
Guest: Yeah, so for me it wasn’t, you know, and I I want to set the record straight, I did not hate the people I worked with, so I don’t want anyone if they’re listening thinking I hated them.
Mindy: No, that’s that’s me projecting. I hated the people that I worked with at that one job.
Guest: Yeah, there were certainly some things that I was asked to do that I didn’t want to do, for instance. They were like, oh, you should create this new fund because this is the hot new thing of the day, you know? And I was like, nah, I’m not going to do that. Uh I don’t agree with that, and if you want someone to do that, you need to hire somebody else to do that. And I really just kind of towed the line and even, so I was managing a large cap um blue chip dividend fund basically is what it was. Um and I was at the board meeting in 1999, if you remember what happened in 1999, when the internet stocks were all the rage, you know, I had board members telling me like, just buy anything. All this stuff is going up, just buy anything. And I was like, no, that’s not what we’re doing, that’s not what our prospectus says. And frankly, I’m a larger shareholder than you are. So I am, you know, my I have more skin in the game and we’re not going to do that to any of the shareholders and, you know, I was proven right, but I had to be willing to basically be walked out the door and say, see you later. But I so I always, I feel like because when you’re in this position of not necessarily financial independence, but a situation where you have a financial wherewithal behind you, you can make decisions that other people might not make because they’re worried about the next paycheck. I was never worried about my next paycheck. So I basically would push back and it never really came to bite me. So in all these situations, it really just kind of worked out because, you know, and frankly, I worked for a small company that was privately owned and the owner of the company would frequently tell me, I’m so glad you just tell us how it is because we would have made a lot of mistakes if you didn’t say that. So thank you for doing that. And oh, by the way, you know, here’s a few shares of the company as a result or whatever, you know, uh it would it would benefit me more than it would hurt me. And I I just tell people that if you have the financial backing, you can make your own path. And if that path that you’re on doesn’t look good, choose a different path.
Scott: You know, it seems like your story and your like you you you’re obviously a highly competent person and you have very clear values and are not afraid to speak your mind. And you had the basic financial position and strength to be able to say, this is how I feel about it, no, at various times in your career when those things came up. And I think all those things are interrelated, right? It’s so much easier or you’re you you can have that confidence to speak up and say, no, we’re not going to do it that way. Um when you’re when you’ve been saving for a decade uh and and have built a strong financial position and know you’re know you’ve got a uh a strength in a career, and you save that money and don’t spend it and blow it on things when you have the character to begin with uh in the first place with it. It seems like these basic principles, it seems so obvious, so easy, the way that you’ve gone about building your financial position um over a few decades and were able to retire early. Why don’t you think this is more commonplace? Like why why do you think you were the exception um one of the one of the rare folks who was able to do this early when maybe some of your peers making the same income as you uh maybe weren’t able to achieve the outcome you had you you’ve been able to create financially in your life.
Guest: Well, I think it’s, you know, being willing to walk a, you know, a different path and being different than others. That’s the first thing because all of my friends from, you know, back then um were all spending all of their income, especially, you know, people that work on Wall Street, it’s it’s crazy. I mean, you think people on Wall Street would be financially savvy. I would say it’s actually the opposite. They always believe there’s more money around the corner. Um and I wasn’t like that. We were willing to just be different. Um so, you know, we were willing to just say, no, we’re not going to go out to that fancy dinner or we don’t need fancy clothes or fancy watches or whatever. We’re just willing to do what we want to do and walk this, you know, different uh life. So I think that is one thing you need to be is kind of independently minded. Um but I think that again, not having as much information, I think was almost a benefit because today with so much information, I think you’re comparing yourself to others. Um and I think that’s a mistake because we never really compared ourselves to others. We just compared ourselves to how are we doing today relative to how we were doing a year ago or two years ago or five years ago. And that was our benchmark. We were never comparing ourselves to others. And frankly, now that you know, when I did retire, a bunch of my friends from back east who couldn’t retire because they were, you know, continually increasing their lifestyle along with their paychecks, were like, you were telling us this whole time how to do this and we none of us did it. And we can’t believe you actually did it. I was like, yeah, it’s not rocket science. Um you know, I really believe that if you save, and my daughter, you know, we kind of instituted this with her when she first started earning money was save 20% of everything you earn and just get used to it. And if you do that, I think as a bare minimum, you’re going to get there eventually. It’s just a matter of when. If you want to make it 30%, great. You know, I’m kind of hesitant to suggest people do 50 or 70 or 90 because I think you’re potentially giving up too much life to do that, unless you just have, you know, big windfall or you have a a ridiculously high income, then maybe that’s a different story. But for the average person, um I think, you know, it’s fine to retire at 50, it’s fine to retire in your mid-40s. You don’t have to do it in your 30s or 20s.
Mindy: That’s right. You don’t have to retire in your 30s or your 20s, but if you do want to retire in your 30s or 20s, then you’re going to have to have a much higher savings rate than 20%. You’re going to have to have a 75, 85, 90% savings rate and you’re going to have to have a super high income. You can’t be making uh Mark’s $23,000 a year starting bonus or starting salary back in the day with uh and save you know, 80% of that, that’s not going to get you to early retirement at age 28.
Scott: So mechanically, once you retired, how did you begin actually spending down the portfolio um and and harvesting the the wealth that you created? As I understood it, you had a couple of big great housing moves, the 401k balance and did you have any after tax accumulation, cash pile, other dividends, income, um how how are you financing this?
Guest: Yeah, so um because, you know, if you talk to people in my age bracket, you’ll find that many of them have a very high percentage in tax deferred traditional type accounts. That was me. I did have somewhere in the neighborhood of 85 to 90% of my assets, our assets really, but mine now that I’ve inherited my wife’s assets in traditional 401k, traditional IRAs from, you know, previous employers. Um, I did have or we did have um some money in cash as well uh and also smaller Roth IRAs that we were converting a little bit over time. Um but actually I have avoided drawing down my portfolio for the first two years and I’ll tell you how I did it because I was kind of afraid to take the money out and how was I going to do this? And there was money in the Roth, there was, you know, a runway of a couple of years in in the brokerage account and cash and so forth that I could tap but even that I was afraid to do. So what I ended up doing was we had this classic car, as I mentioned, we used to race cars. I was, you know, I did have this car in the garage that was worth a bunch of money and I didn’t really need it anymore and wasn’t driving it on the racetrack or anything. Uh became kind of a collector car, so I sold that, which basically paid for my first year’s or our first year’s of income. So I avoided drawing down in year one by selling this asset that I didn’t really count, I don’t count it in my financial portfolio, a car or even equity my home for instance. Um in year two, I did own a very tiny piece of that company I worked for, but it was a private firm. I never counted it because I never knew if I would be cashed out, who knows if the company will last, you know, will it be worth anything, I don’t know. They did end up calling me and saying, we’re going to cash you out if you’re up for it. I was like, yeah, I’m totally up for it. Um and that was a little less than year two’s required income. So it was not some big windfall kind of thing. Um we actually did own a second home uh in Crawford, Colorado, so it’s kind of over the hill from us. Um and I did, we did end up selling that in 2019, so that helped with the aspect of not having so much in or having so much in our traditional bucket that was a little more difficult to get to. Um so that has somewhat bridged the gap that access. Actually now access is not an issue for me because an inherited IRA, um you do not have a 10% penalty. I would have to pay the tax on it if I were to withdraw from that. And my inherited Roth IRA um from her is fully accessible without penalty. Um so that age 59 and a half thing is not as difficult for me now, but I’m actually not even really tapping into those too much. Um and uh so I’ve been doing really big Roth conversions. So, you know, we were expecting to do many Roth conversions um between um when I retired until, you know, RMD age, um, and at the married filing joint tax bracket. Um, but when she passed away, all of a sudden you become single tax bracket, which is half as much. Um, so in the year that she passed away, we were still considered marrying filing joint so I went up to the top of the 24 with a really big conversion. Um and then in the following year, my daughter was still considered a dependent so I was eligible for a qualifying widower, which is basically the same tax bracket as marrying filing joint so I did another really big one. Um and then for the next two years, I’m still going to go up to the top of the 24 which is half as much for me as a single, um but still a pretty decent bracket, but I am walking away from ACA credits by doing that because I’m trying to get ahead of having so much money stuck or not stuck, but in the traditional bucket where RMDs are going to kind of get out of control down the road. So Roth conversion kind of strategy is is big on my mind now, how best to do that to reduce my lifetime taxes as opposed to my this year taxes.
Mindy: That that answered that question extremely thoroughly and was obviously shows a a a a a financial uh uh wherewithal and savviness and sophistication that is way beyond what my my capability set in terms of of planning these things in that way.
Guest: Well, so I will tell you for fun, I did get my CFP after I retired because I just wanted to learn more. And I was again kind of scared about like, should I, you know, should I really stop working? And if I don’t stop working, what am I going to do? And I said, I really like personal finance, maybe I’ll just sit for the CFP. I I did take, you know, the exam, I passed it. And because of my history in the financial industry, I they gave me credit for all the hours that you need. So actually I do have my CFP, but it was primarily for a personal learning experience. I don’t um practice or anything like that, but that is where some of the knowledge base does come from.
Mindy: Okay, Mr. CFP, mechanically if I were to want to do this rollover, Roth conversion stuff, uh I I shouldn’t use those words, Roth conversion. Do you wait until the end of the year just in case you made some income? Do you do it throughout the year, do you do it at the beginning of the year?
Guest: Yeah, so for me, I almost purposely don’t make any income because I kind of want to prove a point that you can actually live on your portfolio. So it’s funny because I go to these all these campfires and people are like, I don’t know anyone who’s living really on their portfolio under the 4% rule. I’m like, well, I’m living on a withdrawal rate rule, it’s not quite 4%, it’s lower than that, but I am living on my portfolio. It is doable. So I almost feel like an obligation to prove a point that it can be done. Um so as a result of knowing I’m not going to have any income, I target, you know, I calculate how much do I want to convert in a year? What are the pros and cons and of doing that? Because like I said, if I convert, you know, any dollars I convert, I’m basically walking away from ACA subsidies. So I view that as an additional tax. What does that, you know, added on to my tax bracket equate to? So therefore at what tax bracket do I want to go up to including walking away from the subsidies. So for me, I kind of do it in two pieces. I do a pretty good amount at the beginning of the year, and then I’ll do a true up at the end of the year. And for me, I have this little bit of a benefit in that because I have an inherited IRA, um I can actually take a withdrawal from the inherited IRA and withhold, well you could technically withhold 100%, but Vanguard which is where that account is, will only let you withhold 99%. But I can basically calculate what my tax liability is going to be in December and then do that withholding because the IRS, as long as it’s withholding, considers it as paid evenly throughout the year. So I don’t even need to make estimated taxes. I do estimated taxes on the state side, but not on the federal side, and I just do a a withdrawal to um you know, withhold enough to pay my tax obligation and I do all that in the fourth quarter. So the true up of the Roth conversion and the withholding calculation that I need to do to make sure I’m not going to be penalized.
Mindy: So for those of us who aren’t CFPs ourselves and kind of got lost in what you were saying but understand that it’s very important and we would need to do this when the time is right for us, would we connect with a CFP to help us with this or would we connect with an accountant to help us with this?
Guest: Hopefully the CFPs understand this. Um so a CFP could help guide you, but a CPA would be the one that would actually make sure that you’re doing it all correctly and so forth. And actually finding a team that is a CFP and a CPA combined might even be more beneficial um to doing that and making sure you’re doing it correctly. It’s not really that difficult. Um especially if all you’re focused on is the tax code that pertains to you particularly, it’s easier to understand it just like, you know, Brandon the Mad Fientist goes down rabbit holes with that. It’s not hard to do it on your own. Um and it’s not, there aren’t really too many uh levers to kind of worry about um other than really kind of figuring out the whole ACA aspect because that can come back to bite you a little bit if you’re not aware of that. And and frankly, if you go over into the next bracket, it’s not like all of your dollars are taxed at that next bracket. It’s just the incremental dollars are taxed at. So, you know, yeah, it’s great to, you know, be right up to the edge on your tax bracket, you know, perfectly and you can do that with, you know, different software out there that you know, there’s public free software, tax planning software out there that you can use to make those calculations, but again, if you go over a little bit, it’s only that extra dollar or two that’s going to be taxed at that. But you do need to think about things like, you know, is net investment income tax going to come into play? Is uh, you know, are you walking away from capital gains at a 0% tax bracket? You know, there are some other levers that you do need to kind of pay attention to.
Mindy: How do you handle health insurance, Mark?
Guest: So I purchased my health insurance through the ACA. In Colorado has its own plan. I actu you know, it’s interesting because um my wife was working when she was diagnosed with cancer, just at a local, she worked for the police department, wasn’t making much money but it did come with some pretty good benefits and frankly she could uh actually stuff all of her paycheck into a 457. So that was actually our, you know, access to because when she, you know, planned to leave, we had full access to the 457. So that was another little kind of quiver in our in our uh a packet there I guess you would say. Um but um she was staying for the healthcare um primarily and we ended up actually um going on Cobra which in hindsight was kind of a mistake I think because we were afraid of rocking the boat as far as her doctors were concerned, um, and I think it was fear that was unnecessary. We would have been fine if we just immediately switched over to the ACA it would have been a lot cheaper. That was also when there were specific rules about she was actually laid off, so she was considered unemployed uh and and receiving unemployment benefits, and if you recall back in the COVID times, there was a special carve out if you had received unemployment benefits, no matter what your income was, even if you made a million dollars, you were considered to receive full subsidy from the ACA. We should have taken advantage of that, we didn’t. Um so we would not only not have had to pay Cobra, we would not have had to pay really anything on the uh ACA either. And I think it was just a fear that the ACA wasn’t going to be as good. But what I found out is it’s actually better than what her insurance was through the employer, which was a small municipal government. Um so I think, you know, don’t fear the ACA. It actually is really good coverage.
Scott: What’s what’s uh what’s next for you here?
Guest: Well, um so what I’ve been doing is, you know, I really do like, um, you know, I was read Jordan’s book, Taking Stock and Die with Zero and really thinking about, you know, how can I um, you know, move forward after my wife has passed away and really enjoy life. And what I’ve found is that, you know, spending money on experiences. And I am kind of learning how to spend, that was a whole another little piece that I’ve uh been working on. I have this thing called a fun bucket and if we have time, I can talk about that a little bit. But um basically, I found that enjoying experiences and enjoying them with your social network is really where I get the most joy right now. And I think most people do, if you do that, combine experiences with uh social aspects. So I’ve been, you know, I was just uh on a cruise to Alaska with a 50 friends uh a couple of weeks ago. Um we I do a whole bunch of campfis. I love those. That actually that community has been so good and economy as well and things like that. And as I mentioned, I’m doing the FI Freedom retreats with Amy Minkley in Bali this year. There’s a bunch of us going over to that. So I just find, you know, traveling around with friends and and of course living in a ski resort and a um recreational community. There’s always plenty of people willing to come and hang out here too. So um that’s kind of what the focus is and a lot of it is also with my daughter. She really enjoys hanging out with me which is great. So, you know, getting those experiences, you know, memory dividends, uh lifetime memory dividends and putting them in the memory bank. I don’t think any of us would be disappointed in having those down the road.
Scott: So, uh, I’d love to hear about the fun bucket and then I’d also love to hear about if any of this, um, you know, savviness with money and and financial planning is rubbing off on your daughter and what, um, a couple, some of how she’s doing.
Guest: Yeah, so um the fun bucket actually came out. I was at a CampFi in California and I was staying with a friend uh ahead of time and he was asking me so how’s it going with withdrawal and all that? I’m like, yeah, well, you know, I’m kind of working on it and I don’t really draw that much. It was sub 2% at the time. And he’s like, dude, you need to start spending some money because you’re just going to end up stacking it up and you’re gonna turn around and you’re gonna wish you had done more. I was like, yeah, but I just I don’t know, you know, it’s hard to you know, get comfortable with pulling that money out. He’s like, well you need a fun bucket. I’m like, well what is a fun bucket? He’s like, so if you think about, I retired in 2015 at the wind at my back, you know, you’re always worried about sequence of return, being a bad sequence. Well, not only was it not a bad sequence, it was a really good sequence. He said, look, you have a lot of kind of cream on top of the cake, just peel some of that off and stick it over in a fun bucket and just allow yourself to spend on things that you wouldn’t ordinarily do. So I said, oh, that’s a pretty cool idea. Maybe I’ll do that. So I moved some money over into this separate online savings account, labeled fun bucket, and it’s for all these things that you would normally not be comfortable doing, but you’re saying, hey, it’s pre-funded, it’s sitting over there, that’s what it’s for. You need to spend it. And I actually put like a timeline on it. I kind of put four years worth of kind of and people ask me what’s the number? I I’d rather talk about in percentages. It’s kind of 20% of what my normal annual expenditures are per year and I did that for four years. So let’s say you’re making 50,000, may be it’s $10,000 a year for um for four years or $40,000, you know, you can change the numbers however you want, but that’s basically what it worked out to. Um and so it’s things like um well like for instance the Bali trip when it came up, I was like, I’m in. And Amy was like, well, do you want to know how much it is? I was like, no, I’m in, you know. And uh or this cruise which was crazy expensive, it was a really expensive high-end cruise and I was like, nope, I’m going, no question. That’s what the fun bucket before. Normally I would have like stressed about it, I don’t know if I want to take this money out of the portfolio and so forth. And it’s also for little stuff like, you know, if I get a email from a airline that says, oh for $400 you can upgrade to first class. I’m like done. Or I never fly, I always fly nonstop. I never stop and I know that’s a sore point for Mindy, but um you know, I always fly nonstop. I also fly whenever I feel like during the day, I don’t, you know, do early flights, I’ll do flights that make sense for me. Um I will, you know, when we go out to dinner, I’ll pick up the dinner tab sometimes, you know, just like, no, don’t worry about it’s fun bucket. You know, and people are like, oh, I feel bad. And I’m like, no, it’s fun bucket and they’re like, oh, well that’s cool, you know. What else can we do on your fun bucket? Um but that’s kind of what the fun bucket was about. It was to retrain myself on how to spend and it’s worked. And actually what I found was I thought, so what I do is I will reimburse myself from the fun bucket, you know, I spend on my credit cards as, you know, all of us kind of travel hackers do, and I can reimburse myself from the fun bucket. What I’ve actually found is that I’m finding that I don’t even need to reimburse myself always from the fun bucket, but having the money in the fun bucket has allowed me to make that decision even though it really actually fit in my normal spending pattern. So it was just a way to kind of retrain um myself on how to how to spend.
Mindy: And how much did you say you put in the fun bucket initially?
Guest: So, in percentage terms, um, it is around uh 20% of my annual expenditure amount. So, you know, and I live, I pay, I I I pay myself a paycheck every month um from my financial independence portfolio, uh and this was over and above that. So think of it in terms of let’s say you spend $100,000 a year, it’s $20,000 a year times four years, and then as that depletes, I’ll re-up it down the road at some point. I haven’t had to re-up it yet, but because I actually opened it two years ago and I’m actually only down about one year’s worth of spending even though I’ve spent the equivalent of two years, I just haven’t had to withdraw the full two years because a lot of that kind of fit into my regular spending pattern.
Mindy: So are you going to increase your spending to increase the withdrawal rate of your fun bucket?
Guest: Well, so uh, I will tell you that this cruise that we went on was, so my daughter did go with me. It was a seven-day Alaska cruise on a very high-end cruise ship and it was $18,000 I think for two of us. Um and then on the cruise you save a little bit if you sign up for the next one, so we actually signed up for a Mediterranean cruise next year. Um I’m going, my daughter’s going and my mother’s going, my mother’s paying her own way, but our room for that one, it’s 11-day cruise going from Greece through Croatia to Italy. Um and it was 20 grand. So I mean it’s not small. So, but if that money was not sitting there, there’s no way I would have just said, yeah, sure, let’s do it.
Scott: That’s awesome. So speaking of of your family, um is there a FI tradition getting started in in a uh uh in your household in your family?
Guest: Oh right, that was the second part of your question. So yes, my daughter has come now to two CampFIs. She was at Rocky Mountain last year and she actually spoke with me. Um and so that is up on the YouTube page for CampFi so you can see our speech there. But basically we was talking about how we talk about financial matters in our household, how that’s translated, and some of the things she’s learned from us and what the moral the story is, she learned from modeling, not from preaching. Um really what we do is is um what translated into her kind of path and she is, you know, she is also just graduated from CSU with a master’s in accountancy, so she’s got the right kind of brain for all this stuff. Um but she did come to CampFi this year as well in Colorado and brought a friend. Um and so yeah, she’s definitely on the path and I actually teach a financial literacy class in the high school that I was asked to um uh create about seven years ago now. Um so she was in that class as well when she was in high school. So she’s definitely um you know, drinking from the Kool-Aid.
Scott: That’s wonderful to hear. So we’ll have to have her on the show at some point if she’s uh if she’s interested. So I’d love to hear about her journey and and how that’s going.
Guest: Yeah, well, I mean, one of the, you know, benefits, you know, in a way, um, is that she started, um, we actually contributed to her 529 account and had her understand what that account was the whole way through. So really, once she was in middle school, I think, and we kind of, she we have an only child, so it’s a little easier. I do, you know, kind of preface it with that. So we kind of math out, what did we think a um a state school would cost when she turned 18 and we kind of math out, oh we think about $100,000 worth of contributions and we’ll see how that goes. So it was $500 a month from the day she was born um every month through her 18th birthday. So that’s like $108,000 I think in contributions, but there was also really good market returns during the time. So there was actually quite a bit of money in that account, more than it would cost to go to a state school. And we basically sat her down and said, hey, look, this is uh a pretty good amount of money. You could go to an Ivy League school that may not quite pay for that, but that you would have to figure out the difference. Or if you go to a school that costs less, this is your start in life. So she chose a state school and actually the 529 ended up paying for um five years of school, uh including her one-year graduate program, and she still was left với over half the money and so that was kind of her start in life. And then also um originally we started with a UTMA account which I wouldn’t necessarily suggest um before we kind of figured out the 529 thing. So it was basically 50/50 between UTMA and 529. Um so the 529 basically was used to pay for school and she ended up with the UTMA which you know, basically turned into a regular brokerage account. But over the years as she was earning money, starting I think at age 15, we would move money from the UTMA account over into a Roth IRA um to the degree that she had earned earned income. So she’s been doing that since she was uh 15. So now she has a Roth a pretty sizable Roth IRA account and this brokerage account and did not have to pay for school. So she’s got a pretty good start.
Mindy: Just even starting off without having to pay for school, not, you know, graduating without student debt is a huge leg up.
Guest: Yeah, for sure.
Mindy: Never mind all that other extra money. Not extra money, additional money. There’s no such thing as extra money.
Guest: She did ask, am I coastfi yet? I said, well, I don’t know if we’re quite there yet, but.
Scott: Well, Mark, thank you so much for sharing your incredible wisdom and savviness and uh technical expertise on managing, you know, a a a a FI portfolio here with us. Thanks for sharing the principles that got you there and um for the uh the the the the the wonderful success story from a financial independence standpoint, um that your approach has has been. So, really appreciate it. And um where can people find out more about you?
Guest: Well, first of all, thanks for having me. I really appreciate it. And um, so I’m pretty active on like Facebook just under my name Mark Troutman and that’s with an A, T R A U T M A N. Um on other platforms, it might be at Mark’s Money Mind and um for my blog, it’s marksmoneymind.com and I don’t, I like to joke that I write about as much as uh Brandon the Mad Fientist. We’re in a competition for the least number of posts. Um but um I do, I would like to post something about the fun bucket and I think I’m kind of obligated to do that, so I want to I want to get that out there at least. So maybe there’ll be more on that there.
Mindy: Do it. If you get that article out before this episode comes out, we’ll link to it in the show notes.
Guest: Cool.
Mindy: And if you get it out after this episode comes out, we’ll link to it in the show notes afterwards. Just send me a link.
Guest: And if anyone is interested in that financial literacy class, a lot of people ask me for that. So I actually put it out there as a post on the website that you can see the entire course. You know, it’s basically it’s not a paid course or anything like that. It’s totally free. Anyone can go view it. Um it was basically what I recorded in 2020 for COVID, so I couldn’t go in the classroom. So I just put up all of those videos from 2020 and all the handouts. So if anyone’s interested in the, basically a seven-week financial literacy course directed towards high school students, but pretty much anyone, I mean adults go through that too. So it’s free. Anyone can see it. Um it’s just easier to put it there than to email it out to people that ask for it.
Mindy: And we will definitely link to that in the show notes. Awesome, Mark. Thank you so much for your time today. It was great to talk to you and we’ll talk to you again soon.
Scott: All right.
Mindy: All right, Scott, my mind is blown. That was Mark Troutman from Mark’s Money Mind and holy cannoli, all of those things he was telling us at the end, I’m going to need to go back and listen to this show and take a lot of notes. What did you think?
Scott: I think that, you know, despite the the personal loss that Mark had with his wife passing a few weeks ago, I think that this is a a fellow who really has attempted and and done a really good job of living his best life inside of his values being uh consistent and conservative and disciplined with his finances has is extremely confident as an individual with how he thinks about money, building wealth and pursuing, um, and and and designing his life. And I think that’s an example of of of a way of a great way to go about it. Um, and to go about um, trying to trying to optimize for that happy, wonderful life. I I think it’s funny, uh, to a certain extent that he has to make an actual point of not earning money, um, because he prides himself on being this expert in the financial independence space and so makes a point to not charge anything for anything even though he got his CFP license and clearly loves talking about all of this uh financial planning stuff and could easily get paid for doing stuff that he likes to talk about anyways. Uh I I love the fact that he travels to these campfis and and makes it to make a point to to spend more because he’s uh reflecting on some of the good advice and die with zero. Uh I I just think it’s a fantastic story here and someone to learn from. I think you would a lot of listeners would do well to follow a lot of the stuff that Mark’s putting out and um and learn from him.
Mindy: Yep, I like what you said, Scott, he’s living inside his values. And that seems to be something that he has done his whole life. He knows what he wants, he doesn’t waver from that, and that gives you ultimately what Mark has so far, a life well lived.
Scott: Yeah. And and there’s just fun in there. Like this is not like a all out and you know, intense effort to pursue uh you know, financial independence and wealth creation. This is a guy who raced cars and went to St. Bart’s and had and had a and had a great time. So again, I I think there’s a there’s a right way to go about it and um if you’re if you have a a competence set and an ability to earn income, um a discipline and those kinds of things that that Mark has had, you know, thinking about how to emulate some of the things he’s done might be a wise a wise approach.
Mindy: I completely agree.
Scott: Oh, I do want to point out one thing before we get out of here though. You know, so we talk I I’ve observed a large number of people who are financially independent and they’ve all got an ace in the hole, right? Mark’s no different in the sense that he doesn’t live off of the 4% rule, uh you know, with a 60/40 mix stock bond portfolio. He had the car that he sold and he had the uh this that and the other thing associated with his first couple of years for income generation in the path to FI and has a much more conservative overall portfolio. So I think it’s just another example of hey, you know, this FI FI concept, the 4% rule is the beginning of the end of the journey to financial independence. And even though it’s technically the right answer, we continue to see examples of folks who need a little bit extra on top of that to truly feel comfortable and secure as a financially independent um person.
Mindy: Yes, and honestly, I don’t know that we’ll ever be able to convince everybody that 4% is the way to go. I know that 4% is the way to go.
Scott: We haven’t convinced anybody that the 4% rule is the way to go. I I don’t again, I can’t think of a single example of someone who has who has retired on the 4% rule and nothing else, right? And has no other ace in the hole, no other cash position, no other actual um uh uh backup plan there.
Mindy: Well, I understand that mathematically it works, but even though I do this every day, I don’t really want to put all my eggs in that 4% basket, so.
Scott: That’s right. So I think it’s just I I I I I just continue to observe that in discussion after discussion after discussion and discussion with financially independent folks, uh that everyone agrees with the math and not a single person lives it in its in a in a literal interpretation of it.
Mindy: Yep. That’s okay though.
Scott: Mhm.
Mindy: That’s, you know, it’s your life. Live it the way that you are comfortable.
Scott: All right, Scott, should we get out of here?
Mindy: Let’s do it.
Scott: That wraps up this episode of the BiggerPockets Money podcast. He is Scott Trench and I am Mindy Jensen saying, bye bye Apple pie.
Mindy: If you enjoyed today’s episode, please give us a five star review on Spotify or Apple. And if you’re looking for even more money content, feel free to visit our YouTube channel at youtube.com/biggerpocketsmoney.
Scott: BiggerPockets Money was created by Mindy Jensen and Scott Trench. Produced by Kailyn Bennett. Editing by Exodus Media. Copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.
