How to Retire with Christine Benz
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IT shows a proud member of the retirement podcast network. The more I know about investing, the more boring vanilla in minimalist I get. Christine bds, 哦， yeah.

Welcome to the show dedicated to help you not just survive retirement, but I have the confidence to lean in. And rocket, why got so? Oh yeah.

Anyway, welcome to the show. IT is december. Today is a little bit of a special episode.

The entire episode, give me about an hour long, is a conversation with Christine bans on her new book, how to retire. SHE came into the rocks retirement club. We have had an our long meet up where I got to ask some questions.

Some of the members asked your questions, and we talk about log term care, we talk about the four percent rule, we talk about investing, and we also talk about simplification. In addition to Christine, we had fitz gilbert in there, who is a member of the club. He came on and shared some of his thoughts on his retirement journey because he was featured in a chapter Christian book.

And frosty gilbert, from the retirement manifesto is a long friend of the show and a wonderful man. So we are going to focus this episode. I'm chatting with Christine bds.

Are you everybody? Welcome to, uh, a special meet up with a special guest, Christine bds. How are you, Christine.

and write here. I am great. Thank you so much for having me here.

Thanks for coming into the rock retirement clu B2Chat abo ut you r boo k and we hav e fru its gol t her e who has a c ha pter in tha t boo k as wel l. Um full disclosure, this audio will be shared on the public podcast. So for those of you that we Normally we don't share what we do here in the club outside of the club, but this one will be because we want to share ah the wisdom of Christine book and really I my job here is just a really facilitated discussion, Christine um and let everybody in the club chat about your book because you are well loved and light by people focusing on retirement planning and especially from morning star and all the work you've done there but especially your book I doubt they have a lot of questions. But I have a few to start .

if that's okay .

of course OK um what was your goal for the reader of this book? right? You, these books start at all different phases and reasons. But in your mind, what was the goal that you wanted for the reader?

Well, I remember when wade flowers retirement planning guide book hit my desk and I sort of had in my mind at the time the thought to do some type of a retirement book. And I remember thinking, well, what am I even doing here? This book is everything wades retirement planning guidebook. You know, for people have picked IT up.

It's dislike textbook IT covers everything that you might want to know about retirement planning and I took a step back and thought about, well, how can we know kind of put a human face on some of these same topics are coming at them a little bit differently and maybe just wait a little bit friendly er than wades very helpful, very intense book. And so I think of of IT is kind of a corner part to that where I knew I wanted to bring in a lot of different topics. Things know Frankly are outside of my regular baily wik.

And I didn't want my impostor syndrome to arise. I want to be I didn't want to be the person professing to know everything there is to know about things like housing and health care. I know people who know a lot about those things. So that was really the idea was to cover retirement in a really holistic way and bring in the voices of some of these outside experts who i've come to learn from and rely on over the years.

And another thing I would say about the book graduate that I knew I wanted IT to be as much non retirement, as much non financial as IT was financial um and i've mainly toiled in the financial realm of retirement planning, but i've come to appreciate just how important that non financial considerations are. So I wanted to bring in a lot of people who could help you know frame up some of those discussions. So that was really the goal in creating this book out of retire.

I think the word that comes to mind is it's approach able.

I love hearing .

it's appropriate and IT definitely is. And I I find IT in retirement planning. We tend to think of retirement planning at the end and forget the whole point of the exercise, right, which is to create a great life. Uh, it's a natural thing for nurse to do and natural thing to focus on, because you don't want to mess up the money. I was really surprised when I read the book that you did IT the way you did in the interview style. That's why think one thing that makes IT approach able um is because it's an interview with a conversation not just simply uh dissertation um because I was the first thing I thought was a Christine is so prolific in her writing that SHE didn't need to have other voices. What was the what was the reason for that approach?

Well, this was the brainchild of craig peers and harman house, who I had been talking to about doing a book for many years prior to actually coming out with this book. And I just could not find the time. And so craig was like, well, would an interview format make IT easier to do a book? And I stepped back and thought, well, IT probably would be.

I wouldn't be sort of staring at the blank page every day as I was working on the book in hindside. I'm nature IT was like that much easier than writing a book from scratch but I do love kind of the humility that IT suggests that i'm not the person with all the answers I know about Frankly a fairly narrow um area of retirement planning, the portfolio construction area. But there are a lot of people who know other areas Better than I do.

And I love that I was able to leverage their insights, people like fruits and other people who I who I really admire. And I would also say there are people like you, Roger, who I would have loved to have head in the book. I just had more, more people than I could possibly have used. We wanted to keep IT twenty in, and IT was really difficult to decide who who would address various topics.

IT is very nice that there are so many voices that are trying to be thought ful about retirement planning, uh, because it's such a niche relative to general financial planning. Uh, and I don't recall expLoring that in you expLoring that in the book or any of the people that you interview. But we found it's like generalist retire financial planning, which is what we think of is really just a generous and it's a very different process, almost a totally different process when you're doing withdrawls. Did you have many begin sights that you were that we're unexpected.

I had spoken to all of the people in the books side. I wouldn't say that there were a lot of you lightning boat moments. What I would say for me is that um I just heard people explain things incredibly well so I would highlight john guidance chapter, for example, where we talk about withdrawal rates and um discuss some of his research in that area.

But he also was just phenomenally good at explaining things and you can tell he works with clients a lot so he uses this metaphor, for example, in the context of the four percent guideline, where he basically says, the four percent guideline is like you are setting out on a road trip in a car that has no lights, no windshield wipers, no modern conveniences that we know of. And so if I were to ask you, if you're setting out on a road trip in such a car how fast you would want to go, you'd say, well, gash, you know, I don't know what lies ahead. So I mean, to choose low, right? And basically, that's what the four percent guideline is set up to do.

It's it's sort of assuming that you are setting your speed and you are never going to revisit IT. And I just thought that was such a beautiful and easy to understand way to uh, depict why you'd want to be flexible about your in retirement portfolio with roles because my goodness, you do have a modern car. You can pick your head up and check weather conditions and adjust your speed accordingly.

And, you know, I just love to hearing from him. I felt like he explained what can be a hard concept incredibly well. And I I heard that throughout the interviews, people who really are great communicators discussing these topics in an incredibly easy to understand way.

Yeah because that's probably one of the biggest thing we says. I talk to my adviser and I don't know they're same because they get all nerdy now. So let's start off because so if you have a question or something like you'd like to chat about with Christine, you can rage your hand or put IT in the chat. If it's in the chat, i'll facilitate that or we can have you uh, ask her directly but uh, while you're doing that, lets start off with play in the ground work um and fitz you here I believe right you're still yes thank you me and appreciated and friends and I we're able to walk some of this journey together ah in our first retirement plan. Live as he post um preretirement um for its how did you find Christine process anything that the by her asking new questions came out that you had already .

thought of? I tell you what I want to say that when he said, you know, I thought that would be easier but then not being just as much work, i've got ta give Christine serious crudo les for the approach he took on that SHE sent me email. I don't know Christine. I could look back but you a while ago and we were going ready to do an interview on the long view by guest and he said, by the way, um in addition to that, i'm working on something kind of personal would you be interested talking to me that said, yes.

So we know we're going to call and Roger, the amount of homework that he did prior to the eden view was, you can tell that by the question he asked as you read through the book, it's really obvious that he picked the people SHE picked because SHE perceived them is kind of being the experts for that particular topic. But SHE did so much more than that. SHE clearly studied my material.

SHE knew what my philosophy wasn't certain areas and all of her questions. They were deep questions. And and I can't imagine in the manual that would take to go through twenty different topics and dive into the the content that each one of those people had produced to really understand their philosophy and scope questions around its all very, very well done.

And I think that's why the book is so good. So um gu to Christine, I think that's quite the more important part of the process he took. IT demonstrates itself in the final final blood I was really embraced thank you .

so much for for that for this I think you and I kind of click from the first time we talked. I just love your methodical approach to um dealing with the years leading up to retirement. And I just thought that know that checklist thing, which you said is like the most popular part of your retirement manifesto blog or the most visited post. I just found that was incredibly helpful. In fact, i've sent IT to is several friends who are embarking on, you know, that kind of the countdown to retirement, and they found IT super helpful too.

Well, thank very much. As anyone you know, I loved how Christine for those ever read the book. We want to give you away. But SHE interviews herself. SHE has one of her, her partners go, you know, interview.

And I just thought that was brilliant and SHE did the bucket strategy, which is everybody not not everybody, but most people know that that's something i'm pretty passionate about. Its surprises. I'm using a similar to Rogers packet.

And and he wrote a beautiful japan on how to use the bucket energy. So we are very much kindred spirits first thing, and I appreciate the R. V. In the world.

Of course, I was thrilled .

to have you. yeah. One thing I was appreciated to have and having fits in the book and a couple of others is it's very easy.

There are a lot of great academic thinkers on these topics. Wait file, Jimmy hopkins bencher. And it's nice to have voices of people that have actually done IT.

In this case, fftt is actually living what he's talking about. And a few of the advisers that you that you have in there actually have done this with clients. And I think both of those perspectives are critical because D Z, I think of this is an academic exercise. Um marren, you have a question do you anna, a mute for moment and .

ask IT um hi thank you. Um I one of my question is if you were doing this book today because I don't know how far back you know you are working on IT um in light of what the upcoming four years may hold for us, um would you change anything or would you have any different suggestions um from your perspective, from some of the people who you interviewed? And this is not necessarily related to your book, but i'm just kind of curious about when you have done your model portfolio on morning star.

Um you know how often do you update those? And one might the next one be that you plan to release? Thank you, preciate, and level everything.

thanks. Thank you so much, mary, for that question. In terms of weather, I would have adjusted anything in the book to accommodate the recent election. Probably not. And I guess just sort of as a going philosophy to portfolio management, my main sort of concept is, is humility.

There's so much we don't know about how the future might unfold that, you know, I was just sending an email to a reporter this morning who sort of want that to know about people who who are retiring now, what they should be keeping in mind. And I like interest rates could go up. They could go down.

U. S. Stack seemed expensive, seem expensive today, but they seemed to me A A year ago, and yet they continue to climb. So you know, I guess the way I think we express humility in terms of our investment portfolios is we diversify, right? We say we're building this thing for a range of outcomes as people who have followed my work now, i'm a believer in the idea of building a runway of safe assets into a retirement portfolio that you could spend from if stacks drop.

Um and you know in many market environments, you might just leave those safe assets and pull from appreciating equity holdings to supply your cash losses. The years unfold. So um I probably wouldn't have changed anything in the in the book from the standpoint of the recent election.

Are you interested as a citizen to see how things shake out? But I not sure that I would affect any any sort of time at planning guidance that I would give in terms of those model porfolio. I'll say there there on morning star dt come mainly to be educational tools.

They're pretty ever Green in terms of their composition. So I generally gravity to very plain vanilla building blocks that give people brought asset class exposure. I tend to shy away from a lot of actively managed funds, mainly because i'm a bogo head fact of the president of the john sea blogger center for financial literacy.

So I tend to think that very low cost index funds are your best building blocks for retirement portfolios and and the main advances in addition of their very low costs is that you don't have to monkey with them or kind of second gas the exposure that they're giving to you. So um I do plan, however, to just do a throw review of all of those model portfolios earlier early in twenty twenty five and i'll indicate where i'm making any changes. But I wouldn't expect to be making many big ones I do receive.

I'm going alerts um to the h portfolio OS if there are any meaningful changes such as analyst rating changes or manager changes. So I keeping I on those things and I wouldn't expect to be making big changes, but I will expect to be doing a third of review early in twenty twenty five. So thank you for those questions.

marina. When IT comes to portfolio construction, Christine, and I think some of the experts in your book called this out, it's very easy to overcomplicate these things. And unfortunately, on the internet, the messaging and the marketing tested lean to overcomplicating these things because you have a lot of very geeky people that are into the the new answers of optimization.

Um and I look at all you know the twenty lessons in your book that's enough to to pretty much spend your time on. And if you start to add in portfolio optimization or tinkering, there's only so much time you going to make sure focus on the things you have the most control over. I appreciate that.

Yeah know Roger is such a student point complexity cells um in fact, I call IT the financial complexity complex because there are so many people who have a vested interest in making this seem hopelessly complicated. I don't think that needs to be that complicated. I don't personally think that we need to be watching the daily news flow. In fact, they are often surprised when i'm out and about in social settings, people be like od, you see the market is today and i'm like, no, actually, I didn't really pay attention. And I think it's a healthy attitude for a lot of us.

And I think it's especially important as as we're retired and maybe some of our time is freed up to not let that financial complexity complex step in and capture too much of our attention um because I think they're risk to your portfolio that you would get in there and maybe toil and make changes more than you really need to. And then plus, I just think probably got Better things to do with your time and more impact for things to do with your time and then tuning into to see nbc or bloomberg whatever IT is. So that's just my bias. And I know um it's kind of emptied self serving because morning star has a lot of stuff that very much tuned into the to the news flow. But i'm just i'm not really there in my grand.

I used to frustrate my father in law because he would all he only knew how to talk to me about markets and I always head of going on.

I know it's disappointing to some .

people and you lot of things um Larry, you have your hand rays thanks for being patient and anybody else has a question you can post IT in the chat or rage your hand would be great first thanks for the book um but let you know I bought IT because for its is in IT um he's been very generous with the club so I wanted to give you him a credit for that the reason I picked up the book but thanks this is .

like all those books .

they used to put out where is like twenty fifteen travel stories is like a travel log where there would be all these different sub pieces that you would go on an adventure and hear what people did. They don't do that anymore as far as I know but that's what it's like. Um I put this in the um um the club piece, but I thought I just ask you, so you're somebody who's looking at your own retire at your own planning, your own stuff. You get all this information flow into you what chAllenges you are confounds you the most about your own planning for retirement?

Um well, one big thing is long term care, and I feel like that's the elephant in the room when i'm out and about speaking to groups of older adults, people are very uncertain about how to address that risk. Many people have decided to for go long champion their insurance, and yet they're left with this big, looming ing risk of you.

Is this this sort of balloon payment of costs that might or might not materialize later in their life? So my husband and I actually worked with an hourly financial planner who has been incredibly helpful to us. We still have not done anything with respect to long term care.

SHE has advised us that we are good to self fund and that i'm probably irrationally concerned because both of my parents had a long term care need. And IT was he know, Frankly, they had the funds, but IT was IT was a lot of money and you know sort of something that I think gets underrated as just the management of long term care. So my parents had in home caregivers, which was what they wanted, so they're able to stay in their home.

And he have Carried, delivered. And I think what people sometimes neglect is, you know, even as this is the preference for most people, I think, is that there's a lot that goes into seeing that through. So I think about how often I was at my mom and the ads to help you supervise the caregivers, hire the caregivers.

The caregivers have complicated lives um and you know may not be able to show up when they think they um can show up. So if there's like the financial dimension and the nonfinancial dimension, and I would say that that's kind of top of mind for me, me and my husband and S I do not hate my husband. I do not have children. So we really are cognizant of the importance of having a financial plan for long term care and a non financial plan for IT as well. So that's probably the big unaddressed chAllenge in our own retirement plans real quick.

Uh, are you concerned that dollars the industry when you look at IT, that in fact, we may not be able to find people to provide a term care in the out years of demographics?

Very much so. And you know it's also an immigration issue when I think of some of the best caregivers, I don't want to be political here, but some of the best caregivers we had for my mom and dad were not board here in the U. S. They were immigrants to this country and and they delivered care with so much love often think about my mom's last caregiver um and my mom had cogniac decline and our members saying to her one day my mom likes to watch pbs on sunday which are saturday which he did every saturday there was a series of cooking shows and I remember I would pop over there some saturdays not trying to surprise the caregiver but my mom would be sitting in her chair with her, you know glasses perfectly clean and a perfectly clean outfit watching pbs and and that was a bit immigrant care of her and and tearing up a little bit because I was so grateful of the the love that went into that care and um so yes, I am concerned about the demographic aspect of this. But I think immigration is the key to getting some of these jobs filled.

I definitely when IT comes to long term care and you you delineate between two issues, which are we think about the money side of IT, right? Will I have the money to pay for IT, which is definitely an issue. But outside the money, even if you're self funding, having someone to coordinate everything I think is I have I have on tapper someone i'm going to interview related to that because I think that's an emerging industry just to have A A project manager resource to help coordinate IT. Um there's really not anybody around yeah .

yeah there are these care ordinators. I forget the specific title that they use, Roger IT is an uh a emerging area. I think it's the idea that is sort of the trusted adult child don call.

And as our society is geographically dispersed more we're going to need more of that, not less, right? Or you know, people like me need to be super thoughts about just falling back on this idea that, oh, you know, I have ample funds, i'll get care in my house if I need to well, who is that person who is going to do that? What kind of quarter backing for me? I'm not sure. Um so yeah, it's it's you're absolutely right that there's a need. And in emerging industry.

they are acted for sure. And a lot of times in long term care policies that corners or sources built into a policy which is one of those hidden benefits really hasn't grown significantly outside of the insurance end of IT. um.

What about so let's take your situation because we're doing A A A retirement plan live in january. We're going to go on a single person with no children. In your case, you're married.

But when you get got willing not to that point but to the point of needing some assistance, IT will likely also mean needing some assistance on the financial just household management end of IT, right? absolutely. Which is totally separate from this caregiver project manager. Have you how have you thought through that? Or what are you aware on the horizon for that?

Yeah for ourselves, I guess I I hope we're a good bit away from I mean or you know we're not uh near you know sort of a Normal return an age. So I haven't thought that far ahead with respect to our own finances. Um I will say we uh but would probably lean more on the early financial planning firm that we have used um and they can do as much as little as we would want them to do and terms of um helping us. So that would probably be our ball back plan.

Yeah, and it's hard for everybody going have to figure out their own, I think who was that that provide that the metaphor. We used to all be on a bus together with a pension, tony. And then now we're all just started driving and separately and trying to .

figure IT out and we don't know .

how to drive necessary a map road. Some guys point that way. You don't know if you know what he's talking about. Um laun hit out a point that you hit on related to uh, caregiving and there's definitely a lack of supply because lawns, i'll read her comments first, a very touching story about your mom on saturday afternoons. Christine made me tear up after my mom was in hospice at home for six months to um is that this isn't an institutional problem to this is like a really human thing, right? It's not about having IT is about having someone there, but then having someone that cares at some level, right, which is a whole different thing.

No, absolutely. And which which I think you know what you look at, who are the caregivers in this country will mainly is adult children and mainly is adult daughters. In fact, there's a fabulous podcast, I think it's called daughter od that org that is about this very issue.

It's about adult female children delivering care to their parents. It's a phenomenal community. They have, they've got and h they do a great job kind of because people at this live stage two are often times incredibly lonely.

The caregivers um that you know it's it's a hard journey that creates health problems. There might be a mental health problems. People have trouble retaining their jobs and they may need those jobs. So there are a lot of considerations in the mix.

Can you restate the name of that group?

I think it's called daughter hood, that org. And they have a podcast that I happened to listen to as well. They just do an amazing job.

Thank you. I recently really uh, just finish recently finished a being mortal al, I forget the author's name. Somebody maybe can put you in the chat. It's a good book to read, I think, on the topic.

But also the evolution of of care facilities from and there are some resources in the foot notes around places that do IT in a more human way and not so much in an institutional way, right? Kevin miles, you had your hand up, and I hope you're going to switch to a more optimistic, happy topic. I am, although I want to, as a father of our first borne with a daughter and I tell people making the long term care insurance decision, you're not doing IT for yourself.

You're doing IT for your kids. That's why you get the insurance. But I want to thank you and love this book, Christine, and for its your part of your chapter as well.

Ah I want to ask you about asset allocation. We get a lot of questions from people. Well, when I retire, what should my asset allocation b and I think that needs to be very bespoke. Can you talk about the factors that come in to play for someone trying to figure that out?

Yeah, thanks for that question, Kevin. In the book, we showcase a few different perspectives on acid allocation, but I think you're absolutely right that IT is very much a something that should be customized based on an individual's own situation. So my chapter addresses the bucket approach, which I do find one of the bike attractions is how customizable IT is.

So as I mentioned, the basic idea there is that you are um you know building a runway of safer assets that you could spend from if bad, if a bad equity shock occurs early in retirement. So um you're using your planned portfolio withdrawls as kind of the yards stick to determine how much you drop into each of those buckets. So say i'm using a standard sort of four percent starting withdraw rate.

Well then i'm holding roughly two years worth of those portfolio withdrawls in cash investments and that the basic idea there is that cash is the only asset that we know can be stable um no matter what else is going on with the fixed income or or equity Marks. So we want to hold cash to cover us if we have another twenty, twenty two style market environment show up where stacks and bonds both fall at the same time. Well, in that case, you would be pulling from the cash.

So you've got roughly two years of withdraws in cash. If you're withdraw rates lower, IT would be not um eight percent of the portfolio, but you know what would be maybe five or six percent if you are using a starting withdraw rate that's lower and then you're kind of stepping out on the risk spectrum from there. So i'd like the idea of putting another five to eight years worth of planned portfolio withdraws in a high quality short and intermediate term bond portfolio.

Um and so with those two buckets, you've got roughly um seven to ten years worth of portfolio withdrawal. And we know that there have been cases of the two thousands where a great recent example where stacks can go down and stay down for that long. And and so the idea is with those two buckets, you can spend from them without having to touch the appreciated equity portfolio.

The funny thing with um the bucket strategy and kind of our standards, four percent starting withdrawal is that, that is kind of a sixty forty portfolio, right? So we have if we're using a four percent withdraw, we've got eight percent in cash. We've got another thirty two percent in fixed income.

If we have eight years worth of portfolio withdrawal, well, that's a sixty forty portfolio. So there's not really any um you know alchemy in terms of the acid allocation outcomes. For the most part, it'll leads you to kind of a baLance ed looking portfolio, which I think this is a pretty same place for most retirees to start out.

And then in terms of any sort of other assets that I would add to the portfolio with the equity portfolio, I would make sure that it's globally diversified. And I think that's especially true today where we've had such a long running out performance in U. S.

Equities and less strong performance and reign stacks. Well to me, that suggests while a under evaluation in non us stacks um and the potential for our performance going forward. So I would be just making sure that, that portfolio is globally diversified.

And then in terms of other categories that you might bring into the portfolio, i'm a little less excited about alternatives simply because their costs tend to be on the high side. Um and then things like commodities and precious metals. Bitcoin, I would think of, as you know, not not necessarily must have. I would think of those three key building blocks of cash, high quality bans and and ethidium as being the main .

things in practice. If we just talk about equities for a second, Christine of U. S. First, global or international, they've been underperforming for fifteen this year. It's very difficult to understand why do I want to do that when IT comes to allocation um and where we're going. I agree with the global diversification, but it's a little difficult when you're implement because you always going to hate some things .

that you always own, right? absolutely. In fact, I pulled some financial advisor friends on ask about this very question like what's the harder sell for you today, getting clients to come away from cash bonds or getting clients to stay the course with global diversification.

And the latter was the thing where advisers, uh, said they're really finding a chAllenge in talking to clients. But I do think the undervaluation story at some point uh, will prevail that valuations over long periods of time do tend to influence market returns. You do have lower value and overseas also have Better dividend yields.

Um and you also get an element of sector exposure that is not in the U S. Market today. So the U S.

Market today is more than forty percent tech and health care, like forty five percent in those sectors today and like thirty percent tech, where's if you're venturing overseas, you're getting way more and financials, you're getting more in industrial basic material stacks, 而 sectors that are unrepresented in the U。 S. Market today.

So you're doing one sort of rebalancing activity within the equity component of your portfolio today. Tipping a little bit more into in into international gives you a kind of a tool IT gives you that non U S. Exposure but as well as as well as um exposure to some other sectors that are unrepresented in the us.

Here's the question from Laura, which I think is a really good one. Uh, not that they're art. Um when you talk about high quality ban portfolio, do band funds work in law? You can you can a frame this a little bit. Lord, you let me know i'm not frame IT correctly if you you have two years of cash reserves, return of my money and then the arrest is invested in the media on on my money um in your mind .

you buy and funds .

work for the rest of the beyond two years? Or should you have some individual bonds that you have fixed maturity rates with?

Yeah there's a lot of enthusiasm for individual bonds following twenty, twenty two where we saw interest strates jump up and that really knocked down bond Prices. And in turn, bond funds, which are baskets of individual bonds. I do tend to be on team bond fund mainly because of that all in one versification that you get an element of professional management.

Um the thing that I would say is you just want to make sure that you are matching your bond fund to your anticipated holding period. So I would say for um cash flow needs, uh, that you might want to address within safe five years, I would focus on short term bond funds. And if I have say a holding period of five to ten years, well then I can step out on their interest rate sensitivity spectrum a little bit.

And perhaps hold an intermediate term bond where you have the potential for higher yields but also more short term volatility. So I would hold both in my fixed income portfolio. That's one reason why I would push back a little bit on kind of total band market is being a one and done solution for a fixed income exposure, mainly because I don't have the opportunity, if i'm holding total and market to say, hey, I want to sell a piece of that but only give me the short term bonds today.

Leave the intermediate turbines that have fAllen in intact. We want them to recover in a twenty twenty two. You don't have that opportunity. So I like the idea of segregating IT into a component of short term, intermediate term.

And then I would also augment that with the component of treasury inflation protected securities, which are not going to come up in the typical bond find, whether it's active index, they're just not typically going to hold tip some active funds will, but not as a going portfolio sleeves. So I would actually hold a component of tips and a fund as well. Um i've been intrigued by these um uh sort of defined maturity like a bullet .

share type of structure.

Yeah, I think that that's kind of a nice hybrid solution where you have bonds that are all going to mature within the same year. I think that can be a kind of an elegant middle ground. So that is an idea as well.

But by the time someone builds individual band portfolio that's adequately diversified, i'm afraid that they end up with something that is looks a lot like A A bond fun and yet you're having to manage IT yourself. So um I would push back a little bit on the individual band portfolio. Just think I can lend itself to maybe more complexity that then really needs to be there for the portfolio.

Didn't ask back and I talk about this. It's like distinguish between return of your money and return on your money. And the return of your money need to be in things that you know have a fixed maturity rate and you don't have to make IT really complicated.

And that could be two years. That could be three years. That's going to be a situation the .

totally I love das contribution in this area. She's amazing.

Yeah, he is he is one question I have when we're talking about and I agree with indexes um mainly because of cost tax efficiency and broad diversification. When we're talking about broad diversification, the way indexes are primarily structured as are all following the same inx indexes.

And so what we've had is and all those industries are captained, ted, and we have I forget with the last percentages of the the amount of every dollar is going to the same in disease. What is your view on the true diversification in these large market? Cap waited indices that are dominated by the biggest players and all the money keeps blowing into them. Is that a little bit for diversification in your mind? Or is a Better solution that you've come .

across potentially? So I do think that um especially because the U S. Market and total U S. Total market indexes have been so strong, I think that there is a little bit of a tendency to say well, that that gives me everything I need and then some so there's been kind of a self reenforcing behavior in part because of performance.

But the fact is, and we've had other periods of time when when this has happened, like the late nineties, early two thousands or another recent example, where U. S. Tech names really prevailed at the expense of almost everything else.

And we saw U S. Market become very, very concentrated in a handful of companies we're seeing in again. Um and it's been kind of just a self fulfilling propac's because of the dollars flowing and index funds.

I think that's been a contributor as well um which underscores the point I was making about looking outside the U S. For a component of your portfolio because IT nicely baLances out that concentration risk that you get in the U. S.

Market today. So I would urge people to look at that. I think you can use the um global market capitalization is A A tool to determine how much to hold in the us and outside the us.

I think it's roughly sixty percent us, forty percent nine us today. That's kind of a good starting point when thinking about how to allocate between those two pieces because as you mentioned, rather, the U S. Market is pretty heavily concentrated in a handful of stacks today.

Now that someone had a comment related to some of the research on small cat value and a lot of that comes from dimensional and university chicago um and in the comment was a struggle to have that till because we had some Spikes early in in decades ago but they haven't really materialized. Do you have any view on that research of having a more diversified small cap value tilt?

Well, the time certainly looks right for um that till to uh deliver at least going forward that looks that um you know there's some undervaluation in the small values square of our style box. Um I don't think you need to go completely overboard with IT. But you know if someone wanted to put in place up you know a five percent or ten percent allocation to U S.

Small value, that seems perfectly reasonable to do. Um when people are in retirement, I think what they have to realize is just that your time horizon to benefit from these trends is is truncated. You have less a less time to benefit from IT.

So I would be a little bit less heroic in terms of assuming that the market patterns that we've seen in the past um will necessarily prevail over my twenty five or thirty year time. Her eyes. And so Young people just starting out if they want to put in a small value tilt, that doesn't seem unreasonable. But as you come into return and I would back off some of those kind of factor tilt since they call them, this is a really.

really important point, I think, about two parts. One is acid allocation as a methodology is an institutional methodology that has no end date, has no cash flows in and out, has no end date. And so it's just a statistical model that doesn't really apply when your life lifetime is truncated and you have withdraws. Um and the other part of IT is that over sit, you know over optimization, you can drive yourself now we're gonna on a researching all day rather than playing pick ball right elegant simplicity to get the job done so you can actually go live a life is a consideration here.

Absolutely and definitely, I think it's incoming upon all of us as we age and move into a retirement um to try to skinny down the number of holdings in our portfolios, try to reduce the number of accounts that you have um if you can collapse multiple iron rays in your name, you know under the same from all of those things um to try to reduce the moving parts, I think is fabulous thing to think about um if you have a financial advisor. Even so, I would urge him or her to you know or always be sort of questioning is there way that we could do this more simply? Um I would have that is kind of an ongoing chAllenge to that .

financial adviser and that goes against the complexity complex, right simple, elegant simplicity can be very sophisticated ah but we tend not to think that way, right? Eric cata question related to tips and tip latters, what is the an eric? You're welcome to ask the question. I have a follow of people like but what is the argument for using tips? And what if you could define briefly what a tip is and then what role they might play for retirees?

Yet the bill bernstein in the book makes the case that really your core building block for your retirement or folio should be treasury inflation protected securities when you think about. But IT, from kind of an academic standpoint, tips are the risk free asset, right that they um their treasury's so they're backed by the full faith and credit of the U. S.

government. So there is safe as security as you can find. Um and then they also deliver this measure of inflation protection so their Prices adjust with inflation um as the years go by. So they are link to the consumer Price index. So they are i'm going to keep you whole keep your purchasing power hole with respect to inflation.

So um one idea that that build puts forth in the book is that you would build a latter of these tips bonds with one matching in each of the years of your retirement. And the idea is that you would um be able to kind of spend through that portfolio. The problem is that if you happen to live longer than that tips later that you built well, you would need something to supply your cash flows in those out years beyond um the the years for which you built that tips later.

But that's the basic ID and play um in the book I ask bill about whether someone could use a tips bond funds in lieu of building that tips later and he said that that would be fine. I think he advocated for using a combination of short and intreat dia term tips um in u of building that that tips later. But that's the basic idea that um when the academic researchers look at sort of the perfect that kind of a kin to social security, really tips are are really when IT comes to our port folios, they address the main risks that we .

might be worried about that you know spending well if and IT doesn't change, right yeah .

there there's a lot that kind of academic about IT. But but um it's I think an elegant solution when you think about and and IT does address some of the big risk factors that we want to be a tune to when we think about retirement portfolio construction.

Friends will spring you in here for second and talk about simplification now that your how many years into your retirement are you .

I retired twenty eighteen, so six, nine, five years.

So after six and a half years, are you simplifying things even more aware your mind on that verse? Optimization.

I definitely not optimization. You can just become an octopus because everything makes sense when you're is when you're looking at the silo, right? Like we were some other tips and you can do always do a tips letter and then you like, wait, i've already to get this bond fund. I want to tips later and a bond funding and you can really complicate things. So I always chAllenge myself to simplify.

And the biggest move I made, I I closed out my four one key and I rolled at all into the I ra and roth individual accounts in my vanguard account and get rid of the third four or one k the main reason for that is doing roth conversions from a four one k into my individual routh was just ridiculously difficult. You had to do a phone call. You had to do a snail mail form extended to you'd fill IT out once you close the four one k and move IT into the account is just a couple of clicks on the screen and you do your roth conversions.

So it's simplified. That tremendously, which was part of my goal, is not just simplification of your portfolio, but you also want to try to find a simplification of managing your portfolio, right? I'm A D I Y. guy. I been very little among the time doing this. So the two biggest things I would say i've done to simplify is got rid of the four one k and then i've also set IT up where I don't have to worry about during the course of the year moving money around.

I I have an automatic paycheck set up every month that comes out of my money market fund, which I refill a couple times year um and then I don't worry about IT, you know that I do a deep dive year and review, but I probably spent I did the article on this and I spent something like twenty twenty five hours a year managing our investments. So it's about a simples. I can get IT, but i'm always tempted to go there and do a little bit of tinkering. So it's always the temptation and you got to manage and really be careful to not get caught up in self.

Thanks for thanks for sharing your perspective. Um yeah a one thing I worry about, Christine, is that yeah we divide things in four pillar. What do I want? What's our vision? And then defining that is feasible and then making IT resilient.

And then you optimize and IT can be very difficult, but you IT can be very difficult because the optimization park sometimes dominate the conversation and it's fun to talk about what you know, what's the what's the jewelry i'm going to put on my outfit, right? But IT can really make people that aren't into this like i'll use way to book as an example, which is an amazing reference book. IT is going IT is very appealing to those that are really into this as hobby and just analytically fits them.

But IT also can make a Normal person tuned. How do I I tell people you don't. If you never optimize, you should still have a great retirement. Yeah, you may leave some money on the table, but you're going to be off playing, pick up all or doing nothing in your mind. Have you found, even in your own life, a baLance between making sure you don't get too complicated?

Oh, I am such a minimal alist um I really um I have a too hard file I call IT well is that it's not my idea is the charly monger idea. Where do you sort of have to have these categories? And we all do this.

We all have this window process in our lives. You just have whole categories of things you are like. I'm not gonna think about that.

And so um spending a lot of time monkey with my investment portfolio is just not on my list of things to worry about um so I um you know often think about what is in my too hard pile. And so I would put IT like um crypto automatically would go there. Commodities investments.

Um individual stacks was once an individual stack holder. We have and I do have a couple individual stacks and we have a fabulous team of researchers at morning star, but I don't have time. And I know there are some really talented, funny managers out there.

I'm a Better holder of funds, then I am individual stock. So I think it's incoming upon all of us to just create a list of things that you are not going to think about and IT freeze you up to focus on things that you care a little bit more about. So I feel like for me, for my husband and me, we can move that needs more in the ROM of tax planning. That's one of the reasons why we engage that planner shesol us with employers stuck trying to figure out how to divest ourselves of that in a way that is tax efficient. So I just focus more of my efforts in those areas where I feel like there's a little bit more value to be added.

Yeah in the human cost when you're close to retirement of getting caught up in all the optimization that's talked about, I think is will forget this. I'm just gonna hire somebody, anybody to take this and maybe maybe there helpful. Maybe you're just paying fees for and making IT more complicated and you don't realize IT or i'm too tired, I know is i'm just going to work another year. I mean, these are real human costs of this obsession with optimization and how IT can cloud IT can dominate the public square, very much like politics, right? All although crazy stuff done ates the public square rather than the core things that you can do to have a great retirement.

Yeah hundred percent. We have um in my little team at morning star, we call ourselves like the good enough portfolio team. We have all these optimizes at morning star.

Our work is largely focused on helping people focus on things to get them to a solid plan. Is that the perfect plan? I don't know, maybe we will never know. But um good enough should be the target for most of us.

I think we have one more question and then will close this up. Ibra.

either pristine, I had one question for you after the twenty folks that you've interviewed and the book is now out. What question now rests in your mind? What's your question lately? Now that you've tackle those questions, what are you thinking about more these days? Yeah thank you. That's a really good question. Um couple of things that got left on the cutting room floor um in the book uh one is that unfortunately we didn't have a chapter dedicated to fire the financial independence retire early movement I wish we had because I ve learned a lot from people in the fire community and been super inspired by them.

I think that probably the main overarching thing that i've been thinking more about is like whether the concept of retirement is flawed and law the in the book makes the point that we need to retire more often um that the this idea of retirement is kind of a puntuated mark at the end of our careers is maybe not the way that we should be thinking about IT. So I was recently talking to a family member who is in her thorius wants to have a family and um IT makes a lot of money in her career and I was like, k, have you thought about setting inside of fund where when you have Young children, you could potentially take a pause from this job? And then maybe reenter IT some later later date.

So I would like everyone to be thinking more about that about um not being so linear about you know sort of work than retirement that maybe um you know there would be opportunities to be a little bit more fluid about IT where we'd check in and out of work a little bit more throughout our careers. That seems like that would be a healthier way to approach retirement. But of course, there are a lot of forces that work against that. So maybe it's just a pipe dream, but it's something i've been thinking more about.

Thank you. Thank you so much for hanging out with this, Christine. Course you are kind enough to connect me with bill on your team and I pursued this. You didn't offer this. So uh, in that we're going to share a link with members for those of you that use morning star or want to have a platform to be able to use IT where they just for club members offering the discount to think that the list Prices like two hundred and forty nine dollars year to seventy five dollar discount. So we'll have that link shared here in the next week or two. Um thanks so much for the work that you do on retirement and also the work that you do from the the the human side of IT and willing to share part of your journey .

right back at your Roger I love what you're doing here. So thank you. Thanks for inviting me today and thanks for everyone for being here.

So next week on the show, we're going to chat, believe, who's IT with, I think, with Michael easter talking more about gear of stuff to maybe help us inform our child giving and how we organize our lives. I want to continue reading into the record my grandfather's journal from his time in war, war two, as a waste unner in A B seventeen bomber were on mission. What mission number are we on? He started in may.

Let me get to all send a photo of this book, and maybe i'll send into our six shot saturday email here the actual page of IT. Okay, his last mission we read last week, july fit, that was a long one. This mission was five in six IT happened on july seventh, one thousand and forty four.

Ship number three, sixty one, thirty number four. This a long one, if I can read IT, why not too good. Okay, target oil refinery in germany had fifty one, thirty eight four escort. So, p.

Thirty eight, I know I am not sure if fifty one is escorts, but regardless of escorts, encountered thirty five enemy place planes, busy day last two b seventeenth today, flag heavy, accurate, Carried twelve five hundred pound bombs, mission, eight hours long, altitude twenty three thousand eight hundred feet oh, and then he wrote, just as an after thought, if you were call in his first mission, he got shot. And you can tell this is an a different pen. So he wrote IT, as an after thought, got even on this mission so that today's record, i'll share a photo of this in our sick shot saturday.

Hope you have a wonderful beginning of december. The appended voice in this podcast for general information only is not intended to provide specific of baseball recommendations for any individual. All performance references is historical and does not guarantee future results. All induced are unmanaged and cannot be invested in directly. Make sure you consult your legal text or financial adviser before making any decisions.