We Changed The 4% Rule!?

Retirement planning isn't as simple as following the classic 4% rule anymore. In this video, Brian and Bo explain why the traditional retirement withdrawal strategy deserves an update, how William Bengen's latest research changes the conversation, and why your retirement age should determine your safe withdrawal rate. Whether you're planning for early retirement, traditional retirement, or retiring later in life, you'll learn how withdrawal rates, portfolio longevity, inflation, and retirement income all work together to build a sustainable financial plan. Plus, see our updated retirement withdrawal framework and discover tools that can help you estimate your retirement goals more confidently. ⁠⁠⁠⁠Jump start your journey with our FREE financial resources⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠Reach your goals faster with our products⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠Take the relationship to the next level: become a client⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠Subscribe on YouTube for early access and go beyond the podcast⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠Connect with us on social media for more content⁠⁠⁠⁠⁠⁠⁠ Bring confidence to your wealth building with simplified strategies from The Money Guy. Learn how to apply financial tactics that go beyond common sense and help you reach your money goals faster. Make your assets do the heavy lifting so you can quit worrying and start living a more fulfilled life. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:37Brian Preston?

  You heard it here first. We changed the 4% withdrawal rule.

• 0:40Speaker 02

  Brent, I am so excited about this because I think this is going to be incredibly valuable because a lot of people out there are excited about retirement and even a lot of people are excited about early retirement. They're trying to figure out, how do I know if I have enough? How do I know if I've reached that point? And I worry that some people arrive at a poor conclusion because they're using the wrong info.

• 1:02Brian Preston?

  Well, look, everybody wants a napkin financial plan. And wouldn't it be great if all you had to do was say, you know what? If you can just take what you think you need and multiply it by 25?

• 1:13Speaker 02

  That'll get you there.

• 1:14Brian Preston?

  You've got a retirement. That's essentially what the 4% withdrawal rule is because if you think about doing the math, what's four times 25? 100%. You should be covered and set and, and we want to show you, no, there is way more going on when you're trying to figure out than just doing a napkin financial plan.

• 1:30Speaker 02

  Yeah. Said slightly differently. It's a retirement guideline that suggests withdrawing 4% of your portfolio in the first year of retirement. Then you get to adjust that amount every year for inflation. So you build up this big pot of money. You take that big pot of money, you multiply by 4% and that is what you get to live off of in retirement. That's what a lot of people have used and that's what a lot of people use for their planning.

• 1:55Brian Preston?

  But where did the 4% rule come from?

• 1:57Speaker 02

  Yeah, it actually came from a financial advisor, Bill Bangen, came up with the idea and then it was popularized by the Trinity study. But even Bill has come out and said, maybe 4% isn't exactly Right. Maybe we can even adjust the 4% rule of touch.

• 2:12Brian Preston?

  Yeah. I mean, now realize this has got asset allocation built into it. So you do try to limit volatility based upon your asset mix. But Bill did come out and updated it. It's not 4%. If you put in the right diversified portfolio, it can be increased according to Bill, the author of this originally.

• 2:30Speaker 02

  Bill Bangen.

• 2:31Brian Preston?

  4.7%.

• 2:32Speaker 02

  4.7%. So, and as you can imagine, when you're thinking about preparing for retirement, the higher your withdrawal rate number is, the lower your portfolio value needs to be, or the higher the income that you get to experience in retirement. Because so naturally, people would want to think, okay, the, if I can have a really high withdrawal rate, that means that, okay, maybe I can save a little bit less, or maybe I get to live a little bit larger. But we worry about that because if you get too aggressive and you assume that, oh, man, what if I had a 6%, 7%, 8% withdrawal rate? You could get yourself into some really hot water really quickly. If retirement doesn't go exactly the way that you thought that it was.

• 3:14Brian Preston?

  Well, all of this is built off of the math. And, and even when you look back at the Trinity Study, they're assuming a 30-year withdrawal period. And you know, but the thing is, we've covered the FIRE movement. We talked about the FINE movement where you move from financial independence to the next endeavor. Because maybe, especially if you're doing this in your 40s or 50s, you're not ready just to play golf or sit on the beach. There's going to be lots of things going on, but you definitely are thinking, think about somebody who's 45 years old or 50 years old. You add 30 years to that, you're probably going to live longer than that.

• 3:47Speaker 02

  You're still going to make it past that. Yeah.

• 3:48Brian Preston?

  So that's, that's why it doesn't work to just assume that you can just use the 4.7. And it's the other, let's go the other way. What if you're somebody who loves your work? And you actually work until you're 60 years of age, or 65, or 70 years of age? That should not have the same withdrawal rate as somebody who retires in their 50s or 60s. So there needs to be some type of elasticity or flexibility to, to what your withdrawal rate is.

• 4:15Speaker 02

  Yeah. Instead of having one safe withdrawal number, and again, we're going to talk about where. It's useful and where it's not useful. Instead of having one, perhaps there should be a range. Perhaps it should be a little more elastic. So we tried to take some money guy dust and sprinkle it on the withdrawal rate rule to come up with something that could be a little more helpful for you. And this is what we came up with. If you're someone and you're going to retire past the age of 75, and we're going to assume a normal life expectancy for most adults, then your withdrawal rate could likely be higher than 4.7%. You could actually likely go up to five and a half percent. If you retire in your early 70s, maybe you subscribe to a 5% withdrawal

• 4:55Speaker 02

  rate. Normal retirement age, 66 to 70, four and a half percent. So right there at that 4.7% range. But if you're someone who's going to retire early, and maybe you're going to retire between the ages of 56 and 65, we would argue you should stick with like a 4% withdrawal rate. Someone who's retiring very early between ages 45 and 55, maybe think about a three and a half percent withdrawal. And if you're someone who's going to go like major fire, major retire early, you're going to have a very long retirement, long financial independence window. We would argue you should be super, super conservative and think about maybe something around a 3% safe withdrawal rate in terms of how you use your back of the napkin planning to arrive at your number.

• 5:38Brian Preston?

  Yeah, a lot of this, yes, is conservative. And that's on purpose. Because what we, when you make the decision to leave a good paying job, that's a threshold that sometimes you can't come back from. Meaning it's hard to get the water back up the hill is that your earning potential might not be what it was once you leave. So you do want to be conservative with your assumptions when you're making big plans. So that's why I think it's probably a great time to talk about, give us some key takeaways, because I love the 4% from a planning perspective, but there's way more that goes into this.

• 6:08Speaker 02

  Yeah. So the very first thing is that the 4% is a starting point. We call it back of the napkin planning. But in reality, you guys know this, in our day job, we are fee only financial advisors that get to help people make it to and through retirement. And here's what we don't do for our clients. We don't say, okay, how much is your portfolio? What's that number times 4%? Okay, on your day of retirement, you are now locked in at that withdrawal rate for the rest of your life. That's just not the way that it works. In practice, withdrawal rates are much more dynamic. You might have a season of retirement where you have a very high withdrawal rate because you're traveling more and social security hasn't kicked in and these other factors are at play. But as you move through your life, your withdrawal rate might drop as you have pensions come into play

• 6:53Speaker 02

  and social security, or you downsize, or whatever the case may be. So it's a much more dynamic thing in practice than it is just in the academic thought process. But it's a great starting point to let you know if you were directionally moving in the right direction, duh, to be able to have financial independence.

• 7:11Brian Preston?

  But I do think it's a powerful tool. If you're in the planning stages and you're decades from retirement, there's nothing wrong with using a planning rule like the 4% rule. Just understand your retirement age will change the math. And as we've already covered, if you're going to start early, meaning you think that you want to leave your workforce or your professional earning years much, much sooner than most people, your peers, you want to be conservative and adjust the math accordingly.

• 7:38Speaker 02

  Yeah, and you want to recognize that early retirees require more flexibility. The earlier you retire, the more variables are going to change. And the more small deviations in the plan, small changes to your assumption can have a big impact. If you're someone who's retiring at age 75 and you get your living expenses off by 3% to 5%, you're probably going to be okay. But if you're someone who retires at 45 years old and you get your living expenses off by 3% to 5% and that compounds over a 50 or 60-year retirement time horizon, it can have a very, very meaningful difference. So the earlier you retire, the more conservative you want to be and the more cushion you want to build into your plan.

• 8:20Brian Preston?

  And then that leads to my kind of closing point on the key takeaways. It's like, there's nothing wrong with using this tool when you're planning decades in advance. But if you are within that five to seven-year halo of landing the airplane and making sure that your retirement is going to be as good as you hope and all variables are accounted for, you need to stress test your Plan, you need to kind of thinking about taking the relationship to the next levels, because that is where you're going to get a lot of answers that are personalized to you, instead of just using this planning tool.

• 8:52Speaker 02

  Now, it's possible that you're out there and perhaps you're still a long way away from financial independence. Perhaps you're not even really thinking about your withdrawal rate just yet. That doesn't mean that you can't still be future minded. We want you to go, if you haven't done this, go to moneyguy.com/resources and play with our Wealth Multiplier tool. Because at least what this can do is you can take the current savings that you've accumulated up to this point. You can drop it in our Wealth Multiplier tool and you can see what that savings is on track to turn into by the time that you get to retirement. And if you get to a normal age 65 retirement, then take that number, multiply it times 0.04, and it will give you an idea of what a 4% withdrawal rate would be able to produce for

• 9:36Speaker 02

  that age. And you can begin to ask questions. Okay, am I on path? Am I on track? Am I behind the curve? Am I ahead of the curve? We want you to be able to use these tools to be able to navigate your financial circumstance to ultimately be able to leave, lead the life that you want to live. Let's just have a moment. Let's just, let's just have a moment, right?

• 9:58Brian Preston?

  Ditto.

• 9:59Speaker 02

  Love that. We, we love that we get to show up here at 10 a.m. and do this. We love that even as things change, we go from a 4% withdrawal rate to a 4.7% withdrawal rate. So now even a Money Guy dynamic withdrawal rate, we get to be the source for you because we do believe that there is a better way to do money. So much so, that we love answering your questions. We love that we get to sit here and load you guys up. So if you have a question right now that you want to get our take on, that you want us to weigh in on, we have the team out in the wings collecting your questions. So make sure you get them in. With that, Creative Director Rebe, I'm gonna throw it over to you.

• 10:35Speaker 03

  Very excited because I've got some questions queued up. Keep them coming. And while you're putting in your long form questions, be sure to submit a rapid fire question if you have one, because we will be doing our it does not depend rapid fire segment later in the show. Just put RF at the beginning of your question in the YouTube live stream chat. So we know that you want to be part of that segment. What's an acquired taste?

• 10:57Brian Preston?

  Rapid fire.

• 10:58Speaker 03

  You, I think you've acquired it, though.

• 11:00Brian Preston?

  No.

• 11:00Speaker 03

  Okay.

• 11:01Speaker 02

  Last week, we did.

• 11:02Speaker 03

  We'll let them.

• 11:03Brian Preston?

  I've just learned, yeah, it's kind of like, I actually do like broccoli's, but I don't love Brussels sprouts. So I feel like, but I eat Brussels sprouts because that's the trendy thing in Nashville. It feels like they, they douse them and.

• 11:13Speaker 02

  You actually don't like Brussels sprouts?

• 11:15Brian Preston?

  No, I don't like.

• 11:15Speaker 03

  Oh, I don't either. If they're really like fancy, like he's talking about, that's fine.

• 11:19Brian Preston?

  I'll eat them. I mean, I'll, I'll eat them.

• 11:21Speaker 02

  Who eats Brussels sprouts not fancy? Just like raw boiled Brussels sprouts? Nobody does.

• 11:25Brian Preston?

  Rapid fire is Brussels sprouts.

• 11:27Speaker 03

  Not that hot of a take, honestly.

• 11:28Speaker 02

  No, no, no, that's a bad, that's a foretake.

• 11:31Speaker 03

  No, it's more fun than Brussels sprouts. Okay, we're gonna get into the long form.

• 11:35Speaker 02

  I like Brussels sprouts.

• 11:36Speaker 03

  Some personal finance question.

• 11:37Speaker 02

  But I've never, I've never eaten them just plain.

• 11:38Brian Preston?

  Can, can we be honest while Brussels sprouts aren't good too? They make you gassy.

• 11:45Brian Preston?

  I'm just telling you.

• 11:46Speaker 03

  All right, you heard it here.

• 11:48Brian Preston?

  Probably means it's doing good work for you, though.

• 11:49Speaker 02

  Well, there's, first question answered. There we go.

• 11:52Speaker 03

  Okay, great. With that.

• 11:54Speaker 02

  What do Brussels sprouts do?

• 11:55Speaker 03

  Onto the finance questions. The first one is from Isaac S. and he says, it's the first time being here for a live event.

• 12:01Speaker 02

  Welcome.

• 12:04Brian Preston?

  Brussels sprouts to you.

• 12:09Speaker 03

  Isaac's question says.

• 12:10Speaker 02

  I didn't know what that means.

• 12:14Speaker 02

  Brussels sprouts to you?

• 12:15Brian Preston?

  It doesn't matter. It's not kiwi happy, that's for sure. Or banana happy.

• 12:21Speaker 03

  Isaac says, I am currently investing 25% of my income, but I am not yet maxing out my employer sponsored plan. Should I move on to funding my child's 529?

• 12:33Brian Preston?

  This is a good question.

• 12:34Speaker 03

  Age old question in the foo. When it, when is it okay? You have permission to go ahead and start investing in things like your child's future and college and things like that?

• 12:42Brian Preston?

  I was gonna hold it up.

• 12:43Speaker 02

  Yep, hold that thing up.

• 12:45Speaker 03

  And why would you not want to do it right away? I think that's a good thing to say, too.

• 12:49Brian Preston?

  Well, I mean, look, there's several things, well, we don't know from Isaac. This is where I have to give the, it depends, is we don't know what his income is. We don't know what his age is. But he has shared with us, he's saving 25%. That, that gives us a lot of context because remember. Step six to max it out. Now, look, ideally, yeah, we want you to hit all those government limits, but there's, if you're somebody who makes under a hundred thousand dollars a year, you're going to hit the 25% before you, because you've done your Roth IRA.

• 13:19Speaker 02

  Yeah, I think we did this for me and the media was like 137,500 dollars before you max out.

• 13:24Brian Preston?

  So a lot of people are going to hit 25% before they hit the government thresholds. And that's A, okay. That's why you can move to step seven. That's when you start thinking about how you're going to use your money. If you're going to, because here's the reality of step seven, too. If you think you're going to leave the workforce at 55, your number's not 25% probably. It might go up to 30, 35, 40%. I don't know. We have to do the math to know what your number is. Step seven is where you're going to do the math to figure out where am I at in my financial journey? How do I do the account structures? What does it go with and integrate with my goals? But after you've done that, and maybe you have a normal retirement age, yeah, you get to step eight for sure. Take care of the kids. You know, expand your lifestyle. It's just you've done the hard work. You should start living your life and even helping out the kids at that point.

• 14:09Speaker 02

  Yeah, you know, we have a great resource. If you go to moneyguy.com/resources, it's how much should you save? And it shows what a 25% savings rate can do for you. So go find your age, put your 25%. And there's a really good chance, if you're someone who's in like your, your mid 30s, and maybe you're just starting out, or if you've been saving up to this point, saving 25%, you're going to be well on track to be able to accomplish all of your long-term financial goals. So by all means, I would say graduate to step eight. Consider funding the 529, assuming that you're on the trajectory that you want and need to be on. And I think it's awesome. That's why the Financial Order of Operations is there. It can free you up to begin spending money on some of those prepaid future expenses

• 14:54Speaker 02

  or some of those abundance goals. Once you've made sure that you've taken care of the financial independence saving that you need to be doing.

• 15:03Speaker 03

  Love that. Isaac, welcome to the live stream and thank you for your question. We're glad you're here.

• 15:09Speaker 02

  Does he get a... okay. It's his first time, Rebi. It's his first time.

• 15:14Brian Preston?

  But if she makes an exception for him, what type of press are we sending?

• 15:17Speaker 02

  I'm just saying, it might not be the next person's first time, but it was Isaac. That's fine. No, that's okay. Isaac, hey, I tried.

• 15:23Speaker 03

  I wasn't going to declare today Tumblr day. Do you want me to?

• 15:26Speaker 02

  No, I just want to give Isaac one. Not everybody, just Isaac. It's his first time. It's his first time here.

• 15:32Speaker 03

  Those are fighting words.

• 15:34Speaker 02

  You know what?

• 15:34Speaker 03

  You know what, Isaac?

• 15:35Speaker 02

  Balls in your court.

• 15:35Speaker 03

  If you would like a Tumblr, just email [email protected] to welcome you to the live stream. Look at Brian. He's like, oh, here we go.

• 15:46Speaker 03

  We'll see. Maybe the next person will get a Tumblr too. We don't know.

• 15:49Brian Preston?

  I think I just signed the invoice on the reorder of hundreds more Tumblrs, so why not?

• 15:55Speaker 02

  We got them to give now.

• 15:57Speaker 03

  We got them. Let's give them away, you know?

• 15:59Speaker 02

  That's it. That's what I heard.

• 16:00Brian Preston?

  Burning a hole in our pocket.

• 16:03Speaker 03

  All right. Next question is from hopefuldreamer108. It says, what do you think about a wife having a separate bank account for just her? My fiance and I are getting married soon after three years of being together, and we want to merge everything else. What do you think of this?

• 16:23Speaker 02

  Communication, communication, communication. We say this all the time. Personal finance is personal. And so what works for you and your household? I don't want to be so presumptuous, say you have to do it this way, or this is the absolute best way to do it. So if you and your spouse have the conversation, say, hey, I want to have this separate account that I can spend freely, no real oversight, so long as you guys have a clear understanding of, okay, what money goes into that account? How do we factor that in? What, you know, you answer all the hard, tough questions about that account? I don't think that there's necessarily anything wrong with it, but I also think you could have that exact same conversation and be on the exact same page, doing it jointly. So one of the questions I would have if I was going to like sit in between you guys is, all right, why?

• 17:08Speaker 02

  What's the reason? What's the purpose? What's the thought? Why does this need to be said? Separate, what's the purpose, the goal, the idea behind it being separate? And could we actually achieve the same type of freedom, flexibility, oneness, understanding? Having that in a joint account or does it have to be separate? There's no like absolute right or wrong answer. I care more about the question behind the question than the logistics of it being separate or not.

• 17:35Brian Preston?

  So this is, I like to give some context here. I don't know hopeful dreamers age, where they are in their journey, what assets that they're bringing into the marriage. These things are unknown currently, but I, but I can give you the philosophy. Cause the reason I say all that is because if you're both coming into the marriage with substantial assets, whether it's family or previous marriage, you know, previous life, you're coming in this as an older adults versus young adults. Then you do your legal protections on that stuff, you know, because premarital assets are protected. If you have family gifts or inheritances, there are some legal protections that we want to be respectful of whoever funded or put those bequests upon you.

• 18:17Brian Preston?

  But if, and also if you have adult children or children from other marriages, there's, there's unique things. But I say all that to put all the contingencies in there is because when you get married to become one, and I want you to have all the income flow into a joint account. Now, once the money flows into a joint account, why? It's because you want to take the power out of the money. And if you've got one spouse that's making six figures, one spouse that's, you know, making 50,000, 60,000, and there's, and maybe down the road, you want to do family planning or, you know, where one of you is going to stay home and one's not.

• 18:56Brian Preston?

  Money is going to be a unique power dynamic that you never want to be able to go, have to go to your spouse and ask for more money. Because it just creates what's mine versus what's theirs. And it's supposed to be to become one, it's ours. And I think when people don't do that, it really screws things up. Because I, and look, we've had people on the show, Making a Millionaire. And I, and this is my opinion, but it's weird sometimes when, when I see people. Keeping their money and you feel some, some like ownership or this is my money versus their money, which that, that, that creates some unique things. Now, when you have all the money flowing into a joint account, if y'all decide later, you know what? We ought to set up allowances for each other because maybe he likes to golf,

• 19:39Brian Preston?

  or maybe she likes to do a hobby that, you know, where she's traveling on girls trips or doing stuff. It's okay if you set up allowances that then if you want to go fund, set up accounts, maybe it's for keeping gifts unique and separate and stuff like that. I could get on board with that, but that's a group, back to Bo's point, communication, a purpose, and it's not what's actually how you're paying the mortgage, how you're paying the utilities, how you're paying all the childcare costs. That stuff, you want to take the power out of the money as much as possible, so it doesn't create strange dynamics in your relationship.

• 20:11Speaker 02

  It's interesting. We had a little bit of extra context come in. Hopeful Dreamer said, I'm 26, he's 30. So this is, I actually assumed-

• 20:19Speaker 03

  This is the wife. I thought it was the husband asking.

• 20:21Speaker 02

  This is the wife asking the question. I thought the husband was asking a question. Very interesting. She said, I'm 26, he's 30. First and last marriage. Love the sound of that. And he makes more for sure. So the question that I would ask you, Hopeful Dreamer, goes back to the very beginning. You wanting to have this separate account, what's the why behind it? Is there something like, oh, I'm afraid he's going to be upset about the things that I want to spend money on? Well, that should be a conversation.

• 20:44Brian Preston?

  That's a communication.

• 20:45Speaker 02

  Even if it is a separate account, I would imagine-

• 20:47Brian Preston?

  It's not for secrets.

• 20:48Speaker 02

  He's still going to be upset about that if you're not on the same page. My wife and I, we had to come to an understanding about shampoo and throw pillows. Like it was a thing we had to get on the same page about, and once we got on the same page, life got that much better.

• 21:01Brian Preston?

  If there's, if there's anything that's going to draw that you need secrecy with how you're using your money, that, that's a red flag for me that you might need to have better communication.

• 21:09Speaker 03

  I'm all for an allotment of like fun money for each person. And maybe that's even like a separate account, but like, um, like we've done that. My husband and I have done that at different seasons of life, but it's still like a joined, like if I have fun money, he could still technically see it. He just knows, oh, she's going to spend that on what she wants. You know?

• 21:27Brian Preston?

  But there shouldn't be secrets in a marriage.

• 21:28Speaker 03

  Like throw pillows, you know?

• 21:29Brian Preston?

  There shouldn't be secrets in a marriage. If you're going to get naked with somebody and you can be open about that, why can't you be open about all your financial goals?

• 21:36Speaker 03

  No, I agree with you a hundred percent, even though that was a special way of saying it.

• 21:40Brian Preston?

  Yep, it's marriage.

• 21:41Speaker 02

  No, you, yeah, that's-

• 21:44Speaker 02

  Put that on a T-shirt.

• 21:46Speaker 03

  Oh, man. Oh, man. Oh, man. Okay.

• 21:49Speaker 02

  No, it was right. It's on.

• 21:51Speaker 03

  No, it's, he was exactly right.

• 21:53Speaker 02

  You went from Brussels sprouts to getting naked, and I just wasn't expecting that connection in the first two questions.

• 22:00Brian Preston?

  Maybe I'm turning into an old man. It says inappropriate things.

• 22:05Speaker 03

  I'm for it. Let's go. All right. Well, hopefuldreamer108, great question. Thanks for being here. Hopefully that starts off some really fun.

• 22:14Speaker 02

  And congratulations on the pending nuptials.

• 22:18Speaker 03

  All right. BigDog1313 is up next.

• 22:21Brian Preston?

  Hey, how do they spell dog?

• 22:23Speaker 03

  Just like a regular dog, not a Georgia dog.

• 22:26Speaker 02

  Not the right way.

• 22:28Brian Preston?

  I wrote it the right way.

• 22:31Speaker 03

  He says, I, 25, and my wife, 26, have 150K income and 95K invested.

• 22:38Brian Preston?

  Wow, not even, right, even 30 yet.

• 22:40Speaker 03

  Which is great. At 25 and 26.

• 22:41Brian Preston?

  That's great.

• 22:42Speaker 03

  I have a car payment and have 10K left at 5.7%. That's his interest rate. I hate my car payment, but no, I should invest and pay off on schedule. Can I accelerate?

• 22:57Speaker 02

  We're gonna have a fight.

• 22:59Speaker 03

  At 25 and 26 years old.

• 23:00Brian Preston?

  Well, you know, I'll let you, I'll let you speak first, but I want to give Big Dog a tool. If you go to moneyguy.com, we have how much did you save? And it's somebody who's 25 years of age. You're gonna see that. It's not, you're not gonna have to be at 25% yet to do that. So that's the context I'm laying out. What, what, because I can already see you shaking your head.

• 23:22Speaker 02

  My Big Dog, I also do not like car payments. I just don't. 238 exists, and it's a thing, and I support it, but I don't like car payments. However, if you have this car payment, and you are already inside the confines of 238, I mean, you've, when you bought the car, you put 20% down, you're paying it off in less than three years or 36 months, and the payment does not represent more than 8% of your gross income, you've already made the financial mutant decision. I'm gonna argue every dollar that prepays that loan.

• 23:57Speaker 02

  It might not be the best utilization of that dollar because I'm going to argue, I think that you can make 5.7%, better than 5.7% if you're out there investing and growing. Now, it's a little bit tongue, it's a little bit, uh, talking to both sides of our mouth. Because we say all the time, if you can pay cash, you should pay cash. If you can pay cash, you should pay cash. But if you're going to have to like decrease your savings rate and you're going to have to stop saving and accumulating the pace you are in order to do this, I'm going to argue, I think that you would be better served, continue to max out the Roth IRA, continue to max out the HSA, put money in the employer sponsored account, fund the after-tax brokerage account, and that car payment will be gone soon enough

• 24:39Speaker 02

  if you're inside of 23.8. I love the idea of seeing those dollars work for you.

• 24:46Speaker 02

  Agree? Disagree? Want to fight?

• 24:49Brian Preston?

  Look, I do agree with you to a degree. But look, first, I want you to run it through some, some decision matrices. And the fact that, first of all, are you, are you within 23.8? If you're not within 23.8, we got a problem.

• 25:02Speaker 02

  Well, then you gotta fix it.

• 25:03Brian Preston?

  We gotta, we gotta fix that. But you gotta go ahead and triage the situation. But assuming you are in 23.8, like Bo said, I would love for you to, you gotta get the Roth IRA. I will, I agree with Bo in the fact that I would be very sad if you didn't fund your Roth IRA, um, because you were trying to pay off this loan sooner. But after you get past the Roth IRA and the health savings accounts, with that tax-free opportunities, I do want you going and looking at that percentage savings and assuming that you, maybe you're doing greater than 15%, you're 25 years of age and that thing is just, you know, gnawing on you at night. You're sitting there going like, why do I have this debt? I'm not going

• 25:45Brian Preston?

  to be mad if you paid it off earlier. Maybe come up, it does have to be an all or nothing. Maybe it's one of those things where you're splitting it with Uncle Bo and funding an automatic for the people, you know, always be buying, you know, setting up a dollar cost averaging, where you're funding into either your 401k or additional after-tax or some other things. And then you're throwing a little bit extra on that car payment each month. It doesn't have to be extremes. There's, there's a lot of common ground in the between that you feel good, get it paid off earlier, but still maximize that wealth multiplier. Because that's the big thing. Bo saw you, you're 25 years of age, your spouse is 26. It's like that in the old cartoons where your tongue falls out and your eyes get big.

• 26:26Brian Preston?

  It's just when you see what the multiplier is on somebody your age, you get really excited. And that's why he just wants to help you grow that.

• 26:33Speaker 02

  That's right.

• 26:36Speaker 03

  So would you fight too much? Do you feel like you got to a good answer?

• 26:38Brian Preston?

  Look, we both agree. I know where he's coming from.

• 26:41Speaker 02

  Either way, realistically, this is like brass tacks, probably going to be okay. If you pay it off, you're probably going to be okay. If you don't pay it off and you invest, you're probably going to be okay. One, I would argue, one is a maximization, optimization, mathematical. But we know that 80% of personal finance is behavioral. And so if behaviorally getting that gone is something that's really, really important, I'm not going to fight you on that.

• 27:03Brian Preston?

  I will tell you, the thing that I've, because we both come from humble beginnings.

• 27:10Brian Preston?

  Are you about to sneeze?

• 27:11Speaker 02

  I just get emotional thinking about car payments.

• 27:14Brian Preston?

  And I have thought, you know, when you get to your first million dollars of investable assets, you're going to look back and go, where did it come from? You know, you're trying to figure out which dollars routed. Now, it's easier if they're all in one account, like, you know, if you have a 401k, they hit seven figure before everybody else, and you have a huge employer contribution. It's like, oh, hey, if I put in five and my employer puts in 10, that automatic 15 probably drove it. But for a lot of you, you're not going to be able to see which incremental decision. It is going to be stacking up a lot of small wins. And paying down a 5.7 is not necessarily going to hurt you, but it might, and that's why I think Bo has shown, your training with slows you down a little bit on maybe reaching that first seven figure.

• 27:58Speaker 02

  That's right.

• 28:00Speaker 03

  There you go. BigDog1313, great question, honestly. We got a little disagreement, a little nuance.

• 28:06Brian Preston?

  It's D A W G.

• 28:08Speaker 02

  That's right.

• 28:09Speaker 03

  Just note, just, you know, some feedback on the username.

• 28:14Speaker 03

  All right. Um, just a reminder, we're going to be doing rapid fire very soon. So this is your last chance to get your RF rapid fire questions into the YouTube chat.

• 28:23Speaker 02

  That sneeze, it just was like hanging up all around here.

• 28:25Brian Preston?

  You know, it's okay if you want to let it go.

• 28:27Speaker 02

  I know.

• 28:27Brian Preston?

  Just make sure you dab it up when you do it. Dab it up.

• 28:30Speaker 02

  I'm fighting it.

• 28:32Speaker 03

  All right. The next question is from PJ Dad Life.

• 28:36Speaker 02

  This guy again. Did he ever confirm?

• 28:39Speaker 03

  Confirm what?

• 28:40Speaker 02

  You don't remember?

• 28:42Speaker 03

  I remember several things. Which thing are you talking about?

• 28:44Speaker 02

  So, all right, PJ Dad Life, we were so curious.

• 28:46Speaker 03

  About what the PJ said for?

• 28:47Speaker 02

  Pyjamas or a private jet? Cause those are two very different types of fathers.

• 28:50Speaker 03

  This has been a whole conversation, PJ Dad Life. I see you didn't know.

• 28:53Speaker 02

  PJ, we've talked about you a good bit in our show meetings.

• 28:57Speaker 03

  Well, the question, um, first of all, thanks for listening to our collaborations. Cause he says on the-

• 29:02Speaker 02

  I bet his name is PJ. I bet that's like-

• 29:05Speaker 03

  I know. I've actually got that too.

• 29:06Speaker 02

  Patrick Johnson.

• 29:07Speaker 03

  Well, maybe we'll find out PJ, if you're out there, let us know. He says, on the Rich Habits podcast two weeks ago, which you guys guessed it on the show, Bo picked career switching as a key wealth building lever. When is careers, a career switch worth the risk versus staying put and building skills? And so Bo, I kind of know the backstory here. I know that this was a draft style pick of different investment types. And this was, to be transparent, spoiler, the last one.

• 29:37Speaker 02

  That's right.

• 29:37Speaker 03

  And you were left with it.

• 29:38Speaker 02

  I did not pick it. It was like, which one of these piles of poo do you want the most?

• 29:43Speaker 03

  Uh, and so- But let's talk about, why do you feel like that? When is career switching a good one?

• 29:47Brian Preston?

  Also, Bo is the worst person to answer this question.

• 29:48Speaker 03

  I think this is a great question.

• 29:49Brian Preston?

  Cause how many jobs have you, since you graduated college?

• 29:52Speaker 02

  One. Uno. Single job.

• 29:54Speaker 03

  You're looking at it.

• 29:55Speaker 02

  Job switching was not the thing that I did. Now, there are a lot of people, and we have a lot of clients, especially those that work in high tech, that that is the way that you move up. You gotta like bounce around and you gotta go, the only way to move vertical is to change employers. But I don't know that that is what's necessary for everyone. I think we, I think a lot of us, I had this conversation with a prospect yesterday. I think a lot of us fall into the place of thinking, man, the grass is going to be greener, the grass is going to be greener, the grass is going to be greener. When oftentimes where we are, things are pretty good. If I'm in a really good career, at a really good place that I love, working with people that I love, and I see opportunity and trajectory, there's nothing wrong with working my way up at that place. And I think a lot of young people are told,

• 30:38Speaker 02

  oh, well, the only way to progress, the only way to move, the only way to improve your lot is to jump around and bounce around. I don't know that that is absolutely true. So I ended up picking that in this draft. It was a super fun little exercise because it can be a thing if you find yourself in a place where there, maybe the culture does not fit what you're ultimately looking for, or you don't love the work that you're doing, or the people that you're surrounding yourself with are not the kind of people you want to be around. All of those things might be reasons to change. That is different from saying the only way that you improve, the only way that you move up is by bouncing around. I refuse to believe that that is, that is a must for people in their career.

• 31:23Brian Preston?

  Look, I don't mind. I jumped, I had, my third job was when I started my company.

• 31:30Speaker 02

  Yeah.

• 31:30Brian Preston?

  You know, I'm not counting all the careers or jobs, not careers. They were jobs all through. The bus driving, the plumbing, the back, working on the ramp for Delta. All that, all those were jobs I did all through college.

• 31:44Speaker 02

  You said you got scars on your back from the J-Hooks, right?

• 31:46Brian Preston?

  That's for, I put that love out there for the comment person that says, you guys have never, obviously, you've never worked a real job. I'm like, you might be surprised. But, um, but I say, career jobs, like I came out in public accounting. The CPA firm I worked at, love, love, loved the, the culture of that place, loved my bosses, but I was, I looked around and I was like, man.

• 32:11Brian Preston?

  I don't see the career trajectory that I need to see to do what I want to do. So that's why I wrote down, when you start a job, I want you to ask yourself, what is the opportunity here? You should be able to figure out very quickly, look ahead of you and say, hey, how did the people get what they do? Is the way they're living their life, the way I want to live my life is because you're more than likely, you're on the track of somebody that you're working with. So ask yourself, what's the opportunity here? And I had found myself at this public accounting firm is that I was kind of in no man's land is that they, we just started a financial planning division at this company. Um, when they hired somebody ahead of me because that worked for Merrill Lynch. I was like, man, they do not know what to do with me. They don't know how to go get business.

• 32:54Brian Preston?

  I was like, this doesn't seem like there's a lot of opportunity here. So that's what I knew I needed to leave. And by the way, I reconnected with my old boss, you know, back in 2024. And he, and, and, and Bob was like, look, we didn't know what to do. He was honest. We didn't have it figured out. We didn't have it all figured out and I, and I love that we got to connect on that. So I think my read was right is they didn't have it all figured out at the time. But then I went to my second job.

• 33:19Speaker 00

  This episode is brought to you by Indeed. You're ready to level up your business, but the pressure to find the right person to make that happen is intense. Indeed sponsored jobs can help carry the load. It boosts your job post to help it reach quality talent fast. Cut through the chaos with Indeed sponsored jobs. Get a $75 sponsored job credit at indeed.com/podcast. Terms and conditions apply. Hiring now, then this is a job for Indeed sponsored jobs.

• 33:48Brian Preston?

  And they had the business figured out. I mean, this place was a well oiled machine. Corporate. But, but I looked around and I was like, man, culturally, I just don't know if I love this place. I mean, it just didn't fit into me. Um, and I think I shared with you guys, when my dad passed away, I only got to take like a day off work. I mean, and it's just, they, they just, their, their connection with family was different than my connection with how I process the world. So you need to also ask yourself, what is the culture of this place? Does, do I fit in here with this? And if you, if you ask yourself that. That's why I tell you, do the homework is because so much content I see out there is you have to career switch to know if you're going to get, if you're going to move up in the system. If Bo would have done that, that there's no other opportunity you could have come to that

• 34:33Brian Preston?

  would have done what has happened. Now, Bo's brilliance is, is because Bo is so good, he's so smart and he's so likeable. I was like, this guy needs to own a part of my business with me, you know, so we may became business partners. So I mean, I think that we all played off of each other very well, but I hate when people give blanket advices that you have to change two jobs to create out. But I think you have to look around and make sure you feel like there's opportunity. Cause you know, one of my dear friends, he was just doing door to door sales. And then he moved out to San Francisco and worked for in the tech industry for a while. And he's like, man, I would have never become who I am unless I took this. But I think it's the same, it ties into everything I just shared is because you need to be honest. Look at your,

• 35:14Brian Preston?

  your job. Cause we were talking to somebody, I just assumed everybody got three to 5% pay raises at least, if not even, because most job, most pay raises I got as I was coming up through my career were 10 to 20% every year. And I found out there's people who've been working jobs for seven years and they've got zero pay raises. And I'm like, no, that's, that doesn't work, you know? So, so be honest, go through a mental or financial triage of your life and say, what's the opportunity? Be honest with yourself. And if it stinks, go, go advocate for yourself, go find another job. But if you're at a place that's great opportunity, there's people ahead of you, you love where you work. Don't just change jobs for the sake because you read an

• 35:56Brian Preston?

  article or saw a blog post or watched a YouTube video. You have to make personal finance, personal, and really make sure you're doing this for the right purpose.

• 36:05Speaker 02

  Can I give a, just a quick, brief PSA for young people out there? When you accept a job or when you're looking for a job, I would also encourage you, begin with the end in mind, thinking through opportunity. I'm thinking about Brian, way, way, way back when we were going to hire our very first employee. Like it was literally me and you and administrator were going to hire our very first associate. And the person we were interviewing, she actually turned down the job because she got a different job that was-

• 36:30Brian Preston?

  You got $5,000.

• 36:31Speaker 02

  It was two, it was two, $2,000. The, the starting salary we offered was $2,000 less than the starting salary from this. That would have been like employee number three at this enterprise. And I just feel like it was very short sighted to, to, to not recognize the opportunity that was there for that. So if you find a really great opportunity, what that may mean in your circumstances, yeah, I might not be commanding top dollar, top tier, best salary. But if it creates a trajectory that's going to allow me to move along the course of life that I want to move along. That's okay. And I think a lot of young people are like, no, you've got to get as much as you can, as soon as you can, as much as you can, as soon as you can. And you can definitely do that, but it's going to be a fight.

• 37:14Speaker 02

  Whereas I think if you can find really great opportunities where you can actually build some longevity and put the time in and actually develop some expertise. I think those opportunities are out there too. And I just hate seeing young people miss out on that.

• 37:28Brian Preston?

  Well, and sometimes bigger, more established companies can give you better starting salaries. Almost to trap you in a way.

• 37:36Speaker 02

  Yeah.

• 37:36Brian Preston?

  Because that's why it's, you do need to think about what is, that's why, ask yourself, what does the opportunity look like? Three years? What does it look like? Five years? And if you really love the place, what does it look like 10 years? And does it fit into what you're trying to build for your life? And then if it does, you don't have to, you don't have to necessarily go create change to make yourself better.

• 37:55Speaker 02

  Yep.

• 37:57Speaker 03

  There you go. I knew you had something to say and we had a few questions about that. So.

• 38:03Brian Preston?

  It's Patrick.

• 38:05Speaker 03

  Thank you PJ Dad Life, AKA Patrick. We just heard not pajamas, not private jet.

• 38:10Brian Preston?

  These are the things we talk about.

• 38:12Speaker 02

  That's been a two week conversation here at the Money Guy Show.

• 38:16Speaker 03

  I was really hoping for PJ or private jet.

• 38:18Speaker 02

  Cause here's the stuff, like, I don't know if you guys know this, but, well, you do know this because Brian told you, he still reads every single book review that comes in on Millionaire Mission. Like we read the YouTube comments, we're out in the discord, we read the, like, we try to stay plugged in. So.

• 38:35Speaker 03

  It's impossible to see everything, but we do see some things.

• 38:38Speaker 02

  We do see some things.

• 38:40Brian Preston?

  You also can tell when I'm on vacation, because I respond to a lot more comments and then getting a lot of trouble with the, with the content team. Like, what are y'all doing? What are you doing? I'm like, oh, I couldn't help myself. You haven't seen all the ones I didn't respond. I wrote, and I was like, Brian, don't write. Don't hit that. Don't hit that publish.

• 38:57Speaker 02

  You want to see the ones I didn't. That's like, that's the math my wife, my wife does when she goes shopping. You should see all the stuff I didn't put in my cart. You should see all the stuff that I didn't buy. We made a ton of money today.

• 39:09Brian Preston?

  No, the, my, the, where my wife gets us on that is like, she'll go return $200 worth of stuff. And then because she only spent $220, she'd be like, I can't believe I got all this stuff for $20.

• 39:20Speaker 02

  Look, that's amazing.

• 39:21Brian Preston?

  You did not get all that for $20. You got all that for $220.

• 39:26Speaker 02

  We're about, we're about to go, um, we're going to the beach next week and, uh, and Jenna was like, hey, just so you know, you're going to see a bunch of charges come through, but I didn't know what size me and the girl needed. So I ordered like three or four different sizes. And so just so you know, all that's going, I'm like, if it goes back, so long as it goes back and it doesn't turn into exactly what you said, reabsorbed into the spend.

• 39:51Speaker 03

  Don't even get me started about shopping online.

• 39:53Speaker 02

  She watches all the shows, so I know she heard.

• 39:55Brian Preston?

  She doesn't watch any of these shows. That's why you know you're safe.

• 39:57Speaker 02

  She's super involved in the live chat.

• 40:02Speaker 03

  I hope one day she is.

• 40:03Brian Preston?

  By the way, I do want to give a shout out in a PSA. You know, I, I mentioned a few weeks ago that I had something cut off my face. And, um, no, seriously, it came back that it was precancerous. You know, because it was one of those things that, look, it's fine. I got it on the early stages, but I want to give a shout out to, to my PA.

• 40:22Brian Preston?

  She, she, she really did a great job of making sure, and she said, make sure you put on sunscreen. And I found out she watched the live stream, so I wanted to make sure I corrected after, you know, making some of the jokes I'd previously made.

• 40:35Speaker 03

  That makes it sound like you were just off the rails. Oh, man. You guys are fun. Okay. Speaking of fun, it's time to do our it does not depend rapid fire segment. Brian, are you ready?

• 40:49Brian Preston?

  Yeah.

• 40:53Brian Preston?

  I was going through what I just said, making sure, do I need to apologize now or later? Cause in three months, I have to go see her again.

• 41:00Speaker 03

  Oh, man. It does not depend. Rapid fire segment is where Bo and Brian have a combined 30 seconds to answer your financial question. But remember, they cannot say the phrase, it depends. You know, we've had some people calling out, you are getting creative and how you are saying, basically it depends. So I'm gonna have my antenna up today.

• 41:21Speaker 02

  The rule is you can't say it depends and we don't say that.

• 41:23Speaker 03

  Hmm. Okay, okay, okay. We'll see. And remember at the end, we will have a segment where they can say all the things that they didn't get to, if there's some nuance that needs to be clarified. So with that, let's get 30 seconds on the clock and dive in to question number one.

• 41:38Brian Preston?

  Okay.

• 41:40Speaker 03

  Is it better to pay for a used car in cash and drain my emergency fund? Or get low interest financing and make extra payments? I know mathematically lump sum wins, but I am wary of no emergency fund.

• 41:53Speaker 02

  I don't like people riding with no emergency funds. So if you must borrow, then that's okay. Try to get as favorable as a rate you can, either through the dealer you're buying from, or maybe through a local credit union. We don't love debt. We'd rather you pay for it, but that's why 238 exists. So you don't get yourself in a predicament.

• 42:09Brian Preston?

  You can't blow through all your emergency reserves. I'd rather you, if you have the ability, drive whatever clunker you're currently driving for another few months, so that you can keep reserves and pay cash. Otherwise, that's what 238 is for.

• 42:23Speaker 03

  Not too shabby, Brian and Bo. Next question.

• 42:27Speaker 02

  You're up.

• 42:27Speaker 03

  It says, I feel like I cannot get out of step two of the foo. My employer does a 25 cent match to every dollar without a cap. At what point do I move on to the next steps?

• 42:40Brian Preston?

  I mean, a good start is go to our website, moneyguy.com/resources. How much should I save? And you can, that, well, at least that way, if you're in your early twenties, maybe it's 10, 15% and then you can move on to get into Roth and other things. But you're probably gonna want to come back pretty quickly.

• 42:56Speaker 02

  Yeah, I'm not gonna do the public math on this, but 25% match up to every dollar that you put in there. That means that if you were to max it out at 24 or 5, there's just tons of free money that's gonna come your way. I think you gotta get as much of it as you can, because that's what's on the table.

• 43:12Speaker 03

  Maybe we'll come back to it, but that was a pretty good answer, I will say.

• 43:15Brian Preston?

  What if they got a credit card debt?

• 43:16Speaker 03

  Next question.

• 43:18Speaker 02

  It's 25, it's.

• 43:20Speaker 03

  We'll come back to it.

• 43:22Brian Preston?

  We might have something that broke the system.

• 43:25Speaker 03

  Next question.

• 43:26Brian Preston?

  They're paying 26% on that credit card.

• 43:28Speaker 03

  Should your dream or luxury home upgrade ever cost more than your total investable assets? And why?

• 43:36Speaker 02

  Has, has a dream upgrade?

• 43:38Speaker 03

  Should your dream or luxury home upgrade ever cost more than your total investable assets?

• 43:44Speaker 02

  I'm gonna, I'm gonna err on the side of no, I think. Is like home renovation, home improvement?

• 43:49Speaker 03

  Yes.

• 43:49Speaker 02

  Or buying the next home?

• 43:51Speaker 03

  It says an upgrade, so.

• 43:52Speaker 02

  I'm gonna think home renovation, home improvement, no. That's my answer.

• 43:55Brian Preston?

  No, because, I mean, I want to talk about this with a little more detail. But I would feel weird if you have a $2 million portfolio and you buy a $3 million house. It's because toys cost more than toys.

• 44:08Speaker 03

  All right.

• 44:09Speaker 02

  I just.

• 44:10Speaker 03

  We'll come back to it.

• 44:11Speaker 02

  But what if you had?

• 44:12Speaker 03

  Next question, next question. This is rapid fire. It does not depend.

• 44:16Speaker 02

  I'm making a note on that one.

• 44:18Speaker 03

  What is the best way to celebrate financial independence?

• 44:21Speaker 02

  You're up.

• 44:22Brian Preston?

  I would, I would immediately plan a trip or do something that gives you tremendous joy and excitement. And, and take some time to, to, in the planning stages to, to think about the journey you've been on.

• 44:34Speaker 02

  I, I think travel, a big trip is a great way to celebrate financial independence. But doing something you've never done before. So don't like, ah, we're gonna go, uh, we're gonna just go to the beach again. Go somewhere you've never done, gone before to have an experience you've never had before. So that way it really is like a monumental, momentous celebration.

• 44:52Brian Preston?

  Big family dinner.

• 44:54Speaker 02

  Too. Yep.

• 44:56Speaker 03

  It's a good one.

• 44:56Speaker 02

  Love that.

• 44:58Speaker 03

  Do I prioritize saving for a master's degree or investing in Roth IRA?

• 45:06Brian Preston?

  Is it me or you?

• 45:07Speaker 02

  Seventy-five. Roth, both.

• 45:11Speaker 02

  Roth IRA, you got, yeah, you gotta do the Roth. You gotta do the Roth. You gotta do the Roth.

• 45:16Brian Preston?

  Wait, it depends on your age.

• 45:17Speaker 03

  Ah, it does not depend.

• 45:20Speaker 02

  Staggum said it.

• 45:21Speaker 03

  You are disqualified and we will come back to it.

• 45:23Speaker 02

  Oh my gosh. I hope you're taking notes because we have a long segment of depending.

• 45:29Speaker 03

  Next question, I'm a state government employee. Should I use the Roth IRA my employer offers or go through Vanguard Fidelity, et cetera?

• 45:38Brian Preston?

  Is there a match?

• 45:39Speaker 02

  When they say Roth IRA, I wonder if they mean Roth IRA or if they actually mean like a Roth 457 or something like, like a Roth retirement account. Either way, one of the things we love is when you get to pick your own custodian, your Vanguard, your Fidelity, your Swab, you don't have to pay fees for that. You get to choose the investments, low cost, easy to access and portable.

• 45:56Brian Preston?

  Make sure though, if there's employer match, that you get in step two though. Free, free money from your employer is very, very powerful.

• 46:03Speaker 03

  All right, next question. How much weight should we give in employer's 401k match and HSA contributions when evaluating a job offer versus a higher base salary? Is there a rule of thumb?

• 46:17Brian Preston?

  I mean, I, I think that definitely base salary is more important than benefits, but you're crazy if you don't take into account free money when you're doing your full analysis.

• 46:28Speaker 02

  It's toppings to me. The salary and the trajectory and the opportunity, that's the main course. Then the benefits, employer match, HSA contributions, those sorts of things are the toppings. Now, if it's RSUs and options in part of your comp, that's different. But if it's just employer free money, toppings.

• 46:48Brian Preston?

  That's the frothy part.

• 46:49Speaker 02

  That's the frothy part.

• 46:51Speaker 03

  There it is.

• 46:52Brian Preston?

  Just for the bingo cards.

• 46:53Speaker 03

  Next question, is it okay to prepay our mortgage with a refi or recast if one spouse is stepping away from work and we will lose a lot of income?

• 47:03Speaker 02

  You need to determine where you are in your financial journey so that you know if prepaying the mortgage is going to inhibit you from reaching your other long-term financial goals.

• 47:16Brian Preston?

  Was it prepaying mortgage or, or taking a loan?

• 47:20Speaker 03

  They want to prepay a mortgage with a refi or recast.

• 47:26Brian Preston?

  I'm just gonna say depends, but essentially blow it up because there's so many variables I need on that one. I can't give a good answer.

• 47:34Speaker 02

  With a spouse walking away, it's not gonna make sense.

• 47:37Brian Preston?

  I don't want you to have him more debt.

• 47:38Speaker 03

  Over time, maybe we'll come back to it.

• 47:40Speaker 02

  No, they're talking about prepaying. They're talking about dealing with less debt.

• 47:43Speaker 03

  Next question. Since someone said the forbidden phrase, we're moving on to the next question.

• 47:49Brian Preston?

  I spiked the football to basically get more time.

• 47:52Speaker 02

  I hope y'all are ready to be here for two hours today for us to go through all these it depends.

• 47:54Speaker 03

  Oh, we'll get through it. Is it better to take a pension as an annuity monthly payment or as a lump sum one-time payment?

• 48:02Brian Preston?

  Oh, you can't even, there's no way you can answer that one without going through.

• 48:06Speaker 03

  Let's get creative, Brian. You're a creative guy.

• 48:07Brian Preston?

  Look, I'll pass.

• 48:10Speaker 02

  Lump sum makes the most sense when you've done the calculation to determine the net present value of the future cash flows in today's lump sum. You do the calculation, you determine which one has a higher net present value. You make the decision based on that.

• 48:23Brian Preston?

  Don't you feel like Charlie Brown? Because we couldn't, we can't give the details in 30 seconds on that.

• 48:31Speaker 03

  Brian, you gotta get back up again. You just said it depends one time.

• 48:34Brian Preston?

  By the way, they are now gaming us. These are all systems that should say, these are depend questions.

• 48:41Speaker 03

  That was a good one. They got them.

• 48:42Speaker 02

  You don't have to say depend. You just walk through A, B, and C. You know, you say all the things.

• 48:48Speaker 03

  That's right. Okay, last question. Best midlife crisis purchase, a convertible sports car or a vacation home? If it doesn't break the.

• 49:01Brian Preston?

  Oh, how much money you got in the bank?

• 49:05Speaker 02

  If you're a friend of mine, I'm gonna go vacation home because I will get more utility out of that midlife crisis of yours than I will out of your sports car.

• 49:12Speaker 03

  Good answer, good answer.

• 49:14Brian Preston?

  The car, the car's gonna have a limited burn rate on you, whereas vacation homes, you might find there's a lot more costs associated. So I need to know how deep your pockets are.

• 49:24Speaker 03

  That was a good answer, too.

• 49:25Brian Preston?

  Yeah, but that was a depend.

• 49:26Speaker 02

  It's more unlikely for the car to break.

• 49:28Brian Preston?

  That was a depend.

• 49:29Speaker 03

  You did it correctly, though. You did it great.

• 49:32Brian Preston?

  I did it properly, but it was a depend.

• 49:34Speaker 03

  You satisfied the rule.

• 49:36Speaker 02

  You're saying the quiet part.

• 49:37Speaker 03

  That's the fun of it, Brian. I was, I'm cool with how you answered it. I thought it was great. All right, that concludes our it does not depend.

• 49:44Speaker 02

  You tripped one time and then you were like, you were done.

• 49:47Brian Preston?

  Okay, let me, I can hit a few of these.

• 49:48Speaker 03

  We have a few, okay.

• 49:49Brian Preston?

  I think like the vacation car, vacation home versus car.

• 49:53Speaker 03

  Should we go in order, you think?

• 49:54Brian Preston?

  Okay.

• 49:55Speaker 03

  Okay.

• 49:56Brian Preston?

  Okay, we can do that. I'm sure I'll forget the point.

• 49:57Speaker 03

  I knew Bo would want to go in order. He was like, yeah, go in order, go in order.

• 50:00Speaker 02

  You said I'll forget the point.

• 50:02Brian Preston?

  I'll make this show go much faster.

• 50:07Speaker 03

  We had one where somebody could not get out of step two because they have a 25 cent match on every dollar without cap. And there was a lot unsaid. So what else do you want to say? Does depend for that person.

• 50:21Brian Preston?

  All knowing Bo, what if their credit cards at 26%?

• 50:26Speaker 03

  Yes.

• 50:28Speaker 02

  If I put in a dollar, that means you put, my employer puts in 25%.

• 50:32Brian Preston?

  It's also gonna probably have a vesting schedule to it. So there's, there's issues with that, too.

• 50:36Speaker 02

  Yeah.

• 50:36Brian Preston?

  Or is the credit, credit card company gonna hit you at 26% no matter what?

• 50:39Speaker 03

  Right away.

• 50:40Speaker 02

  My, okay, so now, as I'm having time to think through this, I want you to not have credit card debt. And I also want you to have an emergency fund, because I am thinking through, it'd be pretty, it'd be pretty negligent to not have, have an emergency fund. But if my employer were just like, hey, I can't wait to dole on you free money. I'm doing everything in my power to live as small as I can. And I mean, like, some really creative stuff. To be able to like do step two, raise through step three, raise through step four, so that then I can go back and load up that step to the full extent. Because if the employer just wants to like, give you money, man, I want you to be able to capitalize on that.

• 51:22Brian Preston?

  Well, that's why the realistic is that if you, if you're in your twenties, you'd probably go do the employer match. First 15% of your pay, and then that way you can pay off the credit card, get the emergency reserves. Didn't even potentially do your Roth because you're, but if you have a Roth 401k, you might go back to the 401k after you get the emergency reserves just because you could do the Roth 401k and get that free 25%. So it is going to modify. That's a very generous benefit that you'd need to plan accordingly.

• 51:56Speaker 02

  That's right.

• 51:58Speaker 02

  Hey, did you see Erin dropped in?

• 52:00Speaker 03

  I was just chatting with her.

• 52:00Speaker 02

  And she made a joke about a midlife crisis. Girl, you ain't midlife yet. You can't have a midlife crisis if you're not midlife yet.

• 52:07Speaker 03

  Fair.

• 52:08Speaker 02

  She not there yet.

• 52:10Brian Preston?

  I feel like you can say that to Erin because y'all are, y'all are in a similar stages of life.

• 52:13Speaker 02

  I'm not there yet.

• 52:15Brian Preston?

  But Erin, you know, she got some things, she's feeling it. She's feeling a little bit. She's got some good upgrades in her life and things going on. So I, I think she probably.

• 52:24Speaker 03

  And she said she bought a unicycle for her midlife crisis.

• 52:27Brian Preston?

  She bought a unicycle?

• 52:28Speaker 02

  Sounds dangerous.

• 52:29Brian Preston?

  Erin, don't hurt yourself. Because the body, it takes a little longer to heal the older we all get.

• 52:34Speaker 02

  Don't hurt yourself, but also make sure you film that and put that up.

• 52:40Speaker 03

  All right. We had, Bo had a note on should you, should your dream or luxury home upgrade ever cost more than your investable assets?

• 52:49Speaker 02

  And here's where I just want to, I want to be intellectually honest here because I agree with you. If you've got a $2 million portfolio, you should be wary, wary of going to buy a $3 million house. But like, what if you're upgrading and you've got like a $500,000 portfolio, but I'm thinking like around here, trying to buy a home in middle Tennessee. Like the way that home prices have increased, any second home, certainly in an area, you know, like, like where we have, the, the costs have just risen so much. I think a lot of people may find themselves in a million dollar home before they get to a million dollar portfolio.

• 53:23Brian Preston?

  That's a great qualifier. And that's a great depend in the fact that if you're like under 40 and you're like in the messy middle with kids, I could see how there's a point where yes, the cost of your house might exceed where your investment assets are.

• 53:35Speaker 03

  And you could still do that following Money Guy home buying rules. You could do 3525.

• 53:39Brian Preston?

  But if you're, so I'm willing to qualify that for somebody who's in their 30s in the, in the messy middle stage, you're trying to buy the house that you're going to raise the kids. There is an asterisk that I will say, but what I, I still hold true. I don't know how old this person was that was asking a question. If you're in your 40s though, and now you're doing it because maybe on paper for qualifying for underwriting, you look like you're upgrading for the sake of upgrading. And I see a lot of people in our area do that. And it drives me crazy. When I ride through the, I go do the tour of homes every year.

• 54:11Speaker 02

  I do too.

• 54:12Brian Preston?

  And I could, I could, you know, and I think about, I'm like, who is buying these? Cause I could afford these homes.

• 54:17Speaker 02

  Have you gone, have you gone to look at these homes?

• 54:19Brian Preston?

  I, I could afford these homes that we go look at in these tour homes, but then I always ask myself, and this is why I end up doing commercial real estate is because I'm like, wait a minute, I could buy this house for $6 million. But then I think about, do you realize the opportunity cost that I'm giving up? Those assets, my army of dollar bills, living in a six to seven million dollar home versus letting that money continue to build.

• 54:40Speaker 02

  Or a used asset versus an investment asset.

• 54:41Brian Preston?

  It, it just blows up in my mind how that, that's why I don't like the idea of buying the trophy piece.

• 54:48Speaker 03

  That's true. And this is saying luxury or dream home upgrade. So 3525 doesn't even come into play. There's still money guy home buying rules that apply.

• 54:56Speaker 02

  Yeah. Like if you're buying your dream home, you need to be far enough and long in your financial journey that the dream home is not an impediment to you being able to achieve your financial goals.

• 55:06Speaker 03

  Because like upgrading to have a house large enough to raise a family doesn't, isn't necessarily a luxury home. You know, I don't know.

• 55:14Brian Preston?

  The diminishing return on, on what luxury is gets so, so small. Unless you got an incredible view now. You put the ocean out there. You put a mountain scape over here. That, that's where a million, you know, I get, I get why people pay for that stuff, but you're going to find a diminishing return. Once you can buy the water pumps to give you instant hot water, those, that's not as expensive as you think. And you can have tankless water heaters where you have unlimited hot water.

• 55:40Speaker 02

  Yep.

• 55:41Brian Preston?

  You're going to find out that there's just, there's not much more that you're getting out of. It's just like, you think about.

• 55:47Speaker 02

  More square footage. That's what it is.

• 55:48Brian Preston?

  Like when you upgrade your phone, they got to a point that you just weren't getting the speed. They could tell you how much faster your phone was processing and you just didn't feel anymore. I'm telling you, it happens that way with. Upgrade. So that's why be honest with yourself on what you're really getting out of this luxury home, because it might be the opportunity cost is is too much.

• 56:09Speaker 03

  Yeah. So I don't know if there's a perfect answer there, but definitely be cautious is what I'm.

• 56:13Brian Preston?

  Well, I just want people, because I think a lot of you, you're like we are, we don't, we come from humble beginnings. You start having some success and you're trying to figure, nobody tells you how to be wealthy. And you're trying to figure out where's the balance from living your best life, but also squandering this money. And also, and this is, you know, some of the influencers I've talked to in our, in our, in our influence that were buying massive houses. I said, if you're raising kids, pay attention to that too, because if you want your kids having that traditional, I'm going to go down the street and play with my neighbors and, you know, and play in the woods and do all the stuff that is considered more in the past.

• 56:50Speaker 02

  Harder doing it.

• 56:50Brian Preston?

  If you live in a super nice neighborhood where everybody's 60 plus and they all living on two acre, three acre, four acre tracks, you're probably not going to get the same neighborhood experience that maybe you want to repress or push down the lifestyle out of choice so that your kids get the better raising experience. Cause you can mess your kids up by giving them too much and living in a weird experience too.

• 57:13Speaker 03

  Right. Well, Brian, there were two questions where you said it depends and didn't really end up answering. Do you want a shot to go back?

• 57:20Brian Preston?

  Was that again?

• 57:21Speaker 03

  One was, do I prioritize saving for master's degree or investing in Roth IRA?

• 57:25Brian Preston?

  Well, I think, you know, this goes back to in the beginning of your journey, your career choice is one of the most important decisions you can do. So don't go back to school. We've told you, education, I love education, but I'm mad at the institutions for how much more expensive education costs have gotten over just even inflation. So they don't have your best interests. So you need, it's on to you, buyer beware. Is the degree actually going to generate additional income for your family? Don't go off the brochure anymore. Unfortunately, they want your money. So pay attention, if it will really truly increase your earning potential over a lifetime, then that is very valuable to do. I mean, without a doubt, I wouldn't be who I am if I had not gotten the accounting degree.

• 58:10Speaker 02

  But you ain't got no master's degree.

• 58:12Brian Preston?

  I don't have a master's, but now I would have to, I would have to, I told. Jonah.

• 58:17Speaker 02

  Yeah, yeah, yeah. No, he had to go back.

• 58:18Brian Preston?

  I told Jonah would have been a year further in his career, but he was already, and I said, go back and get the master's so you can sit for the CPA exam. And I think that was good advice.

• 58:28Speaker 02

  It was great advice. I don't disagree with anything you're saying, but I would do everything in my power to fund Roth IRAs as early as often as I can.

• 58:40Brian Preston?

  Yeah, I love that.

• 58:41Speaker 02

  If it's between like, oh, man, I gotta write a check for this master's degree for $7,500, or I gotta put $7,500 in my Roth, I'm going to figure out how I drive Uber, I do Uber Eats, I'm gonna go figure out what I can do to be able to pay for that master's degree without sacrificing getting money in that Roth. Because I just, especially if you're young, if you're around the age that most people go pursue a master's degree, go to moneyguy.com/resources, put $7,500 into Wealth Multiply at your age and see what every single Roth contribution can turn into for you. Man, I would love for you to not miss out on that if you didn't have to.

• 59:21Speaker 03

  All right. Bo, did you have any other notes? And we talked about an annuity, taking a pension or a lump sum and prepaying a mortgage?

• 59:28Brian Preston?

  I can say one quick statement.

• 59:30Speaker 02

  Yep.

• 59:31Brian Preston?

  Every pension plan has different assumptions. When they design a pension, they have to put in what is their guaranteed rate of return that's built into it. There's also how well-funded the pension is. These are all variables. And a lot of times you'll find out is that they, when they come up with these early retire options, sometimes they goose them, meaning that they, they, they, they give you really good incentives because they're trying to offload the liability, then you should probably, in those situations, take the lump sum. Because if they've, if they've front-end loaded this by giving you a lump sum that's really over the top, but in other situations, we've seen where they made too good of a promise, and they have a tremendous amount of assets in the bank, so this thing's not gonna blow up, they're not going to the pension benefit guarantee corporation and getting out of the

• 1:00:16Brian Preston?

  obligation, then you should take the annuitized benefit. That's why it really does depend. This is our bread and butter. Don't just make assumptions. Do the math and sometimes people don't have the ability to do the math. That's where we come in and we help clients take it to a relationship to the next level.

• 1:00:33Speaker 02

  Yeah, it's really interesting. We've had clients, same age, same size portfolio, relatively same pension offering, different companies. One client, it made sense for them to take the lump sum. The other made sense to annuitize just because the pension were differently. Now, check this out. We've had clients for the same company, but they retired on different timelines. One retired five years before the other. Because of the way their pension plan worked, for one of them, the lump sum made the most sense and for the other, the annuitized. It is not something that stays constant in time. So what we tell people is when you're like four or five years out, do the math. And then do the math again three to two years out. Then do the math again one year out. And then do the math up till the day you have to make the decision on the pension. Cause it can change which one is most advantageous.

• 1:01:15Brian Preston?

  And there's also, look, the math gets really complicated because it's when you die with a pension, once it's annuitized, you don't, your beneficiaries don't get anything. So you have to take into account the higher withdrawal rate. Cause you're essentially, it's a higher, you know, you're burning through the assets.

• 1:01:31Speaker 02

  Taking it to zero.

• 1:01:32Brian Preston?

  Because you're taking it, you're dying with zero on those assets. And that, there's a legacy factor that we can build that into our analysis to figure out. So you can make sure you measure twice, cut once, and you know all facets of this complicated decision.

• 1:01:45Speaker 02

  And the last one that he wanted to start with was the thing about the mortgage. All I wrote was mort. I don't remember what the question was.

• 1:01:51Brian Preston?

  It was, should you, midlife crisis, should you buy a car versus a house?

• 1:01:55Speaker 02

  No, no, no, not that one. It was should you refinance to pay down the mortgage if your spouse is stepping away?

• 1:02:00Speaker 03

  Yes.

• 1:02:01Brian Preston?

  Well, I want you to be as debt-free as possible.

• 1:02:05Speaker 02

  Reread the question.

• 1:02:05Speaker 03

  Is it okay to prepay our mortgage with a refi recast if one spouse is stepping away from work? And will lose a lot of income?

• 1:02:12Speaker 02

  My spouse is stepping away, we're going down. So we're going to recap, we're going to try to prepay a bunch of money on the mortgage to get our payment down is the question.

• 1:02:23Brian Preston?

  Here's the problem, if you, if, if you do that, you lose access to that money. So if life throws any curveballs with you and the house is not completely paid off. You just, it's a riskier endeavor. Sometimes it's better to have money in the bank. And then that way, yes, you still have your existing mortgage payment, but you also have access to capital that you can pay down. Whereas the banks are very unforgiving if you, if you did anything wrong.

• 1:02:51Speaker 02

  I, and I don't want to pick a fight here, but in the comments all the time, we, I know we're going long, sorry, Reba. I know we, we get this comment all the time. Oh gosh, you always, I've never heard anybody say, oh, I'm so sad I have that paid for house. That's not true. We actually, you have an experience of someone that you had a conversation with, who said that very thing.

• 1:03:10Brian Preston?

  Yeah, she came to me, y'all have heard me tell this story before. I had a widow who unfortunately, her husband passed away. And I think she was in her 40s when this happened. And she came into some life insurance proceeds and a lot of people had come to her and said, just pay off your mortgage. And so she just paid off her mortgage because she got an invite, somebody saying, hey, just be completely debt free.

• 1:03:29Speaker 02

  Which is a noble idea.

• 1:03:30Brian Preston?

  And then she said, you know, and especially in our neck of the woods. And then, and she came to me and she goes, Brian, it was a disaster. She goes, because nobody told me how expensive it was to raise these kids without my husband's income being here. And I just got in a situation, she didn't have enough emergency reserves. She didn't have, there's a process before you write that check to the mortgage company that you go through is because the banks don't give you, when you're in a desperate situation, they, they don't get excited for you. They look their chops because they know that, hey, we're a house with a lot of equity, potentially is going to become ours again. Be careful with that. Sometimes you need to, that's why we have an order of operations. Is because I don't want you to run yourself so thin on the, the, the capital liquidity,

• 1:04:12Brian Preston?

  of, you know, having cash reserves and so forth, that you can't even pay the bills. And so this poor woman was in a situation, yes, she was debt free now, but she didn't have the money coming in to pay for her kids, to pay for the other stuff. That money would have probably, she needed a period of time, probably where she would have had this lump sum of money, several hundred thousand dollars, to help her figure out how life is going to work while she was making the monthly mortgage payments. And then, yeah, down the road, after she figured out how much is appropriate in cash reserves, how much she needed to live off of, then yeah, maybe you throw a little money at the mortgage to pay it down even quicker. But there was a lot of steps skipped just because it was easy to give advice of just pay off the mortgage.

• 1:04:50Speaker 02

  That's right.

• 1:04:52Speaker 03

  Wow, you really covered a lot of bases and financial mutants, you really stumped them in the rapid fire today. Thank you. That was good. A lot of stuff really did depend.

• 1:05:01Brian Preston?

  Just to close the circuit for me, it's easier on the midlife crisis or whatever.

• 1:05:06Speaker 03

  I knew it.

• 1:05:07Brian Preston?

  To buy a car, expensive car, because yes, that was versus a house, because there's just a lot more ongoing expenses to buying a vacation property. That's why you'll find a lot of people buy vacation properties and they realize, oh my God, this is a headache. I just went down to ours last week and immediately I have somebody who helps me out and comes and does stuff when I'm not there. I was like, the landscaper stinks. So, you know, I started trading tax, pool pump needed something. There's a mouse in there that I felt like wily coyote and the road runners, because I was baiting traps and the thing for some reason wasn't taking them.

• 1:05:45Speaker 02

  There's a mouse in the pool, not there's mouse in the house.

• 1:05:46Brian Preston?

  No, mouse in the house. So, I mean, there was all, all these things where you do vacation properties, just know that it, there's going to be curveballs, that it takes your time, it takes, even if you have somebody who helps you with this stuff, whereas a car, if you're going to go do a splurge, the car is going to be the easier of the two.

• 1:06:04Speaker 02

  It's gonna be the less, less risky likely.

• 1:06:06Brian Preston?

  Yeah. And I didn't really want a house, but I looked at how my wife, our life was being used. And I was like, okay, and it was a good purchase. And even with all the headaches of a second house, it fits my life very nicely.

• 1:06:18Speaker 03

  Yeah. All right. Really good thoughts. Thank you for all of the questions submitted today. Thank you for joining us for the live stream and we'll be back every Tuesday at 10 a.m. Central time. And until then, be sure to check out moneyguy.com/resources, where we load you up with free calculators and downloads about tons of the stuff that we've talked about on the show and more. So be sure to go check that out. Moneyguy.com/resources.

• 1:06:42Brian Preston?

  I mean, I don't know if anybody's left because we've gone over, but I mean, everybody's probably have to get back to their day job. But I, hopefully you can tell from the way honesty and transparency we flow through on the show. We come from humble beginnings, but we try to tell you the way money really is. I don't think there's a lot of people that are out there doing that. And that's what, that's our promise to you guys. We love, that's why we've created the Financial Order of Operations. We want you to be able to use money, this tool of money and do it that much better. And that's why we get really excited about creating this type of content. I'm your host, Brian, joined by Mr. Beau, Rebby and the rest of the content crew. Money Guy out.

• 1:07:16Speaker 02

  Happy birthday, Jake.

• 1:07:17Speaker 03

  The Money Guy Show is hosted by Brian Preston and Beau Hanson. Brian and Beau are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities, laws, and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through The Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial, tax, investment, or legal advice. All investments involve a degree of risk, including the risk of loss.