Afford Anything - Ask Paula: Am I Saving Enough For Retirement?

Episode Date: May 10, 2023

#440: An anonymous caller wants to retire and travel in 20 to 30 years. How does she know if she’s saving enough? Trace plans to take a mini-retirement next year. Where should she keep her savings until then? Samantha and her partner have lived out of their truck for 20 years. They sorta-kinda feel ready to buy a house and settle down. But they’re hesitating. What if they hate it? “Barbara,” an anonymous caller from Episode 422, is struggling with a scarcity mindset. How does she stop worrying about the future and build the confidence to enjoy life now? Former financial planner Joe Saul-Sehy and I tackle these four questions in today’s episode. Enjoy! P.S. Got a question? Leave it here. For more information, visit the show notes at https://affordanything.com/episode440 Learn more about your ad choices. Visit podcastchoices.com/adchoices

Hey, Joe, do you remember Barbara? Barbara Walters. Barbara Walters. An anonymous caller, you nicknamed her Barbara Walters. She just did something that I love, love, love, love, love, and strongly encourage. Bought us donuts. Ooh, well, I do love that, too, but that's not what she's done yet. Oh.

She called with a follow-up, which is amazing because so many times, Joe, you and I answer calls, and we have no idea how. Our responses affected the listener. But we are about to hear from Barbara to find out exactly what impact our answer made on her life, her money, and her choices. Fabulous. This is the Afford Anything Podcast, the podcast that understands you can afford anything but not everything. My name is Paula Pat. I'm your host.

Every other episode, we answer questions that come from you. the community, and my buddy Joe Saul Seahai joins me for this. Joe, today, let's begin with a quick refresher on Barbara's original question. My husband co-w owns a business, and we've been going back and forth on whether or how to include the possible lump sum payout from a sale in our financial planning. We prefer to be conservative in our plans, which is why we haven't included it in our numbers, but we're also having a hard time enjoying the present since we know we have close to a decade to go if the sale doesn't go through. What are your thoughts in our situation?

Should we be less conservative today with the possibility of this sale on the horizon? Should we stay the course? Or maybe there's an alternative perspective you can offer. And we have now heard back from Barbara. Among other things, she raises a topic that we don't discuss on this show enough. Scarcity Mindset Hi Paula and Joe, this is Anonymous, aka Barbara from a recent Ask Paula episode. My husband and I really appreciated your thoughtful responses and questions back to us

around including his potential business sale and our net worth. It turns out that was a loaded question. I laughed and even cried a little bit listening to that episode. In reflection, I think we're suffering from a deep-rooted scarcity mindset because of financial insecurity in our past and because of our families. and my husband is experiencing burnout from running a business that he can't back away from. I promise we're not miserable. We lead a wonderful love-filled life surrounded by two sets of parents and an abundance of close friends. We even made the decision during COVID to move closer to a place

we love at the beach. I like the work I do and I've already made the career change you referenced. I'm planning to solve for the two parts of my work that I don't like with a future job change. We're trying to do everything in our power to not end up in the financial situations that both sets of parents are in, which is why we prioritize saving and investing. We also want to be able to help our parents financially while not sacrificing our future. You ask what we're working for, providing more financial support for our parents, getting to the point where we can choose to work or work part-time, and generally not feeling stressed about money. Our ultimate dream, though, is to buy a piece of land with a house. to live in, and a barn, which we would convert into an event space. Seriously, that's what keeps us motivated. We're on track to be Coast Phi at the end of 2024, meaning we won't need to

contribute anything additional to our retirement accounts. At that time, we'll also have a brokerage account with roughly 400K in it. We're debt-free and currently rent a charming and affordable cottage by the beach. We have a meaty emergency fund and plenty of cash on hand for a reasonable down payment in our medium to high cost of living area. While we'd be most comfortable taking the conservative approach and waiting until the end of 2024 to increase our spending, I'm curious to hear your thoughts on that plan. Are we letting fear hold us back too much? Are we not prioritizing happiness enough? How can we build the financial and emotional confidence to take action now instead of waiting? Thanks, as always, for your guidance. Barbara, thank you so much for update

us on your question and on the thoughts and emotions that you've had since then. I love these follow-ups. I love the opportunity to develop ongoing conversations. And you said one thing that particularly stood out to me. And then you can tell it resonated because I said it even as I was cueing up your message. And it was when you talked about scarcity mindset, it strikes me that you know, you know, what keeps you motivated. It's that event space. The dream of that event space is the thing that gets you out of bed in the morning. It's the thing that keeps you motivated. It's the thing that brings you

happiness. The idea of creating that, of bringing it into the world. And so my response to you is very straightforward. When it comes to spending money or loosening the reins, it sounds like it's not superfluous spending. It's not a few extra sushi dinners a month that's going to bring you happiness. It's building that dream. So orient everything towards that. That is your North Star. I think that's the key.

In fact, it's funny. I was just speaking today with a guy who I gave advice to five years ago, Paula, about his career. And I thought that he should make the move. and he was so afraid. He thought that it was imposter syndrome, which sometimes, or he had this severe imposter syndrome, which I think sometimes is related to a scarcity mindset, right? That I'm not enough.

I don't have enough and I'm not enough. And I feel like you just have to do it. So I'm there with you. You have to do the thing because, like I told him, he was, by the way, writing me, telling me what a great move it had been. And five years ago I had told him he should do this. And it was one of the best moves he'd ever made. but then I wrote him back and said, that was more advice for me than anything.

There's never been a time when I delayed this thing that I really wanted to do, where I looked back and went, man, I'm glad I didn't do that. I didn't do that thing I really wanted to do until five years later. Sometimes you just got to go. That's incredibly insightful. The link between imposter syndrome and scarcity minds that I have never, I've thought separately about each of those topics, but I have never synthesized the two. But aren't they so similar? Yeah. One is the who and the other is the what?

Yeah, around the same pivotal question. Yeah. Exactly. Yeah. I think that, you know, Barbara talked about her husband's burnout or being worried about burnout from running a business he can't get out of. Sometimes I feel like it's because you're working in a job. And, you know, she talked about how much they love what they do and they're in a good

place, which is what we were questioning before, the fact that they are. But I feel like sometimes, Paula, the burnout comes. less from the job, but from this dissatisfaction between doing a thing that is okay and good, but not being the thing I'm really chasing, you know? How many times you've been in a situation where you're like, this is fine. There's nothing wrong with it. Well, then why do I feel affected by it? Why do I feel like I just don't want to get up for it the next day?

Like, everything's okay, but it just doesn't, it's not the thing. It doesn't light me on fire. So you know in dating, like have you ever been in a relationship that makes sense on paper? Yes. Yep. It's that but for a job or for a business. They actually had a callback recently on the hit show Ted Lassow to the owner of the team and a guy she had dated for a while that they talked about this very thing. The guy was perfect on paper. Everything, he was great. He was fantastic.

Super great toward her. They made a good looking couple. and didn't do it. Yeah, some jobs, careers, businesses, some paths in life are like that. There are many, many paths in life that make sense on paper. So I think, Paula, we go back to the beginning. She knows what she wants. I would just organize everything around how do I make that happen.

Exactly, yeah, make that the North Star. And the beauty of having a North Star, having such clarity around it is it makes all subsequent decision-making. far easier because there's one singular guiding light around which every question falls. Will this bring me closer to that dream, which is the event space? Will this bring me closer to that or not? And every decision falls in line from there. Joe, I'm going to talk about all the off-topic limits today, right?

It just brought up dating. Now I'm going to switch to religions. So I raised Hindu, went to an all-girls Catholic school. I'm fascinated by religion. In fact, I wrote my master's thesis on religion, which is why this is top of mind for me right now. I wrote it on the intersection between religion and immigration. That's a different topic for a different day. One thing that I've learned from being around devout practitioners is their level of respect for a calling.

right, if you have a calling, then that's your calling. And it doesn't matter what your parents want or society wants or what you think you want, right? If you've got a calling, you've got a calling. And you have to answer it. And I think that's a lesson that regardless of what your faith is or if you have any at all, I think that's a lesson that could benefit everyone. Barbara, I don't have anything else to tell you. You have such a clear North Star that I think that's your answer.

Thank you for calling in with that update. My message to anyone who has previously had one of their questions aired on this show, please call in, send us an update. That sense of continuity is everything. So thank you, Barbara. And let us know when you opened the event space. Ford Anything Meetup. Ooh, yeah.

Oh, I love it. Okay, you heard it here first. All right, well, thank you, Barbara. We'll come back to this episode after this word from our sponsors. Fifth Third Bank's commercial payments are fast and efficient, but they're not just fast and efficient. They're also powered by the latest in payments technology, built to evolve with your business.

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for up to 70% off. That's W-A-Y-F-A-I-R.com. Sale ends December 7th. Our next question comes from Samantha. Hey, y'all. I think we have a pretty unique situation. We are in our 40s and we live a sort of different lifestyle. We have either lived out of our pickup truck or a van for the last 20 years. We do work contracts across the U.S. or often in the middle of nowhere. And so we'll sort of work for a few months and then that contract will end and we'll take off and go. on national parks or travel internationally. I think financially we're actually in a pretty good place. We have no real debt, which is pretty sweet, and we love the freedom of being debt-free.

It's awesome. There is nothing like it. We have about 600 in retirement accounts. We have three rental properties that we own free and clear, and they're in great places that we love, and we love our tenants, and it's so easy to be landlords in those places, and those profit about $40,000 to $60,000 a year. One of them is a short-term rental. That's what the big discrepancy is. The other two are long-term, and we love them. Our income varies is anywhere from $80,000 to $400,000 a year. I'm not kidding. And then we have working towards potentially saving for a house for ourselves. We have about $350,000 in savings, including what I would call an untouchable $50,000 emergency fund. We do not have a primary residence. We still use our husband's house for mail because they're awesome at getting it to us

and we're just on the road all the time. We found a place that we really love and that we would want to settle down in someday. We actually bought a piece of land there before the pandemic. The problem is it's incredibly expensive. It is $500 a square foot for even the most simple square box. And that's just how it is. We've called everyone. We've been trying to work this out for years. It's either we do it for that price or not. So that would be about $500,000 to build a thousand square foot place. We would have to take out a mortgage or a helock for about $300,000 to finish that, we think. We love it there. It's awesome. But now we're getting cold feet on building it at all. There's nowhere else we want to settle down. But what if we don't want to actually settle down yet?

Yeah, it's really hard to get inventory in that place. There are only about five houses for sale and they're all above a million dollars. Our life goals are to work less. But eventually, we want to be part of that community and we love it and want to spend more time there. Yeah, we hate debt because we love the freedom of our work ending and just we're going to Southeast Asia for a couple months. But it also seems like our future selves would be pretty psyched to have this house paid off in five or ten years. I don't know if that's a weird question. Could you help us figure out what we want? Thanks for all you guys do.

You really are the best. No, you're the best. That's my response to that, Samantha. You're the best. Yeah, totally. Samantha, I love your lifestyle. That sounds like so much fun. My answer here is super simple. From a financial perspective, from a sheer money, dollars perspective, this is a slam dunk. Do it now. Yeah, absolutely. I mean, you know for sure, if you were to settle down anywhere, it would be there. So there's no risk that you're not going to like it, and then you're going to bear a bunch of transaction costs associated with getting out of the deal, right?

So like the certainty and stability of if anywhere then here, that is established, the fact that all the other properties in the area are selling for a million plus. So you'd have the cheapest and newest property in the area, maybe also the smallest, but the cheapest and the newest, awesome. awesome, awesome. You want the cheapest house in your area. That's exactly what you want, the cheapest house on the block. She also has experience renting it out if she decides she doesn't want to settle down right away. She's already an experienced landlord. You know, we tell sometimes some people we, you might like being landlord, you might not. And that's going to depend on who you are. She already does it. So until she's ready to settle down, she could rent it out. She could bring in money. And if it's a desire, for her, Paula, it's desirable for a reason. A lot of people want to go there, which means that should be also a slam dunk rental market, I would think. Maybe, yeah, maybe. And Samantha,

you would know the answer to that much better than we would. And then the other thing is, Samantha, your income fluctuates between 80,000 to 400,000 a year. This house is going to be $500,000. That's not that much more than your highest earning year. So from every, from every every financial angle, this is a total slam dunk. But as you said, you don't know if you want to settle down. And maybe you don't want to settle down enough to oversee the building of a place, right? Because that's going to take a while. The design, the build, the permits, the blah, blah, blah, blah, blah.

It's a huge headache. It's going to take some time. It's going to anchor you to the space. So maybe it's a yes but not now. Oh, maybe it's a, hey, once we build this, we don't want to rent it out. Like, this is our dream home. We kind of want to keep it just for us. Awesome.

You certainly have the budget for that. That's not a problem. But if those are reasons that building this now would make you feel tethered. And there's a distinction between feeling tethered versus technically being tethered. Because there are going to be a bunch of people who are like, but technically you could do this, do that. Sure, yeah, logistically, you might not necessarily be tethered. But if the emotional truth is that you feel tethered, then that is your experience, right?

That's how it's going to feel for you. That's what it will be. And so if you don't want to feel tethered and if you think that there is a risk that building this is going to give you that feeling, that claustrophobic, oh my goodness, I'm chained to this project feeling, if that's going to be the emotional truth of it, that's a valid concern. I look at this a couple different ways, Paula. The first way I look at this is if they did decide to go ahead and build today, what is the cost of being wrong, right? If they are wrong, what's the cost going to be versus what's the cost of them not making the move?

So let's go through those. Let's say that they miss out on this opportunity right now and the price continues to go up at the same rate of inflation. It's just going to be the same cost as it was today. And their money that they're piling, though, might be growing at a lower rate than inflation. So it's actually going to cost them some dollars that way. On the other side, if this is a hot place and there's very few places for sale, they build it, they turn around and they sell it. Well, then they have the transaction cost. So I don't think that the cost of this decision is as big as she's building it up in her head.

I feel like the downside either way is not as big as it is in her brain. Right. Exactly. And certainly it's possible that labor materials associated with home construction might outpace inflation. Could, sure. Yeah. You know. Yeah.

But at the end of the day, if she's emotionally, psychologically, mentally, spiritually, not ready to build, because that is going to be a commitment, if she's not ready, then she's not ready. And so going back to dating, using that as another analogy, right? You know how sometimes it's like you're ready or you're not? And if someone tries to force you when you're not ready. It makes it worse. It makes it so much worse. But I just think, Paula, there's a way for her to date this house. I really do.

I think that she can look at this the same way she looks at her rental properties and she's just adding another rental property. And this one, they might want to live in the future. That way they're dating, right? She can date this property, I think. There's a valid opportunity there. She can slow dance with it for a while. Yeah. She can take it out for a nice Italian dinner.

And if that's the case, then Samantha, when you are building, when you're making all of those decisions, make those decisions based on what you want, not based on trying to force the property to make sense from a rental lens. Because as I teach my students in our rental property investing course, when you're buying a home purely, purely for the purpose of that home being an investment, then it's entirely a spreadsheet-based decision. And when you're buying, or in your case building, a personal residence, then it's in no way a spreadsheet-based decision. It's entirely something that you're doing for personal consumption. And so where a lot of people get conflicted is when a property serves the function of a hybrid of the two, whether that's because people plan on house hacking or they want a vacation home or they want something for their aging grandparents. anytime people try to make a property a hybrid of the two, it often ends up doing neither well. And so never try to hybridize a property.

That doesn't mean it can't be used for both functions. It means that when making decisions about the acquisition and the renovation of that property, you make those decisions from a lens that is pure one or the other. So she would build that property for her. Yeah. The way that she wants it and then rent it out. Exactly. And don't give a rats behind about its ROI, what's the cap rate.

Right. Who cares? Right. Because that's not the point. You're just decreasing your holding cost. Yeah, exactly. Until you make your ultimate decision. Are we going to get married to this property?

Precisely, precisely. And so, Samantha, if you use this as a rental property, don't stress yourself out about feeling as though it needs to fit any parameters you have around what's the cap rate, what's the internal rate of return, what's the net present value of this property. Don't make it fit any of those formulas, which you would do and you should do on, you know, some duplex that you're buying in Indianapolis. Sure, yeah, because I'm never going to live there. I'm not hardly ever going to even visit it. maybe once every three years for a weekend, right, just to make sure it's still standing. You know, when you're making those decisions, yeah, that's a formula-based, spreadsheet-based, math-based decision. Don't try to make your dream home fit into that box.

Build it in the way that you want to build it, and then offset some of those costs by letting someone live there. If you decide to build now, it's also perfectly valid. You already own the land. So it's also perfectly valid to just keep holding onto the land, keep stockpiling money, and then when you're ready to build, do it. And yes, the costs might go up at that time, maybe only at the rate of inflation, in which case it's a wash, maybe at greater than the rate of inflation, in which case, sure, yeah, you lost a little bit of money, but you gained a little bit of life.

So that's a wash too. again, I don't think the opportunity cost, if we did some hard calculation, is going to be as big as she thinks it's going to be. I don't think it's going to be that huge. You know, the other way I think about this, and before I get to it, I just love her aversion to debt. It is so great, especially with her lifestyle. I mean, wanting to continue that flexibility, I think, gives her a powerful place to work from that a lot of people don't have. A lot of people have to go to work tomorrow because they've got these huge debts they have to pay. And these huge bills and the fact that she can go from place to place and do what she wants is a testament to that living. I think that if she does it now, she could obviously make a plan to then very quickly pay off this debt. So she gets back to that position. And based on everything that she told us, Paul, I don't think it's going to take that long. It certainly doesn't seem to me that if she built today, that it would take that long to get there. But the fact that she's so conflicted, there's another stress.

that I truly like when somebody's not sure which way to go, they don't know what to do, take a coin out and flip it. And then before you look at it, ask yourselves which one you were hoping it was when you were in the air. I do a slightly modified version of that. It's I flip a coin. and then I pay attention to how I feel about the result. Yeah. When I was a financial planner, I would flip the coin,

and I would ask them which one they were kind of hoping for, and then I put the coin in my pocket. They're like, wait, I want to see what it was. I'm like, it doesn't matter what it was. Right. I tell myself, like, okay, I have to do however the coin toss lands. Like, I tell myself that, I convince myself of that. If it lands on heads, I got to do X.

Lands on tails, got to do Y. cannot deviate, must do what coin says. I tell myself that I flip the coin, I get the result. And immediately, there will be a bodily feeling, like either enthusiasm or relief or disappointment. Like there will be a visceral feeling. And that's how I know. Well, yeah, we respond to deadlines. I asked Don Hahn, who was the producer behind Beauty and the Beast and a lot of Disney movies,

I said, you're working with these great artists. He used to be an artist himself. He was a Disney Imagineer. Now he's the guy holding on to the purse strings. I said, does it feel weird being an artist and not being able to just give these artists everything they want? You got to tell him no. And he said, an artist without a deadline gets nothing done. I think you can take the word artist out of that. I think deadlines are great for decision making. And all that that trick is with the coin whether you do it the way you did it the way I do it is it just creates a deadline. The deadline is now. And we're going to live with whatever the decision is.

And then you know what you want to do. Right. So Samantha, there's your answer. Flip a coin. We could have just said that, Paula. It's such a shorter episode. Flip a coin, Samantha. Next caller.

That would be a great April Fool's Day episode. We should. Can you imagine? We'll just answer every call like that. We'll air like 27 calls in the span of a single episode. All right. Well, thank you, Samantha. And please call us back with an update and let us know what you decide. We'll return to the show in just a moment. Our next question comes from an anonymous caller. You, Paula, are getting close to the finish line for people that, are new to afford anything, you don't know that Paula and I, whenever we get an anonymous caller, we give them a name. We assign them a name. We don't like talking to anonymous people. We want to know who we're talking to. Right. Like Barbara, quote unquote Barbara is technically an anonymous caller,

but we nicknamed her Barbara after Barbara Walters. And so this year with Paula's pursuit, we are diving into the world of journalism and naming people after professional journalists. So which journalist are we going to honor through this pick? Well, as listeners who afford anything, no, not only am I devoting this year to doing this deep dive in journalism, but also I am Nepali. I was born in Kathmandu Nepal. And so I want to honor a Nepali journalist named Uma Singh,

who was murdered at the age of 27, by as many as 15 people who attacked her with knives. She died of multiple stab wounds in Nepal, and it is suspected that the work that she was doing, as a reporter, the light that she was shining on issues of importance, motivated her killing. So as a token of respect for her and for all the journalists who risk their lives,

particularly in countries that do not have strong rule of law or that have high levels of corruption, in honor of all of them, this next caller will be named Uma. Hi, Paula. I'm calling in about a retirement question. I'm a federal employee, and my husband splits his work time between a part-time federal government job and a part-time job running his own LLC doing project management type work. My salary is $161,000 and my husband makes approximately $85,000 a year with the opportunity to increase if he takes on more clients for his LLC. I am 33 and he's 39. We're both maxing out our TSP traditional retirement accounts as of this year, which means we've started putting in $22,500 per account for the year with a 5% match from the federal government. Currently, I have just a

over $100,000 saved up in my retirement account, and he has about $70,000. We have two children, both under five years old. Because I have a decent amount of student loans and am eligible for the Public Service Loan Forgiveness Program, we file separately, which makes it difficult for us to contribute to a Roth. This should change in about two and a half years when hopefully my loans are forgiven. We do plan on contributing to a SEP IRA, but it's unclear as of this year exactly how much will be contributing. I have two key questions. First, when considering our retirement goals, how should we take into account our pensions? Are they reliable enough to count on as part of our overall plan for retirement? Second, how do we figure out how much we need to save for retirement

in order to maintain a lifestyle that allows us to travel frequently and live comfortably? Think a light version of fatfire. Third, how do we determine if we are on track to save enough for retirement. Assuming a 7% rate of return, no salary increases, and a continued contribution of $22,500 per year for each of us, I should have $2.5 million by the time I turn 59. My husband should have about $1 million by the time he turns 59. I'm not sure yet if we will have a mortgage at that time. Our current mortgage is about $2,500 a month, and we may not be done with the 30-year term quite when we turn 59. We're trying to decide if we need to increase the number of years we work

or if it would be feasible to retire slightly early for both of us if we save enough in a separate brokerage account. However, we're having difficulty figuring out how the pensions play into our considerations as well as how we need to save and exactly how much we need to save in order to be successful. Thank you. Umah, thank you for your question. A few things right off the bat. Number one, I love that you are taking such great action towards retirement savings. And I wouldn't worry at all about the fact that you can't contribute to a Roth account right now. I know if you've listened to this show, you know how much I love Roth accounts. But the benefits that you're getting as a substitute are so much better that, Having to wait for another two and a half years, three years before you can contribute to a Roth IRA is small details. It's a small price to pay.

To your question, your second question of how much will you need. You know, as you said, you're 33, your husband is 39. This is the inherent challenge of all retirement planning. Necessarily when you're trying to make predictions about what a given lifestyle will cost decades in the future. It's anybody's best guess. Even Joe, as you're a former financial planner, as you can attest, even financial planners, even AI that does financial planning. Like, even our best humans and our best tech cannot predict how prices will rise for different commodities, for different services in different geographic regions, and cannot predict how markets will perform. and this is a time in particular of so much rapid change

that imagining life 20 years from now is all but impossible. But what we can do is calculate for a range of options based on historic information. It's an imperfect science, but it's the best we have. And so, Uma, what I want you to do is test drive the type of lifestyle that you're talking about, you described it as just a little less than fat fire,

a moderate version of fat fire. Can you test drive that for a month or even for two weeks? Can you test drive that lifestyle as a vacation? And get a sense of what your day-to-day is like. Get a sense of what the spending is like. Build a budget for what you think in today's dollars, what you think you would be spending, if you were to live like that today.

And once you know that, once you have your budget in today's dollars, then it's a simple math equation of, you know, assuming X percent inflation, what is that going to be when I retire? And assuming Y percent market performance, how much will I need in order to build out a portfolio that is at a minimum 25x my annual spending for that time? I actually like a lot of the retirement calculators that are out there for this, Paula,

but especially because to Uma's point, the pension is going to become more and more important the longer that she and her husband work for the federal government. You do want to calculate the pension. You're going to have to calculate a number of years, and you can get some easy pension estimates from the government website. It's super easy to get. when I was a planner, we would get these all the time. What do we think that the pension's going to look like later on? Those are going to be forward estimates. And if you leave before the number of

years, your pension will be different. So it may actually make sense to work with a calculator, base it on you're leaving soon, the amount that the pension factors in. If you left today, how much would that give you and your husband every month? And then a few years from now, do it again. And that'll be a much bigger number. Or if you're really sure you're going to be there for the full duration, well, then you can use a much, much bigger number for that pension calculation. I like what Paula, you're saying about starting off with the lifestyle, see how much then that the pension will cover of that pension and social security.

And then when you are through, there's probably going to be in some years a deficit that your portfolio is going to have to make up. and that will tell you how much money you need to have in those accounts. So you start with the end product. This is the lifestyle that I want. This is what the pension's going to cover. Here's the amount the pension won't cover. What's the net present value of that number?

So I take that number and I run it back to today. That gives you the amount of money you need to save. And Joe, that also answers the first element of her question, which is absolutely count the pension. Yeah. If it were a pension through a bank right now. Oh, oh. Oh, ooh. What, too soon? I'm telling Daddy Diamond on you. Is it too soon? Too soon to be busted on banks. If it were, if it were from a shaky industry, you know, like banking, it's not a cornerstone of our. Oh, I was going to say twist the knife, but then I just remembered we've named her Uma, so I can't say that. Oh.

Well, that might be, that might make it even worse. Okay. We're too soon now on many fronts. However, we've gone off the rails. But the big point there, Paula, is because it's the federal government pension, absolutely you count it. 100%. Because the only way in which you wouldn't receive that money is if the government goes bankrupt and defaults on its pensions. And if the federal government goes bankrupt, we all have.

have way bigger problems. Yeah, agreed. Yeah, that is the collapse of society as we know it. There's a website of pointing people to here several times. It's our friend Chris Mamula, his website, can I retire yet, has a wonderful page full of calculators, some that you pay for, some that you don't, a calculator that I really like and that we recommend on the Stacking Benjamin show is the new retirement calculator. That one's going to be a little more expensive. And of course, Paula, if she wants to make sure those numbers are right, this might be worth hiring a financial planner for a couple hours, you know? Find a fee-based hourly financial planner. Do this work for her with her, whatever it might be.

And maybe look at the big picture that way. 100%, Joe. And, Uma, you're, in terms of retirement planning, you're in a stronger spot than most because have you heard of the concept of a three-legged stool? So the three-legged stool is social security, pension, and then private savings, such as your investments. Oftentimes, people don't have pensions. The fact that you and your husband have access to a pension and the fact that it comes from the most stable possible entity. And that's what Joe's driving at earlier. It's not a pension that comes from Blockbuster Video or Bedbath and Beyond, something that conceivably could collapse.

But not a bank. Ouch. Joe, did you hear the first 18 minutes of my most recent episode? No. No, seriously. Go listen to the first 18 minutes of the episode that aired right before this one. You'll see why I'm wincing. That goes for all y'all.

Go listen to that intro. It's the intro to the encore episode with the Michael Kitts. Just listen to the first 18 minutes. The First Republic Bank story is one that. that I have been tracking very closely. And the turmoil in the banking sector, man, all I can say is that lack of public confidence becomes a self-fulfilling prophecy. Especially in banking.

Ooh, yeah. Especially. Anyway, listen to the first 18 minutes of the episode that aired right before this. And you'll get it. So, Uma, I hope that helped. To summarize, include the pension. and run a handful of scenarios with different assumptions about return and about lifestyle expenses. But I think for you, the first thing that I want you to do, the biggest thing to figure out is to try to hone in on the cost of that lifestyle in today's dollars.

Try to hone that in to the most clear extent possible. Because once you can tighten the range of what that is in today's dollars, then that'll make every can. calculation substantially more clear. So thank you, Uma, for asking that question. Our final question today comes from Trace. Hi there. My name is Trace. I am 27 and I live in California. I am looking for advice on where to store some funds for my mini retirement. I'm planning to take a mini retirement on the next one to two years, most likely starting in February of 2024. And I have saved $8,000 of the $25,000 that I plan to save for that. This is going to be outside of my emergency fund and my regular investments borrowing K, all that separate fund. I currently have those

assets in the ally high-yield savings account, but knowing that I'm going to start drawing from it at the earliest summer of 2024, where do you recommend storing these funds for a short period of time totaling 25K and still allowing them to work their hardest? I look forward to your response. Thank you so much. Trace, thank you so much for your question. Given that you need to tap this money in 2024, you're going to want to keep it in cash. Where you've got it now, Ally Bank, is as of the time that we're recording this, paying around 4% for a money market account, 3.75% APY on an online savings account. That's a fantastic rate. I'd leave it there.

For the sake of other people who are listening, Apple just opened a savings account with, Goldman Sachs, they're paying 4.15% APY on savings as of the time that we're recording this, which is Friday, May 5th, 2023. Knowing that she doesn't need this for one year, if she's able to find a one-year CD that pays higher, I don't know, Paula, maybe she does that, but I'm with you. I think this is the best place to have it because if she ends up needing it later, then she can get at it. She puts in a CD. She can't. I'm looking at deposit accounts.com. right now, 5.1.9% APY. It says is top 1% of CDs, one year CDs, by the way, currently

national average on CDs as of today, 3.17%. So not a lot to see here. Right. Savings accounts, top 1% 4.18%. National average, by the way, 0.38. So she already has it an ally. If she makes sure that she has it in their money market account, I think she's going to be great. And the thing about ally is since ally's been around i was going to say since the time i've had a podcast paula but seriously since the time allies based in detroit i'm from detroit i've followed ally for a long time since they've been around ally tries to make sure that their interest rate is among the leaders all the time they won't always be the top but as the top ones move they will move with it they'll move up they'll move down with it and i've heard people complain about ally bank when

interest rates went down a couple years ago you know everybody else is interest rates were going. It wasn't allies problem. It was the whole industry was paying less. So I like finding a bank like this, and this is not an ally commercial, but I like finding a bank that has a reputation for just keeping up with it. So it's one last thing I have to worry about. I don't want to worry about 50 different things and whether I'm in a money market that's paying today versus tomorrow. I've got so much bigger decisions to make than this. Joe, I'm laughing just because for someone who seems so eager to rag on regional banks. And now I'm like, Mr. Ally boy.

Right. Hey, hey-oh, yeah. Bank that has like no brick and mortar branches. A regional bank based in Utah. So, yeah, ally bank, do it. Stay there. You're good. Do nothing.

This is my favorite advice of all of them. Do absolutely nothing. Do nothing. Yeah, Trace, your job right now is to do nothing. I'm exhausted by giving this advice. Well, Joe, I will let you rest from your exhaustion because Trace was the last question of today. Already. Where can people find you if they are hungry for more?

Yes, you can find me. And very soon again, Paula Pant will be back on the Stacking Benjamin Show. We call it the greatest money show on earth because it's a circus on purpose that it's all about helping you prove to yourself that you can do this, that it can be fun, it can be easier than you think. And so we just started a brand new eight weeks, Paula, listen to some of the themes we've coming up. We're going to talk about leadership with Oscar Munoz, who is the first Hispanic-born individual to lead a major airline, but he also led the turnaround of United Airlines. And his discussion about listening is so powerful and about taking care of yourself first. he had a major health issue while he was CEO of United.

So that's a big one. A gentleman on Memorial Day weighs over 300 pounds. It was told by a lot of people some very bad things about him deciding to go running, like people laughing at him. And he's a marathoner now. And he's got a huge Instagram community about you can do this, which is exactly what you and I say about finance all the time. Also, last I'll mention one more,

Mignon Francois had $5 to her name. Her neighbor came over and said, why are you in the dark? And she wanted to tell her neighbor that she had no electricity. She took that $5. And her neighbor, by the way, came over because she had a huge cupcake order. And she wanted Mignon who made great cupcakes to fill it. And she helped Mignon do that. She turned that $5 into $60, then the $60 into $600.

Now she has this cupcake empire that's worth well over $6 million. It's a great story about going from having nothing to making it happen. So those are a few of the inspiring stories coming up. That's amazing. And all of that is at the Stacking Benjamin's podcast, which I will be rejoining very soon when my fellowship at Columbia. We can hear the Calvary coming. Right.

Exactly. The Paula Calvary is on the way back. How am I doing on that trivia contest, by the way? You're actually winning, which by the way is, for the time, Pellette perhaps. who writes for major publications and for the New York Times a lot as an example. Paulette has taken Paula, who is, I don't even describe you as one of the smartest people I know. My wife says you are way smart of the bee and how we work together is beyond her. But Paula also has a reputation, everybody, for being crappy at our trivia and constantly being in last place.

in our trivia contest. Perpetual last place for years and years and years. Always last place. It's always OG and Len Penzo fighting over first. But you're in first place right. Paulette. See, all you had to do is let someone fill in for me. And suddenly...

Paulette has you in first place when you return. So it's yours to ruin now. It's yours to ruin. Perfect. Perfect. Well, thank you for tuning in. This is the Afford Anything podcast. My name is Paula Pant. If you enjoyed this episode, please subscribe to the show notes. Afford Anything.com slash show notes. And if you haven't heard it yet, listen to the beginning of

last week's episode to understand why I'm cringing so much at this bank conversation. Thank you again for being part of this community. My name is Paula Pant. I'm Chosal-Chi. And we will catch you in the next episode. Here is an important disclaimer. a distinction between financial media and financial advice. Financial media includes everything that you read on the internet, hear on a podcast, see on social media that relates to finance. All of this is financial media. That includes the Afford Anything podcast, this podcast, as well as everything Afford Anything produces. And financial media is not a regulated industry. There are

no licensure requirements. There are no mandatory credentials. There's no oversight board or review board. The financial media, including this show, is fundamentally part of the media. And the media is never a substitute for professional advice. That means anytime you make a financial decision or a tax decision or a business decision, anytime you make any type of decision, you should be consulting with licensed credential experts, including but not limited to attorneys, tax professionals, certified financial planners or certified financial advisors, always, always, always consult with them before you make any decision. Never use anything in the financial media, and that includes this show, and that includes

everything that I say and do, never use the financial media as a substitute for actual professional advice. All right, there's your disclaimer. Have a great day. So, Joe, I just started a Twitter war. Oh, no. Oh, yeah. Yes, and I am all in for it. And this is the benefit of not needing a job. This is the benefit of work being optional. So here's what happened. Some dude, some editor, some fancy schmancy publication comes to Columbia today to do a lunchtime talk to teach my graduating class, whom I love and who I'm very protective about. He comes to talk to my graduating class about how they can pitch freelance articles.

he tweets this long thread that just goes on and on about how everyone there is dressed in at leisure and they look, quote, schlubby, and that the school has really gone downhill. These are graduate students. Why are they dressing so slubby? I mean, it's just, wow, it was so rude. And it just so happens that this morning I decided to put on a really. really nice dress. Like, I got dressed up to go to school. So I'm in a nice dress, professional dress with a collar, with heels. Not for any reason. I just, I don't know, total coincidence. I just woke up this morning and was like, I feel like dressing up today. Let's go. Right. So I had a friend take a picture of myself with him in the background on stage,

giving the talk. And I posted, true class and style comes not from how you dress, but from your character. So boom, best dress person there defending all my fellow grad students who he's trashing. I understand what that would have to do if this were a job interview or if this were some of that where I was meeting employers. But if it's my, if it's my day to day, I'm with the same group of people doing the same stuff. Why is, why is, I don't understand. You don't get me wrong. I'm a guy that thinks that you should dress. And I do, if I'm meeting with you for the first time, and we're in a professional setting where it's like a networking meeting. If you dress up a little bit for that meeting, I think that you have some respect for me. Right. So I do appreciate that.

But in a classroom? Right. Exactly. Exactly. On a college campus in the middle of finals, week? Really? Wow. Buddy. He was kind of a naysay or thing. Yeah, what do you think his MO was? You know, I think he's just kind of a negative person in general because in the remarks that he made, he also said, hey, if you're looking to make a lot of money, you're in the wrong business. And I just kept thinking, buddy, that's a reflection of you, not of your industry. Because there are a lot of journalists out there who have figured out how to make this hyper profitable. I mean, what do you think being a media entrepreneur is? We live in a time where anyone can become their own media mogul of their own mini empire,

their own niche empire. So this guy is talking to students who are a week from graduation during finals week, and he's telling them, oh, if you want to make a lot of money, you're in the wrong end. Really? Buddy. And then he's ragging on them for showing up in Lulu Lemon? Come on.

I just had a great discussion with Milau, who's the new Pushkin show, other people's pockets, where she pretty much, Paula, asks people how much money they make. And she's been a long time investigative journalist. She was with the Los Angeles Times. She said that that was a problem

for her was that she had this feeling in her head that because she was a journalist, she wasn't supposed to make much money. Like that's the game. And she said when she asked people like Adam Davidson, the co-creator of Planet Money, about how much money he was making. And he's like, yeah, I had a down year. I made less than $400,000. And this is a guy who's doing journalistic work. And he doesn't have that paradigm. And she's like, this is what I needed to hear. I needed to hear that I can do the job I love and I can make good money as well. I don't need to hear somebody telling me, no, you're not going to make much money. Yeah. And you know what that speaks to? That speaks to the idea of reframing from I can't do it to how can I do it. Yeah. And when you reframe, if you say,

I can't, I am a journalist, therefore I can't make any money. And this goes not just, this goes for plenty of professions. I'm an artist. I'm an actor. I'm a costume designer. if you have decided straight out of the gate that you're going to be poor. Guess what's going to happen? Yeah, you'll be right. But if instead you reframe and you ask the question, how, how can I make a lot of money doing this? How can I make this profitable? Then you figure it the F out.

And I know that sounds rainbows and unicorns and blah, blah, theoretical, but we have case study. after case study after case study of people who have done precisely that. Look at the highest paid, and not just the highest paid like Hollywood celebrities. Like, forget about those. Look at the tier of people who make between 200,000 to 500,000 per year, right? I think by any definition, even if you live in New York or San Francisco, even if you have six kids, I think pretty much everybody would agree that an income of between 200,000 to 500,000 per year is considered solid, right? You can live well on that. You can support your

family on that, even in a high-cost center or even with a large family. And that is within the realm of any occupation. And anyone who tells you otherwise is effectively communicating that they gave up. They gave up. They lost the game. And now they want to inflict their limited thinking on you. That sounds like the MO right there. And then, by the way, because I'm not making a lot of money, maybe then that's a good reason to bash Columbia, you know? Yeah, exactly. Just to quote, bring people down to my level. Yeah.

I'm not making any money. And the whole industry is going bad. And here's the reason why, because these people don't dress in three-piece suits to go to class. That's why. Right. Yeah. What a jerkwad. So anyway, so I posted that photo and that, you know, the, you know, the trucey.

True class and style comes not from how you dress, but from your character. And I was thinking about it. The reason that I felt the freedom to post that is because, in part, because of the fact that I became a media entrepreneur before going to school, which means I don't have to pitch this guy. I'm not looking for a job. So I'm not afraid of speaking up and defending and protecting my friends whom he is insulting. Who may need a job. Right. Yeah.

And who are super stressed right now. I know how many of my friends are stressed right now. And so that is, we go back to, you know, why does financial independence matter? Or why does entrepreneurship matter? Or why is it important to have multiple streams of income or to have rental properties that provide you with a base or a stock portfolio that provides you with a dividend base? right? When you go back to why, to all the people who are like, why are you so focused on money? It's because you can do stuff like this. You know what? I didn't burn the bridge. He burned the bridge when he decided to rag on the very students that he's coming to purportedly help. He burned that

bridge. I'm simply the one who stood up when he said it rather than cowered down. And that's not to rag on anybody else, I understand. If I were hoping to pitch him, if I were, if I were thinking that maybe I need him to pay me a trickle of 300 bucks an article, then yeah, I might not, as a 23 year old or as a 24 year old, I might just nod and say, yes, sir, understood, sir, I'll dress better next time, sir. But you know what? F it, I'm not 23 anymore. I'm in my late 30s. And I've done well. And I'm going to use that to defend the 23-year-olds who are not yet in a place where they can speak up for themselves. Even then, I think, for those people to go to the program directors and say, hey, just some feedback about this person. Could be helpful. Yeah. I guess, yeah, that's the official way to do it.

You could do it that way. Or you could just tweet. Oh, yeah. That's a good idea, Joe. I forgot about that route. I guess you could do that too. I never thought about the fact that I might just give some feedback to the people that brought him in. That's a good idea.

Look at it. Look, collaborative problem solving. Paula might do that too now. Tadletale.