Afford Anything - Ask Paula: What the F**k are Annuities?

Episode Date: July 2, 2018

#137: Today's episode is an annuity sandwich: we answer one question about family and relationships, three questions about annuities, and one question about time management. My friend and former financial planner Joe Saul-Sehy joins me to answer questions in what, I hope, is the most entertaining episode about annuities you'll hear. Here are the five questions that we'll tackle today. Anonymous asks: I didn't grow up with much money, and my father recently went into bankruptcy. I've worked hard to become financially stable. Unfortunately, my parents expect a handout. How do you handle parents and other family members who look for handouts when they see you're doing well? Zoey asks: I'd like to retire in the next 10-15 years. I'd like to understand the difference between an investment with a lump-sum payout vs. an annuity fund. What are the benefits and drawbacks of these options? How do annuities work? What are their benefits? How do I know what's right for me? Charlene asks: Let's say you're looking at your retirement portfolio, and you realize you're behind. You still have 10-15 years left. You have 10 percent of your portfolio in an annuity. Should you move this money into a stock fund? Or should you keep the annuity? Magy asks: My husband and I are both 32, and save 25% of their income for retirement. He has a 401(k) and maxes out a Roth IRA. I'm a teacher and make a pension contribution. I also max out my Roth IRA and contribute a small amount to a 403(b). My 403(b), however, has a variable annuity with no surrender charge, with a 1.5 percent account fee. Should I keep putting money in this 403(b)? I also have a side hustle; would it be better for me to open a retirement account through my side business? Also, since we're already saving 25% towards retirement, I'm curious if we should invest more for other goals. We're putting 3 percent of our income in non-retirement investment accounts and 1.5 percent of our income in our sons' 529 plans. How should we divide our savings between retirement vs. other long-term goals? Laura asks: You've often written about the importance of an emergency fund and cash reserves. Do you have any ideas in thinking about this way with regard to your time or focus? If you're spending at capacity -- whether you're spending money, time or focus -- you have no space for either emergencies or opportunities. How do you conceptualize this? How do you balance busy-ness with the importance of creating free time and space? We answer these five questions in today's episode. Enjoy! ______ Resources Mentioned: - Afford Anything podcast episode with Laura Vanderkam - Laura Vanderkam's book, 168 Hours - David Allen's book, Getting Things Done - Austin Kleon's book, Steal Like an Artist - RoseMarie Garner interview on the FinCon podcast - Afford Anything blog post, "I tracked my time in 15 min increments"   Visit the website at https://affordanything.com/episode137 Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything but not everything. Every decision that you make is a trade-off against something else. And that's true, not just of your money, but also your time, focus, energy, attention, anything in your life that is a scarce or limited resource. And so the questions become twofold. Number one, what matters most to you? And number two, how do you align your day-to-day behaviors to reflect that? How do you live in accordance with your values? Answering those questions is a lifetime practice.

There's no simple answer. but our podcast is here to explore that. My name's Paula Pan. I'm the host of the Afford Anything podcast and the founder of Afford Anything.com. Every other week, I answer questions that come in from you, the community. And today, helping me out

is former financial planner Joe Saul Seahy. Hey, Joe. What's happening, Paula? Not a whole lot. I'm happy to be talking to you again. I am so happy to be here. I love doing these, and I hope everybody has their seatbelt on.

So today's show is, think of the formatting of it, kind of like a sandwich. We've got five questions today. Three out of those five, the middle three questions, are all about annuities. This is the annuities episode. So we're going to open with a question that is not about annuities. In fact, the question that we're opening with is very philosophical, and I think a lot of you are going to connect with it. Then we're going to go into three annuities questions, and then we're going to close out with a totally different question. Pinch me. All right. Let's start with this question from Anonymous.

Hi there, Paula. My question involves parents. I didn't grow up with a lot of money. And in fact, about five years after I graduated high school, my father went into bankruptcy. But I have worked diligently and hard to earn the money that I do now. And my parents expect a handout and expect free trips to vacations and whatnot. nuts. How do you handle parents or family members expecting a handout after you have reached success and financial freedom? Thank you so much. I love the show. Anonymous, first of all, congratulations for putting yourself in such a good position. The fact that you have come from nothing and have gotten yourself into a space where you are financially stable and perhaps even financially independent is effing fantastic. So congratulations. You should be very proud of yourself. I'm very proud of you for achieving everything that you have. There's two components to your question. One is philosophical and the other is tactical. We'll try to address both. And I guess I'll start

with a tactical first because that's in some ways the tactical is easier than the philosophical. Tactically in order to, and I'm saying this not just for your benefit, but for anybody else who's listening who's in a similar situation, There are a couple of things I would suggest. One is the practice of being very clear up front about what your boundaries are. Because once you make that first loan to a family member or a friend, then it's almost as though you're painted with the brush of, this is somebody who I can ask for a loan. Never give a loan to anybody. Give a gift or nothing at all. Because when you give a loan with the expectation that they'll pay you back, that's just setting yourself up for disappointment.

So one of the tactics that I would suggest is being very clear from the beginning that you are not somebody who ever gives out loans. You may give gifts with zero expectation of reciprocity or you may give nothing, but you don't play in the in-between land. That's one thing that I would recommend. Another, and I hate to tell you to... Actually, Paula, before we go on to the next one, can I just jump on that for a second? Sure. Because I totally agree, but I would also add to that one thing, which is historically dealing with, clients that would have these questions, and I try to help them through this back in the day

when I was a financial planner, a little old guy stories. Confrontation never got you anywhere, by the way. I think there's ways to do that without being confrontational. I mean, I suppose, and this might get to the philosophical little earlier than you want to go there, but it depends on what type of relationship you want to have with your parents or with the family member. But if you want to keep them close to you, you just don't want them to expect you to give them things all the time, I think there's ways to do that. I've had this happen in my own family rather than use anybody else's story. I have a sibling who asked me for money a couple times. I gave them money a couple times as a loan. And the second we started talking about payback, man, that went out the

window. And I soon realized any time you give money to your point, you loan money to a relative, it's a gift. And that money is long gone. My sibling has never talked about it since. But ever since then, whenever they brought up money at all, I, number one, changed the subject. And then number two, if they continue to talk about money, I just tell them it's a bad time for me. And I do, and I bring up real things in my life going on. Listen, I'm moving right now. Oh, I had this thing where my business is expanding. I've got, and don't get me wrong, it isn't that I don't have the money to loan them. But after a few times of that, where I pushed the topic away, I was able to diffuse and deflect it and keep the relationship. Because for me, the relationship with a sibling was pretty,

important for me, not for anybody else, but for me. But confrontation, you know, could have burned that to the ground. And that's okay if you don't really care about the relationship. But I don't know that you have to be confrontational when you define your boundary. But I think that there is a way that you can be direct without being confrontational. So, for example, you could state something like, hey, when you X, I felt Y. And you're not stating you're a bad person. You're just stating, when cause, I felt. blank. And that might be a way of doing it. Largely depends on the type of communication that you already have with these family members, but it's depending on the relationship that you have,

it may be possible to say, hey, you know what, when you bring up these topics, I feel really uncomfortable. The last time that you asked me for XYZ, I felt really uncomfortable. The last time that I gave you money and you never paid me back or even said thank you, I felt a little hurt. don't say you took advantage of me. Like, don't make any type of accusation. Just state how you felt. And then leave it at that. That's, I think, a way of being direct without being confrontational. But that being said, not every family member is receptive to hearing that. The thing about making statements such as when you X, I felt, Y, is that the other person needs to have the maturity to receive that statement without denying. it or disowning it or somehow throwing it back in your face. And not every family member has the ability to do that. So I think this is less of a financial issue as it is a relating issue, an authentic relating issue. Yeah, I like Sun Sues the Art of War. And a great quote from that ancient book is the best battles, the one that's never fought. And a lot of the time, especially

with this sibling, and I think for most of people listening, you can hear the pitch about to come. know why the person is starting to come over. You can discern that. Sometimes it takes you by surprise, but in most cases, in my personal and professional life, it hasn't taken me by surprise. I kind of see the road ahead. And so I'm able to find ways to head that off. So I don't have to have that confrontational moment. And I was thinking about this, Paula, because sometimes for siblings, you want to do things for them. So if you want to be close to your parents in this case, and you did well and you want to see them, but you don't want to give them things all the time. Maybe you fly them on a plane once a year to see you. And it's just a gift because you want the relationship.

But in terms of more than that, I even like acting, I mean, to your point of telling them how you felt, which I really like that tactic about how it made you feel, I also like acting surprise when they ask, even if I'm not surprised. And you don't have to be a good actor. Just I'm really kind of sad that you asked me that is kind of a good place, a good tactic to take. But I think if I focus on me and what makes me happy in that relationship and what I'm willing to give and what I don't want to give, instead of trying to placate my relative, I think I come out in a better place. I guess we have covered the philosophical, but one final tactical tip that I will offer. I've done this with several friends is when my friends have asked me for money, I often

will figure out a way that I can hire them to do something. Actually, this happened this morning. I have a few friends here in Vegas who are less than paycheck to paycheck, a few friends whose bank accounts are regularly very close to zero. And so one of my friends this morning, she came to my condo because she couldn't call me because she didn't have $50 to load up her prepaid cell phone. She didn't ask me for anything, but she was telling me about some of her financial stresses and she's a hairstylist. I asked her, I was like, well, how much money do you need to reload

your phone? And she was like, I need $50, but I have 25, so I only need to make 25 more, and then I'll be able to get my phone working again. And because she's a hairstylist, I was like, well, you know what? For 25 bucks, I need a haircut. I've got a bunch of split ends. So that's what we did this morning. That's another way of doing it. And I understand with parents that might not apply, it's hard to hire your parents. But again, I guess I'm saying this for the sake of anyone else who's listening who's in a similar situation. If you have friends or siblings or cousins who are coming to you asking for money, hiring them not for your business, because that is a whole different can of worms, but hiring them for small project-based things, like giving you a haircut, mowing your

lawn, cleaning out your attic, hey, I've got a bunch of piles of boxes in the attic. You know, Like if you think of some type of chore or errand, some very, something that if they screw it up, it doesn't really matter. Just hire them to do that. Let's call this what it is. Paula's paying me 50 bucks to be on this show. Joe, you can reload your phone after this. I'm so happy. Fantastic. You know another way of handling at Paula that I also thought of? And I have actually heard people tell others, which is that just as a rule, I don't loan money to friends. I don't give money to friends and I don't loan money to friends because I value our friendship. And I find that comes between too many people. And it just, there's nothing to do with this particular request. It's just I don't do it.

And that can be very simple too. Yeah, I completely agree. And I would say it exactly like that. And that goes back to the first point that I made, give gifts or nothing, but never give loans. And oftentimes if you directly say to someone, oh, you know what, I do. I do. I do. not give loans. I give gifts, but I do not give loans. For the person who is making the request, it's easy to ask for a loan. It's much harder for them to ask you to just give them money, right? It's one thing to say, hey, can you loan me five grand? It's another thing to say, hey, can you give me five grand? Paula, can you give me five grand? I can, I can say it. I'm very, very, very good at saying that. Can you give me 10 grand?

Well, then never mind. Could you give me 20 bucks? I don't care. Can you cut hair? I never can offer that because if you see my head, I can't do that. Maybe she can oil my scalp. Yeah, something like that. Right. Right. But that's a tough place to be in. It really, I don't feel great in any of those situations because as much as I don't think confrontation helps anything. There's some aspect of this that's always confrontative and makes people

uncomfortable. Annonymous, I hope that was helpful. And thank you for asking that question because it's, it's an issue that a lot of people face, particularly when, you know, it is one of the unfortunate realities of upward mobility. It is one of the unfortunate realities of doing better than the situation that you came from, is that you look around and your family and friends are not even in the same order of magnitude as you. And that is isolating and uncomfortable and can put a lot of pressures on you in various ways, some that are completely internal and some that come from external forces. Yeah, agreed.

Our next question comes from Zoe. Hi, Paula. My name is Zoe. I really like your podcast and appreciate all your advice and just helping me learn about finances in particular real estate investing. But the question I have today is about the difference between a mutual fund that you get in a lump sum when you retire versus an annuity fund and how exactly the annuity fund works and what is the benefit of that, especially someone like me who is in early 40s and looking to retire in the next 10 or 15 years,

is an annuity fund the way to go? Or is that something that is not the best plan and why? Thank you for helping me kind of understand the difference so I can make a smart decision. Appreciate it. Bye. Paula, this one could get a little complicated and while you can handle complicated, this is something as a financial planner I address quite a bit. You want me to jump on it? Do it. All right, Zoe, so your terminology got me because when you talk about a fund that you take at retirement, I'm assuming that you're being given two different choices. Do you want a fund that

you can have access to that has mutual funds in it, or do you want a fund that pays out like an annuity? So to get there, I'm going to have to kind of back up because if this whole episode is around annuities and annuities have tons of different ways that people talk about them, let's define the different, what an annuity is first, and then we'll define the three different basic types of annuity. Sound like fun? Woo-hoo. Yes. Fantastic. Get the popcorn out, kids, because Uncle Joe's going to town. Nice. All right. Let's start with a basic question of what is an annuity?

So an annuity is a life insurance product where you put money in, and the basic goal of annuity was you would build up a fund inside this annuity so that when you retire, it looked like a pension. But instead of the city government or the company that you work for or the whatever place you work at giving you that pension, the insurance company that you had the contract with gave you the pension. So an annuity is a DIY pension? Anuity is a DIY pension at its heart. Now, what's happened is over the years, annuities haven't been that sexy. And so annuity companies have tried to sexify the annuity by giving it all kinds of bells and whistles,

which is why so many people speak negatively about annuities. The cool thing is, is that there are now companies in the fintech space that are disrupting annuities, just like there are companies disrupting, banking, disrupting, you know, all kinds of things. So let's talk about the three basic types of annuities. Cool. Annuity type number one is a fixed annuity. And that means you're putting money in and it builds at a rate similar to a CD. So when you put money in, you know what the interest rate is that you're getting.

And then it builds up. And when you go to take the money out, you can either take it out to Zoe's point. You can take it out like it's a savings account. Just take it out whenever you want. Or you can do something called annuitize it. And when we talk about anuitizing it, that means turn it into the pension. So you can turn it into a pension or you can just take the cash. Your choice.

Okay. So there are three types of annuities, and type number one, in no particular order, is a fixed annuity. And a fixed annuity can operate either like a CD or can operate like an annuity. While it's building, though, until you annuitize it, Paula, it operates like a CD. Once you pull that anointizing trigger to make it a pension, you can't go back. That's an irrevocable move. And the way I think about a fixed annuity, it's all around the rate of return that you're getting while you go. If somebody tells me they have a fixed annuity, I know in my head it gets a fixed rate of return,

and I can ask what that rate of return is, and the person should be able to tell me. Very simple. All right. The second type of annuity is a variable annuity. By the way, a variable annuity is exactly the same as a fixed and the basic way it works. You put money inside of it. It grows tax deferred until you decide to take the money out, which you can do or until you decide to, once again, turn it into a pension by annuitizing it.

The difference here is a variable annuity gets a variable rate of return depending on which one of the mutual fund looking and smelling things inside of it you choose. So a lot of annuities will have maybe 20, 30 different choices inside of investments. You can choose between all these investments. You can move money around inside the investments. These type of annuities are the type that when people talk about fees on top of fees on top of fees, they're usually talking about a variable annuity because the company charges. you a fee for the tax deferral, then they charge you a fee for the investments on the inside. And the bad news is because the average person doesn't understand it, the insurance company socks people with a bunch of fees inside of those funds that look like mutual funds inside

of the annuity. Got it. The third type. So we've got fixed rate of return like a CD variable. It's variable because you get to choose from a bunch of different choices. So everything's variable. And then the third type is called an indexed annuity. And an indexed annuity will be indexed to something.

like the S&P 500. So far, it sounds good. We talk about indexes all the time. Sounds really cool. The difference with an annuity that's indexed, when the index goes up, they don't give you the whole thing. They give you a percentage. In exchange for that, when the index goes down, you don't go back down. So this sounds great. I can get a percentage of the S&P 500 going up, but when it goes down, it never goes down. Are you kidding me? The bad news is most of the time, yeah, an indexed annuity sounds really sexy, but the percentage of the return that they give you is just horrible. And I've never found once an indexed annuity that I actually liked. I hear about them all the time. And then I do the math, and the math never has ever worked. Maybe it does work out, Paula. I just have never seen it

work out. So I want to be fair to these products. I just have never seen it work. And with an indexed annuity, do you have to at some point anuitize it in order to get it to perform as a pension? Or does it do that automatically. No, once again, you have the choice. And all three of these, you have the choice. I can take my cash out as cash, or I can annuitize it, turn into a pension, and now it's a pension for the rest of my life. Making it a pension is an interesting piece of the annuity, because what you're trading is security for a fee. And this actually gets into philosophically how you manage money also. You know, Ben Stein, the guy in Ferris Bueller, the economist, cool dude. Ben Stein says that annuities saved his parents' retirement because even though he's really savvy

about money, they're not savvy about money. And without that annuitization and trading a little fee for a set rate of return, they would have never been able to retire. But realize the insurance company is deciding how much money you get per month for the rest of your life. And they have actuaries that know, based on the law, large numbers, how long they think you're going to live. And so they design it so they might not win with you, but they probably will. It's almost like going to Vegas. You might win one time. You're not going to win every time, right? The house is always going to skew it a little bit toward them. So by annuitizing it, you may lose. But here's the deal. The big thing that certified financial planners are talking about right now that I never read in the

popular press is this idea you and I've talked about a few times here, Paula, is this idea of longevity and not having enough money. So the question becomes, which bothers you more, have you. Have this set amount of money that might not be as much as it was if you had a variable or leaving it variable and potentially having more money, trusting yourself to only take that money when you need it and to meet it out in a way that it's going to last for a long time. If you can meet it out in a frugal way, you can probably beat what the annuity would do. And the second thing is, is depending on which annuity option you choose, and now we're getting in the weeds a little bit,

But you can choose an annuity, Paula, where I take it for my whole life. And the second that I pass away, there's no more money. The insurance company gets anything that would have been left. And by the way, if I spend it down and I still keep living, the annuity company is on the hook. They keep paying me that same amount forever, even if potentially I would have run out of money. So if I lived to be 150. But let's say that I pass away early, I can choose a survivor benefit, which means I can pass it on to my spouse, Cheryl. and then she continues to collect it for her life.

And now I'm going to get less money during my life because there's mathematically a better chance of one of us living for a long time than there is if it were just me. I'll get less per month. But now I have a little more security that even if I pass away that she'll get some and we'll make sure that there's a chance that we come out ahead even if I get run over by a bus, month two in retirement. So very much like how a pension works because oftentimes in a pension you can do the same thing. you can choose whether or not to take a survivor benefit and that will affect your pension payout. And I'm glad you brought that up because an annuity at its heart was meant to be a pension. And those three types that I just gave to you are ways of the annuity companies making this product sexy, right? They took this basic thing and made it sexy.

So that gets to Zoe's question. So now we'll back up and we'll go to Zoe's question. Soie's question was, when I retire, do I take a mutual fund payout or do I take an annuity payout? And I'm not quite sure what she's talking about because she used. the word payout in there when she retires instead of putting money in. I'm assuming what she's talking about then is that she works for a company where she has a 403B. And now I'm throwing big terms out there. But 403Bs often have annuities inside of them, Paula. So I'll bet that Zoe has an annuity inside of her 403Bs, because 403B plans, unlike 401Ks, often have annuities on

the inside. And then she's getting close to retirement. She's wondering, do I take that and turn it into a pension, or do I just choose to take this and take it a little bit at a time? It depends on your behavior, not as an investor, but as a spender. And do you trust yourself with that money over time? Are you willing to take less based on the amount that the company, annuity company is going to give you? So it's as much about your behavior as it is about the company. I would ask the annuity company how much money you're going to get per month from that annuity if you did anuitize it. So you have as many facts as possible. They're going to give you a few different options. They'll give you only. They'll give you you and another person like a spouse.

They may even give you a third option, which is I'll get more money while I'm alive and my spouse will maybe get just 50% of what I got if I pass away. So they might give you a few options like that. Make sure you have all of those different options. And then I would work to keep flexibility in the plan as much as possible and annuitize as little as possible. So if I can find out how much money I need minimally and maybe anuitize that portion and then keep as much flexible money as possible, I may go with that option. It's so difficult without knowing her because here's the problem I ran into as a financial planner. My client looks me in the eye and says, Joe, you know what? I'm going to be great. Everything's going to be great. They put their money then in their retirement fund. They stop working.

now they no longer have an income stream except this pile of money. And then they come to me two months later and they go, Joe, I have a problem. I got this one time thing. Seriously, it's a one time thing. I just need to put my hand in this cookie jar that I need to live off the rest of my life just once. And then three months later, you'll never believe this. The one time thing, I got this other one time thing. This happened.

And before we know it, my client and I are having a discussion four years later about how they have to lower their standard of living for the rest of their life because they couldn't keep their hands out of the cookie jar. That's what I worry about when it comes to just leaving the money in a fund versus taking the annuity. On the other side with the annuity, I worry about being on a fixed income where I can't go higher or lower for the rest of my life. And studies show that early in retirement, you're more likely to be active. You're more likely to take trips. Your health is probably better, right? Those first 10, 15 years of retirement. So I prefer to keep it flexible because once I'm on that fixed income, I can't change it. That's an irrevocable decision. And I don't

like having to make irrevocable decisions. So, Zoe, that's the way I answer the question, which is I think those are the things you need to think about. I can't make that decision for you, though. So it sounds like a lot of this is going to come from self-knowledge of Zoe, of how much you trust yourself to handle that money. Yeah, because there's definitely a trade-off, Paula. And Joe, the thing that I, the thing I really like about your answer is the hybrid approach of annuatizing your basic needs and then self-managing your wants. Yeah. If you can do that, that's fantastic. Right.

So let's say that your cost of living, and I'm just going to invent numbers here, we'll say your cost of living ideally would be $5,000 a month, but $2,000 of that are your actual needs, and $3,000 of that is fun spending, you know, traveling, restaurants, dining, new clothes, you know, that other $3,000 are your wants, whereas the $2,000 are your bills, your fixed bills. There's something to be said for having security that covers. the fixed bills and then being a little bit more footloose and fancy free with the variable part

of your income. Absolutely. Because then that way, worst case scenario, you just cut back on restaurants, you know, you dial down your standard of living, but you at least have the basics covered. Yeah, you can still sleep at night, which I like. Right. You still have a bed to sleep in at night. Now, the good news is Zoe mentioned that she's still a little ways away from making that

decision. And I love the fact that she's looking at this ahead of time, which is fantastic. I'll say this, not only does she have the gift of time, which allows her to get these projections and make an informed decision ahead of time, but the annuity industry, as I mentioned earlier, is changing very fast right now. And I'm super excited about not just what little companies like Blueprint Income are doing. Our mutual friend, Paula, Gene Chatsky, is on their board. And she loves the fact, and I love the fact that Blueprint Income is kind of blowing up that space on a fintech level along with some other companies. but they're not the only ones, you know, big nonprofit companies like TIA. TIA is doing some amazing stuff with low-cost annuities as well that is pretty exciting. So the good news, Zoe, is I think

it's going to get better for you by the time you get there just based on how quickly the, to not even put it politely, the scum in that business is being erased and there's plenty of scum in that business. these high fee, really bad sales approach products are very quickly becoming something that the public's learning they don't want anymore. A big part of your fans here, Paula, the second we said annuity turned out because they've learned that annuity is horrible. And annuity is not horrible. It's just been treated horribly by an industry that realized it's a little complicated so we can take advantage of people, which is rotten. Well, thank you, Zoe, for asking that question. The good news is, Paula.

Yeah? Because we did all that up front, the next two annuity questions, we can go a little faster. Woohoo! We'll take plenty of time. We'll answer it thoroughly, but we won't have to do all the definitions anymore, hopefully. Right, exactly. The foundation has been laid. We'll come back to this episode after this word from our sponsors. So a few months ago, I became a Grove collaborative VIP member and started getting all of my household staples delivered right to my door. Things I absolutely need, like my dish soap and towels or my window cleaner.

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wear yoga pants every day. I mean, in the summer when it's hot, I don't wear pants at all, but whenever it's cool, whenever it's pants wet, I'm in yoga pants because they're comfortable. And why would I ever want to wear pants that aren't comfortable when I could be wearing yoga pants instead, right? Well, of course, for most people, you've got to wear dress pants. Surprisingly, myself included, there are occasions when I actually am quote-unquote supposed to be wearing something a little bit nicer than yoga pants.

Problem is, those pants aren't as comfortable. Until now, beta brand sells pants that look like dress pants, but they feel like yoga pants. they have a front button, they have belt loops, they have a faux zipper in pockets, they come in all kinds of different styles like straight leg or boot cut, lots of different colors like gray, khaki, black, navy, and they have the fit and the feel and the comfort of yoga pants, but the look of dress pants. I've got a pair and I wear them around, I get compliments on them. I look like I'm wearing real pants, even though they're yoga pants, they're dress pant yoga pants. So that is why I've started wearing Beta Brand's dress pant yoga pants.

And if you want to check them out, visit Betabrand.com and use my code Paula to get 20% off yours. These are the most comfortable pants you'll ever wear to work. So that's Betabrand.com, B-E-T-A-B-R-A-N-D dot com. Use my code Paula and get 20% off your dress-pant yoga pants. Our next question comes from Charlene. Hi, Paula. Thank you to you and Joe for the recent podcast you had on retirement. I have a question about pension annuities and wanting to get both your thoughts on where these fit into a person portfolio. So for instance, if someone is looking at their retirement portfolio now and they're a little behind on where they should be and they have X percentage, 10% in a pension

annuity, should they take that money out and move it into a stock fund knowing they have about 10 to 15 more years to actually save and grow that particular money in a stock fund. And would it also be better if someone is concerned about having an annuity or having some income paid out for the rest of their lives to actually buy an annuity as they get closer to retirement or when they retire? Thank you for all the information that you provide to us, Charlene. Charlene these are awesome questions and once again with 10 years to go it's the perfect time to be asking these questions everything that you ask for question number one about your pension fund should you take it out and invest it

yourself versus build up that pension stream depends on projections so the first thing is there is a multiplier that the company will use when they decide to give you the pension money if that's an option for you and have you roll it over to an IRA. We want to know how much money they're actually going to give you because a lot of the time as a pension, you don't know how much money that is. So you want to get that projection. How much money you're going to give me to put into an IRA that I then can manage myself? And then you want to project at a low rate of return. Now, get back to that in just a second at a low rate of return, how much money that will grow to until retirement if you manage it yourself versus leaving it in the pension fund. And the reason for that, a lot of the time what

happens is people get financial help from advisors here. And a lot of advisors are paid. Once again, this comes down to how advisors get paid. And a lot, Paul, a lot of fee only advisors are paid based on assets under management. And the one thing I care about, if I'm an assets under management advisor, getting my hands on all that pension money. So how do I do that? One thing a mentor told me early in my career is beware charts and graphs, because charts and graphs can show anything that someone wants them to say. And if I use a fairly high rate of return like eight or nine percent, and I'm able to convince you that we're definitely going to get that in the next 10 years between now and retirement, I could come out way behind where I would.

have been if I use a very conservative 6% return. Seven I might use, probably six. If it's against the security of a pension, this is something different than I do if I'm just using a multiplier for a 401k. So for my own retirement money, if I'm just building my stack, I'll go ahead and use 8%. Listen, I'm very comfortable with 8%. But if I've got the security of a pension that I'm going up against, I want to use a number like six to make sure that I'm going to come out ahead. That totally makes sense. because you're making, in order to make an apples to apples comparison, you would want to use a more conservative benchmark. Yeah, because the pension is such a conservative way to go anyway, right? Exactly. Compare the conservative option to a conservative projection. Yes. And then the second thing I want to do.

So that's the first thing. How much money am I going to get if I take that money out? Then use a number like 6% to see what it will grow to. And then look at that number and do your calculations on what that'll do. The second set of projections I want, if I leave it in the pension and I just keep building it as a pension fund, 10 years from not, whatever my retirement date is, how much money am I going to get per month if I just leave it that way? And then I can look at how big is this ball of money going to be if I take it out? And then how much can I expect to get per month that way versus the security of the pension and how much money am I going to get that way? Now, if you're looking at taking out the ball of money, as you call it, which is kind of an

interesting visual, if you're looking at taking out this giant ball of money, would you use the red band around it? Would you use a 4% withdrawal rate as your sort of guiding benchmark for that, meaning that for every million dollars that you have, you would anticipate withdrawing 40,000 in the first year and 40,000 adjusted for inflation every subsequent year? I like that as a general rule of thumb, as long as you realize ahead of time, like, you know, Dr. Wade Fow and others have said the 4% rule is kind of broken. So it doesn't work all the time, but it's a great place to start.

So, yes, I would use, if it were me and I was still a financial planner, I would use what's called a Monte Carlo simulation, and you can find those all over the place. I don't know where you get one for free, sadly, but a Monte Cardo simulation will tell you it's like this, this computer algorithmic program where they take your ball of money, you take the rubber band off it, it stuffs it in there, and it tells you the percent chance based on your lifestyle that it'll last your whole life. And generally speaking, if you can get up around 80 percent chance of all the different scenarios, really, really good chance. And 80 percent chance is a great chance that it's going to last your entire life. You said you don't know where people can tap into that for free. Where can

they tap into that for not free? Ask your financial planner. Ask a financial planner and ask them, you know, financial planners all the time get requests. Can I just pay you for a few hours to consult with me about Monte Carlo simulations? Maybe it's an hour, maybe it's a couple hour. How long do I have to pay you for for us to do a Monte Carlo simulation together? And financial planners will have that software. Yeah. And maybe a listener knows where you can get it online. I've never seen one online without a financial planner, but many financial planners have them. If you know, please go to afford anything.com slash episode 137. That's afford anything.com slash episode 137. That's where the show notes are. If you know where a good website that has

Monte Carlo simulations, please share it in the comments there. That'd be great. Now, there's a third thing they have to look at, Paula, which is super important. And that is the health of the organization that you work with because money in an IRA, if you take that money, money out and you roll it over to an IRA that you manage yourself, that money is not subject to bankruptcy, to lawsuits, it's separate cash. Money inside of a pension fund with a company is subject to a bankruptcy. So if I work for, sorry, state of Illinois. New Jersey. New Jersey. I want to stay away from, I want to say, I'm going to be very biased against the pension fund. And by the way, if I come out fairly close, once again,

handling the money myself at a good low interest rate, Paula, on that money like a 6%, I will also still be biased toward flexibility. I'm generally biased toward take the money and let me be flexible because I don't know what's going to happen in the future and being stuck with this set pension fund versus having the flexibility to decide year by year

how much I take. I prefer that. So I had clients back in the day that we knew that we were going to have a little less money using these very low risk assumptions than we would having a set pension and we took it anyway because it hey having flexibility low price to pay if they come out very close one quote that I heard a few years ago that really stuck with me was uh and I'm paraphrasing here but it was that nothing can make you poor faster than living on a fixed income right yes yeah and I think it's because

is it because you get a fixed income mentality I don't know that's a there might be a different mentality. Maybe. Or just from a purely mathematical point of view, it might just be that the fixed income does an inadequate job of keeping up with cost of living increases. Yeah, that's true too. You know, sometimes the consumer price index does not accurately reflect the cost of living increases in your own life. And that's some good terminology that people and human resources will use when it comes to pensions and annuity salespeople will use.

They'll talk about whether your annuity has a cola on it and they're not talking. about Coca-Cola, not talking about RC Cola. They're talking about a cost of living adjustment and you want to know how much it goes up by per year and what that measures based on. A lot of time they'll say 3%. But what they really mean is it's a maximum of 3% as long as the consumer price index doesn't go up more than 3%. So it'll cap out at 3%. But if the consumer price index only goes up 1, it'll go up 1. The frustrating thing about that, and I don't want to turn this into an economics discussion, the consumer price index is, not an adequate measure of inflation. Yeah, because there's so many things that doesn't take into

account. I mean, if you look at the cost of education, the cost of health care, all of these major costs that have gone up significantly in the last several decades, that is not reflected in the CPI. So many times during my life, there was no inflation, according to the government, where there was hellacious inflation in my life without me, you know, having lifestyle creep. That, yeah, that doesn't do it. But that's ask what the cost of living adjustment or the cola, if they keep talking about the cola, they're talking about a cost of living adjustment. I'd have that. I say, I make a big deal about that, Paula, because way early in my career when I was a first

year financial planner, people kept talking about colas, and I would just shake my head. And I pretended like I knew what they were talking about. I had no idea. Got it. But that's great, Charlene. I mean, but looking at this stuff early, same as with Zoe, these are huge decisions when you're deciding flexibility versus lifetime income, but they're irreversible. So getting your facts together early, understanding as much of it as possible way ahead of time so that when you're ready to sign that paperwork, you can make the decision and never worry about it again is fantastic.

And you know, we have one more question about annuities as well. Bring it. This is truly the annuities episode. Anytime we get an email or a comment about annuities, I'm going to start just referring people to this episode because I think we've done a pretty good job. Really, you've done a great job, Joe, of explaining annuities 101. And now the annuity experts are going to come out of the woodwork and go, well, Joe, you forgot to explain 0.37B.84, subparagraph 3. You know, a mutual friend of ours, Todd Tresseter, who reads the blog Financial Mentor, he put out a book on Amazon called The Pros and Cons of Variable Innuities. And then with a title like that, he was shocked that nobody bought it.

And then, to make matters worse, the only people who did buy it were people in the annuities industry. And because he was critical of variable annuities, they then gave it one-star ratings and completely trashed it. So he had the worst of both worlds. He had simultaneously almost zero sales and bad reviews. I got to tell you, Paula, I gave it a five-star review in Chapter 8 when they get to the annuitization part. Oh, my, oh, that was horrible. I started to cry. It was must-see TV.

Sitting there with it with a, you know, box of Kleenex wiping tears away from your face, thinking this is sadder than the Titanic. We talk about the sub-accounts of the variable annuity. Yeah. We'll come back to this episode in just a minute. But first, how often do you remember to change your AC filter? Probably not as often as you should. The vast majority of homeowners and renters forget to change their air filters regularly.

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I mean, after all, that's what the show is about. When we think long-term, we often think of retirement, but there's something that comes after retirement, and it's something that doesn't get talked about enough. Let's talk about creating a will or creating a revocable living trust. Both of these options can seem expensive, time-consuming, daunting, and scary, but don't worry. There's an app for that. Tomorrow.me is an app that makes creating a will or living trust free, easy, quick, and accessible. For most people, this process is usually lengthy, it's emotionally draining, and it's expensive. Estate attorneys usually cost a few thousand dollars.

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Hi, Paula. My name is Maggie, and I have two questions about retirement savings and allocating my money in general. My husband and I are both 32 and save 25% of our total income toward retirement. He saves in a traditional 401k and maxes out a Roth IRA. I'm a teacher and I put 8% of my salary toward a defined benefit pension that's set by the state and I can't change that amount. I also max out my Roth IRA and put a small amount into a Roth 403B. So my first question is 403Bs are notorious for having large fees. My 403B is in a variable annuity in low-cost vanguard funds with no surrender charge, but it has a 1.5% account fee. And my only other option there is a fixed annuity with surrender charges and the 1.5% fee. Should I keep putting money in that 403B?

I also have a side hustle that's a sole proprietorship. Would opening a solo 401k or simple IRA be a better option for me. My second question deals with investing in general. So if we're already saving 25% of our income for retirement, rather than worrying about my first question of 403B versus other retirement investment plans, maybe we should be putting more money toward our investment income. We're currently only putting about 3% of our income in low-cost funds of Vanguard and 1.5% toward our two Sun's 529 plans. We also add cash to our reserve or add money to our cash reserve each month. Do you have any tools or suggestions on how to divide income between retirement savings and other investment options? Thanks, Paula. Maggie, first of all, I am not a big fan of your

403B. So the good news is that because you have a side hustle, assuming that your side hustle is profitable, you can open up a retirement account through your side hustle. There are certain limitations as to how much you can contribute based on what type of account you open up and what other accounts you were contributing to. But you can absolutely open a workplace retirement account via the company that you run and make contributions to that. And you can set that all up through a low-fee brokerage like Vanguard. And so that will be an option that gives you a lot more flexibility than what you currently have and it will allow you to be in lower fee funds. If I were you, I would work with a CPA and or a financial planner while you do that just to make sure that all of your eyes are dotted, all of your T's are crossed, because the contribution guidelines change every year, and because what you are eligible for will also depend on the structure of your company, how you yourself are paid, whether or not you are eligible for a workplace retirement plan through your full-time employer and what types of plans those are and how much else you're contributing. So long story short, work with a CPA slash financial planner when you do it. But the more that you can

divert money into a retirement fund that you yourself have selected and manage, the less you have to be in this 403B that you dislike? You know, can we talk about the 403B for a second, though? Absolutely. There are a lot of people that are going to hear this, and they don't have a side hustle, and they're going to hear that Maggie has a 1% fee and go, well, my 403B has a 4% fee, so I should probably not contribute to mine either. Did you say 4%? No, I said 1. I thought. Did I say 4? You said one on first reference and four on second reference. Oh, well, how about 14? Could I say 14% fee?

That's a 44% fee. Yes, yes. The whole thing is fees. Maybe I did. But the frustration that I have is that I've met a lot of people that don't contribute to their retirement plan and they say it's because the retirement plan has a high fee. And so instead of coming up with a strategy like Maggie has where, hey, maybe I've got this other fund that I can put the same amount of money into. they don't have that ability because if you don't have another place of work and you're eligible for a 403B, it's your only choice.

And the frustration is I want people to not make perfect the enemy of good. And a 1% fee in the big scheme of things is not the end of the world. It is not the end of the world. I haven't seen a 1% fee get between a person in their retirement. I've never met a 70 year old that goes if I didn't pay that 1% fee, I would have been able to stay retired, but man, I'm going back to Walmart to be agreed here now. Keep saving. And the fact that you have that tax, that pre-tax nature of the 403B, the fact that you have that tax shelter trumps the fee, right? Don't get me wrong. There are some where they have horrible fees and it might be a

better opportunity, but maybe, Paula, that's like a 4% fee, right? That I was referencing earlier. But a 1% fee, the fact that it's pre-tax beats the heck out of saving in an after-tax account that's with the most fee advantage company on earth. You know, if you're saving into S&P 500 fund like IVV, you know, the lowest cost S&P 500 fund, that 1% tax deferred, tax sheltered, 403B is a better option. And your money's going to go faster that way than it will with the low. fee. So, Joe, what I hear you saying is, if you are choosing between two bad options, option A being a 1% or 1.5% fee, and option B being just not contributing to your retirement accounts at all because you'd rather avoid the fee, then paying a high fee is the better option of those two. Use the account. Absolutely. Use the account. So if you're comparing between two evils, then go for the lesser of the two evils, yes?

Yeah. Too often I would find people, though they wouldn't do any real analysis. analysis they go, wow, I've got a, I work for a small company, so I have fairly high fee, so I'm not going to contribute. Okay. You lost. It is very, very frustrating. I'll tell you, though, to Maggie's, Maggie's point, talking about her goals, here's what I like doing first. And very few people do this, but it's really cool when you do it. Take a blank sheet of paper and put you on one end, little stick figure you, and draw a line of you for the rest of your life, and put different ages down. And then make, we talked about balls of money before, take these different balls of money and put down where they're going to occur in your lifetime. So she talks about kids, uh, 529 plans, right? She talks about retirement. She's got these different goals. Put these goals on a timeline together and you'll start to see where they overlap. And you'll also see where you can save for some of these things.

So as an example, uh, sometimes I had clients that had children that were going to go to college after. the person reached retirement age. So instead of opening this separate 529 plan, if they had a choice between 529 plan that wasn't that great and a 401K that was fantastic, we could just save into the same fun for the kids college and for retirement, make it super easy, press the easy button, get it all done at one spot. I could also look at which tax shelters were available, right, based on when those things were happening.

I also knew when my cash flow crunch was going to happen. Like me, I have twins that were in college at the same time, but I would often have clients that had kids that were going to college two years apart. So we knew those middle two years with two kids in college at the same time. That was going to be the ball of stress time. And we would have to plan around how things were going to be really tight those two years. I love timelining my goals. Absolutely love it. So Maggie, to your question specifically, what's great about your situation is that you have a lot of options.

You have workplace retirement accounts that you are eligible for. Both you and your husband do. You have IRAs. You have side hustles, which give you eligibility for even more opportunities to save for retirement. You have 529 plans. You have this huge basket of different types of accounts that you can choose from. And I get that that is the genesis of your question is, hey, we have so many options. What do we do?

Start with the end in mind. Timeline your goal and work backwards to today. What do I need today to make each of those things happen? Absolutely. That solves 99% of this issue. Absolutely, right. Because in the absence of a why or in the absence of a what, then there is no direction. Because if the general idea is, well, let's just save money and let's just, you know, do it in a tax efficient manner. Well, that's, that's not really a goal. I mean, it kind of is. But that's, that is a how. It is not a why or a what. And let's talk for a second here, Paula, Maggie's defined benefit pension because there are two types of of plans, and this is also fascinating and something I didn't know until I was a financial planner for a little while, when they talk about, well, I have a defined contribution plan.

People call it a DC plan, who, or a defined pension plan. They never call that a DP plan, but it's a, or a DB plan. I never hear that. But define benefit versus defined contribution. Just think about the word choice there. Define contribution would be where you know how much you're putting in, but you're not sure what you're going to get out. So defined contribution plan would be a 401k, a 403B, a 457, a Roth IRA.

Those are all defined contribution plans because you know what's going into the plan. A defined benefit plan, a lot of the time you're putting in money, like Maggie said, she doesn't have a choice. She has to put X amount in. Okay, that just goes in there. It gets taken out of her salary. The company's probably putting money into, or the school system in her case, putting money into. She doesn't know how much money that is.

The contribution may change, by the way, based on. a formula that they use. So the contribution may be variable, but on the other side, the defined, the benefit is defined. Define benefit plan equals pension. A pension is, an annuity is, a defined benefit plan if you annuitize it. So the second she says define benefit and then says pension, it's actually redundant. Yeah, because that is what it is. But you know what?

And she talked, and maybe Maggie, I was reading too much into your voice when you said, Well, I have this money and I don't have a choice there. I have to put it in. And there was a little bit of a, I really don't want to. If the school system is solvent, having this money go into this guaranteed bucket that's this amount of money you're not going to have to worry about later, it's actually kind of cool. And something a lot of people don't get that opportunity to have anymore. So I'd embrace it. Embrace the pension, Maggie. Embrace it. Well, and you know what? That kind of harkens back to your answer to it was either Zoe or Charlene when we were talking about when you think about the money that you need for retirement, dividing that into two different buckets, needs and wants. So you can use something like a pension or an annuity to fuel your needs, your basic bare bones, housing, food, transportation, like essentials. And then you can use more flexible but slightly. riskier and more DIY options, such as a solo 401k, your Roth IRA, all of those types of accounts, to fuel the other component of your retirement, which would be your wants. Now, Maggie, because your workplace offers you a 403B, this means that with your side hustle, you are eligible to open an IRA-based retirement account through your side hustle. So you are eligible to open a SEP IRA or a simple IRA through the side hustle that is

your company. You cannot open a solo 401k through the side hustle that's your company because you're already covered by a 403B with an employer-sponsored workplace plan. But you can absolutely open a SEP IRA or a simple IRA. So those are totally options that you have available to you. Great question, Maggie. Thank you. Awesome. And to close out the annuity sandwich, we opened with a non-annuity question. We then sandwiched the episode with three annuities questions. And now we are going to close out the episode with our other non-annuities question. Our final question of today comes from Laura. Hi, Paula, this is Laura. Whenever you start your podcast, I love how you say that there's a limited amount of any resource, you know, it could be money, it could be time, it could be focused,

it could be attention. And often you've written in your blog about how you have to have an emergency cushion in terms of money and not have all your spending be at capacity because because emergencies could happen or you wouldn't be able to take advantage of an opportunity because you wouldn't have that flexible spending money. But I wonder if you have any ideas about thinking this way about your time or about your focus. So I've noticed that when I'm scheduled to the max, if anything goes wrong, I can't really recover and have a project done in time. But I also can't take these different interesting opportunities if I'm too scheduled up.

And then also if I'm focused on too many projects, maybe it's harder to take other opportunities. and that's hard to be meta, making sure you're watching your own productivity and making good decisions. And I don't know if you had any resources that sort of spoke to this other idea about being at capacity, not just with money, but with your time and your attention and your focus. So if you have any thoughts, I'd appreciate it. Thanks. Laura, you're absolutely correct. If you are operating at capacity in any of your limited resources, money, time, or attention, you aren't going to have the space to be able to take on anything that comes your way, whether that thing is an emergency or that thing is an opportunity.

That being said, with regard to all three of those buckets, money, time, and focus, it is sometimes surprising how if something is truly an emergency, all of a sudden everything else in your life shifts in order to deal with it. So you could be dealing with what is an extremely hectic busy schedule, but then some trauma or catastrophe happens, heaven forbid. and all of a sudden, in some completely unexplicable way, you have the time to deal with it because you have to deal with it because you have no other choice. And that is true in terms of your money, in terms of your time, in terms of your focus. That's true in every regard. My concern, you'd ask kind of what my general thoughts on the matter are. When something is urgent, we figure out how to deal with it. When something is urgent, we step up to the plate. The concern is what happens when something is, important but not urgent because that is when we can procrastinate. And sometimes the effects of that procrastination over the long term can create an unfortunate urgent situation that could have

otherwise been avoided had we just dealt with the important back before it became a calamity. I think in terms of pictures and maybe semi-weird sayings, but I have this saying that I have for myself when I'm thinking about what Laura's talking about, which is I have to get out of the trench. I never, during my daily work life, I never have the big ideas that really move the needle for my career, for my life, or for anything. You know when I have those ideas when I'm running, when I'm out on a hike, I have to be a way to actually make things happen. And that, by the way, is counter to a lot of the popular advice that you'll get from business gurus, from life gurus, that you have to be 100% in it, right?

In it to win it. I don't think it's possible. I love this guy, Austin Cleon, who talks about your side hustles and form your main job, you know? Practicing the guitar can help you be a better manager of people. Like these things that seemingly have nothing to do each other really can have a lot to do with each other. And I think that how you begin your day and how you end your day

are very critical when it comes to, what you're asking, Laura. I think if you start your day with what do I need to get done today to move the needle in my life, whether it's with your relationships, with friends, with spouse, with people around you, with your career, whatever it is, what are those important things, to Paula's point, versus the urgent stuff, which, by the way, most people wake up and what is the first thing that you do? You check your phone, check your email, check Instagram. And then everybody else's priorities are number one and your priorities are at the back. I like ending my day with a list of what I finished, what I didn't finish, what I'm going to

throw to the curb and which things are going to be important tomorrow. And then I find myself, my subconscious mind kind of thinks about those. And then I begin the day with a nice, strong workout out of the trench, once again, with a list of those things that are important for me on that particular day. two resources that I like, and I'm sure you have several resources. I actually have three, but two names that I know, Paula, you've an appreciation for these people. When it comes to the time management aspect of your question to getting to the important stuff, if you split your time reading Laura Vandercombe and reading David Allen, I think you've gone a long way.

Laura Vandercam talks a lot about effective time management and has studied that for a long time. and David Allen's a guy that talks about clutter in your life and a lot of your life is clutter. And David Allen has a wonderful phrase that he uses. He talks about being like water and water flows. And so many people are stuck in the rocks and they're moving upstream. Like you have days. I've had days that I'm in the weeds, right? We use that expression.

I'm in the weeds. I'm not like water at all. I'm so busy working against myself. But I want to flow where things. are flowing on that particular day, and that's by eliminating clutter. One more resource that I have. I'm lucky to host a podcast that normally has nothing to do with this audience. It's the Money and media podcast presented by FinCon, big conference that Paula and I both go to. I just did a recent interview with a woman named Rosemary Groner. And what's cool about Rosemary is she kind of answers

Laura's question, Paula. Rose Marie has a business that when she set up her business, A lot of people talk about doing a better job at work, doing whatever. She started off with one simple question, what's the highest ROI task based on my goal? And how can I set up a system based on ROI that's going to get me what I want more quickly? She has a family with young children at home. She said, I want to spend 20 hours a week or less working, but I want this to be a successful business. I love my business, but my priority is my family.

So how can I do both? I'm going to focus just on ROI, and that's it. And I'm going to design a system that's all based on return on investment, investment being my time. And Rosemary has a business that makes well over $100,000 a month on 20 hours a week because she designed it from the beginning with the end of mind. You said $100,000 a month? $100,000 a month. Wow. Yeah. It's a powerful interview, not normally for Paula this audience, but in this case, it's a great resource. My interview with Rosemary on Money Media Podcast. We'll link to that in the show notes. So the show notes are available at Afford Anything.com slash episode 137, where you'll be able to listen to that.

Rose Marie's strategy reminds me a lot of essentialism, the book Essentialism, which talks about the same thing and also the book, The One Thing, which I can summarize for you right now. The idea behind that book is to constantly ask yourself, what is the one? thing that I can do such that by doing it, everything else becomes easier or unnecessary. And you can ask yourself that question, not just with regard to your work, but also with regard to your health, with regard to your family, your relationships, your inner relationship, your spiritual life. I mean, what is the one thing that I can do in all of these different verticals of my life, such that by doing that one thing, everything else becomes easier

or unnecessary. By virtue of asking yourself that question, you're not making a list of the top 10 best things that you can do for your health. You're picking the one thing. And maybe that one thing is getting enough sleep or not drinking alcohol or not eating as much junk food as you do. Whatever that one thing is, you do that. And once you've done that to the point where it becomes habit and it no longer requires any conscious effort, then you re-ask yourself that question. and then you do the next one thing. But that type of approach allows you to do one thing at a time in each thing of your life. Welcome to Paula's Cliff Notes.

We interviewed Laura Vandercambe on this podcast as well. We'll link to that in the show notes as well. What I like about Laura's approach, I relate to mathematical solutions. And Laura made the point that there are 168 hours in a week. So if you sleep eight hours a night, seven nights a week, that's 56 hours. If you work for another 40 hours, then that 56 plus 40 adds up to 96 hours. And if you spend, let's say, another 10 hours commuting, okay, that's 106 hours. You spend maybe another 10 hours transitioning in between all of these various times.

All right, we've still got another 40 hours a week that are unaccounted for. Where are those going? What are you doing with them? And I like the mathematical question because it's so easy to make these emotional statements of, I don't have any time. But when you boil it down to hold on, where is my time actually going when I break this down hour by hour and I recognize that there are 20, 30, 40 hours a week that I cannot account for. Where is that time going? It forces you to quantify your relationship with time. And I think that there's a lot of value in that. that. And so I wrote a blog post actually about a year, maybe two years ago at this point, in which I tracked my time in 15-minute increments over the course of a week. And I wrote about how I was shocked to find out, number one, that I did significantly more housework than I thought I did. And number two, that I had completely unaccounted for time, time in which I just zoned out. I did that basically at the level of a part-time job, just zoning out. So those are some of the things that came up for me when I tracked my time. And I think that's a very valuable exercise.

I did it. I didn't want to risk getting distracted by my phone. So I physically carried a blank, like a spreadsheet round with me over the course of a week so that I could mark that up because I knew that if I turned on my phone, then I could get lost in Twitterland. I'll link to that article in the show notes as well, which are at afford anything.com slash episode 137. Well, thank you, Laura, for asking that question. And that is our show for today, Joe, where can people find you? You can find me sitting at stackybenchments.com. I have a new podcast, Paula, a newish podcast. Let's hear about it. Well, there's so much financial media and we read so much every day. If we go to financial blogs, we go and we go to Kiplinger, CNN, Yahoo, Fox,

business. We go to all these different, CNBC, go to all these different sites. There's so much jargon. There's so much terminology. Every day we take two headlines. We talk about what's important and what probably isn't in those headlines. And then we have one big idea that combines those two headlines, which ostensibly have nothing to do with each other. We do it live on Facebook in front of a live Facebook audience and there's no editing. And sometimes I get caught saying things that maybe I shouldn't say. So it's really fun. It's about 15 minutes every day. It's called Money in the Morning. It's wherever you listen to, this show. Cool. So money in the morning is your new podcast. 15 minutes a day. 15 minutes. Nice. Well, thank you so much, Joe, for joining us. I always enjoy these episodes with you.

That was fun. Anytime I can geek out with Afford Anything fans on annuities, it's a great day for me. Nice. And thank you so much for tuning in. If you enjoyed this episode, please do three things. Number one, tell a friend. Number two, subscribe to this show. So if you are listening to this with an right now just to open up that app and hit the subscribe button. And you can do that in whatever podcast player you use, whether that's Apple, Stitcher, Overcast, Spotify, whatever it is that you're using to listen to today's show. And number three, please leave us a review. Also, I'm going to make a little plug here for afford anything.com slash store. That is where we sell t-shirts. And as we mentioned in the last, Joe, the last time that you were on the show, these t-shirts have really cool

sayings on them. One of them says eat, sleep, invest, repeat. The other one says take radical responsibility, which was the theme of episode 66 with Emma. So these are all shirts that were inspired by this podcast. And every single penny from the sale of these shirts is a donation to charity water. So we make a profit of $5.38 per shirt. And all of that money is going to go to charity water, which is a non-profit organization that builds wells and builds water sources in communities that don't have them. So they bring fresh, clean, safe drinking water to people who don't have access to that.

So head on over to afford anything.com slash store to pick up a shirt. Thank you again for tuning in. My name is Paula Pan. I am the host of the Afford Anything podcast. I appreciate you spending this time with us and we'll catch you next week. You're the only friend I have

that can just casually throw out the word Harkins and nobody thinks second about it. I just have that speech. page pattern. We do. Paula says, if I say harkens, this harkens back to the time. Everybody else, what the hell are you talking about, Joe? The other day I was at a buffet, this guy was like, oh, don't you think this thing looks

like whatever? And I looked at it and I was like, oh, I suppose it does. And he just started laughing. And I was like, why? And he was like, you're the only person I know who talks like that. And I was like, talks like what? I only catch myself occasionally going, oh yeah, but it's Paula. It's fine. She harkens. Nobody else can harken, but Paula can harken. I harken back to that episode where Paula and I were talking about annuities. So great.