The Personal Finance Podcast - How to Build a Forever Portfolio With Rob Berger

Episode Date: December 27, 2023

In this episode of  the Personal Finance Podcast,  we are going to talk to Rob Berger about how to build your forever portfolio. How Andrew Can Help You:  Join The Master Money Newsletter where you will become smarter with your money in 5 minutes or less per week Here! Learn to invest by joining  Index Fund Pro! This is Andrew’s course teaching you how to invest!  Watch The Master Money Youtube Channel!  Ask Andrew a question on Instagram or TikTok.  Learn how to get out of Debt by joining our Free Course  Leave Feedback or Episode Requests here.  Thanks to Our Amazing Sponsors for supporting The Personal Finance Podcast. Shopify: Shopify makes it so easy to sell. Sign up for a one-dollar-per-month trial period at  shopify.com/pfp Chime: Start your credit journey with Chime. Sign-up takes only two minutes and doesn’t affect your credit score. Get started at chime.com/ Policygenius: This is where I got my term life insurance. Policygenius is made so easy. To get your term policy go to policygenius.com and make sure your loved ones are safe. Listen to Planet Money wherever you get your podcasts. Visit MasterClass.com/PERSONALFINANCE and get one free annual membership when you give one annual membership this holiday season. Connect with Rob Berger: Website Youtube Linkedin Twitter Facebook Connect With Andrew on Social Media:  Instagram  TikTok Twitter  Master Money Website  Master Money Youtube Channel   Free Guides:   The Stairway to Wealth: The Order of Operations for your Money  How to Negotiate Your Salary  The 75 Day Money Challenge  Get out Of Debt Fast  Take the Money Personality Quiz Learn more about your ad choices. Visit megaphone.fm/adchoices

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Save the Everyday with Amazon on this episode of the personal finance podcast, how to build your forever portfolio with Rob Berger. What's up, everybody, and welcome to the personal finance podcast. I'm your host, Andrew founder of mastermoney.com. And today on the personal finance podcast, we're going to be talking about how to build your forever portfolio with Rob Berger. If you guys have any questions, make sure to hit us up on Instagram, TikTok, Twitter, at Master Money Co and follow us on Spotify, Apple Podcasts, or whatever podcast player, you love listening

to this podcast on it. If you want to hop out the show, consider leaving a five-star rating and review. I cannot thank you guys enough for leaving those five-star rating and reviews on your favorite podcast player. Now, today, we are so excited to have Rob Berger on the show. Now, Rob is someone that really had a huge impact on me overall, especially when I was in my early 20s learning how to invest my money. and Rob used to have this show called the Dole Roller Podcast that I would listen to religiously

when I was working my 9 to 5 job. And he would talk about investing. He would talk about how to manage your personal finances. And he is one of the cornerstones of where I gained my financial knowledge very early on. So Rob has been someone I have wanted to have on this podcast for a very long time. We met at FinCon and then we met again, we spent a lot of time together when BlackRock invited us up to the New York Stock Exchange and we were up there for the opening bell of their target date, ETF.

So this is some time where Rob and I got to spend a ton of time together. He is now coming on the show and I am really, really excited to have him here. Today we're going to talk about portfolios and Rob has a great YouTube channel. You could search his name and find him very quickly. That is growing very, very fast. And on his YouTube channel, he talks all about investing. And today we're going to be diving into asset allocation. We're going to diving into, you know, how much bonds should you actually have in your portfolio.

If you should rebalance your portfolio or not and Rob dives deep into that. We're going to talk about cash and how much cash you should have on hand. some of his favorite tools for kind of researching index funds and ETFs or mutual funds or whatever other investments you have. And then we're going to talk about does he own individual stocks and some timeless principles that never change. And we want to make sure that you are building out your forever portfolio. Then we're going to dive deeper into retirement because Rob dives deep into retirement and what you should be doing in retirement. So we're going to talk about the impact of Social Security on your asset allocation. We're going to talk about some of the

things that you should do with your Social Security and some of the things that you should consider when you're at retirement age. And then we're going to talk about Rob's portfolio and a bunch of other questions as well. So this is an amazing episode. Really excited to have Rob on the show. So without further ado, let's welcome Rob Berger to the Personal Finance Podcast. So Rob, welcome to the Personal Finance Podcast. Andrew, thanks for having me.

I am really excited to have you today. And I kind of want to go through kind of the impact that you've had on me over this timeframe and kind of what I've learned from you over time. So I actually originally, and I usually don't do this, I usually have the guests kind of introduce themselves, but I kind of want to talk through this because when I was in my early 20s, I started to listen to a little podcast called Do Roller. And you were obviously the host of that podcast. And I really, really credit you to the baseline for me kind of understanding how to invest in index funds and a bunch of different other funds that are out there. And I would listen to your show for hours and hours on end. And you introduced me to so many different cool things from even your interviews with Jesse Meacham and Mr. Money Mustache and all the way back to some of the original episodes. I was listening way back. I don't even remember what you started, but I want to say it was 2014, 2015, somewhere around there. And so I remember just this was the first personal finance podcast I ever listened to. And so I'm really excited to have you on because now, you know, obviously we have the first

personal finance podcast. And that's kind of just led to a lot of the things that we've done. But a lot of the baseline that I learned was from you originally and just listening to your podcast and kind of going through that stuff. So for all the listeners out there, Rob is a guest that I've wanted to have on for a very long time, and I'm really, really excited to have you here today. So, Rob, welcome to the show. And can you kind of give us a background of what got you started and interested in personal finance and teaching other people about personal finance? Well, first of all, that was great. I will tell you, the intro there kind of made me feel old, if I'm being honest, that's terrific. You know, we started that back in 2013. What got me sort of

really focused on money? So I started my first personal finance blog in 2007, but my real interest started in 2005. And, you know, I was an attorney at that point. And I suppose we were kind of typical of the professional, you know, we made good money, but not insane money. And, but we had debt. We had, you know, mortgage. I had student loans. We had a car payment. And I was listening, I've never been a huge Dave Ramsey follower. I've never done the baby steps, even though I think that they could be great for people, but I didn't follow them. But I was listening to the Dave Ramsey show. And somewhat, it was in fact, it was in June of 2000. 2005. You know, folks are calling in and screaming their debt free, which is one of the things they do,

you know, on his show. And just something just like a switch flipped in my mind. I said, you know, I don't want fancy stuff. At least that's not my first objective in life to buy a lot of fancy stuff. I want my freedom. That's what I want. I want to be able to do what I want to do. And I'm not going to do, be able to do that if I'm trying to finance a fancy lifestyle. We've never really lived super fancy. But, you know, I really thought, you know, I need to get out debt and we need to control our spending. And so that was sort of the moment. I committed then that we'd be debt free in seven years, including the mortgage. We failed miserably at that goal. But we were eventually debt free. Maybe it took, you know, 15 years instead of seven. But that was the moment

where I started to really think differently about money. Yeah, 2005. And that is a huge impact overall because I think some of the lessons that you learned, you started to teach other people through your blog, Dole Roller, which you eventually had turned into the podcast and then you eventually sold and then now you bought it back. And it's a really cool story of what you have there. And it's one of those things where I think you've just had a huge impact on a lot of people, especially learning how to invest overall. And one big piece that we've had in that you kind of taught me was learning how to figure out what your asset allocation is. I love your content when you talk about investing and building portfolios because I think it's some of the best content out there.

And when it comes to asset allocation, obviously this is one of the most important factors to building wealth. Because if you mess up your asset allocation or if your asset allocation is out of whack, this could be a million dollar impact on your portfolio if you have a really, really long time horizon. So what are some of the first things that you tell investors to consider when they're considering their asset allocation? So, you know, I start by saying, look, an asset allocation plan sounds fancy, but it doesn't have to be. All it is is a recipe. It's no different than a recipe. And you just got to figure out what ingredients you want in it and how much of each. and by far the most important question is stocks versus bonds.

There are other questions to answer, but that's the one you've really got to get right. It has the biggest impact on your long-term returns and how volatile the portfolio is going to be. Once you figure that out, putting together a portfolio, I don't care if you've got, you know, $500 or $500,000 or $5 million or $50 million. To me, the investing is basically the same. And you just need some U.S. stocks. I believe you need international stocks. disagree with me, but I think you need international stocks. And then you need bonds. And you can get those things with a handful of very simple low-cost index funds. And that's it. And you could,

in fact, get all of that in just one fund. Could be a target date retirement fund, could be like what Vanguard calls a life strategy fund that sort of mixes all that together for you. It's not hard. It's not complicated. The hardest part is once you've set that up, leaving it alone. We like I like to meddle with things. We're like, maybe I should do this. No, you probably shouldn't. But it's not complicated. Overall, in long term, this is the best part about this,

is like you said, the hardest part is kind of maintaining your patience, controlling your emotions. That's overall kind of 90% of this game once you have this all set up. So I think that is one lesson that a lot of people, especially if you're a new investor, you've got to learn that piece overall. Now, can you kind of talk about the asset allocation and how it kind of shifts over time, especially as you approach retirement age?

because you have a lot of investors that you talk to who are approaching retirement age or at retirement age. And that is one thing that I think a lot of people need to understand. It may shift over that time frame. And if it does, how would that shift? So my approach was for the longest time I had a 90-10 portfolio, 90% stocks, 10% bonds. That was my view of a, it's not the only answer, but it was my answer for a long-term portfolio. And I started to slowly change that when I got to about within 10 years of retirement. Again, there's no necessarily magic number.

It doesn't have to be 10. Some might wait until they're five years out. And to me, where I wanted to go for our situation was 75% stocks and 25% bonds as sort of the retirement portfolio. Now, I will say as retirement portfolios go, I would say that's a little bit on the aggressive side. I think for most people, somewhere in the 60 to 70% stocks is probably a good place to be. But a lot of it depends. It depends on how much of your portfolio you're spending each year in retirement. retirement. Some people don't need to spend any of it. They've got a pension, they've got Social Security, you know, and so they could maybe take some more risks with their portfolio or less risk. They have more options. But yeah, you definitely, I think most people, you're going to want to get more conservative as you get near retirement and into retirement. I would tell you, there are contrary views to that. There are some folks who are Dave Ramsey, actually, not to talk about him all day, but he's 100% stocked all the time. It's just not a view that I share, but I think it's worth noting. There are other people that have different perspectives on this, and folks need to

figure out what's right for them. I think for most retirees, you need to be more conservative, somewhere in the, I'll say generally 50 to 75 percent in stocks. The one thing I would caution is, we've by and large had a really good stock market for a really long time. We've had our moments when it didn't do so well last year, for example. But, you know, I think we can get too comfortable and think that this is just always how it's going to be. And it's not always how it's going to be. We're going to have two or three or a four-year period where we have losses in a row. That's going to happen again. And the 100% stock portfolio folks are probably not going to, they're going to be a little uncomfortable at that point. And I think that's a key to understand is

overall it's not going to be the same as it always was. Obviously, history is the only thing we have to go on. But going forward, it's something that you really have to consider some of the risks going forward and make sure that your asset allocation kind of shows that. I'm one right now where I'm more so a D10 portfolio, the Warren Buffett portfolio, as we like to call it. And it is one where I am, you know, looking at that long term, and I would consider that aggressive as well. And as time goes on, my entire plan is to shift that asset allocation to increase my bond exposure and my cash exposure so that I can have that overall be something where I have more bond exposure in that portfolio. So we mentioned kind of the Warren Buffett portfolio. We even mentioned the 6040 portfolio. Are there some portfolios out

there that you think a lot of people should, you know, consider? And what are some of the reasons for that? So I've come to believe that sort of the foundation portfolio involves four asset classes. I know there's the three fund portfolio, the Boglehead three fund portfolio, which is U.S. stocks, international stocks, and then usually a total sort of U.S. bond ETF or mutual fund. And so I start there, but I actually add tips to the bond portion, tips, you know, which protect us against inflation. Total bond funds, like B&D is one example from Vanguard, they don't include tips. because they track indexes that don't have inflation protected bonds in them. And so you need a fourth fund if you want tips.

And I think that's important. So to me, that's a solid foundation for anyone. You would change how much you have the two stock funds versus bonds based on how much risk you wanted. But to me, that's a solid portfolio for anybody. I mean, we could talk about other things you might add to it if you wanted to. But to me, that four fund portfolio is a great foundation. It is. It's a fantastic foundation. I think overall it kind of de-risks a lot of situations that could come up. And it kind of helps you kind of have that where you have that growth standpoint there with the stocks. And in addition, you can also de-risk with some of the bonds, the tips. So I think that's a great, great piece there. Now, you have great stuff on rebalancing portfolios. And you kind of dove into a bunch of different scenarios when it comes to rebalancing your portfolio. And we've talked about how, you know, John Bogle used to say you don't really need to rebalance your portfolio. And at the same time, other people argue, you know, the other side. So I think overall, do you think we need to rebalance our portfolio? And if so, what are some of the

reasons of why we need to rebalance our portfolios? You can think of rebalancing in two ways. The first is rebalancing between risky assets like stocks and less risky assets like bonds. So if you start, like you've said, you've got a 90-10 portfolio, stocks do really well. Maybe you're at 93-87. And so now you have a riskier portfolio. And by that I simply mean more volatile, right? And so here's the thing about rebalancing in that situation. It's probably going to result in less returns long term. Why? Because you're reducing your stocks from, in our example, from 93 to 90, and you're increasing

your bonds back up to 10, right? But you're doing that, not because you want to maximize your return. I mean, we all love to, but because there's a certain volatility that you're comfortable with. And you're willing, you were willing to accept slightly lower expected returns when you started with a 90-10 portfolio to begin with, right? So the idea is we want to keep that. And so we're going to rebalance. It could be once a year. It could be just when becomes out of balance by a certain amount, right? And I think a lot of times when people quote Jack Bogle, I think that's the

kind of rebalancing we're talking about. But there is another kind of rebalancing. And that is rebalancing within a group of all risky assets, right? So you may have U.S. stocks, international stocks. Maybe you have some small-cap value exposure. Maybe you love real estate. So you've at 10% in a refund at 10% in emerging markets, right? Well, these are all risky stocks. And I think rebalancing among risky stocks can actually help increase your long-term returns because you're effectively selling high and buying low. Again, the question becomes, how often do you do it? I think, again, you know, you could do it once a year. I tend to think what I call opportunistic rebalancing is maybe a little better, but a little more work. And that is, you know,

is only rebalancing once the portfolio gets out of balance by a certain amount. And I think I did a video on that a while ago. But that all may be far more detailed than your viewers care to, you know, I hope I haven't just lost everyone. But I think of rebalancing in those, they're different. And you do them for different reasons. But I think they're both important. I will say, the only caveat I'd say is, I've gotten to the point now where I won't rebalance if it forces me to incur taxes. So I've tried to set up my portfolio so that I can always do the rebalancing inside a retirement account. If I ever got to a point where I couldn't do that, I'd have to start selling investments in a taxable account. I'd probably think twice, depends on how far out of balance my

portfolio was, but I'd probably think twice about rebalancing if it triggered substantial taxes. That's a great point. The account that your investments are in really do matter when it comes as rebalancing, especially as your portfolio grows over time, because obviously if you're in a taxable account and you have, you know, $100,000 that you need to rebalance, well, all of a sudden that could be a massive tax bill in comparison to, you know, just having it in a Roth IRA or something along those lines. And so that is a great point there as well. And I do think, like you said, the riskier their portfolio, it can be really beneficial for people to consider rebalancing if you have a high risk portfolio because of that. So overall, there's a bunch of different options and we've kind

of talked about it too. And I think your video is great where you kind of break it down and you go through both sides, which I love, and then you kind of talk through, hey, maybe sometimes when your portfolio just gets out of whack by, you know, 5%, then you can rebalance that way as well. So there's just so many options for a lot of people. And I think that most people think, well, I got to rebalance quarterly or I got to do it every year. But sometimes you can make this much easier on yourself by just doing it when it gets out of whack by a certain percentage point. So I think overall that's a great point as well. Now, we've talked about some different asset allocations, and we've kind of talked through a little bit of bond exposure. Do you think that

think that all portfolios need bonds? Because like you said, I know a lot of people out there who are just 100% stocks, like we mentioned, Dave Ramsey, and maybe some other people out there are just 100% stock. So do you think all portfolios should have some bond exposure? I think most should. I can't say that a 100% stock portfolio is some, you know, terrible mistake if you've got decades to go before you need the money. But it requires you to hold the course, you know, stay the course when you've lost 50%. I mean, that's the thing I would say to someone who's in their 20s or 30s with 100% stock portfolio, you will lose 50% of that at some point. We don't know when and we don't know what will trigger it. It's always something different, but you should

assume that. And if you can stick that out and you may have to stick, you know, you may have to stick with that for a decade or more because it just can take that long to get back to where we were. Now, if you're that young and you're still contributing, say, to your 401K, every paycheck, your IRA, it's really a good world to be in because you're going to be buying in at lower and lower prices, you just have to be able to stomach watching the value of your portfolio fall. I think aside from that, most people should have some amount of fixed income. I just think it gives stability to the portfolio. I also think it helps us stomach the downturns. By the way, particularly if you're in retirement, and it's not so much, you're still going to lose money. Well, last year was a bad year for

stocks and bonds. But if you're 60-40 and stocks are down and let's say bonds are flat, you're still losing money, right? And you may lose a lot. But where fixed income, I think, helps a lot of people, myself included, is in retirement, you look at that number. It's okay, I've got X dollars in fixed income. It may go down a little bit, but it shouldn't completely, you know, crater like stocks can. And if I had to, I could live on that. For a pretty long time, let's say you're a 6040 portfolio, for example. Well, that 40% of fixed income, so it meets investment grade and U.S. government bonds and the like, you can live on that a fairly long time if you had to. And I think, at least for me, that gives me some comfort, helps me sleep at night.

And I think most retirees, there's exceptions, right? But most folks need that sort of comfort. 100%. And I think overall, a lot of people, you know, even if you're the type of person out there who you're hearing Rob say, hey, your stocks could dip 50% at some point in time in your life, which is very, very likely overall because it always happens historically. We've seen that it's happened over and over and over again. And like Rob said, you know, we don't know when it's going to happen, but it's definitely,

you know, something that could very well happen. if that sounds like it's a daunting thing for you, then you definitely want to have some bond exposure in there because it's just going to smooth out that ride over time. And I think for a lot of people, reducing that volatility, especially when it comes to the psychology of just continuously investing over time, is also going to be a big, big thing. What are some of your favorite ways to invest in bonds? Do you like investing in, you know, bond index funds? Do you like investing in, you know, specific things? Or what are some of your favorite ways to get that exposure? Yeah. So for my long-term investments, I just have a B&D a total U.S. bond fund. That's an intermediate term.

I don't know how much you want to go into the weeds, but it's an intermediate term bond fund. And then I get an intermediate term tips fund as well. One can argue short-term tips would be good as well. But it's just simple. So I have two funds. My bond allocation is roughly 50-50 between the two of them, right? Tips will prove to be the better bet if inflation turns out to be higher than the market

thinks it will be, right? and the nominal bonds, the B&Ds of the world, will turn out to be better if inflation is not higher than people expect. And so the idea behind owning both is sort of covered both possibilities. And then I do buy individual bonds for cash. So I have cash in T bills right now because there's no state and local income tax. Most of my bonds are in retirement accounts. But the cash, which will need here soon for spending, I keep in T bills for the most part. the rates have been good and very liquid market, no state and local income tax.

And I love the idea of splitting that allocation from B&D to those tip bonds as well. I think that's something I want to look into further. I think overall, I think that's one of those things that, you know, having those hedging both those downsides is going to be really, really important from that time frame. David Swenson, who passed away, but he ran the Yale Endowment Fund for a long time. That was actually his idea, at least where I first read it. And that was the idea you cover both bases on your bond. in your bond portfolio. I love that. That's one where I think, you know, diversifying those bonds a little

bit is going to be really, really important. Now, you mentioned that you have cash in things like T-bills, for example. How much cash do you like to keep on hand? Are there any other places that you like to keep cash? So normally, I just keep one year's worth of expenses. That's sort of my emergency fund. We have a little bit more now because we have some things that we'll be using it for in 2024. But yeah, right now there are a lot of good places to keep it. Again, I like T-bills. Money market funds just generally have been quite good. And if you're like a fidelity, Vanguard, they all have, you know, I think competitive money market funds. If you want to focus on those funds that focus on U.S. government bonds, you know, if you feel more comfortable with that, but those are good options.

Honestly, right now, no penalty CDs. Again, you could go longer term, but you're going to actually end up with a lower rate right now. But no penalty CDs, I tracked them on one of the, actually on door or retract them. And I was just looking at it before we started the show. And it was, I think the top rates are over 5%. Wow. You'll find some savings accounts the same way, same rates are similar. So all of those would be reasonable options. What you're not going to find in most cases is a great rate at your national bank. They're generally not going to have great rates. So you often have to go somewhere else. Exactly. And that's one where I kind of say, you know, your brick and mortar bank, you can keep like a small buffer, cash buffer there or something like that in that savings account. Outside of

that all of your emergency fund probably needs to go into something else that will have a higher rate of return, especially right now with these fantastic returns as we're recording this at the end of 2023. It's some of those fantastic returns that they have overall in high-yield savings account, like you said, CDs, all the money markets, all those different things. So you have, because of Dole Roller and because of your other websites, you have tested a ton of different tools out there when it comes to personal finance and investing. So when you research something like an index fund or you go out there and you research a different stock or something like that, are there any favorite tools that you have out there that you love to use? Yeah, so I use Morningstar a lot because

you can very quickly evaluate a fund, understand its expense ratio, how it's investing, you know, what its portfolio consists of. If it's a bond fund, is it investment grade? Does it invest in high yield debt? You know, what's its duration, which gives you an idea of interest rate risk. So it's very easy to use and very quick. You can look at the performance. You can compare it. The other tool I use a lot is portfolio visualizer. Both of these tools are free. They both. They both have paid versions, but I don't think most people need the paid version. But with portfolio visualizer, you can look at the historical returns either at an asset class level or you can put in your actual portfolio with the tickers, depending on how long the fund has existed, though,

there may be a limit to how much data they have, of course. But it goes back, the longest period, I think, is 72, and it'll show you, you can compare portfolios, you could add in withdrawal rates if you're in retirement to see how a drawdown on the portfolio would have performed. So honestly, those two tools alone, I think get you pretty much just about everything one could want in terms of evaluating funds and evaluating the performance of a portfolio. There are other tools like Empower, which is free, which I think is a great tool to understand your asset allocation. It won't really show you, it'll show you historical performance of your own portfolio for as long as you use the tool. It's not going to go back to 1972,

but it will show you your asset allocation in a way that I think is very, very, you know, easy to understand. So that's another good tool that I like. I second all three of those, because those are some where I think, you know, you can really, really get into the weeds when it comes to Morningstar or when it comes to some of these other ones. But I think they are really all you need to kind of get that baseline surface, you know, learning about each fund and all that type of thing. So I think that's really, really some great tips there. So you have a great video called timeless investing principles that never change. And I kind of want to go through some of these and see, are there any favorites that you have these timeless investing principles? because I think a lot of us need to hear these or be reminded of these sometimes, especially, you know, when we get to markets and, you know, volatility comes into play.

And we kind of want to think through, hey, we got to master this investing psychology. We want to stay invested, stick to our plan, that type of thing. So how can we kind of think through this? And what are some of those timeless principles that never change that you love to talk about? Yeah. So there's a lot. I'll just give you a few. But to me, one of the most important is to realize that when we're investing, and this is true, whether you're investing in an individual stock or an index fund, you're,

investing in a real business. Forget the stock market for a moment. Forget the ticker, forget what it's doing today. It's doing pretty well today, by the way. Forget all of that. It's no different than going down the street and buying a dry cleaner. And if you were going to do that, you'd want to see their financial statements. How are they making money? What's their profit? And what you would care about more than anything else is that company's profit, not how much someone off the street is willing to pay you for that business. But when you see that number flashing every day in terms of the value, we tend to get focused on that. And we have to realize we're an owner. We own a business. And that's ultimately what's going to drive our returns is performance. It helps at least a little bit not get caught up

into the highs and lows of the market. And I think that's really, really important. I think the other truth that never changes is that fees matter. Fees matter a lot when you think about compounding over time. And by and large, you can tell how good an investment is based on its fees. And it's one of the rare cases where the more you pay, the less you get. Exactly. And, you know, high fees, particularly in the fund industry, generally result in relative poor returns. And so, you know, you want to do your own due diligence and your own analysis. You want to look at something more than just fees. But fees matter a lot. And you're going to do well to keep your fees as low as possible. We have these list of things that we talk about called the million dollar impacts on your portfolio.

And fees are obviously one of the greatest ones overall. And we're going to. kind of teach people, hey, here's how you look for your fees and people have gone through this process and they've uncovered that they're paying two, three percent layered fees in some of their investments and they run the numbers on these and they say, oh my goodness, all of a sudden, I'm going to be paying $2 million with the fees over the course of my lifetime if I continue this investing plan. So it's one of those things. If you're listening to this and you've never looked at your investment fees, it is 100% one of the first things you need to do because it is a million dollar impact, depending on how long your investing time horizon is and what that opportunity cost is. So for sure,

that is a huge one overall. Now, I want to kind of look at retirement and social security here, because this is one that we started to talk about a lot more overall. And I think a lot of people just need to understand and think through, hey, what is this going to look like and what is this going to be like when I get to that point in time? And I always talk about this, but I think of, you know, once you start to build out this portfolio and you have your portfolio in place, it's one thing to kind of visualize over time and plan this whole thing out and you have a portfolio there. It's another thing to actually have to start drawing down on that portfolio. I think that could be somewhat of a kind of scary thing overall. And so that's one thing I always keep in the back

of my mind when I think through this. But I want to kind of talk through Social Security. So is there anything, you know, does Social Security impact your asset allocation at all? You know, if you start to take Social Security or how do you think about that when you get to retirement age? Yeah. So there's two schools of thought. And it applies not just to Social Security, but people will also look at annuities and pensions the same way. And they'll say, look, that's a very safe, secure investment like a bond, right? So let's figure out, if we were, to calculate the present value of Social Security, you know, for me or for you. And let's sort of take that amount and assume that's like we've got that invested in effectively a bond. And then do

our asset allocation with the rest of our money based on that. Let's say it's 15 percent. It equals 15 percent of your total portfolio. Some of them would say, okay, then for the rest of my portfolio, I'll put 25 percent more in bonds and the rest in stocks. I personally don't like that approach. I think it's complicated, convoluted. Who wants to sit there and try to calculate present value, what's your discount rate going to be, but more importantly, it's this. You can take your Social Security and all the other guaranteed forms of income. Great. Now, how much more do you need out of your portfolio each year? After you've cashed your Social Security check and your annuity check, how much more do you need out of your portfolio? Let's just say your portfolio is a million

bucks. That to me should drive your asset allocation because if you need roughly 4% of your portfolio, the 4% rule, right, then you should. should really determine your asset allocation of that portfolio based on that withdrawal rate. And going all the way back to 1994 and Bill Benkin in his paper that's so well known, you need probably 50 to 75% in stocks to be able to successfully withdraw 4% to start and adjust for inflation. All that guaranteed income is great. But if you still need 4% from your portfolio, to me, that's what we should use to figure out what your asset allocation should be.

And if you say, well, Rob, I don't need that much. Social Security and annuity and pension cover, I only need 1%. Well, then you can pretty much do whatever you want with your portfolio. You know, and if you want to be 100% stocks and you think you can stomach it, yeah, you're probably going to be okay because you're drawing so little from it. So anyway, that's how I prefer to think about it. After your guaranteed income sources, you've got that. How much more do you need from your portfolio?

And let that inform what your stock bond allocation should be. Agreed. And I would kind of let it roll. with that 4% rule the same thing. I would maintain that asset allocation for that 4% rule. I think it's going to be really important overall. Like you said, I think it just gets too complicated when you start to try to factor all of these different pieces in.

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I wonder if my head of office has a forever setting. An IG Private Wealth advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center. Find your advisor at IGPrivatewealth.com. So what are some other things that people should be aware of as they approach retirement age? Is there anything up top of mind that you think people should kind of understand before they, you know, enter retirement? And how should they think about that?

Well, there are a number of things. You mentioned Social Security. So you still have to figure out when you're going to claim Social Security. If you're married, when your spouse is going to claim Social Security. By and large, waiting later is generally best. But again, there are times when it's not. often it's the higher income earner for spouses that waits till they're 70, and the lower income earner takes earlier. You can use Mike Piper has a free tool if you know Mike, but open

Social Security to try to get an idea of when to claim. You do need to start thinking about if you retire before Social Security and certainly before RMDs kick in, I think you should give some thought to Roth conversions because you're probably going to be in a lower tax bracket until RMDs start and certainly before Social Security starts. So that's something. to think about, you know, once you hit 63, you need to start thinking about Irma, which relates to Medicare and what your premiums are going to be. And then the other thing I'll mention, I don't kind of throw a lot out here just randomly, but how you're going to actually create a retirement paycheck, right? I mean, figuring out the withdrawal number, you know, that could be hard enough,

but then where are you going to take the money from? And that's, there's a couple of things there. You can take it from taxable, traditional pre-tax or Roth or some combination. And that can change from year to year depending on, are you trying to avoid Irma? Are you trying to keep the amount of your social security that's taxed down? Are you trying to lower your future RMDs? So there's a sort of a lot of things going on. I mean, I tell you, this is much, much harder than saving for retirement. I mean, this is night and day different. And I would suggest that you either hire someone to help you or if you're going to do it yourself, get good retirement planning software. And I've used just about all of them. But I think, you know, the calculations are complicated enough.

that you're going to need some computer help at some point. Agreed, because as you can see, as you progress through this and you get to this point in time, this can be really, really complicated overall. And I think even so you're saying, you know, where's your retirement paycheck going to come from? That's one. We get a ton of questions, even from people in their 20s. They're already thinking about this, like, well, which account do I draw from first? How should I actually think about this?

And so it's a complicated thing. And I think a lot of people, they keep this in the back of their mind when they're kind of thinking through this. And it also is an impact if you want to retire early, maybe you're in the fire movement or something along those lines. We have a lot of listeners who want to retire early and become financially independent. And so that actually changes your equation as well. Do you pull from the taxable or you're going to look at the HSA or are you going to do Roth conversions,

all these different things that we kind of need to think about overall as we go through this process. So like you said, I think getting help at this point in time is really, really helpful. And you can get a, you know, fee-only CFP to help you out. You don't have to pay a percentage of your investments or anything like that. And I think that's going to be really, really helpful for a lot of retirees as they enter this phase. Now, when it comes to cash, we kind of mentioned cash and where you put your cash now. I'm the type of person who kind of is thinking through this long term and saying, hey, I want to, you know, have my, you know, mortgage paid off and I want to have a larger amount of cash on hand. How do you think about that when it comes to cash in retirement?

Do you think, you know, having a larger runway is important or are you okay with just having that one year of cash on hand? So I'm perfectly fine with one year of cash, but everyone's different. everyone's financial situation is different. I would say, if you go beyond one year, I start to think of it in terms of part of your bond allocation. So I'd be careful about saying I'm 60-40, oh, but by the way, I've got five years of cash, too. Right. So, okay, then you're not 60-40. You're maybe 50-50 or whatever, or even lower. So I would make sure you have sort of a bird's-eye view of your stock bond allocation, including the cash. I would include cash as part of the the fixed income. Now, again, if you've got just a six-month emergency fund or something like that, I don't know that it would matter that you include it in your asset allocation calculation, although you could. It certainly would probably be the purest thing to do. But certainly,

if you're someone that wants to hold a lot of cash, you've got to factor that in. I will tell you, too, not to get, Bill Bingham did actually do another paper on this after his 94 paper. And what he found was you can keep about 10% of your fixed income. So if you imagine, say, 60% in stocks, 40% in bonds, 25% of that bond portfolio, which would be 10% of your overall portfolio, could be in cash. He used treasury bills, and that's not going to significantly lower what he called the safe withdrawal rate. Interesting. Once you go above that, it can start to actually lower the safe withdrawal rate.

And just to keep in mind, right now, cash or T bills look fantastic, right? But long term, that's not true. Right. Long term, intermediate term bonds are going to outperform. So, again, that was his research. his findings, take that for what it's worth. But that seems generally correct to me. I would start to get uncomfortable having more cash than that. Exactly. And I think overall, one big thing that when I think about cash a lot of times, and this baby, just, you know, me personally and how I kind of think

about this, but I like to have enough cash on hand until I'm slightly uncomfortable. And then be anything beyond that I don't really want to have more cash on hand. Obviously, I want to have it invested or in something else. But that's how much I like to have. It's almost a feeling for me is like, right when I'm slightly uncomfortable. So a lot of people will tell you, hey, three months, six-month emergency fund, one-year emergency fund, but it's kind of a personal thing based on some of the things that you want to do there. You want to have enough on hand, you know, if you have a job loss or anything like that, obviously. But at the same time, that's kind of how I think through it, too. So I want to shift gears here to your portfolio. Now, we've talked about it a little bit before,

but if someone was looking at a bird's eye view of a pie chart of your portfolio, how do you kind of have your dollars invested into different things? So the overall stock bond allocation is roughly 7525. In terms of the funds, the funds we've talked about, I have a U.S. Total U.S. market fund, total U.S. market fund, total U.S. bond fund, a Tips fund. I've tilted the portfolio a little bit towards value, but not much. So I have some large-cap value fund, but again, it's relatively small portion. And then the only sort of curveball for me is that I do have a portfolio of individual stocks, which I know is totally contrary to the Boglehead low-cost index fund approach. And I own five stocks. Apple. I want to tell you what they are?

I'd love to hear it. Okay. So I own Apple, which I've owned for 10 years now since 2013. I have Berkshire. I bought Berkshire because I wanted to go to the annual meetings, which are a lot of fun. And I'm glad I did. I got to see Charlie Munger, who of course, passed away recently. It's amazing. And then I own Bank of America, Wells Fargo, which I bought when Bank were really depressed a couple of years ago, and I owned deer and company. The vast majority of it's in Apple. It's probably, I don't know, 80% of that portfolio. And it's just because it's grown and we give some shares to charity, but we haven't spent anything out of that portfolio. So, yeah, that's the stock portfolio. I love it. And I think that is one that overall, I still have

just a few individual stocks just like you. I just have a couple of them. And Apple is my longest holding overall. And like you said, it's kind of grown so much that I'll probably never sell it at this point in time just because I think I've had it for like 10 to 12 years now too. But it's one of those things where I just kind of factor it in almost the S&P 500 has so much Apple weight in it already. It's kind of like I just throw it into that. Right. Plus I own Berkshire, which is a heavy way to Apple. But I bought it back in 13 when it was trading. This is several splits ago. It was trading at over 700. And I don't know. They had some bad court or whatever that means for Apple. And it fell below 400 at the time.

and it just seemed like such an easy decision. Anyway, but sometimes I feel like it's better to be lucky than good. And that's just one that worked out. I just read this, this is off topic a little bit, but I just read this incredible stat that just the AirPods alone with Apple is worth more than Spotify, Airbnb, and like two other massive companies all combined is just the AirPods product alone,

which is just absolutely crazy when it comes to some of this stuff. And why I love owning the company also. And then once, I know for a long time I was owning it and then Warren Buffett started buying it, And that was like my double reassurance that, hey, we're in a great spot here as we do this. So I'm not a huge individual stock investor anymore. I used to be as well. But now I own just a small portfolio.

Berkshire and Apple are two big pieces of that. And originally my main goal also with Berkshire was to go to the meeting. I never got to go with Charlie going. And every year I say I'm going to go and then I don't go. But I definitely got to go, you know, to see Warren at least. We should commit to going next May. We should. Because I think that is one where I, every year I say I'm going to.

And if somebody will go with me, I think that's one where it would be much more. beneficial overall. Absolutely. Let's do it. That'd be great. Because I'm, that's one where I know, I've always wanted to go. I've, you know, Warren, I've been reading Warren Buffett's stuff since I was a teenager. So it's one of those things that I'm really, really excited for that. So that'd be great. Absolutely. Let's do it. Okay. So I want to shift gears here to some of the questions that we ask a lot of our guests. We get some really fun answers out of some of these. We could do them rapid fire or however else you want to do it. But these are some fun questions I love asking people. So what are some of your favorite books that you have read lately? Well, I just, I reread this book.

Charlie's Almanac, right? I have one at Charlie's Alman. Yeah, it's a great book, and I highly recommend it. And this version of it is fantastic. The pictures, the way it's published was phenomenal. You know, it's funny, I don't now, I don't read a ton of finance and investing books anymore. I mean, back in the day, I did. And your money or your life is a good one, which actually I just happen to have my copy here.

It's a great book. I read a lot of religious books in terms of ancient texts. Believe it or not, I know that's probably not very sexy. you're exciting. And I read a lot of science and math books. So, yeah, the more I think about it, this is not a fun answer to your question. But I like it, especially poor Charlie's Almanac. And your money or life is obviously amazing too. But poor Charlie's Almanac is one of those books that, you know, I will go back every single year and go through it. And it's one that you can kind of flip through too. And for a lot of people listening, it's not a cheap book. It's like,

I think I bought mine for 90. I think it's dropped like 70 bucks or something like that. They might even have cheaper versions now. But it's worth the money to me. I mean, I think it's one that it's definitely, definitely you can get a ton of wisdom out of that book for sure. The second one is what part of your work or your life makes you come alive? Well, I love doing YouTube videos. That just has worked well for me and I have a lot of fun doing it. Outside of work, my family and particularly our granddaughter, who's now almost three, she pretty much runs the house at this point when she's over and they live just a few minutes from us. In fact, we were at her school today for a sing-along. Amazing.

I've always heard people say that they could skip having children and just have grandchildren. That's what they would have done. I'm always like, oh, that's so silly. And I'm like, no, you know, you were right. That would have been terrific. By the way, I don't think my kids will watch this, so we're good. Perfect. That's perfect.

And I think, so she's almost the same age as my son turns three in March. So he, my youngest. So that's awesome. It's a really fun age of that age too. But sure, I'm in the thick of it right now. I have a five-year-old and an almost three-year-old. So we're in the thick of the, you know, I wish maybe I just want to skip the grandchildren phase, but we'll see.

The third one is what is your biggest fear when it comes to money? You know, I will say I don't lie awake at night worrying about too much. But when I do give it some thought, my biggest fear is what could happen that I'm not even thinking about. Right. The biggest, what's the thing that I don't know that I don't know? And the thing that comes to my mind is some sort of cataclysmic event that just shakes the economy as we know it. I don't know if that's a climate event, some sort of massive. computer hacking event, God forbid, some sort of, you know, I don't know, war that's, you know,

we have that now, but, you know, bigger. But is there some sort of event that I just can't even picture that's going to just sort of change the way we live? But after a while, it's like, yeah, Rob, there's a reason why you can't predict that. These are just some, these are the black swans, right? They, by definition, cannot be predicted. You know, I try to think, should I do something to prepare financially? And I, you know, it's like, should I buy crypto?

because I'm not a crypto investor, but I'm like, that seems silly. So, yeah, I don't prepare for those things because I don't know how to. But yeah, if I want to worry about something, that would be a good thing to worry about. That's kind of a big thing for me, too. I think I just kind of keep it in the back of my head. But like it things, you know, I look at history a lot and I see, you know, here's how it happened historically. And we know, probably going forward, it's not going to be exactly the same as it was historically. So, you know, what type of things are out there that could happen? Obviously, there was a lot of bad things that happened historically in the markets. And so what kind of things out there could kind of shift all these pieces?

And I think that's a really important thing to kind of just keep in the back of your mind so that you can kind of conservatively plan when it comes to leveling up your finances. And speaking of leveling up your finances, do you have any plans or any changes that you're going to make to your finances this year? Are you looking to just kind of maintain overall? I don't see any big changes. I've not made any adjustments to my asset allocation through any of the craziness from the pandemic forward.

So I haven't made any changes, you know, yeah, I don't see any big changes at all. I'm just going to try to, you know, my basic goal is to just stay out of the way of my investments and let them compound and not interrupt. It's like they're busy. They're working. Don't interrupt them. Don't bother them. Don't even look at them unless you have to. Exactly.

That is the way to go, especially, you know, as you get to retirement age, just kind of looking at, you know, some of these things that you just don't want to touch them. You want to let them compound over that time frame and kind of reap those benefits because that is where the benefits are really going to come forth and you'll be able to see them overall. If you could tell your younger self, one thing about money, what would it be? Yeah, it would be to focus on financial freedom. It's great to, you know, buy a house. These are important things maybe depending on your priorities or to have maybe a card that doesn't break down. That's pretty important. These are all important things. But achieving financial freedom should be beyond providing for your needs. It's achieving financial freedom. And it wasn't until I was, you know, whatever, 35 or 40 that that light bulb finally went off for me. So if I could go back to when I was 22 or 24 and talk to myself, that's what I'd be. saying. I'd probably also say invest in Berkshire Hathaway and eventually Apple. If I got to tell myself three things, maybe Bitcoin at the right time. But yeah, it would be focused on financial freedom. I couldn't agree more. And I think that is a really powerful lesson overall. Now, the last one is my favorite one. And it is one that I love some of the answers that we get from this.

But it is what does wealth mean to you? Yeah, it's just freedom. It's the ability, you know, to have a nice chat with you on a weekday afternoon and I'd have to worry about, you know, a boss or getting to work. Just the ability to set my day and do the things that I want to do, that to me is far more important than being able to buy a lot of things with money. Exactly. Overall, that is, I think what we all want is to have that freedom with our time, our energy, to spend time with people we love to go to sing along with our three-year-old granddaughter and be able to do all of this stuff. So I think that is the most powerful thing. Well, Rob, this has been absolutely amazing. Thank you so much for coming on.

Where can people find out more about you, your YouTube channel, even your book and all your websites, all those pieces? Yeah, so Robberger.com would be the website to go to or if you're just on YouTube and you search for me, you'll find me. And that's, YouTube is where I'm producing most of my content today. Perfect. And we'll link all that up down on the show notes down below so that you guys can check that out. Rob, thank you again so much for coming on. This has been amazing. Thanks, Andrew.

It was a lot of fun. Sorry. Investing, trading. That isn't a personality. You don't need the voice. You don't need the jargon. You don't need the podcast. You already know how to trade.

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