#219 – Foundational Investment Principles of the Retire Sooner Community

Wes Moss [00:00:51]:
I’m just going to do it here while we’re in the studio. It’ll take just a few minutes, but it’s part of one of our foundational investment principles, and that is just to do a little bit of planning. And then it’s fine to do planning every so often. Update a plan, do a new plan, figure out a new way to look at retirement. And if you can do it easily and accessibly in a couple minutes, why not? I find it so almost fun. And the roadmap we can give ourselves just lowers anxiety when it comes to a very anxious sport investing. Now, today we’re going to go through the Mallory joins us. Mallory Boggs producer been a little while since we’ve had you in studio.

Wes Moss [00:01:30]:
Thank you for being here on the mic.

Mallory Boggs [00:01:32]:
So excited to be here. Yeah, yeah. I feel like normally you got me like sitting in the corner making weird faces at you.

Wes Moss [00:01:38]:
Say that. What did you say? Say that again.

Mallory Boggs [00:01:39]:
Hang on. I don’t understand.

Wes Moss [00:01:41]:
And so today you are. So you can just say live if you don’t understand. As we go through this. Thanks. Thank you for being here. I want to reflect for a minute. And by the way, we have, call it five foundational investment principles for the retire sooner community that we want to go through. First, I want to reflect just a minute about what we as investors have just been through in the last, call it quarter of a century, 25 years.

Wes Moss [00:02:05]:
And I think that gives us some clarity of what we’re trying to do and help with here on the retire sooner podcast and help us tune out the noise. There is so much noise as if the world is burning down around us. Everything’s awful. The world’s broken like the media would like us to believe with that. See, in that same vein, I don’t use social media all that much? Yes, our team does. We post important things, but I’m not scrolling almost ever through any social media, and I did for some reason. So one of our other producers, Jeff Lloyd, will frequently send me really interesting market facts from an account that may be on x or somewhere. Maybe it’s Facebook, maybe it’s x.

Wes Moss [00:02:50]:
And he sent me one today about the number of houses in the United States that have gone over a million dollars. That number was 4% a handful of years ago, before the pandemic. Because we’ve had such housing appreciation price wise. Now it’s something like eight and a half percent of homes in the United States are worth over a million dollars or have a million dollar value. The whole point of seeing a chart like that that has grown dramatically over the past, call it five years and ten years, is that housing affordability has gotten worse and worse. It’s harder and harder for the everyday American on the median salary in the United States, or even a median high salary for the high earning category to be able to buy a home. So then what happened? As you can probably imagine, Mallory, what happened? I got stuck doom scrolling.

Mallory Boggs [00:03:39]:
Oh well, here’s a real question. Were you doom scrolling on Twitter or did you go straight to zillow and start looking around on there? Because personally I love to pull up Zillow and start looking at all the different houses.

Wes Moss [00:03:47]:
I love zillow. I have a couple saved searches of places I might think about maybe one day moving. And I do love that. I love Zillow, love being able to see houses, see what they’re worth. This morning I saw one of the, I don’t know which company it was, but it was one of those photo cars. Oh yeah, the Google Maps cars and where they have all the different lidar around. They’re taking pictures of your street. So that’s besides the point.

Wes Moss [00:04:16]:
This was only a few minutes. I only got stuck doom scrolling for maybe five minutes. But it was negative after negative after negative after negative. Housing prices, just everything on the economy, right? So you go and you’re reading something about the economy. The comments, of course were all negative. Then it was. The next iteration was not only have housing prices gone through the roof and we have over eight and a half percent of all homes in the United States, over a million dollars, the amount that we have to pay as Americans as a percentage of our salary has now hit all time high. To be able to buy the median house in America, it’s something like 40 plus percent of the money we bring home in the United States, 40% would go to a new mortgage if you bought a home today.

Wes Moss [00:04:58]:
Of course, if somebody’s locked in a much lower rate, that’s okay. That reminds me of another doom scroll, that the folks in America that have low mortgage rates are now able to rent their homes out for twice what their mortgage amount is. They’re going to go to smaller towns and they’re going to rent a house and they’re going to essentially make money every single month. And what’s that going to do? It’s going to perpetuate the housing issue because people aren’t going to sell and it’s going to cause more inflation. Then I saw a chart of rising bankruptcies in the United States. More and more companies have been.

Mallory Boggs [00:05:33]:
My point here is that, let me just be very clear. You’re giving me anxiety just going through all of these. I’m sitting here and I’m like, okay, well now it’s getting worse. And like, I’m like, I get why people aren’t moving. And like maybe that, like, you know, if you can rent out your house and make money, that’s good. But then you’re like, it increases inflation. It just sounds like it gets worse and worse.

Wes Moss [00:05:50]:
So the point of this is that you gonna, at any given time and again, here we are in a really good economy, in any given time, you can go and read 100 things that are bad no matter what period of time we’re in. Sometimes it’s even easier to make a bear case or a bad case for the economy. And things aren’t good. But it’s always that way.

Mallory Boggs [00:06:14]:
Is it kind of like that annoying aunt at the family reunion that you get next to and you’re just like, please stop talking about how terrible the world is never going to stop. Never, never.

Wes Moss [00:06:23]:
Social media is never going to stop. And that is again, one of the principles around why investing is tough. So whether you listen to this podcast today, next month, next year, it’s always the same. There’s lots of bad news that the world is happy to bestow upon you. And guess what? You can do it for free. The real cost is your time and the anxiety that provokes, the unnecessary anxiety that provokes, and what it does to diminish your long term market returns because it puts you in a state of fear. And we know we don’t do well. We don’t make good decisions when we’re in a state of fear.

Wes Moss [00:06:56]:
So we’ve gone through a rough 25 years and we’ve come out dramatically better than where we started. Ten years ago and 15 years ago and 20 years ago and 25 years ago. And think about all the craziness that we’ve been through. Massive bout of hyperinflation. Can’t deny that this completely unprecedented election cycle where we had an assassination attempt, we had an incumbent president drop out of the race, we’ve never seen this combination. It’s always something new. It’s always something that is new and unprecedented. Unprecedented is a scary word.

Wes Moss [00:07:35]:
COVID pandemic. Before that, stocks were down 30% in a matter of a month prior to that global financial crisis. An economic crisis. 2007, 2009, stock prices went down 55% for the s and P 500. Then, of course, before that, in reverse chronological order.com burst again. Stocks down 50% between 2000 2002. That’s all just in the last 24, 25 years. At the start of all this, right before.com went bust, the Dow was around 10,000.

Wes Moss [00:08:09]:
And despite all that carnage we’ve seen in the economy and the markets during that stretch, the Dow Jones stands at least as we sit here today, comfortably above 40,000, with a total return of over 490%, including dividends, or nearly six x, six times your original money. If you had invested back then, it’s almost an identical story. For the S and P 500, you go to January of 2000. It’s risen about 280% as I sit here today in price, but over 490%, including reinvesting dividends, again, six times your original money.

Mallory Boggs [00:08:47]:
That’s a nice argument to remind you that, like, listen, as much as the headlines love to come in and tell you how awful everything is, the sun will come out tomorrow. And what is that you always like to say? The army of american productivity is going to show up.

Wes Moss [00:09:01]:
The army of american productivity is going to allow us to fight another day, inch the football just a little bit forward every single day. And eventually what’s happened over the course of economic history and market history, markets eventually realize that even though there’s times when the ball gets pushed back and sacks happen all the time going through these numbers, and if you look at it from again, let’s just, let’s just do January of 2000 through June, the end of June 2024, for the S and P 500, it was a 492% gain. So almost 500% averaged a little over 7.5% annualized rate of return. Remember, that’s going through some really rough periods of time. During that early stretch of the two thousands, really through the early in the mid two thousands, really through the entire decade of the 2000, I was sitting.

Mallory Boggs [00:09:56]:
Here, I was like, I don’t know if you can really limit it to those. And then you got some things that got kind of funky there. It was not always a tough decade.

Wes Moss [00:10:06]:
And then you look at the Dow Jones industrial average, again, same exact period of time. January of 2000 through end of June of this year of 2024 through June of 2024, almost an identical cumulative rate of return if you’re reinvesting dividends, 492% again, a little over seven and a half percent on average rate of return year over year during that 24 25 year stretch. Looking at it, January 2010 through June of has averaged more like 13.5%. The Dow Jones during that same period of time has averaged about 11.9. So almost 12% both. Again, dramatically positive results over time. If we give it time. Investing isn’t rocket science, but it takes a, a really strong stomach and an enormous dose of time and patience and in many cases, mental endurance, mental toughness for the big bumps and the sacks and the declines that are inevitably along the way.

Wes Moss [00:11:13]:
If you’ve ever done a Jane Fonda workout or if you remember as a kid rocky running the steps, and if Michael Keaton is still Mister mom to you. But guess what? It’s officially time to do some retirement planning. It’s wes Moss. Weren’t those the good old days? Well, with a little bit of retirement planning, there are plenty of good days ahead. Schedule an appointment with our team today@yourwealth.com. dot that’s y o u, ryourwealth.com. so here are five of what I think are the most important financial pieces when we’re thinking about being investors over time to survive that journey. Number one, stocks mostly.

Mallory Boggs [00:11:56]:
Stocks mostly. What is, what is that supposed to mean?

Wes Moss [00:11:59]:
There are plenty of financial planning advocates that will tell you that you need 100% stocks at all times, because that’s what does the best over time. That’s our best weapon against inflation. The reality is that that’s not necessarily right for everybody. There’s almost too much volatility to handle mentally. If you’re just 100% stocks, some folks can handle it, particularly if you’re younger.

Mallory Boggs [00:12:22]:
Well, to that point, I think oftentimes it probably comes back to how much you have in the bank. I’m sure looking at like 100,000 versus a million. Seeing a 10% dip is dramatically different.

Wes Moss [00:12:33]:
I’ve talked to behavioral psychologists that don’t give that a lot of credence. They say that a 10% decline hurts whether it’s $100,000 and you’re down ten, or you have a million dollars and you’re down 10%, or you have 10 million and you’re down 10%. I tend to think that the lull of larger numbers makes things harder as you accumulate more.

Mallory Boggs [00:12:55]:
Yeah, being down $100,000 per year, perhaps.

Wes Moss [00:12:58]:
That’S up for debate. So again, I strongly believe in us equities. We talk about that here all the time. I still think that is one of our best bets to combat and rise above the pace of inflation that we’re all trying to, to fight against. I also realize that an all in, if we’re talking about stocks, an all in strategy just doesn’t work for everyone’s stomach. So I think we can use other areas for diversification, including safety assets. Including, as much as some people don’t like fixed income or cash, because it doesn’t earn us what stocks should over time. I think a certain percentage there is really important so that we can maximize what our equity exposure is to a tolerable level.

Wes Moss [00:13:47]:
That means if you can’t have 100% in stocks, how much in safety assets does it take for you to feel comfortable with your stock exposure? That might simply be three years worth of dry powder. Dry powder. Just let’s call it safety assets that we’re not worried about going down much, or if any, during a stock market decline. So take your annual spending, let’s say it’s $100,000 per year, multiply it by three. It’s $300,000. So if you have a million dollars, it would be 30% to set aside into safety assets, the rest in equities. That’s what really should, over the long term, protect you against inflation. So that’s number one, stocks mostly.

Wes Moss [00:14:30]:
Number two, patience and longevity. The shade that we’re sitting under here today, not maybe literally, Mallory, but it’s because somebody planted a tree a very long time ago. Long time ago, not a year ago, that’s a sapling. But at least ten years ago, and 20, and 30. And now we’re talking about some serious cover, serious shade. That’s just the reality of the world. Growth, like a massive white oak tree, simply takes a couple decades to really produce shade and protection, and being patient and giving yourself longevity to invest, those are both purely behavioral. There are no analytics involved there.

Wes Moss [00:15:14]:
Those are just behavioral practices, and they have almost nothing to do with picking any actual investments.

Mallory Boggs [00:15:22]:
Let me ask you, Wes, because you’ve been working with families for many, many, many years now. What habits have you seen for people who are really particularly good at this patience and longevity piece.

Mallory Boggs [00:15:37]:
I’m putting you on the spot.

Wes Moss [00:15:38]:
No, that’s an awesome question. So humans are inherently flawed investors. Just because we’re meant to protect ourselves, we’re meant to protect what we gather, what we accumulate. Go back 10,000 years. Imagine getting dinner and then dinner all of a sudden, because you were careless, is gone. The consequence is so big you’re hungry for the night, maybe you starve. So we have this. The thought around the whisper of danger, again, go back 10,000 years, and this really hasn’t changed much at all, is if something bad happens, think about how quickly that news spreads just through your little community, your tribe, your neighborhood, whatever it has been in history.

Wes Moss [00:16:27]:
If there’s something bad happening, everybody finds out really quickly. So humans are inherently just cautious and pay attention to bad news, pay attention to scary things that could hurt them. That inherently makes us react to anything that looks not so good in the economy of the stock market. So we all inherently have that gene to some extent. I think what I have found is those who have less of an antenna that goes up on any little bit of bad news, I’m not going to call this aloofness, but those who are able to ride through these storms, their reaction to news in any kind of news, if it is slightly more muted and less reactionary than the general public, if I had to make a bet that’s an investor, over time, that probably does better. You could also say that group, there’s another group that is just slightly more optimistic in general, that they look at bad news and they say, oh, I think in general this will get better or will solve itself. And they don’t reactionarily go into the darkest of rabbit holes. They think of, oh, we’ll climb out of this.

Wes Moss [00:17:44]:
Mallory, I don’t know if I’ve ever had this question. Those are a little less reactive or not overreactive to general happenings of the world, and or those who are a little optimistic that are a little bit more optimistic than the general maybe population, with the thought that things will solve themselves or get better. And those are the investors that tend to do well because it allows them to stay invested with patience and longevity. Number three, again, we’re talking investment principles here on the retire sooner podcast. A large dose of diversification. I think this has gotten a lot easier to do over the years. It was pretty easy 25 years ago when I was first becoming really an investor, and now it’s gotten really easy 30 and 40 years ago. Highly diversified mutual funds.

Wes Moss [00:18:44]:
They were expensive, but they were almost an essential component of any long term investing strategy. But they were expensive. Today, mutual funds have largely shifted to their, call it their ultra low cost cousins, exchange traded funds, ETF’s. If you have just a collection of ETF’s, each one of them typically is going to include several hundred stocks. Not all ETF’s, but a lot of ETF’s. I would say have 100 stocks or more right out of the gate. That gives you a massive diversification oriented, call it chassis that can allow you to continue to drive for a very long time. I certainly think that owning some individual stocks, that is still fine, but not at the expense of diversification.

Wes Moss [00:19:38]:
And thinking about today versus 30, 40 years ago, there are hundreds, really thousands of different ETF options that can give you lots of diversification at ultra low costs. Meaning to buy a basket of stocks today can cost you a 10th or two tenths of a percent, versus 30, 40 years ago when ETF’s really didn’t even exist. A mutual fund that’s going to be one, two, or even 3% per year, huge win for investors. That’s made getting real diversification. So you eliminate your single stock risk more accessible and less expensive than ever.

Mallory Boggs [00:20:19]:
Can I do a side note really quick here? I remember. Cause we’ve been working together now, Wes, for a decade.

Wes Moss [00:20:26]:
Over a decade.

Mallory Boggs [00:20:27]:
Yeah, over a decade. And I remember coming on board.

Wes Moss [00:20:29]:
We were still. I was still writing. I remember when you were new, I still hadn’t even published. You can retire sooner than you think.

Mallory Boggs [00:20:36]:
You hadn’t.

Mallory Boggs [00:20:37]:
No, it was.

Wes Moss [00:20:38]:
You were helping. I remember you helping as we were editing that book.

Mallory Boggs [00:20:41]:
Yeah, it was right before it came out. I think that was like, I think your big push for bringing in some help, which I’m so grateful for, and it’s been so fun.

Mallory Boggs [00:20:50]:
But my point with this, I was.

Mallory Boggs [00:20:51]:
Just going to say it’s interesting thinking about the ETF’s and how the cost has lowered. I also remember whenever there was that big shift with the pricing from brokerage accounts where it was like it used to cost, what, $10 a trade, and that just kept dropping.

Wes Moss [00:21:05]:
That’s another great point. Right when you probably started. When I started, there were still pretty big commissions to buy or sell any given stock. 25, 30 years ago could have been a couple hundred dollars to buy a. A few hundred shares of a stock. And then the discount brokerages came into the picture, the Schwabs, Fidelitys TD Ameritrades e trades of the world, and started making that more accessible. And it was, I think at one point it was under $50, and it was $29, and then it was 19. And eventually, over the course of another decade or so, everybody just went to zero and it became essentially free to buy and sell stocks.

Wes Moss [00:21:46]:
ETF’s not only the internal costs. Mallory, good point here have come down the cost to acquire XYZ ETF has essentially gone away for most investors.

Mallory Boggs [00:21:59]:
All the more reason to diversify wisely.

Wes Moss [00:22:01]:
Yes. Number four, investing is both easier to our last point and harder, I think, than it’s ever been. Think about the information flow that we’re subjected to on a daily basis today. Information is free. It is infinite. It’s limitless. It expands every minute of the day.

Mallory Boggs [00:22:23]:
On top of that, you can find an opinion for just about everything from.

Wes Moss [00:22:26]:
Every which way, shape or form and investment options. Again, highly accessible. And lots of diversification opportunities have evolved. Financial products have evolved to become extremely inexpensive. However, all of those positives, I think, have just led to a more confusing and maybe a more challenging environment to have patience in or to have patience for. So the question is, can you navigate this on your own? Can you navigate through all these principles completely on your own? I think the answer is absolutely yes. And I don’t know the exact numbers here. I’ve read multiple studies that have given me different answers on this.

Wes Moss [00:23:12]:
What’s the percentage of people that do get some help? I’ve read 30%. Maybe it’s 50%, depending on your net worth. Maybe it’s two thirds of folks. I’ve never gotten a perfectly acceptable answer here on the amount of investors who end up using some sort of guidance or coaching. But there is a very large group of folks in the investing population that do get some help, that do get some coaching. And I think for the group that does, I think that someone alongside of you can be invaluable. It’s just like I think about exercise and working out. Lots of people exercise perfectly well on their own.

Wes Moss [00:23:50]:
They know exactly what to do. They have the discipline to do it. They have a three day a week running schedule and a two day a week lifting schedule, and the rest of the time they’re active. And then some folks need a little bit of help. And it could come from a podcast, it could come from an app, it could come from an actual running group, it could come from a trainer, could come from a coach that’s kind of making you do the right habits or guiding you to make sure you’re doing the right habits. So I think it’s just like any other behavior we have that we know is good for us if we can do it on our own. I think the environment set up better today than it’s ever been, but it’s also maybe a little harder than it’s ever been because of the confusion. And there’s lots of people out there that can help guide you through this if you find somebody that really can be that coach, and it can be invaluable.

Wes Moss [00:24:41]:
Number five, and notice we haven’t talked about any particular investment here still.

Mallory Boggs [00:24:46]:
Oh, my gosh, we haven’t.

Wes Moss [00:24:48]:
We’ve talked about ETF’s, we’ve talked about mutual funds, we’ve talked about stocks. But we. Original principle number one, mostly stocks, mostly, is a foundational principle. And the good news is we can find low cost ETF’s and there’s plenty of them to do that.

Mallory Boggs [00:25:00]:
And then you get that nice dose of diversification that we have for number.

Wes Moss [00:25:04]:
Three, all at the same time.

Mallory Boggs [00:25:05]:
There we go.

Wes Moss [00:25:07]:
This is where it all, I think, comes together. Maybe this is the glue for all of these. Know where you’re driving towards or know what you’re driving towards, aka some sort of plan. Now, for some people, this may not be the most fun thing in the world to do any sort of financial plan or write down your exact money and life goals. I find that it’s hard for people to come up with that, with those life goals, those money goals.

Mallory Boggs [00:25:36]:
These are probably not the same people that love sitting down at the beginning of the new year and saying, what are my New Year’s resolutions?

Wes Moss [00:25:42]:
Which, and again, I’ve been, maybe I’m, I guess, inherently a planner. So I’m one of those people that always writes down my yearly goals January 1 or two. I think it’s a lot of fun to do that, but some people just don’t want to do it. I get it. Benjamin Franklin, of course, said you failed a plan. You’re planning to fail. We know that. But how do you just get.

Wes Moss [00:26:04]:
What are the resources to do this? Yeah.

Mallory Boggs [00:26:07]:
Because is it just most people sit down and, like, bare knuckle it? They’re just like, I want to retire. You need some kind of way to know how much you actually need.

Wes Moss [00:26:16]:
Yeah. Okay. So there are a couple of ways to think about this. One, of course, any sort of financial advisory team can do this. And if you go to any sort of financial planning firm, or usually an investment firm, you’re going to get. You can easily get done a 25, 35, 50 page plan that maps everything out just by putting in the basic variables of what makes for any sort of retirement plan. How much we think we’re going to need in the end. How much we have today, how much we’re going to save along the way.

Wes Moss [00:26:46]:
Assumed rate of return, an assumed rate of inflation.

Mallory Boggs [00:26:51]:
That one’s hard to guess these days, right?

Wes Moss [00:26:53]:
How much? Well, again, the variables are easy. The question is, do you get them? Are they correct over time? That’s a little scary.

Mallory Boggs [00:27:03]:
That’s a little terrifying.

Wes Moss [00:27:05]:
So we’ve got think about the answers to those questions. They shouldn’t be that hard. But then there’s the thought, wait a minute. What if the numbers are not right? And here’s the reality. Of course they’re not going to be right, because there’s nothing to predict the future at all perfectly. So we just have to have reasonable assumptions, reasonable goals that we can enter in and we can get some sort of financial plan. There are plenty of online tools that do this, too. You don’t have to go to a financial advisory firm to get this done.

Wes Moss [00:27:34]:
You can go and do planning online. You can go to 100 different financial planning tools. I’ve gone through the gamut of the online tools, and there’s some good ones, there’s some not so good ones. Some are seem to be pretty straightforward, some are pretty complicated, and it’s almost like they’re trying to lose you. I even went out to go try to find some sort of software team to just put a good calculator on our website so that people could do financial planning, and I didn’t really find it. Now, I know there are plenty of institutional software products, meaning that you buy them as a company and you license them and your advisors can use them, but they’re almost so robust, you can’t just stick them online and have somebody go through it. So you have to have some sort of modified way to do some planning. And I’ve gone through phases where, and I still love this, it’s harder to replicate online, but I love just drawing out a financial timeline, sitting down with a family saying, okay, when you’re 62 or 67 or 70, when are we taking social? Let’s at least put in a date, map that out, what social is.

Wes Moss [00:28:47]:
Maybe there’s a pension that drops in another period of time. Here’s what we’re starting with, savings wise. Savings plus annual savings and an assumed rate of return in five years, seven years, ten years, 15 years. Here’s about what you should have. Use the 4% rule and back into this is probably about what you could be able to spend. It’s a little hard to recreate just this drawing out of a financial timeline on the web or on an app. So looking at dozens of different financial plan software, we just build our own. So we decided we’re just going to build our own here for the retire sooner team, and we’re going to make a combination plan that is part lifestyle.

Wes Moss [00:29:29]:
And then, of course, how do you pay for that lifestyle? So it’s a two part plan. Two odometers. What’s your odometer score on a scale one to ten on your lifestyle goals and habits? And what’s your financial odometer look like? Is it a two, three, or is it at a ten? And our team just sat down and built it. Now it’s taken several.

Mallory Boggs [00:29:48]:
Yeah, I love it.

Wes Moss [00:29:49]:
The better part of it.

Mallory Boggs [00:29:49]:
I love it. You’re like, oh, yeah, we just sat down and built it when it knocked it out in the afternoon. No, no. This thing, this took a lot of brainstorming and iterations and brought in some graphic help. And it’s a bit of a beast, but it’s beautifully simple, I think, for the end user.

Wes Moss [00:30:04]:
Right. I think it’s very, very. So it’s called the happy retirement planner. And I look at it as a really nice and quick sketch of what’s important to get to your financial goals. Lifestyle, how do you pay for it? And I think the quote that I repeat in my head, more than any other quote in the financial world over the last 20 some years, is the enemy of a good plan. Is the dream of a perfect plan. The enemy of a good plan is the dream of a perfect plan. Guess what? There is no plan that can ever be perfect because we can’t.

Wes Moss [00:30:40]:
We don’t know what’s happening over the next five years. Ten years, 2030 years, we don’t know how long we’re going to live. We don’t know how, when our kids are going to, what college is exactly going to cost. We don’t know. We don’t know exactly how much we’re going to spend when we stop working and all of those unknowns stop people from starting a plan. Well, I don’t know my exact, most common pushback in any sort of plan. I don’t know what I’m going to spend in the future. Okay, what do you think you might spend? What are you spending now? Oh, we’re spending ten grand a month now, but I have no idea what it’s going to be in seven years when we retire.

Wes Moss [00:31:21]:
There’s no way to exactly know. Well, if ten works today and in five years, all the kids are going to be out of college. Is it safe to say maybe ten is a good place to start or a little lower? Maybe it’s eight grand. But remember, we’re going to increase that for inflation. So not going to be perfect, but let’s look at something that kind of makes sense. And that’s how this plan works. I’m going to actually go through this. First of all, you can find it on yourwealth.com dot.

Wes Moss [00:31:55]:
Y o u rwealth.com dot. You can just go to. It’s right on the homepage. Go down and click on happy retirement planning tool. Or you can go to the resources tab and find another resources tab. I’m going to go through this live. So it starts out and this is, again, I think this ends up being a helpful guide that you can easily quickly modify, but it gives you a good sketch of about what you’re going to need as long as you can just come up with a couple of numbers. So I’m going to go through this and do a quick financial planning exercise here.

Wes Moss [00:32:29]:
So I come to a page. It’s got a cool picture of a beach and a hat. Looks like exactly where everybody wants to be hanging out on the beach. No riff raff, no jellyfish on shore, no people with boomboxes right next door.

Mallory Boggs [00:32:43]:
It’s truly the dream retirement spot is what I’m hearing.

Wes Moss [00:32:46]:
This is a dream. So you put in a email, you hit start, and you go through five quick questions that are lifestyle oriented. How do you currently feel about your overall social connectedness? I don’t see my friends at all. I occasionally see my friends. I frequently socialize. So I’m going to just say I do an okay job here. I’m going to pick the middle one. How do you currently feel about your physical activity and your health? I’m just going to pick the middle.

Wes Moss [00:33:13]:
How many core pursuits hobbies on steroids do you have? Next question. I’m going to say I only have two to three. I’ve got arguably, I do have a list of these. I’ve got like ten of these malheard.

Mallory Boggs [00:33:25]:
This is just a demonstration. This is just a demonstration. Also, to be very clear for our listeners, especially if you’ve been listening for a while, I expect to hear a lot of happy lifestyle pieces come into play.

Wes Moss [00:33:36]:
Next question talks about activities. What gives you a sense of purpose? We answered that question. And then finally, how confident are you in your overall retirement planning, in your sense of financial freedom, in your future income sources? I’m just going to pick kind of the middle point here and go next. Then it brings me to the financial questions. I’m just going to assume this is a plan for Jim and Susan. So let’s just say Jim is 40, he wants to retire at 65. So I type in 40 and 65. Let’s say Jim’s pre tax income is $100,000.

Wes Moss [00:34:10]:
I put in $100,000 current. How much does Jim, how much do Jim and Susan have saved? Well, they’ve got, let’s call it five hundred k. And we’re going to say how much per month are they going to save? Let’s say $1,000 a month. Again, round numbers here. And then we come into the spending. This is the tough one, right? This is the, we know we’re not going to get it perfect, but let’s get it. Let’s get a good number here. If Jim and Susan are pretty comfortable at $8,000 a month, maybe you could say in retirement, I only need seven, maybe six, but let’s just keep it at eight.

Wes Moss [00:34:43]:
If this is what you’re spending today, let’s just keep it at $8,000 a month. That’s the monthly goal in retirement once you stop working. Now, right now, the way this plan, and it’s interactive, so every time we put in a number, it changes the chart dynamically. This shows Jim and Susan are going to need about four and a half million dollars, but these numbers only get them to about 2.9. So the chart showing some red. There’s a deficit here. But there’s one more really important question to answer. How much retirement income do we think we’re going to get? Now, assuming, again, not many folks have pensions in this day and age.

Wes Moss [00:35:21]:
So let’s, particularly if Jim’s 40. So let’s assume it’s just going to be Social Security. You can, again, another number we may not know exactly. Well, I don’t know exact numbers. I can’t put it in. You can get close, you can go to SSA dot gov, get your Social Security statement. It’ll give you a really accurate number for 62 or 65 or 67 or 70. And let’s assume again this is Jim and Susan together.

Wes Moss [00:35:44]:
Let’s say together, one of them gets 2000 a month, the other gets 3000 a month. It’s five grand a month. So let’s put in $5,000 a month that Jim and Susan are going to get. Now we have life expectancy. If you hit show more, you can change the life expectancy, the pre retirement rate of return, the post retirement rate of return, the inflation rate, et cetera. But if you just leave these standard, I think the standard here is just a post retirement rate of return of 5%, trying to keep it conservative. Now, all of a sudden, because of that Social Security number, the savings number needed goes way down. It’s not 4.5 million, it’s more like 1.7 million because of the monthly income.

Wes Moss [00:36:33]:
Now, this shows that Jim Susan are going to have almost $3 million, but only need about 1.7. To do what? Fund the eight grand a month. And that’s what we’re trying to do until they are 95. Now, all of a sudden, this chart starts to work, and now all of a sudden, we’re getting something that looks like a plan. We hit next. Get an odometer that shows the lifestyle habits on a scale one to ten. How we doing financial one to ten. And puts all of this together into one, really just one five page plan.

Wes Moss [00:37:08]:
You hit download PDF, and wham, there we go. It’s a good plan. Go back and change the numbers. Get a little more aggressive on saving, get a little more conservative on the expected rate of return. Maybe you want to run it at a 4% rate of return. Maybe you want to put inflation at 3.5% instead of 3%. But it’s a tool that will get you the semblance of a guide and the semblance of a roadmap and the semblance of a blueprint so that you know where you’re headed, which is the glue to all of these financial principles. Number five, know what you’re driving towards, aka a plan.

Wes Moss [00:37:48]:
So you don’t have to use the happy retirement planner, but some sort of plan, in my opinion, just goes a very, very long way. Does that seem doable? Mallory?

Mallory Boggs [00:37:59]:
I think that sounds very doable.

Wes Moss [00:38:01]:
Okay, it’s doable. And it’s kind of fun just to go through.

Mallory Boggs [00:38:05]:
That helps, too, honestly, it’s the kind of thing I feel like it would.

Mallory Boggs [00:38:08]:
Help me sleep better at night.

Wes Moss [00:38:11]:
That’s exactly right. A little direction can go a really long way. Now, wealth accumulation, it’s for the freedom of worry that we all seek. We want freedom of worry, and that’ll never go to zero. Live in a big, scary world, worried about a lot of other things beyond just money, paying for all the lifestyle habits and activities that we want to engage in, but we’re trying to lower that worry as much as possible. And I think most of us, not all of us, but most of us, see wealth or accumulating wealth as just some higher level of freedom, do what we want when we want to do it. Even if you have plenty of money and you still worry and don’t feel financially free, then you’re not really all that wealthy. So the goal of planning and the goal of investing towards your goals is to put you in a place where you’re able to, to your point, Mallory, just sleep well at night, have a little a better sense of where financial freedom really seems to kick in.

Wes Moss [00:39:17]:
So that’s the first part of wealth. It’s the freedom. The second part of wealth is to give you a glide path to get to the point where your money is now working, just like you were working in your twenties, thirties, forties, fifties, sixties. Now your money is trying to take that working role and do it for you. And then I think part three is probably just legacy when it comes to wealth. Again, not important to everyone. So legacy important to some, not everyone, that you want your next generation, your kids and maybe your grandkids to have at least some financial freedom or leg up as well in what seems to be a world that just gets a little more difficult every day. So put it all together, we’ve got time, patience, planning.

Wes Moss [00:40:07]:
Maybe that’s just it. Some part of this, of course, is investing. You have to know something about that. But the greater part of the equation, I think, is just how we behave as investors. Time, patience, planning. I think that’s 70% of the battle, 80% of the battle. So, yes, here on the retired senior podcast, we spent a little bit of time talking about and trying to remind ourselves about these very topics, me included. Talk about the power of time, the power of patience, the power of planning.

Wes Moss [00:40:40]:
But it’s a little less exciting to talk about the year every week. That’s why we do interviews and we have guests. So it’s not just about reminding you to be patient. I think if that was it, it’d.

Mallory Boggs [00:40:51]:
Be a really boring podcast, right?

Wes Moss [00:40:54]:
It would be. I don’t even know if I could do it every single week. I don’t even know if I have the patience for that. But today’s episode is that reminder. And I think anytime you get tested and you’re thinking of not being patient and your investing doesn’t seem like it’s worth all of the mental anxiety that comes along with it, the emotional pain that watching markets go up and down and being worried, maybe today would be that reminder. So again, the investment principles here we covered today. Number one, stocks mostly. Number two, patience, longevity.

Wes Moss [00:41:28]:
Three, a large dose of diversification. Number four, investing is both easier, probably, and harder than it’s ever been. Five know what you’re driving towards, aka some sort of plan. So put it all together. That’s why we’re a mix here on the retire sooner podcast, lifestyle habits and guests that can guide us in that realm, and then the foundational behaviors that we need and the and the general market instruments that we can use. That should give you and me and us here, Mallory, you and me, a good chance, or a better chance at the financial freedom that so many of us seek to sleep well at night when it comes to money sense that we’re all looking for. That’s the retire sooner podcast. Some magic tries not to be a lot of hype, just the boring essentials that we all need on this financial journey that we’re in together.

Mallory Boggs [00:42:28]:
Hey y’all. This is Mallory with the retire sooner team. Please be sure to rate and subscribe to this podcast and share it with a friend. If you have any questions, you can find us@westmoss.com that’s wesmoss.com. you can also follow us on Instagram and YouTube. You’ll find us under the handle Retire sooner podcast. And now for our show’s disclosure.

Mallory Boggs [00:42:48]:
This information is provided to you as a resource for informational purposes only and is not to be viewed as investment advice or recommendation. Investing involves risk, including the possible loss of principal. There is no guaranteed offer that investment return, yield, or performance will be achieved. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions for stocks paying dividends. Dividends are not guaranteed and can increase, decrease, or be eliminated without notice. Fixed income securities involve interest rate, credit inflation and reinvestment risks and possible loss of principal. As interest rates rise, the value of fixed income securities falls. Past performance is not indicative of future results.

Mallory Boggs [00:43:28]:
When considering any investment vehicle, this information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investment decisions should not be based solely on information contained here. This information is not intended to and should not form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment tax, estate, or financial planning considerations or decisions. The information contained here is strictly an opinion and it is not known whether the strategies will be successful. The views and opinions expressed are for educational purposes only as of the date of production and may change without notice at any time. Based on numerous factors such as market and other conditions.