Financial Horror Stories, Vol. 5: The All-Monster Edition

Speaker A: A hidden gems rule breaker halloween crossover today on the motley fool hidden gems investing podcast, I'm Robert Brokamp, and besides ghosts, goblins and gourds, one tradition for me around this time of year is appearing on our sister podcast, Rule Breaker Investing, hosted by Motley fool co founder David Gardner. For the past five years, I've told financial horror stories on David's show, including this year in which I discuss seven money monsters possibly lurking in your closet. Given that today is Halloween, we figured we'd replay that episode for the Hidden Gems Investing audience. And if you haven't yet, make sure you subscribe to the Rule Breaker Investing podcast. So settle in, dim the lights, grab a hot beverage, and get ready to hear about ways to slay some dollar denominated demons.

Speaker B: Um, remember that opening scene from Twilight Zone, the movie? Two guys driving down a rainy highway at night telling each other scary stories. Dan Aykroyd and Albert Brooks, one finally turns to the other as he pulls the car over. Hey, you want to see something really scary? Well, I won't spoil what happens next. I saw it in the theater in 1983 when I was 17, and I can tell you it scared me. Well, I'm not Albert Brooks and I don't have Dan Aykroyd this week. But I've got the next best thing. The Motley Fool's longtime retirement expert Robert Brokamp, returning for our 5th annual Halloween Fright Fest. And this year, we're changing things up. The ghosts of financial mistakes past have given way to seven monsters that may be lurking in. Dear listener, in your own financial life, some you know, some you may never have suspected. And all of them are worth confronting before they come for you. Financial Horror Stories, Volume 5, the All Monster Edition. Only on this week's Rule Breaker Investing,

Speaker C: it's the Rule Breaker Investing podcast with Motley fool co founder David Gardner.

Speaker B: Welcome back to Rule Breaker Investing. It's getting scary out there. Halloween is approaching. Although I do wonder whether Halloween starts a little earlier every year. I think I say this every year. I feel like I started seeing those enormous skeletons and animated zombies on people's front lawns. I'm going to say now back in late August. At this rate, give it another decade and it'll be Halloween year round in America. And to the roughly 1/5 of our listeners joining us from outside the United States, welcome to our peculiar American tradition. This is Financial Horror Stories, Volume 5. It's the All Monster Edition. For the past four years, my good friend and longtime fellow fool, Robert Brokamp has joined me around Halloween to share true financial horror stories, often involving famous people whose financial decisions came back to haunt them. This year, we're changing up the formula. Robert has dreamed up seven financial monsters, each representing a danger that could be lurking in our own financial lives. Now, the monsters may be imaginary. The financial dangers, though, are very real. And as always, we're here to do more than frighten you. Each monster, I think, will come with a lesson and, we hope, a way to defeat it. And that's how we make the world smarter, happier and richer, even at Halloween. A quick reminder that next week is our October mailbag. We'd love to hear from you. Send your stories, questions, your thoughts, your scary stories too, to rbiool.com you can also find us on Twitter X bipodcast. And a quick reminder, we're also accepting audio submissions now. So if you want to bring your own scary voice and share a scary thought or scary story on next week's mailbag, your audio submission is also welcome@rbiool.com all right, so let's open the crypt, summon our first monster, and welcome back the man who has made frightening our listeners an annual tradition, Robert Brokham. Welcome back to Rule Breaker Investing.

Speaker A: Sweet Cheez, its David. It's great to be back. I love this tradition. I know we're entering the best time of the year when I get that slack from you saying, are you ready? And I'm always ready

Speaker B: and you are always ready. And for four years, as I mentioned at the top, Robert, you've brought us true stories of financial misfortune. Some of the world's most famous people. It turns out we can all make mistakes. This year though, I asked you to create the monsters yourself. I understand you have brought seven, is that right?

Speaker A: This is true. I have seven.

Speaker B: Seven financial monsters. And I'm trusting, Robert, that each one has something useful to teach us about our own money. But before we unleash them, I have one question for you. Should our listeners be more afraid of the monsters they already know about or the ones they don't even realize are lurking?

Speaker A: I would say probably more of the latter because, you know, anyone who's listening to this podcast is probably a relatively sophisticated person when it comes to money and investing. So they probably already prepared for some of these. But. But there are going to be a few that while they know are out there, they may not be doing enough to prepare.

Speaker B: And that is a sufficiently unsettling thought. I think we're going to keep the identities then of these seven creatures under wraps until each makes its appearance. So, Robert Brokamp, let's meet monster number One. What is the title of the tale about this monster?

Speaker A: Our first monster we learn about in the legend of 401 hollow. And, you know, we're all about investing here at the Motley Fool. And the number one reason people invest is to become financially independent to retire or to work because they want to, not because they have to. And unfortunately, the evidence is that many, if not most Americans aren't saving enough to retire when and how they want. So I'm going to give you a few examples of the evidence here. So, according to a report From Vanguard, only 41% of Gen Xers and 42% of, uh, millennials are on track to have enough to retire and maintain their current lifestyle. According to a report From Morningstar, only 46% of Americans have a fully funded retirement if retiring at age 62. But that figure does go up to 55% if they retire at age 65, which just shows the power of working a few extra years. And according to the recently released Survey of Consumer Finances from the Federal Reserve, the median amount in retirement accounts for all American households is just $106,000. Now, that figure is brought down by the younger households. But if you look at the median amount for those who are ages 55 to 64, so those who are close to or already, or already in retirement, the median amount they have is $239,000. So that's a decent chunk of change, but it's only enough to provide around $10,000 to $12,000 a year in retirement. So, while everyone wants to retire, many people need to be doing more to make sure that they will retire on time.

Speaker B: Robert, do you want to retire?

Speaker A: I would say yes and no. So, for example, I love what I do. I feel so fortunate to do what I do. And I think it is very important to maintain both physical and mental exercise. And what I do is very intellectually stimulating. I can see a point where I do want to take more time off to do some of the adventures with my wife that she and I have always dreamt about.

Speaker B: Yeah. And so whether that equals retirement or not, or what we sometimes even mean by retire can vary from one person to the next. And I realize, I mean, I'm somebody who is on record for saying, I don't want to retire. I never want to retire. Um, I think we even said that in one of our early Motley fool books. We told a story of our two grandfathers, one of whom retired and sadly died at a Younger age and then the other who never retired and lived to an age that most of us can only imagine living to. So that was admittedly sample size of 2 for me, but that was a little bit of my, um, what does retire really mean? And yet I realize vanguard and the numbers and you always do such a good job with this, Robert. You're always bringing data. Whatever you think retirement is, dear listener, you probably want to have more than $100,000 or even $200,000 as you start to approach, uh, whatever you think your so called quote, retirement age, end quote, is.

Speaker A: Yes. In fact, the evidence on whether retirement is good for us is actually very mixed. Um, and there are some studies that find that when people retire, it could increase the chances of dying sooner or at least depression. Um, on the other hand, it does depend on your job, Right? Some people do have very physically arduous jobs and for them retiring sooner, um, is good for them. But so really it's up to you and decide what retirement means to you. What do you want out of life? What gives you a purpose and to some degree, for a lot of people, working provides that.

Speaker B: You're absolutely right. And so I think a mix, right? I think we all want to lead whatever the fun life is that we want to lead. And I think that's probably going to involve both some form of labor for the benefit of others as well as, I don't know, golf for your own enjoyment. Although, Robert, it's certainly iconic these days, stories of people who dreamed of playing golf in their retirement and after six months, while they still like golf, they're kind of bored, wondering what they should actually be doing. So I think that that also figures into the legend of 401k Hollow. So you've presented, Robert, some scary numbers. If we were to give this one a happy ending, give us some, some positive thoughts or an action that all of us might benefit from as we look at this monster.

Speaker A: So retirement is really a math problem and a pretty complicated math problem because you're mixing all kinds of variables, right? The size of your portfolio, how much you're saving, investment returns, inflation when you claim Social Security, things like that. And you need a tool to run those numbers. So I think everyone should. The Internet is full of free retirement calculators. Most of them aren't very good, so I'm going to recommend a few that do cost some money, but I think they're worth it. So one is Bolden B O L D I N. Another one is Maxify, and another one is Projection Lab. And these will cost 100, $200 a year, but I think they're worth it. I should disclose that, uh, Motley Fool Ventures, a sister company of the Motley fool, has an investment in Bolden. Um, but all three are good. Many people use more than one, because that way you're getting sort of a second opinion. And if you find that you are behind, there's some steps you can take. Right. You could max out your retirement accounts. We're reaching the end of the year here. If you have not maxed out your IRA and 401k, you can do that with every raise. Aim to increase your savings rate. So, you know, if you're saving 10% now and you get a raise, try to save 11%. And then the following raise, save 12%. And then another thing is to commit to investing sporadic money. And by sporadic money, I mean money that just kind of shows up. It could be a bonus, maybe a reimbursement from your flexible spending account, maybe a tax refund, maybe even an inheritance, but that you commit every time you get that, you put that into your IRA and 401k to get you caught up if you're behind.

Speaker B: So instead of Ichabod Crane, Ichabod Better Financial Brain.

Speaker A: Oh, I love that. Very nice, Very nice.

Speaker B: Now, thank you. Thank you for humoring me. And that is the legend of 401k Hollow. Thank you, Robert, for helping us hear it and then think about how to do better. Let's move on to number two. Now, you've submitted me the. The titles of each of our monster stories. It's not immediately clear whether there is a monster in number two. Robert, what title have you brought us to scare us? Item number two.

Speaker A: I'm calling this one the Curse of the Broken Crystal Ball. Uh, and, you know, like, we're talking about monsters. And I would say, really what I'm thinking about is sort of conditions or things that could be lurking in the background that could undermine some aspect of your personal finances.

Speaker B: Sure.

Speaker A: And with this one, what I'm talking about here is when you use any kind of retirement calculator or retirement tool, you have to put in many variables, and some of them are predictions about the future. What's my portfolio going to earn? What's inflation going to look like? What am I going to use spending in retirement? And that could be a tough question to answer if you're 10, 15, 20 years from retirement. And seemingly small differences in assumptions can lead to significant differences in outcomes because they're compounded over many years, if not decades. So I think it makes sense to be pretty cautious with your assumptions. I'd rather be wrong in such a way that leads to me having more money at age 65 than, than less money. But I'd like to focus on one assumption that the majority of workers end up being wrong about and it's when they think they'll retire. As many studies have found, most people actually end up retiring sooner than they expected, and that could lead to a financial shortfall if you thought you were going to work to age 65 and you end up retiring sooner than that. So, for example, uh, according to the Transamerica center For retirement studies, 58% of retirees retired sooner than planned. And that's nearly identical to a survey conducted by the Society of Actuaries, which found that 59% of retirees retired earlier than anticipated. Now, this isn't all bad news because many people retire sooner because they had enough money. In fact, we're seeing that now. A research note from the bank of America published in August pointed out that the labor participation rate is dropping, which is the percentage of people who are of working age but actually working. And they attributed it to what they called, quote, a stock fueled retirement party.

Speaker B: Mm. Um,

Speaker A: but most of the people retire sooner for less good reasons and the two biggest healthcare reasons. And it could be your own health or maybe your spouse's, and you have to be a caregiver. And the other one is job loss. So a, uh, 2018 study from the Urban Institute found that slightly more than half of workers in their early 50s lose a job, and only one in 10 find a job that paid as much as they were earning before they got laid off. And it takes them longer to find a job, likely due to ageism. So many of them just get discouraged and they decide to retire, even though maybe they were not financially ready to do so.

Speaker B: And that is why it's the curse of the broken crystal ball. Crystal balls on their own don't seem very threatening to me, as monsters and broken ones seem even less so. Until we start thinking about what you really mean, and that is that our predictions don't always come true. I do appreciate that you gave an example of like, something that didn't come true for good reasons, like, oh my gosh, what a great market, or I've invested well, honey, we can retire, whatever that word means, earlier than we had been planning. But I absolutely appreciate the difficulty of the opposite situation where you do lose a job and have a harder time getting one. So, Robert, I know you're helping us on each of these, get past it. Scare away, uh, the monster of story number two. What do you got?

Speaker A: So one of the most important variables you'll put into one of these tools is what your portfolio is going to earn. We all know that the stock market has earned 10% per year over the long term, much better over the last 10, 15 years. I think, though, if you're running your retirement numbers, you should assume something no higher than 8%. I personally only use 6% in my portfolio, but of course, I'm someone who's getting closer to retirement, so I'm not all stocks, mostly in stocks, but I am starting to play it a little more conservative. But then the other thing too is when you are projecting your retirement age, I think it makes sense to assume three years sooner than you think. And this comes from a survey from the Employee Benefits Research Institute. It said that when they asked workers when you're going to retire, most said 65. When they asked retirees, when did you retire? They said 62. So I think run your numbers, assuming you're going to retire three or sooner, and if it looks like you have enough, you're in good shape.

Speaker B: All right, so the good news when using a good proper financial retirement calculator is you can change the numbers and you can see the effects of those things. And under promising and over delivering for oneself is, uh, doesn't just work in business. It works with retirement calculators as well. You know, one thing that I, I remember, and I know we've talked about this before, probably on this podcast, this is something that comes naturally to you. There's an old saw about how you subtract your age from a certain high number, and that's the percentage that you should have in stocks. And I think that number, we used to be something like 80. And so the idea is, you know, if you're 60, 60 from 80 leaves you with 20, which means you should only be 20% in the stock market. Now, at some point, either I or my brother Tom and one of our radio shows started saying, we're all living longer. Is that the right number? 80? And I think we started saying a hundred. Do you have any viewpoint on what the magic number is? If in fact there even should be a magic number?

Speaker A: Yeah, I think most people are agreeing that it should be higher than 100, at least 110, maybe 120. And you can see, even when you look at the changes in the allocations of target date funds for people who are getting close to or in retirement from folks like, you know, Vanguard Schwab, Fidelity, all those folks, they're moving it up in recognition of the fact that someone who retires in their 60s could live another 20, 30 years. And they need stocks to help their portfolio last that long.

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Speaker B: All right, let's move on to title number three. I like this one. I think it speaks for itself. What have you entitled Monster number three?

Speaker A: This one is the Taxes Chainsaw Massacre.

Speaker B: I like that Taxes is even still an anagram, right? You could still work out the letters and it's Texas, but you turned it into taxes.

Speaker A: Um, yes, I fully intended that, David,

Speaker B: so I can maybe guess at this, but we're not to leave our listeners guessing. Robert, tell us a scary story.

Speaker A: So when it comes to investing in taxes, there's an old saying, it's not what you make, it's what you keep. And another way to think of that is that you're not the only owner of your portfolio. Uncle Sam is a co owner and he eventually will want his share in the form of taxes. However, you can limit how much of your returns you lose at taxes through the art of what's called asset location, which is deciding which investments should go in which types of accounts. And it starts with understanding the tax characteristics of different investments. Some have built in tax advantages, right? If you buy a stock and don't sell it for 20 years, you don't pay taxes on that until you pay long term capital gains, right? Um, if it's in your taxable brokerage account, other investments can raise your tax bill each and every year. If it's in a taxable brokerage account, we're talking about like bonds, for example. And then the next step is to understand the tax treatment of, uh, the different types of accounts, IRAs, 401s, regular brokerages, the difference between traditional and Roth. With all that knowledge in hand, you kind of put the most taxing of your investments in your tax advantaged accounts and you use your regular brokerage accounts for the investments that come with tax benefits.

Speaker B: In a lot of ways, this one makes pretty obvious intuitive sense, but the devil can be in the details. There are a lot of different accounts. Um, many of our listeners have multiple different types of accounts. They have different tax strategies or restrictions and then there's like how much to put in each one, et cetera. Robert, you have made a career of looking over members, especially Motley fool members, portfolios or plans. What is your overall perspective on this one? Are we generally getting it right? Is there an obvious mistake many of us are making?

Speaker A: I think the biggest mistake is that we focus on what to buy and not where to buy it. And as I will get to in a later monster, uh, story as well, I think people should be favoring Roth accounts a little bit more than they are. Roth accounts being the ones that grow tax free. Um, I think the easiest way to think about it really is just to break up the three different accounts. So, you know, with the taxable non tax advantage accounts, you use these for the investments with built in tax advantages. Again, low or no yielding stocks that you plan to hold onto for several years, maybe low turnover stock funds, maybe bonds with tax benefits like municipal bonds or U.S. government savings bonds or I bonds because you can choose to have those tax deferred with the traditional tax deferred retirement accounts, those are the ones where you got a tax break when you put the money in. But the withdrawals are going to be taxed as ordinary income. I would say you use those for the tax inefficient investments, but that don't have the highest growth potential. So corporate bonds, maybe blue chip dividend paying stocks, um, stocks that you like, but you don't expect them to be your highest growers. And then the Roth account is the tax free account. The withdrawals are tax free if qualified. You put the investments that you believe have the highest growth potential in that account because that's the tax free account, that's the one you want to grow the most.

Speaker B: And since you entitled this the Taxes Chainsaw Massacre, I just want to be scary for, for a moment. Robert, Chainsaw massacre. Let's focus on that phrase here. Could you give me just a few sentences or a paragraph length look at somebody who's doing Everything wrong. What does the opposite of everything you just said sound like?

Speaker A: So, for example, you could have your real estate investment trust in your taxable brokerage account. REITs provide a good deal of income, and those dividends generally are not qualified. So you have to pay the taxes at an ordinary income rate versus a qualified rate. Eek. Yep. And then you would have cash or bonds in your Roth account, meaning it grows very slowly, but that's the one you want to grow the most.

Speaker B: All right. And of course, our talented producer Bart has been providing and will continue appropriate sound effects throughout this episode. Bart, I'm quite sure you want to rev that chainsaw one more time after what Robert just shared.

Speaker A: And I'll add one more thing. When it comes to mutual funds and ETFs, some are more tax efficient than others. And one way to determine the efficiency of your funds is go to Morningstar, enter the ticker, click on the price tab, and you'll see what they call the tax cost ratio. And that's how much of the return is lost over a three year, uh, period for someone in the highest tax bracket. If you have a fundamental in which you are losing more than 1% a year to taxes, or even worse, 2 to 3%, those are the types of funds you should keep in an IRA or 401k if you're not losing that much. And this is often the case with index funds. You know, maybe 0.3%, 0.5%. That means it's probably pretty tax efficient and it's okay to have that in a taxable brokerage account.

Speaker B: All right, on to number four. Now, I'm going to let you give the title Robert in a moment, but before we do, since this one involves zombies. Are you a Walking Dead fan? Did you watch this series or any of its spinoffs?

Speaker A: It's actually kind of ironic I didn't. Even though I love a good zombie movie, and I think it came down to that, was really popular when I had kids at an age where I did not feel comfortable watching that type of show when the kids could walk in.

Speaker B: Yeah, so you do. Love you some zombies, but you're not a Walking Dead fanboy.

Speaker A: Now, you've talked about retirement. One of the things I plan to do in retirement is watch all these shows that I missed out on, um, when my kids were growing up.

Speaker B: All right, what's the title at number four?

Speaker A: I'm calling this one Beware the R and D Zombies. So in the previous segment, I said that Uncle Sam may be a co owner of accounts and it's not the case with Roth accounts, right, because they're tax free. But traditional retirement accounts are taxable. But on top of that, you may get to a point when you are forced to make withdrawals and pay some taxes. And these are known as required minimum distributions, or RMDs. And they kick in at age 73 or age 75 if you were born in 1960 or later. And you know, some of our younger listeners, they may hear this and sound like, eh, I don't have to worry about that because I'm so far from my 70s. But the reason RMDs are such a pain for older investors is because they didn't worry about them when they were younger. I recently met a member, um, at our recent fool fest, who says his RMDs are now five times higher than the salary he earned when he was working. And one of his biggest regrets is that he didn't build up more of his Roth assets when he was younger. Because Roth assets not only are tax free, but they're not subject to RMDs. So the question for you, dear fool listener, is whether RMDs will be a major nuisance for you or just kind of a minor nuisance. Um, and the way to do that is there are RMD calculators available out there on the Internet. Um, you first of all have to calculate how much you're going to have around your RMD age. And then it will calculate how much you have to take out each year. And you'll get an idea of whether, again, this is just going to be kind of an inconvenience or you're going to be forced to take out way more than you need, which will increase your tax bill, increase your adjusted gross income.

Speaker B: And

Speaker A: the more your adjusted gross income goes up, the more you will lose out on some tax deductions and tax, uh, credits and increase the odds that you'll have to pay more for Medicare.

Speaker B: That is scary,

Speaker A: Very scary. And people just don't think about it because they're so happy to have this tax deferred growth. And they're not thinking of how not only are they going to pay taxes in the future, but they're going to be forced to take that money out

Speaker B: and bring zombies back into it again. Robert, it's not exactly clear what the zombies are or how zombies are playing here.

Speaker A: So, uh, the way I thought about this is whenever you see a zombie movie, it always starts out with just a couple of zombies, right? Just one person. And then there's like Two or three. And then all of a sudden you're being chased by a town full of zombies. And that's the way RMDs are in that first year. If you're 73, it's like you have to take out 3.7% of your portfolio. That's no big deal. But once you reach like age 80, you have to take out 5%, 85, more than 6%. And you add that percentage on top of the growth of your portfolio, and your actual amount you're going to have to take out could be increasing by 40% to 90%. Again, paying way more in taxes than you expected.

Speaker B: Wow. So in real world terms, and obviously zombies are real. So this is the real world. I mean, just seeing a single zombie in your zip code, wherever you are, that's much more cause for concern that you're realizing at that moment. Am I right?

Speaker A: That's absolutely right. You know, there's never just one zombie.

Speaker B: There's never just one zombie. And so help us get out of these potentially horrendous circumstances. Robert, financially, what should we be doing?

Speaker A: So again, it comes down to seeing whether this will be, uh, what I call the RMD Tsunami for you or not. And there's those calculators, but also the tools I mentioned, Bolden, Projection Lab, Maxify. They also will give you a hint of whether you should be concerned about that. If that is the case for you, the solution is to contribute or convert more to Roth assets. Also, you should be using your traditional accounts for your lower returning investments. So if you have a diversified portfolio of cash, bonds and stocks, use your traditional accounts for the cash and bonds. That'll kind of limit the growth. Once you reach age 70 and a half, you can do qualified charitable distributions, which means you move money from your traditional IRA directly to a charity. That money is excluded from your income, so you don't have to pay taxes on it. Plus, it offsets your RMDs dollar for dollar. And if you're married, you should tap the oldest spouse's accounts first because you're limiting the growth of the portfolio. Um, that will be subject to RMDs sooner. And then the final thing to think about is if you're going to delay Social Security, maybe you retire at 65, but you're not going to claim Social Security at age 70 because you know the benefit grows for every month you delay. Use your traditional accounts as a Social Security bridge. So you're draining those accounts, maximizing your Social Security, so those accounts will be worth a little bit less Once you hit the RMD age,

Speaker B: there's a lot to think about there. And this is just one of our seven monster stories this week. Robert, thank you for yet another scary story. And over the years you've written so many different articles and stories, whether it's really your retirement newsletter back in the day, you're providing, as you just mentioned, full fest last weekend. Um, do you have like an iconic feature, favorite thing by you that I could search Google, find on the Internet and see like that is the definitive bro or is there, I don't know, a reduced monster version of this that anybody could encounter online if they search? Robert Brokamp

Speaker A: I will say the best source of information of the things that I am talking about is the Motley Fool Hidden Gems investing podcast. I do the Saturday episodes. So all those episodes I'm talking about just about every one of these topics.

Speaker B: That is fantastic. Our, uh, sister podcast. Much bigger than this one, by the way, the Motley Fool Hidden Gems podcast. And Robert there on Saturdays.

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Speaker B: Let's move on to number five. Scar us in some new way.

Speaker A: This one I'm calling the Silence of the Engrams. And I talked about this last year, David, but sometimes, frankly, I feel a little bad about making up these goofy titles when we're about to talk about something that is very serious. Um, so I'm no neuroscientist, but as I understand it, an engram is the physical or chemical trace that a specific memory leaves in the brain. And as we age, our ability to activate them declines. So the monster here I'm talking about is the specter of cognitive decline as we get older. And I recently came across a study. It was published in the Journal of the American Medical association back in 2021, but I only stumbled across it recently. It was entitled the Financial Presentation of Alzheimer's Disease and Related Dementias. And what it found was that Medicare beneficiaries, so those 65 and older who go on to get diagnosed with dementia begin missing bill payments as early as six to seven years before the clinical diagnosis. They also had an increased risk of developing a subprime credit score starting two and a half years before the diagnosis. And missing payments is just one potential financial mistake that happens when we have some sort of cognitive decline. Right. We might start making bad investment decision, not paying our taxes, falling for scams, making estate planning mistakes, allowing quote unquote helpers into our lives who are actually not there to help. And I think what this study showed is that these mistakes begin many years before an actual dementia diagnosis. And, and by then a lot of the damage has already been done. So the bottom line here is that we need to keep an eye on our older relatives.

Speaker B: Mhm.

Speaker A: And as we get up there in years, we need to build in safeguards for our own finances so that we don't make big mistakes if we begin to suffer from some sort of cognitive decline.

Speaker B: And um, having already had some of my own engrams silenced, I assume I'm not the only one who could relate to some aspects of this. Increasingly, as Americans and really fellow earthlings, we're not relying on our memory in the way we once did. I was reading a wonderful book called Moonwalking with Einstein by Joshua Foer, which is all about human memory. And it was reminding me that before there were books, uh, yeah, people had to remember stories, they had to remember facts, they had to remember everything because they didn't have any repository these days. We have the Internet, we have our note systems, we can search and find lots, which means we don't rely on our memories in ways that we once did. So a lot of us have chosen in a sense to silence some of our engrams. I am m wondering in the same way that we go to the doctor maybe once a year and get those tests and see some real numbers, is there anything like that for mental acuity as we age? Because I truly would hold my hand up and willingly volunteer to take a sort of how with it. Am m I test each year just in the same way I do a blood test with my doctor and that would make it easier for my relatives, those who come after me, younger people who are reliant on me, to know, especially if I've agreed ahead of time with them, that they should start taking more responsibility at the age of 60. I don't feel like that's, that's now, but I'm very comfortable with the idea of enabling that when it should happen. Are there any tests like that or systems or structures in place, Robert? Or are we just making up, uh, something that should exist?

Speaker A: No, there are tests. In fact, you know, if you've been paying attention to presidential politics over the last several years, you've probably heard about these tests because various presidents brag about how well they do on these tests, but they're real tests. And my mom's 87 and she does these tests, and she probably shares her results. So there are tests like that.

Speaker B: So that's at least one way to scare away this monster. But what else do you have in mind?

Speaker A: Yeah, so I think the most important thing is to first of all update your estate plan, right? And most people think of estate planning as preparing to pass on your assets when you pass away. But it's not it that. It's not only that. There's mostly that, but you do other things, like get a durable power of attorney, maybe set up a, uh, trust and various healthcare directives so that if you do become incapacitated, someone can step in and manage your finances. But the other thing to do is really just establish a second set of eyes and maybe a third or fourth, and again,

Speaker B: that's it.

Speaker A: Do it for your older relatives. Hopefully they'll allow you to do that. But then you start doing it for yourself when you feel like that time is coming. And there are many ways to do this right. You actually can, um, grant people read only access to your online account. So just to see the bank account and the brokerages to make sure everything's okay, you could sign up for a service like Quicken or Monarch Money or Empower, which aggregates all the account information so you see it all there and then give other people access just to keep an eye on things. Um, you could work with a financial advisor. And especially if you're getting up there in years and you are the person who's handling all the finances, but your spouse isn't really interested in doing that. You might want to begin a relationship with a fee only fiduciary financial planner. So that relationship is already going, but then that financial planner will also be keeping an eye on things you'll often read in the, uh, industry news about financial planners or being the first people to notice that someone's making too many withdrawals or making bad investment decisions or hadn't done their taxes, things like that.

Speaker B: You know, I, having observed this in some familial circumstances and seen friends as well, one of my conclusions is that over the course of our lives, for much of our lives, when we're completely with it, technology is generally our friend. We're able to use things like Quicken, which didn't even exist when you and I were in our early teens and all of a sudden started popping. And we've used the Internet, we've used apps, we've used calculators, and these are our friends as we get much older. I've watched technology go from friend to foe for older people. And obviously the fleecing of older people by scamsters is, uh, a real thing. And just in general, I especially those who are a little older than I am, and I'm 60, and maybe even those who are a little younger than I am, I am encouraging you to start recognizing that if technology is running a lot of your life, make sure that you give, as Robert just mentioned, read only access at least to one or more with it trusted younger people. Because I have watched technology go from friend to foe. I think it's actually kind of a natural human curve of existence, part of the narrative of the modern day today.

Speaker A: And the final thing on this, I just want to point out, is that we all have to have the grace to accept that this could happen to us. There have been studies that have looked at how financial literacy declines as we get older. Um, and it does go down. Um, but our confidence in our ability to manage our finances doesn't. And we just have to be open to the fact that at some point our kids, our spouse, somebody's going to come to us and say, listen, I think it's time that I help you with your finances. And it might be hard to hear that, but have the grace to accept it because it's not going to be easy for them to do it and you don't want to make it harder by fighting them.

Speaker B: Yeah. And it's even better than, rather than have the grace to accept when they have that conversation, maybe have it with them, initiate it with them in advance of that, so that it's just a continuation of a conversation, not a stressful moment for all. So thank you. Excellent idea. I think a lot of us are hearing you and feeling that one in particular, because that one goes beyond Mere Finances, a lot about life. I really appreciate the silence of the engrams. Story number five. Okay, moving on to number six. Now, I'm going to say the title for this one because you did give them to me ahead of time. And then I'm going to ask you a question. So the title is 28 days later, and then you put in parentheses after it and you still haven't done it. But it makes me bravely want to have a conversation about 28 days later. Now, I've. I've not really seen any of these, but there was 28 days later in 2002 and then in 2007, because we're a sequel culture. We like sequels. They came up with 28 weeks later, and then there was 28 years later. That came back in 2025. And my understanding, and I haven't seen actually any of these, is there's even 28 years later, the Bone Temple, 2026. So which of these is it really, Robert? Days. Weeks? Years.

Speaker A: I'm going with days because I do love that movie. It is a zombie movie. I highly recommend it takes place in England. Um, but what I'm going to talk about here could apply to months and years. Um, and so the monster here is. I wanted to think about something that is an issue for myself because sometimes when we do these episodes, David, I fear that I come off as maybe a bit scoldy and holier than thou.

Speaker B: No,

Speaker A: I think it's important to acknowledge that we professional fools aren't perfect. We've all made mistakes in terms of our portfolios and our personal finances. And the monster in my closet is procrastination. I am very add. I am a congenital procrastinator. Um, though I'm much better than I was, say, 20 years ago, thanks partially to you, David, because you may recall me asking you for productivity tips. I remember us sitting at a Starbucks and you were showing me some of the ways. And you were one of the people who introduced me to David Allen and his getting things done method, which I found extraordinarily helpful.

Speaker B: As did I.

Speaker A: Fact is that procrastination has a cost. There are investments I delayed making reimbursements I waited too long to get, bills I paid too late. And I'm not the only one, because there are studies that have documented the cost of being a procrastinator. A study from TIA CREF Institute surveyed 50 people or surveyed people 50 and older and categorized them as procrastinators and non procrastinators.

Speaker B: I'm glad that they surveyed more than 50 people.

Speaker A: Yes, that

Speaker B: just didn't seem like it was worth even doing

Speaker A: so. The procrastinators, uh, are 9.3 percentage points less likely to have a will or a trust.

Speaker B: And

Speaker A: those who procrastinate report significantly lower retirement satisfaction and describe themselves as being in worse health. And then in a study titled Procrastination Present Based Preferences and Financial Behaviors, Jeffrey Brown and Alessandro Pevatero found that people who waited until the very last day to sign up for their health plan were also less likely to sign up for their retirement plan and took longer to do it when they eventually got around to it and contributed less money to the account. The bottom line for me is that when I look back at some of my biggest financial mistakes, that came down to procrastination and maybe what you could call its cousin, disorganization. So one of the best things I did for my finances and my career and my home life and my marriage is work to become more organized and more productive.

Speaker B: That is fantastic. And the reason that I love David Allen is because I found myself so in need of being more organized and more productive. Especially it was really sort of my mid-30s, when my kids are all coming of age a little bit and we're helping run the fool together and all the, all of us, um, especially when you end up with a family, it starts to kids outnumbering the parents. You start finding that you have to be, I did. You have to be more productive. You have to be more organized. I was a huge procrastinator. I'm also happy to say with you that I'm better 20 years later. David Allen, a past guest on this podcast anybody can Google if you want. He, by the way, is the genius behind Getting things done. That's the title of the book that Robert and I have both appreciated and it's been a chronomized to gtd. And I know there's some GTD fans listening to us for the fun of it. Robert, the various things that you've picked up from David Allen over the years, and now you're 20 years in. What would be an example of a productivity or other helpful life tip. That stays with you and I'll share one too.

Speaker A: So a couple. So I think the foundation of the GTD system is that you have to have a system, a, uh, collection system that collects everything because your brain is not a good way to store information. Um, so you have to have that system. And I've tried several until I came down with one that works for me. Um, and the other one is, if it can be done in under two minutes, just do it. And there's so many things about our finances that, that falls under. Right. Let's say the IRS announces next year's 401k contribution limits. It only takes a couple of minutes to go into your 401k and increase the amount that you are having taken out. It does not take that long to sign up for the flexible spending account. It doesn't take that long to do all kinds of things related to investing. So don't put it on the to do list if you can get it done right now.

Speaker B: And of course, there's some naturally organized people who don't need to read this or do anything. And then there are, uh, procrastinators like Robert and David, who really have massively benefited from this. And, you know, I've always appreciated his mind like water philosophy. And one way of thinking about it is that, um, things that happen in life, including financial things, picture them as a rock going into a pond. And in general, in real life, when rocks go into ponds, the concentric circles of waves are kind of reflecting the size of the rock that just hit the water. Not kind of. It's pure physics here. They're directly reflecting it. And we should be trying to do the same with the, the stones that hurl themselves at us through life. But sometimes people take a little pebble and make way too big a deal out of it. And other times something big hits and we're not reacting with the commensurate effort or awareness that we should. And that's sort of a mind like water thought from David Allen. You know, it is true that if we're going to be financially helpful, this podcast or all of your work, Robert, and these be relevant to as many people as possible. I feel as if, uh, this one, again, goes well outside of finance and makes us better people, if we will. But listen, care, and start to practice a little bit, try to do a little bit better in the next two minutes than we did in the previous two minutes. Anything more you want to say about 28 days later or years or months?

Speaker A: Yes. And I'll add one other book that really helped me become more productive, and that was Eat that Frog by Brian Tracy. And the name comes from a quote attributed to Mark Twain, but like many Mark Twain quotes, it really wasn't so by Mark Twain. But it's the quote. If it's your job to eat a frog, it's best to do it first thing in the morning. And if it's your job to eat two frogs. It's best to eat the biggest one first. I changed that to eat the money making frog first. Right. So, for example, if it would just take you two minutes to save $1,000 more in your 401k each year, you compound that over the rest of your life. The amount of wealth that can be attributed to just making that one move can be enormous. So you think of all the financial things you have to get done. Think, all right, what's going to increase my net worth the most over the long term or protect my family and net worth the most, such as getting enough life insurance or getting an estate plan?

Speaker B: All right, I had missed that Twain quote, but as it turns out, Twain himself missed the quote since he never said it. But I really appreciate the point that grew out of that. And yeah, I'm a big fan of attributing the right quote to the right person who said it. And it's amazing how you can add authority if you simply said, yeah, Churchill, Churchill said it, or, yeah, Mark Twain or George Washington, the list goes on of, uh, Gandhi. How many quotes are misattributed to these amazing human beings? Robert let's move on now to the seventh and final scary story that you have for us this Halloween ish week. What's the title?

Speaker A: Will you be the richest person in the graveyard? And so far, David, I think we've been talking about playing it safe and playing defense, right? Making sure you're saving enough, being conservative with your assumptions, having an estate plan and all that stuff. But there is a point where you could be playing it too safe, perhaps maybe working longer than you need to, spending less than you could, maybe enjoying yourself less than you could, at least to the extent that money can enhance you and your family's enjoyment. And of course, this depends on each individual person, right, and whether they're financially, whether they have the room to sort of loosen up the purse strings. Uh, but there is plenty of evidence that for many people, for example, many retirees, they're not spending as much as they could. And this topic is being addressed more really over the last five or six years. And I attribute it partially to the pandemic, people being aware that, um, time is limited, life is limited. Um, there's a recent article, uh, in the Atlantic by Jean Chatky, and she cites studies that have identified what experts are calling the retirement consumption gap. So according to one study, the gap for middle income retirees is about 8%. Or they could be spending 8% more a year than they are. And then with wealthy retirees, they're spending as much as 53% less than they could and a gap remains. Even when these people account for maybe long term care or leaving a legacy, they still could be spending more. And I love, uh, Gene Chadsky wrote in the article, bucket lists everywhere are suffering. I thought of a good way to express it. And the result of this, of course, is that many people die with a lot of money. In many cases more than they had when they first retired. And if your goal was to leave a lot of money to your kids or to your heirs or to charities, that's great. But that money that gets passed on also represents experiences you could have had but didn't, including possibly retiring sooner. So, and the other aspect of this for me is that as I've gotten older, I've seen many people, both celebrities and people I know either die much too soon or have health issues that prevent them from enjoying the life and the retirement they thought they were going to have. So I really have been thinking more and more of looking at my finances, making sure everything is safe and secure, but maybe moving up some of the experiences I was saving for later in life.

Speaker B: Yeah. And it is, I mean, uh, again, you know, the subject of retirement and how we can do it well and the mistakes that we can make better than anyone I know, Robert, far better than I. And I'm certainly aware of the notion, and I think you've just confirmed it, that a lot of people overestimate how much they will be spending in their retirement. And that is as you're mentioning, because we end up not necessarily being as mobile or in some cases as healthy as we expected to be. So there's a little bit of a sad. This is the scary week for this podcast. There's a little bit of a sad thought that you may have over saved. Um, I realize we don't want to send mixed messages because I think the legend of 401k Hollows said, are you saving enough? But I guess if you tried to unite these. How do you reconcile stories number one and number seven, our first monster out of the closet today, Robert. And then this, this last one.

Speaker A: So I would say first of all, you do have to run your numbers and analyze your situation. Right. And if you're behind you, you have to make some sacrifices if you want to ret. And again, a lot of people are retiring not out of choice. They were forced to retire. But the other thing I would say is really take a look at. Okay, what is it I want to do with the rest of my life? What experiences do I want to have? What causes do I want to support? What people do I want to see? And is there a way to do that sooner? And a lot of that, of course, doesn't cost any money. It doesn't cost anybody to volunteer on a Saturday for an organization that you like. It doesn't cost money to set up a zoom call with your best friend from high school that you haven't Talked to in 10 years. Move up some of those experiences while you can. Don't save everything for the future.

Speaker B: And this fits really nicely with our, uh, recent podcast where I called out Walter Green and the say it now movement that he founded, which is largely about making sure. Kind of like Robert just encouraged you to seize the day and go do the thing that you've been saving for. Make sure that you have that opportunity for yourself and your family. And Walter Green reminding us just a few weeks ago through this podcast that you should also say it now. If you feel great gratitude for somebody, if somebody's always meant something to you, don't wait for this halcyon day where you imagine you'll eventually say it to them, or don't save it for their funeral when they probably don't actually get to hear you say it. Say it now. So there's a little bit of a say it now, do it now, carpe diem theme here as we move to the end of Financial Horror Stories, Volume 5. You know, you did say something scary earlier. I don't think I made it sound quite as scary as it probably should be, but you said uncle Sam Co owns our accounts, and I've never really thought about it that way. I think of it as my account with my account number, and I've invested in this. But you. You're right. And I'm not saying it shouldn't be the case, but once you reframe things in that way, Robert. Well, I think it's a true reframing. It does make everything a little scarier.

Speaker A: Yeah. So I'm not saying that anyone should be a tax cheat. I feel very grateful to live in the United States of America. I think it was, was it Oliver Wendell Holmes who said taxes are the price of civilization or something like that, and I'm very grateful. But that doesn't mean you should pay more than you need to. Um, and when it comes to projecting your retirement, for example, you have to project your costs, and one of the biggest costs is going to be taxes. So what can you do about that now to Manage your tax bill over the course of your life.

Speaker B: Well, on this fifth anniversary of this series, Robert, I want to thank you once again for your wisdom, for your imagination, and for trying to scare the dickens out of us, but not just for its own sake. Trying to give us a better solution. Uh, a monster slaying thought or two or seven, as I might say this week. And I think, therefore it behooves me to ask you, Robert, would you briefly, would you summarize, Would you give us the title of each of the seven stories and maybe the one line takeaway you want us to have for each of our seven monstrous prospects this week?

Speaker A: Absolutely. Here we go. Number one. The legend of 401K Hollow. Use some sort of a tool to analyze your retirement plan. And if you're behind, take some steps to get on track. Number two, the curse of the broken crystal ball. As you project your retirement numbers, be cautious with your assumptions, including assuming that you won't work as long as you think. Number three, the Texas Chainsaw Massacre. Take steps like, you know, asset location, choosing between Roths and traditionals to make sure that you're keeping as much of your investment returns as possible. Number four, beware the RMD zombies. Project how much you're going to be required to take out of your traditional accounts once you reach your 70s. And if it's going to be a lot of money, takes steps now to limit that. Number five, the silence of the engrams. M. Be open to the possibility that either your relatives or you yourself will at some point suffer some sort of cognitive decline that will impair your ability to manage your money. Number six. 28 days later and you still haven't done it. Factor in some sort of productivity tips that will encourage you to get the most important financial things done. And number seven, will you be the rich, richest person in the graveyard? You know, we're not investing just so that we can die with a lot of money. Find a way to balance using your money today versus being prudent for the future.

Speaker B: Robert Brokamp, thank you. Five years now of financial frights, and somehow you've managed to make Halloween both scarier and more financially rewarding for all of us. So, while, uh, I hope we've given our listeners a few chills, I also hope even more that we've helped you, dear listener, recognize a danger or two and giving you the confidence to do something about it. Because the best horror stories, of course, are, uh, the ones we get to walk away from. Robert Brokham, thank you once again for making us all a little bit smarter, happier and richer this particular week or two of this particular month. Happy Halloween, my friend, and fool on.

Speaker A: And the same to you. Always a pleasure, always a highlight of the year for me. And that's the show. Thanks for listening. And thanks to Bart Shannon, the engineer, for this spooky episode. As always, people on the program may have interest in the investments they talk about, and the Motley fool may have formal recommendations for or against. So don't buy or sell investments based solely on what you hear. All personal finance content follows Motley fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To support our full advertising disclosure, please check out our show notes. I'm Robert Brokamp. Happy Halloween, everybody.