Rob Berger: Retire Before Mom and Dad

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Welcome to the new retirement podcast. Today we're going to be talking with Rob Berger, a lawyer by trade and personal finance expert, about his top financial lessons and his new book, Retire before mom and dad. The simple numbers behind a lifetime of Financial Freedom. Rob achieved financial independence the, quote, normal, unquote way, working, saving and investing, then achieved it again when he built and then sold his dough roller site. He's also a deputy editor at Forbes. So with that, Rob, welcome to our show. It's great to have you join us.

Hey, Steve, good to be here. Thank you.

So I'd like to dive in and just have you share your background. I mean, we met face to face at fincon couple years ago and you've always impressed me as a very thoughtful person and obviously I've had a lot of success and you've built several things that are impressive. And so I just wanted to kind of have you share how you came up, learned about financial independence, got motivated and about that journey.

Sure. Well, I grew up pretty much middle class in Ohio, so I'm a Buckeye fan. Sorry to disappoint your Michigan listeners. And you know, two, working, you know, both parents worked for the most part and we didn't have a lot of money. So I start there because growing up, for me to have any money to spend, I had to have a job. So I got a job as soon as I could delivering papers at five in the morning and then, you know, the fast food thing. And it kind of instilled in me a work ethic that hasn't left me. But then, you know, you fast forward to college and law school and it was pretty much, you know, sort of the plan was the 45 year career practicing law. That was what I thought I'd be doing. And I did that for a couple of decades, 20, 25 years. And I guess it was 2005, I had a bit of an epiphany. And that was a couple of things really. One was I decided I didn't want to practice law the rest of my life. So I had to figure out something else. But also that I was spending money in foolish ways and trying to live the lawyer lifestyle. And so I just one day decided I'd had enough and changed.

Now, did some event trigger that?

Yeah, people ask me that. I wish I had some brilliant, some great experience or something. But no, not, not really. It wasn't any one thing. I think it had been building up over three or four years. I've made partner at a big firm and after about two years of being partner, realized that's not really what I wanted. So I quit and took a huge pay cut to do something else in the law. And that kind of started the process, but it took me. I'm a slow learner, so some people might get this, have an overnight epiphany. Mine was more like a three or four year epiphany, but that kind of started it. And I just came to believe that really, we think about what money can buy us beyond the necessities and whatever your passions are. It could be world travel, it could be fancy cars, if you're into cars, whatever. What I found for me was what I wanted to buy was my freedom.

Yeah.

That's what I want. Yeah.

Yeah. So it sounds to a certain degree like you got triggered by some work that you didn't love. Once you made partner, you're kind of like, is this what I really want to be doing? Spending my time on.

You know, it's funny, I decided to be a trial lawyer in the eighth grade. Who does that? Right? I mean, that's just absurd. And I really did like my time as a lawyer. But, yeah, I quickly, I think, yeah, I kind of came to the conclusion that I don't want to do this the rest of my life. And I certainly don't want to be trapped into a sort of a lawyer lifestyle.

Yeah, I mean, like a high spending lifestyle.

Yeah. I didn't, you know, I looked at the lawyers that were 10 or 20 years older than I was, and they had sort of, as their incomes went up, so did their lifestyle. And they had the golden handcuffs, Right? Yeah, they were living a nice lifestyle, but they were kind of stuck to the, you know, practicing law isn't all, you know, if you watch it on tv, it's not. That's not reality.

Yeah.

And. And so they were kind of stuck doing billing 20002200 hours a year just to keep pace with the lifestyle they'd created. And I did not want to get on that hamster wheel.

I think that happens in a lot of industries. Consulting, sales, you know, people, they elevate themselves and then they're like, I gotta pay for all this stuff. A quick side note, I remember when I was in college, I was an engineer, and then someone mentioned, oh, maybe you should consider being a patent lawyer. And I started looking at that. And then I started looking at some. I was also a resident assistant to help pay for college. And one of my fellow ras was getting his law degree. I remember talking with him and then just looking at all these books he was reading and what his work was like just to prepare to become a lawyer. And it's like, I don't know if I want to spend three years doing all this stuff and then what's the actual work like? And it didn't seem that compelling. So I feel like that was a good decision.

I enjoyed it while there was a challenge involved and I was learning. But honestly, once I made partner, making partner almost for me, almost took fun out of it. It's like, now what's the goal? I mean, you know, making partner, it takes about eight years. And it's like, it's like being in an eight year pie eating contest. And when you win, you learn that first prize is more pie, you know, And I just, I'd had enough of it. So I needed something. I needed a new mountain to climb.

Right?

Yeah, I needed a new challenge.

That's cool. That's good to get that backstory. All right, well, let's. Let's move on to Dough Roller. So you started dough roller in 2007. So I guess a couple years after you had this epiphany and just would love to kind of hear kind of the highs and lows as you built that and then ultimately sold it last year.

So I started Dough Roller just really as a hobby. I wasn't thinking of business. I wasn't ever thinking this would be something I would do full time. And I didn't know a thing about how to build a website, how to get traffic to a website, how to monetize it. I didn't know a thing. But I really, I don't know, I found it motivating. I just loved doing it. I was up at 5am Seven days a week for the first couple of years building this thing on my own. And I'd meet other bloggers, I'd learn. And over time, you start to get traffic to your website, you start to learn how to make money from it. You start to learn what kind of information people need to make smart financial decisions so your content improves. And by 2000, and, I don't know, a few years after I'd started, it was making enough for us to live on. And I didn't quit the law right away. I mean, over time I went part time. I ended up retiring from law in 2016, but it turned into this full fledged business. I bought some other sites and yeah, it surprised me as much as it surprised anyone. And then I sold it in 2018. So I kind of retired from law in 2016. Then I retired from that in 2018, I'm not sure. I've got a few ideas of what's next, but in any event, the whole website thing and that whole online business piece of my story was truly life changing and I'll continue to do things in that space, at least for the foreseeable future.

Yeah, well, I mean, it's impressive what you built. I mean, I was looking at the site, I know it's been sold and maybe they've amplified things a little bit, but it's getting a million visitors a month. It looks like you've got this podcast as well, which you're continuing to do and that has a big audience and you've got a Facebook group that's active, which I'm also part of. That's been. You can definitely tell there's a lot of power users that are highly engaged.

There are, yeah. And I'm starting to meet with folks, not one on one, but in groups, particularly here in Northern Virginia, which is a fun part of all of that.

Yeah. Talking to J.D. roth about that, he goes traveling and he's got this worldwide audience and he's like, oh yeah, I'm going to be in Amsterdam. And then so. And so is going to. Wants to meet up. Then they'll meet up and they'll show them around their city and they'll talk about personal finance purpose and stuff like that. But that's got to be pretty rewarding to kind of like have these people out there that are, you know, engaging with you directly.

It's funny because it all starts all by yourself in your home as you publish Your first article 10, 15 years ago and you think you would have. It's just impossible to imagine that it would turn into all of this. I mean, I've been to Israel for my job for this company. I've traveled all over the country.

Yep.

And I would have never, you know, I just published the book, which opens up other doors. Yeah. Who would have thought, right?

It's been interesting watching the fincon bloggers. You know, it feels like there's a story arc of many of them started with, hey, I'm in a lot of debt. They're writing about that and then, and then they're writing about, oh, now I'm getting out of debt and I'm starting to save and invest. And now they're like, oh, now I'm getting to be financially independent, you know, that they're selling their companies and like, like this whole group is going through this wealth journey together.

Well, it's people, you know, it surprises People. But, I mean, I know countless bloggers that have sold their blogs for seven figures. And people, you know, people hear that, they're like, what? How's that? What world do you guys live in? Yeah.

Yeah. But I don't know, sometimes for me, I think of kind of a commercial real estate analogy where, hey, you get a chunk of land, your domain and your blog, you kind of build it up, you're making it better and better, starting to make more and more money, and then it's like a thing that's like spinning up income and people will buy that, you know, and it's just a virtual piece of property that you've. You've developed, you know, except it's highly personal. It's your thing. And. And you can do it for almost nothing. Unlike real estate investing.

Yeah. There's no capital. I mean, you can invest capital, but you don't need to.

Yeah, you don't need to. Just got to put your time and energy into it. Cool. Yeah. And one thing that I. One of the tools that I saw on your site that I liked a lot is this blue binder idea, which I read a post that you had about that. I'd love to hear you kind of describe that for our audience.

Yeah, I call it the I just got hit by a truck binder. I think this is true in a lot of relationships where one person is sort of focused on the finances and investing, and the other significant other or spouse doesn't even have any interest in it. And that started to worry me because I'm the one who has an interest in it. My wife. Not really. And I thought, well, what if something happens to me? How is she going to know what to do with our 401ks, our IRAs, our taxable accounts, and will she even know where everything is? So I put together a binder, and I talk about this in a couple of episodes on the podcast, but I put together, I call it a blue binder. It's just blue because that's the color of the. The binder. That's what the blue is for. I should have called it the green binder, but it starts off with a net worth statement that I update once a year. And then below simply has all of the documents, all of the brokerage statements, 401k statements, all of the bank accounts, our will, a copy of our will, some information, financial information for our children, and I also sort of personalize it. So I have a letter that kind of walks through. Here's what I would do. Like, if I've told my wife, look, if I get hit by a truck, go hire Vanguard Advisor Services. I don't do that because I don't need to. And why pay the 30 basis points? But she's not going to want to do this on her own. So that's fine. Hire a Vanguard, pay the 30 basis points. They will invest the money in a way that I think is reasonable. And so, you know, I walk through that letter and it walks through all of this in the letter. And it's a binder that I update once a year. We were having, like, quarterly meetings. We've sort of fallen out of that habit, and so we're going to have a fall meeting. She doesn't know that yet, though, so she's in, she's in the other room. I better quiet down. I mean, she doesn't mind that. And she actually found the last. We had to be. She just doesn't want to talk about it all the time. Like, I'm in there saying, hey, you know, we can shave, we can shave two basis points off of our average weighted average expense ratio. She's like, rob, shut up, would you? She'd actually, she wouldn't say that. She's, she's, she's, she's a keeper.

Yeah, but she'll nod her head politely.

Yeah, but, you know, she tolerates me.

Right. Good job, Rob. Good job getting us Financial.

That's right. So, you know, that's the blue binder. And you can really customize it however you want. But the point of the binder is if something happens to me, it's like a playbook. It's a blueprint. Here's everything we have and what you should do. By the way, it has a list of all of our, like, our accountants, our trust and estates lawyer. You know, I mean, she knows these people, but I'm the one that really deals with them.

Yeah.

So here it all. All mapped out.

Right. I think it's. It. That idea resonated a lot. And I sort of have that digitally, but not to the degree you have. And it's something that is important to build.

And let me just throw one other thing in there that people don't think about. You think about passwords to your online things, and people immediately think investment accounts, bank accounts you don't need, your significant other doesn't need those passwords. My wife will be able to reach out to Vanguard, deal with the accounts without a password. But what about Facebook?

Yeah, right, right.

What about email? What about Gmail? Because you ain't going to get those passwords from those companies. So that's something to think about. In terms of the blue binder, how are your significant others going to get passwords? And it's not the passwords you think they need, right?

Yeah. I had a good talk with Cameron Huddleston about talking to your parents about this stuff and getting everything organized. And, you know, she wrote a great book on that. Right. Power of Attorney and all that stuff. And it definitely, like, if you don't take care of this stuff, it can get really messy and frictionful for, you know, years and expensive. You know, you can be spending 10,000 bucks on this or that or, you know, getting. Getting stuff through the state. So that's awesome. All right, so I would love, you know, we're going to talk about your book in a sec, but any other, for our audience who's kind of 50 to 65, they've been saving, they're working on our site to kind of build plans and think about all their assets and how to draw it down and manage healthcare and stuff like that. But a lot of them, they're approaching retirement. Any kind of insights that you have based on dough roller and your own experience, things to pay attention to and or look out for?

Well, for me, the biggest challenge, and I'm 52, when I sold my business, I thought I would be transitioning into spending down my nest egg. For a variety of reasons, I haven't had to do that yet. But it's going to, you know, at some point, not too far down the road, that will happen. And that transition, I think, from working and saving to spending what you've saved, there's both a psychological component to that transition and sort of a mechanical one. The psychological one is, at least for me, it's very hard to start spending your money. You don't want to see your balances going down. I mean, you know, that's how it kind of works. You know, that's what you've been saving for. But I found it to be a pretty big psychological barrier, and it can cause us, I think, a lot of angst. At least it does for me. And I don't have, by the way, I don't have an easy answer to that other than I think it's good to know in advance that that's going to happen. One of the ways I prepared for it in my case, it moves us to the mechanical side, the drawdown. How do you do that? Was to think in terms of buckets. And this is, I think, a fairly common strategy. But the bucket strategy and the reason I like it was because if you imagine taking whatever, say two years of expenses and you put it in a savings account and years three through whatever, seven maybe go in intermediate term bond fund and then beyond that it can be in equities. That helped me sleep at night because I thought, okay, worst case, even if the stock market just crashes and we have another 0809, I've got two years of cash, another five years of relatively short duration bonds that I can live off of. Now. There's no guarantee that the next bear market won't go longer than seven years. And I don't mean literally every year down 20%. The odds of that are pretty unlikely. But you could have some really bad years, maybe a good year followed by some more bad years, and the net effect of that could be a difficult decade. There's no guarantee that that difficult period won't last more than seven years. But I think somewhere in that range of cash and relatively short duration bonds is a pretty good insurance, right? No guarantees. We all know that. But to me there's a lot of other issues, right? Insurance, health insurance, particularly if you retire before you're 65 and can get Medicare. So depending on your specific circumstances, there could be a host of other issues. But for me it was that transitioning from working, earning an income and saving on the one hand to how do I then start spending what I've saved? And that was my approach. And then it turned out, at least for the time being, because of my work at Forbes and some other things, I don't, I haven't started to spend it down. So I've been able to delay, I've delayed the inevitable.

Yeah, we'll see.

We'll see for how long?

You know, I think the bucket strategy resonates a lot of people. It resonates with me. And I was talking to Fritz Gilbert about this. He was on. We were actually. I had three fire people on a panel, like one year into retirement. What did they learn? And Fritz was talking about how he essentially has deployed this and he likes the idea of just having that visibility for two, three years. He doesn't have to worry about it. So then he can take more risk with his longer duration investments.

The one thing I haven't solved, though, there is part of this that I think is not clear and that is at what point do you take from your equity holdings and move that either into your bond or your cash buckets? Because a year from now you've spent one year of cash. Well, do you just take some equities every year and fill that bucket back up. Well, what if part of this whole system is so that if the market crashes, you can avoid selling your stock during a down market? Well, then, well, how long do you wait for the market to go up? And how do you even think about that? Do you have some sort of valuation metric that triggers a buy or sell given current valuations? Now, should you have more in your cash bucket? I probably would. By the way, if I were using it now, I might have three or four years in cash, given the market. But again, even that is not exactly scientific. Right. I mean, it's not like I've got some algorithm that's doing this. The bucket strategy doesn't solve all your problems, but I think at least gives you a decent framework to think about the issues.

Yeah, it's a great question. Carsten Jeske from early retirement. Now, his view is keep the whole thing in your optimal portfolio for your risk that you can handle and just draw it down even if the market tanks. And instead of going from a 4%, you have to take it up to a 6% drawdown rate to hit your income needs. Assuming the market recovers. He's pretty confident, like, oh, I'll still be okay. I know it can deplete your assets earlier, but that's kind of his point of view.

Well, part of that equation is for your 4%, which I know is sort of the rule of thumb, how much of that spending is discretionary? Is your 4% cutting everything to the bone and you've got no wiggle room? Or is 2% necessities, and 2% is discretionary, which is kind of where I want to be. And if that's the case, sure, I could ratchet up to 6% in a bad market if my portfolio dropped, and that's what I needed to hit the number. Or I could just for a couple of years, cut my discretionary spending, which is more what I would probably do.

Yeah, well, we're trying to do some of that stuff in our tool, and I agree with you. And back to this point, Doug Nordman said the same thing where he's like, you know, we try to have some flex in there in the expenses side. And also he keeps in mind I could go back to work. Like, in a worst case, I don't have to go back to work to say, making. If I made 100,000 to make 100,000 again, I can go back to work and make 25,000 bucks. And there's lots of ways I made 25,000 bucks. And that makes it, that's game changing. So having that approach now he's granted younger, he's not, you know, if you're 75 years old, I think that you're capabilities or not capabilities, but some of your opportunities.

You could go back as a surfing instructor, right? Isn't that his thing?

Good point. Surfing, yeah, totally. He's probably thought about that. So, okay, and then real quick, last question. Healthcare, is that an issue for you at all? And how do you deal with it?

It's not an issue if I don't get sick. No. So. Well, at the moment I have health insurance through Forbes.

Okay.

But it's actually a great question. So when I was going to buy it on my own and for a while I did, I went, so I don't qualify for subsidies. So I was going to, you know, the Affordable Care act, what a great thing, right? I've got all these, I can go right onto the government website and I can get a high deductible plan for $2,000 a month. Isn't that wonderful? And so much for the Affordable Care Act. And it turns out though, when I priced this, the company that was gracious enough to offer me this wonderful insurance was leaving the exchange at the end of the year. The broker I was working with said, but not to worry, there's someone else can fill it. But the downside is starting in January, that'll cost you 2,500. And I'm like, what? By the way, that's the reality that most people don't see about the Affordable Care act, because most people don't buy the insurance on their own through the exchanges and also without subsidies. But for that group of people, it's a nightmare. It's like the worst possible set of circumstances. So what I ended up doing was getting a business policy. This is when I still had my websites. And this is the insanity of it all. That policy, that would have cost me two grand and then 2,500. I paid $1,600 for it, by the way. Still not cheap, but a heck of a lot better than 2000 and 2500. So what's the takeaway for those listening? Well, I guess one is don't assume that the insurance under the Affordable Care act is actually going to be affordable. So if you're thinking about quitting your job early, before you hit 65, you need to have a solution for your insurance first. And if you can buy even small companies in Virginia, you can be a sole, you can have a company that's just You, I think you have to make. I think it's $12,000 a year. You can qualify for a business plan. And the exact same insurance as a business plan is going to be better than if you buy it as an individual or a family. There's a reason for it. The reason is the risk profile changes. The absolute most expensive risk pool is those individuals in the exchanges. I don't know why, but it is. Small business owners, not as risky. Now, it's going to vary from state to state. This is probably already more information than people want to hear, but if you can get a business policy, it's cheaper.

Yeah. No, I actually have been thinking about this, and I think for our audience, many of them do create sole proprietorships. Small businesses, they're consulting whatever it is so that they can say, hey, I'm actually creating a business. They have to go through the mechanical part of creating it with their state. Like in California, you can file and create an LLC for like 50 bucks. I mean, there is an $800 a year LLC fee, but there's other ways to do sole proprietorships. And then you can get health care from, you know, as a small business. So there's one thing.

Well, yeah, so I'm 52, so I don't know when I'll leave Forbes, but I'm not gonna. I certainly won't be there until I'm 65. And so I've already thought through this one thing I've learned. You know, you can get COBRA for a year and a half, but a business plan, maybe every time, but nine times out of ten is going to be cheaper than cobra.

Yep.

Right.

Sure.

And so. And leaving your job is a triggering event that allows you to. To get insurance. So my plan when I do leave Forbes is to immediately get a business insurance, a business policy, because I still have my business and it still makes enough income for me to qualify for a business policy in Virginia.

Nice. Good. Yeah. Well, I think the tip on, like, really, I think being thoughtful about insurance, where it's going to come from, makes sense. Yeah.

Don't assume it's going to be affordable just because of the Affordable Care Act. Well, I mean, you know, it's just that, I mean, you know, I don't want to get into politics, but really what the Affordable Care act was, was the Medicaid Expansion Act. I mean, that's the vast majority of people. It helped a lot of people, there's no question. But the majority of them were people that didn't. Weren't able to be on Medicaid. And now they are. Yeah, that's the majority of what the Affordable Care act did. And but for a lot of people, it really is a nightmare.

Yeah, no, I agree. It doesn't work for a lot of folks. All right, awesome. Well, this is super helpful. So let's talk about your book, Retire before Mom and dad. So why did you write it and what are you hoping to accomplish with this?

So I wrote it for two reasons. I've talked to a lot of folks about finances, really, at any age, and I'll ask them what I think are basic questions. And these are people that have want to share information with me. I don't just go up to strangers and ask, what's your net worth? But I'll see what's your net worth? Well, I don't really know. Are you investing? Oh, yeah, I've got a 401k. Okay. What are you investing in? I'm not sure. I could look. What's the cost? What are your expense ratios? What's an expense ratio? Do you have index funds or actively managed funds? Well, what's an index fund? And so the first reason I wrote this book was to help basically give everything they need in a single book to do smart things with their money so that they can achieve financial freedom in a reasonable amount of time. That was the first reason. And the second reason was I think there's sort of a growing voice or viewpoint in our country that concerns me, and that is that the average person just can't do it. If you're on an average income, whatever that is in your area, you can't really achieve financial freedom. It's not going to happen for you unless you're whatever, extremely wealthy, unless you make six figures. And certainly you shouldn't even think about investing on your own because you just can't do that. And I just think that's a bunch of nonsense. And I wanted to show people a lot of wealth. Even with vantage, you can build far more wealth than you might imagine. And in fact, I kept the assumptions at what I thought were sort of reasonable, average, middle, kind of how I grew up kind of numbers. And I walk through and show them step by step. Here's how compounding works and here's how you can use it to your advantage. And we go through investing and different approaches to investing that are simple and straightforward. And so that was the goal, was to give them basically the information, tools and strategies to go from a beginner to someone on their way to financial freedom.

Right.

Well, by the way, I Called it retire before mom and dad because I want 20 year olds to read this.

Sure.

But it really is applicable to anyone who is either just starting out or frustrated with where things are.

Yeah, yeah, I think it's a great idea. You know, one of the challenges is that the financial services industry helps you. If you have money, there's plenty of people that will help you. And, and if you have money, maybe you're a little bit smarter about how not to lose it when you don't have money. The people that are helping you are credit card companies, high transaction sales, you know, financial product salespeople that are loading you up with all kinds of fees that you don't understand. Right. And they're not really incented into helping you. Like there's a lot of money made by financial services on people that don't have money, payday loans, you know, credit card companies, whatever. Right. And you're fighting against that whole tied to try to get to these folks when they're young. You know, I mean, one of the things that I talk about this a lot in the podcast that I really think shouldn't be happening is that there should be required personal finance education in high schools. You know, just teach people like balancing a checkbook, how credit works, how credit cards make money, how investing works. Like your book, you know, have every kid read your book. Right. Change America.

I like that, I like the way you're thinking.

So yeah, go talk to Next generation Personal finance. They're a group doing this, advocating a non profit, teaching teachers and getting it in high schools. And it's available in 60% of high schools now, but only required in 20% across the country. But yeah, that's what it's going to take. Or that's part of what it's going to take.

Well, part of the thinking on this book though I do think you're right that, that there are certainly a lot of financial services that take advantage of people. But at the end of the day, we don't have excuses. We need to be responsible and accountable for the decisions we make and the money that comes into our lives. And we can do that. And we've got this. We don't need someone, we don't need to pay a broker or an advisor a lot of money to stick our money in three or four mutual funds.

Right, right.

And we don't need to pay a lot of interest on credit cards. We can pay our balances in full every month.

Right.

So you know, yes, there's a lot of people out there in companies that Might take advantage of us, but we also shouldn't use that as an excuse to bury our heads in the sand.

Yeah, yeah, right. We don't have kind of a victim mentality like, hey, this just happened to me. I totally get that as well.

Well, you know, but. But the thing is, is I think there's a growing voice in this country that. That thinks there is a victim mentality. And I'm not suggesting that we don't have challenges and obstacles to get over, and I'm not suggesting that there aren't systemic issues that we all face depending on our particular situation. But I think everyone can make positive steps to improve their financial lives, notwithstanding those challenges. And so I think there are some that all they want to talk about are the challenges.

Sure.

I'd rather talk about how to overcome them.

Totally. Yeah. No, it's. Right before this, I was actually having coffee with an entrepreneur, 28 years old, and I was listening to his story. He's out here trying to round up some seed capital, building his business. And it's good I came away. I was like, you know what? It's still in America. It's good. You can still go for it. And part of his backstory was, same thing, middle class background. He told me how he got his first idea. He was working as a security guard in a residential building and just kind of like this terrible job. But he's like, looking at the data about how people get in on the building. He's like, oh, yeah, I came with this idea to do RFIDs in entry cards, to kind of track all the stuff and automate all this stuff and automate my job. And it's like, good. If you're thinking about it and innovative, you're going to see ideas and opportunities everywhere. So there still are. It is definitely possible in this country to do great things. And if you get educated, take advantage or use the system to your advantage, well, you can.

But at the same time, I'd say, like, my mom is a teacher. Teachers can become millionaires. It's not hard, and it doesn't even require the sacrifice that I think a lot of people in their minds think it does. And my mom was a teacher. My stepfather worked at the gas company. I know folks that have earned very average salaries and built million, $2 million portfolios with their homes paid off when they retired. That is a great thing about our country. You can start whatever business you want and all that sort of thing, but you can also, you know, work a career that you just are passionate about, like teaching for Example and still achieve financial freedom.

Yep. So, yeah, you do have to know how the system works. You know, invest appropriately and watch the fees. So one thing about teachers is, and some public service folks is they will get amazing pensions if they are thoughtful about it, make sure they hit the right gates. But also in some of these, some of these programs there are ridiculous fees, you know, so they got to pay attention to that stuff and also work through, you know, representatives to like, make sure, hey, we're not getting loaded up with some kind of like insane fees.

So, yeah, two things there. One in the book, I walk through exactly how to find your fees. It's not hard. I mean, you could use Morningstar.com, but I walk through examples. But with respect to teachers specifically and others in the nonprofit, like 403B.S. As opposed to 401K.S. Because of their history, 403s can have really expensive investment. I mean, 401K.S. Can too. But 403s, you've really got to watch the expense ratios of your investments. They can get quite high. I mean, basically, certainly for an index fund, you don't want to be over 25 basis points. I don't think quarter of 1% and frankly 15 or 10 or less is better. Yeah.

What kind of fees have you seen for index funds inside of 403s?

Well, the problem that I've seen is not index funds, but it's annuity type of products or that were born out of the insurance industry. And so you'll see actively managed funds that are incredibly expensive.

Yeah, like 100, 200 basis points or something like that.

Oh, I see. You certainly see them over 1%. I don't know if I've ever seen. They definitely exist funds over 2%. I don't know that I've seen one of those in a 403B but you know, my wife worked at a adoption agency for a while part time. It's a nonprofit, 403B and some of her investment options were well over 1%. It's terrible, right?

I know. I think, you know, when you're, at least when I was kind of coming up and I worked in financial services, you know, positioned like, oh, 1%. Well, okay, fine, I have a hundred bucks. You know, I'll pay a dollar a year to manage my money. Right. That sounds not that bad. Right. But then when you look at it, you're like, oh, well, what's your average return? Well, you know, maybe it's 4 to 7%. Right. So if it's on the downside, lower end of that, you know, it starts to be a, you know, big piece, 25% of your returns or whatever. So it's 15 to 20% of your returns for that year. Plus you lose that money. You're not growing, you're not compounding on that money. So it can end up being, you know, 20 to 25% of your portfolio over a 30 year time horizon. It's enormous.

It's enormous. And another way to look at it, you know, we talk about the 4% rule or guideline I prefer to call it, but when the studies are done to calculate that, they're not factoring in a 1% investment fee.

Yeah, right, right.

They're looking at market returns. And so one way to look at it for those nearing retirement is effectively you might have to be living off 3% instead of 4. Or put differently, you might be living off 4 in year one and then adjusting for inflation. But because of that 1% fee, your odds of effectively the goal is to die before your money runs out. Right. I mean, just to put it bluntly, but with that 1% fee, your odds of dying before your money runs out go way, go down.

Yeah, In a huge way.

Yeah. And you're, you know, thus another way to put it is you're getting your money could run out before you do.

Right. Yeah.

That's a bad thing, by the way.

Yeah, that would not be good. That's what people are.

Not that any of us want to die young or anything, but. Yeah.

So any from your book, any particular things? Like I was looking at kind of the things you cover, you know, five money myths that are keeping you from a life of financial freedom. Freedom and kind of a step by step approach to kind of saving. Without concurring too much hardship, any kind of main rules that you think should apply, especially to our audience, kind of the 50 plus audience.

Well, the 50 plus audience, hopefully they're well on their way to saving. But I will say this. So I walk through the math of early retirement and I think of early retirement as if you start with a zero, retiring in 20 to 30 years, there are certainly people that do it in 10 to 15. That's very extreme. The thing about that is if someone is 50 listening to your show and they either haven't gotten a start or they've gotten a very slow start. Maybe they've gone through a divorce and they're sort of starting over. Of course they're not thinking early retirement. Right. They're thinking, goodness, I just want to retire on time. But here's the thing. For that kind of person, you need to adopt the mentality of early retirement, because you've only got 15, 20, 25 years left. Now, there is a silver lining for someone that's going to do that. They're presumably going to have Social Security when they do retire. Someone that's going to retire in their 40s or 50s is not going to have Social Security. So someone that's 50 now and is trying to retire on time, or maybe by the time they're 70, they are going to have some advantages, right? Social Security is one, Medicare is, and those are significant. But you're still going to need a nest egg, unless you're going to try to live off Social Security, which is not easy to do. The mentality of the early retirement crowd can help someone in that situation cover what they need to cover in that relatively short period of time. So in that sense, you've got to adopt that early retirement mentality. One of the things I cover in the book is, and I think it's a sticking point for a lot of people, is how do you reduce your spending? And when we think about that, most people immediately think about sacrifice. I can not eat out. I can never go on a vacation again, wear the same clothes five days in a row, whatever. And so what I did in the book, I said, look, let's break it in two. Let's first start with ways to reduce your spending that don't change your lifestyle at all. And those are significant. And we walk through a whole process of how to reduce your spending on things that won't change your lifestyle at all, like reducing the cost of car insurance. It's just a simple example. Or your cell phone. And these amounts at first might not seem like a lot. Save 25 bucks a month here, 50 bucks a month there. But if you take all of that money and you save and invest it, even over a relatively short period of time, say 20 years, as you know, you're looking at hundreds of thousands of dollars, possibly a million or more. It really has a huge impact. So we cover that. And it's a mentality that I think is important. Forget all the lifestyle changes you can make first. I call it a money audit. Look at all of your monthly bills and figure out how you can reduce them. And I walk through some ideas in the book. And then on the lifestyle changes, I kind of think a good way to approach it is a combination of asking what if? Questions and then experimenting. So what I mean by that is, well, I'll give you A perfect example of my life. The what if question I recently asked was, what if I got rid of my car? Now, for a lot of people, myself included, you immediately have an objection. How am I going to get to work? How am I going to get to the grocery store? Okay, but what if you didn't? What would you do? And I started asking those what if questions, and we kind of configured things in our home. I bike a lot. My wife has a car that I can use if I need to. But the long and short of it is we decided to experiment. So I got rid of my car about two months ago. So far, I don't miss it at all. Now it may fail. I may decide three months from now, yeah, I do want a car. And okay, I've tried it. It didn't work out. But I like to apply this sort of what if followed by an experiment. And it can be on big things like a car. It can be on small things like your daily latte or eating out five times a week, or whatever your spending habits are. I think we get locked into a certain routine, and we think any changes to it will be painful and will sort of diminish the quality of life. And what I found is, yeah, sometimes that's true. And it's good to know when that's the case, but many times it's not true. And what you thought you had to have to be happy when you go without it for three or four weeks. How about that? That really wasn't making me as happy as I thought it was.

Well, I like the money idea anyway. That definitely resonated. One thing I just did was I took my credit card and I just changed the number. So I went and said, I want to kill all recurring charges and then have companies contact me, and then I'll decide if I want to keep doing some of this stuff. You know, I like credit monitoring on there, stuff like that. I was like, you know what? Instead of trying to do this one at a time, I'm just gonna do everything.

And I hope you weren't paying your power bill with that.

No, I wasn't.

I mean, I have your electricity.

No, I don't. You know what? I electronically pay bills, but I don't automate any bill.

I think that's a great idea. So how many subscription services did you end up killing?

Well, I'm only. I just. I just fired this off last week. So we're gonna be. It's also on the business, so it's gonna. Essentially, it's forcing it on the Business as well. Well, so I'm dividing it a little bit more cleanly, so. Cool. Another thing I'd love to ask about real quick is the seven levels of financial freedom. So for our audience, I think this is important because like, this idea of like, hey, you know what those are? And kind of where you are in that can change your mindset.

Yeah, the idea here, there's a couple ideas. So I have seven levels. The first level is when you've saved one month worth of expenses. And the seventh level is when you've got 25 years worth of annual expenses and then everything in between, it goes from 1 to 3 to 6 to 1 year, to 5 year to 10 years and then to 25. And there's a couple things about it. First of all, it's always in relation to your spending, it's not in relation to how much you make. And the key here is your saving rate. So obviously the higher your saving rate, the faster you'll go through these levels. But the key is to always define financial freedom in relation to what you spend, which I think is very powerful because it gives you far more control over your journey and financial freedom. I mean, we can't always control what we make. Obviously we can to some extent and we can influence it and hopefully our income grows, but usually we have more control over our spending. So that's the first thing. And then the second thing is by breaking it up into levels, it gives you nearer term goals to try to reach rather than trying to think 20, 30, 40 years down the road. It's kind of hard to really embrace that kind of goal. And then the third thing is, at the beginning, the differences don't seem that great. Level one to two is one to three months of spending, but level six to seven is 10 years to 25. And it's like, well, wait, what? But the thing is, is by the time you get to about level four, what starts to kick in is the power of compounding. So what gets you from level 6 to 7 is not additional money you're saving. Sure, that helps a little, but what actually gets you over the hump is all of the compounding. All of the compounding that's occurring because of all of the money you've saved and invested to that point. At some point, compounding takes over and builds far more wealth than your actual amount that you've saved.

Totally. That's awesome.

This whole sort of seven levels really kind of gives you a framework to see that in action.

I love it. I kind of want to take your Book. And we're kind of evolving a method here over at New Retirement. And one of the things I thought about was, like, all right, karate belts. You know, what are the different ways we can kind of measure people's Progression? You know, J.D. roth had an article about, like, hey, you can be, you know, you have, you know, you're dependent on other people. You have some agency. You know, you can, you know, control. You know, these levels of control. I really like your, like, just time. It's like, how much. And I think about this all the time. How much visibility do I have? You know, it started with this FU money concept, but then it became like, just visibility. Right. And I like to walk around with a certain amount of visibility. So I'd be like, hey, you know, worst case scenario, this is what it looks like, and if it's good, then I'm not going to freak out. And also understanding, what are those levers that you can pull if things do go sideways? And if you have a good understanding of the dashboard in front of you and what you can pull, then it also kind of lowers down.

That's right. And when you think about levers, one of the examples I give. You've heard of the latte factor, right? And people love to hate the latte factor, and I get that. But one question to ask is, well, if I give up something, it doesn't have to be a latte, but let's say I give up something and I can save an extra five or ten bucks a day, just a couple hundred bucks a month. How does that affect my journey to level 7? I walk through in the book how to do that. The thing that's amazing is even small savings like that can shave a year or two off your journey. Now, you may or may not choose to give up whatever it is and save that extra 10 bucks, but you can at least now make an informed decision. Right. You now can see. All right, if I make these changes here, I can shorten my journey to financial freedom by five years or whatever the number is. Now, do I want to do that or not?

Yep. Right. Right. Awesome. This is super helpful. Okay, so I know we're running out of time here. Just a couple. Couple thoughts before I wrap up, you know, for you. What's next? I mean, you've. This is definitely, by the way, striking me. So I'm 50, you're 52. Right. And I interviewed all these fire guys that were 40, mid-40s to, like, you know, 50 and, you know, young kids. Yeah. Hopefully we. We live a long time Another quick story here is a dad that I mountain bike with and was part of the mountain bike team here. I saw him in the, in the, the store parking lot and he's like, yeah, we just dropped off our youngest kid at college. He's like, he's like, I just feel so young, you know, like, like, he's like, this is so strange. And I was like, what are you gonna do? He said, well, we have bought an Airstream and we're now gonna. We didn't want to just. You wanted to make a change, so we're just gonna truck. We rented our house out and we're gonna drive around the country for a year hauling's Airstream, which is ginormous. He bought this big truck too, which is ridiculous because he's going from a Prius to a big truck. But you know, it just kind of resonated like, okay, like, you know, you're facing this big window of time, you know, and, you know, so for you. And you don't have to work. He's going to work. But I would love to kind of hear how you're thinking about it, what.

My future looks like. Well, in six minutes I'll be on my bike going to the gym. So I got that going for me. Well, I'm working at Forbes now. I work from home. It's a very sort of a lifestyle friendly thing. And I'll do that for a little while. I will be building out more websites for sure because I enjoy it. I continue to do the doorworlder money podcast, the book Retire before Mom and dad. At some point I'm gonna build out the website further. Retire before momandad.com I wanna write more books. I wanna become a chess grandmaster. To put that in perspective, I'm like a bench warmer on a high school team and I wanna become an NBA superstar. So I kind of have a long way to go. And, and, and, and at my age, it's almost impossible.

Yeah.

Just like it would be in the real. In the NBA. Same. Believe it or not, you age out in chess as well.

Sure.

And so my odds are probably not that good. But that's one of my goals. I want to write some fiction.

Yeah.

You know, I, I've got, I don't feel in my day.

That's nice. That's awesome. I don't know if you saw the article about the. These guys getting in shape for chess, how they're running and how they. Chess, Chess guys are burning 5,000 calories a day or 6,000 calories a day.

That was so for your, for you, for the attorneys that are in your audience, I always found taking or even defending a deposition, which I've, you know, I've done, I don't know, hundreds and hundreds, thousands of hours exhausting after a day of a deposition, it seems silly. You're sitting in a chair drinking coffee all day. It is mentally and physically exhausting.

Yeah.

And the attorneys in your audience understands that chess is the exact same way. You're hunched over a board for a five hour game. It's exhausting.

I think people underestimate. Well. So your brain is 5% of your body weight burns like 20% of the calories. And I find the same thing if I'm super concentrating on a hard problem or I see that on our team, I think that they're torching calories in a way that you didn't think you would be doing when you're kind of, you feel like, quote, unquote, sedentary. All right, well, look, four minutes. Let's wrap this up. I want to get you on your bike, get your workout in. I'm jealous. Okay. So thanks, Rob, for being on our show. Thanks, Dotto Robeson for being our sound engineer. Anyone listening? Thanks for listening. Hopefully you found this useful. Our goal at New Retirement is to help anyone plan and manage their retirement so they can make the most of their money and time. And if you made it this far, I encourage you to one, check out Retire before mom and dad, Rob's site and also his new book that you can find on Amazon by the same title and his Doe Roller podcast. And also hopefully check out our site and a planning tool where you can build your own plan for free or take advantage of our premium tools. You can join our private Facebook group or Rob's Dooroller and follow us on Twitter. And finally, we're trying to build the audience for this podcast. So if you could leave us a review on itunes or Stitch or anywhere, that's super appreciated and we read those and try to improve the show. That's it. So thanks again, Rob and everyone for listening.