Podcast: Wealth & Wisdom with Robert Brokamp

Summary

In this episode of the NewRetirement Podcast, Steve Chen interviews Robert Brokamp, a CERTIFIED FINANCIAL PLANNER™ professional and key figure at the Motley Fool. They discuss Robert’s journey in the financial sector, the valuable lessons he’s learned about financial planning, and the story behind the Motley Fool.

They also touch on topics such as the 4% rule, retirement planning, and the importance of purpose in retirement. Robert emphasizes the need to think about what you want to do with the rest of your life and develop your human capital, including your ability to earn a paycheck, intellectual curiosity, and physical health.

He also suggests considering opportunities beyond traditional retirement, such as continuing to work in a different capacity or pursuing new interests and skills.

Listen Now

Listen to the podcast on Simplecast or right here:

Callouts

[9:35] The Bogle Effect: How John Bogle and Vanguard Turned Wall Street Inside Out and Saved Investors Trillions by Eric Balchunas

[11:38] A Random Walk Down Wall Street: The Best Investment Guide That Money Can Buy by Burton G. Malkiel

[13:11] David Chen Podcast

[40:48] The New Retirementality: Planning Your Life and Living Your Dreams…at Any Age You Want by Mitch Anthony

Robert Brokamp Podcast

Transcription

Introduction (00:00):

This episode is brought to you by the NewRetirement Planner. Create a financial plan for free at NewRetirement.com.

Steve Chen (00:18):

Welcome to the NewRetirement Podcast. Today we’re delighted to have Robert Brokamp with us, a certified financial planner, seasoned podcaster, a Bogle head, and a key figure at the Motley Fool, where I was just a guest on his podcast. In this episode, we’re going to explore Robert’s journey in the financial sector, dive into the valuable lessons he’s learned about financial planning, and learn about the story behind the Motley Fool. Welcome, Robert. Appreciate you taking the time and excited to learn with you about what you’ve discovered in your own journey here to become a CFP

Robert Brokamp (00:50):

Steve, it’s such a pleasure to be here.

Steve Chen (00:51):

We always like to open up a little bit about our guests and how they got to where they’re today. When I looked at your cv, you were a teacher for a while, then you were a practicing advisor at Wells Fargo, and then you joined the Motley Fool where you’ve been for quite a long time, but would love some color on how you went between those steps.

Robert Brokamp (01:09):

Yeah, so I was an elementary school teacher. When I graduated from college, I actually thought I was going to be a doctor, but when I graduated from college, I thought I’m going to do some service work first before I go to med school. I joined something called the Teacher Service Corps for the Archdiocese of Washington DC and I taught elementary school at a Catholic school in Georgetown. And in that process I learned I don’t really want to be a doctor, but I also learned that I need to make more money. I was not making a whole lot of money in an expensive city, already had a kid at that point. So I figured, wow, I need to be more responsible for my money. I used what was then, this is the 1990s, something that was relatively new called the Internet, and I discovered a company that was relatively new called The Motley Fool, and that started me on my journey to really becoming more cognizant about the importance of personal finance.

Steve Chen (02:00):

[00:02:00] When you were at Wells Fargo for a little bit, what was that experience like?

Robert Brokamp (02:04):

Well, so it happened because I had actually taken a job with American Express Financial Advisors. As I got into the world of personal finance, I’m like, I might want to do this as a job. So I called my high school English teacher’s husband who worked for Wells Fargo, and I did sort of a summer internship for him once, and I said, should I take this job with American Express? And he said, no, you should move back to Florida where I grew up and work for him, and I worked for him. They’re a couple years, they were really good guys, but I had to wear a suit every day. I had to do a little bit of cold calling about municipal bonds every once in a while, and it just didn’t really suit my personality. And all along this time, I was still paying attention to the Motley Fool. So in 1999 when the Motley Fool said they need an editor who also knows a thing or two about finances, that was the perfect thing for me because I was a former English teacher who was also a financial advisor. So it was a good fit.

Steve Chen (02:57):

Interesting. And then inside the Motley Fool, you do a couple of different things, right? You’re a podcaster and a writer, you participate in the community. How is your time split inside of the Motley Fool?

Robert Brokamp (03:08):

Yeah, when I started, I was just an editor. I don’t want to say just an editor because being an editor is very important, but I knew I wanted to be a writer. I took the editing job, but then would taking a writing assignment they would let me do, and I did more and more writing. And then in 2009, podcasting became a thing. So we launched our Motley Fool Money podcast, which I was originally just a contributor every once in a while, but then I become a more regular contributor over the years. Those are really my two main responsibilities. But as we may discuss later on in the show, I’ve sort of also become an ad hoc member of the HR committee because there’s so much that an employer can do to nudge employees into making better financial decisions that I’ve become a part of that group to make sure that our internal employees, who most of them are not, they’re not investment experts, they’re not financial planning experts, they’re techies, they’re sales folks, they run the office operations. We want to make sure our employees are on the right path to financial wellness.

Steve Chen (04:11):

Definitely one of the best ways to encourage good behaviors and educate people is through the workplace or probably the single best place. Ideally it would happen in high schools all the time, but it should continue through your life and be supported in your workplace. So glad to see the Motley Fool investing there. I mean, the Motley Fool is a long history, right? I’ve been around as well, and I remember in the dot com days they were like a hot company and there was a lot going on there. What did you find attractive? And then they’ve survived. It’s kind of interesting that companies have survived and evolved, so I’d love to get your take on what you find so unique about it.

Robert Brokamp (04:43):

Yeah, and I’ll say survived barely during the dot com crash. Anyone who was around in the nineties remembers the mania. The emergence of the internet, the world was going to change, and of course it did as a young person, then you wanted to be involved in that somehow. So it was just the perfect marriage of being part of this new technology, this really society changing force. And our goal was to help people become smarter, happier, and richer, and to do it in a way that was helping people. And that’s really the founding ethos of the Motley Fool, which is to help the individual person make better financial decisions. The name, the Motley Fool comes from a Shakespeare play as you like it, because the Fool was the only one who could tell the king the truth about his head getting lobbed off. And in the early days, we liked to sort of poke the eye of Wall Street because back then Wall Street told you, you can’t manage your money on your own. You need us to do it for you, and you need to pay us a lot of money to do it as well. And the Motley Fool came along with this emerging technology called the Internet and said, no, if we all work together, you can make a lot of these decisions on your own.

Steve Chen (05:55):

And do you feel like the Motley has been pretty successful in doing that?

Robert Brokamp (05:59):

I think so. Yeah. I feel very confident in that. And it started in the early days, it was really a chat room in a OL, and it’s hard for us to imagine today, but how revolutionary that was that you could just turn on your computer and talk to anyone in the world, and you can talk about an individual stock, you can talk about the pros and cons of indexing. You can say, Hey, I need help getting out of debt. What suggestions do you have for me? And that was the beginning of The Motley Fool. It was a chat room in AOL, and that was in 1993. Then we went on the web in 1997, and we’ve been around since then. But during the dotcom days, man, we were close. We were close to going under. We had to lay off about 80% of our company, but we survived.

Steve Chen (06:44):

Yeah, well, I like that. Smarter, happier, and richer. I like that ethos a lot. And also the story behind the Motley Fool and Speaking Truth to Power, I think that’s an important thing. It does still feel like there’s a part of that where there’s definitely much more democratization of information, but there’s still a lot of gating controls over it, and it’s good. I mean, it’s also interesting, I mean, you shared that you’re part of the Boglehead community, and I go on that forearm as well, and there’s some incredible knowledge in there, but it feels like it’s a little bit, it’s good because it’s out there and it’s indexed, but it doesn’t feel as open as it could be. I mean, not that they’re restricting it, but it feels like it’s kind of a little bit hidden off in one corner of the internet, and it’s like it’d be great if that was disseminated more widely.

Robert Brokamp (07:30):

Yeah, totally agree. And I’ll point out that some folks, if you know the Motley Fool, you may think the Motley Fool is all about picking individual stocks, which is mostly true, but we have been supporters of Indexers since the very beginning. I mean, our office now has been downsized like many since the pandemic, but we had a whole room named after John Bogle. We had a great picture of him in the room, and he came to the Motley Fool a couple of times to speak. So we love indexing and we feel like most people would be fine without ever buying an individual stock. So I’m just pointing that out because some people listening, they’re like, someone from the Motley Fool is also a Boglehead. But no, we’re big fans of indexing.

Steve Chen (08:11):

It’s pretty cool that Jack Bogle showed up and didn’t want to talk to you.

Robert Brokamp (08:14):

Yes. Yeah, no, he was such a good guy. Such a good guy.

Steve Chen (08:19):

Yeah. Hopefully his legacy lives on, I mean, it lives on for folks in the Boglehead, but hopefully other folks take the time to learn about what he did and how he drove massive change for [00:08:30] the world in terms of aligning himself with the investor and aligning their whole company with their investors so that Vanguard would drive the fees down for investing in funds. And that in turn brought fees down across the whole industry.

Robert Brokamp (08:46):

It’s increased the retirement savings and the wealth of Americans by literally billions of dollars by the way he structured that company. And it’s so admirable,

Steve Chen (08:55):

Right? It’s good that he did that and had that insight and was able with me to make it through and also build a huge company. I mean, Vanguard has ultimately, I mean, it’s basically, if you look at the biggest custodians of wealth, it’s Vanguard, it’s Fidelity, it’s BlackRock, Schwab. Wealth is getting housed in these places, and it’s good that the fees are coming down broadly.

Robert Brokamp (09:19):

And even with BlackRock, right? BlackRock’s got mostly index based investments, maybe not mostly, but an awful lot, and really they have to give credit to John Bogle for that as well, and Vanguard for really bringing everyone else along because as I’m sure his story, it wasn’t easy in the beginning.

Steve Chen (09:35):

Yeah, yeah, for sure. No, we had Eric Balchunas on here and talking about his book, the Vanguard Effect. We’ll reference that, and it tells the story of Jack Bogle and what he did and how it affected the whole industry, and it has some great anecdotes about what he was like. It doesn’t surprise me that he would show up at your company and give a talk, but very opinionated guy, and unfortunately I never got to meet him. But yeah, no, we’ve talked to some other Vanguard folks here and it’s definitely his values and the cultural impact for sure. I’ll live soon. How do you make those two things jive? So individual and stock investing and indexing, they’re kind of opposite ends and the risk concentration is very different. How do you make those two things jive together?

Robert Brokamp (10:22):

Well, first of all, many people are going to be picking individual stocks regardless of what they read about investing or indexing or not. And I’m one of ’em. I mean, I have a large part of my portfolio into individual stocks, but I compliment it with indexing as well. And we write about that all the time. We used to write an awful lot about what we’d say, index plus a few. Most of your portfolio is indexed, but then you own some individual stocks. And by the way, this is what a lot of the people who are well known for indexing do as well, and I know you’ve had some of them on your show, they’re mostly indexed, but for 5% of their portfolio, they’re picking individual stocks. So there’s room for that too. I have to say that the bottom line is, for many people, investing in companies is the same way. Some people approach following sports. They love it, they read about it, it gives them entertainment. Hopefully it’s also making them money. That’s how we marry those two. And we always say, you don’t have to buy individual stocks, but the bottom line, there’s an audience out there for it. And my colleagues at the Motley Fool, I’m on the investing group at the Motley Fool, and they all invest in individual stocks and they love it, and they want to do it as well as they can and help people be the best investors they can be.

Steve Chen (11:38):

I was actually just looking at our podcast and I got it wrong. It was the Bogle Effect, so we’ll fix that for the book that Eric wrote, the Bogle Effect as part of the Bogle Heads thing, I saw Burt Malkiel speak, and he wrote a random walk down Wall Street. It was incredible to get him on the podcast. The guy’s 90 years old, still a total dynamo, and he was sharing how he still buys individual stocks. It’s good. It’s part of our animal spirits that people like to take risk and just understand the risk you’re taking and don’t make it too much of your portfolio.

Robert Brokamp (12:12):

And I think it’s important no matter where you are in the world, what you do with your portfolio to understand the economy, to understand businesses, to be able to analyze businesses, because chances are you’re working with a business. And I think that’s one of the things for me that has been great about owning individual stocks and staying on top of them. I’ve learned how the economy works. I know what, or at least I try to know the difference between a good leader and a bad leader, good marketing, bad marketing. And I think that’s helped me just personally beyond what it’s done for me and my portfolio.

Steve Chen (12:48):

Well, if we had all bought Apple Stock when we started using iPhones, we’d all be a lot richer.

Robert Brokamp (12:53):

But for those indexers out there, you do own Apple stock, which is what’s so great about it.

Steve Chen (12:58):

I know. I think that’s where indexing Nvidia spiked and you’re like, well, guess what? Good news, if you own the S&P or some big indexes, you own a bunch of Nvidia. What’s driving this stuff

Robert Brokamp (13:10):

Yup, exactly

Steve Chen (13:11):

We’ll also link to a podcast. We did a podcast with David Chen. That’s what he did. He got laid off. He had to pull his money out of his Hewlett Packard 401k, and he couldn’t do it in Kanye, take it out in cash. And he is like, I like Apple a lot, and I’m going to just buy Apple in 2008 or something, or whatever it was 10 years ago. Anyway, he 10 x himself and now he’s got other problems, tax problems.

Robert Brokamp (13:36):

And then I have a friend who retired early because he wrote options on Tesla, and it worked out very well for him a few years ago. As for me, Tesla was my largest individual holding, and now it’s down, what? I don’t know, 50%, something like that. I don’t even want to think about it. So you never know. You never know what’s going to

Steve Chen (13:53):

Happen. Well, that’s where you get into the whole behavioral side of this. It’s like when it’s going up, it’s great, and then it goes down. You’re like, oh, but it’ll come back and don’t catch falling knives. Dead cats don’t bounce.

Robert Brokamp (14:07):

I’m hoping that cat bounces. I’m just hoping, like I said, most of my money is indexed, but even into my individual stocks, I try to offset the risks. So my other top holding is Berkshire Hathaway, so they sort of take turns being my top holding depending on what’s going on in the market. And then I have to sort of pair off other things further down in my portfolio,

Steve Chen (14:30):

Understanding human emotion and how people trade. I do think there is the psychology of the market. When you see true capitulation, that’s the Warren Buffet thing. When there’s blood in the is when you want to push your money in. The thing is it’s very hard to do. Everyone around you has to be like, it’s over. Game over. We’re going to go bankrupt. In 2000, great financial crisis, 2008, I remember Google tanked absolutely tanked. I was like everyone else, I was [00:15:00] like, I’m buying some Google because I feel like that stock. And then I doubled up and then I did what I shouldn’t have done, which is like, oh, I doubled up. I guess that’s good, and I’ll get out instead. Well ride the winners, right? That’s another thing. It’s like, don’t get out of your winners.

Robert Brokamp (15:14):

Yes, that’s true, that’s true

Steve Chen (15:17):

but just understand these behaviors about yourself. But yeah, I think that’s the one time where if you have cash and everyone else is around you is freaking out, one, don’t liquidate your positions, and that’s when you buy. And then I think the people that do also win, it’s also regularly rebalanced. So when you have Tesla becomes a massive part of your position, if you rebalance at that point into indexes or other things, that’s when you can kind of preserve some of your wealth.

Robert Brokamp (15:45):

Yes, exactly. And I think that’s good to have an idea. How much do you want a single company to be part of your portfolio? For me, the rule of thumb is no more than 10%, probably even less if you work for the company. And for me personally, I am very risk tolerant, but I always try to maintain somewhere around 10% of cash bonds in my portfolio, and that’s when I do the rebalancing. If it ever drops to 5% because my stocks did so well, I sell some stocks. If it ever grows to 15% because my stocks are down, I rebalance into the market.

Steve Chen (16:18):

Okay, good. Well, you’re disciplined. Yeah. I saw an interesting tweet about someone who was like, I just started indexing because it saved me so much time, the human capital cost of doing this. And that is kind of where I ended up, which is my own personal journey, was through this work getting way more educated and talking to people like you about how this all works. And then I was like, all right, I’m going to become an indexer and then I got to get all my money and I did all that stuff. And doing that is very freeing. Like, all right, I’m generally capturing the returns of the market in a low cost way. I’m diversified and I don’t think about it because I just have to spend my time on this business and growing this company. So I think you have to decide if you’re going to be investing and a chunk of your money, then you need to learn about it and pay attention that has a human capital cost or a time cost, which you should factor in.

Robert Brokamp (17:06):

Right, and that’s where the Motley Fool has come in as a help to many people. They subscribe to our premium services because they’re looking for ideas, but also a team of people to help keep them on top of those things. We, I don’t do this part, but the company does offer sell recommendations and things like that because a lot of people are in that same situation where I want to invest in individual stocks, but I don’t have the time to do all the research to stay on top of it all the time. And that’s where the Motley Fool could be helpful.

Steve Chen (17:37):

I think what you need to recharacterize investing, it’s like either you are an indexer or you’re a professional investor, this is what I do for a living, or this is a hobby, this is a pastime. You’re having fun with your money, but it matters because it’s your life savings. So it’s like flying planes. It can be an expensive, dangerous habit or hobby that you have on the side.

Robert Brokamp (18:00):

Yeah, I mean, I think so for sure. For people who are not so experienced and who are not on top of things, I think it can be very dangerous. And that’s why if someone were to come to me who’s never invested before, I say start with index funds if you want, especially nowadays with no commissions and fractional shares, it’s very easy to build a portfolio of 10 individual stocks, 20 individual stocks with very little money. Just try it. Don’t commit a whole lot of money to it, and you’ll find out very quickly, I love this and I’m good at it, or I don’t really enjoy this. And at that point you can just hold onto those or just sell ’em and go into index funds. But it does not take much money these days to buy a little bit of a stake and enough companies to feel diversified and figure out whether it’s your thing or not,

Steve Chen (18:45):

If you want to pay attention to it and whatnot. I guess if you own a bunch of Nvidia, you’ll be like, yeah, this is awesome. But

Robert Brokamp (18:52):

Even that, that stock was flat for five years and then all of a sudden it took off. So it takes so much patience.

Steve Chen (19:00):

Yeah, it’s funny when this stuff happens, people also show up on Twitter. Yeah. I called this 10 years ago when we were like, it’s going to happen. AI is going to happen. And you’re like, okay. And then it does happen, but hindsight is 2020. What about the calls you made where everything tanked or nothing? It’s still flat. A couple more topics on the Motley Fool. So one is you talked about the 401k and health and the stuff you’re doing internally. Any big insights that have come to you from doing that work? We chatted a little bit in the preamble about how you’re doing it because that’s the lever to help a lot of people internally.

Robert Brokamp (19:32):

Yeah, I mean really it comes down to, I think the employer is the nexus of someone’s financial life. It’s the paycheck they provide, the health insurance provide the retirement plan. They might provide flexible spending, disability insurance, the benefits that an employer chooses will determine someone’s financial wellbeing, but then they also have the power to nudge people in better directions. So that’s either through education, that’s either through defaults when you automatically sign up to people to the 401k and then maybe auto escalate them to a certain point. But also one of the issues with the Motley Fool is that we’ve emphasized the importance. So in 2010, we did our first financial health day. We spent a whole day saying, we want you to spend this day working on your personal finances. We had classes, we had professionals come in that you can meet one-on-one with, and we had a checklist of things that you can just take care of on company time because we think they’re so important and we’ve created this culture of how this is important. We want you to be doing things that are good for you. And if the employees trust the employer, if the employer is going to say, this is important, they’ll listen. As opposed to if it’s not part of the culture of the company and the 401k provider just sends out an email saying you could attend this live webinar, it doesn’t have the same impact as if the CEO says, this is really important and you should attend this class. It’ll be better for you.

Steve Chen (21:04):

That’s awesome. I love that. Putting the company resources in terms of paying people to do the stuff they should do, how do you measure the impact of the Financial Health Day? Are people changing things up, optimizing their benefits, investing, saving more, contributing more and things like that?

Robert Brokamp (21:20):

Yeah, we didn’t measure it directly other than to say it was a big honors system, but we would do things like if you took care of various things or did various things, you would get a ticket, right? If you attended a class, met with a professional, checked off things off the to-do list, and then you could put the tickets. This is when we were all in person in various bowls for various raffles. And so just by looking at the tickets, assuming everyone was being honest, we could see that these many things were accomplished. Now that’s in the early days. Now that we’re mostly remote, it’s more virtual. But all I can say is if I have a class on retirement planning, for example, a quarter to a third of the company will show up, which is a very high participation rate compared to if our 401k provider has a class and it’s maybe five to 10%.

Steve Chen (22:09):

Yeah, I love the idea of well led by internal advocates. We see this in our community. People in our community are champions for financial, personal finance. Very often their own families are going around and saying, you should do this, and we also think this could happen inside of companies. Have you seen other companies embrace this kind of idea of a financial health day?

Robert Brokamp (22:28):

Not really. I mean, the idea of a personal financial wellness program is picking up speed. You can find companies that offer these, and some of it is classes, some of it is live webinars. Some of it is you can actually have the opportunity to speak with a financial professional, may not be a certified financial professional, but maybe a financial coach or something like that. But I think a lot of those companies are having trouble gaining a footing because I think what happens is employers are well-intentioned to offer it as a benefit, but then it’s just one of the whatever 10 benefits that are there on the HR website and people don’t give it much thought. Whereas again, at Motley Fool, they’re like, we’re taking a whole day off to do this and we really think you should attend.

Steve Chen (23:19):

Have you ever thought about doing it quarterly? Like, Hey, let’s give people half a day, once a quarter and we’re going to take care of all the stuff. Let’s update your estate plan. Let’s update your financial plan. Let’s tune [00:23:30] up your contribution rates. Let’s get ready for taxes.

Robert Brokamp (23:33):

That gets to another thing that I’m doing now that I’m on something we call the wallet team and a wallet team is four other fools and me who meet every other week to come up with ideas that, so for example, next month we’re having, because most of our employees are in Virginia, we’re having Virginia’s 529 plan teach a class, and we try to do something every month if we can. That is educational. I love the idea of the time aspect. So that’s something I think we should probably consider. To be honest, the Motley Fool is reevaluating all our wellness things because we also have a physical wellness program and a mental health wellness program, and we tried to combine them all in one week and it was too much. So we’re now reevaluating everything and maybe we should focus on things separately, but I love the idea of doing the time aspect quarterly because that gives employees permission to say, I know I have these things I’m supposed to do, but I’m allowed to spend these next three hours during a workday taking care of these things. And the key there is it often has to be during a workday if you want to call an estate planning attorney, if you want to talk to an insurance agent, if you want to try to choose a financial planner, if you’re trying to do those on a Sunday morning, you’re not going to get anybody.

Steve Chen (24:51):

Yeah. Here’s something I think it would be cool to do would be that I think could help benefits people too, or employers when people have life events like a kid. So I was talking with someone who was like, the move when you have a kid is fund the 529 when they’re born. You could go to new parents and be like, guess what? We’re going to give you 10 grand for your kids 529, but you got to stay here for two more years to best into it or something like that. 20 grand, we’re going to give you that as a bonus. It would be awesome. It would solve a financial problem for them, get them off going on their end and also drive retention. You could do that for 529s. You could do it maybe a little bit for HSAs, you could do it for Roth IRAs for your next generation.

Robert Brokamp (25:36):

It’s been a few years since we’ve talked about it, but we as a company talked about having just this pool of money that employees could use in various ways, like the things you just said, or if they have school loans, they could put that money to paying off their student debt, but basically some type of thing because all in different situations, some of us have kids, some of us don’t. Some of us are empty nesters, some of us aren’t. Some of us have done a good job of saving for retirement and some haven’t, and that’s where they need the money. But we talked about it years ago, we didn’t do it, but it’s something to certainly consider

Steve Chen (26:08):

For sure. That’s awesome. Okay. One more question about, I know I think you have strong opinions on the 4% rule or you have some opinions on that. We’d love to get your take on that and then we’ll go to the last segment.

Robert Brokamp (26:20):

I think part of what’s interesting about the 4% rule is that, as I’m sure many of you out there know, it first came about in a 1994 paper by a guy named William Bengan who then was a financial planner. He has since retired. Great guy, literal rocket scientist, went to MIT to study rocketry, but then went into his family’s soda bottling business until it was sold. And he comes out with this report in 1994, and you’ll read in there and it says around 4%, but it really was 4.15%, and then it was confirmed a few years later by what became known as the Trinity study. But Bill Bangin to this day, well into his seventies, is still doing research. That original study had just two assets, s and p 500 and I think it was intermediate term government treasuries. And then a few years later, he added small caps and he moved it up to 4.5%, and then several years later, he included other assets and moved it up to 4.7, 4.8%.

(27:17):

So part of it is, I just think it’s interesting that 4% is so fixed in our brains when the guy who came up with it hasn’t been using 4% really from the beginning. Now, other studies have found 4%, but the other issue too is that it is the super safe, safe withdrawal rate because it assumes, first of all, you’re going to live 30 years, which is the right assumption if you’re retiring in your mid sixties. But still, chances are you’re not going to live 30 years. Most people will not live till their nineties. It’s a prudent assumption, but you probably won’t make it. And the other aspect is you take out money in that first year of retirement, that dollar amount, and then you adjust that dollar amount every year for inflation. But for most people, they don’t need their spending to go up every year for inflation.

(27:59):

In fact, most people, their spending goes down on an inflation adjusted basis as we get older. So Morningstar did an analysis of this that came out at the end of last year, and they found they agreed with 4% if you use the original regimen as suggested by banging back in 1994. But if you use actual spending found by research from folks like the Employee Benefits Research Institute, the safe withdrawal rate is actually closer to 5%. And then there are situations where, well, [00:28:30] okay, if something happens bad in the market, like the market goes down or there’s high inflation, you cut back your withdrawals a little bit, and that’s what most people do. If my portfolio’s down, I’m going to be like, you know what? I’m going to tighten my belt for a little bit. That also could boost your safe withdrawal rate. So I think if I were 65 and retiring today, although frankly I plan to retire much later than that, but we’ll see. But if I were 65 retiring today, I think I’d feel comfortable with 4.5%, maybe even a [00:29:00] little higher, but just being prepared that if my portfolio does not perform very well, I cut back when I have to.

Steve Chen (29:07):

Yep, makes sense. Why do you think your retirement age will be much later?

Robert Brokamp (29:11):

Well, this is something maybe we’ll talk about, but I’m not sure retirement’s good for people and the academic research is clear that it is mixed. There are studies that have found that people who retire sooner experience accelerator rates of physical decline, mental decline, because frankly, we are built to  be stimulated physically and intellectually. We’re built to be around people and we’re built to have a purpose. Now, there are other studies that have found the complete opposite that retirement is very good for people. And I think really what it depends on is what job are you retiring from and what you’re retiring to, because there are some jobs out there that are boring, that are isolating, they’re stressful, and getting out of those jobs is probably good for you. For me personally, I have a great job. I like what I do and I’m not eager to retire. So I could see myself working well into my sixties and then maybe part-time well into my seventies.

Steve Chen (30:05):

Yeah, I think purpose is such a huge part of this. Do you see people thinking about this earlier and earlier in their lives? I know that our community thinks about it as they get older and they’re like, okay, I’m getting ready to retire. Yeah, what am I going to retire to? They be thoughtful about these things. Are you seeing that one younger?

Robert Brokamp (30:24):

I see two things going on. First of all, we saw this during the great resignation of the pandemic, there was something like two to 3 million excess retirements of what would’ve normally happened, but then a year or two later, a lot of these people went back to work. Now, some of them, because their portfolios are down and inflation is high, but others were frankly bored. They did the things that were on their list. They had the time off for a while, and they’re like, is this all there is? And they went back to work. So that’s one thing. But the other thing is too, I think there is a greater appreciation also partially from the pandemic, that life is short and you can’t plan on being perfectly healthy and living well into your seventies or eighties. So there’s this other side of it where people are like, okay, I may not want to be retired forever, but I don’t want to put everything off until my sixties or seventies. So you’re seeing more of people doing, whether you call it a sabbatical or changing jobs to a more flexible workspace, now that we’re working remotely, people are maybe moving to a job where, you know what? I can have this job and I can work from the mountains of Colorado rather than in my busy city. And that’s the balance for me. I like my work life balance better if I do that and I can do it for longer because I’m enjoying it more.

Steve Chen (31:44):

So this idea of diversifying your time, so do you spend it at work? Do you have a better kind of job? Do you have a better work environment? Have you seen any good studies on this? Because that totally makes sense. I mean, I’ve seen it and people here moved to Tahoe, they moved to Park City, they go to these different great places. They all went to their vacation towns and hopefully have great lives there. Or they moved somewhere way less expensive. They took their San Francisco or New York City salary and moved to Virginia and their quality of life jumped up.

Robert Brokamp (32:12):

And I don’t have any studies other than the evidence that we know this is what’s happened, right? I mean, the United States is full of what were one small quiet communities that are now filled with people leaving the coast, leaving the big cities and looking for a different pace of life and a different cost of living, to be honest. But there’s no question that I see more and more people saying, listen, I don’t want to save everything to the end, my daughter, my oldest right now is a digital nomad in Europe. She does not live in one place for longer than two to four weeks with her husband because she can, their jobs allow them to do that. So I think that there’s more of a realization that you’re not fixed in one place, in one city, in one job.

Steve Chen (32:58):

How long does she want to do that for?

Robert Brokamp (33:00):

Probably for another year or two. She’s 32. She just got married last summer in Rome, as I like to say. She wanted to make it as difficult and as expensive as possible on the rest of us, but she and her husband live a great life. I think in the end, when they’re ready to have kids is when they’ll put down more firm roots

Steve Chen (33:16):

And having sampled life and all across the world, or at least Europe, they’ll have a wider choice about where they go.

Robert Brokamp (33:25):

Yes, absolutely.

Steve Chen (33:27):

Someone on our team is considering moving to Virginia from LA and she’s like, yeah, it’s from Ireland. She’s like, it’s closer to Ireland. I could be anywhere. So here we go

Robert Brokamp (33:38):

As a resident of Virginia, I say, come on over. It’s a great state.

Steve Chen (33:44):

All right. Last section here. Just curious about some of the biggest things you’ve learned as you’ve worked with the Motley Fool community around financial planning. What are some of the big challenges or concerns people have as they interact with you?

Robert Brokamp (33:57):

Well, because people come to the Motley Fool mostly for investment guidance or discussions or education, it is mostly about what to invest in because it is a financial media company, the majority of consumers of financial media have above average wealth and are frankly older. So these are people who generally are in their forties, fifties, sixties, and a big question is, alright, how do I transition from this all stock portfolio to retirement? And whenever you have a year like 2022 or for the two or three months of 2020 when stocks are down, people are like, oh, holy cow, what happened here? So I think that’s a big discussion right now in terms of how you do that. And I think certainly once you are within a decade of retirement, it’s time to start scaling that back and you can do it incrementally. A couple of things I think I will do once I’m within a decade of retirement, which is maybe a year or two from now, I’ll stop reinvesting my dividends and I’ll start letting them accumulate as cash a portion of my contributions to my 401k and IRAs. They will go a little bit in cash and then every year I will rebalance stock. So it’s not a decision you have to make immediately. It’s a good way to gradually build up your cash and bonds as you approach retirement.

Steve Chen (35:21):

Nice. How do you want to be positioned as you approach retirement? How would you like your portfolio to be and do you think about it, not just the portfolio cash bonds equity, but taxable tax deferred and tax exempt. Do you think about it in those buckets?

Robert Brokamp (35:37):

Oh yeah, absolutely. I mean, I do a live webinar every year for our premium subscribers, and all I do is just answer questions with another former financial planner. And so many of the questions are about how much should I contribute to the Roth? Should I do a Roth conversion? So many questions about the backdoor Roth, IRA, and it’s certainly at this time where tax rates are historically low. They’re definitely going to go up in 2026 unless Congress and the President Act, whoever is occupying those offices at that time. So it certainly makes sense that way as well. And then once you enter retirement with these different types of buckets, which ones do you tap first? So yeah, a lot of discussions about that.

Steve Chen (36:20):

Well, we’re working on automating all of this.

Robert Brokamp (36:23):

Well, I’m glad to hear it. I will say one thing about the evolution of the Motley Fool is again, in the very beginning in 1993 was like, we can all do this together. We don’t need Wall Street, we don’t need experts. But what we learned over the years is there are many people like, yes, I wish I had the time for that. I wish I had the interest for that, but I don’t. I need some sort of help. And that help could be working with a financial planner or it could be a really sophisticated tool that can crunch the numbers for you, because in the early days, people were making their own spreadsheets and things like that, which is fine if you really know Excel, but it’s probably not right for the average person. So you put together a good community of educated, well-meaning folks with some good tools, and I think you have a good combination.

Steve Chen (37:09):

Yeah, that’s happened here. A lot of our folks show up with spreadsheets or have them, and they have advisors too, but then we’re building this platform and they can all feed into it and give their ideas. And it’s interesting how the world’s evolved from, okay, how do I buy stocks and how is that done to how do I index and be smart about investing? But then you got to be smart about asset location when you’re accumulating as you transition, and then as you decumulate all those ratios ideally change in concert to minimize taxes and maximize your return. I think there’s a lot of room to automate this as well. So one of the things we’re looking at is we do a lot with Roth conversions, but withdrawals. A lot of our users are doing stuff on our platform to move money between accounts, withdraw from the right place at the right time, and I think there’s a lot of space for us to automate it, a lot of this stuff, or at least surface how to do it in a better way. So that’s an area that we’re leaning into in a big way. Alright, well, I guess my last question would be any big suggestions you have for folks if they’re approaching retirement or making this transition, things that they should pay attention to?

Robert Brokamp (38:18):

This is more philosophical. I like to think of retirement and really anyone’s situation. It’s a time to ask yourself, what do I want to do with the rest of my life? And for some people that is stop work and watch TV and hang out and maybe visit the grandkids. And as you know, sure, the stats on the number of hours of TV watching that retirees do is quite surprising. But I think if you change it to what do I want to do with the rest of my life? It brings up other questions like, I may not want to retire or I just want to break, or I might want to go back to school and become a nurse, or I may want to continue working, but I want to work for a nonprofit or a cause that I am concerned about. It makes you think more about the opportunities ahead, and that might be retirement or it might not be.

(39:06):

I mean, I know of people who took money out of their 401k to pay for an education so they could get a new job that they’re happy to do well into their seventies and they’re much more fulfilled. So I think that’s the big question to ask when it comes to the rest of your life. I think one of the topics that is most neglected in financial planning is developing your human capital, and I use that as a broad term for starting with your ability to earn a paycheck and to grow your paycheck and to protect your paycheck, the foundation of your finances, but it’s also your intellectual curiosity and development. It’s your physical development, and when you ask retirees, what’s the number one ingredient of a happy retirement, the first thing they say is health, because you can’t enjoy your retirement if you’re not in good health. Some things, of course, health issues we have no choice over, but anywhere from 30 to 50% are due to our lifestyle choices. So thinking about those things like what do I need to develop? Where do I want to be? What skills do I have to work on to get there and think of all the opportunities ahead of you? I think that’s a great way to frame your finances.

Steve Chen (40:09):

Yeah, I actually remember talking to my mom and she was like, well, as I approach retirement, the next decade is going to be about this. And she had some ideas about what she just wanted to do and it was great and chop it up a bit. But yeah, we have a limited time horizon, so we have to be pretty intentional with this and being aware of it. I see this with more younger people, they’re much more aware of how short life is and I think making good choices and doing things that are purposeful. So hopefully that continues to spread and people do things they love and they’ll consequently do better work.

Robert Brokamp (40:48):

Yeah, I say more power to ’em. One of the first interviews I did as a writer was with a guy named Mitch Anthony who wrote a book called The New Retirementality, and he talked about how we have this binge society where when we’re young, we binge on education, and then in our careers we binge on work and that the end of life we binge on leisure, and I think it actually makes a lot of sense to sort of mix all that together and do a little bit of all of that throughout the rest of our lives.

Steve Chen (41:12):

That’s awesome. Yeah, the idea of a sabbatical strongly appeals to me. It’s hard to do when we’re doing this kind of work, but I get why folks would want to do it. Some folks write about mini sabbaticals, just making them a regular cadence. Americans don’t take enough vacation. Generally, we’re I think, by far the hardest working society out there. No question about it. We grind it out, work all the time, and be healthier for us to build in a little bit more rest and time for recovery. Robert, this was great. I appreciate you taking the time, so thanks for sharing your insights with us, and I’m sure we’ll get a lot of good feedback on this. And for the folks listening, definitely can check out Robert’s work. Robert Brokamp at the Motley Fool will link to his writing and the podcast. Thanks for tuning into the NewRetirement podcast. If you have a minute and haven’t built a financial plan, definitely check out what we’re doing NewRetirement.com. Also, if you have a minute to write a review for this podcast or share any feedback, it’s always welcome and we’ll talk to you next time.

NewRetirement Planner

Do it yourself retirement planning: easy, comprehensive, reliable

NewRetirement Planner

Take financial wellness into your own hands and do it yourself retirement planning: easy, comprehensive, reliable.

Share this post:

Keep Reading

All Posts