Q&A: We Saved $1.2 Million But We’re Still Renting. Should We Buy?

26:58Hey, Paula and Joe. Love the show. I'm trying to evaluate a 4 % withdrawal guideline versus a CapEx return rate on a rental property. Here's the backstory. I bought a 3 ,300 square foot primary residence in 2011 as a short sale in a highly desirable neighborhood. After a year of fighting to get permitting, I was authorized to build the perfect for me second home, which is 1 ,800 square feet, on the same one-third acre. I moved into this 1 ,800 square foot home in 2017 and have leased the larger home since. The lot cannot be divided, and if I were to sell, I'd have to sell both properties at the same time as one property, one lot.

27:35Here's the numbers. I purchased the 3 ,300 square foot house for$645 ,000, currently valued at approximately$2.3 million. I built the 1800 square foot house for$450 ,000, currently valued at about$2 million. I separated the current value so that you could do the CapEx rate calculation on the rental, but the total value of the property if I were to sell is somewhere around$4.3 million, and I owe$350 ,000 at$2.75 interest on a 15-year loan with about six years to go. So I rent a larger home for$10 ,000 a month and live in the smaller. I love my neighborhood that I live in and the house that I built is perfect for me, but I'm not thrilled with being a landlord, even though it doesn't take up a lot of my time.

28:18It's not like I could really turn it over to a property manager because I live in the adjacent property and I'm sure the tenants would always look for me to resolve their problems. I also feel like that at$10 ,000 a month, I'm not able to attract very long-term multi-year tenants because at that price, they're interested in a shorter term solution while they look to purchase their own home. Vacant months have been almost zero. I know that the capex rate on the 3 ,300 square foot rental home is not good based on the$2.3 million current market value, but the rental income is$120 ,000 annually. However, if I were to use a withdrawal rate guideline of 4 % on the same$2.3 million, that would equal$92 ,000 annually.

28:59I'm not really sure how to figure out how to apply long-term capital gains taxes and real estate commissions to this decision since I don't know very much on the total property in relation to its value. So is it better to collect$120 ,000 in rent or withdraw 4 % equaling$92 ,000 if I sold and invested the proceeds less long-term capital gains in the total stock market index? Of course, if I did this, I'd have to find someplace new to live myself and probably would spend around $1.75 million on a smaller home in the same neighborhood. I have a well-diversified investment portfolio of about$3.5 million separate of this property that generates more than enough for my lifestyle.

29:40I look forward to your debate about this situation. Paul, thank you for the question. First of all, that's quite impressive appreciation. You bought this property for$645 ,000 and it's now worth$2.3 million. And the other property you built for$450 ,000 and it's now worth$2 million. You're in a neighborhood that has appreciated like gangbusters. That is some serious, fast appreciation. He mentioned getting a distressed property. Yeah. Man, if you can find those distressed properties, it's very hard, right? It's very, very, very hard. But if you are able to, I mean, that's a big life-changing moment.

30:23It's a huge life changer. You know what I often tell my students in our course, Your First Rental Property, is there's a matrix that I'll show them, and it is what I call the effort-reward spectrum. If you are looking for move-in-ready homes on the MLS, that's the easiest way to buy a home. It's the way that most owner occupants or retail buyers purchase their home. It's the lowest amount of effort, but it's also the lowest level of reward. Now, if you've got more money than time and you just want to do something quick, but you don't want a lot of your time to be taken up, that's a perfectly fine place to be.

30:58Right. But if you just think of this as a spectrum, if you want to be further along on that spectrum where you are going into higher effort, higher reward situations, such as looking for off-market deals, which might mean having a direct mail campaign or driving for dollars, buying those off-market properties, and particularly buying distressed off-market properties, that's where you have the opportunity to have massive, massive value add. And so the appreciation that he has seen, and there are two types of appreciation. There's forced appreciation, which is through repairs, through renovations, through upgrades, improves the property such that every dollar you spend on it yields far more than that dollar that you put in, right?

31:48That's forced appreciation. And then there's market appreciation, which is completely outside of your locus of control. And so the appreciation that he has seen, and I have to assume that this is a combination of two, and I have to assume that the market appreciation in that area must have been incredible. And also given that he has indicated that he spent a year fighting with the permitting authorities, that he has put a ton of work into the forced appreciation on this property. But wow, those numbers, I mean, in total, he's in for a little over 1.1 million. With that investment of 1.1 million, those two homes on the same lot are now worth about 4.3 million.

32:34That's life-changing. Well, let's open up then and talk about answering his question because Paula, I will pose this. I don't know that this is a financial question. I think this is a different type of question with a strong financial component because if you run the numbers on both of these, I think it's going to be a little difficult to run the numbers. I think it's probably gonna be better to run the numbers on the one that you want to do. Because here is the crux of the question that I really heard. Paul wants to keep his house because he likes where he lives, but he doesn't want to be a landlord.

33:15That's a pain in the ass. So he doesn't want that. So then the question is, which one is more painful to Paul? Is it moving and having to accept this much, much higher cost, right? There's going to be a big cost because he's in this place where he's had a ton of appreciation. Now he's going to get out of his current situation. He's going to get a big old bag of money, which is fantastic, but his housing cost to purchase the new properties could be way more than what it was here. Is that pain better or staying and putting up with being a landlord better? I think this is a question of what does Paul really want to do?

33:58Because both those options have clear downsides. So my first question when I was a financial planner was, before we get to doing the math on each of these, which one do you want to do, Paul? Do you want to move and not be a landlord? Is this a big enough pain in the butt that you want away from that? Or is the thought of actually moving and picking up and paying more every year the issue? Now, this would be much more of a financial question, I think, Paula, if he hadn't remarked that he's good, he has enough money to do either thing. He's going to be able to live his lifestyle in either spot. So if lifestyle is going to be fine either way, I think the best way to answer this is what do you want to do?

34:41Paul, I want to challenge the assumption that you wouldn't be able to have a property manager just handle it for you. Because I think any property manager worth their salt is going to love taking on this home and is going to love taking on you as a client. And there's no reason that your tenants need to know that you're the owner. In fact, that was my question, right? Was do they need to? Right. Yeah. The tenants don't need to know that. If they were long-term renters, there would be a better chance that, you know, going around in the neighborhood after a long period of time, they discover that you are the owner.

35:20and even if they do discover that you're the owner, I think then just the act of saying no, not me. There's actually this business in between us that has a property manager. You can't call me to come over and fix your toilet. Sorry. Oftentimes when it's a small business, people like to conflate you yourself personally with the business. And so there was this one time I was doing a photo shoot for the business, which requires hiring a photographer. It requires a lot of planning because you're planning different outfits. You're planning different settings. You are coordinating typically with a website designer or a thumbnail designer around how these pictures are going to be used.

36:01It's a core part of your business. And I had this friend who was like, I want to come along. I want to come along. I want to be part of the photo. She was treating it like this is just something fun that I was doing and that she could just like butt in and join in. Unfortunately, I let her. In hindsight, I was unable to say no because I was afraid of disappointing her. But the crux of the problem and the crux of her request was that she didn't recognize that there was a distinction between me and my business. And the way that I handle that these days is when I get requests like that from friends who want to butt in on something, like they want to use the cameras that we have, I can just say, no, that doesn't belong to me.

36:52That belongs to the business. And I think when you really insist on that distinction, no, it doesn't belong to me. It belongs to the business. Whether that's for a rental property or whether that's for a small business that you run, it's a way of really separating out a person's perception of you, the individual, versus a person's perception of what the business owns and operates. And I think with Afford Anything now, it's different because we have employees and because more broadly, I think there's greater social recognition these days that online jobs are jobs. I don't think that recognition was there 10 years ago in the way that it is today.

37:35Right. All Cheryl's friends thought I was napping at home all day. Yeah. While she was working. Yeah. I think there's greater recognition that remote work is work. So I think that helps. Now I can say, look, we have employees. If you try to take resources from us, you're not just taking it from me personally. You're taking it from our entire team. Well, the analogy is, do you go to Mary Barra, the CEO of General Motors and say, hey, can I borrow a car? Right. You know, just because she's a CEO doesn't mean you get to go borrow a car from GM. Right. Yeah. But this happens so often with small businesses where people really fail to recognize the distinction between the individual and the business.

38:16Paul, I think that insisting, no, I'm not the owner. This business is the owner. And this business has contracted with a team of people who manage it. It requires that confidence and that certainty, but it requires like really, really delineating that line. such that you yourself don't get conflated with the business that exists to run this operation, right? Because your business also, it has managers, it has contractors, like your business has a team, your business hires plumbers and electricians and HVAC technicians and painters and power washers, like your business provides a lot of jobs to a lot of people.

38:57It's not you. It's not just your house. It truly is your business's property. To bring this back around, I think, Paul, there might be the middle ground that you're looking for, which is if you can't divide the property, you might be able to separate church and state by just being a neighbor and not being officially, as far as they're concerned, the landlord. You still can put a third party between you. The hard part would be if they ever learn, you just have to be able to say, not me. Go talk to my team. Yeah. I think that you do that once, maybe twice. People will learn and you don't have to say it like you're some kind of jerk.

39:37You know, you say, I'm sorry, I don't handle any of that stuff. I hired that all that stuff out. Yeah. But I think you do need to be assertive about it because absolutely people will tread that boundary. Sure. That's happened to me a thousand times. But if somebody has a clogged toilet and you just say, yeah, I can't help you. I'm sorry. I heard that all that. I don't I don't even know how to do it. there's no way you want me doing that. If their number one goal is to get something done, I think you can very quickly dissuade them from coming to you. Yeah. But it's not the clogged toilet. It's, they're going to come to you with, can you lower the rent?

40:12Can you do that? Again, still not me. I just go, you know, I've still not me. I'm sorry. I, did you talk to Bill or Linda or whoever my property, did you talk to Linda? Cause I don't know anything about that. So frankly, not my deal. And then I would just actually, I wouldn't even give an opportunity to reply. I just turn around and leave. You know, I just go, yeah, I'm sorry. I don't deal with any of that. Listen, I got to get back. I'm sorry. Yep. Yeah. I'd be very insistent. Like, look, don't think of this as mine. Think of this as belonging to the business. The business hires a team and the business has processes and the business has systems.

40:47Go through our process. Go through our systems. Not my department. Yeah, exactly. And then, by the way, Paul, they may think then that you're a much bigger landlord than you are. Because assuming this is your only rental property, because if you say, no, I have a team for that. I heard people to take care of that. That's fine, too. That's great. Yeah. Or I would just say, I'm not in charge of any of that. Even if they ask about a fee or whatever. Look, I'm not in charge of any of that. My manager is. Did you talk to Linda? Yeah, exactly. You know, that's what I should have said when that friend was asking if she could like come along on this photo shoot.

41:28You know, I was reflecting on it. I was like, man, if I had an employee who did that, I would fire them immediately. If I had an employee who just let somebody tag along and take half of the resources for something that we had allocated for a day. If I had an employee who did that, I'd fire them instantly. But I let myself get talked into doing that. Why? Because I let my friend pressure me because she couldn't see the difference between me and the business. And I didn't have the fortitude to insist on that delineating line, you know? Well, that thing I was going to ask you about, Paula, we can ignore that then.

42:05Oh, wait, what were you going to ask? If the next photo shoot, I could come along.

42:13I just, I need to snap some new pictures. You told me ahead of time, we need some new pictures. Well, actually, I mean, Joe, if you and I did it, there would actually be a business purpose to it. Oh, there we go. Right? See, figure out you're in, people. That's it. Just be on the Afford Anything show for a long, long time, and maybe you'll get to be on the photo shoot. But yeah, no, what a, yeah, horrible. Did she get some nice shots for free, by the way? She did, yeah. She got lots of nice shots for quote unquote free to her, but it was actually at company expense. It's horrible. Yeah. Yeah. She's actually charging you.

42:51Yeah. Yeah, exactly. Exactly. So I think about that a lot. I like, I reflect on that a lot as to where I should have been more assertive and should have laid down boundaries. And I should have said to her, Hey, if one of my employees did this, I would fire them. So what makes you think it's okay for me to do it? I should have had that thought at that time. Or at the very least say, oh, you want to split the cost with me? Right. But I would be steaming while I'm paying for a photographer and they're taking pictures of somebody else. I would be steaming. Yeah. Just stay in there going. Okay. Because that is to your point.

43:27If you had had an employee do that, it would be stealing from the company. You'd be stealing company resources. Exactly. Exactly. Yeah. Yeah. Yeah, and that's the thing is they'll ask the owner to do things that they would never ask an employee to do. Because if you ask an employee to do it, it's just brazenly wrong. But if you're the owner, then they're like, well, you can do it, right? Come on. Yeah, exactly. As if it's free to you. Right. Yeah. Paul, I know that doesn't answer your question. But yeah, it goes back to I really question the premise of not being able to get a manager. I really think that you can get a manager, and I think that will solve all of these problems.

44:09Get a manager, have the manager handle it, and insist both to your tenants as well as internally to yourself that you're not the owner. You're the guy who set up the LLC and put the management in place. And if you decide not to do that, then I think we go back to my question. Which of the two pains is less? Is it less pain to move and pay more to live in the new place so that you're not a landlord anymore? Or is it less painful to continue being the landlord and continue in the same spot? Yeah. The other thing I'll say, you know, in terms of the cap rate that you're getting on this property, sure, measured against its current value, it's not great.

44:52But measured against what you put into the deal, the$645 ,000 that you purchased that main home for, the cap rate is absolutely astonishing. It's a fantastic cap rate. So the returns that you're getting on the property relative to your investment in it, the returns are phenomenal. But at the end of the day, for the purpose of paying for your lifestyle and for the purposes of cash flow, we're looking at two amounts that are actually pretty similar. Because that$120 ,000 a year, minus what you'd pay the property manager, works out to ballpark pretty close to what you would pull out of the market after paying taxes and fees and everything else at a 4 % rate.

45:39So in either scenario, we're talking about very similar amounts of money, which is why I concur with what Joe said. Financially, the effect on you is going to be pretty much the same regardless of which one you choose. So then it's just a matter of which one is it that you want to do more. But I will add, Paul, I always calculate the cap rate based on the money that you yourself put into the deal. And based on that, your cap rate is astonishing. And the reason that I calculate the cap rate based on what you have invested is because you're looking at your own return numbers. You're not looking at what some hypothetical person who bought the deal today would be getting.

46:21You're looking at your own return numbers. You're assessing the cap rate from that. And then if you have this increased equity, which you do, if you wanted to, you could tap that equity and pull it out and put it into another deal. So the fact that you have this additional equity that has grown from that just increases your options. But it doesn't change the basic fact that the cap rate that you're making for the money that you put into the deal is so great. So thank you, Paul, for the question.

46:56This Friday, the NBA on Prime tips off with their debut doubleheader. First up, Boston brings the action to the Garden as the Celtics face the New York Knicks. Then out west, it's a battle of the superpowers as the Lakers try to poster the relentless pace of the Minnesota Timberwolves. The Celtics and Knicks, who has the most hustle in defense? This game will come down to who wants it more. And the Timberwolves and the Lakers, it's two Western Conference heavyweights going toe-to-toe. Buckle up, folks. This one's going to be electric. Celtics, Knicks, T-Wolves and Lakers. Coverage starts Friday, 7 o 'clock Eastern, only on Prime.

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48:41Our final question today comes from Mike. Hello, Paula and Joe. My name is Mike. I live in California. I am 61 years old, married. My wife is 54. She is a W-2 employee and she makes about$100 ,000 a year. I am recently retired. My wife and I have a home that we have paid off worth about$1.5 million. My health care is fully covered by my former employer. I have about$5 million in investable assets, about million dollars in cash, about 1.5 million in Schwab Dividend ETF, fees around 4%, about a million and a half in SCHG, that's the growth ETF, and about 1.5 million in their S &P 500 fund. These are spread across a low-level IRA, Roth IRA, and taxable brokerage account, and I like to draw about$100 ,000 a year.

49:43The question is, what assets do I spend down first? Mike, thank you for the question. You've done a heck of a job of saving. Nice work. And I love this question, Paula, because we covered this a few episodes ago when I talked about a bucket strategy and this is kind of what you are going to want to create. But for people that didn't hear that, But let's just dive into it a little bit here so people, Paula, can see Mike's case study. We're going to do a case study. Case study. Case study time. So the false premise people fall into is that taking maybe the brokerage account first is best, or maybe the pre-tax money out first is best, or the Roth out first is best.

50:29We don't want to do that. The reason we don't want to do that is because it's going to be better to maximize your tax brackets as much as you can along the way. So if you want to live on$100 ,000, let's say in an arbitrary year in the future, we've got a tax bracket line that's at$75 ,000. dollars. We take out of the pre-tax bucket up to$75 ,000. And then the rest of it comes out of either the taxable brokerage, because of the fact that you're going to pay different tax, right? You're going to pay a capital gains tax, but that's going to be income tax agnostic because you've already paid income taxes on that money, or take it out of the Roth where you're going to pay no income tax on that money.

51:18You're not going to pay any tax on that money. You're going to just spend it out of that. So using these three different tax treatments together, I like much better than picking one to go first, one to go second, one to go third. So that said, it becomes then how do we do this cleanly, right? Because if I'm taking money out of two or three different places every year, how do I do that in a clean structure? Well, the way to do it is to think about buckets. And the first bucket is money you're going to spend in the next couple of years. Now, Mike has half a million dollars in cash. At$100 ,000 a year, he only needs$200 ,000 in cash.

51:59So he's got that bucket full. And Mike, what I would do if I'm you then is I would take all of your money from that cash bucket for the next couple of years. In fact, you're doing so well, you could actually keep taking that out for five years, which is you're creating this plan. It's going to make it easier to implement because you're slowly implementing it over time instead of having to move a bunch of assets to be in the right place, which could cause some consternation around taxes, right? Capital gains taxes. If it's in the non-qualified brokerage account, you might, to get in the right place, have to move some money around.

52:37Then for money from year three to year 10, we're going to begin creating that bucket for you because you've given us a very simple answer of I've got$500 ,000 sitting in cash. I now have years one through five sitting in cash, which means six through 10. I want to create an asset mix that's in two of my accounts. One's going to be the pre-tax account, which might be an old 401k or an IRA. I'll get back to that in a second, why that's kind of the cornerstone of this. And then you're also going to want to choose another one of your accounts. This is going to depend on a lot of things. But if you said you're married, if your wife has X amount of money that will fill that bill, that's great to then call her Roth the middle bucket Roth or your bucket, the middle bucket Roth.

53:32But I like choosing a second account that works there. So I can look at an account and I go, Mike's Roth. That is middle bucket Roth money. Boom. Got it. And then the rest we're going to manage for the long term. Pretty much doing, it sounds like, what you've been doing if you're happy with that asset allocation. So what this does is it makes it so that you're not as worried about the market when you take money out. If you take money out of your S &P 500 fund and it was early April this year, Paula, that would be a painful place to take money from. So we want to create a spot where we're not that worried about where we come up with money.

54:14As you may know, if you've listened to us for a while, I like then picking a spot on the efficient frontier that's around 7%. That's going to give you a mix of low risk stocks and a collection of bonds, which is being managed for maybe a 6 % or 7 % return. And then we are taking money out of that. And the way you do that is when it comes time to rebalance your money, instead of rebalancing the money by moving money that is excess from a spot over to a spot you need to fill in, selling from the spots that have done really well. And as that rotates, you're always skimming the best performing stuff at that time from this low risk place anyway.

55:03then from your long-term asset allocation, you're filling in the middle-term bucket, again, using the same approach. So that means, by the way, that once that Roth IRA gets used, there will come a time when maybe you'll have that second Roth IRA, part of its midterm money, and part of it is long-term money, and then part of its short-term money, and part of its midterm money. And so what some people will do is they'll have that in two different custodians. They will break up. Let's say it's yours, Mike. You will move part of your Roth IRA over to Vanguard and lead part of it at Fidelity. So I can very easily remember the Vanguard money is my short-term money and the Fidelity money is my long-term money.

55:48It just makes it cleaner to do it that way, cleaner to manage versus in your head. You got to remember these two different asset allocations and say it's the same account that can get messy when it comes to keeping track of your dollars. When I do this, the reason why the crux of this is your pre-tax money is because every year you're going to want to spend up to whatever that tax bracket line is out of the pre-tax money. The reason we want to be diligent about that is if you delay taking the pre-tax money now, you're going to create a bigger issue when you get to require minimum distribution age.

56:32That'll be when you reach age 73. You're going to have to take money out of your account and you're going to be forced to take that out. And if you haven't been taking some money out of there, it may create an income stream that's way bigger out of there than you actually need. And if that's the case, you're going to end up paying what's called IRMA, which is really a tax, it's a fee on your Medicare Part B and Part D that you wouldn't have to take if you had taken some money early. So I do like beginning to tap those pre-tax accounts early so that I don't run into required minimum distribution challenges later where the government's forcing me to take a lot more out than I truly want to.

57:19How does he determine up to which tax bracket line he should use when he's calculating that pre-tax portion? No, great question, Paula. And that's going to depend on balances, right? That's going to depend on. So if he's got, if most of his tax triangle is in that pre-tax bucket, I'm going to take more out every year because of the fact that I'm going to have to continue sucking money out of this account at a fairly high rate. but it sounds like he said it's pretty balanced. He then can look at maybe the tax bracket below. I think this is where using some good calculators to figure out the, the, the timeline of spending down these assets, like model that out.

58:04I can see it in my head. I hope a lot of other people can see it in their head, but I can see these models of if I do tax bracket X, that's going to skim money out of this account at this rate based on, you know, whatever the rate of return assumption is that I'm going to use. If I use this tax bracket, then it's going to spend it down at this rate. So the tax bracket you choose is going to be based, I think, on the amount of money that's in that particular pot. But in his case, it sounds like he's pretty evenly distributed amongst all three points of the tax triangle. So he's definitely going to be wanting to prioritize that pre-tax bucket, but he's got two-thirds, if he is evenly distributed amongst all three, he's got two-thirds of his net worth in places that won't be subject to RMD, which is the good news.

58:56And if we say that we're embarking on this journey this year, this is a year where if he's trying to live on$100 ,000, the 12 % bracket goes up to$96 ,950 for married filing jointly, and then 22 % bracket goes up to 250 ,000. So for him, I'm not going to stop at 23, eight. So I get a 10 % tax versus a 12 % tax Paula. What I would do in his case, I also wouldn't take out 96 ,950. He can choose a spot then between 23, 850 and 96, 950, because for what he's looking to do, the tax bracket mirrors very closely where he's at anyway. So this is going to involve then a little bit of modeling his spend down.

59:47I want to spend down so that requirement of distributions, again, at 73 are not going to affect him as adversely later on. And he's not going to get hit with IRMA, which is that tax on Medicare in the future in his modeling. So I want to try to take those off the table earlier. So maybe that means I spend the first 70 ,000 or 60 ,000 out of the 401k. And then the rest comes from either Roth or from taxable brokerage. But for him, because the line is really almost at a hundred thousand, it kind of means his strategy can really be much more around how am I keeping balanced in those three different buckets that has pre-tax Roth, AKA tax-free bucket and taxable bucket.

1:00:40Taxable bucket. So actually, Mike, while the strategy itself, hopefully in your head, that is straightforward. This is why I like the three buckets because I can keep it clean. It's also why I like the just two different asset allocations plus cash for the next couple of years makes it really easy to implement. setting that up is a little bit of a pain and some of the modeling to decide how much needs to come out is going to be a little bit of work. But I got to tell you, Paula, just a little bit of work up front is going to save a ton of pain later on. Because if he decides not to take pre-tax right away, goes with taxable because it feels easier or burns the tax free, which a lot of people never do.

1:01:28They wait too long to do that. It's far worse than balancing the three different tax buckets. Joe, what strikes me is this entire conversation has been about asset location, meaning the tax treatment of the buckets of his investments. And we have not addressed the composition of the actual investments that he's holding. That's actually intentional. It's by design. But do you want to address, I guess, for the sake of the broader audience, why we are so focused on asset location rather than asset composition? Yeah. Well, and I am worried about asset composition, but to your point, I skirted around that because frankly, if you have, let's say you're the average person, Paula, you have a Roth IRA, a 401k or a pre-tax IRA, and then you You have a taxable brokerage account.

1:02:22You have three accounts. Now, let's say that like Mike, he's married. Now he has maybe five accounts. Then he has possibly a couple different employers each. And if they had pre-tax accounts with a couple employers each, he may have seven accounts. He may have nine accounts. So first, bucketing these into the tax ramifications is going to make it easier to manage. Then second, deciding whether you're going to use it short-term, mid-term, or long-term is going to be important. And for that, that's why we got into the discussion of staying balanced tax-wise. Once you have that framework, then we go, this account is my mid-term account.

1:03:12this is a long-term account. Once I've done that, then, then we go to the part that you and I didn't talk about, which is okay. Based on the fact that I know I'm not spending this money until year 10, how would I allocate that resource? And then now that we know the growing season of the investment, said the farm boy from Michigan, right? Everything has a growing season. So once I know the growing season, I'm like, okay, I can plant these seeds knowing that I'm not going to touch this for 15 years, I could easily be in the S &P 500 fund he's talking about. It fits very well. If I find out that he's got the S &P 500 fund in a bucket he's going to need to harvest in year three or year four, you and I know, Paula, it's a horrible place to have money.

1:03:59So by starting off with the bucket and then lining up the tax consequence of that bucket, then I can then look and see what's inside of this particular account and match up the timeframe with the investment to make sure it fits. But the theme that we've heard between all three of these questions today is that everyone, Emily, Paul, and Mike have all set themselves up very, very well. Oh, yeah. Yeah. They've done a great job of saving. In Paul's case, taking advantage of the opportunity on the distressed asset, right? Right. Yeah. Yeah. Nice job. Yeah, absolutely. Everyone's done an incredible job of saving and of preparation.

1:04:41And so. That makes these funner questions to answer. Yeah, exactly. Exactly. Right. Yeah. It's, hey, I'm in a good situation. And how do I make sure that I really optimize this good situation? Right. That's the overarching theme of the questions that we've answered today. So that is a testament to the strength of the people in this community. So thank you, Joe, for the bucket breakdown of Retirement Drawdown. And we've done several episodes, several deep dives on Retirement Drawdown and Retirement Decumulation. So we will link in the show notes to some of the previous episodes that we've done on decumulation.

1:05:25That's probably the single hardest topic in personal finance. Accumulation is the fun part. The decumulation can get a lot more complicated. Yeah, and rightfully so. I mean, now you're actually spending money. I think a lot of people when they're young, they needlessly make it complicated when it doesn't have to be. And then when people get older, they make themselves more comfortable with the fact that it shouldn't be that complicated when truly it maybe needs to be a little more scientific. Yeah, exactly. With accumulation, so long as you're making contributions and so long as you're in broad market index funds, you really can't go wrong.

1:06:05So in the accumulation phase, you're just trying to be more right. But as long as you're contributing money to tax advantaged accounts, and you're putting that into broad market index funds, you're good, right? Like, sure, you could be better, but you're good. Whereas decumulation or drawdown, you really can get it wrong. And then you don't have the benefit of time to recoup from that, which is why Drawdown is so much more complicated. And which is why we've done several deep dives recently on the complexities of Drawdown, including episode 609, which was an ultra deep dive into this topic. So again, we'll link to that for anyone who wants to explore that topic further.

1:06:56Joe, we've done it again. It was so fun. I love these financial planning questions. Same. Absolutely. Joe, where can people find you if they would like to know more? Man, this week over at the Stacky Benjamin Show, Paula, we are doing consumerism deep dive week. So on Monday, OG and Doug and I are going to talk about the cost of consumerism, about just what we buy into. And the episode starts with OG really and I having a fight about what is consumerism and what is not consumerism. He does it by the fact that if you buy great seats to a college football game, that's participating in consumerism.

1:07:33And I go, nay, nay, nay, nay, nay. He's like, no, that's an experience. Well, an experience could still be consumerism and it doesn't make it bad. It just means you've bought into the construct that this is important. And so when you spend money, realize you bought into the construct. We followed up on Wednesday with a woman who talks about consumerism a lot in her new book, Katie Getty Tassin from Money with Katie joins us. I love her hot girl hamster wheel discussion on consumerism. And Katie's going to join us tomorrow to talk to us about a level of consumerism, which is cloaked in quote feminism, which truly isn't.

1:08:12It's people getting more money out of your wallet than maybe you should be letting them take out. Well, Katie is a great, great guest. She's been on this show a couple of times. I blurbed her book. So I'm very excited to hear that interview. She's a great mind. I enjoy talking to Katie. So you'll hear that tomorrow or you'll hear our deep dive on consumerism leading up to that on yesterday's show. Excellent. Well, thank you, Joe. And thank you to all of you for being an afforder. If you enjoyed today's episode, please do three things. First, share this with all of the people in your life, your babysitter, your dog walker, your...

1:08:48Joe, who else should they share it with? Your renter next door. Oh, your renter. Yeah. Yeah. Share it with the renter next door who doesn't actually know that you're the owner of the LLC that owns the property. Yeah. Yeah. Share it with them. Also with your property manager, with your plumber, your HVAC technician, your electrician. Share it with the movers who help you move from your high cost East Coast city to the Midwest. Share this with all the people in your life. That's the single most important way that you can spread the message of FIIRE. So that's number one. Number two, make sure you are subscribed to our newsletter, affordanything.com slash newsletter.

1:09:28That's affordanything.com slash newsletter. And number three, make sure you're following us on your favorite podcast playing platform. And while you're there, please leave us up to a five-star review and write a few words talking about what you enjoyed about the show. Oh, you can also hang out with the community at affordanything.com slash community. Completely free and a great place to discuss these episodes. affordanything.com slash community. So that's number four. So thank you so much for spending this time with us. I'm Paula Pan. I'm Joe Salcihai. And we'll meet you in the next episode.