The 5 FIRE Mistakes CFPs See Over and Over

21:28Adrianna Adams:There's like a lot of these like back of the napkin math numbers that people will look at sometimes. And you have to have a solid plan for how you're going to actually fund your income needs. It can't just be that you're going to ride it out in equities for forever. And the 4 % rule might not work for everybody. You know, when you're modeling out retirement for 55 years, it looks a little different for someone that was modeling it out for 25 or 30 years, if that makes sense. Yeah, it does make a lot of sense. And, you know, I think that the people who grasp all this stuff, they would love to retire after a large market crash.

22:04And that opportunity has not come yet from the markets right now. What you don't want to do is retire right before a big market crash. And that's a fear people will continue to have at all times when things are near peak. So how do you reconcile that? And what's the solution to this problem?

22:19Adrianna Adams:So there's a few different mitigation strategies, if you will. One of them is like a cash or bond buffer, right? Something that is a little bit more liquid and might not be moving as directly with the equity market. So if there is a big crash, you have time for the rest of your money to recover, right? So a lot of times it makes sense to have two to three years of liquid assets at any given time, which to a lot of people also sounds like way too much. Two to three years of liquid assets being including your bond position. You think about your bond position as part of that liquidity. It depends on the client.

22:51Adrianna Adams:It can. I would say it depends on your risk tolerance and how aggressive you are with the rest of your portfolio. So I have some clients who are in, have a much lower risk tolerance in our, let's say, 60 % equities and 40 % bonds. And between the dividend income and their bond interest and the bond stability, they don't need as much cash on hand because they've got more stability in the bond portfolio and they've got income coming in that's replenishing the cash they're spending. And then I've got some clients who are like, I want to stay invested in a more growth-oriented portfolio. And the bulk of their money is still in growth-oriented or just generally in stocks.

23:26Adrianna Adams:And in that situation, we might want to have a little bit more in cash so that you can ride out those waves, if that makes sense. So it kind of depends. There is no hard and fast, like everyone just keep three years of cash on hand rule, but we need to determine how much your other income sources are able to fund your lifestyle and how much do we need to fund from your portfolio, right? So if you've got$50 ,000 coming in from your rental income and you only spend 100 ,000, we don't need to have three years of$100 ,000 in cash because you've got something else in another diversified part of the market, if you will, or another type of investment that is also providing some stability there.

24:07We've had very smart people who have done original research or, you know, spent thousands of hours researching portfolio construction that disagree on the right approach for early retirees. And so this is confusing to me. I'm sure confusing to everyone else. But we've got, on the one hand, you know, folks like Ben Felix and Paul Merriman, who have offered up all equity portfolios with factor tilts as a potential solution to a portfolio problem in early retirement. And then we've got guests like we've had like Frank Vasquez, who have recommended a golden ratio portfolio with stocks, bonds, gold, managed futures, international exposure in descending weighting to allow for higher withdrawal rates.

24:52And he withdraws at 5%. So how do you think about that for somebody with an early retirement goal is beginning to withdraw? Do you think there's a portfolio that supports 5 % in your view, for example?

25:04Adrianna Adams:I do. I think that there are a lot of ways to do this. And I have my own kind of biasness towards certain ways of investing as well, right? What are your biases? So I am very much like a passive track the index investor. So there's a lot of research out there too that shows, you know, like having a mutual fund or a professional money manager that's trying to beat the market over very long periods of time, they're not as successful or it's very hard to find someone who consistently can outperform, right? So I'm much more in the camp of building a diversified portfolio that is allocated to a bunch of areas.

25:41Adrianna Adams:and the other piece, I also, quick plug for direct indexing because I'm a huge direct indexing fan rather than just like an ETF so that you can get additional tax loss harvesting. I feel like we could talk for another hour on that. Yes, I do wanna talk about that. I wanna go on a nice tangent there after you do it, yeah. What I would actually say here matters the most in my experience and opinion is the emotional side of the investor. So there are certain portfolios that might be guaranteed or guaranteed is a very risky word to say in investing but there are going to be certain portfolios that maybe have a better track record of producing better returns.

26:15Adrianna Adams:But keeping clients invested and in their portfolio and their allocation is one of the most important things we do. So when the markets get chopped, because if the markets get choppy and you get scared, you miss, there's the stat, like if you miss the 10 best days, your rate of return is like cut in half over a 10 year time period, right? So you can build the best portfolio ever. But if you don't actually stick with the long-term plan, you could be in a really, really poor position from a rate of return perspective. So it kind of goes back to what I was saying about like, I'm just a big believer in like buying the index and like, let me help you manage the emotional side of it, right?

26:52Adrianna Adams:And make sure that you stay invested. We do have clients that have other portfolio philosophies. One of the cool things about domain is that we can help you with your assets, whether they're under our management or not. So we can give you guidance on your allocation and thoughts, and then you can take them and implement them yourself. Or we even have some clients who have a portfolio manager, but come to us for the planning help. So there's a lot of different ways to do this. And we just try to keep a really open mind and make sure that what we're recommending in the final plan we put together really takes into consideration the person and what they believe in and what's going to work for them.

27:27I have a question about direct indexing. I've obsessed about tax for the last year. I've just spent so much time because I was weak on it a year or two ago. And so I built this like crazy tax engine that stacks, you know, all these different things, moves through every state and federal, all that kind of stuff. I've thought about real estate tax and the challenges there with depreciation recapture and long-term capital gains on sales, how to get that equity out. I've thought about Roth conversions. And my conclusion with tax, and this comes to direct indexing. My conclusion is direct indexing is great.

28:01There's actually – there's real advantages for it. But like a cost segregation or like a Roth conversion, there's opportune moments to do it, right? So when I sell my property, let's say I have five rentals. When I sell my loser, the one that's annoying and the real pain in the rear, and I have my gain on it, that's when I want to do my cost segs in the other two properties to offset that bill. Or I want to save those shots in the chamber for that year, for the year where it's going to matter. That's how I feel about direct indexing. It's a great thing, but it's going to probably result in losses in that first year.

28:33That's the point. And so you want to do that in years where you're going to have some other kind of gain to offset or your income is going to be otherwise high to maximize it. What's your thought process reaction to that bias I've constructed over the last year?

28:45Adrianna Adams:I love that you brought that up because I feel like there are people in the camp of direct indexing is the greatest thing ever and it works every time and everyone should be doing it. But then in reality, when you're working with clients, right? Like if you have a client who has a$500 ,000 mature portfolio with$250 ,000 of gains and they're now in spend down phase, how do you transition that ETF portfolio into direct indexing and have it be worthwhile? like you might not be able to. So it does really depend. And I really, really love it. I think it's almost a no brainer if you are younger and you're starting to save your taxable money, because over time, this engine will work for you.

29:23Adrianna Adams:Because if there's one thing that is certain in investing, it's there's going to be volatility, right? So there's going to be stocks that are down. And if you own the ETF, right, you can't sell it unless the entire S &P 500 is down, where when I was looking the other day, like 200 of the 500 stocks in the S &P 500 are negative this year. So there's opportunity there, right? So that's where we need to take a look at that. But back to your original question, Scott, it really does depend on where you're at in your journey, what your portfolio looks like today. I would say if you're just starting out or you have a good chunk of cash to invest, it can be a great time to put it to work in something like that.

29:59Adrianna Adams:But it's not always the best if you're closer to the end of the journey and you've already got a lot of your portfolio mature and built up. Does that make sense? Yeah. So just for those who need a refresher on direct indexing, you know, a very popular strategy in the financial independence community and broader personal finances, buying index funds, right? So this is a fund that contains usually a market cap weighted allocation to every company that is publicly traded in the United States or in the S &P 500 or another index. And what a direct indexing portfolio does is it Instead of buying a fund that owns all those stocks, it actually buys every one of those stocks on your behalf.

30:36And the advantage of that is that when some go down or lose money, that's when you can sell those. And that results in a realized loss, which produces a real tax benefit. And I believe that the research shows that that advantage kind of reverts to not being very meaningful after a period of years. But it is meaningful for the first few years of the time when you're holding those direct indexing because over time, the gains begin to overwhelm it and go over there and it reverts to a normal index. So there's a real use case for doing that. And so my bias then with direct indexing is if you know that the next few years are going to be years where you're going to have high capital gains or qualified dividends or other things that can be offset with those losses, that's the time to take basis and move it, not make a big tax event or maybe make some sort of tax event because there will be some offset presumably in that year to move it into direct indexing, but use it as a bullet in the chamber.

31:27Don't just immediately move to direct indexing. It would be a shame to get those advantages when you're in the 0 % long-term capital gains tax bracket, for example. So complicated tax stuff, but that's my bias on the direct indexing component for it.

31:39Adrianna Adams:I have a couple of things I want to add there. One, I definitely have examples where it doesn't make sense. I have a client who did direct indexing for a long time before we ever started working together. He had accumulated about$5 million in his direct indexing portfolio and about$250 ,000 of losses that were locked in. So he was harvesting them along the way and he didn't have gains to offset them. So he just built up this really large bucket of money. And now when his portfolio is out of whack and he was really a little bit too heavily tilted towards emerging markets and we wanted to rebalance things a little bit so that he had a better allocation overall.

32:19Adrianna Adams:We were able to sell a lot of funds in his portfolio and he didn't have to pay much tax at all because those losses rolled forward with him. So it is one of those things too that's kind of hard to turn on or off year over year. For this client in particular, he does not do direct indexing anymore because he's not adding to it. He's spending it down. There's really not much because of the gains like you were saying, Scott. But him doing it 10 years ago when he wasn't even sure he needed the losses really paid off for him long term. Like there's so many ways to think about it, if that makes sense.

32:53Adrianna Adams:I'm like when it's going to work, because sometimes these things do need to be a little bit more seasoned to start accumulating some of the losses to. Adriana, if I have a large position I've masked over 15 years investing in, you know, VOO, like a standard index fund, do I have a taxable event when I attempt to move that into the direct indexing? You do. So that's where it's often not as impactful because you in theory could move that position in and try to get it transitioned over. So like one example is you can set like a capital gains budget in your account, right? So you can say, I want this direct indexing portfolio as my overlay, but I'm moving in this position and I only want to realize$3 ,000 worth of gains a year.

33:37Adrianna Adams:It's going to take decades for that portfolio to automatically transition because it can only realize so many gains per year. Now, it still might make sense, especially if you're young enough and you do want to transition it. The other thing that I don't think we've touched on yet today too, though, is especially, and this actually is a whole nother mistake that we'll get into, I guess, in a moment, but there are going to be certain windows where you might be able to realize capital gains at that 0 % tax bracket. Scott, I think you may have started to hint at that earlier today too. So you really have to think of all of these things together and how they're going to work and then how they all like co-mingle, right?

34:10Adrianna Adams:Like Roth conversions worth realizing capital gains and not paying any tax on them. And like, what's the trade-off? Which one are we going to do? So I think we could spend another three hours on just this one. So, well, Adrienne, let's leave that discussion for another time. Tell us about the last mistake that you've highlighted here for folks in the financial independence community. This is one of the most fun for me because there is a lot of planning and like architecture that kind of goes into this one, but it's how valuable of a window you have when you retire early and you haven't started RMDs or social security yet.

34:45Adrianna Adams:And Scott, to your point earlier, you might not have no income, but you might have some rental income or some other tax advantage income or some dividends. But if you're no longer earning that W-2 salary, there's a lot that we can do. And this is something I see clients miss so often is maxing out every tax advantage and tax window you can in that early retirement phase. So most often this is right when you retire all the way up until either 67 or 70 or 73, whenever you start collecting social security and have to start taking those RMDs. So it's leveraging a couple of different things together.

35:20Adrianna Adams:Roth conversions, right? So we were talking very early on today about how a lot of people build up their 401k and all of a sudden they have this massive pre-tax account. Well, if you keep letting that grow and you're just living on your brokerage account until 59 and a half, 60, or maybe you don't even want to touch it until you're 73 or 75 when you have to start taking RMDs, you could be bumped up into the 37 % tax bracket based on what the government is going to force you to take out. So Roth conversion strategies in that phase, we look at what income you already have, what are your capital gains or what are your dividends?

35:53Adrianna Adams:What is your rental income? and how much more room do we have in the 12 % bracket or the 22 % bracket to convert some of that pre-tax money into Roth today so that you never have to pay tax on it again and keeping you like in that example, I was just saying we could max out the 22 % tax bracket and your effective rate could still be about 15 % depending on your state and whatnot, right? So it's about getting really savvy with those different thresholds and levers. And one thing I will say that I think gets missed here too, is this has to be an annual calculation because the amount you might want to convert this year might be very different from what you want to convert next year if you have a liquidity event or you sell one of your properties or something.

36:36Adrianna Adams:So it can't just be, okay, the next 20 years, we're going to convert$100 ,000 every year. Another thing, the tax codes change all the time. I could also talk about this one for hours. Such a conspiracy. They just make it so complicated for what reason, right? But they change them all the time. And you have to keep up with that and know if I convert this much, it actually might trigger something else that I wasn't expecting, like IRMA taxes and things like that. So you do have to be careful, but there is a lot you can do in that like golden window where your income is tapering off. Hey, Joanna, do you suppose that if you're, let's say, let's take a hypothetical here, you're 50 and you have four and a half million dollars in your 401k.

37:16And you know, you, you're, you have plenty of additional assets on top of that because you've, you know, listened to fire podcast for a very long period of time, built a huge net worth and then blew past your number by just staying invested. Suppose you're in that situation. Do you think that the tax code will treat that person more or less favorably in future administrations than the current administration?

37:35Adrianna Adams:My blanket answer is less favorably because I don't see tax rates coming down significantly. They might tweak them and they might make it look like it's coming down over here, but then they add something back in over here. So I am kind of in the belief that if we have like a relatively lower tax rate today or we know what we're getting into, I like to bet on what we know is real today, knowing that it may be much higher later. I feel like this could be very debatable, though. I'm curious what you think, Scott. I think the answer is yes. The plan has to be that the next administration is going, like future administrations are going to, who are they going to go after?

38:10They're going to go after that person, right, from a tax perspective, in my view. Now, here's my solution to this that I want to hear. It's kind of wacky, but I love your opinion here. Suppose this person was an active real estate agent that was actively helping people buy and sell houses and made significant income at this activity set on an annual basis. And it's a fairly deep buyer's market in this person's specialized area that they spend all this time helping other people buy and sell properties with. My hypothesis for this person might be to buy a rental property and aggressively depreciate that property and then use that opportunity to roll over a significant portion of that 401k into the Roth in a given year, maybe do that one, two or three times.

38:54And now we've moved, you know, half of that thing out in a year or two, all in one big lump up to maybe the 22 or 24 % tax bracket in order to move that over. What do you think of this plan, Adriana?

39:06Adrianna Adams:I generally really love the idea. And I feel like you've gotten really savvy with it and creative. I will say depreciation can be a whole another beast. And so typically when we start talking about depreciation and bonus depreciation, I love to bring in a classic tax advisor or a CPA who can really help us button those two things up together. But I have seen this work with clients that have businesses or real estate that we can leverage to use other tax moves. So generally speaking, I love it, but I think we would need a CPA to sign off to make sure that our bonus depreciation and everything is all nice and clean and we're not going to run into any issues with that.

39:46Mindy, what do you think of this concept?

39:48Mindy Jensen:Hey, Scott, in this completely hypothetical situation that you're talking about, would you be able to take enough depreciation on a single family home to make this work? Or would you need a larger property in order to get enough depreciation? Well, I think you could get one or several properties. So you can get a collection of single families or on a small apartment complex or duplex, quadplex, anything in between, right? And it seems to me that when you massive depreciate this property, then if you sell that property, you would have to recapture some of that depreciation. You would, yes.

40:26Adrianna Adams:So a great idea for that property then would maybe to be like the inheritance bucket. If you've got a family member that you wanna leave some money to, let that property step up in basis at your death and then they don't pay taxes on it. Again, all depends on your goals, but if you are planning to hold it for long-term, like you could use that strategy and still not end up having to pay capital gains on the real estate or that depreciation. And here's the other thing though. Here's the other thing. So this position, let's take our four and a half million hypothetical, right? It's gonna double at 57.

40:57It's gonna double again at 65. So we're at nine, then we're at 18. Then it's gonna double again at 74. And now we're at, you know, so the rule 72, right, for all this. So you got 36 million. That's a big deal inside the pre-tax. that will compound reasonably, you know, depending on how much you lever up the rentals at a different rate post-tax. So it's a very, very different estate situation, I think, in this particular hypothetical example, where you'd have that money out in there. And in those situations as well, because a rental sale could be in an environment, it could be controlled at your discretion later in life.

41:31So you can sell it in a year where there's offsetting items there or the tax bracket that's different versus the RMDs will be required when they're required.

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43:35Mindy Jensen:What if you weren't planning on holding this property long term? I mean, I guess you could get a property manager to make it far more passive. No, it needs to be active income for rep status, doesn't it? If your income is going to be super high in the highest bracket for life, then none of this matters, right? It's just like, OK, there you go. Like you're going to pay them. But if the timing can change, then that's where the advantages come. And I think in this case, there's plenty of years where the income might be in lower than max tax brackets before the RMD bill comes due. I would take this completely hypothetical situation and say, if you're planning on Mr.

44:1050-year-old, if you're planning on leaving money to your children, a$36 million 401k

44:17Mindy Jensen:is like, wow, what a horrible problem to have. But on the other hand, if you're leaving this to your child who might be 19 right now, now when you're 50, and then in 20 years will be 39 and maybe in big earning years as well. And they have 10 years to take it out. So 39 to 49, they're now taking out this, and it's got another 10 years to grow. So it's 36 million. And now it's on comp. I mean, this is just ridiculous numbers. Or you could mitigate some of that by having a rental property that you have a manager for and don't really have to deal with so much. What a great point, Scott. But you should talk to both people in this hypothetical couple that you're discussing with this with.

44:58Adrianna Adams:Mindy, I love that you said that. That's exactly where my brain was going to is like the inherited RMD on those accounts can be crushing as well. But I also am a huge fan of like, let's optimize your life today. So first priority is what do you want to do and what do we want to do to maximize your life? But then there's this entire secondary layer that we haven't even really scratched the surface on today of, okay, how do we get tax efficient for the next like 100 years? Because a massive 401k when your child or the person who inherits his account is likely in their highest income earning years, you're just writing bigger and bigger checks to the government at that point.

45:34Adrianna Adams:So there's a lot that we can do if we start thinking really long term.

45:37Mindy Jensen:Yeah. And I think that having more of that in the Roth is a great plan because when they inherit the Roth, they still have 10 years to take it out, but they can leave it in there for the whole 10 years, pull it out at the end, and it's all tax-free. If only that person would have contributed to a Roth 401k when they had the opportunity. I think one of the themes here is this most valuable tax window you'll ever have. I agree. I think that that's right. After you stop working, even if you decide to have a side hustle or a business, it's likely that you're going to have a year or three or five at some point where your income may drop relative to your peak earning years before you retire early or declare financial independence.

46:16And that's a valuable window. But I also think that to fully take advantage of that, a little bit of entrepreneurial spirit goes a huge way, right? Like if that year for this hypothetical person, they finally do actually do the 750 hours of real estate hustle to get that rep status. And then they save a million dollars on taxes via the depreciation from those purchases. That's a huge deal in that particular situation. That's worth three to five years of extra, maybe more of actually working at a full-time job at peak earnings in some of these situations. So I think a lot of people are very averse to that little bit of entrepreneurial effort.

46:52But if, when you price it out like that, maybe it'll change people's perspective. Do you find that to be the case in a lot of these situations?

46:59Adrianna Adams:Yeah, I 100 % agree. And it's also really important to do tax planning all the time, but really at the end of the year, because I want to see exactly what happens this year. One important thing that I have seen people make mistakes on too is doing like Roth conversions or something too early in the year. And then another liquidity event happens. You want, you really have to sell a house and you got to get out of it. And now you've got this huge capital gain from the property, right? And oh crap, we've already realized a bunch of Roth conversion income tax. And now we have this capital gain. So this is a huge thing to look at like November timeframe and put all of your like year to date numbers in and figure out like what you can do for that year.

47:35Adrianna Adams:Because also maybe that's the year where you're right. Like you hit that 750 threshold and all of a sudden now you open up this window, make sure you're checking everything before December 31st, because once that time has come and gone, you can't do anything about it January 5th, right? Like you've got to get that done by the deadlines. So something to keep in mind for everyone, like put a little calendar reminder on now for like November, mid-November, November 1st, and make sure that you are looking at this at the end of the year before it's too late. I love that point. I think that that's so important is realize your income at the end of the year, or if you have to realize it, realize, you know, very conservatively early in the year.

48:14So you can true it up at the end of the year, because especially like, like another thing, another point for this is healthcare. If you go, if you realize a dollar over the healthcare cliffs here, you don't get any premium tax credits. So if you're going to go over the cliff for Magi, for example, then you might as well go way over and use that year to convert all the Roth, you know, to do your Roth conversion, for example, up to like a higher tax bracket or whatever it is that you're going to be doing in that year. And if you're going to go under the cliff, you may want to like say, maybe I'll actually keep my income much lower so I can maximize my tax credit up to this point.

48:49Adrianna Adams:Love that because I feel like so many times people are like, oh no, I went over the cliff. I have to pump the brakes on everything. That might be the best opportunity to do something else that you were planning to do. Because if not, if you do it next year, then your rates are also going to be higher the next year and things like that. So I think that is such a great call out, Scott, that is another, If we could add another mistake to the list is pumping the brakes right then and not realizing that that might be an opportunity to actually do some other things so that you don't have to double down and make the same mistake the next year or the next year.

49:17Adrianna Adams:I love that. Well, cool. Well, Adriana, this has been awesome. There's been a lot of really good knowledge shared here. And I think it's very hard for people to find knowledgeable professionals that talk about this stuff. Can you tell us a little bit about how you got into this world of professional advice and specifically supporting people in the early retirement community? Yeah, absolutely. I don't know if we could call this a mistake, but it kind of ties into this. I ended up in this profession kind of by accident because I was studying corporate finance. I loved math and numbers and data and all of that.

49:49Adrianna Adams:And I found myself in a room with people that were talking about Roth IRAs, back to the whole Roth thing. So this is like a long time ago, right? And I'm like, what is a Roth IRA? I've never heard of this before. When I started talking to them and then I realized that there was this entire world of personal finance and tax planning and strategy. I switched my major and was like, I'm studying personal finance. I need to know every single thing about this. Not even necessarily just for myself, but because I was like, I need to tell all of my friends, like nobody else I know knows this. No one's told me this.

50:16Adrianna Adams:So I really got into it because I found it so fascinating and very underutilized just in like layman's terms, like in most of the world, especially at a young age, I think once people start to accumulate money, all of a sudden, they do more research and they figure this out. But the more you know and the younger you start, the better you can set yourself up for long-term success. So that was kind of the flip of the switch for me. I was like, I have to learn every single thing about this. I studied for my CFP back in college. I've worked at a couple of different firms, more traditional, like the Morgan Stanley's of the world, right?

50:47Adrianna Adams:Just in portfolio management and financial planning. and a lot of the world, which I think a lot of buyer people actually realize this, a lot of financial advisors are focused on portfolio construction and they can give you some tax strategy or they can comment on things here or there. But for me, I think the biggest impact that financial advisors can make is this planning piece of it and helping people think through this strategy. So that's what Domain's all about and that's why I've been here for, I think three years now, since day one. But it's just been an awesome place because we can really help people make those everyday life decisions.

51:23Adrianna Adams:And that's truly just what fuels me so much. Like giving people the confidence, the clarity to make these decisions and go live their life is just the most rewarding thing ever. So I'm really in it for like seeing what people are doing. People are texting me their photos from Ireland, things like that. You know, like it's all about the people and what they do with their life. And so that's why I'm here.

51:43Mindy Jensen:So the planning aspect is something that I wasn't aware CFPs did. I mean, I'm a certified financial planner, but I thought it was just about portfolio management. Here, put your money here. Put your money here. I don't need any help with that. I'm doing fine by myself. I do need help with the planning. I did need help with the planning. You're going through these mistakes. I'm like, yep, made it, made it, made it. I host a money podcast for early retirees. I could write a book on all the mistakes that I have made in my journey. And I'm, you know, Scott, would you consider me successful? I would consider me successful on the FI journey.

52:18Mindy Jensen:Yeah, wildly successful.

52:20Adrianna Adams:I can't believe you're asking the question right now, Mindy. I'm terrible at the retirement part. You have great hypothetical problems, Mindy.

52:26Mindy Jensen:You have very successful hypothetical problems. Hypothetical problems, yeah. If I would have made different choices, if I would have had somebody helping me, hey, don't do it like this, do it like this. I mean, Scott even preached, I'm going to contribute to the Roth 401k. And I'm like, I am going to prioritize reducing my taxable income. So I'm not going to contribute to the Roth. I would have a very different scenario right now. And I wouldn't have potential issues to deal with if I would have listened to Scott. I guess the bottom line is listen to Scott about everything. Right, Scott? That's it.

52:58That's exactly right. I think it's you have to have a worldview. Well, actually, here's I think the lesson is I think that this stuff is in conflicting. I think it is the optimization. There's optimized and there's options in your life. and those compete and freedom, like the flexibility in your life in your 30s or 40s is extremely expensive relative to the career earnings you could be having there or whatever that is and requires suboptimal tax decisions to some degree, unless you're very comfortable with a very low level of spending, for example, then you can kind of can have it all. If you want to spend 40 grand a year, there's plenty of ways to do that.

53:35Adrianna Adams:But then do you really have it all? Some people love that and they love their life at that level of spending. And that's great. We got a really fair pushback from a recent episode when we said that the goalposts had moved from 40 grand a year or a million dollar portfolio to 2.5 million dollars and 100 grand for the baby money community, which they have. But many people are very happy with that. And that's that's totally fine. Then then this stuff doesn't apply, I think, nearly as much at that very low levels of spending because you can really manipulate your income to be zero across or very close to it across a huge portion of your life.

54:04But anyways, I think that's the challenge here. And you have to I think you have to really know this stuff well to be able to then engage a CFP effectively. A CFP was going to be very helpful to you if you know nothing, of course. But I think it become more and more and more helpful the more you have articulated clearly what you want and the tradeoffs that you're weighing in the space is my view.

54:25Adrianna Adams:I agree with that. I think we can provide value in a lot of different ways, but one of the ways that fuels me the most is the education piece of it too. It's not just like, okay, I'm going to tell you what to do now. Go do it. It's like, here's what the plan should be and why based on what you've told me. And here's some of the weird nuanced pieces of the tax code that come into play. And I thoroughly enjoy and love working so much with clients who are like, tell me more about that. Not just like, tell me what to do and I'll ride off into the sunset. But like the people want to learn more and understand why we're doing certain things have the best conversations, I feel like, because it's kind of like what we're doing today.

55:02Adrianna Adams:We're just nerding out on a bunch of like finance stuff. And that's the best way to do it is like, let's just talk about it and figure out what works for you.

55:08Mindy Jensen:Yeah, I have Google, but Google doesn't help me if I don't know what I'm searching on anyway. Like I know several things, but there's all these other things that if I had known at different points in my life, I could have made different choices. And that's where I think the CFP is so beneficial to somebody, like not at the end of the journey, in the middle of the journey. Start in the middle or even before the middle of your journey and get some advice so you're not doing... I mean, we didn't even talk about capital gains harvesting in your after-tax portfolio. We didn't talk about the 0 % long-term capital gains, like maxing that out every year that you can or as much as you can.

55:49Mindy Jensen:There are several years that I could have done something like that and didn't because I'm so good with money. Well, we are delighted and proud to partner with Domain Money and all the work you guys are doing over there. Before that, I think there's like maybe three, maybe four firms in the United States that are actually firms, not individual practitioners. We love individual practitioners, too. There's plenty of really great ones out there that charge flat fees or hourly or advice only. But it's very hard to find a firm that, you know, hey, if something happens to your guy, you can work with somebody else at the firm as well over time.

56:20And you guys seem to be doing a great job with it. You've provided a really good plan for me as part of our partnership. So thank you for that complimentary plan. Virginia and I really appreciated that. And we're thrilled to partner with you guys. And we've heard good things from our members so far about you. So thank you very much for coming on the show, sharing your knowledge with us. And we look forward to more opportunities to interact and learn from you.

56:39Mindy Jensen:Sounds good. I love it. Yeah, Adriana, this was a lot of fun. I really appreciate your time today. And we will talk to you soon. Sounds good. Bye, guys. Scott, that was Adriana Adams. And that was so much fun. I really enjoy listening to mistakes that other people have made that she has seen other people make. So I don't feel so alone in all the mistakes that I have made in my own journey. How about you, Mr. Has Never Made a Mistake in His Life, man? I've made plenty of mistakes. Also, we got to call out the stock sale in February 2025. At least through July 2026, I'm trailing the stock market pretty heavily there.

57:18Now, I had other reasons for that out reallocation, but that's definitely a big opportunity cost for me right there. Do you regret it? No, I am very happy with my decision to make that there. And I think that the ballgame will be called over 10 years or so. But I think that, yeah, if I get crushed by the market by one, two, three times on the investment, then yeah, that'll be a mistake for sure.

57:41Mindy Jensen:Okay. But, I mean, you made a decision. You didn't make a whim decision. You made a decision based on your feelings on the stock market, based on a lot of research about past performance. And past performance is not indicative of future gains. But the past performance tells a story. And you looked at it and said, I think it's overvalued. I'm going to pull some money out. And you're right to say it's measured in 10 years, not in one year. I mean, anybody can have one great or one terrible year. Yeah. So we'll find out. I think we're a little over the first inning out of nine, right? How the math works.

58:15Definitely down on that particular decision. We'll see how the ball game plays out over the next 10 years.

58:20Mindy Jensen:Yeah. Have you ever been down in the first and then you came back to win the game, Scott? We'll see. But yes, I've made plenty of mistakes in my financial journey here. What I think was really refreshing about Adriana was, hey, this is a professional financial planner. And I think there wasn't a ton new there that we hadn't kind of uncovered in a lot of these things. And it was really refreshing to hear professional agree, I think, to a large extent with a lot of the ways we've been framing mistakes and evolving our thinking here on BiggerPocketsMoney over the last year or two, especially with the optionality versus optimality.

58:53I think it's a very hard thing for a financial planner to say too, in some cases, because the AUM guy is like, you bulk it. Well, are you being the market or not? And they're like, well, beating the market's not the goal. Well, this is a better articulation, I think, of what a financial planner may be able to do, which is, hey, there's a decision we want to make here. It's expensive. Can I make it less expensive? Can I get there sooner? Can I feel better about it? Anyways, like I said, I'm proud to partner with Domain Money because I think they're one of the few firms in the country where you can go and get a rotation of great CFPs that are flat B and advice only.

59:26Mindy Jensen:With experience in the FI community, Scott, I think that's really important because what we're doing is different than what the normies are doing. You can learn more at biggerpocketsmoney.com slash CFP, by the way. So biggerpocketsmoney.com slash CFP is where you can get connected with domain if you're interested in talking to one of their financial planners. Yes. And just because this episode is done doesn't mean that you're done learning. You can hop on over to biggerpocketsmoney.com and find resources, templates, calculators. We've got a blog. We have a newsletter. If you're not subscribed to our newsletter, change that by going to our website and signing up for the newsletter.

1:00:02Mindy Jensen:We also have a forum, Scott. We've got so many good things happening. Our tech team is busy at work making awesome stuff for you to help you on your financial journey. So you can find all of that at biggerpocketsmoney.com. You know, I was thinking about how to frame what we're doing there. And I think, Mindy, what we're really building with these resources and tools is how do we help you, our listeners, get a high quality rough draft of financial decision. Like we're not going to be the final source for that. We're not going to tell you to sell something or here's the portfolio that you should own or here's your financial plan, but we can provide you templates and fictional personas and calculators and other things that provide directional estimates.

1:00:41They're not full tax planning. They're not full, you know, it's not a perfect healthcare quote, but hopefully it's a very good rough draft for you as you're thinking about these decisions and they're free. We would give you a money back guarantee, but there's currently no way for you to take out your credit card and pay us on BiggerPocketsMoney.

1:00:57Mindy Jensen:Yes, everything is free on BiggerPocketsMoney. We would love to have you over there. You get what you pay for. You get more than you pay for here. All right, Scott, should we get out of here? Let's do it. That wraps up this episode of the BiggerPocketsMoney podcast. He is Scott Trench. I am Mindy Jensen saying, beat the tax man, Pelican. I'm skeptical of a lot of financial products, but life insurance isn't one of them, at least not term life. For the vast majority of you listening, term life is simply the right answer. And the smartest way to buy it isn't one big policy, it's a ladder. Your need for coverage isn't flat.

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