Should You Retire Sooner, and Is Your Fund Winning?

0:04Is your mutual fund winning? And should you retire sooner? You're listening to the Saturday Personal Finance edition of Motley Fool Money.

0:20I'm Robert Brokamp, and this week is part two of my conversation with financial advisor and author Wes Moss about his years-long research into what makes for a fulfilling retirement. But first, let's look at what happened last week in Money. And we start with chaos at the IRS. President Trump recently fired IRS Commissioner Billy Long, who had been on the job for less than two months. He will be temporarily replaced by Treasury Secretary Scott Besant, who apparently doesn't have enough on his plate already. This transition makes Besant the seventh person to become the head of the IRS so far this year, the seventh.

0:55Meanwhile, a quarter of the IRS's employees have left or been let go in 2025. Now, this comes after the passage of the One Big Beautiful Bill a month ago, which requires the IRS to provide guidance, issue regulations, and update publications regarding the myriad changes enacted by the new law. It could be an interesting tax filing season next year. The immediate consequence of all this turnover and reduction in staff is that it may take longer to get official clarifications from the IRS, either via their publications or if you're just trying to get anyone on the phone. It could also mean fewer audits.

1:28Listen, I don't want to be audited more than anyone else, but I also don't love the idea of people getting away with not paying their lawful share. According to a recent article in Barron's that highlighted this likelihood of lower audits, the IRS collected$5.1 trillion in 2024 taxes, but estimates that there's another $700 billion that goes uncollected. Speaking of audits, what the IRS calls examinations, know that in the vast majority of cases, the IRS will contact you via regular old snail mail. Anytime you receive an email or a text from the IRS, it's actually probably a scam. Don't click on any of the links, don't download attachments, don't reply with any personal information.

2:10If you do get a letter in the mail about being audited from the IRS, respond immediately. There's actually an official appeals process for audits, but if you wait too long to respond, you lose your right to appeal. Our next item comes from Peter Malouk of Creative Planning, who wrote this in a recent post on X, quote, credit card debt is the silent killer. Over 12 % of balances are 90 plus days delinquent near the highest level in 14 years with interest rates north of 21%. Nothing destroys wealth faster, end of quote. You may have heard that credit card debt is at an all-time high, which some experts find alarming, whereas others say that, well, considered relative to today's current GDP and income, today's debt levels actually aren't anything to worry about.

2:56But I certainly find the increasing levels of credit card delinquencies concerning, and the rise in the average credit card rate is remarkable. According to the Federal Reserve, the average rate is 21.2%. Three and a half years ago, it was below 15%, and then it began to take off. In fact, before the spike that began in 2022, the last time the average credit card rate was above 16 % was$19.95. Why are rates so high? Banks will tell you that they need to charge those rates to compensate for all the defaults. Of course, someone has to pay for all those credit card rewards and TV commercials. The bottom line, in my opinion, is that banks get away with charging these higher rates because they can.

3:38Of course, you don't have to pay those rates if you keep your spending in check and you pay off your balance each month. If you have a card charging a high rate or maybe offering modest rewards, look for a better deal. Many websites these days offer credit card reviews, offer special deals, including one here at The Motley Fool, which you can find by visiting fool.com.com.

4:01Now we come to the number of the week, which is 90. That's how old Social Security turned this past Thursday. President Franklin Roosevelt signed the Social Security Act into law on August 14th, 1935. Here are some current stats on the program according to the Social Security Administration. The average monthly retirement benefit is$1 ,975 or$23 ,700 a year. That represents 31 % of the income of Americans age 65 or older. For almost half of people that age, Social Security is their number one source of income. For 12 % of men and 15 % of women, Social Security accounts for at least 90 % of their income.

4:42Your Social Security benefit will be determined by the 35 highest earning years of your career adjusted for inflation or that of your spouse if you're married and your spouse earned much more than you over your careers. The amount you receive will also depend on when you claim benefits. The longer you wait, the bigger your benefit up to age 70. To help you determine the best claiming strategy for you, check out some free online tools such as opensocialsecurity.com and the T. Rowe Price Social Security Optimizer. Another tool that costs$49 but is still worth considering, many professional financial advisors use it, can be found at maximizemysocialsecurity.com.

5:21Up next, I talk with Wes Moss about the value of super activities in retirement when Motley Fool Money continues. Trading at Schwab is now powered by Ameritrade, bringing you an expanding library of education with even more ways to sharpen your trading skills. Access new online courses, insightful webcasts, articles, engaging videos and more, all curated just for traders. Plus, guided learning paths with content designed to fit your unique interests. No sifting to find exactly what you need so you can spend your time learning to trade brilliantly. Learn more at schwab.com slash trading. Wes Moss is a certified financial planner practitioner and the author of What the Happiest Retirees Know.

6:05Last week, I spoke with Wes about the financial resources and habits of the happiest retirees. This week, we discussed the non-financial keys to a fulfilling retirement and whether more people should retire sooner. You found out that a happy retirement isn't just about how you spend your money, but also how you spend your time. What does your research say about the day-to-day habits of the happiest retirees. There's something I have referred to for many years now called core pursuits. Core pursuits are essentially hobbies on steroids. Joe saw sea high from stacking Benjamins. I ran into him at a, some, you know, some VIP event.

6:46Of course he would be there for that. You, it's like an event you should be at. It was, I think is it FinCon and the, he goes, you know, I really love those super activities you talk about in your book. And I said, Joe, that is such a great name for it. But I give him the credit for that. But they're super activities. That's just how I do this once in a while. I like them. So it's those core pursuits, super activities, hobbies on steroids. The more of them we have, the better, number one. But the other thing is I measured recently the amount of time we spend doing them. And there is a big difference between the amount of time we spend during our week between the happy and unhappy retiree camp.

7:26As you may imagine, the happy retiree camp spends more time on those core pursuits they love. Now, it doesn't really matter. Yes, there are certain categories that I show to lean people towards or a higher propensity to land in that happy group. Yes, there are some specific categories around that that seem to work even better than other categories. But most importantly, it's about the amount of time we spend doing them. Happy retirees, and again, I measured the time. I looked at how many hours do you spend doing this and doing that, and whether it's an athletic activity or an adventure activity or a creative activity, etc.

8:06Happy retirees spend about 280 hours a year more than the unhappy group. That's it. That's that's weeks and weeks and weeks if you add it all up. And so it's 40 percent more time doing the things they love, doing those super activities. And that is extraordinarily important. The other part of that is that if I if I were to dive in to what is bringing people joy in retirement, many of those activities, Robert, are are social. And there is a real sense, and we can maybe talk about this even further, but if I look at those categories, I categorize nine different, let's call it categories of core pursuits.

8:49seven of the nine in answering the question, what brings me the most happiness when it comes to retirement had something to do with socialization. It was with doing XYZ with friends, doing with friends and family, doing with family. So it was striking to me. And this was, this took a long time. And it's funny. I tried to, I actually tried to use AI for this and it didn't work because it was too much data, but I got open-ended responses from, and the reason it didn't work is that many of the responses I got that were open-ended in the, in the latest research had multiple things in their answer.

9:28It was, I like to garden, but I also, what I really love is my weekly bi-weekly walking group with my friends and neighbors. So what, what, what AI couldn't decipher for me was when somebody had two or three different things in one sentence. So the, I gave up doing it that way and literally just went through and read every single response and categorized where it landed, even though there were two or three things. And I wanted to get the essence. What was the most important person that this responded? What is the, what is the most important aspect of their, of this person's respondents retirement life that brings them the most joy?

10:09So I manually calculated all, put all of these into different categories. And what really struck me is that over and over and over again, I have a social category. So some people literally just said, I just love to socialize and love to hang out with my friends, hang out with my family. So there were some that were purely social. But many of those other groups were, I like to volunteer with my friends at church. I like doing my part-time job because I'm with my friends and my colleagues. So there was this real heavy ingredient of socialization that permeated through many of the different core pursuit categories.

10:51And it's just so important. You talk about people taking walks with friends. Sometimes people play tennis, golf. It's a social activity, but it's also a physical activity. Did you find any connection between happiness and just general exercise, getting outside, getting up and doing things? Yes. The answer is yes. They're the happy group. Now, it is not a massive difference in the amount of time because, again, I measured the amount of time these two groups spent in these different categories. And the great news is, and this is what I'm writing about in this most recent book that I'm writing. I think maybe you'll give me a title for it, but it should probably be called the retire sooner method.

11:37you like formula but it's really a method to retire sooner and it's about the five secrets of america's happiest and least happy retirees but what i'm writing about is that some small changes call it 15 minutes a day more in active the active category activities it doesn't matter what it is what can be biking yoga spin class a lot of hiking in my in my research people love to hike. There's a lot of golf, tennis pickle, but these are categorized as, as, as physical activity. There is something about that, that tips people even further into the happy category versus the unhappy group. So yes, it works.

12:19It matters, but it's not as, as big of it, of an uplift as people might think. The name of your podcast is retire sooner. And it does seem that there's a general trend these days for people to say like, you know what, you shouldn't put off retirement. You don't know how long you're going to live. You don't know what kind of shape you're going to be in in your 60s, 70s or 80s. You should take advantage of the time you have while you can. So do you think people should be retiring sooner?

12:51Without question. Yes, more than ever. You know, I was listening to, I had a long drive recently back from Michigan to Atlanta. It took, you know, 15 hours. And one of the audio books I listened to, it was called Outlive. And it was long. And there's only so much my wife could handle. But it was pretty, I found it pretty depressing. I know it's a really good book. But so much of the book is just how often people die. and the four horsemen of heart disease, cancer, autoimmune. I mean, it just, it was a depressing listen, if you will. And as I'm listening to it, and yes, of course, the whole point of the book is that you can fight against that and maybe outlive your, you have more of a life, a health span and maybe a lifespan extension.

13:42But it just made me think how many Americans should be retiring as soon as they're financially ready to do so and understanding some of the other things we talk about, which is the lifestyle side of retirement. The other thing, Robert, that I think is also fascinating from the research, my most recent research study, and I'm looking at, again, general happiness baseline in America. What do we do to be above that baseline? And what activities and habits do we do that lands us below that baseline? And we want activities that bring us above the happiness baseline. It's called happiness alpha if we're talking finance today.

14:26There is a massive jump just getting to the point where you say, yes, I no longer have to work. I'm retired in happiness in America. Just getting into that new mode of now I'm done. And we know this. And we're in an amazing work culture. And that's why we love investing in America. One of my themes on the Retire Senior Podcast is the army of American productivity. We get up every day and we work. Everybody in the labor force just pushes the peanut just a little further up the hill. And you have 166 million people doing that. You've got an amazing economy like no other place in the world. Now, only about one in five of those people really love what they're doing.

15:09The rest of America either hates their job, absolutely hates their job, or they're just doing it because they have to. And that's the reality. It's expensive to live in America, but it does create a powerful army of productivity. And even though we have this great work culture, all you have to do is hop on LinkedIn for five minutes and you're going to see, I get your five to nine routine. What is it? I saw something just the other day. It was my five to nine routine before my nine to five job, which they get up you do a cold plunge you run 10 miles you do yoga save the world and then you go and then you do your nine to five right we get up we're all the reality is that work on a human level ranks really really low on the things that we would love that we want to do if we were it were totally up to us it ranks just above being sick in bed robert so it to some extent it does makes sense that the very act of tipping into retirement is in itself a happiness booster.

16:17You mentioned earlier that people are concerned about outliving their money, even multimillionaires. There are studies that show there are people who are retired and could spend more than they do, but they don't. How do you, as a financial advisor, help someone get over that hurdle of saying, According to your analysis, they have enough to retire, but they're nervous. They're anxious. They say things, well, I don't know how long I'm going to live. I'm worried about long-term care. What's it take to get someone to say, no, you've been saving for this for decades. It's now time for you to take advantage of it.

16:57You've got to put it in black and white, or black and white in color is fine. It's got to be written down, whether you draw it out, you analyze it through artificial intelligence, whether you use one of the more sophisticated software programs that exist today to map out your cash flow. That blueprint, seeing it on paper and putting in the right variables, which are not that complicated, inflation, expected rate of return, amount of spending, you put all that together. And as long as you are utilizing, and I've written about this several different times, and I believe so strongly in this, you understand how you're able to max out your withdrawals without running out of money, abiding by, I call it the 4 % plus rule.

17:47If you're able to understand that and map it out, which doesn't need to be overly complicated. So it's preparation and it's some education, having the confidence around some of these really important rules of thumb. I think if you understand that, and I think that's the job for an advisor to do when they sit down with folks, if they're uncomfortable, to help them understand that as long as you're mapping this out and you're using conservative long-term assumptions, then people should have the confidence and not the fear of running out of money. And that's a huge part of the overall equation is that planning takes away so much of the anxiety as long as you have enough resources to make it work.

18:31It's time to get it done, fools. And this week we're focusing on funds. You know, there's approximately$40 trillion invested in US-registered mutual funds and exchange-traded funds, according to the Investment Company Institute. And it's split. As an investor, I'm buried in data and making sense of it all is hard. That's where Claude helps me every day. I regularly give Claude a company's financial statements going back a few years and ask it to flag anything that looks like an outlier, line items moving in a way that didn't match the trend around them. It surfaced a lot of things I probably have skimmed past before.

19:04Things like expenses growing faster than revenue, are margins quietly improving while the headline numbers look flat. Claude doesn't tell me what to think. It helps me see just where to look closer. That saves me time, helps me find more opportunities to invest, and more risks to avoid. Claude is the AI for minds that don't stop at good enough. It's the collaborator that actually understands your entire workflow and thinks with you. Whether you're debugging code at midnight or strategizing your next business move, Claude extends your thinking to tackle the problems that matter. And with Co-Work, Claude actually builds real spreadsheets.

19:35with working formulas, not just a CSV dump that leaves me with 90 % of the work undone. For problems worth solving, get started with Claude at Claude.ai slash fool. That's Claude.ai slash fool. And check out Claude Pro, which includes access to all of the features mentioned in today's episode. Claude.ai slash fool. Roughly evenly between actively managed funds and index funds, even though the evidence is clear that most actively managed funds fail to beat a relevant index fund. Morningstar threw more evidence on this pile in its recently released mid-year active passive barometer report, and here's what it found.

20:11Over the 12 months ending on June 30th of this year, only 33 % of actively managed funds beat a passively managed peer. That figure drops to just 21 % when you stretch out the timeline to the past decade. And fees really matter. The percentage of actively managed funds in the cheapest quintile had a success rate that was 12 percentage points higher than the funds in the priciest quintile. Now, I'm not saying you shouldn't own actively managed funds. I own several myself. But you should check the performance once a year or so to make sure they remain in the minority of outperformers. So here's what to do.

20:49Line up the performance of your fund with that of an index fund that is in the same category. You want to make sure you're doing an apples-to-apples comparison. For example, if you own an actively managed small cap value fund, compare its performance to a small cap value index fund from a firm like Vanguard or iShares. If your actively managed fund isn't beating the index fund over the past 5-10 years, then it might be time to part ways. If the fund you own is in an employer-sponsored account like a 401k, you may not have a choice. You're limited to the funds offered by the plan. But if the actively managed choices in your plan aren't keeping up, make some noise.

21:26reach out to your benefits administrator and the company that operates the plan. They have a duty to offer you low-cost investments that at least match the performance of their stated benchmarks. And that's the show. Thanks to Dan Boyd, who's the engineer for this episode. As always, people on the program may have interest in the investments they talk about, and The Motley Fool may have formal recommendations for or against. So don't buy or sell investments based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only.

22:02To see our full advertising disclosure, please check out our show notes. I'm Robert Brokamp. Fool on, everybody.