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Episode #583 - Curiosity: The Key to a Happy Retirement

“Study hard what interests you in the most undisciplined, irreverent and original manner possible.”

-Richard Feynman

Roger: Welcome to the show dedicated to helping you not just survive retirement, but to have the confidence because you're doing the work to really lean in and rock it.

Welcome to the show. It is harder to have confidence in your plan for retiring right now “given the state of everything”. I wrote that quote down from someone that had said that in an email like three months ago. But it feels like the pace of change has ramped up into hyper drive in terms of the economy and the world and the government and benefits, et cetera. So next week we're going to explore should you be worried about your retirement, given the state of everything. We're going to dive into that in an organized way so we can take action where we can improve our plan.

Today, however, we're going to answer some of your questions related to building a retirement plan of record. In addition to that, we're going to focus on one of the non-financial pillars mindset, specifically, cultivating curiosity, which I think is a key to rocking retirement regardless of what's going on in the world. So, we're going to focus on that. We'll mention some resources today. We have some books that we're going to mention. We will share a couple summaries of those books in our weekly email, The Noodle, so if you are receiving The Noodle, you can get those book summaries to see if you want to explore the books further. If you're not signed up to receive our weekly email, you can do that at thenoodle.com. With that said, let's get this party started.

PRACTICAL PLANNING SEGMENT

So today we're going to focus on the non-financial pillar mindset, specifically curiosity. I've been doing financial planning and retirement planning for over 35 years. I'm 58. That feels like a long time. That feels like an old person, 35 years plus I have worked in a role observing people as they've aged through their 30s, 40s, 50s, 60s, 70s, 80s and 90s. One thread comes out that it seems that the happiest, most in control, well-adjusted people have a high level of curiosity not just about themselves, but about the world. So, from a mindset perspective, I think curiosity is one of those key attributes that we all should foster.

Let's talk through how to do that. Well, what is curiosity? Well, it's to have a strong desire to investigate, explore and understand new things. They actively seek knowledge and ask questions. If we look at the etymology of the word curious, and I'm a very, very amateur etymologist, I don't know if that's even a word. It derives from the Latin word curiosus, which means careful, diligent or inquisitive. Being inquisitive about things. When we're defining something, sometimes it's helpful to define what it is. Not the clearest definition for me because I've used this phrase for a while. There are certain people that I don't need them to be in the room in order to have a conversation with them. What I mean by that is I know exactly what their point of view is because I've heard it multiple times. Any conversation I have with them is never going to reveal more shared knowledge because any active conversation is just going to be them rebutting something that challenges their point of view. They're not open to exploring things from different ways. They're just a talking head of sorts. They have lost a sense of curiosity because they have figured everything out. I don't really need them in the room to have a conversation with them. We have a number of people that ask to be on the show from time to time. I'm like, no, I know how you approach these conversations. I don't think I'm going to learn anything more by talking with you. That's the epitome of not being curious. Then there's indifference, there's apathy, there's close mindedness. All of these things we do not want to cultivate as we grow older. It's very easy to naturally fall into them. I think today's society, the way that media is played out in the way that we are, we consume information, tends to be all opinion based information of salvos of opinions being thrown back and forth without much listening or curiosity as to what's behind those so we can build a better understanding.

Now it's important that we have curiosity. Why? One, it just makes you a more interesting person to be around. Two, there are studies that show neural pathways are activated when you are curious. It triggers dopamine. It helps create new neural connections. I may have to have Bobby on to talk about that. It benefits by building cognitive flexibility. If you're regularly engaging in unfamiliar concepts openly, it forces the brain to connect new mental models. That's why I like mental models and problem solving. It creates connection making. Curiosity encourages us to see relationships between similarly unrelated concepts.

You know, one of the ones that has changed my life is using the Agile project methodology with retirement planning. Connecting those dots. Curiosity at the end of the day drives learning. Learning creates cognitive resilience, and cognitive resilience enables further curiosity. It's this virtuous circle and we've all talked with people in our lives that aren't curious. I have one friend I’m thinking about that I love hanging out with, Sean and his wife who are another couple but he never asks a question. It's one thing that I notice about people, whether or not they are asking questions, and he never does. At first it really annoyed me. But now I know when I'm going to have a social interaction and we're going to go do something with them, I'm more comfortable. I enjoy his company. He's a super nice guy, very smart. But I know it's not going to involve curiosity as much because he’s not as curious about me or the world or other things. That's fine.

Let's look at some exemplars of curiosity. I have two that are like top two for me just because I'm familiar with them. The first one is Richard Feynman, who I quoted at the beginning of the show. He is a physicist who early in his career was part of the Manhattan Project and won a Nobel Prize. If you chronicle his life, he was the one that discovered or helped discover why the Challenger exploded in the 80s. If you read the books about him, you can see his curious nature. He liked lock picking, he liked codes. He would have friends that they would create codes and write to each other and they'd have to figure out each other's codes. He just is an exemplar of curiosity and just exploring things. He would get himself into all these situations. His book that I would recommend starting with is Surely you Must be Joking, Mr. Feynman. It's a wonderful book that is about his writing and he has many others. But that was the book that's like, oh, this dude. I would love to live a life that was as curious as his was. The second one is one of my best friends. One reason why I talk about him a lot is Rajib Roy. Rajib is one of my best friends and he is one of the most curious people I know. We have countless conversations where we're just exploring the weirdest things and going down deeper and deeper and we'll talk about that. You can learn a little bit about Rajeeb at his blog, rajibroy.com where he chronicles what's going on in his life. He's wicked smart.

Brene Brown is another exemplar of curiosity. She is actually someone I have not read deeply about but have read the book summaries of a couple of her books which we're going to share in The Noodle this weekend. She's written books like The Gifts of Imperfection, Daring Greatly, Braving the Wilderness. We'll put a link to one of her book summaries in our email. She is one that just has frameworks where she's trying to help people be curious about their imperfections and exploring and having courage to explore those things. Leonardo da Vinci, we're going to quote someone who wrote a book about, actually we'll do it now, How to Think Like Leonardo da Vinci is a book by Michael Gelb, and we're going to talk about one of the tools he outlines in that book and we'll put a summary of that book in The Noodle this weekend. Leonardo da Vinci, if you examine his life, was a man of curiosity. He's usually the exemplar that we think of. Then the famous scene from Ted Lasso, which is a wonderful series. It's got some saucy language in there. I have a quote in my office in Texas that “Be curious, not judgmental”. Now he quotes that as being from Walt Whitman. If you research it, it's not. But be curious, not judgmental. They are sort of the opposites of each other, aren't they? Those are some exemplars. We'll share some book summaries so you can explore their lives a little bit more deeply.

How do you build curiosity? I think we need to be intentional about this because it is not a natural thing to build or that we see modeled in everyday life, at least public life. I think it's something we definitely need to cultivate intentionally. The first tool I would tell you is to think like a scientist. There's a framework of thinking we can use and the framework is usually used when we do something or we glitch, we make a mistake. I said something at the party I shouldn't have said or I can't believe I just did that, or I can't believe I just did that again. Normally what we bring out is a hammer. The shame hammer. I'm such an idiot. I can't believe I didn't remember that. How could I ever do that? I can never figure this out. We shame ourselves and beat ourselves up with a hammer about things that we do or even think or say, and that closes the door on curiosity. So, the more that we can act like a scientist and say, hm, well, you know, I have to deal with this all the time. Oh, I just said that. Hm. Why did I say that? What was behind that rather than shaming myself? Float as a bubble above yourself and just ask questions. Why did I do that again? Why did I say I wasn't going to have a glass of wine and I had a glass of wine? Or why did I say I was going to get up in the morning and I didn't get up in the morning rather than bring the hammer out and hit ourselves over the head. Be curious like a scientist. Why did I do that? What's behind that? I think the first step in how to build curiosity is to put away the hammer of judgmental and shame and be like a scientist. Hm. Why did that go on? Why did that person just yell at me? That's the first thing that opens the door to curiosity.

The next tool you could do is have a notebook. We have, like, little field notebooks that we share in the Rock Retirement Club. Keep a notebook in your pocket and then ask questions or make observations or identify patterns or maybe write down a moment or if you see somebody that is interested in doing something sort of cool and you have an interest in it, just write it down. Then that will give you ideas and as you build that muscle of observing the world and not just living in it, you'll pull out, ooh, yeah, I see that pattern. I see why. Why is that? Or where exactly does a tumbleweed come from? We were just driving in West Texas. We saw tumbleweeds. I never thought about them, but that was something to write down in a notebook. Tumbleweeds. Where exactly? How do they live? Just to keep a little notebook, a little small one, put in your pocket. You don't ever have to do anything with it but it will help practice that muscle of curiosity.

The next tool to build curiosity is to ask five questions. Let's say you're talking to somebody and I'm going to go here for a second. Let's take a political issue. I'm not going to choose one but take a scenario where you are talking to someone that has a different stance on an issue than you do, rather than get into a tit for tat argument, ask five questions. Just ask and try to dig deeper and learn about what their belief is founded on, and it forces you to not be judgmental. How did you come to that belief? Really? Where is that from? It can be hard to ask five questions, but it's forcing you to be curious rather than just stating your argument. We're just having the surface level conversation, we don’t have to change each other’s opinion, but curiosity leads to understanding and connection. Graham and I were practicing this the other day. Graham is my nephew who's editing this podcast. He and I were practicing this, not too long ago. He was in the car. Graham's a wicked smart kid. He's 20 years old. You know, he's in that I feel like I know everything stage, although he doesn't. He actually acknowledges that. He's very curious. But he was practicing questions and like, okay, Graham, for the next half hour, he and I were driving back from Austin said, whenever we talk about something, I challenge you to ask three or four questions before stating your opinion. He actually did. And it opened his eyes to being curious.

Another tool that you can use to cultivate curiosity is skill based learning. This is something that Rajib is really good at. We have a number of people that I interact with in the Rock Retirement Club and in my life that exemplify this. That is exploring a new skill that's outside of something you're comfortable with. Rajib Roy is a good example of this. Right now, I think he's exploring, like coffee foam art. He's been exploring being a bartender and he posts photos of new drinks. He started with gin and just went through the gin drinks. He's doing things that he doesn't have competency in, but now because he's put in reps, he totally does. David in the club makes syrup. He sent me a bottle of his syrup. I think he's been on the show before. He didn't know anything about doing that for a while. It was just something that he was exploring. Richard, a good friend of mine, just sent me a photo of a sourdough bread that he made. He's not a baker, but he did this cool thing. There's this whole thing where I'm, going to get the name wrong at the moment that you build this living thing dough. I forgot. I don't know what the name of it is. Maybe I need to write that in my notebook. You build this living thing that you can make bread out of, and it's such a thing, it's living, that there are things that these things you pass down generation to generation, if you keep it alive and tend it. Well, Richard knew nothing about that. He sent a photo of his first or second sourdough. He says, I'll send you one as soon as it doesn't take me forever to make one. There's knitting, there's. I have another buddy, Phil, who never lived outdoors. He's an immigrant from South Korea, and he is enthralled with the outdoor culture of America. He went from not knowing how to camp or do anything that he goes out in camps and does all of these things, and he has researched it. We can build these things over time. One more, one more. This is the big one that can be difficult to do. This is highlighted in Michael Gelb's book, How to Think Like Leonardo da Vinci, which is to sit down, give yourself 45 or 60 minutes in a quiet place where you won't be interrupted, and write out a hundred questions. Just brainstorm. 100 questions. That's step one. Now, you'll get maybe 10 or 20 or 30 easily. Then it gets harder and harder and you have to stick with it. Once you do that, you look at your list of hundreds of questions and you analyze themes, you try to identify themes within those questions. Once you've done that, then you pull out the 10 you find most meaningful and you rank them by order. You're refining some things, some potential things that come out of the exercise that perhaps you can explore more fully. Don’t shame yourself or anybody else. Be like a scientist, Put a flashlight on it and try to understand. Then we went to keeping a notebook. Then we went to asking questions rather than judging. Then we went to skills based learning. You can follow this pathway to cultivate this. It doesn't matter how old you are. The most alive people I know that are in their 80s are curious people. So, I think, mindset wise, this is something we need to cultivate.

I encourage you to do the same with that. Let's get to answering some of your financial questions.

LISTENER QUESTIONS

Now it's time to answer your questions. If you have a question, you can go to askroger.me and we'll do our best to get it on the show to help you take a baby step towards rocking retirement.

DREW’S QUESTION ABOUT GIFTING

Our first question comes from Drew related to gifting.

Drew says,

“Hey, Roger, you mentioned in the latest podcast that payments for medical and education paid directly to the provider are not part of a gifting limit for a year. My question is whether or not using a credit card is considered a direct payment. Technically, I'm not paying the provider. Visa is and I'm paying Visa later. I could see in the argument that this is no difference. What are your thoughts on this?”

That's a good question, Drew. I talked to Aaron on my team about this one as well.

What Drew's referring to is there is an annual gift limit that you can give anybody. I believe it's $18,000 for 2025. I'd have to look it up to anyone without any gift tax consequence. You are able to pay for medical expenses and tuition expenses if the payments go directly to the provider without any limit. So, if I had a million dollar hospital bill and someone paid the hospital directly for that million dollar bill, that would not fall any of the gifting limits within the IRS. You can do that at an unlimited basis. The key there is that the payment has to go to the actual provider.

In my example, if I had a million dollar medical bill and someone gave me a million dollars and then I paid the medical bill, that would not qualify. It has to go directly from the person paying to the institution paying the invoice. So that's the key there. Drew's question, well, what if I want to pay Roger's medical bill, but I use my Visa or MasterCard to pay that bill? So, Drew, that would not matter. That is, you making the payment because you're doing it directly to the provider in this case, so you should be fine there. One important exception for this that Aaron pointed out is if you pay, say, Roger's medical bill of $1 million and somehow Roger gets reimbursed through some means, say, insurance, well, then that becomes a gift. So, there are some technical aspects of that. But the key thing that we're thinking about for our relationship in this transaction is you want to pay the bills directly to the provider, not to the person and using a credit card is perfectly okay.

TOM’S QUESTION ABOUT PERMISSIBLE INVESTMENTS IN ROTH IRA’S

Our next question comes from Tom, and this is definitely an optimization question related to Roth IRA investment.

Tom says,

“Hey, Roger.

I need to understand the rules of permissible investments in Roth IRAs. I want to start an investment club within a Roth, whereas I have people use their Roth money to put in a pool of a house flipper and the flipper pays out a straight 10% interest rates. What are your thoughts and suggestions?”

There are two parts of this, Tom, that I want to address. Number one is what are allowable investments within an IRA or a Roth IRA? We won't get into all the details here, but essentially what you need is a self-directed IRA with a custodian that can help you facilitate alternative assets as an investment. So, your traditional IRAs say, have one at Schwab or at Fidelity or at some other firm, they're not going to allow these private investments. But there are some specialty self-directed IRA providers which are easily found on the Internet that will facilitate you doing direct investments into a private debt, which is essentially what you're talking about here, or a private investment property or, or as a limited partner in a private equity deal. You have to find those specialty custodians because there has to be a financial firm that handles some of the reporting related to that. It's very important that you follow the rules as best you can. Otherwise, there could be some downstream taxable consequences, especially in a traditional IRA and a Roth IRA, maybe less so. You have got to be very careful. Those types of custodians have a lot of education on that, but ultimately, it's onto you to make sure you're following the rules. This is a fringe structure within the realm of custodians that work with IRAs and Roth IRAs, so this is not a normal thing. Not to say that it can't be done and that it's not done all the time, but it's on the fringe of normal investments within tax advantage accounts. So be cautious.

Now, I want to go to the second part of your question where you want to have people use their Roth money to put money into a pool for a house flipper that pays 10% to have the money, I assume to have the resources to flip houses. you used, I think, the term investment club. Well, you can learn a lot about investment clubs, which is a traditional educational tool where people pool their money and buy stocks together and they meet and have committee meetings. The national association for Investors Corporation NAIC has a lot of educational material on that. We'll put a link to that in The Noodle email. Just because you could, doesn't mean you should. I would be very wary of even thinking about doing this tomorrow. Doing your own money, that's one thing. Starting to try to organize other people to facilitate financing for a house flipper. I don't know if you're the house flipper that's trying to figure out a way of accessing some people's capital in order to finance your flipping or what this is. I would be very careful. In fact, I would just not do it. My suggestion, my thoughts, is no, don't do this. Especially with other people's money and trying to facilitate that. I can't think of many good things that can come from that.

Now for everyone else who gets offered these types of things from a friend with the best intentions trying to say hey, I got this great idea. We can get out of the stock market or the bond market and we can get a 10% coupon through Johnny down the road who has been a successful house flipper. All we have to do is set up an IRA and a self-directed way and I can help facilitate that. That person may have the best intentions in showing you this. That doesn't mean that they know what they're doing or that they truly understand all the risks. That's the big hard stop I want to make here to everybody. Don't do this type of stuff. If you get offered this type of stuff that's on the fringe, that sounds too good to be true from someone who doesn’t do this as their main business, I would counsel to stay away. Retirement and rocking retirement, having a great life is complicated enough. Let's not overcomplicate it.

JOHN HAS A QUESTION RELATED TO BUIILDING A RETIREMENT ALLOCATION USING THE PIE CAKE

Our next question comes from John related to building a retirement allocation a la the pie cake. This is a question related to the resiliency pillar of retirement.

“I joined the RRC in November 24th cohort. I am age 64, have just retired, have been in a 60% stock 40% bond allocation for several years and feel right for my risk tolerance. After I build my 5 year income floor or safety, how should I look at my allocation? If I put everything other than the five year ladder in equities it would be like 85% stock, 15% bonds and that feels too risky to me, Should I consider the five years as part of my 40% bond allocation?”

Well, that's a great question, John. You say the 60% stock, 40% bond allocation feels comfortable with you from a risk tolerance standpoint, I'm guessing you've had this kind of portfolio for some time and you've been through ups and downs and been fine with that.

The short answer to your question, John, is yes, you should include all of your financial assets, your bank accounts, your bond ladder, your emergency fund, your upside investment accounts in your allocation study to determine what the target allocation is. The short answer is yes, you would include that five year income floor in your allocation. That said, it really takes a mental shift on how you actually build an investment portfolio in retirement.

Traditionally, the way that everyone has been taught how investment portfolios should be built, and this includes advisors, is that you take a risk tolerance questionnaire, which tries to determine your capacity for volatility markets going up and down. That's when you take those questionnaires and it tells you what asset allocation, which is just a mix of bonds and stocks on a very basic level, matches that risk tolerance. It tries to optimize the risk for the level of volatility or minimize the volatility for a certain protected return. That's how we end up coming up with these pie charts of so much in stocks and so much in bonds.

This comes from modern portfolio theory, which comes from Harry Markowitz's work back in the 50s about portfolio optimization. It's a little bit important to understand where these concepts come from. When that work was done and going forward, it was done looking at portfolios absent cash flows. It was an exercise more in the institutional realm of portfolio construction than individuals, because individuals weren't really investing back in the 50s, 60s, and 70s, and that means these are perpetual organizations that aren't going to die necessarily or retire. It was absent cash flow and so it was trying to understand how to optimize return or minimize risk for a given level. This is where all this comes from.

I say that to say this, John, the proper way to build a retirement portfolio is not from the top down like you have traditionally done during those accumulation years of doing an investment questionnaire, targeting a portfolio and riding it out in rebalancing. That is not how you build retirement portfolios. The way you should build retirement portfolios, in my humble opinion, is from the bottom up, which is funding your life becomes the most important thing. You are not a perpetual entity. You will pass away. You need to have cash flows that are withdrawals from your assets to fund your paycheck for your life. These are very different than how portfolios were constructed. The way you should build your portfolio is what do I need as a contingency fund, that emergency fund so I have liquidity for the unexpected and bad estimates, et cetera. Then you need to build a payroll reserve which is prefunding the first five years of your retirement of money that you're going to need from your assets. Five years, nothing special about that, but that's a good default to work off of. Those monies are going to be invested in the things that we talk about. Things that have a maturity that you earn interest and that's money that you will spend year by year. Then you can have an upside portfolio which will be more like your traditional allocation. That upside portfolio doesn't have to be 60/40, it can be 80/20, it can be 50/50, it doesn't matter. But when you build a portfolio from the ground up to serve you so you can have confidence in how you're going to live your life, what ends up happening is the allocation just becomes the allocation. It is a result of solving for your life, not a result of some statistical model that is based off of a questionnaire to get to some target. So yeah, I would include it all in there.

MARY IS CURIOUS ABOUT WHETHER SHE SHOULD PUT MONEY IN AN HAS OR IN A MONEY MARKET ACCOUNT

Our next question comes from Mary related to where to park some cash.

“Hey Roger.

I have been listening for about three years.”

Well, welcome Mary. Her question is, should I take a large amount of money and put it into an HSA or money market account?

“Not sure about this. I'm completely comfortable with online access and know that some have withdrawal limitations. I just want security and interest with no fees. I want to be able to access the funds quickly in case life happens and we want it back in our house. What are some recommendations?”

So, Mary, you mentioned an HSA or money market. First off, an HSA is a health savings account which is a specific type of account that has limitation on monies that you're putting into it and that can be brought out tax free for qualified medical expenses. I'm assuming we're not actually talking about an HSA and the question is that I have some money that I want to try to earn interest on. Where can I put that? You may have that at your local bank savings. This is a great question because we want our money working for us as much as we are able without having to create too much complication. Many times, if you look at your local bank, what you have in your savings account, they're paying next to nothing. As an example, I'm just randomly going to a website, I think this is a major bank. I'm not going to say the name. They have Diamond Honors account where if you have over a certain amount, you can earn 0.0004 return on your money. A lot of us have money in local banks that are earning 4/10 of 1%. To put a dollar on that, if there's $100,000 in there and you're earning 4 bips or 4/10 of 1%, you're earning about $40 a year on your $100,000. This is just off of a national bank that we all would know. So, Mary, if you're looking for a place where you can earn higher interest than that, there are a number of online banks and even local credit unions that will pay you a higher amount of interest either in a savings account or in a money market account. Let me pull up one of those and I'm pulling up one of the major ones that's FDIC insured and it's paying 4.3% in platinum savings. So that same $100,000 that was earning $40 a year at the local major national bank could earn $4,300 a year at an online bank if you're willing to deal with the friction of online banks and some of the nuances. Some of them do have withdrawal limitations where you can't take so much out in any one time. I had a client that just had that happen the other day. I forgot the name of the bank, but they needed like $50,000, but they couldn't do it all at once. So, there can be some limitations there that can be imposed.

As long as they show FDIC insured, they're all going to have the same insurance in terms of the bank going under. Just like with interest rates on mortgages and things, if they're in a money market or a savings account, those things are going to float up and down based off of interest rates, but they're still likely going to be higher than your major bank honors saving of 4/10 of 1%. So, I think all of those are viable options to one, have your money safe.

In addition, you have to understand the limitations on moving money around because some of them can be a little quirky that way in the online world. Then you need to know that they're safe from an FDIC standpoint.

So yeah, Mary, I think it is not a bad thing to go explore that. Then you can electronically link them to your local bank so you can just log in online and move money between the two relatively easily. This is basically a $4,300 a year difference just by being smart. I do this in my business account when I have cash there, and I have done this for years, Mary. I'm like, wait, I need to be moving money over from my business account to a high yielding money market that I use at Charles Schwab for myself. There's some friction, but it adds up. It can be thousands of dollars. So, I think you're smart to think about this. As long as you stay with FDIC insured organizations and you are dealing with banks that have a relatively well known profile You can go to bankrate.com, there's lots of online resources that reference these. Mary, I think you're smart and you can pick up some cash just for paying attention.

NICK’S EMAIL ABOUT TARGET DATE PORTFOLIOS IN RETIREMENT

Our next email is from Nick related to target date portfolios.

Nick says,

“Hey Roger.

My wife and I decided at the beginning of 2025 that we will be retiring in 2030.”

Congratulations. It's good to have a date as an organizing principle, Nick.

“Because of ignorance, we've been heavily invested in stocks.”

Well, that's done extremely well and you've been accumulating, so don't beat yourself up on that.

“Now that we've learned about sequence of returns, we want to change our investments to something more compatible to our age. We've been looking at target date funds. We created a spreadsheet to compare the returns of a hypothetical million dollar portfolio from 2007 to 2024. The only time that the 2020 fund would be ahead is if I had started in 2008. Am I missing something? Do you think we should switch to a target date fund? Do you have another recommendation? I have $500,000 and my wife has $300,000 in her 401k, all in the S&P 500 equivalent.”

Well, that was going to be my first question, Nick. You said the only time it would be ahead was in 2008, and my first question was well ahead of what? Well, you've answered the question because you've been 100% in the S&P 500 for a while. So, you're comparing apples to oranges there. The odds are it would not be ahead of a one hundred percent equity portfolio, because a target date fund is going to be an asset allocation fund, number one, which means it will have the S&P 500 large stocks, it'll have small stocks, it'll have international stocks, it will have bonds, and it will have some cash. So that's a very different flavor of portfolio than an S&P 500. It's like comparing if S&P 500 is Tabasco sauce and a target date is more like a smoothie? Well, yeah, a smoothie's not going to be as hot as a Tabasco sauce. It's also not going to give you acid reflux as much. You'll have less upside, less spice to it, but it will be smoother overall. So, be careful what you're comparing things because then you can get yourself into some traps in your thinking based off of endpoint bias or how things have done.

When S&P 500 is good, if you compare everything to that, well, you're going to think that it was the right investment. When you look at decisions, it's not the outcome of the decision that is most important. Of course we care about outcomes, but it's the way you make the decision that's even more important because you can control that. You can control the decision. You can't control the outcome. Just because you didn't know any better, as you said you were in the S&P 500, that doesn't make it a great decision, doesn't make it a bad one. You have got to be careful on how you compare things with target date funds. The way that they're designed is to have an allocation that's appropriate given your age. I'm putting air quotes around appropriate, appropriate given your age. Then that allocation will change over time as you age. So, as you're approaching the target date of retirement, in this case, the portfolio will get more conservative and more conservative in investment management terms is to have more bonds and have less stocks, with the idea being that you can't take those higher risks as you're older. This is true to an extent, but it's also an antiquated way of thinking about asset allocation.

I'm not a big fan of target date funds. I think they're perfectly appropriate if you're younger and you're investing because they'll stay aggressive for a longer period of time, but as you get closer to retirement, Nick, I think they become more problematic as an investment portfolio option.

How would you build your portfolio? Well, I talked about that a little bit today and we'll put a link to the four pillars of retirement planning sessions I did last fall. We'll put a link to those in The Noodle this weekend, Nick, so you can revisit Vision, Feasibility, and Resilience that talks about the construction step by step to start to build a portfolio that can take you into retirement. You're five years out right now, Nick, you and your wife recently made this decision. You're doing this at a good time. You can slowly start to make adjustments to the new version because your whole investment structure is going to change as you get closer to retirement. This is a great time to revisit those pillars and think through this step by step, but I don't think a target date's the best option. I think you should build it from the ground up like I talked about on the previous answer. If you revisit those foundational pillar episodes, that will give you a primer to help find a decision that's right for you.

Good luck on this journey. You have got a lot of time, so take advantage of it.

TODAY’S SMART SPRINT SEGMENT

On your marks, get set, and we're off to set a little baby step in the next seven days to not just rock retirement, but rock life.

All right. In the next seven days we have got to work on cultivating our curiosity.

I challenge you to do one of two exercises. One, do the hundred question exercise and just brainstorm 100 questions. If that's a little bit too big of a piece of the pie to eat, the next time you're in a conversation with somebody, focus on asking three or four questions in a row before you respond with your thoughts or judgment. Focus on asking 1, 2, 3, 4 questions and be curious. I think either of those exercises are great little things that we can do to cultivate. Hm. I wonder why that is foreign.

BONUS

Now it's time to get to the next mission from Zigmund Canceller in his flying in B17s in World War II. We're on mission 31 and 32. We've been doing this since Veterans Day. We're going to get through all 50. This is August 20th.

“Ship number 274 sortie 21. Poland was the country we paid a visit to today and our target was the something oil company. Doubtful as to results of our bombing. Flak was heavy and accurate, but one burst was enough to make us respect it. Escorts were P-38s and P-51s. Carried 16250 pound bombs. Mission was 7 hours and 45 minutes. Altitude 23,000ft. 15 miles away from Mary's grandparents’ home.”

Mary was Zigman's wife, my grandmother, so he flew about 15 miles away from her family's home. It sounds like they had some pretty heavy flak that day.

The opinions voiced in this podcast are for general information only and not intended to provide specific advice or recommendations for any individual. All performance references are historical and do not guarantee future results. All indices are unmanaged and cannot be invested in directly. Make sure you consult your legal, tax or financial advisor before making any decisions.