How Do You Know You're Making the Right Financial Decision? | Roundup with Ginger

@Brad Barrett Just want to call out, that point travel newbie’s (me) might not be aware of some general credit card rewards such as an annual travel credit. My husband and I figured this out just before our membership anniversary on a recent road trip and saved $200 on two hotel nights!

@GingerG, if you are talking about withdrawal strategies (accumulation strategies are much simpler), I'd start with taking the Retirement Income Style Awareness (RISA) Assessment (or at least picking the quadrant you think you are in after reading about it) - see: Retirement income sourcing preferences / biases.

Also determine whether you are interested in an inflation adjusted fixed spending model target (Safe Withdrawal Rate) or a variable spending approach based on market conditions. As you know, in the former case, it defines a cap on safe spending level, which you can vary up to that cap as you see fit (and likely ratchet up the SWR over time as it is probably increasing as the market tends to go up, you have fewer years to cover, and if you typically spend at or below that). In the later, you can spend more early, but your safe spending level varies with the market, rather than your own decisions - though it is lower stress on a portfolio if you spend less in down markets.

From there, you can narrow down to the strategies that align with your own preferences and biases (because if they don't align, you will be unlikely to be able to stick to it), rather than the whole gamut of possible strategies.

Finally, I would consider the credibility of the various strategies you narrowed down to consider. What evidence supports the strategy? What credentials and relevant academic and professional expertise do the various proponents of a given strategy have - especially if it is not a commonly accepted strategy outside of FI? Is it controversial - and if so, are you still comfortable relying on it after taking a serious look at the objections / detractors arguments?

Ginger, just a thought, you don’t have to pick one strategy - bonds or guardrails. You could employ a mix of the two. You could set up the bond strategy so that the bonds paid out the minimum amount you need (or the lowest guardrail) each year. Then, you can complete your guardrail calculations each year and sell equities for the difference. That way, there is only upside and you know your necessities are always covered by the bond allocations which mature each year.

Brad mentioned a focus on travel rewards in some upcoming episodes. I wanted to put a plug in for an episode or two dedicated to booking award airfare. There are many different tools to do searches which all have a free and a paid version. Would be helpful to have all the options distilled down a bit. Something more specific than the general guidance of 'these tools don't cover all the programs' and 'you get better redemptions if you book early and are flexible'. As Brad always says, we should walk away with actionable steps after episodes.

I think the first question should be "How much expertise in this area do I really need based on what I am doing and what MY goals are, as opposed to someone else's?"

Too many people jump into optimizing something when they could just satisfice it, or confuse strategies (needed to achieve financial goals) with preferences (not needed financially, but desired for other reasons that are usually rooted in psychology or familiarity).

When it comes to withdrawal strategies, the first question should always be "How much do I plan on spending?" Because if its less than 3% of your invested assets, you probably don't need much of a strategy at all – you have already chosen continued accumulation as the strategy, and could hold just about anything within reason (i.e., something involving diversified funds and not individual investments).

So your real question becomes not one of strategy – you've already "solved" the problem (of not running out) by just choosing not to spend much money. That's the strategy. Rather, it just turns into one of organizational preferences.

This is what I learned studying all the popular personal finance gurus between 2010 and 2020. They all seemed to have different portfolio strategies, until I realized that almost all of them were actually essentially following the same strategy – which is just to underspend their assets. After that, the only difference ends up being the projected terminal value at death. And their choices really came down to organizational preferences like "only have two or three funds" or "only use funds from this company" or "line up and label the assets in this order for psychological comfort."

Thus, most of what people are calling "strategies" in this area are not strategies at all, because they are not really needed to achieve the stated financial goals in question.

About Ginger feeling overwhelmed by different tips by different experts: I felt the same way until about two years ago.

When I checked my diary from that time, I had just transitioned to 100% VTSAX (and similar) after a lot of JL Collins's talks… Then came to know about Paul Merriman's work and it made sense. Took a while to add some AVUV. Then started risk parity radio (RPR) and added international with ETFs like IDMO and AVDV and now (80% FI) slowly moving to a modified golden ratio portfolio with 70% stocks. Over the last year, I have learned a ton from RPR.

The Bruce Lee principle from RPR resonates the best with me. It has helped me discard a lot of sensational posts and irrelevant ideas (to me).

Cody's target maturity bond fund idea (and other such bucket strategies) is mostly a psychological band aid for his clients with irrational fears, not for people in the FI community who are willing to educate themselves. The total return approach is the more mathematically correct way for portfolio construction and used by professionals like RPR talks about.

Sometimes it takes you a while to get used to a few things. A sample portfolio with a small amount (even $1000 is good to start with at Fidelity) is a great way to overcome irrational fears like selling stocks, withdrawing from your portfolio, and annual rebalancing. It's just like exposure therapy. Once you get used to it, you can see for yourself that the fear is gone.

Ginger, thank you for asking the question that lived in my head rent-free for years! We just hit FI and left our W2's in May- currently slow traveling full time. We use Aubrey's guardrails AND Fritz's buckets (in our own way) and the two work very well together. We have 2 years of cash and 2 years of bonds and the rest in equities, split between VTSAX and VTIAX (80/20). We toyed with the efficient frontier for awhile, it felt overwhelming. All that to say- all of this advice from the pros is fantastic- and you can take what works for you and leave the rest.

Does Brad really think notebook LM doesn't hallucinate? Of course it does. Just because you tell it what documents to use doesn't mean it doesn't make things up.

I'm not saying don't take advantage of all the tools at your disposal but please understand the limitations.