Ep. 485 — Mailbag: Spending Down to Zero, High Fee 401(k), Mini Retirements | Rachael Camp

ChooseFI Podcast Episode Notes

Episode Summary

In this episode, Brad Barrett and financial expert Rachael Camp discuss thoughtful financial planning, sharing insights derived from listener questions. They delve into the implications of spending down retirement savings as suggested in the book Die with Zero, tackle common queries about high-fee 401(k) plans, explore tax-efficient investment strategies, and address the concept of mini-retirements. The discussion emphasizes finding a balance between enjoying life today and planning for the future.

Key Topics Discussed

• Spending Down Retirement Savings 00:02:30

  • Rachael emphasizes the idea that many people may be "over-saving" instead of enjoying their money.
  • The concept of spending throughout retirement, rather than only the earned interest as suggested by the 4% rule, is explored.
  • Die with Zero proposes a strategy encouraging individuals to consider a life balance between spending today and saving for tomorrow.

• 401(k) Fees Discussion 00:31:30

  • Rachael advises listeners to look for low fees in their 401(k) plans, ideally under 0.2%.
  • It’s critical to always get the employer match regardless of fees, as it represents a guaranteed return on investment.
  • Comparing tax savings from contributing to a 401(k) against the investment fees is essential.

• Mini-Retirement and Life Choices 00:41:00

  • The math behind planning for a mini-retirement is straightforward: save enough cash for your living expenses during that time.
  • Emphasizes the importance of experiences over purely financial considerations.
  • Discusses the potential positive impacts a sabbatical can have on one's career and financial independence journey.

• Roth IRA Contributions 00:50:00

  • Rachael explains the backdoor Roth IRA strategy as a way for high earners to contribute to a Roth IRA by first making a non-deductible contribution to a traditional IRA.
  • She addresses concerns about the five-year rule, clarifying its impact regarding taxable conversions.

Actionable Takeaways

• Withdrawal Strategy: Adjust your withdrawal strategy based on market performance and your personal goals 00:12:25 .
• Maximize Your 401(k): Always capitalize on the employer match offered in your 401(k) plan 00:37:26 .
• Analyze Discretionary Spending: Evaluate discretionary spending to inform retirement withdrawal rates 00:22:19 .

Key Quotes

• "Many of us are likely over-saving rather than enjoying our money." 00:03:41
• "Switching from saving to spending isn’t easy, but it’s necessary!" 00:09:34
• "Not every decision needs to be strictly numerical; consider the life experiences too." 00:46:01
• "Maximize your experiences—balance spending with appreciation." 00:29:58
• "Challenging the norms of financial planning can lead to fascinating insights about spending." 00:30:36

Discussion Questions

• How does the philosophy of 'Die with Zero' resonate with your own financial planning? 00:03:41
• What impact do high fees in 401(k) plans have on long-term savings? 00:32:31
• What are the benefits and drawbacks of taking a mini-retirement? 00:41:02

Related Resources

• Jillian Johnsrud's Website 00:48:18
• Michael Kitces' Research 00:10:41
• Bill Perkins' Die with Zero 00:06:12

Podcast Links

• Podcast Intro: 00:00:00 You're listening to ChooseFI. The blueprint for financial independence lives here...
• Podcast Extro: 00:56:30 You've been listening to ChooseFI Podcast, where we help middle-class America build wealth one life hack at a time.