Nate Reineke (00:01)
Hello, physician moms and dads. I'm Nate Renike, Certified Financial Planner and Primary Advisor.
Chelsea Jones (00:06)
And I am Chelsea Jones, also a certified financial planner and primary advisor here at Physician Family Financial Advisors.
Nate Reineke (00:14)
Chelsea, we have some interesting questions today. We were just talking before we clicked record and a lot of these require a lot of nuance. And so, what you'll hear from any decent financial advisor is them hedging what they're saying before giving some big blanket advice, which you might hear that, ⁓ our listeners might hear that today. But ⁓ I think they're really good questions and
Chelsea Jones (00:26)
And then.
Nate Reineke (00:43)
hearing Chelsea and I talk about them ⁓ may not feel like we're giving you a very specific answer, but that's because it matters, your situation, your specific instance matters when answering these questions. So we're gonna do our best. We like to kind of live in the average physician world, not even average, but maybe our average client's world where...
They are high income, but sometimes not ultra high income. ⁓ Or they, meaning they make $500,000 a year, but maybe not a million. ⁓ But some of these questions are coming from physicians making in that million dollar range. And so we're going to try to speak to them and then scale it back potentially. I think that that's my goal. We'll see if we accomplish it.
Chelsea Jones (01:36)
Yeah. ⁓
Nate Reineke (01:36)
But these
are also aimed at Chelsea's specialty. She's retirement planning specialist. So I'm gonna read the questions today. I'm gonna try to answer two of them, even though Chelsea's probably best to answer all of them. Okay, you ready? All right, let's do it. A gastroenterologist in Washington says, as I get closer to retirement, I'm realizing that spending down my investments is very different
Chelsea Jones (01:53)
Ready.
Nate Reineke (02:06)
from building them up? What are the most important things to focus on with retirement right around the corner? And I just want to say before you answer this, this is a very common ⁓ thing we hear. ⁓ Many people will build and build and they're just accumulate, we call this accumulation phase. They're accumulating assets for about 30 years and then one day, boom, no more accumulation and they're kind of lost.
Chelsea Jones (02:22)
Thank
Nate Reineke (02:35)
spend decades of doing the same thing, which is just save a whole bunch of money and invest appropriately. So what are the things that you see that are kind of ⁓ forgotten about or misunderstood, I guess, ⁓ when people are entering retirement?
Chelsea Jones (02:36)
Yeah.
Yeah, the I think I've talked about this before the most important thing that you need to know as you're entering retirement You're to start taking money out of your accounts that you've saved in for 30 plus years You need to know how much you need You don't just ⁓ you don't want any surprises when it comes to withdrawals. You don't want to take out too much ⁓ and You don't want to take out too little and not have enough to ⁓
Nate Reineke (03:08)
Mm-hmm.
Chelsea Jones (03:21)
cover your bills and have to go take out more that can be kind of hard to stomach like psychologically maybe but. ⁓
Nate Reineke (03:23)
Mm-hmm.
Yeah,
because you're doing some planning that kind of hinges on how much you're going to spend. So, I mean, we could go into a million examples of this, but one might be, ⁓ you you convert some pre-tax money to Roth, but that is after you spend money. You have to determine how much you're going to spend because you don't want to convert so much money that you
Chelsea Jones (03:53)
Mm-hmm. Yeah.
Nate Reineke (03:59)
get push yourself into a higher tax bracket. You want to keep yourself below a good tax bracket. So there's some planning involved here, but you can only plan as well as you know you're spending in retirement. Okay, I gotcha. All right, what's the next thing?
Chelsea Jones (04:10)
Exactly.
Yep, the next one you kind of touched on it. You need a good CPA, especially if we're doing something like those Roth conversion strategies. You need to know how far you are into whatever tax bracket you're in. So that way we know how much Roth conversions you can do. All of my retired clients, I work very closely with their CPA.
Nate Reineke (04:19)
Mm-hmm.
Chelsea Jones (04:38)
every year because I'm very careful about this. We're trying to manage the tax bill and we don't want to accidentally cause you to pay more taxes than than intended and so having a really good relationship with a trusted tax preparer, CPA, is really important. ⁓ You also need to know your risk tolerance because kind of in the same vein it's different taking money out
It's also different ⁓ to sustain movements in the market and watch your portfolio go up or down when you're taking money out. It's a different level of ⁓ involvement, maybe, ⁓ whenever you're watching your account balances as you know you need to take money out compared to when you're working. You see a dip in the market, you're like, well, you know.
Nate Reineke (05:14)
Mm-hmm.
Yeah.
Mm-hmm.
Chelsea Jones (05:36)
It'll probably rebound by the time I retire.
Nate Reineke (05:38)
Yeah, when you're working, a dip in the market could almost be looked at as an opportunity. But when you're retired, a dip in the market looks like, oh my gosh, is this going to impact the way I live my life for the next 30 years? So yeah, be very careful about this. We were just, and this touches on asset allocation, and Chelsea and I were also discussing for this episode, we might need to do a whole episode on asset allocation. It is sort of one of those things that is taken for granted.
Chelsea Jones (05:54)
Yeah.
Nate Reineke (06:08)
You know, you're just like, oh, I'm yeah, I'm 90, 10, I'm 60, 40, whatever. Well, it's really not. mean, like there's some a lot of people are really confident that the stock market will just do fantastic forever. They don't really think much about it. They just want to take a whole bunch of risk. And you see this a lot more often and that you work with, you know, retired physicians.
Chelsea Jones (06:08)
Yeah, I kind of slept on a little bit sometimes. Yeah.
Nate Reineke (06:37)
that's not their attitude. They actually care about what the stock market is doing and they want to take the appropriate amount of risk. And so if you're going to learn from your elders, all our listeners, if you're going to learn from your elders through Chelsea, it is to care about this because when you have money where it really matters, you can lose 10 % in a portfolio, but if you only have 100 grand, you lost 10 grand.
Chelsea Jones (06:41)
you
Yes.
Nate Reineke (07:07)
You lost 10, it's not the end of the world. But when you have $5 million, you lose 10%, that stings. It's hard to stomach. yeah, risk tolerance. probably just like, risk tolerance is how much you can stomach, right? But it's also how much your plan can like withhold, like withstand. So that's a big one. How do you go about setting that for people? Do you let the plan do the talking?
Chelsea Jones (07:28)
Yeah.
Nate Reineke (07:35)
Or are they kind of chiming in about how much risk they want to take?
Chelsea Jones (07:44)
So the plan does, it's a little bit of both. I would say mostly the plan does the talking because the plan gives context on like what is the actual effect of a drop in the market and it informs that conversation of how much can I actually stomach. Whereas if I just.
Nate Reineke (07:50)
Mm-hmm.
Mm-hmm.
Chelsea Jones (08:10)
cold, like straight out cold, asked how much can you stomach, the answer might be a little bit different without the context of the plan. So usually we're planners here. did I get my kombucha? Gonna go to the plan first and kind of inform that risk tolerance conversation. And again, it goes back to knowing how much you need to spend. If...
Nate Reineke (08:16)
Of course.
Yeah.
Chelsea Jones (08:39)
If you know your baseline necessity expenses are like, you know, $10,000 a month, but right now you're planned, we're planning for you to spend 15, there's a little bit of wiggle room. And so that also informs the risk tolerance conversation. It's very case by case, know, risk tolerance is something that's kind of, it can be kind of intimate, it's different for every person. So.
Nate Reineke (09:06)
Yeah.
Chelsea Jones (09:07)
Yeah. And then the last thing I would say about kind of what to focus on in retirement is there's a little bit of being opportunistic, especially in the early years. So again, pre-RMD age post-retirement, ⁓ there's some opportunities to utilize low tax brackets while you have them. ⁓ So just looking at those.
Nate Reineke (09:28)
Mm.
Chelsea Jones (09:35)
Taking a big picture, look at everything and making sure that ⁓ we're taking advantage of strategies that are going to benefit you in the long
Nate Reineke (09:45)
Got it. Okay, that leads us into the next question a bit, think. utilizing low tax brackets, we'll intentionally keep that vague because we're going to get into a little bit more here. ⁓ So this is from a neurosurgeon in New York. If I am at the top marginal tax bracket now and intend on spending enough for retirement that we keep me at the highest tax bracket then, should I still contribute to a pre-tax 401k? So. ⁓
The debate continues. This is our 153rd episode, and yet we still get the question of, we do pre-tax or should we do Roth contributions? Now, I just want to be real clear here. It's not always a foregone conclusion. I have yet to find the case where physicians shouldn't be contributing pre-tax, but this is actually a reasonable question, I would say. It's like, they're saying, hey,
Chelsea Jones (10:15)
Okay.
Thank
Nate Reineke (10:42)
We make a lot, we spend a lot. We're gonna spend enough where I feel like we're gonna be, our income tax rate is gonna be really high in retirement as well. So I get it, you want me to save taxes this year, but if I'm gonna pay 50 % in taxes anyways, why not pay it now and let it grow tax free? And I asked you this as if like I didn't know the answer before.
Chelsea Jones (10:54)
Mm-hmm.
Nate Reineke (11:10)
for the podcast and you had a really solid answer. This is, you got this question. And funny enough, I got this question about a week later. So this is, anytime this happens, I know there's some blog out there that's like something. But remember, this is unique to everybody. And it is also unique to people who are actually following a plan, who are doing actual planning ⁓ that might be different.
Chelsea Jones (11:17)
Thank
⁓ nice.
Yeah, something's circulating.
Mm-hmm.
Nate Reineke (11:38)
⁓ for you as someone who has a plan who has a planner versus somebody who is ⁓ DIYing this and doesn't really understand the reason you would want this money in pre tax accounts. So you have the floor should they contribute to Roth or a pre tax 401k even if they're big spenders in retirement.
Chelsea Jones (11:59)
Yeah, so this really all comes down to opportunity cost. ⁓ I think it's clear, it's expensive to get money into a Roth account because you have to pay taxes on that money first. Yeah, because it's coming off the top slice of your income. know, the money that's going into your 401k is taxed at your highest marginal rate. so, ⁓
Nate Reineke (12:11)
a lot of taxes.
Mm-hmm.
Right.
Chelsea Jones (12:26)
For this family in New York, they're at the highest marginal federal rate. They're in one of the higher New York rates. And so they're paying 50 % taxes to get money into the Roth. And the opportunity costs there, know, Roth sounds really good because tax-free growth sounds really good. But people forget that they're kind of paying money to get it into the Roth. If we...
If we want to do an apples to apples comparison, we have to consider those tax dollars that you're paying in order to get the money into the Roth. You could, you know, you could invest the tax dollars that you would have paid putting money into the Roth and have, you know, your pre-tax money going in and the, you know, $12,000 you saved in taxes by putting money into the pre-tax account, you can invest that.
Nate Reineke (12:58)
Mm-hmm.
Mm-hmm.
Chelsea Jones (13:20)
And now you've got money growing in two places. So, yeah.
Nate Reineke (13:22)
Right. That's the biggest thing everybody misses. I've discussed,
I mean, I feel like I haven't given this answer several times, but you can technically save 30 % more money or 40 or 50 % more money because if you took the savings and invested it, would have, instead of 24,000, let's say you'd have, you know, $40,000 growing, but doctors don't think like that because
Chelsea Jones (13:35)
Mm-hmm.
like 30, yeah.
Nate Reineke (13:51)
they're already investing the extra money because they have a plan that you or I wrote for them that says you also need to save $10,000 a month in a brokerage account. So it just doesn't quite, they're thinking about two different things. One is taxes and the other is ⁓ just what's required to save for the plan. you know, when you compare apples to apples here, the race is a lot closer.
Chelsea Jones (13:54)
Mm-hmm. Yeah.
Mm-hmm.
Yeah.
Okay.
Nate Reineke (14:21)
You know, OK. In fact, it's a lot better for pre-tax because not only do you get the tax break, but you have more money to invest.
Chelsea Jones (14:25)
Yeah.
Yeah. So that's kind of the opportunity cost to consider now when you're making the contribution, but also making Roth contributions now kind of takes away some, some opportunities for ⁓ strategic planning in retirement. Like we talked about in the last question. ⁓ so, and one thing I want to talk about too, in retirement, your money is coming out of different accounts. It's not just your 401k that you're taking money out of.
Nate Reineke (14:44)
Yes.
That's right.
Chelsea Jones (14:57)
So even if you're spending $350,000 a year, a good chunk of that is gonna be coming from your taxable account. And your taxable account is when you take money out, part of it's gonna be a return of basis, it's not gonna be taxed at all, and part of it is gonna be taxed as capital gains, which have preferential rates. Right now, the highest rate is 20%. And so when people are...
Nate Reineke (15:17)
Mm-hmm.
Chelsea Jones (15:25)
expecting to spend a lot in retirement, that doesn't automatically mean that you're gonna be in a high earned income, like regular, yeah, tax bracket.
Nate Reineke (15:35)
earned income. Yeah, this
is the key. this is honestly, Chelsea, I mean, this sounds I don't even know if I should say this. But when someone asked me this question, thought, that sounds good. That doesn't sound all that bad. Certified financial brain, financial planner brain turned off for a second. And I'm like, wait a minute, hold on. OK, so there's different buck buckets of accounts like, you know,
Chelsea Jones (15:50)
Yeah.
Okay.
Nate Reineke (16:02)
I shouldn't
call them buckets. There's different accounts that have different profiles for how they're taxed. And if you're doing this the right way, you're going to be pulling from different ones at different times. ⁓ And what you're saying as well, I think you're about to get to this, is you're going to convert some of this money to Roth in the early years before you have RMDs coming out of your traditional accounts. So you take that 401k, you put it in an IRA. It's traditional.
Chelsea Jones (16:08)
Yes.
Nate Reineke (16:30)
In the early years, you're not forced to take any money out. So you're converting a lot of that money into Roth anyways. So let's say you're 10 years out and you're asking this question, or 15 years out. You're not talking about money growing in a traditional IRA account for 40 years. Talking about it growing in for 15 years, and then a lot of it growing in a Roth IRA for another 30 years.
Chelsea Jones (16:36)
Mm-hmm.
Yeah.
Roth. Yeah.
yeah, and instead of paying 50 % to get into the Roth, you're paying 24%.
Nate Reineke (16:56)
So again, if it was as easy as A versus B for the next 50 years, like $1 in a Roth, $1 in a traditional for the next 40 years, of course the Roth is going to But now, but hold on, what about taxes? Hold on, what about investing the money that you saved? Okay, now it's like $1.50 versus $1. Okay, but hold on.
Chelsea Jones (17:12)
Yeah.
Nate Reineke (17:23)
But later on, we're also gonna convert some of that dollar into Roth. It goes way beyond this. So this is a very good question. It's too simple. It's just too simplistic. And you have to be careful when you get into this because some people, some people, most people aren't like you as a physician who makes a million bucks a year. That's the person.
Chelsea Jones (17:27)
and
Yeah.
Thank
Nate Reineke (17:52)
you know, roughly who asked this question. And other people, let's say you're talking to someone who makes a hundred grand a year, okay? They're already in a low tax bracket and they have to work longer and they probably will spend the same exact amount of money in retirement as they do ⁓ when they're working and they probably won't be able to retire until their RMD age actually hits. So it's just, you need a plan.
get out your kombucha, you need a plan. And ⁓ this is a cool question, but at the end of the day, like you need a plan and you need a planer.
Chelsea Jones (18:21)
you
Mm-hmm. Yep.
Nate Reineke (18:29)
Yeah. Is
there anything else? I got excited there.
Chelsea Jones (18:33)
⁓ Yeah, I think the last thing I would mention to another opportunity in the future for having money in a pre-tax account is qualified charitable distributions. So if you're charitably inclined, you know you're going to be ⁓ donating money to whatever cause you're passionate about, you've been when you're retired. ⁓ Having money in a pre-tax account allows you to not pay taxes on the money at all.
Nate Reineke (18:43)
Mm-hmm.
Chelsea Jones (19:02)
Give away your RMD essentially, because qualified charitable distributions, it's taking money out of your IRA. ⁓ That distribution can satisfy all or part of your RMD. So you get a benefit there too. And then you give it to your charity. You don't owe taxes on it because you're donating it. And then the QCD is actually more beneficial than taking money out of your taxable account to give cash to a charity.
you have to pay capital gains to liquidate the cash and then you get a deduction whenever you ⁓ file your taxes and so ⁓ yeah that's another opportunity that you have with with pre-tax accounts that you don't have with ⁓ with Roths or yeah.
Nate Reineke (19:40)
Yeah.
with going straight to Roth, yeah.
You're just locking in this 50, you're gonna pay 50%, we're calling it 50%, you know, New York and 40 % in federal. ⁓ You're locking in, you're paying 50%, guaranteed. And you know, we always get the, what if tax rates go up? Well, yeah, what if, what if, what if? What we can tell you right now, yeah, what I can tell you right now is you're paying 50%. So ⁓ this is a, it's a cool question. ⁓
Chelsea Jones (19:53)
Mm-hmm.
Mm-hmm, guarantees.
Yeah, we could one-iff all day.
Nate Reineke (20:15)
It made us think that it deserves a ⁓ good explanation. Anytime you get a question like this and underlying assumptions are just not clear, I feel like on us, let's put it on the podcast and flesh it out so that people feel good about getting this tax break. The amount of times I have had to negotiate with a physician about saving money on taxes in this way is kind of funny. But what that kind of means is that we're not explaining it.
Chelsea Jones (20:40)
What?
Nate Reineke (20:43)
well enough to get excited about the break you're getting.
Okay, ⁓ next question is from an anesthesiologist in California. When should I take social security? I have always assumed age 70, but are there benefits to taking it earlier? Okay, so this is, I'm gonna make this simple. ⁓ You could get more complicated with it. ⁓ But at the end of the day, this is another one of those things, by the way. If you grew up around middle class people, they always say, wait till I'm trying to wait.
wait until I'm 70 and trying to get there because there's this assumption that you get more money because you do. Your benefit is larger. So that's where this question stems from. Here's the thing. The government doesn't care when you take the money.
Chelsea Jones (21:25)
Mm-hmm. Yep.
Nate Reineke (21:36)
So you have to ask yourself, why don't they care? Because they could make you take it at 67. Why? It's complicated. Why not just start sending checks at 65? The answer is because it doesn't make a difference to them.
Chelsea Jones (21:42)
Yeah, I mean, why give you the option at all?
Nate Reineke (21:53)
Okay, and this is the same with things like annuities. There is a company, there are life insurance companies or actuaries that are very good at knowing when everyone's gonna die. And so if they know on average, let's just say, I don't even know what the average, I mean, we don't know how long people are gonna live with modern technology, but let's just say the average person's dying at 85.
All they're saying, if you take it out at 65, 67, 70, whatever age you decide to take it out, all they're saying is you waited long, you didn't take part of your benefit. We already think you're gonna die at 85. So we're just gonna give you more when you're 70 because you waited longer. We need to give you your full benefit, but they just assume you're gonna die at a certain age. So if you knew when you were going to die,
Chelsea Jones (22:38)
Mm-hmm.
Yeah.
Nate Reineke (22:52)
then you could game the system. You could say, I'm gonna wait till I'm 70 because I know I'm gonna die at 100. So I'm gonna squeeze all the extra juice out of this thing. But since you don't know when you're gonna die, Chelsea always tells people, take it when you need it. If your life expectancy is lower, you just know, we have some clients where their grandparents and their parents died, let's say in their late 70s. And so if that's the case, then...
Chelsea Jones (23:07)
Okay.
Okay.
Nate Reineke (23:21)
you would probably want to take it earlier because even though the benefit amount, the amount you actually get is lower, you get it for more years. But for most people, we just don't know and therefore just take it when you need it and don't worry too much about it. At the end of the day, there's not a whole lot to game here. Now, what's funny is people always want to see in their plan which one they should choose, but it actually doesn't represent
Chelsea Jones (23:30)
Yeah.
Nate Reineke (23:51)
the real decision when you put it in a financial plan, because in a financial plan, it always assumes that you're gonna die in your 90s, or some financial planners will write it out to 100. The reason we write the plans out so far is so that you don't run out of money. We don't wanna write it till 85 and then you live to 95 and you run out of money. But if you write in the plan that it's gonna go till 95, then that's a strong assumption to be made about social security.
Chelsea Jones (23:58)
Yeah.
Yeah, of course the plan is going to say 70.
Nate Reineke (24:23)
Of course, because you live to 103 years old in your plan and you want to wait as long as you can, but that's not the case. So we always just put it right in the middle in our plan. We just say like 67 and that just is what it is. But it's a funny question. I hear it all the time still, even family members are like, I'm waiting until 70. I'm just like, I don't, I won't say anything. But you wanted to point this out too.
Chelsea Jones (24:26)
Yeah.
Nate Reineke (24:52)
A lot of people are trying to speed to it, speed to social security, because they feel like it's gonna go away. I think we have a pretty strong stance here that social security won't go away, mainly because it would be political suicide to do so. But also, if we just took it really seriously, we could fund social security. ⁓ There's lots of things in our government that go, ⁓
Chelsea Jones (24:59)
Mm-hmm.
and
Yeah.
Nate Reineke (25:21)
unsolved, underfunded, ⁓ because whatever administration is in office at the time does not want it to be their administration that spends too much on something. you know, I heard something the other day that our government's ⁓ technology systems are really poor, like they're not updated. And it's because no one, yes, right?
Chelsea Jones (25:36)
Okay.
I mean, anybody who's been on the government website can tell that.
Nate Reineke (25:49)
But that's,
and it's like, well, why don't they fix it? Well, because nobody wants it on their balance sheet. They want the next person to do it. Well, it's the same with Social Security. Nobody wants on their watch to eliminate Social Security. That would be crazy. They wouldn't get reelected. So it's an interesting question politically to look at it, but I just don't see a world where Social Security goes away entirely. I wouldn't make my decision based on.
Chelsea Jones (25:56)
Yeah.
Nate Reineke (26:17)
Okay, I thought I was gonna answer that quickly, but I didn't. ⁓ Dermatologists in Texas, what if we put most of our money in stocks, but just keep a few years of cash on the side, so we don't have to sell when the market is down? Does that actually make things safer? So ⁓ a little bit of context here. This dermatologist in Texas has ⁓ far more money than they need to retire.
Okay, they've saved, they've done fantastic job saving, they're super savers. They still spend a decent amount, more than the average family, but they've made more than the average physician for many, many years. And they did a great job saving. So when I wrote their plan, I said, hey, it's time to consider, just to consider taking some risk off the table. They were about 90 % stocks.
Chelsea Jones (27:13)
and
Nate Reineke (27:16)
and they're five years out from retirement. And we agreed on going 70-30, I think it was. Well, I think that there was some regret a little bit. ⁓ Only they could tell you exactly why, you know, that they were regretting it because obviously they had plenty of money to retire, but there was just a little bit of regret like, well, maybe I'm leaving some gains on the table by going 70-30. And so the question was,
What if I just took out a few years of cash so that I could stay 90-10?
And ⁓ I understand the sentiment. This is another one of those. It's very unique to you, whether or not this is a good idea or not. Most of the time, I think that it can be solved in a much more straightforward way. But ⁓ what this is addressing is a sequence of returns risk, which is that when you first retire, there is a risk that you now have that you will start withdrawing money, taking, know, selling your stocks as the stock market is going down.
Chelsea Jones (28:19)
Okay.
Nate Reineke (28:19)
which makes
it ⁓ very difficult if you're on the edge of being ready for retirement, experiencing that type of drawdown at the very beginning of your retirement makes things difficult. ⁓ But here's the thing. So there's a couple of things as I was thinking about this question. One, we know about the asset class of cash, right? Inflation destroys your cash.
Chelsea Jones (28:44)
Thank
Nate Reineke (28:49)
To have money in cash, three years worth, five years worth, a lot of times people talk about five years worth, ⁓ that could be a million bucks. Five years worth, it's a million dollars in cash. So the question is, is it safer to put money in cash, five years worth of cash, so that I can stay aggressive with the rest of my money? That doesn't really, when you really think about it, doesn't make a lot of sense. All you would need to do,
Chelsea Jones (28:58)
Mm-hmm.
Yeah.
Yeah.
Nate Reineke (29:18)
is just not be 90-10. Like let's say instead you just, you go 80-20. So instead of being 70-30 and wanting to be 90-10 and taking money out in cash, just look at it as ⁓ I need five years at least worth of money and bonds and cash and keep it a part of your portfolio. Cause at least bonds will keep up better with inflation than cash will. So ⁓ I don't think it's an
Chelsea Jones (29:37)
Okay.
Yeah.
not to mention two
million bucks in a bank account in a single bank accounts above FDIC insurance levels.
Nate Reineke (29:52)
Yeah, it's already, we already got problems. Yeah. No, it's
interesting, you know, for this particular person, has saved plenty of money to where if he was 90 to 10 or 80 20, there would be enough money in bonds. So technically, this doesn't solve any problems because if you have that sum of money and being 90 10, while it feels really aggressive, which it is, but 10 % of money is, you know, six, seven years worth of
Chelsea Jones (30:10)
Mm-hmm.
Nate Reineke (30:21)
your expenses, you have a lot of capacity for risk. Your portfolio has the capacity. What we're discussing when we say go 70-30 is not your portfolio's capacity. It is your capacity, your stomach's capacity for this. And it comes back to something we should address on a different day, which is this very overconfidence in the market right now. Everybody is very confident.
Chelsea Jones (30:22)
Yeah.
Okay.
your capacity.
Okay.
Mm-hmm.
Nate Reineke (30:49)
Why wouldn't you be? Most of the people we're talking to, they have never seen a down mark.
Chelsea Jones (30:55)
Yeah, or they didn't have much money during the last down market.
Nate Reineke (30:56)
Right, they've been, right. The
last down market they had, you know, under a million dollars. ⁓ But most people who have been investing since, let's say for the last 15 years, not very many major bear markets. And so they just don't want to miss out. But this is something that's unique to everybody. You should talk about this with somebody else.
Chelsea Jones (31:04)
Okay.
Mm-hmm.
Yeah.
Nate Reineke (31:25)
You shouldn't just hear me say this and make your decision on your own. This is asset allocation, what to do with your money, how to invest it. I think that's a conversation that should be had with an advisor or a trusted person. So yeah, I think at the end of the day, some of these unique little strategies, if you zoom out, maybe they're not necessary, but ⁓ you just need to understand that when you're making decisions,
Chelsea Jones (31:40)
Absolutely.
Nate Reineke (31:54)
With investing, usually it's driven off of two feelings. It's fear or greed. But most of the time, we only think about fear, meaning I'm going to be 90-10 because I have the stomach for it. And they think that I'm not going to let fear get the best of me. Remains to be seen. But what you're actually also saying is there is an element of greed here and that I don't need the money, but I still want to maximize the money.
Chelsea Jones (32:03)
Mm-hmm.
Nate Reineke (32:23)
And there is nothing wrong with either of those things. We all have both of those feelings as investors. But the big question is to have, or the big thing is to have someone to ask you why and be able to justify why do you want to take that much risk? And is it worth it after you've justified it? Like, okay, now is it worth taking the risk?
Chelsea Jones (32:23)
Thank
Mm-hmm.
Nate Reineke (32:42)
Okay, that's it for today. Thank you everyone for listening. If you liked this episode, be sure to subscribe so you don't miss it when it comes out every Wednesday. And if you'd like to work with us, you can visit us at PhysicianFamily.com to schedule an interview. And if you're not ready for that, you can send us a question. Send us a question at podcast at PhysicianFamily.com. We will answer every single one of them, even if it doesn't make it on the show. Until next time, remember, you're not just making a living, you're making a life.
