Risk Parity Radio
Risk Parity Radio is a podcast about investing located at www.riskparityradio.com. RPR explores risk-parity style portfolios comprised of uncorrelated or negatively correlated asset classes -- stocks, selected bonds, gold, managed futures, and other easily accessible fund options for the DIY investor. The goal is to construct portfolios that are robust and can be drawn down on in perpetuity, and to maximize projected Safe Withdrawal Rates regardless of projected overall returns.
Risk Parity Radio
Episode 436: Your Fear of Running Out of Money May Be Something Else And Portfolio Reviews As Of July 4, 2025
In this episode we explore one big long answer to an email from Bob about why people refuse to spend money in retirement despite having more than adequate resources. We touch on the math and psychology of the Possibility Effect and how to use Base Rates to overcome that, what the numbers say you really should be afraid of, how to break down expenses to alleviate fears and the real underlying problem in many cases, which is not fear, but personal identity rooted in "Frugality Inertia."
And THEN we our go through our weekly and monthly portfolio reviews of the eight sample portfolios you can find at Portfolios | Risk Parity Radio.
Books Referenced:
"The Top Five Regrets of the Dying" by Bronnie Ware
"Falling Upward" by Richard Rohr
"Strength to Strength" and "Build The Life You Want" by Arthur Brooks
"The Second Mountain" by David Brooks
"The Soul of Wealth" by Daniel Crosby
"The Art of Spending Money" by Morgan Housel
"Die With Zero" by Bill Perkins
Additional Links:
Father McKenna Center Donation Page: Donate - Father McKenna Center
Morgan Housel Podcast: The Morgan Housel Podcast, Episode 1: The Art of Spending Money
Narrative Psychology: How to tell stories that give you meaning | Jane Goodall, Terry Crews & Dan McAdams
ChooseFI Pod #508: 508 | 5% SWR, Revealed Preferences, and the 3 Stories | Frank Vasquez
Four Idols Video: https://tinyurl.com/4vua3eb2
Satisficing: Satisficing - Wikipedia
Breathless AI-Bot Summary:
This episode tackles the psychology behind the "golden coffin" phenomenon – wealthy retirees who maintain sub 3% withdrawal rates, essentially ensuring they'll die with maximum assets. While justified as prudent planning, the real barriers to enjoying retirement wealth are more complex and fascinating.
We dive into cognitive science, exploring how the "possibility effect" (identified by Kahneman and Tversky) distorts our risk perception. Your brain amplifies the tiny probability of running out of money while downplaying the vastly higher probability of running out of time. A 55-year-old man has an 11.3% chance of dying within 10 years – yet many obsess over financial scenarios with less than 1% probability of occurring.
Beyond cognitive biases lies an identity crisis. Many successful investors have spent decades defining themselves through wealth accumulation. This "frugality inertia" becomes so embedded in self-image that spending feels wrong, even when mathematically sound. The financial services industry exploits these fears, selling products that promise impossible certainties while encouraging hoarding behaviors.
The solution? Reframing retirement spending around four evidence-based wellbeing categories: relationships, experiences, work avoidance (paying for freedom from tedious tasks), and giving. These categories reliably generate happiness returns far superior to watching account balances grow. For those struggling to make this psychological transition, books like "Falling Upward" (Rohr), "Strength to Strength" (Brooks), and "The Soul of Wealth" (Crosby) provide frameworks for evolving beyond accumulation as life purpose.
What retirement story are you living? The miser who dies rich but unfulfilled, or the transformed Scrooge who discovers generosity's joy? The choice defines not just your retirement, but your legacy.
A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines.
Voices:If a man does not keep pace with his companions, perhaps it is because he hears a different drummer, a different drummer.
Mostly Mary:And now, coming to you from dead center on your dial, welcome to Risk Parity Radio, where we explore alternatives and asset allocations for the do-it-yourself investor Broadcasting to you now from the comfort of his easy chair. Here is your host, frank Vasquez.
Mostly Uncle Frank:Thank you, Mary, and welcome to Risk Parity Radio. If you have just stumbled in here, you will find that this podcast is kind of like a dive bar of personal finance and do-it-yourself investing.
Voices:Expect the unexpected.
Mostly Uncle Frank:It's a relatively small place. It's just me and Mary in here and we only have a few mismatched bar stools and some easy chairs.
Voices:We have no sponsors, we have no guests and we have no expansion plans. I don't think I'd like another job.
Mostly Uncle Frank:There are basically two kinds of people that like to hang out in this little dive bar. You see, in this world there's two kinds of people my friend, the smaller group are those who actually think the host is funny, regardless of the content of the podcast.
Voices:Funny how, how am I?
Mostly Uncle Frank:funny. These include friends and family and a number of people named Abby.
Voices:Abby, someone Abby who.
Voices:Abby normal, abby normal Abbey normal.
Mostly Uncle Frank:The larger group includes a number of highly successful do-it-yourself investors, many of whom have accumulated multi-million dollar portfolios over a period of years.
Voices:The best, jerry the best.
Mostly Uncle Frank:And they are here to share information and to gather information to help them continue managing their portfolios as they go forward, particularly as they get to their distribution or decumulation phases of their financial life.
Voices:What we do is, if we need that extra push over the cliff, you know what we do Put it up to 11. 11, exactly.
Mostly Uncle Frank:But whomever you are, you are welcome here. I have a feeling we're not in Kansas anymore. But now onward, episode 436. Today on Risk Party Radio.
Mostly Mary:It's time for the grand unveiling of money Onward episode 436.
Voices:Today on Risk Parity Radio.
Mostly Uncle Frank:It's time for the grand unveiling of money, which means we'll be doing our weekly portfolio reviews of the eight sample portfolios that you can find at wwwriskparityradiocom on the portfolios page, and we'll also be talking about our monthly distributions Boring, but before we get to that, first I'd like to remind you that we are working on improving the website with our volunteer, luke from Quebec.
Voices:We have top men working on it right now. Who Top?
Mostly Uncle Frank:men and we are collecting comments on the alternative, which you can find at wwwriskparityradiocom and go to the top and click on the alt site button and you can check that out in demo form. We're collecting comments on that. We've got a bunch of good comments so far. If you'd like to comment on its appearance, don't worry about its functionality right now. Please send me an email to frankatriskparityradiocom and we will collect your comment in the comment pile for that and we'll get around to actually implementing that in August or September.
Mostly Mary:I think I've improved on your methods a bit too, and we'll get around to actually implementing that in August or September. I think I've improved on your methods a bit too. I employed some.
Mostly Uncle Frank:Chiara Scuro shading. And the other thing we have going on right now is our Top of the T-Shirt matching campaign for the Father McKenna Center. If you want to hear all about that, go back to episode 426, but I'll just mention it briefly that we do not have any sponsors on this program. We do have a charity we support. It's called the Father McKenna Center and it supports hungry and homeless people in Washington DC. The best way to give to them for this campaign is to go directly to their website, which I will link to in the show notes, and donate on their donation page. Do mention Risk Parity Radio in the comment section there, or you can become a patron on Patreon by going to the support page at wwwriskparityradiocom and give that way. Either way, we will greatly appreciate your donation and move you to the front of the email line when you have an email.
Voices:Yes.
Mostly Uncle Frank:And, speaking of emails, we do have one that we're going to respond to today that I've been holding back because it's a long response, and so without further ado, I'm intrigued by this how you say emails First off, second off, first off, second off, last off, first, second and last off. We have an email from Bob.
Mostly Mary:You're never home. You talk to your trucks more than you do me. You never even touch me anymore. Bob, I just can't do this. And Bob writes Hi Frank, long-time listener here, I often hear you talk about how many retirees unconsciously aim for the golden coffin, dying with the most money possible by using a 3% or even lower safe withdrawal rate and barely spending anything.
Voices:It's such a terrible thing for a man to struggle with something better than he is.
Mostly Mary:Another idol has replaced me in your heart. To me, that behavior is driven by one thing fear, the plain, simple fear of running out of money before running out of life. I struggle with that too. I want to use a four to five percent withdrawal rate, but I just can't pull the trigger because of this deep-seated fear. Markets are unpredictable and volatile and even though stats say the four percent rule is 96 percent safe, the fear doesn't care about math.
Voices:Dogs and cats living together mass hysteria.
Mostly Mary:You, on the other hand, seem comfortable aiming for a 5% safe withdrawal rate in your own retirement and I don't get the impression you rely on side income from the blog or podcast. How do you manage that fear? How do you build the confidence to actually enjoy your money instead of hoarding it? Just in case I'm 55 and sitting around 20 times my annual expenses now and using one of your portfolios with a 5% safe withdrawal target, I'd like to call it quits, but I really appreciate any advice you can give on mentally overcoming this fear and trusting the plan. Thanks, Bob.
Voices:Looks like a tricky job, Bob, Not when you have a good team. Mr Bentley, Okay, team let's get to work.
Mostly Mary:Can we fix it? Yes, we can.
Mostly Uncle Frank:Well, this one's gonna take some explaining because it's going into psychology and philosophy regarding spending money.
Voices:Always with you. What cannot be done? Hear you nothing that I say. You must unlearn what you have learned.
Voices:All right, I'll give it a try.
Voices:No try, not Do or do not. There is no try.
Mostly Uncle Frank:My experience is that, yes, people have fears about running out of money, but there's also a deeper issue involved here that has to do with identity. That we're going to talk about. But first let's talk about the fear component itself.
Voices:We got a scary 140 this week.
Mostly Uncle Frank:So if you have accumulated enough to retire on 25 times expenses is a general guideline. If you have that much, yes, you can work it out, and you probably need less than that. And so the way the math works is that you have almost no chance of running out of money. And the reason you have almost no chance of running out of money because if you get on a plan that has a small chance of running out of money and you happen to start running out of money, you can just change your plan. So you have no chance of running out of money. You have a small chance of having to change your plan, and by small I mean something on the order of less than 5%. If you are using a good plan with a good portfolio. Okay, just recognizing that, you can see that a fear of running out of money here is really a phobia. That's what it is a phobia, and it's no different than being afraid of spiders or sharks or enclosed spaces or any other phobia that you can think of.
Voices:You are talking about the nonsensical ravings of a lunatic mind.
Mostly Uncle Frank:This is not different, and a phobia of running out of money does not make you special and does not require special treatment. That is different from all other phobias. If it is severe, yes, you should get counseling, go to a therapist, because there may be and are likely to be scripts in your past life whether growing up in scarcity or other things that cause you to be the way you are, and so you may need a therapist to help you change that, and you should be willing to spend money on that. But since I can't do that here, let's talk about something more practical. But since I can't do that here, let's talk about something more practical which is just the numbers and the overall psychology of this and kind of where it comes from. And the best source for this broad understanding is Kahneman and Tversky and Daniel Kahneman's book Thinking Fast and Slow, where he talks about human beings. You can essentially divide thinking processes into two groups, what he calls system one and system two. System one is your reactive system that makes decisions very quickly based on rules of thumb or fears in many cases. System two is the rational thinker part of your brain that actually tries to reason through things and make the best decision based on the evidence that you have. And what he identifies in Thinking Fast and Slow is a whole list of cognitive biases, system one patterns, if you will, that many human beings adopt and that seem to be part of our general programming as human beings. The other way this has been described that I really like is Predictably Irrational, which is the title of a book by Dan Ariely. Just the idea that, yeah, we have these kind of cognitive biases built in because it probably serves some important function in keeping us safe from predators or being able to accumulate enough food. It's in some hunter-gatherer kind of society we lived in thousands of years ago. But a lot of them are not that useful now and are often counterproductive, since we have to plan for many, many years in advance and not just what's going on in the next five minutes or tomorrow.
Mostly Uncle Frank:So one of the cognitive biases that Kahneman and Tversky had identified is called the possibility effect. And what is the possibility effect? The possibility effect is the tendency of human beings to misassign probabilities based on mere possibilities, either in some circumstances over-weighting the possibility of some kind of occurrence and in some cases under-weighting the possibility of some kind of occurrence. And usually, if it's in our personal control, we think it's more likely. So one of the classic examples is you ask somebody if you opened a restaurant what's the probability you would succeed at it, and suppose this person is a good cook and they had worked in restaurants before or they have some kind of skill.
Mostly Uncle Frank:Many people of that ilk would say something on the range of oh yeah, I would have like a 60 or 70% probability of success. That's completely wrong. Actually, their probability of success is probably less than 30%, and the reason that is is because the base rate probability of anybody succeeding is like 20% or less. So even if you're skilled, you only go up the scale a little bit. You don't go all the way up to high likelihoods. The way this works in the context we're talking about is you are erroneously assigning a high probability of failure, when the probability of failure in running out of money or having a financial problem if you're adequately saved in the first place is ridiculously low. But if you are not spending money and have a fear of this, what you are actually doing is assigning a much higher probability to this event. In the worst cases, you turn into Dustin Hoffman's character in Rain man.
Mostly Uncle Frank:Where he wouldn't fly in any airlines except for Qantas, because he knew that every airline had had at least one crash.
Voices:There's an American plane. American flight 625 crashed April 27, 1976. We don't have to take American. There's a lot of flights.
Voices:Yeah, there's another airline Continental.
Voices:Continental crashed November 15, 1987. Flight 1713, 28 casualties. Now there's a Delta. Yeah, I mean it leaves a midnight ray, you know. But Delta, how's Delta? Delta crashed August 2nd 1985, lockheel 1011, dallas 4. All right, all right. Terrible winds. All airlines 135. All airlines have crashed at one time or another. That doesn't mean that they are not safe Qantas, qantas. Qantas never crashed that they are not safe, qantas, qantas.
Mostly Uncle Frank:Qantas never crashed, but instead of assigning a trivial percentage possibility to having a crash on an airline, he took that as any one crash that an airline might have, gave it a high probability that their next flight would crash.
Voices:Ah, ah, ah, ah, ah, ah, ah, ah, ah, ah, ah, ah, ah Ah we're not going to take the plane.
Voices:He's okay, he's okay, he's okay. We're not going to take the plane, just just relax. He was, he was upset, we were going to take the plane. We're not going to take the plane now. We're not going to take the plane. We're not going to fly. Okay, no flying.
Mostly Uncle Frank:That's a cartoonish example, but that is exactly what you are doing when you're saying I'm afraid to spend money when I've got a plan that has a very low probability of failure. Because the truth is, the kind of failure you're talking about would probably be events that are affecting society overall, like nuclear wars or something of that ilk that no amount of financial planning is going to solve anyway. So what is the cure or the system to answer to this? It's to always use base rates whenever you're calculating anything or thinking about what is the real probability. What kind of fear should I really assign to this?
Mostly Uncle Frank:Based on real probabilities and I've talked about this many times before that this is something that CFPs do not do well. They haven't been trained in it. They have not been trained in proper forecasting techniques, and a lot of people misuse retirement calculators because they have not been trained in using forecasting techniques. Using base rates means you actually use the best rate you think is the right one. In my case, I would use long-term historical data to assess returns or likely outcomes, and you would not change that by making it more aggressive or more conservative and then ramming it into a calculator. If you really want to learn that you look not only at Kahneman and Tversky, but people that study forecasting, like Annie Duke, who wrote Thinking and Bets, or Phil Tetlock, who wrote the book Superforecasters.
Mostly Uncle Frank:But that is the mathematical cure for this recognizing that the fear is coming from this possibility effect. That is a cognitive bias that we all have. But the cure for that is to use base rates when you are forecasting. And if you're running a Monte Carlo simulation, like you've done already, and using actual data or something akin to it, you'll get base rate forecast with those low probabilities. Now how else would you use base rates in this context? One of the things people get hyper fearful about is needing long-term care. And then I ask them well, have you calculated the possibility of that happening and what are the probabilities, the real probabilities? Most people haven't done that. They don't know, they haven't done the research. Instead, they sit and fearmonger about it.
Voices:You can't handle the dogs and cats living together.
Mostly Uncle Frank:And say well, it's a possibility, therefore I need to plan for it as if it's a high probability. Let me give you some just basic statistics on that. The possibility of a man in the United States needing long-term care any long-term care is only a 50% probability. Half the time you'll need zero long-term care. All right of the people that do need long-term care, the mean for a man is needing it for one to two years, of which only the second year or the years after year one actually require a significant monetary outlay. So only half the men need it. And if you do need it, you probably only need to pay for about a year's worth of it. So the probability of needing it for a longer time is somewhere down around 10%, at least for a man.
Mostly Uncle Frank:But that's not the problem. If you think this is a problem, the problem is not that you might need it or there might be a 10% chance you need it. You have to also understand the problem is you think you might not be able to pay for it. So what is the probability that you wouldn't be able to pay for it after living a long time? Well, if you need it early on, that probability is kind of zero, because if you've saved enough money to live for 30 years or some number like that, and you only happen to live 15 more years and then go into long-term care for a few, you had an extra 15-20 years of money to pay for it. So that scenario is not a problem. The scenario that's the problem is you actually live the 30 years, then you need long-term care and you don't have enough money at that point to be able to afford it. Now the chances are, if you're spending four or five percent and have a good plan, you are going to have more money than you started with. So the probability of living a really long time, needing a lot of long-term care and not having enough money to pay for it you have to multiply all those probabilities together and if you multiply even 10% times 10%, without even factoring the other one, you're down at 1% all of a sudden.
Mostly Uncle Frank:So that is your base rate probability of both needing long-term care, having lived a long time, and not being able to afford it. Now how would you modify that? You would modify that by personal data Do you have a history in your family of dementia or something else like that? And also you would do some kind of assessment of your personal health, but that's an example where people use the possibility effect instead of using base rates to calculate what their actual probability is of both needing it and not being able to afford it, which is vanishingly small if you were prepared for a long retirement anyway. Now you need to recognize that the financial services industry does not calculate base rates and does not want to calculate base rates. Forget about it. They love the possibility effect. That is called marketing.
Voices:A.
Voices:B C A, always B B C. Closing, always be closing, always be closing.
Mostly Uncle Frank:You can sell things. If you can convince somebody, they have a high probability of having this problem, even if they don't.
Voices:Because only one thing counts in this life Get them to sign on the line which is dotted.
Mostly Uncle Frank:And if you are consuming a lot of financial industry content, chances are they are giving you possibility effect-based reasoning and not base rate-based reasoning.
Voices:Am I right or am I right, or am I right, right, right, right.
Mostly Uncle Frank:But what's the other base rate that you're not thinking about? That you should be thinking about it's this Go look up the chances of you, as a 55-year-old man, dying in the next 10 years. What is the chance of you dying in the next 10 years? If you look at actuarial tables, you have an 11.3% chance of dying in the next 10 years. So why aren't you worried about that? Why are you worried about vanishingly small probability of running out of money in 30 years when your chances of dying are 11.3% in the next 10 years? That's what you should be worried about. That's what you should be afraid of is not running out of money, it's running out of life. And once you're past 50, your chances of running out of life start going up a lot.
Voices:No more flying solo. You need somebody watching your back at all times.
Mostly Uncle Frank:In other words, people who are afraid of running out of money. You're probably afraid of the wrong thing and you also need to think about this. If you have a spouse, what is the probability of, say, two 50-year-olds, a man and a woman? The probability of the woman dying in the next 10 years is something like 4.9%. The probability of the man dying in the next 10 years is something like 7%. The probability of one of them dying is more like 12% when you do the calculation. So that's the probability that you're going to be living without a spouse or that one of you is. No, I haven't subtracted the possibility of you both dying at the same period, but it's close enough for this purpose. The point of all of this is is to say you have other things. You should be afraid of more, a lot more than running out of money you will find that it is you who are mistaken about a great many things.
Mostly Uncle Frank:Thankfully, you can reduce those probabilities by spending some money on your health, both your mental health and physical health, but we'll get to that in a little bit, all right. So that's the math of it and that's convincing to some people. It's not convincing to other people. Stupid is what stupid does, sir. What else can you do to get over the fears?
Mostly Uncle Frank:You can break down your expenses. For one thing, recognize that if you're doing something like we're doing, where our base or mandatory expenses are about 60% of our expenses, which is 3% of our investable assets, and so we have 2% that is discretionary, which I would divide into comfort expenses and extravagances, and so, knowing that if there's a problem, we could simply dial that back, we could sell our big house and move into something smaller. There's a whole lot of things that we could do to ameliorate any significant loss in our assets, if you will. And so if you haven't done that exercise, I really would sit down and say well, what is my base life actually cost, how much of that is covered? And if it's 3% or less, that's another indication you don't have any problem.
Mostly Uncle Frank:Another question is whether you've accounted for other incomes you're likely to have, including Social Security, and assigning that some number and if you're over 50, you probably should be doing that too or recognizing that it's yet another buffer you have. The next thing you might try to overcome your fear is actually test running a little portfolio. Create a separate account, put some money in there maybe $10,000 or something Structure that like you think your portfolio is going to be structured, and then start taking money out of it every month just as a test run, and maybe, if you're five years away from retirement, you can do that for five years just seeing how it all works, like we're doing with these sample portfolios.
Voices:And that's the way. Uh-huh, uh-huh, I like it. Casey and the Sunshine.
Voices:Band.
Mostly Uncle Frank:It's the same principle as learning how to ride a bicycle or cook a souffle or something. You're not going to learn that much about it by reading about it. At some point you have to actually start doing it, and there's no reason you can't actually practice on that before you start retirement. All right, let's stop talking about the fear itself.
Voices:Let me assert my firm belief that the only thing we have to fear is fear itself.
Mostly Uncle Frank:And start talking about what I think is the real issue. For most people, it's not really fear. It's easier to say fear because it sounds like something that is going to elicit sympathy. The truth is that for most people who have trouble spending money, it's not really about fear. It's about identity, self-identity, self-worth, attached to having more money or seeing that number go up as long as you live. And people don't like to think about themselves that way because we attach pejorative terms to that, like hoarder or miser or something of that nature.
Voices:What's with you?
Mostly Mary:anyway, I can't help it. I'm a greedy slob, it's my hobby.
Mostly Uncle Frank:save me and so you'd rather just be saying, oh, I'm just afraid, not that I'm a hoarder, I'm a miser. I really value watching the number go up. It's part of my identity, it's part of what I do and it's part of what makes me great.
Voices:It's mine understand mine, mine, all mine, go, go, go, mine. Do you hear me? Oh, oh, oh, mine, mine, mine, oh, brotherimb, climb, climb, oh, brother, climb up for me. Oh, sesame, I'm rich, I'm a happy miser.
Mostly Uncle Frank:And some people like having that identity and they really don't want to change. I think that's what we're really dealing with a lot of times, when people say that they are afraid of something. And no, I'm not saying you're this person or not this person, but my experience is particularly in the personal finance area. When you listen to the interviews of guru types about what they personally do. They think this is a great thing to be, somebody that is accumulating money until death and they're proud of it.
Voices:Oh boy, I'm rich.
Mostly Mary:I'm wealthy, I'm independent, I'm socially secure. I'm rich, I'm rich, I'm rich.
Mostly Uncle Frank:Because a lot of ego gets wrapped up in that as part of the identity. I'm a great investor. I know how to do this. A good sign that somebody falls into this category is if you ask them who their retirement role model is and they say Warren Buffett retirement role model is, and they say Warren Buffett, that is undoubtedly a hoarder person or a person that attaches a lot of their ego to investing. What they don't realize is that that is probably a bad role model for most people, because Warren Buffett's success is not based so much on personal habits or disciplines or anything else. It's based on talent, talent that you or I don't have and we're not going to acquire by adopting the habits of Warren Buffett. And if you read the book Snowball, you'll realize there's a lot of parts of his life that were not desirable and we do not wish to emulate, particularly in interpersonal relationships. But if that is your role model, you may have this identity problem and you probably need to get some better or different role models. If you want to level up, go to who Warren Buffett says is his hero, which is a guy named Chuck Feeney who spent the second half of his life giving away billions of dollars, and his example is what actually led to this billionaire's pledge that a lot of very wealthy people have adopted in giving their money away or planning to give their money away, Because you don't need any special talents to be able to do that. That's something you can learn how to do. That's what makes a good role model for retirement Not people with special talents, but people that do things that you can also learn how to do and emulate.
Mostly Uncle Frank:Morgan Housel calls this identity piece of this frugality, inertia that you've spent so much of your life building up assets, saving, investing well that that has become so integral to your personal identity that you can't let go of it. Or you have a very difficult time letting go of it, or you really don't want to let go of it in your hardest of hearts. He's going to be talking about that in his new book, the Art of Spending. I will link to something in the show notes where he outlines that and other things in a short podcast. Another reference you should check out is Arthur Brooks, who's written some excellent books. He's like a professor of happiness at Harvard now, after having two other careers, he's got a book out called Build the Life you Want, and one of the things he talks about in there is the four idols, which are money, power, fame and pleasure, and that everybody has one that is kind of their bugaboo or their problem that prevents them from perhaps living their best life, and for many people, listening to this money is that one, and particularly seeing the number go up. I'll link to a funny thing. It's a Jordan Peterson interview of him about this and him going through the exercise to determine which idol is. Your problem is your personal problem and you'll see how they go through it. But you probably want to do that exercise and I would think that if you have a fear of running out of money, that being obsessed with the money idol is probably your bugaboo in that respect. Anyway, if you can recognize that perhaps this is part of your identity and you want to change that, you really want to change that.
Mostly Uncle Frank:You have some learning to do. You don't need to figure this out. A lot of other people have figured this out. You do need to learn some things. You do need to go and read some books about these kinds of issues, which is kind of, how do we maximize life towards the end of life? Fortunately, with AIs you can also ask your favorite artificial intelligence to summarize these books for you, and that may be a shortcut. The first one I'd recommend is the Five Regrets of the Dying by Bronnie Ware. This ties into if you only have 10 years left, what are the things you need to do before you die?
Voices:Dead is dead.
Mostly Uncle Frank:Most of those are focused on self-expression and relationships. In addition to that one, there are three ones that I commonly recommend. One is called Falling Upward by Richard Rohr, which is basically transitioning from your first life to your second life or your retirement life. Strength to Strength, also by Arthur Brooks, is another one. Like that how Do you Reinvent Yourself, which is essentially what you are doing when you are deciding?
Mostly Uncle Frank:I'm not going to be this person who is frugality, inertia and ties up their ego and their self-worth and is wanting to make a change. Read the Second Mountain by James Brooks and that book I just mentioned. Build the Life you Want, again by Arthur Brooks. There are other ones, but I have to tell you I've recommended these books to other people before, and then I talked to them later and I asked them whether they read them or not, and of course they hadn't, and so it really makes me wonder. Well, maybe you really don't want to change? Do you just want to say, oh, I'm afraid, or I can't do it, or it's too hard, or whatever the excuse is?
Voices:You will be visited by three spirits. What Was that? The chance of hope that you mentioned, jiggy? It was In that case, never mind, I think I'd rather not.
Mostly Uncle Frank:But if you really do want to change this, you do have to take some action. You do have to learn some new tricks. You do have to learn what the research says and how to go about this. It's not going to happen by listening to me telling you how to overcome your fears or anything like that.
Voices:But what's easy to do is what easy not to do? Guess when I went and got this little book. Guess when I went and got it. The same day I heard about it. I went and got it. Somebody says well, mr roan, does that make you different than most everybody else? The answers yes. Somebody says well, why is that? We don't know. What do we know?
Mostly Uncle Frank:you don't know, I don't know, nobody knows because the truth is some people want to change and they read the books and do the things to make themselves change and other people don't, and they don't all we know is some, some get the spark and say I'm going to change my life.
Voices:I'm going to change my health, I'm going to change my relationship with my family. I'm going to change everything. And if it starts with an apple, if it starts with a walk around the block, if it starts with a book, if it starts with a journal, whatever it starts with, I'm a candidate. I'm ready to you to change.
Mostly Uncle Frank:And you'd rather be one of these people who goes to the end of life accumulating as much money as possible, because that is your self-identity or your ego. Three other books you can read about spending money in particular, or using money. One is the Soul of Wealth by Daniel Crosby. It came out last year. One is the Soul of Wealth by Daniel Crosby came out last year. I'll actually be doing that one with our ChooseFI DC group that meets in Lorton in August. I think we'll be talking about that one and I will lead that discussion.
Mostly Mary:It's all the same to you.
Mostly Uncle Frank:I'll drive that tanker. The Art of Spending Money by Morgan Housel is going to come out in October, but I've already seen the sort of preview of that that I'm linking to in the show notes. Die With Zero is another one that some people like and some people don't. I don't think it's that great of a book compared to the other ones. It's not written by somebody who's either studied this intensely or is a psychologist or both. I would say it's more of a example of somebody's implementation of these sorts of ideas, but unfortunately he's so ridiculously wealthy that a lot of the stuff he's talking about is not applicable to most people, but some people find that convincing. Another thing you probably want to study is narrative psychology, and the idea of narrative psychology is that people live their best lives when they know what kind of their story is. I'll link to a nice video in the show notes about narrative psychology applied to Jane Goodall and Terry Crews. I also talked about this in episode 508 of the Choose Fi podcast, which I will link to again in the show notes.
Mostly Uncle Frank:But you may need to change the story of your life or your next life from what it was, because if your story was, I work hard and accumulate lots of money on this kind of hero's journey in your career. You need a different story, and I think the trap people fall into is they create a different hero's journey. They have a different career and maybe that works out well for some. But if you're really talking about enjoying life beyond that, where you're the hero, maybe you don't want to be the hero anymore. You want to be somebody else who is helping some other people on their hero's journeys, and so mine are the Mexican fisherman, the starfish thrower and the curious child. But you'll have to go listen to Choose FI, episode 508 to get more on that.
Mostly Uncle Frank:All right, we already talked briefly about the four idols. The answer to those four idols is what is enough? If you haven't defined what's enough money, what's enough power, what's enough fame or what's enough pleasure seeking, then you end up substituting those for some kind of real purpose. But then that leads to the question well, what should you be spending your money on to promote and expand your well-being in your second half of life or retirement? And again, this is not something you need to go figure out on your own or make up or invent. It's something you need to learn, and you're probably only going to learn it if you start reading some of these books that I keep recommending. Learn it, know it, live it.
Mostly Uncle Frank:So this comes from Daniel Crosby, and what he's identified is basically four things you can spend money on that are likely to improve your well-being and that you should be trying out. The first one, and the biggest one, is relationships, and that means strengthening your old ties and creating new ones, and that is the best way to decide whether you're going to go on a trip or buy something or do something. Is this activity or this expense going to help improve relationships? And the answer can be different for the same object for different people relationships and the answer can be different for the same object for different people. So, for example, if you've always wanted to drive around in an RV, that might be good for you, but if your spouse doesn't want to do that, buying that thing is creating a problem in that relationship, whereas if you both agree and you both want to do that, then buying the RV improves your relationship there. But I think that should be a primary, or one of the primary thoughts you have in spending money on anything in retirement beyond the necessities is how is this going to affect relationships, either improve them in some way, or would it detract if I did that?
Mostly Uncle Frank:Next week, I'll be taking a trip to New York to get together with some old friends from the Midwest, one of them who is a big Cubs fan and he likes to plan these trips where we go to a different city and watch the Cubs play whomever is there. In this case, we're going to watch the Cubs play the Yankees next weekend. Now do I really have an interest in going to New York or going to see baseball games in Yankee Stadium? No, I really don't, but that's not the point. The point of doing this and spending the money on it is it is sustaining and improving an old relationship or old relationships with this group of guys. So if this was an invitation from somebody I barely knew, it would not be a good way to spend my time or my money. But the point of this trip is to spend it on the relationship, not on the particular activity. All right.
Mostly Uncle Frank:The second thing you can spend money on to improve your well-being is experiences, and those basically fall into two categories. One is just stuff you really like. Doing that would likely get you into some flow state, whether that's riding a bicycle or writing or cooking or gardening, could be all kinds of different things, and this is one place you should probably experiment in retirement, thinking you know, I'd always like to go skiing a lot. And maybe you go and you discover, yeah, that's your bag and you want to spend a lot more money on it. Or maybe you go and discover, yeah, I really don't get that much out of it. Personally, I don't feel a flow state coming on when I think about it. So that's one kind of thing you can spend money on that is worthwhile, particularly if you grow or create out of it. But the other kinds of experiences you want to have are the ones where you are going to form new relationships, where you are joining with groups of people doing some kind of activity or something, and maybe that requires you to travel to a certain place or spend some money on some equipment so you can participate in whatever the activity is. But that is, in fact, where you are going to discover new friendships, because that's not going to happen if you're just sitting around reading financial news and doing things by yourself.
Mostly Uncle Frank:You do have to get out there and make a lot of acquaintances and then, if you do enough of that, you will acquire new friendships over time, but friendships are generally not acquired in a linear manner.
Mostly Uncle Frank:Usually what happens is you have an acquaintance, then something bad happens to one of the other people and the other one steps up and does something nice for that person or helps them with something, and that's where friendships are really formed. Not all acquaintances are going to turn into friendships. You can't count it that way, but if you're not making more acquaintances, you're not going to have new friends, and maybe you don't need any new friends when you get to, say, age 80, but you probably want to get out there at age 55 and experience a few new people so that you have those friends when you get to be 80. So one of the ways I've been able to make new friends is by interacting with people in financial independence communities, and so we had a good example of that this week. I had met Bill Yount and his wife in 2019 at the FinCon event that happened to be in DC, and since then we've become very good friends and they were over for the past week.
Mostly Uncle Frank:We had a great time the best, jerry the best eating, drinking, pontificating and wandering around various historical sites and parks in the dc area what are all these people doing here?
Voices:drinking and having a good time, oh that.
Voices:That's why we're here. You're too stupid to have a good time.
Mostly Uncle Frank:But stuff like that doesn't happen unless you get out there and start interacting with other people.
Voices:Au contraire, don't be saucy with me Bernays.
Mostly Uncle Frank:It was extremely fun, and we even went to a medical museum, since they're both doctors.
Voices:It might be a tumor.
Voices:It's not a tumor. It's not a tumor at all.
Mostly Uncle Frank:Third thing you can spend money on to make your life better is work avoidance, and that means paying other people to do things that you don't like doing and don't like spending time on and are taking up a lot of your time.
Voices:Looks like you've been missing a lot of work lately.
Mostly Uncle Frank:I wouldn't say I've been missing it, bob, and whether that's doing your taxes or mowing your lawn or whatever it is, it's different for each person. Getting somebody to clean your house is probably a good use of your money is probably a good use of your money. What you're doing there is you're buying your time back so that you can spend your time having experiences with other people, making new acquaintances or doing other things that are likely to be more interesting and more fulfilling. If you still find yourself trading time for money, that is not a good use of your time anymore. So if you're going to multiple stores to save a few dollars or changing your own oil in your car when you don't have to anymore, or any other number of tasks that you might have sensibly done when you were a younger person and didn't have much money, you want to reverse that and start spending the money to get the time back and not be spending a lot of your days doing menial tasks. A concept you should become acquainted with is called satisficing, where, instead of trying to optimize for saving money, you just take the first thing that seems reasonable or that meets a minimum requirement. I'll link to an article about that in the show notes. But it's the opposite of trying to optimize everything, because trying to optimize everything wastes a lot of time.
Mostly Uncle Frank:All right, the fourth thing you can spend more money on that makes your well-being improve is what I like to call red hot chili pepper pie, and that's giving money away. And there are basically three ways you can give money away, or categories. One is charities regular charities. You'll find that you get more well-being out of a charity if you're actually participating in it in some way, as opposed to just writing checks, and I would encourage you to think about that, which is what I do with the Father McKenna Center. You'll also find that if you're engaged with an organization like that, that is also a place to make new acquaintances and then make new friends. And the nice thing about charitable organizations is that people there typically are not fixated on having the most money, so they make better role models and better people to hang around. Since you become the average of the five people you spend the most time with, you need to make sure you're spending some time with some people who are not obsessed with investing and having more money.
Voices:Let me tell you about the power of association. You are the average of the five people you spend the most time with, want to know your future. Look at your friends, want to change your future. Change your friends. I'm not saying abandon your old friends. I'm saying expand your circle. Include people who inspire you, challenge you, push you to grow. Because here's what I found you can't soar with the eagles if you're hanging around with the turkeys.
Mostly Uncle Frank:Okay. Besides that, you can give to your heirs. If you have children or other people who are going to get money when you die, it is probably a better procedure for you to give them some of that money while you are alive, pretty much starting right now. What we do for our kids is give them their advance in the form of funding their Roth IRAs, and that's kind of an easy one. There might be other things that you can help with paying for, whether it's child care or a down payment on a house or some kind of family celebration like a wedding or something like that. You don't want them to become dependent on. You. Do not buy them club memberships or very expensive cars that cost a lot to maintain or insure, or houses they can't afford. But giving while you are alive to people who are younger, who can really use it at that time, is way more efficient and way more life-affirming than waiting until you are dead and they're probably 60 years old and don't need the money anyway.
Mostly Uncle Frank:The average person who inherits money significant money in the US these days is nearly 60 years old, which tells you a lot about how bad people are at planning, particularly people who have a tendency to hoard a lot of money, because, no, you do not get to be known as a generous person if you are not generous while you are alive.
Mostly Uncle Frank:If you want people to think you're a generous person, don't make them wait until you're dead for you to prove that. Prove that up while you're alive, and that is also a way to teach adult children how to invest or handle money or do other things. So it's also going to improve relationships if you give money strategically and appropriately to your would-be heirs and then, finally, you can just give money to support family members or friends. We own the house that my parents live in, and being able to do that gives me a great deal of personal satisfaction. Now, some people do spend too much money on other people, but generally those are not the people listening to this podcast or having accumulated enough to retire with, but that can be a great source of personal satisfaction and better relationships. Whether that's a family member you're not required to support, or some friend or some small organization. That is not a traditional charity.
Voices:I haven't taken leave of my senses, Bob. I've come to them. From now on, I want to try to help you to raise that family of yours, if you'll let me. Well, we'll talk it over later, Bob, over a bowl of hot punch.
Mostly Uncle Frank:It could also be just hiring somebody to do a job that you wouldn't necessarily need them to do, but maybe they need a job. There are kind of infinitely many ways you can approach this. Anyway, hopefully this helps some. This getting over fear generally means replacing that fear either with a different fear that you really should be worried about running out of time and not running out of money, or just a desire to be a better person in some way.
Mostly Uncle Frank:That fears or phobias are something to be overcome. It's no different than not knowing how to be a public speaker and wanting to be a public speaker and then overcoming that fear by taking action to do that. And that question comes up are your desires to be a better person or have a better life more important to you than either your fears or your identity as a saver? Because I think it's unlikely you're going to overcome this fear if you don't have a better or higher purpose that you are seeking to achieve. That is more important to you than the fear or the identity, and hopefully those books and references will help you discover that.
Voices:That and a nickel. Get your hot cup a jack squat.
Mostly Uncle Frank:So you can rewrite the story of your retirement as not one that I was afraid to spend money. Therefore I didn't, and I had the most money at death. And that was all To something that resembles more the reformed Ebenezer Scrooge at the end of the Christmas Carol, who used his money to form all kinds of better relationships all around with all kinds of people.
Voices:I don't deserve to be so happy. I can't help it. I just can't help it. I just can't help it. Scrooge was better than his word. He became as good a friend, as good a master and as good a man as the good old city ever knew, or any other good old city, town or borough in the good old world. And to tiny Tim, who lived and got well again, he became a second father, and that's news.
Mostly Uncle Frank:Hopefully that helps and thank you for your email.
Mostly Uncle Frank:Now we're going to do something extremely fun, and the extremely fun thing we get to do now is our weekly portfolio reviews. Of the eight sample portfolios you can find at wwwriskparityreviewcom on the portfolios page, we also have distributions for July to talk about. Just looking at the markets this year, so far, it's looking like a pretty good year. Right now, the S&P 500, represented by VOO, is up 7.46% for the year so far. The NASDAQ 100, represented by QQQ, is up 9.08% for the year so far. Small cap value, represented by the fund VIOV, is still a loser, but not a big loser. It's down 3.49% for the year so far. Gold continues to be the big winner this year. Representative fund GLDM is up 27.02% for the year so far.
Mostly Mary:I love gold.
Mostly Uncle Frank:Long-term treasury bonds, represented by the fund VGLT, are up 2.2% for the year so far.
Mostly Uncle Frank:Reits, represented by the fund REET, are up 5.42% for the year so far. Commodities, represented by the fund PDBC are up 2.54% year to date. Preferred shares, represented by the fund PFFV are up 0.90% year to date and managed futures are managing to be almost flat. Now, representative fund DBMF is down 0.14% for the year so far. So a bad year is turning into an easy year, although it's been pretty easy for us this year overall. Looking at these portfolios, the first one's a reference portfolio called the All Seasons. It's only 30% in stocks in a total stock market fund, 55% in intermediate and long-term treasury bonds and 15% in gold and commodities long-term treasury bonds and 15% in gold and commodities. It is up 0.2% for the month of July. It's up 6.1% year-to-date and up 15.18% since inception in July 2020. For the month of July, we are distributing, or have distributed, $32 from the cash that is built up. It's at a 4% annualized rate and that's $219 year-to-date and $1,909 since inception, july 2020. All these portfolios started with about $10,000. Moving to the bread-and-butter kind of portfolios, first one's Golden Butterfly, this one's 40% in stocks divided into a total stock market fund and a small cap value fund. This one's 40% in stocks divided into a total stock market fund and a small cap value fund, 40% in treasury bonds divided into long and short and 20% in gold GLDM. It's up 1.06% for the month of July. It's up 7.31% year to date and up 43.71% since inception in July 2020. We are distributing $46 out of it. It'll come out of the gold portion of it GLDM for July. That's at a 5% annualized rate. That'll be $318 year-to-date and $2,619 since inception in July 2020. We will also be rebalancing these later this month, at least the first four of them. We'll be selling a lot of gold at that point in time.
Mostly Uncle Frank:Moving to the next one, the golden ratio, this one is 42 percent in stocks divided into a large cap growth fund and a small cap value fund, 26 in long-term treasury bonds, 16 in gold, 10 in a managed futures fund and 6% in cash in a money market. It's up 1.01% month to date. It's up 6.4% year to date and up 38.27% since inception in July 2020. We are taking $45 from the cash portion for July. That's at a 5% annualized rate. We always take out of the cash portion for this portfolio, the way it is managed, in the most simplified form that you can manage, a portfolio, which we'll be talking about more at rebalancing time and that's $304 distributed for the year so far and $2,566 since inception of July 2020.
Mostly Uncle Frank:Next one's the risk parity ultimate. Not going to go through all 14 of these funds, but it's up 0.96% for the month of July. It's up 6.01% year-to-date and up 26.51% since inception of July 2020. For the month of July, we are distributing $40 out of it in accumulated cash. It's at a 5% annualized rate. That'll be $276 year to date and $2,726 since inception in July 2020. Now moving to these experimental portfolios involving leveraged funds.
Voices:You have a gambling problem.
Mostly Uncle Frank:We do hideous experiments here, so you don't have to Look away, I'm hideous. First one's the accelerated permanent portfolio. This one is 27.5%, so you don't have to. It's up 0.49% month-to-date for July. It's up 7.49% year-to-date and up 8.59% since inception in July 2020. It'll be distributing $39 out of it from gold for July. It's at a 6% annualized rate. That'll be $269 year-to-date in distributions and $2,899 since inception in July 2020.
Mostly Uncle Frank:Next one's the aggressive 50-50. This one is the most levered and least diversified of these portfolios and the worst performer too. It's one-third in a levered stock fund UPRO one-third in a levered bond fund TMF and the remaining third divided into a preferred shares fund and an intermediate treasury bond fund as ballast. It's up 0.34% month to date. It's up 2.37% year to date, but down 9.84% since inception in July 2020. We'll be distributing $32 out of it out of accumulated cash for July. Accumulated cash for July that's $224 year-to-date and $2,892 since inception in July 2020. Next one's the levered golden ratio, which is a year younger than the first six. This one is 35% in a composite fund called NTSX that is, the S&P 500 and treasury bonds. 20% in gold GLDM treasury bonds. 20% in gold GLDM. 15% in an international small cap value fund, avdv, 10% in KMLM, a managed futures fund, 10% in TMF, a levered bond fund, and the remaining 10% in two levered funds, one that follows the Dow and one that follows the Utilities Index. It is up 0.47% for the month of July. It's up 9.8% year-to-date and up 4.94% since inception, july 2021.
Mostly Uncle Frank:We'll be distributing $35 out of accumulated cash for July or have distributed. I should say it's at a 5% annualized rate. It'll be $236 year-to-date and $1,792 since inception, july 2021. And the last one is our newest one, the Optra portfolio, which just became a year old. This one is a return stack portfolio. It is 16 percent in a leveraged stock fund, upro, 24% in AVGV, which is a worldwide value fund, 24% in GOVZ, that's a treasury strips fund, and the remaining 36% in gold and managed futures. It's up 1.02% month-to-date. It's up 8.49% year-to-date and up 11.65% since inception in July 2024. We're distributing $52 out of it out of accumulated cash for July. It's at a 6% annualized rate. That'll be $354 year-to-date and $614 since inception in July 2024. And that concludes our weekly and monthly portfolio reviews.
Voices:I'm putting you to sleep.
Mostly Uncle Frank:Which is enough for now, because this has been a long podcast. We do that sometimes. This is pretty much the worst video ever made, but now I see our signal is beginning to fade. If you have comments or questions for me, please send them to frank at riskparityradiocom. That email is frank at riskparityradiocom. Or you can go to the website, wwwriskparityradiocom. Put your message into the contact form and I'll get it that way. If you haven't had a chance to do it, please go to your favorite podcast provider and like subscribe. Give me some stars, a follow, a review. That would be great.
Mostly Uncle Frank:Okay, thank you, stars. A follow a review? That would be great. Okay, thank you once again for tuning in. This is Frank Vasquez with Risk Parity Radio signing off.
Voices:Some people never will have much. They're too cautious. Now, you can also be too reckless, but you can also be too cautious. This is called the timid approach to life, and my caution was always the risk. Risk used to drive me right up the wall. I used to say what if this happens? What if this happens? And on top of that, if this was to happen, look at the fix. I'd be in. Better not try. I could always ace myself out. Then I'll tell you what changed my whole life when I finally discovered it's all risky.
Voices:The minute you were born it got risky. If you think trying is risky, wait till they hand you the bill for not trying. If you think investing is risky, wait till you get the tab for not investing. See, it's all risky. Getting married is risky. Having children is risky. Going into business is risky. Wait till you get the tab for not investing. See, it's all risky. Getting married is risky. Having children is risky. Going into business is risky. Investing your money is risky. It's all risky. I'll tell you how risky life is. You're not going to get out alive. That's risky.
Voices:The Englishman says well, if that's the way it's going to work out, let's give it a go Right, that's what it's for. Give it a go. Somebody says, yeah, but I'm looking for safety and security. Fine, then huddle in a corner, we'll cover you with a sheet, bring you three meals a day and we'll protect you, feed you, look after you, care for you. We won't let anything happen to you and you'll probably live to be 100. The guy said well, yeah, I'd live to be 100. But what a way to live, right, what a way to live safe and secure. Don't ask for security, ask for adventure. Better to live 30 years full of adventure than 100 years safe in the corner. And see, it's not important how long you live. What's important is how you live.
Mostly Mary:The Risk Parody Radio Show is hosted by Frank Vasquez. The content provided is for entertainment and informational purposes only and does not constitute financial, investment tax or legal advice. Please consult with your own advisors before taking any actions based on any information you have heard here, making sure to take into account your own personal circumstances.
