In this episode, the 401(k) Brothers—Bill and Andy Bush—discuss popular financial rules of thumb and how they may or may not apply to different retirement situations. They tackle everything from when to delay Social Security, avoiding 401(k) loans, the pros and cons of paying down your mortgage early, and more. This conversation is packed with insights that can help you navigate your personal retirement decisions, ensuring that these "rules" work for you, not against you.

Chapters & Time-Stamps:

• 00:00 - Introduction to Financial Rules of Thumb. The 401(k) Brothers open the episode by introducing the topic of financial rules of thumb and explain why these generalized rules may not always be applicable to every retirement scenario.
• 01:00 - Delaying Social Security: Pros and Cons. Bill and Andy discuss the first rule of thumb: delaying Social Security until age 70 for higher monthly payments. They delve into when it makes sense to follow this rule and when it's better to take Social Security earlier based on health, family history, or ongoing employment."You don't know when the last grain of sand's going through your hourglass." – Andy
• 02:24 - Personal Considerations for Social Security. The conversation continues with examples of how family longevity or terminal illness can influence the decision to take Social Security earlier rather than later.
• 03:10 - Working and Social Security. They explain how working while claiming Social Security before full retirement age can reduce benefits due to the earnings test, and highlight why waiting until FRA can make a difference.
• 03:51 - 401(k) Loans: When to Avoid and When to Use. Next up, Bill and Andy discuss the second rule of thumb: avoiding loans from your 401(k). They explain how 401(k) loans can stunt growth by interrupting compounding. However, they acknowledge there are rare situations, like significant emergencies, where it may be justified.
• 05:39 - Mortgage Management: Pay Down or Invest? The third rule of thumb: prioritizing paying off your mortgage. The hosts explore the impact of rising interest rates and how those with lower mortgage rates may benefit more from investing rather than paying off their mortgage early.
• 07:36 - Diversification in Investing: A Key Strategy. Bill and Andy tackle the fourth rule: diversification. While younger investors can afford to take more risks, as retirement nears, it becomes essential to spread risk across various assets to protect your savings.
• 09:01 - Buy Low, Sell High: The Investment Mindset. The fifth rule: buy low, sell high. The brothers explain why they're not market timers, emphasizing that investing should be tied to a long-term strategy and purpose rather than reactive decisions.
• 10:21 - The 4% Withdrawal Rule: Understanding Retirement Income. Rule number six: the 4% withdrawal rule. Bill and Andy discuss its flexibility, stressing that it should serve as a guideline rather than a rigid rule. The longevity of one's retirement and market conditions can influence how much to withdraw safely.
• 13:37 - Maximizing Employer Contributions: A Smart Move. The seventh rule of thumb: maximize employer matching contributions to your retirement savings plan. Bill and Andy emphasize this as “free money” and encourage listeners to take full advantage if possible.
• 14:35 - Hedging Against Inflation: Protecting Your Wealth. They explore rule number eight: prioritizing hedges against inflation. The brothers share insights on how bonds, money market accounts, and stocks can help counteract inflation's impact over the long term.
• 15:33 - 100 Minus Age Rule: Stock Allocation Strategy. The ninth rule: the 100 minus age rule, which suggests how much of your portfolio should be allocated to stocks. They express that this rule may be too conservative for younger investors and provide alternative approaches.
• 17:23 - Redefining Retirement: Beyond the End of Work. The episode closes with the final rule: retirement is the end of work. Bill and Andy challenge this idea, offering a perspective that retirement can be a new beginning filled with purpose, hobbies, and personal growth. "Retirement is about living out your purpose in life." – Bill

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Key Takeaways:

• Social Security: Delaying can boost your income, but personal health and financial needs might dictate a different approach.
• 401(k) Loans: Should generally be avoided to prevent interrupting growth, except in critical emergencies.
• Mortgage: Paying off your mortgage early depends on interest rates and whether that money could work better for you elsewhere.
• Diversification: Crucial as you near retirement to spread out risk.
• Investment Strategy: Stick to long-term goals rather than trying to time the market.
• 4% Rule: Useful as a guideline, but individual factors like longevity and income needs matter.
• Employer Contributions: Always maximize these if possible for free money toward your retirement.
• Inflation Hedge: Consider a mix of bonds, stocks, and other vehicles to keep up with inflation.
• Stock Allocation: Be more aggressive when you're younger but taper down as retirement approaches.
• Retirement Mindset: Retirement isn't the end of work but the beginning of a new phase in life.

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Memorable Quotes:

• “You don’t know when the last grain of sand’s going through your hourglass.” – Andy
• “Retirement is about living out your purpose in life.” – Bill
• “There’s risk everywhere, so spread it out as you get closer to retirement.” – Andy

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Resources Mentioned:

https://www.horizonfg.com

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