Mostly Voices [0:00]

A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines. If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. A different drummer.

Mostly Mary [0:19]

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. Thank you, Mary, and welcome to episode 68 of Risk Parity Radio.

Mostly Uncle Frank [0:42]

Today on Risk Parity Radio, we are going to follow up on episodes 64 and 66, where we talked about risk uncertainty and managing a portfolio in retirement. like a vehicle on a road. And to do this, we are actually going to look at an email from Chuck H about his situation and then think about what kind of process we might want to apply to the situation and how we might go about that. So let's take a look at Chuck H's email. He writes, Frank, I heard my shout out on your show this week. Never had that happen before, so it was exciting. It just confirmed for my wife that I am a nerd. But I do want to thank you for putting this content out there. I feel like it's now filling in a key area that's been missing for me. I do have a serious question though. I am about three years out from FIRE at age 55. I'm going to move our, my wife's and mine, portfolio into a retirement portfolio soon. just trying to decide how to construct it. But our portfolio is stretched across two 401ks, two Roths, a solo 401k, an HSA, and a taxable account. The solo and HSA is at Fidelity, the rest is at Schwab, but I have all asset classes and ETFs available to me on those platforms. I plan to use the rule of 55, and my goal is to aggressively move most of our 401k assets to the Roth in a conversion for the first five years of retirement. Do you have any insight on where the asset classes should be primarily parked? Or should I just equally allocate in each account so each account has a RPP ratio and holdings? By assuming you meant risk parity portfolio by RPP there and not just retirement portfolio. But thank you for that email. It raises a lot of interesting issues for a lot of different people and it's something that we faced ourselves a few years back. So now how should we approach this from a global or macro perspective? How do we approach putting our vehicle together, if you will, in retirement and what do we do? And we need to talk about a process first before we talk about the details. First things first here. I think the best way to approach that is to invert the question like Charlie Munger always tells us to do. So we'll invert the question and say, what would be a bad process for deciding how to construct our retirement portfolio? Well, the first bad process that you can think of Would be to panic. But unfortunately that is what we are programmed or encouraged to do. If you read a lot of articles about this, they are typically negative. They typically say things like the 4% rule doesn't work. The 60/40 portfolio is dead. There is a lot going on there that gets people excited angry, fearful, and frankly, to me, it sounds like this.

Mostly Voices [4:14]

Real wrath of God type stuff. Fire and brimstone coming down from the skies. Rivers and seas boiling. 40 years of darkness, earthquakes, volcanoes, the dead rising from the grave. Human sacrifice, dogs and cats living together, mass hysteria.

Mostly Uncle Frank [4:29]

Yes, dogs and cats will be living together. It's a big problem. Well, first of all, we need to think, why does this stuff exist? and perhaps I'll do a rant about it at some point. The reason it exists is for two reasons. Negative stories or headlines attract eyeballs, so the financial media has a use for those kinds of stories and promulgates them frequently. This dovetails with the needs of the financial services industry and their need is to sell you stuff. And a good way to sell you stuff, whatever products they have, frequently high commission products are often sold on the principles of fear, uncertainty, and doubt. And this plays straight into that fear marketing. And so this is why you hear these kind of panic stories, because on the other end of it, somebody wants to sell you a solution and generate a large commission. And that's part of why this is a bad process. Sometimes we just need to calm down and listen to Sergeant Holka. Lighten up, Francis.

Mostly Voices [5:38]

Lighten up, Francis.

Mostly Uncle Frank [5:42]

Or maybe get the Biff Tannen treatment. Hello, hello, anybody home?

Mostly Voices [5:46]

Huh, think McFly, think. Think McFly, think.

Mostly Uncle Frank [5:50]

In either respect, you can see why that doesn't help you make any decisions. running around like a chicken with its head cut off. Panicking is not ever a good idea. Instead of panicking, we should listen to Winston.

Mostly Voices [6:04]

We had the tools, we had the talent. Listen to him again. He's got good advice. We had the tools, we had the talent.

Mostly Uncle Frank [6:12]

Because we do have the tools and the talent for modeling portfolios, and we have incredible options that did not exist even five or ten years ago that we can take advantage of through our calculators and through the multitude of ETFs that are now available. And that's what we should do, and that's what we will do. The other bad process that you commonly see is to make decisions based on your own personal crystal balls And the way this usually works is you feel comfortable with a portfolio and then you go out and find information to support that comfort with your portfolio. Some of these things involve trying to predict inflation, trying to predict future tax rates, trying to predict something, or then going and relying on some expert. I see one of these experts, Ed Slott, running around these days. He's got a new book. and he's a very knowledgeable person, but the big mistake he made is he's been telling people for 25 years that tax rates are going up and they haven't gone up. So he's been wrong in giving bad advice for 25 years on that because nobody should have been trying to predict that 25 years ago. And now we're still trying to predict that, but what he really also screwed up on was he told people to put things in a Roth IRA and use that as an inheritance vehicle, and that's actually what got changed in the tax code. So what that tells you is if the smartest experts can't predict the future, why do you think that you would be able to predict the future? Or why do you think you should rely on the smartest experts to predict the future? Stop the crystal ball gazing, trying to say this portfolio is going to do this because I think this is going to happen in the future. That is not a good process for portfolio selection. Because even if you're right, you would not be able to predict exactly the effect that would have on your portfolio into the future because of the uncertainty principle. So now let's take that back to our Mad Max vehicle construction analogy. It's all the same to you.

Mostly Voices [8:31]

I'll drive that tanker.

Mostly Uncle Frank [8:35]

And he's still there. He's still gonna drive that tanker for us to create diversion. But anyway, what we see there is in order to prepare yourself for that journey in retirement, you want to think about a couple of things. In terms of a vehicle, you would test drive the vehicle, make sure your wipers and equipment were all up to date, your tires had tread, all those sorts of things. And then to decide where you were going, you would actually look at maps and figure that out. What you wouldn't do is try to predict what you're going to find along the road. For instance, you wouldn't say, I like peanut butter sandwiches, but I think there's going to be a shortage of peanut butter in the future. Therefore, I'm going to hoard thousands of jars of peanut butter because I know I can buy bread on the road. At least that's what I think in my head, and that's my prediction. Unfortunately, The way people think about their future investments is often along those lines. They're just predicting different things. So what is the process that we could follow that would get us away from either these panic predictions or these over predictions of the future? Well, the first thing we want to do is take an inventory of what we have. In our analogy, these are our fuels, our motors, the things that are going to make us go down the road. These are analogous to our asset accounts and whatever other sources of income that we might have in the future. Then we want to arrange that inventory to decide what are we going to rely on first. what are we going to rely on second? And then after that, we want to fine tune it. We want to make adjustments. And some of that we're going to do up front, and a lot of it we're just going to do along the road. That's going to tell us when to switch fuel sources or motors, what assets we're going to use, when we should convert from one fuel to another, like we're converting a traditional to a Roth. All of those things don't necessarily need to be made up front. But before we get to that with respect to Chuck H's situation, I did want to give you something to get you over the fear problem that I see people often have. That instead of doing some modeling and analysis of their portfolio, They just throw up their hands and say, well, the 4% rule doesn't work. Therefore, I'm going to spend 2% and I'm going to take eight years of cash and that'll solve my problem. And they don't bother to even model that or think about what that actually means. That's no way to approach decision making or retirement. The truth of the matter is and why you shouldn't be afraid of this is that most portfolios are going to work just fine most of the time. Whether you could go in there with 100% stocks, you could go in there with a 60/40, you could go in there with a risk parity style portfolio. Now you're going to get better results with a more diversified portfolio, but that doesn't mean that most of these portfolios are not going to stay on the road. It is like driving around. Most of the traffic you see is actually driving down the road. It's not in the ditch. Occasionally you see somebody in the ditch. How I think I can give you to get over that, I want you to use a specific calculator. It is the retirement spending calculator at Portfolio Charts, and I'll link to this in the show notes. Why this is a superior calculator to almost every free calculator that I've ever seen is because it allows for two things. First, you can put a diversified portfolio into it. You can put different kinds of stocks, small cap value, international, different countries, different kinds of bonds by maturity, gold, commodities, REITs. You can put any combination of those things into this. And it is based on 50 years of data going back to 1970. And it will tell you what it was like to hold that kind of portfolio using a Monte Carlo simulation. And it gives these nice graphs showing how much you would still have left, how many times it would have failed over that course of period, which is what you really care about. And if you go in there and start putting in your parameters, you'll see that almost every common portfolio that you think of only failed a few times unless you were taking out A lot of money from it, but some portfolios did better than others. Now, the other important thing about this calculator is that it allows you to adjust your withdrawal conditions. And this is the problem that we talked about last time with the way the 4% rule is commonly applied as if it's this one ray ratchet or stuck accelerator in our vehicle analogy. that just keeps going faster and faster. This calculator allows you to make adjustments for different withdrawal strategies. And the withdrawal strategy is just as important or maybe more important than the actual allocation strategy. And it gives you not only the inputs, the tells you where to put them in, it gives you a little description of common strategies that are used in these modeling. So you can use the constant dollar that is the Trinity Study or original Bengen rule with the 4% stuck accelerator that ratchets down. You can use the constant percentage model where you're taking the value of the portfolio each year and then taking out a constant percentage from that. That is what, say, Paul Merriman does with his personal portfolio. He has a 50/50 portfolio, 50% stocks, 50% treasury bonds, takes out 5% at the beginning of each year, and that works just fine for him. And so that's a constant percentage withdrawal strategy. There's a more complex strategy, one's called the Bengen floor and ceiling strategy. One's called the client 95% rule. There is a ratcheted withdrawal strategy from Michael Kitces. There's something called the Geitner Klinger and you can put in different kinds of strategies. And going in there and just taking what you think is your portfolio and then looking at various withdrawal strategies is going to give you a much better, stronger sense of what it would be like to have that kind of portfolio in a lengthy retirement. what its failure characteristics are likely to be or how much it's going to have left. Because sometimes, depending on your parameters, you may end up with far too much money if you follow the withdrawal strategy to a T, depending on what you're putting in there. But then the other thing I invite you to do is put your projected portfolio, what you're thinking of using two stress tests. What if you just keep making the withdrawal rate go up and put in more aggressive parameters? Then how many times does that fail? And if you take common portfolios and you compare them to the risk parity style portfolios that we use, such as the Golden Ratio or Golden Butterfly, you're going to find that the risk parity style portfolios just perform better under stressful conditions or more stressful conditions and yield higher safe withdrawal rates than standard portfolios. But I invite you to do that yourself. We do talk about it all the time when we talk about those portfolios in particular. But just using that tool will get rid hopefully of your fear so that you can start rationally making decisions then about what you're going to actually do with your assets in your portfolios. Okay, so now let's apply this simple three-step process that we talked about to Chuck H's situation. And that three-step process, just to remind you, was first take an inventory, then arrange the inventory, and then make adjustments. Okay, so what Chuck H has got is two 401ks, two Roths, a solo 401k, an HSA and a taxable account. And he's going to use the rule of 55 when he turns 55 to be able to access what would be at least one of those 401 s. For the listeners that are unaware, there is a rule of 55 that applies to most 401 s that says that if you stop working at your employer where you have your current 401 And then you start using that money, you don't have to pay a penalty on it. So it's like you were 59 and a half, even though you're only 55. Okay, so looking at those, and he says he can put basically any kind of portfolio across that group of funds, which he should think about doing in constructing that portfolio. And I hope it's a risk parity style portfolio, but even if it's not, that's fine. I don't have a license on portfolio construction here. But one thing I would suggest is that if you're going to rely on the rule of 55, one of the strategies you can use before that is to try and roll your other 401 s, if you can, into the 401 that you will be retiring on, because then you'll be able to apply the rule of 55 to a larger set of assets. Now you're going to have to look at that to see what or what other accounts could be rolled into that. Maybe none of them can be because some of them maybe belong to your spouse. And so you can't roll your spouse's 401 into yours. But that would be the first thing that I would look at in terms of arranging these assets. Then when he gets to 55, he's going to have two things that are available without penalty right away. And those will be this 401k that's subject to the rule of 55 and then the taxable account. Now the easiest way to then structure withdrawals if you think about it is you just need to get to 59 and a half for the other accounts to become available. and then you could use those. So it's most likely that you're going to be spending out of your Rule of 55, 401k, and your taxable account up until that time. You could take money out of the Roth, but it's really not ideal. Ideally, then you arrange the portfolios, you arrange your inventory in the things that you won't be penalized for first, you're taxable, you rule 55-401k, then at 59 and a half, your traditional become available, your other 401ks, those sorts of things. But you do not spend the Roth money as long as you can. And the reason you don't want to spend your Roth money is it's never taxed. And so all the growth in there, no matter when you bring it out, will never be taxed. And so that, Ideally, although you could access in an emergency, you would want to leave those Roths alone for as long as possible and then in fact move more money into the Roths if you were allowed to do it and if it makes sense for you. And so that is the basic arrangement for the inventory as Chuck has presented it here. you also need to account for any pensions or other rental money or other money that's coming in. Easiest way to do that is usually to subtract that from your projected expenses and then just think about the smaller expense thing that needs to be covered by these portfolios. But that's an individual thing that needs to be done. I should say that most of this is individual because everybody ends up with a different variety of assets when they get close to retirement and there's no one size fits all here. Okay, now that we've taken that inventory and arranged a little bit, now we need to start thinking about what kind of adjustments that we will be making either soon or later. One of those adjustments was trying to get some more of this money into that Roth 401k. I'm sorry, the 401k. that is subject to the rule of 55. The next series of adjustments may happen a little bit later, and a lot of that depends on your tax brackets. And this is very different for different people, and this is another reason why it's really bad to take generic advice about your retirement without seeing how it applies to your tax situation. A lot of the things that I hear recommended are only applicable to people who are taking out hundreds of thousands of dollars per year in their retirement. Otherwise, they don't make any sense. I'm going to give you a link to some tax brackets from Investopedia, but there are two that are really important. One that's neglected. The first one that's important is what is your basic income tax bracket, when will you go from the 12% bracket in particular to the 20% bracket and then when you go to the 30% brackets? They're basically 10%, 20%, and 30%. I know there are six brackets, but they break down that way. If you know that, then you also need to look at what is your capital gains tax bracket. and that starts at zero. And if you have a 0% capital gains tax bracket, it gives you a lot of different opportunities. So who this applies to is basically any couple who is planning on having $100,000 or less of income in retirement is going to be with the standard deductions in the lowest tax bracket. It is pretty much in the 0% tax bracket for their capital gains. What that 0% tax bracket allows you to do is basically pay almost no taxes in retirement. I'm going to link to the Go Curry Cracker article that most people need to read because they start yelling about taxes, but they don't even light a candle in the darkness and look at their situation. And oftentimes, unless they're taking a lot more than $100,000, It's not going to be a big deal if they just sit down and manage it. But a couple of things that 0% tax bracket allows you to do is tax gain harvest. So if you have gains in your taxable account, you can sell those gains, get a higher basis, then rebuy the same assets and keep doing that as they go up. And so you'll essentially never pay taxes on that, as long as you're in that 0% capital gains tax bracket. The other important thing that this affects is when it comes to what are qualified dividends. Now, the dividends thrown off by various assets are treated differently under the tax code. Dividends that come from bonds or other interest paying financial instruments are taxed as ordinary income. So if they're in their taxable account, in your taxable account, they count as ordinary income. Most dividends from common stocks are not taxed that way. They're taxed as qualified dividends in there, but there are rules for these. And you need to go look at that. I'll link to another article in the show notes about qualified dividends, but you do need to understand that qualified dividends are taxed as long-term capital gains. And so they are extremely advantageous in a taxable account because you're either going to be a 0% tax bracket or most people besides that would be in the 15% tax bracket, which is the next capital gains tax bracket you can be in that covers basically from 100,000 to 490,000 for a couple. So what does this tell us about where to put assets? If you've got assets in a taxable account that aren't actually being taxed because they're paying qualified dividends or you're recycling the gains by tax gain harvesting, then that's where you would want to put those kind of assets. And those actually would include things like preferred shares because they come from common stocks or they come from companies. and so most preferred share income is a qualified dividend. Now compare that for instance to the income from REITs. The income from REITs is not a qualified dividend in most cases. And so if you were thinking about well I've got some bonds and some preferred shares and some common stocks and some REITs, what that would tell you is that basically You would want in the taxable bucket your common stocks and your preferred shares, and you'd want the income producing bonds and REITs and other things like that, particularly if they have a higher rate of income, the higher the percentage of income, the more that wants to be in a traditional retirement account. Think about it the other way though, how it's disadvantageous to put things that pay qualified dividends in a traditional retirement account. Because what happens is this, they pay that dividend, you don't get the advantage for it being a qualified dividend or a capital gain. And then when you take it out of the account, it counts as ordinary income. So it kind of shoots yourself in the foot. You want to take anything that has a tax advantage over ordinary income and put that in your taxable account and then put the things that are already generating only ordinary income and put those behind the the traditional retirement account because they can just throw off their income in there and then you only have to get taxed on it when you pull it out of the account. Okay, so suppose you're in the next tax tier and your income in retirement you project to be somewhere in the low 100s to $490,000, which is probably going to apply to most of us. if you have a greater than $500,000 income in retirement, then you probably are not listening to me or if you are listening to me, thank you for that, but I would get some more professional help that I could talk about briefly later. But anyway, for us mere mortals who are in the essentially 20% marginal income bracket and 15% marginal capital gains bracket for that income over there, then you begin to think so much not about tax gain harvesting, but about tax loss harvesting. And this is where keeping some of the uncorrelated assets in your taxable account can actually help you. Because what you can do is suppose stocks are having a bad year, or at some point are having a bad time as they were last year. You could have sold things at a loss and then bought something similar to replace it, effectively doing a tax loss harvest. For instance, you could sell your total stock market fund and buy a S&P 500 fund. The way we have ETFs these days, you can almost find something that is 98% plus correlated with the current fund you hold, but is not the exact same thing. And if you can do that, you are allowed to sell one, take the loss, buy the other one without running afoul what's known as the wash rule, because otherwise you'd have to hold it in cash for 30 days before you could rebuy the other asset. There are enough ETFs in existence in all of these categories to make tax loss harvesting very accessible and relatively easy. So you could have done that for stocks last year. You can also do that for bonds and that's what's interesting about in particular if you're using long-term treasuries the actual interest they pay is not often that significant these days. It's down around 2%. If you have some of those in your taxable account and they go down in value like they have this year by 18% or something like that That gives you another way of tax loss harvesting. You can harvest those things. And since these things are uncorrelated, they're frequently going up and down. What that gives you in a risk parity style portfolio is a lot of tax options to eliminate or reduce your capital gains liabilities by using those things. Now, of course, you're also going to have to pay income to the extent you hold those in your taxable account, but it's good to have some things that are uncorrelated with your other assets so you can realize tax losses every year in your taxable accounts in addition to dealing with any tax gains. Okay, then the next thing you would need to think about, particularly in Chuck's situation, is conversions. When do I do those? How do I do those? if you're already getting close to 59 and a half, I just plan to wait till I'm 59 and a half to start those. There are ways of doing that beforehand. I will link to the famous Mad Fientist article about how to convert your traditional IRAs and 401ks into Roths earlier on. If you are younger and want to do that, there's a five year holding rule that applies, but you can look at those instructions and follow them. It is advantageous to convert as much of your traditional into Roths as possible, simply because the Roths are never going to be taxed again. The problem is that when you do that, you do create a taxable event. It is ordinary income in that year. Where this goes is I think you want to be flexible on this and not try to plan it all out today, particularly if you're going to be doing it sometime in the future. There is a large window for us between age 59 and a half and when we have to start taking required minimum distributions at age 72 to do these conversions and that's when I plan to do most of ours, but it's going to depend on a year to year basis and probably looking at towards the end of the year, what is my income for that year? And if I do a conversion this year, what effect is that going to have? Am I just filling up the next tax bracket? You would not, for instance, want to be jumping from a 22% bracket up to the 30% bracket. By doing a Roth conversion, you might be willing to stomach the 20% bracket depending on where you are. Ideally, you would find a year where you don't have any income or living on very little, which you can often do if you're using that taxable account just selling things There's capital gains on it, but there's no ordinary income generated out of living off your taxable account, which is a big advantage it has. They should be calling these things barely taxed accounts. So that often is a good combination that you live off taxable money for a year and then do a conversion in that year. This is one of those things I don't think it makes sense to try to plot it all out. 10 years in advance, both because conditions will change in some way, IRS rules or other things, your situation is going to change depending on how much has been accumulated in those accounts or not accumulated in those accounts. And there may be other rules or situations that you need to take care of. You may be able to take a very low income year to help you do that in some years. and then you also will need to coordinate that with when you actually take Social Security, because once you take Social Security, that is other income that comes in there, which may interfere with your ability to convert at a low rate. So you'd probably want to do your conversions before you start taking Social Security. All right, let's talk briefly about those. super high income people who expect to be taking more than $500,000 in retirement income every year, you should get some professional help. I mean financial help because one of the things that actually becomes useful to you is some forms of insurance if your estate is going to be worth more than $20 million in particular and you do not want to buy insurance off the retail markets, which you're looking for is what it's called private placement insurance for very high net worth individuals. It is not sold by your average insurance person, which is the unfortunate thing about insurance, that those kind of policies that build value in them are of use to some people, but they are very few people. And chances are that does not apply to you. and will not apply to you in the future. So get over your billionaire dreams that if I start using these policies like the Rockefellers or somebody, somehow that's going to make me like the Rockefellers in the future. It's not. It's just you're being stupid. So don't be stupid. Use the tools and financial instruments that apply to you in your situation. not that are applicable to somebody else in somebody else's situation. Or Biff Tannen's gonna come after you. Hello, hello, anybody home?

Mostly Voices [36:41]

Think McFly, think. Think McFly, think.

Mostly Uncle Frank [36:49]

So let's go back to Chuck's question and just sort of summarize where we got to at the end. And his ultimate question was, do you have any insight on where the asset classes should be primarily parked? or should I just equally allocate in each account? I think the answer is this, that across the tax advantaged accounts, it doesn't really matter what goes on in those. That they could be allocated separately or equally or in any way simply because they're not generating taxable events while they're sitting there. There is some impetus though, I think, that if you are thinking of the Roths being in the back, the caboose of the train, the last thing you're going to use, you might want to put your most growth-oriented stocks or other assets in there with the idea that that is almost like an account that may be left to children or other people that you just want to grow and you're not even going to touch it for 20 years. So you might as well treat it like it's you know, 100% stocks you could put in there, as long as you're going to leave it alone. If there's plans to use it, then don't do that. Diversify more in those Roths if you're going to use them that way. So really, the decision making comes in terms of what goes in the taxable and what goes in the non-taxable or tax advantage accounts. I think we've mostly answered that. What you mostly want in your taxable are things that don't pay dividends at all or pay very low dividends, stocks, things that generate qualified dividends, because qualified dividends are taxed as long-term capital gains. And you have to think about it this way. If you plan on drawing down on that taxable account, you're probably going to be having some capital gains anyway. So if you are holding something that generates capital gains and you're just spending the money, because they're paying qualified dividends, that's okay. That's okay. It's being taxed at a lower rate. And certainly, you are not getting an advantage if you take something that pays a qualified dividend and put it behind a tax advantage account, because then the advantage of the qualified dividend is nil. And it'll be taxed as ordinary income if you brought it out of the account. Now, the opposite is true for Particularly things like your REITs, those need to be tax advantaged accounts. There is a QBI application to REITs now that reduces the taxes, but it's not like being taxed at long-term capital gains. So those should go in your tax advantaged accounts. So what I would probably do in your taxable account is have it mostly be the stocks, go very light on bonds or anything paying a bunch of income and put that mostly in the tax advantaged accounts. But I do think it's best to think of this as this lengthy trip you're going on down the road that you are going to make adjustments along the way. I think it would be a mistake to think that it makes sense to make all the decisions up front. What you want to do is just have some options open in terms of having conversions or other things. That's also the reason why if you can avoid it, I would avoid drawing down completely on your taxable account. The taxable account is the most flexible account that you have. It's always accessible. It does not generate ordinary income when you spend it, and so it is extremely useful to have. I suppose the same could be said for Roth accounts, but then if you use them, you lose the tax advantages going forward. And so that's undesirable. And I should mention that gold is also subject to some special rules, even if you're holding it through an ETF like GLD or GLDM. It gets taxed as a collectible, which is at a 28% rate, but that's not always a 28% rate. So, I'm going to link to an article on portfolio charts to explain exactly how that works because it's too difficult to explain on a podcast. Chances are you're not going to have a lot of gold in your portfolio and you're not going to be doing transactions in it. One of the advantages of it is in a taxable account, you're not getting any income from it, so there's no income there. So the only time that it would generate any taxable event is if it were to go upward so much that you were selling it to rebalance out of it or use part of it. And so that's that would be the only taxable events you would have. That being said, it probably resides best in the traditional IRAs or Roth 401 s. In the end, I do want you to appreciate the 2 things that what goes on in a taxable account is not a whole lot of taxing. I think people get very confused thinking that if they put money into a taxable account, I don't think you're one of these people, Chuck, but a lot of people think that if they save money or invest money in a taxable account, they're going to be taxed on it every year on the value of the money in the account and that's just not how it works at all. you only get taxed on the income dividends that are paid. And then if you have transactions that generate capital gains, and you can then also use transactions to generate capital losses that will subtract from your capital income. The other global point I just wanted to get across is that this is a ongoing process that All you need to start with is a basic plan, some maps, some modeling, something that you are comfortable with. You don't need to have all the answers, make all the predictions about what you'll find along the road, and in fact, over predicting or trying to predict what are going to be future market returns, future rates of inflation, future legislation, future anything is not in your best interest because the chances are you will be wrong and you will overcompensate in your portfolio currently. It's better to use that energy to focus on your expenses and how you're going to manage those in particular housing and transportation, which are still the big ones. If you have a paid off house, it helps a lot. If you don't, or you need to downsize, then you need to think about doing that sooner rather than later. One of the biggest problems that the average American has is that they have most of their assets, over 50% of them, tied up in the equity of their house, which is almost no use to them in retirement, and then are faced with getting that money out, hopefully before they retire and getting it invested in something that will actually pay them income to live off of. It doesn't sound like you have that problem. I think most of our listeners are more savvy than that and are worried about a large number of accounts that the things that they've accumulated that need to be managed in some way. But that is the problem that we see most people have. But now I see our signal is beginning to fade and I hope I answered your question in a reasonable way. Chuck H. And this was a very long episode, so I thank you for paying attention to it. If you have comments or questions for me, you can send them to frank@riskparadioradio.com that's an email frank@riskparadioradio.com or you can go to the website www.riskparadioradio.com and fill out the contact form and I will get your message that way. We will pick up this weekend with another question or two from listeners and then our weekly portfolio review. Thank you again for tuning in.

Mostly Mary [45:19]

This is Frank Vasquez with Risk Parity Radio signing off. The Risk Parity 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.