Upcoming Event + What’s New


Before jumping into today’s questions—there are some good ones—I want to share a quick note.

I’ll be at the Annual RetireMeet on March 7 in Bellevue at the Maidenbauer Building. I’ll be there all day at the booth and will be discussing the inside story on diversification, including new thinking on rebalancing that I believe you’ll find useful.

Christine Benz —HOW TO RETIRE

Don McDonald — RETIREMENT EVOLUTION: FROM NONE TO FUN

Tom Cock — RETIREMENT INCOME: THE 4% RULE & BEYOND

Kevin Peterson — GETTING THE MOST FROM MEDICARE

Joe Saul-Sehy — COMMON MISTAKES THAT MAKE RETIREMENT MISERABLE


The event is available in person and online. In-person attendees receive lunch. Online attendees pay a small fee that supports nonprofits focused on financial education.


I also spent time this week with Daryl Balls, working on updates to the quilt charts and new tables. We’re excited to share those soon, along with the next Boot Camp series, starting later this month.


1. How can I avoid getting scammed by a bad financial advisor? 04:03

Paul’s core advice is simple: never give an advisor direct access to your money, such as power of attorney or the ability to move funds. That’s where real risk begins.

Bad advice is another danger. Advisors who rely on high-cost, tax-inefficient, actively managed funds instead of low-cost index funds are a red flag. Even highly respected figures—Bernie Madoff included—have misled investors. The best protection is education and understanding how investing should work when it’s truly in your best interest.


2. How can my parents decide when to start Social Security? 07:08

Rather than relying on rules of thumb, Paul recommends using high-quality resources. One of the best is Social Security Made Simple by Mike Piper, a highly respected CPA and frequent Bogleheads speaker.

Paul also points listeners to Jim Dahle’s discussion of legitimate reasons to take Social Security early, which shows that the “delay at all costs” advice doesn’t always apply.


3. How do I identify my target asset allocation if I am 41 and plan to retire at 65, taking Social Security at 70 and with a pension? 08:47

As with most investing questions, the answer is it depends.

Risk tolerance matters, as does what the portfolio needs to accomplish. At age 41, with many working years ahead, it may be reasonable to remain heavily—or even entirely—in equities, depending on comfort with volatility.

Having Social Security at 70 and a pension may reduce future withdrawal needs, which could justify staying more equity-heavy longer. Reviewing glide paths used by different fund families can also be helpful.


4. Can you help me build a sample asset allocation? 11:46

The starting point is knowing whether you are a conservative, moderate, or aggressive investor, and understanding what those labels actually mean in terms of risk and return.

Paul reviews long-term results from Vanguard Total Market, Mid-Cap, Small-Cap, and DFA Small-Cap Value funds. Historically, taking slightly more risk—especially through small-cap value—has produced higher long-term returns. If certain asset classes aren’t available in a 401(k), an IRA can sometimes provide broader access.


5. What should I learn first to understand asset allocation? 14:10

The first lesson is understanding the long-term growth power of equities. After inflation, fixed income produces very little real growth over long periods.

Equities drive long-term growth, while bonds exist primarily to stabilize the portfolio during difficult markets. From there, investors can learn how diversification across size, value, geography, and asset class affects both risk and return.


6. How do target date funds fit into asset allocation? 17:42

Target date funds manage asset allocation for you. You select a retirement year, and the fund automatically adjusts the mix of stocks and bonds as you age.

For many investors, a single target date fund can be a lifelong solution. These funds bake in assumptions about risk and time horizon and gradually become more conservative over time.


7. How does VTSAX fit into this strategy?17:04

VTSAX, the Vanguard Total Stock Market Index Fund, holds about 3,500 U.S. companies and delivers market-level returns.

An investor can hold all equity exposure in VTSAX, but doing so requires taking responsibility for adjusting bond exposure over time. Target date funds automate that process, while VTSAX requires hands-on management of the glide path.


8. My 401(k) only offers Vanguard Total Market, Mid-Cap Index, and Small-Cap Index. Can I build a good portfolio? 20:40

Yes. Historically, all three funds have delivered strong long-term returns, with mid-cap and small-cap funds producing higher returns but with more volatility.

Paul explains that tilting slightly toward smaller companies can increase expected returns over time. If small-cap value funds aren’t available in a 401(k), investors may consider using an IRA to access additional asset classes.


9. If I’m contributing monthly, should I rebalance using contributions or make separate trades? 27:59

Using contributions is generally the most efficient approach, especially in taxable accounts. Even in IRAs and 401(k)s, directing new contributions and reinvested distributions toward underweighted asset classes is an effective rebalancing strategy.


10. I have a closed 401(k) with a target date 2050 fund. Is that a good core holding? 28:50

Yes. Target date funds make excellent core holdings because they automatically adjust as you age.

An investor may choose to be more aggressive than the fund’s glide path suggests, but as a foundation, a target date fund provides diversification, simplicity, and built-in risk management.


A Final Thought

I recently spoke with an investor who realized they didn’t need to draw from their investments at all, thanks to Social Security and a pension—even with nearly $2 million invested.

When you don’t need the money, you get to choose your medicine—aggressive or conservative.

We’re excited about the upcoming Boot Camp, new tables, and educational tools. If we can do a better job teaching, our hope is that you’ll do a better job investing—for yourselves and for those who count on you.


Links Mentioned in This Episode


Investor Education

Truth Tellers – Social Security

Asset Allocation & Target Date Funds

Event

Research & Tools