485 | Mailbag: Spending Down to Zero, High-Fee 401(k), and Mini-Retirements

Most financial planners will tell you to save more, but what if you're actually saving too much for retirement? Brad Barrett and CFP Rachael Camp tackle listener questions about whether to spend down retirement accounts, navigating high-fee 401(k)s, and the financial math behind mini-retirements—all while challenging conventional wisdom about how much is "enough." Spending Down Retirement Savings [00:02:30] Rachael challenges the idea that many people may be over-saving instead of enjoying their money. The traditional 4% rule suggests living only off earned interest, but Die with Zero proposes a different strategy: consider a life balance between spending today and saving for tomorrow. The key is finding what works for your personal goals rather than following a one-size-fits-all approach. Withdrawal Strategy: Adjust your withdrawal strategy based on market performance and your personal goals [00:12:25]. Evaluate discretionary spending to inform retirement withdrawal rates [00:22:19]. 401(k) Fees Discussion [00:31:30] Rachael advises listeners to look for low fees in their 401(k) plans, ideally under 0.2%. It's critical to always get the employer match regardless of fees, as it represents a guaranteed return on investment. Comparing tax savings from contributing to a 401(k) against the investment fees is essential. Maximize Your 401(k): Always capitalize on the employer match offered in your 401(k) plan [00:37:26]. Mini-Retirement and Life Choices [00:41:00] The math behind planning for a mini-retirement is straightforward: save enough cash for your living expenses during that time. Rachael emphasizes the importance of experiences over purely financial considerations and discusses the potential positive impacts a sabbatical can have on one's career and financial independence journey. Roth IRA Contributions [00:50:00] Rachael explains the backdoor Roth IRA strategy as a way for high earners to contribute to a Roth IRA by first making a non-deductible contribution to a traditional IRA. She addresses concerns about the five-year rule, clarifying its impact regarding taxable conversions. Key Quotes "Many of us are likely over-saving rather than enjoying our money." [00:03:41] "Transitioning from saving to spending can be a challenging mindset shift." [00:09:34] "Not every decision needs to be strictly numerical; consider the life experiences too." [00:46:01] "Maximize your experiences—balance spending with appreciation." [00:29:58] "Challenging the norms of financial planning can lead to fascinating insights about spending." [00:30:36] Related Resources Jillian Johnsrud's Website [00:48:18] Michael Kitces' Research [00:10:41] Bill Perkins' Die with Zero [00:06:12] ▶ Listen Next: Ep. 491 — Answering Your Questions on How to Access Money Before 59.5 | Essential Listening