So much is going on in the financial world! Inflation rose 5.4% year-over-year in July, AMC will start accepting bitcoin, and Robinhood had a delayed IPO pop. What questions do you have about the latest financial news or about personal finance in general?
As a reminder, three participants in the Q&A will be chosen at random to receive a matte black Money Guy tumbler!
Thanks so much to everyone that has submitted a question so far! I did not expect such an overwhelming response, so we will definitely have to do this again soon. I am still going through and answering questions, but I may not get to everyone. As long as you have left a top-level comment, though, you will have a chance at a tumbler even if I don't respond. Also, please feel free to respond and interact with each other and answer other questions. Thanks again for participating in our inaugural Q&A!
I'm sure you hear this over and over but I wish I found Money Guy team years ago! When did we find out who were selected for the Tumblers? Hope I had a good question below!
Congrats to our tumbler winners, Neil, Kirsten, and Melanie! Please email daniel@aboundwealth.com and we'll get those tumblers sent out.
Thank you so much to everyone who participated! I really enjoyed answering questions and interacting with you all. I'm sure we'll do more of these in the future, so there will be other chances to ask questions and win a tumbler. We'll also be answering questions and giving away tumblers this Tuesday 8/17 at 10 AM CT on our YouTube channel (and biweekly every other Tuesday). Thanks again for joining us and being a subscriber!
I'd like to see a "Reverse FOO". That is, a recommended sequence of withdrawals in retirement assuming money is different buckets, like after-tax, tax-deferred, Roth, etc. Any guidance on that? Of course, every person's circumstances are different, but looking for general info.
HEY EVERYONE! The discussions below are very much like the FOO Course FB page. Consider joining the course (it covers a lot of life's financial basics) and get active on that FB page.
The Wealthy Barber and The Millionaire Next Door are timeless classics. I haven't got around to reading it yet, but Brian really loved The Psychology of Money by Morgan Housel.
While not directly related to personal finance, the best financial book I've ever read is probably "Black Edge" by Sheelah Kolhatkar. It is absolutely fascinating and very entertaining. I'm really looking forward to "Stacked" by Joe Saul-Sehy, of Stacking Benjamins, as well.
I am doing my Roth IRA, Roth 401k, and my HSA. I am comfortable with these items because I know that my age multiplier will see amazing growth by the time I withdrawal (in my 30’s now) and it will be tax free.
However, I have some extra cash I could put into a brokerage account for investment, but am gun shy because I simply don’t understand how taxes on investments work. I worry about building taxable wealth without understanding and so have not done anything with my cash.
Is there a primer for understanding investment tax liabilities and how best to strategize those brokerage accounts? Basic buy, hold, sell in a few decades sort of investing, not day trading or loss harvesting, or anything fancy.
In a taxable account, you generally want assets that don't generate ordinary income, or as much ordinary income, and more tax-efficient investments (and investments you plan to hold for more than one year). The article I linked gives a really great run-down and overview.
Great job Daniel! Such a wide variety of needs people have evidenced by breadth of questions. Thanks for sharing. RMD at age 80 shows the depth of thinking by your listeners.
Hi Daniel! Thanks for doing this! Can you explain more about what Abound Wealth does? My husband and I follow The Money Guy Show and are on step 7 of the FOO. Brian and Bo sometimes talk about the complexity that occurs when you reach a certain level of wealth and I always wondered what some examples are of that complexity that Abound Wealth can help with. Thanks so much!
Hi! Common areas where complexity can pop up are allocating investments across multiple accounts (401(k), IRA, taxable, HSA, etc.) and making sure your portfolio is tax-efficient and working together, estate and legacy planning (planning for future generations or what happens when you're gone), tax planning (the larger your portfolio and higher your income, the more complicated taxes can be), insurance coverage (what is necessary, what isn't, making sure you aren't underinsured or paying for unnecessary coverage), education planning for kids, retirement planning (how much will you spend, how much do you need, what will inflation look like, what will returns look like, how long will you live, etc.). We are a holistic fee-only financial advisory firm, meaning we offer all of the above and more.
I have always managed my own money, but am now considering getting some help. Some of the questions I have:
1. I am over the income limit to contribute to a Roth. I am not sure how to do a backdoor Roth, so need help.
2. I have a respectable 401k, primarily (about 90%) in pre-tax. I also have a pension (I am recently retired), so I really do not need to touch my 401k. By my calculations, my RMD when I hit 80 will be astronomical (about $400k, assume 9% growth, reduced by 0.1% every year, and RMD at 72). I need to do something so I don't have RMDs that put me in a top tax bracket.
I am 39 years old, and I maxed out my 401k and ROTH IRA contributions every year since graduating from college 17 years ago. As such, I have $1.2M in those accounts as a 39 year old and am starting to think about a goal of early retirement. Since I need to build a bridge account to last me to 59.5, at what point should one consider paring back 401k contributions if they’ve done so throughout their 20s and 30s and how much should one pare back (to get the company match only? Or to put myself in the lowest possible marginal tax bracket?)?
Jason - From the perspective of age 68, those large Trad IRA funds (rolled from the 401Ks) are now looming RMDs that will be TAX problems forever as they can not be turned off once started. See IRMAA and Widow Tax Trap.
Congrats and great job! What percent are you in Roth? As Charles said, tax planning to lower RMDs in the future is something I'm looking at. Run your numbers/age up to 45 and we are basically in your situation.
I'm curious how much of your financial advising becomes couples counseling. What advice do you have for couples (married or not married) to help prevent fights over money? Does your advice change if your talking to a younger couple vs an older couple?
My husband and I have pensions through our employers that will be equal to approximately 40% of our pre retirement income. Should we be more aggressively invested in stocks since we already will have the stable income portion covered? Thanks for your advice!
If your pension covers a significant portion of your income needs in retirement, and you have a large portion of outside assets, you may have the capacity to take on more risk and be more aggressive. Just because you have an increased capacity for risk doesn't mean you need to or should take it, though, and you should also consider how much you will need to cover your financial needs and goals in retirement, and how aggressive you need to be to accomplish those goals.
It depends mostly on what you want in retirement. If you can live on 40% and be fine and that's what you want you can stick with it. If you want more you just need to invest the difference of what you want. I would personally invest because pensions have a history of drying up (unfortunately).
Ha! I don't participate in the annual charity golf tournament so I can't say for sure. I think they are both pretty good. I think I could take them both in ping-pong.
Any tips for a soon-to-be first-time parent? We've done some of the basics like life insurance, working on a will as well. 529 plan is in the works and we're working on maxing our HSA. What am I missing?
ROTH CONV: What should be the deciding factors when considering Roth Conversions? I was sure it was Marginal Tax Rate, but recently saw a video proposing that Effective Tax Rate should be the consideration. Can you also comment on Tax Brackets, Time, and the 5 Year Rule ?
We are 15 years from retirement and have an HSA maxed out with an end value projected to be around $150k. With healthcare costs continuing to rise what is a good bogey to budget for the annual costs of healthcare in retirement years?
Hi Daniel, should I be investing in several different target retirement funds? Example lets say I plan to retire in 2050. Should I invest all in 2050 target retirement fund or should I spread it out with 2050, 2060, 2070 target retirement funds? Thanks!
I love the FTE touch on these articles. Wondering, your opinion on where should I keep my 3-5 year “cash” expenses? If it sits in my savings account, I might buy something stupid. I have seen some Fidelity options, but concerned about inflation and taxes. I’m 40y/o, stable govt paycheck and debt free. Thanks. Joe
Our average age is 30. We make a little over 100k gross. We are maxing our IRAs, and my HSA. We contribute to our 401ks and a brokerage account. Which brings us to about 27% savings. We have about 20k in student loans. The interest rates range from 3.15% to 4.25%. They are in forbearance until Jan, and are in deferment until May 2023. Our current plan is to save the cash until Jan for a house payment. After the forbearance ends, should we just pay the interest and continue to save for the house? Should we just focus on paying off the debt, maybe reduce our savings to help pay it faster? We're looking forward for the family part of our journey but we are also looking forward to being debt free (minus the future mortgage). Thoughts?
Thanks a ton for the show. It really has inspired us and we have made a huge improvement to our finances because of your show.
I was in your situation a while back. I am 30 now. If you can save 27% of 100K that is 27 thousand a year, since you have only 20K in student loan debt i would, pause my brokerage and 401 (unless there is a match your getting, then keep contributions until match). I would get that debt paid off in 1 year or so without completely stopping your retirement contributions. You'll feel better without that SL debt.
That's pretty much what my wife was leaning towards. Her work does match so we would keep hers no lower than 5%. My work does have a match but is discretionary by quarter and I wont find out if they are going to match or not until its to late. So not sure what to do with mine. My concern would be that once we lower our contributions we'll find a reason not to work them back up. house, kids, college, etc. But I think your approach is what we are going to do unless someone has a really compelling argument against it.
There will always be something or someone trying to pull at your wallet. We setup automated withdrawals to reach our 25% then live off the rest. Since we spend less than what we make after contributions we always have a few dollars at the end of the month to save for the things like house, car, college. etc.
But it seems like every month we change our minds on what extra thing to save for so we are admittedly not the best at that part.
I'm having a hard time understanding why I need money in an after tax brokerage account. With our options for HSA, Roth, Solo 401k with "company contributions", and after tax mega backdoor Roth conversions, my wife and I are able to put away close to $100k in tax advantaged retirement accounts. We have been saving 30-35% for last few years and at 45 debt free including house with enough in retirement now we could coast and be fine. Is there really a reason to do after tax brokerage accounts? I could retire before 55 if I really wanted to, but of course it would be easier to stick it out to 55 so I wouldn't need to due 72t or have had money in brokerage account to bridge. I know 72t can be a hassle, but I'd hate to give up the tax advantaged options if I still have some left on the table.
I’ve heard them refer to advanced tax strategies as a reason. Things like loss harvesting don’t work in those advantaged accounts. But I don’t have the experience to comment on it practically.
Are you concerned with Legacy issues? The Trad is taxable to non spouse heirs - 10 yrs. You paid the tax on the Roth and is Tax Free to heirs - also 10 yrs. Stuff in your account gets a step up in Basis - no tax.
Good points to consider. I plan to try and convert more to Roth before 2026 when TCJA expire and rates go up, so they will be left with a good chunk tax free if I don't end up using it. I'll check into it a little deeper.
The optimum time for conversions are after work (I quit at 67) and before SS and RMD (which start at 70 & 72, respectively). This is a good reason to have "your" money to cover living during this period to minimize income and maximize conversion. But who know what the rate will be for you then???
with tax rates reverting back in 2026, I can convert now even while working and likely be better off than what the "lower" tax brackets will be in 10 years when I'm 55 and can officially retire. I'll still save some in pre-tax to do conversions in the later years as well to maximize the lower tax brackets. Its a good problem to have, but just want to make sure I take advantage now. I'll be setting something up with a CFP just to make sure.
One reason is access to the money. Like you said you put away funds in tax adavntaged accounts, but will have to wait to access that money. The money guys may know other reasons to have an after tax brokerage account.
I do some side-hustle business that could keep our living expenses covered until 59.5, but backup plan could be setting up 72(t) deductions. I hear they can be a hassle though so you don't hear planners mention it that often.
Rule 72(t) allows penalty-free withdrawals from IRA accounts and other tax-advantaged retirement accounts like 401(k) and 403(b) plans. ... This rule allows account holders to benefit from their retirement savings before retirement age through early withdrawal without the otherwise required 10% penalty.
If you have a large amount of money in savings (greater than your 3-6 month emergency fund) then you should probably have that money in the market so that its value isn't eroding away due to inflation. If you have children or grandchildren you could also set up a 529, UTMA, etc for their benefit which could have tax advantages depending on your state.
Retirement Calculators. Are they any good at predicting what you might actually need/ want in retirement? I live in a HCOL and am in a decently high earning profession, as is my husband. Retirement calculators are all based on being able to have a certain % of your income each year after you retire and include the idea that your income will increase over time as a function of the calculators. Most calculators suggest you will need somewhere around 70% of your pre-retirement income. I can’t tell if that still is accurate for higher earners who don’t live above their means and are very thoughtful with their money and purchases (in order to avoid golden handcuffs). During our working years we will have a mortgage and it will be expensive (HCOL area) but that would be paid off before we retire. What is a good benchmark % as a function of pre-retirement income for higher earners, is 70% still accurate?
Thanks Matt B. I've done speadsheets also. I've seen YouTubes that show nice graphics for this information and I guess I'm envious. My situation does not lend itself to easy analysis, so I guess I will muddle on...
I am curious about factoring inflation into retirement income needs. Similar to the above, I currently live in a HCOL area, but I am able to keep my fixed expenses low because I live in a modest home that I bought for a great price many years ago. I make about 160k, and save about 30% in Roth 401K, with an after tax mega back door convention of my generous company match annually, and I also have an after tax brokerage account that I contribute to monthly with the money I have left over each month that I don’t spend. I am single, 40yo and living in Southern CA. Unless the tax and political climate changes I don’t plan to retire here, so it’s difficult for me to predict my income needs when I retire somewhere around 60 and it’s even more confusing when I consider inflation. So for now I am keeping my foot on the gas petal and living the forced scarcity model. I would like to be able to model my expected income and needs 15-40 years in the future along with my availability of 3 bucket funds which I am driving to balance out to minimize future taxes (another huge unknown that I have been able to accept). I appreciate any explanation or advice on factoring inflation into my nest egg growth and retirement drawdown modeling.
How do you manage couples income? My wife makes a lot more money than I do and I’m ok with separate account. Fortunately we have the same end goal with finances as far as savings for retirement per 403b and 457. One is a expender more than the other. Please advise
You guys give a lot of guidance about retirement for folks who don't have a pension, but what about those of us who do? How much should we be saving? I'm 52 and will retire with 30 years of service, but I know my pension won't be enough. What's a reasonable amount that we should have saved to supplement our pension?
If you know how much your annual pension contributions are, include that in your savings rate. You can also include employer contributions if you make under $100k/single or $200k/MFJ. If you don't know how much your annual pension contributions are, you should be able to pull your latest pension statement to find out.
For mid-term savings goals like vehicles and down payments, do you recommend investing this money to help save up faster? When is it wise to invest it vs keep cash on hand?
How much does the actual service that someone uses matter? I currently have 2500 in a Roth IRA with Betterment, but I've seen a lot of people talk about how vanguard or schwab would be better. Will the choice of brokerage actually make that much of an impact in the long run? If so, is it better to switch now or wait until I have more saved up? Thank you!
The important factors you want to look at are the range of investments and funds available and the expenses and fees of those investments. There's also something to be said for considering a custodian that has been in business for decades over one that is new on the scene.
My kids are mowing some lawns this summer and may make up to $600 each. They are interested in starting a Roth IRA. I have found articles online stating you can used lawn mowing and babysitting as earned income to contribute to a Roth. In the recent money guy article it said you have to file a tax return in order to pay FICA taxes to contribute to a Roth. It looks like lawn mowing is considered a household employee so there are no FICA taxes due. Is it possible have the kids contribute a Roth IRA using their lawn mowing money without filling a tax return for them?
First of all congratulations on your first newsletter! With the extension on student loan forbearance until January what should folks do with those funds for student loan payments?
Potential student loan forgiveness, in some form or another, is still on the table so it's best to wait and see what happens. Since all federal student loans are at 0% interest, there is no drawback to waiting (but there could be a huge drawback to paying your student loans off and finding out that all or a portion could have been forgiven).
You could save the money you would be paying to your student loans in a high-yield savings account, and when interest resumes and forgiveness or no forgiveness gets determined, you can dump that money into your student loans.
Is there a rule of thumb to determine when it's financially okay to outsource household tasks such as lawn care, laundry services, or house cleaning? It feels wrong to outsource some of those tasks, because we can do them ourselves; however, I'm wondering if there's a way we can think about it that will help assess if the money to outsource is worth it. Thank you!
If you know you are saving what you should be saving for retirement (20-25%) and have reached Steps 8 or 9 of the FOO you can consider it (and maybe even earlier if the cost/benefit makes sense). It's hard to put a dollar value on the time and energy it will save you, but if you have reached a point where you it isn't going to impact your retirement savings or other financial goals, it's definitely worth considering. Time is the only resource we can't ever get more of; there's nothing wrong with outsourcing tasks you don't enjoy.
Daniel, I hear you as to the financial sense but there are a few things to consider when it comes to home care, lawn care, etc. Yes, you are capable of doing these yourself. If you do, is there an opportunity cost? Financial - now you have less time for side hustles or extra hours at work. Personal - less time to spend with loved ones. Then, since you may not enjoy these tasks, they may not get done often enough. If the kitchen is dirty, do you eat out? Do you turn down side hustles because “you really should” get to these tasks first, only to avoid the tasks a little longer? Do you go out with friends instead of inviting them to a messy house? Is there a mental component - do you beat yourself up for the mess?
My wife and i took Brian's advice from an older episode and laid out what we wanted to do in terms of experiences in 0-5 and 5-10 years. For the longer time frame, 5-10 years is it recommended to put that money aside in a brokerage account and let it grow? As those trips in the 5-10 year time frame are the more expensive ones!
For additional info: we are about to turn 30, we save 50% of my income, own our home (2.75% 30yr fixed), and have only low interest student loan debt
I am in my late 20s and have about $110k in savings, no debt. I'm being a bit aggressive with savings/investing as I want to take advantage of compound interest and buy a duplex in a few years. I don't want to be a miser (lol) though- any tips on balancing savings and investing with "fun money"?
I'm 53. Trying to maximize contributions to Roth IRA accounts. I maxed my Roth IRA $7,000 for 2021. Had after tax contributions from years past in my employer's 401k plan. So last week I moved the after tax to the Roth IRA (the gains which are 2x the after-tax contributions, went to a traditional IRA, so I don't have to pay taxes this year).
I want to continue putting more after tax money in Roth accounts. I'm told that I can also create an LLC, pay myself up to $50K, and open a solo 401k and put more after-tax money, as long as I have a schedule C activity. Then I can roll that solo 401k after tax money, and put it in another Roth IRA. Is this shady or valid in the eyes of the IRS?
I'm curious about ESG funds offered by the likes of Vanguard and Fidelity, which allow someone to support companies that align with their moral values. Can these types of funds fit into a healthy retirement plan? Should I worry about having too much of my portfolio tied up in these funds?
FTE Daniel, what are your thoughts on having a "in case of death" packet for Spouse or Family? I am building mine now, but unsure on who should have "access or knowledge" that it exist, and where. Worried due to all the info it will have listed out. Is there a certain way I should go about this?
How do you feel about “Robo investment” accounts ( examples bring wealthfront or betterment)? Seems like a good opportunity to use tax loss harvesting on a small scale. Never heard you guys talk about it, am I missing something?
Everyone talks about how equities will give about 10% rate of return due to historical trends and past performance. However, bonds have averaged a similar yield, and they’re abysmal for the foreseeable future. Do you think there’s any correlation between equities - and CDs, mortgage interest rates, bonds, etc. ?
They were quite high for a period, but so was inflation (Thank-you Jimmy!), which is a big driver of bond yields. During that time, you may have gotten big returns, but the return was mostly replacing your lost purchasing power.
Compare this to (sorry I could not find percentage growth):
Realize that when the RATE goes up, the value of bond your are holding goes down.
Also note that the GMVT and FED are loosely related. Given the debt, the GMVT can not afford to have the rate to increase. The amount of tax proceeds that allocated to pay interest on the debt is enormous.
We’re following the FOO and started contributing to a 529 for our two girls (4 & 6 years old) last year. We’d like to get our oldest in a few classes like music lessons, horseback riding, gymnastics, etc. however we’d have to cut into the 529 budget in order to do so. What are your thoughts on lifestyle choices affecting our investment strategy and delaying potential growth?
First off, congrats! You guys are killing it and it's fun to watch along. If I could invest in your subscriber count, I wouldn't have to save another penny for retirement! Seriously Q though. With inflation rising and interest rates so low, is there any better place to store house down payment dollars to be used in the < 3 years than a "high interest" savings account?
The Wealthy Barber and The Millionaire Next Door are timeless classics. I haven't got around to reading it yet, but Brian really loved The Psychology of Money by Morgan Housel.
While not directly related to personal finance, the best financial book I've ever read is probably "Black Edge" by Sheelah Kolhatkar. It is absolutely fascinating and very entertaining. I'm really looking forward to "Stacked" by Joe Saul-Sehy, of Stacking Benjamins, as well.
I'd like to hear what others on here think as well, so I'll add mine. I read Millionaire Next Door when I was probably 20-21 and it stuck. Books I'd recommend now would be "Simple Path to Wealth" by JL Collins and "I'll Teach You to Be Rich" by Ramit Sethi. I'm not all the way through the last one, but I like how it's put together and written. More like a bunch of magazine articles in a way. Millionaire Next Door is more mindset, the other two are more practical application with some examples and actionable items.
I know the money guy show recommends the Millionaire Next door. There was an episode where Brian and Bo talk about books they read and recommended. I can’t remember which episode that was.
Kingsley - With none of your details provided, I share my decision criteria. Marginal Tax Rate!
As you know about the MGs, do you consider yourself a financial mutant? If so, you will likely have some money when you retire.
If you have a lot in Trad IRA, you will have to take RMDs (starting age 72). Like an atomic bomb, there is a critical mass - less, the IRA will decrease over time and more, it will increase. Your RMDs will shrink or grow and you will move up or down the tax brackets. If you think you will be in the money, do conversions, but if you expect to be broke, there is little need to do them.
If you decide to do Roth Conv, convert just enough to fill your current tax bracket.
Don't convert it all, you can take some out to fill your standard deduction - free money.
BTW, if you are All Wall Street, Trad and Roth are OK, but if you are considering Alternative or early retirement (FIRE), you should hold back some to have "your" money.
Possibly outside your typical wheelhouse, but where should I go about seeking advice on life insurance, wills, etc. if I’m an American living abroad who moves frequently?
Loved the article on saving for children, but what's your advice on instilling a mentality of saving into our children? Recommended approaches, books, etc?
Definitely have your kids read The Wealthy Barber. It's written in a narrative format and the barber is actually talking to kids. I think it's important to involve your kids in household financials, and get them used to concepts like giving, saving, budgeting, etc. and leading by example.
Generally when you crossover a combined marginal income tax rate of 30% you can consider it. There are other factors to consider as well, like your tax rate now vs. tax rate in retirement, taxability of Social Security, increased Medicare premiums, current account structure, etc.
Back to basics FOO question, but if I work somewhere with a pension, already fund an IRA, am I correct in assuming my only other option is a taxable? Anything I might be missing? Thanks!
HSA is you have a high-deductible health plan, and solo 401(k) or other self-employed plan if you have any self-employment income coming in. Otherwise, taxable would be the next place to look.
It sounds like with those 3 funds you are covering your bases and being prepared for the unexpected. It's always better to be a little more on their conservative side, as you'd rather have too much cash than too little when the market goes down or you lose your job, etc. Still, you don't want to hold too much cash when that money could be working harder for you if it were invested. The general rule of thumb is 3-6 months of expenses. If you are single with one source of income you may need more in cash; if you are married with multiple sources of income, you may need less. You should also consider your job security, industry, how likely certain events are (in addition to job loss, car breaking down, medical emergency, other unexpected expense).
With many people talking about crypto these days, what are your feelings about it? Is it better utilized truly as a currency or as a small portion of ones investment strategy going forward? I often hear Brian and Bo talk about the stock market being similar to walking up a mountain with a yo-yo, is crypto, specifically Bitcoin, viewed in the same manner, or is it too early to tell? Thanks!
If you are enthusiastic about crypto, it can be a small portion of your overall portfolio; the rule we have for single securities applies (no more than 5% of your total investable portfolio). Consider it a more speculative play. Right now it is too early to tell how it really behaves since it has been around for such a short time when compared to the stock market. It seems to behave a little like gold, with speculation increasing in times of uncertainty and when there are fears of inflation. "Digital gold for younger people & the tech-inclined" wouldn't be a completely inaccurate description of crypto.
Thanks so much to everyone that has submitted a question so far! I did not expect such an overwhelming response, so we will definitely have to do this again soon. I am still going through and answering questions, but I may not get to everyone. As long as you have left a top-level comment, though, you will have a chance at a tumbler even if I don't respond. Also, please feel free to respond and interact with each other and answer other questions. Thanks again for participating in our inaugural Q&A!
Thank you for all you and the team are doing
Thank you FTE DANIEL!
Thanks Daniel!
I'm sure you hear this over and over but I wish I found Money Guy team years ago! When did we find out who were selected for the Tumblers? Hope I had a good question below!
Congrats to our tumbler winners, Neil, Kirsten, and Melanie! Please email daniel@aboundwealth.com and we'll get those tumblers sent out.
Thank you so much to everyone who participated! I really enjoyed answering questions and interacting with you all. I'm sure we'll do more of these in the future, so there will be other chances to ask questions and win a tumbler. We'll also be answering questions and giving away tumblers this Tuesday 8/17 at 10 AM CT on our YouTube channel (and biweekly every other Tuesday). Thanks again for joining us and being a subscriber!
Do we just ask those questions in the youtube chat live? Or submit them in advance?
Yes! The best way to get in the hopper is to just ask in the YouTube chat for the live show.
I'd like to see a "Reverse FOO". That is, a recommended sequence of withdrawals in retirement assuming money is different buckets, like after-tax, tax-deferred, Roth, etc. Any guidance on that? Of course, every person's circumstances are different, but looking for general info.
HEY EVERYONE! The discussions below are very much like the FOO Course FB page. Consider joining the course (it covers a lot of life's financial basics) and get active on that FB page.
What's your top 3 personal finance books that you highly recommend?
The Wealthy Barber and The Millionaire Next Door are timeless classics. I haven't got around to reading it yet, but Brian really loved The Psychology of Money by Morgan Housel.
While not directly related to personal finance, the best financial book I've ever read is probably "Black Edge" by Sheelah Kolhatkar. It is absolutely fascinating and very entertaining. I'm really looking forward to "Stacked" by Joe Saul-Sehy, of Stacking Benjamins, as well.
I am doing my Roth IRA, Roth 401k, and my HSA. I am comfortable with these items because I know that my age multiplier will see amazing growth by the time I withdrawal (in my 30’s now) and it will be tax free.
However, I have some extra cash I could put into a brokerage account for investment, but am gun shy because I simply don’t understand how taxes on investments work. I worry about building taxable wealth without understanding and so have not done anything with my cash.
Is there a primer for understanding investment tax liabilities and how best to strategize those brokerage accounts? Basic buy, hold, sell in a few decades sort of investing, not day trading or loss harvesting, or anything fancy.
Thanks!
Check out this guide from Fidelity about the appropriateness of different types of assets in different accounts (especially the table near the bottom of the page): https://www.fidelity.com/viewpoints/investing-ideas/asset-location-lower-taxes
In a taxable account, you generally want assets that don't generate ordinary income, or as much ordinary income, and more tax-efficient investments (and investments you plan to hold for more than one year). The article I linked gives a really great run-down and overview.
There are lots of resources online, but the basics are that if you don't sell you don't pay taxes.
Great job Daniel! Such a wide variety of needs people have evidenced by breadth of questions. Thanks for sharing. RMD at age 80 shows the depth of thinking by your listeners.
Congrats on this by the way! Have you thought of starting a discord for MGS?
That would be fun! A Mutant Meetup Discord!
Hi Daniel! Thanks for doing this! Can you explain more about what Abound Wealth does? My husband and I follow The Money Guy Show and are on step 7 of the FOO. Brian and Bo sometimes talk about the complexity that occurs when you reach a certain level of wealth and I always wondered what some examples are of that complexity that Abound Wealth can help with. Thanks so much!
Hi! Common areas where complexity can pop up are allocating investments across multiple accounts (401(k), IRA, taxable, HSA, etc.) and making sure your portfolio is tax-efficient and working together, estate and legacy planning (planning for future generations or what happens when you're gone), tax planning (the larger your portfolio and higher your income, the more complicated taxes can be), insurance coverage (what is necessary, what isn't, making sure you aren't underinsured or paying for unnecessary coverage), education planning for kids, retirement planning (how much will you spend, how much do you need, what will inflation look like, what will returns look like, how long will you live, etc.). We are a holistic fee-only financial advisory firm, meaning we offer all of the above and more.
Check out our most recent show about financial advisors, what to look for, when you need one: https://www.youtube.com/watch?v=I-4Iz1y5TFI and our Work With Us page if you are interested in learning more about us or submitting a form: https://www.moneyguy.com/work-with-us/
Thanks so much for the detailed answer, Daniel!
I have always managed my own money, but am now considering getting some help. Some of the questions I have:
1. I am over the income limit to contribute to a Roth. I am not sure how to do a backdoor Roth, so need help.
2. I have a respectable 401k, primarily (about 90%) in pre-tax. I also have a pension (I am recently retired), so I really do not need to touch my 401k. By my calculations, my RMD when I hit 80 will be astronomical (about $400k, assume 9% growth, reduced by 0.1% every year, and RMD at 72). I need to do something so I don't have RMDs that put me in a top tax bracket.
Just several examples of complexity.
Hi Aras! Thanks for the response! I really appreciate how clearly you explained some real life examples!
I am 39 years old, and I maxed out my 401k and ROTH IRA contributions every year since graduating from college 17 years ago. As such, I have $1.2M in those accounts as a 39 year old and am starting to think about a goal of early retirement. Since I need to build a bridge account to last me to 59.5, at what point should one consider paring back 401k contributions if they’ve done so throughout their 20s and 30s and how much should one pare back (to get the company match only? Or to put myself in the lowest possible marginal tax bracket?)?
Jason - From the perspective of age 68, those large Trad IRA funds (rolled from the 401Ks) are now looming RMDs that will be TAX problems forever as they can not be turned off once started. See IRMAA and Widow Tax Trap.
Congrats and great job! What percent are you in Roth? As Charles said, tax planning to lower RMDs in the future is something I'm looking at. Run your numbers/age up to 45 and we are basically in your situation.
About 25% Roth/75% 401k
Good morning yall! It's awesome to already see some familiar names from the youtube chat!
Yall have answered my big life questions time and time again so i'm just here to watch and enjoy yalls company!
The money guy family gives me all the motivation I need!
I'm curious how much of your financial advising becomes couples counseling. What advice do you have for couples (married or not married) to help prevent fights over money? Does your advice change if your talking to a younger couple vs an older couple?
My husband and I have pensions through our employers that will be equal to approximately 40% of our pre retirement income. Should we be more aggressively invested in stocks since we already will have the stable income portion covered? Thanks for your advice!
Congrats Melanie! Your question was selected at random to receive a tumbler. Please email daniel@aboundwealth.com and we'll get that tumbler sent out.
Check out this Ask The Money Guy segment: https://www.youtube.com/watch?v=t0CyQqDMSfw
If your pension covers a significant portion of your income needs in retirement, and you have a large portion of outside assets, you may have the capacity to take on more risk and be more aggressive. Just because you have an increased capacity for risk doesn't mean you need to or should take it, though, and you should also consider how much you will need to cover your financial needs and goals in retirement, and how aggressive you need to be to accomplish those goals.
It depends mostly on what you want in retirement. If you can live on 40% and be fine and that's what you want you can stick with it. If you want more you just need to invest the difference of what you want. I would personally invest because pensions have a history of drying up (unfortunately).
Great question!
Who's better at golf, Brian Or Bo? whos better at ping pong, Brian or Bo?
Ha! I don't participate in the annual charity golf tournament so I can't say for sure. I think they are both pretty good. I think I could take them both in ping-pong.
Any tips for a soon-to-be first-time parent? We've done some of the basics like life insurance, working on a will as well. 529 plan is in the works and we're working on maxing our HSA. What am I missing?
About 80% of the things that you are told you need to buy for a baby, you don't need at all. :) Congratulations!
Haha, thank you! Have definitely been asking people what baby stuff they got that they didn't need. Lots of "keep the box, keep the receipts!" advice
UTMA or UGMA account is probably the only thing I can think of financially, but there's a lot more to parenthood than money :)
For sure! I'm fixated on what I can control for now, since I know it's all about to be way out of my control, LOL.
ROTH CONV: What should be the deciding factors when considering Roth Conversions? I was sure it was Marginal Tax Rate, but recently saw a video proposing that Effective Tax Rate should be the consideration. Can you also comment on Tax Brackets, Time, and the 5 Year Rule ?
We are 15 years from retirement and have an HSA maxed out with an end value projected to be around $150k. With healthcare costs continuing to rise what is a good bogey to budget for the annual costs of healthcare in retirement years?
Hi Daniel, should I be investing in several different target retirement funds? Example lets say I plan to retire in 2050. Should I invest all in 2050 target retirement fund or should I spread it out with 2050, 2060, 2070 target retirement funds? Thanks!
I love the FTE touch on these articles. Wondering, your opinion on where should I keep my 3-5 year “cash” expenses? If it sits in my savings account, I might buy something stupid. I have seen some Fidelity options, but concerned about inflation and taxes. I’m 40y/o, stable govt paycheck and debt free. Thanks. Joe
How to be patient while just needing to give your army of dollar bills time to grow?
Our average age is 30. We make a little over 100k gross. We are maxing our IRAs, and my HSA. We contribute to our 401ks and a brokerage account. Which brings us to about 27% savings. We have about 20k in student loans. The interest rates range from 3.15% to 4.25%. They are in forbearance until Jan, and are in deferment until May 2023. Our current plan is to save the cash until Jan for a house payment. After the forbearance ends, should we just pay the interest and continue to save for the house? Should we just focus on paying off the debt, maybe reduce our savings to help pay it faster? We're looking forward for the family part of our journey but we are also looking forward to being debt free (minus the future mortgage). Thoughts?
Thanks a ton for the show. It really has inspired us and we have made a huge improvement to our finances because of your show.
I was in your situation a while back. I am 30 now. If you can save 27% of 100K that is 27 thousand a year, since you have only 20K in student loan debt i would, pause my brokerage and 401 (unless there is a match your getting, then keep contributions until match). I would get that debt paid off in 1 year or so without completely stopping your retirement contributions. You'll feel better without that SL debt.
That's pretty much what my wife was leaning towards. Her work does match so we would keep hers no lower than 5%. My work does have a match but is discretionary by quarter and I wont find out if they are going to match or not until its to late. So not sure what to do with mine. My concern would be that once we lower our contributions we'll find a reason not to work them back up. house, kids, college, etc. But I think your approach is what we are going to do unless someone has a really compelling argument against it.
There will always be something or someone trying to pull at your wallet. We setup automated withdrawals to reach our 25% then live off the rest. Since we spend less than what we make after contributions we always have a few dollars at the end of the month to save for the things like house, car, college. etc.
But it seems like every month we change our minds on what extra thing to save for so we are admittedly not the best at that part.
Do you think the threshold for seeking planner advice is a certain dollar amount, or a certain level of complexity, or…?
I'm having a hard time understanding why I need money in an after tax brokerage account. With our options for HSA, Roth, Solo 401k with "company contributions", and after tax mega backdoor Roth conversions, my wife and I are able to put away close to $100k in tax advantaged retirement accounts. We have been saving 30-35% for last few years and at 45 debt free including house with enough in retirement now we could coast and be fine. Is there really a reason to do after tax brokerage accounts? I could retire before 55 if I really wanted to, but of course it would be easier to stick it out to 55 so I wouldn't need to due 72t or have had money in brokerage account to bridge. I know 72t can be a hassle, but I'd hate to give up the tax advantaged options if I still have some left on the table.
I’ve heard them refer to advanced tax strategies as a reason. Things like loss harvesting don’t work in those advantaged accounts. But I don’t have the experience to comment on it practically.
Are you concerned with Legacy issues? The Trad is taxable to non spouse heirs - 10 yrs. You paid the tax on the Roth and is Tax Free to heirs - also 10 yrs. Stuff in your account gets a step up in Basis - no tax.
Good points to consider. I plan to try and convert more to Roth before 2026 when TCJA expire and rates go up, so they will be left with a good chunk tax free if I don't end up using it. I'll check into it a little deeper.
The optimum time for conversions are after work (I quit at 67) and before SS and RMD (which start at 70 & 72, respectively). This is a good reason to have "your" money to cover living during this period to minimize income and maximize conversion. But who know what the rate will be for you then???
with tax rates reverting back in 2026, I can convert now even while working and likely be better off than what the "lower" tax brackets will be in 10 years when I'm 55 and can officially retire. I'll still save some in pre-tax to do conversions in the later years as well to maximize the lower tax brackets. Its a good problem to have, but just want to make sure I take advantage now. I'll be setting something up with a CFP just to make sure.
One reason is access to the money. Like you said you put away funds in tax adavntaged accounts, but will have to wait to access that money. The money guys may know other reasons to have an after tax brokerage account.
I do some side-hustle business that could keep our living expenses covered until 59.5, but backup plan could be setting up 72(t) deductions. I hear they can be a hassle though so you don't hear planners mention it that often.
Rule 72(t) allows penalty-free withdrawals from IRA accounts and other tax-advantaged retirement accounts like 401(k) and 403(b) plans. ... This rule allows account holders to benefit from their retirement savings before retirement age through early withdrawal without the otherwise required 10% penalty.
If you have a large amount of money in savings (greater than your 3-6 month emergency fund) then you should probably have that money in the market so that its value isn't eroding away due to inflation. If you have children or grandchildren you could also set up a 529, UTMA, etc for their benefit which could have tax advantages depending on your state.
In light of inflation, what would be your current rec for mid-term saving with an uncertain timeframe, perhaps I-bonds?
Retirement Calculators. Are they any good at predicting what you might actually need/ want in retirement? I live in a HCOL and am in a decently high earning profession, as is my husband. Retirement calculators are all based on being able to have a certain % of your income each year after you retire and include the idea that your income will increase over time as a function of the calculators. Most calculators suggest you will need somewhere around 70% of your pre-retirement income. I can’t tell if that still is accurate for higher earners who don’t live above their means and are very thoughtful with their money and purchases (in order to avoid golden handcuffs). During our working years we will have a mortgage and it will be expensive (HCOL area) but that would be paid off before we retire. What is a good benchmark % as a function of pre-retirement income for higher earners, is 70% still accurate?
RELATED: RETIREMENT: Do you know of any available Tax forecasting software? Something that takes into account SS, RMD, IRMAA, IRA growth, etc.
I just set up a spreadsheet to simulate different projections and scenarios since I couldn't find anything out there.
Thanks Matt B. I've done speadsheets also. I've seen YouTubes that show nice graphics for this information and I guess I'm envious. My situation does not lend itself to easy analysis, so I guess I will muddle on...
I am curious about factoring inflation into retirement income needs. Similar to the above, I currently live in a HCOL area, but I am able to keep my fixed expenses low because I live in a modest home that I bought for a great price many years ago. I make about 160k, and save about 30% in Roth 401K, with an after tax mega back door convention of my generous company match annually, and I also have an after tax brokerage account that I contribute to monthly with the money I have left over each month that I don’t spend. I am single, 40yo and living in Southern CA. Unless the tax and political climate changes I don’t plan to retire here, so it’s difficult for me to predict my income needs when I retire somewhere around 60 and it’s even more confusing when I consider inflation. So for now I am keeping my foot on the gas petal and living the forced scarcity model. I would like to be able to model my expected income and needs 15-40 years in the future along with my availability of 3 bucket funds which I am driving to balance out to minimize future taxes (another huge unknown that I have been able to accept). I appreciate any explanation or advice on factoring inflation into my nest egg growth and retirement drawdown modeling.
How do you manage couples income? My wife makes a lot more money than I do and I’m ok with separate account. Fortunately we have the same end goal with finances as far as savings for retirement per 403b and 457. One is a expender more than the other. Please advise
You guys give a lot of guidance about retirement for folks who don't have a pension, but what about those of us who do? How much should we be saving? I'm 52 and will retire with 30 years of service, but I know my pension won't be enough. What's a reasonable amount that we should have saved to supplement our pension?
If you know how much your annual pension contributions are, include that in your savings rate. You can also include employer contributions if you make under $100k/single or $200k/MFJ. If you don't know how much your annual pension contributions are, you should be able to pull your latest pension statement to find out.
For mid-term savings goals like vehicles and down payments, do you recommend investing this money to help save up faster? When is it wise to invest it vs keep cash on hand?
For any goal greater than 5 years in the future, you can consider investing for your goal. With shorter-term goals you may want to consider cash.
How much does the actual service that someone uses matter? I currently have 2500 in a Roth IRA with Betterment, but I've seen a lot of people talk about how vanguard or schwab would be better. Will the choice of brokerage actually make that much of an impact in the long run? If so, is it better to switch now or wait until I have more saved up? Thank you!
The important factors you want to look at are the range of investments and funds available and the expenses and fees of those investments. There's also something to be said for considering a custodian that has been in business for decades over one that is new on the scene.
My kids are mowing some lawns this summer and may make up to $600 each. They are interested in starting a Roth IRA. I have found articles online stating you can used lawn mowing and babysitting as earned income to contribute to a Roth. In the recent money guy article it said you have to file a tax return in order to pay FICA taxes to contribute to a Roth. It looks like lawn mowing is considered a household employee so there are no FICA taxes due. Is it possible have the kids contribute a Roth IRA using their lawn mowing money without filling a tax return for them?
First of all congratulations on your first newsletter! With the extension on student loan forbearance until January what should folks do with those funds for student loan payments?
Potential student loan forgiveness, in some form or another, is still on the table so it's best to wait and see what happens. Since all federal student loans are at 0% interest, there is no drawback to waiting (but there could be a huge drawback to paying your student loans off and finding out that all or a portion could have been forgiven).
You could save the money you would be paying to your student loans in a high-yield savings account, and when interest resumes and forgiveness or no forgiveness gets determined, you can dump that money into your student loans.
Is there a rule of thumb to determine when it's financially okay to outsource household tasks such as lawn care, laundry services, or house cleaning? It feels wrong to outsource some of those tasks, because we can do them ourselves; however, I'm wondering if there's a way we can think about it that will help assess if the money to outsource is worth it. Thank you!
If you know you are saving what you should be saving for retirement (20-25%) and have reached Steps 8 or 9 of the FOO you can consider it (and maybe even earlier if the cost/benefit makes sense). It's hard to put a dollar value on the time and energy it will save you, but if you have reached a point where you it isn't going to impact your retirement savings or other financial goals, it's definitely worth considering. Time is the only resource we can't ever get more of; there's nothing wrong with outsourcing tasks you don't enjoy.
Daniel, I hear you as to the financial sense but there are a few things to consider when it comes to home care, lawn care, etc. Yes, you are capable of doing these yourself. If you do, is there an opportunity cost? Financial - now you have less time for side hustles or extra hours at work. Personal - less time to spend with loved ones. Then, since you may not enjoy these tasks, they may not get done often enough. If the kitchen is dirty, do you eat out? Do you turn down side hustles because “you really should” get to these tasks first, only to avoid the tasks a little longer? Do you go out with friends instead of inviting them to a messy house? Is there a mental component - do you beat yourself up for the mess?
We are new parents, and we'd love to have more time to spend with our daughter since we both work (and love our jobs :) ). Thank you!
My wife and i took Brian's advice from an older episode and laid out what we wanted to do in terms of experiences in 0-5 and 5-10 years. For the longer time frame, 5-10 years is it recommended to put that money aside in a brokerage account and let it grow? As those trips in the 5-10 year time frame are the more expensive ones!
For additional info: we are about to turn 30, we save 50% of my income, own our home (2.75% 30yr fixed), and have only low interest student loan debt
I am in my late 20s and have about $110k in savings, no debt. I'm being a bit aggressive with savings/investing as I want to take advantage of compound interest and buy a duplex in a few years. I don't want to be a miser (lol) though- any tips on balancing savings and investing with "fun money"?
I'm 53. Trying to maximize contributions to Roth IRA accounts. I maxed my Roth IRA $7,000 for 2021. Had after tax contributions from years past in my employer's 401k plan. So last week I moved the after tax to the Roth IRA (the gains which are 2x the after-tax contributions, went to a traditional IRA, so I don't have to pay taxes this year).
I want to continue putting more after tax money in Roth accounts. I'm told that I can also create an LLC, pay myself up to $50K, and open a solo 401k and put more after-tax money, as long as I have a schedule C activity. Then I can roll that solo 401k after tax money, and put it in another Roth IRA. Is this shady or valid in the eyes of the IRS?
I'm curious about ESG funds offered by the likes of Vanguard and Fidelity, which allow someone to support companies that align with their moral values. Can these types of funds fit into a healthy retirement plan? Should I worry about having too much of my portfolio tied up in these funds?
I had a similar question below, following!
FTE Daniel, what are your thoughts on having a "in case of death" packet for Spouse or Family? I am building mine now, but unsure on who should have "access or knowledge" that it exist, and where. Worried due to all the info it will have listed out. Is there a certain way I should go about this?
Question:
We finished baby step 7 of Dave Ramsey, what next?
Get on the FOO Train! Where are you on it?
https://www.moneyguy.com/wp-content/uploads/2020/09/FOO-deliverable-4.pdf
How do you feel about “Robo investment” accounts ( examples bring wealthfront or betterment)? Seems like a good opportunity to use tax loss harvesting on a small scale. Never heard you guys talk about it, am I missing something?
Everyone talks about how equities will give about 10% rate of return due to historical trends and past performance. However, bonds have averaged a similar yield, and they’re abysmal for the foreseeable future. Do you think there’s any correlation between equities - and CDs, mortgage interest rates, bonds, etc. ?
I feel that you have a very selective view of historic bond yields; see this link: https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart
They were quite high for a period, but so was inflation (Thank-you Jimmy!), which is a big driver of bond yields. During that time, you may have gotten big returns, but the return was mostly replacing your lost purchasing power.
Compare this to (sorry I could not find percentage growth):
https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart
Realize that when the RATE goes up, the value of bond your are holding goes down.
Also note that the GMVT and FED are loosely related. Given the debt, the GMVT can not afford to have the rate to increase. The amount of tax proceeds that allocated to pay interest on the debt is enormous.
We’re following the FOO and started contributing to a 529 for our two girls (4 & 6 years old) last year. We’d like to get our oldest in a few classes like music lessons, horseback riding, gymnastics, etc. however we’d have to cut into the 529 budget in order to do so. What are your thoughts on lifestyle choices affecting our investment strategy and delaying potential growth?
First off, congrats! You guys are killing it and it's fun to watch along. If I could invest in your subscriber count, I wouldn't have to save another penny for retirement! Seriously Q though. With inflation rising and interest rates so low, is there any better place to store house down payment dollars to be used in the < 3 years than a "high interest" savings account?
Will you send me your top three financial books to read?
Commented this above, copying and pasting:
The Wealthy Barber and The Millionaire Next Door are timeless classics. I haven't got around to reading it yet, but Brian really loved The Psychology of Money by Morgan Housel.
While not directly related to personal finance, the best financial book I've ever read is probably "Black Edge" by Sheelah Kolhatkar. It is absolutely fascinating and very entertaining. I'm really looking forward to "Stacked" by Joe Saul-Sehy, of Stacking Benjamins, as well.
I'd like to hear what others on here think as well, so I'll add mine. I read Millionaire Next Door when I was probably 20-21 and it stuck. Books I'd recommend now would be "Simple Path to Wealth" by JL Collins and "I'll Teach You to Be Rich" by Ramit Sethi. I'm not all the way through the last one, but I like how it's put together and written. More like a bunch of magazine articles in a way. Millionaire Next Door is more mindset, the other two are more practical application with some examples and actionable items.
Morgan Housel The Psychology of Money. Helps understand why we do what we do with our money.
Thanks Matt. I will check those out. I have not read them. Based on your other post I think we are are in similar financial spots in our lives.
The millionaire next door and any book by Dr. Thomas Stanley. Richest man in Babylon.
I also have that book. You are right on with your suggestion.
I know the money guy show recommends the Millionaire Next door. There was an episode where Brian and Bo talk about books they read and recommended. I can’t remember which episode that was.
Thank you. That is a good read!
When does it make sense to do Roth Conversions?
Kingsley - With none of your details provided, I share my decision criteria. Marginal Tax Rate!
As you know about the MGs, do you consider yourself a financial mutant? If so, you will likely have some money when you retire.
If you have a lot in Trad IRA, you will have to take RMDs (starting age 72). Like an atomic bomb, there is a critical mass - less, the IRA will decrease over time and more, it will increase. Your RMDs will shrink or grow and you will move up or down the tax brackets. If you think you will be in the money, do conversions, but if you expect to be broke, there is little need to do them.
If you decide to do Roth Conv, convert just enough to fill your current tax bracket.
Don't convert it all, you can take some out to fill your standard deduction - free money.
BTW, if you are All Wall Street, Trad and Roth are OK, but if you are considering Alternative or early retirement (FIRE), you should hold back some to have "your" money.
Possibly outside your typical wheelhouse, but where should I go about seeking advice on life insurance, wills, etc. if I’m an American living abroad who moves frequently?
Loved the article on saving for children, but what's your advice on instilling a mentality of saving into our children? Recommended approaches, books, etc?
Definitely have your kids read The Wealthy Barber. It's written in a narrative format and the barber is actually talking to kids. I think it's important to involve your kids in household financials, and get them used to concepts like giving, saving, budgeting, etc. and leading by example.
Whats the threshold for stopping ROTH contributions and switching to pre-tax contributions on a 401k plan?
Generally when you crossover a combined marginal income tax rate of 30% you can consider it. There are other factors to consider as well, like your tax rate now vs. tax rate in retirement, taxability of Social Security, increased Medicare premiums, current account structure, etc.
Back to basics FOO question, but if I work somewhere with a pension, already fund an IRA, am I correct in assuming my only other option is a taxable? Anything I might be missing? Thanks!
HSA is you have a high-deductible health plan, and solo 401(k) or other self-employed plan if you have any self-employment income coming in. Otherwise, taxable would be the next place to look.
How much is too much to hold in cash (in the bank)? I have a sinking fund, emergency fund, and car replacement fund.
Congrats Kirsten! You've been randomly selected to receive a tumbler. Please email me at daniel@aboundwealth.com and we'll get it sent out.
It sounds like with those 3 funds you are covering your bases and being prepared for the unexpected. It's always better to be a little more on their conservative side, as you'd rather have too much cash than too little when the market goes down or you lose your job, etc. Still, you don't want to hold too much cash when that money could be working harder for you if it were invested. The general rule of thumb is 3-6 months of expenses. If you are single with one source of income you may need more in cash; if you are married with multiple sources of income, you may need less. You should also consider your job security, industry, how likely certain events are (in addition to job loss, car breaking down, medical emergency, other unexpected expense).
That's probably too much unless you are planning on using them within the next 3-5 years
With many people talking about crypto these days, what are your feelings about it? Is it better utilized truly as a currency or as a small portion of ones investment strategy going forward? I often hear Brian and Bo talk about the stock market being similar to walking up a mountain with a yo-yo, is crypto, specifically Bitcoin, viewed in the same manner, or is it too early to tell? Thanks!
If you are enthusiastic about crypto, it can be a small portion of your overall portfolio; the rule we have for single securities applies (no more than 5% of your total investable portfolio). Consider it a more speculative play. Right now it is too early to tell how it really behaves since it has been around for such a short time when compared to the stock market. It seems to behave a little like gold, with speculation increasing in times of uncertainty and when there are fears of inflation. "Digital gold for younger people & the tech-inclined" wouldn't be a completely inaccurate description of crypto.