This week, former financial planner Joe Saul-Sehy and I answer five questions about investing, retirement, insurance, travel and selling an expensive car.
Eliana is 25 and makes $63,000 per year, plus a little extra from freelance work. She holds $95,000 in cash, $67,000 in retirement investments, and no debt. She doesn’t necessarily hold early retirement as a goal, but she’d like the option to access her funds before she’s 59-and-a-half.
She asks two questions: First, she’s been spreading her money between a Roth IRA, pre-tax 403b, and taxable brokerage account to spread her risk. Should she not contribute so much to the taxable account?
She’s also paying $88 per month for a $25,000 life insurance policy for her mother, who is 57 years old. She likes the peace-of-mind that comes with knowing it’ll be there to cover funeral expenses, if needed. But she recognizes that there’s a huge opportunity cost that comes from paying for such an expensive plan. Should she drop it?
Rudy’s employer offers two options: a pension or a retirement plan that essentially functions as an annuity. He would need to contribute 3 percent of his income, regardless of which option he chooses. Which one should he pick?
Nicole lives in Canada. She has a Registered Retirement Savings Plan (RRSP), to which she contributes monthly. She’s been with her employer for almost 10 years, but she’s about to switch into a new field. She’ll have about $45,000 in a pension plan from the employer that she’s leaving. What should she do with this money?
Julie is a frugal single mom of two. Four months ago, she purchased a brand-new vehicle for $39,000 and instantly regretted it. She’d like to sell it, but she could only recoup around $33,000 of value. She’d lose $6,000 from a car she’s owned for 4 months. Should she take the hit? Or should she hang onto her car, since the damage has already been done?
Finally, an anonymous caller wants to know more about long-term travel. How do you acquire visas that will let you stay in a country for many months? How do you find health insurance with overseas coverage? And what should you do with your snail mail?
We tackle these questions in today’s episode. Enjoy!
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Resources Mentioned:
Julie’s question:
- Articles on selling a car, private party:
- 10 Steps to Selling Your Car, on Edmunds
- Sell Your Car Safely, on Edmunds
- How to Close a Used-Car Sale, on Edmunds
- Articles on buying a car, private party:
- Buying a Car, Sight Unseen, on Edmunds
- 10 Steps to Buying a Used Car, on Edmunds
Travel question:
- Overseas health insurance:
- Travel Medical Insurance with International Medical Group
- Travel Insurance Plans for Short-Term Trips Overseas with Good Neighbor Insurance
- Travel Medical Insurance Plans with BCBS
- How to handle mail while overseas:
- Goldstein on Gelt
- GoCurryCracker
- How Jeremy and Winnie Retired in Their 30’s – Interview on Afford Anything Podcast
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R. Coy
I agree that she should be using the 403b more to save on taxes. If she is $63000 she can easily ensure all or almost all her money stay in the 12% bracket 63000-4819.50(SS/Medicare)-unknown medical -12000 is still in the 22% bracket so every dollar is saving the 22 % in taxes.
Kevin
Paula, Please elaborate on your view that it would be political suicide for the government to change the tax rules with respect to Roth accounts. Since under 30% of Americans have Roth accounts, I’ve always felt (like Joe does) that taxing Roth accounts would be a politically easy way to raise additional revenues. This could be done a number of ways. A common way would be to tax Roth distributions by people over a certain income. If they did it with Social Security, why wouldn’t they do it with Roths?