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!
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?