Is it ever a good idea to use your 401(k) as an emergency fund?
What’s the best way to break up with your financial advisor so that you can move all of your funds to Vanguard?
Should you put all of your Roth IRA money into index funds, or is there a better option for your money?
A listener has a job offer working less hours for more money, but without a retirement plan. Is this a good move?
When running a small business as a sole proprietor, are there tax advantages to incorporating or forming an LLC? If so, what should you consider?
What’s the best way to maximize the earnings on a large amount of savings while keeping the savings liquid? Can a robo-advisor help with this?
Myself and former financial planner Joe Saul-Sehy tackle these six questions in today’s episode. Enjoy!
Inna asks:
I live in California, where I’ve run my own business as a sole prop for the last year. It’s going really well, and I’d like to hire employees. Should I incorporate in order to protect the personal assets that I have? What makes sense in terms of tax advantages? Is an LLC or an S-Corp better for a small boutique consulting and recruiting business? Also, what are your thoughts on incorporating out of state for cost purposes and the corporate veil?
Brian asks:
I’m married, we’re both 40 years old, and together we earn $250,000 a year. Our only real debt is our mortgage: $320,000, which is $2,400/mo. We want to pay off our mortgage early, so we’re contributing $1,500 extra each month, and we both max out our 401(k)s.
We have $100,000 in cash savings sitting in a few different accounts to get the best interest possible. I’m not sure if that’s the right place for this money or not. We have no major plans or needs for it, but I want to maximize the savings and the earnings that we get from it.
We want an option that’s liquid. It sounds like index funds might be the way to go, but I’m not sure. If so, should I buy funds directly from a place like Vanguard, or put the money into a robo advisor? Also, is it in my best interest to speak with a fee-only advisor?
Charlene asks:
I’ve started using Vanguard products for my retirement accounts and I’m very impressed with the 0.3% that they charge. I have a financial advisor that I’ve been using for the last 20 years who manages a rollover account I have. I’m happy with what he’s done for me, but when I look at the 0.3% Vanguard charges me versus the 1% that he charges, it seems to be more advantageous to have my money in Vanguard where I can reinvest the savings. I’d love to get your thoughts on the best way to break up with my advisor and move my funds to Vanguard.
Sanjay asks:
I’m 38 years old. My wife and I have individual Roth IRAs totaling $32,000, and we have 401(k)s from work totaling $60,000. We also have $200,000 in real estate that doesn’t generate income, as it’s a piece of land.
All of the money in our Roth IRAs is invested in the U.S. total stock index fund because of the low cost factor. I don’t plan to retire for another 25 years, and I want to know: am I doing the right thing by putting all the Roth IRA money into index funds, or could I be doing something better?
Druu asks:
I currently spend 40 hours a week working for a school, and I gross $3,950/month (net is $2,800/month). I’ve been there for three years, and to be vested in the retirement plan, you have to be there for five.
Another company has offered me a job working 25 hours a week, and my monthly salary would be $4,335 with a net of $3,500. The new company offers health benefits but no retirement plan, and my current job offers CalPERS and a 457 plan. Additionally, the new company is five minutes away, whereas my current job is 20 minutes away.
Does it make sense to work for this new company, or should I stay with my current company? Also, if I do leave, what retirement plan would you recommend?
Andrew asks:
What are your thoughts on using a 401(k) loan as an emergency fund?
If I’m saving 10% for retirement and also putting 10% into my savings account, I’m really just moving that 10% savings portion into my 401(k) and then grabbing it from the loan if needed for emergencies.
Thanks to our sponsors!
Gusto
Gusto makes payroll, benefits, and HR easy for modern small businesses. In fact, 72% of customers spend less than 5 minutes to run payroll! If you sign up at gusto.com/paula, you’ll receive 3 months free once you run your first payroll.
Native
Native creates safe, simple, effective products with trusted ingredients and performance. Their deodorant doesn’t have aluminum and comes in a wide variety of scents for everyone. You can try it risk-free as Native offers free returns and exchanges in the US. Want to give them a try? Enter promo code paula during checkout for 20% off!
Frank & Oak
Frank & Oak is a Canadian apparel company dedicated to providing purposefully designed products. They’re made from eco-friendly materials and use eco-friendly processes. You take a short quiz for clothing recommendations and have seven days to try your clothes out. Give it a try by going to frankandoak.com/paula for $25 off your first box.
ShipStation
ShipStation is a centralized platform where you can process shipping orders. They have shipping labels for all the top carriers, and they offer deep discounts on shipping. Try ShipStation for free for 30 days and get an additional month free if you use my promo code Paula. Click this link, then click on “heard our ad?” on the top right of the screen, and type Paula.
