Lauren is 26 and earns $48,000 per year after taxes.
She saves $12,000 annually in retirement accounts, and an additional $18,000 per year for a downpayment on a home.
She wants to buy a home in the next five years. Where should she keep her savings in the meantime?
Sawyer has a five-year financial independence plan. She owns two high-end condos in a NYC suburb. She lives in one unit and rents out the other, but she’s bothered by the fact that she’s forgoing collecting rent on the other unit. Should she move?
Katie’s husband is going back to grad school and they want to pull money out of a retirement account to help fund this cost. Are they able to do that? Or is there a better option for short-term investments that they should use?
Cassie is in the process of finalizing a divorce. She and her daughter will receive between $80,000 – $116,000. Should they use the funds to buy a home with a 20 percent down payment or pay off their $30,000 debt?
Andy is curious: should you re-adjust the 4 percent withdrawal rule if your investment portfolio grows?
Joe wants to become self-employed but is concerned about health insurance. What are some affordable options?
Laura is close to pulling the FIRE alarm but her fiance wants to keep working. She wants to know what will change once they get married. Should they file taxes jointly or separately?
Doug is interested in learning more about equity sharing programs. Are these safe to invest in?
Tania wants to know: can you open and fund a Roth IRA if you haven’t worked in the past two decades, but earn alimony?
Brian took out a 401k loan to purchase a new car and regrets his decision. Would it be a wise move for him to take out a personal loan to pay back the 401k loan?
Former financial planner Joe Saul-Sehy and I answer these questions in today’s episode. Enjoy!
Lauren asks (at 2:20):
I’m 26 years old. I net $48,000 per year and save about half of that. I put $6,000/year, pre-tax, in my 457(b) plan with my employer, and $6,000/year in a Roth IRA with Vanguard.
That leaves around $18,000 that I’m not sure what to do with. I’d like to buy my first home within the next five years. Where should I keep the rest of my savings until I’m ready to buy a home?
Sawyer asks (at 12:15):
I’d love to get your input on my five-year FIRE plan, which I’m hoping I can turn into a three-year plan.
A year-and-a-half ago, I inherited some money, which I used to pay off all of my debt. I also purchased two high-end condominiums in a NYC suburb, both of which have two bedrooms and two bathrooms. These cost a total of $1.4 million. My plan is to hold onto them for the long-term and generate a nice income stream.
Right now, I live in one of the condos, and the rental brings in $5,200/month.
Three months ago, I started a part-time job as a Nurse Practitioner, bringing in $76,000 gross annual income. According to a real estate broker, the unit I live in could bring in $5,600/month. If I move out, I have the potential to earn $200,000 in annual gross income. If I stay, I make about $138,000 gross income.
I’m 47 years old, single, with no kids. I try and keep my personal annual expenses to $40,000/year. I’d like to save $400,000 cash for a downpayment for a dream home in Boulder, CO.
Should I move out of the condo, rent a place locally, and then rent both units out? Or should I continue to live in the condo for a while, and then move to a small place in Boulder, and save up for my dream house there?
Cassie asks (at 23:19):
I have a dilemma. I’m in the process of finalizing a divorce, where based on equitable division of assets, I’ll get a minimum of $80,000 and maximum of $116,000. I have a daughter and I want to purchase a home for her safety and security. However, I have $30,000 in debt, comprised of student loans, car loans, personal loans, and credit card debt.
I’m torn on how to use the money I’ll receive. Should I put a 20% down payment on a home in the area I’d like to purchase? A down payment plus closing costs would total $80,000 – $90,000, which means I’d still be left with my debt and a mortgage.
My other option is to hold off on purchasing a home for a year, take the minimum of $80,000 and pay off all of my loans, and then take $10,000 of that and put it in an emergency fund. The remaining $40,000 would start my home savings fund.
Andy asks (at 37:00):
After doing a lot of reading about the Trinity Study and the 4 percent rule, it seems like your initial nest egg, which the 4 percent rule is based on, can grow significantly over time. For example, if you pick up a side job or geoarbitrage and take out less than 4 percent for a few years.
My question is: at what point should you re-adjust the 4 percent rule for a new nest egg? If you start with a portfolio of $1 million, and it grows to $1.5 or $2 million, that you’re still taking out 4 percent based on the initial $1 million.
Joe asks (at 43:54):
My question is about health insurance. It continues to get more expensive and I’m considering self-employment, so I need to think about what my health insurance plan is going to be. I currently have an HSA with a high deductible, but I’m not sure if this is the best approach.
I’ve also considered flying out of the country to do medical procedures for non-emergencies.
What are your thoughts on this?
Katie asks (at 56:23):
I’m invested in the Vanguard 500 Index Fund Admiral Shares index fund, VFIAX. In the next year or so, I’ll need to pull some money out of this account as my husband plans on going to grad school. How much am I able to pull out of this account? Under the “funds available to withdraw,” the amount is about a third of the amount of the funds that are in the account. How does this work? Should I choose another option for short-term investments?
Laura asks (at 01:01:45):
My fiance and I are in a unique situation. We’ve both been high income earners for several years, and we’ve essentially reached FI, but only I am looking forward to pulling the FIRE alarm within the next year.
We’d like to get married beforehand, but we’d also like to understand what considerations and changes there will be if we’re married and filing jointly versus separately, in a scenario where he continues to earn more for several years to come. I want to make sure that I can leverage strategies that we’ve discussed – same as I would if I remained single.
Doug asks (at 01:07:45):
I had a question about equity sharing programs. The one I found online is a tokenized, blockchain investment platform where people give the company money. The company then works with homeowners to pay them a portion of the equity in their home in exchange for future profits when the home sells. Have you heard anything about this or looked into it? I’d like to know your thoughts.
Tania asks (at 01:10:29):
I’m 58 years old and I make $180,000 in alimony. I don’t have a job and haven’t had one for 27 years. Is there any way I can start saving money for retirement in a IRA under these circumstances?
Brian asks (at 01:12:50):
Last December, when the market was down, I needed to buy a new car. Since I didn’t want to have to pay for full coverage (I only have a 2.9 mile commute), I didn’t want a car loan, so I took out a $25,000 401k loan instead. Since then, the market has gone straight up – the worst-case scenario!
I still owe $22,000 on this 401k loan. Should I take out a personal loan on a shorter term (to pay it back quicker) from a bank in order to pay this 401k loan back? It would be about 6-7 percent interest, and this 401k loan is my only debt aside from my mortgages on a rental property and my primary residence.
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