Kelsey doesn’t feel comfortable investing in total stock market index funds and would rather invest in ESG funds. How can she tell if she has the necessary $2,000 invested in a company to submit a proposal to participate in a proxy voting? Also, Vanguard has a poor history of supporting shareholder resolutions. What can we do about this?
An anonymous listener, nicknamed “Jack from Belgrave,” wants to buy and househack one duplex every year to achieve financial independence and leave his office job within the next three to four years. Is his plan realistic?
Dylan and his wife rolled her 401k into a rollover IRA with pre-tax contributions. They’ve continued contributing to this IRA with post-tax contributions. Should they separate the accounts, or can they worry about this when they’re ready to retire?
“Alyssa from Belgrave” (another anonymous listener) and her partner earn $150,000 per year after taxes. They’re currently saving 80 percent by living with family. What should they do with their savings?
Leigh and her husband are three years away from retirement. They have an extra $50,000 in income this year and plenty of options for where to invest this money. Which one is the best?
Former financial planner Joe Saul-Sehy joins me to answer these questions on today’s episode. Enjoy!
Kelsey asks (at 5:23 minutes):
I’ve always felt a pestering moral dilemma in the back of my mind, and recent events have inspired me to act on it. While a total stock market index fund is a tried and true way to reach financial independence, I don’t feel comfortable building my wealth by investing in companies that are not committed to meeting ESG standards, particularly when it comes to climate change or having a diverse executive team.
I found a Vanguard ESG ETF with low expense ratios and broad market diversification, and I think I’m ready to see if FIRE can be achieved through ESG investing. However, I’m not confident that many of the large-cap companies within these funds are truly committed to the things that ESG funds advertise.
On Episode 250, Jon Hale mentioned that shareholders can submit proposals to participate in proxy voting if they own at least $2,000 in a company. Here are my questions:
- If you own an ETF or index fund with over 1,000 companies, is there a way to know exactly how much money you have invested in each company?
- After further investigation, I found that Vanguard has a poor record when it comes to voting against ESG-related shareholder resolutions. They have a history of blocking initiatives that would have otherwise had majority support. Do you think there’s a way to participate in some form of activism to move our fiduciaries towards a culture of supporting their shareholders?
“Jack from Belgrave” asks (at 19:46 minutes):
I’m 38 years old and earn $80,000 per year in state government, increasing to $85,000 within the next year. I have $15,000 saved in an emergency fund, I just started investing in the Vanguard Total Stock Market Index (VTSAX) – I have $3,000 in there and I’m adding $500 per month. I have $10,000 in my Roth at Vanguard and I plan to fully fund it for the second year in a row. I have $100,000 between a 401k and a 457 plan – I’m putting eight percent in each of those. I get a three percent match on the 401k.
I bought a duplex in February 2019 for $135,000. It brings in $1,000 per month in rent, which covers the mortgage. I pay extra — up to what equates to a $1,500 payment, so I’m getting extra off the principal. My goal is to buy another duplex, househack another time, and continue to buy one duplex or new property each year to get out of my office job in the next three to four years. I’d like to pursue a second career in photography and real estate. Based on what I’ve laid out, how would you suggest adjusting my savings and investing plan to meet my goals? How realistic is it? Would you reduce the amount I put into my retirement accounts? What else should I think about?
Dylan asks (at 29:09 minutes):
When my wife stopped working to become a stay-at-home-mom, we rolled her 401k into a rollover IRA. Since then, we’ve contributed to this particular IRA – we didn’t open a separate spousal IRA. As you know, our contributions to this rollover IRA are post-tax. However, the original rollover contained pre-tax contributions.
Is this an issue? What can we do to resolve it?
“Alyssa from Belgrave” asks (at 39:49 minutes):
After our lease on a NYC apartment ended, my partner and I moved in with family. Due to COVID-19, we’re allowed to work from home for the remainder of the year. We work in tech with relative job stability and earn $150,000 per year after taxes. We’re saving 80 percent of that while we live with family. We have a robo-investing account, an account with Robinhood, and $40,000 in cash.
We don’t have any concrete plans for our cash. We may buy property in three to four years, but we may also move overseas to work for a few years. What should we do with our excess savings? Should we keep it in cash, or invest it in a short-term security?
Leigh asks (at 57:24 minutes):
I’m in the PPE business and I estimate that I’ll earn an extra $50,000 this year. What should I do with it?
Here are our details:
My husband and I are both 57 years old and plan to retire at 60. We earn between $170,000 to $195,000 per year (we’re both sales representatives, so our income varies). I max out my 401k each year, and my husband contributes 15 percent of his $80,000 income to his. We both max out our Roth IRAs when we qualify.
We have $250,000 in cash, $650,000 in our after-tax investment accounts, $100,000 in our 401k accounts, $1.2M in our IRAs, $110,000 in our Roths, and $150,000 in a 529 plan.
Should we both increase our 401k contributions to $26,000? Or should we add to our after-tax investment account? Or some combination of both?
Resources Mentioned:
- Morningstar.com
- Morningstar’s X-Ray Tool
- Ethical Investing 101, with Jon Hale
- Robinhood
- Netflix Letter to Shareholders
- Originals, by Adam Grant
- Steal Like an Artist, by Austin Kleon
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