Anonymous (“Jennifer”) keeps hearing us say that you should “start with the end in mind” – that your investments should match your goals and timeline. But what if you don’t have any specific financial goal? What if your risk tolerance is different than you once thought?
Rachel’s new employer won’t let her contribute to retirement for more than a year – what should she do??
Carri’s parents are in poor health and can’t work much – what should they do about their life insurance policy and their health insurance?
Do you have a question on business, money, trade-offs, financial independence strategies, travel, or investing? Leave it here and we’ll answer them in a future episode.
Enjoy!
Anonymous asks (at 05:53 minutes): If you don’t have a specific financial goal, what is a good strategy to make sure that you can be flexible with your money and also allow it to grow in a smart way, both within brokerage accounts and retirement accounts?
And how do you make changes when you realize your risk tolerance is actually different than you thought without going down a rabbit hole about trying to time the market?
I’m a tenured professor in my late thirties and I love my job – I don’t see myself wanting to retire until my late eighties, if possible.
When I retire, I’ll get a pension and I’m also investing in my 403(b) in a way that would give me the option to retire at 65, but I really don’t think I’ll retire at that age.
After taxes and retirement contributions, I’m spending about half of my net income on my child’s 529 plan, travel, general living expenses, as well as our mortgage, on which we still owe about $144,000. My total retirement savings are at about $235,000. I have a nine month emergency fund and $140,000 in investments.
We would like to move to a bigger condo within the next 10 years, but we’re not sure when. We’re open to selling or keeping our current condo as a rental.
Beyond that I really don’t have a goal, but I want to keep my money in a flexible place because of my planned retirement timeline.
28% of my total investments are in the Vanguard Core Bond Index Fund, within a brokerage account and a Roth IRA, and I think that’s too much. I would like higher returns and I’m okay with the risks.
I’d like to exchange most of it for shares in the VTSAX fund, where I already have about 53% of my investments. But if I do that now, I’d be selling at a loss. This gets a little bit into timing the market, but wouldn’t it be smart to wait until the bond fund is up and perhaps other funds I’d like to buy are down?
In addition, I wonder when and how to start moving some money into safety, for a down payment for our next condo. I like the idea of I-bonds, but I can only buy $10k per year. TIPS aren’t a good option in case we want to buy a condo in less than five years. Any suggestions?
The remaining 19% of my investments are in mutual funds with TIAA-CREF. Through TIAA-CREF, I have about 75% of my 403(b) in a 2050 fund, but I don’t know what my strategy should be for investing my retirement funds since I don’t really plan to retire in 2050. Any thoughts?
Rachel asks (at 35:39 minutes): I changed jobs about a month ago and I can’t contribute to my new job’s 401k for about 13 months.
I’m a W-2 employee and my salary is $100k. I live in a state with higher income taxes, so I’d really like to contribute to pre-tax retirement funds.
If not for this lockout, I would be maxing it out. I’ll be fine for 2023 because I can enroll in July and double the monthly contributions so that I can still max it out – the issue is 2022.
Based on my income, I won’t be able to deduct traditional IRA contributions. I’m also maxing out my Roth IRA and it is done already for this year so I can’t backdoor that. Correct?
I also have some 1099 income from a side gig. It’s just a few grand per year, but I had an idea to open a solo 401k and put the income from the 1099 gig into that.
I could also roll my previous job’s 401k into the solo 401k. I need to get the money out of that previous 401k because the fees are super high, so this option would be convenient.
I don’t know much about solo 401ks and I’m anxious about opening one. Do you see any problems that I’m not thinking of, or do you have any better ideas for retirement savings options while I’m in this situation?
Here’s some background: I own a house and my mortgage is my only debt. I have about $70k in a Roth and $90k in pretax funds. I also have a brokerage with about $7k with index funds in it. I’m in the Midwest and I am 31 years old.
Carri asks (at 50:19 minutes): My parents are reaching a new phase of life because of their poor health.
My dad is 58 and my mom is 53. My dad has been on disability since 2010. My mom currently works full time making about $30,000 a year and she spends the majority of her time off work, just trying to recuperate. My siblings and I have finally convinced her to cut back her work hours.
My parents have a flexible premium, whole life insurance policy set up by my sister. I don’t think it’s a terrible idea for my parents to keep their whole life insurance policy. My gut feeling is if they pay the minimum, they’ll keep the life insurance benefit.
What questions should I ask about their policy? Under which circumstances would you recommend they back out of their policy altogether? What else should we consider as my parents enter their pre-retirement years?
Also, we have a few options we’re looking into as far as their health insurance. They own their trailer house and pay $600 a month for their space. They don’t have any debt. They also don’t have much as far as retirement savings. Their vehicles are old, but my mechanic siblings keep them running. They don’t travel much.
Resources Mentioned:
For Carri’s question, here are other podcast episodes that talk about whole life insurance:
- Episode 380: How to Optimize Your Investments Along The Efficient Frontier
- Episode 350: How Much Should We Spend On A Wedding
- Episode 203: Early Retirement and the 4% rule
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