Nicole’s 78-year-old mom is paying huge fees for low returns. How can Nicole help her mom make better investments?
Nick is in his 40’s. His long-term care insurance rate is nearly doubling. Should he stop spending on this type of insurance?
Paul is a single dad, worried about paying his daughter’s college costs. He’s trying to figure out how to report lower income on the FAFSA, so that his daughter can get better financial aid.
Former financial planner Joe Saul-Sehy and I tackle these three questions in today’s episode.
Enjoy!
P.S. Got a question? Leave it here.
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Nicole asks (at 03:11 minutes): My retired 78-year-old mom has several poorly invested, high-fee retirement accounts with two financial advisors.
I don’t expect her to have large returns at this stage of life, but she pays 1.65 percent in annual fees while her investments have only gained 1.45 percent over 10-plus years.
Her other accounts are in a total value annuity, which has surrender charges until 2026, and a REIT that’s dropped 50 percent since April 2023.
I’m helping her move her investments to Schwab but I have some questions:
What asset allocation should she consider for the money in the Schwab accounts?
How should we approach taking her required minimum distributions (RMDs)? Should we put the expected amounts in a CD ladder?
Do RMDs need to be taken out of each account separately?
Or, can I take RMDs out of only the annuity and REIT accounts since I want to sell them anyway?
Unfortunately, I don’t have records of what kind of accounts she held before they were actively managed.
She was a teacher, so I believe her accounts were originally 403b’s.
Nick asks (at 35:00 minutes): My wife and I are federal employees who signed up for long-term care insurance in our mid-20s when it was very inexpensive.
We’re now in our mid-40s and the rates have increased significantly every few years since we got the plan.
The current plan provides a daily benefit of $278 with an annual inflation protection of five percent with an unlimited benefit period.
Rate increases are affecting all federal employees who’ve enrolled. How should I think through the three options we’ve been given?
Keep the plan as is, but the rates will increase from $150 to $278 a month.
The premium stays at $150 a month, but inflation protection would decrease to two percent a year.
A paid-up limited benefit with no future premiums due. My $278-a-day benefit would be limited to a lifetime total of $22,000, which is equivalent to what I’ve paid into the plan.
Our combined income is $200,000.
We expect a good pension during retirement, we have significant savings in a Thrift Savings Plan (TSP), and we have some income from rental properties.
Paul asks (at 50:37 minutes): Are there any strategies to minimize reportable income from a FAFSA perspective?
I’m a single parent and file as head of household. My daughter’s junior year of high school will be 2025, which will be her first FAFSA application year.
As I understand it, FAFSA will look at my 2025, 2026, and 2027 income to assess aid qualification. I’m also allowed to keep up to $50,000 in cash without affecting my application.
Is there a way to prepay $200,000 of expenses for 2025-2027 so I can spend at a higher level while staying under the $50,000 threshold?
I’ve thought about prepaying credit cards upfront, but my experience is that they’ll refund large credit balances at some point.
I don’t like the idea of buying gift cards in bulk because it seems risky.
Are there any other strategies to keep cash off the books as far as FAFSA is concerned?
Resources Mentioned:
Stacked: Your Super-Serious Guide to Modern Money Management | Book
Tiffany Aliche Shares a BIG Money Hack and a Sad Money Truth | Podcast
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