An anonymous caller who received a large inheritance feels paralyzed by all the investment philosophies he’s read about. How does he pick a winning strategy he can stick with?
Josh is an expectant dad looking to buy a bigger house but doesn’t know how much everything will cost. Should he save more or invest more?
Another anonymous caller worries that large expenditures like buying a new car or replacing her home’s roof will blow up her budget in retirement. How does she plan for unexpected expenses?
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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Anonymous asks (at 03:47 minutes): I received an inheritance a year and a half ago and in the fog of grief just left it invested as it was when I received it.
I’ve been a keep-it-simple index investor since I found this community, increasing my savings rate and investing those savings across my retirement accounts.
But now I’m figuring out how to align it with my existing investments and I’m stuck for several reasons.
- It’s a large sum relative to my existing portfolio, so the stakes feel much higher.
- Half the funds are in a taxable brokerage and individual stocks. Despite receiving a step-up in basis, they’ve accrued substantial capital gains. Changing course now would make things difficult tax-wise.
- There are so many investment theses available. And then decisions within those decisions. It makes my head spin.
Even if I limited myself to “lazy portfolios”, there are still more than 10. After that, I’d still have to figure out asset allocation. And then I worry if my portfolio falls on the efficient frontier.
I also understand the value of diversification and planning for scenarios such as the lost decade or turnabouts in the U.S. economy. It’s all very overwhelming.
Each personal finance book I read, I’m like “Yes! I get the rationale behind that approach”. Then I read a book with another approach, and I find myself saying, that makes sense too.
I’d like to reprogram my inherited funds. But I don’t want to make a mistake, cost myself excessive taxes, or take a strategy I won’t stick with because I don’t believe in it.
Can you help me see through this fog?
Josh asks (at 36:54 minutes): I don’t know how much I’ll need to save for my short-term goals. How do I decide how much of my income should go towards savings versus investments?
My wife and I are expecting our first child in November. We’d also like to move to a larger house in the next one to two years and rent out our current one.
With our future fixed costs going up, but by an unknown amount, how should we allocate our excess cash each month between a savings and a taxable brokerage account?
We save $3,000 monthly, splitting it 50-50 between savings and investments. Should this change once we have a kid?
We also don’t have a true goal for our investments besides assuming we’ll need it for ourselves as we grow older and our kids grow older. Is that okay?
Anonymous asks (at 53:37 minutes): How should I plan for large expenditures in retirement? Should they be part of the year’s budget or should a sinking fund be established?
For example, if our four percent withdrawal amount is $125,000, a $25,000 roof is a substantial piece of that budget. How do we pay for major expenses without blowing up our retirement?
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