Afford Anything

Category: Episodes

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#380: Ask Paula: How to Optimize Your Investments Along the Efficient Frontier (If You Dare!)

Anonymous and her spouse are both in the military and about to reach retirement. They have an expensive whole life insurance policy, costing $550 per month, and wonder if they should switch to term life insurance.

Ionnie just rolled over her Roth IRA and would like to understand how to withdraw her contributions without getting penalized

Matt wants to optimize his portfolio and wants to know if he should invest along the Efficient Frontier – despite the fact that the asset allocation it recommends is absolutely bonkers; it’s wild and risky and tilted like nothing he’s ever seen before.

Former financial planner Joe Saul-Sehy and I tackle these three questions in today’s episode.

Enjoy!

P.S. Also – we’re launching a book club!! Each month, we’ll read and discuss a book written by an Afford Anything podcast guest, starting with Morgan Housel, James Clear, Ken Honda, and Dr. Susan David.

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#379: Invest Anywhere: 4 Benefits and 5 Challenges of Long-Distance Real Estate Investing

Welcome to our First Friday bonus episode.

Once a month, Afford Anything presents a special feature called Invest Anywhere, in which we teach our audience how to invest in real estate from thousands of miles away.

We kickoff today’s episode by discussing current market conditions. Yesterday the Fed raised interest rates by another 50 basis points, which means mortgages are more expensive than they’ve been in years. Additionally, jittery investors worried about an impending recession led the stock market to its worst day of the calendar year so far.

How should we interpret the current market conditions? Is this a good time to buy an investment property? We cover this in the first 20 minutes of today’s episode.

Next, we discuss 5 challenges associated with investing in long-distance real estate investing: (1) fear, (2) accountability, (3) traction, (4) stress, and (5) relationships.

We elaborate on each challenge and offer solutions.

Finally, we discuss 4 benefits to investing out-of-state: (1) competitive ability, (2) diversification, (3) returns, and (4) repeatability. We elaborate on four types of diversification: economic, strategy, business cycle, and asset based.

Enjoy!

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#378: Ask Paula: Should I Take a Higher-Paying Job if I Can’t Save As Much for Retirement?

Anonymous is 25. She has a job offer that comes with a substantial raise. Hooray!

Buuut … there’s a problem. If she accepts this job offer, her new employer won’t allow her to contribute as much money to her company retirement accounts.

How should she think about the trade-off between increasing income and funding her retirement?

Meanwhile, Dan from California is retiring soon and wants to know what he and his wife should do with the loan they took out against their 401(k).

Finally, an anonymous caller who goes by “Daughter” has a whole life policy that only costs her less than $50 per month. Since her policy is so cheap, should she keep it?

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#377: How I Discovered The 4 Percent Retirement Rule, with Bill Bengen

Today’s episode is sheer retirement nerd bliss.

We talk to the creator of the 4 percent retirement safe withdrawal rule, Bill Bengen.

If you’re new to retirement planning, you might not yet grasp the gravity of this. Let’s cut to the chase: the 4 percent rule is one of the most revolutionary, groundbreaking insights in the field of retirement research in the past 30 years.

To understand why, let’s climb in our time machines and return to 1994.

Back then, many financial advisors were telling their clients that they could safely withdraw 7 percent of their retirement portfolio each year.

After all, the simplistic logic went, the stock market has historically yielded between 7 to 9 percent returns, so that type of withdrawal rate shouldn’t dwindle the principle … right? ⠀
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Bill Bengen, an MIT graduate and former rocket scientist, decided to build a better model. He looked at the performance of investment portfolios across 30-year time horizons, beginning in 1926.

Under the assumption that the portfolio is invested 50 percent in an S&P 500 Index and 50 percent in intermediate-term bonds, in a tax deferred account, he found that retirees could only withdraw 4.2 percent of their portfolio in the first year of retirement, and that amount adjusted for inflation each subsequent year.

He called this the “safe withdrawal rate” that gave people a reasonable chance of not outliving their money, based on historic performance.

He published the results in the Journal of Financial Planning and caused a stir. This was revolutionary. It upended the assumptions that dominated the field at the time.

And it remains a cornerstone of retirement planning to this day.

We talk to Bill Bengen about his discovery – and his latest research – in today’s episode.

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#376: Ask Paula: How Should My 64-Year-Old Mom Handle a Toxic Boss?

Meghan’s mom is 64 years old and suffering under a toxic boss. It’s tough to switch jobs at her age. How should she think through the next steps?

Ellen has a 20-year-old son with physical and developmental disabilities. Her other child, age 21, will need to look after him for the rest of their lives. How should she handle their inheritance? 

Joe wants to start working part-time in four years, and fully retire four years after that. He worries he’s investing too aggressively for his retirement date.

In today’s episode, former financial planner Joe Saul-Sehy and I tackle these tough situations.

Enjoy!

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#375: The 2X Rule (and Other Wealth-Accelerating Advice), with Nick Maggiulli

Here’s the deal:

The majority of people who write about personal finance repeat the same tired aphorisms and cliches.

“Millennials aren’t investing enough,” they’ll lament. “Millennials are amassing wealth at a slower pace than previous generations!”

But when you ask for their source, they turn up blank. Each writer points to a headline, which sources another headline, in a neverending circular secondary-source-citation that fails to point to any primary data source.

Nick Maggiulli doesn’t play that game.

If you haven’t heard the name Nick Maggiulli yet, prepare to meet one of the most original, insightful voices in the media landscape of personal finance and investing. (His last name is pronounced “ma – julie,” and his godfather refers to him as “paper hands,” but that latter point is a different story for another day.)

Nick is a data scientist with a knack for clear written communication, a rare Venn Diagram intersection of skill sets. He holds a laser-focused interest in the arenas of personal finance and investing, and he’s eager to share fresh, nuanced, evidence-backed takes about savings, spending and investing with anyone who will listen.

He recently released his first book, Just Keep Buying; the title reflects a user-friendly reminder to continue dollar-cost averaging. It also speaks to the main idea behind wealth creation: accumulate income-producing assets, consistently, for as long as you possibly can.

It’s an honor to welcome Nick Maggiulli onto the Afford Anything podcast for what I hope is the first of many appearances. In today’s episode, we discuss actionable strategies for managing your money, including assessing your spot along the save-invest continuum, implementing the 2X rule into your spending decisions, and saving half of your inflation-adjusted future raises.

Enjoy!

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#374: Ask Paula: Watch Out! Here’s How Lowering Your Investment Tax Bill…Might Increase Your Risk

Jake wants investment cash flow until he’s eligible for his military pension in 10 years.  Should he buy small multifamily properties right now, wait a few years and invest in syndications or should he invest in index funds through taxable accounts?

Andy in Palm Springs is shoveling money into a taxable brokerage account. He wants to use these investments to create another stream of income. But there’s a problem: his tax bill is going to be high. What should he do?

Anonymous is a U.S. citizen, lives in London, and can’t invest in index funds. Can he emulate the index fund experience by directly buying a huge number of individual stocks?

Former financial planner Joe Saul-Sehy and I tackle these questions in today’s episode.

Enjoy!

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#373: Invest Anywhere: The 5 Ways Real Estate Makes Money

On the First Friday of each month, we air a special bonus episode.

Historically, these episodes have been the same as our normal weekly shows. They alternate between interviews and community Q&A episodes.

But for more than a year, I’ve wanted to create something special, something that makes these monthly bonus episodes stand out […]

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#372: Ask Paula: I’m 33 and Want to Retire at 45 – What Should I Do?

Eve has been investing in her brokerage account and the tax liabilities are starting to add up.  She wants to retire in 12 years and is wondering if she should invest in after-tax contributions and plan on a Roth conversion.

Anonymous has rental properties and wants to start building his kids credit histories.  Is it a good idea to add them as co-borrowers on the mortgage?

Lily is really excited about investing in real estate, but househacking wasn’t the right fit.  She’s looking for advice on investing in opportunity zones through crowdfunding platforms.

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#371: What’s the Point of Happiness, Anyway?, with Dr. Bill Von Hippel

When our earliest ancestors noticed their immediate surroundings change – the trees began disappearing and their environment morphed into open savannah – they sensed they had a huge problem on their hands.

They were easy prey. They lacked adequate speed, strength and sharp sense of smell that would be useful for protection from predators.

But if they huddled together, they would be more protected. So like a school of fish or a herd of zebras, early humans began to band together as they roamed the dangerous and exposed plains.

But in any herd of zebras, a few slowpokes, the very young or old, the ill or injured, get eaten alive. This needed a solution.

Early humans improved their odds of survival by using handheld tools to kill predators from a distance, for example, by throwing rocks at lions in a coordinated defense.

Once they developed a coordinated, weapon-centric defense, they began using these same weapons offensively, in order to hunt.

They enjoyed the most successful hunts when they cooperated, communicated and coordinated, imagining future scenarios, strategizing and planning together. This required sharper cognition.

They traded brawn for brain.

And so an unprecedented cognitive revolution began, one that made humans the most remarkable species the world has ever seen.

In today’s episode, psychology professor Bill von Hippel explains the evolutionary science behind how we’re hardwired as humans.

We’re wired to be social, to connect, to communicate and cooperate.

We’re wired to want to learn and teach, to build a collective body of knowledge that stretches beyond what any single individual could ever learn in their lifetime.

We’re wired to feel surges of happiness that fade, so that we’re intrinsically motivated to keep repeating behaviors that lead to additional surges of happiness.

Once we understand the evolutionary science behind what makes us happy, Dr. von Hippel explains, we can apply this knowledge to making better decisions for our work, money and lives.

Bill von Hippel is a graduate of Yale University and the University of Michigan. He’s currently a psychology professor at the University of Queensland in Australia. He joins us to share his insights into the history and science of happiness.

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