Bella is SO CLOSE to reaching F.I.R.E and is worried about her withdrawal rate if the stock market drops. If the stock market does drop, can she withdraw as much as she had originally planned?
Meisha is making more money at her new job but can’t contribute to her 401(k) for the first six months – what should she do with her extra money in this interim??
Kyria is a young investor with multiple goals: she’s wondering how to best save for a down payment without it being eroded by inflation and also whether her investment choices should take on more risk, since time is on her side.
Sam has been investing for several decades and thinks that he should stay invested in his portfolio, despite the recent drop in value…but he is still wondering if there’s a chance that he should sell.
Former financial planner Joe Saul-Sehy and I tackle these four questions in today’s episode.
Enjoy!
P.S. Got a question? Leave it here.
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Here are the details:
Bella asks (at 04:23 minutes): I’m 50 and single. I have about $2.4 million net worth with $1 million in brokerage accounts, $1 million in tax deferred 403B IRA accounts and $400,000 in cash and cash equivalents.
I’d like to reach F.I.R.E next summer. I anticipate spending about $90,000 annually which is slightly under 4 percent.
I have a pretty unique job and I’d like to give them at least six months’ notice because they’re going to have a hard time replacing me.
What happens if, during that interval, the stock market drops 50 percent?
Then, as I’m about to F.I.R.E, I’ll no longer have $2.4 million – I’ll only have $1.4 million, and my $90,000 annual expense budget is more than 4 percent of my portfolio.
I have $400,000 because I want to use the bucket method, so I have about four to five years in cash to cover my expenses until the stock market recovers.
If there is a massive crash, is $90,000 annually still safe to withdraw?
Meisha asks (at 23:51 minutes): I recently switched jobs, which gave me nearly a 20 percent salary increase.
However, my new job will not allow 401(k) contributions for the first six months.
What should I do with the money that I would normally be contributing to my 401(k)?
I’ve considered putting it into ETFs, but given the market, I’m not sure this is the best idea.
I also have $17,000 in federal student loans and $120,000 in private student loans. I could use this money to make extra payments.
What are your thoughts?
Kyria asks (at 40:30 minutes): I want to buy my first home in five years’ time, as well as make sure that I’m planning diligently for retirement and investing my money in the smartest way possible.
I just graduated high school and work as a claim’s administrator at a personal injury law firm.
I have been financially independent since I moved out from my parents’ house in Florida to New York City two years ago. In those two years, I have jumped two tax brackets, making me want to take my finances more seriously.
I currently make a salary of $80,000 and have a side hustle making me about $15,000 annually. I also have a 401k with a 6.5 percent contribution through my employer.
I know that if I save $1,500 a month, I will have $100,000 by the time I graduate college for a down payment on a home.
Unfortunately, after accounting for inflation, it will only be about $72,000.
Where should I put the $1,500 monthly so that my savings won’t be eroded due to inflation?
Due to my youth, I know that compound interest is in my favor, but should I also be a little bit riskier and invest in more lucrative and volatile stock options?
Think of me as a blank page with no financial ties or serious financial commitments as of yet. What advice would you give that person?
Sam asks (at 1:02:51 minutes): Does one sell in this downdraft?
I’m down about 25 percent in net worth liquidity.
I’ve been through this since 1987 and my answer is to stay the course – these things rotate back around. I don’t need the money most importantly, it’s not money that has to be spent.
** Timestamps accurate as of August 2022. Starting 60 days after episode release, timestamps may shift slightly as we make updates and changes.
Resources Mentioned:
Episode 119: How Much Can I Spend In Retirement, with Dr. Wade Phau | Podcast
Episode 217: Retirement Planning in 2020, with Dr. Wade Pfau | Podcast
Episode 156: How to Build Incredible Habits, with James Clear | Podcast
Debunking the myth: “Renting is throwing money away” | Blog
Fable x Afford Anything | Digital Book Club
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