Cara made $100,000 in commissions this year, her biggest bonus ever. What should she do with the money if she wants to retire early?
An anonymous caller is upset that the 401k plan he sold his boss on is charging him an Assets Under Management (AUM) fee. Should he keep the 401k at all?
Remy and her husband need to come up with $30,000 for IVF treatments. How do they build their family without breaking the family finances in the process?
Another anonymous caller and his partner have lived in an RV for years. They’re ready to settle. Should they sell most of his investments to purchase raw land and build an off-grid home?
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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Cara asks (at 01:36 minutes): How should I decide between allocating a bonus to investments versus paying down our primary residence?
I’m 30 and my partner is 31. We’re not sure if having kids is in the future for us, but we’d like to retire early, between age 50 to 60.
Our base salaries are $160,000 combined and we net $30,000 on rental properties. I’m expecting a $100,000 commission check in March, which should net $65,000 after taxes.
We plan to use $15,000 to add a patio and hot tub to our new home, but what should we do with the remaining $50,000?
Our annual expenses are $100,000. We have a three-month emergency fund and a separate six-month emergency fund for the rentals.
Our investments total $457,000, with $29,000 in an HSA, $344,000 in 401ks, $75,000 in Roth IRAs, and $9,000 in brokerage accounts.
My husband and I contribute four percent to our 401k plans. His company offers a four percent match and mine offers an eight percent match.
We owe $486,000 on our home at a 6.875 percent interest rate. Our total net worth is $826,000.
According to our amortization schedule, a $30,000 payment would save us $160,000 in interest and a $50,000 payment would save us $239,000 in interest.
Should we invest the money or pay extra to the principal on our house? Or some combination of the two? How do we think through this?
Anonymous asks (at 20:37 minutes): My wife and I make $145,000 combined as organic farmers at a small farm business.
Two years ago we asked our boss to open a free-to-the-employer 401k service called Save Day and we’ve saved $40,000 so far.
We were jazzed because we had no other tax-advantaged option outside of Traditional IRAs. And I was under the impression that they charged percentage fees on the contribution only.
However, it’s an “annualized fee charged to each employee’s 401k account every month, assessed to the overall total assets held within the account.”
Save Day also announced a recent fee hike to 90 basis points.
This sounds a lot like the one percent Assets Under Management (AUM) schemes we’ve been warned to stay away from.
How do I weigh the decision between terminating the account and losing the tax advantages or keeping it and paying the fees?
We’re leaning towards the latter, but it’s an emotional blow. Am I letting the tax tail wag the dog?
Remy asks (at 39:25 minutes): My husband and I have been trying to grow our family and it’s looking likely we’ll need to do IVF.
We expect it to cost $30,000 out-of-pocket. We have $20,000 in cash saved but we’re not sure where to pull the additional $10,000 from.
We have $60,000 invested in a brokerage account and $10,000 in I bonds that we bought when rates were high.
Should we take the money out of the brokerage account, or should we cash in the I bond before its maturity date?
Anonymous 2 asks (at 50:15 minutes): My partner and I have been living on the road in an RV for the last several years.
We enjoy the lifestyle but we want to establish a home base for part of the year. We plan on purchasing raw land to build a small, off-grid home, but we’re stuck on the financing aspect.
Our goal requires two large purchases: the raw land and the building costs.
We expect to do most of the labor ourselves, so the majority of the construction budget will be spent on materials and equipment. We’re aiming to spend a total of $300,000.
How should we fund this purchase?
I’m 30 years old and I make $180,000 a year. My partner is finishing up university and expects to make $60,000 a year after graduation. We have no debt.
I have $300,000 saved for retirement and I contribute the maximum to these accounts each year.
I also have $125,000 in cash and other non-retirement accounts, not including my emergency fund. My partner has $130,000 invested in a brokerage account.
I plan on spending the cash, but I’m uncertain about the money in the taxable brokerage account.
We’re very debt-averse and we like the idea of being able to take mini-retirements from time to time. It seems that having a loan would make it harder to achieve.
Our timeline is flexible, so we don’t have to buy the raw land and develop it at the same time.
If we decide to use the taxable brokerage account, what implications should we be aware of? Conversely, if we want to take a loan, what kind of loans should we look into?
Lastly, what are your thoughts on raw land as a conservative investment option?
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