Fri, 30 January 2015
144-Friday Q&A: Can I Retire With $1.4M, What Do I Do With Too Much Cash, and Should I do a Roth 401(k) or Traditional 401(k)?
Today, I bring to you three very fun but straightforward questions. Here they are:
Question #1: @01:56
My wife and I are well read in the areas of index fund investing, frugal living, early retirement, and financial independence (including your podcasts). We have been on the path to early retirement for many years and we think we are there. We both have high stress jobs and want to quit to raise a child and do whatever interests us whether it brings additional income or not. We want to have a significant financial cushion, but also don’t want to be so conservative that we work years longer than necessary. We are worriers and are very conservative in our estimates.
Although we are fairly confident in our calculations for early retirement timing, we hired a fee only financial planner for an outside opinion, and the experience was positive, but we believe the timing recommended was extremely conservative (4 years from now without a child; 5-6 years from now with a child). We have a very good handle on our spending as we have been tracking it closely for several years.
The financial planner did not seem to understand our frugal lifestyle and rather than reducing our current spending by the “cost of working” that we clearly communicated, he added $15,000 per year to our current spending, which significantly changes the projections for retirement. The explanation given was to account for “unexpected expenses”, but that amounts to >$20,000 per year in excess of our retirement spending estimate below. We would be very grateful for your opinion of our plan to retire NOW, given the following data, which we have abbreviated to the most important points.
Ages: Him-45, Her-37
Debts: None (own a house and 2 cars free and clear)
Current Spending: $45,000
Question #2 @26:20
Came across your podcast and dig the advice/honesty.
I've read numerous articles encouraging the use of fee-based financial advisors but haven't had a lot of luck finding the right person.. discouragement set in after numerous canned responses/what seemed like aggressive sales tactics.
I made somewhat of a half ass attempt in my early 20s with regularly maxing out a roth/always contributing enough to various company 401k to get the contribution match.
I've not paid a lot of attention and recently realized I'm holding roughly 50% of my total assets in a standard savings account yielding only 1%.
Without pulling the actual figures that'd be ~90k in retirement accounts Roth/Traditional rollover and ~90k in straight up cash... terrible I know.
My question is how do i fix/prevent it? I currently have one investment property with a mortgage that's less than what it's leasing for.
I see a couple fix it options:
Buy another house
Pay down existing mortgage
Invest outside of a retirement account
I believe adjusting my 401k contribution may be a start to preventing it but what about after I max it out?
I don't mind paying for advice but what I really want is someone that's hands on/up to date.. helping me get the most out of my money.
Question #3: @46:37
My name is Joe and I’m 24 years old. I’ve been listening to your show for a while now and really enjoy it, keep up the good work.
My question has to do with whether or not a Roth 401k is the right move for me. Currently my gross income is $58,616. This year, I’ve contributed 6% of my AGI into a regular 401k and my employer matches .80 cents on the dollar up to the first 5% of my pay. ($3,517+$2,344 = $5,861) I also contribute to my Roth IRA and will max it out at $5,500.
My employer just recently began offering a Roth 401k option and my question is whether or not it is the best move for me to make to begin contributing to the Roth vs the regular 401k? I understand the tax benefits on the front end at my young age and do believe taxes will rise in the future and also that I will hopefully be in a higher tax bracket in retirement than I am now. In my mind, the advantage of the Roth is the higher contribution limit (18k vs 5,500) but the advantage of the Roth IRA is I have it at Schwab and have lower fees and more investment options than inside my 401k. I would like to keep my net take home pay the same and am having trouble running the math to figure out which would be the better option. In addition, I have the option to do a Roth 401k conversion on the $12k that’s in my Regular 401k. Your advice would be much appreciated.
Assets: $27k in Roth IRA, $12K in 401k, $3k in taxable investment acct, $6K in savings acct, $2k in checking acct
Debts: $41,200 Federal Parent PLUS @ 7.65% and $16,500 @ 5.25%. I currently am on the standard repayment plan (10 yrs) and make an extra $100 payment each month on top of that. No credit card debt or any other type of loan, own a 2005 Camry that is paid off.
Enjoy the show!
Thu, 29 January 2015
143-Intro to Self-Directed IRAs: How to Invest In Real Estate, Tax Liens, Physical Gold and Silver, Structured Settlements, Horses, Livestock, Farmland, Timberland, and More In Your IRA
I've been looking for an expert on self-directed IRAs to bring on the show and I was thrilled to meet Kirk Chisholm at FinCon last year.
Kirk is an expert in both the self-directed IRA niche and the alternative investments world. His firm, Innovative Advisory Group, helps serve clients in this space with advice.
Self-directed IRAs can be a powerful tool in your arsenal. Just think of the magic of Mitt Romney's $100,000,000 IRA!
When you combine an IRA with alternative investments, you might really be able to work some magic.
What is an Alternative Investment?
Well, right from Kirk's site: "The term “alternative investment” has become a trendy term in the financial services industry to describe new approaches to investing. It is frequently used to describe different asset classes or investment types such as: hedge funds, structured products, managed futures, or even Timber REITs. If you describe traditional assets as stocks, bonds and mutual funds, then by contrast everything else is an alternative investment.
"We look at the term “alternative investments” differently. We take a step beyond the current industry definition and use it to describe assets or investments such as physical real estate, tax liens, physical gold and silver, structured settlements, horses, livestock, farmland, timberland, and more. We would characterize alternative investments as an asset or investment which is: not publicly traded, has a low-correlate to most traditional investments, is too small for institutional investors, is illiquid, is not easily able to be securitized, or is not reliant on the publicly traded markets to be profitable.
"The characterization of what is a suitable asset for diversification purposes is a fluid concept. Some asset classes, which have traditionally provided a low or negative correlation to other assets, have become much more highly correlated since early 2000. Asset classes such as managed futures, timberland, farmland, and certain types of hedge funds in the past did provide a low correlation to the traditional markets, however, due to a higher level of institutional interest in these areas, as well as changing market conditions, they have become more highly correlated to traditional markets. This minimizes the effects of diversification as a risk management tool."
This interview is super fun and super deep.
Wed, 28 January 2015
142-One Possible Business Model For an Ethical Financial Planning Practice Serving Middle-Income Families
I designed a potential financial planning practice structure a year or so ago. It has been my backup plan if Radical Personal Finance were unable to be financially productive. (It's probably still a backup of a backup.)
In light of the Episode 139: "My Advice for People Interested In Getting Into Financial Planning," I decided to follow up with some specific ideas for a practice I considered creating.
Here are my ideas.
The show includes a discussion of:
Enjoy the show!
Tue, 27 January 2015
The most popular episode--by a long shot--of the Radical Personal Finance podcast is Episode 40: "Making $80k on 1/3 Acre With an Urban Farm Without Owning Land? Yes, Please! Interview With Curtis Stone."
Today, Curtis is back for another appearance.
We set out to record a show with a basic overview of how to get into urban farming with some practical steps lined out.
The first step is to get your mindset right. Although our interview got stuck on step one, it wound up being a fascinating discussion of business principles.
I hope you enjoy!
NOTE: Curtis is on the road over the coming weeks with seminars in Florida, California, Washington, British Columbia and Mexico. Details are here: http://www.greencityacres.com/events/
Mon, 26 January 2015
140-Friday Q&A: Planning Steps When A Spouse Is Planning to Stay Home, Borrowing On A Paid-For House For Real Estate Investment, Pension Plans in an Asset Allocation Plan, and How To Plan Your Life Together After Divorce
On Fridays, I answer your questions! And, even though this is going out on Monday, I still answer your questions! :)
Today, I handle these four questions:
Thu, 22 January 2015
At this point, I'm honored to get about an email a week from someone asking about how to get into the financial planning business. Sometimes, I get multiple emails in a day!
Here are four examples that I mention on the show today:
It's a great question and there are a bunch of ways to answer it. I decided for today to focus on the big picture answer which is primarily about having a good fit between your skills, your firm, your firm's abilities, and your prospective clients.
I might do another show on the actual steps needed to set up a firm if you want to do it independently.
In this show I go through:
Direct download: RPF0139-Advice_for_Getting_Into_Financial_Planning.mp3
Category:podcast -- posted at: 4:00pm MDT
Wed, 21 January 2015
We're continuing our college series with an in-depth discussion of 529 plans.
529 plans are incredibly popular in all their permutations. (Many people who are currently participating in a 529 plan don't actually realize it because they refer to it as a pre-paid tuition program.)
They're also under attack. President Obama's most recent budget proposal targeted them for change. (It also targeted Coverdell ESAs.)
Personally, I think 529 plans are often misused and mis-applied. The majority of the mass affluent who participate are simply not getting a huge benefit in exchange for giving up the freedom and flexibility of the money.
But, there are a number of things that can be done with these accounts that are really unique.
Enjoy part 1 of our class today and learn:
Mon, 19 January 2015
As we rattle around and around the iron triangle of wealth (income, expenses, and intelligent use of the difference), we come today to the topic of income. Specifically, how can you create some extra income?
The world is changing and there are more opportunities to earn some money from a side project than ever before. No longer are you limited to throwing papers early in the morning or delivering pizzas in the evening; now, you can work in all kinds of interesting ways with people from all over the world.
Listen to today's show and enjoy some of the ideas. But, if none of the ideas appeal to you, use them as a jumping off point and create your own idea.
Fri, 16 January 2015
We need to get into some economics today and I'm going to do some prognosticating. This is a very rare event on the show, so here goes!
Prediction: there will be a global recession in the future. And gas will go up to $20/gallon.
Now that we have that out of the way, let's talk about what we can do to get ready for it! After all, that's the only thing that likely matters to you or me.
One of the keys to being financially successfully over the long term is to avoid the big mistakes. One big mistake (of many) might be getting laid flat by the coming recession and increase in gas prices.
Today I share with you some thoughts on some of the things you can do today to prepare for this eventuality.
I hope these ideas are useful to you!
Thu, 15 January 2015
Today's show is a bit of a pep talk--for you but also for me!
We are taught by society to compare ourselves with other people. Even though we're all supposed to be "unique and different, we're really not. After all, we're measured on our weight as a baby (compared to all other babies), our grades as a student (compared with our class ranking), and the amount of money we make and have (thus defining us as successful)!
Well, let's challenge that a bit. Sometimes we need a reminder to forget about what everyone else is doing and focus on what we're doing and why we're doing it.
Join me today for a bit of a pep talk. I hope you find it encouraging. I was encouraged as I created the show.
Here are the influences on today's show:
Wed, 14 January 2015
134-Q&A: Incorporating in California vs. Wyoming (or Nevada or Delaware) and How to Decide Asset Allocation for an Investor in Sri Lanka
Q&A continues with two very interesting questions today:
Enjoy the show!
Tue, 13 January 2015
133-Q&A: Paying off Your Primary Mortgage With a HELOC (Mortgage Acceleration) and How Safe is My Deferred Comp Program?
We're continuing our Q&A series this week and today I handle these two questions:
Enjoy the show!
Direct download: RPF0133-QandA_on_HELOC_Strategy_and_Deferred_Comp.mp3
Category:podcast -- posted at: 3:02pm MDT
Mon, 12 January 2015
132-Q&A: Thinking Through Buying Life Insurance on Your Kids' Lives and Clarification on 72(t) Substantially Equal Periodic Payments for Retirees
When I started recording the show, I planned to answer six questions. But, after finishing the first question and realizing how in-depth the show would be if I covered all six in one show, I decided to break it out into multiple shows.
Today, I cover these two questions:
Notes-Life insurance for kids:
Wed, 7 January 2015
I read a lot of financial advice from many different perspectices. I also frequently am asked about financial advice. "Is this a good idea?" "What do you think about this investment idea?"
Over the years, I have noticed that I have developed a filter that many people don't have: I view all financial advice through a filtering lens of scale.
When I hear advice, I don't immediately accept is a blanket statement; rather, I think, "what type of household profile would this be appropriate for?"
When I talk to someone who's asking for financial advice, I try to ascertain where they are in their financial journey so I can give them the most appropriate advice.
Having this filter helps me to give advice that matters. It also helps me to coach myself more effectively by identifying where I am in my own journey so that I can focus on the things that are most appropriate for me.
In today's show I share with you many examples, including:
Enjoy the show!
Tue, 6 January 2015
I like the change of the calendar year. It's a convenient time to sit down and take an inventory of where things are and assess the plans for where things are going.
2014 was an awesome year. It was certainly one of the more challenging times of my life and was filled with change of all types. But it was awesome.
2015 will be transformative. This year, I'll be heavily focused on stepping up my game and making everything I do to be world class.
I have plenty of goals. But for me, the end result of achieving a goal is less important than who I become on the way.
Also, since there's no way for me to achieve a lofty goal without developing as a person, I tend to focus less on the goal or outcome and more on the plan of what I need to learn and who I need to become.
In today's show I share with you some of my areas of focus for 2015 and some of the plans I have for my personal development.
Here are three of my areas of focus for the coming year coupled with some of my action plans for development as an example with resources:
Fri, 2 January 2015
Teaching Canadians to be Financially Independent By Age 45: Interview with Timothy Stobbs, Author of Canadian Dream-Free at 45! RPF0129
As we begin a new year, I think it's fitting to start with a discussion of financial independence!
My desire for all of you is that you may experience financial independence as you define it and that you may establish a workable plan this year toward its achievement.
Tim Stobbs is right in the middle of his financial independence plan. After stumbling across the idea of early retirement/financial independence, he was awakened to the possibility that an ordinary person could achieve it.
He set out a plan and started following it. He's now ahead of schedule!
Along the way, he wrote a book to teach others how to accomplish the same goal.
Enjoy the interview!