Ask Todd
Ask Todd R. Tresidder Your Single Most Important Question About Investing, Personal Finance, Retirement Planning, Or Financial Freedom – It's Free!
Just enter your question in the comments box below – it's that simple. I will then reply back with an answer.
Why do I offer this service for free? The truth is we're really helping each other because your questions teach me what my readers are most interested in learning. When you provide questions it helps me focus my writing on what interests you the most. You get relevant content, and I get happy readers – we both win.
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Now, what's your single most important question about investing, personal finance, retirement planning, or financial freedom?
Thank you for your support,
Todd R. Tresidder – Founder, FinancialMentor.Com
I would like a response to the question of how can we start a consultation floor in the Salt Lake City area? We do the consultations and if they qualify we can set to one of us or to whomever you choose for the enrollment into a coaching program. There is a lot of talent here lookng for work that want to help people get into the type of coaching that really makes a difference. Dee
Dee, thanks for your question. I will be adding a page to the financial coaching section of this site in early 2009 titled “A Consumers Guide To Financial Coaching” or something similar. It will point out the differences between education, seminars, generic financial coaching, and my brand of financial coaching so that people can make a wise decision what type of service fits them best. There is nothing wrong with any of the different alternatives – it just depends on the client’s needs and budget. For right now, I am choosing not to work with the mass- production coaching model. Hope that clarifies. Todd
I’d be curious to know if you’ve two or three tricks to pick the stocks you decide to investigate. As in, whether you’ve any method to quickly eliminate poor-looking stocks. — Denis
Hi Denis,
Thanks for your question. I decided to make it the “Question of the Week” so you can find your answer at my blog https://www.financialmentor.com/investment-advice/investment-strategy-alternative/three-criteria-for-picking-individual-stocks/511
Again, thanks for your input.
Todd
Todd,
Do you ever advice your clients to explore the benefits of offshore corporations, or IBC’s?
Hi Aaron, Thanks for your question. I decided to make it the question of the week and published your answer in my blog here https://www.financialmentor.com/wealth-building/should-i-use-offshore-corporations-and-ibcs/570 .
Thanks for your input.
Todd
What is your opinion of the investment approach taken by Harry S. Dent?
Steve,
Regarding Harry Dent, I am not an expert on his work and don’t really follow him. The reason is because he falls into the category of “financial forecasters” which I consider irrelevant and actually dangerous to profitable investing. I explain why in great detail in this article https://www.financialmentor.com/investment-advice/investment-strategy-alternative/financial-forecasting-hoax-stock-market-predictions/18251/
So in a nutshell, I have no idea if he is good or bad. I have no opinion on his work except that because his approach is based on forecasting the future he is irrelevant to earning consistent investment profits.
Hope that helps, Todd
In todays’ turbulent economic times, what tools are available to help improve ones’ financial literacy? What can be done to get those tools in the hands of the unknowing public in a mass scale campaign, in the most efficient and effective way?
Hi Clint,
Hoo boy – that is a loaded question! It is like you are begging me to pitch my services.
The whole reason I am offering the educational resources on this site is because I believe it is the best answer I know to address your question. In other words, I am living your question with this web site and my answer is the education offered by http://www.financialmentor.com
The whole reason I started this business was because the vast bulk of what I read and hear in the popular media is inconsistent with what my personal and professional experience has shown to work for attaining financial freedom. I saw the need you are pointing to and decided to try and give back the benefit of my experience by filling that need.
So now I spend my time writing and blogging about my version of financial reality trying as best I can to get the word out on a mass scale. In the end, because of the way search engine ranking and social media works I am truly dependent upon my readers through linking, digg, stumbleupon, etc., to turn this into a mass scale enterprise. I can produce the content, but the only way it can go big and help millions of people is if my readers get enough value from my message that they choose to spread the word.
In other words, you as the reader are in charge of deciding if this web site will be an “efficient and effective way” to “improve financial literacy” for millions of people. Time will tell if people care about my message enough to spread the word…
So in addition to my blog you can search out other trustworthy blogs and valuable sources of alternative information on the internet. That is where you will find the next level in financial literacy I am trying to teach through this web site and my financial coaching services.
In summary, you question is dead on. Yes, there is a huge need. I am trying to serve that need. I hope that answers your question. Your answer exists in alternative financial media like this web site – not the mainstream financial media.
Todd
I have built several businesses ready to go on autopilot.
Websites that sell and deliver products on complete autopilot, business partnerships that generate a revenue %age of sales, affiliate programs with the same structure etc…
How do I reap the fruits of my labors, please?
Thank you.
Norman Cristina (Malta)
Hi Norman,
Per your other comment under my Multiple Streams of Income article you point out you have several online businesses – none of which get traffic. It appears your definition of building an online business is to build a website. I disagree – it is not enough to just build a site as you are unfortunately figuring out already. You must market the site also.
The formula is traffic + conversion = profits. Building a web site only puts you in the starting gate ready to run the marketing race to build traffic. Once you run the marketing race and build traffic then you must successfully convert the traffic to realize profit. It is a three step process of which it appears you have taken just one step so far.
Sorry to be the bearer of bad news, but judging from your own explanation of your “businesses” it appears you are closer to the starting gate than the finish line. It is good that you have started, and there is much more to this game.
One last comment, another lesson that others can take from your inquiry is that you violated the focus rule. You have spread yourself thin among many unrelated web sites that lack a cohesive theme (besides the fact that they all interest you). Success results from focus and not getting spread too thin. Again, review my Multiple Streams of Income article referenced above for a more detailed explanation.
Hope that helps, Todd
Your bio says you started building your net worth at the age of 23 – if you could go back and talk with your young self on your 23rd birthday, what would you tell him?
I turn 23 next month. I’m from an immigrant family and got a wonderful education (engineering) on scholarship, have no debt (I’ve been a compulsive saver since I was 11 and put money aside for retirement as I earn it, somehow scraping by with the rest), have a few months of emergency savings and an IRA…
…and I don’t know where to go from here. I’ve read all (not kidding… it’s a small shelf, though) the books on financial planning at the library but they either (1) already talk about stuff I’ve done already or (2) are written for folks twice my age with a heck of a lot more money. Meanwhile I head-scratch my way through filing taxes, barely keep financial records (yeah, I know that’s bad) and am totally baffled by the idea of a long term financial plan (I don’t even know what industry I’ll be in 3 years from now!) and the concept of retirement (in my family, you work for a salary until you die… I don’t want to do that).
I know what I’d do if I didn’t have to worry about money for the rest of my life. I would go to graduate school and become an engineering professor (and change the way undergraduate engineering is taught from the inside out, making it more self-directed and commmunity-based) and set up community workshops with low-cost classes where people could come in and learn how to invent things – to share the joy of creating things to solve your problems, with math and science and technology as your tools under your control instead of Scary Things You Learn By Rote. And fund the development of an open hardware hearing aid platform, because I’ve wanted to tinker with mine since I was a kid. But I don’t know how to get out of the rat race yet.
What’s the biggest piece of advice you wish you’d known at 23 that helped you figure out how to escape the rat race?
Hi Mel,
A little sidetrack to set the context first, and then I will answer your question directly…
I avoid oversimplification of wealth building and financial freedom unlike other educators who provide “the secret to wealth” that supposedly can make a difference because it doesn’t work that way. It is more complex and that is why financial freedom eludes most people. They want simple answers and smart marketers deliver what they want – unfortunately, it doesn’t build wealth for anyone except the marketer.
I’m a dumb marketer because I tell you the truth even though it doesn’t sell as well – building wealth is complex. It is no different than any other profession requiring specialized skills and a depth of knowledge. I often tell my financial coaching clients that “investing isn’t brain surgery – it is far more complex than that.” Think about it, if that wasn’t true than why do Nobel prize winners and PhD economists and mathematicians fail brilliantly at it? (ie: Long Term Capital Management and other recent hedge fund failures) It requires a fascinating combination of finance, business, mathematics and emotional intelligence skills – not to mention a little common sense.
I’m not trying to scare you, but I am trying to set your expectations correctly so that you are less susceptible to all the hucksters and marketers as you begin your journey to develop your financial intelligence and build wealth. It will help make the path you travel more direct.
With that said, I specifically published two articles on this site that address your question which I am interpreting as “what are the base skills and knowledge I must know to succeed at investing and building wealth?” I’m also including a link to another article explaining “the cause and effect chain to wealth” that I think you will find helpful…
(1) The Ten Commandments of Investment Strategy
(2) The Ten Commandments Of Wealth Building
(3) Warning! Why Most Wealth Building Systems Are Dangerous Half-Truths
One final comment and I will let you go: I am so thankful I took the effort to learn what I teach here. That is the message I want to leave you with. Yes, it takes effort, but there is no way it is any more effort to figure out how to gain financial freedom and to pursue the dream while you are young than to spend your whole life working for financial mediocrity. Invest in yourself and build your financial intelligence starting now while you are young. You will likely never regret it. I know I am thankful for the journey.
Hope this helps.
Would it be a wise decision to take the cash value that a life insurance has accured and put it into a ira or invest in some other plan to make more money, seems a waste to leave it and be paid the full amount of the policy at the time of death, if we can invest the cash value and make more money than the policy is for. Is it possible
@Caryl – Life insurance is a very narrow area of personal finance that I have no expertise in. Sorry, but I can’t answer your question with any depth of knowledge. The reason is simple. Life insurance has no practical application to building wealth because it is an inefficient vehicle for building equity, and once you become wealthy you have no practical need for it. There are some specialized uses for life insurance by the wealthy that are beyond the scope of this reply and not relevant to your question anyway so I won’t go into them here. Let me be clear that I am not dead-panning life insurance in this reply: it can be useful as a defensive strategy to protect against a loss you can’t afford and it can be useful in business buy-sell situations. In general, it is useful as a defensive strategy. Building wealth and achieving financial freedom is by its nature an offensive strategy. With that said, your question is very straightforward and could be answered by anyone with training in life insurance. The issues are not complicated so you should have little trouble getting an accurate answer from an appropriate resource. Just understand that life insurance is not likely to help you gain financial freedom – that is why most experts recommend you only buy term life and invest the difference in premiums. Hope that helps, Todd
Todd,
I have $57k in a retirement account from a matured CD making 4%. I have the cash and want to invest in something safe…I have another $300k in the IRA in stocks and other CD’s and I am 57. What would you recommend investing in and how long? I would love to put it into another CD, short term, but rates are so low. What is your advice?
John
@John – Thanks for you question John, and unfortunately I can’t provide personalized investment advice on these pages. There is much more that goes into building a well planned investment strategy than can or should be addressed by email. I teach generalized investment principles which you can choose to apply, but personalized investment advice requires a more intimate relationship with your goals and financial situation than we can adequately address in a public blog or forum. I would be disrespecting your situation to provide a cavalier answer on these pages, and a cavalier answer is all I could offer based on one paragraph of information. Your finances deserve better, and you should settle for nothing less. Hope that helps. Todd
Todd,
I have a hard time using retirement planning calculators (for many reasons), and one of my basic hang-ups is that I don’t know how to use them to calculate retirement for both my husband and me together.
Would I do one calculation for me and one for him, and then add the final answers together? Use our joint income, savings, etc. as one figure in the calculator?
We anticipate he’d retire earlier (as he’s a few years older than I am), but maybe not live as long (because he’s older and male) … just don’t know how to work in all these variables. Any advice you can offer?
@ Kathleen, Thank you for your question. I decided to make it the question of the week so you can find your answer at this blog post https://www.financialmentor.com/retirement-planning/retirement-planning-for-two-the-challenges/2235
Hope that helps,
Todd
Hi Todd,
Am so impressed on you client’s testimonials. My husband and I are seeking a financial coach. How much is the cost of your service.
Thank you,
Jeanette
Hi Jeanette,
I love it when readers ask me to plug my services. Yes, many people have experienced success with my financial coaching services: it can be very rewarding. Prices and availability are discussed here…
Thanks, Todd
Hello,
Do you think the only kind of advisor one should hire is a fee based one? I was told by a commission person that when they have a client buy an insurance policy they HAVE to take a commission. Is this true?
@ Carenna – My general rule is to hire only a fee based advisor for investment products. I explain all the reasons why with an in-depth discussion about the inherent conflicts of interest in compensation models here.
However, your question is a little different because it regards insurance. I don’t mix insurance sales with investment advice and I have never purchased an insurance product for an investment. I don’t go to generalists who sell all financial products (investments, insurance, etc.). I buy only from specialists – experts in their unique fields. The people I buy my home, auto and health insurance from are all specialists – that is all they sell – and they usually represent a single company or product line. They are experts in those product lines and receive commissions on what they sell. I have no problem with a commission in that situation because I shop them based on the insurance product they represent – commission included.
That is very different from investment advisors who all (for the most part) recommend investments from basically the same menu of choices. In this case, you are paying for their expertise in choosing from that menu; therefore, fee based compensation minimizes conflicts of interest best.
In summary, my concern in your question is you are blending two issues. Investments and insurance are two very different animals that I believe are best kept separate. Each is complex enough to merit a specialist in that field. Conflicts of interest and compensation are different for each specialty.
Hope that clarifies.
Todd,
How much do you recommend to have in an emergency fund? I hear anywhere from 3-8 months. I am 44 yrs old, debt free, ready to rev up my emergency fund first and then my retirement. I am planning to increase my retirement to 50% of my monthly pay. Because I will essentially live off of one check (I get paid every 2 wks), I feel I need a lot more in my EF to feel secure. Yet the more I need in my EF, the longer the delay to increase my retirement. Thank you!
@ Bridget – I know this is financial heresy but I have never really made much sense out of the emergency fund concept. To me all liquid assets are an “emergency fund” of sorts.
I encourage people to max out their government sponsored retirement plans first because of the tax advantages and the government penalties if you try and raid the fund provides discipline. Something sorely lacking for most people.
After that put the remainder in savings. You can call it an emergency fund or you can call it retirement assets. In my world they are all net worth under the category of liquid assets. They all compound, grow, get invested and get spent the same.
The significance of the separation has always eluded me.
Hope that makes sense…
Todd,
Your website contains a lot of references to “investment risk management” – which is an area of interest for me. Can you point me to a specific article that contains details about how to go about actual strategies to manage the risk in my portfolio?
Thanks,
John
@John – Unfortunately, there aren’t good resources on investment risk management that teach the subject the way I understand it. Most use VAR and other academic based theories that don’t work when you need them most – in extreme markets. I teach a multi-pronged approach to investment risk management that is based on sound logic and mathematics. I have the process mapped out in a file in a drawer ready to be compiled into an ebook but unfortunately that won’t happen for some time yet – other projects to complete first. Thank for your interest, and make sure to subscribe to the email updates where I will discuss aspects of investment risk management on a regular basis and will also announce the ebook when it is available.
Hi Todd,
I found your website some time ago through another website where you suggested buying an apartment building while young, and then later I saw your name in a few quotes in the Millionaire Real Estate Investor by Gary Keller. In Canada, as you may know we had no real estate implosion, we can currently get a 5 yr mortgage for 3.89 % (a 40 year low), and consequently demand for investment real estate is extremely high. My question is, should/could I treat the extremely low rate as a form of the value discount that is so important in buying any investment? As background, the small city where I live has a vacancy rate of 1 % that is not likely to change anytime soon, real estate prices are very stable, rental yields are high (>10 % per year on purchase price), and there are very few multi-unit buildings to begin with.
Put a different way, would you stay focused on buying at a big discount even if it means potentially waiting 3-5 years? I appreciate all the many nuances in this question that are individual to each property and to each investor, but if you answered just the broadest issue that would be great.
Thanks in advance,
TDW
@Tris – I’m getting quite a few questions around the theme of real estate strategy and buying criteria in the current market conditions. As a result, I have written a post addressing these issues scheduled to publish in February, 2010. It should answer most of your questions.
The short answer is every situation is unique, and it appears the area you are in is vastly different from the conditions I’m experiencing. You will need to adapt your strategy accordingly. You would only wait if you had a good reason to wait, and you should only commit to a purchase if you have a sufficiently compelling deal to justify the risk.
With that said, I would be very cautious of purchasing with any type of financing except fully amortizing, long-term, fixed rate mortgages. No balloons, adjustables, etc.
While we remain in a deflationary, low interest environment for the time being that won’t last forever. If your time horizon for ownership is long-term your financing must match that objective or you risk getting in trouble with higher interest rates and other difficulties at the point of refinancing.
Your loan (interest expense) is one of your biggest expenses and risks in owning income property. I encourage investors to limit that risk.
Hope that helps, and watch for the more complete blog post in February 2010.
Todd, I pulled all of my 401k investments (~450k) out of stocks and into a low yielding (~2%) stable interest fund late in 2008. I thus missed the dramatic decline in the market and preserved my 401k. I have no confidence in the market as I believe this is a suckers market. So I missed the uptick but I dont care as I cannot get involved in this kind of market guessing. Comments and suggestions on what to do with my 401k investments? Comsidering foreign markets as an inflation-hedge?
@Glenn – Congratulations on missing the 2007-2008 decline, and thank you for your question.
Unfortunately, I cannot provide personalized portfolio/financial advice on these pages. There are just too many individual nuances to do it justice. Your portfolio deserves the respect of personalized advice, and these pages are limited to general educational content both by law and from a practical standpoint as well.
Hopefully that makes sense.
Hey Todd, I understand, let me word my question differently. I think the available data indicate that this market rally is not based on any real improvement in our economy. In fact, the mounting debt should have a dramatic effect on our economy in the not too distant future. It seems to me that this is a real disaster in the making, the likes of which have never been experienced in the history of our nation. Imagine if the world monetary community refuses to recognize or invest in the dollar? Am I being overly pessimistic? Seems real to me!!!
@ Glenn – Predicting the future is a tenuous process at best. Read my article here https://www.financialmentor.com/investment-advice/investment-strategy-alternative/financial-forecasting-hoax-stock-market-predictions/18251/
However, with that said, I will go so far as to state the risk/reward appears grossly unfavorable for stocks in 2010 as stated in two previous posts:
https://www.financialmentor.com/financial-information/stocks-offer-unfavorable-risk-to-reward-ratio/2701
https://www.financialmentor.com/investment-advice/risk-management-plan/new-bull-market-or-bear-market-rally/2278
While you make some interesting points, I believe unfavorable risk/reward ratio is sufficient for an investment decision. I try to stay away from extreme language and just focus on getting my investment postions right.
Hope that helps.
QUESTIONS: How should I handle the risk of higher future income taxes in planning my retirement? I’ve been contributing the maximum to Roth accounts and I plan to do a IRA conversion under the new rules this year (I made too much money to do this in the past). How can I determine how much I should convert and the right overall mix of retirement assets to hold in Roth vs taxable accounts? Besides Roth accounts, what are some other options for managing this risk?
SOME BACKGROUND INFORMATION: I recently analyzed historical US federal tax rates over the last 94 years using data I found on the internet. The average marginal federal income tax rate for taxpayers in the highest bracket from 1937-2008 (70 years) was 64.4 percent. The highest federal income tax rate was 94 percent from 1944-45. The highest federal income tax bracket was over 80 percent from 1940-63 and 70 percent or higher from 1936 to 1980. The lowest the highest tax bracket has been in recent US history was 28 percent from 1988-1990. Note that current federal tax rates appear to be on the lower end of the historical spectrum. Based on my analysis, it appears that federal income tax rates (and the associated income tax rules) are pretty unpredictable. This really complicates the task of retirement planning. Like everyone else, I don’t want to run out of money in retirement and taxes seem to add yet another significant risk to the equation. I haven’t seen a lot of useful information on managing this risk.
@Rick – What a great question!
In fact, I liked it so much I am writing an entire blog post on the subject to be published in February. I agree with your concerns and converted all my retirement assets to Roth IRA’s using a very aggressive plan beginning back in 1998 when they were first offered. With that said, there is no security that the government won’t change the rules and decide to tax Roth IRA assets later on when they are desperate for revenue.
Additionally, what I find most disconcerting about the tax rates is not only that they trended to the current historic low, but the last time they did the same was right before the Great Depression. The years after the depression as debts and deficits rose the government escalated tax rates dramatically to help pay for it all. The similarities are striking – your concerns are well merited.
Again, this question is so interesting it will require a well thought out post to address all the nuances. Make sure you subscribe and watch for February 2010 posts – no later than March 2010. Thanks again for the question.
Since converting to a Roth IRA would require me to pay taxes at 25 – 28%, I have been trying to think of a stealth way to get money into my Roth and out of my traditional IRA. I have been thinking that by investing in an index fund in one account (or a stock) and then shorting that same fund in the other account, I would in effect transfer dollars from one account to the other and thereby avoid paying taxes on the transfer. My return would be the taxes I avoid paying. What do you think?
@Gary – Interesting idea. I’m a big fan of Roth IRA’s and converted substantial sums in the decade following 1998 when they passed into law. My choice was to pay the taxes and my reasoning was simple… I was young, very good at investing, had 60 years to compound tax free, and so the up-front taxes were a no-brainer. In just one decade the math is already overwhelmingly in my favor.
Investing profitably with consistency is a tough enough game to figure out without adding the complication of spending the rest of your life hedging between accounts in an effort to game the system on one year of taxes.
The formula for Roth IRA conversions is well documented on other sites throughout the web and is fairly straightforward. Either it makes sense for you to do it after tax or it doesn’t.
My goal is freedom, both personal and financial, and creating investment complication that will last for the duration of my life is the antithesis of freedom. I believe in keeping things simple. If they are complicated then they are probably not correct.
Hope that helps…
I’m still in college and own only one property creating a nice cash flow of $200/mnth, nothing substantial. However my question is since I’m so young and we are in a a state of economic turbulence how can I prove to banks and investors that I can produce good returns for them if they invest in me(besides just showing them the numbers claculated from the property). It seems experience is very important epspecially now, yet I don’t have much being so young(especially collateral). I don’t believe giving outrageous interest rates will help on the cash flow side for me, yet I understand this is the most profitable time to buy properties at huge discounts, any help would be much appreciated.
@Rob – Interesting question, but unfortunately it is too broad in scope to do it justice in a blog comment – or even an entire article. In a nutshell, other’s will only do business with you when it is clearly in their best interests. Your job is to make it clearly in their best interests. Once you have done that then your problem will be solved.
I know that isn’t much and there is more to say on the subject, but that should at least point you in the right direction. One final note – be careful what you consider a “huge discount”. Study economic history and learn valuation models.
Hope it helps…
Hi Todd, you were lised as a coach on CNN Money and I wonder if you have any need for “Financial Coach Assistant?” I am very passionate about exactly what you are doing, I have an MBA and have worked as teacher in Europe and I have helped a lot of my friends looking at and improving their economy.
@Peter – I would encourage you to submit some unique, educational posts for publishing that teaches this community how to build wealth and invest smarter. Show your capabilities through insightful writing and let’s see where it goes. What I’m looking for is education that is a cut above the mainstream half-truths published throughout the web.
Hi Todd,I used to be a biology student, but I changed to broadcast journalism. I’m concern about the future of this career. Lots of lay offs in several media companies, the media program is about to be closed in two schools I know, etc. I’m thinking about getting a Phd in Psicology. Do you think that might open new doors in the medical field? or any other? Is a good option in regards to good job opportunities? Thank you!
@Lina – Wish I could be helpful but your questions are completely outside my field of expertise. I coach investors and business owners to build wealth and achieve financial freedom. I have no background in the career counseling field and know nothing of the job market. One important principle of success is knowing your strengths and limitations. These issues simply never cross my field. Sorry I can’t be more help. Best of luck to you…
Hi Todd,
There are two schools of thoughts regarding a possible upcoming bear market. One being we are going to have a deflationary recession/depression and the other being inflationary recession/depression. Both schools have their arguments.
I have read the Turning Inflation into Wealth Mini Course that you recommended. You did write in a post that you are not buying real estate this time. Are you not buying real estate at this time because you feel that this deflationary period will continue for a while before we have an inflationary period? Are you going to be more interested in buying real estate when we enter a stronger inflationary period?
Thanks,
DJ
@ DJ – I am intimate with both schools of thought, and frankly, my crystal ball has never been cloudier. I find extremely well reasoned experts on both sides of the fence with compelling arguments. I believe in the rule, “When in doubt – stay out”. I’m simply not willing to make a big bet right now for the sole reason that valuations are not compelling enough to justify the risk. Notice that this approach doesn’t require any forecast of the future as you are making. It just looks at the facts here and now to measure risk and reward. The challenge with real estate is lack of liquidity and high transaction costs. If I’m going to make a bet it needs to be long-term and with plenty of cash flow to cushion any downside risk – what I call a “fat pitch”. People are finding them, but I’m just choosing to wait and see. Only time will tell if that is the right stance or not. The fact is I don’t have to have a deal right now, and the last thing I want is a bad deal. I will wait awhile longer to see what develops. That might prove to be wrong, but if it is there will be other opportunities another day. No rush.
Hi Todd,
I was reading the above posts, and you wrote that you coach investors and business owners to build wealth and achieve financial freedom and not give advice to people careers and jobs.. however, in order to be coached by you, do I need a cash flow to start investing with? or would you be able to give me tailor made advice for my life (having my own career, own income, where Iive etc) … also, is financial freedom possible in all careers? is it a way of dealing with life? or is it being in a particular field, like you did in hedge funding etc?
Thanks,
Sarah
@ Sarah – You have several questions so let me take them one by one…
My one-on-one coaching clients are typically business owners and investors because it is an easy process for people in that situation to add more value than the coaching costs. In other words, coaching is smart business decision for this client profile because one bad deal avoided or slightly improved investment returns can pay for years of coaching with all the other education and value created thrown in for free. Stated another way, I’m about creating more value than I cost when coaching so that the coaching process puts money in my client’s pockets.
With that said, there is no black-and-white rule about what has to be going on in your life to support coaching, but the reality is the fees are not cheap and a smart business decision must be made about whether that money should go to your asset column or get spent on my fees. Again, this is just business – you must decide if the coaching process will put money in your pocket or take money out? It is a no-brainer decision to opt for coaching when you have capital at risk as an investor or are growing a business as an entrepreneur, but the decision is often wiser to conserve assets and control expenses in other situations and learn through my free and low-cost services (books, group coaching, etc.) . That is why I have the individual coaching client profile that I have – for people in those situations it is smart business ( You can read a sampling of client testimonials here.)
To answer your other question, yes, financial freedom is possible in all careers. There is no particular occupation or income level required. That is why school teachers can become financially free while doctors and lawyers can end up in bankruptcy. It is a question of commitment and what price you are willing to pay to reach the objective. It is not a function of your current career. I believe anyone can achieve financial freedom in 7-12 years if they are adequately committed. The math is unequivocal on this statement. Some can do it faster depending on personal circumstances, but anyone can do it in 7-12 years if they are dedicated.
Hope that answers your questions…
Thanks a lot Ted for your honest feedback.. and not just get me on board as your client…
I asked coz maybe you have another one to one, which is not so costly and maybe would be shorter (if it makes sense).. I would like this coaching or advice because mainly because of my family backgound and my situation in life right now – I am at a crossroads.. I am coming from a family where we were quite above average for the island we live in, Malta. I had a very good lifestyle as a child, my father owned a boat,a house with pool,another house in another village, my mother also has her own house.. but in the past yr..everything went down the drain..i think it was mainly due to bad investment decisions in stocks and maybe bad lifestyle of my parents.. I am now at a crossroads, since I had to leave home as mum had to sell the house, and i am now thinking of deciding whether it makes sense eg to get into a 40 yr loan to ‘purchase’ a house, or else save up money and buy it in 10 yrs time in cash, or else weter it makes financial sense to take a loan for my masters and go study abroad,.. I mean, your service striked me since I am not after luxury lifestyles or huge spending like my parents did, but more as a financial free and stable lifestyle with other good healthy aspects in life..and I feel I need to show all facts I got of house loan,interests, masters loan and study etc to someone who can guide me take the right decisions.. since the wrong decision I make this year can take me into totally unwanted lifestyles in my early and late 30’s(and from my parents I am very well aware the consequences one might have)…and I do not trust anyone (not even my parents) with good advice. you say one can do it, but how?and which decisions should I take in my life?..I could read your free materials here, but it wont be tailor made to my life and decisions I have to make… Should you offer something for this case, I would be glad to consider it.
Thanks,
Sarah
@Sarah – Yes, there are many people (like you) that would like to access my services through some other vehicle than one-on-one coaching. I hope to be able to satisfy that need soon. I have several web projects to complete through this summer to build the base web site, and then I expect to begin offering specific group coaching products beginning in Fall 2010. Eventually, I will also offer the Monthly Mentor Mastermind which will include office hours, although I’m guessing the roll-out date on that will be pushed back to 2011. Just watch future issues of the newsletter for announcement and make sure you are a subscriber.
Thanks for your interest and trust. Todd
Thanks,
I will hear from you then,
Sarah
I was so happy subscribing to your site. I read a lot of your articles and I’ve learned so much from it. Thank you so much for this free site.
I would like to ask you advice on an outline about INVESMENT 101 that I would have to do as a module for my work. I am into the insurance industry and my boss told me to make a powerful module on investment 101. I’ve had a lot of ideas in mind, but I can’t seem to start. I would like my presentation to not only give knowledge but to also incorporate financial managment. My participants are insurance advisors, so please please help me on this. Maybe you can suggest a good book or you can help me on the outline. Do you have some sample presentations on this?
Thank you very much Sir.
Maritess Esparaguera, Philippines
@ Maritess – Thank you for the praise. I’m glad you are getting great value from all the free articles. Please link to them and tell others so that we can spread the word and help more people.
Regarding investment 101, that is a vague term that could mean a lot of different things to different people. I will be offering an advanced investing course in Fall 2010 or Winter 2011 as part of the Seven Steps to Seven Figures curriculum I am developing. It will walk through all the various alternatives in investment strategy and reduce the available field down to the 3 concepts that not only work but most people are also capable of implementing. It will be a 90 day coaching program so watch the newsletter for an announcement. In the meantime, you are welcome to quote from the investment advice and investment strategy articles on this site (with proper attribution, of course) in the course you are developing. Best of luck to you, and I hope that helps.
Hi Todd,
I have purchased and read your “How Much is Enough to Retire” book and would recommend it to others to read. I am aware of your book on Variable Annuities.
Do you recommend any other financial books to read?
DJ
@ DJ – Thank you for purchasing my book, and thank you for recommending it to others to read. That material came from the heart and is based on my own personal experience sorting these issues out. I wrote the book because I feel the lessons are important and widely misunderstood. I appreciate you letting others know about it.
Regarding recommending other books, I will be adding a section to this site (hopefully this summer) under the Free Stuff menu where I offer a variety of recommended reading lists organized by category (passive investment strategy, active investment strategy, wealth building, etc.). I’m a total bookworm and read extensively so I do have definite opinions on what is worthwhile reading so please stay tuned to the blog posts/newsletter that you get by subscribing. I will announce the new reading lists there as soon as I add them.
Aloha Todd,
I’ve just signed up to receive your newsletter and am enjoying the
education I’m getting
from your website.
My husband and I have suffered a HUGE financial loss with a group of
hedge funds that turned out to be a fraud.
We are still recovering emotionally from loosing our life’s savings
which we worked so hard to save over the years.
We are trying to get back on our feet and start over. My questions are:
1. Is is worth going through the SEC to see to if we can qualify for any insurance that is available for victims of hedge fund fraud? Our accountant thinks we should never
have been in hedge funds based on our income level and that we were misadvised to invest our money in these funds.
2. In starting over, how much money do we need to have invested,getting a moderate return, if we wish to retire in 10 years and earn $5000 a month?
Thank you for your service,
Lisa Cary
@ Lisa – I’m sorry to hear about your losses. It is devastating when it happens, and there are many today that share your pain.
To answer your questions, this first bit of advice won’t help you because the horse is already out of the barn, but it might help others reading this reply from repeating your mistakes and ending up in the same situation. Investment fraud is far more common than most people believe. Because I coach others on these issues I run across it with remarkable regularity. That is the reason I devoted a lot of time writing many free articles educating people on the subject here. Everyone should read these articles and educate themselves so they don’t get taken in. It may be cliche, but a few minutes of prevention reading those articles can prevent a lifetime of pain. I’m sorry you didn’t find this resource before your bad investment experience…
With that said, one of the articles in this investment fraud section discusses what to do if you are a victim. My position is that as long as you can pursue compensation on your own through the firm that sold the investments as well as through governmental agencies (i.e. – not incurring attorney fees that increase your cost and risk) then there is little downside and little reason not to try. In fact, the process might prove very healing. When you begin running up attorney bills is when you have to really consider the odds for potential recovery down the road. You don’t want to send good money after bad.
The answer to your second question is a bit self-serving but genuine nonetheless. I wrote an ebook How Much Money Do I Need To Retire that explains all the subtleties and issues around your question. It is a complete solution, and I wrote it because I get asked similar all the time and no other resource explains the answer fully.
If $37 is too much for clarity on this issue then you will have to settle for partial answers. In that vain a common formula that provides a decent workaround approximation is to use the “Rule of 25” or “Rule of 30”. That means you need roughly 25 to 30 times your first year spending in assets. In your example, 60K per year puts you in the ballpark of 1.5 – 1.8 million in assets. Again, this is an oversimplified, gross approximation that will vary widely based on age, market valuation, expected return, expected lifespan, expected inflation and much, much more. I provide a fully detailed explanation in the ebook but I wanted to give you at least something useful here that you could work with and was appropriately simplified for a blog comment.
I hope these answers help, and welcome to our community. Please spread the word and tell others…
There has been advertising on TV of investing in Gold. What is your opinion on this and what percentage of Gold is reasonable.
@Dianne – Thank you for stopping by and asking about gold investing. Unfortunately, it would be inappropriate for me to make specific, personalized investment recommendations on these pages given that I know nothing about your investment needs or risk profile. What is right for one person can be completely inappropriate for the next person.
On this blog I focus on principles and education that stands the test of time (ie: risk management) instead of the “flavor of the month”. I focus on what is true for everyone and must be learned to successfully build wealth. It is an area ignored by the other bloggers selling the latest “hot market tip”.
To learn more about my investment philosophy please check out all the articles providing investment advice here…
Hope that helps.
Confused:
A lot of financial gurus said I should do a reverse mortgage and buy stocks, real estate etc.
For retirement.
I set it up but was advise not to leverage invest at my age of 61.
Is it a good idea?
As my mortgage get paid the difference in equity is available to borrow in the form of an Equity loan.
Too old to make mistakes.
The house I have the equity available is rented and mortgage and taxes are being covered.
I was hoping that the rent would be part of my retirement $ after the mortgage was fully paid ($98,000.00).
House valued at $220,000.00. Have $30,000.00 of improvements in equity loan. (Granny Flat.)
Presently I apparently will not be able to retire until age 86 without the rental income.
Probably will continue to work in the Computer Industry.
Thanks
@Ken French: Thanks for your question Ken; however, too many personal facts missing and contradictory data provided to give a complete answer. This situation is best presented to a personal financial adviser (fee only) where you would purchase an unbiased, full analysis without any salesmanship or commissions involved. This forum is not an appropriate venue for that type of personal analysis as it focuses on principles relevant to most readers.
With that said, I wrote a general response regarding leveraging rental property equity as you near retirement dated for publication June 29, 2010 under the “leverage” and “wealth building” categories.
Even though it doesn’t answer the specific nuances of reverse mortgages I’m hoping you find it helpful.
Todd
TOdd,
My husband and I are 59. We have several investments in IRAs with Wells Fargo. For lots of reasons we want to take control of our financial future. I want to close the Wells Fargo account but I need help finding a safe haven for the money. We have huge real estate problems with 6 properties to manage and 2 we need to sell asap. We need advice but we no longer trust advisors as we have suffered many losses over the years and have watched our wealth dwindle rather than grow. Before it all disappears, we want to start over at this ripe old age of 59 and find a better way. Can you point us, direct us or help in any way? I’ll be searching for advice daily until I discover the best course of action now.
Julianne
@ Julianne – I’m sorry to hear about your challenges and loss of wealth.
Your question, “can you point us, direct us or help in any way?” is a bit general to work with. You put me in the position of having to write a monologue with insufficient background information to do it justice. For example, you question about finding a “safe haven” for your Wells Fargo accounts is an entire discussion in itself around risk, investment objectives, clarifying what you mean by “safe haven”, and much more. Additionally, offering solutions on “huge real estate problems with 6 properties to manage” is another complex discussion in itself. Putting it altogether in a blog post reply is simply not possible.
I know it sounds like a pitch (which is not my intention), but that is why I offer financial coaching services. I can’t possibly answer your questions fully and completely in a blog forum. There is a great deal of discussion and strategy development that would have to take place. And frankly, with the dollars you are dealing with it would probably be money well spent.
Sorry, but I’m afraid blogging is not the correct forum for your questions which would be better solved in a money coaching relationship.
Hope that helps…
I’ll inquire about your money coaching offer. I agree these issues are complex and I’m either going to fumble through this alone, or find effective help. Thanks for your response.
What is your opinion Trend Following in general and Michael Covel’s program in particular? Does his offerings fit the definition of “Dream Merchant”? I have researched the field and the methodology seems logical because predicting the market is a fool’s errand. But getting the correct program to capture trends (without knowing all the intricacies involved in back testing, etc., could also quicky separate a fool and his money). I really want to learn but don’t want to make a lot of expensive errors in the meantime.
@Mark – I support long-term trend following as a risk management tool. I cannot speak to Michael Covel’s program in particular as I’m not familiar enough with it to provide a well supported opinion. I appreciate your concerns so here is a free resource that spells out one valid way to implement the strategy and it won’t cost you a dime and you won’t be beholden to any vendors… http://papers.ssrn.com/sol3/papers.cfm?abstract_id=962461&rec=1&srcabs=1585517 .
Hope that helps.
To help avoid negative consequences from a future US dollar collaspe, does the conversion of a domestic US dollar savings account into an offshore account denominated in another currency such as the Qatar Riyal make sense? I identified the Qatar Riyal because Qatar’s currency appears to be backed by a fiscally strong government, and the currency could be unpegged from the dollar if/when collaspe becomes iminent.
I agree with the many voices in the wind that warn the US dollar is in trouble and tough times are ahead. I am very serious about preparing for the future because I do not want to spend my retirement years wishing I had acted on my beliefs… instead I want to survive and prosper.
@Clay – This is far too involved an issue for a blog comment-style answer. There are many factors to consider…
Will the dollar actually collapse?
If yes, what will be the timing and extent of the collapse?
What alternative currencies will perform best in that type of environment?
Will currency controls thwart your plan to protect your assets?
Are there safer, easier ways to benefit from that type of environment while staying domestic?
In short Clay, it is a very big discussion. I cavalier or excessively concise answer could be dangerously misleading.
I hope the questions posed at least point a direction that helps.
Thank you for taking the time to send me the link. Fascinating reading. Have also read a good deal about Dan Zanger and his method which is similar — he only trades on volume. Thanks again. I have learned a lot from this site and am growing increasingly impatient for the 7 Steps! 🙂 They don’t teach any of this in school which leads people to make tremendously poor choices in their financial lives — which ends up negatively affecting every other part of their lives.
@ Mark – Thanks for your feedback. Yes, you are preaching to the choir. I’m looking forward to getting the courses published, and I agree this material is not taught elsewhere and it does have the power to positively impact people’s lives. That’s why I do this. I appreciate your support and also spreading the word so that I can help others as well.
Thank you for addressing my question; I appreciate you taking time to provide a thoughtful response. The questions you highlighted are certainly in alignment with the issue I raised and underscore the web-like delimma faced by those trying to secure their financial future. I will continue to monitor your website and spread the word to my friends.
My question revolves around the use of IRA funds and I’d like to hear if my idea is a good one or not. I’m an architect suffering under this dreadful economy like so many of us are, and I need to do something to help carry me through. I need to also add that the general rule for architects is that they don’t really retire, they just slump over at their desks; and I don’t want that to happen to me. What I’d like to do is use a portion of the IRA funds to educate myself further in the investment arena, pay back the loan, and use the remainder of the IRA to actively invest for income and growth. In other words, keep a portion of the earnings to supplement my income and reinvest the rest for growth. Does that sound like a reasonable idea?
@Darren – I don’t know enough about your situation to answer the question properly. However, I find it very hard to support any plan that involves spending retirement assets. There is nearly always another solution.
The reason people default to retirement fund spending is because it is easy. The alternatives are nearly always more difficult… IN THE SHORT RUN. But in the long run spending your retirement accounts is usually the more difficult solution even though it the most expedient today.
Another point is you may have a false belief about what is possible with active trading. There are a lot of hucksters with very convincing promotions selling courses of instruction. Don’t believe them. If you are not sure who to believe then study the returns of hedge funds and the percentage of funds that fail (a database without survivorship bias). Hedge funds attract the best and brightest of active trading and the results are not impressive over the long term. It is exceedingly hard to get better than a 1:1 risk to reward over the long term. In short, it isn’t as easy as all the promoters make it sound.
My suggestion is if you want to take up active trading that is fine but recognize it has a learning curve like any other profession so set realistic expectations. Keep your day job because it is not a slam dunk. Don’t spend your IRA money – figure out another way to accomplish the objective. If you are truly committed to this path (which you will have to be to succeed) then you will find another solution.
Their is nothing inherently wrong with your overall objective. I would just be careful how you implement it to protect yourself from the downside risk.
Those are just my biases based on experience and the limited knowledge I have from the one paragraph you share. I hope it helps.
Hi Todd,
Great site and information!
I recently retired, have a pension, am starting a home based biz in affiliate marketing, but am not quite convinced if I should be spending so much time on this for the ROI. I think I would rather spend my time in growing my 150k. I have a financial advisor and feel I can do better, with guidance. I am debt free except for an 85K mortgage, health is good and not too many other restrictions or responsibilities. Website promotion is time consuming.
I want a consistant simple process. I suscribe to a newsletter “Alpha Profits” and I am intrigued in the idea of lending money thru the peer-to-peer lending. I want to learn “how to fish” be prudent and make money. I have the time and desire to learn. What would you suggest?
Can you tell me more about the mastermind and 7 steps to 7 figures. Looking forward to your reply.
Lina
@Lina – Thank you for your question. Yes, web site promotion requires a great deal of knowledge and effort. I see your site is a page rank of zero and and Alexa rank of 19 million so you are experiencing the reality of this situation first hand. Web site promotion is a profession and requires a solid skill set.
My suggestion is to be careful of what I call “the bright shiny object syndrome”. The grass always looks greener on the other side of the toilet bowl, but all business and investing is competitive.
In other words, I’m guessing you got into affiliate marketing because somebody sold a course and said it was basically easy. The truth is it’s hard work and a profession like any other. The same is true with investing. There are a million web sites willing to sell you the latest whiz-bang course on how to turn your 150K into millions. Don’t trust them. It is harder than it looks.
What I will be teaching in 7 Steps To 7 Figures is how real people that didn’t become Wall Street investment bankers build wealth. It is proven effective in my own life and in the lives of my coaching clients. It is how ordinary people produce extraordinary financial results.
I will be letting you know more about the course as I make the first module available in early 2011. In the meantime, be careful of bright, shiny objects. Every business and investment strategy is competitive. There is no royal road to riches. It requires a plan based on proven principles and the discipline and persistence to implement that plan until success. That is how wealth is built.
Hope that helps…
Just discovered your site today, Todd, and I like what I’ve read so far! Thank you. I especially love what you’d written about the myths of multiple streams of income. My personal pet peeve is how often the term “passive income” is thrown about, when most of the time these passive income streams are the results of gurus selling their info systems and regular people have to spend 2x or 3x as much time to replicate substandard level results (translation: now they have made multiple jobs for themselves).
My question is as a newbie for our family’s financial strategy. We have some goals that are very long term, and while I have been reading what books I can understand in the little time I have (I run a business and parent a toddler), I feel like I’m perpetually playing catch-up in the knowledge acquisition department. We are coming from a pretty good starting point, but I almost feel like I need to make “learning about finances” my job#2 (after parenthood). I’m having a bit of a tough time juggling these plus the existing business. How can I prioritize?
@Jane – Welcome to my site. I’m glad you found our community and derive value in the message delivered here. I try my best to be a straight-shooter and deliver practical solutions where possible.
The challenge you are addressing is common. I wish there was an easy-quick-fix solution but that would be a lie. You have a limited amount of time and multiple commitments – all of which are important to you. There is more to do than time to do it. Many share this problem.
There are techniques that help manage the inherent time conflicts more effectively that I will be teaching in Steps 1 and 2 of 7 Steps To 7 Figures starting in the Spring of 2011 so stay tuned to the newsletter for an announcement. I know that sounds like unabashed self-promotion (because it is!) but the reality is the topic is too big and complex for a blog comment. It is a real problem and requires a serious solution. Each one of those courses is a 90 day group coaching program so obviously that level of content can’t be distilled down to a few sound-bite sentences. Sorry it isn’t easier.
With that said, you just have to do your best to keep juggling constantly looking for ways to manage things more effectively. I know that is not the answer you wanted, but it is the reality of being a parent in today’s hectic society with personal goals and interests that extend beyond mere survival.
That answer may not be a lot of help, but at least you know the problem isn’t about you. It is inherent in your situation
Thanks for asking, and I look forward to hearing more from you in future posts…
Hi Todd,
I just discovered your very informative website and look forward to exploring it even further.
My question involves real estate investing. I read your blog post on early retirement extreme where you thought you had made a mistake by not purchasing an apartment building in your 20’s. I think you may have saved your sanity by not getting involved in real estate.
I decided to get into the real estate market late in the game (try the top of the bubble-2005-2006) and now my 2 rental properties are worth considerably less.
I am considering short selling one of them since it has negative cash flow as well (due to decreased rents over the last couple of years) and maybe keeping the second property.
I really want to get out from under both of the properties and put my money into a better investment.
Real estate investing is only good when you are making money since the hassles of maintenance and tenant relations can be very draining at times. The argument that some real estate gurus make is to hire a property manager. How can you hire a property manager when your cash flow is negative and your can’t raise rents due to the economy? How long should an investor wait for the economic turnaround and essentially hold on to a failing investment?
Is there a plan or formula you recommend for the numerous real estate investors in my position sitting on negative equity property? Thanks for your help.
Hi Kevin,
I sold all my investment real estate in 2006 before the big decline for the very reasons you are citing.
The thing all investors need to understand about real estate investing is it’s a leveraged bet on inflation. Since inflation has dominated ever since the creation of the Federal Reserve monster in 1914 real estate has generally benefited. It provides long-term, inflation adjusting cash flow (when purchased right) that you can never outlive (as long as you maintain it). However, during the brief periods when deflation dominates real estate investing can be catastrophic because the leverage works in reverse plus it lacks liquidity so you can’t get out to preserve capital.
The unfortunate reality is you invested right before one of the most serious bouts of real estate deflation this country has ever experienced – or is likely to experience in your lifetime. You got the worst of it. I’m sorry.
There is no plan or formula to solve the negative equity problem that I am aware of. Some people have chosen strategic default. Others have handed back the keys. Still others have short sold. One size does not fit all because each situation is unique. Unfortunately, there is no way that I know of to make a silk purse out of a pile of dung (which is a kind word for negative equity, negative cash flow real estate).
In the end, you either have to eat the loss in one form or another or feed it long enough for inflation to eventually bail out the bad timing, but even then you can only follow the latter strategy if it is financed with a long term, fully amortizing, fixed rate mortgage so that rising interest rates don’t eventually add insult to injury.
Let me know if you learn anything different not mentioned here.
Hope these few brief thoughts help,
Todd
1. >> What does financial coaching cost? I like face to face so where to you or reliable coaches reside (video work)
I believe in the coaching concept so am very intrigued with your approach.
I will be trying your retirement calculator. 2. >> Is it available in Excel version? I very much like the addition you have made to add in income earned “during” retirement. I want to cut back work but hope I will never stop.
Ken Joslyn
Hi Ken,
Thanks for your interest in my money coaching services. Follow this link to learn how much money coaching costs. All coaching is by telephone for many reasons I can explain if you choose to pursue coaching.
Also, thanks for your positive feedback on my Ultimate Retirement Calculator. I had it custom programmed for this site because I could not find anything that did what I found was necessary when working with my coaching clients on these issues.
I appreciate your participation in this community and wish you the best.
Todd
I am looking for extra income so i can work from home.. What program would you recommend to work from home?
@Stacey – I don’t recommend any “work from home” programs.
My suggestion would be that if you want to work from home and earn extra income then you build a legitimate business based on your unique skills, interests and resources that allows you to work from home.
I wouldn’t suggest any so-called “work from home programs”.
I am an unemployed health care worker and my husband is also laid off from construction. A very close relative of mine had recently passed away leaving me a part of her estate. My portion of the estate is not even in my hands but between urgently needed car repairs and my renewing my medical licenses, it would be about an extra $1,000 on top of the $5,000 total amount of bills for this month.
Todd, what I’m concerned about is that I wanted to save up to get a house like my relative was hoping for me, but mine and possibly my husband’s unemployment is running out soon.
I don’t want to spend all that money just to barely pay my bills. I’ve been thinking about investing, first, into a money-market account, but I think that’s a minimum of $1,000.
Any suggestions of how I can finally get out of my financial rut and get ahead like my relative really wished for me, would be most gratefully appreciated as I really want something more to remember her and honor her more by. Thanks!
@Jeannine – Nothing happens until you earn more than you spend. It is inviolable math. The only way to achieve your objectives is to cure your unemployment situation so that you are producing revenue. There is no magic answer. You have to get the basics right which is to earn more than you spend.
This question is about whether I should invest in my 401K plan or not.
I am currently in the process of paying off my college debt that’s totaling around $15k. My interest rate for my loan is around 9% as it continuously is adjusted. My company offers a 410(K) plan that matches up to 3%.
I’ve been debating for a while on whether I should invest in my 401(k) plan or continue paying off my debt as fast as I possibly can. Over approximately a year and a few months, I’ve managed to pay over $5K already while building up a contingency fund of approximately $4K for rainy days. Think that’s pretty good. I’ve thrown everything else into my loan payment.
Should I bother with the 401K at this time? I know I ultimately do see more money by paying into the 401K plan at least for the first 3% I contribute but I won’t be seeing that money for years and years and my interest rate is so high. I’m still very young, fresh out of college. Any thoughts?
Thanks for your suggestion in advance!
@Sung – Like a true economist, the answer is “it depends”.
It depends on your goals, how close you already are to maxing out your 401(k), how much you are saving, and so on.
The general principle is you should do whatever provides the highest after tax return over the long-term. In general, a young person should always max out their tax deferred savings. The tax deferral benefit over many years combined with the company match makes it pretty much a no-brainer.
In addition, it sound like you have no problem saving money and your current pay-down rate on your debt is plenty good enough implying the debt will be gone in 2 years or so anyway. You will be rid of that debt soon, but you can never recapture the lost opportunity to fund the 401(k) for any years skipped.
My vote is the 401(k) based on the limited information in this comment, but you will have to decide what works best for you based on your knowledge of your long-term goals and other issues not discussed in this comment.
Hope that helps…
Hi Todd,
can you please tell me , if I’ill engage in pursuing the CFA designation how much will that help me in my career, but what I want to know more is how much that will help me in obtaining my FINANCIAL WEALTH AND INDEPENDENCE?
TNX
@Sebastian – The CFA designation will provide a solid knowledge of the basic fundamentals. Think of it as foundational knowledge.
I’m a big supporter of financial education in general, and the learning contained within the CFA designation is a positive step.
However, there is more to building wealth than is taught in the CFA program. That is why I’m creating the educational programs on this site (see 7 Steps To 7 Figures specifically) – to fill in the missing gaps.
Hope that helps.
I am almost 70 and my wife is 68 years old. Our primary Illinois home is paid off and now worth about $120,000. In 2007 we bought a second home in Colorado for $408,000 with an adjustable 6.25% interest only loan. Last year the interest rate dropped to 4.25%. We originally thought we would sell the house when the market was good, but you know the rest.
The Colorado home now worth about $314,000 (electronic appraisal) or about $350,000 estimated value. We tried selling the home but no one bid on it.
HARP could finance up to $393,000 which includes loan cost but we would need to bring about $20,000 cash. We would still pay the $400 plus in PMI . Interest at 5.25%.
We have no debt(other than the Colorado house) and our credit score over 800.
We could eliminate the PMI by paying another $80,000 – $90,000 as 20% down payment.
We have roughly $300,000 in retirement savings/cd ($10,000 in stock) and we could get a reverse mortgage of about $60-70,000 on our Illinois home.
We both are still working part time and can still afford the payments.
Should we refinance and use our savings and/or reverse mortgage so that we can have a fixed mortgage and have part of our payments going toward reducing the principal or just wait it out for the market to pick up and just keep paying the interest only loan?
Thanks for any input and/or any other investment strategies you may have.
@Nick – Your question is sincere, and you’ve provided excellent detail. However, this issue is too complex to do it justice in a comment. There are many factors involved including goals, risk tolerances and so much more that can never be considered in a blog comment. In short, this is personal financial advice that requires personal attention.
With that said, I will address some general principles which are appropriate for this column and may prove helpful…
(1) It appears the asset is disproportionately large relative to your other assets. In other words, you are describing a net worth of 400K and a second home debt of 400K that has already lost 10-20% of your net worth. From those numbers it appears likely the monthly payment represents a disproportionately large amount of your monthly cash flow needs which could be causing stress as well. It appears the mistake was made in the purchase decision although, again, much more would have to be known about your personal goals and objectives behind this decision, but that is the implication of the numbers.
(2) A good rule-of-thumb in investing is the first loss is often the least expensive loss. Trying to fix a losing situation can just add to the problem by compounding the initial mistake.
Again, too much to cover in a blog comment, but I wanted to give you some ideas to ponder. In summary, be careful with this decision. Don’t put your retirement security at risk by trying to save a bad decision. Weigh your options carefully. You may want to consider some alternatives not even discussed in your question.
Hope that helps…
Hi Todd,
When is your group coaching session starting? Do you have details?
Thanks!
-Darlene
@Darlene – I have the curriculum all in drawers ready to teach. Everything has already been proven out with real clients.
The hold-up is that much of the instruction is multi-media involving video and audio. I want to get some practice producing this multi-media stuff and publishing it to the web site before I commit to the course. I’m hopeful for this summer. I wish it were sooner but I’m trying to be realistic. There are many pieces I need to put in place.
Thanks for your interest. I’m getting quite a few people hitting me over the head to get it out (which is a good thing). I’m working on it. I just want to make sure I can deliver quality for everyone.
I need to know if I can open an IRA of any kind that can’t be seized for payment of a student loan. I’m told the Roth IRA is one such savings plan, but no one can confirm it. I’m currently receiving my Social Security, but am still working part-time. I’m still making monthly payments on my student loan, but I’d like to be able to put-away extra monies for later. Thank You
@Deborah – I have no clue. Sorry I couldn’t be more help. You would have to look to case law on an issue like this.
I am a 49 yr old chiropractor with a good income. My wife works 3 days/week and home schools our 2 teenage girls. We would like to invest in real estate and have been pre-approved for 232k loan for rental houses. I would like to replace my wife’s income (40k/yr) with the rental income and eventually increase. Based on the market it appears to be an incredible time to buy and rent and eventually sell -to speed up our retirement/assets. Good idea or bad idea? Do you have clients with similar ideas and doing well -or not? Also do you have personal experience with making money in real estate?
I appreciate your response.
thanks
Dr. Joe Stanfield
@Joe – It can be a good idea or bad idea depending on the deal. It all depends on the deal and how the numbers work. To a lesser degree it depends on your market.
Do I have clients doing similar? Yes.
Do I have personal experience? Yes. I owned a 162 units at the top in 2006 along with a company that acquired property through the tax lien system. I sold everything in 2006-2007 for reasons that appeared crazy to most people back then but looks pretty good in hindsight. The only real estate I’ve owned since 2007 is my personal residence, but I’m watching closely for re-entry at some point.
Hope that helps…
HelloTodd,
I am curious to learn about why you sold your 162 units real estate holdings in 2006? What prompted you to sell? Which instruments do you invest in order to replace your income form the 162 units?
Thanks in advance for any input
Eric Blankenstein
@Eric – It was a combination of factors – overvaluation, every person I talked to was a buyer, and other issues that made the risk/reward extremely unfavorable.
The fact that it was the final top was luck. I just knew I was selling a premium and no longer wanted to have financial leverage. I didn’t know it was the exact top, but I did know I would only pay about half what people were offering me for the properties so I let them have them.
The final blow was that marginal tenants that didn’t even qualify to rent from me were getting loans and moving out of my properties to become homeowners. They couldn’t even afford rent on a class C apartment building and had horrible credit history so home ownership was an absurdity. The whole thing made no sense. Everything pointed to the exit door as the safest route. I wanted out.
I didn’t reinvest. I just paid the taxes and got out. The money just got blended back into my portfolio.
Hope that clarifies.
Todd,
Could you describe at a very high level*** what kind of investment strategy you teach in your private coaching? (Or point me to posts on your website that discuss this topic). You’ve mentioned glimpses like “3% dividends” and variable annuities now and then. But it would be great to get an overall overview of the strategy you propose. ***I understand that of course you can’t give away the details…
@Charley – Off the top of my head, probably the most clues are contained in the following posts…
https://www.financialmentor.com/investment-advice/investment-strategy-alternative/how-to-invest-for-inflation-deflation/5419
(specifically look at the comments in the above)
https://www.financialmentor.com/investment-advice/investment-strategy-alternative/gambling-or-investing/17094
… and I’m guessing there are others. Look at the articles under the “investment strategy” categories both in the blog and Top 50 articles because that is where I would locate that type of content.
Hope that helps.
Hi Todd,
I heard your interview with the Martells about your Affiliate Business/Retirement plan article.
I’m just getting started in affiliate marketing but am wondering what you think about just having my Affiliate Business in my Roth IRA. I talked to the people at Pensco.com last summer, they wanted $5K to set it up.
If an Affiliate Business is like a 1 million dollar $ Retirement Plan, why not run it inside your Roth IRA?
Thanks in advance
Kent
@Kent – Interesting idea and interesting logic, but the devil is in the details…
It depends on several things.
First off, are your goals for your affiliate biz compatible with having the asset wrapped inside an IRA? For example, if you are 30 and you want to live off the income maybe the rules, costs, and requirements don’t make sense.
Another thing to consider is costs vs benefits. The benefit is potential tax savings, but that benefit is elusive. Owning your own business and income producing real estate are two of the most tax advantaged paths to wealth to begin with. Putting them inside an IRA may not make sense because all the cost and rules can more than offset any potential increase in tax savings.
In short, the decision is not clear cut. It depends on many different factors and details.
Hope that helps…
Todd,
thanks for your answer! You are right.
I’m in my 60’s and plan on doing AffMkt full time for 3-5 years. The only negative I see – is the greedy plan administrators [costs], and once the gov see this opportunity the [rules] will definitely change.
I’m a bachelor with 2 Roth IRA’s, and I’m going to follow this putting a biz in a Roth idea, because if you research the history of tax rates in the USA, it was 50% back in the 60’s and if you watch the news now – it’s on it’s way back to 50% probably within a decade, just to pay the interest on the national debt.
The opportunity to grow your wealth – tax free – in a Roth IRA will not last long. Like Sandy Botkin says “Taxes are your biggest expense.”
Todd,
I’d love to get your thoughts on an optimal asset allocation and what asset classes are most important to have represented.
I know this is a highly personalized question, based on one’s age, risk tolerance, dependants, income, net worth, desired retirement age, need for investment income and many other factors.
I’ll therefore give you a little background about myself. I’m a 40 yr old male, married with a non-working spouse, a 2yr old and another (our last) child on the way. We’ve accumulated a net worth of about $1.4M, with about $1M of that in liquid assets. My income is in the $200K/yr range and I am hoping to retire from full time work in the next few years to enjoy my family and seek more creative outputs for my time and energy.
I’d appreciate your thoughts on a proper mix of not just stocks, bonds and cash, but would welcome a deeper analysis that included percentages devoted to specific market cap levels (large, mid and small), investment strategy (growth, value and specialty funds like natural resources and REITS), percentage dedicated to both foreign stocks and foreign bonds (developed and emerging markets) as well as any other categories you felt were important to have represented.
I’m a big fan of your site and the service and forum that you provide and I look forward to your thoughts on this topic.
All the best.
@Patrick – There is an implied premise behind your question… that such an optimal answer exists or has any validity.
If you look at the research optimal asset allocation is a function of the historical time period, assumptions and data applied. Change the data and assumptions and you change the allocation that is “optimal”. In other words, it is unstable and parameter dependent.
The only optimal allocation that has any meaning is what applies in the future, and that is impossible to determine using historical data.
In other words, any claim to an “optimal allocation” is premised on an implied prediction of the future… which is 100% impossible to do. I can’t do it and neither can anybody else. Anybody who claims otherwise is either a liar or self-deceived.
The real question you want to be asking is, “how do I invest into an unknowable future that results in an acceptable risk/reward”.
That is what I will be teaching in Steps 5 and 6 of 7 Steps To 7 Figures.
I know that is self-promotion, but hey, this is a business, and the reality is the answer is far too involved for a simple blog comment. That’s why I will provide a group coaching course that provides all the necessary education.
However, asking the right question is 80% of the battle, and I’ve given you the right question.
Your initial question will send you down a dead-end path. There is no answer. The premise is wrong even thought it is the entire focus of traditional financial advice.
Hope that helps…
Hi, Todd!
I graduated from high school last year, and am working for a year before going on to university. I want to start building wealth, and I’m saving everything I can–however, I’m on minimum wage and I only have about $4000 in the bank. I also have to pay my own way through university (likely to be about $20 000 for three years).
I kind of have two questions…
Firstly, I know that investments are the best way to build wealth, but when you don’t have very much to start with, what do you do? I’d like to know if you have any tips for people my age who are basically starting off with nothing.
Secondly, I don’t know what they do in America, but in Australia, the government will take on your university fees, and you can pay them back later at low-interest when you’re earning over $40 000 per year. As long as you’re earning under this amount, you don’t need to pay anything. I happen to be debt-phobic, and would rather pay this back as soon as I can rather than have it hang over me. As an added bonus, you can get a 20% discount on any upfront payments you make directly to the university.
Thing is, since I want to work in the film industry, I may never actually reach a high enough level of income for me to qualify for paying back. I know people in this kind of situation, and it’s looking like a very real possibility that I may never technically *need* to pay this debt back (though my conscience may have other ideas). I’m wondering if, while I’m in uni, it’d be a better use of my money to invest what little I have rather than use it to pay off a debt I may never be forced to pay off.
What would you do in my situation?
Also, I just want to say that I like the advice you give in articles like the 10 commandments of wealth and the article on accountability. It applies to so many different things, and definitely made me re-evaluate a lot of my life that wasn’t related to finance. So, thanks 🙂
@ Stephanie – Glad you found value in my writing. Thank you for the acknowledgment.
If you are saving to spend for college in a time frame of 1 year then you should just stay liquid in savings and earn a paltry rate of interest. Guaranteed bank deposits and money market funds are acceptable alternatives.
You won’t get rich, but the problem is the time frame is so short that no actuarial discipline can be applied to investing and there is not enough time to compound any wealth. In essence, you would be gambling that an investment would rise or fall over a short period of time which is probably not a good idea. You are essentially saving to spend so just do accordingly.
Regarding the debt and government student loan issue, that is a personal choice. If I had to guess you will do far better in life than you are estimating right now given your current savings habits and penchant for avoiding debt. If you incur debt you will most likely be repaying it at some point. Debt is like a bad drug and is best avoided as a habit (unless it is income producing debt i.e. investment property mortgage or business).
In the bigger scheme of things your tuition and current savings are short-term cash flow issues that will have little impact on your long-term financial success. Instead, focus on your lifetime earning capacity and your savings habits coupled with building investment knowledge. These skills and habits will compound into a fortune and make your college tuition issues seem like small potatoes in comparison.
You biggest asset is time. Learn how to use it to your advantage and you will do well.
Hope that helps…
Yes, that definitely helped! I’ll look up guaranteed bank deposits and money market funds, since I have no idea what either of those are. I already have shopped around for the best high-interest account I could find (~6 percent pa and no fees, as long as I fulfil certain deposit and withdrawal conditions, which I have no problem with).
Your advice also gave me some much-needed perspective. Now I get that I’m trying to do everything with my money at once at a stage in my life where it’s not practical or wise to do so. And also that there’s no point in getting grand ideas before I build a good foundation. Probably things my parents could have told me, had I but asked–but there you go.
I think I will pay off that debt ASAP and get the up-front discount and peace of mind rather than make wild, uneducated guesses about my future income stream… Also, since I posted the previous comment, I started having a good look at your articles on investing, and I’ve realised that I need to get a good grounding in how to be a smart investor before I start investing (as well as get to the stage where not all the money I have is money I can’t afford to lose).
Finally, thanks for reminding me about time being my best asset. You can bet I’m going to do everything I can with that.
God bless,
Steph
@Stephanie – You are welcome. Please stay in touch and participate in our community. Best of luck to you.
Sounds like a plan!
Can I make money on the side helping people improve the quality of their websites? For instance this embarrassing typo shows on every page on your site:
“The Money Wheel – Is you financial plan balanced?” should be
“The Money Wheel – Is your financial plan balanced?”
I see stuff like this all the time. But what is it worth?
@Mark – I don’t know how you can make money with this skill, but I appreciate you pointing out the error.
Apparently you have an eye for detail. Maybe there is a demand for proofreaders?
Best of luck to you…
Do you subscribe to the adage “it takes money to make money”? If so, do you think in today’s market it is prudent first and possible second to take a business line of credit and invest it to make money investing in real estate? Essentially “investing” yourself wealthy.
thanks
Joe
@ Joe – Your question is interesting enough that I’m going to explore it more fully in an upcoming blog post.
It does not lend itself to sound-bite answer and I really want to give you the benefit of a complete answer. In addition, I think a lot of other people on my list could benefit as well.
So please make sure you subscribe to my newsletter/blog and you will see your reply soon.
Thanks for the great question!
Todd:
At the age of 48 I am returning to school to become a health-care professional. I owned a business the past 8 years and sold it due to the bad economy. I have found it very difficult to find any work in my profession over the past 2 years. I love business but also love my chosen health-care profession. I was accepted by a very prestigious Ivy league university to pursue my doctorate degree. It will take 3 years to complete and $150-$180K in fed loans (at 4 – 6 %) 10 year terms. I have 4 kids 15 -3 yrs old and my wife works full-time and is the sole bread winner at this point. My oldest son will begin college the day I graduate. We have a few hundred thousand in retirement funds (and 2 years tuition in a 509 which was originally being set up for the kids). My job prospects when I graduate are excellent and the pay is good ($75K -$100K+). I figure I will have a 15 -20 year career working until 65 – 70 years old. My goal is to start my own practice within 3-5 years of graduating. In your opinion is it crazy to take out this kind of loan debt at my age and not work for 3 years 4 if you count the 1 year I just did to do pre-reqs? I go back and forth on it ultimately settling on the fact that I will be employed right out of school and work hard for the next 15 – 20 years. And if I were to get another “job” I could be let go at anytime. Wish I was younger and doing this but I am not. Thanks for your perspective.
@Harry – With the limited information available it is tough to make a judgment call. It might be questionable from a financial perspective, but this decision isn’t just financial. Career decisions aren’t just about how much you make or what you do: they are about who you become. If this is a life dream of yours then it might make sense from that perspective. I would have to know you much better and work with you in a coaching capacity to really clarify this decision. I’m not soliciting your business because my practice is full: I’m just stating a decision of this complexity so heavily based more on personal values than pure finance requires a deeper personal knowledge to make a judgment call. I wish you the best, and I hope these few thoughts helped.
Todd,
I have been trying to figure out what to pursue in my life in the last 2 years. Having stumbled on you site, it appears it is exactly what I have been looking for. I have so many questions of what path to take….stocks, real estate, starting a business….to achieve my financial goal of not working a traditional job, but the upcoming economic status and the meltdown of the dollar have me so confused as to what would be a smart avenue and hedge against inflation. I feel like we are heading for a stock market crash in the next couple years due to our gov’t spending and collapse of the dollar. How do you protect your paper assets? Buy Gold? lol. I would love to start financial coaching (given that it makes sense) but I was wondering whether you recommend going through the “7 steps to 7 figures” steps first or just shoot for personal coaching?
Background: I am 28 and had a dream to be retired by 30. I have been itching to start my own business or figure out what to do to make extra money. We live in america and the irony in that is that there are 50 million ways to make money…too many choices! I am extremely motivated to follow a system and work hard to achieve my goal, I just need to know what to do to not waste time. I have a net worth of around $200,000 (not all liquid) and have close to $100,000 in non-Roth IRA (combining my mine and my wife’s). No kids. My wife and I both work retail and have a combined income of $100,000/yr. We are currently living off just my paycheck to payoff my student loans (they will paid off in under 2 years from now). After that, our only debt is our house which has a really low fixed interest rate. I am interested in the best/fastest way to being able to pursue other interests and being my own boss! Any thoughts would be a blessing!
Thanks,
Derek
@Derek – Congratulations on saving 200K at 28. You are doing well and have a good start.
If I were working with you the two things I would focus on is (1) developing a clear plan for wealth (2) that integrates a life that is so fulfilling you would never want to retire from it.
In other words, retirement is over-rated. Don’t just focus on wealth building. Integrate a wealthy life as an integral part of the process. The mistake you are making is very common: you have it as two steps when it is best done as one integrated process. Don’t make a satisfying life wait for completing wealth building dreams. Instead, integrate them.
I wrote more about it in this post…
https://www.financialmentor.com/retirement-planning/early-retirement/myth/5169
Hope it helps…
Todd,
Thanks for your response! I agree completely with your reply and the post articles. I think I did not represent my wants clearly. My dream is to do a job (or own a business) that I love, that has importance helping people. I want to work the hours that I choose and not have to worry about whether I can afford to by a pair of jeans for work! My dream job would be doing something that improves peoples lives and at the same time enables me to give 20-50% (whatever makes financial sense) of the profit to various missionaries that are in my family. Not everyone is called to full-time missions, God needs wealthy people to make money to support these works. Anyways, my problem is that I am too confused as to what I should do, I really need direction and after I figure that out, I need a plan to make it happen. This is where I think you could be of help.
Do you think that your “7 steps to 7 figures” would be beneficial to me or should I pursue the coaching directly?
Thanks so much!
@DEREK: Derek: If you have not read the 4 hour work week you might want to pick it up. It will get you thinking in the right direction and check out the blog of Tim Ferriss for some inspiration.
@Derek – I wrote this article that details who can benefit from working directly with me on financial coaching. It explains who is most likely to receive more value than the service costs so that it puts money in your pocket rather than takes money out. It also explains how to get started if you fit the client profile.
7 Steps To 7 Figures is an obvious fit, but that won’t be available until this Fall (at the earliest).
I hope that answers your questions. Thanks for your interest, and let me know how I can help.
Todd,
I am aching to be free of my student loan debt (roughly $60k), so I’ve been religiously following a debt-payoff plan thanks to your ADP calculator. At the same time, I’ve been struggling to put 10% of my monthly income towards savings, and another 10% towards my IRA (though, I know it’s not enough). I’m 26 years old. Years away from retirement. And aching to be debt-free….
What’s more important? Quick debt-payoff? Or maxing out IRA contributions and saving 10% of my income?
If I cut back on contributing to my savings and retirement even 50%, I could be free of debt 2 years sooner (saving $5,000 in interest) than if I continue to save/contribute the way I am. If I were debt-free, I could travel at will, put away more for retirement later on, save for a house… Oh, the possibilities! But, then I slow down my savings and retirement accounts. Any advice?
@Patty: Hi Patty, your question is featured as my next blog post and will be published May 31, 2011 so make sure you subscribed or come back and visit then. Thanks for the great question…
I am interested in learning how to buy rental houses by foreclosure or tax deed sales. I saw on facebook that you follow Stansberry research “Daily Wealth”. I had just got done reading that article about the housing market myself when I saw your post. I am thinking that it is a good time to look into buying my first rental with prices and interest rates still low. Are there any must-read, up-to-date books or pieces of info that would help me with the basics of buying low cost houses to rent? Any suggestions you have before I would start a challenge of this sort?
I have a question similar to Patty’s about paying off dept vs contributing to retirement. But I am in the opposite position. I am retired from my job of 33 years and currently not working. I have approximately $95,000 left on my mortgage (house worth $275,000) and 8 years left on the mortgage. My retirement is 60% of my previous salary but I have all the same expenses (utilities, food, gas, etc with one child still in college that I try to support. I have a reaonable pension of $62,000 per year and a Federal government Thrift Savings account (similar to a 401K) of $189,000, and an IRA or $30,000. I am 57 and I was thinking when I turn 59 I would use the money in the thrift savings Plan to pay off my mortgage. This is my only debt. My wife will get a small pension at 65 and Social Security. She is 57 as well. The small income from her job helps us get by comfortably month to month. WE have about $45,000 in other liquid assets (savings, stocks, gold/silver). Should we pay of the mortgage dept (to free up $1200 per month in disposable income) from the Thrift savings plan and reduce my supplementary retirement, or continue on course and pay off the house in 8 more years?
Tim
Tim,
You need to put this question over on the post where Patty’s was answered. There are many experts in that topic involved in that discussion that can help.
Hey Todd
I ask awhile back a question in regard to investing essentially borrowed money in real estate to grow wealthly.. Did you respond and I missed it? Or will you respond soon?
thanks
@Joe – I did not yet. I’m trying. Sorry for the delay. Thanks for understanding.
Hi Todd
First of all thank you for your invaluable content – I am really enjoying it.
I am in the process of building a website that focuses on teaching kids financial literacy – I was wondering if you could possibly help me in developing some content.
Our kids are our future and they surely deserve to be guided by mentors like you early in their lives.
If you can help me in anyway – you have my email address.
Kind Regards
Sean
Ps We live a while for ourselves and forever in our children
Hi Sean,
Thanks for the kudos on my content.
I would love to help you and your cause; however, there is more work for me to do here in helping adults that I have time to complete. Adding more projects would just dilute my efforts.
You are welcome to excerpt certain content (with appropriate attribution links, of course) that you find particularly relevant if that helps.
Just let me know if you do because otherwise it gets picked up as stolen.
Thanks, and best of luck to you.
Todd,
Thanks for all the free content on the web. It has helped shaped my financial situation for the better.
Here’s some quick background before getting to my question. I’m 30 years old and have been working since graduating college at 22. Through that time, I’ve religiously maxed out the tax advantaged accounts available to me (e.g. 401K, Roth IRA, Regular IRA). As my career developed, my income also grew. A few years back, after growing my income while aggressively cutting costs, I started to have excess cash to invest after maxing out tax advantaged accounts. That excess cash has gone into a personal online brokerage account where I’ve purchased equity securities. I should probably mention here that I’ve been sqaurely focused on equity securities in my investment portfolio along with owning a condo that I’ll probably rent out once I outgrow it. The majority of my portfolio pays dividends, which also get reinvested. I also continue to invest as much new cash as possible.
With all this said, can you give any guidance on the best way to hold my investments outside of the tax advantaged accounts (401K, Roth IRA, Regular IRA)? My ultimate goal is to be financially independent…which for me means having the freedom to pursue the things I feel are valuable in life on a full time basis. This means at some point (shooting for age 45 or earlier) I will be able to live off passive income from my investments while having the complete freedom to choose what I do each day. Is there an advantage to holding equities within a LLC, C-corp, etc rather than a plain old personal online brokerage account? I can’t think of any but would like to hear your thoughts, or have you point me toward a good resource to learn more on the subject.
Thanks!
@ Matt – Congrats on building a solid base. You are following the right principles and have gotten off to a great start. You will never regret it.
Regarding your question, I have no knowledge of any alternatives. That doesn’t mean they don’t exist, but there are always trade-offs and complications. For example, the IRS has already made rules regarding “holding companies” to guard against “excessive” asset accumulation with a C-corp (using one of the examples cited in your question). Similar rules exist for other entities.
You could probably find a hot-shot attorney or entity specialist to tell you different, but of course they profit from all the expense and maintenance costs associated with selling you those products so they are a bit biased.
My approach has always been to avoid complication where a clear benefit is not plainly available. I don’t play games. Life is complicated enough without creating complication where it doesn’t need to exist. That doesn’t make my approach right and others wrong, but that is what has worked for me and my coaching clients. I find it is generally true for most people.
Hope that helps.
Hi Todd,
I have often had a burning question. I have an annuity that I can get access to without penalty or taxes. I have often thought about pulling out a chunk of it to put toward my mortgage and refinance, especially now with the lower rates. This would allow me to comfortably pay off my house within 10-12 years. I am 40 years old. I am in a 30 year mortgage at 5.625% I owe about 165K. I could about 40-50k and knock it down to a 10-15 year mortgage. I guess the question is is it better to have money invested or be debt free.
Thank you,
Todd C. Jacobs.
@ Todd – A proper answer to that question can’t possibly be handled properly in a blog comment. Sorry. I’m not trying to blow you off. I just want to respect your question and give answers only when they can be done properly and thoroughly. This question involves many issues and can’t possibly be handled correctly outside of a coaching or similar relationship. It would be irresponsible of me to dash off a quick reply. I wish you the best!
Hey Todd
Are you familiar with the term arbitrage? My understanding is borrowing at a lower rate investing at a higher rate and collecting the spread. Your thoughts? I recently ask a question about the I.U.L opportunity -essentially investing i.e. 25k into it ,adding 2k per month, after year 1 -taking a loan from yourself and investing at a higher rate, while your 25k is growing on a snapshot of the S&P, at the time you put the 25k in and a year later receiving the difference of growth btn that time period, i.e. 10-13%, if its zero you are guaranteed 2% by the life insurance. The idea becoming your own bank. At year ten your invested money is dollar for dollar and would be in the neighborhood of 200k. Obviously if you put more in at the beginning it would be a greater amount. No taxes when you borrow out of it and your only paying 4% on what you borrow and hopefully investing at 10% or greater. If the S&P paid you 6% and you got 10% from your other investments your looking at 16%. Your thoughts?
thanks Joe
@Joe – This would require a lengthy and thorough analysis to properly explain. Given that it doesn’t exist anywhere on my site that should probably tell you something. If you want to learn more about this there are plenty of sites on the web that will teach you all about it. Just be careful… they all have something to sell you besides education!
Hi Todd, I’m glad I stumbled on to your site – I am learning so much, thank you for all the free advice. For someone completely ignorant of finances, this was a great find for me.
I’m newly divorced, 2 kids in elementary school, steady job at a public school with full benefits, car paid off, no debt except for a 24K student loan. I automatically put away 20% of my monthly income — but have been using it for car repair, glasses, etc. otherwise, I’m quite frugal. I looked into getting my student loan forgiven since I work at a public school, but they said that was only for teachers. I also write on the side — have a couple scripts on option, but all on deferred payment. I’m considering starting my own short film production company next year, but not sure if that’s a wise move. I’ve had short stories published in the past many years before, but not a lot of money in that for what I put in.
Where does a single mom like me even begin?
(P.S. I am looking forward to your 7 Steps next year!)
@Lin – Unfortunately there are no simple answers… and you should be extremely wary of anyone claiming they have simple answers because they probably have something to sell you. There are only so many hours in a day and yours will be taken up by caring for your family and your existing work earning enough to take care of their needs. There isn’t much time or money left to build wealth. That points to two key areas to focus on. The first is obvious – you must create a spread between what you spend and what you earn to funnel income into the asset column. (I know I’m not telling you anything you don’t already know there.) The second is less obvious – leverage. Your limiting factor is time therefore you must become a master of leverage to overcome your primary limitation. Hope that at least helps point you toward the right way given the limitations of a blog comment. Best of luck to you, and I hope to see you in the 7 Steps program when it launches for more in depth support. Thanks.
Hi
I would like to know how I can get a job in this field. I did financial advising but felt like it did not connect well with the client sometimes because you were always being pressured to sell more than educate or help your client.
I do have a fairly strong financial background. I had my LLQP, secrities license, 2 courses towards my CIFP and 2 year Accounting diploma as well. My passion is to teach and help people with their finances, not just selling but helping them with their credit problems as well.
Please let me know what path I can take to do this type of work. I feel this would keep me motivated and feel like I have accomplished something in life as well.
Regards
Penny
P.S. I think this website is phenomenal and thank you.
@Penny – Thanks for the acknowledgement on this site. The reality is I have more work here than I can handle. You could offer up a guest post or two to try and bring a unique perspective or voice here. If people resonate and the writing is high enough quality you never know what can happen. The point being, if you are truly committed then just dig in and get started somewhere. Hope that helps…
I just turned 82 years old and have about $1,008,000 in an IRA. I expect (hope) to live another 18 years.
I would like to withdraw about $5,000 a month. Question: will I run out of IRA money before my demise?
If so, when and, if so, how much should I be drawing out each month. My current portfolio is yielding about 5%.
@jlmurf If I were in your situation I wouldn’t have any problem with spending 5K per month. Assuming your investments do nothing (don’t win or lose – easily achieved with T-Bills or comparable) that would 60K per year. When you figure in a basic investment return the risk of running out is very small. The key is to make sure you don’t lose significant principle along the way. Stated another way, you claim a 5% yield which almost equals your proposed spending in perpetuity. Again, as long as you don’t lose significantly to earn that return it should be a relatively sound spending pattern. What distinguishes your situation from my writing on safe withdrawal rates is your age. At 82 you can spend some principle (unless you’ve discovered a magic potion for eternal youth).
Hope that helps…
Hey Todd. I just ran across your “Ultimate Retirement Calculator” and have a question. In the ‘desired annual retirement incomet’ field, is this net of taxes or is this gross before taxes. In other words, are your calculations grossing up this income to account for the tax % entered or do I have to do that?
Thanks,
Dennis
Mooresville, NC
@Grease – It is net of taxes – spendable income or actual expenses. The calculator adds the taxes and adjusts for inflation to figure out true need. If you aren’t clear just look at the table provided and you can see the columns and how the numbers flow.
Hope that clarifies, and thanks for asking. I will add that to the instructions…
@grease It is net of taxes and adjusted upward by the tax rate within the calculator to determine total cost burden that your assets must overcome.
Need advice on whether to go ROTH or NOT. My wife and I are in our late 20s/early 30s and we’ve got investments in ROTH 401ks and Traditional 401Ks and we both have ROTH IRAs. We both max out our 401ks and IRAs. I like to go all out ROTH in 401ks AND IRAs because I like the tax free earnings that I would earn in retirement. We are currently in the upper end of the 25% tax bracket. Along with the tax free earnings, I’m not sure if we’ll be in a higher tax bracket in retirement so we prefer paying taxes today as everything suggests taxes will be higher 30 years from now. Are we doing the right thing by putting all our retirement savings in after tax accounts. Should we diversify our tax situation and put some in tax deferred accounts?
@alexanderthegreat When younger I tend to favor tax deferred and tax free for two reasons – the first is exactly as you cited (tax deferred compounding), and the second is because it puts a legal fence around your fortune both in terms of asset/lawsuit protection and difficultly/high cost in accessing the cash during the inevitable setbacks you will encounter during life. In short, it gives you three important advantages and minimal disadvantages in comparison. Hope that helps you sort through your personal situation.
What are some prudent and executable ways to deal with currency risk? I am managing a sizable portfolio for my mom but it is 100% US dollar.
My personal favorites given your criteria of “prudent and executable” are internationally diversified dividend paying stocks where 70% or more of their earnings are from outside the dollar, and income producing, positive cash-flow real estate (domestic) purchased with moderate leverage (50-60% loan to value) using a fully amortizing, fixed rate, long term mortgage.
Hope that helps…
@resourceman99 My two personal favorites based on your criteria of prudent and executable are internationally diversified dividend paying stocks where more than 70% of the income comes from non-dollar sources, and positive cash flow real estate financed with moderate leverage (50-60% debt) using long term, fixed rate, fully amortizing financing. Hope that helps!
I am a healthy 60 yr woman, no family/children. I am divorced with no savings. I am currently working. I only have 80,000 in 401K and I own two houses with a mortgage on each. I don’t know what to do to help myself for retirement. If I should re-finance my home for lower interest rate or is it not worth it? Do I sell my houses now and pocket all the money I can rather than pay property taxes? Should I hold on to my homes until market goes up? What is the best way to handle my current financial situation? I want to work for as long as I can. But I don’t know what I will do when my employer tells me that I have to retire. Please help. I currently live on Long Island and I’m willing to move if I have to at retirement or even sell my homes for an RV if that is the best way to live economically. Help. I’m lost.
@Marion444 I wish I could be more helpful with your situation in this column but your questions are the domain of financial coaching. Many factors must be weighed to direct you properly and that is impossible to do in blog comment format. I don’t want to risk disrespecting the seriousness of your inquiry by providing a half-baked answer. Your situation will require personalized attention to sort out the issues.
@Marion444 With that said, you will probably looking at “all the above”. In other words, you will probably be looking at working longer, restructuring lifestyle to reduce costs, creating an income stream to support retirement, and more.
Hope that helps…
Hi Todd. I’ve recently become a subscriber to your website. Thanks for all of the information! I’m a 21 year old male that’s looking to improve his financial education to pursue the goal of financial independence. After reading, taking notes, learning, analyzing and attempting to apply Kiyosaki’s “Rich Dad Poor Dad” and “Unfair Advantage”, as well as “Think and Grow Rich” I know that there is no other way but financial independence.Starting a business and investing in real estate and other assets are my goals.
My question to you is, what should my next steps be? What sort of education should I pursue? Although I’m passionate about what I want, there are some things I’m quite unsure about. I haven’t gone further than high school. I’m in the process of registering for college, but am not sure if the things I learn there will be applicable to entrepreneurship and investing. I am thinking of studying accounting, to better understand business, but am not sure if it will be helpful. I realize the absolute necessity of education, but am not sure if college will get my the knowledge I need. I also know I can’t just read books forever, and need to apply and practice what I learn. (I will not stop reading, however) Would taking courses, reading and attending seminars be enough or should I also go to college in addition?
I’m doing a lot of my own research, but I just thought I would ask your opinion. I’m somebody starting from zero financial education, and learning fast, but I want to stay on the right track. I’m considering hiring a mentor to push me. I am currently receiving your “52 weeks” series and am excited to learn.
Thanks a lot for your time, Todd. I greatly appreciate it.
-Kevin
@sadykhovful I can’t imagine competing in today’s fast paced, ultra-competitive world without the base knowledge provided by a good college level education. It is foundational.
Hi Todd,
I just heard you on the YNAB (You Need a Budget) podcast and decided to check out your website. I have found your website to be really inspirational and motivating. I know a great deal about personal finances and investing. However, I am not satisfied at all with my career and am looking for a change…but a little lost at the moment of what direction I want to go in.
I like your thoughts of when you were about to graduate and you saw the homeless people on the benches and how “free” they were compared to your college friends who were to go to work in cubicles. I feel the same way and would rather work for myself but I don’t think I’m the entreprenuer type. I enjoy learning how to build wealth. I would love to manage a hedge fund like you or Warren Buffett (big fan!) but it requires the capital from investors to get started in that field. I guess I’m looking more for a career advice than financial advice so I don’t know what tips you could offer? I’m going to continue browsing your site for any career advice type articles.
Thanks for the knowledge you share.
@benjamin12 I don’t offer much in the way of career advice; however, I do recommend you work for knowledge – not money. Focus on developing incredibly valuable, rare, and useful skills. The money will eventually flow to those skills.
@benjamin12 I’m a big fan of Cal Newport’s work in this area at Study Hacks (calnewport.com) . Hope that helps!
Hello Todd,
I found your website through Darrow Kirkpatrick’s website and found your website very interesting. I am looking forward to exploring it further in the next couple of days. We share some of the same values in terms of spending and investing. I have read the Millionaire Next Door book and consider myself a prodigious investor and I have followed Dave Ramsey’s principles for over 7 years now. Consequently, my wife and I are debt free with the exception of our house. I have two quick questions I would love you to answer when you have some time. Thank you in advance for your help.
Here is some information that may be beneficial to you in answering my questions.
Income (low side $150K to high side $250K)-I own a small business
Home is currently valued at $350K and we owe $205K. No other debt outside of our mortgage.
Loan is a 15 yr fixed at 3.25%
Investment assets are $430,000
My age is 44
1) If I want to retire in the next 10 to 12 years, do I have too much house? In other words, should I downsize to a house that could be paid for in cash from my current equity.
2) Dave Ramsey recommends investing 15% of your gross and we have been investing in the 15 to 20% range. What do you recommend given my retirement timeline?
Any input would be greatly appreciated.
Thank you Todd.
Brian
There are no black and white answers. It is a function of making your finances reflect your values. Beware of “rule of thumb” guidelines because they can deceive. To properly develop answers to these questions we would have to uncover many more questions. The baseline answer is you are doing better than most but not likely able to achieve your goals assume that in 10-12 years you are looking to live off your savings. You will likely be looking at additional alternatives to make the math work. I suggest you start developing scenario analysis using my free retirement calculator https://www.financialmentor.com/calculator/retirement-calculator and pick up my book “how much money do you need to retire?” at Amazon (see sidebar). Those two resources should help you sort through the issues.
@bjackson1 See my article on this site “How Anyone Can Retire in 10 Years (or less!). This should answer your questions.
Todd
Enjoy the website. I am 42 and my wife is 41. We are professionals and earn between $550k-650k a year. We have a home worth about $800k and no mortgage. I have total investable assets of
$6.8m including $3.5m in cash now. The cash is earning a paltry 0.1%. I have
$1.3m in stocks and the other money is in the form of mutual funds, IRAs, 529s, hedge funds and real estate (no debt). We have three daughters ages 13, 10, 7 and spend about $200k year living expenses. My question is this: Am I holding too much cash? If so, what would you recommend I do with it? I’m hesitant to plow it into the market. Wealth preservation is primary to wealth accumulation, though I would like the money to grow. Any insight would be appreciated. Thanks.
I am here for your advice after reading your “Pay Off Mortgage Early Or Invest- The Complete Guide”. Thanks for the excellent article.
I have a house with mortgage of 141K (3.875% 15 years fixed, $1,146 monthly payment) and equity of 589K. I currently received 500 K inheritance money. I am only eligible to borrow 250K.
What would be best to invest my 500K at age of 62:
1. Real estate investment: Cash out 100K from 1st house refinance to purchase a 2nd house of 600K with tax ~1.1% plus HOA. Expected rental income is from $2,500 to $3,000/mo for 2nd house, $3,000 to $3,250 for 1st house.
2. Equality investment: 1/3 in stocks/ETFs, 1/3 in mutual funds, and 1/3 in fixed income fund.
3. What are other options possible?
Thanks,
Frances
@SixtyTwo Sorry, but your question is too complex (and too important) to answer in a blog comment properly. There are many issues to consider and quite a bit at risk. Proper risk/reward analysis tells you to pursue this question in depth with properly paid advisers and not limit yourself to the free choices available. This decision will have important long-term implications and must receive proper personalized financial advice. Hope that helps.
Thank you. Let me simplify my question as following:
How to invest $500K at age of 62 with no debt except a 15 years fixed mortgage of 141K at 3.875%, and monthly payment of $1,416. $500K is not needed for income or retirement.
How do I go about to find a reliable paid advisor?
Thanks
I just finished “How Much Money Do I Need To Retire” (posted 5 star review on Amazon today- it was excellent), and I’m really interested in the “Buckets of Risk” retirement strategy. If I understand correctly this strategy is based on the purchase of annuities to ensure your basic needs are covered- even if you live a very long life. However, after doing a little research and looking at the description of your “Variable Annuities Pros and Cons” book on Amazon, it would seem that annuities should only be purchased by a small subset of retirees. My question is: I’ve already read “How Much Money Do I Need To Retire”, so what should be my next step to really understand how to put together a comprehensive “Buckets of Risk” retirement strategy?
Thanks in advance for your response, and time that your devoting to this.
@Finishedat50 Glad you liked the How Much To Retire book. Be careful when looking at annuities (and my book on Variable Annuities) to draw a clear distinction between fixed and variable annuities. The variable annuity book serves as a smart consumer’s guide to that specific investment product and does not apply to fixed annuities. They are very different animals.
Regarding your question, the “next steps” for the “buckets of risk” are to secure a solid base of fixed annuities to support basic living costs as described in the book and to employ the other strategies in the book and on this site for your remaining assets. Hope that helps clarify.
@Financialmentor Perfect. Thank you
Age 60, self employed consultant working through an S Corporation.
I can write myself a $50,000 paycheck for 2012, which allows me to put $35,000 into 401k retirement funds, and reduces my W/H Tax, but not SSEC & MEDI taxes. The “cost” of the $35,000 retirement investment is $7220 in taxes (excludes W/H taxes), which is 20% of the amount invested.
Why would I pay a 20% effective cost in order to put $35k in retirement. Is the gain on the investment going to make this cost worthwhile.
1) am I better off taking the $50,000 as corporate dividends and putting it into moderate risk investment accounts.
2) are there other investment vehicles that I could use that would reduce or eliminate the tax “costs” that the above approach incurs?
@dougcoates This question is best directed to your CPA who will have intimate knowledge of your complete tax picture. With that knowledge the answers should be simple.
Hi,
I have just read “How Much Money Do I Need To Retire” and found it an excellent guide. Some years ago I was looking for something that would enable me to forecast when I could retire and what income I could afford. Not finding anything suitable I created a fairly complex spreadsheet to help me do that. Not being a financial expert I used some basic first principles to model my situation taking into account various variables.
Your book pointed me to your Ultimate Retirement Calculator, so I inputted the same data into it. I was very pleased to find the results very closely matched mine. Not being an expert I found this very reassuring as I always had an element of doubt that I had missed something important!
I am British so I had to take account of this when adding the ‘Federal and State Tax Rate’ figure. As I don’t understand the US tax system I found it was best to set this to zero and then just enter all data as net of tax. My question is – is this the best way to do this for British users?
Many thanks for your book and calculators. I thoroughly recommend them. Have you considered creating versions of your calculators for the UK? I think there would be a lot of interest as pensions and retirement are hot topics at the moment and many changes are being proposed for public sector and state pensions.
@Barry Heaven Thanks for your support! Yes, I’m really happy with how the book is being received because it took a fairly controversial stance. Regarding the calculator, it is actually currency agnostic. You could just use British tax rates and British Pounds and it will work the same. All entries can easily be adapted to your country of choice since they all just represent pension flows, assets, and cash flows. You just need to relabel things a bit in your mind as you work through it. Am I missing something?
Todd.. Have you studied the effects of Hyperinflation on values of real estate as an investment?
How many countries fiat currencies have experienced a Hyper-inflationary event occurring including the U.S.A!Even when this deflationary price decline in houses stops and reverses hasnt Hyperinflation destroyed real estate investors returns calculated in real inflation adjusted dollars?Houses would not be affordable with interest rate increases, and to compensate for this home values would have to decline to more depressed levels for buyers to come in would they not?
@Gordon G The mistake in your analysis is common. Returns in real estate are always a function of the financing leverage applied. The small bit of research I have seen on real estate prices in strong inflationary times is that it does lag on a cash basis due to the negative impact of high interest rates. However, that misses how the return equation in real estate actually works. When you finance real estate your are essentially shorting your own currency by borrowing and repaying in cheaper dollars later. In addition, the return must be calculated on the value of the invested capital (down payment plus expenses) instead of the value of the real estate. That leverage multiplies the return when compared to a cash basis.
@Financialmentor The mistake in your analysis is You did say small bit of research you have seen…Something to consider.. when peoples wages do not increase while inflation costs them more especially in an economy where there is a unofficially reported higher unemployment ratehttp://www.freedomportal.net/forum/index.php?topic=20350.0
@Gordon G @Financialmentor We have different standards in research. I’m familiar with what you are citing and consider it my “small bit of research”. The equations are more complicated than cited in his discussion. The basic point is valid, but history never repeats: it only rhymes. The problem with hyperinflation and high inflation is we have limited data – “i.e. small bit of research”. It is difficult to make gross generalizations. As I said, I agree that availability of credit is a primary factor in real estate pricing, but the evidence does not support the gross overgeneralizations made in the piece you are citing. For example, prices might go flat or decline for brief periods during maximum financial stress but could bounce subsequently giving a solid return net of inflation, leverage, and tax impacts. There is much more to understand.
@Financialmentor With rates at historic lows…what will happen if/when rates move up .. have you seen this kind of analysis.There is also great risk in that 21 Countries Have Experienced Hyperinflation In Last 25 Years – Is the U.S. Next!
http://www.zerohedge.com/article/guest-post-how-increasing-inflation-could-affect-housing-prices-correlating-mortgage-rates-a
@Gordon G I see now that you are not actually asking questions but are pre-sold on this idea and using this forum to promote and spread it. Hopefully you’ve had your say and feel complete. I will delete any further comments. Thanks.
@Financialmentor It seems the students fault for the genuine questions being asked to understand a topic made complicated by the institutions who wish to keep knowlege of the money game confusing..to discourage truth.The teacher is never responsible for the communication being not understood.
Hi Todd,
I’ve read most of your book “How much do I need to retire?” and have been playing with the calculators. At 60 years old and with 1.3 million in savings, the future for retirement at a reasonable lifestyle seems bleak. Most people I know have a whole lot less than we do. What is wrong with this picture? We feel like we have to work until we are 70 and stash huge chunks of money away in the meantime and cut our lifestyle way back and we don’t live extravagantly.
@WantingToBeFree What is wrong with this picture is our government has waged war on savers through artificially lowering interest rates below where they should be normally in an effort to prop up the bubble and inflate asset prices. This has the fully intended effect of stealing money from savers and giving it to the big banks who caused all these problems in the first place with their irresponsible lending practices and greed. How’s that for a little rant? In other words, I totally side with you and believe it is ridiculous that your 1.3 million is not enough, but that is the reality retirees face today thanks to our unethical government and the powerful banking lobbies. It is unacceptable.
@Financialmentor @WantingToBeFree Thanks for our response. I knew you would be able to explain this to me. So any suggestions on what to do? We have a reasonably conservative portfolio making about 4% annually and it costs about $6,000/ year to pay for our financial advisor. Is there a wiser approach out there? Thanks for your response.
@WantingToBeFree @Financialmentor @WantingToBeFree That depends on if the financial advisor is adding value in excess of what he costs and it also depends on the investment strategy employed. If you are doing passive asset allocation (buy and hold) there is seldom a reason to pay an advisor because research consistently proves that cost control through low cost indexing is the smartest strategy. With that said, your personal financial situation is beyond the scope of a comment stream because there are so many personal variations. I’m just stating generic educational principles to be helpful.
@Financialmentor @WantingToBeFree Can you either explain or point me to something that explains cost control through low cost indexing? Thanks again.
Hi Todd,
Your book(s) on Risk Analysis and Buy/Sell discipline aren’t out yet, so what should I be reading on the subject while I wait?
I’m in my mid-fifties, with about $2M passively invested in low-cost stock mutual funds/ETFs (somewhere near PAW, I guess – no inheritance nor windfall, etc). And nope, not in control. I rode the market all the way down in 2008, and have kept adding all the way back up to today – and am realizing I have no clear understanding of when, why or how to buy or sell. I fall squarely in the “conscious incompetence” of stage 2; well, at least it’s nice to have the problem identified! And it’s past time to address it.
I don’t blame anybody/anything else for my ignorance, and I am educable. I have no problem with math nor complex systems, nor with work/study, and can handle ambiguity. But I am a still busy with demanding career, and would appreciate at least a few pointers to get me started in the right direction.
My real question is what books/authors would you recommend (and in what order) to me, and others in my position, to cut through the babble, and form a good foundation for improving understanding and behaviors, and start advancing to stage 3?
Thank you for your site, and for your insights!
@ManyPossibilities I can recommend books, but without coaching you won’t put the pieces together properly. Clients tell me it is the coaching that makes sense of the reading and organizes it into a cohesive system. I know that sounds like a pitch, but it is only halfway. I’m planning on offering a course in October on advanced investing that would be perfect for your needs. However, if you don’t want to wait that long then one-on-one coaching would be the solution. At your net worth, it would makes sense to pay for the personal attention and not wait. If you just want book recommendations, a good starting point would be Ed Easterling’s “Unexpected Returns”. It is not a page-turner, but the info and research in it is golden. Hope that helps.
I apprecite your words of wisdom, I am in the process of starting my own wealth building business, my question to you is “I would like to think about an approach for people who are not smart enough to appreciate what you are saying? And yes I know it contradicts the third link. Also like you said you must go outside your comfort zone
dynamicthinkerUmmm, that’s not actually a question. Anyway, if you are asking what approach I think would be valid, the truth is my job is to simplify as much as possible. If I felt it could be stated any more simply without losing validity than I would do so. As Einstein said, “Everything should be made as simple as possible, but not simpler.”
I have a lump sum of cash – enough to pay off my mortgage. After reading your article “Should I Pay Off My Mortgage Early or Invest?” I have come to the conclusion that it is best not to pay off the mortgage. However, the issue I face now is that I’m not sure now is a good time to get into the market. You talk about mathematical expectations in one of your articles. How can I determine the mathematical expectation for return assuming I invest today in a broad market ETF (e.g. Vanguard VTI)?
growingwealth Good resources for mathematical expectation estimates for the U.S. broad market include Crestmont Research and related books authored by Ed Easterling, the weekly updates by John Hussman on Hussman Funds website, and the monthly updates by Doug Short on Dshort.com (now an Advisor Perspectives site). Hope that helps.
Financialmentor growingwealth Thanks for the suggestions. I just got a copy of Unexpected Returns. When I’m done with that, I’ll check out the other references.
I have purchased a home and contacted the financial institution which purchased my loan. I told them that I intended to make bi-weekly payments and they said that they did not accept them and their system was not set up to handle them. How can I get them to accept the bi weekly payments?
PEhingerTo the best of my knowledge you can’t. However, if they don’t have a prepayment penalty you can “simulate” biweekly payments with your monthly payment by adding a certain amount each month creating the same effect – a 13th payment within the year. This calculator will make the math easy for you https://www.financialmentor.com/calculator/bi-weekly-mortgage-calculator-extra-payment
Hope that helps!
I had a home equity loan with Beneficial and then they switched me to HSBC and supposebly I already finished paying my principal but there is a deferred interest somewhere and they don’t want to tell me how much I owe and to who it seems now its a Spring Castle acct# I have hit so many walls trying to get that account closed and no answers. Any suggestions I appreciate it maybe get a lawyer?
Garthe1 Sorry, but I have no opinion here and can’t be helpful. The question is specific to your situation and just requires follow through on your part to resolve. It is details and should not be difficult to resolve. Persistence.
Hey Todd. I’ll try to keep this short and sweet.
SITUATION: I’m 27, wife is 25, and we just had a our first child. We purchased a nice home in 2008 for 130K which is now valued at 240K (plan to stay in this home for many, many years). Our mortgage was 104K and is now down to 68K with a 4.6 interest rate – I’ve been making more than double payment every month in an effort to get it paid off. We are on track to have it wiped away within 5.5 years. I put away 13% into 401K, and max out two Roths at 11K, have a 30K emergency fund, and additional 50K in savings + 60K in retirement (Roth/401), and no other debts.
QUESTION: My goal is to have 100K in principle invested by the time I hit 30 and my mortgage down to about 40K, which should not be a problem assuming I stay on my current plan. However, after I read your article, I’m second guessing my logic of throwing so much money at my mortgage ($1,250 a month/actual payment due is $534). Should I scale that back and invest more in retirement and/or college funds and let our good friend compound interest take affect? Or do I continue on with the above plan and once the mortgage is gone in 5.5 years, take those funds (15K annually) and immediately shift them into college/retirement savings?
Awesome site, great advice! You have gained one more loyal reader!
Thanks,
Mark
wemasiew Hi Mark, the answer to your question is a personal statement of values. Since you’ve read my article on this subject you already know the math. The article provides the complete solution with the complete answer. There is nothing I can add here. If there was more to add, I would have included it in the article. Your personal decision is a personal statement of values and personal preferences (once you are clear on the math and priorities and discussed in the article). There is no right-wrong answer beyond those clearly spelled out in the article. Hope that helps.
Hi Todd,
thanks for a great calculator! I am wondering though if it is too optimistic.. My scenario is this; I am 68 planning to retire at 69; $1,400,000 in the bank at 3% interest; SS 2490/month and pension 2700/month. I plan to work from 69 to 71 at $17,000/month. I will need $130,000 annually in retirement. I assume 2% inflation and hope to live to 95. Your calculator gives me a balance of $800,000plus at 95 and in reviewing the breakdown chart there is a balance of $1,700,000 at few years after retirement. How can that be? where is the money coming from? I would appreciate an explanation..
Thanks again
Peter
pbellot Hi Peter. Not enough info to answer your question. All I can do is assure you the calculator is accurate and not “optimistic”. 99.9% of user inquiries and concerns are due to user errors on the inputs. I encourage you to review the spreadsheet output carefully and check back with your inputs to make sure they are correct. A close review will usually find the error (if one exists). Hope that helps.
Should I continue investing my Roth IRA in a target fundour other mutual funds or individual stocks?
Mac510I wish I had a crystal ball so I could answer that question. Alas, I have no ability to divine the future. Seriously though, there is so much personal information that would have to be known to answer this properly that there is no way to do this question justice in this format. I suggest you examine the article “What Is A Good Investment?” on this site for some insights into the underlying problem with this question. It should be quite helpful.
Hi Todd,
Love your calculator! Can you please explain how the “Net Present Value” field is determined in your report?
Thanks!
Alice
Financialmentorindygal17Wow- that was fast–thank you! I actually meant the ultimate retirement calculator. But reviewing your Present Value calculator with article is an excellent explanation.
I got to your page from a link in an article about the top three web retirement calculators (http://www.caniretireyet.com/the-3-best-free-retirement-calculators/). In the article it mentions Monte Carlo was not used by design. It stated “Todd believes probabilistic retirement planning is fundamentally flawed.” Could you explain the flaws you see with Monte Carlo for retirement planning?
indygal17Glad you like it. If you are referring to the Present Value calculator then the formula and math are explained in the article found by expanding the box underneath the calculator. Hope that helps.
dbdavidson I will be adding an entire article explaining this issue in the future. In a nutshell, Monte Carlo stands on the foundation of randomization, but financial markets aren’t random. They are not predictable either, but they aren’t random. They are probabilistic. When you ignore this reality it creates more misinformation than value and causes false conclusions. For example, as of this writing I’m dealing with many retirees who are told they have a 5-10% failure risk according to Monte Carlo. Hogwash. If you look at the data you’ll see the risk of failure is much higher because 100% of those failure periods are composed of data subsequent to valuations/interest rates that were comparable to today’s. The reality is those same people are sitting on extremely high failure risk given a deeper understanding of how it all works but they are being deceived by randomization of data that isn’t random at all. Hope that makes sense as a quick explanation.
Too many questions not enough time!! I am a 58 yr old male (married) looking to (hoping) ride off into the sunset at the prescribed 66 1/3 that SSA has pre-defined for me. It would appear that if I stay the course (fingers crossed) I should be OK–the particulars–600K house – 120K mortgage @ 3,4% 30 yr refi about yr ago for home improvements. 1.2+ mil in rollover/savings/mutuals funds–majority in tax deferred rollover. If i was to sell my house and take 500k in equity –my desire is to downsize and move into a better (lower tax area) would it be best to take the entire amount and place into an annuity and use annual gains to pay for mortgage or tie up the cash in a house/residence.?
BTW–I am a student of the game and have rode out the worst of the storm and patience has rewarded me with a 31% return last year and expect modest but at least 11-14% this yr as well–likely going to resort to a safe harbor style in the next yr or so—what are the best annuity style to consider—need to preserve capital and max return?—for 25 yrs.
Thank you in advance for your response.
JH
1Giacomo1 These questions sound appropriate for your personal financial advisor who will have all your portfolio information, expenses, and more. This column is not the right venue due to lack of sufficient information, inability to interact personally with discussion to flesh out details, etc. You are seeking personal financial advice which is best obtained from your own personal financial advisor. Hope that helps point you in the right direction.
I signed up for the news letter- how can I access the e-book?
Thanks
Karen81581 You’ll see the ebook and the link to download it when you confirm your subscription. Aweber (the mail list host) sends a confirmation message to verify you are the real person and wanted to sign up (known as double opt in). When you verify your subscription request a page will open in your browser with the ebook and a link to download. In addition, if you missed it then, no worries. It comes again somewhere around the 5th message (I think) in the email series you get as a new subscriber. In the end, you can’t miss it. Hope that helps…
Hi Todd
I have got only one question really. But believe me it is a tough one..:) How can you legally use other people’s money to create leverage? I have got a stock portfolio but it frustrates me that it grows so slowly. I wish I had some kind of a cash generator or some kind of leverage I could use to speed up the process. 10 percent of 1000 dollars is still only 100 dollars. 10 percent of 100.000 dollars is 10.000… I want to become financially independent, so that I can teach other people how to become financially free.
Kind regards,
M.D.
Michiel DerbovenCheck out the 8th wealth building principle in this article https://www.financialmentor.com/wealth-building/ten-commandments/13166
I believe that should answer your question.
Hope it helps, and good luck!
Hey Todd,What reference would you recommend for a beginning real estate investor? I have plenty of passive stocks/bonds, no business, no real estate (beyond family homes).
I love your material: e-books, podcasts, & website articles. Thanks for your insight!
AK Jack Thanks AK Jack! Glad you are loving the material and it is helpful.
With regards to recommending real estate investor books, that depends on which segment of real estate investing you want to get into.
In other words, the reading you would do to bring yourself up to speed on apartment investing is completely different from what you need to buy a mini-storage.
My suggestion would be to go to Amazon and begin your search with a relevant keyword. Pick what books look interesting and then follow the “also bought” lists in a daisy chain by rinsing and repeating to find additional relevant books.
Once you narrow your shopping list then look at the reviews carefully. Every book attracts negative reviews so just look at both sides of the argument to see what holds water.
That is the process I follow and it always works like a charm. I hope it helps you.
Hey Todd, I want to do an early withdrawal of $65,000.00 from my retirement. I am in the 28% tax bracket. What would be my penalty and taxable amount?
Roger JR Hey Roger, please check my retirement calculators on this site underneath the calculators tab on the main menu. They will help you calculate this for yourself. Hope that helps…
Hi Todd, I am 61 yrs old and retired with half of my annual income coming from secondary market annuities and the other half coming from tax-free municial bonds. By the end of the year I will lose $15,000 of annual income due to called municipal bonds. Where do you suggest one re-invests that bond principal in order to keep my current income where it was before my bonds were called. I averaged 5% tax-free on those bonds. Is it advisable to sit with cash until interest rates start to rise (when and if they do)? Thanks
dkarp Unfortunately, this is a very difficult question for many.
The government has waged war on savers with artificially low interest rates and retirees seeking a fixed income from their assets are taking the brunt of this policy.
There are no easy answers.
You can see my analysis of the credit markets back in March/April 2013 in this post https://www.financialmentor.com/investment-advice/investment-strategy-alternative/bond-bubble/9064
Nothing has changed.
While I can’t specifically answer your question because it would be personalized financial advice (which I can’t legally give), I believe this article will give you a solid understanding of the risk/rewards of fixed income investing for long maturities right now.
Hope that helps.
Hi Todd, I am a 34 year old, working a w-2 job with a defined benefit plan retirement in place. As long as I stay in the system and work for the same line of industry, I do not need to worry about retirement. I have a pretty solid job security and a full coverage of health benefits that would continue in retirement.
I own a house with a 30 year mortgage, that has 28 years remaining on it with a balance of $250k, and the interest rate is 3.75%. I have no debt. I am able to save 1k-2k a month regularly. I am in the 28% tax bracket.
My question is, I have about 75k cash saved that is parked in a savings account, and I would like to hear your opinion about how to invest this money. This includes all emergency cash and everything, though honestly, I am not sure if I really need six months of income saved and just put aside. I can keep maybe 15k for reserve and the rest can all be invested.
Should I switch to a 15 year mortgage and use some of this money to lower the principal balance? Should I get a financial advisor to invest in a portfolio of stocks, bonds, etc? I am pretty knowledgeable about finances, but don’t have the time or motivation to actively invest.
Or, should I consider purchasing a second property, perhaps a vacation home I can also rent out? Or, consider a Roth IRA, traditional IRA to supplement retirement income in case I need it? a side business I can manage or invest in?
Thank you in advance for your input, I look forward to it.
Fay2014 This is exactly what coaching is for. Stated another way, the answers you seek cannot be provided in a sound bite reply on a blog. You are seeking a comprehensive plan.
If you don’t want to pay for personal financial coaching then I have a group coaching process slated to launch Fall/Winter 2014 that is Step 5 of my “7 Steps To 7” Figures curriculum and specifically teaches exactly how to invest your money. Watch for an announcement in the newsletter. Subscribers will get first access.
I also have some free resources on this site addressing some of the other questions you asked including this comprehensive article about paying off your mortgage early or investing the difference https://www.financialmentor.com/financial-advice/pay-off-mortgage-early-or-invest/7478
In a nutshell you are looking for a pretty comprehensive plan and detailed answers. If you don’t want to pay for coaching then you will have to work through assembling the missing resources and education. Your needs cannot be answered adequately in a brief blog comment. It would disrespect the importance of the questions you are addressing.
I hope these resources help…
Hello Todd,
What is you’re opinion on variable life insurance? I am a small business owner and my financial adviser recommended the variable policy as an investment vehicle for the kids college fund. The cost of insurance is less than $400 a year but the investment fees are insane. I invested close to 10k so far but have a $1200 negative balance after seeing a 10% return. I am 2 years into the policy and have contributed $400 a month. Out of the $400, about $90 goes to investment fees and a small fee to cover the COI. I questioned the adviser as this never came up when he sold the product. He said the fees are flat and will never rise and that they are class A stocks and that’s the reason for the expense.
Dave Jr Read my book about Variable Annuities available on Amazon. You can find it in the sidebar or on home page of this site. While not a perfect match to your situation, the general message is consistent and should prove helpful in dissecting the situation you are in. It just 3$ if you pay cash and it is free to prime and unlimited members at Amazon. It should prove helpful.
Thank you for you’re timely reply. I will take you’re advice.
Thanks again, Dave.
Hi Todd, With $600.00 what type of stock investment can I make ? I have had some training on stock options but I’m not sure what I should start with ? I was thinking to do covered calls, to start off with a low risk until I get a few trades under my belt. What do you think?
KEVIN14206 Simple. What is the mathematical expectancy of the strategy you are implementing? Dollar amount is not a factor except at the highest levels (100s of millions or more) and lower levels (under $5,000). Expectancy determines compound returns and thus determines your investment process. See my forthcoming investing course in the 7 Steps To 7 Figures curriculum expected to launch October 2014 for more information. Hope that helps!
Todd,
I sat in on the Webex last night and wondered if more information regarding the rules based system would be shared. Your presentation never really went through any examples. Very interesting session.
RDScherer Because of the technical problems, we’re working on a video replacement. I will keep you content suggestion in mind as I design the videos. I’m hoping to email my subscribers and everyone who registered in the next couple of days to update them. Thanks for your interest!
I just inherited my family home that has a mortgage that is 40% of the appraised value of the house. I want to do my due diligence in order to make sound financial decision but am not sure if my math is right or if I’m even asking the right questions. I don’t have time to join a real estate investing group or read an entire book on the subject. What do you recommend I do?
Tasha Nesbitt I can’t make a recommendation because there is not even fractionally enough information in the above paragraph to make a responsible assessment. In addition, you really didn’t even ask a specific question.
What I would say, however, is I would prioritize the time to gather the information and develop the background knowledge to make an intelligent decision.
I’m only guessing, assuming there is reasonable equity in the home as stated you would probably have to work a darn long time to gather that equity after tax as it sits there today.
It is probably worth making a priority.
You mention in one of your podcasts that there is a point when an emergency fund is no longer a needed part a financial plan. Will you elaborate on that?
JWeatherford Once you get past living month to month and are in wealth building mode you simply have savings or liquid assets. There is no useful purpose to artificially carving out a chunk of those assets in a separate account that is labeled “emergency”. It makes no useful sense and only adds pointless complication by creating an additional account. Additionally, these accounts frequently get mismanaged from an expectancy investing standpoint because they are earmarked as “emergency” thus remaining in cash (typically). In my life, all of my liquid assets are “emergency funds”, and they are long-term investments as well. I have no separation since any and all funds can be readily liquidated to spendable cash if need be. Hope that clarifies.
Can you comment on Ray Dalio’s All Weather Strategy? I have doing some research and was interested to hear your thoughts.
Thank you
RDScherer Great question. I would have to write an entire post to explain my thoughts, both pro and con, to this strategy. I will be asking my readers soon for their most important questions on investment strategy so make sure you chime in with this one. Thanks!
Todd,
I have $300,000 in cash and would like to invest but uncertain on the best approach. I am 61, still working, and I plan to work to 65 or 66 if I am so fortunate. My strategy is to use this money to help generate retirement income to supplement my pension, social security, and dividends from other investments. Thoughts?
Thank you
RDScherer I can’t tell you specifically what to invest in because that would be personalized investment advice. That can only be done by a licensed investment advisor. I can say that I invest 100% of my money according to the principles I teach in the Expectancy Investing course (Step 6 of 7 Steps to 7 Figures coming out in early 2015). These same principles are used by PortfolioCafe.Com (soon to be renamed ExpectancyFinancial.Com) in the models published there which you could use. Full disclosure – I’m a 35% owner of ExpectancyFinancial and have money invested according to the same models. Hope that helps.
If one were to buy an ETF focusing on large cap high dividend stocks in the world with the intention of never selling and simply enjoying the dividend is this such a bad strategy? (You mentioned the many limitations of a buy and hold strategy)
How do I take your course I cannot find the link anywhere
takeshimm I’m working on all the courses and all the infrastructure to support the whole shebang. I’m hoping to be able to offer Step 6 – Expectancy Investing in the first quarter of 2015. Thanks for your interest and sorry for the temporary confusion. The sales pages aren’t complete and that is why you can’t find links. We’ll get there…
takeshimm Much to explain to do full justice to your question. With that said, one simple and direct point to consider is the question of fees. If you intention is to be a passive, long-term, buy and hold investor, then why acquire the position through an ETF and incur the fees? While the fees may seem small, they are likely a huge percentage of the actual dividend income. If your plan is as stated then it might make sense to purchase the underlying securities and avoid the wasteful fees. Hope that helps.
Todd,
I took your advice gave myself a Chrismas gift. Portfolio Cafe. I am excited to get started. Any tips on using the various investing options would be much appreciated.
Thanks!
RDScherer Congratulations. I hope you get great value from the subscription. Tim should be contacting you shortly as a new subscriber and offering to personally walk you through the various models and help you get oriented. For what it is worth, I personally use Perfect Portfolio as a core holding. Hope that helps.
Todd,
I am a few weeks into the Perfect Portfolio and it is as advertised. Thank you!
Any updates on the 52 week course you suspended? I also recall something new was to be announced with Portfolio Cafe changing the name to ExpectancyFinancial.Com.
Thanks
Rick
RDScherer While “weeks” is too short to judge any investment methodology by, it is a thing of beauty to watch in real time, isn’t it. Fun stuff!! Glad you are liking it.
Regarding all the other stuff you mentioned… SHHHH!!!… you don’t want the world to know all the fun stuff I’m cooking up behind the scenes :-))
RDScherer Hi Rick – The remainder of the 52 weeks course will be delivered as I build out the underlying courses.
For example, the wealth building portion is completed because I have that course in draft form. The next section I’ll add to the course is the advanced investment strategy. I expect to add that this year as I build out that course. Each of these items is a surprising amount of work to do right. In time, I’ll get it all done. It just takes time and persistence.
Thanks for your patience.
Thanks Todd, that makes it clear.
Hi Todd,
After reading your book “How Much Money Do I Need to Retiree,” I would like to know what is your recommendation to someone that hits a mandatory retirement and finds himself retiring when the market valuation is extremely high? If the answer was in the book I either missed it or didn’t comprehend it. Also, can you please tell me the best way to determine market valuation. For example, if I were to retire today, how would I best determine this?
Thanks for any advice you can offer, and thanks for the great educational products you’re sharing.
Regards,
DJ
EagleDriver You second question is easy – Doug Short runs a site, used to be called Dshort.com but now is something like AdvisorPerspectives.com, just put dshort.com in your browser and it will be redirected. Every month around the second week he publishes a post that includes both the q-ratio (for assets) and CAPE for income valuation along with some relevant commentary and analysis. Great resource and totally free.
Regarding your first question, that is (unfortunately) impossible to answer without digging into your situation in much greater detail. You are essentially seeking investment strategy advice to weather the inevitable sub-par returns that follow both excess valuation and record low interest rates. Because we have no relationship and I don’t know all the relevant details, I can’t possibly give that question the complete and fully developed answer in a blog comment that is required to be accurate and useful.
With that said, this is likely one of the most difficult periods to begin retirement in all of recorded history because nearly all assets are not just overvalued by historical measures, but are at logical extremes. This is a direct result of government policy causing asset price inflation.
Once your understand the cause (government policy), one potential cure is to look outside the sphere of U.S. government policy influence for markets that might represent more reasonable valuation (and future expectancy as a result).
There are other potential answers as well depending on your needs and situation. Some people are looking to SPIA’s as a solution, and others are choosing non-traditional assets like income producing real estate depending on valuations in the area where they live.
The self-serving answer is I will be teaching a course on Expectancy Investing which shows you how to manage risk and find positive expectancy in these difficult markets. I will announce it in the newsletter likely second quarter of 2015.
Hope those various ideas point a direction that is helpful!
I have too much credit card debt and have been working hard the last couple of years to pay it off. I am interested in knowing if the Lending Club is a legitimate company (it appears it is from my research and the article on your site) and if there is some unstated risk I should be aware of. I am one of those who borrowers who won’t default, however, I want to be careful that there aren’t any hidden risk of the interest rate skyrocketing, etc.
What are the risks to the borrower??
KBorrower My answer is not what you’re wanting to hear. I am not a fan of “bailing out” a credit card debt problem because it tends to result in the person re-creating the problem later again. The permanent solution to credit card debt problems is to endure the pain of austerity required to pay it off because that pain will be driven so deeply into your bones over a significant period of time that you’ll NEVER repeat the mistake again. It is the most certain path to a permanent solution, which I’m assuming is your goal. I would suggest dropping any pursuit of “magical solutions” and simply dig deep to get the job done. It is the short-term pain that gives the best long-term results. Hope that helps.
Hi Todd – love your podcasts. Will you be adding more?
Thanks for the work you’re doing!
Mary Cowen Thanks for asking Mary. Yes, I have two recorded already but just not published. I also have many more planned. They are a lot of work to put together and I’ve had time limitations due to other web development projects that I chose to prioritize. Hope to resume publishing in the foreseeable future. I appreciate your patience and support.
Todd
You are part of owner of Portfolio Cafe. Can you explain why the website has stopped being maintained? My last email to Tim has gone unanswered.
Any insight is appreciated.
Thank you
Rick
RDScherer I bowed out of Portfolio Cafe and no longer have any financial or business interest in the company.
I did leave my investment account intact with Perfect Portfolio because I don’t believe there is any issue with the investment methodology with Perfect Portfolio. It was primarily differences of opinion that come between partners that forced the separation.
I emailed Tim to get an answer for you and this is what he wrote back…
“The site is being maintained. I sent an
email out (to subscribers) explaining the sequence I would update all of the models. That
was completed. I have finished a new template for PP and its getting
moved to a format that will better present it.”
Hope that clarifies…
Hi Todd,
Any updates on the 52 week email course? It was suspended a few months ago and have not seen it start up.
Thanks
Hi Todd,
Thank you for providing such useful and honest information about retirement finances. I have read many of your blogs and books and agree with all you have to say on the state of bonds today and avoiding stocks with high P/E ratios. It seems as though we are entering a difficult year to begin retirement this year when interest rates are bound to move up and the DJI is at a all time high with many stocks with high P/E ratios.
For situations like the above where both index funds and bonds look particularly unfavorable, what are several ways, sectors and other alternatives to diversify within a traditional equity market?
Thank you, John
offshorebanks The problem with your question is the implied assumption – that the answer lies in finding the correct investment product. Your solution is investment process – not product. Please look at my post https://www.financialmentor.com/investment-advice/investment-strategy-alternative/what-is-a-good-investment/5977 and https://www.financialmentor.com/how-to-invest-money to better understand what I’m trying to communicate.
Hope that helps!
Todd Tresidder,
I am on my way in choosing an appropriate subject for my MSc thesis in finance.
The goal: Educate myself as much as possible in reaching financial independence (from scratch).
Assuming basic knowledge of financial markets, active portfolio management and personal finance, I will manage my own and family portfolio in reaching this objective. As the subject of the thesis have to be quite specific/pointed, my question is:
What subject would you choose in order to get the most “time investment return” in gaining valuable knowledge towards the main goal?
Hope question is not to general. Whatever insight would help.
Thank you for the excellent high quality content you deliver.
I am very confident in referring people to your site for information/services.
Best regards
aiminghigh Simple. Wealth is a function of two things. (1) Spend less than you earn. (The bigger the gap, the faster you can achieve financial freedom.) (2) Earn a return on those invested savings in excess of inflation. (The bigger the gap, the faster you can achieve financial freedom.) Simple to understand, but hard to accomplish, and that’s what separates the winners from the wannabes. That gives you 3 subjects – how to maximize saving, how to maximize ROI, and how to get it all done. Hope that helps.
Financialmentor aiminghigh
Much appreciated: )
Also found some references to highly relevant academic studies in your books.
Thank you!
I have $10,000 that I would like to invest short term and have access to with out penalty. What investment vehicle is best to maximize interest over the short term, say 6 months to a year?
jebeach69 In a world of zero percent short term interest rates, there is no answer to that question worth considering. Any difference in interest rate would be so small and the time period so short that the actual dollar value is not worth paying attention to. You would be far better off focusing any energy spent on that question toward increasing income because it will produce more meaningful results. Hope that helps!
Todd,
Do you still have the wordpress calculators plugin available?
contato4 No. I eliminated it. And I know of no functional alternative as a replacement either. Sorry.
Financialmentor contato4
Thanks. Too bad, it looked like a really great plugin!
My 90 year old Mother in Law has lived with us for about 6 months. She is closing on her condo and will be receiving over $100,000. She owes nothing to anyone. What should she do with the money as an investment or safeguard it? Is a Roth IRA a wise choice or is there a better option? Thanks
John 🙂
John Ryan I can’t give personalized financial advice on these pages… by law. In addition, it would take much more information to provide a sufficiently informed analysis that respects the importance of the question. There are many aspects to the decision – income needs, net worth, estate planning – that would be involved in a well thought out decision. Unfortunately, this column is not the right venue for such things. My suggestion would be to find a hourly fee-only financial advisor that knows their stuff to dig through this for you. There is enough money involved to justify the cost given that the decision can likely be made in just one hour of time. Hope that helps!
Hi Todd, Can you tell me which resources on your site are relevant to leveraging business assets, especially intellectual property? I didn’t turn up much in my search, but I’m guessing you must have articles on this that I didn’t find. Thanks so much!
Moshen There is not much on the site right now. It’s a subject I will be writing about more in the future so subscribing would probably be a good idea so you’re notified when I release the material.
Todd
Love the site and content. I would like to discuss business with you and ask some questions. Maybe you get a ton of these emails. Either way, as a former Investment Wholesaler I saw the industry as an insider for over 13 years. What you are providing is something I dreamed of while wholesaling real education, not sales tactical information. Friends and contacts are always asking me advice as I haved owned and run businesses and have an extensive financial services background. I would love to bend your ear if you are open to that, I see an opportunity to help people and business owners cut costs, save more and balance life. I love the balance and non-materialistic stance you have here. My wife and I amassed a good nest egg from my career but never put it in the house or cars only the bank and experiences.
With gratitude Toney Sebra 916-799-6114
Tsebra Thanks for the kudos, Toney. I appreciate your support and enthusiasm.
If you have a specific business proposal involving this site the best course of action is to email me directly and take it off the public forum (this page). My email address is on the contact page.
If you’re looking to bend my ear or pick my brain (as the sayings go) I’m having to carefully guard my time to balance my family’s needs while building out the 7 Steps To 7 Figures product line. In other words, time given to you is time taken away from one of these activities, which is not something I’m willing to do.
I wish I had unlimited time to help everyone, but the reality is time is the one thing that is confined and in ever increasing demand as this site following grows.
Again, I really appreciate your support and look forward to hearing more from you in the future. Great to have you as part of this community.
Hi, new to site. I am 64, very confused about finances, have 39,000 left on 3.25% mortgage, bi monthly of 93.00 but seems like 50% goes towards interest, have about 350,000 in stocks/bonds/annuities, no credit card debt, trying to figure out if I should take $ from 350,000 and pay off house just to stop paying 50% interest. I am on SS now, went from $55,000 income per year to about $16,000. What other information would I need to provide? Thanks for any info as I find some of the terms of financial info difficult to understand.
lululaurie I think this article will address your question https://www.financialmentor.com/financial-advice/pay-off-mortgage-early-or-invest/7478
Hope it helps!
Financialmentor lululaurie Thank you, I will read it very carefully and continue to read through you site, every bit of info helps!
Hello Todd, I’m new to this site and have 2 small questions 1: Why are you not mentioning anything about IUL’s as apart of a type of investment vehicle?, and 2: what are your thoughts on IUL’s? I’ve been doing a lot of research on this vehicle, and i find it to be actually one of the best to date.
jamesgalmo First off, IUL stands for Indexed Universal Life Insurance, for readers who may not know.
Answering your question, eventually I plan on adding entire section to the site explaining all the in’s and out’s of life insurance from a consumer advocate position – not a life insurance salesman position. How to properly use it, versus all the shams sold by the salesman.
Suffice it to say that it’s not a priority, which explains why it hasn’t happened yet because rarely (read “never”) is it used as a wealth building vehicle.
Life insurance is used properly as a risk transfer vehicle, not to build wealth.
There’s much more to explain this position than a comment on this page will alllow, but it’s really common sense when you think about it. The return you receive on your money must be less than what the insurance company makes on your money in order for them to run a profitable company. In fact, it has to be a lot less because of all their expenses and overhead that must be covered.
Therefore, it doesn’t make sense to introduce all the expense, commissions, overhead, and fees of this middleman into the asset accumulation (wealth building) process.
Again, there’s much more to dig into to fully explain this, but that should at least suffice to prompt you to get past the salesman hype and dig deeper into the various life insurance products before committing.
They aren’t inherently bad. There’s just a right and wrong way to use them depending on your specific circumstances. Do your due diligence.
Hope that helps!
Financialmentor jamesgalmo Well now i’m confused because i was under the assumption that it does build wealth by a 0% floor with a cap to not lose money when other vehicles did lose money over the last decade…So, i believe what you say, i just need do some more research on those figures.
Thanks for the response
Hello Todd,
I have a question and need some direction. We have a relative that had a cell tower which they were getting a lease payment each month from the company. Another company came in and offered them the remaining lease payments in full for the rights to the cell tower. They took it but now they are worried they have this large sum of money and someone said they would loose half of this to Capital Gains. They are up in age and are concerned of what this will do because they do not own their home and so they want to shelter this money until they can find something they but its looks like it will go into next year and they received the funds this year. Any advise that I can share with them.
Susie616 It sounds like there is enough money on the table that it would make sense to consult a tax specialist. This actually should have been done before completing the deal. Unfortunately, this is a common mistake where people convert a cash flow stream into a capital item and are then shocked by the tax impact and how little they have left. Hopefully they can find a solution. Wishing you the best…
Hi Todd,
I enjoyed your podcasts, are you planning to record more podcasts soon?
roozbehk Thanks for asking. Yep, I already have one in the can (recorded) and just doing all the post production work. It will probably go live. I’m hoping to publish maybe 6 per year going forward.
Hello Todd
My wife has a 401k through her employer. It’s with Vanguard. She has the option of investing in any one of the funds( approximately 25 or so) offered in that segment of Vanguard funds. I currently subscribe to the IBD and follow the funds weekly if not daily. How would you suggest the best way to evaluate the funds to invest in? We are 54 YOA if that helps.
We can change as often as we like and there are no fees to do so.
thanks so much for your time and help
Joe
joestanfield That’s exactly what I’ll be teaching in Step 5 of the 7 Steps To 7 Figures series of courses. It’s called Expectancy Investing. Given that it’s a 6 month course of instruction there is no possible way to sound-bite an adequate answer in a blog comment. I hope to have the course available for you by the end of 2016.
Hi Todd,
Sorry for the ridiculous username. I saw it somewhere once and thought it was funny, so I made it my own.
I’m trying to figure out which of your 7 steps is the best for me. I make a decent living (+$170,000/year), have a small car loan that I don’t want to pay off because the interest rate is so favorable, have a $260,000 mortgage and no other debt. I have low six figure savings and between my wife’s IRA (she is a homemaker) and my own, a taxable brokerage account, plus 529s for two boys we have +/-$365,000. At the moment, most of it is sitting in cash. My biggest issue with investing is fear of losing the money I’ve earned, so I often have my money sitting in cash, which I know is awful under most circumstances. I know I need to be more active and I’d like to start investing in real estate, etc…, but the taking action part always trips me up. Not because I’m lazy, but mostly because I don’t know where to start and I often get bogged down in reasearch…
I’m 38 and I have a strong desire for financial freedom because of the time it will allow me to spend with my family. I’m tired of the rat race and am willing to do whatever it takes to get out of it.
Do you have any thoughts about where I should start? I’m not sure Steps 1 or 2 are where I need to be, although there are certainly items covered there that would be helpful for me.
Thanks very much in advance for your guidance. I’m so glad I found this website!
Toots
Toots Mgoots My suggestion would be Step 3, but I’m looking at very limited information so please read the description page here https://www.financialmentor.com/educational-products/seven-steps-to-seven-figures/wealth-plan to see if the fit seems right for you.
Hope that helps!
So, I have no mortgage or consumer debt. What I DO have is roughly 60,000in PLUS loans that run between 6.41 and 8.5 percent. Should I think about refinancing and consolidating them or should I just bite the bullet and deal with it the best I can? We are looking to retire in about 4 years, but we may retire sooner if the company shuts down. And BTW we still have a 6 year old at home to worry about!!
DLP0125 This crosses the boundary into personalized financial advice, which I can’t provide by law. This is an educational service that operates within the education exemption of the financial advisory laws. With that said, it would also be a disservice to you for me to attempt to provide an answer with such limited information. It would disrespect the importance of the decision in your life and the answer might be wrong based on important pieces of information that weren’t included that might have changed the outcome. Wish it was black and white simple, but it requires a proper analysis to give the decision proper justice.
What sound advice can I give to my girlfriend who is now 63 (or 64) years old and says she only has about $15k in savings and no other financial accounts or assets. She hasn’t worked in about 9 years, but does have a real estate license (which she hasn’t used for over 15 years). However, the real estate market here is not good at all. Most agents are leaving the business, except for those who have been established for many years. She is healthy, smart, frugal, and willing to work, but has not been able to find employment that will support even basic ongoing needs once taxes and expenses are subtracted. She does not have any children. Also, she does not own a home right now. What does a person in this kind of situation do?? I know she is not alone. Thanks for any advice I can offer her.
lelle11 She has to work on income production. Nothing happens without income. It all starts there. If she can’t find employment then she needs to work on developing marketable skills that are in demand by employers. The market is sending her a clear message (for 9 years!!) She either responds to that message or…
Thanks for your input. I’ll share it with her. Seems obvious given the predicament she’s in. There is no prince charming, for the women nor the men! I live part time in a resort area, and seems the crowd pushing 60 or over, who for one reason or another now have very limited financial resources, believe there aren’t any viable options to really make an impact in their circumstances. So many are ashamed of their plight, embarrassed that they need to work, and are clueless and fearful in terms of creating a lasting income stream. Thanks again.
Hi Todd – wondering what you think about target date mutual funds as an investment vehicle? I have a diversified 401k portfolio which is rebalanced annually by a Fidelty advisor (the service is covered by my employer’s plan. But once I maxed my annual contribution, I decided to open a Roth last year – the balance is fairly small, but I hope to be able to grow it over the next 10-15 years. Right now, I have the entire balance in a target date fund but I’m wondering if I should expand that portfolio into other funds as well.
Magsatplay I’m not a fan of passive investing in general as I believe risk is something that should be managed, not passively accepted. Most of the problems in retirement planning are caused by unmanaged market risk, so when you learn how to solve that problem it completely changes the math of wealth building. So anyway, because I think the math of active risk management is clear, it also means passive investing from periods of high valuation and/or low interest rates is not an efficient investment strategy.
What are your credentials for offering advice? I am curious because based on your very strong marketing and incredibly convincing testimonials, I want to take your course, but I can’t find anything about what education you have to be offering the advice you are offering.
Also, one day I hope to be offering similar advice from my own website (and I’m hoping that your 7 steps to 7 figures wealth planning course will guide me to doing this). I am an engineer with a masters in psychology who recently got licensed (a month ago) to sell insurance and I’m just about to receive a license to sell mutual funds, but my heart just isn’t in it. I have NO desire to “peddle products” so I think I’m looking for an excuse to not do it.
Anyway, I really want to take your course, but I’d also really like to know a bit more about you…
thanks
CK
ColetteKenney You can learn more about my background here https://www.financialmentor.com/about-us/todd-r-tresidder
With that said, I’d be careful. Judging by your comment, you operate from a premise of “credentialization” as validation of qualification (gee, that rhymes).
I wouldn’t trust me based on my “credentials” any more than I wouldn’t trust me based on my credentials. Instead, I would suggest you listen to my podcasts and read what I’ve written. That should tell you if I can be trusted in a way that no credentials could ever do.
Judge by results – often harsh, always fair.
Hope that helps.
Age 50. Married with two kids. 14/17.
Roth 401k and Roth IRA balance is $85,000.
Traditional 401k and Traditional IRA balance is $1,400,000.
Annual contribution to Roth 401k is $18,000 and annual contribution to Traditional 401k is $12,000.
Annual contribution to Roth IRA is $6,000 (conversion annually from traditional to roth).
We will make contributions at this pace until Age 63. Inheriting $250,000 at Age 55. Pension of $2,400 per month begins at Age 65 until death.
Expect both my wife and I to start to take Social Security at Age 70. Both make $120,000 annually and will both work until Age 63. We want to retire at Age 64 with annual income of $20,000 per month. Are we on track?
golfing Good question! In fact, the question is so popular (everyone confronts it at some point) that I wrote the book “How Much Money Do I Need To Retire?” available in the sidebar to answer it at a super-affordable price point. In addition, for people that want advanced training to accelerate their goals I provide a course here https://www.financialmentor.com/educational-products/seven-steps-to-seven-figures/wealth-plan that’s all about advanced wealth planning and how to accelerate your goals. It’s very comprehensive. I hope that helps!
One question on the Ultimate Retirement calculator. What is Desired Estate ? I can’t seem to figure out it’s impact on the model.
golfing When your assets advance to perpetual growth then the effect on the model is zero, which is probably what you’re seeing. It requires the calculator to make the ending value of your assets at estimated death date equal to or greater than the specified amount. For that reason, it’s only relevant in marginal situations where you would have died with less than you’re specifying.
Hello Todd! I have followed, and admire their work. I have something in mind that I can not understand: What to say to people who have beliefs that financial education and wealth building are linked to deprivation? How to convince them that this has nothing to do with deprivation? Thank you very much!
VanessaLankoskiSilva They lack understanding. Your question would actually make a great blog post, which I will put on the to-do list. In a nutshell, you can make-more, spend less; or you can grow more, lose less. Only of those 4 dimensions involves deprivation, and deprivation is an internal experience that many serious frugalists never experience while spending less because they live by a stoic philosophy that converts the deprivation into a virtue.
So anyway, there are many ways to pursue financial independence without deprivation, and there’s only way to pursue financial independence with deprivation. I’ll expand and develop this more fully in a future blog post. Thanks for asking!
Todd,
I am 23 finishing up my master’s degree. I have recently began to realize how important financial literacy is. I have started reading many books to help. What other advice do you have? Also, when do you think 7 steps to 7 figures will be complete? I am highly interested.
Thank you
Read everything on this site. The only cost is time. Also, I provide suggested reading lists here https://www.financialmentor.com/free-stuff/best-books and a paid course for developing your personalized plan to achieve financial freedom here https://www.financialmentor.com/educational-products/seven-steps-to-seven-figures/wealth-plan This course will change your life. It’s a no-brainer purchase for anyone your age who is interested in achieving greater financial results. Hope that helps!
I’m a lifestyle blogger and a reader asked me a question that I’d like to help them with. “Is there a way to refinance parent plus loans?” They are not homeowners and have about 50k in these loans.
I know there are places where students can refinance their student loans but I don’t know of any places for parents to possibly refi and lower the interest on parent plus loans. Any thoughts?
I have no idea. Sorry I can’t be more helpful.
Hi Todd
I’m a late bloomer being 58 in March, I have a small 401k but retirement is looming soon. How can I get to a comfortable retirement income but still be to make it still growing for me? Should it be moderate or should I make it full throttle in the investment scheme or is there more ways to do it?
Thnx
Time is ticking..
You’re thinking in terms of the traditional retirement planning model, which only works with disciplined savings over an entire career. Because you’re starting late and don’t have much time you need an entirely different model. In this course https://www.financialmentor.com/educational-products/seven-steps-to-seven-figures/wealth-plan I teach 4 entirely different strategies for achieving financial freedom/retirement planning. 3 of those strategies can work for you, and the one you are focused on (the traditional model) is the only one that won’t work. Hope that resource helps! it’s the answer to your question.
My mom inherited money when her parents passed away. Based on a recommendation from an elder attorney, that money was passed directly to me and my sister in a family trust. The trust is in our names, but I am 100% responsible for handling it.
The order of priority for the proceeds of the trust are:
1) Be able to pay for any healthcare costs for my parents.
2) Be able to supplement my parents retirement, if needed.
3) Take care of my family and my sister’s family
4) Provide money to ministries
However, my goal is to really grow this money to make a difference in all of our lives and our community, beyond just earning 5% a year in an investment account.
How do I put a plan together to use the money in the trust to take care of my parents and still grow it to help me and my sister become financially independent in the future?
There’s more to answering your question than can be handled in a blog comment. It’s not the right venue to give this question the attention it deserves. In a nutshell, if your “goal is to really growth this money to make a difference” then the answer to your question is two-fold – return on investment and control spending. The control spending part is easy since you’re fully in control of what gets spent and you have clear priorities to govern the spending. However, the return on investment is more complicated. It will be answered by my Step 5 – Expectancy Investing course, but unfortunately it’s not publicly available right now. In the meantime, you’ll have to be really careful because traditional financial advisors will all want to manage your money and most will place you in a conventional asset allocation portfolio which is extremely dangerous as of this writing due to record high valuations and record low interesting rates lowering the expectancy and raising the risk over a 7-15 year time horizon. You’ll want to consider alternative strategies to the conventional wisdom to achieve your goals. So anyway, that’s probably as much as I can give in a blog comment. I hope it was helpful.
Thank you Todd. I have most of the money with an advisor, who is also an friend. I chose him because he is good at what he does and he really tries to do the right thing, even though he may be limited by his company. We talk periodically, but my main concern is what will happen when this bull market is not so bullish anymore.
The only spending I do is for tax prep and any taxes owed.
When do you feel your Step 5 course will be ready to be released?
I don’t have a firm date. I’m finishing the Step 3 course first, and then I have two other projects to complete before turning my attention to building out the Step 5 course. I’m hoping sometime in 2018, but no firm promises.
Todd,
what is your position or advice on IUL life insurance plans?
I will be writing an entire post explaining all the ins and outs in the future as I build out the life insurance education section of this site. It’s too much to explain in a blog comment, but it’s coming soon. Make sure you subscribe to the site so you get notified as soon as it’s published. Thanks for your patience.
Todd, great web site. Enjoy your financial articles. My question. The Feds probable start to reduce their balance sheet some time this year & politicians will be taking us further in debt in 2018. This sounds like a recipe for higher interest rates. What % should a 61 year old have in equity portion of a retirement portfolio? I have an appetite for risk. Buy & pray is probable not the best approach going into next year. I await your response. Thanks.
I’m glad you’re getting good value from my educational content.
Regarding your question, I don’t look at investing even remotely similar to how your question is posed. I don’t consider the news of the day, which was your first premise, in any of my investing so the implications of Fed policy toward higher interest rates has no part in my thinking. Next, all of my investing is based on mathematical expectancy so the whole premise of determining a % equity allocation based on age is equally strange to me. It simply makes no sense within the Expectancy Investing framework. It’s asking the wrong question. Finally, the whole idea of defining a client’s risk profile and then dialing up the portfolio risk so you experience it is equally bizarre. That’s like saying you can tolerate the pain of burning up to a certain temperature so now lets set you in the fire so you experience it. It makes no sense. In a nutshell, I understand your question comes from the traditional financial planning framework where you specify risk tolerances and age-based equity allocations, but I don’t believe that’s a very smart approach. In short, your question doesn’t even exist in my world. Bottom line is you’re underlying assumption is that some answer exists based on investment product selected, but the real answer exists in investment process, which is something you never asked. Nor can it even be answered adequately in a blog comment. That’s why I’ll be creating an entire course (Step 5 of 7 Steps to 7 Figures) to teach it. I’m sorry I can’t give you a better answer, but that’s as good as it gets given the question. Hope that helps.
My husband and I both lost businesses in the 2008 recession. At the same time, we suffered a 50% loss in the value of our retirement savings. We have spent the better part of the last decade building up new businesses and getting retirement back on track. We will both be 50 years old next year, and we have about 50% of our savings in the market now (mostly equity index funds), but still have about half in cash. We are finding it difficult to go all-in with the market at all-time highs. I guess we fear taking another huge loss as our time horizon gets shorter. With that said, we also know that we need to shoot for 8% returns to make our retirement goals work out, and sitting on a big cash percentage is a near-guarantee of failing to get the return we need.
In light of the market’s 2017 performance and day after day of record closings, would you recommend that we gradually average in the rest of our cash position, would you sit at 50/50 and wait for a correction for a buying opportunity, or would you just fully invest today in our target allocation?
I get questions similar to this frequently, and they always make the same incorrect assumption. In a nutshell, I advocate active risk management (not passive acceptance of market risk), particularly from points of high market valuation/low interest rates. I do not believe it’s wise to blindly accept market risk at all points in time, and history supports that conclusion. You can see it in your own short history investing (as well as your fear about the future), and you can see it clearly in long term history as well. So anyway, I believe you’re asking the wrong question. It’s not whether or not you should average into an all equity position or retain 50% cash, but rather, how are you managing the risk in your equity position to maintain positive expectancy despite high valuations/low interest rates? In the future I’ll have the Step 5 Expectancy Investing course which will provide you with the answer to that question. Unfortunately, for now, all I can do is point you in the right direction until that course is available. I hope that helps.
Hi Todd, I am a new investor as I spent the last 4 years digging my way out of debt and changing habits. For the first time ever I am maxing out my retirement accounts. I just read your article, “Bubbles, Bubbles Everywhere – How to Protect Yourself”, and I am wanting to understand risk management better. I am highly interested in the mini-course on investment risk management that you are completing. However, can you give me any actionable tips prior to that course being available?
Congratulations on all your progress in both getting out of debt and continuing forward movement by entering the wealth building stage.
Regarding your question, I could spend hours personally giving you the tips or I could spend those same hours moving the course forward so it can benefit many thousands. There were clear action steps at the end of the bubbles article and the paid course has a full explanation if you would like to accelerate your learning. Given the stage that you’re at it in your financial growth process it would be a no-brainer for you to purchase the paid course. There’s almost no way it won’t put far more money in your pocket than it cost you. I have multi-millionaires and very successful people in the course wishing they had learned what’s in that course 20-30 years earlier because they could have dramatically accelerated their financial growth.
Hope that helps!
Fair enough. Are you able to give a projection on when the mini-course on risk management might be available? That will help me decide if I want to wait or take the one you have available now.
Thank you, Todd.
I’m guessing 2-3 months, but everything takes me twice as long and costs twice as much as I guess. With that said, the Step 3 Expectancy Wealth Planning course is its own value proposition. In other words, the risk management section is just one part of what’s taught in that course. I would encourage you to read the sales letter to better understand what promise the course delivers and what problems it solves in the wealth building process so you can decide if that value proposition is something that would help you.
Todd, assuming CD rates are going up, lets say they hit 5% in the next couple of years, would it be better to pay off a 4% mortgage or invest in the cd assuming you have no other debt, you have adequate safety reserves etc. I was thinking if you paid off you mortgage, you could open an account and invest at low risk each month by making your prior house payment into that newly opened account. thoughts?
There’s a “math” answer, that you can figure on a spreadsheet with total precision based on a given set of assumptions. There’s also an emotional answer about your preference for growing assets vs. paying off debt as explained in my related post here https://www.financialmentor.com/investment-advice/pay-off-mortgage-early-or-invest/7478, and there’s one more issue…
However, there’s also a problem… You should never invest money based on a forecast about the future, which is what your questions implies. All investments must makes sense based on the facts as known today, not guesstimates about an unknowable future.
Hope that helps!
Todd, I recently left a large company after several decades and I’m now with another company. The old company still has a traditional pension benefit. Additionally, now that I’ve left the company I have the option of taking a lump sum distribution now or taking the pension in a few years when I retire.
The options I’m weighing are:
1. Leave the money with the old company and take a traditional pension when I retire in a few years.
2. Take the lump sum now and invest it as part of my portfolio.
3. Take the lump sum now and purchase some Deferred Annuities. This would generate less guaranteed income than the pension, but reduce the risk of losing the income due to the company going bankrupt or defaulting on the pension (which I deem to be a low, but not negligible, risk).
Do you have any articles or advice on how to evaluate those options?
I have not written the article yet, but I need to. There are 3 layers to the analysis. The first layer is just figuring the net present value of each alternative, which is fairly straightforward (use my free calculators on this site). The second layer has to do with how each investment alternative affects the risk profile of your overall portfolio. For example, some people might prefer an annuity for diversification, even if lower present value, because of the diversification benefit against the rest of their portfolio. Finally, you have to make it personal and decide what best fits your personal needs. Sometimes this factor will outweigh the financial implications. Again, there’s more to explain in a fully developed article, but that’s the process in a nutshell. Hope that helps!
Todd, I am 54, and have despised debt most of my life. I have a decent income (150k+), paid for cars, paid for house…really no debt at all. I have about 1.5 million in retirement funds (rollover 40k, roth, defferred comp). My goal is to retire in 5-6 years. I have been an active investor for awhile, but by no means an expert. What stage would you recommend I start at?
My Expectancy Wealth Planning course here https://www.financialmentor.com/educational-products/seven-steps-to-seven-figures/wealth-plan would be the perfect next step. You’ll walk away knowing with confidence how much you need for your financial goals based on different investment strategies and how those strategies impact both the quality of life you want to lead in the next phase of your life, and how much assets are required to support that lifestyle. This is the course that will tie everything together with a bow. Hope that helps!
Todd, I am a medical student, and I was wondering if you know which specialties of physicians have the most financial freedom or at least align more with your wealth building/wealth management model. Should I go private practice? Do you know of any specific personal resources/books related to physician finances?
WhiteCoatInvestor and PhysicianOnFire are both popular sites in this area, although I have not followed either of their work and know nothing about their message. I just know they’re both popular for the physician/financial freedom crossover. Hope that helps.
Todd,
I’d like to know what books have you been reading or have been on your Kindle list YTD? So many new releases, so little time.
On an unrelated note, I think I saw you traverse Reno at one point last month?
I’ve been reading a variety of books lately – mostly related to Buddhism, Stoicism, and global warming/environmental issues.
I have 150000 that I would like to roll over from a DROP account into something safe that will keep pace with inflation and have a little liquidity. I have been to a financial advisor. He wants to fund a mutual fund plus open CD for the liquidity. Mutual fund entry fee is 5500.00 plus 25 base points. his fee 1.50 for hands-on or 0.25 fee for once a quarter checkup.
Multiple research studies show that low fees is the number one determinant of long term outperformance. Those fees absolutely don’t qualify as low. Hope that helps.
Todd,
I was wondering what is your opinion on deliberate practice.
Is it essential to building wealth and subsequent financial freedom?
If so, could you give an example?
Deliberate practice is to personal success what compound return is to financial success. They are different applications demonstrating the same principle – how you compound small gains into large gains over time.
Several months ago, I began whole life “bank on yourself” insurance policies for my wife and myself. I am now finding — after some unexpected and unbudgeted expenses — that the monthly premiums are too high and leave my bank account almost drained at the end of the month. I could recapture $900+/month by going back to term life policies. Should I drop the “bank on yourself” whole life insurance? My wife and are are in our mid-40s with 3 kids.
I can’t give personalized financial advice by law (tell you personally what to do), but I can’t tell you that I don’t know of anyone who built their wealth playing the “bank on yourself” game. Not one. It wouldn’t even be on my radar except for the fact that so many people without wealth keep asking about it. I’ve had no choice but to learn more about it. In a nutshell, I’m not a fan of whole life insurance except in extremely specialized/rare circumstances. You can read my complete analysis of whole life insurance here https://www.financialmentor.com/financial-advice/life-insurance/whole-life-insurance/19216 I hope those educational resources help you clarify your decision.
Is it unreasonable or reckless, at 61, when living expenses will be covered by fixed income in retirement , to have deferred and taxable portfolios at 85/15 stock funds/bonds?
The law prohibits me from giving personalized financial advice. I operate under the education exemption in the advisory laws so I can only provide generalized educational instruction. That means nothing specific to any one person’s financial situation. Additionally, a decision this important should be managed correctly by seeking the advice of a qualified professional. I don’t know enough about your individual situation to provide a well-reasoned answer. Providing specific guidance in a blog post response would disrespect the importance of the decision. I hope that helps.
I have a question about the use of the Ultimate Retirement Calculator on your site. You offer a location to put in one-time lump sums. However, I think your model provides for a tax effect on the money received. What if there is no tax consequence or based on a limited amount of the money received? How to you eliminate the taxes on your calculator? I will receive trust money when my parents pass for their trust and I am a direct beneficiary in a trust my father set up. There maybe some income on investments at the point of distribution, but I don’t believe the principal will be taxed. Can that be changed in your model?
You can adjust the amount you enter to either be before tax or after tax. You determine the amount entered, so raise it or lower to fit your needs based on how you want it reflected in the calculation net of tax.
Todd, I found your site via AllocateSmartly. I was wondering where on your site I can find information on your strategies that they track. Do you offer access to them for prospective investors? Thanks.
The only access to my investment strategies is that which is posted on AllocateSmartly. My affiliate link is https://allocatesmartly.com?aff=7204 Using that affiliate link when you subscribe won’t cost you any extra, but it means you’ll automatically get my entire email course (it’s massive education) teaching you how to use tactical asset allocation the right way, potholes to avoid, my preferred systems, and much more.
Todd, I received your LEVERAGE course as a gift & it is SPOT ON! I love reading it. Thank you for sharing your work with Clients & Pastors. Now the problem? The link to your freebies within the course won’t work on iPhones 7 Safari? Should I try to use something else for a browser? Thank you again & God Bless ???
Yeah, I don’t use Apple products. Use something else. Thank you!
Hey Todd! I read about your Optimum3 portfolio on allocatesmartly, is there a place where I can learn a bit more about it here?
I shared a couple of my systems to Allocate Smartly so my students/subscribers could use those systems in their portfolios. My agreement with Allocate Smartly is that those systems would remain undisclosed. The only disclosures available are what Allocate Smartly already published. In addition, you can learn how I analyze and develop tactical asset allocation systems by subscribing to Allocate Smartly using my affiliate link https://allocatesmartly.com?aff=7204 Purchasing your subscription as my affiliate will bring you a massive education series about the tricks and tips of tactical asset allocation that multiple people have told me is better than any book they’ve read on the subject. That education series for affiliated subscribers is the only information resource I”m providing. Hope that helps.
I’d like some advice on credit cards please. I’d like to get one to build credit, never been good with finances so all the terms really confuse me and I’m not sure what’s good and what isn’t.
@patrick Godfrey
There’s some really good, free material online explaining the basics of credit cards and building credit. This is not something I teach since my focus is advanced investment strategy and advanced retirement planning strategy and wealth building. Many others teach the credit card subject, and their information is a just a quick Google search away. Hope that helps!