Loved this HOWEVER! If you keep your old 401k with an old employer you ARE losing something. Per Kelly Klingaman, CFP®, RLP®:
“When you rollover old 401k and HSA money into your current plans, this means you’re no longer paying what are often excessive administrative & management fees on the old accounts that your prior employer used to cover for you when you worked there 💸” - Kelly Klingaman, CFP®, RLP®
You also have no control over how that 401k is invested and would have more control if you rolled it into an IRA. So even though it’s a pain, it’s worth rolling over an old 401k to either your current employer’s plan or an IRA. Save it for a really rainy day.
Good points. Having control in what you're invested in is extremely underrated, and something I think will become much more popular over the coming decades.
A few scattered thoughts about the ex-US diversification question and the financial zeitgeist of investing in the US stock market (the 'least bad' option).
Investing in an SP 500 index fund has been seen as the best safe option for both US and international exposure, since a significant portion of earnings of the 500 largest US corporations are from international sources. I don't know if that will continue into the future, as a) geographical regions decouple, and b) the US™ brand continues to tarnish (I think this has been the case for years, regardless of administration, due to our national brand of gangster capitalism, increasingly turning bellicose). Investing in something like VXUS would solve some of that but seems like it's still a risk, being a dollar denominated asset tied to an institution like Vanguard.
A more radical option I've personally started exploring is exercising my nationality options and becoming a dual/multi-citizen. This bypasses issues of a) dollar denomination, b) institutional/governmental barriers (because US reporting requirements are usually among the most headache-inducing for international investing), and c) provides a pathway to hedge your bets on other regions of the world without being tied to the state of American affairs abroad.
In my case, I became a Mexican citizen by descent last month, which opens several doors. For one, it solves that ever-present dread of American healthcare with access to an actual universal option for preventative healthcare. (Goodbye ridiculously expensive surprise bill, months later, for the 3M popsicle stick the nurse used during the annual checkup, which you thought was completely covered by your wonderful company PPO - true story). Additionally, some countries have favorable citizen pathways that are not available to Americans (or will become increasingly harder to do, see geopolitics). Mexicans have a two-year pathway to Spanish citizenship; dramatically shorter than the 10-year timeline available to mono-national Americans in most circumstances.
I would encourage anybody to look into what options they have by descent, or favorable residency options that work with their timeline, lifestyle, tax situation, and personal philosophy. Not everybody has the 'royal flush' options of Irish, Spanish, or UAE citizenship and passport. Regardless, finding your options is the first crucial mental exercise of starting to think out of the American 'financial advice' sandbox I think we all have been conditioned into from the moment we heard the name 'Dave Ramsey'.
Thanks for putting a disclaimer early on that this was for people who have extra money. As a poor, I just saw myself out of there to save my time reading about what to do with extra money I sure don’t have. 🫡
I look forward to reading this in full. Thanks for assembling this info.
Scrolled to overview topics and one thing caught my eye. Paying for financial advice at or in retirement is probably a good thing for lots of folks as is the notion of withdrawing four percent yearly to not run out of retirement money.
There are also investors who do what they believe works better for them. Retired for eight years, all Vanguard. Currently my IRA (no contributions post-retirement) is worth twenty percent more than the day I quit working and I've been drawing five and a half percent per year. Also have a money market with Vanguard that holds three-ish years living expenses. Have yet to pay for advice. The point? Conventional wisdom may limit your options. Do some research on where you want your money and don't follow trends. I own the same three mutual funds I've had for years.
"Conventional wisdom" may be way conservative for those that want to spend relatively freely post working years.
The ‘conventional wisdom’ is four percent of your starting balance per year, adjusted annually (thus compounding) with inflation - a subtle, but important distinction. It may sound conservative, but it’s built to survive market downturns like the dot-com bubble an the financial crisis over a 30yr retirement horizon.
Great point. And there's over a 95% chance the index will be positive over a 10 year period as well. Great odds, especially with a dollar cost averaging strategy along the decade.
I agree that most are better off being self-directed investors. As a retail trader and investor since day 1, I playfully "bashed" financial advisors for a long time.
But I have some friends in the business, and they politely helped explain that they provide more than just investment ideas. They plan for college, deaths, vacations, emergency expenses, life-insurance, etc for busy individuals that don't have time or interest to dig into it themselves.
That helped me see more value in the industry, but ultimately, there's no better feeling than having control and understanding your own financial life.
What are your thoughts on purchasing a small business? There are several companies out there selling tools and communities to help you purchase a small business to provide either all income, additional income, investment opps. I can’t tell if they are legit or my media feeds have been over run by them.
I've thought about this too. It's interesting from a pure sense of diversifying into something that isn't correlated to anything else that I'm currently doing. Maybe a dry cleaner or a car-wash for example.
But then I think about how important it is to be passionate about what you are doing and building. I just don't have the passion for businesses like that. But I'm trying to keep an open mind as well!
Great post, we all have a different risk profile. And I find that it's really difficult to find what your true risk tolerance is until you've experienced some bad times with your investments.
It's easy to say you can handle a 50% Bitcoin crash for example, but it's another thing to live through it. Once we finally experience these things is when we really start understanding our true risk tolerance.
And then to make it harder... that all changes with age and circumstances!
I love the wording of choosing the best imperfect option for the life you're actually trying to build.
Loved this so much! A question I was hoping to see is about managing a windfall. I'm expecting a stock buyout equal to about 80% of my annual base salary. What to do? Thought about paying off my mortgage but the rate is below 3% and I already have over 2x what I owe in equity. Seems better to set up a donor-advised charity fund to offset taxes and invest the rest. Any thoughts?
I think you should talk to a flat-fee CFP about your options. I don’t work with them or have any affiliation with them, but you can find advisors for hourly investment/planning advice at Nectarine: https://hellonectarine.com
I miss your voice talking about finance in my ear 💚
Loved this HOWEVER! If you keep your old 401k with an old employer you ARE losing something. Per Kelly Klingaman, CFP®, RLP®:
“When you rollover old 401k and HSA money into your current plans, this means you’re no longer paying what are often excessive administrative & management fees on the old accounts that your prior employer used to cover for you when you worked there 💸” - Kelly Klingaman, CFP®, RLP®
You also have no control over how that 401k is invested and would have more control if you rolled it into an IRA. So even though it’s a pain, it’s worth rolling over an old 401k to either your current employer’s plan or an IRA. Save it for a really rainy day.
Good points. Having control in what you're invested in is extremely underrated, and something I think will become much more popular over the coming decades.
Salivating for a Diabolical Lies episode on what a Caro/Katie utopia looks like.
I loved today's newsletter. The Q&A was ultra-engaging and answered questions I've pondered, and some I hadn't thought to ask. Thanks for sharing!
A few scattered thoughts about the ex-US diversification question and the financial zeitgeist of investing in the US stock market (the 'least bad' option).
Investing in an SP 500 index fund has been seen as the best safe option for both US and international exposure, since a significant portion of earnings of the 500 largest US corporations are from international sources. I don't know if that will continue into the future, as a) geographical regions decouple, and b) the US™ brand continues to tarnish (I think this has been the case for years, regardless of administration, due to our national brand of gangster capitalism, increasingly turning bellicose). Investing in something like VXUS would solve some of that but seems like it's still a risk, being a dollar denominated asset tied to an institution like Vanguard.
A more radical option I've personally started exploring is exercising my nationality options and becoming a dual/multi-citizen. This bypasses issues of a) dollar denomination, b) institutional/governmental barriers (because US reporting requirements are usually among the most headache-inducing for international investing), and c) provides a pathway to hedge your bets on other regions of the world without being tied to the state of American affairs abroad.
In my case, I became a Mexican citizen by descent last month, which opens several doors. For one, it solves that ever-present dread of American healthcare with access to an actual universal option for preventative healthcare. (Goodbye ridiculously expensive surprise bill, months later, for the 3M popsicle stick the nurse used during the annual checkup, which you thought was completely covered by your wonderful company PPO - true story). Additionally, some countries have favorable citizen pathways that are not available to Americans (or will become increasingly harder to do, see geopolitics). Mexicans have a two-year pathway to Spanish citizenship; dramatically shorter than the 10-year timeline available to mono-national Americans in most circumstances.
I would encourage anybody to look into what options they have by descent, or favorable residency options that work with their timeline, lifestyle, tax situation, and personal philosophy. Not everybody has the 'royal flush' options of Irish, Spanish, or UAE citizenship and passport. Regardless, finding your options is the first crucial mental exercise of starting to think out of the American 'financial advice' sandbox I think we all have been conditioned into from the moment we heard the name 'Dave Ramsey'.
Maybe even Puerto Rico, which has no capital gains tax if you can establish residency.
Love all your thoughts...especially the origami cats!
i liked this newsletter and the rapid fire Q&A.
Thanks for putting a disclaimer early on that this was for people who have extra money. As a poor, I just saw myself out of there to save my time reading about what to do with extra money I sure don’t have. 🫡
Totes agree on all counts. *hat tip*
"kosher since I own the copyright, right? Whatever."
Girl you kill me 😂
I look forward to reading this in full. Thanks for assembling this info.
Scrolled to overview topics and one thing caught my eye. Paying for financial advice at or in retirement is probably a good thing for lots of folks as is the notion of withdrawing four percent yearly to not run out of retirement money.
There are also investors who do what they believe works better for them. Retired for eight years, all Vanguard. Currently my IRA (no contributions post-retirement) is worth twenty percent more than the day I quit working and I've been drawing five and a half percent per year. Also have a money market with Vanguard that holds three-ish years living expenses. Have yet to pay for advice. The point? Conventional wisdom may limit your options. Do some research on where you want your money and don't follow trends. I own the same three mutual funds I've had for years.
"Conventional wisdom" may be way conservative for those that want to spend relatively freely post working years.
The ‘conventional wisdom’ is four percent of your starting balance per year, adjusted annually (thus compounding) with inflation - a subtle, but important distinction. It may sound conservative, but it’s built to survive market downturns like the dot-com bubble an the financial crisis over a 30yr retirement horizon.
Great point. And there's over a 95% chance the index will be positive over a 10 year period as well. Great odds, especially with a dollar cost averaging strategy along the decade.
I agree that most are better off being self-directed investors. As a retail trader and investor since day 1, I playfully "bashed" financial advisors for a long time.
But I have some friends in the business, and they politely helped explain that they provide more than just investment ideas. They plan for college, deaths, vacations, emergency expenses, life-insurance, etc for busy individuals that don't have time or interest to dig into it themselves.
That helped me see more value in the industry, but ultimately, there's no better feeling than having control and understanding your own financial life.
Great post! I love your thought process and that you explain it so well. You really are a very talented writer.
What are your thoughts on purchasing a small business? There are several companies out there selling tools and communities to help you purchase a small business to provide either all income, additional income, investment opps. I can’t tell if they are legit or my media feeds have been over run by them.
she has covered this in prev MwK episodes! she almost bought a cleaning company and took us along for the ride: https://open.spotify.com/episode/2Jiv8OSNEp577xNDNKilpO?si=-z7ufn__RxqisvKFwmG0pQ
I've thought about this too. It's interesting from a pure sense of diversifying into something that isn't correlated to anything else that I'm currently doing. Maybe a dry cleaner or a car-wash for example.
But then I think about how important it is to be passionate about what you are doing and building. I just don't have the passion for businesses like that. But I'm trying to keep an open mind as well!
Great post, we all have a different risk profile. And I find that it's really difficult to find what your true risk tolerance is until you've experienced some bad times with your investments.
It's easy to say you can handle a 50% Bitcoin crash for example, but it's another thing to live through it. Once we finally experience these things is when we really start understanding our true risk tolerance.
And then to make it harder... that all changes with age and circumstances!
I love the wording of choosing the best imperfect option for the life you're actually trying to build.
Excited to read your thoughts on the morality of wealth accumulation!!
Loved this so much! A question I was hoping to see is about managing a windfall. I'm expecting a stock buyout equal to about 80% of my annual base salary. What to do? Thought about paying off my mortgage but the rate is below 3% and I already have over 2x what I owe in equity. Seems better to set up a donor-advised charity fund to offset taxes and invest the rest. Any thoughts?
I think you should talk to a flat-fee CFP about your options. I don’t work with them or have any affiliation with them, but you can find advisors for hourly investment/planning advice at Nectarine: https://hellonectarine.com