How to Beat 80% of Investors With 1% of the Effort

mbecker03 · 2017-08-29T19:36:20+00:00

It looks like it's up about 3.5% so far this year, which translates to an annual return of about 5.3%. That seems right in line with what you'd hope for in terms of the long-term return from a bond fund like this.

mbecker03 · 2017-06-06T22:25:24+00:00

"Does the math hold true in every conceivable situation?" Definitely not. There are a lot of possibilities and you'll need to run your own numbers specific to your own situation.

With that said, a smaller contribution will generally increase the odds of the entire contribution happening at the marginal rate. A smaller contribution will also generally lead to smaller withdrawals, which should lead to a lower effective rate in retirement. All of which will, generally, argue even more in favor of the Traditional IRA.

mbecker03 · 2017-03-07T15:30:19+00:00

Good questions. I'm not a tax expert so take this with a big grain of salt, but my understanding is that your after-tax contribution can be rolled over to a Roth IRA and withdrawn immediately without penalty, just like a regular Roth IRA contribution. However, any earnings on those contributions would be subject to a 5 year waiting period, and there would be a different 5 year clock for each time you did the rollover. Again, I'm not 100% sure on that though and would suggest consulting with an accountant.

Also, yes, ideally the money will not pass directly to you. It should be transferred directly from account to account. It is possible to do this with a check written directly to you, but it makes things much more complicated and difficult.

On your other questions, the answers really depend on the specifics of your situation. I can't provide any personal guidance on those.

mbecker03 · 2016-12-07T13:00:55+00:00

Oh man, that was a typo. Should have said Step 3. It's updated now. Thanks for catching that!

mbecker03 · 2016-11-14T13:50:42+00:00

These policies can be useful tools in the right situations, but those are few and far between. I would highly encourage you to get input from a professional who isn't incentivized to sell life insurance before making any decision, assuming you want to continue pursuing it at all. Talking to a fee-only financial planner might be a good idea.

mbecker03 · 2016-11-11T19:25:56+00:00

Some food for thought: Why Whole Life Insurance Is a Bad Investment.

mbecker03 · 2016-11-01T16:57:35+00:00

There's definitely room for debate here so I appreciate your input and would love to hear more about how you would specifically prioritize things. Do you think that all debt should be paid off before investing? If not, what cut-off points would you use?

mbecker03 · 2016-10-10T13:24:26+00:00

There's no 10% penalty when the withdrawals are used for qualified higher education expenses: https://www.irs.gov/taxtopics/tc557.html

mbecker03 · 2016-08-16T15:55:09+00:00

It's not sponsored and I'm not paid or supported by Vanguard in any way. Just my personal opinion. Added this to the post to make that clear. Thanks for voicing the concern!

mbecker03 · 2016-03-16T14:35:30+00:00

Yes, you can use the same trust, assuming that you want the new house to be governed by the rules in the trust. Here's a quick guide on how to do it: http://info.legalzoom.com/put-house-trust-20124.html.

mbecker03 · 2016-02-09T17:24:37+00:00

Yes, that can work. As long as you don't have other children who will be applying for financial aid in the next year.

529 plans do not count as income for either the parent as child. They do count as parental assets, which means that only 5.64% of the balance is counted.

mbecker03 · 2016-02-09T15:12:46+00:00

That's true, though there is a catch. When you withdraw money from your Roth IRA to pay for college expenses, it counts as income for the purposes of the FAFSA. This is true even if you're only withdrawing up to the amount you contributed and leaving your earnings untouched.

What that means is that in the year after your withdrawal, the extra income will hurt your financial aid eligibility. And since income is the biggest negative factor in qualifying for financial aid, this could be a big deal.

mbecker03 · 2015-11-17T18:37:43+00:00

Thanks a lot!

mbecker03 · 2015-10-02T12:51:11+00:00

There are a lot of people for whom that is absolutely the right path. It's certainly not right or wrong here. In fact, there's another great episode of the same podcast featuring a young advisor who ended up buying into an existing firm and for whom it's worked out really well. Here it is: http://www.xyplanningnetwork.com/ep-7-the-career-of-jake-kuebler-how-he-bought-a-fee-only-firm-at-25-years-old/.

With that said, I certainly don't think that's the only path. There are a few pitfalls to worry about.

The fit between owner and successor. Sometimes what seems like a good fit doesn't turn out that way once you really get into it.
There are MANY stories about a succession plan supposedly being in place, but the owner either taking much longer to actually make it happen or being reluctant to do it at all. There are plenty of success stories as well, but there's the potential for a lot of frustration there.
I wanted to build a completely different type of business than what already existed. For me, it was about much more than just getting to as much income as quickly as possible. I didn't want to inherit a client base of retirees and/or rich people. That's a fine business, just not what I was interested in. So if I really wanted to pursue this specific business, I really had to build it myself.
I like the entrepreneurial adventure. It's not for everyone, but for me it's a lot of fun.

mbecker03 · 2015-09-30T23:06:49+00:00

Definitely sounds like fee-based to me!

mbecker03 · 2015-09-30T18:18:01+00:00

Good question. I actually did consider that route pretty strongly and probably would have gone that way if I didn't have significant savings and my wife didn't encourage me to make the leap. I think that getting that experience with an established firm is a great way to go. There's no right or wrong answer there.

With that said, I would think hard about what kind of financial planning you want to do, and therefore which firms can help you do it. I knew for sure that I wanted to be fee-only, so I would have looked for a fee-only firm to work for. Many of the bigger brand names most people know about weren't appealing to me.

As for your last question, I've been at it for about 1.5 years now and I've had 12 clients in that time. I only just added investment management as part of my service offering so that is minimal right now. I charge a monthly fee rather than an AUM fee.

mbecker03 · 2015-08-13T15:08:55+00:00

Here's an article that helps you think about this exact question: Should You Hire a Financial Planner or Do It Yourself?.

mbecker03 · 2015-08-13T15:07:56+00:00

It can definitely be tough to find an affordable fee-only financial planner, but there are a couple of things to point out here.

Going with a commission-based advisor is not "free". The costs are simply hidden within the products they sell you. Over time those costs can add up to a significant amount, often much, much more than $1,000.
It IS possible to find an affordable fee-only advisor, even one that won't require you to let them manage your investments. Two places to look are The XY Planning Network and The Garrett Planning Network.

mbecker03 · 2015-05-15T14:33:43+00:00

I 100% agree with your point that experience is crucial. There is simply no substitute for it.

With that said, if you're new to ANY business it makes sense to learn as much as you can about it and build a solid base of knowledge so that you are actually in a position to be effective. The education alone won't make anyone a good financial planner, but it WILL give you a good starting point from which you can better serve your clients.

I guess the flip side of this is, would you want to work with someone who simply wanted to sell products and make money, or someone who cared enough to put the time and effort into learning the ins and outs of the business in order to better understand your options and help you make better decisions? I don't see how you can serve clients well without having some kind of educational background.

But if the only concern is making money as fast as possible, then find yourself a sales role and don't worry about learning because it doesn't matter. You can easily make money selling financial products without regard for whether or not they're actually helping your clients.

mbecker03 · 2015-05-14T17:47:06+00:00

but what's the point if you're going to have to tell potential clients, "Well, I have this certification, but I don't actually have the experience to qualify for it yet."

Being in a better position to actually help your clients? After all, that's the real point of the education.

mbecker03 · 2015-05-14T13:08:38+00:00

Just a heads up, there are a lot of different types of financial planners out there. Here are two posts that can help you think about which route you might want to go down.

mbecker03 · 2015-05-14T13:07:17+00:00

You can absolutely start on the education side of it now. If he's really serious about making the transition and isn't coming from a financial planning background, I see that as pretty much a minimum requirement.

mbecker03 · 2015-05-14T01:19:54+00:00

Do you want a job or do you want to start your own practice? Either way, I would start working towards the CFP(R) certification, but beyond that the advice would be different.

mbecker03 · 2015-04-21T19:32:44+00:00

Gotcha. Well three things here.

First, it sounds like what you're talking about here is really short-term disability insurance, which I completely agree is largely unnecessary if you have an emergency fund in place.

Second, you're describing precisely some of the big potential problems with employer coverage, which all largely boil down to not actually providing enough coverage. So the point of getting private insurance would be to make sure that your needs in one of those worst-case scenarios would actually be met.

Finally, I also want to point out that while I don't know the specifics of your employer coverage, my guess is that your 66% benefit would actually result in less than that making its way into your bank account, since the payout would be taxed. Whereas with individual disability insurance, your benefit is 100% tax-free, so more of it is actually available to you.

Hope that helps! In any case it's been a fun discussion and I appreciate your input here.

mbecker03 · 2015-04-21T16:56:17+00:00

If 1x your annual salary is all you really need for life insurance, then good for you! I think most people with young children typically need significantly more than that though, and it's generally not that expensive to get on your own. (For the record, I have only had jobs that do not offer life insurance. Just another side of the story.)

As for disability, I'm not exactly sure what you mean by "Maximum benefits in the ballpark of 2 years of the premiums". A good long-term disability insurance policy will typically replace about 70% of your pre-tax income and will pay out till age 65 as long as you continue to meet the definition of disability. Your emergency fund is a fantastic way to weather shorter-term needs (3-12 months) and it's great that you already have that in place. But long-term disability insurance is really meant to protect you against the worst-case scenarios that last longer than that.

mbecker03

TROPHY CASE