How to Money Podcast Episode Summary

Title: Ask HTM - Early Retirement Target Date Funds, Frugal Personal Hygiene, & Coercive House Painting #991
Hosts: Joel and Matt
Release Date: June 2, 2025
Publisher: iHeartPodcasts

In Episode #991 of "How to Money," hosts Joel and Matt delve into listener inquiries surrounding early retirement strategies, frugal personal hygiene practices, and navigating insurance company demands related to home maintenance. This comprehensive discussion offers actionable financial advice, blending practical tips with engaging dialogue.

1. Early Retirement and Target Date Funds

Timestamp: [02:23] – [07:38]

Discussion Overview: Joel and Matt kick off the episode by addressing a listener's concern about using target date funds (TDFs) for early retirement. They critically examine newly launched FIRE-specific ETFs (Exchange-Traded Funds) and their suitability for individuals aiming to retire before the traditional age.

Key Points:

• Critique of FIRE-Specific ETFs:

  • Joel highlights the high expense ratios of new FIRE-specific ETFs, noting rates of 0.67% and 0.89%, which are significantly higher than those of traditional low-cost index funds (typically around 0.02% to 0.3%).
  • Joel (04:27): “The expense ratios on these couple of fire funds that were just launched are 0.67% and 0.89%. Almost a full percentage.”

• Investment Philosophy Alignment:

  • The hosts argue that the investment philosophy of the FIRE community generally favors low-cost index funds or real estate, which offer better long-term growth due to lower fees.
  • Matt (04:25): “Every single year being taken out.”

• Suitability for Early Retirement:

  • For listeners like Bree, who aim to retire at 55 instead of the TDF’s projected retirement at 64, Joel and Matt suggest maintaining or increasing stock exposure rather than switching to an earlier target date fund with higher fees.
  • Joel (05:10): "I think it’s just kind of fascinating. This company launched, they're catering to... the expense ratios are kind of ridiculous in these funds."

Conclusion: Joel and Matt conclude that while TDFs can be useful for simplifying retirement investments, their high fees make them unsuitable for those pursuing early retirement. Instead, they advocate for low-cost, aggressive investment strategies to maximize returns over a longer horizon.

2. Listener Question: Bree on Target Date Funds

Timestamp: [08:10] – [19:11]

Question: Bree from Illinois asks whether she should switch her 401k from a target date fund planning for retirement at 64 to one targeting retirement at 55, considering her goal to retire early and possibly work part-time thereafter.

Hosts' Response:

• Understanding TDFs:

  • Matt explains the basics of TDFs, emphasizing their "set it and forget it" nature, which can be both a strength and a limitation.
  • Matt (09:31): “So make sure you choose the index.”

• Expense Ratios and Performance:

  • Joel reiterates the importance of low expense ratios and how higher fees can erode long-term investment growth.
  • Joel (10:05): "So make sure you choose the index because that the actively managed comes with that. I mean I think it's around a half a percent higher expense ratio associated with that."

• Tailoring Investments to Goals:

  • They suggest that Bree should consider her long-term drawdown timeline rather than just her retirement date. Since she plans to retire at 55 but continue working part-time, allocating funds to a later target date fund (e.g., 2065) might better align with her broader financial goals.
  • Matt (15:33): “So what you're considering moving to is a 2065 Target Date Fund, something that does have a longer runway in order for you to have that exposure to the stocks, which is going to lead to higher returns for you.”

• Flexibility and Combined Strategies:

  • Joel and Matt discuss the possibility of combining TDFs with low-cost index funds to balance simplicity with higher growth potential.
  • Joel (19:41): “I actually think you can do both and I think it can make sense.”

Notable Quotes:

• Joel (10:18): “Significant difference.”
• Matt (12:22): “Yeah. It’s too conservative for younger investors.”

Conclusion: The hosts advise Bree to avoid switching to an earlier TDF with higher fees and instead maintain or adjust her current investment strategy to include more aggressive, low-cost index funds. This approach supports her early retirement goals by maximizing investment growth over a longer period.

3. Frugal Personal Hygiene: Nate’s Razor Dilemma

Timestamp: [24:31] – [35:24]

Question: Nate from Texas describes a situation where he found a 12-pack of a different razor model priced at $20, compared to his usual $45 pack. He debates whether purchasing the cheaper option was frugal (smart saving) or cheap (compromising quality and fairness).

Hosts' Response:

• Evaluating Cost vs. Quality:

  • Joel and Matt discuss the importance of balancing cost savings with product quality. They note that while bulk purchases can reduce per-unit costs, the experience and longevity of the product are crucial.
  • Joel (26:16): “When you buy like the three pack or something like that, you're definitely overpaying per razor.”

• Practical Frugality Tips:

  • Matt shares his experience with different razor brands, pointing out that cheaper alternatives might lead to a less satisfactory shave and more frequent replacements if quality suffers.
  • Matt (26:56): “They are lower quality than before that I had Harry's, you know, the Harry's razors or whatever.”

• Ethical Considerations:

  • The discussion touches on whether exploiting pricing errors constitutes being frugal or crossing into unethical behavior. The hosts lean towards seeing it as a smart saving strategy, especially if the store honors price discrepancies.
  • Joel (28:38): “I think he's overthinking it. I mean, he seemed...”

• Alternative Solutions:

  • They suggest experimenting with even cheaper options like straight razors or maintaining proper razor maintenance to extend their lifespan, thereby maximizing savings without compromising quality.
  • Matt (34:21): “So what is Nate paying? He could have gone straight razor for five cents per razor.”

Notable Quotes:

• Matt (27:09): “It doesn't have that three-dimensional aspect that you get out of some of the better quads or some of the better stouts.”
• Joel (28:05): “Does my ethics need a tune up? I see a deal. If I see something marked like that on the shelf and I'm pouncing like, I am 100% saying, yeah, no, no problem.”

Conclusion: Joel and Matt conclude that Nate's decision to opt for the cheaper razors was frugal rather than cheap, provided that the product meets his basic needs. They encourage listeners to balance cost savings with quality and to explore additional strategies for maximizing savings without sacrificing performance.

4. Dealing with Insurance Company Demands: Catherine’s House Painting Issue

Timestamp: [49:25] – [56:42]

Question: Catherine shares her frustration over receiving a notice from her insurance company demanding she complete several tasks—such as removing yard debris, cutting back vegetation, painting her house a single color, and trimming tree branches—to retain her insurance coverage.

Hosts' Response:

• Assessing Insurance Requirements:

  • Joel and Matt acknowledge that insurance companies are increasingly imposing property maintenance requirements to mitigate risk. However, they express confusion over specific demands like house color standardization.
  • Matt (51:38): “So that sucks.”

• Negotiation and Communication:

  • They advise Catherine to communicate directly with her insurance agent, clarifying the reasons behind such demands and negotiating feasible deadlines or alternative solutions.
  • Matt (53:27): “Start those talks, getting this started, communicating directly.”

• Understanding Underlying Reasons:

  • The hosts speculate that certain requirements, like uniform house colors, might be tied to community standards or aesthetic guidelines that influence insurance risk assessments.
  • Joel (56:09): “It depends on why they’re demanding the paint.”

• Exploring Alternatives:

  • They suggest that if compliance is too burdensome, Catherine could shop around for different insurance providers. However, they caution that most insurers have similar safety and maintenance prerequisites.
  • Joel (54:19): “But going with another insurance company likely isn't going to save you from this repair list.”

• Practical Steps:

  • Joel recommends taking immediate action on manageable tasks, such as trimming vegetation, to demonstrate goodwill and possibly negotiate more lenient terms for other demands.
  • Joel (54:19): “If there’s a return policy, that’s pretty generous.”

Notable Quotes:

• Joel (56:36): “I think this is insane. Like, this is where I would be pushing back.”

• Matt (54:43): “I mean, you can always do that. Think about that too.”

Conclusion: Joel and Matt empathize with Catherine’s predicament, advising her to engage proactively with her insurance company to seek reasonable accommodations and clarify the necessity of certain requirements. They emphasize the importance of maintaining open communication to potentially negotiate more manageable terms while ensuring continued insurance coverage.

5. Retirement Account Prioritization: Cade’s Financial Strategy

Timestamp: [35:24] – [43:14]

Question: Cade from North Carolina seeks guidance on prioritizing his retirement contributions. With a salary of $130,000 in California and an employer match of 10% on his 5% 401k contribution (totaling 15% of his income), he is also considering whether to max out his Health Savings Account (HSA) or Roth IRA, noting that California taxes HSA contributions, which could undermine their typical tax advantages.

Hosts' Response:

• Maximizing Employer Match:

  • Joel and Matt commend Cade for taking full advantage of his employer’s generous 10% match, reinforcing the importance of capturing this benefit as a foundational retirement strategy.
  • Joel (38:19): “That whole structure is incredible.”

• HSA vs. Roth IRA Considerations:

  • HSA Advantages:
    • Matt underscores the triple tax advantage of HSAs: contributions are pre-tax, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. Additionally, HSAs are not subject to FICA taxes.
    • Matt (40:58): “It’s truly a unicorn.”
  • California Tax Implications:
    • Joel explains that California taxes HSA contributions and growth, reducing their overall benefits compared to other states.
    • Joel (41:06): “Both of these states have conspired against their citizens.”
  • Roth IRA Flexibility:
    • Roth IRAs are highlighted for their tax-free growth and withdrawals in retirement, along with the flexibility to use funds for non-medical expenses without penalties.
    • Joel (17:43): “Because you are investing for an even longer time horizon from a drawdown perspective.”

• Strategic Recommendations:

  • Despite California’s unfavorable tax treatment of HSAs, the hosts recommend prioritizing HSA contributions due to their overall advantages, especially if Cade anticipates moving to a state with better HSA tax rules in the future.
  • They also suggest maxing out Roth IRAs for their flexibility and tax benefits.
  • Matt (42:53): “So I do not love the fact that these states do not offer the same tax benefit that almost everybody else does.”

• Additional Financial Goals:

  • Joel emphasizes the importance of not neglecting medium-term financial goals, such as purchasing a home, and maintaining adequate liquid savings alongside retirement accounts.
  • Joel (46:01): “But then what if you want to make some moves in the here and now as well?”

Notable Quotes:

• Matt (40:58): “And they have one other thing... HSA is still better from an overall tax perspective.”

• Joel (43:14): “You're in California right now.”

Conclusion: Joel and Matt advise Cade to prioritize HSA contributions despite California's tax drawbacks, leveraging their long-term benefits, and to max out Roth IRAs for additional tax-advantaged growth. They emphasize maintaining a balanced approach that includes both retirement savings and medium-term financial goals, ensuring comprehensive financial health.

6. Final Thoughts and Light-Hearted Discussion

Timestamp: [56:42] – [59:42]

Discussion Overview: Concluding the episode, Joel and Matt transition to a more casual conversation about their recent beer tasting experience, sharing their thoughts on Black Quad by Real Ale Brewing Company from Texas Blanco.

Key Points:

• Beer Review:

  • Joel describes the Black Quad as solid but lacking complexity, noting its single-note flavor profile with raisin and dark fruit undertones.

  • Joel (57:27): “It's not the most complex and interesting quad I've had. Kind of very basic in one note.”

  • Matt echoes similar sentiments, mentioning its harshness and lack of depth, contrasting it with richer quads like Westbrook's Mexican Stout.

  • Matt (58:06): “It drinks a little harsh. Like it almost had some metallic sort of flavors going on.”

Conclusion: The episode wraps up with a friendly banter about their beer preferences, reinforcing the personable and relatable dynamic between Joel and Matt. They invite listeners to explore additional resources on their website and sign up for their newsletter for more financial tips and discussions.

Overall Summary: Episode #991 of "How to Money" offers a wealth of financial insights tailored to listeners' specific concerns about early retirement planning, smart spending, and managing unexpected insurance demands. Joel and Matt adeptly balance detailed financial advice with engaging, relatable conversation, making complex topics accessible and actionable for their audience.