Ask HTM - Supercharging Retirement as a Freelancer, HSA for Medical vs Retirement, & “Investing” in Your Primary Residence #934

Summary

Podcast Title: How to Money
Episode: Ask HTM - Supercharging Retirement as a Freelancer, HSA for Medical vs Retirement, & “Investing” in Your Primary Residence #934
Release Date: January 20, 2025
Hosts: Joel and Matt (iHeartPodcasts)

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Introduction

In this episode of How to Money, co-hosts Joel and Matt delve into listener-submitted questions that tackle pressing personal finance topics: optimizing retirement strategies for freelancers, the strategic use of Health Savings Accounts (HSAs) for medical versus retirement purposes, and the nuances of investing in one’s primary residence compared to the stock market. The episode aims to provide actionable insights and practical advice to help listeners make informed financial decisions tailored to their unique circumstances.

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Personal Finance Win: Saving on Home Repairs [02:50 - 07:01]

Before diving into the listener questions, Matt shares a personal financial victory that underscores the importance of due diligence and negotiation in managing expenses.

Matt's Story: Matt recounts a scenario where a water line broke at a rental property he owned. Initially quoted $7,500 by his trusted plumber, Matt sought a second opinion and received a significantly lower quote of $4,500 from another recommendation. This prompted a negotiation with his preferred plumber, who graciously matched the lower price after a brief conversation.

Notable Quotes:

• Matt [03:35]: “I sort of gave him a call like an hour later and we talked about it. And bottom line, after a quick five minute conversation, he agreed to the $4,500 price.”
• Joel [06:27]: “He was willing to match it. That’s amazing.”

Key Takeaways:

• Negotiation Pays Off: Don’t hesitate to seek multiple quotes for significant expenses; it can lead to substantial savings.
• Value of Relationships: Maintaining good relationships with service providers can lead to favorable outcomes when circumstances change.
• Financial Preparedness: Having funds saved for unexpected repairs is crucial, especially when managing rental properties.

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Listener Questions

1. Supercharging Retirement as a Freelancer [02:01 - 19:49]

Listener: Eric from Evanston
Situation:
Eric and his wife, both 40, are debt-free except for a low-interest mortgage. They invested over $200,000 cash into building an Accessory Dwelling Unit (ADU) for his mother-in-law instead of into the stock market. They plan to rent it out in 10-15 years but feel hesitant about not investing more aggressively for retirement over the past two years.

Hosts’ Response: Joel and Matt commend Eric for prioritizing family needs and view the ADU as a strategic investment that can generate future income and increase their property’s value. They emphasize that hindsight bias shouldn’t lead to regret over past decisions. Instead, Eric should focus on the benefits of the ADU and plan forward for continued financial growth.

Notable Quotes:

• Joel [12:29]: “Your money is there to fuel your life.”
• Joel [12:43]: “It’s not like he was scrapping investing because he assumed bad things would happen. He directed his investments towards his family’s needs.”

Key Takeaways:

• Balanced Investing: Investing in real estate can complement traditional market investments, providing diversification and additional income streams.
• No Regrets: Decisions should align with personal and family priorities without dwelling on what could have been.
• Future Planning: The ADU can serve as a valuable asset, boosting both property value and providing potential rental income.

2. Investing in 529 Plans: Balancing Growth and Security [26:49 - 35:28]

Listener: Florina from Philadelphia
Question:
Florina has a 529 account for her son, currently in 8th grade, with about four and a half years until college. She’s considering becoming more conservative with her investments or moving some funds to cash since the money will start to be used soon.

Hosts’ Response: Joel and Matt draw parallels between 529 plans and retirement investing, emphasizing the importance of adjusting investment strategies as the withdrawal period approaches. They recommend shifting to more conservative investments as the timeline shortens to mitigate potential market volatility affecting the funds needed for college expenses.

Notable Quotes:

• Matt [28:43]: “You don’t want to slow down the volatility and also slow down the gains that you’re going to realize.”
• Joel [32:23]: “If you are likely to need most of the balance over the ensuing four, maybe five years, it might make sense to become more conservative.”

Key Takeaways:

• Target Date Funds: Utilize student-specific target date funds that automatically adjust the investment mix as college approaches.
• Risk Management: As the need for funds draws nearer, reducing exposure to high-volatility investments can protect the accumulated savings.
• Flexibility of 529 Plans: Consider the flexibility options within 529 plans, such as changing beneficiaries or converting funds, to maximize utility.

3. Utilizing HSAs: Medical Expenses vs. Retirement Savings [35:28 - 48:28]

Listener: Nathan from Knoxville
Question:
Nathan needs to pay for his older son's dental work and is debating whether to use funds from his HSA or withdraw from his mutual funds. He’s concerned about the tax implications of pulling from mutual funds but also hesitant to deplete his HSA meant for retirement.

Hosts’ Response: Joel and Matt advocate for using HSA funds for qualified medical expenses to take advantage of their tax-free benefits. They explain that withdrawing from mutual funds could lead to capital gains taxes, especially if the investments have appreciated. They also explore creative funding options, such as temporarily reducing discretionary spending or considering medical tourism for cost savings.

Notable Quotes:

• Matt [42:10]: “The money in your HSA can stay invested without being taxed in the future.”
• Joel [37:40]: “If you can avoid paying tax now, it’s preferred.”

Key Takeaways:

• Tax Efficiency: Using HSA funds for qualified medical expenses is generally more tax-efficient than withdrawing from taxable accounts.
• Strategic Fund Allocation: Preserve HSA funds for their intended purpose to maximize their long-term benefits for retirement.
• Alternative Solutions: Explore other avenues like reducing discretionary spending or cost-effective medical options to manage unexpected expenses without tapping into retirement savings.

4. Maximizing Retirement Savings Without Employer Benefits [53:26 - 60:05]

Listener: Elle from [Location Not Specified]
Question:
Elle is about to take a well-paying one-year contract job that doesn’t offer benefits. She wants to open an individual Roth IRA but is limited by the $7,000 contribution cap and seeks additional ways to bolster her retirement savings.

Hosts’ Response: Joel and Matt highlight options available to freelancers and contractors, such as setting up a Solo 401(k). They explain that Solo 401(k)s allow for higher contribution limits by acting as both employer and employee, enabling individuals to contribute significantly more than a standard Roth IRA. They also discuss the benefits of diversifying tax-advantaged accounts and planning for future contributions beyond the annual limits.

Notable Quotes:

• Matt [53:43]: “The Solo 401(k) is a killer way to make supercharged retirement savings happen.”
• Joel [60:05]: “It's a good reminder that you can still contribute until you file your taxes, not just by the end of the calendar year.”

Key Takeaways:

• Solo 401(k) for Freelancers: Offers higher contribution limits compared to traditional IRAs, allowing for greater retirement savings.
• Dual Contribution Roles: Acting as both employer and employee in a Solo 401(k) can maximize retirement savings potential.
• Continuous Saving: Encourage utilizing all available tax-advantaged accounts and contributing throughout the year to enhance growth.

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Conclusion

In this episode, Joel and Matt provide thoughtful and practical advice on optimizing retirement strategies for freelancers, effectively utilizing HSAs, and making informed decisions about investing in one’s primary residence versus the stock market. By addressing real-life scenarios and emphasizing the importance of strategic planning and flexibility, the hosts empower listeners to make financial decisions that align with their personal goals and circumstances.

Final Notable Quote:

• Joel [60:39]: “A little bit of looking ahead and a little bit of looking back as well.”

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Additional Highlights

• Community Engagement: The hosts encourage listeners to submit their questions via voice memos or email, fostering an interactive and supportive community.
• Product Recommendations: Throughout the episode, sponsors and partners such as Navy Federal Credit Union, Indochino, Trust and Will, Policygenius, and others are briefly mentioned, offering listeners resources to further their financial wellbeing.

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Listen to How to Money Episode #934 for an in-depth exploration of these topics and more, tailored to help you navigate your personal finance journey with confidence and clarity.

Transcript

[Joel]

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[Joel]

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[Eric]

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[Matt]

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[Joel]

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[Matt]

Card has no cash access and expires in six months.

[Joel]

Welcome to how to money. I'm Joel. I'm Matt and today we're answering your listener question.

[Matt]

That's right, Buddy. We have a lot to get to today. This is a Listener Questions episode and we've got personal finance answers to give. Buddy, A listener is asking about supercharging the retirement, specifically as a contractor. This is something we've got some personal experience with, so we'll get to that.

[Joel]

Not Everybody's got that W2 job map.

[Matt]

I know, yeah. Another listener is asking about actually using his HSA for medical. We'll explain why it is that we don't typically offer that advice. And another listener is asking about investing and I use air quotes there, but investing in real estate as opposed to the stock market. Some of the different considerations there. But we'll get to those listener questions plus more during today's episode. But first, Buddy, I Wanted to share a quick personal financial win that I was able to recently experience.

[Joel]

Love to hear it.

[Matt]

So you.

[Joel]

Love to celebrate with you.

[Matt]

Oh, thank you. A couple weeks ago, you remember back when we had, like, the polar vortex, Everybody's pipes were freezing.

[Joel]

I think it's still left some scars for a lot of folks around the country.

[Matt]

Okay. Well, I've got some financial scars as well, but maybe not quite as bad as I was initially thinking. So I had a water line break at a rental, and this actually happened before the temperatures got all, you know, got real cold. Here's the thing, though. This is a rental, a house we lived in. We had the inspection done, of course, and this is like, a long time ago. I knew this was coming. Yeah, I knew this was coming. I remember on the inspection report, old galvanized line is something they stopped using in, like, the 60s. It's going to fail at some point. Near or at end of life expectancy. Please replace.

[Joel]

And you've owned this home for 15 years now?

[Matt]

Yes.

[Joel]

So, yeah. And then it was only a matter of time.

[Matt]

And of course, it breaks. And I remember thinking we maybe even talked about this on the show, but the solicitations in the mail, that's like waterline warranty. And do you know what I'm talking.

[Joel]

About, where you'd pay what you're paying.

[Matt]

$18 a month insurance, and they're going to cover the cost if you have to replace this. And because it is a really expensive repair.

[Joel]

And I'm kind of wondering, depending on how hard it is to dig up, how much of a section they have to replace.

[Matt]

You're right. Yeah. Well, I'm kind of kicking myself now because I'm like, maybe that should have been the right decision. And it's not because typically someone out there needs to use this, but specifically because I knew that this was on the horizon. Like, I knew that this was an eminent repair, that for you, the insurance.

[Joel]

Would matter more than maybe for others.

[Matt]

It may have actually paid out whatever. You know, that's beside the point. This was going to be a really expensive repair. Now, I was not excited about paying $7,500 to get this thing dug up and replace to get some new, what, pecs or there's another type of, you know, pipe that they stick in.

[Joel]

Why 7,500?

[Matt]

It's just how much it costs, man.

[Joel]

Is it a long run to the street?

[Matt]

No, it's not that long, but it's just very labor intensive. They got to bust up the sidewalk.

[Joel]

I've seen they Got to dig in this massive trench to do it.

[Matt]

Yeah, yeah. And specifically this was with a plumber I have used in the past. And I'm talking, this guy is the best, by far, the absolute best experience, does the best work. Just everything top notch. Still gold plated pipes. It feels like that's what you should be getting. But luckily I did my due diligence though and got another quote from another plumber that I had not used before that came highly recommended. Guess what his quote was? What was $4,500.

[Joel]

That's a big difference.

[Matt]

It is a big difference. And so I like, I wasn't necessarily going to, you know, I understand that he's got the $7,500 guy, he's got bills to pay, he's got a certain type of business that he likes to maintain. But I told him just like, hey, you know, I got a better quote. I appreciate you talking to me, whatnot. And he's. And he was willing and we were texting and he's like, are you willing to talk about this? I'm like, absolutely. So I gave him a call like an hour later and we talked about it. And bottom line, after a quick five minute conversation, he agreed to the $4,500 price. He was willing to match it.

[Joel]

That's amazing.

[Matt]

Which is amazing. And it just goes to show. And I mean, it would have been nice to try out a new plumber, but this is somebody I've used before, does top notch work. And the other guy, while I think good, I'd never used him before. Yeah, they weren't getting back to me as quickly. And given the oncoming polar vortex, it seemed like they were ramping up for that. They just, they weren't as responsive. But it just goes to show the willingness to have a conversation, even just on the phone, even engaging via text, actually performing the due diligence, doing your homework, getting a second opinion. Right. Getting an additional quote gave me the ability to say, hey, I mean, would you consider coming down? And he, you know, initially he said, well, gosh, I'd really like to get five for this, but I'd be willing to do 45. And I'm like, well, of course I'm going to go for the 45.

[Joel]

Yeah, well, you're right.

[Matt]

And he willingly did it.

[Joel]

Did a fantastic job asking for a discount. Highly underrated is something we talk about with regularity. And this is a perfect example of how to do that. And the importance too, of getting multiple quotes for something. Because as a layperson, homeowner Like, I don't know how much it's necessarily supposed to cost. And that's the only way sometimes you can get the proper information is having multiple people come out and tell you what they would charge.

[Matt]

Especially like a one in a lifetime sort of fix like this. This is something I should never have to repair there again at the house at least.

[Joel]

Fingers crossed. Let's hope so. Yeah. But, yeah, I think that's great.

[Matt]

I'm glad you're able to celebrate with me here a little bit. That's what you said you wanted to do.

[Joel]

Cloth $3,000 back in your life. It's a beautiful thing. Enjoy. Enjoy those savings, my friends, and keep it in your savings account for it because, yeah, that's. And this is a rental property, so it's rental property. Managing rental properties ain't cheap. And you got to be prepared for stuff like this. This is when we talk about whether or not rental properties make sense for you. These are one of the things gotta be able to handle that factor in. And actually, we're gonna get to a question on that in just a second.

[Matt]

But you know what's funny? What's funny? Like, so literally, I had beers with a friend the night before, and he was kind of asking him. He's like, oh, yeah, you're. You're into investing in real estate. Is it. Is it hard? Like, do you ever get calls in the middle of the night? That kind of thing? I swear this wasn't karma coming back to bite me in the butt or anything. Like, I wasn't being arrogant or anything, but I was just like, you know, initially, like, there is a learning curve because you have to kind of get your contractors in place, kind of figure out a network, friends who you can call on to provide references, recommendations. And I was just like, but, you know, literally, I've never gotten a call in the middle of the night. And this is the closest I ever got to receiving a call in the middle of the night, because it was just first thing in the morning, like, bright and early. Let's just say they called before I woke up. So I was like, what do you know? Literally, not 12 hours ago, I was recounting how this has never happened to me. Of course it happens right after that.

[Joel]

Yeah. Well, I'm glad you're able to kind of do some of the things we talk about here on the show because, like, we try to live those things out and.

[Matt]

Yeah.

[Joel]

And when you can report back about how much money it saved you, like, that should be inspiring to the rest of us.

[Matt]

3K, baby.

[Joel]

Yeah, it's beautiful. All right, let's mention the beer we're having on this episode, Matt. This is called Reciprocal. It's a IPA by the good folks at Bissell Brothers Brewing.

[Matt]

Oh, yeah.

[Joel]

One of my all time favorite brewery experiences was going to Maine, hitting up Bissell Brothers. I don't know that there's. Yeah, there's not many better places I've been to have beer than that place.

[Matt]

What's crazy is you and I would have sworn that we would have had a Bissell Brothers beer on the show before because we know that we have enjoyed their beers. But then I checked back in the archives and we hadn't even started the podcast back when you had gone up there with Emily, came back with a sweet haul and we split some beers.

[Joel]

That's insane.

[Matt]

Isn't that crazy?

[Joel]

It's so crazy.

[Matt]

We're old men.

[Joel]

I know. I'm glad we get to drink their beer on the show now. They deserve it. We deserve it, my friend. But now it's time to take your listener questions. If you have a question, just record your question on the voice memo app of your phone, send it over to us via email. Hopefully we can take it on the next Ask HDM episode. Or if you need more precise directions, go to howtomoney.com Ask Matt, let's get to a question about investing and whether or not real estate needs to be a part of your burgeoning portfolio.

[Eric]

Hey guys, it's Eric from Evanston again, longtime listener and second time caller. My wife and I are both 40 and we're firmly in money gear six. We have no debt except for our low interest mortgage. We bought our forever home about three years ago before the interest rates went crazy. We knew going into this purchase that we would be needing to build an in law suite or adu for my mother in law. For the past two years, we fully funded both of our Roths. But all other what would be investing money has gone towards the adu. Between some equity from the sale of our old home and the money we would have put towards retirement investing, we spent just over 200,000 in cash. No financing on this. One bed, one bath, fully separate ADU when my mother in law is no longer living with us. Long pause was intentional there. We plan on renting it out, most likely in the next 10 to 15 years. So as much as it feels like a bummer to not invest past our Roths these past two years, I see the money we've spent here as an investment. Once it becomes an Income property as well as added equity into our primary residence. I know you've discussed on the show before, you all are planning to do something similar. So I guess my actual question is what was your rationale into investing to your home instead of investing into the markets for retirement? And am I crazy for still feeling hesitant that I haven't invested more in retirement in the past two years? Anyways, thanks guys. Have a great day.

[Matt]

Joel, classic mother in law joke there about her, about her not living. I was like with us anymore, Eric, that's terrible.

[Joel]

I'm so sorry. And then I was like, oh, okay, dad joke, man.

[Matt]

I totally get where you're coming from and I would just challenge like you said that you, I don't know, it seems like you're having a hard time grappling with the idea that you haven't invested. It has everything to do with hindsight bias. Right. The fact that you can look back at the past two years and so last year the market was up around like 25% and I think the year before that it was also around 25%. So you're looking at gains of 50% which is, let's just say highly unusual for two year cumulative period. Well, you can't change the fact that you didn't invest in the market. But I'm guessing you probably feel would feel a little bit differently had the market done the opposite. Right. Like you would have been kicking yourself and saying, no, we should have done the, the adding the carriage house or the mother in law suite in order to create this income producing property, this asset that we can add to our main res. I think that's probably what has a lot to do with that sort of the feeling of regret.

[Joel]

Yeah. And I think you can kind of look back retroactively and say, oh, should have done this, should have done that. And that's really easy to do and to kick yourself and to beat yourself up for. But the truth is what Prior returns are not indicative of future returns, man. So it's, it's really hard to do that and make predictions on what you should do next from that. And the truth is it's not like Eric was not investing. He was just using those dollars in a different but also a productive way.

[Matt]

That's true.

[Joel]

And so it's not like he was like, well, I scrapped investing because I assumed that these bad things were going to happen or that these good things were going to happen. He just said, I think this is the right thing for my family at the time. And that's kind of Sometimes the best information you can go on.

[Matt]

Yes.

[Joel]

I think it's also important to mention too that with the cost of building, it's gone up significantly in recent years. So I can't imagine that that money was poorly spent or maybe that Eric, you didn't avoid some potential increased costs that have accumulated over the years when to improving real estate, you're also choosing to do it to be able to take care of a family member, which we're totally for, by the way. I think it's important for everyone out there to remember, Matt, us included, to not ever forget that your money is there to fuel your life. And so if building that ADU was the right long term decision for your mother in law, for your family, even if it didn't end up being like a forever solution, don't beat yourself up for making that decision. And plus you now have some square footage that you can make money from. So yeah, yeah, it was there to support your family and now it's there as a way to produce additional income. I don't know. I mean, I think if you're kind of trying to beat yourself up over this, there's, there's no point in it.

[Matt]

Yeah. And this is regardless of whether you opt to go the short term rental route or if you plan to rent it out longer term to a tenant for, you know, months, if not years. But by doing that, you can turn that $200,000 unit into recurring profit and not only have you added value your property, you've also increased its cash flow potential. And you said that you plan to own this home over the long haul, which is great. Right. So I don't know, maybe think less about how much additional money that you'd have if you invested that $200,000 in the market. And instead just think about the significant dividends that it's going to throw off for years to come. Potentially tens of thousand dollars. Oh yeah, each year.

[Joel]

I like that you said dividends, because dividends, you actually think about that with stock. That's kind of sort of what a rental property does to a certain extent.

[Matt]

And granted cash flow, it's not purely passive. It's going to involve maintaining that property. If it's a short term rental, it's going to involve a lot more work. Right. It's going to involve you getting in there. Let's say for instance, on Airbnb, that kind of thing.

[Joel]

I have a couple of friends who recently have told me about maybe their decision to Airbnb their portion of their property or their whole house while they were away living elsewhere in the United States for a significant period of time, and the amount of money they were able to generate from either a portion of their property or their entire property was significant, legit. And so I just think, like, don't overlook that reality, Eric, that this could end up being a better, more profitable situation for you in the long run. Not only are you going to experience maybe increased appreciation of your property because this exists, but increased cash flow. So there's a lot of benefits to investing in real estate if you do it wisely. And hey, the fact that you paid cash for this edition is huge.

[Matt]

Totally. Okay, so I wanted to address, because Eric mentioned, like, how did you sort of reconcile, you know, investing in your home versus the market? And I think he's referring to us adding onto our house, which is what we're currently doing. I'm going to totally admit that an adu, right, an accessory dwelling unit versus in addition to your primary home. These are two different things. Will Kate and I see some return on our investment on a primary home if and when we sell the home someday? Yeah, I'm sure we will, but not nearly as much as Eric will when it comes to what that property is going to create in revenue. So despite the fact that the money is better spent on this than, let's say, on a fancy car or something, where that's going to completely depreciate in value, I am under no illusion that this is an investment like VU, right? Like, like a S&P 500 ETF. And I am totally okay with that because sometimes you spend money instead of investing on purpose. Just make sure that you do it intentionally and that, you know, the trade offs. I will say if there is a chance that Eric is referring to our previous home where we, we finished out, we added on, but we also. So we gained some, some space on the main level, which is where we lived, but we also finished out below that, and we saw that as more like an adu, because it's a separate apartment. Because in a similar way.

[Joel]

And you literally did short term rentals.

[Matt]

Yeah, yeah, we, we rented it out on Airbnb before you and I, Uh, we're able to, to take it over. So in that case, we're able to kind of like have our cake and eat it too. But I, I think he is talking about adding onto our current home. And I will say we didn't justify it. Like, we did not look at it through the lens necessarily of is this the best quote, unquote, investment? We thought through it through the lens of is this how we want to live our life? Like, what are our other goals outside of our financial goals in life? What are our lifestyle goals? What kind of activities do, do we want to be able to host in our home? For Kate, she's going to have the ability to have an art studio in the house, which is not something that she has ever had. And you know what, we're at the point in life to where we don't have to optimize every single dollar to the utmost from a financial perspective. We're also thinking of quality of life to a certain extent in this way as well. So it's not about, okay, well I'm able to justify and look at it through a dollars and cents like you want to be smart about it and obviously you want to make sure that you can handle an addition or adding an ADU to your property, something like that. But I will say we were thinking about it less through a return on investment and more through a lifestyle lens.

[Joel]

And I think most people who renovate Matt, like you're doing or make a little addition to their main house and it costs quite a bit of money, they're oftentimes like putting some blinders on because they don't want to realize the fact that it's not actually an investment. They call it an investment, but typically it's spending money in the way they want to spend money and it just is less harmful than other ways they could spend money. But the truth is when you look at the numbers, most of the home renovations that we do don't pay off dollar for dollar in return to the home value the way it's increased. It's possible, right, to make certain changes to your home and to see an increase in value that's in excess of what you spent. But that is not the norm. So just make sure everybody out there listening. If you're like, I'm going to do this home reno project, don't assume that the ROI is going to be killer. And in fact, you know, you might not see much of one at all. Sure. But that doesn't mean you shouldn't do it.

[Matt]

Yeah. I hesitate to even use the language of investing in our home by adding on because it's not like we're doing this because we want to live in a different way. Right. Like, and so just don't be deceived, don't deceive yourself. Right. Like I think someone would be a bit self delusional if they're thinking about it as a quote unquote investment yes, Agreed.

[Joel]

And I think, too, going back to Eric's question, he said, hey, they were still doing some market investing. They paid for the ADU in cash. Like, his cash flow should be going up because he has this adu. How much depends on in what way he rents this place out. And I think that means he can make up for lost time from a market investing perspective. He can say, hey, I kind of slowed it down there for a couple of years while we were funding this thing, but now we don't have to fund it and it's actually generating income for us. So I guess it's important to say that you shouldn't dwell on the investments that could have been. It's like the one that got away from the love perspective, that's a waste of time. So don't do that from this perspective and just realize you made the best decision you could with the facts that you had, and you're in a strong position to invest more and to increase your net worth in a big way in the coming years. So I think. I don't know. We both believe that you've done a great job here, Eric, and I'm curious to see kind of where this ADU takes you and. And, yeah. How you're able to kind of maximize its value for your family moving forward.

[Matt]

Totally. I think if you've been making the right moves from a financial standpoint for a number of years, if not decades, you can start to think through. You don't. You don't have to priorit the financial goals. Like, so earlier this morning, Joel, you and I were talking about friend of the show, Marshall Allen, who we had on the show, like, years ago.

[Joel]

Yeah.

[Matt]

Investigative journalist, talked a lot about healthcare, how he, you know, he died last year. I don't think we've talked about it on the show before, but he died. And he wasn't that old man.

[Joel]

He, like, he was in good shape.

[Matt]

Yeah, it seemed like he was in good shape. It seemed like he was a healthy guy and he died of a heart attack. And so these are the kind of things that. That I think are important to consider and to kind of hold at the same time, as we're trying. We're trying to be smart with our money. Right. But at the same time, it's like, all right, well, we don't know what tomorrow holds. And it's probably the most challenging aspect to, like, growing older and reaching some of your financial goals and then expanding that. So what. What else in life are you looking to accomplish and achieve? And I don't did Eric. I'm not sure if Eric shared how how old he was. And I don't at all mean to like, be a downer, but I think that that can be a helpful way to think about some of the the dollars that we spend, some of the dollars that we don't spend, some of the dollars that we choose to even to give away. Right. Because it's less about how do I make this as big as humanly possible and what else do I want to do with it, whether that's donating or spending it on others or even just having fun and maybe going on a nice vacation when that's something in the past that you decided not to do.

[Joel]

Yeah. And I think not crying over spilled milk if it wasn't, in retrospect, the most optimized decision.

[Matt]

No regrets.

[Joel]

Yeah, exactly. It's hard to predict that ahead of time and actually impossible to predict that ahead of time. So you did the best with what you had and you did a great job. So be proud, I think, and be thankful. All right, Matt, let's get to more money questions, including one about investing when you're a contractor. We'll talk about that and more right after this.

[Matt]

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[Joel]

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[Matt]

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[Joel]

Matt we were able to get customized Indochino suits and we love them. Getting to customize everything, it kind of endears you to the final product in a different way, including the best friends out embroidering on the inside of the jacket. Takes a couple of weeks for your custom suit to arrive. The fit and the fabric though, they're second to none. I feel like a total stud when I hit up a wedding in my Indochino suit. My next one though, it's going to be tweed.

[Matt]

Matt Ooh, I like it, man. Yeah. You can even set up your measurement profile on Indochino's website and you can choose customizations without even leaving the house. Or sign up for a premium in person experience just by booking an appointment at a showroom near you and let an Indochino style guide walk you through every step. For your 2025 plans. Look your best in Indochino. Visit Indochino.com and use code how2money to get 20% off any purchase of $499 or more. That's 20% off at Indochino.com promo code howtomoney. A new year often feels like it offers a chance to spark real change. But resolutions can feel daunting, especially when they're important. Joel like creating a will or a trust. It may feel overwhelming, but you know it's about time you did it.

[Joel]

Well.

[Matt]

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[Joel]

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[Matt]

Check one of your goals off early this year with trust and will protect what matters most in [e-mail] HowToMoney and get 10% off plus free shipping. That's 10% off and free [e-mail] HowtoMoney so here on the podcast I know listeners have heard me talk about how I like to always have a big annual finance meeting with Kate right as we've wrapped up a great year as we are kicking off a new one. We are nerdy like that and each year is an opportunity to reflect in the plan for the future, like setting career goals or making financial moves and most importantly, ensuring your family is always taken care of no matter what happens. Make this the year that you check life insurance off your list and protect your family's future. With policygenius you can find life insurance policies that start at just $292 per year for $1 million of coverage. Some options are 100% online and let you avoid unnecessary medical exams.

[Joel]

Matt I just double checked our life insurance policies to make sure we're adequately covered. We are thankful for that. It's a good idea for everyone out there to do that, particularly if your family needs have changed recently.

[Matt]

Right?

[Joel]

You want to ensure that you have life insurance to cover loved ones expenses if something happens to you. And policy genius makes a potentially onerous task easy as pie.

[Matt]

Secure your families tomorrow so you can have peace of mind today. Head to policygenius.com to get your free life insurance quotes. See how much you could save. That's policygenius.com all right Joel, we are back from the break. Let's take another listener question. This is a listener who is asking about aggressively investing or maybe not aggressively investing within a 529 account.

[Florina]

Hi, this is Florina and I'm outside Philadelphia, Pennsylvania. I have a question about investments and specifically 529s. My son is currently in 8th grade and we have a good amount invested in his 529 account considering he has about four and a half years until he goes to college. Would you consider at some point in the next few years of getting more conservative or putting part of this lump sum in cash since some of it will be used his first year and some won't be used until the following years. Much appreciated for any insight and guidance. Love love love your show and thanks for any advice you can offer.

[Joel]

Oh Matt, I like this one because it's it's got elements of retirement investing put on like a much truncated timetable Right, Yeah, that's true. It's very similar because you're saving up for a specific need and you have, like, a particular drawdown period. But everything is kind of shorter and more compact when we're talking about 529 plans. So it influences the answer. I'm glad Florina asked this question because it's an important topic for us to touch on. Most folks don't pay much attention to how money inside of a 529 plan is invested. That might mean that those funds are in a money market fund inside of the 529 account or a savings equivalent fund. So maybe they stick the money in, they get the tax break that their state offers, if their state offers one. And then beyond that, the way they're investing those dollars or not investing those dollars, it just never gets revisited. You might just luck out, and maybe by default or accident, you end up investing the money. You luck out, you ride the market up to the point of needing to spend those dollars. But the truth is, it's important to know how your money is invested inside of a 529 plan, whether it is or not. And then also when you change your investment allocation, because you could see the balance erode, especially coming closer to the time you need to spend it if you're not careful.

[Matt]

That's right. Yeah. And then you don't want that to happen. Right. When you need those dollars to fund your child's higher education that you've been diligently saving for, which typically means now opting for a more conservative approach. So a less aggressive investing philosophy, if you've had the money, let's say in a total stock market or an s and P500, you're getting really close to the time that you're probably going to want to dial back that 100% stocks approach. And I'm glad that you mentioned how similar this is to retirement, Joel, because say, for instance, let's say you're 61 years old and you plan on retiring at 65, where you're going to want to start tapping those funds. Well, in a similar way, you're going to want to dial back that stock exposure a little bit to kind of smooth out any volatility. It's likely that you're not looking for returns as much as you are guaranteeing that that income is going to be there for you.

[Joel]

It's like you're using those binoculars and you're seeing what's ahead on the horizon, and you're kind of making adjustments now for what's to come. Because you can say with pretty darn near certainty, not 100% certainty on retirement or kids college, but with more certainty the closer you get to it. Hey, this is what's likely to happen. Here's where we're headed. We usually talk about it in terms of wealth accumulation versus wealth preservation. What stage are you in? And it's not always an age thing for some people who want to retire early. Well hey, maybe their wealth accumulation stage is 15 years and it's like really intense. And then wealth preservation starts to kick in because they're not planning on working until they're 65. But yeah, when it comes to this specific question it's actually quite easy to make the changes that you need to make to ensure that you're not either over indexed to stocks or, or have all your money in savings which you don't want either. And basically every 529 plan has a variety of investment options. And almost all of these plans include the student version of a target date fund. And we talked about target date funds as being kind of the easy way for people to be more well diversified and especially to not have to change the allocation of their portfolios over time because this fund does it for you as you get older, as you reach get closer to that retirement age. And similarly these funds get more conservative as the student gets closer to going to college. It's the set it and forget it approach that many people opt to take because they don't have to think about it at all. Which I think can make a whole lot of sense. And especially again on the truncated timetable, having something that's doing it for you in the back end, I think it becomes even more valuable. But target date fund equivalents, especially in those early years, they often inhibit returns by being too conservative. So that's the.

[Matt]

Yeah, and that's the downside.

[Joel]

And that's the problem when we're talking about to 20 something investors who have 40 plus years of investing ahead of them. We don't want basically any of the money they have to invest going into more conservative investments. We want all their money flowing into stocks because over the long term that's going to help them see the best returns. And so even a 10 12% allocation in a target day fund is too much for those young investors. And that's true for parents of really young kids who are investing in 529 plans too. Whereas if you're in one of these enrollment date portfolios like we have in the state 529 plan, Matt, that we have access to. It would be too conservative for me with my youngest son, Whereas with my 11 year old is starting to get closer to being, to thinking about that. And for Florina, with an eighth grader, I think it makes even more sense to at least start to consider changing her investments from 100% stocks to 1 of these target date fund equivalents.

[Matt]

Yeah, it depends too, just I guess on your, like all this depends on your risk appetite. But I think the exception to putting all the money that you've invested into a targeting fund would be if you don't think that you're going to spend down all of that money. So despite the specific year that your son will go to college, I think it's important to ask the question whether or not you are likely to need most of the balance over those ensuing for most likely four years, maybe it's five. But this might seem like a silly question, but you might not actually need all of those dollars. And because 529 plans have some flexible options, for instance, like naming another beneficiary or Even turning that 529 in the dollars or the funds within that 529 into a Roth IRA for your son, you actually might not want to pivot in a more conservative direction where you continue to invest aggressively, hoping to get the most out of those dollars, because you have a little bit more flexibility not only on what you can do with that 529 plan were you to not use those funds, but also if you have more flexibility and options as to how it is that you're going to fund those college expenses as well. That's right, yeah.

[Joel]

Yeah, I think that's a good point because, hey, maybe a lot of the money Florina has set aside for us on in the 529 account is not needed. And so it's like, well, then the thought is, well, how can I maximize those dollars?

[Matt]

Yeah, you don't want to slow down.

[Joel]

Further down the road.

[Matt]

Yeah, you don't want to slow down the volatility and also slow down the gains that you're going to realize. You want to just keep that at, you know, full, full throttle, basically.

[Joel]

And you're talking about spending this money over the course of four, maybe five years while he's in school. So it's not like you want to be take risk completely off the table either, because we're years away from college, eight years out, many years in.

[Matt]

Yeah, for senior year. Yeah, yeah, exactly.

[Joel]

And so I think, I don't know, in our opinion, maybe going half in one of those in a total stock market fund and then half in the target date fund equivalent that they, that you have access to in the 529 plan in your state. That could be a good option. Or you could pick like a target date fund equivalent that's further down the road than his actual college date. That's another way to kind of level out the risk versus reward that you're taking here. And you could maybe at least start by putting new contributions, if you're still funding it, to the plan in the target date fund equivalent instead of moving portions of the balance over.

[Matt]

That's true.

[Joel]

And if you want to move portion of the balance over, maybe do it in six month or one year increments where you're saying, listen, at the first of every year, I'm going to move over 10% of the overall portfolio, switch it from equities to a target date fund equivalent or enrollment year equivalent. That helps you avoid from changing it overnight or changing it knee jerk. Based on what's happening with market conditions, you're doing it kind of on a set schedule in a methodical way. And so, Florian, I'm glad this is on your radar. I would say there's no need to rush this. You've still got time before you need to tap this account at all and plenty of time before you need to tap it for, for later college years. Sure. But we love that you're preparing now that you do that. Have those binoculars out.

[Matt]

It's good to think about.

[Joel]

Yeah, you're thinking.

[Matt]

It's good to think about. And I'm thinking more too about, like I mentioned, how it depends on the flexibility, flexibility that you have when it comes to funding college. I think that has a whole lot to do with it. I think it's worth, as you said, Joel, with the binoculars, look ahead and think through what your expected financial situation to be. Because let's say it's you and the other parent, you and a partner, and let's say you both are about to be named partner at your law firms and you're like, all right, we're going to be raking in the dough certainly, you know, four years from now. Well, if that's the case, like, you're going to be able, you would possibly be able to cash flow college, even like a private college, without, you know, without even thinking too much about the 529 account. Right. Like, so there's a big difference between a family that's in that kind of situation versus a family who is seeing some other really big expenses up ahead or they're thinking about slowing down their work. Well, in that family situation, they might be more dependent on those $529. And so their biggest concern would be to preserve that money within that 529 account to take less risks so that it is available for educational purposes. Whereas a family that is going to be, you know, rolling in the dough, well, they have the margin, they have the. The ability to take some additional risks with their money and possibly invest it a little bit more aggressively. So I think some of it comes down to what you propose or expect that your financial situation might look like off in the future. Nobody knows exactly what the future holds, but I think doing that to the best of your ability, given your personal situation and some of the other goals that you might have in the next four to eight years, specifically.

[Joel]

And you briefly mentioned this, but don't forget about the Roth IRA ability that the 529 money can have for your son. If, if you do find yourself with that sort of financial flexibility, you might say, oh, this is. This can be the perfect, like, Kickstarter fund to help him invest for retirement. And the fact that you can basically get that started still with a max IRA contribution limit every single year, $35,000 overall, max, you can still get that Roth IRA going for him in a significant way in his early years because of the dedication you've had to saving for his college future. But, Florina, we hope that helps. Matt, let's get to our next question. This one is about HSA dollars. Do you spend them or not?

[Nathan]

Hey, Joel and Matt, My name is Nathan from Knoxville, Tennessee, and my mom turned me on to you guys several years ago, and I've been listening ever since. But my question is, my older son is going to need some dental work, and it is going to be a pretty reasonable amount of money. And my question to you is, am I better off using the money from my HSA for that, or would I be better off pulling money out of a normal mutual fund and using that to pay? My concern is leaving it in the HSA so it can grow. But if I pull it from the mutual fund, I'm probably looking at some pretty substantial capital gains tax. So love the show, come on up to Knoxville, do some mountain biking, stop by some of the breweries, and thank you very much.

[Matt]

Mountain biking and breweries, Joel, that sounds pretty good.

[Joel]

That is one of the ways to my heart.

[Matt]

When's the last time you went mountain biking?

[Joel]

It's been too long. Yeah, I was like, One of my friends got a mountain e bike, and he was telling me about just how fun it is on the trails. And I'm not gonna lie, I'm very interested.

[Matt]

The ability to. Not just to be able to enjoy the downhill portions, but to beast it up the more challenging uphill. That does sound like a whole lot of fun.

[Joel]

It sounds like the whole experience, but bionic.

[Matt]

I wonder. So I don't know if you've talked about this before. I spent an entire summer teaching kids how to mountain bike up in western North Carolina, but I don't know if we ever made it as far west as Knoxville. That's where you said he was. Right. But, like, that entire western North Carolina, man, there's a whole lot of good mountain biking up there.

[Joel]

Oh, I believe.

[Matt]

And I haven't done that literally in, I don't know, a long time, let's just say. Yeah, but I could totally. I mean, if the kids get into it, man, that sounds like it's a fun time.

[Joel]

Yeah. Yeah.

[Matt]

Or you and I can get in mountain biking, and then we'll go visit the breweries.

[Joel]

I will say it's hard to find the time to dedicate towards a hobby like that, but eventually, at some point.

[Matt]

Right now, we're just trying to squeeze in hobbies that are, like, going to keep us healthy, fit, and happy, keeping our families happy at the same time.

[Joel]

Only so many.

[Matt]

All those things, all the same, that we can do without, you know, upsetting the applicant.

[Joel]

That's right. That's right. And big thanks to your mom, by the way, Nathan, for turning you onto the podcast. And I'm so sorry to hear about this dental bill. I'm not sure if you knew that this was coming down the pike or not, but nobody wants to spend money this way, Matt. It makes me think of a dental bill we incurred where I think you know about this, but my daughter. A skateboarding incident I don't know if we talked about on the show or not.

[Matt]

We might have, because at the time, I think it was so traumatic. Oh. It was like. Well, not only for her, but also for y'all, just to make sure that everything was gonna turn out okay.

[Joel]

So my daughter, not a skateboarder, was not. No feet on the skateboard. She literally had. Was on her hands and knees and had her hands on the skateboard, and the skateboard went out from under her face, planted on the ground, and teeth movements. It was terrible.

[Matt]

Even you just saying that.

[Joel]

I know.

[Matt]

And she just gotten braces she just got.

[Joel]

Which actually saved her teeth.

[Matt]

Because he said that had the braces not been there to kind of keep those front teeth from going back further.

[Joel]

Yep.

[Matt]

Sorry to make everybody squirm, but it was bad.

[Joel]

It was bad. And that's one of those things where it's also in for everything and it's an emergency visit and you don't know how bad it's going to be. This is where emergency funds come in handy, by the way.

[Matt]

Yeah. And so I think this is a great question that Nathan's got here because we're always talking about how great HSAs are. Right. So health Savings Accounts, that's what the HSA is, specifically because of the triple tax advantage that they come with. The nice thing about pulling money from your HSA is that you're not going to owe any tax on it for qualified expenses, of course. But like Nathan said, if you pull money from a fund within your taxable brokerage account, well, you're going to owe tax. And so how much depends on when you bought, how much of it that you sell, if you've owned that position, let's say, for less than a year. While we're talking about short term capital gains tax, if that's the case, well, tapping the hsa, I think that that makes the most sense. But if we're talking long term capital gains of 15%, I don't know, kind of depends on a number of factors here, but I think it's worth considering.

[Joel]

That you never want to pay tax. And every time you can avoid paying tax, it's ideal. At least it seems like that in the moment because we're talking about paying tax in the short term versus more extended tax abatement or tax free treatment. Right. And so I think maybe your answer might baffle some folks, Matt. They might say no tax is better than paying a lower tax rate. And I get why that would be their response. But you're going to pay tax on the brokerage funds at some point in the future.

[Matt]

That's right. It's inevitable it's going to happen.

[Joel]

Right, right. And even if the capital gains tax rate stays the same, which it's hard to know, depends on what happens with elections and legislation. Right. It's going to be a larger tax bill because of the growth of those funds. Whereas the money in your hsa, the longer you leave it put, the longer you let it ride, the more the money grows. And the truth is you'll never be taxed on the future growth that money in your HSA experiences. So the more decades your HSA has to do Its thing, the more it can kind of stay invested in the market and you can let it ride, the better for you. So do you want to pay some tax now on some of those dollars and kind of reduce future tax liability or do you want to take the tax free dollars now and kind of limit its growth potential? That's a tough decision, but I think I err on the side of, I don't know, paying some tax today.

[Matt]

Yeah. If you don't have the money on hand to be able to handle that bill. Yeah, I'm leaning towards the brokerage. But the caveat being you've got to have the money on hand to pay that tax. Of course. Even though taking money, let's say, from the HSA wouldn't be the most tax efficient choice, even that isn't dumb to tap specifically for medical expenses if you've been stocking money into that account effectively for many years down the road. I think if the option was between paying for this dental bill with your HSA dollars or let's say cash in the bank, well, of course we choose the latter. That's my favorite option. Aren't the two that Nathan presented But like how, what, what's another outside of the box creative way for you to fund this? Because the ability to cut back and I don't know, even challenge yourself to not spend money in a certain category in order to be able to handle this big expense. And I don't know, it's been years since I've been to the dentist, so I don't know how much orthodontia or Dennis bills can be, but I can't.

[Joel]

Wait to see your invoice when you do finally go.

[Matt]

Okay, so it makes me think of last week. We talked about listener Sam who made the mistake with a passport. But then he clawed his money back and you know, all that. He also talked about how he actually just completed. So last year completed a no beer challenge where he didn't buy beer for a year specifically for a financial goal that he wanted to hit. That can potentially be a ton of money depending on how much you drink, I guess, or how nice of beers.

[Joel]

When you think about how much money we would save.

[Matt]

Matt, when you do rarely partake, if it's a really nice one, we'd have.

[Joel]

To find a new craft beer equivalent.

[Matt]

It could still cost you a lot of money. Yeah, but I really like the idea because in this case you've got a Dennis bill, the ability to say no to certain things. And like I feel like our culture is so down on discipline and saying no to yourself. It's just like, oh, no, you shouldn't have to deny yourself. But I think the ability for us to tie certain sacrifices that we make in our lives, in this case, to something very tangible, to this thing that, you know is going to cost a lot of money to your kid getting their teeth fixed or orthodontia or whatever the thing might be. I think it would be more fun if it was a fun activity. Like if you're saving up for a vacation, right? Like, that's easier to do because you're saying to yourself, no, the reason we're not going out to eat is because we want to go to Barcelona. Like, we want to spend some time in Spain. It's a little bit easier to do that, I think, in that case, as opposed to saying, I gotta fix the mouth, you know, let's get those teeth straight, whatever it might be. But I would really, I think, challenge you, Nathan, to think through, like, what are some areas where you could potentially just really scale back, even if it's for a short period of time, cut back to the bone, but knowing that it's only for a short period of time until you're able to knock that bill out.

[Joel]

It's kind of like hard now, easy later, or easy now, hard later. And you gotta kind of pick your hard and pick and pick. Typically, choosing the hard on the front end is better because it makes the easier later, much easier. And that's why talk of depriving yourself, I think, is rampant in personal finance. And we try to strike that balance. But it's not that there's zero truth to the fact that kind of not allowing yourself to experience the fullness of your income is bad. Because that's partly what we're doing, is we're deferring gratification and we are saving and investing because we know it provides for us a better future. Or we're, you know, reining in our spending even on things that we enjoy occasionally, to be able to have more flexibility down the road. And so I think that's a good point, Matt, that you might be able to find ways to trim the fat in order to accelerate cash inflows so you can pay for this thing in cash and you don't have to make maybe one of these decisions to tap one of these funds.

[Matt]

Totally.

[Joel]

And then last thing I'll say is, and it's going to come out of left field. Maybe, Nathan, for you, but have you thought about getting that dental work done in a foreign country? You might be Able to.

[Matt]

Oh, some medical tourism.

[Joel]

I'm telling you, man, this is like underappreciated. And not many folks attempt it. You might be able to save money. You might be able to also get a vacation out of it. On top of it, man, you were talking about going to Barcelona. Maybe you go to Colombia or Mexico. Those are a little bit closer destinations. And you might find.

[Matt]

Head south of the border. You don't. No need to make it over to Europe. That's right, just head south. Little two for one action.

[Joel]

Exactly.

[Matt]

It's funny you mentioned Colombia. My. The general contractor for our house addition that we've talked about, he's. He literally left for Columbia this morning.

[Joel]

Okay.

[Matt]

His wife is from there, so.

[Joel]

Oh, nice.

[Matt]

They're gonna go do some traveling.

[Joel]

Well, I wonder if he's gonna get his teeth fixed while he's there.

[Matt]

I think he's got pretty good jumpers.

[Joel]

Okay. But the truth is, when you look into it, you could save a significant amount of money on dental care if you go to one. There's even a city, and it's not the real name of the city, but it's like the. The ascribed name of the city. Molar City in Mexico is like right across the border. Thousands of Americans go there every year to get dental services because it's so much cheaper. And on top of that, the expenses you incur there actually are eligible for reimbursement from your HSA as well. So it's not like, oh, man, I'm going outside of the system. And it's not like these dollars are going to count towards HSA reimbursements. You can still reimburse for those expenses in the future, even if you're spending money on medical necessities overseas. So it's not for everyone. Not everyone feels comfortable doing that.

[Matt]

And I totally get that.

[Joel]

But I think the further you look into it, you'll realize that there are exceptional medical facilities in some of these countries too, as long as you pay attention, read the reviews, and maybe go on personal experiences from people who have gone down that. That path. But I do think it's a way to potentially save a meaningful amount of money on kind of more expensive dental care.

[Matt]

Totally. I am personally not even sure if I would feel comfortable doing that to myself, let alone my kids, but to each their own. And Nathan, I love that your knee jerk reaction is to try and not tap those dollars within that HSA since it is the most ultimate retirement account. But Joel, we've got more to get to. Of course we're going to have to get to our Facebook Question of the week just after this break. Debt payoff is the number one financial goal that Americans have for 2025. I love seeing that because debt, especially consumer debt, it can be such a bummer. It not only puts you in a precarious financial situation, the stress that it creates, it can be overwhelming. It impacts every other aspect of your life. That's why Navy Federal Credit Union is here to help you. They have all the financial tools and resources you need to dominate debt Right now. They offer a 0% intro APR on credit card balance transfers for 12 months.

[Joel]

That's a pretty sweet offer. You can also get $250 when you spend $2,500 in your first 90 days on a cash rewards or cash rewards plus credit card. Visit Navy federal.org to start dominating debt. Navy Federal Credit Union members are the mission. Navy Federal is insured by NCUA. After the insure rate expires, variable APRs are 15.15% to 18% based on creditworthiness. Rates are subject to change. ATM fees for cash advances are up to $1 at non Navy Federal ATMs.

[F]

Do you want to understand an invisible force that's shaping your life? I'm Osvlozin, one of the new hosts of the long running podcast Tech Stuff. I'm slightly skeptical but obsessively intrigued.

[Joel]

And I'm Cara Price, the other new host and I'm ready to adopt early.

[F]

And often on tech stuff. We travel all the way from the mines of Congo to the surface of Mars to the dark corners of TikTok to our and attempt to answer burning questions about technology.

[Joel]

One of the kind of tricks for surviving Mars is to live there long.

[Matt]

Enough so that people evolve into Martians. Like data is a very rough proxy for a complex reality. How is it possible that the world's new energy revolution can be based in this place where there's no electricity at night?

[Joel]

Oz and I will cut through the noise to bring you the best conversations and deep dives that will help you understand how tech is changing our world and what you need to know to survive the singularity. So join us.

[F]

Listen to tech stuff on the iHeartRadio app, Apple Podcasts or wherever you get your podcasts.

[G]

What's up everybody? Adnan Virk here to tell you about a new podcast from iHeart podcast in the National Hockey League. It's NHL Unscripted with Virk and Demers.

[Matt]

Hey, I'm Jason Demers, former 700 game NHL defenseman turned NHL Network analyst And boy, oh boy, does Daddy have a lot to say.

[G]

I love you. By the way, on NHL Network, we're looking forward to getting together each week to chat and chirp about the sport and all the other things surrounding it that we love. Right?

[Matt]

Yeah, I just met you today, but we're going to have a ton of guests from the colliding worlds of hockey, entertainment and pop culture. And you know what, Tons of back and forth on all things NHL.

[G]

Yeah, you're soon going to find out we're not just hockey talk. We're going to all kinds of random stuff on this podcast. Movies, television, food, wrestling, even the stuff that you wear on NHL. Now you wish you could pull off.

[Matt]

My short shorts, Virkie.

[G]

That's short of kazaruckus. Listen to NHL Unscripted with Virk and Demers, the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

[H]

I'm Tisha Olland, former golf professional and the host of welcome to the Party, your newest obsession about the wonderful world that is women's golf, featuring interviews with top players on tour like LPGA superstar Angel Yin.

[Florina]

I really just sat myself down at the end of 2022 and I was like, look, either we make it or we quit.

[H]

Expert tips to help improve your swing and the craziest stories to come out of your friendly neighborhood country club.

[Joel]

The drinks were flowing, twerking all over the place, vaping.

[Eric]

They're shotgunning.

[H]

Women's golf is a wild ride full of big personalities, remarkable athleticism, fierce competition, and a generation of women hell bent on shanking that glass ceiling. Welcome to the party with Tish Allen is an I heart women's sports production in partnership with Deep Blue Sports and Entertainment. Listen to welcome to the Party. That's P A R T E e on the iHeartRadio app, Apple Podcast, or wherever you get your podcast.

[Florina]

Presented by Elf Beauty, founding partner of iHeart Women's Sports.

[Joel]

All right, Matt, we're back. We've got more money questions to get to. Now. Let's get to our Facebook question of the week. This one comes from L. She says, I'm about to be offered a job with a one year contract. It pays very well, but that's because it doesn't come with any benefits. I want to open an individual Roth IRA that I can contribute to, but the limit is only $7,000 and I'd like to put more towards retirement. Is the Roth IRA my best option or is there anything additional I can do?

[Matt]

Yeah, Elle, first off, I love that you're wanting to do more than what it is that you can do with a Roth IRA because you know, $7,000, that's not chump change to be shoving aside for your future, but going beyond that, doing more. I think that's a great goal to.

[Joel]

Have a lot of people, Matt, especially early on, they're like, how am I even going to max out the Roth? So the fact that I was like, I got to do more than that.

[Matt]

She's got a pretty, pretty good gig lined up. Obviously the greater percentage of your income that you can allocate towards investments to retirement, the quicker that you're going to achieve financial independence. Although it can be difficult if you don't have a 401k at your disposal. Specifically with a company match, you've got to be a little more proactive. You got to take some steps on your own to ensure that you're setting yourself up off in the future. But it's not just the match that you're missing is that with a 401k you have the ability to sock away much more. Given the higher limits. We're talking $23,000, the ability to sock that away easily into a tax advantaged account. That's was. It reminds me of a story last year that we Talked about the 401k millionaires that are out there. And it is because the fact it's like, well, I haven't even been investing for that. But to allocate those dollars for your future when you have a larger limit like that, it's easier to hit that limit as opposed to trying to arrive at that point with a humble ira.

[Joel]

I think it's also the slow drip and the kind of perpetual motion that a 401k creates. So when you do set it up and now we have more and more companies and kind of more stringent rules about auto enrollment for people and I think we're going to only see more 401k millionaires, obviously, so. Because people are being kind of forced into it. But then also there is something about the fact that it's just happening and you kind of don't see it in the background. And then you look up one day and you're like holy crap, look how much money I invested without having to think about it. But here's the tough thing when you are self employed or an independent contractor is that you have to do a lot more thinking and you have to be a lot more proactive like you mentioned. But there are still great tools at your disposal to be able to sock away a lot of money. You just have to kind of be the captain of your own ship in this situation. So as a self employed individual, you have access to a type of 401k called a solo 401k. It's like a sister account, but it was built just for you, Elle, and for people like me and Matt. So a bit more effort, yes. Is required on your part and there's no match. But there are some additional perks that are not available to W2 workers. Namely that you can contribute much more than they're allowed to. So there are kind of pros and cons, right. To being W2 versus IC. You're essentially acting as both the employer and the employee. When you set up a solo 401k and then you're able to contribute to your own account wearing both hats. It's kind of weird and it's actually, I think, I don't know, maybe it's easier to read about than it is to speak out loud. But you can contribute 25% of your net earnings as quote unquote, the employer. And then you take off the employer hat and you can contribute up to $23,500 this year as the quote unquote employee. And this means you have a total contribution limit of $70,000, assuming your income is high enough, which that would be a lot. I don't know many people who can max their retirement accounts to this degree. More power to you if you can. But it just goes to show, like there are ways to make this happen. You just have to be more proactive, more intentional. But if you are and you're really dedicated to putting a lot of money aside into retirement accounts, the solo 401k is a killer. Killer way to make it happen.

[Matt]

Yeah. That's how you completely supercharge your retirement savings. And the Solo 401K is what you and I have here at how to Money. Though we have never maxed out our solo for our self employed or our solo 401ks. Yeah, we've got our set up via.

[Joel]

Fidelity Money goals though. We've all got them. Maybe that'll be ours.

[Matt]

We've never made that much in order to. Yeah, that'd be. That'd be awesome. But. So Fidelity is great. Schwab. They are also a solid choice after the Roth ira. This is likely going to be your best bet since it sounds like you are pretty keen on investing a fair amount. And you know, as of recently you can even contribute to a Roth solo 401k. Fidelity. They are Actually still working on getting theirs launched. I think it might happen maybe by the end of this year, but I believe Schwab said, yeah, Schwab, they've already rolled theirs out. And whether or not you choose to go with a Roth with the Solo 401k depends on a few specific personal factors like your projected future earnings, what you think future tax rates might be. Personally, we don't have, well, in part because we're with Fidelity, but we have a traditional solo 401k. But in part, even if we did have the option to go with the Roth, I'm not sure if we would. We talked with Sean Mulaney about this back in the day. But the ability to diversify your tax liability by having a traditional pre tax 401k, whether that's a solo 401k or traditional 401k, and to be able to diversify that with something like a Roth ira, he thinks at least for a lot of folks, that makes sense. It is hard, you know, to make a perfect decision on that front, but it's hard to go wrong choosing either one of those and quickly going back to the ira. Something else I just thought of too. She pointed out the fact that she's got a one year contract coming up. And so it might seem like a big pain in the butt to jump through a bunch of hoops setting up the solo 401k, learn, you know, researching it, figuring it all out. If let's, let's say she ends up being a stellar worker and they're like, hey, we actually want to bring you on under, we want to bring you in house. You are going to be one of us. Well, all of a sudden she's not going to have the ability to contribute to her solo 104 solo 401k, in which case, I don't know, it might seem like a whole lot of wasted effort. So something else I wanted to point out. Even though you can only contribute $7,000 this year to your IRA for 2025, you could start saving for 2026 IRA contributions. I think this is a perfect opportunity actually to set aside not $7,000 but $14,000, obviously max out your IRA this year as soon as you can, but then start stockpiling those funds in your high yield savings account. That way at the beginning, beginning of 2026, you have the ability to immediately deploy those funds into the market. And the reason we like to point folks in that direction if you have the ability to is because more often than not, the stock market goes up 75% of the time. Three out of four years. Going to see your balance grow more by investing at the beginning of the year than throughout the year. And this is an opportunity to kind of, you know, get ahead of the curve a little bit.

[Joel]

Well, and I think it's a good reminder, too, for people who feel like they're in the opposite boat and they're like, oh, man, I haven't finished maxing out my Roth for 2024. I feel like I kind of missed out on the boat. You can still contribute until you file taxes. So max out last year's Roth before you start putting money into 2025 Roth. And whether that's the case for Elle, my guess is she's already maxed out last year's Roth based on the way she asked her question.

[Matt]

She sounds like a go getter.

[Joel]

Yeah. But it's a good reminder to everyone else out there. A lot of people think, oh, and close of the calendar year, I'm done. I can't contribute to that anymore. But that's not true. You still can until you file those taxes. Until April 15th comes around.

[Matt]

That's right. So a little bit of looking ahead and a little bit of looking back as well. But, Joel, let's get back to the beer that you and I enjoyed during this episode, which was a reciprocal by Bessel Brothers. This is a double dry hopped ipa. What you think, buddy?

[Joel]

Man, Gosh, it is amazing to think that it was over eight years ago that we went there.

[Matt]

Did it take you back?

[Joel]

It did. And I just remember having the absolute best trip with Emily when we went and we had so much fun, and we've got great pictures, great memories. My favorite memory from on that trip to Maine was the $10 US mailboat tour that we took out there on the water to watch them deliver mail to the islands outside of Portland, Maine. And it was so fun. A great way to see the sights.

[Matt]

I remember you mentioning that.

[Joel]

A cheap trip. This beer in particular, it was more bitter than I even remembered. Yeah, but in a good way. Yeah, like, I. I kind of dig it. It's. It's kind of like this mix between west coast and east coast styles. Got the hazy citrus vibes with a little more of that hop bitterness in there. This beer is as good and as unique as I remember.

[Matt]

Yeah, it's double dry hopped, which I think typically, at least with some of the breweries that we're fans of. Like, it makes me like Burial, for instance. They're double dry hopped IPAs. They typically come with a lot more body, right? Which means that they, they tend to be a little bit thicker which sometimes mean that they're also a little bit sweeter. But that is not the case with this one. It's got the those double dry hop flavors, but it's just drier. It's just drier. So yeah, whether it's bitterness or dryness that kind of comes through, you have that. It's certainly double dry hopped and was hazy as all get out but it wasn't super heavy. Which means it was just a wonderful beer to drink during the recording of this episode. Yes, it was. Glad you were able to pick this one up at our local bottle shop and listeners can find show notes up on the website as well as a picture of this beer. If you are so Interested [e-mail] we'll make sure to link to any of the different resources that we may have mentioned. We appreciate you joining us for this episode. We'll see you back here in a couple days. And that's gonna be it for this episode, buddy. So until next time, best friends out. Best friends.

[Joel]

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[Matt]

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[Joel]

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[Matt]

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[F]

Want to see into the future do you want to understand an invisible force that's shaping your life? Do you want to experience the frontiers of what makes us human? On tech stuff we travel from the mines of Congo to the surface of Mars, from conversations with Nobel Prize winners to the depths of TikTok to ask burning questions about technology, from high tech to low culture and everywhere in between. Join us Listen to tech stuff on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.