So Money with Farnoosh Torabi: Episode 1755 Summary

Release Date: November 29, 2024

Introduction and Upcoming Topics

In Episode 1755 of "So Money with Farnoosh Torabi," released on November 29, 2024, host Farnoosh Torabi delves into financial strategies surrounding family and personal finance as the year winds down. She introduces an exciting lineup focused on "Affording Children in America," targeting prospective and new parents with insights on managing the financial ebb and flow associated with raising children.

Farnoosh shares her personal experiences transitioning back to the hustle of daily life post-summer, juggling kids' schedules, and preparing for the fall season. She emphasizes the importance of balancing financial planning with career aspirations, especially when entering or expanding a family.

Notable Quote:

"We have experts from the financial world, from the pediatric world, as well as the career world to help us answer questions about how to do it all, how to afford it all, not just financially, but also our careers." (02:15)

Listener Questions and Farnoosh's Responses

1. Adding Your Child as an Employee

Question from Lori:
Lori from the audience inquires about the feasibility and benefits of adding her two-year-old son as an employee in her business, primarily to use his photos for promotional purposes.

Farnoosh's Response:
Farnoosh explains that while there are potential tax benefits to adding a child to a business’s payroll—such as funding a Roth IRA for the child and taking advantage of business tax deductions—there are strict IRS guidelines and child labor laws to consider. She advises consulting with a tax planner and an employment law specialist to ensure compliance. Farnoosh also highlights the recently passed Illinois law requiring parents to set aside part of their earnings from children's appearances on monetized social media, advocating for ethical financial planning for child influencers.

Notable Quote:

"There’s a lot of parent influencers out there that are leveraging their kids essentially financially monetizing from their children... it just makes sense that if you’re going to use your kids to run your business, they get some of that right when they get older." (11:45)

2. Opening a 529 Plan for Oneself

Question from Ann in California:
Ann is planning to return to school in two to three years for a bachelor's degree and seeks advice on whether to set up a 529 plan for herself or opt for a Certificate of Deposit (CD).

Farnoosh's Response:
Farnoosh outlines the various investment options within California’s 529 plans, including age-based portfolios and individual fund selections. She advises against using a 529 for short-term goals due to market volatility but acknowledges the tax benefits, such as tax-free growth and withdrawals for qualified education expenses. Alternatively, she suggests high-yield savings accounts or CDs as safer options with guaranteed returns, especially considering the current trend of falling interest rates.

Notable Quote:

"Generally speaking, we don’t want to invest money that is needed before a five year mark... you don’t want to risk that." (10:30)

3. Handling 401k Transition

Question from Kristen:
Kristen is upset with her employer's decision to transition their retirement plan from a 401k to an IRA. She seeks advice on whether to convert her 401k funds to her existing Roth IRA or open a new Traditional IRA to avoid having too many accounts.

Farnoosh's Response:
Farnoosh recommends considering a rollover to an existing Roth IRA if Kristen can afford the tax implications, as this allows for tax-free growth and withdrawals in retirement. She emphasizes the importance of consulting a tax professional to assess the tax impact. If avoiding immediate taxes is a priority, she advises rolling over the 401k into a Traditional IRA to maintain the tax-deferred status. Farnoosh warns against allowing the 401k funds to default to personal distribution, which could result in significant taxes and penalties.

Notable Quote:

"The thing you want to avoid is having this 401k money get sent to you in the mail in the form of a check or just cashed out somehow because then you’re going to lose a lot of value." (16:45)

Podcast Community Engagement

Farnoosh encourages listeners to engage with the "So Money" community by subscribing to the podcast to receive the latest episodes and joining the So Money Members Club for exclusive access to workshops, office hours, and a supportive financial community. She highlights the benefits of membership, including commercial-free podcast access and the opportunity to interact with like-minded individuals focused on financial growth.

Additionally, Farnoosh announces a giveaway for Apple Podcast reviewers, offering a free 15-minute phone call and a complimentary first month in the Members Club for those who leave a review on the podcast.

Notable Quote:

"If you ever have a question for these Friday episodes, it’s very easy to get in touch. You can go to somoneypodcast.com and click on the Ask for Farnoosh button at the top right." (15:30)

Conclusion

Farnoosh wraps up the episode by reiterating the importance of proactive financial planning, especially when it comes to family and career. She previews upcoming workshops on housing decisions—whether to buy or rent—and emphasizes the value of community support through the So Money Members Club. Farnoosh invites listeners to reach out with their questions via various channels, ensuring continuous engagement and personalized financial guidance.

Final Note:

"I hope your weekend is so Money." (23:50)

This episode of "So Money with Farnoosh Torabi" provides valuable insights into integrating family financial planning with personal career goals, offering expert advice on complex financial decisions faced by modern parents and professionals.