So Money with Farnoosh Torabi

Episode 1782: Ask Farnoosh: Midlife Investing Goals, Inheritance Strategies, and More
Release Date: January 31, 2025

Introduction

In Episode 1782 of So Money with Farnoosh Torabi, Farnoosh tackles pressing financial questions from her listeners, focusing on midlife investing strategies and inheritance management. This episode, released on January 31, 2025, delves into practical advice for those looking to start investing later in life, navigate inherited investments, and understand the current economic landscape.

Economic Update: Federal Reserve Rate Decisions ([01:30] - [05:15])

Farnoosh begins by discussing the latest economic news, highlighting the Federal Reserve's decision to pause interest rate cuts after three consecutive reductions towards the end of 2024.

Farnoosh Torabi ([03:45]): "Until inflation signals much improvement, I don't think we're going to see any further rate cuts in 2025."

Key Points:

• Impact on Savings and Loans: The pause in rate cuts means high-yield savings accounts will continue to offer favorable interest rates longer than anticipated. Conversely, consumers with credit card debt might not see a reduction in variable interest rates.

• Mortgage Rates: Average 30-year mortgage rates remain around 7%, a factor that continues to deter potential homebuyers amid ongoing bidding wars and limited inventory.

• Advice for Debtors: Farnoosh recommends seeking 0% APR credit cards to manage and pay off existing debt without accruing additional interest within an introductory period, typically 18 months.

Listener Question: Managing Inherited REITs ([16:10] - [32:00])

The focal point of the episode is a listener’s query regarding an inheritance of $20,000 in Real Estate Investment Trusts (REITs) from her late father, now valued at approximately $60,000. She seeks advice on whether to retain or liquidate this investment, considering her inability to invest further in real estate due to high costs and limited availability.

Farnoosh's Response:

Farnoosh Torabi ([22:45]): "Is this REIT performing as well as it has over the last 20 years? You need to look into the fees and how it fits into your overall investment strategy."

Key Considerations:

1. Performance Evaluation: Assess the REIT’s performance over the last five years and review analyst forecasts to understand future potential.
2. Fees and Minimum Investments: Evaluate the fees associated with maintaining or liquidating the REIT. The requirement to invest an additional $5,000 to keep the account open is a significant consideration.
3. Portfolio Diversification: Ensure that holding the REIT does not overly concentrate your portfolio in a single asset class. Diversification is crucial, and Farnoosh advises not to have more than 10% of your portfolio in any one REIT.

Tax Implications:

• Step-Up Basis: The inherited REIT’s basis is reset to its value at the date of the previous owner’s passing, reducing potential capital gains taxes.

Strategic Advice:

• Alternative Investments: If real estate is not viable, consider other investment vehicles such as broad market index funds or real estate crowdfunding platforms to diversify and grow your investment portfolio.

Midlife Investing: Starting in Your 40s and Beyond ([32:00] - [50:00])

Farnoosh addresses another common question about initiating an investment strategy in midlife, emphasizing that it is never too late to start investing.

Key Strategies:

1. Maximize Retirement Accounts:

   • 401(k) or 403(b): Contribute as much as possible, especially to capture employer matches, which can significantly boost retirement savings.
   • Tax Advantages: Contributions reduce taxable income, providing immediate financial benefits.

2. Utilize IRAs:

   • Roth IRA: Ideal for those who qualify, offering tax-free growth and withdrawals in retirement.
   • Traditional IRA: Suitable for those who do not qualify for Roth IRAs, providing tax-deferred growth.

3. Supplement with Brokerage Accounts:

   • Robo-Advisors: Affordable and efficient, robo-advisors offer personalized investment strategies based on individual risk tolerance and goals.
   • Diversification: Invest in a mix of stocks and bonds to balance growth and stability, leveraging low-cost index funds and ETFs.

Farnoosh’s Insights:

Farnoosh Torabi ([40:20]): "If you're in your 40s, you can't beat around the bush anymore. You need to start investing now to secure your financial future."

Additional Considerations:

• Compound Interest: While starting later reduces the time money has to grow, consistent contributions and strategic investing can still build significant wealth.
• Financial Goals: Clarify personal financial objectives, whether it's retirement, education, or personal independence, to tailor investment strategies effectively.

Previous Episodes Highlight ([50:00] - [55:00])

Farnoosh briefly recaps two impactful episodes from the past week:

1. Ann Lee Swelf’s Battle with Cancer (Episode 1780): A deeply personal story about surviving stage three triple-negative breast cancer, focusing on advocating for oneself in medical and financial matters.
2. Dan Shaw Bell on AI-Proofing Careers (Wednesday Interview): Insights into how AI is reshaping the job market, particularly threatening entry-level positions, and strategies for adapting to these changes.

Announcements and Resources ([55:00] - [32:22])

Farnoosh shares valuable resources and upcoming events:

• Free Investing Blueprint: A comprehensive guide for listeners to start or enhance their investment strategies, available in the show notes.

• Book to Brand Workshop: A live event in New York City on March 7th, focused on helping aspiring authors write prescriptive nonfiction books. Early bird pricing is available until February 2nd.

Closing Remarks and Community Engagement ([32:22] - End)

Farnoosh encourages listeners to share their success stories and engage with the So Money community. She highlights the impact of the podcast on listeners' financial lives and invites them to contribute their experiences for potential feature episodes.

Notable Quotes

• Farnoosh Torabi ([03:45]): "Until inflation signals much improvement, I don't think we're going to see any further rate cuts in 2025."
• Farnoosh Torabi ([22:45]): "Is this REIT performing as well as it has over the last 20 years? You need to look into the fees and how it fits into your overall investment strategy."
• Farnoosh Torabi ([40:20]): "If you're in your 40s, you can't beat around the bush anymore. You need to start investing now to secure your financial future."

Conclusion

Episode 1782 of So Money with Farnoosh Torabi provides invaluable guidance for midlife individuals contemplating their investment strategies and managing inherited assets. Farnoosh combines expert economic analysis with personalized advice, empowering listeners to make informed financial decisions regardless of their starting point. Whether navigating the complexities of inherited REITs or embarking on a new investment journey in your 40s, Farnoosh offers actionable insights to help secure a prosperous financial future.

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