So Money with Farnoosh Torabi

Episode 1845: Ask Farnoosh: Paid Off Mortgage. Now What? College Savings Problems, Roth 401(k) vs Roth IRAs and More
Release Date: June 27, 2025

Personal Anecdote: A Memorable Birthday and Life Lessons

Farnoosh Torabi opens the episode by sharing a heartwarming personal story about attending a Real Madrid FC Salzburg match with her 11-year-old son, Evan, fulfilling his birthday wish. This experience not only strengthened their bond but also provided Farnoosh with valuable insights into financial priorities and the sacrifices often made for passions like sports.

[04:30] Farnoosh Torabi: "Soccer is an incredible international sport that brings so many of us together, especially when it feels like we're not connected otherwise."

She reflects on the balance between supporting her children's interests and managing family finances, highlighting a poignant conversation with her 8-year-old daughter about the disproportionate responsibilities often placed on mothers.

[06:23] Farnoosh Torabi: "Society puts more pressure on moms to show up for everything, and it's not fair. But having your own money gives you the power to make choices."

Weekly Financial Headlines and Insights

Farnoosh transitions into discussing the latest financial trends and news, providing listeners with actionable advice and deeper understanding of emerging topics.

1. Rent Reporting Boosts Credit Scores
   A New York Times report reveals that tenants who have their rent payments reported to credit bureaus can significantly improve their credit scores. The Urban Institute study cited shows that renters in the reporting group are more likely to achieve a score of 601 or higher—a "near prime" range that enhances access to better loan rates and credit opportunities.

   [07:55] Farnoosh Torabi: "If you're a renter, ask your landlord if they offer rent reporting. It's a low-effort way to build or repair your credit."

2. Prenuptial Agreements on the Rise
   Highlighting the high-profile marriage of Jeff Bezos and Lauren Sanchez, Farnoosh notes the increasing prevalence of prenups, especially among millennials and Gen Zers. She emphasizes that prenups are not just for the wealthy but are becoming standard practice for protecting assets, businesses, and future earnings.

   [09:10] Farnoosh Torabi: "Prenups are becoming much more common, even for those who aren't billionaires, as a way to protect what's important to them."

3. Subscription Fatigue is Real
   Citing a CNET survey, Farnoosh discusses the growing trend of "subscription fatigue," where about 60% of adults are reconsidering their various subscriptions. She shares her personal experience of canceling a gym membership to better align with her changing lifestyle and financial priorities.

   [10:30] Farnoosh Torabi: "Don't be afraid to audit your expenses and make those cuts. It's the low-hanging fruit we can address, especially when concerned about job security."

Listener Questions: Navigating Financial Milestones and Choices

1. Paid Off Mortgage: What’s Next?
Question from Jason: "My wife and I are 36 with two young kids. We've just paid off our house. What should we do with the extra money?"

Farnoosh’s Advice:

• Emergency Fund: Ensure you have 6-9 months of savings.
• Retirement Planning: Assess and enhance your retirement savings.
• College Savings: Start or bolster 529 plans for your children's education.
• Future Investments: Consider purchasing a vacation home or investing in another property.
• Financial Planning: Consult a financial advisor to align your newfound financial freedom with long-term goals.

[16:48] Farnoosh Torabi: "You have a lot of options now, and that's financial freedom in my book. Prioritize what matters most to your family and dedicate the extra funds to those goals."

2. College Savings Challenges and Parental Support
Question from Marianne:
"My daughter is entering her third year of law school. We've been supporting her with $1,400 monthly, but we're running out of money after also funding our other child’s bachelor's degree. Should we continue or focus on our growing bills?"

Farnoosh’s Advice:

• Assess Financial Health: Prioritize your own retirement and financial stability.
• Conversations with Your Daughter: Have an honest discussion about financial boundaries and expectations.
• Encourage Financial Responsibility: Emphasize the importance of your daughter managing her own student loans and future financial independence.

[22:00] Farnoosh Torabi: "It's time to have a conversation with your daughter and be honest about your financial limitations while still supporting her aspirations."

3. Roth 401(k) vs Roth IRA: Making the Right Choice
Question from Krisa:
"I have a 401(k) and am considering opening a traditional IRA as well. Also, I'm curious about the differences between Roth 401(k)s and Roth IRAs."

Farnoosh’s Advice:

• Traditional IRA Benefits: Offers more diverse investment options and higher contribution limits if you've maxed out your 401(k).
• Roth 401(k) vs Roth IRA:
  • Contribution Limits: Roth 401(k) allows higher annual contributions compared to Roth IRAs.
  • Required Distributions: Roth IRAs do not have required minimum distributions, unlike Roth 401(k)s.
  • Employer Matching: Only Roth 401(k)s may offer employer matching contributions.
• Investment Strategy: Evaluate the performance of your current 401(k) target date funds and consider diversifying your portfolio with a Roth IRA if better options are available.

[30:09] Farnoosh Torabi: "Do your homework and don't just assume convenience is the best option. If target date funds aren’t performing well, explore other investment vehicles that align better with your financial goals."

Key Takeaways and Final Thoughts

• Financial Empowerment: Building and maintaining credit through rent reporting can open doors to better financial opportunities.
• Protecting Assets: Prenups are an increasingly common tool for safeguarding personal and professional assets.
• Managing Subscriptions: Regularly reviewing and trimming subscriptions can free up significant financial resources.
• Post-Mortgage Strategies: Paying off a mortgage early provides financial flexibility, but it's crucial to have a strategic plan for utilizing the freed-up funds.
• Balancing Family Finances: Supporting children’s education is important, but so is ensuring your own financial security and retirement plans.
• Retirement Accounts: Understanding the nuances between different retirement accounts can optimize your investment strategy and financial growth.

Farnoosh encourages listeners to take proactive steps in managing their finances, seeking professional advice when necessary, and making informed decisions that align with their long-term goals and personal values.

Notable Quotes with Timestamps

• On Rent Reporting:

  "If you're a renter, ask your landlord if they offer rent reporting. It's a low-effort way to build or repair your credit."
  [07:55]

• On Prenuptial Agreements:

  "Prenups are becoming much more common, even for those who aren't billionaires, as a way to protect what's important to them."
  [09:10]

• On Subscription Fatigue:

  "Don't be afraid to audit your expenses and make those cuts. It's the low-hanging fruit we can address, especially when concerned about job security."
  [10:30]

• On Financial Freedom Post-Mortgage:

  "You have a lot of options now, and that's financial freedom in my book. Prioritize what matters most to your family and dedicate the extra funds to those goals."
  [16:48]

• On Supporting Children’s Education:

  "It's time to have a conversation with your daughter and be honest about your financial limitations while still supporting her aspirations."
  [22:00]

• On Choosing Retirement Accounts:

  "Do your homework and don't just assume convenience is the best option. If target date funds aren’t performing well, explore other investment vehicles that align better with your financial goals."
  [30:09]

For more insights and personalized financial advice, tune into future episodes of So Money with Farnoosh Torabi and join the So Money Members Club at SoMoneyMembers.com.