Brunell4MVP
Footballguy
Random thoughts of an older guy that has learned from some small errors ...background ... we are fairly fortunate. not top 1%, but maybe top 3%. Put 2 kids through college. Mid-50s and could retire but will keep working for another 5-10 years mostly to cover the cost of medical insurance since we are self-employed and we'd be bored if we didn't have any work to do.
Here's some things I wish I had done different ... and I'll caveat I am not an investment professional. Just feel like we as little people get duped into a few things.
1) buy a house earlier, and pay it off fast. The latter part is not what many experts will tell you. They'll say spread those payments as long as possible and invest your extra instead. And we have a low interest rate of 2.75%. But the freedom of mind for having a paid off house is enormous when it comes to retirement and making decisions later in life. If you happen to pay it off fast, you can then buy rental properties or rent your own place or make more investments. The freedom of no mortgage is more important than the few extra bucks you might make investing You know who tells you to not pay it off? Investment professionals that make money off your investments. Get a 30 year loan to keep the stress down, and try to pay 10% more per payment. Amazing how much you will save in interest. And your investment is in an appreciating asset.
2) do not maximize 401k / IRA plans - I look back on them and almost think it's almost a scam. Why? You do not know the tax rate when you need those funds. And your money is not liquid until you hit age >59, and more likely age 65 or so. In theory you will make less at age 65 when pulling it out than you will in your working years. But what if the tax rate doubles when you take it out? Or you need it earlier? Or the govt changes the rules? It's tied up as part of the system. And you don't control it Do however put in the max for your corporate match. That's free money. Take the free money.
3. Use 529 plans - Why these but not the 401k? Because you are going to use the 529 much earlier in life. And you are gonna pay for college if you have kids so get it out of the way ASAP. It will really help them get off your payroll if they don't have college debt. It's an ease of mind thing to know it's paid for early on.
4. Do not use an investment advisor unless you have more than the inheritance tax threshold. Why? Even if your professional is cheap at like $5k/year ... amortize that over 30 years at the S&P growth rate of 8%. It's almost $700,000 you've paid for that "advice" which is really just an investment mix in one of their standard portfolios. Now once you hit the inheritance threshold, you need legal advice to create trusts and other tax avoidance strategies. That is worth paying for to help the next generation. But $700K in costs for the potential to make 1-2% more in the advisors "investment mix" is not worth the risk.
5. Put all your stock investments into the S%P 500 index fund or a mix of the S&P large, mid, and small caps - Why? It's a great return in the long run. And you do not know more than everyone else. And you certainly don't know more than large firms helping the super wealthy with hundreds of computers figuring it out. Warren Buffett also backs this strategy. If you want play money for crypto or a few individual stocks for fun ... hey live a little. But you are not going to outsmart the system. Just ride the wave that is the US Economy.
6. As odd as it sounds since it's a bad investment, I wish we had signed up for a universal life insurance plan. We did term insurance. Sure it's cheap. It will also go away in a couple of years, or get prohibitively expensive. The ULI would have been better as I look back. It has really helped a few friends that lost spouses. At worst someone is getting a lump sum payout at a low savings rate.
7. If possible, never sell your houses - If you are forced to move, rent your current house and save up for the downpayment on the next. Most of our super wealthy friends have 5-10 homes. They have the dump they started in, then a few move up homes. And they are pulling in $4-8K per house (big metro area). And a few are paid off, so it's pure income other than the taxes and insurance. One of my buddies make $34K/month on rentals where he has paid off the homes. That is living my friends. We sold our $125K TH 25 years ago because we needed the $20K down for the next house. That TH is now worth $680K. What a dumb decision, all to get a smaller payment on the next house. Find a way to hold rather than sell your real estate assets.
8. Teach your kids a budget - our kids are smart and thifty and luckily doing great. they also were not worldly when it came to money. Like what groceries, cars, houses, etc cost Or even what we paid for. Like they had no idea what home or car insurance was. They have learned quickly since getting out of college.. Sit down with them and show them your budget at like ages 11-14. My wife did not want them to know what we made. It's important they understand so they appreciate the value of a good job
9. Earnings potential is so important - When I met my wife I was doing just fine in computer jobs. She was in sales. If you want to make money you need a job that has high potential earnings. You can be very comfy in a normal 8-6 job. Which keeps you up with the Joneses. You want to exceed the standard? It's not an 8-6 job. It a full time, 24 hour, work your *** job and earn commissions or stock incentives or run your own business job. It's not for everyone. But limited income = limited wealth.
I'm sure there are more. But these are the ones I've been stewing through as I look back on my first 50 years.
Here's some things I wish I had done different ... and I'll caveat I am not an investment professional. Just feel like we as little people get duped into a few things.
1) buy a house earlier, and pay it off fast. The latter part is not what many experts will tell you. They'll say spread those payments as long as possible and invest your extra instead. And we have a low interest rate of 2.75%. But the freedom of mind for having a paid off house is enormous when it comes to retirement and making decisions later in life. If you happen to pay it off fast, you can then buy rental properties or rent your own place or make more investments. The freedom of no mortgage is more important than the few extra bucks you might make investing You know who tells you to not pay it off? Investment professionals that make money off your investments. Get a 30 year loan to keep the stress down, and try to pay 10% more per payment. Amazing how much you will save in interest. And your investment is in an appreciating asset.
2) do not maximize 401k / IRA plans - I look back on them and almost think it's almost a scam. Why? You do not know the tax rate when you need those funds. And your money is not liquid until you hit age >59, and more likely age 65 or so. In theory you will make less at age 65 when pulling it out than you will in your working years. But what if the tax rate doubles when you take it out? Or you need it earlier? Or the govt changes the rules? It's tied up as part of the system. And you don't control it Do however put in the max for your corporate match. That's free money. Take the free money.
3. Use 529 plans - Why these but not the 401k? Because you are going to use the 529 much earlier in life. And you are gonna pay for college if you have kids so get it out of the way ASAP. It will really help them get off your payroll if they don't have college debt. It's an ease of mind thing to know it's paid for early on.
4. Do not use an investment advisor unless you have more than the inheritance tax threshold. Why? Even if your professional is cheap at like $5k/year ... amortize that over 30 years at the S&P growth rate of 8%. It's almost $700,000 you've paid for that "advice" which is really just an investment mix in one of their standard portfolios. Now once you hit the inheritance threshold, you need legal advice to create trusts and other tax avoidance strategies. That is worth paying for to help the next generation. But $700K in costs for the potential to make 1-2% more in the advisors "investment mix" is not worth the risk.
5. Put all your stock investments into the S%P 500 index fund or a mix of the S&P large, mid, and small caps - Why? It's a great return in the long run. And you do not know more than everyone else. And you certainly don't know more than large firms helping the super wealthy with hundreds of computers figuring it out. Warren Buffett also backs this strategy. If you want play money for crypto or a few individual stocks for fun ... hey live a little. But you are not going to outsmart the system. Just ride the wave that is the US Economy.
6. As odd as it sounds since it's a bad investment, I wish we had signed up for a universal life insurance plan. We did term insurance. Sure it's cheap. It will also go away in a couple of years, or get prohibitively expensive. The ULI would have been better as I look back. It has really helped a few friends that lost spouses. At worst someone is getting a lump sum payout at a low savings rate.
7. If possible, never sell your houses - If you are forced to move, rent your current house and save up for the downpayment on the next. Most of our super wealthy friends have 5-10 homes. They have the dump they started in, then a few move up homes. And they are pulling in $4-8K per house (big metro area). And a few are paid off, so it's pure income other than the taxes and insurance. One of my buddies make $34K/month on rentals where he has paid off the homes. That is living my friends. We sold our $125K TH 25 years ago because we needed the $20K down for the next house. That TH is now worth $680K. What a dumb decision, all to get a smaller payment on the next house. Find a way to hold rather than sell your real estate assets.
8. Teach your kids a budget - our kids are smart and thifty and luckily doing great. they also were not worldly when it came to money. Like what groceries, cars, houses, etc cost Or even what we paid for. Like they had no idea what home or car insurance was. They have learned quickly since getting out of college.. Sit down with them and show them your budget at like ages 11-14. My wife did not want them to know what we made. It's important they understand so they appreciate the value of a good job
9. Earnings potential is so important - When I met my wife I was doing just fine in computer jobs. She was in sales. If you want to make money you need a job that has high potential earnings. You can be very comfy in a normal 8-6 job. Which keeps you up with the Joneses. You want to exceed the standard? It's not an 8-6 job. It a full time, 24 hour, work your *** job and earn commissions or stock incentives or run your own business job. It's not for everyone. But limited income = limited wealth.
I'm sure there are more. But these are the ones I've been stewing through as I look back on my first 50 years.
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Traditional vs Roth is a major consideration in 401ks. We’ve discussed it before, but I’m happily doing 62% Roth contributions currently, 22% marginal tax rate. If rates stay where they are (Congress might make that happen), I don’t see us ever being below this bracket - whether that’s due to withdrawing from the traditional accounts or social security.
although I’ve been considering I bonds as cash equivalents. Other than not being subject to state tax, is there a reason to make a distinction?
