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Ask Todd Your Single Most Important Question About Investing, Personal Finance, Retirement Planning, Or Financial Freedom — It’s Free!

Just enter your question in the comments box below – it’s that simple. I will then reply back with an answer.

“A prudent question is one half of wisdom.”

Sir Francis Bacon

Why do I offer this service for free? The truth is we’re really helping each other because your questions teach me what my readers are most interested in learning. When you provide questions it helps me focus my writing on what interests you the most. You get relevant content and I get happy readers – we both win.

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Now, what is your single most important question about investing, personal finance, retirement planning, or financial freedom?

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Todd R. Tresidder – Founder, FinancialMentor.Com

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181 comments
Michiel Derboven
Michiel Derboven

Hi Todd


I have got only one question really. But believe me it is a tough one..:)  How can you legally use other people's money to create leverage? I have got a stock portfolio but it frustrates me that it grows so slowly. I wish I had some kind of a cash generator or some kind of leverage I could use to speed up the process. 10 percent of 1000 dollars is still only 100 dollars. 10 percent of 100.000 dollars is 10.000...  I want to become financially independent, so that I can teach other people how to become financially free. 




Kind regards, 


M.D.

Karen81581
Karen81581

I signed up for the news letter- how can I access the e-book?

Thanks

1Giacomo1
1Giacomo1

Too many questions not enough time!! I am a 58 yr old male (married) looking to (hoping) ride off into the sunset at the prescribed 66 1/3  that SSA has pre-defined for me. It would appear that if I stay the course (fingers crossed) I should be OK--the particulars--600K house - 120K mortgage @ 3,4% 30 yr refi about yr ago for home improvements. 1.2+ mil in rollover/savings/mutuals funds--majority in tax deferred  rollover. If i was to sell my house and take 500k in equity --my desire is to downsize and move into a better (lower tax area) would it be best to take the entire amount and place into an annuity and use annual gains to pay for mortgage or tie up the cash in a house/residence.?

 BTW--I am a student of the game and have rode out the worst of the storm and patience has rewarded me with a 31% return last year and expect modest but at least 11-14% this yr as well--likely going to resort to a safe harbor style in the next yr or so---what are the best annuity style to consider---need to preserve capital and max return?---for 25 yrs.


Thank you in advance for your response.


JH

dbdavidson
dbdavidson

I got to your page from a link in an article about the top three web retirement calculators (http://www.caniretireyet.com/the-3-best-free-retirement-calculators/).  In the article it mentions Monte Carlo was not used by design. It stated "Todd believes probabilistic retirement planning is fundamentally flawed." Could you explain the flaws you see with Monte Carlo for retirement planning?

indygal17
indygal17

Hi Todd,

Love your calculator!  Can you please explain how the "Net Present Value" field is determined in your report?

Thanks!

Alice

Mac510
Mac510

Should I continue investing my Roth IRA in a target fundour other mutual funds or individual stocks?

wemasiew
wemasiew

Hey Todd.  I'll try to keep this short and sweet. 

SITUATION: I'm 27, wife is 25, and we just had a our first child.  We purchased a nice home in 2008 for 130K which is now valued at 240K (plan to stay in this home for many, many years).  Our mortgage was 104K and is now down to 68K with a 4.6 interest rate - I've been making more than double payment every month in an effort to get it paid off.  We are on track to have it wiped away within 5.5 years.  I put away 13% into 401K, and max out two Roths at 11K, have a 30K emergency fund, and additional 50K in savings + 60K in retirement (Roth/401), and no other debts.

QUESTION: My goal is to have 100K in principle invested by the time I hit 30 and my mortgage down to about 40K, which should not be a problem assuming I stay on my current plan.  However, after I read your article, I'm second guessing my logic of throwing so much money at my mortgage ($1,250 a month/actual payment due is $534).  Should I scale that back and invest more in retirement and/or college funds and let our good friend compound interest take affect?  Or do I continue on with the above plan and once the mortgage is gone in 5.5 years, take those funds (15K annually) and immediately shift them into college/retirement savings? 

Awesome site, great advice!  You have gained one more loyal reader!

Thanks,

Mark

Garthe1
Garthe1

I had a home equity loan with Beneficial and then they switched me to HSBC and supposebly I already finished paying my principal but there is a deferred interest somewhere and they don't want to tell me how much I owe and to who it seems now its a Spring Castle acct# I have hit so many walls trying to get that account closed and no answers. Any suggestions I appreciate it maybe get a lawyer?

PEhinger
PEhinger

I have purchased a home and contacted the financial institution which purchased my loan. I told them that I intended to make bi-weekly payments and they said that they did not accept them and their system was not set up to handle them. How can I get them to accept the bi weekly payments?

growingwealth
growingwealth

I have a lump sum of cash - enough to pay off my mortgage. After reading your article "Should I Pay Off My Mortgage Early or Invest?" I have come to the conclusion that it is best not to pay off the mortgage. However, the issue I face now is that I'm not sure now is a good time to get into the market. You talk about mathematical expectations in one of your articles. How can I determine the mathematical expectation for return assuming I invest today in a broad market ETF (e.g. Vanguard VTI)?

dynamicthinker
dynamicthinker

I apprecite your words of wisdom, I am in the process of starting my own wealth building business, my question to you is "I would like to think about an approach for people who are not smart enough to appreciate what you are saying? And yes I know it contradicts the third link. Also like you said you must go outside your comfort zone 

ManyPossibilities
ManyPossibilities

Hi Todd,

 

Your book(s) on Risk Analysis and Buy/Sell discipline aren't out yet, so what should I be reading on the subject while I wait?

 

I'm in my mid-fifties, with about $2M passively invested in low-cost stock mutual funds/ETFs (somewhere near PAW, I guess - no inheritance nor windfall, etc).  And nope, not in control.  I rode the market all the way down in 2008, and have kept adding all the way back up to today - and am realizing I have no clear understanding of when, why or how to buy or sell.  I fall squarely in the "conscious incompetence" of stage 2; well, at least it's nice to have the problem identified! And it's past time to address it. 

 

I don't blame anybody/anything else for my ignorance, and I am educable.   I have no problem with math nor complex systems, nor with work/study, and can handle ambiguity.  But I am a still busy with demanding career, and would appreciate at least a few pointers to get me started in the right direction.

 

My real question is what books/authors would you recommend (and in what order) to me, and others in my position, to cut through the babble, and form a good foundation for improving understanding and behaviors, and start advancing to stage 3?

 

Thank you for your site, and for your insights!

 

WantingToBeFree
WantingToBeFree

Hi Todd,

I've read most of your book "How much do I need to retire?" and have been playing with the calculators.  At 60 years old and with 1.3 million in savings, the future for retirement at a reasonable lifestyle seems bleak.  Most people I know have a whole lot less than we do.  What is wrong with this picture?  We feel like we have to work until we are 70 and stash huge chunks of money away in the meantime and cut our lifestyle way back and we don't live extravagantly.

Gordon G
Gordon G

Todd.. Have you studied the effects of Hyperinflation on values of real estate as an investment?

How many countries fiat currencies have experienced  a Hyper-inflationary event occurring including the U.S.A!Even when this deflationary price decline in houses stops and reverses hasnt Hyperinflation destroyed real estate investors returns calculated in real inflation adjusted  dollars?Houses would not be affordable with interest rate increases, and to compensate for this  home values would have to decline to more depressed levels for buyers to come in would they not?

Barry Heaven
Barry Heaven

Hi,

 

I have just read "How Much Money Do I Need To Retire" and found it an excellent guide. Some years ago I was looking for something that would enable me to forecast when I could retire and what income I could afford. Not finding anything suitable I created a fairly complex spreadsheet to help me do that. Not being a financial expert I used some basic first principles to model my situation taking into account various variables.

 

Your book pointed me to your Ultimate Retirement Calculator, so I inputted the same data into it. I was very pleased to find the results very closely matched mine. Not being an expert I found this very reassuring as I always had an element of doubt that I had missed something important!

 

I am British so I had to take account of this when adding the 'Federal and State Tax Rate' figure. As I don't understand the US tax system I found it was best to set this to zero and then just enter all data as net of tax. My question is - is this the best way to do this for British users? 

 

Many thanks for your book and calculators. I thoroughly recommend them. Have you considered creating versions of your calculators for the UK? I think there would be a lot of interest as pensions and retirement are hot topics at the moment and many changes are being proposed for public sector and state pensions.

 

dougcoates
dougcoates

Age 60, self employed consultant working through an S Corporation.

I can write myself a $50,000 paycheck for 2012, which allows me to put $35,000 into 401k retirement funds, and reduces my W/H Tax, but not SSEC & MEDI taxes.  The "cost" of the $35,000 retirement investment is $7220 in taxes (excludes W/H taxes), which is 20% of the amount invested.  

Why would I pay a 20% effective cost in order to put $35k in retirement.  Is the gain on the investment going to make this cost worthwhile.   

1)  am I better off taking the $50,000 as corporate dividends and putting it into moderate risk investment accounts.

2)  are there other investment vehicles that I could use that would reduce or eliminate the tax "costs" that the above approach incurs?

Finishedat50
Finishedat50

I just finished "How Much Money Do I Need To Retire" (posted 5 star review on Amazon today- it was excellent), and I'm really interested in the "Buckets of Risk" retirement strategy. If I understand correctly this strategy is based on the purchase of annuities to ensure your basic needs are covered- even if you live a very long life. However, after doing a little research and looking at the description of your "Variable Annuities Pros and Cons" book on Amazon, it would seem that annuities should only be purchased by a small subset of retirees. My question is: I've already read "How Much Money Do I Need To Retire", so what should be my next step to really understand how to put together a comprehensive "Buckets of Risk" retirement strategy?

 

Thanks in advance for your response, and time that your devoting to this.

SixtyTwo
SixtyTwo

I am here for your advice after reading your "Pay Off Mortgage Early Or Invest- The Complete Guide".   Thanks for the excellent article.   

 

I have a house with mortgage of 141K (3.875% 15 years fixed, $1,146 monthly payment) and equity of 589K.  I currently received 500 K inheritance money.  I am only eligible to borrow 250K.  

 

What are wise options to invest my 500K cash at age of 62?  

 

1.  Does this real estate investment make sense?  Cash out 100K from 1st house refinance to purchase a 2nd house of 600K with tax ~1.1% plus HOA in Carlsbad California.  Expected rental income is from  $2,500 to $3,000/mo for 2nd house, $3,000 to $3,250 for 1st house.

 

2. Equality investment:  1/3 in stocks/ETFs, 1/3 in mutual funds, and 1/3 in fixed income fund. 

 

3.  What are your recommendations?

 

Thanks

 

 

 

bjackson1
bjackson1

Hello Todd,

I found your website through Darrow Kirkpatrick's website and found your website very interesting.  I am looking forward to exploring it further in the next couple of days.  We share some of the same values in terms of spending and investing.  I have read the Millionaire Next Door book and consider myself a prodigious investor and I have followed Dave Ramsey's principles for over 7 years now.  Consequently, my wife and I are debt free with the exception of our house.  I have two quick questions I would love you  to answer when you have some time.  Thank you in advance for your help. 

Here is some information that may be beneficial to you in answering my questions.

Income (low side $150K to high side $250K)-I own a small business

Home is currently valued at $350K and we owe $205K. No other debt outside of our mortgage.

Loan is a 15 yr fixed at 3.25%

Investment assets are $430,000

My age is 44

1) If I want to retire in the next 10 to 12 years, do I have too much house?  In other words, should I downsize to a house that could be paid for in cash from my current equity.

2) Dave Ramsey recommends investing 15% of your gross and we have been investing in the 15 to 20% range.  What do you recommend given my retirement timeline?

Any input would be greatly appreciated.

Thank you Todd.

Brian

benjamin12
benjamin12

Hi Todd,

 

I just heard you on the YNAB (You Need a Budget) podcast and decided to check out your website. I have found your website to be really inspirational and motivating. I know a great deal about personal finances and investing. However, I am not satisfied at all with my career and am looking for a change...but a little lost at the moment of what direction I want to go in.

 

I like your thoughts of when you were about to graduate and you saw the homeless people on the benches and how "free" they were compared to your college friends who were to go to work in cubicles. I feel the same way and would rather work for myself but I don't think I'm the entreprenuer type. I enjoy learning how to build wealth. I would love to manage a hedge fund like you or Warren Buffett (big fan!) but it requires the capital from investors to get started in that field. I guess I'm looking more for a career advice than financial advice so I don't know what tips you could offer? I'm going to continue browsing your site for any career advice type articles.

 

Thanks for the knowledge you share.

Financialmentor
Financialmentor moderator

@Karen81581 You'll see the ebook and the link to download it when you confirm your subscription. Aweber (the mail list host) sends a confirmation message to verify you are the real person and wanted to sign up (known as double opt in). When you verify your subscription request a page will open in your browser with the ebook and a link to download. In addition, if you missed it then, no worries. It comes again somewhere around the 5th message (I think) in the email series you get as a new subscriber. In the end, you can't miss it. Hope that helps...

Financialmentor
Financialmentor moderator

@1Giacomo1 These questions sound appropriate for your personal financial advisor who will have all your portfolio information, expenses, and more. This column is not the right venue due to lack of sufficient information, inability to interact personally with discussion to flesh out details, etc. You are seeking personal financial advice which is best obtained from your own personal financial advisor. Hope that helps point you in the right direction.

Financialmentor
Financialmentor moderator

@dbdavidson I will be adding an entire article explaining this issue in the future. In a nutshell, Monte Carlo stands on the foundation of randomization, but financial markets aren't random. They are not predictable either, but they aren't random. They are probabilistic. When you ignore this reality it creates more misinformation than value and causes false conclusions. For example, as of this writing I'm dealing with many retirees who are told they have a 5-10% failure risk according to Monte Carlo. Hogwash. If you look at the data you'll see the risk of failure is much higher because 100% of those failure periods are composed of data subsequent to valuations/interest rates that were comparable to today's. The reality is those same people are sitting on extremely high failure risk given a deeper understanding of how it all works but they are being deceived by randomization of data that isn't random at all. Hope that makes sense as a quick explanation.

Financialmentor
Financialmentor moderator

@indygal17Glad you like it. If you are referring to the Present Value calculator then the formula and math are explained in the article found by expanding the box underneath the calculator. Hope that helps.

Financialmentor
Financialmentor moderator

@Mac510I wish I had a crystal ball so I could answer that question. Alas, I have no ability to divine the future. Seriously though, there is so much personal information that would have to be known to answer this properly that there is no way to do this question justice in this format. I suggest you examine the article "What Is A Good Investment?" on this site for some insights into the underlying problem with this question. It should be quite helpful.

Financialmentor
Financialmentor moderator

@wemasiew Hi Mark, the answer to your question is a personal statement of values. Since you've read my article on this subject you already know the math. The article provides the complete solution with the complete answer. There is nothing I can add here. If there was more to add, I would have included it in the article. Your personal decision is a personal statement of values and personal preferences (once you are clear on the math and priorities and discussed in the article). There is no right-wrong answer beyond those clearly spelled out in the article. Hope that helps.

Financialmentor
Financialmentor moderator

@Garthe1 Sorry, but I have no opinion here and can't be helpful. The question is specific to your situation and just requires follow through on your part to resolve. It is details and should not be difficult to resolve. Persistence.

Financialmentor
Financialmentor moderator

@growingwealth Good resources for mathematical expectation estimates for the U.S. broad market include Crestmont Research and related books authored by Ed Easterling, the weekly updates by John Hussman on Hussman Funds website, and the monthly updates by Doug Short on Dshort.com (now an Advisor Perspectives site). Hope that helps.

Financialmentor
Financialmentor moderator

@dynamicthinkerUmmm, that's not actually a question. Anyway, if you are asking what approach I think would be valid, the truth is my job is to simplify as much as possible. If I felt it could be stated any more simply without losing validity than I would do so. As Einstein said, "Everything should be made as simple as possible, but not simpler."

Financialmentor
Financialmentor moderator

 @ManyPossibilities I can recommend books, but without coaching you won't put the pieces together properly. Clients tell me it is the coaching that makes sense of the reading and organizes it into a cohesive system. I know that sounds like a pitch, but it is only halfway. I'm planning on offering a course in October on advanced investing that would be perfect for your needs. However, if  you don't want to wait that long then one-on-one coaching would be the solution. At your net worth, it would makes sense to pay for the personal attention and not wait. If you just want book recommendations, a good starting point would be Ed Easterling's "Unexpected Returns". It is not a page-turner, but the info and research in it is golden. Hope that helps.

Financialmentor
Financialmentor moderator

 @WantingToBeFree What is wrong with this picture is our government has waged war on savers through artificially lowering interest rates below where they should be normally in an effort to prop up the bubble and inflate asset prices. This has the fully intended effect of stealing money from savers and giving it to the big banks who caused all these problems in the first place with their irresponsible lending practices and greed. How's that for a little rant? In other words, I totally side with you and believe it is ridiculous that your 1.3 million is not enough, but that is the reality retirees face today thanks to our unethical government and the powerful banking lobbies. It is unacceptable.

Financialmentor
Financialmentor moderator

 @Gordon G The mistake in your analysis is common. Returns in real estate are always a function of the financing leverage applied. The small bit of research I have seen on real estate prices in strong inflationary times is that it does lag on a cash basis due to the negative impact of high interest rates. However, that misses how the return equation in real estate actually works. When you finance real estate your are essentially shorting your own currency by borrowing and repaying in cheaper dollars later. In addition, the return must be calculated on the value of the invested capital (down payment plus expenses) instead of the value of the real estate. That leverage multiplies the return when compared to a cash basis.

Financialmentor
Financialmentor moderator

 @Barry Heaven Thanks for your support! Yes, I'm really happy with how the book is being received because it took a fairly controversial stance. Regarding the calculator, it is actually currency agnostic. You could just use British tax rates and British Pounds and it will work the same. All entries can easily be adapted to your country of choice since they all just represent pension flows, assets, and cash flows. You just need to relabel things a bit in your mind as you work through it. Am I missing something?

Financialmentor
Financialmentor moderator

 @dougcoates This question is best directed to your CPA who will have intimate knowledge of your complete tax picture. With that knowledge the answers should be simple.

Financialmentor
Financialmentor moderator

 @Finishedat50 Glad you liked the How Much To Retire book. Be careful when looking at annuities (and my book on Variable Annuities)  to draw a clear distinction between fixed and variable annuities. The variable annuity book serves as a smart consumer's guide to that specific investment product and does not apply to fixed annuities. They are very different animals.

 

Regarding your question, the "next steps" for the "buckets of risk" are to secure a solid base of fixed annuities to support basic living costs as described in the book and to employ the other strategies in the book and on this site for your remaining assets. Hope that helps clarify.

Financialmentor
Financialmentor moderator

 @SixtyTwo Sorry, but your question is too complex (and too important) to answer in a blog comment properly. There are many issues to consider and quite a bit at risk. Proper risk/reward analysis tells you to pursue this question in depth with properly paid advisers and not limit yourself to the free choices available. This decision will have important long-term implications and must receive proper personalized financial advice. Hope that helps.

Financialmentor
Financialmentor moderator

 @bjackson1 See my article on this site "How Anyone Can Retire in 10 Years (or less!). This should answer your questions.

Financialmentor
Financialmentor moderator

 @benjamin12 I'm a big fan of Cal Newport's work in this area at Study Hacks (calnewport.com) . Hope that helps!

 

Financialmentor
Financialmentor moderator

 @benjamin12 I don't offer much in the way of career advice; however, I do recommend you work for knowledge - not money. Focus on developing incredibly valuable, rare, and useful skills. The money will eventually flow to those skills.

indygal17
indygal17

@Financialmentor@indygal17Wow- that was fast--thank you!  I actually meant the ultimate retirement calculator.  But reviewing your Present Value calculator with article is an excellent explanation.

WantingToBeFree
WantingToBeFree

@Financialmentor @WantingToBeFree Thanks for our response. I knew you would be able to explain this to me. So any suggestions on what to do? We have a reasonably conservative portfolio making about 4% annually and it costs about $6,000/ year to pay for our financial advisor. Is there a wiser approach out there? Thanks for your response.

Financialmentor
Financialmentor moderator

 @WantingToBeFree  @Financialmentor  @WantingToBeFree That depends on if the financial advisor is adding value in excess of what he costs and it also depends on the investment strategy employed. If you are doing passive asset allocation (buy and hold) there is seldom a reason to pay an advisor because research consistently proves that cost control through low cost indexing is the smartest strategy. With that said, your personal financial situation is beyond the scope of a comment stream because there are so many personal variations. I'm just stating generic educational principles to be helpful.

Gordon G
Gordon G

 @Financialmentor It seems  the students fault  for the genuine questions being asked to understand  a topic made complicated by the institutions who wish to keep knowlege of the money game confusing..to discourage truth.The teacher is never  responsible for the communication being  not understood.

Financialmentor
Financialmentor moderator

 @Gordon G I see now that you are not actually asking questions but are pre-sold on this idea and using this forum to promote and spread it. Hopefully you've had your say and feel complete. I will delete any further comments. Thanks.

Financialmentor
Financialmentor moderator

 @Gordon G  @Financialmentor We have different standards in research. I'm familiar with what you are citing and consider it my "small bit of research". The equations are more complicated than cited in his discussion. The basic point is valid, but history never repeats: it only rhymes. The problem with hyperinflation and high inflation is we have limited data - "i.e. small bit of research". It is difficult to make gross generalizations. As I said, I agree that availability of credit is a primary factor in real estate pricing, but the evidence does not support the gross overgeneralizations made in the piece you are citing. For example, prices might go flat or decline for brief periods during maximum financial stress but could bounce subsequently giving a solid return net of inflation, leverage, and tax impacts. There is much more to understand.