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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.

How will your question get answered? Some get replies right on this page while others with wide appeal get a blog post devoted to the answer so make sure you subscribe to get your answer sent directly to you. The sign-up box is in the sidebar to your right.

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

Thank you for your support,

Todd R. Tresidder – Founder, FinancialMentor.Com

184 comments

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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

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."

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!

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.

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.

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.

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.

WantingToBeFree

@Financialmentor @WantingToBeFree Can you either explain or point me to something that explains cost control through low cost indexing? Thanks again.

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

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?

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.

Gordon G

@Financialmentor The mistake in your analysis is You did say small bit of research you have seen...Something to consider.. when peoples wages do not increase while inflation costs them more especially in an economy where there is a unofficially reported higher unemployment ratehttp://www.freedomportal.net/forum/index.php?topic=20350.0

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 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.

Gordon G

@Financialmentor With rates at historic lows...what will happen if/when rates move up .. have you seen this kind of analysis.There is also great risk in that 21 Countries Have Experienced Hyperinflation In Last 25 Years – Is the U.S. Next!

http://www.zerohedge.com/article/guest-post-how-increasing-inflation-could-affect-housing-prices-correlating-mortgage-rates-a

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.

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.

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?

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?

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.

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.

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.

Finishedat50

@Financialmentor Perfect. Thank you

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

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.

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

Financialmentor moderator

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

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 moderator

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

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.

sadykhovful

Hi Todd. I've recently become a subscriber to your website. Thanks for all of the information! I'm a 21 year old male that's looking to improve his financial education to pursue the goal of financial independence. After reading, taking notes, learning, analyzing and attempting to apply Kiyosaki's "Rich Dad Poor Dad" and "Unfair Advantage", as well as "Think and Grow Rich" I know that there is no other way but financial independence.Starting a business and investing in real estate and other assets are my goals.

My question to you is, what should my next steps be? What sort of education should I pursue? Although I'm passionate about what I want, there are some things I'm quite unsure about. I haven't gone further than high school. I'm in the process of registering for college, but am not sure if the things I learn there will be applicable to entrepreneurship and investing. I am thinking of studying accounting, to better understand business, but am not sure if it will be helpful. I realize the absolute necessity of education, but am not sure if college will get my the knowledge I need. I also know I can't just read books forever, and need to apply and practice what I learn. (I will not stop reading, however) Would taking courses, reading and attending seminars be enough or should I also go to college in addition?

I'm doing a lot of my own research, but I just thought I would ask your opinion. I'm somebody starting from zero financial education, and learning fast, but I want to stay on the right track. I'm considering hiring a mentor to push me. I am currently receiving your "52 weeks" series and am excited to learn.

Thanks a lot for your time, Todd. I greatly appreciate it.

-Kevin

Financialmentor moderator

@sadykhovful I can't imagine competing in today's fast paced, ultra-competitive world without the base knowledge provided by a good college level education. It is foundational.

Marion444

I am a healthy 60 yr woman, no family/children. I am divorced with no savings. I am currently working. I only have 80,000 in 401K and I own two houses with a mortgage on each. I don't know what to do to help myself for retirement. If I should re-finance my home for lower interest rate or is it not worth it? Do I sell my houses now and pocket all the money I can rather than pay property taxes? Should I hold on to my homes until market goes up? What is the best way to handle my current financial situation? I want to work for as long as I can. But I don't know what I will do when my employer tells me that I have to retire. Please help. I currently live on Long Island and I'm willing to move if I have to at retirement or even sell my homes for an RV if that is the best way to live economically. Help. I'm lost.

Financialmentor moderator

@Marion444 I wish I could be more helpful with your situation in this column but your questions are the domain of financial coaching. Many factors must be weighed to direct you properly and that is impossible to do in blog comment format. I don't want to risk disrespecting the seriousness of your inquiry by providing a half-baked answer. Your situation will require personalized attention to sort out the issues.

Financialmentor moderator

@Marion444 With that said, you will probably looking at "all the above". In other words, you will probably be looking at working longer, restructuring lifestyle to reduce costs, creating an income stream to support retirement, and more.

Hope that helps...

resourceman99

What are some prudent and executable ways to deal with currency risk? I am managing a sizable portfolio for my mom but it is 100% US dollar.

Financialmentor moderator

@resourceman99 My two personal favorites based on your criteria of prudent and executable are internationally diversified dividend paying stocks where more than 70% of the income comes from non-dollar sources, and positive cash flow real estate financed with moderate leverage (50-60% debt) using long term, fixed rate, fully amortizing financing. Hope that helps!

alexanderthegreat

Need advice on whether to go ROTH or NOT. My wife and I are in our late 20s/early 30s and we've got investments in ROTH 401ks and Traditional 401Ks and we both have ROTH IRAs. We both max out our 401ks and IRAs. I like to go all out ROTH in 401ks AND IRAs because I like the tax free earnings that I would earn in retirement. We are currently in the upper end of the 25% tax bracket. Along with the tax free earnings, I'm not sure if we'll be in a higher tax bracket in retirement so we prefer paying taxes today as everything suggests taxes will be higher 30 years from now. Are we doing the right thing by putting all our retirement savings in after tax accounts. Should we diversify our tax situation and put some in tax deferred accounts?

Financialmentor moderator

@alexanderthegreat When younger I tend to favor tax deferred and tax free for two reasons - the first is exactly as you cited (tax deferred compounding), and the second is because it puts a legal fence around your fortune both in terms of asset/lawsuit protection and difficultly/high cost in accessing the cash during the inevitable setbacks you will encounter during life. In short, it gives you three important advantages and minimal disadvantages in comparison. Hope that helps you sort through your personal situation.

grease

Hey Todd. I just ran across your "Ultimate Retirement Calculator" and have a question. In the 'desired annual retirement incomet' field, is this net of taxes or is this gross before taxes. In other words, are your calculations grossing up this income to account for the tax % entered or do I have to do that?

Thanks,

Dennis

Mooresville, NC

Financialmentor moderator

@grease It is net of taxes and adjusted upward by the tax rate within the calculator to determine total cost burden that your assets must overcome.

jlmurf

I just turned 82 years old and have about $1,008,000 in an IRA. I expect (hope) to live another 18 years.

I would like to withdraw about $5,000 a month. Question: will I run out of IRA money before my demise?

If so, when and, if so, how much should I be drawing out each month. My current portfolio is yielding about 5%.

Financialmentor moderator

@jlmurf If I were in your situation I wouldn't have any problem with spending 5K per month. Assuming your investments do nothing (don't win or lose - easily achieved with T-Bills or comparable) that would 60K per year. When you figure in a basic investment return the risk of running out is very small. The key is to make sure you don't lose significant principle along the way. Stated another way, you claim a 5% yield which almost equals your proposed spending in perpetuity. Again, as long as you don't lose significantly to earn that return it should be a relatively sound spending pattern. What distinguishes your situation from my writing on <a href="http://financialmentor.com/free-articles/retirement-planning/how-much-to-retire/are-safe-withdrawal-rates-really-safe">safe withdrawal rates</a> is your age. At 82 you can spend some principle (unless you've discovered a magic potion for eternal youth).

Hope that helps...

Penny

I would like to know how I can get a job in this field. I did financial advising but felt like it did not connect well with the client sometimes because you were always being pressured to sell more than educate or help your client.

I do have a fairly strong financial background. I had my LLQP, secrities license, 2 courses towards my CIFP and 2 year Accounting diploma as well. My passion is to teach and help people with their finances, not just selling but helping them with their credit problems as well.

Please let me know what path I can take to do this type of work. I feel this would keep me motivated and feel like I have accomplished something in life as well.

Regards

Penny

P.S. I think this website is phenomenal and thank you.

Todd Tresidder

@Penny - Thanks for the acknowledgement on this site. The reality is I have more work here than I can handle. You could offer up a guest post or two to try and bring a unique perspective or voice here. If people resonate and the writing is high enough quality you never know what can happen. The point being, if you are truly committed then just dig in and get started somewhere. Hope that helps...

Lin

Hi Todd, I'm glad I stumbled on to your site - I am learning so much, thank you for all the free advice. For someone completely ignorant of finances, this was a great find for me.

I'm newly divorced, 2 kids in elementary school, steady job at a public school with full benefits, car paid off, no debt except for a 24K student loan. I automatically put away 20% of my monthly income -- but have been using it for car repair, glasses, etc. otherwise, I'm quite frugal. I looked into getting my student loan forgiven since I work at a public school, but they said that was only for teachers. I also write on the side -- have a couple scripts on option, but all on deferred payment. I'm considering starting my own short film production company next year, but not sure if that's a wise move. I've had short stories published in the past many years before, but not a lot of money in that for what I put in.

Where does a single mom like me even begin?
(P.S. I am looking forward to your 7 Steps next year!)

Todd Tresidder

@Lin - Unfortunately there are no simple answers... and you should be extremely wary of anyone claiming they have simple answers because they probably have something to sell you. There are only so many hours in a day and yours will be taken up by caring for your family and your existing work earning enough to take care of their needs. There isn't much time or money left to build wealth. That points to two key areas to focus on. The first is obvious - you must create a spread between what you spend and what you earn to funnel income into the asset column. (I know I'm not telling you anything you don't already know there.) The second is less obvious - leverage. Your limiting factor is time therefore you must become a master of leverage to overcome your primary limitation. Hope that at least helps point you toward the right way given the limitations of a blog comment. Best of luck to you, and I hope to see you in the 7 Steps program when it launches for more in depth support. Thanks.

Joe Stanfield

Hey Todd
Are you familiar with the term arbitrage? My understanding is borrowing at a lower rate investing at a higher rate and collecting the spread. Your thoughts? I recently ask a question about the I.U.L opportunity -essentially investing i.e. 25k into it ,adding 2k per month, after year 1 -taking a loan from yourself and investing at a higher rate, while your 25k is growing on a snapshot of the S&P, at the time you put the 25k in and a year later receiving the difference of growth btn that time period, i.e. 10-13%, if its zero you are guaranteed 2% by the life insurance. The idea becoming your own bank. At year ten your invested money is dollar for dollar and would be in the neighborhood of 200k. Obviously if you put more in at the beginning it would be a greater amount. No taxes when you borrow out of it and your only paying 4% on what you borrow and hopefully investing at 10% or greater. If the S&P paid you 6% and you got 10% from your other investments your looking at 16%. Your thoughts?

thanks Joe

Todd Tresidder

@Joe - This would require a lengthy and thorough analysis to properly explain. Given that it doesn't exist anywhere on my site that should probably tell you something. If you want to learn more about this there are plenty of sites on the web that will teach you all about it. Just be careful... they all have something to sell you besides education!

TODD C JACOBS

Hi Todd,
I have often had a burning question. I have an annuity that I can get access to without penalty or taxes. I have often thought about pulling out a chunk of it to put toward my mortgage and refinance, especially now with the lower rates. This would allow me to comfortably pay off my house within 10-12 years. I am 40 years old. I am in a 30 year mortgage at 5.625% I owe about 165K. I could about 40-50k and knock it down to a 10-15 year mortgage. I guess the question is is it better to have money invested or be debt free.

Thank you,
Todd C. Jacobs.

Todd Tresidder

@ Todd - A proper answer to that question can't possibly be handled properly in a blog comment. Sorry. I'm not trying to blow you off. I just want to respect your question and give answers only when they can be done properly and thoroughly. This question involves many issues and can't possibly be handled correctly outside of a coaching or similar relationship. It would be irresponsible of me to dash off a quick reply. I wish you the best!