187: How Much Should You Put in a Roth?
Play • 54 min

Is there a recommended percentage of your portfolio that should be in Roth accounts when you retire? We are asked this question a lot. People think there must be an optimal mix. Is there? And is it worth the cost to get to it? These questions are discussed in this episode. There is a general rule of when to make pre-tax vs post-tax retirement contributions as well as when are good times to do Roth conversions. Listen to this show to better understand those as well.

We also dive into listener questions about paying off the mortgage vs investing in a taxable account, understanding how to max out your 401(k), cash balance plans, investing in farmland, over contributing to your HSA, rebalancing your portfolio between accounts, investing in annuities, and the complications of sharing assets with extended family members. A wide variety of listener questions this week that will hopefully be helpful to many. 


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Bogleheads On Investing Podcast
Bogleheads On Investing Podcast
Episode 029: Frazer Rice, host Rick Ferri
Frazer Rice is the author of “Wealth, Actually: Intelligent Decision-Making for the 1%”, host of the “Wealth, Actually” podcast, creator of the "Wealth, Actually" blog, and a Northeast Regional Director for Pendleton Square Trust Company. Frazer is an attorney and experienced trust officer. His wealth management career has included serving for over 15 years as a Managing Director at Wilmington Trust Company. We cover a lot of ground in this episode including estate planning, reasons for using trusts, selecting trustees, family dynamics, investing for 1%'ers, and much more! This podcast is hosted by Rick Ferri, CFA, a long-time Boglehead and investment adviser. The Bogleheads are a group of like-minded individual investors who follow the general investment and business beliefs of John C. Bogle, founder and former CEO of the Vanguard Group. It is a conflict-free community where individual investors reach out and provide education, assistance, and relevant information to other investors of all experience levels at no cost. The organization supports a free website at Bogleheads.org, and the wiki site is Bogleheads® wiki. Since 2000, the Bogleheads' have held national conferences in major cities around the country. There are also many Local Chapters in the US and even a few Foreign Chapters that meet regularly. New Chapters are being added on a regular basis. All Bogleheads activities are coordinated by volunteers who contribute their time and talent. This podcast is supported by the John C. Bogle Center for Financial Literacy, a non-profit organization approved by the IRS as a 501(c)(3) public charity on February 6, 2012. Your tax-deductible donation to the Bogle Center is appreciated.
1 hr
Retirement Answer Man
Retirement Answer Man
Roger Whitney, CFP®, CIMA®, RMA, CPWA®, AIF®
Retirement Plan Live 2021 - Unexpected Retirement: Counting It Up - Trish’s Resources
Last week in Retirement Plan Live, Trish dreamed up big dreams for her retirement. In this episode, we are going to outline her resources to see if she has the ability to fund those dreams. Organizing your resources is an important step in retirement planning. Listen in to learn how important it is to plan what you want to use your resources for, and let’s see if Trish has what it takes to build her retirement dreams. What is a resource? A resource is a natural source of wealth or revenue. It is also a natural feature that enhances the quality of life. It’s what you do with your resources that matters. If you are listening to this show you are probably over 50 which means that you have spent decades building your resources. You’ve built up all 3 categories of resources -- human capital, social capital, and financial capital. Human capital includes your skillset and reputation. Social capital includes pensions and Social Security. Financial capital doesn’t only include your money, it also includes houses and boats in addition to your retirement accounts. What will you use your resources for? When you look at your resources in retirement you have to ask yourself to what end are all these resources for? What is this money for? In retirement, your resources are meant to be used to express your values through your goals that you live out in the season of retirement. Dying with too much money is poor stewardship. It means that your resources were never harvested to live out your values. Think about what you want to do with your abundance. Be intentional and create the life that you want. Explore the options you have now so that you don’t leave your resources like a neglected crop left to be absorbed back into the earth. What kind of capital does Trish have? In our last episode, Trish dreamed big -- European vacations, a second and maybe 3rd home, a convertible, the works. Now that we’ve got her thinking big, we have to see what she can afford. It’s time to take stock of her resources. Just like you and I, Trish has social capital, human capital, and financial capital. She will collect Social Security when the time comes and would like to use her human capital in some capacity until she is 59. Listen in to hear how I walk her through her balance sheet and organize her resources. Check out the Rock Retirement Club to help you organize your own resources Have you been enjoying Retirement Plan Live? Would you like to have guidance as you organize your resources? In the Rock Retirement Club, we have a Retirement Masterclass that does just that. We walk you through all of this planning with worksheets and trainings and there is even an entire module that helps you organize all of your capital. Check it out at RockRetirementClub.com. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN WHAT DOES THAT MEAN? * [1:30] What is a resource? PRACTICAL PLANNING SEGMENT * [11:02] What kind of social capital does Trish have? * [15:32] Trish plans on using her human capital * [25:35] We organize Trish’s financial capital Q&A WITH NICHOLE * [36:10] How did we do on our words for 2020? * [37:32] Lisa asks how the 4% rule changes if you retire at 55 * [40:35] Should Jackie stop saving in her Roth IRA since her husband got laid off? * [44:53] Can Jim’s mother transfer an IRA to him? TODAY’S SMART SPRINT SEGMENT * [48:43] What is your word for 2021? Resources Mentioned In This Episode BOOK - So Good They Can’t Ignore You by Cal Newport Social Security Detailed Calculator Rock Retirement Club Roger’s YouTube Channel - Roger That BOOK - Rock Retirement by Roger Whitney Work with Roger Roger’s Retirement Learning Center
53 min
Student Loan Planner
Student Loan Planner
Travis Hornsby
Ron Lieber, NY Times Columnist, on Debunking the Complexity of College Education and the Financial Aid System
After navigating the system and successfully applying for financial aid, New York Times columnist, personal finance expert and author, Ron Lieber made it his life’s mission to demystify the complexity and help students and their families discover smart ways that they can “beat the system” to get the best value at a reasonable cost. We also discuss his book, The Price You Pay for College, that was released today. In today’s episode, you'll find out: * How colleges financially take advantage of incoming college students * The one hack Lieber says you need to pay less for college * How to ask for a financial aid appeal to get more money for college * How financial aid is disproportionately disadvantages low-income students and people of color * What is merit aid and how did it become so popular at colleges * Why state universities have honors colleges * Whether an honors college is worth it * Why using adjuncts and non-tenured positions don’t lower tuition costs * What is ‘administrative blot’ and why it’s good for students * How college choice impacts the person your marry * Why Lieber doesn't think the tax bomb is going to be as big as you think * The reason Lieber thinks raising federal borrowing limits can help borrowers * Why you should assume your servicer will screw up the reinstatement of your loan payment * What Lieber predicts will happen to student loans in a Biden administration * Where to get a copy of Lieber’s new book, The Price You Pay for College Full show notes at: http://studentloanplanner.com/113 Like the show? There are several ways you can help! * Subscribe on Apple Podcasts, Spotify or Google Podcasts * Leave an honest review on Apple Podcasts * Follow on Facebook, Twitter, or LinkedIn Feeling helpless when it comes to your student loans? * Try our free student loan calculator * Check out our refinancing bonuses we negotiated * Book your custom student loan plan
44 min
The Unstuck Network
290 | We're Talking Millions | Paul Merriman
* Does your portfolio own enough of the companies that carry a lot of the growth over extended periods of time? When you buy index funds, you aren't as diversified as you think you are. * Cap weighted index funds mean you are buying a lot of the companies that are doing really well. But there are two asset classes Paul Merriman is a fan of that he thinks don't get enough attention, small cap and value. * Although many people claim to believe in a buy and hold strategy with investing, their behavior says otherwise. They like to buy when things are hot because they believe it's going to keep going up. * If you look back as far as 1928, a lot of the time the S&P 500 is walloping small cap value returns, yet at the end of this 92 year period, small cap value made 24 times the amount of money the S&P 500 did. * Even though there are long periods of underperformance, when small cap value does take off, there is outstanding performance. Then when it reverts back to the mean, there is a higher compound rate of return. * Owning a large cap fund means each holding in that portfolio, and how much of the portfolio it represents is based on how large that company is. The big companies represent 80-85% of the corporate public value in our economy. * However, history shows that the smaller companies and the value companies produce a better rate of return because they are more risky. * It doesn't have to be a lot to make a big difference. If you were put 10% in a small cap value fund, it would give you a legitimate shot at having 20-30% more money when you retire. * The top 20 companies probably make up 20-30% of the money you have invested. Investing in an S&P 500 or total stock market fund provides an illusion of diversity. As companies get to be bigger in size, it becomes increasingly more difficult to double or triple in size. * Companies are valued by the number of shares times the price in the market. * Large cap index fund companies average a market capitalization value from $50 billion to $150 billion. * Small cap companies are roughly 1/50th the size of the big companies with values averaging $2 billion. They are legitimate companies, but many of them will fail. * Since 1928, the S&P 500 or total stock market compound rate of return has averaged 10%. However, research has shown that only 4% of those public companies made virtually all of that 10%, while 96% of companies averaged just 3%. * As an aggregate, small companies are much more likely to double or triple in size. * Value companies can be seen as companies that are out of favor and years later, they may still be out of favor. Academics don't advise buying value companies one at a time. * People come into value companies to make them more meaningful, profitable, and efficient turning those companies around. * The problem with great companies with a great future is that when something happens to pop the ballon, those companies can fall 25% in a day, similar to what happened with the Dot-com bubble in 2000. * Telsa, for instance, is a car company on the verge of bankruptcy several years ago and now it's up 400% even though it is barely turning a profit. With a current share price of $800, it's going to take a lot to double your money, yet people still believe in Tesla. * Paul wants to help people figure out how to invest in an unemotional way and don't get caught up believing in something that isn't likely to happen. * Last year, growth companies were up 35-40%, however, looking back at 90 years of evidence, growth produced a lower rate of return than value by 2% a year. * Paul's latest book, We're Talking Millions!, is all about the extra half of 1%. For every half of 1% you can make on your portfolio over a lifetime, you add a million dollars. Finding more of those half of 1% and adding them up is a lot sexier than finding the hottest thing in the market. * In his book, Paul lays out 12 simple ways to capture those half 1% that the market is ignoring. * Paul's been hearing complaints for years that his work has been too complex. It's was something his firm did for his clients, but most individuals do not want to make it that complex. * Someone in their twenties, investing just $5,000 a year for 40 years, can use these strategies to make millions over an investing lifetime. * It's not all because you took more risk, it's also how you protect your money from others getting their hands on it, like money managers. * Choosing to save can be a million decision, and choosing to save early can be another million. * In one mind-blowing statistic, Paul says 25% of millennials will not put money in the stock market. * The ultimate buy and hold portfolio might be difficult to replicate inside a 401K. To make things more simplified, Chris Pedersen developed a system to implement the philosophy with roughly 98% of the benefits. * The goal is to keep it as simple as possible so that anyone can do it and won't need to manage it other than for a few minutes a year. * One way to buy a target date fund. But because they don't have enough value or small cap companies represented, have 90% of contributions go to the target date fund and 10% to a small cap value fund. The target date fund is broadly diversified and automatically adjusts to become more conservative as you age. * Chris said the problem is young people should have more invested in small cap value and came up with a formula for calculating just how much, which is 1.5 times your age into a target fund and the remainder in small cap value. * For example, a 30-year-old should multiply 30 years x 1.5 to get 45% in a target date fund and 55% in small cap value. * Paul and Chris encourage continuing to hold 10% in small cap value at the age of 60 and beyond which is good during the 30 or more years in retirement. * Not all target date funds are created equal. Look for one that is low cost and contains total stock market funds. * Jonathan doesn't like having bonds in his portfolio and notes that target date funds have bonds in them. Paul agrees and said he spoke with John Bogle about it once. He was told that bonds are defensive and do good when the rest of the portfolio is down 50%. * You can reduce your exposure to bonds in target date funds by adding equities to your portfolio. * With target date funds, the year indicates how aggressive it is. * As with a traditional portfolio, rebalancing your portfolio is a part of the small cap value strategy. If you want to be true to your strategy, you need to sell some winners and buy some of the losers. * Jonathan has modeled one of the Ultimate Buy and Hold Portfolio pies Paul has on his website in his taxable brokerage account with M1. * Paul says it's never been easier or efficient to invest. Even if the market does return as much as in the past, you can probably make the same return because it used to cost so much to do before. * They are coming out with all new recommendations for best-in-class ETFs. Paul has all his buy and hold funds in DFA dimensional funds and now anyone will be able to buy DFA funds through DFA or Avantis without paying a commission. Since it's an ETF, you can buy commission-free with M1. * Pauls' book is free for teachers and students, just email Paul at Paul@paulmerriman.com to get the PDF by email. The book is also available on Amazon. If you can't afford the $14.95 price tag, email Paul for the PDF. Resources Mentioned In Today's Conversation * ChooseFI Episode 130 Paul Merriman Introduces the Ultimate Buy and Hold Portfolio * We're Talking Millions!: 12 Simple Ways to Supercharge Your Retirement by Paul Merriman * M1 Finance Review – Completely Free Automated Investing! If You Want To Support ChooseFI: * Earn $1,000 in cashback with ChooseFI's 3-card credit card strategy.  * Share FI by sending a friend ChooseFI: Your Blueprint to Financial Independence.
1 hr 2 min
The Long View
The Long View
Gerard O’Reilly: Control for the Unexpected, Focus on the Expected
Our guest this week is Gerard O'Reilly. Gerard is co-CEO and chief investment officer of Dimensional Fund Advisors, an asset manager headquartered in Austin, Texas, that manages more than $600 billion using a systematic investing approach. In his role, Gerard works with his co-CEO, Dave Butler, to set the firm's vision and strategy while also overseeing its investment processes. Prior to assuming his current post, Gerard was Dimensional's head of research. In addition to serving as a Dimensional director, Gerard co-chairs the firm's Investment Research Committee and is a member of its Investment Committee. Gerard obtained his doctorate in aeronautics from the California Institute of Technology and his master's degree in high-performance computing from Trinity College, Dublin. Background Bio “Dimensional Eyes the Fund Sector’s Trillion-Dollar Club,” by Owen Walker, thefinancialtimes, March 31, 2019. ETF Launch “Dimensional Fund Advisors Significantly Expands ETF Offering,” dimensional.com, Nov. 17, 2020. “Dimensional Investing in an Active ETF Structure,” dimensional.com, Nov. 17, 2020. “Dimensional Funds ETFs Launch as Quant Plans to Convert Mutual Funds,” by Claire Ballentine, Bloombergquint, Nov. 19, 2020. “Why Dimensional Fund Advisors Is Converting Six of its Mutual Funds to the ETF Format,” by Lizzy Gurdus, cnbc.com, Dec. 1, 2020. Innovation, Value, and Return “Market Beaters: A Different Dimension,” by Beverly Goodman, barrons.com, Jan. 6, 2014. “3 Shades of Value,” by Daniel Sotiroff, Morningstar.com, Sept. 26, 2018. “Robert Merton on Financial Innovation,” by Robert C. Merton, dimensional.com, June 24, 2019. “The Real Reason Value Has Been Lagging Growth,” by Julie Segal, institutionalinvestor.com, Oct. 24, 2019. “Tesla’s Charge Reveals Weak Points of Indexing,” dimensional.com, Jan. 15, 2020. “Untangling Intangibles,” by Savina Rizova and Namiko Saito, dimensional.com, Sept. 28, 2020. “An Exceptional Value Premium,” dimensional.com, Oct. 5, 2020. “Securities Lending Fees as a Short-Term Driver of Stock Returns,” by Kaitlin Simpson Hendrix and Gavin Crabb, dimensional.com, Nov. 11, 2020. ESG “Sustainability Report,” dimensional.com, Dec. 31, 2020. “Burton Malkiel: ‘I Am Not a Big Fan of ESG Investing,’ ” The Long View podcast with Christine Benz and Jeff Ptak, Morningstar.com, Aug. 5, 2020. “Dimensional Finds ‘Little Evidence’ Emissions Are Linked to Expected Returns,” by Christine Idzelis, institutionalinvestor.com, Oct. 22, 2020.
56 min
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