“There are no stupid questions, just the stupid people who ask them.” That famous quote speaks to the heart of this edition of the podcast. Join us as we seek to educate you about the financial world and answer five of the most popular financial questions we receive on a regular basis. Don’t worry, these are actually pretty complex questions.
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Puzzle Of The Month:
- [spp-timestamp time=”3:13″] – Join us as we unpack the five questions we receive the most. We get these questions from neighbors, prospects, clients, class attendees, and many others.
3:50 – How Do I Know If I Have Enough To Retire?
- It used to be your pension would cover you in retirement. These days, pensions are going away. Most people instead have IRAs, 401(k)s, 403(b)s, etc…
- Consider how much you’ll receive in Social Security benefits. Your benefit can help you to maximize your income in retirement.
- Track your expenses. Do it for one month, and it will help you to assess how much monthly income you’ll need in retirement.
- Dan addresses withdrawal rates and addresses popular financial rules of thumb.
- Use a bucket strategy to allocate your wealth and the risk associated with it. Allocate money you’ll need in the short-term, mid-term, and long-term respectively.
[spp-timestamp time=”13:55″] – How Do I Know If I’m Properly Diversified?
- Every portfolio experiences fluctuation in value. The question you should ask is, “How much fluctuation can I afford to have?”
- Owning different asset classes and fixed-income instruments will work to protect and grow your wealth.
- Ask your advisor to regularly assess the risk in your portfolio.
[spp-timestamp time=”16:10″] – How Do I Know If I Have Enough Life Insurance?
- If you’re retired, there’s a good chance you don’t need life insurance at all. Sometimes, the premiums are so expensive that owning life insurance could actually impede your lifestyle.
- If you’re working, you’ll still want life insurance. It makes an excellent source of income replacement.
- To determine whether you have enough life insurance, consider how much money you’ll make between now and your planned retirement age. If you died tomorrow, and your surviving family invested your life insurance payout, would it produce that amount of income? That’s how much life insurance you need to purchase.
[spp-timestamp time=”18:25″] – Is The 401(k) The Best Way To Save For Retirement?
- The answer is both yes and no. When you’re young, it’s a great vehicle. You can invest tax-free, and if your employer matches your contributions, you’re essentially receiving free money.
- When you’re young, if the money in your 401(k) has never been taxed, you’ll find yourself accumulating a ticking tax time bomb. As you age, you need to begin to consider Roth 401(k)s and Roth IRAs.
- Deferring taxation makes sense, but you need to account for rising taxation in the future.
[spp-timestamp time=”21:10″] – How Will I Know When The Market Will Drop?
- Of course, the answer is you never will. However, the aforementioned bucket strategy can work to protect your wealth amidst market volatility.
The Full Picture:
[spp-tweet tweet=”If you can get the same long-term expected rate of run with less volatility, you should seek it. The way you get it is by being properly diversified. -Dan Cuprill”]
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