My Retirement Plan Charges 1.38% Is It Robbing Me of My Future? (Money Q&A)

In this episode of the Personal Finance Podcast, we are going to do a Money Q&A about  my retirement plan charges 1.38%. Is it robbing me of my future? Watch this episode on ⁠⁠Youtube⁠ Today we are going to answer these questions! Question 1: What should my next steps be after paying off a personal loan—emergency fund, car savings, or student loans? Question 2: What’s the best investment or savings account to open for my 5-year-old to start learning about money? Question 3: Is it worth contributing to a Roth 457(b) with a 1.385% fee, or should I focus on low-cost accounts? Question 4: I’m in the military maxing out TSP and Roth IRA—what else can I do to retire early? And how can my parents retire with $150K at age 55? Question 5: I’m new to investing with $30K in cash—should I just dump it into an index fund, or do something more? Question 6: We’re 48 and 49, saving aggressively with no debt—how do we ensure we hit our $1.5M retirement goal by age 55? Question 7: We rolled over $35K into an IRA, have $125K in a 401(k), and big home equity—how do we build wealth and retire early in California? How Andrew Can Help You: Listen to The Business Show here. Don't let another year pass by without making significant strides toward your dreams. "Master Your Money Goals" is your pathway to a future where your aspirations are not just wishes but realities. Enroll now and make this year count! Join The Master Money Newsletter where you will become smarter with your money in 5 minutes or less per week Here! Learn to invest by joining Index Fund Pro! This is Andrew’s course teaching you how to invest! Watch The Master Money Youtube Channel! , Ask Andrew a question on Instagram or TikTok. Learn how to get out of Debt by joining our Free Course Leave Feedback or Episode Requests here. Car buying Calculator here Thanks to Our Amazing Sponsors for supporting The Personal Finance Podcast. Shopify: Shopify makes it so easy to sell. Sign up for a one-dollar-per-month trial period at shopify.com/pfp Chime: Start your credit journey with Chime. Sign-up takes only two minutes and doesn’t affect your credit score. Get started at chime.com/ Thanks to Fundrise for Sponsoring the show! Invest in real estate going to fundrise.com/pfp Thanks to Policy Genius for Sponsoring the show! Go to policygenius.com to get your free life insurance quote. Indeed: Start hiring NOW with a SEVENTY-FIVE DOLLAR SPONSORED JOB CREDIT to upgrade your job post at Indeed.com/personalfinance Shop Data Plans and Save Big at mintmobile.com/pfp Go to https://joindeleteme.com/PFP20/ for 20% off! Links Mentioned in This Episode: How to Pay No Taxes in Early Retirement, Debunking the Mortgage Fee Fiasco, and More! With Katie Gatti (From Money With Katie!) 10 Powerful Portfolio Strategies (And Which One is Right for You!) - Part 1 10 Powerful Portfolio Strategies (And Which One is Right for You!) - Part 2 The 1-3-6 Method For Building & Managing Your Emergency Fund Connect With Andrew on Social Media: Instagram TikTok Twitter Master Money Website Master Money Youtube Channel Free Guides: The Stairway to Wealth: The Order of Operations for your Money How to Negotiate Your Salary The 75 Day Money Challenge Get out Of Debt Fast Take the Money Personality Quiz Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Andrew Giancola?

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• 0:44Andrew Giancola?

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• 1:27Andrew Giancola?

  I told it what kind of website I wanted, and I built the first version in minutes. No coding, no designer or developer needed. And Hostinger doesn't stop at launch. Their AI can help with SEO, website copy, email marketing, and more. Plus, your domain, website, email, and marketing can all live in one account, with plans starting at just $3 every single month. Hostinger builds your vision step by step. Create your website today. Go to hostinger.com/pfp and use code PFP for 10% off now. On this episode of the Personal Finance Podcast, my retirement plan charges 1.38%. Is it robbing me of my future?

• 2:25Andrew Giancola?

  What's up everybody and welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of MasterMoney.co. And today on the Personal Finance Podcast, we're going to be diving into your questions on this episode of Money Q and A. If you want to submit your question, make sure you join the Master Money newsletter by going to mastermoney.co/newsletter. And there you can send in your question and you could have it answered on the show, just like these ones. And don't forget to follow us on Spotify, Apple Podcasts, YouTube, or whatever podcast player you love listening to this podcast on. And if you want to help out the show, consider leaving a five-star rating and review on Apple

• 3:06Andrew Giancola?

  Podcasts, Spotify, or your favorite podcast player. Now, today, we're going to be diving into seven of your questions on this Money Q and A. And a couple of these questions are also two-part questions. The first one is, what should my next steps be after paying off a personal loan, emergency fund, car savings, or student loans? Secondly, is what's the best investment or savings account to open for my five-year-old to start learning about money? I love this question. We'll probably do an entire episode in the future on that as well. Is it worth contributing to a Roth 457B with a 1.385% fee? Or should I focus on low-cost accounts? Question four is, I'm in the military, maxing out my TSP and Roth IRA.

• 3:47Andrew Giancola?

  What else can I do to retire early? And how can my parents retire with $150,000 at age 55? Question five is, I am new to investing with $30,000 in cash. Should I just dump it into an index fund? Or do I do something more? Question six is, we are 48 and 49, saving aggressively with no debt. How do I ensure I hit my $1.5 million retirement goal by age 55? And question seven, we rolled over $35,000 into an IRA, have $125,000 in a 401k and big home equity. How do we build wealth and retire early in California? So these are all fantastic questions. Really excited to jump into this. We have an action-packed episode, as you can see, so let's get into it.

• 4:25Andrew Giancola?

  All right. The first question is, hello, Andrew. Thank you so much for your podcast. I've been listening since last year. I am single, without kids, happily, and about to be 45. We have almost nothing in common, but I feel you deliver your message in a way that everyone can learn and feel included. That's absolutely the goal with what we're trying to do. I have made great strides in the right direction financially, and it's all thanks to part of you. Well, thank you, and it's really just you taking the action steps here. So that's absolutely amazing, and we'll talk about it here in a second. I have a question about my next steps. I have $5,000 in a high-yield savings account, and I am in the process of paying off $15,000 in a personal loan that I use to consolidate my credit cards and get a lower interest rate. It will be paid off by the end of this year. Oh, congratulations. My next high-interest debt is $100,000 student loan.

• 5:07Andrew Giancola?

  I know it's massive, and I took the max available for nurse practitioner school to get my doctorate. I am on an income-driven repayment plan, and it is on pause due to the save plan being challenged in the courts. The projected date is to start repayment in October 2026. If repayment starts earlier, it will remain around $300 payment in October of 2026. So instead of paying off this loan right away, I want to move my next step and save for three months of emergency money and start saving for a down payment on my car. It is a lease that will expire in 2027. What are your thoughts? I work full-time as a nurse practitioner, and I am in the middle of process of starting up a telehealth business as a side hustle in a few months or so, but money is tight right now, so I should have some more options soon. All right, so Rita, thank you so much for this question.

• 5:50Andrew Giancola?

  This is absolutely amazing, and here's how I would kind of think about this for sure is. Number one is I would finish off paying off that personal loan first. If the interest rate is high and you're on track to finish by the end of the year, that is absolutely amazing. Congratulations on taking the action step for doing that, because those credit cards were robbing you of your financial future. So it is absolutely amazing that you're taking advantage of that. Secondly, is if you already have the $5,000 in savings. This is something that I think that if you can keep your monthly expenses around that, you know, 3,000 range, or depending on where your monthly expenses are, if you can aim for another $9,000 more, we want to try to at least get to that three months of expenses saved up. And then ultimately, we want to have six months of expenses saved up long-term. Since your lease ends in late 2027, you definitely have to do something.

• 6:34Andrew Giancola?

  With the car, with the vehicle, and I would definitely start to create a savings bucket to start saving for that down payment. I think that's really wise for you to be able to do that so that you can start to put together that 20% down of whatever it is. Now, if you need, you know, a used car, maybe it's an older car over the next couple of years until you get through it. Just follow some of our rules, but making sure that you can drive an older used car for, over the course of 10 years is really, really important. And you can find them now. You can find really reliable cars for a good price. And so maybe you downgrade your car till that debt gets paid off. Once that debt gets paid off and over the time, then you can kind of look and upgrade your car over that timeframe. Now, for the student loans, because you're on this specific plan and it's paused until 2026.

• 7:16Andrew Giancola?

  If you focus on those other priorities right now, then you can have that baseline in place to be able to take care of that. Once it comes back into play, because it obviously, if it's a high interest student loan debt, we have to look at the interest rate. If it is truly high interest, then we definitely want to make sure that we are prioritizing that and planning ahead for that. One other thing that I know a lot of people do, which I like this idea, is they will start to put the payments into savings while it is paused. And they will start to build up this savings bucket. And then, once it becomes unpaused and they take all those dollars and they just put it towards us, they can start to pay that money down. I love that option for you because you have cash on hand. It just gives you some additional cash on hand while it is paused. And then during that timeframe, just having the discipline to make sure that you make a big lump sum payment when it starts.

• 8:00Andrew Giancola?

  That's going to help you really start to get ahead on some of these payments over time. So you can almost think of it as, hey, I gotta make this payment now so that your financial life doesn't change. And you get used to making those payments. But I would, you know, you said it was 300 bucks a month. I would take 300 dollars a month and start putting it away in a savings bucket to start getting used to making those payments. Now, on your future side business income to supercharge your savings, I think that is great. And keeping your expenses low at first is fantastic. It looks like it's right in the field of where you work. It's in the health sector. And so that is going to be something that probably comes naturally to you and really, really cool stuff for that. You can start to consider investing once you get that emergency fund built up to that three month range at least. So you're doing a really great job managing on your current income. And I think it is really, really powerful kind of seeing what

• 8:44Andrew Giancola?

  You're doing, you're taking the right steps, moving forward and just continuing that and staying consistent is the big, big key. I would automate my payments to start to get this debt paid off. So I would automate those payments for sure. And I know you're kind of, you said money is somewhat tight right now. And so we just want to make sure that we are managing our money correctly. When money is tight, the focus and you are focusing on increasing your income, which is one of the biggest focuses. The second one is obviously to make sure that we are actually tracking our spending. The tighter your money situation is, the more you need to be tracking your spending overall. And that's going to really, really help you in the long run. So again, congratulations on taking these steps and update us, you know, in the next couple of months. Once you get that paid off, we want to celebrate with you when you get that debt paid off. I think that's really, really cool stuff there.

• 9:27Andrew Giancola?

  The next question is, my question revolves around my kids and saving money. When I was growing up, any money that I saved for college went into a high yield savings account. And in my teenage years, when I became interested in investing in the market, my dad set up a joint taxable brokerage account of fidelity with himself as the custodian. Fast forward around 10 years now, I've got a few kids of my own and my oldest is at the point where we will start introducing an allowance and having him save money. He is five years old. After he's accumulated some savings in cash, I'd love to open a savings or investment account for him to make periodic deposits of his savings. So he can understand and get interested in investing. What would you recommend as the type of account for him to open? I would want any of his savings money to be accessible to him where he graduates high school and goes to college.

• 10:10Andrew Giancola?

  So roughly 13 years into the future, options, and I understand the average historic yields of all these accounts and investments. High yield savings account is number one, joint taxable brokerage account, where I would be the custodian is two, and Roth IRA is number three. I know you've talked about Roth IRAs for kids before, but I'm leaning against this one because I would want all of his money to be accessible to him when he graduates, not just the contribution. So this is really, really good stuff here and a fantastic question. So here's the way I would kind of think about this. Is you have a bunch of options here. You have a non custodial brokerage account, but that would mean that you would control the entire thing. Probably not exactly what you're looking for, but we talked about that a lot. If you are someone who wants to kind of hold the account longer term than when they become of age, but you have a couple of options.

• 10:54Andrew Giancola?

  So you have a custodial brokerage account, which is you could do like a UGMA or a UTMA. And the reason why those are good is if you want the money to go to them when they become of age, those are good accounts to consider. Why? Because they have tax efficient growth when you put dollars into there. They have total flexibility on when and how the funds are used. And there's no penalties like something with a Roth IRA, for example. It can help you teach investing early with real world examples of compounding growth. And you can shift to the child's control and it's typically at age 18 or 21, depending on the state that you live in, is when that would shift to your child's control. So secondarily is we have the custodial Roth IRA, but there's a couple of things to kind of consider there is one, they have to have earned income. So if you want to start matching it for any reason,

• 11:38Andrew Giancola?

  then the custodial Roth IRA is more difficult because they have to have enough earned income to be able to contribute that amount to the custodial Roth IRA. So say, for example, your son earns a hundred dollars a year because he's five. If he earns a hundred dollars every single year, you can only put a hundred dollars into that custodial Roth IRA. You can't put more, you can't put, you know, $700 if you want to for a birthday or whatever else. You have to put in the amount that they earn that year. And so probably around, you know, what I would consider in that situation, if you want all of his dollars to go to him when he turns 18 or 21, is to make sure that you use a UGMA or a UTMA is probably the way that I would look at that, which is a custodial brokerage. And there's a lot of benefits to that. So like one is unearned income, under $1,300 is tax free.

• 12:21Andrew Giancola?

  The next $1,300 is taxed at the child's tax rate, which is usually 10% or lower. And above that, it's taxed at your rate due to the kiddie tax. So the kiddie tax is another thing to kind of think through as you go through this. But if you're investing in low turnover, you know, index funds or ETFs long term, then you can minimize some of those dividends and those capital gains and therefore reduce that tax liability overall. And now filing a return isn't required unless unearned income exceeds over that $1,300 per year. And so really, a lot of great things that can happen if you want those dollars. So the reason why I don't put my kids in there is I don't know exactly when I'm going to give my kids the money. I actually have my own brokerage account in my name that I'm going to hand to them. They are the beneficiaries in those taxable brokerage accounts. And that's all.

• 13:04Andrew Giancola?

  Only because I do not want to give them those dollars right at the age of 18 if I don't have to, or right at the age of 21 if I don't have to. So instead, I put it in the taxable to give them that flexibility. And then they'll have a Roth where they can get that money, you know, later on down the line. But if you want him to have his money, you know, right when he turns age 18, then those UTMA or UGMAs are really, really good options. But you can also do the regular taxable. And some of the cons with the regular taxable is like some of the taxes will fall down to you personally while you're building wealth for them. A lot of different things like that. But overall, I think the custodial is a great, great option. It's so cool that you are looking to, you know, start helping your five-year-old invest. Now, one thing I love to do is kind of identify some of the companies with just a small percentage of the portfolio.

• 13:48Andrew Giancola?

  You can do the rest of it however you want. But I always love to, you know, identify companies that they are interested in. So say, for example, your kid loves Disney. You can invest in Disney and show them, hey, you own a piece of this company now. Or you can invest in Mattel where they can own the company that makes the toys they like. Or you can invest in, you know, anything that they're interested in. There are ways that you can kind of invest in companies to make them more interested in investing. So very, very cool stuff there. And really, really would love to hear kind of what you end up doing. And congratulations again on teaching your kids about money. That is absolutely amazing.

• 14:20Andrew Giancola?

  I'm a municipal employee that contributes to a Roth 457B account through Nationwide. The account has an annualized fee ratio of 1.385%. Woo boy, is it worth it to continue to contribute to this account if I am not maxing out the total contribution limit, $22,000? And could I transfer the balance to Vanguard Low Fee Index Fund and save on the high fees over the course of 20 to 30 years? So, awesome question. Because for most people out there, if you have a 1.385% expense ratio, you gotta raise your eyebrows a little bit. That is a very high expense ratio, especially for having a specific account. And this is actually a super common situation for municipal employees and other public sector workers. I've seen this happen a lot more where they have much higher fees in their accounts

• 15:04Andrew Giancola?

  than maybe someone with a traditional 401K at a private company or a publicly traded company. Usually, the municipal sector does have more fees. And that is honestly just discouraging in some ways, but overall, I'm going to tell you kind of how I would think about this or the ways that I would consider handling this. So should you contribute to your Roth 457B even with that fee? Yes, but only up to a point. And here is why. Why it's worth still considering is that your 457B plans have no penalty for early withdrawals. So, once you leave your employer, even before the age of 59 and a half, a big advantage over the 401k or the 403B or the Roth IRA is that they do have no penalty for early withdrawals. It is still taxed advantage growth.

• 15:45Andrew Giancola?

  So your money still grows tax-free inside the Roth, even with the fees. And if you're not maxing out other retirement accounts like the Roth IRA or low-cost 401k, this can still be a solid way to shelter money from taxes based on your tax situation. But that 1.385% fee is really, really high. And over the course of 30 years, it can be hundreds of thousands of dollars. For comparison, obviously, a typical index fund is 0.03% to 0.10%. So, if you're not maxing out other low-fee retirement accounts, I would consider this order of operations is I would think through, hey, what about my Roth IRA through Vanguard or Fidelity? You can go that route first, and do something like $7,000 in a Roth IRA. Again, this is not financial advice. This is just what I

• 16:29Andrew Giancola?

  would consider, is looking at the Roth IRA at Vanguard or Fidelity and kind of see, is that something you want to do? Because you could put $7,000 in there. And then you could contribute enough to your 457B to take advantage of the tax sheltering up to your comfort level. And then as a secondary option, have the Roth IRA available to you. Now, you could also look in your 457B. Is it the actual plan that has that expense ratio? Or is it what you are invested in? Are there lower-cost investments that you could switch to? If that is an option, look at the lower-cost investments, kind of analyze those and see if that's something that is a better option for you overall. And if they do have those lower-cost options, I would try to switch providers if you could. And then for any extra money outside of that, I would consider the taxable

• 17:12Andrew Giancola?

  brokerage account outside of some of these accounts that we just discussed here. Now, can you transfer your 457 balance to Vanguard now? Not unless you leave your job, unfortunately, because they are locked while you are employed and transfers Which are rollovers are available after separation from service or retirement. So if you plan on being in that job for 30 years, I would probably prioritize the Roth or something with a lower cost first and then get my dollars back into there. Once time goes on and then once you leave your job, you can roll it into a Roth IRA or a traditional IRA, depending on where it's a Roth or pre-tax 457B. But if it's a Roth 457 and you roll it into a Roth IRA, it does continue to grow tax-free. But the five-year Roth IRA clock starts over for the prorata rule unless you already have

• 17:56Andrew Giancola?

  a Roth IRA open. And so making sure that you just have those rules in place is really, really important. But right now, as you're employed, you can't roll it over until you actually separate from wherever you're working. So I hope that's super helpful. If you have any other questions on that, please let me know. But amazing job, even investing your dollars in here, and it is something that you could definitely consider over time. If you don't plan on being there for 30 years, and maybe I would still consider, you know, investing my dollars in there if there's some good benefits there. And if there's a match, I would definitely take advantage of that match, too. So those are definite reasons to get more dollars into there. So hope that helps and let me know if you have any other questions. Now, one of the most important things that you can do currently is you can make sure that you remove your personal information online because your information being out

• 18:40Andrew Giancola?

  on the internet for any data broker to use and to sell is detrimental to your finances. And so what you need to make sure you do is you go to these specific data brokers that have your information online. If you Google your name, your phone number, your address in quotation, you're going to see a bunch of your information come up that you don't really want out there. So what you need to make sure that you do is use a service like Delete Me. Delete Me will remove your personal information from the internet so that data brokers do not sell your information to cyber criminals or anybody else out there who can use your personal information to open up bank accounts, open up other things in your name that you do not want open. It helps protect your finances online. Delete Me is one of my favorite services that I use every single year.

• 19:25Andrew Giancola?

  You must have a financial protection plan in place in 2025. It is so incredibly important because financial scams are growing every single year. And with the growth of AI, this is a real, real problem that we need to protect ourselves against. And so making sure you use a service like Delete Me is really, really important. So if you go to joindelete.me.com/pfp20, you will get 20% off of Delete Me. That's joindelete.me.com/pfp20. And again, this is one of the most important things that you can do in order to protect your finances online. I love Delete Me, been using them for years now. They've been a sponsor of this show for years now. It's because I truly, truly believe in them. So thank you so much to Delete Me. Now let's get back to your questions. The next My relationship with money has changed a lot over the years.

• 20:09Andrew Giancola?

  Early on, I thought building wealth was about making more money. Now I know it's really about having clarity. When you know exactly where your money is going and whether you're on track, you make better decisions. That's one of the reasons I love Monarch. It's the personal finance app that tracks everything from your accounts and investments to your savings, goals and spending. So you can see your entire financial picture in one place. One habit that's made a huge difference for me is my five-minute drill every single morning. I open Monarch, check my spending, investments, cash flow and net worth, and I'm done in just a few minutes. It gives me confidence that nothing is slipping through the cracks. I also love the AI weekly recap because it'll flag spending changes, upcoming expenses,

• 20:53Andrew Giancola?

  or shifts in my net worth before they become a problem. Instead of reacting after the fact, I can make adjustments early. It really feels like having a financial advisor in your pocket. Write your own money story with Monarch. Use code PFP at monarch.com to get your first year of Monarch Core half off at just $50. That's 50% off your first year at monarch.com with code PFP. If you've been listening to this show for a while, you know it's not just me anymore. It takes a great team behind the scenes to make everything happen. And if I had to hire someone tomorrow, I'd want someone who could jump right in and make an impact. That's why I'd use Indeed Sponsored Jobs.

• 21:34Andrew Giancola?

  When workplace chaos hits, Indeed Sponsored Jobs helps you reach qualified candidates faster. Your job gets boosted in search results, so you're spending less time searching and more Time interviewing the right people. Plus, you only pay for results, which I absolutely love. Sponsored jobs posted directly on Indeed are 95% more likely to report a hire than non-sponsored posts. That's a huge advantage when you're trying to grow your business. Spend less time searching and more time actually interviewing candidates who check all of your boxes. Less stress, less time, more results. When you need the right person to cut through the chaos, this is the job for Indeed Sponsored Jobs.

• 22:15Andrew Giancola?

  And listeners of this show will get a $75 sponsored job credit to help get your job the premium status it deserves at indeed.com/podcast. Just go to indeed.com/podcast right now and support our show by saying you heard about Indeed on this podcast. Indeed.com/podcast. Terms and conditions apply. Need to hire? This is a job for Indeed Sponsored Jobs. It's kind of amazing how much can change in just a single year. Every summer, the kids are a little bigger, a little more independent, and life looks a little different than it did the year before. And it reminds me that while we can't predict the future, we can prepare for it. That's one of the reasons I like PolicyGenius. See, PolicyGenius isn't an insurance company.

• 22:59Andrew Giancola?

  They're an online marketplace that lets you compare life insurance quotes from some of America's top insurers, side by side, for free. And their licensed team helps you compare coverage, prices, and terms, answers your questions, and even handles the paperwork so you can get the right policy without the hassle. For me, having life insurance isn't about expecting something to happen. It's about knowing my family is protected so I can actually enjoy these moments together instead of worrying about what comes next. And with PolicyGenius, you can find 20-year life insurance policies, starting at just $276 a year for $1 million of coverage. Head to policygenius.com to compare life insurance quotes from top companies and see how much you can save. That's policygenius.com.

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• 24:00Andrew Giancola?

  Question is, good evening, sir. I've enjoyed your podcast and I'm currently in the military and I'm maxing out my TSP and Roth IRA and plan to do so for the next four years at least. Do you advise any other actions for me to retire early? Secondly, my folks are both 55 years old and have $150,000 saved for retirement and both wanting to retire at age 70. What advice would you have for them that I can pass on? So these are two great questions and I'm going to tell you, it's not advice, but I'm going to tell you, you know, how I would consider both of these situations. So if you are in the military, first of all, thank you so much for your service. We truly, truly appreciate you and cannot thank you enough for that. And as we dive into this, I'm just going to tell you kind of how I would think about that. We actually have, I have really good friends of the show who are going to come on.

• 24:42Andrew Giancola?

  They're from Military Money Manual and they host a show all about the military and we want to have them on for a special military episode that we're working on. So working on schedules for that one, but really excited to have them on too. But since you're maxing out both TSP and the Roth IRA, here are a few strategic steps that you can think through to fast track early retirement. One is you can use the Roth TSP while in active duty. And so your military pay is likely lower taxed. So using Roth contributions now means you'll lock in those tax free growth forever. So look at your tax rate now. If you think your tax rate is going to be lower now while you're in the military, you can lock in some of those tax free growth. And if you switch careers later and jump tax brackets, having the tax free money will be golden in the long run. So that's one consideration that I would think through.

• 25:25Andrew Giancola?

  Since you can't touch most retirement accounts penalty free until age 59 and a half, unless you use Rule 72T or a Roth IRA ladder, then I would use a taxable account because that can give you some flexibility when it comes to early retirement. And specifically, if you want to retire early, I love taxable accounts. I think they are fantastic. Even if you have those taxable rates, it's still significantly lower than getting your income taxed. And so I think it's really, really powerful. And you can invest in, you know, broad based index funds, ETFs, those types of things. Three is I would make sure I have that emergency fund. Place. So I would use the 136 method. So the first month is just the mini buffer. One month of your expenses, then building it up to three months and then building it up ultimately to six months is going to be really, really important.

• 26:05Andrew Giancola?

  Also, using the Roth IRA contribution calculator, the backdoor calculator, because you can always withdraw contributions, just not your earnings from a Roth IRA, tax-free at any given time, and it's a great built-in early retirement bridge. I love talking through that. In fact, we had Katie Gaddy on from Money with Katie, probably a year and a half ago now. But it's a great episode to hear, you know, how you can actually reduce that taxable rate down even more. If you want to really dig in the weeds, we dig in the weeds on that episode. And then five, I would consider tracking my annual expenses, making sure that I understand how much I'm spending so that I can use the 25X rule to retire early. Really important to understand the 4% rule and the 25X rule when it comes to early retirement. And you have those steps there. I think it could help you. So if you get to 1.25 million, for example,

• 26:48Andrew Giancola?

  you can spend $50,000 per year. If you want to spend $80,000 per year, you need 2 million. If you want to spend $120,000 per year, you need 3 million. All those different numbers matter when it comes to making sure you're on track to retire early. But you are doing a great job thus far, and I think utilizing some of these accounts to make sure that you're growing them so you have additional flexibility is the name of the game. Also, if you have a high deductible health plan, using an HSA or something else along those lines can be a great flexibility option as well. So that is perfect. Now, for your parents, they are age 55 and they have $150,000 saved with 15 years to go. So first, I would maximize catch-up contributions. So because they're age 55, they can put extra dollars into things like their 401Ks and their IRAs, for example.

• 27:32Andrew Giancola?

  So in their 401Ks, they can get up to $30,000 in there for their Roth IRA. They can get up to $8,000 in there at the time recording this. And so those are fantastic. If you're over the age of 50, you can get a lot more money in these retirement accounts than most people who are under the age of 50. So big, big difference there. And if they can afford to save $15,000 to $25,000 a year total, they can reach $600,000 to $8,000 by 70, depending on returns, obviously. But you can make a dent in your retirement range if you can do that. It depends on how much they want to live on every single year. If they want to live on, you know, more than that, then they may have to get more aggressive. But it just depends on how much money they want to live on. And then if they're going to continue working until age 70, then delaying social security will be a good option for them.

• 28:13Andrew Giancola?

  Because they're going to need to anyway. So delaying social security until age 70 will give them a higher dollar amount, I think. And help increase that amount about 8% per year. If they delay it till age 70 and it locks in the maximum monthly benefit. If they go that route. Now, if one of them wants to retire early, then they want to, you know, I'm pretty pro taking your social security earlier at times. Especially if you're disciplined enough to take those dollars and invest them or do something else. But that's a whole other episode if we want to think through that. But if they are going to stay till 70. Delaying it if they're going to continue working can be helpful. And they can reduce how much they need to save based on how much they expect to get with social security. So if they go to ssa.gov, I would figure out what that number is. How much they anticipate to have in social security and they do a little, little math, they'll ask you, hey, how long are you going to work?

• 28:56Andrew Giancola?

  You say age 70 and then they could go into there at ssa.gov. And they can figure out how much their social security might be. And then they can reduce that monthly amount by how much they want to live on. And that'll help them kind of run these numbers. Number four is I would stay invested for growth. They still have 15 years left. That's a long time horizon. So at least for the next decade, I would stay invested for growth. And you know, a 60, 40, 70, 30, 90, 10, some sort of stock split that makes sense for them. That will still provide growth and limit that volatility. We did an episode of the 10 portfolios. Recently, it was a two-part episode. Listen to that episode. It'll kind of tell you how volatile some different portfolios are. And that'll give you just a good starting point and a financial education point to start making your decisions.

• 29:39Andrew Giancola?

  And then using a retirement calculator is really helpful. So Vanguard and Fidelity both have some great ones. We probably need to develop our own based on some of the stuff we talk about here. But using a retirement calculator can be really, really powerful, really powerful stuff. So honestly, you are crushing it. Absolutely amazing that you are maxing out both TSP and Roth IRA. That sets you up beautifully for early retirement to build flexibility. And then for your parents, using those catch-up contributions, delaying that social security and staying invested. Is going to allow their nest egg to continue to grow where they can really make some big, big progress there. So absolutely amazing and thank you so much for the question.

• 30:15Andrew Giancola?

  I am new to investing and I have no debt and about 30 grand in cash in my bank account. I only make $60,000 per year, but have no children and pay cheap rent for a house for my stepfather. I'm extremely lucky. I read a few books and they seem to recommend using index funds and not worrying about individual stocks. Should I really put all of my expendable cash into one index fund? I feel like I would not be doing enough. I also have a 401k through work, which they match 4%, but I plan on putting in 15%. I think I'm doing well, but is there any advice that you could give me? So again, this is not financial advice, but I'll kind of tell you, you are doing incredibly well, especially for someone who is brand new to investing. And you have no debt, you have $30,000 in cash. Awesome, awesome stuff. You have a really high savings rate in a 401k with a 15% contribution, which is awesome.

• 30:59Andrew Giancola?

  That is a rock solid foundation for you. And I think that is really going to help you kind of walk through the next steps of what you need to be doing. So one is I would keep a purposeful cash reserve. So with that cash reserve, honestly, you may have heard our episode about the 136 method. We want you to have at least six months of expenses saved into an emergency fund. And we walked you through how to do that in the 136 method episode. But what you really want to make sure is that you have that in a high yield savings account. So if you spend $2,000 per month, you really need to have six to 12,000 in cash. And then over time, since you have 30, you're doing a great job, you know, depending on how much you spend per month. So it just depends on how much you spend on how much you would have in there. So six months expenses is the ultimate goal that we want to have. Step two is you are on pace to use a powerful investment strategy.

• 31:43Andrew Giancola?

  So in a recent episode, we talked about 10 portfolios and there's a part one and part two is about a month or so ago. And in that episode, we talk about just some of the simple, powerful strategies. In fact, you know, the books that you have read where they, you know, may have recommended one index fund. One common example of that is the Simple Path to Wealth where it just recommends VTI. That was on the top 10 list of the portfolios that have returned the most over the last couple of decades. That was the one that actually returned the most, which is kind of crazy. Warren Buffett portfolio, the 9010 is a great one, but if you don't feel like you're doing enough, like if you're saying to yourself, I just feel like I wouldn't stay, you know, invested in this plan because I feel like I wouldn't be doing enough. You know, you can come up with a different plan that would work for you with a couple of different. Funds, maybe you want to add international, maybe you want to add some bonds.

• 32:27Andrew Giancola?

  That kind of stuff is, there's nothing wrong with that at all. And we kind of talked through those portfolios in that episode. Considering a Roth IRA would be a great option too, especially if it's something where you make more than how much you could put in a Roth IRA. You can do a backdoor Roth, but you can contribute up to $7,000 per year. And once you contribute that money, it actually grows tax-free and you can pull that money out tax-free after the age of 59 and a half. But your contributions, you can withdraw at any time without penalty. So that is a really, really powerful thing that you could do there. And I love investing in index funds in my Roth personally. But you can do your own research on that front for sure. And then step four is investing what you don't need. So, once you have your emergency fund set up, and if you started a Roth IRA, I would take the remaining chunk of cash

• 33:08Andrew Giancola?

  and you can invest it in something like a taxable account or continue to increase your contributions to your 401K. And it gives you stability so that you can do things like buy a home in a few years, or take a sabbatical, or retire early. There's so many options that you have, once you start to invest your cash, that it is really, really powerful to see how this money will grow over time. And then understand that you are doing enough. So, you don't need 10 ETFs, you don't need 40 stocks in constant research. All the pros out there, they all recommend boring investing. I am a very boring investor myself. It's consistency, it's long-term compounding, and it's low fees and a high savings rate. That's really what it takes. Consistency, long-term compounding, low fees, high savings rate. If you have those four things, you will literally become wealthy on autopilot.

• 33:51Andrew Giancola?

  And that's the really important thing is to make sure that you are thinking through that. And it sounds like you are crushing all of those. So, absolutely amazing stuff. That's how I would think about this in a quickest format I can think of here, is to kind of follow those steps. And if you have any questions on that, please let me know. But really, really good job and so glad that you started investing. The next question is, spouse and I, 49 and 48, our after-tax pay is $121,000. And currently, we save my entire pay and my spouse saves 11% of his pay. We put into savings in a high-yield savings account, mix of CDs, max out our HSA and max out our Roths. I contribute 9% in a 401K and he contributes 6%, both employers match 6%. Awesome stuff. We have no debt, own our home.

• 34:34Andrew Giancola?

  And cars outright. I guesstimate we will need about 1.5 million dollars to retire comfortably, living on the 4% rule. What can we do to ensure we hit that goal and be able to retire at 55? So first of all, you are doing a phenomenal job with no debt, that's super high savings rate, and maxing out tax advantage accounts and a clear retirement goal. First of all, you are way ahead of the trajectory of a lot of people just thinking through that process and having that plan in place. So let's look at your strategy and kind of focus through some of this stuff and see what you can do. So depending on how much you have in retirement savings currently, that will be a big, big difference maker. But let's say, for example, that you are 49, you have six years to hit your goal, and you already have some retirement savings. So let's just say you have 600,000 as a starting point.

• 35:15Andrew Giancola?

  And if you're saving aggressively, possibly 50 to 70,000 dollars per year across Roths, HSAs, and 401Ks and cash, then you can do a lot of cool things here. So if you contribute 60,000 dollars and your starting balance was 600,000, in six years, you have 1.16 million dollars. If you had 700,000 dollars starting off and your annual contribution was 60, in six years, you have 1.3. And then if you had 800,000 dollars starting off and your annual contribution was 60,000, you have 1.45 million dollars. So you're likely on pace, but depends on how much you currently have right now is a big, big thing that matters because of your shortened timeframe of six years. So we just got to see what you have there in place. And step two is I would prioritize investment

• 35:57Andrew Giancola?

  over cash if you really want to have that aggressive goal. Saving a lot into a high-yield savings account in CDs is great for short-term safety, but for long-term growth, if you want some of that, just making sure you have six months of expenses saved in a high-yield savings account, and then move the rest over to some of these. And then as you approach retirement age, then you can increase that cash position as time goes on. That's the way I would think about that. And then just continuing to run your retirement math. So I would look at something like the Empower Retirement Calculator. Fidelity and Vanguard also have great retirement calculators. Those two are fantastic. And you can plug in the age that you want to retire, and you can go through and say, hey, I'm saving this amount of money. I already have X amount in years. Here's my current assets and my future savings. That's how I would go through this, is running these through Retirement Calculator so you can get the exact numbers based on your current situation. Again, Empower has a great one.

• 36:42Andrew Giancola?

  Fidelity and Vanguard have great ones that can Give you the quick math on this because it really does depend on how much you currently already have invested for me to be able to tell you how you can kind of optimize that. So if you can increase your investments over time, you have no debt, so powerful to have no debt. And if you can increase those investments slightly over time, that's great, too. But it sounds like you are doing more than enough to even get started here. And it's really, really powerful to see, you know, how much this money can compound over time. So awesome, awesome job. There's a lot of things that you can consider here. You know, since it's before 59 and a half, you can consider having a taxable account, too, just so you can bridge and have that flexibility over time. So really, really good stuff. And congratulations on making that amazing progress.

• 37:24Andrew Giancola?

  All right. The last question is, I recently found your podcast and I've been hooked the past two months. Thank you for sharing so much valuable insight. I'm reaching out for some tips. I'm 42, married with two boys, 11 and 8, and just rolled over $35,000 from an old 401k into a rollover IRA. What's the next best step? Here's our snapshot. My husband has $125,000 in a 401k and an employee stock account. We own a home in Northern California valued at $938,000, bought for $320,000 with 80k left on the mortgage, and we hope to pay it off in the next five to eight years. We each use one credit card yearly for a vacation and focus on paying it off within a year of a balance of 6,000. First of all, I'll just tell you right off the bat, stop doing that. So vacations need to be paid off in cash. Do not let the interest rate balance

• 38:06Andrew Giancola?

  come in on your credit card. That's number one for sure. We have about 5,000 in a high-yield savings account and adding $700 a month to it. Awesome, awesome stuff there. Recently opened two custodial brokerage accounts with $4,000 each, contributing $150,000 total. And I want to build wealth and retire comfortably in early in California one day. Any guidance would be truly appreciated. All right. So let's look at your snapshot here. So you're age 42, your husband's 401k plus stock is 125,000. Your new rollover IRA has 35,000. You have 858,000 in home equity, which is awesome. Your mortgage has $80,000 left on it, which is fantastic. You're going to get that paid off. 6k use for vacations, paid off annually and credit card debt. I probably would stop that. That's the first thing I would tell you to stop doing. Savings,

• 38:50Andrew Giancola?

  5,000 in a high-yield savings account and adding $700 a month and two custodial Accounts, 4,000 each with $150 a month total. So the next steps that I would think through is first, the custodial accounts. If you are not on track for your retirement goals, I would probably stop those and contribute to yourself instead. Because overall, you need to prioritize your retirement first before your kids. I know it's hard for parents to hear, including me all the time. But we must prioritize our retirement first because there's no loans for retirement. And so it actually is helping benefit your kids in the long run. If we prioritize our retirement accounts first, so for sure, I would consider that if we're not on pace there. And then secondarily, I would look at maximizing retirement contributions. So I would look at, you know, starting to maximize things like the Roth IRA, for example.

• 39:33Andrew Giancola?

  And over the long term, you can get money into a Roth IRA and be able to, you know, put $7,000 per year. One for you, one for your spouse. So you can get actually $14,000 per year between the two of you. And you can look at doing something like that and investing it over time. The reason why the Roth IRA is so powerful is money goes in, it grows tax-free and you can pull the money out tax-free. And so you only pay taxes on the earned income that you had when you earned that income. And so secondarily, though, with the Roth IRA, if you make too much money or you make over the income limit. Then with a Roth IRA, you can do a backdoor Roth, meaning you open a traditional IRA. And then you transfer that money into a Roth IRA. A lot of people who make too much always say, well, I make too much, I can't open a Roth. But you can, you can do a backdoor Roth IRA. So it's really, really cool to be able to do that.

• 40:19Andrew Giancola?

  Secondly, is you can start to look at maximizing your husband's 401k and/or your retirement account as well. And you could start to increase those contributions over time. And then optimizing that rollover IRA is making sure it's obviously fully invested. Some people I have seen roll over their IRA and they forget to take the next step, which is investing the money. So you got to make sure that money is invested so it can grow over time. And making sure that you are, you know, using low fee investments that are not eating away into your returns. And you have a diversified asset mix is really, really important. Now, when it comes to your home equity, I think that's a great, great progress that you have made there. And over the next five to eight years, I wouldn't rush to pay it off. I mean, I think over time, you are okay, since you have that interest rate that is low. I would not rush to pay that thing off if it were me. Instead, I would work on focusing on

• 41:04Andrew Giancola?

  Growing my investments over time and then going through and really focusing on those investments for sure. As once you hit your 40s, you want to try to get as much money as you can in those investments and really get that thing rolling. Also making sure you have an emergency fund in place. So the 136 method falls into play here as well. We want to get one month of expenses, then three, and once you have three, then you can start investing and then six months of expenses is also really, really important. And then also, if you want to retire early, if you think you're on pace for that, you can look at a taxable account to increase that flexibility overall, and that's going to be really, really help you over time. Now, we want to keep these vacations guilt free. Okay, so this is the big one that I see first is a $6,000 charge on vacations is not the way we do it. We want you to pay cash for vacations so that you can do it guilt free.

• 41:49Andrew Giancola?

  So I would just start a bucket in your high yield savings account every year. And since you're already paying it off at the end of the year, every single year anyway, maybe you have to take a year off. And that's just how this is going to have to go. But going into credit card debt for a vacation is not something you want to do. Instead, you want to pay for it in cash or take a smaller vacation this year and then save up the cash for next year like you are paying off those cards. Just take those payments and put it towards your vacation fund instead so that you can pay for it in cash. And that is going to really, really help you over time is just having that sinking fund or that bucket in place that'll help you grow that amount over time. Now, final thoughts is you're doing exceptionally well. You have this high home equity, you're growing your retirement assets, you're teaching your kids to invest, which is absolutely fantastic, and you're intentional with debt and saving and actively thinking about your

• 42:32Andrew Giancola?

  future. So I think you are really, really making some awesome, awesome progress. And again, I would consider, you know, growing some of those contributions to the investment accounts, growing some of those contributions and considering a Roth IRA and running the numbers on that. And then from there, I would go and start to look at reducing, you know, those credit card payments instead of, you know, putting it on that credit card. I would just pay for it in cash. And then over time, you can start to really, really see some cool, cool changes. You are doing amazing, amazing work here. Congratulations on what you're doing there and really excited to see what you do here in the near future. So thank you so much for the question. It's absolutely amazing. And thank you guys all for listening to this episode. If you guys have any questions, make sure you join that Master Money newsletter by going to mastermoney.co/newsletter and you can ask

• 43:16Andrew Giancola?

  your question to any of those issues that come out every single week. Again, thank you guys so much for being here and we will see you on the next episode.

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