Speaker 1: Episode three eighty one, the six week roth Ira Challenge.
Speaker 1: Welcome to the Frugal Friends podcast, where you'll learn to
Speaker 1: save money, embrace simplicity.
Speaker 2: And live a life.
Speaker 1: Here your hosts Jen and Jill. Mm hmmm, Welcome to
Speaker 1: the Frugal Friends podcast.
Speaker 2: My name is Jen, my name is Jill.
Speaker 1: And I love uninvesting episode. We don't do them a lot.
Speaker 2: Nope, because because of me.
Speaker 1: No, it's because because there's so much to be said
Speaker 1: on the topic of how to spend money and how
Speaker 1: to save money. But coming from a background, as you know,
Speaker 1: a financial writer and investing was like what I wrote
Speaker 1: about specifically retirement, I don't I do not talk about
Speaker 1: the stock market. I'm not a broker, I'm not Wall Street.
Speaker 1: I just love helping people understand and save for their
Speaker 1: future selves. And that is a big reason why we
Speaker 1: pursue saving money and spending less so that we can
Speaker 1: live full lives now and full lives in the future.
Speaker 1: And that comes through investing. And so we are doing
Speaker 1: a special six week challenge for all my roth Ira girlies.
Speaker 3: Yeah, do you want to say why it's a six
Speaker 3: week challenge?
Speaker 1: Okay? So the tax deadline for you to invest in
Speaker 1: a roth ira for the previous tax year is tax day,
Speaker 1: so this year it's April fifteenth, twenty twenty four. That
Speaker 1: is your deadline to open and make any contributions to
Speaker 1: a twenty twenty three wroth ira. And so we're again
Speaker 1: we're not we're not financial advisors, we have no credentials
Speaker 1: in that. We are not going to be telling you
Speaker 1: if a roth ira is the best choice for you.
Speaker 1: That's stuff you're gonna have. That's the research you're gonna
Speaker 1: have to do on your own and decide. But for
Speaker 1: a lot of people, roth aras are a really, really
Speaker 1: good option, probably for ninety percent of you. So that's
Speaker 1: why we're going hard into this. So we want to
Speaker 1: challenge you. This six week challenge is open and or
Speaker 1: contribute as much as possible as you can to your
Speaker 1: twenty twenty three roth ira because you do not get
Speaker 1: this year back if you, like I was telling Jill,
Speaker 1: because she's asking me, like why are we doing this,
Speaker 1: and I'm like you cause you don't get twenty twenty
Speaker 1: three back. There are so few grace periods in life, right,
Speaker 1: and this is a grace period. Twenty twenty three is over,
Speaker 1: but you still have the opportunity to invest in your
Speaker 1: twenty twenty three rathhiae until April fifteenth. Even if you've
Speaker 1: already done your taxes, you can still contribute to this.
Speaker 1: And even if you make more money in the future
Speaker 1: and you're maxing out your wrath areas and you're like,
Speaker 1: I want to contribute more to my wrath aray, you can't.
Speaker 1: You can't, but you can right now if you haven't
Speaker 1: maxed out your twenty twenty three wrath aray. So that's
Speaker 1: we're getting in under the deadline, going hard over the
Speaker 1: next six weeks. You tip, you technically have eight weeks,
Speaker 1: but if you're listening to this episode within two weeks.
Speaker 3: Jen also particularly is really jazzed about this episode because
Speaker 3: the whole thing is a vulnerability round for me. No, no, no,
Speaker 3: but truly, I think stay tuned because before we hit record,
Speaker 3: there were some questions that I had though I like,
Speaker 3: I think that this is worth talking about, but before
Speaker 3: we hit record, I want to be able to talk
Speaker 3: about it in a little bit more safety and I'm
Speaker 3: glad we did, and I'm glad that we did. So
Speaker 3: there's some things that I and learning and it's valuable
Speaker 3: to share that that will come out throughout the episode.
Speaker 3: So yeah, you're getting You're getting both the expert and
Speaker 3: the lived experience of no great experiences.
Speaker 1: And we'll again disclosed off the top, this is not
Speaker 1: investment advice. I sometimes feel silly even still referring to
Speaker 1: my past as the as a financial writer, because I
Speaker 1: haven't written for other people in over two years at
Speaker 1: this point. So I really focus on frugality, saving money,
Speaker 1: conscious consumerism all that. That's where all my energy goes into.
Speaker 1: So I don't I no longer consider myself an investing expert,
Speaker 1: but I'm definitely investing a passionate for you. And you
Speaker 1: can invest and say for retirement, even if you're not
Speaker 1: an investing expert. And so that's why we're excited for
Speaker 1: this episode. But first, this episode is brought to you
Speaker 1: by No Fear. Sometimes people don't invest because they're afraid
Speaker 1: as soon as they tie that money up for thirty
Speaker 1: plus years, they're gonna need it. Well, no fear here
Speaker 1: because we use wrath IRA's and you can withdraw your
Speaker 1: contributions to wrath Ira at any time for any reason.
Speaker 1: So if that was you and you're like, I don't
Speaker 1: think I'm gonna do this no fear, no fear here,
Speaker 1: and even after you've had the account for five years,
Speaker 1: you can within with draw some growth for certain reasons.
Speaker 1: So if you have more saving fears that you want debunked,
Speaker 1: then get the Friend Letter. We're focusing on investing over
Speaker 1: the next six weeks, not heavily but just lightly.
Speaker 2: Uh.
Speaker 1: And we're still gonna be bringing you the freebies, the
Speaker 1: saving hacks, all that frugal Friends podcast dot com, but
Speaker 1: we are going to include a little extra investing content.
Speaker 3: Yes, and we've got more people on our team helping
Speaker 3: us to write the friend Letter, which is soup are
Speaker 3: fun to engage, more voices, more perspective, so even more
Speaker 3: reason to get it, because it's not just the Gen
Speaker 3: and Jill echo chamber that is the Friend Letter.
Speaker 1: Now, yes we are, we are very excited. So in
Speaker 1: the front leader, we asked you guys because we wanted
Speaker 1: to know where you are at. You know where you're
Speaker 1: investing at for retirement and most of you, sixty five
Speaker 1: percent of you are only using your employer plan, your
Speaker 1: four one K four or three B four fifty seven
Speaker 1: stuff like that. Only like you know, is thirteen thirteen
Speaker 1: people out of all of the people we surveyed. This
Speaker 1: survey was a while ago. We're using a roth ira,
Speaker 1: and some of some people weren't currently saving for retirement,
Speaker 1: So we definitely are encouraged that a lot of you,
Speaker 1: most of you are saving for retirement, most of you
Speaker 1: are not using a wrath ira. Well, we did see
Speaker 1: some people are like they're primarily using employer plan and
Speaker 1: supplement with a roth ira, so that's great. We love
Speaker 1: that too. So we've had a lot of investing episodes
Speaker 1: over our almost four hundred, even though we don't do
Speaker 1: them a lot. We've got episode two oh five how
Speaker 1: to Save for Retirement, and then a really good one
Speaker 1: if you don't fully understand roth iras and you want
Speaker 1: to know if it's good it's a good choice for
Speaker 1: you Episode one fifty eight roth Iras explained with Barba Guinty.
Speaker 1: That's a really good one to check out if you're
Speaker 1: unsure if a roth ira is right for you. Today,
Speaker 1: we are going to go through a little bit of
Speaker 1: like the roth Ira verse four oh one k and
Speaker 1: some of the reasons that if for if a roth
Speaker 1: ira is good for you and you just have been
Speaker 1: putting it off, why it makes sense to prioritize that
Speaker 1: right now.
Speaker 3: So this first article comes from time and it's tie
Speaker 3: wroth ira versus four O one K. What's the difference?
Speaker 3: So for those of you who are still needing that
Speaker 3: foundational level of information on what are these different types
Speaker 3: of retirement accounts?
Speaker 2: How do I use them?
Speaker 3: Really? With both a roth ira and a four to
Speaker 3: oh one K, they are accounts for which the government
Speaker 3: offers special provisions in an effort to encourage people to
Speaker 3: be able to build a nest egg. But there are
Speaker 3: some differences between the two. For many of us. Both
Speaker 3: are going to make sense to have, but to understand
Speaker 3: when is one over the other right for me? Are
Speaker 3: they both right for me?
Speaker 2: All of that?
Speaker 3: So, a roth ira is going to make sense for
Speaker 3: someone who doesn't mind paying taxes now in order to
Speaker 3: avoid paying them on withdrawals later, whereas with a four
Speaker 3: oh one K it makes sense for those who are
Speaker 3: looking for the tax deduction today and are prepared to
Speaker 3: pay taxes on the distribute later on in the future. Again,
Speaker 3: both often makes sense for people, and we'll go through
Speaker 3: some of the there are not everyone can invest in
Speaker 3: a roth ira. We'll go through some of those, but
Speaker 3: those are some of the differences. It's really kind of
Speaker 3: what are the tax advantages of both. So a roth ira,
Speaker 3: you are contributing on money that you've already paid taxes on,
Speaker 3: you will not then pay penalties upon withdrawal, whereas the
Speaker 3: four roh one k you will pay taxes on the
Speaker 3: withdrawals later in the future.
Speaker 1: Yeah, and so the reason we're focusing on the roth
Speaker 1: ara right now is because you can still make contributions
Speaker 1: to your twenty twenty three. Uh, if you've already max
Speaker 1: out your twenty twenty three and you want to, you know,
Speaker 1: do a challenge to get a jump on twenty twenty four,
Speaker 1: great for you, Good for you. And then also it
Speaker 1: is self directed. You control your wroth ira, whereas your
Speaker 1: employer controls your fourro one k. So it's sometimes it's
Speaker 1: some employers make it really easy to get in there
Speaker 1: and switch things up, but other times it's not so easy.
Speaker 1: With the wrath Heray, it's all you all the time,
Speaker 1: very easy to go in there every day switch things
Speaker 1: up at your leisure, and so that makes it really
Speaker 1: good for a challenge when you can keep an eye
Speaker 1: on it and really have that control and actually be
Speaker 1: able to do something that your later self will really
Speaker 1: thank you for.
Speaker 3: So as far as the differences we went through, some
Speaker 3: of the similarities are that they're both retirement accounts. Differences
Speaker 3: have to do with levels of contribution. So with a
Speaker 3: four to oh one K in twenty twenty three, the
Speaker 3: contribution limit the amount of money you can put to
Speaker 3: invest into it is twenty two thousand, five hundred dollars,
Speaker 3: whereas with the wroth IRA in twenty twenty three it
Speaker 3: was six thousand, five hundred dollars, So definitely quite a
Speaker 3: range there, a significant amount more you can be putting
Speaker 3: into the four oh one K versus the roth IRA.
Speaker 3: And those numbers are going Are they going up for
Speaker 3: twenty twenty four?
Speaker 1: Yes, yeah, we'll talk about that a little later. Well,
Speaker 1: we're focusing on the twenty twenty three numbers for the challenge,
Speaker 1: but yeah, they went up in twenty twenty four, so
Speaker 1: you won't want to use those as your benchmark for
Speaker 1: the twenty twenty three.
Speaker 3: Roth Now, there are also limitations for a roth IRA.
Speaker 3: It is not going to be an option for all people.
Speaker 3: So if you file taxes as a single person and
Speaker 3: you're modified adjusted gross income MAGI for short, I love
Speaker 3: that acronym must be under one hundred and fifty three
Speaker 3: thousand dollars for the tax you're twenty twenty three, twenty
Speaker 3: twenty four, it is going up to contribute to a
Speaker 3: roth ira. If you're married filing jointly and your modified
Speaker 3: adjusted gross income is it must be under two hundred
Speaker 3: twenty eight thousand for tax year twenty twenty three.
Speaker 2: So again, for.
Speaker 3: A lot of listeners, we are able to invest in
Speaker 3: a roth ira, but if you are a higher income earner,
Speaker 3: this is not going to be an option for you.
Speaker 2: If you're either.
Speaker 3: If you're a single person and you make you know
Speaker 3: above that amount, or you're married filing jointly making above
Speaker 3: that amount.
Speaker 1: Yes, So we are focusing on the roth ara a
Speaker 1: because the and I mentioned this a little at first,
Speaker 1: because you don't get this year back, right, but also
Speaker 1: because there are some withdraw rules that are a little
Speaker 1: bit more flexible for the wroth ara. So I mentioned
Speaker 1: that five year gap, right, So when you are opening
Speaker 1: a roth ara, even if you're not so again four
Speaker 1: one K versus roth aray. We're not going to go
Speaker 1: in depth on how to choose, but for most people
Speaker 1: it is a good thing to have a balance of
Speaker 1: pre impost tax so and you can find that in
Speaker 1: actually both an IRA and a four to one K.
Speaker 1: A lot of employers are starting to offer a wroth
Speaker 1: four a one K option so you can get these
Speaker 1: same tax benefits in a four to one K. Maybe
Speaker 1: you're already doing that, that might be something to check
Speaker 1: and then also consider your tax liability. Usually if you're
Speaker 1: a higher income earner exceed these income limits, then it's
Speaker 1: not gonna be any sweat off your back to not
Speaker 1: qualify for a wroth Ara. But for most of us,
Speaker 1: we love we love the wroth Ira because of its
Speaker 1: full control and sometimes unfortunately employers don't offer the best
Speaker 1: options in their four A one K. So while it's
Speaker 1: still better than using a taxable brokerage, even if the
Speaker 1: options in your four to one K might be like
Speaker 1: high fee actively managed that sort of thing, you still
Speaker 1: you still make out better, uh with a four oh
Speaker 1: one K. It is good if you check to see
Speaker 1: if your four oh one K is high fee, then
Speaker 1: to balance it with a roth Ira might make sense
Speaker 1: for you. So that's all we'll say kind of on
Speaker 1: the four oh one K versus roth Ira debate, You
Speaker 1: can find out a lot more in depth on the
Speaker 1: rath Ira episode we do with Barbara Ginti. She's a
Speaker 1: certified financial planner, so she she is super knowledgeable, not
Speaker 1: just a you know, a schmuck with a podcast. So yeah,
Speaker 1: definitely look for somebody's expertise on this that has a
Speaker 1: CFP designation, either whether you're paying somebody for their advice,
Speaker 1: paying them a fee either hourly or you know, on
Speaker 1: a monthly basis, preferably hourly, or you're maybe looking for
Speaker 1: your social media content on this from somebody with a
Speaker 1: CFP designation. They have a lot more restrictions on what
Speaker 1: they can share openly, like what they're not being paid for.
Speaker 1: But you're going to be sure you're getting more accurate information,
Speaker 1: not just some influencer with who went viral on social
Speaker 1: media or just you know, some well intentioned podcasters. That's
Speaker 1: what we'll say about that. So our next article comes
Speaker 1: from nerd Wallet. They have a lot of great articles
Speaker 1: on investing and it's roth Ira withdraw rules. So the
Speaker 1: last article went into a little bit of withdraw rules,
Speaker 1: but we want to touch a little bit more on
Speaker 1: the five year rule all the reasons that it makes
Speaker 1: sense again to have a balance in these accounts, your
Speaker 1: four o one K and an ira, why it makes
Speaker 1: sense to maybe think a little more highly about your
Speaker 1: wroth aray. Don't just set her off to the side
Speaker 1: and think of her as an addition or a supplement.
Speaker 3: This one's a helpful one for me. We even talked
Speaker 3: before we hit record of Okay, why are we focusing
Speaker 3: so much on withdrawals in the second part of the episode,
Speaker 3: and Jen was really helpful in laying the foundation for me.
Speaker 3: So I'll turn around and do it for you in
Speaker 3: that if there is hesitancy in investing in something like
Speaker 3: a wrath ira, to recognize that withdrawals on a wrath
Speaker 3: ira are more flexible than they are on a four
Speaker 3: to oh one K. And so while we are going
Speaker 3: to advise, well encourage in an entertaining way that this
Speaker 3: is something we use for retirement, at the same time,
Speaker 3: knowing that you can still withdraw for certain reasons pre retirement,
Speaker 3: if something changes drastically in the economy or in your
Speaker 3: own life, you can take back out what you have
Speaker 3: invested into the account. And so I think for a
Speaker 3: lot of us that can give a bit a peace
Speaker 3: of mind in beginning to invest for retirement knowing that
Speaker 3: there is a degree of accessibility to this. It's not
Speaker 3: entirely untouchable if needed for various reasons and if we
Speaker 3: meet some of these qualifications for withdrawal.
Speaker 1: So there are a couple ways that you can withdraw
Speaker 1: investment earnings before your fifty nine and a half. So,
Speaker 1: so yes, contributions you make to your roth aray can
Speaker 1: be taken out at any time without penalty, no matter
Speaker 1: if you are currently investing, no matter how long you've
Speaker 1: had the account open. So it is a really if
Speaker 1: you are really nervous about tying your money up in
Speaker 1: a four oh one K, and maybe that's your hesitation
Speaker 1: for investing for retirement, the rath theray does really take
Speaker 1: away that fear. And I mentioned even some of the
Speaker 1: growth investment earnings can be taken out as well, but
Speaker 1: there are some restrictions on that. So if you withdraw
Speaker 1: investment earnings before fifty nine and a half, there are
Speaker 1: there's a ten percent early withdraw penalty. These are very
Speaker 1: similar to the four to one K. There is a
Speaker 1: five year holding period, so you have to wait five
Speaker 1: years before you do any of these, and then if
Speaker 1: you withdraw earnings for reasons other than the specified exceptions.
Speaker 1: So after five years, you can withdraw earnings, earnings and
Speaker 1: contribution for a first time home purchase, college costs, and
Speaker 1: a few other reasons. But the big one I see
Speaker 1: a lot of people use is for a first time
Speaker 1: home purchase. Obviously that's not ideal. We want to invest
Speaker 1: in a rath ira for a retirement, not for college
Speaker 1: or for homes. But again, if if you have a
Speaker 1: roth ira and the down payment or something is keeping
Speaker 1: you from being able to buy your first home, I
Speaker 1: know that's a big barrier for a lot of people,
Speaker 1: then your roth aray can come to the rescue, but
Speaker 1: only if you've had it open for five years. And
Speaker 1: so that's another reason. You don't even have to be
Speaker 1: actively investing in it. You have to just have the
Speaker 1: account opened for five years and have made like, have
Speaker 1: some money in it. So that is another reason we're
Speaker 1: doing this challenge is so that if you've been putting
Speaker 1: off opening a wrath ira, that you just open it,
Speaker 1: put something in it, and start that five year clock.
Speaker 2: Yeah.
Speaker 3: So the different qualifications for considering withdrawal is that fifty
Speaker 3: nine and a half number is the sweet spot for
Speaker 3: some reason, and most likely that's gonna end up creeping
Speaker 3: up higher than that by the time we get there.
Speaker 2: You don't expect, but these.
Speaker 3: Are some of the distinctions to be aware of. Is
Speaker 3: your age, your personal age, and the age of your account.
Speaker 3: So they've got these different ones. If you're younger than
Speaker 3: fifty nine and a half and your account is at
Speaker 3: least five years old or it's not five years old,
Speaker 3: those are the things that Jen just went through. Then
Speaker 3: you've got your qualifications of if you are fifty nine
Speaker 3: and a half, you have reached that status and your
Speaker 3: account is still less than five years old. Let's say
Speaker 3: you didn't open your Athira until a little bit later
Speaker 3: in life, then then you'll owe income tax, but there
Speaker 3: won't be any penalty on the earnings that you withdraw.
Speaker 3: Whereas if you have reached that age of fifty nine
Speaker 3: and a half or older and your account is at
Speaker 3: least five years old.
Speaker 2: Then go on, go ahead.
Speaker 3: You can withdraw both earnings and contributions with no tax
Speaker 3: or penalty. That's where we all want to see ourselves
Speaker 3: at fifty nine and a half with an account that's
Speaker 3: more than five years old.
Speaker 2: Then your gold then.
Speaker 1: Yeah, so it is. The restrictions are are a little confusing.
Speaker 1: So if you want to do so, if you're younger
Speaker 1: than fifty nine and a half, and once you've hit
Speaker 1: that five that important five year window, then you avoid
Speaker 1: both taxes and penalties on earning when you're withdrawing that
Speaker 1: up to ten thousand to buy your first home when
Speaker 1: your withdraw is due to disability. So that's something none
Speaker 1: of us can see coming. That's another thing that this
Speaker 1: can help with. And you'll avoid both taxes and penalties
Speaker 1: if the withdraw is made to a beneficial or your
Speaker 1: state after your death. So again, just another reason to
Speaker 1: get that five year time clock, you know, going, because
Speaker 1: there's a lot of reasons. Granted the taxes may not
Speaker 1: be a big deal to you, but if they are,
Speaker 1: then that's a reason to get that five year clock start.
Speaker 4: Now.
Speaker 3: I know we're not to the vulnerability round yet, but
Speaker 3: I will choose to start talking about this now. One
Speaker 3: of the things that I have faced. So I have
Speaker 3: a roth Ira. I I opened it four years ago
Speaker 3: and began investing in it three years ago, which is
Speaker 3: something that I have shared on the podcast before, which
Speaker 3: is a common mistake. So that's something to check if
Speaker 3: you're like, yeah, I do have a wrath Ira, but
Speaker 3: I don't really know what's happening with it. You have
Speaker 3: to open it and then pick your investments and pick
Speaker 3: what you're invested in. That's something we cannot tell you.
Speaker 3: That is research you're going to have to do on
Speaker 3: your own, and I mean talk with trusted people. Sure,
Speaker 3: but figure out where you want to then invest your
Speaker 3: wroth Ira money. Now, for me, this is real talk.
Speaker 3: Something I shared with John before we had record was
Speaker 3: I really want to be able to encourage people to
Speaker 3: do this six week wroth Ira challenge and invest as
Speaker 3: much as possible for the twenty twenty three year. But
Speaker 3: I recently looked at my wrath Ira and I have
Speaker 3: only made a little bit of money above and beyond
Speaker 3: what I have put in. So the money I've put
Speaker 3: in has not grown much, and so it feels a
Speaker 3: little bit deflating to me. Of I want to be
Speaker 3: able to say, oh, I'm putting X amount of more
Speaker 3: money in this year, but at the same time that
Speaker 3: doesn't feel really great or comfortable for me because I
Speaker 3: am not seeing much growth. Now. In the back of
Speaker 3: my mind, I also know time in the markets better
Speaker 3: than timing the market. I do listen to you and
Speaker 3: that there are dips and ebbs and flows, and that
Speaker 3: this is going to happen, and don't be checking it
Speaker 3: month to month. And I haven't been, Like here, I
Speaker 3: am checking it three years later only to find out
Speaker 3: my money's not growing that much, and yet my high
Speaker 3: yield savings account is.
Speaker 2: I'm not saying I'm.
Speaker 3: Just gonna invest for retirement in a highyield savings account,
Speaker 3: nor am I recommending that, but like it is a
Speaker 3: thought for me when ben Jen and I looked at it,
Speaker 3: and yeah, I have only made four point nine percent
Speaker 3: on my roth IRA investments and I'm making five point
Speaker 3: h five on my high yield savings account. That doesn't
Speaker 3: feel great. And I got to imagine that depending on
Speaker 3: where some listeners are where you've started, if you began
Speaker 3: in twenty twenty one, twenty twenty two with an investment,
Speaker 3: you probably did see some dips and that doesn't feel great.
Speaker 3: So it's kind of difficult to get over some of
Speaker 3: that hump. And I think for me, I'm a natural skeptic.
Speaker 3: I think a lot of us millennials are to be
Speaker 3: able to talk through all right, help me understand why
Speaker 3: this is still a good idea for me, Because I've
Speaker 3: been doing it for years, I'm not seeing what i'd
Speaker 3: want to be seeing. Now you helped me to find
Speaker 3: maybe some better investments that aren't going to be maybe
Speaker 3: a little not going to be as the lower risk.
Speaker 3: What's the word I'm looking for? But yeah, so tell
Speaker 3: the people what you told me out loud, jem.
Speaker 1: Okay, Yeah, so I'm this is this is all like
Speaker 1: the advice that I will give is all safe to
Speaker 1: save because it's not financial advice. But so what the
Speaker 1: biggest criticism of a target date fund, if you're going
Speaker 1: to meet a critic of one, is that they become
Speaker 1: too conservative too fast, or that they just are too conservative.
Speaker 1: And what that means is that the ratio of stocks
Speaker 1: to bonds more mostly leans too heavily into bonds too quickly.
Speaker 1: And so you should check your if you're in a
Speaker 1: target date fund, you should check your target date fund
Speaker 1: three year performance against an S and P five hundred
Speaker 1: or a total stock market and a bond kind of portfolio,
Speaker 1: or have somebody do that for you. That's where a
Speaker 1: certified financial planner can come in helpful. So that is
Speaker 1: what I would recommend for someone to do is compare
Speaker 1: that and if you're happy with the growth, then you're fine,
Speaker 1: and if you're not happy, then you can Readjust one
Speaker 1: of the biggest barriers to people readjusting their portfolio is
Speaker 1: maybe not having enough money in it. So one of
Speaker 1: the biggest criticisms of index funds is that many of
Speaker 1: the minimums to get in are too high, and so
Speaker 1: over the years fire people financial independence retire early, like
Speaker 1: Geeks have been very much into Vanguard and their index funds,
Speaker 1: and a lot of the higher rate the good ones
Speaker 1: have a three thousand dollars minimum to get into the
Speaker 1: target faiths. Target date funds only have one thousand dollars.
Speaker 1: So one of the criticisms, like I am currently having
Speaker 1: four index funds, is just the barrier to entry that
Speaker 1: they offer. And so lately I have been preferring for
Speaker 1: in just in general, have been preferring fidelity and we're
Speaker 1: not paid by any brokerage or you know, have any
Speaker 1: ties to any of them, but have been preferring fidelity
Speaker 1: because a they have the zero expense ratio funds and
Speaker 1: you can get into those funds for like I think,
Speaker 1: like ten dollars is in minimize much more accessible. And
Speaker 1: then also you can get ETFs. You can get these
Speaker 1: at Vanguard too, but ETFs can get you the same quality,
Speaker 1: same low expense ratio of these really quality index funds
Speaker 1: for a dollar a minimum investment of a dollar. And
Speaker 1: so that's kind of where like I'm also leaning in
Speaker 1: now something that is in like my area of learning
Speaker 1: and interest and could be of interest to you out
Speaker 1: there potentially if these have been barriers in the past,
Speaker 1: to you, these can be alternatives that you might want
Speaker 1: to research and see if they can be the solution
Speaker 1: to these barriers. Because not a lot of people talk
Speaker 1: about ETFs unless you're like in you know, pro finance
Speaker 1: talk or not even gosh, but ETFs are have always
Speaker 1: been this like very on par with index funds, right,
Speaker 1: So it's ETFs or index funds is something we always
Speaker 1: kind of say in articles. But for some reason, and
Speaker 1: we've told you guys, most people are using index funds
Speaker 1: in their investing and that and I think probably a
Speaker 1: big reason of that now seeing the four O one
Speaker 1: K that most people are mostly using their four O
Speaker 1: one K for retirement, usually don't see ETFs in a
Speaker 1: four oh one K. So that's why there's a lot
Speaker 1: I feel like there's a lot more education on index funds, right,
Speaker 1: So that's what we just jump to. It's what's the
Speaker 1: information that's readily available. But we all know ETFs are
Speaker 1: out there too, and they have the same exact You
Speaker 1: can get an S and P five hundred index fund.
Speaker 1: You can also get an SMP five hundred etf. They
Speaker 1: have the same funds. And I shares just came out
Speaker 1: with some target date et so now literally they are
Speaker 1: the same. But I am doing more research on ETFs
Speaker 1: because of that. Just lower barrier to entry.
Speaker 2: Yeah, that's awesome.
Speaker 3: I think this conversation for me, both on and off
Speaker 3: the MIC, has been super helpful in keep going kind
Speaker 3: of the maintenance but also tweaking along the way. I
Speaker 3: think I took it to heart too much of set
Speaker 3: it and forget it, which can be true.
Speaker 2: I'm sure I would be fine if I had never
Speaker 2: looked at it again.
Speaker 3: But it's still worth checking back in a few After
Speaker 3: a few years, are you still pleased with what's going on?
Speaker 3: Make minor educated informed tweaks to what's happening and know that, Yeah,
Speaker 3: you can withdraw on these things if you want to
Speaker 3: it's not in entirely this high risk type of retirement
Speaker 3: investing situation. And also so with the six week wroth
Speaker 3: Ira challenge that you can put money. So right now
Speaker 3: I have automatic withdrawals coming out of my bank account
Speaker 3: to go towards my wroth Ira And so if you
Speaker 3: want to put more money towards twenty twenty three to
Speaker 3: be able to max it out again, you have until
Speaker 3: April fifteenth to be able to do that. You can
Speaker 3: go in and manually say put this towards twenty twenty three,
Speaker 3: or put it towards twenty twenty four. If you don't
Speaker 3: and you just have the automatic withdrawals, it's going to
Speaker 3: go towards the year that you are investing it. But
Speaker 3: you can make that designation. So that's one of the
Speaker 3: things that we are advocating for, is put it towards
Speaker 3: twenty twenty three, make it count for last year. Be
Speaker 3: kind to yourself. And after having this talk with you, Jen,
Speaker 3: I'm back on the wagon. I was ready to pull
Speaker 3: it all out.
Speaker 1: Yeah. Well, when you were describing me, it was like
Speaker 1: super disheartening and being like, oh my gosh, yeah, I
Speaker 1: can see and you're what you're saying it's like, yeah,
Speaker 1: that's not right, that's not what the market's been doing.
Speaker 1: And so it just took putting the fun that you
Speaker 1: had next to the total stock market fund to see like, yeah,
Speaker 1: what you're seeing is is right, but it's not great.
Speaker 1: So let's you know, let's reallocate, and.
Speaker 3: You can do that when you're starting earlier, right, the
Speaker 3: earlier the better.
Speaker 1: And this is another great thing about the challenge, So
Speaker 1: we're not just challenging you to invest. And it's a
Speaker 1: perfect time to getting off of the no spend January
Speaker 1: where you're going to put that money, but it's also
Speaker 1: the time to look into your investments. See what that
Speaker 1: We want to look at the three year history because
Speaker 1: twenty twenty two was horrible. Twenty twenty two was a
Speaker 1: real bad year for the market. Twenty twenty three was better.
Speaker 1: So we want to look at like a three three
Speaker 1: year time horizon. I think is is going to give
Speaker 1: a more accurate picture and see, am I happy with
Speaker 1: my performance? Are my expectations a little devoid from reality?
Speaker 1: Is this what you know other funds are doing? Is
Speaker 1: what I want? Even a possibility? Do I want to switch?
Speaker 1: I can do that? Now you can exchange when we
Speaker 1: are investing extra we're buying. But if you want to exchange,
Speaker 1: you can do that and just kind of realitatea and
Speaker 1: so you feel good about your investments.
Speaker 3: Do you know where I am never disappointed and let down,
Speaker 3: and I always feel good about this investment we made.
Speaker 1: Well, we check back in on it several times a week.
Speaker 5: Oh yeah, we do the bill of the we that's right,
Speaker 5: it's time for the best minute of your entire week.
Speaker 1: Maybe a baby was born and his name is Williams.
Speaker 1: Maybe you've paid off your mortgage. Maybe your car died
Speaker 1: and you're happy to not have to pay that bill anymore.
Speaker 5: Duck bills, Buffalo bills, Bill Clinton, this is the bill
Speaker 5: of the week.
Speaker 4: Hi, I'm Serena from Oklahoma via Minnesota. Can hear the
Speaker 4: accent Probably a little bit. Anyways, I just listened to
Speaker 4: your Negotiating Bills episode and it inspired me. Because I
Speaker 4: am a naturally shy person. I don't like doing stuff
Speaker 4: like that, but I was inspired. So I went to
Speaker 4: the thrip store. I was buying a couple other things,
Speaker 4: and there was this tea cup I had wanted for
Speaker 4: weeks that has a chip on it, and so I
Speaker 4: didn't really want to pay for it when I had
Speaker 4: a chip on it, so I brought it up and
Speaker 4: I was thinking, Okay, maybe I will if I can
Speaker 4: get it for a dollar, then I'll be happy. And
Speaker 4: so I said, hey, this has a chip on it,
Speaker 4: and she just interrupted me right there and was like,
Speaker 4: you can just have it, and I was like, oh,
Speaker 4: thank you. So it worked out super great. I got
Speaker 4: the teacup for free, which is not what I was expecting,
Speaker 4: and I was very happy with the results of my
Speaker 4: foray into negotiating. So thanks.
Speaker 1: Oh my gosh, yes, you don't know if you don't ask.
Speaker 3: It sounds like the most adorable little teacup reminiscent of
Speaker 3: Beauty and the Beast with.
Speaker 2: The little chip on it that you got for free.
Speaker 3: And I love that you're describing this as your practice,
Speaker 3: your foray into negotiation, because it is these types of
Speaker 3: circumstances that can then help us to negotiate when the
Speaker 3: stakes are a little bit higher when it comes to
Speaker 3: our insurance bills or phone bills, internet bills, where there's
Speaker 3: maybe even a little bit more money to be shaved off.
Speaker 3: But well done doing it in person, because that's usually
Speaker 3: the place that we all have. The most issue is
Speaker 3: trying to negotiate face to face can feel a little
Speaker 3: bit more daunting than over the phone. So if you
Speaker 3: can do that, Serena, you are well on your way.
Speaker 2: To some negotiation power in the future.
Speaker 1: And well done knowing that you deserve you deserve to negotiate.
Speaker 1: Sometimes I think that's a big bearer that we think, Oh,
Speaker 1: don't I don't deserve a discount on this, Like what
Speaker 1: have I done to earn this discount? And no, you
Speaker 1: have money. You are a customer, and they need you.
Speaker 1: They need you.
Speaker 2: To give their stuff free. They need to offload something.
Speaker 2: I really the rest store needs stop.
Speaker 1: Real good, Serena. But remember the people that you are
Speaker 1: giving your money to they need you. So true, you
Speaker 1: have the power.
Speaker 3: If you're feeling inspired and you have a bill that
Speaker 3: you want to submit to us, if it has to
Speaker 3: do with entering into the world of negotiation, if it
Speaker 3: has to do with believing in the power that you
Speaker 3: have as a consumer or client, or if your name
Speaker 3: is Bill. We have yet to have a person named
Speaker 3: Bill themselves call us.
Speaker 2: I think I would. I don't know what I'm gonna do.
Speaker 1: If I would probably record your face. I think if
Speaker 1: we're not already recording.
Speaker 3: It virul friendspodcast, dot com, slash bill, we're ready for you,
Speaker 3: and now it's time for.
Speaker 4: Me.
Speaker 1: So we've been, you know, vulnerable already, will continue to
Speaker 1: be vulnerable because I think that you're not missing any
Speaker 1: content or information on rath IRA's the world. The Internet's
Speaker 1: not devoid of that. It's real life experiences. It's real
Speaker 1: feelings about investing. It's real life situations and how to
Speaker 1: navigate them. That is what is missing in conversations about investing.
Speaker 1: And also, let's just tack another thing onto the challenge.
Speaker 1: Talk about it, Oh, talk about investing with people over
Speaker 1: the next six weeks. You don't have to sound like
Speaker 1: a genius or certified financial planner. Just try it out.
Speaker 1: Talk about ask your friends like do you have a
Speaker 1: wrath Ira, do you have like what's in your four
Speaker 1: and one kid?
Speaker 4: Do you know?
Speaker 1: Let's take this challenge, take this opportunity to have more
Speaker 1: normal conversations about investing, because so many investing conversations about
Speaker 1: are like about bitcoin, you know, and we would love
Speaker 1: to normalize conversations about wroth Iras.
Speaker 3: Yeah, I mean it's uncomfortable, but I gotta say after
Speaker 3: our conversation, I'm feeling more comfortable. I'm confident, and that's
Speaker 3: a really good outcome.
Speaker 1: Absolutely. So our official question for the Lightning Round is
Speaker 1: how much are you going to contribute to your wroth
Speaker 1: Ira over the next six weeks? How are you going
Speaker 1: to do this challenge?
Speaker 3: Ho So, because of the January No Spend challenge, I
Speaker 3: did have a little bit of extra money, and so
Speaker 3: I am going to commit to putting an extra one
Speaker 3: thousand dollars into my roth Ira for the year twenty
Speaker 3: twenty three.
Speaker 1: Yes, I love that.
Speaker 3: I wasn't. I can't say that I was gonna say
Speaker 3: that and it be true an hour ago, But now
Speaker 3: that you and I have talked about it, this is
Speaker 3: now going to be true.
Speaker 1: I'm glad that we did talk about it because you
Speaker 1: wrote it down.
Speaker 2: I did.
Speaker 3: I wrote it down like, well, this is probably the
Speaker 3: thing to say, but I'm not loving what I'm seeing
Speaker 3: in my roth Ira right now.
Speaker 1: Yeah, I'm really glad that we talked about it.
Speaker 3: Yeah.
Speaker 1: I hope if you're listening that you'll talk about it
Speaker 1: with your friends because they may be thinking, this is
Speaker 1: what I'm supposed to do, this is what I'm going
Speaker 1: to say I'm gonna do but in private, I'm actually
Speaker 1: I don't feel like I'm.
Speaker 2: Going to do it.
Speaker 1: That's so us. It's like so honest. So I'm glad.
Speaker 1: I'm glad we got that sort of what about you, Jen.
Speaker 5: So me I.
Speaker 1: So we have maxed out our roth Ira every year
Speaker 1: from twenty seventeen to twenty twenty two, and in last
Speaker 1: year we were on track and then Travis got a
Speaker 1: new job and took a pay cut, and the roth
Speaker 1: Ara was what got cut from the budget. Yeah, and
Speaker 1: we had already done it halfway, so it was was
Speaker 1: it sixty five hundred each six? It was a number
Speaker 1: I just had it auto invested and it was about
Speaker 1: like six fifty months and I went through the first
Speaker 1: half of the year. So we like half maxed for
Speaker 1: twenty twenty three. And so we have the renovation that
Speaker 1: should be hopefully wrapping up by the summer. So we're
Speaker 1: going to decide in March once we've spent. By March,
Speaker 1: we will have spent ninety percent of the renovation costs
Speaker 1: and we'll see how much we'll have leftover. We'll also
Speaker 1: get another advance for our book, which I'm going to
Speaker 1: factor in, but that won't come till the summer, so
Speaker 1: we're not going to decide till March. I would love
Speaker 1: to put another three k in. I think we can
Speaker 1: do that. It's so hard to budget around a renovation
Speaker 1: because costs never go down, they always go up, So
Speaker 1: it just depends on what the final numbers are. We're
Speaker 1: also happing to like because we're in a construction zone.
Speaker 1: Our tenant on the other side of our unit of
Speaker 1: our house is mad every day, and so we're gonna
Speaker 1: we're deeply discounting his rent.
Speaker 2: And that's life.
Speaker 3: Yeah, that Like, these are the things that you make
Speaker 3: your best plans and then you work and flex around
Speaker 3: it because these things happen.
Speaker 2: Yeah, timelines don't work the way you want them to do, right.
Speaker 1: So I am definitely going to make some additional contributions
Speaker 1: in March. I will have to get back with you
Speaker 1: on what those are. My goal is to do three thousand, Okay,
Speaker 1: that's my goal, so fifteen hundred in each And I
Speaker 1: hope everyone out there knows that if you're married filing jointly,
Speaker 1: whether one spouse has a job or not, whether you're
Speaker 1: both employed or just one is, both can have a
Speaker 1: wroth iray. So typically one of the stipulations to having
Speaker 1: a roth araa is you have to have earned income.
Speaker 1: If you are married filing jointly, and you are a
Speaker 1: stay at home spouse, you are still entitled to a
Speaker 1: wrath array because you're connected to that, you're your The
Speaker 1: government views your work as valuable, valuable, valuable, and valid,
Speaker 1: valuable enough that you can have a wrath array, but
Speaker 1: not so much that they're really going to help you
Speaker 1: with your big else their childcare, maternity, none of that.
Speaker 1: But yeah, yeah, so there you go, There you go.
Speaker 1: But I wanted to leave with like one more thing,
Speaker 1: maybe something. So compound interest to me is so inspiring,
Speaker 1: it's so confusing, it's mathing, it's I can't comprehend it,
Speaker 1: and maybe you can't either. But one of the general
Speaker 1: rules of compound interest is that theoretically your money doubles
Speaker 1: every ten years. So if you just put a dollar
Speaker 1: you bought a dollar with ets in your wrath ira
Speaker 1: and didn't do anything in ten years, that would be
Speaker 1: two dollars.
Speaker 2: Ooh right whoo.
Speaker 1: So if you look at whatever you have in your
Speaker 1: roth iray today and you did nothing else to it,
Speaker 1: that number would be double in ten years. Theoretically, not
Speaker 1: a hard and fast rule. It's a rule of thumb,
Speaker 1: and I did check it on a calculator. It's a
Speaker 1: little off because I think it accounts for compounding monthly
Speaker 1: when most accounts compound quarterly, but it's close enough. So
Speaker 1: imagine that you have. If you want to be a
Speaker 1: millionaire in thirty years and you don't want to invest
Speaker 1: anything over thirty years, then you just have to get
Speaker 1: up to one hundred and twenty five thousand dollars in
Speaker 1: your wrath ira. So obviously that's going to take you
Speaker 1: some time. But once you get to one hundred and
Speaker 1: twenty five thousand dollars in your roth ira or across
Speaker 1: you and your partner's rath iray, multiple rathirays, then in
Speaker 1: ten years that'll double. It'll be two hundred and fifty thousand.
Speaker 1: In ten years that will double, and it'll be half
Speaker 1: a million, and then in years twenty to thirty it
Speaker 1: will double and become a million.
Speaker 2: Wow.
Speaker 1: So instead of thinking about like, oh, a million dollars,
Speaker 1: there's a lot, it feels like I can't attain it,
Speaker 1: Like I'm not a millionaire. That's not who I am.
Speaker 1: I'm just a you know, middle class working I'm gonna
Speaker 1: be working till I die sorty person.
Speaker 3: I did make that statement before we hoped on this episode.
Speaker 3: Maybe don't worry about me, jen, I'll just work.
Speaker 2: Till I die.
Speaker 1: Maybe you feel like that I do. And don't put
Speaker 1: your goal as the million mark. Let compound interests do
Speaker 1: that for you. Let the math that math and you
Speaker 1: can't comprehend. Let that math do that math for you.
Speaker 1: You focus on that first one hundred and twenty five
Speaker 1: thousand dollars. You focus on that because even as you're
Speaker 1: investing it, compound interest will even help you get there.
Speaker 2: Yeah.
Speaker 1: Right, You're not going to have to, you know, do
Speaker 1: all that on your own. Focus on that first one
Speaker 1: hundred and twenty five or even that first hundred if
Speaker 1: you want an even round number. Focus on that and
Speaker 1: getting there, and your money will work hard for you
Speaker 1: and it will get you the rest of the way.
Speaker 3: So research it, talk about it, decide what your goal
Speaker 3: is going to be. You have till April fifteenth, twenty
Speaker 3: twenty three, four twenty twenty four, thank you to invest
Speaker 3: twenty twenty three.
Speaker 1: What year are we in?
Speaker 3: And you can be kind to yourself now and your
Speaker 3: future self later. Thanks for listening, everybody. Many of you
Speaker 3: already know we have a new US letter called the
Speaker 3: Friend Letter, but if you don't already get it, you
Speaker 3: should fru friendspodcast dot com. We send you an email
Speaker 3: three times a week with freebies you can take advantage
Speaker 3: of that week savings tips, life hacks to help you
Speaker 3: save money spend better. We want to give a shout
Speaker 3: out to a particular friend who sent us this sweet
Speaker 3: email from said change nos Co. Thank you listener. I
Speaker 3: was not going that direction and pronunciation, so thanks, they said,
Speaker 3: thank you for the amazing free download. I have never
Speaker 3: been able to complete a full month of a no spend,
Speaker 3: No Spend challenge. I feel very encouraged and I'm excited
Speaker 3: to be doing this with y'all. Thank you for all.
Speaker 2: That you do.
Speaker 3: So in January we walked everyone through and ourselves through.
Speaker 3: Both Jen and I also did this a no Spend January,
Speaker 3: And when we do challenges like that, we will also
Speaker 3: often give away our own freebies. So we gave a
Speaker 3: thirty day No Spend Challenge workbook, and that's what they're
Speaker 3: talking about. But what we also do is we give
Speaker 3: a budget toolkit at the end of every month for
Speaker 3: the upcoming month. The last Friday of every month is
Speaker 3: a budget toolkit. So if you're getting the friend letter,
Speaker 3: you're automatically going to get that what's going to be
Speaker 3: on sale that month, what are some of the things
Speaker 3: that you need to be putting into your spending plan.
Speaker 3: It's just a really great thing to have in your inbox.
Speaker 3: So forgo Friends podcast dot com.
Speaker 1: Yes, people love the budget toolkit and Sage has kept
Speaker 1: she kept us updated. This was at the beginning of
Speaker 1: the challenge, kept us updated on her progress and Sage
Speaker 1: just good job. You did phenomenally. If you're wondering if
Speaker 1: you like reply to our emails or our direct messages
Speaker 1: on Instagram, like we're there, that's us. So it's mostly
Speaker 1: me actually I'm there, yeah, and.
Speaker 3: Then Jen will send the messages on to me and
Speaker 3: then all draft a response sometimes scatterbrain.
Speaker 2: Amazing.
Speaker 3: Well, thanks for listening, everybody, get more from us Forogle
Speaker 3: friendspodcast dot com and you know, have a good six
Speaker 3: week challenge.
Speaker 1: Happy Investing Frugal Friends is produced by Eric Sirianni.
Speaker 2: What are you hoping to do in retirement? Jen?
Speaker 3: What's this one million dollar compound interest result going to
Speaker 3: get you when you are beyond fifty nine and a half.
Speaker 1: Probably a knee replacement, double knee replacement. I think that's
Speaker 1: what I'm looking at, a real, real good one.
Speaker 2: Your knee is hurting already.
Speaker 1: They always do, not always, but I do have just
Speaker 1: I think from ice skating. I just have bad knees,
Speaker 1: so running does not hurt them more. I it's just
Speaker 1: you know, usually like going to the bathroom or something, you.
Speaker 2: Need a higher toilet.
Speaker 1: I do need one of those toilets that they see
Speaker 1: the memes out of, like it just raises and goes
Speaker 1: down like one of those toppers, toilet topper, one of those.
Speaker 2: Wow, so much to look forward to.
Speaker 1: I'll probably get that in retirement too.
Speaker 2: Wow.
Speaker 3: Yeah, they'll probably be all sorts of new things for
Speaker 3: us in thirty years from now that I absolutely won't
Speaker 3: know how to use because I don't know how to
Speaker 3: use things now.
Speaker 1: Yeah. I don't know. What are you gonna do in retirement?
Speaker 1: I don't know. If I want to know, I'm.
Speaker 3: I'm probably still gonna be working.
Speaker 1: That's what my mother in law's doing. She retired a
Speaker 1: few years ago. You went to a retirement party she
Speaker 1: works harder now than she ever has in her life.
Speaker 3: I just learned something about my great grandmother, my grand
Speaker 3: mother's mother. My mom told me that she worked in
Speaker 3: a pickle factory until she was like ninety two years old.
Speaker 1: Just put the cucumbers in the jar, you do something
Speaker 1: like that.
Speaker 3: Yeah, I think she sliced pickles. She just she worked
Speaker 3: in the pickle factory. And that's my lineage, that's my
Speaker 3: heritage that I come from, and that feels right. I
Speaker 3: will probably working with fermented food of some sort. I'm
Speaker 3: already in my sourdough era, so just multiply that. Recognize
Speaker 3: where I came from. I got a Polish great grandmother
Speaker 3: who worked in the pickle factory until the.
Speaker 2: Day she died. So there you have it.
Speaker 1: Here's goals with that. Here's the problem with that. The
Speaker 1: more you ferment, the more you will preserve your own self,
Speaker 1: and the longer you will live, probably, and you will
Speaker 1: need more money to live that long. You'll live into
Speaker 1: your hundreds because you're preserved so well.
Speaker 3: I'm so picked shot by pickling morphings.
Speaker 2: I just can't stop with the fermentation.