57 min

How Can We Downsize from Two Incomes to One‪?‬ Afford Anything

    • Investing

#142: How can a family of four shift from earning two incomes to one, while still pursuing financial independence?
How would a 55-year-old couple with $2 million saved know if they're ready to retire?
Can parents use leftover money in their 529 plan to help their daughter with her college loans?
If you start a job with an employer who doesn't offer high-deductible, HSA-compatible health insurance plans, could you use a plan from your old boss?
And where should a father keep his daughter's Bat Mitzvah money?
My friend and former financial advisor Joe Saul-Sehy and I tackle these five questions in today's episode. Here's a close-up look at each situation.
Tyler asks:
My wife and I both work 9-to-5 jobs. She's an elementary school teacher, and I work in sales. We've recently welcomed our first child into the world, and we're expecting our second. We'd like to transition to a one-income household, at least until the children are between three to five.
We've maxed out my Roth IRA and 401k, funded a pension through my wife's work, funded a small Roth IRA for her, and started a 529 for our son.
We have no credit card debt, but we have a mortgage, a car loan, and a student loan from my wife's graduate work.
We're thinking about gradually phasing out her income, by reducing her "income" in 25 percent increments over time, and using that money to repay our debts. We hope to have the car loan and student loan paid off by the time our second child is born.
What other recommendations would you offer as we transition into a single-income household?
Heidi asks:
We saved money in a 529 plan for our daughter's college education. We took out some loans for her freshman and sophomore years, thinking that we'd spend the rest of the 529 money during her junior and senior year.
Then a wonderful thing happened: my daughter received $40,000 in scholarship money, covering her junior and senior years. Now my daughter has $13,000 in student loans from her first two years, and also $13,000 sitting in her 529 fund. Can we use the money in the 529 plan to repay her student loans? Or are our hands tied?
Andrew asks:
My 13-year-old daughter just had her Bat Mitzvah, and now holds $5,000 in a Schwab custodial account. Where should I put this money to preserve the capital, but also allow it to grow? She'll probably want to use a portion of this within the next five years. It's currently in a Schwab money market account, but I'm thinking about putting it in VFTSX, the Vanguard Social Index Fund.
Anonymous asks:
My husband just started a new job, and his employer doesn't offer HSA-compatible plans. His new employer only offers plans with low deductibles.
I know that this isn't idea. Could he enroll in plan from his old job, so that he can still contribute to an HSA?
Laura asks:
Am I ready to retire? I'm 55 and my husband and I have $2 million, but we recognize that the market is volatile. How do we maintain our $2 million principal when we're no longer making contributions?
My second question is about real estate. If the returns from both index funds and rental properties comes to around 8 percent, then why would you bother with the additional hassle of real estate?
Enjoy!

#142: How can a family of four shift from earning two incomes to one, while still pursuing financial independence?
How would a 55-year-old couple with $2 million saved know if they're ready to retire?
Can parents use leftover money in their 529 plan to help their daughter with her college loans?
If you start a job with an employer who doesn't offer high-deductible, HSA-compatible health insurance plans, could you use a plan from your old boss?
And where should a father keep his daughter's Bat Mitzvah money?
My friend and former financial advisor Joe Saul-Sehy and I tackle these five questions in today's episode. Here's a close-up look at each situation.
Tyler asks:
My wife and I both work 9-to-5 jobs. She's an elementary school teacher, and I work in sales. We've recently welcomed our first child into the world, and we're expecting our second. We'd like to transition to a one-income household, at least until the children are between three to five.
We've maxed out my Roth IRA and 401k, funded a pension through my wife's work, funded a small Roth IRA for her, and started a 529 for our son.
We have no credit card debt, but we have a mortgage, a car loan, and a student loan from my wife's graduate work.
We're thinking about gradually phasing out her income, by reducing her "income" in 25 percent increments over time, and using that money to repay our debts. We hope to have the car loan and student loan paid off by the time our second child is born.
What other recommendations would you offer as we transition into a single-income household?
Heidi asks:
We saved money in a 529 plan for our daughter's college education. We took out some loans for her freshman and sophomore years, thinking that we'd spend the rest of the 529 money during her junior and senior year.
Then a wonderful thing happened: my daughter received $40,000 in scholarship money, covering her junior and senior years. Now my daughter has $13,000 in student loans from her first two years, and also $13,000 sitting in her 529 fund. Can we use the money in the 529 plan to repay her student loans? Or are our hands tied?
Andrew asks:
My 13-year-old daughter just had her Bat Mitzvah, and now holds $5,000 in a Schwab custodial account. Where should I put this money to preserve the capital, but also allow it to grow? She'll probably want to use a portion of this within the next five years. It's currently in a Schwab money market account, but I'm thinking about putting it in VFTSX, the Vanguard Social Index Fund.
Anonymous asks:
My husband just started a new job, and his employer doesn't offer HSA-compatible plans. His new employer only offers plans with low deductibles.
I know that this isn't idea. Could he enroll in plan from his old job, so that he can still contribute to an HSA?
Laura asks:
Am I ready to retire? I'm 55 and my husband and I have $2 million, but we recognize that the market is volatile. How do we maintain our $2 million principal when we're no longer making contributions?
My second question is about real estate. If the returns from both index funds and rental properties comes to around 8 percent, then why would you bother with the additional hassle of real estate?
Enjoy!

57 min

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