Have you done the following:
- Paid off your home early, even if your rate was 3% or lower
- took your SS at 62
- took your pension early instead of deferring
- bought an annuity
- other…..please explain and let me learn from you
1 Like
Non of the above. Investing in technology instead of investing in cash flow.
Don’t invest in EVs, invest in the EV maker that produces good cash flow.
The Captain
1 Like
I have intentionally stopped investing with the sole purpose of maximizing my net worth. Instead, while I still want a strong return on my money, the first principles are now:
-
What is this money for?
-
When do I need it?
By doing that, I now have enough cash in the form of CDs to cover my in-college kids’ 529-qualified undergraduate costs, even though the market has generally continued to rise. Sub-optimal financially, but superb from a peace-of-mind and ability to hit a key financial priority perspective.
Similarly, I now have a bond ladder in a taxable account. Standard guidance would suggest that a bond ladder optimally belongs in a traditional-style retirement account because of the low-growth, relatively high-income that doesn’t get qualified tax status nature of the income it generates. That was originally started to help supplement the 529 college savings plans for my in-college kids, but now it’s also useful for peace of mind in this rough job market.
Likewise, I also paid off a 3.61% mortgage a few years early, back in late 2022. Inflation had skyrocketed my costs to the point where my choices were to either pay off the mortgage or stop retirement contributions or start pulling money from my limited pool of after-tax investments to cover everyday expenses. While the second option would likely have been financially optimal, I chose the simpler option for both peace of mind and reduced communication complexity.
More recently, I took money from a bonus I earned in 2022 and that matured in 2025, along with money from maturing bonds and interest from the bond ladder to buy solar panels for my house. My best estimate is that those panels will have a 6% ROI over their warrantied 30 year lifetime, and even with the tax credit subsidy, it will take 14 years for them to be cash flow break even. Over 30 years, I would hope I could optimally outperform a 6% ROI, and in tough times, the money invested could have come in useful in a pinch, instead of being stuck in silicon on the roof. Yet in a world where AI data centers are spiking electricity prices, there is a very good chance that electric rates will increase faster than the 3% annualized rates built into that ROI calculation. Between that risk mitigation and the fact that the panels will help keep peace in the family during air conditioning season, it was worth the sub-optimal investment.
Regards,
-Chuck
2 Likes
“Non-optimal” how? All of those examples can be considered optimal under “optimal” circumstances.
1 Like
In the sense that making other choices could have easily resulted in a higher total net worth.
It would have been fairly easy, for instance, to outperform a 3.61% mortgage over the past three years with a straightforward index investment. Similarly, given market performance, keeping my college aged kids’ 529 accounts in stock based mutual funds could have given them money towards graduate school or the newly allowed Roth IRA transfers…
The point is that financial decisions always involve trade-offs. I have found it incredibly liberating to shift my thinking to “what is the goal I am trying to achieve?” from “how can I maximize my net worth with this money?” It makes it easier to find better balance.
Regards,
-Chuck
Chuck,
Love your passion for investing/personal finance.
If your retirement software says you have a 99 of never running out of money, why sweat the small stuff….LOL
Time to retire Chuck and enjoy your retirement….Trust the Process
1 Like
I got married. I paid off my wife’s student loans shortly thereafter. Then I paid for a second undergraduate degree. Then I paid for a graduate degree. Then she got a job that allows her to support herself independently. Nine months later she was gone.
I earned 91% of the income while we were together. I saved for our future. I invested those savings. I managed those investments. She contributed almost nothing financially, and now she’s about to walk away with a small fortune.
I don’t care how “in love” you are. A marriage is a business arrangement. SIGN A PRENUP. If your spouse-to-be objects, then you just saved yourself a lot of trouble. Protect yourself first, always.
4 Likes
I plan to work for quite a long time. What form that work takes is still to be determined.
Also, one of my biggest financial mistakes was over-investing in retirement accounts. As a result, it was only very recently where I got a “good enough” bridge plan in place to cover basic costs of living until I could withdraw from retirement accounts without facing early distribution penalties. Even now, that bridge plan is a bit tenuous…
Regards,
-Chuck
welly3,
How long did you know your wife before you got married?
9 months sounds like a very short marriage.
In looking back, were there any warning signs?
I was always good at saving. IRA, 401(k), ROTH, cash in the bank.
What I wasn’t doing was investing. The 401(k), where the bulk of my savings sat, was in whatever funds happen to be easy choices. I retired early, at 56, in part because my wife was ten years older, giving us time together. What we had might have been enough to get by, but it would have been tight. It wasn’t until three years later that I got a notice that my former employer was going to move the 401(k) to a different administrator, and mentioned that if I chose I could convert it to an IRA and keep it where it was. That was what pushed me to take control. I kept it where it was, subscribed to Stock Advisor, and started investing. I spent at least half a year slowly buying SA choices before I was fully invested.
It turned out well for me despite the years when I was only saving. That was 16 year ago, and I now consider myself modestly wealthy.
1 Like