What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. 401(k) fees and other options
2. Personal finance book recommendations
3. Roth IRA, 401(k), and taxes
4. Learn how to program cheaply
5. National park camping with kids
6. Saving for a reward
7. Evernote and encryption
8. Belt buying advice
9. When to toss a razor
10. Saving old statements
11. When to start garden planning?
12. Exchange health care plan options
Winter is such a confounding season. I actually love brisk weather – I love it when it’s around 30 degrees or 40 degrees out. There’s a certain crispness to the air that I absolutely love. I love snow, in manageable amounts.
What I don’t like is when the temperature drops low enough (usually about 10 degrees F or below) where it’s miserable to go outside. I especially don’t like ice storms that leave everything slick.
Right now, we’re in the midst of a giant ice storm. Our family dog fell down in our driveway and slid about fifteen feet. I only made it to the end of the driveway by holding firmly onto a vehicle along the way. It is absolutely unsafe to drive anywhere and absolutely unsafe to walk anywhere, either. I’m stuck inside.
It’s slick and miserable and all I want is for the temperature to rise enough to melt all of it away.
Q1: 401(k) fees and other options
I have a conundrum that I’m hoping you can shed some light on. I work full time (going part-time later today!) and my nonprofit does not offer retirement benefits. I currently put $300/month into a Vanguard IRA with very low fees, my take home is going to be $2300/month. My husband works full time and his company offers retirement but no match. His take home is $3267 after taxes, family insurance, and putting $499 out of every paycheck into a 401K (maxing) and another $230 for a Roth IRA. These accounts are held through an investment company/broker person and have much higher fees, around 1.5%. There aren’t any other options through his work, although there are other funds we could choose that seem to have slightly lower fees but also lower average returns.
We’re both in our late 30s and our investment/retirement balances are just $100k due to lots of debt that we prioritized for several years (not sorry!), so we’re catching up. Even though we’re still paying off low-interest student loan debt, and throwing a lot at that, we want to put this amount of money into retirement right now. Do you see any other options for retirement investing for my husband that would have lower fees? Is it possible to transfer money from an account when he’s actively contributing to a different account, like a low-cost Vanguard or Fidelity investment? If it helps, I currently make $52,500, going down to about $39,000, and my husband makes $75,000.
– Kim
The ability to roll over a 401(k), and when you can do it, varies a lot from plan to plan. You’d have to have a conversation with the plan manager to find out what options are available to you and what restrictions you have.
Having said that, if you’re not receiving any matching funds from your employer for 401(k) contributions, you should make it a priority to hit your annual contribution cap on your Roth IRA before contributing a dime to that 401(k) plan. That’s a very high fee and you should avoid it if you can.
Basically, here’s the priority you should be following. First, you should contribute to the 401(k) at whatever amount you need to in order to get all of the employer matching money. If there’s no matching, skip that step. Then, you should contribute to a Roth IRA up to the annual contribution limit (usually $5,500). If you still want to contribute more, you can either go back to that 401(k) or put it in a taxable account you manage yourself. There are advantages and disadvantages each way, mostly due to the fact that a 1.5% expense ratio in that 401(k) is way too high.
Q2: Personal finance book recommendations
I am 45, divorced & plan to remarry in the next year or so a great guy; we both have grown kids. Is there a book you would recommend to older couples on merging finances later in life? Or one, for finances later in life?
– Jill
I don’t know of any books specifically targeting older newlyweds. There are quite a few books targeting people in your age range, however.
Surprisingly, one of the best all-around finance books I’ve seen for people in their 40s and 50s is The Everything Personal Finance in Your 40s and 50s Book, which is well-written, easy to read, and quite comprehensive. My expectations are usually low for books in that kind of series format, but this one is very solid, particularly in terms of the basics. A similarly good book is The Charles Schwab Guide to Finances After Fifty by Carrie Schwab-Pomerantz.
The thing is, I’m mot 100% sure either book will be of a tremendous help to you. Most personal finance books tend to cover the basics really well and both of those books do that, but they don’t really tell you what kind of plan to follow. They mostly give you the facts and some things to think about and assume you’ll use those to develop a plan on your own. They’re akin to a bucket of Lego bricks – very useful, and they can be used to build anything, but they don’t tell you how to build it. For good reason, too – everyone’s life is a little different and thus their plan is a little different.
My thinking is that if you read several personal finance books like those and still feel uncertain about what to do, you need some guidance in personalizing a plan, and that’s where a fee-based financial advisor can help. I don’t think it’s wrong to want to use an advisor, nor do I think it’s wrong to plan it yourself; it depends on your personality.
Jill had a second question
Q3: Roth IRA, 401(k), and taxes
On Roth vs standard IRA or 401k. Several posts suggest that when all things are equal (current vs retirement income) splitting between the two options. Sounds good there. However, what I have not seen explored is the impact having a Roth may have on things like social security. There are some income thresholds where social security is taxable (is it only when one is below the maximum retirement age?). Would a withdrawal from the Roth count as taxable income in this circumstance?
For example: if I chose to retire at 62 & take social security then, my estimate is $18k a year. My fiancé (husband’s) is similar. I should also have a pension about that same amount ($18k) for a total family income of $54k a year. Based upon the formula on the IRS website we should be just above the base amount for consideration of taxes on social security. (1/2 social security + taxable income > $32k (married, filing joint)). Then there is the potential that I would need to pay taxes on $2k of the social security. If I take distributions from my standard ira/401k that would only add to the amount of social security that is taxed. If I take distributions from a Roth, would it have an impact?
– Jill
In general, Roth IRA distributions will not count against you when it comes to determining the portion of your Social Security benefits that must be included in taxable income, but 401(k) distributions will.
The problem with relying on specific numbers like that for retirement planning is that in the 20 or so years between now and your retirement, a lot of those specifics are going to change. Tax rates will change. Social Security rules will change. Formulas will change.
The reason a balanced approach is usually suggested is to hedge against future uncertainty. You won’t have the “best” results, but you won’t have disastrous results, either.
Q4: Learn how to program cheaply
What’s the cheapest way to learn how to program? Want to see if it’s right for me but all options seem expensive.
– Alvin
Free Code Camp is hands-down the best place on the internet to start learning how to program. It’s a giant array of free classes and resources to teach you how to code. I would never, ever start with a paid program; I would always start here.
Having said that, there will come a point when you’ve gone through the certifications at Free Code Camp and there are still gaps in your knowledge. At that point, I’d turn to something like Team Treehouse and use their resources to fill in your knowledge gaps. It’s a paid service, but it’s top quality and it’s cheaper than many other services.
If you’ve done all of those things and earned certifications, you’re probably ready to get some kind of a job as a developer.
Q5: National park camping with kids
How do you guys really pull off going to national parks for several days with three younger kids? Do they get bored? How do you keep them engaged? How do you handle sleeping arrangements? A big tent? We have a six year old and four year old and love the idea but it just seems difficult.
– Mark
We have a lot of tools in our repertoire for keeping our kids engaged on a national park trip. Our biggest tool, honestly, is geocaching; we turn all of our hikes and explorations into a treasure hunt. Usually, Sarah and I will pick out a morning trail and then a longer afternoon trail each day and over breakfast we’ll look for geocaches on those trails and describe them to the kids. This usually gets them interested. (Other than our geocaching tool, Sarah and I institute a “no device” rule for camping, for adults and kids, which helps.)
In addition, Sarah and I usually spend time reading a lot of travel guides and thus we can point out interesting things on our explorations. We also usually walk and hike so much that we’re all absolutely worn out when we get back to the campsite and prepare a meal over the fire. The combination of fresh air and lots and lots of exercise (think 20,000 or 25,000 steps of trail hiking and walking) always does the trick for all of us. We’re usually dead in the evenings and go to bed early.
For sleeping, we used to use an eight person tent, but a couple of years ago, Sarah saved up some of her hobby money and purchased a used pop-up camper similar to what her parents had when she was younger and we sleep in that at night now. Both work just fine; I actually somewhat prefer the tent because of ease of use as I don’t like pulling the trailer.
Q6: Saving for a reward
Saving for a reward is something my husband and I have done via the funds from a vice, and I would like to share our strategy.
When my husband quit smoking, what had been cigarette money (a pack a day ~ $75 every two weeks) was auto-drafted into its own savings account. That account was dedicated to a vacation we had planned before we had a medical scare to pay off, and it also gave us something to look forward to during a very difficult time. Since we were used to the money already being out of our budget, we didn’t miss it, and it made it possible to take a trip that meant a great deal to us after a very close call. We cut back HARD to pay off the medical bills without tapping the vacation money, and we did it!
Since then, whenever we’ve cut or reduced an expense, that money becomes either its own savings account or is added to existing accounts (emergency fund, vacation, car, etc.). Per the original question’s example, I imagine this could be done with the difference in grocery bills, decreased medical costs, etc.
– Connie
I think saving up for a reward for yourself for good behavior is a great policy. It gives you something tangible to work towards, not something that’s nebulous and far-off like retirement. Of course, when you do reach your financial target, that doesn’t mean you have to use it that way if you decide not to. You might just find a higher mountain to climb.
Personally, I do the same thing. I save money for months for Gencon, which is a trip I take each year with several old friends. Each year, I take plenty of cash with me. Each year, I never spend it all and come home with some. However, it’s wonderful to have that goal to save for, and it’s also wonderful to be able to go on that trip with my friends and not really worry about budgeting to buy something along the way; I know I’ve planned for it.
Goals are just great.
Q7: Evernote and encryption
So what is your reasoning behind not putting any personal information on Evernote? Michael Hyatt and Tim Ferriss both feel as if it is completely fine to put personal info on. Side note I would tend to agree with you on this, but if you have reasoning appreciated.
– Barry
This is a question spawned by my recent article about how I use Evernote, a tool I consider essential.
In general, I do not trust any service with my private information unless I absolutely have to. I would not put my Social Security number or other such data anywhere unless it was utterly required, and in that case, I’d do the best I could to transmit that data as securely as possible. Thus, I see no reason to have my personal data in Evernote; it is not absolutely required there.
So what exactly does Evernote do in terms of encryption? It’s described here, but in a nutshell, the communication between your device (phone or computer) and the Evernote servers is secured, but the contents of your notes are stored in plain text on the Evernote servers unless you take an additional step to encrypt them, as described here.
Since 99% of my notes are things like notes from classes, brainstorming sessions, recipe pictures from magazines or cookbooks, and so on, this really doesn’t bother me, but I actually do encrypt any of the key notes from projects that I’m working on.
Would I feel okay having my private information in an encrypted note in Evernote? Honestly, I’d feel roughly as secure as I would having it in just about any online service with solid encryption. It wouldn’t keep me up at night, but I wouldn’t be 100% happy with it. This isn’t anything negative about Evernote; it’s just a general way I feel about all cloud services.
Q8: Belt buying advice
Do you have any suggestions for buying a men’s belt that will actually last? I have bought belts at several stores only to find them falling apart usually the latch ripping off of the leather. I want to find one that lasts more than a month without spending hundreds.
– Darrell
The belts that cost hundreds that you mention are usually crafted to look incredible but aren’t necessarily long lasting, either. I’ve had the same trouble as you and I’ve only really found three belt companies that build good long-lasting belts that didn’t charge hundreds, as you mention.
Anson Belt makes a belt that’s microadjustable and doesn’t have the holes in it like other belts. I’ve personally used these and found that there’s a lot less wear and tear on the leather without the fastening and unfastening mechanism on most belts, which accounts for their relatively long lifespan.
Orion belts are made with absurdly thick leather and also reduce the force applied to the fastener and to the belt hole by having dual holes and fasteners on most models.
Saddleback makes a more traditional single hole leather belt, but they treat their leather in such a way that it’s very tough. My experience has been that the belt is so tough that it’s almost rigid for a long while after you first start wearing it, but it really lasts.
All of these belts do a great job of being much more long lasting than a typical department store belt for different reasons and all clock in at or below the $100 threshold.
Q9: When to toss a razor
When do you decide that it’s time to toss a disposable razor cartridge? I’m always trying to get “more value” out of a cartridge and end up cutting myself, but on the other hand, throwing it away always on the first use or two is a bad idea because you can get several more shaves out of it.
– Darren
Here’s my solution to this. Each time I shave, before and after the shave, I “sharpen” it by running the blades backwards on my soapy forearm a few times. I usually then decide whether to throw away the cartridge based on the smoothness of the shave. If I find I’m having to shave over the same spot two or three times and it still doesn’t feel smooth afterwards, I toss the cartridge.
The “sharpening” seems to take care of the worst spots on the blades – the spots that would actually nick you – but it can’t stop the gradual reduction in the edge of the blade.
I find that I can usually get about 25 shaves out of a typical cartridge, more or less. I tried switching to a safety razor a few times but my face skin is really sensitive and I ended up with bright red jaws due to skin irritation.
Q10: Saving old statements
How long should you save old bank statements and credit card statements? I know you should save tax docs for seven years, but what about other statements? Can’t find any “standard” advice for them.
– Alice
Seven years is a perfectly good number. Just file them all away in folders when you receive them.
My system is to have a folder that says something akin to “Bank of America Credit Card – 2017 Statements” and then in that folder I keep all twelve of the statements that arrive that year, paperclipped together. I’ll do the same for each card and each bank statement that we receive. I keep all of these in a filing cabinet in my office. Every seven years, I chuck all of the old ones.
This system really doesn’t take up a whole lot of space. It works pretty well.
Q11: When to start garden planning?
My husband and I live in northern Iowa and bought a house in August. We’re planning on starting a vegetable garden together in the spring and have been inspired by your occasional gardening posts. (More of them please!) When do you start planning for your garden in the spring? Do you grow starts inside?
– Annie
We’re already planning, actually. At this point, it’s mostly just a diagram and a possible seed order.
Usually, in late February or early March, we’ll plant some seeds in biodegradable cups and put them in a tray near our biggest window. We’ll water them and care for them so that they’re pretty tall when the weather turns pleasant, then we’ll plant them on a Saturday afternoon. This usually gives us fresh produce in June or July. (In fact, sometimes we’ll start a second batch of seedlings inside in late May and as soon as harvesting the other plants in late June is done, we’ll tear them out and throw in a second batch for a late harvest in September or early October. This only works for stuff with a short cycle, though.)
We usually wait to plant until the long term National Weather Service forecast does not show any nights that dip below freezing. This often happens in April, but has been in early May before, too.
Q12: Exchange health care plan options
My wife and I have a health care plan through our state’s health care exchange. In 2013, we both left our jobs to start a small business and use that exchange plan. If the ACA is repealed, what do we do?
– Andrew
Likely, you’d continue on the health care plan you have at the time it’s repealed through the end of the year, at which point your insurer may or may not offer you a new plan, likely depending on your pre-existing conditions and other things that might flag you as a risk.
However, that’s a guess. It is really, really unclear what the next year or two hold in terms of health care options for people. I am very hesitant to make predictions about the future, especially on something that could go in so many directions as this could.
I will say this: I will be shocked if the entirety of the ACA is repealed and not replaced with something. The question is what exactly that something is, and that remains to be seen.
Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.
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