All Forum Posts by: Daniel Murphy

First of all, I applaud you for all of the great work you've done.  

Second, Seeing all of the great work you've done, I would not be worried about making the "perfect" financial decision.  You likely have some really good ingrained habits which will lead to you building a successful financial life.  

Honestly, I've learned more and more as the years go on that as long as you're doing enough of the right things financially, I think you are best to trust your gut.  IE - give yourself the freedom to do whatever feels like the best decision for you.  

Finances while although complicated, are realitively easy in comparison to managing the rest of life.  If you can make decisions that relieve any stress points with your spouse, with your kids, or with yourself, those are the decisions I would make.  Those decisions would not be a mistake... 
Financially, I probably wouldn't pay off the car nor the solar because I think your expected returns in the stock market would be higher. And I'm a HUGE proponent of building up large taxable accounts as they give you a crazy amount of flexibility both before, and during retirement.  But... If there are any stressors or pain points around these decisions, I would trust your gut.  

Money is fairly predictable. Marriage & family life are not.  I always err towards decisions that enhance the marriage & family life... 

While not really a loss, one of my biggest Ah Ha's in 18+ years of managing money professionally is that Financial Questions do not always need Financial Answers... 

Most are familiar with personality types etc.  All people process things differently.  

I've learned with time, to try to run a financial question through a, 

Financial lens, Behavioral lens and Emotional lens.  

IE - sometimes you want a financial answer. Like calculating ROI on an investment to see if it's worth it.

Sometimes you want a Behavioral answer - Will making this decision instill new/better behaviors... 

Sometimes you want an Emotional answer - Will paying off your house, increasing your savings etc. bring you more peace... 

More and more, I make less than optimal financial decisions in exchange for ones that are decent financial decisions, but great happiness decisions.  

Buying a 23 year old, high mileage convertable Porsche 911 is a bad financial decision. I'm totally underwater financially.  But... I could care less when I'm giggling like a school girl, or tossing the keys to someone else so they can take it for a spin. :) 

 This is exactly right! It's funny... I've been a financial planner for 18 years and I have told people so many times, "google IRS W4 Calculator".  It's actually quite good... Then one day I actually did it myself! Honestly, you could do it as often as you'd like but that's probably overkill.  
It's mostly geared towards employees and people who work W2 jobs.  Once you get more complicated tax returns, things are a bit harder to calculate... 

 I think we're all on this site because we intuitively are 1) motivated to build wealth and 2) know that RE is a great way to generate that wealth.  But I've also learned that there is a large disparity between between the majority of people on here, and the few who are really knocking it out of the park.  
There are a number of studies that show that a simple stock market investment, net of fees can outperform real estate over time.  But these studies never really capture the nuance of real life.
For example, I have one short term rental property. I previously aspired to have more, but I'm not sure now. I have 8 kids from a blended family. Two who have eating disorders and tons of responsibilities.  If I could go back, I would rather have the cash & time back from this investment property.  I'm constantly stuck between wanting to sell it, or hold it for the long term. 
Whereas, if I dump money into the market, it's pretty simple. I don't have to think much about it. But I'm also not trying to leave generational wealth. I'm just trying to live a happy and balanced life.  
Lots and lots of stuff to think through when it comes to where to invest.  I think it's always best to start with trying to narrow down what you really want in life.  What brings you peace & happiness, then go from there... 

 Morning Dylan, I'm happy to chat with you.  Send me a message and we can connect... 
In my experience, with your current retirement account values and the cash flow you have to save, you are likely well on track to retire comfortably.  Especially if you're also layering on the drive to be a RE investor. 

So yes, I think it's highly likely that you could decrease your employer savings to increase your cash flow.  You could then direct that money into a savings account, or better yet a taxable brokerage.  Like others have said, with a short time frame, investing the money could be at risk of a market down turn.  

The advantage of a brokerage account is that you have access to CD rates nationwide. So you could invest the savings into a series of CD's and likely still get a 3-4% rate rather than your savings account interest...

How decreasing your tax deferred savings effects your taxes is hard to say unless I know your income and tax situation.  But high level, look at last years tax returns & find your Taxable Income on line 15.  Then google "tax brackets (single, MFJ - or however you file).  Subtract your taxable income from the top income in your current bracket.  This is roughly how much you could decrease your tax deferred savings and not have it bump you up into another tax bracket.  

As a financial planner myself, my opinion is biased, but I believe that the answer is yes, it's worth it.  Whether it's worth that $1,500 is up to you... 

Google "Vanguard Value of an advisor".  I like this because Vanguard is the industry leader in DIY investing. So they are biased also, but they still equate value of working with a financial advisor.  Very little "value" comes from investment picking, mostly it is from behavioral coaching, tax planning etc.  The stuff most people don't like.  It's a very hard to quantify value... 

One thing I'll say because it's a personal rub... Ignore the "they have to be a CFP" or "they have to be fee only" lines.  I'd say in general, just avoid someone who works for an insurance firm, or someone in their first 2-4 years of the business.  

I've been doing this for 18 years, I'm not a CFP but I'm confident I could pass the test. I don't have a bachelors degree, so I can't take the CFP test.  Also there are many commisionable products that are a better fit than a fee product, so "fee only" is not a live or die statement to look for... 

Mackaylee has great advice.  I second it all! 

My main advice at this stage is not to get too complicated with things.  Stay simple and patient.  Life insurance inside of a trust and a heloc to leverage into an SBA loan may all make sense and sound great, but usually complicated strategies result in a lot of headache for little noticed gain... 

That being said... There are two ends of the spectrum.  Slow and steady, or fast and furious.  When I was early in my career, 18+ years ago, I worked 60-80 hours per week to try to accomplish the "fast and furious" approach.  I had a young family and was newly married.  Well... Now I'm dealing with the long term hardship that comes post divorce and anything simple, turned more complicated.  

If you're young, hardworking, ambitious and aspire to financial freedom. You'll get there...Keep reading everything you can. Keep hustling. Keep growing.  But continually continually ask your wife questions to check if you're both on the same page... 

I have a handful of UGMA's for my kiddos.  Similar to what many are saying, you can't go wrong with a total market type of fund. Something that is diversified globally... 

As the "cobblers kids who have the worst shoes", IE - I'm in finance and don't want to think about finance all day after work... I invest my kiddos in a diversified small cap value fund. Small cap value has historically had the highest long term growth numbers.   

Full disclosure - small caps have underperformed large caps for quite a long time but I still believe in long term reversion to the mean. 

Nerdy note about UGMA'S.  Once your kid turns the age of majority (18 or 21), these accounts become your kids accounts. You can no longer make changes, or have any control over them.  BUT, you can still retain a sense of indirect control over them.  

I have 4 kids with UGMA'S and I'm hoping that they use them for an asset, not just frivolously.  So... my kiddos don't really know where the accounts are held. (They do, but probably don't really understand what it means).  So if my 21 year old threw a temper tantrum and demanded her money to buy beanie babies, I "could" still retain a sense of control over it by making her find the money, call the company, fill out the transfer of ownership paperwork and distribution paperwork.  

Most of these plans are based on your MAGI.  For simplicity, just look at your AGI and how it is calculated and this will get you close.  Lines 1-10 on your 1040.  

For the most part, your investments will only show up as capital gains (line 7) and rental income will be on line 8.  Both of these can be heavily influenced.  I would suggest researching "tax loss harvesting" and how to manage your long term capital gains.  I've had clients who realized $100k in income from investments in a taxable account, and paid zero in taxes.  

Understanding how your income will look on your taxes is the first step towards shopping on the ACA Exchange.  Once you do this, you can get a much more accurate picture of what Exchange healthcare will cost.  

You may also want to lookup "health sharing" options.  It fits the tax requirement for healthcare, but it's a different animal.  Google "Kitces Health Sharing" for a really good (but detailed) breakdown of the various plans and how they work.  

I've been self employed for 10+ years and had my entire family of 6 covered for ~$600 / mo.  We've spent tens of thousands of dollars on birth and various other health issues.  We've only had mid sized "co pays" and the best part is that all of those costs have gone on our credit card for rewards!

Feel free to reach out or ask more questions... 

Thanks Matt. That most likely means it's in an IRA. So you received the annuity in an "inherited IRA". You can withdraw as much or as little as you'd like, but it will be 100% taxable to you when you draw it out. Whether you do that now, or over 5 years.

I'd approach this as:

1) tax effect

2) annuity product effect

3) your "opportunity cost" or what would you do with the $

Oversimplified, go check out line 15 of your last tax return. Your 1040. This is your Taxable income.  Add $86,000 to it.  Google "Joint Tax rates 2025" and see if this causes you to jump up a tax bracket or not.  Most commonly, people are in the 22% rate and stay there... 

If there is no change in your tax rate, this should mostly answer #1.  

#2) product effect.  Insurance companies are are VERY good with number crunching (in their favor).  Chances are this annuity is either 1) a variable (stock market) annuity which likely carries higher fees than an index fund.  Or 2) a fixed annuity (or fixed indexed) and may not be the best use of the money. Especially if you're here on BP and wanting to be a RE investor.  Most likely, there is no real "product advantage" to leave it in the annuity for 5 years.  

#3) if you feel solid in your plan for what you'll do with the money... You're probably best to just withdraw the money now and put it to work for you.  I'd re-run the math you originally gave us, but consider 100% of the money taxable rather than partially tax free.  See how the numbers compare then... 

This may sound like a lot of gobbley gook so feel free to ask more questions.  Without knowing your tax situation and seeing a statement from the specific investment, all of these answers are just educated assumptions.