Debi is stressed about saving a down payment to buy a house in her high-cost-of-living area. Should she cash out her brokerage account to speed up the process?
Lucas and his wife are high earners, but they’re tired and ready for a change. What strategies can they use to maximize their investments and confidently step away from their jobs?
Grant is thrown off by recent discussions about the efficient frontier. It sounds a lot like market timing to base an investment strategy on an arbitrary set of historical dates. What’s he missing?
Former financial planner Joe Saul-Sehy and I tackle these questions in today’s episode.
Enjoy!
P.S. Got a question? Leave it here.
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Debi asks (at 01:41 minutes): I have a question about financing a home. My husband and I have been saving for a down payment, but it’s been tough because we live in Paula’s favorite place—New York City.
Right now, we have 5 percent saved, but I realized that if we cash out our ETFs and mutual funds, we could reach a 20 percent down payment. That would make our monthly mortgage much more affordable, especially with rates where they are.
I’d love an outside perspective from someone who isn’t emotionally attached to either our savings or the idea of homeownership. Does this seem like a smart move?
For added context (and pressure!), we’re expecting a baby later this year. That’s a big reason why we’re looking now—I work from home, and a small one-bedroom apartment isn’t going to cut it for me, my husband, my office, and a baby.
We do contribute to our employer 401(k)s and have Roth IRAs, so this wouldn’t be pulling from our only savings. Given all that, what are your thoughts?
Lucas asks (at 25:13 minutes): What’s the best way to grow our taxable brokerage account so we can eventually reduce our workload or transition into different careers?
My wife and I are both 33, work in IT consulting, and earn a combined $315,000 before bonuses. We don’t love our jobs, but they pay well and offer flexibility. Our goal is to save enough to be able to step away from our careers.
Our current financial picture looks like this.
- Home: Purchased in 2019 for $375,000, fully paid off
- Vehicles: Both are owned outright.
- Investments:
- $470,000 in traditional 401(k)
- $130,000 in Roth IRA/Roth 401(k)
- $10,000 in a Health Savings Account (HSA)
- $15,000 in a 529
- $27,000 in company stock
- $160,000 in a taxable brokerage (primarily S&P 500 index funds)
- Cash: $40,000 in an emergency fund.
- Annual expenses: Typically $80,000, but expected to rise to $100,000–$110,000 due to daycare and baby-related costs.
We aggressively paid off our house in just over four years, and in 2024 alone, we saved $100,000 in our brokerage account. Once we commit to a financial goal, we tend to hit it.
As we continue building our taxable brokerage, what key factors should we consider before using it to supplement our income?
Aside from dividends, capital gains taxes, and potentially making quarterly tax payments, are there any major pitfalls or strategies we should be aware of? Is it as simple as growing the account to a comfortable level and then drawing from it as needed?
Grant asks (at 49:15 minutes): I have a question about the efficient frontier. After listening to past episodes, it feels like there’s a lot of cherry-picking and market timing implied in the way you and Joe discuss it.
Specifically, the year 1970 keeps coming up, and that raises red flags for me. You’ve always cautioned against using arbitrary timeframes to analyze returns—so why is 1970 the starting point? Why 54 years? What happens if you go back to 1965 or earlier?
I realize some of this may be due to tool limitations, but I’d love to hear your perspective on why that date is used and how to better understand the efficient frontier.
Resources Mentioned:
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