Is the S&P 500 Overweighted? Becoming an Accidental Landlord? Can We Retire Early and Move to Japan? (Money Q&A)

23:04You've actually got free will. And you can use your free will with the more money that you have, the more freedom that you're going to have in your life. So, Kevin, first of all, you're already winning with this math. If you have$800 ,000 invested at age 33, here's what this does, even if you never contribute another dollar. because I ran the numbers on this. I want you to hear about this. So a 7 % real rate of return, like let's be conservative here when we're planning out for retirement, you'd have roughly$1.8 million by 45, about$3.5 million by 55, and close to$7 million by age 65. That means your traditional retirement is essentially handled when you run the numbers like this, okay?

23:44So for anybody who wants to run the same exact numbers that I just did right there, if you go to mastermoney.co slash resources, is we have a free retirement number calculator that you can run numbers like this on that, but that's where we're running these, okay? So what you've actually done is you've gone through this and you have said, hey, I could potentially, depending on how much money you wanna spend, become CoastFi right now. So for anybody that doesn't know what CoastFi is, this is where you get to a certain point in time in your life where you have enough money saved up or compound interest is gonna do the rest of the work.

24:14So if you don't contribute more money going forward, compound interest will do it all for you. And so for Kevin, he's in a wonderful position that by age 65 could potentially have$7 million, or if he only needed$3.5 million, could start drawing down that at age 55. And I want you to reframe the way that you're thinking about this, Kevin, because now you don't have to choose between Japan and a secure retirement. You can have both. You can have it all because you set yourself up early on in life to have the ability to have this wonderful amount saved up for retirement. Now, the 80 % pay cut is part two of this equation.

24:48And we want to make sure that we think through, okay, well, if I go to Japan, I take this 80 % pay cut, what is going to happen here? Well, would that pay cut, if the 20%, cover your costs of living in Japan? That would be the next part of this equation that I would want to be thinking through. Because if the cost of living in Japan is going to be lower, depending on where you live, like in Tokyo, obviously, the cost of living is significantly higher. But in other parts of Japan, the cost of living is usually lower than the US. And so we want to think through, would this cover my cost of living?

25:19If not, what are some of the things that I could do to help cover this cost of living? Well, we can build up our portfolio over the course of the next couple of years, but I would come up with some sort of Japan budget. Now break down this budget by what you think it would cost and you can utilize or have some conversations with people. It's a lot easier to find this information than it used to be, where if you say, hey, hey, I'm targeting living in this location and living in this location costs X amount of dollars per year for me and my family, depending on how many children we have. And so you're thinking through this process that way.

25:49Now, if your new salary covers your new life and you already have the money on hand for retirement that could be coast-fi, then this is a really good position to be in because your retirement could be covered and then you just need that 20 % to cover you in Japan. And so that is one way to look at this and having the flexibility available because you're so young, you can do some cool stuff with that. Then, if you decide, okay, well, I want to increase my income here in Japan. Maybe you want to start an online business because you work in tech, or you want to do something along those lines. Could be some cool stuff that you could do in Japan by just making some more money on the internet.

26:23And then three, I would define what the number needs to look like before you move. So, if you want to retire by 45, for example, like you mentioned earlier, and you're on track to be able to do that, then as you start to progress through life. And as you start to think through the next couple of years, you could say to yourself, okay, well, what does this COSFI number need to get to for me to be able to live out my dream and cover some of the living costs in Japan? Maybe you need to supplement some of those living costs. But then in addition, you can also get to a point in time where you are really on track to be able to do this.

26:55So let's say by age 37, you feel as though, okay, I'm going to save an extra$100 ,000 per year over the course of the next five years. And so you have an extra $500 ,000 that you put into the market. Maybe it grows to 1.8, 1.9, 2 million bucks by the time you reach that age, depending on what the market does over the course of the next five years. And so you're sitting there at that point in time, having the ability to have those funds available and working with the 20 % to cover your living expenses. Again, if that 20 % covers your living expenses, you're in a really, really good spot. And then the kids timeline is a real, real interesting component to this.

27:31You can look through what the cost of living with having kids in Japan is going to be. And if that shift is dramatically cheaper than in the U.S., then that is also going to help you with your equation as you start to think about this. And so what I would recommend is kind of getting over the psychology of this is the harder part. Because when you start to think about this, you're saying to yourself, well, what if I'm missing out on compounding years? Or what if I make a mistake in the numbers or the math? And that's something that we have to be realistic about. And so as we start to think through this, I would say first, work on the psychology?

28:01What are the reasons why you want to go there? What are the reasons that are holding you back? Do you feel as though you're going to have enough in retirement over the course of the next couple of years? Those three things alone can help you solve this equation. If you actually have the math on hand, and if you actually go through this, it's going to be black and white right in front of you. And then all you have to do from there is take the leap. Taking the leap is a lot easier said than done. And so those are some of the things that I just want you to make sure that you're thinking through. Also, if you decide you go to Japan and you're like five years down the line, you're like, actually, I don't want to do this.

28:32Do you feel as though you could come back to the US and start working back in tech again? If you do, and you feel as though you can do that, then you have nothing to lose when it comes to taking that leap of faith, especially in the position that you're currently in right now. You can come back, find a job in that industry. Or if you work in a similar industry over in Japan, that means you wouldn't have any gaps in your resume when it came to tech. So you could even do that for the first couple of years just to hedge or protect against maybe you not liking living over there. So that's another consideration when you're thinking about this on the career level.

29:01So here's what I would do. One is I would run the numbers on how much you want in retirement. If you feel as though you're on track to do that and you are willing to even have COSFI in place, that'd be really, really powerful. Number two is run the numbers on the cost of living in Japan. Let's say the 20 % only covers half of your cost of living. Well, how are you going to supplement the rest of the income? That's going to be question number two. You can either stay longer in the U.S. and have enough money on hand to supplement that extra 20 % while the rest of your portfolio compounds via COSFI.

29:32Or secondarily, you can make the move and figure out if you can make more money in Japan once you get there and kind of test it out for the first couple of years. I would probably go with option one over option two when I'm thinking about that, but that is something you could do. And then number three is I would get over the psychology. I know this is tough, but the psychology of making the move, I think that is one of those things. If you are dreaming about this, if you really want to do this, you should go for it and kind of set the timeline of when it's going to happen. Is it going to happen at age 37?

30:01Is it going to happen at age 35? When do you want this to happen and how do you want to think about this? Now, if you feel more secure because you reached age 45 and you feel as though then you kind of have your life established and you understand how many children you're going to have and what it's going to look like, there's nothing wrong with that, but just making sure that you are doing what you want in life. There's a book called, if you haven't read it yet, called Die With Zero. I would highly recommend that you read it because this is going to help you reframe the psychology side of this equation where losing out on those really valuable early years.

30:30When you're in your 30s, maybe you want to spend more time in Japan because you want to do more active things there and you want to be able to kind of ingrain you and your family in the culture and do some cool stuff. Well, if that's the case, you know, doing this earlier rather than later, there's nothing wrong with that. And I think that's a really, really powerful move. So, again, I am really, really excited for you. Let me know what you decide to do because I really want to hear more about this. I think this is a very cool way to spend money and a very cool way to use money as a tool to get what you want out of life.

30:57So congrats to you and your family. Super, super exciting. And congrats on getting married, too. I think that's absolutely wonderful. All right. The next question is from Amanda. So my husband and I accidentally became landlords when his job required us to move. We bought our house for$300 ,000 and currently owe about$289 ,000 at 5.6%. We currently rent it out for about$2 ,275 a month at a small loss, though tenants may renew at$2 ,500. We think we could sell for around$350 ,000 but may owe capital gains. We have about$38 ,000 in student loans at 8.99 % and$7 ,500 on a car loan at 8.59%. Long-term, we want to build a real estate portfolio.

31:44Should we sell to eliminate the debt or keep this as the start of our portfolio? So Amanda, before you decide anything, I want to kind of fix one assumption in your question, which we will talk through. A lot of you listening right now may have become accidental landlords. This happens to a lot of folks out there where you have to move very quickly for a job. All of a sudden, you have the house on hand and you don't know what to do next. So you decide, okay, I'm just going to rent this out and test out this real estate thing. So, so far, Amanda, you sounds like you are enjoying the real estate process because you want to be landlords in the future.

32:13So one big thing that stands out right now in your situation is that you are cash flow negative. I am not a fan whatsoever of any real estate investment being cash flow negative. And so you have something actually very powerful right now, as long as you have lived in that home for the last two to five years that I want to point out. because you move for a job and this was your primary home, you likely still qualify for the home sale exclusion. Now, if you haven't looked into this yet, I would highly recommend that you look into this. And if you have a CPA in your corner, you can talk to them about this as well.

32:46So if you live in that home for two of the last five years, you have the opportunity to not pay capital gains on this money all the way up to$500 ,000. So in your specific situation, if your gain is roughly 50 grand, you wouldn't pay capital gains on the profits on that money. So you wouldn't have to worry about the capital gains if you live in the home two out of the last five years as your primary residence. Now there's even a partial exclusion specifically for job-related moves if you don't quite hit the two years. So for you saying, hey, we may own capital gains here, that may be a non-issue because there is that partial exclusion, but it is time sensitive, okay?

33:25So starting off, I want you to look into that first. Number two, is run the actual net proceeds number. So I did a little quick math here, back of the napkin math, just to see where we would land on this. So let's say you sell at$350 ,000, you pay off the$289 ,000 mortgage, and you take off about 6 % in selling costs. So that'd be about$21 ,000. If you can find an agent or someone to sell you this home for even less than that, great. If you can find somebody that has 2 % or even 1%, some agents do that now, even better, which leaves about$40 ,000 left in your pocket, which is likely with little to no tax owed on this overall.

34:01So if you did all that math and you had$40 ,000 left over, let's look at this for a second. Because then all of a sudden, we have a couple of pieces of debt here that is high interest debt that we want to get rid of, obviously. So you have$38 ,000 in student loans at 8.99%, which would be my highest priority in this situation. You also have$7 ,500 in the car at 8.59%, which means you have about$45 ,500 in high interest debt that you are looking to get paid down. You want to get rid of it. Obviously, that's why you're kind of talking about this. And so paying off the 9 % debt is a guaranteed 9 % rate of return if you do this.

34:35So you sell the home, okay? You pay no capital gains on that because you figured out the exclusion. And if you only can get a partial exclusion, that's also something to look into. But let's say you have that$40 ,000 available. All of a sudden, you can take this$40 ,000 and you have a guaranteed 9 % rate of return if you pay off that debt. If you get rid of that debt completely in student loan debt, where you don't have to worry about it anymore. And so selling wipes out nearly$40 ,000 of that$45 ,500 in high interest debt that you have on hand. Now, here's the next part of this equation because you're saying, well, I want to be a landlord long-term, which is absolutely a wonderful thing.

35:11And I commend you for thinking through all this stuff because this is absolutely amazing. But if the rental property is losing you money every single month, this is not an investment, it's a liability. And so for me, I'm saying to myself, I will never hold a real estate asset that has negative cash flow. Why? Because those dollars, even if you decided to sell it and not pay off the debt, those dollars can be invested. And historically, something like the S &P 500 has returned to investors. What we know over the course of the last 10 to 20 years is right around 12%. Now, is that going to happen in the future?

35:41I don't know, but I wouldn't bank on it always. And instead, you want to make sure that you are conservative with your numbers. So looking between 7 % and 10 % is the numbers that you want to think through. So even if you held this property, is literally, in my eyes, a liability because it's losing you money every single month. But in addition to the negative cash flow, you also have to pay for maintenance, repairs. This is going to be a money pit unless you make a choice here on what you really want to do. When you start to go back to investing in real estate, then what I would say is you can say to yourself, let's find cash flow producing properties going forward that actually have positive cash flow if that is part of your overall strategy.

36:17Now, the arguments that you have to keep it is, yes, you have a sub 6 % mortgage and the home is appreciating. Those are two arguments a lot of people will have, but if it's negative cash flow, it's not of interest to me ever because it becomes just an overall liability and you are taking money out of your pocket and putting it into an asset that is not producing an income for you. That is a liability in my eyes. Obviously, a home is always an asset, but it's a liability in my eyes for your balance sheet specifically. So to get the portfolio you want. What I would do personally, if I was in your shoes, is I would move on from the property when the tenant leaves and or if the tenant's still in there, you could do it now because a lot easier to sell an empty home.

36:55And I would then take the money and the proceeds from selling the home and pay off the student loan. And then from there, start building wealth based on that foundation, because you have a really good position that you could be in. If you have that foundation where you are literally having zero high interest debt. You've got the mortgage on the old home paid off, the old home help you pay off your student loans. That's fantastic. And so you have the ability to do some really cool stuff. Then you can build out your portfolio and begin investing in rental properties based on having that foundation of zero high interest debt.

37:30You can pay off the rest of the vehicle while you're kind of working through that stuff and have the ability to start from a position of strength instead of a position that you're currently in where you are losing money every single month. And so that's exactly how I would do this. And I know it's hard to kind of get rid of a home when you feel as though I want to invest in real estate long term, but it's actually starting with a position of strength. And so that is the way that I would approach this going forward. Really great question. And congrats to you guys on working through this. I think that's absolutely fantastic and hope you're enjoying the new location that you're living in.

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42:56So the next question is from Katie and Katie says, I'm trying to balance staying home with my child and I want to create a steady, flexible income. Is there any ideas that you have based on this? So for anybody out there who was kind of going through this, I'm going to give you just a couple of quick tips on what you should consider. One is if you have skills on hand, if there's something that you're pretty good at, try to find a way to monetize that skill. And if you're like, I don't know where to start, here's what I would say is list all of your skills on a Google doc or wherever else, and then take those skills and say, Hey, Claude, Hey, chat GPT.

43:29These are all the skills that I have on hand. I'm a stay at home mom, and I am trying to figure out exactly what I need to do next? What are some of the side business ideas that you have that I can do while my kids are napping or while my kids are doing other activities that I can start to contribute financially to the household? It's going to spit out a bunch of different ideas based on your skill sets. So that's the first thing I would say is thinking through all the skills that you have already built. Maybe you are really good at crafts. Maybe you're really good at math. Maybe you're really good at writing.

43:59Maybe you're really good at social media. Maybe you're really good at marketing. There's so many different things that you can do from home that can be really powerful. Number two, think about what people already ask you to help them with. If you're having a hard time figuring out what your skills are, what do people ask you to help them with? What are things that people say, you are really good at this? Let me give you an example. So my wife is really good at sleep training. So sleep training is, you know, you get your kids to sleep through the night. Well, she gets our kids three in a row now.

44:23She's gotten them to sleep through the night really early on. Like I'm talking, you know, a few weeks into when they are born. And we have never had a single kid sleep in our bed in the middle of the night. We've never had a single kid have any issues. And people always ask her for sleep training advice because she is so good at understanding what the needs of a child are and how to get them to fall asleep faster and how to get them to sleep through the night. So all my kids sleep about 12 hours a night. They all go to bed at the same time. And it is one of the best things that she ever did because it allows us, the parents, to also get a good night's sleep.

44:53And so it was important to me. And so she figured out, you know, some of the best ways to do that. and we kind of worked as a team together to make sure that we could figure this out. Now, the interesting thing about that was each of our children needed different strategies in order to get them to that point in time. And so because of this, she's very good at this. So if she was gonna monetize something, this would be a wonderful skill for her to monetize. She also worked in the corporate world for a very long time, doing all different things from marketing and all this other stuff. She could go back to those skills and do something like this.

45:22For you specifically though, what are some of your skills that you have? What are some of the things that you've done in the past? What are some of the jobs that you've had in the past? that you feel as though you can monetize. Then I would say to pick a monetization model that fits your schedule. So what I mean by that is you could trade time for money and do consultations. You could build something once that sells repeatedly. So something like a video course, if you're teaching sleep training, for example, and or you could find some recurring income and start a membership or subscriptions, things like that.

45:52But pick your income model that fits your schedule based on being a stay-at-home mother. I think that's going to be the next thing that you do. And then start getting after it. Test one out. And don't quit. Do this for a certain period of time. Test out to see if it works and see if it's really, really helpful for you. I think that's a great place to start where you can help contribute financially and get the ball rolling. I think it's a really fun idea and it's really something that can help you guys long term. Even if you set a goal. What I like to do is set a goal with side hustles back when I would start them.

46:19And I would say, okay, I want to make sure that I can pay the light bill first. Then I want to make sure I can pay off some sort of debt. Then I want to make sure I can pay the car payment. Then I want to make sure I can pay the mortgage. And then we just go down the line and kind of think through some of the goals that you have and some of the areas that you want to contribute to and take care of. That keeps you motivated and that gives you your why. So really great stuff here. And then if it takes off and it really does well, you have a full-time business that you could be working on in the future.

46:44So really, really great stuff. I'm so glad you're thinking about this. And let me know if you have any questions on that. The next one is from Tyler. Tyler says, I just bought a place and I'm trying to revamp my budget based on new percentages. My mortgage and HOA together are about 37 % of my income, but I want to keep investing at 18 to 24%. Where does that leave me for fun money and food money and how do I make the numbers work? So Tyler, first thing I would say is the 37 % is high. That is outside of the parameters that we want you at housing to be between 28 to 30 % of your income max. And so 37 % is going to be outside of the traditional guidelines that we give.

47:22It's not a crisis, but it is something that you want to consider. Now, because of this, you have to give 7 % somewhere else. You have to reduce your spending 7 % somewhere else in your entire budget in order to make all of this work. That's what you have to do. So like folks in New York City, for example, if they were spending 37 % of their income on housing, I would tell them, okay, well, your transportation should go down because you don't have a car or car insurance. And so maybe you're riding the subway or you're walking for most of your transportation. And so that number should go down. You've got to figure out what would work best for you based on that.

47:53Because if you lay out the whole pie in numbers, you look at this every single$100 that you make,$37 of that is going to go towards your housing, mortgage, and HOA. And then investing is going to be anywhere from$18 to$24 per month, which I love that you are sticking to that because you absolutely need to. And that leaves you somewhere between$39 to$45 for everything else. So what are the non-negotiables on your list? Food, obviously, is a non-negotiable. transportation you got to get from point a to point b that's most likely a non-negotiable health and medical stuff that's a non-negotiable having that on hand making sure the debt payments are there the insurance payments those are all non-negotiables so let's say for example all of that stuff is another 20 percent of your income and so now we're looking at this and we're saying okay well food and groceries all that other stuff maybe it's going to leave you with another or anywhere from you know 12 to 18 percent range for fun stuff and where the fun stuff is going to be but you got to kind of go down the list and figure out exactly where it's going to land based on the other parameters.

48:54But 7%, you know, 7 % is going to go away and it's going to have to go to something because over 30 % is being spent on housing and HOA. And again, it can absolutely be done. And in 2026, some people want to prioritize that over some other areas and I completely get it. And if you are prioritizing that, you just got to know something's got to give and it's not your investments. Please make sure that your investments can kind of stay in that range. Instead, try to find some of those other areas that you are not feeling as valuable about. Like if you eat out a lot and you say, hey, I don't really care about eating out.

49:25I'm going to reduce that down and it will help me with my 7%. That's great. Or if you feel as though there are things that you are doing, you want to downgrade your car because you want the nicer house. And maybe you say, okay, I'll sell my car and I will remove my car payment and just pay cash for a car that's five years old. Well, that's another thing that you can do, another move that you can make that could help you pretty quickly. Or if there are just areas that you're overspending you're like, I don't care about this stuff. I'm going to stop spending in these areas. Maybe you got a fancy membership somewhere, or you're doing things that you feel as though you're just frivolously spending on just random stuff that you don't care about.

49:56Those are the areas that you can cut pretty quickly and make it easy. And then the rest of it's there. So again, congrats on the new house. I think that's wonderful. And just make sure you understand kind of what the parameters of everything else is. And then the other way to do this is also obviously increase your income because then it just reduces the percentage that you're spending on your home. So that is another thing for a lot of folks out there is if you feel as though you're overspinning on a home and you feel like you could increase your income if you really pushed, that's another thing to do.

50:21And it will reduce that percentage pretty quickly. That's why we do it in a percentage base because it allows you flexibilities to shift some of this stuff. So congrats on that home. I think that's absolutely fantastic. If you have any questions on that, please let me know. All right. The next one is from Greg. Greg says, Andrew, I am trying to figure out how my military pension impacts my savings for retirement. First of all, Greg, Greg, thank you for your service. Absolutely fantastic. I truly, truly appreciate you. Again, I have tons of family members who are service members and cannot thank you enough for your service.

50:50I know the sacrifices that you have to go through to even get to that point in time of being in the military. So really, really appreciate it. I believe the biggest benefit is the reduced cost of health care for myself and my family. But at 44, if I start a second career, will I have enough so my spouse won't need to work? So first, this is a really great thing to have, Greg, is having this pension. Because a military pension at 44 is a guaranteed paycheck for life. So you can think of this as your income floor. So lifetime income, we're looking at, this is your floor where you can start at this point in time.

51:23And you can think through the cost of living adjustments. You can treat this like a bond or an annuity or whatever else. This guaranteed income directly reduces the amount of money that you need to have on hand in your portfolio. It directly changes the numbers and changes the math dramatically. And so because you have this, this is going to be a great starting point. And again, I would highly recommend, Greg, we have a retirement calculator that you can use. And if you go to mastermoney.co slash resources, we will have the retirement calculator there where you can find your retirement number based on this.

51:52And we have a section there where if you have a pension, you can put the pension number in of how much you're making every single month, and it will reduce your retirement number based on the pension. So that's something I would definitely recommend looking into as we go through this. Secondly, as you are absolutely right about healthcare, healthcare is a big deal for folks who want to retire early. And we've seen people retire at 50 and have to go back to work because they have to pay$1 ,500 to$2 ,500 in order to be able to afford healthcare before they reach Medicare age. Because you have this reduced healthcare cost, that is one of the biggest costs in retirement.

52:25It's a big, big deal. And so you could say to yourself, okay, well, I'm going to be saving myself an additional chunk of money here that I think is a really big deal. Most people on average in retirement spend about$300 ,000 on healthcare, and so that's a big deal. Now, whether your spouse works comes down to one quick calculation. What are your household expenses? How much do you burn every single month? So if you add up your annual expenses, subtract your guaranteed pension of how much you're going to be making every single year, then subtract your healthcare savings and anything else that's there, what's left is the gap you actually need to fill.

52:54So let's say your pension covers, I'm just going to use easy numbers here, you want to spend$100 ,000 per year. and let's say your pension covers$60 ,000 of it. Not sure if it would, but that's one thing to consider. And then you come down and you're like, I got$40 ,000 left that I need to come up with. Well, will social security cover a portion of that? Maybe, if not, then we need to look at what we need to fill the portfolio with. Well, we know with the 4 % rule, you could draw down 4 % every single year. It's gonna be about a million bucks in a portfolio before you want to retire. And so if you're gonna be working for the next couple of years, you can say to yourself, okay, well, I got this pension in place and it covers X amount of my expenses.

53:29I just need to be able to cover an extra$40 ,000 per year. And maybe, you know, if you start working a second career, you're making, you know,$40 ,000 to$60 ,000, then that's going to be the way that you look at this. And the second career can also be a huge wealth accelerator. Let's say you bank some of that stuff and you want to live a fun, amazing retirement. And so you start your second career over the course of the next 10 to 15 years, then you could take a portion of that saving and save it for your retirement portfolio and use the rest as living expenses and money that you can spend over that time frame.

53:57So it's one of those things that I think is really, really important. The pension is such a hack when it comes to building wealth. And the fact that you have it and you are young enough at 44 to be able to do some really cool stuff, I think is powerful. So take your yearly expenses, subtract it from your guaranteed pension, and what's left is what you need. That's what you need to make sure that you are covering either with your second career and building up your portfolio to be able to cover that portion. Now, you can also factor in that, again, like I said, Social Security. And if you do factor in Social Security, you can go to like ssa.gov, for example, see how much you're going to get in Social Security.

54:28That would be the next factor as well. But again, with the pension income, that might reduce the Social Security income pretty dramatically because it's income that's coming in. So you just want to kind of factor all that stuff in and make sure that you're looking at each one of those pieces. But health care is a big deal. That's awesome for you. So thank you again. And I truly, truly appreciate your service. The next one is from Trent. Trent says, Hey, Andrew, I'm 18 and graduating high school this spring with my associate's degree. So I'll ideally only have about 2.5 years left of college studying accounting and financial planning, working towards my CPA and CFP.

55:01Wow, you got that double whammy going. I love it. I started investing at 15, and right now I have about$17 ,000 in my brokerage account. Incredible! And$3 ,000 in my Roth IRA. My parents are covering college, and I run a photography business on the side. During college, how would you recommend balancing investing between a Roth IRA and taxable brokerage? I want to maximize my Roth advantage while still keeping enough accessible for post-grad flexibility. And thank you for all you do. Trent, you are crushing it, my man. Having 20 grand at the age of 18 is absolutely incredible. I think when I was 18, all I had to my name was maybe$2 ,000 or$3 ,000.

55:39And for the most part, it was from working and kind of saving. And I don't even probably think I had it invested right. So you are absolutely crushing it, my friend. And this is something that is absolutely amazing. So I want to talk through some of the things that I would think through first. If it was me and I were in your shoes, I would attack the Roth first. So if you're making enough money in your photography business to be able to save, I would save in the Roth first. What does that give you flexibility for? Well, your contributions absolutely had to, although I wouldn't interrupt compound interest unnecessarily.

56:06But you could pull those out if you absolutely had to post-grad. But I would try to put as much as I possibly can. It is unbeatable when you have a 50-plus timeline. Why? Because when you look at this, that tax-free growth over that timeframe is a huge, huge deal. In fact, if I use the master money investment calculator and I go in there and look at, okay, well, what would it be over the course of just 50 years if you max this thing out over the course of the next 50 years? Okay, we're going to do$7 ,500 over 50 years at a 7 % rate of return and your additional contribution. All right, so we're going to look at that.

56:40We'll do it at the end of every single year just to look at it. and over 50 years, okay, you would have$3.1 million in your Roth IRA. You would have contributed$375 ,000 over that timeframe, and you would have$2 ,759 ,000 in your Roth IRA. And this is at a 7 % rate of return. I'm going to do a 10 just for fun in a second. $2.7 million in your Roth IRA, completely tax-free. But let's do a 10 % rate of return. Let's look at what it could become. It's just crazy. Time is so crazy. If you did it at a 10 % rate of return, same numbers, 7 ,500 bucks per year. And obviously that balance is going to go up in the Roth every year.

57:18So you'd even have more than this. We just don't know what that's going to be in the future. You would have contributed$375 ,000 and you would have 8.7 million in total interest, meaning the amount of money that your money would have made completely tax-free. That's why I would choose the Roth first and why I would be very bullish on the Roth long-term because there's a really, really cool stuff that you could do with the Roth. And then I would look at the other 2 ,500 in the taxable. Taxable gives you that flexibility. If you do decide you want to retire early, as you start to make a lot more money when you are a CPA or a CFP, then you'd be able to just dump a lot more into that taxable brokerage account at that point in time.

57:51But the Roth just gives you that flexibility that you want. Now, if you're like, no, I want to retire at 40. I know I want to retire at 40 and this is what I want to do. Then adding a little more to the taxable is A-OK, but I would try to put as much in the Roth as I possibly can, because again, those contributions can be withdrawn at any point in time. So for me, anybody who's young or a teenager, the Roth is a wonderful, wonderful account. And most likely you are really seeing the results of that just based on that tax-free growth. I love it for that reason. And then if you want that additional flexibility, as you start to make more money, I would start to pour more into the taxable.

58:24I think that's the way that I would look at that personally. But again, if you want a lot of flexibility than the taxable, you can split it off 50-50 if you want. It's going to depend on what you truly want. But congratulations for being 18, having$20 ,000 already invested. That is absolutely incredible. Let's say you stopped investing. I'm just curious now. Let's see what this would grow to at a 10 % rate of return. Because I just want to see how you've positioned yourself already. I think it's so cool. So if we did that, you would have$2.3 million, literally, if you didn't invest another dollar at a 10 % rate of return.

58:55It's crazy what can happen when you have time. And that's, I think, just why it is so important to get started early. So my friends out there listening, if you are a teenager listening or in high school or you're starting to think about investing your money, That's how powerful it can be if you just get started. All right, let's jump to the next question. The next one is from Nicholas. So hello, Andrew. I've been watching your podcast on Spotify and have enjoyed the content so far. I'm in my 20s trying to become a teacher in Ohio, but currently working in Indiana with no pension and contributions going anywhere.

59:26How do I factor a future teacher's pension into my plan? Investing on a lower income and still safe for a wedding house and kids. Great question, Nicholas. And I think this is something as you are still, you know, if you're in college, it sounds like, and you're trying to think through, well, what's the next thing you need to do? I would first, again, I keep plugging this because this is the reason why we created this tool, because I know so many people can use it. But if you go to mastermoney.co slash resources and use that retirement number resource, it's going to give you a lot of information on how to use this for your specific situation.

59:55So right now, focusing on what you can control is the most important. So right now, you don't have the pension in place yet. And so we need to focus on our current portfolio and starting to invest for that going forward. But then as you're starting to save for a wedding, for kids, for future expenses, I would start a high yield savings account and start sending some money over to some of those goals. Just getting the ball rolling, even if it's a small amount of money, can be very, very helpful. And as you start to think through building this out, what I would do next is think through the pension.

1:00:21And if you think you're definitely going to go and work in Ohio, well, how long does it take for you to get that pension vested? A lot of times it's three, four, five years before it kind of locks in and make sure that you have it on hand. In some states, you may have to be a teacher for 30 years before you actually get the pension. So it depends on the state and kind of what you're looking at there. So figure that part out first and make sure that you at least stay as long as you were going to have that vested if you were going to bank on this. Then number two is once you know what that pension number is going to be, what you want to do is figure out how much you're going to spend in retirement and subtract the amount of money that you feel as though the pension is going to be giving you and that gap, The difference between your pension and the amount of money that you're going to have on hand is going to be how much that you need to save for retirement.

1:01:07And so when you look at this, you say to yourself, OK, well, I'm going to spend one hundred thousand dollars per year. My pension is going to give me forty thousand dollars per year. I need to make up for another 60. Well, sixty thousand dollars, if you look at that and multiply it by 25, is going to be one point five million dollars is what your portfolio needs to be. And so then you try to figure out, OK, well, I can use, you know, you can use our compound interest calculator if you want to. that will kind of help you factor in, well, if I invest this amount, how do I get to the point in time where I have$1.5 million by the time I want to retire?

1:01:34And it will walk you through those steps. That's exactly how you do the math and exactly how you think about it. So you don't have to worry as much about some of these other factors. Pensions are wonderful because they give you that guaranteed income, that income floor that gets you started. Now, social security for some folks, especially when you're a teacher, and even in the last question where we had talking through the military pension, a lot of times social security could go away if you have that pension on hand or you may not get much in your Social Security. So you got to look into that as well and see how that factors in because it is something down the line that you just want to think through.

1:02:05And then I would compartmentalize. Wedding, house, kids, all that kind of stuff. If it's a shorter term goal, that would go into the high yield savings account and start to invest in the short term goal. Money you need within the next couple of years would kind of go into midterm goals and then long term goals would be your retirement. And I would kind of separate those three and then just attack all three of those goals and make sure you're saving towards them. that's going to be the best thing over the course of the next couple of years. But factoring in it is just a quick math problem. And honestly, once you have that number in place, it may change over time.

1:02:31And that's okay. You got to feel that that's okay. You just got to make adjustments year in and year out. And for everybody listening, we want you tracking your retirement number on a yearly basis because of this reason. Life's going to change. Things are going to shift. You may want to move to Japan. You may get a pension that you didn't realize you were going to get. You may get a big giant bonus. You may get an inheritance. And so you can shift the numbers in your retirement plan if you are tracking it on a yearly basis. I don't care if you're 25 or 55. You need to track your retirement number every single year.

1:02:59So really great question. Thank you so much for sending that in, Nicholas. And that's it for today's money Q &A. I hope you guys enjoyed this episode. A bunch of wonderful questions. If you want to get your question answered on the show, again, make sure you join the MasterMoney newsletter by going to mastermoney.co slash newsletter. You can get your question there. Or if you want me to answer your question live right in front of you where you can continue to ask me questions every single week, join Master Money Academy. There's a seven-day free trial down below in the show notes for you to check it out.

1:03:29It is one of the best ways to spend your dollars. It costs less than a coffee every single week, guys. It is, especially with that seven-day free trial, you can test it out and see if it's right for you. Again, thank you guys so much for being here. My goal is to bring you as much value as we possibly can. I hope we did that today, and we will see you on the next episode. Ryan Reynolds here from Mint Mobile, with a message for everyone paying big wireless way too much. Please, for the love of everything good in this world, stop. With Mint, you can get premium wireless for just$15 a month. Of course, if you enjoy overpaying, no judgments, but that's weird.

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