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00:00:01
Finance Q&A: How much money would I need to never work again?
11 Plays9 days ago
In this special Q&A episode of The Future of Finance Podcast, host and financial advisor Marissa Wood answers your most-asked personal finance questions — from how much car you can afford to the truth about Roth IRAs, student loans, and even that daily coffee habit ☕.
If you've ever wondered:
Should I max out my 401(k)?
How expensive of a car can I afford?
How much money would I need to NEVER work again?
This episode is for you.
These practical, real-world answers will help you take control of your money — whether you're just starting out, navigating student debt, or planning for a work-optional lifestyle.
💻 Work with Marissa: https://www.union-financial.com/
📩 Got a question for a future episode? Send it through our site!
⏱️ Timestamps
00:00 – Intro: Listener-submitted financial questions
00:52 – What is a Roth IRA & why should you invest in one?
02:15 – What a Roth IRA can actually hold
03:09 – How expensive of a car can I afford? (The 15% Rule) 🚗
04:58 – Why you should shop your car insurance every year
05:17 – Should I max out my 401(k)? Pros & cons
06:17 – Why liquidity matters when investing
07:17 – One of the biggest mistakes: cashing out your 401(k) early
08:50 – The compounding cost of taking out retirement funds
09:33 – Another big mistake: waiting too long to invest
10:01 – How much do you need to retire at 35 with 4 kids in NJ?
11:43 – Explaining the 4% withdrawal rule
12:05 – The bare minimum number: $1.8 million
13:03 – Best ways to invest when you’re young
14:03 – Why consistency is key 🧾
15:12 – Why you should keep investing when markets are down
16:44 – Tax-free investing vehicles for young people
17:18 – Should I aggressively pay off student loans? 🎓
18:09 – Student loans = good debt?
19:16 – Why investing instead of accelerating payments might win
20:00 – How do financial advisors get paid?
21:44 – Understanding fees vs. commissions
22:30 – Wrap-up & how to submit questions for future episodes
📌 Hashtags
#FinancePodcast #FinancialFreedom #RothIRA #401k #InvestingTips #StudentLoans #MoneyAdvice #QandA #PersonalFinance #FutureOfFinance #Budgeting #FinancialGoals #SmartSpending
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Transcript
Introduction and Theme
00:00:09
Speaker
Hi, everyone. Welcome back to the Future Finance podcast. I'm your host, Marissa Wood. And today's episode is really exciting because we are going to be answering listeners' questions.
00:00:20
Speaker
So we put up a prompt on our social media a couple weeks ago asking you your top financial questions for a financial advisor. And we received some really great ones. We're going to start out with an easy question and ah you know we have some fun ones in here today as well. So thank you for everyone that wrote in a question and we'll be hoping to incorporate these Q&A type episodes a couple times throughout the year.
Understanding Roth IRA
00:00:45
Speaker
So the first question that we received is, what is a Roth IRA and why is everyone telling me to invest in one? And that is a common question that we receive.
00:00:56
Speaker
You know, your neighbor might be telling you, your uncle, your parents might be telling you, open up a Roth IRA, you have to. And that's all well and good, but most people don't even understand what is Roth IRA.
00:01:09
Speaker
And so I'm going to give you an example. Let's say that you're making $50,000 a year and you contribute $5,000 to a Roth IRA.
00:01:21
Speaker
Well, your taxable income is still $50,000. It doesn't save you on taxes right now the way 401k or traditional IRA would. But that $5,000 you contribute to a Roth IRA, it sits in that account growing, earning interest.
00:01:38
Speaker
And then when you retire one day and you go to withdraw those monies, you know, a couple thousand a year or all of it, it's completely tax-free to you. And so it is a bit of a delayed gratification type of investment where you have to wait for the future to withdraw those funds, but it's 100% tax-free.
00:01:58
Speaker
And so that's why we always recommend to anyone that's getting started investing, open up that Roth IRA with even $1,000 right now. Let it start growing and compounding for you.
00:02:11
Speaker
And eventually you can have a huge tax-free asset for yourself in the future. Pretty amazing. um And a Roth IRA is just the tax classification of the investment. It's not where it's actually invested.
00:02:25
Speaker
So you can have a Roth IRA that's a bank account. You can have a Roth IRA that holds stocks for a bunch of different companies in it. You can have a Roth IRA that's an annuity.
00:02:36
Speaker
It can be invested in many different places depending on what your goals are, but it's just the titling that makes it tax
Car Affordability and Insurance Advice
00:02:44
Speaker
advantaged. Okay, now our next question is a little bit more exciting.
00:02:49
Speaker
This person asked, how expensive of a car can I afford? Is there a formula I should be using? And that's a great question because most times we don't even know where to begin. of course, you know, our financing person at at a car dealership will give us some ideas, but it's good to know, am I overspending on a car?
00:03:13
Speaker
Is it within my means? And so I wanna share a rule of thumb that we like to suggest people use when shopping for a new car. Now, think of your take-home pay when I'm going through this scenario, not your salary. So take-home pay would be after taxes, after health insurance was withdrawn from your paycheck.
00:03:34
Speaker
Now, the rule of thumb is that your total auto expenses, so that includes your auto payment, whether that be a lease or your monthly payment, plus your car insurance.
00:03:47
Speaker
So you want to include both of those. Your total auto expenses for the month should be no more than 15% of your take-home pay. So let's say your take-home is $5,000 a month.
00:03:59
Speaker
That means you should be spending no more than $750 a month between your car payment or lease payment and monthly car insurance.
00:04:12
Speaker
And so using that formula, regardless of what your salary is and your take-home pay is, you can figure out, so okay, I can afford this car or I cannot. And definitely shop car insurance quotes. I would recommend using an independent agency for car insurance because they can shop all the insurance carriers for you.
00:04:33
Speaker
And have them re-quote you every year. You know, i I personally change auto insurance carriers almost every single year because and a better price is out there. You don't know until you shop it around.
00:04:46
Speaker
So you want to include that auto insurance cost in the total monthly car expenses category. And so I hope that gives you a better idea on what car you can or cannot afford.
00:04:58
Speaker
Now, personally, i think cars are not a great investment. They depreciate almost instantly. But if it's your passion or if you're buying it for you know safety reasons, I understand spending a little bit more.
00:05:12
Speaker
Just make sure it's within that 15% of your monthly take home pay category.
401k Contributions and Investment Diversification
00:05:18
Speaker
All right, now another question we received is, should I max out my 401k?
00:05:23
Speaker
Now, maxing out your 401k means you're putting the absolute maximum allowable contribution per government rules into that four ah one k plan.
00:05:35
Speaker
It's usually about $20,000 a year, can go up from there. Maxing it out will give you the max tax savings right now. But I'm a little bit hesitant whenever anyone asks, should I max out my 401k?
00:05:51
Speaker
Because it's not always the best idea. Anything you contribute to your 401k, you're basically saying goodbye to that money until you're 59 and a half. So it's it really lacks liquidity. You cannot get to it before that without paying a penalty.
00:06:07
Speaker
So you don't want to put all of your eggs in that 401k basket. You need to have a little bit of money for the now and the next year and the five years from now. And so I would encourage people to put in up to the company match.
00:06:22
Speaker
If the company match is 5% your salary, contribute 5% of your salary. contribute five percent of your salary If you can afford to invest excess of that, let's do it in another account that maybe you can have more access to or more control over.
00:06:39
Speaker
It's usually our best tip. All
Common Investment Mistakes and Consistency
00:06:41
Speaker
right. What is the biggest financial mistakes that you see people making? That is a great question. And, you know, we actually have a full episode on that coming up. We're going to go through the biggest mistake that each generation is making most commonly.
00:07:01
Speaker
But I would say, you know, if I were to just generalize off the top of my head, big mistake that I see people making you cashing out their 401k to pay off other things.
00:07:16
Speaker
um It's a big problem for a few reasons. Let's say, you know, we have a 35-year-old and they had 50 grand in their 401k.
00:07:28
Speaker
They need to cash it out to pay down maybe some other debts that they have or... to renovate their kitchen or to buy a car, whatever that may be that they're spending that money on, they decide, I'll cash it out.
00:07:44
Speaker
Well, the problem is, first of all, you're going to be hit with a 10% early withdrawal penalty. And then you're also going to be hit with a tax bill, usually at least 20% tax bill.
00:07:58
Speaker
So there we have about 30% of that account that's gone immediately. And not only that, now you no longer have that asset that's going to be compounding and growing for your future.
00:08:14
Speaker
Now, you could say, well, I'll replace it. I have plenty of years to replace it. That may be so, but you're losing out on that $50,000 that would have already compounded and grown for you.
00:08:27
Speaker
And now you're going to have to do a ton of catch up in the future, which most people don't end up doing. And so, you know, I'm always telling people to proceed with caution if you're cashing out your 401k.
00:08:41
Speaker
Now, taking a loan against your 401k is a different story altogether. That's not what I'm talking about. What I'm talking about is cashing out that 401k. It's usually a huge mistake for your future.
00:08:55
Speaker
So that's a big mistake. And the other one that we see a lot, and it seems so self-explanatory and simple, is waiting too long to start investing. You know, there's no magic age when you should start or magic number that you need to start with.
00:09:12
Speaker
Every dollar counts a little at a time. Consistency is key when it comes to investing. And so don't wait until you feel completely financially set and you're making several hundred thousand a year.
00:09:27
Speaker
Don't wait until then to start. Start now and then build upon that as time goes on. So, you know, very simple with that tip, but it is a big mistake and a really common mistake, I would say.
Planning for Early Retirement
00:09:41
Speaker
All right. Now, this next question um did make me laugh when I read it. And, you know, I know the person that asked it as well. And it's kind of funny, but it's going to be a great exercise to go through. So this person asked, how much money would a 35-year-old father of four in New Jersey need to have in order to never work again in their life.
00:10:06
Speaker
Isn't that the dream? to be 35 years old, have children, and never have to work again. You could just spend all your time with your kids. That's amazing. And I so wish that for you. but you know, the reality is there is a dollar amount behind that.
00:10:23
Speaker
And you know how we calculate that dollar amount, of course, depends on a lot of different factors. But the biggest one is going to be, what are your expenses on a monthly basis? You can have all the assets in the world, but if it doesn't cover your expenses, it's not going to do it.
00:10:39
Speaker
you know We have to work backwards in a way. And so without knowing your personal situation and what your monthly expenses are, I'm going to just use an average monthly expense that We've gathered for about, you know, 35-year-olds, I would say, on average.
00:10:57
Speaker
Let's say your household expenses are $6,000 a month. Okay, that's $72,000 a year. That's what we need to cover. That's the bare minimum that we can live off of, right?
00:11:10
Speaker
Okay, so we know that now. Now, a good rule of thumb that's been in the world of investing for years and years is that if you withdraw 4% of your assets per year, you should never run out of money.
00:11:27
Speaker
Now, it's not a foolproof plan because... We don't account for market volatility and inflation and everything. But that is kind of the golden standard is that if you withdraw 4% of your assets every year, it should last you for life.
00:11:45
Speaker
Okay, so let's try to do the math on that. And lucky for you, i already did the math. I'm not that good at math, but I'm just doing it in my head. So if we need $72,000 year our expenses,
00:11:57
Speaker
to cover our expenses and we're withdrawing 4% to get that $72,000, the amount of money we need right now in order to produce that is about $1.8 million. $1.8 million is the absolute bare minimum that a 35-year-old father of four would need in order to cover those average expenses for the rest of his life.
00:12:25
Speaker
Now, I don't know if that number is going to be shocking to you. Really high, really low. um I think it should probably be higher than that because we want to adjust for inflation and, you know, fun expenses too, not just living expenses.
00:12:42
Speaker
But to answer your question, at least $1.8 million dollars to never work again in your life. And I hope you win the lottery and that becomes a reality for you. And I'd be happy to walk you through making that money work for you. But to answer your question, about $1.8 million.
Benefits of Early Investing
00:13:00
Speaker
Our next question is, what is the best way to invest your money at a young age? And now this is something I'm pretty passionate about because I got started at a young age. And I recognize the fact that I had a lot of privilege going into investing because i grew up with two parents in the industry.
00:13:24
Speaker
I was fortunate enough to start a Roth IRA at the age of 18. I understand that majority of people weren't given those opportunities and the education along the way.
00:13:37
Speaker
And I'm very, very blessed and thankful for that. And it's one of the reasons I wanted to start this podcast. And I'm passionate about educating my clients because I know that I had it well and that I was given so many tools to succeed. And so I want to share that with the average person. um So, you know, when it comes to investing at a young age,
00:14:01
Speaker
There's two things that you should do to set yourself up for, you know, that cruise control success in the future. One would be to invest consistently. And I know I say this all the time, but consistency is key.
00:14:16
Speaker
If it becomes a habit to you, you're not even going to miss that $100 or $200 a month that is withdrawn from your account. You're used to that happening.
00:14:27
Speaker
It's just another bill, basically. And the great thing is you're not paying your cable company. You're paying your future self. You know, that's the best kind of bill to have. And so consistency is key.
00:14:40
Speaker
um you know, and consistency regardless of market conditions. Right now at the time of filming this, we're experiencing a lot of volatility in the stock market. And I received a call from a client last week that that is currently adding a couple hundred dollars a month to her brokerage account.
00:14:57
Speaker
We've been doing that for several years. And I received a panic call from her last week. And she said, oh my gosh, I can't believe what's happening in the stock market.
00:15:08
Speaker
I need to stop adding to my account because, you know, I don't want my money to just disappear. And I feel like that's what's happening every time I add. You know, I understand the panic because it can be scary when you see your account value go down.
00:15:24
Speaker
But we had a conversation about the fact that You know, adding to your account is what you need to be doing right now. If we suspend those additions, it's the worst possible thing that we can be doing for your plan.
00:15:39
Speaker
Because guess what? When the market is down and you're adding to your account, you're buying everything on sale. You know, if you were eyeing a pair of shoes for six months and all of a sudden they were 30% off, wouldn't you run to the store to go buy them?
00:15:57
Speaker
Yeah, of course. Well, it's the same thing with the stock market. When stock prices go down, that's the time to buy in. and so sticking the course and adding on a consistent basis is going to allow you to buy in some months when it's low.
00:16:13
Speaker
And then you're going to buy in some months when it's back up. You know, you're going to pay that premium again. But throughout the average of your investing life, you'll realize the lower average price per share.
00:16:26
Speaker
um And so, you know, anyone panicking that their account values are going down, that's just the price per share going down. It is not the number of shares that you have. You're still buying shares.
00:16:37
Speaker
And eventually they will go back up and you'll own more of them and get to reap those gains on a larger basis. So consistency is key um at any age, at any dollar amount.
00:16:50
Speaker
um And the other tip would be, you know, for young investors to take advantage tax-favored accounts. Things like a Roth IRA, health savings account, cash value life insurance, all investment vehicles that you'll be able to access tax-free in the future.
00:17:12
Speaker
Because the one thing that we do not know and no one knows, you know, they would just be guessing, is what future tax rates will be. It's anyone best guess, and...
00:17:24
Speaker
You know, all we can do is try to prepare ourselves the best we can that no matter what tax rates are going to be, we'll be okay because we have some tax-free assets.
Student Loans vs. Investing Strategy
00:17:34
Speaker
All right, our next question, and I think this will really be relevant to a lot of our listeners, is should I aggressively pay down my student loans to try to completely pay them off soon?
00:17:47
Speaker
And that's a good question because think student loans can feel heavy on many of us. You know, we don't want to have that hanging over our head forever. But you may or may not be in a position where you should pay them off. You know, it really does depend on the interest rate, of course, how many years left,
00:18:10
Speaker
the amount of loan you have outstanding. But in general, I always like to tell people student in debt is really good debt. It is not bad debt to have. First of all, it was an investment for your future.
00:18:24
Speaker
Education is absolutely investing in yourself. And second of all, the interest rates are usually relatively low. Now, that's going to depend on everyone's personal situation, but you're not looking at credit card level interest rates.
00:18:39
Speaker
on average, we're going to see, you know, 6% or 7% of an interest rate for student debt. Now, what might be a great strategy for you is to pay that minimum payment every month and then take the excess for what you were going to pay down.
00:18:57
Speaker
You know, you're planning on throwing an extra $1,000 a month towards that payment maybe. Well, take that extra $1,000 a month and invest it in a brokerage account where your money can actually be working for you. You know, the S&P 500, which is the benchmark for the stock market, it tracks the 500 top domestic companies throughout the country.
00:19:20
Speaker
The benchmark for the S&P has averaged about 9% a year over the last 30 years. Now, if you can earn 9%
00:19:32
Speaker
you know, that's a whole lot better than paying down interest that is costing you 6% or 7%. So, you know, pay that minimum and don't worry about paying off that debt immediately because you can put that money to work for you. And then maybe in 5, 10, 15 years, all of those extra payments that you've put towards your brokerage account will be enough that you can wipe the rest of that debt clean and save yourself tons of money on interest over the years.
00:20:01
Speaker
So that could be a strategy that might work for you. Of course, let's have a conversation about, you know, the best, most efficient strategy for your case. But don't worry about that student debt.
00:20:12
Speaker
It was a great investment for your future and the interest might not be that bad. Pay that minimum and invest the rest.
Financial Advisor Compensation and Contact Info
00:20:19
Speaker
Okay, our next question is one that I actually receive a lot and people always feel funny asking me.
00:20:26
Speaker
And so I want to just put it out there because there's no reason to feel funny asking this. And it's, how do you get paid? How does the financial advisor get paid? And, you know, you have every right to know, of course, just as we have every right to make a living.
00:20:41
Speaker
And so every advisor gets paid in a couple different ways depending on how they structure their business. So I'm only going to be speaking to us at Union Financial Services. We get paid in one of two different ways.
00:20:53
Speaker
Now, if we're doing a asset management service for you, managing your brokerage accounts, things that are going to be, you know, traded a little bit more frequently, actively managed in the market, market goes up, market goes down, little bit more volatile.
00:21:13
Speaker
On that, we charge an asset management fee, a percentage of the total assets that we manage. Okay. And it's an annual fee. It's broken down monthly, so it is spread out throughout the course of the year.
00:21:25
Speaker
But it's based on your account value. And so when you make more, we make more. And there is that you know fiduciary obligation with that. And now on the other side of things, we also do insurance-based products, life insurance, annuities, MYGAs, which work as a CD alternative.
00:21:44
Speaker
And on that side of things, we get paid a commission from the insurance carrier. So doesn't come out of your pocket, but we are still getting paid from the insurance carrier. We get paid a commission.
00:21:56
Speaker
And so those are the two different ways that we get paid. Most often with the plans that we put together for clients, it's going to be a combination of brokerage accounts and insurance products.
00:22:06
Speaker
So that really does bring down the aggregate fee even further for you. But important to know, we don't ever charge for meetings, for plans. We don't charge an hourly fee, ah which really makes it simple and easy and also helps us serve our clients the best we can without costing you a lot of money up front.
00:22:28
Speaker
So don't ever feel funny asking me how I get paid, but I hope that gives ah really simple explanation for you. And so those are just a couple questions that we received from our listeners this past week.
00:22:41
Speaker
I look forward to answering more questions in the future. and you know, there's no question too silly or too common. Chances are a lot of people are wondering the same thing and they're just waiting for someone to ask it.
00:22:53
Speaker
Now, thank you all for tuning in to another episode of the Future of Finance podcast. I'm your host, Marissa Wood. If you have questions that you would like asked on our next podcast or you'd like to schedule a consultation with myself,
00:23:08
Speaker
Please go to our website, union-financial.com, schedule a meeting. We can do it by phone, Zoom, or in person. And I'd love to help you live a better financial future.
00:23:21
Speaker
investment advisory services offered through brookstone capital management lc a registered investment advisor bcm and union financial services are independent of each other insurance products and services are not offered through bcm but are offered and sold through individually licensed and appointed agents The opinions expressed by Marissa Wood and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change without notice. Investments involved risk and otherwise stated are not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you. Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation. This program is designed to provide accurate and authoritative information with regard to subject covered. Indexed or fixed index annuities are not designed for short-term investments and may be subject to caps, restrictions, fees, and surrender charge as described in the annuity contract.
00:24:32
Speaker
Guarantees are backed by the financial strength and claims paying ability of the insurer. Please refer to our firm brochure, the ADV 2A, item 4, for additional information. Any comments regarding safe and secure products and guaranteed income streams refer only to fixed insurance products. They do not refer in any way to securities or investment advisory products.
00:24:51
Speaker
Fixed insurance and annuity product guarantees are subject to the claims paying ability of the issuing company and are not offered by Brookstone.