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5 Questions: Bonds, Interest Rates, and Retirement


We haven’t done a five questions for awhile. Today it’s back! Andrew and Thomas answer five questions submitted by our listeners.

Today we answer questions about bonds, interest rates, and one of our favorite subjects, retirement.

1.  If you’re young and looking to grow wealth, why bother have 10 or even 5% invested in bonds? If you’re in your early 20’s, go ahead and go 100% stocks. As you get closer to retirement, you move more to bonds. This is what a life cycle fund does for you.

2.  Am I going to incur a lot of fees if I take money in and out of my Betterment account frequently?  When you pull money out, Betterment will let you know the tax implications of doing so. That’s one of the reasons we tell you to buy and hold. But even with the taxes, you will almost always make more in Betterment than making dick interest in a savings account. The bigger question is why Joe is not leaving that money alone.

3.  Wouldn’t it be beneficial to have a traditional IRA for your working life, retire, wait a year, and then withdraw the money?  Yes, your tax rate will be lower after retirement. You can even start slowing converting to a Roth.

4.  How does the Fed lowering or raising interest rates affect me?  Banks offer us loans with interest rates that are based on the Fed rate. The higher the Fed sets it, the higher the interest rate the banks will charge us to borrow money.

5.  I have unvested stock options. What are the implications of exercising them before the IPO?  It depends on the price. You could clean up or you could end up under water. The most important thing to consider is the taxes.

Thanks everyone for sending in your questions!

Show Notes

Patreon: Help support LMM

Keegan Ales Hurricane Kitty: An India pale ale.

Betterment: The smart way to invest.

PS:  Gawd, PF nerds don’t know who Vince Lombardi is! Embarrasing.

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6 responses to “5 Questions: Bonds, Interest Rates, and Retirement”

  1. Andrew M says:

    I really liked the first question with why invest in bonds. It’s something people are always told, but think about why we do it. As they say, there is no bad questions.

    For the second question, I think Betterment should have a something to indicate that in “with dawl all” will not work right away but go through other steps. Sounds like someone just looking at it wouldn’t know it did what was discussed in the podcast.

    Thanks for answering my Fed question 4. Really clarifies for me what’s happening.

    Thomas, in regards to your earlier comment… You are a pretty face and comedy relief :-D
    Just kidding, you have been a good co-host to LMM and add a different perspective to the show. Allowing Andrew to chat with you helps to clarify things he might not have thought to clarify.

    To clarify the man behind the quote:
    Vince Lombardi was the head coach for the Wisconsin football team Green Bay Packers. Under his leadership, the Packers won 6 NFL championships (before the Super Bowl was implemented) and the first 2 Super Bowls.
    Thanks to these wins, Packers have won more football NFL sponsored seasons than any other football team ever. The current Super Bowl trophy is named after him.
    He is considered one of the best coaches in the history of the NFL.

    Another awesome show.
    Thanks for answering my question.
    GO PACK!

    • Allison says:

      I agree with Candice “PS: Gawd, PF nerds don’t know who Vince Lombardi is! Embarrasing.” I thought replacing Matt with Thomas we would get some more football knowledge on the show.

  2. Andrew M says:

    Awesome rant at the end Thomas about the health insurance stuff. Would be neat if you two could make it a thing.

  3. jb1907 says:

    Bonds are for income, but even at 3%, that isn’t great, but it is predictable. How do you NOT know who Vince Lombardi is?????

  4. jb1907 says:

    We are going to have IRA money, 401K money, SS, Pension money. It is hard to keep the money from rolling in at some point. We are going to have about 4 years with no income and we will be too young to collect SS, so I will start to drain my taxable IRA money first when I am in a low tax bracket. Then i will getting my SS and pension money and then start to take money out of our Brokerage account. Our Roth money will be last. Heck, I hope to have about $85K just in dividend money coming in so I can have that in cash instead of having it reinvested.

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