5 Questions: Bonds, Interest Rates, and Retirement

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  1. Show Notes


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.

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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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