Forum Mailbag: Suze Orman, Funding Multiple 529s, Buying A Larger Home, And More!

There is so much great information on personal finance forums. I participate on several message boards, including the Bogleheads and White Coat Investor forums. Here are some of the discussions happening around the internet.

1. White Coat Investor: Suze Orman and Retirement Age

Question: Samy77 wants the forum’s thoughts on an article by Suze Orman, who argues that 70 is the new 65 when it comes to retirement age.

WSP’s Take: I’ve run into this article before, and it obviously doesn’t sit well with those in the early retirement community. Her point is that people these days live much longer than they used to, and we should be planning for longer retirements. She states in the article that most people have 15 years saved for retirement, but may need 30 years of retirement savings if they retire in their 60s.

Of course, the classic Trinity University study assumed a 30-year retirement, so the standard 4% rule should usually work out for someone retiring in their mid-60s. Super-savers can retire in their 50s, 40s, or even 30s, so long as they have enough saved for retirement, which actually isn’t that significantly more than someone who chooses to retire in their 60s.

Her advice to delay taking Social Security until 70 is sound, but that doesn’t mean you can’t retire before you start taking Social Security at age 70.

2. Physicians On FIRE Facebook Group: How To Fund 529s

Question: A doctor on the Physicians on FIRE Facebook group asks whether it is better to equally fund 529s for multiple children or fund more money into the eldest child’s 529 and roll over the money to the younger children if there is extra money?

WSP’s Take: Before we get into the financial considerations, how will your youngest child feel if their older sibling gets their entire college fully paid for from a 529, while he/she has to take our loans?

Everyone has their own approach to funding for college, but since 529s are your accounts with your children as beneficiaries, I would say it’s best just to have a 529 for each of the children and partially pay for each child’s college tuition using their 529. If anything, you would want to pay more of your youngest child’s education from a 529 so that you get tax-deferred growth on your 529 money for as long as possible.

3. White Coat Investor: Justifying Buying a Larger Home

Question: Slowandsteady wants to purchase a larger home for his family — his current home is paid off. He is otherwise well on-track for retirement and his other financial goals. He asks the forum whether purchasing this newer, larger home is lifestyle inflation or additional diversification.

WSP’s Take: It’s lifestyle inflation, but there is no shame in buying it anyway. From the rest of the reader’s description of his financial situation, he seems to be able to afford it. If a larger home is something he and his family will enjoy, then by all means he should buy it, even though it’s not the greatest financial decision.

4. Bogleheads: Investing Time Horizons In Retirement

Question: Dknightd is 60 years old and nearing retirement. He is wondering whether it is reasonable to think about investing according to three different time horizon buckets:

1. The time from now until retirement (he won’t retire until he hits his number — a short-term investment)
2. The time from now until he will start taking Social Security (a medium-term investment)
3. The time after he begins taking Social Security at age 70 (a long-term investment)

WSP’s Take: I don’t think this approach significantly changes how he would allocate his money compared to treating his entire retirement portfolio as a single bucket. Let’s say that 10% of his money should go in Bucket 1, 20% should go in Bucket 2 and 70% should go in Bucket 3. Bucket 1 (short-term) is invested in 100% bonds/short-term CDs, Bucket 2 (medium-term) is invested conservatively at 20% stocks / 80% bonds, and Bucket 3 (long-term) is invested moderately aggressively (80% stocks / 20% bonds). Your overall portfolio ends up being 60% stocks / 40% bonds, which is probably what his asset allocation should be given his age anyway.

Wall Street Shares: 5 Articles/Tweets To Read This Week

1. 1. Dr. Cory S. Fawcett, MD: Tax Surprises My Retirement Year — The early retiree can have some unique tax circumstances. Dr. Fawcett shares his experience doing his 2017 taxes, his first outside of clinical medicine.
   2. White Coat Investor: What It’s Like To Have a Seven Figure Income — Money can solve a lot of problems, but new problems crop up for those with top 0.2% incomes.
   3. Physician On FIRE: 43 Things to do with 86 Weekends in 2018 — VagabondMD is a part-time radiologist who only works three days a week, leaving him with 86 weekends in 2018. Check out his to-do list and see if any get added to your own personal wish list
   4. The Happy Philosopher: Keeping Score — Everyone loves to keep score on everything in life, but this radiologist argues that maybe we should be less competitive on things that aren’t that important in the big picture.
   5. Rogue Dad, MD: Congratulations to pediatric emergency medicine physician Rogue Dad, M.D. and his son for breaking the Internet with this tweet, which has over 700,000 likes:

Just learned our 9y/o did an experiment on us. Lost tooth, told no one for 3d, kept tooth under his pillow. No $. Then he tells us he lost the tooth, next night there is money under his pillow. Then confronted us with his scientific evidence that the tooth fairy isn’t real.

— Rogue Dad, M.D. (@RogueDadMD) April 23, 2018

What do you think? Do you agree or disagree with any of my responses? What’s your take on the topics in this week’s forum mailbag?