We’re playing a game to determine what’s underrated and overrated when it comes to a few topics in the financial world (and even a few outside of financial planning). Let us know what you think.
(Click the featured times below to jump forward in the episode)
[1:06] Variable Annuities
- Eric says variable annuities are overrated.
- A lot of the hype surrounding variable annuities centers around the guarantees they provide.
- You need to be careful and understand the hidden fees involved with variable annuities.
- Eric gives an example using the duck boats he rode on vacation. These are vehicles designed for both land and water.
- Annuities are like duck boats; they can operate in two investing worlds. They’re designed to provide growth and safety, but they’re not efficient at providing either.
- Underrated – Eric says these are cool unless you try to operate them yourself.
[4:30] Paying Off Your Mortgage Early
- A little of both, but more so, overrated.
- A lot of people might sacrifice to pay off their mortgage early. This could come at the expense of saving for retirement.
- You can finance anything in life except retirement.
[5:45] Roller Coasters
- Eric is a big fan of roller coasters, so they are underrated.
- It’s an impressive engineering feat to be suspended in the air and upside down.
- Eric says overrated.
- You’re paying a lot for something that hasn’t even been cooked.
[7:52] Getting a Big Tax Refund
- Extremely overrated.
- It may feel like a forced savings account that allows for a trip.
- Tax refunds essentially mean you paid the government too much money and received zero interest in return.
- Try to get your taxes to the point where you pay a little bit, but not enough for a penalty.
- You could have that money invested toward retirement instead.
[10:11] Roth IRAs
- Severely underrated.
- You can invest in an account that allows you to grow your money tax-free.
- Some may have too much income to contribute.
- This is the optimal time to shift money from IRAs and 401(k)s to Roth IRAs.
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