Today’s Prep:

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.

Equipping Points:

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.

4:02 Fireworks

• 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.

7:12 Sushi

• 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.

Today’s Takeaway:

“You have to remember that you can finance anything in life…except retirement. – Eric Peterson“