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.
Check out some other recent episodes
In part two of our series on the SECURE Act, we talk about some of the downsides to the changes. Eric explains the stretch IRA and what impact the SECURE Act made on it.Read More
What happens if you’ve maxed out your 401(k) contribution limit? When is a good time to make a Roth conversion? Eric answers three questions from the mailbag this week all pertaining to the options you have when it comes to saving for retirement.Read More
Are you considering making a move this year? When it comes to home buying or selling decisions, there are a lot of factors to consider. Eric answers a few questions from the mailbag related to real estate.Read More