MTM Mailbag: ⚡️ How should I mix my portfolio to make the max money on my 401k?

As always, thanks to everyone who sent in questions! 

We answer the specific case situations in more detail over email but share some general feedback so you can find valuable takeaways in your own circumstances.

Let's rock and roll!


Cathy writes: My husband is 61-years-old and has been diagnosed with a rare type of dementia. We have a 15-year-old daughter and we’re paying about $1,000 per month on healthcare through his company, but this has been putting a strain on our budget. I’m 54-years-old and I’ve always had medical benefits through my or my husband’s employer, where do I begin to find a more affordable option?

Cathy, it sounds like you’re going through a very intense time and I appreciate you reaching out. I’m inferring that your husband’s medical treatments are expensive and are likely supported by insurance. Considering he’s pre-Medicare age, if that company benefit is paying for those expensive treatments on his preexisting condition, it would be very hard to find a more affordable private option. If you’re looking for just you and your daughter, there are definitely less expensive options. I’d need to find out the details of his treatment and how much the current plan is for him, then we want to look at the bigger picture and even if we can’t reduce that payment to offset the pressure. 

george asks: I’m six years away from wanting to retire and I have a 401k that’s currently all in mutual funds or stocks. I’m ready to start building a safer portfolio such as 820 or 730. I’m starting to understand your philosophy and rules for managing money. What type of safer, stable investments would you recommend at this juncture?

If you’re six years away from retirement, you don’t need to be 100 percent in stocks. Based on your current portfolio, it’s evident you have a high risk tolerance. But you’re looking towards the future and understand that it’s best to downshift into something safer. My advice is to look to short to intermediate term bonds, with an emphasis on government treasuries which are safe but grow at one to two percent. If that’s more return than you’re willing to sacrifice, you can put your money in a CD. There are some fixed annuities that pay around four to five percent, but they come with surrender charges. You have to ask yourself (or sit down with me to discuss) if that fits your bigger situation.


REg asks: I’m 65-years-old and I want to invest in something that will produce some income as I move into retirement. I have a small account with Fidelity but I’m looking for something that’s more aggressive. I’m going with that maxim, “It’s never too late to start”.

Reg, you’re not alone. A lot of people I see have waited to invest and thinking that being aggressive will help them make up for lost time. Together, we should figure out what level of aggressiveness your plan can handle. We'll identify your max and then decide to stick with it for a set number of years.

joe writes: I’m a fireman in Sandy Springs. I have a 401k with a five percent match, but i don’t like where they have my money invested. A lot of my money’s in stocks right now, but I know the market is going to change. How should I mix my portfolio to make the max money on my 401k?

Joe, thank you for your service. Based on the information you provided, I’m guessing that you’re not within a few years of retirement. In your case, if the market drops, the best possible way to max out that growth is by participating in that drop and buying as it goes down. Think of it as buying stocks on sale. When the market rebounds, you’ll see explosive growth.

candace writes: If a person is in their 50s and self-employed as a private nurse, would it be more financially advantageous for that person to incorporate and become a viable business like an LLC to have tax advantages and a Roth/401k?

I always think it’s wise to incorporate if you’re self-employed. Officially, if you’re self-employed and don’t incorporate, you’re still taxed as if it’s a separate entity like you’re incorporated but you don’t have any protection advantages. Considering your profession, protection is paramount in defense of civil suits. If you’re ever sued, all of your assets are on the line. By forming an LLC, you put up a wall to separate your assets from your company’s. If you live in Georgia, you can go to the Secretary of State’s website and inexpensively and painlessly form an LLC.

In terms of tax advantages, you can open a solo 401k if you’re self-employed even if you don’t incorporate. 

That's All For This week!

Every week during the More Than Money show on AM 750 WSB we open up the week's mailbag and answer your questions in the "Lightning Round." MOST of these come from the site, but we aren't afraid to throw in texts, DM's and great things we hear from in-person meetings.

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