40 yr old son has asked for financial advice!

[stephenson]

Hi All!

Well, today my 40 year old son asked for advice! Yeah, some of you get it

You have seen my recent posts re my sister's passing - both sons were beneficiaries of her TSP account and her smaller Roth IRA. I also disclaimed about $125K in taxable assets (bond and equity funds) to each of them. The transfer are all complete and beat the timelines for transfer.

This son is well educated (VT CivE and W&M MBA), works for a technology company in their real estate department, remains unmarried and is so focused on work he doesn't always think about the future, he bought his first house about a year ago. He has his own taxable and 401K investments, and has discussed things a bit with my Fidelity rep - he has also been trading a small bit over the years, but mostly invested in mutual funds. BTW, I am a self-guided investor with Fidelity.

So, his questions will include:
1. What should I do with the new taxable assets?
2. What should I do with the new non-taxable (IRA and Roth IRA)
3. What asset allocation is appropriate for me?
4. Should I used mutual funds or ETFs?
5. What other things should I be doing?

We have discussed a lot of financial topics over the years, but he has never actually asked for advice ... he watched me go through the financial aspects of my sister's passing and perhaps has decided he needs to know more.

Another BTW - I gave he and his brother a copy of Bogle's book when they graduated from college.

Far ranging or focused comments and recommendations - all appreciated!

 

[FLSUnFIRE]

J.L. Collins' "The Simple Path to Wealth" has become my standard textbook when people ask advice.


I would look at the tax implications of the distributions of the inherited IRAs (especially if rates go up in 2026) for optimization as it could kick him into a higher bracket.

 

[Aerides]

This son is well educated (VT CivE and W&M MBA), works for a technology company in their real estate department, remains unmarried and is so focused on work he doesn't always think about the future, he bought his first house about a year ago. He has his own taxable and 401K investments, and has discussed things a bit with my Fidelity rep - he has also been trading a small bit over the years, but mostly invested in mutual funds. BTW, I am a self-guided investor with Fidelity.

Given that, he's not a noob, I think he'd be better served if you stepped back a bit and asked him what his thoughts were first. Ask him to sketch out his plan, what he wants his money to achieve, and what he likes in terms in investment ideas, and then work with him from there.

 

[savory]

At about their age, I was given an opportunity by my company to work with a financial adviser. I knew they existed but not much more. They were only assigned to work with me on a general outline. The question that I did not consider was “when do you want to chose your lifestyle?”

That could be working or …. So, I provided an age and guessed at an income to be FI. He help develop a plan not much different than Firecalc. That became my target.

If it were my kids, which I have not been successful in having the conversation you have started, I would follow the FI conversation. I expect with your help and all the tools that exist today, they can develop the investment plan.

 

[Al18]

Most of these questions can bettered be answered by a financial advisor who is a fiduciary. I would search for a fee only advisor and treat him to a session. Make it clear to both you are only interested in advice and a plan.

 

[ut2sua]

So, his questions will include:
1. What should I do with the new taxable assets?
2. What should I do with the new non-taxable (IRA and Roth IRA)
3. What asset allocation is appropriate for me?
4. Should I used mutual funds or ETFs?
5. What other things should I be doing?

The first 3 questions will/may depend on:
a- His tolerance for risk
b- What/When the invested $ will be used for (early or late retirement, leaving $ to others, or not).
For #4, there are a very minor differences between ETFs and similar MFs. It is more important to pick a low cost diversified ETF/MF than comparing between the two.
I will leave #5 to others in the forum.
Cheers

 

[SevenUp]

1. What should I do with the new taxable assets?
2. What should I do with the new non-taxable (IRA and Roth IRA)
3. What asset allocation is appropriate for me?
4. Should I used mutual funds or ETFs?
5. What other things should I be doing?

Getting started - Bogleheads is a good jumping-off point for many topics.

For his questions, some specific links:
1&2. Tax-efficient fund placement
3. Asset allocation
4. ETFs vs mutual funds
5. Prioritizing investments

Good luck to him!

 

[SnowballCamper]

Given that, he's not a noob, I think he'd be better served if you stepped back a bit and asked him what his thoughts were first. Ask him to sketch out his plan, what he wants his money to achieve, and what he likes in terms in investment ideas, and then work with him from there.

After that conversation, he'll need to decide on DIY (with boogleheads as a great starting point) or set him up with a fee only fiduciary advisor.

Or do it the hard way and read the academic literature such as at https://www.altruistfa.com/readingroom.htm

 

[Route246]

People have asked me but rarely follow my advice with one exception, my oldest nephew. I follow Bob Brinker's philosophy.

Assess risk tolerance
Choose model portfolio that matches
Move assets into a trusted brokerage (Vanguard, Fidelity, Schwab, in that order of preference)
DCA and build the portfolio
Rules: Diversify, low expense ratios, DCA

I have never read Bogle's book but I assume it gives similar guidance.

The most important advice I give is to pay attention to expense ratios. You're in these funds or ETFs and those savings from low expense ratios compound monsterously over decades. You don't need to give 1% to a sales rep, you really can self-manage with some very basic guidelines.

 

[Texas Proud]

Some good answers, but as for the IRAs it is the law that matters...


IIRC (and I could be very wrong) you have to take all the money out within 10 years now.. I would have him contact whoever is holding them as they would know exactly what needs to be done...


If it is an investment question on those... I would just leave them as is and concentrate on the other questions...

 

[DrRoy]

My favorite book is "Your Money and Your Brain" by Jason Zwieg. It covers a unique angle of the investment arena.

 

[Midpack]

Getting started - Bogleheads is a good jumping-off point for many topics.

For his questions, some specific links:
1&2. Tax-efficient fund placement
3. Asset allocation
4. ETFs vs mutual funds
5. Prioritizing investments

Good luck to him!

+1. I think asking him to first review topics on the bogleheads wiki would be a good idea - ’Give a Man a Fish, and You Feed Him for a Day. Teach a Man To Fish, and You Feed Him for a Lifetime.’

Then field his questions or review his conclusions after he’s learned a little on his but…

…the mechanics of investing is the easy part. Even if you gave him perfect answers to the 5 questions in the OP, it’s all for naught if he panics…and he’ll face those challenges sooner or later. Having the temperament to stay the course when the inevitable downturns occur is where most people go wrong.

If he wants to know more, I’d highly recommend The Four Pillars of Investing Second Edition by William Bernstein. That would be a thorough education!

 

[mrfeh]

Another BTW - I gave he and his brother a copy of Bogle's book when they graduated from college.

Far ranging or focused comments and recommendations - all appreciated!

I think you're on the right track, and there really isn't much to do.

Just point him at the Boglehad wiki.

 

[Exchme]

IIRC (and I could be very wrong) you have to take all the money out within 10 years now..


.

Newly inherited IRAs have to be withdrawn in 10 years, but I think these are IRAs that OP's son has started himself.

 

[target2019]

Hi All!

Well, today my 40 year old son asked for advice! Yeah, some of you get it

You have seen my recent posts re my sister's passing - both sons were beneficiaries of her TSP account and her smaller Roth IRA. I also disclaimed about $125K in taxable assets (bond and equity funds) to each of them. The transfer are all complete and beat the timelines for transfer.

This son is well educated (VT CivE and W&M MBA), works for a technology company in their real estate department, remains unmarried and is so focused on work he doesn't always think about the future, he bought his first house about a year ago. He has his own taxable and 401K investments, and has discussed things a bit with my Fidelity rep - he has also been trading a small bit over the years, but mostly invested in mutual funds. BTW, I am a self-guided investor with Fidelity.

So, his questions will include:
1. What should I do with the new taxable assets?
2. What should I do with the new non-taxable (IRA and Roth IRA)
3. What asset allocation is appropriate for me?
4. Should I used mutual funds or ETFs?
5. What other things should I be doing?

We have discussed a lot of financial topics over the years, but he has never actually asked for advice ... he watched me go through the financial aspects of my sister's passing and perhaps has decided he needs to know more.

Another BTW - I gave he and his brother a copy of Bogle's book when they graduated from college.

Far ranging or focused comments and recommendations - all appreciated!

My son is 38 and daughter is 33. They are both more successful than I was at their age.

When they asked me an investing or financial question, I noticed that my answers are long-winded and rambling. So, about 10 years ago I began crafting my answers as short articles, much like a post here. These answers are all stored in a Google doc for them. It's ordered by date, so like a journal between myself and them. I try to allways refer back to a guiding principle, and reinforce that in my answer.

I am quite good at staying away from negativity, even if they're interested in an investment I don't agree with. My response is now like, "Well, let's see where that goes for the next year."

I've also introduced the concept of growth vs. value to them both. That helps take conversation into why different investors have different approaches. They have different goals! So when they see the parents portfolio, it has a different goal than there portfolio.

Adults that age are subjected to the same targeted advertising that you see, But there are differences, based on their age. Also remember that your advice is out of step from what they hear from their peers. So, let's say the adult child mentions that their best friend's parent invests in dividend stocks. Ok, I ask them to invest a bit in a dividend ETF or stock, but also buy a total stock market ETF in their taxable account.

I actually have that "wager" going on in one child's new Simple IRA. She put half into VTI (my recommendation, it is up 14% YTD). The other half went into an individual stock recommended to her, and it is down 28%. Now she knows. I don't gloat, just show her https://finviz.com/map.ashx?t=sec&st=ytd and ask her to find the next winners. She's very smart and understands how difficult that is to do.

I'm giving each the new edition of Four Pillars of Investing. I'll add a note which tells them everything is in that book, and don't be persuaded by other messages that proliferate in their lives. Stick with the simple principles.

 

[Exchme]

My son is 38 and daughter is 33. They are both more successful than I was at their age.

When they asked me an investing or financial question, I noticed that my answers are long-winded and rambling. So, about 10 years ago I began crafting my answers as short articles, much like a post here. These answers are all stored in a Google doc for them. It's ordered by date, so like a journal between myself and them. I try to allways refer back to a guiding principle, and reinforce that in my answer.

I am quite good at staying away from negativity, even if they're interested in an investment I don't agree with. My response is now like, "Well, let's see where that goes for the next year."

I've also introduced the concept of growth vs. value to them both. That helps take conversation into why different investors have different approaches. They have different goals! So when they see the parents portfolio, it has a different goal than there portfolio.

Adults that age are subjected to the same targeted advertising that you see, But there are differences, based on their age. Also remember that your advice is out of step from what they hear from their peers. So, let's say the adult child mentions that their best friend's parent invests in dividend stocks. Ok, I ask them to invest a bit in a dividend ETF or stock, but also buy a total stock market ETF in their taxable account.

I actually have that "wager" going on in one child's new Simple IRA. She put half into VTI (my recommendation, it is up 14% YTD). The other half went into an individual stock recommended to her, and it is down 28%. Now she knows. I don't gloat, just show her https://finviz.com/map.ashx?t=sec&st=ytd and ask her to find the next winners. She's very smart and understands how difficult that is to do.

I'm giving each the new edition of Four Pillars of Investing. I'll add a note which tells them everything is in that book, and don't be persuaded by other messages that proliferate in their lives. Stick with the simple principles.

Like you, I wrote something, just a few sentences on each of lots of topics, from insurance, stocks, bonds, annuities, real estate, asset allocation, indexing, fees, advisors, staying the course, IRAs, etc. The idea was that it was more important for them to be aware of a topic and have one or two key nuggets than to put them to sleep trying by trying too hard to teach everything. We gave each a check as a gift and went through the document. The check kept their interest!

 

[pacergal]

Very nice that he has come to you for advice!

I would start off with asking him what his questions are to get an understanding of his knowledge base.

Have him read William Bernstein's "If You Can: How Millennials Can Get Rich Slowly"--a free downloadable pdf.

Offer a one time fee only advisor if you wish.

Keep the conversations open and ongoing if he wants, but know that his decisions are his to make, possible mistakes and all.
It sounds like you have given your kids a good financial base to start with. Good job, Dad!

 

[Texas Proud]

Newly inherited IRAs have to be withdrawn in 10 years, but I think these are IRAs that OP's son has started himself.

My bad... I was up late...

 

[stephenson]

Hi All,

So, we made a bit of progress - reviewed where his assets are and what kind - I knew a bit since we had previously discussed and I had assisted by late sister in setting my two sons (reminder - she is my only sibling and she had no children) as beneficiaries of her TSP, Roth and IRA accounts. I also disclaimed some taxable assets to them as I worked my way through the process.

His own IRAs and Roths are from employment with three companies - and, these are all in 2045-2050 target date funds, so we put off further discussion on them until I had better idea of what the allocation inside each is. Long horizon. Lowest priority for review.

He had a few thousand sitting in cash in a old Roth he had set up - so I recommended this be reallocated immediately to ITOT (lots of other broad market options). Easy to do this and forget about it. Long time horizon.

The inherited Roth was all in Fidelity Puritan - an OK place to start, but may be a bit conservative. Will discuss options. No immediate need to act. Don't like the 0.5% ER, though. 10 year window.

It hurts me to note my late sister had saved via TSP for about thirty years, but mostly in the cash account - I know, I know. I've back-of-envelope computed she gave up the opportunity to have made about a million dollars. Painful recognition. I assisted her in making them beneficiaries - she had TSP transferring to trust. Sigh. This is in SPAXX. This is where the work of aligning and balancing across the other bits needs to be done - especially given the 10 year window.

 

[pb4uski]

It sounds like some of his money is with former employers. I would have that either rolledover into is current employer's 401k or Roth or a personal tIRA if he has one... strike while the iron is hot.

What is ITOT?

IOW, consolidate and centralize as much as possible.

 

[stephenson]

Still researching, but I think all the companies used Vanguard target funds, and there was one TRP fund, as well.

 

[WhenIsItTime]

Given that, he's not a noob, I think he'd be better served if you stepped back a bit and asked him what his thoughts were first. Ask him to sketch out his plan, what he wants his money to achieve, and what he likes in terms in investment ideas, and then work with him from there.

This is a great and often forgotten approach. Sometimes we are so quick to share our wisdom, we forget to engage the target and encourage them to think for themselves. I'm involved with Boy Scouts and we as adult leaders try to use this approach all the time. Teaches problem solving and to use critical thinking vs just relying on what somebody else says.

This goes hand in hand with the great resources others posted.

 

[stephenson]

Yep - we went through the goals and planning process a bit. He has been reviewing the various threads on bogleheads.

All good stuff - thanks!