#547: Ask Paula: “We Have $2 Million at 40 – Now What?”

An anonymous caller and her husband have a $2 million net worth at 40, but they’re worried that the one-fund portfolio that got them there isn’t good enough anymore. Are they right?

Jared feels frustrated that so much personal finance media is centered around tech and freelance workers. Does Paula and Joe have negotiation advice for someone in the union?

Sam owns two overseas properties in a country that’s experienced runaway inflation for the past decade. He’s worried he’ll lose $500,000 worth of assets. How does he control the bleeding?

Steve is calling back with an exciting update on his house-swapping journey from Episode 487.

Former financial planner Joe Saul-Sehy and I tackle these three questions in today’s episode.

Enjoy!

P.S. Got a question? Leave it here.

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Anonymous asks (at 02:00 minutes): I’m reaching out after listening to Joe’s spirited answer to the question posed in Episode 535 about DIY investing. We’ve been on a simplified path to wealth and it’s treated us well so far, but have we turned a corner?

Just as we began discussing if we’re doing the right things to prepare us for a full retirement in 10 years, along comes this new addition to our vocabulary: the Efficient Frontier.  So on behalf of everyone in the middle years of a financial journey, please say more.

Specifically, what resources can we use to educate ourselves on an allocation perspective? What components make up a portfolio that’s set up for long-term success? How do we transition out of a simple one-fund portfolio?

We’re in this phase where accumulation is accelerating and we’re beginning to see the light at the end of the tunnel.  Though we’ve loved having ownership in the management of finances, is an advisor needed to help finish the financial independence journey for us?

My husband and I are just over 40. We have a net worth of $2 million, including our home. $800,000 is held in investments like 401ks, taxable brokerages, IRAs, etc. We max out the usual suspects and invest additional funds into our brokerage account monthly.

Everything is “VTSAX and chilling” as the cool kids say, but with our most youthful years behind us and an eagerly anticipating retirement in the coming decade, please help us navigate the waters of researching a better place for these funds to chill in the Efficient Frontier.

Jared asks (at 32:04 minutes): After listening to your recent podcast episode “How to Handle Seven Types of Hardball Negotiation Tactics”, can you provide a job negotiation scenario that would apply to a teacher in public K-12 education?

While I could connect with some examples, such as the car purchase negotiation, I found it difficult to relate with ones about job offers and potential work, given my professional experience as an educator in both the public and private sectors.

When I worked as a public K-12 school teacher, my salary schedule was governed by a union contract and not open to negotiation. There was no opportunity for vacation days, remote work agreements, equity, stock options, or anything similar.

Overwhelmingly, across all the personal finance media I consume, people regularly go to tech sector jobs and freelance jobs when discussing job offer negotiations. I struggle with the embedded assumptions in these discussions about what’s on the table for negotiation.

I’d love some examples that I could map to my work experience. There are an estimated 3.2 million full-time education teachers in public elementary and secondary schools in the US, almost twice the estimated number of software developers at 1.7 million.

To zoom out further, an estimated 16.2 million workers in the US are represented by a union or under a union contract. I don’t want to set you up with an impossible task, but perhaps there are negotiation examples that apply to those of us who are bound by pre-determined negotiations.

Sam asks (at 55:34 minutes): I own an overseas rental property that’s fully paid off but it’s located in a country where the economy hasn’t been stable for the last decade. What should I do with it?

I bought the condo in 2011 for $80,000 and its current market value is $45,000.  It rents below market value at $100 a month, but in return, I’m not responsible for any expenses associated with maintaining the unit.

I also own a house in the same country for personal use. I purchased it in 2022 for $589,000. It’s now worth $433,000 with $74,000 remaining on the mortgage.

Over the last five years, the local currency has been devalued several times. Local banks offer three-year term Certificate of Deposits (CDs) with a 21.5 percent annual return. However, CD values will still be worth less than their original value at the end of its term.

With the primary goal of asset preservation, I‘m considering one of several options:
1) Keep the rental property and pay off the house from my income.
2) Sell the rental property and use the cash to pay off the house.
3) Sell the rental property, use its value to buy a CD, and pay off the house from my income.
4) Sell both properties and invest in the US real estate market.

I’m a dual citizen, living and working in the US. I don’t plan to return to my country except possibly for retirement.  I have no retirement accounts, but my house in the US is paid off.  I also have a business loan and an equivalent amount of emergency cash saved to pay off the loan.

Using my income to pay off the overseas house won’t strain my budget.  I’m mainly worried about losing the monetary value of these properties.

Would your decision be different if the income from the rent or CD was used for monthly expenses? Should I consider the rental property as a stock which fluctuates in value?

Resources Mentioned:

• #535: Ask Paula: Is Your DIY Investing Strategy Holding You Back? – Afford Anything | Podcast
• #487: Ask Paula: “Should I Put My Dreams on Hold … and Buy a House Instead?” – Afford Anything | Podcast
• Portfolio Visualizer | Tool

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Source: Afford Anything