Reader Mailbag 5: Life insurance, 9-5 lifegoals, and why The Money Wizard sucks.

*Disclaimer #2: I am not a professional, and MyMoneyWizard.com is an opinion-based blog. Nothing on this website should be considered financial advice.

Another reader mailbag, coming in hot!

With a delivery that urgent, there’s clearly no time to waste. So let’s get right to the questions:

1. Advice for a 20-something with a 9-5 job

Hi there,

Just your average 23-year-old working a 9-5 job, looking to advance my way towards a couple goals:

1. Financial Independence
2. Life independence

At my current job for almost a year, and realizing very quickly that sitting in an office isn’t something I will want to do for the rest of my life. I work for/with people who live to work instead of working to live, and my biggest fear is to turn into one of those people.

My questions for you are:

1. Incredible to see how much you’ve saved, but is your job 9-5?
2. If so (I’m assuming yes), did you have any desire to get out of that lifestyle? Or is that something you plan on getting out of when you retire early?
3. Most people who live/save that much don’t really enjoy their lives, and I also do not want to enjoy my 20’s. How can I do that?

Hey there!

Keeping this response short is gonna be tough since pretty much everything in your email is exactly why I started this blog. But I’ll do my best. 

Yep, I’m textbook 9-5. And I’m definitely saving to get out of it. At my current pace, I should make it by 35.

Biggest advice to enjoying your 20s? Find an affordable place to live and don’t buy a fancy car. Saving a couple hundred a month on your rent and car payment alone is money that you can instead use to travel and live it up at concerts, bars, etc.

Be smart about it and you’ll have a huge difference left over to invest heavily each month.

Here’s two articles you’ll probably find helpful: 

• The Only 3 Expenses that Matter for Saving Serious Cash
• How to Adult: 10 Money Lessons New Grads Need to Know

Also keep in mind that your 30s and 40s can be even better than your 20s, as long as you make it there wealthy and with options.

Hope this helps!

2. Stocks and Taxes: If I sell, what will I owe?

Hey!

I’m a big fan and have been following your blog for quite a while. I share a lot of the same thoughts on investing and it’s great to read your interesting take on how to approach early retirement.

I have a taxable brokerage account (~$70k) that is solely invested in VTSAX. I’m not a fan of timing the market, but all the shutdowns and COVID spikes have me a little concerned and I wanted to move the money into a money market account for a few months until I’m more convinced we are aren’t heading for a full economic meltdown ha.

Do you know how the tax works on this exchange?

I think that since it’s not a 401k or tax incentive IRA that it would be considered a withdrawal and I would be taxed on the gains, right? Do you know how they determine the short/long term tax due if I’ve been routinely adding to the account monthly for years?”

You’re 100% right. Whenever you sell stock that’s not held in a retirement account, you have to pay taxes on the gains of your investments.

This is called “capital gains tax” and different rates apply depending on whether you’re paying “short term capital gains” or “long term capital gains.”

• Short term = anything you’ve held for under 12 months. Short term capital gains are taxed as ordinary income, so up to 38%, depending on how much you make.
• Long term = anything longer than 12 months. The tax rate on long term capital gains is 15% for most people. 

Here’s more info about capital gains taxes than you probably ever cared on know:

Capital Gains Tax 101 – Investopedia.com

As far as short vs. long…

When you sell you usually have the option to choose which shares you’re selling. This is called your “cost basis.” Since you mentioned being invested in VTSAX, Vanguard has some helpful info about this on their website.

PS – your strategy is 100% market timing. 🙂

3. You suck.

Dude you suck and I mean that in the most respectful way. You are a rockstar in the making. Good job dude.

Haha, thanks! I think?

4. I REALLY need to write an article about life insurance…

Hey MMW,

I’ve been reading you blog for a few years now and have liked what I see.

We’re about the same age, I think I’m 2-3 years (32 now) older and have roughly the same goals, although I’m a little farther behind, getting a later start.

I was wondering your thoughts on Life Insurance, if you’ve ever looked into it, or have written about it. Hope all is well.

Writing a guide to life insurance for millennials is one of those things that’s perpetually on this blog’s to do list. I’m about 50% done with it so far; hopefully I can knock out that last half soon.

In the meantime, I’ll just say that if you’re single, I think life insurance is mostly pointless.

If you’re a big saver, hopefully by the time you’ve got dependents, you’ve saved up enough money that your own net worth can act as a mini policy for yourself.

For example, I’ve never had a life insurance policy, and this has saved me about $20 a month for the past 10 years. Instead, I’ve used some of those savings to build up over 400K in savings, most of which is liquid. If I have kids in a few years, those savings are basically a half-million dollar life insurance policy for them.

If you’re worried about not having this saved up, then term life insurance (life insurance that only lasts 10-30 years) is okay for the very narrow window in your life when you don’t have enough saved. After that time, you’ll probably be rich enough or have kids old enough that continuing a life insurance policy becomes pointless.

5. Multiple account craziness – how do you track it?

You mentioned on your about page that you max out your employer’s 401k, your Roth IRA and lastly you invest what is leftover into Vanguard stock market.

How are you able to record your net worth if your have all these accounts?”

Thanks for the segue into a plug for one of this blog’s sponsors!

I use Personal Capital, which was created specifically to deal with the annoyance of trying to add up your net worth when you’ve got a ton of accounts in different places.

It lets me see everything and automatically tallies up the total. Here’s an affiliate link which means if you sign up through it, the site gets some $.

6. Retiring at 37 in Canada

My 37th bday is two weeks away. I have $325k CAD in cash and equities and two indexed annuities for life at a combined $3+k/mo net. No dependents (divorced). Retired this summer.

I came from NOTHING. Anyone can do it.

Stay frugal.

These sorts of stories are super inspiring! Can’t wait to share this!

I’m not the biggest fan of annuities, but awesome to hear that they’ve worked out for you!

Got a question?

Send me an email through the contact page and you might get featured in the next reader mailbag!

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Related Articles:

• Liquid Net Worth: How to Calculate Your Runway to Financial Freedom
• The Only 3 Expenses that Matter for Saving Serious Cash
• How to Adult: 10 Money Lessons New Grads Need to Know