No Diversification = Deep Trouble?! | AMA #3 with Jesse - E90

Back with another AMA, Jesse tackles your questions on employee stock incentives, diversification, how taxes affect investments, and more!

Our first question comes from Lynn, who asks about when to take Social Security, which opens up a broader discussion on optimal timing for retirement benefits. While she and her husband initially planned to wait until age 70 to maximize benefits, based on family longevity, Lynn's making some reconsiderations. Key considerations for anyone approaching Social Security include health, family history, need for benefits, ongoing work plans, spousal benefits, and how Social Security fits into their broader financial plan. 

Yogi is considering his company's Employee Stock Purchase Plan (ESPP), which offers a 5% discount but no look-back provision. While it may seem like "free money," he's concerned about missing other investment opportunities. Key factors include market risk, taxes, and the risk of holding too much company stock. 

Jacob and his wife, both 32, have diversified investments across various accounts, including sector-specific funds and broader options like S&P 500 and international funds. Jesse dives into ideas on how to diversify investments into a variety of asset classes, sectors, and geographies.

Maple Leaf is turning 65 and plans to apply for Medicare, asking whether the income lookback period for IRMAA (Income-Related Monthly Adjustment Amount) is a one-time event or reviewed annually. The lookback period is annual, with a two-year delay, meaning income from two years prior determines the surcharge.

Jimbo from Alabama asks whether the fiduciary standard is a sufficient filter when choosing financial advisors. While being a fiduciary is important, as it requires advisors to act in their clients' best interests, it's a "coarse filter," and clients should dig deeper by asking about advisors' payment structures, investment philosophies, and potential conflicts of interest. 

Our last question comes from Eric. Eric, 38, plans to retire at 55 while his wife intends to work until 65, raising the challenge of coordinating their financial and lifestyle transitions. Jesse emphasizes the importance of clear communication about how their daily routines and relationship dynamics might change as one partner retires while the other continues working

If you'd like a question in a future AMA, send Jesse a message!

Key Takeaways:
• When you want to take out Social Security depends greatly on your health (current and anticipated), personal needs, work plans, spousal benefits, and more.
• How do ESPPs work? And how can you make the most of these employee offers?
• How to diversify your investments into a variety of asset classes, sectors, and geographies.
• What is IRMAA? And how can you make the most of it?
• Just like when you look for a doctor, a therapist, or any other professional help, you'll want to ask a series of questions to find out how they work and if it's a good fit.
• How to balance your retirement plans with your spouse's.

Key Timestamps:
(00:00) - Introduction and Featured Review
(01:47) - Family History and Social Security
(12:54) - ESPPs and Taxes
(21:21) - Investment Diversification
(29:06) - IRMAA and Lookback Periods
(37:41) - Questions to Ask Potential Advisors
(45:57) - Lifestyle Transitions to Retirement

Key Topics Discussed:

The Best Interest, Jesse Cramer, Rochester New York, financial planner, financial advisor, wealth management, retirement planning, tax planning, personal finance, IRMAA, ESPP, Income-Related Monthly Adjustment Amount, Employee Stock Purchase Plan, ask me anything, early retirement, capital gains tax

 

More of The Best Interest:

Check out the Best Interest Blog at bestinterest.blog

When Should I Take Social Security?:  https://bestinterest.blog/when-should-i-take-social-security/

Contact me at [email protected]

The Best Interest Podcast is a personal podcast meant for educational and entertainment. It should not be taken as financial advice, and is not prescriptive of your financial situation.