Episode 420: Wrestling With Roths And 401ks, Assorted Shenanigans, And Portfolio Reviews As Of May 2, 2025
May 4, 2025
Explore the ins and outs of Roth conversions, especially for those in low tax brackets. Discover the quirks of a pricey 401k with limited options, all while the hosts reassure listeners they're working on site improvements with 'top men.' Dive into lively portfolio performance discussions, examining investment strategies amid shifting market conditions. The atmosphere is light-hearted, filled with humor and practical advice, making personal finance feel approachable and engaging. Tune in for insights and a few laughs!
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volunteer_activism ADVICE
Roth Conversion in Low Tax Bracket
Convert to Roth while in the 12% tax bracket for long-term tax-free growth.
Don't fear future taxes excessively; most see lower effective tax rates in retirement.
insights INSIGHT
Taxes Often Decline in Retirement
Fear of future tax increases is often overblown and used as a marketing tactic.
Most retirees pay lower taxes since retirement income is taxed differently than earned income.
volunteer_activism ADVICE
Optimize 401(k) and Asset Allocation
Avoid expensive 401(k) plans and target date funds; seek better sponsors or alternatives.
Treat all invested assets as one portfolio, focusing on overall stock allocation rather than account-level diversification.
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In this episode we answer emails from Anderson, Ian, FFS, and Michael. We discuss using Roths earlier in accumulation and tax considerations, wrestling with an expensive 401k plan with limited options, and the various and sundry deficiencies of this program and its website. Rest assured, we have "top men" working on it. Top. Men.
And THEN we our go through our weekly and monthly portfolio reviews of the eight sample portfolios you can find at Portfolios | Risk Parity Radio.
Breathless Unedited AI-Bot Summary:
Welcome to the dive bar of personal finance, where frank conversations about investing happen without sponsors, guests, or corporate jargon. In episode 420, Frank Vasquez serves up practical wisdom alongside his signature blend of humor and no-nonsense advice.
The heart of this episode centers around listener questions that reveal common investing dilemmas. When a father of six asks about Roth conversions while in a low tax bracket, Frank not only endorses the strategy but takes the opportunity to debunk widespread myths about future taxation. "The fear of future taxes is often overblown," Frank explains, noting how this anxiety is frequently exploited by financial professionals selling expensive products. He articulates why most people actually face lower tax rates in retirement—a perspective that runs counter to conventional financial advice but makes perfect mathematical sense when examining income sources and tax treatment.
Another listener struggling with limited 401(k) options receives thoughtful guidance on transitioning from 100% equities to a more balanced risk parity approach. Frank's explanation of the "macro allocation principle" illuminates why focusing on the percentage of stocks across all accounts matters more than perfect diversification within any single account. His pointed criticism of target date funds—describing them as "easy but not simple"—offers a refreshing counterpoint to the retirement industry's oversimplified solutions.
The episode culminates with Frank's detailed review of eight sample portfolios, revealing how diversification strategies are performing in today's volatile markets. While the S&P 500 struggles with a 3.02% year-to-date decline and small cap value plummets 13.16%, gold shines with a remarkable 23.2% gain. More importantly, the risk parity portfolios demonstrate remarkable stability compared to single-asset approaches.
Whether you're considering tax strategies, rebalancing your portfolio, or simply looking for straight talk about investing, this episode delivers valuable insights without the financial industry's typical marketing hype. Subscribe, leave a review, and visit riskparityradio.com for more resources to help guide your investment journey.
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