NerdWallet's Smart Money Podcast - Smart Planning Sessions: Investing Through Uncertainty and Planning for Early Retirement Abroad

Episode Date: May 19, 2025

In this month’s Smart Planning segment, a financial advisor discusses when it might make sense to scale back your 401(k) contributions. Is it safe to invest right now? Should you keep contributing to your retirement account when the economy feels uncertain? Hosts Sean Pyles and Elizabeth Ayoola discuss how to navigate turbulent financial times by focusing on long-term investing strategies and what you can control. They break down what’s going on with recent stock market activity, why the dollar is weakening, and how investors can stay the course by understanding their risk tolerance and using tools like dollar-cost averaging. They also touch on emotional investing and offer practical ways to handle market anxiety without pulling back on your financial goals. Then, Elizabeth welcomes Ross Anderson, founder of Craftwork Capital and co-host of the Check Your Balances podcast, to answer a listener’s question about whether to reduce 401(k) contributions due to fears about job security. They discuss how to evaluate whether you’re holding too much cash, the trade-offs between contributing to retirement versus living for today, and how the FIRE (Financial Independence, Retire Early) movement can work even if you start later in life. They also cover the impact of retiring abroad, how international taxes can complicate your strategy, and why certain insurance products might not match your goals. Inspired to navigate your finances with an advisor? Use NerdWallet Advisors Match to find vetted professionals today at https://www.nerdwalletadvisors.com/match  Learn about dollar-cost averaging as a strategy to reduce the impact of volatility by spreading out your stock or fund purchases over time so you're not buying shares at a high point for prices: https://www.nerdwallet.com/article/investing/dollar-cost-averaging-2  In their conversation, the Nerds discuss: investing during market volatility, dollar cost averaging, stock market downturn 2025, how to manage risk tolerance, emotional investing, investment risk capacity, long-term investing strategy, FIRE movement explained, barista FIRE, how to retire abroad, retiring in Portugal, retiring in Italy, buying a home in Europe, saving for early retirement, high-yield savings account vs investing, when to reduce retirement contributions, investing vs lifestyle spending, how to handle market swings, tax rules for expats, international index funds, when to use a brokerage account, what to do in a market downturn, life insurance for retirement planning, long-term capital gains tax, when to sell stocks for retirement, CDs vs savings account, risk tolerance vs risk capacity, and when to rebalance investments. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend. Disclaimer: This podcast is for informational and educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks or securities. Any comments posted under NerdWallet's official account videos are not reviewed or endorsed by NerdWallet or representatives of financial institutions affiliated with the reviewed products unless explicitly stated otherwise. Avoid disclosing personal or sensitive information such as bank accounts or phone numbers. NerdWallet employees do not offer personalized financial advice and will not respond to posts here.

Elizabeth, have you been getting 2020 vibes recently? Like the whole world feels a little off? I think off is a gentle way of putting it, Sean. Chaotic feels a little more befitting. 2020 felt chaotic, and so does 2025. Yeah, I'm with you there. Well, if anyone listening is worried about what the recent economic shakiness means for their investment plans, this episode, we've got some answers for you. Welcome to NerdWallet's Smart Money Podcast,

where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles. And I'm Elizabeth Ayola. This episode, we have the next installment in our smart planning series. And we're going to be joined by a listener and a guest financial expert to discuss whether

to pull back on 401k contributions due to the current economic uncertainty. But first, we're going to talk about whether it's safe to invest right now and if you should trust the market at all, given the way it's behaved over the last several weeks. So Sean, since you're Mr. Certified Financial Planner, what's your take on that?

Well, I'll remind you, Elizabeth, and everyone listening that while I am a financial planner, I'm not your financial planner. So don't take this as personalized advice and don't get litigious if your investments don't perform like you want them to. But here is what I'm thinking. Investing remains most folks' best bet

for staying ahead of inflation, as in the return you get on your investments is greater than the rate of inflation typically. And because of that, I can't afford not to invest, regardless of what sort of wackiness is going on with the stock market or tariffs or the news of the day. Listen, I can't afford not to invest either. But a lot of people out there are seeing the swings in the stock market and even changes in the bond market, which are supposed to be safer investments. And the value of the dollar is dropping and they might be wondering if investing will continue

to be a reliable way to grow your money. Yeah, I feel that. And one thing to keep in mind is that there is never a guarantee that the money you put into an investment will grow, that's just the risk of investing. But over the long run, investing has been a reliable way to build wealth. The average return over the past 100 years has been 10%, back to inflation and is closer to 7% or 8%. And last year, the S&P 500 was up over 20% and the Nasdaq was up almost 30%. Because of the banner year that we had in 2024,

some analysts were saying that some stocks were overvalued and were due for a correction. It looks like that's part of what's happening right now. And I'm also seeing a lot of chatter about how, quote, this time feels different. Maybe this is the period of market volatility that sends the whole system crashing down. And the folks saying that are right in a way, this time does feel different.

We haven't seen this specific convergence of circumstances before. But here's the thing, every time is different. No two market crashes or economic calamities are the same. And that can be really hard to reckon with, because as humans, we like predictable patterns. When we see something unfamiliar or scary, it can lead us to act irrationally or make decisions from an emotionally heightened state. SHONDAHERN Absolutely. But is it weird, Sean,

that I get some peace even in the middle of the chaos in terms of knowing that at some point, the market's gonna correct itself and everything's gonna be fine? SHONDAHERN That's why the long view is important. Exactly. Okay. But let's get back to the point. So I agree and I get that every time is different. And I also think it's helpful to have that context

around market performance. But is there anything about the recent turbulence in the stock market and bond market that makes you personally think that investors might want to consider shifting how they're investing? Back in early April, we saw an interesting convergence of events. There was one week where the stock market was dropping while bond yields were going up and the dollar was going down.

To avoid making a confusing situation even more difficult to follow, I'm going to spare everyone an in-depth recap of what all of that means. But here's the gist. It's common for investors to flee to bonds when stocks aren't doing so hot. That generally results in treasury bond yields going down in part because they're more in demand. The more folks want bonds,

the less treasury has to pay out in interest, which is essentially what the yield is. But if the yields are going up, that can indicate that people are moving away from treasury bonds, which is kind of unusual given what I described before. OK, I think I'm following you. And what about the dollar, Sean? You said it was going down, right?

Yes. Over the course of April, we saw the dollar weaken relative to other currencies, something I am not too thrilled about as I prepare for a vacation in England in a couple of weeks. And Elizabeth, by the way, I still need your London recommendations. Fun fact for listeners, Elizabeth lived in London for many years. I did. I was born and partly raised in Southeast London. Shout out to my friends over there.

Also, I did my higher education there. Shout out to King's College London. And finally, you should know that I've been craving fish chips and pie, real bad. But what about mushy peas? Do you like those, Elizabeth? No, now you're taking it too far. Taking it too far, Sean.

I'm a fan of the baby food that is mushy peas. So I will get that on my own terms. Well, anyway, back to money things. As of this recording, the dollar is down nearly 10% for the year. And that's roughly a three year low. As with many things when it comes to macro financial movements,

there are a lot of factors at play, but some investors may be looking at the volatility in the United States right now and thinking that they can just get better returns elsewhere for less risk. But at the end of the day, the dollar remains what's called the world's reserve currency. All sorts of transactions around the world rely on a stable dollar, so even if investors are moving away from the dollar as it appears, they won't fully extricate themselves from it overnight. Okay, that makes sense. Maybe the global financial system isn't going to come crashing down tomorrow,

and investing is still a smart way to grow your money. But I'm still feeling this uneasiness. You said earlier that people like predictability and patterns. How can we find any predictability right now and how can people navigate this stressful time? I'm going to go back to some advice that we talk about regularly on Smart Money. Focus on what you can control. You can find and build predictability through how you manage your money and your investments. So I'll just give you an example from my own life. I'm going to continue to make investments

on a regular basis. This is sometimes called dollar cost averaging. We have an article about this that I'll link to in the episode description, but basically you make steady contributions to an investment account so that the cost of your investments averages out over time. In periods where stocks are going down, you can think of them as being on sale compared to what they cost when their prices were higher. But by making regular contributions to my brokerage account, I'm continuing to make steady progress on my long-term investing goals.

And that to me feels safe and predictable. Same here, Sean. I haven't switched up my investing strategy and I continue contributing to my accounts as well. And let me tell you, I love a good sale and retirement isn't on my horizon yet. So it's investing, business, as usual over here. And times like this can also be a good opportunity to reevaluate your investing strategy. If you feel really rattled by the recent economic news, this might be a sign that you have a lower risk tolerance than you thought. Risk tolerance is essentially how much

risk you can handle from an emotional standpoint. There are a bunch of risk tolerance questionnaires online, so I recommend taking one and seeing where you land. But also keep in mind something called risk capacity, which can be thought of as a quantifiable counterpart to risk tolerance. Risk capacity is how much risk you can take on while still being financially solvent or able to meet your financial goals. So if there is a mismatch between your risk tolerance and your risk capacity, like if you are emotionally risk-averse but need to take on more risk to meet your financial goals, consider either adjusting your goals or finding ways to make dealing with the swings of the market

a little bit easier to handle. Yeah, and I get that investing can be an emotional affair, but there's usually something deeper going on when fear is driving our investment decisions. Now, beyond having a lower risk tolerance, if you're constantly freaked out during market swings, you may be more prone to emotional investing, which is when your emotions impact your investment decisions.

So understanding what's driving these emotions by exploring your money values and fears through things like journaling, I love a good journaling session, or even talking to a therapist can be helpful. And also looking at the facts versus your emotions can help shift your perspective. So Sean, in terms of specific investments, are there any areas people might want to turn to for a little more stability? Well, I'm generally of the belief that most people are probably fine with a strategy of dollar cost averaging and putting their money into an exchange-rated fund or an index fund

which tracks the market or an industry. Trying to beat the market is often a fool's errand, but if people are really wary of investing in the US right now, they might wanna look at international funds, which primarily invest in companies outside the US. For example, in late April, FSPSX, an international fund from Fidelity,

was up over 11% for the year. That's compared with the S&P 500, which was down more than 6% as of this recording. I love a good index fund. So it can be helpful too for people to take the long view of their investments, something that I personally always like to emphasize. We've been seeing these big market swings over the past several weeks, but how long do you really have until you need this money? Unless you're retiring in the next few years or you need to pull money from your brokerage account

to let's say put a down payment on a house in the next year or two, you can find that nerdy balance of staying informed about what's happening but not letting yourself get caught up in the day-to-day anxiety of it all. I also remind myself that life ebbs and flows and no bad situation lasts forever. That applies to the market too. And some people like to ignore their 401ks and times like this. Maybe I'm a little masochistic,

but I can find it actually really helpful to check my retirement account balances when the market is going wild. After I have that brief pang of anxiety upon seeing my balance, which is not as high as I wish it was, I go and I look at how it's grown over time. Then I think about how much more time I have that brief pang of anxiety upon seeing my balance, which is not as high as I wish it was, I go and I look at how it's grown over time. Then I think about how much more time I have until my retirement.

So I take the balance for what it is, a snapshot in time. Doing this helps build my financial and emotional resilience, which helps with my risk tolerance. Because I'm trying to have a very cushy retirement, and that means that my risk capacity is pretty high. I've personally been ignoring my 401k to be honest with you. That's fair. Yeah, but I will say that I had to sell

some restricted stock units to pay for expenses last month while the market was down, and that was not fun because I was at a loss. But thankfully, I do not need to pull funds from my retirement account, and hopefully when I do in the next few decades, my account will be in the green territory. And hey, we can also talk about tax loss harvesting later on. So don't worry about selling for a loss, Elizabeth.

You sound like my financial advisor. We talked about that last week. Uh-huh. But hey, I'm not your advisor. Just getting that out there. Okay. Well, Elizabeth, are you feeling better about continuing to invest in the long term, even as the market and the world are acting like they have had one too many margaritas?

I love margaritas. But to answer your question, I am thankful for the stock market sale and I feel like the future of my portfolio is bright. I'm running with that blind optimism. I love it. Next up, we have our smart planning segment with a listener who has questions about adjusting their investment strategy in times of economic uncertainty. But before we get into that, we are at one of my favorite parts of the show, the part

where we ask you to take a second and think about where you need some guidance with your money. Maybe you're feeling a little lost, like you don't even know what your financial goals should be, or you're trying to break yourself out of a bad financial habit, but just can't seem to do it. Whatever your money question, we nerds are here to help you. Leave us a voicemail or text us on the nerd hotline

at 901-730-6373. That's 901-730-NERD. Or email us at podcast at nerdwallet.com. And a reminder that one of our goals on Smart Money this year is to talk with more of you live on the podcast to help you with your money questions. So if you want to hang with Elizabeth and me for a bit and get some nerdy wisdom, let us know.

One more time, leave us a voicemail or text us on the Nerd Hotline at 901-730-6373. That's 901-730-NERD, or email us at podcast atnerdwallet.com. All right. Let's get to this episode's smart planning segment. That's up next. Stay with us.

Many of our listeners are looking for professional advice on elevating their wealth. So we invited another financial expert onto the show to take a deeper dive into listeners' financial questions and also to provide smart strategies for building and leveraging their money. Welcome to Smart Planning. Let's begin. This episode, we're joined by one of our listeners, Elena, who had some questions about

whether they should reduce their 401k monthly contributions. Welcome to Smart Money, Elena. Hello. Thank you. It's nice to be here. Now, to help us answer your questions, we have Ross Anderson, the founder and principal at Craftwork Capital and the co-host of the Check Your Balances podcast. Welcome to Smart Money. Thank you so much for having me. Happy to be here.

Let's dive into the conversation for today. Elena, you wrote us about whether you should reduce your pension slash 401k monthly contribution, considering everything that's happening in the economy right now. So can you talk to us a little bit about why you sent us this question and what your thoughts and feelings are around this? I work for it's a public benefit corporation I guess to make it not a very complicated explanation because I have I'm sometimes trouble understanding it myself

But I work for the New York City Housing Authority, so we get federal funding through HUD yet We're also sort of operated at the local and state level. Being sort of under HUD in terms of funding, I was, you know, I grew a little concerned with all the cuts that are being made at the federal level with DOGE. I thought maybe I should be hitting pause on some of the contributions I'm making. Maybe I should be putting my money somewhere else in case I need it. Should I lose my job in the next few months? So that's why I reached out.

Thanks for a little bit of the context that you're sharing some concerns about whether or not the federal cuts might impact your employment. My first question would really be, what does your emergency fund look like? And we don't necessarily need the numbers here, but I would think about it in terms of how long could

you go, whether that's weeks or months, if you didn't have paychecks coming in. That's really how I think about evaluating emergency funds. So could you share a little bit about where you are in that respect? I have at least a couple of years. A couple of years. okay. So very strong. I guess so, yeah. That's awesome. Typically what you'll hear advisors say

is kind of three to six months as a good, healthy emergency fund. Now, the more sensitive your income is to the environment, I actually think notching that up can be prudent. So people that work in commission jobs, for example, or real estate where they may not have, you know, commissions for a long period of time or they may have a slow season and things like that. So being a little above that is really healthy. But in theory, if you could go multiple years, first of all

congratulations, that's fantastic. That also may be an indication that you're a little too heavy in cash, so we can talk about that as well today. But that's a really, really impressive place to be. So you should be proud of that, that you were able to save that much and put yourself in a really strong position. Thank you. It's good to hear. That kind of then leads me back to your original question, which is, does it make sense to reduce your retirement contributions if that's the case?

If you're starting from a position of really strong balance sheet, meaning you have that emergency fund in place, then quite frankly, I would almost go the other direction. When we've got times of economic uncertainty, that's normally when markets are going to price down because people are scared. The stock market is the one place where everything goes on sale and nobody wants it. It's a great place to be putting money, especially when there is fear in the markets. And I don't know if we're at a bottom or if we've already seen the bottom of kind of this current unrest,

but generally I want to be a buyer when everybody else is concerned. I think of it as how can I put the most money to work possible when everybody else is a little bit nervous. Then, Ellen, I want to ask you, since you were maybe considering pulling back on your retirement savings, are there other financial goals that you maybe wanted to prioritize instead of saving for retirement? Yeah. So, I think that I'm sort of in a, I wouldn't say unique category, but it's one

that you don't hear discussed often when you hear about different sort of financial advice or podcasts that I listen to. And it's, but I'm not as, I'm not concerned with like my legacy. I'm more concerned with my lifestyle. So that's why I'm trying to find this balance between how much do I put away for when I retire, but how much can I keep for now and do some of the things that I wanna do. So I recently learned about the fire movement and something that I'm really interested in,

but I don't know what I could do. I'm in my 40s. And maybe, you know, typically people get started younger. So that's one of my goals is to be able to not work, at least in what my professional career is, until I'm 65 or whatever the retirement age is now. And I would also eventually like to leave the US and purchase a home either in Portugal or Italy. That's sort of my long-term goal. So I wanna say for listeners who may not know what the FIRE movement is, is financial independence, retire early.

And I think, Elena, that you brought up something very interesting, which is that some people don't usually focus on living for know, living for the now maybe and not leaving an inheritance. And I think it has a lot to do with what your money values are or your financial values in terms of which one you choose. And I feel like the fire movement, which I love, heavily kind of focuses on your values

and how you want to live during retirement. So Ross, can you maybe answer Eleanor's question and kind of talk through how to think through FIRE, if that's something someone is considering, and also how she could potentially achieve that? Yeah, so I'll try and keep it fairly succinct here, but when I think about wanting to retire early, what that generally means is that you're gonna need

a higher savings rate or a higher contribution rate to get to the finish line faster. And so I'm going to use some very broad generalizations here, but typically about 15% for folks, if you're saving a total of 15% towards your retirement, that's normally going to have you on track for what I'll call a traditional age retirement, which might be in that 60 to 65 range.

Depends exactly when you get started and what you spend and kind of what your spending mix is. So there is some nuance to it, but 15% is a really nice benchmark to say, okay, that's probably going to get you to a normal age retirement. If you want it to be done earlier than that, then what we probably need to do is ramp up those resources. If we can get to saving 20% or 25% of your income, and some people in the fire movement, you'll see end up saving really, really large percentages of their income. And that's because they have that goal to be done sooner.

Right, so we have to build capital sooner and we've got less time for that money to compound. And so if we're thinking that way, then how aggressive you wanna be leads down kind of two paths. Number one is we're thinking that way, then how aggressive you want to be leads down kind of two paths. Number one is we need to think about what that savings rate is, what can we really get to. And it is a balance, as you said, right? We're balancing how do we live today with how ambitious do we want to be towards that savings goal. And the second thing that I don't think it's talked about as much or enough is where are we saving.

So if you wanted to be retired at 50, for example, you don't have full access to your retirement accounts. When you're putting money into 401ks or Roth IRAs, and there's nuances and rules to all of this stuff where you may have an exception or two, but you don't have unrestricted access to that money. And if you're trying to take whatever you're saving as your nest egg, you're gonna go overseas with it, buy a house and start living on your resources.

You wanna make sure that it's accessible and that it's not causing you really big tax headaches. And so that would be the other really big focus I would have is make sure that you're still getting your match in your 401k, right? Anything that you can do to get free money, we should do that. But you may also want to prioritize saving in just a brokerage account and building wealth outside of your retirement accounts because you may need access to them way before

you traditionally would have kind of easy access to those retirement dollars. And something else I'd like to quickly touch on before I ask you a question, Elena, is that there are different types of fire, right? So you have very quickly lean fire, which is for people who want to live a maybe minimalist lifestyle during retirement. You have fat fire, which is maybe people who want to live more on the more lavish end. And then you have barista fire, which is my favorite, which is where you maybe you don't completely retire, right?

And maybe you follow passion projects or just take on work part-time instead But you saved enough whereas you can still live off a lower income So with that said have you thought about Elena what you want retirement to look like for you? Do you want to live on the more luxurious side or are you more on the lean side? I sort of like your description or the description of barista fire. I'm Pursuing my doctor. I'm pursuing my doctorate, I'm nearly done in public health. And so public health is an area that I've loved

and I've been passionate about for a very long time. So I'd like to sort of stay involved, but not necessarily through a full-time job that requires me to be based in one place. So probably barista. You're teaching me new terms today I always called that one kind of coast fire Where you're gonna get to a spot where you can coast a little bit

You're still working, but you don't have to necessarily work at the same level of intensity, but I like barista fire I'm learning today. I Love that. So Ross, what would you say? You know considering that Elena wants to do more barista style Does that change any of the information that you just provided about how maybe she can navigate fire? Well, ultimately, I think what I would do in this case is a little bit of modeling, right? We kind of have to start guessing at what some of the numbers are going to be. And, you know, we're going to say guessing, but it's hopefully an informed guess on what

will it cost you to acquire housing, right? Are you hoping to buy something overseas? Are you gonna plan to rent? That's gonna be a big difference in how much money you need to bring to the table versus how much you just need to earn over time. But that would really affect how I would kind of adjust my savings as if I need to make a down payment. And I would also explore the local market.

So for example, a resident in Portugal, and I'm not an expert on Portugal, by the way, but a resident in Portugal can typically buy a house and borrow up to 90% of the value of the house, right? So you could put 10% down and end up in a house. If you're considered a non-resident when you move there, you might only be able to borrow between 65 and 80% of the value of the home. So you might need a much bigger down payment. So really that's what I would be thinking about is, what am I gonna need to purchase,

both in terms of one-time things and then on an ongoing basis, how much cash will it take me to live comfortably in those markets? I would do a lot of a deep dive on, what does it cost an average person to get groceries or go out to a restaurant? How comparable is that if you're living in New York now, maybe you've got a really high cost of living now

and your costs will actually come down if you do that. And so what that would do is start to build a target, right? We generally think that people can live on, let's call it four to 5% of their portfolio value every year as a distribution. Again, there's a lot of science to that. I'm trying not to go too deep. But so if you were able to accumulate a million dollars

over your lifetime for retirement assets, we think you could take 40 to $50,000 out, right? So if I know that I can cover my expenses with that, now I've got really good information and you'll have other resources, hopefully like social security or things like that on top of it. But that's what's gonna help you plan for,

can I retire? Is do I know how much money I need to spend to be comfortable? And then that kind of creates the target for how much you need to get to. Elana, you also wrote to us since we're talking about living abroad, about potentially not retiring in the US.

So what questions did you have for us or questions did you have for us around potentially retiring outside of the US? A few, actually. I got started kind of late, contributing to a retirement account. Currently have a Roth IRA and a traditional IRA. I have a 401k through my job. However, there's no match, which is unfortunate. So I got started kind of late because

I just worked places where salary maybe wasn't great or they didn't offer any sort of 401k or pension plan. And now that I'm in a better place, I'd say like professionally, financially, I've started to contribute more. So I'm trying to balance that, like how much I put away for when I can retire and not get like taxed too crazily for it, and how much I need before I can retire

in order to sort of have the lifestyle that I want. Ellen, I just had a couple questions. Sounds like you are sitting on quite a bit of cash right now. Is that building up every month that you're kind of underspending what you have coming in, so your cash is just kind of sitting in banks at the moment? Yeah. The majority of my cash is in a high-yield savings account. I have some of it in stocks through my brokerage account, but I'm thinking maybe I can be more aggressive with that and put more into my brokerage account.

I also have a life insurance plan. It's a universal life insurance policy. And how I've understood it is I can, the money can grow over time and I can take it out without being penalized like maybe, you know, something like a Roth IRA or traditional IRA. So I have my money in a few different places. I just want to maximize where I have it in terms of what I want to do with it now and later. Yeah, so you had mentioned earlier that you're more focused on kind of lifestyle and not as much legacy. So it did tick my ear a little bit when you just said that you had life insurance. Some folks will sell that as a savings vehicle and

ultimately, yes, you can build an asset in the cash value part of a life insurance. So there's kind of two big categories. Term insurance is normally just kind of, think about it like rent, you just pay for it while you have it. And then permanent could either be a whole life, a universal life, or a variable universal life, where you're going to have some cash value component. But what you're really doing when you take the money back out of it

is that you're borrowing from your own insurance policy. But if you borrow too heavily, the policy can actually collapse. What I would do with that, I would have them run you an illustration, it's called an in-force illustration and say, how much could I actually take out of this and see how that really serves you? Because in most cases for somebody that doesn't have legacy goals,

I really wouldn't reach for a permanent life insurance contract. Some people truly believe in it as an investment vehicle. I'm not really in that camp. So I would at least double-click on that and make sure that that product is serving you well or that it'll do what you expect it to. But I do love that you've got a brokerage account. It sounds to me like you could probably be a little bit more aggressive in how you're funding that

and get through some of that cash that you're accumulating and maybe just turn that into a regular monthly contribution. So you don't have to put all the work, the money to work right now. If we're worried about markets, if we're nervous about it and we don't wanna just plop everything in, things could always go down from here, right? And so instead, what I might recommend is just dollar cost averaging and getting some

of that cash to work over the next three to six months so that you don't have all of the risk of just a single entry point into the market. Okay. Sorry, could I ask a couple of questions? Of course. Yeah, please. Did you call it an in-force simulation? Yeah, an in-force reprojection.

So when you bought that contract, what they should have shown you is a projection of kind of, if you put X number of dollars into it, this is how much cash value it'll have over its lifetime. And a lot of times it looks really impressive depending on what return rate they show. And then they say, well, all this is going to be tax-free. And you go, well, that all sounds great.

What the policies sometimes require though, is when you start taking the money out of it, we need to see if it's healthy. Because you can do what's called collapsing them, if there's not enough money to still pay for the insurance component, then the policy can collapse on you. And so again, different policies

are structured different ways. I don't want to go too, too deep into this, but you can ask them to run a new projection for you and say, well, I want to take X number of dollars out in these five years so that I can help with this down payment or whatever it looks like. And they'll have to show that to you on how the contract will hold up or if it ends up crashing and burning, which I think will help you make a good decision on whether to keep it. Okay. And what does it mean if it crashes and burns? So if it runs out of money or it requires you to put in a whole bunch of money later in life

to keep it alive, I would say that probably doesn't make sense for you. We don't want to be in a spot where we're trying to pay for retirement, and now we've got this life insurance contract that's on for you, right? We don't wanna be in a spot where we're trying to pay for retirement. And now we've got this life insurance contract that's on life support. And now you're having to make payments to the insurance company, which is just gonna add to your spending burden in retirement.

We'd much rather be spending money on fun things and exciting things that you're doing overseas rather than having to buy insurance that you didn't really need at that point. Okay, got it. And I'm also curious why you're not that convinced in a universal life insurance account. You're saying some people see it as a vehicle

to sort of generate assets faster that are tax-free. Yeah, so it's really because of the mechanism that we're talking about. The reason that it's tax-free is that you're borrowing against your own asset, right? All borrowing is tax free. If you go and you buy a home and you get a mortgage and they send you a big check basically,

or they really send it to the, whoever you're buying the home from, but when you borrow money, they don't tax you on that borrowed money. So the same way that you could borrow against an investment portfolio, if you were doing like a portfolio supported loan, that's tax-free too.

And so I think that these get sold on the dream of this is tax-free and there's other ways to achieve kind of similar things. A Roth IRA, if you wait until you're 59 and a half is gonna be tax-free growth, tax-free withdrawals. And so you've got other access points to things that are tax-free, but because these things can get complicated, they're difficult to understand. I would only reach for a permanent life insurance contract in really, really specific situations

where we do have a lot of legacy goals and we want to really overfund this thing. So to me, I'm not hearing alignment in the tool versus what you're trying to do with it. Got it, that's good to know, thanks. Yeah. Since we don't give investment advice, and our goal here is to empower people to make their own decisions,

Ross, I want to ask you at a high level for other listeners who may be thinking about pulling back on their savings or pausing their retirement savings, what are a handful of things they should think through before making their decision? Yeah. So just as we've been talking about here today, I think the first question is, how secure of a position are you in?

Ellen has done a great job of creating really a battleship full of cash that she can go to war with if she needs to. So even if there is job uncertainty or an interruption there, I think she's put herself in an incredibly strong place. Not everybody's in that position. So if you are concerned about the economy affecting your job and you're not in a place where you could live more than weeks or a couple months without an infusion of, you know, weeks or a couple months

without an infusion of cash from somewhere, to me that represents a risk. And so even though I want to treat economic uncertainty as a spot to go harder at my investments, I want to add cash, I want to be a harder saver when things look like they're opportunistic, I would caution anybody to do that and certainly don't put yourself at a higher level of risk if that's the position that you're in. So having enough money to live on is always job number one. And then to tee up as well, anyone who's considering retiring out of the US at a high level, how should they change their retirement

saving strategy based on maybe a plan to live abroad? To me, the big question is gonna be timing and taxes. So number one on the timing, and again, we talked about this just a bit, which is when do I have easy access to my accounts? If you retire after the age of 55, you can typically touch your 401k accounts that were with an employer.

After 59 and a half, you generally have easy access to all of your IRA accounts or Roth IRA accounts. But if we're thinking about anything before that, or we're thinking about needing to buy a home, then we gotta go, well, where's that money gonna come from? Is it gonna come from me selling my current residence and taking that equity out

and then using it to rebuy something? Or do I really need to save specifically for that goal? So I really think of that as the, kind of timing and where the money is gonna need to come from. We need to map that out. The second big piece is always going to be taxes. You do need to understand how international taxes work,

and that is a highly specialized area of expertise where every single country might be different. Knowing how the taxes are going to interact, I would find a blog that is dedicated to exactly the country you're thinking about and find an expat community in that country, because I think that's going to be your best resource for either finding a really good CPA to work with

or hearing the experiences of other people that have moved to the exact place that you've gone. So to me, that's going to be the trick is how do the taxes work for an expat that is living abroad in that specific country, because it's not the same everywhere that you go. Most cases, you're going to get a situation where you are paying some international taxes and then you still have to file in the US as well. And again, that's going to be a specialized knowledge base where nobody knows all of that

stuff for every country. So having a really strong advisory team, I think is critical to making sure you get that tax filing right and not getting yourself into hot water when you do it. Thank you for that, Ross. All right, Elen. Now, so based on everything we've discussed, do you have any other questions that you would like to ask? And if not, what are your thoughts about what you'll do next?

Um, early in the conversation, we talked about, um, you know, how certain stocks have really plummeted. It's been volatile, the market in the last few weeks. I know you don't give financial advice, but seeing that I still have disposable cash that I could maybe invest more, I don't know, wisely, is it a good time to buy stocks? And if so, which ones or how should I learn about, like, which ones would be good to invest in now? So I'm going to give you an annoying answer first, which is that if your time horizon is long enough, it's always a good time to buy stocks.

I know that's annoying to hear. That's something that advisors generally believe. But if we think that the market's going to go up, and it tends to, if we look at the last, about 45 years, it goes up 74% of the time. Three out of four years, essentially, the market goes up. And so by being a long-term investor, we're putting those odds on our side, and that tends to be my position at any given time. If you're within three to five years of spending the money,

that's when I think it's not a good time to be buying stocks because that's when you're needing to create some safety and have that capital ready to be accessed, right? So if we're getting close to needing the money, that's when stocks stop being a good idea. But between three, five years or longer as a time horizon, I would say it's mostly a good time to keep investing, not overthink it and just continue to be

a dollar cost average person and put that money into the market. The second question that you asked or piece of that was what to invest in. The broadest answer would be, if we don't have really specific thoughts about what we wanna own, just buy all of it, right? And so when I say that, that typically means broad-based index funds.

The United States, you can buy all of it in basically a total stock market index. You could also buy all of the companies outside of the US in an all-world XUS index. So with two positions, you could basically own the entire world stock market. To me, that's a great answer for somebody that doesn't have specific things that they've researched and really want to dive into. And that is a completely valid way to invest. And honestly, I think people find it overly simple, and they want to fight that they're looking to make it harder. Fight that instinct as much as you

can, we can keep this really, really easy, really low cost and not have to put that much thought into it if we're buying really broad-based, very well diversified index funds across a bunch of things. You mentioned that it's been kind of a volatile year and you're right in the US, we are down year to date. International stocks aren't. So if we've been diversified,

you could actually have positive gains in your portfolio so far on a year to date, international stocks aren't. So if we've been diversified, you could actually have positive gains in your portfolio so far on a year-to-date basis. And so I do think making sure that you've got some international exposure and not just the United States in your portfolio is a really nice way to make sure that you're balanced out and that we're kind of spreading our eggs into multiple baskets as well. But that could fluctuate. I mean, that's going to fluctuate over time. So I guess I'm just a little confused about selling your stocks. You're taxed on it, right? So you're going to pay, I don't know what amount it is actually.

Maybe I shouldn't know. So if it's something that you need, like you said, within three to five years, maybe don't put your money in these indices, right? I think that that's correct. If it's something that you need on the short term, I love your high-yield savings account, I think that's a good place to have money parked, or even something like CDs or conservative like that. Yes, with anywhere that you're earning money,

ultimately we're going to pay taxes. If you own stocks or index funds in a brokerage account and you hold that in there for more than a year, you're gonna move into the long-term capital gains territory. That's gonna be a lower tax rate than what you pay on your income always. So for most people, they pay 15%. It goes as high as 20 or really 23.8, depending on if we're including the net investment income tax,

but it's always going to be lower than what you're paying on your income. And so there's also opportunities in our lives. If you're going to do what you're talking about, and let's say you're going to explore the fire movement, the year that you sell those stocks might be a year that you're not earning any income, right? If you quit your job and you sell those stocks, you might be in a really low tax bracket. Some gains might be completely free federally. If you're in the 12% income

tax bracket, you can actually sell stocks at 0% capital gains rates on the federal level. And so when we get into really specific planning, that's when we can look at kind of those opportunities, but I wouldn't choose not to invest because of the fear of the taxes, right? You pay taxes on that high yield savings account every single year, they send you a 1099 and then you put that in your tax return,

you pay income on that too. Some people will choose not to make any money just so that they don't pay any taxes. I would much rather make plenty of money, plenty of investment gains, be smart about it, let them get into that long-term territory if at all possible, but paying a few bucks on earned money is not gonna be the end of the world.

I agree with that. Thank you. All right, Elena, so do you have any thoughts on what you're gonna do based on this conversation in terms of potentially pausing your savings or you're going to think about it? For sure. I'm going to revisit my life insurance plan. That made a lot of sense to me. I also want to explore CDs, something where I could invest money and keep it there if I don't need it immediately. Six plus months is fine for me,

as well as the international index funds that you mentioned. Happy to hear it. Thank you so much, Elena, for coming on and sharing your life with us. We appreciate it, and we hope the information we shared was helpful to you. And Ross, thank you for sharing all of your wisdom. My pleasure. Happy to be here.

Ross Anderson, thanks for coming on and answering these investing questions. And Elena, thanks for coming on as well. And that's all we have for this episode. Want to appear in next month's Smart Planning segment? Let us know. Inspired to navigate your finances with an advisor yourself? Use NerdWallet Advisors Match to find vetted professionals

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and it may not apply to your specific circumstances. This episode was produced by Hilary Georgie, who also helped with editing along with Tess Vigeland. Nick Charissimi mixed our audio, and a big thank you to NerdWallace editors for all their help. by Hilary Georgie, who also helped with editing along with Tess Vigeland. Nick Charisame mixed our audio, and a big thank you to NerdWallace editors for all their help. And with that said, until next time, turn to the nerds.