It's Friday. On Fridays we do Q&A shows. Basically, you call in with questions and I do my best to come up with some kind of helpful answer. Of course, you've got to be the judge of how truly helpful it is. Welcome to the Radical Personal Finance Podcast. My name is Joshua Sheets and I'm your host.

Thank you for being with me today. This is the show where we're dedicated to providing you with the knowledge, skills, insight and encouragement you need to live a rich and meaningful life now while building a plan for financial freedom in 10 years or less. If you're a patron of the show, you get access to a Friday Q&A call.

That's the very best way if you've got a specific question that you'd like to get some input on for you to get a hold of me. As we head over to the conference call line here, it looks like I've got a total of four callers lined up. I know what a couple of them want to talk about.

I just want to mention to you if you would like to ask a question, if you'd like to steer the content of these shows, the best way to do that is to become a patron of the show. As a patron of the show at a certain level, you get access to the conference call line.

You can call in and you can ask a question. I don't screen the calls, so if you want to catch me out or ask me something interesting or see if you can stump me, this is the very best way for you to do that. Right now, I've got four callers on the line.

Let's go and jump first to Eric from Georgia. Eric, go ahead with your question, please. Thanks, Joshua. What are some hands-on investments in the $1,000 to $10,000 range? When I think of hands-on, I'm thinking of real estate. I can purchase the real estate, go to the property, fix it up and meet my tenants.

I consider stock index fund investing hands-off. I want to do more of that hands-on investing, but it seems like most people only talk about relatively affordable stocks or on the other side, the relatively expensive real estate. Do you have any ideas for lower cost hands-on investments? Why do you want to do hands-on investing?

It really comes from your podcasts and your philosophy of trying to get out of the market. I know you have your specific reasons for that. I like those reasons. I do own one rental property and I really enjoy that hands-on aspect of that, of being able to go fix things when I need fixing to in a sense touch my investment as opposed to just hope that companies do well with whatever money I invest with them.

The reason I ask the question is we should start first always with the why. If we're going to do extra work, why? There could be a few different reasons. For example, you mentioned, "Well, I might not be comfortable. I might not want to invest in this certain vehicle over here and so therefore I'm choosing something else." If you're going to get involved in the world of active investing where you're actually putting your time and energy into it, the only rational – well, the major rational reason for you to do that would be if you could earn higher returns.

So that's kind of the why that I would encourage you to consider first. If you could trot down to the bank and buy a guaranteed one-year CD and they pay you a 10% annual rate of return on that CD, well, if you're comparing that 10% annual rate of return on the CD to the hands-on investment and you're calculating that I could do this work but basically I'm going to wind up with a 10% rate of return, there would be no rational reason for you to do all the work of say finding another rental property.

So with that as just a basic foundation, the major reason you're going to be looking for something is so that you can increase your returns. So you've got to find – the ideas on how to invest in this active way is going to be where do you see an opportunity to invest your cash and your time in such a way that you can get returns that are to a very – that are much higher than what's available in a passive world.

This is the fundamental distinction if we were just to restrict our conversation to active mutual funds and passive mutual funds, the biggest conversation that goes on in the personal finance world. Usually those who argue in favor of passive investing are not saying that an active investment manager can never beat the market.

What they usually are saying is when you take into account the costs of potentially beating the market, they can't do it in excess of the costs, the costs of research, the costs of the time, the costs of the work of the investment manager. So we can apply that same thing to your and my individual investment activities and say if we're going to invest actively, we've got to get returns that are going to be in excess of the costs, the costs of the time, the costs of the energy, the costs of whatever specific things we need to spend money on.

Now you are already investing in – you have one specific rental property. Are you specifically looking for tools and strategies and ideas that are related to real estate or a more general question? Yeah, a more general question I guess just a way to have – I guess just be more diversified as well but without having to drop a lot of money on a second rental property or other real estate, just kind of looking for more things in a lower price range but that have that hands-on feel of the investment.

What type of work is your job or your business? I do website development and it's my own company. So I invest in that in a sense of investing in the business. Have you exhausted all of the areas of investment that you see there or is there something there within the context of your own business that you could employ the money in?

Yeah, I could probably employ the money in that probably mostly on the education side, learning new skills and improving that way. So that's probably going to be your best opportunity. Let me give you a simple example. Let's just say $1,000 or $1,000 to $10,000. You could – and I'm using this as a real example but also as a metaphor.

You could go and buy a hot dog cart and sell hot dogs from that hot dog cart on the weekends and the evenings. That would be a legitimate form of investment. That would be an active business basically that you're functioning in but that would be a legitimate form of investment and you could do that in that $1,000 to $10,000 budget range that you talked about.

So why wouldn't you do that? Well, the reason you wouldn't do that is if you had a better use of your time and money elsewhere and usually, the best place for us to invest our time and money is into our primary career. Now, what hampers some of us is within the context of employment, some of us have more upward mobility options and some of us have fewer upward mobility options.

If you are running your own company, whether that's a solopreneur endeavor or whether that's just you and a few employees, you probably have a lot of options and areas around you through which you can invest and that will probably be the most productive thing for you to do. I don't know if this is applicable to your business.

So again, take this metaphorically and apply it to whatever is appropriate in your specific situation. But if you're looking at your business and you're saying, "I develop software or websites or I do this IT work and I could really use the services of a graphic designer," then perhaps the $5,000 that you desire to invest would be most effectively invested into buying a new computer, putting it into a corner of the office and bringing in a part-time graphic designer to work on it and operate it.

Then perhaps by adding that additional capability and skill to your company's offerings, you'll be able to provide more of a one-stop solution. That's the type of investment that we should usually be primarily looking for. If you didn't have your own company or even if you do, you would be looking to say, "Is there an opportunity for education that I need?" You mentioned that.

"Is there an opportunity for networking that I need?" That would be something that I would look for. A thousand dollars might be effectively used by going and signing up for an industry conference or going and finding somebody who is a real leader in the field and asking them to study with you and perhaps – excuse me, to study with them.

Perhaps the best use of the $3,000 of cash is for you not to go to your office every day for a week but rather to fly across the country and spend a week with somebody who's a real leader in the field and observe what they're doing. You may come home with a notebook filled with ideas and possibilities of ways to improve your business.

Now, that is usually going to be the highest returning investment for most of us. However, we can't always stay with that. So depending on what phase you're in, perhaps you've done some of those investments. Perhaps your business is working well and now you're looking to diversify out of your business or your job.

Now you need to look at the market around and say, "What am I trying to accomplish?" So let's pretend that you've done all those things and take the example a little farther. You've invested in your business. You've bought that computer. You hired that employee. You're getting new revenue. You went ahead and hired the bookkeeper, that freed up time.

So now you've got more time and now you've got some excess money. Now you're looking and saying, "I've got some capital and I want to invest the money." But the business is working well and you're concerned about a change in the marketplace that's going to affect your business and you're not exactly sure how you are going to reposition yourself to compete with it.

You're manufacturing buggy whips and buggy whips are quickly going out of style because people are buying cars. Well, you might want to hedge against that by saying, "I need some other type of investment that's not correlated to my primary business." So when I was actively managing investment accounts for clients, I didn't want to have all of my investments invested in the stock market because if the stock market were to decline dramatically, that would dramatically affect my personal compensation because all of my clients' accounts would decline.

That would affect my compensation and that would also at the same time affect my investment accounts. So I would really be feeling the pinch if all of my money were invested in stocks. Now of course I had to have some money invested in stocks. Otherwise, I would probably be a bit of a hypocrite to my clients when they ask, "Well, how do you invest?" and I say, "Well, I don't buy stocks." That would be a problem.

But I have to protect from that risk. So that's where then you look and you say, "Now, how do I invest this capital?" and if you have time, then maybe you buy a food truck or a hot dog cart or maybe you take something like that, some type of simple business and you can invest that.

You can – specifically on the topic of investing, you can flip all kinds of things. So for example, if I had $1,000, I would probably not – and I didn't have any skill or experience to point to. I would probably not be looking to flip real estate. I would be looking to flip lawnmowers or washing machines or something in my area where I could see that I can purchase this item over here for cheaper and flip it for more.

I know people who flip cars and they do four, five, six cars a year. They have perhaps – sometimes they have a little mechanical ability. They get a dealer's license. They go to the auction. They buy some cars for cheap. They shine them up, fix them up and they flip them and they're making a few thousand bucks on every car.

Well, that's a dramatic rate of return that is a lot higher than what they're going to make if they just passively invested the money. But you have to do it based upon the scale where you're at and the skills that you have and the time that you have to invest.

So that would be my way of answering it is more conceptual. I don't – practically it sounds like an answer to your question, Eric. It's going to be your business at this stage. But then perhaps in the next stage, it will be something different. So be aware of what those skills are.

For you, maybe it's flipping computer systems. If you only had $1,000 to invest and you could buy computers at 50 bucks, tweak a few things and sell them for 150, that would be a great rate of return but it's a lot more time-intensive. So as the investment capital grows, you have to adjust the things that you invest in so that you can still produce higher returns because you have so much capital.

You can invest $1,000 in computers and flip them possibly, maybe. I don't know if that's actually true but you would know that. But it would be really tough for you to figure out how to invest $100,000 in used computer systems and flip them. So it's the basic concept and idea of investment and you've got to look in your local area based upon your situation, your skills, your time, your markets and just be aware of the opportunities and the answer will probably present itself.

Helpful, Eric? Any follow-up question to that? Yeah. No, very helpful. Thank you very much. Good. Denise, you're next. Thanks, Joshua. So I am looking for suggestions for prioritizing competing goals and by this I mean I'm a true sandwich generation. I have two children, one in college, one going in four years, but I also have an older parent who I have to plan to care for.

So I'm trying to balance the competing goals of savings, building emergency funds, saving for retirement with the goal of eliminating debt, paying off credit cards, student loans and I anticipate in the next three to five years I'm going to need to purchase a home that can accommodate my mother.

My current home just cannot do it. I need a first floor disability accessible. So I'm trying to balance those three goals, trying to figure out which I should work on because I look at them as sort of all being urgent and within the next two to three years I need to really work on things.

So I just appreciate some thoughts. Tell me a little bit more about your current financial situation. Are you – you're working to pay off debt, save an emergency fund or you're well established in some of those basic steps? I'm working on all of those things. I have money in a 401(k).

I think I'm a little bit ahead of the game on that. I have a bit of an emergency fund. It's probably at this point probably about one to two months, so I certainly want to bulk that up. At the same time, most recently I've been really focusing on trying to pay off my credit card debt, get all of that out the way so that I can have more money to use for other things.

Is it just your mom you are caring for or going to be caring for? Yes, it's my mom. I'll be caring for. And just to tell you one more thing, I have a high income. I'm an attorney. Great. But, well, I actually probably want to transition to a different career in the next, say, five to seven years, and I anticipate that'll be a much lower paying career.

So that's something that's on the backbone that I have to consider as well. Okay. And what level of care does your mom presently need? Currently she's fine on her own, but I anticipate, like I said, three to five years I'll need something that's a little more accessible. And my home, current home, just can't be reconfigured for that.

I need something with no stairs. Is she physically healthy and you're just planning for her advancing age, or is she showing indications of beginning stages of dementia, something like that? Oh, no, nothing like that, but just more physical. She has knee issues. She uses a cane. So I'm anticipating a little bit more of a decline in that respect, but otherwise healthy.

Okay. A couple of ideas occur to me. It's a good question. I think it's a challenge that we all have as far as we always have competing goals. I bought some paddle boards this week, and some of the audience have been yelling at me to get them for a while, but I bought some paddle boards this last Saturday.

And I didn't necessarily have to buy them, but I chose to not save and invest the money that I chose to spend on my family. And I have thought about it for years. I've considered it for years. I was just shopping the market. I was never willing to pay the money that people wanted to pay for them, but I finally reached a point in time where the prices had come down.

I found a deal that worked and I'm at a phase in my family life where those paddle boards are going to be really useful. I don't know that I can create an academic model. It's just simply that by being aware of what you're giving up, you can start to look at some things.

So here would be some ideas that I would suggest for you. First, you can think about it in terms of concentric circles of responsibility. If you are not stable yourself, you're not able to be of any help to anybody else. I've said it as a joke and some people are offended by it, but I think it's in many ways true that the best way to help the poor is to start by not being one of them.

It's only people who are financially stable and who have money who are able to help others on financial topics. So our first responsibility is always to care for ourselves. I need to care for myself first and then I need to care for my family, which is the stage that you're at.

But if your mom is presently able to take care of herself, you need to focus first on taking care of yourself. So I wouldn't give a major amount of focus to saying I'm going to do certain things – so I wouldn't set aside extra money for the care of my mom in the future if I'm currently saving up an emergency fund and paying off debt for myself.

So you've got to care for yourself first. Then once you are in a solid and stable place or as your financial stability increases, you'll be able to be of more help to other people. The cool thing about finance is the things that you do for yourself are also the things that are going to prepare you to be effective for helping your mother and your children.

So focus on you first, recognizing that everything you do for you is also going to equip you to be able to help others. So that's the idea of concentric circles. Start with you and spread out. Don't worry about caring for the orphans in Africa until you first cared for the orphans next door and then you can't care for the orphans next door until you've cared for yourself and taken care of that.

The second thing is look to see what the opportunities are. So with your kids, are you paying for their school? Have you promised to pay for their school? What are your obligations or what commitments have you made to them with regard to that? I purchased a Virginia 529, so I told both of them, "I'll pay for your first year of school.

After that, you need to seek scholarships and if necessary, take loans." Certainly, I would like to help them as much as possible, but I recognize that I've heard the saying, "They can borrow for their education, but I can't borrow for retirement." So I've sort of limited it to that.

And fortunately, my older daughter that's in college now has a tuition scholarship, so she won't need to borrow for her room and board. My younger daughter, we have a little time. She's in high school. Great. So if I were you, given my opinions, perspectives, and I guess just awareness of the world, which are not going to be yours, but if I were you, I would not prioritize trying to save money or allocate money towards my kids' schooling.

Any person who is desirous of getting a college education can put themselves through school simply by working and studying at the same time, absent any scholarships, absent any financial aid, absent any tuition. If your children want to get a college degree, the best way that you can help them is to simply provide a place for them to live rent-free if they're being responsible with their studies and they can go and they can work a minimum wage job and put themselves through college.

And if you remove simply the cost of rent from their life, there's no reason why anybody who wants to can't work their way through school. To me, I don't see the point of anybody paying a lot of money for college degrees. And I certainly wasted a lot of money on my college degree and that the biggest waste was on that room and board.

So if you can help your children, and you can do this without saving any money just by budgeting it in, help your children stay at home, live with you. They can do the first few years of schooling online for very cheap or they can go to a local community college or they can just go to a university that is nearby.

Or if they want, they can do the work that's required to get a bunch of scholarships and have somebody else pay for their school if they really want to do it. And then in the worst case scenario, if they do borrow money, that's up to them. They can easily borrow money for school.

I think it's a foolish thing to do but they can easily borrow money for their schooling. So as a parent, I don't think you have any responsibility or moral duty or obligation to pay for your kid's college education. A lot of parents feel they do. And if you do, you have to address that.

But I don't see any reason whatsoever why any parent has a moral duty or obligation to pay for the kid's college. You can let them live at home. They can work a minimum wage job and they can put themselves through school. It's not that expensive to get a college degree here currently.

It's much more important for you to care for yourself and also to be prepared to care for your mom than it is for you to set aside money for your kid's college. So even if they did borrow money and even if they did have to pay that back, they've got a lifetime of earnings before them.

So if I were you, I would focus on me and I would focus on caring for mom. And the final comment that I would make with regard to being prepared to care for mom, it probably will not involve a lot of money. So it probably – just based upon what you said to me, it's probably not going to involve a lot of money.

It's probably going to involve your simply moving and adjusting to a different place to live in the future. But you could probably adjust from where you are living to a different place to live that's simply more suitable for your circumstances without spending a lot of money. If you have to sell your place and buy another place or sell your place and rent another place, you could probably find something suitable similar to what you're paying right now, especially if you have a bedroom that's freed up with a kid moving out.

I've cared for – I cared for my grandparents when I was younger and my parents were caring for them. Depending on the ages of your children and your mom, sometimes, yes, you do need a bigger house. But if she's independent right now and then if at some point in the future you join your households together, remember she's going to be bringing income to the table.

So that income can be planned on to meet the needs. So if I were you, given what you said about the career, I would focus on saving some cash, getting out of debt, freeing yourself up, building an appropriate career that's going to give you the flexibility that you need and the earning power because the biggest thing you'll need with – if you wind up in a position where you're providing physical care for your mom is you'll either need a lot of money or she'll need a lot of money to pay for professional caregivers or you'll need flexibility and help to actually provide the care.

It's primarily the flexibility that will be the most benefit to you, especially if she's healthy. If your mom were facing a severe end-stage form of dementia, that type of care is very difficult. But just occasional care, she's weakening, she needs some help with cooking, those are things that you can integrate into your lifestyle without a lot of excess – not a lot of excess money.

You just need some time and flexibility. Those would be my answers. Helpful, Denise? You want to ask a follow-up question? Is that good enough? No, that was incredibly helpful. Thank you very much. Good. Thank you. Next, Joe. Hey, Joe. Excuse me. Hey, Joshua. If I take a job with a 501(c)(3) as a contractor, I'll have an opportunity to enroll my 401(k) into a 457(b).

My understanding on this is that there's no 10% penalty on early withdrawals from a 457(b). So I'm wondering if this is a valid strategy for accessing 401(k) money penalty-free before age 59 and a half without committing to a 72(t) or waiting five years for a rock ladder to kick in?

That is a good question, Joe. Are you planning on retiring early before 59 and a half? Yes, definitely. Looking at unjobbed mostly, I'm sort of very illiquid right now with most of my money in 401(k)s and minor A's. Okay. Trying to think here. I am not sure of the answer, Joe, and I don't know the answer to that.

Have you found anybody online who's written about that or talked about that previously? No, no. That was sort of the genesis of calling in. I Googled the heck out of this and couldn't find anything. On the IRS publication, it seemed to suggest that 401(k) to 457(b) was a valid transition, but there was some footnote about requiring separate accounts, and I wasn't sure if that was somehow related to trying to prevent this strategy I was thinking about.

I'm sorry. I can't confidently say whether it's one way or the other. If the 457(b) – so let me give you a short answer and let me add that to my things to research and try to determine an answer and publish a researched answer. If you can – if the 457 will accept the transfer in, then there's the technical legal answer and then there's the practical answer.

So I don't know the answer to the technical legal answer. I'm giving you just the practical answer. If the 457 will accept the transfer in and if the 457 allows distributions from assets, there's no – practically, it would work. There's no – the people who are running these plans are not generally – they're not going to be all that knowledgeable about this.

So if you can actually get the money in without paying taxes and things like that and if the money is seasoned and it's in the 457, you start taking distributions, it's unlikely practically that anybody is ever going to – that it's ever going to be a problem. So if the funds allow that transfer, then I would say practically you could probably do it.

Now technically, I don't know but I don't see any reason why if the 457 would accept the fund and if you've proven that, why it wouldn't be possible. But I'm hesitant because it would seem to me that I would have heard about it and I've never heard this idea.

So I'm useless to you, Joe. Let me – I've made a note of it. I will research it and I will try to do my best to get an answer and please do me a favor. Email me, Joshua@radicalpersonalfinance.com and let me know that it was you. If I can determine the answer, I will personally tell it to you and if I can get the clear answer where I'm confident, I'll go ahead and share it on the show in a future episode.

But send me an email after our call and I will follow through on it. Joe Fossum All right. I appreciate it. Marc Thiessen For sure. All right. We've got three more callers. Let's go with – who's next? 856-AREACODE, please. Looks like a Philadelphia number, 856. Go ahead with your question, please.

All right. We'll go on to the Arizona number, 520-AREACODE, please. Julian Julian, go ahead. Joshua Julian Thanks, Josh. I've been struggling a little bit with a particular situation with a 401(k) profit sharing and cash balance pension plan match. My life is a little bit shaken up based on getting married and going on a honeymoon and then also moving all within a few months.

By the time the dust settles, I'll only be a couple months away from being fully vested for a three-year vest period. About seven months away, I could theoretically transfer within the company to, I guess, finish out the three-year timeframe to get the matching contributions while at the same time I'm evaluating just moving on altogether to greener pastures, if you will.

I think that moving would provide a clean break to do that, but I'm trying to evaluate the opportunity cost of those matching contributions for the past two years against the opportunity cost of having a fresh start and moving on to something and starting that sooner rather than later. How much money are we talking about?

It wouldn't be a significant amount of retirement savings. It wouldn't derail me altogether, but I'm just really thinking about the opportunity cost 30-35 years later, looking back and thinking about what it could have been. Depending on bonuses and other pay between now and when I leave, I would say it's going to be between $7,500 and $10,000.

If you were to leave right away, what type of opportunity would you be going to? Something that makes more sense given my skill set and my career aspiration. I've been with the company a while and it's been a rocky path, if you will. It's a little bit difficult to find my true calling within the company.

I've been able to make it work, but I've consistently been trying to find other opportunities. I haven't found anything that was worthwhile to jump for, but with the move, I technically have to find another job within the same company which if I'm going to do that, I could also just spread that out to working for other companies.

For my clarity, you have gotten married and you have moved or you have a specific deadline where you're going to move for certain and that's what's causing the question? Exactly. Based on my wife's job, the move is in September. By then, if I were to transfer, if I can do that which I think that I can, then I would be seven months from this three-year like cliff fast on both retirement plans.

If you were to leave this company completely, would you go to a company in a similar industry or similar occupation or would you completely switch industries? Same industry. Probably the role itself would be similar in scope, but the company would be quite a bit different, sort of a different type of company within that same industry.

It wouldn't be an occupation change at all. Final question before I give you my thoughts. Is $7,500, is that a significant amount of money as compared to your annual compensation and your investments or is it relatively insignificant? That's kind of tough. I think I struggle with that because I'm thinking back on the amount of time it took to get those matching contributions.

A little bit of back story, I did sort of a similar thing with another company where I was a six-year. I left earlier. Obviously, I was far off from working there six years, but I left some money on the table and I still look back at that and think to myself, "Well, that would have been nice.

That would have been helpful to my overall retirement, obviously to my overall net worth." I wouldn't say it's significant, but it's not like I would burn that amount of money if that makes any sense. In theory, without having a specific idea, without having a specific opportunity to compare it to, you're not going to be able to come up with the right answer because right now, you're basically trying to calculate something, the $7,500, as compared to nothing.

You don't have the opportunity lined up. You don't have the job, et cetera. You're not going to be able to make that as a clear decision. Something is better than nothing. $7,500 or zero, well, I'll take $7,500. That's why you're experiencing such an emotional cognitive dissonance about it because you don't have anything that you're actually comparing it to.

Again, you're trying to compare something to nothing. That's the major problem. I don't think there's anything magical about retirement accounts or vesting, et cetera. The concept is golden handcuffs and you're experiencing the power of those golden handcuffs. If you have a compelling opportunity, if there's something that you knew you wanted to do or were clearly something that you should do, the decision would be easy.

When I left Northwestern Mutual, I walked away from the vast majority of my retirement plans because I wasn't fully vested in them. I did that without – I mean I considered it, but I had something that was compelling to me and had a reason why the timing was important.

I was watching the timing of what was happening in the marketplace. I was watching the timing of what was happening with podcasts. I wanted to have as much of an early mover advantage as possible and I knew I was already a year or so behind where I would have liked to have been and I said, "I'll get more benefit out of being a year early with this business than I will if I hang out and get this extra retirement money." For me, it was a relatively easy decision because I had something compelling to go to.

So practically speaking, what would my advice to you be? First, if you're moving to a new town and a new city and you don't have anything there, there's really not much reason for you to go there and sit on the couch and do nothing. If you're going to a – if you want to work in a similar industry, what I would do if I were in your shoes is I would do my best to try to arrange a transfer within the company that you're in.

If there's a job position, once you're in a company, you know what the job positions are that are probably suitable for you or more suitable or less suitable. But if you can arrange a transfer within that company, that will be helpful. Even if you earn less money because perhaps you transition to a different type of position, maybe it pays better, maybe it pays less.

Even if you're earning money, just – I mean let's say you're earning median income, $4,000 a month but you're working in this new city for six months. Well, if you can line up $4,000 of income for six months, that's $24,000 of gross earnings plus the $7,500. You've got a compelling reason to be working at that company.

Secondly, it's always easier to get a job when you're already well-employed than it is when you're unemployed. So if you can arrange to be employed while you're doing a job search, I think that's superior to your being unemployed. So I wouldn't burn the bridges unless there were some tremendous reason why you had to leave, ethical conflict, compelling issue, major problems.

I wouldn't burn the bridges. I'd rather transfer within the company knowing that I've got a $7,500 in effect bonus coming and knowing that it will be easier for me to get a job when I'm working within the industry and I'm already settled in the industry than it will be for me to get a job if I'm unemployed.

Finally, practically speaking, it's just easier to set up life in a new town if you've got a job and it's going to be easier for you to arrange a job with the company you're with than it will be with a different company. I wouldn't let that keep me from looking for another opportunity with another company but I would allow it to motivate me to negotiate a little bit harder, to work a little bit harder and to try to negotiate a deal knowing that I'm going to walk away from $7,500 if I take this job.

So raise your sights. Try to get a better job, a fancier job, knowing that if you want to get an equal job with a different company, you can always do that but you need to get a better job and a fancier job in order for it to compensate for the $7,500 potential loss.

So those are my thoughts, Julian. Julian: Thank you so much, Joshua. That's extremely helpful and gives me definitely a lot to think about and I really like the way that you broke that down into a couple different things because it's not necessarily just about the money. It's also about what am I going to do when I get there and how am I going to find a better job.

So I can't tell you how much I appreciate it. That was a great answer. Josh Buettner: Good. I'm happy to help. We often think and it's hard. This is why we always have to talk things out. A multitude of counsel is wisdom and it's helpful to talk to people because other people who aren't facing the emotion of what we're facing often see opportunities.

But there's no reason why every single person who is listening to this show can't concurrently with your current employment be working on something better. We should always be working on something better. So we often see it as an either/or and that's what I'm encouraging is it's not. You can both work on something better and continue what you're doing at the same time.

Of course, you can't give full priority to one or the other. You always have to adjust and vary how much energy and focus and effort do I have. But you can do both at the same time. So that'll be awesome. What town are you moving to? Josh Buettner: The home of your ex-employer, sir.

Ah, Milwaukee, Wisconsin. I like Milwaukee. If you like midwestern towns, it's a nice city. It's awesome. Josh Buettner: We're really excited for it. Thanks, Josh. Cool. Let's see. I've got another caller here, Los Angeles phone number. Go ahead. Hey, Josh. How are you doing? Well, sir, how are you?

Good. Good. So I've got a question about my in-laws actually. So they have a small business. It's a motel business and they have a couple of employees that are family members. And then they have a couple of employees which are not family members. And they're both over 55. And so they don't have a 401k or retirement plan, an account or anything like that.

And they have a high income right now for the last two years. So I'm thinking what are some good ways they can defer a good amount of money through the business, through like a SEP or an SEP IRA or a simple IRA? How many employees do they have? They have about 12.

Okay. And what is a high income? Do you have any idea of how much money they're actually earning? About a quarter of a million. Okay. And do you have any idea what they're actually spending? Like is this a new thing for them? They're living on 50 and earning 250?

So that's after, that would be after all the expenses. So that's the profit. What do they intend to do with regard to retirement? Do they intend to retire? Is that important to them? Well, the business, the motel business is not going to be there for that many years. So the owner is, they don't own the business, they lease the business and that property is getting converted into condos.

And we don't know when that's going to happen, but I'm guessing two or three years later it's going to happen. So they're probably going to retire after that happens. Do they have a lot of other savings and investments that aren't connected to this hotel business? They just have cash set aside.

And I know you may not know all the details, but I mean a lot of cash. Do they have millions of dollars of cash that they actually can retire or do they have $100,000 sitting in a checking account? Yeah, it's the latter. Okay. So there's almost two questions in what you're asking.

The first is simply is there an intelligent type of financial deferral account? That's the first question. That's the less important question. The bigger question is what are they going to do with their lives? But let's start with that first question with regard to retirement accounts. If they don't currently have any retirement accounts in the business, which would not be unusual for a business like you described, a hotel business, 12 employees, this is a small business.

It's unusual for a business like this to have any type of group retirement account set up. If they don't have something, they could establish, for example, a 401(k) plan. They could establish some – depending on what type of business entity they're running, they could establish some kind of group plan.

Let's just keep it simple and compare a 401(k) plan versus where a lot of people's minds go on a question like this, some sort of defined benefit plan. A 401(k) plan would allow them to set aside some money and it would also allow their employees to set aside some money.

The challenge with a small business like this and the challenge with 401(k) plans in a business where you have an owner who's making a high income and you have the majority of the staff, which is probably not making a lot of income. Several of the employees I would imagine are housekeepers, some basic front desk staff, et cetera.

These are not highly compensated employees. You have to meet all of the appropriate regulations for highly compensated employees and owners of businesses. So that means that they need to match their employees' contributions. They need to do a safe harbor plan, something along those lines. Their employees probably don't have much of a value of that.

In this type of business, it's unusual that the employees highly value retirement accounts. That's very different than a white-collar engineering firm where people want the 401(k) accounts. Oftentimes, business owners in this position struggle to get enough participation among their employees to meet the federally required participation ratios. So I wouldn't guess that their employees are clamoring for it.

Also, within the context of their overall financial plan, for them just to put aside some money in a 401(k) plan for two years, that's not going to make a meaningful impact on their ability to retire. If they are, you said they're 60 years old? How old are they? Yeah, they're 60 years old.

Okay, 60 years old. So if they're 60 years old and if they've got $100,000 in the bank, maybe they own a house with a hundred or a couple hundred thousand dollars of equity and then they have this business, if somehow magically we were able to fast forward a couple years and they open a 401(k) plan for themselves and they defer into the 401(k) plan, let's just say $100,000 each and they – over the course of a couple years and they're able to have an account with a couple hundred thousand dollars in it, this is not going to allow them to retire.

They can't retire at 62 years old with $200,000 in a 401(k) plan. So practically, it's impractical. It's not going to adjust their financial situation very significantly. It's not going to allow them to retire. Their employees probably aren't going to participate. They're probably not going to meet the participation ratios such to allow them to not have to do a safe harbor plan or something like that.

It's not going to work. Now, the next employee option, when you have a business where you are going to have – where you have highly compensated employees and less highly compensated employees, where you have a big diversity and also when you have a business where the business owners are older but some of the employees are much younger, then you want to look to see if doing a defined benefit plan would be an intelligent option.

Where financial planners usually look out for these is the best example is you look for a doctor who has a very high income and they have one older doctor, two older doctors in the company and then maybe a couple of nurses and receptionists who are earning less money, substantially less money.

Then perhaps there's an opportunity there where they can set up a defined benefit plan. The idea behind a defined benefit plan is instead of deferring a certain amount of the doctor's compensation based upon the contribution like a 401(k) plan, which is called a defined contribution plan, instead of just deferring $50,000, the way a defined benefit plan works is you can calculate out the total annual retirement income that you're trying to solve for.

Let's say you're trying to solve for an annual retirement income of $75,000. Now the business needs to fund the plan sufficient to the level where actuarially it can deliver that retirement benefit for the retiring physician. So this type of plan is very attractive if you have an older, higher income earner as a key figure in the business and you have younger, less compensated staff.

The reason it's attractive is because the business will have to set aside enough money to fund a benefit for all of the employees. But the older, highly compensated business owner is going to get proportionately a much higher benefit because it's going to be based upon the salary. So this is the way we're in the scenario I mentioned.

Like I said, financial planners, we look for doctors who are old and rich and have a young, lightly paid staff. This is where – why do I allow the business to set aside hundreds of thousands of dollars per year, all of which is deductible? Well, that type of situation doesn't apply here with this scenario of outline for me either simply because they're going to be forced out of the business.

The defined benefit plan, it's very important when setting up one of these for a business that the business needs to be confident that its future earnings are stable because these plans need to be funded for enough time and they need to be stable. Depending on the nature of the business, you can sometimes choose a business that's steady or that's – where the contribution is steady and flat or it's adjust but it needs to be stable.

So if they know the business is going to be closing in a couple of years and this is just – this is not going to work. It's just too much of a hassle to set it up. They don't have enough money practically to fund it anyway in what you described to me and it's just not going to work.

So that was the long-winded financial planner way to say I wouldn't bother with setting up any kind of retirement plan in what you described here. What I would do in their situation is I would start with that second question which is more important. I would say, "What are they going to do with their lives?" because they're not going to sit around – number one, in what you described to me, they don't have enough money to retire.

So this idea that they're going to somehow turn 63, take social security and say – are they going to live on $2,000 a month? They need to figure out what's the business and adventure that they're going to start on for the rest of their life. What I would do is I would take the next two years of profit from this business and I would – knowing that it's going to be closing under the circumstances you said and I would invest that profit into setting up the next business.

I would encourage them to consider some sort of lifestyle business that will meet their needs. So is that lifestyle business to establish a bed and breakfast in the Shenandoah Valley? I don't know. Is that lifestyle business to purchase some houses that they're going to put out on Airbnb in a desirable market of real estate?

Do they want to – what do they want to do? They're going to need to earn income out of it because they don't have enough money to retire. So how could they take some of those profits and invest them into that next business and make these higher years of earnings the time in which they're making these investments into the next business?

Now, whether that's within their current business entity or that's in the context of a separate business entity or whether that's in the context of investment activities, that's beyond the scope of your knowledge of their finances. That's between them and their financial advice team. But conceptually, that's their best opportunity to save taxes is to take these next two years of high income and invest it into setting up the next business which is actually going to fund their retirement lifestyle.

That's my answer. Follow-up questions? Is that helpful? Yes, that's very helpful. Now, when you say the best way to defer the taxes currently would be investing in another business. Now, what sort of structure would that be? If they don't know what that business is, would it be like opening up another corporation and then just putting money there or was that just more of a general idea?

Well, it would depend on the specifics of their situation. So I'm just talking about in general an idea. But simply speaking, they own – they are operating a hotel using a leased facility. Well, if they like the hotel business, then why don't they go find another hotel? And so if they have one location – and where is this hotel located that they're operating?

In Los Angeles. OK, in Los Angeles. And do they want to stay in Los Angeles? Yes. OK. So they need to go find another hotel in Los Angeles. And so what I mean is there – that if it takes them time away from the business to go find the hotel, if it takes them hiring a consultant to help them find the hotel, if they need to go and negotiate a deal on a building to buy a building, if they need to go and find some unbuilt out land to build it, if they need to go and find a new lease and they need to put a – make a purchase – set up a lease option and make an option payment on a building that they find, these are all reliable ways of them investing money into the business.

And what this has the net effect of doing is it lowers their profit in the current year, which lowers their tax burden, and it shifts – this is a – it moves the timing forward. This is a timing strategy. So they're making an expenditure and deferring a deduction to the future, cutting down on their tax bill now so that they can set that next business up.

So every business grows and expands itself by investing back into it. And so yes, this does have the net effect of lowering the tax bill, but it's not a game. It's not a shell game. It's just simply that it's a way of thinking that I'm going to invest and to expand the business.

And the biggest thing is for them to build a compelling vision of what their next business and career is going to be and then go make that happen. But there's no – in the circumstances you described to me, I don't see any easy wins from a tax perspective with regard to retirement plans.

Specifically, I see a big win for them to recognize they're not going to retire. Now go and build the business they want to own for the next 20, 30 years. Sure. That makes sense. Cool. Got a few minutes left. I think I've taken all the questions from the callers on the line.

Anyone – would anybody like to step in and ask another question or ask a follow-up question who's on the line right now? Joshua, this is Joe. Hey, Joe. Go ahead. Yeah, I just wanted to let you know I've been Googling furiously for the past 25 minutes and it looks like using the 457(b) to dodge the 10% early withdrawal penalty is not a valid strategy.

According to an IRS publication I found, it appears that the 457 plan will track them out from a qualified retirement plan and they're subject to the 10%. That's what we need to know. If you found an IRS publication saying that, I wouldn't risk it. There are enough other things that you could do.

I wouldn't risk that and I'm glad you found that. I could go with the Roth ladder. This sounded too good to be true. It is. Yeah. I've never heard of that strategy of moving the – the 457 for those listeners who aren't familiar because I didn't clarify it earlier.

457 accounts can be tremendously valuable for early retirement because they can be tax-deferred accounts that are open to government employees, usually nonprofit employees, but they don't have the 59.5 restriction on them. So a police officer can heavily fund a 457 plan and they can retire, pull money from the 457 plan just like they would if it were an IRA, but they don't have to wait until 59.5.

That can be a valuable bridge account for example if they're going to have a pension distribution at a certain age and they fund the bridge, the gap between when they retire and when they start receiving their pension payments. There can be a lot of options and usefulness with it.

But Joe, I had never heard of somebody using it for early retirement and I read enough and I pay attention to it that I figure if it were a useful strategy, I probably would have heard of it. I'm not infallible. A few weeks ago, I did that show on just simply taking profits out of a 401(k) and having that still be superior to using a taxable account even if you're paying the penalty and I learned something completely new.

But yeah, I had not heard of somebody using this strategy. So if you found the IRS publication, that's what we need. Maybe, Joe, after this show goes out on the website, maybe you can link to that publication and if any other listeners have comments or contributions on this subject, chat about it in the blog post for today's show.

Any other follow-up questions, comments before I hit the music? Cool. Thank you all so much for calling in to these shows. I enjoy doing these Q&A shows. I hope that you, the listening audience, have learned something. I love doing this. It's so useful to hear other people's questions because then you can turn and hopefully look at your own situation and apply a little bit of creative thinking to your own situation.

My encouragement to you is consider what you can do with your money in your situation and your context. Notice there was not a specific theme that rolled through this but the theme in today's show that I picked up on was invest the money into things that you know. So if you know how to operate a hotel and that's something where you have skills, well, you can take that skill and you can transition it to a new business.

Now, it might be better for you to go and just get a job as a general manager of a hotel for someone else. I mean $250,000 of profit is -- it's not insubstantial but you could probably get a nice six-figure job working for a major hotel chain or you could take that skill and if you wanted to go and open a bed and breakfast in a rural county somewhere, you could go and do that as well.

Even in the first caller, Eric, when he was talking about how do I invest the money, you look to see can I invest the money in myself, in my business, and then is there something where I have a skill and interest and ability to invest it locally. I talk about flipping lawnmowers because I see that.

I know a couple of friends of mine who make a lot of money flipping lawnmowers on Craigslist. They live a great lifestyle. Now, what that is for you, you'll have to figure out. But take the concept and apply it. It applies to flipping lawnmowers on Craigslist and it applies to flipping billion-dollar businesses.

Same concept. So thank you all so much for listening. Thank you for calling in. If you would like to call into a show like this, frankly, this is your best way. Presently at the moment, you can see I think we have five or six callers on today's show. This is your best way to get a direct response from me.

I get dozens of emails. It's very difficult for me to respond to emails consistently. I put them aside in the queue for future shows. But this is always going to be your best bet. So feel free to become a patron of the show at RadicalPersonalFinance.com/patron. All the details there.

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