Manage Your Complicated Cash Flow: Fund the Fun Stuff While Still Knowing You’re Safe.

The pink heads of two Block Women look up at 3 white spinning plates on poles.

Ahhhh, remember when your parents received a steady salary and paid, like, four bills a month? Times were simple. Times were good.

Your finances—on both the Income side and the Expenses side—are way more complicated. And that, my dear, is why managing your cash flow is so maddeningly difficult to do well.

But there is a way to set up your cash flow so that it’s logical, repeatable, and largely automated. 

Why Is It So Hard to Manage Cash Flow?

If you had just a salary, and it came twice a month, and all your bills came once a month, you might not need help managing your cash flow.

But instead of that setup, you have income that comes on several different schedules:

  • A salary that comes twice a month
  • RSUs that vest monthly or quarterly
  • ESPP shares that come every six months
  • A bonus that comes annually

On top of that, while you know how big your salary paycheck is going to be (it’s the same every time), all those other sources of income? You don’t know how much money they’ll be until they come. Hard to plan too much around that, eh?

Now let’s look at the expenses side of things.

Some of your expenses are “must haves” (ex., groceries, mortgage). Many more are “nice to haves” (ex., travel, remodel). Some of your expenses come every month, nice and predictable-like (ex., rent, groceries), while others come far less frequently (ex., summer camp for your kids, vacation, a new car).

I, too, find myself in this complex situation. I’m not in tech, but, by running a business, I have multiple sources of income: A salary and quarterly profit distributions. Those quarterly distributions act very much like your RSUs, in that they come infrequently and the dollar amount isn’t entirely predictable.

I have figured out a cash flow system that works well for me, so that’s what I’m going to discuss for the rest of this blog post. I think it can serve as a good framework for you and your cash flow.

Using Different Accounts for Different Kinds of Expenses

I keep my cash in two different places:

  1. Checking account at my credit union. These are the accounts I live out of, day to day. All of the money for my “regular” expenses goes here. I basically get no interest on the cash, but I get lots of convenience!
  2. High-yield savings account at Ally. I keep my money for less-frequent expenses here. I like being able to cordon off this money from my day-to-day money. I like getting a higher interest rate. And I like using Ally’s “buckets” to save specifically for each of my many goals over the next couple years (ex. vacations, house projects, gifts). It’s less convenient to access the money than my checking account is, but that’s ok because I access it so infrequently.

Setting Up the Cash Flow for My Salary

Let’s start with my salary, more specifically, the amount of money that I actually receive in my paycheck, which is to say, after taxes and 401(k) contributions are withheld.

This is the same amount of money, each time, so I can automate how much goes where via direct deposit. Most of you probably already do this, too.

Enough of my take-home salary to cover all my ongoing expenses and ongoing savings gets deposited into my checking account.

  • I figure out my ongoing expenses by tracking my spending. I use Monarch Money. I encourage you to get a sense of how much you’re spending on “the regular stuff.” Let’s say I spend $7k/mo on ongoing expenses. (And yes, I realize that many of you spend more than that on just your mortgage; it’s an example, people!)
  • I also save to various investment accounts from my salary: our HSA, our kids’ 529 accounts, and my husband’s and my joint taxable brokerage account. Now, how much to save to these accounts is a giant question that is what real financial planning can help you determine. For now, let’s say that I determine I need another $3k for this, as a “minimum viable” savings. (More savings to come later.)
  • So, I need a total of $10k going into my checking account each month.

And then I set up automatic transfers out of my checking account to my savings accounts, and all my regular bills get paid from my checking account in one way or another.

All of this happens automatically. I don’t have to do anything, month to month, to have my ongoing bills paid and ongoing savings accomplished.

[Now, you might be thinking, “Woman, after I contribute to my 401(k) pre-tax, my 401(k) after-tax, my HSA, and the ESPP, I’m taking home $14 each paycheck! I can’t pay any of my bills with it!” Understood. I have a special blog post just for you, because this is a very common challenge in tech: “Is Your Take-Home Pay Too Tiny to Live On?”]

I do have one more account at my credit union, and that’s a small Emergency Fund. The bulk of my emergency fund is at Ally, but it can take a business day or two to get money from Ally to my checking account, so I like to have a little extra cash lying around that I can access instantly.

My required expenses and minimum viable savings don’t use up my entire salary. So, whatever is left over (which is, again, a dollar amount I can calculate) gets pushed automatically from every paycheck into our Ally account.

 I Ally is where I hold my emergency fund and also where I save up for the bigger, less frequent expenses. I have many such expenses!

Some are fun (50th birthday trip to Puerto Vallarta!). Some are just responsibilities (annual insurance premiums). Some of these expenses are predictable in size and timing (like those insurance premiums). Other goals have varying price tags and timelines. One year we want to go to Vancouver Island, which we can drive to. The next year we want to splurge on a long trip to Italy.

How does the money get out of Ally? When one of those goals or expenses I’ve been saving for comes due, I manually move that money from the Ally account (from the relevant bucket) into my checking account. All the actual spending happens from my checking account.

Here’s what the full cash flow looks like from my salary:

Setting Up the Cash Flow for My Quarterly Income

Now let’s look at my quarterly, less-predictable income.

This part I can’t automate, just as you can’t automate movement of your RSU (or ESPP or bonus) money, because we don’t know ahead of time how much money it will be.

When my quarterly income comes in, the first thing I do is set aside enough cash to pay the taxes on it. I do this simply by putting cash into a “tax” account out of which I will pay my estimated taxes later. With your RSUs, hopefully you can accomplish this automatically by electing to have your tax withholding raised to a high enough level (the default withholding on RSUs and bonuses is 22%, which isn’t enough for a lot of people).

With the after-tax money that remains, I manually move it into my Ally buckets until all the buckets are filled. 

My quarterly income is really how my “fun” gets paid for. Note that, not at all coincidentally, this is the easiest kind of spending to turn off, if somehow my income dropped a lot (or if your RSU values dropped a lot) and I was unable to fill those fun buckets. Also note here the embedded assumption that you save up for these big expenses before you spend money on them. You don’t put them on your credit card, assuming you can pay them off with future income.

When that is accomplished, I can start pushing this quarterly income into long-term savings (our taxable investment account) and paying down our mortgage more aggressively.

My husband and I fully fund the goals at Ally before saving more to our long-term goals. We can reasonably do this for two reasons: we naturally spend less than we can, and our existing long-term savings is already robust and doesn’t need to grow much. This doesn’t necessarily work for you! You could reasonably set up your cash flow to follow different rules. You could, for example, choose to put 50% of after-tax quarterly income towards goals and put the other 50% into long-term savings.

Here’s our entire cash flow for my quarterly income:

And If I Get a Small-ish Windfall, It Fits Right In!

If I ever get a small-ish windfall (a monetary gift or tax refund, for example), I can slot it right into that “quarterly income” side of the diagram. I can use it to fund big, infrequent expenses or to boost my long-term investments and pay down my mortgage even more.

If you get a significant windfall (like a $3M IPO or inheritance, but really it’s all relative), you probably want to revisit your whole financial plan. Have your goals changed? If they have, then you probably need to redo how money moves through your life.

Finally, here’s what my entire cash flow, for all my income and savings, looks like:

Setting Up Your Own Effective and Easy Cash Flow

You likely shouldn’t use my exact cash flow setup.  Your cash flow is different from mine, in quality and quantity.

I don’t get an annual bonus; you might.

You might be in a stage of life where you need to save way more (or less!) than I do.

While I can pay all our ongoing expenses and do our minimum viable savings with my salary take-home, you might not be able to. (That’s very common among my clients, in fact.) You might need to use some of your RSU or other infrequent income to help cover your monthly expenses.

Even though my exact cash flow isn’t the right fit, I do hope that you’ll take away from it some good governing ideas from this discussion:

  • It’s essential you get a good-enough grasp on how much you’re already spending and, to the extent possible, how much you want to spend on goals in the future
  • Use separate accounts to hold money for different kinds of expenses or goals. I generally like to have “1 goal per account (or bucket)” and to separate monthly ongoing expenses from bigger, less frequent ones. This makes it easier for me to tell if I’m on track to pay for each individual goal.
  • Fund as much of your “must-have” spending and saving as possible out of your consistent, predictable income (salary) and reserve your variable income (RSUs, ESPP, bonus) for “nice-to-have” expenses and extra savings. In the event that variable income is lower than expected, you can simply slow roll saving for a nice-to-have expense (as opposed to falling behind in your retirement or college or other essential savings).
  • Automate as much as you can. Your variable income will likely just have to remain entirely manual. My advice? Put a recurring entry in your calendar to remind you to sell RSUs and ESPPs and move the cash around. That way, you at least don’t have to remember anything.
  • Try to get some higher interest for big, static piles of money, but not at the expense of too much inconvenience.

It is far easier for me to showcase how logical and tidy this arrangement is in the current moment than it was to set it up and tweak it over the course of years. Yes, years. My advice: Set up something that you think works for your income and and expenses, see what part of it breaks or Just Doesn’t Fit Quite Right, and then fix that one part. Rinse and repeat.

Keep in mind: This cash flow setup didn’t just come from nowhere. It flows logically out of my family’s financial plan. It is not the financial plan itself. And your cash flow setup won’t be your financial plan. It will be one way of implementing your financial plan.

You first have to get clear on what you want in your life, both now and later, and how much all of it costs, to some reasonable degree. If you don’t know how much your kid’s college will cost or how much you need to have saved for retirement or how much that trip to Italy will cost in two years, how can you ever set up a system that puts the right amount of money in the right place at the right time? It’d be like answering a math problem when you don’t know what the question is. “I don’t know…2x? Or maybe the square root of 77?”

Do you want your cash flow to just work, no muss no fuss? The right dollars in the right place at the right time?

ISOs have good tax benefits. Sometimes it’s better to ignore them.

Block Woman is standing over a background of a printed Greek text with a white question mark above the top of the Block.

ISOs can give you a nice tax treatment.

How? If you exercise an ISO and hold the share for at least a year before you sell it, then you will pay a lower tax rate than if you had instead:

  • Done the same thing with an NSO, or
  • Exercised an ISO and sold the share in under one year.

This fact means that most people (including us financial planners) generally recommend that you exercise ISOs and then hold the stock for at least a year before selling it. This is the only way you get access to those sweet, sweet tax bennies.

If the exercise price is really low (let’s say 10¢), that strategy often makes sense because you’re not putting much money at risk when you exercise the stock. But if the exercise price is substantial (let’s say $8, more on that price later), then maybe it doesn’t.

In other words, sometimes it makes every bit of sense to treat ISOs just as you would an NSO: exercise and sell ASAP. Don’t try to take advantage of the tax benefits.

Note: For the most part, this discussion applies to options in a public company. You can sell shares in a public company on the stock market, no problem. Selling shares in a private company, if even allowed by your company, is far more complicated and more expensive, because the private market is far less transparent and efficient.

Also note: Not many public companies award new ISOs, so in practice, this blog post is for people who worked at a company when it was private, were awarded ISOs at that time, the company has since gone public, and you still have exercisable ISOs.

ISOs Reward “Exercise-and-Hold,” Unlike NSOs

So that my comments later in the blog post make sense to you, let’s make sure we all understand how ISOs work.

Let’s say:

  1. You exercise an ISO. You have to pay the exercise price, $8. The price at the time of exercise is $10.
  2. When you exercise an ISO, you can avoid any sort of tax liability by exercising few enough to stay under the Alternative Minimum Tax (AMT) threshold. So, let’s say you exercise few enough, and so all you pay upon exercise is the exercise price.
  3. After a full year, you sell the stock for $14, and all the gain from the exercise price to the sale price ($6) is taxed as long-term capital gains (which is generally a lower tax rate than your “ordinary” income tax rate).

By contrast, non-qualified stock options (NSOs) operate this way:

  1. You exercise an NSO. You have to pay the exercise price, $8.
  2. The moment you exercise the option, you owe ordinary income tax on the gain from the exercise price to the current price of the stock ($10). So, you owe ordinary income tax on $2.
  3. Whether you sell the stock immediately or you hold it for 5 days, 5 months, or 5 years doesn’t affect the fact that you owed taxes the moment you exercised.
    1. If you sell it immediately, you pay no more tax.
    2. If you sell the stock after a full year for $14, then you own long-term capital gains tax on $14-$10 = $4.

So you can see that, handled correctly, ISOs will subject all of the gain above your exercise price to the lower long-term capital gains tax rate. NSOs will subject some of the gain above your exercise price to ordinary income tax and the rest to the lower long-term capital gains tax rate.

All else equal, we’d rather have all the gain subject to a lower tax rate, which is a vote in favor of ISOs over NSOs.

As for NSOs, my advice is almost always: Exercise and sell ASAP. There is no tax benefit to exercise and holding. The only reason to hold on to the shares would be your faith that the company stock price will increase. And if that’s the case, then you might as well hold on to the options, because as long as you hold the option, you’re not putting any money at risk and you’re still participating in the possible upside of the stock. You can see my thoughts about when I think is an appropriate time to exercise (and sell) your NSOs.

Yet You Might Still Want to Exercise and Sell Immediately.

When you exercise options, you pay two costs:

  1. The exercise price
  2. Taxes you pay on the exercise

If the stock price continues to rise after you exercise, great! You have a positive return on that investment cost. If the stock price falls, however, you can end up losing money, even if you get a lower tax rate because it’s the fancy kind of option (aka, ISO).

You can avoid taxes entirely with ISOs, if you plan it well enough. (I recommend working with a CPA to figure this out.) For the sake of simplicity, let’s assume going forward that there is no tax bill upon exercise.

If the exercise price is only 10¢, and you have 20,000 ISOs, heck, the price to exercise them all is only $2000. Which, for most people I work with, is money they can afford to lose.

But…

What if the exercise price is $8, as it is for a client of mine whose company recently went public and she has a bunch of these lovely ISOs at that exercise price?

Exercising all her ISOs, even if we assume no taxes, will cost her $160,000.

Uh…I work with some high-income and/or high-wealth people, and I don’t think any of them thinks “$160k? Pshaw. Pocket change.”

So, this client has decided, for now at least, to not exercise any of her ISOs. She’s going to work her way through her NSOs (exercising and selling ASAP), and each year we’ll reevaluate whether she wants to put any money at risk by exercising and holding her ISOs.

If we use up all of her NSOs and the client still doesn’t want to risk any of her existing wealth on exercising and holding the ISOs? Then we’re just going to treat them exactly as we have the NSOs: exercise and sell ASAP.

Will she pay a higher tax rate? YES

Will she eliminate any risk of losing money? ALSO YES

Has she considered and is she fine with that trade off? ALSO ALSO YES

Am I fine with that trade off, as her planner who only wants what’s best for my client? YES. In fact, I think it’s highly rational.

So if you have ISOs, and you know all about how awesome they are tax-wise…that doesn’t mean you have to take advantage of their better tax treatment. You could completely ignore their tax benefits (by selling right after exercising) and still be confident that you made a rational, pragmatic decision.

Do you want to feel more confident about the choices you’re making with your stock options?

Protect Your Investment Portfolio from the AI Bubble

The top part of the pink Block Woman block is next to an inflated yellow ballon with black letters AI written on the balloon.

Are you afraid of the AI bubble? That it’s going to burst and devastate your investment portfolio?

Many clients are expressing this same concern. Here’s what they say (with some poetic license):

AI has dramatically driven up the stock price of all the big tech companies. But there’s no there there in those companies. At least, there’s not enough there there. It’s a bubble. At some point, people are going to realize that Nvidia isn’t worth infinity dollars, the bubble will burst, and all those big tech companies will lose a lot of value and any money I have invested in those companies will go <poof!>. And I will be sad. Very sad indeed.

I know market timing is bad, but still, should we be timing the market?

I can’t knowledgeably comment on all the potential damage caused by the proliferation of AI (though, Lord knows, the abuse of the em dash is damage enough!). But I can usefully comment on how to manage the risk of AI in your investment portfolio.

Market Timing Baaaad. You Know This.

Bubbles are definitely a thing. When they burst, it’s horrible. (Hello, those of us old enough to have lived through the Dot Com Bust, especially if we worked in the tech industry at the time and saw all sorts of paper millionaires become paper un-millionaires overnight.) If you could get out of the market right before the bubble burst, that’d be awesome.

But you almost certainly can’t. There are two problems with trying to get out of the market because you’re afraid of a bubble:

  1. If you get out of the market too soon, you risk missing big gains.
  2. Even if you get out at a good time, you risk missing big gains because you don’t get back in at a good time.

There is ample evidence that trying to time the market—in any way—puts you at a severe disadvantage in achieving long-term returns. Yes, the AI bubble might burst in six months…but also some of the best gains ever might occur in the next five.

Imagine getting out of the market earlier this year because of fears of Trump or tariffs or the AI bubble. Look at how the US stock market has performed this year (using the Vanguard Total US Stock Market ETF, ticker VTI, as a proxy for the whole market). It’s up 13.9% as of November 9, 2025. Especially look at how it has performed after the tariffs-induced crash in April. Holy rebound, Batman!

Source: finance.yahoo.com November 9, 2025

Let’s say you are that statistical anomaly that successfully got out of the market at a good time, back in January, because Trump! (Trust me, I feel you.) In April you were feeling pretty darn vindicated. But if you haven’t yet gotten back in because Still Trump! or because of the AI bubble…oh my goodness, you would have missed a lot of growth!

So, if market timing isn’t the answer, what’s a gal to do?

First, let’s revisit some important rules for investing.

What Makes for Good Investing?

While there is boundless commentary on “how to invest” (some of it even useful), I think most people will agree that there’s a short, simple list for the basics of good investing. Let’s discuss some of those here.

For more discussion, read about our investment beliefs here at Flow.

Know when you need your money.

Do you want to buy a house or retire in five years? Or is it in 20? You’re going to invest your money differently depending on the answer.

Why? Because if you invest in the stock market, your investments could lose half their value within one year and not recover the value by that five-year deadline, and you would therefore be unable to meet your goal of home ownership or retirement.

But if you have twenty years to wait before you need that money, you have more time to recover from stock market losses, including an AI bubble burst. Additionally, if you don’t invest in the stock market for a goal 20 years from now, your money will likely not grow enough to be able to buy or retire in 20 years.

Be it too aggressive for a short timeframe or too conservative for a long timeframe, if you invest inappropriately for your timeframe, you risk not having the money you need when you need it.

Know how flexible your goal is.

“Sure it’d be cool to fly first class for that big trip around the world after the kids are old enough to appreciate it, but if we have to fly coach or cut the trip short by a week, I’m okay with that.”

Or

“It’d be the bee’s knees to retire in five years, but I also still quite like my job, so if I have to work another 10 instead, that’d be okay.”

If you can talk about your goals in this flexible sort of way—you’re willing to adjust their price tag or their timing—you can be a little less strict in how you invest for them.

I encourage this framework when it comes to managing a big pile of company stock. If you have a lot of your wealth wrapped up in company stock, it can be very hard to know if you should sell any of it. Even if you know it’s too risky to keep all the stock you have, the lack of a logical strategy for selling it prevents you from doing anything.

Here’s what I usually propose:

  1. Identify the essential goals in your life. Putting your kids through college. That kitchen remodel. Down payment on a home. Full financial independence at age 55.
  2. Tally up how much money you need to fund all those goals.
  3. Sell enough company stock to set aside for those goals (after paying taxes!).
  4. If you have company stock left over after that, then you can be much more flexible about selling vs. holding the stock. You don’t need the money for anything essential, so you can afford to take more risk (by keeping a concentration in this single stock) if you want.

The same logic applies to investing in general: if you have goals that are “nice to have”—not “must have”—I believe you can be more loosey goosey with how you invest for them.

Yes, I still think that statistics work the same no matter your goal, i.e., a diversified portfolio with a balance of stocks and bonds appropriate for the timeframe is the most likely way to grow your money. But if you’re okay with the possibility of not having enough money at the end of the timeframe, you can reasonably choose to invest far more conservatively (you’re less likely to lose as much, but nor will it grow as much) or far more aggressively (maybe it’ll go to the moon! But also maybe it’ll plummet to earth).

Diversify.

Diversification—making sure you own a bit of every kind of investment asset—is the “magic” solution to managing risk in any single company, sector, country, etc.

Do you work at Chime and 90% of your net worth is in Chime stock because the company just went public and all the RSUs you’ve acquired over the last four years just vested? Diversification will reduce your risk.

Is all your money in US stocks, no international stocks or bonds? Diversification will reduce your risk.

More to the point of this blog post: Is all your money invested in the S&P 500 (which is dominated by Big Tech/AI companies) or, more risky, the Nasdaq 100 (even more so) or, more risky still, just a handful of Big Tech/AI stocks?

Yeah…you’re in for a very bumpy ride if/when the AI bubble pops. Aaaaand diversification will reduce your risk.

If, on top of Big Tech/AI stocks, you also own:

  • the rest of the US stock market
  • international stocks
  • maybe even some bonds (whuuut?!)

then all that is money that likely won’t be so devastated by the bursting of the AI bubble.

Write down your strategy.

Let’s say you have a lot of Bitcoin or Google stock. You constantly worry that “something” should be done, but you can’t bring yourself to actually do anything. One of the biggest causes of your paralysis now is that you had no strategy when you acquired it.

As you were acquiring Google stock or Bitcoin, you could have created a reasonable strategy like “If Google stock exceeds 20% of my total investment portfolio, I will sell the excess and invest that in my diversified portfolio” or “Every time Bitcoin’s value reaches another $10k high, I’m going to sell half of that increase and invest that in my diversified portfolio.” Make your own rules, but make sure they are clear. Rules that leave no wiggle room or uncertainty.

For more traditional investment portfolios, with their boring mix of index funds and ETFs, your strategy might look something like this:

For my goal of retiring in 20 years, I am going to:

  • Invest 90% of my money in stocks and 10% in bonds.
  • The stocks are going to be 60% US stocks and 40% international stocks.
  • Furthermore, the US stocks are going to be 80% large-cap stocks and 20% small- and mid-cap stocks.
  • All investments are going to have expense ratios under 0.20%.
  • I am going to check on my portfolio once a year.

You can make your strategy as high-level or as detailed as you want. For example, you could say you are going to invest 90% in stocks and 10% in bonds, or you could say you’re going to invest 3% US small-cap value stocks, 3% US small-cap growth stocks, 3% small-cap blend stocks, and so on through all the various “asset classes.”

The more general the strategy, the easier it is to manage. The less poke-poke-poking you’ll do. The more detailed it is, the more advantage you can possibly get from differences in how each different tiny piece of your portfolio performs. On the downside, you’ll be tweaking your portfolio far more often. And as Warren Buffet purportedly said, “Money is like a bar of soap. The more you touch it, the less you’ll have.”

If you don’t have a strategy, how will you ever know that you have too little or too much of something, and what to do if you do identify a deficit or surplus?

Protect Your Portfolio from the AI Bubble.

What does all this “investing best practices” stuff mean for what you should actually do to protect yourself?

In a word: Rebalance.

In many more words that might actually mean something to you:

Start by ensuring you have a strategy for each life goal. If you don’t have a strategy already, create one. If you are feeling emotional about it (which you probably are, and emotion is the killer of prudent investing), I recommend you hash it out with someone else you trust to be knowledgeable and (relatively) impartial. Hey, like a financial planner!

If you already have a strategy, then I encourage you to review it. Does it still make sense for your goals, both the timeframe and the flexibility?

Then at least every year, and possibly even after major market movement, look at how your actual investment portfolio matches up against your strategy. If it differs significantly, then you need to buy and sell to bring it back in balance. Hence the term “rebalance.”

Is your Google stock worth 30% of your portfolio now? You know you need to sell that 10% excess.

Is your portfolio 60% in the S&P 500 (a Big Tech/AI-heavy index) but your strategy said it should be only 45%? You know you need to sell that 15% excess.

If you have new cash to invest, you might not need to sell anything that there’s too much of. You can use the cash to buy more of what you have too little of. This makes sure that the balance or ratios between all your investments are as prescribed.

If you’ve been invested in the US stock market and haven’t rebalanced recently, you likely are overweight Big Tech/AI companies, simply because they have grown so much in the last year or so. This, in turn, probably means you need to sell some of your Big Tech/big US company stock investments, be it individual stocks or funds that are dominated by those companies.

You can then take that money and buy more of other types of investments: smaller companies, international stock, bonds. Oooh, oooh…even better: take a gander at those inflated values and donate the shares to your local food bank! (You can read more about this strategy in this write-up of how I created my own charitable giving strategy.)

In a way, it really is That Simple.

  1. Create a strategy. At a high level, this dictates how much of each kind of asset you are going to own.
  2. Check if your investments still abide by that strategy.
  3. If you own “too much” of one asset, sell some.
  4. If you own “too little” of another asset, buy some.

After you create the strategy (which yes, involves some level of guessing), there is no guesswork here. No market timing. Just prudent, boring, rational ways to manage risks of all sorts along your investing journey. A way to disconnect yourself from all the anxious hand-waving about AI (at least, from an investment perspective).

This does not mean your portfolio won’t suffer if the AI bubble bursts. It does mean you are more likely to weather any investment storm a little better.

Do you want a strategy for your investments that makes sense to you? That you have confidence in?

Your 401(k)’s After-Tax Contributions Are a Retirement Savings and Tax Superpower.

Block Woman surveys muslin money bags with a tag that says "taxes" and a small pile of coins

Hopefully you’ve figured out the basics of your 401(k). Maybe you’ve even figured out whether or not you should contribute to your 401(k) pre-tax or Roth. But what about this after-tax contribution? Otherwise known as the “mega backdoor Roth.”

Around 2018 (when this blog post was originally published, many major revisions ago), after-tax contributions were a precious rarity. By now, most major tech companies offer them. You can see whether your 401(k) plan offers them on the contributions page of your 401(k) portal. Right where it allows you to set contribution percentages for pre-tax and Roth…it might also have an “after-tax” section.

After-tax contributions to your 401(k) can help you supercharge your retirement savings, in an amazingly tax-savvy way.

How After-Tax 401(k) Contributions Work

Step 1. Put Money into Your 401(k).

You can get money into your 401(k) in three ways:

  1. The “normal” contribution from your paycheck
    Put into either your pre-tax account or your Roth account (or both!). In 2025, the “basic limit” (IRS term) for these contributions is $23,500.
    If you’re 50 years old or older, you can contribute another $7500, for a total of $31,000.
  2. Company contributions (usually in the form of a “match”)
    If you’re lucky, your company will also match some of your contributions. Some matches are generous, some are not. Nothing you can do about it.
  3. After-tax contributions
    Even though both these and Roth 401(k) contributions are made with after-tax money (i.e., you don’t get any tax benefit this year by making the contribution), they are not the same thing. They are treated differently.

Added together, these three numbers cannot exceed $70,000 in 2025 ($77,500, if you’re 50 or older; with an even higher limit if you’re 60-63 years old).

For example, if your company provides a $6000 match, you can contribute up to $40,500 after-tax:

A-T amount

So, now you could have many “buckets” of money in your 401(k):

  • Pre-tax contributions + earnings
  • Roth contributions + earnings
  • After-tax contributions + earnings
  • Company match contributions + earnings

Step 2. Move Your After-Tax Contributions into a Roth account.

This move-to-Roth is where the real benefits begin.

Most of the big tech companies allow you to do this in an amazingly awesome way that I’m frankly surprised the IRS hasn’t gotten shirty about: You can set it up so that as soon as that after-tax money is contributed, it is instantly/automatically converted to your Roth 401(k) sub-account.

Why is this awesome? Because this means that not only the contributions but also all subsequent earnings on the contributions will be tax-free, because they’re all in the Roth account.

In practice, you should:

  1. Set up after-tax contributions on the 401(k) website. Usually you can do this right where you’re designating the % to go to pre-tax and the % to go to Roth. There will be another section for “after-tax.”
  2. Find the widget/checkbox/what-have-you that allows you to automatically convert after-tax contributions to Roth.
    1. If there is no obvious way to do this on the website, then you need to call your 401(k) provider on the phone and say, “Hey there. I have started making after-tax contributions to my 401(k). I would like those after-tax contributions to be automatically converted to my Roth sub-account. Could you please set that up for me?”

That should be it. All future after-tax contributions should be shoved into the Roth sub-account without further effort on your part. Of course, I’d check after a paycheck or two to make sure.

If your company’s 401(k) doesn’t allow this intra-401(k), automatic conversion, your other options are:

  • Roll your 401(k) into an IRA when you leave the company or when your company terminates or replaces your 401(k) plan. This way you can at least get all future earnings on the after-tax contributions into a Roth account, even if they have been pre-tax up until now.
  • If your 401(k) allows “in-service withdrawals,” you can (probably manually) roll those after-tax contributions into a Roth IRA every paycheck or two.

If You Roll Your 401(k) into an IRA, Pay Attention to How Each of These Buckets of Money Gets Treated

Pre-tax contributions and earnings, and your Company match and earnings, will go into a pre-tax IRA.

Roth contributions and earnings and the after-tax contributions will go into a Roth IRA.

Where the earnings on your after-tax contributions go depends on whether you had the after-tax contributions converted to Roth inside of your 401(k). If you did, then the earnings are Roth money. If not, then the earnings are pre-tax money.

You want to make sure the money ends up in the right kind of IRA. Sometimes “paperwork” gets screwed up and Roth/after-tax money ends up in a pre-tax IRA, or vice-versa, and both are bad. If you catch this mistake, call the company where your IRA lives and they can help you fix it.

The upshot: You can put an extra $40,500 into a Roth account every year. For those of you earning more than $246,000 (married) or $165,000 (single) in 2025, you are not eligible to contribute to a Roth IRA at all. And even if you were eligible, the contribution limit is $7000/year. So, this is an amazing opportunity!

Benefits of After-Tax 401(k) Contributions

Why would you make such contributions?

  1. You can get more much more money into tax-protected accounts than you’d be able to with the usual IRA contributions (witness the $7000 IRA limit vs. $70,000 401(k) limit). The longer you have until retirement, the longer that money has to grow and benefit from its tax-protected status.
  2. You can get more money into a Roth IRA, specifically (eventually, when you roll it over) than your income might otherwise allow you to. If you and your spouse make, say $300,000/year, you simply can’t contribute to a Roth IRA. But you can put after-tax money into a 401(k), and then eventually roll those after-tax contributions (and hopefully earnings) to a Roth IRA.
  3. Your money is much more protected now than it would be if it were invested in a taxable investment account. Money in your 401(k) is protected from creditors, lawsuits, etc.

You Should Probably Make After-Tax 401(k) Contributions If…

  1. You have extra money to save for retirement.
    If you’ve got daycare bills out the wazoo and you’re saving for a down payment, it’s possible you don’t have more retirement savings in you. For now. That’s ok. It’s also possible that you can put some money into the after-tax 401(k), just not max it out.
  2. You’ve maxed out all other (appropriate) tax-protected ways of saving for retirement.
    “Normal” 401(k) contributions are an obvious way to do this. If you’re still eligible for direct IRA contributions (in particular, if you’re eligible to contribute directly to a Roth IRA), do that first. Additionally, Health Savings Accounts can be an incredibly tax-savvy to save for retirement, possibly even better than your 401(k) or IRA!
  3. You already have enough taxable savings and investments.
    All of this money we’re talking about will be in some sort of retirement account. And retirement accounts make it difficult for you to get at your money (for good reason). There are taxes and penalties if you withdraw money. But money you have in bank accounts and in taxable investment accounts, aka brokerage accounts, you can use anytime for anything, no restrictions. This is why I think investing outside your 401(k) is so important.
  4. Your 401(k) is a reasonably good plan.
    You don’t want to trap extra money in your 401(k) every year if it’s a crappy plan, unless you have the opportunity to get the money out of it and into an IRA quickly. Fortunately, I find that plans that offer all these extra whiz bang features like after-tax contributions also seem to be on the ball when it comes to providing a good 401(k).
  5. Your income is so high that just maxing out your “regular” 401(k) isn’t nearly a high-enough savings rate.
    $23,500 is a nice bit of change to save for retirement. But if you’re making $400k/year, that’s only a 6% savings rate. In general, you’re gonna need a much higher savings rate to get to a financially sound retirement. If you put in an additional $40,500 after-tax (from our example above), that brings your savings rate up to 16%. Much better!
  6. You are keen on early-ifying your retirement/financial independence.
    Maybe you have goals that are more important to you than retiring early. Like, say, buying a home, or taking time off with a child, or starting your own business. (And yes, you could justly accuse me of some transference there.) You’re going to be able to support those goals more easily with money invested in a taxable account than with money in a retirement wrapper.
  7. You can either do in-plan conversions of after-tax money to a Roth account, or you expect to be able to roll the money over to an IRA within the next few years.
    If you can’t do in-plan conversions, then the earnings will be pre-tax. The sooner they can get into a Roth account (Roth IRA in this case), and have both the contributions and the earnings grow and remain tax-free, the better.

After-tax 401(k) contributions can be a great way of super-charging your retirement savings in a way that will lower your future tax bill significantly.

Do you make good money? Are you good at saving? Can you almost taste that Financial Independence?

A Case Study in Navigating an IPO

Block Woman surveys white puzzle pieces

Do you want to create a smart strategy for your company’s IPO, but you have options and shares and RSUs, you don’t know how they fit together, and it all just seems irreducibly complex?

Maybe a case study will be helpful, to illustrate how one woman came up with a good solution for her specific life and equity details. My client, let’s call her Mia, has worked for a company, let’s call it FinTech, Inc., for five years. Earlier this year, it went public. Together we created a strategy that she has partly executed so far.

We abided by these priorities when creating the strategy for Mia. This is likely a healthy starting point for you, too.

  1. Define what this money is for in her life (i.e., define her essential goals; what does she need to feel safe, to feel fulfilled).
  2. Sell enough company stock to fully fund those goals.
  3. Minimize taxes while doing this.
  4. Consider keeping company stock only to the extent she doesn’t need the money for an essential goal.

To make sure you are really understanding the meaning of “priorities” here: minimizing taxes is less important than selling company stock to fund her goals. Yes, she might make some tax-inefficient decisions along the way!

Start with the Most Important Thing: What Is This Money for?

Some people already have a list of things and experiences they want to spend money on: buying a house, funding a kid’s college savings account, doing a remodel, taking a sabbatical, etc. Those people should focus on getting enough money out of company stock and into cash or a diversified portfolio ASAP, invested in a way and in an amount that is appropriate for those goals. 

Clearly defined goals make this part of the game pretty easy. In my experience, it’s really easy to convince someone to sell their company stock if they get a house out of it, or a sabbatical, or something that is personally meaningful to them. Convincing them to sell their stock when they don’t have any well-defined need for it…well, it’s less convincing.

This is the situation Mia was in. She has no such clearly defined goals. She has more of a “I want to have strong finances so that I have more choice and flexibility in the future” attitude about money.

In my world, that meant selling a bunch of the company stock (not necessarily all of it, but a bunch) to put it in a robust cash emergency fund and a diversified portfolio that will be less volatile in the future than a single stock would be. Thankfully, Mia was amenable to that. She didn’t hold any strong feelings about the stock.

So, she had an overarching strategy for her work with company stock: Get enough money out of the company stock to build:

  1. A robust cash cushion. (This provides near-term flexibility and protection.)
  2. A retirement portfolio big enough to give her a robust level of financial independence. Not fully financially independent, but financially independent enough. She targeted achieving “Coast FIRE” (having a big enough retirement portfolio that she wouldn’t need to save any more to it), assuming she’d retire16 years from now. (This provides long-term flexibility and protection.)

She could assign a dollar value to each. In Mia’s case, she decided to make it:

  1. 1 year’s worth of expenses, in cash ($100k)
  2.  Looking at her existing retirement portfolio, she needed an additional $700k to be Coast FIRE.

She needed $800k, after tax, out of this IPO. (Yes, these are both somewhat arbitrary targets. But also reasonable, a combination that characterizes many important financial decisions.)

Between the two, Mia will now have way more freedom to make life and career choices that aren’t motivated primarily by “how do I make a lot of money?”

If you’re doing this yourself, write these goals down and put a dollar amount next to them. It’s remarkably helpful, in my experience, to have a visually clear list of the dollar target and the “why.”

Rules of the IPO

FinTech, Inc. had a fairly standard (for the modern era) IPO setup:

  • Double-trigger RSUs fully vested on IPO day.
  • Employees couldn’t sell any shares until six months after IPO day (i.e., there was a six-month lockup). They could exercise options but would have to hold the shares after exercise).
  • If the stock price hit certain desirable targets, there would be a mid-lockup, one-week-long trading window.
  • During that limited trading window, employees could sell 25% of their total ownership as measured on IPO Day. We calculated that Mia “owned” 100,000 shares (between outright shares, vested options, and RSUs vesting on IPO day). She was therefore allowed to sell 25,000 shares.

Strategy in the Years Before the IPO

In each year leading up to the hoped-for-but-we-don’t-really-know IPO, Mia exercised some ISOs. If you have really cheap options, the upper boundary of this exercise should likely be the number of ISOs you could exercise without triggering Alternative Minimum Tax.

In Mia’s case, the exercise price was kinda pricey ($10). So, Mia chose an amount of money that she felt good losing entirely (because that’s what she risked by exercising options in a private company, especially one with no specific plans for a liquidity event), and she exercised as many options as that would buy. Turns out, that was always beneath the AMT threshold. She ended up exercising only a small fraction of her ISOs by the time the IPO rolled around.

(By the way, despite the potential tax awesomeness of exercising ISOs early, it was reasonable for Mia to exercise so few ISOs. Any money you put into exercising private-company options is money you risk losing all of. It is, in fact, entirely rational to delay exercising all options until you can also sell the resulting shares. Although it limits your upside (because your tax rate will be higher), it eliminates your downside.

Going into the IPO, she had:

Basically, she had every type of equity comp you could imagine. How should she make the best decisions across the entire suite of equity comp, not just for one type at a time?

Strategy Right Before the IPO: Choose RSU Withholding

Leading up to the IPO, Mia had one big decision to make: When her RSUs vested on IPO day, she could default into the statutory 22% withholding rate for federal income taxes on the RSU value, or she could choose to withhold 37%.

Even though Mia didn’t have much in the way of RSU shares—which meant that this choice didn’t involve a lot of dollars—she chose to have 37% withheld. Why?

  • This reduced her “concentration risk” sooner. We had no idea what was going to happen to the stock price before she’d be able to sell any shares. If the stock listed at $50 and dropped to $20, she would have effectively “sold” at that higher $50. Yay! Even if the stock price ended up increasing, she at least didn’t have to worry about it in the meantime.
  • Even though her RSU income wasn’t going to be big this year (meriting the highest tax-bracket withholding), she had plans for exercising NSOs, and that would make her income high (and therefore tax rate high) this year.

Strategy During the Lockup and Right After: Turn Company Stock into Cash ASAP

After IPO Day, when the rules were in place and we had some sense of the stock price after the company went public, that’s when most of the strategery could usefully happen.

RSUs that Vested on IPO Day

When the special, limited trading window opened up in the middle of lockup, she wanted to diversify (start selling).

Because Mia’s RSUs were “double trigger,” (which is the norm for private-company RSUs), all of Mia’s 6000 time-vested RSUs had fully vested on IPO Day. Almost 50% of the RSUs were withheld (between state income tax and 37% federal tax), so Mia then owned 3000 shares from that vesting.

Leading up to the limited trading window, she didn’t know exactly what she was going to do with those shares. We made this plan:

  • If the company stock rose in price since the IPO, she’d keep it, so she wouldn’t pay the higher short-term capital gains tax on that gain, as she’d only held the shares for a few months. We’d have to sell more of other kinds of shares to fill that 25,000.
  • If the company stock fell in price since the IPO, we’d sell it. She wouldn’t incur any tax bill (although wash sales would likely mean she couldn’t benefit from that tax loss until future years). This would mean we’d sell fewer of the other kinds of shares to fill that 25,000.

As it turns out, the stock price fell from IPO to limited trading window. It had IPOed at $40 and was down to $30, so she sold those 3000 shares she had from IPO Day RSU vesting. These ended up being the tax-wise cheapest shares to sell…because she sold them at a loss. 

She had now sold 3000 of the permitted 25,000 shares.

Shares She Already Owned

Mia owned 4000 shares of company stock. She sold them all during the limited trading window.

Because Mia had already owned these shares for at least one year, she would get the lower, long-term capital gains tax rate when she sold them. These were the second cheapest shares tax-wise to sell.

Had Mia had significant charitable intentions, she might have kept these shares to donate (instead of cash), because that’s tax awesomeness.

One thing that didn’t apply to Mia but might to you: If you acquired the stock early enough in the company’s timeline, it might be Qualified Small Business Stock (QSBS), which would eliminate most or even all federal capital gains tax on the gain when you sell. So, before you sell, make sure you know the stock’s QSBS status!

She had now sold 7000 of the permitted 25,000 shares.

Exercisable NSOs

To sell the remaining 18,000 of the permitted 25,000 shares, she looked to her NSOs. Because you owe income tax (on the “spread” between exercise price and fair market value) the moment you exercise, it costs a lot of money to exercise 18,000 NSOs ($10 x 18,000; plus taxes on the spread). But because she sold at the same time (and she could set aside some of the cash proceeds to pay the taxes), Mia didn’t put any of her existing wealth at risk.

You should know that there is no good reason to exercise and hold NSOs (in a public company). So, when Mia exercised, it was assumed that she would also sell. Read my favorite blog post on this topic.

We also took into consideration the idea of the “leverage” her options provided (leverage = exercise price / fair market value). NSO leverage isn’t a particularly intuitive concept (at least, not to me!) but it boils down to this: It would be silly to exercise the options at $10 if the fair market value were only $11. You only get, in a sense, $1 of value. That leverage is high ($10/$11 = 91%). It’s better to wait until you get more bang for your exercise buck.

During the trading window, however, the stock price was $30, so leverage was 33% ($10/$30). Leverage below 40% makes it worthwhile, as a rule of thumb.

RSUs as They Vest, Now in a Public Company

One of the challenging transitions when your company goes from private to public is how your RSUs work. When your company is private, usually you have no control over RSUs and do nothing. It is just Future Fantasy Money. Once your company is public, when those RSUs reach their vesting date…

  • They immediately turn into stock.
  • They are treated as taxable income.
  • You can sell them for actual dollars.
  • You probably don’t have enough taxes withheld on the vest and will therefore end up with surprise tax bills.

The best practice for RSUs, in public companies, after they vest is: Sell ASAP. And this is what Mia is doing. Remember, there is no tax benefit to holding RSU shares after they vest. No really.

Remember, as long as Mia remains an employee, she will continue to get new stock via RSUs vesting. So, whatever the fate of the company stock, she will share in it via the value of those RSUs upon vest, even if she were to sell all the rest of her stock.

Exercisable ISOs

I consider ISOs the most complicated of equity comp types, so I leave it for last, both in this blog post, and in Mia’s strategy in general.

ISOs have this awesome tax treatment of not incurring tax at exercise as long as you stay under the Alternative Minimum Tax threshold. (Remember that this is in contrast to exercising NSOs; tax is always due when you exercise NSOs.) Also, as long as you hold the stock for at least a year after exercise, you’ll get the lower long-term capital gains tax rate on the gain when you eventually sell.

Add on top: That AMT threshold, in general, goes up the higher your ordinary income is. So, with the RSUs that vested at IPO and continue to vest every quarter now that the company is public, and especially with the exercise of NSOs, she now has a very high ordinary income this year.

What does that mean for Mia’s ISO strategy? It allows her to exercise (and hold…to get the tax benefits) a bunch of ISOs with no tax bill.

How many? Welp, this is where she brought in her CPA and asked them to model how many ISOs Mia can exercise without triggering AMT. Thank you, CPAs with equity-comp expertise and a service model that includes an annual tax projection!

I still advised Mia to only exercise as many ISOs this year as she could without triggering AMT. Why? 

  • She doesn’t plan to leave the company in the near future, so she should have future years in which to continue to exercise the ISOs. (After you leave a company, your ISOs might outright expire. But if they don’t, they will convert, by law, to NSOs after 90 days.)
  • This keeps her risk of losing money with the company stock lower. Sure, she’s putting that exercise-price money at risk, but she’s not also putting tax money at risk.

Yes, this will add to her collection of company stock (in conflict with our general goal of reducing the concentration). She is knowingly increasing concentration risk because the possible tax benefits are so good. By itself, that likely wouldn’t be enough, but this is only one part of a larger strategy of sell, sell, sell.

I find this bit of mental accounting helpful: Mia isn’t putting any of her existing wealth at risk. The money she’s risking by exercising and holding ISOs is money she got from selling other FinTech, Inc. stock.

[Side note: AMT is not to be avoided at all costs under all circumstances. There are situations in which exercising a bunch of ISOs and triggering AMT is a reasonable choice. If you pay AMT this year, you get an AMT credit and it’s possible to get that credit back in future years. That said, it still puts you at higher risk of loss. You’re spending more money to buy stock…whose price might then drop.]

Strategy in 2026 and Beyond: She Can Be a Bit More Nuanced

Remember our high-level strategy:

Priority #1 = Sell enough stock to fund goals.
Priority #2 = Minimize taxes.

What does this prioritization look like in practice? In Year 1, sell sell sell. In Years 2+, once she has funded her goals from those Year 1 sales, she can choose to slow down the sales and let tax considerations (or risk-taking) drive the bus more often.

What will she do with her RSUs? Mia will continue to sell them as they vest in 2026 and beyond, as long as she stays at FinTech, Inc. Because, to repeat the message, there is no tax advantage in holding on to RSUs after they vest.

What will she do with the shares from exercised ISOs? These are only shares she will hold. She’s going to hang on to them for a full year (to get the lower tax rate on the gains) and then sell. If Mia develops a charitable plan in the meantime, these ISO shares (assuming the fair market value is higher than their $10 cost basis) will likely be the things she should donate to charity, not cash.

What will she do with her exercisable options? Each year she starts the NSO/ISO dance again:

  1. She exercises (and sells) some NSOs (as long as leverage < 40%).
  2. If she wants to prioritize taxes over diversification, she could reduce the number of NSOs she exercises in order to keep her income below a certain tax rate. (Her CPA can help her calculate just how many NSOs that is.)
  3. Then she sees how many ISOs she can exercise (and hold) without triggering AMT.

She now has much more flexibility in how she treats company stock:

  • Keep more: If she has an emotional connection to the stock, or doesn’t want to sell everything because “what if?!”, then cool, let’s leave more NSOs unexercised or let’s keep some exercised ISO shares past the one-year date.
  • Keep less/none: Statistically speaking, any concentration in a single stock increases your risk without a concomitant increase in your reward. 100% diversification (i.e., getting out of all of her stock) is her best chance of having successful long-term investing. This, by the way, is where I stand. But I don’t impose this perspective on clients when their life goals don’t require it.

There’s more detail to the “2026 and beyond” strategy, but I’m keeping things short and simple here for the sake of digestibility.

Here’s a summary of Mia’s strategy by type of equity:

Feeling overwhelmed? I’m not surprised.

Have a better sense that all these pieces can and should fit together? I hope so.

Convinced of the primary importance of clarifying what this money is for in your life, and of orienting all your decisions around supporting that? Good.

If you want to work with a financial planner who can help guide you through your IPO in a way that feels right and true, reach out. Even if I can’t help you myself, I Know People.

Why a Traditional Investment Portfolio is Better than Real Estate

Pink Block Woman is standing on part of a Monolopy game board with a red hotel game piece and two green house game pieces. A blue Boardwalk card is partially visible.

If you want to invest in real estate because you want passive income, keep this in mind: There is no kind of investing that produces income more passively than a traditional investment portfolio.

When I talk about a “traditional investment portfolio,” I mean owning individual stocks and bonds or, more likely, funds (mutual funds, index funds, ETFs) of stocks and bonds in accounts like a 401(k), IRA, and taxable brokerage account. You know, the Boring Stuff.

If you’re looking for passive income, a traditional investment portfolio can create that easily! You just sell shares of the aforementioned stocks, bonds, or funds with a few clicks of a button and take the cash.

(Okay, yes, investing is more nuanced than that. But apparently it has never occurred to most people that you can generate income from a traditional portfolio just by selling stuff. In fact, that’s probably how most clients of most financial advisors get income when they retire!)

The Potential Benefits of Owning Investment Property

I’m not a “real estate guy.” I know financial planners who are, and who specialize in helping people build wealth through real estate investing, like this planner. If you’re interested in buying real estate, you likely don’t need me to enumerate its virtues, but let me give it a bit of screen space…before I start digging into the potential negatives.

It Scratches that Cultural Itch We Almost All Have.

It’s pretty clear that, in this country, we love owning property we can touch. Also there’s a deep-seated appeal to the idea that “If I buy a property, then not only do I now own an asset that increases in value over time, I also get checks every month. It’s the best of both worlds.”

And that’s okay.

It Might Help You Reduce Taxes Over Your Lifetime.

I’m not an expert on this. TikTok will give you all sorts of wrong and potentially “If the IRS finds out, you’re going to jail” advice on using real estate to reduce or avoid taxes.

In the legitimate world, I know and respect enough tax and financial planning professionals with real estate expertise to know that there are legitimate ways that real estate can help optimize your taxes over your lifetime.

Please keep in mind that, we generally shouldn’t care about optimizing taxes in any one year (which unfortunately is the focus of far too much tax advice). Who cares if you save $5k in taxes this year…if you still have to pay that money plus more in the future? The goal is to minimize taxes across your entire lifetime. And sometimes that means that paying less in taxes this year is the wrong thing to do.

It Can Be Emotionally Easier to be a Successful Long-Term Investor.

Behavior is a huge component of investment success. If you want to be a successful investor in the long term, you want to be a long-term investor (duh). The most reliable way to accomplish this is to buy investments and then just keep holding them.

In this way, owning real estate directly can have an advantage over a traditional investment portfolio.

You can see the value of your stock, bond, or ETF every day. When it goes up, glorious! You’re floating on air! Envisioning those first-class tickets you can now afford. When it goes down, ack! Gloom and doom and everything is horrible.

When you own, say, a single-family rental home, you know what its true value is on the day you buy it (i.e., it’s the price you paid) and the day you sell it (i.e., it’s the price someone else is willing to pay for it). The best you can do on every other day is “comps,” which are just informed guesses, and not a number you’re confronting daily in the headlines.

We financial planners try to train clients to not look at their investment portfolio very often, so as to minimize the self-defeating emotions that looking at the numbers can stir up. You don’t have to worry nearly as much about that if you own a single-family home…because there’s nothing for you to see. It’s  therefore easy to ignore the daily, weekly, annual vacillations in the value of a single-family home. That probably makes it easier, emotionally, to own long term.

The Downsides of Owning Real Estate, and How to Avoid Them by Owning a Traditional Investment Portfolio

It’s Often Anything but Passive.

As the saying goes, “Your index fund doesn’t call you at 3 a.m. to complain about a leaky pipe.”

For sure, you can reduce this problem by hiring a property management company. But that is still one more relationship you have to commit time and energy to, and it doesn’t get you out of all decisions and effort associated with the investment property. (Not to mention the cost, of course.)

Even after you buy it, you have to keep spending on it.

You have to pay the pest guy every month to come keep the rats out. Or the landscaper to keep the lawn mowed. Or the property tax. Insurance. Or repairing the roof. Replacing the carpet. Paying a property management company. Etc. If you own your own home, you already are well aware of many of these “hidden” costs of owning real estate.

Yes, obviously the point is for rent to cover these costs. And ideally it will (plus some!). But just keep in mind that these costs are always there…rent may or may not be.

It increases the complexity of your financial life.

It is hard enough keeping track of all your 401(k)s and IRAs and 529s and Robinhood and Coinbase accounts, not to mention your eight different bank accounts.

Now you’re going to add an entirely different kind of asset to the mix, with an entirely different way of tracking and managing it. Not a deal breaker! But it should be a consideration.

Unfortunately, I think our modern financial lives are irreducibly complex. We cannot make them simple. But we can fight to make them simpler. Not only does that make our lives more pleasant, but I firmly believe it indirectly benefits us financially. We’re more likely to understand and stay on top of all the bits and pieces when there are fewer moving parts.

You’ve just complicated your taxes (and have to pay for that complication).

This is a special case of the above mention of complexity. But I think it warrants calling it out by itself, because taxes are such a source of stress and anxiety for most of us.

Somebody has to prepare Schedule E—and possibly a bevy of other schedules and forms, depending on what you’re doing with your real estate—on your tax return. Either you’re taking your time and energy to do it (which I highly recommend against), or you’re now paying your CPA more money to plan more and do more tax paperwork.

Real estate prices don't actually grow all that much over time.

The stock market, historically, has meaningfully outperformed real estate. According to this Investopedia article,

The S&P 500 index, which tracks the performance of the 500 largest U.S. public companies, has delivered an average annual return of 10.39% (including dividends) from 1992 to 2024, resulting in an inflation-adjusted return of 7.66%. During the same period, the U.S. housing market grew at about 5.5% annually.

Yes, there are regional variations.

Real estate—much like company stock or a cryptocurrency—tends to produce a lot of stories (from your cousin or your co-worker or the internet). But stories aren’t a good basis for long-term investing. Data is.

You just increased your investment risk.

You’re probably aware of the benefits of “diversification.” Diversification means, simplistically, owning lots of stocks instead of only a handful of stocks. It’s described as “the only free lunch in investing.”

If you looked at someone’s net worth (possibly even your own!), saw that it was $2M and that $1M of it was in their company stock, I bet you’d be all “Whoa….that’s a bit crazy.”

But if you buy real estate as an investment, you’re likely going to be putting a lot of money into that investment and could end up in the very same situation, where $1M of your net worth is in this single investment property.

Concentration risk is concentration risk. That one house gets hit by an earthquake. That one neighborhood becomes unpopular. These things are outside of your control but have a huge effect on that one asset. It’s similar to owning a bunch of a single company’s stock, say, BlueApron, and then riding the stock down from its IPO price of $10 to below $1 less than two years later.

It’s illiquid. Otherwise known as, you can’t buy groceries tomorrow with your property value today.

I’ve written a critique of investing in “fancy” investments. One of those critiques is that many fancy investments are “illiquid,” that is, you can’t easily sell it and turn it into dollars to buy groceries with tomorrow.

The same thing applies to owning real estate. You do have some tools for getting money out of these assets if you need it, like a cash-out refinance. But in general it is way easier, faster, and less expensive to get money out of a traditional investment portfolio. You just sell shares of your stocks and bonds and funds during the next day that the stock market is open. Which it is almost every weekday of the year.

You can’t just buy or sell small bits at a time. It’s all or nothing. That might not match up with your finances.

When you’re buying a property, you likely need a lot of money as a downpayment. (Sure, at times you can secure a mortgage that enables you to make a very small downpayment. I’d argue that just because you can doesn’t mean you should.)

Maybe you only have $100s or a few $1000s at a time to invest. You can either wait, maybe years, to accumulate enough to buy real estate…or you can just start buying stock and bond funds Right Now. You can usually start investing in a traditional portfolio with just a few bucks.

Now let’s say you need some money, say, $50,000 out of your investment portfolio. You can easily sell $50,000 out of your $2M investments…if it’s a traditional investment portfolio. But how do you get $50,000 out of your $2M investment property (or four $500k investment properties)? It’s probably possible, but it sure as heck is also more complicated.

This might be the wrong time, in your financial life, to receive more income.

When you’re retired and living off of your investments, having an investment that generates income every (or most) months could be a great match for your needs.

When you’re still working and earning a paycheck, you might not want additional monthly income from your investments, and it certainly isn’t appealing from a tax perspective. Why pay taxes on income that you don’t need if you could instead delay that income into the future when you do need it?

Either way, you might not have as much control over when you receive—and are taxed on—the income.

By contrast, you have a lot of control over income and taxation timing when you own a traditional investment portfolio. Yes, even the most tax-efficient stock, bond, or fund distributes dividends, interest, and capital gains on occasion, at a time that you have no control over. But you can minimize current income (by quite a lot!) by choosing tax-efficient investments and strategically choosing when you sell the investment.

I know there are a lot of tax maneuvers to reduce your current taxable income from investment real estate. Maybe you can arrange it so that the tax impact of the real estate income is a non-issue. You’d want to work with a tax professional to figure that out before committing.

Most people don’t have the skills and experience to properly evaluate a real estate investment opportunity.

I know I don’t, which is a big reason I don’t invest in real estate or seek to provide much advice to clients.

The wonderful thing about a traditional investment portfolio is that it’s easy to understand and implement the best practices of “own a diversified portfolio of low-cost funds, mostly in stocks when you’re many years away from your investment goal.” I don’t have to know—and I don’t—how to evaluate the investment worthiness of Airbnb or Coca Cola or Exxon to successfully invest in the stock market.

If you’re going to drop $100ks into a single investment property, you’d better know how to evaluate its investment worthiness. If you do, yay! But I reckon that more people think they do than actually do, and it’s too big a risk to take without actually being one of those few.

When Owning Real Estate Could Be a Good Solution for You

You like the game.

You like evaluating properties and bidding on them and managing properties and improving properties and maybe even the interpersonal demands of tenant relationships.

One of the things I love about my traditional investment portfolio is that I basically never have to think about it (even before I hired my own financial planner). I just set it up once, plow money regularly into it from my paychecks, and check in once a year to make sure it’s all copacetic. I really really don’t want to have to think about my investments more frequently.

You have the necessary expertise to evaluate the investment.

You have sufficient expertise or have hired professional expertise so you can properly evaluate investment opportunities.

You have the necessary skills to maintain properties.

You either have the skills to maintain properties or have a network of professionals who are willing to do it for you.

If You Really Want to Own Real Estate

There are smart, successful people out there who grew meaningful wealth through real estate. I’m not one of them, and I don’t know enough about real estate to help anyone else be one of them.

If you want to own real estate but don’t like the idea of everything that comes with tangible property, considering owning real estate through a public REIT (real estate investment trust), which offers the same ease and liquidity of your S&P 500 fund.

And don’t forget that if you own a “total US stock market” fund, you almost certainly are already invested in real estate. Vanguard’s Total US Stock Market ETF (ticker: VTI), for example, currently allocates about 2.5% of its money to real estate.

If you really want to own something you can touch, then alright.

Because of the complexity and cost involved in evaluating, buying, maintaining, and managing property, I recommend you work with a specialized financial planner (not a real estate professional, who would probably have pretty profound conflicts of interests or unhelpful biases). You can start that search in the XY Planning Network’s Find an Advisor tool, filtering by Profession > Real Estate Professionals.

Do you want to build wealth and passive income the easier way?

Is Your Company Going Public? Stop Obsessing About Taxes. Start Obsessing About Your Life.

Block Woman stands next to a pile of coins topped by a colorful bouquet of paper flowers.

It’s been a long few years, but your company is finally having its IPO. Lucky you!

If your company is going (or has recently gone) public, then perhaps you are beset by anxiety about “How do I do this right?” You recognize that this is probably a once-in-a-lifetime opportunity to make real wealth in a very short period of time, and you don’t want to screw it up.

And ‘tis true! On all counts. It’s rare to work at a company that goes public, especially one that goes public successfully. It probably won’t happen to you again. And there are a lot of ways to screw this up.

But what I don’t want you to think is, “In order to do this right, I have to be sure to pay as few taxes and make as much money as possible.”

It’s possible those things will coincide with “doing it right.” But they’re not sufficient. Hell, they’re not even necessary.

If I lost a few readers with that comment, okay, I’m not surprised. Because this simply isn’t the way we generally think about IPOs. We generally think about Money Money Money! Taxes Taxes Taxes!

What I would very much like you to think about instead is Life Life Life! Purpose Purpose Purpose!

Most content I see or advice I hear about IPOs or anything equity comp-related is about technical stuff. Minimizing taxes. Diversifying your portfolio. Etc.

And that stuff is indeed really important to think about! I just think it tends to distract us from the main point (“what is this all for?”). Its prominence in the discussion of equity comp increases the chances we’re going to make sub-optimal decisions. Ultimately, I think, it has the potential to make us all less content with our finances.

I am drafting this blog post on the airplane ride back from two weeks’ vacation on the east coast. I took my family to NYC for five days. There we got to have new experiences together, I got to see my kids get excited about things. I got to meet in-person some clients I’ve only ever seen on the screen. (As one of my daughters said, “Are all your clients this cool? No wonder you love your job.”)

Then we went to New Hampshire, where we spent over a week in a rented house on a lake, with my father and my brother’s family, including my kids’ only cousin. I get to see them all only once a year, and it’s very special to me.

Now, did I need money to have and enjoy this vacation? No doubt. Some money is definitely necessary.

If I were twice as rich, or if I paid less in taxes, could we have afforded a fancier rental house or rented a speed boat for more than one day?

Certainly.

Would it have given me more or better memories? Would it have strengthened my relationships with my family any better? Would it have helped me avoid getting Covid (which I did…womp womp)? Would it have increased my joy at looking over the cabin railing down at the beach, seeing my two daughters play Marco Polo with their cousin in the lake?

Probably not.

We’re all different. Different values. Different stages of life. Different histories with money and relationships. I don’t share my recent vacation awesomeness as a specific aspiration. I’m sure many of you have had more expensive, more elaborate, and even more enjoyable vacations.

But I do want to invite you to think (many times, with many people, sometimes in silence, over a long period of time) about what makes your life meaningful. What gives you purpose. What gives you joy.

That should be the guiding light of your IPO decisions.

If your goal is to minimize taxes, then sure, yes, you can:

  • Strategically exercise and sell your ISOs so that you never owe Alternative Minimum Tax (AMT)
  • Wait to exercise (and sell) your NSOs until you have used up most of the leverage in them (gotten most of the value out of the options)
  • Hold on to your shares for at least a year to ensure you pay the lower long-term capital gains tax rate when you sell them
  • Spread your options exercise and share sales over several years so you stay out of the highest tax bracket
  • Put your giant pile of company stock in an Exchange Fund to get diversification without immediately selling (and incurring taxes)
  • Donate a lot of company stock to a Donor Advised Fund

If your goal is to get as rich as possible, then sure, yes, you can keep most of your company stock. After all, concentrated ownership in an asset is one of the few ways to build startling wealth.

But what if the company stock price tanks? (That’s been known to happen a time or 1000 in the aftermath of an IPO.)

Or you need the money to do something or buy something now?

Your savvy tax- and wealth-optimization maneuvers can result in less money, for the simple reason that we just don’t know how this stock is going to perform. Now, if it’s “just money,” then maybe our attitude is “oh well.”

But if instead of “just money,” it’s your kid’s college, or your first home, your return to school to train for a new career, that trip you really want to take your family on, or that robust cash emergency fund you’ve always lacked and has always made you feel vaguely unsafe…well then, that’s actually kind of a tragedy.

Consider two people going through the same IPO: Chloe and Jane.

They each have $2M worth of company stock. Chloe does all the wealth-maximizing, tax-minimizing things. Chloe doesn’t have much sense of what she wants out of life. She just wants to have more money, be wealthier, be “financially independent,” to do what she wants when she wants.

Jane, on the other hand, has a pretty clear vision of what she wants out of life. She has thought about this before. She wants enough wealth that she can feel comfortable saying No the next time her job makes her feel uncomfortable or morally compromised. She wants to move back home, closer to family, and buy a home there. So, she sells most of her stock as soon as she can, not even paying much attention to the tax rate.

This can play out two ways:

Way #1: Let’s say the company stock goes on to do poorly. Well, then, generally it was a better bet to sell the stock ASAP, when it was worth more. Jane comes out on top: She has more money than Chloe and more ability to build her vision of a rich life.

That’s an easy one.

Way #2: But now let’s say that the stock instead goes on to do great! Chloe ends up with four times the wealth that Jane does!

You might think this makes Jane’s path the less fortunate one. I would argue Jane still probably comes out ahead. How is that possible?

Jane still has enough money to allow her to quit her job if it ceases being a good fit for her, and enough money to move back home and buy a house. She can still fund her vision of a rich life.

On the other hand, yes, Chloe has money. Lots of it. And money ain’t nothing to sneeze at. But that’s kind of all she has. There’s no higher purpose that this money is serving in her life. Maybe she can get a more expensive home. Go out to eat more. Take nicer vacations. But unless there’s a broader vision underlying those things, it’s just plain consumption.

Now, look, no financial planner worth their shiny CFP® lapel pin would tell you to ignore taxes and the strategies for building more wealth. We have to know these things so we can make an informed decision.

But I don’t actually think your IPO, even if it “goes well,” will meaningfully change your life if you don’t start with a vision (even a vague one) of the life you want to build for yourself, now and in the future.

Step #1 is to build that vision. At least the outlines of one.

Step #2 is to optimize for minimizing taxes and building wealth within that larger life plan, not as the plan itself.

I invite you to figure out how you’re going to define a “successful” IPO.

Is it defined by how much you pay to the IRS? Is it defined by how much money you get compared to your colleagues?

Or is it (and I hope you arrive here) defined by your ability to meaningfully support a life of meaning and joy? A life that better enables you to build and honor relationships? To serve others?

Do you want help making your company’s IPO a success?

Should You Contribute Pre-Tax or Roth to your 401(k)?

Block Woman looks at a spreadsheet on white paper with columns of black numbers

Recently I spoke on a panel of financial planners, here in my home of Bellingham, WA. The two other planners immediately made clear their love for Roth accounts. I was a bit taken aback because I don’t hold that unequivocal enthusiasm.

As I reflected on it, I realized that the audience we were speaking to (people whom my colleagues are likely to work with) was a bit different from the demographic I work with. Largely, my clients have higher incomes, live in higher-income-tax states (hard to be lower, given that Washington doesn’t have an income tax), have different forms of compensation, and have access to more “luxurious” workplace retirement plans.

The experience made me want to collect my thoughts about the “pre-tax vs. Roth contributions” topic, despite it being one of the most overdone and usually uninteresting topics in personal finance.

Usually, the resolution to the “pre-tax or Roth?” question is pretty basic: “If you think your tax rate will be higher when you’re retired, contribute Roth now. If you think your tax rate will be lower when you’re retired, contribute pre-tax.”

And, you know, if you can remember only one thing when making the choice, that’s probably the best one thing!

But the discussion can be soooo much richer (and I think more interesting, but I realize most people don’t share such feelings). I really like these two articles about this topic because they go into a lot of that nuance, are both persuasively argued…and happen to be on opposite sides of the debate:

You might think this is a pure math problem, but I would argue there’s a lot of behavioral input that goes into making the right decision…for you. (And let me take this opportunity to reiterate that this applies to all of personal finance: It’s not just a math/optimization problem.)

What are Pre-Tax and Roth Contributions?

Let’s just make sure we’re starting with the same basic understanding of the terminology here:

When you contribute to your 401(k), you can contribute “pre-tax” or “Roth.”

When you contribute pre-tax, every dollar you contribute is $1 of income you don’t get taxed on this year. If:

  1. You earn $400k and
  2. Contribute $20k pre-tax to your 401(k), then
  3. You pay taxes on only $380k, which saves you in taxes.

When you contribute instead to Roth, you still pay taxes on that contributed amount, so you pay taxes on the full $400k.

One point to Pre-tax.

But later on, in retirement, when you take the money out of your 401(k), you pay taxes then on the money in your pre-tax account. By contrast, you don’t pay taxes on the money you take out of your Roth account.

One point to Roth.

The lesson here: The IRS is gonna get its pound of flesh, either on the front end or the back end.

I don’t want to belabor this discussion, so if you want to learn more, please see what Investopedia has to say about the two kinds of contributions, two kinds of accounts.

A couple clarifying notes:

  • I’m talking about that $24,500 portion (the 2026 limit) of your 401(k) contribution, not any “after-tax contribution,” a wonderful feature that many tech companies offer.
  • “Pre-tax” and “Roth” apply to IRAs, too. I’m focused on 401(k)s for a couple reasons: you can put so much more money into them than into IRAs ($24,500 vs. $7500 in 2026), and there are no income limitations on tax deductibility for and contributions to 401(k)s, as there are for IRAs.

Why You Might Choose Roth

Let’s start with the classic analysis: a comparison of tax rates now vs. in retirement. It has more nuance than you might anticipate!

You think your tax rate in retirement will be higher.

There’s a rule of thumb saying that you should contribute Roth when you’re younger and earning less. We just assume, generally, that your income—and therefore tax rates—are lower when you’re younger.

When you’re older and later in your career, earning more and thus paying a higher tax rate, that same rule of thumb tells you to contribute pre-tax.

To put numbers to it:

  • If you contribute Roth now, when your tax rate is 32%, you don’t save any taxes.
  • But if you expect your tax rate to be 35% in retirement, and you’ll be able to withdraw Roth money tax free, then that’s a win!
  • You paid taxes at 32% instead of 35%.

While the math makes sense, it begs the question: How can you possibly know what your tax rate will be in 20 or 30 or 40 years? Both your finances and the government’s tax structure can change in meaningful and unpredictable ways.

Further confusing the matter is that your income (technically, your Adjusted Gross Income) in retirement can increase the premiums you pay for Medicare Parts B and D and the percent of your Social Security income you owe taxes on, which create in effect higher tax rates on your income. The more Roth income you have (which doesn’t get included in your AGI), the more chance you have of avoiding these “effective” taxes.

You live in a state that doesn’t impose income tax, and you might move to one that does.

In a way, this is just a specific case of the above tax rate comparison, but I think it warrants being discussed on its own.

If you live in Washington state, your income tax is only your federal rate. There is no state income tax. (Would that there were. Good lord does it make state administration and revenue raising and adequate school-funding a nightmare.)

If you plan to stay in Washington (or another no-income-tax state) while in retirement, then this isn’t really an issue. But in retirement, if you might move to California or NYC, where there is a high income tax rate, then your current tax rate, even if you’re earning a high income now, might be lower than it will be in retirement.

Similarly, there are several states that impose an income tax, but they specifically exclude distributions from retirement accounts from taxation (ex., Illinois, Iowa), which makes it as good as Washington for this conversation.

(Note that while a couple states don’t give you income tax deductions for contributions to IRAs, all states give you tax deductions for contributions to 401(k)s. Yet another way that 401(k)s are so much better than IRAs and it’s a moral crime that your access to such accounts depends entirely on your employer’s choice, not yours.)

You earned way less income this year than usual.

This is yet another variation on the “current tax rate vs. future tax rate” analysis.

Did you not work for the first, say, eight months of the year, and earned money only for the last four? Lots of this going around nowadays, what with frequent tech layoffs.

You’ll probably be at a lower tax rate than you’re accustomed to and more likely to be at a lower tax rate than you will be in retirement.

It’s likely a good year to make your 401(k) contributions (during those four months, when you have access to your job’s 401(k)) Roth. (As an aside: It might also be a good year to do a Roth conversion, shoveling even more money into a Roth bucket and out of a pre-tax bucket.)

Your future tax rate on this money is now predictable. It’s 0%.

This reason has nothing to do with math.

I personally contribute Roth because I value predictability. (I mean, I also live in Washington state, with no income tax, and I’m not at the top federal tax rate.) I don’t know what tax rate I’ll have in retirement. But I do know what tax rate I’ll have on all of this Roth money. And that tax rate iiiiiis? 0%.

So now, to the extent I have Roth money, I don’t have to care about my tax rate in retirement. Not having to care is a wonderful feeling.

(For your Not Caring entertainment, if you’re a woman in perimenopause or menopause, I present the We Do Not Care Club. My favorite part is that she always has three pairs of glasses hanging off her.)

You can effectively SAVE more to a Roth 401(k) than to a Pre-Tax 401(k).

Hunh? Isn’t the contribution limit $24,500 (in 2026) no matter if you contribute Roth or pre-tax? Yes, yes it is.

But in effect, the money you contribute to your 401(k) is only worth $24,500 minus the taxes you will owe on it in the future. Whereas the $24,500 you contribute to your Roth 401(k) is worth the full $24,500.

That said, theoretically, if you save $8700 in taxes by contributing to your pre-tax 401(k) and then save that $8700 elsewhere (like in a taxable investment account), you will have saved kinda the same amount as if you’d made a Roth contribution.

Problem is, a lot of people won’t think about it that way and even if they did, they wouldn’t get around to setting up the system by which they save and invest that $8700. So, this argument for making Roth is more behavioral than it is mathematical.

(Why $8700? Because the highest federal tax bracket is 37%, and 37% of $24,500 is roughly $8700.)

You Want Access to Some of this Money Before Age 59 ½.

If you end up retiring early or if a large, unexpected expense comes up before retirement age-ish, it can be really helpful to have access to retirement money. Usually, however, if you take money out of IRAs or 401(k)s before age 59 ½, you get penalized (on top of owing whatever income tax is required).

A big exception to these constraints is contributions to a Roth IRA. If you have contributed to a Roth IRA, you can pull those contributed dollars out any time, for any reason, no penalty, no tax. How helpful!

Unfortunately, if you have contributed to a Roth 401(k), withdrawing that money isn’t nearly as nice. There is a way to fix this, though! When you leave your job, you can roll your 401(k) over in such a way as to make that Roth money equally accessible.

If you have both pre-tax and Roth money in your 401(k), when you roll it over:

  1. Roll the pre-tax money to either your new 401(k) or a pre-tax IRA. For today’s discussion, it doesn’t matter.
  2. Roll the Roth money into a Roth IRA, specifically. (Yes, you can do this, rolling different buckets of money in your 401(k) to different destinations.) Now you have that kind of unfettered access I mentioned above.

Warning: Don’t Make Everything Roth

Keep in mind that it’s ideal—from the perspective of minimizing lifetime taxes—to have at least some pre-tax money in retirement.

Why?

Because at least some of the money in your pre-tax accounts is going to come out at either 0% or low % tax rates. Which means you get the tax benefits now when you contribute and also later when you withdraw.

A primary way that money will come out at low or 0% tax rates is thanks to our income tax brackets:

In 2025, the first $23,850 (for a couple) and $11,925 (for a single person) of income are subject to no income tax. After that, it’s only a 12% tax rate up to $96,650 and $48,475, respectively.

Your withdrawals from a pre-tax retirement account count towards that income. So, some of your pre-tax contributions now (at a high tax rate) can be taken out at such low (or even zero!) tax rates in retirement.

Below I discuss other ways to get money out of your pre-tax account completely tax-free.

Why You Might Choose Pre-Tax

Most of the reasons below boil down to “You think you’ll have a lower tax rate in retirement than you do now, when you’re making the contribution.” But I think it merits going through specific scenarios because it’s often not obvious!

You live in a high-tax state now and might not in retirement.

Making $100ks and living in California? You’re gonna have a banger of a combined tax rate between federal and state.

If you’re married and make $700k combined, and you live in California, combined federal and state income tax rates = 44.3% (35% + 9.3%). And if you make enough money to max out both state and federal income tax brackets, you’re paying roughly 50% (37% + 12.3%) on your topmost income dollars!

At those tax rates, it’s pretty nice to contribute $24,500 to a 401(k) and have it “cost” you only about $12,000 after your tax benefits.

If you plan to move for retirement to a state that has no income tax (hello from Washington) or a state that has an income tax but excludes distributions from retirement accounts from it, that argues for a pre-tax contribution now.

Get the state income tax tax break now and later. Nice!

You plan to donate to charity in retirement.

One way to not pay income tax on your pre-tax money is simply to not take it out of your retirement accounts. Clever, eh?

Problem is, the federal government is on to you and your schemes! The IRS forces you to take money out, via the “Required Minimum Distribution” (RMD; see Investopedia’s explanation).

For most people who read my blog, it will be at age 75 that you must (i.e., are “required” to) withdraw (i.e., “distribute”) a certain “minimum” amount of money from your pre-tax retirement accounts each year. And when that money comes out, you’ll have to pay income taxes on it.

Unless!

First, you roll your 401(k) into an IRA. Then you direct that RMD money straight from your IRA to a 501(c)3 charity. That is called a “Qualified Charitable Distribution.” The amount of your RMD that you direct to charity never hits your tax return. Voila, no taxes.

Again, you get the tax breaks now and later. Sounds pretty savvy to me.…

You plan to donate to charity when you die.

When you die with money in your pre-tax retirement accounts, and you leave it to a loved one (other than your spouse), they are forced to withdraw the money over 10 years and pay income taxes on those withdrawals.

At this point, you’re dead, so you might ask “what do I care?” And…fair! But if you’re also interested in optimizing for taxes for your heirs, you’ll think about this.

Just as you can direct money to a charity when you take RMDs from retirement accounts during your life, you can leave your pre-tax money to a charity upon your death. The charity doesn’t pay any taxes and they receive the full value of the account. (By contrast, if your adult child inherited your $1M IRA, they could receive only, say, $600,000 after taxes.)

At the same time, you can leave your other buckets of money (taxable investments, Roth accounts, etc.) to your adult child, which often gives them all that money with no tax bill.

Again, you’ll have gotten the tax deduction when you contributed…and no one had to pay taxes upon withdrawal. Neato.

You anticipate having years of no/lower income before or in the early years of retirement.

This is where the Roth conversion comes into play.

How does this play out?

  1. You make pre-tax contributions now, and get the tax deduction now, at your current high tax rate (let’s say 35% federal, 9.3% state).
  2. Then in 5 years when you take a sabbatical or retire early, and you have no-to-low income, you can convert that pre-tax money to Roth. Yes, you’ll pay taxes on this conversion, but it’ll be at a lower tax rate.

Now, in practice, many of my clients who have taken sabbaticals haven’t really been able to take advantage of Roth conversions because they are eligible for Medicaid or heavily subsidized ACA policies on their low income. They would lose that eligibility if they did a Roth conversion and are understandably quite loath to lose it.

So, in practice, this is probably most likely to happen in years when the cost of your health insurance doesn’t depend on your income. (If you’re a domestic partner to someone, but you each file taxes single, this is a banger of a proposition. You get health insurance through their employment, but you can purposely incur income without changing the cost of that health insurance. Another time when this can happen is after you become eligible for Medicare, at age 65.)

You have the discipline to save and invest the tax savings.

As I discussed above, contributing pre-tax to your 401(k) effectively saves less money than contributing Roth to your 401(k). But, if you are disciplined enough (or follow your financial planner’s advice sufficiently) to invest that tax savings (which we calculated as being $8700 in the above example) in a taxable account, then you have more or less saved the same amount of money.

In Practice, It’s Often Pretty Obvious.

If I have made you feel as if the “pre-tax vs. Roth” decision is overwhelmingly complicated, then let me reassure you that, in practice, with my clients at least, the decision is usually pretty simple.

Here’s a typical profile of a client I work with:

  • They live in a state or city with high income tax rates (ex., CA and NYC).
  • They have a high-enough income that they can save a lot of money in addition to the $24,500 pre-tax or Roth contribution limit.
  • Their 401(k) allows them to make after-tax contributions (immediately converted to Roth) of roughly $37,500 on top of that $24,500, and more even to their taxable account.
  • They are in their 30s or 40s and have probably one or two decades before full-fledged retirement planning, and even more decades before they die. Which is to say: there’s a looooot of unknowability in front of them.

So, what do they do? They get current tax breaks by contributing $24,500 pre-tax and then they also contribute after-tax-turned-Roth money and sometimes even to a taxable investment account, so now they have a nice pile of all three kinds of tax buckets (pre-tax, tax-free, taxable) in retirement. 

If you find yourself struggling to make this decision, here’s my parting advice:

I don’t want to downplay the importance of minimizing taxes. Over the course of a lifetime, the right decisions can save you $10ks, $100ks, or possibly $Ms. But in cases when there’s no clear winner, then I’d stick with just trying to save a bunch of money and then wait for the tax picture to get a bit clearer.

Do you want to make sure you’re saving for retirement in a tax- and life-optimized way?

Reflections on 9 Years of Flow

Block Woman stands next to a white circular cake-like object that has a single yellow flame above it.

I’ve been thinking about this blog post for over a month now.

Despite starting to think about it such a long time ago (by blogging standards), and despite generally being not at a loss for words, I found myself struggling to write about this last year in business.

[Note: We celebrate Flow’s birthday on May 9. If you want, read my Year 8, Year 7, Year 6, Year 5, Year 4, Year 3, and Year 2 reflections.]

Eventually I realized, Duh, Meg, you’ve had a physically, psychically, and emotionally exhausting 2025 so far. You just don’t have the energy to write your “usual” blog post.

Prior to last December, my business was stable, which was actually kinda…uncomfortable for me. My business coach counseled me to practice “tolerating the shit out of your success.” I was busy experimenting with this novel idea when December hit.

In December, my stage 0 breast cancer—for which I’d had two lumpectomies and radiation in 2023 and 2024—came back. I had a (single) mastectomy in early March, followed by convalescence for the rest of the month. And since then, I have been catching up.

I don’t want to belabor the whole experience, so let me share something important I took away from it:

It’s Really Nice to Let People Care for You

I often hear from people that it’s hard for them to accept help. When I was preparing for my mastectomy, my OOO, and my recovery, I made a conscious decision to embrace the shit out of letting people help me.

And it. was so. lovely. (10/10, would recommend)

My colleague, Jane Yoo, stood ready to help my clients with any urgent financial planning needs during my convalescence. (I still haven’t figured out a thank you gift that reflects the huge impact of your support, Jane. Sorry!)

My Client Service Associate Janice worked diligently to keep communication going with clients and pushing work forward in my absence.

Clients expressed concern in meetings and via email.

Local colleagues and friends brought my family meals.

Remote colleagues and friends sent us meal kits and Door Dash cards. And even the occasional t-shirt with “Thank fuck that’s over” emblazoned, conveniently, right over the breast that I had removed.

(My husband was all, “Jesus, Meg, how many people do you know?” To which I responded, It’s nice to be a woman. We support each other really well.)

Most important of all, my husband. He made the family “run” throughout it all. He made me feel loved and supported and not like a freakshow in the aftermath of the mastectomy. (Many parts of the whole experience were gross, and many more uncomfortable or painful. But the single worst experience was the first time I looked beneath the bandages just a few days after surgery. It took my breath away, but not in a good “Top Gun” sort of way.)

What Else Happened During My Ninth Year in Business?

I think Cancer and Mastectomy pretty handily trumps most other things. But other important things did happen!

We hired our own planner.

My husband and I hired our own financial planner. I had been our financial planner up until then.

Despite having enough of the technical knowledge to do the job myself, as I had been doing for years, I wanted to work with a financial planner for four reasons. I wanted:

  1. a thinking partner. Life is complicated, and getting increasingly so.
  2. a backup for me/for my family
  3. someone to put me first (as I put my clients first)
  4. someone to Identify my blind spots

Professionally, the whole process of interviewing financial planners and working with ours so far has been instructive to me, unsurprisingly.

Personally, we’ve only been working with him (yes, a man! <gasp>) since January, and I already feel the relief of knowing that someone is in my (our) corner, keeping an eye on things.

I established a formal emergency continuity plan for Flow.

One of the biggest challenges of starting an independent advisory firm is making sure your clients are taken care of if something happens to you (you die or become disabled).

I had been doing what I think most small, independent firm owners did: I arranged (informally) with a few colleagues to help serve my clients in the event I became unable to. The arrangement had meaningful inadequacies:

  1. These colleagues ran firms that probably wouldn’t allow them to assume relationships with all my clients, overnight. Which meant that many of my clients would have to be redirected elsewhere.
  2. My family wouldn’t get any monetary value out of this firm that I’ve spent nine years building.

The firm I now have a legal agreement with is big enough to accommodate all my clients, have a plan for how they’d do that, and sufficient expertise and compassion to serve my clients.

This was a very big deal for me, and I’m very glad it is finally done.

My Associate Planner left.

In mid-January, my associate planner left.

This meant I had to rejigger my plan to support clients before and during my medical OOO. ‘Twas stressful, but I got it done, and I’m quite proud of myself for how I navigated the whole thing.

Without an associate planner, I am back into alllll the weeds of financial planning. And I gotta say, it’s fun. I like the process of forming the “picture on the boxtop” from all the individual puzzle pieces of a person’s financial life. Diving back into the entire process has given me more opportunities to see what might be improved.

Leading up to my surgery, during my convalescence, and for these two or three months back in the office but “catching up,” I made the conscious decision to not think (much) about what to do about no longer having an associate planner. I simply need to “get through” (i.e., work a lot, but it is work I know how to do).

Once I am through this crush, I will raise my head again, like a curious meerkat, look at the expanse of my business and my life, and start thinking Big Thoughts again.

I continue to fall deeper in love with the Annual Renewal Meeting.

I learned from my former marriage therapist that “there is freedom in structure.”

After a client and I get past the first year’s hurly burly, the cornerstone of my client-service structure is the Annual Renewal Meeting. I love this meeting, and I love the structure I’ve created for it. My preparation is structured. My follow-up is structured. Which means I can find real “freedom” in the meeting itself; it can be largely guided by whatever feels most important for the client.

I love this meeting so much, I married it. Wait, no, I mean I wrote a whole blog post about it. 

I found my professional home.

In 2023, five women business owners and financial planners who live in the Pacific Northwest got together in an Airbnb on the beautiful, dreary coast of Washington (or Oregon, I forget…they’re very close to one another!) for a long weekend business retreat in January.

In 2024, the group met again. Alas, I was starting radiation so couldn’t attend. But in 2025, I did! (We had a bra-burning party on my behalf—bras burn alarmingly easily—as I knew by that time that I’d have to have a mastectomy.)

That weekend was profound. It felt like we’d found a real “home” in the profession. Colleagues (and friends!) who could help each other improve. Celebrate each other’s accomplishments unstintingly. Laughingly demand, “Alright, who farted!” (It was me, okay? You’re the one who fed me lentils!) And also simply hold each other (sometimes literally, sometimes metaphorically) as we talked about hard things. This industry can be full of judgment and hardness. It’s nice to have a safe, soft landing spot.

As I left our 2025 retreat, I asked, “If what I’ve already built in this business is enough to enable me to have weekends like this in my life, why am I so anxious about building anything more or different?”

Looking Forward

Since December, I have had my head down and blinders on, intent on getting myself, my family, my clients, and my business through the entire surgery “thing.” As such, I don’t have any clear ideas about what’s next… other than dedicating time to figuring out what’s next.

Even though I started writing this blog post without much direction, now that I’ve written it, I realize that a big theme is connection and relationship.

It reminds me of a favorite David Brooks opinion piece, in which he talks about the two mountains we climb in life. We climb the first when we’re younger, and on that mountain we try to achieve all the things that “society” tells us we should: money, career, awards, a home, etc. For people on the second mountain, “It’s not about self anymore; it’s about relation, it’s about the giving yourself away. Their joy is in seeing others shine.”

So, I sincerely hope that, whatever comes next, it’ll be less focused on measurement and more focused on connection.

Are you looking for a financial planner and don’t mind one who, at least once a year, does some serious navel-gazing?

Build Some More Room for Error into Your Finances.

Block Woman stands next to a small dog that is looking into its white doghouse, with the name ROVER over the doorway.

How are you feeling? After the chaos of the last few weeks and months in the markets, the economy, and national politics? After the last couple difficult years in the tech employment scene?

When things are going well in your life and career and the markets and the economy, you probably don’t think much about having “room for error” in your finances. Error, what error?!

Welp, I’m guessing so-called Recent Events have made “error” very obvious, and the idea of making room for it might sound pretty good, eh?

Three stories from my life in just the last two weeks have made me think about how valuable “room for error” is. [To give credit where credit is (probably) due, I think I got this specific phrase from the engaging, thought-provoking book The Psychology of Money.]

Story #1: Air travel

Last week, my family and I went to San Francisco for my girls’ Spring Break. Though we took Amtrak down (and try as they did, Amtrak couldn’t ruin the awesomeness of long-distance train travel), we flew back.

On that return flight, we arrived at SFO a full two hours before our flight.

We went directly to the TSA Precheck line in Terminal 1… where they told us we needed to go to TSA Precheck in Terminal 2. The whole thing probably added only about 20 minutes to the time it took to get to the gate and was ultimately pretty straightforward. That said, I tend to be a somewhat nervous traveler, especially when I have my kids with me, and uncertainty unnerves me.

Thankfully, that two hours—plus the fact that we’re all able-bodied, my kids are old enough to take care of themselves, we didn’t have bags to check, and we have TSA Precheck—was our “room for error.” Even with the addition of 20 minutes and some uncertainty about the new security process, I felt pretty unharried. 

Story #2: The possibility of losing your job

While we were in San Francisco, we had dinner with a couple, both of whom work at a major hardware company. I’m no economist, but even I know that this company will be majorly impacted by tariffs.

I asked them how they were feeling about their jobs. The wife agreed that if tariffs were imposed for any meaningful length of time, the company would simply have to lay off a lot of workers, possibly her and her husband included.

I asked if, in anticipation of that very real possibility, they were trying to build a really big cash cushion. Turns out, they didn’t need to build one; they already had one. One that could last at least two years.

So, despite the fact that this couple had a pretty good chance of losing both their jobs in the current economic landscape (and being deposited into a nasty environment for finding a new job), they were fairly undisturbed by it. That cash cushion was a giant “room for error” that allowed them to still enjoy eating out with friends from out of town.

Story #3: Stock market gyrations

As you must know, the US stock market has been positively insane this year so far, and especially in the last couple weeks.

Here’s the US stock market year-to-date (as seen through the eyes of Vanguard’s Total US Stock Market ETF (VTI)). Just check out the last couple weeks, at the right of the chart!

Source: finance.yahoo.com April 14, 2025

It’s down “only” 9.48% as of April 14, having reached a nadir of 15% down just a few days ago. A lot of the big-tech company stocks are even worse off, down 15%+ after hitting a nadir of 20%+. And it’s going up and down wildly for the craziest of reasons, like maybe some dude whose last name is Bloomberg but not that Bloomberg posted something on Twitter/X about Trump calling off tariffs?

If you pay too much attention, you can start to get sea sick. If you need money from your investments now or soon, and you are invested in the stock market, this sort of craziness might make you feel a little nauseated.

But! Of my clients who don’t need their invested money for another 10+ years, I more or less haven’t heard a peep from them. (Now, let’s hope that’s because they’re not that worried, and not because they’re afraid to talk to me. I’m nice! I swear I am!) They have a lot of “room for error,” that is, they have a long time until they need to sell any of their investments to pay their expenses.

Of the clients who are living on their portfolios right now, I haven’t heard a peep from them either. Hopefully that’s at least in part because I’ve oft explained that when you have a diversified portfolio (very basically, both stocks and bonds), it’s kinda okay if stocks go down, because your bonds probably won’t. (Thus far, bonds—if you look at Vanguard’s Total Bond Market ETF (BND), which seeks to own the entire investment grade US bond market—are pretty neutral this year.) The bonds—which don’t tend to grow fast…but also don’t tend to lose value fast—are these clients’ “room for error.”

The few clients who are the most stressed out are the ones who have run through their cash cushion—or are close to doing so—and might need to start selling investments in a way they didn’t quite anticipate. They have depleted their room for error.

Your own “room for error”

How have you felt this last couple weeks, or this year so far? Have you been scared? Anxious? Thinking about making drastic changes in your life or finances? If so, you might need more room for error in your finances.

If you’re not yet in a pickle, then you have time to create room for error for your future self, who might find themselves in said pickle.

You could:

  • Build a bigger emergency fund. Instead of setting aside enough cash to cover 3-6 months of spending, build one to cover one year (or more!) of living expenses.
  • Save more for upcoming expenses than you think you’ll need. Saving for a remodel or a trip or a new car or a home purchase? You should, of course, do your best to estimate how much that thing will cost. But maybe then save, say, 25% more than that. You know and I know that things “have a way” of being more expensive than we think they’ll be. If you don’t use all that extra, great! You can deploy it, at that point, to other uses.
  • If you are approaching retirement, consider buying some sort of annuity. Annuities are tremendously varied, some are very complex, and some are “sold, not bought.” But the simplest of annuities—give an insurance company a lump sum of money in exchange for them giving you a monthly paycheck for the rest of your life—can ensure you have a steady paycheck no matter what. the markets do. (I am personally a big fan of this kind of income annuity. Research shows that this sort of guaranteed income vastly increases the amount retirees spend, which is a good thing.)
  • Ensure your living expenses are well under your current income. For example, if you have a salary + bonus + RSU income, live on your salary and save and invest your RSUs and bonus. In my world, as a business owner, with two types of income, I have a similar dynamic: I live on my salary and save and invest profit distributions from the business.

Intentionally not optimizing

In my view, creating “room for error” is in opposition to optimizing.

A full year of expenses in cash? My goodness, I could be investing some of that money! And, the stock market goes up 74% of the time, so I would be better off in the long run!

(I got that percentage from this article, which says that “Since 1980, the S&P 500 has been positive in 32 of 43 years.”)

Buy an annuity? Good grief, I could keep all that money invested and, statistically speaking, will end up with way more money upon my death!

Live just on my salary? But I could be living so much “larger” instead!

I am not persuaded of the merits of optimizing. It usually takes way more effort to optimize than it does to get to “good enough,” and the pursuit of optimization gets you closer to the edge of “Sh*t’s gonna break if something goes awry.” In general, it can create a lot of stress. 

One of the roles of money in my life is to reduce stress so I can enjoy the rest of my life.

In good times, optimizing might seem the obvious approach. But when times turn bad, I think you’ll thank yourself for having built in more room for error instead.

Do you want someone to help you figure out how much financial room for error is right for you?

How to get the most out of working with your financial planner

Pink Block Woman is on the left facing a Yellow Block on the right.

Communicate, communicate, communicate.

This is the first rule of working with a financial planner.

(It is also, by the way, the first rule of estate planning.)

If you can only remember one thing about how to have a good relationship with your financial planner, it’s a good one thing to remember.

But considering the amount of time, effort, sometimes uncomfortable introspection, and cost it takes to work with a good financial planner, it’d behoove you to figure out how to make the most out of that relationship. Yes?

Behold one financial planner’s thoughts about how you can do just that.

Ideally, the First Step Is: Hire the Right Planner at the Right Time

It’s going to be really hard to milk all the value out of the relationship with your financial planner if you hire one that you don’t jibe with very well.

I mean “jibe” in a very broad sense. You need to like their personality, their philosophy of investing and planning, and their process. If you don’t like one of those things, the relationship will likely always feel a bit like a pebble in your shoe—you can deal with it, but you’re never fully comfortable.

You have to like their “story.”

When I first changed careers into financial planning, back in 2010, I was hired into a firm with the idea that I could succeed the owner in a few years, as she was looking to sell the firm. After a few months of working at the firm, I had all sorts of anxiety about this plan.

(Spoiler alert: all those anxieties coalesced into me not buying it. Which is why I now live in Bellingham, WA, and work with women in their mid-career in tech as opposed to living in Norfolk, VA, and working with federal-government retirees.)

At that time, I had the luck of talking with a well-respected thought-leader (let’s call him Michael) in the industry about this “to buy or not to buy” choice. I mentioned that one thing giving me pause was that the retiring advisor was an “active investor.” She chose individual stocks and actively managed mutual funds, which she sold out of and bought into over time. By contrast, I have always been a passive investor: just “own the market” by way of index funds and keep costs low so that I keep as much of the market returns as possible. I don’t try to “beat the market.”

Michael told me that shifting from active to passive investing would be a hard transition to make in the firm. The clients had been told/taught/sold an active investment “story,” and I was proposing changing that to a passive story. Changing stories is really really hard.

What does this mean for you? I believe you need to make sure, before hiring a planner, that the “story” they’re telling is one that you already agree with or could see yourself agreeing with. It’s going to be bumpy if you believe one story and they’re constantly telling a different one.

I have had relationships with clients that made me feel like a bad financial planner. It didn’t seem like these clients were getting much value out of our relationship. So, by that reasonable definition, I was a bad planner. For them. (And man is that a bitter pill to swallow for someone who considers herself in fact quite a good planner.)

Upon reflection, the usual culprit was that these clients simply didn’t fully buy into the investing or planning story I was selling. It wasn’t my fault. It wasn’t my client’s fault. I mean, except to the extent that neither of us identified early enough that I just didn’t offer what they wanted or needed.

Ask Yourself These Questions

When you’re on the hunt for a financial planner, interview several. I’ve written several articles about which questions you should ask when interviewing a financial planner. There are innumerable other such articles on the interwebs.

After the interview, ask yourself these questions:

Do I trust this person? Enough, at least?

Trust will definitely grow with the relationship. But starting from a position of distrust or cynicism is, IMO, a big red flag.

Do I feel comfortable (enough) talking with this person?

Personal financial planning is pretty intimate work. It’ll be way easier and more enjoyable if you like your financial planner. You don’t have to be friends. But feeling friendly is important.

Do I agree with how this person approaches financial planning and investing?

The first step here is figuring out what the planner’s approach is.

You can ask them questions directly, when interviewing them, of course.

But before you even get face to face, consume their content. This is one reason why I write so much. I have blogged consistently for nine years. I post on social media (mostly LinkedIn) all the time. I dedicate a lot of effort to the firm’s website. I want my story, Flow’s story, to be so obvious and accessible that only the people who like that story ask to work with me.

All financial planners tell a different story. Some slightly different. Some radically different. If one planner’s story doesn’t suit you, just continue looking! There are plenty of financial planners (even if sometimes maybe you don’t know how to find them).

“At the right time” = Are you ready to do the work?

Working with a financial planner will require work from you. Some of it is merely technical, but can still be administratively burdensome (“roll your old 401(k) into your new 401(k)”). Some of it has real behavioral implications (“reduce your monthly spending by $500” or “work with this estate planning attorney to ensure your estate planning is up to date”).

This is great stuff! This work will put you in a much stronger financial position! But only if you do it. If you don’t, then you’re wasting your time and money with your planner.

I recently watched a webinar about the transtheoretical model of change. I am, of course, still mostly ignorant about it, but it seems a helpful framework for evaluating whether you’re ready to get real value out of your work with a planner. The stages of change are:

  • Precontemplation: Not ready to change
  • Contemplation: Getting ready to change
  • Preparation: Ready to change
  • Action: Making changes
  • Maintenance: Sustaining changed behavior

If you’re not ready to change, maybe don’t hire a planner yet, because they won’t be able to do much for you.

Show Up As You Would in Any Relationship You Care About

Your relationship with your financial planner is, to a large extent, just another interpersonal relationship. You probably know what makes interpersonal relationships work:

  • Show respect to the other person
  • Appreciate the other person
  • Care about the other person
  • Be responsive
  • Be honest
  • Make an effort
  • Express your needs

I owe this to my clients, as their planner. And I believe they “owe” it to me. Yes, yes, they’re paying me a fee for my work and the roles and responsibilities in the relationship are different. It’s not the same as your relationship with your husband, for example.

But, I can work with clients who pay me a fee and show up in the relationship, or I can work with clients who pay me a fee and don’t show up in the relationship. Give you one guess which type of client I’m going to gravitate towards.

Communicate communicate communicate.

Give your planner feedback. Let them know what you need that you’re not getting. It makes it so much easier for me. I appreciate this feedback!

Respond promptly when your planner asks you something. If you don’t know the answer or can’t do what they’re asking you to do, simply let them know! Just don’t leave a void of communication, which the planner (if they’re anything like me) can fill with all sorts of unsettling stories that almost always turn out to be untrue.

Some of my best relationships are with clients who have, in no uncertain terms, told me about something that was lacking in the relationship. Sometimes even about an explicit mistake I made. I apologize, fix the process, and if necessary, make the client whole. The client feels heard and respected and is also more confident in our work going forward (it seems, at least).

We run annual client-feedback surveys to try to get more of this insight out of our clients, but you needn’t wait for any official “tell us what you think” requests. Tell them what you think when you’re thinking it!

There really is no downside. If you have something critical to say, then either the planner addresses that issue in a way that satisfies you (yay). Or they don’t. In which case you’ve just found out that this maybe isn’t the right planner for you after all. Not pleasant, but still a step in the right direction.

Ask Your Planner How to Get the Most Out of Working with Them

I imagine most planners would agree with what I’ve already said. I asked some colleagues how they would advise potential clients to get the most of working with a financial planner. (Please note that I circulate in comprehensive-planning-forward, emotionally attuned professional circles, which is a small part of the overall industry. If you ask, say, a stockbroker this question, I imagine you’re going to get very different answers.)

Here’s a smattering of their answers:

Come to the quarterly meetings and ask questions. Decide on an allocation [balance of stocks, bonds, cash] and stick with it. Ignore the news. Provide data when the planners ask for it. Under the markets are efficient and if the client hears something, it is already incorporated in the markets.

For retirees: Let your advisor manage your investments. The ability for an advisor to monitor flows into and out of a portfolio is one of the most under-appreciated aspects of what advisors do for clients, particularly when considering risks associated with cognitive decline and elder abuse.

The ability to put aside their ego and what they think they know, to explore with curiosity what they don’t know.

Bring your life partner, especially if you generally avoid talking about $ together.

I feel like the clients who I see make the most progress are the ones who are most engaged. They come to meetings to listen with few distractions, ask questions, and reach out proactively for guidance around decisions … instead of informing me after.

Show up, ask questions, listen, ask before acting.

The clients I work best with are the ones that come to the meeting with questions or ask questions as we’re discussing things in the meeting. They also come with updates; when asking questions about selling rental properties, they have the rent and other P&L numbers. When they have questions about investments, they have a rough idea of how much cash leftover they have each month/year.

What I think is valuable in the relationship isn’t necessarily what you think is valuable. I’ve certainly had clients for whom I thought I wasn’t providing much value who have then expressed profuse thanks for my work. Some clients who exclaim, “Please don’t fire me!” after not communicating with me for many months.

So, perhaps I’ll end with a final piece of advice:

Figure out for yourself what would make your work with your financial planner feel most valuable to you. And then communicate, communicate, communicate that to your planner.

What could you do to get more out of your relationship with your financial planner?

Protect Your Parents from Scammers.

A blurred Block Woman is next to a tall yellow block with side tufts of hair and a shorter blue block with white hair.

A couple weeks ago, I almost-not-really got scammed.

A man called me from Capital One’s fraud department to confirm that I had not, in fact, made some purchases. (No, I didn’t buy anything from Turkish Air…but that does sound kinda fun, now that you mention it.)

My guard went up pretty quickly because I’m aware (because of both my age and my profession) that scammers try to get personal information from you on the phone in this way. But it was only mildly up, so I spoke with the man for a few minutes, getting increasingly anxious. He pushed on, quashing any minor protestations of suspicion. When he finally asked me to go get my credit card so I could give him a piece of information from it, I knew it was a scam and said I’d be hanging up now. He abruptly did the honors himself.

It rattled me. Why did I spend any time on the phone with this man? I know the rules: Financial institutions (banks, credit card companies, brokerage houses, Social Security, the IRS, and on and on) will never call you and ask for information. And yet I, a cognitively healthy, informed person had not just immediately hung up. I had spent several minutes actively trying to figure out if it was a scam or not. The longer I’m on the phone, the more vulnerable I am.

If I didn’t recognize it immediately as a scam, what did this mean for my older loved ones? I mean, my parents and my aunt are all in their 80s and really healthy…but they’re still in their 80s and stuff just slows down. (Hey, Mom and Dad…wassup. Erm…you’re still great, even with your 80-year-old brains.)

This started me thinking about “What advice can I give them that is extremely easy and simple to execute that won’t require any judgement in the moment?”

I settled on advising them to say this every time a financial institution calls: “Where are you calling from? Thank you. I’m going to hang up and call back.”

Then go find the institution’s phone number (from a statement, the back of the credit card, or by typing in the URL of the website itself and finding it on the website; you can’t just search for the website because scammers can manipulate search results) and call the institution yourself. I also told my loved ones, “And you can always call me if you have any questions about what’s going on or what you should do.”

I shared these thoughts on LinkedIn, and it clearly hit a nerve. Many people reposted it. Many people shared their concerns about their own loved ones being scammed.

But what got me is that many people also shared other advice for how to deal with this situation differently or how to deal with other situations (An email! Malware on your computer! Someone at the front door!). A friend also observed that her mother would never use the script I suggested because she’d consider it rude and the mother was raised to avoid being rude at all costs.

So, while clearly people liked my specific advice, it also clearly wasn’t sufficient. But I remain committed to the idea that, whatever the solution is, it has to be simple, easy, one-size-fits-almost-all-situations, and reflexive. We can’t expect anyone to be making judgments in the moment about whether it’s a scam or not.

Why This Is So Important

You want your parents to have health insurance so that medical needs don’t bankrupt them, right? You want them to have car insurance so that if they get in an accident, they don’t need to pay out of pocket to replace an entire car or in case someone sues them for $100,000, right?

These are examples of potential economic devastation wrought by a couple different risks.

Getting scammed is a risk that can be just as disruptive and economically devastating. A big problem, it seems, is that we have no way to “offload” that risk onto anything like an insurance company. (If there is such insurance, lemme know!) So, we are left only with making sure it never happens in the first place.

From $5,000 in digital gift cards that your parents might be persuaded to buy and then give to a scammer, to unknowingly giving access to their entire bank account, and possibly their investment accounts. (Anyone else see The Beekeeper? That’s what I’m talkin ‘bout. Alas, I am not remotely as effective as Jason Statham.)

We have to take this seriously.

Stay Abreast of the Scam “Landscape”

The book Mom and Dad, We Need to Talk: How to Have Essential Conversations with Your Parents about Their Finances provides a lot of resources to help you and your parents stay up to date on current scams and how to protect yourselves:

I was going to also include the Consumer Financial Protection Bureau here, because the book mentions it, and it is reputed to be successful in helping people recover money if they’re scammed. I just don’t know what shape it will have (if any) once Elon Musk/DOGE/President Trump are done with it. Which is just so uncaring and horrible for our vulnerable loved ones.

The book has an entire chapter dedicated to “Talking to Your Parents About Scammers,” that would be a very practical how-to resource for you.

Make a Plan with Your Loved Ones

My first draft of this blog post had all sorts of specific advice about how to help your parents and other vulnerable loved ones protect themselves against scams. But there’s just so much (too much) advice out there! The blog post got longer and longer, and the longer it got, the less useful it got.

Ultimately, the best advice will really depend on the type of scam and the type of person. You know your loved ones—their finances, their personality, and their habits—better than I.

So, my advice to you is:

Take this seriously. Talk with your loved ones about it and about why it’s important to create a plan to protect themselves. Work with them to create a plan that will work for them.

  • Is it a specific script they can always say on the phone?
  • Is it a rule that they always call you before responding to any communication about finances?
  • Is it requiring your confirmation for them to move any money over, say, $500 out of their accounts?
  • Is it a rule that they never ever click any links in an email? (I could definitely benefit from following this advice, too. It’s just so ingrained!)
  • Is it a rule that if something “weird” happens on their computer (which we know could be malware), they call you before doing anything with it?
  • Is it turning over management of certain accounts to you, so they can’t move money out of it?

And then, much as you (should) revisit your financial plan regularly (say, once a year), you should revisit this issue with your loved ones regularly. People forget. Scams evolve. The world changes.

I’m not an expert on this matter. But I am enough aware of human behavior to know that whatever the plan is, it has to be simple, easy to follow, and not require judgment in the moment. It needs to be muscle memory, basically.

Even if you’re not a big-time caregiver (yet?) for your loved ones (you’re not accompanying them to medical appointments or coordinating in-home nursing care, for example), this is a kind of caregiving that you can—and should—start early. An ounce of prevention and all that.

Do you worry about vulnerable loved ones? Do you want to work with a financial planner who can help you consider your total financial picture (which is usually way bigger than you think)?