Questions About 529s, Cheese, Pyrex, Retirement, and More!

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. 401(k), Roth IRA, or mortgage?
2. Cost versus value
3. Timing the market?
4. Food staples not store brand?
5. Pyrex questions
6. Making ends meet
7. 529 investment options
8. Current personal finance books?
9. How much in 529?
10. Going out of business sale?
11. Cheese question
12. Patreon?

March is here, and theoretically that means that spring is just around the corner. However, as I write this, the temperature is significantly below zero and there’s somewhere close to two feet of snow on the ground.

I don’t mind a winter where there’s maybe one hard month of winter and two months around it that are mild, but there are some years where we have months of hard winter surrounded by additional months of mild winter and, well, let’s just say I’m glad that March is here and I can see the first day of spring on the wall calendar.

On to the questions.

Q1: 401(k), Roth IRA, or mortgage?

I’m weighing my options on how much to contribute to 401k versus Roth IRA or paying of my mortgage faster. My current plan was to work in this order:

1) get full company match on 401k (6%), 2) Max out Roth IRA, 3) Max out 401k, 4) add extra to mortgage payment (Mortgage is about 4% interest). I’m currently doing 1, 2, and am about 70% to 3. However, I recently realized we are neglecting my wife’s Roth IRA potential.

I’m now thinking that I should 1) get full company match on 401k, 2) max out my Roth IRA, 3) Max out my wife’s Roth IRA, 4) add extra to mortgage. While my 401k is through Vanguard and I have some decent index fund options to invest in, I like the flexibility of the Roth IRA to invest in a wider range of index funds. Plus the option to withdraw our money we put in before 59.5 without penalty is appealing as well since there’s a decent chance we’ll be able to at least semi-retire before that age. Does this new approach sound reasonable? I want to make sure there aren’t any considerations of Roth IRA versus 401k that I’m not missing.
– Nick

From a financial standpoint, your plan is exactly what I would be doing in your shoes, but it’s worth noting that it does come with a few embedded assumptions, the biggest one being that you and your wife will be married for the long haul. Thus, part of making this plan successful is putting in the time needed to keep your marriage strong (this is a perfect example of the interaction between financial life and marital life).

I would suggest that, if you are operating under the assumption of lifelong marriage, that you treat all three accounts (401(k), both Roth IRAs) as being effectively the same pool of money. I’m not sure how you’re investing within those accounts – it may be something as simple as putting them all into Target Retirement funds, which is a great plan – but if you’re doing anything fancy, treat all of the money as one big pool.

Also, when you do eventually pay off the mortgage, redirect (most of) that money into your 401(k). Don’t let it inflate your lifestyle (much). If you let that money inflate your lifestyle, you either put retirement off further into the future or you’re signing on for a bigger lifestyle downgrade when you do retire. Neither one is fun.

Q2: Cost versus value

On Facebook one of my friends said “Cheap people only care about the cost of something but frugal people care about the value of something.” I hate it when people say things like that. There’s a point in there somewhere but I don’t know what it is.
– Amy

I take it to mean that cheap people buy stuff based on price alone, while frugal people care about getting the best item for their dollar.

Let’s say you don’t know anything about trash bags. You go to the store and you buy the absolute cheapest trash bags. Half of them split out at the bottom and even the ones that don’t hold only a little bit of trash.

A cheap person will go to the store and buy those cheapest bags again. A frugal person will go to the store and avoid that brand, moving up to the second least expensive, and will do that until they find a type of trash bag that does the job well.

That cheap person will have a lower grocery bill, but that same cheap person will be dealing with a lot of kitchen messes and have to buy bags again before too long. The frugal person might pay a little more for the trash bags, but they’ll actually do the job well.

Q3: Timing the market?

With all of the stock market predictors out there saying that a big fall is coming sometime in 2019 and 2020, what’s the best thing people can do with their retirement accounts?
– James

The advice doesn’t change, no matter what the prognosticators say. Any money you intend to use in your retirement account in the next ten years should be in something safe – a mix of bonds and treasuries and cash. Any money you won’t use in the next ten years should be in something aggressive, like stocks.

Don’t worry about “timing” the stocks in order to hit the peak of the stock market. In order to actually successfully time the market, you have to not only sell out of stocks when the market is at its peak (which means you have to somehow know when the stock market isn’t going to climb more and is going to go down from here), but you also have to buy back in when its at the bottom (meaning you have to somehow know when the stock market isn’t going to fall more and is going to only go up from here). You can’t predict either of those things, and if you miss either one by very much, you end up losing all benefits of trying to time the market. If you miss them both by any significant amount, you’ll actually be worse off than if you just rode through the bump in the road. So, don’t bother.

The only thing such predictions should be telling you is that it’s a gentle reminder to make sure your next ten years are secure. If you’re going to need to pull out money in the next ten years, make that money safe. Let the other money, the long term money, stay in the stock market and ride it out.

Q4: Food staples not store brand?

You’ve said before that you buy almost everything store brand if possible. What food items do you skip the store brand on and buy a name brand?
– Jenny

Butter immediately comes to mind. The store brand butters I’ve tried seem to be almost completely devoid of flavor. I prefer to buy the butter made by a local dairy that costs about twice as much as the store brand, but it has a wonderful flavor and is a lot easier to spread on toast, too.

There are a few items that I buy a name brand version of versus the store brand because of the package size. For example, I like buying individual guacamole packets, because it’s hard to keep fresh guacamole good in the fridge for very long (I’ll make my own if we’re going to use a lot) and the inexpensive guacamole comes in a large container that has the same problem as making my own. Individual packets last for a while. That might count as a “not available in store brand” example, though.

I don’t buy store brand (or low cost brand) yogurt because I don’t think it’s particularly healthy. There are other brands that check the boxes for what I’m looking for in terms of yogurt. This may be mostly related to the store brand yogurts available near me.

I’m struggling to think of other food items that I don’t buy in the store brand variety.

Q5: Pyrex questions

We’re slowly stocking our kitchen as we’re trying to eat out less and make more meals at home to save money. Needed some baking pans so we put some Pyrex stuff on our registry. My dad told me that new Pyrex stuff is junk because they changed the glass formulation. True? If so what should I buy?
– Daniela

Several years ago, Pyrex changed their glass formulation from borosilicate glass to soda-lime glass. There are a number of differences between the glass types. Borosilicate (old Pyrex) is more resistant to rapid temperature change – think taking a glass pan out of the freezer and popping it straight into a preheated oven – than soda-lime (new Pyrex). Another benefit of old Pyrex is that it’s somewhat more resistant to breakage when dropping it on the floor.

The big advantage of new Pyrex is that if it does shatter, it is far less likely to break into thousands and thousands of little shards, something that happens with old Pyrex.

The change that most people focused on was the ability to easily handle rapid temperature change without cracking or breaking. While new Pyrex is fine for pretty much any home kitchen use, it will crack if the temperature shifts radically in a short timeframe. You don’t want to accidentally sit it on a burner. On the other hand, I really wouldn’t want to drop old Pyrex on the floor, unless you want to be picking up glass splinters for a week.

I think new Pyrex is perfectly fine for home kitchens. It’s not the same as old Pyrex, but it works well and will last for many, many years unless an accident occurs. I would not use it for make-ahead meals, however, especially if you intend to transition straight from the freezer to the oven. For those things, I’d use either Gladware or aluminum pans.

Q6: Making ends meet

I am a single woman with two daughters. Father of the daughters abandoned us and moved overseas and we can’t track him down so no child support. I bring home about $2700 a month. Rent costs $1400 for 1BR. We’re in the cheapest neighborhood that we can find that still has good schools and is relatively safe. Don’t own a car as I use the train to get close to work and walk the rest of the way. It is hard to keep the bills paid.

It feels like we’ve already done the big things (cheap living, no car) and the little things don’t add up to enough to make a difference. It feels like I’m on a treadmill where everytime I get a few steps further ahead some expense comes up and we backtrack and we’re never really getting anywhere.

I don’t know what to do. I’m hoping you’ll have some advice.
– Katie

My first question is why you’re living in the city you’re living in. I know from personal experience that there are many other cities in the US with lower cost of living than a $1,400 one bedroom apartment. What is your reason for living in that city versus other cities?

If the reason is primarily your job, I’d see if I could find a similar job in another area and move to where the cost of living isn’t so painful, so that you have more breathing room in your finances.

If the reason is primarily your friends or family, lean into them to help you get things in a better state. Don’t hesitate to ask them for help when you need it (and be willing to help when you can). If you can’t do this for some reason, is your relationship really tight enough for you to stay in this situation?

Q7: 529 investment options

How aggressive should I be with investment options in my daughter’s 529? It offers the ability to choose among a bunch of different funds along with some targeted funds based on when she expects to start college. Are those aggressive enough?
– Andrew

My feeling is you should be as aggressive as you can be as long as there’s at least ten years to go before your daughter starts her education. After that, you should start moving into less aggressive investments.

You’ll find that most target investment options do this for you automatically. They move money over time from highly aggressive options into less aggressive ones at about that same timeframe.

If you feel like you want to largely use the model of one of the targeted funds but with a bit more aggression, choose an aggressive fund and put, say, 25% of your contributions into that and 75% into the targeted fund.

Just be aware that the more aggressive you are, you run a risk of running into significant losses. The closer you are to your child starting college, the more likely it is that you won’t be able to recover those losses, which is why it makes sense to transition to less aggressive investments as you get closer.

Q8: Current personal finance books?

Do you have recommendations for current personal finance books? Don’t want an outdated one.
– Tammy

I’d say that any personal finance book published in the last ten years is going to be highly relevant, and many older ones are, too, as long as they focus on timeless financial issues.

My honest suggestion is to go to the library, browse the personal finance section, and pick a personal finance book that’s most related to your current situation and your goals. You may find a few that are right. Choose one that’s been published in the last ten years or so; I’d say anything after the 2008 financial crisis is fine.

For example, if you’re in a bad debt situation, look at Dave Ramsey’s The Total Money Makeover. If you’re in your twenties or early thirties, look at Beth Kobliner’s Get a Financial Life. Just find ones that speak to you and your situation and you’ll be fine.

The thing to remember is that good personal finance advice is timeless. “Spend less than you earn” works today. It worked in your parents’ heyday. It worked in the heyday of Charles Dickens. It worked in the heyday of the Roman Empire. The principles stay true.

Q9: How much in 529?

I have a newborn daughter, born in January. I want to start a 529 for her and contribute some each month and try to get grandparents and relatives to contribute as birthday gifts. How much should I be contributing monthly?
– Daniel

It depends on whether or not you’re wanting your 529 to pay for all of your daughter’s tuition, room, and board for four years. What proportion do you want to pay, and what proportion do you want your daughter to cover herself?

Before you say, “I want to pay everything,” consider a few things. First, there is some value in having your daughter be invested in her own education. She’s likely to appreciate it more if she’s bearing some of the financial weight. Second, money you don’t contribute to the 529 is money you can contribute to your own retirement, which means you’ll be less of a financial burden on your daughter later in life (and possibly a better support as she has her own children, etc.).

If you need to figure out a total, look at the cost of attendance at a nearby school that you think your daughter may attend and do your math based on that school. Then, multiply it by 1.05 for each year between now and when your daughter might start attending. In this case, that’d be 18 times, so a quick shortcut is 2.4 times that amount. For example, a university near us costs about $9,000 a year in tuition with an additional $9,000 for room and board. In 18 years, that’ll be $21,400 in tuition and $21,400 in room and board. So, if you’re wanting to cover all of that, you should be aiming for about $43,000 per year, or $185,000. To get there, you’re going to need to sock away about $350 a month, give or take a little.

Again, your number might rise or fall depending on what university you’re targeting and what proportion you decide you want to save. Sarah and I chose to save less than that for each of our children per month, for the reasons stated above. We want to help, but we also want them to feel invested in their education and take it seriously and not just a four year paid vacation from the bank of Mom and Dad. (We may end up helping them with student loan payments after they graduate, but that will be at our discretion based on their situation.)

Q10: Going out of business sale?

Do you have any strategies for taking advantage of a going out of business sale? [A local retailer] is going out of business and I want to get the best value out of it.
– Dave

You should just treat it like a big Black Friday sale. Make a list of stuff you actually need, then go there and decide if the price is right for you. If it is, buy it. If it isn’t, don’t bother.

You might see things that you might be able to “flip” for a profit, but only do this if you’re absolutely sure you can profit from it and that you’re going to do it immediately instead of just putting the item in storage (where it will probably devalue).

Just because something is on sale doesn’t mean you have to buy it.

In general, I don’t make a big deal out of going out of business sales. Often, the big bargains don’t happen until everything’s already picked over and the only stuff that’s really cheap are things I wouldn’t even want and things that can’t easily be flipped.

Q11: Cheese question

Is it more economical to buy shredded cheese or to buy blocks of cheese and shred it yourself? I know the blocks are cheaper for the weight but is it worth the time?
– Bill

This is actually a better question than one might think. For me, it really comes down to a cheese quality question.

Almost always, cheese you shred freshly yourself is less expensive than the cheese you buy already shredded. In my opinion, the freshly shredded cheese tastes significantly better, too – I don’t know whether it’s the cheese quality or the fresh air exposure or what, but the freshly shredded stuff just tastes a lot better.

The issue is time. How quickly can you shred the cheese? I use a box grater when I shred cheese and I can shred two cups worth of most cheese in about two minutes or so, and then I just toss the box grater in the dishwasher. For me, this is often worth it unless I need a lot of shredded cheese and am pressed for time. For me, the better taste and the lower price means the extra two minutes are worth it.

Q12: Patreon?

Love your writing. Do you have a Patreon that I can contribute to?
– Adam

While I appreciate the sentiment, I don’t have a Patreon for my financial writing. It’s self-sustaining through advertisements on The Simple Dollar.

If I were to try a new career avenue, such as writing fantasy novels or board game reviews or something like that, I’d likely start a Patreon for that and also discuss it on here. Honestly, though, my commitments to The Simple Dollar fill up most of my professional time, and what time is left is usually filled up with other writing and presenting opportunities related to my financial writing.

Aside from that, my advice is oriented toward directing people toward preserving their own money, so asking people to give their money to me for something I’m already giving away seems to be counter to what I’m trying to do here. I understand that some people want to support the message continuing to be public and free, but I will personally do everything I can to make sure that happens anyway.

Save your Patreon pledges for other creators, or for my own attempts to try to do something new.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.