Questions About Checking Luggage, Funeral Expenses, Altruism, Roth IRAs, 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. What is wealth?
2. Logistics of multiple savings goals
3. Cost of unexpected funeral
4. Changing goals
5. Shipping items verus checking luggage
6. “Get what you pay for”?
7. Retire early for altruism?
8. Can’t reduce debt
9. Emptied out 401(k)…
10. “Mega backdoor Roth”
11. Summer things on sale
12. Holiday gifts without reciprocation

My youngest son is quite skilled at chess and carries around a pocket chess set with him. While he’s not a chess prodigy by any means, he’s quite skilled at the game and can give me a run for my money – and I played chess fairly seriously for years.

It’s been fun watching him inch through the stages of it, from learning the rules to learning the joy of playing to learning the joys of making a really good move to now being on the precipice of wanting to study great games and learn opening sequences.

My son and I are having great conversations, we’re thinking a lot, and it’s a completely free activity (aside from the cost of a simple chess set). It’s wonderful!

On with the questions and comments!

Q1: What is wealth?

What is wealth?

Money is a tool. It is not – nor can it ever be more than a tool. It’s great to have some. You can probably survive with less. But nice to have more. If you’re driving a car, it’s great to have a spare tire in the trunk. The spare tire is not good for much else. Oh, it can become a rope swing or someone’s version of a lawn ornament, but it’s best use is as a tire when you need one. It’s a tool. If you think it’s really anything but a tool, you are imbuing it with lots more traits than it can possibly have. It’s a tool. Money can’t make you happy. What that particular tool can buy you might make you happy for a while, but the money is a tool. If it buys you a healthy diet and good healthcare, you are using that tool really well. If you use it to buy only beer, soda, and candy – well, you’ll probably be gone before the money is. Lots of tools outlast their owners. No amount of money can give us physical or mental health. Using the tool of money properly can give us a great sense of security that will bolster both our mental and physical health and create the general sense of well being that most people would define as ‘wealth’.
– Jaden

This comment comes from a very long time reader who has written in many times over the years, and I felt it was such a great description of what wealth is that I wanted to share it with you all.

Money is a tool that enables you to live the life you want. If you want a life that’s filled with convenience store purchases but lacks a stable retirement, then spend your money on convenience store purchases and don’t put money away for retirement. It’s that simple.

The challenge we all face is overcoming the short term things we’re tempted to use our money for in order to adequately fund the long term things. Can we overcome the temptation for a treat right now to adequately fund our retirement forty years from now? It’s fairly obvious from a detached perspective which one is better, but in the moment, it’s not nearly as clear.

Q2: Logistics of multiple savings goals

I have a problem with putting all savings in one savings account, and then planning to budget some of that for car, vacation, a mortgage etc. it’s difficult to keep longer, medium and short term savings and non monthly expense reserves in just one pot. This also also interesting in terms of new innovative banking accounts that let you create virtual sub spaces for the savings accounts. Haven’t read much quality debate around that. What do you think?
– Jerry

There are a number of online banks who do exactly this, like Capital One 360, for example.

I think that it’s a good tool for helping people organize their finances. When you log on to online banking with a bank that has a service like that, you can clearly see the different places where your money is.

Still, it’s honestly not much different than maintaining a spreadsheet where you track the amounts put aside for different goals.

Basically, a spreadsheet like that would have a top line containing the full balance of your savings account. Under that, you’d have lines that describe each of your savings goals and the “balance” of each one. At the bottom, you have a remaining total, which consists of a formula that takes the total balance and subtracts from that the amount in each of your savings goals. So, it would look something like =B1-B2-B3-B4, if cell B1 had your total balance, and B2 through B4 had the balance of each of your goals. You could update your actual savings account balance regularly and then adjust the amount saved for each goal manually until the remnant is $0.

Q3: Cost of unexpected funeral

I’ve come across a situation that I am stuck with and I think you might be able to help. I have a grandchild who became a ward of the state last fall. We are unable to care for him. After bouncing through some foster homes, he eventually committed suicide. We are his only involved relatives, so we helped make the final arrangements, knowing no one else would. The funeral home was awesome. They gave us a bottom dollar price. Half of that came in from generous friends and co-workers. Now we are looking at the last half. It’s really not all that much, but we are struggling as well. We are approaching retirement age and have no real nest egg built up. I’ve looked all over for public assistance (then I was told that paperwork had to be filled out before the funeral took place – and it was never brought to our attention!). This child was in the care of DHS. Should they not be responsible for the cost? Any ideas?
– Jane

DHS might seem like they would be morally responsible for the cost, but they may not be legally responsible. You could contact a lawyer, as this might be a case that a lawyer who focuses on issues like this might look at pro bono.

Still, the first thing I’d do is contact the funeral home again and ask whether they’re aware of any additional programs that you might be eligible for, just to make sure. They might yet know of something you can use to help pay it off in a situation like this.

I don’t know of a magic solution that will fix this. If neither of the two solutions above help, just talk to the funeral home about a payment plan with tiny monthly payments. That’s about all you can really do.

Q4: Changing goals

Ten years ago, I was single in my mid 20s working at a really high stress job that paid super well. I was banking everything I could and elsewhere and living in my car, using work facilities for everything (there was a gym, a laundry, and a cafeteria). My goal was to fund a great startup idea out of pocket.

Now I am married with a kid and another on the way. I quit the stressful job and now work as IT director for a school district which is busy but not nearly as high stress. The money I saved up turned into a house. I wouldn’t do that startup idea if my life depended on it though I’d sell my business plan if someone wanted to buy it. Saving for retirement in a typical 403(b) and probably won’t retire until I’m 60 or 65.

Moral of the story? Things change. Don’t lock yourself into some grand financial plan for the future because who knows what your life will look like a decade from now. Save money for retirement but keep some of it flexible, too.
– James

Fifteen years ago, I lived in a tiny little apartment and had debt totaling multiple years of my salary which I thought I’d never pay off. I’ve been debt free for most of a decade now.

I didn’t have any kids. My wife and I weren’t sure we wanted any kids any time soon. Our oldest (of three) just celebrated his thirteenth birthday.

Ten years ago, I worked in a research lab in a position I thought I’d probably work in for the rest of my life. Now I’m a freelance writer.

Things change. The better your financial foundation is – no debts, solid resume, decent job – the easier it is to transition right along with those changes.

Q5: Shipping items verus checking luggage

I’m about to fly with my family to visit extended family for six days for Thanksgiving and “Christmas.” A friend told me it’s cheaper to ship a box with clothes and other travel items in it than to check a bag at the airport and less hectic too. Checking prices seems comparable. Is it worth it to ship a box instead of checking luggage?
– Alex

In terms of headache, I’d far rather ship a big box of clothes and other items than try to check luggage at the airport. It’s not even a question. Just putting everything in a box at my convenience, dropping it at UPS at my convenience, and having it already at the destination and in my room when I arrive? Compare that to trying to get luggage through an airport with kids in tow, checking a bag rather than using express check-in, and then waiting at the luggage carousel (this time with tired kids) for the bags to (hopefully) appear.

For me, if the costs are close at all, I ship the clothes and other items in a single box. I do it a week or so in advance of the trip so that I can use the low-cost options for shipping and I have enough time to verify that it arrived safely.

It sounds like you’ve already done the price comparison and the price is similar. If that’s the case, load up a box tonight and ship it soon. That’s my advice to a parent with kids.

Q6: “Get what you pay for”?

How accurate do you think the old maxim of “get what you pay for” is accurate?
– Alice

I think it’s partially true and partially false.

In general, the best version of a particular item will not be the cheapest version and that, in general, if you pay more you will usually get a better items. The best version will probably be one of the more expensive versions, though not always. At the same time, the most expensive option is not always the singular best option.

What matters more than anything is research and finding out which is truly the best item and, perhaps more important, which is the best “bang for the buck” item. If you can get an item that’s 90% as good as the very best item at 50% of the price, that’s probably a wiser purchase than the best item at full price.

As I mentioned last week, I have some amazing socks that cost about as much as ten pairs of cheap socks at the store. Are they worth ten times as much? That’s debatable. However, if I find those expensive socks on sale, they’re definitely worth it for me because I won’t be replacing socks very often.

At the same time, for a lot of household goods, we buy store brand versions. They do the job perfectly well and fulfill exactly what we need from the item.

The moral here? Do your homework and be patient for sales.

Q7: Retire early for altruism?

Do you have any thoughts on this article about Vicki Robin? She’s one of the authors of Your Money or Your Life and she seems to think that the reason to retire early is to be charitable and altruistic. Thoughts? https://amp.businessinsider.com/purpose-of-early-retirement-giving-back-altruistic-behavior-2018-11
– Kevin

I think that anything you do in life has a lot more value if you have a purpose behind it. What’s your purpose in going to work? The more clearly you understand that purpose, the more tolerable work will probably be.

The same thing is true if you retire early. How are you going to fill your days? If those days have a purpose and you’re doing something that’s meaningful for you, retirement is going to have far more value and you’re going to find far more happiness there.

Is altruism or charitable work the answer for everyone? Probably not, but I think it’s a good answer for a lot of people, enough so that people should investigate it.

More than that, I think that if you’re considering retirement at any age, you should start thinking seriously about what your purpose and meaning in life is and what you can do most effectively with your newfound abundance of time to achieve that purpose. What are you going to do to use that time and not just let it pass by you?

Q8: Can’t reduce debt

I do not make enough money to reduce my debt even if everything goes perfect. My pay is eaten by rent and utilities and minimal groceries at the store. I managed to get out of payday loan cycle by selling most of my possessions but can’t get further ahead no matter what I do.
– David

First thing: put some loans in forbearance. If you’re struggling this hard, contact some of your lenders and discuss forbearance with them, starting with any student loans. This basically means putting those debts on pause for a while as you take care of other ones. You’re likely eligible for this because I’m almost sure you’re making a relatively low income.

Second thing: if you can, move back in with your parents for a while. Yes, this might seem like a step backwards, but it gets the cost of rent off your back for a while. You can give your parents what you were paying for utilities and then channel the rent money into paying off debts rapidly.

Third thing: if at all possible, seek out a temporary second job, especially during the holiday season. Use that income to maybe knock a debt out of the way, freeing up some breathing room.

Doing what you’re doing now isn’t going to work. You’re going to have to try some new approaches.

Q9: Emptied out 401(k)…

Three years ago before I knew what I was really doing I emptied out my 401(k) to pay off all of my loans. While I am debt free now, I’m now 37 with almost nothing saved for retirement and I really regret it. Don’t empty out your 401(k) even if it seems like it would help!
– Jeffrey

I do agree with this sentiment. Emptying out a 401(k) should be a last resort move. If you need to get rid of debt quickly, just cut the contributions for now. Don’t empty out the account.

Still, you shouldn’t feel that much regret. Right now, you have zero debt. You should, in theory, have the capacity to dump a lot into your 401(k) by making large contributions going forward. You have a lot of financial flexibility right now.

Yes, your net worth would likely have been much higher had you not touched anything, but that’s water under the bridge. You’re 37. You’re debt free. You have a decent job. You have a lot of options. Don’t dwell on the downside.

Q10: “Mega backdoor Roth”

I’ve seen some mentions of a “mega backdoor Roth” on other sites but it was barely explained with tons of jargon. You are good at explaining things simply. How does a mega backdoor Roth work?
– Daniel

A “mega backdoor Roth” refers to a strategy where you’re basically able to move money from a 401(k) into a Roth IRA using a multi-step process.

When you contribute money to a 401(k) through your workplace, this is usually a pre-tax contribution. It’s taken out of your paycheck before taxes are calculated.

However, you’re also legally able to make after-tax contributions to a 401(k), provided your plan allows it (about half of 401(k) plans do). If you can do so, you can make additional contributions to your 401(k) using after-tax money – money from your paycheck after taxes are calculated and taken out. These contributions won’t help your tax returns this year, but they will get more money into your retirement savings.

What’s the benefit? First of all, it gets around the contribution cap for a 401(k), if you’re bumping up against that. You can only contribute about $18,000 in pre-tax money to a 401(k), but you can contribute much more if those additional contributions are after-tax.

The “mega backdoor Roth” also comes into play here, because the IRS allows you to roll over those after-tax 401(k) contributions straight into a Roth IRA if your plan allows you to do so (this is called an in-service distribution) or you’re changing employers. This allows you to bypass the annual $5500 contribution limits on a Roth IRA. The big advantage of doing this is that, if the money is in the Roth IRA, you won’t have to pay taxes on the gains on that after-tax money, but if it stays in the 401(k), you will.

While this is a nice trick, it’s not quite as effective as simply contributing straight to a Roth IRA directly or contributing to a 401(k) pre-tax. It’s only useful if you’re wanting to contribute many tens of thousands to retirement, and those people are often over the income limit for Roth IRA contributions.

It’s a strategy useful for extreme savers and high income earners who want to hedge their bets regarding taxes in retirement. For the vast majority of people, it’s a novelty, but not directly useful.

Q11: Summer things on sale

This is a great time of year to watch your local hardware store for summer nonperishable but consumable supplies like wood chips and charcoal and bags of soil. They’re often trying to get rid of the stuff and mark it down like crazy to make room for things like bags of ice melt and show shovels. If you garden or have a big yard or a charcoal grill look at the clearance section of your hardware store right now.
– David

This is some great advice, though that clearance season blew through northern Iowa a few weeks ago. That’s because we need the ice melt awfully early around here.

I did manage to buy some organic fertilizer on clearance a few weeks ago. It was spread immediately on our garden as we were winterizing it and another couple of bags were put into storage for the winter.

Still, if you live in most of the country and are a homeowner, it might be a great time to take a peek at the clearance section at your local hardware stores, especially if you have some good dry storage space.

Q12: Holiday gifts without reciprocation

In June, my youngest brother lost his job. He sent everyone in the family an email this past week saying that he couldn’t afford to buy anyone holiday gifts and requested that no one buy him any gifts. I still want to give him a gift. I don’t feel that the holidays are about what you receive, but what you give. But then I feel like I’m violating his request. Thoughts?
– Angela

If you feel like giving him a gift, give him a gift. Flat out tell him that it’s because you love him and it is part of a great holiday for you that you get to see him open a few gifts and that him not giving gifts is completely fine given his current situation. Give him a hug and tell him that you love him, no matter what, and that having him here with everyone at the holidays is the real reason you came, and opening a few presents together like when you were kids is something really important to you.

His request for people to not give him gifts is likely so that he doesn’t have to feel guilty about receiving something when he doesn’t have anything to give. He may still feel guilty about your gift even with the above explanation.

A good compromise might be to get him something relatively small, or make something for him so that he doesn’t feel that you went out and spent money on him.

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.