535 | The Top 10 Ten Investing Mistakes We All Make · ChooseFI | Financial Independence Podcast summary

Key takeaways

Investors must understand asset location and the tax implications of different account types.
Don't let cash accumulate in investment accounts: reinvest dividends and returns.
Consider the return on hassle when evaluating financial decisions.
Donating appreciated securities can provide tax advantages over cash donations.
Be intentional about helping family members financially during their life, rather than only through inheritance.
Maximize your HSA contributions and keep in mind that limits may change yearly.
Don’t fear Medicare premiums; they can remain manageable with proper income management.
Carefully consider health care costs when planning retirement; options exist to retire earlier.
Develop a strategic withdrawal plan to minimize taxes and maximize retirement income.
Balance financial goals with physical and mental health, nurturing relationships along the journey.

Summary

Introduction: Exciting Updates and Guest Introduction

Brad introduces exciting news about the launch of the Choosify community member site, which aim to enhance member engagement without reliance on Facebook. Jonathan, who is actively developing the feature, receives praise for his efforts. Brad also welcomes Cody Garrett from Measure Twice Money, who is here to discuss common investing mistakes with the audience.

Mistake #1: Asset Location Ignorance

The first mistake discussed revolves around asset location, where savvy DIY investors often neglect the optimal placement of their investments across different types of accounts—taxable, tax-deferred, and tax-free. Cody illustrates this with an analogy, explaining how each account serves as a vehicle, and shares the significant differences in tax implications based on asset location.

Mistake #2: Allowing Cash to Accumulate

This section highlights the common oversight of allowing cash to pile up in investment accounts instead of investing it. Cody advises listeners to ensure they reinvest dividends and capital gains to avoid missing out on potential growth, and he provides practical steps to enable this feature within major brokerage accounts.

Mistake #3: Chasing High Yield Savings Accounts Without ROI Consideration

Cody discusses the importance of evaluating the return on hassle (ROH) when pursuing high-yield savings accounts or bonuses. He emphasizes the need to assess whether the potential gains are worth the effort required to move funds, particularly highlighting that small differences in interest rates may not justify the hassle of account switching.

Mistake #4: Cash Donations Instead of Appreciated Securities

In this segment, Cody discusses the significant tax advantages of donating appreciated securities to charity instead of cash. He explains how this strategy allows donors to avoid capital gains taxes, thus providing a higher value gift to charities without incurring tax liability, benefiting both the donor and the organization.

Mistake #5: Disregarding Purposeful Giving to Family

Cody raises awareness about the importance of intentional family giving. Many retirees hoard wealth and miss opportunities to provide financially when their adult children could benefit most. He encourages discussing 'oops money' (emergency funds) and 'ooh money' (opportunity investments) in family settings to help nurture opportunities for future generations.

Mistake #6: Not Maximizing HSA Contributions

The discussion turns to Health Savings Accounts (HSAs), where Cody points out that individuals often fail to maximize contributions due to lack of awareness about updated limits. He highlights the importance of adjusting contributions yearly and being mindful of added catch-up contributions for those 55 and older.

Mistake #7: Fear of Medicare Premiums

Cody addresses the common fear of escalating Medicare premiums in retirement and assures listeners that these costs will typically not exceed 3% of household income. He encourages proactive management of income sources to avoid unnecessary anxiety about healthcare coverage.

Mistake #8: Waiting Until 65 to Retire Due to Health Care Costs

In this segment, Brad and Cody discuss the myth that individuals need to wait until 65 to retire due to health care costs. They explain how careful planning can result in little to no insurance premiums, emphasizing the affordability of health care options for retirees earlier than traditionally allowed.

Mistake #9: Neglecting Order of Operations in Withdrawals

Cody wraps up with an important note on the order of operations in retirement withdrawals. He emphasizes the necessity for strategic withdrawal plans to avoid unnecessary tax implications, recommending the use of financial planners for personalized guidance.

Mistake #10: Neglecting Holistic Wellness

Finally, the importance of maintaining holistic wellness is highlighted. Cody warns against focusing solely on financial success at the expense of physical and mental health, stressing the significance of nurturing friendships and relationships and enjoying life's experiences.

Show notes

Most investors — even sophisticated ones tracking every basis point — leave real money on the table through simple oversight. Cody Garrett, CFP® at Measure Twice Money, recently outlined ten mistakes that trip up DIY investors and financial advisors alike. Brad and Cody walk through each one, from asset location missteps to overlooked HSA opportunities, with a focus on making optimization practical rather than theoretical. Timestamps & Key Points [00:01:50] Asset Location Where you hold investments matters as much as what you hold. Stocks generate capital gains and qualified dividends taxed at lower rates, making them better suited for taxable accounts. Bonds produce ordinary income taxed at your marginal rate, so they belong in tax-advantaged accounts like IRAs. Getting this backwards can cost thousands annually in unnecessary taxes. [00:15:46] Investing Contributions Log into your accounts and confirm contributions are actually invested. Cash sitting uninvested earns nothing. Enable auto reinvestment for dividends and capital gains distributions so you're not manually managing every transaction. [00:20:29] Return on Hassle Chasing an extra 0.5% APY by constantly switching high-yield savings accounts rarely justifies the time spent. Compare the hours invested against the actual dollar savings. Often, fixing asset location or maxing an HSA delivers far greater returns for less effort. [00:24:14] Charitable Giving Donating appreciated securities directly to charity eliminates capital gains tax while you still receive the full fair market value deduction. Donor advised funds allow you to bunch multiple years of donations into one tax year for additional tax benefits. [00:33:01] Family Giving Distinguish between "oops money" (emergency support) and "ooh money" (wealth transfer). Consider whether financial help is better given now when children need it most, or later through inheritance when they may be financially stable. [00:39:23] Maximizing HSA Contributions HSA contribution limits change annually. Verify both your contributions and employer contributions don't exceed the current limit. An HSA is the most tax-advantaged account available — triple tax benefit — so maximize it if eligible. [00:41:38] Understanding IRMAA Income-Related Monthly Adjustment Amounts increase Medicare Part B and D premiums based on income from two years prior. Planning Roth conversions or other income events requires awareness of IRMAA thresholds to avoid unintended premium increases. [00:43:02] Early Retirement Concerns Don't let health insurance costs delay retirement. With strategic income management, many early retirees qualify for subsidized ACA marketplace plans with low or zero premiums. Model your expected income and explore options before assuming coverage will be prohibitively expensive. [00:47:25] Retirement Order of Operations Develop a tax-optimized withdrawal strategy. Generally: spend taxable accounts first while doing Roth conversions, then tax-deferred accounts, then Roth accounts last. Your specific situation may vary based on pension income, Social Security timing, and legacy goals. [00:52:25] Holistic Wellness Financial optimization means nothing without mental health, strong relationships, and physical wellness. Don't sacrifice life experiences or relationships chasing marginal financial gains. Maintain perspective on what truly matters. Action Items Review asset location to ensure stocks are in taxable accounts and bonds in tax-advantaged accounts (00:01:50) Enable auto reinvestment for dividends in your brokerage account (00:17:57) Evaluate the actual dollar savings versus time spent when considering account switches (00:20:29) Maximize HSA contributions according to current limits (00:39:20) Consider donating appreciated securities instead of cash for charitable giving (00:25:27) Related Resources Measure Twice Money Advice Only Network Nectarine Quotes to Remember "Optimize your taxes, don't sacrifice growth." (00:15:27) "Is t…

535 | The Top 10 Ten Investing Mistakes We All Make