Questions About 529 Excess, Multiple Roth IRAs, Cord Cutting Football, 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. Emergency fund before home purchase
2. Money doesn’t buy happiness
3. Post-college money in 529
4. Living closer to work?
5. Don’t like slow cooker food
6. Parents afraid to use 401(k)
7. Bank won’t close HELOC
8. Digging out of a hole
9. Napping at work
10. Should I combine Roth IRAs?
11. Watching football after cord cutting
12. Getting started with board games

Over the last few years, I’ve gotten into a routine of getting up from my desk once an hour and spending five to ten minutes stretching or exercising. I’ll do a brief stretching routine, do some pushups, do a plank or some squats – just enough to breathe heavy.

I find that if I do this, then I follow it with drinking a bit of water and walking around a little and looking out the window, I come back to my desk ready to focus and I absolutely hammer it down for the next 45 minutes or so.

If I don’t do it, I find that my attention will often wander.

Sometimes, if I’m lucky, I get into a “zone” where I completely lose track of time. That’s the best of all worlds, but it’s somewhat rare. However, I know that it’s far more likely to happen if I’ve had plenty of water to drink and I’m actually doing the stretching and mild exercise.

In short, if I take that time regularly to stretch and exercise a bit and drink water, I’m actually way more productive over an eight hour period than I would be if I didn’t do that.

Just a little tip that works well for me.

On with the questions.

Q1: Emergency fund before home purchase

My husband and I are working to save up a 20% down payment for our first home. Before we buy a house, I would be much more comfortable if we had a larger emergency fund to handle the unexpected. The gap between our income and expenses (including retirement savings) is about $1200. My question is, should we put all of our money into our down payment savings or should we split the amount between the two accounts? I know this is subjective, but outside perspective would be helpful.
– Erin

Keeping two separate “funds” – your emergency fund and your down payment fund – in the same account is possible, but it requires extra bookkeeping. You have to keep track of how much is in each account and you also have to determine where interest goes. Will earned interest go into the emergency fund, or will it go in the down payment fund?

It’s much easier, in my opinion, to keep them in completely separate accounts. That’s the approach we use for our own distinct savings goals. We have been long time users of ING Direct / Capital One 360 for this purpose, as it makes creating a new savings account as easy as a single click.

We have several accounts for different savings goals – our next two replacement cars, our home improvement fund (now pretty depleted, but rebuilding), holiday gifts, and a few other odds and ends. It works very well for us.

Q2: Money doesn’t buy happiness

Saw this article in NY Times Magazine and wanted your thoughts:

Wealthy, Successful, and Miserable
– Jim

That article nails it. Money doesn’t buy happiness once you’ve reached a certain level, and that level really isn’t very high. The perks that more money gives you beyond a certain point aren’t as big as they seem, and the downsides to wealth are quite real, as they cause you to sacrifice a ton to get there and then cause problems and stress on their own (relationships, money management, etc.).

The truth, in my opinion, is that the only genuine source of happiness in life comes from within. It comes from a content life cultivated to be fertile ground for happiness to bubble up on its own. It takes time, but most importantly it takes a real mindset shift if you’re not already in a place where you’re consistently happy. There’s definitely a neurochemical / mental health aspect, too, of which I’m really not qualified to speak.

All I can say for sure is this: the only lasting sources of happiness I’ve found in my life, and I’ve found more than a few, were really independent of money. At the same time, many sources of unhappiness in my life came from efforts to acquire more money.

Q3: Post-college money in 529

My daughter is 24 years old and graduated last May with a double degree in biology and secondary education. She is now a high school biology teacher! I couldn’t be prouder!

During the last half of her childhood, we put a ton of money into her 529 and she also got a lot of scholarships and attended an in-state school. So now that she’s done, she has no student loans but has a lot of money in her 529.

What should she do with it? There’s a stiff penalty for withdrawals for non-academic reasons. But it seems useless to just let the money sit in there.
– Lois

My first question would be whether your daughter would ever want to get a masters degree in secondary education, which would significantly improve her lifetime earnings. Many colleges offer evening and weekend programs that will help people get their masters in secondary education. She could definitely use the money for that.

Another option to consider is to just sit on the 529 plan and then, if she has children in the future, change the beneficiary on that 529 to the child, which doesn’t have any tax implications. So, if she were to have a child five years from now, the money in that 529 would grow for 23 years before that child would need it. That’s a pretty good start to that future child’s college savings.

Even if neither of those situations really applies here, your daughter might want to still hold onto that 529 money as an “educational emergency fund” should she ever decide to make a career change or perhaps train for a different teaching focus.

In the end, unless she has a good reason to do so, given that she doesn’t have any student loans, I’d probably sit on that money. The financial gain for doing so, if she were to ever use that money for educational purposes, is pretty significant.

Q4: Living closer to work?

How does it save money to live closer to work if you ride the subway?
– Ariel

If you ride the subway to work every day, you’re probably not saving much money by moving closer to work. All you’re doing is reducing the length of your commute, which might be a money saver for you in some secondary ways, such as increasing your ability to prepare meals at home or cutting back on child care costs. On some subway services, you may save money by being closer to your destination, but if you’re a daily rider, you’re likely buying a pass that makes this inconsequential.

The big advantage of moving closer to your workplace comes from being able to switch from driving a car to using mass transit or walking to work. This might enable you to sell off a car entirely, and will definitely enable you to spend less on gas and maintenance.

If that advantage doesn’t exist for you, then moving closer to your job won’t provide a major financial benefit, and will likely cost you if your rent goes up.

In general, if you live in a metro area, I usually encourage people to live in a reasonably safe neighborhood with the lowest rent they can find with reasonably good access to mass transit of some kind, assuming of course that your job is accessible by mass transit.

Q5: Don’t like slow cooker food

I like the slow cooker in concept but everything that comes out of it is mush. Texture is awful. I junked mine.
– David

My feeling is that if everything is coming out of your slow cooker as “mush,” you’re probably overcooking it. I make soups and stews in ours multiple times a week and it’s never mush. We also frequently make lasagna in it, and you can definitely make amazing roasts and whole chickens in one that are most definitely not mush.

My only experience where things have gone bad in a slow cooker is when it’s been allowed to run far past the time in a recipe. If you put something in there that’s supposed to cook 6 hours on low and you let it sit for 10 hours, yeah, it probably won’t be good.

If you find that you’re always gone for longer than your recipes, look for a slow cooker that has a programmable mode that has a “keep warm” mode, or else focus on soups and stews and roasts.

Q6: Parents afraid to use 401(k)

My parents are in their late 60s and recently retired. They are on Social Security and Medicaid. My father has about $400K in his 401(k) plan from work. They refuse to tap it for anything and are living on Social Security. They say that they’re keeping the money for “emergencies” but I suspect that they’re wanting to give it to grandkids when they pass. But they are staying at home all the time and not traveling or doing the things they always talked about doing. Struggling to make sense of it or how to advise them.
– Andrew

You shouldn’t advise them. Rather, you should just respect whatever it is they choose to do with their money and their life at this point.

It’s likely that their talk of travel was at least somewhat in the category of “pipe dream” and that they don’t really intend to do so. If that’s not something they’re actively pursuing now, it’s almost definitely due to a choice they’ve made.

They may have come to the realization that paying for their grandchild’s full college education is something that’s more important to them at this point, or maybe they have some other vision in mind. Whatever it is, it’s their business. If they have $400K in the bank but are able to live off of Social Security, they’re extremely unlikely to become a financial burden to you, so that shouldn’t be a worry.

Let them be. They’re fine.

Q7: Bank won’t close HELOC

We have a HELOC with a local bank that has a zero balance. We have asked them to close it and it remains open. This is a little annoying because of credit impact but not a huge deal. What’s annoying is that they just charged us an annual fee for it. What can we do?
– Andrew

If I were in your shoes, I would go right into a local branch and ask to speak to a manager and ask very directly that (a) the line be closed and (b) the annual fee be waived. If they won’t, I’d go up the chain of command at the bank, above the branch manager and into the corporate office. Make a nuisance of yourself.

Banks don’t want to close accounts for the very reason you’ve seen here. They can make money off of fees, plus they can keep up their “open accounts” numbers which is something that owners and shareholders and outside investors care a lot about.

You have to keep being a squeaky wheel about this issue. If nothing happens and you’ve contacted the bank several times, you may want to consider contacting bank regulators as there may be a minor bank fraud issue going on.

Q8: Digging out of a hole

I’m 36, wife is 32, three kids ages 7, 5, 2. I make about $50K. My wife made about $40K a year but lost her job in 2015. We made a decision to try being a single income household. Very hard. We ended up basically going pretty deep into debt to get by. She decided to go back to work last year if she could find work that could provide child care or make really good money to pay for it. She found a job that has child care as a perk and returned to work in November. Free child care, makes $31K a year.

We currently have $30K in credit card debt and about $20K in student loans and $10K and $8 left on car loans. About $2K in emergency fund. We live in a 3 bedroom apartment that is pretty tight with the three kids and would like to buy a house someday. Not sure what to even do.
– Dan

Well, you’re earning $81K a year, which is above the national average for household income, and you don’t have child care costs, so in that regard, you’re in good shape. What isn’t good is that you have a ton of debt, including a lot of high interest debt.

If I were in your shoes, I’d aim to make the apartment work for another couple of years at least, live as cheap as you can, and get rid of that credit card debt. Make minimum payments on all of your non credit card debt and try to use balance transfers to minimize the high interest on those credit cards, if possible. This may involve opening new cards solely to transfer the balance, if your credit rating allows it.

The best thing you can possibly do is eliminate some debts right now, particularly high interest ones. This gives you more and more breathing room between your minimum monthly bills and your income, and you’re going to want that gap as wide as you can get it.

If I were you, I’d aim for getting rid of all of the credit card debt, then I’d start saving all of that money you were throwing at extra credit card payments each month into saving for a down payment. Don’t speed up payments on the other debts.

Don’t panic – you have the resources in hand to be well on your way to being able to get into a house in two years. The key is to keep your spending in check. You need to be channeling at least 25% of your pay into extra debt payments – not the minimum payments, extra payments. If you can do that, then get rid of all of the credit cards, then start channeling that 25% into savings for a down payment. You’ll be in a house in no time.

Q9: Napping at work

What do you think about napping at work? If I don’t nap in the early afternoon I’m basically unproductive all afternoon. If I do sleep for 30 minutes I can usually knock out a lot of work in the afternoon.
– Aaron

That’s probably a strategy that works well for you, but it’s not a good look. Sleeping at work is often going to be frowned upon – employers don’t want to pay you to sleep.

The big thing is that you need to not get a reputation for sleeping on the job, and that starts with your boss understanding what’s going on.

My suggestion would be to have a serious conversation with your boss about this. Talk about different solutions to the problem. If you’re a good worker, your boss might be completely on board with the idea of a brief afternoon nap for you.

Q10: Should I combine Roth IRAs?

I started a Roth IRA at [Company A] in 2001 and funded it partially through 2006. In 2006 I went back to school and graduated in 2011 with a masters degree in a new field. Went back to work in 2012 and completely forgot about my old Roth IRA as the statements were being sent to my parents and they were just putting them in a box for me. I opened a new one in 2013 and funded it the last several years. In 2016 my dad passed away and I found all of the papers they’d been saving. I didn’t deal with it then and kept funding my current Roth. Now I’m starting to wonder what to do. What’s the game plan here?
– Orlando

You can directly roll over one Roth IRA into another. All you likely have to do is contact the company that’s managing the Roth you want to stick with and tell them that you want to roll over the other Roth IRA and they’ll be happy to walk you through the steps. There should be no tax impact for you at all, though there will be a little paperwork.

So, which one should you go with? If I were you, I’d examine the investments available at both of the companies you have a Roth IRA with. Which one offers investments you’re happier with? Which investments have lower expenses? You can probably figure this out by checking out both accounts online.

I’d probably move everything into the company that has the lowest expenses on the investments you’re most interested in. So, if you have everything in a Target Retirement Fund in both Roth IRAs, compare those two funds and figure out which one has the better expense ratio and compare their returns as well (unless the returns are way off, prioritize the lower expense ratio). If they’re close, choose the business you like working with more. Then, transfer the money from the other fund into the fund you’ve chosen by calling the company that manages the fund you chose and having them help you through the process. Problem solved.

Q11: Watching football after cord cutting

Considering cord cutting now that football season is over. What are the best options for watching football w/o cable? Interested in NFL mostly.
– Austin

Let’s break this down.

You can get all of the games that air on the major networks (NBC, CBS, ABC, Fox) over the air for free with a digital antenna. If you’re in or near a major metro area, you should easily be able to receive these signals for free once you’ve bought the antenna, which will cost $30-50.

If you have Amazon Prime, you can watch Thursday Night Football for free via streaming. Many TVs have an Amazon Instant Video app so you can watch it using that. If your TV doesn’t have such an app, there are a bunch of devices you can buy to stream to your television, like a Roku or an Amazon Fire stick.

If you sign up for Sling for $25 a month, you can get the NFL Network and NFL Redzone to supplement those viewing options. I have a couple of NFL junkie friends who swear by NFL Redzone and that’s all they watch.

That should cover most of what you’d want to watch.

Q12: Getting started with board games

Our family celebrated a late Christmas a couple of weeks ago and one of my cousins brought several board games and they were great. We played Shadows Over Camelot, 7 Wonders, and a few others and I really enjoyed myself. I had always wondered why you talked about enjoying boardgames so much and now I understand!

My husband also enjoyed the games and we want to “dip our toes” into the hobby but the games are really expensive! How can we dip in a little without spending a bunch of money?
– Sara

My number one suggestion is to see if there is a board gaming meetup or board gaming club in your area. The first place I’d look is Meetup; see if there’s anything near you. The next place I’d look is the website of any hobby gaming stores in your area, as well as the website of any libraries. You might also want to look on Facebook to see if there’s a group for board gaming or tabletop gaming in your city.

Most cities have a free public board gaming event most nights. I’d recommend going to a few to see which ones click with you. There’s no expectation that you bring anything, especially if you’re new – just show up and play a few games.

Before you purchase any games, I’d get a strong bead on what you and your husband really like. What games really click with both of you? Which games are playable with just the two of you? What about games you might play with other people in your life? You should be seeking out games that check all of those boxes at once, and I’d highly recommend playing a variety of games before really deciding on that.

When you do decide on a game or two, take your time and shop around. Look for used copies – often, local game groups will have people selling games when they need to make room in their homes. Some game stores facilitate this. You can also find really good sales at local stores and online (Amazon and popular board game sellers like Coolstuffinc and Miniature Market).

Be patient. Don’t buy games if you have games still on your shelf that you’re excited to play right now. Don’t feel bad about almost entirely playing games that others bring to public game nights, but be appreciative that people are bringing their games and teaching them to you and be a little flexible to accommodate what they might want to play. You can always reciprocate later when you have a few games in your closet. (Also, board games make GREAT gifts.)

Board gaming is a great social hobby that doesn’t have to be expensive. I really enjoy it.

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.

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