Sam Taube
Appearances
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
Event contracts have a face value in dollars, and that's typically $1 per contract. But in the lead up to the event in question, traders can buy yes or no positions on the contract for some amount between $0 and $1 that is determined by the market. It's the market's odds that the thing will happen.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
Once the event happens, or doesn't happen as it may be, and we get a definitive yes or no answer to the question, then the contract pays out $1 to whoever was right. For example, suppose you paid 25 cents for a yes position on a contract about whether the S&P 500 will close above 7,000 by the end of the year. then suppose that actually happens.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
You'd receive $1 from your 25 cent investment, so you'd be quadrupling your money. And if you bought a 25 cent yes position on 1,000 contracts, you'd get $1,000 from an initial investment of $250.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
Prediction markets are the online trading platforms where people can buy and sell yes or no positions on event contracts. Predicted and Polymarket are some of the biggest prediction markets, although Polymarket's technically not available in the US. There's also another big one called Kalshi.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
Then there are a couple of conventional stock brokers, Robinhood and Interactive Brokers, that actually operate their own in-house prediction markets. There are a couple different ways to make a profit in these kinds of markets. You can either buy a position and hold it until the event in question and make money if your prediction was right.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
You can also potentially buy a position and then resell it to another trader for a higher price before the event in question.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
That's a good question and an unresolved question. Yes, prediction markets are definitely one of those things that's kind of in a gray area between high risk speculation and gambling, along with small cryptocurrencies and meme stocks and things of that nature. When it comes to the legality of these things, that is also an open question.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
Until recently, as you mentioned, election betting has generally been considered illegal in the U.S., in part because there's a concern that it could harm election integrity. It could create an incentive for someone to stand for an election as a candidate and then lose deliberately for a betting market payout or something like that.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
regulators, including the Commodity Futures Trading Commission, have been trying to shut down these election-related prediction markets on that basis, among others. As I mentioned earlier, polymarket, which I believe is the biggest of these things, is blocked in the U.S. The regulators managed to shut it down in the U.S., although that hasn't stopped some U.S.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
users from accessing it in various ways through various kinds of Internet technologies. But the rest of these prediction markets are de facto legal for the time being because of a decision in an ongoing court case between Kalshi and the CFTC. Back in October, a federal appeals court ruled against a CFTC effort to block Kalshi's event contracts from trading while this court case plays out.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
That doesn't mean that Kalshi won the case or that prediction markets on elections are definitely legal, but it might turn out that way. And the courts have given these markets the green light to operate until that case is decided.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
Yeah, I think that this election outcome was a very significant moment for these things for a couple of different reasons. For one thing, this was a very high profile case of prediction markets making a correct prediction when a lot of other experts didn't or were a little more ambiguous.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
If you looked at election models or poll aggregators in the days leading up to the election, most of them showed just a 50-50 coin toss. But the prediction markets were different. Most of the major prediction markets favored Trump and won. Does that mean that prediction markets are perfect crystal balls? No, this is a sample size of one event, but it's a very significant vindication.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
Of course, it's a little hard to predict what exactly the incoming administration will do. But there are some early indications that Trump might be fairly lenient with these things, particularly compared to what a Democratic administration might have done.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
After all, downsizing the government and cutting regulations, particularly regulations on the financial sector, was a pretty consistent theme of Trump's campaign. For example, he's been very critical of Gary Gensler, who's the chair of the Securities and Exchange Commission, in part because he feels that they've been too strict on things like cryptocurrency and other new financial technologies.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
There was a Reuters report a few days ago that said that Trump might appoint Dan Gallagher, who is currently the chief legal officer of Robinhood, to lead the SEC instead. Again, Robinhood is one of the platforms that has allowed investors to speculate on this recent presidential election using event contracts.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
So if Trump puts their top lawyer in charge of a major financial regulator, that would probably signal a green light for these types of prediction markets.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
Before we get into that, we have to do our little disclaimer here. We're not financial advisors. This podcast is not financial advice and everyone's needs and circumstances are different. Having said that, there are a couple of reasons to be cautious about putting money into prediction markets. For one thing, they're not long-term investments.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
These are short-term bets and they're everything or nothing. If you're investing for a long-term goal like retirement, most advisors are gonna steer you toward passive investments that slowly but consistently grow your money over time, index funds and things like that. Event contracts are much, much riskier than that. Also, we talked about how prediction markets are kind of like gambling.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
An event contract is a type of investment instrument that lets people speculate on whether a particular event will happen or not. That event might be something finance-related, like will the S&P 500 close above 7,000 points by the end of the year? It can also be a political question, like will Donald Trump win the presidential election? Or it can also be something sports or pop culture related.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
And I mean, in some cases, like the people betting on the Tyson-Paul fight, that very literally is gambling. As we all know, gambling can be addictive. If you're on track to meet your financial goals and you have some extra money and you really want to dip your toes into prediction markets just for fun, there are some guidelines that are probably worth following.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
Don't bet any more than you can lose. Treat your bets like they're entertainment expenses, not like they're investments that you're expecting to get.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
Yep.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
Thanks for having me on. And if listeners want to learn more about this, we're going to be writing about it in the upcoming issue of the Nerdy Investor newsletter.
NerdWallet's Smart Money Podcast
Prediction Markets Let You Bet on Just About Anything — But There Are Risks
In the last couple of weeks, people have used Polymarket and have traded event contracts on Polymarket to speculate on the outcome of the Mike Tyson, Jake Paul fight. Event contracts can cover any kind of yes or no question that will get a definitive answer at some point in the future.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
Happy to be here.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
Yeah, the most immediate effect was definitely on the treasury bond market, where yields really spiked last week due to the downgrade. To explain why that happened, let's back up for a second. A treasury bond has a face value, which is often $1,000, and the bondholder will get that face value plus a fixed amount of interest if they hold the bond to maturity.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
But they often buy the bond at a discount to that face value. What we call yield is really just the difference between the purchase price and the face value plus interest.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
So when we say that treasury yields are going up, what we really mean is that the purchase price of treasuries is going down, either because people are selling them or because they're demanding a steep discount or a high interest rate at government auctions. So last Wednesday, the government auctioned off $16 billion worth of new 20-year treasury bonds.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
It was the first auction of this type since the Moody's downgrade, and it went really badly. Investors demanded much higher yields than expected to buy these new bonds because they were freaked out about this downgrade. And that pushed the 20-year yield above 5%, which is not necessarily a doomsday omen, but it's a psychologically significant number.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
Well, the U.S. bond sell-off did spread to other government bonds from other countries. German and Japanese bonds both saw their prices fall and their yields spike as well. The stock market did falter slightly as well, although that wasn't as dramatic as some of the tariff-related stock market crashes we saw earlier this year. The S&P 500 dipped by about 2.7% over the course of last week.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
I think that a good way to explain the long term effects is by looking at the government. So in any given week, the U.S. finishes paying off a bunch of treasuries, but it also issues a bunch of new treasuries. The national debt is this rolling, continuous thing whose interest rate changes over time as yields go up or down.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
When yields go up, as they have in recent weeks, that effectively means the US government's interest expense goes up. When bondholders demand a higher yield, they're basically lending the government less money per bond, but the government still has to pay them back the face value of the bond plus interest. no matter what.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
So that increases the effective interest rate the government is paying on its bonds. It increases the cost of servicing the national debt. To put this in perspective, bond interest payments already make up about 14% of total government expenditures so far this year. That's more than we spend on Medicaid or Medicare or even defense.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
It's actually the second largest line item right now after Social Security. If we can't get that number down or it goes up, it could really limit the government's ability to spend money or return it to taxpayers in the future. And that's bad news no matter what your politics are or what you want the government to do with your money.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
It makes left-wing policy ideas like a universal healthcare program less affordable, but it also makes right-wing policy ideas like tax cuts less affordable.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
Definitely, and I think it's important to not catastrophize about what this downgrade means. Treasury bonds are still a very, very safe investment, and the U.S. still has a very high credit rating even after this downgrade. It doesn't mean a default is likely by any means. It just bumps up the probability from almost impossible to really, really unlikely.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
Moody's provided a lot of reassurance on this point in the announcement about the downgrade. They basically said that as long as things like checks and balances and the rule of law still exist in the U.S., we have the capacity to get our house in order financially. So this isn't good, but it's not the end of the world.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
Here's a glass half full perspective on all this. Treasury bonds are still very, very safe investments. And this downgrade means that they pay a little more than they did before. We've talked about long dated treasuries like the 20 year bond, but shorter term treasuries like the one year bill also have elevated yields as a result of this downgrade.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
In some cases, they're actually paying more than one-year certificates of deposit. Plus, the interest on treasuries is exempt from state and local taxes. So if you're looking for a safe savings vehicle to put your money in and earn a little interest, short-term treasuries might be worth considering, potentially as an alternative to CDs.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
Nowadays, some financial institutions also offer something called a treasury account, which is kind of like a savings account, but it automatically invests in short-term treasuries for you. It basically gives you the ease of use of a savings account, but the high yield and the tax advantages of investing in treasury bills.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
NerdWallet actually offers a treasury account through a partnership with Atomic.
NerdWallet's Smart Money Podcast
What to Do When the U.S. Gets Downgraded and Your Travel Credit Card Stops Paying Off
Of course. Thanks for having me on.
NerdWallet's Smart Money Podcast
Strategies for Navigating Market Swings and Leveraging Home Equity Wisely
Ah, perfect.
NerdWallet's Smart Money Podcast
Strategies for Navigating Market Swings and Leveraging Home Equity Wisely
All right, fine. Since we can't look into the future, let's do a little bit of an explainer instead. Can you talk to us about why stock markets worldwide freaked out in the wake of the tariff announcements?
NerdWallet's Smart Money Podcast
Strategies for Navigating Market Swings and Leveraging Home Equity Wisely
Sam, can you give us some perspective on just how manic this market is right now? Is it 2008 financial crisis wild or 2020 pandemic wild?
NerdWallet's Smart Money Podcast
Strategies for Navigating Market Swings and Leveraging Home Equity Wisely
What's an average investor to do in a time like this? I've seen all kinds of advice out there and some of it the tried and true. If you're not retiring the next five years, just don't look at your account balances and let history take its course.
NerdWallet's Smart Money Podcast
Strategies for Navigating Market Swings and Leveraging Home Equity Wisely
But some of it is also sounding alarms about how the Trump administration is trying to remake the global economy and that we're in uncharted territory where the old rules and historic record might not apply. Help us out here.
NerdWallet's Smart Money Podcast
Strategies for Navigating Market Swings and Leveraging Home Equity Wisely
And are there any sectors of the investing world that haven't taken a hit, or at least as big of a one as, say, the Dow or the S&P have? And if so, does that mean we should all pile on that bandwagon?
NerdWallet's Smart Money Podcast
Strategies for Navigating Market Swings and Leveraging Home Equity Wisely
All right, that was really helpful. Thanks so much, Sam.
NerdWallet's Smart Money Podcast
Strategies for Navigating Market Swings and Leveraging Home Equity Wisely
Well, I'll give it a shot. And I'm joined by fellow nerd, Sam Taub, who covers investing for us. Welcome back, Sam.
NerdWallet's Smart Money Podcast
Strategies for Navigating Market Swings and Leveraging Home Equity Wisely
Let's start with the obvious question. Can you look into your crystal ball and tell us when the market madness is going to stop?
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
Many advisors would say that building up an emergency fund and paying down high interest debts like credit card debt are good things to tackle before you even start thinking about long-term savings and investments.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
For some people, that era was worth a lot. For others, not so much. That Fed survey is also borne out by another survey, this time the Economy and Personal Finance Survey from Gallup. That one found that around 62% of American adults invest in stocks. That's everything from what we already mentioned, so savings for retirement or college to people holding individual stock portfolios.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
For now, that's all we have for this episode. Do you have a money question of your own? Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. Remember, you can follow the show on your favorite podcast app, including Spotify, Apple Podcasts, and iHeart Radio to automatically download new episodes.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
And here once again is our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
If you're interested in investing, well, you have a lot of company.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
I would be a very rich man if I could do that. But unfortunately, I can't. Bummer. What we can do here is prepare for both the best and the worst and make it so that the daily stock market gyrations don't factor that much into our overall well-being. Our goal today is to make that possible for you. Fair enough.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
I do believe that people should generally build a safe and boring portfolio of index funds first, and then they can speculate with whatever money they've got left over. And I'm practicing what I preach there.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
It was a rip roaring year for a lot of different kinds of investments. The S&P 500 was up over 25% year to date by early December, which is when we're recording this. That's an exceptionally good return compared to the long term average of 10% per year. It was also a really big year for crypto. Bitcoin more than doubled in price last year, and certain tech stocks did even better than that.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
Nvidia shareholders, for example, almost tripled their money last year. If you spend enough time on social media, you find stories of people who have gotten very rich very quickly from big bets on these things over the last year. If you weren't one of those people, it's easy to get kind of retroactive FOMO about it. Yeah, I feel that.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
In truth, if you diversify your investments enough, you're not really missing out. As a personal example, I did not own individual shares of Nvidia at any point last year, but I did indirectly profit from Nvidia's gains because I own S&P 500 index funds, which contain Nvidia. My returns for the year were probably lower than someone who went all in on that single stock.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
On the other hand, that person was probably a lot more stressed about their investment than I was.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
Tech in general had a pretty good year. The NASDAQ composite is actually doing even better than the S&P 500 at the time of recording in late 2024. There's still a lot of hype for certain kinds of AI and semiconductor-related companies like Taiwan Semiconductor and, as we previously mentioned, Nvidia. They've kind of carried the tech sector this year.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
Another sector that outperformed the market in 2024 was communications. There's kind of a blurred line between communications and tech. For example, Meta, which was formerly known as Facebook, had a really great year, as have certain kinds of big media conglomerates like Disney and Netflix. Another big outperformer last year was the financial services sector.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
A lot of the big banks like Goldman Sachs and Bank of America also outperformed the market by quite a bit. And then, as we mentioned, crypto had a really great year.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
The energy sector was kind of a laggard last year. It had a positive return, but less than the S&P 500. The performance of oil and gas stocks, generally speaking, is very dependent on the market price of oil. And that has actually decreased slightly over the course of 2024.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
You might think that poor performance in the fossil fuel industry would mean that clean energy has done well, but that has not been the case. Clean energy, particularly solar, has actually had a really rough year. The Invesco Solar ETF, which is sometimes used as a benchmark for the solar industry, was down almost 30% last year, despite the strong performance of so many other stocks.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
A lot of these trends, both the winners and some of the losers, are likely related to the election. There's a theory that the stock market was kind of anticipating that President-elect Donald Trump would win. Many of these trends may reflect expected changes in government policy or regulations that have kind of been priced into the market over the last year.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
For example, the Biden administration has made some moves toward trying to break up some of the big monopolistic tech companies. Shareholders in that industry may be betting that those antitrust actions are just going to go away under Trump.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
Another thing that's really important for the tech industry is there's a perception that we may be getting a looser regulatory approach to AI under Trump than we might have gotten under Vice President Kamala Harris. Bank shareholders may also be anticipating looser regulations.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
In his first term, Trump loosened some of the banking regulations that were put in place after the 2008 financial crisis, and there's a chance he may do more of that in his second term. It's a similar deal with crypto. Markets may be just betting on less regulation in that space.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
There is a good case for it. The solar industry in particular has really benefited from tax credits under Biden, and shareholders may be predicting that those tax credits won't last. But there's an important caveat here, which is there are a lot of assumptions in this thinking. We don't necessarily know what's going to come out of this new administration.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
And if these policy changes I've talked about don't happen, say the new government doesn't loosen banking regulations or it keeps the solar tax credit going, then these trends that we've been talking about might reverse somewhat.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
What goes up must come down is very true in physics, but in some ways the inverse is true when we're talking about the stock market. When it comes to stock indexes like the S&P 500, it's kind of what goes down must come up.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
Bear markets do happen, and they can feel really gnarly while they're happening, but they're generally followed by much longer bull markets that tend to surpass previous highs by quite a bit. Since 1932, the average S&P 500 bear market has lasted less than two years. The average bull market, on the other hand, has lasted more than four years. And we just had a bear market in 2022.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
History suggests that we've got a lot more upside ahead, even after a very strong 2024.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
For long-term investors, I can't really think of an immediate action anyone needs to take when we hit a new high, but it's something to keep in mind. A lot of people set up their portfolio to contain a particular mix of stocks and bonds, say 80% stocks, 20% bonds. And when we have a really strong year in the stock market, it can sometimes mess up those proportions.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
And let's say upfront what we always say at the end of the show, which is that we are not investment advisors. And this nerdy investment info is for general educational purposes only. It may not apply to your specific circumstances. That said, a lot of us touch the investing world in some way, whether it's through retirement accounts or college savings plans or maybe a health savings account.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
If stocks go up more than bonds, you might log into your retirement account or whatever after a while away and find that you now have a 90-10 stock and bond portfolio. This is why financial advisors recommend rebalancing your portfolio once or twice a year, which you mentioned at the beginning of this episode.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
That means selling off some of the investments that have done really well and then using the proceeds to purchase some more of the investments that have lagged so that you maintain your target mix over time.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
I'm mostly very boring. Almost all my investments are in index funds and I'm planning to hold them for years. For the most part, I'm just going to keep holding and adding money to them in 2025. I do also have a tiny amount of Bitcoin and Ethereum.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
it's kind of spare money and i don't have a particularly strong investment thesis for it but you know one bitcoin was worth a few hundred dollars in the early 2010s and recently it passed a hundred thousand dollars i kind of want to see what it does in the years ahead
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
In our line of work, people can sometimes sound a little bit scoldy when we talk about high risk speculative investments like crypto. I don't know if it's realistic to tell people that they should never, ever touch stuff like that. I know how risky crypto is, but I'm a human being and I'm curious about it.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
But I do believe that people should generally build a safe and boring portfolio of index funds first, and then they can speculate with whatever money they've got left over. And I'm practicing what I preach there.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
The first step is going to be to open an investment account if you don't have one. NerdWallet has some really helpful roundups of the best brokerage accounts if you don't know where to look. Once you have an account, you need to put some money in and then you also need to invest that money. I've mentioned index funds a couple times already.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
For listeners who don't know, these are baskets of stocks that mirror the performance of a stock market index like the S&P 500. They're really good for beginners. The nice thing about S&P 500 index funds and most other index funds is that they give you exposure to dozens or hundreds of stocks in a single purchase. They're pretty low maintenance.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
You don't really have to research the individual stocks or worry about whether or not they're doing better or worse than the overall market because index funds just give you the overall market's return.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
There's a lot of bad faith and scammy information out there. And I think a big red flag is any kind of promised return. If you come across some crypto product or investment guru or something who promises that they can double your money in a year, that's probably a scam. A milder red flag is if someone or something is bragging about its past returns.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
If you go on TikTok, you can find these stock picking gurus who advertise themselves by bragging about the big 500% score they made on Nvidia options last year or whatever the case may be. The thing is, even if that claim is legitimate, past performance doesn't guarantee future performance.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
It's still good to be skeptical of any kind of influencer or financial product that advertises itself that way. There's kind of a common thread here, which is to beware of things that sound like get rich quick schemes. If it seems too good to be true, there's a good chance that it is.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
The best investing platform for a particular person is going to depend on their goals and also on their skill level. Again, I'm going to plug NerdWallet's roundups here because we have a whole bunch of them that cater to different kinds of needs. If you're looking for a retirement account, we have a roundup of the best IRAs.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
If you're really new to investing, we have a roundup of the best brokerage accounts for beginners. If you're more experienced and you're looking to trade options, we have a roundup of the best brokerage accounts for options too.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
On each of these roundups, we have a really easy-to-read table that lists each broker's fees, account minimums, active promotions, and our NerdWallet rating, and also detailed pros and cons lists for each one. We want to make it easy for you to do all your comparison shopping in one place. Of course, we'll include a link to those in today's show notes.
NerdWallet's Smart Money Podcast
From Meme Stocks to Index Funds: A 2025 Investing Guide
Absolutely. For that matter, if you're really just starting out from square one financially, investing probably isn't even going to be your top priority. And ditto if you're trying to recover from some kind of setback or get out of debt.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
Glad to be back.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
It's definitely not the time to make any impulsive decisions. It can be tempting to panic when the market takes a dive like it has recently, but that's often the worst thing you can do.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
Private credit is a little bit technical to define, and I think the easiest way to explain it is by analogy. It's a little bit of a hike, but bear with me here. A lot of listeners have probably heard of private equity. Private equity is kind of like stock, it's shares in a company, but it's shares of a company that hasn't gone public yet, like an early stage startup.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
It has the potential for much higher returns than what you'd get investing in the stock market, but it also comes with more risk. And since it's not publicly traded, you don't necessarily have the ability to sell whenever you want.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
If private equity is like a non-publicly traded stock, private credit is like a non-publicly traded bond. It's a fixed income investment that pays interest income to investors, but it's issued by companies that aren't big enough or aren't established enough to borrow money the normal way by issuing publicly traded bonds. So private credit is to bonds as private equity is to stocks.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
You have the potential to earn much higher returns, a much higher interest rate than you'd earn with conventional bonds, but there's also more risk and you have less flexibility about when you can pull your money out.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
It really is. There was a McKinsey report last year that estimated the private credit market was worth about $2 trillion a year ago. And since then, some other sources have estimated it at $3 trillion. It's really ramped up in the last few years.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
A lot of it has to do with regulation. During the late 2000s financial crisis, a lot of financial institutions got themselves into trouble with bad loans. And in the aftermath of it, we created a lot of rules on bank lending to try to prevent that from happening again. One side effect is that banks became much more reluctant to lend money to small or early stage companies.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
it became harder for those companies to issue bonds which is part of the traditional corporate lending process but for better or for worse people have found a loophole in these post-great recession regulations which is that they only apply to banks they don't apply to other financial institutions like hedge funds and high net worth individuals who can act as non-bank lenders
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
Exactly, yeah. Shadow banking is an ominous but also frankly accurate term for unregulated lending, which is private credit. Now, private credit has grown really fast in recent years, partially because it provides this regulatory workaround to less established companies, but also because the returns are really good and that's created a lot of investor demand.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
One investment advisor I spoke to told me that the returns on private credit average around 9% to 11% per year, which is a lot higher than what you'd earn with most investment grade bonds.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
In recent years, some robo-advisor firms have started to offer private credit investments to customers. Of the robo-advisor's nerd wallet reviews, Titan has a private credit strategy and Fidelity does too, although Fidelity only offers it to accredited investors who have a net worth of a million dollars or more. On top of that, a few companies have recently launched private credit ETFs.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
These give anyone the ability to invest in private credit, and they allow you to buy or sell whenever the markets are open, like any other ETF.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
The pros are pretty simple. Private credit potentially offers high returns and it also offers some diversification to a portfolio. There could be a case for devoting a small percentage of a portfolio to private credit if you understand the risks, but there definitely are risks. Such as? Well, as we talked about, private credit, the underlying loans here, are not publicly traded.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
They can't be bought and sold at any time between 9.30 a.m. and 4 p.m. the way that stocks and conventional bonds can. Some private credit investment vehicles, like Titan's RoboAdvisor offerings, will only allow you to buy or sell once per quarter. The new private credit ETFs don't have this limitation, but that's not necessarily a good thing.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
If a lot of people buy shares of these private credit ETFs and the ETF isn't able to buy a proportional amount of private credit loans, or if a lot of people sell the ETF and the ETF can't sell enough investments, then the price of the ETF could really get untethered from the value of its investments.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
It very well might be. When I asked an investment advisor about the potential risks of investing in private credit, he pointed out that this is a very new type of investment that hasn't really been through a big crisis yet. And given that it's outside the guardrails of our post 2008 regulations on corporate lending, it's hard to say how bad a private credit downturn could get.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
We thought it was important to write about this topic in the newsletter, not just because it's this buzzy new thing that people might want to invest in, but also because people might want to keep an eye on this sudden rush into an asset class that isn't really regulated at all. There's potentially money to be made in private credit, but there's also a lot of money to be lost potentially.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
And as private credit goes mainstream through ETFs, the risks and returns may both get higher.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
Well, it's 25% tariffs on Mexican and Canadian goods and also an additional 10% tariff on Chinese goods. It so happens that these are our three largest trading partners and they've all announced or threatened their own retaliatory tariffs.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
Our tariffs create new costs for businesses that import things, and those costs are either going to eat into corporate earnings or get passed on to consumers as higher prices or both. The market really doesn't like that, especially because we've already been struggling so much with inflation in the last few years.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
Those make it harder for US exporters to sell things abroad, and the market really doesn't like that either.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
You know, I don't know if there's a completely logical answer to that question, but basically, people thought the tariff was just a negotiating tactic, and that is something Trump is known to do sometimes. When he first got inaugurated, he threatened these same 25% tariffs on Canada and Mexico, but then he got some concessions from those countries and suspended the tariffs.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
Up until a few days ago, I think the market expected Trump to produce some other last minute deus ex machina. But this time he didn't. The tariffs have gone into effect. He seems to have actually meant it this time.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
Anything's possible. As we've discussed, investors seem very quick to say, oh, well, Trump probably doesn't mean it. So if there is some news of major new concessions from Canada or Mexico or another delay from Trump, we could see a rally in stocks. Now, does that make sense in the long term? That's a more complicated question.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
It's hard to say what this means for America's trade relationships in the longer term. It's pretty safe to say that our biggest partners don't like all this drama, and it could hurt our ability to make new deals going forward. We're just going to have to wait and see.
NerdWallet's Smart Money Podcast
How Tariffs Could Impact Your Retirement and What to Know for 2025 Taxes
Always happy to come on.
NerdWallet's Smart Money Podcast
The Best Financial Products of 2025 and Investing in Collectibles
That would be Fidelity. And they've gotten the highest score among brokers we review for several years in a row now.
NerdWallet's Smart Money Podcast
The Best Financial Products of 2025 and Investing in Collectibles
As you said, Fidelity just works. It's really streamlined and it's really easy to use for beginners. And it's great for passive, long-term investors who want to keep things simple. But that doesn't mean it skimps on features for advanced traders. Our methodology for these awards looks at a lot of different variables.
NerdWallet's Smart Money Podcast
The Best Financial Products of 2025 and Investing in Collectibles
Some of those, like educational resources or mutual fund selection, are really geared toward beginners and passive investors. Others, like the interest rates on margin loans and the execution quality of trades, those are geared more toward active investors and experienced day traders. Fidelity does really well across the board, which is kind of unusual.
NerdWallet's Smart Money Podcast
The Best Financial Products of 2025 and Investing in Collectibles
Most of the brokers we review are kind of specialized for either day traders or passive investors, but Fidelity bridges the gap in a way that very few other brokers do.
NerdWallet's Smart Money Podcast
The Best Financial Products of 2025 and Investing in Collectibles
Fidelity got a lot of credit in our ratings for its low costs, particularly for those passive, long-term, retirement-minded investors I was talking about. It charges very few account fees, no trading fees or commissions for stocks and exchange-traded funds. Something that really makes Fidelity stand out in terms of costs is this line of index funds it offers called Fidelity Zero.
NerdWallet's Smart Money Podcast
The Best Financial Products of 2025 and Investing in Collectibles
Most ETFs and mutual funds have an expense ratio, as you just mentioned, and for listeners who don't know, that's a percentage fee that is deducted from the fund's annual returns. But as their name implies, Fidelity Zero funds don't have expense ratios, and that's pretty unusual. There's only a couple of different costs I can think of where Fidelity isn't best in class.
NerdWallet's Smart Money Podcast
The Best Financial Products of 2025 and Investing in Collectibles
One is options trading fees. Fidelity doesn't charge a commission on options trades, but it does charge a fee of $0.65 per contract. That's pretty typical among brokers we review, although some other brokers like Robinhood and Public have done away with this fee as well. Fidelity also charges a relatively high fee for broker-assisted trades.
NerdWallet's Smart Money Podcast
The Best Financial Products of 2025 and Investing in Collectibles
That means if you want to place buy or sell orders the old-fashioned way, if you want to call up a human broker on the phone, that'll cost you $32.95 per trade at Fidelity, which is on the higher end.
NerdWallet's Smart Money Podcast
The Best Financial Products of 2025 and Investing in Collectibles
That's a really good question, Holden. And it's especially a good question if you're talking about retirement accounts. If you're rolling over an IRA from one provider to another, you want to double check that you're rolling over the right type of IRA. If you have a Roth IRA, you want to make sure that you've opened a Roth IRA at the new provider and transferred your investments into that.
NerdWallet's Smart Money Podcast
The Best Financial Products of 2025 and Investing in Collectibles
If you have a traditional IRA and you're not trying to convert it into a Roth IRA, then you want to make sure that you're rolling it over into another traditional IRA at the new provider. You don't want to accidentally convert a traditional account to a Roth if you don't mean to do that because Roth conversions generate tax liability.
NerdWallet's Smart Money Podcast
The Best Financial Products of 2025 and Investing in Collectibles
Generally speaking, you also don't want to go Roth to traditional because then you lose the tax-free withdrawals in retirement that a Roth IRA offers and you don't get any benefit from that.
NerdWallet's Smart Money Podcast
The Best Financial Products of 2025 and Investing in Collectibles
On kind of a similar note, Holden, I'm wondering if there are any criteria that are especially important to first-time home buyers who are comparing mortgage lenders. You've laid out why U.S. Bank got the highest score overall, but how do they stack up for beginners specifically?
NerdWallet's Smart Money Podcast
End-of-Year IRA Fixes Before Tax Time: Roth Contribution and Correction Strategies
Thanks for explaining that. And I'm not going to lie, the first time that I heard about backdoor Roths, I honestly thought they were too good to be true. But anyway, how do people go about doing a backdoor Roth?
NerdWallet's Smart Money Podcast
End-of-Year IRA Fixes Before Tax Time: Roth Contribution and Correction Strategies
And just to note here, Robinhood, Webull, and SoFi are nerd wallet partners, but it doesn't affect how we talk about them. All right. So, Sam, finally, do people have to do these now or do they have until the next tax filing season next year?
NerdWallet's Smart Money Podcast
End-of-Year IRA Fixes Before Tax Time: Roth Contribution and Correction Strategies
I will just add before we leave, and I'm going to put it out there that putting some money into your IRA is better than nothing. Of course, if you can afford to. If you need some inspiration, because I know holiday spending is coming around, use the compound interest calculator on our website to see how much your contribution could grow in the next few years.
NerdWallet's Smart Money Podcast
End-of-Year IRA Fixes Before Tax Time: Roth Contribution and Correction Strategies
And on that note, that's all we have for this episode. Remember, listener, that we're here to answer your money questions. So turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. And lastly, visit nerdwallet.com slash podcast for more info on this episode.
NerdWallet's Smart Money Podcast
End-of-Year IRA Fixes Before Tax Time: Roth Contribution and Correction Strategies
And remember, you can follow the show on your favorite podcast app, including Spotify, Apple Podcasts, and iHeart Radio to automatically download the new episodes.
NerdWallet's Smart Money Podcast
End-of-Year IRA Fixes Before Tax Time: Roth Contribution and Correction Strategies
And with that said, until next time, turn to the nerds.
NerdWallet's Smart Money Podcast
End-of-Year IRA Fixes Before Tax Time: Roth Contribution and Correction Strategies
We're back and answering your real world questions to help you make smarter decisions about your money. Now, this episode's question comes from a listener's text message, and here it is. Hi, nerds. According to my wife's and my pay, it looks like by the end of the year, our modified adjusted gross income will put us over the Roth IRA contribution limit.
NerdWallet's Smart Money Podcast
End-of-Year IRA Fixes Before Tax Time: Roth Contribution and Correction Strategies
The problem is she and I dollar cost average into the Roth IRA. So we have already contributed about half of this year's limit. Will that be an issue? How can I fix this in tax season? Can I do a backdoor Roth IRA? How do we fix what we have already contributed this year? That's a lot of questions.
NerdWallet's Smart Money Podcast
End-of-Year IRA Fixes Before Tax Time: Roth Contribution and Correction Strategies
And listener, if you're thinking, why should I keep listening? I don't even have a Roth IRA. Then don't worry. NerdWallet has you covered. Our investing nerds have put together a list of the best Roth IRA accounts, and we will put a link in the description of today's episode. Or you can search online for NerdWallet best Roth IRA account. Now let's get into this listener's question.
NerdWallet's Smart Money Podcast
End-of-Year IRA Fixes Before Tax Time: Roth Contribution and Correction Strategies
Sam, can you start by explaining what the contribution limits are for Roth IRAs this year?
NerdWallet's Smart Money Podcast
End-of-Year IRA Fixes Before Tax Time: Roth Contribution and Correction Strategies
And we will include a link to that in the episode's show notes. So that's a hint for you to go and check those out. I personally would advocate for using the accountant. I mean, last year I overpaid. I know we're talking about Roths here, but I overpaid on my health savings account and I overpaid on my taxes because I was doing my own math. This year, I definitely used a CFP.
NerdWallet's Smart Money Podcast
End-of-Year IRA Fixes Before Tax Time: Roth Contribution and Correction Strategies
Anyways, it's important that people who might earn too much to contribute the full amount to a Roth IRA understand what their limits are. If they contribute too much, they could face IRS penalties.
NerdWallet's Smart Money Podcast
End-of-Year IRA Fixes Before Tax Time: Roth Contribution and Correction Strategies
Wow, that's a lot of legwork. But at least we know that they have options. Tell us, Sam, what happens if you don't realize that you contributed too much until after you filed your taxes?
NerdWallet's Smart Money Podcast
Can AI Really Manage Your Money? Plus: The Truth About Roth Conversions
Generally in a traditional IRA or a traditional 401k, the contributions are tax deductible. So if you convert a traditional account to a Roth account, those contributions aren't tax deductible anymore and you'll owe taxes on them.
NerdWallet's Smart Money Podcast
Can AI Really Manage Your Money? Plus: The Truth About Roth Conversions
Assuming that David deducted all of his traditional IRA or 401k contributions from his taxes in the years before this conversion, he'd owe income tax on the entire amount rolled over into a Roth account that year. He wouldn't owe the 10% penalty, though. To figure out how much this would actually be, one thing David could do is use NerdWallet's income tax calculator.
NerdWallet's Smart Money Podcast
Can AI Really Manage Your Money? Plus: The Truth About Roth Conversions
He could run the numbers once with his normal adjusted gross income for the year, and then once with his AGI plus the whole balance of the traditional IRA. And the difference between those two numbers is going to be the amount of tax he owes on the conversion.
NerdWallet's Smart Money Podcast
Can AI Really Manage Your Money? Plus: The Truth About Roth Conversions
It does have a sketchy sounding name, but as you said, it's a perfectly legitimate strategy. A backdoor Roth IRA involves opening a traditional IRA and then making non-deductible contributions to it, which is a thing you can do, and then rolling over that traditional IRA into a Roth IRA.
NerdWallet's Smart Money Podcast
Can AI Really Manage Your Money? Plus: The Truth About Roth Conversions
The reason it's called a backdoor Roth IRA is because, number one, it gets around the income limits for Roth contributions. High income taxpayers aren't always eligible to contribute directly to a Roth IRA, and this circumvents that rule. And it also means you'll only owe tax on the profits your investments earned in the traditional IRA before conversion.
NerdWallet's Smart Money Podcast
Can AI Really Manage Your Money? Plus: The Truth About Roth Conversions
As we talked about earlier, if you convert a traditional IRA that contains tax-deductible contributions into a Roth, you'll also owe tax on the contributions. But the backdoor strategy usually involves making non-deductible contributions, so you get around that. Having said that, there's actually a wrinkle of the backdoor Roth strategy that I'd like to get your input on, Sean.
NerdWallet's Smart Money Podcast
Can AI Really Manage Your Money? Plus: The Truth About Roth Conversions
Our listener asked about the pro-rata rule. How does that work exactly?
NerdWallet's Smart Money Podcast
Can AI Really Manage Your Money? Plus: The Truth About Roth Conversions
Well, I think that a big part of the reason Sean understands this is because he's completed certified financial planner training. And in general, very few people other than licensed financial advisors really know all the ins and outs of Roth conversion rules. I certainly didn't understand how the pro-rata rule worked before Sean explained it.
NerdWallet's Smart Money Podcast
Can AI Really Manage Your Money? Plus: The Truth About Roth Conversions
So if you're considering a Roth conversion, backdoor or otherwise, it's really worth talking to an advisor. And if you don't know where to find one, NerdWallet's Best Financial Advisors Roundup is a good place to start. You can list your main financial priority like tax strategy or investment advice or financial planning, and you can get matched with an advisor for free.
NerdWallet's Smart Money Podcast
Can AI Really Manage Your Money? Plus: The Truth About Roth Conversions
We'll put a link to that in today's show notes.
NerdWallet's Smart Money Podcast
Can AI Really Manage Your Money? Plus: The Truth About Roth Conversions
Sure.
NerdWallet's Smart Money Podcast
Can AI Really Manage Your Money? Plus: The Truth About Roth Conversions
The process works just like a regular rollover. You can either have your traditional IRA custodian cut you a check and you deposit it into a Roth IRA within 60 days, or some custodians may be able to transfer the funds electronically.
NerdWallet's Smart Money Podcast
Can AI Really Manage Your Money? Plus: The Truth About Roth Conversions
Well, there's a spotlight on Roths in general at the moment because they offer a little more flexibility than a traditional IRA. The contributions to a Roth IRA are not tax deductible. They're already tax money and you're allowed to withdraw them at any time. The investment earnings in a Roth account are different.
NerdWallet's Smart Money Podcast
Can AI Really Manage Your Money? Plus: The Truth About Roth Conversions
You'll get hit with income tax and a 10% penalty for withdrawing those unless you're over age 59 and a half. or disabled or liquidating an inherited IRA. Those are basically the same rules as withdrawing from a traditional IRA. But there's one other exception which is only available for Roth IRAs, and that's the first-time home purchase.
NerdWallet's Smart Money Podcast
Can AI Really Manage Your Money? Plus: The Truth About Roth Conversions
You can withdraw up to $10,000 in earnings tax-free and penalty-free for a first-time home purchase if your account has been open for at least five years. Needless to say, that's an appealing feature with the cost of housing nowadays. That said, there are some trade-offs to consider if you're thinking about a Roth conversion.
NerdWallet's Smart Money Podcast
Can AI Really Manage Your Money? Plus: The Truth About Roth Conversions
They're irreversible, and as David said, they can generate some tax liability.
NerdWallet's Smart Money Podcast
Stop Scrolling, Start Saving: Better Habits and Budgets for 2025
Hey, this is Sam. I'm an incoming grad student and a PhD in engineering. My salary is kind of weird. It appears like I'm getting paid by the semester, so a big stipend, every four to five months.
NerdWallet's Smart Money Podcast
Stop Scrolling, Start Saving: Better Habits and Budgets for 2025
I was wondering how you should work out a budget plan with a salary that is given in discrete chunks up here, how I can make regular investments with that while not depleting my income before the next paycheck comes. Thank you so much. Love to call back to talk. And yeah, take care. Bye.