NerdWallet's Smart Money Podcast
Smart Planning Sessions: Investing Through Uncertainty and Planning for Early Retirement Abroad
Mon, 19 May 2025
In this month’s Smart Planning segment, a financial advisor discusses when it might make sense to scale back your 401(k) contributions. Is it safe to invest right now? Should you keep contributing to your retirement account when the economy feels uncertain? Hosts Sean Pyles and Elizabeth Ayoola discuss how to navigate turbulent financial times by focusing on long-term investing strategies and what you can control. They break down what’s going on with recent stock market activity, why the dollar is weakening, and how investors can stay the course by understanding their risk tolerance and using tools like dollar-cost averaging. They also touch on emotional investing and offer practical ways to handle market anxiety without pulling back on your financial goals. Then, Elizabeth welcomes Ross Anderson, founder of Craftwork Capital and co-host of the Check Your Balances podcast, to answer a listener’s question about whether to reduce 401(k) contributions due to fears about job security. They discuss how to evaluate whether you’re holding too much cash, the trade-offs between contributing to retirement versus living for today, and how the FIRE (Financial Independence, Retire Early) movement can work even if you start later in life. They also cover the impact of retiring abroad, how international taxes can complicate your strategy, and why certain insurance products might not match your goals. Inspired to navigate your finances with an advisor? Use NerdWallet Advisors Match to find vetted professionals today at https://www.nerdwalletadvisors.com/match Learn about dollar-cost averaging as a strategy to reduce the impact of volatility by spreading out your stock or fund purchases over time so you're not buying shares at a high point for prices: https://www.nerdwallet.com/article/investing/dollar-cost-averaging-2 In their conversation, the Nerds discuss: investing during market volatility, dollar cost averaging, stock market downturn 2025, how to manage risk tolerance, emotional investing, investment risk capacity, long-term investing strategy, FIRE movement explained, barista FIRE, how to retire abroad, retiring in Portugal, retiring in Italy, buying a home in Europe, saving for early retirement, high-yield savings account vs investing, when to reduce retirement contributions, investing vs lifestyle spending, how to handle market swings, tax rules for expats, international index funds, when to use a brokerage account, what to do in a market downturn, life insurance for retirement planning, long-term capital gains tax, when to sell stocks for retirement, CDs vs savings account, risk tolerance vs risk capacity, and when to rebalance investments. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [email protected]. Like what you hear? Please leave us a review and tell a friend. Disclaimer: This podcast is for informational and educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks or securities. Any comments posted under NerdWallet's official account videos are not reviewed or endorsed by NerdWallet or representatives of financial institutions affiliated with the reviewed products unless explicitly stated otherwise. Avoid disclosing personal or sensitive information such as bank accounts or phone numbers. NerdWallet employees do not offer personalized financial advice and will not respond to posts here.
Chapter 1: Is it safe to invest right now?
Elizabeth, have you been getting 2020 vibes recently? Like the whole world feels a little off?
I think off is a gentle way of putting it, Sean. Chaotic feels a little more befitting. 2020 felt chaotic and so does 2025.
Yeah, I'm with you there. Well, if anyone listening is worried about what the recent economic shakiness means for their investment plans, this episode, we've got some answers for you. Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles.
And I'm Elizabeth Ayola. This episode, we have the next installment in our Smart Planning series. And we're going to be joined by a listener and a guest financial expert to discuss whether to pull back on 401k contributions due to the current economic uncertainty.
But first, we're going to talk about whether it's safe to invest right now and if you should trust the market at all, given the way it's behaved over the last several weeks.
So, Sean, since you're Mr. Certified Financial Planner, what's your take on that?
Well, I'll remind you, Elizabeth, and everyone listening, that while I am a financial planner, I'm not your financial planner. So don't take this as personalized advice and don't get litigious if your investments don't perform like you want them to. But here is what I'm thinking. Investing remains most folks' best bet for staying ahead of inflation.
as in the return you get on your investments is greater than the rate of inflation, typically. And because of that, I can't afford not to invest, regardless of what sort of wackiness is going on with the stock market or tariffs or the news of the day.
Listen, I can't afford not to invest either. But a lot of people out there are seeing the swings in the stock market and even changes in the bond market, which are supposed to be safer investments. And the value of the dollar is dropping. And they might be wondering if investing will continue to be a reliable way to grow your money.
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Chapter 2: What is dollar-cost averaging and how can it help?
I'm a fan of the baby food that is mushy peas, so I will get that on my own terms. Well, anyway, back to money things. As of this recording, the dollar is down nearly 10% for the year, and that's roughly a three-year low. As with many things when it comes to macro financial movements, there are a lot of factors at play.
But some investors may be looking at the volatility in the United States right now and thinking that they can just get better returns elsewhere for less risk. But at the end of the day, the dollar remains what's called the world's reserve currency.
All sorts of transactions around the world rely on a stable dollar, so even if investors are moving away from the dollar, as it appears, they won't fully extricate themselves from it overnight.
Okay, that makes sense. Maybe the global financial system isn't going to come crashing down tomorrow and investing is still a smart way to grow your money. But I'm still feeling this uneasiness. You said earlier that people like predictability and patterns. How can we find any predictability right now and how can people navigate this stressful time?
I'm going to go back to some advice that we talk about regularly on Smart Money. Focus on what you can control. You can find and build predictability through how you manage your money and your investments. So I'll just give you an example from my own life. I'm going to continue to make investments on a regular basis. This is sometimes called dollar cost averaging.
We have an article about this that I'll link to in the episode description. But basically, you make steady contributions to an investment account so that the cost of your investments averages out over time. In periods where stocks are going down, you can think of them as being on sale compared to when they cost... compared to what they cost when their prices were higher.
But by making regular contributions to my brokerage account, I'm continuing to make steady progress on my long-term investing goals. And that to me feels safe and predictable.
Same here, Sean. I haven't switched up my investing strategy and I continue contributing to my accounts as well. And let me tell you, I love a good sale and retirement isn't on my horizon yet. So it's investing, business as usual over here.
In times like this can also be a good opportunity to reevaluate your investing strategy. If you feel really rattled by the recent economic news, this might be a sign that you have a lower risk tolerance than you thought. Risk tolerance is essentially how much risk you can handle from an emotional standpoint.
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Chapter 3: How to evaluate your risk tolerance and capacity?
And some people like to ignore their 401ks in times like this. Maybe I'm a little masochistic, but I can find it actually really helpful to check my retirement account balances when the market is going wild. After I have that brief pang of anxiety upon seeing my balance, which is not as high as I wish it was, I go and I look at how it's grown over time.
Then I think about how much more time I have until my retirement. So I take the balance for what it is, a snapshot in time. Doing this helps build my financial and emotional resilience, which helps with my risk tolerance. because I'm trying to have a very cushy retirement, and that means that my risk capacity is pretty high.
I've personally been ignoring my 401k, to be honest with you.
That's fair.
Yeah, but I will say that I had to sell some restricted stock units to pay for expenses last month while the market was down, and that was not fun because I was at a loss. But thankfully, I do not need to pull funds from my retirement account, and hopefully when I do in the next few decades, my account will be in the green territory.
And hey, we can also talk about tax loss harvesting later on. So don't worry about selling for a loss, Elizabeth.
You sound like my financial advisor. We talked about that last week.
But hey, I'm not your advisor. Just getting that out there. Okay. Well, Elizabeth, are you feeling better about continuing to invest in the long term, even as the market and the world are acting like they have had one too many margaritas?
I love margaritas. But to answer your question, I am thankful for the stock market sale. And I feel like the future of my portfolio is bright. I'm running with that blind optimism.
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Chapter 4: What is the FIRE movement and how does it work?
That's really how I think about evaluating emergency funds. So could you share a little bit about where you are in that respect?
I have at least a couple of years.
A couple of years. Okay. So, so very strong.
I guess so.
Yeah.
That's awesome.
Typically what you'll hear advisors say is kind of three to six months, um, as a good, healthy emergency fund. Now, the more sensitive your income is to the environment, I actually think notching that up can be prudent. So people that work in commission jobs, for example, or real estate where they may not have, um,
commissions for a long period of time or they may have a slow season and things like that. So being a little above that is really healthy. But in theory, if you could go multiple years, first of all, congratulations, that's fantastic. That also may be an indication that you're a little too heavy in cash. So we can talk about that as well today. But that's a really, really impressive place to be.
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Chapter 5: Should you adjust your 401(k) contributions during uncertainty?
So you should be proud of that, that you were able to save that much and put yourself in a really strong position.
Thank you. It's good to hear.
That kind of then leads me back to your original question, which is, does it make sense to reduce your retirement contributions if that's the case? If you're starting from a position of really strong balance sheet, meaning you have that emergency fund in place, then quite frankly, I would almost go the other direction, right?
When we've got times of economic uncertainty, that's normally when markets are going to price down because people are scared. And the stock market is kind of the one place where everything goes on sale and nobody wants it. It's a great place to be putting money, especially when there is fear in the markets. And
I don't know if we're at a bottom or if we've already seen the bottom of kind of this current unrest. But generally, I want to be a buyer when everybody else is concerned. I think of it as how can I put the most money to work possible when everybody else is a little bit nervous.
Then, Ellen, I want to ask you, since you are maybe considering pulling back on your retirement savings, are there other financial goals that you maybe wanted to prioritize instead of saving for retirement?
Yeah, so I think that I'm sort of in a, I wouldn't say unique category, but it's one that you don't hear discussed often when you hear about different sort of financial advice or podcasts that I listen to. And it's that I'm not concerned with my legacy. I'm more concerned with my lifestyle. So that's why I'm trying to find this balance between
How much do I put away for when I retire, but how much can I keep for now and do some of the things that I want to do? So I recently learned about the FIRE movement and it's something that I'm really interested in, but I don't know what I could do. I'm in my 40s. It may be, you know, typically people get started younger.
So that's one of my goals is to be able to not work at least in what my professional career is until I'm 65 or whatever the retirement age is now. And I would also eventually like to leave the U.S. and purchase a home either in Portugal or Italy. That's sort of my goal.
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Chapter 6: What are the implications of retiring abroad?
And the second thing that I don't think it's talked about as much or enough is where are we saving? So if you wanted to be retired at 50, for example, you don't have full access to your retirement accounts, right? When you're putting money into 401ks or Roth IRAs, right?
And there's nuances and rules to all of this stuff where you may have an exception or two, but you don't have unrestricted access to that money. And if you're trying to take... Whatever you're saving as your nest egg, you're going to go overseas with it, buy a house and start living on your resources.
You want to make sure that it's accessible and that it's not causing you really big tax headaches. And so that would be the other really big focus I would have is make sure that you're still getting your match in your 401k, right? Anything that you can do to get free money, we should do that.
But you may also want to prioritize saving in just a brokerage account and building wealth outside of your retirement accounts because you may need access to them way before you traditionally would have kind of easy access to those retirement dollars.
And something else I'd like to quickly touch on before I ask you a question, Elena, is that there are different types of FIRE, right? So you have very quickly lean FIRE, which is for people who want to live a maybe minimalist lifestyle. During retirement, you have fat fire, which is maybe people who want to live more on the more lavish end.
And then you have barista fire, which is my favorite, which is where you maybe you don't completely retire, right? And maybe you follow passion projects or just take on work part time instead. But you saved enough, whereas you can still live off a lower income. So with that said, have you thought about, Eleanor, what you want retirement to look like for you?
Do you want to live on the more luxurious side or are you more on the lean side?
I sort of like your description or the description of barista fire. I'm pursuing my doctorate. I'm nearly done in public health. And so public health is an area that I've loved and I've been passionate about for a very long time. So I'd like to sort of stay involved, but not necessarily through a full-time job that requires me to be, you know, based in one place. So probably barista.
You're teaching me new terms today. I always called that one kind of coast fire, where you're going to get to a spot where you can coast a little bit. You're still working, but you don't have to necessarily work at the same level of intensity. But I like barista fire. I'm learning today.
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