How Do We Build Wealth Once Our House Is Paid Off?
·7 min
The episode begins with Scott calling in to share that he has paid off his house, marking his entry into Baby Step 7 of the Ramsey plan. He explains that he used $12,000 from his emergency fund to complete the payoff and now needs to rebuild it to $50,000, currently having $25,000 saved. Scott has a traditional IRA with about $214,000 and earns $100,000 annually from his job, which lacks a 401k program. He asks if he should invest in mutual funds—specifically high-cap, low-cap, mid-cap, and foreign funds—and use a high-yield savings account, while also considering a Roth IRA for tax balance. George and Rachel advise focusing first on tax-advantaged retirement accounts, suggesting he max out his IRA annually. They recommend Fairwinds Credit Union for a high-yield savings account with rates over 3% to beat inflation. Once the emergency fund is funded and IRA maxed, they suggest moving to a taxable brokerage account with mutual funds diversified across four types: growth and income (high-cap), growth (mid-cap), aggressive growth (low-cap), and international. They note that international funds can balance U.S. market downturns, as seen from 2000 to 2010. Scott mentions working with a financial advisor for 15 years, who helped him start this journey. The hosts emphasize that at Baby Step 7, he can explore options like paying cash for real estate. Scott reveals his house is worth $325,000 and plans to work indefinitely, enjoying his job, with no intention to retire soon. He discusses potentially drawing Social Security while still working, and the hosts advise delaying it until age 70 to maximize benefits. They also mention catch-up contributions for retirement accounts due to his age. The episode concludes with the hosts expressing admiration for Scott's progress and calling it a win.
