Last night around 8:15 I said to my wife, “I don’t know if I should exercise or just drink wine?” She replied, “Do both.” So I jogged on the treadmill for a bit and when I came upstairs I said “Should I drink wine or have leftover birthday cake.” To which she replied, “Do both!” And so I did. We’ve continued this “do both” joke today as I filled my cup halfway with regular and halfway with a pumpkin spice coffee. When we asked our son, who just had his adenoids removed, if he wanted a popsicle or ice cream he replied without hesitation, “BOTH!”
In planning for your financial future, many decisions can be made with far less stress if they are not viewed or treated as EITHER OR. As financial planners, we tend to want to optimize our advice and in doing so we search for the one perfect solution. For example, where to save money for retirement. The optimizing approach looks at your income tax rate today and makes an educated assumption of your tax rate in retirement. When our assumption is a lower rate in retirement, saving pre-tax today to your 401(k) plan is the most efficient solution. However, it may be more practical to have two solutions and do both. In this case, save to your 401(k) pre tax and save to your Roth IRA after tax. You may not be optimizing according to today’s assumptions, but in doing both you’ve created flexibility and options for yourself.
This weekend, when faced with a bike ride or a donut, I’ll do both and I hope you do the same. 🙂