Hey Travel Nurses! Over the weekend a travel nurse asked a group of other nurses for their recommendations on retirement savings, investments and other financial challenges she was facing.
As you can imagine, over fifty unqualified nurses offered their opinions without asking her what she needed the investment income for, when she would need it by, or any other relevant fact finding questions that are necessary to be able to give an informed opinion or solution.
And yes, as you can imagine - all of the answers sounded like some regurgitated blog post that you could find by quickly doing a search on Google.
You know exactly what I’m talking about, right?
The posts that sound like “5 Steps To Doing XYZ”. All of the answers were like: Max out your 401K, fund your IRAs, buy an IUL life insurance policy.
All of your typical one-size fits all advice.
The problem with this one size fits all financial advice is that saving for retirement, saving for any of your other financial goals is not happening in some vacuum where all of the other variables of life can’t affect it.
And it doesn’t make sense for you to plan your savings in a way that ignores the other variables that just occur within the natural tempo of your life.
Let me explain.
A lot of my travel nurse clients are young professionals. They either have yet to go through or are currently going through major milestones in their life. We’re talking about saving for a wedding, buying their first home. All of which have huge cash-need implications.
If they were to just continue following all of this one-size fits all information online that’s not tailored to their specific needs, it would end up doing a ton of damage to them along the way.
Take for example a 28 year-old nurse who is engaged and she and her partner are going to buy their first house. The nurse has been diligently saving in their 401K and in their IRAs, they’re putting all their extra money into retirement savings.
But because all of their money is tied up into their 401K and their IRAs, they have no access to cash to fund their wedding. They have no access to cash to put a down payment on their home.
So they do what any couple who is in love and who desperately wants to have the wedding of their dreams and the house of their dreams does. They end up taking an early withdrawal from their 401K which ends up costing them penalties and an immediate taxable event that leaves them with 40% less than they actually would do in the first place.
So to make up the difference, they finance the rest of their wedding on their credit card that has a 17% annual percentage rate and now they have no savings, retirement or otherwise, and an astronomically high credit card balance. After the wedding is done, after they’ve purchased a house, all they do is fight about money because they didn’t have a plan that was tailored to their needs.
A good advisor would have asked them about their goals and their financial needs, would have found out what their time horizon was for each of those goals, and would have identified the costs associated with each of those goals as well.
The advice that advisor would have given might have sounded more like this:
Because you are young and you’re in the building stages of your life it’s obviously extremely important that you save as aggressively as you can but also that as you save you maintain a level of liquidity - a level of access to cash.
So as you go through major life milestones like getting married, buying that first house, moving to a different state - that you have a cushion to do that without debt.
Try to establish a savings rate between 10% and 15% of your annual salary, and do invest in your company’s 401K but up until the company is matching you. The rest, invest it into a taxable brokerage account where there are no penalties for you withdrawing funds from it.
You may be asking, taxable brokerage account? But what about taxes?
Well, 15% in long term capital gains rate is a hell of a lot better than paying 35% at your marginal tax rate plus 10% in early withdrawal penalties plus that 17% in interest that you have on your credit card because you didn’t have enough cash to fund those purchases anyway. It’s a heck of a lot more permissible.
But like all good financial advice, it depends on your specific situation. Don’t fall prey to the one-size fits all trap from non-experts. Create a financial plan that is individually tailored to your specific needs and goals.
Remember, we’ve got the limited resources of time and money and it’s up to us to find the best way to leverage those resources to turn our money into more money and to keep more of it.
Marlon is a licensed financial advisor at weshfinancial.com and is known as "The Travel Nurse Financial Advisor". Marlon specializes in helping travel nurses crush their financial goals by helping them optimize taxes, accelerate retirement savings, and maximize their investments.