When Cash Feels Safer Than the Market: Funding Big Projects, Managing Risk, and Avoiding Tax Traps
Hunter Kelly discusses a client case (names changed) involving Mark and Lauren, who earn just over $300,000, have nearly $1 million in retirement savings, and $100,000 cash while considering a $175,000–$180,000 pool project. They explored HELOC/pool loans but were uncomfortable with added debt, so they chose to delay until Mark’s July bonus and retention payment arrive, including temporarily reducing his 403(b) contributions to increase short-term liquidity. The episode also covers Mark moving about $700,000 of his 403(b) into a money market due to market fears, the risks of staying in cash, and using a rules-based reentry plan and more fitting allocation. Kelly explains capital loss limits ($3,000 against ordinary income with carryforwards) and a backdoor Roth IRA reporting error on Form 8606 that, once corrected, saved about $1,000, emphasizing sequencing and broader advisor value beyond investments.
00:00 Welcome and Setup 00:46 Meet Mark and Lauren 02:23 Pool Project Costs 04:31 Debt vs Peace of Mind 05:42 Waiting for Bonus Cash 07:33 Pause 403b for Liquidity 09:10 Moved Retirement to Cash 11:56 Rules Based Reentry Plan 14:08 Breakeven Bias and Purpose 17:00 Capital Losses Explained 19:54 Backdoor Roth Reporting 23:03 Sequencing and Takeaways 26:02 Wrap Up and Disclaimer
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