Can We Retire Early?

Updated : Sep 04, 2019 in Articles

Can We Retire Early?


it’s the weekend and you have financial
questions that need answering that can only mean one thing
it’s time for Jill on money the show that takes the mystery out of your
finances here’s your host Jill Schlesinger welcome welcome it’s great
to have you here this Labor Day weekend it’s Jill on money where we are
broadcasting live from the Capital One studios Labor Day weekend you know what
I did I went to the Department of Labor website and I did a little history
lesson ok Labor Day is always the first Monday in September and here’s what it
says it’s a creation of the labor movement and is dedicated to the social
and economic achievements of American workers well that’s what it’s means it
was a frankly started back in like 1885 ad 1886 New York was the first to become
the first day to celebrate Labor Day so happy Labor Day to you and we’ve got a
question about early retirement in honor of Labor Day first up today Michael from
New York how can I help you out Michael great talking to you and my wife and I
are both 47 years old we’re looking to retire within the next four years oh
wait a second hold on you’re gonna retire in four years we’re trying if not
sooner oh my gosh are you sitting on top of a pile of money I hope a little bit
how much okay and you have a couple of kids and in the in the picture or not
okay no kids it does make your retirement planning a bit easier let’s
be honest how about do you own the place where you live are you renting no
mortgage no debt no mortgage no debt okay and of the three million tell me
how much of that is in retirement accounts in other words what would be
taxable if you pulled it out and how much in non retirement account
so I have a Roth 401k with about 530 and a traditional IRA with about 550 mm-hmm
my wife has all traditional areas and 401ks and she’s about 800 mm-hmm and
then we have about 800 and the taxable accounts okay great
when you look at how you spend your money right now would your retirement
have to kind of keep up with that exact level of spending or are you planning to
say I’m willing to cut back on the money we’re spending in retirement so we can
get out earlier you are okay that’s great
are you gonna stay in the New York area or are you planning to bolt once you’re
done with working nope we’re gonna pull up and move to someplace much much
cheaper if you look at your real estate right now if you were gonna just blow it
out what would the value be don’t do the top dollar give me a conservative
estimate of your what you’d pull out of a sale probably 300 okay 300 grand let’s
just presume that that you sell and you move someone at somewhere else with a
cheaper cost of living but you spend that the 300 you pull out you actually
say okay we’re just gonna spend that in the next place okay so that we then have
the three million dollars essentially to work with I think that the the issue
that is going to be challenging is that two things one is how you gonna manage
health insurance yeah yeah so one of the things that our planner is kind of
discussing with us is possibly pulling some of the money and converting it into
an immediate annuity and to generate our cost of living money you know our food
clothing shelter healthcare why do you need to do an immediate annuity can’t
you just do that yourself and so an immediate annuity you’d pull
let’s say some of your non qualified money out right because you wouldn’t
want to turn on the spigot yet and start paying taxes
why pay an insurance company to create that I mean you’re working with a
financial advisor why don’t you just say well why do I need to do that with them
why don’t you do your job and make sure that I can live on I’m gonna make it up
five grand a month how much do you think you can live on yeah I think I think
that’s about the number we targeted okay is that including or not including
health insurance that would include Wow all right cuz I think I sort of feel
like health insurance is gonna be a thousand bucks a month easy for you guys
so you’re gonna live on fifty grand a year and then in addition you’ll have to
pay for health insurance all right I want to trust you I am NOT
going to doubt that that you can figure that out so what I guess I’m saying is
that let’s say forget about for four years you get to be whatever you’re 51
52 years old right if you look at your projections how much do you think you’ll
save in that non-qualified account over the next four years we could probably do
maybe another four hundred thousand really that would be fantastic
that’s great let me focus our income currently we both make two hundred
thousand all right so you make four hundred a year if in four years you’ve
got 1.2 million dollars what we need to figure out is can you generate enough
money at that time to cover your five grand a month right and and you pretty
much have to sort of count on the fact that you’re gonna spend that down you
kind of get close I’m still concerned about how long it takes you to get to
claim Social Security like you’ve got this ten year time horizon and maybe 15
years where there there might be real needs to pull money and then you lose
all of that compounding let me ask you this let’s say you retire from working
in a in a high-pressure job would you guys consider working part time and to
bridge the gap so we don’t have to drain the whole non-qualified account
absolutely okay then I think you might be able to make it work
I don’t think you need an immediate annuity because you’re just gonna pay
fees for that and I guess that I would make a different suggestion to you that
if in four years interest rate were way higher and immediate annuities
were a good way for you to say okay let’s look at the numbers I think you
should look at it as a means of comparison at that time I wouldn’t do
anything like that now but if it if interest rates are higher and the
guarantee is such that you can say okay we’re gonna retire
we’re 51 52 years old we are going to take a portion of that non-qualified
account and it makes sense to put a portion of that into an immediate
annuity the reason why I wouldn’t do the whole thing is that you lose all your
liquidity then you’re screwed we want you to keep that money I don’t think
you’re even gonna need it I think that any advise are worth his or her salt
would be a able to create income for you from that 1.2 million dollar account and
so let’s say that from the 1.2 million you pull 30 grand a year okay and then
from your ability to work part-time or do some project work or whatever it is
you just you guys generate another 30 grand a year okay then I think we’re
pretty close or 30 or 40 grand just between the two of you then I think this
works pretty well because what in my strategy here what I would be thinking
about is can I live on the non-qualified account until I claim Social Security
and can I then leave the Roth 401k the traditional 401k the traditional IRA can
I leave those assets alone so that they can grow and then in my 60s I can use
those to create the income to supplement whatever the Social Security is I think
that to me is the game plan so I think you’re kind of close I just think that
if you if you set your sights close if you say 55 versus 50 or 52 you’re gonna
be more comfortable I think you’re close enough that you could probably do some
research and make it work I would feel more comfortable if you were my client I
would feel more comfortable if you were willing to at least look at different
scenarios rather than calling it quits at 52 how’s that sound okay we will get back to more of your
questions in just a minute if you want to get on the air with us
send an email ask Jill at Jill on money.com we’ll be right back welcome back to jail on money where Jill
Schlesinger takes the mystery out of your finances your back it’s Jill on
money hey have you gone to the website recently you should Jill on money calm
you can watch some TV segments read some old blog posts or some really recent
ones and also listen to old programs you can also buy my book the dumb thing
smart people do with their money thirteen ways to write your financial
wrongs you know you want it might as well get it just get it now okay if you
have a financial question while you’re on the website just click on the contact
us button and you will get us very easily that way all right let’s do our
next caller it’s Steve from Cleveland good morning Jill thanks my mom and dad
were getting very close to retirement mom was 62 my dad was 60 when my dad
unfortunately passed away very unexpectedly I’m so sorry
mom thank you so I’m trying to help my mother figure out a new plan for her
retirement and for her finances going forward since the old one isn’t really
going to work anymore right so tell me a little bit so mom is 62 tell me is she
working she is working the original plan was she was going to work for one more
year and then she was going to retire and start collecting her pension my dad
was going to work for a couple more years as they tried to squirrel away as
much money as they could into their retirement accounts and and also they
were planning on you know figuring out where they actually want to live in
retirement and selling their house and and things like that okay
so right now in terms of where they where she is living she’s living in the
home how much is the house worth right now the house is probably worth about
six hundred I think there’s about a hundred thousand
left on a mortgage at issue of what is her state of
residence also Ohio Michigan ok Michigan the mortgage the house is it a big house
I mean what do you what this did you did your dad pass away how long ago that was
just a couple months ago so we don’t really want her to make big decisions
yeah right now she’s working on finishing off the house just to try to
get it ready to sell that was the plan anyway and it’s a lot of house for one
person to live in yeah yeah we’re still working on figuring out where she
actually wants to go where she wants to live if she wants to work another year
or two or just be done after this year like the original plan my primary
concern I think right now is there’s so much to think about I’m struggling
prioritizing okay Kenneth cashflow seems like a big problem right now
there’s mom’s income was much less than dad’s okay income covers the mortgage
and that’s about it okay so how much does mom make I don’t know her actual
salary but take-home is about 2500 and what do you think her expenses are and
staying in the house let’s just presume that she stays in the house for you know
at least through the end of the year but how what are the expenses that she has
to juggle for her basic not you know going crazy but also not scrimping yeah
so mom’s been doing a good job of keeping track of that it’s about thirty
five hundred a month alright so we where we got to get a thousand bucks a month
okay tell me about besides the house the assets that she and your dad had
accumulated sure so between the two of them they had I think about two hundred
and fifty in various rollover IRAs from previous employers my dad had about a
hundred grand in an esop plan with his employer that he was with when he passed
away in retirement mom is expecting about three thousand a month in pension
costs whatever from social which I think was estimated at about two
thousand a month okay so that obviously as soon as that gets turned on will
cover her needs so that’s really the issue okay anything in non retirement
assets thankfully my dad had a good amount of life insurance through his
employer so that was about two hundred and fifty thousand that paid out once
all the paperwork was done there okay so that’s actually very helpful right now
that’s how bills are being paid okay interesting okay so for this minute
let’s think about the best way to address the cash flow problem and that
is to use the life insurance proceeds which is exactly why life insurance
proceeds are so fabulous right there’s there’s no problem in spending some of
this money down did she did they have any other money in in savings or is the
life insurance proceeds essentially all the savings that is not in retirement
okay so here’s what I would do I wouldn’t start putting money that life
insurance money to work anytime soon I would assume that you should keep at
least $50,000 liquid okay how much more money does she have to spend to get the
house in shape by the way think the the total quotes she got so the work is
ongoing I think it’s going to be 50 or 60 okay so you know ready – alright so
she needs of the 250 she needs 50 grand for the ongoing needs just so she has
that thousand dollars a month that she needs to live on right and it’s set
aside and you and that’s it and she needs 60 grand for the house so that’s
what I know so of the 250 110 is spoken for that’s it
don’t don’t let anybody at all talk you into doing anything with that 110 the
140 is intriguing that remains from that life insurance because obviously that if
you added that 140 and you had the 350 or so of the retirement assets you know
that’s a decent number amount of money but I am I’m
little bit unwilling to go crazy with a 140 because I think that we just don’t
know what’s gonna happen next for Mom how is mom just in terms of managing the
money is she relying on you to manage the money did your dad manage the money
like or do they have an advisor what tell me a little bit about what was
going on for them my dad did most of that when he was still around mom she
doesn’t know let’s just say that let’s say that she was very good at delegating
the responsibilities of asset management to your father
I like that okay thank you so she’s been relying on me
a lot to help figure things out financially they do have an advisor
they’ve been working with for at least a couple years now that I actually wanted
to ask you about okay some I’m trying to figure out how to evaluate the advice I
got a bit of a bad taste in my mouth initially when I was looking through
some of the paperwork for their rollover IRAs that these people are managing
because it looks to me like they’re operating under the you know semi
standard you know 1% of assets model but they also sold them funds with a huge
front load which ooh good keep that bad taste in your mouth rinse twice a day
and get rid of that person because if you’re if they’re charging a fee and a
front-end load that’s no good that’s not cool and by the way maybe it depends on
how much you really want to do I mean if you feel comfortable doing this
one idea I would have is to say you know what would you take over the management
of this you know you can just open up a pretty boring account and buy some index
funds and get mom into a fairly conservative portfolio because look when
she retires she is going to have good income really good income and you won’t
have to sweat this you know I mean five grand a month pre-tax presuming she
doesn’t have as big a house is probably gonna be pretty close to what she needs
now in terms of managing the money there are two things you could go to a
fee-only financial planner you could literally get somebody to help her at
the very least just focus on what the gameplan should be and then you know
build a plan out and then maybe or maybe not manage the money maybe you’ll manage
the money in my heart of hearts given her age and everything that’s going on
and how sudden the sounds I would actually tell her to keep working
because I think that that is going to be a consistent part of her life that will
help her a great deal and and it’s not for the money because I actually think
that financially she probably can swing it but I actually believe that for her
emotional state it might be better to keep working okay we will get back to
more of your questions in just a minute have you started to follow us on social
media sometimes we do some very interesting stuff Twitter Instagram
Facebook YouTube at Jill on money is our handle we’ll be right back 401ks IRAs refinancing she covers it all
back to Jill on money with Jill Schlesinger you are back it’s Jill on
money it’s Labor Day weekend gang and I hope that you are enjoying it I hope
that you labored throughout the summer and labored very tirelessly at your
vacation if you got one if you took a vacation and you didn’t disconnect I
totally understand I thought I was going to I didn’t hey Mark it’s kind of hot in
here can you uh turn down the temps you want to heat me up anyway I tried to
disconnect it just did not work that well I wish I I wish I could have done
it better but you know Mark gets crazies all that but we are here and now it is
time to tell you one of the reasons that I love what I do is I receive emails of
thanks sometimes so here is a note from Steve who I had met at a speaking
engagement earlier in the summer and he discussed the sort of a long rambling
email but let me give you the the basics here
his wife is foreign and she believes that debt is toxic and he said my wife
knew that I had student loan debt and somehow bought the explanation that the
sixty some thousand dollars I owed was normal and he says I subconsciously I
think I thought I would have this debt until the day I died and meeting you and
then hearing you on the podcast it caused me to do something I feared more
than flying I put all of my debts student loans credit cards personal
loans on one page and I took stock of where I was after coming to the
realization I was broke and needed to show my wife all of it most of which I
had kept from her we had a pretty rough weekend perhaps the most painful
soul-baring vulner a weekend of my life my wife not only
had nearly as much in savings as I had in debt but she had finished a master’s
degree which she had paid for in cash all the while I was going to games and
conferences and paying for upgrades and hotel amenities and he writes my wife
deciding I was somehow worth sticking around for which kind of like brought a
little tear to my eye worked with me to come up with a game plan that HAP will
have us externally debt-free by 2022 which would be the first time in my
adult life by the way and then by 2023 debt-free to her all the while saving
for a down payment on a house in a car and he says it was the one-two punch
combo of the message you presented that really hit me that I needed to face my
debts and my spending habits head-on two plus weeks later we are on track were
closer than ever in our relationship it’s been emotional but me baring my
soul to her and being vulnerable has allowed her to put put aside her
mistrust with me and money and allowed me to feel like a true equal working
together toward a shared goal I’m sure you get emails like this often but I
feel like there’s not only hope for me to live the life I want to live but
meeting you may have saved my marriage mark anyway it was so this is one of the
most gratifying emails that I have ever received because it sort of puts
everything together it’s why I think mark and I love doing this show that we
do feel like of course there’s a bunch of rich people who call in and we love
to help you guys but there are also people who are in crisis and we really
understand that this is a taboo topic it is hard to talk about with your spouse
with your kids with your parents and anything we can do to get you on the
right track just take some of this emotion out of it and to save you a
little heartache boy that’s about the best thing ever okay okay
here is a and by the way if you’ve got a financial question just email us ask
Jill at Jill on money.com ask Jill at Jill on money.com
that’s what Joe did he and his wife have lived comfortably they’ve got a couple
hundred thousand dollars saved a couple hundred thousand dollars in an IRA my
wife is a little bit younger she wrote a book that we’d we thought would do okay
her publisher said it’s in their top number one sellers she gets royalties
what should we do with the extra windfall the book she gives me the title
and he’s up he’s alright so what do you do with a windfall let’s let’s think
about that first of all Joe you need a game plan
so I need to know a lot more about you and we need to understand what are your
goals what are your objectives are you trying to retire early are you trying to
save money for college are you do you have any outstanding debt what’s
happening Joe send us more info well we’d be happy to help you out really
okay Denise has five hundred seventy four thousand dollars from a pension
wants to know how to invest it I don’t own a home I have no debt I’m 66 years
old Social Security after taxes and Medicare
deductions that brings in about $1,900 a month savings account a hundred grand
mark what should we do with this half a million dollar pension should we put it
in a nice balanced portfolio these are very general questions I love you all
for writing these but we need way more detail so Denise if you if you don’t
have any other investments this makes me very anxious for you to do this by
yourself so you may want to consult with somebody you may want to use a an
automatic investing platform out there you know any of the ones that you might
have heard of like betterment or Vanguard personal service advisor or
Schwab intelligent portfolios you may want to check these out or you may want
to seek the services of a financial planner okay
Marianne writes okay I don’t know if Marianne wrote this or someone else
wrote this this is funny but anyway Marianne says my wife will soon be 70
and a half before me we’ve got several IRAs hypothetically we’ve got 10
different qualified accounts with 50 grand each can we take our required
amount of withdrawal from one account or a certain amount from each county
here’s the deal you can lump together all of your IRAs
and take one distribution on behalf of the IRAs but for the 403 B you’ve got to
do it separately so if the IRA if all the IRAs added up to a bunch of money
and let’s just call it a half a million dollars you can say one distribution
from all the IRA accounts from take one account lump them together but you can
take it from one account but a 403b a 401k or an annuity that’s a 403b
that you have to actually take separately okay
ah blowing through these mark feeling good Jill Schlesinger back from vacation
it’s Labor Day weekend have you subscribed to our podcast it’s called
Jill on money you can get it on Apple stitcher radio comm Google Play anywhere
else you find your favorite podcasts Jill on money we’ll be right back welcome back to jail on money where Jill
Schlesinger takes the mystery out of your finances mark look what I just did
to this microphone I’m gonna hold it like this
I’ve now ladies and gentlemen theater of the mind this is radio I’ve just
disconnected the microphone from the mic stand I’m holding it like I am a a
cocktail lounge singer right now stick around for the veal I’m here all week
okay this is if you’re listening to Jill on money and what we would love you to
do is hop onto our website Jill on money.com
check out all the fun stuff that we put up there when I say we I mean mark cuz
he does all the hard work here I put the content out he gets it to you so you can
read things that we have written you can listen to past shows you can watch
television and video segments we’ve got a great resource section and of course
you can sign up for our free weekly newsletter and of course you can buy our
book the book is called the dumb thing smart people do with their money
thirteen ways to write your financial wrongs I’m trying to prove to the
publisher that I can sell you know a couple thousand books every weekend
let’s see if you guys can tell help me out with that I may not really be able
to do that but let’s try okay Sonny writes that I am trying to figure out
what’s the best course of action to take regarding retirement planning I work for
a city as an employee and so I am investing some of my money into a 457
plan my next goal is to set up a Roth IRA account for my wife and for me my
wife does not work she stays home to take care of our two lovely boys
full-time I recently talked to a financial company about establishing a
Roth IRA is it wise to have them do it or could I do it myself do it yourself
if you’re gonna do a Roth IRA through Vanguard absolutely he also writes Sonny
says I’m also looking at setting up a 529 plan for
both of my kids so what I would do is I would try to establish that 5:20 the
Roth IRA through Vanguard make it easy just put in you know you can do some
money in a stock index and extended stock index fund some in a bond index
fund call it a day 529 plan you didn’t say where you are
from just make sure that whatever plan you choose that you are not
shortchanging your own retirement savings for that 529 so I love those
ideas it’s fantastic again I the 529 just make sure you do it through your
state if your state offers some sort of specific deduction or if you want just
send us a note back let us know where what state you live in and we can say
whether or not your plan is worth using or whether you might want to go out of
state okay here we go mark one of your favorites our daughter is about $50,000
in debt from a college loan she received full tuition oh my god but she had to
take money out for housing she’s got a bachelor’s degree on and her degree was
in Family and Children studies she had to use an unsubsidized loan which has
been gathering interest since day one she’s now working on her master’s mark
shaking his head like that’s not good anyway she’s coverage mark she’s
receiving full tuition and so this is interesting she’s got a job this that
you know for some extras and here’s what the parent writes we did not want her
working full-time because we felt like her education was more important that’s
good but we are not able to help her financially because we’ve been in the
hole since breast cancer bills after insurance we were able to keep our home
pay our other bills that’s about it can you please help us and her figure out
the best way to pay that loan or any avenue she can get to get a paid off
quickly is there a public service that she can do that will pay it off for her
well there is something that is called the public service loan forgiveness plan
and you should look at Student Aid dot e-d-u you can learn about it but I
just want to say broadly remind people that it’s okay if you say gosh I don’t
want my kid to work that’s fine but maybe what could have been a more
prudent step would be to take some time in between undergraduate and graduate to
start working that debt down you know I find that to be there’s a lot of people
just gathering debt gathering debt I mean especially in a field of study
where you’re just not gonna make so much money there’s not so anyway you check
out the public service loan forgiveness there are a lot of very thorny
requirements for it if you don’t have a federal student loan it will not work so
I don’t know if if the unsubsidized part would be allowable under this but anyway
this is a toughy I don’t really know what to do with this we’re gonna book a
guest shortly mark what’s her name again about the student loan she’s that
professor from NYU Katelyn Zaloom we’re gonna come have her come on and talk
about this issue it’s crazy okay Tom Tom’s brother he’s writing my
Tom writes my brother has eight pieces of rental real estate property in
addition to his purse to personal properties he’s named my son as the
personal representative in his will the will directs the Tom’s son to sell and
liquidate my estate upon my death before distribution to my devise ease
he lists his devise ease as his brothers and sisters eg my brothers and sisters
and make the will also states that the personal representative shall quote take
possession of property to keep it safe to retain to rid of a question should
the properties be transferred to my son upon my brother’s death in order to
avoid paying large capital gains I believe he would get them at the market
value of my brother’s death versus if they were to be sold immediately without
transferring to the estate I want to get back to this let’s let’s come
– this right after the break we’re gonna do a little quick recap about cost basis
step-up and real estate and why you really need to be careful about this so
when we come back we’re gonna do a little estate planning boot camp for the
last segment of the program okay it’s Jill on money hey let us know if we can
help you out our email addresses ask Jill at Jill on money comm we’ll be
right back you’re back it’s Jill on money and we are broadcasting live from
the Capital One Studios here in New York and right before we went to the break we
got a question about an estate and this is essentially a question about cost
basis and step up so here’s the deal if you are the if you are the beneficiary
of some piece of property of some stock and someone gives you that asset during
his or her life you basically are gifted not just the asset but also the price at
which the person purchased it so that’s the cost basis but if that person dies
and leaves you the same asset you inherit the asset at a stepped-up
cost basis now the question that was asked from tom is about whether his son
who is named in his brother’s will as the personal representative I think that
leaving the property to the son is not the issue I think that what your brother
really should be doing is talking to an estate attorney and finding out the most
tax-efficient way to a owned these properties and be leave them to his
siblings upon death because what happens is the will is saying your son is going
to be the guy who is kind of like the executor I don’t know who the executor
of your brother’s estate is is gonna do the stuff he doesn’t have to
receive the property for a tax consequence to occur where you get the
step-up in cost basis so what I really think is important is that in any of
these events when it comes to real estate and estate planning you really
need to actually talk to an estate attorney because Tom actually writes
that does a you know he asked about his own home that his he and his wife having
a trust as the trust automatically put it into our children’s name so they get
the property at market value at the time of our deaths
well since the trust owns the home then that is what that’s where the estate tax
is going to be triggered so you should be talking to an estate attorney about
whether or not that makes sense for you guys okay so check that out all right
estate questions investment questions tax questions we got them all right here
it’s Jill on money after we come back from the break we’re gonna take more of
your fantastic questions Jill on money calm as a website go check it out we’ll
be right back it’s the weekend and that can only mean
one thing you’re listening to Jill on money the
show that takes the mystery out of your finances here’s your host Jill
Schlesinger welcome welcome it’s our number two it’s Labor Day weekend and
you’re listening to Jill on money we are broadcasting live from the policy genius
studios policy genius is the easy way to compare and buy insurance insurance of
all types by the way check it out go to policy genius.com alright we are using
Labor Day weekend to labor over all the emails that have been sitting around so
let’s get through some of these if you have a question you need some help just
shoot us an email it’s ask Jill at Jill on money.com ask
Jill at Jill on money.com LeAnn says she’s 56 years old single mom 17 with of
a 17 year old they’ve had some big time life events oh yeah yeah she’s had a
tumor in treatment knee replacements my mother died
suddenly when I was in my 20s I got divorced five years ago and then my dad
died this is terrible story just tons and tons of amazingly horrible events is
what I can tell you all right now my daughter has been my inspiration right
arm I want her to go to a private school in Boston like she wants to but I think
it’s gonna be too much money she’s in been in private Catholic school her
whole life but I don’t want her to be saddled with debt all right so I have
about $120,000 from my father’s estate I’m protective of it and I’ll have to
take more time off for my own health care and I also have about two hundred
thousand dollars in retirement accounts when I do the college net cost
calculator I don’t know what I list is abscess well you don’t
usually have to list retirement account assets oh that’s good um but you if the
money for your from your father has been is in your name then you’ll list that
but um you know I’m thinking that what you want to do this way you should do
you should go have her go – money – mentor.com
money – mentor.com it’s part of common bond and it is a way for her to get
hooked up with a trained college student and that money mentor will make the
process of applying for college and getting financial aid a lot easier so
that’s what I think you should do because you do have a very difficult
story and certainly I mean really you you don’t want to fritter away money
that you know you’re gonna need I know you want her to be you know you want her
to get what she wants and you’ve all have gone through a lot but we have to
make sure that you you really truly are making sure that you take care of
yourself as well as her okay so here is Pamela who says she’s been listening to
the show for a couple years and how nice she says you’re able to distill complex
and potentially shame inducing topics and make people feel empowered and
optimistic it’s a gift I’ve been thinking about writing you for as long
as I’ve been listening I decided to just do it
my hesitation has been that I’m not exactly sure what my question is
anyway she wants me to just come out to her beach house for a weekend and just
chat over a latte listen depending on where the beach
house is mark and I can come do you mind taking care of an infant with us it’s
not my baby mark has the mother of his child and she
is in his life however I’m gonna come with mark because who knows he might be
an knucklehead I don’t know anyway okay I’ll tell you a bit about myself married
for 31 years three
kids in their 20s I earned about $200,000 a year my husband earns about
$150,000 a year with an annual bonus between 15 and 20 we own three rental
properties and a primary residence with no mortgage it’s a lot of real estate
and the nut of this question is they own about a million and a half dollars of
real estate mortgages of 900,000 husband’s got 720 grand than a 401k and
then he started using a Roth 401k he’s got a bunch of money and other
retirement accounts so the question is should we convert our IRAs to Roth IRAs
so I think until you have lower income it may not be worth it to do the
conversion so if you start pulling back from your big income then it could be
interesting to convert it really could be but you really need to make sure that
you’ve got money that’s available to pay the taxes but not but you don’t want to
drain all of that money because you need that money to live on so you say you’ve
got about let’s see four hundred fifty thousand dollars in a brokerage account
two hundred grand in cash I wouldn’t want to I certainly would not want to
drain all of that money so I would say that if you could move to a situation
where you could convert some of the money sure no problems
don’t just absolutely do it but I might do it when you have a little bit less
income so that’s that’s I think what you would do it’s it’s certainly a good
story and you seem to be in good shape so how about that let’s do it okay um
here’s a message from Myles who is going to school for business and I have to
take six accounting classes do you have any tips and can you send me a free copy
of the book so I can use it for reference in any paper he might have
coming up no go buy your own book mister I have sixty six thousand dollars in
student loans in deferment is there a good way to pay them off
yes pay them off sorry to be so blunt about that but that seems crazy um I
would I mean if you’re in deferment now that’s fine but yeah I I don’t know like
III don’t love these income-based plans through the federal government because
it’s really gonna stretch out the length of your payback period so hopefully
you’ll get a good job Thomas is retired he owes 97 grand on his house he’s got
about one point three five million dollars in retirement accounts no other
debts outstanding should I withdraw money from my retirement accounts to pay
off the mortgage even though that will put me in a higher tax bracket for the
year no do not do that stay in this bracket if your bracket goes down and
you want to pull some money out sure but you this is gonna be very easy for you
to pay off over time don’t worry don’t make yourself crazy about that just you
know don’t pull the money out please no reason to pay taxes that you don’t need
to pay Jerry wants to know 401k statements in accounting which agency
would be best to discuss or report 401k account discrepancies first go to the
plan provider immediately and if there’s a problem beyond that you would go to
probably well the labor department oversees it ERISA is the big legislation
that would oversee it but go to the plan provider first and see where that leads
you okay all right it’s Jill on money go to the website during the break Jill on
money comm and there you can actually buy the book no I’m not giving them away
for free thank you very much the dumb thing smart people do with
their money thirteen ways to write your financial wrongs we’ll be right back do I invest here should I put my money
there Jill Schlesinger can help you back to Jill on money your back it’s Jill on
money hey have you heard we’ve got a sister podcast it’s called Jill on money
it’s similar but a little different Oh check it out
Jill on money you can get it on Apple stitcher radio comm Google Play anywhere
else you find your favorite podcasts all right here is a message from someone
who’s calling me aunt Jill which means that they know me from way back when
when I used to appear on a CNN show okay I’m not gonna say the name because this
person is a very distinctive name I’m a 34 year old with $70,000 in student
loans it’s the only debt I have I’m finishing a degree in IT at a public
university I can increase my income to pay off the loans the student loans are
from a for-profit school that shut down oh brother anyway I left the recently
recently left a low paying job with $20,000 in a 401k $60,000 in an employee
stock ownership program my plan is to cash out the 401k to play off my loan
and leave the 60 K in the ESOP just in case the company gets bought out I have
money saved up that should be three months emergency reserve should I just
focus on paying off my loan or should I invest a little bit no leave the 401 K
alone take half of the money out of the ESOP and then use that to pay off that’s
what I would do I really that to me is don’t pull money out of this 401 K
that’s when you start getting into trouble
you simply have just too big a tax liability penalty all of that and
and when you get your job just kick-ass and paid that stuff down okay
John is a retiring New York City firefighter he’s got a million dollars
in retirement accounts should I use a pre-arranged target date fun or create
my own diversified portfolio if I were to do it on my own what should I use the
sp500 what kind of bond funds I currently use the New York City deferred
comp and Vanguard what should my percentages of each be well okay I need
more information but John it sounds like you may want to you may be like the
perfect candidate to use a Robo advisor meaning an automatic investment platform
you should check out Vanguard which has Vanguard personal service advisor and
this has a pretty I mean you’re used to in Vanguard already so it has a steep
minimum but you’re gonna meet it it’s fifty thousand dollars that way they’ll
take you through a whole bunch of questions and then you can actually
inform how the diversification from yet what the diversification they would use
for you is so that’s what I would do I would check it out go check out Vanguard
personal service advisor I think that’s gonna be smart Richard is retired he’s
74 he’s got Social Security a pension two fixed annuities one is qualified the
other is non qualified I’ve got money in a savings account that I would like to
put elsewhere to earn better than what the bank is giving me where would you
suggest I put this money Richard II we talking about your safe emergency
reserve money are we talking about you putting to work money that you actually
want to keep really safe if that’s the case you should probably just look at
going with a money market account or a no fee CD go to deposit accounts calm
you can see a listing all over the place in terms of if this were an investment
I’d be I don’t know I it depends how much money you have so
let us know how much money you have and then we can try to steer you into you
know because if you say I’ve got a million dollars in a savings account
obviously you’re not gonna put all of that to
work okay Joe says big fan of the show wanted to
write for a long time I finally made the time the subject should I sell my home
in India I emigrated to the United States eight years ago at the age of 34
and became a citizen about a year ago Oh congratulations I intend to keep
visiting India every couple of years but I’m gonna live and retire in the US when
I left India I collected all my retirement benefits and use it to pay
off my mortgage the property is now worth 250 to 300 grand and it brings in
three thousand dollars a year in rental income after expenses I expect the
appreciation to keep up with inflation but of course hard to predict I have two
questions should I sell the home or keep it I don’t know the rental income kind
of pays for my India India vacations I mean that sounds good if I sell it
should I use the funds after tax to boost my retirement savings I don’t know
this is a hard one let me tell you a little more about this this dude he
makes 250 grand a year he’s got 340 thousand dollars in
retirement savings he owns a house worth about six hundred thousand with a three
hundred seventy thousand dollar mortgage he’s got another 50 grand saved up
excuse me and six thousand dollars in a 529 I don’t know like I can’t judge the
real estate market in India I mean I presume it’s probably decent but I can’t
judge this for you I really can’t I mean I might talk to someone in India it
would be nice to have the you know two hundred and also like what kind of tax
would you have to pay it seems like you’re doing pretty darn well
you’re 34 you’re making 250 grand you’ve already saved a lot of money maybe I’d
keep it for a little bit and just or talk to people in India about exactly
how much you know you might need to put into the house and what the future is
but it’s hard for me to weigh in on this I’m so sorry I this
is a difficult question to answer okay Margot wanted is said in response to an
episode is fine is my financial manager charging too much
Margot writes this was another fantastic episode wouldn’t it be great if you
could say that mark so I didn’t to say it about myself what was remarkable to
me was that 20 minutes prior to listening to your podcast I had just
concluded a phone conversation in which I finally hired a Vanguard financial
manager I have several funds with Vanguard I decided that since my
profession is fitness training and not financial planning it would behoove me
to seek some management of my funds thank you so much for this episode it
really helped increase my comfort level and the overall feeling that I did the
right thing by hiring a financial manager from one upholder no filter
woman I thank you for your podcast every single week I truly enjoyed well thank
you thank you that’s very nice okay this is from Richard who’s an avid listener
to our show on 1510 in Phoenix Arizona my question my wife and I are 67 and
retired and we have no earned income can we contribute to a Roth IRA answer mark
says thumbs-down I agree with him you need earn didn’t come sorry you know it
happens Rick okay Rick wants to know our market losses in a Roth IRA able to be
applied as regular market losses on your tax return no your they are not you
cannot use that you cannot do that you cannot do that so I absolutely he had
asked someone a fidelity about that the fidelity guy said he couldn’t but you
can’t do that I’m sorry it’s all you know is because it’s a retirement
account you can’t do that okay Jay is a retired New York City school worker he’s
got a tax deferred annuity and he said I’ve been I’ve been pushed to a higher
bracket by my required minimum distributions from my annuity
however converting the tax deferred annuity to a Roth would mean taking it
all out and that would be a huge tax so you know what here’s a deal don’t do it
first of all the New York state annuity is amazing it has a huge interest rate
and I would not mess with it so just keep working on it and you’ll take your
defer your your you take your required minimum distributions and that’s okay
all right so when we return I’m just gonna give you a quick cautionary tale
about your conversion to a Roth IRA from a guy who calls himself a tax guy all
right when we return Roth IRAs little known facts it’s Jill on money if you’ve
got a financial question go to the website Jill on money.com
click on the contact button and guess what you should also sign up for our
free weekly newsletter we’ll be right back welcome back to Jill on money where
Jill Schlesinger takes the mystery out of your finances your back it’s Jill on
money if you’ve got a financial question we would love to hear from you all you
have to do is send us an email ask Jill at Jill on money.com want to keep up
with all the stuff that we put out there when you go onto our website Jill on
money sign up for our free weekly newsletter mark sends it out every
Friday it’s kind of cool all right this is a wonky question but I love it so if
you’re not into the wonk you may not love this as much as I do but this is
from Mark who is a self-described tax guy and he said one thing never
mentioned about Roth and IRAs is net present value
you and he says I would submit that the current tax costs for a 35 to 40 year
olds future tax liability is virtually zero that is to say if I get a 30
percent tax benefit on a $5,000 contribution which is $1,500 today I
might choose paying the tax on the accumulated amount in 35 years yes the
five certainly the $5,000 is going to grow let’s assume it grows to $50,000
the tax rate is 40 percent that’s 20 grand and future value
blah-blah-blah-blah-blah anyway here’s the deal
bottom line I believe that even if I had the option to invest in a Roth 30 years
ago I’m better off having made traditional 401k contributions I was
making a very good wage so I was in a higher tax bracket then than I am in in
retirement so for me the Roth might not have been the best option just saying
thanks mark mark I totally get that it doesn’t work all the time it really
doesn’t but it does work a lot of times I will say that so that’s worth kind of
understanding all right this is from Eric Jill first of all thank you for all
the valuable content my wife and I have been out of debt for a while however in
the next one to three years we anticipate needing to replace our
vehicles and also we’ve got to buy a house we’re going going from no debt to
taking on a mountain of debt is stressful I’m wondering if you have any
advice on the situation we’ve been trying our best to prepare ourselves for
these upcoming purchases currently we’ve got an emergency reserve fund with six
to eight months of our expenses we also contribute to our 401ks up to the match
and each max out a Roth IRA that’s good these retirement contributions add up to
about 18% of our gross income I like that savings about 20% is gonna keep you
at a lot of trouble okay as for the purchases themselves we expect oh gosh
they need two cars not one oh yeah yeah okay so they’re gonna
essentially say that they’re gonna accumulate about 250 $250,000 in debt
and he wants to know kind of what do I think I don’t know you gotta buy cards
and you gotta buy a house then you know pay your bills I don’t know if there’s
much to say about this I’m gonna give you the the good news is you sound like
you’re very good savers and what depending on the cost of the car alone
maybe you’d sort of aim to pay that down more quickly again depending on the cost
and if you you may actually find yourself not being able to save as much
because they’re putting some money away about let’s say $1,300 a month to their
high yield savings maybe you’re not gonna be able to do that but that’s okay
Whittle away don’t buy too big a house and don’t make yourself crazy all right
how about that bill writes I’m in a puzzling situation I’m recently divorced
our house is on the market and I should be getting in the neighborhood of
$150,000 when all is said and done I’d like to buy another house maybe in the
neighborhood of 230 to 270 thousand I’ll soon be 65 I have excellent credit I was
wondering if it’s better to take a 10 15 or 30-year mortgage and putting the
majority the cash down on the house currently I’m paying close to
twenty-seven hundred dollars per month on mortgage and tax payment which I’m
able to do but it is stretching a bit I’d like to be paying somewhere between
fifteen to eighteen hundred dollars a month I’m gonna work a few more years
I’ve got $150,000 in retirement right now is it better to take a shorter or
longer term mortgage and then my ex suggested a different approach with the
cash from the house instead of putting the full 150 into the house use a lower
amount invest the rest this may be putting down 50 to 75 grand and I do
work with my ex it’s a two-person business she would like to continue the
business but I’m looking to sell it relatively soon and most likely will
stay on for a year or two we are both equal partners the value of the business
is weighted towards me since I’m more of the identity
she does the accounting and it would not be a success without her efforts as well
we split the inside sales duties so I think there’s a couple of questions that
are being asked here so one is I don’t know how you’re gonna get out of this
business with your ex because is she gonna buy you out I don’t get that it
doesn’t doesn’t make sense to me for the housing I’m not sure that I
would buy a house I mean why don’t you rent for a little bit and see how it
goes because I don’t know like until you figure out how you’re getting out of
your business and what else you’re gonna do to work why not just find some
reasonable rent for a year let things settle down after this divorce and go
from there in general this is an option that’s gonna preserve your cash and if
you were to buy a home and I’m not saying you should and you wouldn’t want
to burn through all that cash because you don’t as you said don’t have that
much money in total saved so I don’t think I’d buy a house right away and
that therefore I’m punting on your real question which is ten fifteen or thirty
year mortgage I would rent settle down see what your cash flow looks like and
then let’s determine a year from now what’s out there and what you can afford
to buy because the best way for you to control the cost of that mortgage is to
make sure that you buy a smaller place and maybe renting is gonna be cheaper
for you we should say I’m not sure okay someone is asking why are REITs being
ignored they put a positive returns yeah I mean REITs are great it’s it’s just an
asset class so you can many retirement plans have them you know generally they
are good income generators they can bounce around a little bit so you know
it’s okay and finally here’s a question about
someone who’s got twenty two thousand dollars in personal loans at a rate of
twenty four percent twenty six thousand and credit card debt can you help me
find a service that consolidate all your debt into a single lower interest rate
no you have to do it yourself because otherwise you’re gonna pay for something
that you do be yourself okay ah it’s Jill on
money if you’ve got a financial question give us a holler ask Jill at Jill on
money comm follow us on Twitter Instagram Facebook YouTube at Jill on
money we’ll be right back Twitter Instagram Facebook YouTube
cheese all over the place go to jail on money.com to find it all now back to the
show with Jill Schlesinger well hello it’s back here with Jill on money I am
Jill and I’m talking about your money Jill Schlesinger that is if you’ve got a
financial question give us a shout ask Jill at Jill on money.com
here’s a question from Melissa who read column in The Baltimore Sun about
information around financial advisors so listen to this scenario she writes I
recently received an 11 million dollar trust which is fully invested in stocks
I want to diversify with real estate it said I’m very comfortable with the
buying and selling of stocks had done it for most of my adult life I don’t want
to turn the whole thing over to an advisor who would want to manage the
stock part of this as well as anything else what I need is some kind of
business advisor who can help me research other opportunities like real
estate so many bad players out there what would this kind of person be called
how should I go about identifying someone who works with me rather than
someone who Pat’s me on the head and says there there I’ll take care of this
for you dear would you believe a financial advisor I interviewed actually
said that ok so Melissa I don’t know if I’m the right person to ask I think what
you’re asking to figure out is whether you could be working with someone in the
real estate world who can help you identify properties and that probably
requires you to go do a lot of nosing around and talking to some folks who are
very much more versed in your local real estate market than I what you may want
to do is engage a fee-only financial advisor you can go to
naptha NAPFA org if you’d like to check that out
but I really would be careful cuz as you say
lots of bad actors and maybe all you really need to do is talk to maybe an
attorney or a couple Realtors and find out you know who does more of the
investment style of real estate rather than residential give it a try let me
know I might I don’t know if I that helps you or not
faith writes hi Jill your awesome alright I’ll read that okay I’m a
firefighter vested in a pension system I’ve been at the department for 10 years
my hiring and for my hiring bracket my deal isn’t quite as sweet as the guys
who retired 10 years ago I know that always happens with these municipal
pensions okay here’s how their pension works you can retire at a minimum of 20
years service you earn a percentage of your top 3 years average salary but
here’s the issue you can purchase time for a portion of your current salary to
buy 1 to 12 months of additional time and it’s a think of it as a way of
retiring early well I mean you can purchase time to basically get you to
the to qualify for your pension the question you’re asking is kind of how
how you need to really think about this and because this is a very specific case
I don’t necessarily have to run through all the numbers for you what I can tell
you is this this is probably a math question that you could ask a fee-only
financial advisor or a CPA either one anyone who does this kind of for a
living in terms of math and numbers what you’re trying to figure out is whether
the cost which is about two grand a month let’s just say 24 grand a year
whether that makes it with whether it makes sense to buy that time because
what you’re getting is this guaranteed stream of income now the one thing that
I think is important for you to remember is that buying this time would really be
about you make a decision around you know kind of how
much how much more you want to work at this job the question may also lead you
to get to a fee-only advisor simply to run retirement numbers under these
various scenarios that you’re considering so that I think knapford org
is for you lady really very interesting really good question
there’s a tough one though Carol’s 83 retired husband passed away two years
ago we saved our money for our retirement its invested with fidelity in
an IRA one of my son’s needs a loan uh-oh
ding-ding-ding he’s responsible but he’s had some unexpected medical expenses
he’d like to borrow $30,000 from me if possible he’d like me to make some money
instead of a credit company I’m fairly sure that if my husband were alive he
would agreed to do it okay we’ve loaned money to our other sons my question is
it better for me to obtain the 30 where do I take the 30,000 from if I take it
out of my IRA lose I you know I obviously have to pay taxes it puts me
in the next tax bracket I have no debt except three years on a car loan my
credits excellent he and his wife would have to sign a note with me regarding
the loan and the inheritance consequences if he were unable to pay it
back good for you does he need all the money at once that’s a question could we
give him some money this year and some money next year is there any other money
available I mean the only other thing you could potentially do is you you have
you I presume you have a home you could get a line of credit on your house
potentially that’s one possible you can’t deduct the interest on a home
equity loan that’s not used to improve your home but that would be the only
other thing to consider let me know what you end up doing what’s my time Marco
heads there wrote a long question so I’m not sure
see I’ve now I’m frittering away my time here’s a suggestion love your podcasts
when I can’t sleep the first thing I do is reach for my phone refresh to hear
the late podcasts on Tuesdays and Thursdays after
3 a.m. otherwise I listen to past podcast hey do you want to join DB and
do that all you have to do is subscribe to our podcast it’s Jill on money you
can get it on Apple stitcher radio comm Google Play anywhere else you find your
favorite podcasts DB wants us to find to go check out a auw equal pay for women
salary negotiation course it’s found out about it by reading lilly ledbetter book
let’s get lilly ledbetter as a guest mark go get him ok it’s Jill on Monday
we’ll be right back you’re back it’s Jill on money we are broadcasting live
from the policy genius Studios policy genius is the easy way to compare and
buy insurance go to policy genius.com Heather writes that last year she called
in and we talked about backdoor Roth’s and she says I’m back with more
questions last year my employers 401k plan announced that they will allow
after-tax contributions and in plan Roth conversions this is so-called sort of a
new twist the question here I’m already maxing out my Roth 401k contribution
should I contribute another chunk of my paycheck and presumably immediately
convert it to a Roth or should I keep that money on hand for near term goals
house kids general flexibility I’ve been great about saving for
retirement but I’m getting married this year my future husband doesn’t have much
save for retirement I forced him to open a Roth IRA last year I’m thinking it
would be good to pack my retirement account to bring our combined retirement
balance up I’m not sure how to weigh how much to put towards this retirement
contribution vs. what to keep accessible for other goals well I know that you
probably have your emergency reserve fund so that’s all set you got 6 to 12
months in the bank I think that if you’ve got young ish kids and you have
some needs in the future I wouldn’t necessarily do this immediately why
don’t you get married see how your cash flow goes and see what
your needs are and then you can decide you don’t do
this today let’s see what you got in the future
here’s another Roth question from Steve and he and his wife have 2.2 million in
tax deferred retirement accounts a million dollars in taxable accounts big
emergency reserve fund 250 grand I’m 63 my wife is 60 gonna work another couple
years I’m fortunate to have a good penchant 45 grand a year I’ve been
retired six years they have and have yet to draw on any retirement or investment
accounts as my pension plus my wife’s income covers all of our expenses and
then some I have yet to start Social Security I tend to wait to at least my
full retirement age question does it make sense to start converting tax
deferred accounts to Roth’s over the next several years given the magnitude
of required minimum distributions or should I just leave well enough alone I
would start doing small Roth’s small Roth conversions that don’t pop you into
another tax bracket so that’s what I would do yeah I’d like to get some Roth
money for you okay that’s it that’s the show thank you so much for listening if
you have a financial question day-night doesn’t matter send us an email ask Jill
at Jill on money.com and you can always go to the website
Jill on money.com sign up for our free weekly newsletter and why don’t you go
help me out by the book the dumb thing smart people do with their money
thirteen ways to write your financial Rong’s okay we’ll see you next week
thanks so much for listening you

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