Figuring out the Retirement Number

Updated : Sep 09, 2019 in Articles

Figuring out the Retirement Number


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 back to
school it’s after Labor Day I really think that we need to change the
official end of summer to September first or something don’t you Marc I mean
it’s really emotionally where everybody is get back to work thank God it was a
short work week that’s what everyone was saying welcome to the program it’s Jill
on money we took vacation but you didn’t even know we did but we did take
vacation this summer and it was wonderful and we love hearing from you
and we endeavor to answer all of your email questions however we don’t always
get there on time I should tell you that we are broadcasting live from the
Capital One Studios here in New York and one of the great delights of being in
New York is seeing all of the tourists leave at the end of the summer and only
come back in the holiday time no I’m just kidding come on visit us visit us
and spend as much money as you possibly can
this is the time of year when people do kind of get their money heads back on
straight it’s tough during the summer so if that’s you if you’re ready to kind of
get the ball rolling and trying to move your your brain out of the where which
Beach should I go to which pond should I be fishing in and which hike should I
take in to which is the best allocation for my retirement account then send us
an email it’s ask Jill at Jill on money.com ask Jill at Jill on money.com
so that’s where you can get your answers and the answers to your questions should
also note that we are always looking at building up our resource section so we
would love to hear from you if you’ve come across some interesting
resources maybe over the summer do let us know and also if you’ve got ideas for
future podcast and radio show topics we would love to hear from you so just hop
on to Jill on money.com and in the top right corner there’s a
little button that says contact and you can send us a note that way as well okay
let us start the program with the way we always do which is a call from one of
you so we have Heather on the line from Denver hello Heather welcome to the
program what can we do for you hi Jill thanks so much for taking my call of
course um I am trying to figure out what our
retirement number is and I feel like I have a good handle on what our expenses
are but I don’t know how to factor in taxes so any guidance you can give about
how what sort of like good rule of thumb to plan on for paying taxes in
retirement okay let’s talk about how old you are okay I’m 47 and my husband is 53
okay and a little bit about yourselves just some basic how much money you’ve
saved how much you’re earning now and and kind of those pieces okay so total
we earn about a hundred and seventy thousand a year we have saved we have
kind of different buckets of money we’ve got about five hundred thousand in Roth
IRAs about a million in tax deferred so that would be like rollover IRAs and my
husband’s 401k yeah and we also have a brokerage account that’s got about a
four hundred and fifty thousand and it in the $450,000 brokerage account would
you imagine just because the markets have come back that you have a lot of
gains in that account do you have an idea of the 450 what’s an unrealized
capital gain on that I do not know all right we’re gonna Ballpark this no
worries okay and what what’s the target in terms of retirement date like not the
actual date not not like you know August 13th but here I’m
probably well we’re not sure exactly when we want to completely retire but
maybe in about 8 to 10 years we might want to cut back work part time not type
of a perfect that’s great and you said you have a good handle on
the income so tell me about what your income need is I think there’s somewhere
between 60 and 70 thousand that would be after-tax great have you gone to the
Social Security website ssa.gov and gotten a snapshot of what your Social
Security benefit will be for each of you yes I think for my husband it would be
around 30,000 if he took it at about 67 mine would be a little less I’ve had
more of a spotty employment records so probably a more like 15 to 20 okay
that’s great okay so we got a good chunk maybe two-thirds of your need just
through Social Security on a pre-tax basis so we know that yeah here’s the
tricky part so so let’s just like look at the different buckets of what you
have obviously the Roth there’s you don’t have to worry about it because you
don’t have to factor taxes into that the brokerage account is capital gains and
you know I have to talk about right now because I think that we’re in this very
strange situation where we are in a low tax environment however Heather you know
maybe by the time you retire 20 years from now taxes could be higher and we
don’t like to get a retirement planning based on what’s the very best case
scenario we actually kind of want to look at the the likelier case so okay
Roth we don’t have to worry about brokerage account you know there’s two
choices here we could say you know it’s probably gonna be taxed at capital gains
which you know top rate is twenty three point eight percent right now maybe you
could say that a corridor just to be really safe a quarter of the of the you
know gains of that account might go away because of capital gains okay you could
do that I don’t know if you have to it’s the tax deferred account that’s really
the thorny one right because when you take the money out of that tax deferred
account you are taxed at whatever your tax bracket is it’s
fine so if you look at today you know not that you would take the money all
out at once but even if we were just kind of to wind the clock forward and
say let’s pretend it’s your required minimum distribution and you know you
have I don’t know forty five thousand dollars of Social Security you’re
starting to take your money out now from the from the tax deferred accounts maybe
you’re in the twelve percent tax bracket at that time if that’s today’s tax rates
I don’t think that’s likely I think tax rates would go up so I think
maybe the safest way to build in the conservative assumption is to at least
assume that your tax bracket would rise or if in your case kind of stay where it
is like your top bracket would be more like twenty twenty two percent i
wouldn’t drop it down and so if you look at that tax deferred account in your
mind what you could you there’s two ways to treat it one is to say if I really
want to play around with these numbers myself I would say I don’t really have a
million dollars of tax deferred it’s as if I had eight hundred thousand dollars
of taxed money mm-hmm that’s one way to think about it the other way is to play
around with the calculations a little bit so I just want to wait if you
wouldn’t mind I just want to go to break very quickly I’ll come back to you
because I want to talk through some other ways to think about the retirement
the retirement planning process and and maybe guide you with a couple of
different ideas for calculators that might help you out so hang on one second
Heather we’re gonna go pay some bills you are listening to Jill on money and
by the way we do have a sister broadcast our podcast is coincidentally called
Jill on money whoo-hoo you can get it on Apple stitcher radio comm Google Play or
go to our website Jill on money calm and just click on the listen tab it’s Jill
on money more fun when we return 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 if you’ve got a financial question we’d love to hear from you our email
address is ask Jill at Jill on money calm before the break we were talking to
Heather she and her husband are trying to do some retirement calculations and
you’re being so smart Heather because you’re trying to factor in taxes and so
I guess what I’m wondering from going back in it to your question do you work
with someone who has helped you prepare your financial future with retirement or
are you doing this on your own we’re basically doing with our own we have
talked to a we have a Vanguard account so we’ve talked to some advisors there
okay other than that we’re kind of doing it ourselves how have you done have you
used any retirement calculators specifically or have you just done the
played with the stuff on the Vanguard website basically just done the Vanguard
nothing roll in depth okay great I have a couple of ideas for you just to help
you out only because I heard in your voice bit of the hey we’re kind of
do-it-yourselfers there is um there’s there’s an easy I would say
high level just give me a give me a big breakdown of my retirement that
calculator that’s free it’s called the choose to save ballpark estimate so
choose to save dot org slash ballpark that one is kind of interesting because
you know give you sort of like your your that’s almost like your first pass at
this there’s also a website that I think is interesting I’ve been trying to get
this guy who’s behind it on the podcast but he blowing me off but anyway he’s a
he’s an economist you know those economists there’s a very thorny anyway
this is called e s planner calm and by the way I don’t have any financial
interest in this I just think it’s kind of cool in and it’s not very expensive
it’s it starts at like 120 bucks or something but anyway they have a way to
build more sophisticated and planning scenarios and I know if
it’s 120 or $200 I’m not exactly sure where it comes out but they’ll give you
an analysis that probably would build into your your retirement plan different
things like the potential of changes in tax law or maybe build in other things
that are going on and you didn’t mention if you had kids or not you have kids no
we don’t that’s why you can retire early so anyway but it will also you know it
will build in like okay I live in Colorado now but if you move to a
different place you might say hey what would happen if I move to blank some
other place you know Washington State so anyway I think that one of the things
that’s cool about this is that it might give you a little bit more nuance
because that’s what I think it sounds like you would like with some of the tax
based decisions that that could occur so I think that one other thing to consider
is you know are you guys in the tax deferred accounts or any of those
accounts just non active in other words summer 401k or 403b is anything sitting
in an IRA right now yeah we have some rollover IRAs in that mix so and and the
170 pretty consistent income yeah gotta you know there’s one other thing to
consider I don’t know if you’re going to like this or not but if you want to be a
much have much more clarity on your tax liability what you could do is you could
convert some of that rollover money into Roth money whatever you convert would
pop you into a higher tax bracket because you guys are probably pretty
your top bracket right now is 22% but the next brand is only 24 so yeah I
wonder if it might and this may be part of like going through a more
sophisticated planning process which is hey maybe what we should do is convert
some of this deferred money tax deferred money into Roth money and where we’ll
know that it’s a 24 percent tax burden at that at that price right that at that
level I will never have to worry about it in the future
and that maybe something that gives you more comfort for me I wouldn’t mind
having like half of my money tax-deferred half of my money in Roth
because I really do think that we have a risk of seeing tax rates go much higher
in the future at least during our lifetimes I think that maybe it wouldn’t
happen tomorrow but I do think in the next you know 10 20 30 years which is
you know the time of your potential retirement and beyond that I think we’re
gonna see higher tax brackets and maybe it makes sense to convert some of this
money right now well I was wondering also I mean right now we’re maxing out
my husband’s 401k contribution I was wondering if so it makes sense to put
some of that money into the brokerage account instead and go ahead and take
the tax tax on it now well I mean look that’s a possibility that might put you
in the twenty four percent bracket anyway does your husband work for a big
company out of curiosity um fairly big company yeah do they have a some of them
are putting in Roth 401k options have you looked at that how does he have it I
don’t think he has ever we could check it out a lot of companies are starting
to do it and that might I think that I might be interested I don’t I don’t know
I think that if he could do a Roth 401k that would be great you could pay the
tax do but then again you might be I don’t know it’s sort of like six one
half-dozen the other right so you can or you could see whether converting makes
more sense because it’s still gonna be you’re still gonna get popped up into
the next tax bracket I think if he’s not making the salary deferral mm-hmm you
know I mean if he’s paying the tax I’m yeah but but all this is to say that
you’re doing a fantastic job considering this absolutely and I think that you um
you don’t have to go crazy but I do think thinking about the tax situation
maybe this es planner com will help you out okay great
I appreciate all your help my pleasure all right take care good luck okay
bye-bye all right we got a question from somebody who was looking at putting some
money into a 401k but she no longer works for the organization and now she’s
a self-employed and she’s kind of freaking out like
hey wait a second I don’t before o 1k anymore and I wasn’t allowed to use any
of the details about her situation on the air but there’s two things that
happen one is she doesn’t have access to a 401 K and the other is she’s gotten a
windfall from the sale of a home so I think what’s really interesting is that
a lot of people are going to see more self-employment income maybe because
they have side hustles maybe because they’re doing other stuff that’s you
know that is where they are in charge of their own destinies but they’re leaving
behind the 401 K the 403 B the traditional employer-sponsored plans and
a lot of people keep saying to me like well I’d I can only put you know she’s
over 50 I can only put a little bit of money you know 6000 plus the $7000 into
an IRA hey there’s an entire world of retirement plans for folks who are
self-employed and they range from a SEP IRA to a 401k just for yourself a solo
or a uni 401 K to profit sharing plans to actual defined benefit like putting
in a pension plan for yourself some of these accounts allow you to put
away fifty six thousand dollars pre-tax another six thousand dollars if you’re
over the age of 50 some of these plans allow you to put in a couple hundred
thousand dollars a year away and that’s amazing and that does not require you to
put the exact same amount of money away every single year so if you’re
interested mark maybe I should write an article about what to do like retirement
plans for the self-employed that sounds like a good column for me right
yes he’s shaking his head I’m gonna put that down as a note here it is
retirement plans for self-employed and then we’ll put it on the website how
about that I better get busy with us oh brother
so do check it out if you are flying solo and doing your own gig be sure to
know there’s a lot of options for you and so thanks for writing and if that’s
you and you want to know which why don’t you choose give me a little
bit I need like a week to bang that article I’m gonna make that my Tribune
article mark that’s a good one right I’m happy with that idea okay
so happy to be with you all the website I kept plugging before es planner com es
planner com you can find the link to it on our
website which is called Jill on money comm just go to the resource tab and
you’ll see all sorts of fun stuff there all good stuff also I want to remind
people to please if you’re looking at social security stuff just go to ssa.gov
or go to our website where we have the social security estimate tour and you
should manage your own account online those are the things that you can do
it’s Jill on money that’s the name of the website that’s the name of the radio
show and we’d love to hear from you send us an email ask Jill at Jill on
money.com we’ll be right back dr. Jill on money where Jill Schlesinger helps
you take the mystery out of your finances your back it’s Jill on money
and if you’ve got a financial question send us an email ask Jill at Jill on
money.com that’s what Dave did asking about that tax impact of social security
Dave says it’s my understanding you could pay up to 85 percent of half of
your social security depending on your income that is true so the taxation is
right if you make thirty four grand as a single 44 married yeah you get taxed I
don’t know what to tell you man it’s them’s the rules
and sorry okay no we’ve been getting so many questions
about Roth’s so this is interesting I was early retired I’ve got substantial
IRA money and I also have sufficient after-tax money to avoid withdrawals for
several years possibly until I when my required
minimum distribution kicks in I’m 61 and a half my advisor feels strongly that I
should be doing Roth conversions every year I’ve done several the balances are
still under 10% of my traditional IRAs any thoughts are appreciated hmm
well I mean I presume that your advisor has done the math and and I’m I don’t
know how much money you have if you’re doing this simply as a tax arbitrage and
you have plenty of money anyway I’m wondering if the big impetus here is to
pass along an asset that’s already been taxed that is is a good reason to keep
doing it and it is kind of nicer to try to convert some of the money today while
tax rates are low and maybe I would do it until tax rates drop yeah you know
tax rates change or probably go up so I don’t know I probably keep doing it so
that would be me not not a zillion dollars you know keep it simple
don’t go crazy here’s another Roth question from Dennis who said in your
column recently you said when you take money out of the Roth after 59 and a
half you don’t pay any tax don’t you have to pay tax on the gain above the
bases no that’s the best part of a Roth no you don’t it’s so great so no you
don’t need to Paul has a traditional IRA and under the new tax rules he claims
the standard deduction can a person convert part of a traditional IRA to a
Roth and still make a yearly contribution to a traditional or would
it be better to just start a Roth and not get a federal and not get the tax
deduction I you could convert but why don’t you just start using a Roth I
don’t know how old you are but why not just I if you if you could maybe just
use a Roth going forward and maybe if you
have a Roth option on your retirement account you would use that might be
easier than starting to do the whole it depends on how much money is involved
and here is a note from Kimberly who’s recently divorced 36 years of marriage I
don’t get this when people do this but I mean the next one ain’t gonna be a lot
better there’s no way but maybe you wanted to anyway listen to this Kimberly
says I had to give away half of my retirement savings this is a divorced
man it is financially horrible that’s a quadrille qualified domestic
relations order I want to will I be able to retire in seven years I don’t know
how much money do you have we need more details follow up to us
right pretty please that would be great uh all right more
questions more questions let’s say Oh mark I’m I’m plowing through these this
is good Lorenzo says if I can put up 20 to 25% down payment on a house should I
do it in order to have a month a manageable monthly payment we have cash
set aside as an emergency reserve and a large down payment would not affect us
at this time should we just do the minimum and invest and save the
difference no I like put 20% down that’s like a vet you get the best rates I
would do that absolutely I really would it’s much it’s really
it’s sort of best practice put the 20 down go forward Rick is a small business
owner he’s got a number of part-time employees over the past year I’ve had
multiple instances where checks that were deposited via an app were then
deposited via a bank or a check cashing service huh some of these staffers don’t
have bank accounts so direct deposit is not really an option for them when I’ve
asked my bank about the responsibilities of a duplicate deposit they have no
answer for me in terms of how to prevent this from happening again
I would like to know if you have heard of similar situations what is the best
practice to ensure that a check is only deposited once Wow I don’t know the
answer to what I would do is I would talk to an
accountant i I don’t I think that that would be important really okay let’s see
Margaret I enjoy watching your eye on money segments on CBS this morning I’m
looking for some direction on my student loan issue I’m single 51 no kids making
less than 70 grand a year in the 1990s I took out student loans totaling less
than $40,000 however over the years I had to forbear payment for various
reasons making the total amount owed increase by the time Navy intrusive the
loan it was $47,000 at six and a half percent interest the payoff amount of
approximately $64,000 I have it on a graduated repayment plan the monthly
amount is $318 its interest only in the next few years this is going to increase
significantly and my income cannot sustain it oh boy
I have 143 in retirement I’m fully vested I could request a hardship
withdrawal I know there are penalties do you think this would be a good move my
last payment for the student loan is twenty forty year 2040 and I will be 72
years old oh my god so here’s what I would I would want to know a couple
things do you have a home is that something that could be we could tap
into maybe that would be an option and maybe you would take some money others
hiring plan I need a little bit more info so do you have a home that we have
some equity in it maybe we could use that all right oh boy
student loans they’re killing me and you all right it’s Jill on money go to Jill
on money comm you can read you can listen you can watch you can go check
out all the resources and you can buy the book the dumb things smart people do
with their money 13 ways to write your financial wrong so we’ll be right back if you’ve missed any part of the show or
want to check out a past she’ll go to jail on money.com for more great
personal finance content your back it’s Jill on money have you checked out our
podcast it is also called coincidentally Jill on money a little different than
the radio show and you know what’s kind of cool about the podcast the podcast
you can listen to whenever you want so go subscribe to our podcast Jill on
money you can get it on Apple stitcher radio comm Google Play anywhere else you
find your favorite podcasts and if you’ve got a financial question we
always would love to hear from you just send us an email ask Jill at Jill on
money.com okay this is a question from I’m gonna say P because the name is very
distinct okay it’s about vwi annex it’s a vanguard fund and so the question is
this Vanguard fund has 58% in bonds 37% in equity the rest in cash I’m 76 years
old is this appropriate for me to invest in
I’m looking to invest fifty thousand dollars I have over two hundred thousand
dollars in my IRA account it’s all in equities Wow
you’re 76 and you’ve got two hundred grand and it’s all in equities well
there’s a couple things you could do if you are already in a Vanguard account
why don’t you just take a chunk of money maybe half and pop it into a bond market
index and that might be helpful on the other hand are you pulling a lot out of
this fund are you just taking the required minimum distributions or are
you living on this in a bigger way I need a little more information I mean
yeah this fund is fine to be sixty forty sixty bonds forty percent equity on the
other hand if you never needed the money at all and you’re just investing it for
your heirs then you could stay in a you could say in an all-stock court felony – a firm ROI who’s talking about salary
parity and so he says when it comes to this topic and women catching up to
themes seem to drive the process making sure that women learn how to negotiate
better shout out to Megan Rapinoe for serving as a spokesperson and role model
and knowing the prevailing and appropriate range for what you do
the latter begins by building out a dynamic and supportive network think
LinkedIn and attending events and conferences you are right
Millennials are more comfortable sharing their information it’s the rest of us
who need to follow their lead sending you my best ROI hey thanks Roy he’s a
career coach by the way so that’s kind of cool and I know him I actually know
that guy so but it’s true it’s so hard we old fogies sometimes it’s difficult
to share that kind of information okay Barbara is 73 she’s got income from
Social Security plus retirement an investment person has suggested a quote
self-funded pension he claims that for a small management
fee I could get income when the funds of the plan are up and just do nothing that
way my investment goes up but not down do you have any advice regarding this
strategy you know what we need is a sound effect mark you know like yeah one
of those like back or when we’re in like an English siren so Barbara I would like
much more information about your situation but my guess is that the self
funded pension is just a fancy name for an annuity and as a result what I’m
going to ask you to do is maybe get back in touch with us and tell us a little
bit more about yourself I’m going to tell you to don’t do not sign
the dotted line take a moment let’s get some more information I’m not sure you
even need this and it certainly is not gonna be for a small fee how about that
Christine’s a 33 year old single mom she paid off all of her death she bought a
home for 375 grand makes about $100,000 a year I’m focusing on planning for
retirement and saving for my two kids college I need your advice on retirement
I have 75 thousand dollars in a traditional 401k and I’m thinking of
opening a Roth 401k at my job maxing it out at 6% then putting 10% in
my traditional is that something I could do I think it actually depends on your
employer but you should be able to do it but my question is if you make a hundred
thousand dollars a year maybe you should just do a Roth for the whole 10 percent
chances are you’re in your income is going to rise in the future your tax
bracket is low now so I might do a Roth for the whole thing so you could
potentially do partial but check with your employer and then maybe I would
consider just doing a Roth for the whole thing next her kids have 36 months of
free college education through their dad I saved up some money in a 529 for them
because of the benefit should I invest in their education savings somewhere
else and if I do have extra cash flow I throw it to my mortgage invested in
index funds no here’s what you do stop putting money away in your 529
plans and you and then instead max out your retirement account I that’s what I
would do I don’t know how much why I shouldn’t say that I don’t know how much
money you have in your 529 accounts but if you have extra cash flow it should go
into your retirement account you are not maxing out yet you know because you’re
you you know it seems to me that you’re you just shy of the max out but remember
19 grand a year so max that out first extra cash flow not on the mortgage
probably in the 529 I don’t know like 36 you get 30 you have about 36 months of
free college so you got three years down I don’t know if you need to save that
much more for college so max out your retirement and then maybe an on
retirement account that’s B that’s about what I think you should do okay it’s
Jill on money if you’ve got a question send us a note ask Jill at Jill on
money.com hey during the break go onto the website Jill on money comm sign up
for our free weekly newsletter okay we’ll be right back you’re back it’s
Jill on money before we close out the hour here get in a couple emails one
maybe two this is someone Helen who is writing in about the student loan scam
that is just rampant it’s crazy I mean the the sound of the voice on these
messages is so real it’s kind of mind-blowing so Helen says the
information about student loan scams was excellent listen to this she says I got
into one of these programs due to the lies and high-pressure sales techniques
used by the representative they told me I no longer had a PLUS loan so they
could reduce now could reduce my loan amount I lost one payment to these
people but managed to contact the loan holder navient who confirmed I did have
a PLUS loan and I stopped the payment on the checks at the bank by following
filing a scam complaint thanks for the additional information you provided hey
everyone really just pay close attention to this
it’s rough these scams are eerily real sounding here’s a question is it
allowable to withdraw from the principal part of my Roth IRA at age 56 I need
some confirmation yeah of course you can it’s not a problem yes you can do this
penalty free not a problem you can always take that money out and
if if you really are using this this is I recently incurred a very high credit
card debt due to a sudden illness and paying the card off through this Korea
root is my best option so penalty-free absolutely and go do it I usually don’t
like having people tap their retirement accounts but in this case as you said
it’s this sort of one-time event it doesn’t sound like you’re gonna get into
this habit so I think this is very good very good idea and you know listen gang
if you have these real unique situations why don’t you let us know what’s going
on maybe we can come up with creative solutions like this and maybe it’s
tapping some equity from your home or maybe it’s a refi maybe you have what
you thought was a great rate but now interest rates are moving in a different
direction so all these things to consider so if you’ve got a question
give us a holler ask Jill at Jill on money.com
and you can also go to the website Jill on money.com
click on the contact button and we will get that note all right
that’s the end of the hour but stay tuned we’ve got a whole nother hour
ahead it’s Jill on money and we will 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 back it’s our number two of Jill on money we are broadcasting
live from the policy genius studios policy genius is the easy way to compare
and buy insurance check it out go to policy genius calm all right let’s blow
through some emails here come on I got to dig out neal writes i am 55 I have a
SEP he said 401 K but I think he means a SEP IRA um
how much can I roll over to a Roth IRA what are the tax issues recommendations
thank you so some of you may have these SEPA counts simplified employee pension
SEP and usually it’s through a small business you being the small business
owner a part of you can convert a SEP IRA to a Roth and this would allow you
to generally speaking like any Roth conversion you pay the tax today so that
you don’t have to pay it in the future and you can convert a Septuagint it
because what you the easiest way to do this would be to go from a SEP by doing
a rollover and the rollover goes into essentially a SEP into a Roth IRA you
tell the trustee of your SEP to move the money directly to your Roth and then you
have to pay the taxes so again whatever happens in the SEP IRA
whatever happens has happened and all that accumulation you have to pay
hacks on it so just remember that right okay
now the thing that I don’t know is whether or not you can do an in-service
Roth IRA conversion so if you’re still working I don’t know the answer to that
Neal but I would talk so let me know are you still working or not and then we can
talk more about this how’s that makes sense the secure Act
which is a retirement account a retirement overhaul by the Senate and
the House hasn’t passed yet but there was an article in July about the secure
act and everybody’s freaking out about it first of all it’s mostly gonna be
good the problem with the secure act that people have a lot of money who are
worried about it says that if you have a whole bunch of money in your IRA is that
your kids would then have to pull that when you die your kids have to pay that
or your heirs would have to pull the money out very quickly as opposed to
stretching it out over their lifetimes it’s not passed yet don’t go crazy and
let’s see I think this is correct I’m gonna write about it but I’m only gonna
write about it after it passes both houses so it’s in the Hat it has the
house it has not yet passed the Senate and so until that happens I’m not going
to write about that here’s a question we are Americans living in Canada we own a
hardware store in Washington State across the border we pay taxes in both
countries we’re close to selling the business and retiring worth 60 my wife
has only worked in the state since 2012 and I have my whole life our income
combined is about 400 grand six hundred thousand dollars in investments a
million dollars in our house the business itself was worth a million
dollars we’ll have proceeds left over we’re
gonna get some money from Social Security and Canada questions when we
sell the business how will the taxes in both countries affect the net proceeds
of the million dollar sale price I have no idea this is an accounting question
believe me I’m not weighing in on any accounting issue I would get yourself a
CPA that is well-versed in both Canadian and US rules
okay next question want to take advantage of Medicare when we turn 65
we’d like to live in Canada how can we do this
I don’t know if you can take apply for Medicare unless you’re a unless you live
in the United States I mean you’re a citizen of the United States but then if
you’re gonna live in Canada you can’t use your Medicare in Canada wouldn’t you
have to come to the United States to do that what kind of investments can we
make yeah this is you need a cross-border tax specialist i-i’ll tell
you what I’m gonna send you a the name of somebody in Canada who may be able to
help you out I met this guy who’s a Canadian money manager so I’ll tell you
what Gordon I’m gonna get you his information and I was very impressed
with this guy I just met him over the summer very recently so I’m gonna get
and I think that that’s you know I I don’t like to venture into the the tax
stuff it always makes me nervous David writes I love the podcast I hate
to write this email but I must someone can coincidental to your last piece the
ship has sailed the Big D is upon us and I’m sad for D divorce it’s a it’s
amicable the kids are past 18 it should be pretty clean you never talk about the
divorce topic but just freaking about out about what to do now financially now
that I’ll be on my own where do I start what do i do first what do I think about
now that I’ll be single oh my god feel free not to respond if you fear that
this is too depressing I want to hear your thoughts don’t hate me because I’m
the guy in this equation I love guys in the equation I just you know if it’s
amicable it’s amicable you know my friend once sent this great greeting
card and on the front it said there’s two sides to a divorce yours and you
open it up and it says and inside it said the a-holes so it’s always the
other person so it’s a Famicom don’t worry okay here’s the thing David you
are starting over so you need a financial plan and to me that is the one
of the smartest things you can do divorce can be financially devastating
it usually is but you need a game plan to go forward this just happened to a
friend of mine and I sat down with her and we we talked
she had a local financial planner we went through the plan and it’s amazing
how much peace of mind the planning process can provide so I don’t know
where you live but I’m very happy to help you out if you send me some more
information okay Albert writes I recently found your show I’ve learned so
many helpful lessons so I want to open the email by saying thank you I’m 37
married we have two children under the age of four a third on the way oh my god
my wife stays home with the children I earn around $100,000 a year as a federal
employee our current savings include two hundred ten thousand dollars in a 401 K
from an old job and my wife has 30 thousand dollars in her Roth and I have
thirty thousand in mind because I’m a new government employee we have only
thirty thousand dollars in our Thrift Savings Plan we have roughly 30 percent
of our entire retirement savings in bond funds ten percent international stocks
sixty percent in US stock I plan to work for 25 or 30 years my wife and I are
both savers but with kids we hope to decrease our savings rate and spend on
children’s education family vacation so here we go what annual savings rate do
you suggest we need moving forward to put us on a good path towards retirement
would 15% be adequate should we try to get that higher I don’t know I like if
total savings is 20% I think that’s pretty good any help with the VA
accounts just start with the target date fund it’ll be easier that way we have
200 grand left to pay in our house over the next twenty three years if we were
to buy a new house what do you recommend is roughly our monthly mortgage payment
why do you need a new house I think that what you would do is you would choose a
mortgage payment that allowed you to put 20% of your money away total that’s what
I would do all right Albert thanks for writing and hey we are just
getting rolling here it’s Jill on money you can go to Jill on money calm and
there you can read listen watch and check out our resources we’re always
looking for new ones so if you’ve got some suggestions let us know send us an
email ask Jill at Jill on money.com we’ll be right back follow Jill on
Twitter and Instagram for more personal finance content just use the handle at
Jill on money now back to the show you’re back it’s Jill on money and we’re
trying to blow through some emails here so feel free shoot us a note ask Jill at
Jill on money comm okay this note is actually a lengthy letter
so bear with me because I’m gonna read the whole thing
Elle is the name Elle okay hi Jill I so enjoyed reading your latest book also my
only book that’s my little editorial there many thanks to you for sharing
your gift in creating a beautifully written work that really lays everything
out in black and white I’m 63 and headed for retirement or semi retirement of
some sort at around age 66 my spouse and I are seriously considering the idea of
selling our home and renting at that time I love how you wrote about that in
your book and I couldn’t agree more our current home is almost paid for as you
know this would free up our equity for retirement investments and better cash
flow the only reservation we have is that some rental properties we lived in
years ago we’re not up to the standards that we enjoy now and as homeowners for
the past 35 years I can understand that and to maintain those standards our rent
would be extremely high as a happy medium I am considering a mortgage on a
brand-new home in a lower priced area with little or no maintenance with at
least a year one year builder warranty if finance the cheapest way possible
we’d be looking at 20% down so we avoid my closing costs under two grand no
points and probably some type of 30-year fixed-rate adjustable rate or interest
only financing below the goal is the lowest possible payment I don’t know if
I would do a an adjustable or interest only but let’s look at that to that in a
second okay hypothetically if we buy in a desirable
area that is appreciating capital gains are tax-free after you live there at
least two years I wouldn’t think about that at all but okay um okay
although timing and predictability are not in anyone’s favor historically
there’s a distinct possibility we’ll make money on the new home when we sell
Y all right and we’re okay my research indicates we can do this even as seniors
without jobs as long as we have adequate cash flow to qualify for future loans I
think the scenario is worthy of a closer look
I was simply wondering what your take might be hey I think it’s great part of
the reason I wrote the book you buy when you should rent as one of the dumb
things some aren’t people do is that they don’t they don’t go through a
process that is as thoughtful as what you yourself are laying out and I think
that that can be damaging here now if you’re telling me essentially what you
have chosen to do is downsize that’s great
you should downsize I wholeheartedly applaud that what I have found is that
many people don’t actually downsize that they end up buying something that is too
close in value to what they’re selling so if it works for you I absolutely
think it’s it’s worth considering the only caution I would kind of build into
this is I don’t know if I would necessarily count on any appreciation I
mean if you got an appreciation great but like we wouldn’t count on that and I
I’m not sure you know depending on where rates are at the time you actually pull
the trigger on this maybe it won’t even be worth it to get an adjustable or an
interest only so let me know if I’ve missed something there but I like the
game plan okay here is a note from Barbara wants to change banks who
she was in Pennsylvania what bank is the best the banks that have FDIC insurance so I just wonder if there’s what Barbara
what is the genesis of this question maybe that’s the real question you want
to move banks do you have some CDs you have REITs there’s all sorts of banks
they’re all there there’s tons of different information out there deposit
accounts comm is a wonderful place to look and compare the current rates if
you’re comfortable banking online that could be fine
you don’t have to just limit yourself to a local bank if you have access to a
credit union that could also be a good idea so you may want to check that out
okay Laura writes I just love your show wouldn’t that sound better with Laura
saying that I mean it really sounds awful when I say it myself okay
my son is 25 and is a mechanical engineer he just started working two
years ago right after graduation he makes about $75,000 right now no
expenses cuz he lives on a ship nine months out of the year oh my god the
only expenditure is a sailboat slip and yacht club membership so five grand a
year no car payment no credit card debt he’s got $80,000
he had $80,000 in student loans he since sliced that down to 50 and he will he
intends to pay his student loans off entirely within the next two years the
company he works for is a union so he’s got amazing benefits already I want to
marry this guy my question is with his retirement projections summary we wanted
to know if there was more he could be doing he’s putting 5% in his 401k they
are matching two and a half percent and they are putting six point six percent
in something called a defined contributions should he be putting more
aside okay so first of all he could be putting away up to $19,000 into the 401k
now he doesn’t have to do that maybe he should put in let’s say 10% in
his 401k and then also set up a Roth IRA and just as long as he keeps six months
of his living expenses socked away that would be fine but his living expenses
are so low so maybe I would I don’t know for him you just said it’s got five
grand a year for the club yacht club or whatever so I think you should probably
have ten grand a year in his emergency reserve fund that should be fine for him
I’d bump up my 401k and also do a Roth IRA if they allow him to do a Roth 401k
he could just do that but again number one priority is to pay down that student
loan debt and presuming he could do that really quickly he’ll be able to max out
his 401k in in I mean moments I mean it’s amazing
so then we get into you know using the Roth which is great and then starting to
save outside of retirement what a what an amazing story though huh okay I just
got a new thing a new bit of research out and I know that this is something
that you all probably do know already which is that people care a lot about
their benefits but the most important benefit that they care about health care
that’s it that’s it and you know it’s a funny thing because when you’re we’ve
been interviewing some folks about the fire movement I think that one of the
big issues that they are encountering is how do you pay for health care and
that’s a big nut so you better be factoring that in as you look at your
future planning that to me is going to be a major-league issue for anyone and
we have that same question that comes up here when people talk about early
retirement what are you gonna do until you get to age 65 that’s when you can
claim Social Security Medicare and what that that should be your main goal we
had so many people who are who are offered early retirement and it all
looks great until you have to pay for health care
and they’re like wait I don’t actually want to retire early because I want my
health care oh and by the way making money that’s good too
just to by the way okay and here’s a note from John who writes that my mom
passed away oh I’m sorry she had an esop an employee stock
ownership plan that he inherited and he says I’ve been trying to find
information on this I’m confused by the whole situation what are my options if
any I would like to take the money out and use it for a business is there a way
to do this it’s about worth about a hundred
thousand dollars Wow this is a little bit of a quirky
situation so an esop generally speaking should allow I think you can roll over
an esop I’m not a hundred percent sure you’re gonna have to go and talk to the
people who run the program find out if you can actually roll it over or whether
you need to take a lump sum distribution from the account but remember when you
do that you’re gonna have to pay taxes so just factor that in and decide
whether or not you really want to do that and this is really the best way to
fund your business okay you are listening to Jill on money if you’ve got
a financial question ask Jill at Jill on money.com we’ll be right back follow Jill on Twitter and Instagram for
more personal finance content just use the handle at Jill on money now back to
the show you’re back it’s Jill on money and we are delighted that you are
hanging with us marc has given me a Herculean task I am about to get through
40 emails over the next hour we’re gonna do some business all right let’s go this
is from Robert who’s 81 he’s never found out his FICO score he says I’m sure it
should be very good since I have no debt whatever and I always pay my bills on
time that may not be if you have no debt it may actually not be as good as you
think how can I find out my figure without having to occur a fee okay here
are some places you can get your free FICO score Discover credit card American
Express City these are all credit cards so Discover credit score card American
Express credit cards Citibank credit cards Bank of America Chase Walmart
credit card accounts credit unions and allied bank hopefully that you can get
it there of course if you don’t actually need credit it’s just a score it doesn’t
mean anything okay Lori was listening to an interview I did on wben in Buffalo
about claiming the $125 settlement from Equifax she says I quickly went on my
computer to do this does this apply to everyone the site asks you to input the
last six digits of your social and your last name then you get a pop-up response
and it says for her you were not affected uh so yeah it’s so she says if
I’d not affected can I file a claim anyway I mean you you might file it but
I don’t think you’re entitled to it you have to have been affected so and you
can’t it can’t hurt to try but when I went and did it I wanted to make sure
that I was you know first it’s your impacted so then then I did it but let
us know how that that follows through there okay I read
your article recently as skim about scams and I experience a new one I think
we should register with the government and well and also inform the public
about I’m not sure the FTC is the proper route to take in a nutshell I call
DirecTV for service and it’s a total scam because they want you to pay to
repair their service and then it prompted a return call from DirecTV
service department that turns out to be an attempt to to rob my identity after
asking for my social and my date of birth how do I file a complaint with the
government and how do I make this public the way you can do it is you can
actually do it on the CFPB website consumerfinance.gov and then also in the
FTC website there is an FTC gov complaint part I would register it both
places and thank you for keeping us abreast of that so if you’re a DirecTV
person and you get some notification from the service department
it may be bunk berry rights I’m so disillusioned when I get calls
collecting for a charity that because so little can actually go to the charity
it’s just wrong well you know what that may be true it’s good that you have more
information about how what percentage goes to charities that’s what I think is
good so a lot of websites now that are actually out there putting the
information out to the public chelsey writes I have a 14 year old an 8
year old should I be checking to see that they’re either their credit was
compromised yeah you should absolutely and I know it’s uncomfortable to enter
information again ftc.gov / Equifax will give you the Equifax stuff but you
should be checking at annualcreditreport.com
that’s annualcreditreport.com she’s on TV and I said annual credit score
recently it’s annual credit report.com so that is something everyone should be
doing at least once a year question this is from Jay John after the we pay our
taxes on our required minimum distributions can the
meaning amount be put into a Roth and considered a conversion from the regular
IRA to a Roth IRA no because you can only put money into a Roth if you have
earned income so and you don’t have to put it back into a Roth if you have
earned income you can do it but no you can’t do it that way
what’s the best way to pay off a thirty-year mortgage with fifteen years
left on it uh pay it off just put extra money down okay
that’s the easiest way Jan wants to know should I rent or buy I’ve got three
hundred thousand dollars in my traditional IRA a hundred grand and my
Roth I am retired my gross fifty six hundred dollars per month in retirement
I’m 63 years old does it make sense to buy or continue renting I’m not a handy
type but I have toys that I use to fish and hunt so I need space to keep them a
condo doesn’t provide that can I borrow money against my IRAs no
you cannot borrow money against your IRAs
it depends I I don’t know the difference in your area we need to look at exactly
what it would cost you to buy something comparable that’s what we need to know
it may be better for you to just it may be better for you to simply stick to
what you have in the rental just say I’m okay
oh let’s see our daughter went away to college
Eastern Kentucky University in the fall 2013 she received a bachelor’s in family
children’s studies in 2017 that’s good her tuition was paid for
through scholarship however she did have to take unsubsidized loans for housing
and books her grand total is fifty-seven thousand dollars she has since come home
to live and is furthering her education she’s getting a bachelor’s and master’s
degree in nursing her last three semesters are being paid for by a
hospital she’s not paid any of the other school loans off my husband and I would
love to help her but our annual income is just over a hundred thousand dollars
I was diagnosed with breast cancer just finished treatment a couple years
ago this all set us back what are her options to pay off the loans as quickly
as possible we’ve heard of public service forgiveness loans how would she
go about doing this okay so if you are working in the public sector the federal
government has a way for you to potentially and I’m going to just say
very clearly potentially because it’s not always the same to get loan
forgiveness there was actually a recent article in the paper that described just
how hard it was to qualify so go to student aid dot e D gov and then when
you click on there’ll be a number of links and you will look for public
service loan forgiveness and check it out there I hope that helps
it’s Jill on money if you’ve got a financial question send an email ask
Jill at Jill on money.com or go to the website and just click
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want to check out a past she’ll go to jail on money.com
for more great personal finance content your back it’s Jill on money if you’ve
got a financial question we want to hear from you send us an email ask Jill at
Jill on money.com we’re trying to get through some of our summer emails so let
us continue here this is this is a very interesting question this is from
somebody who says I’m relatively new to your website and shows do you have any
items related to long term care insurance yes we do we have a couple of
articles that I’ve written way back when but here’s the comment that I thought is
interesting it appears a lot of retirement and financial advice is
focused on people who are previously married or have long-term significant
others as another group of us who have no one I think many of the personal
finance writers forget that we exist we don’t forget about you but I will say
this if you are by yourself that may mean that you actually don’t
need long-term care insurance you might just spend your assets down and be fine
so sometimes what the reason why you talk a lot about couples with financial
planning is that if especially when it comes to long term care if something
happens to one and the other one is left bereft that’s not good so it’s a very
interesting point though and I think I should do that it may be a bit take a
little bit maybe I should do a singleton approach to financial planning hmm that
could be a good article let me think about that okay here’s Felix who’s
almost caught up with podcasts and thanks for the info and advice here’s a
story over 15 years ago I participated at my first jobs
Employee Stock Purchase plan I left the job I never sold the stock recently I
looked again at the account that holds the plan and I find that it’s value has
grown significantly the average share price went from 30
bucks purchase price to the current stock price of over 300 ding-ding-ding
according to the e-trade account there’s over $150,000 of unrealized gains I
recognize I shouldn’t be leveraging the stock from one company but I’m at a loss
of what I should do with this so here are your choices that he presents to me
do I sell it all at once or in small increments my guess is probably all at
once since I’d be in this 15% long-term capital gains rate regardless yeah I
agree with that should I pay down my mortgage no should I reinvest some sort
of of the proceeds in a ETF like an SP 500 or do something else with it
the answer is just so you know the mortgage rate was three point three five
percent so I would say that you should just create a non retirement general
investment account you can use ETFs but it should be a little bit more
diversified than just one SP 500 fund or ETF and so I would say that it is truly
a gift that you did not get shellacked on this position so be careful to ensure
that you have a diversified portfolio and and I think that that’s it just
double check with any if you have someone do your taxes I would just
double check on your calculations to make sure that you are in the 15% you
might be you know up you might that may pop you up into some other categories
just make sure you’re withholding enough money that’s what I would say here’s a
follow up to a question about putting down 20% on a mortgage and the question
was you know should you put in 20 25 percent and I said 20 percent and the
follow up is I’m thinking about borrowing against a CD I have with a
bank and using that loan as my down payment for the home that we will
eventually buy what just use the CD proceeds sell it I mean unless there’s a
big fee no borrowing no leverage to leverage you know when you
coming up with these like little funny workarounds generally speaking choose
the simplest approach it really is gonna get you where you want to go rosemary
wants to know about application for Social Security okay she retired in 2018
and she got her first Social Security check a little bit after that and she
says I just received a notice from Social Security that they need to get
$7,200 back because she made too much money
oh she must have retired early and then started I’m claiming this I understand I
came can’t make more than about $14,000 a year once I was on Social Security
because and I was one I was 64 when I retired so yeah so you can’t go back in
time but you should not have applied for Social Security if you could have
afforded not to write until you were your full retirement age when you take
early Social Security as early as 62 but until your full retirement age which
would probably be about 66 you are subject to that earnings test and if you
wait till your full retirement age that goes away so the clarification that
you’re seeking is essentially it would have been better to wait but I don’t
know if you could have waited I think that’s the other question because
sometimes we don’t know I mean I don’t know all the details of your financial
situation it may not have it may not have been possible for you
and but he can’t go back in time either so there’s that okay how much my time
one minute okay my son-in-law is a French citizen he lives and works in the
US he and my daughter considered buying a home and the process he discovered he
has a lock on his final financial information from TransUnion his bank
told him that he can’t check his credit score with TransUnion there’s a lock on
it how can he did he put the lock on the
account did he freeze his account all he has to do is essentially unfreeze the
account he does that directly with TransUnion so see if he can do that it’s
a freeze not a lock and he should be able to do it
so you’re listening to Jill on money when we return we’re going to get back
to your questions while we’re on our break go to Jill on money.com
listen to past shows and check out our resource section and please let us know
if we should add something cool to that resource section it’s Jill on money.com
we’ll be right back you’re back it’s jill on money and before we finish up
the show couple of emails here jennifer wants to know about a vanguard
tax-free fund if i put money in a tax-free fund do i get ten thirty at tax
time i don’t even know what that means i think you mean you mean a different tax
form okay if you’re in a tax-free fund then you will not pay taxes you’ll get a
form but it’ll say that you don’t have to pay taxes so there you got that
that’s easy Ron keeps hearing a bill is currently in
Congress to make IRAs more expensive for those that inherit them by increasing
the taxable income Bill is there truth to that there are two bills that are
going through Washington DC one has already passed the house the other ones
in the Senate the the rule is going to basically is one where you would be
forced to pull money out of a retirement account within five years of the
person’s death as opposed to or two years or three is whatever they decide
on as opposed to over the course of your life so it would make it more expensive
for people who inherit those IRAs especially if there’s tons of money in
them and here’s a note from Sandra who’s 71 single retired although she writes I
occasionally take on contract work in the pharma industry I have a small Roth
account with a couple of others I want to know can I still contribute to the
Roth from current earnings yes you can what a beautiful thing right it’s
fantastic and if you’ve got earned income you can keep putting money
– that Roth account so that’s fantastic and finally penny writes I love your
segments on CBS this morning I’ve run so many credit reports I used
to be a property manager I’m now retired one of the frequent issues was
unreturned cable boxes people moved out turned off the service never returned
the box and the cup and the cable companies never remove this from your
credit report so hey check it out please do that thanks for that note penny and
thank you for listening it’s been a great program Jill on money where we
have been broadcasting live from the policy genius studios don’t forget
policy genius is the easy way to compare and buy insurance you can go to policy
genius comm and if you have a question during the week don’t forget we’re
always checking the email account ask Jill at Jill on money.com
is our email address thanks for listening and we’ll chat with you next
week

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