Should I Pay Off the Car Loan Early?

Updated : Sep 04, 2019 in Articles

Should I Pay Off the Car Loan 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 to the dog days of
August ladies and gentlemen thanks for hanging out with us we are always
grateful for you it’s Jill on money where we are broadcasting live from the
Capital One studios fantastic right you ha hey you know the summertime you want
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you do send us that a note just be patient we will get to it we we have a
we have cycles at the show so when the emails start to really pile
up we start to plow through them an extra episode so don’t worry we will get
to you be patient okay we like to begin the program with a caller and today our
caller is Devan he is calling from Pittsburgh welcome to the program what
can I do for you Devon I just I just have a quick question for you I think
it’s fairly basic but some of your takes on debt and paying down debt are
interesting to me so I wanted to want to ask you a question
basically I have a car note and it’s a nice low I think it’s 1.9 percent per
year yeah and i but i so i OA bout let’s call it 14 on the car okay and I have a
have a kind of a cash savings bucket and there’s about let’s call it 28 K in
there and I’m really really tempted to pay off the car with that cash I hate
that you hate it you hate it you hate the car just want to get rid of it
because that’s the only debt that I have right now okay well that’s great
and I just want to be debt-free and it’s really just a psychological thing but
what I would do with that 400 all or month payment that I pay towards the
cars probably put it into an IRA which then would give me some tax some tax
benefits there okay but then it would also obviously take a nice chunk but
pretty much half of my my cash savings right now I wish I want to use to
potentially buy a house maybe buy you know III it’s not quite an emergency
fund but it’s all it’s more of an investment fund do you have a separate
emergency reserve fund I do not that I would say in my mind five or ten of that
is his emergency mm-hmm how much do you earn Devin that’s what’s called about a
hundred year okay are you putting money into a employer-based retirement plan
right now I am yeah how much I think I put in remembering correctly it’s about
it’s about 15% of my okay of my pay 401k straight up no you know I think it’s I
think it’s more more like 12 13 % into the into the IRA or I get the tax
benefit now let’s call it let’s call it so I put in the max to a Roth
whatever that is 5% yeah and then 4 or 5% into another
tax advantage HSA okay so that’s good that’s awesome
that’s great okay so here’s the thing you make a hundred grand you’ve got this
car payment where do you live you got a rental or you living at home we rent a
rental house it’s about 1,200 a month Oh cheap when you say we is there a week
Kemosabe as their partner yeah my fiance and I okay and fiance how about the
earning potential over there how much is the fiance she is a schoolteacher so I
don’t know maybe half what I make yeah but steady man steady but you make
good money together that’s the good news yeah if you are looking at a home to buy
I mean first you’re gonna get married part probably how much do you think
you’d need to spend on a home that you’d want to live in for a while a great
question I’m not a big fan of starter homes and so all in all I’d say about
about 300 would be would probably the final price of the home that we would
buy okay great the cash that is sitting in that account
that $28,000 any idea about how much it’s earning yeah it’s in an ally
account so it’s at this point maybe with one seven one eight okay so it’s kind of
a push between the cash and the car in terms of rate the rate the car rate is a
tiny bit higher than the cash account in other words if you were like oh I’m
making a quarter of one percent in my car loans four point nine percent that’s
an easy decision to make right yeah not as easy right now how many years left on
the car loan tuna house satisfied okay you’re gonna hate me keep the dumb lekar
loan just keep it don’t worry you’re gonna
because you know what you’ll pay it off it’s cheap money you’ll pay it off at
the point when you have that four hundred dollars a month then you’re
gonna start jamming more cash into that account so that you can accumulate the
money you need for your home down payment
and you know I presume that it’s probably the timings about right because
when are you getting married November ok you know look the the $1,200 a month
rent is such a good number mm-hmm that I’m not unless you hate the place it’s
nice to stay there and just pop a lot of money in you’re putting money into your
retirement which is great you know you are putting about 20% away which is a
fantastic savings goal how old are you 33 I mean you’re young so I would say
you’re doing exactly what you should be doing if you end up making more than a
hundred if all of a sudden you’re making 120 and you want to start saving more
aggressively for the house that’s great but I would keep the car loan because
you’re liquidity is kind of the keys to the kingdom that money that’s sitting in
cash so if you found that an a you know you get married and then it’s a year now
from now and you say oh I actually found a house that I want for $300,000 we have
30 yeah we got some wedding money there’s $35,000 in cash we’re gonna take
that money even though it’s not we’re not putting 20% down we’ll put less than
20% down we can get into a house we love whatever you run the numbers and it
works that’s one thing but if you’ve paid off the car loan you don’t even
have the choice you need that money because you’ve got stuff to do
so the good news is the car loans cheap and it’s gone in two and a half years
yeah yeah so if you’re feeling like oh I really just want to buy a house I just
want to buy a house like calm down patience is going to be a very necessary
component to you going through this process get married settle in and start
you know looking at how you guys want to manage your money together go through
that process and then call me back and we’ll talk about buying a house how’s
that yeah all right I’m here I’m not going anywhere
okay we will get back to more of your questions this is Jill on money and if
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our handle 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 you are back its Jill on
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hop onto the website Jill on money.com or send us an email ask Jill at Jill on
money.com hey all you folks who are looking at
colleges right now with your maybe your rising high school seniors we want to
hear from you we want to know what you’re finding and whether or not you’re
having the tough conversations about college that’s your job you’ve got to
talk about the money the money actually matters it really does so let us know
how those college viewing it trips are going and we’ll bring you on the air
hopefully all right let’s go back to the calls katie is on the line from Omaha
and I’ve already asked her don’t worry she’s not related to Warren Buffett do
you see him at McDonald’s every morning Katie you pass him is he is he a figure
about town he is a figure about town but I don’t personally eat it a tunnel for
often though no yeah I like that you don’t stalk him which is probably a nice
thing so I think he appreciates that Katie besides not stalking Warren
Buffett what are you doing in Omaha what do you do I worked in health care great
how old are you I’m 32 okay married single married okay spouse does what yep
he works in hospitality he’s 38 okay tell me a little bit about what’s going
on and how we can help you out well so you know we’re years away from
retirement but we I have always felt kind of behind
with retirement because I didn’t start working until my late 20s and we’re at a
point now where I thought hey maybe we should figure out which is the best
vehicle for to increase our savings into whether
that’s retirement my husband has an option for deferred compensation versus
backdoor Roth or just plain old taxable investing okay so how much money you
guys make to 50 to 55 pre-tax okay that’s good and I had to imagine that
that goes a decent way in Omaha or am I being normal
Oh Coast skewed snobby yeah at whatever the cost of living here is pretty good
so I would say I mean right now we have about two thousand dollars maybe 2500
every month that I just like to do something with you’re both maxing out
your retirement accounts through work yeah so his is about I mean a thousand
dollars away and I have a highly compensated employees role that’s Tim I
can only do ten percent right that annoys me I hate that rule okay
these are traditional 401k accounts so his is a traditional and mine is a Roth
401k no good just about a year ago so I’m putting all my money into that just
so that we’re diversified in retirement love that and it’s good anyway because
honestly you’re in the twenty four percent tax bracket you’re gonna stay in
that tax bracket probably I’m happy to have you use the the Roth how much money
is in retirement savings currently so his is it 130 great mine is at 120 okay
good and then I have 10k in a Roth from when I was a kid but I haven’t been able
to contribute to that’s how young you are you could have been a kid and used a
Roth whereas I remember when a Roth was introduced and I was working hmm I don’t
know if I feel good about that call me your aunt Jill right now all right so
what else is going on you got a house we got a house how much is it worth uh 380
mortgage yes how much left about three hundred okay three point six percent all
right no rush to pay that off any debt from college or anything like that yeah
what do you got so he’s got about 20,000 at 2% 20,000 2%
is nice that’s not so bad no but my work gets bad
uh-oh you tell your great aunt Jill what’s happening about two hundred and
fifty thousand dollars of student loans oh stop it
mark mark just fell over on the board in fact this may not even be recording
right now because he’s just falling over what are your in health care what did
you do are you a nurse are you a doctor I’m a pharmacist okay so you’re an
artist right and the loans are in the public service forgiveness oh okay so I
have five years left and then the rest is forgiven so you’re making payments
right now correct it days you have to stay current every year yeah based on
how much money we make it goes up there’s no reason for you to pay it down
I mean you are halfway through what are the what’s the rate on the 250 like two
hundred of it is at six point eight and then I think the rest is it 8% or
something so you’re working for a public service
institution recognized by the plan you’re doing all of the everything you
have to do you’ve got to dot the i’s and cross the t’s because I’m talking about
they’re gonna die every year okay you got some kids what’s happening no kids
okay oh how nice for you are those bills paid off or they still
out stand everything is paid off we’ve yeah we haven’t had to decrease our
retirement savings which is really great okay how about how about emergency
reserve fund or non retirement investments yes we’ve got about fifty
thousand dollars right now sitting in cash okay which for us is about six
months if we were both out of work which would be unlikely that we were both out
but you’re very conservative so that’s good I mean the only thing you’re really
taking a roll of the dice on is the loan forgiveness what are you gonna do you
got a try you got a you’re in it and every day that passes is a better day
for you I’m hoping okay so what are we going to do with this 2,000 to 2,500
dollars a month this is
the interesting thing so right now you are putting money into a Roth you guys
are prevented from doing a contributory Roth that’s why I like the Roth 401k for
you if for some reason your husband’s employer introduces a Roth option to the
401k do that do that do that right I mean the tax break in fact it is so big
now so I get really changes exactly exactly
all right what are we gonna do with this cash is there anything else that is out
there that I should know about anything else in terms of you know needs wants
desires for the 2000 or 2500 dollars a month anything that we’re looking for
that needs to be we’re focused on I don’t think so I have a car loan that’s
twelve thousand dollars at one percent God so I’m not looking to pay that off
early correct and we have a rental property that essentially runs itself
like it’s positive three thousand dollars a year maybe not very much but I
think we’ll just keep that you know to me yeah sure we’ll do anything with that
but you don’t have to do any big renovation there or anything like that
right okay nothing so we just got we got money to
play with and I say play I mean that very seriously but money that is
available I don’t know what’s gonna happen you got a longer you got a bunch
of money already saved in retirement you’re doing good retirements that maybe
we should just open a plane brokerage account you’re in a pretty ass you know
you’re in a good tax bracket to start saving some money why not yeah I mean we
opened them the best thing account last year cut about five grand in it we just
kind of been adding a little bit every single month and what are you putting in
that account and I mean like investments what are the investments inside it oh
just like ETF and okay you know low-cost good whatever I can go across mutual
funds index funds keeping it simple okay I think you should keep doing that
for a little while you know you got some money that’s socked away already you’ve
got some Roth money let’s build up your non retirement assets who knows what
you’re gonna do you guys gonna stick around Omaha
you’re gonna leave I mean is that a possibility it’s not a bad thing
eventually we’ll have to move but I’d like to stay here for another five or
six years at least I think we should make a
this this investment account I think we should call it short to intermediate
term money and I think this is the money you build up and here’s why
couple things one god forbid something weird happens with the loan forgiveness
I want you to have some money available that you can do something with in other
words like if or they say yeah we’ll wipe away this you know two hundred
thousand but you’ve got fifty on your own then you have money to pay that off
keep adding to your investment account use that taxable investment account to
be an insurance policy in the next five years and then I think in five years
you’ll have a very different decision to make because I do think that you’ll know
more I bet that you know at that point you’ll have to make a decision about
diste this employer or not and all those things but I like the idea of having a
little slush fund just in case okay when we return more of your calls and as I
mentioned before we did the call with Katie if you’re looking at colleges
don’t forget you’ve got lots of resources one of my favorites Beth
kobliner dot-com though we need to talk college section is fantastic okay we’ll
be right back welcome back to jail on money where Jill Schlesinger takes the
mystery out of your finances your back is Jill on money if you have a financial
question we’d love to hear from you very easy to do just send us an email ask
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smart people do with their money thirteen ways to write your financial
wrongs let’s go and do some emails here is a question from Christine I love your
podcast I’m hoping you can help me figure out what to do in regards to
retirement and buying a home I moved to Southern California four years ago I’ve
been renting and I’m at the point where I want to buy but I’m not sure because
I’m 54 I’ve always rented and when when I lived
in Illinois for 15 years I was only paying four hundred ninety five bucks a
month it utilities included needless to say I saved money I’ve got six hundred
thousand dollars in my 401k and Roth and eighty four thousand in a
brokerage account emergency funds a little weak at ten thousand because I
was off five months last year putting I was putting thirty percent of my
paycheck into a 401 since the beginning of year I’m hoping to max out I’m also
maxing out my Roth with all that said you think I should do any assistance I
tell you what Chris I wouldn’t be buying anything right now
the real estate market if you could tell me that you can own a place for a
cheaper rent then yeah maybe but you’re kind of coming closing in in like the
last ten or fifteen years of your career if anything I would much prefer you not
to tie up your liquid assets now’s the time to keep renting but put more money
in non retirement savings so you got a bunch of money in retirement
let’s beef up that emergency reserve fund let’s do that let’s beef up the
money that’s already been taxed so it’s a Roth or it’s a non retirement account
I think that that would be better all right Barry writes I started working in
1967 my first w2 was for $2,300 for the year we were to rely on Social Security
or a pension if offered for retirement I didn’t get into a 401 K until the
nineteen ATS I sure wish I knew then what I know
now because living on Social Security is not enough and 401k is not cutting it
right now I guess I was born too soon I don’t know about that Barry but it’s a
good lesson how many people say to us mark gosh I wish I started sooner that
seems to me the yeah everybody says it just saying okay Daniel writes I just
heard your show yesterday and a caller with a similar issue as I had I’m in
good shape financially retired military reach critical mass mortgage paid off no
debt $300,000 in Roth IRAs for me and my wife all my investments are with USAA I
just ordered your book and newsletter but my questions concerns my parents
they are retired they’re both 85 they’ve saved well their whole lives they’ve got
a net worth of more than one and a half million dollars they live frugally in
the house I grew up in driving fifteen-year-old cars they have
everything with a brokerage firm and I think they’re being taken advantage of
by that firm by the way I’m not mentioning the name of that firm because
that’s kind of gal I am they have no clue about the amount of fees they pay
each year they both have small traditional IRAs and they started Roth
IRAs at age 64 they didn’t convert all their money into Roth’s I don’t
understand why the bulk of their portfolio it stocks two hundred fifty
thousand dollars in one stock I always understood that at their age their
portfolio should be less risky bit more in bonds they like what they have and
they think the company is doing right by them but I think they need to
restructure and consolidate their many accounts to reduce fees I heard you say
that baby steps is the way to go I say my folks are drinking the kool-aid they
don’t want to hear what I say dad still pays $11 a month for a ten thousand
dollar life insurance policy that he got me from the VA in 1956 okay what should
a portfolio worth in excess of one and a half million dollars look like for an 85
year old retired couple currently it’s 75 percent stock I think it needs to
flip to an income or a bond fund for 75 percent of not more than 25 percent in
stock I think you’re right I mean I guess that look
they never pulled any money out of the portfolio one could make an argument
that they could take on more risk they’re really investing it for you but
in general doesn’t seem like they need to be taking this much risk here’s a
question what’s up with financial management companies not showing their
fees on annual statements I asked my parents to have the company show them
the fees charged for 2018 I’m betting they won’t provide it I looked up the
fees on the website it’s mostly fine print blah blah blah they’ve got IRA
some mutual funds one big one big annuity and multiple stock accounts hard
to figure out fees 1% a good ballpark for fees yeah that’s a good ballpark for
one and a half million bucks but listen if they have 250 grand in one stock
there’s no fee on that stock so it depends how here’s the thing question to
ask them company how are they paying how are your parents paying for these
services is it a commission based or is it a fee base you know is it a certain
percentage of assets under management the thing that is very hard in this is
that the onus will be on you or in this case your parents to really dig in and
figure out what’s there and it’s very hard to do so I would love it if you
could get me a statement from them mmm maybe we could look at it we could do a
little forensic accounting on it you know what might be good why don’t you
see if your parents will allow you to come to the meeting with the with a
broker and then you can ask just if you can write down the questions in advance
and just say to your parents like just think we should have have this
information maybe that’s the way to do it don’t push too hard of course because
if they’re doing fine you don’t want to have like a really bad Thanksgiving meal
because you push too hard all right Tim is 66 retired not in the best of health
180 grand in a 401k draws 1,500 dollars of it for living expenses I’m not
comfortable leaving it in the 401k I want something secure so I don’t lose
money like it didn’t last crash should I put it in my bank savings account where
I know it’s safe oh I mean you can roll it up move it into our IRA rollover and
then you can if you want to do it at a bank you can certainly buy CDs with it
and be safe like that but remember you won’t be keeping up with inflation okay
so good luck it’s Jill on money if you’ve got a financial question send us
an email ask Jill at Jill on money comm 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 you got a financial question we’d love
to hear from you remember I am a certified financial planner a
professional trademark that’s so funny when they have a little registered mark
they call it the mark anyway we CFPs we liked a bit look at
you holistically so that’s why when you send us a note we want you to give us as
much detail as you can sue writes that she’s recently retired she’s 65 years
old and here’s where I would like a little bit more detail
she says I’ve got $400,000 in a qualified retirement account and you
ready for this she needs to make fifteen thousand dollars a year from her four
hundred thousand dollars how you think she’s gonna do that mark huh
how’s she gonna do that not gonna happen that’s right it’s gonna be close I don’t
know if she means you so here’s the thing if you have four hundred thousand
dollars you’re not saying you want to make I think what you’re saying let me
rephrase this I think what you’re saying is you’re pulling you want to pull
fifteen thousand dollars a year from your retirement account and are you
saying you want net or you want gross and you’re close I think you could have
a balanced portfolio and be pretty close but it it it’s gonna be you know some
years it’s gonna look easy some years it’s gonna be hard so I think that a
balanced portfolio you know be pretty good you know half risky half
not so risky if you are thinking about index funds and managing yourself I
would try to you know think about whether or not you can really take the
ups and downs because you say you’re a conservative investor if you are a
conservative investor you may want more like 60% or 65% and safer stuff in which
case it might be hard to generate that 15 grand a year so you’re close I just
don’t know if you’re gonna make it okay let’s see this is a message from Brian
who’s getting ready to retire considering rolling over his 401 K into
an IRA I want your opinion on mutual funds versus exchange-traded funds I’ve
heard some thoughts about this I’m concerned about longevity ETF versus
mutual fund what do you think well if it’s an exchange-traded fund and it’s
based on an index and it’s a mutual fund and it’s based on an index then I don’t
think there’s a big difference you can trade an exchange-traded fund more
easily throughout the day intraday but we’re talking about long-term investing
both of them are going to be efficient as long as you don’t mess around with it
too much so I don’t think in your case you have a huge issue I would really
caution you that exchange-traded funds they they can sort of induce you to
think you’re gonna trade them so I would just be careful with that and by the way
here’s a follow up question from a different person Michael who says index
funds are actively managed funds index funds over the long-term index funds
really do tend to outperform the managed funds and part of the reason is that
managed funds cost more but again with an index fund or an index extreme
exchange-traded fund the costs are really low and that money flows to you
really the big mistake is not whether I should pick any
of the you know one index versus another index or an exchange-traded fund index
or a mutual fund is is about a passive approach versus an active one and I
really like the passive approach of index funds and if you don’t want to do
it yourself then you may want to turn to an online advisor or an online platform
Vanguard personal service advisor Schwab intelligent portfolios betterment
wealthfront personal capital all these are good companies and they’re pretty
cheap if you need advice that’s also what Jacob is asking about in need of a
financial planner or advisor can you help me yeah I can help you first of all
go to jail on money.com because there I have a brand new exciting part of the
resource section I updated my ten questions about financial advisors
thirteen financial questions to ask I don’t know mark I think we need to say
thirteen I think we have to save thirteen questions to ask before hiring
an advisor maybe that’s how we should do it thirteen questions to ask before
hiring a financial advisor too long all right we’ll come up with a better one
but anyway it’s the first article under the resource section right underneath
that we have a link to find a CFP professional right underneath that we
have a link to the National Association of personal financial advisors so we’ve
got a lot of a lot of resources right there so check it out okay and and you
got to really figure out do you need this are there other ways to do it all
of those things this is a follow up to a question that we got about Robo advisors
and the follow up question was we narrowed our search down to Vanguard
with a simpler format and a dedicated CFP for periodic reviews Schwab is less
fact flexible as what he’s saying too many funds
and Schwab forces you to have 8 to 12 percent in cash and they only pay 33
percent of the market rate what can you do that I couldn’t do myself
they rebalance I think it makes sense for me to use it is so basically I don’t
know I think he’s leaning towards Vanguard that’s his journey everyone
should check this out themselves so it’s Jill on money if you’ve got a financial
question we’d love to hear from you give us a holler ask Jill at Jill on
money.com we’ll be right back you’re back it is Jill on money and if you’ve
got a financial question just give us a holler you can reach us by email ask
Jill at Jill on money.com or just go to the website it’s very easy to do just go
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we also love it when you just send us general messages like comments about
things you may have seen me talk about on TV or maybe just an insight you have
reading a interesting book that’s helped you and or just maybe a generalized
question anything doesn’t have to be specifically personal finance it can be
happy to do that so I got a great email a while back from Tom who was asking
about different about the financial meltdown and so he’s following up and he
says thanks for mentioning that both the Bush and advant Obama administrations
dealt with a financial meltdown he says it’s amazing to me people listen
it’s amazing to me to listen to people who do or should know better all blame
bailouts on the Obama administration and I do agree that presidents probably get
too much blame and too much praise depending when it comes to the economy
one question I’m trying to determine an answer to if someone is off unemployment
compensation and still not working anywhere how would
the government know to include these people and its numbers okay so the
government has two different ways to calculate unemployment figures one way
they go to employers and they say how many people did you hire how many people
did you fire and that’s where you get that top-line number so many jobs added
in a specific month the household survey is how you actually figure out the
unemployment rate and so the way that the way that the household survey works
is it’s literally a call are you working yes no are you actively seeking a job
yes no and they extrapolate and are able to determine the unemployment rate it’s
not very scientific and as you right Tom it is a little bit like throwing darts
but in that case over the longer term over the course of a year we do get a
better sense of the employment landscape I hope that helps
anyway we got a whole nother hour of this program so stay tuned it’s Jill on
money during the break go on over to the website Jill on money comm and there you
can sign up for our free weekly newsletter 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 you are back it is our
number two of the Jill on Money program and we are broadcasting live from the
policy genius studios policy genius is the easy way to compare and buy
insurance all cut different kinds of insurance go to policy genius.com all
right a month or two ago I wrote a big article for Tribune about tariffs and
the trade war and all that stuff which was hot hot hot in the news and we’ve
got a slug of email questions about this so by the way if your local paper
doesn’t carry my column why don’t you tell them they should check it out okay
so the first question that we have here is from James who read about this in the
Broward County Florida Florida Sun Sentinel he wants to know where do the
collected tariffs go are they designated for trade related issues or just general
revenue good question and thank goodness the New York Times had just written an
article like a couple months after I wrote my article so I have many many
good facts to cite okay so I’m just going to talk about the Chinese imports
for now they’ve the money raised is about 21 billion dollars it goes to and
that’s from the US states Customs and Border Protection so that comes in as
just general revenue 21 billion dollars the only problem is that we’ve already
committed the president and the administration committed to paying
American farmers hurt by the trade war twenty eight billion dollars so anyway
that’s just that’s not a you know one way or the other I guess that you know
you feel like the tariffs from maybe make some money but
that sounds like a net negative so they’ve cost more money than they have
brought in okay Melvin wants to know this is the same thing
Melvin wanted to know the back basically the same question it’s not it’s they’re
not restricted there general so that’s important so then we have questions
about has anyone done research on the impact on the sales results for the
foreign companies yeah I mean so this is what’s interesting so since I wrote that
article we did get information out from China where their growth rate had slowed
down to 6.2 percent and that there’s clearly some problems that that in we’re
seeing that the Chinese companies are certain Chinese companies are not doing
so great with that we also know that you know China x exports are about 20% of
the economy here in the US it’s 12% of the economy and so there’s just we just
you know we know that China is kind of hurting a little bit but we don’t see
that we are actually doing that much better as a result so that’s what I
would say a lot of companies what they are doing is shifting their supply
chains meaning that instead of going to China they might go to Vietnam or they
might go to to Korea so there’s just a lot going on and if you’re multinational
you’re you’re moving things around as much as you possibly can okay I’m still
doing tariffs mark I’m what this is from James why does the president feel that
these are beneficial weapons to use I think that what this is what I would say
assume and I would never presume to actually know what a president or anyone
is thinking but I think the the thought might be that the tariffs will cause so
much pain to China and we just saw again that the Chinese growth rate is
softening that the Chinese will come back to the negotiating table and it
will be a better negotiation because they will
be desperate so far that hasn’t happened so that’s that let’s keep going on
tariffs anything else here caring myself to death here here’s a tariff question
to whom do importers pay the tariff that’s a federal government and so again
it’s about twenty one twenty two billion dollars and that is unfortunately been
twenty seven billion dollars promised to go out mark did I do all I think I’ve
done all the tariff questions did you not send me the ones that were mean I’m
sure there was a plenty of mean ones thank you for not doing that I
appreciate it how much time do I have in this segment may I sniffs gears now yes
here’s a question which I think is interesting from Teddy I enjoy listening
and learning with you I have some questions about helping my parents care
for their money in retirement my father was a long time IBM er he’s got a big
retirement from there my mother is a retired schoolteacher my father has
Parkinson’s disease they are living in an assisted living facility which is
covered by their long term care insurance well that’s amazing I do need
some help managing their assets they’ve got a lot of IBM stock a decent amount
of cash I wondered if you have some advice reaming Teddy yes I do first of
all um you should ask for some referrals in your area maybe from an accountant or
some friends but what you may want to do is go to naphtha NAPFA naphtha org and
find yourself a fee-only financial advisor and maybe also consider maybe
you would go to I’m just trying to think if you want to manage the assets or you
want someone else to manage the assets if you just want help that’s what I
would do and if you want someone to actually manage the assets for you then
potentially I might go to the Certified Financial Planner Board of standards
website which is let’s make a plan dot org write mark org and so give that a
give that a try okay Delphine who’s got the best name
so far in the segment says I have a trust fund from my mother who passed
away of gaash more than 15 years ago every month I receive a statement with
my account details and the last year the balance has decreased significantly
should I close the account and put my money in a CD I got to see what’s in
there let’s see why the estate why did it go down did you pull money out did
you invest in something weird we want we need more details I can’t tell you what
to do unless we actually know more okay does that seem reasonable okay you’re
just happy I stopped talking about tariffs right mark mm-hmm John wants to
know if I provide CFP services I think highly of yours no I don’t do it
anymore um this is from someone in Illinois I don’t know where this is in
Illinois hey send in the name of that dude in
Chicago yeah and then we’ll we’ll hopefully get it get you some help
61 years old plan to retire in three and a half years that’s so great what’s it
gonna be like when we retire mark I me yeah I better make sure you gonna make a
lot of money before then I don’t know it’s so weird I never really think about
it I do like what I do it’s true ah okay rosemary lives in Delaware kids live in
San Antonio Texas I want to open a college savings plan for them how do I
get started ah this is excellent you know you can go
to save for is it saving for college or save for college I think it’s saving for
college yes saving for college calm you can open a plan in your name with the
kids as the beneficiaries or you can look into the Texas plan but I think I
would probably keep it – your plan might be easier and I’m sure that Delaware has
a plan and like that okay so saving for college
comm lots of information there you’re listening to Jill on money if you’ve got
a financial question we want to hear from you ask Jill and Jill on money comm
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
you’re back its Jill on money and if it is August we are going to address your
email questions because I got so backed up earlier in the summer
boom boom we’re doing it we’re doing it baby okay Roseanna and her husband
recently moved their brokerage accounts from Merrill Lynch to Vanguard well I
bet that resulted in some nice cheaper fees okay so all of the mutual funds and
exchange-traded funds transferred over and I see that it is a conservative mix
of bonds and some equities I’d like to sell our current positions and buy
Vanguard index funds that more accurately reflect our risk tolerance I
don’t understand the tax implications of doing that there will be tri realized I
could be charged transaction fees but I don’t know how that will work either can
you provide guidance all of those funds that you had should have come over with
a cost basis and I presume that most of these are long-term capital gains and if
they didn’t come over with that cost basis information
pull up your most recent Merrill Lynch statement and they probably have your
cost basis so let’s just say that you bought something at 20 and it’s now 30
the difference that ten bucks if you’ve held it for more than a year is a
long-term capital gain and depending on your tax bracket you’ll pay some
long-term capital gains taxes so long-term capital gains are the highest
capital gains rate would be twenty three point eight percent
but you know could be as low as 15% because if you’re married filing jointly
and you make less than four hundred and eighty eight thousand dollars a year
it’s only 15 percent so you need to figure that out and you need to ask
Vanguard what the transaction fees would be now that said I wouldn’t be so quick
to move everything maybe you want to spread it out over this year next year
but you’re very smart to ask these questions before you do anything all
right so get that cost basis information Mary
writes that she is a special educator by profession but I must work full time now
to make ends meet I’ve got four credit cards an equity line of credit and I
don’t think I can do anything about my equity line it can’t be refinance it’s
never going away let’s see so she’s got a bunch of payments I don’t know if I’m
in she’s thinking about bankruptcy are there other options you should be
considering I think that look if you want to know about bankruptcy what you
do is you talk to a bankruptcy attorney in your state I mean you could
conceivably try to negotiate with your credit card lenders but I would go see
an attorney and find out what the rules are so that to me is something that you
should consider okay let’s see Julie writes I have a question about a
backdoor Roth conversion my background first my husband is a stay-at-home dad
I’m working we’re in our late 30s we only made your financial debt is our
mortgage I’m maxing out my 401k contribution which is a varrock Roth my
income does not allow for a Roth IRA but I do contribute to an IRA every year and
immediately meaning a non deductible IRA I think and then convert it to a Roth I
contribute to our 529 with any extra cash that goes then goes into a
brokerage account my question is for a nonworking spouse can we also do a
backdoor conversion mark I think the answer is yes
I think the answer is yes there’s a lot of spousal IRA info but I’m pretty sure
you can because it would be a non-deductible IRA contribution for him
because you can’t take a if you can’t take the IRA contribution if you don’t
qualify for the Roth yourself because of your income neither will your husband
but he said I think he can do basically what you do mark let’s check on that
just in case this is for Julie and see if we can give her a link on that’d be
very interesting Kevin writes Oh God uh let’s see
here’s a problem so Kevin writes that basically looks like he’s been hacked
and wants to know credit-card information
bla bla bla okay you have to go to ftc.gov head over there like in a hurry
and you want to report this and then also alert the credit and then at
ftc.gov slash complaint then you’re gonna follow a bunch of directions so
you there are specific steps you ought to be taking okay so that’s important marvin writes that he listens to me on
the way home from church is that okay is that kosher I don’t know I’m just
kidding I always promote I don’t promote Vanguard I like Vanguard tiro price what
else charles schwab fidelity all the places where you can get cheap index
funds the question that marvin is is what would i recommend for a 76 year old
senior looking for decent returns and safety most of my investments are index
annuities which I don’t like but I’m locked in for a while oh man I need more
information I don’t know if you should do it I need
to know how much money we’re talking about is this your emergency reserve
fund or your investments and I’m not gonna give you advice till you tell me
more terrible of me to say that oh man here’s one from Jeffrey his
in-laws are in there Seth they’ve got three not one not two but
three time shares that they’re trying to get out from under my question is if
they pass away before us I know that by law we don’t have to accept the time
shares however does that work if there’s some inheritance to be left to us with
the time shares demand to cover their lifetime maintenance fees do you know
any reputable companies that want to help unload the time shares this reminds
me of my mother-in-law did I ever tell you about this yeah when my
brother-in-law came home and said he bought a timeshare and she goes times
time shares are for suckers it is very hard to unload them I do not think you
have to pay for anything associated with them but I would ask an estate attorney
and I think that if your in-laws are doing any sort of estate planning that
might be something to consider if they look at this you just get a lawyer to
you know kind of get a second opinion there this is from Betsy she 63 she runs
an Airbnb from her home let’s see she’s an artist what else
she loves the book she’s so cute and she said said listen to this she says it
exposes your book is exposed of fear and me who or what kind of professional can
advise me to vanquish a student loan that I haven’t paid on because of the
personal deception imposed on me by my art department chair fiance admits the
existence of criminal acts and quote theologies that I wished witnessed
around him and the University mark I have no answer to this and I don’t know
if you did you make a complaint with the University I’m you can’t get out from
under these student loans so I don’t know if my advice to you is that you
better go figure out what’s going on with those student loans because they
could explode in your face it is you cannot get out from under them by
ignoring them so can you please try to check that out please please please
please pretty please they’ll be so good Matt loves my
appearances on CBS three in Philadelphia and he says my girlfriend and I said
that we both want to spend the rest of our lives together just not get married
advantages or disadvantages of living together for the rest of our lives
compared to marriage you know what there’s it’s not huge but marriage can
help with the state planning it can help with some health care decisions even if
you’re just if you’re not going to get married and you’re gonna live together
you may need to do a little bit of extra estate planning so I would see an
attorney if you are gonna spend the rest of your lives together you want to put
your financial plan together and also your estate plan together and it’s very
exciting no judgments here live together get married do whatever you want but
it’s usually a little bit more work just because marriage confers certain legal
aspects to passing assets and taxes in general that would might be helpful to
you okay you are listening to Jill on money the program that takes the mystery
out of your financial life hey follow us on Twitter Instagram at Jill on money
that’s where we are even facebook right there we go I forgot about that one all
right 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 you are back it’s hat hat hat here in August and we
are blowing through your emails because I got really backed up and I’m sorry for
that however you know what we’re rocking it we’re getting it we’re getting it
done so spending a little extra time doing some extra segments like that okay
so we got an email from somebody who was issued a settlement from a case due to
death as a terrible situation and the question is about in the investment
advisor that was chosen and what this so here’s what is the the note I’d like to
make sure I’ve made a good decision with my money going forward
my daughter also has a trust and I own my home and rental property free and
clear I’ve got no debt so how can I do that okay what I would do in this
situation is I would get a second opinion and I would do that from a
fee-only financial planner you can find that kind of person on naptha NAPFA org
and you you just you want to be careful and you know what mark what we should do
is we should invite this person to maybe send us the allocation and that way we
could potentially take a look at it and have someone else take a look at it you
know I’m thinking about okay good so let’s do that
terrible situation I don’t want to go into too many details here this is a
question from Elyse who is a stay-at-home mom two kids and wants to
know should I go back to work part-time I have a master’s and higher ed I’m
looking for a part-time at a local university 20 bucks an hour
no benefits I know there are social benefits for me to going back to work I
don’t know sure the finances work out my spouse and I are in the top tax bracket
my take-home would be very little is there anything you would recommend that
could offset the taxes that feel so it feels more worthwhile to work well no
benefits no benefits but do they all wait do they allow you to contribute to
their retirement account that could be a possibility or maybe you could write off
some things that come with it I don’t know I don’t want to go too crazy you
obviously don’t need to work now you just want you want to work so even if
you are in a high tax bracket and let’s say you’re in the 50% tax bracket and
even if you just took them a little bit of money a little bit as more than
nothing and if you want to work and you want to feel more productive that could
be really an important step for you so I don’t know I think it might be I
think you might want to try it out just saying okay all right hold on credit
scoring hold on I’m waiting for this because of course my internet connection
has died mark okay I hear you on occasion when I
tune into KMOX in st. Louis my question why is it the banks give you 30 days
grace period to pay your credit card balance but the bureau’s drop your score
when you have a balance that’s so true that is it’s yeah it’s ridiculous
I have Credit Karma I pay attention to it but I notice this can you get the
credit reporting bureaus to explain all of this to us I wish I could I find this
to be a very thorny area that um I had always thought that the credit reporting
industry would change very dramatically after we had a couple of scandals so the
Equifax data breach was kind of enough for me
and maybe it wasn’t enough for anyone else I guess because no real substantive
changes have occurred in terms of that so I don’t know I just that’s that’s the
it’s not appear to be changing okay bill
writes I’m recently divorced house is on the market I’ll be getting in the
neighborhood of $150,000 when all is said and done I would like to buy
another house maybe in the neighborhood of 230 to 270 thousand I will soon be
sixty-five sixty-five huh in getting divorced I’m wondering whether to take a
ten fifteen or thirty year mortgage putting the majority of cash down on the
house is also an alternative I’m paying twenty seven hundred dollars per month
on a mortgage and tax payment it stretches a little bit I’d like to get
my payment down to fifteen to eighteen hundred dollars a month I would like to
work a few more years sell my business we’d use the proceeds as partial
retirement income only have about 150 grand right now save for retirement
better to take a shorter or longer term mortgage my ex suggested a different
approach with cash from the house instead of putting the full 150 into the
house use a lower amount and invest the rest what do you think on these
scenarios you know what I think bill I think that you should rent for a little
bit I think that you should use this opportunity big huge change in your life
and I think that you may want to think you may want to have a little
flexibility and be a renter and see how that goes and not put a gun to your head
about this because you don’t have a ton of liquidity I like the idea of putting
less money down but are you sure you want to actually buy a house right now
chapter four smart things don’t think people do with their money you buy a
house when you should rent times of transition can make you do some loopy
things if you are hell-bent on buying then I would put down twenty thirty
percent I’d get a 30-year mortgage and then give yourself flexibility so that
you would be able to pay it down later but that’ll give you the that’ll be the
easiest on your cash flow Mary is a low cost index investor is there a way to
avoid deep market cycles that come around
every 10 years I want to keep my gains from the last 10 years money’s in an IRA
oh yeah let me just get my magic wand and give you that okay what you could do
is you could put more money in safer stuff like the bond market or in cash
but the thing that’s interesting here is that if you do that and the market keeps
going up you won’t make as much that seems to me a very good trade-off so one
of the ways that you can make sure that you don’t lose money is not have as much
money at risk but by doing so what would happen is that you would obviously
forego the upside can you do that can you I think it would be very good for
you to at least ask that question all right okay you are listening to Jill on
money and we are slamming it with these fantastic emails if you have a question
give us a holler ask Jill at Jill on money.com go to Jill on money comm
that’s our website you too can buy my book the dumb things smart people do
with their money thirteen ways to write your financial wrongs 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 if you’ve got a financial
question we would like to hear from you hey maybe it’s a career question I
really like the career questions – I’ve just been interviewing a ton of people
that workplace about leadership about team-building I’m really into this why
are you staying at your job if you hate it it’s a good labour market hurry up
it could just change at any moment even for those of you who are in industries
that are not actually experiencing rapid growth I know it always feels good to
stay safe and maybe you should stay but you might want to pick your head up and
see what’s out there okay here’s a follow-up from sue she wrote in an asset
how can she generate fifteen thousand dollars from a four hundred thousand
dollar portfolio and she said that she was conservative and so I wrote back
like hey I don’t know if your conservative you might not get 15,000
and she followed up by saying if you don’t mind continuing the conversation I
had could I basically talk about what a conservative portfolio really would look
like and I had said 65% in safer stuff and so what is safer stuff that could be
some combination of CDs high yielding money market short-term and intermediate
term bonds some income generating stuff maybe even like I put a tiny position of
REITs in there maybe and then she says what are the other what would the other
35% look like that would be riskier investments basically stocks stock
mutual funds maybe some US stocks maybe some dividend producing stocks and also
some international stocks but you know when you’re looking at this just be care
careful because often will get the people who will say to me you know oh I
really want safe stuff and then the market goes up and they Trump their own
real desires so whatever your allocation is just check just try to stick with it
okay Laura writes we’ve been putting money away for our children they’re now
eleven and fourteen we’ve been using a 529 plan for college we will have enough
to cover tuition to a California State School for undergraduate hopefully have
some extra money for graduate school at this time though California universities
are incredibly impacted and the better ones turn kids away who are high
achieving oh my god my children are also citizens of the
Netherlands Wow they can attend University they’re for a
very low cost three grand for a three-year bachelor’s program taught in
English slightly more for grad school we would like our kids to finish grad
school ideally without taking on any debt our oldest is approaching high
school now we’re seriously seeing this as a good plan B which could leave them
with money left over at the end to even start their lives however the money in
the 529 plan cannot be used for expenses at these schools without penalty my
question is since this is an option should we stop contributing to the 529
and put future money elsewhere and if so we’re considering we have four to seven
years until they start University ready stop putting money into the 529 just
stop because you know you can accumulate sounds like you’ve done a very good job
accumulating money at the very least what you can do is you can head your bed
put it in a plain old investment account make it a somewhat of a more balanced
portfolio considering the four years you know
maybe a little bit more than balance maybe 60/40 60 stocks forty bonds
something like that and let’s judge and I I think this is a great idea okay
continuing on the student loan debt issue I just watched your recent
appearance on CBS this morning and I plan on four
the video to a recent college graduate I have a question
this recent graduate has an obscene amount of debt approximately sixty
thousand dollars for an undergraduate degree and she currently makes thirty
eight thousand dollars a year my question is as follows you stated that
student loan debt errs should pay more than required why her required monthly
payment is based on her income okay that’s different in other words if if
you have I don’t know if she has an income based repayment or they just base
it on that so she has income based repayment it doesn’t matter that that’s
a different issue I was talking about people who just graduate with that debt
but what the the issue here that Tom says is that with an income based
repayment plan after making twenty years of monthly payments the remainder of the
debt will be forgiven that’s true for income based repayment so now I was
really talking about people who don’t have income based repayment in other
words if you just come out of school and you haven’t done that yet and so yes
they if she’s got an income based repayment fine and of course we have to
hope that these plans all stay in place without any changes because of the
current administration or the current Secretary of Education messing with us
but yeah you’re right if you’re already at income based repayment then you
wouldn’t mess with it so good point okay oh gosh I got a lot this a long question
so I won’t do it yet so many long questions mark how am I supposed to fit
now here we go here’s Doug what is the source you use when you write wages are
rising faster than the inflation rate the Bureau of Labor Statistics has those
both of those things so wages are up by you know over three percent from a year
ago and inflation is up by less than two percent from a year ago so that’s where
that number comes from Doug okay you’re listening to Jill on money if you’ve got
a financial question just give us a holler ask Jill at Jill on money.com
and don’t forget go to the website and you there at Jill on money.com you can
send it for our free weekly newsletter 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 just go to policy genius.com ok let’s say Carl
wrote in about an article that was published in the Chicago Tribune that I
wrote called many workers feeling confident about
retirement so this was a we usually I do an analysis of this annual survey by the
Employee Benefit Research Institute or eBRI and they release something called
release something every year called the retirement confidence survey and so
retirement confidence is definitely inching up for sure what Carl wrote was
that I talked about this but then there was a another article about why you need
to establish a retirement plan now and so the question from Carl is is the
difference on one level folks think they have things well in hand but when the
details I look under the hood are scrutinized one has to conclude that
folks are deluding themselves and engaging in irrational exuberance yeah I
mean that’s what’s so fascinating people say they feel confident they say I want
rack but none of them are running the numbers are very few of them running the
numbers so how can you feel confident if you’re not actually running the numbers
that’s something to really consider so I think that that may be a piece of the
puzzle here that yeah you’re right it’s a little disconnect okay
here’s a question about tenants and common voice versus joint tenants with
rights of survivorship the so this woman Gretchen writes that her friend who does
a lot of real estate closings say that if agreements don’t specify the default
tenants in common I know it applies to my state I’m not sure about other states
why do so few people understand the difference here’s what happens tenants
in common means that you to own a property together and then your share
upon death goes down to some person you have to name who gets that share could
be your kids or whatever tenants we joint tenants with rights of
survivorship means your share automatically goes to the person with
whom you co-owned the property you should ask your attorney which is the
best ownership option for you and yes affirmative lis make that decision great
question okay thanks for listening it’s been so
much fun any questions send us an email ask Jill at Jill on money.com and if
you’ve missed any part of the show or want to catch up with old ones or you
want to subscribe to our podcast go to Jill on money.com Jill on money comm is
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anywhere else you find your favorite podcast we’ll see you next week thanks
for listening you

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