← HerMoney with Jean Chatzky
HerMoney with Jean Chatzky
“I’m 56 and just got laid off. Is it safe to step away from full-time work for good?”
00:23:36
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- [00:02]
Karen Feinerman
Hi everyone, I'm Karen Feinerman and I'm delighted to share that we have a new season for you of my podcast How She Does It. You may have seen me on cnbc. I'm a long term Wall street investor and a mom of four and I love taking time to sit down with dynamic women leaders and touch on all things women, money and power. This season we have open Table CEO Debbie Sue, Today show hosts Jenna Bush Hager, author Gretchen Rubin, model and Beauty CEO Pritika Swarup and more. You can subscribe to How She does it on Apple Podcasts and learn more@hermoney.com we'll see you soon.
- [00:38]
Jean Chatzky
This is the way it feels to move through summer in Lululemon iconic aligned softness without the front seam.
- [00:49]
Katherine Tuggle
For our.
- [00:50]
Jean Chatzky
Smoothest look and feel ever, summer won't know what hit it. Stretch your limits in the non stop flexibility of the new Lululemon Align no line pant in select stores and@lululemon.com hey everyone, I'm Jean Chatky. Welcome to another Her Money Mailbag episode. I am here with the wonderful Katherine Tuggle. Hermoney's content sheet. Hard to believe July is already in full swing. I hope you all had a fabulous fourth of July and are soaking up these long summer days. Katherine, are you enjoying summer?
- [01:28]
Katherine Tuggle
Yes, so much. I feel like I, I really love summer in New York City because it gets quiet.
- [01:34]
Jean Chatzky
Yeah.
- [01:35]
Katherine Tuggle
People leave, people go to the Hamptons, people go to the mountains and we do those things too. But to just be in the city and experience less traffic, less lines, less crowds on the subway. It's kind of nice.
- [01:47]
Jean Chatzky
Yeah. And you can get into pretty much all the restaurants you want to get into.
- [01:51]
Katherine Tuggle
The restaurants, the Broadway shows. We were able to get tickets to some things. So it's been great.
- [01:56]
Jean Chatzky
That's great. Today we're going to dive into more of the financial questions our listeners have shared everything from long term care worries to whether you can actually save too much for retirement. So let's dig in. What do you say?
- [02:12]
Katherine Tuggle
Absolutely. Our first question comes to us from an anonymous listener. She writes, hi Jeannie, Catherine. My dad has dementia and is in memory care. Thankfully, his long term care insurance that picks up the $10,000 a month bill that has four exclamation points after it. By the way, for those of you listening, I have been diligent in saving for retirement, am in good shape financially, but I'm unable to get long term care insurance. I've been rejected twice due to a chronic illness. When I retire, I'll probably have about 2 million in assets. Too much to spend down for Medicaid, but not enough to pay for long term care out of pocket. Are there any alternatives to long term care if I need it? Is there anything I can do now in terms of planning? Or will I just be left to spend down all my money for several years and take a reverse mortgage when the time comes? I have no children, so I do not need to leave any money for heirs. But I also need to be able to take care of myself. It's the thing that worries me most about getting old. Thank you.
- [03:11]
Jean Chatzky
First of all, I'm so sorry about what's happening with your dad. Dementia is really, really rough and these bills for memory care units, you're right, they are incredibly high. I wanna push back just a little bit on this notion of you not being able to afford your own Care with $2 million in assets. But when we look at the average amount of time that people spend in a care situation before they die, it is about three years. And I think if you look at it that way, the scenario doesn't seem as dire. Also, because you have no heirs, if you did have to continue to spend your money until it was gone, at which point you would qualify for Medicaid, would that be such a disaster? I mean, I understand nobody wants to spend all of their money on care, but if there's no other need for the money, if there is nowhere that you need need to leave it, no one else who needs to use it, this is for you. And getting the best quality care for you is, I think, the probably best use of the money. Now, are there other things that you could do? There are other things that you can do. Sometimes people who don't qualify for straight up long term care are able to qualify for hybrid policies, a life insurance policy with a long term care bucket of benefits, or an annuity that you can use to fund long term care. The benefit of the annuity route is that you get the money while you're still living and active and not in care. And then typically, if you need to access care, the benefits that you get on a monthly basis kick up a little bit. So I might explore those options. The other thing that you can do is just think about carving out potentially a separate bucket of money that might be for your care expenses. If you reserve a bucket of money off to the side, you might feel better about your usage of the rest of your assets, about using them to live the life that you want. I know it's just mental accounting, but Sometimes mental accounting can be really, really powerful. And finally, because you're single, I want to make sure that you are buttoned up when it comes to having the people and the paperwork in place that make sure that your wishes are honored if something does happen to you. So have you named somebody to be your durable power of attorney for finances and for healthcare? Do you have a living will? Have you had conversations with important people about what you want and how you want life to play out if you were, for some reason to become incapacitated? All of those things are just as important as the money. What do you think, Katherine? Did I miss anything?
- [06:55]
Katherine Tuggle
No, I. I love that you pushed back on the notion that 2 million isn't enough, because I think for a single person, it absolutely is. And I know right now that your eyes are popping out of Your head with $10,000 a month bills for your dad. I get it. But I also think that I was in a situation where I was a durable power attorney for my aunt, and she had no heirs and burned through her money. And we asked the home that she was in when she went in, can she stay in if she runs out of money? And they said yes. So, you know, that's exactly what happened with her. She ran out of money. She lived there for another year, basically on Medicaid, and everything was fine and nobody cared. So, you know, it's not something to be fearful of.
- [07:41]
Jean Chatzky
Yeah. And that, at least from what I understand, is very typical, that once you're in that you can get in on your own dollar. Right. But if you do run out of money, they have Medicaid beds in a lot of these private pay facilities and they just essentially make the switch. And what you really want to insure for is that you have a choice of care facility when you're entering. And having enough money to pay for that care, either on your own or with an insurance policy is what it takes to have the choice. And for anybody who's wondering, oh my God, how did her father get a long term care policy that covers $10,000 a month? He bought it a long time ago. No, it's true. The policies have changed over the years. They've gotten a lot more expensive. The benefits have in many cases been reduced, and so you need to look at the hybrid policies as well, just so you've covered the landscape.
- [08:48]
Katherine Tuggle
Yeah, yeah, that's a great point. All right, our next question today comes to us from Alex, who has a question we don't get often. She's wondering if you can ever over save she writes. Hi Jean, My husband and I started saving immediately for retirement once we became employed out of college. My question Is it ever okay to slow down significantly if you're exceeding retirement savings goals? Our current strategy makes it difficult to fund more immediate savings goals like home renovations, vacations and a down payment for a Future Home. We're 37 and 39 years old. We live in California and have surpassed the 3 times your salary by 40 guidance we have a mix of pre tax and after tax Roth accounts and I expect to have a pension from my employer. Here are Some Gross income 215,000 a year Net 158,000 Retirement savings $810,000 Debt Mortgage and car payment totaling $2,200 per month no student loans or credit card debt monthly average expenses $8,000 to $10,000 with two kids we have a small amount of personal savings at about 15,000 that I would love to build up. So considering slowing down retirement to do this, what is your advice? Thank you for considering my question. I love the podcast and the private hermoney Facebook group.
- [10:06]
Jean Chatzky
Oh thanks Alex. And I'm looking at your numbers and I'm just blown away. They are so, so impressive. Yeah, you can over save and if I was a member of the fire movement, which I am not, I would say no, you can't oversave because these are folks who strive to save 50% or more of their income to get to retirement as fast as possible. But that doesn't sound like what you're doing. It sounds like you're trying to work toward retirement at what we typically think of as retirement age based on the fact that you're, you're using the benchmarks. And yeah, it absolutely take the foot off the gas a little bit and bulk up that savings account, that personal savings account which you need to have for emergencies and, and other things, but also do the things that you want to do right? Take the vacation, renovate the kitchen or the bathroom, hold on to the down payment for the next house that you want to buy you are living on. It sounds like so little. I mean the fact that your mortgage and car payment total $2,200 a month and you have no other debt is just astonishing to me. On this income I would get really specific about the other goals that you have and how much they're going to cost. If you have been wanting to take a vacation to a specific place, start planning that vacation, start saving a certain amount of money each month to get you to that vacation so that when the vacation actually happens, you've already paid for it in advance. That's the best way to enjoy a vacation. Start looking for that next home and figure figuring out what the down payment is actually going to cost you and what that's going to do to your cost of living and then just try to keep yourselves on the benchmarks. It sounds like you're doing incredibly well. The only other thing I might put on your radar because it doesn't sound like you have it, although you might are 529 college savings accounts for the kids. If you expect that they are going to college and you haven't started 529s, you may want to allocate some money for that to try to save a good third of the cost of college before they go. Knowing that you'll pay for the rest out of a combo platter of aid in some cases and current cash flow in others. And you're doing aces. I mean you really are doing so well. So I hope, I hope you can take heart in that.
- [12:58]
Katherine Tuggle
Yeah, I am like early 40s. A lot of my friends are around this age. Like you're blowing all of them out of the water. This is an insane amount of savings. So don't sacrifice on vacations or trips or home renovations or any of those other things that you mentioned because you guys are doing amazing.
- [13:15]
Jean Chatzky
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- [15:46]
Katherine Tuggle
Yes, we are. It's one more question, but it is a long one. Okay, it comes to us from Tammy. She writes Hi Team Hermoney. I am a huge fan. I never miss a podcast and I have devoured your books and articles. You've been my go to source for financial smarts and now I could really use your expert advice. Here's my deal. I'm 56, single and sharing a home with my demanding cat and my mom. Glad it's the cat that's demanding and not the mom who's been needing some extra care lately. After 30 plus years in the corporate grind making $170,000 a year, I was laid off last August. I've got $1.6 million tucked away in retirement accounts. No debt besides $117,000 mortgage and about $25,000 in savings. I've been living off severance and unemployment, which just ended. But the job hunt has been rough. Here's where it gets interesting. My financial advisor says I don't need to jump back into the corporate rat race. Instead, I could start withdrawing from my retirement accounts thanks to turning 55 just before my layoff and work part time to pull in around 2,000 to 3,000amonth according to the numbers. I could do this and still have a cool 700,000 left when I'm 97. But here's the catch. I'm hesitant to touch that retirement money before 62. My dad's voice is in my head reminding me it's too soon and I'm Struggling to believe that this could actually work. My original plan was to keep grinding until 62, then ease into part time work and avoid dipping into my retirement until 65. But life threw me a curveball and now I'm wondering, is it crazy to consider semi retirement at 56? Could I really ditch full time work, do my side gigs and still be financially secure? What am I not thinking about? I'm meeting with my advisor again soon, but I'd love to hear your thoughts. Thanks so much for all that you do. Your advice means the world to me.
- [17:33]
Jean Chatzky
Cheers.
- [17:34]
Katherine Tuggle
Cheers.
- [17:35]
Jean Chatzky
Thank you so much, Tammy, for the great and thoughtful question. I. God, I keep coming back to the word grinding in your letter and I don't want you to be grinding. I don't want you to be grinding for another day, let alone until you're 62. Because you've done such an excellent job of setting up your financial life, I'm wondering if you can explore a few different scenarios. If you worked part time to pull in two to $3,000 a month, what if you maybe worked full time but not at something that felt like a grind? Like, does that world exist where you escape the corporate rat race, you find something that you actually like which may take you a little bit of time to explore. You've got that time. You've. You've definitely got the money to do a little bit of exploration. What if at 62 you're still earning part time? What if 65, you're still earning part time? This is the thing that I think people are missing about retirement these days. When most retirees are still working for pay, they are still earning some sort of an income. They're trying to be really careful about it so that they're not earning so much that they come up against things like Medicare penalties. But if you found the sort of part time job or even full time job that didn't feel like a grind, but gave you healthcare, that would allow your money to continue to grow, but also give you some emotional space to enjoy your life more than it sounds like you're enjoying it now. So the answer is, yeah, you could do this. The wild card in terms of retirement spending, the thing that comes around and surprises us is the cost of health care and the cost of long term care. Typically when we look at people spending in retirement, in the initial stages of retirement, what they call the go go years, we spend about the same amount of money that we were spending while we were working. These are the years where we're traveling, we're doing lots of Fun things. We're using our money. Then we get to the slow go years, which is like the 70s, and we spend less because we're staying closer to to home, but we're still pretty healthy and healthcare expenses haven't kicked in and, and cost us a ton of money yet. And then we get to the no go years. Those are the 80s and beyond. We're not going very many places, but we're starting to have health conditions and those health conditions may be getting expensive. That's when you may find some of those surprises. What I'd like to see you do is some scenario planning with your advisor. When you go in to meet with the advisor, lay out three scenarios. What if I worked part time until I was 62 or 65 or 68? What does that do? What if I found a job part time or full time that offered me health insurance? What does that do? What if I worked full time for a couple of years and then scaled back to part time? What if I took six months off before I started all of this? I'm just making this up, by the way. But you can make it up based on what actually makes sense in your own life and you can look at all the different scenarios and see where you're comfortable.
- [21:38]
Katherine Tuggle
Yeah, Gene, that's amazing advice. And the other thing that I just want to say is about her mom. She mentions that the mom's been needing some extra care lately. She doesn't say if that's been emotional support, financial support, it could be all of the above. But I do think that that's something to factor in because what you don't want is for that to be a surprise. Tammy sounds incredibly financially savvy. I feel like Tammy is the kind of person that sees around corners before other people even know that there's a cor coming up. But, you know, if you don't have a handle on your mom's financial picture and you think that could be something that you're going to be responsible for, I would just add that to your list of considerations. Thank you guys so much for writing into us and being part of the Hermoney family. If you're new here, you can go back and binge listen to all of our episodes since 2016. Join us on our Private Hermony Facebook group, and if you have any questions, please, please drop us a line@mailbagarmony.com and we would be happy to tackle them. And we also love reading your reviews of the show. So if you haven't yet, head over to Apple Podcast and Leave us a review with your feedback on the show. Thank you again for being part of the Hermoney family and thank you Jean for the great answers.
- [22:50]
Jean Chatzky
Thanks, Katherine. See you soon. And if you're ready to keep the money conversation going, HerMoney has three amazing programs designed to help you feel more comfortable, confident and in control of your money. There's Finance Fix. It's our four week coaching program that helps you rethink your spending, find hidden savings and make smarter choices for the future. Our pre retirement program runs for six weeks and walks you through building a retirement strategy that's personalized for your next chapter. Finally, there's Investing Fix, our investing club for women. It meets every other week on Zoom. It is a supportive space to learn, ask questions, grow your investing confidence and build your portfolio. And your first month is absolutely free. These programs are truly helping level the playing field for women financially. I'd love to for you to join us. Her Money is produced by Haley Pascalides and our music is provided by Video Helper. Thanks so much for listening and we'll talk soon.