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- [00:00]
A
You know, I always say to make smart financial decisions. So let me ask you this. What exactly is that old car in your driveway doing for you right now? Seriously, is it an extra car? Nobody drives anymore. Maybe it doesn't run. Do you keep saying you'll sell it one weekend and suddenly it's been two years? Meanwhile, it's taking up space, costing you money, and slowly becoming part of the landscape. Here's the easy solution. Donate it to Cars for Kids. And yes, it's that Cars for Kids. The the one with the jingle you absolutely know already. 1877 cars for kids. Here's why people love to donate to Cars for Kids. It's ridiculously simple. You go to carsforkids.org Jill, that's cars with a K. Answer a few simple questions and you're done. They'll come pick up the vehicle for free, tow it away, handle the paperwork, and you'll receive a tax deductible receipt. Done. Cars4Kids has been doing this for over 30 years and has accepted more than a million vehicle donations. So if you've got a car you're not using, turn it into something meaningful. Go to carsforkids.org Jill that's cars with a K. And fair warning. Now that jingle is going to be stuck in your head for the rest of the day. Hey gang, remember those resolutions you put together at the beginning of the year? Maybe it was estate planning, maybe it was life insurance. Check in. Well, I know it's summer, but how about if we get one of these items checked off your to do list in just minutes? Policygenius can help. Policygenius does all of the heavy lifting of searching for the best plan for you, giving you the peace of mind to enjoy a much more carefree season with your loved ones. I know that you value financial planning for the future. It should be a huge priority. Policygenius makes it incredibly straightforward with their online marketplace where you can compare quotes from America's top insurers side by side for free. I trust them because their licensed team works for you, not the insurance companies. So there's no guesswork, just clarity. With Policygenius you can see if you can find a 20 year life insurance policy starting at just $276 a year for $1 million in coverage. Head to policygenius.com to compare life insurance quotes from top companies and see how much you could save. That's policygenius.com welcome to the Jill on Money Show. It's Tuesday, June 30th and we are here answering your Financial questions. If you have one, all you need to do is go to our website, jillonmoney.com and in the upper right hand corner there is a contact us button. When you click that button, a form will come down and that will be the email that we receive. So if you're shy and you don't want to come on the program, give us a lot of detail for that most important piece of information. How much money do you spend? That is usually the one piece of information we can't manufacture without your help. So do that. And if you'd like to join us via audio, then check that box. If you want to be a video star, then check the video box. But it's kind of a. I have to say we're going to be a little ageist about this because we have another program which is actually launching today. It's called Money Moves. It is a podcast and web show, and it is geared towards younger folks who are kind of starting on their financial journey. When I say young, I mean 45 or younger, which is now young for us. If you have kids who are in that age range or you want to learn how to better communicate with your kids about money, do, do, do subscribe to the new Money Moves podcast. You can do that right on our website@jillonmoney.com and you can also subscribe to our free weekly newsletter. So two free things you can subscribe to Money Moves, which is now going to be dropping on Tuesdays and Thursdays, and also our free weekly newsletter, which drops on Fridays. Okay, let's get to you guys right now. We are going to talk to Bob from New York City. Hello, Bob. How are you?
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B
I'm doing well. I'm excited to be here. Jill and Mark.
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A
Oh, we are happy to have you Tell us what is going on and how we can help you out.
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B
So I am currently 56. I am divorced. I have no children, and I will be retiring at the end of this week, as a matter of fact.
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A
Oh, my God. Congratulations. How does it feel?
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B
I'm gonna have to get back to you about that. I have a lot of. A lot of emotions. Some of it's good, some of it's a little scary. I'm looking for chapter three. I think it'll be exciting.
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A
Okay, I like that. So you know you're retiring. Do you know that? Because you have a pension or have you saved a ton of money? What's going on?
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B
Yes, I am a teacher and I will have a pension and I think I've saved. I don't know if it's a ton, but I've certainly been diligent about my saving, savings and investing.
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A
I mean, not to be daft, as the British would say, but if you have pension and savings, what's the, what's the reason for getting in touch with us?
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B
I just wanted to talk to you.
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A
I love that. Tell me more.
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B
Well, it can't hurt to double if not triple check.
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A
Okay.
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B
And, you know, put some of those fears, at least the financial fears aside, and I want somebody to pat me on the back and say, you've done well and you're going to have a good future.
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A
Okay, so let's start with this, Bob. How much will the pension payment be?
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B
They haven't calculated it exactly, but the estimate is probably 6,500amonth for your life, right? Correct.
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A
And you have health care because you're a New York State employee, right?
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B
Correct. Fully funded health care until Medicare kicks in.
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A
Okay. When you look at your current spirit spending, how does $6,500 a month compare with the amount of money that you spend right now?
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B
I calculated my expenses probably short of
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A
5,000amonth, but let's say five.
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B
Let's say five. And I'm thinking things are going to go up a little bit because I want to have a little room to play.
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A
I love room to play. Well, so obviously from your. Just the basics, you're good, you're covered. Awesome. Now tell us about the money you saved and how you were. We can supplement this, the $6,500 a month pension.
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B
My philosophy is my life, which will be covered by the pension and the medical. And then my style, the style we're about to get into. And I'll give you the figures. So together I will have a perfect lifestyle with your blessing.
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A
Okay. I'm already blessed. I feel like I'm good. I like that. Mark, do you like that lifestyle? I think that's good, right?
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C
I've seen the numbers. I think the lifestyle is pretty good.
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A
Oh, I haven't seen the numbers. Okay, hit it. Hit it, man. What do you got saved up?
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B
A taxable 403B 900,000.
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A
Okay.
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B
A Roth 403, approximately 105 to 110,000. A taxable 457, approximately 100,000. And then I have another hundred in a. Another TVA from the job I'm in currently.
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A
And okay, so tax deferred.
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B
So it's tax deferred, but it's also contractual at a 7% for life rate. Oh, guaranteed. Which is. Wow, crazy. Yeah. I've tried to sock away everything I can as quickly as possible, but I've only been in this job for a few years.
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A
Wow. Okay.
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B
I wish I could have dumped everything into that no kidding guarantee.
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A
All right.
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B
And then outside of retirement, I have about 3/4 or 750 in a fidelity brokerage account and then just some local bank checking and savings. About 40,000.
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A
Incredible. And you own your home?
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B
I do not. I currently rent. I just finished at the beginning of June. I paid off my newer suv, so I'm good. I'll have no debts and it's basically me. I want. I want to relocate.
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A
What?
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B
Yeah, yeah.
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A
We need you to spend your money in New York. How could you abandon us now? Look at all we've done for you and now you're going to abandon us?
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B
I'll send you a check. Don't worry.
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A
You're going to buy subscriptions to Jill on Money Live for everybody in your life.
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B
Correct.
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A
Okay. Where are you going to move to, do you think?
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B
Nevada?
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A
Nevada?
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B
Yes.
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A
Okay. Are you sure?
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B
I think so. I think. I'm sure. I'm positive that I'm pretty sure that I think so.
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A
So cost of living should go down ish. A little bit.
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B
I think so. I'm going to try to live a little high on the hog, but obviously, you know, state and local taxes, income taxes are non existent, so that'll be pretty good.
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A
So you'll keep more of your money. Okay. So this. So it's fascinating to me. Okay, so good news is you can do whatever you want. I mean, I think your lifestyle idea, you know, $6,500 a month covers your life and that is at today's dollars, like I mean in New York dollars, meaning at five grand a month today, if you might even need less money or maybe not. But like you said, you could live a little bit bigger when you move to Nevada. You have a million dollars in the deferred money. You have that tda, which is, you know, keep let crank on. You got all them, the 750 in the bank. You got. I mean there's nothing that is problematic here at all. So it is with, you know, it sounds crazy maybe to other people who are listening because like, oh my God, why'd he call? What's the problem? You got all the money. You kind of know you have the money. But what I can tell you is even if your spending went up to not 6,500amonth, but like 8 grand a month, you're fine. You're totally fine. Mark, what's the most you think Bob could spend on a monthly basis before you got nervous?
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C
No, he's got, he's got a ways to go. I mean, the only thing I would say is, you know, you're so good, you can live anywhere. So I, you know, unless you really want to go to Nevada, that's fine, go to Nevada. But I wouldn't move there just because
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A
Mark and I are so inclined for New York. You know that. Right, right. I think a lot of people do this. Like, in fact, I know a lot of teachers and municipal workers from New York and New York City. They'll move someplace where the pension has better tax treat. And so that's great. I mean, you want to move in Florida, you want to move to Nevada, you want to move to New Hampshire. In your case, you can afford to stay in New York if that's something you want. I agree with Mark, but you are in such good shape. Just live where you want to live and don't worry about the tax stuff and have fun and, you know. How long were you a teacher?
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B
Almost three decades.
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A
You put your time in, get that pension. And don't worry about the one question before I let you go, because I know you don't have kids. Do you have estate documents where somebody. Obviously, you've made designations for beneficiaries from the retirement accounts. But where does all this money go? Like the brokerage account? Where does that go upon your passing?
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B
I have family. I have siblings and niece and nephews, and all of my documents are updated, taken care of.
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A
All right. All right, then go live where you want. Stay in New York. Come on, man.
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C
He's had enough. He wants.
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B
I'll come visit you. I'm not moving just for financial reasons.
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A
Okay.
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B
The lifestyle out there is adventurous and there's hiking and it's a great jumping off point, I think.
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C
You don't like. You don't like jumping over the rats in New York City.
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A
Yeah, right. Look at all the, look at all the great things that we have. Like, it's like an obstacle course every day. It's the dirty, the, the, the trash that falls in the street, the dog poop and the rats. I mean, there's so much there for you. I, I'm really not doing a good job of selling it.
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B
You don't have.
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A
Count your money and don't look back.
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B
Before we depart, can I ask you about a rollover strategy in terms of moving money from the TDA accounts or the large account into more of a Roth IRA situation, particularly with Fidelity. I Want. I want to eliminate some of that IRMA and RMD that's coming down the road.
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A
I mean, I think the general game plan would be to roll over. Like, you have the 900 and the 100, right. That those two accounts, not the one that's earning 7%, not the TDA. I would take those two, I'd roll them into an IRA rollover, and then I would start converting slowly but surely, or, you know, and you don't have to make it again all at once. You have a bunch of money in your brokerage account or some money in, and anything that you can build up terms of paying the tax bill would be great. It would be good to convert and, or pull the money out before you get to the time of required minimum distributions. The thing is about the IRMAA part is, as you know, you're, you know, you kind of want to get this done, Mark, it's two years before Medicare. That looks back, right? It's like, isn't that the IRMAA look back is two years from when you claim your Medicare?
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C
Yeah, I think it's two years. Let me just double check.
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A
So I think what you'd want to do is kind of get two years. Yeah, get. Yeah. So you'd want to kind of look at the ages of 56 to 63 as the time to really make a little bit more of a dent in the retirement account and conversion. Now, it's also true, Bob, that you don't have to kill yourself either. Like, it's fine, you know, you can play the game. On the other hand, you could just kind of wait. You could convert some for some years. You can start pulling some money out a little bit at a time. You can get your Medicare, you can dribble the money out, and then you can get yourself where you need to go, you know? Well, before, you know, Irma's one thing and then required minimum distribution is the next thing. And it may be that in a given year, you say, I had to pay IRMAA this one year, but I didn't. It's not that much. So I wouldn't get myself apoplectic about it. Meaning that you don't have to convert everything right now. You don't need to. I don't want to compound your tax problems a lot of times in an effort to kind of sidestep this. Again, if everyone's listening, you know, sometimes you don't know what we're talking about. So Irma is not a person, is a rule which says that when you make Extra money above certain levels you are subject to something called the income related monthly adjustment amount. So that's IRMAA I R M A A in this case, Bob is making a bunch of money every month. The $6,500 a month. Well, as a single filer, as soon as you earn over total of $109,000 in a given year for Medicare purposes, you might have a surcharge. Now the surcharge may not be that much. It might be like 100 bucks a month. So that's not a big deal. But it might be a couple hundred dollars a month and if you convert too much at one time, it might be a significant amount like you know, 500 bucks a month. So you kind of have to balance the IRMAA with do I have enough money to pay the conversion and can I do it slowly but surely. So a lot of this, like it's just math. This is not a tough thing, but I would hate it if you said, oh well, I now have to sell a low basis position in my brokerage account in order to pay the tax that's due on the conversion. So that's what I just want you to be careful about that there. It wouldn't be the worst thing in the world if you said, okay, I did some of it at this level, some of it at this level and I have to pay a little bit more. I had to pay IRMAA two years, but not for 12 years. So just, you know, don't go crazy. You got plenty of money, you can pay the bill.
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B
Okay, I really appreciate that. Yeah. You get different opinions. My CPA didn't want me to convert, but my financial advisor does want me to convert. So.
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A
Yeah, I mean, because the CPA, I find a lot with many CPAs, what they want to do is they're always looking at minimizing taxes today.
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C
Right.
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A
Whereas a financial planner I think takes a somewhat longer view of like. Yeah, true, but then you're going to be subject to that required minimum district distribution eventually, probably after your CPA retires, someone else will be dealing with that. So it's not bad to have two different opinions. I just, I don't think you're going to make a mistake. So let me just say that. And that's why I think you're going to be in great shape. So Bob from New York City, soon to be Nevada, very best of luck. If you are thinking about what your strategy should be. Are you thinking about moving? Maybe you don't have to. Are you thinking of upsizing, downsizing Are you thinking about how you're going to get wherever you want to go? Get in touch with us. Go to Jill on money dot com, click the Contact Us button, write us a note, and if you'd like to join us on the air, just check the box. Mark will do everything else. Don't forget, you can subscribe to us on the Odyssey app or wherever you find your favorite podcast. You can also subscribe to our new show called Money Moves, which we are launching today. So hooray, you should do that. Don't forget to do something nice for someone else today. Change your work, change your wealth, change your life. Thank you for listening and we'll talk to you tomorrow.
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B
Foreign.
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A
Hey there, it's Jill Schlesinger. I'm launching a new show. It's called Money Moves and your money is going to move. We're going to help you make better financial decisions. We're going to call out the B.S. you're finding all over social media. We're going to give you actionable guidance to make your financial life clearer, less stressful. We're going to answer your financial question questions and take the mystery out of your financial life. Follow and listen to Money Moves with Jill Schlesinger wherever you get your podcasts.