← Jill on Money with Jill Schlesinger
Loading summary
Transcript8 lines
- [00:00]
A
Hey gang. You know, it's one thing when I'm at work and there are professionals doing my makeup, but when I'm home, I want something different. I want simplicity. Merit is a minimalist beauty brand created to streamline your routine with clean, high performing products that are impossible to mess up. Merit is designed for people who want to look polished without spending hours in front of the mirror. Merit makes beauty feel effortless. Merit's products are clean, vegan, cruelty free, and made with skin care ingredients that support your skin long after your makeup comes off. In fact, Merit makes it easy to get ready in five minutes or less. That's right up my alley. There are curated sets and essentials that fit seamlessly into any lifestyle. Are you ready to simplify your routine? Head to meritbeauty.com and get their signature makeup bag free with your first order. That's meritbeauty.com need contract help for those workload peaks and backlog projects? You're not alone. Robert half found that 67% of companies surveyed said they will increase their use of contract talent. That's why their recruiters leverage their experience and use award winning AI to quickly find the skilled candidates you want. Learn about their specialized talent in finance, accounting, technology, marketing, legal and administrative support at Robert Half. They Know Talent. Visit roberthalf.com talent today welcome to the Jill on Money Show. It's Tuesday, August 19th and we are here trying to help you make better, less bad financial decisions. And maybe it's not a big decision. Maybe you want to know, am I on the right track? Maybe you're just starting out and you've just gotten some notification from your HR department. They've got all these fantastic benefits, but you don't know which one is the right one for you. Maybe you're thinking about a career shift or a different industry. Whatever's going on, get in touch with us. Go to jillonmoney.com click the contact us button. It's in the upper right corner. Write us a note. And if you'd like to join us on the air live, check the box. That's all you need to do. And we would be delighted to bring you on the air. And hey, while you're on the website, sign up for our free weekly newsletter comes out every Friday. Mark does a really great job with that and that's essentially our substack subscription. So if you do that, you're also going to be getting the blog that I write. Also, by the way, check out our subscription service. It's called Jill on Money Live. That's where you have access to quarterly live webinars, the back catalog of those webinars, bonus audio and video content. It's 45 bucks for the next 12 months. So our next webinar is on Wednesday, September 10th and we are focusing on you ready for this Estate planning? I've got an estate attorney lined up. I'm trying to get a shrink. I think it would be so much fun to have a family therapist to be on with us. So I'm lining that up. But it's going to be estate planning, everything you need to know. And you can only join us and ask your questions live during that webinar if you are a member of our subscription service. So you should check that out. Okay, Mark, how about some emails for today? I'm going to start with Sarah, who writes I'm going to be separating soon from my employer. I'm expecting a payout on my unused vacation time which should work out to around $12,500 before taxes. If it is paid out to me, it will be taxed at a high level because it's a bonus. I'm contemplating the best way for me to handle this one thought I could put it into a pre tax 457 plan to save the tax hit and let it grow tax free until retirement. You mean tax deferred. By the way, there's a parentheses here that is just for you, Mark. It says Mark. I'm normally an all Roth person after the match. Another thought is to roll it into that pre tax 457 and withdraw since I'll be leaving my current job and and then I could use the money towards paying for a car. I'd love to hear from you on your thoughts. Also open to other suggestions. Thanks in advance. I guess the problem is that this is such a weird time that you know you're in a high tax bracket but it sounds like you're going down in bracket. So I mean look, either way is fine. I think that if you have it and go into a 457 and you didn't say how old you are, but you know, if you have it in a 457 plan and, and it's in there and you wait until you're a lower bracket and then you take the money out and you use it to pay for a car, that's fine. I'd much rather you do that than get a car loan. I just don't know what other assets you have. And alternatively, you know, whatever, you can just take the 12 5, pay the tax on and go have your car and all that. But it's a very distinct question when you know your tax bracket's going down. So I'm okay with that. Mark, you seem to be okay with that. I would presume you'd be like giving me the seal of approval on that, right?
- [05:05]
B
Yeah, I would probably just take it, be pay the taxes and be done with it. This is a little too complicated for my liking.
- [05:11]
A
A little cute for you, but I get it. I do get it. Okay. Don writes. I've heard money forums and podcasts speak on the dreaded tax deferred bomb. Okay, Don, I hear you right, the little dripping with the sarcasm here. So this is the Ed Slot version. Ed Slott is one of our favorite guests that we ever have on the show every year. He's fantastic. And he wrote the book called the Ticking Tax Bomb. Isn't that what the name of the book was? This refers to the fact that you've put money away into a retirement account on a pre tax basis. The money that grows in there. It's all well and good, but at some point you have to pay the tax that's due. When you're 75 years old, the government will force you to take money out of that plan. That's called a required minimum distribution. And the reason why that can be a bomb that goes off is that you don't know what tax bracket you're going to be at that time. Okay, so now Don goes on to just explain that. Don says, I've even heard people say put all of your bonds in tax deferred accounts to slow down growth. This seems extremely counterintuitive to me. If someone gave me $100,000 and told me I had to give them back 15,000 and if the same person gave me 200,000 and I had to give you 5,30,000 back, I know which one I would choose every time. Love your show, Mark. I think this is funny. I think the reason why people are. I've never heard put your bonds in a tax deferred account to slow down growth. I've heard you put bonds in your portfolios, any retirement account, Roth or traditional, because the interest that you are earning in a non retirement account is taxable on an annual basis. But I never heard it as to slow down growth. That does seem dumb. I kind of agree with Don, don't you, Mark?
- [07:02]
B
Yeah, I've never thought of putting bonds in any account to slow down growth. It's all about the tax benefit.
- [07:07]
A
And also it's. And listen, slow down Growth. It's just for diversification. I think that some people like to say anything that creates current income should be inside of a retirement account structure so you don't have to pay tax on it. You end into paying tax on at the end. Okay. Anonymous is a longtime listener who's reached out to us in the past and Anonymous says it served me well. Thanks for that. Coming back to you now because I'm at an inflection point. While my job is good, lamentably the relationship with my boss is not. Oh my God, the bad boss thing. Mark. Hate that. My position is due for renewal later this year and I'm certain it will not be renewed based on comments from the aforementioned boss. I'm reaching out because I am burnt out. I'd like to take a sabbatical, six to 12 months to reconnect with my purpose and find a new role. But I need your guidance to make sure this will work out okay. Anonymous is 56 years old, makes 155 grand a year. Husband, 62, partially retired, receives a pension of 78,000 and the the husband makes another 20 or 30 grand consulting. They live in New York. Their house is worth 730 grand with a mortgage of around 300 grand at 3%. Two kids, 17 and 15. They've got some money saved in 529, 74 grand for one, 65 grand in another. You ready for the amount of money they've got saved? So remember, the husband's got 78 grand a year in a pension. Traditional IRA, 700. Let's come. Can I call it? I'm going to round up 740 for the traditional. There's 78,000 in a Roth. In TIAA, there's about 387,000. Some money in a money market. The husband has another $330,000 in a stable value fund, draws $5,000 a month so they can cash flow half the annual tuition payments. Deferred comp. Anonymous has 132,000 also in a stable value fund. I want to draw on that over the next year to be on sabbatical and seek new employment. Ready for the expenses. $10,000 a month. That's not so bad. So they have a bunch of money saved. Okay. I guess the question that I have for you, Anonymous, is if you take this six to 12 months off, how do you know you're going to be able to get back into the workforce? I'm a tiny bit worried about this. I think you've got a lot of money and you know, basically Your husband's consulting pension is hugely helpful. I would. Okay, for six months. I think six months you take off and then at six months you have a better idea. I think that's a better time horizon. If six turns into 12 and now all of a sudden you're 57 and you can't get a job that you really want, you're gonna have to go back and make some money. You're gonna have to, at least with your husband's pension, be able to float your expenses probably, you know, essentially for like 8 more years till we get this 15 year old out of college. Do you agree with that, Mark? Like, it's a little bit early to just say I'm taking a year off, which I think sometimes turns into two years.
- [10:32]
B
It's close. I mean, because of the pension. It's close. I mean that's a huge factor in this. That's, you know, almost 80 grand a year right there. They're only spending 10amonth. They have a lot of money saved. So I'm not going to like completely rain on this. It's doable.
- [10:45]
A
I think it's doable. I think six months is where you should start. I think once you're out of the labor force for like more than a year, it becomes much harder to reenter. And maybe you don't care, you know, honestly, maybe you're like, I don't care. Even if I take a year off and I have to go back and make 40 grand a year. I mean, you're just going to have to do something. You're young and your husband is five years from being full retirement through Social Security. So here's what I think. I think it's, you shoot for six, you hope to have something new lined up by the end of the first year. So six months, like you're really chilling the next six months you are working towards finding a new position, even if it's a part time position. And then I think we're good. Let's get these kids through school. Okay. This is from Maureen, who had come, had, had written to us about the continuing care retirement community investment ccrc. What's very interesting is that these are facilities where you plunk down a bunch of money. It's almost like an investment in their business. And so that partially will cover your sort of getting in the door. And then there are these annual monthly charges. Right. But if you needed continuing care, right. If you go in, I'm like, I feel pretty good. Then you need assisted living. Then you need to go to memory care. And then you're at the end of life. All that happens in one place. And so what I said was that the problem with these things is that some of them have very shaky finances. And so Maureen wrote back and she said, I went through their Fitch Ratings and they said that this particular organization has, quote, a strong financial profile, manageable capital spending and effective cost management leading to solid operating metrics. The part that had me concerned is the financial report on them right now, which is what causes CCRCs to fail down the road. For example, this facility is increasing the number of domiciles apartments and expanding the size of other facilities beginning in October. The mayor report thinks they can fiscally manage it given the rate of occupancy today and other aspects of their metrics. But if the expansion is exceeds their estimated budget and given tariff wars and costs, that could be a possibility and occupancy rates decline, could that send them into a financial tailspin that would affect those of us who have bought into the community? What happens to us if the CCRC declares bankruptcy? Okay, so to be clear, when one of these places goes into bankruptcy, they're not going to throw you out. The question is that when you die, they then your estate would not necessarily get the money back or get a fraction of the money back. You'd be like any other investor, which is an equity investor, and you'd get in line. Maureen goes on and says all of the current applicants, those who have paid the hefty deposit are on their wait list, will be meeting with management in August to discuss the expansion. I would appreciate any question you think we should ask them to help us decide if we were wise to continue pursuing this part of our retirement aging strategy. Okay, so one of the questions that you would ask is how much debt are you carrying right now? That's a big question. Because if these folks went out and borrowed a bunch of money and also find out what interest rate it is, it's the same as if you and I borrowed money, they would be leveraged. And if their costs explode higher and they can't keep up with that and they have to keep making these interest payments, that could be a problem. By the time we finally get a call about an available apartment, something in our physical health could have drastically changed that might cause them to decline admitting us. They tell us now that deposit money is 100% refundable. But if the CCRC is in financial straits, will all the money be refunded? This feels like such a gamble. We're giving them money to assure that we'll have continuing care as we age. They're telling us that they may decline to offer us continuing care if we're not healthy. Are we better off looking for in home care services? Our home is paid off and saving our money for that, or does New York State regulate so heavily that in home care is impossible? Okay, big, huge, deep breath. The continuing care facilities are plugging into a need, but they have not necessarily proven that they can financially keep up with that need. And I think there is the risk that you see. So I'm going to like pretend. Let me take you back in time for a second, Maureen. I remember when I was a young financial advisor and this was like the 1990s, it's a long time ago. My God, when I say it that way, we would have long term care insurance policies and they were not cheap but they really made great promises in terms of what they could provide in terms of coverage. And what we found out later with hindsight now, is that they mispriced the cost of long term care. They mispriced half how much it would cost to provide services over a length of time. And they mispriced that people would live longer and live longer with certain diseases. And as a result a lot of these policies basically collapsed in on themselves. They were able to basically go to every state insurance regulator and say we are raising premiums for every single person who has this policy. And so that is why a lot of people had basically no choice but to abandon their policy or live with a much smaller coverage amount. This is what I'm fearful about with these communities because I don't think we have enough experience of someone who does it really well. So if you're saying are you better off? I think that you would be smart to at least compare in New York State. It's not that in home care isn't possible. There's plenty of places that provide care. It depends what kind of care you do need and what your total asset level is. So Maureen, I'd love for you to get in touch with us and we could walk you through exactly what we think is the better option for you or what what the various options are for you and then we could work it out together. Oh by the way, we have another. Maureen, let's finish the the show with this. So this Maureen says that I mentioned six months ago that she converted her parents paper bonds to electronic using treasury direct. By the way, this was my mother in law. So just to be clear, okay, so Maureen says I decided to do that with my father's bonds this summer. I just completed the process this morning by adding my siblings and me as beneficiaries. I wanted to send you a note to show you that people can actually act on what you say and to say thank you for the suggestion. Have a good vacation. Oh, thank you, Maureen. I appreciate that. See, Mark? People are listening. All right, that's it. That's the program. We thank you. Thank you so much for joining us today and during our entire vacation. And it is now vacation time for Jill and Mark. You will be hearing a show every single day. You can subscribe to us on the Odyssey app or wherever you find your favorite podcast. Don't forget to leave us a rating and review wherever you listen. Try to do something nice for someone else today. Change your work, change your wealth, change your life. Thank you for listening. We'll talk to you tomorrow.
- [18:08]
C
You say you'll never join the Navy, that living on a submarine would be too hard. You'd never power a whole ship with nuclear energy, never bring a patient back to life or play the national anthem for a sold out crowd. Joining the Navy sound sounds crazy. Saying never actually is. Start your journey@navy.com America's Navy forged by the sea. Every week on the Moth podcast, we hear from incredible people who have found their own voice. There's this little bit of wisdom people say all the time, you know, that you should live in the moment. Let me tell you something. There is nothing worse than being forced to live in the moment. The Moth podcast features real people telling their stories live on stage to connect and learn from them. Follow and listen to the Moth on the free Odyssey app or wherever you get your podcasts.