Can I Reduce My Savings Rate?

Summary

Podcast Summary: "Can I Reduce My Savings Rate?"

Podcast Information:

• Title: Jill on Money with Jill Schlesinger
• Host/Author: Audacy
• Episode: Can I Reduce My Savings Rate?
• Release Date: February 18, 2025

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Introduction

In this episode of "Jill on Money," host Jill Schlesinger delves into the topic of savings rates, addressing whether individuals can afford to reduce their current savings momentum without jeopardizing their financial future. The discussion is enriched by listener questions and expert insights from co-hosts Mark and Brandon, offering practical guidance for those contemplating adjustments to their savings strategies.

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Listener Questions and Expert Responses

1. Adding a Spouse to the Deed

• Listener: Kenneth
• Timestamp: [05:00]

Kenneth's Situation:
Kenneth and his wife, recently married, reside in a home solely owned by his wife. Kenneth has taken over the house payment and wishes to add his name to the deed in the most straightforward and cost-effective manner.

Mark & Brandon’s Advice:
Brandon explains that adding a spouse to a deed is relatively simple and can be accomplished through a lawyer by declaring joint ownership with rights of survivorship. However, if the property has a mortgage, adding a name directly to the mortgage without refinancing is challenging. They suggest leaving the mortgage terms unchanged and focusing on legal steps to share the property's ownership.

Notable Quote:

"Adding somebody to the mortgage during your lifetime can be a bit tricky, so the simplest route is to add them to the deed and leave the mortgage as is." — Brandon [05:15]

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2. Reducing Savings Rate for Financial Balance

• Listener: Brandon
• Timestamp: [06:10]

Brandon's Situation:
At 37, Brandon is a freelancer in the TV and film industry with a net monthly income of approximately $7,000 and expenses around $4,000. Despite maintaining a high savings rate of 40-50%, he feels the pressure of "playing catch up" financially, having increased his net worth from negative $44,000 to positive $40,000 since January 2022. Brandon is contemplating reducing his savings rate to alleviate financial stress and begin enjoying more of his income.

Mark & Brandon’s Advice:
Mark and Brandon commend Brandon for his financial progress and suggest that since he has built a substantial emergency fund and fully funds his Roth IRA, he can consider easing his savings rate. They recommend lowering it to around 30%, which would still allow for substantial savings while reducing personal financial strain.

Notable Quote:

"You're doing great. You're 37. You've swung into the plus category. You're doing great." — Mark [07:00]
"Why not back it off a little bit, like to 30%, and see how that feels?" — Brandon [08:20]

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3. Managing Retirement Contributions for Higher Education Expenses

• Listener: K
• Timestamp: [10:15]

K's Situation:
K, nearing 56, along with her 60-year-old husband, owns a $2.8 million home outright with no debt. Together, they have a combined income of nearly $600,000. K is a diligent saver with significant investments, including multiple 401(k)s, a traditional IRA, and a substantial brokerage account. They are now faced with a $60,000 tuition bill for their child, prompting K to consider reducing her 401(k) contributions to allocate funds for education expenses.

Mark & Brandon’s Advice:
Mark emphasizes the importance of spousal communication in financial decisions. Brandon advises evaluating the asset allocation, particularly the high concentration in individual tech stocks, and suggests rebalancing the portfolio if necessary. They recommend maintaining retirement contributions if possible and exploring other funding options for tuition, such as selling specific assets to minimize tax impacts.

Notable Quote:

"The number one thing you should do is have a conversation with your husband and start sharing information." — Mark [10:40]
"You could sell some of those stocks, pay the tax that's due, and fund the tuition without drastically altering your savings rate." — Brandon [11:00]

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4. Navigating Student Loan Payment Issues

• Listener: Lynn
• Timestamp: [13:00]

Lynn's Situation:
Lynn's daughter is nearing the final payments required for forgiveness under the Public Service Loan Forgiveness (PSLF) program. However, recent automatic and manual payment attempts have been rejected, causing concern about maintaining eligibility.

Mark & Brandon’s Advice:
Brandon advises Lynn to meticulously document all payment attempts by taking screenshots and printing records from the loan dashboard. He encourages being proactive in communicating with loan servicers, certifying employment, and ensuring all required payments are accounted for to safeguard the forgiveness process.

Notable Quote:

"Screenshot everything and get aggressive with your documentation. This is not the time to be passive." — Brandon [13:20]

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Key Insights and Conclusions

1. Flexibility in Savings:
   High savings rates are commendable but can lead to undue stress. It’s crucial to assess personal financial goals and adjust savings rates to maintain a healthy balance between saving and enjoying life.

2. Communication in Financial Planning:
   Couples should maintain open dialogues about their financial situations and decisions to ensure mutual understanding and support, especially when facing significant financial obligations.

3. Strategic Asset Management:
   Diversifying investments and periodically rebalancing portfolios can mitigate risks associated with high concentrations in specific sectors or stocks.

4. Proactive Financial Management:
   Diligently managing debt obligations, such as student loans, and meticulously documenting all financial transactions are essential steps in securing financial benefits like loan forgiveness.

5. Long-Term Planning:
   Building substantial emergency funds and fully funding retirement accounts provide a safety net, allowing for more flexibility in adjusting savings rates without compromising future financial security.

Final Thoughts:
The episode underscores the importance of personalized financial strategies that consider both current lifestyle and future aspirations. By evaluating and adjusting savings rates thoughtfully, individuals can achieve a balance between financial security and personal fulfillment.

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Notable General Quotes:

• "You don't have to make yourself crazy. Take a deep breath." — Mark [09:33]
• "Change your work, change your wealth, change your life." — Brandon [14:21]

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For more personalized advice or to join the conversation, visit jillonmoney.com and subscribe to "Jill on Money" on your favorite podcast platform.

Transcript

[Jill Schlesinger]

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[Mark]

Welcome to.

[Brandon]

The Jill on Money Show. It's Tuesday, February 18th and we are here trying to help you make better and more considered financial decisions. We're also here to maybe just listen to whatever's going on for you and help you navigate your financial journey. If you need some help, go to the website jillonmoney.com click the contact us button, write us a note and if you wanna join us on the air live, check the box. Mark will do everything else while you're on the website. Don't forget, you can subscribe to our beautiful Jill on Money Live service. That's where you have access to quarterly live webinars. Next one's coming up soon. Thursday, March 6, with Ed Slott. He's a CPA. He's an IRA expert. He is the man who is the Roth cheerleader extraordinaire. So if you have anything going on in your tax world or if you have questions about converting Roth IRA. Converting to a Roth IRA. I should. Eds the man. You can only be part of the webinar if you join Jill on Money Live. 45 bucks for the next 12 months. I'll tell you what. I think 45 bucks is Ed alone. He's worth it. So that's all I'm saying. All right, Mark, we got to do some emails. I see. I see. They are piling up. Let's start with Kenneth, who says, my wife and I were married back in October. She owns the home that we live in. However, she would like to add me to the deed. How do we go about this in the easiest and cheapest way? There is still a house payment, which I have taken over. Thank you for your time, care, and assistance with this. Okay. There's always two things with this. Number one is adding a spouse to a deed is easy, easy peasy. You literally can do this with a lawyer where you just say, hey, I am bringing my spouse as a joint holder of this asset with me. However, if she has a mortgage, you cannot necessarily be added to the mortgage unless you refinance. And now that is sort of a sticky situation. So if you can do it, if you could just add. Sometimes they'll let you add somebody upon death, like a deceased. You have, like two spouses and one's name was on the mortgage and the other one wants to take it over. So often a mortgage company will allow that, but during your life, it's a little bit harder. So if you had to refinance, that would stink, maybe. So perhaps the best way to do it is to simply just. You go to a lawyer, you make sure that you now are joint holders of this asset, the house, joint with rights of survivorship, and that's that. And leave the mortgage alone. Don't touch it. Okay. All right. This is Brandon, who's 37 years old and works in TV and film. He's a freelancer. Net monthly income about seven grand. Okay. It's been volatile in the industry, but I've been fortunate to maintain work and I hope to do so on my current gig through the end of this year. My monthly expenses, not including savings, around four grand. So he makes seven grand. Four grand is the expense. He says, let's call it five Grand. I live in New York City, no car, no plans to buy a house. I receive very good healthcare through my employees employer. I plan to be child free throughout my lifetime. Okay, so listen to this. Since January of 2022, I've taken my net worth from minus 44,000 to plus 40,000. Wow, that's so great. Current savings rate is about 40% of my net income. But a few times over the last couple of years, I've been able to get my way into a 50% savings rate. By the end of this year, I'll have my $36,000 of emergency reserves in a high yield savings account. I fully funded my Roth since 22. By the end of this year there should be 28,000 in there. I do not have a 401k. If I understand my Social Security benefit, It looks like 2,400amonth at 62 up to 4,500 at age 70. While my industry doesn't provide a traditional pension plan, there is something called motion picture insurance plan that will provide me a pension of under little under $4,000 a month. He must be part of a union. My main question is when can I let my foot off the gas with a savings rate? I've spent all of my 20s living in and out of debt while building my career. I've gotten a late start and the absence of over a decade of compound interest weighs on me heavily. God dang it, Brandon, you're doing great. You're 37. You've swung into the plus category. You're doing great. So he goes on to write, once I leveled up financially, I cranked it to 11. I kept my expenses low, sold my car, paid off loans, hoarded money and savings. And I know that typically even a 15% savings rate is considered adequate. But what if you're playing catch up? I don't have any immediate goals. It's partially because I've never been above water long enough to consider spending more. Right now, my long term plan of getting out of debt and having six months of emergency reserves will be completed at the end of the year and then I will continue fully funding my Roth. What's next? Brandon says buying a house even if I left the industry and moved somewhere else, feels out of reach. It would take so many more years, and if I do, I'd have to leave the industry and it lose all this and the pension benefit. But the prospect of indiscriminately dumping money into a taxable brokerage account feels like no savings rate will be high enough to make up for the lost that's come on now, he says, I'm looking to be talked off the ledge and given some practical guidance on what savings rate I could pull back to now that my future is taken care of and I can start spending a little bit more. Side question, should someone in my position be looking into long term care insurance for later in life? That's easy. No, no, don't do that. I don't want to be a burden on my family. With no kids in my future, I'll be on my own in that way. Okay.

[Mark]

Killing himself.

[Brandon]

He's killing himself. This poor guy. Okay, Brandon, you're great. Just calm down a little bit. So you got $7,000 a month, you're gonna spend five grand a month, you're gonna take that two grand and, you know, as far as I'm concerned, you can just kind of slowly plug away in a brokerage account. So you'll do your Roth, that's great. And then put some money away in a brokerage account. You will build it up. You are under no obligation to be at a 50 or 40% savings rate. I mean, if it, if you were happy and living that way, that's fine. But it sounds like you're driving yourself crazy, so why not back it off a little bit right now? Why don't we just let you kind of just say, well, you know, let's go to 30%. Does that kind of ease the burden a little bit? That future benefit that you're going to get, which is not a traditional pension, but that motion picture insurance plan, that's pretty great. I have a lot of faith that that's a good thing, but I think if you just keep doing what you're doing, you're going to be fine. Mark, are you okay with him going to a 30% savings rate just to see how that feels and give him a little less of a burden?

[Mark]

Yeah, I mean, it's just, I can just feel the pressure coming through the screen, you know? Yeah, just max out the Roth IRA. Keep doing that. In 10 years, that Roth IRA is going to be $200,000. If you keep doing what you're doing. If you have any excess cash, open up a brokerage account and yes, use the s and P500, knowing that pension is going to be there down the road, which is basically what you're used to spending right now. I mean, that's a huge, huge benefit. That's the equivalent of more than a million dollars.

[Brandon]

So what we want you to do right now is to take a deep breath Brandon, you've come through a lot.

[Mark]

Come to.

[Brandon]

You don't have to make yourself crazy.

[Mark]

Come to Brooklyn, have a drink with me.

[Brandon]

Go have a. Go have a lager with Mark. He'll be happy to take you out. No, really, like, it's okay. You can take your foot off the gas now. If you were at an 11 out of 10, like, you can go to like an eight and a half and see how it feels and. All right. I love it. Feel that. Okay, so this is from K, whose subject is, can I retire at age 60? I will be 56 in May. My husband is 60. We have no debt. Their home, they own outright. It's worth $2.8 million.

[Jill Schlesinger]

Listen to this.

[Brandon]

Together they make almost $600,000. Okay, I'm a saver and investor. I'm going to start laughing because I don't even want to like expose these people for how funny this is about to be because there's a lot of money that we're talking about. So there's a 401k that has 193 grand. Then there's another 401. Then there's a traditional IRA which has $300,000. There's a brokerage account with 2 million. Did I mention the $2 million in the brokerage account, Mark? 70 grand in cash. Let's say the $2.5 million that we were talking about. That's what she knows about. And it could actually be more because she says, I don't know how much money my husband has. Come on now, how could that be? I only know that his fidelity count is more than a million. He's frugal and he has more money than I have. Anyway, they got a kid who's in a public high school. Oh my God. So the public high school he went to, there was a fire there, part of the California fire. So they're sending them private school now. Tuition, 60 grand. So Kay says, should I reduce my contribution to my 401k to free up cash to pay my son's tuition? I mean, I feel like husband and.

[Mark]

Wife need to have some conversations.

[Brandon]

I'm just going to say, let's just be clear that the husband and wife had to get on the same page. If you want to pull back on your retirement contribution instead of being, you know, sort of hyper saving and pre tax especially, then sure, go do it. She says, I have a high concentration in individual stocks. 24% of the brokerage account is in Apple. 15% is in Google. Come on. Now she knows she needs to Sell some of those stocks. Why don't we sell some of those stocks? Just pay the tax that's due, pay for tuition and move on. What's the deal? You don't have to sell your stocks. You could pull back, but you want to sell your stocks because you say, you know, you have too much in these high tech stocks.

[Jill Schlesinger]

So what I would say is this.

[Brandon]

Okay, you could do anything you want. You seem to have a lot of money. I think the number one thing you should do is have a conversation with your husband and start sharing information. Hey, this is a question. I was on the CBS Mornings talking about what happens like in the Education Department if they make changes and shut down the. Shut down the website and things like that. And here's a. Looks like a public service announcement by a listener, Lynn, who says this morning you advise student loan holders in the public service loan forgiveness program to use the auto pay option. My daughter is one to payments away from forgiveness and she has found her January auto payment was not accepted. Her February manually entered payment was also not accepted. What should we do? I would print every single bit of information out from that website proving that you've made all of these payments. They're not going to.

[Mark]

Screenshots.

[Brandon]

Lynn screenshot it all. I mean, for real. And this is like the time to get aggressive with this. This is not like the alarm bell. Like, I don't, you know, I don't think that they're going to abolish a federal department, but could they make changes? Screenshot the dashboard. If you're enrolled in an income driven repayment plan, that'll tell you how much time you have left. If you have in, you know, the public loan forgiveness program. Same thing. Get the whole repayment history. Certify the employment. If it's been a while since you've done that, if for some reason that your daughter has the ability to buy back no payment months, do that. I would get ahead of this as much as possible, gang. I really would. So, Lynn, let us know how that goes. That's about as. That's all we can do right now. There's nothing else to do. All right, so what else do you want to talk about, Mark? Anything. Can I close the show now?

[Mark]

Yeah. I think the big takeaway here is to make sure you're having conversations with your partners.

[Brandon]

Please talk to each other.

[Mark]

Completely weird separate financial lives where nobody even knows what's going on.

[Brandon]

It's not. It's just not. Okay. It really isn't. All right. If you've got a financial question, go to jillonmoney.com click the contact us button and let us know if you'd like to join us on the air live by checking the box. Don't forget to sign up for the free weekly newsletter. You can subscribe to us on the Odyssey app or wherever you find your favorite podcast. Try to lift someone up. It's going to make someone feel better, I promise. Change your work, Change your wealth, Change your life. Thank you for listening. We'll talk to you tomorrow.

[Jill Schlesinger]

For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been complex, time consuming and expensive. But imagine if real estate investing was suddenly easy. All the benefits of owning real, tangible assets without all the complexity and expense. That's the power of the Fundrise Flagship Real Estate Fund. Now you can invest in a $1.1 billion portfolio of real estate starting with as little as $10 4700 single family rental homes spread across the booming Sun Belt, 3.3 million square feet of highly sought after industrial facilities. Thanks to the E commerce wave. The Flagship Fund is one of the largest of its kind, well diversified and managed by a team of professionals. And now it's available to you. Visit fundrise.com jillonmoney to explore the fund's full portfolio, check out historical returns and start investing in just minutes. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the Fund's [e-mail] Flagship this is a paid advertisement.

[Unknown]

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