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A
This message comes from Jill on Money sponsor Charles Schwab. Independent Financial Advisors focus on building a relationship with you that goes beyond your portfolio. As fiduciaries, they must act in your best interest always. The relationship they have with you will be based on transparency and trust, and they're committed to bringing you advice that fits your values. That's why Schwab is proud to support them. Visit find your independentadvisor.com youm know how the holidays can sneak up on you. Suddenly you're hosting a dinner or bringing a dish to a friend's party and you're scrambling. This year I decided to make my life easier and head straight to Whole Foods Market and honestly, it's my new holiday headquarters. Whether you're looking for show stopping mains like their bone and spiral cut ham or Heat n Eat sides from the prepared foods department that are seriously easy and delicious, whole Whole Foods Market has you covered. I stocked my pantry with all the $3.65 favorites Creamy Mushroom soup, traditional stuffing and even French style green beans. Perfect for classic holiday meals without breaking the bank. And don't even get me started on desserts. The holiday rump cake Buche de Noel? Yes please. Plus it's easy to grab something thoughtful for the host, cheeses and crackers, seasonal candles, cookie gift boxes, or even something from the floral department to make their table feel extra festive. You can order online for pickup or delivery. Select zip codes, which is a total lifesaver. Shop for everything you need at Whole Foods Market, your holiday headquarters. This year, give a gift that goes far beyond the moment. An Invest529 account. Whether it's a child, grandchild or someone just starting out, you're helping them save for education that can open doors for a lifetime. Invest529 is a tax advantaged way to save for college, trade school or even apprenticeship programs. It's flexible, easy to start, and you can contribute any amount, big or small. And because the money can grow tax free, it's a gift that really builds value over time. So instead of giving something that gets used up or set aside, give the gift that can change a Life. Start an Invest529 account today. Go to invest529.com to get started.
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Welcome to the Jill on Money show. It's Monday, December 8th and we are here trying to help you navigate your financial journey. We're like Waze or Google Maps for your money. You tell us where you want to go and we'll figure out some of the different routes to get there. Then by the way you get to choose which route is best for you. If you want that kind of guidance, all you need to do is go to the website jillonmoney.com, click the contact us button, write us a note. And if you'd like to join us live, check the box. Mark will do everything else. Hey, while you're on the website, check out our subscription service. It's called Jill on Money Live. This is where you have access to quarterly live webinars, the back catalog of those webinars, and there's also bonus audio and video content. It's all for 45 bucks for the next 12 months. Now, by the way, you may want to join right now because then you'll get our most recent webinar where we did tax and financial planning for year end. And a lot of the stuff we discussed really does mean that you need to act before the end of this month. So if you subscribe to Jill on Money right now, there are actionable items that really need your attention maybe right before the end of the year. So check it out. Okay. Right now let's talk to Charles, who joins us from Rochester.
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I'm 59. I'm working full time. My wife is retired. She was a teacher and a vice principal. She's now retired. I would like to retire at age 62 in like two and a half years. I mean, I like what I'm doing. I'm a computer programmer. But I'd like to do it part time and kind of on my own terms, picking up gig work here and there. And I'd love to do that at 62, so. So I wanted to get your take, see if I'm on track to do.
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A
That before we go on once one, before we move on from that. What's the pension amount that your wife receives? Right now?
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B
She gets $80,000 a year. So that's her pension.
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A
Oh my God. And taxable, federal, tax free New York state. Right. Okay. What about healthcare?
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B
And she is getting health care, her same healthcare plan that she had with the district until 65 when we, when she goes on Medicare.
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A
That's so great. Are you on her insurance?
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B
I am, yep.
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A
How old is she?
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B
She is 59 as well.
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A
Do you guys have kids?
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B
We do. We have a son and a daughter. They're both in their 30s and fully on their own. But we do, we do help them with stuff.
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A
They're on their own. Except they're not.
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I love that. Okay, so Charles, how much do you earn right now in your full time position?
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B
I Earn. Including my bonus, it's around 150,000 a year.
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A
How much do you figure you guys need to live on? Like, let's just say you retire in three years. What is the amount that we are shooting for, that you need for your expenses?
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B
I did, like, a monthly budget a couple years ago, and it came out around 7,000. I haven't gone back and updated.
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A
Let's inflate that. Let's just say 8,000.
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B
Yeah, even. Yeah, 8,000. That's probably reasonable. Yeah.
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A
Or even, you know, we can do more, but let's just say. Would you be more comfortable just saying 9,000, just so we have that.
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B
That's a little.
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A
And will you be entitled to any sort of pension when you retire?
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B
I will have a very small pension. I think it's $7,000 a year from a job I had at a hospital.
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A
Will you both be entitled to. To Social Security?
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B
Yes, we will.
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A
Okay. Do you happen to have those amounts at your. Let's call it your full retirement age? Give me those amounts.
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B
I'm doing this based off memory. I think it was 32,000 for myself, and I don't know what it is for my wife.
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A
Well, it's probably. I mean, she was a. You said she was a principal.
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B
Yes. Yeah.
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A
So she. She made a lot. What was her last year of work? What did she earn full time?
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B
She was around 135,000.
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A
All right, so, you know, we essentially know that by the time you guys get to your full retirement age, your pension plus your two Social Security checks will more than cover your needs, right?
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B
Yeah, I think so. Yeah.
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A
Okay. Given that we know that, what's your concern right now?
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B
Well, my concern. One thing is, you know, how am I going to. I don't want to. I don't want to take my Social Security early and get hit with the penalty. Right. I'd rather wait as long as I can to do that. I just want to make sure that, you know, I have enough to tide me over, you know, through that interim period until I turn, you know, 60.
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A
Okay, so let's talk about what you have. So tell us about your retirement account savings so far.
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B
So the retirement amount savings. I have an IRA with Vanguard with index funds. $472,000.
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A
Mm.
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B
I've got a Roth IRA with Vanguard, $78,000. And I have a 401 that has $515,000 in it.
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A
Now, what about your wife? Did she have. In addition to her pension, did she have a deferred comp plan?
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B
She did. She's got $60,000 in a 403. And she's got the inherited IRA that I had mentioned with $275,000 in it.
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A
When did the person die?
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B
He died a little over a year ago. It was her father.
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A
Okay, so she has to get that out within 10 years, right?
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B
Yeah, from the way I read that, she's got 10 years to get it out.
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A
Yep.
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B
There's no link to that when you can take it or what amounts.
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A
Right.
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B
10 years. Right.
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A
Okay, so that's good. That's good. So it's last year. All right. This could work out beautifully as a matter of fact. So I'm very happy about this. Okay, so now let's think. Think about a couple of other things. Money in the bank or a brokerage account. In other words, non retirement savings.
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B
So non retirement savings. There's about 20,000 in a high yield savings that I use for, like ongoing expenses, taxes, repairs, that type of thing. 20,000 there. I've got about 20,000 in my checking again for ongoing expenses. And I've got kind of an emergency fund of $18,000. It's in a money market in Vanguard.
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A
And there's no other brokerage account. Right. So most of the money is in retirement savings. Correct?
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B
Yeah. Other than this cash. And I also have a company stock plan with about $50,000 worth of shares in the company that I work for.
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A
How about a home? Do you have one of those?
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B
I do. So we have a home here in Rochester and we also have a house in Florida that we go down to in the winter.
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A
Oh, snowbirds. Wait a second. What's the house worth in Rochester?
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B
That is worth about 250,000.
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A
Is there a mortgage still on that?
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B
There's no mortgage, no.
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A
Okay. What about Florida? What's Florida worth?
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B
Florida is worth about 350,000 and there's no mortgage on that either.
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A
Oh, my God.
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B
And we also have a. We also have a cottage, a summer kind of a vac home. This is a cottage that her father built. It's been in the family for years. We have that as well.
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A
Okay, so all three of these you want to maintain, correct?
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B
Yeah, we want to maintain. And there's actually a mortgage on that summer home as well. There's a. There's a hundred thousand dollar mortgage on that one.
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A
Okay.
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B
Yeah. And we rent that out in the summer because the taxes are so crazy. So we rent that out for half the summer and that kind of pays for the taxes and some of the mortgage on that one.
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A
What's the cottage worth?
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B
Do you figure that's a hard one, but I think it's worth around 500,000.
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A
Oh my God, he said cottage, Mark. And I was thinking like little bitty cottage, you know, 500,000. Okay, so all of this real estate is fabulous. So let me be clear. You got no problems, you're great. This is fantastic. So what's going to happen is let's say right now, are you maxing out your retirement through work?
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B
I'm not. I'm close, but I'm not quite maxing it out.
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A
Do you have a match?
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B
Yes, there is a match.
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A
Up to what percent?
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B
Up to 4%.
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A
I would do something completely opposite. Again, we're in like bizarro land because you're doing planning work for like making a big change. What I would do is I would put up to 4% and the rest of the money, I would stop contributing to retirement accounts. I think you should build up your non retirement savings in anticipation of the next three years so that by the time you are looking or whatever, two and a half years when you're 62, I want the money that's just in savings, checking, money market. I want you to have a little extra money because we need to spend down some of your money for the five years that you are not going to be working before you claim Social Security. Right? So I think there's a great combination here because your wife has this inherited Iraq. And what I would do is I would not take any money out now. I would wait until you and your income goes away. So at your age 62, you can divvy it up, probably be six or seven years that you have to take the money out, use that money every year to fund the gap between her pension and your little pension and your expenses. And then because you actually know that you have to take that money out, you're doing so before you have other income because it's taxable income to you, right? Let's see, the person died last year, so that's year one is this year, or was it last year for the distribution? When did the clock start ticking?
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B
I think it started ticking last year because that's when all the paperwork went through at the end of the year, right before the end of the year, last year, okay?
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A
So let's pretend that you have six years to get the money out, okay? But when you stop earning your 150, then she's gonna take out what essentially is about 45 grand a year, okay? You have to pay tax on it, so you know it's going to add to your taxable income. So it'll be, here's what your taxable income will look like when you're 62, her 80, you're seven from that old pension and this 45. So it's not going to be like you're in a huge tax bracket, but that should be. I think that does it for you, right? Because when you think about what your needs are, even if you need a little extra money, then you can dip into the cash that you're saving between now and the time you retire. So doesn't that work out kind of nicely? Because it's sort of like, it's like a beautiful symmetry that, you know, it's 87. I don't know. Let's just say that out of 45, 46. Let's say that you. Let's say you cleared 30. I mean, I think that this gives you your $110,000 a year after tax. And if you don't have it all, you will have saved up some extra money in your cash accounts. And I think it works beautifully. So delay taking any money out of the inherited IRA until you stop working, and then for whatever years you have left there before Social Security. So it's, you know, five or six years, whatever it is, take the money out over those from the time you retire to when you're claiming Social Security. That's it. It's as easy as that. And I think you'll be very happy. And then, you know, essentially, once you retired, it's a really interesting situation because you have a ton of money. You will be able to tap some of this money, unfortunately. And fortunately, you're going to be in a higher tax bracket than you would have imagined just because you have pension income. So you'll have pension income, and then you're going to have to start taking money out of your retirement account. So, you know, if you are starting to give some money away to your kids, you may want to start dribbling money out of your retirement account. If you're charitably inclined. You'd want to use a qualified charitable distribution, all of these things. But you have plenty of money. You can do what you want. You can retire in two and a half years. You could probably actually retire before then.
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B
Okay, that's awesome.
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A
So the two things are, let's pull back our retirement, the retirement contributions. Now build up your cash reserves and delay taking those inherited IRA distributions until you stop working. And then you're good. You're good to go.
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B
Awesome. That's a great plan. Thank you very Much.
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A
Okay. Now, of course, I have to do one last thing. Do you have your estate documents done?
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B
Yes. Yes. Last year, after, after her father passed away, we, you know, we said as she was dealing with the mess, we were like, you know what, we're not going to put our kids through this when we die. So we.
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A
Wait a second. Did dad not have a. Any estate documents?
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B
He did, but they were not in good shape.
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A
It's such a drag, isn't it? It's so avoidable. Also, once you do, once you have to go through that yourself, then you're like, nah, not never. That's never happening in my life. If you need some assistance, some guidance, all you need to do is get in touch with us. Mark and I are both certified financial planners. We love talking to you. We love talking through the issues that matter to you. So just go to jillonmoney.com, click the contact us button, write us a note. And if you want to join us live, check the box. Mark will do everything else. You can subscribe to us on the Audacy app or wherever you find your favorite podcasts. Try to leave. Lift someone up. Change your work, change your wealth, change your life. Thank you for listening and we'll talk to you tomorrow.
- [15:58]
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- [17:02]
C
It's Vaughn Miller, Super Bowl MVP, chicken farmer and now host of Free Range. This is a show where I go off the field and off the script. We're talking what's hot in music, film, trending news and everything blowing up your feed. If you love football, you'll feel at home. But if you're here for the vibes, the Internet deep dives the conversation. This is your podcast. Join me every Wednesday. Follow and listen to Free Range with me, Von Miller everywhere. You get your podcast.