Jill Schlesinger (0:00)

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Mark (1:00)

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Jill Schlesinger (1:55)

Welcome to the Jill on Money Show. It's Monday, May 19th and we are here helping you answer your own question. And what I mean by that is oftentimes you are wrestling with a big decision and obviously when you're making a big life decision, your money can often get involved. So the times that I think we have the most fun with you guys is being able to listen to you and have you articulate what you'd like to do and then present a couple of different options for how to get there. And I think this is basically what we'd like as human beings. We want to take some control over our destiny. We want to know that there are different ways to do it. And you know, frankly, if you are feeling pressure or anxiety about something and you don't know where to turn, I know maybe you have a financial advisor, maybe just want someone separate to weigh in. Mark and I are both certified financial planners. But you know the great thing is we really don't have any skin in the game. We don't really care if you are going to take the advice or the guidance that we give you or not. We're just going to tell you what we think is available to you. You can go ahead and make your own decision. That's why sometimes you hear Mark laughing in the background where he's like, that guy's not going to do what you tell him to do because it's okay. We know that you have your ideas. If you'd like to get in touch with us, just 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. While you're on the website, don't forget that there's all sorts of stuff there. Our content lives there. We've got another podcast, we've got a radio show, we've got blogs, I'm on television. So that you'll see videos, resources, and of course you should sign up for the free weekly newsletter. Okay, today we're going to do some emails to kick off the week because we've been getting a lot and the first one is from George, who was going to come on the program with us, but I don't know, he got busy and everything. And I just wanted to touch base on this question because I think it's an interesting one. A lot of folks have been asking me about this. So George writes that he and his wife are 55 years old. They've paid their home off many, many years ago. They live in an area that is a high tax state. And he also says that because they live near a lake, he's got high cost of insurance. So here's the question. Ready? My wife and I both love Hawaii and we travel to the islands often. We know it's very expensive to live there, but we really would like to sell our home and rent there. And he says we would both work and I want to know if this is possible. So, you know, I think the most important thing that you mentioned in this email, George, is that you're familiar with how much the cost of living really is there. So let's say that you are thinking about something like this. Anybody listening? The real issue is how much money have you saved so far? How much is the differential in the cost of living? Because obviously renting in a place like Hawaii is expensive, right? And so what we're really trying to do is the same thing we do when we do any kind of Planning, and that is figure out what is the cost of your day to day expenses. Plus I'm sure you're going to want to go back to the, to the state which is your first love or where you grew up and had your lives. And so you want to figure out what are your expenses. Then you're going to figure out, hey, can our income cover those expenses? And if not, if you want to use the proceeds of the house sale to help you out, that's fine, but you still have to figure out your retirement part. So we still would have to do just the standard form financial planning to see whether your retirement goals are still within reach. But I like the idea of just thinking like this, which is maybe I don't have to own, maybe I could rent. It doesn't mean that you don't have to do the other work though. So get back in touch with us or just go on and run those numbers yourself. Okay. Patrick writes, how do you determine whether to take a lump sum offer from a company in lieu of monthly pension payments? My monthly pension amount is $3,400. How much should the lump sum offer be to get me to take it? What interest rate do you assume I would use? 30 years as the number of years the pension would be drawn. How do you factor in the fact that a lump sum is a guaranteed payment, whereas the pension would end if I got hit by a bus one day after I retire. Thanks, Pat. Okay, Pat, here's the thing. This is an interesting observation about two parts of a pension. One is that you get all the money up front, which is great. It sounds like your pension doesn't have any kind of survivor benefit attached to it, or maybe you're not, maybe you're not even married, I don't know. But I think the idea would be, is that they'll give you these choices. We don't have to back end it. So once you get the actual lump sum amount that the company offers, then we would determine, well, how much is that worth? Is it better to have that money in hand, have full control over it, rather than get that monthly payment? Sometimes the pension, the monthly payment is a better deal based on the fact that it's a guaranteed stream of income with a certain amount of cost of living adjustment attached to it. But a lot of this is not just a straight up which one is better, it's what's better for you. So I want to hear more about who you are, what else is going on in your life and get that lump sum offer and we can start to pound the numbers with you. Okay, good. All right, next up we have Jason, who writes both my wife and my employer offer a 32 hour per week schedule with a 20% reduction in pay. We currently gross just over $200,000. My wife is 46. I am 52. We have a 14 year old and a 6 year old. Oh, my gosh. That's a big age difference. Okay, so Jason says we would like to know if we could both take advantage of this reduced schedule without risking our future retirement. We like the idea of being around more while our kids are at home. I would like to fully retire at age 67. My wife is more insure, but somewhere between 62 and 65. All right, here's what we got. 401K. $650,000. These are combined numbers. Six hundred and fifty grand in traditional. They're putting $37,000 a year in with a 14% employer match. That's a lot of money. Wow. Roth IRAs. 680,000. Currently maxing out. Okay. And they're maxing out at 15 grand a year because she's under 50. He's over 50. HSAs. 30,000. They contribute 8,000. It's good. These accounts are invested, not being used for current health expenses. 520900 grand. Contributing $650 per month. They've got a primary home that is worth about $250,000 with a $47,000 mortgage. 3.6%. Oh, boy, here we go. Four rental properties. Oh, my God. Lot of money in these properties. And let's just say forgetting about this because I'm not going to talk about selling these proper right now, because he's not here to answer some questions. But they basically have $2,000 per month cash flow from the properties. But they've been saving the money in just an account because they've got to do some repairs and updates. Okay. $6,000 a month is what their current spend is. His Social Security at age 67. 3200. Wife's is similar, but she would prefer to retire before 67 if possible. Okay, so here's the thing. If he were to take a 20% pay cut, the question is, could we reduce our 401k contributions to what level? We need to contribute 3% in each account to get the full match. All right, so they're young, you know, so we're talking about 20 years or so before Social Security kicks in. I guess the question is if you were to look at your spend right now. If you have your $200,000, let's say it's you know, 205 or 210. What I would do is I would back into the reduction on your retirement accounts. What I would look at is on our 32 hour per week schedule managing that, what would you need to do to make sure you could spend the $6,000 per month? My guess is that something will have to give. Probably I would give on the pre tax 401k. I think that I would likely pull that back and make sure that whatever you're not getting paid in that, you know, because you've taken the reduction in your incomes, that you probably would just take it out of the pre tax 401k. I would continue doing Roth, I'd continue doing your HSAs, I'd keep putting money in your 529s. I think you're going to be fine. It's just really the question is that, you know, you've got all these rental properties, you say you're going to get paid off in 10 or 12 years. Maybe not each one is doing exactly what you wanted to do. So maybe that's some money there. But I think it's possible. If we took that reduction, what would our take home pay be and then go back into it? I'm guessing they put $37,000 a year into their 401k in a pre tax 401. You know, honestly they could definitely pull back by 10, 15, maybe 20 grand. That would be fine. And the money will grow and then we always have, you know, potentially the sale of a couple rental properties. You know, he doesn't have a ton of money in the rental properties. Like his equity is, you know, 300 grand or so. But it sounds like they're in pretty good shape. Mark, do you agree with that, that we would pull back from the pre tax, the traditional 401k rather than the Roths?