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- [00:00]
A
Everyone has their own reason for giving. Maybe it's to honor someone they love, to support a cause close to their heart, or just to make the world a little brighter. Whatever your reason, there's one way to do it better. A Donor advised fund from Daft Giving360 makes charitable giving simple, strategic and tax smart. Donate anything from stocks, securities and cash to non cash assets like real estate, life insurance and crypto. Contributions can be invested with the potential for tax free growth and then granted to any qualified U.S. charity. And you may qualify for a current year tax deduction on your contribution, but you don't have to make your grant decisions right away. No end of year scramble, no paperwork headaches, just smart flexible giving. All managed through an easy online dashboard. And there's no minimum to open an account. DaftGiving360 really does help you make a greater impact on your terms. Want to learn more? Visit dafgiving360.org Today's episode is supported by what Should I Do With My Money? An original podcast from Morgan Stanley and like Jill on Money, this podcast makes understanding money and getting advice about what to do with it less intimidating. You'll hear candid conversations from people just like you who have money questions just like yours. They talk to experienced financial advisors about their goals, worries and dreams, asking questions like can I retire early? Like really early? How do I leave a financial legacy for my special needs child? Menopause is making me feel wacky and and it's shifting how I think about my money. Help. The conversations can get emotional, but they're always practical. Find what Should I Do With My Money? On your preferred podcast player and feel empowered and supported when it comes to managing your life and finances. Welcome to the Jill on Money Show. It's Thursday, October 30th and this is the program that is attempting to help you navigate your first financial journey, wherever that journey takes you. We are not here to tell you where to go. We are here to listen to what's going on in your life and try to help you figure out the different options to get to your destination. We're like ways for your financial life. So if there's something going on, if you're making a big life decision, maybe you're thinking about a new job, maybe you're trying to figure out how am I going to get my kids through college or you're buying a house, you're selling a house, you're retiring, you're dealing with an estate issue. Whatever it is, get in touch with us. Don't be doing this on your own. Mark and I are both certified financial planners. We'd love to help you out. Just go to jillonmoney.com, click the contact us button, write us a note and if you would like to join us on the air, just check the box. Mark will do everything else. Hey, while you're on the website, check out all the free stuff that is there. The free weekly newsletter. We've got another podcast called Money Watch. We've got a radio show, there are videos, we resources. So many things right there for you@jillonmoney.com so check it out. Today we are joined by JJ from North Carolina. We've already talked about Bill Belichick and we're done with that. So jj, welcome to the program. We will not belabor the issues that plague your dear state.
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B
Thank you so much. I'm a huge fan. Thanks so much for having me.
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A
Oh, we are delighted. What's going on? How can we help out?
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B
Some of our main concerns right now is kind of when we can realistically retire. And I have a sep IRA and we're really looking to put more towards Roth at this point. But I get confused with kind of how to convert that and if there's like the pareta or if I should Open a solo 401k.
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A
So tell us a little bit about the we that you are referencing. You said we.
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B
So it's myself and my husband, we're both 52 years old.
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A
Okay. Do you have kids?
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B
We do. We have a junior in college and a junior in high school.
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A
How are you paying for college and how do you contemplate paying for college with a high schooler?
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B
Pretty much. We have the 529s that are fully funded.
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A
Okay, great. Superb. And you're both working full time right now, right?
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B
That's correct.
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A
Okay, you're self employed. Just you?
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B
I'm self employed. Correct. And my husband's a W2.
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A
Okay. So as you self employed person, what is your actual income? Don't do the whole like, oh, I had the company pay for all these different things. Like what are you claiming on your tax return for income?
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B
On average, about $120,000.
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A
Okay, great. Your husband, how much does he earn?
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B
So on average about $170,000.
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A
So you're putting money into your step. Is he using a 401? Yes.
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B
So that's our other question. So he maxes out the 401k, but he's been putting a lot into the pre tax 401k and then he was also putting stuff in the Roth 401K. So we're wondering now at this point if he should be putting all of it in Roth 401.
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A
Okay, so right now how much is in his traditional 401?
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B
So in his traditional 401k, they just had a company merger. So the previous employer here, he has about a million fifty thousand.
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A
Oh, that was a big number. I wouldn't, I wasn't expecting you to. About a million. Like you were very nonchalant. Okay, a million fifty.
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B
And then now since the company merged, in the new 401K, he has 22.
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A
Okay, so 1 million 70, let's call it. And then what about his Roth old employer?
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B
Roth 401K has about 90. And then the current employer, Roth 401K has 31.
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A
Are they going to roll these plans together? Do you have to make a decision about whether to roll them out? Like, what are the choices for him?
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B
It seems like they're kind of distinct from each other.
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A
Okay. I mean you could just roll one into the other. Where's the new plan held?
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B
The new one is held. I think it's at Fidelity.
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A
Oh, okay. That would be helpful if that were the case. Okay. And so he's maxing out, including the over 50 extra contribution that he gets to do or. Right.
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B
So is that 30, 31?
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A
Yep. And what about you in the SEP, what have you been doing? You've been mostly trying to max that out. Like about how much are you trying to put in there every year? Yes.
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B
So I just ask my accountant, every year, what's the max I can do? So that's what I've been putting in.
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A
How much is in there now?
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B
360.
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A
Great. What is your game plan in terms of like right now you're making a lot of money together. You've got these kids. You said like, when can I retire? Sort of like how you started. What are your hopes for retirement? Like, how much longer are you going to be working? Is this a business that you could continue to be self employed for many years? Like, what would, what do you think is your game plan?
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B
I think our game plan, we would like to try to retire in five years, but I don't know if that's realistic.
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A
Okay, so you want to be like, okay, the high school kid is basically done, right. Almost done. Retire in five years. And will either of you. Well, you won't be. But is he entitled to any pension? No. Look at her. No. Okay, so then in five years you stay where you are in North Carolina, you move somewhere. I mean, Everyone moves to North Carolina for retirement. You're already there. So do you own a home?
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B
We do.
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A
How much is it worth?
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B
About, I would say a million one.
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A
Wow, look at you. What about the mortgage? Any mortgage remaining? No. Would you stay in this $1.1 million sprawling campus of yours?
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B
No. So I think our, we would like to get closer to the beach. So we, we. The thing is, we also have an investment property.
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A
Oh, tell me about that. Let's do that first. Hold on a second. Investment property, how much is that worth?
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B
400,000.
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A
And is there a mortgage on that?
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B
No.
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A
You don't like debt, do you?
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B
No, we don't.
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A
JJ is anti debt. So you have these two, like you've got a million and a half dollars worth of real estate. Right? Right. And so in five years would you keep the investment property?
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B
So I'm actually thinking we would sell our primary home. Cause we don't need this size house once the kids are gone and we don't need to be in the, you know, the schools and all of that. So we would be open to selling the primary home and then possibly just kind of going over to the investment property to stay there for two years.
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A
Yes.
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B
Capital gains on that.
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A
Yes. I love this plan. Do you hear me going? You hear the excitement in my voice, Mark? It's so good. So essentially in five years, that's why I'm asking you about the, like you, would you work anymore? Would you keep your business up and running or not?
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B
I think mine is fine because it's flexible.
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A
Sure.
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B
You know, fortunately I get to kind of pick and choose how I work. So I have longevity there. It's my husband, the poor guy, he's, he's so burnt. So he's got a.
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A
How's he going to grid out five years? He.
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B
I think he would love to do it in less than that. I just think it's realistic.
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A
Forget it. We're not letting him do that. Okay, so. But in five years, let's just think about this. We have your two, you know, you're, let's say a million and a half bucks in pre tax retirement. That's today. In five years, Mark, can you grow that at like 3%? Don't even grow it at anything. Don't go crazy with it. For all I know we're going to have some horrendous bear market and I don't want to be responsible, which we're scared of actually. You've got that thing. It's good to be scared. It's good to be Scared at the top. So let's say that there's a million and a half in five years at 3%. Mark, what's it worth?
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C
$1,700,000.
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A
Okay fine. So we have 1,700,000. I'm being very conservative. We have $1,700,000 in pre tax retirement that whatever there is in the Roth. Not too much, but it's fine. They'll probably be. Since you're putting money away, both of you. Right, right. 30, 69. I think there's probably going to be $2 million in these accounts. 2 million in pre tax slash Roth. Okay, next. Then we're going to have this million bucks from your primary. Did you buy it really cheap, just out of curiosity?
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B
Yeah, we, we got in before the, before the, the big, the boom.
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A
Yeah. What's your cost basis on this house?
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B
We'll be just shy of the like the 500,000.
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A
Okay, good. And you'll, you'll, you'll, you'll gin up. Knows no one from the IRS listening anyway. There's no one working there anymore. You can gin up enough expenses against that, you know. Oh, we built this playroom. Whatever. Okay, so really clear. A million bucks is what I'm saying. Close to ish. Okay, so then we've got 3 million. And then when you think about being self employed in five years and yeah, you choose what you want, would we then reduce you to more like 80?
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B
I would say so.
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A
Okay, so then we'll have that. How much do you think you'll need to spend?
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B
So realistically, if we get rid of the primary home and we just have the townhouse, realistically, we can get that to about 6,000.
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A
Oh, okay. Per month. Yeah. All right. And what if these kids, they go to grad school, they're on their own or like what happens then?
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B
On their own.
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A
Oh, look at you. Okay, so Mark, are you going to. I wonder if Mark's going to have a different opinion about this. Do you think, Mark, we should go through the rigor mortar. We only have five years to go. No, no, we're not doing the whole Ross thing. I agree.
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C
No, in fact, I would probably start building up a brokerage account.
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A
That's what I'm thinking. Okay, so I mean he should switch.
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C
His contributions to Roth through his job. But as far as she's concerned, brokerage.
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A
Okay, so what we're talking about here, JJ is that we're sensing that, you know, at 57, you're done, you have 80 grand coming in and self employment income. I don't think it's really worth it for you to go through the whole pain in the ass of like moving your sep, moving it into a solo. Forget about it, do nothing, do nothing. Keep doing your SEP ira, it's fine. Your husband, he should make his contribution all Roth. Do you have money in the bank, like cash accounts? Yes.
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B
So we have about, between the high yield savings and checking, about 120.
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A
So I think what I would suggest, and Mark is echoing this, is that instead of you now pushing money into a Roth, let's have your husband do the Roth. You've got plenty of money that's been pre tax. But we would love it if you could create a brokerage account. It could be very mellow if you're nervous about market movements. You know, you could have a 50, 50, you know, 50 stock, 50 bond or even like 40% stock and 50% bond and a cash account and like just build that up. We'd like you in five years to have a chunk of money built up in addition to that cash account and that would be a brokerage account. So whatever is building up in your cash account right now, maybe that's probably happening because some extra money comes in, you just throw it in there. But now we'd like you to be a little bit more considerate of the idea of building a brokerage account. It may not work 100% of the time. In other words, if he goes to all Roth, your cash flow is not going to be as good as. But if, for example, you're like, okay, one year I'm gonna make it 120, but next year it's 140. If you have a little extra money, let's open a brokerage account and start getting going. I also would very much encourage you to or and your husband to look into his current 401k plan and see if they will accept a rollover from the old plan and consolidate everything. Because this is a pain in the neck to have four accounts. Got it.
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B
So that's a great point about the brokerage. We were actually just talking about this since he works for a financial instit all of the trades, especially if it's. If we're buying individual stocks, like everything has to get approved. So it just seems like, you know, just such a hassle. But would you recommend just doing like ETFs or mutual funds?
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A
Totally. When you work in financial institutions, of course they have this whole like annoying rule about like, well, we have to look at everything, but they usually waive it if you're just in index funds and so that would be fine. Or by the way you can buy index funds in their accounts as long as they're waiving all their horrible fees that they usually levy.
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B
Okay, okay.
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A
So that's something to look into. But I mean I don't think they'll have a problem with like a brokerage account with you know, three exchange traded funds that are market based funds. They don't want you to do something where there could be a conflict where they have, you know, material non public information that your husband would have access to. So make it as easy as possible. ETFs or just plain old mutual funds. Zero cost ish. You know and I wouldn't worry too much about at the end of the day worrying about your SEP being pre tax. We're going to get the money out of these accounts. We're going to have to because we're going to need to, you know, essentially start pulling money out when you guys are, you know, 59 and 60. And we're going to start pulling money out of these pre tax accounts and using it to live on. But you don't spend that much money and at six grand a month I think you'll be okay. You'll get Social Security eventually and you know, as long as we don't see your expenses start to balloon up. But I think that's highly unlikely given the balance sheet you've just presented to us which is essentially I have no debt, I own my real estate outright. And I guess the only other thing I would just caution against is that you'll have this chunk of money from the selling of your primary residence. Right. It's going to help you a lot in just bridging the years from say 60 to 70. Okay. But you'll blow a hole through your plan if all of a sudden you sell your investment property and decide you want to spend another million dollars on a house. We don't. It will. Okay. Because that, that is what will will absolutely put us into the danger territory. Who knows, your burnt out husband may want to do something else later when, because you're going to be very young and your kids are young and they're taken care of. So you know, again, if he could be just the guy who wants to go surfing but that's going to get boring. So you know, I think that it's also possible, you know, as you do something and it's fun, if he can find something fun, it's great for him to be engaged as well. Right, right.
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B
So then do you Recommend so at 57, we wouldn't want to take anything out because we don't want to pay penalty. So 59 and a half. We start pulling from his pre tax.
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A
Pull some money out of his pre tax and get some money out of there between 60 and 70. And are you guys both in good health right now?
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B
Yes.
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A
You hesitated. I got nervous.
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B
What I'm really concerned about my. We have very. Alzheimer's is very strong in my family, and my mom just passed recently. So you want to live life now? Yeah.
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A
I'm so sorry. Terrible disease. No, don't be sorry. It's a terrible disease. And I understand that and I think that that's very smart. So why don't we do this first of all, stay in touch. But I think that making your game plan one that allows you to enjoy your life within reason, you're not gonna go crazy. Let's make some determinations about whether your Social Security claiming strategy shifts once you have a little more information about yourselves. You know, if everything's going great and you're feeling good and blah, blah, blah, great. If all of a sudden, like you have a diagnosis that's not great, then we make a different decision. Maybe you claim Social Security, not, you know, not 70. Maybe it's 67. You know, it really depends on you guys. And so I completely understand when you have this kind of, you know, this autobiography, like, you have your story, you have an experience of living, living with something that's very difficult and that influences what you choose to do next. So I think, within reason, I think you're totally on track to do this, even with that extra bit of information. What I would say also is that that also would argue to me that, like, let's have some flexibility, let's build a brokerage account, make it nice and easy. You'll add what you know. If you start doing it now, when you sell your primary residence, even if there's just 100 grand that's sitting in that, that brokerage account, in five years, you'll add the million dollars, and then, you know, you'll have. You'll have a basis for making different decisions.
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B
And can I ask you another question?
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A
Why not?
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B
As far as beneficiaries go for, you know, for brokerage accounts or for the retirement accounts, is it. We have our real estate in our revocable living trust. Okay? But for beneficiaries, for other things like financial, for checking accounts or for retirement accounts, for brokerage accounts, is it best to do to put the beneficiary as individuals or as the estate or the trust.
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A
Well, first of all, if you already have a revocable trust, when you establish your invest your brokerage account, that will be an account that is called the blanket, the JJ trust that will be in that will be a trust account that absolutely should be labeled that way.
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B
So over in the brokerage account in.
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A
The name of the trust. Yes, absolutely. Now for checking savings, it's kind of like a pain in the neck to do that sometimes. So maybe what you do is you make it a transfer on death account whereby you guys have a joint account. So you're the survivor and he's the survivor. Right. Right. Something happened to you both. Where would the money go? So I guess that right now, I mean, you do have a junior in college. So you could leave it all to your junior in college or, or someone else. Or you can maybe, I don't know. Like it's. These banks are kind of a hard. It's a bit harder to do it but like you could eventually make that a trust account. It's just a little bit clumsier. So if you make it a transfer on death account, it will clean things up a little bit. If something bad happens to both of you at the same time and in terms of retirement accounts, then it's always the individual, then it's the two kids. And your estate documents are done right now. They are. And so you have somebody who would be the guardian for them. Right, Right.
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B
Okay.
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A
Keep in touch with us. Thank you so much and thank you so much. Five year plan. We're on a five year plan.
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B
Okay, sounds great. Thank you so much, both of you.
- [21:04]
A
A pleasure. If you are like JJ and her husband, someone's burnt out, someone's doing okay, you've got like some illness in your family. You've just got an experience that makes you want to take advantage of the here and now. Get in touch with us. Go to jillonmoney.com, click the contact us button. Write us a note. Let us know if you want to come on the air by checking the box. Mark. We'll do everything else. You can subscribe to us on the Odysee app or wherever you find your favorite podcast. Please leave us a rating and review wherever you listen and of course do something nice for someone else today. Change your work, Change, change your wealth, change your life. Thank you for listening. We'll talk to you tomorrow.
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C
Hey everyone, I'm Josh Radner and I am so excited to tell you about How We Made youe Mother a Rewatch podcast. Looking back at how I Met yout Mother. And I'm here with Craig Thomas, who co created the show along with Carter Bayes. Hi, Craig. Hey, Josh. Somehow it has been 20 years, years since the show premiered that seem. I'm gonna check the math on that. Ten years since it went off the air and we thought that made this a perfect time to look back, see what the hell we did and why the show still seems to resonate with fans around the world today. Follow and listen to How We Made youe Mother wherever you get your podcasts.