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- [00:00]
A
Hey Fidelity, what's it cost to invest with the Fidelity app? Start with as little as $1 with no account fees or trade commissions on US stocks and ETFs. Hmm, that's music to my ears. I can only talk.
- [00:17]
B
Investing involves risk, including risk of loss. Zero account fees applied to retail brokerage accounts only $0 commission applies to online US equity trades and ETFs and retail fidelity accounts Sell order assessment fee not included Some account types and securities excluded Details of Fidelity. Com Commissions Fidelity Brokerage Services LLC Member.
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A
NYSE SIPC 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, September 30th and we are here answering financial questions and boy oh boy do we have a lot of emails from all of you. So let's get going. Let's make sure we get through some of these emails. If you have a question and you're shy, you don't want to join us on the air, it's fine. Just go to jillonmoney.com, just hit that contact us button. It's in the upper right hand corner. Write us a note and you know, if you don't want to come on the program, give us a lot of detail. That way when we answer emails like we're going to do today, you have the information you need. So let's get this going. This is From Dan, who's 57 years old and he writes, I've got about $880,000 in a 401k. About 3/4 of it is pre tax 20 and 1/4 is Roth. And he also $1.3 million in a standard brokerage account. Listen to this Mark. This is just like your situation. I'll likely be inheriting another three to five million dollars in the next five to ten years or so. Okay, maybe that's not you. Dan's house is paid for. It's worth about $800,000. No debts, he said. A Fidelity advisor is suggesting that I purchase an immediate annuity with a 10 year payout to provide income to replace my work income. I could, but I'm also thinking of putting that money into A dividend paying fund instead. There'll be less income and no guarantee, but the principal and the risk are still mine. Your thoughts? You know, it's interesting that he said he's retiring at age 57 right now. So he's thinking, you know, not like in the future. I guess there's a part of me that's like, okay, it's fine to have that annuity as long as I know about the money that is coming in. But how much of the money is going in? Like if you have $880,000 that's in the 401k, are we talking like take that pre tax money, put it in the immediate annuity because we'll pump, we'll shoot out income to get that money out of the 401k, the pre tax part. And then we know you get it out before you inherit all this money because then I could almost get on board with it because you have this other million dollars. But. But I think that the interesting, complicating, but also beneficial part is that you know you're gonna have this money, this 3, let's call it 3, another $3 million in the next 5 to 10 years. Most of this depends on how much money you actually spend now. And you left that one little piece of information out. But if someone is saying an immediate annuity because it makes sense to take not. And again, I don't think you should do an immediate annuity with your brokerage account. I would do the immediate annuity with the money inside of the 401k that is pre tax. I would start the clock from 57 to 67, get the money out before you collect Medicare, probably before you even inherit that money, you be able to annuitize it, get the money out, pay the tax that's due, then maybe I can get on board with it. How about me, Mark? Actually saying an immediate annuity could make sense. What do you think?
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B
Little surprising, but yeah, he left out the one key detail, how much he spends. And I'm wondering if there's any pension involved as well. Well, so some, yeah, some questions that we need to have answered.
- [04:19]
A
We just need a little bit more info. But I'm not averse to an immediate annuity. If the strategy is let's get that pre tax money out before you have even more money from either your Social Security. I think I said Medicare before from Social Security and from the money that you'll be inheriting, which will create income. So we need a little bit more information. Okay, Vicki's subject is to Sell or not to sell? That is the question. Ready? My husband and I are Both retired, ages 66 and 63, respectively. We're wondering if we should sell our house and move. We live in Northern California. They've got about $8,000 in expenses each month with $5,500 a month in Social Security and a small pension as well. We offset expenses with distributions out of our IRA of about $3,000 a month. Okay. They've got traditional IRAs that total $700,000. So they're pulling out this, you know, 36 grand a year out of their $700,000. Slightly more aggressive withdrawal rate than I'd be psyched about, but okay, it'll probably be all right. Home is valued at $720,000, and there's a mortgage of $240,000 at 3.625%. Now here she goes on to write, we live on three beautiful acres, but we have a little too much house for us. We love it, but there are so many projects that have to be done within the next five years. A roof, flooring, windows. Should we sell and consider buying in an area closer to family about an hour away and lose that low mortgage rate? I realize it may be better without the work needed on the house. Any assistance would be appreciated. Well, look, we have to know what it is that you would have to spend in the new place. Right? Could you potentially really downsize? Could you take whatever equity you have left in this house right now? You know, the 720 is what it's worth and 240, that's on the mortgage. Could you walk away with enough money to own something free and clear? I think that's the big question. And, and if you could, of course, that's a no brainer. Maybe you can't. Maybe, you know, it looks like you have like four, I don't know, you have some bunch of equity, you'll walk away with probably 450ish. Could you then use that to buy a condo? Would you be willing to do that? I'm inclined to think that if you've got a, you know, you have a home that is too much home for you, that I would just sell it anyway. But then the alternative is you must really come clean about what it would take to be in a place that, that you want to live in. And maybe this is a case where renting might make more sense. Maybe it's going to be that, you know, you can't actually live in something as affordable as where you are right now. We need to Know what the alternatives are before we can give you the advice. But I like the idea of selling something, you know, you don't actually want.
- [07:19]
B
For sure, only if they're going to downsize. If they're going to go and buy something and their monthly expenses are going to increase and they got it pulled more out of their IRAs. Is not going to work.
- [07:27]
A
Not going to work. Definitely not. Okay. Sue just turned 61, and she said her husband's about to turn 62. And she says we are both still working full time. Our spending is about $8,100 a month plus health care, which our financial advisor, who is a cfp, says will be about six grand per person per year by the time we retire. Okay, so they've got 2 million bucks in retirement, about 400 of that is in Roth. Everything else is pre tax. They've got $190,000 in various accounts earmarked for house upgrades, which we would do without assuming a mortgage. Our primary home is worth about 620 grand. No mortgage. We share a second home that is owned outright. No plan to ever sell or rent that property. Okay. Sue will get about 3,700 bucks a month from Social Security at age 67. So that's six years from now. Husband estimated to get 24,000 dol. 400 at 67, and he'll get a small pension starting at age 65 of $1,000 a month. An advisor suggested we could retire now, but I'd like to continue to build up retirement savings to give us a big buffer between how much we have and how much we need. And because I don't know whether the advisor should be believed in the scenario that we both lost our jobs right now. Would we have enough to get us through to retirement age? I know it's unlikely we would both lose our jobs, but I'm trying to remove the nuance from that. I'm worried about various projections that suggest the US Stock market could be overvalued and that returns for the next decade could be considerably muted compared with the past 10 years. I mean, honestly, I don't know how they could be equal the same as the last 10 years. Right. So I think it's probably smarter to presume that you're not going to be earning a 12, 13, 14% a year from the stock market. Come on, gang. And by the way, sue goes on to say, I'm concerned about how AI is shifting the job market for knowledge workers like me. And. And I'm spooked by tiny adjustments in expected returns. You know, like when they say the expected returns are just adjusted down a little bit, it seems like it has a large impact on the scenario from 30 years from now. Can you help put my mind at ease? Would we be okay if we both lost our jobs? Okay, so Mark, 8,100 bucks is what they got. You know, listen, they. Right now, if they lost their jobs and that $8,100 a month, I guess would be. I don't know if she's saying 9100, because it would be another $6,000, but let's say it's $9,100 a month with all in. They lost their jobs right now. Oh, my God. They got $2 million. And they didn't say anything really about their other investments so much, except for the 190 grand in the house. House upgrade. What do you think? What if they both lost their. Lost their jobs immediately? And even if they had to float themselves for five years, they might have to pull some money out of their retirement accounts between now and Medicare, but they'd have a good chunk of money. It's interesting. It seems like she's very nervous, but if you. Even if you waited for those five years, right, to claim their Social Security, you know, and his pension is there, you have about 7100 bucks a month coming in, an income later. And, you know, so how do you think they're doing if they both lost their jobs?
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B
I think they're probably okay. I mean, the $2 million, a lot of it's pretax, so the $2 million could not sustain them from now until, you know, they're in their 90s, but it could sustain them until. For another five years or so until they claim Social Security. So I think they're fine.
- [11:04]
A
I think so, too. But I also understand that you need comfort, and so I think you're fine. I think that what would happen. I always have a break the glass scenario that's operational. I get you, Sue. And the break the glass for you guys is you've got your 190 in various accounts. You would not be doing all of your earmarked plans for that house upgrade. You would have that safe. You would start using some of your retirement money that hasn't been taxed yet. It would last you for your five years until you claim Social Security and the pension. And then I think you'll be okay. But I don't want you to fret over this, because I really do think that you will be okay. It's just that sounds to me like you're kind of driving yourself crazy a tiny bit. So I understand that and that's. I can relate. I do that myself. But I do think that you should be okay. You really should be okay.
- [11:59]
B
You do that about other things, not money.
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A
Yeah, I never do about money. Well, that's because I, I'm always willing to work. That's why. And I would, I would work and do something and be comfortable just earning a living. I stress about many other things. I stress about Mark's trip to China. I was worried about him.
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B
You know, stress about negative comments.
- [12:18]
A
Negative comments. Right. Mean people. I don't like mean people. I stress about that. Yeah. But other than that, I'm good. Amit says hi Jill and Mark, I love your show. I started listening to it last year and I love the fact you have clear answers to many questions which many other podcasts don't. Here's something I feel I don't agree with you. Oh, Mark, this is dedicated to you. Traditional versus Roth. Here's Amit's situation. Age 49. Married to someone who's 49. Annual income a half a million dollars. They've got a traditional and a Roth 403B and available and a 457 through work. Basically have ten grand a month in expenses. They don't have any loans paid off. House, cars and well funded 529s. I feel that pre tax contributions for us is a better option because we're going to save 32 to 35% taxes on them going in and when it comes out we'll only have 90 to 100 grand a year from retirement and we will fill. We will be in the lower bracket. They've got cash and Roth to cover the rest. I know RMDs will be a problem. We plan to retire at age 55 and we have 20 years before our RMDs hit. Tell me I'm wrong. They've got three and a half million dollars in pre tax money. Can I just say again, they're 49 so they're going to work for six more years. Let's just pretend I'm going to. Okay, you got $4 million and they're going to use the age of it. They're going to take the money out that $4 million. Are gonna use that money and take that out. Okay. And I don't think they're gonna end up in the 10 to 12% bracket but good try. I think you're gonna be in the 22% bracket. That's my guess. But even so let's say they're in the 22% bracket, they manage it and that compares. They save 10 percentage points on taxes. And Mark, you're wrong, says Amit. Tell me why you are right.
- [14:09]
B
I mean, I just, you know, he says we're gonna take only 90 to 100k out of our retirement accounts. Yeah, you may think that's all you're going to take out, but the RMDs, you already have three and a half million dollars. This stuff is going to keep growing and growing and growing.
- [14:24]
A
I think that also you can choose to do that. If you're right, you're going to kill it. If you're wrong, you haven't really given yourself. I know you've got a backdoor Roth of a couple hundred grand, but you know if you're wrong, then you'll just pay more in taxes. It doesn't sound like you're going to have any problems. The tax arbitrage may or may not work. That's all I can say. We don't know, but we are fans of the Roth because we know that people who make a half a million dollars a year who have money, you can pour all your money into that. But I presume that that brokerage account that you opened last year with 250 grand mark, and 200 grand in cash, they have. People who have money like that tend to stay in high tax brackets. Maybe you will not stay in 32, maybe not. Maybe you'll drop to 24, but I don't know. We see a lot of evidence that people who retire, even when they retire early, end up with more money than they think in terms of income and that leaves them in a higher tax bracket. But you know, you do you man, we're good. Whatever you want to do. Final question mark. Are you ready? This is from Ali, who says. Hi Jill. I enjoy your content. Thank you for the insight. Using retirement calculators and assuming no further contributions to my accounts, with a 10% annual return over 30 years, it looks like I will have more than enough money saved for retirement. Given that, I'd love to hear your perspective. Should I keep contributing at the current rate? I'm putting 25% of my income into retirement, aiming to potentially fire financial independence. Retire early at around age 55 like our previous guys. Or would you scale back to just the employer match and use the extra money to enjoy life now or even stop contributing altogether and fully front load life experiences while I'm younger? And here's the background. Mark, 35 years old, married with Kids, no major debt except a mortgage, which is at 3.5%. You know, I love this whole the fire movement. It's so funny to me, but, like, are you kidding me? 30 years at 10% may not happen, number one. So run the numbers at seven, then tell me six. At six. Really? And then I don't know, how old are your kids? You saved for college yet? Have you done this? Like, do you know what's going to happen? All these people who are, like, fired, do they not read the headlines of all these people who are actually supporting their college graduates and helping them out because things get harder. So, number one, I would keep contributing. If you feel like you are only saving and not enjoying life, then make a change. I mean, that to me is kind of silly, but I think that it is the balance that is really you're trying to strike and only you can speak to that. I'd love to actually have you come on the air with us and talk this through, because maybe you're killing yourself.
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B
Keep saving. I would not stop saving. You know, you're only 35. If you feel like life is no fun at all, then don't save 25%. Maybe go back, go down to 15% and see what happens.
- [17:20]
A
Or go, let's do what about 5% increments, go to 20% even and see how you feel that. Let's do that. Let's start with that. Look, I am not the kind of person, I don't want to be like, a dope about this, okay? I really understand that. But I also want to be clear that, like, you don't have to make these, like, huge life decisions. And, like, for the next 30 years, like, we can keep looking at this. We can really see whether or not it works. It's just important that you have a little bit of flexibility. It doesn't have to be one or the other. Okay? That's, I guess, the most important thing. So if you've got a question, if you have a concern, if you are seeking some, I don't know, some guidance, then just get in touch with us. Go to jillonmoney.com, click the contact us button, write us a note, give us lots of detail. When I say detail, like, what I also want to know is, you know, how much do you spend now? If you've got kids and you in college is important. How much is in the 529 plans? Like, all these things matter. Some people come on, they're like, oh, I have plenty for College. I have $25,000 and we start. Really? No. You don't have enough. You don't. That's not enough. So we want to know as much information as possible. So give us a holler. Jill on money dot com. Click the contact us button. Write us a note. Come on the air. We'd love, love, love to have you. And while you're on the website, sign up for the free weekly newsletter. And you can also check out our service called Jill on Money Live, where you have access to quarterly live webinars, the back catalog of those webinars, bonus audience audio and video content, all for 45 bucks for the next 12 months. Woo. What a deal. Okay, check that out. All right. Don't forget to put your hands, metaphorically on someone's back. Send a note to somebody. Reach out. Okay. Change your work, change your wealth, change your life. Thank you for listening. We'll talk to you tomorrow. Hey, gang, here's the thing about wine. Some of the best bottles are not sitting on a store shelf. They're being crafted at small, independent wine wineries. But those wines can be so hard to find sometimes. I wish I had a personal sommelier to guide me to find the best wines I normally wouldn't be able to access. Where's that handcrafted pinot that I've been craving? Well, Psalmsation's expert team seeks out incredible wines from top independent producers. These are bottles that you will not find in stores and on shelves. They aren't mass produced wines. They're handcrafted with care, using pure ingredients and meticulous winemaking. Whether you want a single bottle, a guided tasting experience, or an entire wine club membership, Psalmsation makes it easy to elevate your wine experience. Shop their wines@psalmsation.com jillonmoney that's psalmsation.com jillonmoney hi, I'm Nancy Cartwright. You may know me better as the voice of Bart Simpson on Simpsons Declassified. We're diving into the mysteries that keep the Simpsons forever young. Have you ever wondered how the Simpsons regularly predicts future events? Who better to ask than the show's creators, performers and writers, the celebrity guests? Be sure to follow and listen to Simpsons Declassified wherever you get your podcasts.