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- [00:00]
A
You know, I always say to make smart financial decisions. So let me ask you this. What exactly is that old car in your driveway doing for you right now? Seriously, is it an extra car? Nobody drives anymore. Maybe it doesn't run. Do you keep saying you'll sell it one weekend and suddenly it's been two years? Meanwhile, it's taking up space, costing you money, and slowly becoming part of the landscape. Here's the easy solution. Donate it to Cars for Kids. And yes, it's that Cars for Kids. The the one with the jingle you absolutely know already. 1877 Cars for Kids here's why people love to donate to Cars for Kids. It's ridiculously simple. You go to carsforkids.org Jill that's cars with a K. Answer a few simple questions and you're done. They'll come pick up the vehicle for free, tow it away, handle the paperwork, and you'll receive a tax deductible receipt. Done. Cars4Kids has been doing this for over 30 years and has accepted more than a million vehicle donations. So if you've got a car you're not using, turn it into something meaningful. Go to carsforkids.org Jill that's cars with a K. And fair warning. Now that jingle's going to be stuck in your head for the rest of the day. Hey gang. You know, over the years I've realized one of the biggest limitations in business isn't a lack of an idea. It's the manual follow up the legacy systems that demand your constant attention. Way back when, I remember the frustration of having to take a morning off just to drive to a physical branch to sign a piece of paper, which felt incredibly outdated in a world of digital first companies. Banking on Mercury eliminates that frustration frustration entirely. It's a best in class software experience that feels intuitive and reliable. From day one, you can apply online in minutes and immediately start using smart features like bill pay where you can just scan an invoice and the system handles the rest. You can even set up recurring payments and automated transfers to keep your accounts balanced perfectly. It's a smart all in one home for your finances that scales with you, allowing you to focus on the big picture of while the software handles the details. Visit mercury.com to learn more and apply online in minutes. Mercury is a fintech company, not an FDIC insured bank. Banking services provided through Choice Financial Group and Column NA Members FDIC. Welcome to the Jill on Money show. It's Friday, July 3rd. You probably have the day off, so in anticipation of that happy Independence Day 250th moment here. Okay, sure. Well, we'll take it. If you want to have little financial independence, this is the program for you. We are here to try to take the mystery out of your financial life and give you actionable financial advice and also maybe just some guidance along your financial journey. Mark and I are both certified financial planners and we love talking to you. So if you've got a question, just go to our website, jillonmoney.com in the upper right hand corner there is a contact us button. Click that button, write us a note. And if you'd like to join us on the air live, either via audio or video, all you need to do is check that box and Mark does everything else. Hey, don't forget to subscribe to our free weekly newsletter which comes out today Fridays. And you should also check out our subscription service. It's called Jill on Money Live. Boy, did we have a great recent webinar. Remember, Jill on Money Live is where you plunk down 45 bucks for the next 12 months. And that allows you access to quarterly live webinars, the back catalog of those webinars, and bonus audio and video content. It's so much fun and we love doing these broadcasts with folks. And so if you want, you can check out what we just did, which is in the middle of June, we had a wonderful webinar with a Social Security expert named Heather Schreiber. If you want to join Jill on Money Live, you can just get that video by being a member. Or if you don't want to like plunk down $45 that you're commitment phobic and you just want to pay $15 for the Social Security webinar, you can do that as well. So check it out. It all lives at Jill on Money Live. Okay. Today we are talking to Don, who joins us from the Midwest. Hello, Don. How are you? And what can we do for you?
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B
I'm doing great, Jill. Thank you for taking my call. Thank you. And Mark, so my biggest question right now, I'm getting ready to retire. My question is fee only advisors versus pre based advisors.
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A
Oh, this is a good question. Okay. And you're sure you don't want to do it yourself? Yes, I like man knows himself. Do you want to just give us a quick rundown of what's going on and then maybe we can talk to you a little bit about the difference between these two types of advisors. So how old are you? Don't.
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B
I am 61 right now and I'm looking to retire a year from now.
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A
And will you have a pension?
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B
I have a small traditional pension which pays roughly 900 bucks a month. And it's frozen, so that amount will not increase.
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A
Okay, and are you married, partnered, single?
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B
I am married. My wife is 57 years old.
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A
Working or not working?
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B
Not working.
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A
How much money have you guys squirreled away that some advisor can manage? Let's go through it like retirement assets. What do you have?
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B
401k? 1.975.
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A
I like that. You do that. Wait a second. Can I round it up? I'm going to say 2 million. Okay, let's do 2 million on a
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B
good day in the market. Yeah, 2 million.
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A
And is it all traditional or is that some of that Roth?
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B
10% is Roth. I just recently started utilizing Roth.
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A
So that's the. That's your. Your retirement through your 401k. What else have you saved?
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B
I personally have a Roth IRA of 285,000. My wife has a Roth IRA of approximately 50,000. We have a brokerage account of 400,000. An inherited IRA, a small one of 13,000. HSA account, 50,000.
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A
How much do you earn right now? Don't.
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B
140,000.
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A
Okay, got it. How much do you guys need to live on, like, on a monthly basis?
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B
Well, I've tracked our expenses over the last year and it bounces up and down, but it's between 5 and 7,000amonth.
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A
Your Social Security benefit amounts. So at age 67, what does Social Security look like?
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B
4,000.
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A
Okay. And what about 75,000? Okay. And your wife would get half of yours, is that right?
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B
Yes.
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A
Okay, gotcha. Do you have grown children? No children. Some launch children. What do you got?
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B
I have one daughter. She is still with us, but she's out of college and started her career as a teacher.
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A
Oh, great. Is she living with you now?
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B
Yes.
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A
And do you think that you want to stay in this house for the time being?
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B
For the time being, yes.
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A
What do you think the house is worth about?
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B
Looks like about 475.
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A
Do you have a mortgage still outstanding?
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B
No, it's all paid off.
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A
Okay. Any rental property or vacation property?
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B
No other property, but I did forget one other piece. I have a 401A?
- [07:57]
A
Yep.
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B
And that one. The account balance is 135.
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A
So this is really great news. I mean, you've got a ton of money that you've saved up. You have done a wonderful job of just kind of keeping the expenses at a reasonable place. You said five to seven. I'll say six. Or $7,000 a month when you retire next year, how do you plan on managing your healthcare?
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B
That's a great question. Because healthcare is kind of one of my biggest fears. I figured for the first 18 months, the Cobra option might be the way to go.
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A
Right. It's expensive, but, you know, it's what you're used to. And then you would go to the marketplace after that.
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B
Yes.
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A
Okay, so when we talked about six to $7,000 a month, that doesn't include health insurance, right?
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B
Correct.
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A
Instead of saying six to seven, I'm just gonna say 8,000amonth. Okay. Just for the heck of it, stay with me here. It's not that bad. You'll be fine. If we looked at $8,000 a month and you're gone, you know, say, okay, I'm done in a year, there's a few things that you can do. First of all, you can start taking some money out of the traditional account that you have, that $2 million, and you can start to live on it. Right. You'll need. You'll need to take, you know, some chunk of money out. You'll live on that money for a bunch of years. That you can do that until you claim your Social Security, and then you should be all fine. But now this gets to the question around the financial advisor. So it's very interesting that you ask this question, because fee only versus fee based is kind of a nuance and an important one. I don't want to, you know, I want to make sure that I don't, like, throw shade at either one. In each of the models of pricing, you have a financial advisor who you're going to be working with, who hopefully is a fiduciary, who's going to put your needs first. It's not like one is a fiduciary, one is not. In either case, if you're working with, say, a cfp, that person has to act in your best interest all the time. Okay, now, so what's the difference? Fee only essentially means the person is charging a fee and never a commission, would not even take a commission. And sometimes that fee is quoted as a certain dollar amount per year. So it might be like, you got to pay us 10 or 20 grand a year no matter what. Right. And I'm just saying that, like 20 grand, because if you think about your 401 and your other assets, you're kind of over that 2 million level. And they might say, we're going to charge you a fee of $20,000. We'll manage your 2 million plus. The Roth and all that. And it's just a flat fee usually. And fee based can mean that whatever they are managing, the investment advisory or financial planning firm, they will charge a fee based on the money they're managing, usually 1%, let's just call it 1% of whatever they manage. In each of those two fee structures you would still be working hopefully with somebody who will provide you with full time financial planning, meaning you will be working with an advisor who will be working with you and saying, okay, here is our strategy, here's how we're getting the money out of the retirement account, here's how we're managing the money so that you have the cash flow you need. Here's what you need to think about when it comes to healthcare. Here's how we're going to manage your money until you get to your Social Security claiming ages and that they will do all of that work regardless of whether they are fee based or fee only. Now when it's fee only, a lot of those folks can be very, you know, like not, I don't want to say the fee only folks used to be a little bit tougher. They used to sort of say like, oh no, we're not even going to send you to somebody who's going to get you insurance that they're going to charge a commission on. So then you start to realize, well, you know, people need certain products that often can charge a commission and they may not want to do it. They may not want, but, but many will refer you out. So I think that you should be interviewing people. I don't think one is necessarily better than the other. I think that you always say I must have a fiduciary. That's number one. Number two, I want to make sure they're doing full time financial planning, not just asset management. And then you should interview people and see who do I get along with. And I think that you'll find that if you kind of keep that in mind, you probably won't go wrong either way. So have you talked to both a fee based or a fee only planner yet?
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B
Well, we do have someone that manages the Roth accounts and the brokerage account. It was my understanding that, that one of them you would only consult on a, on a periodic basis when you needed like a checkup. When you go to a doctor's office, it depends.
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A
Some of them will do it ongoing. It could be that you say I'm going to do a. You can find a fee only planner who works with you on an ongoing basis. You can also Then says, like, I will charge you 20 grand to do a retirement plan for you. I will do this like a, like a project for you and you go manage the money. But you really have to decide what it is you need. It sounds to me like you don't want to manage the money. Is, or am I wrong? Do you want to manage the money?
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B
I really don't have. Have that kind of skill. So, yeah, I don't. I want someone else to take care of it for me, but I want to make sure I get the best bang for my buck.
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A
I think that in either case, that if you say, I'm not coming here just on an hourly basis, that you say I want to pay a certain amount every. I want to come to you whenever I want to come to you. I don't feel like the hourly is a great model for someone who needs ongoing financial planning. I just don't. Because then you're in that same. You're like in that weird situation where it's like how I talk to my lawyer sometimes. I'm like, okay, that's my 15 minutes, let's move on. I don't want to. You don't want to have a relationship. You want an ongoing relationship where someone's going to take care of you. And if you feel like the person you're working with now is not the right person, then absolutely, absolutely. Go interview people and see how you feel and say to them, tell them exactly what you need. I need ongoing financial planning and investment management. I really want to hear from the person, like, how they would manage the relationship with you. That's really what I want to know. And if you have feedback and that, you know, and you need some help or you want to come back and talk to us after you've talked to them, let us know. But you're. This is all good news. This is not going to be, you're not going to be in trouble here. This is like, you've got the, You've done the hard work, now we're kind of putting the finishing touches on this for you, you know, and they'll work with you, like, make sure you have your estate planning. They'll make sure that you, like, everything is on track. But that's the beauty of working with somebody as like a relationship, you know, when I think about financial planners in general, the best ones are the ones, you know, of course they're going to manage your money and they're going to be very smart about the, the types of investment management structure for you. That makes sense. But they're not going to start with like, oh, let me tell you how I'm going to make you all this money. That's a very like wirehouse kind of meaning, like the big investment firms like the ones you've heard of, like, you know, Morgan Stanley and Mary lynch. You're like, oh, let me tell you how I'm going to make all this money for you. You. But the advisors out there who do what I think is the best job, they say, here's a relationship with you. They treat you more like, I am your primary care physician. We will make sure that we refer you out when something is necessary. But we are going to keep track of everything. We're going to make sure that we have a game plan for you. We're going to adjust it as your life changes and we're going to also manage your money. It's part of the thing that we do, which is provide ongoing service. That's what I think it sounds like you need. And you can do it under either structure. Okay, but you know, ask the questions. We actually have a little document on the website under resources, which is the questions you should ask a financial planner before you hire one. And if you have a bit more follow up questions, we're happy to walk you through that. All right, you're, you're ready to rock and roll. So have a good Financial Independence Day, Mike, and thanks for getting in touch with us. Hey, gang. If you are thinking about hiring a financial planner or if you have one that you're working with and you're not so sure if it's the right person for you going forward, get in touch with us. Go to jillonmoney.com, click the contact us button, write us a note. And if you'd like to join us on the air live, check the appropriate box, either audio or video, and we'd love to have you. You can subscribe to us on the Odysee app or wherever you find your favorite podcasts. And it is Friday, so let's do some business. Our music is composed by Joel Goodman. Mark Talercio is our executive producer and king of all things web. We are distributed by the lovely folks at Odyssey. And by the way, we just want to make sure that you know that even at Odyssey, you can also subscribe to our other show called Money Moves. So you can, wherever you get your podcast, do that. Okay. Please lift someone up. Change your work, Change your wealth. Change your life. Life. Happy Independence Day. Thank you for listening. We'll talk to you on Monday. Hey there It's Jill Schlesinger. I'm launching a new show. It's called Money Moves. And your money is going to move. We're going to help you make better financial decisions. We're going to call out the B.S. you're finding all over social media. We're going to give you actionable guidance to make your financial decision life clearer, less stressful. We're going to answer your financial questions and take the mystery out of your financial life. Follow and listen to Money Moves with Jill Schlesinger wherever you get your podcasts.