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- [00:00]
A
Well, summer's just around the corner and I know you're focused on getting that summer travel, that fun vacation booked. But with prices escalating, you really want to make sure you can afford this summer travel. Monarch is the personal finance app that tracks everything, accounts, investments, savings goals and spending. Get your first year of Monarch Core for half off just 50 bucks with promo code Jill OnMoney it's like having a financial advisor in your pocket. I was playing with their site and I found the visual flow of money so easy to understand. You might realize that by using Monarch that your lifestyle expenses are creeping up or maybe that your savings rate has fallen off a little bit. Most apps tell you what you've already spent, but Monarch helps you map out big purchases to see if you're on track before it's too late. Use code Jill OnMoney@monator.com to get your first year of Monarch Core Half Off. At just $50, that's 50% off your first year at monarch.com with code Jill OnMoney. Hey gang, you know it's been a tough job market and a lot of people looking to bring in some extra income. And if you've ever looked into starting your own company, you know how quickly the complexity piles up. Setting up systems, finding partners and building processes from scratch can be a roadblock. That's where Fora comes in. Fora is a modern travel agency platform designed for entrepreneurs who want to build and scale scale their own travel business without starting from zero. They've basically packaged everything you need to launch and operate successfully into a single platform. Instead of spending months sourcing partnerships, Fora connects you to a network of over 7,000 preferred travel partners which unlocks those amazing VIP perks for your clients like room upgrades and resort credits. As an advisor, you'll have full autonomy and control over your business using their industry leading, booking and payments infrastructure to earn commission on every hotel, cruise and experience you book. It's a professional foundation that lets you focus on your clients rather than the logistics. Become a Fora advisor today@foratravel.com jillonmoney that's f o r a travel.com jillonmoney and make sure you tell them that we sent you foratravel.com jillonmoney welcome to the Jill on Money Show. It's Friday, June 26th and we are here trying to help you along your financial journey. Now, wherever you are in that journey could be you're in your 20s, you could be in your 80s. It does not matter. What matters is that if something is going on for you, if you have a question, if you have a concern, if you're trying to think big picture or you're going real micro, doesn't matter. But you have to get in touch with us so that we can help you out. Both Mark and I are certified financial planners, so we got the credit. Come on. And also, we just love hearing from you. So if something's going on, just go to our website, jillonmoney.com, click the contact us button, write us a note. And if you'd like to join us live, all you'll need to do is check the box. Mark will do everything else while you're on the website. Don't forget, we've got a lot of stuff that lives there. We've got another podcast. We've got a blog. We've got videos. We've got resources. We also have a free weekly newsletter which comes out today, Fridays. And so if you want to just subscribe to it, it's free. And that will also entitle you to the blog that I write every so often whenever the mood kind of moves me. Okay, today we are on the line with Chuck from Wyoming. Hi, Chuck. How are you?
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B
Very well, thank you.
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A
Tell us what's going on and how we can help you out.
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B
My wife and I are both retired. I retired five years ago from Sheridan College. Wonderful, wonderful career there. My wife retired as a. As an English teacher at the junior high level. We have a combined retirement income of $84,000. We have a combined Social Security income of 46. 8. We have paid off our home and property. We've lived fairly frugally. We would like to enjoy this next chapter with a little less financial stress. Managed to put away a fairly substantial amount of money. And I'd like to break that down for you.
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A
Sure.
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B
Okay. In a traditional IRA, we have $133,000.
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A
Keep going.
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B
Vanguard 500 mutual fund, $588,000.
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A
So that's just. That's not a retirement account, right? That $588,000 that you just said?
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B
Yeah. That's just a straight mutual fund.
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A
Okay, Got it. Yep.
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B
Go have a 457 with 187,000 in it. And I actually tried to get a hold of you 10, 12 years ago to see if it was a wise idea to pay off the house and put the money into a deferred savings account. I was teaching in basically a Faraday cage, and your producer called, and we couldn't make connections, but it turned out to Be a very good move. We have about $17,000 in today's dollars of silver. We have $21,000 in our HSA. We have 38, almost $37,000 in Walmart stock, $33,000 in an annuity. My wife was sold when she was a first year teacher. About $114,000 in CDs and $31,000 in savings and checking.
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A
Great. That's fantastic. Chuck, how old are you guys?
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B
66 and 63.
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A
Okay, got it. And so right now, if you looked at your spending, what is it that you spend on an annual or monthly basis?
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B
Monthly basis, between 51 and 52.
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A
Why are you, why are you talking to me? This is incredible. Stop it. Stop being incredible. I mean, you have 120 grand coming in. What's the problem?
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B
Double what they need? Well, it's, you know, there are taxes and things that come up.
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A
Okay, okay, okay. I will grant you that. But tell me what's really going on. You're freaked out. You don't want to spend more.
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B
Well, my question is, I've started drawing 3,000amonth out of the 457, and that puts us in a comfortable position. I would like to go to four. And I'm curious about the traditional IRA if I should take 2,000 from it and 2,000 from the 457 to kind of defer that minimum required distribution. Distribution.
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A
Wait, wait, why, why do you need to take the money out of the account? You have 120 coming in, right?
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B
We're doing okay. We would like to do some traveling. We have a son with a family on the. In North Carolina. Now I also feel like I'm a little overexposed in the market, like maybe pulling a little extra money out each month and putting it into the CD.
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A
Okay, so just, let's just deal with two different things.
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B
Okay.
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A
Of your 120, are you essentially saying that you don't think you can spend more of that? Because I think you can. I think that, like, of your 120, aren't you netting about 80?
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B
Close. Yes.
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A
Okay, so, but, and you said how much are you spending a month? 50 something, whatever. So let's say it's six. Let's say it's six grand a month. So you got 80 coming in and you're spending 72 and you'd like to spend some more. And where should that money come from? So first of all, you're in great shape right now. Amazing. And if you wanna spend a little bit more money, there's two different things. One is, where should it come from? Yes, of course, you're exposed to the s and P500. That's crazy. What's inside of the traditional retirement account? Is that S and P or is that.
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B
That is also S and P. And then the 457 is 60% large cap, 40% bond.
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A
Okay, first of all, what you could do is you could treat the traditional and the 457, which both have not been taxed. Let's think of it as like, almost like your, your lower risk portfolio. Because if you, if you sell your S and P or your Walmart stock, I presume you're going to get whacked with taxes. Yes.
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B
Yes.
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A
Okay. So what I think I might do is, I mean, if you wanted to, you could essentially say, I'm going to make the whole traditional and the 457 fixed bonds boring. Right. And even, like, horrific. Like they're not even acting that great. But let's just say you did it right now. And he said, I'm going to put all that money right now into fixed. And then you'd have, you know, 600 and change in your stering and poor's 500 index and your Walmart, you'd have, you know, 6 change there, and then you'd have 3 in the retirement accounts. That's, you know, kind of boring. Right, right. And then so you could just easily do that and make that change right now. And then all of a sudden we are not even talking about, like, where should we pull the money from. We're just talking about asset allocation. Now instead of being, you know, so heavy stock, you're kind of changing things around. So then the question is if you want to take a little bit of money out, you know, you are in a pretty, you're in a pretty big tax bracket, Right. Because you have so much income, which is wonderful. Right. But you're not in a crazy tax bracket. I mean, you're in the 22% bracket. So could you take, I don't know, 20 grand a year from the 457 or the traditional accounts? Could you take some of that money out every year? Yes, of course. Until you, you know, you can just do it every year and pay the tax on it, not even worry about it. Are you, okay, Are you at all concerned about in general? I would just say, are you at all concerned about being charitable or leaving money to your kids? Like, where, where are you emotionally around, like, the bulk of this money?
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B
Okay, that, that's a great point. I have two sons that are Both launched doing very well, high speed military. And I would like to kind of think long term that 35 years from now or whenever, the portfolio is still equal to the house and property value.
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A
Mm, okay. Okay. But in other words, do you want to be able to help them during their lives? During your life? Okay.
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B
Yeah.
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A
And okay, they're in the similar tax bracket. They're launched. So they launched married. Like if. If you're single and you're, you know, I presume they're also in the 22%, 24% bracket. Right.
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B
Well, one is married with two kids and a wife, so I don't think he is in the 22 bracket with the deductions. The other is single and has a lot of feelings for a young lady, and we might have a marriage coming up shortly.
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A
Okay, very good. I mean, you could also, if you want, gift them some of the shares that you have if you want to, like, kind of help them along the way a little bit. I don't think you have to, but you could do that. And, you know, at the end of the day, you're healthy now. You're in your 60s. This is a time to kind of be happy with where you are. Are you feeling okay with the risk level of. At, like, if we made these changes, could you be okay with, you know, being like 70, 30 versus which I think you're about 80, 20 right now? Stocks to. To safe stuff. How do you feel about seven. You want. Do you want to pull more risk away?
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B
I'll tell you what, it's really tough. The run the market has been on. It's hard to say I want to pull money out.
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A
I hear you.
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B
But I would like to gradually get in, maybe get to that 30 or 40% of boring money.
- [12:21]
A
Okay, so, I mean, so there's two different things. You could either just. All right, you can, as I said, you can make the change right now in the two traditional accounts, the 133, the 457, even the dumb old annuity. And by the way, we'll talk about that in a second. But, like, that's also a possibility. You could then slowly but surely not again, not all at once, but you could take a little bit of money out of, say, the Walmart position, the S&P 500 position. You could take some of the money. You could sell the shares again. You don't have to go crazy, and you could simply let that be sort of like your extra cherry on the top, like, take a little bit of money out of that and then reallocate it either in your CDs, your cash position, or even a bond position. But I do think that making changes inside of the traditional accounts right now makes sense because there's no tax implication in doing that. We will have a tax implication of pulling that extra 20 grand out of the traditional accounts will add to your tax liability. But as we discussed, you're only in the 22% bracket. You're not going to 24. So we're not saying that you're going to go crazy here. You're just saying, I want a little travel money, I want a little extra, I want to have some fun. And exactly that. You totally should do that because that annuity is so old. What's happening inside of that annuity? Your wife's, the one that she bought when she was first, her first year of teaching.
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B
Yes, it is growing at the incredible rate of maybe 3%.
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A
I mean, the thing is, you'll have a tax hit taking money out of it. Is it, was it, was it a retirement annuity or non retirement? That would be called like a non qualified. It might say on the top of it.
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B
I, I think it was retirement annuity.
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A
Okay. If that's the. If it, if it is like labeled as an ira, she could roll it out and just put it into an IRA rollover account and then you could do whatever she wants with it.
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B
Okay.
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A
And that, that I might do for sure.
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B
Okay.
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A
Now, you guys are in your 60s. You have your state documents done.
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B
I've spent all of the money last spring for a wonderful trust.
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A
Oh, sweet. Perfect. I think that you are in a very comfortable position. I think we're just talking about, like making a few adjustments around the edges. And so if you want to get to a less risky portfolio quickly without any tax implication, you would just make changes inside of the traditional accounts. If you want to pull some money out of those accounts little bit at a time, you'll reduce your required minimum distributions in the future. And then you can kind of see where tax rates are. You can see where you are just philosophically around after making these changes. See if you want to take some of the money from the s and P500 index or the Walmart shares, and you might want to sell some, you might want to gift some to the kids. Don't go crazy. You still need this money, right? But you do have plenty of money to support your basic needs. So again, I rounded up on your expenses. You are fine where you are. It's great. You can use that extra money that you have saved to kind of get through your travel period. You can do this for 10, 15 years. You'll be great. And then over time, you'll see what your needs are. And you might say, I want to take some of the money from the s and P500, and I do want to actually defray the risk, But I think you'll feel better about the 600 sitting on the balance sheet and risky stuff if you make the changes in the traditional right away.
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B
Okay.
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A
Does that make sense?
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B
That does. That does.
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A
Are you ready to do something really fun? Now? You must tell us, where is it? Don't say North Carolina.
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B
No.
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A
You live in a great place. So it's very weird when you live in, like, a place that's like, everybody wants to go to. To ask you, where would you like to go? But where would you like to go?
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B
Well, we spent two weeks in May in Abaco island in the Bahamas, and we absolutely love it.
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A
Nice. So go back. Yeah, go back.
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B
When you live in a place with the kind of winters Chuck has, you
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A
want to go somewhere nice and warm. All right.
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B
Well, that is true.
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A
We're excited for you to have that kind of amazing experience, and you should. So give us a holler back if you run into some issues. But I think you're in great shape, and we look forward to getting the pictures of your Caribbean paradise. And also, I'll take a picture picture of Wyoming. It's one of my favorite places. I love those Grand Tetons. Boy, I skied there, Mark, a long time ago. Very steep. That's what I remember. Wow. Was it steep there at Jackson Hole? It was like, whoa.
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B
When Theo gets a little bit older, we're going to do all the national parks.
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A
Oh, that's amazing. That's a great. That's a great target. All right, gang, if you have a question about how you can spend a little bit of more money while you're healthy and you can afford it and you can physically do these things. We'd love to hear from you. Just go to Jill on money.com, click the contact us button. Let us know if you want to come on the air by checking the appropriate box. And if you're younger and you're like, wow, I want that kind of life. Boy, that sounds good. Two major pieces of information that Chuck gave us. Both he and his wife receive pensions. So know that I'm sure that if we said, how much did you make at the top part of your career, it wouldn't have been like maxing out a salary. But I'll tell you what's amazing. When you work in a job where you're entitled to a pension, you have a lot of that. That anxiety that we talk through about the income that people are trying to produce when they retire, it kind of goes away, just a trade off right during your life you're not going to make as much, but when you retire, you're going to have that stream of income. It's pretty good. So if you're considering a job like that, a job change, you have the guts to become a teacher or something. Wonderful. Careful like that. Give us a Holler. Jill on money.com Click the contact Us button. We'll get you on the air. You can subscribe to us wherever you find your favorite podcast. Our music is composed by Joel Goodman. Mark Telarisio is our executive producer and king of all things web and we are distributed by the lovely folks at Odyssey. We always ask that you lift someone up. Change your work, change your wealth, change your life. Thank you for listening and we'll talk to you on Monday.
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B
Foreign.
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C
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