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- [00:00]
Podcast Advertiser
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- [01:49]
Jill Schlesinger
Podcasts welcome to the Jill on Money Show. It's 3 Thursday, October 16th and we are here trying to guide you along your financial journey. I've often thought about this program as like the ways the Google Maps for your money and the reason is that there are a lot of different ways and routes to get where you would like to go. You usually have to kind of let us know where you are today and then let us know what the destination's gonna be and then maybe we can craft different ways to get there. And this requires you to do a tiny bit of work. You go to our website jillonmoney.com and you click the Contact Us button, which is in the upper right hand corner of the site. You write us a note if you would like to join us on the air. You check the box. If, however, you just want to write your note and make it an email, that's fine too. We do email shows. Today is one of them as a matter of fact. So let's get started. This Is such a unique name that I'm just going to call this person Jay who writes, I'm a 51 year old woman who has not worked since. Since 2012. Wow. Okay. After losing several close family members. My parents at age 65, my husband at 59. Oh my God, this is terrible. My youngest, youngest sister at 42. I decided to live more simply and focus on my family. Today I live on about $40,000 a year supporting my 17 year old niece and 10 year old nephew, both legally adopted. Okay, here's the snapshot. Pay attention, Mark. Primary home is worth $900,000. No mortgage. And after $100,000 in repairs and updates, I could rent it for about 3 to $3,500 a month. Rental property worth $450,000. A mortgage of $250,000 at 2.75%. And this rent is 2,250 after management fees. Okay. The brokerage account, a half a million dollars which generates about $2,200 in dividends after tax retirement accounts. $150,000 for me, 350,000 inherited from my husband. An annuity which pays $10,000 annually guaranteed. The challenge. I need $200,000 in cash, 100 for repairs for my primary and 100 to build a modest home overseas. Okay, question. Where should I free up this $200,000? 1 pull from my brokerage account, risking reduced growth and dividends. Use the annuity which gives guaranteed lifetime income. Tap into my primary home's equity through either a home equity line of credit or a refi. Or what would make the most financial sense for my immediate cash needs while keeping my long term income and stability secure. Well, okay, I think there's a couple of choices here. Okay, we have a brokerage account with a half a million dollars. Mark. Should we plunder the brokerage account for the 200 grand? See, the thing is, once we get the, the repairs done in the primary, she's going to be able to rent that. So that's going to hopefully replace whatever we lose in the brokerage account. So what do you think about that?
- [05:21]
Mark
I mean, to me that's the obvious. The obvious solution. Yeah, you know, she's too young to get into the retirement accounts, right? I don't know that I would do that anyway. I mean, the broke, that's what the brokerage account is there for, in my opinion.
- [05:32]
Jill Schlesinger
Yep, I agree. I think that's what we would say. So I think we, you know, be careful on the brokerage account. Maybe there's some way that you could Limit some of the capital gains, but I think that's what I would do. And then rent the house out and you know, hopefully that that gives you enough to live on. So I hope that helps. Okay, Help me. Rhonda is the subject. I love your show. This is from Karen. I love your show. I've been listening for years. I appreciate your kind, wise advice. Here's our situation. My husband is 62. He retired from his corporate job last year. He's still a small business owner. He has about 24 to 30 grand a year from his business as distribution salary. The business could be sold at some point for 150 to 250 grand. He's likely to continue with the business for the next five years or so. He does receive a small pension of $18,000. So essentially he gets like, let's just think about that, gang. So about four grand a month between the business and the pension. Okay. Now she is 56. She retired last year. She's working part time. She makes 12 grand a year. She's going to be looking for more full time work. Okay. She receives a pension of $41,000 net. No COLA. But health benefits for the family, that's good. We've got three children, two grown ones at school. My husband wants to start his Social Security at age 62, but I would like him to wait. We are not financially savvy. I'm not sure about that. I'm going to tell you that right now because it seems like they're doing okay. Husband is more confident with our financial situation than I am. Okay. Here are the benefits. By the way. Let me just start by saying he is in good health and has longevity. She's in good health, but she has had cancer. Okay. So remember, he's the healthy one. Right? And he is older than she is. He could start at age 62, grab $2,500 a month at age 68. I don't know why she's doing 62, 65, 68, but let's just say 68 because I'm thinking that maybe that's. He thinks that's his full retirement age, but it's 2,500 versus 3,800. Okay. Hers 2,162, 26, 3,268. Okay. My husband is concerned about the state of Social Security. He believes that it's smarter to take earlier invest. Have you ever heard of such a thing? Hmm. Yes. Yeah, I've heard such a thing. Your husband's wrong. Okay. This is wrong. So the big issue that I see around this is he is healthy, he should wait. He is wrong about Social Security because even if he were right about Social Security, you want there to be a larger benefit if there are any future cuts to Social Security. So waiting is better for him with you. We've got some time, so I feel like I don't have to make that decision right now. All right, next up, they got a lot going on. They're in the process of purchasing a $600,000 house. They currently rent $3,200 a month. They own rental property, it's worth about 600 grand and they net $2,000 a month. They've got a adjustable rate mortgage that they need to refinance next year. They owe 270 on the property, no plans to sell. They've got $240,000 in a high yield savings, $280,000 in a 401k, another $245,000 in a traditional IRA. Okay, aside from the Social Security timing question which I've answered already, wait. We also have the question on funding the house. We are obviously going to use a mortgage for some of it. We plan on using the $240,000 in the high yield savings, but should we pull pull some funds out of the pre tax accounts to help fund the project? They will stay in the home for five to seven years tops. They spend 6,500 to 7,000 monthly. Some of the expenses flow through the business mark.
- [09:31]
Mark
Five to seven years tops.
- [09:33]
Jill Schlesinger
I mean what, why, why are we doing this? Buying this house for five to seven years. Do we really have to do. This is when I wish I had you on the show live. Because why is it that time horizon if that's the my time horizon, I would never buy. I would just keep renting. So why buy this house? That's the big question to ask yourselves. If you're only going to be in it for five to seven years. I think that's a, that's a clue that you should be a renter. I don't think this is a good plan. I'm just going to go on the record and say why buy? This doesn't seem like reasonable to me. Even if your rent was for you say you rent for 3,200. What if your rent were $5,000 a month? Even that's a better deal for five to seven years. I would never buy under these conditions.
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Mark
Yeah, I think that ship has sailed. But I would not read the retirement accounts to finance this home.
- [10:21]
Jill Schlesinger
No, I mean you just then do a 10 year interest only loan and pray, and you better be out of there in seven years. And maybe that's the case. All right. Anthony says, my wife and I are retired. They're 65 and 67. She's got a pension of 80 grand. He's got a traditional IRA of $1.2 million. They are waiting till ages 70 and 68 for their Social Security, which will be about 72 grand a year. They've got $150,000 in a CD savings of. Hold on, I got to read that. Thirty thousand. They own an apartment that's worth 300,000, a townhouse worth 4, 500 and 50 with a $180,000 mortgage. They're trying to spend 10 grand a year. No, 100 grand. Or is it 10 grand a month? It looks like maybe 10 grand a month after tax. Okay, so the question is Roth conversion or not? Not. No, you cannot do a Roth conversion. We need your money. CDs and savings. Nuh. I'm not spending that down. But if you want to start taking money out before you start claiming Social Security, maybe you both wait till you're 70, then I can get on board, start pulling some of that money out that. That traditional ira and, you know, try to stay in your tax bracket. Maybe that's 24% and get that money up. But I wouldn't burn up my money. That is sitting in cash. You've got a lot of real estate, you know, assets which are wonderful, but essentially, in order to preserve your. Your liquidity, we don't want you to do the conversion. Agreed, Mark?
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Mark
Yeah, I agree. I mean, they got the pension, and once Social Security starts in a few years, those two combined will cover their needs.
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Jill Schlesinger
Yeah, very good. Andrew discovered us on YouTube about the value of a pension, and he said, I was hoping you could give me your thoughts on what would be in my best financial interest. I'm choosing between a city job that offers a top payout of $58 an hour after five years. It includes a pension and health benefits after retirement. Some details is that it is a 2555 pension plan, meaning you have to work at the company for 25 years and have at least 55 years of age to reap the full benefits of the pension. Luck would have it that I'm 30 years old. That would be good. Also, the pension pays about half of the highest paid annual salary during retirement. The private sector job. So remember, he's got 58 bucks an hour. He says the private sector job is about 70 bucks an hour. After five years, 401k with a 9% match. But when I am retired, no health benefits. I've got $110,000 between retirement accounts. Ideally I would like to retire between 55 and 60. I'm kind of digging this pension job. Mark, what about you?
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Mark
Yeah, I think without being able to ask more questions and the fact that he does want to retire early, he is going to have to pay for health care. Yeah, I'm probably leaning the pension job.
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Jill Schlesinger
I am too. Although I'm wondering if the private job doesn't have more upside. That's one thing. It says the top pay is $70 an hour now, but could it go higher? I'm interested to learn more. Based on what you wrote us, I'm kind of leaning pension. Okay, K writes. Hi Jill and Mark. I am a 65 year old widow and I wrote to you in July of 2024 about paying off my mortgage after my husband passed away. I followed your advice about cashing in my CD after it matured and putting a $20,000 lump sum payment on the mortgage. I also made a few one time extra payments. I'm sure that we didn't tell you to do that. Okay. The mortgage balance is now $81,000 at 6.5%. I told you then that my monthly spending was 3,500amonth. After literally writing down every expense on paper for the last year. Even if I bought a Coke, LOL. My actual expenses. So she said 3500amonth. Remember 6500amonth. Whoops. Way more than I realized. Okay, now total pensions from her husband, 2,500 bucks a month. She still works full time. She brings in 2,750amonth. And after taxes and deductions, so right, 2,526 50, she spends 6,500. So we're short. With the mortgage going up because of taxes and insurance, the payments are now $1,828 a month. I have an emergency fund, 25 grand. I also have a Roth IRA, $30,000. I have $94,000 in ETFs and mutual funds. Here's my question. I've got a meeting coming up with my financial advisor. She always talks me out of paying my mortgage. She says when I retire and start taking Social Security then I can use those payments to pay down the mortgage. I don't want to pay on it for another 11 years. I don't want to retire without it being paid off. I'd really like to take 81 grand from the brokerage account. I know I'd have capital gains. I worry about that. The market is doing well now. I hesitate to lower my 20% contributions to my Roth 401k. I also contribute 5% up to the 5% match on the traditional 401k. Neither is fully funded. I plan to retire at age 67 or later, depending on my health and my parents health. I value your advice. I'll go with whatever you recommend. I need to know what to say or have in mind when I meet with her this month. My gut wants to be free of this mortgage, but I also want to make the best financial decision. Please help. I hate being in limbo. Thank you so much for educating us on a daily basis. Love you guys. Maybe the way you can consider this is by saying to yourself, it's all the same pot of money, right? And by not paying it off sooner, I give myself more flexibility. So maybe your gut wants to be free of the mortgage, but I want your head to say to your gut, freedom of that mortgage means I don't have access to that 80 something thousand, that $81,000. And I am 65 years old and I've already lived through the death of my spouse and if something happened to me, I would want to want access to that money. So in other words, that $94,000 of ETFs and mutual funds, that's money that you may need to tap for something else. And so I'm so grateful that you followed up with us because I think really this exercise showed you that $6,500 a month is what your real number is. That's the important thing. Now you are still working, you are able to, you know, sort of float this. But I think, because the way you've written this note, the one thing I would try perhaps to consider is that at age 65, to help with your cash flow, what I would do is I would lower your 401 contributions to your 401k right now to your Roth 401k. I wouldn't do 20%. It seems to me you need your cash flow because you're saying here that between your husband's pension and your full time income, you are not actually meeting your expenses on a monthly basis. So I'm fine with you lowering your 401 contributions. Those Roth contributions go down to 10% and then see how that feels. And you don't have to be mortgage free by the time you retire. But what you do have to do is understand that your, your advisor's right. Once you have your Social Security in hand, you'll better assess what the next step should be. Anything else to add to that, Mark?
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Mark
No, I was just going to say I assume she's working with an advisor. So I am going to assume that the pensions from her husband include some sort of survivor benefit from Social Security. If not, look into that.
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Jill Schlesinger
Yeah, maybe you could get a little moolah flowing in. You know, gang, when you have these emotional conversations with yourself, you know that you're being emotional, that's okay. But if you're wrestling with it, you don't have to just do what we say. But like, I think you have to remember that every decision you make there is a trade off. So paying down that mortgage feels good in your. You say your gut. But if something then happened to you where you needed access to your funds and it wasn't there, that's gonna hurt. And I think it is important for you to remember that. So anyone who's going through these kinds of questions, give us a Holler. Go to jillonmoney.com, click the contact us button. Write us a note if you want to come on the program live. Just check the box. Mark will do everything else. Don't forget that you can check out all the cool stuff on our website, including my book. It's called the Great Money Reset. And boy, so many of you are still resetting your lives.
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Podcast Advertiser
Find.
- [19:14]
Jill Schlesinger
Find out what are the 10 bold steps you can take to turn chaos into opportunity. That's all in the Great Money Reset, based on my conversations with you guys. How about that? You can subscribe to us on the Odyssey app or wherever you find your favorite podcasts. Put your hands, metaphorically on someone's back. Reach out. Okay. Change your work, Change your wealth. Change your life. Thank you for listening. We'll talk to you tomorrow.
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Nancy Cartwright
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.