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- [00:00]
Jill
This message comes from Jill on Money sponsor Charles Schwab. Independent financial advisors focus on building a relationship with you that goes beyond your portfolio. As fiduciaries, they must act in your best interest always. The relationship they have with you will be based on transparency and trust, and they're committed to bringing you advice that fits your values. That's why Schwab is proud to support them. Visit find your independent advisor.com I want to tell you about another podcast I Can't Get Enough of. Giving Done Right is all about how to make an impact with your charitable giving and tackles the question every donor is asking, how can I make the biggest difference right now? With shifts in federal policy and funding in flux, nonprofits and civic institutions are struggling and your giving matters more than ever. You'll hear from philanthropic experts and major donors who reveal how to maximize impact on issues from protecting democracy to supporting immigrants in crisis. Whether you give hundreds or millions, this show delivers knowledge that turns good intentions into real results. You can listen to Giving Done Right wherever you get.
- [01:14]
Podcasts welcome to the Jill on Money show. It's Wednesday, October 8th, and we are here trying to provide you with unconvent and entertaining insights on your money and your life. Okay, that's what we wrote like 15 years ago when we first started the Jill on Money radio show. It still holds. It's still really good. And we do love to talk to you about whatever's going on in your life, and we want to try to figure out how you can get where you want to go with the resources you have. And it's really important that you hear that, that you don't need to compare yourself to anybody else. We just care about you. Don't get spooked by someone who comes on these airwaves and says, I got tons of money, because it may be at all relevant to you. So if something's going on, you need assistance, give us a Holler. Go to jillonmoney.com, click the contact us button, write us a note, and make it detailed if you don't think you want to come on the air with us. But if you do want to come on the air, check the box. Mark will do everything else. Hey, while you're on the website, sign up for the free weekly newsletter. It comes out every Friday and it also automatically gets you our blog. So that's kind of fun, too. Today we're going to do some emails. Let's start with a note from dawn, who writes, I'm a longtime listener. I respect and trust your opinion. I'M retired, I live off pension and rental income, and I have not yet had to dip into my investment accounts. They've grown steadily throughout the year. My question is, when should I be harvesting my profits? How much money should I take? Where should I invest it? I'm tempted to pay down my rental property. Hmm. Then she goes on to write, I know paying off a low interest loan is not a smart move, but eliminating a mortgage does feel appealing. If I had more cash on hand, I would consider a Roth conversion. However, I do not want to spend my emergency fund. That doesn't seem like a viable option. I'm worried that a correction is coming. I would like to lock in some of the profits I've made since Suggestions or insights would be appreciated. Well, Dawn, I think that the I mean, I don't like market timing. I don't believe in it. I don't think it's helpful. But if you're telling me that you're out of whack, your allocation is out of whack, that you know, you want to be a 5050 investor, 50 in stocks and maybe 50% in cash or bonds, and you're out of whack, then I would go ahead and reallocate and get yourself back into the allocation. That is where you want to be. But if you're asking me should you sell a bunch of stuff just to get the gains and sit in cash, I'm not going for that. So my very best advice is to stick to your game plan. If you need to rebalance, rebalance, great. But at this point, I don't know how old you are. But even if a correction is coming, if a crash is coming and you're 68 years old, we still have to make sure your money lasts. And I just don't know where the next challenge is going to be for markets. But what I know is that people who have diversified portfolios, the ones that rebalance on an ongoing basis, they're the ones who seem to do just fine when the bad stuff occurs. So I hope that helps. This next question is from Vanessa, who writes, I bought life insurance for my children to also use as saving for college. And I'm starting to think that I might have made a mistake. I'm hoping that you can find help me find a way to get out of it and put the money into a better account. I okay, Vanessa. The life insurance for college. It used to be something that a lot of advisors and insurance salespeople would recommend. I just usually do not think that is the most effective way to save for college. I always love a 529 account. It is a tax efficient way to save for college and you can put the kids fun piggy bank money in there or maybe you can just open up a small savings account for them depending on their age. But if you have this life insurance policy, the question is really how much money is in it? What is the cost to get out of it? One way to get out of it would be just to say I surrender the policy. But before you do that, I'd love for you to get back in touch with us. There could be tax consequences for doing that and perhaps there's going to be a big penalty to get out. So I'd love to know a little bit more about that. Importantly for anyone listening, if someone is selling you life insurance as a means to save for college, then I think you should get in touch with us because it is not an efficient way to get you where you want to go for college savings. It really isn't. Here is a question from Catherine who says, my partner listens to you when she can't sleep, which is nightly. Oh boy, poor Catherine. And really poor her partner. Anyway, she says, I figure I might as well run a question by you since I enjoy your show even at 2am okay. Katherine will turn 74 in February of next year. She says, I continue to work very part time. I'm paid as an employee. I have not taken any required minimum distributions because I understood that if you are employed you do not have to take them. Is that accurate? And if accurate, can I calculate my own RMD amount since I have only one 401k account? Or must someone from Fidelity where my account is held, do they do the calculation? Thanks a bunch Mark. This is so funny. It's like the second time in this week where we're talking about people who are working into their 70s and not having to take their required minimum distributions. I just want to make sure that as long as you're paid as an employee, that's great. You don't have to take the rmd. If the only asset you have is at fidelity in this 1,401k account, then they will calculate the RMD. That said, if you want to start taking some of the money out because you're not making that much money and maybe you're in a low tax bracket, you can just take out the money that you'd like. But the required minimum distribution as soon as you stop working, that's when the clock is going to start ticking and you should be aware of that.
- [07:32]
Mark
And let me just say, like it only applies to your current employer plan. Even if you're still working, if you have an old IRA or an old 401k from an old employer, you, you do have to take the RMDs from those accounts, right?
- [07:44]
Jill
And this is interesting because a friend of mine, what happened was she was had an old retirement plan that she had rolled into an IRA, then got a job in like when she was 72. And what she did was she took the old plan, rolled it into the current plan and then avoided. She. So she took distributions for a year and then stopped while she was working in that new organization for two years. It's kind of cool. But Mark is right. You have to be, it has to be the plan plan that is actually active, the one that you are actually in is the one that you really need to be paying attention to. And if you've got old plans that really does argue to get as much money into the current plan, roll it in, see if they'll take money from other sources, other pre tax retirement sources. Okay, this is from Anonymous and says Anonymous needs help with my mom. Okay, here's the deal, Mark and Jill. I need help with my mother's financial situation. She is 82 years old. She lives alone. She's in good shape. She's still very active. She has $235,000 in an IRA, $250,000 in a brokerage account, and about $7,000 in checking. Her income is about $1,150 from her required minimum distribution. Okay, $1,600 from Social Security and then $1,000 with a pension that has a cola. So that's kind of cool because at least 2,600 is, you know, going to be inflation adjusted. So there's the income that she has, which is 3750. She doesn't own her home, but so we have income of 3750 and it's all taxable, everybody. Her monthly spend is about $5,000 to $5,500. She is drawing from her brokerage account to meet her monthly needs. I am fearing that she will run out of money in seven to eight years. Okay. I hear nothing but bad things about annuities. But if the online calculators are correct, I've tried a few. If she used $200,000 of her Iraq to buy a single life annuity, it would pay out $2,000 a month for life. That would decrease the burden on her brokerage draw and be there for her life. The only other note would be if her ex husband, who is in good health at 84, passes before she does, she would get a bump in the pension to $2,000. But I'm not counting on that. What are your thoughts? Does an annuity make sense? Mark, do you think maybe an annuity could make sense in this case? I don't see how $2,000 for life, but maybe you beat the odds because you're 82 years old.
- [10:32]
Mark
I mean, I would certainly look into it because right now there's, you know, there's a shortfall. So she probably is going to run out of money.
- [10:38]
Jill
So I think what you should do in this situation is talk to a fee only advisor and maybe you're going to have to pay for this, but you're going to have to talk to somebody who doesn't get paid by an insurance company to look at this annuity scenario for your mom. And I think that that's going to be the key here, that the person who recommends an annuity cannot be the person who is getting paid by the annuity company. It would be better if you just paid someone, you know, a thousand bucks, two thousand, whatever it is, just to look at this and to see what the opportunities are. I mean, she is 82 and she's in good shape. It would be wonderful if we could get that single life annuity. And I presume that, that it's an immediate annuity. I don't think that it would be a, you wouldn't defer it. So it would, you know, you'd take money, 200 grand from the IRA, you'd pop it into the annuity. The annuity starts, you know, sending out the two grand a month. And I would like to preserve that brokerage account as well. So I again, fee only advisor to help with this decision. Okay. Eileen writes that she bought her condo 15 years ago. The mortgage rate then 3.125%. She paid $325,000 for the condo. She's got $179,000 balance. However, the mortgage rate was a 10 year ARM. The adjustable part of the mortgage will kick in in the beginning of 2027. Okay. A lot of people have these kinds of loans. One of them is on the microphone on the other end there. I would like to refinance the mortgage for a fixed rate and I'd also like to take cash out to pay off a home equity line of credit that has a balance of approximately $39,000. Question, should I refinance now or wait another year closer to the end of the fixed rate part of the mortgage to see what the rates will be like. I know that I won't see 3.125% again in my life, but I don't know how to tell when the right time is to take the plunge. Mark, as someone who has a 10 year adjustable rate mortgage, can you give Eileen some guidance on this?
- [12:55]
Mark
Well, thankfully I've got nine more years to go. I mean this is a complete roll of the dice. But I'm inclined to wait.
- [13:00]
Jill
Me too.
- [13:01]
I would certainly wait till the beginning of next year. And I think that you, you know, we might see. We are seeing mortgage rates as we speak right now. We're seeing mortgage rates heads towards six. If you run the numbers of a fixed rate note, what I would see is like where is the level at which you can really afford it? And if it's five and a half percent, then jump on that. Like just run those numbers right now so you feel comfortable. I think that we will get below six. I don't know if we're going to get to five, but I could see us being at five and a half, five and three quarters next year. And if you can make that work, then pull the trigger and do it. Okay. Kathy says that she's 70, the husband's 67. They live in Buffalo. Wasn't that lucky for them? They've got a great football team. Anyway, she says we've been looking for a next stage of life house. We found one in our area. We signed a contract for $539,000. Okay. We have to sell our current house and pay off our $80,000 mortgage. The realtor thinks we can get about a half a million dollars for it after closing costs and paying off the mortgage. We need a mortgage of $160,000 on a new house. Boy, this is mortgage episode, right? So 30 year rate, 5.85%. That's good. That's cheaper than what I've seen. 15 years, 5%. I'm agonizing over 15 versus 30. My husband said go with 30, we'll never see the end of the mortgage. It doesn't matter. Your thoughts, other concern. Let me just do the thoughts on this. Get a 30. Get a 30. Drive down your payment as low as possible. That's what you want to do. If you want to, you know, if everything is going great and you want to pay it off sooner, fine. But I'd go for the 30. I'm with your husband. Here's the other concern. If this house does not sell and Close by the beginning of December. We need to come up with 200 grand at closing. Ay yai yai. Okay. She's got a thrift savings plan of 580. Husband has got a $280,000 retirement account, taxable Schwab account of 210 with a bunch of stocks that she inherited in 2012. So there's got to be a huge tax liability there. They've got a few other accounts. Main question is, if I need. If I need house closing account money prior to closing, should I take a withdrawal from the thrift savings plan and try to reimburse within 60 days? Does that make sense? So they have pensions. So what do you think, Mark? Do you want to try to, you know, withdraw from the thrift savings plan? And so I'm anxious over these decisions.
- [15:39]
Mark
I hate time in these real estate transactions.
- [15:41]
Jill
I know.
- [15:42]
Mark
Never really works.
- [15:43]
Jill
I know what I'm really worried. I guess what I'm back. Let me go back in time. You found a house in your area. You signed the contract. That's the done deal. Okay. So the most important thing that I would say is you tell your realtor we want to price our house to sell. And that is something I would really be paying attention to. You cannot afford to wait till the last second. I would rather you make less money on your existing house than go through these guessing games of which is the best money to tap. Your downside of taking the money out of the thrift savings plan is you'll have a distribution, but you have to get the money out of there anyway. So I guess that, you know, it's not the worst thing in the world. I think I'd rather try the distribution than start paying tax on all these stocks. I. Kathy, if you're listening right this second, I just want you to take a deep breath. 30 year note. Don't go for the last dollar on the house. Tell the realtor we want to price this to sell. If they. If you can get half a million for it and you get a bid for 470, I might be like very quick to hit that bid. That is an important aspect of this transaction that you get out of this house as quickly as you can. Getting as much money as you can, but not waiting for dear life. Okay. I hope that helps. Mark. This has been quite the week of mortgages and questions and required minimum. We have such a great, great, smart audience. It's incredible. If you've got a question, maybe you are not at your 60 or 70, but you're just starting your financial journey. We'd love to hear from you too. We like to have diversity and types of people that we talk to. Get in touch with us. Go to jillonmoney.com click the contact us button, write us a note, and of course, let us know if you'd like to come on the air live with us. If you would, check the box. Mark does 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 do something nice for someone else today. Change your work, change your wealth, change your life. Thanks for listening. We'll talk to you tomorrow.
- [18:06]
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- [19:11]
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.