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- [00:00]
A
Hey, gang, I know that we're all juggling so much. There's work pressure, there's personal stress. There's just that constant anxiety of being on edge. And maybe that rings true to you. Maybe you think you need some support, but every time you try to find a therapist, you get stuck. Maybe they don't take your insurance. Maybe the cost was so high it wasn't realistic. It just shouldn't be that hard to take care of your mental health. That's why Rula stands out. And they partner with over 100 insurance plans, which brings the average copay to about $15 per session. And depending on your benefits, it could even be $0. That's licensed in network therapy that actually works. With your budget, you can find a provider accepting new patients and book as soon as tomorrow. Visit rula.comjillonmoney to get started. After you sign up, you'll be asked how you heard about them. Please support our show and let them know we sent you. That's R U L A Dot com. Do you deserve mental health care that works with you, not against your budget? When you're ready to start a business, it can feel overwhelming. There's paperwork, legal stuff, websites, email compliance. It's a lot. But with Northwest Registered Agent, you don't have to think about all those details. They don't just help you file an LLC and send you on your way. They help you build a real business identity. From day one to Northwest Registered Agent has been helping small business owners for nearly 30 years. They're the largest registered agent and LLC service in the US with over 1500 corporate guides. Those are real people who actually know your local laws and can walk you through what you need. They don't sell your data, they don't outsource services, and privacy comes standard. Don't pay hundreds or thousands of dollars for what you can get from Northwest. For free, visit northwestregisteredagent.com jillfree and start using free resources to build something amazing. Get more with Northwest registered agent@northwestregisteredagent.com Jill Free welcome to the Jill on Money show. It's Monday, March 2nd and we are here trying to help you make better. Sometimes it's less bad financial decisions and and sometimes what we're just trying to do is guide you along your financial journey. There are a lot of different ways to get there and you may not think that you're on the right track, but maybe you are. Maybe you want to know what your options are. If that's the case, get in touch with us, go to our website, jillonmoney.com jillonmoney.com, click the contact us button, write us a note. And if you would like to join us live on the program, just check the box. Mark will do everything else. We while you're on the website, check out all of the free content that lives there. We've got another podcast, it's called Money Watch. We've got a radio show. There are videos, resources, and of course, the free weekly newsletter comes out on Fridays. But that newsletter does entitle you to our blog as well, so check it out. All right, so if you want to get in touch with us, don't forget jillonmoney.com today we are talking to Joe, who joins us from Texas. Hello, Joe. What's going on? How can we help you out?
- [03:20]
B
How you doing? As a caveat, I'm prior, prior military. I was in for almost 28 years, so I have a decent pension, but I also have almost $600,000 in my TSP that I don't use at all. There's no need to use it, really.
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A
Wow. How much is your pension?
- [03:38]
B
About 55,000 annually. Also get another. I'm a widower, so right now I'm receiving my wife's Social Security at about 24,000 annual. I also VA Disability, which is tax free, and another 20,000, $21,000 annually. My wife was a, she was in civil service, so I get about $6,000 annually from her pension.
- [04:09]
A
Wow.
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B
Also have a rental property that I own outright that I get about a thousand dollars, and that's after taxes and management fees, which because I don't have somebody managing it for me. So after taxes, management fees, insurance, everything, it's another thousand dollars a month, which is about $12,000 annually.
- [04:27]
A
Wow. Wait a second. So let me just get this. So first of all, I'm sorry about your wife because that sounds like she did not get to enjoy a nice retirement with you. So I'm sorry about that.
- [04:36]
B
Thank you.
- [04:37]
A
So you have your pension plus the VA disability. You have your wife's Social Security, her civil service pension. All right. Is that, is that right?
- [04:47]
B
Correct.
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A
And that will, in her civil service pension is for your life.
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B
Yes.
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A
Okay. So that's just a lot of money coming in. So what do you need to live on?
- [04:58]
B
I live on about $4,000 because I own my house outright also. My, my residence outright also. So I live on about $4,500 a month. So I have, I have about three to 4,000 left over. But I I have an expensive hobby.
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A
So. What's your expensive hobby?
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B
Home theater.
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A
So, okay, so. But are you still net saving?
- [05:19]
B
I do. To a savings account? To a high yield savings.
- [05:23]
A
How much is in the high yield savings right now, Joe?
- [05:25]
B
Right now about 70. But that's come down because I spent about $14,000 this past summer upgrading my home theater. That's why I said it can be expensive.
- [05:33]
A
So, my God, love that. What about. Okay, so you have about. You said 600 grand in the thrift savings, 70 grand in the high yield savings.
- [05:43]
B
Yes.
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A
Any brokerage or anything else like that?
- [05:46]
B
No.
- [05:47]
A
Okay, so those are your two big assets. You have your primary residence. How much is that worth? I know it's paid off.
- [05:53]
B
400,000.
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A
The rental property, how much is that worth?
- [05:57]
B
About 250.
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A
Going to keep it?
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B
That's a good question. Don't know.
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A
Okay, that's a possibility. Okay, so. So do you have kids? Grown kids?
- [06:07]
B
My daughter lives in Austin, Texas, and she visits all the time. In fact, I'm using her mic now. She works a lot, but she's on
- [06:15]
A
her own, like, doing her thing.
- [06:16]
B
She's doing her thing real well.
- [06:18]
A
Okay. All of the money that you have and that you and your wife accumulated together, that all of this has. You have one heir, your daughter, right?
- [06:26]
B
Yes.
- [06:27]
A
Okay, so you're in ridiculously good shape. How old are you, Joe?
- [06:32]
B
I'm 65.
- [06:34]
A
Okay, so you're getting your wife's Social Security. When are you. When do you plan on claiming your own Social Security?
- [06:40]
B
I was at 67, but I may push it to 70 depending on how my health is. To be honest, I'm not. I'm not sure.
- [06:48]
A
So what are we going to do about the fact that you have all this money and you do have an expensive hobby? I think that's wonderful. Why? Why come on with us? Like, you sound like you're in incredible shape.
- [07:01]
B
Well, I guess the issue I have is that 600,000 was only 410,000 when I first retired four years ago. Nine. 600,000 by the time I get to RMD, you know, it could be eight, nine, or a million. Should I move some of that to Roth? Because it could affect me. It could affect my. My taxes a lot and my Medicare a lot.
- [07:24]
A
Well, okay, so I'm going to, like, my magic wand would be, oh, yes, for the next 10 years. Let's start converting some of that money, move it, and then it'll become a Roth. But you don't have a ton of money on the sidelines to pay the Taxes with that. Right, Right. So the question becomes, well, then what? So I mean, listen, you've got some money in a high yield savings account, and I'm sure that if you put your mind to it, that you could build up your high yield savings account. But unless you had sold, unless you sell that rental property and you know, we have a chunk and maybe you pay the taxes that are due, whatever, and you got a couple hundred thousand dollars that's available, you know, there's not a ton of room here. I don't want you to deplete the high yield savings account to do the conversion. I really don't. But could you spend like each year. Let's just think about this. Could you convert like you got a lot of income though. Boy, you're gonna hate me because when I look at your taxes, you know, you're in a high tax bracket right now. I know the 21 grand is not taxable. That's the DI. But your wife's civil service pension, your civil service pension and her Social Security is all taxable to you, right?
- [08:43]
B
Correct.
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A
What was your tax like last year? Bottom right hand corner. What did the AGI. What did that look, what did that. What was that number when you added everything up?
- [08:51]
B
It's about 85.
- [08:53]
A
So let's look at where you are right now, which is at 85 or 90 grand, you're in the 22% bracket. If we start to convert, we will be converting you at the 24% bracket, just to be clear, like. Cause you know, you're right up at the top. The top of the single bracket is 1057. So I think that if you really want to make any sort of meaningful difference, and I mean, I know it's only 2%, but some people get. I just want to make sure you understand that. But if you said, like, hey, what would happen if I added. Let's say I converted of the thrift savings plan? You're right. You know, it's you. You can move it into an IRA rollover account and you can maybe convert, say 50 grand a year. What if you did that and then that extra income that falls to you, you would then pay the tax on that out of the money that's in your high yield savings account. And I would try to make sure that my high yield savings account, even though you're, you are a net saver, you know, you just want to make sure you've got an extra, you know, 20 grand or so that's in there to pay taxes that are due and make sure you can take care of your rental property until you sell it. And, and then I think you're good if you did that. I think it works a lot better. Mark, do you agree with that? Like, to you, are you okay with Joe hopping up from the 22 to the 24% bracket in order to whittle down the tax liability associated with that traditional thrift savings plan? Well, yeah, we're definitely okay with that. I'm on board with that. You know, the alternative if he, if he can't capture some of his net savings every month to pay the tax bill, is to just pull it out. Right? You can definitely just pull the money out. There's no doubt. But I wonder whether you're going to need to do, do that. I don't know. You can just take some money out. You can say, Let me take 20 grand out, see what that feels like. And then you can add it to your high yield savings account, or you can create a brokerage account. How are you feeling about investing your own money? Are you good with that?
- [10:53]
B
I'm, I'm good with it. I kind of guess overthink things. So I end up doing nothing, basically, but I guess I could do that.
- [11:00]
A
Yeah. I mean, you could just pull some money out. I mean, I like the conversion because it's like not nice for your daughter to actually inherit a Roth asset rather than, you know, even a brokerage account asset. But it doesn't matter either way. Mark's right. I think it just kind of depends on, like, you know, how you want to manage that process. Like I said, if you sold that rental property, paid the tax that was due, and then you had that money. When you think about, you know, overthinking, let's not overthink. Let's try to make sure that you have some money. And it's like the way you probably manage your thrift savings, which is a stock fund, a bond fund, a little cash, maybe a commodity or real estate fund. Nothing huge, just like a few different types of funds.
- [11:40]
B
Right.
- [11:40]
A
That would bring you the exact kind of diversification you would need. Either way, nothing bad is going to happen to you. You're just trying to be more efficient. I think you're in great shape. If you could convert, I think it would be better. But if my second choice is just pull some money out of the thrift savings because you don't want to start with a conversion, fine. Then, you know, every year you could essentially say, let me pull out, you know, 30, 40 grand, pay the tax that's due, see How I feel, Build up my high yield savings account, create a brokerage account. All that could be that's just. It's almost as good, not quite as good as the Roth.
- [12:17]
B
Okay, okay, that sounds good. I guess I have to stop working on that. Goodness.
- [12:22]
A
Let me ask you something. You got a will? Do you have your estate docs done?
- [12:26]
B
Well, they're done. I gotta get them signed.
- [12:29]
A
Okay, that definitely needs to get done. Joe, I'm telling you right now, without a signature, it's not so good. Get that done and give us a holler back if you ever have a question or if you sell that rental property and that, you know, kind of opens up the world. But if you're going to move to a brokerage account, pick some company that's easy to navigate. You haven't really necessarily done this. So we're talking about a Fidelity or a Vanguard or a Charles Schwab or an E Trade or a T. Rowe Price. These are places where you can buy some index funds. Don't, don't overthink it. If you're feeling like you're overthinking it, shoot us a note and Mark will give you like, very easy allocation that'll keep you out of trouble. Okay.
- [13:08]
B
I have a swab account, but I don't have like a thousand dollars in there because like I said, I got kind of paralyzed once I got it in there and couldn't figure out what to do.
- [13:16]
A
Well, if you need to do that, if you want to get unparalyzed, we will like send a follow up email and just say, okay, I'm actually ready to invest. Give me a sample allocation. It's. And Mark will happily, again, it's not rocket science. It's some stocks, some bonds, some cash, maybe a little commodities. Done, call it a day. You don't have to overthink it. We're not talking about timing the market. We're talking about making sure you get some diversification. And you know, probably you're never going to need this money. You're probably never even going to touch it. But just in case, let's give you a little bit of a nice generalized portfolio that, that you can live with.
- [13:56]
B
Okay? Okay, Thanks. I appreciate it.
- [13:58]
A
Oh, we appreciate you. So if you're like Joe from Texas, you're swimming in money and you want to be more efficient with your retirement assets, 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, all you need to do is check the box. Mark will do everything else. While you're on the website, you can check out all of our content that lives there. And of course, course, please sign up for the free weekly newsletter which comes out on Fridays. You can subscribe to us on the Odyssey app or wherever you find your favorite podcasts. Don't forget to lift someone up. Change your work, change your wealth, change your life. Thank you for listening and we'll talk to you tomorrow. Hey gang. I just made a first time ever purchase on behalf of the pod. I was so psyched because Mark and I don't do a lot of promotional materials, but I was able to create a branded sweatshirt. Yep, a Jill on Money branded sweatshirt with vistaprint. Now I'm not usually good at these things, but vistaprint made it simple to bring this idea like, oh, wouldn't it be cool if Mark and I could create some sweatshirts that we'll try out and maybe the listeners would want to get them as well. They've got these great design tools. They have fast shipping human support if you need a little guidance along the way. Because the sweatshirts were so easy to execute. Now I'm thinking about doing some other stuff. Maybe there's some baseball caps, I don't know, other fun stuff that you guys would want. You'll let us know. There's a reason that over a million people trust Vistaprint for their small business print needs. Vistaprint print your possible right now. New customers get 20% off with code new20@vistaprint.com.