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- [00:01]
A
Ringcentral will completely transform the way you work. It gives you built in AI across all your business conversations. Your phone System has an AI receptionist that answers calls 24. 7. Your video meetings have AI that takes notes instantly. Even your contact center has AI so you can help customers faster. It all comes together in one reliable platform for effortless AI communications. See for yourself@ringcentral.com RingCentral Voice of your business this year, give a gift that goes far beyond the moment. An Invest 529 account. Whether it's a child, grandchild or someone just starting out, you're helping them save for education that can open doors for a lifetime. Invest529 is a tax advantaged way to save for college, trade school, or even apprenticeship programs. You it's flexible, easy to start, and you can contribute any amount, big or small. And because the money can grow tax free, it's a gift that really builds value over time. So instead of giving something that gets used up or set aside, give the gift that can change a Life. Start an Invest529 account today. Go to invest529.com to get started. Welcome to the Jill on Money Show. It's Thursday, January 15th and we are here answering your financial questions. If you have one, go to our website, jillonmoney.com click the contact us button, write us a note. And if you'd like to join us live, check the box. We would love, love, love to bring you on the air. If you would like, you can check out all of our free content that lives on the website. We've got another podcast which is called Money Watch. We have a blog, we have a radio show. There are videos, there are resources and, and we also have a free weekly newsletter and you should sign up for that. Okay, let's get started. Today we are talking to Paul who joins us from Chicago. Hello, Paul. What's going on?
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B
Hello. How are you? Jill. Nice to meet you.
- [02:08]
A
Good to meet you. What's going on? What can we do?
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B
You know, I feel very fortunate. I've been working hard for many, many years and I find myself at a crossroads. I trying to figure out can I get off the rat race and can I potentially downsize work, you know, to a, to a sort of second act before finally retiring.
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A
I like it. So we're looking for a glide path and, but, but not a, like, I must get out because I'm miserable, but like a different, a different trajectory. Slowing down a little bit because you've saved a bunch of money. Is that fair?
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B
Yeah. And the question is, how quickly can that glide path be executed? Is it a, is it 18 months, is it five years, is it eight years, that kind of thing.
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A
Okay, let's talk about the, the details. So first of all, Paul, how old are you?
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B
I am 57.
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A
57. And you are married?
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B
I am.
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A
Spouse is how old?
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B
She's 51.
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A
Okay. You're both working full time?
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B
We are. We're fortunate. Yes.
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A
Okay, and how much do each of you earn? Or give me a combo, whatever is easier for you.
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B
Combined is with bonus, which is pretty predictable, about 520.
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A
And you're both putting money into retirement accounts?
- [03:28]
B
Yeah, we. We both max out our 401ks, we both get a modest match. We have of the last few years switched to predominantly Roth versus traditional for the advantages Roth presents, I think in the for retirement in particular. And trying to do that even more. I think I just changed our percentage over the holiday break to a higher percentage to Roth for the new year.
- [03:56]
A
Cool. When you say max out your 401ks, do you also mean the catch up contribution? Okay, got it. And how much have you saved? Let's start with traditional. How much is in a traditional retirement account?
- [04:09]
B
So we've got approximately. Because we've got lots of different types of accounts we've got in pre tax savings. So like 401ks?
- [04:19]
A
Yep.
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B
And IRA. IRAs, IRIs, not Roth. About 3.2 million.
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A
Oh, that's great. Okay. And what about Roth types?
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B
Roth? We've got just under 400,000.
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A
Do you also have money saved in a brokerage account?
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B
We do. We've got about 600,000 in a brokerage account.
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A
Do you guys own or rent in Chicago?
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B
We own.
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A
What is the house apartment worth?
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B
The apartment is worth 1.7, give or take.
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A
And is there a mortgage outstanding on it?
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B
There is, but I think it's a good mortgage at 2.75%. 500,000.
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A
500,000. And is this a place even if you slow down or whatever, you're going to stick around because this is like a great low mortgage interest rate. So I'd love it if you didn't.
- [05:18]
B
It's almost impossible to move. I mean, part of me was. One of the questions is how do you tap into the, you know, substantial equity? Right. We got about over a million dollars of equity there. Could. How do we leverage that without going like reverse mortgage kind of fee heavy things in the future?
- [05:34]
A
Probably not yet. Just not, not not. How about that? Not not tap it. That, that might be interesting. But we'll get to that.
- [05:41]
B
Yeah. Well, we'd like to potentially buy a place and like, you know, somewhere else, like a country place or something, you know, warmer environments. Nothing terrible, terribly fancy, but just a, you know, 1500 square feet, you know, three bedroom, two bath kind of place. Somewhere that could give us a little peace from the big city.
- [05:58]
A
Let's. Do you guys have kids?
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B
We do. We're lucky. We've got two kids. One's a freshman in college, one's freshman in high school. And we've saved in 529 plans, we've got about a half a million and 529.
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A
Okay, and the high school, is it public or private?
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B
It's public.
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A
Okay. And how much is college for the freshmen? Is this a public or a private college?
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B
It's a, it's a grotesque amount of money for a private institution.
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A
How much?
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B
$91,000.
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A
Oh, my God. Okay. That's what I have to look forward to, huh? Yeah, exactly. But let me ask you this. So you have 500,250 each. What happens to the freshman in the middle of junior year?
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B
Well, we are good, good points. We, we've already paid for the first year, so that, that's, that's of paying for freshman year.
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A
Okay. Okay. So and so you mean you have 2:50 in addition to. So you, you basically are going to get, you'll, you'll cripple through that. Those, the four years.
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B
Yeah, we'll probably, I think we'll have to supplement about 10,000 each. If you do the average about 10,000 a year for three years.
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A
Okay, next question is how about just money in the bank?
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B
We have not a ton because we try to, I try to put it into our investment accounts. And we have, we have a decent amount of cash investments. I feel like the market's so overpriced. Stop and start taking a little money off the table, particularly like, you know, tech side of things, you know, so we, we have, you know, plenty in like, you know, high yields, Fidelity Savings, Savings accounts kind of thing. A money market rather in the brokerage, you know, probably 150 there, but actual, just like a plain old, you know, 40,000.
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A
Okay, got it. Do you have any other assets that we have not covered?
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B
There's deferred comp at work. There's some.
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A
When does that come to you?
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B
That deferred comp comes upon leaving my employment. So it's essentially a way to reduce your tax burden today, you know.
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A
Right. You push it out into the future. How much is in the Deferred comp?
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B
About 100 company stock.
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A
How much is that?
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B
So I've got about 65 that's vested and then another probably 80 that's not invested yet.
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A
Right. So if you gave your notice, if you gave your notice, do you lose that unvested or do they vest it for you?
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B
If I get my notice, it would be unvested. So that's why I, from conservative perspective, I say 65.
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A
Okay, got it. Anything else that we don't have? Okay, wait, I have a couple of other questions. I. Life insurance. Because you have life insurance policy. A whole life.
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B
Yeah.
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A
Oh my God. Wait a minute. That's a whole. That's a can of worms. Okay, how much is the death benefit?
- [08:59]
B
The death benefit's about a million. The cash value is 171. Now it's something that, believe it or not, I was incredibly skeptical of. I still am very skeptical of. And we bought a small policy.
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A
And.
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B
My wife's name, Right. It's about $8,000 a year.
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A
Right.
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B
But it's actually, when you look there's the first couple of years, truly the cash value doesn't increase much. But now in like the 15th year of it, this year we put 8,000 and the cash value increased like 20,000.
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A
So I love how you can delude yourself. I've dug myself a hole for 15 years and now I'm finally reaping the benefit. I mean, obviously we took that same money. Let's just. I'll give you the difference.
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B
I love Joe. This is why I didn't. I almost was going to put 50,000 because the guy at the time, the guy's like, put all the money Instead of your 401k, put it here.
- [09:51]
A
What in. Okay, so just to be clear for everyone listening, if Paul and his wife. 15 years ago, right. Remember, he's 57. So 15 years ago wasn't like a spring chicken. But you know, you were in your early 40s. If you'd bought yourself a 20 year term policy then and put the money in some, you know, mix of funds or just put more money into your brokerage account, I can guarantee you would have been better off. You are where you are and you probably still need some life insurance, at least until the freshman in high school is kind of through the. But that whole life is going to be something you can easily tap into.
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B
We do have term insurance too. So we have term insurance for a lot, for another, you know, 2 million each separately. And then also work included with work is another like, you know, couple hundred thousand, 2x salary.
- [10:44]
A
So how much money do you guys spend?
- [10:47]
B
So living in a big city is expensive with kids and school and you know, all those kinds of things. I would say to be conservative, when I looked, I looked at the last two years of our bank statements, it just took an average.
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A
Yep.
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B
And I would say it averages about 25,000amonth.
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A
All right, That's a real number. And if you were to think about this off ramp. Okay. And you said how, when are we talking about like right this second or in a couple of years? Like what are your, what's your thought process?
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B
I'd like to say no more than five years. My goal would be, I'd like to step off in no more than five years.
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A
Three to five years would be like good, right? Yeah.
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B
I mean, I feel, I'm grateful. I, my, my, my gig is stressful and it's incredibly all consuming. But like I, but if we could.
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A
Get you done at 60, right, and then at age 60 for let's say how long you'd work. Just give me an idea, like what you think about an off ramp. Number one, what could you guys make and number two, how long you would do that for?
- [12:00]
B
Well, and this is where the age difference helps. My wife is six years younger. She, and the type of work that she does, you know, she loves what she does, which is awesome. And so I think she, she'll probably stay, you know, at least until she's 65. Right. So, wow, that turns me into my, you know, I'm already in my 70s.
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A
Yeah.
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B
I feel like we have the buffer, you know, she's, you know, taking home with, with her bonuses probably, you know, 220.
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A
So. But, but when you think about that, your, your three year time horizon, it's a pretty low bar because she's making 220. I mean, I know you make more, but like that's a huge chunk of money that she'll keep making. Instead of you making 300, you know, could you make 100 and be happy doing something?
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B
Yeah, that's exact. That's exactly my point.
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A
Okay.
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B
I'm talking about I want to work at a non profit. I want to go each, I want to go. I literally want to like say how can I do something where truly it's more about giving back than it is like trying to make it the last dollar in revenue because I've got to pay for $90,000 of college.
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A
Okay. So in three years, I mean three to five years, but let's just say three because you, you will have already saved like working for Three more years, you can throw a little bit more Money in the 529 you can, you're saving more money. But then at your age 60, you're done. You make 100. She keeps making her 220. You keep doing that for I don't know how long, five years, you'll do your 100, maybe you'll do a little bit more, I don't know. But this works to me. Even though you spend a lot of money because you're going to basically float your lifestyle, not 100%, but like between the two of you, you will also, I guess your expenses will probably go down because the kids will be gone. But let's not even contend with that. Let's say that of your brokerage account and of the deferred comp and all this stuff, that money is out there, you will fund the difference between the 25 grand a month you need and the money that's coming in. Right? So of your portfolio, we need gross out of the portfolio. Probably you would start tapping that pre tax retirement fund, right? You would get that money out and you would probably take another 10 or 15 grand a month out of your traditional retirement funds. And that's what you would do until you claim your Social Security and then it would be less. I think you can do this. Actually, I feel pretty good about it. Mark, do you agree that even though, so we spoke to somebody right before we got on the line with you and, and that person spent like really low amount of money and saved a bunch. You've saved a lot of money and also spend a lot of money, but your wife's willing to work and that does a lot of the heavy lifting for you. So I think this works. Mark, do you agree Yesterday's caller spent 5,000amonth, these guys 25,000amonth. But both situations work because like you said, the wife loves her job, plans to keep working, she earns a good living. They have a lot of money already saved. Yeah, I think it works. I think it works too. And I would even suggest that, I mean, I don't know how you guys like are really thinking about the timing of it because it doesn't really matter because you can get your health benefits through your wife, right?
- [15:24]
B
Yeah, exactly. Because right now we get them through me. That's what. Another thing that I think is A plus is when I'm not worried about, you know, waiting to get on Medicare when we're 65.
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A
Okay, now let me tell you what's going to blow this plan up. Do you Want to know if you desperately AI crashing. No, I don't care about that. That'll happen or it won't happen. But if you're like, I want to buy something in the warm weather, I would not do that. You need your money right now. I think that we need to see really what happens. Like, I think you're. If you want to buy something, then the, the choice will probably be. You said, what did you say? Three bedroom. That like you want to buy some. Let's just pretend you bought a 500,000. 500,000?
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B
Yeah.
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A
I don't think you could do that. I would rather you rent and do. And like, just. Why do you need us? Why do you need a second place that's just gonna be.
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B
So, so here, here was the thinking, Joe. Yeah, that was the other thing. We were thinking about buying a place using as a short term rental, taking advantage of depreciation for the first, you know, couple years. Only use it a couple weeks a year and, and meet all the rules, do everything by the book, of course, and then eventually convert it into a, you know, regular home. But we've already depreciated it and gotten the advantage, you know, the tax advantage from.
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A
Sounds very exciting. And I'm not interested. Want to do that? That's fine. Don't spend too much on your second place. Have you ever done any, have you been a landlord?
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B
I've not. So this is, I haven't said I've done it. We're thinking about it. So.
- [16:51]
A
Okay. Okay, fair enough. I am not, I am not a great fan of that. I think that I would be very careful. Okay. Okay. If you want to do it and you know, it's. I would rent first. Taste where you're going to be, try it out and then maybe. Okay, we say, oh, I found this. Here's what I think we can do and assume all the worst case scenarios and if we don't blow through all of your money, then maybe. But I'm, I'm, I am not a huge fan of trying to walk into the real estate market in my 60s, never having done that as a landlord. So I think that's some. Unless, like you walk. Unless you said to me, oh, you know what? We rented for three years in this southern place, we love it. We are selling our city apartment, we're taking $1.2 million, we're buying another place for, you know, 800,000 in the Southern climate.
- [17:47]
B
That is. And that is something that we've been debating. I keep saying the flip. I keep saying to my Spouse, we should sell our place and rent and then buy a place in the warmer.
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A
Weather and try everything out first. Please do make no big decisions, but we try it out. Okay.
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B
Okay. Thank you for, for that. That's good. Good feedback.
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A
All right, now, last question. Do you have your estate documents?
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B
We do. We've got Will's will and there's a trust in there. Forget exactly how it's set up.
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A
But.
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B
But it's.
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A
You got it. Yeah, it's all fabulous. Okay. You manage the money yourself, right?
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B
I do, I do. You know, I had a degree in finance. I will just mean I know anything. But my point is I feel comfortable with it. But at some point, I'm also trying to figure out does it make sense for optimization for taxes and so forth to go somewhere? I just. The idea of paying someone 1% of assets under management seems insane though, so I don't like that model.
- [18:52]
A
Okay, well, you might want to pay somebody to do some planning work for you. I think what would be helpful would be to have somebody analyze that insurance contract that I think would be worthwhile. Even if you said, I want to pay someone, you know, for five hours of time, or it's probably wouldn't even be that much. Someone needs to look at that policy. You can find a fee only planner who you can say, hey, I need a third. A second opinion as to whether I should keep this or whether I should extract the cash value from it. And do I have enough life insurance in general and that I think you can pay somebody to do an insurance analysis for sure. Sounds good. All right, we're going to hop off because I got other people to talk to. Paul from Chicago, you are no longer at a crossroads. Get ready. You got a clock that is ticking three years from now. It's very exciting. Hey, are you thinking about downshifting? Are you thinking that, you know. Oh, no, actually, what I really want to do is I want to do something really incredibly lucrative. I just want it to be time limited. If there is something going on in your life and you got a few bucks or you don't have a few bucks and you need some help trying to figure out how to make this goal or this dream a reality, get in touch with us. Go to jillonmoney.com, click the contact us button. Write us a note. If you'd like to come on the air, just check the box. Mark will do. Everything else, check out all of our content that lives on the website. Jillonmoney.com just bookmark it. You know you want to come back. All right, you can subscribe to us on the Odyssey app or wherever you find your favorite podcast. Please lift someone up. Change your work, change your wealth, change your life. Thank you for listening and we'll talk to you tomorrow. Are you thinking about starting a business in the new year? Well, your business identity is everything and it shows what your business is about, from what customers see to what they don't like operating agreements, meeting minutes and compliance paperwork. Get more for your business, more privacy, more guidance and more free resources with Northwest Registered Agent. Northwest Registered Agent has been helping small business owners and entrepreneurs launch and grow businesses for nearly 30 years. Northwest makes life easy for business owners. They don't just help you form your business, they give you the free tools you need after you form it, protect your privacy, build your brand, and get your complete business Identity in just 10 clicks and 10 minutes. Visit www.northwestregisteredagent.com Jill Free and start building something amazing. Get more with Northwest registered agent@northwestregisteredagent.com Jill Free hey, this is Richard Deutsch, the host of the Sports Media Podcast. If you're interested in what's happening with all the places where you consume sports, the sports media podcast has you covered.
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B
I've been turning down interviews all week. Coda Copy reached out Oprah, George Stephanopoulos.
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A
So I said no.
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B
I was booked on the Deitch podcast before the Taylor Swift phenomenon. I must live up to my responsibility.
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A
Listen wherever you get your podcasts.