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A
Support for today's episode comes from Square. Whenever I need a jolt in the afternoon, I head over to my local coffee shop and they use Square. It makes the entire experience effortless, from ordering online to checking out at the counter. When a business uses Square, you can just tell they've got their act together. And let's face it, running a business is hard work and you're constantly juggling at payroll, online orders, and customer service. Instead of forcing you to manage multiple platforms that don't talk to each other, Square brings your entire operation into one. Smart Transparent with no hidden fees or contracts, it works in real time so you can focus on your passion instead of administrative headaches. If you're starting a business or running one that deserves better tools, Square helps you sell, manage and grow without slowing down. Right now, you can get up to $200 off square hardware at square.com go jillonmoney that's sq u a r e.com go jillonmoney run your business Smart get started today When a child faces a serious medical challenge, a children's hospital quickly becomes a family's entire world. Whether they're helping a child recover from a sudden injury or helping them manage a long term condition, these hospitals provide an irreplaceable community resource. Children's Miracle Network is dedicated to supporting this specialized care by securing the crucial funds these medical centers depend on daily. Children's Miracle Network is a leading charity impacting the health of all kids. They raise funds for one hundred and seventy children's hospitals across the United States and Canada, protecting health care access for millions of families. Their fundraising network brings together corporate partners, local grassroots programs, and everyday donors like you and me. Your donation directly empowers your hometown hospital to use those resources exactly where they are needed most. Wherever you see the Children's Miracle Network balloon, you're helping a local child receive care. Visit cmn.org today to learn more and make a donation to your local children's hospital. Welcome to the Jill on Money show. It's Wednesday, July 8th, and we are here answering your financial questions, if you have one. It could be about anything financial. It could be about retirement, which we hear from you a lot about. But it could also be about maybe going back to school. Maybe you've got a new job. Maybe you're thinking about upsizing or downsizing. Maybe you're thinking about saving money for college. Whatever's going on, 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. Just check the box. Now when you see that box, it's going to say audio or video. If you want to come on our other show, you know, if you're young and starting out, like, honestly, if you're under 45, check video. Come on the show with us and we'll do it. And that's our other show, of course. That's called Money Moves, where you can check it out. It's video, it's audio, it's me, it's Mark. It's all so good. But here at Jill on Money Land, we are always happy to hear from you again. Everything that we do lives on our website@jillonmoney.com today we are talking to Grace from Arizona. Now, Grace, I just came from London where it was a bazillion degrees and it was a bazillion degrees in New York. Now I'm talking to someone in Arizona. How do you cope with the heat? You just don't go out. Right. And everything's air conditioned, I presume.
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B
Exactly. You go from your air conditioned house to your air conditioned car to your air conditioned office and then reverse.
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A
Uh huh, exactly. By the way, Mark, just Mark and I always have like a running thing because I say that the subway system in the UK is not my favorite. Just so you're clear, Mark, about four of the seven main lines in London have no air conditioning. Zero. That's bad. Yeah, that's bad. Okay. Anyway, Grace, we digress. What can we do for you?
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B
Well, I wanted to talk about my situation. I'm looking at really retiring in eight or nine months and I think we're good. But then I have questions about, you know, how to take this lump sum pension if that's offered when I retire. And then just, you know, we've been decent savers, but how do we be more tax efficient with taking out these traditional monies?
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A
Grace, how old are you?
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B
I'm 58.
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A
Okay, and you are married and you have someone, you're both working?
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B
I am married and my husband actually retired last year.
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A
Ooh, how old is he?
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B
He's currently 57.
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A
So he went early. Does he get a pension or not?
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B
He does.
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A
What's his pension amount?
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B
Do you want gross or net?
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A
Whatever you want.
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B
Gross is about 3,800.
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A
3,800amonth? Gross. Okay, great. And how much are you earning right now, Grace?
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B
I also retired about eight years ago. What? Yeah, my husband and I, we were both in public safety and so jobs were stressful. As soon as we kind of could get out. We kind of got out. Okay. So I actually retired about eight years ago at 49, and I have a pension.
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A
How much is that?
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B
5,400amonth. And then less than a year after I retired, a job opportunity came up and so I went back to work full time. Different. It's still public service, but I work. I've been working full time for almost eight years.
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A
But you have $9,200 a month of gross income, income from the two pensions?
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B
Correct.
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A
Okay, and then how much are you making now?
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B
Annually? It's about 140.
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A
Do you guys have kids?
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B
We do. We have two young adult children.
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A
How old are they?
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B
Well, one is 25 and one is 28. I guess not so young.
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A
No, that's 20s will get you young. Okay. Are they launched or you have to help them. What's going on?
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B
One child, I would say is 90% launched, but he's living at home because he's saving up for a house. And the other child is in last year of grad school.
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A
Okay. Will that graduate degree get. Get them on their own? You know, the way it's what, you know, like medicine or something like that, where, you know they're going to get a job or is it like philosophy and like, I hope I get a job.
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B
No, it should be fine. Although there's going to be a period of residency, so those few years are going to be a little bit on the cheaper side, but then they should be fine.
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A
Okay, great. That's good. In terms of your own spending, what are you guys looking at in terms of just like, not just to cover your needs, but to live your life the way you guys want to live it? What do you need right now?
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B
Since I'm still actively working, we have been consistently spending five or six thousand a month.
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A
Okay, I'm hanging up now. Goodbye. Goodbye. Mark, are you ready to go? She. We have gross income of $9,200 a month before this next pension, and they only need six grand. So what is it that you want to talk about? The next pension decision.
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B
So because I've only been working for eight years, so it'll be like eight and a half years. In nine months, I'll be able to get a small pension, and it's about 1200amonth gross. So there's the option. Oh, I should say with our other two pensions, it is the joint survivor option.
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A
Great.
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B
And so if I wanted to do that for my second pension, it looks okay. It looks, it's. It's about I'd get 10, 50 gross instead of the 1200. I'm kind of leaning towards doing that. But when I told my husband that option, he was like, no, let's not do that. Let's get the full, full amount.
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A
What's the lump sum?
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B
The lump sum is around 90,000.
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A
Okay, wait a second. I have other questions. Okay, so lump sum would be 90. What other money have you guys saved up?
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B
Can I just give it to you, like, total for him and I. Okay, do it. So we both have. In our first jobs, we had 457s. So on the traditional side combined, it's 1.3 million.
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A
Okay.
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B
And then on the Roth side, it's about 350,000.
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A
Okay, that's great. And do you guys have, like, a brokerage account or a cash account that's sitting on the side?
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B
We do. In the brokerage, it's about 160 between, like, a money market and stocks. And then we have about 75,000 for just regular savings emergency fund. Because we knew when we wanted to retire there was a large gap between, you know, for insurance and Medicare. We have about 190,000 saved up in an HSA.
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A
Okay, that's great. The. The. The one who's still in school. You. Did you guys help out with that? Did you have 529 plans? Is there any other money that's. Is there any big chunk of money that you will have to be allocated for something coming up?
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B
Well, other than possibly this last year of school, we've been able to, between us and our child and their savings and 529 and, like, savings bonds and stuff, we have so far, everything has been, you know, zero debt this last year. We might have to dip into, you know, where we're helping to pay a little bit, but we're also paying for some of their living expenses. They're out of state.
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A
How much do you think that would, like, just give me a ballpark of, like, last year of school, we're going to need to come up with blank. Give us a number to hold that.
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B
Maybe 25,000.
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A
You guys own your own home?
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B
Yes, we do.
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A
What's it worth?
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B
Seven hundred. No mortgage.
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A
Okay. Second home or other. Other real estate, Rental real estate, anything like that?
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B
No.
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A
Okay, so if I looked at your need at like, six grand a month and you wanted to also, you're young, right? So even if like we said it was seven grand a month because you want to travel a little more, you know, seven or eight grand a month, like, that's not a big deal, you'll be able to do that no matter what. I guess the question is on the pension conversation, if you just looked at your situation like we know you have a lot of money in this joint and survivor pension benefit, $9,200 a month gross. Right. You don't really need to actually have another pension. I might, you know, sort of think about that lump sum. You could roll it over into an IRA rollover. Of course that money along with your traditional 457 is the ticking time bomb that you, you just have to think about that. You know, we have to get that money either converted or we have to take that money out because it just, you know, it's going to keep sitting there and growing and growing and we don't want to create a required minimum distribution problem. You could certainly convert. You know, obviously that's a better asset for one of your, both of your kids to actually inherit, but you're in such good shape, I'm inclined to take the lump sum. Mark, are you in agreement with that or would you like to make that a pension? The monthly amount of the pension, 1200 or 1050 in the grand scheme of things, this is small potatoes and their, their existing pensions are above and beyond what they need. So I don't think we need another pension. I would take the lump sum, you know, just add it to the stockpile and you know, instead of it dying with you two guys, it'll eventually go to the kids as an inheritance. Yeah. So I think that this is a great situation. Have you thought about the, the 457 and converting or have you, Are you, is the game plan that like as you look ahead that you will just take the money out and add it to the brokerage.
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B
So first of all, you know, I am concerned about when we are Medicare eligible or two date two years before in that look back period I've wanted to convert but then it's like silly to do that while I'm still, while I still have this other. Oh, totally.
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A
That I agree with. So if it were, let's just think about this. In a year from now when you're 59, right, or 59 and a half right, you could convert for a few years and you know, again, you could just choose to stay in a certain tax bracket because you know that you're in 22, 24%. You could maybe decide that you want to do that until you're 63, no matter what. I think that it is important for, for you guys to feel like, you know, you're okay with this, you know, every time you think about taking money out of a traditional account, it's adding to your tax liability, which, yes, impact the Medicare planning. But even if you were, you know, kind of sticking with the first couple of levels of that Medicare extra amount, we're not talking about huge money, you know, we're talking about one, two, three grand a year. And compared to your whole asset base, I think it's actually more important to get that money out because listen, this 1.3 million is going to grow and it's going to be really 1.4 because you'll get that extra lump sum. And so I think that you can, you can work hard to try to minimize it and be tax efficient. At the end of the day, it's not going to change your life. It might help your kids some, right, to get a Roth asset or to get money out of those accounts that hasn't been taxed yet. It'll help you in the long run. But you know, I wouldn't, I wouldn't stress about this. These are great problems to have, Grace, really. I mean, you guys have done an amazing job. You have, you know, you, you sort of were, as you said, you sort of were like, I'm out of this one thing, but I'm doing this other thing. Now you have this third pension and it's just amazing. But I think you're in such good shape, I really wouldn't worry too much one way or the other. You're gonna be in good shape.
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B
Very good. Can I ask a question about. So in public service and with 457s you can do like this catch up situation, which, you know, when I was working the first time, we were just barely making it, you know, paycheck to paycheck. And so I just kind of didn't always contribute. And when I got this other job and I had a pension, we started to max out our annual contributions to the 457. But then there's also this three year catch up where you can do like double what the regular is. So for this year it's 49,000. So this is actually my third year, my last year where I'm contributing the max max and for, this is actually the first year where I've done it 50% Roth and 50% traditional. In the other years I really needed our taxable income to be low enough because we were like, we had our, we were declaring our kids as dependents. We were trying to write off, you know, school expenses and things like that. This year I finally Just said, I'm just going to bite the bullet and just do 50% Roth, even though it's, you know, we'll see how it turns out in the end. But is it kind of crazy to still contribute to the 457 at all and we're just kind of creating the situation?
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A
Yes. Yeah, I think I'm done with that. Mark, do you agree? I mean, there's no match. No. Yeah, we're talking nine months. I don't see the need. No, no need. Absolutely not. I think you're. You're good to go. Truly, I think that this is, like, a great situation. You're good to go. And I wouldn't. And again, it's a weird thing when you hear someone say, like, oh, no, you don't need to put money away, because you don't. You're in such a different, you know, you're. This is such a different kind of a situation for. For you guys in that, you know, you so used to saving and saving, and we're like, oh, no, you're compounding your problem. It's not a problem problem. It's just like, you don't need to. You got plenty of other money, and you can, like, collect your money and do your thing and, you know, build up your cash a little bit more, put money in your brokerage, whatever you want to do. It's great. And maybe it's like, honestly, maybe you don't even need. Maybe you're not putting money in your 457, then you're going to cash flow the last year of school for the kid.
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B
True.
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A
Right. So then we're our problem solved. I love that. Do you guys have your estate documents done, Grace?
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B
We do. We do.
- [16:47]
A
Great. From our perspective, again, not a lot of bad decisions that you could make here. So get your money, roll it over, get that lump sum, pull back on the 5457 plan and consider converting. But don't go crazy either. Everything else is fine. You're in great shape. All right, Grace. Good luck to you and happy retirement. And if anyone out there doesn't have a pension, which is the vast majority of you, get in touch with us, we're happy to talk to you. And listen. If you're in your 40s and you're listening to this and you want to know how to, like, move ahead and you're. Or you're early in your career, you want to come join us on our other program, Money Moves, then check that out. We have all the ways to subscribe and follow us on our website@jillonmoney.com but you can get this, this program as well as our sister broadcast, Money Moves on the Odyssey app. You can also go onto our YouTube channel and just check us out. All right, do that, please. And we'd love to hear from you. Okay, if you have a question Again, Jill, on money.com, contact us button, write us a note, check the right box and we'll get you on the air live. Put your hands, metaphorically on someone's back. Change your work, change your wealth, change your like. Thank you for listening and we'll talk about you tomorrow. Hey there, it's Jill Schlesinger. I'm launching a new show. It's called Money Moves. And your money is going to move. We're going to help you make better financial decisions. We're going to call out the B.S. you're finding all over social media. We're going to give you actionable guidance to make your financial life clearer, less stressful. Going to answer your financial questions and take the mystery out of your financial life. Follow and listen to Money Moves with Jill Schlesinger. Wherever you get your podcasts.