How to Negotiate a Raise in a Tough Economy (w/ Brown Ambition’s Mandi Money)

Summary

NerdWallet's Smart Money Podcast: How to Negotiate a Raise in a Tough Economy (w/ Brown Ambition’s Mandy Money)
Release Date: June 9, 2025

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In this insightful episode of NerdWallet’s Smart Money Podcast, hosts Sean Files and Elizabeth Ayola delve into the art of negotiating a raise amidst economic uncertainties. Featuring Mandy Woodruff Santos from the Brown Ambition podcast—a renowned career coach and personal finance expert—the episode offers practical strategies and inspirational stories to empower listeners in their financial and professional journeys.

1. Episode Introduction

The episode kicks off with a light-hearted icebreaker between hosts Elizabeth Ayola and Sean Files, setting an engaging tone for the discussion ahead. They introduce the main topic: compensation negotiations and career strategies in an unpredictable economic landscape.

2. Introducing Mandy Woodruff Santos

Mandy Woodruff Santos is warmly welcomed as an honorary "nerd" and introduced as an award-winning career coach, personal finance expert, speaker, and writer. Mandy shares her journey from being a financial journalist at Business Insider and Yahoo Finance to founding her own podcast, Brown Ambition, aimed at centering conversations about finance for women of color.

Notable Quote:
“Business Insider... I did it until it couldn't make any money off that. So I started Brown Ambition, which is now my main focus.”
— Mandy Woodruff Santos [03:27]

3. Mandy’s Career Journey and Building Brown Ambition

Mandy recounts her transition from traditional financial journalism to creating a platform that resonates with her identity and audience. She highlights the challenges she faced in corporate environments and the liberating decision to launch Brown Ambition as a side hustle that became her primary endeavor.

Key Points:

• Starting Brown Ambition: Mandy felt the need for a more authentic voice in personal finance, especially for women of color.
• Success and Growth: Through perseverance, Mandy grew Brown Ambition into a successful venture, allowing her to 10x her salary over a decade by strategically navigating her career moves.
• Mentorship: A pivotal moment in her career was advice from her mentor, Ray Metoyer, emphasizing the importance of always seeking new opportunities and leveraging them to secure deserved compensation.

4. Strategies for Negotiating Raises

Mandy shares actionable strategies for effectively negotiating raises, especially in a challenging economic climate.

Notable Strategies:

• Know Your Market Value:
  “You have to know your market value in order to go out and assert your value.”
  — Mandy Woodruff Santos [06:36]

  Understanding your worth in the market is crucial. Mandy advises continuously researching and staying informed about industry standards and compensation trends.

• Leverage Opportunities:
  “I had a lot of opportunities come to me because I never had to apply for those roles. People came to me with opportunities.”
  — Mandy Woodruff Santos [06:26]

  Mandy emphasizes the importance of building a reputation that attracts opportunities rather than relying solely on job applications.

• Transparent Conversations:
  Establishing open dialogues with peers about compensation can demystify salary negotiations and provide valuable insights.

• Creating Your Own Projects:
  For those struggling to find higher-paying roles through traditional means, Mandy suggests embarking on entrepreneurial projects that showcase skills and attract potential employers.

Notable Quote on Negotiation:
“I think loyalty doesn't pay. Loyalty feels good, but it doesn't pay.”
— Mandy Woodruff Santos [12:07]

Mandy underscores the importance of prioritizing financial growth over unwavering loyalty when it hampers your earning potential.

5. Listener Money Question: Balancing Roth vs. Traditional Retirement Accounts

The episode transitions to a listener segment where Mitch from California seeks advice on optimizing his retirement contributions between Roth and Traditional 403B accounts.

Mitch’s Situation:

• Household: Mitch, his wife, and two seven-month-old twins.
• Income: Combined household income of approximately $230,000.
• Retirement Accounts: Mitch contributes to a 403B with options for Roth or Traditional, while his wife has a 401K without an employer match.

Advice Provided:

• Maximizing Contributions:
  “Think about how you can maximize the amount that you're putting in given what's available to you.”
  — Sean Files [33:33]

  Sean advises prioritizing contributions to accounts with higher limits, such as Traditional 403B, especially when nearing the peak earning years.

• Tax Diversification:
  Contributing to both Roth and Traditional accounts can provide tax flexibility in retirement. Mandy suggests a split (e.g., 75% Traditional, 25% Roth) to hedge against potential future tax increases.

• Roth vs. Traditional Considerations:

  • Roth Accounts: Pay taxes now for tax-free withdrawals in retirement. Beneficial if expecting higher tax rates in the future.
  • Traditional Accounts: Offer tax-deferred growth and lower taxable income now, beneficial during peak earning years.

• Future Planning:
  For those considering early retirement (FIRE movement), maintaining a brokerage account for flexibility and avoiding penalties associated with early withdrawals from retirement accounts is recommended.

Notable Quote on Tax Strategy:
“Contributing to a Roth now can be a good idea because you pay income tax on the amount that you put into a Roth IRA at the front.”
— Sean Files [28:40]

Sean elaborates on how Roth contributions can be advantageous by locking in current tax rates before potential increases.

6. Additional Financial Safeguards

Mitch shares his proactive approach to financial security, including term life insurance, supplemental coverage, 529 plans for educational savings, and establishing trusts. The hosts commend these measures, highlighting the importance of comprehensive financial planning for family protection.

7. Conclusion and Final Takeaways

The episode wraps up with affirmations of Mitch's solid financial groundwork and encouragement to continue refining his retirement strategy. Mandy and the hosts emphasize the importance of community support, continuous learning, and strategic planning in achieving financial goals.

Final Insight from Mandy:
“The economy will be shifting and changing. At the end of the day, you have to believe that you have everything that you need exactly where you are and that there is no version of events where you don't find an opportunity that works for you.”
— Mandy Woodruff Santos [13:21]

This powerful reminder underscores the resilience and adaptability needed to navigate financial challenges successfully.

Key Takeaways:

• Prepare and Research: Understand your market value and stay informed about industry compensation standards.
• Leverage Opportunities: Build a reputation that attracts job offers naturally rather than solely relying on applications.
• Transparency Matters: Open discussions about salaries with peers can provide valuable insights and reduce negotiation anxieties.
• Diversify Retirement Contributions: Balance between Roth and Traditional accounts to ensure tax flexibility in retirement.
• Comprehensive Financial Planning: Incorporate life insurance, educational savings, and trusts to secure your family's financial future.
• Stay Resilient: Embrace the evolving economic landscape with confidence, believing in your ability to find and create opportunities.

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For those seeking actionable financial advice and strategies to enhance their career and personal finances, this episode of NerdWallet's Smart Money Podcast delivers a wealth of knowledge, bolstered by Mandy Woodruff Santos’s expert insights and experiences.

Transcript

[Elizabeth Ayola]

Sean, if you could pay yourself any amount of money based on what you think you're worth, how much would it be?

[Sean Files]

This is probably not the answer you want, but the limit does not exist. I tend to think that people are worth more than a dollar amount can capture. So I would say an infinite amount of money. Elizabeth.

[Elizabeth Ayola]

Well, you could save that for yourself, because I would like to be paid $50,000 a month. Just kidding. Your wallet.

[Sean Files]

That's fair.

[Elizabeth Ayola]

All right, so today we're discussing compensation negotiations and also career strategies for an uncertain market.

[Sean Files]

Welcome to NerdWallet's Smart Money podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Files.

[Elizabeth Ayola]

And I'm Elizabeth Ayola. This episode, we're speaking with a listener about whether they should prioritize contributing to Roth or traditional retirement accounts. But before then, we're gonna chat with Mandy Woodruff Santos from the Brown Ambition podcast about career strategies for an uncertain market and salary negotiat. Now I have to tee Mandy up and let y' all know that she's an award winning career coach, personal finance expert, speaker, and writer.

[Sean Files]

Mandy, welcome to Smart Money.

[Mandy Woodruff Santos]

Can I call myself a nerd now?

[Sean Files]

You're an honorary nerd now. Yes.

[Mandy Woodruff Santos]

I'm so excited. No, you don't understand. Personal finance reporter since 2010. Like, I feel like me and NerdWallet have just, like, come up together. Yes.

[Sean Files]

And it's about time we have you on the podcast.

[Mandy Woodruff Santos]

How perfect, right? Honestly, I've been waiting. Fifteen years is a long time to make a girl wait. Fine.

[Elizabeth Ayola]

So, Mandy, we're going to start with a little icebreaker here so we can all familiarize ourselves.

[Mandy Woodruff Santos]

Okay, sure.

[Elizabeth Ayola]

If you had to describe the first six months of the year, now we're entering June in one word. Technically five, I guess. What would it be?

[Mandy Woodruff Santos]

The first six words of this year?

[Elizabeth Ayola]

Yes.

[Mandy Woodruff Santos]

I can't curse. Joy. Chosen Joy. Chosen Joy. Rebellious joy. I started a community garden with my neighbors earlier than we probably should have. We live in New York. Stuff freezes. There's frost, it's cold even in May. And we made this little hodgepodge garden that has just kept growing. And every day I just get to put my hands in dirt. And no matter what is happening, I have the garden, and it's just so therapeutic. So, yeah, rebellious joy is what that feels like.

[Sean Files]

Well, you know, I'm a big gardener. I talk about it a lot on the podcast. And it's so important to have a space where you can Relax, get your hands a little dirty and focus on something big, bigger than yourself, which is your community, your garden, what you're creating and growing in your everyday life.

[Mandy Woodruff Santos]

Or if you're a newbie gardener like me, it's often smaller than yourself and will remain smaller and might die.

[Sean Files]

It's all about the process.

[Mandy Woodruff Santos]

It's a garden with a lowercase g is what I like to call it.

[Sean Files]

Well, Mandy, you are a career and money expert. Talk with us about how you got to where you are today.

[Mandy Woodruff Santos]

Oh, my goodness. Well, Brown Ambition, my baby. I started this podcast when I was coming up as a financial journalist. I was a reporter at Business Insider. I was the personal finance editor at Business Insider. And then I moved over to Yahoo. Finance and I just could not create enough content about personal finances for millennials. And I'm a black woman in the business journalism space. And I thought BI was bad in terms of like, the number of bi bros that I had to contend with.

[Sean Files]

Bi meaning Business Insider.

[Mandy Woodruff Santos]

Business Insider. Yes. I didn't realize that at the time. I thought something was wrong with me. I was like, I don't speak this language. I don't feel like I have a voice that anyone cares to hear. You know, I'm just gonna sit over here and write my stories and not speak up. And by the time I got to Yahoo. Finance, I was gaining more confidence about my financial knowledge and all of that. And then what I'm realizing is it's not that something is wrong with me. It's just that the default voice and the default tone and style and personality is just something that, as a black girl from Georgia, like, I just was not bringing. And I came up with the idea to do Brown Ambition. And thank goodness Yahoo said, no, we can't make any money off that. So I started it on and Brown Ambition became my side hustle. That is now my main focus. And I'm really privileged and honored to get to serve this audience of women of color and really put us centered in every conversation about finances. And because I quit 6 times in 10 years and I 10xed my salary from 30k to 300k over that time, I had a lot of tips to share.

[Sean Files]

I'd like to hear a little more about that specific moment where you said, I'm going off on my own. I'm starting Brand Ambition. I'm making this my full time job.

[Mandy Woodruff Santos]

It's a choice every day. Brown Ambition. Because I'm my own boss, it doesn't have to be my focus. I could be doing other things. I'M working on my first book. I just submitted my manuscript a couple of hours.

[Elizabeth Ayola]

Congratulations, girl.

[Mandy Woodruff Santos]

What a joy. For me, it's not so much about I'm gonna make Brown Ambition my focus. It's just I am so excited to do Brown Ambition. I'll just keep doing it until the wheels fall off. And the beauty of this platform is that, yes, the ad revenue is great and it's nice to be able to pay my bills with that, but it is another pathway to more opportunities that can also bring in revenue.

[Elizabeth Ayola]

It's very impressive how you said you were able to 10x your salary, is that right?

[Mandy Woodruff Santos]

Yeah, 10x. Not at one job. I had to work really hard. I had to quit my Way rich, which I came up with that expression. And it is really hard to say four years later, quit my way rich? No, but I mean it wasn't some. It wasn't like a big master plan I had that said, okay, I'm just going to keep quitting and moving to new jobs. But I quickly realized I thought I was playing the game well and I still didn't get the raise that I asked for. When I didn't get the raise, I was like, well, can I ask some equity please, sir? And it was a no. And I got a really great piece of advice from a mentor of mine. His name is Ray Metoyer. He gave me one of the best pieces of advice ever, which is that as you are killing it in your current job, always be looking and keeping an eye out for other opportunities. Sometimes you need that additional leverage to get them to give you what you deserve. And so I talk a lot about how I didn't just negotiate to get from 30k up to 300k across 6 different roles. I also put myself in a position where I never had to apply for those roles. People came to me with opportunities and that's the secret sauce that I want more and more of us to understand so we can start getting that back.

[Elizabeth Ayola]

Well, I'm going to ask you, Mandy, specifically for people who like nugget sized takeaways, how should people navigate compensation negotiations, especially in this economic climate?

[Mandy Woodruff Santos]

I think that the economy is always going to be doing whatever the economy is doing. I know that AI is not even an existential. It's like a real crisis right now and they're coming for our jobs. I get that. At the same time, you can only control what you can control. Right? One of the best nuggets I can give y' all right now is knowledge. You have to know your market value in order to go out and assert your value. Right? So by that I mean you need to be always looking for new opportunities, taking those calls if you're lucky enough to get them from hiring managers and recruiters and asking them upfront what the salary range for this position. Even if you don't want the role, you should still be having that conversation. Another way to get knowledge is to talk to your peers. I made a pact with one of my college pals that we were always going to share what we were earning, what negotiations were like, and help each other. And I made that pact with a few other colleagues and peers over the same period of time. And it just takes away all of that bs. We get scared to talk about compensation with people. You have to, like, tiptoe around it. You desperately want to know, but you don't ask the question. And once that's sort of taken away and you just have an understanding like, oh, at this table we're going to be transparent. It is so helpful because that knowledge is what's going to give you that confidence to go in and ask for what you're worth. Now the next part is, how do you get a job that's actually going to pay you what you're worth? Because knowing it, it's not the same as earning it. I was just coaching someone earlier today. She is someone who has not been earning her value for 3 years. Now she's making 50k when she should probably be making 150k because she had to take a step back. She was let go and I had to tell her, like, you're a rare case where I don't think you're going to find your next opportunity by applying and going through an interview process. I said in your case, going out and creating your own project, your own entrepreneurial endeavor and creating that using every skill set that you're going to bring to the table for the role that you want. And actually demonstrating that in like a market sample, like a proof of work, is actually going to give you the edge because it's going to give you an excuse to connect with people and tell them what you're working on. It's going to give you a reason to share what you're working on. And it's just so much more likely that you're going to be found and that people who have opportunities but are not publishing them will come to you because they think of you first.

[Sean Files]

I think we know that throwing out a bunch of job applications online is often not very fruitful. You mentioned how you have been approached by a lot of folks over your career and have found good jobs in that way. For people who maybe aren't getting those calls all the time, how do you think they can begin to drum some of them up? Is it posting on LinkedIn? Is it Instagram? What do you recommend?

[Mandy Woodruff Santos]

LinkedIn is great, but I think everyone's got the LinkedIn tip now. What can you do beyond LinkedIn? Don't get me wrong, is plenty of y' all who I know know about LinkedIn, but when you're on LinkedIn, what are you sharing? You don't need to be sharing what you had for lunch that day. Shout out a teammate, someone on your team who's done something cool. Shout out a company initiative that you had a part of. Of course, shout out if you win an award or if you get a promotion. But day to day, what are you excited about spotlighting in terms of your skills? The next thing is get off the Internet. People are outside now. We're outside. I don't think everyone's got the memo since post Covid. We are outside. We are meeting in person. I signed up for my first national association of Black Journalists convention in six years. I think putting yourself in those spaces, we have to get back out there. I don't care if you're an introvert, but you have to be putting yourselves into a room where you can bump into someone, where you can strike up a conversation, leave an impression. And you just can't get that from the Internet.

[Elizabeth Ayola]

Mandy, some people may not actually be looking for a new job. They may actually like the job they're at, but just want to be paid more. So for people who are comfortable where they're at but want higher pay, what are some ways that they can negotiate their salary? And then second part is if their employer says, nope, we're not giving you that extra $10,000 more, are there other things that they can negotiate?

[Mandy Woodruff Santos]

Oh, absolutely. I mean, we're at the mid year point, right? We're six months into the year. If you have a mid year check in, this is the. And what I like to say about the mid year check in is for a lot of hiring managers, they're not fully into it. It's not like the end of year check in. However, I would be planting the seeds of I want that promotion, I want that raise right now. I think you need to adjust your expectations for how quickly that can happen. I think the mid year check in is a great time to say, to let your hiring your manager know, like, I want this. I'm going to be annoying about it. I'm going to ask again. So by the time they're in Q4 of this year, which is when a lot of managers thinking about what job wrecks they're going to be asking for, what budget they're going to be asking for, for promotions, for bonuses, for new talent, that's kind of happening toward the end of the year. And if they remember you back in June being that squeaky wheel and asking for more, please, they're just more likely to think of you then. So I think it's important to make your case, go in there and say, hey, my market value based on my own research is actually 20% more. What can we do to get me closer to that market rate? I love what I'm doing here. I don't want to go anywhere like, let's make this happen. I want to be sure I'm paid commensurate with my market value. That's like the bare minimum of what you can do, even better is to have a competing offer. And that is the ultimate leverage. Of course, you don't want to go into that conversation without thinking about the what ifs. What if they say no? Do I really want to walk away and take this opportunity? Hopefully, yeah. Because loyalty doesn't pay. Loyalty feels good, but it doesn't pay.

[Sean Files]

Something I've been hearing from your advice so far is that it's really important to know your narrative, understand the skills that you bring to the table, where you want to go in this story that you're creating, and then also know how to pitch it. Whether you're pitching it to someone that you meet at a networking event or your own hiring team, would you say that's accurate? And is there anything else that I'm missing there?

[Mandy Woodruff Santos]

Storytelling is essential. People want to root for someone whose journey they can understand. And I think what trips up or not think, because I talk to women almost every day about this, we've got to own our story. And I don't mean own and embellish. Don't embellish anything. Just give them the raw, the real, the gritty. You know, tell them where you've been, why you made the choices you did to a certain extent, and own it. And I don't care if that means owning a career break for mental health challenges, if it means owning the fact that you took a step back because you were caretaking, like own that, all of a sudden the other person on the side of the table is like, woo, I want you to win. And it doesn't matter so much about that gap in your resume.

[Elizabeth Ayola]

Mandy, what is one key takeaway for everyone listening who's like, the economy is killing me. I need more money and I need to ask for more money, whether it's through a new job or my current job. What is the one tip that you have?

[Mandy Woodruff Santos]

There's no rules. I don't have to just do one. Okay? But the big one is the economy will be shifting and will be changing. And at the end of the day, you have to believe that you have everything that you need exactly where you are and that there is no like, there is no version of events where you don't find an opportunity that works for you. The story just maybe hasn't played out all the way yet, and there may be some chapters you didn't expect to read. There may be some little side quests you have to go on, but it's all part of the journey. And along the way, community will be the thing that is going to separate people who are really struggling from those who are able to bounce back a lot quicker from the side quests that have gone awry.

[Sean Files]

In some ways, that's worth more than a single raise that you're getting because that'll pay dividend throughout your career.

[Mandy Woodruff Santos]

Money's good too, Sean. But yeah, that's true.

[Sean Files]

You're right. I am pro money as host of this money podcast.

[Mandy Woodruff Santos]

Yes, everything all at once.

[Sean Files]

Mandy Woodruff Santos, host of the Brown Ambition Podcast, thank you so much for coming on and talking with us about your journey and your compensation negotiations.

[Mandy Woodruff Santos]

Thank you for having me.

[Elizabeth Ayola]

We're about to get to this episode's Money Question segment where we talk with a listener about how to decide between putting money in traditional and Roth retirement accounts.

[Sean Files]

But before we get into that listener, I've got a question for you. What is your money question? That financial thing that keeps you up at night, or that goal you just can't seem to make progress on?

[Elizabeth Ayola]

Maybe you have some follow up questions for us about how you can get the raise you desire, or you want to level up your investing strategy but aren't sure just how to go about it. Whatever your money question, we nerds are here to help. Leave us a voicemail or text us on the Nerd hotline at 901-730-6373. That's 901730, nerd. You can also email [e-mail] Alrighty, let's get to this episode's Money Questions segment. That's up next. Stay with us.

[Sean Files]

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[Mitch]

Hey, guys, how you doing?

[Sean Files]

Great. Good to have you on. Let's start by hearing a little bit about your finances. Can you talk with us about how you feel things are going? What feels good, what maybe feels challenging?

[Mitch]

Overall, I feel pretty good. I've been interested in the personal finance space for a long time, so I feel like the basics I have relatively covered. The biggest thing now is I want to try and make sure that I'm optimizing my contributions to my retirement funds. And the biggest aspect within that is I have a 403 through my company and they give me the option within the 403B to contribute to a Roth or just a traditional 403B. So that's where I'm getting a little confused as far as what the advantages are on each different side and what the disadvantages might be.

[Elizabeth Ayola]

Where do you work, Mitch? Because I know 403Bs are usually designated for nonprofits, right?

[Mitch]

I work at a medical center called City of Hope in Southern California. So we deal mainly with cancers. I deal with leukemia, lymphoma anything like that. So we do different types of transplants and chemotherapy.

[Elizabeth Ayola]

So you're a hero, basically.

[Mitch]

No, no, no, no, no, no. Don't be thrusting that on me.

[Sean Files]

I want to hear a little more about your household finances. What's your family situation like?

[Mitch]

Like, it's my wife and I and then we have two relatively newborn twins. They are seven months old. Congratulations. Thank you so much. They, they're finally calming down a little bit. So that's where I'm able to jump back in, make sure that we're all set up and everything like that. So my wife and I both work, we're both full time employees. She has her 401k and then I have my 403b. The individual finances and spending obviously has gone up a tiny bit, introducing two little family members. But I think that's where the aspect is, making sure that we're as set up for the future as we can be. So that that way our kids don't have to worry about us and we can kind of focus on them.

[Sean Files]

And has becoming a parent changed the way that you and your wife talk about money or how you think about it personally?

[Mitch]

Yeah, I definitely think that it was a little bit easier prior to kids. Cause I think that it was like, I love finances, I'll just handle it. Like it's fine. But now if anything were to happen to me, I need to make sure that she's as prepared as she can be in order to be able to kind of not take over the finances, but like just kind of understand how the system that like I have works. So it's definitely created a lot more intentional conversations around money and making sure that we kind of understand what's going on, what the goals are and then if anything were to happen to either of us, how we're protected and how it kind of goes from there.

[Elizabeth Ayola]

I love that you and your wife are now thinking about ways to protect your family financially now that you have two little bundles of joy. So what kind of protections have you been thinking about? We know that you're trying to contribute to retirement accounts. Are there any other kind of financial investments or safeguards that you're putting in place?

[Mitch]

We both have term life insurance, so we both have it as like the casual one time salary that's like free through our workplaces. And then I put supplemental on both of ours through my company so that we're covered up to, I think that like I'm up to like a mil and then she's like 750,000. So if either of us pass like it immediately pays off our mortgage and then we kind of have that aspect. So that's one way. And then we've started 529 and then we just set up our trust as well. So I think we're relatively covered. But I'm not, you know, I'm not.

[Elizabeth Ayola]

I'm not sure that you need us, Mitch. It sounds like you're doing all the things.

[Mitch]

No, no, no. I, I need somebody to tell me I'm doing it. Okay. That's like my big thing.

[Elizabeth Ayola]

You're doing amazing. Thank you.

[Sean Files]

So much. Of money conversations and financial planning are just getting that gut check and the perspective of someone else. So we're happy to provide that. But it does seem like you are doing things pretty well overall. One last area I want to hear about is emergency savings. Where are you there?

[Mitch]

I probably need to get it up a tiny bit more. My workplace is really stable from like the standpoint of being let go or anything like that. I'm a nurse, so it's very difficult for that to happen. I'm also unionized, so it's even extra more difficult for that to happen.

[Sean Files]

Nice.

[Mitch]

So we kind of have a, I would say a four to five month emergency fund just sitting in our high yield that way if my wife wasn't able to work anymore, if we just kind of need to take a break and go down to one income for a minute, we have that option at least in the short term to kind of figure that out.

[Sean Files]

A general guideline is that if you are in a two income household, you can probably get away with a three month emergency fund. The fact that you think that your wife might stop working for a period of time makes me think that you might be okay where you are. But if you are a one income household, you might want to get that up to closer to six months just so you have a better cushion. So think about that as you and your wife are talking about whether she might want to pull back from work and then you might want to save a little bit more if you can.

[Mitch]

Perfect. She's in a tech field, so who knows kind of where that's heading.

[Sean Files]

Well, let's get into some of your specific questions around balancing Roth versus traditional with your 403B. How have you been saving for retirement thus far? What's been your approach?

[Mitch]

I have the automatic contribution set up through my workplace. So I've been kind of hovering between. While we were pregnant with the babies, I was down like 8% just so that we had a little Bit more cash on hand, and I'm slowly working back up to trying to get. Get both of us back up to the 15%. It's not maxing, which is my next goal, I think is to max those accounts. But yeah, and then I split pretty evenly between the Roth side and then the traditional side. So that's kind of been my approach so far. I didn't get enough information about it, and it just kind of seemed something that I wanted to dig into a little bit more.

[Sean Files]

Do you get a mash from your employer?

[Mitch]

Kind of. So they do it a little weird. I have a 401A as well, where they contribute to it, regardless of what I put in. So right now it's 2%. When I hit, I think, six years of service, it will move up to 6%.

[Sean Files]

As you're calculating the percentage of your income that you're contributing towards your retirement accounts, include that 2% match that you're getting as you work toward 15% or maxing it out, whatever you would like to have as your goal.

[Mitch]

Okay, perfect. That's good to know.

[Sean Files]

So now let's dig into how you can split your money from Roth versus traditional. I guess one question behind this is, what are your goals behind splitting it between these two different accounts? Just because you think it might be a good idea or do you have any motivating factors, specifically, I think it.

[Mitch]

Might be a good idea. And then also I know that, like, Roths are kind of like a powerful tool. And so that's where I just don't understand if they are different between the Roth IRA and the Roth 403. I know that kind of when it comes to retirement, what I've been told at least, is to have different buckets that I can pull from between taxes, with the traditional being take the taxes then, Roth being take the taxes now. And so trying to separate it to where I have a relatively even amount between all of those different buckets that I can pull from in retirement.

[Elizabeth Ayola]

So the main difference between a Roth IRA and a 403B is in the contribution amount. So with a 403B or 401K, you can contribute a lot more than you can usually to a regular Roth IRA account and also in the investment options. So with the former, you tend to have more investment options, whereas with the latter, you might have fewer.

[Mitch]

Gotcha. That's what it seems like it comes down to, is like the investment options. That's like, the main aspect of my question is my Roth 403B. I can contribute. I think it's like 20 something thousand compared to a Roth IRA which is around 7,000. I think I have pretty good selections when it comes to my workplace. I have the target date retirement funds, so I feel like it's like a decent idea. And then I just don't know if I like before I max, should I even contribute to a Roth ira? Is there any aspect of that? Am I missing out on something if I don't finish? And then when can I withdraw from a Roth IRA compared to my retirement accounts within my employer? So like my 403B for example.

[Sean Files]

So in general you can pull from your retirement account a Roth IRA tax and penalty free. When you're 59 and a half. There are rules around 403s and 401ks where if you retire from that employer you can withdraw from their account at 55. So it's a little bit more flexible in that regard. But I want to talk about contributing to a Roth IRA specifically for you because a lot of people who are high earners can face some limits on what you can contribute, if you can at all. So you're a nurse. You said that your wife works in tech. I'm gathering that you guys are probably high earners. What's your household income?

[Mitch]

We're at about 230,000 between the two of us.

[Sean Files]

So for those who are married filing jointly, the phase out range for contributing to a Roth IRA in 2025 is between 236,000 and 246,000. So you're a little close to that but you're not at it yet. Do you anticipate that you might have any other income coming your way this year?

[Mitch]

I think that this year I just got my raise and so it might push me above that. Thank you. I am an hourly employ employee and so is my wife. Like she works very exact hours compared to mine, which I work variable depending if I need to stay over or not. So it can fluctuate more higher than lower. I feel like I'm going to be flirting with that line like you were talking about. That's where it gets a little complicated I think too.

[Sean Files]

Unless you are really unhappy with the investment options in the Roth 403B, that might be the safer bet for you because you're still getting the after tax contributions and then you have a diversified fund to pull from and terms of retirement accounts in retirement. So I caution people when they are close to that edge just to maybe not play with fire because you don't want to have to do something later on. Come Tax season where you have to pull back the amount that you took out in the Roth IRA or converted. It just gets to be a little bit messy. But I would like to talk through a little more about how much to put into a Roth account versus a traditional account. And there are some questions that can help you decide what might be best for you. So one main one is, is do you expect to earn more and be in a higher tax bracket later in your career or in retirement?

[Mitch]

Would that be my individual career or my wife and I combined?

[Sean Files]

Combined and individual. But for now, since you're filing jointly.

[Mitch]

Consider I'd probably say post like 40, 45. I feel like she'll probably stop working. Like our goal is to send her into early retirement. It kind of as soon as we can. So I feel like we'll drop off then, but for the time being we're only going up. Like I said, I'm unionized. So I have set increases every year so I can kind of map that out generally for the next career path.

[Sean Files]

So it sounds like you might be in what people call your peak earning years.

[Mitch]

I'd probably define it like that.

[Sean Files]

Okay. So in general, if you think that you might be earning more later or you'll have a higher tax bracket in retirement, contributing to a Roth now or prioritizing, that can be a good idea because you pay income tax on the amount that you put into a Roth IRA at the front. So you would be paying a lower tax rate on the contributions now versus what you would pay later. So then a traditional is often better when you are in your peak earning years because if you are earning the most that you may ever earn, you're also likely being taxed at the highest rate you may ever be taxed at. So in that case, saving for retirement in pre tax accounts like a traditional 403B or traditional IRA or 401K can be a better option because that helps you lower your taxable income. You really just are getting a better tax break from those pre tax contributions. And that is a big thing to consider.

[Mitch]

That definitely makes sense. Would it be worth it still to break it up a tiny bit? It seems like the traditional might be the best option for me as what we are describing as like my highest earning years now from a financial combined income perspective, would it be worth it still to maybe change the split like 75, 25?

[Sean Files]

That's about how I do it myself.

[Mitch]

Okay.

[Sean Files]

Because I am what people may consider is in my peak earning years too. But I want to have tax diversification and that is what contributing to a Roth and Traditional gives you as well. So how exactly you split that is up to you. And there isn't a precise one size fits all formula. I do about 75% traditional, 25% Roth, and that just helps me hedge against future tax increases because historically tax rates are pretty low right now, and we have quite the blooming national deficit. We may need to raise taxes later on to cover this. So contributing to a Roth while you're also doing traditional can help you sort of hedge your retirement bets in a way. Gotcha.

[Elizabeth Ayola]

I also split mines, so I have some going to a Roth and some going to a Traditional. And I think as much as the numbers matter, it also maybe matters when you want to pay your taxes. And I know that when I am sipping margaritas when I'm retired, I don't want to have to worry about paying Uncle Sam any taxes. So I like Roth's for that reason, but it's a personal preference.

[Mitch]

And then, Elizabeth, I have kind of a question for you. I think that you're more. I don't know if you would define yourself into the fire movement, but I know that it's. And so, like, that's definitely something I've calculated in theory, my fire number. How can I best set myself up knowing that it might be before 59 and a half? Like, is that where a different type of account would come in to where I'm not taking penalties and stuff like that?

[Elizabeth Ayola]

So obviously I can't tell you what to do, but I can just share my own personal experience. And while I don't think I'm necessarily on track to retire early yet, it's an ambitious goal that I do have. And some things that I'm doing that anyone can do to diversify is, first of all, I have a brokerage account I save in as well. I also try to live a little frugally. I say a little because I like to shop on Zara. But I do try to keep my expenses way lower than my income and just cut out unnecessary expenses. So essentially, those are the main things that I do diversify my investment. And also the pots that I'm putting my investments in and saving aggressively, I think those are like the fundamentals of fire. Really perfect.

[Mitch]

Appreciate it. Thank you.

[Sean Files]

Are you contributing to a brokerage account right now, Mitch?

[Mitch]

I was, and it was mainly for a new down payment for a house is kind of the idea. I stopped because it's hard to know where we're at with our next house and the down payment. So I pulled out of it and just put it into the high yield savings account for now. Didn't take out the contributions, but I did just change where I'm contributing. So I'm just saving in cash right now to the High Yield Yield. That's the only brokerage account that I have set up for now, but it might be worth looking into for the future.

[Sean Files]

Yeah. Well, if you are interested in the fire movement, that is a way to save and invest without having to deal with a lot of the red tape that comes with these tax advantaged accounts like Roth IRAs and 403BS. They just have a lot of very particular rules that you don't want to get on the wrong side of. So paying capital gains on what you have in a brokerage account is a lot of folks who are going the fire routes primary way beyond, you know, the other standard retirement accounts.

[Mitch]

That's perfect.

[Elizabeth Ayola]

And some people like I hope to do because I don't want to be doing absolutely nothing, will still work part time. Right.

[Mitch]

I don't mind working it. I like the option of not having to do it if I don't want to.

[Elizabeth Ayola]

And now we're besties. Yeah, now we're besties because you get it.

[Mitch]

The barista fire.

[Elizabeth Ayola]

Look at you listening to the show. Exactly.

[Mitch]

I had to do my research. Come on.

[Elizabeth Ayola]

I love it.

[Sean Files]

Mitch, I'd like to hear a little more about how your wife is saving, how she's thinking about this. Is she similar to you or does she have a different approach?

[Mitch]

She's similar to me because I set it up for her. It's basically identical. But now we'll be able to have a discussion as far as what she wants to do and have a little bit of a better idea as far as what might be best going forward. She doesn't have a contribution match anymore. They took that away. And so I don't know really what to do with, with that. If I should continue to invest within the 401k like I want to invest. It's just where and if it should.

[Sean Files]

Be with the company or not with your wife's 401k.

[Mitch]

Yeah.

[Sean Files]

Again, you're getting a great tax advantage by reducing your taxable income by putting money into it. So even if you aren't getting a match, it's still really helpful to be using this account that you have access to. Many people who don't have that opportunity are really struggling to save enough for retirement. Because. Because as you mentioned before, the contribution amount is, I believe in 2025. It's $23,500 that you can put in on your own. That is much higher than the $7,000 that you can put into a Roth IRA. And those are both the limits for those who are under 50. So think about how you can maximize the amount that you're putting in given what's available to you.

[Mitch]

Makes sense.

[Sean Files]

One last thing I wanted to throw in as it relates to your wife's retirement contributions amount as she thinks about different accounts that are available to her since she doesn't have an employee match. Some financial advisors will suggest that folks contribute to their employer retirement account enough to get that match. Obviously, it's not an option for your wife. Then go to contributing to an IRA enough to max it out and then go to an HSA if they have access to that and then return to their employer's plan and then work on maxing that out. Do you guys have HSAs that you're contributing to?

[Mitch]

We just did her elections and so it starts in June and my son has a procedure on June 3rd, so I wanted to play it safe. And we didn't know how much with a high deductible plan plan that would cost. So next year our plan, it does, it does have the option to drop down to where we do have the eligibility for an hsa, but we won't do that until next year, unfortunately.

[Sean Files]

Well, there are trade offs that come with having a high deductible healthcare plan and an hsa. So consider all of the health expenses that you and your family might have and see what might be most advantageous to you. Well, Mitch, we've run through a lot around retirement savings and different options that you have. How are you feeling now and what do you think you might do next?

[Mitch]

I feel good. I think it's always nice to get a little bit of reassurance. Insurance is definitely my big thing. And then just with the aspect of potentially changing my split from 5050 between traditional and Roth and potentially moving it a little bit more towards traditional and understanding why that would benefit me compared to just like shooting in the dark and just kind of not fully understanding.

[Sean Files]

Well, thanks for coming on and chatting with us, sharing your story a bit. We're really excited for you and your young family. Keep us updated on how things go for you.

[Mitch]

Thank you so much. I appreciate you guys this time.

[Elizabeth Ayola]

And that's all we have for this episode. Remember, listener, that we're here to answer your money questions. So turn to the nerds and call or text us your questions at 901-730-6373 that's 901-730-N-E R D. You can also send us an email at podcastnerdwallet.com join.

[Sean Files]

Us next time to hear about how you can get your credit back on track after some missteps. Follow Smart Money on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes. And if you're listening on Spotify, drop us a comment right on the platform.

[Elizabeth Ayola]

And here's our brief disclaimer. We are not your financial or investment advisors. This nerdy information is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances.

[Sean Files]

This episode was produced by Tess Vigler. Hilary Georgie helped us editing. Nick Karisimi mixed our audio. And a big thank you to NerdWallet's editors for all their help.

[Elizabeth Ayola]

And with that said, until next time, turn to the Nerds.