Is My Financial Future on Track?

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• 0:00Speaker 00

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• 2:22Speaker 01

  Welcome to the Jill on Money Show. It's Tuesday, November 10, and we are here answering your financial questions. If you've got one, just get in touch with us by going to jillonthemoney.com and click the Contact Us button. And don't forget to check the audio box if you want to come on the air with us. Now, you might notice that video dropdown. That is for our sister broadcast. It's called Money Moves, and you can find that on YouTube. We have a link to it. It's so much fun. We really encourage folks to subscribe to that show as well. It definitely has a different pacing and a different feel, and it's a lot of fun. We hope you join us there as well. Okay, right now, let's go talk to Kevin from New York State.

• 2:57Speaker 02

  Hi, Jill. Hi, Mark. Well, I wanted to get your opinion on some retirement planning questions I'm asking myself as I look at where I'm at and really tried to get an assessment from your expert standpoint in terms of how am I doing? Am I where I should be? And maybe over the next few years, what should I be thinking about maybe doing differently?

• 3:20Speaker 01

  Well, that's cool. So tell us, start by telling us a little bit about yourself. First, how old are you?

• 3:25Speaker 02

  I'm 58.

• 3:27Speaker 01

  And are you single or married or partnered? What's your status?

• 3:32Speaker 02

  Married and four children, so.

• 3:35Speaker 01

  Wow. Oh, my God. Are they all grown and okay? Everyone on their own?

• 3:39Speaker 02

  Yeah, everyone except I have one left, a senior in high school, and she.

• 3:44Speaker 01

  Wait a minute. You've got to be the old father in the group. Oh, my God. They're like, oh, look at her grandfather. He came to her soccer game. Isn't that nice?

• 3:55Speaker 01

  Okay, so one kid in high school. All right, great. So do you work full-time, Kevin?

• 4:00Speaker 02

  Yes, I do.

• 4:01Speaker 01

  How much do you earn?

• 4:02Speaker 02

  Currently, just over $200,000.

• 4:05Speaker 01

  Are you making a retirement contribution on that $200,000 salary?

• 4:10Speaker 02

  Yes, I'm maximizing out my percentage that I legally can, of course.

• 4:16Speaker 01

  Okay, the maximum, including the catch-up contribution?

• 4:19Speaker 02

  That's correct.

• 4:20Speaker 01

  Okay, great. Does your spouse work?

• 4:24Speaker 02

  Yes, she's a, she's in the medical profession. She works part-time, but she annually earns about $30,000 to $35,000 a year.

• 4:34Speaker 01

  And does she have a retirement plan, or is this kind of just pin money? What are we doing on that income?

• 4:41Speaker 02

  So she's in the home healthcare industry, so works for independent people and families. So she does not currently have a 401K or a retirement option in her current employment.

• 4:55Speaker 01

  Is this counting for social security purposes?

• 4:58Speaker 02

  Yes, I claim every dollar. And yeah, the last four or five years, she's been in the home healthcare industry doing this type of work.

• 5:06Speaker 01

  I just want to say that that is an industry where you are not remunerated for the amazing work that you do. So I'm just going to thank her on behalf of anyone who has a family member who's ever had care like that. It is such important work, and I can't believe how little it pays. That has to change. Does she make a Roth or an IRA contribution on this income or not?

• 5:28Speaker 02

  She doesn't, but I can go through if you want the 401K and IRA. Now, I have some long-term and short-term monies, which I can take you through the.

• 5:38Speaker 01

  Sure, let's do it.

• 5:40Speaker 02

  So in various 401K and IRA funds that I've had throughout my career, we've accumulated about $750,000 in retirement money sitting.

• 5:53Speaker 01

  Okay, all pre-tax, right?

• 5:55Speaker 02

  All pre-tax, yeah.

• 5:56Speaker 01

  Got it.

• 5:56Speaker 02

  I have about $35,000 in two individual Roth accounts. So total long-term money, when you look at what we have, we have about $785,000, let's say.

• 6:09Speaker 01

  Great.

• 6:10Speaker 02

  My wife has some independent stock money that she was given through her family. That's about $35,000 that we haven't really touched. We just leave it. I sold a condominium this past June in Florida. I've owned the condominium about seven years or eight years, and really was not planning to sell it, but got what you might call an offer I couldn't refuse through a real estate agent. So I have the proceeds that I earned from that sitting in right now in a money market account, just really on the sidelines, only because really not sure what I want to do with that. And that's part of my question for you today is maybe some options you might suggest.

• 6:52Speaker 01

  How much is in there?

• 6:53Speaker 02

  $377,000.

• 6:56Speaker 01

  So you've got this money sitting in cash. Might you want to buy another Florida or something else? Or what do you think?

• 7:02Speaker 02

  We may, we may. I'm not sure. I mean, if, let me take you through, I guess, the other two pieces to this puzzle that hopefully, you know, give you a good foundation of what I'm doing. So I have also sitting in cash, just accumulated cash that I've kept on the sidelines, another $280,000. So all told, with that, I'm somewhere around 1.4 to 1.5 million dollars in long-term and short-term cash on the sidelines, if you will.

• 7:34Speaker 01

  Okay.

• 7:35Speaker 02

  I have a home, but we paid off the mortgage, so I have really no debt whatsoever. The home is probably worth, in the market I'm in, between 450 and 500.

• 7:49Speaker 01

  But you're going to stay in this house? What do you think?

• 7:52Speaker 02

  Yeah, I will, probably for until my daughter finishes college. I'm thinking the next maybe three, four years. And then it's a pretty big home, so I'm thinking we will just move to something smaller at some point here over the next, you know, three to five-year window, probably.

• 8:07Speaker 01

  Okay. All right. So we have your cash. We have your retirement. We've got some stock floating around. You've got the proceeds from the condo sale. So now, the big question I have for you is, what do you want to do? How much longer do you want to work?

• 8:21Speaker 02

  Well, my goal was always, hopefully be able to be in a position to retire somewhere around 62. I enjoy what I do, so, you know, to the point of maybe being, I'm healthy, hopefully, and I continue to be healthy. You know, I could see myself going probably to the max of 65. But if I really wanted to just understand from, an assessment from your viewpoint, you know, am I in a position where if I wanted to stop working at 62, or at least retire and, you know, go work at a sporting goods store if I want?

• 8:57Speaker 01

  What do you figure your expenses are right now?

• 8:59Speaker 02

  Upwards of between 5,000 and 6,000 a month.

• 9:02Speaker 01

  When you look at your retirement that is social security-based, what is your full retirement age benefit from social security?

• 9:15Speaker 02

  You know, for me, I think the number, last I looked earlier last year, is about 2,400 a month.

• 9:22Speaker 01

  Your wife, I presume, would just take half of that. Is she the same age-ish, older, younger?

• 9:27Speaker 02

  She just turned 60.

• 9:29Speaker 01

  Just because she doesn't have a lot of income, I presume that it would be half of your benefit is going to be more than hers.

• 9:34Speaker 02

  It's more near their job.

• 9:35Speaker 01

  Right. Okay. So, I mean, it's kind of cool, because when you think about it, if you, your full retirement age is probably 67. And if you look at like where you are right now, you don't spend that much money. And if you think, wow, I need, let's say, $6,000 a month, what's nice to know is that, you know, you'll have half of that about just from social security. And you have all this other money that can generate money. And let's just pretend, let's pretend for a moment that you've got the 401K, the IRA. Do you want to include, I sort of feel like I'm not sure about the condo proceeds, whether we should include that or not, because you may want to buy something else, right?

• 10:16Speaker 02

  Yeah, I think, you know, when we get to the point of selling the house, we probably would buy a property. I wouldn't want to, I mean, I probably don't see myself renting. So I would probably take some of those proceeds and buy something small, you know, here in the area where we live.

• 10:31Speaker 01

  Right.

• 10:32Speaker 02

  We'll probably end up being in the, in the upstate New York area.

• 10:35Speaker 01

  Right. Well, let's just pretend that between your cash, the proceeds from the condo and some of the money from the sale of your primary, your current primary residence, I'm not going to presume that all of that money is available for your retirement. I'm just not because I think you'll spend some chunk of it, right? So let's just say that instead of you having 1.4 or 1.5, you really have more like, let's say at 1.2, okay? And then when you look at that, we would say a good chunk of it hasn't been taxed yet, right? So we have to factor that in. So we think like, it's probably more like a million bucks that you have, you know, conservatively. Now, the good news for you is, number one,

• 11:20Speaker 01

  you've got a few more years to work before you get to 62, right? The challenge that you have is that the years between 62 and full retirement age, you would be forced to be spending down some of your savings. And so if you really want to call it quits at 62, the plan is not quite as good as working till 65. I'm going to tell you that right now. Because what happens is you eat into a chunk of that $280,000 cash reserve. Or you say, you know what? I don't care. I'm sick of this. I'm going to call it quits. But you don't buy another house, another condo in Florida that you use some of that cash. You know, something has to give a little bit because we have to replace your income

• 12:04Speaker 01

  until you can reach full retirement age. So I think that you have a lot of options. You're on the right track. My sort of favorite way to look at this is say, all right, what are, what are my, you know, sort of best case, middle, worst case? I think your best case is you keep putting money away. You've got plenty of cash. You keep investing. You keep working. And I convince you to work till age 65, just so happens that that's when you get Medicare and it kind of helps you with building up your asset base. It's all great. It works. That's my best case. You wait your two years. You claim social security. You have plenty of money. It'll generate the money for you. That's your best case.

• 12:43Speaker 01

  Your next best case would be you say to me, hey, Jill, I, I kind of really, 62 is going to be it. If 62 is really the number in your head, then I think that we have to make a decision, you have to make a decision about the proceeds of that Florida condo. If you're willing to say, I'm not going to use that money to buy anything else. I'm going to use it to float those years, those extra years, while I'm not working at age 62, except in the sporting goods store, then you could still make it work. You really could. It's just that I would feel more comfortable on your behalf if you work till 65. Obviously, there's so many variables in this. I would say you're totally on the right track.

• 13:25Speaker 01

  Absolutely. You're great. There is more risk if you stop at age 62. If you really want to be in the place where you're like, I want the maximum opportunities of buying a place in Florida, also downsizing, but not really caring if I, I don't have, you don't have to cash out so much. You work till you're 65. That's it. If things are going well, like, or you're saying like, maybe your wife is all of a sudden making more money in the next few years and you can make, you know, we can revisit it. But I think you're, you're absolutely on the right track. I feel comfortable with your plan. I do think that if you don't hate your work, I'd be really inclined to just keep, keep on keeping on because it just makes the plan better and better. It really does.

• 14:08Speaker 02

  Sure. Great. This is great information. Thank you. I just have one question for you. You know, you had mentioned something, I think, with respect to moving money out of investing into your 401k and IRA.

• 14:21Speaker 01

  Yeah.

• 14:22Speaker 02

  And moving it onto the sidelines to help, you know, preserve some cash, let alone the pre-tax piece of, of the effect of 401.

• 14:33Speaker 01

  Yeah. I mean, so here's the thing. I know you live in New York and it's an expensive tax state. You do have cash. It's a weird thing. Like, you have so much cash on hand. It's almost silly for me to say like, build up that cash. Like, because I don't think you have the cash. It's just a question of like, how can we better manage this? I think that maybe if you're feeling like you want to have more of the 62 possibility and also really want to have the ability to use that money from the proceeds of the condo to buy another property, then yes, you can maybe pull back on your contribution. It's just a weird thing because you do have so much cash. It's weird to, to say like, yeah, build up your cash when you really, I mean,

• 15:15Speaker 01

  you have 200, you have more than a half a million, you have 600 grand in cash, almost seven. So I don't know. It doesn't, it's not a necessary thing. I'm, I'm inclined not to worry too much. You're going to be in a high tax bracket, but you know, you may be one of these people that, you know, when you actually, what happens is that like, because a lot of your money hasn't been taxed yet, the period between age 62 or 65 and when you collect social security, that is the time when you're going to pull out your money from your 401k and your IRA and start paying the tax at hopefully what will be the 12 or the 22% bracket. It's just paying the tax that's due while you're in a low tax bracket. One quick question. You got your estate documents done?

• 16:00Speaker 02

  Oh, yes. Yes, I do. I know you always ask that and we have will and power of attorney and everything in, in place for, for the family. So yes.

• 16:10Speaker 01

  Perfect. All right. I think you're done. Anything else for me?

• 16:13Speaker 02

  No, it's terrific, Jill. Love watching your show. I love, we love when you're on CBS and thank you so much for your time and looking at my scenario.

• 16:22Speaker 01

  If you've got something that's going on in your financial life, get in touch with us. Go to jillonthemoney.com and click the Contact Us button. You can subscribe to us on the Odyssey app or wherever you find your favorite podcasts. And please, if you wouldn't mind, leave us a rating and review wherever you listen. Try to do something nice for someone else today. Change your work, change your wealth, change your life. Thank you for listening. We'll talk to you tomorrow.