May 11, 2025 • 33 mins
An article about raising your credit score is full of bad info. Matt and Joel pick it apart.
Ask HTM: Edward wants advice about going to back to school for a more enjoyable career.
People are freaking out about social security and many are opting to snag their benefit sooner than they should. There's a lot to consider before you make that knee jerk response!
Ask HTM: Is a Roth or traditional IRA better as you get closer to retirement?
Ask HTM: Edward wants advice about going to back to school for a more enjoyable career.
People are freaking out about social security and many are opting to snag their benefit sooner than they should. There's a lot to consider before you make that knee jerk response!
Ask HTM: Is a Roth or traditional IRA better as you get closer to retirement?
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
I Am six forty. You're listening to How to Money
on demand on the iHeartRadio app.
Speaker 2 (00:07):
All Joel and Matt want to do is help you save,
invest and enjoy more of what matters. This is how
to Money with Joel lars Guard and Matt.
Speaker 1 (00:18):
Altmix k I am six Live everywhere on the iHeartRadio app.
(00:42):
This is how Some Money. I am Matt Altmix and
I am Joel Larsgard and we're glad to have you
along for the show today. By the way, if you're
looking for the right credit card for your wallet, well
you want to be able to use it responsibly. But
if you do that, if you pay your credit card
on time and in full every single month, well check
out our credit card tool. You can find that up
(01:03):
on the website at howtomoney dot com. And of course,
now it is time for the ludicrous headline of the
week and we're going to take this segment and talk
about credit. There's an article from CNBC that I am
unhappy with because the title of the article was I
don't like seeing you unhappy. How to raise your credit
score one hundred and sixty points in thirty days. Well, okay,
(01:25):
so specifically, well it wasn't the headline, it was what
was contained within the story, because yeah, the headline it
sounds promising, right, Yeah, yeah, we talk about improving your
credit score all the time. This is something that we
it's a regular feature here on the show. You don't
want to ignore your credit score, and especially raising your
credit score this much in just a month. I am
all four, But sadly this article had some really bad
(01:46):
advice that was mixed in with the good stuff. So
first of all the good stuff, they say, to pay
attention to your credit score, Yeah, totally true. When reports
in particular two right to say, hey, if there's an
error on there, you want to fight it. Exactly, there
are mistakes on a huge percentage of those reports. Consider
reports says that half of folks who actually go looking,
(02:08):
they're gonna find an error. So that's something that you
can be on the lookout. Basically, the credit bureaus not
so great at the record keeping, which is their primary job.
But in addition, so that's like a small example of
something that was good. In addition to that, the article
said to consider hiring a credit repair company, and also
interspersed and mixed throughout this entire article, I think it
(02:29):
was sort of like a pay to play. It had
to be sort of journalism, but you saw I didn't
even check with you, but I assumed you also saw
the I'm not going to call them out specifically, but
it was a lending I'm sorry, a credit repair company,
and they had like some charts to where it looked
like it was a part of the story. But then
there's also ads from the same company. There's like the
small grade out thing that says ad in the bottom
(02:51):
raper sketchy. Don't like it because this is something that
you can completely deiy. You don't need another expensive monthly subscription,
which is the model that most of these companies operate under.
It like one hundred and fifty bucks a month or
something like that, right, And like you can tell oftentimes
when something's a scam, when there's something called gosh with
like a startup fee or like an onboarding those are
(03:13):
the worst. Yeah, like a setup charge. I'm like, what
needs to be set up? Like you taking me as
a customer. I don't like it. When we've actually got
an article up on the website with some tips to
rebuild your credit score, and it is a much better
article than the one that CNBC was running If you've
got like a question because you feel like your credit
score is not where it needs to be, send us
a question. We'd be happy to take it on the podcast.
(03:35):
But just do not do not sign up for one
of these credit repair companies because they'll take more than
they give and most of the things that they're offering
to do, yeah, you can do yourself. More bad news
on the credit front, Matt medical debt. It might be
staying on credit reports after all because of like these
policy changes were essentially made by executive order, and it
(03:57):
seems like that's the only way changes get made these days,
which just puts more power in the hands of the president,
no matter whether they have an R or a D
by their name. But many of the changes that were
enacted by the previous administration are now subject to change,
and the same will be true of whoever is in
the Oval office next. And as the Consumer Financial Protection
(04:20):
Bureau has been downsized and its futures in jeopardy, a
judge has been asked to vacate the rule that would
have excluded medical debt from appearing on credit reports moving forward.
And so this isn't final, but it does seem that
the medical debt exclusion is unlikely to stick around. And
although I think the credit bureaus have still basically on
(04:42):
their own, of their own volition, said well, you know,
medical debt under five hundred bucks, we're not going to
put on there anyway. But with this and what's happening
with student loan collections, it's even more crucial to pay
attention to your credit report and credit score. These days.
We're likely to see average scores I would say, dropping
in the coming years and in the future. I think
it would make sense for both parties to get the
(05:04):
legislative branch involved in writing and passing bills for the
changes that they want to see endore, because otherwise it's
just kind of kind of be this back and forth,
this whiplash of like, no, we're going to do this,
but if it's issued by executive order, the chances of
that thing sticking around over the long term are just minimal.
You're advocating for some sticky legislation. Yes, I totally agree. Man.
(05:24):
So another article that was also ludicrous, so a little
two for one today, but this one was from USA.
Today Americans saved money in FinTechs when money went missing
FDIC was nowhere to be found. This was okay, So
this is like the opposite of the CNBC article. This was,
you know, some good reporting that was taking place. And
this article highlighted the way that fintech banks grew into
(05:47):
these juggernauts for savers. They're promising higher rates, they're promising
better perks, and the rise of these cool online banks.
That's really a story of actual fintech growth. But as
we mentioned before, many of these fintech banks are on
shaky ground. And what happens inevitably, when customers of some
of these neo banks lost or savings, the FDIC they
(06:09):
had nothing to do about it. They're like, what huh
are you? Are you reaching out to us because like
that in our jurisdiction. Yeah, And so the reason for
this is basically like that Spider Man meme, wherever he's
one's pointing and the FDIC is pointing, that is exactly
the ke our fault. So the company, these new startups,
they aren't actual banks. Instead, what happens they work with
FDIC insured banks through an intermediary. But still when these
(06:30):
banks experienced again, when these tech companies experienced issues, the
FDIC didn't do anything in order to help these customers.
Call it. I'm glad you call them tech companies because
they're not They're not banks. They look and feel. That's
the problem though, because on the website themselves like a bank,
they say that they are not banks, and so some
of them. But if you just at first glance as
a consumer, you it would be understandable that you would
(06:51):
think they were exactly But this is why this has
been a drum that we've continued to beat. We want
folks to stay away from this. We want you to
to actually go with a real online bank, an actual
company that's been around for a minute, that has their
very own FDIC insurance. Yeah, all right, we've got more
to get to. On today's show.
Speaker 2 (07:08):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (07:15):
If you are over on Facebook and you want to
join a group of like minded folks who have money
questions and insight, please go ahead and join the how
to Money Facebook group. Let's now hear from a listener
who is looking to invest a little bit more in himself.
We're talking about higher education. Hi, Joel, I'm d my
name is Edward.
Speaker 3 (07:36):
I'm forty years old. I'm in a good career field
when it comes to money, but it's not giving me
a lot of job satisfaction. And I'm looking to make
a change and go back to grad school and become
a registered dietitian and help people with their health and weight,
which has been a struggle for me personally. But I'm
(07:58):
bulking at the amount of money that it's going to cost.
It's going to cost about seventy three thousand dollars over
the course of two and a half years. And I
was wondering if you guys had any resources that I
could use too, by.
Speaker 1 (08:11):
Grants, scholarships.
Speaker 3 (08:12):
I really want to avoid student loans and I have
no interest in that. It's hoping you'd be able to
maybe point me in the right direction.
Speaker 1 (08:19):
Thank you. Well, Matt, let's see what we can do
to help Edward out here. That's pay for grad school.
Is that sound familiar to you, Joe, Yeah, literally just
got done paying that joker off. And well, we never
took out a loan. We paid for it and cash
as we went. But and I don't know, I have
to look back and see exactly how much we spent.
But there's a lot of money. There's a lot of
(08:39):
money in total. Yeah, and we're hoping for Emily's marriage
and family counseling that she went through and hopefully that
means increased lifetime earnings and really a lot of increased
job satisfaction too, which is one of the things that
Edward was alluding to here. And I think that's a
reason a lot of people go back and get an
advanced degree at this point in their life. I mean,
(09:00):
he's forty years old. That's around the time people say
I feel like I know myself a little bit better,
and I know that I want to pursue this path,
but there's no way for me to get there without
getting more education. And I love this, So I guess
I love that Edward's wanting to make a career change here.
And it's a tough choice, especially if you're making a
solid salary, like those golden handcuffs of a solid job
(09:22):
can be difficult to cast off if you're like if
I've talked to another friend recently, Matt, who left like
a pretty high faluton career in the energy field because
he wasn't feeling fulfilled. And he makes a heck of
a lot less money now, but guess what, he's way happier,
and so I think important. There's a lot to be
said for that, right, And it sounds like Edward really
knows what he wants to do based on his personal
(09:44):
experience and his interests. And I just think there's a
good chance that he's gonna have greater levels of success
doing something that he loves as his next career. So
I'm excited for him. But let's try to help him
do it without forking over quite as much. Yeah, totally.
And he even said that he he is not interested
in student loans, but not everyone has the money on
hand to be able to pay for that. And I'm
(10:05):
going to say, like at the outset here, finding money
for grad school is harder than finding money for undergrad
and specifically universities, they make more money on graduate programs
than they do on many of their other degree offerings.
So finding those dollars to help you out it's not
going to be easy. And we're talking about a lot
of money here, seventy three thousand dollars. You are looking
(10:26):
to avoid student loans, we want you to avoid them
as well, and in part because and this is for
everyone else again, not you, Edward. You are It sounds
like you are set. It makes sense too. He's in
his is he forty or he is in his forties,
he's forty looking to make some changes. It sounds like
he's had a fairly lucrative career. I'm guessing he's looking
to cash flow this thing. But for everyone else out there,
(10:47):
when you're looking at grad school, you're talking about interest
rates in the nine percent range from the federal government
right now, which is pretty scary. When it comes to
student loans specifically, it's a far cry from where they
were like ten fifteen years ago too. I mean, so
you might be able to get like some better rates
from private lenders, Yeah, if that's something you're considering. But yeah,
is a good point. And this makes it a bit
(11:09):
more nerve racking to take out student loans for something
like this. Yeah, And there are some people who are
incredibly scared of private student loans, but I think, especially
in today's environment, private student loans might offer a better rate.
And you're the federal protections that student loan borrowers are
afforded have been kind of going away anyway, So I
(11:30):
think I would at least look in that direction, I
would also want to know what my likely post degree
earnings would be, Edward. I think that's an important question
to ask, right, asking around to people who are doing
the jobs you want to do, and not that you
would opt to not pursue this degree because of course
you've got a passion. But I think it's you know,
knowing what you stand to gain by getting this degree.
(11:51):
It's an important part of this decision making process, and
it could influence your specific decisions here too. I think
it kind of helps to not justify a little bit,
but you're able to put a finger on Okay, I
know I am giving up this kind of salary. I
know I am also going to spend this much in
order to get this degree to hopefully put me in
a position to earn what. Yeah, like it's good to
(12:13):
at least be able to put your finger then on
what it is that you'll be earning. As like a
basic math equation solve for X, yeah, and you want
to know X so that you can make an informed decision.
And it feels like a way to potentially stem the
bleeding as opposed to kind of like this endless cycle
of like, well, what's going to happen off the future.
Who knows you need to have some definites out there
that you can project to, and it'll help you know
how much debt you can feel comfortable taking on, because typically,
(12:36):
like what we advise with an undergrad is to say,
don't take out any more than what you're likely to
make in your first year in that job. And I
think it's pretty good advice, right, And if you don't
have any other debt, I think you might be able
to apply that to a master's program as well. But
even then, like dating on lessons in Edwards case too,
he's not interested in student loans. But from an emotional standpoint, yes,
(12:58):
I think it can just be incredibly helpful too to
personally sort of run through that equation and just like
to say, what am I willing to put into this
to earn what? Yeah? Yeah, next year or not next year,
but maybe three years from now?
Speaker 2 (13:10):
Sure?
Speaker 1 (13:10):
All right, So I'll make a couple of suggestions here. One,
does your employer offer any financial incentive to get more education,
because a lot of employers do, and there are often
no stipulations about what course of study you take. It's
funny because Matt, one of our buddies. His wife. Her
employer does this very thing, and she has been going
back and taking nutrition classes and she could get a
(13:32):
degree in neutrier. That's like her hopeful second career. But
she's getting the education while she has her day job
because they're paying for it and they haven't made any
stipulations and said like nice, sorry, underwater basket weaving is
off limits. Like she can do whatever she wants and
that's pretty cool, And a lot of employers do that.
They say, go get a degree, a nextra degree if
you're interested, will help foot a lot of the bill.
(13:53):
Is that not what Edward said, that he's interested into nutrition?
Yeah exactly, Yeah, okay, Yeah, I think that's cool. Maybe
they could chat. I think it's just worth looking at
your company's internal website or asking the HR department, because yeah,
maybe there's something there. Maybe there's a benefit there that
you didn't know about or you just hadn't considered. Also,
(14:13):
what about getting that degree over a longer timeline. I
think that's a way to save money too, and maybe
cash flow the cost maybe graduating in four years instead
of two and a half. That's actually the route that
we took one it just felt like it was going
to be too difficult, right to actually condense that education
that Emily was gonna be taking extra classes and meant
a lot more homework. It was going to be tough
(14:34):
to have the balance that we wanted in our lives.
But also stretching out those classes well can make it
easier to kind of keep that income rolling in while
also reducing the annual cost of school, which just means hey,
I've got more time to work, less money actually going
to the school itself. So yeah, maybe i won't be
in my new career as quickly as I'd hoped, but
(14:56):
at least I'm going to be able to pay it
off as I go. Yeah, well, and what about in
the school that you're planning on attending, how other students
are affording it? Like, what you're literally doing here is
putting the ball in their court. I think by starting
the conversation here, like you were showing that you were
taking a proactive approach, and I don't know, you might
even find a way to negotiate that price a little bit,
(15:16):
Like if you don't ask, like it's almost like the
art of asking for a discount, Like you're definitely not
going to get it if you don't ask. And so
I think even just by starting the conversation, I think
that that could be yeah, a whole lot. I could
see that being financially beneficial. I'll have other students been
able to pull this off, and you might you might
get some some answers so that you weren't expecting, and you
might get some resources thrown your way that you didn't
(15:36):
expect it just because you're the squeaking wheel. You might
even be surprised at any financial aid that they might offer,
just because you're asking that. They're like, well, we've actually
got this program, and then you look into the program
a little bit and turns out, well, there's five figures
here waiting on somebody who jumps through the right hoops,
which Edward might have the ability to do. I would
also say that you might want to consider other schools
(15:56):
that offer a similar degree, because even I have a
similar like quote unquote sticker price, they might offer substantially
different amounts of aid to students. And I think, like
it sounds like he's pretty set on what it is
he wants to study. I think it's okay to get
married to a particular course of study, but don't marry
(16:17):
a particular school just yet, not until you see what
they're willing to how they're willing to meet you halfway.
Perhaps dream degree is one thing, dream school is another,
because that dream degree is offered a whole bunch of
places in all likelihood, and so there's no need to
kind of get your heart set on that one specific place.
You might even find, Hey, I can get this degree
for a third of the price if I take an
(16:37):
online classes that this place. It's not even in my state.
And you know, the end result is kind of the
same at least from a credentialism standpoint and what you're
able to learn. But you just save a whole lot
of money in the process. It's at least worth considering. Yeah,
that's right.
Speaker 2 (16:52):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty and if.
Speaker 1 (16:59):
You have the money question, we'll send it our way.
All you have to do is record your question on
the voice memo app there on your phone and send
it over via email. You can find the simple instructions
at how toomoney dot com. Forward slash ask Matt, let's
talk about social security for a second. The spotlight is
on Social Security right now. Problems seem to be getting
(17:19):
worse at the Social Security Administration. We've got staff cuts,
changing requirements to claim benefits, have some folks on edge.
And then on top of that, which we've detailed this
before on the show. We did dedicated a whole episode
to it a couple of years back, the Social Security
Trust Fund is set to run out sooner than expected
in that year. It feels like that year keeps of
when the trust fund's going to run out keeps getting
(17:41):
pushed up and up, so in less than a decade,
that's when the trust fund is set to expire, which
has retirees worried about receiving the benefit they're entitled to.
They might not get what's coming to them, what they've
paid into for their whole lives. So what happens if
or when we reach that point, well, benefits get on
actually cut by essentially like a quarter, So retirees and
(18:03):
soon to be retirees they're getting fearful about the solvency
of Social Security. It's leading to early claims and so
instead of waiting until sixty seven or even later, they're
starting to get that monthly check at sixty five or
even earlier. And this is a personal decision. There's a
lot at play in when you claim social security, and
the reality is that there's trade offs right to claiming
(18:23):
early and to waiting, especially if you're not in great health,
like waiting till seventy if you're not doing so hot. Well,
I get why you might claim early, but a good
chunk of folks would be when you run the numbers,
better off waiting longer, even with this kind of increased
uncertainty around social security. And I also just think people
in their sixties should be less worried about the future
of social Security. It's people in their twenties and thirties
(18:46):
and forties who should be like, hmm, have player impact
on them planning a little more, investing more for their
own future retirement, and banking less on the reality of
social Security being a major major part of their retirement
income plans. Yeah, let's talk about the specific numbers. Because
the benefit is roughly seventy five percent higher if you wait,
if you claim at age seventy as opposed to age
(19:06):
sixty two, Those early claims are going to reduce benefits
for decades to come, and for if you're healthy, right,
If you're a healthy retiree, the overall amount received could
be reduced by up to six figures over your lifetime,
essentially one hundred and twenty thousand dollars less in your pocket.
Because it's significantly too early, right, Yeah, and obviously none
of us out there know how long we're going to live.
(19:28):
But if you are in good health at retirement age,
if you can afford to wait, it's still likely the
best option. If you want a little bit of additional reassurance,
you can consult this fairly inexpensive software that's out there.
There's this one called Maximize My Social Security. If this
is something you're trying to really crunch the numbers on,
and again, like you mentioned, Joe, for younger listeners, it
(19:50):
is going to impact you more than if you're like
sixty years old. But even still, I think it's going
to be around for all of us. If you're listening
to this just in a diminished fashion, yeah, form or fashion,
it's going to be there. But I do think our
benefits are unlikely to be as high as what it's
saying over at Social Security, do like go, yeah, if
you log in, it'll give you kind of a projection
for what your social Security income is likely to be.
(20:12):
I would take that with the grain of salt. I
would reduce that meaningfully into my retirement projections, like something
will be there in all likelihood. But the fact that
our politicians have let it get to this point where
social security is kind of living on the precipice that
it bottles the mind. And there's just it's going to
take some political will to change the future of social
(20:34):
security so that it's going to be around stick around
for the rest of us. It's a real issue that's
going to Like there are some things that are worth
talking about or the politicians actually addressing, and there are
some things that really aren't. And it's just for show.
This is like one of the real things that needs
to be addressed. It's take it taking from a time
bomb exactly from my policy standpoint. But I want to
go back as well to the like you mentioned that
(20:54):
the personal factors and some of the different trade offs.
You got to keep in mind too, some of the
different life goals that you have, because I like I
for folks out there who are tapping it, who are
tapping it early, right, like, so so far like we
kind of we address the numbers sort of side of
the equation, but like, think through what it is that
you want to be able to accomplish in your life
while you still have the ability to write. And so
(21:15):
for retirees, if you're like, you know, yeah, we could
wait until age seventy and you know we're going to
be wealthier. Yes, you definitely will, but that's that's like
a no brainer, right, Like anytime you crunch the numbers, waiting,
waiting is always going to lead to you having more
a higher net worth, and so like, I think the
more important questions to ask are what am I likely
(21:38):
gonna want to be able to do within my retirement
years or like what life goals am I trying to accomplish?
What kind of impact am I looking to have? And
I'll be like, maybe this is like a little bit
of Matt confession time. I'm not having like retirement like questions.
But Kate and I we've been talking about this more
and we're not talking about are you going to claim now? Yeah,
we're not to be like I'm sorry, sir to you
you need a yeah come back here three years? Wait?
(22:01):
Hell am I? Yeah? But the ability to wrestle with
some of these thornier issues. I think it's really important
because and we're not again, so we're not talking about
tapping retirement, but other dollars that we've invested, And it's
kind of hard to wrap your mind around, like, Okay,
this is something that we've been putting money into for
a very long time, and so this is within a brokerage.
(22:23):
But what do we want now what to do with
that money? What is that going to allow us to
accomplish that we may not have the ability to do
a decade from now, two decades from now, knowing that yes,
by waiting it's going to lead to a larger sum
of money, but what are the other factors that you
need to take into account? And the game plan can change, right,
(22:43):
So I've talked about this on the show. When my
mom was diagnosed with cancer, like the thought was, well,
we will tap some of our retirement funds, maybe a
little bit more than we otherwise would, just to be
able to hold off on taking Social Security. And the
plan flipped once my mom's diagnosis happened and it was
like no, no, no, we're I want as many months of
Social Security as I can get because I don't know
how long I'm going to be around and then we'll
(23:05):
leave the retirement funds a little more intact. And so
this isn't necessarily a cut and dry always easy to
figure out this scenario. I think this is like one
of the hardest things to figure out. Like this truly
is like one of the toughest nuts to crack. And
Kate and I have a had like a lot of
different conversations over the years about personal finances and business
and like, okay, strategy different things like that, but man,
(23:25):
this is it's so difficult, And I get you know,
we're not thinking through like life expectancy that like those
are less the questions I guess that we're thinking about
right now. But even still, like, am I guaranteed the
ability to wake up a week from now and continue
along doing the same things that I'm doing today now?
And I'm not saying in the next week, I'm gonna yolo, like,
(23:46):
you know, drain my accounts. So you got to find
some sort of balance though, between yolo or only looking
to the long term, because that I feel like that
can be just as seductive, right like, like, let me
build up the account balance as big as I humanly can.
Let me guarantee the fattest social security check. I've run.
Guess what, I've run the compounding interest calculator, I've run
through the different glide pass and scenarios, and like, that's
(24:08):
a really easy button to hit. And if that is
all you're doing. The easy button is also to just
take social security as quickly as you can, be like,
let me give that money. But yeah, and then you
wake up five years down the road and you're like,
this check isn't as big as I wish it was
or need it to be. Both ends of the spectrum
can be really easy. A little bit of layed gratification
would have done me better. Yeah, so now, Yeah, I
think the ability for folks to address these sort of
(24:29):
thorny topics more head on could lead to productive conversations
not only with like your partner or your spouse, but
even like maybe you don't have a partner, like you
yourself to like like think, like spend some time thinking
about this and like journaling to perhaps uncover some of
the different Yeah, what's going on the under the hood? Yeah,
what else are you are you looking to accomplish? Even
that social security software, those calculators are not they don't
(24:51):
account for that. They don't have the journaling feature included,
so you do have to take some personal stuff into consideration.
It's the numbers matter, but the numbers aren't the only
thing it matters totally. All right, We've got actually more
to get to on today's show.
Speaker 2 (25:04):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (25:10):
Don't forget to sign up for the how To Money newsletter.
You can find that up at how tomoney dot com
slash newsletter. Joel. Let's hear from another listener they are
wading into the WROTH versus traditional debate as they're contemplating
quasi early retirement.
Speaker 4 (25:25):
My wife is fifty one years old, and we'll retire
in the next three to five years. She will have
a pension that will cover our living expenses. Currently, she
has seven hundred and twenty five thousand in a four
percent matched traditional four to five to seven deferred compensation account,
which she contributes the annuel maximum for her remaining three
to five years. I'm thinking of switching her future contributions
(25:48):
into a ROTH four to fifty seven deferred compensation account.
Can you tell me is there a benefit to making
future contributions into a ROTH four fifty seven versus maintaining
the traditional four to five seven deferred account in order
to hedge against future tax liabilities related to any withdrawals
from that traditional four five seven pre tax deferred compensation account. Also,
(26:13):
if we're Abel, should we convert any of her seven
hundred and twenty five thousand from the traditional four five
seven funds to a ROTH four Thanks again for your time,
appreciate it.
Speaker 1 (26:26):
Oh, Matt, it sounds like Mike. That is his name,
by the way, he didn't say it at the beginning.
That's okay, Mike, Well give me it's okay, Yeah, his ord.
Did he say where he's from? That's true, Like, you know,
maybe he's in Alaska, could be maybe he's in Rhode Island,
big difference. Who knows. Well, your wife is going to
be a young retiree. It sounds like Mike, and you
said something crucial by the way, that her pension will
(26:47):
cover your living expenses, which is fantastic, Like what a
great position to be in. It means that you're going
to have a lot of freedom because of those additional
dollars that she's worked hard to amass over the years
a pension is great, but when a pension is substantial
enough to cover all of your living expenses, that just
(27:07):
the flexibility you have with your retirement accounts can be incredible.
It's pretty sweet. But one thing that Mike didn't say
anything about was his job. And you're inter sitting at
home watching Sports Center. Maybe because of that, maybe your
household overall, no judgment, no judgment that would partially dictate
whether or not you opt for a roth or traditional
(27:27):
for your wife these days, if you are both, let's say,
at peak earning years, well then you know, if you're
finding yourself in the twenty four percent tax bracket or
even higher, I might continue to opt to contribute to
the traditional account in hopes of paying less intact during
your retiming years. And this is coming from someone who
is a huge fan of the of all the different
(27:49):
wroth varieties out there. That being said, it still makes
particular sense to prioritize a roth, specifically in your early
career years when you aren't earning a ton of money,
when you aren't in those higher tax brackets, and for
many when they're making bank it makes sense to take
the tax deduction. Now with the traditional accounts, and like
he alluded to, you can always convert to WROTH in
(28:09):
the first years of retirement where you can zero in
on a particular withdrawal rate where you are targeting a
specific tax bracket when you convert, And you know, there's
some science to it, but it's it's oftentimes more of
an art than science. There are so many different factors
that come into play as to whether or not you
go with the ROTH versus the traditional and specifically whether
(28:31):
or not you convert those dollars later in life. And
it's almost always like a multi year thing to convert
little bits at a time so that you're continuing to
keep the taxes that you pay on those conversions minimal. Right, Sure,
but if you're already retired, let's say, and your wife
is the only one working, Hey, your income has likely
already declined from those peak earning years. If you have
(28:51):
cut your income, let's say, in half. I'm just making
a guest here. If that's the case, contributing directly to
a WROTH with additional investing dollars, that's what I would
do in all likelihood, Right, It's all about those specifics.
But if that's been the case, it's like we've had
two full time jobs, lots of income coming in. That's
why we've kind of prioritized traditional That makes sense. And hey,
(29:13):
maybe now maybe you were retired last year or something
like that, and now the only paycheck that's coming in
is hers, and so that has brought your justin gross
income down significantly for the time being. That might be
a perfect time to utilize roth contributions, kind of like
you're alluding to, like your ass which maybe that's what
he's thinking. He's thinking through. He's just like life is
going to look different for the next three to five years.
(29:34):
Like you said, it also comes down to say yes
from my plase we don't have all the informas exactly
I was going to say too. It also depends not
only on their income, but also their expected expenses off
in the future as well, because I'm thinking of let's
say they both went from both working full time jobs,
so now they're both retired, they've got a lot more
time on their hands, and what are they going to
do with that extra extra additional time? Pickleball? Let's maybe
(29:55):
is pickleball, which it sounds very affordable, in which case
you could see your expenses go down signific in which case, uh, making,
let's say the roth option now while she is working
actually the unwise choice, because essentially, the fewer dollars you
need to realize down the road, the more likely it
makes sense to take advantage of the traditional now because
(30:19):
and especially if part of it depends too, like you're
alluding to on your overall balance in those retirement accounts,
because rm ds coming down the road, they might not
be that might they might not be that substantial if
you don't have tons of money safe. So so what
you said was like pickleball, which is sort of like
the frugal Like, if you expect a future retirement of
like simple living, frugal living, pickleball, I'm gonna splurge and
(30:39):
spend like one hundred and fifty bucks on a paddle. Okay,
that's nothing in the big scheme of things, But like
let's say, for instance, you're plenty to travel the world,
and you're going to expect to see your expenses go
up significantly because hey, not only is the pension completely
covering our cost of living here that we're that we've
been used to, but we've got a ton of money
set aside to be able to live the life to
(31:02):
do all the traveling. Well, what that means is that
you're gonna have to realize some of those four to
fifty seven dollars, which is going to increase your Those
dollars are tax as ordinary income, is what I'm saying,
which could potentially lead to you needing to tap more
of those dollars, putting you in a potentially higher tax
bracket later down the road. So that would be an
instance where opting for the wroth actually did make sense
(31:25):
because you took the tax hit when you were realizing
fewer of those dollars. So basically, retirement, it's not a straightforward,
easy answer, no, and there are a lot of factors
at play, and this might be something you want to
do over time, and then it comes down to income.
It comes down to account balances. Yeah, retirement accounts current
in future income, but also current in future expenses and
(31:46):
the kind of lifestyle you're looking to be able to
afford as well. Yeah, let's talk about roth conversions for
just a second. Whether or not you choose to do that,
it depends on your income two and also somewhat on
what's going on with the stock market. So given that
current combination of fairly low tax rates and a market
that is down a little bit. I think converting to
(32:07):
a roth ira some of those dollars would be at
least on my radar, but your wife also might not
have that ability. So you know, converting to a roth
ira is it's often an option once you've left your job,
but if you're still actively employed, you're making contributions to
that account. That's not always allowed. Some plans do allow
for in service withdrawals, that's what it's called, but you
(32:28):
need to check and see first. So if your wife's
employer offers a WROTH four fifty seven B option, you
might be able to do what's known as an in
plan rollover from the traditional four fifty seven B into
the WROTH. That might be the only maneuver to turn
to when you're talking about rothifying those dollars. I consider
pursuing it, but you got to know whether that's an
(32:49):
option first, and you also have to take into some
consideration some of those things that we mentioned before before
you opt for a WROTH conversion, especially when we're talking
about like a bulk wroth conversion, that that might be
something that's best done for tax purposes over an extended
period of time, not in one fell swoop. Totally agree, buddy,
and that is going to do it for today. Thank
you for listening. We appreciate your time and attention. We'll
(33:10):
see you back here next week. You've been listening to
How To Money with Joel Larsgard. You can always hear
us live on KFI AM six forty twelve pm to
two pm on Sunday, and anytime on demand on the
iHeartRadio app
I Am six forty. You're listening to How to Money
on demand on the iHeartRadio app.
Speaker 2 (00:07):
All Joel and Matt want to do is help you save,
invest and enjoy more of what matters. This is how
to Money with Joel lars Guard and Matt.
Speaker 1 (00:18):
Altmix k I am six Live everywhere on the iHeartRadio app.
(00:42):
This is how Some Money. I am Matt Altmix and
I am Joel Larsgard and we're glad to have you
along for the show today. By the way, if you're
looking for the right credit card for your wallet, well
you want to be able to use it responsibly. But
if you do that, if you pay your credit card
on time and in full every single month, well check
out our credit card tool. You can find that up
(01:03):
on the website at howtomoney dot com. And of course,
now it is time for the ludicrous headline of the
week and we're going to take this segment and talk
about credit. There's an article from CNBC that I am
unhappy with because the title of the article was I
don't like seeing you unhappy. How to raise your credit
score one hundred and sixty points in thirty days. Well, okay,
(01:25):
so specifically, well it wasn't the headline, it was what
was contained within the story, because yeah, the headline it
sounds promising, right, Yeah, yeah, we talk about improving your
credit score all the time. This is something that we
it's a regular feature here on the show. You don't
want to ignore your credit score, and especially raising your
credit score this much in just a month. I am
all four, But sadly this article had some really bad
(01:46):
advice that was mixed in with the good stuff. So
first of all the good stuff, they say, to pay
attention to your credit score, Yeah, totally true. When reports
in particular two right to say, hey, if there's an
error on there, you want to fight it. Exactly, there
are mistakes on a huge percentage of those reports. Consider
reports says that half of folks who actually go looking,
(02:08):
they're gonna find an error. So that's something that you
can be on the lookout. Basically, the credit bureaus not
so great at the record keeping, which is their primary job.
But in addition, so that's like a small example of
something that was good. In addition to that, the article
said to consider hiring a credit repair company, and also
interspersed and mixed throughout this entire article, I think it
(02:29):
was sort of like a pay to play. It had
to be sort of journalism, but you saw I didn't
even check with you, but I assumed you also saw
the I'm not going to call them out specifically, but
it was a lending I'm sorry, a credit repair company,
and they had like some charts to where it looked
like it was a part of the story. But then
there's also ads from the same company. There's like the
small grade out thing that says ad in the bottom
(02:51):
raper sketchy. Don't like it because this is something that
you can completely deiy. You don't need another expensive monthly subscription,
which is the model that most of these companies operate under.
It like one hundred and fifty bucks a month or
something like that, right, And like you can tell oftentimes
when something's a scam, when there's something called gosh with
like a startup fee or like an onboarding those are
(03:13):
the worst. Yeah, like a setup charge. I'm like, what
needs to be set up? Like you taking me as
a customer. I don't like it. When we've actually got
an article up on the website with some tips to
rebuild your credit score, and it is a much better
article than the one that CNBC was running If you've
got like a question because you feel like your credit
score is not where it needs to be, send us
a question. We'd be happy to take it on the podcast.
(03:35):
But just do not do not sign up for one
of these credit repair companies because they'll take more than
they give and most of the things that they're offering
to do, yeah, you can do yourself. More bad news
on the credit front, Matt medical debt. It might be
staying on credit reports after all because of like these
policy changes were essentially made by executive order, and it
(03:57):
seems like that's the only way changes get made these days,
which just puts more power in the hands of the president,
no matter whether they have an R or a D
by their name. But many of the changes that were
enacted by the previous administration are now subject to change,
and the same will be true of whoever is in
the Oval office next. And as the Consumer Financial Protection
(04:20):
Bureau has been downsized and its futures in jeopardy, a
judge has been asked to vacate the rule that would
have excluded medical debt from appearing on credit reports moving forward.
And so this isn't final, but it does seem that
the medical debt exclusion is unlikely to stick around. And
although I think the credit bureaus have still basically on
(04:42):
their own, of their own volition, said well, you know,
medical debt under five hundred bucks, we're not going to
put on there anyway. But with this and what's happening
with student loan collections, it's even more crucial to pay
attention to your credit report and credit score. These days.
We're likely to see average scores I would say, dropping
in the coming years and in the future. I think
it would make sense for both parties to get the
(05:04):
legislative branch involved in writing and passing bills for the
changes that they want to see endore, because otherwise it's
just kind of kind of be this back and forth,
this whiplash of like, no, we're going to do this,
but if it's issued by executive order, the chances of
that thing sticking around over the long term are just minimal.
You're advocating for some sticky legislation. Yes, I totally agree. Man.
(05:24):
So another article that was also ludicrous, so a little
two for one today, but this one was from USA.
Today Americans saved money in FinTechs when money went missing
FDIC was nowhere to be found. This was okay, So
this is like the opposite of the CNBC article. This was,
you know, some good reporting that was taking place. And
this article highlighted the way that fintech banks grew into
(05:47):
these juggernauts for savers. They're promising higher rates, they're promising
better perks, and the rise of these cool online banks.
That's really a story of actual fintech growth. But as
we mentioned before, many of these fintech banks are on
shaky ground. And what happens inevitably, when customers of some
of these neo banks lost or savings, the FDIC they
(06:09):
had nothing to do about it. They're like, what huh
are you? Are you reaching out to us because like
that in our jurisdiction. Yeah, And so the reason for
this is basically like that Spider Man meme, wherever he's
one's pointing and the FDIC is pointing, that is exactly
the ke our fault. So the company, these new startups,
they aren't actual banks. Instead, what happens they work with
FDIC insured banks through an intermediary. But still when these
(06:30):
banks experienced again, when these tech companies experienced issues, the
FDIC didn't do anything in order to help these customers.
Call it. I'm glad you call them tech companies because
they're not They're not banks. They look and feel. That's
the problem though, because on the website themselves like a bank,
they say that they are not banks, and so some
of them. But if you just at first glance as
a consumer, you it would be understandable that you would
(06:51):
think they were exactly But this is why this has
been a drum that we've continued to beat. We want
folks to stay away from this. We want you to
to actually go with a real online bank, an actual
company that's been around for a minute, that has their
very own FDIC insurance. Yeah, all right, we've got more
to get to. On today's show.
Speaker 2 (07:08):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (07:15):
If you are over on Facebook and you want to
join a group of like minded folks who have money
questions and insight, please go ahead and join the how
to Money Facebook group. Let's now hear from a listener
who is looking to invest a little bit more in himself.
We're talking about higher education. Hi, Joel, I'm d my
name is Edward.
Speaker 3 (07:36):
I'm forty years old. I'm in a good career field
when it comes to money, but it's not giving me
a lot of job satisfaction. And I'm looking to make
a change and go back to grad school and become
a registered dietitian and help people with their health and weight,
which has been a struggle for me personally. But I'm
(07:58):
bulking at the amount of money that it's going to cost.
It's going to cost about seventy three thousand dollars over
the course of two and a half years. And I
was wondering if you guys had any resources that I
could use too, by.
Speaker 1 (08:11):
Grants, scholarships.
Speaker 3 (08:12):
I really want to avoid student loans and I have
no interest in that. It's hoping you'd be able to
maybe point me in the right direction.
Speaker 1 (08:19):
Thank you. Well, Matt, let's see what we can do
to help Edward out here. That's pay for grad school.
Is that sound familiar to you, Joe, Yeah, literally just
got done paying that joker off. And well, we never
took out a loan. We paid for it and cash
as we went. But and I don't know, I have
to look back and see exactly how much we spent.
But there's a lot of money. There's a lot of
(08:39):
money in total. Yeah, and we're hoping for Emily's marriage
and family counseling that she went through and hopefully that
means increased lifetime earnings and really a lot of increased
job satisfaction too, which is one of the things that
Edward was alluding to here. And I think that's a
reason a lot of people go back and get an
advanced degree at this point in their life. I mean,
(09:00):
he's forty years old. That's around the time people say
I feel like I know myself a little bit better,
and I know that I want to pursue this path,
but there's no way for me to get there without
getting more education. And I love this, So I guess
I love that Edward's wanting to make a career change here.
And it's a tough choice, especially if you're making a
solid salary, like those golden handcuffs of a solid job
(09:22):
can be difficult to cast off if you're like if
I've talked to another friend recently, Matt, who left like
a pretty high faluton career in the energy field because
he wasn't feeling fulfilled. And he makes a heck of
a lot less money now, but guess what, he's way happier,
and so I think important. There's a lot to be
said for that, right, And it sounds like Edward really
knows what he wants to do based on his personal
(09:44):
experience and his interests. And I just think there's a
good chance that he's gonna have greater levels of success
doing something that he loves as his next career. So
I'm excited for him. But let's try to help him
do it without forking over quite as much. Yeah, totally.
And he even said that he he is not interested
in student loans, but not everyone has the money on
hand to be able to pay for that. And I'm
(10:05):
going to say, like at the outset here, finding money
for grad school is harder than finding money for undergrad
and specifically universities, they make more money on graduate programs
than they do on many of their other degree offerings.
So finding those dollars to help you out it's not
going to be easy. And we're talking about a lot
of money here, seventy three thousand dollars. You are looking
(10:26):
to avoid student loans, we want you to avoid them
as well, and in part because and this is for
everyone else again, not you, Edward. You are It sounds
like you are set. It makes sense too. He's in
his is he forty or he is in his forties,
he's forty looking to make some changes. It sounds like
he's had a fairly lucrative career. I'm guessing he's looking
to cash flow this thing. But for everyone else out there,
(10:47):
when you're looking at grad school, you're talking about interest
rates in the nine percent range from the federal government
right now, which is pretty scary. When it comes to
student loans specifically, it's a far cry from where they
were like ten fifteen years ago too. I mean, so
you might be able to get like some better rates
from private lenders, Yeah, if that's something you're considering. But yeah,
is a good point. And this makes it a bit
(11:09):
more nerve racking to take out student loans for something
like this. Yeah, And there are some people who are
incredibly scared of private student loans, but I think, especially
in today's environment, private student loans might offer a better rate.
And you're the federal protections that student loan borrowers are
afforded have been kind of going away anyway, So I
(11:30):
think I would at least look in that direction, I
would also want to know what my likely post degree
earnings would be, Edward. I think that's an important question
to ask, right, asking around to people who are doing
the jobs you want to do, and not that you
would opt to not pursue this degree because of course
you've got a passion. But I think it's you know,
knowing what you stand to gain by getting this degree.
(11:51):
It's an important part of this decision making process, and
it could influence your specific decisions here too. I think
it kind of helps to not justify a little bit,
but you're able to put a finger on Okay, I
know I am giving up this kind of salary. I
know I am also going to spend this much in
order to get this degree to hopefully put me in
a position to earn what. Yeah, like it's good to
(12:13):
at least be able to put your finger then on
what it is that you'll be earning. As like a
basic math equation solve for X, yeah, and you want
to know X so that you can make an informed decision.
And it feels like a way to potentially stem the
bleeding as opposed to kind of like this endless cycle
of like, well, what's going to happen off the future.
Who knows you need to have some definites out there
that you can project to, and it'll help you know
how much debt you can feel comfortable taking on, because typically,
(12:36):
like what we advise with an undergrad is to say,
don't take out any more than what you're likely to
make in your first year in that job. And I
think it's pretty good advice, right, And if you don't
have any other debt, I think you might be able
to apply that to a master's program as well. But
even then, like dating on lessons in Edwards case too,
he's not interested in student loans. But from an emotional standpoint, yes,
(12:58):
I think it can just be incredibly helpful too to
personally sort of run through that equation and just like
to say, what am I willing to put into this
to earn what? Yeah? Yeah, next year or not next year,
but maybe three years from now?
Speaker 2 (13:10):
Sure?
Speaker 1 (13:10):
All right, So I'll make a couple of suggestions here. One,
does your employer offer any financial incentive to get more education,
because a lot of employers do, and there are often
no stipulations about what course of study you take. It's
funny because Matt, one of our buddies. His wife. Her
employer does this very thing, and she has been going
back and taking nutrition classes and she could get a
(13:32):
degree in neutrier. That's like her hopeful second career. But
she's getting the education while she has her day job
because they're paying for it and they haven't made any
stipulations and said like nice, sorry, underwater basket weaving is
off limits. Like she can do whatever she wants and
that's pretty cool, And a lot of employers do that.
They say, go get a degree, a nextra degree if
you're interested, will help foot a lot of the bill.
(13:53):
Is that not what Edward said, that he's interested into nutrition?
Yeah exactly, Yeah, okay, Yeah, I think that's cool. Maybe
they could chat. I think it's just worth looking at
your company's internal website or asking the HR department, because yeah,
maybe there's something there. Maybe there's a benefit there that
you didn't know about or you just hadn't considered. Also,
(14:13):
what about getting that degree over a longer timeline. I
think that's a way to save money too, and maybe
cash flow the cost maybe graduating in four years instead
of two and a half. That's actually the route that
we took one it just felt like it was going
to be too difficult, right to actually condense that education
that Emily was gonna be taking extra classes and meant
a lot more homework. It was going to be tough
(14:34):
to have the balance that we wanted in our lives.
But also stretching out those classes well can make it
easier to kind of keep that income rolling in while
also reducing the annual cost of school, which just means hey,
I've got more time to work, less money actually going
to the school itself. So yeah, maybe i won't be
in my new career as quickly as I'd hoped, but
(14:56):
at least I'm going to be able to pay it
off as I go. Yeah, well, and what about in
the school that you're planning on attending, how other students
are affording it? Like, what you're literally doing here is
putting the ball in their court. I think by starting
the conversation here, like you were showing that you were
taking a proactive approach, and I don't know, you might
even find a way to negotiate that price a little bit,
(15:16):
Like if you don't ask, like it's almost like the
art of asking for a discount, Like you're definitely not
going to get it if you don't ask. And so
I think even just by starting the conversation, I think
that that could be yeah, a whole lot. I could
see that being financially beneficial. I'll have other students been
able to pull this off, and you might you might
get some some answers so that you weren't expecting, and you
might get some resources thrown your way that you didn't
(15:36):
expect it just because you're the squeaking wheel. You might
even be surprised at any financial aid that they might offer,
just because you're asking that. They're like, well, we've actually
got this program, and then you look into the program
a little bit and turns out, well, there's five figures
here waiting on somebody who jumps through the right hoops,
which Edward might have the ability to do. I would
also say that you might want to consider other schools
(15:56):
that offer a similar degree, because even I have a
similar like quote unquote sticker price, they might offer substantially
different amounts of aid to students. And I think, like
it sounds like he's pretty set on what it is
he wants to study. I think it's okay to get
married to a particular course of study, but don't marry
(16:17):
a particular school just yet, not until you see what
they're willing to how they're willing to meet you halfway.
Perhaps dream degree is one thing, dream school is another,
because that dream degree is offered a whole bunch of
places in all likelihood, and so there's no need to
kind of get your heart set on that one specific place.
You might even find, Hey, I can get this degree
for a third of the price if I take an
(16:37):
online classes that this place. It's not even in my state.
And you know, the end result is kind of the
same at least from a credentialism standpoint and what you're
able to learn. But you just save a whole lot
of money in the process. It's at least worth considering. Yeah,
that's right.
Speaker 2 (16:52):
You're listening to how to Money with Joel Larsgard on
demand from KFI AM six forty and if.
Speaker 1 (16:59):
You have the money question, we'll send it our way.
All you have to do is record your question on
the voice memo app there on your phone and send
it over via email. You can find the simple instructions
at how toomoney dot com. Forward slash ask Matt, let's
talk about social security for a second. The spotlight is
on Social Security right now. Problems seem to be getting
(17:19):
worse at the Social Security Administration. We've got staff cuts,
changing requirements to claim benefits, have some folks on edge.
And then on top of that, which we've detailed this
before on the show. We did dedicated a whole episode
to it a couple of years back, the Social Security
Trust Fund is set to run out sooner than expected
in that year. It feels like that year keeps of
when the trust fund's going to run out keeps getting
(17:41):
pushed up and up, so in less than a decade,
that's when the trust fund is set to expire, which
has retirees worried about receiving the benefit they're entitled to.
They might not get what's coming to them, what they've
paid into for their whole lives. So what happens if
or when we reach that point, well, benefits get on
actually cut by essentially like a quarter, So retirees and
(18:03):
soon to be retirees they're getting fearful about the solvency
of Social Security. It's leading to early claims and so
instead of waiting until sixty seven or even later, they're
starting to get that monthly check at sixty five or
even earlier. And this is a personal decision. There's a
lot at play in when you claim social security, and
the reality is that there's trade offs right to claiming
(18:23):
early and to waiting, especially if you're not in great health,
like waiting till seventy if you're not doing so hot. Well,
I get why you might claim early, but a good
chunk of folks would be when you run the numbers,
better off waiting longer, even with this kind of increased
uncertainty around social security. And I also just think people
in their sixties should be less worried about the future
of social Security. It's people in their twenties and thirties
(18:46):
and forties who should be like, hmm, have player impact
on them planning a little more, investing more for their
own future retirement, and banking less on the reality of
social Security being a major major part of their retirement
income plans. Yeah, let's talk about the specific numbers. Because
the benefit is roughly seventy five percent higher if you wait,
if you claim at age seventy as opposed to age
(19:06):
sixty two, Those early claims are going to reduce benefits
for decades to come, and for if you're healthy, right,
If you're a healthy retiree, the overall amount received could
be reduced by up to six figures over your lifetime,
essentially one hundred and twenty thousand dollars less in your pocket.
Because it's significantly too early, right, Yeah, and obviously none
of us out there know how long we're going to live.
(19:28):
But if you are in good health at retirement age,
if you can afford to wait, it's still likely the
best option. If you want a little bit of additional reassurance,
you can consult this fairly inexpensive software that's out there.
There's this one called Maximize My Social Security. If this
is something you're trying to really crunch the numbers on,
and again, like you mentioned, Joe, for younger listeners, it
(19:50):
is going to impact you more than if you're like
sixty years old. But even still, I think it's going
to be around for all of us. If you're listening
to this just in a diminished fashion, yeah, form or fashion,
it's going to be there. But I do think our
benefits are unlikely to be as high as what it's
saying over at Social Security, do like go, yeah, if
you log in, it'll give you kind of a projection
for what your social Security income is likely to be.
(20:12):
I would take that with the grain of salt. I
would reduce that meaningfully into my retirement projections, like something
will be there in all likelihood. But the fact that
our politicians have let it get to this point where
social security is kind of living on the precipice that
it bottles the mind. And there's just it's going to
take some political will to change the future of social
(20:34):
security so that it's going to be around stick around
for the rest of us. It's a real issue that's
going to Like there are some things that are worth
talking about or the politicians actually addressing, and there are
some things that really aren't. And it's just for show.
This is like one of the real things that needs
to be addressed. It's take it taking from a time
bomb exactly from my policy standpoint. But I want to
go back as well to the like you mentioned that
(20:54):
the personal factors and some of the different trade offs.
You got to keep in mind too, some of the
different life goals that you have, because I like I
for folks out there who are tapping it, who are
tapping it early, right, like, so so far like we
kind of we address the numbers sort of side of
the equation, but like, think through what it is that
you want to be able to accomplish in your life
while you still have the ability to write. And so
(21:15):
for retirees, if you're like, you know, yeah, we could
wait until age seventy and you know we're going to
be wealthier. Yes, you definitely will, but that's that's like
a no brainer, right, Like anytime you crunch the numbers, waiting,
waiting is always going to lead to you having more
a higher net worth, and so like, I think the
more important questions to ask are what am I likely
(21:38):
gonna want to be able to do within my retirement
years or like what life goals am I trying to accomplish?
What kind of impact am I looking to have? And
I'll be like, maybe this is like a little bit
of Matt confession time. I'm not having like retirement like questions.
But Kate and I we've been talking about this more
and we're not talking about are you going to claim now? Yeah,
we're not to be like I'm sorry, sir to you
you need a yeah come back here three years? Wait?
(22:01):
Hell am I? Yeah? But the ability to wrestle with
some of these thornier issues. I think it's really important
because and we're not again, so we're not talking about
tapping retirement, but other dollars that we've invested, And it's
kind of hard to wrap your mind around, like, Okay,
this is something that we've been putting money into for
a very long time, and so this is within a brokerage.
(22:23):
But what do we want now what to do with
that money? What is that going to allow us to
accomplish that we may not have the ability to do
a decade from now, two decades from now, knowing that yes,
by waiting it's going to lead to a larger sum
of money, but what are the other factors that you
need to take into account? And the game plan can change, right,
(22:43):
So I've talked about this on the show. When my
mom was diagnosed with cancer, like the thought was, well,
we will tap some of our retirement funds, maybe a
little bit more than we otherwise would, just to be
able to hold off on taking Social Security. And the
plan flipped once my mom's diagnosis happened and it was
like no, no, no, we're I want as many months of
Social Security as I can get because I don't know
how long I'm going to be around and then we'll
(23:05):
leave the retirement funds a little more intact. And so
this isn't necessarily a cut and dry always easy to
figure out this scenario. I think this is like one
of the hardest things to figure out. Like this truly
is like one of the toughest nuts to crack. And
Kate and I have a had like a lot of
different conversations over the years about personal finances and business
and like, okay, strategy different things like that, but man,
(23:25):
this is it's so difficult, And I get you know,
we're not thinking through like life expectancy that like those
are less the questions I guess that we're thinking about
right now. But even still, like, am I guaranteed the
ability to wake up a week from now and continue
along doing the same things that I'm doing today now?
And I'm not saying in the next week, I'm gonna yolo, like,
(23:46):
you know, drain my accounts. So you got to find
some sort of balance though, between yolo or only looking
to the long term, because that I feel like that
can be just as seductive, right like, like, let me
build up the account balance as big as I humanly can.
Let me guarantee the fattest social security check. I've run.
Guess what, I've run the compounding interest calculator, I've run
through the different glide pass and scenarios, and like, that's
(24:08):
a really easy button to hit. And if that is
all you're doing. The easy button is also to just
take social security as quickly as you can, be like,
let me give that money. But yeah, and then you
wake up five years down the road and you're like,
this check isn't as big as I wish it was
or need it to be. Both ends of the spectrum
can be really easy. A little bit of layed gratification
would have done me better. Yeah, so now, Yeah, I
think the ability for folks to address these sort of
(24:29):
thorny topics more head on could lead to productive conversations
not only with like your partner or your spouse, but
even like maybe you don't have a partner, like you
yourself to like like think, like spend some time thinking
about this and like journaling to perhaps uncover some of
the different Yeah, what's going on the under the hood? Yeah,
what else are you are you looking to accomplish? Even
that social security software, those calculators are not they don't
(24:51):
account for that. They don't have the journaling feature included,
so you do have to take some personal stuff into consideration.
It's the numbers matter, but the numbers aren't the only
thing it matters totally. All right, We've got actually more
to get to on today's show.
Speaker 2 (25:04):
You're listening to How To Money with Joel Larsgard on
demand from KFI AM six forty.
Speaker 1 (25:10):
Don't forget to sign up for the how To Money newsletter.
You can find that up at how tomoney dot com
slash newsletter. Joel. Let's hear from another listener they are
wading into the WROTH versus traditional debate as they're contemplating
quasi early retirement.
Speaker 4 (25:25):
My wife is fifty one years old, and we'll retire
in the next three to five years. She will have
a pension that will cover our living expenses. Currently, she
has seven hundred and twenty five thousand in a four
percent matched traditional four to five to seven deferred compensation account,
which she contributes the annuel maximum for her remaining three
to five years. I'm thinking of switching her future contributions
(25:48):
into a ROTH four to fifty seven deferred compensation account.
Can you tell me is there a benefit to making
future contributions into a ROTH four fifty seven versus maintaining
the traditional four to five seven deferred account in order
to hedge against future tax liabilities related to any withdrawals
from that traditional four five seven pre tax deferred compensation account. Also,
(26:13):
if we're Abel, should we convert any of her seven
hundred and twenty five thousand from the traditional four five
seven funds to a ROTH four Thanks again for your time,
appreciate it.
Speaker 1 (26:26):
Oh, Matt, it sounds like Mike. That is his name,
by the way, he didn't say it at the beginning.
That's okay, Mike, Well give me it's okay, Yeah, his ord.
Did he say where he's from? That's true, Like, you know,
maybe he's in Alaska, could be maybe he's in Rhode Island,
big difference. Who knows. Well, your wife is going to
be a young retiree. It sounds like Mike, and you
said something crucial by the way, that her pension will
(26:47):
cover your living expenses, which is fantastic, Like what a
great position to be in. It means that you're going
to have a lot of freedom because of those additional
dollars that she's worked hard to amass over the years
a pension is great, but when a pension is substantial
enough to cover all of your living expenses, that just
(27:07):
the flexibility you have with your retirement accounts can be incredible.
It's pretty sweet. But one thing that Mike didn't say
anything about was his job. And you're inter sitting at
home watching Sports Center. Maybe because of that, maybe your
household overall, no judgment, no judgment that would partially dictate
whether or not you opt for a roth or traditional
(27:27):
for your wife these days, if you are both, let's say,
at peak earning years, well then you know, if you're
finding yourself in the twenty four percent tax bracket or
even higher, I might continue to opt to contribute to
the traditional account in hopes of paying less intact during
your retiming years. And this is coming from someone who
is a huge fan of the of all the different
(27:49):
wroth varieties out there. That being said, it still makes
particular sense to prioritize a roth, specifically in your early
career years when you aren't earning a ton of money,
when you aren't in those higher tax brackets, and for
many when they're making bank it makes sense to take
the tax deduction. Now with the traditional accounts, and like
he alluded to, you can always convert to WROTH in
(28:09):
the first years of retirement where you can zero in
on a particular withdrawal rate where you are targeting a
specific tax bracket when you convert, And you know, there's
some science to it, but it's it's oftentimes more of
an art than science. There are so many different factors
that come into play as to whether or not you
go with the ROTH versus the traditional and specifically whether
(28:31):
or not you convert those dollars later in life. And
it's almost always like a multi year thing to convert
little bits at a time so that you're continuing to
keep the taxes that you pay on those conversions minimal. Right, Sure,
but if you're already retired, let's say, and your wife
is the only one working, Hey, your income has likely
already declined from those peak earning years. If you have
(28:51):
cut your income, let's say, in half. I'm just making
a guest here. If that's the case, contributing directly to
a WROTH with additional investing dollars, that's what I would
do in all likelihood, Right, It's all about those specifics.
But if that's been the case, it's like we've had
two full time jobs, lots of income coming in. That's
why we've kind of prioritized traditional That makes sense. And hey,
(29:13):
maybe now maybe you were retired last year or something
like that, and now the only paycheck that's coming in
is hers, and so that has brought your justin gross
income down significantly for the time being. That might be
a perfect time to utilize roth contributions, kind of like
you're alluding to, like your ass which maybe that's what
he's thinking. He's thinking through. He's just like life is
going to look different for the next three to five years.
(29:34):
Like you said, it also comes down to say yes
from my plase we don't have all the informas exactly
I was going to say too. It also depends not
only on their income, but also their expected expenses off
in the future as well, because I'm thinking of let's
say they both went from both working full time jobs,
so now they're both retired, they've got a lot more
time on their hands, and what are they going to
do with that extra extra additional time? Pickleball? Let's maybe
(29:55):
is pickleball, which it sounds very affordable, in which case
you could see your expenses go down signific in which case, uh, making,
let's say the roth option now while she is working
actually the unwise choice, because essentially, the fewer dollars you
need to realize down the road, the more likely it
makes sense to take advantage of the traditional now because
(30:19):
and especially if part of it depends too, like you're
alluding to on your overall balance in those retirement accounts,
because rm ds coming down the road, they might not
be that might they might not be that substantial if
you don't have tons of money safe. So so what
you said was like pickleball, which is sort of like
the frugal Like, if you expect a future retirement of
like simple living, frugal living, pickleball, I'm gonna splurge and
(30:39):
spend like one hundred and fifty bucks on a paddle. Okay,
that's nothing in the big scheme of things, But like
let's say, for instance, you're plenty to travel the world,
and you're going to expect to see your expenses go
up significantly because hey, not only is the pension completely
covering our cost of living here that we're that we've
been used to, but we've got a ton of money
set aside to be able to live the life to
(31:02):
do all the traveling. Well, what that means is that
you're gonna have to realize some of those four to
fifty seven dollars, which is going to increase your Those
dollars are tax as ordinary income, is what I'm saying,
which could potentially lead to you needing to tap more
of those dollars, putting you in a potentially higher tax
bracket later down the road. So that would be an
instance where opting for the wroth actually did make sense
(31:25):
because you took the tax hit when you were realizing
fewer of those dollars. So basically, retirement, it's not a straightforward,
easy answer, no, and there are a lot of factors
at play, and this might be something you want to
do over time, and then it comes down to income.
It comes down to account balances. Yeah, retirement accounts current
in future income, but also current in future expenses and
(31:46):
the kind of lifestyle you're looking to be able to
afford as well. Yeah, let's talk about roth conversions for
just a second. Whether or not you choose to do that,
it depends on your income two and also somewhat on
what's going on with the stock market. So given that
current combination of fairly low tax rates and a market
that is down a little bit. I think converting to
(32:07):
a roth ira some of those dollars would be at
least on my radar, but your wife also might not
have that ability. So you know, converting to a roth
ira is it's often an option once you've left your job,
but if you're still actively employed, you're making contributions to
that account. That's not always allowed. Some plans do allow
for in service withdrawals, that's what it's called, but you
(32:28):
need to check and see first. So if your wife's
employer offers a WROTH four fifty seven B option, you
might be able to do what's known as an in
plan rollover from the traditional four fifty seven B into
the WROTH. That might be the only maneuver to turn
to when you're talking about rothifying those dollars. I consider
pursuing it, but you got to know whether that's an
(32:49):
option first, and you also have to take into some
consideration some of those things that we mentioned before before
you opt for a WROTH conversion, especially when we're talking
about like a bulk wroth conversion, that that might be
something that's best done for tax purposes over an extended
period of time, not in one fell swoop. Totally agree, buddy,
and that is going to do it for today. Thank
you for listening. We appreciate your time and attention. We'll
(33:10):
see you back here next week. You've been listening to
How To Money with Joel Larsgard. You can always hear
us live on KFI AM six forty twelve pm to
two pm on Sunday, and anytime on demand on the
iHeartRadio app
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