Male Speaker: Would you like an opinion on a financial matter you're dealing with? Whether it's about retirement, investments, taxes or 401ks, Scott Hanson and Pat McClain, would like to help you by answering your call. To join Allworth's "Money Matters," call now at 833-99-WORTH. That's 833-99-W-O-R-T-H.

Scott: Welcome to Allworth's "Money Matters," Scott Hanson.

Pat: And Pat McClain.

Scott: Glad you are with us. Both myself, my co-host, we're both financial advisors, practicing financial advisors. Spend our days during the week helping people like yourself, broadcast our program on the weekends to be your financial advisors over the airwaves, podcast waves, whatever you wanna call those.

Pat: Yeah. And sometimes we dig into the financial numbers and put our commentary in there, and other times we say, "You have enough access to what's going on in the news."

Scott: Yeah. I mean, it's not the program you come and hear exactly what the Dow did last week, like...

Pat: Yes. I don't think you need another source of telling you...

Scott: It's interesting, Pat, how we now have access to what our portfolios valued at by the minute on the device we have in our pocket or our hand, right?

Pat: Yes.

Scott: Our mobile device. We can know what's going on in the financial markets at the tip... I remember years ago, mutual funds published the things once a quarter, like, how your fund is doing. And then newspapers started publishing more, and then I remember there used to be some phone numbers that you could call. Forget who actually hosted those. But I remember sometimes I'd be in my car and use the car phone to call a number to figure out what was going on in the market.

Pat: And you'd type in the stock symbol, and it would... Or the mutual fund symbol.

Scott: But the interesting thing is we have access to information, not only what our portfolio is worth, what the markets are doing, we have access to just about every bright economist in the globe at our fingertips, but yet we don't seem to be making better choices when it comes to our finances as a society. If you think about this, we still have market cycles.

Pat: Wait, you're implying that people didn't change their behavior just because they have access to information?

Scott: Well, if you think about it, the information age, and if values of securities are based upon information readily available to us all, why is it that the last 30 years as technology has changed so dramatically where we all have access to the information and it continues to increase... Maybe, although one could argue that perhaps we are starting to lose some of that access with the way some of these...

Pat: But do you think that...? I guess this would be a question that we could go back and measure, is that, have the markets become more volatile as we have had greater access to information?

Scott: They're about the same when I looked in. The financial crisis, we had a lot of volatility, the VIX. Remember the VIX? Every day you hear about the VIX. You don't hear so much about the VIX anymore. People talk about what a volatile year this is. Actually it's not that volatile, it's just a lot more down days than up days, unfortunately. It's tough to be an investor in times like this, and particularly so with interest rates going up. A year ago people talked about, "There is no other." There are no alternatives. "TINA" whatever it was. There is no alternative, "TINA." That's what I think, "TINA."

Then stocks. And I realized, actually there are quite a few alternatives, and you probably shouldn't have everything in stocks if you need your money anytime soon. But now it can be tempting for someone to say, "I've had a balance portfolio. I'm down for the year. My stocks are down, my bonds are down. I'm just gonna cash out and go buy CDs. I can get some CDs pretty... Or I can get two year treasuries, around 4%. Why don't I just go and put my money in the treasuries and bail out of the markets? Or, maybe I'll just take my money out, put it in treasuries, CDs, and wait for things to...

Pat: Recover

Scott: ... recover a bit, and then go back in."

Pat: As if you knew the time. As if you knew...

Scott: But these are the questions that people are having around the dinner table at night, right?

Pat: I understand, Scott, but if you were actually that good at calling the bottom, why weren't you that good at calling the top and taking your money out then? That's what I say to my... I have discussion with friends and my family all the time. Look, we don't know what the sequence is going to do. What we do know is historically how long the holding period should be, and what the assumed rates of return conservatively can be through a long period of time. But to believe that I can call the bottom but wasn't able to call the top would be foolhardy.

Scott: That's a good point. You think you'd be so smart to be able to get back in, what happened the last time? Why wasn't I there at the top? Why didn't I come out at the top?

Pat: And it is the constant. And you say it's difficult to be an investor, this is the cost of investing. This is flat-out. Right? This is the cost.

Scott: That's right.

Pat: This is it. Right?

Scott: But what I'm saying is it can be tempting for someone to say, "At this point I'm gonna be happy with 4%."

Pat: Scott, it's tempting for people at the top of the market to actually push more money into equities, because that's the only way they're gonna make a lot of money. So, we all struggle with this thing as an investor. It's fear and greed, fear and greed, fear and greed.

Scott: I don't know if it's a greed thing as much as it is, people want to protect what they have. Clearly people make stupid investment choices out of greed. Like, "If I strike rich on this I'm gonna get myself a Lamborghini."

Pat: Ponzi schemes wouldn't exist unless there was that greed.

Scott: Absolutely. But I think that most Americans who have saved well during their lives have some financial resources and some financial independence, I think it's more fear than anything. They don't want to have to go backwards in their lifestyle. They've worked hard, they've had a certain lifestyle over the years, they've planned well, they're at a stage in their life, like, "Okay. I can maintain. I just wanna maintain the standard of living." Most people are much more concerned about not going broke than they are about becoming richer.

Pat: That is correct.

Scott: So, I don't know if it's a greed thing as much as it is trying to protect what I've got.

Pat: I think it's a station-in-life thing, because how someone reacts to a $2 million portfolio or a $1 million portfolio in their 40s, versus someone who reacts to 'em in their 60s or 70s when they're not working....

Scott: Totally agree with that.

Pat: Because the older you get when you leave the workforce, you realize it's difficult for you to step back in and try to make it up. Which is why portfolios, by the way, get more conservative a lot of the times when people go into retirement by design. Unfortunately this year the bonds didn't help the portfolios, in terms of stemming losses.

Scott: But you might be saying, "Well, I shouldn't have been in those bonds," but the reality is, people were expecting rates to go up for the last decade, right?

Pat: Yes.

Scott: I mean, I've heard that argument, "Rates are gonna go up." And look, we were very short on our bond portfolio, so we didn't have the same kind of declines and stuff [crosstalk 00:07:49.127].

Pat: Scott, would it surprise you? It wouldn't surprise me at all. I was thinking about this this morning, it wouldn't surprise me if all of a sudden the Federal Reserve slowed the interest rate rise.

Scott: Yeah. Or a time we're expecting another increase of 75 basis points. That's 75/100, 0.75%. We're expecting that and suddenly they say, "We're doing a quarter," "we're doing a half," or, "we're not doing it right now."

Pat: It wouldn't surprise me at all, and it wouldn't surprise me at all 18 months from now for them to cut rates by 0.25%. Neither one of those things would surprise me...

Scott: Or more 18 months from now.

Pat: That's right. As they try to increase the growth of the economy. This is someone that's just banging on different pedals on the floor of your car. You imagine this, you're like, "Okay. This is danger ahead. Do I step on the gas? Do I hit the brakes?" Gas, brakes, gas, breaks, gas, brakes. That's what the Federal Reserve is doing. And then you've got someone in the back seat, we're gonna call it the Federal Government, screaming directions that have nothing to do with the problem. That was a big analogy stretch.

Scott: Yeah, it's a good analogy there, Pat.

Pat: Well, thank you.

Scott: All right. So, would love to take your calls regarding your financial matters, and if you want to join us, love to take your call. Our contact number, 916-473-5459. Again, 916-473-5459. We're in Colorado with Christopher. Christopher, you're with Allworth's "Money Matters."

Christopher: Scott and Pat, such a pleasure to be on the show with you guys. My mom and I are big fans of you, and a couple of months ago she got on the show, and she's been holding it above my head ever since. So, now it's time I get on the show myself.

Pat: Well, we appreciate you listening to the show.

Christopher: All righty. So, just some context about myself. I live in Denver. I'm a 21-year-old finance major, and I'm gonna graduate this fall. So, I'm calling today to talk about, as I enter my career...

Scott: You sound about 35. At first I'm thinking, "Are you still living at home here buddy?"

Pat: What school are you going to?

Christopher: Metropolitan State University of Denver.

Pat: Okay.

Christopher: So, I'm calling to ask a question about, as I transition into a career and a full-time job after I graduate, what are the best ways that I can save and put into investment vehicles that not only meet my retirement goals, but also my near-term and midterm goals?

Pat: What do you think you should do?

Scott: Yeah, you're the finance major. You should be all fresh on this stuff.

Pat: Well, you're talking to a bunch of old guys that forgot.

Christopher: Very wise gentlemen, is what I would say. Just for context, I currently have $10,000 in savings, $19,000 in traditional brokerage accounts, $2000 in a Roth 401(k), and then $14,000 in a Roth IRA.

Pat: Okay.

Scott: Have you been maximizing your Roths?

Christopher: My 401(k) or my IRA?

Scott: Your Roth IRA?

Christopher: Previous years I have, but I've started to invest a little bit more into my 401(k) now that I've had it this year.

Scott: And in your brokerage account... I mean, the one thing I'd be saying is, you might as well get the money from your brokerage account into the Roth IRA as much as possible. So, if you could only save X dollars and it's going into your 401... How do you have in a 40...? You've got, like, a real job while you're going to school?

Christopher: I landed a pretty awesome internship, where they offered interns the full perks and benefit packages that normal associates have with an insurance broker here in Denver.

Scott: Wow. That's good.

Pat: Wow. That's good.

Scott: I would be looking at maximizing that Roth IRA, and if you need the money for some shorter-term goals, if it's to buy a house or something at some point in time, you could always take out your contributions without any taxes or penalties, and leave whatever earnings are in there. That's preferable to the brokerage account, which you've got what's gonna be taxable. Granted, that most of it probably capital gain, but still taxable versus non-tax.

Christopher: Right. Originally, I was thinking more in brokerage as of right now, because I think I wanna retire before 59. And also, I don't know, I wanted to afford a down payment on a mortgage, but with current rates and prices on houses I think it's gonna be renting for the first couple of years coming outta college. So, I probably [crosstalk 00:12:28.797].

Scott: You're probably not in a big rush either.

Christopher: No, no. Definitely not.

Scott: I mean, I wouldn't be in a rush to buy a house right now just given where the markets are.

Pat: I think you're doing great. Let's go with that.

Scott: No question.

Pat: Yeah. And then let's go with the second thing, don't think about the date you're gonna retire. You might find that you have such a phenomenal career and so many options in your life, that you'll never wanna retire. You're gonna build a life that fits...

Scott: Pat, you turned 60 this year, right?

Pat: Yes.

Scott: And when you were 21, if I asked you... Well, I know. I've worked with you a long time, and you used to say, "If I have this much in savings, I'm gonna retire."

Pat: I used to say that.

Scott: And then it's like, "Well, "If I had this much in savings I'm gonna retire." And now your retirement option.. your plan is...

Pat: I have none. I have none. What I'm trying to do is build a life around and in work that affords me the opportunity to do what I wanna do, but work is still an important part of my life as are other parts of my life. So, I think you should put off this, you know...

Scott: Christopher, you probably read something about this FIRE movement?

Christopher: Yeah. My mom's been telling me all about it. I haven't done a whole lot of research, but she's been telling me a about that.

Pat: Yeah. This Financial Independence...

Scott: I think it's weird.

Pat: Retire Early?

Scott: Financial Independence, Retire Early. And you read these stories about people that worked hard for 10 or 15 years, saved a bunch and then quit working.

Pat: But they write these stories, which actually seems like work to me. So, did they really work and retire or did they just change their job to write about how they're supposedly retired, while they're actually getting paid to work?

Scott: They just changed professions.

Pat: They just changed professions.

Scott: I mean, look, I think the sweet spot really is, if you have a career such that it's the intersection right between what the marketplace needs, what your skillset is, and what you're passionate about. It's really the intersection of those things. If you spend your whole career on what the marketplace needs, and what you're good at but you hate doing, you'll find yourself miserable, you'll be seeing a financial advisor in your early 50s saying, "How quickly can I retire? I can't do this anymore. This job's terrible, I can't..."

And conversely, if you only do the intersection between what you're great at, your skills, and what your passions are, you might do something that the marketplace can care less about and you're gonna starve to death. So, it's really the intersection between those three things. And then secondly, it's having a plan to financial independence where work is an option and not an obligation. And I think I'd be looking at much more around that, than I would about having some time I'm gonna retire.

Pat: Yeah. But I think you're doing... Savings, I agree with Scott. You would wanna put as much into the Roth IRAs as you can, even if you have to liquidate some of it out of the brokerage account in order to get there. I would continue to actually save at the current rate, but still enjoy life. And I will give you unsolicited advice that I give all the young associates that ask...

Scott: He solicited your advice.

Pat: Oh, he did?

Scott: Yeah, he called.

Pat: No, I'm gonna give him some unsolicited...

Scott: Okay.

Pat: He solicited advice about finance. I'm gonna give him career advice. So, all the young people in our organization that come to me and they ask, "What is the thing that I should be doing in order to further my career?" And I tell them to join Toastmasters, to learn how to public-speak and articulate an idea in such a manner...

Scott: Does Toastmasters still exist?

Pat: It certainly does exist. In fact, we have a number of associates here, young associates that have joined it after soliciting. But then the person that asked me that question, and then six months later comes and ask the same question again, the first thing I say is, "Did you take my advice last time you asked?" And if they say, "No." I say, "Well, I'm not gonna waste my time answering it again." So, that's just the reality.

Scott: Well, it's being able to communicate.

Pat: Being able to communicate and...

Scott: And be persuasive.

Pat: In order to communicate and convey your ideas in a persuasive manner with logic, and sometimes emotion surrounding it.

Scott: Yeah, emotion can do it.

Pat: And I think that for anyone beginning their careers, Toastmasters, it's a friendly forum. I have gone to it, many of our top advisors have gone to it. It costs pretty much nothing, but it creates a little community where everyone not only cheers you on about how to communicate, but actually how to build a career.

Scott: You've saved a lot of money. He's a great...

Pat: Yeah, 21-year-old.

Scott: Unbelievable.

Christopher: Thank you.

Scott: Unbelievable.

Christopher: My mom helped me open a custodial Roth IRA when I got my first paycheck. I was 15, so ever since then it's been saving pretty much everything I can.

Scott: Yeah. Well, part of the trick is to enjoying life too, right?

Pat: Or marry money.

Christopher: Sure, sure. Yep.

Pat: Which may be the hardest dollar you've ever earned.

Christopher: Right.

Pat: So, good...

Christopher: Like you said, none of us leaves this place alive, so we don't wanna leave anything...

Pat: Yeah, yep. Great job. Phenomenal job.

Scott: Yeah. Wish you well, Christopher. Man... I think, look, every generation talks about the next generation, complains about this, and this generation... Certainly there's been a lot of people talk about how their work ethic's not the same. I have not experienced that. I haven't.

Pat: And quite frankly, they may have talked about us when we were that age but we couldn't hear them, so good for them.

Scott: I mean, the young people that work with Allworth are fun, energetic. They may not want the same 9:00 - 5:00, same exact structure, but we don't need that kind of structure anymore anyway with the way things have moved on. Let's continue with...

Pat: What did I start? When I started, the guy told me it was a halftime job. You could work any 12 hours of the day you wanted. That's what he said.

Scott: Well, it was true.

Pat: "Pat, just remember, it's a halftime job. You can work any 12 hours of the day you want." Like, "Saturday and Sunday, six hours on Saturday."

Scott: I worked most Saturdays for... Not that I was that productive, but man. Whatever. Let's go to Florida and talk with Carla. Carla, you're with Allworth's "Money Matters."

Carla: Hi.

Scott: Hi Carla.

Carla: How are you guys doing?

Scott: Fantastic.

Pat: Good. What can we do for you, Carla?

Carla: Yes, I have a question. I'm currently in the process of doing a refinance of my mortgage and...

Scott: Refinance?

Carla: Yeah.

Pat: Okay. What's the interest rate on your current mortgage?

Carla: That's it. The current mortgage interest rate is 3.25. The new one is 5.25. No, 5.75%.

Pat: Okay.

Carla: The reason for the refinance is to pay off a lot of credit card debts, a HELOC that I have and a couple of other few things that I have just to kind of get me on a fresh start. And I'm kinda concerned... I'm sorry, go ahead.

Pat: Oh, you're concerned...?

Carla: I'm concerned that, you know, is this a good deal? Is it a good time? Should I do that or put as far as putting... Because I have a lot of equity right now in my home.

Pat: Okay. Let's break this out. Let's just go through line by line. It's gonna take a couple of minutes. We'll go through line by... What's the value of your home?

Carla: The value of my home is about $300,000.

Pat: And what do you owe on it?

Carla: I have the first mortgage is $150.

Pat: Okay. And that's at 3.25. Okay.

Carla: 3.25. The HELOC is $29,000.

Pat: And that's an adjustable rate mortgage?

Carla: Correct.

Pat: Okay. Who else do you owe money to?

Carla: Credit card bills averaging probably about $17,000 maybe. I have a time-share that's about $6,000. I think that's it, including all the...

Pat: Okay. Absolutely do not refinance your mortgage.

Scott: No.

Pat: Do not.

Carla: Do not?

Pat: Do not.

Scott: The bank, whoever's doing this, should have told you that.

Pat: Do not refinance your mortgage. Absolutely not. Absolutely not.

Carla: Okay.

Pat: How did this credit card bill get to you?

Scott: I mean, just the interest alone, the increase in interest alone on your home is gonna be about $4,000 a year, and it increased in... $4 grand more, just on that $150,000 first mortgage.

Pat: Yeah. And when you said you have a lot of debt, you don't, relative to the equity in your home. What do you make? Are you retired or are you still working?

Carla: Unfortunately I'm still working.

Pat: Okay. And how much do you make?

Carla: About $4,000 a month.

Pat: Okay. And are you supporting anyone?

Carla: No.

Pat: And do you have any money in IRAs, 401(k)s, anything like that?

Carla: No, I don't.

Pat: Okay. And how old are you, Carla?

Carla: 54.

Pat: All right. What you'll have to do, this credit card debt, did it take place in, like, one time or was it years in making?

Carla: Kind of a couple of years in making. I started a business and I kind of had to use the credit card for the business.

Pat: Okay. And what did you do with the HELOC?

Carla: That went towards the business as well.

Scott: Okay.

Pat: Okay. You're fine. You're fine. Here's what I want...

Scott: Well, she's not fine. She's trying to figure... She's making these payments.

Pat: I want you to go and subscribe to Dave Ramsey's system.

Carla: Oh, yeah. Okay. I've heard of that.

Scott: A hundred percent. Like, whether I agree with Dave on all his investment stuff's irrelevant. I have tremendous respect for how he's helped people like Carla get out debt. That's his main thing is, "Get out debt." If you get outta debt, you've got a lot of financial freedom in your life, regardless of how much finances you have, right?

Pat: And a lot of his is Christian-based or biblical-based, whether that's something you're interested in or not, I mean, that's not why we're sending you there because of that message. We're sending you to Dave Ramsey because he takes people like yourself and has, they call 'em baby steps, where you actually learn how to manage your budget in order to fix your life and then save for retirement. At 54 years of age, I would actually assume that you're gonna work until you're 70 and that you're gonna institute his program, and you're gonna...

Scott: Well, maybe not 70. You can't retire without having any savings.

Pat: That's right.

Carla: Correct.

Pat: So, he has got this system and it's gonna cost you a few hundred dollars to subscribe, and then they offer 'em through local churches, and there's all kinds of programs.

Scott: I have no idea what it costs.

Pat: I do, it's a few hundred dollars depending upon what program you sign up for. I would go to Dave Ramsey. What we do know is the answer of what you called for, which is, "Do I refinance?" Absolutely not. Absolutely not.

Carla: Okay.

Pat: Do not refinance, but you're able to dig yourself out of this hole. It's probably gonna take you two or three years, but you'll be able to do it. Sorry, the business didn't work out.

Scott: Or four years or five years.

Pat: But if you refinance, now suddenly you're $150,000 mortgage goes to $200,000, but the interest rate you're paying is so much greater that... It doesn't make any sense. In fact, you should not talk to the institution that recommended this to you.

Carla: And that's my current mortgage company.

Pat: Then just tell them no. Tell them no.

Scott: I mean, if you had $150,000 first mortgage and $300,000 in some other debt at a high rate, and then, like, okay, maybe.

Pat: Then, maybe.

Scott: Maybe.

Carla: Okay.

Scott: But your mortgage is substantially greater than your other debt.

Carla: Right. Correct, yeah.

Scott: It's 75% of your debt is your mortgage, and I'd hate to see you, like, throw away that great interest rate you've got in that first.

Pat: So, Dave Ramsey does a great job helping people get out of debt and to build a good financial foundation, yeah.

Scott: And, look, it's not easy. Look, Pat, I know you've seen it as well. People that have lived in the same house for 25 years, they come visit you trying to figure out how to retire, and they owe a substantial amount on their house, and you're thinking, "What happened?" It's because, well, they refinanced, and they refinanced, and they refinanced. So, yeah.

Pat: Well, we wish you well.

Scott: Yeah. We do wish well. And Carla, I know there's a way out. I would agree with Pat there. We're gonna take a quick break. We'll be right back.

Male Speaker: Can't get enough of Allworth's "Money Matters?" Visit allworthfinancial.com/radio to listen to the "Money Matters" podcast.

Scott: Welcome back to Allworth's "Money Matters." Scott Hanson.

Pat: And Pat McClain.

Scott: You know what's strange this year? Is how strong the dollar's been compared to some other currencies. Some other? All other currencies. The pound has gotten hammered.

Pat: Well, there's a lot of extenuating circumstances around that.

Scott: The euro is at par.

Pat: Yes, that's true.

Scott: Wasn't that many years ago the euro was a buck 50. Now it's a buck. Yuan is depreciated, the yen depreciated. The dollar has just been...

Pat: It's the bellwether, and it has been for years and years, but never this strong against that basket of currencies. I shouldn't say never. Not for a long, long time.

Scott: But I didn't see anyone predicting this, did you?

Pat: No, but it does make profits for companies that... You know, if you look at the major, not only technology corporations in the United States, but multinationals, what percentage of their revenues actually come from overseas, and then they're converting from that currency to this currency without hedges, it most certainly will...

Scott: Well, even if you hedge, it's a temporary... And there's a cost-associate. Long-term that's not a great...

Pat: Yeah. But it most certainly will have an effect on profitability of some U.S. corporations over the foreseeable future.

Scott: Yeah. Hey, before we go back to this call here, Pat and I are setting aside two hours to be in the studio to take your question regarding your financial life. Something that's going in your... Someone's recommending something, you want another opinion. You wanna just to check up, wonder if you can afford to retire, is your 401(k) allocated correctly? Whatever the case may be, we'll be in the studio two hours, Monday, October 24th from 10:30 a.m. to 12:30 p.m. Pacific. Again, Monday, October 24th, 10:30 a.m. to 12:30 Pacific. That's 1:30 p.m. to 4:30 p.m. Eastern Time, and would love to take your calls during that time.

So if you wanna join us, you can schedule a time by sending an email to questions@moneymatters.com. Again, questions@moneymatters.com, or our phone number, which you could either schedule a time or just call during those two hours. Wanna just put on your calendar with the phone number, you can just call during those two hours and we will take your...and we'll hang out late if we need to. 916-473-5459 is the number. Again, 916-473-5459.

Pat: On occasion, we ask people to get in touch with us, or we get in touch with them, of questions that we have answered in the past and follow-up and see whether our advice worked or didn't work. And we call this the house calls part of Allworth's "Money Matters." And today we're gonna visit with someone we talked back in July.

Scott: Yeah, that was last July. We spoke to one of our podcast listeners named Laura. She's not an Allworth client, but she says she listens to us practically every day.

Pat: I don't know how you could, it only ran once a week, but...

Scott: Although I remember at a conference years ago, this woman came up and said how, this is before podcast, she'd recorded every program and would listen to it twice. She was a little odd, I ran away from her. Anyway, at the time the 62-year-old was going to be separated from her job, and needed advice on how her severance should be incorporated in her overall financial picture. So, here's a clip from that call last July.

Laura: About 60% pre-tax in brokerage accounts, various 401(k) and IRAs, etc., etc. My husband, he's 77, has a pension of $5,500 a month approximately. It's per, so we both get our health insurance there as well. He also gets about $1,800 of security. As of August 1st, I'll also have a small pension at the month-end, $800 or so. And if I filed $2,100 in social security, our annual spend is about $123k, and here we go. I will be getting an approximately $118,000 gross severance on August 1st.

Scott: The $1.5 million, which is split 60% in brokerage accounts, pre-tax dollars and 40% in retirement dollars, how are those dollars allocated? Are they 100% stocks?

Laura: Say, 70-30. Sixty five-thirty five, 70-30, something like that.

Scott: Okay. So you've got...

Laura: I think it was 70-30 until recently.

Scott: And this $900,000 in brokerage, how much money do you have in your 457 or 401(k) at work?

Laura: Two ninety five. I actually split out... It was $700,000 or $800,000, and then I split some of it into an IRA to see... Well, anyway, I did, and left the remaining $300,000 in the 401(k). It is now $200 and something thousand and $400 and something thousand.

Scott: And when did you say your last day at work was?

Pat: It's this August, 1st.

Laura: It's going to be August 1st.

Scott: Oh, I was gonna say...

Pat: So you've got, you've got money in your brokerage account. Thirty percent of it or 35% of it, is not in the stock market at all, right? Based upon what you just told us.

Laura: In bonds. It's 70-30 bonds, yeah.

Pat: If you started social security today, how much would you receive?

Laura: Twenty one hundred dollars.

Pat: Okay. So, when we look at this number, you've already done the math here, you've said that... So, you barely, barely... Your income will be at $10,200 a month and you're living on 120 a year, is what you said?

Laura: Yeah.

Pat: All right. So, are you confident you're not gonna go back to work? Tell us about your mortgage.

Laura: Let's assume I'm not, my mortgage is $45,000, and we actually have an account that I am determined to convince my husband to pay it off with...

Scott: Yeah. Because you're not getting any tax deductions, it's too small.

Pat: You owe $45 grand on your mortgage?

Laura: Yeah.

Pat: Oh, yeah. Did any of the fiduciaries tell you to pay off the mortgage immediately?

Laura: No.

Pat: They are not good fiduciaries. Pay off your mortgage immediately. Your husband...

Scott: I would take this and pay the mortgage off.

Pat: I would pay it off right now.

Scott: Right before I'd invest it.

Pat: And don't even ask your husband, because you don't have to convince him. It was your income, you made it. You're gonna take 100% of that severance, you're gonna pay taxes on it, you're gonna pay the mortgage off.

Laura: Okay.

Scott: And throw the rest in your brokerage account. What little was left, throw into the brokerage account.

Pat: But better than that, Scott, she can increase her 401(k) contributions and 457 contributions to the maximum.

Scott: Are you working for the state, county? Just county?

Laura: No.

Scott: Oh, the 401(k) then.

Laura: Telecommunications.

Scott: I would put as I would put as much...

Laura: I actually took... Really? Put as much? I did the opposite. I stopped on my 401(k).

Pat: I know, I know. We would put as much as possible.

Scott: You're in a high-tax year, you get the severance coming on top of your other pay.

Pat: Severance comes as ordinary income. It's probably one of the highest taxes...

Laura: Yeah, but I won't be working...

Scott: For six months out of the year.

Laura: Yeah, but I won't be working from August to the end of the year.

Scott: Yeah. But do you make...

Pat: If you don't wanna do it, then use the Roth 401(k).

Laura: Yeah, I make about $150, $160 normally, so it wouldn't be that much more.

Scott: But it'll be more, and it's still more than you're gonna be making in 2023, 2024, 2025.

Laura: That's true.

Pat: 2026.

Scott: When you're in a lower tax bracket, so I would clearly use the 401(k) if I were you. That's your highest return.

Pat: Pay off that the mortgage immediately, you're gonna need less to live on. Take the rest and put it into your 401(k), either Roth or not Roth. I would hold off on the social security for a couple years to see if you went back to work. May or may not. I know how you're feeling today, like, "I'm not gonna go back to work." But that may dissipate over time.

Scott: You might do some part-time consultant, or who knows?

Pat: They may miss you so much at work, they beg you to come back, and they fill your office with flowers every day and thank you for coming in. We have no idea.

Scott: And I've had clients do all kinds of interesting work around the globe on kind of part-time assignments after they've retired, and thought they would never work again.

Pat: And then, take the difference outta your brokerage account that you need to live on.

Scott: All right. So, that was the call we had with Laura back last July. Laura, you're with us now. Is that right?

Laura: That is right.

Pat: Okay. So, how's retirement

Laura: I don't know. It's strange. It's very strange. In many ways it's good but, I don't know, it just doesn't feel permanent.

Pat: And how many years...?

Scott: Sorry, this was August 1st?

Pat: I know. It's not very long ago. This is pretty...

Scott: That's two months.

Pat: You know, it's pretty normal. It's pretty normal. You know, when you're truly retired by your vocabulary. When you say, "We're going on a trip," versus, "We're going on vacation."

Laura: Oh, right, right, right. Well, I thought for a second there you're gonna say my vocabulary will deteriorate. Oh, no.

Scott: It depends how you spend your retirement, I suppose.

Pat: Yeah. And so, what I have noticed with clients when they are... I can always tell there's this kind of a tell. If they say, "Oh, we're going on vacation," and they've been retired for a while, it tells me that they haven't actually in their mind, because what are you vacating from? Right?

Laura: Right.

Pat: But if they say, "We're doing a trip," you know, these are subtle tells that they are.

Scott: So, are you planning on staying retired if...?

Laura: That's an interesting question. I thought so, and then a former manager of mine called me in and said there was a job that... I mean, he's become the director of blah, blah, blah, and he needs to hire three people. And I didn't know that I had a number. I do, and $300,000 is really close to it. And so, I haven't said yes, I haven't moved forward because I really do think that if you keep doing that, you never actually get off the merry-go-round. So, in any case...

Pat: Interesting.

Laura: I do think that I'm gonna stay retired.

Pat: You do. You know, Scott and I are, you know, practicing advisors and we have walked through this for years and years and years with many people. I have had clients that took four or five runs at this retirement thing before they got it right, and I have other ones... In fact, I have an 80-year-old client that didn't really retire until... He said two years ago, but he had been doing contract work, and it had become less and less and less.

Scott: My stepfather retired from utility company at mid-50s, early retirement package, and the next 22 years worked 85% of the time and didn't fully retire until 77.

Laura: I actually would like something that is a step down, you know?

Scott: Yeah.

Laura: You know, a gradual step down, but in...

Scott: It sounds like the job you're being offered was probably more responsibility, and not less, right?

Laura: Correct.

Pat: But, you know, don't be afraid to counter with the job you want and see what they say.

Laura: That's actually... Yes, I did.

Pat: Okay. And so, on a couple of the financial points, did you make any modifications to your 401(k) deposits that we'd suggested?

Laura: I did pretty much everything you suggested. I maxed out everything, everything and I made it to my max by the time I stopped being paid, so that was awesome. Very low paychecks for the last few.

Pat: Yeah, yeah.

Scott: Yeah, it all went to the 401(k), sorry.

Laura: It did. But that was okay because my husband's got a pension and...

Pat: And did you pay off your mortgage?

Laura: Yes. Yes.

Pat: And your husband was okay with that?

Laura: He was okay. He was totally onboard. And after we got to say, "We don't have a mortgage anymore, and money not going out is just like money coming in." He knows that phrase now.

Scott: Yep.

Pat: And did you start social security or not?

Laura: No, because I made too much money this year. I did kinda make a mistake, because I wasn't sure. I did unemployment, but I'm still kind of up in the air about that. And yeah, I can't make any more money this year, because otherwise I'll be into a completely different tax bracket.

Pat: Okay. But the unemployment, did you leave...

Scott: Wait, the tax bracket, they only take a portion of your... The tax rate only gets... It's never 100% or more than 100%.

Laura: Yes.

Pat: But I thought this was a voluntary severance. Was it an involuntary severance?

Laura: Yes but no. Yes and no. So, half of the people were left to.... stayed on to take care of the customers that were going to be turned down, and half the people went and I was in the half that went. I didn't have big accounts, so the ones that had big accounts stayed.

Pat: So, do you qualify for unemployment?

Laura: Yes.

Scott: Okay. All right. Perfect.

Pat: And you wondered if that was the right decision, you said?

Laura: Well, because if I wasn't going to be unemployed anymore then unemployment seems, like, not right. So, since I haven't decided, I think it's okay.

Scott: Yes. Yes, yes, yes, yes. Well, as financial advisors...

Pat: It's funny. For years when the government started... I remember, this was back in the financial crisis. We had a client retiring, he got, like, a year's severance and a ton of money in his retirement account, and the government gave him $20 grand towards his mortgage payment just because he fell under some weird thing, right?

Laura: Mm-hmm.

Pat: And I remember the time, like, the government starts doing, like, after a while, we're all gonna look for whatever little program we could take advantage of, because it's our tax dollars. They're getting redistributed all over the place, so, like, you qualify for the unemployment, take the unemployment.

Laura: Yeah. And it was just a sort of a push me, pull you, initially. And then it was, I had already started and I'm like, "Ah, heck with it. I'm just gonna keep going."

Pat: And by the way, you know, if you were sitting in my office, I would've told you to apply for Social Security in January rather than before then, just to get away from the paperwork. Because if you had applied for it this year in 2022, you would've fallen under what's called the special monthly rule...

Scott: Which means you wouldn't have any reduction on it.

Pat: Yeah. You wouldn't have a reduction of it, but it would require you to actually go back and substantiate your income month-by-month to the Social Security Administration. Which is kind of a pain in the butt and so the difference there, I'm like, "Yeah, if we were in August or September, I'd just blow it over to the next year."

Scott: Well, good hearing from you again, Laura. Any questions you have for us today?

Laura: I did find one really kind of... It's very little, but it kind of puts a zip in my step. My pension, my little tiny baby pension that I get, instead of being $700 a month, it's $905 a month.

Scott: There we go. You got a nice dinner or two every month and an additional...

Laura: Exactly. Exactly.

Pat: Where's she eating?

Scott: What?

Pat: Where is she eating?

Scott: Her and her husband, a dinner or two? I said two dinners.

Pat: It's $100 a dinner?

Scott: After tax. When was the last time...? Have you not taken your wife out to dinner, a nice dinner recently, Pat? Chilies does not qualify, by the way.

Laura: Yeah. It's a buck and a half every time. Pretty much.

Pat: Well, not at the taqueria I go to. "Hey babe, get a third taco tonight."

Scott: "Look, the drinks are free. You could re-fill it as many times as you want."

Pat: "We're sharing the soda."

Scott: Exactly. All right, thanks and congrats on, maybe your retirement.

Laura: Thank you. Thank you so much.

Pat: Well, I love hearing stories like this, because you worked hard. What a blessing, right, to be in this situation in life?

Laura: Oh, it's completely. Ever since it was a choice. I mean, there's a point at which, you know, it's a choice. I can leave or I can stay. Work just seemed like a joy, most times, instead of, you know, "Oh my God. It's Monday," blah, blah, blah. But I'm gonna tell you, I do not miss any of your episodes, and many of them I listen to more than once. So, love you guys.

Pat: Thank you, Laura. Appreciate it.

Scott: I appreciate you.

Pat: That's nice.

Scott: Yeah, it was great. It's a nice way to finish this program today. So, anyway, it's been great having everyone with us. Thanks for being part of Allworth's "Money Matters." But if you think this show is useful, if you're learning stuff from us, Laura says she enjoys it, forward this to a friend and say, "Hey, check these guys out. I think you might get something from it." That's how our podcast listeners grow, it's by people letting other people know. It's not like we have some big advertising budget and we're trying to promote this, so this is how most of our listeners find us, and we certainly appreciate that. And we'll be back with you next week. This has been Scott Hanson, Pat McClain of Allworth's "Money Matters."

Male Speaker: This program has been brought to you by Allworth Financial, a registered investment advisory firm. Any ideas presented during this program are not intended to provide specific financial advice. You should consult your own financial advisor, tax consultant, or estate planning attorney, to conduct your own due diligence.