Listener Jamie reached out to our show after hearing previous episodes about retirement planning. Jamie is 52, and her husband is 9 years older, which creates some interesting questions around their retirements. She's here to ask Paula some of those questions, including:
Throughout the podcast, Paula talks about financial planners. She gives Jamie her best tips on finding one.
Also, we reference the social security administration website, and how to look at your account. You'll find that page here:
https://www.ssa.gov/myaccount/
If you'd like to come on the show and ask Paula questions about your specific situation, or if you'd like to reach out to her privately, you can email her: Paula@PaulaChristine.com.
Or visit her website at PaulaChristine.com.
We want to wish everyone Happy Holidays and Happy New Year. We'll be back with new episodes in January!
Jamie Interview Mixdown 1
Paula: Welcome to Beyond the Paycheck. I'm Paula Christine. Stop living paycheck to paycheck and start living the life that you dream about by taking control of your money. I can provide you with the knowledge and the tools. It's up to you to make the commitment to put them into practice. So today we're gonna talk with our listener Jamie, who had some questions about retirement.
And so I asked her to be on the show and ask her questions. So welcome Jamie.
Jamie: Hi. Thanks for having me, Paula.
Paula: So you're gonna lead this interview, so go ahead and ask your first question.
Jamie: So I listened to your podcast on other ways to save for retirement, and that got me thinking my plan is to retire at 62.
I'm 52 now, so that's 10 years away. How do I know my actual year I can fully retire is my first question. And my second question would be, how can I be sure I'm investing in the right products and will I have enough money at 62?
Paula: So the answer to both of those questions is to put together a retirement plan where we can look to make sure that you are saving enough money and if your assets are in the right buckets of money.
And then the second thing then would also help us determine when you can retire. So if I sit with a client, we look at retirement planning. If your goal is 62, we wanna project how long you're gonna live, and as long as we have some extra cash at that time, some extra. Then we could say it's okay.
But if we run into a deficit, let's say you're gonna run outta money at age 85 and, you know, we're using 90, then that's a good sign for us that you can't retire at 62. And we have to make some adjustments. Doesn't mean you can't retire, just means maybe we need to save a little bit more. Or if your investments are too conservative, maybe you need to be slightly more aggressive.
But the only way we can answer those questions is to start with putting together a retirement plan. So you need to work with a financial planner to do that.
Jamie: What is the difference between a Roth and a regular 401k, and then what should I be in at my age?
Paula: So are you asking the question, what's the difference between a traditional 401K and a Roth 401k?
Or are you asking what is a 401k and what's a Roth ira? Or both?
Jamie: I guess both.
Paula: So a lot of 401ks now have the option to do either a traditional 401K or a Roth 401k. In the traditional, your money goes in with pretax dollars. So if you're making say, $50,000 a year and you put $10,000 into your traditional 401k, your taxable income will be $40,000.
On the other hand, if you use the Roth 401k, it goes in with after tax dollars. So again, same example. If your income is $50,000 and you put $10,000 into your Roth 401k, your taxable income will be $50,000. Does that make sense,
Jamie: It does. Thank you.
Paula: So it's kind of the same thing with a 401K versus a Roth IRA. So depending again, which option you would use a 401k.
If you use the traditional, again, goes in with pretax dollars where if you use the Roth IRA, it would go in with after tax dollars. There's income rules for the Roth ira, so we'd have to make sure that you qualify for that. And also you're limited to the amount that you can put into a Roth IRA versus the amount that you can put into a 401k is much greater.
Jamie: What is the amount I can contribute to either the Roth or the 401k?
Paula: So for 2023, the amount that you can contribute into your 401K is $22,500, and for the Roth it would be $6,500. Now because you gave me your age of being over 50, you can contribute an additional $7,500 for a total of 3$0,000 into your 401k and an additional thousand or a total of $7,500 into a Roth. So you can see the difference between $30,000 versus $7,500.
Jamie: Yes.
Paula: Next question.
Jamie: So if I retire at 62 and not take my full battle, can I still work for myself and make income?
Paula: So if you retire at age 62, I'm assuming you're talking about social security. You are capped at a certain amount. So right now, not giving out exact numbers, it's around $20,000 where then you have to start basically paying back your social security.
So yes, you are capped when you collect your social security at 60. I don't know what that number will be 10 years from now, but it'll depend on what that number is. Now, if you're retiring at your full retirement age or thereafter, you can earn as much as you want. There's no cap.
Jamie: How do I figure out my full retirement age?
Paula: So anybody born after 1960, their full retirement age is 67.
Jamie: Thank you. My husband's nine years older than me. Should he take his benefits at age 62? And if so, how can I determine the monthly amount he'll receive?
Paula: Well, the answer to the question is when he should take his benefits will really depend on the retirement plan that you could have when you meet with your advisor and sit down.
Cuz you're gonna wanna look at, if he's not earning any income at 62, it may make sense to take his benefit, but if he's still working, is he gonna be over or under that cap? And then we also wanna look at survivorship benefits and whose social security is potentially higher. There's a lot of factors that go into when to collect your social security.
It's not so simple to say, Hey, I'm gonna retire at 62 and I'm gonna start collecting. I can give you tons of reasons why you might wanna wait, and then I can give you tons of reasons why you might want to collect as soon as you retire, but it really goes down to that retirement plan. Now, how does he determine how much he will receive?
He's either at the age where he is gonna be getting a social security statement in the mail, but if he is not receiving those, you can go on to ssa.gov/myaccount. Register for your account and then it will show you what your social security will be when you are at 62, all the way up to full retirement and age 70.
Now be very careful when you go in to register. I know I keep getting myself locked out. Making sure that you have the correct information when you put it in. You know, I've been married twice, so every time I go to put my information in, it says that it doesn't recognize me, so I have to call Social Security to figure that out. You'd think it would be off your social security number and not your name, but whatever.
Jamie: Right. Because my husband is nine years older than me, does getting a term life insurance policy make sense?
Paula: It depends on what that term policy is for. So if it's to say, pay off your mortgage. Yeah, that makes sense to me.
If it's affordable. Depending, you said he's nine years older, he's in his sixties. Then we have to look at is he gonna qualify for life insurance and what that premium was gonna look like and does it make sense because if you didn't have the insurance, could you pay off the mortgage yourself or do you really need to have that insurance for that reason. Because you can't pay it off.
Is there other reasons, like it could be to pay off some other debt that you might have or funeral expenses? You know, I can make a case to have life insurance or term life insurance, and I could also make a case no. Now, another good reason would be if maybe you haven't saved enough for retirement, since you've got about 10 more years to go.
And if something happened to him, you would need that money that he was contributing to your retirement plan to make yours a success. Then I would say yes. Do look at a 10 year policy to make sure that your retirement is funded if something were to happen to him between now and the age that you retire.
So it depends on your situation. But when you meet with a financial planner and put that retirement plan together, that's one of the things that they're gonna look at. Do you need life insurance? And how long that term should be if you do need it? Does it make sense?
Jamie: Yeah. Thanks Paula. These have been really helpful tips for my personal situation. I heard you mention a few times about a financial planner. How do I find one?
Paula: My best advice when finding a financial planner is to ask your family and friends who they are using and what they like about 'em. It's not necessarily truly just about what rate of return that they're getting. It's more about, you know, does that person listen to them?
Do they understand what their goals are? Are they working with you together to make sure that those goals are being achieved? You also wanna talk to them about what their fees are. Sometimes if you just need a financial plan, then you wanna maybe look for a planner that does like a one time fee and will put that plan together for you versus someone that's managing just your assets.
Ideally, you wanna find someone that can do both of those. So just ask around, see who your friends are using, and ask them questions about who they have. And why they like them and it's not just about the rate of return.
Jamie: Thank you very much.
So if anybody has any additional questions or would like to be a guest like Jamie, please reach out to me at paula@paulachristine.com and check out my website at paulachristine.com.
I wanna wish everybody a happy holidays and a happy New Year, and we will see you back in January.