Barbara Ginty
Appearances
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
Okay. Tell me a little bit about when you say step down. So step down meaning that you no longer are saving for retirement or step down meaning you're going to change and maybe reduce hours at work. What does step down mean to you?
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
The magic question, and I would say the number one question I get is how much do I need for retirement? And that is very specific to the individual in the household. And it really comes down to how much you need to maintain your current lifestyle, right? Because most people in retirement,
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
want to be able to at least maintain, maybe make a little bit more, a little bit less, but be around where they currently are if they're currently comfortable. And so you said you're stable. So are you currently comfortable on your income now? And that would be what you're targeting for your retirement?
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
Referring to your net income. So it's after those contributions. So you would be comfortable on less than what you're currently netting?
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
And is that before or after the mortgage payment goes away?
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
So if we took what you're netting now and then took out the mortgage payment, that would be about the right number that you would be comfortable on in your retirement.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
Yes. Okay, perfect. And then the one other thing that I think is really important to consider in retirement is medical, right? And so are you both fully covered with medical at your jobs or one of you is covering medical?
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
So at 65, you'll be eligible for Medicare and that is the retiree healthcare system. If you retire with medical, that would become your secondary insurance. If not, you might want to get gap coverage. And so what I would say is the number I would use for what you would need, you know, ballpark,
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
would be what you're currently netting, subtracting out the mortgage, but then maybe adding a little bit more to buffer for potentially a higher cost for medical since it's currently covered. And you will have some expenses with medical. And I think a lot of people underestimate what that might be in retirement.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
And so what I always say to people is in retirement, no one's really ever upset if they have extra money. It's only if you have less than what you expect it.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
Yes. So there's actually a great government benefit. It's either the Office of the Aging or the Office for the Aging in your local community. And it is a government benefit. run agency and you can sit down with them and they'll do healthcare counseling and they'll go over what the various costs are going to be and what they also see locally, right?
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
And what plans are working well locally in terms of like gap coverage. And then you also have the choice. There's a big difference between Medicare and Medicare Advantage. Medicare is going to be your traditional Medicare where you have part A, part B, and then your prescription coverage.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
Medicare Advantage is where you have a private company that goes in and puts all of your pieces together for you and you just pay them. Right. And so that oftentimes comes in a lot cheaper and it's seamless because it's one right versus the various pieces that you have with. traditional Medicare, and then you would get that gap coverage.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
The thing I like to warn people about in retirement is the Medicare Advantage will come in cheaper initially. But as we all know, as you get older and your later years of retirement, most people need more medical care at that stage. And so the Medicare Advantage might be cheaper in the beginning, but oftentimes isn't cheaper later on when you need more medical care.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
Additionally, depending on your retirement goals, you might want to travel in retirement. And those plans tend to be very local specific. And so you could be out of network on vacation versus if you're doing Medicare, the traditional, which can come in a bit higher. You're not going to be out of network when you're traveling because it's a federally run program. So it doesn't matter where you are.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
So that's one thing also to take into consideration.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
This is domestic only. So for instance, if you took a Medicare Advantage plan and we'll just use the state I'm in, Kay, but I'm in Utah and I did a Medicare Advantage. And so I'm in network in Utah, but then I go to New York to visit my sister and I have, we'll just say I have a stroke and I need to go to the hospital.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
Well, that hospital most likely will be out of network because I'm no longer in Utah. But if you are on Medicare, Medicare is a federal program. So it doesn't matter what state I'm in.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
Correct. Nope, neither would port abroad. And that's why it's important. And oftentimes, and these are other expenses that come up in retirement. But if you're planning on traveling a lot abroad, a lot of my clients travel very frequently. It is important to get your own travel insurance. And oftentimes, they have good medical coverage.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
And it's worth, as an adult, this is another adult lesson, right? We pay for a lot of insurance throughout our lifetime with the hope that we never use it. Travel insurance abroad is really important, especially with good medical coverage if you're going to be traveling. And the hope is that you don't have a medical event while you're abroad.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
But it is important to have that travel policy separate for international.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
I do think it's important to sit down and kind of come up with a vision for your retirement and what that looks like and a ballpark. It doesn't have to be exact. That's the trick with financial planning, right? We don't have all the variables to come up with the perfect plan. Most importantly, we don't know how long you're going to live, either of you.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
when we're planning for a household, but we can come up with approximate values, right? So we know we want to take one or two vacations. We know we'll have the mortgage paid off. We do know we might have, I would plan on having higher medical costs. Most likely that will happen. We know we're still going to have taxes, right?
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
And so you just map out using your approximate inputs on where you think you're going to be. And I always say it's better to plan for more expenses than than less because as I said, nobody's ever been upset if they have a buffer, right? They have extra at the end of the month. That's ever really been a problem. The only time it's a problem is if you don't have enough, right?
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
Because the way I always describe retirement, it would be like jumping off the high board into the pool, right? You want to make sure you check the water first before you do it because there's no going back. And so I always think it's better to plan for a little more and have a bit of a buffer. And so when we're talking about what you need,
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
The textbook rule is you want to look at what you'll have at your retirement and what it'll generate. And we usually use to be conservative 4%. You can also use 5%, but I would say somewhere between 4% and 5% off of how much you have saved. So for instance, if you have a million dollars saved, that would generate on the conservative side, $40,000. And so then you know, okay, that's 40,000.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
But now is that 40,000 gross or is that 40,000 net? And so if that million dollars is a million dollars in an IRA, right, traditional IRA, then we know we're also going to have to pay tax on that 40,000. So it's not really 40,000 in our pocket, depending on where we're going to fall tax-wise.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
If it's a million dollars in a Roth, which would be amazing, then that is 40,000 to spend versus 40,000 on a traditional IRA. And that's where you start to kind of rough draft your plan and say, okay, this is how much we're going to have. This is how much on a ballpark it's going to generate. And then you say, what are our tax ramifications on that? And then that gives you an idea of
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
if that's going to be able to maintain your current lifestyle.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
So I would say the big missteps I see with people planning for retirement is they underestimate some of the expenses. We'll just say in this instance, medical, right? What medical is going to cost, right? And then taxes are often underestimated depending on what you have saved for retirement.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
Oftentimes when people come in to work with me for retirement, the majority of their monies were saved through workplace plans, right?
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
You know, you're payroll driven. And so oftentimes, especially people retiring soon, the Roth option wasn't there or wasn't a consideration. And so oftentimes the bulk of the money is going to be taxed at ordinary income brackets that's going to be supporting them.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
So that'll be an important consideration on how you're then going to spend your monies, right? Because on your workplace plans, you're going to fall under required minimum distributions. You're going to have those mandatory distributions and those will be taxable. And then your Roth doesn't have them and won't have any tax.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
So it'll be important to see how you break that down in terms of whether you start with the Roth or then maybe do a breakdown of some Roth, some... traditional monies, right, to offset your tax ramifications.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
Yeah, if you can. But once again, right, we don't know what our health expenses are going to be, you know, and how our health is going to go. So if you can leave it, absolutely. You can then use it later on, which would be great. But if you need it, that's what it's there for, right?
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
So what I would say is it's going to depend on the answer to, is there enough there currently? that you are going to be able to maintain your current lifestyle. And I would say with a bit of a buffer on the upside.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
Well, the numbers are going to and should dictate whether or not you can stop saving. But what I will say, Kay, is between, you know, you're in early 50s and said maybe fully retiring at 60, right? 65, where you would start pulling from those accounts.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
So what I would say is you have an opportunity between now and then for your accounts to double one more time, right? Because if we're looking at compounding of interest accounts using the rule of 72, so if your accounts are making 7.2% compounding interest, they'll double in 10 years. So if we use that as... benchmark and say, what's the value?
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
If the value today is a million, which is round numbers, and then we'll just say you're just 50, then at 60, they could be 2 million if they're making 7.2% interest. But if you're also contributing to them, even for half that time, till 55, or even till 60, could be a lot greater than 2 million.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
What I would say is you're correct. So the 2040 fund is going to become more conservative as you get closer to 2040, which is in 15 years. But what I would say is I'm a big believer that time mitigates risk. Let's just say on April 1st of this year, as we know, we've had a lot of volatility in the last couple of weeks.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
If you were looking to pull your monthly income out, it would have been a very nerve-wracking time to do that with what was going on in the market. So I believe more in the bucket theory where you segment out your investments based on the time. And so what I would do in your shoes is if you know you're going to start pulling from those accounts, we'll go back to the timeframe, at age 60, right?
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
And they're going to start supplementing your day-to-day expenses. The money that you're going to be spending over the next 12 to 24 months should be in a more conservative and I would argue a cash alternative because we know we're going to spend it. So it shouldn't be in the market.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
Yeah, absolutely. So as Kay said, she's been doing this, they've been saving diligently and been very conservative with saving for her entire working career. And what I would say is it usually takes people around 30 years to get to their target retirement and have saved enough money.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
And so it is prudent for it to take a couple years to plan for your retirement and have those conversations about what do we want our retirement to look like? What do we want to allocate for whether you're a homebody or you want to travel? What does our retirement look like? And what are the things we want to plan for?
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
And start doing this, which is what, Kay, you're doing, which is wonderful, in advance of that retirement date so that you can really refine your numbers and make sure you have everything you need so you're able to maintain your current lifestyle and enjoy your retirement.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
Thank you for having me.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
For the electronic savings bonds, you have to set up an account to purchase them with treasurydirect.gov. And then you were purchasing them in the name of each recipient. So each nephew has their own. Right. Perfect.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
So they should be showing then inside on the treasurydirect.gov website, when you're purchasing it in someone else's name for the intention of a gift, they should show in what's called your gift box. So when you log in, you'll see your gift box inside of that online portal with the government? Absolutely. I see all of them in there. Here's the trick.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
Your nephew then needs to set up his own treasurydirect.gov account. And then once he does that, you would go in your gift box and select that nephew's. treasury bonds or savings bonds. And then you would, it's like three steps, but essentially you would highlight the ones you're gifting in his name and he has his account set up.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
And then you would click deliver and it would be delivered to his account.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
There may be some taxes, but that is where you really want to talk to a tax professional.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
From the difference in the original value versus the value when the recipient receives it. So it will have grown in value. And so what Kay purchased versus what her nephew is going to receive, there is going to be a gain in the gift, right? From what she spent versus what he's going to receive. And that is where the taxation will come.
NerdWallet's Smart Money Podcast
Smart Planning Sessions: When is it OK to Stop Saving? (Plus: Spring Cleaning Your Finances)
And whether the recipient's going to pay, which is what I would presume is the most likely scenario, but you would want to talk to a tax professional.