Hosts: Gary Abely, CFP®, AIF®, CPA and Joe Bert, CFP®, AIF®
Yes, good morning it is an ask the expert weekend here on News 96.5 WDDO. It’s good to be with you, and I’m so glad you’re with us for the next hour, On the Money with the Certified Financial Group. They’re Central Florida’s oldest and largest independent firm of certified financial planning professionals. In the studio with us, Gary Abley, who is a certified financial planning professional along with the Oracle of Orlando, Joe Bert, who will be joining us here shortly. Well good morning, Gary, how are you?
Well I am doing super. It’s a beautiful weekend for Bike Week.
It is at that man.
If you can handle that traffic on I-4. It’s a mess out there.
Yeah, we do have a red alert going on, and we’ll tell you more about that coming up throughout the morning. But Gary, in case anybody may be new to this program, what do you take telephone calls and texts about?
Well, Kirk, we are here to talk about retirement planning, investment management. We are going to talk about Social Security planning, risk management. We can talk about tax an estate planning and cash flow and budgeting. Really anything that our listeners have a question about related to their financial matters, we are here to talk to them about it. Just yesterday I met with a wonderful couple, and they had a question on can they retire in three years. And it was a really great meeting. Unfortunately, they didn’t bring their budget with them. The reason they didn’t bring it with them is they didn’t have a budget. Joe is looking at me now and saying, yeah, that’s important. If you want to know if you can retire you have to first have a budget and you have to have a plan. So we invited them to a workshop that I host <Inaudible> just got done doing one, but the next — can you retire or when can you retire, know your number. Know the amount that you’re going to need in order to successfully retire. We try to shoot for right about 90%, right Joe? And as a confidence that you’re not going to outlive your money. So if we get to that level we feel pretty good.
If you have a question or a call you want to talk about with Joe, your IRAs, your rollovers, stocks, bonds, mutual funds.
We are here to talk about anything that’s on your mind regarding your personal finances. As Gary was alluding to, the things that we for our clients is to help them figure out how they’re going to get through their retirement years. What they need to do now is they’re going to look back 5 or 10 years and <Inaudible> gee I wish I would have known or man I’m sorry I did. And that’s what financial planning is all about. We charge a fee for our services, Monday through Friday, 8:30 to 5:30, but on Saturday morning we are here for free. So if you have any questions regarding your personal finances, things that have been on your mind, just call us, and the number is.
844-220-0965. Or you can send us a short text, and that text number is 21232. Or you can have your voice become part of the program here, use the open mic. You can find that on our News 96.5 app. Joe Bert, the Oracle of Orlando, stepping in for another hour here On the Money, 25 years you’ve been doing this now.
Something like that.
When are you going to call it quits?
Maybe this afternoon.
Let’s hope not. I hope for another 25 years Joe.
This is an opportunity to talk to Joe in Lake Mary. Good morning Joe.
Good morning Joe.
How are you doing guys?
Good, how are you, how can we help you?
I’m doing fine. The reason I’m calling, my daughter makes over 200,000 a year, and she’s an employee, and she has no retirement plan where she works. And because of her income she can only qualify for the 5,500 IRA, and I was wondering if there was anything else she can do?
I presume she’s a W-2 employee and not a self-employed 1099.
Right, right, yeah, yeah, she’s an employee, W-2 employee.
Alright Mr. CPA what do you do here?
Well, obviously she does want to put away the 5,500 into an IRA. That’s a given as you already mentioned. But a lot of people really concern themselves with they’ve got to get it in a retirement account, they’ve got to get it in a retirement account. You need to — everybody needs to remember everything that you pull out of a retirement account, unless it’s a Roth retirement account, either a Roth 401(k) or a Roth IRA is going to be taxed at ordinary income rates. I think Joe and I are both a little skeptical that income tax rates are going to stay as low as they are now in the future. And somebody with her income — how old is your daughter Joe.
Okay, at that age and that income, she has the ability to amass quite a bit of wealth. So I would be recommending that she buys some tax-advantaged or tax-managed mutual funds, possibly some individual stocks that would be very efficient. She would have qualified dividends from these investments, which would be taxed at lower rates. And she would be building a nest egg that she could sell in retirement and only pay a maximum rate of 15% or 20%, depending on her tax bracket, which will likely be less in taxes than through a disbursement from her retirement account. Now obviously she wants to maximize the retirement account first.
Is she married Joe?
No she’s single.
She’s single.
What a catch.
<Inaudible>
So I think what Joe was alluding to just for our listeners, if she was married, for those in that situation, you could do a spousal IRA as well.
And if her husband wasn’t maxing out his 401(k) <Inaudible> do there. But the most important thing for her situation, Joe, is the good news is she has a nice income.
Yeah.
The sad news is that she doesn’t have a retirement plan at work. If she was self-employed she has a lot of opportunities, but because she doesn’t have a retirement plan at work, the best way to get the tax deduction, as Barry said, is the IRA. And then you mentioned to look at some tax-favored kind of investments. But the important thing is that she needs to get this money growing for her. She needs to get set up on a systematic, regular, disciplined basis, put money aside every month, month in and month out, regardless of what the market is doing, and she will look back in 20 years and my gosh I didn’t realize I could accumulate so many millions of dollars. It can be done. The good news for her, like I said, she’s young, and she needs to take advantage of time which is a great asset.
That’s right, and so she can in essence create her own 401(k). She won’t get a deduction for it, but she can dollar cost average maybe into 8, 10 different mutual funds, have it come out automatically out of her checking account, and that will be her retirement account. By the way, it might be taxed at half of what the regular retirement account would be if she does it efficiently. See, the most important thing that she needs to do, Joe, as Gary alluded to early
What are you saying here?
Earlier in the discussion is she needs to really do some planning. She needs to look at what she needs to live on every year to maintain her lifestyle, to buy the car she wants to buy, the clothes she wants to do or wear and the vacation she wants to take and all that stuff. And then set aside some money every month, month in and month out like clockwork, putting money aside for her retirement. Because when she retires, the only thing she’s going to have is Social Security plus whatever she’s been able to save for the last 20-some years. So the good news for her is she has a great job, she needs to get serious about setting aside some money and then take advantage — then of course you don’t know what the new tax laws might be. The whole situation might be turned upside down in the coming years. So that’s the basic rules of thumb there Joe.
Then would this be something she can do by herself or should she go for say some kind of planning?
Joe, I would recommend that — and for all of our listeners, depending on her background on the financial side, she may want to go to one of our workshops. The next one is Saturday, May 14th. It’s Financial Basics for Life, Strategies for Success. And what she can learn from that workshop perhaps is whether or not she wants to do this herself or whether she wants to hire somebody to assist her. It’s always a great idea whether you do it yourself or not to get a second opinion periodically on how you are doing. Are you meeting your own targets?
So to get more information on that, Joe, just go to our website. That’s financialgroup.com, click on the workshops, you can make a reservation right online, and we hope to see you there.
Okay, thank you very much for the call. 9:50, Dave Wall is in the news center, keeping an eye on the news. Of course coming up in five minutes he’ll have more on the news, including that debacle last night in Chicago at the Trump rally, Donald Trump rally. The weather of course is coming up and of course any traffic issues, which of course we have one now.
<Inaudible> from the Bill’s Car Wash and Detailing traffic center.
A crash I-4 Eastbound at Lee Road and Maitland Boulevard is causing some delays this morning. One lane has reopened, which has <Inaudible> traffic backed up until Par Street. The best thing to do is to take South Orlando Ave. as your alternate just to avoid all the traffic. Triple team <?> traffic on the <Inaudible> 96.5 WDDO.
I love the music of Billy Joel and the music of Elton John, of which we will be hearing a little bit throughout the next two weeks <?>. There’s a reason why, right Joe?
There is a reason for the season, it is coming up here. We are once again the main sponsors of the annual concert at The Springs with the Orlando Philharmonic Orchestra. This year is a tribute to Billy Joel and Elton John being held May the 7th, under the stars at The Springs Community in Longwood. The OPO, the Orlando Philharmonic Orchestra, does a wonderful job of <Inaudible> some great tribute bands. They’re bringing in one that does both Billy Joel and Elton John. It’s an opportunity for you to come out and hear some great music under the stars. You bring your blanket, maybe some adult beverages. To get more information you can go right to our website, the financialgroup.com, financialgroup.com and click on information, and you can get <Inaudible> and buy some tickets.
Speaking of the west side, I was just on this week’s <Inaudible>.
Have you guys mentioned that?
No we didn’t.
Every 25-year old in America needs to see this chart right now.
Yes.
It’s a great chart, particularly for the youngin’s, because it shows them the advantages that they have that Gary and I no longer have. I have less <Inaudible> here being a little bit older, but if you are in your 20s this is definitely something that you want to see. Because unfortunately as they say, they don’t teach us this stuff in school. And this is a great chart for you to read, for you to pass onto your youngin’s for any opportunities that they have, really how they can become a millionaire without too much effort.
Joe I’m just going to add to that, and it is a great must ready. In the workshop, the financial basics workshop, I showed teenagers how by the time before they get into college if they’re willing to work six summers, maybe at Publix 30 hours a week for 13 weeks, they can actually at a 7% growth rate put enough money away prior to entering college to have $1M at age 67.
Time and compound insurance, eight wonder of the world.
Eight wonder of the world for sure. So when is that again? When do you do that?
Let’s see, you would ask me <Background Noise>. Financial basics for life, the next one is May 14th, Saturday from 11:00 to 1:00. It’s great I would say for anybody 13 and up. Parents bring your children. This is a great way to teach them, and a lot of parents will learn something as well.
To find out more where <Inaudible>
Right on our website, financialgroup.com, click on workshops, and you’ll get some more information about the upcoming shredding event.
That’s right.
That is going to be on April the 16th, right after tax day. <Inaudible> well actually tax filing day is April 18th this year. But April 16th at our office in Altimonte Springs. We are offering you the opportunity to bring you all that stuff you’ve been accumulating every year, didn’t want to throw in the trash because it had your Social Security numbers on it or private information, personal information. You can bring it to our office. There’s a two box maximum.
How big is the box?
I’ve seen some big ones.
It’s generally banker’s boxes, but you bring it to our office, we have an industrial shredder there that’s in a big, large truck, you can see it shredded right before your eyes. So getting more information once we get into our website financialgroup.com and click on the shredding event.
So if your accounts haven’t been performing as well as you’d like, you can watch your planners <Inaudible> for you
If you would like to speak to Gary Abley or Joe Bert here’s the phone number right now. It’s 844-220-0965 or text us from your mobile device at number 21232, 21232.
I wonder if the band, the tribute band that plays if they go back to when he used to be able to hit those high notes or
I don’t know.
Of course you know we all age and the voice changes.
Oh, you don’t know what we are talking about. It’s Certified Financial Group in Altimonte Springs is doing something spectacular. They do it every year <Inaudible>.
This year is a tribute to Elton John and Billy Joel at the Orlando Philharmonic at The Springs Community in Longwood. It’s a wonderful night under the stars, bring your blanket and perhaps adult beverages. To get more information go to our website financialgroup.com. That’s financialgroup.com. I’ll tell you something. I remember that the Philharmonic did this stuff, and I used to see the signs around town here, the adds, and for years it hot that it was a Philharmonic playing the music of The Beach Boys, The Beatles or Billy Joel and Elton John, which would be good.
Right.
But when you bring in somebody that sounds like them, a tremendous tribute band, and then you had it backed up by the entire orchestra, it’s phenomenal. And that’s what they’re doing. Folks the tickets are selling out. I heard this weekend at a 50% higher clip than in years past. So it’s going to be a sellout, and we hope to see you there. It’s May the 7th.
Yeah.
Alright, here’s as couple of texts we have to get through. Looking for my son, he’s 20, trying to figure out where to put a retirement whatever.
Yeah.
<Inaudible> well I think that it’s wonderful that he’s 20, and he’s focused on his retirement because most of us don’t focus on our retirement. So <Inaudible> with the text message, who we don’t know if he’s in college or if he has earned income, but if he does have earned income and he’s maybe working part-time in college which is hypothetically think that for a moment, he might want to contribute to a Roth IRA to start out. Because he might not even be paying taxes. That’s the key. One of the frustrating things for me, I’ll see folks young like this, and they’ll contribute to an IRA and they have zero taxable income. Because they have a standard deduction of 6,000, a personal exemption of four. So the first 10,000 is not even taxed. So if you have children out there who are working part-time in college and maybe you want to match that money that they’re earning, because you like that they’re being industrious, have them put that into a Roth IRA not a regular IRA, because they won’t pay any taxes on it.
There’s a text along the same lines, Joe, what should your plan be if you are 33 and you have nothing for retirement, where do you start?
Well the good news is you’re only 33 and not 63 or 53. You’ve got a lot of time on your side, and the first thing you want to look at is do you have a plan through your employer. Because as we talked with one of our earlier callers, if you have a plan through your employer, it gets you a straight upfront, clean tax deduction with your 401(k), 403(b), 457, 401(a), whatever it might be. If you are under the age of 50, it’s $18,000 max. If you are over the age of 50, the government says you’ve got a little catch-up yet to do here, we are going to give you a little break. You can put in $24,000 a year, that’s a great place to start.
I want to have a plan through your work.
Well you do.
Well you save on your own and/or you contribute first to a retirement account, an IRA or a Roth IRA depending on your preference, and we typically — I should say I typically, we all have different thoughts on this, but if you are in the 25% tax bracket, top marginal bracket or higher, I would always say take the deduction, because you are able to more away in your retirement account because of that tax deduction. If not, if you were maybe in the 15% bracket or lower consider contributing some to a Roth 401(k) or a Roth IRA.
Gary Abley and Joe Bert are both certified financial planning professions with the Certified Financial Group in Altimonte Springs. Jay Wall is in the news center. We are going to go to him right now for a more in-depth look at the news, including what happened last night in Chicago. Did you get a look at that Joe?
Yes I did.
What a mess.
Alright, let’s hit Jay Wall. Here’s the number if you would like to join Joe and Gary, 844-220-0965.
Uptown girl, you know I can’t afford to buy her pearls.
Thanks for singing.
Then some day.
Sorry guys, I forgot to tell you your microphones were on.
<Inaudible> it’s like in the shower you know, only you know you sound terrible.
Well thanks Curt.
I mean you sound great. You sound just great.
<Inaudible>
Alright, this is On the Money brought to you by Central Florida’s oldest and largest independent firm of certified financial planning professionals, that being the Certified Financial Group in Altimonte Springs. And you can join Joe Bert, the Oracle of Orlando, along with Gary Abley right now. There’s the telephone number, 844-220-0965, 844-220-0965, or text us from your mobile device not too long of a text please. 21232, 21232 is the texting number. Or you can use the open mic feature to send us a question or a comment. You’ll find that on the News 96.5 app available at any of your stores. Okay? Let’s talk to Gary. I think Jerry’s been — I’m sorry George — George has been one patient fella.
Morning George.
Good morning.
How you are guys doing?
Good.
Great.
Thanks for calling.
How can we help you today.
Okay, I’ll be 70 and a half this year, so I already did my required minimum distribution.
Okay.
Okay, and that is fine. But I had kind of a rough year last year. I had to withdraw a lot of money from my IRA, like $18,000. I did my taxes last Thursday, and they — $1,800. Like 10% of the money that I had to pay. Does that sound right to you?
It could have been higher.
Could have been a lot higher.
Well George it’s probably right because you’re also receiving Social Security.
Right.
And because of that distribution, you probably had more of your Social Security taxed than in the past.
I see.
So that does sound right I’m afraid, George.
Wouldn’t I be better off then just like borrowing the money from a credit union and <Inaudible>.
No no no.
I don’t think so. We don’t want to see you going into debt. Your retirement account is to be able to take money out just for that purpose. This isn’t the time to go into debt George.
Okay okay. Alright, it is what it is.
It is what it is. Thanks for your call George.
<Inaudible>.
One of the things that folks in your situation, obviously he got bumped up maybe into the 10% tax bracket because of the $18,000 withdrawal, but if he didn’t have that and was in the 0% tax bracket.
Well —
He had <Inaudible>.
There are some opportunities. Two things, one if he’s in the 0% or 10% bracket, he would be able to sell if he had investments that had accumulated long-term capital gain, his tax in selling those investments would be a donut — zero. A lot of people don’t realize about the capital gains rates for those lower brackets is actually zero. The other thing that he could do if he was in a no-tax situation is he could convert some of his IRA to a Roth IRA at zero cost.
Right, and that would have to be in addition to what his RMD is.
That’s exactly right.
Because <Inaudible> RMD and put it in the Roth.
That’s exactly right.
That’s why we’re here folks!
Alright.
Let’s talk to Art.
Art.
No, this is Alice.
Alice! I thought this was Art.
Hi Alice.
Let’s talk to Alice in Orlando.
Good morning.
Hi, good morning Alice.
Hello.
How can we help you?
I have a question on behalf of my daughter-in-law. My son and daughter-in-law are both 58, and she is still a stay-at-home mom. He passed away in January, and I want to know if there is any kind of Social Security widow benefit she might qualify for.
Yes there is. At age 60, she’s eligible for the widows benefit.
Okay. Based on his income?
Yes. She hasn’t worked you said?
She hasn’t worked in years. Many years.
Yes. She would qualify for what’s called survivor benefit.
Widow benefit.
Yeah basically.
Okay.
Okay?
Well thank you.
You’re welcome!
<Inaudible> thanks for the call.
Sorry for your loss there, Alice.
Yes.
If you’d like to join us, it’s 844-220-0965. 844-220-0965. Or you can text us at 21232, 21232. Speaking of Social Security, don’t you guys have some kind of workshop coming up soon?
We do. So Nancy Hecht and Denise Kovach are hosting on March 17th, a Thursday, from 11:30 in the morning to 1:00 in the afternoon, they are hosting what they call the Social Security Boot Camp claiming strategies, and it’s really important for those who are thinking of filing a restricted application for spousal benefits that they attend this workshop because the upcoming deadline for doing so is April 29th. Now, you do have to be 62 years old in order to do this because this is one of the things that has changed recently.
Right. So you get all the details on that, the window is closing so if one spouse is 66 or older and one of them is 62 or older, you have an opportunity, that window is closing April 29th.
That’s right.
So here’s what you need to do. You need to go to our website, financialgroup.com, click on workshops, and it will give you all the information and you can make a reservation right there online. We hold it at our classroom in our offices right there in Altamonte Springs. Leave your checkbook at home. Nancy and Denise not going to try to sell you anything, but a way for you to get good information and secondarily it’s a way for you to get introduced to our firm, what we do day in and day out for our clients doing fee planning and helping guide them to and through their retirement years.
And this is during a lunch break so they will be providing some refreshments, so don’t even worry about your lunch.
That’s what James was calling about, right James? About the change in the law <Inaudible>?
Yes.
<Inaudible>.
Okay I’m going to be 63 in April by the way, and I haven’t filed yet, and I was wondering if I filed — I think they call it a file and delay?
Well that’s file and suspend, and I’m afraid James that you would have to be 66 as of this past in order to qualify for that strategy.
Yeah.
So you’re not old enough to do the file and suspend, but let me ask a question, if you’re married, how old is your spouse?
No I’m not married.
Okay alright. So your main decision then James is going to be to decide do I want to take Social Security before my full retirement age, in which case if you do you’re penalized about 8% a year. Conversely, you could look at it for every year you defer, you’re gaining that much in a benefit. So you have to really factor in your health and what your needs are for current income to decide whether or not you should claim this <Inaudible>.
Are you still working James?
No I just retired about a month ago.
You just retired. Okay.
Okay.
And I do have a pension coming in from another job that I have my TSP account.
Okay, let me ask a personal question, James. How’s your health?
Pretty good. Nothing. Yeah.
If you’re in good health and you don’t need that cash flow today — in other words you say I’d like to have it, it’s in the bank, I know that it’s there, if I want to do something I have it, I would not take that Social Security right now because you’re going to take it — if you were 62 you take a 25% hit on that benefit for the rest of your life, and as Gary said, if you wait until your full retirement age, that amount is going to increase at 8% per year and that’s for your lifetime, so you can’t get that kind of return on any kind of investment. So if you don’t need the money today I wouldn’t take it, particularly if you were working I wouldn’t take it, but you’re not working, so — and that’s why I asked about your health. You <Inaudible> great you want to take the money and run because who knows how long you’ll get the check.
What about the TSP. You think I should tap into that and take a certain percentage every year instead of waiting until I’m 70 and the tax rate could be 30%, who knows.
Well James, I think it depends on your needs. If you don’t need that money then I’d let it grow because when we look at life expectancies, you know averages are something funny. We all want to look at the longevity tables say that men are going to die around 78, but reality is if you make it to 65, for a couple I know the statistic you’ve got about 1/3 <?> of an opportunity of one of you living to age 95, so you could be retired for 30 years, James. In fact, with healthcare innovations today that’s actually likely. And so the more you can defer taking money out, the more confident you can be about not outliving your money.
Got you. Okay, well thanks. Can you give me the number again, maybe I’ll go to a workshop.
Yes it’s 407 — or our office number is 407-869-9800, and if you have access to a computer the easiest way to register is just to go to financialgroup.com and click on the workshops tab and you can register your attendance right there.
Alright, thanks. Great to know, <Inaudible> talking to you guys too.
Thanks James, appreciate it very much.
Enjoy your retirement my friend.
Absolutely.
9:46 on News 96.5. Dave Wall is coming up in just a few minutes, four minutes — under four minutes form now, and he’ll have a new update for you including a red alert going on right now on I-4, that’s what all the slowdown are for. He’ll tell you all about that coming up. If you’d like to join Joe Bert and Gary Abley right now, the telephone number is 844-220-0965. 844-220-0965. Here’s a question. Are my expectations for rate of return reasonable in this market environment? I forecast a return of 7% per year in retirement with an allocation of 60% stocks, 40% bonds. I intend to keep this allocation consistent throughout my retirement years.
How old is this person?
It doesn’t say.
This was a listener question that came in, and I think the person was 65, so they were —
I think long-term you have a reasonable shot at that. It gives you — I think the thing that gives me pause is you say in this market. Well in this market is a snapshot of what’s going on right now. It doesn’t think look long-term.
That’s right.
And so we all — the only thing we know is what we know and the sun came up this morning, it’s warm, so the weather is good. Who the heck knows what it could be next week, next month. You’ve got to think long-term. I don’t think that number is unreasonable, but certainly what’s happened in the last year one would question that.
And what I would say is that’s a great goal, but I would model in a financial plan right now for a balanced portfolio of about 5.5%, and that would be based upon a 7% equity return and 3% or 4% on the fixed income, so doing a weighted average of that would be somewhere around 5.5%, 6%. If we hit 7%, terrific. Great. You have some excess money. But let’s not shoot for the moon.
Alright.
Alright. Here we go.
Here’s the number again. It’s 844-220-0965. 844-220-0965. Let’s talk to — I think it’s Dave. Good morning Dave in Orlando.
Hello Dave!
Hello Dave.
Hello Dave.
Anybody there?
Nope.
<Inaudible>.
Hold it hold it. Let’s see — there he is.
Dave are you there?
Yeah I’m here.
There he is.
Alright.
How can we help you? Thanks for calling.
I had to quit my job at 62 and draw Social Security in order to take care of my dad. Well I got him back on his feet, and I’m 65, and I want to go back to work. Can I suspend my Social Security?
Yes you can.
Yes you can, and that’s a great idea, and the work that you start back up at will influence, potentially, your Social Security benefits.
<Inaudible>.
Go ahead.
In order to do so, what is it just — like go to the office and tell them I want to suspend it?
Yes.
Exactly.
Yep.
Okay. And you need to do that because you’re not full retirement age and if you continue to get benefits you’re going to get an offset of $1 for every $2 that you earn over something like $16,000.
Yep.
You get it on the back-end but you’re not going to be — there’s no benefit for you to continue to get Social Security right now.
That’s right.
Okay, thank you for your help.
You’re welcome.
Thanks for calling.
Again, we’ll tell you more about this Social Security Boot Camp that’s coming up — what is it next week?
Yeah next Thursday — or this coming Thursday March 17th, at 11:30 to 1:00.
March 17th. Isn’t that St. Patrick’s Day?
Yeah.
Better wear green, or we’ve got this little inversion thing we’ll <Inaudible>.
<Inaudible>.
Joe Bert is going to tell you what he’s going to be doing St. Patrick’s Day. That’s coming up next here on News 96.5.
9:57 on News 96.5, WDBO. This is On The Money brought to you by the Certified Financial Group in Altamonte Springs. Just a couple minutes left in the program, so we’ll tell you briefly if you’d like to get out to the Springs concert, Joe where do we go find more information?
On our website, financialgroup.com. That’s financialgroup.com. It’s the annual event at the — at the Springs community in Longwood. Tribute to Billy Joel and Elton John this year. It’s going to be a great night.
Okay, financialgroup.com. Financialgroup.com. We’ll do a quick lightning round of some callers here, and if we don’t get to your call then you hang on and we’ll get you off the air, okay. Let’s talk first to Cheryl. Hi, good morning Cheryl in Orlando.
Hey, good morning, thank you all for taking my call.
Sure. Absolutely.
How can we help you?
Okay real quick, I’m currently in the position of changing jobs. I’ll be starting with a new company. I’m currently vested with the company that I have now. I have about $20,000 in my pension. I was thinking about when I change companies to withdraw that amount because I’m making less than 3% a year on that $20,000. I was thinking about taking that money out and using half of it to get out of debt and then rolling over the rest of that remaining to my new company because my benefits start with them on day one. And then, that would free up about $600 a month in outgoing bills that I could invest towards my retirement with my new company.
What is the interest rate on your debt Cheryl?
Right now it’s major credit cards. I’m looking at a car payment which is about 4%. And then the credit cards are around 19%.
Whoah. Okay.
And how much is on the credit cards? How much of the total?
Approximately around — I’d say around $6,000 maybe.
Alright, well Cheryl, I don’t like either of those ideas, and let me explain why. When you take money out of that retirement account you’re going to have to take out maybe 115 — 125 — well actually it’s probably more like 125% or more of what you need because you’re going to have a 10% penalty from Uncle Sam and you’re also going to have to pay income taxes at your highest marginal bracket for taking that money out before age 59 and a half, and I’m assuming you’re under 59 and a half. I think you said so.
Yes sir.
Okay, so that’s not a great solution, and what you lose, that money would potentially grow to in the hundreds of thousands of dollars depending on your age and growth rate, so that’s not a good plan. And then the second part is taking that money and rolling over to the new plan, I would always want to look at your options at the new company because you have the option of rolling that money into an IRA most likely, and then your options are unlimited and also you can invest in a low cost <Lost Signal>.
Dictation made on 3/17/2016 3:39 PM EDT.
