0:00:00 - Speaker 1

Discussions in this show should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions. Securities offered through registered representatives of Cambridge Investment Research Inc. A broker-dealer member, finra, sipc Advisory Services through Cambridge Investment Research Advisors Inc. A registered investment advisor. Cambridge and Greenway Wealth Advisory are not affiliated. It's time to dive into some insider secrets of investing and retirement planning To make your retirement as smart and as elegant as possible. This is Money Chic with Sherry Rash.

0:00:31 - Speaker 2

Hey everybody, welcome into the podcast. It's Money Chic, women and Retirement. With Sherry Rash and myself. We're going to talk about some financial debates. We were going to do top five, we were going to kind of make it nice and simple Top five important financial debates, but we went up with six. So we're going to go odd and go top six financial debates that we might want to pick sides on or maybe not. You know, with advisors, a lot of times you ask them a question and the answer is it depends. So Sherry may go down that path as well, but we'll see what side she falls on on some of these things. How are you doing today, sherry? Good, there's just so many things to debate.

0:01:03 - Speaker 3

We couldn't limit ourselves to five.

0:01:06 - Speaker 2

Well, we had like 12 and then we got down to nine and then so we were like all right, six, Six is the ones we got to go with.

0:01:12 - Speaker 3

These are really really good ones, these are really good ones.

0:01:15 - Speaker 2

So you doing all right, doing good, doing good, fantastic. Well, I guess we should probably see where you fall on some of these. I think it is fair, though, like I pick on advisors and say you guys, it could easily go to the it depends, and it's true because it does. You can easily say that about a lot of things. But because you know these universal things that affect us all and that's where these financial debates are starting, from that place of that universal truth that we all encounter. But then when you get into the nitty gritty, that's where the depends kind of comes in for the individual. So we'll do our best to see if we can pick sides, but we may not be able to.

0:01:48 - Speaker 3

Yeah, we tend to have these universal truths, and it is what it. You know, this is what you should do, and we all kind of just follow it. But then when you bring it back to yourself, well, maybe that doesn't make the most sense for me.

0:02:00 - Speaker 2

Yeah, Conventional wisdom kind of thing sometimes. So, yeah, we're going to dive into a few of those on the big ticket items like the house. So let's get started with that one. You should, and I think that the here's the caveat. It's in the phrasing of the of the phrase Well, it's in the wording of the phrase, right? So you should always pay off your house as soon as you can.

0:02:20 - Speaker 3

Well, it's like getting flashbacks to taking the SATs Whenever you have always or never, in the question. Odds are the answer is going to be false, right, because there's. It's an absolute so, and I think we spoke about this a couple of episodes ago, so I'm curious to see what the listeners thoughts were when I said it last time. But no, you don't always have to pay off your house as soon as you can. Sometimes there are benefits to waiting to pay off your home, and that could be tax wise mainly. Or are you focusing so much on paying off your home that you're not saving? That could be that could hurt as well.

There's a gentleman that wrote a book and the name's escaping me but it was about how he was super focused on just paying off his house. That was his only focus. And then he lost his job and he didn't have adequate savings to live off of till he found a new job. So he went into the bank and said, hey, I have all this equity, can I just chill out on paying my mortgage for a couple months? And the bank's like that's not the way it works. And then they said, okay, well, can I then just take some equity out of it so I can live off of it and pay my mortgage. Yeah, you need a job for that, to prove that you can have the equity and actually pay it back. And he ended up losing his home. So his hyper focus goal of paying off his home actually ended up hurting him in the end.

0:03:55 - Speaker 2

Yeah, well, I think most advisors would. I don't know. There's nothing wrong with saying, hey, let's get rid of debt. Right, I mean, if we can go in a retirement debt free, cool, that's great. But okay. So, like for an real-world example, sherry, let's say you owe 100,000 left on the house on the mortgage and you start thinking, well, hey, I've got plenty of money in my 401k or IRA. Maybe I'll just pull the hundred thousand out, pay it off and I'll sleep better at night. Right, because I mean, certainly makes a lot of sense, you feel, make you feel good to not have that mortgage. But is that the smartest financial move?

0:04:25 - Speaker 3

No, and the and reason being if, using your example to net out that hundred thousand, you have to take out more because you're paying taxes on. If it's an IRA 401k, like you said, you have to take out way more than that. And then is it time value of money You're losing out. On having that money invested, could you potentially make more than what the interest rate was that you're that you're paying on your mortgage, so you could be losing some purchasing power of your money that way. Or if you're younger than 59 and a half and you Take from your IRA to pay off your mortgage, not only are you paying taxes, you're paying a penalty. So, yeah, it's definitely something you want to talk about with an Advisor to walk you through that process. And I also do believe that whatever Makes you feel better if your stomach hurts with the idea of having a mortgage when entering retirement, then we come up with a plan to get rid of it. But we don't want to act purely on emotion and act quickly To just make to get rid of something.

You have to have a plan for it.

0:05:40 - Speaker 2

You know that makes sense and that's why I kind of gave that example, because that's a little on the high side, right? But some people do feel that way, right. Or some might say, well, now I'm down to now I'm down only 30 or 40 grand, cherry, you know, to get the house paid off, and maybe that makes a little more mathematical sense. But at the end of the day you need to run the numbers, get the math, get the logic and then, yeah, you can weigh in that emotional component and then you know that your client can say to you sherry, I get it, I understand, you've explained it all to me, but at the end of the day it's my money and I just want to get the house paid off. Well, then that's another conversation, right?

0:06:10 - Speaker 3

So? And then you're making a very educated, an educated, yes, exactly that's the point.

0:06:15 - Speaker 2

All right, so that's the first one, the house. Let's go to our next one on the list, which is life insurance. No, nobody needs life insurance once they're retired. Couple of key points in there Nobody a little absolute there. And also once you've retired, we tend to think of insurance as something we need in our you know 20s, 30s, 40s, when we have kids in a family in case something happens to us. We tend to think we don't need to, you know, insurance when we are Our retiree because our kids are all grown or whatever right.

0:06:43 - Speaker 3

We think of life insurance as replacing income in the unfortunate death of a spouse or a partner and or to pay off expenses in an untimely death, and that is absolutely true, especially when you're younger. You have the mortgage, you have kids going into college and you need you need that insurance. But I also like to position insurance for my clients that are Near or approaching, or even in retirement as a way to leave a legacy. So we hear of so many people.

My grandmother, in particular, was someone like this. She didn't want to spend any money because she wanted to leave it to her children. And no, spend your money right, don't sacrifice we. We want you to live and enjoy your life. Spend your money, please.

Well, if you want to make sure your children have something, what after you pass, life insurance may be a good way to achieve that, because Wanted allows you to spend your money right. You don't have to think what you can spend your money not worry about. Well, I want to leave my children money because you have this life insurance policy, and so you know my children are getting X amount of dollars when I pass. And it's actually even a better way to leave Money to someone, because life insurance is tax free where retirement account is not, if you're to leave that to your children. So it actually could be even even better way to leave money to your children through life insurance so to pay expenses. Maybe you don't need life insurance once you retire, but if you think about it as a different way to utilize it as far as leaving your legacy, it could make sense.

0:08:24 - Speaker 2

Yeah, and I think again, conventional wisdom right to the conventional wisdom of life insurance. Yeah, that statement might have a little, whole little water, but in the new way of thinking about things and the fact that life insurance has changed so much, there's a lot of other options that it could be useful for as a retiree as well. So that's why these are the top debates that we are going through. I got to go with a word, I got to drop the word on the podcast here.

0:08:47 - Speaker 3

Next one is the family show. I know, I know, I know.

0:08:51 - Speaker 2

Annuities are a rip off. That is the statement a lot of times people will have or say or make Again. The wisdom or the narrative gets pushed pretty hard that these things are problematic and they, to be honest, they used to be a little bit more problematic than they currently are Again, like life insurance, they've changed an awful lot in the last decade or so.

0:09:12 - Speaker 3

Annoities have changed a lot and, yes, this is usually people that have opinions about annuities, especially if they're negative have very strong opinions. But I think reasons why folks have such strong opinions is because they were trying to use an annuity for what it's not necessarily for.

0:09:32 - Speaker 2

Okay, incorrectly.

0:09:34 - Speaker 3

Like everything, there's pros and cons to every investment. Everything in life right.

There's pros and cons. So when I talk about annuities with clients, I say, as long as you follow the rules of it and understand the purpose, it could be a good tool for you. So the biggest thing is, most annuities have surrender charges, so you can't open up your account today and expect to walk away with the full amount three months from now. It's just not the way it works. There is some liquidity depending on the annuity you choose. But so if you need something that's liquid, meaning you can access that cash money right away, the annuity is not the answer for you. But conversely, if you need income, for example guaranteed income because you're retiring without a pension and you like the idea of that guaranteed income, an annuity with a living benefit for a portion of your money could make sense. But once again, as long as you understand the rules of it. So I do believe annuities are not for all of your money. It's a slice of the pie. It could serve a very good purpose as long as, once again, you follow the rules and understand how it works.

0:10:47 - Speaker 2

Yeah, and again, they've changed a lot. It's having the right tool for the job, and every situation is going to be a little bit different, and it doesn't mean that it's the right fit for you, but it also does. I think what happens is we live in an age where, if you have a preconceived notion about something and you start to Google it based on that preconceived note, you can find anything to support your narrative, so you can find information that's going to show you.

Yes, they are a ripoff, but if you go into it with an open mind and you're looking at any product, no matter what it is, whatever financial vehicle it might be, as to whether or not it's going to be the right fit for you or not. Then at least it keeps your options open, versus closing some doors that you may not. It may be the only thing that can fit that particular need.

0:11:27 - Speaker 3

And there's so many different types of annuities. When you say annu, I mean there's so many different types. So someone could be thinking of the qualities of a fixed indexed annuity but really what may make sense for them is a variable annuity.

0:11:40 - Speaker 2

So there's so many different types of annuities as well, with different features and benefits and costs that and usually a variable is the one that gets the bad rep because of the higher fees and things of that nature. Right, but a lot of times fixed or just fixed annuities or fixed index annuities could be useful.

0:11:57 - Speaker 3

So it just spins. Yeah, so yeah, have an open mind and make educated decisions when it comes to investment products. Don't just listen to commercials, or what have you about it, because they also don't know your situation, right?

0:12:11 - Speaker 2

And that's why we're saying these are the top debates that you typically hear, financially speaking. And so do you pick a side or do you just get the information to find out what's going to be the best fit for you? Here's another classic one, another conventional wisdom on our list. You'll be in a lower tax bracket in retirement, sharey, so it's best to just defer those taxes and pay them later on down the way. Well, this is how we've been raised for the last 40, 50 years, right? So you get a job, you go to work, you pump into the 401k, you defer those taxes and life will be good. You'll be in a lower tax bracket when you get older, and I talked to a lot of advisors. They say most of them say about 70, 75% of their clients are not in a lower tax bracket.

0:12:49 - Speaker 3

Right. I mean in the 80s there were so many tax brackets so it was very reasonable to expect to jump up or go down tax brackets. But right now tax brackets are pretty broad and I would venture to guess that they're probably going to stay broad. So it would have to be a pretty significant decrease in income in retirement to actually go down tax brackets.

0:13:13 - Speaker 2

Well, and we know the taxes are going to go back up if they do nothing in 26, they're going to sunset to back to the Obama Air Administration tax rate. So let's say, if you're in the 22, well then you're going back up to the what? 24, you know, or the 24 or the 28.

0:13:26 - Speaker 3

So yeah, I mean when, anything in life, when you're at the bottom, there's only one way to go, and tax rates are low right now. So even if all things were to stay the same pre-retirement and post retirement and as far as your income goes, you still probably will end up paying more taxes because the tax rate is going to be higher. So I talk about this all the time with my clients. Do not make that assumption, especially if you have a lot of guaranteed sources of income in retirement. If you are going to receive a healthy social security paycheck, you have a pension, you may have annuity income. Those are a lot of sources that you cannot adjust downward. So you're getting what you're getting, and so it might be. You don't have flexibility as far as your income goes to put yourself in a lower tax bracket in retirement and then also, with putting all of your money in the tax deferred traditional 401Ks, traditional IRAs at age 72, you have to start taking income from that through required distribution.

0:14:31 - Speaker 2

If it's a big bunch of money, that could be a tax bill.

0:14:34 - Speaker 3

That's a big tax bill, whether you like it or not. So it's definitely. Do not I say at least do not make that assumption that you're going to be in a lower tax bracket.

0:14:43 - Speaker 2

Let's find out. And if you end, up being.

0:14:45 - Speaker 3

It's not a bad thing.

0:14:46 - Speaker 2

Yeah, I mean you can strategize and get there possibly. You know, I think the the misnomer here is that it just happens naturally. Can it be done? Sure Right, but you got to strategize, you got to plan.

0:14:58 - Speaker 3

That's right. Yeah, it probably will not happen, naturally, if you don't have a plan.

0:15:02 - Speaker 2

Yeah, I'm just going to go to work, I'm just going to pump my 401k and then I'm going to retire, and I'm naturally going to because I'm going to not have an income, I'm naturally going to be in a lower tax bracket.

0:15:10 - Speaker 1

Maybe not, so let's do some strategizing.

0:15:12 - Speaker 2

If that's the goal, then let's strategize for it. So all right. Credit cards, that's one on my list. You should never use credit cards. Again this might have been the case once upon a time, but to me this one, sherry, comes down to be honest with you about who you are. If you know you've got one of these things and you're going to go hog wild and you can't control yourself, then yeah, that might be good advice, but they can actually be a pretty useful tool too, as well.

0:15:37 - Speaker 3

We use credit cards today with the points and the miles and the cash back. If you are like you said, if you're honest with yourself and you know you can pay off that bill every month, then yeah, you're making points and miles and cash back from that credit card Good perks.

But then it's a slippery slope. If you put too much on it oh, I can't pay it off this month Okay, I'll pay it off next month and you have all of your bills automatically going to the credit card. That's where you can get yourself in trouble. If you're able to pay it off each month, or you only put so many items on the credit card that you know for certain you can pay off, it could be a nice little tool. I mean, one thing that I do is I have, like probably every household, the prime truck comes to my house way too much every week. I have a lot of Amazon purchases. I have the Amazon credit card. I save up that cash and that helps for some Christmas presents. But you have to have that discipline to pay it off in order to get those points, because if you're not paying it off, your interest rate that's your points Well, it is paying yourself and in a world where everything has changed, I mean A, you kind of have to almost have a credit card.

0:16:49 - Speaker 2

I mean even post pandemic or middle pandemic, whatever you want to call this a lot of cases stop taking cash, right, so because they don't want to handle cash. So you had to use a credit card anyway, which, I mean, it's still an item, but whatever, or everything's a service, right? So how many of us have tons of streaming or various different reoccurring monthly things? So I, like you, I have a credit card with a specific, with a low limit. I kept it low on purpose, I don't you know. They ask, hey, you can qualify for an increase.

Now, I'm good, I don't have it increased and I just have all my reoccurring monthly charges go on it and I can just go through and I can scroll it and I can look at it until your point I get the you know, get the cashback type of thing, but everything goes into one nice neat little spot, right? So you got to be honest with yourself. Never using a credit card. I think is probably not realistic in the modern world. However, again, be honest with yourself. If you know you're a spin happy shopaholic, maybe it's not a good idea.

0:17:40 - Speaker 3

So yeah, agree.

0:17:42 - Speaker 2

Okay, Last one on our list our top six financial, important financial debates to discuss social security. Of course we had to talk about it, so you should start it just kind of like the house right. So, as early as possible, you should turn this thing on because you know you want to get your money, because the systems go on broke. If that's the reason, I think that's a silly reason. If you need the money, that's the debate.

0:18:05 - Speaker 3

Right, ideally, again, coming up with a plan for it. Don't just act emotionally, or it's the 11th hour, I'm retiring soon. Okay, I guess I'm going to turn on my social security now because I'm retired and that's what you do but having a plan around it, ideally. If you can wait till full retirement age that way you're getting 100% of your benefit that's great. If you can have a plan and be able to live off of other income sources until your 70s so you can get the maximum amount, that's even better. But a lot of times it is an emotional decision because I've been paying into this system for all of my working years. I want my money back, or the system might not even be in place in a few years. There's also a conversation that I have with clients and that's a legitimate concern, but that doesn't mean, like you said, to just take it right away because it might not exist in a few years. I think that having a plan around social security, like everything, is important so you can get as much of a paycheck from it as possible.

0:19:13 - Speaker 2

And so there's the break-even point, right, there's the break-even conversation where you've got to live to a certain age if you're delaying, to turn it on later to maximize the money, and you can go through this social security maximization, basically, sherry, where you can kind of try to figure this out, because we don't have a time stamp on us so we don't know when we're going to expire. So we're trying to figure out the best strategy for taking it. I think turning it on just for some of those reasons that we hear is not the right move. If you straight need the money and your plan calls for it, then that's fine. Let's turn it on at 62. But why not again debate it, evaluate it, run some numbers and see what makes the most sense?

0:19:49 - Speaker 3

Exactly and to make sure you're comfortable with it as well. You like the idea, you like the plan and it makes you feel good.

0:19:58 - Speaker 2

Kind of like the house right? Yeah, exactly, things definitely have the. It depends in there. But there are the big, top, important financial debates we often come across in the industry and so it's important to talk to them. It's important to have an open mind and get an analysis done, get a strategy put into place and see what makes the most sense for your unique situation, because you know what sharing needs is different than what I need and the different what you need, and so on and so forth. There's still that universal stuff that affects us all, but as we get into the nitty-gritty of our lives, it's different from person to person.

So, as always, if you need some help, make sure that you're talking with a qualified professional like Sherry. Find her online at GreenWhealthAdvisorycom. That's GreenWhealthAdvisorycom. A lot of good tools, tips and resources to to go through there. On the website, you can book some time with her. Lots of cool stuff there. You can subscribe to the podcast on Apple, google, spotify, all that kind of stuff. So just find it all again at GreenWhealthAdvisorycom. This has been Money Chic Women in Retirement with Sherry Rashery. Thanks for hanging out, appreciate it.

0:20:59 - Speaker 3

Thank you. I'm glad our debates were. It wasn't too heated, so that was. That's always good.

0:21:03 - Speaker 2

Yeah, definitely not too heated that's for sure. Well, thanks so much for your time. Folks, don't forget to subscribe to us and we'll be back with more episodes in the future. This is Money, chic, women and Retirement with Sherry Rash.

0:21:19 - Speaker 1

Discussions in this show should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions. Securities offered through registered representatives of Cambridge Investment Research Inc. A broker dealer member, finra SIPC advisory services through Cambridge Investment Research Advisors Inc. A registered investment advisor, cambridge and GreenWhealth advisory are not affiliated.