Every week during the More Than Money show on AM 750 WSB we open up the week's mailbag to answer your questions in the "Lightning Round." Today we’re discussing how much money is enough to retire, where to park your funds, how to apply for a credit card when you have no credit and which pension should you choose?
Most of these questions come from the site, but we aren't afraid to throw in texts, DM's and great things we hear from in-person meetings. We answer each specific case situations in more detail through email, but I always like to share some general feedback.
Let’s get into it!
“I’m 57 and have over $1,000,000 in my 401K, but there’s a good possibility I might be laid off in November. I'm somewhat confident I have enough money to last, but I'm still nervous about it. What do you think?”
The question of whether or not that million dollars is going to last you is a huge unknown because of a few other pieces. I don’t know how much you spend every month, what cost of living looks like for you each year or what your dreams are for retirement. Do you want to travel a lot or you want to stay at home? I don't know the kind of debt you're carrying or how much you pay in debt every month. Do you have a pension from any of the jobs you worked with? Do you have rental property?
Some people that I've met with would be fine with a million dollars for 30 years of retirement because they have no debt, their cost of living is really low and they feel confident due to other income streams.
In your case all I know is that you're young enough right now that social security won't kick in for a number of years and that you're going to rely on that million dollars. I also don't know when the market’s going to drop. We talked about this earlier in the show, but we’re in the longest bull market in history. The chances of it dropping in the next 5 for 6 years are pretty high. Only relying on that million dollars could be problematic.
“I want a 100% safe instrument to park funds that yields more than 2% and is completely liquid. What do you think?”
A few things here. Tom wants 100% safety, he wants to make more than 2% and for it to be completely liquid. Normally you have to give in on one of those things. There are a few things out there that fit this criteria, but they carry relatively high fees as well.
There are some life insurance products, weirdly enough. If the market's up you're going to gain and if it's down you're not going to lose. It’s also fully liquid and you get the advantages of a life insurance product.
All these things that are great, but the two downsides of life insurance are
You have to qualify for it, and I don't know your health.
There are pretty high fees. That's what a lot of people don't talk about. You still pay the fees which means you might net a loss even though you know you didn't lose anything in the market
Other than that, you're going to have to give up one of those three things. There is no perfect instrument that's going to give you a great yield, with no risk, with total liquidity (at least on this side of heaven), but this might be the closest thing.
“I am a recent college grad. I just applied for a credit card through my bank to begin building my credit and was rejected. Do you have any recommendations for a way to build my credit?”
There's a great line of credit cards called secured credit cards, and they’re built for people in this situation. Whether you’re a recent college grad who doesn't have credit and wants to build credit, or you're older and need to rebuild your credit, secured cards are a great option.
The best article I found on this is through NerdWallet. You can also Google “best secured credit cards of 2018.” This article will pop up pretty quickly.
My favorite that I've worked with is Capital One. They have a secured MasterCard. In this case you have to give some kind of a deposit, anywhere from $50 to $200, and then based on where your credit is at at that time they will give you some sort of credit line in that range.
It automatically is going to build credit when it's used well. They're going to report it regularly and give you a higher credit line overtime.
“I’m about to retire. I’m not married. I have a pension option through my work and my primary concern is my son. I can take a life only pension or a lesser pension..like a 10-year certain option. I want to make sure I leave my son some sort of inheritance, but I also don't like the idea of the smaller payout. What are your thoughts on this?”
When you retire for the pension and take the life only option, it as the highest payout rights. You will get a higher payout every month, but if you die it goes away.
The 10-year certain means you can take a lower pay out. They're going to reduce it, but they're going to guarantee it for at least 10 years. In other words, if you take that pay out and get hit by a truck the next day, the pension doesn't go away. It still pays out for the first 10 years to whoever your beneficiary is.
The problem is you could live 9 years, get hit by a truck and have it only payout for one year. It's not guaranteed ten years after you die, it's guaranteed 10 years from when you start. You’re going to take a lower payout forever. If you live past 10 years, which is a good thing, you're still going to get that lower payout for the rest of your life.
It might be best to go ahead and take the 10-year certain so your son is guaranteed something, but something else to look into is what you could get in the life insurance world. I would love to dive deeper into this if you choose to set up a free consultation.
THAT'S ALL FOR THIS WEEK!
As always, I don’t know the full situation with these questions. If you want to dive deeper into any of these questions please don’t hesitate to set up a free consultation through the link below. I would love to help you figure out the most efficient way to save and utilize your money.
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