When you think about the young women in your life, what comes to mind for you? Specifically, what do you want most for them to realize and achieve, and how do you want to help them get there? It’s a question that you might be giving more thought to this month or week than you might ordinarily. October 11 is “The Day Of The Girl,” an internationally recognized day for celebrating female empowerment. It’s been recognized since 2012 when it was first christened by the United Nations, and it’s truly an important day. It raises awareness about the millions of young girls in third world countries without access to education and health services, and it also helps to elevate the ones in our own backyard who so desperately need a helping hand. Studies have shown that between the ages of 8 and 14, girls’ confidence can drop by 30%, and that is a tough number to swallow. It hits home with me for two reasons: One, it’s during those very ages when we’d like to see girls’ confidence skyrocketing, so that they can confidently blossom and get ready to take college by storm, and two, as a woman who lived through those ages, I know firsthand just how tough they are. It’s so disheartening to hear that even though we’ve made so much progress for women over the last few decades, we’re still facing those same confidence roadblocks.
The Day of The Girl also marks a very special anniversary for this week’s HerMoney Podcast guest, Illana Raia, whose book: “Girls, Who Do You Want To Be?” debuted a year ago today. Illana is also the founder of Être, a mentorship platform for middle school girls, that brings young women directly into major companies of their choosing — like Google, YouTube, and Spotify to name a few — to meet female leaders face-to-face. In all of its programs, Être strives to “help girls raise their hands instead of lowering their standards,” which we love!
In this episode, Illana walks us through why she started Être, and why she felt it was so important for girls to meet female leaders in person. She discusses her transition from her law career to founding Etre, and credits her daughter (who was in middle school at the time) with the inspiration. “I realized early on that she did not understand what i did every day. She wasn’t seeing enough female role models. She knew I went to work, but I wasn’t taking the time to explain to her what I did every day.”
We tend to underestimate our kids, Illana says. It would be so beneficial for them (especially young girls) to hear other women talking about getting a raise or negotiating a salary. Talking openly about that in front of our girls would be huge — it matters, she says.
“It’s important for girls to see that women hold each other up, and that we support each other. They might watch their mom, or their aunt do that in a book club setting, or on the phone with a girlfriend, but it’s different to see a woman in a boardroom leading an all-female team,” Illana says.
Illana and Jean also discuss the importance of diversity in boardrooms, how to bridge the “confidence gap” that plagues women of all ages, how programs like Être help young girls get into college, and how Être has evolved in the COVID era.
In Mailbag, we talk about ROTH IRA conversions, maxing out a 403b, and financing a new car. Lastly, in Thrive, we talk about online shopping — specifically ways we can all start doing less of it!
This podcast is proudly supported by Edelman Financial Engines. Let our modern wealth management advice raise your financial potential. Get the full story at EdelmanFinancialEngines.com. Sponsored by Edelman Financial Engines – Modern wealth planning. All advisory services offered through Financial Engines Advisors L.L.C. (FEA), a federally registered investment advisor. Results are not guaranteed. AM1969416
Illana Raia: (00:01)
It’s important for girls to see that women hold each other up and that we support each other. They might watch their mom or their aunt do that in a book club setting or on the phone with a girlfriend. But it’s different to see a woman in a boardroom leading an all female team.
Jean Chatzky: (00:22)
HerMoney is supported by Fidelity Investments. We all have our own financial needs and goals. Investment advice from Fidelity can help you reach yours. Plus, they have tools like financial checkups and more to help you make smarter well-informed decisions every day. Visit Fidelity.com/HerMoney to learn more.
Jean Chatzky: (00:45)
Hey everybody. I’m Jean Chatzky. Thank you so much for joining me today on HerMoney. When you think about the young women in your life, what comes to mind? Specifically, what do you want most for them to realize and achieve and how do you want to help them get there? It’s a question you might be giving more thought to this month or this season then ordinarily. This Sunday, October 11th, is “The Day of the Girl” – an internationally recognized day for celebrating female empowerment. It’s been recognized since 2012 when it was first christened by the United Nations. And it’s truly an important day. It raises awareness about the millions of young girls in third world countries without access to education or healthcare services. And it also helps to elevate the ones in our own backyards who so desperately need a helping hand. Studies have shown that between the ages of eight and 14, girls confidence can drop by 30%. That is a tough number to swallow. It hits home with me for two reasons. One, it’s during those very ages when we’d like to see girls confidence skyrocketing, so that they can confidently blossom and get ready to take college and the world by storm. And two, as a woman who lived through those ages, I know firsthand just how tough they are. It is so disheartening to hear that even though we’ve made so much progress for women over the last couple of decades, we are still facing those same confidence roadblocks. “The Day of the Girl” also marks a very special anniversary for today’s guest, Illana Raia, whose first book, “Girls, Who Do You Want To Be?” debuted a year ago today. Illana’s the founder of Etre and Etre is a mentorship platform for middle school girls that brings young women directly into major companies of their choosing – like Google and YouTube and Spotify – to meet female leaders face to face. The company strives to help girls raise their hands instead of lowering their standards, which I just love. And Illana is also a former mergers and acquisitions attorney. She’s joining us today from the Jersey shore. Hey Illana, thank you so much for being with us.
Illana Raia: (03:14)
Thank you so much for having me. I’m delighted.
Jean Chatzky: (03:16)
Tell me a little bit about why you started Etre. I mean, you had this very, very high-powered corporate job going and you were certainly making lots of progress on your own.
Illana Raia: (03:30)
It’s true. And I have to say at the outset, I was a really happy lawyer. I know there are so many stories about people who said, oh, I was practicing law and then I found the thing that made me happy. I loved law from the outset and I had tremendous mentors my entire career. So, there was no, I didn’t leave because I was dissatisfied or anything else. While I was working and being so happy, my daughter was in middle school and I realized kind of early on that she did not understand what I did every day. And now some of that is, corporate law is complex and no one expects a middle schooler to grasp that. But she wasn’t seeing enough female role models in general. She knew I went to work. I wasn’t taking the time to explain to her what I was doing every day. I was trying to put it down quickly and focus on her and her brother when I got home. And more than that, I had friends with these amazing jobs and I wasn’t showing them to her. I wasn’t saying, come look at this woman who is an orthopedic surgeon or a news anchor, or the CEO of a public company. We were all just so and so’s mom or, you know, someone who came in for library hour. So, at the time I started taking her to lunch with my friends. I just thought, let’s spend 10 minutes and come ask her what her job’s like. How does she spend her day? What scares her? And when I saw how much my daughter loved it and how much the women loved it, in the back of my mind was always this idea. Other girls should be doing this. And this isn’t hard to do. So then when I did retire in 2014, my original idea was just to have a one day girls summit. I thought I would invite all of these women to my house. We’d have one day and girls could ask their questions. And one of my girlfriends said, this is bigger. This is bigger than that. That should be a website. This should be a place where girls can drop in and see role model quotes. And then it just grew from there. So, that was the original idea.
Jean Chatzky: (05:27)
It’s so interesting. I see so much of myself or I hear so much of myself in the story that you tell. Because I was such a conflicted working mom. I mean, I still love what I do, but when I got home, I also felt like I had to put it down and turn my attention to what my kids were doing. And so, I know I didn’t share as much as I probably could have or should have with my children about both my career, but also just managing money in general.
Illana Raia: (06:06)
Right. And that’s an area where we tend to underestimate our kids in general. And I think girls specifically. And it would be so much more beneficial if they watched us talk about negotiating a raise. Or they watched us talk about comparing salaries and the idea that that’s not rude, that’s relevant. And this is how grownups figure out their worth and figure out their next steps. Talking openly about that in front of our girls I think is huge. And I personally don’t think middle school is too early for them to hear that kind of stuff. I think it matters that early.
Jean Chatzky: (06:41)
I think it’s actually the right time because the research points to that’s when the confidence gap expands. Kathy Murphy, who is the president of Fidelity, tells this story, I’ve heard her actually tell it a couple of times, about this girl named Piper who came into the Fidelity office. And she was probably around fifth grade at the time and took the place by storm and was just so eager to ask all of her questions and willing to talk to every possible executive. And by the time that girl and others like her hit 13, they were not raising their hands in math class or science class anymore. What happens?
Illana Raia: (07:26)
I mean, there’s so many answers to that question. I think what you hear from teachers sometimes is that it’s simply the social pressure. They just don’t want to be wrong. That the boys are more willing to be wrong. They’ll throw their hand up and say whatever pops into their mind. And they’re much more comfortable being brave and less worried about being perfect. And Reshma Saujani wrote a whole book about that, which I love so much. And I think she’s right. So, there’s a bravery aspect to it. I think girls see so much on social media with these curated perfect lives. And that reinforces that idea that there can’t be a flaw. There can’t be a chink in that armor. I think sometimes they feel like they’re not being taken seriously. When I bring girls into companies, and that part of Etre started with an idea from one of the girls. That was not my original idea. I thought we were just going to have role model quotes. One of my girls early on said, why can’t we meet the women in person? Why are we just interviewing them? And so, we started going into companies, as you said, that the girls pick and they vote every month on where they want to go. The minute they got into those rooms, they knew they would be taken seriously. So, a lot of that worry just fell away. The fact that it was all girls in the room. We only meet women. They throw their hands up constantly in every boardroom and every lunch room everywhere we go. And I think it’s because they know at the outset, these women want to hear from them. They remember what it’s like to be their age and they’re being taken absolutely seriously. And that’s a big part of it.
Jean Chatzky: (08:59)
What is it about all girls, all women? I get pushed back on this. I mean, I still get pushed back on this. We’re a company called HerMoney and we have gatherings where it’s all women. Why do you think that’s important?
Illana Raia: (09:15)
Great question. I’m a big fan of all-girls’, all-women’s settings. I went to Smith. So, from very early on, I was in a place where all of the student government roles were reserved for women. Most of the role models presented to us were women and everything was there for us. So, I think that there’s an empowering aspect to that. I think it’s important for girls to see that women hold each other up and that we support each other. They might watch their mom or their aunt do that in a book club setting or on the phone with a girlfriend. But, it’s different to see a woman in a boardroom leading an all female team. Maybe her assistant is male. Maybe the people who work for her are male, but I think it’s really important for girls to see that and know, my friend group right now might be precarious. Middle school. The sands are shifting all the time and maybe I don’t feel like I have an army of support at my back. But when I get here, when I get to a place where I’m doing what I love and my skills match this job or college or whatever the stage is, I will have it. It does exist. It’s out there. And I think it bolsters their confidence. It reassures them at exactly a time when their social confidence might be faltering a little bit.
Jean Chatzky: (10:29)
When we’re looking for mentors to spotlight, when we’re looking for women, how important is diversity in this mix?
Illana Raia: (10:38)
It’s huge. For the girls I bring into the room, and the companies already understand that it’s going to be huge for who they see once they’re there. Part of what I love about these lunch and learns is that it’s not simply one entire classroom from one school where they all know each other. The girls I put on the bus are from a million different places. And once they’re on the bus, they have no idea if they’re from a very privileged prep school or an underserved school in the city. They have no idea. They’re all in the same room. Their hands are all raising at the same time and they have access to the same women. And without fail the companies we have seen understood it at the outset, and they show us diversity. And I can’t tell if that’s because the companies that are drawn to what we’re doing are already forward-thinking and sensitive to that. Or if everyone remembers the girls need to see it. But there’s been a really, almost effortless match when it comes to making sure there’s diversity on both sides.
Jean Chatzky: (11:32)
I want to get into how we can expand on these concepts and experiences in this COVID world when nobody is going anywhere or very few people are going anywhere. As well as, how do we bring these kind of experiences to girls where they don’t have an Etre, where clubs are not in existence and getting one off the ground might be difficult. But first, let me remind everybody that HerMoney is proudly sponsored by Fidelity Investments. Whether you’re looking for a turnkey way to save and invest, or you need to tap the support of an experienced pro for a more complicated financial picture, Fidelity can help you meet your goals. In addition to investment advice, Fidelity also has online tools like financial checkups that can help you make smarter, more informed decisions every day. So, visit Fidelity.com/HerMoney to learn more. I’m talking with Illana RIAA, founder of Etre, a mentorship platform for middle school girls aiming to help girls raise their hands instead of lowering their standards. So, we are in strange times. We are not leaving the house very often. A lot of kids are going to school remotely. Or sometimes remote and sometimes in person. And the parents who might help expose them to these sorts of mentorship experiences are struggling to get through the day. How do we boost the confidence of our middle school girls during these crazy times?
Illana Raia: (13:12)
It’s a serious question. And when everything first started, I didn’t know whether we would just be putting down our lunch and learn aspect – this idea of meeting female executives one-to-one. I just thought we would have to put it down for awhile. But my girls, with every good idea that has come from my girls, they immediately said, oh no, let’s just DM them on Instagram. Let’s just set up a zoom chat. And this way we could visit companies that aren’t close by. In the beginning, all the companies we were visiting were in New York, because that’s where I am. Now, we can do, we call them pop-up mentor events, and we can zoom, instead of just 10 girls at a time, we can put 30 girls in a room, and talk to companies in different places. So, that has been a silver lining for us, is that our geographic reach, who we could talk to and how many girls we could bring at once, immediately expanded. The clubs, 0ur Club Etre chapters, are really the way we had always thought we would expand. And Etre’s four years old a,nd this will be a big year for us because the clubs are really starting to move into different spaces. And they’ll just be virtual. The girls are unfazed by the fact that we can’t step foot into a boardroom. They understand that social media is the way to reach out and it’s been tremendous. So for schools in particular that are looking at remote learning now, or parents who are homeschooling, the idea of this club in a box, where you can say, start a Club Etre chapter. Everything you need is on the website. All of the discussion questions. All of the topics. And what we’ll do is help you figure out who you want to zoom with. If you are a group that wants to talk to an astronaut, let’s talk to the people at the international space station, which we have, and see who you want to speak with. If you want to mine the local working mom population, and the schools have been so into this, because like I was like, perhaps you were, I couldn’t be the class mom. I was working all the time. But if someone had said to me, once a year, will you come in and talk about being a lawyer? Or would you get on a zoom call for 30 minutes? And our zoom calls are only 30 minutes now. I would have done it in a heartbeat. So, the idea that schools can reach out to their working moms and say, life is crazy. Your life’s crazy. The kids’ lives are crazy. But for 30 minutes, talk to them about advertising. Talk to them about working on Wall Street. Why not? So, the options are huge now.
Jean Chatzky: (15:36)
Is there a big cost to starting an Etre chapter?
Illana Raia: (15:40)
No, everything is free. All the lunch and learns, I should have said that at the outset. Everything about Etre for the girls, for the families, is free. And I’m committed to keeping it that way. Etre has been self-funded so far and now companies have been asking graciously, what can we do? Give us something to do. We want to help this. And I hadn’t made any asks yet because I didn’t know what it was going to be. We’re growing with our girls. This is the year now where we see how it’s going to work. And I think it’s going to be a sponsorship type model where companies can sponsor local clubs in their area. So, put down roots in their area and help girls move through these processes. Virtual now, and then later it’ll be in person again. But no, if a school wants to start a club, if a girl wants to found a club.
Jean Chatzky: (16:26)
I want to get into your book a bit. Can you tell us how it breaks down big ideas like financial confidence and philanthropy and entrepreneurship for today’s girls?
Illana Raia: (16:38)
The book started, when I first launched the website, I sent cold emails out to a number of women, many of whom I didn’t know saying, hey, I just launched this website. I would love your feedback, good or bad. And Arianna Huffington wrote back, when we were only six weeks old, and said I love what you’re doing and I want you to write for Huffington Post, where she was at the time. So, I started then, taking big topics and breaking them down, as you said, for younger girls. Talk about equal pay. And let’s break it down like a word problem, like a math word problem. If Jack and Jill had the same job and they work the same hours and Jack makes a dollar, how long into the next, you know, you get the idea. And I got a great response from the articles. I think that obviously the girls necessarily weren’t reading HuffPost, but that cool aunt or the big sister was passing the article on and they were circulating in schools. And then I started writing for Thrive. I write for Elevate. All of those articles became the book. And so, I broke it down into 10 chapters, which mimic the 10 sections of the website. So “Be Smart” is all about academics and it has the big STEM focus. “Be Wise,” where the S is a dollar sign, is all about financial confidence. “Be Innovative” highlights young entrepreneurs doing tremendous things our girls age. And so, the idea for the book was let’s put the articles all in. Let’s have them all in one place. And then 40 women, tremendous women that we had met or had hosted us, gave comments. And my favorite part of the book, 50 girls from across the country gave quotes as well. So right next to a CEO’s quote might be a 13 year olds quote. And they’re talking about the same topic. Maybe they’re talking about philanthropy or a recent book release, but they’re right next to each other, which I love.
Jean Chatzky: (18:24)
We’re amoney show. So, I’m going to dig a little more into that idea of financial confidence. What did you learn? What have you learned from both the girls and the mentors that can help us close that gap?
Illana Raia: (18:38)
Without fail, the companies that have either hosted us, like a Morgan Stanley or a Goldman Sachs, or bringing us just to the floor of the stock exchange, or publications like Worth, that actually want our girls to be contributors now, no one has thought that this was beyond girls in middle school or watching them grow into high school. No one has said to us, let’s wait until they get to college. Everyone understands that there is power in girls understanding these concepts at a basic level, and there’s huge power in a pipeline, and having them grow and ask more questions. So, whether it’s girls organizations like “Rock The Street, Wall Street” or Girl Scouts, that provide really excellent resources. Age appropriate. All free. Or grown-up financial institutions that are saying, oh, let us share these concepts. You can break them down for the girls. But they’re terrific for the girls and for the big sister reading over her shoulder. So, I think there’s been, they’ve thrown the doors open to their places and brought us on to trading floors, and brought us into their meetings, which is terrific. And the best part about that is that it’s taken away that veneer of, this is impolite to talk about. And that, I think, is really important. There’s sort of this layer of, oh, maybe that’s bad manners. Maybe we shouldn’t be talking about that at the dinner table. When in fact of course you should be because that’s how you talk about it in the boardroom table. So, I think that’s one of my favorite sections of the website and chapters of the book is “Be Wise.”
Jean Chatzky: (20:07)
For our listeners out there who are thinking they might like to mentor a young woman, or they have a young woman in their life who needs mentorship, what’s the best way to get started?
Illana Raia: (20:20)
Go to EtreGirls.com. It’s E T R E girls.com. And there’s a section that says, “Be Involved.” And all of those options are right there. If you want to start a club, if you’d like to come on a visit, whether it’s virtual or live. Whether you’d like to mentor, all of those options are there. Even girls as they’re getting into college, we just turned four, so we had our first class of girls graduated high school, all of them said, we need to stay with this. We want to reach back to that woman we met and talk about an internship. We don’t know anything about LinkedIn. So “Etre Campus” is there too and there are forms for that. But, oh my goodness, yes. If a woman wants to mentor, this is exactly how it’s happened. It’s one woman saying it to another, hey, you should see this. Your expertise would be really valuable. We would love it and welcome it.
Jean Chatzky: (21:07)
Illana, thank you so much. I’ve enjoyed this.
Illana Raia: (21:11)
Thank you so much for having me. This was a blast.
Jean Chatzky: (21:13)
Absolutely. And we will be right back with Kathryn and your mailbag.
Jean Chatzky: (21:17)
And HerMoney’s Kathryn Tuggle has joined me in the studio. Hey Kathryn.
Kathryn Tuggle: (21:27)
Hey Jean, how are ya?
Jean Chatzky: (21:28)
The virtual studio, I should say. Although you are in the real studio and I am at the home back bedroom, where there is little noise.
Kathryn Tuggle: (21:36)
I’m in the real studio because I need an outing. I’m in the real studio because, once a week, this is my highlight. I get to get a coffee and I get to get food out. And as much as I love my husband, I get a few hours away. So, I’m coming into the studio and you can join me here when ever you like.
Jean Chatzky: (21:57)
Okay. I will try to wrap my brain around that. I don’t know if I’m quite there yet, but I hope to be very, very soon. So, I was wondering as we were listening and talking to Illana, did you have a mentor?
Kathryn Tuggle: (22:12)
Hmm, good question. I have never had a long-standing relationship with a mentor that spanned many decades or even a decade. But in every job I have had someone who I felt was my advocate, who was looking over my shoulder and giving me guidance when I needed it. And I’m still in touch with those people. But, in terms of one that, I don’t know, I feel like some people have these mentor relationships that are, that lasts a lifetime and I’ve never had that.
Jean Chatzky: (22:44)
Yeah, yeah, no, I actually haven’t either. I mean, I had my college professor who really helped guide me into journalism, but she died way too young. And I did have people at each job that I felt I could go to for advice and information and who would definitely advocate for me. But I didn’t really have the decades long relationship either.
Kathryn Tuggle: (23:08)
Right. And you know, not everybody needs it, I guess. I think that, you know, what Ilana was saying is that sometimes what you need is a mentor just to give you that spark of an idea or that spark of an encouragement, and to see someone living the dream that you want to live and that’s it. You’re off to the races.
Jean Chatzky: (23:27)
Yeah. And I also think that your definition, or at least how you’ve lived it, is a little more realistic. I mean, I think those people who find that mentor relationship, I remember my roommate when I graduated from college. I lived in Brooklyn, in Park Slope with a friend of mine. And she had a mentor. This woman who hired her in her first job and who just continued to be her mentor through every job that came afterwards. I saw her, last year I was out in San Francisco and I said, are you still in touch with Barbara Lee? And she’s like, well, yeah. I talked to Barbara Lee all the time. And I also think if you’re a good cultivator of relationships in general, I think the keeping in touch part is easier.
Kathryn Tuggle: (24:14)
Yes, yes. I agree with that. I agree with that.
Jean Chatzky: (24:17)
But we’ll take the help wherever we can find it. And the work that Illana’s doing just sounds so great. I was very happy to be able to shine a little bit of a light on that. But I know we’ve got questions, so let’s dig in.
Kathryn Tuggle: (24:32)
Our first question comes to us from Rose. She writes, hi Jean. I love your podcast. I’m in my forties. My husband and I make a combined income of over $300,000. I’m considering a Roth IRA conversion to take advantage of the lower amount that I’d have to pay on taxes. Is it wise to do a Roth backdoor conversion? We are in a high tax bracket. We’re thinking that the money we put in today will grow to a large sum of money when we retire. But is it better to pay the taxes today at a high rate, than to pay it later at a somewhat reduced rate? I have several traditional IRAs at different brokerage firms. Should I convert them at the same time or wait it out? Thank you.
Jean Chatzky: (25:10)
Hey Rose. Thanks so much for the question. We actually get a decent amount of questions on whether a Roth IRA is better than a traditional IRA or vice versa. And so, I’m happy to dig into this one about a Roth conversion. The deal is, when you convert assets from a traditional IRA into a Roth IRA, you have to pay taxes on that conversion at the time that you do it. And so, generally the advice is, don’t convert unless you have money from outside that IRA in order to pay those taxes. What you don’t want to do is pull money out of a tax-advantaged haven and take the hit on that money that you use to pay taxes. That’s not the way to go about it. It doesn’t sound like that’s what you’re looking at right now. However, the other consideration is your tax rate. When we opt for a traditional IRA over a Roth IRA, it’s generally because we think that our tax rate is going to go down in the future, which is what it sounds like you’re expecting to happen. When we go with a Roth, instead of a traditional, it’s generally because we think our tax rate is lower now and is going to go up in the future. What we’re aiming to do is pay our taxes at the lowest rate possible. Now, your letter indicates that you are thinking that your tax rate is going to go down. And so, for that reason, I would be hesitant to convert all of these assets to Roth assets. If you are of the belief that taxes are overall going to go up in the future, and I’ve got to say, personally, I’m of that belief, then having at least some assets in a Roth is beneficial. The other thing that’s nice about a Roth, particularly for people who are significant earners, is that you never have to pull the money out. You can pass it along to future generations in your family without that money being taxed. And so, if that’s something that you’re thinking about doing, that indicates that a Roth conversion would be a good idea as well. And so, what I would do is probably look at your menu of traditional IRAs, because it looks like you have several of them, and convert them strategically based on your financial situation and your ability to pay those taxes, at the time, out of proceeds that are not in retirement accounts. The other thing, finally, to pay attention to is growth of the assets. The markets have been just charging along. People who converted to a Roth after the markets dipped, following the start of coronavirus, got a really good deal, because they were able to convert more assets for less money. If you believe that the markets are going to continue to be volatile, you may want to choose your opportunities to convert these accounts down the road. Does that make sense? There’s a lot there, Kathryn. But I’m hoping I got it all in.
Kathryn Tuggle: (28:43)
Yeah, yeah, absolutely. And in my mind, I think maybe meeting with a financial planner could also be helpful in this case, right?
Jean Chatzky: (28:49)
Oh, absolutely. Absolutely. Rose, if you haven’t met with a financial advisor, if you don’t have somebody that you are talking to about how you’re going to take all of these assets and make them work for you to build a future, sooner is better than later.
Kathryn Tuggle: (29:06)
Great feedback, Jean. Thank you so much.
Jean Chatzky: (29:08)
Kathryn Tuggle: (29:09)
Our next question comes to us from Jenny. She writes, dear Jean. I love your show and always learn so much. Thank you for empowering women through finance. The world is the better for it.
Jean Chatzky: (29:18)
Oh, that’s nice. Thank you.
Kathryn Tuggle: (29:20)
I recently received a promotion and raise and I now qualify for my organization’s 457 plan, in addition to the 403b plan I was already contributing to. I was maxing out my 403b and now I’m in a position to save even more. I currently do all of my contributions via the Roth option. My employer’s 5% match is automatically pre-tax. I had about $110,000 saved for retirement before I stopped checking in mid-March. What do you recommend to fully leverage both plans? My understanding is that I can take withdrawals from the 457 plan at any time with no penalty. Should I treat it as a savings investment vehicle for other goals – not just retirement. I’m 36 and married with no kids. Thanks.
Jean Chatzky: (30:01)
Hey Jenny. So, if you’ve been listening to this show for a while, and it sounds like you have, you know that I am big fan of saving in a tax-advantaged way, whenever you option. And you’re right, you have the option to put money into both of these plans. I would advocate for putting as much as you can, knowing that you’re putting that money away for retirement. My understanding is, like yours, yes. You can take withdrawals from that 457 plan at any time with no penalty. However, you still have to pay taxes on that money. And that can, if you’re doing well with those investments, be a pretty significant bite. So, I wouldn’t necessarily treat it as a saving or investment vehicle for your other goals. I’d treat this as a retirement plan, which is what it was established to be, and save on the side for other things that you are thinking about, things that are more short term. When we talk about the other goals that we have in life, typically we’re talking about things like down payments for a house, and that may be something that you’re looking to do in the next three to five years. That money doesn’t belong in stocks or other higher risk investments anyway. And so, I carve my funds into shorter-term goals and longer-term goals, and let this account do the work that it was set up to do.
Kathryn Tuggle: (31:44)
I love that advice. I think keeping things separate sometimes is the best way to go.
Jean Chatzky: (31:48)
Well, I think too, there is tax treatment and we get into the flexibility of retirement accounts a lot when we talk about Roth IRAs, which are just the gift that keeps on giving. Because yeah, you can pull money out of them for paying for college. You can pull money out of them for buying your first house. But when you do that, you pull money out of the pool that is then growing for those long-term goals. And that can set you back a little bit. Our colleague Dayana wrote a piece for HerMoney.com about the new rules under the CARES Act, that effect 401k withdrawals. And basically, the bottom line is that 401k withdrawals, if you pay the money back within three years, can actually serve, under these parameters, as a 0%, three-year loan, which is really, really tempting. The problem is that once the money’s out, it’s not growing for your retirement. And I just think of people who perhaps withdrew from their retirement accounts, when the markets had taken that big tumble in March, and hadn’t had the opportunity to put the money back in by the time the markets came roaring back in the middle of August. And so, that’s a lot of growth that you don’t want to miss out on. And for that reason, I sometimes just think we’re better off keeping retirement assets for retirement, college assets for college, and assets that we want to save for down payments for homes or for other goals in other places.
Kathryn Tuggle: (33:31)
I agree. And you’ve said before over the years, just mentally that having your different buckets of money in different accounts can help you, whether you’re saving for a vacation in one account and you’re saving for a car in another, it’s just like that mental divide that’s helpful.
Jean Chatzky: (33:45)
Yeah. Yeah. You can sort of see that you’re closing in on these particular goals and the behavioral finance folks have found that in and of itself to be really, really powerful.
Kathryn Tuggle: (33:54)
Absolutely. Our last question comes to us from Nervous in Nashville. She writes, hi HerMoney team. So thankful for your recent mailbag episodes. I realize how privileged this question is. My husband and I are public servants and fortunate to have steady employment. After taxes, his pension fund contributions, my 13% 401k contributions, health insurance deductions, etc., we bring in $77,208 annually. Our essential monthly budget total averages around $3,700 and includes a refinanced 20-year mortgage, utilities, groceries, etc. We have an emergency fund that will cover us for six months. We own four cars, all of which we’ve purchased or acquired for a total of $5,000. Their age range is 1997 to 2012 with over 200,000 miles on all of them. Needless to say, we rent a car when we drive over a hundred miles to visit family. We’re looking at buying a new car and taking advantage of the 0% financing for 63 months on a Subaru. Mentally, I never thought I would be someone who would buy a new car. It just seems weird to me to spend $27,000 on a depreciated asset. We’re going to trade in one of our vehicles and I’m going to negotiate my ass off. But even if we ended up buying something for $20,000, it still feels weird to me. Should we be concerned if our monthly buffer amount is a thousand dollars after essentials, plus a $300 car payment for the next five years? If not, how do I get over this mental block? Thanks for your time and attention. Appreciate all you do.
Jean Chatzky: (35:24)
I’m just so impressed with everything in this question.
Kathryn Tuggle: (35:28)
Jean Chatzky: (35:29)
Particularly that you’re going to negotiate your ass off. I love that. Yeah. I think you can go ahead and buy this car. I mean, I would be inclined to look at the financing because there’s cheap financing out there for so many different things. Look at the difference on a monthly payment on a three-year-old certified used Subaru versus this one, that you’re likely to get with 0% financing. If the payments are relatively equal or if, over time, you look like you’re going to be paying just a little bit less because the interest rate, then I’d probably go for the new car. And just based on everything that you write here and how careful you are, I would not worry about this one bit. And if you want to make yourself feel better, I do suspect that somebody in your family is good with cars and probably fixes them up. But if that’s not the case, just think about what you’re spending to maintain those four cars, which probably get really bad gas mileage, or at least less good gas mileage than this newer Subaru will. And just realize that you don’t need them. I mean, you may want to get rid of three out of the four, or two rather than just one. And know that you’ve got cars to get you guys back and forth to work or wherever it is you’re going. Plus at least one backup in case one is in the shop. I think this is fine. I would just go ahead and I wouldn’t even think twice.
Kathryn Tuggle: (37:11)
Agree. And I’ve heard great things about Subaru by the way.
Jean Chatzky: (37:15)
Oh my gosh. I feel like every other car in my neighborhood is a Subaru these days. And they’re all a very specific orange Subaru. Have you seen that orange. It’s Crosstour or Crosstrek or something? It comes in orange and it comes in a sky blue. And Elliot and I point it out to each other every time we see one on the highway because when we got our last car, which you guys know I’m pretty loyal to my Volvos, when we got our last car, we actually thought about the Subaru. But my Volvos have treated me well and I’m sticking with them, at least for now. If any of those four cars in her driveway are Subarus, she knows that firsthand.
Kathryn Tuggle: (37:55)
Absolutely. Thanks Jean.
Jean Chatzky: (37:57)
Thanks Kathryn. In today’s Thrive, we are all spending more time at home right now. And what are we doing with all that time – other than bingeing Netflix? Turns out, we are shopping. We are shopping a lot. In June of this year, online sales in the US hit 73.2 billion dollars. That is a 76% increase over last year. Now, shopping online isn’t, in and of itself, a bad thing. In fact, staying home these days is to be commended, and many of us are ordering new things online that we would have ordinarily bought in stores. The trouble comes into play when we start throwing three extra pairs of pajamas into our cart at Target. Or we don’t scale back on our online shopping habits as we start to trickle back into those stores for in-person visits. If you’re feeling the need to rein it in a little bit, we’ve got a list at hermoney.com of eight ways to start spending less. I hope you’ll check them out. Meanwhile, three of our favorites are… number one, watch your stress spending. Instead of spending when you feel anxious, as many of us do, walk away and find something else that makes you feel good. A walk. A long bath. A good book. An online yoga or meditation course. Whatever works for you. Number two, establish set shopping times. We’re spending more time at home. So, the urge to scroll through enticing merchandise on our laptops and tablets and phones is essentially constant. But if we’re never really not shopping when we’re online, then does that mean we’re always shopping. No need for an existential crisis here. The point is that maybe you should consider limiting yourself to shopping only at certain times or on certain days. And lastly, think about only buying items that are on sale. If you really want it and you’ve thought the purchase through, then wait for the item to go on sale. Challenging yourself to buy only sale items can help you save money on the things you really want to buy. And, for the record, we recommend doing this all the time, not just during a pandemic. Thank you so much for joining me today on HerMoney. Thanks to Ilanna Raia for chatting with us about mentorship, making a difference in what young girls need most from our community of strong and empowered women. If you like what you hear, I hope you’ll subscribe to our show at Apple Podcasts. Leave us a review because we love hearing what you think. We also want to thank our sponsor Fidelity. We record this podcast out of CDM Sound Studios. Our music is provided by Video Helper and our show comes to you through Megaphone. Thanks so much for joining us and we’ll talk soon.