When we launched the HerMoney Podcast four years ago, and when we launched HerMoney.com nearly two years ago, we did it all with you in mind… And by “you,” I mean all women. Every single one of us. Our company is led by women, we produce content for women and about women, and we love hearing from so many of you that you feel you have a place where you feel safe talking about your money.
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But occasionally, we do get the question: “Do women really need financial advice just for them?” or “Shouldn’t money advice just be the same for everyone?” But money is absolutely not the same for everyone — women’s financial concerns differ widely and wildly from men’s in so many ways. The gender wage gap means we have to save more than men to just end up with the same amount once we reach retirement, and then our longer life expectancies mean we’ll have to do more with less. And since we’re more likely to work as unpaid caregivers than men, we’re much more likely to end up behind the 8-ball financially. Fortunately, there are some strategies that women can employ around social security (some that you might not have heard of!) that can set us up for success in retirement.
This week’s guest, Marcia Mantell, author of “What’s The Deal With Social Security For Women,” and founder of Mantell Retirement Consulting, has spent the last 25 years translating challenging retirement concepts into everyday language.
Listen in as Marcia and Jean dive into everything women need to know about their social security, both today and in retirement. We discuss claiming strategies for women, the rumor that social security is not going to be there for us when we need it, and why women are different when it comes to social security.
Marcia also breaks down what the gender wage gap means for women, and discusses the three things that really make women different when it comes to social security claiming strategies. She also articulates the best time to claim, and why you could end up making as much as 30% less if you claim too early. “It’s a huge decrease in your monthly benefit that will impact you for the rest of your life,” she says. The pair also talk about the benefits of waiting until you’re 70 to claim social security, and how to do the math on the annual 8% bump in benefits you can get if you defer claiming from age 62 to age 70
We also go into the rules around claiming your spouse’s social security, both if you’re divorced or if you’re still married. (Hint: You don’t have to call your ex in order to make this happen — it’s all handled by social security, and when you “claim on a spouse,” you won’t get their full benefit unless they die, but you can get as much as half of their benefit.)
Jean and Marcia talk about what happens when women step out of the workforce. Unfortunately, unpaid caregiving years will leave you with a “0” on your social security earnings statement, which is why stepping out of the workforce can reduce your social security benefits by hundreds of dollars per month.
In Mailbag, Jean and Kathryn tackle where to invest additional funds in retirement, how to help victims of domestic abuse get back on their feet financially, and how to avoid falling into the lifestyle inflation trap. In Thrive, we talk about how to get out of the negative feedback loop that may be preventing you from pursuing your bigger financial goals.
MORE FROM HERMONEY, ALL ABOUT SOCIAL SECURITY:
- Tempted To File Early For Social Security? Don’t Do It Before Considering These 6 Things
- Is Social Security Going To Disappear? Where The Rumor Came From, And What The Truth Really Is
- 3 Burning Questions About Social Security You Were Afraid To Ask
- Should You Hand Over Your Social Security Number?
- Do You Know How Much You’ll Need For Retirement?
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
Marcia Mantell: (00:02)
It’s not designed for women of today. And I call them the full-time, career women, working mother, loving wife and future caregiver. Social security doesn’t cover us. The math stayed the same. Women changed. We changed the model.
Jean Chatzky: (00:21)
HerMoney is supported by Fidelity Investments. We want you to demand more from your money. Start by knowing what you own and what you owe. We’ll help you take the next step at Fidelity.com/demandmore. HerMoney comes to you through Megaphone.
Jean Chatzky: (00:41)
Hey everybody. It’s Jean Chatzky. Thanks so much for joining me today. You know, when we launched the HerMoney podcast three years ago, and when we launched HerMoney.com nearly two years ago, we did it all with you in mind. And by you, I mean, all women. Every single one of us. Our company is led by women. We produce content for women and about women. And I have loved hearing from so many of you that this is what you wanted. That you now have a place where you can feel safe talking about your money. Every time I hear things like that, it just gives me so much joy. But occasionally I do still get the question, do women really need financial advice just for us? Or shouldn’t money advice be the same for everyone? The truth is, no. Money is not the same for everyone. And yes, women do need advice just for us. Because women’s financial concerns differ widely and wildly from those of men in so many ways. The gender wage gap means we have to save more than men just to end up with the same amount once we reach retirement. And then our longer life expectancies mean we actually have to make that money go further. Our lower risk tolerances mean we don’t always invest as aggressively as we need to. And since we are much more likely to work as unpaid caregivers than men, we’re more likely to end up behind the eight ball financially. I could go on and on and on, but I’m going to stop there because today we’ve got an incredible guest who can pick up where I left off. Marcia Mantell is the author of “What’s The Deal With Social Security For Women.” She is the founder of Mantell Retirement Consulting, and she has spent the last 25 years translating retirement concepts into everyday language. So today, we are going to dive into everything that we all need to know about our social security today, but also in the future, no matter what age you are. We’re going to talk about how to get the most money that we possibly can. That rumor, that social security is not going to be there. And why, as I said again, why women are different. Marcia, welcome. Thanks so much for being with me today.
Marcia Mantell: (03:23)
Well, thanks so much, Jean. I’m so excited to be here.
Jean Chatzky: (03:25)
So I think that anyone who doubted that women had different challenges when it comes to social security should really only look at the title of your book. So what is the deal with social security for women?
Marcia Mantell: (03:40)
Well, I am so happy to hear your intro talking about that money is different or financial advice for women is different. Well, social security is different too. And what’s interesting is when you look at just the facts about the program, the math is the same. The calculations are the calculations. They’re not different by gender, but there are three really big differences for women. The first you’ve already mentioned, and that’s that wage gap, the gender wage gap. So I call it less in means less out. And what happens with social security, your benefit for every one of us, it’s based on our own work history. So if we’re getting paid, you know, 82%, 82 cents on the dollar on average than men, well, then we get a lot less on the way out because there’s just less going in for us to even get the payout. And yet we live longer.
Jean Chatzky: (04:31)
Can you, before you move off of that point, can you dive a little deeper into how social security math works? Like, I don’t want people’s eyes to glaze over here, but I also, or ears cause it’s a podcast. But I also do think many of us do not have this basic understanding of what goes into that social security check that we will eventually receive.
Marcia Mantell: (04:56)
Yeah. Thanks for asking. And it is a great question. There are three key components so that no one’s ears glaze over. The first is you have to be eligible. That means you’ve had to pay into the social security for 10 years or longer. We talk about it as earning 40 credits. You find out if you’ve earned those credits on your social security statement. So it’ll tell you right in the first sentence, you know, you’re eligible because you earn so many credits.
Jean Chatzky: (05:21)
Do we all have a statement?
Marcia Mantell: (05:23)
We all have a statement. Yes, it’s on SSA, the social security’s website, ssa.gov. And then you go to their vanity URL or slash my social security and right from their homepage, you set up your account and you get your statement. It is easy to do, and I strongly encourage every woman to do this. So get your statement. Information is on there, as is the second item you need for the calculation. And that is your full retirement age. There’s math behind this. It’s not super hard math, but there is. And based on your, your benefit, your check is going to be based on when you claim relative to this idea of your full retirement age. And that is a specific, a very specific month and year when you reach age 66 and four months or 66 and six months or 67, because that’s when social security deems you to be retired and says, okay. You can get your optimal benefit now because we think you’re retired. You can still be working, but you need to know your FRA. And the third piece of information you also get from your statement. Do gather that I’m thinking this is a great tool. The third piece is how many years have you worked? Where do you have what we call covered earnings? So those are wages where an employer has paid into social security on your behalf. You need 35 years because social security is going to look at your highest 35 years. And that gets to be really interesting for women because we don’t always have 35 years. Oh, we’ve worked 50 years. Like, don’t get me wrong there, but we’re not always paid. As you mentioned.
Jean Chatzky: (07:02)
Marcia Mantell: (07:02)
Especially for that caregiving, right? Either you stay home with your young children, you stay home with your teenagers. You’re dealing with, you know, an elderly parent or relative. There are whole, you know, decades, sometimes in our life where we’re not getting paid, but social security still uses 35 years as the number.
Jean Chatzky: (07:22)
So what happens when they look at a 35 year history and we stepped out of the workforce for 10.
Marcia Mantell: (07:28)
You get 10 zeros. It is really that simple. You have 20 years of earnings or 25 years of earnings in this example and 10 zeros. So your overall benefit is going to be greatly reduced relative to someone who did have earnings all 35 years. And this is what, the second reason and big reason that social security is so different for women. I call it the antiquated model. This is a little bit antiquated. You know, in 1935, the model, it was built for that era. That era of men and women. Women got married. Women had children, their husbands were out and working. So the husband’s got the social security and it was meant to protect at home wives and mothers, recognizing they didn’t have any work earnings. But today, it’s not designed for women of today. And I call them the full-time career women, working mother, loving wife and future caregiver. Social security doesn’t cover us. The math stayed the same. Women changed. We changed the model.
Jean Chatzky: (08:34)
Okay. I know there are things that we can do about that. I know there are different social security claiming strategies that we can employ to basically get the most money possible. But before we get there, tell me about the third thing. What’s the third thing that make women different?
Marcia Mantell: (08:51)
The third thing is what I call the risks and rewards of relationships. So we enter relationships in really interesting ways. You know, we’re not just a wife, right? We’re a trusting wife. And what happens in that particular situation, when your husband comes home after 40 years on the job, whatever it is, he’s tired. He wants to retire. And he decides to claim social security early. What we don’t realize oftentimes is that has a huge implication to us women that we are actually going to be getting oftentimes the least amount of social security if we become the widow, all because our husband who we love and we trusted to make good decisions, made a decision that has a real financial impact on us. So we need to understand our relationships and understand what happens in these different relationship lanes, or these categories, on our financial situation.
Jean Chatzky: (09:49)
For the 30 year olds in my audience who are listening and thinking, yeah, maybe this is going to help my mom, but it definitely is not going to help me. What do you say?
Marcia Mantell: (09:58)
Well, I say I have a 28 year-old daughter. I also have a 23 year-old daughter. And what I say to them is, understand what social security is designed to do for a nation. It is a social insurance program, which is different than everything else we have. But what it’s designed to do is to provide, and these are key words, a modest social safety net for your retirement. It does not, and never was, intended to replace your income. So for the 30 year-olds and the younger folks, keep in mind, you should get some amount of safety net, but you also have 35 or 40 working years in front of you. Use them to your fullest advantage. Take every advantage of saving in your company’s 401k, your 403b. Or if you don’t have those, learn about IRAs and Roth IRAs, and start moving money directly out of your checking account into these retirement accounts. You do own your retirement.
Jean Chatzky: (11:00)
You’re preaching to the choir. But it also sounds like you’re not a big believer that social security will be around for them.
Marcia Mantell: (11:08)
I think it will be around, but not to the same calculation that it is today. So, on average today, that’s the average worker, if you are in middle income, work in wages throughout your whole career, social security is designed to cover about 40% to replace about 40% of that income. I can see where that could change, but I think it will especially change for high income earners. Instead of getting whatever the estimate is going to be, I think higher earners are going to see lesser social safety net. It could be smaller.
Jean Chatzky: (11:42)
So the people who still need it most, you think it will be around for them.
Marcia Mantell: (11:46)
I do think it will be around. Social security is turning 85 this August. You know, she’s been around for a long time. The underpinnings of it, it was written by a woman, at a time when women didn’t have a place in the cabinet. Frances Perkins was the architect behind social security. You know, Ruth Bader Ginsburg really supports this and made sure it was equal and gender neutral. So it’s there for all of us. And it’s a key provision of what a government does in a developed country. We do provide for our elderly. We do provide for disabled. I think it will still be around for a long time.
Jean Chatzky: (12:24)
And we’re going to get to what you need to know no matter what age you are to get the most from social security. But before we do that, let me remind everybody HerMoney is proudly sponsored by Fidelity Investments. What if you could demand more from your money? What if you could make your savings work as hard as you do? And what if that helped you reach your financial goals faster? It all starts with a financial checkup and an understanding of what you own and what you owe. From there, the folks at Fidelity will work with you to evaluate your investment options and ways to grow your savings. You can get started today at Fidelity.com/demandmore.
Jean Chatzky: (13:04)
We are talking with Marcia Mantell, author of “What’s The Deal With Social Security For Women” and founder of Mantell Retirement Consulting. All right, let’s talk about the top things people need to know to really get the most from social security. Let’s start with claiming strategies. I have often been asked the question, when is the best time to claim social security? And I know that in a general sense, you get more. If you can wait from age 62, when you’re first eligible to as late as age 70. But I also know that general rules don’t work for everyone. So can you, can you talk about this?
Marcia Mantell: (13:51)
Yes. And you’re right. General rules work for almost no one, in fact. However, what I would say, if you wanted a really quick answer. When’s the best time to claim? It’s at your full retirement age. And that’s because all of these wonderful actuaries and all these folks who do math all the time. They have calculated the odds that you’re going to live a long time and using your 35 highest years of your earnings, they’ve come up with the number. Here’s how much per month you’re entitled to, to provide for you a modest amount of income, to give you some dignity in retirement. So if you needed an answer, full retirement age, and right now it’s between ages 66 and 67 for all of us getting ready to claim. But that’s not really a good answer. The good answer is more around what you’re speaking to Jean, that you can’t use generalizations. Every situation is different. But what I do know and what I hear, I often have an opportunity to speak to various audiences around the country. And, oh my gosh, they’re so funny. I ask an audience, what’s your full retirement age? I don’t know. Okay. What’s the earliest age you can claim social security. 62, they all know. And it’s like this huge rising that everybody knows 62 is the earliest. And then I ask them, how much of a reduction are you going to get if you claim at 62? And they have no idea.
Jean Chatzky: (15:21)
So dig into this. If you claim at 62, instead of at your full retirement age, how much less money do you get?
Marcia Mantell: (15:32)
A whopping 25 to 30% less in monthly income. It is a huge decrease. And that’s because this pile of money, again, that these actuaries figured out you’re going to need has to stretch an extra five, six, seven years. So it has to be a lot less because it has to last a lot longer. And that concept is very foreign to most people. It’s a huge decrease in your monthly benefit. And you’re making the decision in your very early sixties, that will impact you when you live to your eighties and your nineties and those turning a hundred.
Jean Chatzky: (16:12)
So I hear what you’re saying. Wait until you’re between 66 and 67, when you hit that full retirement age. Why wouldn’t you wait until age 70, if you could? I mean, the math shows that for every year, between 62 and 70, that you wait, you get this bump in benefits of about 8%, which is a huge guaranteed return, no matter what kind of an investment environment we’re living in.
Marcia Mantell: (16:39)
Yeah, it is a great question. And it’s something that everyone should look at considering. But here’s what happens. You decide to retire at 65 perhaps, or sometimes you’re shown the door. You know, frankly, you don’t always have a job in your mid- to late-sixties. If you do have a job, you are the person who can delay. There’s probably only a few of you who would need to claim while you’re still working in your late sixties. So if you have a paycheck, think about delaying social security, you do get that 8% per year, delayed retirement credit bonus, which is great. But the reality is for most of us, by the time we’re in our mid-sixties, someone in our family is ill and needs help. So we need to step off the work path or we’re no longer able to work for whatever reasons. At that point, you still need to keep the lights on, right? You still need to eat. Where’s that money coming from. And you either have to pull from your own personal savings, or you can start your social security. People tend to start social security.
Jean Chatzky: (17:46)
Let’s talk about some different life scenarios. If you’re divorced, what’s the strategy?
Marcia Mantell: (17:52)
Interestingly, divorced individuals have often an option that they can claim benefits on their ex spouse, but they have to meet four very specific rules. The big rule is you had to have been married to your ex for 10 consecutive years or longer. If you meet that rule, then you go to the others. You need to be 62 and your ex needs to be 62. You cannot have remarried and you need to wait two years or longer before you can claim, unless your ex is already claiming. So the real gatekeeper here is you had to have been married for 10 years. But if you are, and so many women don’t know this, it’s like, no, no, no, Marcia. I was married back in the seventies. You know, I was married in the eighties. It’s like, yes, but did that marriage last 10 years or longer? Oh yeah, we were married for 15 years. Okay. Then you’re eligible to at least see if you get a bigger benefit, more monthly income, by claiming on your ex. But you don’t call your ex, all right. This is not a conversation between you and that person. This is between you and the social security administration. You make a phone call, you set up an appointment with the SSA. You bring in your marriage certificate, your divorce decree, and they will look up for you and say, okay, well, so if my husband is Dan, but if we were divorced, it would be okay, Marcia, on your record, you’re eligible for $900 a month, but as an ex spouse, you can claim on Dan and get $1,500 a month.
Jean Chatzky: (19:26)
Now, explain how that works. When you claim on a spouse, you don’t get their full benefit, correct?
Marcia Mantell: (19:32)
You do not. Spousal benefits have always from the beginning, been set as you can get as much as half of your spouses or ex spouses, what they call your primary insurance amount, your calculated value. So it’s a calculation. And if, if Dan’s benefit was $3,000 a month, mine as a spouse is 1500. I can get half of Dan’s. If we’re divorced and met those four rules, I can still get half of Dan’s. If that gives me a higher benefit. What if Dan dies? Oh, poor Dan. I always kill him off when I talk to people. Yes, when Dan dies, I will be a surviving spouse. And at that point I will step into his shoes if he was getting the higher benefit. So, even if we’re divorced, if we had been married those 10 years and I have not remarried, I can step into my exes shoes and get the amount he was getting.
Jean Chatzky: (20:31)
So you would get his full benefit if you’re surviving spouse or a half benefit?
Marcia Mantell: (20:36)
No, you get his full amount that he was receiving as his monthly payment. So in my example of Dan, if he was getting $3,000 and I was getting 1500, when Dan dies, I step into his shoes and get the full 3000, my 1500 goes away. Same happens with an ex. If your ex dies before you, and you know about it, somehow you have to find out about that. But if your ex dies, you step into his shoes as well.
Jean Chatzky: (21:02)
Well, let’s hope you’re amicable enough that you would realize that somebody that you were once married to has passed away. That’s very sad to me that you might not know that. What about, is there anything that married couples need to do when they look at who should claim first and who should claim when? If we’ve both been in the workforce, how do we strategize there?
Marcia Mantell: (21:25)
That’s a tougher situation. So I look at it as a series of steps. First step, each of you get your statements out so you have real information in front of you. Second, what’s the age gap between the two of you. If you’re close in age, Dan and I are eight months apart, you know, essentially the same age so we could retire at the same time. But what if we were five years apart? Well, there are two different strategies. You have to look at that age gap if there is one between the married people, and then you look at the amounts. If there’s a big differential in insurance amounts that each of you will get, that higher earner has to be concerned with protecting the lower earner. If she’s the one who’s going to be the survivor. You want to have as much income coming into your retirement household as possible from social security. So that’s a person who might, if the discrepancy is big, let’s say, well, again, Dan’s 3000, I’m getting 1500. We want to make sure that Dan waits till 70, if it’s at all possible so that he gets the maximum amount. So first of all, we have more money when we’re living in retirement. So those retirement years where we’re together. And then if he dies first, I step into a higher benefit and it helps protect me when I’m 95.
Jean Chatzky: (22:46)
Is there anything that if we are in a same sex couple that’s different?
Marcia Mantell: (22:53)
The good news today is no, there’s nothing different anymore. I call it married is married. So now that everyone can be married and marry the person you love, you’re eligible for spousal benefits. If you do get divorced, the same sex, couple gets divorced, they’re eligible to be considered for ex-spouse benefits and surviving spouse benefits.
Jean Chatzky: (23:14)
I want to go back before we wrap this up to my younger listeners for a second. As we’re thinking about accruing social security credits, as we’re thinking about paying into the system, are there any things that we can do actively so that we know that we’ll have a decent size benefit on the backend?
Marcia Mantell: (23:33)
There are a couple of things to think about. And it may be harder to do. So the key ingredient to getting a bigger benefit is having a bigger paycheck and as many years as possible in those 35. So if you’re thinking about looking for a new job, if you’re thinking about asking for a raise, do it. Give it a try. It can’t hurt to ask the question. And be mindful that as you work and gain career experience, you should be getting more income. So look to that. Another thing, I grapple with this is the millennial moms who step off the work track. They want to stay home with their babies. I totally get it, but be mindful that you’re going to have some zeros on your statement. So just be wise to that, be aware that that’s happening
Jean Chatzky: (24:25)
Well, and I think that’s one thing if you’re staying home because you want to stay home and it’s another thing, and this is true of caregivers and in older age as well, if you are stepping out because of the argument that it’s costing you as much to pay for somebody to care for your kids or care for your parents, as you get paid yourself, these social security credits often are an afterthought or not thought of at all. And that’s real value.
Marcia Mantell: (24:53)
It’s real value. And even five years out of the workforce, no matter when it happens, you know, early on with the babies or later with caregiving, it matters and it can reduce your monthly benefit hundreds of dollars per month. And that is real money.
Jean Chatzky: (25:10)
Last question, there are these services that I have recommended in the past where you can have a calculation run for you that determines exactly the right time to claim social security, cause there are so many permutations, especially among couples. Are you a fan?
Marcia Mantell: (25:32)
I’m a partial fan. I think your first and best tool is your statement, unless you’re really doing a deep dive retirement income plan, you’re getting truly ready to step off the workforce. You know, getting ready to quit that job. You can just do a whole lot of good stuff in five minutes by reading your statement. However, if you are doing that deep dive plan, I am a fan of doing the tools. It just makes it easier. You know, unless you want to become a retirement income and social security expert.
Jean Chatzky: (26:05)
We’ve got you. So, why would we do that?
Marcia Mantell: (26:05)
Exactly. I like the tools that are out there.
Jean Chatzky: (26:09)
All right. The book is, “What’s The Deal With Social Security For Women.” Marcia Mantell, thank you so much for being with us.
Marcia Mantell: (26:17)
Oh, it was such a pleasure, Jean. Thank you.
Jean Chatzky: (26:18)
And we’ll be back with Kathryn and your mailbag.
Jean Chatzky: (26:29)
HerMoney.com’s Kathryn Tuggle has joined me in the studio. Hey there.
Kathryn Tuggle: (26:35)
Hi. How are you?
Jean Chatzky: (26:36)
My head’s spinning and from all the social security information.
Kathryn Tuggle: (26:41)
That was so much. I think my favorite takeaway is that you don’t have to call your ex.
Jean Chatzky: (26:47)
It was funny. Marcia actually helped me with one of my recent columns for AARP magazine.
Kathryn Tuggle: (26:53)
Jean Chatzky: (26:53)
Where we had this situation. A woman had been married years ago, her ex had passed away and she didn’t know that she was eligible to claim on his record. She got a lot more money than she would have gotten on her own. She was so excited. And she was relieved too, that she hadn’t been in touch with the guy in 20 years.
Kathryn Tuggle: (27:17)
Jean Chatzky: (27:17)
Kathryn Tuggle: (27:18)
My mother-in-law claims on her ex’s social security and gets so much more than she would have because she was a stay at home mom for my husband.
Jean Chatzky: (27:27)
Yeah. Yeah, exactly. It’s so interesting. I should say, if you’re looking for one of those computer programs to help you run the very best way to take social security, Maximize My Social Security is the one I like. It was developed by an economist in Boston named Larry Kotlikoff and he has written some bestsellers on social security as well. And I think it’s $49. It’s not a ton of money.
Kathryn Tuggle: (27:55)
Oh, good to know.
Jean Chatzky: (27:55)
Kathryn Tuggle: (27:56)
Jean Chatzky: (27:57)
So we’ve got letters.
Kathryn Tuggle: (27:58)
We sure do. Our first question comes to us from an anonymous listener. She writes, I love listening to your podcast and I’m new to educating myself about investing in retirement planning. We recently decided to cut back on childcare, which has enabled us to save an additional $300 per week. We annually max out my husband’s SEP, but not my 403b. I contribute about $13,000 a year to my account and receive about $5,000 per year in an annuity from my employers 4% match. I’m 43 years old. I know this $300 per week is not a ton of money, but my goal is for it to add up. Where would you recommend we stash it? The options I’ve been considering are another IRA, an investment account we have that’s filled with mutual funds, a new low-fee index fund or something else. Thanks so much.
Jean Chatzky: (28:47)
First of all, can I just argue with the fact that $300 a week is not a ton of money? $300 a week is $12,000 a year. It’s probably more. I mean, I just did some quick math in my head. It’s a lot of money.
Kathryn Tuggle: (28:58)
I had the same thought.
Jean Chatzky: (28:59)
It is and good for you, by the way, for being able to, I think it’s closer to 15,000 a year.
Kathryn Tuggle: (29:06)
It’s a huge amount of money. I think back to any point in my early career, when you couldn’t even save $300 a quarter, you know?
Jean Chatzky: (29:14)
Yeah. So good for you for being able to put aside that much money. I would actually choose option D on your list, which is something else first. I would max out that 403b. Maxing out a workplace retirement plan is very, very easy. You say you contribute 13,000 a year to your account. You’re eligible to contribute about 50% more than that. So I would do that first. I don’t know if that’ll get you any more in matching dollars, but I know it’s a very easy move. After that, I’d look at two things. I’d look at other tax advantage options that you’re eligible for. So that might be another IRA, but it also could be a health savings account if you have one, that’s not on your list. It could be a 529 if you want to save for college for those kids. Places where the money has the ability to grow tax deferred. Because it sounds like you’re putting aside a lot of money already for retirement, I feel comfortable suggesting that you might want to put some money aside for healthcare or for college. Beyond that, if you’re already doing those things, I think the investment account that you have, the new low-fee index fund sounds, they both sound fine. It’s very important as I think this writer clearly understands, to minimize investment costs and fees wherever possible, because any money that you minimize in fees is money that goes right back in your pocket. But I think you’re doing a great job. So look at your goals. If college for your kids is a goal, then I would think about putting the money there.
Kathryn Tuggle: (31:08)
Great point, and she doesn’t mention an emergency fund. So that’s a possibility.
Jean Chatzky: (31:14)
That’s actually very true. I assume that somebody who’s putting so much money away for retirement has an emergency fund. But if you don’t have one, that’s a very good place to put it as well.
Kathryn Tuggle: (31:26)
Fantastic. Our next question is also from an anonymous listener. She writes, hello ladies, thank you for all of the wonderful content I’ve learned so much in my short time as a listener. So keep it coming. My questions are all around money issues for victims and survivors of domestic abuse. How can family and friends provide specific financial support that doesn’t jeopardize the person’s safety or open up the possibility of the abuser taking the money? Financial independence is such a major part of domestic violence and is one of the biggest hurdles for survivors to overcome. I’d love some tips for how family and friends can support these brave women and men who find themselves in such unfortunate circumstances. Specifically, my family member is a long-time victim and I’m finally in a place to support her financially to some degree. I’m 24, I’m working full time and living with my family. So I’m saving a lot of money on rent. I’m especially concerned about her savings for retirement and emergencies. She has two kids in college who she’s taken out parent loans for, and two more kids on their way to college. Like so many other women she prioritizes her children over herself. She has about a hundred thousand dollars in student loans and is 43 years old. I know she contributes about 3% of her $65,000 annual salary to her 401k, but says she can’t afford any other savings and has only been saving for the last two years. Of course, I don’t know the full financial picture here, but I know that this is not nearly enough for what she needs to save for retirement. And I’m guessing she has no cash savings for emergencies. What are my options to help her financially? Should I open investment accounts and contribute to them for her? How involved should she be? What else should I be thinking about here? Thank you so much.
Jean Chatzky: (33:07)
Thank you so much for writing and thank you for stepping up to help this member of your family. I’m struck by the fact that at 24 years old, you are thinking about this. And I think that says an awful lot about you. You don’t mention whether or not this woman is still in the situation, the abusive situation. It looks reading between the lines as if she has gotten out of it and is starting to get herself back on her feet. Assuming that that’s the case, I think there are a number of different ways that you might be able to help her. You could contribute to repaying her student loans if that is something that is sitting on her head. You could open an emergency savings account or just make an automatic contribution to her emergency savings account to give her some cash to make her life a little bit easier. You could also help her by enabling her to sit down with a financial advisor who could look at her overarching situation and see if there’s any way to restructure her debts, maybe to lower her interest rates, to make the financial burden easier. I might simply start by asking her how you can help. I think you seem to be close enough to her to say, what can I do for you to make your life easier? I have money at my disposal that I can use for this. It’s not everything, but it’s something. I want to help. Please tell me what you’d be most comfortable with. And I think that’s how I would approach it. What do you think?
Kathryn Tuggle: (35:02)
I think that’s a fantastic idea because it may be that she needs time more than anything else.
Jean Chatzky: (35:10)
Kathryn Tuggle: (35:10)
Time babysitting or maybe an hour of house cleaning that you could do. I mean, the offer for money is great if money is what you want to give, but I feel like asking the question as to how you can help is just so appreciated.
Jean Chatzky: (35:26)
And I also think that getting her in front of a compassionate financial advisor, she’s taken out parent plus loans for children that she really can’t afford based on this picture.
Kathryn Tuggle: (35:40)
Jean Chatzky: (35:40)
She’s got two more kids. I would like to see her not take out parent plus loans for those next two kids, because she can’t afford those either. And the sooner she realizes, that the better off her entire situation is going to be.
Kathryn Tuggle: (35:53)
Right. I think like you said, maybe just hearing an expert say you have to put yourself first. You have to pay yourself first is what she needs. Exactly.
Jean Chatzky: (36:03)
Exactly. Please keep us posted.
Kathryn Tuggle: (36:05)
Yeah. Please let us know. Our last question is from Melinda. She writes, hi Jean and Kathryn. I’ve been a listener of HerMoney for several years now and I am incredibly appreciative of the knowledge and understanding it’s given me on my financial journey. I’m grateful for your candor and compassion, and I’m hoping you can help me make a financial decision. I’m at a rather unique juncture and find myself at a loss as to what to do. Backstory. I’m employed full time, but for the last two and a half years, I’ve been attending graduate school at night. My salary is $69,000. For the last four to five years, I’ve had a credit card balance of around $12,000. Despite my debt, I have a FICO score of 785 due to an immaculate payment history. So I’ve managed to move my balances to balance transfer credit cards for 0% interest periods, occasionally paying the standard 3 to 4% balance transfer fee. I’ve done this half a dozen times now. Despite my best efforts and attempts at better budgeting, my balance has remained the same over the years. I’ll occasionally pay off one credit card, but then slowly add the debt back on to another. It’s a painful admission. I live in the greater NYC area and my cost of living is high. And as a single woman, the financial responsibilities fall solely on me. The balance transfers just save me the interest, but I haven’t made a substantive dent in my debt. I’m wondering if now is the time to consider a personal loan rather than look for another balance transfer card and continue this process. I just have a hard time accepting a 4 to 5% interest rate when I know I’d very likely be accepted for another 0% interest card. One consideration, I graduate with my masters this May and expect that this summer I’ll be earning closer to 80 to $85,000 in my new career. Thanks for your guidance.
Jean Chatzky: (37:49)
Oh boy. So, the good news is you got more money coming your way.
Kathryn Tuggle: (37:55)
Jean Chatzky: (37:57)
No. You are not going to take out a personal loan. You’re not going to take out a personal loan at this point. It’s okay to transfer your balance again to a 0% card but what you really need now is accountability.
Kathryn Tuggle: (38:10)
Jean Chatzky: (38:10)
If you’ve been able to pay off a credit card and then you’ve just built that debt back up, it’s because you’ve allowed yourself to build that debt back up. And so we’re going to give you some accountability. We are launching a coaching program, our initial starter class will be launching right around the time that you graduate with your master’s. Kathryn’s going to get back in touch with you, and I’m going to coach you out of this. And then you’re going to come on the show and you’re going to tell everybody how the experience was.
Kathryn Tuggle: (38:45)
I love it.
Jean Chatzky: (38:46)
Because this is what this is about. The money is there. It’s just sometimes I think we all need a sounding board. Sometimes we all need someone to just hold our feet to the fire and say, you know, no, you are not going to have that second glass of wine tonight. You told yourself you only gonna have one. And so you’re only gonna have one. And sometimes if we’re on our own, we need somebody else to do that for us. And by the way, that was the example from my own life. So that’s why we’re launching a coaching program. We’ll use technology to help you see where your money is going, but it involves tracking your spending. And it involves talking to a coach who initially will be me, about where your money is going and how to make changes to make it go to the right place.
Kathryn Tuggle: (39:32)
That sounds fantastic. And I also think just looking at how much more she’s going to be earning in her new career, if you are diligent and you don’t spend the level. What is the saying?
Jean Chatzky: (39:46)
Spend to your income? Is that what you’re talking about?
Kathryn Tuggle: (39:52)
Yeah. It’s like, spend to the level of what you make.
Jean Chatzky: (39:54)
Kathryn Tuggle: (39:54)
If you don’t spend to the level of what you make, then you’ll be out of the debt in no time.
Jean Chatzky: (40:00)
Yeah. The risk is that she falls right into that lifestyle inflation trap. Right?
Kathryn Tuggle: (40:04)
Jean Chatzky: (40:05)
Exactly, You’re like, oh my God. I’ve got so much money. I’m going on vacation. Well, no, we’re not going to let you do that.
Kathryn Tuggle: (40:10)
Jean Chatzky: (40:11)
In today’s Thrive. Thank you, Kathryn, by the way.
Kathryn Tuggle: (40:14)
Jean Chatzky: (40:15)
In today’s Thrive, let’s talk about financial anxieties. If you’re late paying your bills, if you’re dealing with a spouse who’s overspending, if you constantly feel like you’re unable to make progress on your bigger financial goals, you may have a loop of negative self-talk running in the back of your mind that isn’t motivating you to make changes at all. It’s simply keeping you up at night and that is no good. Although we may not want to, facing our financial fears is the only way we can really start to feel better. There are a few things that we can do to get over our money hangups and start overcoming the emotions that sideline our financial progress. Number one, know where you stand and where you want to go. I feel like I say this all the time when we’re talking about our sponsor Fidelity. You’ve got to know where you are and what’s the goal. Put it all on paper, your current financial picture, as well as your specific goals and steps to get there. Two, put a system in place. Once you’ve figured out where your money needs to go, put your finances on autopilot, as much as possible, whether it’s making automatic monthly debt payments, or automatic transfers on each payday into an emergency fund or retirement savings accounts. This helps minimize daily decisions. Three, schedule a weekly money hour. Money like exercise is something you have to do on a regular basis. Progress doesn’t magically happen on its own. You can spend your money hour paying your bills, checking on your budget, totaling your savings, or dealing with sticking points. And four, seek help. There is no reason to struggle through this alone. The Association for Financial Counseling in Planned Education and the Financial Therapy Association have searchable directories of practitioners. Some have come from a psychology background, others from the world of financial advice, and most will provide a free initial consultation to see if it’s a good fit. Thanks so much for joining me today on HerMoney. Thank you to Marcia Mantell for sharing her expertise on all things social security, and for helping us to calm down and rest easy about the fact that the safety net in some form will be there in retirement. If you like what you hear, I hope you’ll subscribe to our show at Apple Podcasts. Leave us a review. We love hearing what you think we want to think. Our sponsor is 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. Join us next week when we’ll be back with another great HerMoney guest.