Seven in 10 Americans — 70% of us — are planning on redecorating our homes this year, according to a recent survey by mattress company Puffy. In other words, the vast majority of us are looking to make changes to our interior design and decor as we head into Summer 2021… And although this is a big number, it’s also a completely unsurprising number, I think, for anyone who has lived through the pandemic… Because one big thing that’s happened as we’ve all spent more time indoors is that we’ve also spent more time picking apart the little things about our homes that, well, “could be better.”
Because there is always something that we could improve — and this last year many of us have seen the need for a bigger outdoor deck, or perhaps an open concept living room where we find ourselves spending most of our time. We’ve also seen a need to redecorate our homes for improved office spaces, with millions of us working from home… And the truth is, our needs for improvement to these living spaces aren’t going anywhere… Many of us have learned to love cooking from home — or at least learned to love the money we save when we do — and more of us will be working remotely post-COVID than ever before. According to a recent survey by Staples, 76% of workers would prefer to work from home at least one day per week post-COVID, up from 31% pre-COVID.
So when we started thinking about all the many ways in which our spaces may need a facelift this year, we knew we needed to consult an expert. We could think of no one better than Tiffany Brooks. You may know her best as the host and designer of HGTV’s “Smart Home” and host of season two of “Rock The Block.” She’s also the founder and CEO of Tiffany Brooks Interiors, and was named one of the top 20 most famous interior designers working today by Architectural Digest.
Listen in as Tiffany tells us how she got her start when she started her firm more than a decade ago, and how she balances running her own business, working at HGTV, and being a mom to a teenager.
She also shares what she’s seen trend-wise over the last year-plus as more Americans began spending more time at home, working from home, and needing to spend more time outdoors… You may be surprised to hear what she says is just a “COVID trend” and what may be here to stay for when you’re redecorating your home in the future.
Tiffany addresses what she thinks are the biggest challenges right now for homeowners looking to redecorate their homes, and what her favorite design touches are to incorporate into a space. She also walks Jean room-by-room through a home and talks about the most impactful changes that people can make, particularly if they’re on a budget and there’s a limited amount they can spend per room — or a limited amount for the entire project.
We take a deep dive into home offices, and talk about why they’re so important to a home these days, with most of the world now working from home. She shares her top design tips for people looking to revamp their WFH spaces when they’re redecorating their homes.
“Just to be able to have a designated space for what you do is key,” Tiffany says. “Mentally and emotionally, being able to separate it and walk away from it. Working in an office space it is nice because you can easily recognize that work is at work and home is at home, and it serves as your barrier, your boundary… But when we’re at home, we have to create those boundaries, and create those limits.”
In Mailbag, we tackle questions on the best vehicles for retirement investing, how best to set up a trust or secure account for two girls who just lost their mother, and how best to invest stimulus money of $5,600 for your children. In Thrive, Jean tackles how to forgive yourself for your financial mistakes and move on.
About The Sweepstakes:
To enter the Staples Connect #RemoteOfficeRedo sweepstakes, simply post a picture on Instagram or Twitter showing your home office in need of an upgrade and tag @StaplesStores using #RemoteOfficeRedo and #Sweepstakes for a chance to win. One grand prize winner will win a 1:1 virtual consultation with HGTV host and interior designer Tiffany Brooks and a complete office makeover valued at up to $10K, and an additional 20 lucky winners will receive $1,000 to Staples stores to makeover their home office space. For official rules, visit StaplesConnect.com/RemoteOfficeRedo. Shop Tiffany’s curated looks and all the essentials for upgrading your home office space at your local Staples store, or via Instacart at StaplesConnect.com.
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
Tiffany Brooks: (00:01)
Just to be able to have a designated space for what you do is key, mentally and emotionally. Being able to separate it and walk away from it. Because working in an office space, it is nice, because you easily recognize that work is for work and home is at home. And it serves as your barrier, your boundary. But when we’re at home, we have to create those boundries and we have to create those limits.
Jean Chatzky: (00:26)
HerMoney is proudly sponsored by Fidelity Investments. We can all use a little help reaching our financial goals, especially during uncertain times. That’s where investment advice from Fidelity comes in. They’re there to help you make smarter, more informed decisions. Visit Fidelity.com/HerMoney to learn more.
Jean Chatzky: (00:48)
Hey everyone, I’m Jean Chatzky. Thank you so much for joining me today on HerMoney. So here’s a statistic for you. Seven in 10 Americans, 70% of us, are planning to redecorate our homes this year, according to some recent research. In other words, the vast majority of us are looking to make changes to our interior design and decor as we head into summer 2021. And although this is a big number, I got to say, I do not find it surprising. I think for anyone who has lived through the pandemic, because the one thing that’s happened as we’ve spent all this time indoors, is that we’ve spent more time picking apart the little things about our homes that could be better. Because, let’s face it, there’s always something that we could improve. And this last year, many of us have seen the need for a bigger outdoor deck, or maybe closing off some of that open concept space. We’ve also seen the need for improved office spaces, with millions of us working from home. And the truth is, many of us are not going anywhere. According to a recent survey by Staples, 76% of workers would prefer to work from home at least one day a week after COVID. That’s up from 31% before COVID. And so when we started thinking about all the ways in which our spaces may need a facelift, we knew we had to get to the expert. And I could think of no one better than Tiffany Brooks. You know her as the host and designer of HGTV’s smart Home. You’ve seen her on Rock the Block. She’s also the founder and CEO of Tiffany Brooks Interiors and was named one of the 20 most famous interior designers working today by Architectural Digest. Today she’s joining me from her home in Chicago. Hey, Tiffany. Welcome.
Tiffany Brooks: (02:49)
Hey. How are you doing?
Jean Chatzky: (02:51)
I am good. So you have been doing this a while. You started your firm, I know, about a decade ago. Can you tell us a little bit about how you got your start?
Tiffany Brooks: (03:02)
Oh my gosh. My start was very, very odd. I actually lost a bet. One of my coworkers bet me that the model was good enough to win the best two bedroom model in Chicago. And the bet basically was, if the model home won than I would pursue interior design full time. And lo and behold, I got the model together. It was nominated. It was entered into the contest. And it turned out that I won and I had to basically pay up on my bet. So I stopped my corporate comfortable job. And I started a design firm in 2008, which was the middle of a recession.
Jean Chatzky: (03:52)
Tiffany Brooks: (03:53)
Yes. If you guys remember. So yeah, right around 2007, 2008, I launched my design career and I haven’t looked back once.
Jean Chatzky: (04:03)
That is amazing. You have a lot of different hats that you wear. How do you balance running the business, working on the HGTV shows, and being mom to a teenager?
Tiffany Brooks: (04:13)
Oh my gosh. I think that my biggest thing is that I’m not afraid to ask for help. I have a wonderful staff that help and I hate to call them my staff. I have a wonderful team that I work with that help me throughout the day to day. They keep me straight. They keep me informed. They let me know what’s coming up. And my son is, I’m blessed. He’s a kid, but he’s very self-sufficient. And I hate to say it. Sometimes he keeps mom in check. You know, I feel like that. He’s very grounded. He’s my little Virgo. So he’s an earth sign and so he’s very grounded and he seems to simplify ways to do things so eloquently. But I definitely have the support and calendars and time management is definitely key in my world.
Jean Chatzky: (05:04)
So what I love most about your style is that it’s accessible. You know, I feel like when it’s one of your spaces, I feel comfortable. Tell me what you’ve seen trend-wise as Americans have been spending more time at home this year. What are they asking you for?
Tiffany Brooks: (05:23)
Well, you hit it basically on the head. People want livable spaces. I’m not saying that gone are the days or the high designed spaces that you know are only gracing the magazine covers. We’re seeing more and more real homes with real storage, real kept clutter, I should say. People aren’t asking anymore for a $2,000 chair. They want an Ottoman that can hide their remotes and things like that when company comes over. They want durable fabrics on their sofa because they have a five-year-old who loves peanut butter and jelly. People want function now. They want function and they want form. But they don’t want it to look too precious or too fussy. You know, I feel like the pretension in design is slowly more and more stepping away. So hopefully it’s not just a trend. It’s something that we’re stepping into. And to be a more and more accessible and more and more reachable luxury, I should like to say. Accessible luxury.
Jean Chatzky: (06:37)
I totally agree with you about the clutter. There is something about being in your home all day long. That clutter just makes it harder to think. It’s harder to get anything done when you could at any moment drop your work and clean up.
Tiffany Brooks: (06:53)
Exactly. Oh my God. And that is one of the things. People like their stuff and they like their stuff accessible, but they want it to be kept. They want it not to be clutter. They want everything to have a place and a place for everything. And you know, we’re finding that home offices are definitely on the rise for spaces that people are asking to be made over. Because, like you said, seven out of 10 people, working from home, that’s a big number. And it’s 70% of the country basically. So why not want to have your spaces look and feel presentable so you can take on your day, so you can have a better and more productive workspace balance.
Jean Chatzky: (07:41)
I’m going to come back to the home office in just a second, because I do want to talk about, room by room, what are the important elements where you splurge, where you save. But are there any trends that are happening right now in home design where you’re thinking, oh, that’s just COVID and that’s going to go away.
Tiffany Brooks: (08:01)
Hmm. Wow. I think that right now that everyone that is actually redesigning their spaces, I think that that might be going away very soon. Because it is so huge the impact that COVID is having right now. I think that there is going to be some sort of settling in the remodeling world. Because right now you can barely get appliances. And I just heard today that a very, very well-known paint manufacturer is totally out of their semi-gloss paints. So that is very, very telling. Everybody is at home and everybody is rethinking their spaces. And with us going into spring time, especially in the northern and the midwestern states, we’re now reaching for the exterior spaces to be done too, not just the home offices in the kitchens. But the whole house, like you said, room by room. So I’m thinking that the whole renovation craze within itself is going to be something that we see slow down post COVID.
Jean Chatzky: (09:04)
Okay. So my heart just stopped Tiffany, because as my listeners know, I’m renovating. And this has been a two year slog because it got stopped and started so many times during COVID. But we just finished drywall. We are getting there with the paint. Please tell me that it was not Farrow & Ball or Benjamin Moore, because those are the paints I’m using.
Tiffany Brooks: (09:29)
It was not. It was not Farrow & Ball or Benjamin Moore. I love it.
Jean Chatzky: (09:38)
Okay. All right. I can’t handle another delay. I think my head might explode.
Tiffany Brooks: (09:42)
I want to prepare you. There will be delays. And I want to prepare all of your listeners for this. There will be delays. And that’s just the way of the world. The supply was not ready for the demand of all of us to be at home, looking at our spaces and wanting a remodel. And we just weren’t ready. Nobody could have anticipated this. But like you said, everybody, 70% of us are at home and renovating.
Jean Chatzky: (10:11)
Absolutely. All right. We are going to go room by room. But before I do that, let me just take a breath and remind everyone that HerMoney is proudly sponsored by Fidelity Investments. Whether you are looking for guidance to help you through the uncertain market, working on your long-term financial plans or diving into a renovation, 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. And while I’m talking about our sponsor, I do want to let you know that we are collaborating on a new series of articles, all about the challenges that moms are facing this year when it comes to our money. The pandemic has really dealt a body blow to mothers everywhere who have had to step out of the workforce or had to fit it all in and are feeling like our finances are a little more chaotic than perhaps we’d like. And so just in time for Mother’s Day, we’ve got a series of articles coming out, a special podcast on the topic. And if you’d like to get these articles delivered straight to your mailbox, go to HerMoney.com. We’ve got a banner at the top of the page. Just tell us that you want to receive them and we will be happy to send them your way.
Jean Chatzky: (11:48)
And we’re back with Tiffany Brooks, host of HGTV’s Smart Home, on how we can, the most of every room we’ve got. All right. So when we are talking room by room, what are the most impactful, budget friendly, freshen ups that you can do? And where do you find that people make improvements that actually add value to their space? You teed up the home office. So let’s start with the office.
Tiffany Brooks: (12:16)
So in the home office, the most impactful thing that you can do, overall, is going to be your surroundings with your wall colors and your ceiling colors. That’s in every single room. But specifically in the office, I would definitely investigate your lighting selections and your furniture selections too. Because you definitely have to be comfortable while you’re working and in your office space. Make sure that your desk has enough storage for what you do during your day. Make sure that you have a chair that definitely is comfortable to you, that has the back support that you need. And then you also need your organizational tools as well. You need your desk organizers, you need things that you would function. And then, like we had hit upon, storage is key, especially in a home office space. Because your home office is where you’re going to have all of your personal records, not just what you do for your profession and your career. But I envision that it will have your home records, your car servicing details, your tax records. Make sure you have a place to store that. And also make sure that that place that you have it stored is smart and it might have a lock to it. So there are a ton of things that you can do in your office, but I find that the lighting would definitely add value. A huge impact that’s budget friendly would be a paint in there. And then definitely getting organized and streamlining your workspace.
Jean Chatzky: (13:52)
How important is it that the office is a separate space in terms of functionality and productivity?
Tiffany Brooks: (13:58)
I would say it kind of depends on what you’re doing. If you are listening to voiceovers or you’re doing something that depends on quiet or you’re relying upon zoom calls all day, you might need a little a room, if not a separate private corner. Because not everybody can afford to have a whole space or a whole room dedicated to an office. But if you have a wall or a corner somewhere separate, that this is your dedicated office space and this is where you know that your workday will start and where your work day ends, it’s healthier. It’s mentally healthy, and then it helps you keep on track and on task a little bit better throughout your day. So privacy is important. However, having a separate room, I would say you can definitely work around that.
Jean Chatzky: (14:49)
I’ve been watching as, you know, a lot of HGTV, but also surfing a lot on Houzz. And I really love the fact that people have created home offices out of closets or out of armoires. So you can close the doors at the end of the day and take a breath, even if you’re working from home.
Tiffany Brooks: (15:10)
Most definitely. And that kind of feeds into the idea where you just having a separate wall, just to be able to have a designated space for what you do, is key mentally and emotionally, being able to separate it and walk away from it. Because working in an office space, it is nice because you easily recognize that work is for work and home is at home and it serves as your barrier, your boundary. But when we’re at home, we have to create those boundaries and we have to create those limits.
Jean Chatzky: (15:42)
Yeah, absolutely. All right. Kitchens and baths, what is worth paying for these days? What are the must haves? And these are the places I think where people’s budgets go nuts. So how do we keep ourselves in line?
Tiffany Brooks: (15:56)
First of all, you have to decipher, which are your bigger ticket items. For example, are your bigger ticket items the cabinetry. Usually is. Can you then go into a painted situation to where your cabinets are good, but it’s just a different color that you want to have. And that’s a way for you to definitely save some money. Is it a simple thing to where you’re just redoing your lighting scheme in there? Instead of having an Island, can you have a really, really cool piece of vintage furniture? You know, that that might be a savings depending on your style. Floating shelves versus cabinetry is also a thing that you can do in your kitchens to save a little bit of money.
Jean Chatzky: (16:42)
And in the bathroom, do we need a tub anymore or is a shower sufficient?
Tiffany Brooks: (16:47)
Shower is definitely sufficient, but in homes, I would say for resale value, at least one tub. You know, I typically think about all types of families when I’m designing a home and consulting on a home floor plan. Moms still like the idea of having bath time with the kids and things like that. And just as long as the house has at least one tub in it, I would say, you’re doing fine.
Jean Chatzky: (17:15)
What about bedrooms and master bedrooms or primary suites as we’re calling them these days, in particular? I keep hearing the advice that you should get the television out of there. That this needs to be almost a place for you to just decompress and relax and get away. Do you agree?
Tiffany Brooks: (17:36)
I do agree. I haven’t necessarily gotten rid of the television altogether, because we still have those sick days where we do want to lay in bed and just watch Netflix all day. But what I have started doing is finding creative ways to hide the television in the owner’s suite or the main bedroom as we’re calling it now, the main bedroom. So hiding them can be putting the TV behind a beautiful armoire cabinet. Maybe it is something where it’s hidden in that workspace area if you are dealing with a smaller space. You have that armoire and you have a TV mounted behind it. And then you have a desk area. In a larger space maybe it’s something to where you can actually mount a TV called the frame on the wall. And it basically is a piece of art. It renders art when your TV is not in use. So that way you have the best of both worlds. You have a large scale piece of art on your wall, but when you want it to function as a TV in your bedroom, you can swap it just with the click of a button.
Jean Chatzky: (18:44)
Yeah, absolutely. That sounds like a great solution. You’ve got a new show called $50,000 Three Ways or $50K Three Ways premiering at the end of the month. I like the whole philosophy of this show because it’s budget based. And when so many people, myself included, embark on a home improvement project, sometimes that budget just goes out the window. This doesn’t allow for that. So tell me a little bit about the show and how you reign the budget in and decide where is the smartest place to spend the money?
Tiffany Brooks: (19:20)
So the premise of the show is that homeowners come to me and they have a minimum of $50,000 to spend on a home project, whether it be your kitchen or your main bedroom and bathroom. Whether it be us doing a section in your basement or your exteriors. So I go to homeowners and they have a multitude of projects and I show them three different ways to invest their $50K. So I will come up with a plan for that main bedroom and bathroom. I’ll come up with another plan for that kitchen. And then I’ll come up with a third plan for their exterior’s. And by the end of the first portion of the show, the homeowners pick which design plan they’re going to go with, and then they have me get started.
Jean Chatzky: (20:11)
Where do you think the best investments in a home are?
Tiffany Brooks: (20:15)
Depending on the state of the home, I would say your money is best spent in your kitchens, your bathrooms. And if you have a lower level, finishing out your basement. Those are where you’re going to get the best for resale. However, if you are in a position to where you’re not worried about resale, I suggest that you really, really dig into what you want out of your house. Like for example, I really, really want a conservatory in my home. With everything that happened this past year, I am so interested in having a place to just being able to zone out from the zoom calls, from the chaos and from everything that has been happening. Just basically a peace garden. So it resale is not something that’s definitely important to you, I suggest that you explore something that will not only bring value to your home, but also bring value to your well-being at home.
Jean Chatzky: (21:14)
Such an important point, because I think what people forget when it comes to putting money, particularly into a home that you’re going to be in for quite some time, is that renovations are cyclical, right? 15 years down the road, you’re going to have to look at it again.
Tiffany Brooks: (21:30)
Exactly. Exactly. They are and they do. And you want to try to beat that curve. Try to create something timeless and something that you love versus something that is a huge trend right now.
Jean Chatzky: (21:44)
Well, I could talk to you all day. But I know that we don’t have that luxury today. You are such a pleasure. I love watching you, as I said. Can you just tell us all a little bit more about where we can find you?
Tiffany Brooks: (21:56)
Of course you can. So you guys can find me on Instagram, Tiffany Brooks Interiors, and then also, I have teamed up with staplesconnect.com for the Remote Office Redo. And so what we’re doing is, we’re finding one lucky winner that is going to get a $10,000 Staples Connect renovation. And they’re going to get up to $10,000 worth of Staples products. And they’re also going to get a consultation with myself. So I’m going to help them spend that money. And all they have to do is upload a picture #remoteofficeredo, and then post that on Instagram, Twitter, and upload a picture of their home office. I want to see them. So all entries are being accepted up until 5/4, May 4th. And then you guys can go and visit staplesconnect.com/remoteofficeredo, to get like official rules and everything like that. So Staples is going to have me busy out here, redesigning someone’s remote office. So I’m excited about that. So I am switching my brain all the way over into home offices because I got to help whoever wins this create the home office of your dreams. Oh, and also too, with that, an additional 20 winners will also get to win a thousand dollars to spend at Staples to upgrade their workspace or whatever they need. So yeah.
Jean Chatzky: (23:28)
Hopefully some of our listeners will be among those winners.
Tiffany Brooks: (23:31)
I know I’m hoping. So yeah, they could just visit the Staples Connect website to submit their photos and everything. So here’s to one of your listeners being that winner. I would love, love, love to help one of them out with their remote offices. This is going to be so cool.
Jean Chatzky: (23:48)
Thank you so much for visiting with me today. I appreciate it.
Tiffany Brooks: (23:51)
No problem at all. I had fun.
Jean Chatzky: (23:53)
Oh good. And we’ll be right back with Kathryn and your mailbag. HerMoney’s Kathryn Tuggle joins me now. Hey Kathryn.
Kathryn Tuggle: (24:08)
Hey Jean. I have to say I’m feeling like I have to redecorate my house now.
Jean Chatzky: (24:15)
I’m kind of feeling like I need to get to the end of this project. I mean, literally, when she said that about the semi-gloss paint, my heart just jumped up to my throat because that’s all I need is one more delay.
Kathryn Tuggle: (24:27)
Jean Chatzky: (24:27)
And I know that so many people are feeling exactly the same way that I am. But I do think home offices are a very interesting space to talk about right now. Not just because so many of us are spending more time at home, and so we need a designated workspace, but also because the rules have changed on the home office deduction. You can’t really, well a) you can’t deduct your home office if you’re an employee, but b) you can’t take it unless you itemize. And so I think it makes it a little easier to just say, okay, I’m going to use this space that is a nursery during the day to be a home office at night or vice versa. You know, it gives you a little bit more flexibility.
Kathryn Tuggle: (25:12)
Right. Yeah. That’s a good point. And I think in New York as well, there are so many little nooks that people use over the years as a dining alcove and a nursery and an office and a place for a day bed, depending on the need. And I think that so many homes have one of those rooms that just becomes like a catch all room. So it’s interesting to think about what to do with those spaces.
Jean Chatzky: (25:36)
Yeah. We have one of those spaces in my new apartment. And during the time that we’ve been renovating, it was, on our various sets of blueprints, it was a meditation room. It was a bedroom. It was too small to be a bedroom. It was never going to be a bedroom, but it wasn’t briefly a bedroom. Now it’s a bonus room. But really what it is is a space for Elliott’s desk and my Peloton, right? And not that those things go together, but they’re going to go together because we needed a space to put them.
Kathryn Tuggle: (26:11)
Right. Right. Whatever you want to go in the bonus room is what goes in the bonus room.
Jean Chatzky: (26:16)
Exactly. Exactly. Okay. So I should have asked Tiffany about strategies for my bonus room, but I think I’ve got a plan. Put some shelves in there. Put my Peloton in there. And close the door. That’s my space. That’s my plan for the bonus room. Close the door.
Kathryn Tuggle: (26:32)
Jean Chatzky: (26:33)
She was lovely. And I know that we’ve been talking a lot about renovation in the past couple of weeks. I just, these days I can’t get enough of it. And I suspect that our listeners are like me.
Kathryn Tuggle: (26:44)
Oh yeah. Well the stats. Every time I read the news, the majority of Americans are doing something to fix up their spaces right now. Because we’ve just all been staring at the same walls for so long, we’re looking for ways to improve.
Jean Chatzky: (26:59)
A hundred percent. All right. Let’s dig into some of our mailbag questions.
Kathryn Tuggle: (27:04)
Yeah. Our first question comes to us from Lindsay. She writes hi, Jean and Kathryn, I love your podcast — especially the mailbag segment. I have a question. I’m 39 years old with a six-year-old son. I got divorced about four years ago which wiped out my retirement savings as I had to buy my ex-husband out of our home. Financially, it has been a tough few years. However, I’m finally turning a corner where my salary is starting to exceed my expenses and I’m feeling good about the future. I’m lucky to be in my dream job, which includes enrollment in a public employee pension system. I anticipate staying with this employer or at another employer within the same retirement system until retirement, at which point my pension payment and social security should exceed my retirement needs. I also plan to have my home paid off by retirement. My question is going forward, what is the best vehicle for additional retirement investing? My employer offers a 457 plan, but no match. And I exceed the income eligibility for a Roth. Does it make more sense to reduce my tax burden by investing in the 457 or just invest in a regular brokerage account since it’s unrestricted and I can use the money at any age for any purpose. Thank you for your podcast. It has helped me tremendously.
Jean Chatzky: (28:22)
Thank you so much for writing Lindsay, and I’m really glad to hear that you have turned the corner. It also sounds like you’ve really got your planning under control. I mean, the fact that you know, that you’ll have enough from your pension and social security at retirement to exceed your retirement needs says to me that you’ve actually run the numbers on this, which is fantastic. I’m so glad to hear it. So I’m all for saving taxes and the 457 plan, yes, will allow you to do that. But I also think you may want to consider putting some of the money into an IRA, a non-deductible IRA, with the idea of converting to a Roth. You exceed the income for a Roth, but nobody exceeds the income for a Roth conversion. So that would involve leaving some money on the sidelines to pay any taxes on the Roth conversion. But it’ll allow you to have something that you don’t have right now, which is a pool of income at retirement that you will be able to draw from tax-free. I think having buckets of money, both taxable and Roth, or non-taxable at retirement is advantageous for a whole lot of reasons. I also think though, that you are at a point where sitting down with a financial advisor to plan this out and take a look at the benefits of putting money into a Roth pool, and how that plays out over the next few decades to come, looks for you. The other advantage of Roth funds is that you can use that money to pay for education. And so you haven’t said anything here about your six-year-old and what the plans are for college, but that could enable you to have some flexibility there as well. I’m not saying that I think that you need a financial advisor that you see four times a year, or that you need one to manage your assets. I just think sitting down with somebody to make a longer term plan is something that a) you have the money to do right now, and b) would be a really positive step for your long-term future. Does that make sense, Kathryn?
Kathryn Tuggle: (30:52)
Yeah, I feel like she may be thinking that because the employer doesn’t offer a match, it’s not worth it for her to invest. But I still think it is.
Jean Chatzky: (31:02)
Well, I’m not saying that it’s not worth it for her to invest. I’m just saying that because, the pension assets will be taxable at retirement. The social security assets will be taxable at retirement. She clearly was thinking about a Roth because she wrote that she exceeds the income eligibility for it. And so when you’ve got a 457 or any retirement plan without a match, is it worth investing? Sure. It’s worth investing because it’s easy. You get a tax benefit for doing so. The money will come out of your paycheck. It’s set it and forget it. You know how much we like that. But there is a benefit to having money on what you’ve already paid the taxes, if you can afford to do that now. And I believe that for a couple of reasons. I believe it because typically our incomes go up over the course of our careers and therefore our tax rates go up. But I also think taxes are just going up in the future. That it is very likely that we will be taxed at higher rates several decades from now than we are right now. And for that reason, having money in a Roth is beneficial.
Kathryn Tuggle: (32:15)
Yeah, that’s such a good point. I think we all get lured into a false sense of security when taxes get set for a few years. And it’s very easy to think this is how it’s going to be, but that’s not necessarily the case.
Jean Chatzky: (32:28)
It’s also, when you look at your retirement stash and I just went through this exercise with my financial advisor and with Elliott. When we look at our retirement stash and we chart out how much the assets will grow in the future, and then you look at what you’re withdrawing and you look at the tax bite on that money even at today’s rates, it’s substantial. It is just amazing how much taxes will take out of that. And so knowing that there is a pool of money on which you’ve already paid the taxes, on which you never again have to pay the taxes is like a sigh of relief. And so I want her to explore that as well.
Kathryn Tuggle: (33:10)
Absolutely. Thanks Jean. Our next question comes to us from an anonymous listener. She writes, hi Jean and Kathryn. I’m a longtime listener who looks forward to your weekly podcast. You give me one more reason to love Wednesdays aside from it being hump day. We have a friend who passed away suddenly last week. She lived in a small apartment with her two girls, ages nine and 13, and their father. Our friend was not married to her girls’ father, and she was always the breadwinner. The father set up a Go Fund Me to help with funeral costs, even though my friends family assured him they were covering all costs. We have no idea where that money will go. Several concerned friends in our group have made a collaborative effort to raise money for the girls, and some have voiced concern about all the money ending up going to the father. We have zero faith that he would use it to benefit the girls in any way. So far, we’ve collected almost $10,000 and counting, and more people are donating every day. My question is, how do we gift this money to the girls? Some suggested giving them this money every month toward their school expenses or even creating a trust fund. In a perfect world, we would not want their father to know that this money even exists. Is that even possible? What should we do? Thank you so much.
Jean Chatzky: (34:29)
Wow. This is such a sad letter. I’m really sorry for your loss. And your friend was very lucky to have people like you in her corner, who are thinking of her girls and their welfare. To answer your last question first, I don’t know if you can do this in a way where the father doesn’t know that the money exists. You definitely should talk to a lawyer about this. It should be an estate planning attorney because putting the money in trust may be the way to go. It does seem like there are grandparents in the picture that you trust. You said that your friend’s family assured the father that they were covering all costs of the funeral. So if you do set up some sort of a trust, you may want to do it in such a way that those grandparents are the trustees and that they can be in charge of doling out the money. I don’t know what sort of relationship they have with the father, but that may be possible. You may also want to consider setting up some sort of college savings accounts for the girls that they wouldn’t access until down the road. But again, I think this is well worth spending a couple hundred dollars of the money that you’ve raised on a lawyer, or maybe you even have a lawyer in the group, who can advise you on this. Money in the names of children gets tricky. And so I want to make sure that you do it in a way that is buttoned up and that serves your purpose. And unfortunately, I don’t have a lot of grease, so I don’t want to set you off on the wrong track.
Kathryn Tuggle: (36:06)
Yeah. I mean, my first thought reading, this was the 529s, but I also understand that what she’s saying is the girls may need access to that money before college. So that’s a tricky one.
Jean Chatzky: (36:18)
And money can be paid directly to schools, right? We know that money can be paid directly to schools and other institutions. And so there may be a way to funnel the money right there, and to alleviate some burden on the family by doing it that way. 529 accounts may be a possibility, but I’m with you. I think it sounds like the need may be more pressing than six years from now.
Kathryn Tuggle: (36:45)
Agreed. Thank you, Jean. Our last question comes to us from Paula from Iowa. She writes, hi Jean. I love listening to the podcast. I’ve learned so much and I look forward to it every week. I’m a stay-at-home mom of three small children, all under the age of four. My husband and I recently received stimulus money of $5,600 and we want to invest it somehow. My husband maxes his 401k match through work. We max out our Roth contributions. We have mutual funds and stocks and we both have term life insurance. We save 17% of our income. We have 529s for each of our girls. I’ve heard of friends opening a Roth IRA for their children, and that if we put in about $2,000 now, it could be close to 1 million by the time they reach retirement. I’ve also heard of investing in mutual funds and the children’s names. I know there are other options as well and each have their pros and cons. I’m wondering, is it worth opening some sort of account for the girls with $2,000 each? Or is it better for us to invest that money and grow it as best we can so that we can gift it to them later, such as a down payment on a first house? Thank you so much for all you do.
Jean Chatzky: (37:56)
So this is a lovely question. Thanks so much for asking Paula. And let me just dig into a couple of the specifics here. The Roth IRA for the children won’t work. You can’t open a Roth IRA for somebody who has no income. And I’m guessing that your three small children under the age of four have no income. So take that off the table. You could put the money in a uniform gift to minors account, and that would enable the taxation on that money as it grows to be at a preferable rate. The assets of children are taxed lower than the assets of their parents, at least until they get to a certain level. And so that may absolutely be the way to go. Or you could just simplify. I don’t mind the idea of you just opening an account, a brokerage account, a separate brokerage account. One that you know this is the money for your children and just investing it on their behalf and gifting it to them later on. I think that would be a fine way to go. The estate tax laws, at least as they are right now, allow adults to gift up to about $13 million each, either during life or at death, without coming into contact with any sort of estate taxation. That’s on a federal level. And there is some talk that that may change. That the Biden administration would like to see that brought back down to three and a half million, which is where it was during a prior administration. But it’s still a substantial amount, certainly enough to allow you to gift your children enough for the down payment on a house without any sort of taxation getting in the way. The last thing that I want to raise is this idea that we talked about in last question of 529 college savings accounts. You haven’t mentioned them, but this is the time where, if you want to put money away for college for your kids, it can be hugely beneficial. You invest the money, it grows tax-free. When you pull it out, you don’t pay any taxes on it. And in Iowa, the 529 college savings plan actually does offer an annual tax break for contributions, so you would get a tax deduction on your state return. So I would probably put that at the very, very top of my list, unless you have other plans for paying for college. And if you do then pick from one of the other choices. But I do think it’s a lovely notion and am looking forward to hearing what you decide.
Kathryn Tuggle: (40:46)
Whenever I see letters from parents like this, I just think what an amazing gift. What amazing foresight to be thinking ahead and how incredible that would be, as a child, to be handed that money for grad school or a down payment on a home. There’s really no greater gift than that gift of security.
Jean Chatzky: (41:04)
A hundred percent and everything we read about the financial pressures on the generations that are coming up now — the millennials who got hit with the recession, Gen Z who got hit with the pandemic. Any sort of a helping hand that we can give them I think is such a wonderful thing to be able to do. Not everybody can do it, but if you can, I think it’s fantastic.
Kathryn Tuggle: (41:27)
Absolutely. Thank you so much, Jean, for your guidance today.
Jean Chatzky: (41:32)
Oh, thanks Kathryn. Thanks for teeing up the interview with Tiffany and for being here as always. In today’s thrive, how to forgive yourself for your financial mistakes and move on. We’ve got so much on our plates, now more than ever before, due to increased pandemic responsibilities that we’ve all taken up over the last year. We’ve got jobs and careers and partners and families, and those are all important questions about what to make for dinner every single night. It is no wonder that understanding and processing our relationship with money isn’t always a priority. In fact, some days it’s probably not even on our radar. But the truth is our internal financial dialogue and confidence around our money matters, touch every facet of our lives. So when you make a not-so-great decision around your money, you make experience some guilt since you know that that decision isn’t just impacting you today. It’s possibly going to impact your future as well. But here’s the thing, even though we may feel regret, we may feel guilt. Sometimes we feel a lot of it. When we make a mistake, we can move on from it and get to a better place emotionally. At hermoney.com this week, we’ve got to look at how we can keep on trucking after a financial setback, and get to a place where we’re actually excited to check our balances, pay our bills, invest, even budget. So how do you do that? First examine what you’ve learned. To let go of past mistakes, you need to process what you’ve been through, and to congratulate yourself on what you’ve taken in. Now that you’re on the other side of the mistake, you are ready to make better choices. Take time to write down the lessons that have transformed your perspective. Change entails being self-aware enough to recognize to take responsibility for and then modify your unhealthy thoughts or feelings that have led you down the wrong path. Next, discover your triggers. If you’re struggling with letting go of a financial mistake, it may be because you worry about history repeating itself. Much like we have emotional triggers based on past experiences, we have financial ones that may tempt us down a similar path, like overspending or failing to budget. Figure out what your triggers are. Maybe loneliness or boredom leads to online shopping. Maybe excitement causes you to fall prey to get rich quick schemes or investments that are too tempting. Sadness might cause you to avoid paying bills. Examine how your emotions are impacting your judgment. And from here, you can identify new coping strategies to deal with them. We hope you’ll check out the rest of the list at hermoney.com. And remember the bottom line. You’ll have better financial days ahead as long as you choose to let in happiness and success. You got this.
Jean Chatzky: (44:44)
Thank you so much for joining me today on HerMoney. Thanks to Tiffany Brooks for joining us today to show us all how we can make the most of every room we’ve got, even when we’re on a budget. 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 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. Thank you so much for joining us and we’ll talk soon.