Financial Feminist - 127. Ask Tori: How Do I Retire?

Episode Date: November 30, 2023

You asked, and we answered! In this episode, host Tori Dunlap answers voicemail questions from the podcast community and Stock Market School, including questions about investing, retirement planning, and the notorious pitfalls of certain financial institutions. From navigating the emotional pull of paying off mortgages to escaping the clutches of Edward Jones, Tori addresses it all with her signature blend of financial wisdom and candid humor — tune in! Join us in Stock Market School for Investing Education and LIVE coaching from Tori: https://treasury.app/herfirst100k/investing-101-workshop FREE Stock Market Secrets Workshop: https://event.webinarjam.com/register/50/ml1zoizz Get our free debt payoff worksheet: https://herfirst100k.ac-page.com/debt-payoff-freebie Read transcripts, learn more about our guests and sponsors, and get more resources at https://herfirst100k.com/start-here-financial-feminist-podcast  Not sure where to start on your financial journey? Take our FREE money personality quiz! https://herfirst100k.com/quiz Learn more about your ad choices. Visit podcastchoices.com/adchoices

Hi, everybody. Welcome back to the show. My name is Tori. I host Financial Feminist, which is a show committed to talking about how money affects women differently, and also how you can use money as a tool of protest in this bullshit capitalist society. Feminist, which is a show committed to talking about how money affects women differently and also how you can use money as a tool of protest in this bullshit capitalist society. If you're an oldie but a goodie, welcome back. If you're new to the show, welcome. Hope you stick around for a good time and a long time. A couple housekeeping things before we get started. Y'all know the drill. If you love the show, the easiest thing you can do to support us, if you've ever gleaned just a little ounce of value from this show, is subscribing.

It's one of the most helpful things you can do to support your favorite podcasts and is literally just a click of a button. So wherever you're listening right now, hit the plus button, hit the follow button, hit the subscribe button. They're all the same thing, just called different things. So that helps us a lot and we really appreciate it. If you want to go above and beyond, share the show with friends, leave a five-star review. We so appreciate the support. All right. We are doing a fun little ask Tori today. We haven't done one of these in a while. You can submit voicemails with your questions. We are going to take questions from our voicemails that you all leave for the show, but also from our stock

market school community, which is our year-long investing education platform hosted by me, where I offer step-by-step investing guidance and support and monthly coaching and live workshops. You can get all of the deets about that down below. And then we're also going to take some questions from our just general community all about investing. If you're wondering where to go after this episode, if you listen to part of it and you're like, I want more. Well, we have a bunch of episodes on investing in the back catalog of the show that we'll link as well as an entire investing chapter in the book. We also have stock market school. So we've got a bunch of options of where to go next. All right, let's

take our first question about investing. And this is from our Facebook community. So I'm going to go ahead and read it here. All right. Can we talk about paying down our mortgages versus investing? Recovering Dave Ramsey person here. I'm buying a home after selling a home from 10 years ago. It is quadrupled in equity. My new mortgage payments will be about $450 a month. Oh my God. That sounds so nice. Sorry. $450 a month. I'm not sure where this person lives, but oh, I kind of wish I lived there. Gosh. Full disclosure, and maybe I'll talk about this on an episode. And Kristen doesn't even know this. Kristen, this is going to be news to you. I looked at a house this weekend that I was in serious talks about purchasing. And I was doing the math on how much this mortgage

was going to be. And I don't even want on how much this mortgage was going to be. And I don't even want to tell you what the monthly payment was in Seattle. Like I don't even, it was awful. And especially with interest rates as high as they are. So I just bless this person who's only paying $450 a month. Oh my God. That sounds like a dream. Okay. My new mortgage payments will be about $450 a month over 25 years, which is unbelievable. Yes, it is. Okay. My new mortgage payments will be about $450 a month over 25 years, which is unbelievable. Yes, it is. Okay. I've done the math over 25 years with my current savings, plus my new yearly savings, which is cutting out the commute and the equity built in my sold home minus the mortgage interest I would pay over 25 years. It was still a projected

difference of $300,000 versus paying off my home in five years, which would be less mortgage interest paid, but also less money in long-term investments. So in case you're wondering with all of that, basically she's asking again, do I pay down my mortgage quicker or do I invest? She says, does anyone else feel a weird emotional pull to pay off your mortgage ASAP? Even when you've crunched the numbers, I hope all of this makes sense. So many thoughts flying around in my head right now. I would absolutely love Tori to talk about this on a podcast. I'm doing it. Dear listener, dear reader, I'm doing it. Okay. So let's talk about this. This is a question we get all the time. Again, should I pay down my mortgage faster or should I invest instead? The quick and dirty answer is you should invest

instead. I have an entire free investing workshop called Stock Market Secrets that we will link down below. And this is actually one of the myths I debunk that all of your debt needs to be gone before you start investing. Now, some of your debt needs to be gone. High cost debt like credit card debt should be gone before you prioritize investing. But with something like a mortgage where your interest rate is normally three to four percent, right now it's not great, but it's normally under that seven to eight percent that we could be expecting on the stock market, it's actually more advantageous to put any additional money beyond your monthly mortgage payment towards your investing. Why? Because again, you could be making more money by investing. But also, let's say hypothetically, you do wait until

your mortgage is paid off. Well, if your mortgage is a 30-year mortgage, and let's say you do pay it off early, let's say you even cut it in half, which is an incredible accomplishment, right? Let's say that you pay off your mortgage in 15 years and then you start investing. Well, guess what? You can't get those 15 years back. And as we know from previous episodes of the show, time is way more important than the amount of money when it comes to investing. So you've just waited 15 years to start allowing compound interest to work harder for you, right? And what happens with Dave Ramsey in particular, right? And this mindset that like all debt is bad and must be gone immediately and that you got to pay off your debt as quickly as possible is that it costs you actually a more fruitful,

stable retirement. It costs you mental stability and peace of mind. This narrative and this person is mentioning that she feels this weird emotional pull to pay off your mortgage. That's not a fucking accident. That's like Dave Ramsey 101 shit, which is shaming you for having debt and making it your number one priority in your mind, as opposed to actually crunching the numbers and being realistic about how life works, right? Let's say you're lucky enough to buy a house at 25. And then again, we pay off our mortgage 15 years early. Well, now we're 40 years old before we even think about prioritizing investing. are 40 years old before we even think about prioritizing investing, that's not a great experience, right? And then let's say that we prioritize investing after our 30-year mortgage,

right? Let's say that we're not able to pay it off early. Well, then we're looking at you being 55 by the time you're saving, right? The average retirement age in this country is 57 to 65, right? In that range. So we've literally done the math. We have a graph that I show you in the Stock Market Secrets Workshop that demonstrates that the math works, the psychology works, you protecting yourself for retirement works. So yes, continue paying your monthly payments, right? We're not defaulting on our payments to do this, but with your additional money, as opposed to chipping away at your mortgage faster, it will probably mathematically make more sense for you to actually contribute towards your retirement, towards investing instead. So to this person

who's asking, should I pay down my mortgage faster or should I invest? You know the answer. And even it sounds like in this post, you know the answer, but the little like Dave Ramsey devils on your shoulder being like, nah, you got to pay off your debt first. So investing is the right move here. All right. Let's take our second question. This is from our podcast community in a voicemail from Emily. Hi, Tori. Thank you guys so much for all you're doing. I have a really possibly dumb question. What does retirement actually look like logistically when you're trying to take the money when you're at the stage of taking the money out of your IRA accounts? And are you having to sell all those stocks kind of all at once and then you get that

money? Then you get it in distributions? Are you doing it a little bit at a time? And if that is the case, what if the market is really bad at the time that you're retiring? Let's say if somebody was trying to retire like tomorrow, and the market is super low, and you have to sell all these stocks in there. So if you could provide a little bit more clarification on what the logistics look like post-retirement and how you would actually pull your money out of those funds once they've grown and sat in those accounts for a while, that would be super awesome and helpful. Thank you so much. I appreciate it with Emily's voicemail that I think we heard some wind chimes in the back

and it was very ASMR soothing. And I just, I don't know. I just really appreciated that. Okay. Emily, this is a question we get a lot. A question that we have answered in a full workshop in Stock Market School. So I'll give you the TLDR. If you are anticipating retiring soon, this is not the time to start planning for how you're actually going to use this money. What I mean is if you're 64 and expecting to retire at 65 with some money in your retirement accounts, that's not the time to start

thinking about, oh, I'm going to need this money tomorrow. We're going to backtrack a little bit. And if you can, we're going to start thinking about you needing this money five to 10 years before you actually need it. I'll give you the example of my parents. My parents are in their early 60s. And for the past couple of years, what they've been doing is slowly taking out money from their retirement accounts and from their general brokerage account, which as a reminder, is not a retirement-focused account, but is an investing account. And they've been putting it in what's called a CD ladder. What is a CD ladder? It is various CDs with various terms, like year amounts. So for instance, they might have one CD that matures, for instance,

10 years from now. And then they'll have another CD that matures eight years from now, and then five, and then four, and then two, and then one. So that they're slowly getting that money as they will need it. You are not taking all of your money out of your investing accounts for retirement at once. One, that's going to be a tax nightmare. And two, the point is you want to allow your money to continue to grow the money you don't need yet, right? So if you spend, let's say $50,000 a year, if your expenses every year are $50,000, maybe the time you're thinking about retirement, right? And those maybe five years before, you're slowly starting to pull out that money. So, you know, you might take out, if we're retiring at 65, at 58, you might take out 50K. And then when you're 59, you might take out another 50K and

then another 50K, right? You're not taking out this whole lump sum of money at one time, but you're moving it instead to places where your money is safe and at a less high of a risk, right? You mentioned in your voicemail, like, oh my God, what if I am taking out my money for retirement, but the stock market isn't performing well during that time? This is why we're slowly taking out our money in anticipation of needing it to protect it in places that aren't the stock market, hence a CD. And again, as a reminder, a CD, we've talked about this before, is a certificate of deposit. It's like a souped-up savings account. It is holding your money for a period of time. And in exchange for you not being

able to access your money, you're getting a higher percent interest rate. So that's one strategy that you can employ. My parents have done that. Again, a CD ladder and just being more strategic about when you're taking out your money and how you're using it. So the biggest thing to think about to your question is one, no, you're not taking out all of the money at one time. That again would be a nightmare in terms of managing it. But two, you want your investments to continue to grow as well as during retirement season, let's call it. You don't want to hypothetically start planning for your retirement like six months before

you're set to retire. This is something we want to think about in anticipation of retiring. And this is the perfect time, just like any time, to sit down and make sure that you are setting yourself up for success, not just right now financially, but in the future. So this is why my parents have done something like slowly siphon their money out of retirement accounts in order to protect it in lower risk or really no risk savings accounts. And the thing that they've done, because if you know a bit about retirement accounts, you might be asking yourself, well, how did they do that without paying a penalty, right? How can you start withdrawing money out of a Roth IRA, for instance, without paying a penalty? Fun fact, you can take your Roth IRA

contributions out penalty-free. So your $6,500 that you've contributed, right, year over year, and it's been different depending on the year, right? But that contribution that you've contributed, right? Year over year. And it's been different depending on the year, right? But that contribution that you've made, you can take out penalty free. So that's part of what my parents have done is take out their contributions, but not their earnings of their Roth IRA early so that they don't have to take a penalty. But it's only if you're under age 59 and a half that you have to pay a penalty for withdrawing your earnings. So if you're over that age, right, my parents are now over that age, they can start taking even more money out of their Roth IRA. That might be an option for you. This is all in the weeds, right? But if you are somebody who's trying to plan for early retirement,

you are somebody who's trying to help an older family member, or you maybe are an older listener to this show, then this is a just general piece of potential guidance. But you got to figure out what's right for you. You got to make sure that this works for you. And I'll also say, too, we have had so many conversations in stock market school about like, how do I stop working as soon as possible? And these are those kinds of strategies that are more, again, slightly more complicated because they are more strategic. They're kind of in a positive way, gaming the system that exists so that you can say fuck off to your work life forever and retire. So yeah, that is my answer to that question. You're not taking all the money out at once. You're being more strategic about it. And

if you can plan ahead, we're talking years, if not like a decade, that can be really, really helpful for you in strategizing your future retirement. All right, let's take our next question. Hi, Tori. A few months ago, I quit an incredibly toxic job that was severely impacting my mental health and my well-being. And recently, I got a new job, which has been such a welcome change in terms of work, culture, and having a kind and empathetic manager. And I even managed to negotiate my salary to get $3,000 more than the job offer. Now that I've settled in at my new job, I'm wondering what I should do with my old 403B retirement account from my former job. The account is currently managed by Vanguard. Should I leave those funds with my former employer, transfer it to a 403B account with my new employer,

transfer it to a Roth IRA or something else? I don't particularly like the idea of leaving that money with my former employer, but I want to figure out what would be most beneficial for those funds. Thanks for all your help, Tori. All right. First of all, congratulations are in order in two regards. One, you left that toxic job, baby. We got to love it. I just love that you decided I don't want to do this anymore. And then you negotiated and found yourself a better opportunity somewhere else. Double win for you of getting out of a bad situation and then putting yourself in a really good spot. So congratulations. All right. Let's talk about ruling over your 401k. You're a hundred percent right. Your impulse is a hundred percent right. We are not leaving our money with an old employer. That is like leaving money with an ex-boyfriend. I don't trust my ex-boyfriend

with my money. No, thank you. I don't know what he's going to fucking do with it. Like, no, money. No, thank you. I don't know what he's going to fucking do with it. Like, no, the reason we don't want that to happen is, I mean, many. One, we don't know what the employer is going to do with it. It's your money. Let me be clear. But they might switch 401k providers. And because you don't work there anymore, of course, you might not know that they're switching 401k providers. And then when you do go and try to find the money in a couple of years, you're like, I don't know where the fuck it is. Two, it's just, you're not going to remember your login. You're going to have to like manage a bunch of different accounts from a bunch of different past employers. And that's going to be a headache. And so we just, we do want to like consolidate.

We do want to get your money out of your old employer. And we have two options. Just like you said, we can either put it in our current retirement accounts offered by old employer. And we have two options, just like you said. We can either put it in our current retirement account offered by your employer. But if you don't have a retirement account offered by your employer, you can roll it into a Roth IRA. And that does not count for your Roth IRA contributions for that year. So again, Roth IRA contributions for this year are $6,500. If you roll a 401k into that Roth IRA or into a general IRA, you are not contributing. That's not, that doesn't count towards that $6,500 contribution. We, I will shamelessly plug, we have a partner tool that we use and recommend and love called Capitalize. They will literally

do this for you for free. So if you are the person that's listening and going, I forgot to do that, or I have been meaning to do that. And I don't remember my login and I don't even know where the 401k lives. And I've been stressed about it, but I have just not looked at it. Well, cool. Capitalized can help. We will put the link down below. Again, it's entirely free. They will help you find your 401k if you've lost it and then also help you roll it into an IRA. So Victoria, you have two basic options. Like I said before, the nice thing about rolling it over into a Roth IRA is you own the Roth IRA, right? You are the Roth IRA owner. It's not associated with any employer. So you have more control over how you invest the money, where you invest the money. So that might be your better

option. However, either option is great. Just get it out of your ex-boyfriend's house. Get it out of your ex-employer. Make sure it doesn't live there. And if you are somebody who's listening, who's been meaning to do that, Capitalize might be able to help if you, again, don't know how to do that whole process. So yeah, don't leave it with your former employer. Let's roll it over either into an IRA that we have, that we own, or into our current employer-sponsored retirement account. All right. We talked about this before, Edward Jones. They're on my hit list. This is probably going to turn into a rant about Edward Jones, but this person is asking, hey, Tori, probably, yeah, I've heard your episode,

how the fuck do i get out of this hellscape that is edward jones so let's go ahead and take a listen hi tori i have bounced around from one financial advisor that was trying to sell me whole life insurance to a new one with edward jones but recently i don't really want to be with them either. How do I switch to more of a robo-based investing or investing on my own from my current investments? Like how do I get my money out of there? How do I leave them? Or do I just leave it there and start my own thing and stop giving them my

money every month? I'd love to have direction. Oh boy. Okay. I'm taking deep breaths here because I just fucking hate Edward Jones. Sure. Let me, I'm going to go on the rant first and then I'll give you the advice. Edward Jones is bad. In case you didn't hear the previous episode where I was mad at them. They're just a not, they're just a terrible company. They take so much of your hard-earned money and fees. All of these places have fees. Don't get me wrong, right? It's how they make money. It's how they stay alive. That's fine. But Edward Jones has the most ridiculous unfair fees

at the highest percentages I think I've seen. It's so much bullshit. It's so much bullshit. And I am just going to tell you, if you are currently investing in Edward Jones, of course, this isn't your fault. Nobody told you it's okay. But get the fuck out. Look at me.

Like, get the fuck out. They are spending so much of your hard-earned money not actually growing your wealth but on making themselves money just just get the hell out of there they're not good for comparison's sake i literally in anticipation for this episode because kristin told me we had a fucking edward j. I pulled up Edward Jones's, what they call schedule of fees. This is easily Google-able. You can Google Edward Jones fees and find the same spreadsheet. They want to charge you for anything and everything.

And it's not like $2. It's like 2%, which doesn't sound like a lot, right? You're thinking 2%. That's not anything. One, no companies, other companies like charge fucking 2% for this thing or for anything. And then the thing is 2% of a million dollars, because we hope we're all fucking millionaires, is a lot of money to just keep your account open. So I just implore you so strongly that if you inherited an Edward Jones account, if you're at Edward Jones because somebody told you like, oh, this is the place to go.

Just get the fuck out. And if you Google Edward Jones scam, you can get all this information as well. I'm not the only person saying this. Any good finance expert will also tell you the same thing. Okay, let's talk about how we actually get out. Fun fact, Edward Jones, because they have to squeeze the lemon that is you right before you leave. They're like, let me get one little last drop out of this lemon. They charge you a fucking closing fee. They charge you a fee for you to close your account. closing fee. They charge you a fee for you to close your account. It's a bullshit fee, but it's worth paying so that we don't have to deal with them anymore. You will pay a $95, most likely $95

exit fee. That is that last little squeeze the lemon juice on your way out. This is a transfer of an account fee. So if you are trying to close out your account at Edward Jones and transfer it to somebody else, they're going to get you on the way out. Now, if I was in your shoes, I might tell you with any other place that you don't like, yeah, it's fine. Keep it open. Just start investing somewhere else and just leave that account for now. Because it's fucking Edward Jones, if I was you, I would pay the fee, call it a loss, and transfer my money over. You have three basic options for where you can start investing next, for where you can close your account and transfer your Roth IRA or your individual brokerage account. Your three options

are as follows. One, you can DIY your own investments. We've talked about this on previous episodes, but DIY platforms include Fidelity, Charles Schwab, Vanguard. The pro to these platforms is that they're way less in fees. All of these bullshit fees that Edward Jones charges you, any of those three companies that allow you to do it yourself are not charging you nearly as many fees and definitely not the bullshit fees. So that's the pro. The con is that just as the name suggests, DIY, you have to do it yourself. And for the average listener of this show, they don't feel confident enough to do it for themselves. And that's okay. If you've ever

logged into one of these platforms and seen all the graphs and charts and tried to figure out how to actually invest, and you've been like, holy shit, this is so confusing. And then you've hit the bail button. You've just been like, bail, bail, bail, bail. Then you know what I mean. So DIY platforms are great because they're low fee, but you have to know what you're doing. You have to feel confident enough to manage your own investments and to make investment choices for yourself have to feel confident enough to manage your own investments and to make investment choices for yourself. I feel confident enough to do that.

The average person, completely understandably, does not. So, dear listener, that is probably not the best option for you. You mentioned robo-advisors. That is the other option. That is option number two. The great thing about robo-advisors is that you hand them your money and they ask you some information, right? Your demographic information, your risk tolerance, when you're expected to retire. And then they make choices for you.

They invest for you depending on your answers. So that's a great thing is you can get in and get investing quickly, even if you have no idea what the fuck is going on. a great thing as you can get in and get investing quickly, even if you have no idea what the fuck is going on. Some platforms that are robo-advisors, this is not an exhaustive list, but Ellevest, Acorns, Wealthfront, Wealthsimple, Betterment, there's a bunch of other ones out there. But that's an example of some of the robo-advisors. So the pro is that you're investing quickly because they're investing for you. The con, as you might imagine, is they're going to take a small fee to do this. Now, it is not an Edward Jones massive fee, but it's somewhere between typically, it's under like half a percent, typically, which isn't a lot, again, especially compared to Edward Jones, but that adds up. In addition, the thing we hear from

our community a lot is that they are fishing for you rather than teaching you to fish, right? So someone might invest through an Ellevest or an Acorns or a Betterment and they get cooking, which is great because we want to get started. But what happens is after a couple of years, they'll come to me and they'll go, Tori, I don't understand what's happening though. I don't have any investing knowledge three years later than I did when I first got started. I don't know why they're choosing the things that they're choosing. I don't know what any of these terms mean still. And it's my hard-earned money that's just kind of like going into the ether and I'm crossing my

fingers that people are making good choices with it. So the pro, the rub reviser again, is that they're getting you started fast. But the con is that they're doing it for you and they're taking a fee and you're kind of left going, wait, what the fuck is going on? So call me the Hannah Montana of investing because I built you the best of both worlds. You get it? You get it? We built Stock Market School with you in mind. We literally teach you and guide you through DIYing your own investments in a safe place so that you can actually know what the hell is going on without the shame, without the jargon, and in a place where you can not only actually invest, but learn how to invest, get your questions answered, learn from me in coaching and in workshops and all of that. All of the information can be found below, including pricing,

including testimonials, FAQs. But we literally built Stock Market School with the Her First 100K community in mind, because frankly, we didn't like any of the options that were out there. You can manage your money yourself. We've talked about this before. You don't need a Wall Street Chad. And yes, this includes Edward Jones in this case to come and save you. You just need somebody to guide you and support you and give you the information that you need to make smart, educated choices. So we would love to see you in stock market school if that's of interest. But those are your options in terms of getting out of Edward Jones. Again, if I was you, I would pay, suck it up and pay that fucking $95

fee to get out and then move my money to either a DIY platform if I feel confident enough to manage my own investments, to a robo-advisor if I want to get started, or to stock market school and I would love to see you there. So those are your three basic options for actually moving that money out of Edward Jones. I will round out this by saying, again, if you are at Edward Jones, they are scamming you. They are taking your money for things and for fees that don't exist at most other companies. They're kind of just making them up and that's some bullshit. And we want your hard-earned money to actually go towards building your wealth, which is why the money's there. Thank you so much for all of your questions about investing.

As always, we have both free and paid resources around learning to invest that we will link in the show notes if you want to take your investing education further past this episode. Thank you to everybody who submitted their questions. You can always leave us a voicemail and we might feature it in another Ask Tori in the future.

We appreciate you being here. We're so excited to watch you fucking build your wealth and grow it by investing. I hope you have a great rest of your week and we'll talk to you soon. Thank you for listening to Financial Feminist, a Her First 100K podcast. Financial Feminist is hosted by me, Tori Dunlap, produced by Kristen Fields, associate producer Tamisha Grant, marketing and administration by Karina Patel, Sophia Cohen, Khalil Dumas, Elizabeth McCumber, Beth Bowen, Amanda Lefeu, Masha Bakhmutyeva, Kaylin Sprinkle, Sumaya Molokurio, and Harvey Carlson. Research by Arielle Johnson, Audio Engineering by Alyssa

Midcalf, Promotional Graphics by Mary Stratton, Photography by Sarah Wolf, and Theme Music by Jonah Cohen Sound. A huge thanks to the entire Her First 100K team and community for supporting the show. For more information about Financial Feminist, Her First 100K, our guests, and episode show notes, visit financialfeministpodcast.com.