Show 3 - Teacher Getting Married: What to Look For Financially with Barb Besal

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Student Loan Advisor at studentloanadvice.com
Note: Simply Know Money is a previous website of mine, but regardless the advisor is great!

Policy Genius

Show Transcript

Barb

I don't know what are some of the perks maybe I've always kind of looked at marriage as being somewhat of a tax break um and among other things among other great things but you know what are some of the perks and some of the pitfalls I guess of like moving forward that you know my partner and I need to sit down and talk about.

Shaun

Welcome to the teacher money show the podcast dedicated to helping Educators like yourself navigate your unique Financial challenges and unlock your financial superpowers. I'm your host Shaun Morgan a full-time teacher and entrepreneur and I'm here to help teachers navigate everything related to your money. Whether you have questions about budgeting on a teacher's salary, managing student loans, increasing your income, or making the most of your benefits I'm here to make money less confusing, more empowering and a tool you can use to focus on what matters most. So whether you're a seasoned teacher looking for fresh insights or a new educator navigating your first paycheck this podcast is your go-to resource for all things money related. So if you're ready to have a richer wallet classroom and life let's Dive In. The contents of this podcast are informational in nature and are not legal or tax advice and neither I nor my guests are engaged in the provision of legal tax or any other advice. You should not act upon this information without first seeking appropriate advice from an accountant financial planner lawyer or other professional.

Alright, Hi Barb welcome to uh the podcast I'm so excited to have you have how about you just tell us a little about yourself uh where you're teaching and so forth.

Barb

Thanks for having me Shaun uh my name is Barb Bissell I'm from Virginia Beach um until last year I was teaching chemistry in a high school setting I did that for 16 years and this past year I just finished my first year as an instructional technology specialist so sort of a technological coach for teachers when they want to plan using technology or want to help like have help co-teaching a lesson or they simply need to know what button to press on Canvas to make the thing work I'm usually one of the people that they call. I'm split between two schools this year so it's a little bit different and I'm also an 11 month employee so I saw a little bit of a change in my pay scale um as from moving from teacher to ITS so that's that's been a nice change but the trade-off is a little bit of time. So yeah that's my background.

Shaun

Awesome that's really cool I love how there's so many unique things that people can do in education besides just teaching especially if you're like well I've been doing this for a while let's try something else so that's awesome that you're transitioning to that. So what I want to start us off on is just your money story right? Really briefly okay I don't want to drag on for 30 minutes but like looking at the numbers that you you gave me you're actually doing financially quite well. So this this coaching session is not going to be about like I'm in tons of debt and I you know need to get out of it or I'm struggling to make ends meet or anything like that which well I'm sure we'll talk about at some other time in the podcasts but um you're doing financially well so how did you get here?

Barb

Well um so let's start with I'm uh well until three weeks ago I was single um I recently engaged so that's going to be a part of my story later on but I have been living a single life no kids for a long time I'm a homeowner um and I have been for about 12 years uh but for the most part once I sort of stumbled upon Financial Independence what I've really focused on is cutting back expenses and saving in the employer provided plans uh specifically my 457. So that that really felt like a game changer to me and I think I found that in 2019 maybe it was uh 2019 um when I really started to change my financial habits. Before then I mean if I could go back the time I was like living at my mom's house while I was a young teacher um you know Amazon boxes would be showing up twice a week and I I probably blew way too much money you know on goofy t-shirts or whatever it's just sort of things would fill up my room. Um becoming a homeowner and having the mortgage eat up quite a bit of my income you know changed that behavior some but that even then I felt like I had disposable income those are words that I actually used like I have oh I'm a teacher I can buy stuff from my classroom I can pay for the chemicals that I need and I don't want to go through the purchase order process because that takes too long I need them you know in two days I'll just put it on my credit card you know that was that was kind of my behavior um before I came to financial Independence once or or to find Financial Independence. Once I once I found out you know how much of my money once I really looked at how much of my money was going to things that other people would pay for if I would just take the time um I really started to change some of those habits. So yeah I think I've positioned myself pretty well by um trimming expenses where I can. I also have a side hustle I don't think there are many people in the education profession who don't have a side hustle because it just it's just not that lucrative a profession. Um so I and and I have increased probably the amount of of I've already I referee volleyball so I've probably increased um I don't know at least two fold the amount of volleyball rapping that I've done over the past five years like I've I've seen those fees um the the that I've taken in increase. Um so that's been a healthy substantial portion and that you know that just helps me be able to squirrel away more. So I think that's what's positioned me best is just cutting expenses um where I can you know the things that are frivolous um and then increasing the amount of money that I'm bringing and doing volleyball.

Shaun

Awesome thus how did you stumble on financial Independence?

Barb

A friend of mine introduced me to the Choose FI podcast we were just chatting one night at dinner and he was talking to me about credit card rewards and he turned me on to Choose FI so that's I started listening to their podcast I think in January of 2019 and I just started blazing through it and I was like oh my gosh this is like life-changing stuff um you know I would listen to it and a lot of the stuff that they would talk about especially if they were talking about taxes would be like well if you're married filing jointly you get this much of a of a tax deduction and I thought well that doesn't apply to me and so there was a lot of stuff that I would listen to and kind of go well that's that's not for me I'm not you know um not my story but I would take from it what I could um and so now my story is changing I just mentioned I got engaged about three weeks ago so um that's kind of why I'm here is what does my life look like moving forward because I've only done the planning for a single person uh and largely not ignored but not paid as much attention to the the advice for a family and so I'm kind of wondering what comes next or or what are the things that I haven't thought about yet.

Shaun

Awesome awesome so uh I want to get into to that specifically here in a second but I just want to you know give uh people an overview of kind of where you're at. Um and since you're doing well I'm not going to dive into the deep numbers but you do track your spending right which I that's the number one thing right if you're going to uh try and be within a budget you need to have you know you're spending trash so congratulations on that. Uh no debt right other than a mortgage which these days are leaving comes as debt although the interest rates going up that's a little bit more of a concern but uh did you have a lower interest rate do you have a one of the more current interest rates?

Barb

Yeah I refinanced in 20 2019 or 2020 um when interest rates went down so my interest rate on my mortgage is two and a half percent and I cut from four and a quarter so I'm feeling pretty good about that and I refined to a 15-year loan yeah yeah so hopefully I'll still have it paid off before I'm done working.

Shaun

That is amazing all right and then uh Investments so you've got a 457 taxable broker Roth IRA HSA you're contributing to all those it looks like you are maxing out your 457 is that correct?

Barb

Yes

Shaun

That is no easy feat. I remember my first my first real teaching job um was you know the first day they sit us down in like our you know new teacher training in the HR person comes out and it's like okay and you can contribute up to this amount to your 403b and every teacher at my table said yeah right that's not happening. I just did a mentality of like there's no way we could contribute twenty thousand dollars to you know uh you know 457 or 403b but your living proof it's possible if you put your mind to it so uh that's just I think that's fantastic. And then um just to get an idea because it's actually going to apply a lot to our conversation uh in the pension system in Virginia because every state is different uh it looks like there's uh two tiers and then there's a hybrid system uh are you on the first tier or are you did you elect to switch over to hybrid?

Barb

I'm on the first tier so the formula is something like um 1.7 times the number of years that I serve which 30 is the minimum um and then times my average final compensation which is basically the highest cumulative 36 months so I expect that'll be whatever my last three years is. Um so yeah it's a it's a fair pension I mean if I figure if I work 30 Years it'll give me roughly 50 of my you know income um and there's no yeah there's no it's not hybrid so there's no like investment portion that's what the folks today are working with.

Shaun

Yeah so you've got the um the just the straight what they're going to give you which you know good job being being getting into teaching before they started lowering the age it's just one of those things like if you could get in earlier you get it um but yeah that's gonna be a huge deal of course for your uh your long-term Financial picture so that that's awesome. Okay so before I dive into the stuff that I'm thinking about talking about do you have any burning questions you want to talk about?

Barb

Um well there's there's so bringing in a partner and a kid actually to the scenario um I know that um she has some student loans she is in um public service and she's tried PSLF and that hasn't gone through and now all this stuff with um loans not being forgiven I mean she felt filed for loan forgiveness through Biden's plan and then of course that got struck down so um I know that you know although her loans aren't mine that's still debt for our family um and I didn't put that on my sheet that I sent to you um but so thinking about you know filing taxes in the future whether it's best to file single or married filing jointly because of what status that puts her loans in you know I mean there's there's little things like that but I think in general it's just kind of like what and my my um partner and I we we talk about finances that's that's fine um but just kind of what are I don't know what are some of the perks maybe? I would always kind of looked at marriages being somewhat of a tax break um and among other things among other great things but you know what are some of the perks and some of the pitfalls I guess of like moving forward that you know my partner and I need to sit down and talk about?

Shaun

Right so that's a a great question so I guess starting with the the tax tax implications of getting married right? Uh you know the government likes married finally and jointly it's their favorite hacks um declaration I guess is what it is called. Um they tend to give higher uh income limits on those things for you know tax brackets and so forth so uh automatically you're gonna be able to have more income because you're sharing it with somebody else right at the same tax rate basically which you know is huge because you get to keep more of your money in general um and then you know children are a tax break as well which is my favorite thing I I always wanted to get like a little onesie for my babies that said tax break but I never did so you know I'm having that um is fantastic. However the only situation that I've ever heard of marriage finally separately being a good idea was in a student loan situation so I of course I don't know the full situation there um and because I am not a student no I'm not a uh a student loan financial advisor there's like a very specific uh thing and I have a friend who does it so I can send you a link to to get free consultation uh with him and then you can of course do more stuff and then feel like um but he can talk to you specifically about that and um the the implications of you coming together on your taxes for the uh Public Service Loan Forgiveness and the the interest rates you can get and like I'm assuming it's a income driven repayment plan.

Barb

I honestly don't know I don't know which payment plan she's on.

Shaun

Okay so if it's an income driven repayment plan that could be a part of the issue right so if you are on income driven repayment plan and you have you know fifty thousand dollars and then you suddenly jump up to $150,000 in income you suddenly have to pay more on that income driven payment plan and that's all based on what you declare on your taxes which if you're married finally jointly you file jointly right if you're separately you're declaring you know that certain amount your taxes so that'd be one thing to talk about and of course depends on how large the loan is and so forth but uh that would definitely be something to talk to uh to people that specialize in student loans that's like the only thing that they do so I'll send you a link to talk to that guys so that way he can help you out.

Barb

Sure

Shaun

And I'll definitely uh talk to him see if he wants to come on here and talk about that sometimes just so everyone can your basic advice around that okay so uh student loans. You have any questions about the student loan situation?

Shaun

Uh no no I I need to gather a lot more information I think before I can clarify questions.

Barb

There is your partner uh currently renting um she's just moved in with me so no that she was renting and now she's saving Seventeen hundred dollars a month by moving in with me so yeah.

Shaun

So there's no like mortgage for another home or another home to to deal with it's all one so that that's that's huge okay so this is a topic that most people don't like to talk about but when you are getting married it's a good idea to discuss the prenuptials now when people say that they go how dare you think we're going to get divorced well statistically but other than statistically it's a good idea for this one reason alone if you like each other right now which I'm assuming you do because you know you're getting married you're going to make calm rational nice decisions with what should happen should you choose to separate but when you're divorcing you don't like each other and then you make mean irrational decisions about what you should do so it's just the the easiest way to get you know a nice calm happy you know quick and done uh situation so I just recommend looking into that uh they're very relatively inexpensive I mean like it's a lawyer that you have to deal with so it's not going to be cheap but it's relatively inexpensive to to get one of those drawn up basically just however you'd like to discuss that you just discuss and say hey we want this in here so I'd recommend that if uh if you haven't considered it already have you thought about anything like that yet?

Barb

No we haven't uh we haven't gone down that road yet but that's a really good idea and it's a good way to describe it or to sell it I guess um.

Shaun

The best way to frame it is to keep everything happy.

Barb

I think um through my through my work I can sign up for legal resources like during open enrollment and do basically 200 maybe 250 in a year to to secure a lawyer to do things like that so I got a will drawn up last year which I'm gonna have to redo now um so I'll probably this October I'll sign up for those legal resources again and um and and work on some of that those those two things a will and some um prenuptials so yeah that's a good idea.

Shaun

That is an awesome perk I have not heard of that perk before every school has different perks that's a really cool one.

Barb

Mm-hmm yeah it was really helpful it's nice to not have to worry about you know it just comes out of my paycheck and I don't have to worry about striking a check to a lawyer for you know however many hours they decide to bill me for.

Shaun

Yeah that's awesome so how about incoming expenses have you guys talked about whether or not you're going to combine uh all that or keep it separate or what do you think?

Barb

In there we are planning on keeping separate accounts um and basically at the beginning of the month she'll probably just you know we'll she'll she'll send me money for her half of mortgage utilities things like that um when it comes to Shared expenses be it you know um going out to eat or you know paying for something the kid wants to do or whatever it's um we we just we're both pretty even about you know saying hey I'll take care of this one you know I but we haven't really set up a specific formula or you know a schedule or anything like that for those kind of uh joint expenses but we are we are planning on keeping separate accounts I've already kind of done a basic spreadsheet of my you know simple Finance uh expenses and so she's planning on just kind of sending me a check at the beginning of each month and letting me handle the the bills.

Shaun

Okay yeah anyway that that makes a lot of sense I mean it's really whatever works for uh different people you know there's pros and cons to every option um something that you you said like you have these joint expenses and you have these separate expenses and all that have you considered having a like your separate accounts without having a joint account that you both contribute a certain amount to each month so that way you can be like okay this is the account that you know we have our joint credit card and our joint account that we can you know we're just going to use the joint account to pay the joint credit card that we use to pay for joint expenses like that that way instead of having anything flow through you it's like a a central location for both of you?

Barb

We have talked about that and we may actually land on that um it was something that I I brought up you know not putting everything in a joint account but like you said having a you know maintaining a a joint account aside from our separate accounts and I I do like that idea um and I like the idea of being able to have let's say a joint credit card or something like that with multiple authorized users especially if we're going to try and work on like credit card um travel Awards and things like that that's nice to have two authorized you know Spenders so um yeah I I do like that idea and I'll probably we'll we'll revisit that together.

Shaun

Yeah awesome awesome so you got your expenses figured out you got them separated nicely or your split uh combined income those are you know of course important things to figure out when you're combining now you did ask a question about insurance but did you have a specific question about insurance or you just want to talk about what to consider when you're getting married?

Barb

So I know that um well let me say what I think I know and you can correct me if I'm wrong um because we're both employed separately by different employers um I think are we required to be on our own employers insurance or is one of us allowed to say I'll forgo my insurance. Her insurance is better than mine it's just it just covers more stuff mine is cheaper but it doesn't cover as much um so am I allowed to say no thanks to my employer's insurance and go on her policy or because I'm employed do I have to have insurance under my employer I guess is my first question.

Shaun

You know that that is a great question and I'm I have to say it's an HR question because that's kind of like a across-the-board law type of a thing it's a policy of a district uh as far as I'm aware a lot of districts like to have the employee on their plan because it gives them you know the purchasing power right because with the insurance company the more people you have on the plan the better rates they get because you can like spread out the risk over more people um that's how they work I'm currently on a plan that's got like 12 people on it so if my rate is terrible um yeah that's just how it goes uh but you know sometimes that they will let you out of it it just depends on the district so um it you know it depends on how often you go to the you know get medical services as well right if you're not going to use it very often then it's going to save you money in the long run to just stay on the individual while she stays on you know her just you know employee and child uh insurance or if you're like you know I'm actually going to use this and I really want these benefits a lot more than you can consider you know going over there if the HR allows it. yeah and if you think that it's good enough over there and you're not paying very much over here then you might want to just also be on her insurance because there's no law against over insurance if that makes sense yeah be on the other one even if you're on this one but you'd then be double paying.

Barb

Right somebody I somebody had told me that it was a part of the Affordable Care Act I think that if you were employed you had to be on your employer's insurance but I that didn't sound right to me so all right I can I can look it up through HR.

Shaun

The Affordable Care Act has been changed and twisted and gutted and ignored yeah pretty much across the board so it's really it's anyone's guess without talking and you know it's unfortunate that some HR departments have talked to them you're going to get three different answers if you ask two different people so uh you just need to do the best you can and I don't know you might have a great HR department and they can tell you really quick so just I would talk to them about that.

Barb

So the other side of the insurance question is life insurance which is something that I've never needed before because I've never had dependents um not to say I haven't been sold life insurance because I have been in K-12 education and I definitely was sold the whole Term Policy and about 18 months later I really figured out how bad I regretted it and I cashed it in for like $43 or something you know after paying them a few thousand so um not gonna buy whole life insurance I know that um but if you have any recommendations or thoughts on I guess term policies maybe maybe vendors or how to shop it or things like that um because I'm not sure if she has Insurance um like you know life insurance um but I think it's probably a good idea if you know we have a little one so.

Shaun

So the question is.. so you have the little one that's your dependent that's what you're worried about correct?

Barb

yes

Shaun

And I guess the worry then is that if either one of you goes you want to make sure that the other one's taken care of even though they're working right yeah how old is the the child?

Barb

Seven

Shaun

Seven okay so you have 11 years until that's not really a concern I mean you'd be nice for if you passed away for your part to have a nice chunk of change regardless but life insurance is really about making sure that the dependents are taken care of because if you're if your partner can work then it's not as big of a deal if that makes sense right so the way I think about it is you know just who are you trying to protect having life insurance when you have no one to protect it's kind of a waste having life insurance and if someone to protect makes sense so since you're worried about the uh you know you the the your child um yeah that makes sense to have a life insurance and definitely like a term uh policy would do that. Um it depends on how long you want to have it at that point though because you can get you know 10-year terms and 30 year terms and 20-year terms and all that stuff and if you're wanting to protect your partner just in case you pass away you know for the next 30 Years then you can do that um or if you're just worried about you know your child probably a 10-year policy would be fine because they'd be nearly graduated by the time the 10 years is up at that point anyway. So you can just play with that uh as you're thinking about it because a 10-year policy since you're less likely to die in the next 10 years is going to be cheaper than a 30-year policy now that being said you know most people who are under the age of 50 or 40 are going to be able to get term life insurance for 20 bucks a month or something like that it's this relatively inexpensive because you're not very likely to die in that term. And honestly the way to get it is to get one of these aggregate life insurance companies online and they'll just quote you a whole bunch of people and you choose the one you want right there's uh and I'm not sponsored by anybody so there's like quotacy or policy genius both of those will do that for you just fine I mean you can even go to a life insurance person you really want to uh there are people that sell life insurance in your hometown but they're probably going to try and push whole life insurance on you so that's why I like just the online version because you're like I want term life insurance I want it for this long give me some quotes and they'll just pop it up and it'll be like eleven dollars, fourteen dollars, twenty seven dollars you're like no not twenty seven dollars and it's just really simple.

Barb

That sounds perfect

Shaun

And I'll I'll uh let me write this down I'll send you a link for uh yeah I use policy genius just because someone recommended it to me and you know I just was too lazy to look anywhere else so I'll send you that uh so you can look at it.

Barb

Sure that one keeps popping up on the podcast ads that I of all the podcasts I listen to so that one's in my brain.

Shaun

Alright awesome all right so we've got uh Insurance health insurance life insurance things to consider um and then you also mentioned long-term care insurance.

Barb

Yes that is another another thing um it's a topic I don't know a lot about I know it is something that has been I think it's been growing in popularity um at least a lot of the teachers who are my contemporaries but are you know maybe 10 15 years further along in their career than I am have talked about you know long-term care insurance or I'm not sure if that's their end of Life Care basically you know it's um I don't I don't know if I don't know how much research has been done on it is it you know isn't is it worth it or is it uh I think for for my partner and me that's also gonna that's gonna be a much deeper conversation about what we want our end of life to look like but I want to know what options there are to be able to have that conversation with all the facts.

Shaun

Yeah so there are two options as far as I'm aware when you're considering long-term care. So this is long-term care is I'm going to go into a home of some kind and have to pay exorbitant amounts of money for someone to wipe me and feed me. That's basically what it comes down to is is what long-term care is and uh long-term care insurance assumes that you're gonna go in and live there for probably 10 or 15 years and 10 or 15 years in one of these places is super expensive so they're going to basically say okay you're going to move in at this day is our estimate it's going to cost us this much over the 10 to 15 years so we're going to try and recoup all that cost over the next you know 20 30 years. So it's not cheap. Long-term care insurance is very very expensive. I mean if you start when you're 20 I guess it's relatively inexpensive um so you can do that which I guess it's easy because you're always going to do it because you're getting charged and you can't really not when you're getting charged you're going to pay it. The other option would be to self-insure where if you like I'm worried about this I want to make sure I'm doing this you say I would have paid this much for insurance I can create a long-term care uh fund for myself you can put it into you know certain types of bonds or anything like that if you just want to keep it safe and you know growing itty bitty or you can just say okay I'm assuming that my investments are going to grow over the long term so I'm going to have you know a certain portion of my investments dedicated to long-term care and just you know put extra into your Investments for it to grow over time for long-term care. Um and then the third option in my mind as a teacher especially and you know because I'm assuming that you're a partner as a public servant also has a pension of some kind is that correct?

Barb

She won't have a pension no she's um yeah no her job doesn't have a pension she does have a 401k and they have a pretty healthy match but it's not a pension job.

Shaun

Fair enough um so just speaking as an individual teacher with a pension that's one of the best options because it's basically long-term care right there because you're getting paid without having to do anything else over that time so if you set aside your pension and assume I'm investing South for my own retirement that pension is gravy that's going to set you up just fine for long-term care probably even for you and your partner because you're gonna have a healthy pension your Max you're maxing out your 457b all right unless you're planning on going out there and spending you know hundreds of thousand dollars a year when you retire I don't imagine that long-term care is going to be something that's going to you know cripple you as long as you keep you know putting that money in for your retirement as long as your uh partner keeps you know getting the match putting some more in to make sure that their retirement's there and then having that pension to fall back on. Um that's how I would think about it so I guess those are your I guess three options one is just straight up Insurance. Two is I want to make sure I have something set aside directly for this because I'm worried about it. And the third one is you know I'm investing for the future I have this pension to fall back on will probably be okay because when we get there our money will have grown so much that it won't be an issue. So you just have to you know weigh those options am I worried enough that I want the safety of insurance? Because insurance is just like a nice little safety blanket to put on you. Or am I you know risky enough that I'm willing to invest in just you know hope that I I can cover it? Or am I not worried about it really is that I'll just handle it when I get there because I'm investing and making the right choices as I go.

Barb

The third option definitely sounds the most appealing to me I like the flexibility and not having uh a payment to pay every month which is exactly what long-term care insurance would be. Um so I I It's My Hope right it's my hope that I'm doing all the things that I need to do today to secure you know a comfortable existence at the end um for my partner and me so um I just for now I guess I'll just stay the course and until they you know raise the federal limits on my 457 or increase the amount I can put into my HSA or whatever I'll just you know keep doing that.

Shaun

And you know just two side Notes. One um you have the best insurance against long-term carers to the healthy lifestyle right? Because usually if you end up in long-term care it's because of you know bad habits that people have had have led to the degeneration of their their body you know people that are in long term care for a short time generally are at the end of their life as opposed to people that are in long-term care for a longer time have had their body degenerate slowly and then they're being like limped along for for a while or you have some disease that but still long-term care such as uh acute Dimension or something like that so I mean if you're worried about it because like for example in my family we have Alzheimer's in my family um so it's a good idea for me to think about long-term care because without any like bad habits on my side I can just need long-term care because I have Alzheimer's.

Barb

Yeah

Shaun

If you don't have any history of those kinds of things a healthy lifestyle is going to help you avoid long-term care in general so that's something else to consider and then another thing since we're talking about the benefits of getting married your contribution to your HSA goes up about doubles.

Barb

Now is that true even if my partner is not on my insurance if I'm if I'm on my own insurance and she's on her own does my HSA contribution still double?

Shaun

As far as I am aware you just have to have a family because then if you are spending it on people um in your family that it counts I would you know of course this is one of those things where you double check make sure that you know the rules are within that but having a family should because it's just like do you have a family because it's part of your tax filing not like your insurance rules is like I'm filing this family therefore I can contribute this much to my HSA that's my understanding of it so double check on that um as with anything right anything that I'd say double check on it but it's just trying to give you things to think about like you know you might be able to increase your HSA contributions and speaking of the HSA um I'm assuming that you are investing your HSA?

Barb

Yes yes there's a minimum like threshold of two thousand dollars I think that just kind of gets put into the savings part and then everything past that I'm investing.

Shaun

Yeah okay awesome awesome so if someone doesn't know that you're able to invest your HSA and if your HSA tells you you can look into a different HSA because you can't and all of that growth is tax-free that's tax free money going in tax free growth tax-free coming out when you retire or if used for medical expenses it's a beautiful beautiful thing okay let's see we've talked about taxes insurance um and then I think the last question you had asked about was uh getting a will or what to do about that do you have any specific questions around that?

Barb

No um I I currently have a will um but I made that will before I entered into my current relationship so um the things that are in that will go to the family but I'd like to start redirecting some of those things. You know there were a lot of things that I could skip I think it was just sort of a forum to fill out like I said is done through legal resources so you just kind of fill out the form and they sort of do their thing and you know punch it through their will creating program and it doesn't take them a whole lot of time I don't think um but I I don't know if there's I I don't know a ton about you know probate or things where yeah it's where you have to specifically designate you know who your beneficiaries are I know I need to go back into all of my investment accounts and redo who my beneficiaries are um that's not done through my will but um for other things like um you know are there are there certain benefits that my spouse will get um that I that I I that I don't need to necessarily declare in the will I'm not sure there's just a lot I don't know about you know how the end of life process works with with a marriage you know it's easy enough when you're single you just say who you want everything to go to but it seems like there's some lots of little caveats where you know this the spouse can can have this you know but it's not necessarily something that's spelled out in the will so whatever whatever advice you have there I don't have specific questions it's just kind of a lot of gray gray area.

Shaun

Well um my first piece of advice is that probate is a headache. It's an absolute nightmare. So um for me the this is just my preference I would do anything I could to avoid probate which means not having a will having a trust instead. Now that you've heard about the using trusts and basically a replacement of a will?

Barb

Yeah actually my mom has a trust um and I met with her and my sister and her financial advisor and so he was talking us through uh her trust and then we also have a partnership as well like a family limited partnership so there's a lot going on there that I'm still trying to wrap my head around but yes I've heard of those terms.

Shaun

Okay so having a trust allows you to basically say all of this stuff is owned by my trust my investment accounts are owned by my trust my home is owned by my trust and so forth and then instead of having to go through and divvy out all these things you can basically say this person and this person are beneficiaries in my trust and then you just add stuff to your trust instead of having to change up your will or move things around and the best part about it is that having the trust it just says oh because this person is a beneficiary of the trust just like that you're like your investment accounts have a beneficiary it just goes directly to them instead of worrying about this or that it just says oh you're dead it belongs to them now. No probate. It's it's just I mean you have to go through probate everyone goes through probate but they basically say oh that's some trust next so anything that you don't have in this wrestle have to figure out but it's it makes the moving uh moving uh assets and things from you know the deceased to the beneficiaries much faster uh and it's not that much more expensive than getting a will um if you don't want to put the money into a trust right now I mean because it is probably one to two grand depending on hold your touch if you want it done right which I recommend right. You you could just make another will because I mean once again the likelihood of you passing away right now or it's quite low which is why they'll give you great rates on your life insurance um but yeah just updating beneficiaries for all of your financial accounts and then just making sure that your will states who your beneficiaries are would be another you know easy way to just Band-Aid it until you're wondering more about what to do trustwise. Now uh you asked about um how spouses are handled and it seems to be then it's state to state so this is a difficult question because it depends on the state but most States seem to say your spouse basically is you until they die. It's almost like okay it's you guys for sharing the house you're sharing your income and expenses you're sharing your Investments so when you're dead you're not really dead because your other half is still alive and then when when they pass away then it kind of dissolves into what your your will says more or less. Um I think you still have to go through probate and all that stuff but it's but it's not the same as when both uh Partners have have passed away if that makes sense. So that's something to consider but you know dogging your eyes crossing your teeth making sure um they're on your Will so that way it's not like oh I actually meant for everything to go to my partner but my will says it goes to my Uncle Tim so.... whoops.

Barb

Right

Shaun

So just realizing that it tends to favor spouses but making sure it's all legally covered that way is the way to go.

Barb

Okay that sounds like I have a lot of boxes to check here coming up.

Shaun

A lot of a lot of the boxes to check getting married is a lot more than just we're married now yeah. Alright well do you have any uh other questions?

Barb

I mean we've gone through a lot of things on on this discussion so but if you have anything else we can um I guess one one other question that's not related to um you know my marital status at the beginning of this year I had a I had a bit of a rethink on my 457 and for the past two or three years I've been maxing it out pre-tax um and of course that's nice it lowered my taxable income um lovely at the beginning of this year I sort of stopped and think about it and and um I thought I guess the rethink that I had was you know I will have a I will have income when I retire it'll be my pension even before Social Security kicks in I know that for some things um when it comes to Social Security and maybe it's more Medicare it's like there are some things where it's good to look like you have a little income you know it's there are some places where that can benefit you or at least that's not what I've heard and so I'll always have some amount of income coming to me.

Shaun

Right

Barb

And I I decided to in March I switched over to a Roth uh contributions to my 457 and so raw 457 and of course that's going to change my tax situation in this year and that's fine I can plan for that I kind of wanted to get your two cents on whether that's a smart move or not or or is there I mean you know as long as I'm saving I'm saving I think that's great but um I just wanted to even even whether it's I do you know one year pre-tax one year Roth one year pre-tax one year Roth and just kind of go back and forth I like the idea of flexibility um in retirement and I didn't want to have to take all of my money and pay taxes on it you know um since I was already going to have some income so do you have any specific thoughts on on that about what kind of contributions would be best um in your working years since I plan to have a pension in retirement?

Shaun

Alright that's a fantastic question so uh the 457 has one amazing benefit over a 403 or a 401k and that is uh when you separate service from your employer you can pull out those funds without a penalty. Which as a teacher teachers tend to retire before the 65 or 60 whatever the random retirement and a half number is uh I can't remember off my head right so there's usually a gap there and there's less a bit of pension but like if you have money in retirement savings as well you can't necessarily access that so you have to like maybe work a second job to bridge the gap so the 457 kind of handles that problem because you're able to start drawing on that money right away. The 457 Roth version is slightly different so that's something to consider while if you contribute to the 457 regular traditional any of that money that you have you can start drawing from for a Roth you can only withdraw your contributions without having to be penalized because it's acting just like a Roth IRA would where you can withdraw contributions but not the gains without having the penalty or the tax implication of it. Does that make sense?

Barb

Yes and I didn't know that um so is that does that at 59 and a half then am I able to start withdrawing the um the gains?

Shaun

Yes so 59 and a half all retirement accounts just become the uh I I was thinking 69 and a half that's not right 59 thank you at 59 and a half you know all the all the gains everything comes you know fair game there's no more penalties and all that uh but for the uh 457 it's just the the traditional is the one that anything is fair game after you leave that employer right and it's only the stuff you've contributed at that employer and you know it gets all messy from there if you change jobs a lot but anything that you've contributed to you know whatever school you're at right now and the gains when you leave of the traditional as soon as you leave you can start drawing that money if you'd like but if it's Roth contributions you can only withdraw the uh money that you contributed and not the gains until you retire.

Barb

Okay

Shaun

Ontil you have 59 and a half so that's something to consider in the balance I still generally like Roth options just because Roth is um my money now instead of later how much do you trust the government holding on to your money for you know a long time who knows right and and then um you know you can uh plan on having a higher income later because I'm optimistic I'm assuming I'm going to make more money later in my life and therefore you know if I pay taxes now I won't have to pay more taxes later I plan on being making more money in retirement than I do now because I want to um so you know those are reasons why I like the Roth option even though it doesn't have those benefits because once again you could still take out the contributions If You country if you contributed you know 20,000 a year for 20 years that you know you could have forty thousand a year for ten years on just contributions right so that's something to consider if that's what you want to do it depends on when you're going to retire and if you want to be able to withdraw the full amount plus the uh the growth or just the contributions.

Barb

Gotcha that that helps I didn't know that detail thank you

Shaun

I I one of the things I signed up for the Roth and then my financial guys like well you know that this doesn't do that when you get there awesome like what it's just little the little rules that that get you here and there so um something to consider.

Barb

Thank you

Shaun

Alright well if you have any more questions I'd really appreciated this is so much fun talking to you Barb and you know I think we'll follow up with you again at some point and see how you're doing.

Barb

Thank you so much for having me Shaun. I appreciate your Insight.

Shaun

Thank you for coming on.

Do you like to come on the podcast for coaching to share an expert opinion or just to talk about a topic you think is relevant I'd love to talk to you just fill out the form at teachermoneyshow.com/Guest I look forward to talking with you.