Welcome to How to Money. I'm Joel and I am Matt. Today we're going to answer some of your listener questions.
You know what, buddy, And by the ways, there might be some newer listeners out there who are thinking, how do I get my voice memo played on the How to Money podcast?
All you gotta do is record.
That thing on your phone and email it to us at how to Money pod at gmail dot com.
Send Matt one hundred bucks via Venmo. It does help to question a little bit. Now, I'm just kidding. And if, by the way, whatever question you have, send it over. Like if it's a question you've been batting around in your brain, chances or somebody else has that question, you might think, Yep, this is a stupid question. Nobody else is thinking the same thing. But that's just not true. You would be wrong.
And plus it just add so much color. We love hearing where everybody's from, what they've got going on in their life. It adds a lot of detail and color to the different financial topics that we talk about day in and day out. But we're gonna hear from a listener who is looking to manage some of his car at maintenance costs how to do that most effectively. Another listener is looking for some clarity on her WROTH and
her traditional IRA accounts. Specifically, she's asking about contributional limits. And we've got someone else who's looking to mitigate some risk when it comes to house hacking. We'll get to that as well as additional personal finance topics during our episode today.
Buddy most deeph All right, well, let's start off looking forward to it. One interesting personal finance topic that I wanted to cover, Matt after seeing it in the hod of Money Facebook group. Listener Devin made a post and you and I we haven't done a frugal achievement a while, and so I was like, oh, this is a good frugal chief, Matt, and I should bat this one around,
he asked. And if you're not a if you haven't signed up for the how of Money Facebook group, please go join if you're on Facebook, because it's occasionally there's silly things like this in there, but most of the time it's people helping each other out. And this was an hon question I think from Devon truly saying should I save money in this way? And tell you what he asked you, I call this serious as well.
Yeah, you should say sometimes the questions are more technical, whereas this one is.
It's a little more lifestyle based. That's right, that's right. So his question was essentially, winshow wipers taking them off my car? Is that frugal or cheap? And he was basically saying, what if I take them off when I know it's not gonna rain, Because even just the sun beating down on them is wearing at these windshield wipers, And so guess what if I leave them in the garage or maybe maybe even in the house and heated and cooled, Matthews, windshield wipers are gonna last a whole
lot longer. I don't know what's your take on Devon's fruguler.
Cheap question, So I think, okay, I'm pretty sure that you're gonna I know which direction you're gonna go in, and so I'm gonna start start out by saying that I think the knee jerk reaction is that this is I think most people hear in this are like, man, that is so cheap.
Basically everybody in the Facebook group said please don't do that.
But I think the reason that a lot of folks would say that is because this is just an unorthodox way to save money. And you know what, Joel, we don't discriminate. We do not hate when it comes to how does that people spend their money. That is the craft beer equivalent. We always ask our guests, hey, what's one way that is a total waste of money in fact, but for you, you find a whole lot of joy
in spending your money this way. And so by that same token, I feel I can't go down the path of hating on someone's practice of how it is that they save money because for that person it just might be I don't know, it's just one thing, and for different unique individuals out there, they might really enjoy how it is that they're able to save a buck. What I'm saying, I totally know what you're saying, Yeah, and
I agree. I think for a minute there, maybe I've talked to Smack about plasma donation and I feel bad about that now because we have listeners who do that. They make extra money donating plasma, and I did it in college, and so it was just like, I think I've gotten past a point where I'm willing to do that. That doesn't mean that other people can't do it successful.
If not talk trash about donating plasma on the show. I feel like I did. I don't know, maybe like a year ago or something really and then we had a listener.
We had a listener even write in or maybe maybe it was an email, and that's how he would pay for vacations. Yeah, it's specifically like trips to Disney. They travel a ton and for him, it's how he's sort of mentally accounted for it.
He siloed the money that he makes via donating plasma and that's awesome vacation. And I think, but I think I cheapened that a little bit because I was just like, ah, I wouldn't do that. Different strikes for different folks, but these different structure for different folks. I guess this one makes me worried about the listeners safety at time. Like let's say there is some sort of pop up thunderstorm.
We live in Atlanta. Those happen all the time. What if you accidentally pop on your Wins show wipers and they're not there, you have to sit, You're wasting time. I guess the savings are so potentially small. I just don't know that it makes sense to focus on this one to take the wind show wipers on and off, like depending on how whether checking your phone and stuff like that. What's so what they're going to be like
today tomorrow? And I get the downside possibilities for forgetting your win show wipers are far more severe than the potential cost savings that you're gonna accrue.
Yeah, you can always keep him in your car that way. If it does start to rain, you just hop out pop them on real quick.
That's true. You know you can do it that way.
But I agree with you ultimately though, Like practically speaking, I just know that. So I recently changed out the wipers on our van. By the way, do they always sell them at Costco? I think the micheline ones where they don't squeak at all, and which is something that our kids have been complaining.
About like for years. I actually I think they.
Rode in y'all's van and they're like, oh, it's so quiet. And that's when I realized, Oh, I just need to get the non cheap whin Scholl wipers that.
They sell at Costco. And honestly, when they're on sale, they're cheap. They're eight bucks a blade.
Yes, literally, I bought two of them for sixteen bucks. Yeah, but so I recently changed them out. And what happened, though, is when you're popping off the old ones, a lot of times what happens is the little plastic tab that
holds them on breaks. And so this could be an instance where Devin ends up actually paying more money because of the fact that maybe he's getting ready to pop off a perfectly brand new pair of wipers that he had on during last week is a rainy week, and he's going to wanting to preserve him and he ends up breaking a tab. He's up the creek without a paddle. Then he's got to go maybe buy a whole other set. Yeah, And then okay, so here's another So.
We've talked about.
We dedicated an entire episode to are you being frugal or are you being cheap? And one of the things, like one of the criteria that we encourage folks to think through was are you being too near sighted? Are you only looking at the short term as opposed to the long term. And so I was picturing myself in the situation and I'm like, Okay, I'm driving around my Winchel wiper arms are up there and they're sitting there against the glass, and then I pictured that.
I was like, oh, I don't like that.
I don't like the idea of the arms sitting there against the glass. And then I thought, what if my knee bumps the winchell wiper arm and then that metal just scratches across the glass of the of the windshield. And he's worried about having streaks on his windshield from there being gaps in the rubber because it's not able to wipe properly. How about permanent scratches on the windshield, Because here's the thing. You're not going to replace your
windshield just because it's got some scratches on it. Somebody like this is going to say, now I just have to suffer through it. But that's an instance where you're trying to pinch some pennies here and there, when ultimately it's going to potentially cause you much more money or hardly down the road as well.
Might say some pennies cost you dollars down the line. Yeah, you don't hit it perfectly in the way you take them on and all exactly. And I think it's just going to add a little.
Hassle into your life for very little savings. So you're super tall. I know you bump the winchell wiper arm all the time. I know you're like just climbing in for me now your vehicle. It's true. Yeah, So I'm just gonna say, and you know, not again, not in a hating way, but this was cheap in my estimation.
Ultimately, I agree.
I love the creativity in some of the different ways that folks want to get out there to try to save some money, But in this way, practically speaking, I think it's just not going to pan outgain.
Maybe too far. All right, Matt, let's mention the beer we're having on this episode. This one is called Champion Ground. It's abourbon barrel aged out with coffee in it from the good folks over at Jackie. O's really looking forward to having this one. We'll give our thoughts at the end of the episode. But yeah, if you have a money question for us, please do submit it. The instructions can be found at how money dot com slash ask mount.
Let's get to the first question for this episode. This one is about car maintenance and how to budget appropriately.
Hey guys, this is Rory from Highlands Ranch, Colorado. Thank you so much for everything you do and for sharing your knowledge and expertise so widely via the podcast. That's super appreciated. My question today is on navigating carbon maintenance costs. I'll just raise my hand and say, I'm not that knowledgeable about cars, and I'm not very handy. I'm certainly
not a mechanic. So when I go into the shop to get oil changes performed, oftentimes the technician will recommend, you know, various sort of maintenance services that be done, like break fluid flushes, and a recent one was a rear differential fluid flush. I struggle a little bit because these these kind of everyday maintenance upkeep items are so expensive. So for example, for that break fluid flush, it cost one hundred and fifty dollars, one hundred and twenty five
dollars of which was which was labor. And I got to imagine that this is a pretty straightforward procedure, so it just seems so expensive. So I'm wondering if you've got any tips or advice on how to navigate these types of costs so that you're not spending you know, an arm and a leg on them, especially when you're just not that handy and not very well equipped to do them yourself. Thanks a lot of guys, Bye Joe.
I like how Rory said that he is gonna go ahead and raise his hand and admit that he's not super handy.
I can just picture like a group.
It's like, oh no, don't pick me, I can't change mo oil. It's being honest with your talents and the capabilities.
That you have. I too, will raise my hand alongside Rory. I have friends who are great at car maintenance, and I'll you know, pick their brain, ask them questions. Sometimes Hey I'm hearing the sound, Hey this thing is going on with the car, and they've always got great advice or they're like, just take it to your mechanic. And that's what I end up doing because I can do the most incredibly basic stuff like change my winshow wiper blades.
That's fairly That's about as far as it goes from me, though, And so we say, like, first, first things, first, verify whatever quote you're getting Rory. You know, one way to do that is to utilize a tool that Kelly Bluebook offers, which is going to help you estimate what to repair
for your given making. My should cost. So Matt I looked up what the service that he was talking about would cost on our twenty thirteen Odyssey, and one hundred and fifty bucks seems like a great deal based on kind of the numbers that it spit back out for a break flush. Yeah, exactly. I think it was supposed to be between one hundred and seventy three and two hundred and twenty three bucks something like that. So one hundred and fifty bucks, it's like, oh, that's actually not
that bad. But the tool is really, I think, a godsend when you're trying to figure out if the quote that you were given is based in reality or not. So at least you can see what Kelly Blue Book says you're likely to pay to either an independent mechanic or a dealer. They kind of break it up like that so you can know, Okay, cool, Wait a second to see it totally seems like this is not competitive with what other mechanics are likely to charge me for
the same service. I need to check around, call a couple of other mechanic shops and get quotes, or wait a second, it looks like gonna get a decent deal here, or it's at least within the normal price range. Maybe I should just pay the piper.
And I think that should give folks you should feel at ease once you look something up and if you can find a price, if you can get a quote that's within that range, because that's the biggest thing.
It's just not knowing.
It's being there in the lobby at a shop and they tell you that it's going to cost as much and you say, I don't know, well should I do that or or shouldn't I like, you've got no idea. You're kind of behold and then you're stuck there and oftentimes you probably need to get going, or you need to make a decision, you got to go to work, you're about to catch your uber or something like that. You need some data to help exactly. And so this is totally something that you can just pull up on
your phone. But I think that could keep folks from just feeling taking advantage of it. I think that's what that's what I hear Rory speaking to, is the fact that it's like, well, how am I supposed to know? You feel like you just feel so vulnerable there in the moment, and especially too like.
How so many people feel with people trying to sell the financial products, You're like, well, you know better than me. You're telling me I need this. I guess I should pay the big price, whereas a you know, quick little search could inform you quite a bit and you might realize, wait a second, this is fee laid and not actually terribly helpful.
Except I would say that car maintenance is even you're even more. It feels like you're being held hostage because literally your car is somewhere else you or being inconvenienced, and you are just wanting to move on with life, so you.
Have less time to figure out yes exactly.
It's a combination of that, and I think it's also a combination of feeling that like for a lot of folks, you're not getting bigger repairs done on your vehicle like every single year, like every year you get your old changed, right, But it's not. It's like every few years that something
bigger comes along. And I think what that means is that given inflation and how we've seen prices go up, we've seen prices go up on everything, and then let's say two three years go by and all of a sudden you're told it's going to cost you this much, looking the actual price of a procedure or not a procedure,
this is a medical this is a car repair. Looking a fix up like that can just put you at ease as opposed to feeling like you're just getting older and you're like, oh, man, I remember when everything used to be a whole lot cheaper cars didn't used to cost us much to repair a nickel, right, exactly one thing you mentioned though, so you said, trying to figure out whether or not you should go and go see
an independent repair shop or a dealer. Well, stats show that having work done at a dealership is going to cost you more, and you won't just pay more money, but you're not going to be as happy with a quality either. This is according to data from Consumers Checkbook. They found that a much higher percentage of folks were happier with the work done at a locally owned independent shop. The average hourly rate for labor there. It's also going
to be more affordable as well. At a dealer it comes in at two hundred and fifty five dollars versus one hundred and eighty two dollars an hour at an independent mechanic. So that's important to keep in mind car stuff, it's not cheap. But yeah, these stats back up everything else that we've heard, everything that I've certainly experienced myself over the years about independent shops. It's at least going to be less expensive than the name brand dealership alternative
out there. And you know, just because you go to one local shop doesn't mean you can't hit up some others as well, where you can maybe call around see what it is that they might charge for the same service, that kind of thing.
So I needed to get new brake pads and my roaters turned recently Matt, and I was like, okay, cool. The number came back hit me in the face. I was a little surprised. I was like, wait for all four wheels, I think it was five hundred and sixty dollars. I was like, that sounds like a lot, And it was the inflation thing because I hadn't done that in a long time, and I was like, I swear I remember that being like three hundred bucks, sure, and.
So maybe it was two fifty. Maybe I'm remembering ry it was like two twenty five. So I called my friend pretty sure it was one hundred and eighty dollars to fixes his own cars, and I didn't ask him to do it for me, although that would have been awesome. But I was like, does this sound normal to you? And he's like, yeah, it does. But here, call this place in this place because they do good work too.
So I called two other places I trusted, and I was able to get quotes over the phone, so I didn't have to go in there and show them the car. I was like, listen, this is exactly what I'm looking to have done to this vehicle, and they had higher quotes.
So I took it to the place that had given me the initial quote that I already trusted. And that I think is a really important part of this conversation too, is do you trust your mechanic? Do you think they're recommending things to you that you don't actually need. If so, that is a potential problem too, and I think it's
something that maybe people worry about. I don't know how prevalent it is, but it's something people are like, I don't know if you need to replace this in such hose, but if you say that it needs to happen, I guess needs to happen. And so one thing I would recommend is to ask your mechanic to show you the issue. Most of them will, and that can be enlightening, right.
I love laying eyes on the problem, even if I don't fully understand how everything's working under the hood or whatever, if you can point it out to me and show me, hey, look at the degradation in this. You can see how like this products or this part of the car has worn out over time it needs to be replaced.
It pushes like a finger through some poes. You're like, oh, buddy, why don't you just leave that alone? Starts smoking and stuff, and you're like, I guess I gotta repair it now.
Do whatever you gotta do. But the thing is, it is often easy for us to see, even if we don't know exactly what's going on. Maybe fluid discoloration or worn down break pads or a belt that's past its prime like those are the things that even the layperson who doesn't know anything like myself, can kind of understand
when they pointed out to you. And the best mechanics are typically more than willing to spend a couple minutes showing that problem to you and explaining it to you to put you at ease totally.
Yeah, I think another question to ask too is what would happen if I don't go through with this maintenance right now? Yeah, so recently I received a quote. It was like for some steering arms or like tyrod arm bushings or something. It was like the little rubber piece or plastic piece that goes between it sounds like a made up thing, I know exactly, but yeah, you get
super curious and say, oh, what does that mean? Like I would love to see that A because well I am curious, but B there's a little bit of accountability there. It's just like I would love for you to help me to understand why this is gonna cost so much. He showed it to me. I saw the cracks, but then ask, okay, well, if I don't do this, what does that mean?
Is it dangerous? Is the car going? Am I gonna lose control and crash or something like that?
And they're like, oh, no, you'll start to notice some clunking, like when you turn over time it'll continue to degrade. Okay, great, that helps me to understand that this is not like a life or death situation.
They might say, oh, six months, a year from now, you should be fine to replace them. Then if you're feeling more issues.
Well, at least I can just yeah, keep I'm able to monitor it myself and kind of have a pulse as to the state of my own vehicle. And it just helps you to feel a lot more informed. And plus it helps you just to save up for that purchase as well. And so Rory, I think another I guesscommendation we'd make is just to make sure to start
budgeting for these future repairs. I'm not sure how old your car is or how well it's been maintained, but depending on the age, depending on the state of your car, you might need a funnel more money maybe less into that car repair fund. Consumer reports they actually have solid stats on the likely annual repair costs based on the age as well as the vehicle type, which which certainly helps.
And then if you overstuff it, you know, if you've got too much cash on hand, well, that means you've got more money on hand for.
The purchase of your next vehicle. Matt, I've never had too much cash on hand. I haven't either. I would be willing to endure that problem though.
I'll point out to you this is when having being a money nerd and keeping up with all of your expenses pays off. Because I was able to open my excel file, jol and I was able to quickly just a nice glance, see how much I spent on average over the past decade.
You want to guess on annually for car maintenance annually on our van? Yeah, okay, I'm gonna say, I guess so.
It's ten years. We haven't had our van for ten years. So before that we had the VDUB yeah beside, okay, So overall, I'm gonna say twelve hundred dollars. Okay, So I came in low. Seven hundred and thirty bucks. Wow, seven hundred and twenty nine dollars and twenty four cents.
To the exact.
But what that gives you the ability to do is at the beginning of the year, when you're making your budget, to say, all right, by the end of this year, let's just round up. Let's say we need eight hundred bucks in that account to handle any likely maintenance costs.
All right, sixty six bucks a month. Let's just start plugging that into the savings bucket for card maintenance, four different repairs that might pop up, And that way you can It feels different too, a to know that, Okay, this is a legit repair that needs to be made. But then also, man, I've got the money set aside to make this repair happen.
Yeah.
Man.
Last thing worth mentioning here is I think some people they when they get a repair bill or they get a quote or something like that, they freak out and they're like, it's time to ditch this ride and get something new that's not gonna give me as many problems. And I get why people think that or why people feel that way. Is that emotional response, Oh dude, it really does stink. It really does stink. But you when
you look at the numbers, the numbers don't lie. And think about how much you pay have paid a year in maintenance costs for that van. Some years is more, but then some years this is. Hold on. That's the average, right, yes, But think about what the average car payment is for someone who buys a new car. It is right in that ballpark, potentially even just a little bit higher than that. I think the average monthly car payment for a new
car is like seven hundred and fifty something dollars. Other other costs go up to when you buy a new car. So while it can feel like a gut punch to get a five to six twelve hundred dollars repair bill. It's so much better than the continual gut punch of a payment for sixty or seventy two months. You definitely don't want that, so Rory. Hopefully all this is helpful. Ultimately, what feels like a financial loss forking money over for
car repairs, think of it as a financial win. You're forestalling your need to buy something newer that's going to cost you even more.
That's right, Joel. We've got more to get to. We're gonna hear from a listener who has a sweet retirement benefit. We'll get to that and more right after this.
Our back. We got more money questions we've got to get to on this episode. This next question comes from a listener who's wondering how to think about his retirement given a special perk he's been offered.
Hi, Matt, Joel, this is Mike calling from Kansas City, Missouri. Love the show, love all the advice that you provided over the years, and love the theme song too. My daughter, who's now almost six, I used to comfort her and try and get her to bed back when she was an infant, and I have many happy memories of the theme song coming on as it's one or two in the morning, and I was listening to you all as
I'm trying to put my daughter back to sleep. My question today is about how to figure out how pensions tie into retirement. I know you've had some previous guests and questions about teacher pensions, and my questions more about military pensions. So my spouse and I are both in our forties. My spouse is a public health service officer who's got about six more years left till she's eligible to retire, and she's able to stay in longer if
she'd like. Once she does retire, though, she'll be retiring with fifty percent of base pay, and probably just as important, will also be covered from a healthcare perspective under Trycare for Life. So as we're kind of figuring out our retirement goals and strategy, how do we account for this pension or this retirement again fifty percent of base pay
and having Trycare for Life. I don't want us to underinvest or underplan for retirement, but I also want to make sure that we're playing at smart so we're not sacrificing things in the current day and maybe we're putting away too much for retirement. Thanks so much and excited to hear what recommendations you might.
Have, Joe, should we tell Mike that that's why his baby was up in the middle of the night was the fact that he was listening to our podcast.
That's also why his baby's going to go to Harvard.
Sorry, our screeching voices were in the background giving.
His daughter up, like stop it, stop playing the music and they're terrible voices and I will sleep dad. Oh man, no, it's super sweet.
I feel like now that we've been told this, this is the first time actually we've ever heard this, because anytime we talk about the music, we're like, man, maybe it's time to ditch the music, or maybe we're going to switch it up. I feel like you, Joe would be happy if we switch it over to like Tyler Childers sounding like so or whatever my jam. I'd be done with more like alt electronic or something like that. But now I feel now that we've heard from Mike, I feel like we.
Can't really switch things up. I know, you know some people. I feel like what we've heard most consistently is that it sounds like the theme music from Entertainment Tonight. I hate that, yeah, which is kind of true. People don't even know what EAT is anymore. I don't. I don't think so.
That was early nineties, dude, Man, that show was We're dating ourselves, popping back in the day, show.
Fire, you know what they say? Yeah, all right, let's get to the heart of Mike's questions, specifically talking about pensions and retirement. They're dying off obviously incredibly quickly. So this question, Matt, it's not as applicable to as many folks it used to be, But I do think just to maybe make it more applicable to everyone out there, maybe use our answer to this question and think about how it relates to factoring in social security to your
retirement plans. And I get the desire too to find the sweet spot here. We will offer some advice on that front, but I think it's also important to mention from the outset that it's a tall order. It's hard to predict the future, and even with the advice we have to offer here, please Mike realize there's a margin of error, right, as well as a lot of personal details that can impact the answer. So we're trying to
achieve the same goal as you are. We want to save and invest enough to have a non worrisome retirement without overdoing it so much that we deprive ourselves in the here and now. That is a good goal to have, but also know that while you're striving for that, hitting it perfectly that's the die with zero mantra, Matt, I understand the goal to do that, Actually pulling that off is another matter. Yep, one hundred percent.
Man.
Yeah, and that balance is something that we're striving for as well, but just knowing that we're not going to be able to necessarily nail it perfectly.
But Mike, it's also like Simone Biles at every Olympic event, right, whatever she fell out.
Everything else, she's still the most She the most decorated American gymnast of all time.
I'm going to say that's she's the goat. She and kater Ly Decky. What's crazy.
We shouldn't go on the stange but like, have you seen the chart for different gold medal winners best all around gymnasts based on the with their age, They're in the chart as well.
Because she is the first, the first.
Gymnast over the age of nineteen. Since like nineteen fifty two, wow or something like that, all of the top gymnasts have been like fourteen, fifteen, sixteen, like all the way up to nineteen years old. But the likelihood of someone being able to maintain that kind of performance I guess into their twenties is just unheard of, which is.
A part of why Tom Brady heurline touchdown for forty.
She is like literally the gymnast gymnastic versions of Tom Brady.
Wow.
Yeah.
So anyway, it is also pretty cool to know that you're not going to have significant health care expenses in retirement as well, because that is an incredible benefit that's certainly well earned thanks to your spouse's service. That's it's like one wild card that you're not going to have to deal with, that pretty big one the rest of us are going to have to deal with. You won't thanks to try care. The other thing is that she'll be getting that pension before she reaches full retirement age.
It's amazing, but it also won't be as much as she's currently making. And so this is where focusing on your income replacement rate is how a lot of financial planners like to plan things out for retirement, and the typical suggestion is to have the goal of replacing seventy five percent of your income in retirement. And so the more that coming from the pension, the less you're going to.
Need to save up and provide yourselves.
And part of the reason that it's you're only looking at seventy five percent as opposed to like a full income replacement is because your expenses are typically lower in retirement. But also you won't be saving for your retirement anymore, like simply.
So you've been putting twenty percent aside, you can automatically take that off exactly now you're at the point where you're tapping those funds, so like, stop saving for retirement now that you're seventy as well in taxes as well, so typically you're going to be paying less in taxes. You might not have a mortgage either, right, which is
gonna be another big help. So yeah, using the pension amounts alongside the twenty five x rule of your projected retirement nest egg, I think I should give you a solid place to start. And that is of course a rule of thumb, because this is an imperfect science. But other questions that we would have for you. Are are you going to have a paid off home? Right, That is a big factor into the mix as to how much you're going to need to save in addition to
that pension. If you're going to still have a house payment for many, many years into retirement, that's going to change the number that you need to save. When are you planning on retirement, Right, If you both want to retire in your early to mid fifties, you're going to want to invest more than if you're planning on working
into your sixties or early seventies. How much you're setting aside depends largely on answers to those bigger questions and also how flexible you're willing to be, because you might say, Oh, I like to retire when I'm fifty four, but honestly, I like what I do, and if circumstances arise that I have to work longer, no big deal. The more flexible you can be, the less tightly focused you're going to have to be on getting that number as large as possible.
Yeah, So as we zoom out, like when you're looking at the income replacement rate, that's an approach where you're looking at the income side of things, but which also essentially what you're highlighting here is like you can also just look at the expense side of things and calculate how much you're going to need based on that, and.
So let's let's be honest, if you can it's a monocular calculate, it's going to be an easy Well, it's simpler like that.
That's what I really like about that too, Because you can look at what your expenses are this year and the ability to just multiply that by twenty five and shoot for that amount in your retirement account.
It's typically more accurate, it's going to be great.
And so what you simply need to do is just take your pension amount that your wife is going to receive every single year, subtract that from your annual expenses, then multiply that by twenty five, and you should pretty dang accurately have a good number in mind as to what it is you should be shouldn't what you should be shooting for.
Yeah, I guess the the other thing to factor in is lifestyle creep and we don't mean that in a bad way, but like, how are you going to inflate your lifestyle over time if you are retiring early. Do you have big ambitions in those early retirement years, You're going to want to save up more in your investment account for that too, Because if you're like, we're going to hold off all travel until we hit that early
retirement age we're searching for. But once we get there, man, we're probably gonna be spending like fifteen twenty grand a year on travel. No shame in that game, but just make sure you're prepared for it. If you're not spending anything on travel now, but that's going to ramp up significantly in early retirement years. That is another part of the equation that you've got a factor in. That's right.
The other thing to note is that when you have a pension, you can be less conservative with your investments, and that is because your pension acts as this safe asset class for you. Right, that could mean having more stock exposure for longer. You can be less conservative with your specific investment choices.
Yeah, you go all in on crypto if you can. Well, honestly, a pension from the government might be as far to the conservative side as crypto is to the risky side, you think, except for one less there are government shutdowns that that takes place. But that's the question do pensions continue to get paid out during government shutdowns? That's not something I know at the top.
May have you me either, but yeah, what we're really highlighting here is that you can have more a higher stock allocation than a whole lot of people because similar to as the bonds, similar teachers, like we talked about with Dan Otter back not a few weeks ago, Matt and he was basically saying, yeah, because of this pension that teachers have access to, they don't have to be as thoughtful in terms of their acid allocation. They can just have more of a stock heavy approach because they
have that pension in their back pocket. The same is true for Mike and for his family, and we typically want people to invest at least fifteen percent of what they make. That's what we suggest Mike. We'd say, while you might find that you can invest a smaller amount, you might not want to diplow that point either though.
If you're living a great life at your current savings rate, and you find that you can save less without cramping your lifestyle, without missing out on things that matter to you, you can keep things the same, and it just means you're gonna have more optionality sooner. So that's the other thing when we're talking about flexibility, Matt, it's like, well, yeah, I could cut down on how much I'm investing now, but if it's not going to meaningfully improve my life,
why don't I keep investing? And guess what, at some point down the road, I'm gonna have more flexibility, more options to choose what it is I want to do and whether I want to rent my left lifestyle up in a bigger way that's going to make me happier five, six, eight, ten, twelve years down the road.
That's true, Yeah, I will say, And that's good advice, and that's what we typically say because most Americans are not saving enough for their retirement by far. I would say that the majority of our listeners they I wouldn't assume that a lot of our listeners are on a pretty dang good path. They're like, they're on a good trajectory when it comes to their retirement savings, and it's certainly got bigger goals, but they're probably doing a lot already, I think so.
I would think so.
And so Mike, I guess the reason I bring this up is because you mentioned your daughter within your question, right, and so keep just keep in mind that the time that it takes to be a parent right now, it takes a lot of your time, is basically what I'm getting at, Like the next couple of years are not going to look like the last two years that your daughter is living with you there at your house. Like once they're in their teenage years, it requires a whole
lot less of your time. And parent after parent that I talk to they mentioned this. They talk about how like they're their own person, they're interested in teenage things. And what that means typically is like honestly, more free time for you, more free time and more of an ability to continue to work, maybe to launch. Like imagine once you're an empty nester in fifteen years, maybe even ten years, you are going to have more of an ability to take risks, to work longer, to launch a business.
And I don't want you to, I guess over sacrifice in the here and now, because you're trying to hit that fifteen percent fifteen plus percent, like you are in that stage.
Of Russia with the pension backup. Yeah, yes, exactly.
Like we talked to the money guy. We talked with Brian about the messy middle like you are in this stage of life where everything is being asked of you, more time than ever is being asked of you, more money. You are hemorrhaging like at all the different seams, whether it's like things that you and your wife want to do, whether it's things for the kids. And I think it can be really difficult to save that much money in these years right now, and I think it's okay to
with that in mind, to not beat yourself up. I guess over the fact that maybe you're not quite hitting that mark, knowing that you be able to ramp things up further down the road.
And that's what was so great. If you have been dedicated to saving and investing pretty heavily in those early years and then you hit the messy middle years and you feel like you can dial it back in terms of how many hours you're working, in terms of how much money you're saving and investing, and then guess what, ten years down down the road, when your kids are off partying with their friends or whatever, you know, and they don't want to hang out with you as much,
then maybe you're like, I think I'm going to ramp up my work activities again, and I am going to ramp up my investing game a little bit too. That flexibility matters so much, and getting started early before you have kids is such a help. And feeling less pressure. I think in those years, Matt, when you feel like the time the time crunch is real. That's where we're at right now with munch of young kids and we
have cut back our work schedule a little bit. I could totally see ramping that up down the road with that kind of like an empty nester and there are fewer domains being made of me, like on the home front. You're gonna be on CNBC like five days a week. Please.
What I want to point out here is the fact that that optionality that Joel, that you're talking about, it might be to a lot of folks in granted this is a note for the parents out there specifically, but like that optionality to potentially work less. It doesn't have to be twenty thirty years in the future. It could be like a few years from now for a shorter window of time before you choose to say, hey, now
I have the ability to ram things up again. And I think, because I don't know, I'm putting myself in that situation. I can picture myself doing that, Mike.
I don't know. That might be a situation you find yourself in as well. One of our super good buddies just adopted a baby, and I love it for their family so excited, and he was like, are you gonna what are you gonna do? You're gonna take some leaf family leave time? He said, no, I just work part time and I'm gonna keep working part time. I love what I do. Yeah, and so this it's the perfect balance already.
He has found the sweet spot. And that sweet spot's gonna vary from person to person. But Mike, we hope that you are able to find that for you and for your family. Joel, let's get to our next listener question. This one has to do with some of the finer points of contributing to multiple retirement accounts.
Hi, Matt, and Joel, I have a question about Rock one. Okay, I have a TSP retirement plan through my company, and since this is a WROTH from a company, does that mean the amount I contribute for both the traditional and ROTH accounts. It's part of the limited twenty three thousand dollars contribution for twenty twenty four or is the Roth contribution a part of the seven thousand elemit? Thank you love the podcast, Matt.
This is a really good question, and I think part of the me is it's a good question is because there's a lot of confusion over contribution limits, and there is we're talking abou alphabet soup when we're talking about retirement accounts so much of the time, And if you've been listening to Hot of Money for like two or three years, you might be thinking, well, I got this stuff figured out by now. But there are a lot of people out there, Matt, and understandably so it can
be confusing. How much can I contribute to this account? What does that account even mean? And who has access to the account? Can I open up one of those accounts? And I wish it was simpler. It's not terribly simple. So I guess it allows us to continue having jobs,
which is the best part of that. But yeah, especially when one of these accounts has at least shares the same name as another account, the Roth Ira and the Wroth four O one K, and then there's a traditional four oh one K, and you're like, and then we're throwing thrift savings plans into the mixed TSP into this question.
That's what Oh, that's what Katie has. By the way, she didn't mention your name at the beginning. Yep, let's humanize this question, jol So.
Yeah, so like so many accounts thrown into the mix, and it can feel like a foreign language, that's right.
Yeah, So let's talk about limits, Katie, because the answer to this question is that you can contribute twenty three thousand dollars to your WROTH TSP, which is the.
Federal employee equivalent of the four one.
K by the way, and you can also contribute seven thousand dollars towards a WROTH IRA. And this is true for everyone out there listening who has a workplace retirement account. And by the way, also your your employer contribution, it doesn't count against your personal twenty three thousand dollars max.
So if you're getting that six or nine percent match, you don't have the fact it's it's just your own attribution that is out side of that. Yeah.
So you as an individual, you essentially have thirty thousand dollars that you can invest in tax event retirement accounts overall in twenty twenty four.
Yeah, I remember hearing some of these numbers thrown around early in my investing career, Matt, when I was making almost nothing at my radio gig, and I was like, that's cool. Those contribution limits go that high. Who hits that though, that's insane, Like, haha, must be nice. I know exactly. But over time, hopefully you grow in your income and you're able to get closer and closer to maximumt those retirement accounts. It's easier said than done, but
I love that goal at least. And then that number goes up regularly too, over the years we mentioned every year. Yeah, it goes up with inflation. That's right. So income for tax brackets goes up every year. Same thing with contribution limits. They're going up most years. And the only people who have different contribution limits than what match just outlined, by the way, are folks who are fifty and over. They're allowed to make catch up contributions. So, Matt, we're getting
closer to that. We're still a little ways off. Well, in Katie, she didn't mention how old she is. Maybe she's in her two, but she might be at the other end of the spectrum, she might be closer to retirement. Let's say she's fifty two, and she's like, I got tons of money to toss that thirty thousand dollars, that's not enough. I have more than that. I want to contribute. Well,
good news for you. You can put an additional one thousand bucks into your IRA each and every year, and an additional seventy five hundred into the TSP four oh one K four or three B. She has the TSP, but whatever account whoever's listening to this has, if they're over that age, they can contribute even more. So that means that folks fifteen over Matt can invest as much as thirty eight five hundred bucks, which is incredible. Again, one of those things that like twenty five year old
Joel would have been like, who's doing that? Yeah, but there are people doing that. It's really impressive.
I wanted to highlight something else too, so you mentioned kind of like the alphabet soup, which can be crazy confusing when it comes to all these different retirement accounts. I think another potential confusing aspect of retirement accounts is the fact that just putting your money within one of these accounts, that's only the first step towards investing. And actually I don't even like saying investing because you haven't
actual invested your money. If your money is just within a four one k or if your money is just within a roth ira, because you actually have to like deploy those dollars, right, you have to like otherwise like that money is just hanging out in your account is they're kind of like these free radicals that are just like floating around.
They haven't a big car, but it hasn't turned the ignission on. They haven't been told what to do.
It makes me think of uh, surfing, like your money is just hanging out on the beach, right, And there's like this cliche of surfers, like folks who don't actually surf, and they're just like hanging out on the beach, like waxing down their.
Board, talking about big ways that they've actually caught.
Which did you watch any surfing during the Olympics a little bit? Yeah, it's like a newer event. But money that you haven't actually invested in any accounts are like those surfers where they're just kind of like hanging out. They're not really doing anything. You actually have to get wet, you gotta take you gotta take some risks. Because yes, there's a chance you'll get like totally wiped out, but
you're never gonna have any fun. Like there's a zero chance of seeing your money grow at all unless it's actually invested, if you're not actually out in the ocean.
So in this analogy, is the wet suit the emergency fund?
No, no, no, because you don't invest any money that is your emergency.
That's completely separate, So you're keeping that on the beach.
Yeah.
Yeah, that's the other person who's hanging out in the car, like completely safe away from any wave, away from any threat.
Gotcha. The last thing I think is worth mentioning here to Katie is just massive props for prioritizing Wroth accounts, the Wroth version of the IRA and of the TSP. Oh yeah, then the traditional ones, because yes, it means paying more in tax now, but future you is going to be thankful for the absent tax bill in those
retirement years. That we recently talked in depth about roths with Ed Slott, who's like is America's IRA experts, right, he provided a lot of good information, but I think one of the things he did I was you and I were already pro roth and now I feel more rapidly pro ROTH thanks to that talk with Ed, So I think ultimately it's going to be helpful to most people.
The people love to see that little tax break now, but when you listen to that interview with Ed, you might rethink your desire for traditional accounts and that little bit of tax break now in favor of massive future tax savings.
That's right, Was that just confirmation bias? Like we're hearing from somebody who also believes in what we believe, which is most likely going to be higher tax rates off in the.
Future, and it's been doing it in a long time. He knows what he's talking about, and so I appreciated his in depth perspective. I think it's anybody who's on the line are not sure which account they should be investing in, traditional or WRATH, they should totally listen to that one.
All right, man, we've got more to get to. We're gonna hear from a listener who has a question about house hacking, something that we feel like it's been a minute since we've talked about house hacking.
But we'll get to that right after the break. Matt, Let's keep rolling. Let's get to our Facebook question. Of the week this one. We got an email this week from a listener wanted to remain anonymous, which is understandable, but had a question about house hacking. I'll read it here. She says, I'm a twenty nine year old woman buying a duplex with plans to live in one side and rent out the other. By the way, Matt, this is a strategy we would highly recommend to a lot of people.
Love it, so we're all for it already, she said. Recently, I started worrying about a scenario where the only renters I could find were men who were flirty or disrespectful. I was concerned that if I denied a man housing based on this behavior, rather than his credit score or references,
I might risk litigation under the Fair Housing Act. To my pleasant surprise, I discovered the Missus Murphy exemption, which states that an owner occupied property with four units or fewer can deny a tenant on any criteria they choose. To my immediate dismay, I learned that the Missus Murphy exemption may not apply to homes with an FAHA mortgage. I found that my mortgage details have an addendum that explicitly states I must comply with the non discrimination provisions
of the Fair Housing Act. My question is it worth considering refinancing in the future to reduce the risk of this scenario. I would love to hear any insights you have on what good reasons there are to refinance and how to avoid litigation as a landlord. This is all new to me. I don't know any landlords.
Yeah, okay, I guess I think it's worth taking a step back and just talking about house acting generally speaking. Maybe it's worth defining it because folks might be thinking, okay, well, like do you have to get a duplex to house hack? And we've dedicated entire episodes to house hacking, which can be as simple as having an apartment even and just reunning out one of the rooms of the apartment that
counts as house hacking. It can be that it can be running your place out on Airbnb, or it can be something that takes a little more investment, like this listener is looking to do right like renting out or purchasing a duplex and running out half of it, getting.
A triplex a quad plex. And we have talked about what a financial game changer it can be to house hack like, oh my gosh, it's huge, Because it's huge massive. You reduced your housing costs that can provide extra income, and so you're like, it's.
The biggest line, single line item on your entire budget, like every single month is housing. So any way that you can significantly reduce that is going to make a massive difference. And we've talked before about the small wins that you get from being able to cut your hair or change your oil hat. This is something that is man, you are reaping massive dividends every single month.
It's nice to hit the really big items on your budget to dramatically reduce the outflow on those, and then you don't have to cut your own hair. Yeah, or you can do both and then just bank even more. Mind Yeah.
But like when I think back on my financial life, I don't have many like financial regrets. I guess I feel like everything that I look back on and I'm like, h now, that was a misstep.
I was still able to learn.
But man, I totally wish I did not know about house hacking prior to purchasing a home, and I wish that I would have considered that. Actually I take that back. I didn't know about it but it wasn't. It just wasn't something Kate and I were at all considering. And especially when you're younger, you're thinking in your twenties, even in your thirties, if you're looking at your first place, you're thinking, oh, this, this house has got to be perfect, right,
I'm gonna be here forever. But the average American moves every five years. The chances are pretty slim that you're going to be in that house way off into the future. So what that means it doesn't have to be perfect. It can be a great place, maybe one that doesn't check all the boxes, but hey, you're actually able to better yourself financially every single month. I think that's something that I wish that Kate and I would have considered early on when we.
Before we buy our But it also doesn't have to be permanent, right Like I think of when we bought a duplex. At one point, Matt that we saw the potential in making that a single family home, but we said, we don't really have the cash nor the desire to take on the debt to turn this home into the home of our dreams yet. But what if we ran out the back for a few years before we give it a go, have extra kids in space that needs
to be filled, and that was like incredibly helpful. We were able to bank so much of that cash that we were getting from running out the back part of that duplex ultimately turn it into a killer single family home down the road. So yeah, we were able to do that for multiple years. It is a financial game changer, and we will link to some of our episodes on
house hacking. But if you are willing to do something that presents a little more discomfort in the here and now, you can have a lot more financial comfort down the road because of it. And Matt, I gotta be honest too, I didn't know much about the Missus Murphy exemption until recently, and I think this is so great. It makes so much sense, especially for young ladies like this listener. Like, I was just talking to a single female friend Matt, who is trying to date online and it sounds utterly
absurd these days. I'm so glad you and I met our spouses before the age of online dating really took hold. I can't imagine what it's like to date right now. Feel for all the single folks out there. Yeah, and I know this list, or she's not trying to date anyone. She's trying to do the opposite. I think, at least when it's a keeper distance, so she's at least trying to create solid barriers between tenant and person she might
go on a date with. But I totally get why a female would want to try and protect themselves, especially when you know we're talking about running out half of a duplex and that's where the Missus Murphy exemption covers those people really beautifully.
Yeah, and so we did some digging on this, and we didn't find anything that states that you wouldn't qualify for the miss Murphy exemption if you have an FHA mortgage. With that in mind, I wouldn't necessarily worry about refinancing for this reason. Maybe there might be other reasons that you might want to refinance in the future, but not necessarily for this. Something else too, is I want to, I guess, ameliorate some of your concerns about this actually happening.
I don't know what the exact numbers might be giving your situation, but HUD so the housing and urban development everyone's heard of HUD, but they've got some numbers and figures and of the millions and millions of different rentals that are out there, I think they've received something like thirty three thousand different complaints. And that might sound like a whole lot of complaints, right, but when you actually do the math, what that comes out to is a point zero eight percent complaint rate.
And that's just complaints, right, that's assuming that. I think.
Let's be honest, I think there are a lot of complaints unfortunately that get voiced where there isn't a whole lot that's done essentially.
Yeah, or maybe they're against maybe serial abusers from like let's say it's one of the Wall Street firms right that continues, or some frustrated people, or.
Or somebody that's just being like straight up racist, right, Like, I've got to think that the folks who are voicing their concerns are I mean, they either feel like full on threatened or they feel that they've been just treated in an incredibly unfair way. It does not sound like that that's what you are planning to do. You are trying to protect yourself and so it's you do keep
some of those protected classes in mind. But I think the likelihood of this happening to you as a landlord they're at your duplexes is highly unlikely.
Yeah, exactly, And I wouldn't want to spend the thousands and thousands of dollars that it would take to refinance, unless, of course, you were also locking in a much lower rate, and breaks have ticked down recently, so that might be the case totally, But you don't want to spend those thousands of dollars just to feel like you're perfectly covered. These are one of those like shark bite scenarios, Matt, where my kids worry about getting attacked by a shark.
But the truth is they're more likely to get I think, killed by a vending machine, and we're not worried about that, So why are we worried about the other? This is something I wouldn't worry too much about. The other really important thing to mention here real quick, too, is that in your listing you have to abide by the FHA guidelines.
Even though you have protection from being forced to rent to let's say a man, as a woman living on that property, you're not allowed to state no man allowed in the listing, so you don't have the rent to the man who comes up to take a look at the property, but you also can't write anything that's against those guidelines in the listing when you put it on Zillow or or wherever it is that you're listing that unit. That's right. Yeah.
I think the last thing I would say to this listener, though, is to I don't know, maybe look on the bright side of things. Like Joel, you and I we have both been landlords for I don't know years at this point, We've got multiple properties, and folks always talk about all the things that could potentially go wrong, whether it's the you know, the plumbing toilet call in the middle of the night, or like a tree falling on you know,
someone's car or something like that. But these things rarely happen. Have you ever gotten a call in the middle of the night.
I literally have never gotten now, and I've had a call annoying issues to deal with of course exactly, and got to maintain these properties days where I'm like, why am I a landlord again? And then I have to realize, wait a second, it's been really good to me. But yeah,
you're right, like it's overblown, and there's a lot of blown. Yes, there's a lot of like landlord fear being I think, especially from people in the traditional investment community, it's like, why would I want to go through that that massive pain of being a landlord. And the truth is it can be worth the reward. Like we talked about in the beginning with just how great house hacking can be as an investment and as a wealth generator, the juice
can be worth the squeeze. And realize that there's some squeeze involved, but it's usually not as difficult as so many people make it out to be. And it's also important to mention, Matt, this is the best advice you and I can offer as landlords and as people who know a lot about this stuff. We're also not lawyers speaking from personal experience. Yeah, take that into consideration too. Let's move on, Matt. Let's get back to the beer that we had on this episode. This one is called
Champion Ground. It's a coffee stout from Jackie O's. What were your thoughts on this beer, my friend that this is a big old stout, it's got those and you know what, I think that led to us enjoying the heck out of it, because this is the kind of beer where if I were to have like, well, how big is this bottle.
This is over twelve ounces, right, so this is twelve point seven. If you were to have enjoyed this beer by yourself, by the end of it, you're just like, oh my gosh, too much overwhelming, right, but enjoying a nice chill six ounces of this beer so good.
It was perfect.
It almost felt like, I don't know, enjoying a nice little port at the end of a fancy meal, like a little dessert type of wine.
But it had incredibly robust coffee flavors going on.
So they partnered with a local coffee roaster there and they had those flavors. It's got that nice barrel age depth that you get with a style as well. Pretty much any beer out there, I think you can probably age in oak or whatever barrels they happen to stumble upon and make it taste better. So there's just I don't know, I freaking love barrel aged beers.
Barrel it makes it so much better. Stouts in particular are barrel stouts and barrel aged sours. YEP.
As I was saying that, I was like, have we had a barrel aged IPA before? I'm not sure if we have.
I think maybe once or Yeah, those don't lend themselves to barrel not nearly as much. This was delicious. It had vanilla and coffee vibes with a little bit chocolate thrown into and super chocolatest. It was sweeter than I thought it was going to be, not quite as roasty as I thought it was going to be. But I think that sweetness comes from the vanilla and the barrels, and I think Jackieo's make some of the best stouts out there.
So you still liked it. I still love the sweetness. Yeah, you're not a huge fan.
Nice to have a stout again because we haven't had a stout in a while.
So even though it's not to have these bigger right stout beers during the summer when it's hot, it.
Makes more sense in December and January. But still lovely to have one, and lovely to have this one. All right, that's gonna do it for this episode, Matt. Listeners can find more information about some of the things we've talked about on the show notes up on our website at howtomoney dot com, and they can also sign up for our newsletter at how to money dot com. Slash Newsletter that's right, So that's gonna be it until next time. Best friends out, best friends out,