Personal Finance Guidance for Retirement and College Savings

Jennifer must prioritize her retirement savings over funding college for her teens to ensure financial stability.

### Navigating Personal Finance at 51: A Guide for Jennifer
* 👋 Welcome to the Money Guy Show, Jennifer! It's great that you're taking personal finance seriously at 51, with a pension and **$135,000 in your Roth IRA**, planning to work for **nine more years**.
* 💭 To maximize your finances, start by determining your retirement spending needs—will it be **$2,000, $5,000, or $10,000 a month**?
* 📉 Assess how much your pension will cover, and calculate the **shortfall between your expenses and what the pension provides** to understand your **financial gap**.
* 📊 Use tools like a **net worth statement** to inventory your assets and compare them against your income and savings rate, helping you **gauge your financial health**.
* 🔍 It's crucial to prioritize your financial goals, especially with teenagers and a mortgage; consider whether **funding their college** should take precedence over **securing your retirement**.
* 🎓 Teach your kids about college costs and options, such as attending **in-state schools or community colleges**, which can **save significant amounts** compared to traditional routes.
* 💡 Remember, while saving for college is important, **educating your children on financial decisions** may yield even greater long-term benefits.
* ✈ Lastly, prioritize your financial stability first, akin to **putting on your oxygen mask before assisting others**, ensuring you can support your kids without jeopardizing your **retirement plans**.

[Music] All right, next question is from Jennifer. It says, Hi there. I'm 51, and I was ignorant about personal finance until this January. I have a pension and $135k in my Roth IRA, and I will work 9ish more years. I have two teens and very little college savings, if any. I feel dumb, but I don't know what to focus on. I have a new car. I drove the old one past 200k, and a mortgage. But like she said before, she's really struggling with what to focus on now that she has kind of woken up to some of these ideas and concepts in personal finance. Can you kind of help guide her or give her some things to think about? Well, Jennifer, first of all, welcome to the Money Guy Show. Well, welcome to the other side of finance. Welcome to taking it seriously. That man, okay, now that I've kind of caught the bug and now I see personal finance for what it is, how can I begin maximizing, uh, you said you're 51, you've got $135,000.

In a Roth, you've got a pension. You're going to work for nine more years. My first question would be, okay, you have defined that I'm going to work for nine more years. I want to know a little bit more about how did you define that. Like, how did you determine that is 60 just sort of some arbitrary number that you grab and say, okay, 60 years old, that's when I'm going to retire. It's fine if that's the case, but then you have to take it a step further and you have to say, okay, if I'm going to retire at 60, what kind of life do I want to live? And I mean literally, you have to figure out how much money am I going to spend in retirement. Is it $2,000 a month? Is it $5,000? Is it $10,000 a month? You have to figure out what will your spending need in retirement be. And once you have that number, then you can begin backing into your sources. Okay, you're going to have a

pension. Well, how much of your income did your pension replace? Does it replace 40% of your income? Does it replace 60%? How much is the shortfall between what the pension replaces and then what the need that you have from a living expense standpoint is? Once you know that shortfall, then you got to start doing the math to back into if my timeline is 9 years and I'm starting at 135,000, how much do I need to save from today until 9 years to get to where I need to be so that I can retire? I think you have to do all of that analytical thought process, kind of going through that to figure out, okay, is nine more years realistic, and realistically, what numbers do I need to be putting to work, and then I can figure out where to be putting them to work? Yeah, Jennifer, this is exactly, you are once again, this is why we've created these tools and resources. The first thing you've kind of started doing the work, you got to take inventory of what you got. That's why I do like doing the

net worth statement. In addition to the network statement, this is why I love our tools. It lets you have a dashboard of, you know, taxable assets, you know, tax-deferred, tax-free, but also, you know, how does this compare to my savings rate, to my income. So, you're doing the net worth to kind of take inventory of what you have, and then I love that, Bo, what you said, but I would take it a step, and I see even the content team was kind of keying in on it too, is that if you're asking yourself, Hey, I'm new to this and I'm trying to figure out, I don't want to leave anything behind, that is why we have to know your number. Because, but the step of what your expenses are and what you'll need in retirement. Because why this is important is that you're going to be able to, because you have a pension that's coming your way, you'll be able to figure out what your retirement expenses are, take out what you're going to get.

from pension, take out what you'll get from Social Security and any other cash flow promises that are coming your way, and you'll figure out what the net amount that you'll require from your investments. And that's when the Know Your Number course is going to let you say, Hey, do I need to be saving more, or maybe I'm right where I need to be on my current savings and my current assets that I've invested? That's why we love creating these types of tools so that you can know if you're ahead of the curve, behind the curve, or right where you need to be. If you follow those steps, I think you'll end up being in a good place and kind of feel like you're in much more control, and that'll protect you from a lot of the emotional stuff that derails a lot of your peers. The other thing that I think, and Brian, I'd just be curious for you to speak to this, 'cause the very tail end of her question had two little nuggets on there. She says, I don't

know what to focus on. I have a new car. Great. Love that. And I have a mortgage. And I also have teenagers who might be going to college. And while we love our folks, being debt-free is pursuing that goal. The top priority you should have, or is that something that might distract you from your top priority? We love being able to pay for college for our kids and provide help to them, but should that be the top priority goal? I think one of the big things at 51, when she has all these different things she's trying to figure out, is she does have to figure out how to prioritize, how to like figure, Okay, what's the most important thing, and how do I work towards that thing and not allow myself to get distracted on those other? And here's a few, of course, we have the financial order of operations. You go to money.com resources. You can check out Millionaire Mission if you really want to get some insight. But those things will let you kind of know where you are and what to do with your next dollar to

prioritize, but then we also did a show recently that was kind of the financial priorities or financial tugs of war, and it's exactly these types of things: save for retirement or pay for kids' college or, you know, and things like that. Because, by the way, your kids, we all love our kids, but based upon your situation, do the homework I laid out and be laid out first. But, and if there's extra, sure, you can start funding the 529s and thinking about that type of stuff. But if you find out that you're not in such a stable place with your retirement or it's going to require a little bit extra from you, it is back to put that oxygen mask on your face before you help out your children, just like you do on the flight. And the fact that we've got to fund and get you in a good stable place because your kids can get student loans, they can get scholarships, you know, maybe it's more important to fund an ACT or an SAT prep course than it is to

immediately assume that you're going to have to go get yourself in a lot of student loan debt. Um, don't skip out on those steps. That's something I'll tell you. Growing up in a house that didn't know how money worked and didn't know how the systems worked. I didn't. I don't got scholarships just because I was blessed at some things lined up, but I didn't know. I didn't take any prep courses for the ACT or SAT. For my oldest daughter, we knew. We found out that if we could just get her score up another three or four points, she'd qualify for all kinds of, you know, merit-based scholarships at the institution she was looking at. So we paid a few, you know, I can't remember what the course cost. So don't skip out on those steps too. I think a lot of times those of us who don't have resources, we don't know that these things are out there that can really cut the corner off of, you know, of big.

expenses in your life that was good stuff. Thank you. Know what? I got one more thing. Sorry. Okay, do it. Save for your kids. Saving for college is great. Educating them on what they should pay for college is even more valuable. Meaning you can save a 529, but if you have a conversation with your kid about going to an in-state public school or a community college or a college that's not super far off, you may do a lot more economic value having that conversation and teaching them that lesson instead of saving in a 529 and building up assets to pay to send them somewhere else.

51 and Torn: Pay Off Debt or Save for the Future?

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The Money Guy Show

Jennifer, 51, has a pension and $135k in her Roth IRA, planning to work for nine more years.

She is struggling to focus on her financial goals and needs guidance on retirement planning.

It's important for her to determine her desired retirement lifestyle and monthly expenses to effectively plan her financial sources.

Planning for Retirement: Analyzing Pension and Savings

Understanding how much your pension replaces of your income is crucial for retirement planning.

Identifying the shortfall between the pension and living expenses helps determine the necessary savings over a specific timeline.

Taking inventory of assets and knowing your retirement number are essential steps in creating a realistic retirement plan.

To determine the net amount needed from investments, subtract Social Security and other cash flow promises from the pension.

The Know Your Number course helps individuals assess their savings and investments, providing clarity on their financial situation.

Prioritizing financial goals, such as paying off debt and funding children's college, is crucial to avoid distraction and achieve long-term financial stability.

Balancing Financial Priorities for Parents

Parents often face a tug-of-war between saving for retirement and funding their children's education.

It's crucial to stabilize one's own financial situation before helping children, as they can access student loans and scholarships.

Investing in ACT or SAT prep courses can be more beneficial than immediately assuming the burden of student loan debt.

The Importance of Saving for Kids' Education

Saving for college is important, but educating children on their college options is even more valuable.

Having conversations about in-state public schools, community colleges, and nearby colleges can provide greater economic value.

Teaching kids about making smart financial decisions for their education can be more impactful than just saving in a 529 plan.