Do You Have Moldy Money Laying Around? Ep #90

Do you have moldy money hanging out in your accounts? I’m not talking about the cash that got wet and stuck in the back of a drawer. Moldy money is the topic of today’s Retire Ready segment, you’ll want to listen to find out why you don’t want to keep moldy money around. You’ll also get to hear 3 listener questions about various retirement topics. Find out more about moldy money, 401K questions, and how to calculate a pension into your retirement plans on this episode of Retirement Starts Today.

Find out about moldy #money, 401K questions, and how to calculate a pension into your #retirement plans on this episode of #RetirementStartsToday. Click To Tweet

Outline of This Episode

[1:42] How to avoid moldy money
[8:31] Does he have too much in a 401K?
[14:10] How should a modest pension be calculated into an overall retirement plan?
[19:30] A Rollover 401K question

What should you do with moldy money?

Moldy money is a big pile of cash with no real goal or purpose. Many people think that it is a good idea to have a stack of cash there when they need it, just in case. But anything beyond emergency savings and short term fund savings is considered moldy money. Although moldy money doesn’t necessarily hurt anything it represents a lack of planning. You need to consider the missed opportunity cost of having lots of cash without a goal or purpose. What trips weren’t taken? What experiences weren’t had because you just left the money to sit with no plan? Make sure your money always has a plan. Find out more about what you can do with your moldy money by listening to this episode of Retirement Starts Today.

Moldy #money is the topic of today’s #Retire Ready segment, you’ll want to listen to this episode of #RetirementStartsToday to find out why you don’t want to keep moldy #money around. Click To Tweet

When should you convert 401K funds into a Roth IRA?

I recently asked my newsletter subscribers to send in some questions and I got a great response. One listener had some questions about his 401K. He feels like he has a lot in them and doesn’t want to get stuck with a large tax bill after deferring the taxes for so long. Although there are limitations to how much you can contribute to a Roth IRA, there are no limitations to how much you can convert from a 401K. Just remember that when you convert your 401K to a Roth you will have to pay income taxes on that amount. The more you convert before age 70 the less you will have to take out at age 70 ½ for the required minimum distribution. Listen in to hear the rest of the response to this great question.

How should a modest pension be calculated into an overall retirement plan?

Normally in retirement planning, all assets and income sources are calculated together get the total retirement resources and then compared with the total retirement goals to get a good picture of your likelihood of success. But if you want to consider how much you will need to achieve the equivalent of a small pension you can do some fun math problems. If the pension is $300 a month then that equals $3600 a year. Find out how much you would need at a 4% rate of withdrawal or using a 5.5% rate of withdrawal either by doing your own math or cheat and listen to how I find this calculation.

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Should you keep separate 401K’s for each job or roll them all into one?

Another listener has a different question about 401K’s. He has changed jobs several times over the years and has rolled over his 401k each time. He wants to know if all of this change is hurting his investment portfolio. I don’t think so. By bringing your retirement with you each time you change jobs it allows for more accountability and more control over your investments. Old 401K’s often get neglected. To ensure that your money doesn’t stay out of the market long try and make sure your funds do a direct transfer instead of receiving a check. Direct transfer is the best way to rollover so you won’t lose market performance. Bringing your 401K with you ensures that you have your money all in one place, it becomes easier to keep track of and keeps life simple.