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Ep 20B: Do you have your financial house in order? Ready for Retirement?: Angel & Stephen Thomas

Updated: Jul 16, 2023


Hello, This is Sirisha, welcome to my podcast!

Are you planning to retire soon? Have you planned out all the details? How do you protect your lifestyle and assets? In this episode, we talk about Insurance, Wills, trusts, protecting your assets and the reality of retirement. We also discuss travel reward points, free hotel and airfare. This is Part 2 of the conversation with Angel & Stephen Thomas.

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Below is a transcript of the episode, slightly modified for reading.


[00:50] - Meet Angel & Stephen [Jump to section]

[04:31] - What can retirement really look like... [Jump to section]

[06:30] - Airlines and Hotel Points... Free Vacations [Jump to section]

[10:19] - Can you retire early... [Jump to section]

[16:22] - Wills...Trusts...Etc...Protecting your Assets[Jump to section]

[21:40] - Note to 21-year-old self [Jump to section]

[23:06] - Food for thought. Episode takeaways [Jump to section]


[00:50] Meet Angel & Stephen

Sirisha: Welcome to today's podcast. We are continuing our series on "Let's Talk about Money" and I have some really good friends, Angel and Stephen Thomas joining us. Stephen is an independent consultant and he will talk more about what he does Angel works in the high-tech industry as an engineer. They're both parents of two lovely young children, and we are going to walk through their journey from when they started college, all the way to where they are now in their life. I met Angel and Stephen when I started my first job. So they've known each other a long time and had financial discussions over the course of years. And I think it is a good perspective to hear about some of the decisions they made early on as they graduated college. So, Angel and Stephen, Welcome. Thank you for being here on the podcast today.

As part of all the planning you did, can we spend some time talking about all the different types of insurance you have and how have you protected yourself?

Stephen: All the insurances that we have, it's definitely where people are very opinionated about term versus whole life versus disability and it's really up for people to see what works best for them. For us, we understand that we're paying more for a whole life policy and, other people would think it's the silliest thing in the world. But for us, it fulfils the need and provided what we wanted at that time. And that's why we supplemented it with the term insurance as well. Most people probably don't have both, but I get it's really what works best for everyone's situation.

Angel: And we've also protected ourselves with some disability insurance on our own, on ourselves, in case we become disabled. That way, we still have some money coming in as well as umbrella policies or liability insurance through my work as well.

Stephen: So it's one of those things where you pay six, $700 a year and it could save you from a million-dollar lawsuit.

Sirisha: What I'll do is on the blog, I'm going to post the different types of insurance. So people can do the research and figure out what's right for them. But at least it gives them the opportunity, I know about umbrellas, I don't know about everything that you're talking about. I know some of the disability insurance and stuff.

Stephen: There's long-term care insurance too, which is outrageously expensive and so we don't have that long-term care insurance, when they're older for medical insurance, Medicare, Medicaid, or assisted living. And our friend here, his dad had it and was in a very expensive one, had a memory, Alzheimer's type issues. Was it a very expensive assisted living home for several years? And it was a miracle for them to have that policy that paid for it all. Cause that's $10,000 a month and this policy paid for it all. But for us now to buy it, it would be $500 a month for the policy. It wouldn't even be worth it.

Angel: Yeah. It's interesting as our parents get older and so I realize that, oh, if they have to go into one of the places, they would deplete their savings, in possibly one year all of their savings and so that's really worrisome, wondering about that someday.

Sirisha: I've heard most people take it around 50, but from what you're saying, you need it even earlier.

Stephen: Yeah, I've heard it. It's relatively inexpensive. If you get it like, when we first got our life insurance policies, it's just money over time. If it'd be a hundred dollars a month then, but you're paying for 35 years versus now we'd only be paying in 10 years. So it's, it would cost a lot more, but yeah, last time I priced one and then it was so restrictive. Like it was $5,000 a month maximum and then there were policy maximums like it was just so restrictive that it wasn't even, worth it. I'll just have to have Angel take care of me. Westin will take care of me. He's a good caretaker. And yeah, we'll see. It's interesting how expensive that is honestly.

[04:31] What can retirement really look like...

Sirisha: I have an interview coming up with a financial planner and she's going to talk about the four pillars of retirement, which talks about healthy living relationships, and finance because most of us, when we think of retirement, we think only about the money part, a huge portion of it. But there are all these other aspects that you need to get ready or even think about. It's a lifestyle, it's not just about the money or having insurance and just living, but the lifestyle you want, what hobbies, how are you going to think about it?

How do you plan ahead so that after you retire yes, your travel, but how else are you going to keep yourself busy investing in the relationship?

Stephen: The new thing is separate master bedrooms. That's the key to a happy retirement. So sounds pretty good that I got a time limit of 15 more years and I'm on my own again.

Angel: It's actually interesting though. Most couples, we know, like at least the older couples in his family, do all have separate bedrooms. Cause if one wants to watch TV, they wake up. One person wakes up every day at 2:00 AM and wants to read a book and turn the light on, and at the end of the night snore so there's a lot of snoring going on and so it is, that is funny.

Sirisha: You know what? I remember my dad, when he retired, was telling me about his friend. A lot of the women are homemakers, so when the husbands retire, they would come and stand at the door and say, what are you cooking? How much are you making? Did you put salt in this? They were driving their wife's a little crazy. One of the wives gave her husband a rag and said, okay, go clean the windows until then you don't get your morning coffee. So that's how she got him out of the way.

Angel: That's smart. Smart. Yeah. I like that. I think our travel keeps us sane, we try to do, we probably travel five to six weeks a year, I'd say. And a lot of short weekend trips around all of the holidays. The shorter holidays, if we can. We usually have the airline miles covered and hotel fees covered.

So we usually don't spend very much on our trips, which is great, so I think he was talking about doing a cruise around the world when we retire someday.

Stephen: That I can't get for free.

[06:30] Airlines and Hotel Points... Free Flights... Stays... Upgrades...

Sirisha: Stephen, maybe you have ideas. I know there are a ton of sites on points and stuff, and maybe you can point us to some of those because I do not use it. I was thinking about just before COVID hit on how to utilize that because there are blogs.

Stephen: is good and I've wrote a couple of articles on there about the Southwest companion pass. So it really takes an investment. Like you really have to. It's not oh, I'm just going to get this credit card we started going you got to fully invest in it, cause it takes a lot and it only gets worse.

It takes a lot of points to get things free and then it takes more points over time. If you wait three years, it's going to be or more points. So they always appreciate so it's finding the sweet spots and all the programs. And then the points guy will help you stay on top of it.

We paid for all our estimated taxes using a credit card and we pay a small fee for that but then we are in Southwest miles, which has a value. And then we, our points are their companion passes, which we get $3,500 in value in a year or two. So we've got a factor and we put it all in an Excel spreadsheet and calculate it up. And she thinks I'm crazy coming up because she's like you're spending $800 in fees. I'm like we're getting $600 in points, plus halfway to our companion pass or a third of our day, it's all a trade-off, and at the end of the day, it saving money. But it is a big investment, like in time, but it's fun and I enjoy it.

Angel: And there was things like when he was travelling full-time as a consultant, he would switch hotel rooms every night because, in a lot of the hotel chains, you get your status based on the number of nights or number of stays. So instead of doing one stay for a whole week, he would get four or five stays in that week.

Stephen: They've all changed that. I had a third of my project team, all switching on hotels every night. And then we all had to submit our receipts to our manager and he was like, oh my God. When he got through it and then he started doing it to Oh because you would get all these bonus points. lifetime Marriott, over 2,500 nights at Marriott I've stayed because they merged with Westin. They merged the profiles. I have 2000 at Marriott and 500 at Starwood proximity every year. Now some of those are bonus nights. You'd earn these bonuses five nights with the credit card, but probably two-thirds of them are stayed nights. So there were times we used to some clients would give you a residence in for the whole month. So I was getting 30 days to stay every month, even though we were just there a couple of nights.

Sirisha: For getting all these travel It's a time investment in a time commitment. Definitely.

Stephen: Yes. It's the thrill of the hunt, you're out looking for the best deal. You can find that deal when you find it and then you feel really, successful and happy. It's addictive.

Angel: I have one of my credit cards that I use frequently for my, all my daily purchases, gas, grocery, shopping, whatever it gives me travel points. So basically all I have to do is, anytime I travel anywhere and there's a hotel or a rental car or an airline charge on my credit card, I can just say, okay, I want to use my points to take that away. And basically, it takes away, that amount of money. So it's super easy. I don't have to go and book through them for airline purchases or things like that. So it's so easy to use and it's definitely, that's 2% are pretty good. 11/2 % to 2% is about the most you can expect to get.

Sirisha: We talked about you starting your financial plan. We talked about your entrepreneurship, what you learned, going through building inventory, going through debt, we've talked about just the benefits of work, investing crypto, IRAs, all of this insurance, which is a lot of different types.

It's quite complicated. So everyone has to do their research. What other lessons do you want to share? Financial lessons that we may not have touched, could be through your career, through other things that you've learned.

[10:19] Retire Early? Are you ready? What does retirement look like for you...

Stephen: So we did a really great job of saving for retirement, especially when we were young, we saved a lot of money for retirement. But now we're thinking of, what if we want to retire early? Now all our money is tied up in retirement accounts. We can't get to it till like 59 and a half. So that's a, I guess kind of a good thing we always want to eat for later, but like we both wanted to retire at 55. We would really have to think about how we would make that happen. As we're retiring at 60, it would be no problem. We have plenty of money, so it was really access to money and I would definitely not recommend anybody not saving as much as we did the first 10 years. But I think after that, we probably should have allocated a little less to accounts that we don't have access to until we're later in life. And that wasn't something that even crossed my mind at the time, to be honest. And we did have some other accounts. We used that money to build this new house that we built. We did have other money, but now that is not as plentiful as our retirement account. So we're very retirement heavy and we saved well, but we did have a plan, same as we plan for everything else that we do. But we met our financial advisors just two weeks ago, it was like, okay what's your plan for retirement? I'm like, I don't know. We have money. I don't have a plan now. And it's a little too early. We're just 46 to really plan on that now. But Mike, my brother-in-law just retired and he's 65 and he has this very complex plan. He would meet with his financial advisor all the time before this plan and I didn't understand how much thought was really into it.

Angel: I think our financial advisor said the best way to really plan or one of the best ways, to know when you can make it and retire is, if you can take all of your investments and take about 4% every year of your investments and just live off the 4%. He said, then almost everyone won't run out of money. You can also maybe consider living off about 5% of your investments and most of the time you won't run out of money and once in a while, you will. So we just have to find out at what point our expenses are not above 4% of what we have in investments. So once we live off of that, that's good. Another good thing we did do quite a few times is refinance our homes. Our current mortgage is at 2.5%. And it's hard to beat that and at that rate, it's hard for me, but it's better to put any excess money and investments instead of on a mortgage because the interest rate is so low in the mortgage, but I do hate seeing the amount of money and pay on mortgage interest. So that really hurts me, but it's best to, put it in investments which are going to make more than 2.5%. So that is a big thing, but we also try to do a lower mortgage loan if we can. So we should have our house paid off in about 10 to 12 years and we've had it for 5 years, so trying to pay off our houses within 15 to 20 years, if we can, instead of 30 years. Cause once we get to that point when our houses are paid off, then retirement is definitely an easier thing to do.

Stephen: The point to decide to retire, It's really tough. Factors in everything you've worked for your whole life and then now you got to think of, okay, when am I going to die? And it's you got to make it. So your money lasts until you die and that's a challenging thing to sit here and try to calculate, like my brother-in-law, he's like I ain't living past 75 or 80. No one in his family has ever lived past 80. So that's how he's allocated his funds. As, if I'm past eighties, like I'm going to be in such bad shape. Yeah. It doesn't matter. But my mom and stepdad are 86 and running around almost 87, it's like they're 60.

Angel: Yeah. So they're still doing great. But, just never know. It's like the crystal. You don't know.

Sirisha: None of us do, but that's interesting. You talked about saving for retirement. How do you balance if you want to retire early, how do you start thinking ahead of time? Because, I think when you're on that trajectory when you start working, your nose is to the grindstone and you're headed down this long tunnel trying to get there fast. And then now you have to switch your thinking as to, yes, I have it ready, but if I pull that trigger early, what do I need to get that 4%? I think it's good for everyone to start thinking about what their financial plan needs to look like and holistically, there's all these pieces, Insurance investments, benefits, everything. Whether you're an independent freelancer entrepreneur, a corporate job, whatever it is, think about it holistically. And whether you get a financial planner, which should be probably a good idea or do it yourself, you have to think of all the moving parts because yes, you'll invest for retirement, you'll take out 4%. I find that it took me a long time and I find it interesting. When I have conversations with friends, they give a number and they talk about a date I retire at like you said, 65, 70, or I need so many million, whatever that number is. But I think no one really knows what that number is and that's where the financial planner helps because, what I've realized when I've gone is, yes, you need a certain number, but it may not be actually as high as you think, because your money is growing when you retire. It's not like you're pulling all that money out and it's sitting in a bank. It's continuing to grow still. So, it's good for those people who might consider that trajectory of early retirement. I want to pivot to actually know what that looks like, and then make a conscious decision then, just assume a number you heard from a friend that may not be the right number for you. Because it depends on your lifestyle, what you want to do, what your spending habits are, how much is in retirement, how much is somewhere else.

Stephen: Angel was thinking the other day, she's looking at our life insurance and our house. When we die, the kids will get that and they're going to be loaded. That's so much more money than either our parents made out of their whole lifetime. Just the value of this house, assuming it doesn't crap. They should have no problem making a very good life of just that. And I know that doesn't mean that anything else.

Angel: And hopefully we'll downsize. We get older and that'll be a huge chunk of money that we can use for our retirement. So we, so I feel like our house is part of retirement as well.

[16:22] Wills...Trusts...Etc...Protecting your Assets

Sirisha: So we've been talking about setting up for the future. Do you have a Will, Power of attorney? Can you talk about those kinds of documents and set up,

Angel: We have an 8-year-old daughter and then we have an 11-year-old son and he has some special needs. He has a rare genetic syndrome, so he might not go to college but because of that, we are preparing for his future. So we'll have a special needs trust that will put some savings in for him and that's what he can use to live off of when he's an adult. And we'll probably live the best for most of his life, most likely, but we built a house and it's all custom for any needs that he might have. This guy's own little apartment that he can live in when he's an adult. And it's got wide hallways in case he's in a wheelchair, things like that.

Sirisha: With your son, you've set the setup, it just shows clear thoughtfulness on your part.

Stephen: But we should've had a will the second our first kid was born, but, we procrastinated. So we're working now on getting our will's set up. And since our son can't have assets, cause he has special needs, we have to do a special needs trust. So that's a little more complicated and we're working on that, but the will is definitely very important. And after seeing some of Angel's family go through deaths without wills, it can be very traumatic. Like your family lose everything. If some random person comes in and says, oh, I have a will, and it's hard, very hard to dispute them.

Angel: Both of our families have actually had that happen and where someone changed the will right before death strangely. And we don't think it was their sound mind, strange things like that.

Stephen: The will is very important.

Angel: It's very important. My company has a legal plan that you can join and I did join that. And so our parents have been able to use the parent's service on that to do their wills. And they both just got the wills and are in place and we're working on ours as well, along with the special needs trust for our son, and so we'll have it done by April.

Sirisha: And I'm glad you talked about the Will because those are as important. You do the retirement, you set up insurance, but you need to protect your assets. If you especially looking at inheritance, there's a whole tax implication that people will need to do a review. But I think just the thought, just as you're talking about it, just having a will, a power of attorney, health directives, everything. I think people have to look at all those pieces when they're planning their future, because if you're building the assets, I think you said it in the beginning, right? When they go into, if they have medical needs, It consumes a lot of that. So you may not have as much left, but if you do have it, you want to make sure that the inheritance goes the way you plan.

Angel: And we do have our beneficiary set up, Most of our savings as we would like. You can do what is your bank account, where you can also put like a beneficiary and it's called something a little different depending on the bank you're at. It's nice to have, especially when you have children, you need to list who you want to take care of your children. It's not so obvious in our case because I don't have any really close younger siblings and then my husband, his siblings are much older and we don't have any family that lives near us. So none of them are really all that familiar with our kids. So, it was a difficult decision to make, on who would care for our kids. And that's why, it's taken us a little while, to do our will. We have the person down now, but we weren't really sure who we'd used, so that was a big one.

Stephen: We're actually using a friend instead of family because none of our family can really dedicate the time needed to take care of Westin and the capacity he needs. In general, his care is only gonna be more time-consuming over time, not really better.

Angel: It'd be easy for Hayden to go with someone knowing that by the time she's 18 and hopefully she'll move out and go to college and continue on. But with Westin, we're going to need more care or someone to make sure that he's set up okay in a group home type of situation. If that's where he ends up, it's hard to say, but we'll just have to see how he does when he's older.

Sirisha: Exactly. I think will is not just about the financial part. It's about the children as well, especially if they're 18 or they have needs outside. And I think that is something for people to remember, because otherwise depending on the state you are in, they can assume responsibility to make the decision for you. You brought up a really good point. It's not always family, so it's an interesting discussion to have because you both have to agree on who is going to take care of the children, who is the right person who can provide the care financially and outside of it. So, I think that is the reason to have will and other pieces put together because you're, especially if you have kids, to have that conversation, then there's also the financial piece of it. And you're right, there's investments banks, or they have their, joint or survivorship or trusts or beneficiaries, or very many ways of how you want to divide the money. And if you talk to a financial advisor or a trust, like you said, kids get inherited a lot and you can even stagger those amounts over the number of years and how you choose to pay for them so that they have that.

Angel: There's also the decision about doing a living trust that helps to save a lot of these and inheritance fees. Later on down the road, that's another big decision for people to make as well.

Sirisha: Yeah, exactly and I think that's where all these pieces with maybe an advisor or whoever they choose to do. I think there are so many implications as people are growing their wealth to take into account as they look at it.

Angel: Yep, for sure.

[21:40] Note to 21-year-old self

Sirisha: Great. This is a question I ask everyone. What advice would you give your 21-year-old self in life and career or finance?

Angel: So I would say don't live above your means. So I know some people jump in with their first house and it's quite a bit above their means and that causes a lot of stress on relationships and things like that. So, start saving from day one, at least I would say at least 25% of your salary, honestly. And then I would say travel, get the travel bug in when you're young, go see other places, see how other people live. I just think it's neat to see other cultures and, or just relax and get away. Sometimes I think that's important as well.

Stephen: And I would say just because you end up with extra money in a month, doesn't mean you have to spend it, it's just making sure we have the savings so that when you do want to spend it and do want to move on and forward up in your life that you have that money available.

Angel: And also donate, I think that's really important to donate to causes that are really near and dear to your heart and, that's an important thing to us too.

Sirisha: So, we touched on some really good things. I love the fact that you're talking about donating and charity because it's something you can support. You can see the impact you're having and it also brings back a certain amount of joy and happiness.

Angel: You can always donate time if you can't donate money, donate time to charity.

So I think that's very important as well.

Sirisha: Exactly.

[23:06] Food for Thought, Episode Takeaways

Sirisha: So I wanted to just summarize what we talked about. You had some really good advice about saving and, making sure you spend within your means, you talked about retirement, you talked about all the different types of insurance, so people can look at it. Travelling and if you want to do it on points and stuff it's more time-consuming and complicated, but that definitely a lot of resources outside, like the points guy. Setting up a will, a trust, just so many different pieces that we talked about and not to forget, to give your own time and investment in charity, you could even use it to mentor someone. You could use it to help someone, there are so many ways to do it and find something that benefits you. As people are looking at retirement, a lot of people, when they think of retirement, they think of travel and volunteering, right? Those are very often the two responses you hear. And I read this article a few years ago, it says, start planning five years before you get them because it's not like a time switch, you can switch and then you find the resources and you built the network, but start investing early. So you can build the resources, the group, the community around you for either the travel or volunteering or whatever you may choose to do.

Resources Mentioned:

Please do your research and/or consult a financial advisor to determine what is right for you.

Guest: Angel Thomas

Guest: Stephen W. Thomas

Host: Sirisha

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