Every week on “The Financial Symphony,” John Stillman answers your retirement planning questions on the request line to help you make sure that all of the instruments in your financial orchestra are playing in tune. Submit your financial question below, and you could have it answered by the maestro himself!
I just started a new job that has a higher upside than my previous job but a lower base salary. I’m counting on some big commissions in my future! But my base salary is low enough that it would be hard to contribute to a 401(k) and still be able to pay my bills. Is that OK? Can I just use my commissions for retirement savings even though those payments will be somewhat irregular?
— Kerry in Chapel Hill
Well, you can make that work, but I would tell you to be careful. With most people in your situation, they end up living on such a tight budget on a month-to-month basis that when those commissions or bonuses come in, it’s really tempting to go spend money on all of the things that you haven’t been able to do for the last couple of months.
So, if you’re going to be getting big commissions three or four times a year, you have to be very intentional about putting some of that money away for retirement savings. Otherwise, it will get frittered away on all the stuff that you couldn’t do in the other months.
Another thing to consider is that when you look at your monthly budget, you might not be factoring in things like property taxes, car insurance, or annual subscriptions that are due on an annual or semi-annual basis. If you haven’t factored in those expenses, you might find that your commissions end up paying for things like that, and the next thing you know, you don’t have anything left for retirement savings.
I was under the impression that the new tax laws would mainly benefit rich people, but I’m the definition of middle class, and it appears that my 2018 taxes were quite a bit lower this year than they were last year. Do you think I did something wrong?
—Mark in Oxford
Well, it’s possible that you did something wrong, but more likely, you’ve just been listening to politicians who are, how you say, less than honest in their talking points.
Here’s what I’ve seen with most of my clients. People who make less than $100,000, for the most part, are better off with the new tax laws. Higher income earners have been all over the place… some have benefited, others were better off with the old laws. Business owners across the board have benefited greatly.
I haven’t seen a single person who’s been significantly impacted in a negative way. I’m not saying those people don’t exist, I just haven’t run into them.
So when you hear politicians talking about policies implemented by their opponents (and, obviously, this is true for both sides), you have to remember that they’re going to criticize those policies, regardless of how legit (or not) their critiques actually are.
But the broader lesson here isn’t really about your taxes. The main lesson is that you need to be very careful about the narratives and storylines that you automatically assume to be true as it relates your money. Whether it’s politicians, the media, or even a friend or relative, there’s almost always an ulterior motive behind what they say. Or in some cases, especially if it’s the friend or family member, it’s not really an ulterior motive, it’s just ignorance.
Before you make up your mind about whether a financial “fact” is true or not, make sure you’re exploring how those facts actually play out in your own life.
Hosted by John Stillman of Rosewood Wealth Management, Financial Symphony equips you with the tools and knowledge needed to successfully orchestrate your way to and through retirement. You can listen to the full show here, and tune in every weekend 97.9 The Hill. The shows airs Saturday at 11am, with a repeat airing on Sunday at 10am.