HerMoney with Jean Chatzky: Detailed Summary of Episode “I make $150k a year and put $1k into retirement every month. What else should I be investing in?”

Release Date: April 11, 2025

In this insightful episode of HerMoney with Jean Chatzky, host Jean Chatzky invites financial expert Jenny Van Leeuwen Harrington for a comprehensive mailbag session. The episode delves into various investment strategies tailored for women at different life stages, addressing listener questions with frankness and expertise.

1. Investing Pre-Retirement

Listener Question: An anonymous listener nearing retirement with six years left and limited investment experience seeks guidance on starting a Roth IRA and effective investment strategies.

Discussion:

Jean introduces the topic by highlighting the importance of diversifying investments outside of a workplace Simple IRA, especially as one approaches retirement.

Jenny's Advice:

• Investment Timing and Strategy:

  “I think it really is never too late. The challenging thing here is six years. Is six years long enough to be considered long term? I would argue yes.”
  (02:18)

  Jenny emphasizes that a six-year horizon is sufficient to engage in long-term equity investments. She recommends a plain vanilla portfolio composed of Exchange Traded Funds (ETFs) to ensure diversification and stability.

• Portfolio Composition:

  “I would do an equal weighted S&P 500, which is the ticker's RSP. I would do an international developed market fund, the ticker is EFA. And I would do a mid-cap US Fund, the ticker that I like is just the Vanguard one, VO, and some combination of those three because that's a plain vanilla all-stock.”
  (03:17)

  Jenny suggests allocating 80-90% of the portfolio to ETFs and reserving 10-20% for individual stocks to stay engaged and informed.

• Proportion Recommendations:

  “I might do something like 50% in the US maybe 30% in the international and maybe 20% in the mid-cap US.”
  (04:40)

  She advises a balanced approach, adjusting allocations to mitigate risk while capitalizing on growth opportunities.

• Behavior Over Allocation:

  “When you take the best investment advice from the best investors of all time... they're all just talking about behavior.”
  (04:40)

  Jenny underscores the significance of maintaining disciplined investment behavior over obsessing about specific asset allocations.

2. Saving for Children's College Education

Listener Question: Jessica, a parent of three high schoolers, struggles with saving for college amidst financial constraints and seeks the best investment approach for the coming years.

Discussion:

Jean acknowledges the challenges of funding higher education and transitions to Jenny for expert advice.

Jenny's Advice:

• Investment in Bonds:

  “I think you go for bonds when you only have a few years left. I do not think you have that long-term horizon and I don't think you can take risk.”
  (06:22)

  Jenny recommends shifting investments to bonds, particularly short-term corporate bonds, to preserve capital and ensure liquidity.

• Current Market Advantage:

  “Jessica, you kind of got lucky in that you can buy bonds and actually get some return right now.”
  (06:22)

  She notes the favorable interest rates on bonds currently, making it an opportune time to invest in them.

Jean's Additional Tips:

• 529 College Savings Plan:

  “Go to savingforcollege.com, look and see if you're eligible for a state plan that gives you a state tax deduction or any other sort of perk.”
  (06:50)

  Jean advises utilizing 529 plans to benefit from tax advantages and tailored investment strategies.

• Conservative Portfolio Selection:

  “You want to go the conservative route. You don't want to go with the aggressive portfolio or even the moderately aggressive portfolio with this few years between you and that first tuition payment.”
  (06:50)

  Emphasizing a cautious approach, Jean reinforces the importance of protecting funds as the college payment deadlines approach.

3. Required Minimum Distributions (RMDs) and Account Withdrawals

Listener Question: Mary Carmen, a retiree, seeks advice on whether to withdraw $2,000 monthly from her brokerage account or traditional IRA to complement her Social Security, focusing on tax implications.

Discussion:

Jean introduces Mary’s question, highlighting the complexities surrounding RMDs and strategic withdrawals.

Jenny's Advice:

• Red Flags in Financial Management:

  “I am bothered by the IRA account that is managed by the financial advisor at a 1% cost with a 1 to 3% return on investment, I would say that was a red flag.”
  (12:28)

  Jenny critically assesses Mary's IRA management, identifying high fees and low returns as significant concerns.

• Tax Impact Considerations:

  “Don't worry too much, which bucket it is. Just worry about which account's going to create a smaller tax bill for you when you take it.”
  (12:40)

  She advises focusing on minimizing tax liabilities rather than strictly segregating accounts.

• Long-Term Tax Planning:

  “If you do kick the can on the retirement account, you can end up with a higher tax rate later.”
  (14:02)

  Jenny warns against delaying withdrawals from retirement accounts to avoid future tax burdens.

Jean's Perspective:

Jean echoes Jenny's concerns, reinforcing the need to reassess her financial advisor and consider alternative strategies to optimize her retirement funds.

4. Additional Investment Options for High Earners

Listener Question: Angelique, earning $150,000 annually, contributes $1,000 monthly to her 401(k) and $450 monthly to her son’s 529 and custodial accounts. She seeks advice on additional easy and moderate investment opportunities.

Discussion:

Jean commends Angelique's robust savings strategy and introduces Jenny to provide further investment guidance.

Jenny's Advice:

• Positive Reinforcement:

  “Angelique, you're a brilliant investor because so much of those long-term returns are putting the thousand dollars a month in and good behavior.”
  (15:29)

  Jenny acknowledges Angelique's disciplined investment approach, emphasizing the power of compounding.

• Compounding Power:

  “If you want to do something fun… you will have essentially lost not just the $60,000, but now it's doubled to 120.”
  (19:35)

  She explains the exponential benefits of consistent investments over time, urging continued disciplined contributions.

Jean's Additional Tips:

• Maximizing Tax Advantages:

  “If you are old enough to make catch-up contributions, you may be able to put a little bit of additional money into that 401(k) which would allow the money to grow tax-deferred.”
  (18:08)

  Jean suggests exploring additional avenues like catch-up contributions, Roth IRAs, Health Savings Accounts (HSAs), and brokerage accounts to leverage tax benefits.

• Diversified Investment Strategy:

  “It's easy, you can set it and forget it again. If you want to do some stocks for fun or for your 15-year-old son, for fun, great.”
  (17:48)

  She recommends maintaining a balanced and diversified portfolio to sustain growth while managing risks.

5. Compounding: A Double-Edged Sword

Discussion:

Jenny elaborates on the concept of compounding, highlighting its significant impact on long-term investments.

Jenny's Insights:

• Visualization of Compounding:

  “If you set it a growth rate of 5%, what the difference is between a growth rate of 8%. It's pretty stunning.”
  (19:35)

  She encourages listeners to utilize compound calculators to visualize potential growth and understand the profound effects of different interest rates.

• Cautionary Tale:

  “If you do something like, okay, I really need to buy a new car, but that's $60,000. And by the time I'm 59, I will have essentially lost not just the $60,000, but now it's doubled to 120.”
  (19:35)

  Jenny warns against impulsive large expenditures that can negate the benefits of compounding, illustrating how financial decisions can either build or erode wealth over time.

6. Conclusion

Jean and Jenny wrap up the episode by reiterating the importance of disciplined investment behavior, strategic asset allocation, and leveraging tax-advantaged accounts. They encourage listeners to continue educating themselves, utilize available resources, and maintain consistent investment practices to secure their financial future.

Notable Closing Remarks:

• Jenny on Commitment:

  “You're putting money in, in a consistent way. Actual dummies are the ones who inherit $150,000 account and spend $12,000 a year and freak out when the market's at a low.”
  (17:10)

  • “If you want to do something fun… compounding can help you make really smart financial decisions.”
    (20:05)

Jean concludes by promoting HerMoney’s programs, Finance Fix and Investing Fix, aimed at empowering women with financial confidence and knowledge.

Final Thoughts:

This episode of HerMoney with Jean Chatzky offers invaluable insights into pre-retirement investing, saving for education, managing RMDs, and maximizing investment strategies for high earners. Through expert advice and practical examples, Jean and Jenny provide listeners with actionable steps to enhance their financial well-being and achieve long-term financial security.