55 and Thinking of Retirement

Summary

Episode 55: Thinking of Retirement

Release Date: January 8, 2025
Host: Jill Schlesinger, CFP®
Platform: Audacy

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Introduction

In Episode 55 of Jill on Money with Jill Schlesinger, host Jill Schlesinger delves into the complexities of retirement planning with a special focus on real-life scenarios. The episode primarily features a caller named Bennett from Colorado, who seeks guidance on his financial situation as he approaches retirement age.

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Guest Introduction and Financial Overview

Caller: Bennett, Age 55
Spouse: Also 55
Children: Two teenagers; one recently employed full-time, the other a college sophomore.

Bennett initiates the conversation by outlining his and his spouse's financial landscape:

• Income:
  • Bennett: Commission-based sales, averaging between $150,000 and $210,000 annually, expecting to stabilize at around $150,000 in the coming years.
  • Spouse: Part-time employment earning approximately $5,000 to $6,000 annually.

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Retirement Accounts and Assets

Jill inquires about their retirement savings:

• Bennett's Retirement Accounts:
  • Roth 401(k): $500,000
  • Traditional 401(k): $255,000
  • Schwab Account: $125,000 in a Roth and $243,000 in rollover IRAs.
  • Cash Balance Plan: $53,000 (treated as non-retirement money)
  • Additional 401(k) Rollover: $164,000 in Vanguard Target funds

Notable Quote:

"It's 60 years old. You get that pension."
— Bennett at 07:23

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Pension Plan Details

Bennett explains his pension plan, which includes a company-funded component and a voluntary one:

• Company Component: Provides $4,000 monthly at age 60.
• Voluntary Component: Offers an additional $600 monthly or a lump sum of approximately $118,000.
• Contribution Status: Frozen three years prior; no current contributions.

Discussion Points:

• Access to Pension: Jill questions whether the pension can be accessed earlier if Bennett decides to leave his job before age 60.
• Future Employment: Bennett is uncertain about continuing his current sales role beyond age 55 and is contemplating a potential job pivot or early retirement.

Notable Quote:

"If they were to say, like, you're out of here, Bennett, I think they have to start paying out on the pension."
— Jill Schlesinger at 11:56

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Housing and Assets

• Primary Residence: Owned outright, valued at approximately $1 million.
• Second Home: None.

Jill emphasizes the significance of owning a paid-off home in retirement planning, reducing monthly expenses and increasing financial security.

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Monthly Expenses and Income Projections

• Current Monthly Expenses: Approximately $9,000.
• Projected Income at Full Retirement Age:
  • Pension: $4,600
  • Social Security: $3,388
  • Total: $7,988

Jill highlights the gap between current expenses and projected income, focusing on strategies to bridge this difference.

Notable Quote:

"At your full retirement age, just so we're clear of the 9,000 you need, you get seven grand coming in between the pension and Social Security."
— Jill Schlesinger at 09:16

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Savings and Investment Strategies

Jill advises Bennett on maximizing his retirement savings:

• Current Savings Approach: Maximizing Roth 401(k) contributions with catch-up provisions.
• Additional Savings: Allocating any surplus income from higher earnings years into non-retirement accounts to cover the interim gap between pension access at 60 and full Social Security benefits at 67.

Notable Quote:

"If you could sell anything and you can make that money that you guys need that nine grand a month, then I think you're in really good shape."
— Jill Schlesinger at 11:22

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Insurance Considerations

• Long-Term Care Insurance: Jill advises against it due to Bennett's substantial pension and savings, which already provide a safety net.
• Life Insurance: Bennett and his spouse have adequate term life insurance coverage.
• Estate Planning: They have estate documents in place but need to update them, as it has been 20 years since the last revision.

Notable Quote:

"Have somebody take a little look, see and update it. Because estate laws have changed..."
— Jill Schlesinger at 15:25

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Conclusion and Takeaways

Jill reassures Bennett about his financial standing, emphasizing the importance of:

• Updating Estate Documents: To reflect current laws and personal wishes.
• Maintaining Healthy Savings Habits: Continuing to maximize retirement accounts and save in non-retirement vehicles.
• Planning for the Interim Retirement Period: Strategizing for the 7-year gap between pension commencement and full Social Security benefits.

Bennett expresses his gratitude for the insightful advice, and Jill encourages listeners to review and update their own financial plans regularly.

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Key Insights and Recommendations

1. Balanced Retirement Savings: Leveraging both Roth and Traditional retirement accounts can provide tax diversification in retirement.
2. Estate Planning is Essential: Regular updates to wills and estate documents ensure that they align with current laws and personal circumstances.
3. Insurance Needs Vary: Assessing the necessity of long-term care insurance based on existing assets and income sources.
4. Strategic Income Planning: Utilizing a combination of pensions, Social Security, and personal savings can effectively bridge income gaps in retirement.

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Final Thoughts

Episode 55 offers a comprehensive look into retirement planning through Bennett's real-life scenario. Jill Schlesinger provides actionable advice, highlighting the importance of diversified savings, proactive estate planning, and strategic income management to ensure a secure and comfortable retirement.

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For more personalized advice, listeners are encouraged to reach out via jillonmoney.com and consider subscribing to the weekly newsletter for ongoing financial insights.

Transcript

[Jill Schlesinger]

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[Jill Schlesinger]

Learn [e-mail] AmExBusiness welcome to the Jill on Money Show.

[Mark]

It's Wednesday, January 8th and we are here talking about you, your needs, your.

[Jill Schlesinger]

Financial needs, your big life picture Questions.

[Mark]

If something is going on, we want to hear from you. And we want to hear from you. No matter what it is, I promise you we'll uncover something interesting. Go to our website jillonmoney.com, click the contact Us button. Let us know if you wanna come on the air live by checking the box Mark will do everything else on the website. You will also see a ability to sign up for a free weekly newsletter and it comes out every Friday.

[Jill Schlesinger]

I encourage everybody to do that.

[Mark]

I know that not all of you do because there are more people listening to the podcast than there are subscribers to the newsletter.

[Jill Schlesinger]

So let's get going, gang.

[Mark]

Come on. Right now, let's go talk to Bennett, who's on the line from color.

[Bennett]

I'm 55 years old and we're kind of getting to the end of the line here and I wanted to get another set of eyes on where we are financially and kind of get your thoughts and opinions on, you know, where.

[Mark]

We are, where you be.

[Jill Schlesinger]

What, what else? There's a we. So there's a spouse.

[Bennett]

There's a spouse, yes.

[Jill Schlesinger]

How old?

[Bennett]

Teenagers. My spouse is 55 as well.

[Jill Schlesinger]

Okay, and how old are the kids?

[Bennett]

The kids are 22. One of them just started a full, full time employment yesterday. Yay. And then, and then the other one is going to be a sophomore in college.

[Jill Schlesinger]

Okay, how much do you guys earn together, you and Spousie?

[Bennett]

We. I'm in sales, commission based sales. So it varies between, I'd say 150 and 210,000. I think the next couple years it's going to be on the lower end of that. Okay, so I would say, you know, conservatively 150,000. My wife does. She earns about five to 6,000. She does home.

[Jill Schlesinger]

I'm so sad because I thought you were about to say. When you said five to six, I thought you were going to say five to six hundred thousand. I was getting a big like. Okay, so she's five to six thousand dollars as just part time something or other.

[Bennett]

Yes.

[Jill Schlesinger]

Got it. Let's go and do some more details. So on your sales job, you put money into a 401k.

[Bennett]

Put money into a Roth 401. Correct.

[Jill Schlesinger]

How much is in there right now?

[Bennett]

About $500,000.

[Jill Schlesinger]

Is there money also in a traditional.

[Bennett]

There is also in a traditional. There's another $255,000.

[Jill Schlesinger]

Okay, so $500,000 in a Roth, $255,000 in a traditional 401. Other retirement assets that are outstanding. What's going on?

[Bennett]

We've got some money in schwab account and 125,000 of that is in a Roth. And then 243,000 is in rollover IRAs. And we have a joint tenant account there that's 155,000 and that's money.

[Jill Schlesinger]

You guys manage yourselves in index funds or what's in there generally.

[Bennett]

So it's the robo advisor funds.

[Jill Schlesinger]

Ah, yeah, good. Okay. So it's all robo, so that's easy. What else do you guys have that's outstanding in terms of assets in addition to what You've just recounted to us.

[Bennett]

So I have another account via my employer that's they call it a cash balance plan that's 53,000.

[Mark]

Is that a pension plan?

[Bennett]

It's kind of a pension. It accrues a low interest level and then it's something that I can't touch until I leave my employer and then.

[Jill Schlesinger]

I just will get that money as a cash out. Or is it, in other words, is it treated as retirement money or non retirement money? Do you know?

[Bennett]

I think it is treated as non retirement money.

[Jill Schlesinger]

So, okay, what else? Any pension?

[Bennett]

I do have a pension. There's a couple of other accounts. I have another 164,000. We have another 164,000 in a 401k rollover that's in a couple of Vanguard Target.

[Jill Schlesinger]

What do you mean a 401k rollover? Is that an IRA rollover that's rolled over at someplace else?

[Bennett]

That's a good question. I think it's just money that moved early in my career to a census. Is the company that manages it. And I don't know, I don't think it's an IRA or a Roth.

[Jill Schlesinger]

It's an old 401K. Sorry, what was the balance on that?

[Bennett]

$164,000.

[Jill Schlesinger]

So that's it. And then we're going to talk some pension. You know, I'm excited about this.

[Bennett]

Yes, yes, the pension. So I have a pension that has a company funded component and voluntary component to it. So in looking at that, If I use 75% rights of survivorship with that, the pension will be 4,000amonth.

[Jill Schlesinger]

Holy smokes. And are you contributing?

[Bennett]

No, they froze that, I want to say three years ago.

[Jill Schlesinger]

Okay. All right. Is there some formula or some point in time where you can take it? In other words, is it 55 plus years of service or is it like you have to wait till you're 65?

[Mark]

What are the rules of the pension.

[Jill Schlesinger]

And how you can access it?

[Bennett]

It's 60 years. 60 years old. You get that pension.

[Jill Schlesinger]

So is it your intention that you'll work five more years or is it your intention like get me the hell out and I'll just wait till 60 to crank on it?

[Bennett]

Well, I guess that was part of what I'm trying to figure out. I wouldn't, I don't mind working five more years, but if I have a forced exit or want to pivot to something else in the next couple of years.

[Jill Schlesinger]

Mm.

[Bennett]

I'm just wondering if that's possible.

[Jill Schlesinger]

You guys live in a home.

[Bennett]

We Live at home? We live at home.

[Jill Schlesinger]

You live in a dwelling?

[Bennett]

Yes.

[Jill Schlesinger]

What's it worth?

[Bennett]

It's worth about a million dollars.

[Jill Schlesinger]

Wow. Is there a mortgage outstanding on it?

[Bennett]

No.

[Jill Schlesinger]

The house is paid off Any second home?

[Bennett]

No.

[Jill Schlesinger]

What about these kids? And the older one is done. So. Started a new job. Congratulations. Sophomore in college. How are you paying for that?

[Bennett]

We have a 529C that we pay out of and that I think there's enough in there for his education. And the other part of the pension that I didn't mention, there's a voluntary component to that. So the company part is 4,000amonth and the voluntary part is another $600 a month. Or I can take a lump sum of about 118,000.

[Mark]

How much do you think you guys.

[Jill Schlesinger]

Spend on a monthly basis? What's your guess?

[Bennett]

I would say nine thou. Roughly $9,000. And I don't know if that'll, you know, with our oldest son kind of moving on to his own thing, if that will go down or not. Not sure.

[Jill Schlesinger]

Let's not. Let's not. Let's not hope for that. Let's just use the nine, you know what I mean? Like, it's easier. And then if you look, Bennett, at your Social Security future full retirement age benefit.

[Mark]

What is that benefit?

[Bennett]

Do you know that is $3,388 a.

[Jill Schlesinger]

Month you say you have looked at. I'm totally kidding. So that's. So you're saying to me that at your full retirement age, just so we're clear of the 9,000 you need, you get seven grand coming in between the pension and Social Security. That's fantastic. So that's great. So all I need to worry about is this period between now or. Let's call it age 60. Right. And 67. At 60, you get the 4600. So then I need some more money that comes out of one of these. Some combination of these accounts. And then at 67, you're kind of golden. Right. If you keep working for five years and again, presuming that out of your 150, you don't even have to save so much money. I mean, I love that you're using the Roth now. Are all new contributions going into your Roth at this point?

[Bennett]

They are.

[Jill Schlesinger]

Great. And you're putting in right now the maximum plus the catch up.

[Bennett]

Correct.

[Jill Schlesinger]

Okay. And is there any other saving that you're doing just in addition to that, or is it just sort of like.

[Mark]

Well, if I have a good year.

[Jill Schlesinger]

And it's 200, not 150. I'll throw money someplace else. Is that kind of how it goes?

[Bennett]

Yes.

[Jill Schlesinger]

Okay, that's great. I mean, I think obviously I just want to kind of beef up your joint account more than anything else, because I do want to make sure that you have access to money at 60. Between ages 60 and 67, we are going to have to draw some money down from these assets. And there's nothing wrong with that. We're setting it up so you can do that. But if you say to me, like, wow, I thought it was 150, but it's actually been 200 for the next few years, then I would put that extra money into the non retirement account, because again, it's just like that weird period where the pension will begin. Social Security will not. But you're in good shape.

[Mark]

If you're asking me whether you should.

[Jill Schlesinger]

Call it quits right now at age 55, I'm not so keen on that. Like, you definitely have a lot of money, but it would really necessitate if you said to me, you're trying to protect yourself. Like, I'm worried that they'll do something and I'll lose my job. Then. First of all, in that case, does that push up the pension? In other words, sometimes when a company lets you go, that triggers the pension almost immediately. Is that the case or is it always 60?

[Bennett]

I think it changes depending on the scenario.

[Jill Schlesinger]

Yeah, I think so, too. Because I have a feeling that if they were to say, like, you're out of here, Bennett, I think they have to start paying out on the pension. So that gives you a little bit of security. If you tell me you hated it and you're like, I can't do one more day. I hate it, I hate it, I hate it, then I would just say, well, from 55 to 60, I really would want you to make some money to just cover those expenses, you know? So if. Even if you said, I'm never going to make 150, you're a salesperson, I'm a salesperson. I love salespeople. So that means that, you know what, you're just going to do something and make 120 grand a year, even if it's like, oh, you're going to go sell cars, I don't know what else you sell right now, but, like, if you could sell anything and you can make that money that you guys need that nine grand a month, then I think you're in really good shape.

[Mark]

It wouldn't even necessitate you saving that much more.

[Jill Schlesinger]

Although, I mean, it would Be nice, right? But I think other than that you're.

[Mark]

You actually this, this is a good plan.

[Jill Schlesinger]

I mean I, I'm reading the end of your email. So I have a little bit like two to four years. Like you know, if you did it, if you left in couple years and then you could make some money, there's probably a way to piece it together. It's just not going to feel quite as comfortable. You're not going to have that same security. So if you could get another job and you're making 100 grand a year and you're kind of like, all right, I mostly cover my expenses, maybe not 100%, but pretty close, that would be good. That would be better for me. Or make the old lady start working, you know, I'm done. I've done this for 40 years. Your turn. How does she feel about that?

[Bennett]

Probably not so good, but.

[Jill Schlesinger]

All right, well then I don't want to make.

[Bennett]

We could try it. We could try it. What are your opinions on long term care insurance?

[Jill Schlesinger]

Yeah, and I was just going to ask you about insurance. So look, you guys probably you don't have a huge long term care insurance problem because you're going to have that pension. So you know, if you told me that you have this million and a half dollars and a million dollar house, right.

[Mark]

Let's just say that was all you.

[Jill Schlesinger]

Had and no pension, there would be.

[Mark]

Some risk for you guys.

[Jill Schlesinger]

And the reason is that if one of you were to need some care.

[Mark]

The other, the healthy spouse could be.

[Jill Schlesinger]

Left with a much smaller nest egg at the end.

[Mark]

But I think with the pension you should be okay.

[Jill Schlesinger]

You could look into maybe getting some long term care coverage. Is it a benefit through work by any chance?

[Bennett]

I don't believe so.

[Jill Schlesinger]

I wouldn't go nuts. I don't really think you need it. I think that it's expensive and it will really drain a lot of the. It's going to mean that you're going to be paying like one or two grand a month and then all of a sudden we're at 11 or $12,000 a month that we need pre tax, you know what I mean? I don't think it's probably worth it.

[Mark]

How's your health?

[Bennett]

Oh, good, excellent.

[Jill Schlesinger]

Well, stay healthy and don't bother me. No, I'm just kidding. How about life insurance? You have any of that?

[Bennett]

We have, we have quite a bit of that. A couple million, I want to say.

[Jill Schlesinger]

In term life insurance or whole life.

[Bennett]

I get those two confused.

[Jill Schlesinger]

The one that is the cheap kind, which just goes away after a certain term is up.

[Bennett]

Okay, Term. It's term.

[Jill Schlesinger]

It's term. Okay.

[Bennett]

And then some through my employer.

[Jill Schlesinger]

Okay, good. How about those estate documents that you knew I was going to ask about?

[Bennett]

I knew you were going to ask about that. We have those in order. I do have a question about that. The last time we did those was 20, 20 years ago. And do those need to be refreshed?

[Jill Schlesinger]

You know, it's probably worth it because I'm sure that the thrust of those documents is guardianship for your kids. And so it wouldn't be a bad thing. Just have somebody take a little look, see and update it. Because estate laws have changed and importantly, there could be some specific changes also around how you want to talk about your healthcare proxy and your durable powers of attorney. So I'd have someone look at it after 20 years. I usually say, you know, maybe every.

[Mark]

Five years or so.

[Jill Schlesinger]

So yeah, that would be a good thing to do. Bennett from Colorado, I'm coming to visit. Good luck. Let us know how it goes. And thank you so much for joining us today.

[Bennett]

Yeah, really enjoy your podcast. Thanks to both of you.

[Mark]

If you've got a question, it's so easy, just go to jillonmoney.com click that.

[Jill Schlesinger]

Contact us button and write us a note if you want to join us live.

[Mark]

Check that box. Mark will do everything else.

[Jill Schlesinger]

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[Mark]

Odysee app or wherever you find your favorite podcast. We ask that you put your hands metaphorically on someone's back.

[Jill Schlesinger]

Someone needs a hug today, I can promise you that.

[Mark]

Change your work, change your wealth, change your life. Thank you for listening and we'll talk to you tomorrow. Real estate. It's been a cornerstone of wealth building for generations, but it's also often a major headache for investors. 3:00am Maintenance calls, tenant disputes, property taxes. Enter the fundrise flagship real estate fund, a $1.1 billion real estate portfolio built for you. We're talking more than 4,000 single family homes in thriving Sunbelt communities. 3.3 million square feet of in demand industrial facilities, all professionally managed by an experienced team. With the Flagship fund, you're tapping into real estate's most attractive qualities. Long term appreciation potential, a hedge against inflation, diversification beyond the stock market. Check, check, check. All without complex paperwork, massive down payments or soul sucking landlord duties. Visit fundrise.comjillonmoney to explore the portfolio. Check out historical returns and see just how easy it can be to add real estate to your investing strategy. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the Fund's [e-mail] flagship. This is a paid advertisement.

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