Episode 55: Thinking of Retirement

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

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.

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.

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

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

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.

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

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

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

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.

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.

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.

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