Podcast Summary: Jill on Money with Jill Schlesinger Episode 57: Considering Retirement Release Date: May 27, 2025

In Episode 57 of Jill on Money with Jill Schlesinger, host Jill Schlesinger and co-host Mark Tulareus delve into the intricate considerations surrounding retirement planning. The episode features a thoughtful conversation with James from North Carolina, a 57-year-old small business owner approaching retirement, who seeks guidance on whether to retire sooner rather than later.

Guest Profile: James from North Carolina

James is a small business owner nearing the age of 58. He is married with two children, one about to graduate high school and another preparing to enter college. James is contemplating retirement and is seeking expert advice to determine if he is financially prepared to retire now or should continue working for a few more years.

Current Financial Situation

James provides a comprehensive overview of his financial landscape:

• Savings and Investments:
  • 401(k): $140,000 in a Roth 401(k) at his current employer.
  • IRAs and Mutual Funds: Approximately $55,000, including a $30,000 IRA and a $25,000 old 401(k) from a previous employer.
  • Stocks and Other Accounts: $30,000 in stock investments and additional funds in an HSA and small accounts.
  • Total Retirement Assets: Around $3.65 million, primarily in traditional, pre-tax accounts.
  • Cash Reserves: Over $300,000 in bank accounts and mutual money markets.
• Housing: James owns a home valued at approximately $650,000, which is fully paid off.
• Monthly Expenses: Estimated at $8,000 to $9,000, encompassing current lifestyle and forthcoming educational expenses for his children.

James remarks at [03:46]:
“The job is good, but I'm just wondering, like, I'm 57, about to turn 58, and the number of years where I'm going to be able to be active are dwindling.”

Retirement Planning Discussion

Mark and Jill guide James through a detailed analysis of his readiness for retirement, focusing on several key areas:

1. Retirement Timeline:

   • Immediate Retirement: Considering retiring within the next year.
   • Delayed Retirement: Continuing to work for an additional two years until his youngest child completes high school.

2. Health Care Considerations: James expresses concern over health insurance if he retires early, noting the difficulty in qualifying for medical benefits while part-time.

3. Social Security Benefits:

   • Current Projections:
     • At full retirement age (67): $4,000/month.
     • At age 70: $5,000/month.
   • Spousal Benefits: James's wife plans to claim half of his Social Security benefits once eligible, enhancing their total monthly income.

Mark explains at [07:05]:
“So, if you were to actually do something part-time... unless you or your wife is in a position to go get a job that will offer you health benefits for some.”

4. Required Minimum Distributions (RMDs):
   • Understanding RMDs: Mark elaborates on how traditional retirement accounts necessitate withdrawals starting at age 75, potentially leading to significant tax liabilities.

Mark states at [17:56]:
“At age 75, you would be forced to take $160,000 in withdrawals... It becomes a future tax liability that we have to deal with.”

5. Withdrawal Strategies:
   • Utilizing Cash Reserves: Suggesting James use his $300,000 cash reserves to sustain his lifestyle during the initial retirement years.
   • Roth vs. Traditional Accounts: Advising against tapping into Roth accounts early to preserve tax-free growth, instead recommending withdrawals from traditional accounts to mitigate future RMD burdens.

Mark advises at [11:56]:
“I think your notion of, hey, if you're going to retire in two years, the numbers look better...”

James’s Questions and Expert Responses

Question 1: Why Not Use the Rule of 55 Instead of Waiting Until 59½?
James inquires about why the advice leans towards using funds starting at 59½ rather than invoking the Rule of 55.

Mark responds at [17:09]:
“Well, if you're waiting till 59 and a half, then you can just use whatever money's in a retirement account. You don't have to use the rule of 50 of 55....”

Question 2: Understanding RMDs and Their Impact at Age 75
James seeks clarity on what to expect from Required Minimum Distributions and their potential tax implications.

Mark elucidates at [17:56]:
“At age 75... your first required minimum distribution would be about just over 4% of the total account value... you would be forced by Uncle Sam to take $160,000 in withdrawals.”

Strategic Recommendations

1. Delay Retirement:
   Both hosts suggest that James consider delaying retirement by a couple of years until his youngest child completes high school. This approach provides additional time to bolster his retirement savings and reduce the strain on his cash reserves.

2. Health Insurance Planning:
   Emphasizing the importance of securing health insurance through the Affordable Care Act or part-time employment benefits to avoid unexpected medical expenses that could deplete retirement funds.

3. Withdrawal Management:
   Advocating for a strategic withdrawal plan that prioritizes traditional accounts to minimize future RMDs and taxes, thereby preserving Roth accounts for their tax-free benefits.

4. Emergency Planning:
   Advising James to maintain a robust estate plan and continue monitoring his financial situation for any unforeseen changes or opportunities that may arise.

James reflects at [16:21]:
“I was hoping you'd say, hey, you're great. You should have retired two years ago, but yeah.”

Conclusion

The episode concludes with Jill and Mark reaffirming their commitment to assisting listeners like James in navigating the complexities of retirement planning. They encourage James to maintain open communication and consider the proposed strategies to ensure a secure and enjoyable retirement.

Jill summarizes at [22:28]:
“You want to create a plan that's doable. Get in touch with us. Go to jillonmoney.com, click the contact us button, write us a note...”

Key Takeaways:

• Comprehensive Financial Assessment: Before deciding to retire, thoroughly evaluate all sources of income, savings, investments, and potential expenses.
• Health Care is Crucial: Securing affordable health insurance is a critical component of early retirement planning.
• Strategic Withdrawals: Prioritize withdrawal from traditional accounts to manage future tax liabilities and preserve Roth accounts.
• Delay if Necessary: Extending the working period even by a few years can significantly enhance financial stability in retirement.
• Plan for RMDs: Understand the implications of Required Minimum Distributions to avoid hefty tax burdens in later years.

By addressing these facets, James can make an informed decision about his retirement timing, ensuring financial security and peace of mind.