60 and Planning for Retirement at 67

Summary

Jill on Money with Jill Schlesinger

Episode 60: Planning for Retirement at 67
Release Date: July 25, 2025

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Introduction

In Episode 60 of "Jill on Money with Jill Schlesinger," host Jill Schlesinger engages in a comprehensive discussion with Mike from Chicago about his retirement planning. The episode delves into Mike's financial strategies, concerns about future expenses, and Jill's expert advice tailored to his unique situation.

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Caller Introduction: Mike's Financial Profile [02:21]

Mike, a 60-year-old teacher from Chicago, shares his current retirement plan:

• Employment and Income:

  • Plans to work until 67.
  • Current salary: $57,000 per year.

• Retirement Income Streams:

  • Social Security: Expected to receive approximately $2,600/month starting at 67, indexed for inflation.
  • Frozen Pension: Receives $460/month from a pension established 20 years ago, beginning at age 65 with no cost-of-living adjustments.
  • Fixed Index Annuity: Generates $2,200/month starting at 67, also without inflation adjustments.

• Savings and Investments:

  • 403(b) Plan: Approximately $170,000, contributing monthly with a 2% employer match (pre-tax).
  • Roth IRA: Balance of $130,000, contributing $300/month.

• Expenses:

  • Housing: Condo valued at $120,000, fully paid off.
  • Car Payment: $270/month lease, with plans to purchase the vehicle to eliminate this expense in retirement.
  • Other Expenses: Estimated $3,000/month covering utilities and discretionary spending, managed without accruing debt.

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Assessing Mike’s Retirement Readiness [03:50 - 07:13]

Jill reviews Mike's financial situation, highlighting strengths and areas for consideration:

• Guaranteed Income:

  • Combined fixed income streams provide approximately $5,200/month, exceeding Mike's current salary.

• Inflation Considerations:

  • While Social Security adjusts for inflation, Mike's pension and annuity do not, potentially leading to a gap as living costs rise.

• Savings Strategy:

  • Mike effectively balances his 403(b) with his Roth IRA, optimizing tax advantages by leveraging pre-tax and post-tax contributions.

Notable Quote:

"You've done a perfect job. You live within your means."
— Jill Schlesinger [07:13]

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Strategizing for Future Financial Needs [07:13 - 09:15]

Jill offers tailored advice to ensure Mike's financial stability:

• 403(b) Distribution Strategy:

  • Advises Mike to begin withdrawing from his pre-tax 403(b) at retirement to delay Social Security benefits, enhancing future Social Security payments.
  • Suggests gradual withdrawals to manage tax liabilities and avoid high tax brackets in later years.

• Health Considerations:

  • Mike discloses a diagnosis of a manageable, slow-moving blood cancer, influencing his desire to secure finances sooner rather than later.

Notable Quote:

"You're in really good shape... I like the game plan."
— Jill Schlesinger [13:25]

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Managing Required Minimum Distributions (RMDs) [09:57 - 11:17]

Jill explains the implications of RMDs on Mike's 403(b):

• RMD Basics:

  • Calculated based on life expectancy; starting at age 75, Mike would need to withdraw approximately 4% of his 403(b) balance annually.

• Tax Implications:

  • Withdrawals from the traditional 403(b) are taxable, estimated between 12% and 24% depending on the withdrawal amount.

• Investment Strategy:

  • Jill commends Mike's choice of low-expense ratio index funds, emphasizing the importance of simplicity and cost-efficiency in long-term investment growth.

Notable Quote:

"Most people just meet the market... keep your expenses down and you should be fine."
— Jill Schlesinger [11:12]

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Final Recommendations and Encouragement [12:22 - 13:27]

Jill provides concluding advice and encouragement:

• Debt Management:

  • Recommends eliminating the car lease to reduce monthly obligations in retirement, aligning with Mike's plan to purchase the vehicle outright.

• Overall Financial Health:

  • Reinforces that Mike is on a solid path towards retirement, with well-structured income streams and savings strategies.

• Personal Circumstances:

  • Acknowledges Mike's health condition, underscoring the importance of ensuring financial plans accommodate potential changes in life expectancy.

Notable Quote:

"I think you're in very good shape... I like the game plan."
— Jill Schlesinger [13:25]

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Conclusion

Episode 60 of "Jill on Money" offers valuable insights into personalized retirement planning. Through Mike's case study, listeners gain a deeper understanding of balancing income streams, managing expenses, and preparing for unforeseen health-related financial needs. Jill Schlesinger's expert guidance emphasizes the significance of strategic withdrawals, tax management, and maintaining a balanced investment portfolio to achieve a secure and comfortable retirement.

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For personalized financial advice or to join future discussions, visit Jill on Money and click the "Contact Us" button.

Transcript

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[Jill Schlesinger]

Welcome to the Jill on Money show. It's Friday, July 25th and we are here trying to help you make better. Sometimes it's just less bad financial decisions. If you have a question, all you need to do is go to our website, jillonmoney.com in the upper right hand corner there is a contact us button where you when you press that button it will pop a form up and you write what's on your mind here. I have a question about this, that or the other thing. Now if you're sort of shy and you want to leave it at that, that's fine. But what we'd like you to do is give us a lot of detail. If you would like to join us live on the air then just check the box. Mark will do everything else. While you are on our website please check out the free weekly newsletter. You can sign up right there on the website. You can also check out our subscription service called Jill on Money Live. That's where you have access to quarterly live webinars, the entire back catalog of those webinars, and bonus audio and video content all for the bargain price of 45 bucks for the next 12 months. So all there jillandmoney.com all right. Today we are talking to Mike who joins us from Chicago. Hi Mike, how are you?

[Mike]

Hi Joe. I'm very good, thank you.

[Jill Schlesinger]

What brings you to us?

[Mike]

I. I've been listening to your podcast for a couple of weeks straight now and I just had some questions about upcoming retirement. Like Most people do. I'm 60 years old. The plan is to work till about 67. I'm a teacher. I like my job. At 67. I was going to take Social Security, which would be about $2,600 a month. I also have a small frozen pension from about 20 years ago that'll pay me about 460amonth starting at 65. And I have a fixed index annuity with the income rider that will pay me about 2200 a year. A month. Sorry, A month. If I were to. Again, if I were to take payments at 67. So the whole plan is to, to work to 67.

[Jill Schlesinger]

Okay, wait, just give me that. Fixed index was 2200amonth, 2600amonth from Social Security. The 460amonth from the frozen pension, that's kicks in at 60. How much do you earn right now, Mike?

[Mike]

About 57,000 a year.

[Jill Schlesinger]

And are you single, married, partnered?

[Mike]

I'm single.

[Jill Schlesinger]

Okay. Kids? No kids.

[Mike]

No kids.

[Jill Schlesinger]

Okay. So we're just talking about the world of Mike and what you can. Right. Okay, very good. So how does it seem when you think about these numbers? How does it look for you in terms of your expenses? Like, do you think this kind of covers your basic needs, this amount of money?

[Mike]

Yeah, I mean, other than the wild card of, you know, of health, you know. Yeah. I mean, this is probably icon, about 5200 bucks a month that's guaranteed for life. That's, that's probably more than I bring in right now.

[Jill Schlesinger]

Right. And the Social Security will be indexed for inflation. The pension. Is that a straight line? That doesn't have a cost of living adjustment, does it?

[Mike]

It does not. And nor does the annuity.

[Jill Schlesinger]

Okay. So, yeah, I mean, I guess we have to work look at your future. Costs would be rising. But have you saved any other money to be able to fund that gap later in life?

[Mike]

Yes. So I have a 4 or 3B through school, which is right now at 170,000 and I'm still contributing to it. And they, they also match 2%.

[Jill Schlesinger]

And that's all pre tax has not yet been taxed, Right?

[Mike]

Correct.

[Jill Schlesinger]

So that's traditional. Okay. What else?

[Mike]

I have a Roth with 130,000 in it that I also contribute the 300 month, 300 bucks a month to. And I plan to continue doing that as well.

[Jill Schlesinger]

Great. I mean, you're putting money into the 403. You're putting the money into the Roth. I mean, what are your actual expenses, do you think?

[Mike]

Currently, I mean, my condo is paid for I mean, I've got a car payment, about 270amonth. I mean, other than that, it's just the normal utilities and day to day expenses for my credit card. But I pay it off at the end of each month so I don't have any lasting debt there.

[Jill Schlesinger]

You think it's like three grand a month maybe?

[Mike]

Yeah, I would say that's about, I.

[Jill Schlesinger]

Mean, you have condo fees and stuff, but like three maybe. Like, did you travel at all or. Not really.

[Mike]

Nothing super far? No, I'm not a big traveler.

[Jill Schlesinger]

I mean, this sounds like a pretty good, this sounds like a very good situation. How much is the condo worth?

[Mike]

It's, it's small, probably 120, 000 and it's paid for.

[Jill Schlesinger]

Okay.

[Mike]

There was a, there was a thought that maybe four or five years down the road I might look for something just a little, a little bit bigger in a little bit different neighborhood. It's. I'm not sure about that, but if I, if I can get enough for this and be able to pay for the rest out of my Roth and not have a mortgage, that's something that I've thought about.

[Jill Schlesinger]

I don't know if I'd want to pay it out of the Roth. I like that Roth being there for you because the money that you've put into the 403B, it hasn't been taxed yet. You're going to have to take it out. Maybe I would even tap that, you know, sooner rather than later. Is there a tr. Is there. You're using a traditional. Is there a Roth option at work or not?

[Mike]

They just started offering a 403 Roth. I mean, like very, very like within the last year or two. And I haven't, I haven't looked into how that would, how that would work with my current 403B.

[Jill Schlesinger]

Here's what I would, here's what I would suggest. Let's look into that. And if they say, oh, well, you have to put some money into traditional to get our match, put whatever you can put into the traditional, leave it at that, and then anything extra then put into the Roth. Because we're going to have to tap that 403B eventually anyway.

[Mike]

That's kind of what I've been doing. I used to, I used to take a bigger chunk of my personal and put it into my 403B. What I've done now is I've lowered my 403B contribution just to what I need to get the match. And I've taken all of that perceived Extra money. And that's what I'm putting into my personal Roth. I'm trying to get it more balanced.

[Jill Schlesinger]

By the time Perfect I turn 67, that's perfect.

[Mike]

Am I in a spot where I want to start making the conversions or am I.

[Jill Schlesinger]

No, no, there's no need to make the conversion. I don't want you to. If anything, the only thing that would happen is when you ret. Okay. When you're okay. I'm 67, you're done teaching, Right? Then what you could do. Here's a thought bubble for you. Maybe what you do is you take the money that is coming out, that is in the 403. And instead of claiming Social Security at 67, presuming you're in good health, maybe you pull some money out of the 403 to live on and you use that money, you pay the tax that's due on it. Cause you're going to have to pay the tax no matter what. Right. You wait till. So, you know, you pull the money out over three, you know, maybe not all in huge chunks, but you know, if you put it. Let's say you pulled out 30 grand a year for few years for age 67, 68, 69. And then the year that you turn 70, you claim your Social Security. You'll get a higher benefit for Social Security which is indexed for inflation. So that is good for you. And you will have pulled out some of the money that is necessary and you'll make those required minimum distributions. By the time you get 70 to be 75, there'll be. It'll be a lower amount of money. I think that might work for you. What do you think?

[Mike]

The only possible crimp in it is? I am in relatively good health, but I was diagnosed about a year and a half ago with a like a very manageable, slow moving blood cancer. If there's such a thing as the best kind to get. It's manageable with, with non chemotherapy. I'm not in any kind of pain and it looks like if things stay that way, I could live a relatively normal life, which is a couple extra blood tests.

[Jill Schlesinger]

Okay, but you're saying that may not. That could change your life expectancy. In other words, you might. I might. I'm sitting here saying, hey, he sounds like a healthy, great guy, blah, blah, blah. You're like, well, maybe I'm not going to live till I'm, you know, 85 years old. Maybe.

[Mike]

Yeah, I don't know. My parents, my parents are alive. It's in their mid-80s. The doctor says that you should die with this, not from this. But you never know. I mean, none of us know, but.

[Jill Schlesinger]

Okay, but if you feel that way, if you'd rather just take the money at 67, that's fine. I don't want you to worry about it. I really don't. But I do think getting some of the money out, the pre tax money, the money that has not yet been taxed yet, that I think it's worthwhile that you start pulling some of it out. Not convert it, but just pulling some out a little bit at a time and so that you're not whacked with 75 with minimum required distributions.

[Mike]

What is the minimum required distribution like? Is it a certain percentage?

[Jill Schlesinger]

It's funny thing, it's so, it's, it's based on your life expectancy. Okay. And so it means that, you know, the government looks at you and just think about this like whatever the money is that's in that account, let's say at age 75, so pretend you had $200,000. It's about 4% starting off like 4% of that money has to come out. And then the numbers get bigger and bigger, the percentages go up. Because the government basically is saying we want to get paid our money. Right. We want to get paid the amount of money that has not yet been taxed. So. Exactly. And so it's not like terrible, it's just that it's the amount of money you have to pull out. So if you can pull some of the money out a little bit at a time, even if it's like five grand a year and you pay the tax on, that's fine. You're going to be in, I mean you're not going to be in a high tax bracket, but you're going to have taxable income. Right. And so you'll be somewhere, you know, between 12 and 24%, depending on, you know, how much money is getting pulled, and you'll be fine. You pay the tax that's due, what's the big deal? You know what I mean?

[Mike]

In terms of the money I have in a 403B and the Roth, I got them right now, I have them in very low, low expense ratio index funds.

[Jill Schlesinger]

Perfect.

[Mike]

And that's what I like because they're easy to manage and I think that they cover a lot of the bases.

[Jill Schlesinger]

Totally. You don't need. I think people really overthink the investment side. I know that sounds crazy. As somebody who comes from the world of investing, you know, I had that life. But I think that all of the machinations around, oh, I can beat the market. Oh, I, I think I'm going to watch Blankety Blank TV show or I have a trading system or that I don't think it's worth anybody's time because what we learn over the long term is that most people don't beat the market. Most people just meet the market. And if you keep your expenses down and you don't mess around with the portfolio too much, you should be fine. You should be absolutely fine. I think it's the people who are like, I'm going to try to beat the market instead of save more that I think is a waste of time. You've done a perfect job. You live within your means. You don't have any. You did say that you had a car loan. How much was that car loan? Interest rate, the interest rate.

[Mike]

It's, it's a lease. And I, and I. Oh, okay. I release them every three years. I like, I like having expenses.

[Jill Schlesinger]

Okay, that's fine. That's fine. I would thought you had a car loan, but that's fine.

[Mike]

At one point, at some point, either this time or next time, I'm going to probably purchase it out because then I don't want to have. I like, not have the 270 payment in retirement because I know that I'm going to have to probably get a supplementary insurance policy for health in addition to Medicare.

[Jill Schlesinger]

Yeah.

[Mike]

And I know that's going to be a chunk of money. So I'm looking not to have that 270 when I'm 67.

[Jill Schlesinger]

I think you're in really good shape. I get that. You know, and everyone listening, you know that I think that what Mike raises this issue of, like, hey, a lot of us have diagnoses that would change the question about waiting for Social Security. So we talk about this on an individual basis. That's what I'd like to hear from you. But Mike, I think you're in very good shape when you get closer to retirement because it sounds, you know, we'll hopefully be around here and if we can see what the idea for a condo may look like for you. Maybe, maybe you'll be able to move up and maybe interest rates will be really low and it'll be smart to have a small mortgage. Who knows? But for right now, I think you're in very, very good shape. And I like the game plan. You're on it, man.

[Mike]

That's terrific to hear. I really appreciate that.

[Jill Schlesinger]

If you, like Mike, are thinking about your future, maybe it's not even about retirement. Maybe it's about just seeing whether you could become financially independent. Maybe you could make different choices. Maybe you do different things. Get in touch with us. Go to Jill on money dot com, click the Contact Us button, write us a note. And if you'd like to join us on the air live, check that box. Mark will do everything else. Hey, it's Friday, which means we're going to do some business. Our music is composed by Joel Goodman. Mark Tularcio is our executive producer and king of all things web, and we are distributed by Odyssey. In fact, you can subscribe to us on the Odyssey app or wherever you find your favorite podcast. Please lift someone up. Change your work. Change your wealth. Change your life. Thank you for listening. We'll talk to you on Monday.

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