Additional Retirement Savings Advice

Summary

Podcast Summary: "Additional Retirement Savings Advice"
Jill on Money with Jill Schlesinger
Release Date: February 27, 2025

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Introduction

In this episode of Jill on Money with Jill Schlesinger, host Jill Schlesinger, CFP®, and co-host Mark delve into various listener questions centered around retirement savings and financial planning. Skipping over advertisements and introductory remarks, the duo focuses on providing actionable advice to help listeners make informed financial decisions.

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1. Balancing Withdrawals: Robert's Dilemma ([03:24] - [05:53])

Question:
Robert, a retired federal worker from Washington State, asks whether he should withdraw $1 million from his 401(k) or $650,000 from his Roth account to assist his youngest child with purchasing a first home.

Discussion:
Jill recalls her general rule of using Roth funds as a last resort. However, given Robert's specific situation—high pre-tax savings and the implications of rising into a higher federal tax bracket—the conversation becomes more nuanced.

Notable Quotes:

• Robert: "Pulling a million dollars from my retirement account would put us in the 37% federal tax bracket."
• Mark: "I wouldn't do that now... I need more information, but this is a terrible idea." ([05:27])
• Jill: "I say, use the Roth." ([08:36])

Conclusion:
Both Jill and Mark advise against such a large withdrawal from the 401(k), suggesting that using Roth funds might be a more tax-efficient strategy, especially considering the current heavy tilt towards pre-tax savings.

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2. Enhancing Retirement Contributions: Maria's Strategy ([05:53] - [08:54])

Question:
Maria and her husband, with substantial pre-tax retirement savings, inquire about increasing their retirement contributions. Maria contemplates boosting her husband's 401(k) contributions from 6% to at least 10% and wonders if shifting towards Roth 401(k) contributions would be more beneficial given their pre-tax heavy portfolio.

Discussion:
Jill and Mark analyze Maria’s financial standing, noting the significant pre-tax retirement savings ($1 million in traditional 401(k), $720k in traditional IRA) compared to relatively modest Roth accounts ($70k Roth IRA, $30k Roth 401(k)). They emphasize the importance of diversifying tax strategies to mitigate future tax liabilities.

Notable Quotes:

• Maria: "Should we increase the Roth 401(k) contribution? Would that be a better option?" ([08:54])
• Mark: "I think the Roth should be the focus going forward." ([08:36])

Conclusion:
The recommendation leans towards increasing Roth contributions to balance their portfolio, leveraging the tax-free growth and withdrawals that Roth accounts offer, especially beneficial in a high-tax state.

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3. Managing Required Minimum Distributions (RMDs): Julie's RMD Investment Challenges ([08:54] - [10:38])

Question:
Julie, 10 years into retirement, is grappling with managing her RMDs, which are higher than her current living expenses. She's currently placing excess RMD funds into CDs but is concerned about the taxable interest pushing her into a higher tax bracket.

Discussion:
Jill suggests opening a brokerage account for these excess funds, recommending a skew towards index investing with a mix of stocks and generalized bond funds. This strategy aims to grow the funds tax-efficiently without frequent trading.

Notable Quotes:

• Jill: "Put money into this brokerage account... skew towards just plain old stock. Index investing." ([09:10])
• Jill: "That's why we like the Roth so much." ([09:30])

Conclusion:
Investing excess RMDs in a diversified brokerage account with an emphasis on index funds can provide growth opportunities while managing taxable income effectively.

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4. Consolidating 401(k) Accounts: Steve's Inquiry ([10:38] - [12:18])

Question:
Steve has approximately $180,000 spread across four different 401(k) and profit-sharing accounts and seeks advice on whether to consolidate them into his current employer's plan or leave them as-is.

Discussion:
The hosts advocate for consolidation, provided that the current employer's plan offers robust investment options, such as index funds. Consolidation can simplify portfolio management and improve oversight.

Notable Quotes:

• Mark: "I love consolidation... makes it easier to manage." ([10:45])
• Jill: "As long as your plan at work is a decent plan, go ahead and do it." ([10:50])

Conclusion:
Consolidating retirement accounts is recommended to streamline management and potentially enhance investment efficiency, assuming the new plan has quality offerings.

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5. Planning for Future Children: Rich's 529 Plan Question ([10:38] - [12:18])

Question:
Rich wonders if he can open a 529 plan for future children who do not yet have Social Security numbers, effectively creating a "player to be named later" for educational savings.

Discussion:
The duo explains that while traditionally a 529 plan requires a beneficiary with a Social Security number, one workaround is to open the account in the parent's name and transfer it to the child once they are born and have an SSN.

Notable Quotes:

• Mark: "You open it in your name and once the beneficiary comes along, you transfer it into their name." ([11:38])

Conclusion:
It is feasible to prepare a 529 plan ahead of time by setting it up in the parent's name, allowing for smooth transfer once the child is born and has an SSN.

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6. Evaluating the Necessity of Title Insurance: Fran's Concern ([12:18] - [13:01])

Question:
Fran questions the legitimacy and necessity of purchasing title insurance, which she encountered through advertisements claiming to prevent fraudulent mortgages on her home.

Discussion:
Mark and Jill express skepticism about unsolicited title insurance offers, labeling them as unnecessary and potentially misleading. They clarify that title insurance is typically required by mortgage lenders to protect against unforeseen title defects.

Notable Quotes:

• Mark: "This sounds like nonsense... the mortgage company is happy to have you buy the title insurance because they're worried that they have too much risk." ([12:20])
• Mark: "You've just got to throw it out." ([13:01])

Conclusion:
Title insurance should primarily be obtained through legitimate mortgage lenders rather than unsolicited offers, as it serves to protect the lender's interest rather than the homeowner's, making unsolicited offers unnecessary and potentially dubious.

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Closing Remarks

Jill and Mark wrap up the episode by encouraging listeners to reach out with more financial questions via their website, jillonmoney.com. They also announce upcoming content, including the Money Watch show tailored for those looking to deepen their financial knowledge, and tease an exclusive webinar with Ed Slut for subscribers of their Jill on Money Live service.

Notable Quotes:

• Jill: "Change your work, change your wealth, change your life." ([14:13])

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Conclusion

This episode of Jill on Money provides insightful responses to real-life retirement and investment dilemmas, emphasizing the importance of strategic planning and informed decision-making. Whether it's balancing withdrawal strategies, optimizing retirement contributions, managing RMDs, or debunking financial myths, Jill and Mark offer practical advice to help listeners navigate their financial journeys effectively.

Transcript

[Jill Schlesinger]

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[Mark]

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[Mark]

Welcome to the Jill on Money Show. It's Thursday, February 27th and we are here answering your financial questions. If you have one, just go to our website jillonmoney.com while you're there you just click the Contact Us button. It's in the upper right hand corner and a form will pop up. Once you get that form, that is the email that we receive. Complete the form and if you want to join us on the air live, you just check the little box and boy Mark will take care of everything right after that. Now just a little bit of housekeeping here at the show. I want to tell you that this weekend we we are starting to broadcast on the weekends again, not in this feed. We are bringing our Money Watch show to the weekends and that Money Watch show is really geared towards anyone who wants to, I think, beef up their financial knowledge. We're going to be really tackling the core concepts that you encounter in your financial life. So I want to be clear that that is in a different Feed the Money Watch show you can actually subscrib subscribe to it on the Odyssey app. You can get to it from our website. We're still going to answer questions, but, you know, if it's someone in your life is a little bit younger, just starting out, or maybe restarting their financial journey after a divorce or something happened to them, tell them, hey, I got.

[Jill Schlesinger]

A show for you.

[Mark]

It's the Money Watch show. So you can check that out again. You can subscribe on the Odyssey app. All right, for everyone else, here you are on the Jill on Money show and we are answering questions.

[Jill Schlesinger]

Today.

[Mark]

We're going to do some emails. Looks like everyone was very busy on their week of vacation. I mean, not, I didn't take the whole week, but a lot of people had it off because their kids were home from school. We got a lot of questions. This is from Robert, who writes. Hi, Jill and Mark. I am wondering if it would be better to withdraw a million dollars from my 401k or pull $650,000 from my Roth to help our youngest child with his first home. We live in Washington state, so there's no state tax, just federal. We're retired federal workers and we do understand that pulling a million dollars from our retirement account would put us in the 37% federal tax bracket. You say that as a general rule to use your Roth as the last resort, but we're wondering if our situation might fit an exception. We've been doing roth conversion since 2022, maxing out at the top of the 24% federal tax bracket and also means that we're paying Irmaa that extra money that you have to pay for Medicare if you've got too much income. That adds $480 a month for Medicare. So they're at about $200,000 a year. And Robert says he's a good kid. Mark, I must bring you on for this. Mark, did you see the New York magazine article about how many parents are helping their kids? And we've talked about this. You know, they're adult kids, especially in the New York area and also I think on the coast, a lot of parents are helping them with these home purchases. How on earth can I, with any straight face, say, take a million dollars out of your thrift savings plan?

[Unknown]

Goodness gracious. I mean, that's, that's some, some generous helping out.

[Mark]

I mean, it doesn't seem like to me, I wouldn't do that now, first of all, I certainly wouldn't do it all at once. So can the kid, when you say, oh, he's a good kid, what can he afford? Can it be that you just pull money out to help him with the down payment? Are you going to pay his mortgage for him? Are you buying a house free and clear? I need more information, but this is terrible. This is a terrible idea.

[Unknown]

I think they're buying free and clear. And I'm just going to assume, I'm just guessing, that these guys have a lot of money in their retirement accounts and their various accounts, but still, he.

[Mark]

Says he's got a million dollars in his 401.401k. If that's the only money you have and you want to pull all of that out, No, I would not do that.

[Unknown]

I don't think it's. I don't think it's all of his money. He just wants to withdraw a million from that 401k. So I'm assuming there's a lot in there, but I still wouldn't, you know, if you want to help with the down payment.

[Mark]

Okay, that seems a little excessive to me. I'm sorry, I. I'd have. That person would have to have a lot of money. Like, let's say he has $3 million and he's, you know, you do a million. That would be a lot. I still wouldn't do it.

[Unknown]

No.

[Mark]

I want to know more about this kid. He might be a good kid, but like, really, really, this is what we're doing now. I don't know, keep renting. I'm so happy I had four legged children. This is from Maria. Hi, Jill. I stumbled upon your podcast a few months ago. I love that. And now guess what? Maria's a daily listener. I like how we hook them in. Mark, appreciate your insights and your matter of fact approach. By the way, Mark, over the weekend I went out to dinner with friends of mine and one of my friends, Rebecca, was like, I don't even understand half the stuff you talk about with the financial stuff, but I love your interaction with the people. That's kind of fun. I mean, I like that too, but I hope that you guys do get something out of the financial stuff. Okay. Maria goes on and says, I'm wondering if you would provide a recommendation for additional retirement savings.

[Jill Schlesinger]

Here's the situation.

[Mark]

My husband is 60 and working full time, makes $140,000 in salary, about a 15 to $20,000 annual bonus, and Maria's 57, $116,000 salary with a $10,000 bonus. Kids launched. Hmm. I wonder if they bought them houses. Maria's mortgage paid off in three years. Home value, 600,000 a car loan at 2.5%, no other debt. So check out their savings. A million dollars in a traditional 401, 720, 720,000 in a traditional IRA, 70,000 in a Roth IRA, 30,000 in a Roth 401k, 33,000 in a brokerage account, $26,000 in a high yield savings, then about 18 grand in other savings. Checking an HSA of $12,000. Okay, so Maria says I contribute 8% to my Roth and my employer matches 9%. My husband is contributing 6% to his 401, but no employer match. We'd like to increase our retirement contributions and initially we're thinking of increasing my husband's 401k to at least 10%. However, given that our savings are so heavily skewed to the pre tax side, should we increase the Roth 401 contribution? Would that be a better option? That is what Marie wants to know. I'll just answer for Mark, even though I know he's just about to pounce on me. They make a lot of money. They live in a high tax state, so I know where they live. They live in a high cost of living and a high tax state. In the northeast they make 140, 160, 262. They make about 280 grand.

[Jill Schlesinger]

I'm still going to go for the Roth.

[Mark]

Mark, would you agree with that? Hahaha. Of course you do, right?

[Unknown]

100%. I mean that was the first thing that jumped out at me is they have almost, you know, nearly $2 million in pre tax savings, you know, very. They only have 100,000 in Roth. So I think the Roth should be the focus going forward.

[Mark]

Absolutely. Okay, so here is a message from Julie who writes, Dear Jill, I'm 10 years into retirement and better at saving than spending. This seems like a very common theme here on this show. Julie converted about $80,000 into Roth IRAs before taking her required withdrawals three years ago. My RMDs were $24,000 last year. It's way more than I need to live comfortably and travel. I've been putting them into CDs, but then I just pay taxes on the interest from the CDs putting me in a higher tax bracket. And it's also annoying. Where should I invest this money? Okay, so one thing to consider would be to just open a brokerage account. You don't need the money right now. And if you put money into this brokerage account, what you can do is you can try to skew this a little bit towards just plain old stock. Index investing. And maybe you would put it into, I was going to say a municipal bond fund, but I'm really not sure what your income is. So it's probably just going to be a generalized bond fund. You're not going to trade it. Put it aside, don't worry about it, and let's see where you go. I mean, it's so funny, Mark, because one thing to remember about all this is that, you know, you pile up that money pre tax year after year after year. And now here you're listening to this, Julie's like, it's way more than I need and it's pushing her to another tax bracket. That's why we like the Roth so much. That's the reason. This is from Steve, who writes, I have about $180,000 in 401k and profit sharing plans in four different accounts.

[Jill Schlesinger]

Should I move them all to the.

[Mark]

Same account where I work, or should I leave them alone where they are? Hey, you know what, Steve? I love consolidation. As long as your plan at work is a decent plan, go ahead and do it. That makes sense to me. When I say a decent plan, do you have enough options? Are there index funds that you can use? I love the idea of consolidation, and I think having it all in one place just makes it easier to manage. Much, much, much easier. This question is from Rich, who says, hi, Mark and Jill. I have two children age 30 and one age 26. They are both childless right now, but we do suspect that at some point in the future one or both will have children. Is it possible to open a 529 plan for, as they say in sports, a player to be named later? Thanks, Rich. Mark, it is used to not be used to be that you had to have a Social Security number, but it is possible to open a 520 plan 29 without a social, right?

[Unknown]

Yeah, that's true. I, I know people that have done this. You, you basically open it in your name and once the, the beneficiary comes along, you transfer it into their name.

[Jill Schlesinger]

That's that.

[Mark]

I mean, it's very nice to do. I would always wait. I'm sorry, I feel like that's bad juju anyway. But that's just me. Sorry. All right, last question from Fran. I listen to a variety of podcasts and many advertise the need for buying title insurance so crooks don't take out loans on your home. Is it really happening? Is buying title insurance reasonable? She gives an example of a company. All right, Mark, I have no idea. We've Never had a title insurance company come to us, have we?

[Unknown]

No, I would say this is all nonsense.

[Mark]

This sounds like nonsense. Usually title insurance is something that you need when you get a mortgage, and it always seems a little bit. I don't. I was gonna say like a scam. It's not a scam, but it seems unnecessary. But the mortgage company, because it's a big chunk of money, wants to you to get insurance because they're worried that they have too much risk. So they're happy to have you buy the title insurance. But it's such. It really is unnecessary.

[Unknown]

Yeah. I actually remember when we recently closed on our new place here, our attorney told us, he's like, look, in the, in the weeks to come, you're going to get a bunch of. Well, as he said, you're going to get a bunch of crap in the mail telling you to buy title insurance. Just throw it out.

[Mark]

There you go. So throw it out. All right. I hope that helps. Hey, if you've got a question, get in touch with us. Go to jillonmoney.com, click the contact us button, write us a note. And if you'd like to join us on the air, check that box. All right. TikTok. TikTok gang. Next week, it is the most amazing day of the year for me and Mark. We get to talk to ed slut Thursday, March 6, 7 Eastern Time. And I'd love it for you to join us at this webinar. But you can only join us if you are a member of Jill on Money Live. You know, our subscription service 45 Bucks. And you will have access to this webinar with Ed. Three more after that. Bonus audio and video content, the entire back catalog, all for 45 bucks for the next 12 months. So you should check that out because Ed Slut not to be missed. You can subscribe to this show on the Odyssey app or wherever you find your favorite podcast. Don't forget to do something nice for someone else today. Change your work, change your wealth, change your life. Thank you for listening and we'll talk to you tomorrow.

[Jill Schlesinger]

For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been complex, time consuming and expensive. But imagine if real estate investing was suddenly easyall the benefits of owning real, tangible assets without all the complexity and expense. That's the power of the fundrise flagship real estate fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10, 4700 single family rental homes spread across the booming Sun Belt 3.3 million square feet of highly sought after industrial facilities. Thanks to the E Commerce wave. The Flagship Fund is one of the largest of its kind, well diversified and managed by a team of professionals and now it's available to you. Visit fundrise.com jillonmoney to explore the fund's full portfolio. Check out historical returns and start investing in just minutes. 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 Hi, this is Jill Schlesinger. I used to own a small business and now I talk to a lot of business owners like you who know.

[Mark]

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[Jill Schlesinger]

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