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

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.

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.

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.

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.

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.

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.

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.

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])

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.