Am I in Good Shape to Retire Next Year?

Summary

Episode Summary: "Am I in Good Shape to Retire Next Year?"

Podcast: Jill on Money with Jill Schlesinger
Host: Jill Schlesinger, CFP®
Release Date: June 20, 2025

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Introduction

In this insightful episode of Jill on Money with Jill Schlesinger, host Jill Schlesinger addresses a pressing question from a listener contemplating retirement in the coming year. The episode delves deep into the intricacies of retirement planning, offering actionable advice and highlighting the importance of early and consistent financial planning.

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Listener Call-In: Christine from Rhode Island

Background

At [04:48], Christine from the Ocean State, Rhode Island, calls in seeking guidance on whether she's financially prepared to retire next September at the age of 65. Recently widowed, Christine is earnestly reviewing her financial standing to ensure a secure retirement.

Financial Overview

• Income and Savings: Christine currently earns $157,000 annually and has amassed $1,800,000 in pre-tax retirement savings, which includes an inherited $350,000 IRA from her late husband. Additionally, she has $280,000 in liquid savings and owns a fully paid-off home valued at approximately $450,000.
• Social Security: Upon retirement, she expects to receive about $2,000 per month from her late husband's Social Security benefits, increasing to $4,100 when she claims at age 70.
• Expenses: Christine spends around $5,000 monthly, aiming to plan for $7,000 to accommodate future needs, including $10,000 annually to support her daughter's private school tuition for the next five to six years.

Key Discussion Points

1. Withdrawal Strategy and Tax Implications:

   • Jill Schlesinger explains the importance of managing withdrawals from pre-tax accounts to stay within a favorable tax bracket.
   • Quote: “You could pull up to about $195,000 a year out of less than 25%.” [11:11]

2. Asset Allocation:

   • Christine considers moving some funds into a brokerage account, potentially using index funds with a 40% stock and 60% bond allocation.
   • Quote: “Asset allocation... I was thinking of using index funds. Yep. Do you think like 40, 60 is good?” [16:11]

3. Estate Planning and Legacy:

   • The conversation underscores the significance of having an estate plan, including wills and healthcare proxies. Christine confirms that her estate planning is in order.
   • Quote: “Just you. We're going to get to you. There's nothing else that is that I should know about?” [08:32]

4. Long-Term Care Considerations:

   • Jill advises that with Christine's substantial assets and single status, long-term care should be manageable without the need for additional insurance products.
   • Quote: “I don't think you've got a big problem here.” [18:17]

5. Hiring a Financial Advisor:

   • Jill suggests that while Christine currently manages well on her own, consulting a financial advisor could provide additional peace of mind in the future.
   • Quote: “If you did need that, I know someone fabulous in Rhode Island.” [18:35]

Insights and Recommendations

• Consistency in Saving: Christine attributes her success to starting early, paying herself first, and maintaining consistent savings habits.

  • Quote: “You have to be. You have to start early. You have to, you know, look at it as paying yourself, and you have to be consistent.” [14:14]

• Maximizing Social Security Benefits: Delaying Social Security benefits until age 70 can significantly increase monthly payouts, providing a more substantial financial cushion in later retirement years.

• Strategic Withdrawals to Manage Taxes: By carefully planning withdrawals to remain within a certain tax bracket, retirees can minimize their tax liabilities and preserve more of their savings.

• Diversified Investment Portfolio: Utilizing a balanced mix of stocks and bonds through index funds can offer growth potential while mitigating risks, especially important for those anticipating a long retirement.

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Conclusion and Takeaways

Jill commends Christine on her diligent financial planning and emphasizes that her situation exemplifies successful retirement preparation through disciplined saving and strategic financial decisions. She encourages listeners to adopt similar practices, highlighting that timely and consistent efforts can lead to substantial financial security.

Final Thought from Jill:
“Everybody thinks a million dollars is like, oh, I could never save a million dollars. Yeah, you can.” [14:31]

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Additional Resources

Listeners interested in assessing their own retirement readiness or seeking personalized advice are encouraged to visit jillonmoney.com and utilize the "Contact Us" feature to connect with Jill and her team.

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Thank you for listening to this episode of Jill on Money. Stay tuned for more expert financial advice and empowering stories to help you navigate your financial journey.

Transcript

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[Jill Schlesinger]

I know how hard it is and.

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[Jill Schlesinger]

Welcome to the Jill on Money Show. It's Friday, June 20th and we are here answering financial questions. If you have one, please go to jillonmoney.com and in the upper right hand corner there is a contact us button. When you click that button, a form will pop up. That's the email that we receive and if you'd like to join us on the program live, just check the box. Mark will do everything else. Hey. Also on the website is once again my shameless self promotion, which is not really a promotion for me, but it is a ask for donations for the cycle for the cause. This is the big Boston to New York AIDS ride, which I do every year and so you'll see the headline there. You know what, we put it up because it's Pride month and I'm a good gay and this is going to be a rough ride for me. Mark, I just want to let you know I've been training already. I started training earlier this time because I didn't want anything to sneak up on me. And again, gang, this is 275 miles from like the west, west of Boston down to New York. Three days. It's kind of grueling. That being said, I have a new ask in terms of just any dollar amount, $5, I don't care. Like small, big doesn't matter. Big is fine too. If you're one of these people who comes on the program who we get complaints about, like you're really, really rich and you want to support it, go ahead, do it. This year I also want to ask for people to write in and help me build my cycle for the cause. Workout playlist. Mark, do you have a kick ass song that should be added to my playlist?

[Mark]

Let me think about it. You and I probably have a little bit different taste, but you know, when I do my peloton, for me it's all about the music.

[Jill Schlesinger]

I need good music, right. And so I've been training, not on peloton only. I have my regular bike that's on this, this kind of cool thing called a kicker core. You just like put your own bicycle on this trainer. And, and I've been using music and I've been curating myself, but I'm kind of sick of my old songs. So one of my favorite anchors, a guy who does the best bump music from Wina in Charlottesville, told me that from the movie Rocky 5, there's a song called Go for It which I'm about to add. I'm just going to add these songs, I don't care, I skip them. But remember, I have three days of riding to do. So I need a lot of songs to help me out. And yes, I use that, those safe kinds of headsets, the, the ones that are called shocks that don't really go in your ear. And it's really more for training than doing the ride itself. Anyway, Please support me. $5. 500. $5,000. Someone gave me an anonymous $15,000 and I love that. Thank you very much, whoever you are. And so I'm getting started early. I'm trying to raise 60. I got 20 down. I got 1/3 down. So let's go.

[Unknown Speaker]

Help me out.

[Jill Schlesinger]

Thank you very much. Okay, enough of that. Right now we are going to talk to Christine who joins us from the Ocean State, Rhode Island. Hello, Christine, how are you? What can we do for you?

[Christine]

Good morning, how are you? Thank you so much for taking my call today. I really appreciate it.

[Jill Schlesinger]

Of course. So what's going on?

[Christine]

So I am, I would like to retire a year from this coming September, I'll be 65. I just want to run my numbers by you and make sure that I'm okay.

[Jill Schlesinger]

Okay. So right now you're 64, turning 65 next year. That's right.

[Christine]

That's correct.

[Unknown Speaker]

Okay.

[Jill Schlesinger]

And you are working full time?

[Christine]

I am working full time.

[Jill Schlesinger]

How much do you earn?

[Christine]

Right Now I earn $157,000.

[Unknown Speaker]

Okay.

[Jill Schlesinger]

Are you married? Single?

[Christine]

I am recently widowed.

[Jill Schlesinger]

Oh, that sucks. I'm sorry.

[Christine]

Thank you very much. Thank you.

[Jill Schlesinger]

So, Christine, when you look at retirement in a year, will you be entitled to any income? I mean, you'll have your. I guess your. If your husband was old enough, maybe his Social Security. Will you be entitled to a pension?

[Christine]

I will not be entitled to a pension.

[Jill Schlesinger]

His Social Security, though. You have a.

[Christine]

Yes, his Social Security. What I would be able to collect at 65. I think it's around $2,000 a month.

[Jill Schlesinger]

Oh, okay. That's a good number. Do you have a bunch of money that you have saved in anticipation of this retirement?

[Christine]

Yes, I do.

[Jill Schlesinger]

Tell me a little bit about what you've saved.

[Christine]

Okay, I have $1,800,000, but it's all pre tax money. Unfortunately, I did not start Roth soon enough.

[Jill Schlesinger]

You know what, though? I mean, unfortunately, yes, but what are you gonna do? We were of an age where everything was pre taxing and, you know, a lot of places didn't even have the Roth for it for a few years, so. But that's a huge amount of money, which is good. Did your husband also have retirement accounts?

[Christine]

That amount includes his 300, right? His.

[Unknown Speaker]

Okay, got it.

[Christine]

I inherited $350,000 in his IRA.

[Unknown Speaker]

Got it.

[Jill Schlesinger]

Okay, so 1.8 million total. Anything else that you have in savings?

[Christine]

Savings? I have $280,000 in savings.

[Jill Schlesinger]

$280,000? Is that what you said?

[Christine]

Yes.

[Unknown Speaker]

Okay.

[Jill Schlesinger]

Any brokerage account, like any investment account that's not a retirement account?

[Christine]

No.

[Unknown Speaker]

Okay.

[Jill Schlesinger]

How about your house?

[Christine]

My house is fully paid for. I would say it's worth around $450,000.

[Jill Schlesinger]

Would you like to stay in it?

[Christine]

Yes.

[Unknown Speaker]

Okay.

[Jill Schlesinger]

And you have kids, grown kids?

[Christine]

I have one grown daughter, yes.

[Unknown Speaker]

Okay.

[Jill Schlesinger]

Is she launched?

[Christine]

She is launched. I have two grandchildren. I do like to, you know, help out now and again.

[Unknown Speaker]

Okay.

[Jill Schlesinger]

But nothing ongoing. It's not like you're saying, like, oh, I have to pay for their tuition.

[Christine]

Well, right now they're in private school and I am helping pay for their tuition.

[Jill Schlesinger]

Oh, look at that. How I intuited that. Yes. So private school how much are you helping out?

[Christine]

$10,000 a year.

[Jill Schlesinger]

Okay. How long do you think that will continue for?

[Christine]

That will continue. Five or six years.

[Jill Schlesinger]

Do you have any other obligations, anyone else that you feel like? Okay, you got the two grandkids. It's ten grand total or ten grand each. I should have asked that.

[Christine]

Ten grand total.

[Unknown Speaker]

Okay.

[Jill Schlesinger]

Anyone else you have to take care of? No.

[Unknown Speaker]

Okay.

[Jill Schlesinger]

Just you. We're going to get to you. There's nothing else that is that I should know about? You're not going to throw a rental property on me. There's no other big asset that we should know about, right?

[Christine]

No, there's not. The only other thing I'll mention is, you know, both of my parents are still alive. They're in their 80s.

[Unknown Speaker]

Wow.

[Christine]

Yeah. My dad. My dad's been diagnosed with Alzheimer's. But I do anticipate at some point it's likely that I will come into some money. Probably between 3 and $500,000.

[Unknown Speaker]

Okay.

[Jill Schlesinger]

All right. We won't count on it right now because you never know how much people have to spend on care, but I get it. How about the amount of money you think you spend right now? Forget about the $10,000 a year for a second. Just like Christine's great life that begins in a year, what do you spend?

[Christine]

So I spend around 5, but I'm wanting to plan on 7 to see.

[Jill Schlesinger]

What that looks like. Okay, that seems fine to me. So from your age 65 to your age 70, you will have your husband's Social Security. And then do you happen to know what your Social Security benefit would be at your age? 70.

[Christine]

$4,100.

[Jill Schlesinger]

$4,100. Okay, so what we would think about is you have the $2,000 a month that's coming in right now. I guess you'll just bank that. And what are you doing in terms of the money you're earning right now? Are you still putting it all into pre tax retirement or are you putting it into Roth right now?

[Christine]

I'm putting it into Roth.

[Jill Schlesinger]

Okay, so how much is in Roth right now?

[Christine]

About $100,000.

[Jill Schlesinger]

So of that 1,000,800, it's $100,000 is Roth, right?

[Christine]

Yes.

[Unknown Speaker]

Okay, got it.

[Jill Schlesinger]

All right, so for. We're going to pretend it's a year from now, you're done working. Yay. Goodbye. Okay, so then what you would likely do is start to pull money out of that pre tax account.

[Unknown Speaker]

Right?

[Christine]

Because that was my plan.

[Jill Schlesinger]

Right. Okay, so because you have 2,000 from Social Security, you'll. You'll Say to yourself, like, okay, well, you can just set it up so you can have 5,000 dol a month come to you, or maybe $6,000 a month just so we can account for taxes. Maybe even I would consider, if you're okay with it, pulling a little bit more out so that we can start to kind of defuse that big tax bomb that's looming.

[Christine]

That's exactly what I was thinking.

[Unknown Speaker]

Great.

[Jill Schlesinger]

Okay, so look, you're. Now you're single, you're in the 24% tax bracket. So maybe we would just consider the 24% bracket to be where we'd want you to stay. And that would mean that when you retire in a year, you could pull up to about $195,000 a year out of less than 25. So 170,000. About $170,000 from that pre tax account. Pay the tax. Sometimes they'll withhold it for you. Pay the tax that's due, and then you have that money to live on. And you can do that from your age 65 to 70. And then you would do the same thing, but you might reduce it a little bit. We'll have to see where taxes are once you start claiming your Social Security. Right. Because your Social Security payment's gonna go up when you claim it at your age 70. So that's pretty great. I think that there's a combination here of, look, the reality is the money is where it is, right? We're not going back and, you know, converting it or anything. I wouldn't go into like, converting the money. I would try to get.

[Christine]

I was going to.

[Jill Schlesinger]

I don't know. I don't. Just like you, you have a nice chunk of savings.

[Unknown Speaker]

You're newly.

[Jill Schlesinger]

You will be newly retired. You're going to make sure you want to stay liquid. I don't, I don't think. I think you can get a lot of money out of that account. If you're from, you know, 70 to 75, you'll pull some more money out, right? You'll be able to get the money out even after you claim Social Security. You'll just want to stay within probably the 24% bracket. And, you know, if at that time it's like, oh, my God, Jill, I have so much money, I don't know what to do. Yeah, okay. Maybe when you're 75, we'll take some of that money and we would convert it. We'll see. But I don't know. I'm not in a hurry to do all the conversion right now. I Think you're fine where you are. I think it's a great. You've done a terrific job. You and your husband did a great job of saving. You are able to save to actually help out the kids and the grandkids. So that's kind of amazing. And, you know, I don't know. How much money did your husband make in his career? He.

[Christine]

Well, my husband was significantly older than me, so he. He was retired for quite a while.

[Unknown Speaker]

Okay.

[Christine]

Probably about, you know, 80,000.

[Jill Schlesinger]

You know, it's. But so I just want to point out to everyone listening, like, how much money you can accumulate when you start and you stick to it. Because I lived in Rhode island, so I know that the state has high taxes and it may not be, like, the same cost of living as, say, Boston, but it ain't cheap. So it's an incredible story where you have somebody who's making, or a couple that's been making, you know, good money, not over the top money, who's able to save $2 million, not including your house. It's incredible. So give everybody the key to success. Christine, what. What was it that got you there?

[Christine]

You said it. You have to be. You have to start early. You have to, you know, look at it as paying yourself, and you have to be consistent.

[Jill Schlesinger]

The consistency.

[Christine]

I often try to say to people, you know, everybody thinks a million dollars is like, oh, I could never save a million dollars. Yeah, you can.

[Jill Schlesinger]

Yeah. And all of a sudden you're there. And that's the most amazing thing about it. So, Christine, just in terms of your own planning, do you have your own estate? Have you shifted some of the documents for your will and your power of attorney and your healthcare proxy now?

[Christine]

Yes, that's all taken care of.

[Jill Schlesinger]

And is there anything else that you want to ask us?

[Christine]

I think I have a couple of questions. Okay. If I take that money out, should I open a brokerage account and put some money in there?

[Jill Schlesinger]

Yeah, maybe. I think that we have to. I really think that it might be important just to sort of see where you are with savings and where you stand, and maybe you open a brokerage account. Where is your retirement account held right now?

[Christine]

I have an account at four Fidelity and one with Empower.

[Jill Schlesinger]

Okay. So maybe I would go to Fidelity, and I would say, I'm going to take my account from my retirement account. I'll roll it into a Fidelity IRA rollover, and then maybe I would even take some of the money from savings, just see if that's piling up very quickly. Maybe you take, like, 80 grand or something or 100 grand out and you start a plain old Fidelity brokerage account. Then the money that you take out of the retirement account that you don't need, you add it to that account and it's just a boring, like really boring. Plain vanilla. Some exchange traded funds or some mutual funds, little stock, little bond, maybe a little commodity. Go to sleep at night and let that thing build up.

[Christine]

Okay, that sounds great. So, asset allocation. So I was thinking of using index funds. Yep. Do you think like 40, 60 is good?

[Jill Schlesinger]

When you say 40, which 40 are we talking about? Are you saying 40 stock 60 bond.

[Christine]

Or the other way around, 40 stock 60 bond.

[Jill Schlesinger]

You could go 50. 50. You're so young and you've got longevity with your parents.

[Christine]

Yep.

[Jill Schlesinger]

So I mean, I don't know. Unless you hate risk.

[Christine]

No, I don't know. I don't hate it.

[Jill Schlesinger]

I mean, especially because that account, you're probably not going to pull from that account very, anytime soon. I think that'll be it. Like if I looked at like the time like when you what when you would tap each account, you're going to pull money out of your retirement account and you're going to let that brokerage account build, build, build. And the last account will be the Roth and that'll be, you know what I mean? Like that'll be the last money that, that'll be the money that your, your kids or your, your, your daughter or your grandchildren will inherit.

[Christine]

Yeah. Yeah, that makes sense. That's what I'm thinking about too. In good. It would be be nice to be able to leave some legacy. And then the only other concern obviously I have is about covering long term care expenses.

[Jill Schlesinger]

Yeah. But you know what? So somebody's going to try to sell you a long term care policy.

[Christine]

Oh yeah, I'm not doing that.

[Jill Schlesinger]

Okay, so. Exactly. I mean it's different if you're a married couple with this level of assets. Because think about this. If you're a married couple and there's two like there's two of you, you're 65 years old, one gets sick, you could drain a lot of money fast from that pre tax account. Right. But it's just you. I think it's highly unlikely that you will be sick for 15 years. Of course it could happen.

[Unknown Speaker]

Okay.

[Jill Schlesinger]

I don't want to say it won't, but you have a lot of assets and it's because it's just you, you can use your own assets on your own care and if you needed to go into a facility, you could Also, sell your house. So I don't think you've got a big problem here. I do think that it's worth thinking about just like, hey, I can't. In other words, I wouldn't give all my money away to my kids right now or my grandchildren. I keep saying kids because I'm putting them all together so that you're. To your daughter or your grandchildren. But I would be clear that that's something that could crop up in the future. But, you know, again, as you said, you got your parents. Let's see how they do. You'll have that experience. I don't think you need any sort of extra product to cover you.

[Christine]

Okay, great.

[Jill Schlesinger]

Good.

[Christine]

Great. Yeah, that's.

[Jill Schlesinger]

Oh, my God.

[Christine]

And then, you know, the other thing was, you know, do I really need to hire an advisor?

[Jill Schlesinger]

I mean, look, if you're comfortable with where you are, if you feel like, you know what, I feel pretty good, like, I can manage this. I get it. That's fine. If at some point you're sort of like, oh, God, I. I think that maybe I'm just. I'm in. I'm in a weird place. I don't feel like doing it. I'd like another set of eyes and ears, then fine. But I don't necessarily get the vibe from you that you need this right now. If you did need that, I. I know someone fabulous in Rhode Island. I don't think you do. I don't. I don't think you do.

[Christine]

That was sort of my thought that I didn't know. So I think what you're saying sounds really good.

[Jill Schlesinger]

Christine from Rhode island, thank you for joining us. Hey, if you are looking at retirement or maybe you are also recently widowed or a widower, then get in touch with us. Go to jillonmoney.com, click the contact us button and write us a note. If you'd like to join us on the air, check the box. Mark will do everything else. Don't forget to check out all of our great content that lives right there on the website jillonmoney.com you can subscribe to our US on the Odyssey app or wherever you find your favorite podcasts. And it is Friday, so let's do some business. Our music is composed by the fabulous Joel Goodman. Mark Tularsio is the best executive producer and king of all things web. And we are distributed by the fine folks at Odyssey. Please try to 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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