Am I on Target for Retirement?

Summary

Podcast Summary: "Am I on Target for Retirement?"

Jill on Money with Jill Schlesinger
Host: Jill Schlesinger, CFP®
Episode Release Date: February 3, 2025
Episode Title: Am I on Target for Retirement?

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Introduction

In this episode of Jill on Money with Jill Schlesinger, host Jill Schlesinger, alongside co-host Mark T. Williams, delves into the critical topic of retirement planning. The episode aims to provide listeners with actionable insights to determine whether they are on track to meet their retirement goals. Through real-life listener calls, Jill and Mark offer personalized financial advice, breaking down complex concepts into understandable terms.

Listener Call: David from Michigan

Caller Profile:

• Name: David
• Age: 62
• Location: Michigan
• Marital Status: Widowed for four years
• Employment: Working full-time with plans to retire at 65
• Annual Income: $120,000
• Housing: Owns a primary residence valued at $425,000 with no mortgage and a cottage purchased last year for $220,000, now valued at $300,000
• Children: Two grown children, financially independent
• Savings and Investments:
  • Traditional 401(k): $660,000
  • Roth 401(k): $1.2 million
  • Savings Account (Credit Union): $220,000
• Social Security: $3,000/month at 67; $3,746/month at 70
• Pension: None
• Health: Generally in good health; manageable health concerns
• Estate Planning: Up to date, except for transferring the cottage into a trust

Discussion Highlights:

1. Financial Overview:

   • Jill begins by assessing David's current financial status, acknowledging his robust retirement savings. She notes, “Wow, that's good.” at [07:06], highlighting David’s substantial Roth 401(k) balance of $1.2 million.

2. Retirement Income Planning:

   • David's plan involves retiring at 65 with a monthly expense need of $3,600. Jill inquires about his Social Security strategy, leading David to express his intention to claim benefits at 70 to maximize his monthly intake.
   • Jill advises, “You've done such a great job converting and you'll be in a very low tax bracket. I'm not scared of the, the converting even more.” [07:16], endorsing his proactive Roth conversions to minimize tax liabilities.

3. Withdrawal Strategy:

   • Jill and Mark discuss the optimal approach for withdrawing funds from David’s traditional 401(k) to supplement his Social Security benefits. Jill recommends withdrawing up to the top of his current tax bracket (around 22%) to optimize tax efficiency.
   • At [09:39], Jill elaborates, “...you take that money out, you're going to whittle down the 401k, you're going to beef up the... brokerage account, beef up any savings you've depleted for the cottage and the toys, and you're set...” This strategy ensures that David maintains liquidity while managing his tax exposure effectively.

4. Asset Management and Long-Term Planning:

   • Jill assesses David's asset allocation, noting his low-cost investment strategy with minimal fees (0.98 basis points). She commends his approach, stating, “Well, maybe you should get a job with them because it sounds like you fought through this thought this through and you're doing a great job.” [12:25]
   • The conversation also touches on estate planning, with Jill urging David to finalize the transfer of his cottage into a trust to ensure smooth estate management.

5. Final Recommendations:

   • Jill proposes a comprehensive plan where David continues strategic withdrawals from his traditional 401(k) up to his tax bracket limit, bolsters his brokerage accounts, and maintains his savings to cover any unexpected expenses or improvements on his cottage.
   • She concludes with confidence, “Enjoy the next few years. And of course, if for some reason you get flummoxed by your 2-mile commute and you actually want to, you know, maybe quit earlier, there's going to be no problem for you have plenty of money to actually do whatever you want to do.” [13:21]

Key Insights and Takeaways

• Proactive Retirement Planning: David’s case exemplifies the importance of early and strategic retirement planning, particularly through Roth conversions and maximizing tax-efficient withdrawals.

• Tax Efficiency: Utilizing Roth accounts and managing withdrawal amounts within favorable tax brackets can significantly enhance retirement income and preserve wealth.

• Asset Diversification: Balancing retirement accounts with brokerage investments and savings provides both growth potential and liquidity, essential for managing unforeseen expenses.

• Estate Planning: Ensuring all estate documents are up to date, including trusts for property, is crucial for seamless wealth transfer and minimizing legal complications for heirs.

Conclusion

In "Am I on Target for Retirement?", Jill Schlesinger and Mark T. Williams provide a comprehensive analysis of David's retirement readiness, offering personalized advice that underscores the importance of strategic financial planning. Listeners are encouraged to evaluate their own financial situations and consider similar strategies to ensure a secure and comfortable retirement.

For personalized advice or to join the conversation, listeners can visit jillonmoney.com and reach out through the contact form.

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Notable Quotes:

• Jill Schlesinger at [07:06]: “Wow, that's good.”
• Jill Schlesinger at [07:16]: “You've done such a great job converting and you'll be in a very low tax bracket. I'm not scared of the, the converting even more.”
• Jill Schlesinger at [09:39]: “...you take that money out, you're going to whittle down the 401k, you're going to beef up the... brokerage account, beef up any savings you've depleted for the cottage and the toys, and you're set...”
• Jill Schlesinger at [12:25]: “Well, maybe you should get a job with them because it sounds like you fought through this thought this through and you're doing a great job.”
• Jill Schlesinger at [13:21]: “Enjoy the next few years. And of course, if for some reason you get flummoxed by your 2-mile commute and you actually want to, you know, maybe quit earlier, there's going to be no problem for you have plenty of money to actually do whatever you want to do.”

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This episode serves as a valuable guide for individuals nearing retirement, offering practical advice on managing savings, withdrawals, and estate planning to ensure financial stability and peace of mind in retirement.

Transcript

[Jill Schlesinger]

Hey gang, when some of you come.

[Mark T. Williams]

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[Jill Schlesinger]

Welcome to the Jill on Money show. It's Monday, February 3rd, and we are here trying to help you make better.

[Mark T. Williams]

Less bad, more considered financial decisions.

[Jill Schlesinger]

And sometimes you don't even have a big decision looming. But maybe you just want a little bit of a heat Check on what's going on. Maybe you need some assistance with how to manage the idea that you've got to support. Maybe your older generation, your younger generation.

[Mark T. Williams]

Maybe we're talking about a new job.

[Jill Schlesinger]

Offer or whether or not to give up a beautiful pension to go into the private sector. Something like that. We love these questions. All you need to do to get in touch with us is hop onto our website, jillonmoney.com click the contact us button.

[Mark T. Williams]

Write us a note if you'd like to join us live on the air.

[Jill Schlesinger]

Check the box. Mark will do everything else. Don't forget, while you're on the website, we've got all sorts of content there. There are my television snippets, there's resources, there's my blog. Because I write a lot. This is how I think through issues. Mark, I want to tell you I did actually try to, you know, maybe tinker around with a chat GPT. I may be too old for this and maybe I'm going to be one of those people who's like doing more work than I need to. But I think the way that I use my writing is a way to think and it is very important to my process. So I'm not using ChatGPT yet. If you can figure out a way for me to use it, then sure. Maybe we'll have to. I think transcription wise we could use it. What do you think of that?

[David]

I'll have to consult with my better half. She uses it all the time.

[Jill Schlesinger]

Well, talk to her and see how we could be using it because I.

[Mark T. Williams]

Feel like we're missing the boat.

[Jill Schlesinger]

Except I don't really want to invest the time to learn anything because I'm so old. All right, let's get to you guys. We've got David who's on the line from Michigan. David, are you using AI to improve your life yet?

[David]

Not yet, but I'd be interested in it.

[Jill Schlesinger]

I know, me too. I'm interested, but I want someone else to do the work. That's why I have Mark. How can we work for you today, David?

[David]

Well, thank you for taking my call.

[Jill Schlesinger]

Sure.

[David]

I gave you a breakdown of the situation where I'm at as far as finances and I'm just looking to get a second opinion on my process of what I'm thinking.

[Jill Schlesinger]

Okay, so can we ask since I'm looking at the email that Mark just forwarded to me. But let's talk for everybody else. They've got to learn about this. So you live in Michigan. How old are you?

[David]

I am 62 okay.

[Jill Schlesinger]

Are you married? Partnered. What's going on?

[David]

I am a widow of four years.

[Jill Schlesinger]

Oh, man, that sucks. I'm sorry.

[Mark T. Williams]

Okay.

[Jill Schlesinger]

Are you still working full time?

[David]

I am working full time. My plan was to work till 65. It's only two miles from my home, and I'm able to work two days.

[Jill Schlesinger]

A week from home, so that's pretty good. So how much are you earning right now?

[David]

About 120.

[Jill Schlesinger]

And is that enough for you to live the life you want to live?

[David]

Oh, yeah, very much so.

[Jill Schlesinger]

And so you work full time until you're 65 and then to completely call it quits, or would you work part time? What do you think?

[David]

I'm going to call it quits.

[Jill Schlesinger]

Okay, gotcha. All right, tell us about your home, which is only two miles from work. How much is it worth?

[David]

It's about 425,000.

[Jill Schlesinger]

Do you have a mortgage outstanding still?

[David]

No.

[Jill Schlesinger]

Okay. And any other real estate that you own, rental property, anything like that?

[David]

Currently bought a cottage last year. It's a money bit.

[Jill Schlesinger]

It's like one of those beautiful projects, so we'll just call it a hobby. How much did you pay for that?

[David]

220. And it's 300 now.

[Jill Schlesinger]

And any mortgage?

[David]

No.

[Mark T. Williams]

Wow.

[Jill Schlesinger]

You paid out.

[Mark T. Williams]

Right.

[Jill Schlesinger]

So it's. But it's a money pit. It's already gone up in value. So that's good.

[David]

It is. It's just a lot of improvements. It's been one of those that have been neglected over the years, so.

[Jill Schlesinger]

All right, well, between your two homes and your life right now, how much are you spending? What's the need that we need to consider for your retirement?

[David]

About 3,600.

[Jill Schlesinger]

That's it?

[David]

Yes.

[Jill Schlesinger]

Wow. Okay. And no, no idea around, like, you're not going to sell your house, move into the cottage full time, you're going to keep both of these, right?

[David]

That is correct.

[Mark T. Williams]

Okay. Do you have kids?

[Jill Schlesinger]

Grown?

[David]

I do. I have a son and a daughter that are launched and still trying to figure out life.

[Jill Schlesinger]

Okay, but you're not paying for anything?

[David]

No, ma'am.

[Jill Schlesinger]

We just had someone say that their kid was 85% launched, which I thought was funny. What have you saved so that we can figure out how you are doing and whether you're on track for the 65 retirement age? What have you saved in retirement assets?

[David]

401K traditional is about 660,000.

[Jill Schlesinger]

Wow, that's good.

[David]

Roth in 401k is about 1.2 million.

[Jill Schlesinger]

What?

[Mark T. Williams]

Holy moly.

[Jill Schlesinger]

Okay, you're done. But let's keep going. Why not?

[David]

Since the tax brackets have been so low, I've been doing conversions.

[Jill Schlesinger]

Great.

[David]

And then just a traditional savings and a credit union. 220,000.

[Jill Schlesinger]

Oh, that's great. What's your Social Security benefit at 67?

[David]

3,000.

[Jill Schlesinger]

Okay.

[David]

At 70 it's 3,746.

[Jill Schlesinger]

And do you, will you be entitled to any pension benefit?

[David]

I will not.

[Jill Schlesinger]

Okay. And are you in good health? Do you feel comfortable right now?

[David]

How it's manageable, yeah.

[Mark T. Williams]

Okay.

[Jill Schlesinger]

What will be the, the plan about Social Security claiming? What do you think?

[David]

For me I am going to take it at 70 and at 65 because I can get Medicare.

[Jill Schlesinger]

Uh huh.

[David]

I'm also eligible for survivor.

[Jill Schlesinger]

Oh right. Okay. What's the survivor benefit?

[David]

It's about 22, 27amonth.

[Jill Schlesinger]

So you work for a few more years. 65, you get a couple thousand dollars coming in. Right. And then at that point do you between 65 and 70. Are you thinking that you keep pulling money out of the converting or just pull money out straight away from the 401k to subsidize the difference between your need and what's coming in from the survivor benefit?

[David]

I guess maybe that's a question. Should I still do a raw conversion or just take it out of my traditional and offset my costs?

[Jill Schlesinger]

You've done such a great job converting and you'll be in a very low tax bracket. I'm not scared of the, the converting even more. I mean I know you've got this 220 grand in savings. Do you have a brokerage account also or not?

[David]

Well, that was the next question I was thinking of. If I just started taking out of my traditional 401k and offsetting my costs, I then also could create a brokerage account, maybe four funds.

[Jill Schlesinger]

You're not going to have to take out that much money just to meet your needs, but maybe you take up to the, the tax bracket that you're in right now. Right. So you're in the 22% right now.

[Mark T. Williams]

Ish.

[Jill Schlesinger]

No, maybe. Or even a little bit more because you're making 120, you're 22, 24. I would at least take, you're filing single, so I would at least take as much money out of your 401k up to the top of the 22% bracket, which is just over 100 grand. I think it's a little bit more now with the inflation adjustment brackets. Right now. I would do that. I'd live on what I need and the balance if whatever you donate. Yeah, I'd go right into the brokerage account, and I'd put a few funds in there. You know, you said that the cottage is a money pit. Is there some reason that we'll need to spend down some of those savings anyway on the cottage?

[David]

I do. There's some improvements, and then there are a couple toys I'd like to buy.

[Jill Schlesinger]

Oh, okay. Toys seem good. I mean, I think you're in great shape. Shape, obviously, because then if we just took out. Even if you said, I'm going to take out up to the 24% bracket, but let's just say it's 22%, you know, you take that money out, you're going to whittle down the 401k, you're going to beef up the. You'll start the brokerage account, beef up any savings you've depleted for the cottage and the toys, and you're set because at age 70, you are almost essentially covering, you know, your expense need of 3,600amonth, let's say it BOP. Maybe it's even more than that. Maybe it's $1,000 more a month or 4,600. You've got plenty of money. You have no issue. And what I think I would really target is from, you know, we talked about 65 to 70, pulling out what you need. But, you know, depending on where tax law is, maybe from 70 to 75, before you have to take those required minimum distributions, I probably would also start dribbling additional money out of your traditional accounts, just again, up to whatever bracket seems reasonable. Maybe it's 22% by then and just keep pulling the money out little by little. And then by the time you're 75, we've pulled down a lot of your 401k. I mean, it's not going to go away because, you know, generally speaking, Mark, these accounts still grow some, but you'll have a much better handle on how to access your 401k, your traditional assets, and you'll be controlling the tax liability, which I think is really important for you. So how does that sound as a game plan?

[David]

Sounds like a plan.

[Jill Schlesinger]

I like that. And, and just one last thing. Are you managing your assets yourself or is someone else helping you?

[David]

Someone else is helping me.

[Jill Schlesinger]

Is that working for you?

[David]

That is working.

[Jill Schlesinger]

Okay, great.

[David]

I'm less than 1 full or what point? 98 basis points, all in.

[Jill Schlesinger]

Oh, great. So it's like a 1% fee. And are they doing the planning for you also?

[David]

They're working on it as well. But this is basically my Plan is what I'm thinking.

[Jill Schlesinger]

Well, maybe you should get a job with them because it sounds like you fought thought this through and you're doing a great job.

[David]

They. They would have, but I'm a little on the old side.

[Jill Schlesinger]

Oh, stop it. No way. Come on now. You. You're in great shape. Do you have those estate documents all up to date for your launched kids and everything?

[David]

I do the only thing I gotta do is put my cottage into a create a ladybird bead.

[Jill Schlesinger]

Okay. All right, that sounds great. Get on it. Enjoy the next few years. And of course, if for some reason you get flummoxed by your 2 mile commute and you actually want to, you know, maybe quit earlier, there's going to be no problem for you have plenty of money to actually do whatever you want to do. Okay? So we wish you the best of luck. David from Michigan. If you've got a question about a strategy that you have conceived, an advisor has conceived. You want to run it by us?

[Mark T. Williams]

Whether you're 30, 40, 50, 60, 70.

[Jill Schlesinger]

80 or beyond, give us a holler. Go to Jill on money dot com, click the contact us button and when you do that, a form will pop up. Write us a note if you want to join us live. Just check the box. Mark will do everything else. You can subscribe to us on the Odyssey app or wherever you find your favorite podcast. Please leave us a rating and review wherever you listen. And of course, do something nice for someone else today. Change your work, change your wealth, change your life. Thank you for listening.

[Mark T. Williams]

We'll talk to you tomorrow. 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 Sunbelt. 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 College holds a mythic.

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[Jill Schlesinger]

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