Episode Summary: Analyzing Deferred Comp Options

Introduction

In this episode of Jill on Money with Jill Schlesinger, host Jill Schlesinger, alongside her co-host Mark, delves into the intricacies of deferred compensation plans. Released on February 17, 2025, the episode features a detailed discussion with a caller, Bob from Pittsburgh, who seeks advice on his wife's non-qualified deferred compensation plan. The conversation offers valuable insights into retirement planning, mortgage management, and financial strategies for high-earning households.

Caller Introduction: Bob's Financial Landscape [03:21]

The episode kicks off with Bob joining the show from Pittsburgh. He introduces his financial situation, highlighting his wife's employment as a physician and their sustained contributions to her non-qualified deferred compensation plan over 14 years. Bob shares his concern after learning that his wife must remain employed until age 60 to receive her deferred compensation as an annuity. If she leaves her job before then, the funds would be accessible only as a lump sum.

Understanding Deferred Compensation and Annuity Options [04:05]

Mark engages Bob with a series of questions to better understand the specifics of the deferred compensation plan:

• Age Considerations: Bob's wife is 47, and he is 51. This places them several years away from the age 60 threshold for annuitization.

• Employment Stability: His wife has been with the same employer for 14 years and enjoys her role as a physician.

Mark probes into the potential flexibility of the plan, questioning whether the funds can be rolled over or annuitized if his wife decides to change jobs in the future. Bob clarifies that the plan is non-qualified and payable upon termination of employment, ruling out the possibility of returning to the former employer to access annuitization benefits later.

Financial Breakdown and Retirement Planning [07:04]

Bob provides a comprehensive overview of their financial status:

• Deferred Compensation Contributions: $20,000 annual contribution from his wife, with a $5,000 employer match over 14 years, growing to over $750,000.

• Personal Retirement Savings: Bob maintains a rollover IRA with $250,000, contributing approximately $9,000 annually.

• Adjustable Rate Mortgage: They have a $1 million jumbo loan at 2.4% interest, with an ARM set to reset to 4.4% in August 2026. They plan to pay off the mortgage by 2027.

• Brokerage Account: Established in 2016, holding around $650,000, with ongoing contributions of $6,000 monthly.

• Lifestyle and Expenses: Their monthly expenses amount to approximately $25,000, reflecting a "lifestyle drift" common among high-income households.

Mark commends their robust saving habits, noting, “They are spending a lot of money, but they're saving 150 grand a year” ([14:34]). This exemplifies disciplined financial management despite high earnings and expenditures.

Strategic Financial Advice [17:18]

Mark reassures Bob, emphasizing the strength of their financial foundation:

• Retirement Assets: With $2 million in retirement assets and $650,000 in brokerage accounts, their net worth is projected to approach $5 million in the next five years.

• Deferred Compensation Flexibility: Mark advises not to worry excessively about the annuity requirement, highlighting that the lump sum received is substantial and can be reinvested strategically.

Notable Quote:

"If you think about every million dollars will probably generate around 30, 35 grand a year without plowing through it. So in your case, again, this doesn't account for inflation...if you had five million and you could generate 175, $200,000 a year from your portfolio, that's in five years." ([19:20])

Conclusion and Key Takeaways [20:27]

Mark summarizes the discussion by highlighting the importance of:

• Flexibility in Financial Planning: Understanding the terms of deferred compensation and exploring options for portfolio growth.

• Disciplined Saving and Investment: Maintaining high savings rates and diverse investment portfolios to ensure financial stability.

• Lifestyle Management: Balancing high earnings with controlled spending to sustain long-term financial health.

Mark encourages listeners to reach out for personalized financial advice, reinforcing the show's mission to provide actionable information for optimizing one’s financial future.

Final Thoughts

This episode serves as an informative guide for individuals navigating deferred compensation plans and high-income financial management. Through Bob’s real-life scenario, listeners gain practical insights into retirement planning, investment strategies, and the balancing act between saving and spending. Jill and Mark effectively demystify complex financial topics, making them accessible and actionable for their audience.

Notable Quotes:

• Mark on Savings Rate: “They are spending a lot of money, but they're saving 150 grand a year.” ([14:34])

• Mark on Deferred Compensation Flexibility: “I absolutely would not worry about it. You're in great shape.” ([19:14])

• Bob on Financial Strategy: “I've been putting it in the brokerage and I'm glad that I've done that because in hindsight, I've been making much more money in the brokerage account.” ([16:54])

For more detailed insights and personalized financial advice, visit jillonmoney.com and explore their resources or contact the hosts directly.