Podcast Title: Jill on Money with Jill Schlesinger
Episode: Anxiety Around My Finances
Release Date: January 6, 2025
Host: Jill Schlesinger, CFP®
Hosted By: Audacy

Introduction

In the episode titled "Anxiety Around My Finances," Jill Schlesinger delves into the financial concerns of everyday individuals, offering practical advice and actionable insights to help listeners navigate their monetary challenges. The episode features a thoughtful conversation between Jill and Bill, a 46-year-old caller from Virginia, who shares his financial anxieties and seeks guidance to ensure his family's financial well-being.

Caller Introduction

Bill's Background and Family Dynamics ([02:52] - [03:58])

Bill introduces himself as a 46-year-old business owner with a stable income, earning approximately $320,000 annually. He shares his family structure, including his 45-year-old wife who recently re-entered the workforce as a subcontractor in the recruiting space, and their three children aged 19, 14, and 12. Additionally, Bill mentions their two large Labrador Retrievers, highlighting a busy household dynamic.

Bill: "I've been listening to your podcast both for the last kind of month and have, you know, absorbed a lot of the content. And I'm someone that has some anxiety around my own finances..."

Analysis of Financial Situation

Income and Employment Stability ([04:08] - [05:34])

Bill has been the sole provider for his family for the past 15 years, but with his wife's new venture, there's potential for increased household income ranging between $20,000 to $40,000 in her first year. Bill emphasizes the stability of his position, noting his 20-year tenure at his company and the generous severance package he would receive if ever displaced.

Bill: "I've been very fortunate and you know, I don't plan on going anywhere and it's pretty stable..."

Retirement Planning ([05:34] - [06:26])

Bill participates in a robust 401(k) plan through his employer, which includes a match of 50% up to the first 6% of his contributions, supplemented by an additional company-based matching contingent on performance. His retirement accounts boast a substantial balance, with $930,000 in his current 401(k), a $77,000 IRA rollover, and a $35,000 SEP from his wife's previous fitness business.

Bill: "I have matched out the last few years and I plan to do so and then increase my contributions at age 50..."

Education Savings ([06:30] - [07:24])

Bill has strategically utilized 529 plans to fund his children's education. His eldest son, a freshman in college, benefits from a substantial 529 balance and a merit-based scholarship, ensuring his tuition is covered. The younger children have separate 529 accounts with balances of $30,000 and $26,000, respectively, with ongoing contributions aimed at securing their educational future.

Bill: "We have a 529we started pulling from and we are in really good shape to get her through her four years..."

Assets and Investments ([07:24] - [08:29])

Beyond retirement and education savings, Bill maintains a brokerage account with $15,000, bolstered by restricted shares from his compensation and participation in an employee stock purchase plan at a 15% discount. Their primary residence is valued at approximately $700,000 with a mortgage balance of $360,000 at a favorable 2.875% interest rate.

Bill: "So we own our home. Current value in Today's market's about 700,000..."

Debt Management and Cash Flow ([08:29] - [09:25])

Bill and his wife have diligently managed their debt, clearing a Home Equity Line of Credit (HELOC) and maintaining only two car loans with a combined payment of $600 per month at low-interest rates. However, Bill candidly acknowledges a limited emergency fund, currently holding $20,000, which covers about three months of living expenses.

Bill: "I feel like I'm a little light with our emergency fund. Shame on me..."

Financial Advice and Recommendations

Strengthening Financial Foundations ([10:18] - [11:55])

Jill commends Bill and his wife on their solid financial footing and suggests bolstering their emergency fund to six months' worth of expenses. She encourages increasing contributions to their daughters' 529 plans and advises maintaining disciplined investment in their brokerage accounts, emphasizing the importance of non-retirement savings for flexibility and security.

Jill Schlesinger: "I would rather you do that even than doing the Roth 401K... beef up your non-retirement assets especially because you've got... three kids..."

Roth vs. Traditional 401(k) ([11:55] - [16:15])

A significant part of the discussion revolves around whether Bill should consider shifting from a traditional pre-tax 401(k) to a Roth 401(k). Jill initially advises against it due to Bill's current tax bracket but reconsiders in light of potential future inheritances and increased cash flow from his wife's new business. Mark, the co-host, supports converting to a Roth to mitigate future Required Minimum Distributions (RMDs) that could arise from a potentially massive 401(k) balance exceeding $3 million.

Mark: "If he keeps that contribution and the Company keeps matching him dollar for dollar, that 401k is going to be over $3 million pre tax."

Jill ultimately aligns with Mark's perspective, recognizing the long-term benefits of a Roth conversion despite the immediate increase in taxable income.

Jill Schlesinger: "You're going to have many, many, many options... consider the fact that I would feel very strongly in this case..."

Inheritance Planning ([14:38] - [16:15])

Bill brings up the possibility of inheriting $3 to $5 million from his wife's uncle's estate. Jill advises not to hinge current financial plans on this potential inheritance but acknowledges its future impact. She emphasizes maintaining active and strategic financial planning irrespective of anticipated inheritances.

Jill Schlesinger: "You are not planning on it, but it is there... you’re not putting everything else on hold waiting for your relative to die."

Concluding Insights

Jill and Mark commend Bill and his wife for their proactive and comprehensive approach to financial planning. They reassure him that he is on the right track and encourage continued investment in non-retirement assets, strengthening his emergency fund, and considering the Roth 401(k) for future tax advantages. The conversation underscores the importance of diversification, strategic planning, and adaptability in managing personal finances effectively.

Jill Schlesinger: "You really are in good shape. So congratulations. Go forth and multiply your non retirement assets and get excited about your Roth..."

Key Takeaways

• Diversify Savings: Beyond retirement accounts, maintaining robust brokerage accounts and education savings ensures financial flexibility.

• Emergency Funds: Aim for an emergency fund that covers at least six months of living expenses to safeguard against unforeseen circumstances.

• Strategic Debt Management: Eliminating high-interest debt and maintaining manageable car loans can significantly enhance financial stability.

• Roth Conversion Consideration: Assessing the benefits of Roth conversions in the context of potential future inheritances and escalating tax brackets is crucial for long-term tax efficiency.

• Inheritance Planning: While it's wise to consider potential inheritances, financial plans should remain robust and independent of uncertain future events.

Notable Quotes:

• Bill on Financial Anxiety:
  "I'm someone that has some anxiety around my own finances and that really has stemmed from my parents really not educating me as a child..." ([02:52])

• Jill on Bill’s Financial Health:
  "You sound like you guys are putting a lot of money away... you're on the right track..." ([10:18])

• Mark on Roth 401(k):
  "If he keeps that contribution and the Company keeps matching him dollar for dollar, that 401k is going to be over $3 million pre tax." ([16:05])

• Jill on Final Advice:
  "You are doing great and you've got all the, you know, to me, the... The... Things that we're laying out here as ideas, those are things that are like a little like a small edit..." ([17:08])

This episode serves as an insightful guide for listeners grappling with financial uncertainties, illustrating how methodical planning and informed decision-making can alleviate financial anxiety and pave the way for a secure future.