Can I Take On More Risk? - Jill on Money with Jill Schlesinger

Summary

Podcast Title: Can I Take On More Risk?
Host: Audacy
Episode Release Date: February 26, 2025

Introduction

In this episode of "Jill on Money with Jill Schlesinger," host Jill Schlesinger, along with her executive producer Mark, delves into the nuanced topic of risk in retirement investing. The episode, titled "Can I Take On More Risk?", features a listener call-in from Therese, a 64-year-old from Michigan, who seeks guidance on whether she should adopt a more aggressive investment strategy as she approaches retirement.

Caller Profile: Therese's Financial Situation

Therese initiates the conversation expressing her desire to evaluate her current retirement investment strategy. At [03:20], she states:

Therese: "I'm trying to determine if I could be a little more aggressive with my retirement investments. I'm 64."

Therese is married, both she and her husband are 64 years old. She earns approximately $175,000 annually as an accountant, while her husband, a self-employed handyman, earns about $45,000 per year. The couple is financially stable, owning their home valued at $450,000 with a remaining mortgage of $290,000 at a favorable interest rate of 2.9% ([05:44]).

Current Investment Portfolio

Therese outlines her investment landscape during the call. She has accumulated:

401(k): Approximately $175,000
Solo 401(k) for Husband: About $43,000
Emergency Savings: $55,000
IRAs: Around $12,000, which she aims to consolidate

Her combined monthly retirement contributions amount to $1,300 per pay period, totaling roughly $2,600 monthly, supplemented by an additional $800 into savings ([07:21]).

Investment Allocation Analysis

As Mark probes deeper, Therese reveals the composition of her retirement accounts at [10:16]:

20% in Aggressive Growth (mid-cap and small-cap stocks)
40% in a S&P 500 Index Fund
10% in an International Equity Index Fund
10% in a High-Yield Bond Fund
20% in a Total Bond Fund

Mark assesses this allocation and identifies potential over-aggressiveness, considering their age and nearing retirement:

Mark: "You're taking plenty of risk. I don't need you to take any more risk. Okay. It's unnecessary probably to have the aggressive growth." ([12:58])

He suggests adjusting the portfolio to a more balanced 60% stocks and 40% bonds to mitigate excessive risk without significantly compromising potential returns ([13:28]).

Discussion on Risk and Future Planning

The conversation emphasizes the balance between risk and return, especially for individuals close to retirement. Mark highlights that higher risk does not necessarily guarantee proportional returns:

Robert Half: "More risk doesn't really mean a much bigger return. [...] a 70/30 portfolio averages a 9% return, whereas a 40/60 is 7.6%." ([14:07])

He advises that Therese and her husband should consider their comfort with market volatility, especially as they plan to work until age 70, potentially continuing part-time employment if necessary:

Mark: "Are you willing to forego some of the up? That's really the question now, Therese." ([14:46])

Therese acknowledges the importance of not having to withdraw funds during a market downturn:

Therese: "If we don't work part time after 70, I'm going to have to start accessing these funds." ([15:49])

Mark reinforces the necessity of aligning investment strategies with personal risk tolerance and future income plans.

Recommendations and Key Takeaways

Mark recommends that Therese consider shifting her asset allocation to 65% stocks and 35% bonds as a middle ground, allowing for growth while reducing excessive exposure to stock market volatility:

Mark: "Maybe you go 65/35. Maybe just consider it, talk to your husband, see how you feel." ([16:19])

He underscores that taking on additional risk should only be pursued if one is comfortable with the potential downsides:

Mark: "Risk is a four letter word. [...] It just means you have the ability to maybe increase that rate of return." ([16:07])

Therese reflects on the possibility of needing to access her retirement funds earlier than planned and the implications of a market downturn at that time.

Conclusion

The episode concludes with Mark and Jill encouraging listeners to evaluate their investment strategies critically, especially as they approach retirement. They emphasize the importance of understanding one's risk tolerance and the potential long-term impacts of investment decisions.

Jill Schlesinger: "Let us know what you decide." ([17:24])

Listeners are invited to reach out with their financial questions and engage with the community through the show's website.

Notable Quotes with Timestamps

[10:02] Therese: "I'm showing like 75% in domestic stock. Okay, so that seems kind of aggressive."
[12:58] Mark: "You're taking plenty of risk. I don't need you to take any more risk."
[14:07] Robert Half: "More risk doesn't really mean a much bigger return. [...] a 70/30 portfolio averages a 9% return, whereas a 40/60 is 7.6%."
[16:07] Mark: "Risk is a four letter word. [...] It just means you have the ability to maybe increase that rate of return."
[17:24] Jill Schlesinger: "Let us know what you decide."

Key Insights

Risk Assessment: It's crucial to align investment strategies with personal risk tolerance, especially nearing retirement.
Asset Allocation: A balanced portfolio, such as 60/40 (stocks/bonds), may offer a compromise between growth potential and risk mitigation.
Future Planning: Consideration of part-time work post-retirement can provide additional financial security and reduce reliance on investment withdrawals.
Market Volatility: Understanding and accepting the inherent fluctuations in the market is essential to avoid making impulsive financial decisions.

For further financial guidance and personalized advice, visit jillonmoney.com and explore the wealth of resources available.

Transcript

Jill Schlesinger (0:00)

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Jill Schlesinger (1:25)

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Mark (1:38)

Welcome to the Jill on Money show. It's Wednesday, February 26th. Yes, spring is coming, gang, but it has been a long February for all of us. And if you want to snuggle up to your cash register instead of your very delicious blanket, why don't you get in touch with us? Because maybe you're clinging too much to that money issue that's coding in your head. We've been talking to a lot of people lately who just can't quite free themselves and let themselves spend and enjoy their lives. We want to do that for you or with you. So if you need some guidance, get in touch with us. Go to jillonmoney.com, click the contact us button, write us a note, and if you would like to join us live on the air, check the box. Mark, the best executive producer in the world, will do everything else. And by the way, while you're on the website, don't forget we've got a ton of content that lives there, including our free weekly newsletter and our subscription service. It's called Jill on Money Live. That is where for $45 for the next 12 months, you have access to four live webinars. The next one is coming up Thursday, March 6, 7 Eastern Time. Ed Slott, CPA, IRA expert, amazing expert on the Roth as well. He will be in that webinar with us. And we'll be able to field your questions live with Ed, which is so much fun. So you can do that again. If you are a subscriber to Jill on Money, Life just cost you 45 bucks. You'll get bonus audio and video content, the back catalog. It's a great deal. All right, enough of that right now. Let's go talk to Therese, who's on the line from Michigan. Hello. How are you?