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.