Conflicted About Early Retirement Offer

Summary

Podcast Summary: "Conflicted About Early Retirement Offer"

Podcast Title: Jill on Money with Jill Schlesinger
Host/Author: Audacy
Episode: Conflicted About Early Retirement Offer
Release Date: April 15, 2025

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Introduction

In this episode of Jill on Money with Jill Schlesinger, host Jill Schlesinger delves into the intricacies of early retirement through a compelling conversation with Anne, a 53-year-old federal employee contemplating an early retirement offer. The discussion navigates the financial implications, emotional readiness, and practical considerations surrounding Anne's potential career transition.

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Guest Introduction: Anne from Maryland

Timestamp: [03:13]

Anne joins the show to seek advice on whether she should accept an early retirement offer. As a federal employee nearing 53, Anne faces an unexpected opportunity that requires careful deliberation.

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Anne's Current Financial and Personal Situation

Employment and Retirement Offer

• Age: 53
• Employment Status: Federal employee considering early retirement
• Retirement Offer Details:
  • Buyout Amount: Up to $25,000
  • Pension Benefit: Approximately $2,300 per month
  • Remaining Time on Books: Until May 3rd

Notable Quote:
"If you have a financial issue, tax or non-tax related, give us a holler." — Jill Schlesinger [02:00]

Housing and Mortgage

• Home Value: $516,000
• Outstanding Mortgage: $258,000
• Interest Rate: 3.8%
• Mortgage Term: 30 years (refinanced in 2020)

Savings and Investments

• Thrift Savings Plan (TSP): ~$1.5 million, predominantly invested in stocks (C fund and some G and I funds)
• External Roth Brokerage Account: $175,000
• Additional Brokerage Accounts:
  • Index Funds (S&P 500): $103,000
  • Play Fund Brokerage (Stock Learning): $155,000
• Cryptocurrency Holdings: $1,500
• Cash Reserves: $61,000
• Certificate of Deposit (CD): $29,000

Spending and Lifestyle

• Monthly Expenses: Approximately $4,000
• Annual Spending Estimate: ~$50,000
• Lifestyle Preferences: Prefers modest luxuries like Diet Coke and mid-tier chocolates

Notable Quote:
"I pretty much put everything on my credit card, so I kind of use those statements to guide me with my mortgage." — Anne [06:44]

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Discussion: Should Anne Take the Early Retirement Offer?

Mark's Initial Assessment

Mark explores the stability of Anne's current position versus the security offered by the early retirement package.

Key Points:

• Job Satisfaction: Anne enjoys her job environment, colleagues, and the impact of her work.
• Financial Security: With a substantial TSP, pension, and diversified investments, Anne is financially positioned to consider early retirement.
• Risk Evaluation: Staying could lead to unforeseen job termination, whereas accepting the offer provides a guaranteed financial cushion for the year.

Notable Quote:
"If you love it, I hate to tell you to take this deal. I really do. But you have plenty of money. You're gonna be able to do it." — Mark [08:31]

Emotional Readiness and Lifestyle Considerations

The conversation shifts to the emotional aspects of retirement, emphasizing that the decision is not solely financial but also personal.

Key Points:

• Emotional Preparedness: Anne expresses concerns about having enough money and the potential for lifestyle changes post-retirement.
• Future Spending: Though Anne currently maintains a frugal lifestyle, there's apprehension about possible lifestyle inflation ("lifestyle creep") if she retires early.
• Career Transition: Anne is unsure about embarking on a new career path immediately but acknowledges the desire to remain active and engaged.

Notable Quote:
"It's not like you're giving up 250 grand, in which case I'd be like, take the money. But it's almost like the severance is a nice bonus to make the decision." — Mark [13:08]

Financial Viability

Mark reassures Anne about her financial stability, highlighting her substantial savings and low spending relative to her assets.

Key Points:

• Savings vs. Expenses: With nearly $2 million in savings and a modest monthly expenditure, Anne's financial foundation is robust.
• Pension and Social Security: Her pension covers a significant portion of her expenses, reducing dependence on active income.
• Investment Strategy: Anne's diversified investment portfolio further secures her financial future.

Notable Quote:
"Two million, pension, Social Security. What's the issue financially? What's the issue?" — Mark [11:44]

Decision Making

The discussion culminates in assessing whether Anne is emotionally ready to make the leap into early retirement, emphasizing that both paths have their merits and uncertainties.

Key Points:

• Control vs. Reactivity: Accepting the offer provides Anne with more control over her career transition, whereas declining leaves the future uncertain.
• Mindset Shift: Transitioning to retirement requires a change in mindset, focusing on new opportunities rather than career continuation.
• Flexibility: Regardless of the decision, Anne's financial standing allows her to adapt to whichever path she chooses.

Notable Quote:
"I don't think this is a financial question. I think this is really about whether or not you are emotionally ready to do this." — Mark [12:23]

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Conclusion

In "Conflicted About Early Retirement Offer," Jill Schlesinger and guest Anne navigate the complexities of accepting an early retirement package. Through a thorough exploration of financial metrics and emotional readiness, the episode underscores that retirement decisions extend beyond mere numbers, encompassing personal fulfillment and life satisfaction. Anne's case exemplifies the delicate balance between financial security and personal happiness, offering listeners valuable insights into making informed and holistic financial decisions.

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Notable Quotes with Attribution and Timestamps

• Jill Schlesinger:
  "If you have a financial issue, tax or non-tax related, give us a holler." — [02:00]

• Anne:
  "I pretty much put everything on my credit card, so I kind of use those statements to guide me with my mortgage." — [06:44]
  "It's not like you're giving up 250 grand, in which case I'd be like, take the money." — [13:08]

• Mark:
  "If you love it, I hate to tell you to take this deal. I really do. But you have plenty of money. You're gonna be able to do it." — [08:31]
  "I don't think this is a financial question. I think this is really about whether or not you are emotionally ready to do this." — [12:23]

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Key Takeaways

1. Financial Preparedness: Anne's substantial savings and pension provide a strong financial foundation for early retirement.
2. Emotional Readiness: Deciding to retire early involves assessing one's emotional readiness and desire for change.
3. Lifestyle Management: Maintaining a modest lifestyle can mitigate concerns about financial sufficiency post-retirement.
4. Control Over Career Path: Accepting the early retirement offer grants more control over the timing and manner of career transitions.
5. Holistic Decision Making: Retirement decisions should consider both financial metrics and personal fulfillment to ensure long-term satisfaction.

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For more insights and financial guidance, visit Jillonmoney.com and explore the resources available to help you make informed financial decisions.

Transcript

[Jill Schlesinger]

Hi, this is Jill Schlesinger. I used to own a small business and now I talk to a lot of business owners like you who know that having the right partners in place can help you take your business to the next level. Partners like American Express that give you access to world class business and travel benefits so you can get more for your business wherever it takes you. With the Amex Business Platinum Card, you can earn 1.5x Membership Rewards points on select business purchases. And you can get complimentary access to more than 1400 airport lounges worldwide, including the Centurion Lounge, so you can keep running your business while you're on the go. See how the Amex Business Platinum Card gives business owners like you the tools and rewards that can help move your business forward. Terms and points cap apply. Learn [e-mail] AmExBusiness when investing your money.

[Mark]

Starts to feel like a second job, betterment steps in with a little work life balance. It's the automated investing and savings app that handles handles the work so you don't have to While they build and manage your portfolio, you build and manage your weekend plans. While they make it easy to invest for what matters, you just get to enjoy what matters. Their automated tools simplify the complex and put your money to work optimizing day after day and again and again. So go ahead, take your time to rest and recharge because while your money doesn't need a work life balance, you you do make your money hustle with Betterment. Get [e-mail] that's B E T T E R M e n t.com Investing involves risk performance not guaranteed welcome to the Jill on Money Show. It's Tuesday, April 15th and we are here trying to help you make better financial decisions. And you know one good decision to make right now is it's tax filing day. If you have not filed hello, don't forget you can obviously file an extension that is Form 4868. That'll give you six more months to file the return but not an extension to pay. Also, if you've already filed your extension, you really have to make sure that you've put your money into your retirement account because retirement contributions, Roth and regular and traditional IRAs. Your deadline April 15th. So that's today. So go ahead and do that. If you have a financial issue, tax or non tax related, give us a Holler. Go to jilonmoney.com, click the contact Us button, write us a note and if you'd like to join us Live. Check the box. And Mark will do everything else. While you're on the website, don't forget, all of our content lives here. So first of all, sign up for the free weekly newsletter and check out our subscription service, Jill on Money Live. For 45 bucks, you have access to four quarterly live webinars, bonus audio and video content, some cool ed slot tax charts that live out behind the paywall, and the entire back catalog, Jill on Money Live, all there for you. All right. Right now, let's talk to Anne, who joins us from Maryland. Hello, Anne. How are you?

[Anne]

I'm good today. Thanks for having me. How are y'all?

[Mark]

We are doing well. What's going on? How can we help you out?

[Anne]

Well, I am a federal employee and I kinda. I'm one of. Yes, I'm one of the many. And I'm wondering if I should or could take the early retirement option. It wasn't in the plans, but it needs to be considered, I think.

[Mark]

Okay. So, Ann, how old are you?

[Anne]

I'm 53.

[Mark]

What is. What does the early retirement option give you? You stay on the books until the fall or how does it work?

[Anne]

We'd be on the books until May 3rd.

[Mark]

Oh, boy. Okay. So it's soon, huh? And then what happens?

[Anne]

You could qualify for something called the vsip, which would be. I can't remember the actual name, but it's. It's the buyout. It'd be about a up to $25,000 buyout. Plus you can just start collecting your pension with. With your time and service.

[Mark]

And what would your pension benefit be?

[Anne]

About $2,300 a month.

[Mark]

Would you then go out and get another job?

[Anne]

I'm not good at sitting around. Okay, so I'd definitely go get another job, but I don't know if I would be able to get another career started.

[Mark]

Okay. That's an interesting distinction. I like that. That's a smart. I get it. Ann, are you married, single? Anything else? Anyone you got to take care of? What's going on?

[Anne]

Nope. I'm single, no kids. I'm going to have to take care of my parents at some point, but that's a. They can kind of take care of themselves.

[Mark]

So now?

[Anne]

For now. Yeah.

[Mark]

Okay, I got it. Do you own your own home?

[Anne]

I do.

[Mark]

Why is that? That was a funny pause.

[Anne]

Well, I don't own it outright. I've still got mortgage payments.

[Mark]

How much is the house worth?

[Anne]

It's about 516.

[Mark]

And you said you still have mortgage payments, so what's the outstanding mortgage amount?

[Anne]

258,000.

[Mark]

Okay. What's the mortgage interest rate?

[Anne]

It's about 3.8%.

[Mark]

How much longer does that last?

[Anne]

That mortgage I refinanced in 2020, and.

[Mark]

It'S a 30 year, so that'll be a while.

[Anne]

I've got a while. Yeah.

[Mark]

Okay. Okay, no problem. What about the money you've saved? Do you have, like, a tax deferred account in addition to your pension, retirement assets?

[Anne]

I do. I have a tsp. I've got. There's about a million and a half in that.

[Mark]

Wow. How is it invested? Mostly stocks, mostly bonds. A mix.

[Anne]

It's a mix, but it's mostly stocks. It's about 15% in the G, which I did in 2020, right when Covid started. That's the fixed amount? Yeah. The rest of it is mostly C fund and then a little bit of ins. I do have an external Roth that I've contributed to for a while. There's about 175,000 in that brokerage account. I do. I've got two different brokerages. I've got a brokerage index. That's the 500 index. It's about 103,000 in that. And then I've got a sort of a play fund brokerage account where I was trying to learn how to buy stock.

[Mark]

You should just get a hobby. It's much more fun. Okay, continue. How much is in there?

[Anne]

About $155,000.

[Mark]

Anything else? Second home, anything like that that's floating around?

[Anne]

No, nothing like that. I have a tiny bit of crypto. I've got about 1500 in crypto. I've got some cash. I've got about 61,000 in cash.

[Mark]

Good.

[Anne]

And then I've got one CD that's about 29.

[Mark]

All right. You ready for your hardest question of the day? Yeah. How much do you spend?

[Anne]

Okay, this is a rough guess. I pretty much put everything on my credit card, so I kind of use those statements to guide me with my mortgage. I spend a about 4,000amonth. I figure I spend about 50,000 a year. And that's. I've padded that. Yeah. I'm not a real high roller. I'd like to be, but Diet Coke and mid tier chocolate, you know, that's. Those are my luxuries.

[Mark]

That's quite a combination. I'm supposed to tell you to ease up on the Diet Coke swap. Diet Coke for bourbon. Okay. You're amazing. This is fantastic. Um, what is your Social Security benefit? Do you know what that will be in the future?

[Anne]

I don't all right.

[Mark]

It's going to be fine. So the first thing we know is that you take this. What happens if you don't take this, this severance? The question is, will you have the same risk sticking around? You know what I mean? Like. Well, what happens is you. You don't take this early retirement option, but in, you know, a month, you get axed anyway, then you get your severance. You still get your pension.

[Anne]

Right?

[Mark]

Okay. How do you like your job?

[Anne]

It's not a bad job. I do like it. I don't hate it.

[Mark]

Oh, my God. That's a good place to start. I don't hate it. It's not where I wanted to go with it.

[Anne]

I don't wake up dreaming about it every day. But I do like what we do. I like our product. It makes a difference to a lot of people. I like it. I love the people I work with. It's a. It's a great place to work.

[Mark]

Mm. Okay. I mean, my gut reaction is this. If you love it, I hate to tell you to take this deal. I really do. But you have plenty of money. You're gonna be able to do it. Mark, don't you agree?

Yeah. Yeah. If she wants to do it, she can do it for sure.

But it's weird because, you know, a lot of people we've talked to from the federal government are not happy, but.

You just don't know what's going to happen.

I know. That's the problem. That's where I'm wrestling with this back and forth.

[Anne]

That's a lot of concerns.

[Mark]

I know. I'm leaning towards taking it.

[Anne]

Oh, wow. Okay.

[Mark]

I'm leaning towards taking the early retirement. What about you, Mark?

Yeah, just given the uncertainty, you don't, you know, every day it's something different. So you just don't know which way it's going to go. If they're handing it out and it's available, I'm taking it.

I think I would also. I think that chances are, as you said, you may not find another career. But do I think you're gonna make a couple grand a month doing something? Yeah, I totally do. I really do. And so that would mean that your pension, plus whatever you do next, you know, really all you're gonna do is 25, 30 grand a year. That's all you need to make, and then you can do what you want. So financially, I think it makes sense to do it. It might be hard. Yeah. Aren't you scared? Like, a little bit. That's the problem. So that's Why? I think this is not exactly a financial question. So it's a risk question, and it's a life question, and then it's a financial question. The financial part, you can make this. It works. It really works. Don't roll over your thrift savings plan. Do not roll it over. Keep it where it is. Let it roll. Let it. Let it keep doing its thing. You get the pension, you take the severance. That will, like, last you through the year. You know, you'll get paid that money. Figure out what you want to do between now and the end of the year. Go get a job. Go do something. Go, like, find yourself. Because, to be honest with you, Ann Marc makes a good point. Staying there, it could be great. You could just keep, you know, working and having a good job and fun, and it could be wonderful. Or in three months, you could get kicked out on your tush. And, you know, that's. I feel like making the decision today and taking the deal is like, you have more control, and maybe that's why I'm leaning that way. But I can also paint you a picture where if you're like, all right, well, if I gave up 25 grand, it would. It wouldn't be the worst thing in the world. And I really like where I am, and I feel the security, and I like the consistency. I can live with that, too. Really, what we're talking about is you giving up the 25 grand in severance and controlling the process versus you being reactive to the process. So you tell me, how do those two scenarios sound to you?

[Anne]

Right. Well, I'm really surprised. I. I honestly didn't think I had enough money. No one thinks they have enough money at this point in life.

[Mark]

Well, I have no one. You.

[Anne]

You.

[Mark]

You have. But you have. But you don't spend any money. You have basically more than you're gonna have. Basically, almost half of your need is covered with a pension.

[Anne]

True.

[Mark]

That's a huge, huge difference. Right. And you've got, you know, almost $2 million that's stacked up, and you're gonna work. So I don't know. I think that you can do it.

Two million, pension, Social Security.

Yeah.

What's the issue financially? What's the issue?

[Anne]

I. I don't know. You know. You know, everyone always has anything. What if. What if I do take this? What? Well, even if I don't take it, what if I retired at 57, which no one had planned on doing that either, but what if I did, and all of a sudden I've got all this free Time I make new friends and I start living a bigger life, there's always lifestyle creep. I kind of worry about that a little bit.

[Mark]

Well, then you're gonna have to get a real job. I don't.

I don't see that impacting you all that much.

[Anne]

I just don't really. Okay.

[Mark]

I mean, just how much you saved and how little you spend seems to be your personality.

[Anne]

True. That's true.

[Mark]

I really. I just don't think so either. And I don't think it's. It's. I don't think it's. Weirdly, I don't think this is a financial question. I think this is really about whether or not you are emotionally ready to do this.

[Anne]

Right.

[Mark]

And the only difference between not doing it and doing it is 25 grand. So in the grand scheme of things, okay, I'm not that I want to give up 25 grand, but, you know, it really is about where you are emotionally with this. It's like, I know it's coming up so quickly. It's like if you're 63, you'd be like, I'm done. Right?

[Anne]

Yeah. Oh, yeah. This. This wouldn't be a question if I was already qualified for everything. It's those three years you give up.

[Mark]

Yeah.

I mean, if you want to roll the dice, roll the dice. It's not exactly. The 25 grand is not going to make or break.

That's exactly it. It's so funny because, like, none. Nothing on either side of this will make or break it. So it's not like you're giving up 250 grand, in which case I'd be like, take the money. But it's almost like the severance is a nice bonus to make the decision. It's not a big enough bonus to make me want to take the. The. The induced. Like that inducement is not strong enough to me to give up something if you love it. On the other hand, if you're like, eh, I could get psyched about, like. Like, if you let this, you're gonna have to let this sink in. And, yeah, if you let that sink in and it feels okay to you and you're like, I could get into that, then you can take it. But one, you're not gonna go wrong either way. You're not gonna go wrong either way.

[Anne]

Okay. Wow.

[Mark]

I know.

[Anne]

Well, that makes me feel good. It makes the decision. It makes it a different decision. You're right.

[Jill Schlesinger]

Right.

[Mark]

It's just. It's so funny because it's like, it is a different kind of A mindset. That's what it is. It's a mindset shift. Because you were not ready to do this.

[Anne]

Right? Yes. Yeah.

[Mark]

So I think, yeah, go for it, babe.

[Anne]

Wow.

[Mark]

Or not.

Crack some crabs, Anne, if you are living in Maryland, I shall.

[Anne]

Thank you.

[Mark]

All right. Do you have your estate documents? Done.

[Anne]

I working on them.

[Mark]

All right.

[Anne]

I know they're important. Yes.

[Mark]

Someone's got a. Like, get all your money and figure out what to do with it. Okay.

[Anne]

That's right. Pass it on.

[Mark]

All right, well, let me give you.

Theo's Social Security number.

Exactly right. Hang on. All right. If you've got any follow ups, just give us a holler. If you are one of these federal employees, we've had so many of these questions. Get in touch with us. Or if you've got another career decision to make. I really think this has been a critical time. It just feels like in so many different industries. Give us a holler. Go to Jill on money dot com. Click the contact Us button. Let us know if you would like to join us on the air live by checking that box. Don't forget to sign up for the free weekly newsletter and subscribe to us on the Odyssey app or wherever you find your favorite podcasts. Please leave us a rating and review. Wherever you listen. Put your hands metaphorically on someone's back. Some federal worker needs a little hug from you. Just send out some good vibes. Change your work, change your wealth, change your life. Thank you for listening. We'll talk to you tomorrow. Need contract help for those workload peaks and backlog projects? You're not alone. Robert half found that 67% of companies surveyed said they will increase their use of contract talent. That's why their recruiters leverage their experience and use award winning AI to quickly find the skilled candidates you want. Learn about their specialized talent in finance, accounting, technology, marketing, legal and administrative support at Robert Half. They know talent. Visit roberthal.com talent today.

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