Do I Need to Work Longer?

Summary

Podcast Summary: "Do I Need to Work Longer?" – Jill on Money with Jill Schlesinger

Episode Details:

• Title: Do I Need to Work Longer?
• Host: Jill Schlesinger, CFP®
• Release Date: April 29, 2025
• Platform: Audacy

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Introduction

In this episode of Jill on Money, host Jill Schlesinger delves into the intricacies of retirement planning with a focus on whether individuals need to extend their working years to secure a comfortable retirement. The episode features a detailed conversation with Adam, a 55-year-old from Southern California, who recently made a significant career change impacting his retirement strategy.

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Caller Introduction: Adam’s Financial Situation

Adam’s Background:

• Age: 55
• Marital Status: Single, no children
• Employment: Recently switched jobs for better work-life balance, resulting in a 30% pay cut.
• Annual Income: $175,000 (post-pay cut)
• Current Contributions:
  • 401(k): Contributing 7.5% with an additional 2.5% match from his employer.
  • Other Accounts: Holds a 403(b), 457 plan, traditional IRAs, and a Roth IRA.
  • Total Retirement Savings: Approximately $635,000 combining all accounts.

Adam’s Goals:

• Retirement Age: Aiming to retire by 60.
• Monthly Expenses: Approximately $8,000.
• Desired Retirement Activities: Extensive travel, including six weeks in Australia and New Zealand, and an African photo safari.

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Discussion Points

1. Impact of Career Change on Retirement

Job Transition: Adam decided to switch jobs to achieve a better work-life balance, accepting a 30% reduction in salary. This move significantly altered his retirement savings trajectory, particularly affecting his ability to contribute to multiple retirement accounts simultaneously.

Jill’s Analysis: Jill assesses Adam’s financial standing post-job change, highlighting that despite the pay cut, Adam remains in a strong financial position due to his existing pension plans and overall savings. She notes, “Adam, how old are you?” [03:29] to gauge his retirement readiness.

2. Pension Plans and Social Security

Pension Benefits: Adam has three previous positions that offer pension plans, totaling an expected annual benefit of $81,000 starting at age 60. These pensions increase annually, reaching approximately $94,000 by age 62, and continue to grow by $7,000 to $8,000 each subsequent year.

Social Security: Additionally, Adam is entitled to Social Security benefits, projecting a monthly payment of $43,800 [05:57] (note: the timestamp in the transcript suggests a misstatement, likely meaning $4,380).

Key Insight: Jill emphasizes the importance of these steady income streams in ensuring Adam’s retirement is financially secure, reducing the necessity to extend his working years.

3. Retirement Savings and Withdrawals

Current Savings: Adam’s retirement accounts, including his 403(b) and Roth IRA, amount to approximately $635,000. Jill suggests leveraging these savings to supplement his pension and Social Security.

Withdrawal Strategy: She recommends a balanced withdrawal plan, advising Adam to:

• Claim Pensions: Start receiving pension benefits at 60 or delay for increased amounts.
• Optimize Social Security: Receive benefits at full retirement age.
• Utilize Retirement Accounts: Withdraw funds strategically from his retirement savings to cover any additional expenses, estimating a withdrawal rate that keeps him within a favorable tax bracket.

Notable Quote: Jill states, “You can pull down to just make up the difference” [07:00] regarding Adam’s ability to manage his monthly expenses comfortably.

4. Financial Health and Lifestyle Considerations

Expense Management: Despite not owning a home and paying $2,650 in rent, Jill reassures Adam that his financial foundations are solid. She points out, “But if you are happy and you can work five years, you're fine” [08:38], highlighting the balance between financial security and personal happiness.

Future Planning: Jill advises Adam to ensure all estate documents are in order and to appoint a healthcare proxy, emphasizing the importance of comprehensive retirement planning beyond finances.

Travel Aspirations: Adam expresses a desire to travel extensively post-retirement, planning activities like a six-week trip to Australia and New Zealand and an African photo safari. Jill encourages him to utilize his retirement funds to enjoy these experiences, reinforcing the notion that personal fulfillment is a key component of retirement planning.

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Insights and Conclusions

Balancing Work and Retirement: Jill underscores that extending one's career solely for financial gain may not always be necessary, especially when substantial pension benefits and savings are in place. She highlights the importance of evaluating personal happiness and work-life balance alongside financial readiness.

Strategic Financial Planning: The episode illustrates how leveraging multiple income streams—pensions, Social Security, and retirement savings—can create a robust financial foundation, potentially allowing individuals like Adam to retire earlier without compromising their lifestyle aspirations.

Encouragement for Listeners: Jill encourages listeners to assess their own financial situations critically, considering factors such as pension benefits, savings, and personal expenses. She invites those contemplating a similar career shift or retirement decision to reach out for personalized financial guidance.

Final Advice: “Try to do something nice for someone else today. Change your work, change your wealth, change your life” [09:27]. This closing thought inspires listeners to take actionable steps towards improving both their financial health and personal well-being.

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Notable Quotes with Timestamps

• Jill Schlesinger [07:00]: “You can pull down to just make up the difference.”

• Adam [03:03]: “But with a pay cut, I'm no longer able to fund both a 457 and a 403. And I'm wondering, how many years did I add to my work life before I can retire?”

• Jill Schlesinger [07:27]: “At 60, you'd have 81,000… At 62, it's worth about 94.6 annually.”

• Jill Schlesinger [09:27]: “Try to do something nice for someone else today. Change your work, change your wealth, change your life.”

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Conclusion

In "Do I Need to Work Longer?", Jill Schlesinger provides a comprehensive analysis of retirement readiness through Adam’s financial scenario. The conversation highlights the significance of understanding and optimizing pension plans, Social Security benefits, and retirement savings. Jill emphasizes that with strategic financial planning, individuals can achieve their retirement goals without necessarily extending their working years, provided they have robust income streams and manage expenses effectively. The episode serves as an insightful guide for listeners contemplating similar financial decisions, offering actionable advice to balance financial security with personal fulfillment.

Transcript

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[Jill Schlesinger]

Welcome to the Jill on Money show. It's Tuesday, April 29th and we are here chatting with you about whatever is going on in your life that happens to touch your money. And that's a lot of things. So whatever is happening for you. If you need another set of eyes and ears on your situation, get in touch with us. Because both Mark and I are certified financial planners. We love talking to you. So all you need to do is go to jillonmoney.com, click the contact us button, write us that note. If you want to join us live, just click on that little box. Check that box. Mark will do everything else while you're on the website, why don't you check out our subscription service called Jill on Money Live. That is the way that you can join us for four live webinars, quarterly webinars. We also have the back catalog of our previous webinars and and bonus audio and video content. All of that for 45 bucks for the next 12 months. Jill on Money Live. So check it out. This day we are rising up with Adam who joins us from Southern California. Adam, you whined a little bit. You said it's 7:30 in the morning and then we told you we had woken up at four something and five something here on the East Coast. So you are in Southern California. I hope that it is as beautiful as I think it is.

[Adam]

I hope it's going to turn out though. It looks like a cloudy start to the day, but I'm sure it'll burn off and be beautiful.

[Jill Schlesinger]

Oh my God, that's something my dad would say. Wherever we were traveling, this is going to burn right off. Girls, don't worry about it. Okay, Adam, what's going on? How can we help you?

[Adam]

Well, I changed jobs about six, seven months ago, needed a better work life balance, needed to de stress. But that came with almost a 30% pay cut.

[Jill Schlesinger]

Oh.

[Adam]

Which now, in hindsight, I'm happy to have the pay cut. I'm a lot happier with the work right now.

[Jill Schlesinger]

Oh, that's so nice to hear.

[Adam]

Yeah. It's a five minute drive down the road from where I live. So much better than an hour that I was doing.

[Jill Schlesinger]

Oh, my God.

[Adam]

But with a pay cut, I'm no longer able to fund both a 457 and a 403. And I'm wondering, how many years did I add to my work life before I can retire? By making this change, I'm thinking, Adam.

[Mark]

You crack me up.

[Jill Schlesinger]

I got to tell you something. This is one of the funniest things. Like, let me go back in time and see how much this hurt me. But let's. Let's talk about where you are. Maybe didn't hurt you at all. Maybe you already had a lot of money. So, Adam, how old are you?

[Adam]

I am 55.

[Jill Schlesinger]

55. Are you married, single, partnered? All single, single, no kids?

[Adam]

Nope.

[Jill Schlesinger]

Okay, this makes it a lot easier to do the planning. Okay, so right now, age 55, how much are you earning?

[Adam]

175.

[Jill Schlesinger]

And how much are you contributing to your retirement account?

[Adam]

I'm currently doing 7.5. And then they match with half of the first 5%. So I'm getting a 2.5% match, and I'm putting in 7.5%.

[Jill Schlesinger]

All right, so 10% is going 17. 5 is going in. Is this a traditional 401K or is it a 403? What is this?

[Adam]

It is traditional 401K.

[Jill Schlesinger]

Okay. How much money is in there right now?

[Adam]

Well, I just started last November, so a whopping $6,400 right now.

[Jill Schlesinger]

Okay. All right. I'm not judging. Okay. The old job that robbed your soul, did that also have a retirement plan associated with it? You said you got a couple of other plans. What's in the old pile of retirement?

[Adam]

So I've got a 403 and 457 from prior jobs. Those have 233, 235,000 in those combined. Combined.

[Jill Schlesinger]

Okay. Are you going to be entitled for any pension from that previous job?

[Adam]

I have three previous positions that will have pensions.

[Jill Schlesinger]

Hold on, Adam. What Are you trying to do you trying to torture us? 3 pensions. Are you collecting on any of them? Are they coming in the future?

[Adam]

No, they will come in the future.

[Jill Schlesinger]

Okay, pension number one. At what age?

[Adam]

I can take all of them whenever I kind of. Whenever I want to turn them on, because I'm no longer working in a pension system. So they just keep going up. So at 60, it would be about.

[Jill Schlesinger]

81,000 for all three, or are you going one by one for all three. Okay, so at 60, you'd have 81,000.

[Adam]

Yeah.

[Jill Schlesinger]

At 60, what happens if you wait a little longer?

[Adam]

At 62, it's worth about 94. 6 annually.

[Jill Schlesinger]

And what's the next level at 65?

[Adam]

No, it just goes up each year. So if we added about 7 to 8,000 each year, that's probably what it would increase.

[Jill Schlesinger]

Okay. Okay. And you would also be entitled to Social Security eventually.

[Adam]

Correct.

[Jill Schlesinger]

What does your full retirement age Social Security benefit look like?

[Adam]

43.

[Jill Schlesinger]

8, now that you have this great work life balance. And just wondering, do you have a sense of how much you got that pay cut? You're living fine on the money, on the 175?

[Adam]

Yeah, it's what I was making before I changed jobs before, so it works.

[Jill Schlesinger]

Okay. Okay, so what else do we need to know about? Do you have a brokerage account? Do you have a savings account? What else is out there?

[Adam]

I do. I've got an HSA. I've got a Roth, some traditional IRAs and brokerage.

[Jill Schlesinger]

Okay, let's do HSA first.

[Adam]

All right, 25, 7.

[Jill Schlesinger]

Great. Are you still contributing to that?

[Adam]

No, that was with a previous employer.

[Jill Schlesinger]

Okay, so that's frozen for now. Okay. Brokerage account.

[Adam]

Brokerage account is 115.

[Jill Schlesinger]

You also said some old IRAs that are floating around. What's in there?

[Adam]

Some rollovers from previous places. 394.

[Jill Schlesinger]

Oh, there's a big number. And some Roth.

[Adam]

A Roth of 90,700.

[Jill Schlesinger]

So my question to you, Adam, is where you are right this second. What's your game plan? How much longer do you want to work?

[Adam]

I was hoping to wrap things up around 60.

[Jill Schlesinger]

Okay, so 60 is our target. You ready for the hardest question? The one that really causes most people to just very quietly and sheepishly admit, well, this is how much money I spend. How much money do you spend?

[Adam]

Let's go with 8,000amonth.

[Jill Schlesinger]

Okay, I'm happy to go with that. And you own your home right now, Adam?

[Adam]

No. Oh, God. In Southern California? Are you kidding? I'm a renter.

[Jill Schlesinger]

Okay.

[Adam]

How much is the rent, 2,650.

[Jill Schlesinger]

Okay, Adam, you're fine. I don't even know what you were making. But if you are happy and you can work five years, you're fine. You're better than fine. You're amazing. I'm not exactly sure whatever it was that, like, drew you to that other higher wage, which is great, but, you know, the pension of 80 grand at age 60. I mean, Mark, you probably couldn't help yourself, but to work two more years to get that extra 14, six. But Adam, you can, at 60, you can claim your pension. You can start pulling some money out of your retirement accounts. Your, your. That part of that 394, whatever you have in your 403B, the 235. I mean, you basically have 635. You know, you have like $640,000 you can pull down to just make up the difference.

[Adam]

Yeah.

[Jill Schlesinger]

And you wait to claim your Social Security at your full retirement age, and you're fine and dandy. I mean, you are. So I think that because your expenses are low, it's. And we. This is kind of an interesting theme because we've had a couple of people now who've come on and talked to us, and it's not like you don't have to have. You don't have to save millions if either you have a nice fat pension, which you do, and your expenses are in line. I mean, is there anyone in your life you feel like you might have to take care of? Like, do you have a parent or a sibling you might have to take care of?

[Adam]

No, I think I need to take care of myself a little better in retirement, so.

[Jill Schlesinger]

Well, there you go. So even if you wanted, let's say you wanted 10 grand a month, right? You're like, ah, I told, now I told you 8, let's say 10. Even if it were $10,000 a month, okay, so 10,000 is net. So what you would do is you'd have your $81,000 pension. I know it's going to be taxed. Then you're going to pull some money out of your retirement accounts that have not yet been taxed, and you're going to pull out, I don't know, probably 50, maybe 60 grand a year. You'll be the top. You'll be at the 24% bracket. Pull the money out, use the money, spend the money, have fun. That's it. And you will live on your ten grand a month, and you'll be fantastic if you decide once you get to 60, you're like, I'm still happy. It's good. It's fine because I have a better work life balance, great. But there is no issue here.

[Mark]

Zero.

[Jill Schlesinger]

And so I don't even want you to look back because, you know, it's very intoxicating. I used to do this myself. So I'm going to admit to you, I don't take my own medicine sometimes. When I first went into the world of media, I left the world of financial planning. Guess where you make more money? Yeah, you're right. Financial planning. And every so often, I'd look at the markets and I'd be like, oh, based on the money that I was managing and what was going on at the company, this is how much more money I would have made had I stayed there. And then my lovely spouse would remind me that had I stayed there, I probably would never have survived because I was so unhappy. So I can tell you that making that trade off, if you can afford to do so, that's why I wrote the book the Great Money Reset. Because if you can afford it and you've already accumulated the assets, it's a gift that you're giving yourself and it's a good one. And I think that you deserve to, as you said, you get to deserve to enjoy the fruits of that labor. You really do.

[Adam]

Yeah, I just want to spend some money and travel.

[Jill Schlesinger]

Where are we going? What's our first. Where's our first stop, man?

[Adam]

Well, so that's why I would probably need a good amount of money afterwards. I want to do like six weeks in Australia, New Zealand. I want to do an African photo safari. I want to do. These are. These are things like that that I want to go.

[Jill Schlesinger]

Good, Take the money out of your retirement account every year with whatever it is and have some fun.

[Adam]

Perfect.

[Jill Schlesinger]

Do not even look back. I love this, Adam. I hope you enjoy yourself before you go travel. Make sure you've got estate documents and make sure someone's your healthcare proxy. Just make sure you got things buttoned up. Yep, those are all done in the next five years. If you happen to make a different decision or something else is on your mind, get back in touch with us if you want. Maybe things are even better. So let's. Let's keep talking. If you need more guidance. But I think it sounds like you did a fantastic job. So if you are like Adam and you're miserable and you got a long commute and you can find a way to get a job where maybe you can work a little bit longer because you're actually going to last. And maybe you don't have to be miserable for your work life. Or maybe it's just going to be a better balance. If that's something you seek and you have an opportunity, you want us to help you run some numbers? Get in touch with us. Go to jillonmoney.com, click the contact Us button, write us a note, and if you want to join us live, check the box. Mark we'll do everything else. You can subscribe to us on the Odyssey app or wherever you find your favorite podcast. Try to do something nice for someone else today. Change your work, change your wealth, change your life. Thank you for listening. We'll talk to you tomorrow. Hey gang, I was a small business owner. I know how hard it is and starting your business should actually be simple. Now you can get more when you start your business with Northwest Registered Agent. Your entire business Identity in just 10 clicks and 10 minutes. Northwest registered agent provides more privacy, more guidance, and more freedom to run your business from anywhere. If you want to build your business while keeping your personal information secure, Northwest is the partner you need. In just 10 clicks and 10 minutes.

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