Podcast Summary: "Feeling Ready to Retire, Am I?"

Podcast: Jill on Money with Jill Schlesinger
Host/Author: Audacy
Release Date: December 19, 2024
Duration: Approximately 20 minutes

Introduction

In the episode titled "Feeling Ready to Retire, Am I?", host Mark and financial expert Jill Schlesinger, CFP® engage with callers to provide actionable retirement advice. This episode features a detailed conversation with Joe and his girlfriend Carolyn from Buffalo, New York, who are contemplating early retirement.

Guest Introduction: Joe and Carolyn from Buffalo

At 04:00, Mark introduces Joe and Carolyn, highlighting their enthusiasm and setting a friendly tone for the discussion. The conversation quickly shifts to their financial situations and retirement plans.

Financial Profiles

Joe's Financial Overview

Joe, aged 62, provides a comprehensive breakdown of his financial assets:

• Taxable Account: $337,000
• Inherited IRA: $6,000
• Current Retirement Account (Pre-Tax): $526,000
• Rollover IRA: $1,036,000
• Roth IRA: $132,000
• Cash in Bank: Approximately $110,000
• Home: Owned outright, valued between $350,000 and $400,000

At 05:36, Joe confirms his retirement accounts are primarily pre-tax, except for his Roth IRA.

Carolyn's Financial Overview

Carolyn, aged 52, shares her financial standing:

• Annual Income: $125,000
• 401(k): $125,000
• Savings: $50,000 to $60,000
• Debt: None
• Living Situation: Recently sold her own home and moved in with Joe

At 08:26, Carolyn highlights her financial position, complementing Joe's substantial retirement savings.

Retirement Plans Discussion

Retirement Timeline and Goals

Joe plans to retire early, targeting the end of 2025 or beginning of 2026. His strategy includes:

• Final Year of Alimony: Paying off his ex-wife within a year
• Maxing Out 401(k): Continuing contributions for one more year

At 09:07, Joe mentions having approximately $170,000 in annual income.

Monthly Expenses

Joe and Carolyn estimate their joint annual expenses at around $60,000, accommodating lifestyle choices such as travel and leisure.

Financial Analysis and Advice

Income Streams in Retirement

Mark outlines Joe's expected income sources:

• Pension: $16,764 annually starting at age 65 (09:44)
• Social Security: Approximately $45,000 annually at age 67 (11:59)

Total guaranteed income is projected to be around $5,100 per month.

Withdrawal Strategy

Mark advises Joe to begin withdrawing from his retirement accounts to avoid mandatory distributions that would occur by age 75. He suggests:

• Early Withdrawals: Starting from age 62 to 70, leveraging lower tax states
• Roth Conversions: Converting portions of his traditional IRA to Roth to manage tax liabilities

At 15:17, Mark emphasizes the importance of withdrawing to prevent compounded tax issues:

“We're trying to get the money out of your retirement account before you are forced to do so by the government.” – Mark [16:00]

Tax Optimization

Joe considers converting some of his 401(k) to a Roth IRA for tax efficiency. Mark supports this by explaining:

“You could do a combination of using the money to live on and converting both.” – Mark [16:23]

Estate Planning

Mark highlights the necessity of estate planning, especially since Joe and Carolyn are not married. He stresses:

“If you're not married, then you have to be able to tell the government where your money goes.” – Mark [17:20]

Joe acknowledges having a will, while Carolyn plans to work on hers soon (18:32).

Key Takeaways and Conclusions

1. Diversify Income Streams: Leveraging pensions, Social Security, and retirement accounts provides a stable financial foundation in retirement.
2. Early Withdrawals: Strategically withdrawing from retirement accounts can minimize tax burdens and prevent large mandatory distributions later.
3. Roth Conversions: Converting traditional IRA funds to Roth can offer tax-free growth and more flexible inheritance options.
4. Estate Planning: Essential for non-married couples to ensure clear directives for healthcare and asset distribution.
5. Relocation Considerations: Moving to lower tax states can significantly impact retirement savings and tax liabilities.

Notable Quotes

• Mark on Withdrawal Strategy:

  “We're trying to get the money out of your retirement account before you are forced to do so by the government.” – Mark [16:00]

• Mark on Roth Conversions:

  “You could do a combination of using the money to live on and converting both.” – Mark [16:23]

• Mark on Estate Planning:

  “If you're not married, then you have to be able to tell the government where your money goes.” – Mark [17:20]

Final Thoughts

Joe and Carolyn are in a commendable position with substantial retirement savings and a clear plan for early retirement. By implementing Mark and Jill's advice on strategic withdrawals, tax optimization, and estate planning, they can enhance their financial security and achieve their retirement goals with confidence.

For more insights and personalized financial advice, visit jillonmoney.com.