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Feeling Ready to Retire, Am I? - Jill on Money with Jill Schlesinger | Wave AI Podcast Notes

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Feeling Ready to Retire, Am I?

Jill on Money with Jill Schlesinger

Thu Dec 19 2024

Summary

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

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

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Transcript

Jill Schlesinger (0:00)

Hey, gang, it's the holidays.

Mark (0:01)

And I know that means you're going.

Jill Schlesinger (0:02)

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Mark (1:05)

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Jill Schlesinger (1:07)

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Mark (1:46)

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Jill Schlesinger (1:48)

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Mark (1:50)

Learn more@americanexpress.com AmExBusiness welcome to the Jill on Money Show. It's Thursday, December 19th, and this is the program that attempts to take the mystery out of your financial life. And we do that not by giving you these, like boring old rules of thumb, not by telling you that you can't do something by trying to hear what you would like to do and then giving you options for how you might achieve whatever those goals are. So if you've got a big picture question that is weighing on you or even a small thing, get in touch with us. Go to jillonmoney.com, click the contact us button. Of course, check the box if you want to join us on the air live while you're on the website. Don't forget we've got a free weekly newsletter which comes out every Friday. And we've got our subscription service called Jill on Money Live. That is where you have access to quarterly live webinars, four of them for the next 12 months, and the back catalog of everything we've done so far, all for $35 for the next 12 months. But not for long. I feel like one of those ginzo knife people like, not for long. You got to do this right now because on January 1, Mark, who is really, he's just a money grubber, he's going to raise the fee for Jill on Money Live. I tried to get you all set, but no, he said, no, we got to raise the fee. We do kind of have to raise the fee.

Mark (12:13)

All right, don't worry. I'm going to just use the 45,000. Okay, so we got you at 37, 50amonth. Okay. So just to kind of make this nice and easy for you, between Social Security and your future pension, when you're 67 years old, you will have pre tax. I understand this is taxable, but about $5,100 a month in income that's guaranteed between Social Security and your pension. And, you know, I know that we probably need a little bit more money than that because you have to pay taxes on it. But you're there, so you're in great shape. It really is. It's a. You're in a fantastic situation. I think that, Carolyn, if you were like, you know what? I want to be done when he's done, or, you know, you can choose to work basically, if you'd like, you know, you can basically say, let's move someplace, I'll keep working till we get settled, let's see. Because you don't know, maybe you want to, maybe you want to have something to do while you are moving to a new place. But to me, there is like a great staged process here for the next couple of years. So next year, let's say you finish off the alimony, you max out your retirement, you then have this million and a half dollars. So from age 62 to age 67 or 70, but basically 62 to 70, 63 to 70, rather, you'll start pulling money, this is important, Joe, out of your retirement accounts. This is a, kind of a tricky thing because you hate paying taxes. But especially if you're living somewhere else where the tax, if there's state income tax is lower, this is just a great idea for you because your income will be really, really, you know, you'll be, have no income until age 65 at least, and you'll be in a lower tax state and you'll start pulling money out. And you could pull money out. You could pull out, I don't know, like you're used to paying tax at a 24%. You could pull out 150 grand a year and take that out of your retirement account that hasn't been taxed yet and do that until you claim Social Security. And I would encourage you, unless you have bad health, but it, you might want to wait till you're 70, but you'll pull that money out, you'll pay the taxes on it and you're going to live on it. And then as time goes by, you're going to have to keep taking this money out. Right? We're trying to get the money out of your retirement account before you are forced to do so by the government. Because if you don't take any money out between now and age 75, your distributions that will be required of you will be massive. So just to put this in perspective, Mark, could you do me a favor while you're there eating your bon bons, Take a million and a half dollars and grow it at a very modest 6%. 5, 6%. And then tell me in 13 years how much money will be in that account.