Head vs Heart Financial Decision

Summary

Podcast Summary: Jill on Money with Jill Schlesinger Episode: Head vs Heart Financial Decision
Release Date: May 14, 2025

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Introduction

In this episode of Jill on Money with Jill Schlesinger, host Jill Schlesinger engages with Ellen from Massachusetts, who reaches out for guidance on a challenging financial decision that pits her emotional instincts against rational financial planning. The discussion delves into balancing personal feelings with sound financial strategies to secure a stable future.

Ellen's Financial Background

Ellen and her husband have navigated various life challenges over the past decade, including job loss, caregiving for an ill parent, and personal medical issues. These events have influenced their financial decisions, often leaning towards what felt right rather than what was financially optimal.

• Ellen's Situation:
  "All these life things happened. Job loss, needing to take care of an ill parent. We both had some medical issues. And at each one of these inflection points, we needed to make a decision that was going to impact our financial future." [02:25]

• Current Financial Standing:
  Ellen recently turned 62, her husband is 66, and they own two mortgage-free homes valued at $700,000 and $350,000 respectively. Their financial assets include:

  • High-Yield Savings Account: $90,000
  • Brokerage Account: $500,000
  • IRA Rollover Accounts: $1.4 million (all traditional)

  "We own two houses. House number one, our primary residence, worth about 700,000. And then we have a weekend getaway place that's worth about 350,000." [07:57]

Key Financial Concerns

Ellen faces a critical decision regarding her retirement funds and health insurance coverage, particularly as her Cobra benefits are expiring. With monthly expenses totaling approximately $5,364, she seeks advice on whether to draw from her retirement accounts now or wait until reaching full Social Security benefits at age 67 or even 70.

• Monthly Expenses Breakdown:
  "$5,364 a month. 1400 comes from husband, Social Security." [08:40]

• Health Insurance Needs:
  Ellen must secure new health insurance as her current coverage through Cobra is ending. She is contemplating the financial implications of withdrawing from her retirement accounts to cover these expenses without jeopardizing Affordable Care Act (ACA) subsidies.

  "My Cobra is about to run out. So I need to purchase health insurance." [10:09]

Jill's Financial Guidance

Jill Schlesinger offers strategic advice to help Ellen navigate her head versus heart decision:

1. Withdrawal Strategy:
   Jill suggests gradually withdrawing from retirement accounts to replenish the high-yield savings, ensuring Ellen has sufficient funds without facing large, unexpected tax burdens.

   "Taking a little bit out at a time and you'll figure out what that amount is." [13:37]

2. Tax Considerations:
   Jill addresses the concern about maintaining ACA subsidies, clarifying that controlled withdrawals can help manage taxable income effectively.

   "If you do nothing in 10 or 12 years and ... the government is saying, oh, you have to take this money out... That's 120 grand a year in income that you were forced to take out." [13:03]

3. Retirement Account Management:
   She advises against aggressive withdrawals, recommending a balanced approach to sustain their retirement funds over the long term.

   "You can do more than $100,000 a year from the retirement account. I think you'd be fine if you did ... just want to be mindful of the expense side." [13:37]

4. Estate Planning:
   Emphasizing the importance of having a clear estate plan, Jill encourages Ellen to establish her wishes, especially given the absence of direct heirs.

   "Do what I do, which is I told my nieces and nephews ... nobody's getting the vacation home unless you kiss my ass a lot." [17:54]

Ellen's Response and Final Thoughts

Ellen appreciates the practical advice and reflects on her family's situation, particularly regarding estate planning. She mentions her nephews' roles in her and her aunt's lives, illustrating her proactive approach to ensuring her assets are managed according to her wishes.

• Estate Planning Insight:
  "One nephew takes care of her, one nephew takes care of me." [18:24]

Conclusion

Jill concludes the episode by reaffirming Ellen's strong financial position and encouraging listeners facing similar dilemmas to seek personalized advice. She highlights the balance between emotional decisions and strategic financial planning as key to achieving financial peace of mind.

• Final Advice:
  "If you are like Ellen and you're trying to balance ... let us help you out." [18:08]

Listeners are invited to reach out through the podcast's website for further assistance, emphasizing the show's commitment to providing actionable financial insights.

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Key Takeaways

• Balance Emotions with Strategy: Emotional decisions can impact financial stability; it's crucial to integrate both heart and head in financial planning.
• Strategic Withdrawals: Gradual withdrawals from retirement accounts can help manage taxable income and maintain financial security.
• Importance of Estate Planning: Clear estate plans ensure assets are distributed according to personal wishes, especially in the absence of direct heirs.
• Seek Professional Advice: Leveraging available financial planning resources can provide tailored strategies to navigate complex financial decisions.

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For more insights and personalized advice, visit jillonmoney.com and connect with Jill Schlesinger.

Transcript

[Jill Schlesinger]

Hey, Fidelity, can I get a second.

[Ellen]

Opinion on stocks in the Fidelity app?

[Jill Schlesinger]

With Fidelity, it's easy to get an outside opinion from independent experts in a single score. And then when you're ready, trade US stocks and ETFs with no commissions. That's right. I am always right. Investing involves risk, including risk of loss, online US equity trades and ETFs and retail fidelity account sell order, assessment fee not included. Some account types and securities excluded. [e-mail] commissions Fidelity Brokerage Services, LLC Member NYSE, SIPC it's smart to always have a few financial goals and a really smart one. You can set earning cash back on what you buy every day. And with Discover, you can get this. Discover automatically matches all the cash back you've earned at the end of your first year. Seriously, all of it. And we trust you to make smart decisions. After all, you listen to this show see [e-mail] credit card. Welcome to the welcome back to the Jill on Money show. It's Wednesday, May 14th and we are here trying to help you make decisions about your big grown up lives. And that is not just to say about, you know, your money, but it's about how your decisions impact your money or how your money can help you make different kinds of decisions. And we are all about that. We are about hearing your stories, listening to what you are trying to do and maybe give you a few different ways to get there. So if you've got a question, a big picture question, a small picture question, just go to our website, jillonmoney.com, click the contact us button, write us a note and of course, don't forget to check the box. If you'd like to come on the air live. Mark will do everything else. Hey, while you're on the website, there are a couple things. There's some free stuff like the free weekly newsletter which you should sign up for comes out every Friday. And also you should absolutely check out the videos, the resources, the blog, all sorts of fun stuff. It's all there for you. Jillonmoney.com so why don't you just bookmark that website and you'll be able to come back whenever you'd like. Okay. Today we are on the line with Ellen who joins us from Massachusetts. Hello, Ellen. How are you?

[Ellen]

Good. How are you guys doing?

[Jill Schlesinger]

Great. What can we do for you?

[Ellen]

Well, I need some help making a decision. I've got a decision, a sort of a head versus heart decision.

[Jill Schlesinger]

I'm going heart. Okay. Sorry, we're done. Goodbye. Okay. All right. I'm Definitely a heart person. So let's make sure that your heart is leading the way, and we'll use our collective heads to see if it's possible. How's that?

[Ellen]

Sounds good.

[Jill Schlesinger]

Okay. What's the heart want to do?

[Ellen]

Well, so. Well, there's a little backstory for it to some of this where 10 years ago, my husband and I sort of stood on our tippy toes, looked at the horizon. We were like, ooh, retirements coming up. I had DIY or I. I sort of made financial decisions, DIY our finances. But where we saw retirement coming, we thought maybe we should have a professional check this out.

[Jill Schlesinger]

Okay.

[Ellen]

Met with a professional, and he said, yeah, you guys are doing pretty good, you know, and here's a plan, you know, for you to take on for the next 10 years.

[Jill Schlesinger]

Okay.

[Ellen]

Then all of a sud. All these life things happened. Job loss, needing to take care of an ill parent. We both had some medical issues. And at each one of these inflection points, we needed to make a decision that was going to impact our financial future. And we always made the decision with our heart. Probably not the smartest financial decision, but it was the one that, you know, just, I don't know, felt more right, I guess. So now I am at a. Another inflection point, but because my husband and I are both no longer, we're not working. The only safety net we have is our savings and our investments. Like, I'm thinking I need to make the right financial decision.

[Jill Schlesinger]

I'd like to think so. Not.

[Ellen]

Not the one, you know, that sort of, I don't know, might make me sleep better at night. I don't know.

[Jill Schlesinger]

Okay, hold on. Let me just interject here. Let's get some date. Let me get some data points down.

[Ellen]

Sure.

[Jill Schlesinger]

So, Ellen, how old are you?

[Ellen]

I'm. I just turned 62.

[Jill Schlesinger]

Okay, and how old is your husband?

[Ellen]

He is 66.

[Jill Schlesinger]

Are you guys now over your hump of bad illness, like your medical. Your own medical issues?

[Ellen]

I of March, I am cancer free.

[Jill Schlesinger]

Oh, mazel tov. God, that's great. Okay, that's good. And your husband's okay?

[Ellen]

Yep.

[Jill Schlesinger]

Okay. Has he already claimed Social Security or not?

[Ellen]

He did. He. There's not a lot of longevity in his family. So when he turned 62, he felt like, you know, again, that's when you don't have long.

[Jill Schlesinger]

Yeah, when you don't have longevity, that's like the. That's pretty much the only time where I say claim early. So what's the Social Security amount monthly.

[Ellen]

For him, he nets 1400.

[Jill Schlesinger]

Okay. And for you? Have you claimed yet? You could claim, but have you.

[Ellen]

We. We get money in the bank.

[Jill Schlesinger]

Okay.

[Ellen]

No, I'm going to wait until minimum 67, maybe 70.

[Jill Schlesinger]

Okay, got it. All right, so. And also you mentioned parents. Are those parents still with us?

[Ellen]

Well, no, his parents are gone. At least for me. My mother just turned 90, so. Which is why I'm thinking, like I'm gonna, you know, hold on. Hold off on taking Social Security.

[Jill Schlesinger]

Okay. She's. She's a lifer there. 90. She on her own? She's okay.

[Ellen]

Yeah.

[Jill Schlesinger]

Okay. God, that's great. Do you have kids? Grown kids?

[Ellen]

No kids, no pets.

[Jill Schlesinger]

No kids, no pets. I just heard a different acronym that I've ever heard because, you know, we sometimes say double income, no kids, or dink. But I heard one called pank. Professional and no kids. Kind of like that. Professional and no kids. Okay. No kids, no pets. I fully endorse you. Getting a pet. It's good for your aging. Okay. What have you done in terms of savings and accumulation, like savings and investment? What do you have sort of fans.

[Ellen]

Of, I don't know, you call it. What, the Bucket strategy?

[Jill Schlesinger]

Whatever. Give me the numbers, baby. I don't care what you call it. The numbers are the numbers.

[Ellen]

So high yield savings account that has about 90,000 in it as of this month. Good brokerage account with about 500,000.

[Jill Schlesinger]

Great.

[Ellen]

That also includes some, I don't know what's called ESOPs, like employee stock plans, some index funds, some laddered CDs.

[Jill Schlesinger]

Okay, interesting. Okay, got it.

[Ellen]

And then my husband and I each have. Now that we're not working, we rolled everything over. So we have IRA rollovers account with a combination of about 1.4 million.

[Jill Schlesinger]

Okay, that's great. And is that mostly a traditional kind of retirement or 100%? Okay, it's all traditional. Got it. Okay. You guys own your home?

[Ellen]

We own two.

[Jill Schlesinger]

Okay, let's go with house number one.

[Ellen]

House number one, our primary residence, worth about 700,000. And that is mortgage free.

[Jill Schlesinger]

Okay.

[Ellen]

And then we have a weekend getaway place that we pretty much use, well, every other weekend that's probably worth about 350,000, and that's mortgage free as well.

[Jill Schlesinger]

Okay, that's great. Now, you ready for your big question? Get the pressure's on. How much do you think you spend? I have a feeling Ms. Bucket there has an idea about this. So what do you think you have in terms of, like, going forward? How much money you need?

[Ellen]

$5,364 a month.

[Jill Schlesinger]

Did I count Did I get that, Mark? Did I get that or what? I just knew. Bucket, do it yourselfer or heart versus head. I'm thinking. I don't care what you say about heart, your head's doing quite a bit of work. Okay, so can I say 5,500? God forbid I should just round up a little bit. Okay, so, and of that 5500, 1400 comes from husband, Social Security. So what have you. How have you been managing? Where are you pulling from in terms of getting that extra 50 or 60 grand a year?

[Ellen]

So we always had a emergency fund, you know, a high yield savings account with an emergency fund. And so the end of 2023, when I left my job because of my medical issue, we moved money into that high yield savings account. And so what, you know, so that is sort of, you know, my, my bucket one money with two years worth of living expenses. And so we pull $4,000 a month out of that.

[Jill Schlesinger]

Okay.

[Ellen]

Got it into the checking account.

[Jill Schlesinger]

Perfect. That's perfect. Okay, so obviously you're going to do that, and you will continue to do that. I guess the question I have for you is, have you pulled any money from your retirement assets yet or not?

[Ellen]

Well, that's so my sort of head versus heart decision, because I'm only 62. I need health insurance.

[Jill Schlesinger]

Yeah.

[Ellen]

When I left my job at the end of 2023, I selected Cobra. My Cobra is about to run out.

[Jill Schlesinger]

Okay.

[Ellen]

So I need to purchase health insurance.

[Jill Schlesinger]

Okay.

[Ellen]

Through.

[Jill Schlesinger]

Through. Through the Affordable Care Act. Okay.

[Ellen]

And this is. This is sort of like the. The first heart decision. And maybe I am looking at this all wrong and you can tell me I'm an idiot.

[Jill Schlesinger]

No, I know what you're going to say. Can I. Can I guess what you're going to say? Okay, yeah, let me try to be Carnac, which you may understand, but no one else who's under 60 understands. Okay, so I bet you're going to tell me if I pull money out of my retirement account, then I'm going to make too much money to get a tax credit from the Affordable Care Act. Is that what you're about to tell me?

[Ellen]

Well, almost the opposite. I almost feel like I shouldn't take money out of the Affordable Care act because that. That's meant for.

[Jill Schlesinger]

I don't care either way. No judgment either way.

[Ellen]

Genuinely need it. You do.

[Jill Schlesinger]

You need it. Let's not. We're not going to quibble over that. You need this coverage. Now the question is, where should you get the money to pay your expenses and should you Care about making too much money that you would give up your tax credit? That's really the question I thought you were going to ask, which I'm going to ask you.

[Ellen]

Well, I don't. Well, what I care. So what? I. I don't care about making too much money, like. Well, I shouldn't say I'm making, so. Right. So. Because, you know, because of my illness, you know, didn't work at all this year. The only income I earned was interest, dividends and savings from the high yield and the brokerage and then plus my husband's Social Security. So that was 44,000. And I know that puts me well within the range of the Affordable Care Act. Yeah, what I'm.

[Jill Schlesinger]

I'm going forward.

[Ellen]

I guess what I'm more concerned about is because, you know, we only live on $5,000 a month. I will eventually be eligible for, like, $3,700, I think when I turn 67, 4,100 when I turn 70. We're not going to have to dip too much into our IRAs. So should I.

[Jill Schlesinger]

Maybe you should.

[Ellen]

Well, yeah. So should I. Should I, like, not worry about the subsidies and should I start doing Roth conversions?

[Jill Schlesinger]

Oh, no, I'm not doing Roth conversions. Okay, forget that. Let's take that off the table. So why not take the money that you need at. Forgetting about converting it, taking the money. And when you get, you, let's say you pull out $70,000, okay, from retirement, either yours or his. I don't really care. I guess his because he's older. Because we have to get more money out of his. You take 70 out, you pay your taxes, and now you have the extra money you need. That's what you put in. Like, do a couple of years worth and you'll replenish your high yield savings account. What if you did that every year? What if you took $70,000 out every year until you get reached your Social Security age? I mean, you're going to do Medicare first, but you'll still need money for it, for Medicare. Look, you have 13 years before you turn 75, and you want to whittle down that retirement account over those next 13 years, forgetting about the cost of insurance and rebates and all that stuff. But you want that money out because, remember, the rebate is great, but the money that you delay taking out is going to be forced out on you. Okay? So if you do nothing in 10 or 12 years and there's, you know, I don't know, let's just say this. $3 million or something coming out, you know, at the end of 12 years. And now the government's saying, oh, you have to take this money out. You know, that's a big chunk of money for you. That's 120 grand a year in income that you were forced to take out. And then we have no control over what, what, where you are in this. I just think taking a little bit out at a time and you'll figure out what that amount is. And you are still just managing in this yourself, right? You're da. You're doing it yourself.

[Ellen]

Yeah, mostly. Well, I was going to because in a previous century I had worked for Fidelity Investments. That's where we have all of our funds housed there. And because of the, the dollar amount, we have access to free financial planning or wealth management planning. Amazing, they call it. So my plan was to, you know, run that. Also run this by, you know, a financial planner.

[Jill Schlesinger]

Okay, great. Okay. Don't let them sell you an annuity. But yes, good. Even though they're low cost annuities now at Fidelity, I think, first of all, number one, I don't know about the heart versus the head. You've done an incredible job both in both respects. So whatever choices you've made, you are in great shape because we have plenty of money that is built up that will bridge you from. Even if it's like from 62 to 70, let's just pretend you wait like you're feeling great. Life is good. If anything changes in your health, of course, you can always claim early. Right? But as long as you feel good and the diagnosis is good and you feel comfortable with this, if you, let's just say you wait till you're five years, you're now going to have this $3,700 coming in, which is, you know, it's going to net less than that. But let's just. You'll be able to have more cash flow and maybe you can reduce the amount of money from your retirement account, but maybe you won't. Maybe you're just like, you know what, let's just keep taking the money out because essentially if you are looking at your total income, like you said, you know, it's 40 grand, you are in like the 12% tax bracket. That's not going to be forever. You're going to probably be in the 22% tax bracket, which means you could make up to a couple hundred grand a year. I think you'll be able to do that because between Social Security and whatever dividends, interest from your brokerage account, and then Take the money out of your retirement account that you need. It's seventy something thousand dollars. It'll net you what you have and then you're good to go every year. You can do that. You can just say like right now, if you know, hey, my high yield savings account, you're taking four grand a month out. Maybe you just say right now, well, you know what I'm going to do? I'm going to take like 50 grand out of my retirement account right now. I want to beef up that high yield savings account. Fine. And then at the end of the year you can do it again. You can do 50 or, you know, or maybe in January you can say, okay, now I need 70. But you should see what your spending looks like, especially now that you're going to be paying more for your health insurance. Yeah, and, and, and gauge it like that. You don't have to do more than I would never, I don't think you need to do more than $100,000 a year from the retirement account. I think you'd be fine if you did and frankly, I don't really care. You could like deplete a whole chunk of this and you'll be fine and you'll then have plenty of money that it will be, continue to grow. But like, just you want to be mindful of the expense side because if the expense side starts to drift up dramatically, we may need to make different choices. You're not going to hold, I, I, this is what I can guess is that over time, at some point you're going to be like, ah, you know what? I don't want to run two households. We're going to run one and you'll have that money. And so you add that to your brokerage account and you guys are in good shape. There's nothing really to, I don't have any issue here. I think that the only other thing that I'll just remind you of, which I know you've probably have dealt with because you have health issues in your family, is that I'm hopeful that you have your estate planning done, especially with no obvious heirs. Do what I do, which is I told my nieces and nephews, whoever kisses my ass the most in the next 20 years will get more money. And I thought that was fun. Just to put it out there, let's be obvious, no one's getting the vacation home unless you kiss my ass a lot. And do you think that that was mean? No, I didn't do that.

[Ellen]

No. Because I, you know, my, so I have two nephews, and they. They also have an aunt on the other side of the family who has no children either. So the deal is one nephew takes care of her, one nephew takes care of me.

[Jill Schlesinger]

There you go. I like that. Very nice. It's good sharing. All right, give us a holler back if you need any assistance. You're in good shape, Ellen. So continue to thrive and you see your heart and your head can live in your own body. It's incredible. You're a testament to that. If you are like Ellen and you're trying to balance kind of like what you want to do with what you think you should do. I hate the word should. So you can put that over on the shelf. Let us help you out. Go to jillonmoney.com, click the contact us button, write us a note, and if you want to join us live, just check the box. Mark. We'll do everything else. And don't forget, you can subscribe to this program on the Odyssey app or wherever you find your favorite podcast. You can also subscribe to our sister broadcast, which is called Money Watch, which we release on the weekend. So check that out. All right. Do something nice for someone else today. You never know what someone's going through. I really believe this to my core. Change your work, change your wealth, change your life. Thank you for listening, and we'll talk to you tomorrow. Buying a home in California can certainly feel intimidating. We hear from listeners all the time throughout the state, and they want to know, where can they even start? Many of them find that turning to a Realtor changed everything. Realtors can help buyers understand what they can afford. They can explain all of the steps that are involved in purchasing a home. And they can walk you through every detail, from making an offer to closing the deal. Working with a realtor can help you feel less alone or unsure about the process. And that peace of mind that is the power of having a realtor by your side. Whether you're ready to move or. Or just starting to dream, don't go it alone. Don't let what you don't know stop you from starting your next chapter. Find your [e-mail] that's championsofhome.com. 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, they'll form your business, create a custom website and set up your local presence or wherever you need it. Don't wait. Protect your privacy, build your brand and set up your business in just 10 clicks. In 10 minutes, visit northwestregisteredagent.com Jill and start building something amazing. Get more with Northwest registered [e-mail] Jill.