Podcast Summary: Helping Adult Children Now vs Later

Podcast Information:

• Title: Jill on Money with Jill Schlesinger
• Host/Author: Audacy
• Description: Host Jill Schlesinger, CFP®, addresses sometimes uncomfortable and controversial money and investing issues without financial jargon. Each week, Jill takes listener calls and interviews informative and entertaining guests to uncover surprising insights and provide actionable information to help listeners make the most of their money.
• Episode: Helping Adult Children Now vs Later
• Release Date: December 13, 2024

Introduction and Episode Overview

In the December 13, 2024 episode of Jill on Money, host Jill Schlesinger discusses the delicate balance of providing financial support to adult children. The episode delves into various listener questions, offering expert advice on topics ranging from whole life insurance to charitable donations and investment strategies.

Listener Questions and Expert Insights

1. Helping Adult Children Financially: Now vs Later

Listener: Gregory
Timestamp: [06:30]

Scenario: Gregory and his wife have a stable financial situation, including:

• A pension of $90,000/year
• Roth IRA with $1.1 million
• Pre-Tax Thrift Savings Plan (TSP) of $600,000
• Cash reserves of $240,000
• Taxable accounts totaling $250,000

They spend approximately $9,000 monthly, supplemented by $15,000 annually from their TSP. They have three sons:

• Oldest Son (36): Struggling financially, living hand to mouth.
• Middle Son (28): Recently launched career.
• Youngest Son (21): Part-time work and full-time college.

Gregory's Question: Should they help their adult children now by matching Roth contributions or wait and let their children inherit wealth?

Jill's Response:

• Supporting the Middle and Youngest Sons: Jill approves of matching Roth contributions for the middle and youngest sons, emphasizing the importance of encouraging financial independence while providing support.

  Notable Quote:
  "I think having a match is great. It’s fine...they should be standing on their own." [06:50]

• Oldest Son's Situation: Jill expresses caution regarding the oldest son due to his financial instability. She suggests evaluating whether additional support, such as paying off debt, would be beneficial without enabling dependency.

  Notable Quote:
  "If you really believe that it would, he's not going back, lapse into bad habits... then it's fine." [07:30]

Conclusion: Jill advises a tailored approach, supporting children who demonstrate responsibility while being mindful of not perpetuating financial issues with those who might need more careful assistance.

2. Whole Life Insurance Considerations

Listener: Betty
Timestamp: [03:15]

Scenario: Betty's mother has a whole life insurance policy:

• Cash Value: $100,000
• Death Benefit: $200,000
• Annual Premium: $2,000
• Mother's Age: 85, in good health
• Betty's Role: Beneficiary considering taking over the policy

Betty's Question: Is it wise to continue paying the $2,000 annual premium, or should she let the cash value sustain the policy?

Jill's Response:

• Evaluate Paid-Up Policy: Jill suggests consulting with the insurance company to understand the option of a fully paid-up policy, which stops premium payments while maintaining some benefits.

  Notable Quote:
  "I would talk to the insurance company and say if we were to never make another premium payment, what would that mean?" [04:10]

• Recommendation: Avoid adding more money to the policy and explore reducing premiums to prevent financial strain.

  Notable Quote:
  "I wouldn't put more money in, that's for sure." [04:25]

Conclusion: Jill advises a careful review of the policy terms and exploring options to minimize financial obligations while maintaining necessary coverage.

3. Charitable Donations and Endowments

Listener: Herb
Timestamp: [08:20]

Scenario: Herb, in his late 60s and retired, plans to donate his remaining savings to charitable organizations through endowments.

Herb's Question: What are the best charities with the least managerial fees for setting up endowments?

Jill's Response:

• Research Charities: Jill emphasizes that there's no singular "best" charity but recommends using reputable resources to evaluate organizations based on their efficiency and impact.

  Notable Quote:
  "There’s no such thing as the best charities... you can use resources like Charity Navigator or GiveWell to evaluate them." [09:00]

• Local Foundations: For personalized impact, Jill suggests donating to local community foundations, which can ensure funds are used effectively within specific regions.

  Notable Quote:
  "If you want to give to the Providence Foundation, they’ll find the best charities in the area." [09:15]

Conclusion: Jill advises thorough research and consideration of personal interests when selecting charitable organizations to ensure donations are impactful and efficiently managed.

4. Tax Filing and Investment Strategies

Listener: Chris
Timestamp: [10:00]

Scenario: Chris, 52, and his wife, 46, have invested primarily in individual stocks and Dow index ETFs. They are concerned about capital gains loss carryovers and wonder if they should diversify into bonds.

Chris's Questions:

1. Should he continue using TurboTax for simple returns and H&R Block for complex ones, specifically regarding capital gains loss carryover?
2. Should he diversify his investment portfolio to include bonds?

Jill's Response:

• Tax Filing: Jill suggests evaluating the actual complexity of the tax situation before deciding between TurboTax and H&R Block, emphasizing the importance of understanding carryover loss deductions.

  Notable Quote:
  "You should understand like each year... do I have a carry forward tax loss? That's an important part of preparing taxes." [10:30]

• Investment Portfolio Diversification: Jill recommends incorporating bonds to balance the portfolio, reducing volatility without significantly impacting long-term returns.

  Notable Quote:
  "Including some bonds is a good practice. It wouldn't kill you to be 80% stocks, 20% bonds." [11:00]

Conclusion: Jill advises a balanced approach to both tax filing and investment strategies, highlighting the benefits of diversification and the importance of understanding tax implications.

5. Roth IRA for a 17-Year-Old Son

Listener: Double T
Timestamp: [11:30]

Scenario: Double T's 17-year-old son earned $5,000 over the summer and plans to contribute $2,000 to a Roth IRA, with parental matching. They prefer building a diversified portfolio using exchange-traded funds (ETFs) instead of target-date funds.

Double T's Question: What investment strategies or ETF selections are recommended for a young Roth IRA investor interested in diversification?

Jill's Response:

• Diversified ETF Selection: Jill recommends spreading investments across international, value, growth, and small-cap funds to ensure diversification.

  Notable Quote:
  "Put some amount in international, maybe 10%, and then allocate the rest among value, growth, and small-cap funds." [12:10]

• Simplified Approach: Alternatively, focusing on broad index funds can provide adequate diversification with less complexity.

  Notable Quote:
  "I would probably do an index fund and a small-cap index fund." [12:25]

Conclusion: Jill supports a diversified investment approach for young investors, whether through a mix of specific ETFs or broad index funds, to build a resilient and balanced portfolio over time.

Conclusion and Takeaways

In this episode, Jill Schlesinger expertly navigates the complexities of financial support for adult children, balancing the desire to help with the necessity of fostering financial independence. Key takeaways include:

• Tailored Financial Support: Provide assistance based on each adult child's unique situation to encourage responsibility and prevent dependency.
• Insurance and Investment Management: Regularly review and adjust financial strategies to align with changing circumstances and goals.
• Charitable Giving: Conduct thorough research to ensure donations are impactful and efficiently managed.
• Diversification: Maintain a balanced investment portfolio to mitigate risks and improve long-term financial stability.
• Tax Planning: Stay informed about tax implications and utilize resources effectively to optimize returns.

Jill encourages listeners to actively engage with their financial planning, making informed decisions that support both their needs and those of their loved ones.

Additional Resources:

• Visit jillonmoney.com for more financial advice and to submit your own questions.
• Sign up for the free weekly newsletter to stay updated on the latest money management tips.
• Consider reading "The Great Money Reset" for insights on making significant financial changes.

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Note: Advertisements and non-content segments were omitted to focus on the valuable financial discussions and listener interactions in this episode.