I Have a Pension, Do I Need Bonds?

Summary

Jill on Money with Jill Schlesinger: Episode Summary Episode Title: I Have a Pension, Do I Need Bonds? Release Date: January 15, 2025

In this insightful episode of "Jill on Money with Jill Schlesinger," host Jill Schlesinger engages in a thoughtful discussion with Brandon, a 49-year-old employee from a large industrial manufacturer, about optimizing his retirement portfolio in light of his existing pension plan. The conversation delves into the intricacies of pension management, asset allocation, and comprehensive retirement planning, providing listeners with actionable strategies to enhance their financial well-being.

---

Guest Introduction

Brandon’s Financial Landscape
Brandon, approaching the age of 50, boasts a substantial pension from his 20-year tenure at a large industrial manufacturer. Despite the pension program halting new enrollments during the financial crisis, Brandon continues to accrue benefits, positioning himself favorably for future retirement.

Understanding the Pension Plan

Current Pension Details
At present, Brandon can choose between a lump sum payment of approximately $450,000 or a single annuity providing around $3,000 per month ([03:46]). His pension accrues an additional $50,000 to $60,000 annually, significantly enhancing his retirement security.

Future Projections
If Brandon remains with his company for another five years, his lump sum would grow to $710,000, and his annuity would increase to $5,000 monthly ([04:25]). This growth underscores the value of longevity within his pension plan.

Retirement Goals and Planning

Brandon’s Retirement Vision
Brandon aims for a traditional retirement, planning to retire around 55 years old ([05:14]). He and his spouse are committed to maintaining their current employment trajectory, allowing their pension benefits to continue accruing.

Household Financials
The couple owns a home valued at $350,000, with an outstanding mortgage of $150,000 at a favorable interest rate of approximately 4% ([06:00]). Their combined annual income stands at $200,000, with $20,000 dedicated annually to their 401(k) and IRA accounts ([06:15]).

Asset Allocation Strategy

Leveraging the Pension as a Guarantee
Brandon views his pension as a guaranteed income stream, enabling him to take a more aggressive stance with his other retirement assets. He considers allocating the entirety of his $350,000 in 401(k) and IRA accounts to stocks, reducing reliance on bonds ([07:55]).

Jill’s Perspective on Asset Allocation
Jill Schlesinger concurs with Brandon’s approach, highlighting the pension's role in providing financial stability. She advises that as Brandon and his spouse near their target retirement age, they can gradually scale back investment risk to safeguard their portfolio against market volatility ([08:14]).

Risk Management and Market Considerations

Stock Market Resilience
Jill emphasizes the importance of being comfortable with market fluctuations, especially in the context of recent bull markets. As long as Brandon can withstand potential downturns without panicking, a higher stock allocation could be beneficial ([09:09]).

Spousal Involvement in Risk Decisions
Brandon acknowledges the need to discuss this higher risk approach with his spouse, ensuring both partners are aligned in their investment strategy ([09:24]).

Estate Planning Essentials

Addressing Estate Documents
Jill underscores the significance of having comprehensive estate documents, especially with a 20-year-old child. She warns against potential financial mishaps if assets are not properly managed and divided, advocating for written wills and legal protections ([10:31]).

Actionable Takeaways

1. Leverage Guaranteed Income: Utilize pension benefits as a foundation for higher-risk investments in other retirement accounts.
2. Gradual Risk Adjustment: As retirement approaches, gradually reduce exposure to volatile assets to protect accumulated wealth.
3. Comprehensive Estate Planning: Ensure all estate documents are in place to prevent unintended financial consequences for dependents.
4. Spousal Alignment: Maintain open communication with your spouse regarding investment strategies and risk tolerance.

Conclusion

This episode provides a clear roadmap for individuals with substantial pension plans, illustrating how to balance guaranteed income with strategic investments. Brandon’s case exemplifies how to maximize retirement savings while managing risk effectively. Jill Schlesinger’s expert guidance offers valuable insights for listeners seeking to optimize their financial strategies as they approach retirement.

---

Notable Quotes:

• Brandon on Pension Growth: "It grows to 710 and my single payout's 5,000. Right. You know what I mean? So it grows." [04:39]

• Jill on Risk Tolerance: "As long as you can withstand it and not going to freak if 350 went to 250 sometime this year, I don't really have a problem with that." [09:10]

• Jill on Estate Planning: "If something happened to you guys at the same time, your kid will get a ton of money at once, which may be okay, or could lead to a fantastic party at your kid's house for many, many months to come." [10:56]

---

Final Thoughts:
Brandon’s proactive approach to managing his pension alongside his 401(k) and IRA accounts serves as a compelling case study for effective retirement planning. By treating his pension as a stable income source, he positions himself to take advantage of stock market growth while maintaining a safety net against potential financial uncertainties. Listeners are encouraged to assess their own financial situations, consult with professionals, and implement strategies that align with their long-term retirement goals.

Transcript

[Jill Schlesinger]

Real estate.

[Mark]

It's been a cornerstone of wealth building for generations, but it's also often a major headache for investors. 3:00am Maintenance calls, tenant disputes, property taxes Enter the Fundrise Flagship Real estate fund, a $1.1 billion real estate portfolio built for you. We're Talking more than 4,000 single family homes in thriving Sunbelt communities, 3.3 million square feet of in demand industrial facilities, all professionally managed by an experienced team. With the Flagship Fund, you're tapping into real estate's most attractive qualities. Long term appreciation potential, a hedge against inflation, diversification beyond the stock market. Check, check, check. All without complex paperwork, massive down payments or soul sucking landlord duties. Visit fundrise.comjillonmoney to explore the portfolio. Check out historical returns and see just how easy it can be to add real estate to your investing strategy. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the Fund's [e-mail] Flagship this is a paid advertisement and now a word from our sponsors at Betterment do you want your money to be motivated? Do you want your money to rise and grind? Do you think your money should get up and work? Don't worry, Betterment is here to help. Betterment is the automated investing and savings app that makes your money hustle. Their automated technology is built to help maximize returns, meaning when you invest with Betterment, your money can auto adjust as you get closer to your goal rebalance. If your portfolio gets too far out of line and your dividends are automatically reinvested, that can increase the potential for compound returns. In other words, your money is working like a dog while you can be sleeping like one and snoring like one too. You'll never picture your money the same way again. Betterment, the automated investing and savings app that makes your money hustle. Visit betterment.com to get started. Investing involves risk. Performance is not guaranteed welcome to the Jill on Money Show.

[Jill Schlesinger]

It's Wednesday, January 15th and we are here trying to help you make guided smart financial decisions. Now, the most important part of that sentence is trying to help you. Each of you has a different situation, so when we're giving some guidance to somebody, it's fun for you to listen. I get that, but it's not always applicable to you.

[Mark]

If you want us to help you.

[Jill Schlesinger]

Then you gotta get in touch with us. Go to jillonmoney.com, click the contact us.

[Mark]

Button and let us know if you.

[Jill Schlesinger]

Want to come on the air by checking the box while you're on the website. Just bookmark it. There's all sorts of good stuff there.

[Mark]

Today we are joined by Brandon. He is here with us from the.

[Jill Schlesinger]

Midwest and he said it's cold. It's cold everywhere though. But Brandon, where you are, what's the temperature right this second?

[Brandon]

I think about 10 degrees. 10 to 15 right now.

[Jill Schlesinger]

All right, well, I think we're like 20 something, but with a windchill, it's 10ish. Okay, what can we do for you, sir?

[Brandon]

Sure. So, love the show. Thanks for taking the call. So I'm lucky enough to have a pension. I do not work in government or public. I'm in like a large industrial manufacturer. The pension was stopped for new employees during the financial crisis. However, I've been there 20 years, so I'm still part of the program, luckily.

[Jill Schlesinger]

Oh, okay. Yep.

[Brandon]

So I am approaching 50 here. So I have a little ways to go to retirement yet. And I know a lot of your pension questions are close people to retirement, some a little farther away. So it's more around a stock allocation question, around my overall retirement portfolio. So, like currently in the pension, if I were to stop working today, even though I'm not right, I would get like a lump sum of like 450k. Okay. Or, you know, there's a single annuity, you know, 3,000amonth, kind of, you know, the typical or joint. So that's where that sits now. So. And then I also have about another 350k of 401k IRA kind of combined, if you will.

[Jill Schlesinger]

Okay.

[Brandon]

So it's kind of an even mix, right? Currently.

[Jill Schlesinger]

Right, Yep. So that pension plan, was it converted to a cash balance plan or was it just halted for anyone new and it just continues. Do you accrue additional benefits?

[Brandon]

I do, I accrue, Yeah, I accrue. And like, you know, based on the pension benefit formula and everything that goes into play in years of service, like it's about 50 to 60k a year.

[Mark]

What?

[Brandon]

Yeah, that it keeps going. Yeah, yeah. So like, and there's a modeling. Right. So if I were to stay till for five more years, that lump sum grows to 710 and my single payout's 5,000. Right. You know what I mean? So it grows. Yeah. I'm still, I'm lucky. I'm lucky. I'm lucky. Right.

[Jill Schlesinger]

How long do you think you're. Well, I mean, I know you're young, but when you look at your own trajectory, what are you thinking about for retirement?

[Brandon]

I'm going to go tell normal retirement as my Plan. Like, I'm not the kind of person to just stop working early, if you will, but I'd like to at least stay with the company for five more years. You know, that'll be 25 years or so here. And I don't know if I can stay, you know, all the way till 60 or 65. I'm not really assuming that, but, like, I'm kind of saying if I can get till 55, where I am, kind of use those numbers and then my other, you know, retirement, kind of assume that. And if I stay longer than. Great. You know what I mean? That's the way I'm kind of. That's the way I'm kind of looking at it. Right.

[Jill Schlesinger]

So, Brandon, are you single? Married?

[Brandon]

Married. Married. Yep.

[Jill Schlesinger]

Okay. And how old's the spouse?

[Brandon]

Same, same. We're in the upper. Upper 40s.

[Jill Schlesinger]

49. Okay.

[Brandon]

Yep.

[Jill Schlesinger]

So, and does your spouse work?

[Brandon]

Yep, yep, yep.

[Jill Schlesinger]

How much does she earn?

[Brandon]

Oh, between us, we're at like 200.

[Jill Schlesinger]

Okay, so 200. And how is that in terms of your, like, your cash flow? Are you guys both putting money away into retirement accounts? Because you said 350. Is that your 401k and IRA, or is it everything?

[Brandon]

That's both. That. That's both. That's both. And then, like annually between us, we put about 20k in a year to that. Right. Between IRA and 401k. So think of that. Keep growing every year, plus obviously in the market accordingly. Right.

[Jill Schlesinger]

Wow, that's amazing. Do you have kids?

[Brandon]

One. Yep.

[Jill Schlesinger]

And how old?

[Brandon]

20.

[Jill Schlesinger]

20 years old and in college or not doing college?

[Brandon]

Middle of college? Yep. You have a couple years left? Yep.

[Jill Schlesinger]

And how do you pay for that? Cash flow or did you have money saved?

[Brandon]

Cash flow. Cash flow, currently.

[Jill Schlesinger]

Okay, great. How about a house? Yes, one of those. How much. How much is it worth?

[Brandon]

Oh, about 350.

[Jill Schlesinger]

Mortgage or no mortgage?

[Brandon]

Yes. There still is one with about 150 left on it.

[Jill Schlesinger]

What's the interest rate on that mortgage?

[Brandon]

Oh, it's low. It's right around 4ish. Maybe high threes, but somewhere around there.

[Jill Schlesinger]

Yep, I gotcha. And when you look at your spending right now, what do you. What do you figure that you're spending.

[Brandon]

Right now between, like, the mortgage payments, everything else? Car payments?

[Jill Schlesinger]

All the time?

[Brandon]

Yeah, yeah, yeah. If I had to think about, probably, I don't know, seven.

[Jill Schlesinger]

Seven grand a month, I think.

[Brandon]

So I'm just trying to do some rough math. You know, we're paying for college too, so I'm kind of including that. You know, we kind of pay for that.

[Jill Schlesinger]

Yeah, but of course, if you. In five years, if you wanted to do something completely different, maybe one of you. Would your wife continue working as.

[Brandon]

Yeah, yeah, yeah, yeah. And I would too. I would, too. I just maybe would do a change of pace somewhere. Right. So.

[Jill Schlesinger]

So is the question, how do you think about the pension in terms of asset allocation or in terms of. How do you look at that for retirement planning or both?

[Brandon]

It's more around the allocation with regards to the other 350, the other stuff that I have. So, like, in my head, I think of, well, that pension to me is kind of like a guarantee. It's cash. Like, meaning, you know, people will say, well, your other stuff, do a Rule of 100 or Rule 110 to do a stock, bonds. But I'm kind of thinking, like, my other stuff should be all stocks.

[Jill Schlesinger]

Quite honestly, I think I could get on board with that. I mean, again, it just, It'll depend how you feel. Like if you guys start to get closer to that age 55, and it freaks you out. Yeah, you can, like, you could scale it back. But I would, I think of it that way. Like a guarantee is a really huge benefit. When we talk to people who have, let's say, teachers pensions or, you know, something like that, like, what's nice about it is it does allow you to sort of say, okay, I have this big chunk of money that is dependable whether you take it as cash or not. You could. You. It may be that when we run the numbers five years from now, we are like, hey, you know what? You should take the monthly benefit and that would be better for you guys. I don't know. We'll have to see where you are at that point. I'm fine with that as long as you can absorb it. The thing that makes people a little bold in these decisions is a bull market. And we just had two good bull markets right.

[Mark]

Each year.

[Jill Schlesinger]

But as long as you can withstand it and not going to freak if 350 went to 250 sometime this year, I don't really have a problem with that. So is your wife on board for taking the risk there or not?

[Brandon]

I haven't discussed yet. That's the next step. So I wanted to get some professional advice.

[Jill Schlesinger]

Oh, boy. Mark, are you okay with having a little bit more risk on the table for retirement assets? Given the big chunk in the pension and how he's accruing that benefit?

[Brandon]

I have no problem.

[Unknown]

That pension is going to continue to grow by 50 grand a year.

[Brandon]

Yeah, no problem.

[Jill Schlesinger]

50 to 60.

[Brandon]

50 to 60, yeah. Yeah, for sure.

[Jill Schlesinger]

Yeah, I think that that's fine.

[Mark]

I really do.

[Jill Schlesinger]

And I guess that, you know, if something happened where you're like, oh, I didn't make it five more years. Right. And it happened like a year from now, then give us a holler back because it'd be interesting to see, like, what. Where you are at that point. But for where you stand. Sure. The 401k, the IRA, you can skew it towards risk, meaning stocks, and, you know, not go too crazy in terms of trying to select individual stocks. You know, if you have an IRA account. But like, yeah, you want to just be owning the s and P500 or an extended market index. Yeah, I'm cool with that. I. I am. Do you guys have all of your estate documents? Because you're so young and you actually have assets? Do you have everything in. In place?

[Brandon]

Not everything. No. No, I'm. I'm not on board with that yet. So it's a. It's a to do. It's a to do for sure.

[Jill Schlesinger]

Only because you got this kid who, like, in a year is 21. And so if something happened to you guys at the same time, your kid will get a ton of money at once, which may be okay, or could lead to a fantastic party at your kid's house for many, many months to come. No, I mean, just you put it on paper.

[Brandon]

Yeah.

[Jill Schlesinger]

And a lot of people will say to me, oh, my kid's 20. They. You know, if they've never really had that kind of money, it's. If the kid inherited a ton of money when he was. Or she was 22, I don't know. That wouldn't necessarily be the smartest move. So I think you should get some. Do you have a benefit at work that gives you a legal benefit?

[Brandon]

Yeah, yeah, we do. We do.

[Jill Schlesinger]

Oh, amazing. So let's. Let's use it. Let's get that done. See, what you call me about is, like, the easy thing, the harder thing. Now I have to make you work. What else are you worried about?

[Brandon]

I think that's it right now. That was. That was my main. My main question, so I appreciate it.

[Jill Schlesinger]

I love it.

[Mark]

I love it.

[Jill Schlesinger]

Well, Brandon, go ahead and roll the dice. Get going. And you know he's going to mark. He's going to put 350 grand in Nvidia.

[Mark]

No, he can't.

[Jill Schlesinger]

Not in his 401.

[Brandon]

Nice.

[Unknown]

But it's nice to get a $50,000 raise each year.

[Jill Schlesinger]

That's it's. Amazing. That pension is phenomenal. I'm gonna after we get off the air with him, I'm gonna guess which company it is. So if you're lucky man like Brandon and his wife and you need some help thinking about the future, you're 49, you're 50, you're 39. I don't care how old you are. I like when a lot of young people come on. It's so much fun. Get in touch with us Go to Jill on money dot com, click the Contact Us button and of course write us a note. Let us know if you'd be willing to come on the air live with us. Check out all the content that lives on the website and of course, if you haven't already, subscribe to us on the Odyssey app or wherever you find your favorite podcast. Don't forget, put your hands metaphorically on someone's back. Change your work, change your wealth, change your life. Thanks for listening and we'll talk to you tomorrow. Real Estate it's been a cornerstone of.

[Mark]

Wealth building for generations, but it's also often a major headache for investors. 3:00am Maintenance calls, tenant disputes, property taxes Enter the Fundrise Flagship Real estate fund, a $1.1 billion real estate portfolio built for you. We're Talking more than 4,000 single family homes in thriving Sunbelt communities, 3.3 million square feet of in demand industrial facilities, all professionally managed by an experienced team. With the Flagship Fund, you're tapping into real estate's most attractive qualities. Long term appreciation potential, a hedge against inflation diversification beyond the stock market. Check, check, check. All without complex paperwork, massive down payments or soul sucking landlord duties. Visit fundrise.comjillonmoney to explore the portfolio. Check out historical returns and see just how easy it can be to add real estate to your investing strategy. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the Fund's [e-mail] Flagship this is a paid advertisement.

[Ben Stiller]

Hey, I'm Ben Stiller.

[Unknown]

I'm Adam Scott and we make a.

[Ben Stiller]

TV show called Severance. On January 17th, Severance is back for season two on Apple TV and we can't wait for you guys to see it.

[Unknown]

And before the premiere, Ben and I are going to be binging Season one and putting out daily recap podcasts.

[Ben Stiller]

Yep, each weekday beginning January 7th, we'll be dropping an episode featuring exclusive behind the scenes tidbits and brilliant insights from our cast and crew and us.

[Unknown]

Patricia Arquette, Britt Lauer Zach Cherry, John Turturro. The list goes on.

[Ben Stiller]

All your favorite Lumen employees, their friends, families, enemies in your feed every single weekday.

[Unknown]

And here's the best part. After that, we're gonna keep going. Tune in weekly as we recap every episode of season two. The podcast drops on the same day the episode comes out.

[Ben Stiller]

It's the Severance Podcast with Ben and.

[Unknown]

Adam on Apple Podcasts, the Odysee app, or wherever you get your podcasts.