I’m 56, Can I Retire in Three Years?

Summary

Podcast Summary: "I’m 56, Can I Retire in Three Years?"

Podcast: Jill on Money with Jill Schlesinger
Host/Author: Audacy
Episode Title: I’m 56, Can I Retire in Three Years?
Release Date: February 5, 2025

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Introduction

In the February 5th episode of Jill on Money with Jill Schlesinger, host Jill Schlesinger, CFP®, addresses a pressing question from a listener contemplating early retirement. This episode, titled “I’m 56, Can I Retire in Three Years?”, offers comprehensive insights into retirement planning, addressing both financial strategies and personal considerations essential for a secure transition into retirement.

Caller Profile: Robert from Buffalo

Age: 56
Marital Status: Married
Occupation: Both spouses are working full-time
Combined Income: Approximately $225,000
Retirement Goals:

• Age to Retire: Robert aims to retire at 59½, while his wife prefers to retire around the same time.
• Annual Retirement Income Target: $120,000

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Current Financial Situation

Retirement Savings:

• 401(k) Plans: Combined total of just under $1.3 million in traditional 401(k) accounts.
• Roth IRA: $15,000 in a Roth IRA.
• 10-Pay Fund: A policy with a cash value of $60,000 and a death benefit of $300,000.

Assets:

• Home: Valued at approximately $550,000, fully paid off with no mortgage.
• Cash Savings: Around $200,000 in the bank.

Additional Considerations:

• Children: Three adult children who are financially independent.
• Pensions: Neither spouse has a pension plan.

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Retirement Goals and Concerns

Robert and his wife are eager to retire in three years but have concerns about ensuring a stable financial foundation post-retirement. Key points of discussion include:

• Healthcare in Early Retirement: Planning for healthcare coverage before becoming eligible for Medicare at 65.
• Social Security Benefits: Deciding the optimal age to claim Social Security benefits.
• Income Requirements: Assessing the feasibility of living on $120,000 annually in retirement.

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Host’s Analysis and Advice

1. Evaluating Social Security Claims

Jill emphasizes the importance of timing Social Security benefits:

“Claiming early really does rob you of this very strong benefit.”
– Jill Schlesinger [09:52]

Key Points:

• Early Claiming Penalties: Claiming Social Security at 62 results in a roughly 20% reduction in benefits.
• Delayed Benefits Increase: Waiting until 67 or even 70 can significantly increase monthly payouts.
• Health Considerations: Since both spouses are in good health, delaying benefits maximizes lifetime income.

2. Assessing Retirement Savings Adequacy

Jill analyzes the couple's savings in relation to their retirement income goals:

“The real crux here ... you don't actually have enough money to safely retire.”
– Jill Schlesinger [09:47]

Key Points:

• Safe Withdrawal Rate: Using a conservative 3.5% withdrawal rate suggests that $1.7 million could provide approximately $60,000 annually after taxes.
• Income Gap: There remains a shortfall between the desired $120,000 and the projected $60,000, highlighting the need for additional income sources or reduced expenses.

3. Strategy for Bridging the Income Gap

Jill proposes practical solutions to address the financial shortfall:

“Could you defray some of your expense level with income?”
– Jill Schlesinger [13:04]

Key Recommendations:

• Part-Time Employment: Engaging in part-time work could generate an additional $50,000 to $75,000, significantly narrowing the income gap.
• Spending Reevaluation: Reevaluating and potentially reducing annual spending from $120,000 to closer to $100,000 makes retirement more attainable.
• Adjusting Retirement Timeline: Continuing to work until closer to 67 would enhance Social Security benefits and retirement account growth.

4. Reviewing Insurance and Estate Documents

Jill advises reviewing existing financial products and estate planning:

“What would my tax liability be ...?”
– Jill Schlesinger [17:04]

Key Points:

• 10-Pay Fund Evaluation: Assessing the tax implications of accessing the cash value vs. maintaining it as part of the retirement strategy.
• Estate Planning: Ensuring that estate documents are up-to-date to reflect current financial goals and family circumstances.

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Conclusions and Action Steps

1. Delay Social Security Benefits:
Maximizing Social Security by delaying claims enhances long-term financial security.

2. Supplement Income Through Part-Time Work:
Engaging in part-time employment can bridge the income gap, reducing reliance on retirement account withdrawals.

3. Reassess Spending Needs:
Lowering the annual retirement income target from $120,000 to a more sustainable amount, such as $100,000, improves retirement feasibility.

4. Conduct Financial Homework:

• Verify Future Social Security Benefits: Determine benefits at ages 67 and 70.
• Detailed Expense Analysis: Scrutinize current and projected retirement expenses.
• Evaluate Insurance Products: Understand the tax and financial implications of existing insurance policies.

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Notable Quotes

• Early Social Security Claims:
  “Claiming early really does rob you of this very strong benefit.”
  – Jill Schlesinger [09:52]

• Income Sustainability:
  “You're going to have to not spend 120 grand a year. You're not going to spend 10 grand a month.”
  – Jill Schlesinger [13:18]

• Flexibility in Retirement Planning:
  “Go a little bit easy on the first few years, build up some of your asset base and plan on working part time to defray some of your expense.”
  – Jill Schlesinger [14:55]

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Final Thoughts

This episode provides invaluable guidance for individuals approaching retirement, emphasizing the importance of strategic financial planning, the benefits of delaying Social Security claims, and the practicality of supplementing retirement income through part-time work. Jill Schlesinger’s expert advice encourages listeners to adopt a flexible and realistic approach to retirement, ensuring long-term financial stability and peace of mind.

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Additional Resources:

• Contact Jill: Visit jillonmoney.com to seek personalized financial advice or to share your retirement plans.
• Subscribe and Stay Informed: Sign up for the free weekly newsletter every Friday for ongoing financial insights and strategies.

Transcript

[Jill Schlesinger]

Hey gang.

[Mark]

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[Jill Schlesinger]

Today.

[Mark]

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[Jill Schlesinger]

Welcome to the Jill on Money Show. It's Wednesday, February 5th and we are here trying to help navigate your financial journey with you. And you know, it is a journey and things change and sometimes you kind of make a mistake, you get off track, you come back on Track if that is you. If you need some assistance, or if you feel like your journey has maybe taken you to places you didn't even realize you need some assistance, some cheerleading, some mentoring, give us a Holler. Go to jillonmoney.com, click the contact us buttons in the upper right hand corner.

[Mark]

Write us a note, and if you'd.

[Jill Schlesinger]

Like to come on the air, check the box. Mark will do everything else. Don't forget that while you are on the website, you can still buy my book, the Great Money Reset. And it is really geared towards people who want to make big changes in their lives but not blow up their finances. So you can check that out. The great money 10 bold steps to turn your chaos into opportunity. Okay, right now let's talk to Robert, who's on the line from Buffalo, who's probably still sitting shiva after the Bills loss and mourning that. But we're here with you, Robert, and we wanna try to shift your mood away from the cold, away from the loss and onto you. So how can we help you out today?

[Robert]

Hi, Jill, how are you this morning?

[Jill Schlesinger]

Great.

[Robert]

So we are fast approaching retirement age, my wife and myself, and we're looking to make sure that we have the right financial plan in place. And more importantly, we're looking to get guidance on what we do for healthcare if we retire early.

[Jill Schlesinger]

Oh, okay. So are you both still working full time?

[Robert]

We are.

[Jill Schlesinger]

How much do you guys earn?

[Robert]

Little over 225,000 combined.

[Mark]

Okay, that's great.

[Jill Schlesinger]

And how old are you?

[Robert]

I just turned 56. My wife will be 56 in the summer.

[Jill Schlesinger]

Oh, youngins to talk about retirement. And are either of you entitled to a pension?

[Robert]

Neither of us have a pension, but we both do contribute to a 401k.

[Jill Schlesinger]

Okay, great. So when you say pension, fast approaching retirement and thinking about maybe even early retirement, what does that mean to you? What age are you kind of putting out there as.

[Mark]

As at least a possibility.

[Robert]

So if possible, I would like to retire at 59 and a half.

[Jill Schlesinger]

Okay.

[Robert]

My wife is okay working a little bit longer, but I definitely want to retire as soon as I could.

[Jill Schlesinger]

Okay, you could probably. Maybe you can retire before that, if you could. If I said to you, oh, you know what, give your notice at the end of this year, would you want to do that?

[Robert]

No, I think I'd want to wait until she's closer to retirement. Just so we do it together.

[Jill Schlesinger]

Okay, so both of you will just sort of say 59 and a half, 60 for both of you?

[Robert]

Yes.

[Jill Schlesinger]

Okay, got it. All right, now, any Kids that are. That you got to take care of or parents you have to take care of. Anything going on there?

[Robert]

No. We have three children, but all of.

[Jill Schlesinger]

Them are adults and they're all doing fine.

[Robert]

They are.

[Jill Schlesinger]

Okay, great. Now let's talk about a few different factors here. So how much have you saved in retirement funds?

[Robert]

So combined for both of us, we have just under 1.3 million.

[Jill Schlesinger]

Okay. Is that traditional or Roth?

[Robert]

Traditional.

[Jill Schlesinger]

Okay. And any Roth assets?

[Robert]

I have $15,000 in a Roth that I started a long time ago and haven't contributed, contributed to in a while.

[Jill Schlesinger]

Okay. And how about any old IRAs kicking around?

[Robert]

No.

[Jill Schlesinger]

Okay, how about a brokerage account? Do you have one of those?

[Robert]

I do not.

[Jill Schlesinger]

And what about just plain old cash savings money in the bank?

[Robert]

So we have about $200,000 in the bank. I also have a fund, it is a 10 pay fund that I started 11 years ago.

[Jill Schlesinger]

Okay.

[Robert]

It has a cash value of $60,000 and a death benefit of about 300,000.

[Jill Schlesinger]

But did you buy that as an insurance product or as an investment product?

[Robert]

A little bit of both. I bought it as an insurance product when I was younger. But now that we're older and we have additional funds where I don't think we would need it as an insurance policy. We could definitely use it as part of our retirement funding.

[Jill Schlesinger]

Gotcha. That sounds great. Okay, so how much money are you contributing to your retirement accounts right now? Are you maxing out, you know, with the, with the catch up contribution? What are you doing?

[Robert]

So we're not maxing out with the catch up. Last year we put about $40,000 into our 401k.

[Jill Schlesinger]

Okay. And will you continue to do that until retirement, you think?

[Robert]

Yes.

[Jill Schlesinger]

Okay. And you own a home?

[Robert]

We do.

[Jill Schlesinger]

What's it worth?

[Robert]

About around $550,000. And we don't have a mortgage.

[Jill Schlesinger]

Okay. I like no mortgage for this purpose. Now do you look ahead and know what the Social Security benefit is going to be and do you have a game plan on when to claim? What are you thinking right now?

[Robert]

I know what the benefit looks like. We are looking to claim rate at 62 and take it early.

[Mark]

Why?

[Jill Schlesinger]

Are you in bad health?

[Robert]

No, not in bad health. I just don't know if holding off I would. The additional benefit, I'm not sure I would make up through my lifetime.

[Jill Schlesinger]

All right, do you happen to have the 62 and the 67 numbers, like the benefit numbers in front of you?

[Robert]

I have the 62 numbers in front of me.

[Jill Schlesinger]

Okay.

[Robert]

Combined for my wife and myself. It would be about $50,000 a year.

[Jill Schlesinger]

Mm.

[Robert]

I don't have the other number with me.

[Jill Schlesinger]

All right, what do you need in terms of income as you guys are living? You know, again, I know you're making 225,000 now. You're putting 40 into retirement funds. You're paying taxes, but what about your actual expenses? The house is paid for, but it still costs money. So what is it that you're spending right now?

[Robert]

So our. The only set amount we have is our taxes, which are about 12,000 a year. We were planning on having about 120,000 a year in retirement.

[Jill Schlesinger]

You want. You want 10 grand a month in income?

[Robert]

Yes.

[Jill Schlesinger]

Okay. That's going to be kind of hard. Is there any other income that you have not told me about?

[Robert]

No.

[Jill Schlesinger]

Okay, so I want you to think of a couple of things. First of all, unless you tell me you're in very bad health, claiming at 62 is a bad idea for you. First of all, your wife, is she also in good health?

[Robert]

She is.

[Jill Schlesinger]

Okay. So with her life expectancy, she has to wait until 67. You take a big. You take like, a 20% reduction on your Social Security benefit by claiming early.

[Mark]

So even if we just got you.

[Jill Schlesinger]

To 67, I think your 50 would go up to about 60 between the two of you. Is that about right, Mark, do you think? Yeah, I would think so, Yeah. I mean, if it's 50 now, it's 62. Yeah, I would think it would jump up to that. Okay, so. And for you, the downside is if you happen to die before you reach, say, age, what's the break? Even now, it's probably 79, 80. Then you would lose out. But waiting will essentially give you a bigger chunk of money that will be inflation adjusted for the rest of your lives. And so I think that becomes a very important thing. Claiming early really does rob you of this very strong benefit. And it's one of the things that we really worry about, people claiming too early. So unless you have to claim at 62, whether you have bad health or you have no other money, then that is a problem. Okay. The next thing is, are you going to be mad at me for saying I really need you to work longer?

[Robert]

Not at all.

[Jill Schlesinger]

Okay. Mark is laughing at me. We're three years away from retirement, or let's say four years for you guys. Okay, so let's say that your retirement funds and all the money you have, like the 1.3 million, you've put in a bunch of money for your contributions. The markets do well but not great. So then you have, let's call it, Mark, you think it's fair to say 1.7 million with their contributions plus market increases? Yeah, I just did them contributing, you know, 40ish grand a year, conservatively 1.7. Okay, so 1.7 million for three years. Okay, so for three years, what happens with that is a chunk of money that you would pull out of your retirement account that would be like consistent, like you could pull out, let's say you pulled out 60 grand a year for the rest of your lives. Okay, so you would say I could pull out 60 safely. And I mean safe. We call this a safe withdrawal rate. And I didn't even use like the scary one. I did like 3.5%. Even if you did 4% some, this is taxable money to you. So even If I said $1.7 million, what I'm doing, everybody is to say if you were to have $1.7 million in a retirement account, okay, and I pulled out 4% of that a year, okay, what would that be? That would be $68,000 a year. But you know, that's, you'd have to pay tax on it. So it would, you know, probably net you closer to 58, I guess, ish, let's call it, that might make it with your 60 grand a year if you're both claiming Social Security later. But then we don't have the money. Like there's a gap. And to me, the worry that you have, which is about health care, is not the worry. My worry is you don't actually have enough money to safely retire. And that to me is the, the real crux here. I am not saying you have to abandon this plan, but let me ask you a different question. Would it be feasible if you guys Both retired at 59 and a half or 60, would you be willing to work part time doing something so that we could prevent you from pulling money out of that retirement account all at once? Could you defray some of your expense level with income?

[Robert]

Absolutely.

[Jill Schlesinger]

How much do you think you could get if you were to do that? And I'm saying, you know, I don't necessarily need you to be like a bar slinging, you know, guy or a barista. But like, could you make some part time money?

[Robert]

I'm sure we could and I'm sure we can probably bring in between 50,000 and 75,000 part time.

[Jill Schlesinger]

If you could do that, that would be huge. Okay, because then if what you're saying to me is, okay, so here's how I think, I think that I would look at this is. I mean, if we got you working part time from, let's say 60 to 63. Okay, how about that? And you're pulling a little bit of money out of your retirement account to fund the difference. Right. That you need. But the most of the money keeps, just stays in there. Then from 63 to 67, you're pulling out what you need from the retirement account, paying the tax every year and living on that amount. And you know, the only thing is, you'll have to pinky swear with me because if you have a rotten market, at some point we're going to have to not. You can't spend 120 grand a year. You're not going to spend 10 grand a month. So I don't know where the 10 grand a month comes from because, you know, you have a house that's paid for. Is this just like, oh, man, we're just going crazy because I don't know, like, are you going to do a ton of travel maybe? I would just say, like, go a little bit easy on the first few years, build up some of your asset base and plan on working part time to defray some of the differential that I'm seeing here.

[Robert]

Okay.

[Jill Schlesinger]

Oh, I'm worried that I made you upset.

[Robert]

No, no, not at all.

[Jill Schlesinger]

Did you expect this a little bit?

[Robert]

I think we were planning to work part time just for health care.

[Jill Schlesinger]

Okay.

[Robert]

That's really not a shock.

[Jill Schlesinger]

Okay.

[Robert]

I'm not really sure we need $120,000.

[Jill Schlesinger]

Oh, let's. Yeah, take a little bit of a, of a, let's take a little bit of a pen to that and see what you really need. If that number were down instead of 10amonth was more like eight a month, things become a lot easier to achieve. But you need to be planning on how you're going to fund this retirement, which is going to last like 30 years. And that's one of the real benefits of delaying your Social Security benefit. So I'm going to give you a little bit of homework and I'd love for you to follow up. One, I want you to find out what your Social Security benefit is for you and your wife at age 67. And then I want you to find out what the number is at age 70. And the other thing I'd like you to do is really look hard at your spending and see what you really need. Because if we're trying to get you to retire and do that, we want to be realistic, not pie in the sky. And you know, I don't want to delay. You know, you might say, I'd rather spend less in retirement in order to leave my work earlier. There are a lot of people who are like, I'd rather work longer so that I can spend more in retirement.

[Mark]

You guys have to have that conversation.

[Jill Schlesinger]

Between the two of you.

[Robert]

Okay.

[Mark]

Makes sense.

[Robert]

It does.

[Jill Schlesinger]

All right. And also, if we have you work a little longer, you get the healthcare, and that's like. Does take a little bit of the. I think a little of the edge off before 65. All right, what else do we need to know about you? Anything else that we can help you with?

[Robert]

No, I think you've answered all my questions and been very helpful.

[Jill Schlesinger]

All right, this is good. Get back in touch with us with the information. Don't forget to update any estate documents if you haven't done that in a while. And, oh, the other thing is about that 10 pay policy, it may be worthwhile just kind of tinkering around with that and seeing what it would cost you to get out of that upon your retirement and whether you should do that or not. You know, I don't know. Someone sold that to you. I can't imagine you just walked out of the blue and said, oh, I need a 10 pay, you know, policy. So what I'd be interested in is the cash value of $60,000. You can ask the insurance company, hey, what would happen if I took that.

[Mark]

Out of this policy?

[Jill Schlesinger]

What would my tax liability be? Because there's some amount of money you put in, the cash value has grown to a certain amount. The question is, if I pulled 60 out, what part of that would be taxable income to me? And that's another piece of your retirement funding analysis. Okay, perfect.

[Robert]

Thank you.

[Jill Schlesinger]

All right, good luck, Robert. If you've got a question about a game plan that has been operational in your brain, but you want to actually.

[Mark]

Test it with us, give us a Holler.

[Jill Schlesinger]

Go to jillonmoney.com, click the contact us button. Let us know if you want to come on the air to talk it through. Don't forget to sign up for the free weekly newsletter comes out every single Friday. You can subscribe to us on the Odyssey app or wherever you find your favorite podcasts. Please leave us a rating and review wherever you listen. And don't forget to put your hands, metaphorically, on someone's back. Change your work, change your wealth, change your life. Thank you for listening.

[Mark]

We'll talk to you tomorrow. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been complex, time consuming and expensive. But imagine if real estate investing was suddenly easy. All the benefits of owning real, tangible assets without all the complexity and expense. That's the power of the Fundrise Flagship Real Estate Fund. Now you can invest in a $1.1 billion portfolio of real estate starting with as little as $10 4700 single family rental homes spread across the booming Sun Belt, 3.3 million square feet of highly sought after industrial facilities. Thanks to the e commerce wave, the Flagship Fund is one of the largest of its kind, well diversified and managed by a team of professionals. And now it's available to you. Visit fundrise.com jillonmoney to explore the fund's full portfolio, check out historical returns and start investing in just minutes. 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 College holds a mythic.

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[Jill Schlesinger]

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[Robert]

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[Jill Schlesinger]

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