Podcast Summary: "In Our Mid 50s, Can We Retire?"

Podcast Information:

• Title: Jill on Money with Jill Schlesinger
• Host/Author: Audacy
• Episode: In Our Mid 50s, Can We Retire?
• Release Date: May 5, 2025

Introduction

In this episode of "Jill on Money with Jill Schlesinger," host Jill Schlesinger delves into the complexities of nearing retirement in one’s mid-50s. The episode features a candid conversation with listeners Jane and Matt from Arizona, who are contemplating retirement within the next year. Jill provides insightful guidance on decumulation strategies, tax implications, investment management, and health insurance considerations to help Jane and Matt navigate their impending retirement with confidence.

Guest Introduction and Retirement Goals

[03:15]
Jill Schlesinger: “Okay, today we are talking to Jane and Matt. They join us from Arizona. Hello, you two. How are you?”

Jane and Matt from Arizona: Jane and Matt are both 54 years old, soon to be 55, and have been long-time listeners of the show. They are planning to retire within the next year and seek Jill’s expertise to fine-tune their decumulation strategy, especially concerning their tax-deferred assets.

[03:28] Matt: “So longtime listeners and have been thinking about this, and we're coming upon retirement, we think within the next year, probably less than that... we just don't want to go into it blindly. We're trying to do all of our prep on our side so, you know, we can compare notes with [our financial advisor] and, and just looking for an unbiased opinion on what we're facing.”

Financial Overview and Assets

Jill begins by assessing Jane and Matt’s financial portfolio to understand their readiness for retirement.

[04:15]
Jill Schlesinger: “Okay. How old are you guys?”

Matt: “54. Soon to be 55. Both of us.”

Key Financial Assets:

• Pension Lump Sum:
  [04:26] Matt: “I will have a lump sum pension that's going to pay out over the summer... about $30,000.”

• 401(k):
  [04:52] Matt: “$1,500,000 in a 401.”

• Stock Plan (RSUs and Options):
  [04:58] Matt: “That's approximately, let's say 55 grand.”

• Traditional IRA:
  [05:14] Matt: “Husband has a traditional IRA at $850,000.”

• Roth Account:
  [05:20] (Clarification Needed)
  Matt: “It's a Roth. That's 80 grand.”

• Brokerage Account:
  [05:29] Matt: “It's just over a million dollars.”

• Health Savings Account (HSA):
  [05:49] Matt: “Approximately $32,000.”

• Cash Savings Outside Brokerage:
  [06:04] Matt: “$110,000.”

• Real Estate:

  • Primary Residence:
    [06:09] Matt: “Worth $625,000, paid off.”

  • Short-Term Rental Property:
    [06:26] Matt: “Approximately $625,000 with a remaining mortgage of $385,000. Planning to sell this fall, potentially netting around $200,000 after taxes.”

Decumulation Strategy and Rule of 55

Jill emphasizes the importance of a strategic decumulation approach to ensure a sustainable income in retirement.

[12:11] Jill Schlesinger:
“Do you want to invoke the rule of 55 to start pulling money out of that 401k that has not yet been taxed? [...] Part of a decumulation strategy is kind of like, it's sort of twofold. What we know is you have a bunch of money, right? Most of your money has not been taxed yet.”

Explanation of Rule of 55:
The Rule of 55 allows individuals aged 55 or older to withdraw funds from their 401(k) without the early withdrawal penalty. Jill advises leveraging this rule to begin decumulating retirement funds in a tax-efficient manner.

[12:13] Matt:
“I would certainly consider that.”

Strategic Withdrawals:

• 401(k): Utilize Rule of 55 to withdraw funds gradually over the next decade to meet the monthly expense target of $10,000.
• Traditional IRA: Continue growth for the next 10 years, tapping into it post-401(k) depletion.
• Social Security: Plan to claim benefits at 67 or delay until 70 for increased monthly payouts.

Tax Implications and Professional Guidance

Jill underscores the necessity of understanding tax obligations, especially when liquidating assets like rental properties.

[07:44] Jill Schlesinger:
“[...] make sure you have a CPA or a tax filing service or person you work with. [...] When you sell [the rental property], [...] you depreciated it. So just know that there could be some tax due.”

[17:49] Matt:
“We just redid the will. We're set there.”

Jill’s Advice:

• Engage with Professionals: Ensure continuous collaboration with a CPA to navigate tax implications effectively.
• Avoid Unnecessary Products: Stay clear of products like annuities unless explicitly beneficial, as Jill warns against them even when suggested by fiduciary advisors.

[15:42] Jill Schlesinger:
“[...] Do not buy any product. [...] even fiduciaries could probably make a case that you guys might want to consider an annuity. [...] It’s not the right thing for you. [...] If this person happens to bring up an annuity, you need a new advisor.”

Health Insurance Considerations

Navigating health insurance post-retirement is a critical concern for Jane and Matt.

[08:39] Jill Schlesinger:
“So what's the game plan on that? Are you guys thinking Affordable Care Act for 10 years? Kind of.”

[08:45] Matt:
“We’re exploring options like crowd-sharing services due to narrow networks and challenges in finding comprehensive coverage.”

Jill’s Recommendations:

• Stockpiling Cash: Allocate proceeds from the house sale and HSA to cover health insurance premiums and potential medical expenses.
• Alternative Coverage Options: Investigate options like Affordable Care Act plans or crowd-sharing services to ensure adequate health coverage without resorting to additional employment.

Investment Management and Advisor Selection

Effective management of existing investments is pivotal to sustaining retirement funds.

[15:24] Jane:
“Our advisor manages the traditional IRA and the brokerage account with minimal fees, at about 1% of assets under management.”

Jill’s Guidance:

• Fiduciary Standards: Ensure the financial advisor is a fiduciary who prioritizes Jane and Matt’s best interests.
• Cautious Investment Choices: Avoid risky products and stick to mutual funds or other stable investments as currently managed.
• Guard Against High-Fee Products: Be wary of advisors suggesting products that may not align with long-term financial goals, such as annuities.

Estate Planning and Final Preparations

Jill emphasizes the importance of having comprehensive estate documents in place.

[17:49] Matt:
“We just redid the will. We're set there.”

Jill’s Final Tips:

• Ensure Up-to-Date Documents: Regularly review and update wills and life insurance beneficiaries to reflect current wishes.
• Comprehensive Coverage: Verify that all aspects of estate planning are addressed, including trusts if applicable.

Key Takeaways and Conclusion

Jill Schlesinger provides Jane and Matt with a clear, actionable roadmap to transition smoothly into retirement:

1. Leverage the Rule of 55: Begin strategic withdrawals from the 401(k) to meet monthly expenses without penalties.
2. Manage Tax Implications: Work closely with a CPA to minimize tax liabilities, especially when selling assets.
3. Ensure Health Coverage: Utilize proceeds from asset sales and HSAs to secure comprehensive health insurance.
4. Select the Right Advisor: Choose fiduciary advisors and avoid unnecessary financial products that may not align with retirement goals.
5. Estate Planning: Maintain updated wills and life insurance policies to ensure estate preferences are honored.

[17:53] Matt:
“Our biggest... trying to avoid any unforced errors as we move forward.”

Jill’s Final Advice:
“[...] avoid buying products you don’t need and ensure your financial strategies are aligned with your long-term goals.”

Jane and Matt expressed satisfaction with the guidance provided, feeling more confident in their retirement plans and equipped to avoid common pitfalls.

[18:27] Jill Schlesinger:
“Thanks so much for getting in touch with us. [...] Change your work, change your wealth, change your life.”

Notable Quotes

• Jill Schlesinger on the Rule of 55:
  [12:11] “Part of a decumulation strategy is kind of like, it's sort of twofold. What we know is you have a bunch of money, right? [...]”

• Matt on Avoiding Additional Income Needs:
  [15:09] Matt: “We haven’t counted on additional income.”

• Jill's Warning Against Annuities:
  [15:43] “Do not buy any product. [...] If this person happens to bring up an annuity, you need a new advisor.”

Conclusion

This episode serves as a comprehensive guide for individuals in their mid-50s contemplating retirement. Through Jane and Matt’s real-life scenario, Jill Schlesinger illustrates the critical steps and considerations essential for a secure and fulfilling retirement. Listeners gain valuable insights into managing assets, understanding tax implications, ensuring health coverage, and selecting the right financial advisors to support their retirement journey.

For personalized advice or to discuss your own retirement plans, visit jillonmoney.com and reach out through the "Contact Us" button.

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