New Job, New Retirement Plan Options

Summary

Podcast Title: Jill on Money with Jill Schlesinger
Host/Author: Audacy
Episode: New Job, New Retirement Plan Options
Release Date: June 12, 2025

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Introduction

In this episode of "Jill on Money with Jill Schlesinger," host Jill Schlesinger and co-host Mark delve into the intricacies of retirement planning amidst changing career landscapes. The focus is on navigating retirement plan options when transitioning to a new job, specifically addressing whether to opt for traditional pension plans or modern 401(k)/403(b) contributions. The episode features a detailed conversation with Jen, a 51-year-old academic professional contemplating her retirement strategy as she moves to a new institution.

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Caller Introduction: Meet Jen [02:08 - 03:37]

The episode begins with Jill and Mark welcoming Jen from the Pacific Northwest. Jen shares her upcoming career move from one academic institution to another, highlighting her lack of prior pension benefits and her uncertainty about initiating one at her current age.

Jen: "I am changing jobs. I'm in academia and I'm switching institutions... I've never had that option, but at this new institution they do."

Mark: "Okay, well, this is exciting. First of all, congratulations on your new job." [04:16]

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Financial Overview: Assessing Jen’s Situation [03:37 - 10:01]

Jen provides a comprehensive overview of her financial status:

• Age & Family: 51 years old, single, with two children in college and high school.
• Income: Transitioning to a new role with a base salary of $160,000 for nine months and a summer salary of $52,000, totaling $212,000 annually.
• Savings & Investments:
  • Retirement Accounts: Two 403(b) plans, a SEP IRA, and a small individual IRA totaling approximately $1.3 million.
  • After-Tax Accounts: Beneficiary IRAs and other after-tax investments amounting to $200,000.
  • Cash Reserves: A substantial $1.1 million in cash, including CDs and high-yield savings.
• Real Estate Holdings:
  • Current Home: Valued at $800,000 with no outstanding mortgage.
  • Rental Properties: Two rentals worth approximately $800,000 combined, with a $300,000 mortgage at a favorable 3% rate.

Jill: "That's great. Amazing." [06:14]

Mark: "So that's... you have an old retirement plan from the previous job?" [05:57]

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Retirement Plan Options: Pension vs. 401(k)/403(b) [10:01 - 16:33]

The crux of the discussion centers on Jen's choice between accepting a traditional pension plan or contributing to a 401(k)/403(b) plan at her new job.

Jen: "From what I can gather, it's like a mandatory 12% contribution." [12:32]

Mark: "So you get a choice coming in. Is that... a 403(b) or 401K that they'll match up to 7% and then they have a state pension plan." [12:32]

Key Considerations Discussed:

1. Vesting Period: Jen needs to remain in her new position for at least 10 years to vest in the pension plan.

2. Flexibility vs. Security:

   • Pension Advantages: Provides a consistent income stream post-retirement.
   • 401(k)/403(b) Advantages: Greater flexibility in investments and access to funds, especially beneficial given Jen’s substantial existing assets.

3. Age Factor: At 51, starting a pension late in her career may not provide as substantial benefits compared to earlier commencement.

Notable Quote:

Mark: "This may be one of the few times... where I'm going to say I'm not sure I want the pension because I want more flexibility for Jen." [15:33]

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Hosts' Advice: Strategic Financial Planning [16:33 - 19:41]

Jill and Mark offer tailored advice to Jen, emphasizing the importance of flexibility and caution in making significant financial commitments, especially concerning real estate investments tied to her new job.

Key Recommendations:

1. Evaluate Housing Needs:

   • Consider renting for a year to acclimate to the new location before committing to purchasing a home.
   • "I think it's a much better idea to explore the area and decide where you'd want to be." [16:58]

2. Asset Allocation:

   • Given her robust cash reserves, Jen should optimize her existing funds, possibly transitioning some savings into brokerage accounts to maximize growth.
   • "If you don't need this money, then I think it's fine. If you've got CDs and high yield savings and you've got a bunch of money that's tied up in that stuff, I would keep that." [18:28]

3. Retirement Flexibility:

   • Advise against locking into a pension if it restricts financial flexibility, especially since Jen already possesses significant assets and real estate investments.
   • "You have all of this money which gives you this incredible opportunity to do whatever makes you feel good." [15:50]

Notable Quote:

Mark: "I think you're in great shape... you have an incredible amount of opportunity. This may be one of the few cases where we are saying you don't need to choose the pension, have some more flexibility and go and live your fabulous life." [19:11]

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Conclusions: Empowering Jen’s Decision-Making [19:41 - 21:15]

Jill and Mark conclude by reinforcing their role in alleviating financial stress and providing customized advice. They encourage listeners to reach out with their financial questions and highlight the resources available on their website, including newsletters and live webinars.

Final Advice:

• Maintain Flexibility: Prioritize investment flexibility over the security of a pension given Jen's substantial savings and diverse asset base.
• Explore Before Committing: Opt to rent initially in the new location to make an informed decision about purchasing property.
• Leverage Existing Assets: Utilize Jen's significant cash reserves strategically to enhance her financial portfolio without being constrained by traditional pension plans.

Final Notable Quote:

Mark: "You have piles of cash you're wondering about buying, should you rent. All these questions, these are question questions that we can help you wrestle with." [19:47]

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Key Takeaways

• Personalized Financial Planning: Decisions about retirement plans should consider individual asset bases, career stability, and lifestyle preferences.
• Flexibility vs. Security: Balancing the security of traditional pensions with the flexibility of 401(k)/403(b) contributions is crucial, especially for those entering retirement planning later in their careers.
• Strategic Asset Management: Optimal allocation of existing savings and investments can provide greater financial freedom and security in retirement.

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This episode offers valuable insights for professionals nearing retirement age who are evaluating their retirement plan options amidst career transitions. By sharing Jen’s scenario, Jill and Mark illustrate the importance of personalized financial strategies that align with one’s unique circumstances and long-term goals.

Transcript

[Jill Schlesinger]

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[Mark]

Welcome to the Jill on Money Show. It's Thursday, June 12th and we are here trying to help you make better financial decisions or maybe just more informed ones. Sometimes we carry a lot of stress when it comes to these financial decisions. You don't need to carry this stress by yourself, okay? You just need to know that Mark and I are here to walk you through whatever process you need to go through. And sometimes we come up with one idea, three ideas, five ideas, and then we're going to rely on you to pick what you think is the best idea for you. And so we're here to guide you.

[Jill Schlesinger]

We're like your Sherpas.

[Mark]

We're going to do that. We're going to take that baggage, all that emotional baggage that you're carrying that you're schlepping and we're going to put it on our backs so you don't have to anymore. So if you've got a question, go to our website, jillonmoney.com, click the contact us button, which is in the upper right hand corner, no matter where you navigate on our site, and write us a note. And if you'd like to join us live, check the box. And Mark will do everything else. He'll arrange to bring you on the air. Don't forget to check out all the great content that lives on the website. You know, Mark is the best webmaster in the world and he just keeps surprising me. Learns how to do different things all the time. He's incredible. So all that lives on the jillonmoney.com website. Bookmark it. Mark will make it worth your while. Okay. Today we are talking to Jen, who joins us from the Pacific Northwest. Hello, Jen. How are you?

[Jen]

I'm pretty good, thank you. How are you?

[Jill Schlesinger]

We're great.

[Mark]

What's going on? How can we help you?

[Jen]

Yeah, so I am changing jobs. I'm in academia and I'm going. Switching institutions.

[Mark]

Okay.

[Jen]

And I am always so jealous of the people who call you and talk about their pensions. I've never had that option, but at this new institution they do. But I feel like I'm kind of a little too late to start it. And there's a pension option. There's a, like a 403B or 401K kind of thing. And I just don't know, like at my age, if it's worth it and how you kind of figure that out.

[Mark]

Okay, well, this is, it's exciting. So first of all, congratulations on your new job.

[Jill Schlesinger]

Have you already started or are you.

[Mark]

About to start it?

[Jen]

No, I'll start. I'll start in like a few months.

[Mark]

Okay, great. Let's do some of the basics about what's going on in your life and then we can think about which retirement option is most beneficial for you. So first of all, how old are you, Jen?

[Jen]

I'm 50 something. 51.

[Mark]

Okay, very good. Are you single, married? Partnered?

[Jen]

Single.

[Mark]

Okay. Kids? No kids.

[Jen]

Kids.

[Mark]

How old?

[Jen]

College age. One's in college, one's ending high school.

[Mark]

Oh, and how are we paying for that? You know.

[Jen]

We have one of the plans. We, we definitely have money saved. At this point, I haven't really had to do much, but I'm just gonna have to start. Yeah. Like contributing in cash. So it's me and that.

[Mark]

Do you know how. Do you know how much cash you'll have to contribute to help get them through.

[Jen]

I'm assuming about 10,000 a year.

[Mark]

Okay, let's keep going then. New job. How much will you be earning?

[Jen]

So it's kind of funky, you know, it's academic. So it's a 160 for the nine month. But then you can have summer salary, which I have covered at least the first few years. So that's 212.

[Mark]

Okay, so 212,000. And is this more or less than you were making in your old job?

[Jen]

More.

[Mark]

Okay, great. What have you saved so far before this job starts? So you have an old retirement plan from the previous job?

[Jen]

Yep.

[Mark]

And what's in there?

[Jen]

Two 403Bs. One's like the voluntary and one's the retirement plan total with like the 403bs. And I have a small SEP IRA in a really tiny little IRA. It's about 1.3.

[Mark]

Wow, that's great.

[Jen]

Thank you.

[Mark]

Amazing. Okay, so that's. And none of that money's been taxed yet. This is all traditional money, right?

[Jen]

If that's what it means to put it in a 403B.

[Mark]

Yeah. Before you got like the tax benefit, pre tax. Okay, got it. Any other money that you have saved up in non retirement assets, like a brokerage account or Roth account, Anything out there?

[Jen]

Well, just before we go there, I have some beneficiary IRAs in an after tax account that are about 200,000.

[Mark]

200,000. And what's the clock? That is when do you have to get those out by?

[Jen]

That's a good question. I think there's one that is on the clock for another like four years and another one that's maybe eight.

[Mark]

Okay, what else do you have saved up?

[Jen]

I basically I have too much cash.

[Mark]

Well, I'll determine whether it's too much. It's one of my favorite asset classes cash. So what do you have? Good, good.

[Jen]

I have basically 1.1 million.

[Mark]

That sounds like a lot of cash to me. As you say, as in when I said that does. It's my favorite. It's not that much of a favorite. 1.1 million in cash. Is there something it's earmarked for?

[Jen]

Well, yeah, I mean I'm going to have to get a new place when I move institutions and I kind of, I didn't intend for this to happen, but I'm kind of like collecting houses now. Within that, within that cash I do have like, you know, like 2:50 in CDs, but they'll be maturing pretty soon.

[Mark]

Okay, 1.1 million cash CDs. High yield savings, regular savings. Altogether 1.1 million.

[Jen]

That's right.

[Mark]

Got it. Anything else besides. And we'll get to the real estate in a second. But anything else that is investment savings. Anything else that we're not accounting for?

[E]

No.

[Mark]

Okay. Okay. Current home, where you live right now is worth how much?

[Jen]

Probably 800.

[Mark]

And do you want to keep this house or are you going to sell it?

[Jen]

I'm going to keep it.

[Mark]

Is there a mortgage outstanding on it?

[Jen]

No.

[Mark]

Okay. Any other real estate?

[Jen]

Yeah, I have two rentals.

[Mark]

Okay. How much are they worth, total?

[Jen]

800, probably.

[Mark]

And do they have mortgages attached to.

[Jen]

Them between the two of them? About 300,000 at 3%.

[Mark]

And you're managing these right now? Are you going to continue, you know, or is someone else managing those for you?

[Jen]

No, I manage them.

[Mark]

Is it a pain in the neck? You have a new job. Don't you have to pay attention to that new job?

[Jen]

It's. It really has been so easy. And basically I always have enough for, like, big things that come up, like a new sewer or whatever.

[Mark]

Well, of course you got a million dollars in cash. Of course you have new things.

[Jen]

Well, that even I keep rental. The rental income separate and it's like all in its own little thing. So you know what I mean?

[Mark]

Yeah, it's siloed. How much money do you take out of these two properties after you pay all your expenses, like, to you, like, if I had to really cash flow it, how much money do you think comes out either monthly or on an annual basis?

[Jen]

Well, that's the thing. I just put it in that separate account and then just use that for any expenses related to that.

[Mark]

So you're not living on this money?

[Jen]

Not at all. Okay.

[Mark]

But it pays for itself. And then there's. There's an account that has how much in it?

[Jen]

25,000. But I counted that in the cash.

[Mark]

Okay, so there's no reason for you to sell these.

[Jill Schlesinger]

You're. You're like, they're easy.

[Mark]

They pay for themselves. Anything else? And is there anything. There's no reason that you need to sell them at this point, right?

[Jen]

I don't think so. Yeah.

[Mark]

Okay, now when you say you need a new place to live, what does that mean? What, do we need to buy something? Are you thinking about renting to. Because, like, I mean, it's a new job. So are you. Is this an area that you want to be in? Is it a rental place? Do you want to be able to own there? Like, what do you think?

[Jen]

Yeah, I mean, that's a Good question. I guess I had thought that I would just go ahead and buy because I will be down there at least nine months out of the year.

[Mark]

Okay.

[Jen]

And so it just kind of seems like that would make sense. Plus, I have all this cash, like, I could.

[Mark]

Yeah, burning a hole in your pocket, babe.

[Jen]

Right?

[Mark]

Yeah. Okay. How much will it cost us? Let's do a comparison, though. Maybe rent for one year. But I'm just. I just put that out there because I like to try before I buy. But if you had to buy a place, how much of the cash would we need to use to buy something?

[Jen]

I don't love a big payment, so I would think that I could probably use, you know, between 3 and 500.

[Mark]

That's it? Yeah. Don't you live in, like, the Pacific Northwest, which is, like, expensive? You only need 500 grand?

[Jen]

I think so. I think I could get like, a really nice place that ticked all the boxes for probably seven or 800.

[Mark]

Yeah. See, she went. See how that happened, Mark, where she's like 3, 500. Now I'm at 7 or 800. Okay.

She's talking about what she's going to use as a down payment.

[Jen]

Yeah.

[Mark]

Oh, I see. But I could.

[Jen]

If you think that's a better idea. I'm.

[Mark]

But 800 grand would buy you something you'd really love.

[Jen]

Yeah.

[Mark]

Okay. Do you have an idea about just how much it costs you to live your life, Jen?

[Jen]

You mean, like how much I spend monthly? Yeah, it's about 4 to 5,000.

[Mark]

That's it?

[Jen]

Yeah.

[Mark]

Okay. I'm just loving all of this.

[Jen]

I had a lot.

[Mark]

All right. I'm just gonna say five because it's great. And you have a lot of money, obviously, because you have a lot of money that's built up. I don't know if that part of that happened because you, like, dissolved a relationship and you got some money out of that or not. But you have a lot of money and you've got a lot of real estate, which is great. So the new job, which is now we're finally getting to your question. You're like, geez, Jill, thanks a lot. I've been talking to you for however long it's been, and now you're finally getting to me. Okay, so the new job is you have to choose either a pension or a retire or traditional defined contribution plan. So you. You. So you get a choice coming in. Is that the. Is that. Am I right about that?

[Jen]

Yeah. Okay, so like a 403B or 401K that they'll match up to 7% and then they have a state pension plan. That is it. From what I can gather, it's like a mandatory 12% contribution.

[Mark]

Okay.

[Jen]

So the tricky part, you know, is I get to stay if I get tenure. And I think that will be.

[Mark]

Well, don't piss anyone off and you'll get your tenure.

[Jen]

Don't make waves productivity and all of that kind of stuff. So I. I don't feel like that is super risky. But it is there, right?

[Mark]

Yeah.

[Jen]

Who knows what will happen?

[Mark]

Also, who knows if you'll like the job, what if you hate it?

[Jen]

Exactly. Yeah.

[Mark]

I hate to give up a pension opportunity. How much longer you think you're going to work?

[Jen]

I've always kind of planned to be able to retire early.

[Mark]

Just like a.

[Jen]

How early those choices? I don't know, 60, 62, whatever.

[Mark]

I'm going to say 60. Let's look at that.

[Jen]

I love what I do.

[Mark]

You just want the opportunity to.

[Jen]

Yeah. And I also love living life, so.

[Mark]

Yeah.

[Jen]

You know, there I. It is kind of hard to box academic life in research and interests and all of that is into, you know, a manageable work week.

[Mark]

Yep. So that's. So it's. But what's interesting is this. I don't think this is a math problem. Even though you lay it out as a math problem. Right. I got to put 12% in the pension. The 401k is a 7% match. All these things are. Yes, I understand the math. I understand how pensions pay out and it's great. However, you are coming to this, as you said, at age 51, where number one, hopefully this requires you to the vesting of a pension is what, 10, 15, 10 years? Is that what it is?

[Jen]

Yeah, I think 10 years is the minimum.

[Mark]

Okay. So this kind of puts you in one category. This may be one of the few times, Mark, and I don't know how you feel about this, where I'm going to say I'm not sure I want the pension because I want more. I want to like maximize flexibility for Jen. She's 51. She's making 160 for the nine months. Let's say you made 160 grand a year for the next nine or ten years. Fine. You're going to put your money into your retirement account. They're going to help you, they're going to match. You already have a lot of money and you have the ability to buy a home or rent a home and you got plenty of money that you've saved and you don't spend a lot of money. So I'm not sure. The reason why I love pensions is having that consistent flow of income. They become a little bit harder to accumulate when you don't start them early in your career, but you could do it, but you have all this money already and so I'm not sure you need it. Mark, what do you think about the pension? You want to pass up the pension for Jen?

I think I agree with you. Just because like you said, this isn't really a financial decision. She's gonna be fine. She spends very little. She has a lot of money saved. She's soon gonna own four pieces of real estate. You know, three of those can be unloaded when retirement rolls around. So.

Yeah.

And then plus, you know, she may want to call it quits sooner.

[Jill Schlesinger]

Exactly.

[Mark]

What if you have a nasty boss, like, oh, I love my institution. Then you get a new boss, nasty boss, goodbye, goodbye. And then you're not like feeling like, oh, I've left my pension on the table. You have all of this money which gives you this incredible opportunity to do whatever makes you feel good. And I don't want you to necessarily box yourself in choosing the pension simply because, oh, that's a nice stream of income. You will have a stream of income if you'd like. Do you have a sense of where you would like to ultimately end up? Like where your primary residence is now? Do you think that's actually much the more likely place where you will live your life your like your retirement years out?

[Jen]

Yes. Water. So snow.

[Mark]

Yeah. Okay, so what? So I think first of all, I think before you go in and buy, I think you should also look at the rental market just to see what's out there. Maybe it would be nice for you to not feel like you've made this huge investment and you want to live there a little bit and get a sense of the place. Do you have a good sense of the area?

[Jen]

No.

[Mark]

So I think that. So the only thing then I wouldn't be so fast to put that of your $1.1 million. I would not be so quick to spend 800 grand. I would be much happier if you're going to have to live there for nine months. Right?

[Jen]

Yeah.

[Mark]

I would do get a one year rental and see what you like there. Maybe you're like, you're renting one place. You're like, ew, I hate this neighborhood. I want to be in a different neighborhood. But you only know by being there. I don't think you should make the plunge. And unless something fell in your lap like A colleague said, oh, Jen, welcome here. I'm leaving. I'm going to Australia. You want to take my house and, you know, whatever, something fell in your lap. But I think it's a much better idea to explore the area and decide where you'd want to be and whether or not maybe you don't even have to deploy all that cash. Maybe you're like, you know what, I can rent and get a great place and it's really easy. And then you give us a holler back and you say, I'm never going to buy here. And then we talk about where you should invest your million dollars of cash and then you're more flexible and then you see, and maybe you're like, oh, my God, I've fallen in love with this part of the, this state and I want to actually own something here. Then give us a holler back. Or conversely, you're like, oh, my God, it's amazing. I can rent for $3,500 a month. I'm never going to be an owner. Here, check it out. See what you like.

[Jen]

So what about the cash? Like, I feel like people are talking about brokerage accounts or.

[Mark]

Yeah, I mean, so for me, I don't know, because we don't know whether or not you're going to need $800,000 from this account, then I think it's fine. If you've got CDs and high yield savings and you've got a bunch of money that's tied up in that stuff, I would keep that. And then for one more year, you make a decision after a year, you'll make a different decision in a year. If you don't need this money, then I think we should absolutely create a brokerage account. Absolutely. Now, last thing, you got a whole pile of money, babe. You have a will, you have the power of attorney. You got everything.

And she's single.

And she's single, everyone. Pacific Northwest. Jen, can we find you a man, a woman, non binary person with all that money? Is there anything, is there anything you'd like? Should we set up a dating service for you?

[Jen]

I don't know.

[Mark]

Okay, see, she got excited about that in a second. Are you. So you have your documents done, you've got just. You've got this two kids and so. But that's good. So you've got it all done.

[Jen]

I have. I need a power of attorney.

[Mark]

Yeah, yeah, you should have that.

[Jen]

Yes.

[Mark]

Okay, I think we're done with you. I think you, you get, you have incredible amount of opportunity. This may be one of the few cases where we are saying you don't need to choose the pension, have some more flexibility and go and live your fabulous, your most fabulous life. Jen, I think you're in great shape. If you've got a financial question, you're starting a new job, you've got piles of cash you're wondering about buying, should you rent. All these questions, these are question questions that we can help you wrestle with. And again, we're going to take the financial baggage that you have, we are going to unload it, and we're going to carry that for you. So get in touch with us. Go to jillonmoney.com click the contact us button, write us a note and tell us if you'd like to join us. Live like Jen in the Pacific Northwest. And if you want to throw your hat in the ring for dating Jen, just let us know. Mark will vet all potential suitors. Okay? Don't forget, everything that we do lives on our website, including the free weekly newsletter which comes out on Fridays. That's tomorrow if you're counting. And you can also subscribe to Jill on Money Live. That's where you have access to quarterly live webinars, the back catalog, bonus audio and video content, all for 45 bucks. For the next 12 months, you can subscribe to us on the Odyssey app or wherever you find your favorite podcast. Please leave us a rating and review wherever you listen. And of course, do something nice for someone else today. Change your work, change your wealth, change your life. Thank you for listening. We'll talk to you tomorrow.

[N/A]

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