Not Trying to Time the Market, But...

Summary

Podcast Summary: "Not Trying to Time the Market, But..."
Jill on Money with Jill Schlesinger
Release Date: March 27, 2025

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Introduction

In the episode titled "Not Trying to Time the Market, But...", financial expert Jill Schlesinger addresses pressing financial concerns from her listeners. As always, Jill provides clear, actionable advice without the heavy financial jargon, making complex topics accessible to all.

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1. Navigating Inheritance and Trusts

Listener Question: Michelle’s Inheritance Scenario
Timestamp: [02:05]

Michelle reaches out with a complex inheritance situation: her late father left $40 million to his second wife in an irrevocable trust. Upon the wife’s passing, the funds are slated to pass to Michelle and her two siblings, who are concerned about the timeline and their financial planning before the inheritance materializes.

Key Points Discussed:

• Trust Structure and Implications:
  Jill explains the rigidity of irrevocable trusts, emphasizing that the terms are legally binding and cannot be altered easily. She underscores the importance of understanding the trust's stipulations and the potential delays that come with dependent beneficiaries' lifespans.

• Current Financial Situation:
  Michelle and her siblings maintain assets outside the trust, including a principal residence, retirement accounts, and brokerage accounts. They have minimal immediate income, relying on limited freelance work and pending social security benefits.

• Spending and Financial Planning:
  Michelle questions whether they can afford to increase their monthly expenditures in anticipation of future inheritance. Jill advises cautious financial management, suggesting that while they might have the flexibility to spend moderately, they should not rely solely on the inheritance due to uncertainties surrounding the second wife’s health and longevity.

Notable Quote:

Jill Schlesinger [04:13]: "This is why I think people are really crazy the way they create their estate documents. Truly, I think that is a nutty, nutty thing to be doing."

Advice Provided:

• Explore Advance Options:
  Jill recommends consulting with the trust’s executor to explore if an advance on the inheritance is feasible, though she acknowledges the challenges posed by irrevocable trusts.

• Asset Management:
  She advises against depleting their brokerage accounts recklessly, suggesting that disciplined withdrawals might sustain them until the inheritance arrives.

• Health and Longevity Considerations:
  Given the second wife’s poor health, Jill highlights the unpredictability of her passing and the financial strain it could impose.

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2. Protecting Against Financial Information Compromises

Listener Question: Anonymous Concerned About Treasury Department Data
Timestamp: [06:09]

An anonymous caller expresses worries about the Treasury Department's handling of sensitive financial information, including bank routing numbers and social security details, questioning the risks posed to Americans' checking and savings accounts.

Key Points Discussed:

• Risk Assessment:
  Jill acknowledges the pervasive nature of data breaches and the resultant anxiety among the public regarding financial information security.

• Mitigation Strategies:
  She emphasizes vigilant monitoring of financial accounts, regular checking for unauthorized transactions, and the importance of freezing credit reports to prevent unauthorized borrowing.

Notable Quote:

Jill Schlesinger [08:20]: "The number one thing I would be doing is checking my accounts a lot more often, making sure that payments show up when they're supposed to be showing up."

Advice Provided:

• Account Monitoring:
  Regularly review bank statements and transaction histories to spot and address discrepancies promptly.

• Credit Freezes:
  Implement freezes on credit reports with major credit bureaus to deter potential identity theft and unauthorized credit applications.

• Two-Factor Authentication:
  Utilize two-factor authentication on all financial accounts to add an extra layer of security against unauthorized access.

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3. Maximizing Retirement Contributions for Highly Compensated Employees

Listener Question: Seth’s 401(k) Contribution Limits
Timestamp: [09:06]

Seth, identified as a highly compensated employee, faces restrictions on his 401(k) contributions. He seeks guidance on alternative tax-advantaged options to maximize his retirement savings.

Key Points Discussed:

• Contribution Limitations:
  Jill explains the IRS regulations that cap the amount highly compensated employees can contribute to their 401(k) plans to ensure fairness in retirement savings opportunities.

• Alternative Savings Strategies:
  She suggests utilizing backdoor Roth IRAs as a viable option for additional retirement savings, despite the modest limits compared to 401(k) contributions.

Notable Quote:

Jill Schlesinger [09:14]: "You freeze your credit with the three big credit reporting agencies and freeze it for your kids."

Advice Provided:

• Backdoor Roth IRA:
  For those exceeding traditional IRA income limits, a backdoor Roth IRA allows for after-tax contributions that grow tax-free, though annual limits apply.

• Health Savings Accounts (HSAs):
  Jill highlights HSAs as another tax-advantaged vehicle, providing both tax deductions on contributions and tax-free growth when used for qualified medical expenses.

• Investment Accounts:
  She recommends directing excess funds into taxable investment accounts, emphasizing the importance of strategic tax planning to manage liabilities.

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4. The Importance of Guaranteed Income in Retirement

Listener Comment: Stephen on Pensions and Annuities
Timestamp: [09:53]

Stephen comments on the value of pensions and guaranteed income in retirement, noting that while pensions provide security, insurance products like lifetime income annuities also offer similar benefits but come with complexities.

Key Points Discussed:

• Pensions vs. Annuities:
  Jill differentiates between traditional pensions and annuities, cautioning listeners about the hidden costs and convoluted terms often associated with annuity products.

• Advisory on Insurance Products:
  She strongly advises consulting with financial professionals before purchasing any insurance-based retirement products to avoid unfavorable terms and ensure suitability.

Notable Quote:

Jill Schlesinger [10:20]: "Please, please, please do not buy any insurance product before you talk to us first."

Advice Provided:

• Due Diligence:
  Before committing to any annuity or insurance product, thoroughly understand the terms, fees, and long-term implications.

• Professional Consultation:
  Engage with financial advisors to assess the necessity and appropriateness of such products within one’s broader retirement strategy.

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5. Re-Entering the Market After Withdrawing Near a Market Peak

Listener Question: Michael’s Market Exit and Re-Entry Strategy
Timestamp: [10:00]

Michael shares his experience of pulling his entire IRA investment out of the stock market during a perceived peak to avoid potential losses, seeking advice on the optimal timing for reinvestment.

Key Points Discussed:

• Market Timing Risks:
  Jill underscores the dangers of attempting to time the market, highlighting the psychological and financial pitfalls of reacting to short-term market fluctuations.

• Investment Strategy Post-Withdrawal:
  She advocates for a structured re-entry plan, such as dollar-cost averaging, to systematically reinvest funds without succumbing to emotional decision-making.

Notable Quote:

Jill Schlesinger [13:43]: "If you're nervous and you don't want to be 100% in equities because you just realize why that is so scary."

Advice Provided:

• Reinvestment Plan:
  Develop a clear, automated plan to re-enter the market, possibly by setting monthly investment targets to gradually rebuild the portfolio.

• Asset Allocation:
  Maintain a balanced portfolio, such as a 60% bond and 40% stock mix, to mitigate risk while ensuring growth potential.

• Emotional Discipline:
  Resist the urge to make impulsive investment decisions based on market volatility. Automation and pre-set plans can help maintain consistency.

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Conclusion

Throughout the episode, Jill Schlesinger demonstrates her expertise by addressing a range of financial issues with clarity and empathy. From complex inheritance trusts to the challenges of retirement planning and market timing, Jill provides listeners with actionable insights to navigate their financial landscapes effectively.

Final Notable Quote:

Jill Schlesinger [14:05]: "I would still do it all at once because I'd be like, I'm not going to get lucky twice."

Jill wraps up by encouraging listeners to engage with the show for personalized financial advice and to take proactive steps in managing their wealth responsibly.

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Additional Resources:

• Website: jillonmoney.com
• Contact: Click the "Contact Us" button on the website for questions or to join the live sessions.
• Subscription: Access quarterly live webinars, bonus content, and the episode archive by subscribing to "Jill on Money Live" for $45/year.

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About the Podcast

"Jill on Money with Jill Schlesinger" is a financial podcast hosted by Jill Schlesinger, CFP®, where she demystifies money and investing topics. Through listener calls and expert interviews, Jill delivers surprising insights and actionable information to help listeners make the most of their money without the financial jargon.

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Transcript

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[Alex Asulin]

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[Jill Schlesinger]

Welcome to the Jill on Money show. It's Thursday, March 27th and we are here answering financial questions. I'm going to just plow right into this, you know, the whole deal. Go to our website jillonmoney.com and that's where all of our information is. It's also where you can get in touch with us. If you've got a question, hit that contact us button. Let us know if you want to come on the air by checking the box. It's an email episode. Sorry, Martine, I'm going for emails. Okay. This is from Michelle, whose subject line made me laugh out loud. Can I spend an inheritance? I don't have yet. That's great. Okay. Michelle says I have a strange situation, but I'm hoping it could be relevant for anyone who is expecting an inheritance but hasn't gotten it yet. Here's what Michelle says. My father just passed away. Oh. Oh, my God. And left $40 million to his second wife in an irrevocable trust. 4o gang. My brother is the power of attorney and the executor. We have quarterly meetings with the estate firm that handles the account, and it is conservatively invested. When the wife passes away, that money goes to my two siblings and me. No other heirs. She's only 67, but in poor health. Oh, my God. This sounds like a movie. All right, so I'm going to be. I'm going to be nicer about this. Maybe she was a very nice second wife. Who knows? She's only 67, in poor health, in a retirement facility. She's been in the hospital four times in the last year for various reasons. I've been a saver my whole life. I've lived frugally. It seems like a shame that I could be in my 60s before I get that inheritance. It will pass to my kids. So I'm thinking I don't need to save anything for them. Is that correct? If so, here are my assets. The trust is 40 million. It's in. It's irrevocable. Nothing can happen to it. So. Meaning that when the second wife passes away, it goes to Michelle and her two siblings. I think what you're saying is that eventually it passes to your kids, which is true. I just want to make sure everyone gets that. So I'm not worried about the kids, believe me. I'm worried about Michelle.

[Fundrise Advertisement]

Let's see if I have to worry about Michelle.

[Jill Schlesinger]

Oh, I don't think so. Principal residence, California. It's worth five and a half million dollars. That's her house. $300,000 mortgage. There's a 400 grand in a Roth. A million dollars in traditional retirement accounts. A million and a half in brokerage. No income. Michelle and spouse lost jobs during COVID No luck replacing them. They get a little bit of freelance. Husband is 57. I'm 54. Two kids. One is a junior in college. One is a junior in high school. 200 grand and a 529. We haven't even been using that because the trust pays all of our college bills advance. Oh, that's good. And the trust pays for the health insurance directly, so that's good. No new need for cars. They spend 10 to 15 grand a month. They really want to spend 15 grand a month? Social Security, 3 grand at age 67. Questions. How much money can we spend and not run out of money for ourselves or. Before I get the inheritance, tell me.

[Mark]

When she's going to die.

[Jill Schlesinger]

I know this is a tough one. I want to start taking the kids on more luxurious trips. We've been frugal to this point. Can we afford to do this? I don't know how. I don't know how luxurious you want to do. Can they buy property in Europe? No, you cannot buy property in Europe. Should we do Roth conversions? No. Is there anything else we want? Should be. All right. So, Mark, I think they can probably spend 15 grand a month. I'm guessing. I'm just guessing. I don't know for sure. But they must be pulling money out of the brokerage account, right?

[Mark]

I mean, there's no income, so they're getting it from somewhere.

[Jill Schlesinger]

So. And. But they. And they're also not pulling money out of the. I don't know, like, actually I'm uncertain about this, to be honest with you, because it's such a huge amount of money. Is there anything else? So we don't have to worry about college. They don't have to worry about anything. But. But what if this lady, the second wife, holds on for a long time?

[Mark]

Yeah, that's the risk.

[Jill Schlesinger]

That seems like a big risk because you never know. I don't know.

[Mark]

What if she lives 30 more years?

[Jill Schlesinger]

Somehow even 20 years, you know? Okay, so is there any way to see in this trust, there's some. Okay, so your brother. Ask your brother. Is there any way that you can get an advance on the trust against your future inheritance? Maybe there's a possibility. You know, I used to say you can't do mess around with trusts, but I don't know. Everything's a document that's worth generally trying to do something with. I wouldn't want to. I mean, I guess you could spend your entire brokerage account down, but that's not going to take you that many years. Right? Because she wants to spend 180 grand a year. It's like eight years. I mean, at least if. So if that's 180 grand, they spend it over eight years, then they are at least, you know, 60. She's 62. At that point, they don't have to worry about health care. That's good. I think the only way that you can really do this and spend like with reckless abandon and do whatever you want is getting is selling the principal residence Once the kids graduate from high school. I'm not sure that's worth it but I would, I would talk to the brother, the sib and about the trust and seeing is could we take any advance against the trust? If it's like a hardcore ironclad trust, then maybe you're just going to have to wait. And by the way, this is why I think people are really crazy the way they create their estate documents. Truly I, I think that is a nutty, nutty thing to be doing. I mean you could have taken, there are a lot of ways you could have done that by the way. Also there are a lot of things in an irrevocable trust that's make like you know, you're getting your, your health insurance paid for, they're paying for college. You know, could they say for my well being if I lost a job? I mean there's probably some, something you could probably negotiate with this. That's what I would do. Anonymous wants to know with the Treasury Department systems containing sensitive details including bank routing numbers for anyone who receives Social Security payments electronically or receiving refunds via electronic funds transfer ACH for income taxes, what's the risk involved for everyday Americans checking and savings accounts if banking information is disclosed or compromised, what can we do if anything to mitigate these risks? I mean we've been getting this question a ton, right Mark? And I think that it kind of feels crappy to feel like everything is compromised. But again, what should you be doing? The number one thing I would be doing is checking my accounts a lot more often, making sure that payments show up when they're supposed to be showing up. And I think freezing your credit makes a lot of sense. If you don't need to be borrowing money. Freeze your credit with the three big credit reporting agencies and freeze it for your kids. Can't you do that more? You freeze it for your kids as well because those, those numbers are out there in the universe. So I don't think there's much more to do. I really don't.

[Mark]

No, just you know, just have on two factor authorization on all of your accounts, monitor things, freeze your credit reports. I mean that's all you can do.

[Jill Schlesinger]

That's it. Unfortunately it's really what, what an unbelievable environment. Seth is was recently notified that he is a highly compensated employee and he can only contribute a portion of his salary to his 401k, not the full amount. What tax advantage options do I have at this point that would be best to execute? Well, not a lot. I mean, I guess you could Do a backdoor Roth every year if you don't have an IRA account outside, but that's only, you know, seven or eight grand, depending on your age. And then just plow the money into a investment account. And be careful about taxes.

[Mark]

Unless he has an hsa.

[Jill Schlesinger]

Oh, also an hsa. That's a good one, too. Good job, Mark. So smart. So good. Hi, Jill. In listening to you, it's clear you love when people have a pension. I get it. Guaranteed income is a wonderful thing in retirement. A pension paired with Social Security can, for some, cover their essential expenses. But in today's world, fewer and fewer workers retire with a pension. That's true. There's another kind of pension. Anyone with retirement savings. Oh, God. Is this from an annuity salesperson or what? Anyone with retirement savings can purchase a lifetime income annuity contract with an insurance company. Yes, you can. And you can spend a ton of money doing that. So anyone listening to this? Great, Stephen, thanks for your note. It's a great opportunity for. For me to tell you, please, please, please do not buy any insurance products before you talk to us first. How about that? That's good. This is definitely from someone in the business. Thank you very much. The entire premise of the insurance business is to make things so confusing and convoluted that you don't even realize how much you're paying for the contract. So get in touch with us before you actually purchase any insurance product except term life insurance or except disability insurance. Please do that. Okay. Michael says, I love your show. I'm 61. My wife is 62. We're retired. We've got $1.6 million in traditional IRAs at Fidelity, and they are managed accounts. We don't need the funds for living expenses. So we were 100% equities just up until February 18th. That would be, I believe, the top of the market with concerns over tariffs, government shutdown, the destruction of the federal government, Russia, Ukraine, general market uncertainty because of ever changing policies. I moved everything to government treasury money market funds on February 18th. Worry. And the loss of sleep was more than I could take. I got out at the peak. Our portfolio's value avoided a $150,000 loss of value. Question. How do I determine when to get back into the market? A little background, no kids, two pensions, 14 grand a month. We own our home with a low interest mortgage. Because of health. They draw their Social Security. They've already drawn their Social Security. It feels good to have avoided the February March correction. This only has value. If I correctly time reentry. I don't think I can stomach 100% equities for a while. 60, 40 bond mix would be tolerable. When do I pull the trigger? I'm not a day trader trying to time the market. Except, Mike, you are, and I love you for this question. You got lucky. It's awesome. So get a plan to get back into the market. And if you're nervous and you don't want to be, I don't think you should be 100% in equities because you just realize why that is so scary. What I would be interested in is you have this money, it's sitting in cash. So, you know, for me, I would probably get a plan to get your money back invested. Maybe you want to do it by the end of the year. Maybe you say, I'm just going to do dollar cost average into a few different funds. I'll make myself 60%. I think he wants to be 60 bond, 40 stock, which is fine. I don't know if he wants to be the other way around. But get a plan and do it every month and make sure that you get your money to work. Of course, if you're lucky enough to get it on the way out, you're never going to be as lucky on the way in. So I know that you know that you're lucky. Make a plan and get that money to work. And be sure to automate this because you're not going to trust yourself. As soon as we have a down day, you're going to be like, no, don't do it. So get it to work. Make it happen. Maybe just do, you know, by the end of the year, if you want to be fully invested, get that going.

[Mark]

It's amazing he got so spooked given that they've got no kids. He's got $17,000 a month basically in guaranteed income, and yet he got so spooked and pulled it all out.

[Jill Schlesinger]

Well, that's what happens when you're 100% stocks. That's, to me, the real issue. Because once you are 100% stocks, of course what happens is you are highly sensitized to this feeling of downside, right? That's what happens. If you were 60, 40, if you were 60 bonds and 40 stocks, what.

[Fundrise Advertisement]

Would have happened is you would have.

[Jill Schlesinger]

Been like, oh, my 40% in stocks has gone down, my 60% in bonds has gone up. Wow, great for me. But you know, listen, the guy wrote it up, he got lucky. Now get the money back to work. I do it all in one fell swoop. By the way, Just me. You know, I'm a wimp, but I would still do it all at once because I'd be like, I'm not going to get lucky twice. All right, well listen, we love doing these episodes and I like to plow through some of the emails. Mark said they are piling up, so I apologize for that, gang. But I love talking to you guys so much. If you've got a question, go to jillonmoney.com, click the contact Us button and if you want to join us live, check the box. Mark will do everything else. Don't forget that you can subscribe to Jill on Money Live. That's where you'll have access to quarterly live webinars, bonus audio and video content, the back catalog, all for 45 bucks for the next 12 months. So check that out. You can subscribe subscribe to us on the Odyssey app or wherever you find your favorite podcasts. 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. We'll talk to you tomorrow.

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