On the Verge of Retirement

Summary

Jill on Money with Jill Schlesinger: Episode Summary – "On the Verge of Retirement"

Release Date: March 20, 2025

In the episode titled "On the Verge of Retirement," Jill Schlesinger, CFP®, hosts Tony from Texas as he navigates the complexities of transitioning into retirement. The discussion delves deep into Tony's financial landscape, exploring his assets, investment strategies, and plans for ensuring a comfortable post-retirement life. Hosted by Jill and her executive producer Mark Tallacio, both certified financial planners, the episode offers valuable insights for listeners approaching retirement.

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1. Introduction to Tony’s Retirement Journey

At [02:06], Jill Schlesinger introduces the episode's focus on addressing significant financial decisions related to retirement. She emphasizes the show's commitment to answering pressing money questions and invites listeners to engage through their website.

Jill Schlesinger:
"Whatever is going on in your life that happens to touch your money is something we can help you out with." [02:06]

Tony, a 67-year-old professional from Texas, joins the show seeking guidance on consolidating his scattered assets and optimizing his financial allocations as he approaches retirement.

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2. Detailed Overview of Tony’s Financial Situation

Age and Employment: Tony, aged 67, is on the brink of retiring this year. His spouse, turning 65, is still employed, earning approximately $100,000 annually.

Current Earnings: Tony earns a base salary of $250,000 with an additional $100,000 in Restricted Stock Units (RSUs).

Family and Expenses: With grown children—one fully independent and another still in college, supported partially through payroll—Tony and his spouse maintain a controlled spending pattern. Their current expenses range between $130,000 to $140,000 annually, increasing by an additional $20,000 to $30,000 when including expenses related to their child still in the workforce.

Assets Breakdown:

• Pension: Tony receives a modest pension of $500 per month from a foreign government.
• Retirement Savings: Together, Tony and his spouse have amassed $2.2 million in traditional retirement accounts.
• Brokerage Accounts: They hold approximately $1.3 million in brokerage accounts, complemented by $150,000 in various liquid assets.
• Real Estate Investments: Tony has multifamily investments valued at $600,000, spread across multiple properties through syndications.
• Primary Residence: Their home is fully paid off, valued at $560,000.

Notable Quote: Tony:
"One's on the payroll, definitely." [04:28]

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3. Assessment and Recommendations by Jill and Mark

Jill and Mark meticulously analyze Tony's financial portfolio, identifying areas for optimization to ensure a secure retirement.

Social Security Planning: Jill underscores the importance of delaying Social Security benefits to maximize payouts.

Jill Schlesinger:
"I would like you to pull some money out of this account for sure, and use that to live on for a few years." [10:20]

Asset Allocation: A significant portion of Tony's investments is tied up in illiquid assets like multifamily syndications and a Master Limited Partnership (MLP). Jill advises liquidating high-risk, illiquid investments to streamline his portfolio.

Jill Schlesinger:
"Sell that in a second. If that's the only gain. The total gain is $100,000 I'd get out of it." [15:05]

Tax Considerations: Jill highlights the tax implications of Tony's current investment strategies, suggesting reallocating funds to avoid high tax liabilities in the future.

Recommended Asset Distribution: For Tony's $1.3 million brokerage account, Jill and Mark propose a balanced allocation:

• 50% in S&P 500 Index Funds
• 10% in International Stock Index Funds
• 40% in Bond Index Funds

Mark Tallacio:
"Given his age, I would have, you know, 50% in the S&P, 10% in the international stock and then 40% in the bonds." [16:58]

Estate Planning: Jill reminds Tony to complete his estate documents to ensure his assets are managed according to his wishes.

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4. Key Insights and Takeaways

• Consolidate and Simplify: Reducing the number of investment accounts and consolidating them can lead to better management and reduced risk.

• Shift to Liquid Assets: Transitioning from illiquid investments like MLPs and multifamily syndications to more liquid, low-risk assets ensures easier access to funds during retirement.

• Diversification is Crucial: A diversified portfolio, balancing stocks, international funds, and bonds, helps mitigate risks and stabilize returns.

• Tax Efficiency: Strategic withdrawal from traditional accounts can help maintain a favorable tax bracket, preventing unexpected tax burdens.

• Estate Planning: Completing all necessary estate documents is essential for smooth asset transfer and to honor personal wishes post-retirement.

Notable Quote: Jill Schlesinger:
"Just put it into something safe that I don't have to watch and go travel." [16:15]

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5. Conclusion and Final Recommendations

The episode culminates with Jill and Mark's strong recommendation for Tony to liquidate his high-risk investments and reallocate his portfolio towards safer, more manageable assets. They emphasize the importance of living within means, ensuring expenses are covered without over-reliance on volatile investments.

Jill Schlesinger:
"Change your work, change your wealth, change your life." [17:18]

Tony expresses agreement with the proposed plan, acknowledging the need to simplify his financial strategy to enjoy a stress-free retirement.

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Final Thoughts: "On the Verge of Retirement" provides a comprehensive look into the challenges and strategies associated with transitioning into retirement. Through Tony's case study, listeners gain practical advice on asset allocation, risk management, and tax planning, underscoring the importance of proactive financial planning in securing a comfortable post-work life.

Transcript

[Jill Schlesinger]

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[Mark Tallacio]

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[Jill Schlesinger]

It's Thursday, March 20th and we are here trying to help you answer life's big big questions. Like am I on the right track? Like should I buy a second home? Like do I really need to pay for my kids private university education? And these are big questions. They touch your money. And sometimes it might even be should I take this job or that job? Whatever is going on in your life that happens to touch your money is something we can help you out with. Both Mark and I, Mark Tallacio, our Executive producer, the best one in the whole world. Mark and I are both certified financial planners. We love doing this show, we love hearing from you and we are so delighted to help you out. So if something's Going on, just go to the website jillunmoney.com, click the contact Us button and let us know if you want to join us on the air live by checking the box. And by the way, while you're on the website, check out all the cool stuff that lives there. We've got another podcast called the Money Watch Podcast. We've got a blog, we have a radio show. We're doing a lot of stuff, videos, the books, resources. It's [e-mail]. okay, right now let's talk to Tony, who joins us from the great state of Texas. Hello, Tony. How are you?

[Tony]

Hi, Jill. Good. How about you?

[Jill Schlesinger]

Doing great. What can we do for you?

[Tony]

Well, I'd like to get a little bit of guidance. I'm going into retirement shortly and I've got assets and stuff and allocations kind of scattered all over the place, so kind of looking for a little bit of guidance on how I should change that up.

[Jill Schlesinger]

Okay, when is retirement? How soon?

[Tony]

Next. Bad day maybe.

[Jill Schlesinger]

I love that one. Bad meeting away. I'm with you, brother. But believe me, I had one of those weeks recently. I was like, yeah, this was a week where I could have said goodbye. Not to you guys, but to my other job. How old are you, Tony?

[Tony]

I'm 67.

[Jill Schlesinger]

Are you married? Single partner?

[Tony]

I'm married. My spouse is turning 65 this year.

[Jill Schlesinger]

And spouse working or not?

[Tony]

She's working, yes.

[Jill Schlesinger]

How much does she earn?

[Tony]

About 100.

[Jill Schlesinger]

And what do you earn right now?

[Tony]

Base is about 210, 50,000 bonus, about 100 in RSUs.

[Jill Schlesinger]

Do you guys have grown kids?

[Tony]

They're grown. One is, one is out and one's trying to finish college.

[Jill Schlesinger]

So one's still on the payroll? A little bit, yeah.

[Tony]

One's on the payroll, definitely.

[Jill Schlesinger]

Okay, okay, got it. HE LAUGHS HE CHUCKLES I love the chuckle, the knowing chuckle of only as only a parent can do. So, Tony, how much do you guys spend? Considering the one that's still on the pay, the payroll, you know, like, what does your spending look like right now?

[Tony]

I'm thinking it's kind of. If I take what we're spending on her off, it's kind of 130 to 140. With her, it's probably an extra 20 to 30 higher than that.

[Jill Schlesinger]

Okay, so let's talk about what happens for you in retirement. Will either of you be entitled to a pension?

[Tony]

I have a little pension from a foreign government of about 500amonth. That's the only pension. The rest is all tax deferred Savings.

[Jill Schlesinger]

All right, so 500amonth in the small pension and then let's talk about the savings. So let's go into traditional. So traditional retirement savings. What have you guys saved?

[Tony]

Both of ours. We each have about 1,100,000.

[Jill Schlesinger]

You mean for a total of 2,200, or 1,100,000 together?

[Tony]

2.2 together.

[Mark Tallacio]

Oh, my God, we have such rich listeners.

[Jill Schlesinger]

This is crazy. You guys are all incredible. What about any Roth money?

[Tony]

No Roth.

[Jill Schlesinger]

Okay. Brokerage account.

[Tony]

Have a brokerage about $1,300,000.

[Jill Schlesinger]

I always love Mark, how they're like. Yeah, about. I think he's going to say like $100,000. He says 1.3. Okay. And money in the bank, about $150,000.

[Tony]

That's kind of spread out between high interest savings T bills, money market I bonds.

[Jill Schlesinger]

Any other assets that you have. You have rental real estate.

[Tony]

No, rental real estate. I have some multifamily investments, about 600,000.

[Jill Schlesinger]

So you have a multi family investment that's worth 600. Is there any mortgage outstanding on it?

[Tony]

So that's my investment. So it's a group of syndications. So that's spread over seven or eight different properties. And so I'm a passive investor in those properties. And some of them are cash flowing, others are waiting to cash flow or trying to keep above water with the, I guess, difficulties in the rental business.

[Jill Schlesinger]

So in this asset, is this like a limited partnership?

[Tony]

Yes.

[Jill Schlesinger]

Okay. And did someone like a broker sell this to you or an advisor?

[Tony]

There's a group in Texas sets I was associated with that kind of collectively members within the group can put together an asset, you know, search out, find an apartment block and put together, I guess, a deal to, I guess, I don't know, float it. So to gather investors to invest in the property and buy it as a collective group and then.

[Jill Schlesinger]

But you can't get. In other words, it is illiquid. There's nothing you could do to get out of this. If you wanted to say, like, I want my 600 grand out.

[Tony]

Correct.

[Jill Schlesinger]

Is there any way to do that?

[Tony]

No, no. Once it sells, I'll get my money.

[Jill Schlesinger]

Yeah. I hope you're alive.

[Tony]

And there's. I've been through some other ones before.

[Jill Schlesinger]

I hope that your daughter enjoys that. That money. Yeah, it'd be great. So, okay, I'm not. I mean, you can hold it on your balance sheet. What's it producing income wise when you get your K1? What does it look like?

[Tony]

Well, I have another one that's kind of like a REIT. And between the two of those, the REIT's about 250,000 in that, and I guess collectively between those, about 29K a.

[Jill Schlesinger]

Year in cash flow, 29,000 a year. That's it on $850,000?

[Tony]

Yeah. A lot of them aren't performing very well with the interest rates. So. Yeah.

[Jill Schlesinger]

Okay, this is where we are, so I'm not going to make you crazy about that for sure. Okay. So I don't want you to worry. Okay. Because you can't get it out anyway, so what's the difference, Right? Okay. So what about your primary residence?

[Tony]

It's worth about 560 and it's totally paid for.

[Jill Schlesinger]

Is there anything else that's out in your. In your universe of, you know, sort of what is on the horizon? Assets? Anything else? Anything we should know about? Do you have parents that are still alive that you have to take care of, anything like that?

[Tony]

No, parents have a 529 that still has about 110 in it.

[Jill Schlesinger]

Are you using that for the kid on the payroll?

[Tony]

Yes, partially. I guess. The brokerage puts out about $83,000 a year in dividends.

[Jill Schlesinger]

Was the game plan for you that you would just keep working and then whenever you really had the really, really bad day that you would stop, or do you have a date in mind?

[Tony]

I'm thinking I'm probably going to go.

[Jill Schlesinger]

This year, so end of this year. And would your wife also.

[Tony]

That's her plan, yes.

[Jill Schlesinger]

This sounds like a good game here. Like you got a good game plan. Rather, I mean, I would have much preferred to have money that you have in these multifamily and slash REIT investments. Like, yeah, I wish that were in the brokerage account, but, you know, you got three and a half million dollars between the traditional and the brokerage account. And, you know, hopefully, again, if you live long enough, some of this other money comes back to you. Do you feel confident, like, let's talk about their Social Security for a second. What does that look like at your age? 70?

[Tony]

Age 70 is about 4,500 for me and for my wife, about 3,100.

[Jill Schlesinger]

And you guys were planning to wait till 70, right?

[Tony]

Well, it's undecided because you can, you.

[Jill Schlesinger]

Know, one of the things that makes. Would make a lot of sense would be to start to delay social. Is your health good? You guys have good health?

[Tony]

Reasonably good health?

[Jill Schlesinger]

Yeah, only because you got to pull some of this money out of this traditional account. Time's running out.

[Tony]

Right.

[Jill Schlesinger]

You know, so I'd like you to pull some money out of this account for sure, and use that to live on for a few years. And then once you get Social Security, you know, you can pull some money out. You can, you know, keep between 70 and 75. You gotta, like, get a little more aggressive and get money out of that account because it's gonna keep growing. The problem continues to compound, and then you're gonna be forced to take money out at age 75. And, you know, it will spin off a lot of income. It really will. Eight years from now, that 2.2 is going to be in the threes, maybe, you know, depending on what happens in the markets. But, like, that's a lot of money. And if you think about, you know, say, let's just say it's 3 million bucks, right? The first year's distribution is going to force 120 grand out of that account to you, right. And you're going to be receiving Social Security. And so you're going to be in a pretty decent tax bracket. And you'll have no control over it. You'll have to take the money out.

[Tony]

And I'll probably have lots of Irma as well.

[Jill Schlesinger]

You bet. So we'd like to get some of that money out for you guys. So let's say you stop working at the end of this year. Now you don't have any income. I know you're freaking. Wait a minute. You got the $500 a month pension. Don't forget about that. But, you know, we know that you have money coming that is spinning out from the brokerage account, that 80 grand a year. And. And then you have this other 30. Say you have $110,000 of income between the real estate and the brokerage account, but you could basically take another. You could take 200 grand a year out of that traditional account and you would still stay in the 24% tax bracket, which is where you are now, right. You're used to paying taxes at 24%. I would do that. I would definitely do that. And you could do that until you're 70. And then I would keep pulling out to stay in that 24% bracket. Accounting for your age, 70, Social Security, I mean, you got plenty of money. You're going to be fine. That's the sort of the general. But it is a bit of a. It's the unknown of the how much money you're going to have to pull down later. So did you know that you were in as good a shape as you're in or not?

[Tony]

I know that I'm in good shape. I don't know. Overall, it's kind of, you know, I've always kind of felt comfortable. You know, I haven't really felt stress because in general haven't carried any debt and so try to keep that under control. And you know, the kids college have been cash flowing that for the most part and taking a little bit out of the 529. But we're not heavy spenders. We stay within our means.

[Jill Schlesinger]

So when you first started talking, you were sort of. I think I thought you were talking about like consolidation of accounts and maybe you're talking about allocation of accounts. Are you worried about having this big chunk of money that is in the real estate?

[Tony]

Not so much the real estate. I know some of it is at risk. I'm kind of expecting half of that could be at risk and half of it's going to be all right.

[Jill Schlesinger]

Well, I'm not even. Honestly, I'm not even including that in your whole calculation.

[Tony]

I don't include that either. I kind of put that on the side and say, okay, if that comes through. That comes through.

[Jill Schlesinger]

Exactly.

[Tony]

In my brokerage, I'm a little bit nervous because 70% of that 1.3 is in three stocks.

[Jill Schlesinger]

What?

[Tony]

Yeah, 50% in one stock.

[Jill Schlesinger]

Dude, you are killing me. Okay, what's the cost base? Is it. Is the. Is this because you were worked for the company?

[Tony]

Yes, one of the one that's 50%. I worked for the company, but no.

[Jill Schlesinger]

Longer work for the company.

[Tony]

No, I still work for them.

[Jill Schlesinger]

Okay. Oh, boy. Okay.

[Tony]

It's. It's all fully vested, so I can.

[Jill Schlesinger]

Sell it at any time.

[Tony]

But it's kind of. I guess my trepidation is, you know, I get 40,000 in dividends off of that and there's a $100,000 capital gain if I sell it.

[Jill Schlesinger]

So $100,000 due in taxes is what you mean.

[Tony]

The gain is about $100,000.

[Jill Schlesinger]

That's it?

[Tony]

Yeah.

[Jill Schlesinger]

And so you mean you pay 25% of that? I would sell that in a second. If that's the only. The gain. The total gain is $100,000 I'd get out of it.

[Tony]

Okay.

[Jill Schlesinger]

How is that? I don't understand how it's. Well, I don't know. Are you sure that that's just. That's all the.

[Tony]

Yep.

[Jill Schlesinger]

I'm ready to sell right now. Send me your account number.

[Tony]

It might be a little bit higher than that because it's an mlp.

[Jill Schlesinger]

Oh. It's a master limited partnership. Get out of that. I'd be done with that in two seconds. Goodbye. Goodbye. Get out, pay your tax, move on. Do you work with an accountant just.

[Tony]

To do the taxes? I don't have any.

[Jill Schlesinger]

Just make sure you let them know you're going to do that.

[Tony]

Right.

[Jill Schlesinger]

Say goodbye to that mlp. You're done. Pay the tax that's due, reallocate, you're done. Seriously, it is not worth hanging on to that. Absolutely not. That is a. I don't like that risk you have. You are lousy with partnerships, my man. You got plenty.

We're done.

We're done. I'm done with that. Okay. You got your estate documents? Done, Tony.

[Tony]

Part of them. A will's done, but still need to do some of the other stuff.

[Jill Schlesinger]

Okay. Get that done, get going. Sell your master limited partnership and stop putting money in these weird, illiquid assets. Let's go liquid. This is the most. This is the best thing to do when you are retired is like, hey, let me take my money off the table and have some fun. That's what you're gonna do, right? Okay.

[Tony]

Just put it into something safe that I don't have to watch and go travel.

[Jill Schlesinger]

Yeah. Put it in some index funds. Like, honestly, you could put in a stock index fund, an international stock index fund, a bond index fund if you want to. You don't need a real EST fund, that's for sure. If you want a little commodities, throw something in there and that's it. Done. Goodbye. Go to sleep at night. Okay.

[Tony]

All right. Any suggested percentages right now?

[Jill Schlesinger]

Where is the money held that you have, like, in that. What brokerage firm are you?

[Tony]

Brokerage and Fidelity.

[Jill Schlesinger]

Okay. Fidelity has an S&P 500, has an international index fund, has an intermediate bond fund. Mark, do you want to do a basic breakdown that Tony might consider for his $1.3 million? It'll be a little less because he has to pay some taxes, but let's call it 1.2 million. What should we do with that?

[Mark Tallacio]

I mean, if you're just talking about those three, I. I would for. Given his age, I would have, you know, 50% in the S&P, 10% in the international stock and then 40% in the bonds.

[Jill Schlesinger]

Yeah, there you go. Go to sleep at night, man. Don't be worrying about your passive income and your master limited partnership and blah, blah, blah, blah, blah. You're not going to need it.

You're not spending this money.

I hope these kids are not going to blow it, but you're not. You guys are not going to spend all this money. Stay in touch with us. Let's see how the next few years goes. Let's go get some money, though, all right? And spend it and have some fun.

[Tony]

Sounds like a plan.

[Jill Schlesinger]

Tony from Texas. Well, listen, we haven't had a master limited partnership question in a while.

[Mark Tallacio]

That takes me back to my CFP.

[Jill Schlesinger]

Studying Master limited partnership. It takes me back to the 1990s as a financial planner. There were a lot of those things and you know, they can be great. Look, they can generate a ton of income, but they are so illiquid. And you know, it's sort of that same issue that I have with annuities, which is these things can be expensive and they're illiquid and that always bums me out. So if you've got a question about your asset mix as you're turning the corner, maybe retiring, maybe looking at a new job, maybe you're trying to figure out what to do with something that's done really well and you're kind of feeling like, I don't want to take the tax kit. Give us a Holler. Go to jillonmoney.com, click the contact us button, write us your note. And if you'd like to join us on the air live, check the box. Don't forget to sign up for the free weekly newsletter comes out every Friday and you can subscribe to us on the Odyssey app, where you can also subscribe to our weekend show. It's called Money Watch on Saturdays and Sundays, so you can find that on the Odyssey app or wherever you find your favorite podcast. Try to put your hands metaphorically or really on someone's back. Get permission. People don't like to get hugged all the time. Mark. I've learned this mostly because I'm a big hugger and I can tell people get a little squeamish sometimes. So metaphorically is good too. Just send a note to someone. Change your work, change your wealth, change your life. Thank you for listening. I'll talk to you tomorrow.

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[Alex Asulin]

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