On Track for Retirement at 65?

Summary

Podcast Summary: Jill on Money with Jill Schlesinger Episode Title: On Track for Retirement at 65? Release Date: March 3, 2025

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Introduction

In the episode titled "On Track for Retirement at 65?", host Jill Schlesinger, CFP®, delves into the intricacies of retirement planning through a real-life listener scenario. Joined by co-host Mark Telercio, they dissect the financial strategies and considerations essential for a secure retirement at the age of 65. This episode provides valuable insights for anyone navigating the complexities of retirement planning, emphasizing practical advice over financial jargon.

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Listener Spotlight: Renee's Retirement Journey

Timestamp: [03:28]

Renee from Washington State reached out to the show seeking guidance on her retirement plans. At 60 years old, she aims to retire in five years and is evaluating whether she's on the right path to sustain a comfortable retirement at 65. Renee's financial landscape includes:

• Income: $125,000 annually
• Pensions:
  • City of Lewiston, Idaho: $2,200/month starting at 65
  • Current Employer: $3,300/month starting at 65
• Retirement Savings:
  • 457B Plan: $400,000 (traditional, rolled over from a 401k)
• Savings: $85,000 across checking, savings, and money market accounts
• Mortgage: $230,000 remaining on a $400,000 home at 4.5% interest
• Personal Situation: Single, cohabiting with a boyfriend, and sharing household expenses

Renee's primary concerns revolve around ensuring her retirement funds are sufficient to support her and her partner's lifestyle, anticipating monthly expenses of around $9,000.

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In-Depth Analysis and Advice

Timestamp: [07:06] - [19:42]

Jill and Mark engage in a comprehensive discussion, evaluating Renee's financial strategy:

1. Pension and Savings Assessment:

   • Total Monthly Income at 65:
     • Pensions: $2,200 (Idaho) + $3,300 (current job) = $5,500
     • Social Security: Renee plans to delay until 70, expecting around $4,000/month
   • Retirement Savings Usage:
     • With $400,000 in her 457B plan, Vince will support additional expenses beyond the pensions and Social Security.

2. Expense Evaluation:

   • Initial Claim: Renee estimates needing $9,000/month.
   • Reassessment: Upon review, it appears Renee may actually require closer to $7,000/month, which would be more attainable given her current savings and planned income streams.

3. Investment and Savings Strategies:

   • Contributions to 457B: Currently at 6% of her salary, Jill suggests maintaining or slightly increasing this contribution to bolster her retirement funds.
   • Roth IRA Consideration: Opening a Roth IRA is recommended to take advantage of tax-free growth and withdrawals, providing additional financial flexibility.
   • Emergency Cushion: Building a larger savings buffer to account for unforeseen expenses or market fluctuations is advised.

4. Estate Planning:

   • Will and Beneficiaries: Renee is prompted to update her will and ensure all beneficiary designations are current to prevent unintended allocations of her assets.

5. Joint Financial Planning:

   • Partner's Financial Status: Understanding her boyfriend's retirement plans and savings can provide a more comprehensive picture of their combined financial health.

Notable Quotes:

• Jill Schlesinger [07:04]: "You are currently working and you said you're going to work for five more years."
• Renee [08:10]: "I'd like to have upwards of $9,000 a month."
• Jill Schlesinger [12:23]: "I think you're probably sort of taking this as sort of simple math."
• Renee [17:55]: "If I was just on me, it would be right around $50,500 a month."
• Jill Schlesinger [19:24]: "Make sure you get that done. It's very easy to do."

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Key Insights and Conclusions

• Realistic Budgeting: It's crucial to have an accurate understanding of monthly expenses. Overestimating or underestimating can significantly impact retirement readiness.

• Diversified Savings Strategy: Relying solely on pensions and Social Security may not suffice for desired lifestyles. Diversifying retirement savings through plans like a 457B and Roth IRA can provide additional financial security.

• Building an Emergency Fund: Maintaining a robust savings cushion ensures flexibility in the face of unexpected expenses or market downturns.

• Estate Planning: Regularly updating legal documents, such as wills and beneficiary designations, is essential to protect one's assets and ensure they are distributed according to personal wishes.

• Joint Financial Planning: When in a partnership, aligning financial goals and understanding each other's financial status can enhance overall retirement security.

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Conclusion

In "On Track for Retirement at 65?", Jill Schlesinger effectively breaks down the critical components of retirement planning through Renee's scenario. The discussion underscores the importance of comprehensive financial planning, realistic budgeting, and proactive savings strategies. Listeners are encouraged to assess their own financial situations, seek professional advice, and take actionable steps to secure their retirement future.

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Additional Resources

• Jill on Money Website: For personalized financial advice, visit jillonmoney.com and use the "Contact Us" feature to submit your questions.
• Live Webinar with Ed Slott: Join the upcoming webinar on March 6th at 7 PM Eastern Time. Membership details available on the website.
• Free Weekly Newsletter: Subscribe every Friday for the latest financial insights.

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This summary aims to provide a comprehensive overview of the podcast episode "On Track for Retirement at 65?" from "Jill on Money with Jill Schlesinger." For a deeper dive into the topics discussed, listening to the full episode is recommended.

Transcript

[Jill Schlesinger]

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[Mark Telercio]

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[Jill Schlesinger]

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[Jill Schlesinger]

Welcome to the Jill on Money show. It's Monday, March 3rd and we are here answering financial questions. If you have one, just go to our website jillonmoney.com when you get there in the upper right hand corner, we've got a contact Us button there wherever you are on the website. So if you're in the section, that's the blog section or the resources section, contact us is in the upper right hand corner. Kind of cool, right? Also very cool is this week we have a live webinar Ed Slott, cpa, IRA expert Roth Cheerleader Roth enthusiast. He will be joining us for a live webinar this Thursday night on March 6, 7 Eastern Time. And the thing is, you've got to be a member of Jill on Money Live. That's our subscription Service. And for 45 bucks for the next 12 months, you get four quarterly webinars. We've got a load of video content that's going in behind the hate, the paywall, audio content, the back catalog. 45 bucks for the next 12 months. I know a lot of you would pay 45 bucks just to be at the Ed slot webinar. So check it out, Jill on Money Live. Okay, right now, let's get to you guys. We are on the line with Renee from Washington State. Hello, Renee. How are you?

[Renee]

Hi, Jill and Mark. I am doing great.

[Jill Schlesinger]

Tell us what's happening. How can we help you out?

[Renee]

Yeah, so I'm, I've worked for the cities, so I have two pensions. And so I've just always, I've never, I don't like investing a whole bunch, but I am 60 years old and plan to retire at 65. And so a few things I want to be sure. I'm kind of on track from my thought process and thinking about opening up a Roth ira.

[Jill Schlesinger]

Oh, exciting. First of all, Renee, you are currently working and you said you're going to work for five more years. So what are you earning right now, income wise?

[Renee]

Income wise, I am about 125,000 a year.

[Jill Schlesinger]

And how's that for you? Is that like a good amount of cash flow for you? Can you do the things you'd like to do?

[Renee]

Yes, I do the things. I work a lot and I've got a new grand. Well, she's 4 years old, but still new granddaughter.

[Jill Schlesinger]

Yeah, I get it. I get it. That's fun. And right now you're still a municipal worker, right?

[Renee]

Correct.

[Jill Schlesinger]

Okay, so why don't you just give us a little bit of a rundown on those pensions? You said there's so one pension is for the current job and then you have one from a previous employer.

[Renee]

Yes, I did 20 years for the city of Lewiston in Idaho. So I've got a Percy that's a pension as well. And it's 20, about 20 $200.

[Jill Schlesinger]

And when will that pay off? Does that, is that started already or is that at a different age?

[Renee]

That's at 65.

[Jill Schlesinger]

Okay. So the Idaho pension at age 65 is $2,200 a month. And what about your current job? If you were to keep doing this for another five Years, Yeah. What would the pension be?

[Renee]

So it's about 3,300.

[Jill Schlesinger]

Oh, all right, that's good.

[Renee]

Yeah.

[Jill Schlesinger]

And are you married? Single. Partnered.

[Renee]

I'm single, but a boyfriend. We live together. We bought a place together, actually, you know, so I had had a house, sold it and put a down payment on the one we're in currently. So we bought that in 2019.

[Jill Schlesinger]

Oh, good timing on you on your part.

[Renee]

Yeah, we did get. Although it's a manufactured home on. On, you know, an acre and a half, but so we don't get. Super. The interest rates. Four and a half percent.

[Jill Schlesinger]

Well, that looks like a darn good one right now.

[Mark Telercio]

What's the house worth?

[Renee]

So it's worth. About the property and everything is about 400,000.

[Jill Schlesinger]

Okay. And what is the remaining mortgage for that on that four and a half percent mortgage?

[Renee]

Yeah, it's still about 230.

[Jill Schlesinger]

Okay. All right. But that seems. I mean, do you and your boyfriend split most of the expenses?

[Renee]

Yes. Yeah, we split everything up.

[Jill Schlesinger]

Okay, great. So you're earning 125 now and you're putting money, obviously you pay into the pension, but what about other retirement assets? Do you have another deferred compensation plan that you're contributing to as well as the pension?

[Renee]

Yes, retirement, they have a. It's a 457B.

[Jill Schlesinger]

Okay, so a 457 plan. And how much do you have in that?

[Renee]

I. Well, currently it's right around, you know, the mark. Well, market's starting to go down, but it's been. It's upwards of 400,000 currently.

[Jill Schlesinger]

Oh, all right. That's great.

[Renee]

Yeah. I had. Had a 401k that I rolled into that because I did do private contract operations in between there, so.

[Jill Schlesinger]

I see. So this 400,000 all is bright before taxation. So it's traditional. Right. Okay. Any other retirement funds that are floating around for you?

[Renee]

No.

[Jill Schlesinger]

Okay, so we've got the future pensions too. We have your 457 plan. Traditional. What about money in the bank or any other brokerage account like that is a taxable account.

[Renee]

Right. So no brokerage accounts. And in the bank, rough. I got two credit unions. And so all together it's right around 85,000 with checking, savings and a money mark. It's a money market that I.

[Jill Schlesinger]

Great.

[Renee]

Yeah.

[Jill Schlesinger]

That's amazing. How much are you contributing to your 457 right now?

[Renee]

I do 6% of my wage, so, you know, I don't. You know, I, I don't know. I don't max it out. I like to Play a lot, too.

[Jill Schlesinger]

And I love playing. Playing is great, Renee, if you look at the amount of money that you spend, just you're. Like you said, you're playing, right? What, what do you think your expenses are? And don't. Don't just do the vital things. Right. The actual money you want to have. When you, when we're thinking about retirement, how much money do you think you need on a monthly basis?

[Renee]

Okay. I think to have a really good time and whatnot, I'd like to have upwards of 9,000, you know.

[Jill Schlesinger]

9,000Amonth?

[Renee]

Yeah. Yeah.

[Jill Schlesinger]

Okay. When you retire at age 65, tell us a little bit about what happens. You will. You'll file for Medicare. Are there any other benefits you get from being a municipal worker for. Besides the pension? Is there anything else that we should know about?

[Renee]

Yeah. No, there isn't. Not that I'm aware of. You know, I'm just now starting to really dig into maybe looking at the retirement.

[Jill Schlesinger]

That's. Okay. That's. That's great. In terms of, like the125.6% goes into your 457 plan. And you obviously are saving some money because you've got money in the bank. Are you just kind of spending just like whatever you want because you're with somebody? And like, just between the two of you, when you said $9,000 a month, that's the two of you, or is that your portion of it?

[Renee]

It's the two of us. Just because he, you know, he hasn't got his retirement set up as well as mine. So, you know, I'm looking at the worst case scenario. So, you know, like.

[Jill Schlesinger]

So you're saying that if he. Does he contribute? Would he. Does he have any assets to contribute? I mean, I get it, but the house you're splitting, but does he have a pension?

[Renee]

Yes, it's. I think he, you know, I don't know exactly where it's at because we, we kind of keep everything separated, but he's got about, you know, it's over 100,000 in a pension, I believe.

[Jill Schlesinger]

Okay. I just want to make sure. I understand.

[Renee]

Like, I'm sorry, it's not pension.

[Jill Schlesinger]

It's kind of a 401k or something.

[Renee]

Yeah. Yeah.

[Jill Schlesinger]

Okay. I'm just trying to figure out, like, if you are just. Renee. On your own, and you have. Right now, we know at age 65, you'll have $5,500 a month coming in from these two pensions. Right, right. And so I guess what I just want to make sure I understand is that you're saying you want to be able to spend $9,000 a month whether or not he contributes?

[Renee]

Correct. Yeah.

[Jill Schlesinger]

Okay. That's what I want to make. Sure. Okay, so then tell us about what happens for Social Security. What is your game plan? Do you want to wait till you're 70?

[Renee]

I do. I, you know, so far I'm really good health, so I can't see why I wouldn't, so.

[Jill Schlesinger]

Yep.

[Renee]

And. And my idea was, in between the 65 and 70 was to start drawing on that 457.

[Jill Schlesinger]

Okay. Okay. And what would your benefit be at age 70?

[Renee]

It is just. It's a little over 4,000amonth on Social Security.

[Jill Schlesinger]

Isn't that nice how the numbers just seem to line up so beautifully?

[Renee]

Right.

[Jill Schlesinger]

That's what I like that. That's very good. Is there anything else that we should factor into this game plan as you are looking ahead?

[Renee]

Not big changes.

[Jill Schlesinger]

Stay in the house or, you know, like anything like that. Is there another house? Is there someplace else you want to live?

[Renee]

There's not another house. This property is a lot take care of. So we both have talked about that. You know, depending on what the game plan will be at that stage of our life. You know, I always had the dream of buying an RV and just hitting the road and, you know, and I've got family in Montana and I still have family in Idaho and, and just start traveling that way. But otherwise, I mean, we might, you know, it might downsize that if we decide to stay here, then we will, you know, so there's the possibility of selling. I mean, everything's up in the air.

[Jill Schlesinger]

Okay, so what is your basic question as you've just recounted your entire financial life to us? Yeah, what are we trying to figure out? Whether your game plan's a solid one.

[Renee]

Right. That, that. And plus, I, you know, after we're done talking, you know, about the Roth ira, whether or not. Should I, you know, because I know you have to have it in there five years, but yes, based. First of all, if it's a solid thought process, you know, I'm getting.

[Jill Schlesinger]

I think it is. I'm going to tell you one thing. Given that you want to spend $9,000 a month, which I don't even think you're doing right now. I'm just saying that. No, because. So I get that you want to, but if that's the case, I think it's a little bit ambitious to have $9,000 a month with your expenses because you have 400,000 in that 457 plan. But you can, you will plow through that fast, right? Yeah.

[Renee]

I was doing the math and I just, you know, 400,000, it looked like, you know, like if it stayed in there, but it is in the stock, you know, it's on.

[Jill Schlesinger]

Yeah, yeah, yeah. But I mean, here's what I'm thinking.

[Renee]

Okay.

[Jill Schlesinger]

I think you're probably sort of taking this as sort of simple math, right? You're saying, well, if I were to take 50, 60 grand out a year, right, pay the tax on it, then I'll be able to keep my expenses at that nine grand a month, so I'll just add that to my two pensions and I'm good. Right, Right. The thing is that even when you, you know, if you wait till you're 70 and things look good, this doesn't give us a ton of wiggle room. Meaning that it would really mean your 457 plan would be, I mean, not 100% depleted, but it would be, it would get down there. Right. By the time you're 70. And what is. Where are we turning if you need a new car? Where are we turning if you have some sort of issue with your health that's not covered by Medicare? So I think that the one way around to prepare for that is to consider two different things. One is to say, hey, look, I got to save a little bit more money because you're going to want to have some more money set aside for this, I'm going to call it, for like 10 years from 65 to 75. That's usually when people spend the most amount of money in their early retirement. Right. When you're doing all the fun stuff. So I'd like you to build up the, your, your savings a little bit and hopefully I'm wrong and you'll end up having plenty of money in your 457 plan. But, you know, look, we have to factor in that, like within the next five years is going to probably be some time where, you know, the markets go down and, and we have to make sure that you have enough money so that you're not feeling like, oh, in order to do the big thing that I want to do that I have to sell my house. So my guess really is just reading between the lines of what you've just told us. I don't think you're spending nine grand a month. So I think if we ran these numbers, you're really probably closer. I can just almost like eyeball this because you're putting 6% away and you've got money and you know, like, you're probably more like 7,500amonth. If even if that's the case, I think that gives me a little bit more of a. I don't know. I feel like you have a little bit more of a cushion, so I have more confidence in the plan. So what I would do is I don't think I would put six per. I don't put. You don't have to put more into your 457 plan, but I would like you to build up your bank account and, you know, maybe even maybe put a little bit more, like, maybe a couple percent more in your 457 plan, because I'm pretty sure you can afford it. And then if you retire at age 65 and you've got this $5,500 a month coming in, and you find that really, you know what, my expenses really are running closer to seven, not $9,000 a month. I think everything's fine. I just. I. Again, I'm always thinking about, like, the what if scenario. So I don't know. Mark, do you think that this is, you know, do you think that we're kind of on the right track? Do you think that Renee needs a little bit extra. More money sloshing around for the first 10 years of retirement?

[Renee]

I mean, it would certainly help, but.

[Jill Schlesinger]

I think you're right about the expenses. First we got to just get a.

[Renee]

Real handle on what exactly she's spending each month.

[Jill Schlesinger]

Because like you said, if it's closer to $7,000 a month, then really there's not a lot of issues with this plan. Right. And. But if it's like 9 or 10.

[Mark Telercio]

There are more issues.

[Jill Schlesinger]

So I think that if you own a home with your boyfriend and you're really looking ahead at your total, like, what are we going to do in five years? That you should share some of the information, like what. What he would really be able to contribute, what you'd be able to contribute, and within the next five years, you'll have a much better idea. Once you start track, I think for you, you don't need to think about. I don't think you need to think about converting your traditional account. I guess there's a question mark, whether, Renee, do you have the ability to put your 457 plan money into a Roth? 457.

[Renee]

They. They do carry a Roth. I'm starting to dig into that, and that was going to be my kind of the next question. You know, is it a smart move? I was intending. My intention is to fund you know, the 8,000 a year, that's you can start, you know. Right. Is that the maximum into a Roth?

[Jill Schlesinger]

As a Roth ira? Yeah, yeah, yeah, that would be a Roth. But if you have a Roth plan, you can just use that.

[Renee]

It's a Roth IRA, it's not a Roth plan.

[Jill Schlesinger]

Oh, okay. So your 457 is just a traditional. If you were to do that, Mark, what do you think about a Roth IRA instead of putting more into the 457? I'm fine with that.

[Renee]

Well, I'm fine with it too.

[Jill Schlesinger]

You know, get that account opened sooner rather than later. That way you get the clock started. Yeah, we want that five year clock to start. So if you can do that instead of putting more money in the 457, I think that's great too. But I'd like that, you know, again, if you could do that eight grand for the next five years, that's a little extra money. That's the last money you're going to access. It would make it. I just think I'd like just a little cushion. I like a cushion. So can we get you a little. If you can do that little cushion, help us fluff up that cushion a tiny bit, then I think the game plan's good. I really do.

[Renee]

Okay. And, and just, I mean, maybe to. I have put out, I listed my, the expenses that we do. Honestly, if I was, if it was just on me and it would be right around 50, $500 a month.

[Jill Schlesinger]

Okay, then you see, I knew it. I could sniff this out like anybody's business, right, Mark? I was like nine grand, where is that coming from? Okay, but that's a lot of fun. That's 50 grand a year of fun or so, you know, that's a lot.

[Renee]

Especially for some, you know, taxes. Right. I mean, I'm kind of. There's taxes in there. So.

[Jill Schlesinger]

So I think, I think that the plan sounds good. Let's open a Roth ira. Let's get a better handle on the expenses. And look, if this thing with the guys is like the real deal, then you should share some information. You don't have to. He doesn't have to give you everything, but you do own real estate together. And it seems to me that you could try to get on the same page. Just align a little bit around what you think is the five year, ten year game plan. How's that?

[Renee]

We actually do share, but I just haven't. I have a lot on my plate just to think of my own, so I don't pay attention.

[Jill Schlesinger]

I love It. I love it. Well, listen, I think you're. You are absolutely in good shape then. And I feel good about it, and you should, too. So, Renee, one last thing. How about the estate plan? Because you own this house with rights of survivorship, right? Like, in other words, if you die, the house automatically goes to him.

[Renee]

Yeah. Yeah. Well, you have to check more into that. And I used to have a will, but I was divorced and so I haven't redone a will. I've got one son.

[Jill Schlesinger]

Dude, you better make sure that you redo it because I don't want that bum ex husband getting your money for by accident.

[Renee]

Oh, oh, that can happen, right?

[Jill Schlesinger]

That can happen. Like you forget to change a little name here and there. Let's get that done. That's a good thing to do. Yeah.

[Renee]

As far as beneficiary, my son is on everything. Sorry, that's kind of lined up that.

[Jill Schlesinger]

Way, but all right. Make sure you get that done. It's very easy to do. All right.

[Renee]

Yep.

[Jill Schlesinger]

Renee from Washington state, from Idaho, from everywhere else, and maybe from a town near you in her rv, which is soon to come. Thank you so much for getting in touch with us. Hey, if you are thinking about your plan for the next five years, the next 10 years, or the next five or 10 minutes, we want to help you out. Mark and I love hearing from all of you jillionaires. You're just the best and we'd love it if you got in touch with us. All you need to do is go to jillonmoney.com, click the contact us button, write us a note. If you want to join us live, check the box and Mark will do everything else. Hey, don't forget to sign up for the free free weekly newsletter comes out every single Friday. You can subscribe to us on the Odyssey app or wherever you find your favorite podcasts. Music is composed by Joel Goodman. Mark Telercio. He is the executive producer and king of all things web. We are distributed by Odyssey. Don't forget to do something nice for someone else today. Change your work, change your wealth, change your life. Thank you for listening. Talk to you tomorrow.

[Mark Telercio]

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