Podcast Summary: "Retirement Spending Check-Up"

Jill on Money with Jill Schlesinger
Episode: Retirement Spending Check-Up
Release Date: March 19, 2025

Introduction

In this episode of Jill on Money with Jill Schlesinger, hosts Jill Schlesinger and Mark T. O'Connor delve into the complexities of retirement planning by conducting a live check-up with listeners David and Rachel from New England. The episode focuses on assessing their current financial standing, exploring potential lifestyle changes post-retirement, and strategizing for sustainable spending.

Callers' Financial Overview

At [03:29], David introduces himself and Rachel as a retired couple navigating their first year of retirement. They are contemplating changes to their living arrangements and seek professional guidance to ensure their financial stability during this transition.

David:
"We just retired last year, beginning of last year, and we're sort of going through that retirement transition..."
[03:29]

Mark:
"Sounds great. David, how old are you?"
[03:54]

David is 61, and Rachel is 55, enabling them to retire before the traditional retirement age. They have two grown children who are financially independent, though still included on their cell phone plan, a point Mark humorously critiques ([04:00]).

Current Retirement Situation

David and Rachel do not have pensions, relying primarily on their savings and investment accounts. Their total retirement assets include:

• Retirement Accounts: $2.7 million

  • Traditional IRA: $2.5 million
  • Roth IRA: $200,000
    [05:13]

• Taxable Brokerage Accounts: $3.8 million

  • Cash Holdings: $500,000
  • Donor Advised Fund: $200,000
    [05:53]

Additionally, they own two mortgage-free homes in New England, each valued at approximately $1.2 million.

Managing Expenses and Cash Flow

Rachel shares their monthly expenditures, totaling $14,000 ([09:15]), which Mark commends as impressive given their lack of mortgage obligations:

Mark:
"It's very impressive to have no mortgages and still spend four..."
[09:52]

Their current income streams include:

• Deferred Executive Income: $50,000 annually for the next 6-7 years
• Brokerage Account Withdrawals: Occasionally from cash and dividends
• Social Security: Projected to receive $5,000 monthly together when delayed until age 70
  [10:11]

Potential Relocation and Housing Adjustments

David and Rachel are considering selling one of their homes to purchase a new residence in a warmer climate, potentially leveraging rental income. However, both express reservations:

Rachel:
"We wouldn't do it ourselves. We wouldn't manage that. We would have a property manager handle that."
[08:54]

David:
"I don't want to rent it..."
[09:00]

Mark explores alternatives, suggesting maintaining their current tax-friendly residence while renting in a warmer area to maintain flexibility:

Mark:
"Why don't you just see how it goes?"
[15:17]

This approach would provide liquidity without the commitment of purchasing a new property, allowing them to adapt based on future needs and preferences.

Managing Brokerage Accounts and Investment Strategy

A significant portion of the discussion centers on their $3.8 million brokerage account, which includes a concentrated position in a single stock valued at $800,000, down from a previous higher value.

Rachel:
"It's down to 800 now that we've chipped away at it."
[17:03]

Mark advises diversifying their portfolio to mitigate risk and suggests that selling portions could reduce the emotional burden of holding a large stake in one company:

Mark:
"The 800 grand doesn't feel quite as daunting, you know, when it's part of an almost $5 million portfolio."
[17:45]

He also recommends maximizing Roth conversions to address the "retirement ticking time bomb" in their traditional IRA, advocating for strategic withdrawals to stay within favorable tax brackets.

Tax Strategies and Roth Conversions

David and Rachel have begun converting their traditional IRA to a Roth IRA, initiating with a $100,000 conversion last year to manage their taxable income effectively:

David:
"We did initiate our first conversion. Last year, 100 grand."
[18:42]

Mark underscores the importance of continuing this strategy to utilize their current 24% tax bracket, potentially increasing conversions to optimize their tax situation:

Mark:
"You can definitely do another 100, 150. Do you work with a CPA or a tax preparer?"
[19:08]

They are working closely with their CPA to ensure they remain within their desired tax bracket, allowing their savings to grow tax-free in the Roth IRA.

Final Recommendations and Conclusion

Mark concludes by reassuring David and Rachel of their solid financial footing, encouraging them to enjoy their retirement without feeling pressured to make hasty decisions about purchasing a new home:

Mark:
"You guys are in good shape. Just have fun, enjoy it. Don't have to buy something. It's all good."
[22:07]

He emphasizes the importance of maintaining liquidity, diversifying investments, and continuing tax-efficient strategies to ensure long-term financial health.

Rachel:
"Okay. It seems extravagant for us."
[13:37]

Despite initial concerns, Mark's analysis offers a clear pathway for the couple to balance their lifestyle aspirations with prudent financial management, highlighting the value of personalized financial planning in retirement.

Notable Quotes

• Mark T. O'Connor at [05:29]:
  "We're going to convert it. But, Mark, what would you say to me, Jill, if I said to you, we're selling house number two..."

• David at [17:03]:
  "It's down to 800 now that we've chipped away at it."

• Mark T. O'Connor at [19:18]:
  "You're in the 24% bracket. I would be taking more money out."

• Rachel at [22:07]:
  "It seems extravagant for us."

Conclusion

This episode provides valuable insights into managing retirement finances, particularly for couples contemplating significant lifestyle changes. By addressing real-world scenarios, Jill and Mark offer actionable advice on investment diversification, tax strategies, and maintaining financial flexibility, making it an essential listen for anyone navigating the complexities of retirement spending.