Podcast Summary: Withdrawals in Retirement

Podcast Information:

• Title: Withdrawals in Retirement
• Host/Author: Audacy's Jill on Money with Jill Schlesinger
• Release Date: February 10, 2025

1. Episode Overview

In the episode titled "Withdrawals in Retirement," Jill Schlesinger, CFP®, delves into the often complex topic of managing retirement withdrawals. The discussion centers around a listener, Joy from Southern California, who seeks advice on optimizing her retirement income while mitigating risks associated with her investment portfolio.

2. Listener Call-In: Joy's Retirement Strategy

a. Joy's Financial Profile

Joy provides a comprehensive overview of her financial situation:

• Age: 68
• Retirement Duration: Retired since 2008
• Income Sources:
  • Stocks and Bonds: Primarily bonds, totaling approximately $900,000 in ETFs and $1,000,000 in stocks outside retirement accounts.
  • Retirement Accounts: $600,000 in pre-tax retirement accounts with minimal Roth funds.
• Real Estate Holdings: Owns two condos—one valued around $650,000 and the other at approximately $200,000, both mortgage-free.
• Cash Reserves: Holds about $500,000 in CDs amassed from an inheritance.
• Monthly Expenses: Approximately $5,000
• Social Security: Planning to claim at age 70, expecting around $3,700 monthly.

Notable Quote:

[04:02] Joy: "I am retired a long time now and I need income. I am debating should I be taking the income from my IRAs..."

b. Joy's Concerns

Joy is apprehensive about her current investment allocation:

• Current Allocation: 46% in stocks
• Desired Allocation: 30% in stocks to reduce risk

She is nervous about future market volatility and her ability to sustain her income without depleting her assets.

3. Jill’s Analysis and Advice

a. Evaluating Joy’s Current Strategy

Jill assesses Joy's financial standing, noting her substantial cash reserves and diversified investment portfolio. She reassures Joy, emphasizing that at 68, she is not "old" and has a solid foundation for her retirement.

Notable Quote:

[04:50] Jill Schlesinger: "You're not old. What are you talking about getting up there."

b. Recommendations on Asset Allocation

Jill advises Joy to avoid withdrawing from her stock and bond holdings to prevent triggering capital gains taxes, especially given Joy's low basis in stocks. Instead, she suggests utilizing the substantial cash reserves:

• Use Cash Reserves: Recommend living off the $500,000 in CDs for the next two years, reducing the need to tap into investment accounts.

• Adjust Retirement Account Allocation: Shift the retirement accounts to a less risky allocation (e.g., 60% bonds and 40% stocks or 70% bonds and 30% stocks) to decrease volatility without incurring taxes.

Notable Quote:

[10:03] Jill Schlesinger: "I think you should be living on the cash for the next two years."

c. Tax Considerations

Jill highlights the importance of tax-efficient strategies:

• Avoid Capital Gains: By not selling stocks, Joy can prevent significant taxable events.

• Qualified Charitable Distributions: Encourages Joy to consider donating directly from her retirement accounts to charities, which can provide tax deductions.

Notable Quote:

[16:08] Jill Schlesinger: "You can give money away on an annual basis... find some charities to try to actually give some of your money away and do it tax efficiently."

d. Utilizing Cash Reserves

Given Joy's half a million dollars in CDs:

• Liquidate CDs: Jill suggests breaking CDs as needed to cover expenses, leveraging the cash instead of pulling from investments.

• Manage Penalties: Typically, early withdrawal penalties from CDs are minimal and manageable compared to the tax implications of selling investments.

Notable Quote:

[10:30] Jill Schlesinger: "Break a cd, who cares? You got plenty of money, Mark."

e. Estate Planning and Charitable Giving

Jill advises Joy on estate planning:

• Update Will and Beneficiaries: Ensure that all assets, including condos and retirement accounts, have designated beneficiaries.

• Consider Trusts: For more complex estates, especially with multiple properties, establishing a trust might be beneficial.

• Charitable Donations: Utilize charitable giving strategies to provide for loved ones and philanthropic interests while optimizing tax benefits.

Notable Quote:

[16:16] Jill Schlesinger: "You should have a health care proxy. You know, you should have all that."

4. General Insights on Retirement Withdrawals and Asset Allocation

Throughout the discussion, Jill emphasizes key principles for managing retirement funds:

• Diversification: Maintaining a balanced portfolio to mitigate risks.

• Tax Efficiency: Strategically managing withdrawals to minimize tax liabilities.

• Liquidity Management: Leveraging cash reserves to reduce the need for liquidating investments during market downturns.

• Estate Planning: Ensuring that all assets are accounted for in estate plans to benefit heirs and charities effectively.

Notable Quote:

[18:04] Jill Schlesinger: "You've earned the ability most likely to reduce the risk. You curtail your upside, and hopefully, you make those big swings up and down, you make them a little less big."

5. Conclusion and Takeaways

Jill concludes the episode by reinforcing that Joy is in a strong financial position and has multiple strategies to ensure a stable and stress-free retirement:

• Leverage Cash Reserves: Use available cash to cover expenses, preserving investment accounts.

• Adjust Asset Allocation: Modify the retirement account investments to align with lower risk tolerance.

• Implement Estate Planning: Update wills and consider trusts to manage asset distribution effectively.

• Engage in Charitable Giving: Utilize tax-efficient strategies to support causes meaningful to Joy.

Notable Quote:

[13:41] Jill Schlesinger: "Joy to the world, babe. Joy, because you're good."

Jill encourages listeners to reach out with their financial concerns and highlights the importance of personalized financial planning to navigate retirement successfully.

Key Takeaways:

• Utilize Cash Reserves First: Reduce dependency on investment withdrawals by using liquid assets.
• Strategic Asset Allocation: Adjust investment portfolios in retirement accounts to match risk tolerance without incurring unnecessary taxes.
• Estate and Charitable Planning: Ensure proper estate planning and explore charitable giving for tax benefits and personal fulfillment.
• Seek Professional Advice: Personalized financial strategies are crucial for addressing unique retirement challenges.

For more personalized financial advice and strategies, listeners are encouraged to visit jillonmoney.com and engage with Jill Schlesinger through the show's various offerings, including live webinars and the weekly newsletter.