Don’t Earn Much, Am I on Track?

Summary

Episode Summary: “Don’t Earn Much, Am I on Track?”

Jill on Money with Jill Schlesinger
Host: Jill Schlesinger, CFP®
Episode Title: Don’t Earn Much, Am I on Track?
Release Date: July 17, 2025

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Introduction

In the July 17th episode of Jill on Money with Jill Schlesinger, host Jill delves into the financial planning concerns of individuals who may feel their earnings are insufficient for a secure retirement. Addressing listeners' questions with clarity and expertise, Jill offers actionable insights to help navigate the complexities of retirement planning, especially for those balancing multiple income streams and personal circumstances.

Listener Spotlight: Louis from Idaho

The episode centers around a phone call from Louis, a 54-year-old single individual with no children, who is contemplating retirement at the age of 59 and a half. Louis seeks assurance that his financial strategy is sound and whether he is on track to meet his retirement goals.

Louis's Financial Snapshot:

• Age: 54
• Marital Status: Single, no children
• Employment: Full-time job earning $60,000 annually
• Military Pension: $30,000 annually
• Total Annual Income: $90,000
• Retirement Accounts:
  • Thrift Savings Plan (TSP): $60,000 (Traditional)
  • Roth IRA: $300,000
• Cash Savings: $30,000 across high-yield savings, CDs, and regular savings
• Home Ownership: Owns a home worth $350,000 with no mortgage
• Additional Pension: Anticipates a state pension of $1,000 monthly
• Healthcare: Covered through military benefits post-retirement
• Social Security Plans: Intends to begin benefits at age 62, estimating $1,200 monthly
• Cost of Living: Approximately $2,000 per month

Detailed Discussion

Assessing Louis's Retirement Plan

Jill begins by reviewing Louis's current financial standing to evaluate his preparedness for retirement. She notes the significant advantage of having a stable military pension and a substantial Roth IRA, which collectively offer a robust income stream that exceeds his modest living expenses.

Jill's Observation:

“Louis, how much money do you think you need in terms of just meeting your expenses?” (05:23)

Louis's Response:

“Well, actually, my cost of living is very low here, being generous, about $2,000 a month.” (05:23)

Jill highlights the favorable ratio of income to expenses, emphasizing that Louis's military pension of $30,000 annually, coupled with his Social Security benefits, comfortably covers his living costs.

Evaluating Income Streams and Savings

Louis outlines his financial assets, including a $60,000 TSP and a $300,000 Roth IRA, alongside $30,000 in liquid savings. Jill commends his diversified savings strategy, noting that his home is paid off, eliminating mortgage obligations and further enhancing his financial security.

Jill's Insight:

“That's great. Amazing. Okay.” (04:19)

Healthcare and Social Security Considerations

Given Louis's health concerns, specifically being morbidly obese, Jill discusses the implications for his Social Security benefits. She advises that while the general recommendation is to delay Social Security until full retirement age to maximize benefits, Louis's health status may justify an earlier claim.

Jill's Recommendation:

“I generally, and Mark and I believe very wholeheartedly that if you are in good health...then claiming early can be a smarter decision now, theoretically, also in Lewis's case...” (05:50)

Strategic Withdrawal from Retirement Accounts

Jill provides nuanced advice on managing retirement withdrawals. She suggests that Louis should utilize his Thrift Savings Plan (TSP) before tapping into his Roth IRA, as the TSP funds are taxed distributions, allowing the Roth IRA to grow tax-free and remain intact for future needs or beneficiaries.

Specific Advice:

“Before you claim Social Security, don't use the Roth. Use the Thrift Savings Plan. That money hasn't been taxed yet. It’s going to have to come out eventually. Use that to fund any gap.” (08:11)

Conclusion and Takeaways

Jill concludes the discussion by affirming that Louis is well-positioned for a secure retirement. His multiple income streams, minimal expenses, and proactive financial planning underscore a sound retirement strategy. Jill emphasizes the importance of comprehensive planning and the benefits of having diverse financial resources.

Jill's Encouraging Words:

“You're in great shape, Louis. You really are.” (09:13)

She further motivates listeners who may feel uncertain about their financial plans to seek guidance, whether by consulting with financial experts or leveraging available resources to gain clarity and confidence in their retirement strategies.

Final Encouragement:

“Change your work, change your wealth, change your life. Thank you for listening. We'll talk to you Tomorrow.” (10:19)

Key Insights and Actionable Advice

1. Diversify Income Streams: Combining pensions, Social Security, and retirement accounts can provide a stable and sufficient income in retirement.
2. Prioritize Tax-Advantaged Accounts: Using taxable retirement savings like the TSP before tapping into Roth IRAs can optimize tax efficiency.
3. Assess Personal Health and Longevity: Health status can impact the timing of Social Security benefits and retirement planning decisions.
4. Maintain Low Expenses: Keeping living costs minimal enhances financial security and reduces the required retirement savings.
5. Plan for Contingencies: Having liquid savings and a paid-off home offers flexibility and security against unexpected financial challenges.

Final Thoughts

Louis's case serves as an exemplary model for individuals concerned about their retirement readiness, illustrating that even with a moderate income, strategic planning and prudent financial management can lead to a comfortable and secure retirement. Jill Schlesinger's expert guidance underscores the importance of personalized financial advice tailored to individual circumstances.

For listeners seeking personalized advice or to share their own financial questions, Jill encourages reaching out via the show's website, jillonmoney.com, ensuring that everyone has access to the support needed to make informed financial decisions.

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Notable Quotes:

• "You're in great shape, Louis. You really are." — Jill Schlesinger (09:13)
• "So, you're going to be good anyway." — Jill Schlesinger (07:28)
• "Before you claim Social Security, don't use the Roth. Use the Thrift Savings Plan." — Jill Schlesinger (08:11)

Transcript

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[Jill Schlesinger]

Welcome to the Jill on Money show. It's Thursday, July 17th and we are here trying to help you make better financial decisions. They don't have to be the best. To be clear, it's not like you are. You need to optimize your life. It's just that you need to understand what your options are and how different choices lead to different outcomes and then you make your decision and it doesn't. Again, it doesn't have to be the smartest financial thing. It can be partly emotional because we are emotional beings, right? So if you've got a question about something going on in your life and it does impact your money in some way, shape or form, why don't you get in touch with us? Go to jillonmoney.com, click the contact us button, which is in the upper right hand corner, write us a note and if you'd like to come on the air live, check the box and we'll do everything else. And when I say we, I mean Mark because he is the best. The best executive producer in the whole wide world. While you're on the website, don't forget to check out all of the free stuff. We've got the free weekly newsletter and the blog and resources. But if you feel like you want to spend a few bucks, you can plunk down 45 bucks for the next 12 months and be a subscriber to Jill on Money Live and access to quarterly live webinars. The back catalog of those webinars, bonus audio and Video content, it's all living at the Jill on Money live subscription service behind the paywall. So it's a low paywall you can step over. You don't have to jump over it. So you can check that out. Okay. Today we are joined by Lewis, who is in Idaho. So, Louis, hello. Welcome to the program. What can we do for you?

[Louis]

Hello, Jill and Mark. Thank you for having me.

[Jill Schlesinger]

Of course. What's happening?

[Louis]

Well, I'm one of those do it yourselfers, and I just want to know that I'm thinking inside the box or I'm doing the right thing.

[Jill Schlesinger]

Okay, sounds good. What. What is the thing that we are contemplating now?

[Louis]

Well, my plan is to retire at 59 and a half.

[Jill Schlesinger]

Okay.

[Louis]

And I just want to make sure my numbers are going to work for me at that time.

[Jill Schlesinger]

Okay. Louis, how old are you?

[Louis]

54.

[Jill Schlesinger]

Are you married or singled or partnered or anything like that?

[Louis]

Single, no kids.

[Jill Schlesinger]

Makes the planning a lot easier, gotta say. Okay, and you're still working full time right now?

[Louis]

Yes.

[Jill Schlesinger]

How much do you earn?

[Louis]

Well, altogether, I earn about 90,000 a year.

[Jill Schlesinger]

Okay, what do you mean all together?

[Louis]

Well, I make about 60,000 on my job right now. And then I have a military pension. I make about 30,000.

[Jill Schlesinger]

Wow. All right, so. And that military pension is for life, correct? Okay, I got it. And tell us about how you have saved for this five and a half years from now. What's piled in the retirement accounts and non retirement accounts. What are you doing?

[Louis]

I don't have a lot. I have a little tsp from when I was in the military of about 60,000.

[Jill Schlesinger]

Okay.

[Louis]

And then I have a Roth IRA with about 300,000.

[Jill Schlesinger]

That's great. Amazing. Okay. And the TSP is a traditional, right?

[Louis]

Correct.

[Jill Schlesinger]

Okay. What about cash? Just money on hand?

[Louis]

I have about 30,000, and that's combined with the high yield savings and some CDs and regular savings.

[Jill Schlesinger]

Great. And what about any brokerage account? Any money that is invested that's not in retirement?

[Louis]

No, no brokerage.

[Jill Schlesinger]

Okay. How about your house? Do you own it? Do you rent? What's going on?

[Louis]

I own my home. It's worth about 350,000.

[Jill Schlesinger]

Okay. Is there a mortgage?

[Louis]

Still no mortgage.

[Jill Schlesinger]

Oh, that's good. And just one home? Rental property or vacation home or anything like that?

[Louis]

None of those.

[Jill Schlesinger]

Okay. Aging parents that you have to worry about or siblings or anyone you have to take care of?

[Louis]

No one I have to take care of. My parents are retired and doing fine on their own.

[Jill Schlesinger]

And so here's the big question. How much money do you think you need in terms of just meeting your expenses?

[Louis]

Well, actually, my cost of living is very low here, being generous, about $2,000 a month.

[Jill Schlesinger]

So. Wait, you mean you could potentially almost live on just the military pension?

[Louis]

Yes.

[Jill Schlesinger]

What are you waiting for? I mean. Oh, my goodness gracious. So you're going to have the military pension, but then you'll also. And you have health care. Right. So you retired 59 and a half, and now you have health care through the military.

[Louis]

Yes.

[Jill Schlesinger]

Okay, so your health care is taken care of. You've got the pension. At some point, you'll claim Social Security. You'll get some amount of money for that. What's your Social Security benefit look like?

[Louis]

Well, that's one of the things that I know might be a little contention is my plan was to start drawing at 62.

[Jill Schlesinger]

And the reason why are you in bad health?

[Louis]

Well, my doctors say I'm morbidly obese. And, you know, you don't hear about too many obese people living into their old age.

[Jill Schlesinger]

Okay, fair enough. What's the 62 number?

[Louis]

62 is about $1,200 a month.

[Jill Schlesinger]

Okay, so I want everybody hearing this. I generally, and Mark and I believe very wholeheartedly that if you are in good health or if somebody is relying on you for your Social Security benefit, it is better to wait until your full retirement age. But as you hear Louis say this, that with a healthcare issue, and we've had this. We've had people who are cancer survivors who say, look, I'm not going to live till 80 years old. It's just highly unlikely. Then claiming early can be a smarter decision now, theoretically, also in Lewis's case, the $1,200 a month plus the $30,000 of the military pension, these two pieces together more than cover his needs. Is there another pension, Louis, on the horizon, or is that it?

[Louis]

Yes. I work for the state, so I'll have another pension.

[Jill Schlesinger]

Oh, my gosh. What. What will that be?

[Louis]

That's going to be only about $1,000 a month. And these numbers I'm giving you are after tax.

[Jill Schlesinger]

Okay, then you're in fantastic shape then. I'm not. I don't think there's anything to worry about at all. And is there some reason. I mean, I'm going to ask you in this funny way, like, is there any reason that you should wait till 59 and a half? Is there. Should we go earlier? Does. Does your pension, that thousand dollars a month require you to wait till you're 59 and a half?

[Louis]

Well, I was going to plan on taking some out of my Roth IRA at that time.

[Jill Schlesinger]

Yeah.

[Louis]

And between the Roth ira, the military pension, and then my second pension, and I should be good. And then at 62, start drawing my Social Security.

[Jill Schlesinger]

Yeah, I think you're going to be good anyway. Can I make one little extra? Just a note?

[Louis]

Yes, please.

[Jill Schlesinger]

Before you claim Social Security, don't use the Roth. Use the Thrift Savings Plan. That money hasn't been taxed yet. It's going to have to come out eventually. Use that to fund any gap. Okay?

[Louis]

Okay.

[Jill Schlesinger]

Use that amount. Don't even touch the Roth. But if you want. You want to take a few thousand dollars, you know, even if it's like a thousand, if you want to take $2,000 a month out of the Thrift Savings Plan, you know, at age from 59 and a half to 62, use that and get the money out, pay the tax on it, and then you should be good to go. Absolutely. Now, because you don't have any heirs, who's going to be the beneficiary of this Roth account?

[Louis]

Well, right now it's my parents, if they're still alive. And if they're passed away, it'll go to my brother and my niece and nephew.

[Jill Schlesinger]

Okay, great. So you have all those documents that say that, right?

[Louis]

Yes, I do have a will power, attorney and health care proxy.

[Jill Schlesinger]

Okay. You're in great shape. And so the funny thing is that, like, you sort of came on saying, like, well, I don't have a lot of money, but here's the key. You have plenty of money relative to the expenses that you have. And even if those expenses go up over time just because of inflation, you have plenty of money to cover your needs. So as a do it yourselfer, you're doing great. You're doing great all on your own. So well done, man.

[Louis]

That's good to hear.

[Jill Schlesinger]

Yeah. Yeah, absolutely. I don't have a lot of money. That $30,000 a year pension is like having, what, $800,000 saved? Oh, yeah. And I think that you also take for granted that you have that pension. You've got your health care covered. You know, it's a much more secure life to have those streams of income plus having your health care coverage. My goodness, you're in great shape, Louis. You really are. And I want to. I thought that. I thought all the idiots from California moved to Idaho and drove up the cost of living, but evidently you're doing just fine, man.

[Louis]

Oh, that's great to hear. Thank you so much.

[Jill Schlesinger]

Of course, of course. Hey, if you are like Louis and you're like, oh, I don't know whether to claim early, maybe it does make sense. Or you're just thinking about the fact that you've been on your own, managing your own life and doing what you think is an okay job. But you want another set of ears and eyes on the situation. Get in touch with us. Go to jillonmoney.com, click the contact Us button, write us a note, and if you want to come on the air live, just check that box. Mark will do everything else you can subscribe to us on the Odyssey app or wherever you find your favorite podcasts. Please leave us a rating and review. Wherever you listen and put your hands metaphorically on someone's back or reach out to somebody, just be connected. It's good for your soul. I promise you. Change your work, change your wealth, change your life. Thank you for listening. We'll talk to you to Tomorrow.

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[Tobin Heath]

I'm Kristen Press. And I'm Tobin Heath. We're World cup winners, Olympians and the hosts of the Recap show. Every week we sit down with the icons, disruptors and game changers on the field and beyond it to talk victories, heartbreaks and everything in between. We've built a space where athletes, change makers and people creating the future of women's sports can show up and show off as their full, unapologetic selves. Follow and listen to the Recap show wherever you get your podcasts.