How much to retire in late 50's?
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Anonymous
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We are in our late 50's. Got caught in the recession with two kids in college when the stock market tanked, or we might be better positioned by now.
Current annual spending is about $90,000 - 100,000 (the rest of the net is saved/invested). We could cut travel and eating out, but I understand those things increase in early retirement. No debt and a modest home. No defined benefit pension/contribute the max including catch-up to 401K and IRAs. Health insurance through employer: currently pay $0 in health insurance premiums with a high deductible policy and ability to fund HSA in pre-tax dollars. Retirement savings (401K/IRAs): ~$3,000,000 Taxable brokerage accounts: ~ $175,000 (all stock) Cash: ~$675,000 Total: $3,850,000 Notes: *Cash is high partly because we're afraid of a recession starting as we go into retirement. I've been chasing rising CD/IMM rates. *HHI ~250K on one income, but DH would like to retire now. I've been out of the job market too long to get back in the game at this point. *Health insurance is a big concern. Checking the exchanges, it seems it would cost $30000-$40,000 per year for two of us this year. And the costs are out of control from year to year. * We own no rentals and DH has heard enough from colleagues and relatives to be discouraged from acquiring one. * No annuitiies as yet. I've heard variable ones have high commission fees and the fixed ones I have seen have next to nothing in cash flow because of the interest rates built into the products. *LLC options are also a source of stress. To buy or not buy? Financial planner has mentioned single premium life insurance policies and QLACs as alternative to traditional policies. *Financial planner suggests that the best "plan" is for DH to keep working a few more years. Duh! *Once we add in health care (especially pre-Medicare), it looks like she might be correct (140,000 /.03= $4,666,667) or not (140,000/.04 = $3,500,000) How much do we really need, given our spending habits, to be sure we don't outlive our money? (We're expecting to live into our 80's but planning for mid-90's to be safe) How do you get comfortable with the financial planner types who benefit whenever you add or move money? I feel like my naivete/conservatism/distrust are paralyzing our finances. |
Anonymous
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use firecalc.com to test a bunch of your options/scenarios.
Make sure you figure in 250-300k for a couple for the estimated lifetime healthcare expenses (doesn't include cost of Medicare, pre-Medicare age health insurance or long term care costs). Have a plan for health insurance prior to Medicare, and remember that taxes are unusually low now and will likely change. |
Anonymous
| How could this not be enough money? Please. Just find an online calculator. I just ran one assuming you're 58 and plan to retire at 65, earn $100k per year and want 90k per year in income. It said you'll have $5.8M when you retire, you can live to 100 and still die with $11M in the bank. Shut up. |
Anonymous
This is a very aggressive post for someone who didn't read the OP. |
Anonymous
| I'd also suggest spending some time on www.bogleheads.org , I found it tremendously educational and has really helped me determine what our goals are and how to achieve them. One of the primary tenets there is that you can manage your own money and a financial advisor, particularly one who is "managing" your money is not needed. The typical recommendation is to meet with a fee-only advisor if you need a road map, etc. but not someone who benefits financially from you. |
Anonymous
Jealous. |
Anonymous
OP here: Thanks for the suggestions and links to those who provided them. For the PP: DH would like to retire soon, not at 65, so we'll need a good chunk for health care/premiums, and annual expenses will be much higher than now, at least for a few years. Even when I plug in 65, it doesn't look like we're sitting quite so pretty. |
Anonymous
Not just the op, the actual title. The question was about retiring in their late 50's, not at 65. |
Anonymous
So is the main issue that he's not happy with his job right now? Might there be opportunities to downshift or find another company with a better environment, even if it means a paycut? If he got health insurance and some kind of salary, it sounds like you'd be okay. You don't really need to add to your retirement accounts. Is the house paid off? |
Anonymous
OP again: Yes, paid off house with about $500K in equity, but we're staying put until we can't manage the stairs. No debt. DH is too burned out and working too many hours now to look for anything new. He'd have to quit first, and I'm not sure how the job market treats 59 year olds who are unemployed, even in this "hot" market. But you are correct. If we get health care and enough for our actual expenditures, we'd be ok financially. I think going from 70 hours a week to none would be a shock to his system --no structure after all those years and everyone wanting your time. It was for me, but I had kids at home and volunteered a lot. |
Anonymous
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Financial planner is right, working a few more years is the best option. OP, do you have any skills or connections through your volunteering to get a side gig part time?
Are you paying for college for your kids? If so, what share of your annual expenditure is college tuition? What do you spend 100K on, if the house is paid off and there is no health care premiums. 100K is 8.3K per MONTH. Do you travel by private jet several times a year or smth? If DH wants to retire and you already don't work, the responsible thing would be to cut expenses way, way back, especially since you'll have to buy health insurance. |
Anonymous
| OP - can you get a job for the healthcare? Maybe even something retail? That is the hardest part of your scenario. |
Anonymous
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Ok, so let's say you have health insurance/expenses costs 50k/year (aiming high here to account for volatility) for the next 6 years until you're 65 and qualify for Medicare. 300k. Set that aside.
If you consider 3,300,000 as the remainder of your portfolio, and your annual spending not including that to be 120K (to account for taxes) firecalc suggests that you have greater than 93% chance of sustaining that until you're 100+ retiring now. That leaves a 200k emergency fund to cover whatever else. So it seems to me that you *could* do this--but the numbers are close enough that you want to do a careful analysis and/or be willing to reduce spending if you're off in your accounting. What are your actual taxes? What will the cost of Medicare be when you retire? Also, in the early years of retirement annual spending on travel/eating out etc might increase, but that tends to trickle off in later years. I would say to your financial planner, this is what we want to do--how can we make it work rather than 'can we do this?'. Because the safest answer--and the one that often gives the planner more money--is to wait--but it's not always best for life. Your listing of worries seemed to be pretty fear-filled rather than totally rational. I do think your husband who has to put in the grueling hours gets to decide that he doesn't want to do it anymore--(I couldn't tell from your post if you're mainly the one with the "security" concerns). Both of you could look for easier work options--even though you've been out of the workforce--you should try in earnest rather than just assuming he's the one to keep working if the numbers don't work. If he needs to stop, and you want more financial security, you can look for work. You just need something that will give you health insurance for another year or so. Also, can he discreetly review phased retirement options at his workplace--or ask directly once he's sure he's going to retire? Some people negotiate staying on the health insurance rolls via consulting or the like and many places have more formal slow reductions. |
Anonymous
| My DH retired from full time at 60 but a year before he retired he started working on a plan to work part time with his company at a salary that would cover our overhead, or about 50% of his old salary. This enabled him to maintain his health insurance before going on Medicare at 65. During that period our assets were able to grow untouched and when he reached 65 his pension kicked in. He is now fully retired....or almost....and we won't collect SS until we can get the maximum amount at around age 70. With pensions and SS we should be fine living on 4-5% of our net worth which seems to be the magic number. As we have eased into retirement we did see our spending increase due to more travel and leisure spending but we did factor it in upfront. |
Anonymous
| I don't think he should retire until you have a very good handle on your health care premium situation. We all want to retire today/soon but sometimes you just can't/shouldn't. |