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Dear MarketWatch,
I’m 66 years and 4 months old.
My Social Security payments start next month at $3,300 a month. I’m currently working part-time, three days per week, as a professional engineer for $95/hour for my long-time regular full-time employer of 28 years. (I want to leave this position ASAP or sooner.)
I currently have about $1.6 million in retirement accounts. My wife (60 years old) has about $600,000 in various regular and retirement accounts. We have a 16-year-old daughter at home attending high school and college in a dual enrollment program. If she stays with the program she’ll have her bachelors at 19. While in high school she takes college classes and we pay no tuition while she’s in high school.
Our monthly expenses are about $9,000-10,000 per month including health insurance for my wife and daughter. We own our modest single-family home with no mortgage. Taxes and insurance are currently about $6,000 per year. We currently have no debt, aside from an American Express and Visa that we pay off every month.
I’m on Medicare. I get walloped for a double premium for part “B” because I’m considered a high-wage earner. The two of us are in reasonable/normal health for a couple of old farts.
I want to throw in the towel on May 5 and play more golf. Can we do it?
See: We’re in our 60s and have lost $250,000 in our 401(k) plans — can we still retire?
Dear reader,
Congratulations on saving so much for your retirement. That’s a wonderful accomplishment alone!
Because I don’t have all of your financials in front of me, nor am I a financial planner building a comprehensive plan for your retirement, I can’t say for certain if you can retire. However, it does obviously sound like you’re doing well and that you’ve been planning. Instead of telling you to go for it or not, I’m going to offer a few things to consider before you pick up your mid irons.
More than $2 million (you and your wife’s savings combined) is a lot of money — I’m not suggesting otherwise — but when it comes to retirement, it doesn’t mean you’re automatically good to go once you hit the million-dollar mark. There are so many factors, some of which you mentioned like healthcare and debt, as well as saving and spending.
I harp on spending analysis a lot but to me, it’s so crucial when deciding if and how to retire. Why? Because this is something that, for the most part, you can control. That’s a pretty powerful feeling.
So my first suggestion: Review those AMEX and Visa statements, as well as money that comes out of any checking accounts, and make sure that you’re spending the way you want and need to spend. When you retire, you won’t have that part-time income anymore, and while you may be itching to get on the green, you’ll also be stressing out if you don’t have enough green in a decade or two. You’ve told me what your Social Security benefits will be and what your average monthly spending is, but I would suggest really poring over your spending and assessing how comfortable you’ll be if you continue to spend that way when you retire.
Check out MarketWatch’s column “Retirement Hacks” for actionable pieces of advice for your own retirement savings journey
There’s a second part to that analysis, which is how much money you intend to withdraw from your retirement accounts. I’m not sure if your wife is still working, but regardless, the more money you take out of those accounts every month, the less there is available to grow over time. Taxes also play a part here, depending on if you’re withdrawing from a traditional or Roth-style account. Those taxes could take a larger chunk out of your spending money, as well as potentially give you a heftier tax bill come tax time.
Think about this when your daughter goes off to college, too. She may not be there long if she continues with her hybrid high school and college courses (which is wonderful, by the way), but do you plan to pay for her tuition, and if so, where is that money coming from? Advisers tell me all the time: you can take a loan for college, but you can’t take one for retirement. It might be beneficial to have a separate savings account earmarked for education, if you don’t already have one of those or some sort of college savings account like a 529 plan, so that you’re not draining your retirement account for a tuition bill.
One last bit about that — plan for the unexpected. What will you do if a major expense arises? Will that money also come from a retirement account, or do you have an emergency account set aside to cover it? Saving a lot of money for retirement is amazing, but it’s not the only task individuals need to manage… coming up with a Plan B, and maybe even a Plan C and Plan D, is necessary too.
Also see: Are you planning for retirement all wrong?
Next, before retiring, check the way your money is invested. What’s your asset allocation like, and does it need to change? Don’t make alterations just to make them — and definitely don’t make them just because you read the markets weren’t doing so hot that day — but keep in mind this money does need to grow for decades to support you and your wife, so you will need to strike that balance. Reaching out to a qualified financial professional, such as a certified financial planner, can help you make sense of what the best investment mix is, but at the least, log in to your account or call up the firm where your accounts are located and check that asset allocation.
Also, you mentioned you’re already on Medicare. I would suggest taking the time now — well before open enrollment — to review your current and expected future health expenses, and then assess how helpful your current coverage is for you. I know you mentioned you and your wife are in reasonable health, but if there are any operations or services you think you may need next year, it’s better to start reviewing what plans provide you the best coverage for your situation so that you’re not paying more out of pocket than necessary. This is an exercise you don’t need to do immediately, but it will certainly help you feel more prepared come the end of the year when it’s time to keep your current plan or switch for something else.
As an aside, you’ll eventually pay less in Medicare Part B premiums when your modified adjusted gross income declines. Those premiums are based on your tax returns from two years prior.
You sound like you are on the right track, which is wonderful. I would just caution you to tie up a few loose ends before resigning so that you can tee up without worrying.
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Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com
