I am 53 years old, a registered nurse and plan to retire at 58. I am married, my wife is two years older than me and plans to retire at 62. We have a good marriage and friendship. We have three grown children. I only have $300,000 in my 401(k) and not in aggressive mode.
My job at a prestigious hospital will give me more or less $700,000 in pension from 26 years of service. I plan to take Social Security at age 62. When I was younger in my 20’s and 40’s I never planned to retire but illness prevented me (my knee is causing problems that I can’t walk for long periods of time.. I had two minor surgeries and didn’t get better).
In my situation I think it is possible. I plan to live a simple life. I plan to add an additional $1000-$2000 per year to my mortgage.
Do you think my money will be enough? I’m so ashamed that I didn’t prepare well enough. I don’t have any savings or cash. I was living paycheck to paycheck because my wife and I were careless with our spending. We have no debt. I have six cars and plan to limit them to two in the future. And sometimes it annoys me that 5-6 years until retirement is so close, and I’m still young. I started working when I was 22 years old.
What is the best chimney plangyears? In the next 5-6 years I don’t want to open my eyes because I don’t think I’m ready for the next chapter of my life. Thank you.
Mr. Miracle Worker
Look: We’re 58, have $1.3M in savings and two homes, but ‘I’d give myself a B-‘ on retirement planning
Dear Mr. Wonderman,
First, you are not alone. Many Americans are surprised to find that they have not prepared as well as they hoped for retirement when they finally got ready to quit. And having a medical condition certainly doesn’t help the situation.
The good news is that you have time, especially if you both plan to work for another five to seven years. You also have a stable pension, which is something many Americans these days can’t count on. So you’re not as bad as you think.
The bad news is that you’ll probably have to make some realistic assumptions about what your retirement will look like. If you lived mostly paycheck to paycheck during your working years, that may continue to be felt after you retire.
“If his assets are all the money he has to draw from, he’s probably going to retire with less income than he’s making right now,” said Brent Ford, partner and investment adviser at Benefit Wealth Partners.
Think very carefully about the type of income you’ll be receiving until you start applying for Social Security at age 62. If you’re retiring and your wife is still working, you may want to try and rely solely on her income instead of dipping into your 401(k) so the money there continues to grow over time. It’s hard to say how long someone will live, but you should plan to live at least a few more decades, and you’ll need all the savings you have to last that long.
For most people, filling that income gap comes down to work part-time work, Ford said. Is this possible for you? Or do you have another hobby or passion that could potentially earn you money while you wait to claim Social Security?
Whether you will be able to live a comfortable and simple lifestyle after retirement depends largely on how you define it. Estimate what income you’re bringing in now and compare it to what you’ll receive from account withdrawals and Social Security when the time comes. Also, make realistic assumptions about how much everything will cost after you retire—your housing and utility bills, groceries, healthcare, taxes and some of the fun stuff. You have worked all these years, you and your wife deserve to enjoy this next chapter.
Here’s one way to do that: First, try using an annual withdrawal rate of 3% for your grades. In this scenario, if you have $1 million in retirement assets, you’ll withdraw about $30,000 per year, or $2,500 per month. Then see how much you can expect to receive from Social Security. You can do this by doing account on the Social Security Administration website. You’ll be able to view your work and earnings history (which is important – your benefits are based on that, and you want it to be accurate), and you’ll also get a forecast of your benefits at different application ages.
Add these numbers together and see what you get. How does that compare to the amount of money you’re putting in now, and will it cover the bills and then some for the future?
One of the benefits of your situation is that you both seem to be living within your means, even if you’re not happy with how you’ve saved, Ford said. “We have to try to meet their pre-retirement net income or the amount of money that is deposited in the bank every two weeks,” he said. “If we can achieve the same livable wages on a monthly basis, it makes sense that they should be able to pay off the debt they need and continue to achieve a standard of living close to their own.”
He has a few other suggestions, such as not making extra payments on the house, especially if you have a low interest rate. If you’re in a position to pay the mortgage, which it looks like you are, just keep doing what you’re doing and stash away any extra cash for your future. The equity in your house is important, but that money becomes illiquid when you put it toward your mortgage, and you may want to focus on assets that you can easily use. One important account you’ll need for now and after retirement is an emergency fund.
See also: I am retired, my wife is not – how do we pay off our $60,000 mortgage before she retires?
As for your cars, now might be a good time to sell. The current auto economy is a seller’s market, Ford said, and you may be able to sell them for a higher price now than in a few years when interest rates jump and supply chain issues are less of an issue.
Also consider reviewing your 401(k) asset allocation. You said you haven’t invested aggressively, and there could be a million reasons for that, but this is an “awkward” time to be too conservative, Ford said. With historically low interest rates, bond values aren’t too high, which means if you have a lot invested in bonds, they aren’t doing too well for you. Inflation doesn’t help either, because as your values fall, so does your purchasing power. If you’ve tuned into the news at all, you’ve probably seen that the stock market has been hit hard lately, what with inflation and the war between Ukraine and Russia, but you may want to find a financial advisor who can help you make the best decision. investment strategy so your money really works for you.
I want to talk a little bit about your cost concerns. Being aware of your spending habits and how it affects your savings and monthly budget is actually a very good thing, even if you’re not very happy with yourself right now. And it’s something that can be fixed without completely depriving yourself of the joys in life.
Check out the MarketWatch column “Retirement Hacks” for practical advice on your own retirement savings journey
The key is not to go too fast in trying to change your ways, said Larry Luxenberg, a certified financial planner and principal at Lexington Avenue Capital Management. “Trying to get too big at once is a recipe for failure,” he said.
Money is a very personal topic and everyone approaches it differently based on how they view it, which may be a result of how they were raised or what they saw happen to their parents, their grandparents or their peers during major financial events (eg the housing crisis of 2008). Savers may always be reluctant to spend, and spenders may have difficulty fighting the urge to brag, but small, meaningful changes are possible.
To get a better idea of how good or bad your spending is, try it its tracking. You can do this by writing down everything you spend in a notebook or spreadsheet, or use an app like Mint that categorizes your expenses for you. Maybe do it for a month or two and see what you find. Some people print out their credit and debit card statements and use a highlighter to look at their spending.
“It’s important to approach this process with curiosity, not judgment,” said Laura Lee Thompson, a certified financial planner at GWN Securities. “It helps answer the questions: Is the way you spend your money aligned with your values? After that, is there anything that can be eliminated – or can you find a cheaper way to get it?”
You might find that your cable or cell phone bills would be cheaper with another provider, or that you’ve been paying for a magazine subscription you haven’t looked at in years. “The process can be empowering as it helps the retiree become more conscious and aware of their spending,” Thompson said.
Good luck!
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