We’re in our late 50s and have retired with lower than $1 million: ‘Did I bounce the gun?’


I saved $ 540,000 and my wife has $ 250,000 in retirement savings. We also have $ 60,000 in the bank. We decided to retire early (I’m 58 and she is 57). The only debt we owe is my $ 450 a month truck and $ 1,300 a month insurance. Our budget so far is around $ 3,200 a month (since I retired at the end of June). That brings us around $ 38,400 for a year.

Next year when I hit 59½ (late October) I plan to withdraw $ 4,000 a month from my retirement fund. Did I skip the gun when I retired?

Dear Reader,

To be completely honest, it’s hard to tell if you retired too early. Even if you have indicated how much your retirement savings are and what your annual budget is, you may not have considered all possible expenses or are considering future expenses as well. And the fact that you are questioning this suggests that you may think you retired too early.

Plus – and not to be a downer, since this is actually a good thing – people live longer, which means you have to hold your money longer too. You can live well into your 90s or beyond and your net worth must go that far.

That being said, I have some pointers for you to use to determine if you “jumped the gun”. And I just want to note that even if you retired too early, there is no need to panic – the fact that you are so carefully considering your annual expenses and still considering your situation even after you retire is important.

Budgets aren’t very sexy, but you’ve already realized the importance of knowing whether your retirement is safe. I’m sure the $ 3,200 a month figure includes your truck and insurance, but does it include any discretionary expenses if you and your wife want to drive into town, or all groceries and utilities? Does it compare to your early retirement budget? And what about taxes and inflation on everything under the sun, including health care? In an emergency, is there room to maneuver so that you don’t have to access your bank account or withdraw even more from your pension accounts? You will likely need to see home repairs or replace your cars while you are still alive.

See: I’ll have $ 5 million to retire when I sell my dental office next year – but my wife and kids don’t want me to retire

You didn’t specify if that $ 15,600 annual insurance covers auto, home, and health insurance, but make sure you have all three. Health care is extremely important, especially if you are 65 years old and waiting for Medicare eligibility for each of you. You may also want to think about how you can fund long-term care, which includes nursing homes or domestic help. These bills can easily amass and use up retirees’ hard earned savings.

Do not miss: Medicare isn’t enough – why so many Americans over 65 can’t afford medical care

Along with a budget, go deep into your spending and see where your money is going month after month or year after year. What you spend your money on today may not be what you spend your money on in a year or five, and probably not in 10 or 20. B. Subscriptions to streaming services) or are currently spending a little too much (like clothing). Are you trying to figure out what spending you might have in a year, five, or ten years time – does it fit into your current spending estimates and budget? This simple process would “help them more precisely determine whether or not they will succeed,” said Scott McLeod, a certified financial planner and president of Brown Financial Advisory.

Need more actionable tips for your retirement planning journey? Read MarketWatch’s Pension hacks pillar

There is a lot of discussion about the right rate of return on savings and investments if you want them to last for the rest of your life. The rule of thumb used to be 4%, but that has become highly controversial in recent years. The goal, ideally, is to take as little as possible of these accounts so they can keep growing as they age – that way they don’t get wiped out in your lifetime. Your current annual spending of $ 38,400 equates to a 4.9% payout rate from your retirement accounts alone – but taking in $ 4,000 per month would be a little over 6%. Can you reduce these annual expenses, at least until social security kicks in? Or are there other sources of income that you can consider until you apply for Social Security?

I would like to go back briefly to inflation. One of the myriad reasons it’s important to keep your retirement assets intact for as long as possible is that, with reasonable asset allocation, investments are likely to outperform inflation.

“Over long periods of time, inflation tends to undermine purchasing power,” said Ashton Lawrence, certified financial planner and partner at Goldfinch Wealth Management. “An effective retirement investment strategy must include growth, alternative investments, and income generating assets to protect against the corrosive effects of inflation.”

Review your portfolios and their investment mix. Many people have been amazed at the returns they have seen over the past decade thanks to a rising stock market, but there are no guarantees that it will stay that way. You need to be prepared for declines so that they don’t consume your savings. You can speak to a professional at the companies that manage your retirement savings about your portfolios.

If you haven’t already, create an account with the Social Security Administration. There you can check that your overall employment and earnings history is correct, and you can get an idea of ​​how much your retirement pension will be depending on when you start applying (be it early at 62 um). Your full retirement age or postponed to 70 years). This number gives you an idea of ​​how much less to take out of your retirement savings.

See also: I’m 56, my husband is 57 and retired. We saved about $ 750,000 and a military pension. I’m tired of working in America. Can I retire in three years?

Remember, the sooner you claim before your full retirement age, the less you will get your full benefit, and that is a permanent cut. For example, joining social security at age 62 would mean about a 30% reduction in lifelong benefits, said David Haas, a certified financial planner and owner of Cereus Financial Advisors. “That is a lot and it will be very meaningful for the couple.” The way you claim your social security benefits also affects what your wife gets from hers – a cut in your benefits is a cut in her benefits if she becomes a widow.

Again, I cannot say for sure whether you retired too early. If this wasn’t the answer you were hoping for, consider working with a qualified financial planner to go through your numbers in more detail. And just because you’re already retired doesn’t mean you won’t be able to make any more money. If you left because you had to or just didn’t like what you did anymore, consider doing a part-time or freelance job where you can choose your own hours and do what makes you happy. This extra cash means that there is less withdrawal from your retirement accounts and your wealth can continue to grow.

“The good news is that the decision to retire is not an absolute one,” said Haas. “This couple could still get jobs, even benefits jobs. They can move to other jobs that they might like better, even with lower salaries. The benefits can solve the health problem up to the age of 65 and by avoiding early withdrawal of social security they can secure higher lifelong benefits. “

Reader: Do you have any suggestions for this reader? Add them in the comments below.

Do you have a question about your own retirement provision? Send us an email at HelpMeRetire@marketwatch.com.

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