We’re 58, saved $ 1.3 million and two homes, but ‘I’d give myself a B- grade’ for retirement planning

My wife and I are 58 years old. We have four grown children who are alone with good jobs. All of their undergraduate college has been paid for. (A girl has graduate loans for her graduate degree, which she pays.) We consider ourselves lucky and own a house on a lake in Massachusetts and a condo in Florida. In the first years of our marriage, my wife stayed at home with the children. Planning for retirement for both of us has been my responsibility. I would give myself a B- grade with what I did. We currently have $ 1.1 million in a 401 (k), $ 150,000 in IRAs, $ 23,000 in an HSA and $ 55,000 in an emergency fund. We each have a $ 250,000 life insurance policy with a long term care rider in addition to a $ 400,000 term policy for me on the job.

Our home has a equity of around $ 500,000 and our condo is paid off and worth $ 450,000. We own both cars and our mortgage is our only outstanding loan. We have a balance of $ 210,000 and plan to pay it off before we turn 65.

I am continually worried about when I will be able to retire and that I will run out of money during retirement. When we get together with friends and family, they always ask me when I am going to retire and ask me “aren’t you retired yet?” “

I currently have a salary of around $ 200,000 and my wife works part time for some pocket money. I don’t mind working currently, but at some point I would like to quit corporate life. I think we can live well on around $ 10,000 a month.

I don’t feel like I can retire at this point and I think I still have 6 or 7 years before I can. How should I respond to friends and family who think I should be retired by now?

Thanks for listening,

Nervous bill

See: I am 53 years old, my wife is 54 years old. Our $ 1.4 million retirement nest egg is made up of 100% stocks and crypto. What should I do now for retirement?

Dear Bill Nervous,

First of all, you definitely don’t deserve a B-. You’ve worked hard your entire life, you and your family are living comfortably, and you’ve saved over $ 1.3 million. It’s incredible.

As for your friends and family asking questions, we’ll get to that later. I would like to start with a few ways to improve the security of your future retirement.

You mentioned that you need about $ 10,000 per month. It is probably doable, but you should consider how you plan to make up that amount each month, what sources you will get that $ 10,000 from, and whether that takes into account any expenses you will need. Think about all the expenses you might have in retirement – not just housing, utilities, groceries, and some recreation, but health care as well. Health care is one of the biggest bills for retired Americans – a couple retiring at 65 can expect to spend $ 300,000 in retirement on health care alone, and it doesn’t. does not include long-term care, which is also quite expensive (think of the retirement home, renovation of the aging home, a caregiver, etc.). If you were to retire before age 65, you would need to declare your health insurance before becoming eligible for Medicare.

Besides all the necessities, this is also the time for you to have fun, which could mean traveling, dining out, or joining local sports or arts institutions. Factor in price inflation for all of these things.

“Variable expenses are a major concern – the cost of a vehicle, the cost of travel, the cost of clothing, electronics, food have all increased massively,” said Dan Sudit, partner of Crewe Advisors. You don’t just think about prices today or five years from now, but also 10 and 20 years from now, when you will still be retired.

I will note that a financial planner can help you figure out how much money per month makes sense, as well as calculate inflation and investment returns to show you how your portfolio may be able to support your retirement expenses.

As for your retirement income, you will also benefit from Social Security, as you know. But think carefully before you start to claim. Taking benefits from full retirement age (also known as FRA) will give you 100% of the benefits you owe, whereas at any time before this will result in a permanent reduction in your benefits complete. If you were to delay your FRA claim until age 70, your monthly checks would even earn you more money. Make a list of all the sources of retirement income and start to strategize how you will use your monthly amount, including taxes and investment growth.

“Creating a distribution plan is very important when it comes to meeting and exceeding your retirement goals,” said Craig Ferrantino, Founder and Director of Craig James Financial.

While you’re still working, maximize your savings as best you can, Ferrantino said. Reach the maximum contribution limit for a 401 (k), which for Americans 50 and over will be $ 27,000. Do the same for an IRA, which is $ 7,000 for people 50 and over in 2022.

“A misconception that we are seeing is that people think they can’t contribute if they maximize their contributions to their 401 (k), that’s just not true – you might not get the tax deduction, but you will most definitely be able to save for your retirement, ”Ferrantino said. noted.

Your wife can also contribute to an IRA. Normally, an individual can only contribute what he has earned (so, for example, if a 53-year-old man only earns $ 3,000 this year, he can only contribute up to $ 3,000 into his IRA itself. if the contribution limit for a 53 year old former worker is $ 7,000). However, since you earn more than this limit, she can contribute up to $ 7,000 on her own behalf under the spousal IRA rules.

Read the MarketWatch column “Retirement hacks” for practical advice for your own retirement savings journey

It’s good that you plan to pay off your mortgage at age 65, but try to strike a balance between paying off that debt and saving for retirement. Yes, paying down the mortgage is one less task to complete, but you should be focusing on maximizing your retirement savings in the later years of your working years. If your mortgage is on a low rate and you have a few payments left until you retire, it is a perfectly acceptable form of debt to take on with you in retirement.

“As long as people can afford it, there shouldn’t always be a compulsion to pay off a mortgage as long as it’s built into your expenses,” Sudit said. This is a fixed payment every month, so it does not fluctuate. You wouldn’t want to bring “bad debt” to retirement with you, like credit card debt.

Now what to say to your family and friends. I understand that it can be emotionally and mentally draining, but to be honest it’s also not their business whether you decide to continue working or not. If you are happy at work or if you work because you want to keep saving money while you can, then all the power is yours.

“If you’ve told your family and friends that you wish you were retired, it’s still none of their business, but you can say, ‘I will retire when the time is right for me and my family and our future, “” said Ferrantino.

And as for the rating you gave yourself… Sudit said you shouldn’t be so hard on yourself. It would give you an A.

Readers: Do you have any suggestions for D? Add them in the comments below.

Do you have a question about your own retirement savings? Email us at [email protected]

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