I will be 60 in September, have $95,000 in cash, work part time ($30,000 yearly) for insurance and contribute 10% plus the employer match of 8% to a small 401(k). My home and car are paid for, I don’t have any other debts, and I am single. I live in South Carolina where the cost of living is manageable.
I would like to start taking my Social Security at 62, (around $1,100 per month) and maybe still work part time. The job is very physical and not something I would be able to do for more than a few more years. At 64, I will have a pension of $1,900 per month. I don’t spend on anything unless it’s really needed. For example, a new roof last year.
I have a potential inheritance of $300,000, but I know not to count on it as a sure thing.
I think I will be fine financially, but have been to a couple financial seminars that say otherwise. Are they truthful or just looking for a customer?
Curious George
Dear Curious George,
Financial seminars can be a really great starting point to vet for yourself where you are in your journey to retirement, so kudos to you for attending multiple!
A word of caution: some financial seminars are sales pitches disguised as information sessions that use scare tactics and misinformation to pressure unsuspecting participants into inappropriate investments — or even scams — that ring up big commissions for the salesperson.
Just like those financial seminars, I have limited information on your financial situation so I can’t say for sure whether or not you’re set for retirement in a couple of years. For example, you mention having $95,000 in cash and savings in a 401(k) but I don’t know for sure how much is in that 401(k). I can, however, tell you that if they’re saying you should hold off on retirement, it’s definitely worth considering why.
For example, in retirement, you’ll have your pension and Social Security, which is great — not a lot of Americans have a pension anymore — but will those be the heavy drivers of your retirement income? If the $95,000 you have is the primary nest egg for your retirement, maybe not. Think of it this way: let’s say you were to retire at 64 when you get that pension, you could live another 10, 20 or even 30 or more years. That approximately $100,000 likely won’t stretch that long.
If you have more stored away in your 401(k), ask yourself the same question — is what you have invested enough, based on a few factors like cost of living, life expectancy, expected and unexpected expenses and so on? Here’s a retirement calculator that can help you crunch a few figures to get an idea. A note on this — financial calculators are just like a drawing board. They’ll give you an idea of what you may need, but you shouldn’t base your retirement on one.
A qualified financial planner is a much more reliable choice, and if you can afford to see one even once for a financial check-up, it may be worth it for you. They’ll look over all of your information, unlike a financial seminar, and if they’re a certified financial planner, they’re required to work in your best interest. Here are a few questions you can ask a professional to see if he or she is a good fit for you.
Check out MarketWatch’s column “Retirement Hacks” for actionable pieces of advice for your own retirement savings journey
People do retire with that much money, some even retire with less if they have to, but if you’re in a situation where you can continue to generate an income — is it worth giving that up?
I know you mentioned maybe continuing to work part-time if you were to claim Social Security at 62, and that you have a physically demanding job. Instead, is there a way for you to find another type of job utilizing your skills and experience? You could probably translate what you know and do now to something that’s less strenuous, such as staying in your field but taking on a teaching or consulting role. If you do that, you may make the same amount of money — or more — and could potentially live off of that while letting your Social Security benefits (and 401(k) assets) continue to grow.
When you claim Social Security at 62, you’re getting a reduced amount, and that amount will remain reduced for the rest of your life. If you wait until your full retirement age, you’d get 100% of the benefits you’re owed. The longer you delay until age 70, the more you get in your benefit. I’m not suggesting you wait until age 70, but just know if you can keep bringing in an income and enjoy your life all the same, it’s worth thinking about holding off on Social Security as long as you can. (This decision depends on numerous other factors, though… not just if you’re able to afford delaying your benefit, but if you think you’ll live long enough to enjoy it after you begin claiming. Longevity is a key component when deciding when to claim Social Security).
Also, depending on how much you earn as a part-time worker after you claim, the Social Security Administration may withhold a portion of your benefit. You’d eventually get that money back when you reach full retirement age, but it’s something to keep in mind.
Healthcare is very important. It’s also very expensive. Working a job that offers that benefit would save you a lot of money until you’re eligible for Medicare at age 65.
One more note on your spending. It’s great that you’re able to live comfortably without spending so much, and that you live in an area where the cost-of-living is manageable. Still, you did highlight a very real possibility of an emergency situation. A new roof probably costs a pretty penny, and situations like that can arise well into your retirement. It could be a home or auto repair, a health expense or anything else really. If you’d have to tap heavily into the amount you have saved, that could easily derail your plans and make you much less comfortable in retirement.
You’re also right not to rely on an inheritance. Anything can happen until you expect it, and while it would be a nice inflow of cash to use in your old age, it’s definitely not something to bank on. Make a Plan B or Plan C that incorporates that money in your financial plans, but don’t make it Plan A.
I hope this helps. It makes absolute sense why you wouldn’t want to jump on something you see in a financial seminar, because it’s true — sometimes, these sessions really are a sales pitch — but it doesn’t hurt to do a bit more reviewing before you start your retirement. And it’s great that you have clearly already started!
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At the ripe age of 60, many Americans may be ready to take a step back from the nine-to-five hustle and enjoy life as a retiree. That is certainly the case for one individual whose personal financial situation is the subject of this article.
This individual, whom we will call George, is 60 years old and has an impressive bank account balance of $95,000. On top of that, he has no debts. It seems he has built up a significant nest egg that could act as the basis for a comfortable retirement and he believes it is time to take a step back.
There is however, one major issue. Despite his substantial savings and financial freedom, some professionals in the financial services sector are saying that George should not retire at this moment. While seminars, advisors, and other financial experts all have valuable advice on this subject, when it comes to retirement, it seems that one size does not fit all.
To understand why this is the case, we need to consider some of the key factors that come in to play when planning for retirement. First and foremost is income. In order to truly and comfortably retire, financial experts often suggest that you have a steady and reliable stream of income that can be used to finance your new life. This often comes from pension funds or investments, but ultimately needs to provide a sufficient level of sustainability over the course of retirement.
When it comes to George’s situation, he has a sizeable nest egg of $95,000, but the key question is whether this is enough to cover his retirement and provide a reliable, steady income?
The answer to this question is not black and white and it is possible for George to retire with his current assets, as long as he makes smart decisions about his spending. He can do this by using his savings to create a portfolio of investments that generate a consistent income, such as bonds and mutual funds.
“George should also consider the other costs associated with retirement, such as health care and unexpected expenses. While his net worth may be high enough to sustain him, future cost of living increases must also be taken in to consideration.”
Ultimately, deciding whether or not to retire requires careful consideration of all the factors mentioned above. A financial planner can provide invaluable assistance in this area and should certainly be consulted with if George is considering retiring.
Once all of the financial considerations have been taken care of, the decision to retire is largely a matter of personal preference. While George may have arguments on both sides as to whether he is ready to enter into full retirement, it is his life and only he can decide which is the right move for him.
Regardless of whether George ultimately decides to retire or continue to work, he can still be proud of the financial stability that he has built up over the past two decades.
