“I’m 61, recently laid off, with $550,000 in savings and no mortgage. Can I still retire?”

Spread the love

“[I] I just turned 61 and of course I got fired…so I think it’s time to put a hat on the work ring,” he says. He and his wife have his $350,000 in a personal retirement account, plus he has a $200,000 certificate of deposit and an emergency fund. They have paid off their mortgage, have no car payments, and have no fixed costs other than utilities, taxes, and insurance.

On Social Security, “At 62, if your monthly expenses are roughly $2,700 or so, that’s $2,035 before taxes. We’re pretty thrifty… and that includes health insurance.” ” His wife’s Social Security is “pretty little,” he says.

“Do you think it would be comfortable to hang?” he asks the Reddit community.

My opinion: Massachusetts, this is you!

You pushed past the effects of ageism until you were 61. I saved money, lived frugally, paid off my house, and saved $550,000. I’m not stuck paying for a car like most people are. You have a budget, and your and your wife’s monthly expenses are estimated at her $2,700, or $32,400 a year.

A wise move at this point is to consult with a financial planner to see if you can cover all your criteria. Preferably, a fee is paid directly for providing advice, rather than a fee for selling a financial “product”.

But at the moment, if I want to hang up, I don’t know where to start because there are too many options. That’s because he has three big retirement assets: savings, a Social Security account, and a home.

Your savings: $550,000.

What is your home worth? You don’t say it, but the median value of a home in Massachusetts is about $600,000.

And what is social security worth? It says she could receive $2,035 a month if she started claiming at age 62, but it costs about $560,000 to purchase such a guaranteed income for a couple in the private pension market. costs.

Total: About $1.7 million, excluding Medicare and the Massachusetts Social Safety Net value (which is pretty good).

(The primary value of your home is rent-free living, but of course, in an absolute emergency, assets are always available through a loan, sale, or reverse mortgage.)

What are my options?

If you start receiving Social Security when you turn 62 next year, you will be collecting $24,400 in your first year. It goes up every year with inflation. Using the so-called 4% rule to tap into your savings will give you an extra $22,000 in your first year.

Gross Income: $46,000 per year for the first year, increasing with inflation thereafter. Far above budget.

(The 4% rule, devised by financial planner Bill Bengen, claims that by withdrawing no more than 4% in the first year, and then increasing that amount with inflation, you can safely continue investing for the rest of your life. (This depends on some assumptions about how you invest.)

On the other hand, if you delay claiming Social Security until you turn 70, your benefits will jump nearly 80% to an estimated $43,000 a year. (In today’s dollars, adjusted for inflation.)

This alone should be enough to cover your estimated budget. without even starting to save.

But then you’ll be living off your savings, your wife’s Social Security, and your wages and other income for the next nine years.

Will it be a challenge? Whether or not financial history, theory, and current market rates have any say in it is another matter.

Inflation-protected U.S. Treasuries are very low-risk and currently yield near 2% a year, above inflation.

Based on a history going back more than 100 years, global equities are expected to generate annual returns of about 5% above inflation over the long term. However, as we all know, that return varies greatly from year to year.

For example, a portfolio of 50% world equities and 50% TIPS — Vanguard Total World Stock

VTWAX

and Vanguard Inflation-Linked Securities

Vaipus

,
For example, it should be expected to produce an annual average of 3.4% plus inflation.

Calculating that inflation averages about 3% over the next 10 years, that means a $550,000 portfolio could generate an average return of nearly $20,000 a year, and more. Without even touching the principal.

Oh, it’s either or neither. Each of us can choose to start Social Security at any point between age 62 and her age 70, and our benefits will increase for each month we delay.

As always, it’s not just whether you have enough savings to retire, it’s also about how you’ll be able to live in retirement with the amount you’ve saved. The Massachusetts Guy seems to be doing well.

#laid #savings #mortgage #retire


Spread the love

Leave a Comment