Can I retire at 60 years old?
I’m 59.5 years old. I have $300K in a traditional IRA and $1.2 million in 401k’s. I would like to retire but my wife does not work. I have pre-existing conditions and will need to secure health care until I reach 65. My wife is 2.5 years older than me.
Congratulations on building such a nice nest egg through your working career!
With history as our guide, we know that a moderately invested portfolio has a safe withdrawal rate of around 4% (the “4% Rule”). Put simply, a retiree could withdraw 4% from his or her portfolio in the first year of retirement - then increase the withdrawal for inflation each subsequent year - and have the portfolio last at least 30 years. (Of course, past performance doesn’t guaranty future results, so it’s best to review your portfolio annually.)
With this as a guide, your $1.5 million portfolio should be able to provide withdrawals of $60,000 in year one of retirement, with that amount increased annually for inflation.
You don’t mention your annual spending needs, so I don’t know if this is sufficient. Also, you don’t mention if you (or your wife) have any pension income, or if you (and/or your wife) qualify for Social Security. Obviously, these would increase the funds available to you each year, once you meet the age requirements.
Regarding health insurance coverage, you have a few options:
1. The ACA exchange – Policies purchased through the ACA exchanges cannot exclude you due to pre-existing conditions (premiums can be higher if you are a smoker). Further, depending on your income, you may qualify for a premium subsidy. Visit www.healthcare.gov when you near retirement to see which plans are available in your area.
2. Some employers offer retiree health insurance.
3. You may qualify for COBRA coverage from your last employer, but it typically lasts for up to 18 months and it can be quite expensive. It’s certainly worth checking into, though.
4. If you are a Christian, you may want to consider a Christian medical sharing ministry. While they are not technically being insurance, they operate in a similar manner under the Biblical principal of Christians sharing each others burdens. My family has been a member of such a ministry for several years and has had great success with it! If you’re interested, you can find out more here for the ministry in which we participate.
5. Some part-time jobs offer health insurance coverage. While it may not be your first choice, it is an option to consider for a few years.
The good news is you will be only five years away from being eligible for Medicare, and your wife will be eligible in only a couple of years.
Best of luck in retirement and please let me know if you have any follow up questions!
It’s a good time for you to consider consulting with a financial advisor for a number of different reason. You’ve been a successful saver and you are now considering a major life transition into retirement. Complicating this is the fact that you have some medical conditions that should be considered in your financial planning and that may impact you and your spouse over the course of your retirement.
There may be some benefits for you to consider while you are still working. For example, are your medical conditions disabling and is there disability coverage through your employer? Is there any opportunity for a severance package through your employer? This may provide a bridge to Medicare eligibility with some medical coverage continued by the employer for a defined period.
Your total assets for retirement should be analyzed and reviewed against your required spending for retirement. Be careful to be realistic as to your required retirement spending. It is not always true that expenses are less in retirement. In fact, health care expenses, travel and leisure expenses may be higher. In your case will the medical conditions result in a additional costs apart from medical insurance premiums, deductibles and usual out of pocket?
It may not be advisable for you to access Social Security benefits prior to your FRA (normal SS retirement age). As you wife is non working, to provide the highest survivor income benefit to her, you would not want to incur a reduction in your Social Security income by early claiming. This is another reason to seek good financial advice so that all of your claiming options are carefully reviewed.
Cobra does allow for insurance continuation but is limited to 18 months. It might be that you will need to continue working so that you create your own bridge to Medicare until you go on Cobra and then subsequently on Medicare.
A comprehensive plan will review all of your cash flow requirements, benefit options, retirement projections, investment analysis, survivor needs, estate plan, as well and medical funding needs. All bases will be touched. This will help you prepare for this next phase of your life with greater confidence and security. Best wishes to you.
Charlotte Dougherty is a registered representative of Lincoln Financial Advisors. Securities and advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (Member SIPC) and registered investment advisor. Dougherty and Associates is not an affiliate of Lincoln Financial Advisors. CRN-2016462-020518.
Depends--how much income do you need to retire? What are your expenses going to be? You can get health care--and if you factor in future Social Security benefits, you should be able to cash flow at least $90k/year from your nest egg by combining a nice portfolio of stocks, individual bonds, and other investments to provide a 6% yield each year net of fees and expenses. This way you don't draw down principal, and when Social Security kicks in, you have that much more income.
Better yet--start ROTH CONVERTING your IRA/401(k) now --a little bit each year. As an accredited investor you definitely will have access to some unique investments that can greatly reduce your conversion taxes, and if you do it the right way, then once you take Social Security, then all of that money could be received income tax free.
That sounds pretty good to me......tax free Social Security, ($50k/yr? $60k/yr) + Tax Free Roth IRA withdrawals ($90k/yr?) = $140k + a year of inflation-adjusted income.
I bet you could retire now if you managed your future tax burden now with some intuitive and comprehensive planning, things that are personalized to your unique situation, not some cookie cutter out of the box recommendation.
"Can I retire?" is really the question "Do I have enough in savings to sustain me for the rest of my life? As such you do not give us enough information. What are your annual spending needs? An advisor would need to know. (All spending, not just the basic food and shelter; include entertainment, gifts, hobbies, the inevitable new car and new roof, and yes, health care.)
You have $1.5 million in accounts for which withdrawals are taxable. You did not mention having any other savings so I will assume you have none. Thus unless you can live on about $50,000 (after taxes) then the answer is no. You would spend too much of your savings every year and would risk running out in your lifetime. If you can live well on $50,000, you still probably should continue to work if your health permits. It will make your retirement that much more comfortable and secure.
At first blush, many people may think they are retirement ready if they have $1 million dollar+ retirement account and/or other savings. However, many other factors must be considered to see if that $1.5 million retirement account can last a lifetime for both of you.
As you mentioned, you have a pre-existing condition, which could lead do an exorbitant healthcare costs during the retirement. Also, depending on your lifestyle, most people would find slight changes to their current ones unbearable. Thus, you must do some financial planning before you can get answers to when you can retire comfortably and what actions you should take now to make sure the asset will last you a lifetime.
If anyone can just tell you you’re good to go without asking deeper questions and know your goals and finance, walk away. It’s worth of the effort to see a certified financial planner for a comprehensive financial plan. By knowing your needs/goals in retirement, health conditions, legacy goals, with the assistance of a software, the planner can tell you the probability of success of your current path if you stay the status quo. Or, the planner may guide you to improve your chance through proactive planning so that your assets can sustain you longer or ways to reduce your tax, which in turn put money into your pocket. In my experience, the average time to prepare such a plan for a couple is 33+ hours. I have an essay about what the comprehensive financial plan is and how that could improve your financial life. Here’s the link, https://www.investopedia.com/advisor-network/articles/083116/7-key-areas-comprehensive-financial-plan/. Enjoy!