By Alessandra Malito
Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com
Dear MarketWatch,
I will be 60 in September, have $95,000 in cash, work part-time ($30,000 per year) for insurance, and contribute 10% plus 8% employer contribution to a small 401(k). My house and my car are paid for, I have no other debts and I am single. I live in South Carolina where the cost of living is manageable.
I’d like to start taking my Social Security at 62 (about $1100 a month) and maybe still work part-time. The work is very physical and I won’t be able to do it for a few years. At 64, I will have a pension of $1,900 a month. I don’t spend anything unless it’s really necessary. For example, a new roof last year.
I have a potential inheritance of $300,000, but I know not to count on that as a certainty.
I think I’ll be fine financially, but I’ve attended a few financial seminars that say otherwise. Are they being truthful or are they just looking for a customer?
Curious George
See: “Is my financial planner crazy?” We are 55 and 60, five years from retirement and have been told we should invest more aggressively
Dear Curious George,
Financial seminars can be a great starting point to see for yourself where you are on your retirement journey, so kudos to you for attending several!
A word of warning: some financial seminars are sales pitches disguised as information sessions that use scare tactics and misinformation to pressure unsuspecting attendees into making inappropriate investments – or even scams – which earn large commissions to the seller.
Like these financial seminars, I have limited information about your financial situation, so I can’t say for sure whether or not you’re ready to retire in a few years. For example, you mention having $95,000 in cash and savings in a 401(k), but I’m not sure how much is in that 401(k). I can tell you, though, that if they say you should delay retirement, it’s definitely worth asking why.
For example, in retirement you will have your pension and Social Security, which is great – few Americans have more pension – but will they be the main drivers of your retirement income? If the $95,000 you have is your main retirement nest egg, maybe not. Think of it this way: say you were to retire at age 64 when you receive this pension, you could live another 10, 20 or even 30 years or more. That roughly $100,000 probably won’t last that long.
If you have more stock in your 401(k), ask yourself the same question: is what you have invested enough, based on a few factors such as cost of living, life expectancy, planned and unplanned expenses, etc. ? Here is a retirement calculator that can help you calculate some numbers to get an idea. A note on this – financial calculators are like a drawing board. They’ll give you an idea of what you might need, but you shouldn’t base your retirement on just one.
A qualified financial planner is a much more reliable choice, and if you can afford to see one even once for a financial review, it may be worth it for you. They will review all of your information, unlike a financial seminar, and if they are a certified financial planner, they are bound to work in your best interest. Here are some questions you can ask a professional to see if it’s right for you.
Check out MarketWatch’s “Retirement Hacks” column for practical tips for your own retirement savings journey
People 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 income, is it worth giving it up? ?
I know you mentioned maybe continuing to work part-time if you had to claim Social Security at age 62, and you have a physically demanding job. Instead, is there a way for you to find another type of job using your skills and experience? You could probably translate what you know and do now into something less strenuous, like staying in your field but taking on a teaching or consulting role. If you do this, you can earn the same amount of money — or more — and could potentially live off it while letting your Social Security benefits (and 401(k) assets) continue to grow.
When you apply for Social Security at age 62, you get a reduced amount, and that amount will remain reduced for the rest of your life. If you wait until full retirement age, you will receive 100% of the benefits due to you. The longer you wait until age 70, the more benefits you get. I’m not suggesting you wait until age 70, but just know that if you can continue to earn an income and enjoy your life all the same, it’s worth thinking about delaying Social Security for as long as you can. (This decision depends on many other factors, though…not just whether you can afford to delay your benefit, but whether you think you’ll live long enough to enjoy it after you start asking. Longevity is a key when deciding when to apply for Social Security).
Also, depending on how much you earn as a part-time worker after you apply, the Social Security Administration may withhold part of your benefits. You’ll eventually get that money back when you reach full retirement age, but that’s something to keep in mind.
See also: “I don’t think I can wait until 70: I’m still working at 66. Should I wait or apply for social security now?
Health is very important. It is also very expensive. Working in a job that offers this benefit would save you a lot of money until you qualify for Medicare at age 65.
One more note about your expenses. It’s great that you can live comfortably without spending too much and that you live in an area where the cost of living is manageable. Yet you have pointed to a very real possibility of an emergency. A new roof probably costs a pretty penny, and situations like this can arise long after you retire. It could be a house or car repair, a health care expense, or anything else. If you were to dip heavily into the amount you’ve saved, it could easily derail your plans and make you much less comfortable in retirement.
You are also right not to count on an inheritance. Anything can happen until you expect it to, and while it would be a nice cash flow to use in your old age, it’s definitely not something to bet on. Make a plan B or a plan C that incorporates this money into your financial plans, but don’t make it a plan A.
I hope that helps. It makes perfect sense that 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 make a little more review before you start your retreat. And it’s great that you’ve clearly already started!
Readers: Do you have any suggestions for this reader? Add them in the comments below.
Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com
-Alessandra Malito
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