I am 56 and my husband is 57. He spent 26 years in the military and is now retired from active duty. I continue to work full time.
My husband’s current income is a retired military pension of net $2,788 and a disability payment of $3,321. I earn $108,000 per year.
We have a modest savings account with $20,000, as well as $650,000 in my 401(k) plan at work and $75,000 in my pension at work (which my employer no longer contributes to).
We have five excellent vehicles between us and do not plan on having a need to purchase a car anytime in the next decade. Our only debt is our mortgage which is $2,700 per month.
I’d like to know if I can plan on retiring from my very stressful job at 59-1/2, living off my retirement savings until I reach age 67? I would like to claim Social Security then. My husband also wants to wait until he’s 67. I am not sure of the exact amount we will receive monthly but I estimate $3,000 each.
I have an adult son, who still lives at home, contributes minimally and is in school. I carry his medical and dental insurance through my employer but once I retire my husband and I will have military retiree medical and dental insurance.
Thank you in advance,
Tired of Working in America
Dear Tired of Working in America,
The good news: That pension and your savings are and will be great assets for you in retirement, so congratulations on that!
The less-than-good news: I would proceed with caution if you plan to retire in three and a half years. It’s not that this goal is impossible, but you should get all of your numbers and plans straight before leaving the workforce.
There are many factors that go into knowing how much you’ll need for retirement, and a few ways to break down these annual estimates. For example, if you were to use the 4% rule , which is a traditional rule of thumb that suggests you take out 4% of your retirement savings every year to live on, you’d generate about $30,000 to $35,000 a year, said Morgan Hill, chief executive officer of Hill and Hill Financial.
Although that amount of money would hardly replace your current salary, you are fortunate to have other income sources in retirement, such as your husband’s pension and disability, as well as your own pension.
Instead of trying to guess if how much you have saved is enough money to live on, try working backwards by seeing how much you can reasonably expect to need every year in retirement. Take into account all of the mandatory spending — housing, taxes, utilities, groceries, medical and whatever else is necessary for you — and then be honest with yourselves about your discretionary spending, which may include vacations, gifts and hobbies. You’ve both worked hard for so long, and you should enjoy your retirements — it’s just important that you also plan to pay for whatever fun you have.
“Estimating total monthly or annual expenses including discretionary spending or irregular bills as accurately as possible is a key step, especially when retiring early,” said Eric Shapiro, a certified financial planner at Southwestern Investment Group.