I am 60 years old, married, no mortgage. Also, $1.1 million in liquid cash and he has $880,000 in his 401(k). I will receive her two pensions and this has not started yet. My wife receives her one pension. All three add up to about $3,500 a month. Also, we paid social security. By age 65, their combined monthly income will be about $5,000. For the rest of my life, I will have medical and dental insurance through the state government for me and my wife. Not sure if you can retire now or wait a few more years to build up your pension?
The answer to such questions is always “it depends”.
Yes, it certainly takes a lot of mathematics to arrive at your answer.
Here are some things to consider when making your decision, but I can’t give you a concise answer here. If you plan to do this yourself or consult a financial advisor, we highly recommend that you do a fair amount of research.
Retirement income and expenses vary from person to person. So if you don’t know your expenses, you can’t know if your income is sufficient. Regardless of the source of your income (pension or social security) and the savings you have to make up for it (cash and 401(k)), it’s also important to estimate your monthly expenses.
This way, you can compare your income and expenses as you would at work.
One way to create a rough draft of your retirement budget is to start with your current monthly expenses. From there, you can adjust based on your plans or expected changes after retirement. This could be buying a new car, taking a festive vacation, or explaining a change in health insurance premiums.
The fact that you paid off the house is a big plus.
source of income
Once you’ve estimated your expenses, consider your various sources of income for retirement. Some are guaranteed, while others are exposed to risk due to market volatility. Here’s what to watch.
pension and social security
I like to see guaranteed income first. For you, it’s pensions and social security. Rather than delving into the nuances of claiming profits (although the strategy you claim is certainly something to consider), let’s look at the numbers you mentioned. has an income of As an aside, check to see if your annuity includes an annual inflation adjustment.
Compare that to your expected cost. How much does it cover? one third? half? all? Of course, being able to cover most of your expenses means increased security. If you can cover them completely, you’re in a really good position, but for most people it’s not necessary.
This step also allows you to divide your spending into necessities and wants. Think separately about how much your essentials will be covered. It would be great if we could cover them all with a fixed source. That way, you may be less worried about having to cover the rest with your savings.
The rest of the expenses must be covered by deductions from savings. For that, you need to spend some time understanding the different withdrawal methods. This is because you need to decide on a distribution plan that will allow you to comfortably make the necessary withdrawals to pay for the rest of your expenses not covered by your pension or Social Security. A big fear for most people is that their money will soon run out.
A simple way to assess this risk is to look at planned withdrawal rates. As an example, let’s say you decide you need to withdraw $40,000 annually from your savings.
Rounding the savings amount to $2 million, the withdrawal rate is 2%. Most planners will say that this is a very modest exit rate and they should be pretty confident. But again, You should be happy with what you have decided. Make your choice based on your understanding of your income needs and the risks you are willing to take.
your feelings about risk
As you consider your choices, consider how you feel about the different risks you face. The easiest way to see this is through investments, but investments aren’t the only source of retirement risk.
Investing requires trade-offs. The more aggressive your investment, the more likely it will grow and support you in retirement. But that also means they can be more volatile and cause concern when markets are turbulent. However, there is a risk that it may not grow enough to sustain you in retirement.
You find that you keep about half of your savings in cash. Of course I don’t know why. You may have recently inherited money or sold a property and are still deciding what to do with it, but this first shows that you are a very conservative investor. I’m here.
Cash acts as a good buffer against market volatility and is especially useful in the years between retirement and the start of Social Security. This could also be a source of risk as the real value of cash declines over time as inflation weakens purchasing power.
None of what I’ve said here directly answers your question. But that’s because the answers I can give you are incomplete and make too many assumptions about you.
It cannot be overemphasized how important it is to make sure you understand your situation, your appetite for the various risks you may face, and the options available to you. Make decisions based on that understanding and choose what you are comfortable with.
Brandon Renfro (CFP®) is a columnist for SmartAsset Financial Planning, answering readers’ questions about personal finances and taxes. Have a question you want answered? Send an email to AskAnAdvisor@smartasset.com. Your question may be answered in a future column.
Please note that Brandon was not a participant in the SmartAdvisor Match platform and was compensated for this article.
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Ask your advisor: I’m 60, have $1.1 million in cash, $880,000 in 401(k), some pensions and Social Security. Should I retire now? First appeared on the SmartAsset blog.