I am a 61-year-old female who has worked for the same financial institution since the age of 16. I will have 50 years at the company if I retire at 66. I’ve lost over $150,000 in my 401(k) this past year, with a current balance of $749,000. I also have an annuity that will pay approximately $800/month. I was hoping to retire at 65 or earlier if possible.
I’m married and my husband is 64, planning to retire later this year at 65. His 401(k) balance is $340,000, having lost $100,000 this past year. I am the higher earner, and he needs to retire to help care for his elderly parents. We expect to inherit approximately $450,000 in the future from our parents’ estates.
The losses in our 401(k) plans have set back our retirement plans. I contribute 6% now all going into the Roth investment, with company matches. My husband’s company never matched any of his 10% contribution. Retirement before 65 would be nice but I must wait until then for Medicare. I’m hoping I can put away enough into my Roth to bridge me to postpone collecting Social Security until I’m 67, if possible.
Are we on the right track? Any chance I can retire before 66 or 67? We live in California, and our current mortgage balance is about $95,000 with a house payment of $1,400 a month. Our house recently appraised at $800,000.
See: At 55 years old, I will have worked for 30 years — what are the pros and cons of retiring at that age?
It is wonderful to hear how much you and your husband have saved for retirement, though I am so sorry to hear about your 401(k) losses. You certainly are not alone — many retirement savers have seen losses in their investment accounts in the last year, and it is a very hard sight to see.
While you may be stressed to see your 401(k) balance dropping at times (since the volatility is still not over), know that this money will be invested for a while. You’re in your 60s, and we know now that retirement can last for decades after that. This is both a pro and a con. The pro: You’re living longer, which is a blessing, and you have many more years for your portfolio to rebound from market losses; the con: you need that money to last your and your husband’s life, and there’s no way to pinpoint how much money exactly you’ll need in that timeframe.
It’s hard to say for sure if you’re on track, since we don’t know what your retirement plan was specifically and what you expect your expenses to be in retirement. That said, it sounds like you’ve very involved in your financial plans, and that’s always a significant advantage.
Here are a few thoughts to consider: First, while retiring before 65 sounds nice, if you can make it to your 50th year at the company without being miserable, it will save you a lot of money in health insurance. You’re right, Medicare does not kick in until you’re 65, and paying for healthcare out of pocket will be expensive. The less you have to spend on this the better, as you won’t need to tap into your retirement accounts or other savings for it.
Deciding when to claim Social Security can be tricky. Some people want, or need, their benefits as soon as they become eligible, while others want to hold off until age 70 so they get that extra money (the estimate is about 8% more each year from your Full Retirement Age to age 70). But delaying Social Security really only works if you 1) don’t need that money and 2) expect to live much longer than 70 so you can actually benefit from the system you’ve paid into for so many years. Before making your final decision on when to claim at 66 or 67, evaluate your and your husband’s monthly and overall annual expenses, the income you expect to bring in through withdrawals and a pension, and see if you need to file sooner or if you can wait later. Don’t forget to plan alongside your husband. Coordinating spousal benefits can be complicated, but it’s absolutely worth taking the time to do.
Don’t miss: Financial Face-Off: When is the best time to claim Social Security retirement benefits — sooner or later?
One quick thing about your expected inheritance: while it is nice to anticipate extra cash flow in a few years (even if it’s for a sad reason), you should try and keep those estimates out of your concrete retirement plans. Run the numbers with the expected inheritance and see how that might change your retirement goals and plans, but don’t rely on it. As the pandemic alone has shown, the unexpected can always happen… your parents may end up needing more of that money than they anticipated, or something else could happen to dwindle that figure down.
Strategizing with a Roth account is really smart, especially if you have a traditional 401(k), because it allows you to diversify your tax liabilities. Instead of having to pay taxes on all of your retirement withdrawals, you could choose to take money from a Roth based on calculations that keep you in a lower tax bracket. Just make sure to follow the rules — you must have had the account open for five years (as well as be 59 ½ years old) in order to take the money out tax-free.
Another consideration: long-term care planning. As you can see with your husband’s experience caring for an elderly parent, this type of care and planning is crucial. Aside from deciding who or how you’ll be taken care of, healthcare is increasingly expensive the older a person gets, and long-term care insurance (or at least some sort of financial plan in place) could make a huge difference in how much you’re paying for that care.
While you’re at it, review your current healthcare options now to make sure you’re maximizing your benefits and paying as little as you can for all of the care that you need. You may have to wait until your insurance’s open enrollment period to make changes, but it’s one big way to save money in the years leading up to your retirement. Your husband should also do that, assuming he will be starting Medicare this year. I know it can feel like there are a million options to juggle when picking health insurance, but the earlier you start combing through them the more relieved you’ll be.
Also see: ‘Is my financial planner crazy?’ We’re 55 and 60, five years from retirement and were told we should invest more aggressively
As for your home, you can decide now or later if it’s your forever home or if you plan to downsize at any point, but know that this is a major asset for you, your husband and your retirements. Yes, you can tap into your home equity, but depending on what you paid for the house and where you move (not only for the price of the home but the taxes and utilities associated with the purchase), you could bring in a lot more cash if you chose to sell. That could definitely support your retirement lifestyles.
You still have time to decide if you want to retire at 65 or later. You may see that you actually don’t mind working a few more years, which gives you the chance to save even more for your futures, or you might decide in the year or so leading up to your 65th birthday that you just don’t want to work anymore. Either way, for the next few years, keep an eye on your spending and savings habits — those habits make such a difference in how comfortable a person is in retirement.
With your husband leaving the workforce to care for a parent, this is an opportune time to see how you feel about your saving and spending, and if you will feel secure when you, too, stop working. From there, you may surprise yourself with what you decide to do to optimize your retirement.
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