We are in our late 50s and have retired with less than $1 million: ‘Did I jump the gun?’

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Dear Marketwatch,

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I have $540,000 in savings, and my wife has $250,000 in retirement funds. We also have $60,000 in the bank. We decided to retire early (I’m 58, and she’s 57). The only debt we have is my truck, which is $450 a month, and insurance, which is $1,300 a month. Our budget so far has been around $3,200 a month (since I retired at the end of June). This gives us about $38,400 for a year.

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Next year when I reach 59 (late October), I plan to withdraw $4,000 a month from my retirement fund. Did I point a gun when I retired?

Dear reader,

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To be completely honest, it’s hard to tell if you retired too early. Even though you may have shared how much you have in retirement assets and what your annual budget is, you may not have included every possible expense or are considering future expenses. And the fact that you’re questioning it indicates that you may actually think you retired too early.

Also – and not being a downer because that’s actually a good thing – people are living longer, which means you need to make your money last longer too. You may be living into your 90s or beyond, and you need to stretch your wealth to that point.

That being said, I have some pointers for you to help you determine if you’ve jumped the gun. And also, I just want to note that, even if you decide you’re going to retire too early, there’s no need to panic – the fact that you’re so conscious of your annual expenses and Weighing your position, even after retiring itself, is important.

Budgets aren’t very sexy, but you’ve already recognized how important they are to knowing whether or not your retirement will be secure. I’m sure the $3,200 a month figure includes your truck and insurance, but does that include any discretionary expenses when you and your wife want to hit the city, or all the groceries and utilities? Is it equal to your pre-retirement budget? And what about taxes and inflation for everything under the sun, including healthcare? Should an emergency arise so that you don’t need to tap into your bank account or withdraw even more from your retirement accounts? You will probably also see home repairs, or need to replace your cars during their lifetime.

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You didn’t specify whether the $15,600 annual insurance covers the car, home, and health, but make sure you have all three. Health care is of the utmost importance, especially as you wait for Medicare eligibility at 65. You can also begin to think about how you will fund long-term care, including nursing homes or domestic support. Those bills can easily be retired and wipe out the hard earned money of retirees.

Don’t miss: Medicare Isn’t Enough – Why Can’t Americans Over 65 Afford Healthcare?

With a budget, take a deep dive into your spending, noting where your money is going month to month or year to year. What you spend your money on today may not be what you spend your money on in a year or five, and maybe not in 10 or 20. Pay attention to the expenses you can make on autopilot, but don’t actually use (like subscriptions to streaming services) or are spending a little more right now (like clothing). Try to identify what expenses you might have in a year, five years or 10 years – do they fit your current spending estimates and budget? “This simple process will help them more accurately determine whether or not they will be successful,” said Scott McLeod, a certified financial planner and president of Brown Financial Advisory.

Want more actionable tips for your retirement savings journey? read marketwatch “Retirement Hacks” pillar

There is a lot of debate over the correct withdrawal rates from savings and investments if you want them to last for the rest of your life. The rule of thumb used to be 4% but this has been widely opposed in recent years. The goal, ideally, is to take as little of these accounts as possible so that they continue to grow as you age – that way, they aren’t wiped out as long as you live. Your current annual expense of $38,400 equates to a 4.9% withdrawal rate from your retirement accounts alone — but taking in $4,000 a month would be a little over 6%. Can you deduct that annual expense, at least until Social Security kicks in? Or is there another income stream you can consider between now and when you claim Social Security?

I want to go back to inflation for a minute. One of the myriad reasons to keep your retirement assets as long as possible is that the investment, assuming a reasonable asset allocation, will beat inflation.

“In the long run, inflation erodes purchasing power,” said Ashton Lawrence, a certified financial planner and partner at Goldfinch Wealth Management. “An effective investment strategy for retirement needs to include growth, alternative investments, as well as income-generating assets to help protect against the corrosive effects of inflation.”

Review your portfolio and their investment mix. Thanks to the soaring stock market over the past decade, many people became obsessed with that return, but there’s no guarantee it will continue. You need to be prepared for declines, so that they don’t destroy your savings. You can talk to a professional at the firms that hold your retirement assets about your portfolio.

If you haven’t already, Create Account With the Social Security Administration. There you’ll be able to check that all of your work and earnings history is accurate, and you’ll be able to get an idea of ​​what your retirement benefits will be when you start claiming (even if at age 62) your full retirement. of age or delay in attaining the age of 70 years). This number will give you an idea of ​​how little you will need to take out of your retirement assets.

as well I am 56 years old, my husband is 57 and retired. We have about $750,000 saved and a military pension. I’m tired of ‘working in America.’ Can I retire in three years?

Keep in mind, the sooner you claim before your full retirement age, the less you’ll get your full benefit, and that’s a permanent reduction. For example, taking out Social Security at age 62 will result in a roughly 30% reduction in lifetime benefits, said David Haas, a certified financial planner and owner of Ceres Financial Advisors. “It’s a lot and will be very meaningful for the couple.” How you claim your Social Security benefits also affects what your wife will receive — the equivalent of reducing your benefits if you become widowed.

Again, I can’t say for sure if you retired too early. If this wasn’t the answer you were hoping for, consider working with a qualified financial planner to look at your numbers in more detail. And just because you’re already retired doesn’t mean you can’t make money. If you quit because you didn’t like what you had to do now, consider part-time or freelance work where you get to set your own schedule and do what makes you happy. This extra cash would mean taking less out of your retirement accounts, allowing your wealth to continue to grow.

“The good news is that the decision to retire is not absolute,” Haas said. “The couple can still get a job, even a job with benefits. They can switch to different jobs that they may like better, even those with low pay. Benefits can address the health care issue until age 65, and by avoiding taking Social Security early, they can lock in higher lifetime benefits. ,

Reader: Do you have tips for this reader? Add them in the comments below.

Have a question about your own retirement savings? email us [email protected]

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