We’re in our late 50s and retired with less than a million dollars: “Did I take the plunge? “

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

Next year, when I’m 59 ½ (end of October), I plan to withdraw $ 4000 per month from my retirement funds. Did I take the plunge when I retire?

Dear reader,

To be completely honest, it’s hard to tell if you’ve retired too early. Even though you have split your retirement asset amount and annual budget, you may not have included all possible expenses or you may not be considering future expenses either. And the fact that you are questioning that indicates that you might think you retired too early.

Plus, and not to be depressing as it’s actually a good thing, people are living longer which means you also need to make your money last longer. You can live into your 90s or beyond, and you need your assets to go that far.

That being said, I have a few tips to help you determine if you have “I took the plunge”. And also, I just want to note, even if you decide that you have retired too early, there is no need to panic – the fact that you are so mindful of your annual expenses and always weigh your situation afterwards. having already retired is important.

Budgets aren’t sexy, but you’ve already identified how crucial they are to whether your retirement will be secure. I’m sure the $ 3,200 per month figure includes your truck and insurance, but does it include discretionary spending when you and your wife want to get into town, or all the groceries and utilities? Does it compare to your pre-retirement budget? And what about taxes and inflation for anything under the sun, including health care? Is there some wiggle room in an emergency so you don’t need to dip into your bank account or withdraw even more from your retirement accounts? You will also likely see home repairs or have to replace your cars in your lifetime.

See: I will have $ 5 million for retirement when I sell my dental office next year, but my wife and kids don’t want me to retire

You didn’t say if this $ 15,600 annual insurance covers the car, home, and health, but make sure you have all three. Health care is extremely important, especially since you are waiting for Medicare eligibility at age 65 for each of you. You may also want to start thinking about how you will fund long term care, which includes nursing homes or home helpers. These bills can easily accumulate and deplete the hard-earned savings of retirees.

Don’t miss: Medicare Isn’t Enough – Why So Many Americans Over 65 Can’t Afford Health Care

In addition to a budget, dive into your spending, looking at where your money is going month by month or year by year. What you spend your money on today may not be what you will spend your money on in a year, or five, and probably not in 10 or 20. Be careful of any expenses you might have on autopilot but that you’re not actually using (like streaming service subscriptions) or spending a little too much right now (like clothes). Try to identify what expenses you might have one year, five years, or 10 years down the road – do they fit into your current expense estimates and budget? This simple process “would specifically help them determine whether or not they will be successful,” said Scott McLeod, chartered financial planner and president of Brown Financial Advisory.

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There is a lot of debate about the right rate of withdrawal from savings and investments if you want them to last for the rest of your life. The rule of thumb was 4%, but this has been widely disputed in recent years. The goal, ideally, is to take as few of these accounts as possible so that they can continue to grow with age – that way they won’t be erased during your lifetime. Your current annual spending of $ 38,400 is a 4.9% withdrawal rate from your retirement accounts alone, but taking $ 4,000 a month would be just over 6%. Can you reduce these annual expenses, at least until Social Security kicks in? Or are there other sources of income that you can consider by the time you claim Social Security?

I would like to come back to inflation for a moment. One of the myriad reasons it’s crucial to keep your retirement assets intact for as long as possible is that investments, assuming a reasonable asset mix, are likely to beat inflation.

“Over long periods of time, inflation tends to erode purchasing power,” said Ashton Lawrence, chartered financial planner and partner at Goldfinch Wealth Management. “An effective retirement investment strategy must include growth, alternative investments, as well as income-generating assets, to help protect against the corrosive effects of inflation. ”

Review your portfolios and their investment mix. Many people have fallen in love with the returns they have seen over the past decade thanks to a rising stock market, but there is no guarantee that will continue. You need to be prepared for downturns so that they don’t erode your savings. You can talk to a professional about your portfolios at the companies that host your retirement assets.

If you haven’t already, create an account with the social security administration. There, you can check that all of your work and income history is correct, and you can get an idea of ​​what your retirement benefits will be like based on when you start claiming (whether it’s early at age 62, at your retirement age at full rate or postponed to 70). This figure will give you an idea of ​​how much less you will have to withdraw from your retirement assets.

Also see: I am 56 years old, my husband is 57 years old and retired. We have about $ 750,000 in savings and a military pension. I am “tired of working in America”. Can I retire in three years?

Keep in mind that the earlier you apply before your full retirement age, the less you will get your full benefit, and this is a permanent reduction. For example, taking Social Security at 62 would represent a reduction of about 30% in lifetime benefits, said David Haas, certified financial planner and owner of Cereus Financial Advisors. “It’s a lot and will be very meaningful for the couple.” The way you claim your Social Security benefits also affects what your wife will get in hers – reducing your benefits is the same as reducing hers if she were to be widowed.

Again, I can’t say for sure if you retired too early. If that wasn’t the answer you were hoping for, consider working with a trained financial planner to look at your numbers in more detail. And just because you’ve already retired doesn’t mean you can’t keep making money. If you left because you had to or just didn’t like what you were doing anymore, consider a part-time or freelance job where you can set your own hours and do what makes you happy. This excess money will mean less withdrawals from your retirement accounts, allowing your assets to continue to grow.

“The good news is that the decision to retire isn’t absolute,” Haas said. “This couple could still get jobs, even jobs with benefits. They can move on to different jobs that they might prefer, even those with lower wages. Benefits can solve the health care problem until age 65 and by avoiding taking Social Security early they can lock in higher lifetime benefits. “

Readers: Do you have any suggestions for this reader? Add them in the comments below.

Do you have a question about your own retirement savings? Write to us at [email protected]

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