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I am a 59 year old former union construction worker with a full pension of $80,000 per year with no COLA. I also collect $3,400 a month in Social Security Disability. My wife is 59 years old and is an executive assistant to the chief operating officer of a large hospital, and her income is $68,000. My wife has $425,000 in her 401(k).
We have about $180,000 in debt at 2.5%, which we make biweekly payments and expect to pay off in about 8 and a half years. Her wife plans to receive Social Security at age 62. Her pension is also $100,000. Do you have enough income to live a comfortable life? Do you travel once or twice a year?
look: I’m 71 years old and can’t decide whether I should pay off my mortgage in full or take a joint pension which is cheaper. What should I do now?
Have questions about saving for your retirement? Email us at HelpMeRetire@marketwatch.com
Dear readers
Only you and your wife can really decide whether you have enough income to live a comfortable life. It sounds like you’re in a good situation, but there are some exercises you can both do to find an answer.
First, add up all of your current and anticipated sources of income in the near future. You can rely on your pension, Social Security Disability, and her income. How does it fluctuate over time? For example, if SSDI stops, when will you receive Social Security retirement benefits instead? When will your wife access her retirement account or when will her pension start?
Next, calculate your expenses. You get something very granular. Start with essentials like your mortgage, taxes, utilities, home maintenance and upkeep, health care (doctor’s visits and medications), and groceries. Then add in any extras like eating out, vacations you want to take, extra entertainment, and, of course, money you’ve set aside for emergencies.
A note about emergencies: To be on the safe side, your emergency savings account should have a year’s worth of expenses (if not more). That money is a liquid asset and should be easily accessible. Do not touch it except in an emergency. And if you have extra income in retirement, it’s not a bad idea to put more money toward savings in the short and long term. You never know when it will be useful.
Next, review your assets. Check your wife’s 401(k) plan and how it’s invested and make sure it’s properly allocated. For example, you don’t want them to be too aggressive, but at your age it helps to take some risks to continue growing. A trusted, qualified financial planner can help you nail down your asset allocation. Look at your annuity and understand its terms and provisions, including when it starts, what to expect from your annuity, and whether there are any tax implications.
See also: My husband says that if we continue to rent, we will become “homeless.” We are 68 and 74 years old, would we buy a house instead?
If you have not already done so, please set up an account on the Social Security Administration website. This will help you understand what to expect from your benefits and ensure that all the information the Social Security Administration is providing for you and your wife is correct. The site can also estimate how much she can expect from benefits at age 62 compared to after her full retirement age, so you can make an informed decision about your claim. You may decide that you can wait until she turns 62 to file her claim so that her benefits increase.
Finally, any of these factors may change. It’s important to have a backup plan so you don’t get confused or panic if something serious happens. As you mull over the numbers, talk with your wife about what could change and what you would do if it did. For example, if you decide to move, if one of you gets sick, if the roof needs to be replaced, or if one of you needs it. My source of income has disappeared. It’s always best to be prepared.
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Have questions about your retirement savings? Email us at HelpMeRetire@marketwatch.com
