AN expert has revealed whether or not a couple can retire with their current monthly pension payments and savings.
Deciding on the right time to stop working can be challenging, and it’s best to seek assistance from a financial advisor.
A senior couple wants to retire this year with $140,000 saved (stock image)[/caption]
Those who want to do it must consider many factors.
These the lifestyle they seek to have, any ongoing health issues, current amounts in 401(k) or other investment accounts, and what they’ll get in contributions from the Social Security Administration (SSA).
Social Security monthly payments can star being obtained by qualifying Americans once they turn 62.
In many cases, it’s best to wait to start taking the funds until the age of 70 if possible, as that would result in the highest distributions possible.
For 401(k)s or Roth IRAs, cash can start being withdrawn without penalties at 59 and one-half years of age.
Either way, it’s a lot to consider, and that’s why a husband and wife recently sought advice from MarketWatch’s Quentin Fottrell.
The husband explained that he could retire at the end of 2025 and obtain monthly pension payments at $3,600 from military service and $1,500 from civil service.
Both those amounts would completely cover their cost of living.
On top of that, monthly Social Security funds at $3,500 could be used for travel or savings, according to him.
For savings and investments, the husband also noted about $140,000.
He calculated that take-home totals would be around $7,000 before life insurance, dental, vision, medical expenses and taxes.
After, it’s around $4,000, and given that his wife is a Japanese national and lives in the United States as a permanent resident, the husband detailed plans to enroll her in survivor benefits for the military and civil pensions.
That would give her around $5,000 monthly and a one-time distribution of $240,000 from life insurance.
Lastly, the husband noted that both he and his wife were relatively healthy considering their ages of about 65.
Where to save your retirement money
There are several different places where you can put the money you save for retirement. Each has different tax advantages, but not all of them are available to everyone.
401(k) – an employer-sponsored retirement account. Contributions are made pre-tax and many employers will match a certain percentage of your contributions. Taxes are paid when the funds are withdrawn in retirement.
Roth IRA – an individual retirement account. Contributions are made post-tax but withdrawals in retirement are not taxed.
TSP (thrift savings plan) – a retirement savings and investment plan for Federal employees and members of the uniformed services. They work similarly to 401(k)s but may have more limited investment options.
Pension – an employee benefit that commits the employer to make payments to the employee in retirement. Pensions are becoming increasingly rare.
EXPERT’S CONSIDERATIONS
But is the financial situation good enough to retire just yet?
While Fottrell noted that his answer was on a “razor’s edge,” ultimately, it was plausible and relatively secure for the couple to retire at the end of the year if they choose.
The expert also advised pausing on obtaining Social Security for a few more years if possible.
“Ordinarily, I would urge people to hang on until they’re 70 before claiming Social Security, especially if they are healthy,” he wrote.
“If you can retire and delay claiming your Social Security, all the better.”
Either way, Fottrell explained that based on the numbers the husband provided, at least 40% of monthly income would be leftover after expenses are paid, which is a positive, along with the survivor benefits for his wife.
Not to mention, if the couple has been married for at least 10 years, she would get 50% of the value of the Social Security funds should the husband predecease her, even if she didn’t work in the United States.
And she’d also get 100% of her own Social Security benefit at full retirement age, or about 8% more by waiting until 70.
FINAL VERDICT
The only thing the expert advised the couple be wary of is the current savings amount.
While it does cover two years of expenses, it could fall short if there are unexpected home repair or medical costs.
Overall, it’s possible, according to Fottrell, but waiting, especially until 70 for Social Security benefits, is still the most optimal route.
Financial guru Dave Ramsey also advised a “late bloomer” retiree to take crucial steps with $200,000 in student loan debt.
A couple at 65 also found themselves at a “crossroads” recently with $2.5 million saved as an expert recommended they “assess” habits.
