“My husband and I are about four years away from retirement – if you think we can retire.
Our home is worth about $200,000 and is paid off. The only debt we owe is a car loan at zero interest. Our kids are grown and doing well. We have two grandchildren.
My husband has about $410,000 in his 401(k) and I have about $95,000 in mine. We contribute to these and get a company match. We each have IRAs with just over $30,000, but we’re not adding anything to these accounts. We have $19,000 in the bank.
My husband’s social security will be about $2,300 a month and mine is about $1,800. Neither of us will receive a pension.”
Do you think we can retire in 4 years or should we plan on working longer?
We both enjoy your radio show and your sense of humor. We also appreciate your willingness to talk about God and pray for people. We look forward to our Saturday morning breakfasts with you. Thank you.
You are very kind. Except for the breakfast part (I wish I could figure out how to eat a stack of pancakes and host the show at the same time. I keep getting maple syrup on the microphone) I look forward to my Saturdays with you as well. God has certainly blessed us all.
Thank you for the detail of your question. However, there is one detail missing – what will you be spending each month in retirement? Answering this one question will make answering any additional questions quite easy. Not having that information means my answer will need to be a bit more general than I would prefer.
In very simple terms, if your monthly expense level is at or below $4,100 (your social security benefits) you can retire today. Don’t wait four years. Don’t pass Go. Don’t collect $200. Go immediately to retirement. Of course, it’s easy to see why. If your social security meets your needs your future financial security is very nearly assured.
If your monthly required income is at or below $5,900 each month your retirement in four years is also quite assured. Based on your current assets values ($585,000 +/-) and a four percent (4%) annual withdrawal rate you should see about $1,800 per month generated from your investment portfolio. Adding this to your social security benefits provides you with $5,900 or so each month.
If your monthly required is about $5,900 the challenge is a bit more interesting. You will need to measure your actual monthly needs against what you will receive from social security, the $1,800 or so you might expect from your current investments, and what you might generate from the assets you manage to save over the next four years.
You will be adding dollars (perhaps significant dollars – if you maximize both your 401(k) contributions over the next four years you could see your balances grow by more than $200,000) to your investment accounts. Such additional capital might add as much as $700 each month to your retirement income – taking you to about $6,600 per month.
If that income level doesn’t meet your needs it’s time for Plan B!
Check back with us for details of Plan B – if necessary.
If you have questions or comments, please send them to Gene@AskMtM.com