“I also have about $300,000 in a 401(k).” (Photo subject is a model.) – Getty Images/iStockphoto
I am 57 and want to retire next year. I will have two defined-benefit pensions that should bring in close to $7,500 per month. I also have $300,000 in a 401(k). My wife has a 403(b) that currently sits at $650,000. We currently have a mortgage of $1,400 per month and very little debt beyond that. My health-insurance premium through my employer-sponsored plan will be $880 per month, which drops to $567 per month when I hit 60. I say I can retire, my wife says no. She will be 60 as well next year. Thoughts?
This is not a decision that should (a) be taken lightly and (b) be taken without the guidance of a financial adviser who goes through your assets in forensic detail. – MarketWatch illustration
There’s no denying it: $7,500 a month is a lot. But if you retire next year, brace yourself for 30 years on a fixed income.
Your question is multiple questions rolled into one: You say your two defined pension plans will bring in $7,500 a month, but for how long? Are you withdrawing 4% from those plans or less? How long do you expect to live? Are you in good health? Have you factored in private health insurance until your Medicare kicks in, or will your wife continue working and provide you both with employer-sponsored health insurance? Do you dislike your job? Could you work part-time? When will your mortgage be paid off?
This is not a decision that should (a) be taken lightly and (b) be taken without the guidance of a financial adviser who goes through your assets in forensic detail. They will ask you what kind of retirement you envision for yourself: vacations, hobbies, income etc. It’s a tempting and exciting prospect. Sure, everyone deserves some downtime, even if not every American can afford to retire, but your wife is exercising caution for both your sakes. She’s not trying to negate your wishes; she’s trying to make sure you both have a secure and comfortable financial future.
You could possibly retire on $1 million, to pick a round number, but there’s no guarantee that it will last you for the rest of your life. Using the 4% rule — withdrawing 4% of your nest annually over a 30-year period — you would take out $40,000. U.S. adults, on average, say they’ll need $1.46 million to retire comfortably, up 15% over the $1.27 million reported last year, according to a recent study by Northwestern Mutual. People’s “magic number” for retirement savings has risen 53% from the $951,000 target Americans reported in 2020.
You may experience unforeseen health events as you age, and you should obviously make sure you’re fully covered before you turn 65, if you do decide to retire early. The average premium for single coverage health insurance last year was $8,951 annually, according to KFF, while the average premium for family coverage was $25,572 per year in 2024. You may also wish to think about long-term care insurance. Long-term-care policies cost more the older you get; a person who waits until 65 to purchase such a policy pays around $3,135 a year, AARP says.
The Social Security Administration and AARP provide retirement calculators that attempt to answer the question of whether you have enough money to retire. You can input your assets, projected retirement spending, life-expectancy assumptions and tax estimates. Longevity is a big unknown factor. The average U.S. male who reaches the age of 65 can expect to live to around 82, according to the SSA. Retirement calculators are also useful in that they can encourage financially savvy people to save more when they see what’s ahead, research shows.
If you do retire at 58, will you be able to hold off on claiming Social Security until you can maximize your benefits? Most people — 28.4% of men and 26.5% of women — take Social Security when they reach full retirement age, which is between 65 and 67, depending on the year a person was born. Meanwhile, 8.4% of men and 9.3% of women wait until age 70 or later to take their benefits, according to data from the Social Security Administration. Social Security offers a bump in your benefit amount if you wait until 70.
You get 100% of your Social Security benefit at full retirement age, which is 67 for anyone born in 1960 or after, and you receive a lesser amount if you claim at any time from 62 until full retirement age. If you wait until age 70, you receive roughly 8% more per year. Some advisers say it can work out roughly the same whether you start taking your benefits at 62 or at 70 — once again, it all depends on how long you live. Given the possibility of survivor benefits and spousal benefits, this is a conversation you and your wife can have together.
Research published by economists at the Federal Reserve and Boston University recommended that “virtually all” workers ages 45 to 62 should wait until after they turn 65 to draw their Social Security, and more than 90% should hold out until they are 70. For people born in 1960 or later, like you, full retirement age is 67. Social Security is an insurance policy against living longer than you think you might. Even if you delay claiming Social Security, you still need to sign up for Medicare at age 65. Working part-time could be a compromise.
You have given yourself a year to make up your mind. Use the time wisely to explore your future financial landscape.
