“If I work one more year, I will receive about $4,600 a month from my retirement.” (The subject of the photo is a model). – Getty Images/iStockphoto
I am 64 years old and hope to retire next year. I have $140,000 in savings and about $260,000 in my retirement fund. I receive about $2,200 in monthly rent from four properties and will receive about $700 in Social Security. All my houses and vehicles are paid for and I have no debt.
If I retire next October, I will receive about $3,600 a month in retirement. If I work one more year, I will receive about $4,600 a month in retirement. Taxes and insurance for the 4 houses amount to about $1,200 a month. I don’t want to worry about money.
Will it be okay to retire?
Hopeful retiree
Related: I am planning to retire at age 65 when my twins are 15. How will this affect their health care coverage?
If you don’t have enough money for the type of travel and leisure activities you’d like to do in retirement, work as long as you can. – Illustration by MarketWatch
Wait until you retire and sell your rentals.
That’s the short answer. But I have more to say, so buckle up. His rentals bring in $1,000 a month after expenses and all the hassles of owning four separate properties. You are giving yourself a lot of work for a modest return. Let’s say you sold your properties and made $500,000 and invested it in the S&P 500 SPX; If you earned an average of 7% per year on that investment, you could still withdraw 4% per year ($20,000 per year or $1,667 per month), which would last you the next 30 years or more. It is a better performance, although you do not have expenses to cancel. But it also means less work.
Waiting one more year to retire is a no-brainer. You will receive another $1,000 a month in your pension. But examine the delicate balance between your income and expenses. You don’t say what your annual expenses are now and/or what they will be when you retire, but it’s probably safe to say you’re close to exceeding them. The average expense for people age 65 and older is about $4,345 per month, according to RetireGuide.com. This covers housing, food, medical care and entertainment. In their survey, almost half spent less than $2,000 per month, a third spent between $2,000 and $3,999, and almost 20% spent more than $3,999.
If you don’t have enough money for the type of travel and leisure activities you’d like to do in retirement, work as long as you can, even part-time. If you continue working while receiving Social Security benefits, you will continue to pay Social Security taxes. The age at which you break even (making it worth giving up benefits for a larger sum at a later date) should not be the sole basis for what you decide to do; Your decision depends on a variety of factors, including your longevity, income, marital status, and predictions for your cost of living adjustment (COLA).
For people like you who were born in 1960 or later, your full retirement age is 67. The earliest you can claim is age 62, but you get reduced benefits; At that age, you get 36 months of delayed retirement credit, which increases each month after full retirement age until you turn 70. (If you were born in 1957, your maximum retirement benefit would be 128% of your full retirement benefit at age 70; this assumes FRA begins at age 66 and 6 months. If you were born in 1955 and delay Social Security until age 70, you would get 130.7%; your FRA is 66 and 2 months.)
Social Security is an insurance policy against living longer than you think. Of course, the best time to start collecting Social Security is when you stop working. That’s when you’ll need it the most. Some people will advise you to take your benefits at age 67, pointing out all the things that can go wrong in the next 10 years, particularly with your health. If you are more optimistic, healthy, have “good genes” (i.e. your parents lived long) and don’t smoke or drink excessively, you can feel fine waiting until age 70 and collecting about 24% more depending on your tax credits.
I take you at your word and you say, “I don’t want to worry about money.” If that’s your guiding light, consider these next few years a gift and try to reduce work stress as much as possible. You could, for example, start doing some retirement-related activities now for a soft launch into retirement and/or ask your boss if you can work from home a couple of days a week (although this can be a controversial topic in some workplaces). The good news is that you can probably afford to retire next year if you really want to, but know that it will be difficult to reverse your decision.
Related: ‘I fear a significant drop in the S&P 500’: Should I sell my tech stocks before it’s too late?
Previous columns by Quentin Fottrell:
“I think we’ve been lied to”: who exactly is considered rich in the United States?
I am a veteran, I am 57 years old and I receive disability benefits. How can I convince my wife, 52, to downsize so we can both retire?
I received an inheritance from my father’s estate, but the executor wants it back. What do I have to do?
‘Luckily I didn’t mix up our finances’: My husband is 7 years younger and has dementia. What happens now?
