I’m 66 – Can I Retire?
Are you 66 years old and wondering, “Can I retire?” You’re not alone. We have a lot of clients come to us for retirement planning that ask this very question. People want to get out of the rat race and enjoy life, and we actually read an article on Market Watch with a person asking this exact question.
Unfortunately, there is no standard answer to give you because the way you secure your retirement may be different than how someone else has planned for their retirement.
We do this every day. We know each element it takes to retire comfortably. Unless you’re working as a financial advisor, it’s not your job to know every little detail that shows you’re ready for retirement.
In our most recent podcast, we walk through the question of can I retire?
Let’s find out what we talked about.
Can I Retire?
What prompted this article is that a man who is 66 wrote into Market Watch, said he has $2 million in retirement and just wanted to retire and golf. We have folks with far less in retirement that have been able to retire and some with far more who have not.
Someone may read this and say:
- You have $2 million. Of course, you can retire.
- You have just $2 million? Of course, you can’t retire.
Let’s look at this man’s scenario. He is 66 years old and four months. He has $2 million in retirement, plans to have $3,300 in Social Security very shortly and works as a consultant three days a week and wants to leave his position.
He also has:
- $1.6 million in retirement accounts
- $600,000 in his wife’s retirement accounts
- A daughter who still lives at home
- A modest home that he owns
- $9,000 – $10,000 in expenses
- $6,000 in taxes and insurance
- Home is paid off
As financial planners, we’re going to say to this individual, “Job well done.” This individual has done a great job paying off his home and saving over $2 million for his retirement.
Ultimately, dollars in and dollars out will dictate if this person is able to retire at 66 or not.
First, we’ll have a conversation with this individual to better understand their:
- Travel goals
- Legacy goals
- Things they’re worried about
- Health condition
We’ll want to create a retirement-focused financial plan that looks at multiple layers of a person’s scenario to understand if retiring now is possible with what they’ve saved and what they want in their retirement.
If you’ve read our blogs or listened to our podcast, you know that we mention the GPS retirement system a lot.
This system considers:
- Where you’re going
- Where you are right this moment
A fact-finding discussion that we have with our clients allows us to know a person’s starting point and where they want to be in the future.
What we’ll do is run a person’s financial plan at a rate of 4% to 5% because we know that if this plan does good, a higher rate of return will just make life easier. We don’t recommend running a plan at a higher rate of return than this because you’ll have to make riskier investments that can cause you to lose a major portion of your retirement.
The other thing we want to look at is why this person’s expenses are $9,000 – $10,000. We often find out that a person is spending $3,000 a month for traveling, so we then create a fun fund for 10 years.
Often, a person will travel for the first 10 years and then it tends to slow down, saving money in the process.
Taxes are also something to consider. If you’re paying a lot in taxes, it can reduce your ability to retire now or stay in retirement over the long term. Tax planning may be necessary for this individual because they may have deferred taxes, which means the $2.2 million in the bank is far less.
Next, we’ll go into scenarios.
What-if Scenarios
If we’re confident that the person can retire, now or in the future, then we can start looking into what-if scenarios. For example, if the person asking if they can retire has medical issues, they may be concerned about long-term care, which is very expensive. We can then consider:
- Long-term care insurance
- What would happen to the person’s retirement if long-term care were necessary?
What-if scenarios can be very positive, or they can be negative. Perhaps you want to buy a boat, RV or a second home. This will be considered in a what-if scenario.
We know that the individual in question has a lot of money in retirement accounts and a home paid off. Next, we would run a full retirement plan that shows us:
- How much money the person has in their accounts every month based on the rate of return and expenses
- How long the person can be retired
- What life will be like from a financial standpoint if they reach age 90 or 100
If the person has more than enough money left at 90 in their retirement, we can then consider a long-term care scenario. Using the average cost for long-term care, stay length and so on, we can then find out the cost for the level of care, which is often $400,000 – $600,000.
Then, we will look at the remaining retirement balance when the person in long-term care passes, and we’ll see if they can live until 90 or 100 on the remaining retirement accounts.
We may find that self-insurance is possible, but if we find that you start running low on assets early, long-term care insurance may be a better option.
As you can see, there are many moving parts in retirement that you need to consider. We may be a bit biased, but everyone should sit down with a financial advisor to go through all these scenarios to better understand if you can retire and when.
We want to ensure that if you do retire, you can handle the what-ifs that come your way and have peace of mind heading into retirement.
If you have individualized questions that we haven’t covered just yet, feel free to contact us and we’ll be more than happy to answer them for you.