So, you’ve just turned 60 and have $863,000 in your savings.
You might be wondering, "Can I retire now?"
The question isn’t just about a dollar amount; it’s very obviously a complex idea involving your lifestyle, future goals, and, most importantly, peace of mind.
As a Certified Financial Planner with over a decade of experience, I’ve guided hundreds of clients through the transition from a busy career to a fulfilling retirement.
Many people approaching retirement grapple with this question because they lack a clear understanding of what their savings truly mean in the context of their retirement plans. They’re unsure if their nest egg will support their desired lifestyle, cover unforeseen expenses, and last throughout their retirement years. This uncertainty often stems from not knowing how to factor in variables such as healthcare costs, inflation, Social Security benefits, and investment strategies.
Many retirees believe they must wait until their mid-60s to retire, leading to thousands of people delaying their retirement because they lack the information to determine if they’re retirement-ready.

So, CAN You Retire at 60 with $863,000?

Let’s dive into a case study to determine whether someone at age 60 with $863,000 can retire now and what compromises, if any, they might need to make.
First, it's important to budget for healthcare if you retire before qualifying for Medicare.
Establishing the Background Information:
  • Jim is 60 and his wife is 57.
  • Total Net Worth: $862,000 IRA and $25k in emergency savings.
  • Mortgage Payment: Reasonable.
  • Income: $153,000 plus $12,000 from other sources.
  • Retirement Expenses: $5,000 per month (including housing, healthcare, and vacations).
This means they’d be spending $5,000 per month after tax, with housing, healthcare, and vacations covered.

Analyzing the Scenario
When we analyze their situation, something seems off.
Don't get startled yet; there ARE adjustments we can explore. The goal is to have money left over, but currently, that’s not the case.

Scenario Modeling:
  1. Reduce Spending: The first thought might be to reduce spending from $5k to $4k per month. But we may come back to this after exploring other options, as we don’t want to immediately reduce our lifestyle.
  2. Allocation: Let’s review their investment allocation.
  3. Social Security: Adjust Social Security claims from 62/62 to 62/67.
  4. Spending Strategy: Implement a spending strategy to manage withdrawals effectively. This is crucial because many plans don’t reflect true retirement spending.
  5. Vacations: Factor in vacation costs.
  6. Part-Time Work: Consider part-time work for $30,000 annually for a few years.
  7. Increase Spending: Try to increase the spending while keeping vacations.
It’s possible to choose a combination of compromises to retire now. Alternatively, you might find the benefits of working an extra year or two more appealing.

If Jim wants to spend that extra $1k per month, he might lean towards part-time work for a few years or continue working full-time for two more years. Alternatively, he might find that $4k per month works for them.
Definitely, they should adjust their portfolio, ensuring they don’t liquidate within the next 5 years and plan for a horizon of 25+ years.
They have their emergency cash in place, the house is almost paid off, and they have several options to consider.

Key Takeaway

The most important thing you can do is get your financial story in place. This allows you to ask and answer these questions for yourself and build a solid retirement plan that aligns with your goals. Writing down your plan and making necessary changes is crucial to realizing the retirement you want.
Now you know what someone aged 60 with $863,000 needs to consider to retire now. You can assess whether you, too, are ready to make the jump to retirement. However, there are unique factors applicable to your retirement situation that we haven’t had time to cover in this short blog.

Watch the video linked above for more!

Retirement Planning