Peter Dunn, Special to USA TODAY Published 8:00 a.m. ET Oct. 26, 2019 | Updated 8:49 a.m. ET Oct. 28, 2019
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I am now 65 and on the verge of retiring. I am reluctant to retire but am feeling it is time to leave my position for various reasons. I hope to continue working part time if I find a job where I do not feel chained to an office each day for a committed amount of time.
Two years ago I began using an adviser to help me navigate my upcoming retirement years. After filling out their profile online and speaking with advisers there from time to time, I am told I am on course financially to have adequate funds to age 100.
I own my home, no debt currently, $180K in investments. Estimated monthly expenses $2,600. Pensions total $600 monthly plus SS at about $1,860 monthly.
I would like to never worry about money again but find that it is on my mind a lot. Sometimes I get weary holding back on spending for fear of getting derailed. Any words of wisdom? — Donna
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Pete the Planner: The first time I read your email, my stomach dropped. How in the world is $180,000 going to hold up against a 35-year retirement? I ran the numbers over and over again. I kept arriving at the same answer, an answer that really surprised me — As long as things don’t get weird, you’ll be fine.
For the last ten years or so I’ve been convinced the vast majority of Americans, if able to successfully retire, will do so because they don’t need a lot of money, as opposed to a successful retirement based on having a lot of money. This isn’t an exercise in semantics. Donna, your financial scenario is proof of my theory. It certainly blows the doors off the misconception that a person needs over $1 million to retire successfully.
You paid off your house, which eliminated your largest monthly bill. You have no other debt, which would have forced you to pay for your past. And your lifestyle never really strayed too far away from your available retirement income. By my standards, you could arguably teach a master class on this topic.
Of course, there are a few risks and a few tricks you’ll need to take the time to understand in order to give your plan the highest chance for success.
Your willingness to work part-time may be the key.
If you’re able to secure part-time employment, even for just a couple of years, your situation goes from tenable to surprisingly good. Assuming you’ve estimated your retirement income and expenses correctly, you’ll have a minuscule monthly deficit to fill. When retirement begins, it’s only $140, if your $600 monthly pension payment is net taxes. You won’t owe tax on your Social Security benefit, as long as your part-time job, plus your pension income, plus half of your Social Security income doesn’t exceed $25,000 per year, if you’re single. In other words, the most money you can make in your part-time job without subjecting your Social Security income to taxation, is $6,640 per year ($553 a month).
I’d be remiss not to mention the impact healthcare expenses can have on the soundness of your plan. But at this point, you likely know that, and you also know there’s not much you can do about that.
Other than healthcare, your plan will succeed unless one of two things happens. First, if you have a major financial emergency soon, somewhere in the $25,000 to $30,000 range, you could be in trouble later in life. Second, if your monthly expenses involuntarily increase by a few hundred dollars, before inflation takes hold, you could be in trouble too. But here’s the thing — There’s nothing you can do about that. Sure, you can resolve to keep your monthly expenses low, but if life intervenes and forces new and/or higher monthly expenses on you, the minuscule monthly shortage will turn into a large shortage. That’s a problem.
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Working a part-time job, as long as it remains fulfilling, will strengthen your retirement strategy. The wages will fill your income gap, allow you to save a bit of money each month, and most importantly, prevent you from tapping your $180,000 nest egg. Your biggest self-inflicted risk is to become dependent on the part-time income by raising your monthly expenses. If you do this, the moment you no longer have your part-time job, you will tap your nest egg at a much more aggressive clip.
Congrats on a long and successful career. Enjoy your retirement.
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