“If I work an extra year I’ll get about $4,600 a month from my retirement.” (Photo subject is a model.) – Getty Images/iStockphoto
I am 64 and hope to retire next year. I have $140,000 in savings and about $260,000 in my retirement fund. I take in about $2,200 in monthly rent from four properties and will get about $700 in Social Security. All of my homes and vehicles are paid for and I have no debt.
If I retire next October, I will get about $3,600 a month in my retirement. If I work an extra year I’ll get about $4,600 a month in my retirement. Taxes and insurance for all 4 homes comes out to be around $1,200 a month. I don’t want to worry about money.
Will it be OK to retire?
Hopeful Retiree
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If you don’t have enough money for the kind of travel and leisure activities you would like to pursue in retirement, work for as long as you can. – MarketWatch illustration
Wait to retire and sell your rentals.
That’s the short answer. But I have more to say, so buckle up. Your rentals bring in $1,000 a month after expenses and all the hassle of being a landlord on four separate properties. You’re giving yourself a lot of work for a modest return. Let’s say you sold your properties and made $500,000 and invested that in the S&P 500 SPX; if you earned an average of 7% a year on that investment, you could still withdraw 4% a year ($20,000 annually or $1,667 a month), which would last you the next 30 years or more. It’s a better return, although you don’t have expenses to write off. But it’s also less work.
Waiting another year to retire is a no-brainer. You will get another $1,000 a month in your pension. But examine the fine balance between your income and expenses. You don’t say what your annual expenses are now and/or will be in retirement, but it’s probably safe to say you’re close to exceeding them. The average spending for those aged 65 or older is roughly $4,345 monthly, according to RetireGuide.com. This covers housing, food, healthcare and entertainment. In their survey, nearly half spent under $2,000 monthly, a third spent $2,000-$3,999, and almost 20% spent over $3,999.
If you don’t have enough money for the kind of travel and leisure activities you would like to pursue in retirement, work for as long as you can, even part time. If you continue to work while receiving Social Security benefits, you will continue to pay Social Security tax. The age at which you “break even” — making it worthwhile to forego benefits for a larger sum at a later date — should not be the only basis for what you choose to do; your decision depends on a range 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 62, but you get reduced benefits; at that age, you get 36 months of delayed retirement credit, which increases every month past the full retirement age until you reach 70. (If you were born in 1957, your maximum retirement benefit would be 128% of your full retirement benefit at 70 years of age; this assumes FRA starts at 66 and 6 months. If you were born in 1955 and delay Social Security until age 70, you 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 taking Social Security is when you stop working. That’s when you will need it the most. Some people will advise you to take your benefits at 67, pointing to all the things that can go wrong over the next 10 years, particularly with your health. If you are more optimistic, you’re healthy and have “good genes” — that is, your parents lived to a long age — and you don’t smoke or drink to excess, you may feel OK waiting until you are 70 and collecting roughly 24% more depending on your tax credits.
I’m taking you at your word, and you say, “I don’t want to worry about money.” If that is your guiding light, see these next few years as a gift and aim to reduce as much work-related stress as possible. You could, for example, start taking up 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 at some workplaces). The good news is, you can probably afford to retire next year if you really want to, but know that your decision will be hard to reverse.
Related: ‘I fear a significant decline in the S&P 500’: Do 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 America?
I’m a veteran, 57, and on disability benefits. How do I persuade my wife, 52, to downsize so we can both retire?
I received an inheritance from my father’s estate, but the executor wants me to give it back. What should I do?
‘Luckily, I did not mix our finances’: My husband is 7 years younger and has dementia. What happens now?
