I am disabled and my husband is our wage earner. We are both almost 70 years old. We get social security and some monthly pension payments that are not particularly high.
With his current income, we're bringing in approximately $ 99,000 before tax. Without his income, we would be making about $ 65,000 a year. We have a $ 1,310 per month mortgage plus a rental car payment and credit card that we are working on to pay back. We also need to consider the monthly cost of living.
We have some pension funds that we need to add in the next few years, but we are trying to stop this if possible. These funds are not substantial – maybe around $ 160,000. We are unable to move and I see no way for us to retire my husband.
I am so concerned about this and I need some guidance. Can you help?
I understand it's scary when you think about your income dropping by a third. But with retirement, you only have so much control. Sure, you can plan to work forever, but few of us actually will.
You have to accept that your husband's retirement is inevitable, but hopefully you have some flexibility on the timeline. The real question is, how will you survive if your annual pre-tax income is reduced by $ 34,000?
I'm curious to see if your husband wants to retire. If so, does he share your concerns? If the two of you are not on the same page here – as in, you both want him to retire within a certain amount of time – I doubt anything I say is helpful. You both have to make sacrifices to achieve this.
You know your expenses better than I do. Are you spending virtually every penny of your current $ 99,000 income? If so, I don't have to tell you what challenge you are facing.
But let's put this into perspective. Around a quarter of retirees depend on their social security benefits for at least 90% of their income. (Of course, this is not a retirement I would recommend to anyone who can avoid it.)
For couples each receiving the average monthly benefit in 2020, it is just over $ 3,000 per month. You'll see a guaranteed income of roughly $ 5,500 between your social security and your pensions – before you dive into your retirement savings. While this may not get you your dream retirement, many seniors get by on less.
I especially like your plan of delaying your retirement drawing for as long as possible, but I think you should withdraw any money you need to pay off the credit card. Since you are both over 59 ½ years old, you will not pay an early withdrawal penalty even though you owe tax if it is a non-Roth account. Given the high credit card interest rates, this debt is likely to cost you far more interest than you earn on it.
Unfortunately, there are usually no good ways to get out of a car lease. Please promise me that the last lease payment you will make for this car will be your last lease payment. When that lease expires, you should consider making a small cash out of your retirement money to secure yourself a no-frills vehicle, whether you are taking the option to purchase your current car or buying a new drive that is used for you. The aim is to keep your monthly expenses as low as possible.
Furthermore, could you do a test run trying to live on $ 5,500 a month? This is the only way you can find out what deficit you are facing. Once you've tried life on an age budget, you can start planning a payout strategy.
The reality is that you are faced with difficult choices here. What's even more difficult is that these are cuts that you have to make for life. But you should think of this as something you have to do. You can't expect your man to be able to work forever.
Some people amass the kind of fortunes that make separate summer and winter homes and lazy days retired at the country country club. But they are by far the exception. Fortunately, you don't need these things to be happy in retirement.
Focus on what you gain and what you give up. You will be giving up money, but you will have more time together. At almost 70, your husband has the right to retire. Getting there is doable, but you both have to work together.
Robin Hartill is a certified financial planner and senior editor at The Penny Hoarder. Send your tricky money questions to (Email protected).
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