I’m 50 and have $400,000. My wife is a teacher. Can I retire at 55?
“I also have $85,000 in my brokerage account and would like to grow that to fund my $300,000 cash goal.” (The subject of the photo is a model.) – Getty Images/iStockphoto
I’ve been reading your column for years.
I would appreciate your advice on whether I could plan to exit corporate life given my current family situation. If I have $300,000 in cash in a bank in my home country earning 4% interest, I believe I can live comfortably enough on interest income alone until I turn 70 and claim Social Security. I want to keep my 401(k) investment to an 80/20 stock-bond allocation into my 70s and start Roth conversions after I stop working in my mid-50s.
Here is some background about me:
I am a 50-year-old immigrant, I am married, and my wife is the same age. We live in New York and have been together for 12 years, married for 10 years. We have a 1-year-old child who became pregnant through in vitro fertilization after years of trying and losing. Our household income is $250,000. My wife is an educator who earns $100,000 annually, has a pension, and 15 years of service. He contributes 5% to a voluntary 403(b) even though there is no employer match.
Our monthly housing expenses (mortgage, HOA, taxes, and utilities) total $4,500 for a condo we purchased a year ago. I recently started contributing to an HSA and plan to save $2,000 to $3,000 a year; I currently have $5,000 in my account. I maxed out my 401(k) and IRA, and after 15 years of work experience, I have a retirement account of about $400,000.
I have been working in corporate America for 10 years, and due to the toll this has taken on my health, I want to stop working in about five years to spend more time with our child and support my wife. We do not currently pay for child care as a relative provides full-time care during the week. We have no debt other than our $500,000 apartment and have $50,000 in emergency savings.
I also have $85,000 in my brokerage account and would like to grow that to fund my $300,000 cash goal. If my business performance remains strong, I can invest about $10,000 a year. I save about $10,000 a year to build a house in my home country; I plan to move there and live for at least five years before deciding whether to return. If I go back, I’ll probably look for a job at a church, a non-profit, or a city government.
My wife can travel back and forth as needed to care for her aging parents.
In total, your current nest egg will yield about $40,000 a year before taxes. – MarketWatch image
Before you do anything else, seek therapy to understand what’s going on. Much of what we experience today is a reflection of our formative years.
Whether we realize it or not, how stress manifests itself and the label we give it—your gut reaction to your years working in corporate America, which may not actually be for you—can follow you through professional, personal, and geographic changes. Right now, I want you to feel confident that you’re making the right choice, given everything you have for yourself and your family.
New York City is an exciting, expensive, culturally rich, exhilarating, and yes, sometimes (and often) exhausting place. If you give up everything and move to your own country, will your spouse and child come with you? If so, will all the reasons you give for moving magically solve what’s going on? Maybe – I don’t know the answer. But I would feel better if you looked for these answers before making irreversible decisions.
You don’t mention the name of the country you’re from, but I’m guessing your cost of living will be much lower than New York City; Everything from your housing costs to your health insurance and medical bills. My colleague Alessandra Malito recently counseled a couple Who wants to retire to Malaysia. They had many factors to consider, including Medicare, which wasn’t there, and filing taxes as a U.S. citizen.
You will face similar problems in your 50s, and they will become more challenging as you get older and the limited nature of your finances becomes more apparent. You must earn 40 credits to qualify for Social Security benefits; this requires at least 10 years of study (earning four credits per year). You must also be at least 62 years old to receive benefits; however, the longer you wait until your full retirement age (67), the more benefits you will become.
Consider how your brokerage account and HSA can be used. financial bridge before Social Security starts or to cover emergencies. Even abroad, you’ll need to plan for medical expenses (private insurance or out of pocket) that will affect your withdrawals. (It is difficult to give you full advice on medical costs as we do not know if your country of origin has a public healthcare system.)
Let’s run the numbers: Your $300,000 in cash at 4% interest will yield $12,000 per year. Your $400,000 retirement account will produce about $28,000 per year before taxes, assuming a 7% return. In total, this gives you roughly $40,000 per year before taxes; but you don’t have Big Apple expenses, and you’ll theoretically have more than $700,000 in five years. This stress test also does not take into account your wife’s pension.
If inflation averages 2% to 3% per year, your purchasing power decreases over time. Take taxes into account, especially if you’re planning Roth conversions or taking traditional IRA distributions early. This is a back-end calculation and does not take market volatility into account; Investment returns fluctuate, and if a market downturn occurs during the first few years of early retirement, sequence of returns risk can significantly impact your portfolio.
As you mentioned, you may need to maintain flexibility through part-time work and/or a more conservative withdrawal strategy. (To read Here How can withdrawals be divided into three “buckets”?) Even so, if you live modestly, your plan is theoretically feasible, especially if you no longer live in one of the most expensive cities in the world. Think about how you can buy a house in your home country without a mortgage and even work part-time.
Finally, when you delay your Social Security beyond the full retirement age of 67, you get roughly 8% extra per year; If you take your Social Security at 69½, you’ll get about 4% extra. If you die before claiming Social Security, your spouse will receive 100% of your full retirement age benefit, not the amount you would have received in arrears. If you die while claiming Social Security, your wife will likely receive 100% of the amount you claimed.
With an income as large as $250,000 a year, the stress you feel may be replaced by your efforts to protect your nest egg.
