I’m 64, single, considering retirement after fighting cancer — I have $1.6 million. Should I retire?

So now I am considering retiring. Financially, I personal three rental properties that produce $1,250 per 30 days in internet revenue. My Social Security can be $2,500 per 30 days if I take it now, or $3,000 per 30 days if I wait till Full Retirement Age, which is 66½ years previous. My accounts whole $1.6 million, of which $700,000 are in particular person retirement accounts, $600,000 invested in shares with Fidelity and $300,000 in money. My estimated bills are $8,000 per 30 days. In 2021 about $10,000 per 30 days can be resulting from my COBRA medical insurance premiums. In early 2022, I can enroll in Medicare.

Looking ahead to your ideas.

Chris

See: I lived ‘adventurously’ but now my debts equal half my savings and we live ‘hand to mouth’ — how can I save for retirement? 

Dear Chris, 

I am so pleased to listen to your cancer therapies had been profitable and you’re cancer-free. That is a large reduction. 

Financially, you seem like protected to retire, advisers stated. You’ve achieved an awesome job saving, and also you have different sources of revenue, which is all the time comforting. With your present belongings, you can probably take about $60,000-$65,000 out of your portfolio yearly, assuming it’s correctly diversified, after which use rental revenue and Social Security revenue to fulfill your wants, stated Brenda Knox, a monetary adviser at Financial Elements.

You could even have the ability to take much less out of your portfolio after you’re achieved paying for COBRA. If you want $8,000 a month, much less your Social Security and the cash you get from rental properties, that may be about $4,250 a month ($51,000 a 12 months), or 3% of your portfolio, “which is very doable,” stated Scott Hammel, a monetary adviser at Apeiron Planning Partners. Of course, these figures are depending on varied elements, together with how your portfolios are allotted, in case your bills are roughly than you estimate and if something surprising pops up. 

Still, there are a couple of factors monetary advisers introduced up that I’d wish to share with you. 

First, one of the vital vital elements to retirement planning is determining an estimate for the way a lot you’ll be spending in it. You stated your estimated bills are $8,000 a month, or $96,000 a 12 months. You appear to be diligent about your saving habits, however ensure you take each doable expense into consideration when making that estimate. Does it embody a pleasant discretionary or journey finances, in addition to Medicare and well being care prices after 65? A single man can anticipate to spend $140,000 in retirement on health care alone, in keeping with Fidelity Investments. Are you planning to ever transfer, and would that have an effect on your month-to-month bills? And don’t neglect taxes, particularly in California.  

This may sound morbid, but additionally take into account what your life expectancy can be — which may also help you identify the way you withdraw out of your funds so that you just’re positive to have sufficient to reside comfortably your complete life. You’re cancer-free now, which is totally fantastic, however do you anticipate this to have an effect on your well being care prices later in life? And does your loved ones have a historical past of residing to an previous age? A monetary adviser may also help you create a retirement spending plan in addition to construct a steady trajectory to fulfill your entire short-term and long-term wants. This second of reflection may additionally assist you determine when to take Social Security. 

You could really feel compelled to assert Social Security now, despite the fact that it’s sooner than your Full Retirement Age. And some advisers even counsel you do, given your medical historical past and relying on your loved ones’s historical past of longevity, Hammel stated. But you need to try this within the first 12 months after unemployment stops, in order that the opposite revenue doesn’t make your Social Security taxable. 

You may additionally need to wait till your Full Retirement Age, if you happen to’re comfy leaning in your different sources of revenue within the meantime, and even later. Once you declare Social Security early, that discount in month-to-month advantages stays the identical for the remainder of your life. Comparatively, if you happen to wait till Full Retirement Age, you get 100% of the advantages owed, and if you happen to delay even longer, up till age 70, you’d get greater than you’re technically owed in advantages. 

If you determine to carry off on claiming Social Security, you possibly can as an alternative convert a few of your particular person retirement account cash to a Roth, which suggests you pay the tax at times withdraw tax-free afterward, or you possibly can simply withdraw from your IRAs as you go to fulfill your residing bills, Knox stated. 

“I’m comfortable with him dipping into the portfolio more in the first couple of years in exchange for the higher Social Security benefit down the road if his health is good,” she stated. “If he was my client, we’d review the Social Security question each year — discussing the portfolio and longevity assumptions.” 

Now to your investments. One of probably the most essential issues you are able to do in your monetary stability is guarantee you’re correctly diversified so that you just’re getting sufficient of a return, Hammel stated. “On this portfolio, a good rule of thumb is 4-5% distribution, so about $60,000 to $80,000 a year without significantly eating into principal, as long as it’s invested in a moderate risk tolerance,” he stated. Do your risk tolerance? Having an thought of how comfy you’re with danger will permit you to shift your asset allocation accordingly. 

You additionally have so much in money, which is nice, however all of that cash in that account will not be working as onerous because it might be, stated Glenn Downing, a founder and principal at CameronDowning. You positively want an emergency fund, however maybe with not as a lot as you at the moment have. Again, that is the place a monetary adviser may assist — knowledgeable planner may help you in allocating the correct amount right into a money account whereas additionally ensuring your danger tolerance and danger capability are aligned together with your portfolios. 

Also see: I’m 55, tired of ‘soul-crushing jobs,’ have $1 million invested poorly — can I retire now?

Also look into these leases you have. I couldn’t inform if you happen to meant $1,250 per unit or in whole in your rental revenue, but when it’s collective, that sounds a bit low for the Bay Area until they’re studios or one-bedrooms, Downing stated. You can finally elevate the hire, if even barely (and if that’s even a risk on this pandemic), or you possibly can promote and attempt to get a greater return within the inventory market. Rental items are a type of diversification, which is nice, however you might be able to do higher elsewhere, Downing stated.  

Even if you’re single, you need to have estate planning documents in place. Create a will and well being care proxy or energy of lawyer. I say this as a result of it doesn’t matter what, you ought to be accountable for what occurs to you and your belongings if you happen to turn out to be incapacitated or worse. If you don’t have these paperwork, the courts will determine for you. 

I’ll finish with this: Before you formally retire, have a plan for what you’ll do together with your days. The thought of retirement is usually one which brings pleasure — who doesn’t need a break from the hustle — however with none actual thought of what to do in retirement, it may shortly turn out to be a bore or perhaps a stress. 

You may already know what you need to do on this subsequent chapter, but when not, take the time now to evaluation any potential alternatives, resembling volunteering, some part-time work in a area you’ve all the time cherished or taking over a brand new passion. 

“This is a big planning point, even more than money,” Downing stated. “If he’s only 64 now and cancer is gone, he can easily have 30 years ahead of him.” 

Have a query about your individual retirement financial savings or the place to reside in retirement? Email us at HelpMeRetire@marketwatch.com