Retire at 60?

So Glenn – Can I retire at 60?

This is a tough one.  Lots of people want to retire early, and for various reasons.  But there are lots of moving parts to this.  Let’s break it down a bit. 

Where will you get health insurance?

This is your very first consideration, even before the money.  You know you won’t be eligible for Medicare until age 65, nor will your spouse.  COBRA continuation costs a mint.  You’ll be looking for private insurance on one of the exchanges.  How much risk are you willing to assume here?  A long illness with lousy insurance coverage could wipe you out – financially as well as physically.

When do you expect to take Social Security?

Currently you can take a reduced benefit at age 62, your full benefit comes at age 67, and maximum benefit at age 70.  How long can you wait before drawing yours?  Log into Social Security here to see your projected benefits at these ages. 

How much do you have saved? 

Let’s say you are 60 and want to draw $5000/month from your investment accounts.  You can safely earn 6%, and inflation is running at 3%.  You’d need to have $1,420,001 in your retirement accounts to produce this income that keeps up with inflation – which will be fully taxable. 

The good news is that early withdrawal tax penalties for retirement account distributions go away at age 59 ½.  But your withdrawals are taxable, and count toward the income that determines your Medicare Part B premium. 

How about inflation?

The calculation above assumes that each and every expense you have will inflate at 3%.  Not likely to happen that way.  If you’re paying off a mortgage, the payment won’t change – unless you have a variable rate, which I hope you refinanced in 2022.  How about healthcare?  It never stops going up.  And the price of eggs lately?

Can you afford a long illness?

Do you have some long-term care insurance in place?  Either through a stand-along LTC policy or as riders on a life policy?  Assisted living facilities start at around $5K/month, and nursing homes are much more.  How much will your insurance cover?  Don’t look to Medicare for this – it provides limited coverage for skilled nursing care only after a hospital stay of 3 days or more. 

To what, exactly, will you retire?

This is a qualitative question, rather than quantitative.  In other words, what are you going to do with yourself all day?  Remember – you’ve been used to productive work and achievement.  Now all of a sudden that is no longer there.  If you have found your identity in your professional function,  and that is all of a sudden taken away, now what?  You start looking to everyone else to make you happy, and that’s a formula for alienating everyone who cares about you.  Read Retire to What here. 

Look at CameronDowning's retirement financial planning package

This is the kind of planning we do for our clients – both qualitative and quantitative, going deeply into client attitudes, goals, and cash flow.  We offer a financial planning package here for those getting serious about it. 

Best to all,

--Glenn J. Downing, MBA, CFP®

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