We’re in Our 60s and Have Lost $250,000 in Our 401(k) Plans. Can We Still Retire?

We’re in Our 60s and Have Lost $250,000 in Our 401(k) Plans. Can We Still Retire?

I am a 61 year old female who has worked for the same financial institution since I was 16 years old. I will be 50 years in the company if I retire at 66. I lost over $150,000 in my 401(k) this last year, with a current balance of $749,000. I also have an annuity that will pay around $800/month. I was hoping to retire at 65 or earlier if possible.

I am married and my husband is 64 and plans to retire later this year at 65. His 401(k) balance is $340,000, after losing $100,000 last year. I have the highest income and he has to retire to care for his elderly relatives. We expect to inherit approximately $450,000 in the future from our parents’ estate.

Losses from our 401(k) plans have back our retirement plans. I now contribute 6% to the Roth investment, with company matching. My husband’s business has never matched his 10% contribution. Retirement before 65 would be nice but I have to wait until then for health insurance. I’m hoping I can put enough aside in my Roth to allow me to defer Social Security collection until I’m 67, if possible.

Are we on the right track? Can I retire before 66 or 67? We live in California and our current mortgage balance is around $95,000 with a house payment of $1,400 per month. Our house was recently appraised at $800,000.

Dear reader,

It’s wonderful to hear how much you and your husband have saved for retirement, although I’m so sorry to hear about your 401(k) losses. You’re certainly not alone – many retirement savers have seen losses in their investment accounts over the past year, and it’s very hard to see.

While you may be stressed to see your 401(k) balance drop at times (since the volatility is still not over), know that this money will be invested for a while. You’re in your 60s, and we now know that retirement can last decades after that. It’s both a pro and a con. The pros: you live longer, which is a blessing, and you still have many years for your portfolio to bounce back from market losses; The downside: You need this money to last you and your husband’s life, and there’s no way to determine exactly how much money you’ll need in that time frame.

It’s hard to say for sure if you’re on the right track, since we don’t know exactly what your retirement plan was and what your retirement expenses would be. That said, it sounds like you’re very involved in your financial plans, and that’s still a significant plus.

Here are some thoughts to consider: First of all, while retiring before age 65 sounds nice, if you can reach your 50th year in the business without being miserable, it will save you a lot of money in health insurance . You’re right, medicare only kicks in at age 65 and paying for health care out of pocket will be expensive. The less you have to spend on it, the better, as you won’t need to dip into your retirement accounts or other savings for it.

See also: ‘Is my financial planner crazy?’

Deciding when applying for Social Security may be difficult. Some people want or need their benefits as soon as they become eligible, while others want to wait until age 70 to get that extra money (the estimate is about 8% more each year between full retirement age and the age of 70). . But delaying Social Security only really works if you 1) don’t need that money and 2) expect to live much longer than 70 so you can actually benefit from the system you’ve paid into for so many years. years. Before making your final decision on when to apply for 66 or 67, assess your and your husband’s overall monthly and annual expenses, the income you expect to earn from withdrawals and a pension, and see if you should file your application earlier or if you can wait until later. Remember to plan alongside your husband. Coordinate spousal benefits can be complicated, but definitely worth taking the time to do.

A quick thing about your expected inheritance: while it’s nice to anticipate extra cash flow in a few years (even if it’s for some sad reason), you should try to keep those estimates out of your plans. concrete pensions. Run the numbers with the expected legacy and see how it might change your retirement goals and plans, but don’t be fooled. As the pandemic alone has shown, the unexpected can always happen…your parents might end up needing more money than they bargained for, or something else might happen to reduce this digit.

Strategizing with a Roth account is really smart, especially if you have a traditional 401(k), because it allows you to diversify your tax liabilities. Instead of having to pay taxes on all your retirement withdrawals, you can choose to withdraw money from a Roth based on calculations that keep you in a lower tax bracket. Just make sure to follow the rules—you must have the account open for five years (in addition to being 59½) to be able to withdraw the money tax-free.

Another consideration: long term care planning. As you can see from your husband’s experience caring for an aging parent, this kind of care and planning is crucial. In addition to deciding who or how you will be cared for, health care is increasingly expensive as a person ages, and long-term care insurance (or at least some sort of financial plan in place ) could make a huge difference in how much you pay for this care.

While you’re at it, review your current healthcare options to make sure you’re maximizing your benefits and paying so few as you can for all the care you need. You may have to wait until your insurance’s open enrollment period to make any changes, but it’s a great way to save money in the years before you retire. Your husband should also, assuming he starts Medicare this year. I know it can feel like there’s a million options to juggle when selecting health insurance, but the sooner you start combing through them, the more relief you’ll be.

When it comes to your home, you can decide now or later if it’s your forever home or if you plan to reduce at any time, but know that this is a major asset for you, your husband and your pensions. Yes, you can tap into your home equity, but depending on what you paid for the house and where you’re moving (not only for the price of the house, but also for the taxes and utilities associated with the purchase), you could make a lot more money if you choose to sell. It could definitely support your retirement lifestyle.

You still have time to decide if you want to retire at age 65 or older. You may see that you don’t mind working a few more years, giving you the opportunity to save even more for your future, or you may decide in the year before your 65th birthday that you don’t. just not. no longer want to work. Either way, over the next few years, keep an eye on your spending and saving habits – these habits make such a difference to a retired person’s comfort.

With your husband leaving the workforce to care for a relative, now is a good time to see how you feel about your savings and spending, and if you’ll feel safe when you stop working too. . From there, you might surprise yourself at what you decide to do to optimize your retirement.

This article originally appeared on MarketWatch.

Write to editors@barrons.com

Leave a Comment

Your email address will not be published. Required fields are marked *