By Michelle Singletary | The Washington Post
So many people look forward to retiring. But the exuberance of the day you don’t have to work can be accompanied by a lot of anxiety.
Have I saved enough for retirement?
This question about financial security can overwhelm a lot of folks. I know it concerns me, and I’ve been saving for retirement since my early 20s.
Joining me last week for my online discussion was Jean C. Setzfand, senior vice president of AARP programs that address health, wealth and personal enrichment issues for consumers 50 and over. The questions came fast and furious during the chat, so Setzfand agreed to answer some in offline.
Q: My wife and I have about $1.5 million saved for retirement. She is already retired and receiving a pension of $48,000 per year. I am planning on leaving my job at the end of this year. We also own a small business that gives us about $25,000 clear per year. I may decide to work part-time initially, but not sure yet. She is a little worried that we don’t have enough yet to retire. What are your thoughts about our situation?
Setzfand: You and your wife sound like great financial planners. I think it’s wise for you to ask the question even if you’ve done your homework and saved for retirement. You are the best judge for what’s enough, but some of the questions you may want to consider are:
— What’s your plan in retirement and consider the near-term (5 to 10 years) AND the longer-term (20 to 30 years)? If you have a clear view on your lifestyle, you’ll have a better sense for the expenses (costs) required to support that life. Also, don’t forget to factor in where you will be spending your retirement as cost of living expenses can vary by location!
— As you consider your lifestyle, don’t forget to budget for health-care and long-term care expenses. Most people overlook the out-of-pocket health expenses, which really adds up (estimated at $250,000 for a 65 year old couple) and that doesn’t include long-term care costs.
— Your wife is fortunate to have a pension. Most folks today can only rely on Social Security as their sole source of a guaranteed lifetime income. So your decision on when to claim Social Security is also critical. Each year you delay will earn you roughly 8 percent more in income. The difference between claiming at 62 vs. 70 is roughly 75 percent (e.g., benefit at 62 is $750 vs. benefit at 70 $1,350). This amount is locked in for the rest of your life, so the difference does add up!
AARP has some easy to use calculators to help you run the numbers once again.
Singletary: This first question really caught my attention. Here’s a couple with more than a million dollars saved for retirement, and they still don’t feel secure.
But for those of you who have saved a lot of money — and $1.2 million is a lot — here’s some perspective. “According to a report from the Economic Policy Institute, the mean retirement savings of all working-age families, which the EPI defines as those between 32 and 61 years old, is $95,776,” reported Kathleen Elkins for CNBC.
Q: I am 66 years old and have Medicare, a supplemental policy, and a prescription policy. I am really happy with the lower premiums I am now paying compared to what I was paying before Medicare. Do you see any drastic changes in Medicare for seniors who already are on Medicare?
Setzfand: AARP is concerned with changes proposed in the Senate Health Care Bill. We strongly oppose any changes to current law that could result in cuts to benefits, increased costs or reduced coverage for older Americans. We are dismayed that — given Medicare’s long-term financial challenges — the Better Care Reconciliation Act of 2017 (BCRA) cuts a funding source that strengthens Medicare’s fiscal outlook, the additional 0.9 percent payroll tax on higher-income workers. Repealing this provision would cut Medicare funding by $58.6 billion, would hasten the insolvency of Medicare Part A by up to 2 years, and diminish Medicare’s ability to pay for services in the future.
Older Americans use prescription drugs more than any other segment of the U.S. population, typically on a chronic basis. As we look at ways to lower health care costs in this country, we believe that Congress must do more to reduce the burden of high prescription drug costs on consumers and taxpayers. Rather than address costs, BCRA simply repeals the fee on manufacturers and importers of branded prescription drugs. This repeal removes $25.7 billion from the Medicare Part B trust fund between 2017 and 2026, and leads directly to higher Medicare Part B premiums.
Q: I am 41 now with a military retirement and disability that brings me in $6,600 a month. I also have a federal job that I contribute the max into my retirement. (My organization also has a retirement plan they contribute to based on my salary. Also with my disability, once I stop working I can draw Social Security.) So my question is will that be enough for retirement?
Setzfand: Sounds like you’re on the right track! Here are some considerations for you to think about since I don’t have a complete picture of your situation.
- When do you plan on ‘retiring’?
- Your income may take a dip (even if your disability allows you to draw on Social Security sooner); and
- The sooner you retire, the longer length of time you need to support in retirement
- What will your lifestyle be in ‘retirement’? Will you have a higher expense base or lower?
- If you relocate, you’ll want to think about the specific location so you can estimate your cost of living.
- Don’t forget to consider your out-of-pocket health care AND long-term care costs.
Retirement rants and raves
I’m interested in your experiences or concerns about retirement.
Did you retire early and if so, how did you do it?
Is retirement everything you hoped for?
Are you scared you’ll run out of money?
Sharing your story might help others. So send your comments to firstname.lastname@example.org. Please include your name, city and state. In the subject line put “Retirement Rants and Raves.”
Steve Katz of Falls Church, Va., has a question for you savers out there faithfully squirreling away money for retirement.
“I recently turned 50, have what I believe to be a reasonably decent amount saved for retirement but also face some significant insecurity regarding my current (well-paying) gig,” Katz wrote. “I am also in good health and single with no kids. I am consequently struggling with wanting to be ‘the ant’ and save enough for retirement but also worry about getting to my 60s and regretting not having done more when I was younger and had the money. So in a sense I think I am asking if you’ve heard from anyone saying they have ‘grasshopper regret,’ i.e. they were so focused on savings they didn’t do things — which cost money — when they were younger but now can’t because of age/infirmity?”
I’d like to hear from the grasshoppers, too.
Any regrets on saving and missing out on some fun? Send your comments to email@example.com.
I believe that wealth happens intentionally and that means for me reading as much as I can about all things financial, especially retirement.
In this section of the newsletter is devoted to postings from retirement blogs. Got a favorite blog or specific posting let me know.
Timothy Wolfe from New Mexico said he’s a big fan of The White Coat Investor, which is written by Dr. Jim Dahle, an emergency physician who decided to take his financial future into his own hands.
Wolfe recommends this recent post: How To Learn About Mutual Funds
I asked Wolfe why he liked this particular blog.
It “caters to my demographic — professionals with higher income than the societal average, but not high enough to not have to think about money (primarily doctors, but he’s acknowledged a broader professional audience),” he said. “I think that group sometimes gets lost in between financial advice for people with lower income or more dire situations, and people with such significant wealth that they don’t really need to stress about retirement so much as not mess up an already good thing.”