(Q&A) Retiring Early

May 2018


Dear Rick:
I am 61 years old, single, with no dependents. The company I have worked at for over 20 years announced that they’re going out of business. My original game plan was to work until I received my full Social Security, which is another five or so years. At that point, Social Security would cover all my needs. I probably can find another job but it won’t pay what I currently make. Therefore, I’m just thinking of retiring. I figure by the time my severance and unemployment benefits end I’ll be 62 and can collect Social Security. I am divorced and I don’t need much to live on. If I collect Social Security at 62, I figure I would need about an additional $500 a month from my portfolio. My financial situation is I have about $10,000 in the bank for emergencies, and I have about $150,000 in my 401(k) Plan. My question to you is do you think I can retire, or should I work?



Dear Pete:
I would love to tell you that you can retire because I know how difficult it must be to lose a job that you’ve been at for over 20 years; however, I can’t. I believe that the prudent and smart thing to do would be to work for another five or so years when you are eligible to receive your full Social Security Benefit. I think your original game plan before you lost your job made sense and one you should follow, because it puts you in a position where your Social Security would virtually cover your entire living expenses. That leaves you with your IRA which would have five more years to grow to supplement your lifestyle.

One of the things that I constantly stress to investors who are getting ready to retire is the fact that they need to make sure they have a rising income throughout their lifetime. When someone retires in their early 60s it is important that they have money that they can let reinvest and grow for the future. After all, someone in their 60s can easily live another 30 years, and go back 30 years ago, you will see that the cost of living was substantially less than it is today. After all, 30 years ago no one had to worry about cell phones or the internet. Today those items are not considered luxuries but rather, essentials.

In the situation at hand, you don’t necessarily have to earn the same wages you did before. Rather, the key is to make sure that you make enough to cover your living expenses. Even if you don’t have extra money to save, that’s fine as long as you’re covering your living expenses. The fact that you would delay needing money from your portfolio and collecting your Social Security Benefits would give you the cushion that you need. As I said many times in the past, we live in the greatest country in the history of the world; however, life is not necessarily good in America if you’re old and poor. Retirement is not your grandparents’ retirement; it is totally different. Your expenses don’t go down in retirement; rather, they continue to rise. Therefore, before you make the decision to retire, it is important to make sure that you can have a rising income throughout your lifetime. In addition, think about how long you can live in retirement. Someone who retires in their early 60s should plan on being around for 30 years. I can’t guarantee you many things when it comes to investing; however, one thing I can guarantee is that 30 years down the road, it will cost you substantially more to live than it does today.

Good luck!


If you would like Rick to respond to your questions, please email Rick at rick@bloomassetmanagement.com.