Ultimately, whether you have enough to retire depends on your costs and your income.
If you can live on a tight budget with the right circumstances, $2,000 a month from a pension and Social Security, combined with the right strategy with $500,000 in your Roth IRA may be enough to sustain you throughout your retirement. But it’s important to consider the opportunity cost between retiring now and working and investing for a few more years, as it may determine your quality of life in retirement.
Your retirement plan depends on your specific circumstances. Talk to a financial advisor about your goals today.
Steve Davis, CEO of Total Wealth Academy recommends waiting a few years to shore up your retirement portfolio at this point, in order to let your Roth IRA and Social Security benefit grow.
“The average female lives 18.5 years in retirement. That is less than $2,000 a month from the IRA or $4,000 a month total. That is not enough for the basics let alone romance, travel, and fun… [Instead] I would pull the money out of the IRA, leaving maybe $400,000. Get it invested in income producing assets.”
“I would also keep working until 70 at least, to buy additional assets before retiring to get that up to about $10,000 a month [because] $12,000 a month would be a pretty high quality of lifestyle in retirement,” he told SmartAsset.
There are three important issues here:
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By retiring early you are giving your portfolio less time to grow and will spend more time making withdrawals.
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A $500,000 Roth IRA is a small portfolio. Using the 4% rule, it can only generate $20,000 per year/$1,667 per month. This is tight for an individual and probably unworkable for a couple.
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You are not maximizing your Social Security. At age 62, you will receive 70% of your total potential benefits each month, cutting your lifetime income significantly.
Remember, you may need to finance a long life, and you may incur unexpected expenses during retirement. A $1,667 monthly rate of withdrawal will last 25 years, taking you to age 87. That leaves you less than $4,000 per month in total, with the realistic possibility of that portfolio running out.
For many people, this is not a good plan.
A financial advisor can help you develop a sustainable retirement plan.
As Davis suggested, you actually are in a good position to retire, just not to retire early. With a few more years, you can have a very comfortable retirement.
We don’t know how your monthly income is distributed between pension and benefits, but on average a retiree collects $1,793 per month in full Social Security benefits. Retiring at 62 would reduce that by 30% to $1,255. So we assume a $1,255 Social Security payment and a $745 pension.
