Help Me Retire: I’m 49, my wife is 34, we have 4 kids and $2.3 million saved. I earn $300K a year but ‘lose a lot of sleep worrying about tomorrow’ — when can I retire?

I have had a good career in technology and make about $300,000 a year. We max out all retirement vehicles and we have zero debt aside from our primary residence. We also have approximately eight rental income residential properties that net us about $6,000 per month after all mortgages and expenses. Passive income, if you will. Our monthly target expenses are about $10,000 to $12,000 on the high end. 

Combined we have $1.7 million in IRA and 401(k) assets and approximately $500,000 in cash and after-tax savings in Fidelity and E*TRADE accounts. All are in stock-heavy aggressive portfolios and I self manage my IRA averaging a 12% return. 

I started a new job in November 2020 after being let go from my prior position due to COVID-19 and a need to cut expenses. At 50, while I am employed, I am fearful that my job could end again and going through another 7 month+ job search would be incredibly hard on my family and me. I lose a lot of sleep worrying about tomorrow.  

I want to retire, and have my wife retire, likely in Colorado, when I am 58, if I am not forced to retire sooner. I obsess on retirement calculators and try to see if I can achieve this, but one tells me we will be OK while another says I am going to be short and run out of money in 20 years. 

I also have no idea how to look at health insurance costs for my family when not employed and how to factor that into a plan where my spouse will outlive me by 20+ years. I want to make sure she will be OK and never run out of money. We are both in good shape, workout and have good longevity on both sides of our family. She has worked long enough to qualify for Social Security. 

I want to retire because I am going to be an older father and love my wife and children very much, so if I can maximize my time with them not working, but not sacrificing too badly on expenditures, I would like to do so. I just cannot figure out a plan. I am not opposed to working in retirement, either consulting or maybe an hourly wage job, but neither of those options are guaranteed. 

Can you help? 

See: ‘Retirement? How?’ I’m 65, have nothing saved and am coming out of bankruptcy

Dear reader, 

Even with $1.7 million in retirement accounts, an additional $500,000 saved and multiple income sources, I understand why you may be worried about the future. You have a family that relies on you and the unexpected twists and turns of a pandemic certainly don’t help. 

The good news: Retirement at 58 may very well be within your reach, financial advisers said. And if you choose to just scale back from a full-time job but work in some capacity, such as with consulting work or freelancing, you have even more flexibility, said Jen Grant, a financial adviser at Perryman Financial Advisory. “There are dozens of ways to reach his goal,” she said. “Now he should decide on the best way, spend eight years working toward it and set down the stress and worry so he can enjoy his young family.” 

One of the highest-priority tasks you will face if you retire at 58 (or any time before Medicare is available at 65 years old) is health insurance. COBRA may be available temporarily after you have been separated from your old job but you have to make it to 65, at which point you can apply for Medicare.

There are a few options to be covered, including saving now for whatever cost it will be in the open market later on; taking on a part-time job with health benefits so that you can take advantage of the healthcare, earn a little extra income but still have more freedom than a full-time job requires; or have your wife take on a job that provides the family health insurance (if she isn’t already). Since you are healthy, you may also want to look into a Christian Health Sharing company, which is a faith-based health savings approach where members help cover the costs of others in need, Grant said. [Note: This healthcare option is a faith-based, cost-sharing program but is not traditional insurance or government-protected. Critics say Christian health-sharing plans may be more affordable than traditional insurance policies, but not all essential health needs will be covered.]

To get an idea of what health plans cost now in the market, you can check out Healthcare.gov. Keep in mind though that health expenses have been rising every year, with no indication of stopping. 

You mention your biggest concern right now is losing your job. This makes absolute sense, but try to dig a bit deeper into why you have these fears. Is it that you think you won’t be able to adapt to a new job in the future? Or won’t have the skills to be an attractive hire? Is it that your current expenses would be far too much for you to handle if you were temporarily out of work? Knowing that answer will help you find out what you need to do next. 

For example, if you’re worried that you might need to brush up on skills (or develop new ones) to keep the job search short, start now. You may not need to do this for applications, but doing one thing every week to brush up on old skills or learn new ones could keep you as a key asset to your current company and make you a catch to a future hiring manager. Plus, you might even be able to leverage this continued education (in the form of a class or a YouTube video) for a higher salary later on. 

If you’re concerned about losing your job because you think your current expenses would be too much to handle, even temporarily and knowing you have that rental income, then look at your cash inflows and outflows right now and ask yourself what it would look like if you were to be out of work tomorrow. You obviously know how to save, so does it come down to spending? 

“Are they spending in areas that are not meaningful to them as a family? If so, yes, reduce expenses,” said Jeremy Finger, certified financial planner, founder and chief executive officer of Riverbend Wealth Management. 

There are a few other things you can do now to alleviate some of the stress. Because of the age difference between you and your wife, Grant recommends life insurance. You’re a high earner and if something were to happen to you, life insurance could assist in replacing your income. Along with life insurance, look into disability insurance too, she said.

Keeping your investments in an aggressively-allocated portfolio is fine, but make sure you have about two to three years’ worth of living expenses in a more conservative portfolio, Grant said. “This will protect him if the market goes haywire the year he plans to retire,” she said. “He won’t be forced into selling stocks at a loss or liquidating real estate.” A larger emergency fund would also provide you with some comfort — the money could be used in an unexpected situation, or if nothing happened between now and your target retirement date, the money could mitigate the stresses when transitioning into retirement. 

Also, even if you aren’t worried about your investments, check them periodically to ensure they’re properly allocated. A balanced — the key word here being “balanced” — 80% stock/20% bond portfolio, or even a 90%/10% mix, could work with extra cash on hand, such as $200,000, but those portfolios must be balanced, Finger said.

Check out MarketWatch’s column “Retirement Hacks” for actionable pieces of advice for your own retirement savings journey

Finger had a few other thoughts based on your situation. He suggested consulting an attorney about placing your rental properties in an LLC to protect liability, and would also consider adding umbrella insurance to protect yourself. If you’re netting $6,000 in rental income, you’d only need about $4,000 to $6,000 a month from other income and investments (or $72,000 a year?), so he recommends having at least that in cash-like assets to play it safe. 

I say this in nearly all of my letters, but you might want to consider working with a financial planner who could create a financial plan for you. A professional could advise you on your investments — for retirement and the kids’ college funding — as well as provide clarity on how to retire comfortably in the future. “He can outsource the worrying to someone who does this for a living and then let them monitor the plan and adjust as needed,” Grant said. 

If that’s not of interest to you, do the work yourself. Create a full financial plan for yourself and map out what-if scenarios, and keep this stored somewhere nearby so that you can look at it or make adjustments if life changes occur. 

“You cannot completely neutralize every possible thing that could happen, but you can prepare the best you can,” Finger said. “Also be flexible and prioritize your time and expenses. If he can accomplish more time with his family, any little shortfall later in life as he looks back on it would be an easy trade-off.” 

Readers: Do you have a suggestion for this letter writer? Add them in the comments below. 

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