I’m Retiring Next Year: What Essential Financial Factors Am I Overlooking?

A Reddit user is getting ready to retire, but he wants to make sure he didn’t overlook anything first.

His best bet — and the right move for anyone considering retirement — is to talk to a financial planner to get advice before making such a drastic life change. Still, it can be helpful to look at his situation and see what he’s considered, and what, if anything, he missed in order to understand the key factors to think about before giving up work for good.

Here’s the Redditor’s situation

The Redditor indicates that he has been working in forestry. He said that, within his industry, the general rule is you get low starting pay but are rewarded for staying over the long term. The Redditor did stay. Now, he is 65 years old and has been working with his company for 29 years. 

He’s indicated that he makes $100K per year and will leave with a pension equal to around half of his pay, or around $50,000. If he claims his Social Security early, he’ll get a benefit of around $3,000 per month. His company is also going to pay for supplemental Medicare coverage and will provide an 80% reimbursement for medical costs not covered, up to a maximum limit. 

In addition to his $50K pension and $36,000 in Social Security benefits, the Redditor said he also has $450K in a conservative IRA and $300K in short-term CDs. He does have mortgage debt with a $350K loan at 4.2%, and the costs of his property taxes, insurance, and other miscellaneous housing costs come in at $17K annually. 

His hope is to have around $8,000 to $10,000 per month to live on, have fun with, and vacation with — and he feels like he will be in a good position to do that, but he wants to make sure he’s not missing anything.

Is the Reddit poster ready to retire? 

Retiring with $750K in conservative investments would normally be tough, as $750K would provide only around $27,750 in annual income at a safe 3.7% withdrawal rate. However, this Reddit user is lucky enough to have a stable pension providing around $50K a year, and he also has around $36,000 in Social Security income coming in. So, he should have plenty of money to fund his desired lifestyle.

However, if he is married, he needs to consider his spouse’s situation as well. If he passes away and his pension disappears and his Social Security benefit disappears, his spouse would likely find herself in a very tough position. It’s critical to think about what is going to happen to your partner if you pass away first, especially if you were the higher earner and if you are relying on pension income. Some pensions will allow you to ensure your spouse receives money after your death, but you’ll usually get less money each month if you do that. 

The Redditor also needs to think about the impact of taxes on his retirement income, as bringing home $10K a month could put him in a higher tax bracket and also result in his Social Security payments being partly taxable. 

A financial advisor can help the poster to address these issues and to make sure his invested money is in the best places as he moves forward toward retirement. With the right professional help, the poster can ensure he and his spouse will have a stable retirement when the time to leave work has arrived.