‘We are nowhere near this goal based on 7% growth’: I have $2m saved, but how can I ensure a comfortable retirement at 60 despite health risks and financial uncertainties?

Hi Money Minder,

Hey there! I’m going through a bit of a health scare and want to retire by the time I’m 60 so I can have some quality time with my wife. We also want to leave something behind for our kids.

Just to give you a snapshot: we’ve got $2 million saved for retirement, a $1 million condo with no mortgage, no car loans, and zero credit card debt. I’ll also be getting a small pension of $20k starting at 65. We’ve got around $150k in cash/CDs/529. Our combined salary is $220k, and most of our retirement savings are in index funds. I don’t anticipate a significant increase in income since I’m not keen on gunning for promotions due to my health risk.

We’re aiming for around $140k after-tax income in retirement starting at 60. But even though we’ve been saving diligently, it feels like we’re falling short of our goal based on a 7% growth rate (maybe less if we switch to a less aggressive mix) and a 4% withdrawal rate, especially when factoring in healthcare expenses. We might consider downsizing to a cheaper place in the future, but we’re hoping to stay in our condo.

Any advice on how we can get closer to our retirement goal would be greatly appreciated. Thanks a bunch!

Cheers,
Retirement Dreamer

Response from THE MONEY MINDER:

Hello There,

Congratulations on taking the proactive step to plan for your retirement despite facing cardiac risks at a relatively young age. It’s commendable that you have been diligent in your savings and financial management thus far. Your financial situation seems well-organized with a solid retirement fund, a mortgage-free condo, and manageable debt levels.

Considering your desire to retire around 60 and secure a comfortable income thereafter, it’s understandable that achieving a $140k after-tax income goal might seem challenging. It’s prudent to account for healthcare expenses and potentially adjusting your investment strategy to a less aggressive mix to mitigate risks.

To bridge the gap between your current financial standing and your retirement income goal, there are several practical steps you can consider. Firstly, reassess your current budget and expenses to identify areas where you can reduce costs. This may involve downsizing to a more affordable living arrangement or cutting back on discretionary spending.

Additionally, exploring alternative income sources, such as part-time work post-retirement or rental income from your condo, could provide a buffer to supplement your retirement funds. Consulting with a financial advisor to fine-tune your investment portfolio and optimize your withdrawal strategy can also help maximize your retirement income.

Lastly, remain flexible in your retirement plans and be open to adjusting your lifestyle expectations based on your financial realities. Downsizing or relocating to a more cost-effective area could potentially free up additional funds for your retirement income needs.

In navigating these financial decisions, remember to prioritize your health and well-being above all else. Your goal of spending quality time with your wife and leaving a legacy for your children is admirable, and with a pragmatic approach, you can work towards making that a reality.

All the best from THE MONEY MINDER in achieving your retirement goals with financial peace of mind.