We Have $2.5 Million Saved and $40k in Social Security Benefits at 67. Can

A husband and wife who are both 67 look over their assets as they set a retirement budget.

Picture this scenario: You and your spouse are both 67, have $2.5 million in savings and collect $40,000 in annual Social Security benefits. Is that enough to support a $100,000 lifestyle in retirement?

This question is really multi-pronged. It’ll depend on when you both plan to retire, if you can you generate $100,000 per year for life, and if it’s in fact enough to retire on. The good news is that, with this kind of financial profile, you can likely meet your goals. However, if you need additional help surrounding retirement planning, consider matching with a financial advisor.

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Retiring at the Same Time as Your Spouse

If you’re married and planning to retire at the same time as your spouse, it’s important to consider the implications of that decision.

“If one spouse plans to retire before age 65, it can make sense for the other spouse to continue working for health insurance benefits,” said Nathaniel Donohue, CFP® and partner with Consilio Wealth Advisors. “Households that retire before age 65 are often met with costly private healthcare plans.”

But if you’re 67, you’ll already be eligible for Medicare so having employer-sponsored healthcare may not be as important.

However, a married couple planning to retire at the same time will want to think strategically about when to start collecting Social Security.

“Assuming the couple is in good health, it’s often best for the higher earner to defer as long as they can. Ideally until age 70,” said Bryan Kuderna, CFP® and founder of the Kuderna Financial Team. “And while Social Security or pensions are being deferred, low-income years after retirement can present Roth IRA conversion opportunities.”

If you need help deciding when to collect your benefits, consider working with a financial advisor.

Generating Income

A married couple reviews their investment portfolio together.

Next, you’ll need to think about how to generate $100,000 in retirement income.

“Retiring at 67 with $2.5 million in savings and $40,000 in Social Security benefits offers a solid financial foundation,” said Bryan Cannon, author of Retirement Unplanned: An Expert Guide For Navigating The Crossroads of Retirement With Confidence. “To generate $100,000 annually, consider a conservative withdrawal rate (4%), diversify your investments, and be attentive to monthly budgeting.”

This portfolio strategy can likely hit your $100,000 income goal, especially since it only needs to generate $60,000 per year with Social Security taking care of the other $40,000. For example, say that you kept your entire portfolio in cash. Over 30 years you could afford to withdraw about $83,000 each year.

You can, of course, do even better than that. For example, say that you invested your entire portfolio in Aaa corporate bonds, which currently yield between 4% and 5%. That would generate between $100,000 and $125,000 per year in interest income.

Investing in the S&P 500, which historically averages approximately 10% per year, could deliver an average of $250,000 in annual portfolio income. However, stocks are volatile and more inherently risky than bonds or cash.

Investing in an annuity, meanwhile, could convert the $2.5 million into a series of payments guaranteed for life.

Now, these are only representative examples. As Cannon said, it’s important to diversify your investments, so most retirees won’t just dump all $2.5 million into a single annuity or bond. They also likely wouldn’t be invested 100% in stocks, which would expose them to too much volatility and risk.

But these are good benchmarks for what’s possible. With careful money management, and including Social Security, you can probably plan for a retirement income of more than $150,000 per year with a $2.5 million nest egg. Consider working with a financial advisor to build a retirement income plan suited to your needs.

Meeting Your Spending Needs

A married couple enjoys a glass of wine while out dinner.

“Can I retire” is one of the most subjective questions in all of finance. While we can run the numbers on investments, as Cannon said, the sufficiency of that income depends entirely on where you live, your needs and lifestyle.

First, consider your monthly housing budget. This can range widely and is very location-dependent. Renters should budget for annual increases, especially in expensive urban areas. Homeowners should set aside money for repairs and other expenses, on top of monthly costs like insurance and taxes. This will likely be your largest non-discretionary expense, so plan accordingly.

Second, consider your current monthly spending. A rule of thumb is to budget for 80% of your current spending to maintain your pre-retirement lifestyle. A good approach is to examine your finances, determine annual spending and then divide by 12. This will let you account for both ordinary spending and big-ticket events like vacations. After all, you can’t live an August retirement on a January budget.

Finally, consider any known or knowable healthcare needs. Do either of you or your spouse have reason to expect specific health issues? What kind of gap or long-term care insurance do you want to plan for? A financial advisor can potentially help you answer questions like these.

And don’t forget to take a mental victory lap. You’ve done very well.

Healthcare Planning Tips

Healthcare can be a significant expense, especially as you age. When it comes time to plan for healthcare costs in retirement, here’s how you should get started.

A financial advisor can help you build a comprehensive retirement plan, including your healthcare needs. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.

The post We’re 67, Have $2.5 Million Saved and $40k in Social Security Benefits. Can We Live on $100k Per Year? appeared first on SmartReads by SmartAsset.

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