My wife and I are both 54 years old. I am the primary earner with a six-figure salary and equal bonus opportunity. My wife works part time for extra income. For the purposes of this, we can assume that our primary savings vehicle is my bonus, and that we live off of the paychecks.
We have about $1.4 million in 401(k)/IRA money. We have about $750,000 in cash and investments. We do have a $400,000 low-interest rate mortgage on our home, which is valued at approximately $900,000. We have $30,000 in various pensions when the time comes, and obviously Social Security when it comes around (estimated at around $70,000 at age 70, if we do not strike earlier). We own our cars and have no credit card debt.
Professionally, I am exhausted. I have in my mind to want to downsize my career in 2026, when we are 57. Finances aside, my biggest concern is healthcare for us and bridging that gap. I am not retiring in fact, but would look for a different job that perhaps offers healthcare. Part-time work and private insurance is always an option. We are both generally healthy.
My modeling shows all of this is possible. What am I missing? Is my focus in the right place? Do you agree it’s possible? Your advice is appreciated.
From: Wanting to sleep again.
Dear Wanting to Sleep Again,
It’s great to hear how much you’re preparing for your retirement and even your quasi-retirement. Not everyone wants to exit the workforce entirely, and finding some sort of job to hold you over until you finally do, is a great way to keep saving, live comfortably — and maybe even get healthcare, as you’ve said.
Healthcare can be a huge headache when you’re in that transition period between wanting to slow down in your work and turning 65 for Medicare. Health insurance is so important, but it can be so expensive. The price tag for healthcare alone for the average 65-year-old couple retiring in 2022 was $315,000, according to Fidelity Investments. That figure does not include long-term care, and is expected to continue climbing in the years ahead.
It can be even more complicated. Not only do you need to be covered, but you need to dissect the plan to ensure it is appropriate for you…covering the care and medication you need, the doctors you prefer, the institutions you visit and so on. Focusing on this aspect of your life as you downsize your career is crucial, so yes, you seem to be looking in the right direction.
Probably one of the simpler choices would be to move to another job that offers this benefit, since you’ll be able to enroll for you and your spouse and it could be less expensive than going your own way. Of course, this is easier said than done. You have to find a job you want, go through the application process and get hired, but it’s one route that definitely pays off.
You might want to even consider a federal job, said Wes Battle, a certified financial planner who specializes in working with federal employees. “Two of the best benefits they have are the pension and the Federal Employee Health Benefit Plan,” he said. An employee who works for the government for at least five years and carries health insurance that entire time can retire at 62 and retain that healthcare plan for the rest of his or her life. There are various levels in the federal employee system (someone may be considered a level GS7 or GS15, for example), but any worker would get those same healthcare benefits, Battle said.
If you don’t find a suitable job with healthcare, you’re not out of luck. The open exchange created under the Affordable Care Act (some know it as “Obamacare”) has been helpful in finding subsidized plans based on income, said Sean Lovison, a certified financial planner and principal of WJL Advisors. “This can be hugely beneficial to self-employed workers or those who have decided to downsize their careers as they may be able to manage their income level to maximize the subsidy,” he said.
Individual health insurance could be a larger expense than you anticipated, so you’ll need to budget accordingly. You can learn more about plans at Healthcare.gov.
I can’t speak to whether you’ve saved enough for retirement, as there are plenty of other variables to consider (what you’re invested in, how much you’re currently contributing and what you expect to contribute when you switch jobs, what your lifestyle will cost in retirement, if you plan to move homes in the future…to name a few), so I would suggest reaching out to a qualified financial planner who can give a much better, clearer synopsis.
But alongside the day-to-day finances when you get to retirement and healthcare, I will add you should plan for long-term care costs as well. Generally healthy or not, it is important to have an idea of how you’ll pay for your care when you’re much older, considering how expensive that alone could be. Also think through — now — who will be the one providing that care, and if it is a family member, sit down with that person to discuss those expectations. Make sure you have all of your necessary documents in place, such as a will and healthcare proxy, and have your wife do the same.
In the meantime, keep doing what you’re doing. Save as much as you can for the future while balancing the needs and wants of today, keep paying down your mortgage, look for a job that will make you happy as you transition to something else and don’t lose sight of the big picture. You got this!
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