Friday July 11, 2008 - Money Goals for Families: Retired Empty Nesters
Well this is it you think; you’ve raised your kids, worked all of your life and now it's playtime!
Maybe? If you haven’t planned well for retirement you may find yourself coming up short. You and your spouse are 66 and are collecting Social Security benefits of $30,000 and you also have a pension worth $10,000 a year and between the two of you there is $250,000 in IRAs invested in bonds. That’s a quarter of a million dollars you remind yourself.
The house still has a mortgage for you refinanced to help pay for college expenses. So things appear golden until you start to pay the bills each month and you find yourself dipping into the IRAs to supplement the pension income of $40,000. You add it all up and you need closer to $55,000 a year to maintain your life style.
The most common goals:
· Make the money last as long as you do
· Travel
· Spoil the grandkids
Should be easy enough for there is a lot of money in those IRAs! But is there? At age 66 you could conceivably live into your 90s and you would need your money to last at least 25 years.
So right now you need $15,000 a year from the IRAs and that amount will increase each year due to inflation and the fact that the pension has no cost of living adjustment. You will need to withdraw close to $20,000 in five years to maintain your current lifestyle. Inflation is a nasty reality of retirement!
The Social Security benefits have a cost of living adjustment but that annual increase has averaged under 3%. Your pension will always pay you $10,000 a year and if something should happen to you there will be something for your spouse. But not so with Social Security. If one of you should die, the surviving spouse only is entitled to the larger benefit of the two. So your income could be cut by $15,000 causing you to dip more into the IRA
You will need to invest your IRAs for income as well as growth. If you continue to withdraw at your current rate and get only a 3% return your IRAs could be depleted in 15 years.
Other alternatives:
· Get jobs to supplement your retirement income
· Downsize your current home
· Modify your current life style so you need to withdraw less from the IRAs
· Move in with the kids (just kidding!)
As for traveling that may mean you visit your sister in Kansas or use elder hostels instead of a cruise to Alaska.
As for the grandkids, spend time not money on them.
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