My husband and I are 64 years old. She has $1.5 million in her retirement account. he wants to travel I am more cautious. who is right?


by Quentin Fottrell

“We both have longevity on our side. All four of my parents are in their late 80s or early 90s.”

dear Quentin

My husband is retiring at the end of August after 31 years of high pressure work. We are both 64 years old. We both have health insurance under my insurance plan. I will at least qualify for Medicare, he will work until he is 65, and he will work at least another 6 months until he is eligible for Medicare.

Together, we have about $1.25 million in tax deferred retirement plans held primarily in securities, plus about $250,000 in the Ross account, $125,000 in the brokerage account, $25,000 in savings, and currently about $400,000. I own a home worth $10,000. At age 70, our total Social Security payments are expected to be just under $7,000 per month. I expect to receive an inheritance of at least $1 million over the next 10 years, but I have not included it in my retirement plans.

We both have longevity on our side. All four of her parents are in their late 80’s to her early 90’s and we have 3 of her grandmothers who lived well past her 90’s. We have shared family, health and maintaining our current life as priorities. We maintain a standard of living, make charitable donations to causes that matter to us, and have a fortune that we can pass on to our children. I want to work part-time when I retire, and her husband doesn’t deny the idea, but it’s not a high priority.

I am writing this article because I am trying to address philosophical differences in thinking about managing and spending retirement. I’m more conservative. Keeping as much principal as possible, especially for his 5-6 years before he starts receiving social security, given that he will probably have 25-30 years to live off his retirement savings. I’m worried about My husband doesn’t suggest anything too outlandish, but he would like to use the money to fund trips, family reunions, and so on.

He says this is exactly what we’ve been working and saving for so many years and it’s time to take advantage of this opportunity while we’re still healthy. Given the expected Social Security payments, even if he draws heavily on retirement savings early on, he argues that withdrawals will be curtailed once he turns 70, which means that the remaining principal will be at least partially replenished. To the extent he says it will be a chance to recover. And finally, given that it also entails the responsibility of making additional choices, he feels it is a disservice to us not to take into account the possibilities we inherit.

My husband has worked hard. I don’t want to dampen her husband’s fun old age life, but I also don’t want that fun in her youth to adversely affect our wants and needs later in life. what are your thoughts

Am I too cautious?

too cautious dear,

I need a third party to help me. A financial planner or accountant can take a closer look at your numbers, including projected income and expenses for retirement, retirement goals, emergency funds, and other strategies you need to prepare for long-term care. Travel is a small but important part of that overall puzzle. Your letter suggests that your husband views his desire for family reunions, adventures, and other experiences as a never-ending pot of porridge that will sooner or later run dry. It seems like you are.

Start by deciding how much income you plan to withdraw each year. As Mark Hulbert pointed out in a column last year, under the so-called 4% rule, someone with $1 million in a 401(k) and spending $40,000 in retirement each year, adjusted for inflation, would theoretically will beat the odds. About outlive their money. But Hulbert, looking to research by researchers at the University of Arizona and the University of Missouri, says 1.9% may be more realistic for people with lower savings. What this means is that you are in a very fortunate position given your financial situation.

Start with a yearly budget for socializing and travel — $10,000 a year is a number I found out of the sky — and see how it fares over time. Agree to remain open to further consultation on adjusting this figure upwards or downwards. You don’t want to spend money staying in a luxury hotel, but you might consider other options such as Airbnb (ABNB) or VRBO. Turning your home into an Airbnb while you’re on the go could save you money on travel or make it cost-neutral. There are many ways to peel this apple.

Travel plans should be flexible, says Robert Seltzer, founder of Seltzer Business Management in Los Angeles. “Like an unexpected turning point in your life, you shouldn’t lock your financial plan,” he said. is.”

He has some concerns about your stock market exposure. “I don’t think people in their mid-60s who are retiring should be so aggressive in their asset allocation. They should be allocating less to stocks and more to bonds because those assets are in retirement accounts. “There will be no tax impact,” he says.

“Also, for the first time in years, the fixed income portion of the portfolio will provide a legitimate income, rather than just acting as a buffer against the volatility of the equity portion of the portfolio,” he added. “Interest rates will go down in the future, but the current returns are higher than they have been in the last 15+ years.”

Given your family’s longevity and your current financial situation, he agrees with your decision to defer Social Security enrollment until age 70. “I think the expected inheritance should be included in the plan, but I’m conservative about when I’ll get it.” Expect that. ”

“From an asset allocation perspective, given the current interest rate environment, eating cake while eating cake is possible to some degree,” said Paul Karger, co-founder and managing partner of wealth advisory firm Twin Focus. To tell. “If you have retirement funds in your Traditional IRA and Loss IRA accounts, put 50% of that money in a globally diversified equity portfolio with an overweight in the U.S. and 50% in a conservative, diversified fixed income portfolio. We recommend allocating it to your portfolio at a low cost: Mutual funds should offer a more stable source of income and capital preservation, while equities offer growth potential and a long-term hedge against inflation. is.”

He added, “Given the tax-deferred and tax-exempt nature of Traditional IRAs and Roth IRAs, we recommend that these assets be used as a source of income only when taxable funds have been exhausted.” added. “To this end, we recommend investing 70% of your taxable funds in bonds through mutual funds and 30% in money market funds. of liquidity is provided.”

I give the same advice cardiologists give their patients when they give them blood pressure medication. “Start low and go slow.” In other words, it’s best to start with a modest number (maybe he’s $10,000, or less) and see how comfortable you are with that amount and whether you can manage your annual budget. Since housing will be paid off, overheads will be significantly reduced in retirement, so she may be able to spend 5%-10% of her income on travel and leisure. But you may end up becoming a wanderlust in search of your own home.

Bruce A. Tanahil, director of real estate and business planning at MassMutual, said it could be too cautious. “I don’t know if my life expectancy or if the pandemic or other people’s health is limiting my ability to travel or do other things I want to do,” he says. “You and her husband may be able to strike a balance between enjoying good health and having enough money in later life. It is your husband’s right that the pressure on your property to produce is relieved.”

The Moneyist Facebook (META) group had a lot to say about your letter. Here are some good suggestions. “Prioritize your budget for 10 years of annual travel—big trips, international trips, big family outings, luxury domestic trips,” said another. By traveling, you may be able to achieve both, in fact, it will be more enjoyable and cheaper as a tourist.” And the common theme of the answers is, “Tomorrow is not promised. Don’t get carried away, enjoy your life today.”

You may live into your 80s and 90s, but you may not be able to travel for the next 30 years. Enjoy the world while you can.

Readers write to me with all sorts of dilemmas.

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– Quentin Fottrell

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(Closed) Dow Jones Correspondence

07/10/23 1631ET

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