I am 56 years old and semi-retired. I was a single mother for many years, but managed to find success during over 30 years of working in corporate America. My total net worth is approximately $3.4 million, including my home, investments, and cash.
I will write my last tuition check at the end of this year. I have no credit card debt, I own my car, but I have a mortgage on my house for $325,000 at 3.5%. The house is worth $800,000.
I recently got married and have a prenup, trust, will and other related documents. My partner, age 64, is also semi-retired and already receives a Social Security widower’s pension of about $1,400 per month. He has no savings to speak of.
We live on about $9,000 a month, from income generated by my small business and my partner’s part-time job. My question is are we spending too much and should we start considering cutting back on our spending so that the money I worked so hard for lasts for the rest of our lives.?
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See: I’m 76 years old and have $73,000 in an investment account that hasn’t grown in 2 years. Should I abandon the 50/50 strategy?
Dear reader,
First of all, congratulations. Being a working mom, and a single one at that, is hard enough as it is, and to have built a fortune while doing it is truly wonderful.
You look like you’re settled in nicely, with your savings and investments, your home, your small business, and no credit card debt. A mortgage is not often considered a “bad debt”, unless of course you have taken out too large a home loan and cannot live comfortably on your income, but it doesn’t seem like you are in that situation. situation. .
I can’t tell you if you’re spending too much, partly because I don’t have all the pieces in front of me to get a sense of your complete financial picture, but I can give you a few ways you and your spouse can determine if you are or you are not.
This may seem rudimentary, but it really comes down to looking at your cash inflows and outflows. Focus on the short term first, then try this exercise for the long term. Write down all the absolutely necessary expenses you spend during the month – the mortgage, utilities, taxes, insurance, groceries, etc. – and compare them with your monthly income.
When I have semi-annual bills, I like to divide the total cost to see what that would be as a monthly expense. For example, if you have a $1,200 car insurance bill every six months, that would equate to $200 per month. I then write out my monthly budget as if I’m paying for it because I hate paying a big bill when I know it’s something I can plan for in advance.
Then add monthly expenses for the things you really love: gym or golf memberships, subscription services, your weekly trip to the local coffee shop for your favorite latte. No, you don’t need spend that money, but you worked hard for your money and you should be allowed to enjoy it. Just make sure you use memberships and gym memberships.
Plan for the unexpected
Create a budget item in our budget to save money. Even if you’ve amassed a small fortune, you never know when something unexpected might happen. Having as much extra money as possible to protect yourself and your family is a blessing.
Do the same exercise now for your estimated future budget. For example, you mentioned that your spouse receives widow’s benefits. Will this change when he reaches full retirement age? When do you plan to apply for your own service and what will it look like? When will you exit your small business, if ever, and if so, how will it impact your income? When will you make your last mortgage payment and how much extra money will that free up for your spending?
I’ve asked you a lot of questions, but they’re only a fraction of what you’ll need to ask yourself and your spouse to determine whether you’re spending too much now or whether you’ll be able to handle it later. life. When you make this list of questions and answers, you can see if you need to adjust your current spending.
For example, how do your current expenses compare to this anticipated income, and are you confident you can maintain your current lifestyle with the income you expect outside of your retirement savings?
From there, you’ll also be able to see how much of your retirement savings you’ll need to withdraw each year to replace any lost income. A qualified and trustworthy financial planner can help you make sense of these numbers, if it becomes a little overwhelming.
But I’ll let you in on a not-so-big secret: You wouldn’t be the only one who feels this way: retirement planning isn’t exactly the easiest task!
Comfort plays a very important role here. You don’t want to keep your assets locked away forever so you never benefit from your hard work, but you also don’t want to dwindle them too quickly, given that you need them to extend both of your lives.
And while you’re crunching those numbers, talk through all the possibilities you can think of with your spouse, like what income and expenses you’d expect to have if they predeceased you or vice versa. If it helps, have this conversation over your favorite drink. These aren’t easy conversations, and they don’t happen quickly, so be comfortable talking about them.
Readers: Do you have any suggestions for this reader? Add them in the comments below.
Do you have a question about your own retirement savings? Send us an email at [email protected]
2023-12-30 05:47:02
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