I'm 51 years old. I am wondering if there is any possibility of my being able to retire within the next year.

Question

I have approximately 120,000 in savings (50,000 in an IRA and 70,000 in regular savings/investment account. I don't owe money for anything except my $400 loan payment on my home, which has about 25 years left on it. Any ideas?

Answer 1

The biggest problem is that you are going to live a long time.

Your nest egg of $120k needs to last, so you generally are going to want to avoid drawing on your principal.

A safe rule of thumb for a moderately invested portfolio (50/50 stocks / bonds) is to take about 6% per year in withdrawals.

That would give you about $7,200 or $600 per month.

Since your social security is not due to kick in for a at least a decade, I'm not sure how you can reasonably do it.

To make matters worse, you are below the minimum age for withdrawals on your IRA. There is a way around this (IRS rule 72t... but it will force you take out withdrawals even if you don't want them), but it may force you to pay some taxes.

My rule of thumb, is that you need 16 times your first year's living expenses, in the bank, on the day you retire.

If you think you are going to need $20,000 per year to retire, you need to have $320,000 in the bank ($20,000 x 16). That would let you take out 6% comfortably for a long time.

Good luck. Let me know if I can be more help!

Ken Clark
Certified Financial Planner

Answer 2

Based on what my financial mentors have taught me, nowadays, it'll take millions of dollars liquid cash in the bank in order to retire. For example, in order to maintain a lifestyle that would cost $70,000/year, you need $2 million in the bank (assuming 30% taxes and 5% interest) to get $70,000/year coming in year after year.

Your savings is great and your debt is only on your home, which is also great, but in order to prevent downsizing your lifestyle, you cannot rely on Social Security, your 401(k), and a 6-figure pile of money. You're gonna need a lot more than that. What you need is a residual, ongoing, stream of income that is also willable to your children and future generations, especially since there is no such thing as job security and the fact that there will be a major economic depression approaching us come 2010 (when the majority of the baby boomers turn 65).

Answer 3

Make a list of all your monthly expenses. Be sure to budget everything. Divide that into your 120K. That's how long you can live on that money, provided you don't have extra expenses like health issues, major house repairs etc.

Answer 4

i think u can retire whenever u want just get a hobby my dad tried 3 tiems to retire but he kept gettin to bored