According to the 2020 U.S. Census, the number of people in the U.S. who are 65 and older has tripled in 10 years. Baby boomers are retiring — but do they have the money to?
Chuck and Sue Steele have been married for more than half a century, and they have reached the age when retirement is right in front of them.
“For the last five years, I was able to work basically half-time or as much as I wanted to. And then it was an easy transition into retirement,” Chuck said.
Chuck was 70 when he decided to retire. Sue wasn’t far behind and was ready to leave her nursing job.
The couple had been thrifty all their lives but still weren’t sure if they had the financial wherewithal to stop working.
Financial adviser Jeff Graham says there are plenty of factors to take into consideration before making that decision.
“Number one, do you just put that money in an account that’s earning nothing, and you just draw down on it every year? What about inflation?” Graham said.
For the Steeles’ adviser, income was just part of the equation.
“His approach was to take a close, hard look at our sources of income, our health, our savings at that point. And did a forecast at that point that took us out to age," said Chuck.
RELATED STORY | A new rule makes it easier to tap into 401(k). But should you?
While the Steeles found they had “enough” to retire comfortably, finding that financial number that allows you to get there isn’t easy.
One big factor is location. GoBankingRates.com assessed the best states to live in so you can extend your nest egg as long as possible, factoring in things like housing, groceries, medical bills, utilities, and transportation.
The company used $1 million in retirement savings as a base. The Steeles live in Maryland. If you figure average total expenditures of around $66,000 a year, $1 million would allow you to be retired for 15 years.
The state where your money would go the longest? West Virginia, where $1 million would last you over 20 years.
The worst state: Hawaii, where $1 million would last just about 9.5 years because the cost-of-living expenditures exceed six figures a year.
Graham said it’s not just your monthly bills you need to take into consideration: He mentioned major life changes such as the death of a spouse.
“Husband and wife could both be collecting Social Security, but if one passes away, there are a bunch of rules, but all of a sudden that income stream is gone," Graham said.
Medical issues are another pitfall.
According to RBC Wealth Management, the average American over the age of 65 spends about $5,700 annually on medical care.
The Steeles dealt with a major medical issue, but they had a plan.
“I elected to take the health insurance that was being offered. And it’s turned out to be very good insurance and has covered all of our costs. If that had not been the case, we would have had some bumps in the road,” Chuck said.
Ultimately, Graham said how much money you can retire on depends on the lifestyle you want to lead.
“We were never ones to go out and just buy frivolously, but we were always conscious about what we could spend on different things and travel when we wanted, which we have done quite a bit of. So, we’re one of the fortunate couples,” Sue added.
RELATED STORY | Is the 'American dream' still attainable?
