As of this year I am eligible to retire from my career through the rule of 80. My pension after taxes is estimated at $6,500 per month. Health insurance is covered through my pension, and I have secondary health insurance through the VA. I’m eligible at age 60 to access $2,400 per month of my husband’s Social Security. I also receive $1,600 per month as the surviving spouse of a servicemember who died from service-connected illness.
Our house and cars — older, but in good shape — are paid off. There is approximately $1 million in IRAs: $300,000 in a Roth and the rest in a 401(k). I feel that I can retire and explore options and figure out my new life as a widow. Travel? Hobbies? Grandkids? Volunteerism? School? But I have a fear of financial insecurity as my husband is no longer here. Or what if the economy tanks and the 401(k) loses value? Irrational?
‘Currently, my investments are in EFTs and mutual funds with a moderate growth strategy. The projection is an annual return on investment of 7% or 8%.’
My family has a history of cancer, heart disease and dementia. I’m in reasonable health but could stand for more physical and emotional wellness. My remaining family is small, so if my health became compromised, I would pay for caretaking services. I was denied long-term-care insurance several years ago, so that is not an option. Am I overthinking my transition to retirement?
I’ve churned numbers via retirement calculators and have created personal budgets. I’ve met with my husband’s financial adviser, whom he met via his workplace, yet I feel that I might be overlooking something. Currently, my investments are in ETFs and mutual funds with a moderate growth strategy. The projection is an annual return on investment of 7% or 8%. Is that too conservative? What are the missing pieces?
Overthinking My Future
P.S. I see you grew up in Ireland. On a random note, do you know [name redacted] formally of JPMorgan Ireland? She was my college roommate. A wonderful and kind person.
Dear Overthinking,
If you have financial insecurity, it’s better to have it with $1 million in retirement savings.
You’re trying to find your feet in the New Normal, and for many people who lose a partner, and are so close to retirement, your grief may be compounded by the seemingly large amount of financial bookkeeping and estate planning that awaits you. Sometimes, writing it down on paper can dispel some of that anxiety and fear about the future. It’s good to see your financial future in black and white, and know what kind of budget you will have in retirement.
Your house and automobiles are paid off. You have $1 million for retirement. And you have already undertaken a near-forensic examination of your finances and know exactly how much money you will have to live on when you decide to officially retire and draw upon your savings. As for the missing pieces, take it one step, one adviser meeting at a time. Priorities and your feelings of anxiety will shift.
If the economy “tanks,” you keep working and make sure you have enough money set aside in safe havens, and your ability to enjoy your remaining years, working or not. What if the economy doesn’t tank? Many economists, including the Conference Board, predict a year of slowing economic growth and elevated inflation, but point to a “robust” start to the year and a strong labor market. Other people are worried about World War III. Worry exists on a spectrum.
A 7% ROI is more than respectable for someone in your age bracket. You will be able to make withdrawals from your 401(k) and IRA at age 59½ without penalty, with some exceptions, although you must make withdrawals from your IRA by the age of 75 under current rules. Your adviser will suggest more aggressive asset allocations if you wish to opt for a greater return, but there are no guarantees, and any changes will depend on your own risk tolerance. Peace of mind is key.
Many economists predict a year of slowing economic growth and elevated inflation, but point to a ‘robust’ start to the year and a strong labor market.
As David Blanchett, head of retirement research for PGIM, recently wrote: “While quite a few personal-finance pundits have suggested that a stock investor can expect a 12% annual return, when you incorporate the impact of volatility and inflation 7% is a more accurate historical estimate for an aggressive investor (someone primarily invested in stocks), and 5% would be more appropriate for someone invested in a balanced portfolio of stocks and bonds.”
“While it’s true you can achieve a balance of nearly $1 million if you save $100 per month for 40 years assuming a 12% return, that’s incredibly unlikely when you factor in market volatility and inflation,” he added. “In reality, if we assume a 7% return, which even still may be a touch optimistic, it will require saving $400 a month, or four times as much, to generate that same $1 million.” You are 58, and you have reached that $1 million, and 30% of that is post-tax.
There are advantages to being over 50. Employees aged 50 with most 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan can contribute an additional $7,500 to their accounts for 2025. Therefore, you can contribute up to $31,000 each year. I assume you have been getting the 6% employer match for your 401(k). Fidelity recommends saving 15% of your pretax income annual, including an employer contribution.
A quick word on Social Security benefits: A surviving spouse, aged 60 or older, but who has not yet reached full retirement age, gets between 71% and 99% of the worker’s basic benefit amount, according to the Social Security Administration. A surviving spouse, at full retirement age or older, typically receives 100% of the worker’s basic benefit amount. You can read more about these benefits here.
Your grief may be compounded by the seemingly large amount of financial bookkeeping and estate planning that awaits you.
I can understand why you are looking at your family’s medical history and, at a vulnerable time like this when you find yourself widowed — but, I hope, not alone — it’s natural to look at worst-case scenarios and worry about, “What if?” You could turn this around into a positive: You have knowledge about your family’s medical history, and you can alert your doctor and ensure you are receiving all the tests you need.
As for your long-term care plans and concerns, you can take proactive action now by appointing a durable power of attorney who can make medical and/or financial decisions in the (hopefully, unlikely) event that you become incapacitated. One of the most common reasons for an application to be denied, some attorneys say, is a lack of or error in documentation. Others, of course, include pre-existing conditions including cancer and advanced diabetes.
You are probably already on top of your checkups, but for others reading this: Check your cholesterol levels, make sure you are on a statin of an appropriate dosage if you do have high cholesterol, and undergo a calcium test if your doctor is concerned. For women over 45, doctors recommend a mammogram and clinical breast exam annually, a pap test and HPV test every five years, and a colonoscopy at least every 10 years.
Overthinking is not necessarily a bad thing. Just like grief and mourning, or sadness, all of these emotions serve a purpose. They help ground us, remind us how we are really feeling when we are alone and no longer distracted by work, social events and financial planning, and help us deal with those big life events, which can be unexpected, traumatic and unwelcome. Prepare for the future, but be kind to yourself, and know when it’s time to return to the moment.
P.S. I don’t know your old college roommate, but we have four mutual friends on Facebook. The world is smaller than we think — and our community is there to help.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.
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