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I'll be 50 this year and my husband 63. We're both career folks. He already draws a military pension and a a civil service pension, but has worked in the private sector for many years. He's been on a contract gig for the last six years and it looks like it will come to an end this year. He plans to retire this year from the regular 9-5, maybe picking up a few projects here and there if they interest him. But he's also invested in a business with his son, which will take him out of state quarterly. His pensions net about $4,000 per month. If he waits until FRA (66) to file for his SS, it ads $1,350 per month in income. The business with his son will provide some income at some point -- probably a few thousand a month within 18-24 months.
I've always worked in the private sector (I have about 250K in an IRA) until I started in state government in 2014. To retire with any pension at all from this employer, I'd have to work to age 65 -- no option for reduced pension for earlier retirement. If I don't go to 65, I get all of my pension contributions (about $7K per year) back in a lump sum, plus what I'm sure is minimal interest. Sticking it out would net me (if I stay around the current salary) an estimated $2,300/mo. pension with COLA starting in 2030.
Health insurance isn't an issue -- we can go on his TriCare if I'm no longer employed.
If I were single, it would be a no-brainer: stick it out and take the pension. But the trick is deciding how to balance maximizing MY retirement income against sharing in HIS retirement years. We want to be able to travel, do things together, etc. If I work to 65, he's 78. I also have to consider that I enjoy what I do, and I'm not ready to give it up at this point, even if money weren't an issue. Somewhere in the next 15 year span of time is a sweet spot where I should call it quits. Right now I'm looking at working until the house is paid off, which should be a max of nine years, hopefully sooner. How have others decide how to do it?
As higher income folks, you may have to balance your contribution to the cost of maintaining your desired overall lifestyle, versus spending your retirement years together. Another 10-years will only make you 60 (not that much difference between 50 and 60). But, in 10-years, he will be 73 ... and there is a much larger difference between 63 and 73, than between 50 and 60 (health, stamina, interests, etc). What is the point at which you will have enough resources to retire comfortably ... as opposed to simply working to maximize your retirement income?
When we retired 7-years ago, I was 61 and my wife was 65. She has had some vision problems, so we decided to get our travel out of the way, before her sight got worse. We just got back from a second 30-day Mediterranean cruise (and have taken several other cruises since retiring). I could see a significant difference in both of us since our first Mediterranean cruise only 5-years ago, particularly in her ability to clearly see what is going on. We also moved to be near the grandkids about 4-years ago. While we both still enjoy them greatly, we again find our ability to keep up with them slipping.
If I had waited until 65 to retire, we would not have been able to do as much travel, or enjoy the grandkids together as much. We might also have been able to pad our income a little. But, as it stands, we have plenty of resources and protected income (pension, SS) to live out our retirement years in relative comfort. Since we've always been planners and savers, we find that the cost of retirement (mortgage paid-off, etc), is not high enough to even force us to tap into our IRA accounts.
Overall, the decision for me to retire earlier was a good one. I ascribe to the view expressed in the old axiom: 'Nobody lying on their deathbed says, "I only wish I had spent more time at the office." Retirement emphasizes the distinction between a 'work to live' versus a 'live to work' philosophy. Is the financial/lifestyle value of working another 10-years, sufficient to offset the loss of spending the next ten-years together in relative 'freedom' to do whatever you want?
My husband was 21 years older than me, and the questions you're asking are the same questions we faced a number of years ago.
To me, the most important question is this: Suppose you retired today (so adios to the pension), and your husband were to pass away tomorrow, how would you manage financially? And as corollary to that, could you keep the Tricare health insurance forever?
Based on my experience, I would say retire as soon as it's financially feasible for you to live comfortably on your own, should that be necessary. If that's tomorrow, retire tomorrow. Make the most of both your and his good healthy years.
What income will you receive if your husband passes away?
My inclination is you should work until the pension kicks in.
As for the business with his son, the plan is to pay ourselves back and then take the profits for a few years, eventually transferring it all over to his kids (basically how we're handling estate planning in our blended family), so it won't be a factor for the long-term.
If DH were to die, I'd get 55% of the military (steps down to 35% at 62) and 55% of the civil service pensions. There may also be some sort of an offset with the Military/CSRS, so probably about $2,000-2,200 in today's dollars. That's not a lot if I'm 60, have already quit work and am not yet eligible for my own SS. That's the "donut hole" in this planning that worries me. Of course if the house were paid off, my expenses would be much lower, and I'd remain eligible for TriCare. It still seems sub-optimal.
But then I look at my own mother's situation as an example. She sold her house and has that money socked away, and now rents. She brings in about $2,500 a month in pension + SS + annuity, and even with $1000 rent, doesn't spend everything she brings in. She's not super frugal. She just doesn't have much to spend money on. Would I want to spend more? Travel more, etc., on my own? I just don't know.
I'll definitely work until the house is paid off (around age 58-60 barring unforeseen circumstances). It's that gap between there and 65 that's tricky.
I'm 50 and my husband is 57. We have both retired as of April 2015. We've been married 5 years and want to spend as much time as we can with one another, so the jobs had to go.
We just bought a house with cash. If he dies I would get about $35,000 a year from his government pension, plus my SS of about $800.00 a month once I turn 62, plus his 401 k, my small 401 k, and a life insurance policy.
If you think you can make it if he passes first go for it. Once he's gone that is time you can't get back together.
PS: It seems scary making the decision to retire, but after we did it, we now know it was the best decision for us. We wish you luck!
Jakabedy, I'm in a similar boat. My husband's military pension will be 55% to me if he passes away and his health isn't wonderful. I would also receive another small pension, but the majority of our income would be gone with his passing if I stopped working. I've plugged some of that "donut hole" you speak of with a life insurance policy.
Not sure but if you work until you get pension what kind of retirement would you and DH have together. Another aspect is you are already getting hit with CSRS and SS with the offset. If you worked for another state pension that would also hit offset how would all of that be affected. Lastly remember that if your DH passes on before you and you get that 55% it will be to provide income to only one so expenses will be less. Just keep the expenses low in terms of housing if possible and that should make life a little easier. I personally would not pass up the chance to enjoy travel and leisure time with SO. I am not in your situation entirely but I can relate to much of it. I have military pension coming soon and FERS as well. DH is my age (younger by 6 months) so that is the one aspect of our life that is different. I am done early in comparison to your DH being discharged this year or next and then taking the time. I will defer to the wife for her retirement but which ever way she goes is fine. Baring anything unforeseen we will be able to retire relatively close together in age.
I'm 50 and my husband is 57. We have both retired as of April 2015. We've been married 5 years and want to spend as much time as we can with one another, so the jobs had to go.
We just bought a house with cash. If he dies I would get about $35,000 a year from his government pension, plus my SS of about $800.00 a month once I turn 62, plus his 401 k, my small 401 k, and a life insurance policy.
If you think you can make it if he passes first go for it. Once he's gone that is time you can't get back together.
PS: It seems scary making the decision to retire, but after we did it, we now know it was the best decision for us. We wish you luck!
I think if we didn't have the mortgage, I'd be more comfortable making the leap sooner. But I can't complain -- we moved to our present location just last year and knew the higher housing costs were part of it. Its worth it to us to be in an ideal retirement location for us.
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Originally Posted by tom1944
Some government pensions are not subject to the SS clawback
He's subject to the WEP* (Windfall Elimination Provision). But he has enough "good years" of SS earnings that the reduction for him will be fairly minimal -- maybe $100-150/mo.
*The WEP is a provision that decreases the amount one receives of the first basic layer of SS (about the first $900) if one is receiving certain government pensions. But for every year of substantial SS earnings (over a stated minimum for the year), one gets a bit of it back. Once one has 30 years of substantial SS earnings, the WEP goes away. DH will have about 25-27 years.
Quote:
Originally Posted by LookingatFL
Jakabedy, I'm in a similar boat. My husband's military pension will be 55% to me if he passes away and his health isn't wonderful. I would also receive another small pension, but the majority of our income would be gone with his passing if I stopped working. I've plugged some of that "donut hole" you speak of with a life insurance policy.
We've got a bit of an insurance "plug" as well. But it's a term policy that will expire when DH hits 70 and I likely won't renew it at that time due to the exorbitant cost. He'll probably hit 70 before we get the house paid off, so I won't have that plug for the "gap" period.
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Thanks to everyone for the insight. At best it's a very personal decision based on myriad factors. But it's good to get input and hear the stories of others in the same boat. So much of the literature, calculation and common discussion assumes either spouses of roughly the same age, or a younger spouse with negligible earnings -- we're just different!
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