72 and still working. How to retire?
April 20, 2010 by Kate Ashford
By Kate AshfordApril 9, 2010: 4:36 AM ET
(Money Magazine) — The Problem: Doris Partridge, 72, imagined she’d be retired by now. Instead she’s still working part-time, doing data analysis on HIV cases for a nonprofit near her Tallahassee home. “With the changes in the economy, I didn’t think it was prudent to leave,” she says.
Her wages, Social Security, and two pensions — one from her old job, one from her late husband’s — add up to $52,000 a year before taxes, so she hasn’t had to touch her $480,000 nest egg. (Much of it is in equity-indexed annuities, insurance products that peg growth to the stock market with a set minimum return.)
But she’s worried about those savings running out prematurely in retirement, given that she still owes $45,000 on her mortgage and would like to travel extensively.
Philadelphia-area financial planner John Sion says Partridge has a decent chance of stretching her assets over the long haul if she retires this year. But for even greater security, he’d like her to hold on a little longer.
1. Hang on for a year or two.
The $22,000 a year Partridge earns at her job allows her to leave her assets alone and save a bit too. So working even one more year significantly improves the chances of her money lasting to age 95, says Sion.
2. Pay off the house.
Her mortgage rate is a steep 7.4%. And since she’s in a low tax bracket, the interest write-off doesn’t buy her much. Partridge should sell some REITs, now yielding less than 7.4%, to clear the loan. Nixing the monthly payment will free up money for vacations until and after retirement, Sion says.
3. Manage the annuities.
Sion doesn’t love equity-indexed annuities, as they often have hefty fees, and he wouldn’t put them in an IRA, as this duplicates the tax benefits. But Partridge would lose a lot of value by surrendering now.