A 62-year-old widow recently took to Reddit to seek advice about whether she can retire early, given her current finances and recent changes at her workplace. Here's her story and the factors she must consider to make this critical decision.
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This woman's husband passed away in October. She originally planned to work until she turned 65 when she would start collecting her husband's Social Security benefits of about $30,000 per year and her pension of about $27,000 per year. At age 70, she planned to switch to her Social Security account, bringing about $37,000 annually.
She has $1.2 million in investible assets and savings, a home worth $540,000 with no mortgage, no debt, and a three-year-old car that is paid for.
The widow is a federal employee with a secure position, but her work environment has deteriorated under a new director who has effectively forced out senior employees. The woman shared that despite significant staff losses, no new hires have been made, and the library where she works is understaffed. The situation has become intolerable, leading her to consider early retirement.
Unfortunately, this woman is not alone in her working situation. A recent Society for Human Resource Management survey found that 30% of U.S. workers have been treated unfairly due to their age, with 26% of U.S. workers age 50 and older reporting that they have been the target of age-related remarks in the workplace. Facing ageism in the workplace is not conducive to an enjoyable working environment, so it's understandable that the widow would want to retire early.
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Her pension will drop to $21,000 per year if she retires now, while her current annual salary is $92,000. She's still trying to determine her yearly expenses in her new situation with her husband gone, but she says she can currently pay her bills comfortably. Beyond that, she plans to move from a high-cost-of-living (HCOL) area to a medium-cost-of-living (MCOL) area to purchase a less expensive home and move $150,000 of her home equity into investments.
She also expects to inherit several million dollars when her parents pass away, but she doesn't want to plan her retirement around that and prefers to base it on her income.
So, let's breakdown some critical financial considerations:
- If she retires now, her annual income from her pension will be $21,000.
- At 65, in three years, she can start collecting her husband's Social Security of $30,000 annually, bringing her total income to $51,000 annually.
- At 70, she'll have $37,000 per year from her own Social Security, so her income will increase to $58,000 since she'll no longer be receiving her husband's benefits.
- She has $1.2 million in investible assets and savings, which can generate additional income through investments.
Beyond the financial impacts of retiring early, the widow is unhappy in her current work environment. Retiring early might improve her quality of life and mental well-being. And, while she doesn't want to rely on it, the inheritance from her parents may offer a safety net for additional financial security.
Deciding whether to retire early is a complex and highly personal decision. The financial numbers suggest that early retirement is feasible for this widow, especially given her substantial savings and the potential to reduce living costs by moving. However, she should carefully evaluate her expenses and consider consulting with a financial advisor to ensure she makes the best decision for her long-term financial security and overall well-being. A professional can help her navigate the transition, manage her investments, and plan for a comfortable and fulfilling retirement.
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