We have $3.9 million in retirement and cash, but face a $60,000 annual college bill for our child over 5 years. Can I retire if my wife keeps working? 

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I am 61, and recently retired with no current income. My wife is 55 and earns about $150,000 per year. I have approximately $1.5 million in 401(k)s while my wife has approximately $975,000 in her 401(k). Between the two of us, we have $300,000 in Roth IRAs. We also have $300,000 in mutual funds.

We have a child in college with five more years to go in a six-year program, with each year costing $60,000. We have $120,000 in a 529 plan, which will pay for the next two years, leaving us with the three remaining years to pay from other funds.

In addition, we have about $850,000 in cash and CDs. We own our home worth approximately $900,000 with no mortgage. We have no other debt. We are currently covered for medical insurance through my wife’s job, but should for some reason she was to stop working, we would need to get medical insurance in the private market.

She contributes 15% to her 401(k) with a 5% match, and after meeting household expenses with her income, we are not currently adding to our existing savings. Our monthly expenses, including fixed costs, are about $8,000 per month. I can claim Social Security in one year (approximately $2,700 per month) but am not sure if I should wait. 

Based on these figures, do you think I can afford to retire, or should I return to some kind of part-time employment?

Related: I’m 73 and my financial adviser told me to buy $1.5 million in annuities — should I do this? 

Dear Reader, 

You sound like you’re in a very fortunate situation with your savings, your wife’s income and being debt-free. Many would say yes, you absolutely can retire at this point, but here are a few things to consider before you decide for sure.

While your wife is still working, you’re in good shape because you still have money coming in and health insurance. If she were to stop working before you both get to Medicare age, which is 65, yes, you’d have to get insurance another way, and going through the private marketplace can be expensive. That is something you’d have to fold into your estimated expenses in the next 10 years, and could force you to distribute more from your retirement plans than you’d like. 

Don’t get me wrong. Having roughly $2.5 million in 401(k) plans and another $1.4 million in investable assets and cash does not mean you’re in peril. But given that you’re in such a fortunate situation, one of your goals should be to preserve your assets for at least the length of you and your wife’s lifetimes (while still enjoying yourselves, of course). 

The advantage of part-time work

Paying for your child’s college is a gift that will keep on giving, but just make sure it’s not taking too much from your own future at the same time. It’s been said a million times: You can borrow for college — but you can’t borrow for retirement. If paying for your child’s education is a prioritized financial goal, having that income from your wife and maybe even a little extra from part-time work you do would help preserve your own retirement assets and pay off that tuition bill simultaneously. 

A quick note about Social Security: Yes, you can begin claiming at age 62, but there are so many variables that should go into when you claim, including longevity and the amount you’d get early versus at Full Retirement Age. For example, if you think based on family and health history, you could live until age 90, then waiting a little longer to claim would get you more money every month. Also, early claiming wouldn’t affect your wife’s spousal benefits while you’re alive (in the case you have a higher benefit and she wants to claim spousal benefits), but it could affect survivor benefits if you predeceased her.

Create a long-term financial plan

Of course, a qualified financial planner could get more specific with you about your current finances and a projected retirement income strategy. They can also run the numbers for you, estimating various rates of return, inflation and Social Security benefits based on claiming strategies. With a real financial plan, you’d be able to see how your monthly spending would affect your portfolio balances in the long-run. A professional can also get granular about tax implications, health insurance options (including long-term care needs) and estate planning, so that your money is protected and used as you and your wife wish it to be. 

Part-time work doesn’t have to be a pain point for you. Given how well you and your wife have saved, you have a lot of freedom not everyone can afford. You can be picky about where you work, how you work and when you work. Take some time to think about the skills and experience you have, and how it can translate to some jobs, and then peruse the market. Maybe you take on a consulting gig, or you veer off completely and do something you’ve always wanted to do but never did. If the job comes with health insurance or other retirement benefits, all the better. 

It also doesn’t have to be a permanent decision. You could decide in five years, after your child has graduated college, that you really just want to retire. In that case, you can revisit your budgets, as well as financial and retirement plans, and adjust in a way that allows you to do that. The best part: You’ll have that big college bill out of the way.

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Alexandra Williams
Alexandra Williams
Alexandra Williams is a writer and editor. Angeles. She writes about politics, art, and culture for LinkDaddy News.

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