CAN I RETIRE?
Retirement requires a bit of math. You’ll need to know your sources of INCOME? Will you have a pension, business income (even sharpening mower blades), and Social Security? The more “sources” of income the better. Are you planning to live off your savings (see if you can delay that)? You can’t retire until you know how much income to expect. Let’s say, for sake of argument, that your incomes add up to $60k per year. That is quite livable for the frugal, by the way, if you can avoid $7 coffees.
That’s not the end, of course. You also need to know what your EXPENSES will be. Assuming no debts or huge expenses (because those hurt deeply!!) how much will it cost to live and enjoy life? You probably won’t want to buy a $90,000 car or travel to Spain unless you have the income to support that. Add up your utilities, insurances, medical, transportation, housing, travel, and food. If that comes to $70k you can’t live on an income of $60k. (Hint: If your expenses are less than your income you will have a wonderful retirement.)
There are a few things which WILL make it easier to budget:
Being Debt-Free.
If you owe NOTHING on your house, cars, student loans, and credit cards you can breath much easier. If you are 40 years old, your number one goal should be to pay off everything. Now, let’s be clear…if you are renting instead of owning a home you’re never going to be out of debt for housing. Debt is often a trap that keeps you from doing what you want to do. It takes away your freedom and your security. If you have debts you may have to work longer to pay for them. If you don’t you may not have to work longer.
Savings and Investments.
Well! There are ALWAYS unexpected expenses in retirement. Plan on it! If you have nothing (or little) saved your budget will take huge hits and you can easily go into debt. Can you see yourself eating dog food? No? Then you will need to put away lots of savings.
An emergency fund is not enough. I suggest a minimum of $250k invested. (You will read many articles stating you need $1.5million. No you don’t, unless you are wealthy.) The median amount saved by retirees is less than $150k. That’s very risky! Just one month in a nursing home is $10-15k. A new roof is $15-30k. A new car is $35-50k.
Planning Makes Retirement Easier.
Where are you going to live? What memberships will you quit? What’s your budget? There are 20 things (round number) you need to discuss with your spouse and family. Do you have a Will? If you are about to turn 65, have you signed up for Medicare A,B, and D, and arranged for Supplemental insurance?
The sooner you fund your investments the sooner they can begin to grow. At age 40 you should be throwing 15% of your income into investments.
Owning vs Renting.
You don’t need to own a home to have financial success. However, owning a home includes many benefits. First, you’ll eventually (30 years or less) become FREE of housing payments, plus you will have appreciation, tax perks, and stability. The cost of retirement housing will be far lower than others of your age who are still renting. If you want to downsize or move to Tennessee you will have the resources to do so.
Not Competing with Anyone but Yourself.
Retirement is not a competition. You only need to have “enough” for YOUR needs and lifestyle, plus some money for emergencies.
Waiting to the “Sweet-spot” to begin your Social Security.
Hey! Did you know that nearly 40% of those who took Social Security benefits at age 62 regretted that choice? AND, did you know that more than HALF of those who waited until age 70 did not live long enough to “break even” with those who began at age 65? So, there is a “sweet-spot” for taking Social Security. Too early is generally a bad deal and too late means a loss of total income from that resource.
Further, if your spouse will need your Social Security to survive in a manner you want for him or her, do not take it at age 62. By the way, waiting beyond your Full Retirement Age (FRA) is meaningless for your spouse because he or she will receive NO MORE THAN what you would have gotten at FRA anyway.
Don’t fall for the “time-value” argument for taking SS at 62. “Time-value” only applies IF you are going to invest ALL of your SS benefits every month. If you will be using it as spendable income to replace a paycheck “time-value” does not apply.
Same with “opportunity cost.” That’s a business term. It is possible to use the concept for retirement decision making, but ONLY if you have fully researched the options and KNOW therefore which way will work best for YOU. Many misinterpret the term and think it means they can do what they want without doing the hard work.
What if I have a Bunch (more than $500k?) in a traditional IRA, 401 (k), or SIMPLE?
Good question. If you have a large amount in tax-deferred funds you might begin withdrawals early. Talk with your tax advisor about this. In the early years you may be able to transfer some of those funds to a Roth IRA. You will pay income tax on the withdrawals, but then the money can grow without tax penalty for the rest of your life.
There may be another reason to begin withdrawals early. You WILL be taxed on withdrawals from tax-deferred accounts, but by starting early you may be able to reduce the federal income tax rates. At 73 you have to withdraw about 1/29th of the total. But if you start at age 63 you can divide the total by a larger number (~ 1/39th of the total), reducing the amount subject to taxes every year. (By the way you can begin withdrawals as early as 59 ½.) Your tax advisor can help you decide.
Married? If one of you passes away the other spouse will be penalized for the large income. Single taxpayers (widows and widowers) always pay higher taxes than joint filers. Also, the amount one pays for Medicare Part B premiums may increase after the death of a spouse. So, talk with a financial advisor about how to reduce those risks. Here’s the problem: In 2026 the married tax rate will be 12% up to ~$101k of income, but as a single (widow) your tax rate is 12% up to ~$51k, then 22% up to ~$106k. That means a widow pays as much as $5,500 more in federal income taxes compared to a married couple on an income of $105k.
Finally: Don’t trust the online articles about retirement. They assume too much about YOU. Your needs are vastly different than the person those article writers have in mind (white collar workers living in New York City).
Copyright 2025 Donald Whelpley
[PLEASE NOTE that Don is always open to discussing the thoughts and opinions he shares here and welcomes comments as shared in the comment section. He doesn’t use other social media platforms and won’t see whatever you’d like to share with him if you post it elsewhere.
ALSO, Don is always open to offer his thoughts on various topics. If you have a specific request, you can let him know in a comment; he reads – and replies to – them all. ~ Sherry]
See more GUEST POSTS from Don
Sorry about ANOTHER post about retirement.
Except, it seems so many fail at this…
Last week someone I know admitted she did not apply for Medicare during her 65th birth month. I warned her that there’s only a 7-month window to apply without PENALTY! She is almost to the end of that window.
Retirement is one of the hardest things you’ll ever do (only easier than dealing with the death of a loved one).
Too late for me, unfortunately, but hopefully others will take heed before they too make costly mistakes!