‘We’re not sure how ready we are for retirement’: We’re 60 and 61, and we don’t know how much longer we can work, have $360,000 in retirement savings and a pension

I am a 61 year old teacher in Missouri who plans to work 3-4 more years before retirement. Depending on which option my husband and I choose from the Public Schools Retirement System, we should be receiving between $5,200 and $6,000 per month for the rest of our lives. My husband is 60 and has $250,000 in a mix of Roth IRA, traditional IRA and a pension, while I have $80,000 in IRAs (I worked in the private sector before teaching), $30,000 in two 403(b) ), $18,000 in an investment account, and $65,000 in cash. My husband will receive Social Security up to $1,800 a month if he waits until he is 70 to take it. I will get about $1,200 a month based on my work in the private sector and taking into account the Windfall Profit Provisions Act that reduces Social Security for teachers who receive a public pension.

We feel that our accounts are disorganized and as a result we are not sure howprior totrimmed we are for retirement.

We have three years left to pay off our house, which is probably worth around $275,000. Our cars are paid off, but we’ll probably buy a newer one in the next couple of years and sell two of the three we currently have. Other things to consider are that my husband may not be able to work at his current job much longer due to health issues (his job requires heavy patient lifting). Most likely, he will have to retire before the age of 65. We are trying to save and put more into our Roth IRAs now. You put 15% into your pension; the PSRS takes away 14.5% of my salary for my pension. We estimate that we will need about $45,000-50,000 per year for retirement. We don’t live in luxury, but we do want to leave an inheritance to our daughter if we can (we have three fixed whole life insurance policies and term insurance until ages 65 and 70). My husband’s mom is in her 90s, so we’ve seen how longevity can require considerable savings for living expenses.

What do you think? Would you suggest any changes as we approach retirement? Thanks for your time.

Watch: I am 41 years old and my partner is 50. We have $800,000 in retirement savings and earned $250,000. We want to retire as soon as possible, but we know our money won’t last. What can we do?

Dear reader,

I can understand the concern about the security of your retirement as it approaches, but you have a secret tool that many Americans wish they had: a pension outside of Social Security.

“In their case, they have sources of income,” said Kevin Gahagan, certified financial planner and director of Private Ocean Wealth Management. “Having a pension is tremendously powerful. Social Security is tremendously powerful. They have significant advantages because a large part of their retirement resources are related to pensions, whether it’s from Social Security or a real pension.”

It appears to be on the right track, said Robert Gilliland, managing director and senior wealth advisor at Concenture Wealth Management, but the next two to four years will be very important, he added.

There are three contributing factors that greatly affect retirement security: longevity, because the longer you live, the longer you need your money to last; the rate of return on your investments; and their expenses, Gahagan said. She can’t really control the first two, but she can take care of the last one, and it will be a great indication if she can live comfortably in retirement.

For that reason, make sure you’ve reviewed your expenses and your estimated expenses over and over again before you quit. Make a list of all the costs you think you’ll have when you retire and take a hard look at your current expenses, like looking at your latest credit card statements. You mentioned how much you think you’ll need annually in retirement, but does that include taxes? Or health care, which only gets more expensive as you get older? If you really need $45,000-$50,000 per year, that’s great, but make sure of that before you retire so you don’t spend as much time worrying about paying your bills.

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You may also want to earmark some of your savings specifically for emergencies, since they tend to come up whether you’re retired or not. For the next few years before you both retire, consider contributing to your retirement accounts as well as an emergency fund, and keep the latter in liquid assets so they’re easily accessible.

Inflation is a hot topic these days, and you’ll need to keep an eye on it for decades to come. Social Security does have a cost-of-living adjustment, though not everyone agrees it’s in line with inflation for the goods and services older Americans spend their money on, but it still counts for something. Check to see if your pension is adjusted for inflation, and if not, take your spending needs into account when calculating your retirement expenses each year. A financial advisor can help you with this. Not everyone wants to work monthly or annually with a financial advisor, but many professionals offer their services for a one-time or occasional financial checkup and can discuss all of these concerns with you.

There’s no right answer to when to claim Social Security, but I wanted to make sure you’ve considered all of your options. You mention that her husband plans to wait until she is 70, which is a fantastic goal, but if it had to be a little sooner, that would be fine too. Longevity plays a huge factor in Social Security claim strategies: People who don’t live much past age 70 can’t enjoy the benefits they paid all this time. Others use Social Security as a way to avoid tapping into their retirement savings so the money can continue to grow in an investment portfolio. Americans get the full amount of benefits due to them at Full Retirement Age, and many couples discuss strategies to maximize their benefits for their personal situations.

As for Roth accounts, they’re best if you’re in a lower tax bracket now than you anticipate you’ll be when you retire, so be careful not to pay more taxes than necessary on your retirement savings. Traditional IRAs, as you probably know, are taxable at the time of withdrawal, while Roth accounts are taxable prior to withdrawal. Don’t get me wrong, it’s a good idea to focus on Roth accounts to begin with, “we don’t know what tax rates will be in the future,” Gahagan said, and if you don’t get a tax deduction for IRA contributions because of sponsored plans for your employer, a Roth account makes sense, Gilliland said.

Still, try to estimate how you think your tax situation will be in retirement compared to now, so you’re making the best decisions for you. Understand what taxable income you’ll get from your retirement income sources, which will help you decide if a Roth right now makes sense. Also, don’t put money into a Roth if you expect to get it out in a “relatively short period of time,” Gahagan said: You want those investments to have time to grow.

Want more practical tips for your retirement savings journey? Read Market Watch “Tips for retirement” column

Whole life insurance policies are a great way to leave an inheritance for your loved ones. I’m not sure what premiums you’re paying or what your policies are worth, but if you’re happy with the amount a beneficiary would get from your whole life policies, then there’s nothing else to do, Gilliland said. Make sure her daughter is listed as the primary beneficiary on the whole life policies.

You mentioned that longevity runs in the family, and that’s a blessing, so plan now. First of all, the financial aspects are crucial: Nursing homes, assisted living facilities or home health aides can easily empty a bank account. Long-term care insurance policies may not make sense to you right now, but there are hybrid policies that combine long-term care insurance with life insurance, and in that case, that’s another way that you can leave a legacy for your daughter.

But also think about the physical and emotional aspects of estate planning for you and your family. Have important legal documents ready, such as a will, health care proxy, and power of attorney, and have open discussions with your daughter about what you both expect and what she expects, as well as how far care can go . These are difficult discussions to have, to be sure, but getting them out of the way will be a relief to you and your loved ones when the time comes.

Readers: Do you have suggestions for this reader? Add them in the comments below.

Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com

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