Tom Mosley:

I am 55 and I have $1 million, can I retire? You have no idea how many times we get asked that in our conference room because people are just wanting to retire earlier than 60 or 65 or 70, in the old traditional ages, in the old traditional times that people retire. What’s the reason? Some of them are just tired of the grind. I have other people come in, they say, “Well, I’ve got a new boss and it’s no fun going to work anymore. I don’t like the boss, the people I work with, the company got bought out by another company.” Whatever the reason, some people come in and say, “I just want to stop.” And then there’s one other big reason and that is your health gets in the way or maybe a spouse gets in the way with their health and you have to take off so that you can take care of your spouse or a loved one or a partner. And then the other thing is, you might get laid off. So whatever the reason people are asking, “I’m 55, can I retire with $1 million? Can I afford it?”

Today, I’m just going to cut to the chase. I think there are four things to consider if you’re really serious about wanting to retire at the age of 55. Number one, you need to consider all the good things. It’s the go-go time for you because it’s good reason to maybe retire. You’re healthier than you’ll ever be again. You might be wealthier than you’ll ever be again. And you’ve got that big bucket list and you think there’s no way that if I wait till I’m 65 or 70, I’m going to be able to accomplish all of the things on my bucket list. And why do I say go-go? I’ve always taught in my classes that I teach all over Southern California that there’s three stages to retirement. The go-go stage, which that’s the time you need to go and enjoy, and you never know how long that’s going to last before your health causes an end to it or something else comes into play.

Your go-go stage, and then you go into the slow-go stage and before long, if God gives you a long time on this earth, you go into the no-go stage. So one of the things you need to realize is it is a great time to retire if go-go is all you’re thinking about. The second thing though, you need to consider is the gap. Now the gap is this. If you retire at 55, you’ve got some gaps that are serious and that’s why a lot of people wait until they’re mid-sixties to retire. You’ve got the gap from 55 to 59 and a half where if you have an IRA and your money is in an IRA and you start taking money out of your IRA before you’re 59 and a half, there’s a 10% penalty. So there’s a gap of four and a half years if you retire on your 55th birthday until you can take money out of an IRA.

There are ways to get money out of a 401(k) without the penalty. So don’t be really smart and do it yourself and go take your 401(k), retire, move it over to an IRA, and then at 55 years and two months, come ask me to help you. I will help you as much as I can, but getting money out of that IRA is going to cost you a penalty. There’s a gap between 55 and 62 when you can first turn on your social security. Oh yeah, social security’s going to be a big part of your retirement, 40%. So that’s a gap you need to consider. There’s a gap between 55 and the age of 65 when you can qualify for Medicare. That’s a big gap because you’re going to have to carry your own health insurance and nobody needs to be outside of health insurance after the age of 55 because you’ve covered it all your life. You’ve carried it all your life, and now’s the time when people get sick.

And then there’s the gap between the age of 55 and 67, which is, if you’re 55 years of age right now, 67 is your full retirement age with social security where you can get much better bang for your bucks from your social security money. So the big thing to consider during the gap is not just the gaps between 55 and those ages, but where’s your income going to come from? Do you have a pension? If you have a pension, can you turn it on at 55? Some pensions don’t allow you to turn them on until you’re 65. Do you have an annuity, which is the only thing that’s going to pay you guaranteed increasing income for the rest of your life? Do you have rental properties that you might be able to draw income off of?

Do you have an income flow? And that income flow doesn’t need to just take all of that stack of assets that you have and drain them down so that when you get to be 65, bingo, you can turn on social security and Medicare, but you’re out of money and what I call your play check, your fun money, and that’s the money that you have put away in your IRA. The third thing you need to consider if you want to retire at 55, and we talked about, it’s good because it’s the go-go years. You got some gaps to cover, but the third thing you might have is debt. Do you still have a mortgage that you’re paying? That’s a big hurdle in retirement because that’s just a higher and higher and higher income flow you’re going to need. Do you have a mortgage? Do you have a student loan?

Maybe you’ve got those children, they came along and they’ve cost you all along and now, they’re costing you a parent plus loan that you’ve still got to pay off or the credit cards have gone up because you said, I’m not taking out a parent plus loan. I’m going to send my kids to college, but you’ve had to run up a larger than comfortable credit card deal. And maybe you’re caring for your parents. Maybe there’s an expense there. So you’ve got to consider if you’re 55 and you’re in that sandwich age of taking care of parents and taking care of kids and taking care of the mortgage and taking care of everything except taking care of you, you’ve got to consider the debt load that you’re carrying.

The fourth thing you’ve got to consider is 40 years. If you retire at 65, I’ve got statistics on that. If you retire at 65 and you’re single and you’re female, there’s a 40% chance you’re going to live until you’re 90. Well, if you retire at 55, you got to tack on 10 years there, and if you’re going to live until you’re 90, you might live until you’re 95. Check it out. People are living longer and longer and longer. So what that does is, think about how many times you’re going to have to worry if your money’s in the market and you’re counting on a six or a seven or an 8% growth average, think about how many times the market’s going to go up and how many times the market is going to go down. And if you’re doing that for 20 years, that’s quite a rollercoaster, but if you’re doing it for 40 years, that’s a real, real long rollercoaster. I remember my wife and I were riding a rollercoaster not too long ago.

It’s the last rollercoaster I will ever get on, and I’ll remember that it was a short one. I was thankful for that, but I was so thankful that I was not on a long rollercoaster. Now, you want to know the solution to all of these things. You want to know the solution to the go-go years and making sure you have enough money in the go-go years, covering the gaps until all of those programs kick in that can provide you income. You want to know the solution to your debt problem and having a plan to pay off your debt and to making sure that you’ve got income and it’s going to last for 40 years. You want to know the solution to all of that. The solution to all of that is to have a plan, and that’s what we do. That would solve every one of these.

The plan would tell you how much money you can spend in the go-go years. If you don’t have a plan and you’ve got a hope program, you’re just hoping that it’ll last. You won’t feel comfortable spending the money you need to spend to really have the good years out of those go-go years if you do retire at 55. If you don’t have a plan, then you’re not going to know how you’re going to cover that gap and be comfortable. I had a lady recently tell me, she said, “The thing that I’ve liked about working with you through my retirement,” because I’ve been in business 28 years, she said, “The thing I like about working with you is you were just as concerned that I would be able to go to the grocery store when I’m 85 that I was when I was able to go to Venice when I was 65.”

So you’re not going to have that comfortability to be able to go for the go-go years to cover the gap, to cover the debt and get the debt paid off, and also then to last for those 40 years and be comfortable. If I’m going somewhere and there’s beautiful scenery there, but if I look down and I see my gas gauge and that red light is on and I’m afraid I’m about to run out and I’m looking frantically for a service station and I’m hoping I get there before I run out, I miss all the scenery. I miss all the fun. I miss all the enjoyment of the trip. The biggest problem people have when they retire at 55 with $1 million is they don’t have a plan. A blueprint, a retirement blueprint is what we call it at our firm to make sure that you’re going to have enough money to last no matter how long you live.

Hey, at our place, we build a retirement blueprint for everyone, and we could do that for you. That will address your income for life to make sure it’s going to be there, adjusted for inflation so that it’s enough through the years to cover your increasing expense. It’ll address your investments and how risky are they and how risky do you want them to be. Your taxes and how much tax you’re going to pay on that 401(k) and that IRA in your retirement. It’ll address your healthcare and how we’re going to take care of that, and it’ll also address your legacy, how you’re going to leave it.

If you want to get ahold of us, you can contact us at info@mosleywealthmanagement.com, spelled that M-O-S-L-E-Y. You can also call us at (855) 567-0933. Hey, if you’ll give me eight to 10 minutes every single week, I’ll do my best to increase your financial knowledge and to make sure you ease into retirement.