Q. I turn 56 this month and would like to retire soon. I have questions about whether I can afford to, about health care, and if changing my living arrangements will it make a difference. Here’s the deal.
My wife and I own a four-bedroom house worth around $275,000, which we have paid off. We have no debt, and our 3 children are living independently after graduating from college. I have about $1 million in my 401(k) and other investments, including a $150,000 annuity. Our property taxes are around $8,000 a year. We are both healthy and have excellent health insurance through my employer.
Can I retire before I turn 62? Do I have enough money? And what about healthcare? I have even considered renting vs. owning because I think we could get a nice rental for $1,000 or so per month. That would net to about $4,000 against what I pay in property taxes alone. In addition, I would not have the expenses for upkeep of a 50-year old house.
If I did retire, what would I be looking at in health costs? —D.C., Irving, TX
A. The greatest impediment to early retirement is the cost of healthcare. I have met many people who had buyout offers from their employers— but decided not to take them when they learned how much health insurance would cost before they reached Medicare age. The cost can be punitively high, and that assumes you can get the insurance.
The sad reality is that while modern healthcare can do much that wasn't even imagined 50 years ago, you and I have to treat the healthcare system as if it were a blood-sucking monster. While the doctors and nurses who care for us may be altruists with utterly benign intentions, the institutional delivery of healthcare is bankrupting the country.
You can start exploring costs by getting quotes online. Blue Cross Blue Shield, for instance, quotes plans from about $750 a month to $1,250 a month for a $1,000 deductible plan for a non-smoking couple in their mid-fifties. Plans with larger deductibles cost less.
With $1 million in financial assets you have far more resources than most Americans. Many retired readers would assure you that they do nicely on much less. This is particularly true if you are willing to be flexible about your largest single expense— shelter. As you suggest, you can rent an apartment for less than the operating expenses of your house. This would free every dime of equity for the creation of additional income.
An even better option is the purchase of a low-cost condo or a manufactured home in a 55-plus community. Owning the unit will reduce costs significantly. It could provide you with more space while reducing your out-of-pocket shelter expenses to less than the cost of a rental unit. Let me give you some extreme examples. If you visit realtor.com and check the multiple listings for manufactured homes you will find many in high quality 55-plus communities available for well under $60,000. Something like this would leave you with an additional $200,000 or so to invest. A very quick way to start exploring this notion is to pick up a copy of Where To Retire magazine, available in most Barnes & Noble bookstores.
You'd still have to deal with the blood-sucking monster of healthcare. Fortunately, both health insurance and medical care are much less expensive if you live outside of our country. It's sad that this is the case— particularly since American business has been an engine of low-cost products and distribution— but the reality is that your resources and personal health security will be better if you leave the country. So I suggest you research living in Europe or an Asian country like Thailand— at least until you are eligible for Medicare.
The important reality here is that retirement isn't just about "the number"— the financial assets you need to kiss your job goodbye. You can change the number at will by thinking of retirement as an opportunity to do a major "reset" for your life and embracing the most powerful capacity human beings have— our ability to be flexible and adapt. This, by the way, is beautifully captured in a lovely recent film, "The Best Exotic Marigold Hotel."