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Help Me Retire: I’m 41, and my partner is 50. We have $800,000 in retirement savings and make $250,000. We want to retire ASAP but know our money won’t last. What can we do?

Hi,

I love reading your responses to everyone’s retirement questions but realized that I haven’t seen one that matches up closely to what I’m hoping to do.

I am 41, and my partner is 50. We are both employed and make around $250,000 a year. We’re in an expensive cost-of-living area and have no plans to move away, but we live pretty simply. 

We currently have about $800,000 in retirement accounts, and nearly max out both of our 401(k)s annually. The main investments are in target-date funds (aiming for age 65).

In addition, we have about $400,000 in nonretirement savings and investments that we can tap into for living expenses if needed, and we continually contribute about $5,000 to $6,000 monthly to investments. Our strategy is largely a mix of index, value and growth funds, with very little individual stock exposure. 

We don’t have a mortgage or car payment, and our monthly expenses are generously estimated around $3,000 (usually less). This includes standard bills and discretionary spending, plus estimated property taxes spread out over 12 months. 

We would both love to stop working now or soon, but recognize our finances wouldn’t stretch far enough (if we just estimate to age 90). But I’m having a hard time figuring out when is a reasonable time frame we can hope for, particularly if we continue on the savings trajectory we currently are on as well as stagger our retirement so one continues to work for a few years after the other stops.

Thanks!

See: We are in our late 50s and have retired with less than $1 million: ‘Did I jump the gun?’

Dear reader, 

This is a tough question for just about everyone. You are certainly far from alone in wanting to retire as soon as you can but not knowing when it would be appropriate, or how much money is enough.  

What you do have going for you, however, is how you’re both saving — you both sound diligent about preparing for the future, and your incomes and spending habits definitely help. 

You’re right that if you were to retire right now, you might face some difficulties. Don’t get me wrong: $800,000 in retirement accounts plus the $400,000 in nonretirement assets is a lot of money, but not if you need that money to last for both of your lifetimes. If you’re estimating you’ll live to age 90 at least, that’s another 50 years for you and 40 years for your significant other. 

The unfortunate answer is that there is no “right” time to retire. I know that’s not quite the answer you were hoping for. There are, however, questions you can ask yourselves and exercises you can start to get a little more clarity for your personal circumstances. You may also find you actually want to be flexible in this timeline after crunching the numbers and considering the possibilities.

Ask yourselves what exactly it is you want to do in retirement, or why it is you want to retire right now. Do you both hate your jobs, or want to travel the world and think it’ll take a lot of time? Some people can’t wait to retire, and they save as much money as they possibly can to retire at age 50 or before and then find themselves completely bored, with a lack of purpose and a desire for responsibilities. Others, of course, pursue “financial independence,” where they’re capable of retiring at any given moment but continue to work in some capacity, even if it’s not at the job they had at the beginning of their savings journey. 

To find the right time, you sort of have to get to a point where you’re comfortable with whatever life throws at you. Finding yourselves in early retirement, then getting hit with an unexpected emergency can put a lot of pressure on your retirement assets. One reader shared a letter in our “Help Me Retire” column saying she did just that and then couldn’t keep a job after she tried to go back to work. 

Want more actionable tips for your retirement savings journey? Read MarketWatch’s “Retirement Hacks” column 

It’s important to note that the money you do have in your 401(k) plans may also be tied up until you’re 59½ years old (or 55 if it’s your current plan and you’re separated from service). Unqualified distributions are not only taxed but face penalties as well. 

Also ask yourselves how your lives may change in retirement, and what it will cost. Assuming your employers, or at least one of them, offers health benefits, if you were both to retire right now, would you need to find your own health-insurance plans, and what would that cost? If one were to retire now and the other work a few more years, is the one still working going to have access to healthcare that could support both of you? Private health insurance can be quite expensive independently, and you’ll need to carry that cost with you until you qualify for Medicare at age 65. 

You’ve got a very nice setup right now. Your cash flow is extra-positive, and you seem to be on the same page with spending and saving, which is great. The fact that you don’t have a mortgage or a car payment is another plus, of course. If you don’t hate your jobs, you may want to stay at your places of employment for a little while longer to reap the benefits they offer — not just the salary, but any others, like the 401(k) and health insurance, if that’s provided. And if one of you were to stay at a job when the other retires, it’s important to remember the value of those benefits and how much they can help you keep your finances strong. 

Also, consider the consequences outside of the immediate. Leaving the workforce altogether could hurt your Social Security benefits, especially you being so far away from a traditional retirement year. You might want to consider part-time work for this reason, even if you’d be earning much less than you were before. 

I know you want to know when the right time might be, but that’s something only you and a financial adviser can really figure out. To get a general idea, try doing some estimations for what you’d be spending in retirement and how much you’d have to tap into your retirement accounts. 

Don’t miss: I’m 33 and want to retire at 40, but have expensive medical needs – how can I achieve financial independence?

There’s no one-size-fits-all approach to the right withdrawal rate (the 4% rule has been contested over and over again) but say you have an annual withdrawal rate of 3%. Let’s do some very rough calculations. If you’re relying just on your $800,000 in retirement savings right now, that gets you an annual withdrawal of $24,000. Now say you’re going to need $5,000 a month in retirement — that’s $60,000 a year, so you’re looking at a $2 million balance to attain a $60,000 annual distribution for a 3% withdrawal rate. 

Keep in mind that this is extremely generic and does not account for taxes, changes in your lifestyles, increasing inflation, any Social Security benefits you may receive that would lower the amount you need to withdraw and so on. You also need to look at this figure in layers; you may outlive your partner, particularly given the nine-year age difference, which means you’ll need money after your significant other passes to last you the rest of your lifetime. 

These were just a few points to consider to back into the “right” time to retire, or stagger a retirement. I strongly suggest you find a financial adviser, even for just a “financial checkup,” who will be able to crunch more specific and appropriate numbers for you, consider what-if scenarios and give you a sense of when might be “enough.” 

Also see: I’m financially independent at age 33 — now what?

And if you haven’t yet heard of FIRE (short for “financial independence, retire early”) I encourage you to look it up, especially since you and your partner seem to be doing so well in living below your means. MarketWatch has an entire section dedicated to it. Most of the people who pursue FIRE are supersavers, meaning they live frugal lifestyles and aim to achieve a certain number, such as 25 times their annual expenses, before they quit their jobs. 

There is no one standard approach to FIRE, though. Some try to save more than that, which is sometimes referred to as “fat FIRE” while others are OK with saving less, known as “lean FIRE.” And the people I’ve spoken with come from different backgrounds and types of employment, as well as with distinct situations, such as married versus single and with or without kids. While they may have left the jobs they had, many still bring in income with side gigs or managing rental properties. It’s another way to find yourself in an early retirement.  

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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