You Can Retire at 60!

April 23, 2012

She proved me wrong.  When my first appointment of the day for a work site personal financial planning session came in, I was skeptical because the first thing she said was that she wanted to retire in six months and she was sixty years old.  I raised an eyebrow and told her, “It’s not easy to retire at sixty – in fact it is really tough. Not many people do it these days.”

I didn’t want her to have unrealistic expectations and leave the meeting completely crushed.  Well, about ten minutes later, after running some calculations on her retirement income streams – her pension, Social Security (at age 62), and her 401(k) – we watched together and I pushed the “calculate” button and indeed she was on track to retire early.

I smiled and said, “looks like you’ve proven me wrong” and indeed she had.  I was very impressed with this woman with a modest income who was so well prepared when so many aren’t.  This is how she did it:

She was well prepared in three important areas:

Living below her means:  She lived a modest lifestyle and I think she would probably agree that she was frugal.  For example, she doesn’t have a cell phone except for her company phone or other things that we might take as a necessity but she sees as a luxury like cable or satellite TV.  She is able to save over 25% of her income and has done it for years both inside her 401(k) and outside the retirement plan in her bank and in an investment account.

Her expenses will be reduced in retirement:  She paid off her house and made all upcoming major home repairs such as a new roof.  She updated her kitchen and bath rooms and paid cash for these upgrades as she went.  No surprise, she has no credit card debt or car loans.

Maximize company benefits:  She works for a company with good retirement benefits and she stayed there for 30 years.  She was able to build up her 401(k) with the company match, she is vested in a pension plan, and she has a retiree medical benefit that will help her with the gap in coverage from age 60 to age 65, when she will be eligible for Medicare.

This may also not come as a surprise, but she had a will in place with powers of attorney for financial and medical matters.  The next step for her was to look into long term care insurance right away and she’ll start by reviewing the options in her group plan (which is portable after she retires).

She left our meeting with a smile on her face and a secret – she could leave anytime.  She may not. In fact, she may work another couple of years but one thing is certain, her Monday mornings are going to be a lot different from here on out.  I left feeling impressed that I’d met someone with no financial background but with a ton of good sense and discipline.  I don’t know who was smiling more, me or her.  Either way, I was very happy to have been proven wrong.