My wife and I are 66 years old. She retires at 62 and is already collecting social security. I plan to retire at the end of this year at 67. We have only approximately $ 150,000 in 401 (k) account together and we will receive approximately $ 6,500 in social security per month when we retire. We only have a mortgage that we are actively trying to pay off. My house costs between $ 650,000 and $ 700,000. Can we retire?
– Tim
Whether you can retire comfortably will largely depend on your cost needs. Until I know how much you are going to spend a pension, I can help you ask the question so you can get a more clear feeling of where you stand.
If you have similar questions regarding retirement or need help to manage your investment portfolio, consider working with a financial advisor.
If you still have no good idea of your budget, start tracking your costs for a few months. From there, add or remove items you know will change when you retire. For example, you may pay for some work -related costs or have costs related to your daily work trips that will decrease when you retire. You do not need an accurate figure as long as you are sure that your assessment is relatively accurate.
As your income tax obligation is likely to change, I wouldn’t take it here. If your mortgage will be paid, you can exclude the part of the principal and interest from your payment, but you will probably want to keep your taxes and insurance of your property and insurance.
(And if you are struggling to appreciate your retirement revenue needs, talk to a financial advisor to see how they can help.)
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You will then have to compare your estimated retirement budget with your sources of income. In your case, these are your social security benefits and any withdrawals you take from your 401 (K).
However, there are a few things to think about when you take the withdrawals from your 401 (K). In addition to how much you want to withdraw, you must also have a plan forAs You will withdraw this money.
Many download strategies are available, each with its own benefits and risks. They are worth exploring, but for simplicity, let’s assume that you use the standard 4%rule. This would allow you to withdraw $ 6,000 in your first year of retirement and then adjust your inflation withdrawals each year. For example, if inflation is 3%, you will increase your withdrawal next year to $ 6,180.
Then add your social security benefits. Let’s use your number of $ 6500 a month. This is $ 78,000 a year, added to your $ 6,000 withdrawal, giving you a first year of $ 84,000. (And if you need additional assistance to mapping your retirement income sources, consider working with a financial advisor.)
Fortunately, not all of $ 84,000 will be taxed on income. Your 401 (K) withdrawals would be taxable, but only part of your social security benefit will be. The formula is a little complicated, but if your “combined income” is below $ 32,000 in 2025, none of your benefits would be taxable. (This suggests that you and your wife jointly submit their taxes.) The combined income is defined as half of your social security benefit plus your corrected gross income (AGI) and interest -exempt interests.
If your combined income is between $ 32,000 and $ 44,000, up to 50% of the part over $ 32,000 is taxable. Over $ 44,000, as much as 85% of the surplus is taxable. In your case, if we only accept the income we have discussed, about $ 9,400 from your social security will be taxable ($ 6,000 + $ 42,000 = $ 48,000 combined income).
In this scenario, this gives you a total taxable income of $ 15,400: $ 9,400 from social security plus $ 6,000 from your 401 (K). This is well below the standard deduction, which has increased to $ 31,500 for married couples after the law is passed as a large beautiful bill. This means that you will not owe a federal income tax, although you will also have to evaluate your country’s income tax if the state imposes you.
(Taxes play a key role in retirement planning and a financial advisor can help you navigate them. COMMUCTION WITH THE EDITORY FREE.)
Now it’s just a matter of comparing your net income to your estimated budget. If $ 84,000 a year will cover your costs and still leave you a comfortable buffer, you are probably in a good position. If not, you may want to adjust your plan accordingly.
Whether the above leaves you to feel prepared or don’t seem to fall out, here are some things you may want to think:
Social security: This will probably provide the bigger part of your retirement income. I would consider a serious thought to make sure you make the best possible choice of submission. The delay of last full retirement age would allow you to increase your compensation by 8% annually. This is not the best choice for everyone, but I would investigate it if you haven’t done it yet.
Healthcare: Unplanned medical expenses and long -term care needs can be a major risk factor for retirement. Knowing how you plan to deal with them a while ago can reduce their impact. This can be by buying long -term insurance or separation specifically for this purpose.
Domestic capital: If you plan to own your home soon, I think it makes sense to understand how this can help you with retirement. Even if you do not plan to touch it, it would be worth knowing how you can use your own capital if the need arises.
Roth transformations: Given your low expected tax liability, carefully consider Roth’s realizations.
(Financial advisor can help you with these reasons and potentially find gaps in your retirement plan.)
Depending on the needs of your costs, you may or may not retire with the sources of income you mentioned. Comparing your estimated budget with your expected net retirement income will help you decide if you are really prepared.
The financial advisor can help you build a personalized retirement plan, adjust it over time, and make informed decisions on withdrawals, taxes and investment. Finding a financial advisor should not be difficult. The free Smartasset tool is the same with the audited financial advisers serving your area, and you can have a free opening conversation with your advisor to decide which one is right for you. If you are ready to find an advisor who can help you achieve your financial goals, start now.
Plan the order in which you will draw from taxable taxes and tax accounts. A well-sequential withdrawal plan can help with a lower lifelong tax obligation and preserve more wealth.
Brandon Renfro, CFP®, is a Smartasset financial planning colonist and answers readers’ questions on personal finance and tax topics. You have a question you want to answer? Send email askanadvisor@smartasset.com and your question can be answered in a future column.
Please note that Brandon is not an employee of Smartasset and is not a participant in Smartasset amp. It is compensated for this article.Some questions sent to readers are edited for clarity or brevity.
Ask the Publication Advisor: We have only $ 150,000 in savings, but $ 78,000 for social security and a $ 650,000 home. Can we retire? appeared first on Smartreads from Smartasset.
