Okay to Retire or Semi-Retire at 55?

Added: 2026-05-18

[00:00:03]Welcome to the Jill onmoney show. It's Monday, May 18th, and we are here answering your financial questions. If you have one, just go to our website, jillondmoney.com, click the contact us button, write us a note. And if you would like to join us live on the air, all you need to do is click that contact us button in that upper right hand corner and write us a note. And if you want to join us live, check the box. It's all so easy right there for you. I would love to point out a couple of things on the website. First of all, things are going to be changing, changing, changing, changing because we are launching a new show and there's going to be a video component to it, which is exciting. Mark, are we allowed to promote this yet or what do you think? Should I say it or not?

[00:00:45]>> Yeah, sure. Why? I think you already have. Yeah, >> I don't know. Okay. The name of the show is called Money Moves. It's um going to be video and audio and you'll be able to enjoy it anywhere any way you would like. Um, and we are supposedly launching it, I think, uh, in the beginning of June. But the way you'll get access to, we're going to run it on the same feed. So, just make sure you subscribe to the Money Watch podcast, which is at the bottom of our website.

[00:01:11]You'll see, Mark, we're going to have to redo the whole website. So exciting. So much work for you. So, sorry. And, uh, you'll just subscribe to it and then when it gets going, you'll get it. You know what's good is that you will actually know exactly what's going on if you subscribe to the free weekly newsletter which comes out Fridays and I encourage you to do that. So, lots of things happening here. Uh not even at the midpoint of the year yet, but we are rocking and rolling here at Jill on Money. So, and we want you to join us.

[00:01:39]We want you to be along for the ride. So much fun. Okay, so let's get back to you guys. Let's talk to Matt. He joins us from the south and you're going to see exactly how far deep in the south he is.

[00:01:50]So, Matt, welcome to the program. Tell the folks what they need to know about the South.

[00:01:55]>> It's lovely. I enjoy the weather here.

[00:01:58]Um, we're not too far from anything like beach, mountains. We have a lot of variety with things to do and I love it.

[00:02:06]>> All right, then. Um, if you love it, I love it. I like when people are happy where they live. So, Matt, what brings you to us today? Well, Jill, there's um a lot of upheaval um sort of going on in my industry, in my job right now. Um there are industries that are worse, but I just see a lot of things happening and a lot of things going on and I want to make sure that I'm prepared if um I need to retire early.

[00:02:33]>> Um and there's a potential maybe in the next one to three years of a package at my employer. Nothing concrete. I just see that there's a increasing possibility that, you know, that could occur.

[00:02:46]>> I I mean, I think it's smart to project ahead to be honest with you because I no one wants to be caught flatfooted, right? That's that to me is the the big issue. So, we want to make sure that you have all the information at your fingertips and we also want to make sure that you feel confident that if the hammer comes down that you are ready to go. So, first let's let's see how prepared you are for this. Uh, how old are you, Matt?

[00:03:12]>> Okay, I'm 54 now. I turned 55 in um just a couple months.

[00:03:17]>> Is this a job that has a pension associated with it?

[00:03:20]>> It is, Jill.

[00:03:21]>> Oh, see how everyone's like, "Yes, it does."

[00:03:25]So, um, okay. Wait, before we get to the pension, uh, are you married, single, partnered?

[00:03:32]>> Single.

[00:03:32]>> Okay. Kids or no kids?

[00:03:34]>> No kids.

[00:03:35]>> Okay. So, let's say you have the job, you make it through the next couple of months, you're 55. What would your pension benefit look like?

[00:03:42]>> And and Jill, I'm sorry. I messed that up. I'm about to turn 54. In 14 months, I'll be 55. So, sorry.

[00:03:48]>> Okay, got it. It's all right. Some people just don't know. You You lose track of time. Do you have to make it?

[00:03:52]Well, let's just say they came in in a couple of weeks and just said, "Okay, Matt, here are your walking papers. What would your pension benefit look like >> before 55, Jill? It's a mixed bag because there's a formula in the pension that increases a lot when I turn 55. So, if something happened in the next couple of months, I would be more apt not to take it because the value of staying till at least 55 changes the picture dramatically.

[00:04:21]>> So, let's pretend it's 14 months from now and you get the hammer. And then what would it be at 55?

[00:04:26]>> So, at 55, um, there's several different scenarios.

[00:04:30]If I started drawing it immediately at 55, it would be about $27,000 a year.

[00:04:37]>> Okay.

[00:04:38]>> And I'm I see a scenario where around uh age 57, uh it sort of makes sense if I leave at 55. At 57 it would be 30,000 a year.

[00:04:49]>> And how much do you earn right now, Matt?

[00:04:52]>> So I'm right around 70,000 a year.

[00:04:55]>> And how's your how how do you exist on that? Is that tight? Do you you know do you have a lot good cash flow? What's your situation?

[00:05:02]>> It's pretty good, Jill. I monitor most of my expenses uh very well. Um I have no debt. Uh house is paid for and um I really live within my means. So um you know I have some things that I enjoy here and there, but it's pretty good.

[00:05:17]>> Okay. How much is the house worth?

[00:05:19]>> Um about 260,000 >> and free and clear you own that. And do in addition to the pension, have you been saving for retirement?

[00:05:27]>> I have. I've been um I think pretty diligent. So, I've been doing pretty well.

[00:05:32]>> Tell us about that.

[00:05:34]>> Okay, I'll give you the retirement asset breakdown. So, uh 401k >> is at 298,000.

[00:05:44]>> Um 8,000 of that is Roth. They just started that semi-reently.

[00:05:49]>> Yep.

[00:05:49]>> Uh Roth IAS are at 205,000.

[00:05:53]>> Great.

[00:05:53]>> I have an annuity um that's separate from my pension. It is a non-qualified annuity. It's sitting at 220,000.

[00:06:01]>> Okay. And non-qualified. Okay. So, those are those three main chunks of retirement coded assets. Um any other money that you've set aside either in a brokerage account or a savings and checking account, something like that.

[00:06:15]>> Yes. And um so I've got about 415,000 between CD and savings. And there's there's sort of a reason for that in at least in my head.

[00:06:29]>> I'm listening. You heard Mark giggle.

[00:06:32]That's Mark giggling. That is not Jill giggling.

[00:06:35]>> I I've always had my eye on if something should happen and I need to change jobs or industries or I'm some somewhat conservative. So that's my pot of money if I need to make things happen. And it's just sort of, you know, grown and grown and grown. Um, >> but I will say I'm very careful managing that because I realize that it's sitting in something safer, but um the majority of that Jill's in CDs earning about 5%.

[00:07:05]I lock things in Yeah, I locked things in a few years ago and it's got about two more years uh earning that. I'd say about 90% of that is earning um 5%.

[00:07:17]>> Great. That's good. Okay. Um, and maybe it was wise for you to do that even though, you know, I don't love having all that cash and you're pretty young, but on the other hand, maybe it won't matter for you really. So, it sounds like there is something that could be bubbling up in the in the near term with work that you know, you would want that.

[00:07:37]Um, just a question about some of this stuff. So, when you claim your pension, you could do it at you said 55,57.

[00:07:46]Do you have a number at 60 or not? I do.

[00:07:49]I have that right here. It'll be about 37,000 um annually if I took the monthly.

[00:07:54]>> Okay.

[00:07:55]>> How much do you spend right now? I mean, you've accumulated a lot of assets on not a humongous salary on a you know, so I'm just wondering what do you think your your monthly spending looks like now?

[00:08:07]>> Sure. And I and I've I've looked at that and um monthly comes to about right at about $1,800 a month. That's >> how about if I go to a raise and what if I said 2k a month like >> that's fine. Yes. The retirey budget I'm budgeting a little bit more than that because I would probably have affordable care act premiums or if a retiree >> uh health insurance plan is offered that would have premiums and some extra deductibles. So I'm I'm kind of Yeah, I'm I'm looking at about 2K a month. So you're right on Jill.

[00:08:38]>> Okay. So under I know it's a little bit weird since you haven't like been made no offer has been made yet. So I get that. So I just want to say in your industry in the past when people have had uh when they've retired and they collect their pension benefit has there been a health care component for them?

[00:08:56]>> Yes. So right now J till my company offers a component but I have to be 62 and be working there until 62 until it kicks in. So, we're a long ways off with all the I mean, my job is changing a little bit, which I you know, I generally enjoy working it and um but you know, just lots of things are changing with my role and with the company. So, that's somewhat of an un unknown as far as you know, if I make it to that point, but it is there and it is available at the moment if I make it to 62. So if you're looking ahead and you know even if we said your expenses are maybe more going to be like let's say 2500 a month just you know for the heck of it >> you know there's no problem right you you know this like can can I just run the math quickly with you?

[00:09:43]>> Sure please.

[00:09:44]>> Okay I I don't you Mark stop laughing.

[00:09:48]>> Is he laughing because my expenses are so low?

[00:09:51]>> Yes. He's giggling because well I mean also because you're so you're so earnest about this.

[00:09:57]>> So and and you've done an incredible job. So okay let's just say today they your boss like say like oh can you uh come into my office and uh we're letting you go so sorry. Okay, now you like hang your head down and we say well forget it maybe you don't get any package just like right let's pretend no package right so we have to make sure that you can survive >> for at least three years until that um age 57 right >> and maybe until 60 how's your health I mean are because you're a single guy and you're not it's just you so there is there's some interesting planning parts of this so are you in good life expectancy. So, so what's going on for you?

[00:10:39]>> Um, so just to kind of give a summary, I I do have two medical conditions.

[00:10:46]>> Without breaking it down further, bas basically I look at everything and there could be a small ding to my longevity. U maybe a couple of years. You know, I've talked to my doctor extensively about it and he he basically is just kind of like me, you know, and doesn't want to get too deep into it. But, you know, there's a scenario where it doesn't ding my lifespan, but there's also another scenario, maybe a couple of years. So, I'm kind of that's part of kind of why I'm trying to prepare is I want to make sure I have a retirement I can enjoy and not sort of get to the the end of the working years and then not have much left, you know.

[00:11:22]>> Okay, I understand. But in other words, if if if you said to me like, "Oh, well, you know, um I have a you know, like I have a diagnosis that is like has a very low like I'm going to die by the time I'm 70 or something," then we would say, "All right, well then let's not worry.

[00:11:35]Let's just like crank on the pension as quickly as possible."

[00:11:38]>> Even if we did the pension at age 57 and it's a lower amount, I think I probably want to wait till 60. Mark, do you think 60? Remember the difference between 57 and 60 is 30 grand a year versus $37,000 a year at and and he has all this cash cuz basically gang we're looking at Matt's situation and saying there's a ton of cash that's here. We can live off that cash for a while, get the pension, the pension starts and it's really all the money he needs. So Mark 57 or 60 do you think?

[00:12:09]>> I I mean that's a complete no-brainer. I see no reason to take that pension early. I mean, a lot of this money is going to have to come out eventually one day, so you might as well just do that in the meantime.

[00:12:18]>> Okay. So, what you're So, Mark, what you're suggesting is wait till 60 and then in the interim instead of using his cash on hand, eventually you'll want to take the money out of the 401k or actually I'm wondering about the annuity also because there's probably some tax liability built.

[00:12:35]>> Yeah, I I checked on that Jill and I mean there would be some issues with the tax liability or penalty. I pretty much have to wait till 59 and a half um to start drawing it to avoid that.

[00:12:46]>> So that that could be turned on at 60 for sure. Um bearing in mind >> we have to get two two chunks of money out, right? We have to get out the 401k money, the the pre-tax, the 290, and we have to get the annuity money out just because it'll be easier to do that before you start having income. This is what I think you should do. If you again, you lost your job right now. How much? You've got your CDs and you've got some savings. I would live off that money. If you spent down $30,000 a year from those CDs, right, for four years and you know, instead of having 415, we spent down 120, maybe 150, you're still having you still have a ton of safe money available. And we haven't even touched the annuity or the 401k, >> right?

[00:13:34]>> But can you give yourself permission to do that?

[00:13:37]>> Yes. really I I'm I've I've been working in my head, Jill. So, yes, I'm I'm gonna I'm gonna have to spend more. Like, when this happens, it's it's strange that I might go into retirement and start spending a little bit more even on a low budget. So, a couple of things to bear in mind. Uh the last time my company offered a package was around the recession time and it was about a year of base salary roughly and it included the retirey health insurance. So that's no guarantee that if a package comes that will include that or not include that. My alternate is if I have to go say at 55 or 56 and there's not a package then I would be looking at the Affordable Care Act. That's part of the beauty of having that that money there, that pot of money, um save money, is I can pull out of that and keep my income low. Um that determines my premiums.

[00:14:34]>> All right. But even if you I know even if all you had, you know, if you spent money for the next five years, right?

[00:14:42]Let's say you spend 50 grand a year, you would be in fact in a weird way like you get out of CDs, >> your taxable income might go down because you have got less interest, right? You're just spending money you have. They they don't care about it. So, your interest will go down. The 401k is not going to be a thing. And we're really just trying to kind of inch our way to get you to a place where you can get to Medicare. But you have so much money that none of this is going to matter.

[00:15:10]>> None of it. Okay.

[00:15:11]>> Um, but I I think that it's it's good to look like if you could get >> the um, you know, if we could start to get some of the money out of the 401k after 59 and a half, that's fine. I don't even think you have to do it. So, it's not like there's so much money in there, but we have to be methodical about it. That annuity, how much money did you put into that non-qualified annuity? Do you know your cost basis of that? I I asked at one point and the last number that I remember getting may have been a year ago. It was somewhere around 150 or 160k. So there is a good part of that that won't be taxable. So that's >> right. Right. So I mean it is some of it is taxable as you know but the lion share is not and you know you'll have to pay or that so that does count as ordinary income with the affordable care act. Okay. So so right. So if if you took a dollar out, right, the portion that is attributed to interest would be or accumulation would be taxed above your cost basis. But just to be crystal clear, please don't buy another annuity because someone will say, "Oh, well, just don't roll it into something else.

[00:16:15]You'll get the money out."

[00:16:16]>> Yes. If if it helps any, it is it is a there's not a lot of bells and whistles and um for the past three years, I've been earning close to the same 5% and that continues for two more years. Then then the rate resets but it's a basically the company is a nonprofit company and it's not a lot of bells and whistles so I kept it very simple.

[00:16:37]>> Okay. But you know you are absolutely you know you are on track there's nothing bad that can happen. I wouldn't even worry like if you are offered a some sort of benefit um and buyout then let's talk. But if you're offered that buyout and they again if they're going to do one whole year if you got this slug of money, it doesn't really do much to you and it just it might impact your your Affordable Care Act premium, but >> it's not going to be a lot and you can afford it. So don't work too hard to try to monkey around with the income. You know, if you the the way you can limit the income is to wait to take the 401k.

[00:17:18]wait, you're going to wait anyway with the annuity, but the CDs, again, if you spend that money down and you have less interest coming in, then your taxable income will be lower.

[00:17:27]>> So, anyway, if they gave you one uh like a year in advance, right?

[00:17:33]>> You know, you'd be in your 22% bracket, you probably don't have a ton of Are you claiming the standard deduction, you probably don't have a lot of itemized.

[00:17:40]>> Yeah. Okay.

[00:17:41]>> So, I mean, you're you're no worse off than you would have been, except you get this big chunk of money and you probably would rather keep working. I it sounds like you like what you do, but it's not it's there's nothing that you have to worry about. Anytime the hammer comes down, you're good. You are good. You got plenty of money. Mark even giggled to make sure that that was the case. Is there um now the only other thing is you have your um you this 400 grand 415 in CDs and savings. If something happened to you, where does that money go? Do you have a will? Are those transfer on death accounts? So I've I've basically done a beneficiary or transfer on death on all of the accounts that I've mentioned. So I do have a will in place for anything additional which is basically like my house or my car.

[00:18:26]>> But um yeah, all those all those beneficiaries are in place. So that would pass directly for the accounts.

[00:18:32]>> Perfect. Perfect. Then you're in great shape and I applaud you. I hope that you don't get let go and um and you can spend a little more money now. You know, don't worry about it. I feel like you are in really good shape. So, >> right.

[00:18:45]>> And and in the big picture, one more thing I would add is I I like, you know, I hope, you know, when I retire, I'm in a position I can stay a little more active and more healthy and be outside a little bit more. Um, but none of this prevents me from, you know, working a little bit. I don't want to work full time when I retire, but, you know, two days a week or something, 20 hours a week, 15 hours a week. Um, you know, that could be a little bit of thing. You know, I'd have to put that in the balance of, you know, if I'm having my income.

[00:19:16]>> That's if you want to. You don't have to. You do not have to. That's a want, not a have to. Okay.

[00:19:22]>> It would be more for my my mental health.

[00:19:24]>> I like that. I That's good. I I I agree.

[00:19:27]I think it's a I think it's a great idea. So, um, we look forward to hearing more from you, Matt. Let us know if you get the the uh the notification if something else changes. So, if you're like Matt, you're working in an industry where there's downsizing, where there's things that are happening or your company specifically something's happening and you want to prepare for that. The idea of doing this before something some news comes down is really smart. So, be like Matt. Get in touch with us. Go to jillonmoney.com. Click the contact us button. Write us a note.

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