'I'm experiencing issues with arthritis': I'm 68 with $3 million saved. Why am I not ready for a life of leisure?

By Quentin Fottrell

 'I can draw $4,300 a month in Social Security if I retire this summer' 

 "I'm experiencing issues with arthritis, which limit some of my activities." (Photo subject is a model.) 

 Dear Quentin, 

 I'm almost 69 and close to retirement, but I can't seem to pull the trigger. 

 I'm currently employed as a design engineer, and my salary is pretty decent. I'm married, and my wife works one day a week in retail. She is drawing $1,800 a month in Social Security. I spent much of my life playing with collector cars, but I find I'm losing interest in them. I'm experiencing issues with arthritis, which limit some of my activities. 

 We are financially set, with no debt and $3 million in savings ($1.6 million in pretax retirement accounts, $750,000 in a Roth, $700,000 in brokerage/cash accounts, and $60,000 in HSAs). I can draw $4,300 a month in Social Security if I retire this summer at 69, or $4,765 if I delay until age 70. We also have one rental house. 

 'I'm currently employed as a design engineer, and my salary is pretty decent.' 

 We live in North Carolina, so the cost of living isn't that bad. About six years ago, I found out my employer allowed before- and post-tax 401(k) contributions of up to 50% of my salary. The IRS limit on total pre- and post-tax contributions is about $75,000, so I have been working the last few years to pad our Roth savings. 

 My original plan was to work until 69, then do Roth conversions and delay taking Social Security until 70. With all the talk about Social Security running out of money earlier than projected and Social Security payouts not receiving inflation adjustments, I'm wondering if I should start taking Social Security this summer. 

 Also, does Social Security increase every month I wait, or only every year? If I decide to sign up for Social Security at 69 1/2, will I get about a 4% boost? And if I die before I start drawing Social Security, what would my wife be eligible to receive? It seems like I needed to already be drawing Social Security before she could draw off my account. 

 I have the mentality that I should always be prepared for the worst, but the worst never happened. I'm not sure I'm ready to move to a life of leisure. 

 What do you think? 

 Going Strong 

 Related: After 46 years working, I'm not retiring - instead, I take a vacation every month. Is that a good life in your 70s? 

 You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually. 

 A "sequence-of-returns risk," where poor market performance in the early years of retirement, can put pressure on a portfolio from which you are making withdrawals. 

 Dear Strong, 

 Your reluctance sounds financial and psychological. 

 Since you don't mention that you're burnt out, I assume that you enjoy your work. That's the best recipe for working into your late 60s and beyond. You are diligently planning your distributions, as you have mastered the accumulation phase. Ultimately, you get to be the source of your own identity, not your job. That means you can plan your retirement - and how you spend your leisure time - just like you planned your career. 

 You're maximizing your Roth conversions and, perhaps, waiting until you turn 691/2 or 70 to collect Social Security. With $3 million, you could take 4% a year from your retirement fund, and it would technically never run out if it increased by historical averages of 7% (or 5% after accounting for inflation). It would actually grow to $3.3 million in 10 years and $3.7 million in 20 years, given that 1% growth (5% after inflation and 4% withdrawal rate). 

 Some years might see returns of 10% or 20%; in other years, your portfolio might fall by the same amount. 

 In the real world, of course, markets are unpredictable. Some years might see returns of 10% or 20%; in other years, your portfolio might fall by the same amount. This volatility creates a "sequence-of-returns risk" where poor market performance in the early years of retirement can put pressure on a portfolio from which you are making withdrawals. That's why you have Social Security and $700,000 in brokerage/cash accounts. 

 What you don't mention in your letter is your monthly or annual expenses, nor your lifestyle, which may be less hectic given your arthritis symptoms. A 4% withdrawal rate would give you $10,000 a month or $120,000 a year in your first year of retirement. Not bad for passive income and well deserved after more than four decades of work. You and your wife will have Social Security benefits to supplement your income if you decide to reduce your benefits. 

 Required Minimum Distributions 

 But you will also have to adhere to your Required Minimum Distributions. The formula is your account balance at the end of the previous year divided by your life-expectancy factor. At age 73, the factor is 26.5, which means you must withdraw about 3.77% of the account balance, pretty close to the 4% suggestion above. So with a $1.6 million in pre-tax retirement accounts (your post-tax accounts are not subject to RMDs), your first RMD would be about $60,400. 

 By delaying your Social Security until your Full Retirement Age at 70, you would get roughly an extra 8% a year; if you take your Social Security at 69 1/2, yes, you would get around 4% extra by the time you claim. But you've come this far on your salary alone, so it does not seem worth giving up that extra chunk for life in order to claim six months early. Any potential shortfall will not happen until 2032 or 2033 if Congress does not act first. 

 It does not seem worth giving up that extra Social Security for life in order to claim six months early. 

 If you pass away before claiming Social Security, your wife gets 100% of your FRA amount, not the amount you would have gotten by delaying to 691/2 or 70. If you were to die while claiming Social Security, your wife would likely get 100% of the amount you were claiming at the time of your death. Bottom line: You do not need to have started collecting Social Security for your wife to collect your survivor benefits. This is yet another warm breeze blowing in your favor. 

 Remember,  your wife can claim up to 50% of the amount of your Primary Insurance Amount if it's more than what she's receiving ($1,800). However, the spousal benefit calculation excludes any extra money you earn through Delayed Retirement Credits. (Spouses who receive that benefit need to be at least 62, married for one year, and you would already need to have filed for benefits.) Either way, you're in pole position to leap into retirement. 

 The worst has not happened. Enjoy your savings while you can. 

 Related: 'I didn't ask a man to rear-end my car': Social Security is replacing my disability benefits. Will the fund run out of money? 

 More columns from Quentin Fottrell: 

 'I don't own a home': I'm 62, unemployed and have $1.5 million for retirement. Can I afford to divorce my husband? 

 'My parents begged me never to put him in a home': I have taken care of my disabled brother my entire life. Am I doing enough? 

 Can I stop my kids from using their inheritance to support political causes I vehemently oppose? 

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 -Quentin Fottrell 

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03-14-26 1207ET

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