Baby boomers on their way to retirement find that even a carefully planned route can be filled with anxiety.
Susan Ramsey, 68, and Linda Garcia, 65, have savings, rental assets and skills they could use for part-time income, if needed, during retirement. Despite the positive news, they are confused and worried about whether they have managed their finances well.
“We keep asking everyone we know, and everyone has a different opinion,” Ramsey said.
Polls suggest Ramsey and Garcia have company over retirement uncertainty.
Franklin Templeton Investments found that 76% of those surveyed who were within 15 years of retirement worried about the future, especially because of their financial preparation for end-of-life health issues, according to a survey from 2,002 American adults published in March.
A separate survey of 2,000 participants on retirement preparation by Voya Financial Inc. found that only 17% of those still working and 26% of those already retired had a financial plan to follow. Voya said 63% of workers surveyed had never tried to calculate what their retirement savings would be worth if converted into future monthly income.
Ramsey and Garcia – they met 15 years ago when Ramsey auditioned for a “Les Miserables” parody written by Garcia – did a lot of math. But their holdings are complicated, so they’re not sure they’ve done it right.
Paid financial planner Carol Somoano said the sentiment was rife among those nearing retirement.
“They really did a great job,” Somoano said. “It’s not always easy to see when you hear a lot of advice from family and friends.”
Garcia was a director at NBCUniversal, most recently as employee transportation coordinator. That temporary job, which paid $ 3,100 a month, ended in June, reducing his income to $ 1,700 a month from his NBC pension. She wonders when to apply for Social Security benefits.
Garcia is also a certified hypnotherapist, helping people with issues such as fear of flying and habit control, although she does not currently practice.
Ramsey is a massage therapist who works in a chiropractic office and takes on private clients. For extra money, she sews elaborate quilts that have sold for over $ 3,000.
Ramsey made about $ 1,700 a month from a combination of Social Security, her ex-husband’s pension, and massage sessions.
Ramsey and Garcia also control four rental properties – one in Southern California and three in Oregon – giving them flexibility in retirement through the ability to raise rents.
Their property income ranges from $ 18,000 to $ 20,000. The couple aren’t sure if they’re getting the most out of the properties, with Garcia describing them as “kind of a soft touch” on the rent.
The couple had planned to move to Garcia’s hometown of Portland as early as this year, where they expect the cost of living to be significantly lower than in Southern California. They would sell the three-bedroom Burbank home that Garcia has owned for 20 years and buy a new home.
Both have nearly $ 412,000 in savings and investments, including a traditional IRA, a Roth IRA, and an annuity (in which an investor pays an insurer in exchange for guaranteed future income).
Garcia hopes that “when we don’t have a giant mortgage” of $ 1,500 per month on their Burbank home, “there will be money freed up for us to travel and, during the summer, we will have money. grandchildren who will come to visit us ”.
The latter is no small task; between them, Ramsey and Garcia have 10 grandchildren, ranging from 1 to 20 years old.
Another concern is around $ 12,000 in credit card debt, mainly due to work on their properties. Interest rates range from 11.99% to 25.24%.
They suspect that they could have a deficit of up to $ 2,500 per month when all bills are subtracted from their income.
“We continue to adjust to reduced incomes, but we don’t know how far to go,” Ramsey said.
With the right amount of care, whatever the couple wants is right at their fingertips, Somoano said, “including putting money aside for family members and grandchildren to visit.” .
Somoano said the couple’s next few months will be crucial as they adjust to lower monthly earnings due to Garcia’s loss of NBC earnings.
Ramsey and Garcia “need to carefully monitor their spending to make sure they are living within their means,” Somoano said – a tricky task given the two women scowl at the mention of a budget.
“They can raise the rents if they need to,” Somoano said, adding that quilting, hypnotherapy and massage skills could make money, if needed.
The lost NBC paycheck is one of the reasons Somoano wants Garcia to start receiving money from Social Security, even though the wait would increase his monthly payment amount. “She should register immediately,” Somoano said.
Together, Ramsey and Garcia will bring in $ 36,000 in annual Social Security benefits in addition to the $ 28,000 in retirement.
Another crucial step, Somoano said, is to eliminate this credit card debt.
Next on the list: Slow down Portland’s movement.
“They should take their time and find the right house” costing no more than $ 300,000, so they will be mortgage-free, Somoano said.
Garcia is not expected to receive his pension until he is 70, Somoano said. This is because of what is called a “cash value period,” during which she can withdraw more money if she waits longer before making a withdrawal.
They can also save some money by dropping their life insurance policies.
Ramsey and Garcia have relaxed considerably since their visit with Somoano. They decided to wait until February to move to Portland, and they won’t put the Burbank home up for sale until March.
“It made me feel very safe and free to be excited about the move to Portland,” Ramsey said. “And it confirmed for Linda that she had made some really wise financial choices.”
Highlights of Money Makeover
Who: Susan Ramsey, 68, and Linda Garcia, 65
2014 income: $ 36,510
Assets: $ 2.3 million
Debts: $ 715,000
Goals: Full retirement this year. Relocate to Portland, Oregon, where they hope to buy a home and enjoy a lower cost of living. Sell Burbank house. Live comfortably with something to travel with and help pay for visits from children and grandchildren.
Recommendations: Eliminate credit card debt. Garcia is expected to start taking Social Security this year. Don’t rush the sale of the Burbank home. Ramsey and Garcia should take their time and find a home in Oregon that they can buy directly, keeping the cost at $ 300,000 or less. Watch spending carefully. Do not receive the pension before the age of 70. Stop paying for term life insurance.
About the planner: Carol Somoano is a Certified Financial Planner and Vice President of Asset Planning Inc. at Cypress.