Safe withdrawal rate for retirement accounts | Illustrations © Bigstock

Dear Liz,

I am 60 and my wife is 61. I have terminal cancer. We make about $160,000 a year. I have IRAs worth $340,000. She has a deferred compensation plan at work worth $260,000 to which she contributes $1,400 each month. We are eligible to retire now and draw $2,900 for me and $2,400 for her. We also have a small pension of $700 per month. I have life insurance worth $16,000. I have about 16 months left. We both want to retire, but I’m afraid she will run out of money. We have a mortgage of $20,000 and no other debt. Can we safely retire?

— Dan

Dear Dan,

I’ve very sorry to hear about your terminal cancer diagnosis.

You need to find a good, fee-only financial planner to take a hard look at your situation to see if early retirement is feasible. Any mistakes you make now could haunt your wife for the rest of what could be a long life.

You haven’t made clear where the $5,300 monthly “draw” will come from. You’re both too young for Social Security retirement benefits. If the draw comes from one or more of the accounts you listed, you will quickly exhaust your savings. A more sustainable withdrawal rate would be closer to $2,000 a month total.

Even if the draw comes from some other source, such as another pension, your income would be less than half of what you’re making now. Expenses tend to decline in retirement, but typically not by that much.

If your wife leaves her job for early retirement and then runs out of money, she’ll face the extremely difficult task of trying to find employment in her 60s. If she were to start drawing Social Security next year, when she’ll first be eligible to do so, she would be locking in a check that’s 30 to 50 percent smaller than what it could be if she waits.

You understandably want to make the most of the time that’s left to you, but doing so in a way that puts your wife at serious financial risk is not the way to do it. I urge you to consult an experienced planner who can look at the details of your situation and discuss your options.

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