Can my wife and I afford early retirement?


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Dear Liz,
I am 60 and my wife is 59 1/2. I am struggling with whether or not I can retire this year. My biggest issue is medical insurance because I have a pre-existing condition (I had heart bypass surgery), but otherwise I am very healthy. I have $1,550,000 in 401(k)s and IRAs combined. I currently earn $100,000 and am a CPA. We also have a business that my wife manages that generates about $60,000 net profit a year. We are empty nesters, our house is paid for and the combined cars and credit card debt is $67,000. We have about $200,000 equity in our franchise business. My goal was to retire this summer and sell the store, perhaps in 2016, when our business financials are healthier. Please let me know if early retirement is a good decision.
— Roy

Dear Roy,
Under the Affordable Care Act, also known as Obamacare, insurers can’t turn you down or jack up your rates because of pre-existing medical conditions. If that protection should go away because of future changes in health insurance laws, you and your wife could find yourselves without health insurance or paying outrageous premiums until you qualify for Medicare at 65. So that’s a huge question mark.

It’s also worrisome that you have so much debt. Credit card debt is an indication you’re living beyond your means, which is expensive when you have paychecks coming in, but potentially disastrous when they stop. Tapping your retirement funds at a 4% annual rate would replace just 62% of what you’re earning now. If you’ve accumulated debt at your current pay, you could dig yourself a much bigger hole when your income drops.

Your sizable retirement accounts mean you have options. If you’re currently still saving for retirement, you might think about cutting back and redirecting some of that money to pay off your debt. You also might discuss with your employer the possibility of a phased retirement, in which you cut back your hours but still work enough to get benefits, including health care.

Phased retirement: Pros and cons © Bigstock

It’s time to make an appointment with a fee-only financial planner to discuss the specifics of your situation and your desire for early retirement. The American Institute of CPAs can connect you with fellow CPAs who have a respected financial planning designation known as the Personal Financial Specialist, or PFS.

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To ask a question of Liz Weston, go to the “Ask the Experts” page and select “Retirement” as the topic. Read more Retirement Adviser for additional personal finance advice.

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