I am a 60 year-old single woman who lives with a partner, who is a disabled. We are not married mostly due to financial reasons.
I have just started receiving Social Security disability benefits after being forced to retire in 2021. I have a pension of $3,200 per month and a Social Security payment of $2,900 (but that will be lower with Medicare and taxes taken out).
I live in a small town home. I refinanced my $185,000 mortgage a few years ago at 3.1% interest. I will pay the last payment on a 2018 SUV in December, but I may need a new car soon. (Interest rates are way too high so I am trying to wait, but I’m getting anxious.)
I have $100,000 in savings, and approximately $70,000 in investments. I have a 403(b) that’s valued at about $52,000 and a traditional IRA valued at about $7,000. I need this money to work for me, assuming I live at least until 80!
Because of my pension and Social Security disability payments, I am once again in a ridiculous tax bracket. I don’t know who to trust with my information. Can you help?
See: ‘We stay in two-star hotels’: We’re 70 and have $1.8 million, but my husband insists on living cheap. Don’t we have enough?
Dear Reader,
Get serious about your budget. Once you know your cash flow, you will be better able to prepare your long-term plans, and how much money you can set aside for your future.
There is more to this puzzle than income and investments. If you’re spending more than your Social Security and pension income, you’ll be eroding your retirement nest egg faster — that would be bad, especially as you want that money to last at least another 20 years.
But while 20 years seems like a long time, you could very well live longer than that, so expect to be even more conservative when calculating your life expectancy, and your retirement needs.
As for how to make your money work for you, that comes down to a few factors.
Choosing your accounts
Risk-averse individuals prefer easily-liquidated accounts, such as a CD, money-market fund or even a high-yield savings account. The rates attached to some of these options are pretty favorable, but that won’t last forever, and these accounts likely won’t keep up with inflation and cost-of-living expenses.
However, keep some of your money in easily accessible accounts in case of an emergency. That way, you won’t have to draw from your retirement accounts in the event of a market downturn. Set aside three to six months’ worth of living expenses for an emergency, but it wouldn’t hurt to bump that up to one year, or more, for a retired single person.
Asset allocation
For your investments, asset allocation is crucial.