This week we look at a woman finding it hard to keep up at work, but not financially ready to retire.
The Situation
Janet, 65, is an executive for an oil company in Denver. Janet and her partner, Bob, have been together for 32 years. The couple splits their bills down the middle and have never commingled finances, with the exception of their home.
In the past year, several members of the executive team at Janet’s office have resigned, leaving her with an exceedingly large workload. Her employer is seemingly forcing her out as well by becoming very difficult to work for. Janet is currently expected to manage staff for the Operations, Finance, Human Resources, and Technology departments, and the stress level is weighing heavily on her.
As CFO, she makes an annual salary of $96,000 and contributes $23,000 to her company 401(k) plan. The current balance of her 401(k) is $203,000 and she has a 401(k) from a previous employer valued at $97,000.
Bob and Janet have paid off the mortgage and Janet is entitled to half of the value, approximately $150,000. She currently has no loans or credit-card debt and has $30,000 in savings. Janet is very frugal in most aspects of her life except when it comes to gifts for her grandchildren and clothes for herself.
Janet’s biggest concern is keeping up with the new workload and figuring out her best exit strategy. She wrote in to because she would love to be able to quit now, but is afraid she is not financially stable for retirement.
Recommendations
In today’s changing business environment, it can be difficult for older workers to keep up, and circumstances can force retirement before one is ready financially. It may benefit Janet to to find out her rights should the situation become unbearable. I recommend asking specifically about age discrimination and explaining the changing dynamic in the organization.
One of Janet’s questions on our call was what to do in regards to her company 401(k) plan. If she were to resign, she worries that no one at her company would be able to sign the separation paperwork for her account authorizing a 401(k) rollover.
Fortunately for Janet, her plan allows a rollover even while she continues to work for the company. It is a smart decision for Janet to roll out now to avoid delays and protect her hard-earned capital. The 401(k) from her previous employer’s plan and her current 401(k) can both be moved to an IRA that Janet directs and protects.
An important piece of determining retirement options for Janet is to I advised her to visit SSA.gov to determine this amount.
Janet was married to her grown daughter’s late father for more than 10 years. Although they divorced and he is deceased, it is possible that he is “worth more dead than alive” in terms of Social Security benefits. she will need to call or visit the Social Security office in person.
Ideally, Janet should try to hold on and work until age 70. In five more years, her Social Security benefit will increase by about a third! At the present moment, her retirement savings would generate approximately $1,000 per month. This, combined with Social Security, will not come close to the $73,000 per year she has been currently living on.
During the next five years, with aggressive contributions to her savings and modest growth on her money, she can perhaps increase her savings to generate $2,000 per month.
Janet should persist saving $23,000 per year into the company 401(k) plan even after she executes the rollover. I recommend she prepare her final separation-rollover paperwork and have it ready to process for herself the last day on the job, should she be forced to resign suddenly.
Janet is nearing retirement soon and won’t need a lot of new work clothes. I advise she save some money on her wardrobe and use the savings to contribute $6,500 per year to a Roth IRA.
Janet is sacrificing to take care of everyone else in her company. It’s time to take good care of herself and her personal reserves to make sure she never depletes them.
Pam Dumonceau has 21 years of experience in the financial planning industry. What’s the Plan is not a substitute for financial planning or dedicated professional advice. These are examples and actual results may differ. Securities offered through Girard Securities, Inc., member FINRA/SIPC. Investment advisory services offered through Asset One, LLC., a registered investment advisor not affiliated with Girard Securities, Inc.
What’s your plan?
Ask Pam what you should do — e-mail whatstheplan@consistentvalues.com to get advice. Names and identifying information are changed to protect confidentiality
