My client is 54 and desires to retire at the age of 57. However, I recommended that she continue working until she reaches age 62.
So she can take advantage of her Social Security retirement benefits and minimize any fees associated with prematurely withdrawing from any of her IRAs (Individual Retirement Fund).
In order to avoid penalties on your IRA withdrawals, one of the following must apply to you:
– You are 59-and-a-half years old
– You are sending a child to college
– You are purchasing your first home
As you can imagine, learning that she had to delay her well-deserved retirement another five years was not the most encouraging thing for my client.
More discouraging about this whole equation was her asset/liability spread:
- She had $14,000.00 in her retirement fund,
- She had a whopping $ 1,244.00 in monthly transportation expenses, which includes:
– $600 Car Payment on a luxury vehicle she bought new,
– $320 Car Insurance Premium (which was hiked up due to a two-year-old accident), and
– $324 in Monthly Gas Expenses (V8 Engine, premium gas).
We all know that when a new car–luxury or otherwise–leaves the lot, its value depreciates by 20%! According to Bankrate.com, a car in its second year will be worth 80% to 85% of its first year value and a car in its third year will be worth 80% to 85% of its second-year value. Not much “luxury” in that. ‘Sounds like a loss!
While her 401k and Social Security benefits projection will not support her comfortably in retirement, she continues to part ways with $600 every month for a “luxury” she feels she deserves.
My goal is to get my client to see her value beyond what she can buy or drive. “I worked so hard all these years and I deserve to drive something nice” is an understandable sentiment but….NO, MA’AM. What you deserve is a decent retirement! Not to be highlighting peoples at a Walmart exit receipt after working 40 years and obtaining a Masters Degree! Sell that Car! #Stopit
I beg you that you learn from my client! We, the “young & fabulous”, believe that this will never be us. We don’t contemplate aging! Do we think that our organic diets, our distilled water, and popularity on InstaGram will save us?
In my book 10 Things Every Woman Should Keep In Her Purse, there is a chapter entitled “Keep A Strand Of Gray Hair In Your Purse” to remind you that you must achieve a smart balance between your present desires and your future endeavors. When you’re nearing retirement and your working years are coming to an end, you will need liquidity not labels.
Shani Curry St.Vil, is a Mompruner who writes, speaks and consults on personal finance. Shani is the Author of 10 Things Every Woman Should Keep In Her Purse, & Resident Personal Finance Expert to Own Your Power Radio Network. Shani is passionate about elevating women to wealth consciousness where less value is placed on the symbols on their purses as oppose to the contents!