Taking the Work Out of Retirement

Maria didn’t experience the Great Depression, but she might as well have. Her parents survived those trying times, and they made sure Maria understood what they had learned — that it was vital to be careful with money.

Maria carried that principle into her adult years, always making sure to put money away for the future before she splurged on luxuries. “If I don’t have it, then I won’t spend it,” she’d say. When Maria met her husband, John, she discovered that he, too, had taken the same approach over the years.

As they are about to embark on retirement, the couple is still embracing those fiscal ideals. Last year, Maria, 68, and John, 72, moved from New Jersey to Savannah, Georgia. In addition to the warmer weather, they are taking advantage of the lower cost of living — a common reason many couples to leave the Garden State and head elsewhere for their golden years.

Because they saved so carefully, Maria and John are able to enjoy retirement how they want to, not how they have to. Maria continues to work part-time as a registered nurse, and John walks his dog, does household projects and cooks. This is a couple who has planned well and now are benefiting with enormous peace of mind.

But getting there wasn’t easy. Divorced at 32, Maria spent six years raising three children on her own with limited financial support. John, too, had raised three children on his own from a previous marriage. When John and Maria wed, only her youngest son was still living at home. At her retirement, Maria’s salary was about $75,000 a year, while John’s was roughly $40,000. Through careful saving and smart investments, the couple built that income into a solid nest egg.

How did they achieve that? Several years ago, the couple sought professional financial counseling. Their goal was to retire in 2006 with an annual income of $65,000 that would continue into their 80s. Initially, they were advised to keep their investment philosophy conservative, but reallocate their assets to allow for more growth, while protecting those assets from inflation.

The bulk of Maria’s savings is in tax-sheltered accounts: $429,000 in a traditional IRA, which will require her to withdraw a certain amount each year once she turns 70; and $65,500 in annuities, where she can deposit money throughout her life without making any withdrawals. John has $78,000 in annuities and $86,000 in a traditional IRA, from which he has begun making his required minimum distributions. The couple has $330,000 in a joint savings account.

By living on their invested assets, plus Maria’s current income, the couple can live on a monthly budget of $5,400. The two take $1,666 from their joint savings account each month. In addition, John gets $1,200 per month and Maria receives $900 monthly from Social Security. Both have pensions — Maria’s totaling $8,100 a year ($675 per month) and John’s totaling $1,560 a year ($130 per month). The couple get the balance of their monthly income — roughly $800 — from Maria’s earnings. The remainder of Maria’s salary is set aside for vacations or an emergency.

The couple is also protecting their nest egg by carrying long-term care insurance. As a nurse, Maria had seen many families devastated by those potentially crushing costs. In northern New Jersey, the average cost in a long-term care facility is about $270 a day.

It’s important to the couple to preserve their funds to be able to bequeath them to their children. When one of the pair passes away, all assets will go to the surviving spouse. When that spouse dies, the remaining assets will go to their children — the house and Maria’s money to her children and John’s assets to one of his sons.

While still working out the details, the couple is glad they have help from a financial planner. By having a trusted professional manage their portfolio, they’re able to financially secure their future while enjoying more free time to volunteer at their local church, travel when and where they want to, or simply relax.


James Fusaro is a certified financial planner and founder of Fusaro Financial, LLC, in Mountain Lakes, with expertise in portfolio and risk management. Fusaro Financial is dedicated to increasing wealth and protecting assets for high-net-worth individuals, senior executives and small business owners. Fusaro lives in Randolph with his wife and two children.

October 1, 2007