HUNT VALLEY, Md. ( TheStreet) -- In the first of this two-part series, we discussed the amazing leverage that can be gained, even in the case of an apparently floundering retirement scenario, when moving from a higher-cost-of-living area to one that is cheaper. But I fully recognize that while many will see this as an exciting retirement adventure, some would view it as a life-ending transition due to their attachment to their current home, especially if they're near family.You do still have another option, and much as silver bullet No. 1 was summed up in one word -- "move" -- so too is No. 2: Work.
|Retirees should consider continuing to work, but this doesn't mean full time or doing work that drains you. This is a license to create a dream job.|
Assets: Includes a home worth $500,000 and a nest egg of $800,000
Liabilities: Mortgage of $200,000
Income need: $100,000
Income: Social Security brings in $18,000 and the nest egg, at 4%, brings in $32,000, for a total $50,000.
- Begin to plan for the dream job, while adding $50,000 of $75,000 of excess income to their nest egg
- Pay down mortgage with $15,000 per year of excess annual income
- Ensure that the nest egg is invested with capital preservation as the primary objective, assuming 5% rate of return
- Transition to the dream job, accepting lower pay -- $100,000 -- for full-time jobs they fully enjoy
- Stop saving for retirement, but allow Social Security to continue to grow
- Get the mortgage paid down to $94,093 and stop extra principal payments
- Allow the nest egg -- now $1.2 million -- to grow, conservatively invested to earn 5% per year
- Scale back to part-time work at dream job
- The mortgage balance is now $31,062
- Take Social Security benefit at $30,927 and income of $50,000 for a total of $80,927
- With the nest egg at $1.4 million, additional income needed is $19,073 or 1.3%
- The mortgage is paid off, reducing income need by $19,000 a year
- Social Security benefit is $32,176, with 2% inflation a year
- The nest egg is at $1.6 million (4% = $63,354)
- Income need is $81,000
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