Run the numbers before you set your retirement date, adviser says

Richard Peck talks on retirement issues at Legislative Weekend

BEFORE YOU retire, determine whether you can afford to do so, advises financial planner Richard Peck.

“I cannot imagine anybody retiring without some kind of a road map or some picture that gives you some confidence whether you have enough on which to retire,” Peck told Council 2 members during the recent Legislative Weekend held in Olympia. Peck, who works from an office in Mukilteo, specializes in retirement planning for public employees.

“You might be looking forward to retirement, but one thing worse than having to go to work every day is retiring and having your money run out,” Peck, a retired school teacher, said. “You don’t want to be faced with having to decide in retirement whether to cut back on cable, vacations and so on.

“Worse yet, you don’t want to find out your money will run out when you are 77 or 78. You want a plan where the assets never run out.”

To determine whether you can afford to retire, start with a monthly budget, Peck said. Use it to work out how much you will spend in retirement. Make sure you include an estimate or how much medical insurance you will have to pay.

Next, look at your projected income in retirement. To determine how much it is likely to be, Peck suggested you find out what your retirement plan offers you.

If you are unsure, request an estimate of benefits, Peck said. It also is a good idea to attend a Public Employees Retirement System seminar that outlines Plans, 1,2 and 3, Social Security benefits, the Voluntary Employee Beneficiary Association (VEBA) and the Statewide Health Insurance Benefit Advisors (SHIBA).

Next, work out how much you will receive from other sources of income, such as savings, investments or rental income, Peck said.

The difference between your projected costs and income will determine whether you can afford to retire. Be sure to add in an inflation factor greater than the 3 to 4 percent consumer price index (CPI) reported by the government. Medical insurance premiums and medical expenses far exceed the CPI and affect seniors more. Using 5 percent inflation would be much safer, Peck suggested.

“You might say ‘I want to retire because the state says I can," but when you run the numbers you might realize you cannot afford to do so yet,” Peck said.