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Not What We Planned

Marjorie Kondrack

MY HUSBAND WAS STILL working at age 65 when he went into heart failure. After heart surgery, he wanted to return to his job as the warranty administrator at a large New Jersey auto dealership. But we worried that the commute would be too taxing. He traveled 55 miles each way to and from his job, and it could take hours and be treacherous when the weather was bad. When additional complications ensued from the surgery, we decided it was time.

As many others can attest, we don’t always get to choose when we retire. Sometimes, the time is decided for us by circumstances over which we have no control. My husband and I didn’t have everything in place for the retirement we wanted. Still, our nest egg was sufficient. We knew we’d be fine because of prudent planning throughout our marriage.

I had already retired five years earlier to care for my mother, and was receiving Social Security benefits. When my husband reached his full retirement age, he filed for Social Security spousal benefits based on my earnings record, taking advantage of a now-disallowed strategy known as “file and suspend.” Later, at age 70, he filed for benefits based on his own earnings record—a benefit that was larger thanks to the delayed retirement credits he’d earned in the meantime.

I was covered under my husband’s health insurance while he was working. But with his sudden retirement, we both needed to get coverage through Medicare, including purchasing Medigap insurance. Don’t skimp on this. Good health care coverage—along with sufficient savings—are essential to your peace of mind and well-being in retirement.

One wrinkle in our plan: What would be our primary source of income? There were no large balances in either our Roth or traditional IRAs. At the time, there was no 401(k) available through my husband’s employer. Instead, through his union, there was a cash-balance plan, but it was not a pension or retirement benefit.

Instead, it was defined as a “security fund.” When an employee retired or left the job, the balance in the plan could be used for whatever purpose the employee wanted. You could use it for retirement—but it was not lifetime retirement income. Rather, it had to be distributed in equal increments over 10 years. For instance, if the balance was $500,000, you would receive $50,000 annually for 10 years. After each payment, there was no interest paid on the remaining balance, lessening the value with each passing year.

Still, we were in good shape, thanks to the payout from the plan, along with investment income and Social Security. But we got killed on federal and state taxes. The latter was especially painful, since states often don’t tax retirement income—but the payouts from the security fund weren’t considered retirement income and hence were fully taxable. Meanwhile, it took some research just to be able to properly report this arcane income on our 1040 tax return.

One rule of thumb says you only need 80% of your preretirement income to maintain your standard of living later in life. As someone who is well along in the retirement pipeline, I disagree. As our retirement has progressed, our property taxes and health-care costs have soared.

Often, I hear folks express regret for what they gave up by taking an early retirement package. But seldom do they make much of what they gained. Sometimes, those intervening years we spend accumulating more just aren’t worth it. Meanwhile, by retiring earlier, we gain precious time for leisure, travel, friends and family. As the poet Ernest Dowson wrote, “They are not long, the days of wine and roses.”

While our decision to retire was easy, it was overshadowed by concern for my husband’s health. Indeed, we didn’t get the active retirement we envisioned because of major health issues for both of us. On top of that, we took care not only of my mother, but also of my husband’s brother and his parents. What other retirees spend on travel, we spent on family—though I did manage one memorable cruise.

Still, I think it’s a beautiful world and I get small pleasure from each day. And we have each other—a blessing not given to everyone.

Marjorie Kondrack loves music, dancing and the arts, and is a former amateur ice dancer accredited by the United States Figure Skating Association. In retirement, she worked for eight years as a tax preparer for the IRS’s VITA and TCE programs. Check out Marjorie’s earlier articles.

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