I am a 49-year-old married man. My wife and I have no children, live in Maryland and have $75,000 in liquid savings. I’m thinking of putting $50,000 into a one-year CD at 4.5%, but my wife keeps telling me to wait and see how my job goes. We have $90,000 in a 403(b) retirement plan, $280,000 in our portfolio (80/20 stocks/bonds), $18,000 in a traditional IRA and $10,000 in an emergency fund. We own three vehicles, which are all paid off.
I will be going back to work next month after a five-year hiatus due to a medical issue. I wasn’t working during those five years and had to live off our savings, odd jobs and my wife’s income. My monthly take-home pay will be $8,500, and my monthly expenses are $4,000. Outside of our mortgage, we have zero debt. We owe $90,000 on a home valued at $365,000, which I hope to pay off before retiring.
“‘I will be going back to work next month after a five-year hiatus due to a medical issue. I wasn’t working during those five years and I had to live off our savings, odd jobs and my wife’s income.’”
We aren’t sure if we will sell the home or keep it and rent it before moving to the Philippines, where we plan to retire. We see similar properties for rent in our neighborhood for $3,000 to $3,500 per month. If we keep the house, which is 20 years old, I will most likely hire a property-management company to maintain it. It has been updated with a new roof, water heater, air-conditioning unit and furnace. What are your thoughts?
I am a disabled veteran, and my healthcare is provided by the Department of Veterans Affairs. I also receive a government pension of $300 per month. My Social Security benefits should be $1,800, and my wife’s benefits should total $1,700 per month, when we are eligible to receive them. We will also qualify for Medicaid when eligible, which I know is transferable to the Philippines.
I want to retire early — at 57, to be exact. My wife, who is five years my senior, does not. She is concerned we don’t have enough saved up yet. She is from the Philippines and owns a home and property there. It is our intention to move there and retire. Our cost of living there should not exceed $2,000 per month to cover food, medical costs and transportation.
My question is: Will I have enough to retire comfortably? I am expecting a withdrawal rate of 4%-5% for at least 25 years. I have not factored in our Social Security benefits, as we aren’t receiving them yet.
Thank you in advance.
Philippines-bound
Dear Philippines-bound,
You have a lot of wants and a lot of financial goals ahead. Taking the pedal off the metal on the former will make the latter easier to manage. Retiring at 57 is an admirable goal, especially as you plan to move to a low-cost country, but you are also playing catch-up on several years of lost work — during which you dipped into your savings — so don’t hold yourself to retiring at 57 at all costs. You may wish to give yourself some leeway.
Moving to the Philippines is a big deal, and selling your house would make returning to the U.S. more difficult, should you decide to do that. Rent it for the first couple of years and see how you get along with your new life. If you decide that you love it, then you can consider selling your home and releasing that cash. Ultimately, it will give you a cushion in your retirement if you plan to buy a cheaper property in the Philippines.
You can read more about being reimbursed for medical care by Veterans Affairs here. “For eligible veterans living or traveling abroad, VA offers medical services through the Foreign Medical Program (FMP),” the Department of Veteran Affairs says. “Through this program, FMP will pay for health-care services, medications, and durable medical equipment for service-connected conditions and conditions associated with and held to be aggravating a service-connected condition.” The VA also operates an outpatient clinic in Manila on an appointment-only basis.
Regarding your big move, do your due diligence on the Philippines. While it’s much cheaper to live there — and the cost of domestic staff and care workers is also much cheaper than in the U.S. — the State Department last month issued a travel advisory, and recommends avoiding certain regions of the country. “Exercise increased caution to the Philippines due to crime, terrorism, civil unrest, and kidnapping. Some areas have increased risk,” the department says.
“Moving to the Philippines is a big deal, and selling your house would make returning to the U.S. more difficult, should you decide to do that. Rent it for the first couple of years and see how you get along with your new life.”
Still, it’s a beautiful country, and more than 200,000 American expats have moved there, according to International Living magazine. “People are so often happy to drop everything and chat; for them it’s a chance to perfect their English skills, for you it’s an opportunity to make new friends,” it says. “In the Philippines, it seems like no matter where you go, the most common thread throughout the archipelago is the kind-heartedness of the people.”
There are some missing pieces to your story, which are worth flagging. For example, you don’t mention whether your $2,000 in monthly living expenses in the Philippines includes accommodation, utilities, travel and other leisure activities, and it’s not clear whether your estimated Social Security is based on the full amount you’d receive if you start taking benefits at age 67 or on the amount you’d get if you start earlier.
Given that you have approximately $475,000 in savings now, Bruce Tannahill, a director of estate and business planning with MassMutual, says that if you can save $40,000 a year for the next eight years, you would then have $795,000 in savings. “A 4% withdrawal rate would produce approximately $32,000 annually,” he says. Tannahill advises selling your house and investing the proceeds. Note, though, that the house is also likely to rise in value over time.
You may be confused about Medicaid. “Medicaid is a federal-state partnership and does not cover people outside the U.S.,” Tannahill says. “I think you’re confusing Medicaid with Medicare, because your assets greatly exceed the maximum to qualify for Medicaid. Unfortunately, Medicare won’t cover you outside the U.S., although a Medicare supplement (Medigap) policy will cover you for the first 60 days.”
But you will, of course, receive other benefits in your retirement. “As a disabled veteran, you remain entitled to the VA benefits you earned because you served in the military,” Tannahill adds. “Bottom line, it’s possible that you have enough resources for you to retire at 57 if everything goes right. I suggest you plan on working until 62 and periodically re-evaluate whether you have enough to retire earlier.”
In other words, you’re on the right track. You should keep working and saving and planning and — yes — dreaming. After your military service and your medical issues, you deserve to fulfill your dream of moving overseas for a low-cost retirement in a nice climate. If your wife does not wish to retire early, the fact that she is five years older than you may give you some room for a compromise. Good luck with that, and with all your plans.
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