A native Californian transplanted in southern Illinois.I have been meaning to write a long summary of where I am financially. Currently, I have 3 debts totaling 46k and change. I have 460k in a traditional IRA, 40k in a Roth IRA, and 14k in savings. I am vested in CalPers and will receive a small pension for life. I own a modest little house. I am 58 plus, a little more than a year away from that magical age of 59.5 when early withdrawal penalties cease to exist. I'm in a LCOL area. I have a job I enjoy which is paying me 42k per year. I have to buy my own health insurance.
I would like to enter retirement with no debt, at least 40k in savings, and at least 60k in my Roth IRA. My traditional IRA is what it is; I do not intend to add another cent to it ever. I also have a goal to contribute 10k to a 529 plan for my grandson. I would like to have this completed before I retire. I have already opened an Illinois Bright Start account for him and have contributed $200 so far.
I will begin receiving pension benefits of $500+ dollars per month at the age of 62. With the repeal of the WEP, I am definitely opting for the monthly pension instead of the lump sum. If I begin SS benefits at age 62, I can expect $1200+ dollars per month. If I wait until age 65 I can expect $1600+ dollars per month.
I am not certain exactly when I will begin taking SS benefits. I do know it will be when I have both reached age 62 and have retired. I'm opting to preserve my capital over letting my SS benefits grow. I do not intend to work past age 65 come what may.
Of my 3 debts, the one which causes me the most stress is my mortgage. It is due in full 11/28/25. The lender has already agreed to write a new 2 year note. I will need to pay another 2% funding fee and another $59 recording fee. The rate will remain at 7% and the monthly payment will remain unchanged at $225 per month. So I am OK until 11/28/27 when that note will be due. At that time, the lender may be willing to go again. Or, they may not. So I need a plan. I have spoken to several lenders about refinancing options, and none have appealing terms. I think the best option is to pay it off as soon as I can.
The payments on my car loan are $462.02 per month, with a rate of 4.95%. I paid quite a bit extra early on and so the lender considers me to be ahead. That means I can pay any amount I choose as no payment is actually due. Currently I am paying $200 every payday and plan to continue until the loan is paid in full.
My third debt is to Terminix. The monthly payment is $178.21 and the rate is 8%. I hired them to re-do my crawlspace. The insulation under my house had been installed upside down and so was trapping moisture against the floorboards causing mold to grow. They took all of that out, treated the floorboards, installed a quality moisture barrier covering the ground and put in all new vents for air circulation.
I have a drawdown spreadsheet with two scenarios running. Scenario one is what happens to my nest egg if I retire today. I begin withdrawing $3200 per month (less wages for the current month) immediately. I reduce my withdrawals at age 62 by the amount of my pension and SS benefits. I update it every day that I work (and earn a tiny bit more money). The outcome improves slightly with each update. I assume a steady 5% rate of return and give myself an annual 2% COLA. With scenario one, I will have 13k left at age 100. So there isn't much room for error in scenario one. That's why I keep going to work each day!
Scenario two has me withdrawing nothing for now, then $667 (net $600 after 10% withholding) per month beginning when I'm 59.5, then $1600 per month beginning at age 65. Again, I assume a steady 5% rate of return and give myself an annual 2% COLA. With scenario two, I will have 837k left at age 100. Scenario two also gives me more income (than scenario one) every single remaining month of my life beginning at age 59.5. This is a safe plan and I like it. I'm unsure I want to work another 6.5 years though.
So this is my financial reality.
July 12th, 2025 at 11:51 am 1752317500
Given the new tax bill, you may need to consider the possibility of an increase in health care costs. We may not know that fully until 2027. The implications of the bill are complex with a lot of variables and frankly, I don’t think anyone can predict accurately the impact on specific people.
I also think that we will ultimately see a decrease in Social Security benefits if the current administration remains in power - from slow downs in starting benefits to delayed cost of living increases and changes to the maximum benefit age. This too is impossible to predict, but rogue for a bigger cushion.
Do you have a skill or some time where you could generate a little extra money now to speed up debt repayment? Things like babysitting, helping someone do meal prep or laundry, shopping, driving, pet sitting?
July 13th, 2025 at 07:41 pm 1752432104
Downstate Illinois is cheaper than a lot of places to live and for that I feel blessed. That is one advantage we both have.
July 14th, 2025 at 02:06 am 1752455219
Something that retirement withdrawal scenarios don't take into account is your flexibility. Once you're debt-free, if you had to, you could scale back to just taxes, food, and utilities during a rough year (2008). If your tightest scenario has you with a positive amount at 100, I think you'll make it!
July 14th, 2025 at 08:02 am 1752476543
Also, while it's still a bit far off, but I can't help but feel like your traditional IRA is an eventual tax problem waiting to happen. May want to really consider how to get it converted into Roth before the age 70 deadline.
Of course, I'm not a tax expert, so please consult one before doing anything.