Young and nearly retired - the next phase

NEW YORK (Money) -- Question: I am 45 years old, earn $105,000 a year working as a nurse and hope to retire within three years and collect a pension of $25,000 to $30,000. My wife, 54, has just retired from a nursing job that paid $80,000 and now gets a pension of $22,000.

We have real estate investments worth roughly $900,000 after mortgage debt, a home worth about $1 million net, $375,000 in 401(k)s and $75,000 in assorted mutual funds. We also have health insurance that will be subsidized in retirement.

My question is do we have enough? I would go to an investment adviser with this question, but my one experience with one was less than satisfying. We're also undecided about whether we should hold onto the investment properties or sell them.

For that matter, we're also unsure whether we should continue to work in nursing for some extra income (although sometimes I think we need a change). I realize I've posed several questions here, I guess I just don't know what to ask. Any insight you can offer would be greatly appreciated.

-William M., Mt. Pleasant, South Carolina

Answer: Like many people nearing retirement, you're coming to the realization that that the financial issues you're grappling with are inextricably entwined with lifestyle issues. And the fact is, you can't really resolve one without addressing the other

For example, you say you're undecided about whether to hold onto your investment properties. Before you can arrive at a reasonable answer to that question, I think you would have to consider whether having responsibility for a hands-on investment like real estate would cramp your style in retirement.

Would being a landlord interfere with your travel plans or are your properties trouble free enough so that they require very little monitoring on your part? Would you consider it a drag to have to deal with issues like finding tenants or getting repairs made-or would an activity like this keep you engaged and prevent you from being bored in retirement?

As for your work plans, true, continuing to work part-time in nursing would be a good way to earn some income so you wouldn't have to rely so much on your investments. That's important considering you and your wife could easily be counting on your nest egg for 40 or more years.

But based on the fact that you're leaving your nursing job at 45 and that you think you might need a change makes me wonder whether you're really ready to "retire" at all - or if you just want to retire from your current career and maybe start a new one.

If a new challenge is what you're really looking for, then retiring and working part-time in nursing-which makes financial sense as a retirement plan-probably wouldn't be a very good decision as far as your quality of life is concerned.

So the first thing I'm going to recommend is that you and your wife take some time and think seriously about what you want to do for the rest of your lives. I'm not talking about a five-minute chat. I'm talking about a real exploration of your heart and soul. Is there a job you've always wanted to try?

At 45 you've still got lots of time to launch another career. Perhaps there's another challenge, volunteer work of some kind or a project like writing a book? Or maybe you want to shift into a more low-key way of life, maybe moving in and out of the workforce just to earn a bit of money and stay engaged.

Perhaps you need to take a short break from your job-a three- or six-month hiatus - so you can pull back a bit and give all these and other alternatives more thought without the pressing demands of a daily job.

I've been saying "you," but I want to be clear that these are questions that you and your wife should be discussing together since any decision you make will obviously affect her.

To help spur some thoughts, you might want to check out a story I did a while back in my Long View column in Money Magazine that dealt with retirement lifestyle issues. (See "Plotting the Next Chapter").

Once you have a better sense of how you and your wife are going to live in retirement - or whatever this next phase of your life turns out to be - you can better assess where you stand financially.

If you do leave your job within three years and don't start another career, a key question you'll have to deal with is whether you and your wife will have enough income to live on now that neither of you is working full time.

Keep in mind that you won't be able to collect Social Security until age 62 at the earliest. So you've got a number of years where you'll be counting on your investments, plus any part-time work, to fill the gap between your pension income and whatever annual amount you need to maintain your lifestyle.

The only real way to get an accurate sense of whether you can afford to live the lifestyle you would like is to crunch the numbers - that is, see whether your resources can throw off enough income to support you. One way to do that is to go to a calculator like our Retirement Planner. You plug in information such as your pensions, investments and how much income you'll need in retirement and you get an estimate of your chances of success.

You can then re-run the numbers using different assumptions - working part-time, taking Social Security at different ages, investing more or less aggressively, etc. This will give you a sense of whether you might be better off tweaking your plan a bit.

One note: our calculator isn't really set up to handle real estate investments, so you'll have to fudge things a bit by assuming a certain net income from our real estate and plugging in that figure into the "Pension and Other Income" section.

Or you could assume you'll sell the real estate, estimate how much you'll come away with after taxes, add that amount to your investment portfolio and see how the numbers work out.

If you want a more detailed assessment of what sort of lifestyle you can afford given your investments, real estate and other resources, you'll have to go to an adviser of some sort, most likely a financial planner. Yes, I understand your one experience with an adviser wasn't a good one.

But I know there are lots of good planners out there, and by interviewing a few and carefully evaluating them, I think you should be able to find one who's competent and honest. If you want to go that route, you can find the names of planners in your area by clicking here and here. Before talking to them, however, you may first want to read a column I wrote on finding a financial adviser.

But before you start crunching any numbers or talking to planners, you and your wife need to start thinking and talking to each other about how you want to spend the rest of your lives, whether you call it retirement, semi-retirement or just a new phase in your life.

Otherwise, you might end up making financial decisions that conflict with your lifestyle decisions. And that's not a good way to start this new phase of your life.

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