We earn $7,000 a month, have $798,000 in retirement and will receive pensions. But we want to help our child buy a house and my wife wants to retire at 55. Do we need professional help?

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Question: As teachers, my wife and I bring home $7,000 a month combined. We save 20% of our income in pre-tax 403(b) contributions ($120,000 present value combined) and max out our Roth IRAs every year we have $28,000. We have $60,000 in an emergency fund and another $650,000 in a brokerage account. We own our home and have monthly expenses of about $500 (taxes, insurance, lawn service and pool). We have no debt, but one car is 10 years old and will need to be replaced in the next 2 years.

My wife would like to retire in 3 years so her pension will be about $33,000 a year — 48% of her current salary. She will be 55. Then I will have to cover her health insurance, which will take about $800/month out of my paycheck. Should I plan to stop contributing to my 403(b) to cover this additional cost? Should we consider withdrawing from the brokerage account to make up for her reduced income, and if so, how much should we withdraw annually knowing that we want to maintain our current comfortable standard of living? We would also like to contribute up to $50,000 towards our child’s first home when the time comes. Should we hire a consultant to help us? (Are you also looking for a financial advisor?
This tool can help match you with an advisor who can meet your needs.)

Answer: Well done for doing a great job putting yourself in a pretty good financial position! There’s a lot to unpack here, so let’s tackle this question by question.

Should You Hire a Financial Advisor?

It can. “This is a major life change for both of you, and it needs to be done right to avoid financial or marital stress,” says certified financial planner Ken Robinson at Practical Financial Planning. If you feel like you can handle it without too much stress—you seem to have a pretty solid perspective on your finances—you might be able to do it without professional help. If not, a professional might be worth it. This tool can help match you with a financial advisor who can meet your needs.

One thing the pros noted that’s important to consider: You probably have a lot more than the $500 per month in expenses you listed, since those expenses didn’t factor in things like clothing, shelter, food, and health care. “It’s important to know how much you’re actually spending — it’s the foundation of answering your questions,” says Robinson. Indeed, knowing how much you spend will help you figure out if you have enough to retire and buy your child a home.

This recent The Adviser column talks about some of the questions you should ask yourself to see if you have enough to retire on, and this one talks about the 15 questions you should ask any adviser you might hire.

Having a problem with your financial advisor or looking to hire a new one?
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Should you stop contributing to your 403(b) to pay for your spouse’s health care expenses?

You shouldn’t, says certified financial planner Carleton McHenry at McHenry Capital. Instead, draw from your emergency savings account to cover it. “Looks like you have too much in that account at $60,000 and if you had 6 months of your income set aside in that account you would only have $42,000 which would be enough. The extra $18,000 could cover almost two years of her health care costs,” says McHenry.

Additionally, because the market has sold off this year, you don’t want to liquidate your investment account at a time when your investments are at a certain low point. “I’d rather you continue to contribute to the 403(b) while you’re still working. Does your company match your contributions up to a certain percentage? If so, make sure you contribute at least that maximum amount,” says McHenry.

Looking for a financial advisor?
This tool can help match you with an advisor who can meet your needs.

Do you need to withdraw from your brokerage account to make up for your spouse’s reduced income?

“Your retirement will be based on your income and expenses and it sounds like your income is pre-determined based on your salary. Look at your investment returns and expenses to determine if they can support your retirement and care expenses,” says certified financial planner Don Martini. And when it comes to which accounts to draw from, certified financial planner Patrick Logue at Prudent Financial Planning says it might be worth creating a plan that includes a distribution strategy. Make sure you understand the tax consequences associated with withdrawals.

If this seems like too much, it might be smart to consult a financial advisor. This tool can help match you with a financial advisor who can meet your needs.

Logue adds that you should also consider Social Security. Although it’s not extremely common, depending on the type of pension you have, it can reduce the amount of Social Security payments you collect. You’ll want to check if you’re subject to the Windfall Elimination Provision (WEP), which is a “formula used to adjust Social Security employee benefits for people who receive “noncovered pensions” and qualify for Social Security benefits under other earnings covered by social security,” explains the Social Security Administration.

Also note this: When your spouse retires, your income will drop from $7,000 a month to about $5,250 a month, which puts you in the 12% tax bracket, says certified financial planner Chris Chen at Insight Financial Strategists. “Based on the spending numbers you’ve given, you should be able to handle the additional cost of insurance, but you need to consider that your wife’s income is unlikely to adjust for inflation. Based on 3% inflation, it’s 9% currently, she’ll lose about 50% of her purchasing power in 20 years, and assuming she lives to 95, which isn’t unusual, her pension would lose 75 % of its purchasing power authority. Even with your frugal spending, this can become limited,” says Chen.

And since the markets are down now, is there any way to keep your wife working? “A financial planner can help review your spouse’s pension calculations to see if it makes sense for her to continue working for a few more years,” says Logue.

Logue adds, “Does your spouse contribute to a 403(b) and a pension? You might want to see if there is a Roth option in your 403(b). A financial planner could help you determine whether Roth or traditional 403(b) contributions would be appropriate,” Logue says. Unlike a traditional pre-tax 403(b) account, the Roth 403(b) would allow you to contribute after-tax dollars and withdraw tax-free dollars when you retire.

Should you contribute to your child’s home and if so, how?

Of course, we know you also want to contribute $50,000 to your child’s first home. But there may be better ways to do it than throwing them a lump sum. “Think about the financial behaviors you can help your child create. One-time gifts rarely lead to improved habits,” says Robinson. Other ways you can help facilitate healthy financial habits are to set up a Roth IRA or match an amount that your children can pay for a down payment.

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