Can we retire soon and move overseas?


Maya, 59, and Jeff, 56, are looking for a retirement that’s on the move.

Jeff works part-time for minimum wage — something of an early retirement — while Maya would stop working in as little as six months.

If they can afford it.

When Maya stops work, the couple is in for some big moves.

“We plan to live in the U.S. for another six months after that, then leave the U.S. to spend the next three to five years in a lower cost location, such as Mexico or Central America or South America,” Maya says. “We’d spend half the year in my husband’s home country, and the other half as ex-patriots in a country such as Mexico, Panama, or Ecuador.”

They plan to live off their savings, and then when Maya turns 66, they figured they’d start to draw Social Security benefits.

Bryan Smalley, a certified financial planner with RegentAtlantic Capital in Morristown, reviewed the couple’s finances for

“The couple wants to know if they have achieved financial independence and are well prepared to move onto the next phase of their lives,” Smalley says.

The couple recently sold their home and they’re renting until they retire.

“They plan on spending the first five years of retirement in a lower cost destination than the states in order to see the world and enjoy a different pace of life,” he says. “Their plans are open on what to do after that but it is important to test and see what they can do both during and after those first five years of retirement.”


Smalley says Jeff and Maya currently spend around $80,000 a year in after-tax dollars on their living expenses. Maya says she estimates that they will need only $40,000 a year for the first five years of retirement.

“If we assume $40,000 a year for the first five years of retirement and $80,000 a year for every year of retirement after that, Maya and Jeff have a 91 percent probability of success of not having to adjust their lifestyle through Maya’s age 93,” Smalley says.

This analysis used a Monte Carlo simulation of 10,000 different potential market outcomes, and assumed an investment strategy of 60 percent growth and 40 percent fixed income.

“This is great news and a credit to the hard work that Maya and Jeff have put into preparing for this phase of their life,” Smalley says. “Even better news: they could spend $72,000 a year in after-tax dollars on their living expenses for their entire retirement and still have an 87 percent probability of success of not having to adjust their lifestyle through Maya’s age 93.”

The couple may still want live a less expensive lifestyle the first five years of retirement, but Smalley says they should know that they can increase their lifestyle above $40,000 a year if they wanted to.


For many soon-to-be-retiring couples, the question of where to get the cash needed to fund their living needs is among the top concerns. For Maya and Jeff, there have five main sources for cash flow in retirement: taxable assets (cash reserves/brokerage accounts), qualified accounts (401k/IRA), non-qualified accounts (tax-deferred annuities), tax-free assets (Roth IRAs) and Social Security.

Smalley recommends they start by setting aside at least six months of expenses in cash for any unforeseen emergencies.

He also recommends that they defer collecting Social Security and wait as long as possible to tap into their Roth IRAs, but more on that in a moment.

They should start, he says, by first living off their cash reserve — still leaving six months of cash set aside for emergencies. Once their cash reserve is down to their emergency fund, they can use a mixture of their qualified and non-qualified accounts to cover their living needs until they start collecting Social Security and have to take required minimum distributions from their qualified accounts at age 70 1/2.

The couple have seven variable annuities, three of which are in qualified accounts, or IRAs, and four of which are in non-qualified accounts. Each of the seven annuities has a living benefit rider known as a Guaranteed Minimum Income Benefit (GMIB).

“This benefit guarantees a base account value for which Maya and Jeff could one day annuitize their annuity off of if they so choose,” Smalley says. “This means that even if the value of the account drops below the guaranteed minimum account value, their annuity payments would be based off of the higher guaranteed minimum account value.”

Smalley recommends they use some of the non-qualified annuities to cover living expenses after they have used their cash and before age 70.

“In general, withdrawals from non-qualified annuities are part return of principal and part return of earnings,” he says. “The earnings will be taxed as ordinary income and the return of principal will not be taxed.”

But, he doesn’t recommend they use their living benefit rider early on in retirement. That move would annuitize the annuity contracts at historic low interest rates and take away the benefit of the tax-deferred growth in the investments in the policies, he says.

“Now, if interest rates drastically increase over the next several years or the value of the accounts dip well below the value of guaranteed minimum income benefit, it may make sense to annuitize,” Smalley says. “At that point I recommend that Maya and Jeff consult with a financial professional for objective advice on how to utilize the living benefit rider of these annuities.”

Another potential source for cash flow before age 70 is Maya’s and Jeff’s qualified accounts.

Smalley says it’s usually best to not use qualified accounts, such as IRAs and 401ks, until the time that required minimum distributions start. That’s so you can keep these accounts growing tax-deferred for as long as possible. But for this couple, there may be an opportunity for them to use them effectively beforehand.

“There is a good chance that Maya and Jeff may be in a very low tax bracket at that point in time,” Smalley says. “With little income, they can take a distribution from one of their qualified accounts and still keep themselves in a relatively low tax bracket.”

He says the benefit would be that distributions would be taxed at a lower tax rate, and it may lower their future required minimum distributions after age 70 1/2.

When the time comes, Smalley recommends they talk to a tax advisor to determine an appropriate amount for the distribution.


Social Security is another important income source.

Smalley recommends Maya wait until age 70 to collect her own Social Security, and that Jeff file a restricted application at his full retirement age so he could collect a spousal benefit based off of Maya’s record.

“In order for Jeff to file for his spousal benefit, Maya will need to file and suspend her benefit when Jeff turns full retirement age,” Smalley says. “By doing so, Maya will allow her Social Security benefit to grow from full retirement age to age 70 by 8 percent per year — a 32 percent guaranteed increase — which will allow Jeff to collect the higher of the two benefits.”

Given that Jeff’s benefit is less than half of Maya’s, it’s a pretty good deal.

Smalley says by implementing this strategy, they significantly increase the probability of success of their financial plan. With this Social Security collection strategy, they’d have a 99 percent probability of success of not running out of money through Maya’s age 93. For comparison sake, if they were to both collect their own benefits at the earliest date possible — their respective age 62 — they would only collect 75 percent of their full retirement benefits and reduce the probability of success of their financial plan down to 70 percent, Smalley says.

“By collecting early, they not only significantly reduce their benefits — by up to 57 percent — they also significantly reduce the success of their financial plan,” he says. “his goes to show that it’s important to think through one’s Social Security options before making an irrevocable Decision. Many individuals and couples leave a lot of money on the table by collecting their Social Security as soon as possible.”

This story was first posted in December 2014.

Money makeovers offered by should be treated as general advice about personal finance and money decisions. Before you make any changes to your personal financial plan, see a professional who can consider your entire financial situation. If you’d like a free money makeover, email .

Net Worth:


  • Checking: $10,000
  • Money Market: $165,000
  • CDs: $5,000
  • IRAs: $548,000
  • 401(k): $207,300
  • Annuities: $164,000
  • Brokerage Account: $99,000
  • Personal Property: $20,000
  • Autos: $8,700
Total Assets: $1,227,000


  • none
Total Liabilities: $0
Total Net Worth: $1,227,000


Annual Income:

  • Jeff: $10,000
  • Maya: $168,000

Monthly Expenses:

  • Income Taxes: $2,092
  • Housing: $1,730
  • Utilities: $429
  • Food: $490
  • Personal Care: $140
  • Transportation: $190
  • Medical: $775
  • Entertainment: $255
  • Vacations: $500
  • Charity: $50
  • Gifts: $50
  • Misc. credit cards: $2,119