Noli Cabantug has spent his career moving back and forth between the public and private sectors. Now, at the age of 58, he wonders what his retirement income will be like and what he can do to improve it in the years to come.
Mr. Cabantug, a licensed practicing nurse living in Pomona, California, teaches public high school students about medical careers. At 18 years invested, he expects to receive about $1,300 a month from a state pension program for teachers when he retires at age 62 and $1,800 a month when he retires at age 67 going into retirement.
He also paid into Social Security for decades, worked as a nurse in the private sector during school vacations, and before becoming a full-time educator. Now he’s considering working longer as a teacher to supplement his pension or returning to nursing after age 62, depending on how that affects his Social Security.
Mr. Cabantug says he makes the equivalent of $42 an hour as a teacher, compared to up to $60 an hour as a nurse, a job that also has the potential for overtime.
Together, Mr. Cabantug and his wife, Marie Cheryl Cabantug, make about $110,000 a year, and their 25-year-old son, Brian, lives with them to save money. Ms. Cabantug, 48, is a registered nurse at a home health facility and plans to continue working for the foreseeable future. The couple pays her about $400 a month for private health insurance because she prefers using Kaiser Permanente to her husband’s health insurance.
The couple has about $160,000 in IRAs and $250,000 in equity in their home. They have about 20 years left on their mortgage, which carries an interest rate of 4.25%. Monthly housing expenses are $2,600 with an additional $880 for utilities. The family rarely dines out and tithes about 10% of their income to support churches in the Philippines.
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They make about $800 a month renting a room in their home and expect to make another $1,000 a month from next year by renting a second unit on their property. They own a paid-off vacation home in the Philippines worth about $40,000 that they rent out most of the time.
Mr. Cabantug says he is interested in learning more about long-term care insurance.
Mr. Cabantug says he enjoys working in both fields. “Teaching shapes the character of young and promising people, as well as young adults who need inspiration,” he says. “Nursing is caring through touch.” But if his retirement income is secured, he says he may prefer the flexibility, variety and higher pay of nursing in his remaining working years.
Advice from a professional
Mr. Cabantug is eligible for Social Security because he worked at least 40 qualifying quarters in the private sector, said William Huston, founder and chief investment officer of Bay Street Capital Holdings in Los Altos, California. But he will not receive its full benefits.
Workers like Mr. Cabantug are subject (with rare exceptions) to the Windfall Elimination Commission, which reduces Social Security benefits for retired workers who also receive retirement benefits based on earnings that are not subject to Social Security tax.
Assuming Mr. Cabantug starts collecting at age 67, his benefit is discounted to about $680 per month from the $1,372 he would have received if he did not also have the pension.
Mr Huston says Mr Cabantug should consult with his pension plan to get more clarity on how it would change if he continued to teach. He says that while he appreciates Mr. Cabantug’s focus on maximizing his retirement income, he should simply earn more income as a nurse for the next few years, which he shouldn’t overlook.
Mr. Cabantug is eligible for catch-up contributions to his retirement savings, and the couple should maximize tax-advantaged and tax-exempt accounts such as traditional and Roth IRAs and Mr. Cabantug’s workplace 403(b), Mr. Huston says.
The couple don’t spend much on luxuries, but Mr. Huston suggests they buy cheaper car insurance and examine their utility budget to look for further savings.
Long-term care insurance is expensive, Huston says, but seven in 10 Americans are expected to need care as they age. He suggests the couple consider a policy with a return-of-premium tab that would return money to heirs if the policyholder dies without drawing on benefits. It costs more, he says, but gives peace of mind.
Ms. Gallegos is an editor at The Wall Street Journal in New York. Email her at [email protected].
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