Despite solid finances, couple are reluctant to begin retirement journey

Carole and Dave Lutness prepared for retirement the old-fashioned way.

They paid off their house and cars, accumulated no credit card debt, lived frugally and saved with a religious fervor. Carole, 68, is a psychiatric social worker for Los Angeles County and Dave, 64, is an information technology specialist with Guitar Center. Both still work full time.

“They’re a classic example of how previous generations prepared for retirement,” said certified financial planner Alfred McIntosh, who met with the Santa Clarita couple.

But after all those years of careful financial living, the Lutnesses were not sure they were secure enough to take the next step in life.

McIntosh told them that with some adjustments to their finances they would be more than ready to retire. In fact, he pleaded with them to stop working as soon as possible. If they don’t, they risk squandering their healthy years.

“They need to let go and start living,” the financial planner said. “It’s extremely important for them to do the things they love while they still can.”

The Lutnesses have a combined annual income of $118,000. In addition to having paid off debts and the note on their six-bedroom home, they’ve accumulated a total of about $560,000 in savings and mutual fund investments. Including their home, they have a net worth of a little more than $1 million.

Still, Carole, a lifelong saver and reluctant spender, fretted about financial security.

“I’m scared to touch anything,” she said.

She was also worried that leaving work would mean having to give up her financial support of political, environmental and social matters — the couple routinely donate about 10% of their combined income to causes.

To call Carole a political junkie would be an understatement. Twenty bumper stickers supporting candidates and causes cover her decade-old Toyota. Two years ago, she ran for the California Assembly as a Democrat, but lost. She nonetheless spends most of her weekends and evenings on various political activities.

“I’ve dedicated my life to this,” Carole said.

McIntosh, though, expressed concern that Carole’s political passions had a stranglehold on her that threaten to overshadow what could otherwise be a carefree retirement. Dave, too, has worried that Carole’s politicking has become too intense.

“I’m concerned about her level of activity,” Dave said.

There were also possible medical issues. A breast cancer survivor, Carole had to forgo some political activities during the winter because she was run down and had an inner- ear infection. Both Carole and Dave have family histories of health maladies, including dementia and glaucoma.

For those reasons and because of their solid finances, McIntosh wanted to get the Lutnesses on their retirement journey. He recommended that Carole retire at the end of the year, giving her several months to adjust to the idea. This would also put more money into her retirement account at work and a Roth IRA.

McIntosh wanted Dave to retire four months thereafter when he qualified for Medicare benefits.

In addition to their savings, the Lutnesses’ retirement is secured by two pensions that Carole has coming from the county and a previous employer. McIntosh said the pensions, along with the couple’s Social Security payments, would give them $58,000 in annual income, adjusted for inflation over their lifetimes.

“Why are they delaying their retirement?” the financial planner asked. “They get so much unearned income.”

The Lutnesses have lived frugally, in part from necessity. In the 1990s, Dave was laid off four times within a five-year period from different jobs. Each time, the couple pared back, nixing cable, gardeners and housekeeping help.

Also, their commitment to the environment steered them toward a less consumptive lifestyle. To reduce their carbon footprint, they rarely used air conditioning at the house despite 100-degree Santa Clarita summers. The heat came in handy in another way because they line-dried their clothes.

When Carole’s job was closer to her home, she took the bus and walked to work to save gas. And Dave hasn’t bought a new car in a decade, even though his Toyota Corolla has more than 300,000 miles.

Their lifestyle helped give them the freedom to stop working and relax — most of their living expenses in retirement would be covered by pension and Social Security income. McIntosh said they could dip into savings as need be to fund hobbies and travel.

For their retirement, McIntosh budgeted as much as $20,000 a year for travel for the couple and boosted their entertainment budget to $2,400 from $500 annually. He’s also set aside $5,000 annually for Dave to fulfill a long-held ambition to go back to school and study history.

Although McIntosh would like to see Carole drop politics altogether, he recommended that she combine her sense of social justice with travel by taking trips organized by groups such as the Global Volunteer Corps that allow travelers to lend their talents to those in need overseas.

Meanwhile, McIntosh said the couple should reduce their annual political contributions to $2,000 so they could spend more on hobbies and travel.

The Lutnesses should make some adjustments to their investments, the financial planner said. Although they profess to be risk-adverse, most of their investments are in stocks, either directly or through mutual funds. That’s risky for people near retirement.

“There’s been no comprehensive approach to investing,” McIntosh said.

He recommended that the couple reallocate their savings into a more diversified and conservative mixture, putting 60% of their assets into bonds and money market accounts and the rest into stocks.

The Lutnesses have one grown daughter who is living on her own. She is divorced, but her former husband and her 13-year-old daughter live with her parents.

McIntosh recommended that the Lutnesses consider downsizing by selling their house. The couple said they probably wouldn’t do that until their granddaughter graduated from high school.

The financial planner said that when they sell the home, they could take about $380,000 of the proceeds and buy a smaller place. The rest of the money from the sale could be put aside to offset medical or long-term-care costs, if needed.

The Lutnesses were relieved and even shocked to learn that they could retire.

“To not retire now seems almost criminal,” Dave said.

Carole struggled to accept that their finances were so strong.

“It’s a come-to-Jesus moment,” she said. “I just don’t believe it.”

Carole still had qualms about switching to a more laid-back lifestyle. But as the couple talked in McIntosh’s office, visions of another way of living began to form. Dave said he’d love to travel, go to church again, read books and listen to poetry. Carole said she’d love to spend more time with her granddaughter, write and pursue her hobby of making documentary videos.

The couple penciled in a vacation in August during which they’d discuss how to spend their retirement years.

“I feel that whatever I do has to have purpose and meaning,” Carole said. “I’m not the country club type.”

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