Baby boomers calculate risks as they head into retirement

Jim Langerfeld inspects his truck while his wife, Frances, looks on. Approaching their mid-60s, the Langerfelds are considering buying a motel in Canada in retirement, instead of staying in Florida.

TAMPA, Fla. -- Frances and Jim Langerfeld know exactly how much they spent as newlyweds in August, 1968.

Rent for their house: $115. Groceries at Publix: $12.26. A suit for him: $62.68. It is all meticulously detailed in an orange budgeting book Ms. Langerfeld pulled from her garage.

The ledgers show the Langerfelds bought only three new cars over the last four decades, including a big white Dodge van that they drove for 300,000 miles. Their biggest expense, beyond their home, was private school and college.

Now that the children are grown, the Langerfelds -- he is 64, she is 62 -- are contemplating retiring as soon as next year. While they have lived frugally, amassing about $720,000 in savings, they have the same reservations that vex many Americans on the cusp of retirement. Can we really afford it? Will our standard of living fall? How much will we ultimately get for the house?

Mr. Langerfeld, an engineer for a construction company, said he still enjoyed his job -- and would not mind working a bit longer. For his wife, however, retirement cannot come soon enough.

"I don't want to die in my cubicle," said Ms. Langerfeld, who survived advanced breast cancer nearly seven years ago.

But the Langerfelds said they might have an ideal solution: buying a 10-room motel on an island, just off Maine in New Brunswick, Canada, where they already own half of a vacation home with friends. The motel typically generates about $25,000 in income a year.

Mr. Langerfeld, a master repairman, would keep busy maintaining the motel, while his wife, a record keeper, would handle the books.

"We figured it was a good investment," she said.

They discussed their situation with Kathleen Rehl, a financial planner and author in Land O'Lakes, Fla., who, as a 64-year-old widow, is thinking about phasing into retirement. She calculated their net worth at $1.2 million. Their only debts are $20,000 in education loans for a son and a $10,000 401(k) loan.

"Right now, they are standing at the abyss, and they have lots of risk in their life," Ms. Rehl said. She suggested selling the Tampa house first, then renting for two years while they still worked. Ms. Langerfeld did not dismiss that idea.

Here is what their income picture would look like: If they clear at least $400,000 from their Tampa home -- it is worth $502,000, according to Zillow, the real estate Web site -- and use the proceeds to buy the motel and their friends' share of the home, their $720,000 would remain intact. So Ms. Rehl estimated the Langerfelds would have $67,000 in income -- $38,000 from Social Security and nearly $29,000 from savings, assuming a 4 percent withdrawal rate. Since the bulk of their retirement money is in traditional Individual Retirement Accounts and 401(k)s, she said they would owe about $2,000 in federal taxes on that income.

Then there is their portfolio, where stocks, precious metals, and mining investments account for 72 percent of their money -- far too risky for their age. "I had to take the risk because we didn't have enough money to retire," said Ms. Langerfeld. "It has been a successful ploy."