If you're 64, you've saved $1.7 million, and you're getting ready to retire, the first question is probably pretty simple:
How much can you actually spend?
For the hypothetical couple in this example, the answer is about $9,000 a month after tax once Medicare begins.
But figuring out the spending number is only the beginning.
When to claim Social Security, which accounts to spend from, how to handle taxes in the first few years, and how to prepare for future care costs can matter just as much.
The important part is that none of these decisions stand alone.
Let's look at five decisions that can shape the retirement plan.
How much can you actually spend in retirement?
Meet Sam and Sally. They're both 64 and retiring this year.
They have $1.7 million in savings:
$1.25 million in traditional 401(k)s and IRAs
$300,000 in a taxable brokerage account
$150,000 in Roth accounts
They also own a paid-off home worth about $550,000.
Sally wants to travel while they're healthy and active. Sam is more cautious. He's uncomfortable with taking large withdrawals from the portfolio before Social Security starts.
Their planned spending comes to about $9,000 a month after tax once Medicare begins, including travel and the other things they want to enjoy.
The retirement plan could support closer to $10,000 a month, but $9,000 already covers what they need and want.
So that's where they start.
The goal is not to find the absolute maximum amount you can spend. Starting below the maximum gives them more room if markets are difficult early in retirement and makes it easier to increase spending later if things go well.
For Sam and Sally, $9,000 a month gives them that cushion.
A higher withdrawal rate early in retirement is not automatically a problem
During the first few years, Sam and Sally take a significant amount from their investments.
Before Social Security begins, their withdrawals are roughly 7% of the portfolio each year, including taxes.
That sounds high if you look at the percentage by itself.
But it is temporary.
Sally starts Social Security at 67. Sam waits until 70.
Once Sally's benefit begins, the amount they need from the portfolio falls. When Sam starts Social Security at 70, their combined benefits provide roughly $6,200 a month, and the portfolio withdrawal rate drops to around 3%.
The higher withdrawals in the early years are a bridge to Social Security.
Over the six years before Sam's Social Security begins, they withdraw about $650,000 from their savings. That's more than a third of what they started with.
Sam doesn't love seeing that money come out.
But those withdrawals are buying something: a larger Social Security benefit at 70, guaranteed for life and adjusted for inflation, along with a stronger survivor benefit for Sally if Sam dies first.
This is why a withdrawal rate should never be judged by the percentage alone. You need to know how long that withdrawal rate will last and what changes later.
Turn the portfolio into a retirement paycheck
One of the biggest changes in retirement is psychological.
While you're working, money shows up in your checking account every couple of weeks.
Then you retire, the paycheck stops, and suddenly every dollar you spend seems to reduce an investment balance.
Even when the retirement plan is working exactly as intended, that can feel uncomfortable.
So I like to recreate the paycheck.
For Sam and Sally, the same amount moves from the portfolio into their checking account on the same day every month.
Behind the scenes, the money comes from the portfolio as a whole. Interest and dividends are used first, and investments are sold and rebalanced as needed.
The monthly amount is not fixed forever.
Risk-based guardrails determine when spending should change.
At $9,000 a month, their investments would need to fall about 25% before the plan calls for the first reduction in spending. If they started at $10,000 a month, that first adjustment would come after a decline of roughly 18%.
Either way, the first reduction is only about 5%.
And if the plan improves, spending can go back up.
The goal is not simply to protect the portfolio at all costs. It is to give retirees a framework that allows them to spend confidently when the plan supports it and make adjustments when necessary.
Coordinate Social Security with the rest of the plan
For this couple, Sally claims Social Security at 67 and Sam waits until 70.
Sam's projected benefit at 67 is $3,400 a month.
Waiting until 70 increases it by 24%, bringing the benefit to approximately $4,216 a month.
Waiting has a real cost.
He gives up three years of $3,400 monthly payments, or roughly $122,000.
If he claimed at 67, they would come out ahead during those early years.
But the longer the larger benefit is paid, the more valuable waiting becomes.
There is also a survivor consideration.
When one spouse dies, the smaller Social Security benefit goes away and the surviving spouse keeps the larger benefit.
If Sam dies first after claiming at 70, Sally would keep his $4,216 monthly benefit instead of the $3,400 benefit he would have received at 67.
That is an additional $816 per month for the rest of her life.
This is why I would not look at Social Security strictly as a break-even calculation. For a married couple, the survivor benefit belongs in the decision too.
Decide which accounts to spend from and when
A common retirement strategy is to spend the taxable brokerage account first and leave traditional retirement accounts alone for as long as possible.
That can feel efficient.
But the traditional IRA keeps growing, and eventually required minimum distributions begin.
In Sam and Sally's case, following that approach leaves them with approximately $1.6 million in their traditional IRA at age 75 and a first required withdrawal of roughly $64,000.
Instead, the strategy in this example uses their lower-income retirement years deliberately.
Until the year they turn 65 is behind them, they use the brokerage account to help keep income lower while they are buying health insurance through the ACA marketplace.
Beginning at 66, they start converting money from their traditional IRA to a Roth IRA and fill the 12% federal income tax bracket on purpose.
That means paying some tax sooner.
But look at what happens later.
By age 75, their traditional IRA is projected to be about $950,000 instead of $1.6 million, and the first required minimum distribution falls from approximately $64,000 to $39,000.
Across the projection from age 64 through 95, estimated federal income taxes fall from roughly $525,000 without the conversions to about $360,000 with them.
That's approximately $165,000 less in projected federal income tax.
That does not mean everyone should automatically do Roth conversions.
The point is that the years immediately after retirement can create tax-planning opportunities that disappear later.
Which account you spend from today can affect your tax bill many years from now.
Plan carefully around the transition to Medicare
Sam and Sally retire at 64, before they are eligible for Medicare.
They budget about $1,800 a month for health insurance until Medicare begins.
Once they reach 65, their estimated Medicare premiums, prescription coverage, and supplemental insurance total around $900 a month for the two of them.
That transition affects both spending and tax planning.
While they are purchasing health insurance through the ACA marketplace, keeping taxable income lower can help preserve premium assistance.
That is why they rely more heavily on the brokerage account during this period and wait to begin the Roth conversion strategy.
Once the ACA subsidy years are behind them, they have more room to deliberately recognize taxable income.
Healthcare, taxes, and withdrawals are not separate retirement decisions. Each one affects the others.
Have the long-term care conversation before you need it
The fifth decision is not as comfortable to talk about, but it still needs to be made.
What happens if one of you needs help later in life?
The costs can be significant.
In the example used in the video, assisted living costs about $6,200 a month nationally and a private nursing home room costs about $10,800 a month. Three years of assisted living would cost roughly $223,000 at today's prices.
There are three basic ways to prepare.
You can plan to pay for care from savings.
You can transfer the risk to an insurance company through traditional long-term care insurance or a hybrid policy.
Or you can share the risk by combining insurance coverage with your own savings.
For Sam and Sally, their assets and paid-off home give them resources that could be used to fund care. But that does not eliminate the need to test the plan and decide ahead of time where the money would come from.
Which assets would pay for care?
Would the house eventually become a financial backstop?
Where would each spouse want to receive care?
And who would make decisions if one of them could no longer do so?
Those questions are much easier to answer before a crisis.
The retirement decisions need to work together
Your numbers will not look exactly like Sam and Sally's.
You may have more money in pretax accounts. One spouse may be younger. You may want to claim Social Security earlier. Your spending needs may be completely different.
But the larger lesson is the same.
How much you spend affects how much you need from the portfolio.
Social Security timing affects those withdrawals.
Withdrawals affect taxes.
Taxes affect which accounts you should use.
Healthcare affects when certain tax strategies make sense.
And all of it needs to account for the possibility that markets, spending, or life itself will not unfold exactly as planned.
Sam can be more comfortable with the large withdrawals early in retirement because he understands what they are buying.
Sally can spend on travel now because the plan shows that they can afford it.
The decisions work because they connect.
The best retirement plan is not a collection of separate decisions.
It is a plan where the pieces work together.