Ready For Retirement
Ready For Retirement
We're 62 with $2M: Retire Now or Wait?
The real question isn’t “Can we retire?”, it’s “On how much, and when do the big costs fade so our savings can breathe?”
In this episode, James walks through one couples' retirement plan to show how timing, travel, and housing choices can turn a shaky forecast into a confident glidepath.
He highlights the income canyon most people miss (the stretch between retiring and starting Social Security) where withdrawals rise sharply, then ease once benefits begin and the mortgage is gone. By front-loading travel for the first ten “go-go” years, delaying Social Security, and planning a mid-70s downsize, they achieve nearly the same security as working three extra years without giving up their best health and freedom.
James explains why the 4% rule can mislead, how to align income with evolving expenses, and what it takes to keep a plan sustainable through market swings and lifestyle shifts.
Key Takeaways:
• The income canyon between 65–70
• Smarter spending vs. working longer
• Front-loading travel without straining savings
• The “retirement spending smile” in action
• When downsizing adds flexibility and security
If you’re in your 60s wondering when your savings can finally breathe, James lays out a clear, practical path to a confident “yes” on retirement.
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Advisory services are offered through Root Financial Partners, LLC, an SEC-registered investment adviser. This content is intended for informational and educational purposes only and should not be considered personalized investment, tax, or legal advice. Viewing this content does not create an advisory relationship. We do not provide tax preparation or legal services. Always consult an investment, tax or legal professional regarding your specific situation.
The strategies, case studies, and examples discussed may not be suitable for everyone. They are hypothetical and for illustrative and educational purposes only. They do not reflect actual client results and are not guarantees of future performance. All investments involve risk, including the potential loss of principal.
Comments reflect the views of individual users and do not necessarily represent the views of Root Financial. They are not verified, may not be accurate, and should not be considered testimonials or endorsements
Participation in the Retirement Planning Academy or Early Retirement Academy does not create an advisory relationship with Root Financial. These programs are educational in nature and are not a substitute for personalized financial advice. Advisory services are offered only under a written agreement with Root Financial.
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If you're in your early 60s with a couple million dollars saved for retirement, you're probably starting to ask yourself, is now the time to retire? Should I do it now? Should I wait till 65? What's the right decision for me? Well, that's exactly what we're gonna show in today's case study. We're gonna show you how these seemingly little decisions can have huge implications over the duration of your retirement. And instead of just telling you about it, I'm gonna show you an actual case study to illustrate this. So what we're gonna do is we're gonna take a look at Michael and Lisa's plan. This is Michael and Lisa. Michael and Lisa have a couple million dollars saved between their retirement assets. They have a joint investment account, so a brokerage account here. They have a 401k, Lisa's IRA, Lisa's Roth IRA. You can see their ages today are 62. They have a couple million dollars. They also have about$900,000 or so of equity in their home. Now, as of today, that's equity, that's value, but it's not necessarily something they're gonna live on in retirement, at least not initially. So they have equity in their home, they have a couple million dollars in their 401k, and they're asking themselves, can we do this? Can we retire? So they want to retire at 65. That feels like the age they're supposed to do it. Medicare kicks in, that seems like a traditional age to do so. So that's what we're starting with to see is 65 the right age to do so. And their expenses, if we look at a simple projection of what they're spending right now, are$14,000 per month. Now, don't get too tied up on the specific expenses. Your expenses might be$4,000 per month, or your expenses might be$24,000 per month. Regardless of what they are, look at the framework that we're gonna go through as we walk through this. So their core expenses are$14,000 per month. We have a separate travel budget right here. I'm keeping that as a zero right now, and you'll see why in just a couple minutes of why I'm doing that. But$14,000 per month, which to them covers their travel. They spend about$50,000 per year,$48,000 per year or so on travel. And the other$10,000 or so per month is actually core living expenses for them. Then beyond that, they have their medical expenses. If they were to retire pre-Medicare, they would need to be able to plan for$9,600 per year for each of them for medical costs. After age 65, they have their Medicare Part B and part D premiums. And then they're estimating an additional$4,000 per year of out-of-pocket costs beyond that. So these are their expenses, these are their goals. Their income today is their salaries. So they make a healthy income today. This is supporting all of their needs. When they retire, of course, that goes away. But Michael will have his social security at age 70. You can see we're planning for$4,000 per month for Michael. Lisa will have her benefit at$70,000 of$3,900 per month. And then they expect an inheritance. There's probably something there, but we're showing zero. We want to see can you retire? Can you make this happen regardless of whether or not you receive anything in an inheritance? Then we can illustrate what would the actual impact of that inheritance be. But for now, we're planning for zero so that we don't bake that into their initial plan, planning scenario. So that's their income. They're both saving 10% to their 401ks. And what we want to know is, are they on track to do all this? So I'm going to go to their retirement tab and go to cash flows. The cash flows is the lifeblood of everybody's retirement strategy. If you want to know if you can retire, the question is: do you have enough income flows coming in to meet your expense outflows going out? Here's how we look at this for them. For the next few years, Michael and Lisa have their salary. So they're good. That salary comes in that meets all their expenses, but then that goes away. And you can see a whole bunch of zeros here from age 65 until age 70. And at age 70, what happens is their social security benefits kick in. But in the meantime, there's nothing that we're projecting in income outside of any money they're pulling from their portfolio. They do have expenses though. You can see these expenses right here. This is the$14,000 per month that we're planning for. In addition to that, we are showing mortgage payments separately. The reason I'm showing that separately is because that$14,000 per month, that's their core lifestyle expenses. That's going to continue on a go-forward basis. Their mortgage, their property taxes, the insurance piece of this will last forever, but the principal and interest piece at some point gets paid off. And you can see for them that gets paid off right around age 70, and we no longer need to plan for that. But, anyways, if we go back to the expenses, we can start to see how their expenses are projected to play out each year. Core expenses, taxes, if you add all this up, the total outflows is the combination. This is the amount Michael and Lisa need to pay taxes, to pay their mortgage, to have the equivalent of$14,000 per month in today's dollars left over to spend throughout their retirement. This net flows is what I want to focus on for them. This shows how much do they need to pull from their portfolio to supplement their income sources. Their income sources in these first five years, nothing. There's no salary, there's no social security. So that means if their total outflows are 252,000, that full 252,000 must come from their portfolio. But here's the interesting thing with that. And this is actually where some people get tripped up when they think about retirement via can I spend 4% per year of my portfolio or 5% per year of my portfolio, thinking that it's some consistent amount they're going to be pulling. Well, look at Michael and Lisa. It's an amount that actually starts to grow quite large for the first few years, but then that amount gets cut by almost half. And the reason it gets cut by almost half isn't because all of a sudden they stop spending. It's because Social Security kicks in for both of them. And by the way, it's age 70. So they both have strong benefits, and their mortgage is paid off. So it's a combination of outside income sources increasing while simultaneously their expenses are decreasing. So the pressure that's put on their portfolio drops pretty dramatically here. But as we look at all of this, the question is: can their portfolio support this? We know they have a couple million dollars on their portfolio today. We know they're saving about 10% per year towards their 401ks on a go-forward basis. Are they projected to be in a position that they can support pretty significant withdrawals in those early years? That's where we go to this page right here to see. Here's what that's projected to look like for them. Here's their portfolio today, that couple million. They save, they grow, they save, they grow, they retire at the end of their 64th year, so going into their 65th year, and they gradually spend their assets down. Now, they have enough to meet their needs, but not all the way throughout their retirement. And you see they're projected to run out sometime in their 80s. Now, we of course don't know how long they're gonna live, but also we don't know if there's gonna be a major market downturn. There likely will be a major market downturn sometime during their retirement years, which could increase or magnify the impact of this drawdown for their retirement years. If we look at their probability of success, it's not good. It's not a high probability of success. It's not something that Michael and Lisa are gonna look at and have a really high degree of confidence saying, yeah, we're good to go, we're gonna retire at 65. So that's where we started playing with different options. Their first inclination was to say, okay, well, if that doesn't work, then it probably means we need to work longer. What if it's not 65? What if we both retire at age 68? What does that mean? Well, we can refresh their projection here and we can see the impact of that. Working three extra years has a pretty significant financial impact. The probability of success goes from 24% to 65%. So that looks good on paper, but here's what that doesn't take into account is those are the three best years in terms of the health they're gonna have, the energy they're gonna have, the vitality they're gonna have. So that might be necessary, but every year you work longer, yes, it helps the financial side of things, but what does it take away from your ability to actually enjoy and do the things you want to do in retirement? That's where financial planning comes in. What's the balance of being financially prepared without risking too much of working too long, saving too much that you miss life along the way? Now, by the way, if you want to run your own projections, you can get access to the same exact software in the Retirement Planning Academy. Link is in the show notes below. But as we go back to this, hold this in your mind. Think of this that yes, if they work three more years, they're good, but that shouldn't be the first thing that we looked at. I'm gonna reset this for a second. And if you recall, I mentioned that$14,000 per month is what they want to spend. But that was just looking at a snapshot in time right now. And I mentioned that of that$14,000,$4,000 was really for travel, which comes out to$48,000. We'll round it to$50,000 per year for travel. And the remaining$10,000 is what they actually want to spend. So in conversations, do you think you're gonna be spending$50,000 per year for travel in your late 70s and your 80s and beyond? The answer is no. The answer is really can we spend that amount for the first 10 years or so of retirement? So that's why I put this card here. I said, what if we take that travel budget? Instead of making it zero, but you can see here that goal ends after 10 years. What if we do this? What if we take$4,000 per month from here and we put that into their annual travel budget? So in other words, nothing changes for the first 10 years. You're still spending everything you want to do, but from 75 and beyond, you're not spending the same amount on travels. So if we refresh the plan with these numbers here and plan for the same spending for the first 10 years, but then less you're spending 10 years out, what you see is things look the exact same for the next 10 years because again, nothing has changed with how much they're actually spending there. What does change is from 10 years and beyond, their portfolio is projected to stay more stable. Their portfolio is projected to grow more. Now, this is in no way a guarantee. This is assuming some average rates of return of about 6.5% per year with our portfolio value throughout retirement. Not a guarantee, simply an assumption that we're making to illustrate some potential outcomes. Their probability of success, by the way, goes from 24% to that same 65%. So that was the same exact probability of success that they had if they had worked three more years. So put off retirement from age 65 to 68, or in other words, equal outcomes, equal impact of working for three more years and not retiring versus simply dialing in the budget to say what's a more accurate, what's more realistic assessment of how much we might actually spend. Now, here's another thing that could be a potential huge benefit for people's retirement, but isn't always taken into account. When you look at these numbers right here, all these numbers are assuming, so let's assume that 10,000 per month for core living expenses. We're assuming that goes up by inflation. So 3% every single year is the assumption that we're making here. In reality, there's something called the retirement spending smile, where the average retiree, you talk about the phases of retirement, the go-go years, the slow go years, the no-go years, they're not as sharp and distinct as that. It's not like for a few years your spending is here and then it drops here and then it goes up again because of increased medical expenses. It's more of a gradual progression. What research actually shows is that it's more of this gradual projection where if inflation's increasing by 2% per year, your spending as a retiree is more likely to increase by 2% per year if you're that average retiree. So you're still giving yourself cost of living adjustments, but as you start to do less and less over the course of your retirement, your spending's not quite keeping up with inflation. Not because you're sacrificing, but because you're just not doing as much in your 80s as you were in your 60s. So if we look at that and say, well, what would the impact be of not just adjusting our spending for inflation, but adjusting it based upon this retirement spending smile, increasing spending at 2% if inflation increases at three, you can see the probability of success here starts to get pretty high. Let's take this one step further. We showed that Michael and Lisa have almost a million dollars of equity in their home. They've got a great home right now, that's where they raise their family. They don't know that they're gonna spend or that they're gonna live there forever. In fact, one thing we modeled out is we said, what if you downsize your home at some point? If the value today is about 1.1 million, what if in about 15 years you downsize to something that's worth$700,000? So they're 62 years old today, so this means in their mid-70s, they're downsizing. What does that look like? Well, if we illustrate that, what we're gonna see is it's going to have a pretty significant impact on their plan. You can see how dramatically their probability of success has increased without that much of a change. It's simply more accurate input into what we're planning for. So this is a point that I want to illustrate. Going back to those of you who are in your early 60s with a couple million dollars, can you retire? The answer almost certainly is yes. The bigger question is on how much? How much can you spend? What do you want your lifestyle to look like? Depending on where you are in the country, depending upon your needs and your desires, that could be a very low number, that could be a very high number. So the question is it depends. But what you must understand is what does your cash flow look like? How do you convert that portfolio value into an income stream? How do you take that portfolio and understand what can this create an income, and how does that compare to the expenses that I have? Take it a step further to where you should actually be thinking, how do I treat the income from my portfolio as just one income source stacked on top of social security, stacked on top of potential rental income, pension, whatever other income sources you have, to say how do these total income sources compare to these total expenses? And how might these total expenses change throughout my retirement if I travel more or less at the beginning, if I start to spend less as I age, if I have goals that maybe aren't consistent, but maybe I want to support a child's education or wedding or grandchildren or whatever that might be. When you can build a plan that shows you how much your portfolio can create in income and how that compares to the actual expenses you personally want to have throughout retirement, that's what's going to give you the clarity to understand can you retire at your age with your given amount of assets?
