John and Jane are a fictional couple, but the question is one I hear from real people all the time. They're 62, their house is paid off, and they've saved $1.5 million. They'd like to retire at 63 and start Social Security at 67, which we'll assume provides about $60,000 a year between them (all amounts in today's dollars). Is that enough? The account balance alone can't tell us.
What matters most is what their life costs. At $7,000 a month, plus about $12,000 a year for Medicare and supplemental coverage, their savings need to provide roughly $36,000 a year after Social Security starts, plus taxes. If they actually spend $10,000 a month, that gap becomes $72,000. Double. And they'll have drawn more from savings during the four years before Social Security, including two years paying for health insurance before Medicare. Those early years also raise questions about which accounts to draw from first and whether Roth conversions make sense, keeping in mind that extra income can reduce Marketplace health insurance assistance.
At $7,000 a month, there's a potential path worth exploring. At $10,000, we're asking a lot more of the same savings. Either way, I'd want to run full projections and test what happens when things don't go as expected. If you're getting close to retirement, learn more about working with us.
