How Much Can I Expect To Spend In Retirement with a $2.2 Million Portfolio?

As you approach retirement with a well-funded portfolio, critical questions arise: "When can I retire?" and "How much can I spend?" For many, wealth accumulation has been the focus for years, but as retirement nears, it's crucial to shift toward planning how to turn those savings into a comfortable retirement.

Take Tommy and Monica, a couple in their early 60s with a $2.2 million portfolio. After years of diligent saving, they realized they hadn't planned the specifics of their retirement. With annual incomes of $82,000 and $215,000, respectively, and no pensions, they initially thought they'd retire at 70 to maximize Social Security. However, they wanted to retire earlier to enjoy travel and other activities while still in good health.

Their plan needed to consider healthcare costs, home maintenance, and vehicle replacements. By evaluating their assets and income, they found they could retire at 65 without sacrificing financial security. Planning helped them see they had the flexibility to retire earlier, spend more now, or continue working with increased lifestyle spending. For those nearing retirement, it's essential to move beyond saving and start planning how to live in retirement, ensuring your finances align with your lifestyle goals.

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⏱Timestamps:⏱
0:00 - Meet Tommy and Monica
2:03 - Rethinking retirement age
3:59 - A look at income
5:18 - Retirement cash flows
8:27 - Total outflows
9:10 - Portfolio projection
11:50 - Options to achieve successful outcome
13:55 - Scaling back to live today
16:19 - Optimizing other areas

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Worried about retirement?

[jameschaves]

I love that 3rd option James. I’m going to do that, I’m 54 with app. $2.1 million saved. I’m going to stop saving so much and start spending now!!! More dinners and maybe that sports car I’ve always wanted. Why wait until I’m 70 to buy that car!!!

[JeffWilliamfick]

Perfect topic. I'm 3 years in retirement @57, did a good job in the accumulation phase with net worth of $3M+. The problem is I haven't spent any of it despite knowing I have no concerns of running out of money. Some minimalist traits that helped me save are not easily cast aside. I sense I'll be dead and gone with plenty of money left behind, but that was never a goal.

[mikewarby]

They've done a great job of saving a nice sum. Planning to work until 70 with a $2.2M today wouldn't work for me. Expenses not too bad but especially their mortgage is a killer until 74 years is concerning. Nobody knows what their health will be tomorrow.
Me personally would do whatever is needed to retire before 70.
Good analysis and video. Thanks

[hansangb]

Boy, these videos completely changed my outlook on retirement. So very useful. Thank you.

[aquicktake]

I couldn't imagine waiting until 70 to retire. There is no way in hell that I could do then what I am doing now at mid 50s - my enjoyment and capabilities to fully engage in my retirement would have been severely limited. Let alone, all the stories that I hear of people on living 2-5 years after they retire because they waited so late. What a shame to have worked for 95% of your life to get down to the wire and only have a handful of years left. Retire now.

[rayanderson]

Thank you. This is the main reason I scaled back on savings the last several years. The money saved decades ago is doing all the heavy work. Thanks again Great scenario.

[marcorios]

Yes I work for LAUSD and his videos are very enlightening. Helps educate me tremendously. Thank you James.

[MarleneYoung-dyln]

Good point! I started the initial plan of retiring later, but reconsidered after my recent retirement at 64 yo while I am still healthy. My children are doing well career wise and they recognize my efforts on saving for retirement, so they rather I enjoy spending my time to be happy instead of saving money for inheritance for them. Knowing this has allowed me to retire without guilt. The difficult part is withdrawing and spending the saved income. 😂 I enjoy watching your Youtube because it reinforces my decision and allows me to learn something I might not have been aware of. Thank you!

[claytonspann]

My recommendation is to ease into retirement, stop working full time move to part time, free up space for travel and things you want to do while you’re in the go go years.

[bobcaldwell]

This is a great video. I retired at 70 and my wife at age 66. We were able to utilize the spousal benefit to supplement her retirement income and an important thing happened by accident. Something we hadn’t anticipated. Her school district participates in the state teacher retirement program AND social security. Many school districts do one or the other but not both. So end result, she gets two retirement benefits. Teachers especially need to consider this. If their school doesn’t fund a retirement fund or pay into social security then they should seriously consider that 403b that you mentioned and fund it at the level their social security or retirement fund should have been.

Also, I don’t think you mentioned but when you retire your retirement deductions and social security contributions stop. So your income that was funding that can be much less. Medicare + a supplement (Part G) can be had for a $200/year deductible/max out of pocket. If you sign up for the supplement within 6 months of filing for Medicare they CANNOT rate you (higher premium) or refuse you for pre-existing conditions. Plus you can go to any doctor you choose rather than having to stay within some network that your doctors may not be in. Stay away from Medicare Advantage! There are people who specialize in getting people to sign up for Medicare and supplements and there service is paid for by the insurance companies. Let them help you get enrolled. It’s a one time thing. The problem is Medicare Advantage SEEMS less expensive and includes things like Silver Sneakers and prescription drug coverage but it’s a trap. Later if you decide you want to go with Part G they can turn you down or rate you for pre-existing conditions. “Pay me now or pay me later”.

Finally, QCDs (qualified charitable contributions) for charitable recipients. This “supercharges” your standard deduction because the QCD comes out of your retirement fund TAX FREE so your after tax cash flow goes further than if you make those charitable contributions from your monthly cash flow.

If you can pay off your mortgage before retiring then it is much easier to live on your retirement cash flow so all of that needs to be taken i to consideration. We didn’t have the benefit of this software or advice and both deferred social security until 70 but we’re in relatively good health and it worked out but in reality I probably could have retired earlier and been ok. Don’t look back!

[ElisaAvigayil]

Why would a teacher want to keep going until age 70? Teaching is exhausting. And at a private school, no less, with terrible pay and no pension. Another option not mentioned is if Tommy retires today, gives up his not wonderful $82K a year salary, and Monica continues to work and carries the health insurance until age 65, when Medicare picks up. Monica could likely renegotiate with her firm when she reaches age 60 to reduce her hours and her salary but have them continue to pay health care. Also, even if they stop contributing the max to their 401K / 403B, it's silly to contribute zero - they are missing out on free money from their employer. They should contribute the match (which is usually around 3%), but nothing more.

[sklegg]

The audio/voice processing on this video sound really good.

[buckwildz]

Great video. The case studies are great videos from which to learn. I love how James picks different financial scenarios but also focuses on one aspect of the financial plan with each one, ie budget, heathcare, roth conversions, etc. One thing with option 3 is this though: saving less and spending more means inflating lifestyle, which means that in retirement they will likely want to spend more than they thought they would when compared with their current lifestyle.

[jimranney]

Really nice job on the video. A clear, concise step-by-step walkthrough. Well done!

[jadexu]

Why do they have to work until 70 with over two millions in retirement ?

[markb]

Thanks James for another very informative video!

[whitleyca]

Cannot thank you enough, James. All of your content is so good and so relevant. This one here for Tommy and Monica is your best yet (IMO)!

[kamcg]

No point be the richest person in the graveyard. Tomorrow is not promised to anyone and enjoying the financial provisions you have made is a priority.
The reality is retirement falls into a number of phases, 1)Go Go years where you are more active and may want to travel 2) Slow Go years where you still want to do things but at a slower pace 3) No Go years where even less activity and more staying local and enjoying your time. These phases need to budgeted into retirement spending. No point putting $20K a year in a budget for travel at 85+ when you have neither the energy or desire to do that. Plenty of data available to show how spending changes in retirement.
PS. In this example the couple will sleep a lot better without a mortgage, pay it off today. Its not a pet to keep around!

[placesonthelist]

Why not retire now or 62? I retired at 59, 9 years ago with inflation adjustment the same amount of money and similar spending. I am doing just fine and travel about 6 months a year.

[bakntheday]

62 seems like a good number. Doesn't matter if you would draw more SS if your dead or out of steam. 😎