I started working with a new family recently. Both were senior managers at large companies here in the Charlotte area, in their late fifties, and they had been great at saving money for a few decades. About fifteen minutes into our first onboarding visit, the husband set down his pen and said something I have heard more times than I can count.
"Ross, be honest with us. Could we be done working today? Or at least slow down and be around more for our grandkids? If we actually wanted to, is that on the table?"
His wife was nodding. They had been turning that question over privately for months. The numbers looked strong on the page, but neither of them could say with confidence whether what they had built was enough to carry them through the rest of their lives without ever earning another paycheck.
I’m not sure if you’d be surprised at how often I hear this question. Once people start thinking seriously about retiring, they start to realize that the change of pace, the ownership of their time, and sense of transition are appealing. Whether it’s grandkids, getting more time with your spouse, or however you fill in the blank… Suddenly, sooner sounds great, if the money works.
The honest answer is that it is almost never as simple as a single account balance, which is why it is so hard to answer on your own. There is a process to answering it well. I call it putting the facts on trial. It has four parts.
The Real Spending Number
Before we talk about what's in your portfolio, we have to talk about cost of living. A lot of people have a sense of what life costs, but they haven’t always verified that against their actual spending. We need the actual number across twelve months, including everything that tends to get left out. For a large portion of the families I sit down with, this number is higher than they expected.
Another point I emphasize is that spending often changes in retirement. When you’re working, most of your waking hours are filled with making money. It's why you spend more going out to dinner in the evenings or doing projects on the weekends. What about when you retire?
Suddenly, you are filling a lot more empty space, and for many people, a little spending goes a long way toward filling the time with activities. You can't always know what you'll want to do until you retire, given your day-to-day life, but I always expect the budget to increase a little bit along with the free time.
All said, we need to get your baseline spending number right. Without it, we can't realistically know how much income you'll need, and we can't know how to design your income across your different sources.
Guaranteed Income
This is money coming in every month regardless of what markets are doing. For most people in their late fifties and early sixties, that list is shorter than they had hoped. Social Security will eventually be on it, though the benefit may be significantly less over your lifetime than if you were to delay and lean more on your portfolio. There’s an analysis we model here to help you get an idea of the right balance for you. (That will be the next resource I send in two weeks).
We also look at whether a pension exists and whether a spouse's income counts if it continues. We just need the baseline of non-portfolio income sources. If nothing guaranteed is on that list, the full weight of funding the household lifestyle falls on the portfolio, which changes the math significantly.
Pulling From Your Portfolio
Many families start with something like the four percent rule, the idea that you can withdraw between 4% of your portfolio annually without depleting it over a long retirement. It is a reasonable starting point, but it’s completely impersonalized. I know many clients who safely pull more. I’ve also met a few families who just weren’t ready to retire because of how much they would have to withdraw from their investments.
What I am actually looking at is the gap between what the household spends and what guaranteed income covers. The portfolio has to fund that gap, reliably, for potentially thirty or more years. A few questions that shape that analysis:
Is your portfolio correctly allocated for someone who might retire very soon? A mix that worked during the accumulation years may carry more risk than is appropriate when there is no paycheck to absorb a bad stretch.
What does the account structure look like? A portfolio that is entirely in pre-tax accounts means every withdrawal is ordinary income. Having a mix of pre-tax, Roth, and taxable dollars creates flexibility to manage the tax impact of withdrawals year by year. You might be able to retire now, but you can potentially optimize for much better tax treatment by extending your runway by a little bit.
What is the sequence of returns risk? A significant market decline in the first few years of retirement, before the portfolio has had time to recover, can permanently impair a plan that looked fine on paper. How the portfolio is positioned heading into that transition matters as much as the total balance.
The goal is not just a number that looks large enough. It is a portfolio structured to fund the household reliably across a wide range of scenarios, not just the optimistic ones.
Flexibility
What does the plan look like under real pressure? Can spending come down without dismantling the life the household has built? A plan with no room to breathe is fragile in a way that a plan built with real contingencies simply is not.
Real contingencies look like these:
A spending category that could be reduced in a difficult market year without real sacrifice (not debt)
Home equity that could play a role in an extended bad stretch
Part-time work or consulting that would feel interesting rather than like a fallback.
None of those need to be certain. They just need to be real options that have been thought through in advance. Having done this for dozens of families, I firmly believe that the families who have been disciplined almost always discover they have more flexibility than the anxiety around this question suggested. What they needed was not a bigger number. They needed a clear, structured look at the picture they already had.
If you are within a few years of thinking seriously about any kind of transition, now is the right time to run this analysis.
If any of these is already on your radar, send me a message or schedule a time and we can look at the actual numbers together.
This material is for informational purposes only and should not be construed as tax advice. Please consult a qualified tax professional regarding your specific situation.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
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