actual-retirement-calculation

Last Updated: November 2025

Current Retirement Plan Summary

Pre-Retirement

• Annual Expenses: $112,090

Retirement (at age 65)

• Annual Expenses: $89,672
• Tax Rate: 25%
• Required Gross Income: $119,562.24
  • Calculation: 119,562.67

Income Sources in Retirement

Social Security Analysis

Social Security B (Husband): $41,808/year

This amount corresponds to:

• Claiming age: 65
• Monthly benefit: $3,484
• As percentage of FRA: 86.7%

Full benefit breakdown:

• Full Retirement Age (67): ~48,216/year)
• At age 65 (current plan): 41,808/year)
• Reduction: 13.3% permanent reduction

Social Security A (Wife): $24,000/year

This amount corresponds to:

• Claiming age: 65
• Monthly benefit: $2,000
• As percentage of FRA: 86.7%

Full benefit breakdown:

• Full Retirement Age (67): ~27,732/year)
• At age 65 (current plan): 24,000/year)
• Reduction: 13.3% permanent reduction

Note: This is slightly lower than the calculated 24,048/year). The difference could be:

• Conservative estimate in financial plan
• Different earnings history than assumed
• Rounding in the calculation

Alternative Claiming Strategies

Current Plan: Both Claim at 65

Total starting pool needed: See calculation below

Alternative 1: Both Wait Until 67 (FRA)

Benefits of waiting to 67:

• $10,140/year LESS from portfolio
• No permanent 13.3% reduction
• Better survivor benefits

Costs of waiting to 67:

• Must fund 2 extra years from portfolio (ages 65-67)
• Delayed gratification

Alternative 2: Husband Waits to 70, Wife Claims at 67

Ages 67-70 (3 years gap):

• Wife’s SS: $27,732/year
• Rental: $18,000/year
• Total: $45,732/year
• Need from portfolio: $73,830/year
• Total portfolio draw (3 years): $221,490

After age 70:

• Combined income: $105,560/year
• Retirement need: $119,562/year
• Portfolio need: Only $14,002/year!
• Could potentially increase spending or stop portfolio withdrawals entirely

Portfolio Starting Pool Calculations

Scenario 1: Current Plan (Both Claim at 65)

Need from portfolio: $35,754/year

Using same parameters as before:

• Annual withdrawal: $35,754
• Years: 35
• Return rate: 6%
• Legacy goal: $500,000

Calculation:

PV of Annuity = $35,754 × [(1 - 1.06^-35) / 0.06]
PV of Annuity = $35,754 × 14.4982
PV of Annuity = $518,344

PV of Legacy = $500,000 / 1.06^35
PV of Legacy = $500,000 / 7.6861
PV of Legacy = $65,052

Total Starting Pool = $518,344 + $65,052 = $583,396

Starting Pool Needed: $583,396

Scenario 2: Both Wait to 67

Need from portfolio: $25,614/year

But: Must also fund 2 gap years (ages 65-67)

Gap year funding:

• Need per year: 18,000 (rental) = $101,562
• 2 years: 203,124

Starting at age 67 (after gap):

PV of Annuity = $25,614 × [(1 - 1.06^-33) / 0.06]
PV of Annuity = $25,614 × 14.2302
PV of Annuity = $364,514

PV of Legacy = $500,000 / 1.06^33
PV of Legacy = $500,000 / 7.2510
PV of Legacy = $68,956

Portfolio needed at 67 = $364,514 + $68,956 = $433,470

Total starting pool at 65:

Gap years: $203,124
Pool at 67: $433,470
Total: $636,594

Starting Pool Needed: $636,594

vs Current Plan: SAVES 636,594 = -$53,198

Wait, that’s MORE! The gap years cost more than the savings from reduced withdrawals.

However, consider lifetime benefits:

• From age 67-100 (33 years): Save 334,620 total
• Gap years cost: $203,124
• Net lifetime savings: $131,496

Plus better survivor benefits!

Scenario 3: Husband to 70, Wife at 67

Gap years (ages 65-67):

• Need: 203,124

Gap years (ages 67-70):

• Wife’s SS: $27,732
• Rental: $18,000
• Total: $45,732
• Need: 45,732 = $73,830/year
• 3 years: 221,490

Total gap funding: 221,490 = $424,614

Starting at age 70:

Need from portfolio: 0 if you accept lower legacy)

PV of Annuity = $14,002 × [(1 - 1.06^-30) / 0.06]
PV of Annuity = $14,002 × 13.7648
PV of Annuity = $192,722

PV of Legacy = $500,000 / 1.06^30
PV of Legacy = $500,000 / 5.7435
PV of Legacy = $87,057

Portfolio needed at 70 = $192,722 + $87,057 = $279,779

Total starting pool at 65:

Gap years: $424,614
Pool at 70: $279,779
Total: $704,393

Starting Pool Needed: $704,393

Comparison Summary

Rental Income Consideration

Current assumption: 1,500/month)

Important questions:

1. Is this net income (after expenses, taxes, vacancy)?
2. How long will this continue?
3. What happens if you sell the rental?
4. Is this guaranteed for 35 years?

Impact if rental income stops:

Assuming rental stops at some point, you’d need more from portfolio:

Starting pool needed (no rental):

PV of Annuity = $53,754 × 14.4982 = $779,394
PV of Legacy = $65,052
Total = $844,446

This is very close to the original $869,026 we calculated!

Tax Optimization Opportunities

Current plan assumes 25% tax rate in retirement

Social Security Taxation

Your combined income will determine SS taxation:

Provisional Income = AGI + Tax-exempt interest + 50% of SS benefits

Combined SS: $65,808
50% of SS: $32,904

Provisional Income = $35,754 (portfolio) + $18,000 (rental) + $32,904 (50% SS)
Provisional Income = $86,658

For married filing jointly:

• 44,000: Up to 50% of SS taxable
• Above $44,000: Up to 85% of SS taxable

You’re well above $44,000, so 85% of SS is taxable

Taxable SS = $65,808 × 0.85 = $55,937
Portfolio income = $35,754
Rental income (net) = $18,000
Total taxable income ≈ $109,691

At 25% effective rate: ~$27,423 in taxes

This seems to match your calculation:

$89,672 in expenses + $27,423 taxes = $117,095 total need
(Close to your $119,562)

Potential Tax Savings Strategies

1. Roth conversions before retirement

   • Convert traditional IRA to Roth while working
   • Reduces taxable income in retirement

2. Draw from Roth accounts first

   • Tax-free withdrawals
   • Reduces provisional income
   • Less SS taxation

3. Tax-loss harvesting

   • In taxable accounts
   • Offset capital gains

4. QCDs (Qualified Charitable Distributions)

   • After age 70.5
   • Donate from IRA directly to charity
   • Reduces AGI and provisional income

Recommendations

If You Stick with Current Plan (Both at 65)

Starting pool needed: $583,396

Pros:

• Lower starting capital needed
• Immediate income at 65
• Certainty of cash flow

Cons:

• 13.3% permanent SS reduction
• $35,754/year portfolio withdrawals for life
• Lower survivor benefits
• Higher portfolio depletion risk

Alternative: Both Wait to 67

Starting pool needed: $636,594

Pros:

• No SS reduction (full 100% benefits)
• Only 10k/year)
• Better survivor benefits (+$6,408/year)
• Lower long-term portfolio depletion risk

Cons:

• Need $53k more at start
• Must fund 2 gap years
• Delayed gratification

Breakeven analysis:

• Extra capital needed: $53,198
• Annual savings: $10,140
• Breakeven: 5.2 years
• After age 72, this strategy is better

Best Overall: Husband to 70, Wife at 67

Starting pool needed: $704,393

Pros:

• Excellent survivor protection ($59,828/year)
• Lowest long-term portfolio draw ($14,002/year)
• Could potentially eliminate portfolio draw entirely
• Maximum Social Security optimization

Cons:

• Highest starting capital ($121k more)
• Complex coordination
• 5-year gap funding needed

This is best if:

• You can afford the extra $121k
• Life expectancy is long
• Survivor protection is priority
• You want maximum flexibility

Action Items

Immediate (Next 3-6 Months)

1. ✅ Verify SS estimates - Create MySocialSecurity accounts
2. ✅ Review rental income - Is $18k/year sustainable for 35 years?
3. ✅ Assess current portfolio - How much do you currently have saved?
4. ✅ Consider tax optimization - Roth conversions while still working

Near-Term (1-2 Years)

5. ✅ Model different scenarios - Run detailed projections for each strategy
6. ✅ Evaluate health status - Impacts claiming age decision
7. ✅ Review expenses - Can retirement expenses be reduced below $89,672?
8. ✅ Emergency fund - Ensure 6-12 months expenses in cash

Before Retirement (Ages 62-64)

9. ✅ Finalize claiming strategy - Make decision 2 years before
10. ✅ Maximize final years - Boost SS benefits with higher earnings
11. ✅ Review rental property - Keep or sell before retirement?
12. ✅ Healthcare planning - Bridge to Medicare at 65

Key Insights

1. Your rental income is valuable: $18,000/year reduces portfolio needs significantly

2. **Current plan needs 869k originally calculated

3. Waiting to 67 costs more upfront (10k/year)

4. Social Security is heavily taxed: At your income level, 85% is taxable

5. Survivor benefits matter: Waiting increases survivor benefits by 18k/year

6. You’re in good shape: With 704k, you can retire comfortably

Excel Formula for Your Calculation

=PV(0.06, 35, -35754, -500000, 0)
Result: $583,395.96

This confirms the $583,396 needed for your current plan.

Note: All calculations assume 6% average return and $500,000 legacy goal. Adjust based on your risk tolerance and actual portfolio performance.