Be Careful: Retiring At 62 With $2 Million Means Burning Through $380,000 Before Social Security Even Starts

A married couple—ages 62 and 60—sits on $2 million in retirement savings, a paid-off $650,000 home, and guaranteed future income totaling $82,000 annually (Social Security at 67 plus a $24,000 pension starting at 65). They currently spend $68,000 per year but want to spend $95,000 to fund travel and healthcare. The tension: spend more now and risk depletion, or live modestly and leave a seven-figure estate they may not intend.

The Core Financial Reality

This couple faces a classic retirement dilemma—balancing longevity risk against lifestyle flexibility. Their $2 million portfolio ($1.4 million tax-deferred, $600,000 taxable) must bridge a critical gap: ages 62 to 67 (when Social Security starts) and 62 to 65 (when the pension begins and Medicare kicks in). During this three-year window, they need $95,000 annually with zero guaranteed income and must self-fund health insurance—likely $1,500 to $2,000 per month for a couple in their early 60s.

At $95,000 annual spending, they would withdraw roughly $380,000 over five years before Social Security begins, then drop to $13,000 annually once guaranteed income covers $82,000. A conservative 60/40 portfolio (60% stocks, 40% bonds) historically returns 7% to 8% nominally. Using a Monte Carlo simulation with these parameters and a 30-year horizon, success probability sits near 85% to 90%—acceptable but not bulletproof.

Reducing spending to $80,000 annually raises success probability above 95%. Staying at $68,000 pushes it near certainty while leaving a substantial estate—likely $1.5 million or more at age 90.

Common Planning Considerations

Social Security Timing: Financial planners often analyze the trade-off between claiming at 67 versus 70, where waiting increases benefits by approximately 24%—from $58,000 to approximately $72,000 combined annually—but requires larger early portfolio withdrawals. This strategy creates a larger lifetime income floor that actuarial research shows becomes particularly valuable if either spouse lives past 85.

Income Bridging Strategies: Some retirees in similar situations have used part-time work earning $15,000 to $20,000 annually to preserve portfolio principal during early retirement years. Even low-stress consulting or seasonal work can eliminate withdrawal needs entirely during the vulnerable period before guaranteed income begins.

Balanced Approaches: Financial research suggests that spending $80,000 initially while delaying Social Security to 70 represents a middle path that some planners model for clients seeking to balance current lifestyle with long-term security, with reassessment planned once Social Security eligibility arrives.

Common Planning Approaches for Similar Situations

Healthcare cost modeling is a critical first step in retirement planning—ACA marketplace premiums with subsidies may cost less than expected. Financial planners typically model withdrawal scenarios using tax-efficient strategies in similar situations: conventional approaches have historically prioritized draining taxable accounts first, then converting portions of the IRA to Roth during low-income years (ages 62 to 67) to reduce future RMDs. For couples with strong health and family longevity in comparable circumstances, financial research has shown that delaying Social Security to 70 often provides the highest actuarial value. A common planning consideration is whether current spending reflects working-age habits or actual retirement goals—$68,000 may reflect working-age patterns rather than retirement lifestyle preferences.

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