Can You Retire? Your Income – Retirement Stewardship

This article is part of the Retirement Financial Life Equation (RFLE) series. It was initially published on January 31, 2018, and extensively rewritten in February 2026 in the context of the RFLE.

The Retirement Financial Life Equation isn’t just a theoretical framework. It’s a practical diagnostic tool for answering the question that eventually confronts everyone who’s been saving and planning: “Can I actually afford to retire?”

This deceptively simple question requires evaluating all the components of the RFLE simultaneously. We haven’t addressed all of them yet, so we’re admittedly getting a little ahead of ourselves. But I’ll provide enough explanation along the way to ensure you understand the basics.

It’s not enough to have accumulated substantial Current Wealth if your anticipated expenses far exceed what your portfolio can sustainably generate. A generous Social Security benefit helps, but not if healthcare costs or taxes consume most of it. Low expenses make retirement easier, but sequence-of-returns risk in your early retirement years can still derail even modest spending plans.

The retirement decision demands that you honestly assess whether your income sources (Social Security + pensions + portfolio withdrawals + other income) can reliably exceed your outflows (taxes + living expenses + healthcare costs + giving) for as long as you might live, while accounting for the risks embedded in the equation—inflation, market volatility, longevity, unexpected health events, and more.

Here’s the complete RFLE again for reference (as if you’ve already forgotten it…well, maybe you did because you wanted to):

Retirement Income = Social Security + Pensions + Portfolio Withdrawals + Interest/Dividends + Annuity Income + Optional Part-time Work + Strategic Use of Home Equity

Portfolio Withdrawals = function of (Current Wealth, Withdrawal Rate, Asset Allocation, Sequence Risk, Tax Efficiency)

Net Spendable Income = Retirement Income – Taxes – Healthcare Costs

Sustainability = Net Spendable Income ≥ (Essential Expenses + Discretionary Expenses + Giving) × Longevity Factor

This article outlines a systematic process for evaluating your retirement readiness by examining each RFLE component, showing how they interact, helping you identify potential gaps before you make this irreversible transition, and providing a framework for determining not just whether you can retire, but when and how to do so wisely.

The RFLE assessment process

It’s not about whether you can pay the bills this year, next, or even in 5 years. Think of retirement planning as determining whether a complex system will function reliably for 25-30 years. And you can’t just check one component (such as Social Security) unless you think you can live on it alone; you need to evaluate how all the parts work together under various conditions.

Here’s the systematic assessment process we’ll follow:

Phase 1: Assess Your Current Wealth Position begins by totaling your accumulated assets across all accounts—IRAs, 401(k)s, Roth accounts, taxable brokerage, and other savings. Beyond just the dollar amount, you need to understand your tax positioning across traditional versus Roth versus taxable allocation, evaluate your asset allocation and risk exposure, and consider liquidity and accessibility.

Phase 2: Calculate Your Income Floor identifies your guaranteed income sources, including Social Security benefits with their timing and amount, any pension income you might have, annuity income if applicable, and other guaranteed sources you can count on regardless of market conditions.

Phase 3: Determine Your Spending Requirements lumps together all the “minuses” of the RFLE. This means calculating your essential living expenses, healthcare costs including potential IRMAA implications, taxes on retirement income, discretionary expenses you want to maintain, and any giving commitments you’ve made.

Phase 4: Analyze the Gap compares your income floor against essential expenses, calculates your required portfolio withdrawal rate, assesses overall sustainability, and evaluates tax efficiency to understand whether the numbers actually work.

Phase 5: Stress-Test the Plan subjects your preliminary plan to various scenarios, including sequence-of-returns risk, longevity scenarios extending to ages 90, 95, or even 100, healthcare cost escalation beyond general inflation, inflation’s cumulative impact on purchasing power, and potential tax law changes.

Phase 6: Identify Adjustments explores ways to improve an unsustainable plan through Social Security timing optimization, Roth conversion opportunities in early retirement, withdrawal strategy refinement to minimize taxes, expense reduction options that maintain quality of life, and income enhancement possibilities including part-time work.

Let’s work through each phase systematically.

Phase 1: Assess your Current Wealth position

Total accumulated assets

The first RFLE component to evaluate is your Current Wealth—the total value of all retirement-designated assets you’ve accumulated. This includes:

Traditional 401(k), 403(b), or 457 accounts
Traditional IRAs
Roth 401(k) or 403(b) accounts
Roth IRAs
Taxable brokerage accounts
Health Savings Accounts (HSAs)
Cash reserves and emergency funds
Any other savings earmarked for retirement

Not all retirement wealth is created equal. A $500,000 traditional IRA is worth significantly less than $500,000 in a Roth IRA because of future tax liability. When assessing your Current Wealth, you need to consider:

After-tax value: If you have $400,000 in traditional IRAs and expect to pay 22% federal plus 5% state tax on withdrawals, your after-tax value is approximately $292,000. That’s a $108,000 difference from the nominal balance.

Tax diversification: The ideal positioning entering retirement is roughly:

40-50% in traditional (tax-deferred) accounts
30-40% in Roth (tax-free) accounts
10-30% in taxable (preferential capital gains treatment)

This diversification gives you maximum flexibility to manage your tax burden year by year throughout retirement. If all your wealth is in traditional IRAs, you have no tax flexibility—every dollar you withdraw is taxable, potentially pushing you into higher brackets, triggering IRMAA surcharges, and causing more of your Social Security to be taxed.

Asset allocation: Your stock/bond/cash allocation affects both growth potential and risk exposure. A 70/30 stock/bond allocation at age 66 creates different sustainability dynamics than a 40/60 allocation.

If you’re very close to retirement, calculating your total Current Wealth should be straightforward—just add up your most recent account statements.

If you’re several years out, you’ll need to project forward. Use conservative assumptions:

Annual contribution amounts you plan to make
Employer match (if still working)
Estimated annual returns (I suggest 5-6% real returns, not the 10-12% some online calculators use)
Account for market volatility—your actual balance will fluctuate

For our illustration throughout this article, we’ll assume:

Total Current Wealth: $450,000
Allocation: $300,000 traditional IRA (67%), $100,000 Roth IRA (22%), $50,000 taxable (11%)
Asset allocation: 50% stocks, 40% bonds, 10% cash
Age at planned retirement: 66

Tax positioning analysis

Now that you know your total, analyze your tax positioning:

Traditional (tax-deferred) accounts: Withdrawals are fully taxable as ordinary income. Every dollar increases your AGI, affects Social Security taxation, and can trigger IRMAA surcharges.

Roth (tax-free) accounts: Withdrawals are tax-free and don’t count as income for Social Security taxation or IRMAA calculations. This is your most valuable asset from a tax perspective.

Taxable (preferential treatment) accounts: Qualified dividends and long-term capital gains receive preferential tax rates (0%, 15%, or 20% depending on income). Losses can offset gains. More flexible than IRAs for accessing funds before 59½.

2026 tax planning opportunity: Under current tax law (OBBBA provisions), individuals age 65+ receive an additional $6,000 standard deduction bonus per person, significantly reducing tax burden on retirement income. This makes the early retirement years (before RMDs kick in at 73 or 75) the golden window for Roth conversions—converting traditional IRA dollars to Roth while you’re in lower brackets and have room under the IRMAA thresholds.

Phase 2: Calculate your income floor

The second major RFLE component is Retirement Income. We’ll start with your “guaranteed” income sources—the floor you can count on regardless of market conditions.

Social Security benefits

For most retirees, Social Security forms the foundation of the income floor. It’s:

Guaranteed for life (barring legislative changes)
Inflation-adjusted through annual COLAs
Survivor-protected (spouse receives the higher of the two benefits)
Partially tax-advantaged (only 0-85% is taxable)

How to estimate your benefit:

Go to ssa.gov and create a “my Social Security” account
Review your benefit estimate at different claiming ages (62, 67, 70)
Understand the claiming age impact:
- Claim at 62: ~30% reduction from Full Retirement Age (FRA) benefit
- Claim at FRA (67 for those born 1960+): 100% of calculated benefit
- Claim at 70: ~24% increase over FRA benefit (8% per year delayed)

For married couples: Both spouses typically receive benefits, even if only one worked extensively. The non-working or lower-earning spouse receives the higher of:

Their own benefit is based on their work record
50% of spouse’s FRA benefit (if claimed at FRA)

Our illustration example:

Primary earner with $75,000 career average salary
Estimated FRA benefit: ~$28,500 annually
Spouse benefit (50%): ~$14,250 annually
Combined Social Security at FRA: $42,750

Critical RFLE interaction: When you claim Social Security affects multiple other RFLE components:

Taxes: Benefits are 0-85% taxable, depending on combined income
Portfolio pressure: Delaying to 70 means higher withdrawals from Current Wealth ages 66-70, but much lower withdrawals thereafter
Longevity protection: The 24% increase from delaying creates much better inflation-adjusted lifetime income
Survivor protection: The higher earner’s benefit becomes a survivor benefit; maximizing it protects the surviving spouse

According to recent analysis, Social Security’s Old-Age and Survivors Insurance (OASI) trust fund is projected to be depleted between late 2032 and early 2033, when tax revenues alone will be sufficient to pay only approximately 77% of scheduled benefits. Recent legislation, including the Social Security Fairness Act and tax provisions in the OBBBA, reduced revenues flowing into the trust fund, accelerating the timeline.

What this means for your RFLE planning:

Ages 50s-60s: Very likely to receive full benefits, though reductions are possible if Congress doesn’t act before 2033
Ages 40s: May face benefit reductions or means-testing
Ages 20s-30s: Program will almost certainly exist, but may look significantly different

Planning conservatively: Consider using 90-95% of estimated benefits in your calculations if you’re under 55, or build a portfolio cushion large enough that a 10-15% Social Security reduction wouldn’t derail your plan.

Pension income

Traditional defined-benefit pensions are increasingly rare outside government employment, but if you have one, it significantly strengthens your income floor.

Key pension decisions:

Lump sum vs. lifetime annuity: Taking the lump sum converts your pension from “guaranteed income” to “Current Wealth” in the RFLE—you then must manage it like any other portfolio. The lifetime annuity provides guaranteed income but sacrifices flexibility, and survivor protection is often limited.
Single life vs. joint-and-survivor: Single life pays more monthly, but nothing to the surviving spouse. Joint-and-survivor (typically 50%, 75%, or 100% of the balance) pays less initially but protects your spouse. For most married couples, joint-and-survivor makes sense.
Inflation adjustment: Some pensions (particularly government) include COLA adjustments. Most don’t. Non-adjusted pensions lose purchasing power steadily—a $30,000 pension today buys only about $22,000 worth of goods in 10 years at 3% inflation.

PBGC Protection: Commercial pensions are insured by the Pension Benefit Guaranty Corporation. As of 2025, the maximum guarantee for a 65-year-old retiree is $7,431.75/month ($89,181 annually), up 4.56% from 2024. This provides some protection even if your employer’s pension becomes underfunded.

Our illustration: We’ll assume no pension in our example to keep it simpler and more applicable to most readers.

Annuity income

Annuities occupy a middle ground—they can create “guaranteed” income but involve trade-offs that require careful evaluation.

Types of annuities relevant for income planning:

Single Premium Immediate Annuities (SPIAs): You pay a lump sum, and you immediately start receiving fixed lifetime payments. As of late 2025, a 70-year-old can get approximately 8.1% annual payout—meaning $100,000 purchases about $8,100/year for life. Pros: Simple, high payout rates currently, guaranteed for life. Cons: No inflation protection (usually), lose liquidity, and if you die early, you forfeit the remaining value.

Deferred Income Annuities (DIAs): You pay now, income starts at a future date (often 75-80). Creates longevity insurance. Lower cost than SPIA for the same future income since payments are deferred.

Fixed Indexed Annuities (FIAs): Principal protected with returns linked to index performance (usually S&P 500) with caps. 2025 caps are 10-11%, much improved from 4-6% caps of mid-2010s. Can provide income riders for guaranteed lifetime withdrawals. Pros: Principal protection, growth potential, income guarantees. Cons: Complex, high fees (3-4.5% with riders), surrender charges, and caps limit upside.

Variable Annuities: Invested in sub-accounts (like mutual funds), value fluctuates, and can add income riders for guaranteed minimum withdrawals. Pros: Growth potential, income guarantees available. Cons: Very high fees (often 3.5-4.5% total), complex, performance often disappoints.

Annuity payout rates are the most attractive they’ve been in over a decade, driven by higher interest rates. However, fundamental concerns remain:

Inflation protection is expensive or unavailable
Fees on variable/indexed annuities remain very high
Opportunity cost—money in annuities isn’t available for other uses
Solvency risk (small but real)

For a comprehensive analysis of whether annuities fit your RFLE, see my three-part annuities series in the Tier 1 income article. Short version: They can make sense for specific situations (no pension, inadequate Social Security, need guaranteed lifetime income floor), but often aren’t necessary if you have strong Social Security, adequate savings, and spending flexibility.

Our illustration: We’ll assume no annuity income, as it’s not essential to the example.

Add up your guaranteed income sources:

Our illustration example:

Social Security (combined): $42,750
Pension: $0
Annuity: $0
Total Income Floor: $42,750

This is the amount you can count on annually, adjusted for inflation (Social Security COLAs), regardless of market conditions.

Phase 3: Determine your spending requirements

The third major RFLE component is your outflows—what you’ll actually spend annually. This breaks into four categories:

Essential living expenses

These are non-discretionary costs you must cover to maintain a basic standard of living:

Housing:

Mortgage/rent (if not paid off)
Property taxes
Home insurance
HOA fees
Maintenance and repairs
Utilities (electric, gas, water, trash, internet)

Food and household:

Groceries
Household supplies
Basic personal care items

Transportation:

Car payment (if applicable)
Auto insurance
Fuel
Maintenance and repairs
Registration and fees

Insurance:

Medicare premiums (Parts B, D, and Medigap/Advantage)
Life insurance (if continuing)
Long-term care insurance (if you have it)

Other essentials:

Phone service
Minimum clothing budget
Essential medications
Basic financial services (bank fees, tax prep)

For our illustration: We’ll estimate essential living expenses at $45,000 annually. This assumes:

Mortgage paid off (no housing payment)
Two-car household with reasonable transportation costs
Medicare coverage (premiums included)
Moderate cost-of-living area

Healthcare costs

Healthcare deserves separate attention because it’s both essential and highly variable. In the RFLE, healthcare costs interact with multiple other components.

Medicare premiums (2025 figures):

Part B standard premium: $185/month ($2,220/year)
Part D (prescription): $30-100/month ($360-1,200/year) average
Medigap or Advantage: $100-300/month ($1,200-3,600/year)
Base Medicare costs: ~$4,000-7,000/year per person

IRMAA surcharges: If your Modified Adjusted Gross Income (MAGI) exceeds certain thresholds, you pay additional Part B and Part D premiums:

2025 IRMAA thresholds (based on 2023 tax return):

Individual < $106,000 / Married < $212,000: No surcharge
Individual $106,000-133,000 / Married $212,000-266,000: +$74/month Part B
Individual $133,000-167,000 / Married $266,000-334,000: +$185/month Part B
Individual $167,000-200,000 / Married $334,000-400,000: +$295/month Part B
Individual $200,000-500,000 / Married $400,000-750,000: +$406/month Part B
Individual > $500,000 / Married > $750,000: +$443/month Part B

Critical RFLE interaction: IRMAA is based on your Modified AGI from two years prior. This means:

Large Roth conversions can trigger IRMAA surcharges
Required Minimum Distributions can push you into IRMAA territory
Portfolio withdrawal strategy affects IRMAA exposure
Strategic timing of income can minimize IRMAA over the lifetime

Out-of-pocket medical costs: Even with Medicare, expect:

Copays and deductibles: $1,000-3,000/year
Dental and vision (not covered by Medicare): $1,000-2,500/year
Prescriptions not fully covered: $500-2,000/year
Total out-of-pocket: $2,500-7,500/year per person

Long-term care risk: This is the wild card. Medicare doesn’t cover extended long-term care. Options:

Self-insure (pay from assets if needed)
Long-term care insurance (expensive, often $3,000-8,000/year in premiums)
Hybrid life/LTC policies
Plan to qualify for Medicaid if a catastrophic need arises

Our illustration healthcare estimate:

Two people, Medicare premiums: $10,000/year
Out-of-pocket medical: $5,000/year
Total healthcare: $15,000/year
(Not including LTC risk—we’ll address that separately)

Taxes

Taxes are often overlooked in the RFLE, yet they may significantly affect sustainability.

Federal income tax on retirement income:

Your taxable retirement income includes:

Traditional IRA/401(k) withdrawals (100% taxable)
Pension income (usually 100% taxable)
0-85% of Social Security benefits (depending on combined income)
Interest and dividends from taxable accounts
Capital gains when selling appreciated assets

2025 tax benefits for seniors (OBBBA provisions):

An additional $6,000 standard deduction per person age 65+ (beyond the regular standard deduction)
For married couple both 65+: Total standard deduction is $41,600 ($29,200 + $12,400 senior bonus)
This means the first $41,600 of taxable income is tax-free for a married couple

Combined income calculation for Social Security taxation: Combined Income = AGI + Tax-Exempt Interest + 50% of Social Security Benefits

If the combined income exceeds:

Single $25,000 / Married $32,000: Up to 50% of benefits taxable
Single $34,000 / Married $44,000: Up to 85% of benefits taxable

Our illustration tax calculation: Assumptions:

Social Security: $42,750
Need to withdraw from savings: TBD (we’ll calculate this)
Filing jointly, both spouses 65+

We’ll return to calculate the exact tax burden once we know the total income needed.

Discretionary expenses and giving

Beyond essentials, you need to account for:

Discretionary spending:

Travel and entertainment
Dining out
Hobbies and recreation
Gifts for family
Home improvements/upgrades
Charitable giving beyond baseline

Our illustration: We’ll plan for $10,000/year discretionary spending initially, with the understanding that this can flex based on portfolio performance.

Total Annual Spending Requirement

Our illustration summary:

Essential living expenses: $45,000
Healthcare: $15,000
Taxes: $3,000 (estimated—will refine)
Discretionary/giving: $10,000
Total needed: $73,000/year

But remember, we calculated essential expenses at $45,000 + $15,000 for healthcare = $60,000 in total.

Phase 4: Analyze the gap

Now we apply the RFLE formula to determine sustainability:

Income floor vs. essential expenses

Income Floor: $42,750 (Social Security) Essential Expenses: $60,000 (living + healthcare) Gap: ($17,250) shortfall

This means our guaranteed income covers only 71% of essential expenses. We must generate the remaining $17,250 from portfolio withdrawals.

But we also want $10,000 for discretionary spending, plus we need to cover taxes.

Total income needed: $73,000 Income floor: $42,750 Required from portfolio: $30,250

Required portfolio withdrawal rate

This is the critical calculation:

Required Withdrawal Rate = Annual Portfolio Withdrawal Need ÷ Total Current Wealth

In our illustration: $30,250 ÷ $450,000 = 6.7% withdrawal rate

Is this sustainable?

According to decades of research on safe withdrawal rates:

4.0% withdrawal rate: ~95% success rate over 30 years
5.0% withdrawal rate: ~80% success rate over 30 years
6.0% withdrawal rate: ~65% success rate over 30 years
7.0% withdrawal rate: ~45% success rate over 30 years

A 6.7% initial withdrawal rate has roughly a 50-60% chance of lasting 30 years based on historical data. That means roughly a 40-50% chance of portfolio depletion before age 96.

This is marginal at best!

Tax refinement

Now that we know total income, let’s refine the tax calculation:

Total income:

Social Security: $42,750
Portfolio withdrawal: $30,250
Gross income: $73,000

Combined income for SS taxation:

AGI: $30,250 (portfolio withdrawal)
- 50% of SS: $21,375
Combined income: $51,750

This exceeds $44,000 for married filing jointly, so up to 85% of Social Security is taxable.

Taxable Social Security: ~$36,338 (85% of $42,750)

Total taxable income:

Portfolio withdrawal: $30,250
Taxable Social Security: $36,338
Total: $66,588

Federal tax (2025, married filing jointly, both 65+):

Standard deduction: $41,600
Taxable income: $24,988
Tax (10% bracket): ~$2,499
Plus state tax (5% assumed): $1,249
Total taxes: ~$3,750

This is higher than our initial $3,000 estimate, meaning we actually need about $73,750 total, requiring a portfolio withdrawal of about $31,000, or 6.9% withdrawal rate.

Phase 5: Stress-test the plan

A 6.9% withdrawal rate might work if everything goes perfectly. But the RFLE requires stress-testing against realistic scenarios:

Sequence-of-returns risk

What if you retire and immediately experience:

Year 1: -20% market return
Year 2: -10% market return
Year 3: +5% market return

With a 6.9% withdrawal rate, your $450,000 portfolio would decline to:

End Year 1: $450,000 × 0.80 – $31,000 = $329,000
End Year 2: $329,000 × 0.90 – $31,900 (inflation-adjusted) = $264,200
End Year 3: $264,200 × 1.05 – $32,857 (inflation-adjusted) = $244,553

You’ve lost nearly half your portfolio in three years. Recovery from this becomes extremely difficult even if markets rebound strongly.

Longevity risk

If you retire at 66:

Living to 85: 19 years to fund (fairly likely)
Living to 90: 24 years to fund (very possible)
Living to 95: 29 years to fund (not uncommon)
Living to 100: 34 years to fund (increasingly common)

A 6.9% withdrawal rate has virtually no chance of lasting 30+ years.

Healthcare cost escalation

Healthcare costs have historically risen 5-6% annually, well above the general inflation rate of 2-3%. If your $15,000/year healthcare cost grows at 5% while your $45,000 essential expenses grow at 3%:

Year 10:

Essential: $60,500
Healthcare: $24,433
Total essential: $84,933 (vs. $60,000 initially)

Your income floor of $42,750 (even with 2.5% average COLAs) will be about $54,200—covering only 64% of essential expenses instead of 71% initially.

Inflation impact

Even modest 3% inflation cuts purchasing power in half over 23 years. Your $42,750 Social Security benefit, even with COLAs, may not keep pace with your specific inflation (healthcare-heavy).

Phase 6: Identify adjustments

Our illustrative example shows that retirement isn’t yet feasible at age 66 under current parameters. But we have options—adjustments to various RFLE components:

Option 1: Delay retirement

Working to age 68-70 accomplishes multiple RFLE improvements:

Increases Current Wealth (2-4 more years of contributions and growth)
Increases Social Security (8% per year delayed beyond FRA)
Reduces years to fund (retiring at 70 means 15 years to 85 vs. 19 years)
Delays portfolio withdrawals (preserves sequence risk protection)

Impact of delaying to age 70:

Current Wealth: $450,000 → $550,000 (4 more years contributions + growth)
Social Security: $42,750 → $53,000 (24% increase from delaying)
Required portfolio withdrawal: $20,000 instead of $31,000
Withdrawal rate: 3.6% instead of 6.9%

This transforms an unsustainable plan into a highly sustainable one.

Option 2: Reduce expenses

Cut $13,000 from annual spending:

Downsize home (reduce maintenance, utilities, property taxes)
Reduce to one car
Relocate to a lower cost-of-living area
Reduce discretionary spending significantly

New math:

Essential expenses: $47,000 (down from $60,000)
Income floor: $42,750
Gap: $4,250
Plus $5,000 discretionary = $9,250 needed from portfolio
Withdrawal rate: 2.1% (very sustainable)

But quality of life might suffer. Is this the retirement you saved for?

Option 3: Enhance income floor

Consider partial annuitization to create more guaranteed income:

Use $100,000 of Current Wealth to purchase a SPIA paying 8.1% annually, yielding $8,100 in additional guaranteed income.

New math:

Income floor: $50,850 ($42,750 SS + $8,100 annuity)
Essential expenses: $60,000
Gap: $9,150
Remaining Current Wealth: $350,000
Withdrawal rate: 2.6% (sustainable)

Trade-off: Lost liquidity and flexibility on that $100,000.

Option 4: Optimize Social Security timing

If the higher earner delays SS to 70 while the lower earner claims at FRA:

Higher earner at 70: $35,400 (instead of $28,500 at 67)
Lower earner at 67: $14,250
Combined: $49,650 (vs. $42,750 both at 67)

This requires higher portfolio withdrawals ages 66-70, but creates:

Much stronger income floor
Better survivor protection (higher benefit continues)
Inflation-protected for life

Option 5: Tax optimization

Roth conversions in early retirement (ages 66-70 before RMDs):

Convert $25,000-50,000/year from a traditional IRA to a Roth
Pay taxes now while in lower brackets
Creates a tax-free income source later
Reduces future RMDs and IRMAA exposure
Provides tax-free inheritance to heirs

This doesn’t help immediate sustainability but significantly improves long-term RFLE by:

Reducing lifetime taxes
Increasing spending flexibility
Protecting against future tax rate increases

Option 6: Part-time work

Add $10,000-15,000/year from part-time work ages 66-70:

Reduces portfolio withdrawal pressure
Allows Social Security delay
Provides purpose and structure
Often comes with secondary benefits (social connection, health insurance continuation)

The RFLE Verdict: Can You Retire?

Let’s return to our original question with our illustration example:

As originally structured (retire at 66 with $450,000): Answer: No, not sustainably.

Required 6.9% withdrawal rate
~50% chance of portfolio depletion before age 90
Vulnerable to sequence risk
No margin for unexpected costs

With realistic adjustments: Answer: Yes, with modifications.

Most promising path for our illustration:

Delay to age 68: Increases portfolio to ~$500,000, Social Security to ~$47,500
Lower earner claims at 66, higher earner delays to 70: Optimizes lifetime benefits
Modest expense reduction: Cut $5,000/year through efficiency
Part-time work ages 66-70: Adds $10,000/year, delays portfolio withdrawals
Roth conversions ages 66-70: Improves long-term tax situation

Resulting RFLE at age 70:

Current Wealth: $530,000
Social Security: $49,650
Essential expenses: $55,000 (reduced from $60,000)
Gap: $5,350
Required withdrawal rate: 1.0% initially, rising to 3-4% in later years

Sustainability: Excellent, with a significant margin for:

Healthcare cost escalation
Inflation
Sequence risk
Discretionary spending and giving
Unexpected emergencies

Key RFLE Insights for Retirement Readiness

Working through this systematic analysis reveals critical insights:

1. The components must be evaluated together, not individually

You can’t just ask “Do I have enough saved?” or “Is my Social Security adequate?” The RFLE forces you to see how everything interacts:

Social Security timing affects taxes and portfolio pressure
Portfolio withdrawals trigger Social Security taxation and IRMAA
Expense levels determine required withdrawal rates
Tax positioning affects after-tax income available for spending

2. Small changes in one component can dramatically affect sustainability

Delaying Social Security 3 years: Changes the withdrawal rate from 6.9% to 3.6%
Reducing expenses $5,000/year: Reduces portfolio withdrawal need by $5,000+ after tax effects
Working part-time for 4 years: Transforms marginal plan into robust plan

3. Timing matters more than many people realize

The difference between retiring at 66 vs. 70 isn’t just 4 years:

Different Social Security benefit (24% higher)
Different portfolio balance (22% higher)
Different years to fund (15 vs. 19 to age 85)
Different sequence risk exposure
Different Roth conversion opportunity window

4. Flexibility is more valuable than precision

You can’t predict:

Exact future returns
Exact longevity
Exact healthcare costs
Future tax law changes
Inflation rates

Therefore, build margin. A plan that “just barely works” on paper will fail in reality. You want cushion.

5. The tax component is often underestimated

Many people forget that:

Not all retirement withdrawals are equally taxed
Social Security can be 0-85% taxable
IRMAA can add $5,000-10,000/year in Medicare costs
RMDs can force unwanted taxable income
Tax planning in early retirement creates lifetime value

6. Healthcare is the wild card

Medicare costs are predictable. But:

Long-term care needs are not
Serious illness can cost tens of thousands out-of-pocket
Costs rise faster than general inflation
This risk increases with age

You must build a cushion for healthcare uncertainty.

The process in summary

Step 1: Calculate Current Wealth and assess tax positioning Step 2: Estimate guaranteed income floor (Social Security, pension, annuity) Step 3: Determine total spending needs (essential + healthcare + taxes + discretionary) Step 4: Calculate the gap and required withdrawal rate Step 5: Stress-test against sequence risk, longevity, healthcare escalation Step 6: Identify and implement adjustments if needed

Decision criteria:

You can retire if:

Required initial withdrawal rate ≤ 3.5-4.0%
Income floor covers ≥ 70% of essential expenses
You have 12-24 months cash reserves
You’ve stress-tested against downside scenarios
You have spending flexibility if needed
Your spouse (if applicable) is on board

You should delay or adjust if:

Required initial withdrawal rate > 5.0%
Income floor covers < 50% of essential expenses
You have no spending flexibility
You haven’t stress-tested the plan
You’re uncomfortable with the risks
Adjustments (delay, work longer, reduce costs) are feasible

You’re in the gray zone if:

Required withdrawal rate is 4.0-5.0%
Modest adjustments could significantly improve sustainability
You have some but not optimal flexibility

In the gray zone, the decision becomes more personal—risk tolerance, health status, job satisfaction, life goals, family situation.

If you have a shortfall

If your preliminary calculations show an unsustainable withdrawal rate or insufficient income floor, don’t panic. Remember Matthew 6:34: “Therefore do not be anxious about tomorrow, for tomorrow will be anxious for itself. Sufficient for the day is its own trouble.”

The best antidote for anxiety is:

Faith and trust in God’s provision
Understanding your situation clearly (which you now do through the RFLE)
Taking wise action to improve your position

You have options:

Work 2-4 more years
Reduce expenses thoughtfully
Optimize Social Security timing
Consider partial annuitization
Plan for part-time work in early retirement
Relocate to lower-cost area
Roth conversions to improve tax efficiency
Strategic use of home equity (if needed)

Bottom Line

The Retirement Financial Life Equation provides a systematic framework for answering “Can I retire?” It forces you to:

✓ Evaluate all income sources together ✓ Account for all spending categories including often-forgotten taxes ✓ Assess sustainability realistically ✓ Identify component interactions ✓ Stress-test against risks ✓ Find adjustments that improve the equation

The answer is rarely simple yes or no. It’s usually “Yes, if you make these adjustments” or “Not yet, but here’s the path to get there.”

Work through the RFLE systematically. Be honest about your numbers. Stress-test conservatively. Build in margin. And remember—this is stewardship. You’re managing God’s resources to provide for your needs, bless your family, and continue generous giving throughout your retirement years.

The goal isn’t perfect certainty (which is impossible) but reasonable confidence based on honest analysis and wise planning. The RFLE gives you the framework to achieve that.