I’ve spent most of my career skeptical of annuities. Especially the expensive, complicated products often sold to retirees. I don’t sell annuities. I don’t earn commissions from them. And in most cases, I still am skeptical of how they are ‘sold’and not planned for.
In this episode, I break down four surprising benefits of annuitizing part of your fixed income, especially if you’re approaching retirement with $1M+ saved and want a smarter retirement income strategy.
We’ll cover:
• Why everyone is a bull… until the market drops 10% • How annuitization can reduce sequence of returns risk • Why payout rates (like 6%–8%+) is hard to replicate with a ‘safe withdrawal rate’ • How annuities can actually improve legacy outcomes in certain scenarios • The math behind lowering withdrawal pressure on your equity portfolio • How to evaluate TIAA Traditional payout options and vintages
Retirement isn’t just about asset allocation.
It’s about income design.
And if you’re over 55, retiring soon, or already retired, understanding annuitization could materially impact your retirement income, stress level, and long-term legacy. Hope you find this useful.
-Kevin
Are you interested in working with me 1 on 1?
You can start with our Retirement Readiness Questionnaire linked on our website so we can learn more about how we can help in your journey to and through retirement.
If you’ve ever Googled “retirement savings by age,” you’ve probably seen those benchmark numbers that either made you panic or feel like you’re crushing it. But here’s the thing – both reactions might be completely wrong.
Understanding retirement savings by age is something many people get hung up on, but the reality is that these average numbers rarely tell the complete story. Today, we’ll dive into real data from major financial institutions and explain why, if you’re reading this, you’re probably already in the top tier of savers. And if you’re in that top tier, we’ll discuss specific planning opportunities to help you optimize your retirement.
What the Average Retirement Savings Data Really Shows
Let’s start by looking at what the major studies actually reveal about retirement account balances across different age groups.
401k Balance by Age: Fidelity’s Latest Numbers
Fidelity releases quarterly benchmarking studies that track average retirement account balances by age. Their data shows that for people in their peak earning years (55-70), the average 401(k) balance hovers around $250,000.
But here’s the problem with this data: it only includes accounts held at Fidelity. It completely excludes external accounts, creating a major blind spot. There are no taxable brokerage accounts, no HSAs, and no retirement accounts held at other institutions, such as Vanguard or Schwab. This means Fidelity’s numbers aren’t really representative of the entire U.S. retirement landscape – especially not for people who are serious about their financial planning.
The Federal Reserve’s Complete Picture
The Federal Reserve’s Survey of Consumer Finances, conducted every few years, gives us the closest thing to a national financial scoreboard. The 2022 data reveals some eye-opening statistics.
For households in the 55-64 age range:
About 8% have retirement account balances between $500,000 and $1 million
Roughly 9% have over $1 million in retirement accounts
This means approximately 17% of U.S. households in this age group have retirement savings exceeding $500,000
If you’re reading this article and have accumulated at least $500,000 in retirement accounts by your late 50s or early 60s, you’re already in the top 20% nationally. Many readers are likely in that top 10% tier with over a million dollars saved.
The Fed’s survey includes a broad sample of American households – from lower wealth to middle class to high net worth families. Many of the households surveyed may have very little, if any, assets in 401(k)s or IRAs, which skews the averages significantly lower.
Empower’s More Complete Data Set
Empower’s data provides both average and median retirement account balances, which matters because averages can be skewed by ultra-high savers with multiple seven-figure accounts.
For people in their 50s and 60s, Empower shows:
Average retirement account balance: roughly $1 million
Median balance: about 50% of that average
What makes Empower’s data more valuable is that it doesn’t just include accounts held directly with them. It also incorporates retirement accounts imported through their personal dashboard tool. If someone has accounts at Fidelity, Vanguard, or other institutions, those balances get aggregated into the study, making it more representative of people who actively manage their finances across multiple platforms.
However, even Empower’s data has limitations – it still doesn’t include other retirement assets like taxable brokerage accounts, business investments, or real estate.
Why You’re Probably Not Average
Here’s the reality: if you’re actively researching retirement savings by age and reading detailed financial content, you’re already demonstrating behavior that puts you in a completely different category than the “average” American saver.
The average retirement savings by age data includes everyone, including people who have never opened a 401(k), those who cash out their retirement accounts when changing jobs, and households that prioritize other financial goals over retirement savings.
But you’re different. You’re likely someone who:
Has built substantial retirement account balances
Maintains accounts across multiple institutions
Has diversified beyond just retirement accounts into taxable investments
Owns real estate or business assets not captured in these studies
Someone might have $400,000 in a 401(k), but another $1-2 million in taxable brokerage accounts or $3 million in real estate investments. If you’re only comparing retirement accounts, you’re missing half the picture.
This is the key point: if you’re consuming this type of content, you’re probably already in that top 20% of households. You’ve likely saved at least $500,000, and many readers have accumulated seven figures or even multiple seven figures for retirement. You’re playing a completely different retirement game than the average American.
Essential Retirement Planning Strategies for Top-Tier Savers
When you’re in the top tier of savers, your biggest risk isn’t running out of money – it’s retirement planning inefficiency. Here are the critical strategies you need to consider:
Tax Planning: Your Biggest Opportunity
Taxes can actually be one of your biggest expenses in retirement – often ranking as the number one, two, or three largest annual expenses for retirees.
Large pre-tax account balances mean large future required minimum distributions (RMDs). These large RMDs can potentially push you into higher income tax brackets, trigger higher taxes on Social Security income, increase capital gains rates, and activate other hidden taxes. These tax hits compound over time.
If you retire early, you may have lower income years before RMDs kick in at age 73 or 75. This window represents one of the best tax planning opportunities of your lifetime–what’s called the “Roth conversion window.”
Maximizing Roth Conversion Strategies in Early Retirement
During your early retirement years, before RMDs begin, you have the opportunity to strategically convert pre-tax retirement funds to Roth accounts. This means paying taxes now at potentially lower rates to minimize the impact of those ballooning RMDs later.
Roth conversion strategies can also help you:
Minimize IRMAA surcharges (hidden taxes on Medicare premiums based on income)
Make Social Security income more tax-efficient
Create tax-free legacy assets for your heirs
Once this conversion window closes, it shuts for good, making this timing critical for long-term tax efficiency.
Optimizing Your Retirement Withdrawal Strategies
When you have substantial assets across multiple account types–taxable accounts, tax-deferred accounts, and tax-free accounts–the order you withdraw money matters enormously for the longevity of your retirement plan.
The classic approach follows this sequence:
Taxable accounts first
Tax-deferred accounts second
Tax-free accounts last
This default strategy makes sense for many people, but it’s not always optimal. Sometimes it makes more sense to tap Roth accounts first and let tax-deferred accounts continue compounding. Other times, a multi-pronged approach works best–taking baseline distributions from taxable accounts while filling remaining income needs from tax-deferred accounts, even before RMDs begin.
The key insight: retirement withdrawal strategies shouldn’t follow a one-size-fits-all approach. Each year brings a new tax situation that needs to be evaluated and optimized based on your specific circumstances.
Investment Strategy: Risk Capacity vs. Risk Tolerance
Most retirees and many financial advisors focus solely on risk tolerance–how aggressive you feel comfortable being emotionally. But for higher net worth households, we need to discuss something different: risk capacity.
Understanding the Difference
Risk tolerance is emotional and psychological. It’s about how you feel when the market drops 20%. Do you panic? Can you sleep well at night? Can you stay disciplined?
Risk capacity is different – it’s not about feelings, it’s about what your plan can mathematically survive. Can you afford to take on risk in retirement?
Here’s the counterintuitive part: a retiree with a smaller portfolio may actually have less risk capacity than someone with a larger balance.
A Real-World Example
Consider a retiree with $500,000 who needs $30,000 annually (6% withdrawal rate). If the market drops 25%, their portfolio becomes $375,000, but they still need that $30,000. Now their withdrawal rate jumps to 8% – entering the danger zone where retirement plans can fail due to the sequence of returns risk.
Compare this to someone with $2 million who needs $80,000 annually (4% withdrawal rate). If their portfolio drops 25% to $1.5 million, their withdrawal rate only increases to 5.3%. They have margin for error. They can reduce withdrawals, skip inflation adjustments, rebalance, or even take advantage of the downturn.
This is risk capacity: how much volatility can your plan absorb before forcing you to make bad financial decisions?
Where You Hold Investments Matters
Asset location is different from asset allocation. Asset allocation is what you’re invested in. It’s your mix of stocks, bonds, real estate, and cash. Asset location is where you hold those investments.
When you have substantial balances across taxable, tax-deferred, and tax-free accounts, where you locate specific investments can significantly impact your after-tax returns.
The Tax Drag Problem
Taxable accounts face ongoing tax drag. Investments may pay quarterly dividends, generate interest income, or distribute capital gains even when you’re not selling anything. When you’re in higher tax brackets, this drag becomes significant and represents one of the most overlooked ways wealth gets eroded–not from market performance, but from unnecessary taxes.
If your taxable account holds high-yield bonds, REITs, and high-turnover funds, you might pay substantial taxes annually even if you’re not spending that income. Meanwhile, your IRA and Roth accounts might be better locations for these less tax-efficient investments.
The goal of asset location is simple: ensure your taxable accounts aren’t dragging down your net after-tax returns. You don’t just need good performance. You need good after-tax performance. It’s not about what you earn; it’s about what you keep.
Legacy Planning for High-Net-Worth Families
If you’re in the top tier of savers, there’s a good chance you won’t spend down all your assets, even if your goal is to “die with zero.” This means you’re optimizing not just for lifetime income, but also for legacy–specifically, tax-efficient legacy.
This becomes especially important if your heirs are high earners themselves: doctors, entrepreneurs, attorneys, or other professionals. What you leave behind matters significantly.
Leaving a pre-tax IRA or 401 (k) to high-income beneficiaries creates a different tax impact than leaving a Roth account or a taxable brokerage account. The most effective planning involves being strategic about which assets to spend aggressively during your lifetime versus which to preserve for beneficiaries.
The Real Takeaway for Top-Tier Savers
If you’ve built substantial wealth and find yourself in the top 20% of U.S. households, your retirement plan is no longer about chasing returns or worrying about having “enough” money. Instead, your focus should shift to:
Maximizing retirement plan efficiency
Controlling the timing and tax impact of distributions
Minimizing lifetime taxes through strategic planning
Managing Medicare thresholds and IRMAA surcharges
Optimizing Social Security income timing and taxation
Taking advantage of Roth conversion windows
Planning for tax-efficient legacy transfer
Once you’ve done the hard part–saving and investing to reach financial independence–the game becomes about keeping more of what you’ve built. The strategies that got you to this point aren’t necessarily the same ones that will optimize your wealth throughout retirement.
The Bottom Line
Stop comparing yourself to average retirement savings by age. If you’re actively planning and have accumulated substantial assets, you’re already playing in a different league. Your focus should be on advanced strategies that maximize the efficiency of the wealth you’ve built, not on whether you’re “keeping up” with benchmarks that don’t reflect your reality.
Remember, retirement planning for high-net-worth individuals isn’t about accumulating more. It’s about optimizing what you have for the best possible outcomes throughout your retirement years and beyond.
At Imagine Financial Security, we help individuals over 50 with at least a million dollars saved navigate these complex retirement decisions. If you are looking to
Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel.
This is for general education purposes only and should not be considered as tax, legal, or investment advice.
If you’re a TIAA participant, there’s a good chance you own TIAA Traditional—and it may be one of the most misunderstood “investments” in retirement plans.
In this episode, I’m breaking down TIAA Traditional, TIAA Real Estate and answering the biggest questions I hear from TIAA participants:
✅ Should I own TIAA Traditional? ✅ If so, how much should I keep there? ✅ Should I use the TIAA Real Estate Account? ✅ What should I do with TIAA Traditional after I retire? ✅ Bonus: How do I compare to other retirement savers?
We’ll talk about the real issue most people miss—liquidity and contract type—and how TIAA Traditional can be used as a bond alternative or even as a retirement income floor depending on your plan.
Resources mentioned:
TIAA Real Estate Account
Video, How to get money OUT of TIAA (contract breakdown)
Video, Retirement Savings Relative to Peers
⛳ PFR Nation (Who This Is For)
If you’re over 50, have saved seven figures (or multiple seven figures), love golf and travel, and you want to make work optional while minimizing taxes… welcome to the right place.
💬 Comment Below
What is your biggest TIAA question?
Are you interested in working with me 1 on 1?
You can start with our Retirement Readiness Questionnaire linked on our website so we can learn more about how we can help in your journey to and through retirement.
Lately, I’ve been seeing a TON of retirement planning content telling people:
“Don’t work another year. Retire now. You’re wasting time.”
And honestly… as a retirement-focused financial planner, that message kind of rubs me the wrong way.
Not because it’s always wrong… but because I think there’s an angle behind it.
In today’s episode, we break down what One More Year Syndrome really is, why it’s become such a popular retirement planning trend on YouTube and podcasts, and why you may want to take this advice seriously… but also why you might need to take it with a grain of salt.
Because retirement isn’t just about sitting on the beach 7 days a week.
Retirement should be about purpose, meaning, freedom, and using your time, talents, and treasure in the way that matters most.
I also share a powerful story from a recent conversation with a prospective client who reached out after losing three of his closest friends last year, and how that kind of wake-up call can completely change the way you think about retirement timing.
At the end of this episode, I give you 3 questions to ask yourself to determine whether you’re truly delaying retirement for financial reasons… or if you’re simply afraid of stepping into the unknown.
If you’re in your 50s or early 60s, have saved $1M+ for retirement, and you’re wondering whether you should retire now or work longer, this episode is for you.
✅ Questions Covered In This Episode:
Should I retire now or work one more year?
Is One More Year Syndrome real?
How do I know if I’m financially ready to retire?
How do I find purpose after retirement?
What if I retire too early?
What if I wait too long and regret it?
⛳ PFR Nation (Who This Is For)
If you’re over 50, have saved seven figures (or multiple seven figures), love golf and travel, and you want to make work optional while minimizing taxes… welcome to the right place.
💬 Comment Below:
Are you stuck in “one more year syndrome”?
What’s holding you back from retiring today — taxes, market uncertainty, healthcare, or fear of the unknown?
I’d love to hear from real retirees and pre-retirees.
Are you interested in working with me 1 on 1?
You can start with our Retirement Readiness Questionnaire linked on our website, so we can learn more about how we can help in your journey to and through retirement.
What if you retired at 60 and lived to 100? That’s a 40-year time horizon in retirement – meaning you could be retired longer than you were in the workforce. While this sounds amazing on paper, it brings about an entirely different set of challenges that most people aren’t prepared for.
Most people planning for retirement think they need their portfolio to last 15, 20, or maybe 25 years. Some conservative planners might even stretch it to 30 years. But here’s the reality: if current trends in technology and medicine continue, living to 100 might not be as far-fetched as it seems.
With AI and technology potentially helping us live longer, retirement planning for longevity becomes critical. You don’t need to save less because you might live longer – you need to be more thoughtful about how you set up your retirement plan. Longevity will be one of the biggest risks for people retiring in 2026 and beyond.
Let’s explore five specific retirement planning considerations if you’re planning for a 40-year retirement.
Building Retirement Income Planning That Lasts 40 Years
The foundation of any solid retirement plan is creating paychecks in retirement. Effective retirement income planning focuses on generating cash flow because assets that don’t generate income won’t help you pay your bills.
Your retirement plan isn’t just about your portfolio – it’s about building lifetime income that never runs out. Retirement becomes much easier when your baseline necessities and fixed expenses are covered by guaranteed income sources. People who have this foundation sleep well at night, especially when markets are volatile.
Maximizing Social Security Benefits
Social Security will likely be the biggest guaranteed lifetime income stream for most retirement plans. When considering retirement planning for longevity, delaying your benefits until age 70 becomes even more valuable. This is especially important for married couples: delaying the larger benefit maximizes the surviving spouse’s income.
Remember, when one spouse dies, the surviving spouse doesn’t receive both Social Security checks. They receive the larger of the two benefits. If you’re planning for one spouse to potentially live until 100, maximizing that larger benefit becomes critical.
Pension Survivor Benefits
If you have a pension, survivor benefit options require careful consideration. Many people want to maximize what they receive during their lifetime and select a 25% or 50% survivor benefit option. Sometimes, NO survivor benefit is selected at all. But if one spouse passes away, not only does Social Security drop, but the pension could also drop by 50% or more.
This results in a significant reduction in income for the surviving spouse, who might live another 15-20 years. When planning for longevity, protecting the surviving spouse’s income becomes paramount.
The Role of Annuities in Guaranteed Retirement Income
Annuities have become a four-letter word for many people, but they deserve consideration in retirement planning for longevity. While there are bad products and bad salespeople in this space, the concept of guaranteed income has real value.
Here’s what’s interesting: clients who have annuities never say they wish they didn’t have that guaranteed paycheck coming in. It’s usually the opposite – during market volatility, people wish they had something safe and guaranteed that they could never outlive.
Consider breaking down your expenses into needs, wants, and wishes – or simply fixed expenses and discretionary expenses. Then figure out what percentage of your fixed expenses are covered by guaranteed income sources. If Social Security covers everything, you might not need additional guaranteed income. But if your guaranteed sources only cover 30-40% of your total expenses, that could be concerning during market downturns.
Optimizing Your Retirement Portfolio Allocation for Longevity
Traditional thinking pushes retirees into conservative portfolios because they’re “living on their portfolio.” But you’re not living on 100% of your portfolio in year one – you might be withdrawing 4-7% annually. Being too conservative creates other risks, particularly inflation and longevity risk.
The Inflation Challenge
The longer you live, the more inflation compounds. Over a 40-year retirement, inflation becomes a massive risk. The best hedge against inflation is equities – traditional stocks in your portfolio. If you trim your equity allocation too much, you might not keep pace with inflation, which could be a bigger risk than market volatility.
Rethinking the 60-40 Portfolio
The traditional 60% stocks, 40% bonds allocation has been popular for retirees, but you need to stress-test it for a 40-year retirement. Bill Bengen, the creator of the famous 4% rule, recommended a minimum of 50% in stocks, with as close to 75% stocks and 25% fixed income as possible for optimal results.
When stress testing retirement portfolio allocation strategies for extended retirements, a 60-40 portfolio sometimes carries more risk than a slightly more aggressive allocation. This isn’t about putting everything in AI stocks – it’s about a well-diversified pool of equities that can hedge against inflation and longevity concerns.
Implementing Guardrails
If you choose a more aggressive allocation, you face sequence of returns risk – the danger of a bear market in your first few years of retirement. Since nobody can time the market, guardrails become essential.
Guyton and Klinger developed four decision rules for portfolio management:
The inflation rule
The prosperity rule
The portfolio rescue rule
The portfolio management rule
Following these rules throughout retirement can dramatically increase your starting withdrawal rate while reducing the risk of running out of money. The most dangerous retirement portfolio might be the one that feels safe on paper but quietly lags behind inflation for 35-40 years.
Long Term Care Planning: Protecting Your Future
Nobody likes thinking about getting old and frail, but Father Time is undefeated. Some of us will need help with daily living activities at the end of life. Long-term care planning isn’t just about buying insurance – it’s about having a comprehensive plan.
The Reality of Care Needs
About 70% of people will need some sort of care, but the duration and type vary greatly. It might be cognitive or physical care lasting two years or ten years. This uncertainty makes planning challenging but necessary.
Beyond Just Insurance
Long-term care planning involves several strategies:
Dedicated pools of funds
Long-term care insurance
Home equity utilization
Self-funding approaches
Even Warren Buffett has long-term care insurance, despite having enough wealth to self-fund care for 100 years. Why? He doesn’t want his heirs to go through a fire sale of investments to pay for care. Insurance creates a dedicated pool of funds and allows caregivers to hire help.
The Burden Factor
One common concern among retirees is: “I never want to be a burden on my loved ones.” Many people have plenty of money for retirement and care expenses, but are afraid to spend because they worry about unexpected healthcare costs.
Long-term care insurance can give people the freedom to spend their assets and enjoy retirement, knowing they have protection against care expenses. It removes the financial and logistical burden from spouses and adult children who are also worried about their own financial security.
Understanding Retirement Spending Phases
If you’re retiring at 60 and living until 100, assuming your expenses will inflate at 3% annually for 40 years might cause you to retire too late or underspend in your Go-Go Years. Retirement actually has three distinct phases with different spending patterns.
The Go-Go Years
Early retirement represents the honeymoon phase when you’re still active and physically able to do what you want. This is when you hit those bucket list golf trips, travel the world, and experience things you wanted to do while working but didn’t have time for.
Expenses might actually increase during the go-go years due to pent-up demand for activities and experiences. This is when health is in your favor, and you can be most active.
The Slow-Go Years
After checking off major bucket list items, you enter the slow-go years. You’re still traveling and active, but maybe not as frequently. Lifestyle stabilizes, and spending typically moderates from the go-go years.
The No-Go Years
Later in retirement, you enter the no-go years when physical limitations increase. While healthcare costs might spike during this phase (hence the need for long-term care planning), studies show that retirees actually experience inflation that’s about 1% lower than general inflation over their entire retirement.
Planning for Spending Changes
This spending pattern – higher in go-go years, moderate in slow-go years, and potentially lower but different in no-go years – should influence your retirement planning for longevity. Don’t assume linear expense growth for 40 years, as this might cause you to retire later than necessary.
However, if you plan to spend aggressively in your go-go years, those portfolio guardrails become critical. You need flexibility to adjust your withdrawal rate based on market performance, especially if you retire during a downturn.
Retirement Legacy Planning and Gifting Strategies
When planning for longevity, consider that if you live until 100, your adult children might be 70-80 years old when they inherit. This reality should influence your thinking about legacy and the utility of money.
The Concept of Diminishing Utility
Money has diminishing returns as you age. If you don’t enjoy money during your go-go years, you lose the utility of those dollars. The same applies to legacy. There’s a difference between giving money when your children are struggling with mortgages, private school costs, or starting businesses versus when they’re already retired.
Giving with a Warm Hand
Consider the benefits of lifetime giving versus leaving everything as an inheritance. Wouldn’t it be meaningful to see what your beneficiaries do with gifts during your lifetime? This also helps you understand their money management skills, which can inform your estate planning decisions.
If you’re gifting money and your children are using it wisely – contributing to retirement accounts, buying homes, funding education – that validates leaving them more when you’re gone. If they’re making poor financial decisions, you might want to restructure your estate plan with more protections. Or better yet, have some meaningful conversations with those beneficiaries while you’re still alive.
Current Gifting Opportunities
The annual exclusion allows each taxpayer to give $19,000 per recipient in 2026 without filing gift tax returns. For married couples with married children, this can add up to substantial annual gifts. These gifts also remove future growth from your estate, which is particularly valuable if you face potential estate tax issues.
The key question is: when does your legacy have the greatest utility? During your lifetime, when you can see its impact, after you’re gone, or some combination of both?
Taking Action on Your Longevity Plan
Living longer can be a blessing, but it creates significant challenges for people retiring today. With technology and medicine evolving rapidly, longevity planning becomes essential for anyone approaching retirement.
Review Your Foundation
Start by reviewing your guaranteed income sources. Look at your Social Security strategy and make sure you’re maximizing not only lifetime benefits but also surviving spouse benefits. If you have a pension, carefully consider survivor benefit options.
Stress Test Your Plan
Run scenarios assuming you live until 100. Would your current plan hold up? Does a traditional 60-40 portfolio work, or do you need 75-25 or even 80-20? Test different allocations considering both your risk tolerance and risk capacity.
Address Long-Term Care
Regardless of your wealth level, you need a long-term care plan. This includes communication about who will do what, where funds will come from, and how you’ll pay for care. The goal is to remove financial and logistical burdens from your loved ones.
Plan Your Spending Strategy
Don’t assume linear expense growth for 40 years. Plan for the realities of retirement spending phases, and if you want to spend more aggressively in your go-go years, implement guardrails to protect against sequence-of-returns risk.
Consider Your Legacy Impact
Think about when your legacy will be most useful. Consider lifetime giving strategies that allow you to see the impact of your generosity while potentially providing valuable teaching opportunities for your beneficiaries.
Retirement planning for longevity requires a different approach than traditional retirement planning. The stakes are higher, the time horizon is longer, and the strategies need to be more sophisticated. But with proper planning, a 40-year retirement can be not just financially sustainable, but truly fulfilling.
If you’re looking for help creating a retirement plan that accounts for longevity, consider working with a financial advisor who specializes in retirement income planning. The complexity of planning for a 40-year retirement makes professional guidance more valuable than ever.
At Imagine Financial Security, we help individuals over 50 with at least a million dollars saved navigate these complex retirement decisions. If you are looking to
Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel.
This is for general education purposes only and should not be considered as tax, legal, or investment advice.
Is the 4% rule actually causing people to work 5 to 10 years longer than they need to?
In this episode of The Planning for Retirement Podcast, Kevin Lao breaks down a series of real historical 40 year retirement backtests using withdrawal rates of 4%, 5%, 6%, and even 7%, and the results are shocking.
Using Portfolio Visualizer, Kevin tests how different withdrawal rates would have performed starting in 1986 through 2025, and then compares those results to what happens when you retire into a tougher market environment like the lost decade (starting in 2000).
This episode is all about the real retirement planning lesson most people miss:
👉 The market you retire into matters more than the rule you follow.
And having a flexible withdrawal strategy beats blindly following any one “safe withdrawal rate.”
In this episode, you’ll learn:
• Why the 4% rule was never meant to be personalized
• How a higher withdrawal rate can work in some retirement scenarios
• Why sequence of returns risk can destroy even a “safe” retirement plan
• How Social Security timing can reduce long-term portfolio risk
• Why spending often declines in retirement (go-go, slow-go, no-go years)
• How taxes and account types (taxable vs IRA vs Roth) impact retirement withdrawals
• Why guardrails and flexible income planning are the key to retiring confidently
If you’re approaching retirement and trying to determine your safe withdrawal rate, this episode will help you understand what really matters, and why retirement planning isn’t about following one rule of thumb, it’s about building a plan that adapts.
Resources:
Guardrails, 4 Decision Rules
Are you interested in working with me 1 on 1?
You can start with our Retirement Readiness Questionnaire linked on our website so we can learn more about how we can help in your journey to and through retirement.
A lot of retirement plans assume your portfolio needs to last 15–25 years… maybe 30 if you’re being conservative. But if you retire at 60 (or earlier) and live to 100, that’s a 40-year time horizon in retirement — and it changes everything.
In this episode, I walk through five retirement planning considerations to address longevity risk for retirees in 2026 and beyond, including:
• How to build paychecks in retirement (not just a portfolio)
• Why getting too conservative can quietly increase risk over a long retirement
• How to think about Social Security, pensions, and annuities as guaranteed income tools
• Why long-term care planning is a logistics problem (that can become a money problem)
• Spending phases: go-go, slow-go, no-go
• And a legacy concept I love: giving with a warm hand instead of a cold one
📌 Free resource: I’m including a PDF in the show notes on the Guyton-Klinger “guardrails” decision rules (inflation rule, prosperity rule, portfolio rescue rule, portfolio management rule).
Guyton and Klinger Decision Rules
👍 If this was helpful, subscribe and leave a 5-star review on Spotify/Apple Podcasts — it helps us reach and impact more people.
Kevin Lao
Links:
Guyton and Klinger Decision Rules
Are you interested in working with me 1 on 1?
You can start with our Retirement Readiness Questionnaire linked on our website so we can learn more about how we can help in your journey to and through retirement.
If you’re planning to retire before you turn 65 and you’re not yet eligible for Medicare, one of the biggest questions on your mind is probably: What am I going to do about health insurance? Planning for early retirement health insurance requires careful consideration of multiple coverage options. The decisions you make can significantly impact both your health and your finances.
The biggest challenge with early retirement health insurance is bridging the gap until Medicare eligibility. This gap can last several years, and without proper planning, it can become one of your largest retirement expenses. Understanding your options can save thousands in premium costs and ensure you maintain the coverage you need.
The reality is that health insurance before Medicare has become increasingly expensive. Many early retirees are experiencing premium increases of 20-40%, with some seeing jumps as high as 70%. For example, one early retiree saw their premium skyrocket from $2,200 to $3,700 per month starting in January – a staggering increase that forced them to explore alternatives.
Let’s explore six potential paths to healthcare coverage that can help you navigate this challenging period before Medicare becomes available.
COBRA Health Insurance: Extending Your Employer Coverage
COBRA (Consolidated Omnibus Budget Reconciliation Act) health insurance allows you to keep your exact employer plan for up to 18 months after leaving your job. It’s a federal law that provides this continuation coverage for individuals who were laid off, voluntarily left, or had their hours reduced below the threshold for benefits eligibility.
The main advantage of COBRA health insurance is continuity. You can keep your exact health insurance policy, which means no disruption to your doctors, your network, or your coverage. This stability can be invaluable during the already stressful transition into retirement.
However, there’s a significant catch with COBRA health insurance: you’ll be responsible for the full premium cost. While you were employed, your employer likely subsidized a large portion of your health insurance costs. For instance, if your policy costs $1,000 per month, your employer might pay $750, leaving your out-of-pocket premium at $250/month. Under COBRA, you’ll pay the full $1,000 per month.
COBRA coverage can extend beyond 18 months in certain circumstances. If you become sick or disabled, or in cases of divorce where you were covered under your spouse’s plan, COBRA health insurance can continue for up to 36 months. This extended coverage can be crucial if you’re dealing with ongoing health issues or major life changes.
COBRA health insurance serves as an excellent bridge option during career transitions. You’re not obligated to keep it for the full 18 months. This makes it a great option for temporary coverage while you research and transition to a longer-term solution. This flexibility makes it particularly valuable for early retirees who need time to evaluate their options.
Employment-Based Health Insurance Options
Before exploring more complex alternatives, consider some straightforward employment-based solutions for health insurance before Medicare. These options might be simpler than you think and could provide the coverage you need while maintaining some income.
Part-time employment with health benefits is becoming more common. Many companies now offer health insurance coverage to employees working as little as 20 hours per week. This could be an ideal solution if you’re not ready to fully retire and want to stay active while securing health coverage.
The beauty of part-time work for early retirement health insurance is that it can provide multiple benefits.
Maintaining some income
Staying engaged and active
Potentially enjoying less stressful work than your previous career
Securing health insurance coverage
Many retirees find part-time work in completely different fields. Perhaps something outdoors, in retail, or in areas they’re passionate about but never had time to pursue during their primary career.
If you’re married, spousal coverage represents another straightforward option. If your spouse continues working while you retire, you can typically join their employer’s health insurance plan. This arrangement is common in households where one spouse retires earlier than the other, providing a natural bridge to Medicare eligibility.
These employment-based health insurance options are the first to consider for early retirees. They often offer the most comprehensive coverage at reasonable costs thanks to employer subsidies.
ACA Health Insurance Early Retirement: Affordable Care Act Options
Early retirement health insurance under the ACA has been the default choice for many people seeking coverage before Medicare. The Affordable Care Act marketplace, accessible through healthcare.gov, offers several advantages that make it attractive to early retirees.
The most significant benefit of ACA health insurance is the potential for premium tax credits. These credits can be substantial – some couples receive thousands in monthly premium subsidies. The key is keeping your modified adjusted gross income under 400% of the federal poverty line.
Upcoming Changes
However, there’s a critical change starting in 2026 that affects ACA health insurance early retirement planning. The “cliff” is returning. This means that if your income exceeds 400% of the federal poverty line, by even one dollar, you lose all premium tax credits. From 2021 to 2025, there was a gradual slope where credits decreased slowly. The hard cutoff is back starting this year.
This change is particularly important for early retirees who might have multiple income sources. Social Security, pension payments, investment income, and distributions from retirement accounts can all push you over the 400% threshold.
Example:
A couple receiving $3,000 in monthly premium tax credits could suddenly receive $0 if they underestimate their income by just a few hundred dollars. If you want to learn more about how these premium tax credits work, check out this YouTube video (The ACA Premium Tax Credits Are Changing In 2026).
ACA policies are guaranteed issue, meaning they cannot deny you coverage regardless of pre-existing conditions. This protection is valuable, but it’s also why premiums are increasing dramatically. The insurance pools include many people with chronic illnesses and high medical costs, driving up costs for everyone.
The policies available through ACA health insurance early retirement are typically high-deductible plans, often with deductibles of $3,000 or more. While the coverage is comprehensive once you meet the deductible, the high upfront costs mean you’ll pay significant out-of-pocket expenses for routine care.
Open enrollment for ACA health insurance early retirement runs from November 1st through January 15th each year. Missing this window means you’ll need a qualifying life event to enroll, making timing crucial for your retirement planning.
Direct Purchase Health Insurance Options Retirees Should Consider
Direct purchase health insurance options involve buying policies directly from insurance companies rather than through the ACA marketplace. This approach can offer significant savings for healthy individuals willing to go through medical underwriting.
Some options for direct purchase insurance include
UnitedHealthcare
Blue Cross Blue Shield
Cigna
Ambetter
When you go directly to insurance companies, you can access both on-exchange and off-exchange policies. Off-exchange policies, sometimes called private policies, don’t have to comply with all ACA regulations and can offer greater flexibility and lower costs.
The key difference with direct purchase health insurance options that retirees should understand is the underwriting process. Unlike ACA policies that are guaranteed issue, these private policies require you to complete a health questionnaire. If you’re healthy and have no major pre-existing conditions, this works in your favor and can lower your premiums.
Example
A family policy with a $10,000 deductible through direct purchase might cost around $850 per month, compared to $3,700 for a similar ACA policy. This dramatic difference reflects the healthier risk pool in underwritten policies versus the guaranteed issue ACA marketplace.
However, direct purchase policies do have limitations. Pre-existing conditions are typically excluded for 6-12 months after your policy starts. If you need ongoing treatment for a chronic condition, you may need to pay out of pocket during this waiting period.
Lifetime Benefit Limits
Another important consideration is lifetime benefit limits. While ACA policies offer unlimited lifetime benefits, many direct purchase policies cap benefits at $1-2 million per person. For most people, this is adequate, but if someone in your family develops a serious chronic illness requiring years of expensive treatment, you could reach this limit.
The solution for lifetime benefit limits is to remove the affected family member from the group policy and enroll them in an ACA policy (during the open enrollment period), which offers unlimited benefits and guaranteed issue coverage. The rest of the family can remain on the lower-cost direct purchase plan.
Many direct purchase policies and ACA-issued policies are HSA-eligible, which is a significant advantage for tax planning. If you’ve been unable to contribute to an HSA due to low-deductible employer coverage, returning to HSA eligibility can provide valuable tax benefits and retirement healthcare savings. Of course, you must be eligible to contribute to an HSA!
Medishare: Christian Health Sharing Alternative
Medishare represents a unique alternative to traditional health insurance before Medicare. As a Christian health-sharing organization operating since 1995, Medishare has paid out significant lifetime claims and offers a faith-based approach to healthcare coverage.
It’s important to understand that Medishare is not health insurance. They operate as a nonprofit organization in which members share healthcare costs according to biblical principles. Instead of paying premiums, you pay a “monthly share amount,” and instead of deductibles, there’s an “annual household portion.”
Medishare’s cost structure can be more attractive than traditional insurance. They offer four annual household portions ranging from $3,000 to $12,000, with monthly share amounts typically lower than comparable insurance premiums.
Unlike direct purchase policies, Medishare requires adherence to certain lifestyle principles. Similar to direct purchase plans, Medishare does have waiting periods for pre-existing conditions. The organization will exclude or limit coverage for pre-existing conditions for 6-12 months, depending on the specific condition and whether it involves prescriptions or medical treatments.
Medishare’s claims approval process can be more stringent than traditional insurance. The organization strictly enforces its biblical principles, which means claims related to activities like drunk driving, tobacco use, or other lifestyle choices that violate their stated principles can be denied. This strict adherence to principles has led to negative experiences for members whose claims were unexpectedly denied.
Medishare’s network differs from traditional insurance networks. They use the PHCS (Private Healthcare Systems) network, so you’ll need to verify that your preferred doctors and hospitals participate before enrolling.
Tax Disadvantages of Medishare
Two significant tax disadvantages of Medishare are worth noting. First, because it’s not technically health insurance, you cannot use it with an HSA. Second, the monthly share amounts are not deductible as medical expenses, even for self-employed individuals who can typically deduct health insurance premiums.
Despite these limitations, many Medishare members report positive experiences, particularly those who appreciate the faith-based community aspect and find the cost savings significant enough to outweigh the restrictions.
Farm Bureau Health Insurance: An Unexpected Option
Farm Bureau health insurance represents one of the most surprising health insurance options retirees can access, even if you’re not involved in farming. The Farm Bureau is a nationwide network of state farm bureaus that serves as the unified voice for farmers and ranchers, but its insurance options are available to non-farmers in many states.
What makes Farm Bureau particularly interesting is that its health insurance policies are underwritten by major insurers like UnitedHealthcare. However, when you call UnitedHealthcare directly, their agents may not even know about the Farm Bureau option, making this a hidden alternative worth exploring.
The underwriting process for Farm Bureau health insurance is more thorough than direct purchase policies. If you’re over 40, they typically require medical records from your most recent physical and prescription records from the last 12 months. This additional scrutiny allows them to offer competitive pricing for qualified applicants.
Like other underwritten policies, Farm Bureau can rate you based on your health profile, meaning you could qualify for their lowest premium category if you’re healthy. You could also potentially be denied coverage if you have significant health issues. The policies are not guaranteed issue.
The premium structure for Farm Bureau health insurance is typically comparable to direct purchase policies, offering significant savings compared to ACA marketplace plans for healthy individuals. They offer both low and high-deductible options, with many policies being HSA-eligible.
One potential advantage of Farm Bureau policies is unlimited lifetime benefits per insured person, compared to the $1-2 million caps common in direct purchase policies. However, this benefit needs verification, as policy details can vary by state and specific plan.
The network and coverage options through Farm Bureau health insurance are typically robust, backed by major insurance companies with established provider networks and claims processing systems.
Medicare Gap Coverage: Planning Your Transition
Understanding health insurance before Medicare requires planning for the eventual transition to Medicare coverage. The gap between early retirement and Medicare eligibility at 65 can span several years, making it crucial to choose coverage that provides both adequate protection and financial sustainability.
Early retiree health plans should be evaluated not just on current costs, but on their sustainability over multiple years. Premium increases are common across all types of coverage. It’s essential to build some inflation buffer into your healthcare budget.
Consider the total cost of ownership for each option, including premiums, deductibles, out-of-pocket maximums, and any excluded services. A lower premium plan might cost more overall if it has high deductibles and limited coverage.
Making Your Early Retirement Health Insurance Decision
Choosing the right health insurance option for early retirement depends on several key factors:
Your health status
Risk tolerance
Budget
Personal preferences
Here’s how to evaluate your options:
If you’re in excellent health with no ongoing medical needs, direct purchase policies or Farm Bureau options might offer the best value. The underwriting process works in your favor, and the premium savings can be substantial.
If you have pre-existing conditions or prefer guaranteed coverage, ACA marketplace plans provide the security of guaranteed issue coverage, though at higher costs. The premium tax credits can make these plans affordable if your income qualifies.
If you value continuity during your transition to retirement, COBRA health insurance provides the least disruption while you evaluate longer-term options.
For those with strong faith-based preferences and healthy lifestyles, Medishare offers a community-oriented alternative with potential cost savings.
Remember that you’re not permanently locked into any single option. You can use COBRA as a bridge while researching other alternatives, or switch between different types of coverage as your circumstances change.
Taking Action on Your Early Retirement Health Insurance Plan
Health insurance before Medicare requires proactive planning and regular evaluation. Premium increases, changing health needs, and evolving regulations mean your optimal choice today might not be your best choice next year.
Start by getting quotes from multiple sources:
ACA marketplace plans
Direct purchase policies from major insurers
Medishare
Your state’s Farm Bureau
Compare not just premiums, but total potential costs including deductibles and out-of-pocket maximums.
Consider working with a financial advisor who specializes in retirement planning to ensure your health insurance choices align with your overall retirement and tax strategies. Healthcare costs are often one of the largest expenses in retirement, making proper planning essential for your financial security.
The key to successful early retirement health insurance planning is
Understanding all your options
Evaluating them based on your specific situation
Remaining flexible as circumstances change
With proper planning, you can bridge the gap to Medicare while protecting both your health and your retirement savings.
At Imagine Financial Security, we help individuals over 50 with at least a million dollars saved navigate these complex retirement decisions. If you are looking to
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Elon Musk went on the Moonshots podcast and said you don’t need to save for retirement anymore because AI + robots will make work optional and money won’t matter.
If you’re 55+, sitting on seven figures in a 401(k)/IRA, and you’re trying to figure out when you can stop working, travel more, and play more golf — this episode is for you.
In this video, I’ll:
• Play Elon’s quote and explain what’s going on
• Break down the key takeaways from the full interview (energy/solar, longevity, UHI)
• Explain why it’s a terrible idea to change your retirement plan based on a viral clip
• Give you 3 smarter moves you can make right now
The 3 smarter retirement moves:
1. Plan for longevity (modern medicine + AI could mean a longer retirement)
2. Plan for higher taxes (UHI / Social Security / Medicare strain = tax risk)
3. Plan for earlier retirement (AI disruption + layoffs could push you out sooner than expected)
Thanks for listening!
~Kevin
Are you interested in working with me 1 on 1?
You can start with our Retirement Readiness Questionnaire linked on our website so we can learn more about how we can help in your journey to and through retirement.
Susan is 65, recently widowed, and has saved $2.1 million for retirement.
On paper, she’s more than fine… but emotionally, she doesn’t feel fine.
After watching her husband pass away, Susan is ready to retire five years earlier than planned so she can enjoy her “go-go years” while she still has her health.
But she’s terrified of one thing:
👉 Becoming a burden on her adult children.
In today’s episode, I walk you through Susan’s retirement plan inside our financial planning software and stress-test her biggest goals:
• Retiring ASAP
• Maximizing Social Security
• Traveling extensively for the next 10 years
• Gifting during her lifetime (“giving with a warm hand”)
• And protecting against the risk of long-term care later in life
By the end, you’ll hear the 7 key takeaways Susan needs to consider and how you can apply them to your own retirement plan.
✅ What We Cover In This Episode
Susan’s Retirement Goals (And The Real Conflict)
Susan wants to:
• retire immediately so she can travel now
• delay her own Social Security until age 70 to maximize lifetime income
• gift to her adult children (including down payment help)
• give to charity during her lifetime
• and still maintain full financial independence
Baseline Expenses + Go-Go Travel Plan
We build Susan’s plan around:
• $6,500/month baseline retirement spending
• healthcare cost assumptions (inflated higher than normal inflation)
• $20,000/year travel spending for 10 years (her go-go years)
Social Security Strategy for Widows
Susan may be able to:
• claim survivor benefits first
• delay her own benefit until age 70
• then switch to her maximum benefit for long-term protection against longevity and inflation
The Portfolio Reality (And Risk Tolerance vs Risk Capacity)
Susan’s portfolio was built around her late husband’s investing style:
• more aggressive than she’s comfortable with
• which creates stress right as she enters retirement
We walk through how shifting allocations can impact:
• success probability
• legacy potential
• and long-term-care resilience
The Monte Carlo Results (And What They Actually Mean)
Susan’s baseline plan is extremely strong — but as we add:
• $50,000 down payment gifts per child
• ongoing annual giving
• reduced investment risk
• and a long-term care event
…the plan changes fast.
And I explain why Monte Carlo “probability of success” is better framed as:
✅ “Probability of never needing to make an adjustment.”
The Long-Term Care Risk That Changes Everything
The biggest threat isn’t whether Susan can retire…
…it’s whether a long-term care event later in life hits during a market downturn.
This is why long-term care is often less of a “number” problem and more of a sequence-of-returns risk problem.
We discuss why long-term care insurance may give Susan something priceless:
➡️ permission to spend confidently now.
Roth Conversions + Tax Strategy (Without Getting Too Deep)
Susan has a potential Roth conversion window between retirement and RMD age.
We also talk about:
• the tax problem of leaving large IRAs to adult children
• why the kids’ tax bracket matters more than your own
• and how strategies like QCDs (Qualified Charitable Distributions) can play a role
I hope you find this episode useful. Make sure to share this video / podcast with someone else who is in a similar situation.
-Kevin
Are you interested in working with me 1 on 1?
You can start with our Retirement Readiness Questionnaire linked on our website so we can learn more about how we can help in your journey to and through retirement.
