Can We Retire at 64 & 62 With $1.3 Million? A Retirement, Tax & Roth IRA Case Study
By David Lundberg, MBA, MSCJ, RYT 200. Flat Fee Financial Planner
Can we retire now, and how much can we actually spend with taxes in mind? This is what married couple Steve and Ashley want to understand. Steve is 64. Ashley is 62. They live in North Carolina, have accumulated approximately $1.3 million in investable assets, and are considering retiring now.
At first glance, $1.3 million sounds like a substantial amount of money. But that number alone does not tell Steve and Ashley whether they can retire. It does not tell them how much they can spend after taxes, how they will pay for healthcare before Medicare, when they should consider claiming Social Security, whether Roth IRA conversions could make sense, how their investments should support their retirement, or what happens financially when one of them dies.
Those are the questions that can keep people awake at night after spending decades working and saving. Steve and Ashley also want to understand what a one-time flat-fee comprehensive financial plan could actually look like. They are not starting with the question, “What investment should we buy?” They want to see their entire retirement picture, understand their choices, compare different strategies, and determine what those decisions could mean for their life together.
That is where comprehensive flat fee retirement planning begins.
Meet Steve and Ashley
Steve and Ashley's approximately $1.3 million of investable assets consists of:
Steve's Traditional IRA: $500,000
Ashley's Traditional IRA: $340,000
Steve's Roth IRA: $100,000
Ashley's Roth IRA: $130,000
Joint taxable brokerage account: $230,000
Cash and bank accounts: $40,000
They also own a home worth approximately $750,000, with around $400,000 of equity. For this analysis, I keep the home separate from their $1.3 million of investable assets.
For Social Security planning purposes, we estimate that Steve could receive approximately $2,700 per month if he claims at age 65, while Ashley could receive approximately $1,650 per month if she claims at age 62. These are hypothetical assumptions used to illustrate the planning process.
Their situation looks relatively straightforward until we start asking deeper questions. Approximately $840,000 of their assets are held in Traditional IRAs, meaning taxes could become an important part of their retirement-income decisions. They are also retiring at different ages, neither is currently on Medicare, they have multiple types of investment accounts with different tax characteristics, and they want to understand what happens to the surviving spouse and eventually their beneficiaries.
This is why retirement planning is about much more than reaching a certain account balance.
Watch the Video: Can We Retire at 64 & 62 With $1.3 Million?
This article expands on my YouTube video with numerous visuals, “Can We Retire at 64 & 62 With $1.3 Million?” In the video, I walk through Steve and Ashley's hypothetical retirement assets, spending, healthcare, Social Security, Roth IRA conversion analysis, taxes, surviving-spouse considerations, inheritance, and estate planning.
https://www.youtube.com/watch?v=cZK9OiN87S4&t=434s
Use this case study as a guide to the questions you may want to ask, not as a blueprint for what you should do.
Is $1.3 Million Enough to Retire?
This is where the conversation gets interesting. Two married couples could both have $1.3 million and be in completely different retirement situations. One couple may spend $5,000 per month while another needs $12,000. One may have a pension while another does not. One may have most of its money in Traditional IRAs and 401(k)s, while another has substantial Roth IRA and taxable assets. One may already be on Medicare while another needs several years of healthcare coverage before reaching age 65.
This is why I do not believe retirement planning should begin and end with a portfolio balance.
The better questions are: How much do you need to live the life you want? How much can you spend after taxes? Where will that money come from? How long might it last? What could disrupt the plan?
In the hypothetical planning analysis shown in the video, the software illustrates a conservative spending recommendation of approximately $8,270 per month after taxes, with a higher spending level of approximately $9,346 per month under different assumptions and guardrails.
Those numbers are not guarantees or predictions. They are planning estimates based on the assumptions entered into the hypothetical plan. There is also a human side that software cannot fully understand. Steve and Ashley may want to travel, spend time with family, pursue hobbies, or enjoy experiences during their first five or ten years of retirement while they are younger and more active. Their spending could change as they age.
A good financial plan should be capable of changing with them. The software helps us do the math, but people still have to determine what kind of life they actually want that money to support.
Healthcare Can Change the Retirement Decision
Steve is 64. Ashley is only 62. If they retire now, healthcare becomes part of the decision immediately because Medicare generally begins at age 65. For this hypothetical case, we estimate approximately $24,000 per year for their pre-Medicare healthcare coverage. Steve has a relatively short bridge until Medicare. Ashley has several more years.
Once Steve reaches Medicare eligibility, the household's healthcare expenses and coverage structure change. When Ashley eventually reaches 65, they change again. This is a perfect example of why “I have $1.3 million. Can I retire?” is not enough information. Healthcare costs have to be incorporated into retirement cash flow. Taxes need to be incorporated. The timing of Social Security matters. Investment withdrawals matter. All of these decisions interact.
What About Their $840,000 in Traditional IRAs?
One of Steve and Ashley's biggest questions is whether they should convert some of their approximately $840,000 of Traditional IRA assets to Roth IRAs. This is also one of the most common questions I hear as a financial planner.
Should I do a Roth IRA conversion? My answer is generally: Maybe. Maybe not. There is no automatic yes or no.
When money is converted from a Traditional IRA to a Roth IRA, the taxable amount converted generally becomes income in the year of conversion. A $10,000 taxable conversion can add $10,000 of income. A $100,000 taxable conversion can add $100,000. That is why someone should not simply hear that Roth IRAs are attractive and start converting money.
Always perform a tax analysis before making a Roth IRA conversion.
For Steve and Ashley, we can model different conversion amounts and strategies. We can examine current and projected federal and North Carolina taxes, tax brackets, future required minimum distributions, Social Security, Medicare IRMAA, long-term capital gains, healthcare considerations, available cash to pay conversion taxes, longevity, and what may eventually happen to the surviving spouse and their beneficiaries.
We can also examine potential break-even periods. If Steve and Ashley intentionally pay additional taxes today through Roth conversions, how many years might it take before the projected future tax benefits outweigh those upfront taxes? Could it take 10 years? Fifteen? Twenty? Would a partial conversion make more sense? Would converting during certain retirement years be more attractive than others?
The purpose is not to convert simply for the sake of converting. The purpose is to understand the choices.
Taxes Should Be Evaluated Over a Lifetime
One of the most important ideas in retirement tax planning is that paying the least tax this year is not necessarily the same thing as paying the least tax over your lifetime.
A Roth IRA conversion could increase taxes today while potentially creating greater tax flexibility later. Conversely, accelerating taxes today without enough future benefit could leave someone worse off.
The analysis also cannot stop at the federal income-tax bracket. A Roth IRA conversion can interact with long-term capital gains, Social Security taxation, Medicare IRMAA, the Net Investment Income Tax when applicable, state income taxes, and potentially Affordable Care Act premium tax credits for someone retiring before Medicare. That does not mean an increase somewhere else automatically makes a Roth conversion a bad decision. It means we should try to understand and quantify the tradeoff.
Do not guess. Model it.
Tax laws also change. Federal and state rules can change. Your income can change. Your health and retirement timing can change. This analysis therefore needs to reflect your actual circumstances rather than relying on a generic Roth conversion rule found online.
Social Security Is More Than “What Age Should I Claim?”
Steve and Ashley also need to determine when they may want to claim Social Security. Steve's hypothetical benefit at 65 is approximately $2,700 per month. Ashley's hypothetical benefit at 62 is approximately $1,650. They could claim at different ages, and their decisions can affect not only current household income but potentially the surviving spouse later.
This is another area where I prefer not to evaluate one decision in isolation. If delaying Social Security requires additional portfolio withdrawals, where should those withdrawals come from? Traditional IRA? Roth IRA? Taxable investments? Could lower-income years create opportunities for Roth conversions? How does healthcare fit into the equation?
Social Security planning becomes more useful when it is integrated with the tax and investment plan.
What Happens When One Spouse Dies?
This is a conversation married couples sometimes avoid, but it is one of the most important parts of retirement planning. Steve and Ashley are planning a retirement together. Statistically and practically, however, one of them is likely to eventually live without the other.
When the first spouse dies, the household does not simply continue financially as though nothing changed. A couple receiving Social Security benefits based on two records generally should not expect both full monthly benefits to continue after the first death. Survivor-benefit rules apply, and a surviving spouse who qualifies for both their own retirement benefit and a survivor benefit generally receives the higher applicable amount rather than both full benefits added together. Household income can therefore decrease.
Taxes can change at the same time. While married and filing jointly, a couple generally has wider federal tax brackets and a larger standard deduction than a single taxpayer. For 2026, the basic federal standard deduction is $32,200 for Married Filing Jointly compared with $16,100 for a Single filer.
After the applicable survivor filing rules no longer apply, the surviving spouse may eventually file as a Single taxpayer. Imagine Ashley surviving Steve while still holding a substantial Traditional IRA. She may have less Social Security income coming into the household while taxable IRA distributions continue, potentially within narrower Single tax brackets.
Suddenly, the Roth conversion question we asked years earlier has another dimension. Could intentionally paying some taxes while Steve and Ashley are both alive and filing jointly potentially create greater tax-free Roth IRA flexibility for the surviving spouse?
Maybe. Maybe not. The answer still requires analysis.
Retirement Planning Eventually Becomes Inheritance Planning
Steve and Ashley also want to understand what happens when their children or other beneficiaries eventually inherit their money. This is where the type of account matters significantly.
A beneficiary inheriting a Traditional IRA may ultimately owe income taxes as distributions are taken. For many non-spouse individual beneficiaries, current federal rules generally require the inherited account to be fully distributed by the end of the tenth year following the original owner's death. Depending on the circumstances, annual required distributions may also apply during that period. Surviving spouses and certain other eligible designated beneficiaries can have different options.
An inherited Roth IRA can have very different income-tax characteristics. Beneficiary distribution rules still apply, but qualified Roth distributions can generally provide tax-free funds to beneficiaries when applicable requirements are satisfied. Steve and Ashley's taxable brokerage account has another set of rules. Under current federal law, inherited property generally receives a basis adjustment to fair market value at death, subject to important exceptions and ownership rules. That can materially change the capital-gains consequences for the beneficiary.
Traditional IRA. Roth IRA. Taxable brokerage account.
They may all appear as investment assets on a net-worth statement, but they are not necessarily worth the same amount after taxes, and they do not necessarily create the same outcome for a surviving spouse or beneficiary.
That is why tax planning eventually becomes estate and inheritance planning too.
What About Their Will and a Potential Trust?
Steve and Ashley already have a will, but they also ask whether they need a trust. There is no universal answer.
Trust planning depends on what they are trying to accomplish, their assets, beneficiaries, state law, incapacity concerns, probate considerations, property ownership, family circumstances, and many other factors. This is where comprehensive financial planning should coordinate with qualified estate-planning attorneys and other professionals.
A financial planner can help identify issues, organize assets, analyze financial implications, review beneficiary considerations, and coordinate the overall strategy. The attorney provides the appropriate legal advice and prepares the legal documents.
The question should not simply be, “Is a trust better than a will?”
A better question is: What do we want our assets and legal documents to accomplish while we are alive, if one of us becomes incapacitated, when the first spouse dies, and eventually when our assets pass to the next generation?
Your Situation, Your State and Your Laws Matter
Steve and Ashley live in North Carolina. You may not. That distinction matters.
Federal tax law is only one part of retirement and estate planning. Your state can have different income-tax rules, estate or inheritance taxes, property laws, trust rules, and other considerations. Owning property in another state can create additional issues.
The same principle applies to nearly everything discussed in this article. Your Social Security benefits may be different. Your Medicare situation may be different. Your IRA balances may be different. You may have a pension, business, rental properties, concentrated stock, life insurance, long-term care needs, different beneficiaries, or an entirely different family structure.
This article is a guide and provides general educational information. It is not a formula for what you should do.
Understanding these concepts can help you ask better questions. Before acting, however, you need to understand the laws, taxes, risks, costs, and potential consequences that apply to your specific situation. That is particularly important before implementing a Roth IRA conversion, changing Social Security timing, restructuring investments, changing beneficiaries, moving assets, or making estate-planning decisions.
What Does a One-Time Flat-Fee Financial Plan Actually Look Like?
Steve and Ashley's case illustrates why someone might want comprehensive financial planning even if they are not looking to immediately transfer their investments to a new advisor.
Some people simply want to know: Can we retire, and what should we be thinking about before we do?
That is one reason we offer a one-time flat-fee comprehensive financial plan.
The process can evaluate retirement timing and after-tax cash flow; Social Security; Roth IRA conversions and lifetime tax planning; required minimum distributions; healthcare, Medicare and IRMAA; investments and risk; retirement-income planning; estate and inheritance considerations; surviving-spouse planning; and coordination with tax and legal professionals when appropriate. The objective is not to begin with a financial product. It is to begin with the person.
Understand the facts and goals. Analyze the alternatives. Show the math. Explain the potential advantages and disadvantages. Discuss Plans A, B, C, and sometimes D. Then help the person or couple make an informed decision.
For people who want continued support after completing a plan, we can also provide ongoing flat-fee financial planning and investment management.
Ongoing Flat-Fee Retirement Planning in North Carolina and Arizona
For individuals and couples looking for an ongoing no AUM flat-fee financial planner in Cary, NC, or retirement and tax planning elsewhere in North Carolina or Arizona, I believe the retirement conversation should extend far beyond investments. Your financial plan should help you understand whether you can retire, how much you may be able to spend after taxes, how healthcare fits into the plan, when Social Security may make sense, whether Roth IRA conversions deserve consideration, how your investments support your income needs, what happens to the surviving spouse, and what eventually happens to the assets your family inherits.
We can also work virtually with clients where we are appropriately registered or otherwise permitted to provide services. Whether someone chooses a one-time flat-fee financial plan or an ongoing planning relationship, the principle remains the same:
The financial plan should come first.
Can Steve and Ashley Retire?
They began with a seemingly simple question: “Can we retire now, and how much can we spend after taxes?”
Answering it required us to look at much more than their $1.3 million.
We had to consider their spending, healthcare, Social Security, Traditional IRAs, Roth IRAs, taxable investments, Roth conversion possibilities, taxes, investments, surviving-spouse risks, inheritance, estate planning, and the life they actually want to live. The plan does not make their decisions for them. It gives them greater clarity about their choices.
That is ultimately what I believe comprehensive retirement planning should accomplish. Understand where you are today. Understand your choices. Understand the potential risks and tradeoffs. Then make informed decisions about the retirement, family, and legacy you want to build.
Contact: David@AwakenFinancialDesigns.com or David@Wisepathgroup.com
Important Disclosure
This article is provided for general educational and informational purposes only and should not be construed as individualized investment, financial, tax, insurance, Social Security, Medicare, estate-planning, or legal advice. Steve and Ashley are hypothetical individuals used solely for educational illustration. All financial projections, benefits, tax examples, and planning scenarios are hypothetical, depend on assumptions, and are not guarantees of future results. The examples in the video and this article are hypothetical and educational. They are designed to demonstrate the types of questions that can be evaluated through a comprehensive financial plan. They are not a recommendation for what another person or couple should do. Every person is different. Your income, assets, taxes, state of residence, healthcare, Social Security, family, investments, estate plan, and goals can materially change the analysis.
Tax laws, retirement-account rules, Social Security and Medicare provisions, estate and inheritance laws, and other regulations can change and may apply differently depending on individual circumstances. State laws and tax treatment vary. Roth IRA conversions may create taxable income and can affect other areas of a financial plan. Inherited-account, basis, beneficiary, and estate-planning rules depend on factors including account ownership, beneficiary type, timing, applicable federal law, and state law.
Investing involves risk, including possible loss of principal. Before implementing a financial, tax, Roth IRA conversion, Social Security, investment, insurance, retirement-account, or estate-planning strategy, consider your individual circumstances and consult the appropriate qualified financial, tax, insurance, and legal professionals.
