"I'm 60 years old, I'm getting fed up with work, and I'm ready to see if I can go ahead and retire.
This is how a conversation started with a prospective client of ours recently. She and her husband had about a million dollars saved between their retirement accounts and bank accounts, and they wanted to see if that was enough for them to retire immediately. So we did what we do with any prospective client at Spark Wealth Advisors – we ran through a full retirement plan to determine if their savings would last the rest of their lives based on their desired lifestyle and spending.
In this blog post, we’ll share the ins and outs of the financial plan we created for this couple, Tom and Camille (names changed for privacy), to help you determine if you can retire as well. Check out the YouTube video below for a more detailed walk-through of our financial planning software.
Tom and Camille's Financial Snapshot:
Account Breakdown:
Current Earnings:
Social Security Estimates at Full Retirement Age (67):
Using our financial planning software, we ran a Monte Carlo simulation to project 1,000 different scenarios for Tom and Camille's retirement. This initial analysis showed only a 5% probability of their money lasting throughout their retirement if they retired immediately at 60, a clear indication that adjustments were needed.
Key Adjustments Discussed:
By delaying Social Security until full retirement age (67), Tom and Camille would receive significantly higher benefits. For example, waiting until 67 could result in $442,000 more over their lifetimes compared to claiming at 62.
After implementing these adjustments, we saw a significant improvement in their retirement plan:
This improved their probability of success from 5% to 79%.
Income and Expenses Breakdown:
We calculated that they would need approximately $48,000-$56,000 in their first few retirement years, which would be set aside in low-risk investments. This ensured a sustainable withdrawal rate from their portfolio.
Expected Portfolio Growth:
Initial Withdrawal Rate:
This low withdrawal rate indicates a sustainable plan, reducing the risk of depleting their funds.
After further discussions, Tom and Camille decided to budget for $6,500 per month instead of $7,000, increasing their probability of success to 82%.
Future Flexibility:
While we couldn't make Camille's wish of retiring immediately possible, by compromising and adjusting their plan, we ensured she could retire in the near future with confidence and clarity.
If you're considering retirement and want a personalized financial plan, Spark Wealth Advisors offers a free upfront financial plan to help you make informed decisions. Reach out to get started.
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By understanding and applying these strategies, you can retire with confidence, ensuring your financial security and peace of mind.