A $2.8 million portfolio supports $135,000 annual spending if brokerage withdrawals are capped at $40,000 yearly until Social Security kicks in.
A 60-year-old couple with $2.8 million across 401(k), Roth IRA, and brokerage accounts can retire by December 31, 2027, if they limit annual taxable withdrawals to $35,000-$40,000. This strategy avoids tapping the $1.6 million 401(k) prematurely, reducing sequence-of-returns risk during the eight-year gap before Social Security at age 70.
The approach prioritizes brokerage withdrawals to let the 401(k) compound tax-deferred, while capping capital gains taxes at 15%. Roth conversions of $50,000-$80,000 yearly during low-income years further flatten required minimum distributions and cut lifetime tax exposure. The couple targets $135,000 in annual spending, a level their portfolio appears capable of sustaining.
Stanford economists highlight the withdrawal sequence as a critical but often overlooked factor in retirement planning. The strategy hinges on disciplined spending and tax management to preserve principal.