“I also have a work health savings account with $300,000 to help with our medical expenses.” (Photo subjects are models.) – Getty Images/iStockphoto
I am 64 and my wife is 65. We have $1.5 million in 401(k)s and IRAs and $90,000 in a Roth IRA. We are looking to retire next year. I will receive $3,000 in a monthly pension that my wife will inherit upon my death. She will get $2,600 in Social Security and I’m thinking of waiting until I’m 67 when I get $3,800.
Our current combined salary is $210,000. We have 2 houses with a primary mortgage of $500,000 at 2.75%. Our other house has a $300,000 mortgage at 2.75% with a positive rent of $800 after paying the mortgage. We have two challenges: fiscal optimization and ensuring the sustainability of our money.
I also have a work health savings account with $300,000 to help with our medical expenses. I am not looking to leave any money to the children other than at least one of the houses. The properties are worth about $1 million each. What advice can you give us about our retirement plan in 2026?
Now I am 64 years old
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Between Social Security and your pension, you have a guaranteed income of $112,800 a year for life. – MarketWatch illustration
Congratulations on leaving no money to your children! (Other than one or both houses, which is a sizable and generous inheritance.) I’ve said it before and I’ll say it again: Your assets are not your children’s inheritance unless they eventually end up in their bank account upon your death. Until that happens, it’s your money.
With your properties, rental income, future Social Security benefits, retirement, and over $1.5 million in retirement funds, you’re in a very nice place. In fact, between Social Security and your pension, you have a guaranteed income of $112,800 per year for life. And that’s before you dip into your IRA or the $9,600 annual rental profit.
If you took 4% a year from your IRA — and you’re clearly more than capable of taking much less than that — you’ll have another $63,600 a year, bringing your grand total to $176,400. If your withdrawals are controlled, taken with the advice of an accountant, and you avoid withdrawals during a market downturn, then you won’t need to follow the 4% rule.
In your favor: (1.) You are not required to rely solely on your IRA. (2.) Have a big HSA with $300,000 to cover decades of tax-free healthcare. (3.) You have rental income that more or less offsets the cost of your home (4.) You can increase your cash flow by selling one of your homes (5.) And you don’t have to worry about leaving money behind.
Required minimum distributions (RMDs) should be your focus. Now you’re on track, if you’re not careful, to slide into the 24% and/or 32% tax brackets, which could be even higher than you were in your working years. You also open yourself up to potential Medicare Income Monthly Adjustment Surcharges (IRMAAs).
Your mission, if you choose to accept it, is to avoid falling off that tax cliff in the 32% bracket, and one way to do that is to start Roth conversions as soon as possible (if/when your financial advisor gives the green light for such a strategy). A typical Roth conversion window is when you retire and before you claim Social Security.
You have a pretty nice feather in your cap: your $300,000 Health Savings Account, which you can use strategically in your retirement years. The best part about HSA accounts? Withdrawals are tax-free and do not affect your Medicare IRMAA, Social Security tax rate, or other taxable income.
And there’s a wind in that feather working in your favor: time. Under SECURE Act 2.0: Your first RMD for you and your spouse will be at age 75. These apply to traditional IRAs and 401(k)s and do not apply to Roth accounts, which have been funded with after-tax dollars. At age 75, your RMD is that age divided by 24.6, which equals 4.07% of your tax-deferred balance.
Other jobs for your to-do list: Estimate your monthly retirement expenses and test them against your income. Decide whether to claim Social Security at age 67 or wait until age 70 (and get about 8% more a year). Create a “tax map” with your accountant to estimate your brackets before and after Social Security and RMDs.
Get out and retire and keep your accountant on speed dial.
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Previous columns by Quentin Fottrell:
“Never ask for anything”: I’m 61 with a $1.5 million 401(k). My girlfriend says I do too much for my 28 year old son. Is he right?
“Am I simply the unloved son?” My mother ghosted me after my father died. Are they stealing his money?
‘We all have economic jitters’: After the Fed cuts rates, should my son buy a $600,000 house?
