Retirement Income Case Study -- Jamie and Sam

This is a post about Bonfire Retirement Planner, the best app for planning retirement income and taxes. Available on iPhone and iPad. Get Started Now For Free!

Jamie and Sam are a married couple in their mid-50s. Jamie is 56 years old and Sam is 54. Their goal is to retire in 2 years when Jamie turns 58.

They live in a medium cost-of-living city, where they own a home with a paid-off mortgage. Sam is planning on starting Social Security at age 62, estimated to be $21,000 per year. Jamie will wait until reaching 67 and is expecting Social security to be $33,000 per year.

Retirement Assets

Their other assets are as follows:

Asset Owner Account Type Balance
Shared Investments Taxable $185,000
Jamie 401k $460,000
Sam Traditional IRA $175,000
Sam Roth IRA $65,000
Total $885,000

Retirement Expenses

Their combined estimated expenses in retirement are $53,500 per year. However, they'd like to be able to budget $75,000 to cover additional discretionary items such as travel in their early retirement years.

After entering their profile and asset details into Bonfire Retirement Planner and running the planner, they see a range of retirement income plans organized by risk level.

Jamie and Sam are trying to understand how much risk they should take to retire when they want while maintaining the quality of life they desire.

Retirement Income Plans

Looking at the range of plans they see that the two conservative ones are very conservative. Both have a 100% success rate. But the income is only about $31,000 per year, which doesn't meet their needs. The medium- to aggressive-risk plans provide significantly higher income, ranging from $69,000 to about $95,000, but also have failure rates as high as 12%.

Understanding the withdrawal strategy is a key part of understanding each plan, along with income and level of risk. In this case, some use a 'Fixed Dollar' withdrawal strategy and others use a 'Fixed Percent' strategy.

Fixed-dollar plans set your income in the first year of retirement based on an initial withdrawal percentage, and in subsequent years income is adjusted for inflation. The benefit of choosing a fixed-dollar plan is that income remains stable year over year, even when the market has a bad year and your portfolio balance goes down.

Fixed-percent plans are even simpler: you withdraw a fixed percentage from your portfolio each year. With these plans, your income will fluctuate with the market. In good years your income will increase, but during a bear market, your income goes down. Fixed-percent plans will generally provide higher income but you'll need to reduce expenses when the market is down.

Jamie and Sam believe that the medium-risk fixed-percent plan will likely be the best option for their needs. They will start their retirement withdrawing a relatively high 7% from their portfolio annually. This amount will go down in their sixth year of retirement as Sam starts Social Security and again in the tenth year as Jamie starts Social Security. After the tenth year, they expect Social Security to cover their core living expenses.

Their plan has a relatively high success rate at 94%, and they feel confident they'll be able to be flexible and reduce spending as needed during a bear market. Feeling confident in their high-level plan for retirement, they'll make plans to meet with their financial advisor in the coming months to talk through things in greater detail.

- Scott


  1. Multnomah Falls photo
Retirement Income Case Study -- Jamie and Sam


Newsletter Signup