Get new articles by email:

Oblivious Investor offers a free newsletter providing tips on low-maintenance investing, tax planning, and retirement planning.

Join over 20,000 email subscribers:

Articles are published every Monday. You can unsubscribe at any time.

Planning for Uneven Retirement Spending

Jim writes in to ask:

“I’m 58 now and planning to retire in the next couple years. After much reading, I’ve decided that I’m comfortable using a 4% starting withdrawal rate, which means I need to have saved 25 times my annual expenses.

The thing is, I expect my expenses to change over time. Approximately 3 years into retirement, I will finish paying off my mortgage. And once I reach age 70 I’ll begin collecting Social Security, which will further reduce the amount I’ll have to withdraw from my portfolio each year.

How do I account for those changes when calculating how much I need saved before I can retire?”

Situations like Jim’s are pretty common, due to the fact that many investors retire before they begin taking Social Security. So I thought it would make sense to work through it to provide a framework for other readers who have similar plans.

How About Some Actual Numbers?

First, let’s make up some numbers to use. Ignoring inflation for the moment, let’s assume that Jim plans to withdraw the following amounts from his portfolio:

  • $55,000 per year for the first 3 years,
  • $40,000 per year for the next 7 years (assuming his mortgage payments totaled $15,000 per year), and
  • $30,000 per year for the remainder of his life (assuming Social Security provides $10,000 of income per year).

So how much money does Jim need saved before he can retire?

Mental Accounting Tricks

I often find that a little mental accounting makes things easier to understand. Try thinking of Jim’s spending needs as distinct segments:

  • $30,000 per year, plus
  • $10,000 per year for 10 years (from age 60-70, before claiming Social Security), plus
  • $15,000 per year for 3 years (for the final 3 years of his mortgage).

Given that Jim wants to use a 4% starting withdrawal rate, funding the $30,000-per-year need would require $750,000 of savings (because $30,000 ÷ 0.04 = $750,000).

From there, we can just add the remaining numbers:

  • $100,000 to fund 10 years of $10,000 per year, and
  • $45,000 to fund 3 years of $15,000 per year.

So, in total, Jim could retire once his savings reach $895,000.

Accounting for Interest

In actuality, Jim can retire with slightly less than $895,000 due to the fact that he can earn interest on the money that will go toward funding the final 3 years of mortgage payments.

And if Jim expects his savings to outpace inflation, he can reduce his savings goal a little further to account for the above-inflation interest earned on the money that will fund the $10,000 of annual spending prior to claiming Social Security. (I’m assuming that, in contrast to the mortgage payments which are a fixed nominal amount, this $10,000 per year will increase with inflation–hence the need to earn interest above inflation in order to reduce the savings target.)

Multiple (Mental) Portfolios

As to the question of how to actually invest the money, I think it can be helpful to continue with our mental accounting. Think of it as three separate portfolios:

  • A $750,000 portfolio, invested in keeping with whatever asset allocation you think is appropriate for a typical retirement portfolio.
  • A $100,000 portfolio, invested very conservatively (nominal Treasury bonds or TIPS, for example).
  • A $45,000 portfolio, invested in something with zero risk (CDs, savings, etc.).

Retiring Soon? Pick Up a Copy of My Book:

Can I Retire Cover

Can I Retire? Managing a Retirement Portfolio Explained in 100 Pages or Less

Topics Covered in the Book:
  • How to calculate how much you’ll need saved before you can retire,
  • How to minimize the risk of outliving your money,
  • How to choose which accounts (Roth vs. traditional IRA vs. taxable) to withdraw from each year,
  • Click here to see the full list.

A Testimonial from a Reader on Amazon:

"Hands down the best overview of what it takes to truly retire that I've ever read. In jargon free English, this gem of a book nails the key issues."


  1. What I’d like to know is this: for someone retiring between 62-70 (i.e., first and last available ages for taking Social Security), is it better as a rule to take SS earlier and give the portfolio more time to grow, or better to take SS later and at first rely more on the portfolio?

    (The question pertains just as well for pensions, but that doesn’t apply personally to me. At present, too, I am thinking of retiring by 66 or 67, when I will be at full retirement age and projected SS benefits will be substantially higher than if I started them at 62.)

  2. As to Social Security, each year that one delays SS can be thought of as purchasing a lifetime annuity (one with inflation adjustments). That is, you’re giving up a certain amount of money now in exchange for the promise of a certain (inflation-adjusted) payment per year for the rest of your life.

    It’s a heck of a deal as compared to other annuities (especially given current low interest rates). So if you’re even considering annuitizing a portion of your portfolio, delaying Social Security can be an excellent way to do so. See this Bogleheads discussion (particularly the posts from sscritic) for related further information.

    I can’t speak to pensions, because the rate of increase in annual payments for each year of delay varies from plan to plan.

    Edited to add: For those looking for information on the rate at which Social Security payments increase for each year of delay, here are the figures for delaying from 62 to your “full retirement age” and here are the figures for delaying from “full retirement age” to age 70.

  3. On what’s best practice for collecting SS benefits, the final answer primarily hinges on that great unknowable: when will you die?

    To a lesser extent, it also hinges on other unknowables:
    – what will happen with taxation of SS benefits in the future?
    – will SS benefits be left intact at current rates or will they be reduced?
    – will SS benefits continue to enjoy inflation adjustment?

Disclaimer: By using this site, you explicitly agree to its Terms of Use and agree not to hold Simple Subjects, LLC or any of its members liable in any way for damages arising from decisions you make based on the information made available on this site. The information on this site is for informational and entertainment purposes only and does not constitute financial advice.

Copyright 2023 Simple Subjects, LLC - All rights reserved. To be clear: This means that, aside from small quotations, the material on this site may not be republished elsewhere without my express permission. Terms of Use and Privacy Policy

My Social Security calculator: Open Social Security