The retirement question everyone gets wrong
"How much do I need to retire?" Most people answer with a vague number they heard somewhere, or they panic because retirement feels impossibly expensive. But retirement planning isn't about hitting one magic number: it's about building a system that generates the income you need for 30+ years.
The traditional advice says you need 25 times your annual spending (the 4% rule). That's a starting point, but your actual needs depend on your timeline, spending patterns, tax situation, and other income sources. Here's how to build a retirement plan that actually works.
How much do you really need?
The 4% rule baseline: Multiply your expected annual spending by 25. If you need $100,000 annually, target $2.5 million in retirement savings.
But that's just the starting point. You also need to factor in:
- Inflation: 2.5-3% annually over decades significantly impacts purchasing power
- Longevity: Plan to age 95+ to avoid running out of money
- Market volatility: Early retirement years are especially vulnerable to poor returns
- Other income: Social Security, pensions, rental income, or part-time work
The three-bucket tax strategy
Not all retirement accounts are created equal. Smart withdrawal sequencing can extend your money significantly:
Bucket 1: Taxable accounts (brokerage) Use first for flexibility and tax control. You can manage capital gains and harvest losses strategically.
Bucket 2: Tax-deferred (Traditional IRA/401k) Withdraw strategically to manage tax brackets. Required distributions start at age 73.
Bucket 3: Tax-free (Roth IRA) Save for last—no required distributions, grows tax-free, provides maximum flexibility.
The strategy: Bridge early retirement years with taxable assets, then blend tax-deferred and tax-free withdrawals to optimize your tax situation annually.
Asset allocation that evolves with age
Don't abandon growth entirely in retirement. With 30+ year retirement periods, you still need equity exposure for inflation protection.
Sample glidepath (illustrative only):
- Ages 55-65: 70% stocks, 30% bonds
- Ages 65-75: 60% stocks, 40% bonds
- Ages 75+: 50% stocks, 50% bonds (adjust based on health and legacy goals)
Alternative bucket approach:
- 1-3 years: Cash and cash equivalents for near-term expenses
- 4-7 years: Bonds and conservative investments
- 8+ years: Growth-oriented stocks and alternatives
This ensures you won't be forced to sell stocks during market downturns for living expenses.
Sequence of returns: the early retirement killer
The biggest retirement risk isn't running out of money eventually—it's poor returns in your first few years combined with withdrawals. This sequence-of-returns risk can permanently damage your portfolio's ability to recover.
Protection strategies:
- Maintain 1-3 years of expenses in cash when you retire
- Use flexible withdrawal rates that can decrease during poor market years
- Rebalance from gains rather than selling losing investments
- Consider working part-time initially to reduce withdrawal pressure
The goal is surviving the first decade of retirement intact - after that, your odds of success improve dramatically.
Required minimum distributions and tax planning
At age 73, the IRS forces you to start withdrawing from traditional retirement accounts. This can create unwanted tax bills if not planned properly.
RMD planning strategies:
- Roth conversions in low-income years before age 73
- Qualified charitable distributions starting at age 70½
- Coordinate withdrawals to stay under Medicare IRMAA income thresholds
- Consider QLACs (Qualified Longevity Annuity Contracts) to defer some RMDs
Start planning these strategies in your early 60s, not when RMDs begin.
Early retirement and the Rule of 55
Want to retire before 59½ without paying 10% penalties? The Rule of 55 allows penalty-free withdrawals from your most recent employer's 401(k) if you separate from service at age 55 or later.
Key requirements:
- Must be from your most recent employer's 401(k)
- Doesn't apply to IRAs or old 401(k)s you've rolled over
- Don't roll the 401(k) to an IRA if you plan to use this rule
Strategy: Use Rule of 55 withdrawals to bridge to age 59½, when all retirement accounts become accessible without penalties.
Income generation in retirement
Don't chase yield—focus on total return and sustainability. Different income sources serve different purposes:
Dividend-focused ETFs: Provide growing income with equity upside potential Laddered bonds: Predictable income and principal return at maturity Treasury bills/Smart Treasury: Low-risk, liquid income for short-term needs Partial annuitization: Guaranteed income for essential expenses
The key is matching your withdrawal rate plus income generation to a 30+ year timeline without depleting principal.
Quick Answers: Retirement planning questions
"Can I retire with $1 million?" Depends on your spending needs and other income. $1 million supports about $40,000 annually using the 4% rule.
"Should I pay off my mortgage before retiring?" Not necessarily. Low-rate mortgages might be better kept while preserving liquid assets for flexibility.
"How do I know if I'm on track?" Review annually. Are you saving 15-20% of income? Will you have 25x annual expenses by your target retirement date?
"What about Social Security?" Factor it in but don't count on it entirely. Delayed filing until age 70 can significantly increase monthly benefits.
Can Titan help with retirement planning?
Yes. If you're a Titan client, we can:
- Model different retirement scenarios using Monte Carlo analysis for realistic success probabilities
- Optimize your asset allocation throughout pre-retirement and retirement phases
- Coordinate tax-efficient withdrawal strategies across different account types
- Plan RMD management and Roth conversion opportunities
Retirement planning requires ongoing adjustments as your life, markets, and tax laws evolve.
Ready to build a retirement plan that actually works?
Talk to a Titan advisor to create a comprehensive retirement strategy tailored to your timeline, spending needs, and tax situation.
About Titan
Titan is a modern Registered Investment Advisor (RIA) helping high-earning professionals navigate complex money decisions. With a dedicated advisor and access to proprietary strategies and alternative investment options, we're your go-to wealth team for everything from RSUs to retirement. Learn more at www.titan.com.
