Retirees Realize a $3M Nest Egg at 70 Only Means $70K in Real Annual Spending

A 70-year-old with $2.2 million in a traditional IRA/401(k), $500,000 in a Roth IRA, $300,000 in a taxable brokerage account, and $32,000 per year of Social Security has no required minimum distributions until age 73. Using a 3.8% real withdrawal rate on a $3 million portfolio produces about $114,000 in nominal gross withdrawals in the first year, before any spending. Federal income tax on mostly traditional withdrawals is estimated at roughly 22% to 24%, or about $20,000 to $24,000. State income tax is estimated around 5%, or about $5,700. Medicare Part B, Part D, and an IRMAA Tier 2 surcharge are estimated around $4,200 to $5,400. Out-of-pocket healthcare above Medicare is estimated around $5,000 to $8,000. After these costs, the real lifestyle budget is about $70,900, or about $5,900 per month. Inflation increases the gap by eroding purchasing power as withdrawals rise.

"A Bill Bengen-style 3.8% real withdrawal on $3 million produces a $114,000 nominal gross withdrawal in year one. That is the starting point, not the spending budget. Every line below comes out before the retiree buys groceries: Federal tax on a mostly traditional draw at this income runs roughly 22% to 24% blended, or about $20,000 to $24,000. The 2026 single brackets hit 22% above $50,400 and 24% above $105,700, with a standard deduction of $16,100 for single filers plus the additional age 65+ amount."

"State income tax averages roughly 5%, or about $5,700. Medicare Part B, Part D, and an IRMAA Tier 2 surcharge in the $121,000 to $153,000 MAGI band run roughly $4,200 to $5,400 a year. Out-of-pocket healthcare above Medicare, including dental, vision, deductibles, and supplements, lands around $5,000 to $8,000 per year. Net it out and the real lifestyle budget is roughly $70,900, or about $5,900 a month."

"The biggest tension here is the wedge between gross withdrawals and real purchasing power, and that wedge is widening. Headline PCE ran 3.5% year over year in March 2026, with core PCE at 3.2% and services inflation around 3%. CPI hit 332.4 in April 2026, its 12-month high, with a percentile rank of 90.9 against historical read"

Read at 24/7 Wall St.